IMPORTANT NOTICE
NOT FOR DISTRIBUTION INTO THE UNITED STATES
IMPORTANT: You must read the following before continuing. The following applies to the preliminary offering circular (the ‘‘Offering Circular’’) following this page, and you are therefore advised to read this carefully before reading, accessing or making any other use of the Offering Circular. In accessing the Offering Circular, you agree to be bound by the following terms and conditions, including any modifications to them any time you receive any information from the Issuer (as defined in the Offering Circular) as a result of such access. The Offering Circular is being furnished in connection with an offering in offshore transactions outside the United States in compliance with Regulation S under the Securities Act solely for the purpose of enabling a prospective investor to consider the purchase of the securities described in the Offering Circular. You are reminded that the information in the attached Offering Circular is not complete and may be changed. NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN THE UNITED STATES OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. THE SECURITIES DESCRIBED HEREIN HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE ‘‘SECURITIES ACT’’), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION AND THE SECURITIES MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES, EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE OR LOCAL SECURITIES LAWS. THIS OFFERING IS MADE SOLELY IN OFFSHORE TRANSACTIONS PURSUANT TO REGULATION S UNDER THE SECURITIES ACT. THE FOLLOWING OFFERING CIRCULAR MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER, AND IN PARTICULAR, MAY NOT BE FORWARDED TO ANY UNITED STATES ADDRESS. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS. ANY INVESTMENT DECISION WOULD BE MADE ON THE BASIS OF THE TERMS AND CONDITIONS OF THE SECURITIES AND THE INFORMATION CONTAINED IN THE OFFERING CIRCULAR (AS AMENDED AND RESTATED) THAT WILL BE DISTRIBUTED TO YOU PRIOR TO THE PRICING DATE AND NOT ON THE BASIS OF THE ATTACHED DOCUMENTS. IF YOU HAVE GAINED ACCESS TO THIS TRANSMISSION CONTRARY TO ANY OF THE FOREGOING RESTRICTIONS, YOU ARE NOT AUTHORISED AND WILL NOT BE ABLE TO PURCHASE ANY OF THE SECURITIES DESCRIBED THEREIN. Confirmation of Your Representation: In order to be eligible to view this Offering Circular or make an investment decision with respect to the securities, investors must be purchasing the securities outside the United States in an offshore transaction in reliance on Regulation S under the Securities Act. By accepting the e-mail and accessing the attached Offering Circular, you shall be deemed to have represented to the Sole Lead Manager (as defined in the Offering Circular) and the Issuer (as defined in the Offering Circular) (1) that you and any customers you represent are not, and that the electronic mail address that you gave the Issuer and to which this e-mail has been delivered is not, located in the United States, its territories or possessions, and (2) that you consent to delivery of the attached Offering Circular and any amendments or supplements thereto by electronic transmission. You are reminded that the Offering Circular has been delivered to you on the basis that you are a person into whose possession the Offering Circular may be lawfully delivered in accordance with the laws of jurisdiction in which you are located and you may not, nor are you authorised to, deliver the Offering Circular to any other person. The materials relating to any offering of securities described in the Offering Circular do not constitute, and may not be used in connection with, an offer or solicitation by or on behalf of any of the Issuer or the Sole Lead Manager in any place where offers or solicitations are not permitted by law. If a jurisdiction requires that the offering be made by a licenced broker or dealer and the Sole Lead Manager or any affiliate of the Sole Lead Manager are licenced brokers or dealers in that jurisdiction, the offering shall be deemed to be made by the Sole Lead Manager or such affiliate on behalf of the Issuer in such jurisdiction. The Offering Circular has been sent to you in an electronic form. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission and consequently neither the Sole Lead Manager or any person who controls the Sole Lead Manager nor any director, officer, employee nor agent of the Sole Lead Manager or affiliate of any such person accepts any liability or responsibility whatsoever in respect of any difference between the Offering Circular distributed to you in electronic format and the hard copy version available to you on request from the Sole Lead Manager. You are responsible for protecting against viruses and other destructive items. Your use of this e-mail is at your own risk and it is your responsibility to take precautions to ensure that it is free from viruses and other items of a destructive nature. Actions that you may not take: If you receive this document by e-mail, you should not reply by e-mail to this document, and you may not purchase any securities by doing so. Any reply e-mail communications, including those you generate by using the ‘‘Reply’’ function on your e-mail software, will be ignored or rejected. SUBJECT TO COMPLETION STRICTLY CONFIDENTIAL PRELIMINARY OFFERING CIRCULAR DATED 23 JUNE 2017 ed, and no agreement r to sell securities and QINGHAI PROVINCIAL INVESTMENT GROUP CO., LTD （青海省投資集團有限公司） (incorporated with limited liability in the People’s Republic of China)
U.S.$[•][•] PER CENT. BONDS DUE [•]
ISSUE PRICE: [•] PER CENT.
The [•] per cent. bonds due [•] in the aggregate principal amount of U.S.$[•](the‘‘Bonds’’) will be issued by Qinghai Provincial Investment Group Co., Ltd（青海省投資集團 有限公司）(the ‘‘Issuer’’).
The Bonds will bear interest from and including [•](the‘‘Issue Date’’)attherateof[•] per cent. of their principal amount per annum. Interest on the Bonds is payable semi- annually in arrear on [•]and[•] in each year. Payments on the Bonds will be made without deduction for or on account of taxes of, the PRC (as defined herein) to the extent described under ‘‘Terms and Conditions of the Bonds – Taxation’’.
The Bonds will constitute direct, unsubordinated, unconditional and (subject to Condition 4(a) of the terms and conditions of the Bonds (the ‘‘Terms and Conditions of the Bonds’’)) unsecured obligations of the Issuer and shall at all times rank pari passu and without any preference among themselves. The payment obligations of the Issuer under the Bonds shall, save for such exceptions as may be provided by applicable legislation and subject to Condition 4(a) of the Terms and Conditions of the Bonds, at all times rank at least equally with all the Issuer’s other present and future unsecured and unsubordinated obligations.
The Issuer undertakes that it will (i) within 15 Registration Business Days (as defined in the Terms and Conditions of the Bonds) after the Issue Date, register or cause to be registered with the State Administration of Foreign Exchange (‘‘SAFE’’) the Bonds pursuant to the Administrative Measures for Foreign Debt Registration（外債登記管理辦 法）and its operating guidelines, effective as of 13 May 2013 (‘‘Foreign Debt Registration’’), (ii) use its best endeavours to complete the Foreign Debt Registration and obtain a registration record from SAFE within 120 Registration Business Days after the Issue Date, (iii) if applicable, as soon as possible upon being required or requested to do so by any relevant governmental authority, file or cause to be filed with SAFE the Bonds pursuant to the Circular of the People’s Bank of China on Implementing the Overall Macro Prudential Management System for Nationwide Cross-border Financing（中國人民銀行關於在全國範圍內實施全口徑跨境融資宏觀審慎管理有關事宜的通 知）(the ‘‘Cross Border Financing Circular’’) and (iv) comply with all applicable PRC laws and regulations in relation to the Bonds. For consequences of non-registration, see ‘‘PRC Regulations’’.
In accordance with the Circular on Promoting the Reform of the Administrative System on the Issuance by Enterprises of Foreign Debt Filings and Registrations（國家發展改 革委關於推進企業發行外債備案登記制管理改革的通知（發改外資[2015]2044號））(the ‘‘NDRC Circular’’) issued by the National Development and Reform Commission of the PRC (the ‘‘NDRC’’) on 14 September 2015 which came into effect on the same day, the Issuer has registered the issuance of the Bonds with NDRC and obtained a certificate from the NDRC on 21 June 2017 evidencing such registration, which at the date of this Offering Circular, remains valid and in full force and effect. The Issuer has undertaken to file or cause to be filed the requisite information and documents on the issuance of the Bonds with the NDRC within 10 Registration Business Days (as defined in the Terms and Conditions of the Bonds) after the Issue Date.
ffer or sale is not permitted. No offer orUnless invitation shall be made orpreviously receiv redeemed, purchased and or cancelled, the Bonds will be redeemed at their principal amount on [•]. At any time, on giving not less than 30 nor more than 60 days’ notice to the Bondholders (as defined below) (which notice shall be irrevocable), the Issuer may redeem the Bonds in whole, but not in part, at their principal amount, together any interest accrued to the date fixed for redemption, if, the Issuer satisfies the Trustee that immediately before giving such notice, the Issuer has or will become obliged to pay Additional Tax Amounts (as defined in the Terms and Conditions of the Bonds) as a result of any change in, or amendment to, the laws or regulations of the PRC or any political subdivision or any authority thereof or therein having power to tax, or any change in the application or official interpretation, or any statement of any official position with respect to, of such laws or regulations (including any decision by a court of competent jurisdiction), which change or amendment becomes effective on or after [•], and such obligation cannot be avoided by the Issuer taking reasonable measures available to it. At any time following the occurrence of a Relevant Event (as defined in the Terms and Conditions of the Bonds), each holder of Bonds (each a ‘‘Bondholder’’) will have the right, at such Bondholder’s option, to require the Issuer to redeem all but not some only of that Bondholder’s Bonds on the Put Settlement Date (as defined in the Terms and Conditions of the Bonds) at 101 per cent. (in the case of a redemption for a Change of Control (as defined in the Terms and Conditions of the Bonds)) or 100 per cent. (in the case of a redemption for a No Registration Event (as
circular, to purchase or subscribe fordefined any securities. in the Terms and Conditions of the Bonds)) of their principal amount, together in each case with accrued interest to (but excluding) such Put Settlement Date. See ‘‘Terms and Conditions of the Bonds – Redemption and Purchase’’.
Investing in the Bonds involves certain risks. See ‘‘Risk Factors’’ beginning on page 12 for a discussion of certain factors to be considered in connection with an investment in the Bonds.
For a more detailed description of the Bonds, see “Terms and Conditions of the Bonds” beginning on page 35.
The Bonds have not been and will not be registered under the United States Securities Act of 1933, as amended (the ‘‘Securities Act’’) and, subject to certain exceptions, may not be offered or sold within the United States (as defined in Regulation S under the Securities Act (‘‘Regulation S’’)). The Bonds are being offered only outside the United States in reliance on Regulation S. For a description of these and certain further restrictions on offers and sales of the Bonds and the distribution of this Offering Circular, see ‘‘Subscription and Sale’’.
The Bonds are expected to be rated ‘‘BB-’’ by S&P Global Ratings and ‘‘BB’’ by Dagong Global Credit Rating (Hong Kong) Co., Ltd.. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the relevant rating organisation.
Approval in principle has been obtained from the Singapore Exchange Securities Trading Limited (the ‘‘SGX-ST’’) for the listing and quotation of the Bonds on the Official List of the SGX-ST. The SGX-ST assumes no responsibility for the correctness of any of the statements made or opinions expressed or reports contained inthisOffering Circular. Admission to the Official List of the SGX-ST and quotation of the Bonds is not to be taken as an indication of the merits of the Issuer, their respective subsidiaries, their respective associated companies (if any) or the Bonds.
The denomination of the Bonds will be U.S.$200,000 each and integral multiples U.S.$1,000 in excess thereof. The Bonds will be represented by beneficial interests in a global certificate (the ‘‘Global Certificate’’) in registered form, which will be registered in the name of a nominee for, and shall be deposited on or about the Issue Date, with a common depositary for, Euroclear Bank SA/NV (‘‘Euroclear’’) and Clearstream Banking S.A. (‘‘Clearstream’’). Beneficial interests in the Global Certificate will be shown on, and transfers thereof will be effected only through, records maintained by Euroclear and Clearstream. Except in the limited circumstances described in the Global Certificate, certificates for Bonds will not be issued in exchange for interests in the Global Certificate.
Sole Global Coordinator, Sole Lead Manager and Sole Bookrunner DBSBankLtd. • is not soliciting an offer to buy securities in any jurisdiction where such o The information contained in this preliminary offering circular is not complete and may be changed. This preliminary offering circular is not an offe shall be made, on the basis of this preliminary offering Offering Circular dated [ ] 2017 IMPORTANT NOTICE
THIS OFFERING CIRCULAR DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE THE OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS OFFERING CIRCULAR NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUER OR ANY OF ITS SUBSIDIARIES OR THAT THE INFORMATION SET FORTH IN THIS OFFERING CIRCULAR IS CORRECT AS AT ANY DATE SUBSEQUENT TO THE DATE HEREOF.
The Issuer, having made all reasonable enquiries, confirms that (i) this Offering Circular contains all information with respect to the Issuer and its subsidiaries (collectively, the ‘‘Group’’) and the Bonds which is material in the context of the issue and offering of the Bonds; (ii) the statements contained herein relating to the Issuer, the Group and the Bonds are in every material respect true and accurate and not misleading and this Offering Circular does not omit to state a material fact necessary in order to make the statements herein, in the light of the circumstances under which they were made, not misleading; (iii) the statements of intention, opinion and belief or expectation contained in this Offering Circular with regard to the Issuer and the Group are honestly and reasonably made or held, have been reached after considering all relevant circumstances; (iv) there are no other facts in relation to the Issuer, the Group or the Bonds, the omission of which would, in the context of the issue and offering of the Bonds, make any statement in this Offering Circular misleading in any material respect; (v) all reasonable enquiries have been made by the Issuer to ascertain such facts and to verify the accuracy of all such information and statements; and (vi) the statistical, industry and market-related data and forward looking statements included in this Offering Circular (if any) are based on or derived or extracted from sources which the Issuer believes to be accurate and reliable in all material respects.
This Offering Circular has been prepared by the Issuer solely for use in connection with the proposed offering of the Bonds described in this Offering Circular. This Offering Circular does not constitute an offer of, or an invitation by or on behalf of DBS Bank Ltd. (the ‘‘Sole Global Coordinator’’,the‘‘Sole Lead Manager’’ and the ‘‘Sole Bookrunner’’) or the Issuer to subscribe for or purchase any of the Bonds. The distribution of this Offering Circular and the offering of the Bonds in certain jurisdictions may be restricted by law. Persons into whose possession this Offering Circular comes are required by the Issuer to inform themselves about and to observe any such restrictions. No action is being taken to permit a public offering of the Bonds or the distribution of this Offering Circular in any jurisdiction where action would be required for such purposes. There are restrictions on the offer and sale of the Bonds and the circulation of documents relating thereto, in certain jurisdictions including the United States, the United Kingdom, the People’s Republic of China, Hong Kong, Singapore and Japan, and to persons connected therewith. For a description of certain further restrictions on offers, sales and resales of the Bonds and distribution of this Offering Circular, see ‘‘Subscription and Sale’’. This Offering Circular is personal to each offeree and does not constitute an offer to any other person or to the public generally to subscribe for or otherwise to acquire the Bonds. Distribution of this Offering Circular to any other person other than the investors and any person retained to advise such investors with respect to their purchase is unauthorised. Each investor, by accepting delivery of this Offering Circular, agrees to the foregoing and to make no photocopies of this Offering Circular or any documents referred to in this Offering Circular.
i No person has been or is authorised to give any information or to make any representation concerning the Issuer, the Group or the Bonds other than as contained herein and, if given or made, any such other information or representation should not be relied upon as having been authorised by the Issuer, the Sole Lead Manager, the Trustee or the Agents or any of their respective affiliates, directors, officers, employees, representatives, agents or advisers. Neither the delivery of this Offering Circular nor any offering, sale or delivery made in connection with the issue of the Bonds shall, under any circumstances, constitute a representation that there has been no change or development reasonably likely to involve a change in the affairs of the Issuer, the Group or any of them since the date hereof or create any implication that the information contained herein is correct as of any date subsequent to the date hereof. This Offering Circular does not constitute an offer of, or an invitation by or on behalf of the Issuer, the Sole Lead Manager, the Trustee or the Agents or any of their respective affiliates, directors, officers, employees, representatives, agents or advisers to subscribe for or purchase any of the Bonds and may not be used for the purpose of an offer to, or a solicitation by, anyone in any jurisdiction or in any circumstances in which such offer or solicitation is not authorised or is unlawful.
This Offering Circular may not be copied or reproduced in whole or in part. It may be distributed only to and its contents may be disclosed only to the prospective investors to whom it is provided. By accepting delivery of this Offering Circular each investor agrees to these restrictions.
No representation or warranty, express or implied, is made or given by the Sole Lead Manager, the Trustee or the Agents or any of their respective affiliates, directors, officers, employees, representatives, agents or advisers as to the accuracy, completeness or sufficiency of the information contained in this Offering Circular, and nothing contained in this Offering Circular is, or shall be relied upon as a promise, representation or warranty by the Sole Lead Manager, the Trustee or the Agents or any of their respective affiliates, directors, officers, employees, representatives, agents or advisers. To the fullest extent permitted by law, the Sole Lead Manager, the Trustee and the Agents and their respective affiliates, directors, officers, employees, representatives, agents and advisers do not accept any responsibility for the contents of this Offering Circular and assumes no responsibility for the contents, accuracy, completeness or sufficiency of any such information or for any other statement, made or purported to be made by the Sole Lead Manager, the Trustee or the Agents or any of their respective affiliates, directors, officers or advisers or on their behalf in connection with the Issuer or the issue and offering of the Bonds. Each of the Sole Lead Manager, the Trustee and the Agents and their respective affiliates, directors, officers, employees, representatives, agents and advisers accordingly disclaim all and any liability whether arising in tort or contract or otherwise which they might otherwise have in respect of this Offering Circular or any such statement.
None of the Sole Lead Manager, the Trustee or any Agent or any of their respective affiliates, directors, officers, employees, representatives, agents or advisers undertakes to review the financial condition or affairs of the Issuer or the Group after the date of this Offering Circular nor to advise any investor or potential investor in the Bonds of any information coming to the attention of the Sole Lead Manager, the Trustee or any Agent or any of their respective affiliates, directors, officers, employees, representatives, agents or advisers. The Sole Lead Manager, the Trustee, the Agents and their respective affiliates, directors, officers, employees, representatives, agents and advisers have not independently verified any of the information contained in this Offering Circular and can give no assurance that this information is accurate, truthful or complete. This Offering Circular is not intended to provide the basis of any credit or other evaluation nor should it be considered as a recommendation by any of the Issuer, the Group, the Sole Lead Manager, the Trustee or the Agents or any of their respective affiliates, directors, officers, employees, representatives, agents or advisers that any recipient of this Offering Circular should purchase the Bonds. Each potential purchaser of the Bonds should determine for itself the relevance of the information contained in this Offering Circular and its purchase of the Bonds should be based upon such investigations with its own tax, legal and business advisers as it deems necessary.
ii In making an investment decision, investors must rely on their own examination of the Issuer, the Group and the terms of the offering, including the merits and risks involved. See ‘‘Risk Factors’’ for a discussion of certain factors to be considered in connection with an investment in the Bonds.
Each person receiving this Offering Circular acknowledges that such person has not relied on the Sole Lead Manager, the Trustee, the Agents or any of their respective affiliates, directors, officers, employees, representatives, agents or advisers in connection with its investigation of the accuracy of such information or its investment decision.
IN CONNECTION WITH THIS OFFERING, THE SOLE LEAD MANAGER APPOINTED OR ACTING AS STABILISING MANAGER (THE ‘‘STABILISING MANAGER’’) OR ANY PERSON(S) ACTING ON BEHALF OF THE STABILISING MANAGER MAY, SUBJECT TO ALL APPLICABLE LAWS, OVER-ALLOT BONDS OR EFFECT TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET PRICE(S) OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL. HOWEVER, THERE IS NO OBLIGATION ON THE STABILISING MANAGER (OR PERSON(S) ACTING ON BEHALF OF THE STABILISING MANAGER) TO DO THIS. ANY STABILISATION ACTION MAY BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE PUBLIC DISCLOSURE OF THE TERMS OF THE OFFER OF THE BONDS IS MADE AND, IF BEGUN, MAY BE ENDED AT ANY TIME, BUT IT MUST END NO LATER THAN THE EARLIER OF 30 DAYS AFTER THE ISSUE DATE OF THE BONDS AND 60 DAYS AFTER THE DATE OF ALLOTMENT OF THE BONDS. SUCH STABILISING SHALL BE IN COMPLIANCE WITH ALL APPLICABLE LAWS, REGULATIONS AND RULES.
The Sole Lead Manager and its affiliates may purchase the Bonds for its or their own account and enter into transactions, including credit derivatives, such as asset swaps, repackaging and credit default swaps relating to the Bonds and/or other securities of the Issuer or its subsidiaries or associates at the same time as the offer and sale of the Bonds or in secondary market transactions. Such transactions may be carried out as bilateral trades with selected counterparties and separately from any existing sale or resale of the Bonds to which this Offering Circular relates (notwithstanding that such selected counterparties may also be purchasers of the Bonds). Furthermore, investors in the Bonds may include entities affiliated with the Group.
Prospective investors should not construe anything in this Offering Circular as legal, business or tax advice. Each prospective investor should determine for itself the relevance of the information contained in this Offering Circular and consult its own legal, business and tax advisers as needed to make its investment decision and determine whether it is legally able to purchase the Bonds under applicable laws or regulations.
Industry and Market Data All non-company specific statistics and data relating to the Group’s industry or the economies of pertinent jurisdictions, such as the PRC, have been extracted or derived from publicly available information and various government sources. The Issuer believes that the sources of this information are appropriate for such information and the Issuer taken reasonable care in extracting and reproducing such information. The Issuer has no reason to believe that such information is false or misleading or that any fact has been omitted that would render such information false or misleading. However, this information has not been independently verified by the Issuer, the Sole Lead Manager, the Trustee or the Agents or any of their respective affiliates, directors, officers, employees, representatives, agents or advisers and none of the Issuer, the Sole Lead Manager, the Trustee or the Agents or any of their respective affiliates, directors, officers, employees, representatives, agents or advisers makes any representation as to the correctness, accuracy or completeness of that information. In addition, third party information providers may have obtained information from market participants and such information may not have been independently verified. Accordingly, such information should not be unduly relied upon.
iii Presentation of Financial Information This Offering Circular contains consolidated financial information of the Issuer as at and for the years ended 31 December 2014, 2015 and 2016 which has been extracted from the audited consolidated financial statements of the Issuer as at and for the years ended 31 December 2015 and 31 December 2016, included elsewhere in this Offering Circular. The audited consolidated financial statements of the Issuer as at and for the years, ended 31 December 2015 and 31 December 2016 were prepared and presented in accordance with the Accounting Standards for Business Enterprises in the PRC (the ‘‘PRC GAAP’’) and have been audited by Beijing Yongtuo Certified Public Accountants LLP (‘‘Beijing Yongtuo’’), the independent auditors of the Issuer.
PRC GAAP differs in certain respects from International Financial Reporting Standards (‘‘IFRS’’). See ‘‘Summary of Certain Differences Between PRC GAAP and IFRS’’.
The Offering Circular includes figures relating to EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin. None of EBITDA, Adjusted EBITDA or Adjusted EBITDA Margin is a standard measure under PRC GAAP or IFRS. EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin are widely used financial indicators of a company’s ability to service and incur debt. None of EBITDA, Adjusted EBITDA or Adjusted EBITDA Margin should be considered in isolation or construed as an alternative to cash flow, net income or any other measure of performance or as an indicator of the Issuer’s operating performance, liquidity, profitability or cash flows generated by operating, investing or financing activities. In evaluating EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin, the Issuer believes that investors should consider, among other things, the components of EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin and the amount by which EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin exceeds capital expenditures and other charges. The Issuer has included EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin because it believes that it is a useful supplement to the cash flow data as a measure of the Issuer’s performance and its ability to generate cash flows from operations to cover debt service and taxes. EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin presented herein may not be comparable to similarly titled measures presented by other companies. Investors should not compare the Issuer’s EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin to those presented by other companies because not all companies use the same definitions.
iv CERTAIN DEFINITIONS, CONVENTIONS AND CURRENCY PRESENTATION
Unless otherwise indicated, all references in this Offering Circular to ‘‘China’’ or the ‘‘PRC’’ are to the People’s Republic of China and, for the purpose of this Offering Circular only, exclude, Hong Kong, Macau SAR of the PRC and Taiwan, and all references to ‘‘Hong Kong’’ are to the Hong Kong SAR of China.
Unless otherwise specified or the context requires, references herein to ‘‘Renminbi’’, ‘‘RMB’’ or ‘‘CNY’’ are to the lawful currency of the PRC and references herein to ‘‘U.S. dollars’’, ‘‘U.S.$’’ or ‘‘USD’’ are to the lawful currency of the United States of America.
Historical amounts translated into Renminbi have been translated at historical rates of exchange. Such translations should not be construed as representations that the amounts referred to herein could have been or could be converted into Renminbi at those rates or any other rate at all. This Offering Circular contains translation of certain Renminbi amounts into U.S. dollars at specified rates solely for the convenience of the reader. Unless otherwise specified, where financial information in relation to the Issuer has been translated into U.S. dollars, it has been so translated, for convenience only, at the rate of RMB6.9430 to U.S.$1.00 (the noon buying rate in New York City on 30 December 2016 as set forth in the weekly H.10 statistical release of the Federal Reserve Board of the Federal Reserve Bank of New York). Further information regarding exchange rate is set forth in ‘‘Exchange Rates’’ in this Offering Circular. No representation is made that the Renminbi amounts referred to in this Offering Circular could have been or could be converted into U.S. dollars at any particular rate or at all.
In this Offering Circular, where information has been presented in thousands or millions of units, amounts may have been rounded up or down. Accordingly, totals of columns or rows of numbers in tables may not be equal to the apparent total of the individual items and actual numbers may differ from those contained herein due to rounding. References to information in billions of units are to the equivalent of a thousand million units.
The English names of the PRC nationals, entities, departments, facilities, laws, regulations, certificates, titles and the like are translations of their Chinese names and are included for identification purpose only. In the event of any inconsistency, the Chinese name prevails.
v FORWARD-LOOKING STATEMENTS
The Issuer has made forward-looking statements in this Offering Circular regarding, among other things, the Group’s financial conditions, future expansion plans and business strategy. These forward-looking statements are based on the Group’s current expectations about future events. Although the Issuer believes that these expectations and projections are reasonable, such forward-looking statements are inherently subject to risks, uncertainties and assumptions, including, among other things:
• the ability of the Group to successfully implement its business plans and strategies;
• future developments, trends and conditions in the industry and markets in which the Group operates;
• the Group’s business prospects and capital expenditure plans;
• the actions and developments of the Group’s competitors;
• the Group’s financial condition and performance;
• any changes in the laws, rules and regulations of the central and local governments in the PRC and other relevant jurisdictions and the rules, regulations and policies of the relevant governmental authorities relating to all aspects of the Group’s business;
• general political and economic conditions, including those related to the PRC and elsewhere;
• changes or volatility in interest rates, foreign exchange rates, duties, equity prices or other rates or prices, including those pertaining to the PRC and the industry and markets in which the Group operates;
• various business opportunities that the Group may pursue;
• macroeconomic measures taken by the PRC government to manage economic growth;
• the Group’s dividend distribution plans;
• the continued availability of capital and costs of bank loans and other forms of financing;
• risks inherent to the industry in which the Group operates;
• changes in competitive conditions and the Group’s ability to compete under these conditions; and
• those other risks identified in the ‘‘Risk Factors’’ section of this Offering Circular.
The words ‘‘anticipate’’, ‘‘believe’’, ‘‘estimate’’, ‘‘expect’’, ‘‘intend’’, ‘‘plan’’ and similar expressions are intended to identify a number of these forward-looking statements. The Issuer undertakes no obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this Offering Circular might not occur and the Issuer’s and the Group’s actual results could differ materially from those anticipated in these forward-looking statements. Accordingly, investors are cautioned not to place undue reliance on these forward-looking statements.
These forward-looking statements speak only as of the date of this Offering Circular. The Issuer expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in the Group’s expectations with regard thereto or any change of events, conditions or circumstances, on which any such statement was based.
vi CONTENTS
Page
SUMMARY ...... 1
SELECTED FINANCIAL INFORMATION ...... 3
THE ISSUE ...... 9
RISK FACTORS ...... 12
EXCHANGE RATES ...... 34
TERMS AND CONDITIONS OF THE BONDS ...... 35
THE GLOBAL CERTIFICATE ...... 54
USE OF PROCEEDS ...... 56
CAPITALISATION AND INDEBTEDNESS ...... 57
DESCRIPTION OF THE GROUP ...... 58
MANAGEMENT OF THE GROUP ...... 75
PRC REGULATIONS ...... 80
TAXATION ...... 84
SUBSCRIPTION AND SALE ...... 91
SUMMARY OF CERTAIN DIFFERENCES BETWEEN PRC GAAP AND IFRS ...... 95
GENERAL INFORMATION ...... 96
INDEX TO FINANCIAL STATEMENTS ...... F-1
vii SUMMARY
The summary below is only intended to provide a limited overview of information described in more detail elsewhere in this Offering Circular. As it is a summary, it does not contain all of the information that may be important to investors and terms defined elsewhere in this Offering Circular shall have the same meanings when used in this summary. Prospective investors should therefore read this Offering Circular in its entirety.
Overview The Group is a state-owned enterprise located in Qinghai province in China and primarily invests in and operates state-owned assets authorised by the State-owned Assets Supervision and Administration Commission of Qinghai (‘‘Qinghai SASAC’’). The Group’s business comprises of four principal segments including (i) aluminium production (including the production of primary aluminium and fabricated aluminium products), (ii) electricity generation (including thermal power and hydropower), (iii) the mining and sale of coal and (iv) other ancillary businesses (including real estate development, guarantee and leasing services, and real estate management). Across these four business segments, the Group engages in a range of operations including: (i) managing projects in which the Group has made investments, (ii) providing equipment financing and leasing, fundraising and other financing services, (iii) investing in debt, equity and projects designated by the Qinghai provincial government as being related to the Group’s businesses, such as hydropower, thermal power, primary aluminium, fabricated aluminium and exploration of mineral resources, (iv) providing loan guarantees, custodian services and investment consultation services, (v) purchasing raw materials, (vi) selling carbon, aluminium and fabricated aluminium products (except in situations where special state provisions apply, such as those in relation to military products and narcotics) and (vii) exploring, extracting and processing mineral resources.
As at the date of this Offering Circular, the registered capital of the Issuer is RMB6.417 billion. The Issuer is directly owned by Qinghai SASAC, Qinghai State-owned Assets Investment and Management Company Limited（青海省人民政府國有資產投資管理有限公司）(‘‘Qinghai SAIMC’’), Xining Economic and Technological Development Area Investment Holding Group Co., Ltd.（西寧經濟技術開 發區投資控股集團有限公司）(‘‘Xining Development’’) and West Mining Company Limited (a company listedontheShanghaiStockExchange（西部礦業股份有限公司）(‘‘West Mining’’), which have a 58.59%, 7.79%, 13.35%, and 20.27% shareholding in the Issuer respectively. As Qinghai SASAC directly holds a 100% interest in Qinghai SAIMC and indirectly holds a 14.2% interest in West Mining, Qinghai SASAC has an aggregate controlling interest of 69.26% in the shares of the Issuer thereby giving it power to, among other things, appoint and remove the Issuer’s directors and senior management.
COMPETITIVE STRENGTHS
• Well-positioned to leverage the strategic location of Qinghai province as part of the ‘‘One Belt, One Road’’ initiative of the PRC government
• Strong support from governmental policies
• Competitive cost structure
• Efficiencies resulting from a vertically integrated supply chain
• High demand from downstream clients
• Diversified funding channels with good banking relationships
• Experienced management team and operational staff
1 STRATEGIES
• Enhance the Group’s vertically integrated business across coal, electricity, aluminium and fabricated aluminium products
• Strengthen the synergy between the Group’s generation of hydroelectricity and production of aluminium alloys and aluminium fabrication products
• Focus on the exploration, extraction and processing of mineral resources
• Establish a financing company and improving the Group’s financing abilities
• Focus on research and development of fabricated aluminium products
RECENT DEVELOPMENTS
For the three months ended 31 March 2017, the Group recorded a moderate increase in its total assets, total liabilities and non-current liabilities as compared to their respective balances as at 31 December 2016. The increase was primarily due to the Group issuing an offshore bond in the aggregate principal amount of U.S.$300 million in February 2017 and an increase in long-term borrowings. For the three months ended 31 March 2017, the Group recorded an increase in both its operating income and operating costs as compared to that in the same period in 2016. The increase was primarily due to the new aluminium production plants of Qinghai West Hydroelectric Co., Ltd.（青海西部水電有限公 司）(‘‘Qinghai Hydroelectric’’) and Qinghai Baihe Renewable Aluminium Industry Co., Ltd.（青海百和 再生鋁業有限責任公司）(‘‘Qinghai Renewable’’) reaching their expected production capacity and the improved sales of aluminium as compared to that in the same period in 2016. For the three months ended 31 March 2017, the Group also recorded an increase in financial expenses as compared to that in the same period in 2016. The increase was primarily due to an increase in interest-bearing debt resulting from the consolidation of Qinghai Renewable into the Group’s financial statements.
2 SELECTED FINANCIAL INFORMATION
The selected consolidated financial information of the Issuer as at and for the years ended 31 December 2014, 2015 and 2016 set forth below is derived from and should be read in conjunction with the audited consolidated financial statements of the Issuer as at and for the years ended 31 December 2015 and 2016, including the notes thereto and the auditor’s reports in respect of the year ended 31 December 2015 and 2016 included elsewhere in this Offering Circular. The audited consolidated financial statements of the Issuer as at and for the years ended 31 December 2015 and 2016 were prepared and presented in accordance with PRC GAAP and have been audited by Beijing Yongtuo.
PRC GAAP is substantially in line with IFRS, except for certain modifications which reflect the PRC’s unique circumstances and environment. For a summary of the material differences, see ‘‘Summary of Certain Differences between PRC GAAP and IFRS’’.
3 Summary Consolidated Balance Sheet of the Issuer As at 31 December 2014 2015 2016 (RMB) (RMB) (RMB) (audited) (audited) (audited) Assets Current assets: Monetaryfunds...... 4,475,826,967.28 4,393,934,490.26 2,252,578,072.51 Financial assets which are measured based on fair value and whose change is recordedintoprofit/lossofcurrentyear...... – 30,000,000.00 – Notesreceivable...... 251,325,170.47 143,423,395.60 821,039,522.98 Accountsreceivable...... 923,764,730.89 985,285,118.70 907,926,987.51 Advancestosuppliers...... 1,936,944,358.07 602,688,935.53 1,183,382,246.88 Interestreceivable...... 5,507,180.83 220,173.61 8,960,000.00 Dividendsreceivable...... Otherreceivables...... 1,168,119,529.97 445,387,244.37 502,897,228.15 Inventories...... 2,280,857,227.68 2,963,991,084.80 2,896,742,722.03 Non-current assets maturing within one year Othercurrentassets...... 41,000,000.00 31,000,000.00 1,097,822,582.19 Total current assets ...... 11,083,345,165.19 9,595,930,442.88 9,671,349,362.25 Non-current assets: Financialassetsavailableforsale...... 2,513,951,505.45 2,466,102,928.92 2,525,097,760.04 Held-to-maturityinvestment...... 1,000,000.00 131,000,000.00 410,000,000.00 Long-termreceivables...... 1,707,418.68 55,477,327.13 54,032,464.13 Long-termequityinvestment...... 1,837,460.14 59,600,000.00 – Investmentrealestate...... 352,949,078.74 352,935,197.74 391,906,966.74 Fixedassets...... 10,033,401,245.98 11,446,358,749.37 13,360,798,670.44 Constructioninprogress...... 16,548,434,156.26 23,366,607,371.30 25,547,001,960.95 Constructionsupplies...... 45,704,153.98 46,791,732.80 39,081,947.17 Fixedassetspendingdisposal...... 70,593.27 90,593.27 1,937,430,763.69 Intangibleassets...... 815,836,508.68 765,730,025.19 1,216,427,321.58 Developmentexpenditures...... 324,174.52 3,153,042.40 Goodwill...... 730,022,501.97 815,061,248.20 817,122,119.26 Long-termdeferredexpenses...... 55,660,931.21 102,664,623.07 123,978,150.13 Deferredincometaxassets...... 101,096,963.29 112,614,585.27 116,509,384.02 Othernon-currentassets...... 511,057,076.53 557,309,521.59 752,458,993.72 Total non-current assets ...... 31,712,729,594.18 40,278,668,078.36 47,294,999,544.27 Total assets ...... 42,796,074,759.37 49,874,598,521.23 56,966,348,906.52 Liabilities and shareholders’ equity Current liabilities: Short-termborrowings...... 7,805,019,718.54 8,586,967,548.87 11,077,481,618.58 Notespayable...... 709,457,534.86 1,085,505,899.03 1,825,977,378.82 Accountspayable...... 2,793,772,833.69 3,182,900,148.81 3,306,834,640.95 Advancesfromcustomers...... 549,355,974.83 329,322,279.30 664,181,789.98 Accruedpayroll...... 41,128,011.39 73,557,096.97 135,344,175.96 Taxespayable...... -746,398,998.11 -964,250,381.93 153,087,098.09 Interestpayable...... 273,006,145.59 353,865,495.35 221,833,489.26 Dividendspayable...... 11,881,080.00 14,547,746.67 21,465,480.00 Otherpayables...... 1,747,501,026.89 990,352,330.58 995,796,630.07 Non-currentliabilitiesmaturingwithinoneyear...... 4,862,170,000.00 6,578,478,908.52 7,144,018,136.84 Othercurrentliabilities...... 573,436,090.93 664,760,890.93 494,285,207.74 Total current liabilities ...... 18,620,329,418.61 20,896,007,963.10 26,040,305,646.29
4 As at 31 December 2014 2015 2016 (RMB) (RMB) (RMB) (audited) (audited) (audited) Non-current liabilities: Long-termborrowings...... 6,889,846,556.72 9,647,492,651.69 11,648,216,966.35 Bondspayable...... 4,147,611,132.29 4,167,419,560.14 3,100,000,000.00 Long-termaccruedpayroll...... 10,750,500.50 –– Long-termpayables...... 3,711,567,586.84 3,929,147,435.03 2,634,781,357.95 Specialpayables...... 111,449,800.00 453,249,800.00 34,189,800.00 Deferredincome...... 189,580,289.49 195,153,904.51 227,795,264.99 Deferredincometaxliabilities...... 1,713,743.20 1,713,743.20 9,734,216.60 Othernon-currentliabilities...... Total non-current liabilities ...... 15,062,519,609.04 18,394,177,094.57 17,654,717,605.89 Total liabilities ...... 33,682,849,027.65 39,290,185,057.67 43,695,023,252.18 Shareholders’ equity Sharecapital...... 4,016,690,000.00 4,016,690,000.00 6,419,200,180.11 Capitalreserve...... 1,989,121,461.45 2,952,790,206.60 2,915,057,387.73 Otherconsolidatedincomes...... 596,225.49 –– Specialreserve...... 60,482,736.12 14,266,607.54 11,458,542.05 Surplusreserve...... 66,627,843.19 66,627,843.19 66,627,843.19 Undistributedprofits...... 381,265,929.02 380,255,175.44 399,625,330.06 Total owners’ equityattributabletoparentcompany...... 6,514,784,195.27 7,430,629,832.78 9,811,969,283.14 Minorityinterest...... 2,598,441,536.45 3,153,783,630.79 3,459,356,371.20 Total shareholders’ equity ...... 9,113,225,731.72 10,584,413,463.57 13,271,325,654.34 Total liabilities and shareholders’ equity ...... 42,796,074,759.37 49,874,598,521.23 56,966,348,906.52
5 Summary Consolidated Income Statement of the Issuer Year ended 31 December 2014 2015 2016 (RMB) (RMB) (RMB) (audited) (audited) (audited) Total operating income ...... 12,895,028,119.67 14,094,075,714.86 16,387,124,347.59 Including:Operatingincome...... 12,895,028,119.67 14,094,075,714.86 16,387,124,347.59 Total operating cost...... 12,904,584,752.38 14,655,911,288.41 – Including:Operatingcost...... 11,707,838,684.83 13,313,950,485.33 15,028,644,241.55 Businesstaxandsurcharge...... 70,019,925.28 72,216,950.66 73,623,936.76 Sellingexpenses...... 305,546,822.85 171,802,122.95 165,248,846.60 Managementexpenses...... 523,489,589.25 663,819,388.38 591,447,159.31 Financialexpenses...... 284,784,434.17 382,144,601.64 532,362,027.63 Lossonimpairmentofassets...... 12,905,296.00 51,977,739.45 29,567,266.50 Add: Income from fair value changes (Loss represented by a ‘‘-’’ sign)...... 4,359,950.00 2,805,767.00 38,141,362.00 Investment income (Loss represented by a ‘‘-’’ sign)...... 26,915,922.86 54,047,975.49 27,962,782.57 Including: Income from investment in affiliates and joint ventures Operating income (Loss represented by a ‘‘-’’ sign) ...... 21,719,240.15 -504,981,831.06 32,335,013.81 Add:Non-operatingincome...... 162,108,815.35 609,853,506.21 146,016,428.60 Including: Profits from disposal of non-currentassets...... 1,174,415.19 2,612,613.43 2,193,057.52 Less:non-operatingexpenditure...... 66,842,443.18 27,628,808.10 18,767,164.47 Including: Loss on disposal of non-currentassets...... 524,690.75 770,240.00 507,813.97 Total profits (Total losses represented by a ‘‘-’’ sign) ...... 116,985,612.32 77,242,867.05 159,584,277.94 Less:Incometaxexpense...... 24,612,936.54 32,444,961.80 56,932,087.62 Net profits (Net loss represented by a ‘‘-’’ sign) ...... 92,372,675.78 44,797,905.24 102,652,190.32 Net profits attributable to owners of parentcompany...... 15,941,337.70 902,246.42 19,505,454.62 Profit/lossofminorityshareholders...... 76,431,338.08 43,895,658.83 83,146,735.70 After-tax net amount of other consolidated income...... 188,281.59 -596,225.49 – Other consolidated incomes which will be re-classified into profit/loss in the following years Profit/loss of changes in fair value of financial assets availableforsale...... 188,281.59 -596,225.49 – Total consolidated income ...... 92,560,957.37 44,797,905.24 102,652,190.32 Total consolidated income attributable to ownersofparentcompany...... 16,129,619.29 902,246.42 19,505,454.62 Total consolidated income attributable to minority shareholders...... 76,431,338.08 43,895,658.83 83,146,735.70
6 Summary Consolidated Cash Flow Statement of the Issuer Year ended 31 December 2014 2015 2016 (RMB) (RMB) (RMB) (audited) (audited) (audited) Cash flows of operating activities: Cash received from sales of commodities or rendering of laborservice...... 11,428,778,691.04 12,908,024,349.28 17,012,098,185.75 Taxrebatesreceived...... 2,030,827.74 17,207,235.05 2,200,727.18 Othercashreceivedrelatingtooperatingactivities..... 1,537,820,187.33 1,316,657,966.17 2,048,564,442.07 Subtotal of cash inflows of operating activities ...... 12,968,629,706.11 14,241,889,550.50 19,062,863,355.00 Cash paid for purchasing commodities or receiving labor services...... 10,103,997,813.32 11,425,581,105.79 15,201,009,392.91 Cashpaidtoandforemployees...... 1,120,036,257.07 1,288,710,520.61 1,071,420,682.84 Cashpaidfortaxesandsurcharges...... 538,197,439.13 546,446,988.63 308,279,755.36 Cashpaidforotheroperatingactivities...... 497,392,435.79 520,846,386.32 2,102,344,609.34 Subtotal of cash outflows of operating activities ...... 12,259,623,945.31 13,781,585,001.35 18,683,054,440.45 Net cash flows from operating activities ...... 709,005,760.80 460,304,549.16 379,808,914.55 Cash flows from investing activities: Cashreceivedfromreturnofinvestments...... 70,000,000.00 1,541,803,375.33 481,845,168.88 Cashreceivedfrominvestmentincome...... 27,221,040.44 50,707,927.30 18,315,834.80 Net cash received from disposal of fixed assets, intangible assetsandotherlong-termassets...... 5,646,331.92 4,544,238.15 32,163.36 Net cash received from disposal of subsidiaries and other business units Other cash received relating to investingactivities...... 146,608.20 334,599,283.86 140,892.83 Subtotal of cash inflows of investing activities ...... 103,013,980.56 1,931,654,824.64 500,334,059.87 Cash paid from purchase and construction of fixed assets, intangible assets and other long-termassets...... 1,773,981,204.92 4,557,342,603.20 1,407,023,498.19 Cashpaidforinvestments...... 1,951,866,112.00 431,240,000.00 815,012,564.14 Net cash paid for acquisition of subsidiaries and other business units Othercashpaidrelatingtoinvestingactivities...... 60,370,459.78 3,700,000.00 – Subtotal of cash outflows of investing activities ...... 3,786,217,776.70 4,992,282,603.20 2,222,036,062.33 Net cash flows from investing activities ...... -3,683,203,796.14 -3,060,627,778.56 -1,721,702,002.46 Cash flows from financing activities: Cashreceivedfromattractinginvestment...... 1,501,500,000.00 134,064,297.90 200,000,000.00 Cashreceivedfromborrowings...... 18,520,420,443.36 25,435,207,362.76 27,206,804,584.47 Othercashreceivedrelatingtofinancingactivities..... 740,483,698.19 562,961,991.50 5,899,285,802.35 Subtotal of cash inflows of financing activities .... 20,762,404,141.55 26,132,233,652.16 33,306,090,386.82 Cashrepaymentsofamountsborrowed...... 13,876,500,937.98 19,418,519,531.48 24,723,151,368.53 Cash payments for distribution of dividends or profitorcashpaymentsofinterest...... 1,857,386,092.73 2,747,463,800.50 2,848,674,410.73 Including: Dividend and profits paid by subsidiaries to minority shareholders Othercashpaymentsrelatingtofinancingactivities..... 2,935,860,173.73 1,570,000,773.77 5,483,372,754.69 Subtotal of cash outflows of financing activities.... 18,669,747,204.44 23,735,984,105.75 33,055,198,533.95 Net cash flows from financing activities ...... 2,092,656,937.11 2,396,249,546.41 250,891,852.87 Effect of exchange rate change upon cash and cash equivalent ...... 130,193.22 2,237,233.95 3,922,320.76 Net increase of cash and cash equivalents...... -881,410,905.01 -201,836,449.04 -1,087,078,914.28 Add: Beginning balance of cashes and cash equivalents . . 4,422,904,340.84 3,541,493,435.83 3,339,656,986.79 Ending balance of cashes and cash equivalents ...... 3,541,493,435.83 3,339,656,986.79 2,252,578,072.51
7 Other Financial Data As at 31 December 2014 2015 2016 Adjusted EBITDA (RMB millions)(1) ...... 862.9 661.1 1,384.9 EBITDA (RMB millions)(2)...... 875.8 713.1 1,414.4 Total debt (RMB millions)(3)...... 23,704.6 28,980.4 32,969.7 Totaldebt/AdjustedEBITDA...... 27.5 43.8 23.8 Netdebt(RMBmillions)(4) ...... 19,228.9 24,586.4 30,717.1 Adjusted EBITDA Margin(5) ...... 6.7% 4.7% 8.5%
Notes:
(1) Adjusted EBITDA equals EBITDA after deducting loss on impairment of assets. Adjusted EBITDA is not a standard measure under PRC GAAP or IFRS. Adjusted EBITDA is a widely used financial indicator of a company’s ability to service and incur debt. Adjusted EBITDA should not be considered in isolation or construed as an alternative to cash flow, net income or any other measure of performance or as an indicator of the Issuer’s operating performance, liquidity, profitability or cash flows generated by operating, investing or financing activities. In evaluating Adjusted EBITDA, the Issuer believes that investors should consider, among other things, the components of Adjusted EBITDA and the amount by which Adjusted EBITDA exceeds capital expenditures and other charges. The Issuer has included Adjusted EBITDA because it believes that it is a useful supplement to the cash flow data as a measure of the Issuer’s performance and its ability to generate cash flows from operations to cover debt service and taxes. Adjusted EBITDA presented herein may not be comparable to similarly titled measures presented by other companies. Investors should not compare the Issuer’s Adjusted EBITDA to Adjusted EBITDA presented by other companies because not all companies use the same definitions.
(2) EBITDA equals, for the relevant year, total operating income after deducting operating cost, business tax and surcharges, selling expenses and management expenses and before depreciation of fixed assets, amortization of intangible assets and loss on impairment of assets. EBITDA is not a standard measure under PRC GAAP or IFRS. EBITDA is a widely used financial indicator of a company’s ability to service and incur debt. EBITDA should not be considered in isolation or construed as an alternative to cash flow, net income or any other measure of performance or as an indicator of the Issuer’s operating performance, liquidity, profitability or cash flows generated by operating, investing or financing activities. In evaluating EBITDA, the Issuer believes that investors should consider, among other things, the components of EBITDA and the amount by which EBITDA exceeds capital expenditures and other charges. The Issuer has included EBITDA because it believes that it is a useful supplement to the cash flow data as a measure of the Issuer’s performance and its ability to generate cash flows from operations to cover debt service and taxes. EBITDA presented herein may not be comparable to similarly titled measures presented by other companies. Investors should not compare the Issuer’s EBITDA to EBITDA presented by other companies because not all companies use the same definitions.
(3) The Issuer calculates total debt as short-term borrowings plus non-current liabilities maturing within one year, long-term borrowings and long-term bonds. Investors should not compare the Issuer’s total debt to total debt presented by other companies because not all companies use the same definition.
(4) The Issuer calculates net debt as total debt less monetary funds. Investors should not compare the Issuer’s net debt to net debt presented by other companies because not all companies use the same definition.
(5) Adjusted EBITDA Margin equals Adjusted EBITDA divided by total operating income. Investors should not compare the Issuer’s Adjusted EBITDA Margin to Adjusted EBITDA Margin presented by other companies because not all companies use the same definition.
8 THE ISSUE
The following contains summary information about the Bonds and is qualified in its entirety by the remainder of this Offering Circular. Some of the terms described below are subject to important limitations and exceptions. Words and expressions defined in ‘‘Terms and Conditions of the Bonds’’ and ‘‘The Global Certificate’’ shall have the same meanings in this summary. For a more complete description of the terms of the Bonds, see ‘‘Terms and Conditions of the Bonds’’.
Issuer ...... QinghaiProvincialInvestmentGroupCo.,Ltd（青海省投資集團有限公 司）.
Bonds ...... U.S.$[•] aggregate principal amount of [•] per cent. bonds due [•].
Issue Price...... [•] per cent. of the principal amount.
Form and Denomination. The Bonds will be issued in registered form in the denomination of U.S.$200,000 and integral multiples of U.S.$1,000 in excess thereof.
Interest ...... TheBondswillbearinterestatarateof[•] per cent. per annum.
Interest Payment Dates. . The Bonds bear interest from and including [•], payable semi- annually in arrear on [•]and[•]ineachyear,commencingon[•].
Issue Date ...... [•].
Maturity Date ...... [•].
Status of the Bonds . . . . The Bonds will constitute direct, unconditional, unsubordinated and (subject to Condition 4(a) of the Terms and Conditions of the Bonds) unsecured obligations of the Issuer and and shall at all times rank pari passu and without any preference among themselves. The payment obligations of the Issuer under the Bonds shall, save for such exceptions as may be provided by applicable legislation and subject to Condition 4(a) of the Terms and Conditions of the Bonds, at all times rank at least equally with all the Issuer’s other present and future unsecured and unsubordinated obligations.
Events of Default ...... Upontheoccurrenceandcontinuationofcertaineventsdescribedunder ‘‘Terms and Conditions of the Bonds – Events of Default’’,theTrusteeat its discretion may, and if so requested in writing by holders of at least 25 per cent. in the aggregate principal amount of the Bonds then outstanding or if so directed by an Extraordinary Resolution, shall (provided in any such case that the Trustee shall have been indemnified and/or secured and/or pre-funded to its satisfaction) give notice to the Issuer declaring the Bonds are, and they shall immediately become, due and payable, at their principal amount together (if applicable) with any accrued and unpaid interest.
Taxation ...... Allpaymentsofprincipal,premium(ifany)andinterestbyoronbehalf of the Issuer in respect of the Bonds shall be made free and clear of, and without withholding or deduction for, any present or future taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by the PRC or any political subdivision or authority therein or thereof having power to tax, unless such withholding or deduction is required by law, as further described in Condition 8 of the Terms and Conditions of the Bonds.
9 Where such withholding or deduction is made by the Issuer by or within the PRC at the rate of up to and including the Applicable Rate (as defined in the Terms and Conditions of the Bonds), the Issuer will increase the amounts paid by it to the extent required, so that the net amount received by Bondholders equals the amount which would otherwise have been receivable by them had no such withholding or deduction been required.
If the Issuer is required to make a deduction or withholding in respect of PRC tax in excess of the Applicable Rate, the Issuer shall pay such additional amounts as will result in receipt by the Bondholders of such amounts as would have been received by them had no such withholding or deduction been required. See ‘‘Terms and Conditions of the Bonds – Taxation’’.
Final Redemption...... Unlesspreviouslyredeemed,orpurchasedandcancelled,theBonds will be redeemed at their principal amount on the Maturity Date (as defined in the Terms and Condition of the Bonds).
Tax Redemption ...... TheBonds may be redeemed at the option of the Issuer in whole, but not in part, at any time, on giving not less than 30 nor more than 60 days’ notice to the Bondholders (which notice shall be irrevocable) at their principal amount, together with interest accrued to, the date fixed for redemption, if (i) the Issuer satisfies the Trustee immediately prior to the giving of such notice that the Issuer has or will become obliged to pay Additional Tax Amounts (as defined in the Terms and Conditions of the Bonds) as a result of any change in, or amendment to, the laws or regulations of the PRC or any political subdivision or any authority thereof or therein having power to tax, or any change in the application or official interpretation, or any statement of an official position with respect to, such laws or regulations including but not limited to any decision by a court of competent jurisdiction, which change or amendment becomes effective on or after [•] 2017; and (ii) such obligation cannot be avoided by the Issuer taking reasonable measures available to it, provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer would be obliged to pay such Additional Tax Amounts were a payment in respect of the Bonds then due. See ‘‘Terms and Conditions of the Bonds – Redemption and Purchase – Redemption for Taxation Reasons’’.
Redemption for Relevant Following the occurrence of a Relevant Event, the holder of any Bond Events ...... will have the right, at such holder’s option, to require the Issuer to redeem all but not some only of that holder’s Bonds on the Put Settlement Date at 101 per cent. (in the case of a redemption for a Change of Control) or 100 per cent. (in the case of a redemption for a No Registration Event) of their principal amount, together in each case with accrued interest up to but excluding such Put Settlement Date. See ‘‘Terms and Conditions of the Bonds – Redemption and Purchase – Redemption for Relevant Events’’.
10 Further Issues ...... TheIssuermayfromtimetotimewithouttheconsentoftheBondholders to create and issue further securities having the same terms and conditions as the Bonds in all material respects (or in all material respects save for the first payment of interest on them and the timing for complying with the Registration Conditions and the NDRC Post-issue Filing) and so that such further issue shall be consolidated and form a single series with the outstanding Bonds. See ‘‘Terms and Conditions of the Bonds – Further Issues’’.
Governing Law ...... TheTrustDeed,theAgencyAgreementandtheBondsandanynon- contractual obligations arising out of or in connection with them are governed by, and shall be construed in accordance with, English law.
Trustee ...... TheBankofNewYorkMellon,LondonBranch.
Registrar and Transfer Agent...... TheBankofNewYorkMellon,SA/NV,LuxembourgBranch.
Principal Paying Agent. . The Bank of New York Mellon, London Branch.
Clearing Systems ...... TheBondswillberepresentedbybeneficialinterestsintheGlobal Certificate, which will be registered in the name of a nominee for, and deposited on the Issue Date with, a common depositary for Euroclear and Clearstream. Beneficial interests in the Global Certificate will be shown on, and transfers thereof will be effected only through records maintained by, Euroclear and Clearstream. Except in the limited circumstances described in the Global Certificate, certificates for Bonds will not be issued in exchange for beneficial interests in the Global Certificate.
Listing ...... ApprovalinprinciplehasbeenobtainedfromtheSGX-STforthelisting and quotation of the Bonds on the Official List of the SGX-ST. The Bonds will be traded on the SGX-ST in a minimum board lot size of U.S.$200,000 (or its equivalent in other currencies) for as long as any of the Bonds are listed on the SGX-ST and the rules of the SGX-ST so require.
Selling Restrictions . . . . The Bonds will not be registered under the Securities Act or under any state securities laws of the United States and will be subject to customary restrictions on transfer and resale. See ‘‘Subscription and Sale’’.
Ratings ...... TheBondsareexpectedtoberated‘‘BB-’’ by S&P Global Ratings and ‘‘BB’’ by Dagong Global Credit Rating (Hong Kong) Co., Ltd.. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the relevant rating organisation.
Use of Proceeds ...... See‘‘Use of Proceeds’’
ISIN ...... XS1613685475.
Common Code ...... 161368547.
11 RISK FACTORS
Any investment in the Bonds is subject to a number of risks. Prior to investing in the Bonds, prospective investors should carefully consider risk factors associated with any investment in the Bonds, the businesses of the Group and the industries in which it operates together with all other information contained in this Offering Circular, including, in particular the risk factors described below. Words and expressions defined in the ‘‘Terms and Conditions of the Bonds’’ or elsewhere in this Offering Circular have the same meanings in this section.
The following is not an exhaustive list or explanation of all risks which investors may face when making an investment in the Bonds and should be used as guidance only. Additional risks and uncertainties relating to the Group that are not currently known to the Issuer or that they currently deem immaterial, may individually or cumulatively also have a material adverse effect on the businesses, prospects, results of operations and/or financial position of the Group and, if any such risk should occur, the price of the Bonds may decline and investors could lose all or part of their investment. Investors should consider carefully whether an investment in the Bonds is suitable for them in light of the information in this Offering Circular and their personal circumstances.
RISKS RELATING TO THE GROUP’SBUSINESS
The Group’s businesses are vulnerable to downturns in the general economy and industries in which the Group operates or which the Group serves. A reduction in demand or supply could materially and adversely affect the Group’s business, financial condition and results of operations.
Demand for the Group’s primary aluminium and fabricated aluminium products depends on the general economy and level of activity and growth in the industries which the Group serves, such as automobiles, construction, metalware, electronics and packaging. Development of the relevant industries is subject to various factors, including but not limited to market fluctuations of prices of commodities, macroeconomic policies, general political or economic conditions, technological development, government investment plans, fluctuations in global production capacity and consumer spending, many of which are beyond the Group’s control. Unfavourable global financial or economic conditions could materially and adversely affect the Group’s sales volumes. Furthermore, the PRC government has, from time to time, adjusted its monetary, fiscal and other policies and measures for stable economic growth and to revolve the overcapacity in certain industries or markets. As a result, the global as well as China’s economy and the particular industry in which the Group operates or which it serves may grow at a pace slower than expected or even experience a downturn.
Volatility in the price of primary aluminium could adversely affect the Group’s business, financial condition and results of operations.
The price of primary aluminium has experienced fluctuations in response to changing resource availability, government policies, costs of production, global and regional economic conditions, demand in end markets for products in which the commodities are used, technological developments, including commodity substitutions, fluctuations in global production capacities and the level of global inventories, many of which are beyond the Group’s control. There is no assurance that there will be no significant decrease in the price of primary aluminium in the future. Any significant decrease in the price of primary aluminium may materially and adversely affect the Group’s businesses, financial condition and results of operations.
The Group relies on third party suppliers for alumina and coal which exposes the Group to fluctuations of the prices and supplies of the materials.
The Group relies on third party suppliers in China to supply alumina for its aluminium production business and to an extent coal for its thermal power generation business. The prices of these materials that the Group needs could be affected by a number of factors, including supply and demand in the
12 market, changes in the import taxes and duties of China, geopolitical conditions and economic conditions in China, global economic conditions and changes to environmental and regulatory requirements in China and/or in other parts of the world. Any significant increase in the costs of these materials may increase its cost of goods and sales and hence negatively affect its profit margin and, more generally, its businesses, financial condition, results of operations and prospects.
A reduction in, or lack of availability of, raw materials or interruptions in the supply chain could also affect the Group’s profitability to the extent that it is required to pay higher prices for, or is unable to secure adequate supplies of, the necessary raw materials. If any supplier of raw material to the Group ceases or limits production, raises prices of its products or sells its products to other buyers, the Group’s production may be adversely affected and the Group may incur significant extra costs, including capital costs, for finding reliable and affordable alternative raw material suppliers.
The Group’s aluminium production operations consume substantial amounts of electricity and the Group’s profitability may decline if energy costs rise or if its energy supplies are interrupted The Group’s aluminium operations consume substantial amounts of electricity. Although the Group generally expects to meet the power requirements from its own thermal power operations and from entering into electricity supply contracts, which are renewed on an annual basis with third party providers, its results of operations may be materially and adversely affected by significant increases in electricity costs and any changes to the terms of the electricity supply contracts.
The industries in which the Group operates are heavily regulated and changes in China’s regulations and policies on such industries may materially and adversely affect the Group’s businesses, financial condition and results of operations.
The PRC government may exert significant influence on the non-ferrous industry in China by implementing industry policies and other economic measures, such as those relating to credit and financing, land use, governmental approval of new projects, environmental protection, technological and capacity requirements of production facilities and foreign investment. These industry policies and economic measures may significantly reduce the level of construction activities and capital investments in China’s non-ferrous industry, which in turn could materially and adversely affect the Group’s businesses, financial condition and results of operations.
The PRC government has implemented a series of policies and regulations designed to prevent or curb overcapacity in, and to enhance the production efficiency and global core competency of, China’snon- ferrous metals industry, such as, in April 2011, the Urgent Circular Concerning Curbing Overcapacity andRepeatedConstructionoftheElectrolyticAluminium Industry and Guiding the Healthy Development of the Industry（關於遏制電解鋁行業產能過剩和重複建設引導產業健康發展的緊急通 知）was issued and, in December 2011, the Ministry of Industry and Information Technology officially issued the Twelfth Five Year Plan of Non-ferrous Metal Industry which mainly focused on strictly controlling the expansion of production capacity, eliminating obsolete smelting capacity in a regular manner, developing aluminium products with refined and advanced processing technologies and encouraging industry consolidation. In July 2013, the Ministry of Industry and Information Technology issued the Regulatory Conditions for the Aluminium Industry（鋁行業規範條件）, which introduced a higher admission standard for the guidance and regulation of industry development. On 6 October 2013, the State Council issued Guiding Opinions on Resolving Serious Production Overcapacity Conflicts（關 於化解產能嚴重過剩矛盾的指導意見）, focusing on restraining the overexpansion of production capacity, banning projects of building new capacity, rectifying illegal production and encouraging technology improvements. On 13 December 2013, NDRC and the Ministry of Industry and Information Technology jointly issued the Notice of Implementing Tiered Tariff Policies for Electrolytic Aluminium Enterprises（關於電解鋁企業用電實行階梯電價政策的通知）, which intended to leverage different electricity prices to retire obsolete production capacity, reduce the over-consumption of resources and promote the structural adjustment of China’s aluminium industry. In addition, the NDRC also issues the Guiding Catalogue for Adjustment in the Structure of Industries（產業結構調整指導目錄）from time to
13 time in order to formulate development plans for non-ferrous metal industries in China. On the other hand, the transformation of China’s non-ferrous metals industry may result in limitations on the expansion of production scale, reductions in investments in additional production capacity and uncertainties associated with business reorganisations and consolidations, which could present significant challenges for the Group’s business.
These laws, regulations and governmental policies relating to China’s non-ferrous metals industry are subject to changes which may impose significant costs or limitations on the way the Group conducts or expands its business, such as those affecting the extent to which the Group can engage in, or charge fees for, specific businesses. The changes in the laws, regulations and other governmental policies may have significant impact on the Group’s business, and the Group may not be able to adapt to such changes on a timely basis. Moreover, there may be uncertainties regarding the interpretation and application of new laws, regulations and other governmental policies. Failure to comply with the applicable laws, regulations and other governmental policies may result in fines, restrictions on the Group’s activities or other adverse consequences, which could materially and adversely affect the Group’s business, financial condition and results of operations.
The Qinghai provincial government can exert significant influence on the Group, which may cause the Group to make decisions not in its best interest.
As a majority-owned investment platform of Qinghai SASAC, the Group collaborates with various governmental authorities and their controlled entities in Qinghai province. Although the Group believes that it currently maintains close working relationships with those governmental authorities and entities relevant to its businesses, there can be no assurance that these relationships will continue to be maintained on good terms in the future. Local governments and the government-controlled entities with which the Group collaborates may (i) have economic or business interests or consideration that are inconsistent with those of the Group’s; (ii) take actions contrary to the Group’s requests, policies or objectives; (iii) be unable or unwilling to fulfil their obligations; (iv) have financial difficulties; (v) have disputes with the Group as to contractual terms or other matters; or (vi) place higher priority in public interest over the Group’s profitability. If there are any material disagreements between the Group and any governmental authorities or any of the government-controlled entities, there can be no assurance that the Group will be able to successfully resolve them in a timely manner.
In addition, disputes with public bodies may last for considerably longer periods of time than those with private sector counterparties, and payments from the public bodies may be delayed as a result. Any of these may materially and adversely affect the business relationships between the Group and the relevant governmental authorities and/or governmental entities, which may in turn materially and adversely affect the Group’s business, financial condition, results of operations and prospects.
Failure to optimise the Group’s aluminium production business will adversely affect the Group’s profits.
The Group’s primary source of profits and revenue comes from its aluminium production business which focuses primarily on the direct sales of primary aluminium and, in part, on the processing of fabricated aluminium products. Since 2012, due to the general slowdown of the global economy and overcapacity of the global aluminium industry, profit derived from sale of the Group’s primary aluminium has decreased. In response to this decline in profit, the Group is focused on further developing its fabricated aluminium products business in order to generate higher profit margins and improve the Group’soverall profitability. However, given that the direct sales of primary aluminium is, at present, still the main source of revenue for the Group, if the Group is unable to sufficiently increase its development and sales of fabricated aluminium products in the near future, the Group’s financial condition and results of operations may be adversely affected.
14 If any of the Group’s large customers for primary aluminium and fabricated aluminium products reduces its purchases of, or fails to pay for, the Group’s products, the Group’s business, financial condition and results of operations will be materially and adversely affected.
For the year ended 31 December 2016, the Group’s five largest primary aluminium customers accounted forover46%ofthetotalsalesofprimary aluminium while the Group’s five largest fabricated aluminium products customers accounted for over 57% of the total sales of fabricated aluminium products. The Group’s business, financial condition and results of operations will continue to depend on: (i) its ability to continue to obtain purchase orders from its customers; (ii) the financial condition and commercial success of its customers; and (iii) factors that affect the development of the aluminium industry and the industries that the customers operate in. There can be no assurance that the Group will be able to retain any of its large customers or any other key customers, or that these customers will place orders with the Group in the future at the same levels as in prior periods. If any of the foregoing events occurs, especially with respect to the Group’s large customers, the Group would experience a material and adverse effect on its business, financial condition and results of operations.
The thermal power generation business consumes substantial amounts of coal, and the Group’s operations may be adversely affected if the Group is unable to procure sufficient coal or if coal prices rise significantly.
The Group relies heavily on coal for its thermal power generation business. Although the Group relies to an extent on its own internal coal supplies, the Group also needs to rely on third party suppliers to supply the remaining portion of the coal. If there are shortages of coal, constraints on coal transportation, increases in coal prices, the Group’s operating margin, financial condition and results of operations could be adversely affected.
The Group’s aluminium business faces intensifying competition.
The Group’s aluminium businesses line faces increasing competition from other primary aluminium producers in China. Increasing competition in the Group’s key product markets may reduce the Group’s selling prices or sales volumes of aluminium products, which will have a material adverse effect on the Group’s financial condition and results of operations. If the Group is unable to price its aluminium products competitively, maintain or increase its current market share in China’s aluminium markets or otherwise maintain its competitiveness, the Group’s financial condition, results of operations and profitability could be materially and adversely affected.
The Group’s hydroelectricity generation business is subject to seasonal fluctuations The Group’s hydroelectricity generation business has experienced, and expects to continue to experience seasonal fluctuations in its operations during the winter season. During the winter season, the Group’s operations are affected by environmental factors such as snow, frost and lower water levels. The Group’s revenue, cash flow and results of operations for its hydroelectricity generation business may be affected as a result.
The Group’s coal mining operations have limited mine life cycles and eventual closure of these operations will entail costs and risks regarding ongoing monitoring, rehabilitation and compliance with environmental standards.
The Group’s existing coal mining operations in China have limited mine life cycles and will eventually be depleted. The Group needs to perform certain procedures to remedy and rehabilitate the environmental and social impact its mining operations have had on local communities and the environment. Remediation, rehabilitation, closure and removal of the Group’s facilities will incur various costs and are subject to various risks. There is no assurance that such closure of mines will be successful and without any delays or additional costs, in which case the Group may be subject to
15 increased costs, penalties or other administrative actions, damage to reputation, even suspension and cancellation of mining permits, the occurrence of which would cause a material and adverse effect to the Group’s businesses, 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 the Group’s current resource base could negatively affect the Group’s businesses, financial condition and results of operations.
Although the Group has undertaken exploration projects for mineral resources, exploration projects are unpredictable in nature. The success of any exploration projects depends on various factors, many of which are beyond the Group’s control. Due to the unpredictable and speculative nature of the mining industry, there is no assurance that any exploration programme that the Group is currently undertaking or may undertake in the future will result in the discovery of valuable reserves or resources. If the Group is unable to discover any useful reserves or resources from its exploration projects, this may adversely affect the Group’s core business operation and financial conditions in the long term.
The Group may experience a shortage of reliable and adequate transport capacity for its products. Any disruption in transportation of its products or any material increase in transportation costs could have a material adverse effect on its businesses, financial condition and results of operations.
The Group’s operations require the reliable transportation of raw materials and supplies to the Group’s refining and smelting sites and finished products to its customers. The Group’s primary aluminium and fabricated aluminium products are delivered to the Group’s customers primarily by railway or trucks. There is no assurance that the Group will always enjoy sufficient transportation capacity or the transportation of the Group’s products will not experience interruption in the future. Furthermore, natural disasters may cause interruption to the transportation system, which could in turn affect the transportation of its products. In addition, any changes in fuel prices or fuel supply may be unpredictable and beyond the Group’s control. There is no assurance that a shortage of fuel will not occur in the future. Any surge in fuel prices or shortage of fuel supply may lead to increases in the Group’s operating and transportation costs. If the Group is unable to make timely deliveries due to logistical and transportation disruptions, or transfer the increased costs to its customers, the Group’s production, reputation and results of operations may be adversely affected.
The Group is subject to administrative policies and orders relating to China’s Energy-Saving and Emission Reduction Goals that could adversely affect the Group’s production of alumina and aluminium.
The Group is 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 18 July 2013, the Ministry of Industry and Information Technology of the PRC issued the Standard Conditions for Aluminium Industry, which sets forth various standards for existing and new projects, including standards for environment protection, energy consumption, and utilisation of resources. In order to meet these standards, the Group may be required to update its equipment and improve its technology, which could delay its production or result in additional costs and expenses. The occurrence of any of the foregoing could have an adverse effect on the Group’s business, results of operations and financial condition.
The Group incurred operating losses and low earnings in the past and has experienced low liquidity and substantial volatility in its operating cash flow which may adversely affect its ability to pay taxes and repay interest on outstanding debt and limit its ability to achieve or sustain profitability in the future.
The Group has experienced operating losses and low earnings in the past. For the year ended 31 December 2015, the Issuer recorded an operating loss of RMB505.0 million although it recorded an operating gain of RMB32.3 million for the year ended 31 December 2016. The Group has also
16 experienced low liquidity and substantial volatility in its operating cash flow given that the Group’s main source of profit derived from its primary aluminium business has decreased in the past few years. For the years ended 31 December 2014, 2015 and 2016, the Group’s recorded net operating cash flow fell from RMB709.0 million to RMB460.3 million, and fell further to RMB387.9 million, respectively. The Group also has negative net cash flows from investing activities as of 31 December 2015 and 2016 and its current liabilities exceeded its current assets as of 31 December 2014, 2015 and 2016. Furthermore, the Group has continued to invest in capital intensive projects to enhance the vertical integration among its business segments in order to improve the Group’s long-term profitability. As a result, the Group’s ability to pay taxes and repay interest on outstanding debt while at the same time having to invest in capital intensive projects and replenish its working capital may be adversely affected.
Furthermore, the Group expects that it will continue relying on bank and other borrowings as well as debt financing to fund its business operations. The Group’s borrowing costs and access to the debt capital markets depends on the Group’s credit standing. A history of operating losses, further increase in total current liabilities and significant increase in capital expenditures may result in a deterioration of the Group’s credit standing, which could increase the Group’s borrowing costs and limit the Group’s access to the capital markets, which in turn, could reduce the Group’s earnings and adversely affect the Group’s liquidity.
The Group requires significant capital investment for its businesses and has a significant amount of indebtedness and may continue to incur substantial additional indebtedness in the future, which could adversely affect the Group’s financial position. A substantial portion of the Group’sassetshavealso been provided as security.
The Group’s expansion plans requires significant capital investment. The Group has relied, and expects to continue to rely, on both short-term and long-term borrowings to fund a significant portion of its capital requirements. The Group’s past substantial indebtedness and net current liabilities could cause serious consequences, including, but not limited to, limiting its ability to repay outstanding debt, making it more vulnerable to adverse economic and industry conditions, forcing the Group to dedicate a substantial portion of cash flow from its operations to service and repay its debts, thereby reducing its cash flow available for working capital, capital expenditures and other general corporate purposes and limiting its ability to borrow more funds in the future and/or increasing the Group’s financing costs. A substantial portion of the Group’s assets have also been provided as security in order to secure funding from lenders which limits liquidity for the Group. The Group’s ability to meet its respective payment and other obligations under its outstanding debt depends on the Group’s ability to generate cash flows, seek further funding or to refinance such debt. There is no assurance that its business will generate sufficient cash flows from operations to satisfy its obligations under the Group’s outstanding debt and to fund other liquidity needs. If the Group is not able to generate sufficient cash flows to meet such obligations, the Group may need to refinance or restructure its debt, reduce or delay capital investments, or seek additional equity or debt financing. Interest rate volatility can make if difficult for the Group to make plans and implement its strategies. There is no assurance that future financing will be available in amounts or on terms acceptable to it, if at all.
The Group is subject to inventory risks.
The Group inventories raw materials to minimise the effect of the market volatility of and fluctuations in raw materials prices as well as finished goods. However, any sudden decrease in the market demand and the corresponding unanticipated drop in the sales of the relevant goods or any failure of the Group in successfully maintaining the flexibility in its raw materials supply arrangements could cause the Group’s inventory to accumulate or depreciate in value, which may adversely affect the Group’sbusinesses, financial condition and results of operations.
17 The Group may have difficulties in ensuring that it has sufficient internal control measures with respect to its expanding business operations.
As the Group continues to expand its business operations, the Group’s internal control measures may not be implemented satisfactorily throughout the Group due to the increasing number of subsidiaries in the Group. The Group may from time to time encounter difficulties in monitoring compliance with its internal control policies and procedures and the relevant laws and regulations by its subsidiaries and its managerial and other employees. As the Group streamlines the operations of the Group’svarious subsidiaries and operations, the Group aims to continue to strengthen its management and internal control mechanisms to address such integration issues, through various measures such as the integrated management of the Group’s financial data, risk management, consolidation of internal resources and a uniform information system. However, the Group cannot guarantee that it will be able to implement internal control mechanisms that will sufficiently respond to the Group’s expanding business operations, nor can the Group guarantee that its employees will not, in their personal capacity, act in such a way that contravenes the Group’s internal control procedures.
The Group is subject to extensive environmental, safety and health laws and regulations.
Mining and resources companies, such as the Group, are subject to extensive environmental, safety and health laws and regulations in the various jurisdictions in which they operate, as well as international standards. These regulations and standards establish limits and conditions on the Group’s ability to conduct its operations and govern, among other things, extraction, mineral processing, use and conservation of water resources; air emissions; water treatment and discharge; regulatory and community reporting; clean-up of contamination; community health; and the generation, transportation, storage and disposal of solid and hazardous wastes. The implementation of the newly-amended Environmental Protection Law of the PRC（中華人民共和國環境保護法）, Production Safety Law of the PRC（中華人 民共和國安全生產法）and Atmospheric Pollution Prevention and Control Law of the PRC（中華人民共 和國大氣污染防治法）, imposes higher requirements on the environmental protection ability of an enterprise. As the Group’s production and operations involve coal and non-coal mines, construction, dangerous chemicals and other high-risk activities, any safety or environmental accident may have a material adverse impact on the financial condition and the reputation of the Group.
The Group’s business activities discharge waste water, generate gas emissions and produce hazardous substances at its mines and plants, and therefore the Group incurs costs to comply with environmental safety and health laws and regulations. The Group could face fines, penalties and other sanctions, clean- up costs, and third-party claims for personal injury or property damage, suffer reputational damage, or be required to install costly pollution control equipment or to modify or suspend operations, as a result of actual or alleged violations of environmental laws and regulations or the terms of the Group’s operation permits. For example, in October 2013, Qinghai Bridge Electric Industrial Co., Ltd.（青海橋電 實業有限公司）(‘‘Qinghai Bridge Electric’’) was fined RMB50,000 for poor pollution control by the department of environmental protection of the Datong Hui and Tu Autonomous County (‘‘Datong EPD’’). The Group subsequently invested in 500,000 fibre blankets to cover the ash dump to prevent secondary dust pollution in compliance with Datong EPD’s requirements. In December 2014, Qinghai Sanjiang Hydropower Development Co., Ltd.（青海省三江水電開發股份有限公司）(‘‘Qinghai Sanjiang’’) was fined an administrative penalty of RMB100,000 for starting construction without undergoing an environmental impact assessment procedure for Dahejia Hydropower Station（大河家水電 站）. The environmental impact assessment report for Dahejia Hydropower Station has since been approved by the environmental protection department of Qinghai province. In 2013, Qinghai Ruihe Aluminium Foil Co., Ltd.（青海瑞合鋁箔有限公司）(‘‘Qinghai Ruihe’’)wasfoundtobeinviolationof regulations for waste water discharge on two occasions by the environmental protection bureau of Xining City and in October 2015, Qinghai Ruihe was fined an administrative penalty for excessive waste water discharge. The Group has since invested RMB6.8 million to reconstruct waste water treatment facilities and commissioned Jiangsu Tianyu Environmental Protection Group Co., Ltd.（江蘇天 雨環保集團有限公司）to operate the waste water treatment facilities. The additional costs and requirements may adversely affect the Group’s results of operations and financial condition.
18 Failure to comply with regulatory requirements, including licensing requirements for the Group’s businesses could subject it to litigation, negative publicity, significant fines or other government sanctions.
The Group is required to obtain and maintain various licenses and permits for its aluminium production, electricity generation, mining and sale of coal and other ancillary businesses. Failure to comply with the terms and conditions of such permits and licences or any potential changes to regulatory requirements by regulatory authorities may subject the Group to monetary penalties or jeopardise its ability to qualify for new permits and licences or to renew required permits and licences upon the expiration of the current terms. There can be no assurance that the Group will be able to renew such permits, licences or other certificates upon their expiration. If the Group fails to obtain, renew or maintain any of the required permits or approvals and it continues to conduct such business, the Group may be subject to litigation, negative publicity, significant fines or other government sanctions which could materially and adversely affect the business, results of operations, financial condition and prospects of the Group.
The Group’s businesses involve inherent risks and occupational hazards, which could damage the Group’s reputation, subject it to liability claims and cause substantial costs to the Group. The Group may also not have sufficient insurance coverage. The Group’s businesses involve inherent risks and occupational hazards. For instance, under its coal mining operations and aluminium production businesses, the Group engages 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 the Group is 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. Additionally, the Group is 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. In the past few years, there have a number of reported work-related injuries and fatalities. For example, on 13 August 2014, during a dust cleaning project at one of the electricity generators of Qinghai Bridgehead Aluminium Co., Ltd.（青海橋頭鋁電股份有限公司）(‘‘Qinghai Bridgehead’’), the contractor commissioned by the Group was involved in an accident whereby one of its tower cranes tipped over resulting in the death of one worker. The matter was investigated and it was concluded that the Group was not responsible for the accident. Any of these consequences, to the extent they are significant, could result in business interruption, possible legal liability and damage to the Group’s business reputation and corporate image. Although the group carries insurances in line with the customary practice in China, there is no assurance that the insurance taken on by the Group is sufficient, in which case, the Group’s results of operations may be materially and adversely affected.
Failure to hire and retain management executives, technicians and other qualified personnel could adversely affect the Group’s business and prospects.
The growth of the Group’s business operations is dependent upon the continued service of its senior management team. The industry experience, expertise and contributions of the Group’s executives and other members of its senior management are essential to the Group’s continued success. The Group will require an increasing number of experienced and competent executives in the future to implement the Group’sgrowthplans.IftheGroupweretolosetheservicesofanyofitskeymanagementmembersand were unable to recruit and retain personnel with equivalent qualifications at any time, the management and growth of the Group’s businesses could be adversely affected. If the Group fails to attract and retain personnel with suitable managerial, technical or marketing expertise or to maintain an adequate labour force on a continuous basis, its business operations could be adversely affected and its future growth and expansions may be inhibited.
19 The Group may not be able to detect and prevent fraud or other misconduct committed by their respective employees, representatives, agents, customers or other third parties.
The Group may not be able to detect and prevent fraud or other misconduct committed by its employees, representatives, agents, customers or other third parties. The Group may be exposed to fraud or other misconduct committed by its employees, representatives, agents, customers or other third parties that could subject it to litigation, financial losses and sanctions imposed by governmental authorities, as well as affect its reputation. Such misconduct could include:
• hiding unauthorised 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 the Group 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 authorised limits;
• engaging in misrepresentation or fraudulent, deceptive or otherwise improper activities;
• engaging in unauthorised or excessive transactions to the detriment of the Group’scustomers;or
• otherwise not complying with the applicable laws or the Group’s internal policies and procedures.
The Group’s internal control procedures are designed to monitor its 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 the Group takes 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.
The Group faces litigation risks in the course of its business.
In the ordinary course of the Group’s business, claims involving project owners, customers, labour sub- contractors, joint venture partners and other parties may be brought against the Group or by the Group in connection with its contracts from time to time. Claims may be brought against the Group for alleged defective or incomplete work, related personal injuries and death, damage to or destruction of property, breaches of warranty and late completion of the project. The claims can involve actual damages and liquidated damages. If the Group was found to be liable on any of the claims against it, the Group would have to incur a charge against earnings to the extent that a reserve had not been established for the matter in its accounts, or to the extent that the claims were not sufficiently covered by its insurance. Claims brought by the Group against project owners may include claims for additional costs incurred in excess of current contract provisions arising out of project delays and changes in the initial scope of work. Claims between the Group and its labour sub-contractors and vendors may include claims similar to those described above.
20 Both claims brought against the Group and by the Group, if not resolved through negotiation, are often subject to lengthy and expensive litigation or arbitration proceedings such that the amounts ultimately realised from project claims by the Group could differ from the balances included in the Group’s financial statements. Such claims could therefore have a material adverse impact on the Group’s financial condition, results of operations and cash flow.
Failure to comply with the restrictions and covenants in the Group’s debt agreements could adversely affect the Group’s businesses, financial condition and results of operations.
If the Company or any of its subsidiaries is unable to comply with the restrictions and covenants in its current or future debt obligations and other agreements, there could be a default under the terms of such obligations or agreements. In the event of a default under these agreements, the holders of the debt could terminate their commitments to lend to the Company or its subsidiaries, accelerate repayment of the debt and declare all outstanding amounts due and payable or terminate the agreements. Furthermore, some of the debt agreements which the Company or its subsidiaries have entered into may contain cross- acceleration or cross-default provisions. As a result, default by the Company or its subsidiaries under any of such agreements may cause the acceleration of repayment of not only such debt but also other debt, including the Bonds, or result in a default under other debt agreements. If any of these events occurs, there is no assurance that the assets and cash flows of the Group would be sufficient to repay in full all of the debts as they become due, or that the Group would be able to find alternative financing on terms that are favourable or acceptable to the Group. In addition, in the course of securing bank loans, the Group may pledge the shares and assets of certain Groupentitiestothirdpartylenders.Intheevent of a default under such agreements, the relevant third party lenders may enforce such share pledges and this may result in a change in ownership of certain subsidiaries of the Group to the relevant third party lenders, which may have a material and adverse effect on the Group’s business, financial condition and results of operations.
The Group’s guarantee and leasing business may be exposed to credit risk relating to guarantees.
The Group provides guarantees primarily to enterprises concentrated in the non-ferrous coal industry for bank loans, financial leases and other economic contracts through its subsidiary Qinghai Tiancheng Credit Guarantee Co., Ltd.（青海天誠信用擔保有限責任公司）(‘‘Qinghai Tiancheng’’). As the guarantees are primarily given to enterprises within the non-ferrous coal industry, if there is a downturn in this industry and the guaranteed entities are unable to fulfill their obligations under their respective contracts requiring the Group to pay the outstanding debt obligations on behalf of the guaranteed entities, the Group’s financial condition and results of prospects could be materially and adversely affected.
The Group may not be successful at entering new business lines The Group may acquire new assets or businesses or invest in or enter into new business lines from time to time. One of the Group’s subsidiaries, Qinghai Jinrui Mining Development Co., Ltd.（青海金瑞礦業 發展股份有限公司）(‘‘Qinghai Jinrui’’) has previously entered into a purchase agreement to investing in an online internet gaming platform. The purchase was ultimately not completed as the acquisition target failed to meet the financial requirements set out in the purchase agreement. In addition, Qinghai Jinrui has also successfully acquired Chongqing Kinglong Fine Strontum Chemical Co., Ltd（重慶慶龍 精細鍶鹽化工有限公司）, which focuses on the production, processioning and research of strontium- related products.
The Group’s ability to benefit from such future investments will depend upon a number of factors, some of which are beyond its control. These factors include, but are not limited to, the Group’s ability to: maintain, expand or develop its customer relationships; identify assets or businesses for investments, identify additional new markets; work with other stakeholders; and train and retain qualified personnel to manage and operate its growing business and any new business lines. Further, the due diligence that the Group conducts in connection with any expansion or acquisition may not be sufficient to discover
21 unknown liabilities, and any contractual guarantees or indemnities that it receives from the sellers of acquired companies may not be sufficient to protect it from, or compensate it for, actual liabilities. Any unsuccessful expansion could adversely affect the Group’s reputation and reduce or prevent the realisation of the benefits of the acquisition and may have a material adverse effect on the Group’s business, financial position and results of operations.
Any preferential tax treatment and financial support currently available to the Group could be discontinued or modified, which may adversely affect the Group’s business, results of operations or financial condition.
The Group receives financial support from the government in the form of capital injections, priority possession rights to mineral resources, governmental grants and subsidies. The Group has also benefited from preferential tax treatment from the Qinghai provincial government in the form of various tax exemptions and concessions. In the first quarter of 2017, the grants and subsidies from the Qinghai provincial government fell significantly compared to the same period in 2016 due primarily to higher aluminium prices. In order for the Group to benefit from the subsidies, the aluminium prices needs to be below a certain pricing threshold. In the first quarter of 2017, aluminium prices were above the relevant threshold which meant that although the Group could not benefit from the subsidies, it was able to sell the aluminium at a higher price. Any discontinuation or reduction of any of the preferential tax treatments or financial incentives that the Group currently enjoys may adversely affect the Group’s business, results of operations or financial condition.
RISKS RELATING TO THE PRC
All of the Group’s assets are located in the PRC and all of the Group’s revenue is sourced from the PRC. Accordingly, the Group’s results of operations, financial position and prospects are subject to economic, political and legal developments in the PRC.
The Group is subject to the political and economic risks of doing business in the PRC.
The PRC economy differs from the economies of most developed countries in many respects, including, but not limited to the extent of government involvement; level of development; growth rate; economic and political structure; the control of foreign exchange; allocation of resources; and regulation of capital reinvestment. While the PRC economy has experienced significant growth in the past 20 years, growth has been uneven, both geographically and among the various sectors of the economy. The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures benefit the overall PRC economy but may also have a negative effect on the Group’s operations. For example, the Group’s business and financial condition may be adversely affected by the PRC government’s control over capital investments or any changes in tax regulations or foreign exchange controls that are applicable to it.
The PRC economy has been transitioning from a planned economy to a more market-oriented economy. Although in recent years the PRC government has implemented measures emphasising the utilisation of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of sound corporate governance in business enterprises, a substantial portion of productive assets in the PRC is still owned by the PRC government. In addition, the PRC government continues to play a significant role in regulating the development of industries in the PRC by imposing top-down policies. It also exercises significant control over PRC economic growth through the allocation of resources, controlling the payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. There is no assurance that future changes in the PRC’s political, economic and social conditions, laws, regulations and policies will not have a material adverse effect on the Group’s current or future business and financial condition.
22 The PRC has experienced a slowdown in its economic development and the future performance of the PRC’s economy is uncertain.
Although the PRC economy has experienced rapid growth in the past 30 years, there has been a slowdown in the growth of the PRC’s gross domestic product (‘‘GDP’’) since the second half of 2013 and this has raised market concerns that the historic rapid growth of the PRC economy may not be sustainable in the future. According to the National Statistics Bureau of the PRC, the annual growth rate of the PRC’s GDP in 2015 slowed to 6.9 per cent. on a year-on-year basis compared to 7.3 per cent. in 2014, with a further decrease to 6.7 per cent. in 2016 on a year-on-year basis. In March 2016, Moody’s Investors Service and Standard & Poor’s Ratings Services changed China’s credit rating outlook to ‘‘negative’’ from ‘‘stable’’, which highlighted the country’s surging debt burden and questioned the government’s ability to enact reforms.
The future performance of the PRC economy is not only affected by the economic and monetary policies of the PRC Government, but it is also exposed to material changes in global economic and political environments as well as the performance of certain major developed economies in the world, such as the United States and the European Union. For example, on 23 June 2016, the United Kingdom voted in a national referendum to withdraw from the European Union and in March 2017, the United Kingdom formally served notice to the European Council of its desire to withdraw. There is substantial uncertainty relating to the implementation of the United Kingdom’s exit or its impact on the economic conditions of other parts of the world, such as China’s, including but not limited to further decreases in global stock exchange indices, increased foreign exchange volatility (in particular a further weakening of the pound sterling and euro against other leading currencies) and a possible economic recession involving more countries and areas. Therefore, there exists continued uncertainty over the overall prospects for the global and the PRC economies going forward.
The legal system in the PRC is less developed than in certain other countries and laws in the PRC may not be interpreted and enforced in a consistent manner.
The PRC legal system is based on the PRC Constitution and is made up of written laws, regulations, directives and local laws and laws resulting from international treaties entered into by the PRC government. In general, court judgments do not constitute binding precedents. However, they are used for the purposes of judicial reference and guidance. Since 1979, the PRC government has begun to promulgate a comprehensive system of laws and has introduced many new laws and regulations to provide general guidance on economic and business practices in the PRC and to regulate foreign investment. Progress has been made in the promulgation of new laws and regulations dealing with economic matters such as corporate organisation and governance, foreign investment, commerce, taxation and trade. Such new laws, regulations, policies and legal requirements have only been recently adopted by PRC central or local government agencies, and their implementation, interpretation and enforcement may involve uncertainty due to the lack of established practice available for reference. The Group cannot predict the effect of future legal developments in the PRC, including the promulgation of new laws, changes in existing laws or their interpretation and enforcement, or the pre-emption of local regulations by national laws. As a result, there is substantial uncertainty as to the legal protection available to the Group. Furthermore, due to the limited volume of published cases and the non-binding nature of prior court decisions, the outcome of dispute resolution may not be as consistent or predictable as in other more developed jurisdictions, which may limit the legal protection available to the Group. In addition, any litigation in China may be protracted and result in substantial costs and the diversion of resources and management attention.
As the PRC legal system develops, the promulgation of new laws, changes to existing laws, the pre- emption of local regulations by national laws and the uncertainty as to how such laws are interpreted and enforced may have an adverse effect on the Group’s business and financial condition.
23 The PRC government’s control of foreign currency may limit the Group’s foreign exchange transactions.
All of the Group’s revenues and expenses are denominated in Renminbi, which is not currently a freely convertible currency. Conversion and remittance of foreign currencies are subject to PRC laws and regulations that affect exchange rates and foreign exchange transactions. Under the current PRC foreign exchange control system, foreign exchange transactions under the Group’s current account do not require prior approval from SAFE, but the Group is required to present documentary evidence of such transactions and conduct such transactions at designated foreign exchange banks. Foreign exchange transactions under the capital account conducted by the Group, however, must be approved in advance by SAFE or registered with SAFE upon approval of other competent authorities, including NDRC and the Ministry of Commerce of the People’s Republic of China.
There can be no assurance that policies regarding foreign exchange transactions under current accounts or capital accounts will continue in the future. The PRC government may restrict future access to foreign currencies under current or capital account transactions at its discretion. A change in policy could restrict the Group’s ability to obtain sufficient foreign currency, which could have an effect on the Group’s ability to meet foreign exchange requirements. In addition, foreign exchange transactions under current accounts may no longer be freely convertible and could require the approval of the SAFE. Failure to obtain approval from the SAFE to convert Renminbi into any foreign currency for foreign exchange transactions could have an adverse effect on the Group’s results of operations and financial condition. Moreover, if the Group was unable to obtain sufficient foreign currency, it might not be able to pay interest to the holders of the Bonds in foreign currencies.
Any depreciation of the Renminbi may materially and adversely affect the Issuer’s ability to fulfil its payment obligations under the Bonds.
The Issuer receives substantially all of its revenues in Renminbi, which currently is not a freely convertible currency. A portion of these revenues must be converted into other currencies to allow it to make payments on obligations denominated in currencies other than the Renminbi such as the Bonds.
The value of the Renminbi against the U.S. dollar and other currencies fluctuates and is affected by, among other things, changes in China’s political and economic conditions. On 21 July 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. The People’s Bank of China (‘‘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. The PBOC surprised markets in August 2015 by thrice devaluing the Renminbi, lowering its daily mid-point trading price significantly against the U.S. dollar. The currency devaluation of the Renminbi was intended to bring it more in line with the market by taking market signals into account. The Renminbi depreciated significantly against the U.S. dollar following this August 2015 announcement by the PBOC and hit record lows since 2008 against the U.S. dollar in 2016. With an increased floating range of the Renminbi’s value against foreign currencies and a more market-oriented mechanism for determining the mid point exchange rates, the Renminbi may further appreciate or depreciate significantly in value against the U.S. dollar or other foreign currencies in the long-term. Any significant depreciation of the Renminbi may adversely affect the value of the Group’s businesses. In addition, there are limited instruments available for the Issuer to reduce its foreign currency risk exposure at reasonable costs. All of these factors could materially and adversely affect the businesses, financial conditions and results of operations of the Group.
24 TheoperationsoftheGroupmaybeaffectedby rising inflation rates within the PRC.
Inflation rates within the PRC have been on a sharp uptrend in recent years. Increasing inflationary rates are due to many factors beyond the Issuer’s control, such as rising food prices, rising production and labour costs, high lending levels, PRC and foreign governmental policy and regulations, and movements in exchange rates and interest rates. It is impossible to accurately predict future inflationary trends. As a result, further inflationary pressures within the PRC may have a material adverse effect on the Issuer’s businesses and financial conditions and results of operations, as well as its liquidity and profitability.
RISKS RELATING TO THE BONDS
Any failure to complete the relevant filings under the NDRC Circular and the relevant registration under SAFE within the prescribed time frame following the completion of the issue of the Bonds may have adverse consequences for the Issuer and/or the investors of the Bonds.
Any failure to complete the relevant filings under the NDRC Circular and the relevant registration under SAFE within the prescribed time frame following the completion of the issue of the Bonds may have adverse consequences for the Issuer and/or the investors of the Bonds. The NDRC issued the NDRC Circular on 14 September 2015, which came into effect on the same day. According to the NDRC Circular, domestic enterprises and their overseas controlled entities shall procure the registration of any debt securities issued outside the PRC of maturity at one year or above with the NDRC prior to the issue of the securities and notify the particulars of the relevant issues within 10 working days after the completion of the issue of the securities. The NDRC Circular is silent on the legal consequences of noncompliance with the pre-issue registration and post-issue notification requirements. The Issuer has obtained the NDRC pre-issuance registration on 21 June 2017, which at the date of this Offering Circular, remains valid and in full force and effect.
On 18 December 2015, the NDRC issued the Guidelines on Overseas Corporate Bond Issuance（企業境 外發行債券指引）(the ‘‘Guideline’’), which further strengthened the compliance of registration requirements under the NDRC Circular, and provides that, companies, underwriters, law firms and other intermediary institutions who fail to comply with registration requirements and commit to maliciously report foreign debt scale and provide fake information might be put on the blacklist of dishonest persons and sanctioned by PRC government. However, the Guideline does not provide details as to how to implement such blacklist and measures of sanction that government will take.
In the worst case scenario, such non-compliance with the post-issue notification requirement under the NDRC circular may result in it being unlawful for the Issuer to perform or comply with any of its obligations under the Bonds and the Bonds might be subject to enforcement as provided in Condition 9 (Events of Default) of the Terms and Conditions of the Bonds. Potential investors of the Bonds are advised to exercise due caution when making their investment decisions. The Issuer has undertaken to notify the NDRC of the particulars of the issue of the Bonds within 10 Registration Business Days (as defined in the Terms and Conditions of the Bonds) after the Issue Date.
In accordance with the Administrative Measures for Foreign Debt Registration（外債登記管理辦法）(the ‘‘Foreign Debt Registration Measures’’) issued by SAFE on 28 April 2013, which came into effect on 13 May 2013, an issuer of foreign debts shall complete the foreign debt registration in respect of its issue of foreign debts with the local branch of SAFE in accordance with applicable laws and regulations. According to the Operation Guidelines for Administration of Foreign Debt Registration（外債登記管理 操作指引）promulgated together with the Foreign Debt Registration Measures, the Issuer is required to register its foreign debt issue within 15 working days after the execution of the financing documents and to complete such registration in accordance with the Foreign Debt Registration Measures. In the unlikely event that having exercised its best endeavours, the Issuer is unable to complete such registration within the abovementioned time period, investors will have the right to require the Issuer to redeem their holding of Bonds. However, notwithstanding such right, the Issuer may have difficulty in remitting funds offshore to service payments in respect of the Bonds and investors may encounter difficulties in
25 enforcing judgments obtained in the Hong Kong courts with respect to the Bonds and the Trust Deed in the PRC. In such circumstances, the value and secondary market price of the Bonds may also be materially and adversely affected. The Issuer has already consulted with local SAFE in connection with the registration procedures and documentary requirements. The Issuer does not foresee any obstacle in completing the registration within the abovementioned period.
In addition, on 29 April 2016, PBOC issued the Circular of the PBOC on Implementing Overall Macro Prudential Management System for Nationwide Cross-border Financing（中國人民銀行關於在全國範圍 內實施全口徑跨境融資宏觀審慎管理的通知）, which came into effect on 3 May 2016. This circular has since been replaced by the Circular of the PBOC on Issues Concerning the Overall Macro Prudential Management System for Cross-border Financing（中國人民銀行關於全口徑跨境融資宏觀審慎管理有關 事宜的通知）issued by the PBOC on 12 January 2017 and came into effect on the same date (the ‘‘Cross Border Financing Circular’’). The Issuer is also required to file the issue of the Bonds with SAFE in accordance with the Cross Border Financing Circular. However, neither the PBOC nor SAFE has promulgated implementation rules of the Cross Border Financing Circular as at the date of this Offering Circular. The filling process and the interpretation and enforcement of the Cross Border Financing Circular thus involves substantial uncertainties due to its recent promulgation and publication. As such, the Issuer is not in a position to, and will not file the issuance of the Bonds on the date hereof or on the Issue Date. The Issuer has however undertaken pursuant to the Terms and Conditions that it will file the Bonds with SAFE pursuant to the Cross Border Financing Circular and implementing measures as may be promulgated from time to time, as soon as practicable and in any case as soon as requested or required by the relevant regulatory authorities and to otherwise comply with the terms of the Cross Border Financing Circular and implementing measures (if any). The consequences of any failure to file the Bonds pursuant to the Cross Border Financing Circular or to otherwise comply with any other requirements thereunder are unclear.
The Bonds are unsecured obligations.
As the Bonds are unsecured obligations of the Issuer, the repayment of the Bonds may be compromised if:
(i) the Issuer enters into bankruptcy, liquidation, reorganisation or other winding-up proceedings;
(ii) there is a default in payment under the Issuer’s secured indebtedness or other unsecured indebtedness; or
(iii) there is an acceleration of any of the Issuer’s indebtedness.
If any of these events were to occur, the Issuer’s assets (as the case may be) and any amounts received from the sale of such assets may not be sufficient to pay amounts due on the Bonds.
The Bonds may not be a suitable investment for all investors.
The Bonds are complex financial instruments and may be purchased as a way to reduce risk or enhance yield with an understood, measured, appropriate addition of risk to their overall portfolios. A potential investor should not invest in the Bonds unless it has the expertise (either alone or with the help of a financial adviser) to evaluate how the Bonds will perform under changing conditions, the resulting effects on the value of such Bonds and the impact this investment will have on the potential investor’s overall investment portfolio.
Each potential investor in the Bonds must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should:
26 (i) have sufficient knowledge and experience to make a meaningful evaluation of the Bonds, the merits and risks of investing in the Bonds and the information contained or incorporated by reference in this Offering Circular or any applicable supplement;
(ii) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Bonds and the impact such investment will have on its overall investment portfolio;
(iii) have sufficient financial resources and liquidity to bear all of the risks of an investment in the Bonds;
(iv) understand thoroughly the terms of the Bonds and be familiar with the behaviour of any relevant indices and financial markets; and
(v) be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks.
If the Issuer is unable to comply with the restrictions and covenants in its debt agreements, or the Bonds, there could be a default under the terms of these agreements, or the Bonds, which could cause repayment of their respective debt to be accelerated.
If the Issuer is unable to comply with the restrictions and covenants in the Bonds, or if the Issuer is unable to comply with its current or future debt obligations and other agreements, there could be a default under the terms of these agreements. In the event of a default under these agreements, the holders of the debt could terminate their commitments to lend to the Issuer, accelerate repayment of the debt, declare all amounts borrowed due and payable or terminate the agreements, as the case may be. As a result, the default by the Issuer under one debt agreement may cause the acceleration of repayment of the Bonds, or result in a default under the Bonds. If any of these events occur, there can be no assurance that the Issuer’s or (as the case may be) the Group’s assets and cash flows would be sufficient to repay in full all of the Issuer’s indebtedness, or that it would be able to find alternative financing. Even if the Issuer could obtain alternative financing, there can be no assurance that it would be on terms that are favourable or acceptable to the Issuer.
The Bonds will be structurally subordinated to the existing and future indebtedness and other liabilities of the Issuer’s existing and future subsidiaries, other than the Issuer, and effectively subordinated to the Issuer’s secured debt to the extent of the value of the collateral securing such indebtedness.
The Bonds will be structurally subordinated to any debt and other liabilities and commitments, including trade payables and lease obligations, of the Issuer’s existing and future subsidiaries, other than the Issuer, whether or not secured. The Bonds will not be guaranteed by any of the Issuer’s subsidiaries, and the Issuer may not have direct access to the assets of such subsidiaries unless these assets are transferred by dividend or otherwise to the Issuer. The ability of such subsidiaries to pay dividends or otherwise transfer assets to the Issuer is subject to various restrictions under applicable laws. Each of the Issuer’s subsidiaries are separate legal entities that have no obligation to pay any amounts due under the Bonds or make any funds available therefore, whether by dividends, loans or other payments. The Issuer’s right to receive assets of any of the Issuer’s subsidiaries, respectively, upon that subsidiary’s liquidation or reorganisation will be effectively subordinated to the claim of that subsidiary’s creditors (except to the extent that the Issuer are creditors of that subsidiary). Consequently, the Bonds will be effectively subordinated to all liabilities, including trade payables and lease obligations, of any of the Issuer’s subsidiaries, other than the Issuer, and any subsidiaries that the Issuer may in the future acquire or establish.
27 The Bonds are the Issuer’s unsecured obligations, and will (i) rank equally in right of payment with all the Issuer’s other present and future unsubordinated and unsecured indebtedness; (ii) be effectively subordinated to all of the Issuer’s present and future secured indebtedness to the extent of the value of the collateral securing such obligations; and (iii) be senior to all of the Issuer’s present and future subordinated obligations. As a result, claims of secured lenders, whether senior or junior, with respect to assets securing their loans will take priority with respect to those assets. In the event of the Issuer’s bankruptcy, insolvency, liquidation, reorganisation, dissolution or other winding up, or upon any acceleration of the Bonds, these assets will be available to pay obligations on the Bonds only after all other debt secured by these assets has been repaid in full. If there are not sufficient assets remaining to pay all these creditors, then all or a portion of the Bonds then outstanding would remain unpaid.
The Issuer may not be able to redeem the Bonds upon the due date for redemption thereof.
On certain dates, including but not limited to the occurrence of a Change of Control, a No Registration Event and at maturity of the Bonds, the Issuer may and at maturity will, be required to redeem all of the Bonds. If any such an event were to occur, the Issuer may not have sufficient cash in hand and may not be able to arrange financing to redeem the Bonds in time, or on acceptable terms, or at all. The ability to redeem the Bonds in such event may also be limited by the terms of other debt instruments. The Issuer’s failure to repay, repurchase or redeem tendered Bonds could constitute an event of default under the Bonds, which may also constitute a default under the terms of the Issuer’s or the Group’sother indebtedness.
An active trading market for the Bonds may not develop.
The Bonds are a new issue of securities for which there is currently no trading market. Although application in principle has been obtained from the SGX-ST for the listing and quotation of the Bonds on the Official List of the SGX-ST, no assurance can be given that an active trading market for the Bonds will develop or be sustained. No assurance can be given as to the ability of holders to sell their Bonds or the price at which holders will be able to sell their Bonds or that a liquid market will develop. The liquidity of the Bonds will be adversely affected if the Bonds are held or allocated to limited investors. The Sole Lead Manager is not obligated to make a market in the Bonds, and if the Sole Lead Manager does so, it may discontinue such market making activity at any time at its sole discretion. In addition, the Bonds are being offered pursuant to exemptions from registration under the Securities Act and, as a result, holders will only be able to resell their Bonds in transactions that have been registered under the Securities Act or in transactions not subject to or exempt from registration under the Securities Act.
Changes in interest rates may have an adverse effect on the price of the Bonds.
The Bondholders may suffer unforeseen losses due to fluctuations in interest rates. Generally, a rise in interest rates may cause a fall in the prices of the Bonds, resulting in a capital loss for the Bondholders. However, the Bondholders may reinvest the interest payments at higher prevailing interest rates. Conversely, when interest rates fall, the prices of the Bonds may rise. The Bondholders may enjoy a capital gain but interest payments received may be reinvested at lower prevailing interest rates.
Investment in the Bonds is subject to exchange rate risks.
Investment in the Bonds is subject to exchange rate risks. The value of the U.S. dollar against the Renminbi and other foreign currencies fluctuates and is affected by changes in the United States and international political and economic conditions and by many other factors. All payments of interest and principal with respect to the Bonds will be made in U.S. dollars. As a result, the value of these U.S. dollar payments may vary with the prevailing exchange rates in the marketplace. If the value of the U.S. dollar depreciates against the Renminbi or other foreign currencies, the value of a Bondholder’s investment in Renminbi or other applicable foreign currency terms will decline.
28 Bondholders are exposed to risks relating to Singapore taxation
The Bonds to be issued are intended to be ‘‘qualifying debt securities’’ for the purposes of the Income Tax Act, Chapter 134 of Singapore, subject to the fulfillment of certain conditions more particularly described in the section ‘‘Taxation–Singapore Taxation’’. However, there is no assurance that the Bonds will continue to be ‘‘qualifying debt securities’’ or that the tax concessions in connection therewith will apply throughout the tenure of the Bonds should the relevant tax laws be amended or revoked at any time.
Developments in other markets may adversely affect the market price of the Bonds.
The market price of the Bonds may be adversely affected by declines in the international financial markets and world economic conditions. The market for the Bonds is, to varying degrees, influenced by economic and market conditions in other markets, especially those in Asia. Although economic conditions are different in each country, investors’ reactions to developments in one country can affect the securities markets and the securities of issues in other countries, including the PRC. Since the global financial crisis in 2008 and 2009, the international financial markets have experienced significant volatility. If similar developments occur in the international financial markets in the future, the market price of the Bonds could be adversely affected.
The insolvency laws of the PRC and other local insolvency laws may differ from those of another jurisdiction with which the holders of the Bonds are familiar.
As the Issuer is incorporated under the laws of the PRC, any insolvency proceeding relating to the Issuer, even if brought in other jurisdictions, would likely involve PRC insolvency laws, the procedural and substantive provisions of which may differ from comparable provisions of the local insolvency laws of jurisdictions with which the holders of the Bonds are familiar.
The Bonds may be redeemed by the Issuer prior to maturity at their principal amount.
The Issuer may redeem the Bonds at its option, in whole but not in part, at a redemption price equal to their principal amount, together with interest accrued to the date fixed for redemption if, subject to certain conditions, as a result of a change in tax law, the Issuer has or will become obliged to pay Additional Tax Amounts (as defined in the Terms and Conditions), as further described in Condition 6(b) (Redemption for Taxation Reasons) of the Terms and Conditions of the Bonds.
If the Issuer redeems the Bonds prior to their maturity date, investors may not receive the same economic benefits they would have received had they held the Bonds to maturity, and they may not be able to reinvest the proceeds they receive in a redemption in similar securities. In addition, the Issuer’s ability to redeem the Bonds may reduce the market price of the Bonds.
The Issuer may issue additional securities in the future.
The Issuer may, from time to time, and without prior consultation of the Bondholders, create and issue further securities (see ‘‘Terms and Conditions of the Bonds – Further Issues’’)orotherwiseraise additional capital through such means and in such manner as it may consider necessary including the issuance of other securities. There can be no assurance that such future issuance or capital raising activity will not adversely affect the market price of the Bonds.
The Trustee may request the Bondholders to provide an indemnity and/or security and/or prefunding to its satisfaction.
In certain circumstances (including without limitation the giving of notice to the Issuer pursuant to Condition 9 (Events of Default) of the Terms and Conditions of the Bonds and the taking of action pursuant to Condition 13 (Enforcement) of the Terms and Conditions of the Bonds, the Trustee may (at
29 its sole discretion) request Bondholders to provide an indemnity and/or security and/or prefunding to its satisfaction before it takes action on behalf of Bondholders. The Trustee will not be obliged to take any such action if not first indemnified and/or secured and/or prefunded to its satisfaction. Negotiating and agreeing an indemnity and/or security and/or prefunding can be a lengthy process and may impact on when such action can be taken. The Trustee may not be able to take action, notwithstanding the provision of an indemnity or security or prefunding to it, in breach of the terms of the Trust Deed and in such circumstances, or where there is uncertainty or dispute as to the applicable laws or regulations, to the extent permitted by the agreements and the applicable laws and regulations, it will be for the Bondholders to take such actions directly.
Modifications and waivers may be made in respect of the Terms and Conditions of the Bonds and the Trust Deed by the Trustee or less than all of the holders of the Bonds, and decisions may be made on behalf of all holders of the Bonds that may be adverse to the interests of the individual holders of the Bonds.
The Terms and Conditions of the Bonds contain provisions for calling meetings of Bondholders to consider matters affecting their interests generally. These provisions permit defined majorities to bind all Bondholders, including those Bondholders who do not attend and vote at the relevant meeting and those Bondholders who vote in a manner contrary to the majority. Furthermore, there is a risk that the decision of a majority of Bondholders may be adverse to the interests of individual Bondholders.
The Terms and Conditions of the Bonds also provide that the Trustee may, without the consent of Bondholders, agree to any modification of the Trust Deed or the Terms and Condition of the Bonds which in the opinion of the Trustee will not be materially prejudicial to the interests of Bondholders and to any modification which, in its opinion, is of a formal, minor or technical nature or is to correct a manifest error or to comply with any mandatory provision of applicable law.
In addition, the Trustee may, without the consent of the Bondholders, authorise or waive any proposed breach or breach of the Bonds or the Trust Deed if, in the opinion of the Trustee, the interests of the Bondholders will not be materially prejudiced thereby.
The Bonds will initially be represented by the Global Certificate and holders of a beneficial interest in the Global Certificate must rely on the procedures of the relevant Clearing System.
The Bonds will be represented by the Global Certificate except in certain limited circumstances described in the Global Certificate. The Global Certificate will be registered in the name of a nominee for, and deposited with, a common depositary for Euroclear and Clearstream. Individual Certificates evidencing holdings of Bonds will only be available in certain limited circumstances. Euroclear and Clearstream will maintain records of the beneficial interests in the Global Certificate. While the Bonds are represented by the Global Certificate, investors will be able to trade their beneficial interests only through Euroclear and Clearstream.
The Issuer will discharge its payment obligations under the Bonds by making payments to or to the order of the common depositary for Euroclear and Clearstream for distribution to their account holders. A holder of a beneficial interest in the Global Certificate must rely on the procedures of Euroclear and Clearstream to receive payments under the Bonds. The Issuer does not have any responsibility or liability for the records relating to, or payments made in respect of, beneficial interests in the Global Certificate.
Holders of beneficial interests in the Global Certificate will not have a direct right to vote in respect of the Bonds. Instead, such holders will be permitted to act only to the extent that they are enabled by Euroclear and Clearstream to appoint appropriate proxies.
30 Bondholders should be aware that a definitive Certificate which has a principal amount that is not an integral multiple of the minimum specified denomination may be illiquid and difficult to trade.
In relation to any Bond which has a principal amount consisting of a minimum specified denomination plus a higher integral multiple of another smaller amount, it is possible that the Bonds may be traded in amounts in excess of the minimum specified denomination that are not integral multiples of such minimum specified denomination. In such a case a Bondholder who, as a result of trading such amounts, holds a principal amount of less than the minimum specified denomination will not receive a definitive Certificate in respect of such holding (should definitive Bonds be printed) and would need to purchase a principal amount of Bonds such that it holds an amount equal to one or more specified denominations. If definitive Bonds are issued, holders should be aware that a definitive Certificate which has a principal amount that is not an integral multiple of the minimum specified denomination may be illiquid and difficult to trade.
Gains on the transfer of the Bonds and interest payable by the Issuer to overseas Bondholders may be subject to income tax and value-added tax under PRC tax laws.
Under the Enterprise Income Tax Law of the PRC (the ‘‘EIT Law’’) which took effect on 1 January 2008 and its implementation rules, any gains realised on the transfer of the Bonds by holders who are deemed under the EIT Law as non-resident enterprises may be subject to PRC enterprise income tax if such gains are regarded as income derived from sources within the PRC. Under the EIT Law, a ‘‘non- resident enterprise’’ means an enterprise established under the laws of a jurisdiction other than the PRC and whose actual administrative organisation is not in the PRC, which has established offices or premises in the PRC, or which has not established any offices or premises in the PRC but has obtained income derived from sources within the PRC. There remains uncertainty as to whether the gains realised on the transfer of the Bonds by enterprise holders would be treated as incomes derived from sources within the PRC and be subject to PRC enterprise income tax. In addition, there is uncertainty as to whether gains realised on the transfer of the Bonds by individual holders who are not PRC citizens or residents will be subject to PRC individual income tax. If such gains are subject to PRC income tax, the 10 per cent. enterprise income tax rate and 20 per cent. individual income tax rate will apply respectively unless there is an applicable tax treaty or arrangement that reduces or exempts such income tax. The taxable income will be the balance of the total income obtained from the transfer of the Bonds minus all costs and expenses that are permitted under PRC tax laws to be deducted from the income. According to the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (the ‘‘Arrangement’’) which was promulgated on 21 August 2006, Bondholders who are Hong Kong residents, including both enterprise holders and individual holders, will be exempted from PRC income tax on capital gains derived from a sale or exchange of the Bonds if such capital gains are not connected with an office or establishment that the Bondholders have in the PRC and all the other relevant conditions are satisfied.
Pursuant to the EIT Law, the PRC Individual Income Tax Law (the ‘‘IIT Law’’) which took effect on 30 June 2011, and the implementation regulations in relation to both the EIT Law and IIT Law, PRC income tax at a rate of 10 per cent. or 20 per cent. is normally applicable to PRC-source income derived by non-resident enterprises or individuals respectively, subject to adjustment by applicable treaty. As the Issuer is a PRC resident enterprise for tax purposes, interest paid to non-resident Bondholders may be regarded as PRC-sourced, and therefore be subject to PRC income tax at a rate of 10 per cent. for non- resident enterprise Bondholders and at a rate of 20 per cent. for non-resident individual Bondholders (or a lower treaty rate, if any).
On 23 March 2016, the Ministry of Finance and the State Administration of Taxation issued the Circular of Full Implementation of Replacing Business Tax with Value-Added Tax Reform（關於全面推開營業 稅改徵增值稅試點的通知）(‘‘Circular 36’’), which introduced a new value-added tax (‘‘VAT’’) from 1 May 2016. VAT is applicable where entities or individuals provide services within the PRC. The Issuer
31 will be obligated to withhold VAT of 6% and certain surcharges as described below on payments of interest and certain other amounts on the Bonds paid by the Issuer to Bondholders that are non-resident enterprises or individuals. Pursuant to the Interim Regulation of the PRC on City Maintenance and Construction Tax（中華人民共和國城市維護建設稅暫行條例（2011修訂））, the Interim Provisions on the Collection of Educational Surcharges（徵收教育附加費的規定（2011修訂））and the Notice of the Ministry of Finance on the Relevant Matters regarding Unifying the Policies on Local Education Surcharges（財政部關於同意地方教育附加政策有關問題的通知）, a city maintenance and construction tax of 7 per cent., an educational surcharge of 3 per cent. and a local educational surcharge of 2 per cent. will be applicable when entities and individuals are obliged to pay VAT (for an aggregate of 12 per cent. surcharge on any VAT payable).
VAT is unlikely to be applicable to any transfer of Bonds between entities or individuals located outside of the PRC and therefore unlikely to be applicable to gains realised upon such transfers of Bonds, but there is uncertainty as to the applicability of VAT if either the seller or buyer of Bonds is located inside the PRC. Circular 36 together with other laws and regulations pertaining to VAT are relatively new, the interpretation and enforcement of such laws and regulations involve uncertainties.
If a Bondholder, being a non-resident enterprise or non-resident individual, is required to pay any PRC income tax on interest or gains on the transfer of the Bonds, the value of the relevant Bondholder’s investment in the Bonds may be materially and adversely affected.
Additional procedures may be required to be taken to bring English law governed matters or disputes to the Hong Kong courts and the Bondholders would need to be subject to the exclusive jurisdiction of the Hong Kong courts. There is also no assurance that the PRC courts will recognise and enforce judgments of the Hong Kong courts in respect of English law governed matters or disputes.
The Terms and Conditions of the Bonds and the transaction documents are governed by English law, whereas parties to these documents have submitted to the exclusive jurisdiction of the Hong Kong courts. In order to hear English law governed matters or disputes, Hong Kong courts may require certain additional procedures to be taken. Under the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region Pursuant to Choice of Court Agreements between Parties Concerned（關 於內地與香港特別行政區法院相互認可和執行當事人協議管轄的民商事案件判決的安排）, judgments of Hong Kong courts are likely to be recognised and enforced by the PRC courts where the contracting parties to the transactions pertaining to such judgments have agreed to submit to the exclusive jurisdiction of the Hong Kong courts. However, recognition and enforcement of a Hong Kong court judgment could be refused if the PRC courts consider that the enforcement of such judgment is contrary to the social and public interest of the PRC or meets other circumstances specified by the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region Pursuant to Choice of Court Agreements between Parties Concerned. While it is expected that the PRC courts will recognise and enforce a judgment given by Hong Kong courts governed by English law, there can be no assurance that the PRC courts will do so for all such judgments as there is no established practice in this area. Compared to other similar debt securities issuances in the international capital markets where the relevant holders of the debt securities would not typically be required to submit to an exclusive jurisdiction, the holders of the Bonds will be deemed to have submitted to the exclusive jurisdiction of the Hong Kong courts, and thus the holder’s ability to initiate a claim outside of Hong Kong will be limited.
A change in English law which governs the Bonds may adversely affect holders of the Bonds.
The Terms and Conditions of the Bonds are governed by English law. No assurance can be given as to the impact of any possible judicial decision or change English law or administrative practice after the date of issue of the Bonds.
32 The rating assigned to the Bonds may be lowered or withdrawn in the future
The Bonds are expected to be assigned a rating of ‘‘BB-’’ by S&P Global Ratings and ‘‘BB’’ by Dagong Global Credit Rating (Hong Kong) Co., Ltd.. The ratings address only the opinion of the assigning rating agency of the Issuer’s ability to perform its obligations under the terms of the Bonds and credit risks in determining the likelihood that payments will be made when due under the Bonds. A rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time. Although the Issuer has covenanted pursuant to Condition 4(g) of the Terms and Conditions of the Bonds to maintain a rating on the Bonds from at least one Rating Agency (as defined in the Terms and Conditions of the Bonds), there is no obligation for the Issuer to maintain the same rating from the same rating agency and the Issuer cannot assure investors that the rating assigned to the Bonds will remain for any given period of time or that it will not be lowered or withdrawn by the relevant rating agency if in its judgment circumstances in the future so warrant. If the Issuer does not maintain a rating from at least one Rating Agency, this could constitute an event of default under the Terms and Conditions of the Bonds but a lowering or reduction of the rating assigned to the Bonds will not. The Issuer does not have any obligation to inform holders of the Bonds of any such revision or downgrade. A suspension, reduction or withdrawal at any time of the rating assigned to the Bonds may adversely affect the market price of the Bonds.
33 EXCHANGE RATES
PBOC sets and publishes daily a base exchange rate with reference primarily to the supply and demand of Renminbi against a basket of currencies in the market during the prior day. PBOC also takes into account other factors, such as the general conditions existing in the international foreign exchange markets. On 21 July 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. On the same day, the value of the Renminbi appreciated by 2 per cent. against the U.S. dollar. The PRC government has since made and in the future may make further adjustments to the exchange rate system. On 18 May 2007, PBOC enlarged, effective on 21 May 2007, the floating band for the trading prices in the inter-bank spot exchange market of Renminbi against the U.S. dollar from 0.3 per cent. to 0.5 per cent. around the central parity rate. This allows the Renminbi to fluctuate against the U.S. dollar by up to 0.5 per cent. above or below the central parity rate published by PBOC. The floating band was further widened to 1.0 per cent. on 16 April 2012. These changes in currency policy resulted in the Renminbi appreciating against the U.S. dollar by approximately 26.9 per cent. from 21 July 2005 to 31 December 2013. On 14 March 2014, PBOC further widened the floating band against the U.S. dollar to 2.0 per cent. On 11 August 2015, PBOC announced to improve the central parity quotations of Renminbi against the U.S. dollar by authorizing market-makers to provide central parity quotations to the China Foreign Exchange Trading Centre daily before the opening of the interbank foreign exchange market with reference to the interbank foreign exchange market closing rate of the previous day, the supply and demand for foreign exchange as well as changes in major international currency exchange rates. Following the announcement by PBOC on 11 August 2015, Renminbi depreciated significantly against the U.S. dollar. In January and February 2016, Renminbi experienced further fluctuation in value against the U.S. dollar. The PRC government may adopt further reforms of its exchange rate system, including making the Renminbi freely convertible in the future.
The following table sets forth information concerning exchange rates between the Renminbi and the U.S. dollar for the periods presented:
Renminbi per U.S. Dollar Noon Buying Rate(1) Period End Average(2) High Low (RMB per U.S.$1.00) 2011 ...... 6.2939 6.4475 6.6364 6.2939 2012 ...... 6.2301 6.2990 6.3879 6.2221 2013 ...... 6.0537 6.1412 6.2438 6.0537 2014 ...... 6.2046 6.1704 6.2591 6.0402 2015 ...... 6.4778 6.2869 6.4896 6.1870 2016 ...... 6.9430 6.6549 6.9580 6.4480 2017 January ...... 6.8768 6.8907 6.9575 6.8360 February ...... 6.8665 6.8694 6.8821 6.8517 March ...... 6.8832 6.8940 6.9132 6.8687 April ...... 6.8900 6.8876 6.8988 6.8778 May ...... 6.8098 6.8843 6.9060 6.8098 June (up to and including 16 June 2017)...... 6.8097 6.7999 6.8097 6.7888
Notes:
(1) Exchange rates between Renminbi and U.S. dollar represent the noon buying rates as set forth in the H.10 statistical release of the Federal Reserve Board.
(2) Annual averages have been calculated from month-end rate. Monthly averages have been calculated using the average of the daily rates during the relevant period.
34 TERMS AND CONDITIONS OF THE BONDS
The following are the terms and conditions of the Bonds substantially in the form in which they (other than the text in italics) will be endorsed on the definitive Certificates and referred to in the global certificate.
The U.S.$[•][•] per cent. bonds due [•](the‘‘Bonds’’, which expression, unless the context requires otherwise, includes any further securities issued pursuant to Condition 15 and to be consolidated and forming a single series therewith) of Qinghai Provincial Investment Group Co., Ltd.（青海省投資集團有 限公司）(the ‘‘Issuer’’) are constituted by a trust deed (as amended or supplemented from time to time, the ‘‘Trust Deed’’) dated on or about [•] 2017 (the ‘‘Issue Date’’) made between the Issuer and The Bank of New York Mellon, London Branch (the ‘‘Trustee’’, which expression shall include its successor(s)) as trustee for the holders of the Bonds. The statements in these terms and conditions (these ‘‘Conditions’’) include summaries of, and are subject to, the detailed provisions of and definitions in the Trust Deed.
The issue of the Bonds was authorised by resolutions of the board of directors of the Issuer on 3 March 2017.
Copies of the Trust Deed and the agency agreement dated on or about [•] 2017 (as amended or supplemented from time to time, the ‘‘Agency Agreement’’) made between the Issuer, the Trustee, The Bank of New York Mellon, London Branch as principal paying agent (the ‘‘Principal Paying Agent’’), The Bank of New York Mellon SA/NV, Luxembourg Branch as registrar (the ‘‘Registrar’’)andas transfer agent (the ‘‘Transfer Agent’’) and any other Agents appointed thereunder are available for inspection during normal business hours by the Holders (as defined below) at the principal office for the time being of the Trustee, being at the Issue Date at One Canada Square, London E14 5AL, United Kingdom) and at the specified office of the Principal Paying Agent. References herein to ‘‘Paying Agents’’ includes the Principal Paying Agent, and ‘‘Agents’’ means the Principal Paying Agent, the Registrar, the Transfer Agent and any other agent or agents appointed from time to time with respect to the Bonds. The Holders are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Trust Deed and those provisions of the Agency Agreement applicable to them.
All capitalised terms that are not defined in these terms and conditions (these ‘‘Conditions’’) will have the meanings given to them in the Trust Deed.
1 FORM, SPECIFIED DENOMINATION AND TITLE
The Bonds are issued in the specified denomination of U.S.$200,000 and integral multiples of U.S.$1,000 in excess thereof. The Bonds are represented by registered certificates (‘‘Certificates’’) and, save as provided in Condition 3(b), each Certificate shall represent the entire holding of Bonds by the same holder.
Title to the Bonds shall pass by transfer and registration in the Register as described in Condition 3. The holder of any Bond shall (except as ordered by a court of competent jurisdiction or as otherwise required by law) be treated as its absolute owner for all purposes whether or not it is overdue and regardless of any notice of ownership, trust or an interest in it, any writing on the Certificate (other than the endorsed form of transfer) representing it or the theft or loss of such Certificate and no person shall be liable for so treating the holder.
In these Conditions, ‘‘Bondholder’’ or ‘‘Holder’’ means the person in whose name a Bond is registered in the Register (or in the case of a joint holding, the first name thereof).
35 Upon issue, the Bonds will be represented by a global certificate (the ‘‘Global Certificate’’) registered in the name of a nominee of, and deposited with, a common depository for Euroclear Bank SA/NV and Clearstream Banking S.A.. The Conditions are modified by certain provisions contained in the Global Certificate while any of the Bonds are represented by the Global Certificate. See ‘‘Summary of Provisions relating to the Bonds in Global Form’’.
2STATUS
The Bonds constitute direct, unconditional, unsubordinated and (subject to Condition 4(a)) unsecured obligations of the Issuer and shall at all times rank pari passu and without any preference among themselves. The payment obligations of the Issuer under the Bonds shall, save for such exceptions as may be provided by applicable legislation and subject to Condition 4(a), at all times rank at least equally with all its other present and future unsecured and unsubordinated obligations.
3 TRANSFERS OF BONDS AND ISSUE OF CERTIFICATES
(a) Register The Issuer will cause the register (the ‘‘Register’’) to be kept at the specified office of the Registrar and in accordance with the terms of the Agency Agreement, on which shall be entered the names and addresses of the Holders and the particulars of the Bonds held by them and of all transfers of the Bonds. Each Holder shall be entitled to receive only one Certificate in respect of its entire holding of Bonds.
(b) Transfer Subject to the Agency Agreement and Conditions 3(e) and 3(f) herein, a Bond may be transferred by depositing the Certificate issued in respect of that Bond, with the form of transfer on the back of the Certificate duly completed and signed, at the specified office of the Registrar or any Transfer Agent and with any other evidence as the Registrar or such Transfer Agent may require to prove the title of the transferor and the authority of the individuals who have executed such form of transfer.
In the case of a transfer of part only of a holding of Bonds represented by one Certificate, a new Certificate shall be issued to the transferee in respect of the part transferred and a further new Certificate in respect of the balance of the holding not transferred shall be issued to the transferor. In the case of a transfer of Bonds to a person who is already a holder of Bonds, a new Certificate representing the enlarged holding shall only be issued against surrender of the Certificate representing the existing holding. No transfer of title to a Bond will be valid unless and until entered on the Register.
Transfers of interests in the Bonds evidenced by the Global Certificate will be effected in accordance with the rules of the relevant clearing systems.
(c) Delivery of New Certificates Each new Certificate to be issued upon transfer of Bonds pursuant to Condition 3(b) shall be made available for delivery within seven business days of receipt of a duly completed form of transfer and surrender of the existing Certificate(s). Delivery of the new Certificate(s) shall be made at the specified office of any Transfer Agent or of the Registrar (as the case may be) to whom delivery or surrender of such form of transfer and Certificate shall have been made or, at the option of the Holder making such delivery or surrender as aforesaid and as specified in the relevant form of transfer or otherwise in writing, be mailed by uninsured post at the risk of the Holder entitled to the new Certificate to such address as may be so specified, unless such Holder requests otherwise and pays in advance to the relevant Transfer
36 Agent or the Registrar (as the case may be) the costs of such other method of delivery and/or such insurance as it may specify. In this Condition 3(c), ‘‘business day’’ means a day, other than a Saturday, Sunday or public holiday, on which banks are open for business in the place of the specified office of the relevant Transfer Agent or the Registrar (as the case may be).
Except in the limited circumstances described herein (see ‘‘Summary of Provisions relating to the Bonds in Global Form’’), owners of interests in the Bonds will not be entitled to receive physical delivery of Certificates.
(d) Formalities Free of Charge Registration of a transfer of Bonds and issuance of new Certificates will be effected without charge by or on behalf of the Issuer or any Agent but upon (i) payment (or the giving of such indemnity and/or security and/or prefunding as the Issuer or any Agent may require) in respect of any taxes, duties or other governmental charges which may be imposed in relation to such transfer; (ii) the Registrar being satisfied in its absolute discretion with the documents of title or identity of the person making the application and (iii) the relevant Agent being satisfied that the regulations concerning transfer of Bonds have been complied with.
(e) Closed Periods No Holder may require the transfer of a Bond to be registered (i) during the period of seven days ending on (but excluding) the due date for any payment of principal (or premium) in respect of that Bond; or (ii) during the period of seven days ending on (and including) any Record Date (as defined in Condition 7(a)); or (iii) during the period of seven days prior to (and including) any date on which Bonds may be called for redemption by the Issuer pursuant to Condition 6(b); or (iv) after any such Bond has been put for redemption pursuant to Condition 6(c).
(f) Regulations All transfers of Bonds and entries on the Register will be made subject to the detailed regulations concerning transfer of Bonds scheduled to the Agency Agreement. The regulations may be changed by the Issuer, with the prior written approval of the Registrar and the Trustee or by the Registrar, with the prior written approval of the Trustee. A copy of the current regulations will be mailed (free of charge to the Holders) by the Registrar to any Holder who requests one in writing.
4 COVENANTS
(a) Negative Pledge So long as any Bond remains outstanding (as defined in the Trust Deed), the Issuer will not, and the Issuer will ensure that none of its Subsidiaries will create, or have outstanding, any mortgage, charge, lien, pledge or other security interest, upon the whole or any part of its present or future undertaking, assets or revenues (including any uncalled capital) to secure any Relevant Indebtedness or to secure any guarantee or indemnity in respect of any Relevant Indebtedness, without at the same time or prior thereto according to the Bonds the same security as is created or subsisting to secure any such Relevant Indebtedness, guarantee or indemnity or such other security as either (i) the Trustee shall in its absolute discretion deem not materially less beneficial to the interest of the Bondholders or (ii) shall be approved by an Extraordinary Resolution (as defined in the Trust Deed) of the Bondholders.
37 (b) Undertakings relating to Foreign Debt Registration and applicable PRC laws The Issuer undertakes that it will (i) within 15 Registration Business Days after the Issue Date, register or cause to be registered with SAFE the Bonds pursuant to the Administrative Measures for Foreign Debt Registration and its operating guidelines, effective as of 13 May 2013 (the ‘‘Foreign Debt Registration’’), (ii) use its best endeavours to complete the Foreign Debt Registration and obtain a registration record from SAFE on or before the Registration Deadline, (iii) if applicable, as soon as possible upon being required or requestedtodosobyanyrelevantgovernmental authority, file or cause to be filed with SAFE the Bonds pursuant to the Circular of the People’s Bank of China on Implementing Overall Macro Prudential Management System for Nationwide Cross-border Financing（中國 人民銀行關於在全國範圍內實施全口徑跨境融資宏觀審慎管理的通知）(the ‘‘Cross Border Financing Circular’’) and (iv) comply with all applicable PRC laws and regulations in relation to the Bonds.
(c) Notification to NDRC The Issuer undertakes that it will within 10 Registration Business Days after the Issue Date file or cause to be filed with the NDRC the requisite information and documents in accordance with the Circular on Promoting the Reform of the Administrative System on the Issuance by Enterprises of Foreign Debt Filings and Registrations（國家發展改革委關於推進 企業發行外債備案登記制管理改革的通知（發改外資[2015]2044號））issued by the NDRC and effective 14 September 2015 and any implementation rules as issued by the NDRC from time to time (the ‘‘NDRC Post-issue Filing’’).
(d) Notification of Completion of the Foreign Debt Registration and the NDRC Post-Issue Filing The Issuer shall (a) provide the Trustee within five Registration Business Days after submission of the NDRC Post-issue Filing and receipt of the registration certificate from SAFE (or any other document evidencing the completion of the Foreign Debt Registration issued by SAFE), and (b) use its best endeavours to provide the Trustee on or before the Registration Deadline with (i) a certificate in English signed by an Authorised Signatory (as defined in the Trust Deed) of the Issuer confirming (A) the completion of the NDRC Post- issue Filing and the Foreign Debt Registration and (B) no Change of Control, Event of Default or any event or circumstance which could, with the giving of notice, lapse of time, the issuing of a certificate and/or fulfilment of any other requirement provided for in Condition 9 become an Event of Default has occurred; and (ii) copies of the relevant documents evidencing the completion of the NDRC Post-issue Filing and the Foreign Debt Registration, each certified in English as being a true and complete copy of the original by an Authorised Signatory of the Issuer and (iii) an English translation of each confirmation, certificate or other document as is referred to in (ii) above of this Condition 4(d) translated by a professional translation service provider (and the Trustee shall not be obliged to check or verify any such translation and may rely conclusively without liability to any Bondholder or any other person on each such translation as being a complete and accurate translation of the original) (the items specified in (i), (ii) and (iii) together, the ‘‘Registration Documents’’). In addition, the Issuer shall procure that within ten Registration Business Days after the documents comprising the Registration Documents are delivered to the Trustee, the Issuer gives notice to the Bondholders (in accordance with Condition 16) confirming the completion of the NDRC Post-Issue Filing and the Foreign Debt Registration.
38 (e) Financial Information So long as any Bond remains outstanding (as defined in the Trust Deed) the Issuer will furnish the Trustee with:
(A) a Compliance Certificate (on which the Trustee may rely as to such compliance) and a copy of the relevant Audited Financial Reports, in each case within 180 days of the end of each Relevant Period prepared in accordance with the Accounting Standards for Business Enterprises in China (‘‘PRC GAAP’’) (audited by a nationally recognised firm of independent accountants) of the Issuer and its subsidiaries (if any) and if such statements shall be in the Chinese language, together with an English translation of the same translated by (aa) a nationally recognised firm of independent accountants or (bb) a professional translation service provider and checked by a nationally recognised firm of independent accountants, together with a certificate in English signed by an Authorised Signatory of the Issuer certifying that such translation is complete and accurate; and
(B) a copy of the Unaudited Financial Reports within 90 days of the end of each Relevant Period prepared on a basis consistent with the audited consolidated financial statements of the Issuer and its subsidiaries (if any) and if such statements shall be in the Chinese language, together with an English translation of the same and translated by (aa) a nationally recognised firm of independent accountants or (bb) a professional translation service provider and checked by a nationally recognised firm of independent accountants, together with a certificate in English signed by an Authorised Signatory of the Issuer certifying that such translation is complete and accurate.
(f) Financial Covenant (A) For so long as any Bond remains outstanding, the Issuer shall not directly or indirectly permit the ratio of Consolidated Total Liabilities to Consolidated Total Assets to exceed 0.85:1. This financial covenant shall be calculated in accordance with PRC GAAP and tested by reference to the latest Audited Financial Reports and Unaudited Financial Reports (as the case may be) of the Issuer as at the end of each Relevant Period.
(B) For so long as any Bond remains outstanding, the Issuer will provide to the Trustee within 180 days after the end of each financial year and 90 days after the end of each semi-annual financial period, a certificate signed by an Authorised Signatory of the Issuer confirming compliance with the financial covenant contained in this Condition 4(f), showing in reasonable detail the calculations demonstrating compliance with such financial covenant.
The Trustee shall have no obligation to monitor or ensure the compliance by the Issuer of this financial covenant and shall not be liable to Bondholders or any other person for not doing so.
(g) Rating Covenant So long as any Bond remains outstanding, the Issuer shall maintain a rating on the Bonds from at least one Rating Agency.
The Trustee shall have no obligation to monitor or assist with or ensure the compliance by the Issuer of the covenant contained in this Condition 4(g) and shall not be liable to Bondholders or any other person for not doing so.
39 (h) Definitions In these Conditions:
‘‘Audited Financial Reports’’ means annual audited consolidated balance sheet, income statement, statement of cash flows and statements of changes in owners’ equity of the Issuer together with any statements, reports (including any directors’ and auditors’ reports) and notes attached to or intended to be read with any of them;
‘‘Compliance Certificate’’ means a certificate in English of the Issuer signed by an Authorised Signatory of the Issuer that, having made all reasonable enquiries, to the best of the knowledge, information and belief of the Issuer as at a date (the ‘‘Certification Date’’) not more than five days before the date of the certificate:
(i) no Event of Default (as defined in Condition 9) or Potential Event of Default (as defined in the Trust Deed) had occurred since the Certification Date of the last such certificate or (if none) the date of the Trust Deed or, if such an event had occurred, giving details of it; and
(ii) the Issuer has complied with all its obligations under the Trust Deed and the Bonds;
‘‘Consolidated Total Liabilities’’ means the aggregate of all liabilities of the Group for or in respect of any indebtedness;
‘‘Consolidated Total Assets’’ means the total assets of the Group;
‘‘Hong Kong’’ means the Hong Kong Special Administrative Region of the PRC;
‘‘Issue Date’’ means [•] 2017;
‘‘NDRC’’ means the National Development and Reform Commission of the PRC or its local counterparts;
‘‘person’’ means any individual, corporation, partnership, limited liability company, joint venture, trust, unincorporated organisation or government or any agency or political subdivision thereof;
‘‘PRC’’ means the People’s Republic of China, which shall for the purpose of these Conditions only, exclude Hong Kong, Macau and Taiwan;
‘‘Rating Agency‘‘ means S&P Global Ratings and its successors (‘‘S&P‘‘）, Fitch Ratings Inc. and its successors (‘‘Fitch‘‘ ）or Moody’s Investors Service, Inc., a subsidiary of Moody’s Corporation, and its successors (‘‘Moody’s‘‘）;
‘‘Registration Business Day’’ means a day, other than a Saturday, Sunday or public holiday, on which commercial banks are generally open for business in Beijing;
‘‘Registration Deadline’’ means the day falling 120 Registration Business Days after the Issue Date;
‘‘Relevant Indebtedness’’ means any indebtedness incurred outside the PRC which is in the form of, or represented or evidenced by, 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;
40 ‘‘Relevant Period’’ means (i) in relation to the Audited Financial Reports, each period of twelve months ending on the last day of the Issuer’s financial year (being December 31 of that financial year); (ii) in relation to the Unaudited Financial Reports, each period of six months ending on the last day of the Issuer’s first half financial year (being June 30 of that financial year);
‘‘SAFE’’ means the State Administration of Foreign Exchange or its local branch;
‘‘Subsidiary’’ means, with respect to any person, any corporation, association or other business entity (a) of which more than 50 per cent. of the voting power of the outstanding Voting Stock is owned, directly or indirectly, by such person and one or more other Subsidiaries of such person; or (b) any corporation, association and other business entity which at any time has its accounts consolidated with those of that person or which, under the law, regulations or generally accepted accounting principles of the jurisdiction of incorporation of such person from time to time, should have its accounts consolidated with those of that person;
‘‘Unaudited Financial Reports’’ means semi-annual unaudited consolidated balance sheet, income statement, statement of cash flows and statements of changes in owners’ equity of the Issuer together with any statements, reports (including any directors’ and auditors’ review reports, if any) and notes attached to or intended to be read with any of them; and
‘‘Voting Stock’’ means, with respect to any person, capital stock of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such person.
5INTEREST
(a) Interest Rate and Interest Payment Dates The Bonds bear interest on their outstanding principal amount from and including [•]2017 (the ‘‘Issue Date’’) at the rate of [•] per cent. per annum, payable semi-annually in arrear in equal instalments of U.S.$[•] per Calculation Amount (as defined below) on [•]and[•]in each year (each an ‘‘Interest Payment Date’’)commencingon[•] 2017.
Each Bond will cease to bear interest from the due date for redemption unless, upon surrender of the Certificate representing such Bond, payment of principal or premium (if any) is improperly withheld or refused. In such event it shall continue to bear interest at such rate (both before and after judgment) until whichever is the earlier of (a) the day on which all sums due in respect of such Bond up to that day are received by or on behalf of the relevant Holders, and (b) the day falling seven days after the Trustee or the Principal Paying Agent has notified Bondholders of receipt of all sums due in respect of all the Bonds up to that seventh day (except to the extent that there is failure in the subsequent payment to the relevant Holders under these Conditions).
If interest is required to be calculated for a period of less than a complete Interest Period (as defined below), the relevant day-count fraction will be determined on the basis of a 360-day year consisting of 12 months of 30 days each and, in the case of an incomplete month, the number of days elapsed. In these Conditions, the period beginning on and including the Issue Date and ending on but excluding the first Interest Payment Date and each successive period beginning on and including an Interest Payment Date and ending on but excluding the next succeeding Interest Payment Date is called an ‘‘Interest Period’’.
41 Interest in respect of any Bond shall be calculated per U.S.$1,000 in principal amount of the Bonds (the ‘‘Calculation Amount’’). The amount of interest payable per Calculation Amount for any period shall, save as provided above in relation to equal instalments, be equal to the product of the rate of interest specified above, the Calculation Amount and the day-count fraction for the relevant period, rounding the resulting figure to the nearest cent (half a cent being rounded upwards).
6 REDEMPTION AND PURCHASE
(a) Final Redemption Unless previously redeemed, or purchased and cancelled, the Bonds will be redeemed at their principal amount on [•](the‘‘Maturity Date’’). The Bonds may not be redeemed at the option of the Issuer other than in accordance with this Condition 6.
(b) Redemption for Taxation Reasons The Bonds may be redeemed at the option of the Issuer in whole, but not in part, at any time, on giving not less than 30 nor more than 60 days’ notice (a ‘‘Tax Redemption Notice’’)to the Bondholders in accordance with Condition 16 (which shall be irrevocable) and in writing to the Trustee and the Principal Paying Agent, at their principal amount (together with any interestaccruedtothedatefixedforredemption) if (i) the Issuer satisfies the Trustee immediately prior to the giving of such notice that the Issuer has or will become obliged to pay Additional Tax Amounts as provided or referred to in Condition 8 as a result of any change in, or amendment to, the laws or regulations of the PRC or any political subdivision or any authority thereof or therein having power to tax, or any change in the application or official interpretation of, or any statement of an official position with respect to, such laws or regulations (including but not limited to any decision by a court of competent jurisdiction), which change or amendment becomes effective on or after [•] 2017, and (ii) such obligation cannot be avoided by the Issuer taking reasonable measures available to it, provided that no Tax Redemption Notice shall be given earlier than 90 days prior to the earliest date on which the Issuer would be obliged to pay such Additional Tax Amounts were a payment in respect of the Bonds then due.
Prior to the giving of any Tax Redemption Notice pursuant to this Condition 6(b), the Issuer shall deliver to the Trustee (A) a certificate in English signed by an Authorised Signatory of the Issuer stating that the obligation referred to in (i) above of this Condition 6(b) cannot be avoided by the Issuer taking reasonable measures available to it, and (B) an opinion, in form and substance satisfactory to the Trustee, of independent tax or legal advisers of recognised standing to the effect that the Issuer has or will become obliged to pay such Additional Tax Amounts as a result of such change, amendments or statement. The Trustee shall be entitled (but shall not be obliged) to accept and rely upon such certificate and opinion as sufficient evidence of the satisfaction of the conditions precedent set out in (i) and (ii) above of this Condition 6(b), in which event they shall be conclusive and binding on the Bondholders.
(c) Redemption for Relevant Events Following the occurrence of a Relevant Event, the Holder of any Bond will have the right (the ‘‘Relevant Event Put Right’’), at such Holder’s option, to require the Issuer to redeem all, but not some only, of such Holder’s Bonds on the Put Settlement Date (as defined below in this Condition 6(c)) at 101 per cent. (in the case of a redemption for a Change of Control) or 100 per cent. (in the case of a redemption for a No Registration Event) of their principal amount, together in each case with accrued interest to (but excluding) the Put Settlement Date. To exercise such right, the Holder of the relevant Bond must deposit at the specified office of the Principal Paying Agent or any other Paying Agent a duly completed and signed notice of redemption, in the form for the time being current, obtainable from the specified
42 office of any Paying Agent (a ‘‘Put Exercise Notice’’), together with the Certificate evidencing the Bonds to be redeemed, by not later than 30 days following a Relevant Event, or, if later, 30 days following the date upon which notice thereof is given to Bondholders by the Issuer in accordance with Condition 16.
The ‘‘Put Settlement Date’’ shall be the fourteenth day (in the case of a redemption for a Change of Control) or the fifth day (in the case of a redemption for a No Registration Event) after the expiry of such period of 30 days as referred to above.
A Put Exercise Notice, once delivered, shall be irrevocable and the Issuer shall redeem the Bonds the subject of Put Exercise Notices delivered as aforesaid on the Put Settlement Date.
Not later than 14 days (in the case of a Change of Control) or five days (in the case of a No Registration Event) following the day on which the Issuer becomes aware of a Relevant Event, the Issuer shall procure that notice regarding such Relevant Event shall be delivered to the Trustee in writing and to the Holders (in accordance with Condition 16) stating:
(i) the Put Settlement Date;
(ii) the date of the Relevant Event and, briefly, the events causing, as applicable, the Change of Control or No Registration Event;
(iii) the date by which the Put Exercise Notice must be given;
(iv) the redemption amount and the method by which such amount will be paid;
(v) the names and addresses of all Paying Agents;
(vi) the procedures that Holders must follow and the requirements that Holders must satisfy in order to exercise the Relevant Event Put Right; and
(vii) that a Put Exercise Notice, once validly given, may not be withdrawn.
The Trustee shall have no obligation or duty to verify the accuracy, validity and/or genuineness of any documents in relation to or connection with the Registration Conditions and shall not be liable to Holders, the Issuer or any other person for not doing so.
For the purpose of these Conditions:
(A) ‘‘Control’’ means (i) the ownership or control of more than 50 per cent. of the voting rights of the issued share capital of the relevant person or (ii) the right to appoint and/or remove all or the majority of the members of the relevant person’s board of directors or other governing body, whether obtained directly or indirectly, and whether obtained by ownership of share capital, the possession of voting rights, contract or otherwise; the term ‘‘Controlled’’ has meanings correlative to the foregoing;
(B) a ‘‘Change of Control’’ occurs when:
(i) the Qinghai People’s Government and Xining People’s Government and any other person(s) directly or indirectly controlled by the Qinghai People’s Government and/or Xining People’s Government in aggregate cease to directly or indirectly hold or own 70 per cent. of the issued share capital of the Issuer; or
43 (ii) the Issuer consolidates with or merges into or sells or transfers all or substantially all of the Issuer’s assets to any other Person, unless the consolidation, merger, sale or transfer will not result in the other Person or Persons acquiring Control over the Issuer or the successor entity;
‘‘Qinghai People’sGovernment’’ means the People’s Government of Qinghai Province （青海省人民政府）or its successor;
‘‘Xining People’sGovernment’’ means the Xining Municipal People’s Government（西 寧市人民政府）or its successor;
(C) a ‘‘No Registration Event’’ occurs when the Registration Conditions are not complied with on or before the Registration Deadline;
(D) a ‘‘Person’’ includes any individual, company, corporation, firm, partnership, joint venture, undertaking, association, organisation, trust, state or agency of a state (in each case whether or not being a separate legal entity) but does not include the Issuer’sboard of directors or any other governing board and does not include the Issuer’s wholly- owned direct or indirect subsidiaries;
(E) ‘‘Registration Conditions’’ means the receipt by the Trustee of:
(i) the Registration Documents relating to the Foreign Debt Registration as set forth in Condition 4(d); and
(ii) a legal opinion as to PRC law issued by a reputable PRC law firm which could be the counsel to the Issuer in connection with the issue of the Bonds, addressed to the Trustee and otherwise in form and substance satisfactory to the Trustee, that the Bonds (x) constitutes legal, valid and binding obligations of the Issuer and (y) is enforceable against the Issuer;
(F) a ‘‘Relevant Event’’ will be deemed to occur if:
(i) there is a No Registration Event; or
(ii) there is a Change of Control.
(d) Purchase The Issuer or any of its Subsidiaries may at any time purchase Bonds in the open market or otherwise at any price. The Bonds so purchased, while held by or on behalf of the Issuer or any such Subsidiary, shall not entitle the Holder to vote at any meetings of the Holders and shall not be deemed to be outstanding for certain purposes, including without limitation for the purpose of calculating quorums at meetings of the Holders or for the purposes of Condition 9, Condition 12(a) and Condition 13.
(e) Notice of redemption All Bonds in respect of which any notice of redemption is given under this Condition 6 shall be redeemed on the date, in such place and in such manner as specified in such notice in accordance with this Condition. If there is more than one notice of redemption given in respect of any Bond (which shall include any notice given by the Issuer pursuant to Condition 6(b) and any Put Exercise Notice given by a Bondholder pursuant to Condition 6(c)), the notice given first in time shall prevail and in the event of two notices being given on the same date, the first to be given shall prevail. Neither the Trustee nor any of the
44 Agents shall be responsible for calculating or verifying any calculations of any amounts payable under any notice of redemption and shall not be liable to Holders, the Issuer or any other person for not doing so.
(f) Cancellation All Certificates representing Bonds purchased by or on behalf of the Issuer and its Subsidiaries shall be surrendered for cancellation to the Registrar and, upon surrender thereof, all such Bonds shall be cancelled forthwith. Any Certificates so surrendered for cancellation may not be reissued or resold and the obligations of the Issuer in respect of any such Bonds shall be discharged.
7 PAYMENTS
(a) Method of Payment: (i) Payments of principal and premium (if any) shall be made (subject to surrender of the relevant Certificates at the specified office of the Principal Paying Agent or any other Paying Agent if no further payment falls to be made in respect of the Bonds represented by such Certificates) in the manner provided in Condition 7(a)(ii) below.
(ii) Interest on each Bond shall be paid on the due date to the person shown on the Register at the close of business on the fifth Payment Business Day before the due date for payment thereof (the ‘‘Record Date’’). Payments of interest on each Bond shall be made in U.S. dollars by cheque drawn on a bank and mailed to the holder (or to the first named of joint holders) of such Bond at its address appearing in the Register. Upon application by the holder to the specified office of the Registrar or any Transfer Agent before the Record Date, such payment of interest may be made by transfer to an account in U.S. dollars maintained by the payee with a bank.
(iii) If the amount of principal being paid upon surrender of the relevant Certificate is less than the outstanding principal amount of such Certificate, the Registrar will annotate the Register with the amount of principal so paid and will (if so requested in writing by the Issuer or a Bondholder) issue a new Certificate with a principal amount equal to the remaining unpaid outstanding principal amount. If the amount of premium (if any) or interest being paid is less than the amount then due, the Registrar will annotate the Register with the amount of premium (if any) or interest so paid.
Notwithstanding the foregoing, so long as the Global Certificate is held on behalf of Euroclear Bank SA/NV, Clearstream Banking S.A. or any other clearing system, each payment in respect of the Global Certificate will be made to the person shown as the holder in the Register at the close of business of the relevant clearing system on the Clearing System Business Day before the due date for such payments, where ‘‘Clearing System Business Day’’ means a weekday (Monday to Friday, inclusive) except December 25 and January 1.
(b) Payments subject to Fiscal Laws: Payments will be subject in all cases to (i) any fiscal or other laws and regulations applicable thereto in the place of payment, but without prejudice to the provisions of Condition 8 and (ii) any withholding or deduction required pursuant to an agreement described in Section 1471(b) of the U.S. Internal Revenue Code of 1986 (the ‘‘Code’’) or otherwise imposed pursuant to Sections 1471 through 1474 of the Code, any regulations or agreements thereunder, any official interpretations thereof, or (without prejudice to the provisions of Condition 8) any law implementing an intergovernmental approach thereto. No commission or expenses shall be charged to the Bondholders in respect of such payments.
45 (c) Payment Initiation: Where payment is to be made by transfer to an account in U.S. dollars, payment instructions (for value on the due date or, if that is not a Payment Business Day, for value the first following day which is a Payment Business Day) will be initiated, and, where payment is to be made by cheque, the cheque will be mailed on the due date for payment (or, if that date is not a Payment Business Day, on the first following day which is a Payment Business Day), or, in the case of payments of principal and premium (if any) where the relevant Certificate has not been surrendered at the specified office of any Transfer Agent or of the Registrar, on the first Payment Business Day on which the Principal Paying Agent is open for business and on or following which the relevant Certificate is surrendered.
(d) Appointment of Agents: The Principal Paying Agent, the Registrar and the Transfer Agent initially appointed by the Issuer and their respective specified offices are listed below. The Principal Paying Agent, the Registrar and the Transfer Agent act solely as agents of the Issueranddonotassumeanyobligationorrelationshipofagencyortrustfororwithany Bondholder. The Issuer reserves the right at any time with the prior written approval of the Trustee to vary or terminate the appointment of the Principal Paying Agent, the Registrar, any Transfer Agent or any of the other Agents and to appoint additional or other Agents, provided that the Issuer shall at all times maintain (i) a Principal Paying Agent, (ii) a Registrar with a specified office outside the United Kingdom, (iii) a Transfer Agent and (iv) such other agents as may be required by any stock exchange on which the Bonds may be listed.
Notice of any such termination or appointment or any change of any specified office of an Agent shall promptly be given by the Issuer to the Bondholders.
(e) Delay in Payment: Bondholders will not be entitled to any interest or other payment for any delay after the due date in receiving the amount due on a Bond if the due date is not a Payment Business Day, if the Bondholder is late in surrendering or cannot surrender its Certificate (if required to do so or if a cheque mailed in accordance with Condition 7(a)(ii) arrives after the due date for payment).
(f) Non-Payment Business Days: If any date for payment in respect of any Bond is not a Payment Business Day, the holder shall not be entitled to payment until the next following Payment Business Day nor to any interest or other sum in respect of such postponed payment. In this Condition 7, ‘‘Payment Business Day’’ means a day (other than a Saturday, a Sunday or a public holiday) on which banks and foreign exchange markets are open for business in New York City, the place in which the specified office of the Principal Paying Agent is located, the place where payment is to be made by transfer to an account maintained with a bank in U.S. dollars and the place on which foreign exchange transactions may be carried on in U.S. dollars in the principal financial centre of the country of such currency.
8 TAXATION
All payments of principal, premium (if any) and interest by or on behalf of the Issuer in respect of the Bonds shall be made free and clear of, and without withholding or deduction for, any taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by the PRC or any political subdivision or any authority therein or thereof having power to tax, unless such withholding or deduction is required by law.
Where such withholding or deduction is made by the Issuer by or within the PRC up to and including the aggregate rate applicable on [•] 2017 (the ‘‘Applicable Rate’’), the Issuer will increase the amounts paid by it to the extent required, so that the net amount received by Bondholders equals the amounts which would otherwise have been receivable by them had no such withholding or deduction been required.
46 If the Issuer is required to make a deduction or withholding in respect of PRC tax in excess of the Applicable Rate, the Issuer shall pay such additional amounts (‘‘Additional Tax Amounts’’)as will result in receipt by the Bondholders of such amounts as would have been received by them had no such withholding or deduction been required, except that no Additional Tax Amounts shall be payable in respect of any Bond:
(i) Other connection: to a Holder (or to a third party on behalf of a Holder) who is liable to such taxes, duties, assessments or governmental charges in respect of such Bond by reason of his having some connection with the PRC other than the mere holding of the Bond; or
(ii) Surrender more than 30 days after the Relevant Date: in respect of which the Certificate representing it is presented (where presentation is required) for payment more than 30 days after the Relevant Date except to the extent that the Holder of it would have been entitled to such Additional Tax Amounts on surrendering the Certificate representing such Bond for payment on the last day of such period of 30 days.
References in these Conditions to principal, premium and interest shall be deemed also to refer to any Additional Tax Amounts which may be payable under this Condition 8 or any undertaking or covenant given in addition thereto or in substitution therefor pursuant to the Trust Deed.
‘‘Relevant Date’’ in respect of any Bond means the date on which payment in respect of it first becomes due or (if any amount of the money payable is improperly withheld or refused) the date on which payment in full of the amount outstanding is made or (if earlier) the date seven days after that on which notice is duly given to the Bondholders that, upon further surrender of the Certificate representing such Bond being made in accordance with these Conditions, such payment will be made, provided that payment is in fact made upon such surrender.
9 EVENTS OF DEFAULT
If an Event of Default (as defined below) occurs the Trustee at its discretion may, and if so requested in writing by Holders of at least 25 per cent. of the aggregate principal amount of the Bonds then outstanding or if so directed by an Extraordinary Resolution shall (provided in any such case that the Trustee shall have first been indemnified and/or secured and/or pre-funded to its satisfaction), give notice to the Issuer that the Bonds are, and they shall immediately become, due and payable at their principal amount together (if applicable) with accrued interest.
An ‘‘EventofDefault’’ occurs if:
(a) Non-Payment: there has been a failure to pay (i) the principal of any of the Bonds when due or (ii) any interest on any of the Bonds when due; or
(b) Breach of Other Obligations: the Issuer does not perform or comply with any one or more of its other obligations under the Bonds (other than a No Registration Event which gives rise to a redemption pursuant to Condition 6(c)) or under the Trust Deed and such default (i) is in the opinion of the Trustee incapable of remedy or, (ii) if in the opinion of the Trustee capable of remedy, is not remedied within 30 days after the Trustee has given written notice thereof to the Issuer; or
(c) Cross-Default: (i) any other present or future indebtedness of the Issuer or any of its Subsidiaries for or in respect of moneys borrowed or raised becomes (or becomes capable of being declared) due and payable prior to its stated maturity by reason of any actual or potential default, event of default or the like (howsoever described), or (ii) any such indebtedness is not paid when due or, as the case may be, within any originally applicable grace period, or (iii) the Issuer or any of its Subsidiaries fails to pay when due any amount payable by it under any present or future guarantee for, or indemnity in respect of, any
47 moneys borrowed or raised provided that the aggregate amount of the relevant indebtedness, guarantees and indemnities in respect of which one or more of the events mentioned above in this Condition 9(c) have occurred equals or exceeds in the aggregate U.S.$20 million or its equivalent (on the basis of the middle spot rate for the relevant currency against the U.S. dollar as quoted by any leading bank on the day on which this Condition 9(c) operates); or
(d) Enforcement Proceedings: a distress, attachment, execution or other legal process is levied, enforced or sued out by a court of law with competent authority on or against any material part of the property, assets or revenues of the Issuer or any of its Principal Subsidiaries and isnotdischargedorstayedwithin30days;or
(e) Security Enforced: any mortgage, charge, pledge, lien or other encumbrance, present or future, created or assumed by the Issuer or any of its Principal Subsidiaries on the whole or any material part of its assets becomes enforceable and any step is taken to enforce it (including the taking of possession or the appointment of a receiver, manager or other similar person) and is not discharged within 30 days; or
(f) Insolvency: the Issuer or any of its Principal Subsidiaries is (or is, or could be, deemed by law or a court of competent jurisdiction to be) insolvent or bankrupt or unable to pay its debts as and when such debts fall due, stops, suspends or threatens to stop or suspend payment of all or a material part of its debts, proposes or makes any agreement for the deferral, rescheduling or other readjustment of all of (or all of a particular type of) its debts (or of any material part which it will or might otherwise be unable to pay when due), proposes or makes a general assignment or an arrangement or composition with or for the benefit of the relevant creditors in respect of any of such debts or a moratorium is agreed or declared in respect of or affecting all or any material part of the debts of the Issuer or any of its Principal Subsidiaries; or
(g) Winding-up: an order of any court of competent jurisdiction is made or an effective resolution passed for the winding-up or dissolution of the Issuer or any of its Principal Subsidiaries, or the Issuer or any of its Principal Subsidiaries ceases or threatens to cease to carry on all or substantially all of its business or operations, except for the purpose of and followed by a reconstruction, amalgamation, reorganisation, merger or consolidation (i) on terms approved by the Trustee acting on an Extraordinary Resolution of the Bondholders, or (ii) in the case of a Principal Subsidiary, whereby the undertaking and assets of such PrincipalSubsidiaryaretransferredtoorotherwise vested in the Issuer or another Subsidiary of the Issuer; or
(h) Nationalisation: any step is taken by any person with a view to the seizure, compulsory acquisition, expropriation or nationalisation of all or a material part of the assets of the Issuer or any of its Principal Subsidiaries; or
(i) Authorisation and Consents: any action, condition or thing (including the obtaining or effecting of any necessary consent, approval, authorisation, exemption, filing, licence, order, recording or registration) at any time required to be taken, fulfilled or done in order (i) to enable the Issuer lawfully to enter into, exercise its rights and perform and comply with its obligations under the Bonds and the Trust Deed, (ii) to ensure that those obligations are legally binding and enforceable and (iii) to make the Bonds and the Trust Deed admissible in evidence in the courts of Hong Kong is not taken, fulfilled or done; or
(j) Illegality: it is or will become unlawful for the Issuer to perform or comply with any one or more of its obligations under any of the Bonds or the Trust Deed; or
48 (k) Analogous Events: any event occurs which under the laws of any relevant jurisdiction has an analogous effect to any of the events referred to in any of Conditions 9(d) to 9(h) (both inclusive).
In this Condition 9,
‘‘Principal Subsidiary’’ means any Subsidiary of the Issuer:
(a) whose total operating income or (in the case of a Subsidiary which itself has Subsidiaries) consolidated total operating income, as shown by its latest audited income statement, is at least five per cent. of the consolidated total operating income as shown by the latest published audited consolidated income statement of the Issuer and its Subsidiaries including, for the avoidance of doubt, the Issuer and its consolidated Subsidiaries’ share of profits of Subsidiaries not consolidated and of jointly controlled entities and after adjustments for minority interests; or
(b) whose total income or (in the case of a Subsidiary which itself has Subsidiaries) consolidated total profit, as shown by its latest audited income statement, is at least five per cent. of the consolidated total profit as shown by the latest published audited consolidated income statement of the Issuer and its Subsidiaries including, for the avoidance of doubt, the Issuer and its consolidated Subsidiaries’ share of profits of Subsidiaries not consolidated and of jointly controlled entities and after adjustments for minority interests; or
(c) whose total assets or (in the case of a Subsidiary which itself has Subsidiaries) consolidated total assets, as shown by its latest audited balance sheet, are at least five per cent. of the amount which equals the amount included in the consolidated total assets of the Issuer and its Subsidiaries as shown by the latest published audited consolidated balance sheet of the Issuer and its Subsidiaries including, for the avoidance of doubt, the investment of the Issuer in each Subsidiary whose accounts are not consolidated with the consolidated audited accounts of the Issuer and after adjustment for minority interests;
provided that, in relation to paragraphs (a), (b) and (c) above of this definition:
(i) in the case of a corporation or other business entity becoming a Subsidiary after the end of the financial period to which the latest consolidated audited accounts of the Issuer relate, the reference to the then latest consolidated audited accounts of the Issuer for the purposes of the calculation above shall, until consolidated audited accounts of the Issuer for the financial period in which the relevant corporation or other business entity becomes a Subsidiary are published be deemed to be a reference to the then latest consolidated audited accounts of the Issuer adjusted to consolidate the latest audited accounts (consolidated in the case of a Subsidiary which itself has Subsidiaries) of such Subsidiary in such accounts;
(ii) if at any relevant time in relation to the Issuer or any Subsidiary which itself has Subsidiaries no consolidated accounts are prepared and audited, total operating income, total profit or total assets of the Issuer and/or any such Subsidiary shall be determined on the basis of pro forma consolidated accounts prepared for this purpose by or on behalf of the Issuer;
(iii) if at any relevant time in relation to any Subsidiary, no accounts are audited, its total operating income, total profit or total assets (consolidated, if appropriate) shall be determined on the basis of pro forma accounts (consolidated, if appropriate) of the relevant Subsidiary prepared for this purpose by or on behalf of the Issuer;
49 (iv) if the accounts of any Subsidiary (not being a Subsidiary referred to in proviso (i) above of this definition) are not consolidated with those of the Issuer, then the determination of whether or not such subsidiary is a Principal Subsidiary shall be based on a pro forma consolidation of its accounts (consolidated, if appropriate) with the consolidated accounts (determined on the basis of the foregoing) of the Issuer prepared for this purpose by the Issuer; and
(v) in the case of a Subsidiary to which is transferred the whole or substantially the whole of the assets of a Subsidiary which immediately prior to such transfer was a Principal Subsidiary, the Principal Subsidiary which so transfers its assets shall forthwith upon such transfer cease to be a Principal Subsidiary and the Subsidiary to which the assets are so transferred shall become a Principal Subsidiary upon such transfer but shall cease to be a Principal Subsidiary at the date on which the first published audited accounts (consolidated, if appropriate) of the Issuer prepared as of a date later than such transfer are issued unless such Subsidiary would continue to be a Principal Subsidiary on the basis of such accounts by virtue of the provisions of paragraphs (a), (b) or (c) above of this definition.
10 PRESCRIPTION
Claims against the Issuer for payment in respect of the Bonds shall be prescribed and become void unless made within 10 years (in the case of principal or premium) or five years (in the case of interest) from the appropriate Relevant Date in respect of them.
11 REPLACEMENT OF CERTIFICATES
If any Certificate is lost, stolen, mutilated, defaced or destroyed, it may be replaced, subject to applicable laws, regulations or other relevant regulatory authority regulations, at the specified office of the Registrar or any Transfer Agent, in each case on payment by the claimant of the fees and costs incurred in connection therewith and on such terms as to evidence, security, indemnity and otherwise as the Issuer, the Registrar or the relevant Transfer Agent may require. Mutilated or defaced Certificates must be surrendered before replacements will be issued.
12 MEETINGS OF BONDHOLDERS, MODIFICATION, WAIVER, AUTHORISATION, DETERMINATION AND ENTITLEMENT OF TRUSTEE
(a) Meetings of Bondholders The Trust Deed contains provisions for convening meetings of the Bondholders to consider any matter affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of any of these Conditions or any of the provisions of the Trust Deed. Such a meeting may be convened by the Trustee or the Issuer and shall be convened by the Trustee upon request in writing from Bondholders holding not less than 10 per cent. in aggregate principal amount of the Bonds for the time being outstanding and subject to the Trustee being indemnified and/or secured and/or pre-funded to its satisfaction against all costs and expenses. The quorum for any meeting convened to consider an Extraordinary Resolution will be two or more persons holding or representing more than 50 per cent. in aggregate principal amount of the Bonds for the time being outstanding, or at any adjourned meeting two or more persons being or representing Bondholders whatever the principal amount of the Bonds held or represented unless the business of such meeting includes the modification or abrogation of certain of the provisions of these Conditions and certain of the provisions of the Trust Deed, including consideration of proposals, inter alia, (i) to modify the maturity date of the Bonds or the dates on which interest is payable in respect of the Bonds, (ii) to reduce or cancel the principal amount of, any premium payable on redemption of, or interest on, the Bonds, (iii) to change the currency of payment of the Bonds or (iv) to modify the
50 provisions concerning the quorum required at any meeting of Bondholders or the majority required to pass an Extraordinary Resolution, in which case the necessary quorum for passing an Extraordinary Resolution will be two or more persons holding or representing not less than 75 per cent., or at any adjourned such meeting not less than 25 per cent., in aggregate principal amount of Bondholders for the time being outstanding. Any Extraordinary Resolution duly passed shall be binding on Bondholders, whether or not they were present at the meeting at which such resolution was passed.
The Trust Deed provides that a resolution in writing signed by or on behalf of the Bondholders of not less than 90 per cent. in principal amount of the Bonds for the time being outstanding shall for all purposes be as valid and effective as an Extraordinary Resolution passed at a meeting of Bondholders duly convened and held. Such a resolution in writing may be contained in one document or several documents in the same form, each signed by or on behalf of one or more Bondholders.
(b) Modification, Waiver, Authorisation and Determination The Trustee may (but shall not be obliged to) agree, without the consent of the Bondholders, to any modification of, or to the waiver or authorisation of any breach or proposed breach of, or any failure to comply with any of these Conditions or any of the provisions of the Trust Deed which in its opinion is not materially prejudicial to the interest of the Bondholders, or may agree, without any such consent as aforesaid, to any modification which, in its opinion, is of a formal, minor or technical nature or to correct a manifest error or to comply with any mandatory provision of applicable law. Any such modification, waiver or authorisation shall be binding on the Bondholders and, unless the Trustee agrees otherwise, such modification, waiver or authorisation shall be notified to the Bondholders by the Issuer as soon as practicable thereafter in accordance with Condition 16.
(c) Entitlement of the Trustee In connection with the exercise of its functions, rights, powers and/or discretions (including but not limited to those referred to in this Condition 12), the Trustee shall have regard to the interests of the Bondholders as a class and shall not have regard to the consequences of such exercise for individual Bondholders and the Trustee shall not be entitled to require, nor shall any Bondholder be entitled to claim, from the Issuer or the Trustee any indemnification or payment in respect of any tax consequence of any such exercise upon individual Bondholders.
13 ENFORCEMENT
At any time after the Bonds become due and payable, the Trustee may, at its discretion and without further notice, institute such proceedings against the Issuer as it may think fit to enforce the terms of the Trust Deed and/or the Bonds, but it need not take any such proceedings unless (a) it shall have been so directed by an Extraordinary Resolution or so requested in writing by Bondholders holding at least 25 per cent. in principal amount of the Bonds then outstanding, and (b) it shall have been indemnified and/or secured and/or pre-funded to its satisfaction. No Bondholder may proceed directly against the Issuer unless the Trustee, having become bound so to proceed, fails to do so within a reasonable time and such failure is continuing.
14 INDEMNIFICATION OF THE TRUSTEE
The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility. The Trustee is entitled to enter into business transactions with the Issuer and/or any entity related to the Issuer without accounting for any profit.
51 The Trustee may rely without liability to Holders or any other person on any report, information, confirmation or certificate from or any opinion or advice of any accountants, auditors, lawyers, valuers, auctioneers, surveyors, brokers, financial advisers, financial institution or any other expert, whether or not addressed to it and whether their liability in relation thereto is limited (by its terms or by any engagement letter relating thereto or in any other manner) by reference to a monetary cap, methodology or otherwise. The Trustee may accept and shall be entitled to rely on any such report, information, confirmation, certificate, opinion or advice, in which case such report, information, confirmation, certificate, opinion or advice shall be binding on the Issuer and the Holders.
Whenever the Trustee is required or entitled by the terms of the Trust Deed, the Agency Agreement or these Conditions to exercise any discretion or power, take any action, make any decision or give any direction, the Trustee is entitled, prior to exercising any such discretion or power, taking any such action, making any such decision or giving any such direction, to seek directions from the Bondholders by way of Extraordinary Resolution, and the Trustee shall not be responsible for any loss or liability incurred by the Issuer, the Bondholders or any other person as a result of any delay in it exercising such discretion or power, taking such action, making such decision or giving such direction as a result of seeking such direction from the Bondholders or in the event that no direction is given to the Trustee by the Bondholders.
None of the Trustee or any of the Agents shall be responsible for the performance by the Issuer and any other person appointed by the Issuer in relation to the Bonds of the duties and obligations on their part expressed in respect of the same and, unless it has written notice from the Issuer to the contrary, the Trustee and each Agent shall be entitled to assume that the same are being duly performed. None of the Trustee or any Agent shall be liable to any Bondholder, the Issuer or any other person for any action taken by the Trustee or such Agent in accordance with the instructions of the Bondholders. The Trustee shall be entitled to rely on any direction, request or resolution of Bondholders given by Bondholders holding the requisite principal amount of Bonds outstanding or passed at a meeting of Bondholders convened and held in accordance with the Trust Deed.
Neither the Trustee nor any of the Agents shall have any obligation to monitor compliance with the provisions of the Trust Deed, the Agency Agreement or these Conditions or to monitor whether an Event of Default or a Potential Event of Default or a Relevant Event has occurred, and shall not be responsible or liable to the Issuer, the Holders or any other person for not doing so.
Each Bondholder shall be solely responsible for making and continuing to make its own independent appraisal and investigation into the financial condition, creditworthiness, condition, affairs, status and nature of the Issuer, and the Trustee shall not at any time have any responsibility for the same and each Bondholder shall not rely on the Trustee in respect thereof.
15 FURTHER ISSUES
The Issuer may from time to time without the consent of the Bondholders create and issue further securities having the same terms and conditions as the Bonds in all material respects (or in all material respects save for the first payment of interest on them and the timing for complying with the Registration Conditions, for completing the NDRC Post-issue Filing, for making the Foreign Debt Registration and for filing of the Bonds pursuant to the Cross Border Financing Circular) and so that the same shall be consolidated and form a single series with the outstanding Bonds. References in these Conditions to the Bonds include (unless the context requires otherwise) any further securities issued pursuant to this Condition 15. However, such further securities may only be issued if (i) the Rating Agency which has provided credit ratings in respect of the Bonds has been informed of such issue; (ii) such issue will not result in any adverse change in the then credit rating of the Bonds, and (iii) such supplemental documents are executed and further opinions are obtained as the Trustee may require, as further set out in the Trust Deed.
52 16 NOTICES
All notices to the Holders will be valid if (i) mailed to them by uninsured mail at their respective addresses in the Register and (ii) published in a leading newspaper having general circulation in Asia. The Issuer shall also ensure that notices are duly published in a manner that complies with the rules and regulations of any stock exchange or other relevant authority on which the Bonds are for the time being listed. Any notice shall be deemed to have been given, on the date of such publication or, if published more than once, on the first date on which publication is made.
So long as the Bonds are represented by the Global Certificate and the Global Certificate is held on behalf of Euroclear Bank SA/NV or Clearstream Banking S.A. or the Alternative Clearing System (as defined in the form of the Global Certificate), notices to the holders of the Bonds shall be validly given by the delivery of the relevant notice to Euroclear Bank SA/NV or Clearstream Banking S.A. or the Alternative Clearing System, for communication by it to entitled accountholders in substitution for notification as required by the Conditions.
17 CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999
No person shall have any right to enforce any term or condition of the Bonds under the Contracts (Rights of Third Parties) Act 1999.
18 GOVERNING LAW AND JURISDICTION
(a) Governing Law The Trust Deed, the Agency Agreement and the Bonds and any non-contractual obligations arising out of or in connection with them are governed by, and shall be construed in accordance with, English law.
(b) Jurisdiction The courts of Hong Kong are to have exclusive jurisdiction to settle any disputes that may arise out of or in connection with the Bonds, the Trust Deed and the Agency Agreement and accordingly any legal action or proceedings arising out of or in connection with any Bonds, the Trust Deed and the Agency Agreement (‘‘Proceedings’’) may be brought in such courts. The Issuer has in the Trust Deed, irrevocably submitted to the exclusive jurisdiction of such courts and waived any objection to Proceedings in any such courts whether on the ground of venue or on the ground that the Proceedings have been brought in an inconvenient forum.
(c) Agent for Service of Process The Issuer has irrevocably appointed in the Trust Deed an agent in Hong Kong to receive service of process in any Proceedings in Hong Kong based on any of the Bonds.
(d) Waiver of Immunity The Issuer has waived any right to claim sovereign or other immunity from jurisdiction or execution and any similar defence, and has irrevocably consented to the giving of any relief or the issue of any process, including, without limitation, the making, enforcement or execution against any property whatsoever (irrespective of its use or intended use) or any order or judgment made or given in connection with any Proceedings.
53 THE GLOBAL CERTIFICATE
The Global Certificate contains provisions which apply to the Bonds while they are in global form, some of which modify the effect of the Terms and Conditions of the Bonds set out in this Offering Circular. The following is a summary of certain of those provisions. Terms defined in the Terms and Conditions of the Bonds set out in this Offering Circular have the meaning in the paragraphs below.
The Bonds will be represented by a Global Certificate which will be registered in the name of a nominee of, and deposited with, a common depositary on behalf of Euroclear and Clearstream.
Under the Global Certificate, the Issuer, for value received, will promise to pay such principal, interest and premium (if any) on the Bonds to the holder of the Bonds on such date or dates as the same may become payable in accordance with the Terms and Conditions of the Bonds.
Owners of interests in the Bonds in respect of which the Global Certificate is issued will be entitled to have title to the Bonds registered in their names and to receive individual definitive Certificates if either Euroclear or Clearstream or any other clearing system (an ‘‘Alternative Clearing System’’)isclosedfor business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so.
The individual definitive Certificates will be issued in an aggregate principal amount equal to the principal amount of the Global Certificate. Such exchange will be effected in accordance with the provisions of the Agency Agreement and the regulations concerning the transfer and registration of the Bonds scheduled thereto and, in particular, shall be effected without charge to any holder of the Bonds or the Trustee, but against such indemnity and/or security as the Registrar or the relevant Transfer Agent may require in respect of any tax or other duty of whatsoever nature which may be levied or imposed in connection with such exchange.
The Issuer will cause sufficient individual definitive Certificates to be executed and delivered to the Registrar for completion, authentication and despatch to the relevant holders of the Bonds. A person with an interest in the Bonds in respect of which the Global Certificate is issued must provide the Registrar not less than 30 days’ notice at its specified office of such holder’s intention to effect such exchange and a written order containing instructions and such other information as the Issuer and the Registrar may require to complete, execute and deliver such individual definitive Certificates.
In addition, the Global Certificate will contain provisions which modify the Terms and Conditions of the Bonds as they apply to the Bonds evidenced by the Global Certificate. The following is a summary of certain of those provisions:
Notices So long as the Bonds are represented by the Global Certificate and the Global Certificate is held on behalf of Euroclear or Clearstream or any Alternative Clearing System, notices to holders of the Bonds shall be given by delivery of the relevant notice to Euroclear or Clearstream or such Alternative Clearing System, for communication by it to accountholders entitled to an interest in the Bonds in substitution for notification as required by the Terms and Conditions of the Bonds.
Meetings For the purposes of any meeting of Bondholders, the holder of the Bonds represented by the Global Certificate shall (unless the Global Certificate represents only one Bond) be treated as two persons for the purposes of any quorum requirements of a meeting of Bondholders and as being entitled to one vote in respect of each U.S.$1,000 in principal amount of Bonds for which the Global Certificate is issued.
54 Authentication The Global Certificate shall not become valid for any purpose until authenticated by or on behalf of the Registrar.
Bondholder’sRedemption The Bondholder’s redemption option in Condition 6(c) of the Terms and Conditions of the Bonds may be exercised by the holder of the Global Certificate giving notice to the Principal Paying Agent of the principal amount of Bonds in respect of which the option is exercised within the time limits specified in the Conditions.
Issuer’sRedemption The options of the Issuer provided for in Conditions 6(b) of the Terms and Conditions of the Bonds shall be exercised by the Issuer giving notice to the Bondholders within the time limits set out in and containing the information required by the relevant Condition.
Transfers Transfers of interests in the Bonds will be effected through the records of Euroclear and Clearstream (or any Alternative Clearing System) and their respective participants in accordance with the rules and procedures of Euroclear and Clearstream (or any Alternative Clearing System) and their respective direct and indirect participants.
Cancellation Cancellation of any Bond by the Issuer following its redemption or purchase by the Issuer will be effected by a reduction in the principal amount of the Bonds in the register of Bondholders.
Trustee’sPowers In considering the interests of Bondholders while the Global Certificate is registered in the name of a nominee for a clearing system, the Trustee may, to the extent it considers it appropriate to do so in the circumstances, but without being obligated to do so, (a) have regard to any information as may have been made available to it by or on behalf of the relevant clearing system or its operator as to the identity of its accountholders (either individually or by way of category) with entitlements in respect of the Bonds and (b) consider such interests on the basis that such accountholders were the holders of the Bonds in respect of which this Global Certificate is issued.
55 USE OF PROCEEDS
The estimated net proceeds of the issue of the Bonds, after deducting commissions and other estimated expenses, is expected to amount to approximately U.S.$[•] million and will be used for refinancing existing debt and for general corporate purposes.
56 CAPITALISATION AND INDEBTEDNESS
Capitalisation and Indebtedness of the Group The following table sets forth the consolidated total borrowings (both current and non-current portions), total equity and total capitalisation of the Group as at 31 December 2016 and adjusted to give effect to the issue of the Bonds before deducting the underwriting fees and commissions and other estimated expenses payable in connection with this offering:
Actual As adjusted RMB U.S.$(2) RMB U.S.$(2) (millions) (millions) (millions) (millions) Current debt: Short-term borrowings ...... 11,077.5 1,595.5 11,077.5 1,595.5 Non-current liabilities maturing within one year. . . . . 7,144.0 1,029.0 7,144.0 1,029.0 Total current debt ...... 18,221.5 2,624.4 18,221.5 2,624.4 Non-current debt: Long-termborrowings...... 11,648.2 1,677.7 11,648.2 1,677.7 Bondspayable...... 3,100.0 446.5 3,100.0 446.5 Bondstobeissued...... ––[•][•] Total non-current debt ...... 14,748.2 2,124.2 [•][•] Total debt ...... 32,969.7 4,748.6 [•][•] Total equity...... 13,271.3 1,911.5 13,271.3 1911.5 Total capitalisation(1) ...... 46,241.0 6,660.1 [•][•]
Notes:
(1) Total capitalisation represents the sum of total current debt, total non-current debt and total equity.
(2) Based on the exchange rate of RMB6.9430 to US$1.00, the noon buying rate in effect on 30 December 2016 as set forth in the H.10 weekly statistical release of the Board of the Governors of the Federal Reserve System of the United States.
On 22 February 2017, the Group issued a bond in the aggregate principal amount of U.S.$300 million. Except as disclosed above, there has been no material change in the consolidated capitalisation and indebtedness of the Group since 31 December 2016.
57 DESCRIPTION OF THE GROUP
Overview The Group is a state-owned enterprise located in Qinghai province in China and primarily invests in and operates state-owned assets authorised by the State-owned Assets Supervision and Administration Commission of Qinghai (‘‘Qinghai SASAC’’). The Group’s business comprises of four principal segments including (i) aluminium production (including the production of primary aluminium and fabricated aluminium products), (ii) electricity generation (including thermal power and hydropower), (iii) the mining and sale of coal and (iv) other ancillary businesses (including real estate development, guarantee and leasing services, and real estate management). Across these four business segments, the Group engages in a range of operations including: (i) managing projects in which the Group has made investments, (ii) providing equipment financing and leasing, fundraising and other financing services, (iii) investing in debt, equity and projects designated by the Qinghai provincial government as being related to the Group’s businesses, such as hydropower, thermal power, primary aluminium, fabricated aluminium and exploration of mineral resources, (iv) providing loan guarantees, custodian services and investment consultation services, (v) purchasing raw materials, (vi) selling carbon, aluminium and fabricated aluminium products (except in situations where special state provisions apply, such as those in relation to military products and narcotics) and (vii) exploring, extracting and processing mineral resources.
As at the date of this Offering Circular, the registered capital of the Issuer is RMB6.417 billion. The Issuer is directly owned by Qinghai SASAC, Qinghai State-owned Assets Investment and Management Company Limited（青海省人民政府國有資產投資管理有限公司）(‘‘Qinghai SAIMC’’), Xining Economic and Technological Development Area Investment Holding Group Co., Ltd.（西寧經濟技術開 發區投資控股集團有限公司）(‘‘Xining Development’’) and West Mining Company Limited (a company listedontheShanghaiStockExchange（西部礦業股份有限公司）(‘‘West Mining’’), which have a 58.59%, 7.79%, 13.35%, and 20.27% shareholding in the Issuer respectively. As Qinghai SASAC directly holds a 100% interest in Qinghai SAIMC and indirectly holds a 14.2% interest in West Mining, Qinghai SASAC has an aggregate controlling interest of 69.26% in the shares of the Issuer thereby giving it power to, among other things, appoint and remove the Issuer’s directors and senior management.
History and Development The Issuer was established as Qinghai Provincial Investment Company（青海省投資公司）in March 1993 pursuant to the Approval for the Establishment of Qinghai Provincial Investment Company（關於 成立青海省投資公司的批復（青機編發[93]第41號））issued by the Qinghai provincial government. At the time of its establishment, the Issuer’s total registered capital was RMB250 million.
The following table sets out certain key corporate historical events and milestones during the Group’s development:
2001...... InJune 2001, the Issuer changed its name to Qinghai Provincial Investment Group Co., Ltd（青海省投資集團有限公司）and increased its registered capital to RMB1 billion.
2006...... InApril2006,theIssuerreceived investments from two foreign strategic investors and the Issuer’s registered capital was increased to RMB 3.4 billion.
2008...... InDecember2008,theIssuerannounced its plan for a capital reduction, and refunded the paid-in capital of the foreign investors. The Issuer’s registered capital was reduced to RMB1.359 billion.
58 2012...... InJune2012,QinghaiSAIMCinjectedRMB500million of capital into the Issuer.
In October 2012, Xining Development purchased shares in the Issuer in the amount of RMB600 million, of which 465 million was injected into the registered capital of the Issuer and RMB135 million into capital reserves, thereby increasing the registered capital of the Issuer to RMB2.324 billion.
2013...... InNovember2013,WestMininginjectedcapitalintotheIssuerto increase the registered capital of the Issuer to RMB3.625 billion.
2014...... InDecember2014,QinghaiSASACissuedtheApprovalfortheMutual Investments Between Qinghai Provincial Investment Group Co., Ltd and Xining Economic and Technological Development Area Investment Holding Group Co., Ltd.（關於青海省投資集團有限公司與西寧經濟技術 開發區投資控股集團有限公司互相投資的批復 （青國資產[2014]第307 號））and increased the registered capital of the Issuer to RMB4.017 billion.
2016...... In December 2016, Qinghai SASAC injected additional capital of RMB2.4 billion into the Issuer to increase the registered capital of the Issuer to RMB6.417 billion.
2017...... InFebruary 2017, the Issuer issued a bond in the aggregate principal amount of U.S.$300 million.
59 Group Structure
The chart below illustrates the simplified corporate structure of the Group as of the date of this Offering Circular:
Xining People’s Government Qinghai People’s Government （西寧市人民政府） （青海省人民政府）
Xining Economic and Technological State-owned Assets Supervision and Development Area Commission Administra on Commission of Qinghai (西寧市經濟技術開發區管委會) (青海省人民政府國有資產監督管理委員會)
50.37% 100% 100% West Mining Group Company Limited Qinghai State-owned Assets Xining Economic and Technological (西部礦業集團有限公司) Investment and Management Development Area Investment Holding Company Limited Group Company Limited 28.21% 青海省國有資產投資管理有限公司
60 西寧經濟技術開發區投資控股集團有限公司 West Mining Company Limited ()西部礦業股份有限公司 58.59% 13.35% 7.79% 20.27%
Qinghai Provincial Investment Group Co., Ltd 青海省投資集團有限公司
22.63% 40.00% 54.10% 96.90% 48.32% 100.00% 100.00% 100.00% 100.00% 100.00% 70.82% 100.00% 100.00% 100.00% 100.00% 100.00% 58.88% 100.00% 100.00% 67.00% 92.32% Ltd. . . d t o L C , . t Ltd. o n C e e m e p t o n l a e r v a e g u D n i G r n t i e i Aluminium Co., d w M e o r r p a C t o g r S n d d y l e o h H c GCo., Ltd. GCo., n n a a i i j T g Guoxin Aluminum Industry Co., Ltd. i n Interna onal Trade (Shanghai) Trade Interna onal Co., Ltd. Qinghai Kunlun Leasing Co., Ltd. a 䴦⍋ⳕ䞥᯳ὁ᳝䰤݀ৌ Qinghai Ningbei Electric Co.,Ltd. a Pingan High Precision Aluminuim Co., Ltd. h ˄䴦⍋㖨ܝ⠽ὁ᳝䰤݀ৌ˅ ˄䴦⍋⨲ড়䢕ㅨ᳝䰤݀ৌ˅ ˄䴦⍋‟䳏ᆺὁ᳝䰤݀ৌ˅ S Qinghai g 䴦⍋ᯚժ⾳䊗᳝䰤䊀ӏ݀ৌ ˄䴦⍋ᑇᅝ催㊒䢕ὁ᳝䰤݀ৌ˅ Qinghai Xiangguang Property Co., Ltd. 䴦⍋‟丁䢕䳏㙵ӑ᳝䰤݀ৌ Qinghai Ruihe Aluminium Foil Co., Ltd. Qinghai Bridgehead n ˅䴦⍋ᆻ࣫ⱐ䳏᳝䰤䊀ӏ݀ৌ˅ ˄䴦⍋Ⲟ⁶ׂᅝ㺱᳝䰤݀ৌ˅ ˄䴦⍋ⱒ⊇䢕ὁ᳝䰤䊀ӏ݀ৌ˅ ˄䴦⍋䨿䢕ὁ㙵ӑ᳝䰤݀ৌ˅ ˄䴦⍋ℷⲞ⁶␀ᡔ㸧᳝䰤݀ৌ˄ ˄䴦⍋䗮⫼㟾ぎ䲚೬᳝䰤݀ৌ˅ i Qinghai Electric Bridge industrial Co.,Ltd. 䴦⍋䞥⨲ὁⱐሩ㙵ӑ᳝䰤݀ৌ ˄䴦⍋䖄⋄᠓ഄ⫶䭟ⱐ᳝䰤݀ৌ˅ 䴦⍋䁴ֵ⫼᪨ֱ᳝䰤䊀ӏ݀ৌ Qinghai Baihe Aluminium Industry Co.,Ltd. Qinghai Jinrui Mining Development Co., Ltd. Q 䴦⍋ⳕϝ∳∈䳏䭟ⱐ㙵ӑ᳝䰤݀ৌ ˄䴦ᡩ䱯䊓ᯧ˄Ϟ⍋˅᳝䰤݀ৌ˅ ˄䴦⍋催ॳ᳝㡆䞥ቀⷨⱐ᳝䰤݀ৌ˅ Qinghai Qinghai Tongyong Avia on Group Limited ˄䴦⍋ⳕ㽓⍋✸⚁䭟ⱐ᳝䰤䊀ӏ݀ৌ˅ ˅䴦⍋ⱒݡ⫳䢕ὁ᳝䰤䊀ӏ݀ৌ˄ Qingtou Zhengyi Detec on Technology Co.,Ltd. Qingtou Qinghai Qinghai Chentai Real Estate Development Co., Ltd. Development Estate Real Qinghai Chentai Qinghai Gao Yuan Non-ferrous Metal R&D Co., Non-ferrous Qinghai Ltd. Gao Yuan Qinghai Yihe Maintenance and Installa on Co., Ltd. Qinghai , Qinghai Xihai Limited CoalCompany Development Qinghai Baihe Renewable Aluminium Industry Co., Ltd. COMPETITIVE STRENGTHS
The Group believes that its success and prospects are primarily attributable to the following competitive strengths:
Well-positioned to leverage the strategic location of Qinghai province as part of the ‘‘One Belt, One Road’’ initiative of the PRC government Qinghai is an important hub in the Northwest region of China with abundant natural resources and located along an important passageway connecting the Silk Road Economic Belt to the 21st Century Maritime Silk Road as part of the ‘‘OneBelt,OneRoad’’ initiative of the PRC government. Qinghai is also one of the key provinces in the China Western Development strategy of the PRC government. Qinghai has a convenient and efficient transportation network which includes the Beijing-Lhasa Expressway（北京－拉薩高速公路）, 214 Highway, 227 Highway, 315 Highway and the Qinghai-Tibet Railway linking up Qinghai to other parts of China. The construction of the Dunhuang-Golmud Railway （敦格鐵路）, Golmud-Korla Railway（格庫鐵路）and the Xining-Chengdu Railway will further increase Qinghai’s strategic importance in the Northwest region of the China. Qinghai is abundant in natural resources. The province has over 270 larger-sized rivers, which may be harnessed to produce hydroelectricity at a lower cost than coal-based electricity. Qinghai is also rich in mineral resources with an estimated potential value of over RMB1.7 trillion. The Group engages in the exploration, extraction and processing of mineral resources on behalf of the Qinghai provincial government.
The Group is located in the Tibetan Plateau where the levels of oxygen and hydrogen are relatively low, thereby allowing the Group to produce aluminium and fabricated aluminium products which are of a higher quality and purity than comparable products from the eastern and middle regions of China. In addition, the Group’s yield of finished products is 2% higher than in coastal regions and as a result the cost of production can be reduced by RMB100 per tonne. Due to the advantages provided by these regional natural conditions, Glencore PLC（嘉能可國際資源有限公司）(‘‘Glencore PLC’’), a global supplier of aluminium powder, has built an aluminium powder warehouse in the same area as the Group’s production facilities from which it supplies aluminium powder to the Group and other primary aluminium producers in Qinghai province.
As the Group is a crucial investment vehicle of the Qinghai provincial government, it is well-positioned to leverage on Qinghai province’s geostrategic advantages.
Strong support from governmental policies TheGroupisthelargeststateownedenterprisebytotal assets and the second largest state owned enterprise by total revenue in Qinghai province. The Group is also the largest job provider in the province, with 15,029 employees as at 31 December 2016. Accordingly, the Group contributes significantly to Qinghai province’s social stability and economy. Further, as a majority-owned investment platform of Qinghai SASAC focused on the vertically integrated coal-electricity-aluminium industry, the Group has benefited from preferential governmental policies and strong support from the Qinghai provincial government as follows:
Financial support. Since its establishment in 1993, the Group has received financial support in different forms from the Qinghai provincial government to support the Group’s operations and development, such as through capital injections, priority possession rights to mineral resources, governmental grants and subsidies. In 2016, a total of RMB706 million in government subsidies were provided to the Group. These subsidies included RMB200 million in the form of a capital injection by the Qinghai provincial government for the establishment of Qinghai Baihe Renewable Aluminium Industry Co., Ltd.（青海百和 再生鋁業有限責任公司）(‘‘Qinghai Renewable’’), RMB409 million for the cost of electricity in connection with the production of primary aluminium, RMB61.7 million for power equipment, RMB6.75 million for a rebuilding and extension project in respect of Xihai Town’s centralized heating facilities, RMB3.08 million in capital subsidies for project relating to the protection of ore resources, RMB3.64 million for an energy-saving technology transformation project relating to high-strength
61 aluminium alloy smelting and casting and RMB5.92 million for the Group’s efforts in maintaining stable growth to promote employment. In 2016, the Group continued to receive subsidies for electricity, being one of the principal costs incurred in producing aluminium, allowing it to purchase electricity at RMB0.28 per kWh instead of the market price of RMB0.33 per kWh.
Preferential governmental policies. The Group’s aluminium business has benefited from various preferential governmental policies such as the 2012 List of Enterprises to Eliminate Backward Production Capacity in the Industrial Sector issued by the Ministry of Industry and Information Technology of the PRC（工業和資訊化部公告2012年工業行業淘汰落後產能企業名單）and the Guiding Opinions of the State Council on Resolving Serious Production Overcapacity Conflicts issued by the State Council（關於化解產能嚴重過剩矛盾的指導意見（國發 [2013] 41號））, which seek to, among other things, streamline the aluminium industry by removing inefficient and smaller scale enterprises which are unable to comply with the specified guidelines. Due to the Group’s large scale of operations and efficiencies resulting from its vertically integrated supply chain, the Group is able to comply with these policies while smaller competitors are forced to cease their operations.
Preferential tax treatment. The Qinghai provincial government provides financial support to the Group in the form of various tax exemptions and concessions. For example, as at the date of this Offering Circular, a number of the Group’s subsidiaries, including Qinghai Bridgehead, Qinghai Sanjiang, Qinghai Ruihe and Qinghai Pingan High Precision Aluminium Co., Ltd.（青海平安高精鋁業有限公 司）(‘‘Qinghai Ping An’’) are subject to a lower corporate income tax rate of 15%.
Competitive cost structure Since 2011, the PRC market has observed both a constant increase in electricity prices and the cancellation of certain electricity discounts afforded to companiesinhighenergyconsumption industries. Given that electricity accounts for approximately 40% of the production costs of primary aluminium, the increase in electricity prices has directly reduced the profit margin of the aluminium processing industry. Despite this, the Group has been able to mitigate the impact of these events by generating a part of the electricity it requires for primary aluminium production within the Group and through its ability to purchase electricity from the grid at a government subsidised price of RMB0.26 to 0.30 per kilowatt hour (‘‘kWh’’). The Group also produces 260,000 tonnes of carbon anodes per annum through its subsidiaries, Qinghai Bridgehead and Qinghai Baihe Aluminium Co., Ltd.（青海百河鋁業有 限公司）(‘‘Qinghai Baihe’’), and through an affiliate enterprise, Qinghai Hexing Carbon Co., Ltd（青海 和興炭素有限公司）(‘‘Qinghai Hexing’’). In order to better control alumina costs, the Group enters into long-term supply and purchase agreements with alumina vendors and places larger orders when alumina prices are low. As a result, the Group’s unit costs for the production of primary aluminium is lower than the industry average. In 2016, the Group’s unit costs of electricity for the production of primary aluminium was approximately RMB0.294 per kWh while based on an analyst report from COFCO Corporation, unit costs for the industry were approximately RMB0.478 per kWh.
Efficiencies resulting from a vertically integrated supply chain The Group’s business segments form a vertically integrated supply chain across its (1) coal, (2) thermal and hydropower electricity generation and (3) primary and fabricated aluminium production business segments.
Each part of this vertically integrated supply chain is linked and closely connected, helping the Group lower its costs of electricity (given it is able to generate electricity at cost and sell to the grid at market prices) and transportation. The management and operation of the underlying assets of the Group across the vertically integrated supply chain are also integrated and optimised in order to improve efficiencies between business segments.
The Group has expanded its supply chain to include the raw materials required for aluminium processing, such as where the large sheet ingot and cast-rolling coil provided by Qinghai Bridgehead can then be directly processed from electrolytic aluminum liquid at the premises of Qinghai Bridgehead
62 without requiring the two separate processes of re-melting and forging to be performed at a separate aluminium processing factory. This process saves 700 kWh of electricity per tonne, reduces metal loss by 2% to 2.7%, shortens the production cycle and lowers the cost of production by more than RMB800 per tonne. In addition, by sourcing primary aluminium from within the Group, costs savings of RMB200 per tonne can be achieved due to the internal price of primary aluminium being 2% lower than the market price.
High demand from downstream clients The Group has ongoing supply agreements with many major downstream enterprises in the aluminium fabrication industry, including China Minmetals Aluminium Co. Ltd.（中國五礦鋁業有限公司）, Shanxi Guanlu Co., Ltd.（山西關鋁股份有限公司）, Shanghai Goawoo Nonferrous Metals Development Co. Ltd.（上海正誠高和有色發展股份有限公司） (‘‘Shanghai Goawoo’’), Glencore PLC relating to the supply of materials and product distribution. This assists the Group with selling its products quickly, thereby reducing inventory, and ensures timely payment from customers.
Diversified funding channels with good banking relationships The Group funds its business operations and working capital requirements through a variety of funding channels including bank loans, corporate bonds, medium term notes, short-term financing bills, private placements and financial leasing. As at 31 December 2016, the Group’s total indebtedness was RMB32,969.7 million. The Group’s average annualised interest rate for the year ended 31 December 2016 was 6.79%.
The Group has developed strong relationships with major financial institutions in the PRC including Bank of China, Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, Bank of Communications and China Development Bank. As at 31 December 2016, the Group has obtained a credit line of up to RMB41,887 million from a number of commercial banks including Hua Xia Bank, China Development Bank and China Construction Bank, of which RMB19,929 million had not yet been utilised.
The diversified funding channels and strong relationships with major financial institutions assist the Group to lower its funding costs and ensure sufficient liquidity for its business operations.
Experienced management team and operational staff The Group has a strong management team and operational staff who are experienced in managing and operating the Group’s vertically integrated supply chain across coal, thermal and hydropower electricity generation and aluminium production. As at 31 December 2016, the Group had 15,029 employees, 49% of which have a qualification of college education or above.
STRATEGIES
The Group aims to strengthen its position by focusing on the following strategies:
Enhance the Group’s vertically integrated business across coal, electricity, aluminium and fabricated aluminium products Qinghai Bridgehead, one of the Group’s main subsidiaries, has since its incorporation in 2002 focused on developing into a combined aluminium and power business. Currently, it is primarily responsible for operating a key part of the Group’s vertically integrated business covering coal, thermal power, aluminium smelting and fabricated aluminium products. The Group will continue to enhance its vertically integrated supply chain by investing to increase the annual production capacity of Qinghai Bridgehead for thermal power, primary aluminium, refined aluminium and fabricated aluminium products. During the ‘‘13th Five-Year Plan’’, the Group will continue to consolidate its resources across
63 coal, electricity, aluminium, fabricated aluminium and exploration of mineral resources business in order to optimise resource allocation, enhance efficiency and achieve coordinated development among the Group’sbusinesssegments.
Strengthen the synergy between the Group’s generation of hydroelectricity and production of, aluminium alloys and aluminium fabrication products Based on the Opinion on Further Improving the Industrial and Information Development of Qinghai Province（關於進一步促進青海省工業和資訊化發展的意見（工信部規[2009] 第229號）promulgated by the Ministry of Industry and Information Technology, strengthening the synergy between the aluminum and electricity businesses is one of the key aims of the state. The Group aims to strengthen its hydroelectricity generation and its aluminium alloy and aluminium fabrication production businesses to support this. In addition to the existing Kangyang Hydropower Station（康揚水電站）, Huangfeng Hydropower Station（黃豐水電站）and Dahejia Hydropower Station（大河家水電站）,theGroupis constructing the Erduo Hydropower Station（爾多水電站）which is expected to be completed in 2024 and Dahejia 2nd Cascade Power Plant（大河家二級電站）which is expected to be completed in 2020. Once both projects are completed, the Group’s total hydroelectricity generation capacity will be 1,329 megawatts (‘‘MW’’). In conjunction with expanding its hydroelectricity generation capacity, the Group has also made substantial investments to develop its production capacity for aluminium alloys and pre- baked anodes. As at the date of this Offering Circular, the Group has completed the construction of facilities able to produce 450,000 tonnes of aluminium alloys per year and 250,000 tonnes of pre-baked anodes per year. However, due to market conditions, the Group currently only uses the facilities to produce 450,000 tonnes of aluminium ingots per year.
Focus on the exploration, extraction and processing of mineral resources The Group aims to focus on the exploration, extraction and processing of mineral resources to ensure sufficient mineral resources are available to sustain the development of the Group’s core businesses. In recent years, the Group has continued to gain experience in this area and has achieved good results in discovering mineral reserves. As at the date of this Offering Circular, the Group has identified 41 mineral exploration projects for solid minerals, saline minerals and groundwater resources and has obtained exploration permits for 13 projects. Each of the projects covers an area of approximately 420 square kilometers which in aggregate cover a total area of 17,011 square kilometers. For projects in respect of which the Group has already obtained exploration permits, the Group expects to be able to extract 1 tonne of gold, 59 tonnes of copper, 24 tonnes of silver, 1,706 tonnes of lead, 5,842 tonnes of zinc and more than 10.72 million tonnes of pure iron. Although at the date of this Offering Circular, mineral exploration, extraction and processing accounts for a relatively low percentage of the Group’s assets and revenue, the Group aims to further develop this part of the Group’s operations to support the sustainable development of its core businesses.
Establish a financing company and improving the Group’s financing abilities Qinghai Jinding Loan Guarantee Co., Ltd.（青海省金鼎貸款擔保有限公司）(‘‘Qinghai Jinding’’)and Qinghai Kunlun Leasing Co., Ltd.（青海昆侖租賃有限責任公司）(‘‘Qinghai Kunlun’’) are non-financial institutions which have played important roles in helping to manage the Group’s capital requirements, strengthening the Group’s ability to seek financing and increasing the Group’s overall competitiveness by providing guarantees and financing support to the Group’s subsidiaries. As the Group continues to expand its scale of operations and production and to seek further capital input, the Group aims to merge Qinghai Jinding and Qinghai Kunlun to form a new financing company within the next two to three years. The merged financing company, with support from additional shareholders, will have an estimated equity capital of over RMB1 billion and will provide services including financial settlements, fund allocation, financial leasing and loan guarantees. The Group’s aim is for the new financing company to improve the overall operational efficiency of the Group and to better support the financing requirements of the Group as it seeks to expand its core businesses.
64 Focus on research and development of fabricated aluminium products The Group has established a research and development institute under its wholly-owned subsidiary, Qinghai Gao Yuan Non-ferrous Metal R&D Company Limited（青海高原有色金屬研發有限公 司）(‘‘Qinghai Gao Yuan’’) to, among other things, provide technical support for the Group’s aluminium business, enhance technological innovation, reduce production costs and improve product quality. The research and development institute is also engaged in the development of fabricated aluminium products. Due to the low profit margin from its primary aluminium business and the higher profit margin which can be generated from the sale of fabricated aluminium products, the Group’s aim is to increase the number of fabricated aluminium products in order to increase the overall profitability of the Group’s aluminium business.
RECENT DEVELOPMENTS
For the three months ended 31 March 2017, the Group recorded a moderate increase in its total assets, and total liabilities and non-current liabilities as compared to their respective balances as at 31 December 2016. The increase was primarily due to the Group issuing an offshore bond in the aggregate principal amount of U.S.$300 million in February 2017 and an increase in long-term borrowings. For the three months ended 31 March 2017, the Group recorded an increase in both its operating income and operating costs as compared to that in the same period in 2016. The increase was primarily due to the new aluminium production plants of Qinghai West Hydroelectric Co., Ltd. （青海西部水電有限公 司）(‘‘Qinghai Hydroelectric’’) and Qinghai Renewable reaching their expected production capacity and the improved sales of aluminium as compared to that in the same period in 2016. For the three months ended 31 March 2017, the Group also recorded an increase in financial expenses as compared to that in the same period in 2016. The increase was primarily due to an increase in interest-bearing debt resulting from the consolidation of Qinghai Renewable into the Group’s financial statements.
THE GROUP’SBUSINESS
The Group’s principal business segments include aluminium production, electricity generation, coal production and sales and other businesses.
The following table sets forth a breakdown of the Group’s total operating revenue by business segment for the periods indicated:
Year ended 31 December Business Segment 2016 2015 2014 Amount Amount Amount (RMB in %of (RMB in %of (RMB in %of millions) total millions) total millions) total Aluminium...... 13,970.0 85.25 10,898.0 77.32 9,942.0 77.10 Electricity...... 863.0 5.27 1,050.0 7.45 1,140.0 8.84 Coal...... 159.0 0.97 200.0 1.42 489.0 3.79 Otherbusinesses...... 1,395.0 8.51 1,946.0 13.81 1,324.0 10.27 Total ...... 16,387.0 100 14,094.0 100 12,895.0 100
Aluminium production The Group’s primary source of profits and revenue comes from its aluminium production business. The Group’s aluminium production business is conducted mainly through six subsidiaries, namely Qinghai Bridgehead, Qinghai Hydroelectric, Qinghai Ping An, Qinghai Baihe, Qinghai Guoxin Aluminum Industry Co., Ltd.（青海國鑫鋁業有限公司）(‘‘Qinghai Guoxin’’) and Qinghai Ruihe. Currently, the Group’s aluminium production business focuses primarily on the direct sales of primary aluminium and, in part, on the processing of fabricated aluminium products. For each of the years ended 31 December 2014, 2015 and 2016, the Group’s sales of primary aluminium was 689,000 tonnes, 808,500 tonnes, and 911,700 tonnes respectively. The average price of the primary aluminium sold over the same periods was RMB11,541.03 per tonne, RMB10,226.53 per tonne and RMB10,608.31 per tonne respectively. For each of the years ended 31 December 2014, 2015 and 2016, the Group’s sales of fabricated aluminium
65 products was 113,000 tonnes, 118,200 tonnes, and 132,200 tonnes respectively. The average price of the fabricated aluminium products sold over the same periods was RMB13,487.2 per tonne, RMB11,341.42 per tonne and RMB12,477.10 per tonne respectively.
The following table sets forth details of the Group’s production and sales of primary aluminium and fabricated aluminium for the periods indicated:
Year ended Year ended Year ended 31 December 31 December 31 December Product 2016 2015 2014 Primary aluminium Production capacity (ten thousand tonnes) 105 95 67 Production output (ten thousand tonnes) 84.22 77.75 65.75 Sales (ten thousand tonnes) 91.17 80.85 68.9 Sales price (RMB per tonne) 10,608.31 10,226.53 11,541.03
Fabricated aluminium Production capacity (ten thousand tonnes) 85 85 20 Production output (ten thousand tonnes) 14.98 11.31 12.1 Sales (ten thousand tonnes) 13.22 11.82 11.3 Sales price (RMB per tonne) 12,477.10 11,341.42 13,487.2 Primary aluminium The principal costs in the production of primary aluminium include alumina, electricity and carbon anodes. For the year ended 31 December 2016, alumina, electricity, and carbon anodes accounted for 35.88%, 39.80% and 12.06% respectively of the production costs of the Group’s primary aluminium.
Year ended Year ended Year ended 31 December 31 December 31 December Costs 2016 2015 2014 (% of total) (% of total) (% of total) Alumina...... 35.88 33.09 34.97 Electricity...... 39.80 32.01 32.38 CarbonAnodes...... 12.06 10.85 10.83 Periodcosts...... 6.63 16.42 13.54 Othercosts...... 5.62 7.63 8.28 Total...... 100 100 100
Alumina
The Group primarily purchases alumina from major domestic and international corporations including Minmetals Aluminium Co., Ltd.（五礦鋁業有限公司）, China Aluminium Qinghai Western International Trade Co., Ltd.（中鋁青海西部國際貿易有限公司）, Glencore Limited（嘉能可有限公司）Shanxi Xinfa Huayuan Trading Co., Ltd.（山西信發華源貿易有限公司）and Shandong Dongyue Jiaokou Energy Feimei Aluminium Co., Ltd.（山東東岳交口能源肥美鋁業有限責任公司）. The Group makes payment to each of its suppliers three months after the Group receives delivery of the alumina. The Group typically enters into long-term supply contracts with its suppliers. The purchase price of the alumina is typically around 17% of the aluminium price listed on the London Metal Exchange during the period in which the alumina is purchased.
The following table sets forth a breakdown of the Group’s average purchase price for alumina and the quantity of alumina purchased for the periods indicated:
Year ended Year ended Year ended 31 December 31 December 31 December 2016 2015 2014 Average purchase price (RMB per tonne) ...... 1,891.00 2,198.00 2,360.00 Quantity purchased (ten thousand tonnes) ...... 176.12 94.56 130.00
66 Electricity
The Group’s electricity costs accounts for approximately 40% of the total production cost of primary aluminium. This is relatively low for industry standards which typically ranges from 35% – 40% of total production costs, due to relatively low electricity prices in Qinghai resulting from its receipt of government subsidies as well as a vertically integrated supply chain which covers both coal mining and electricity generation.
In 2016, the Group has received government subsidies which allow it to purchase electricity at RMB0.28 per kWh instead of the market price of RMB0.33 per kWh.
In addition, the Group can rely on its own thermal power unit as an independent power source for its aluminium production business. The thermal power generation in turn relies on coal supplied by its wholly-owned subsidiary, Qinghai Xihai Coal Development Company Limited（青海省西海煤炭開發有 限責任公司）(‘‘Xihai Coal’’).
As at the date of this Offering Circular, 24% of the Group’s electricity used for aluminium production is generated from a 4×135,000 kilowatts thermal power unit which is operated by its subsidiary, Qinghai the Ningbei Aluminium and Electric Company Limited (‘‘Qinghai Ningbei’’). The remaining 76% of electricity consumed by the Group is provided by third party sources such as Xining Power Supply Company（西寧供電公司）(‘‘Xining Power’’). The Group has entered into a reserve capacity contract with Xining Power in order to guarantee a continued supply of electricity.
For the years ended 31 December 2015 and 2016, the cost of electricity from the Group’sthermalpower unit was RMB0.28 per kWh and RMB0.26 per kWh respectively, which is lower than the cost of electricity from third party sources. For the same periods, the cost of electricity from third party sources was RMB0.33 per kWh and RMB0.30 per kWh respectively. Overall, the Group’s total cost of electricity for its aluminium business for the year ended 31 December 2015 and 2016 was RMB0.29 per kWh and RMB0.29 per kWh.
Carbon anodes As at the date of this Offering Circular, the Group has the capacity to produce 260,000 tonnes of carbon anodes per annum. The production capacity is split between Qinghai Bridgehead, Qinghai Baihe and an affiliate enterprise, Qinghai Hexing. Qinghai Bridgehead has a production capacity of 120,000 tonnes and Qinghai Baihe has a production capacity of 60,000 tonnes. As at the date of this Offering Circular, Qinghai Hexing has a production capacity of 8,000 tonnes with a planned production capacity of 32,000 tonnes. Qinghai Hexing will be at its full production capacity at the end of 2018. For the years ended 31 December 2014, 2015 and 2016, the Group produced 180,200 tonnes, 210,000 tonnes and 155,800 tonnes of carbon anodes respectively.
Production For the years ended 31 December 2014, 2015 and 2016, the Group’s primary aluminium production capacity was 670,000 tonnes, 950,000 tonnes and 1,050,000 tonnes respectively. For the same periods, the Group produced 657,500 tonnes, 777,500 tonnes and 842,200 tonnes respectively.
The Group smelts alumina into primary aluminium using the Hall-Héroult process of electrolyic reduction. The Group uses a large central-feeding facility with pre-bake anodes to conduct the electrolytic process at 240 kiloamperes (‘‘ka’’). The Group’s waste gas is treated and purified to reduce dust and fluoride emissions to acceptable levels set by state environmental protection agencies.
67 The Group established Qinghai Renewable on 18 May 2016 pursuant to the Qinghai People’s Government’s ‘‘Qinghai Baihe Renewable Aluminium Industry Co., Ltd. Asset Restructuring Plan"（青海 黃河再生鋁業有限公司資產重組方案）. Qinghai Renewable assists the Group’s aluminium production operations by primarily focusing on the electrolytic reduction process while also providing services including, among other things, smelting and scrap metal recycling and processing.
The Group’s production methods and processes are in compliance with the relevant industrial policies set by the PRC government including the Notice of the State Council on Ratifying and Forwarding the Several Opinions of the National Development and Reform Commission and Other Departments on Curbing Overcapacity and Redundant Construction in Some Industries and Guiding the Sound Development of Industries（國務院批轉發展改革委等部門關於抑制部分行業產能過剩和重複建設引導 產業健康發展若干意見的通知 （國發[2009]38號））, the Notice of the State Council on Further Strengthening the Elimination of Backward Production Capacities（國務院關於進一步加強淘汰落後產 能工作的通知（國發[2010]7號））and the Notice of the State Council on Resolving the Overcapacity（國 務院關於化解產能嚴重過剩矛盾的指導意見（國發[2013]41號文））.
Sales For the years ended 31 December 2014, 2015 and 2016, the Group’s aluminium sales was 689,000 tonnes, 777,500 tonnes and 911,700 tonnes respectively. The Group’s customers are primarily large domestic commercial companies. Customers include Shanghai Goawoo, China Minmetals Aluminium Co. Ltd.（中國五礦鋁業有限公司）and Glencore (China) Limited（嘉能可（中國）有限公司）.
ThefollowingtablesetsouttheGroup’s top five customers for aluminium for the year ended 31 December 2016:
For the year ended 31 December 2016 Sales (RMB Percentage in millions) (%) China Minmetals Aluminium Co. Ltd.（中國五礦鋁業有限公司）...... 1,845 17.76 Glencore (China) Limited（嘉能可（中國）有限公司）...... 1,008 9.28 Shanghai Goawoo Nonferrous Metals Development Co. Ltd. （上海正誠高和有色金屬發展有限公司）...... 782 7.51 Shanghai Guo Neng Logistocs Co., Ltd.（上海國能物流有限公司）...... 621 5.91 Qinghai Xinhao Aluminium Industry Co., Ltd.（青海鑫豪鋁業有限公司）...... 573 5.85 Total...... 4,829 46.31
In recent years, the Group has been able to sell on average 98% of its aluminium products to third parties. In particular, aluminium ignot slabs that carry the ‘‘Bridgehead Aluminium（橋頭鋁）’’ brand is favored by clients for its purity exceeding the national standard. The Group sets the purchase price each time a customer makes an order for aluminium. Approximately 80% of payment for aluminium sales is settled on delivery. The remaining 20% of payments is typically settled within three months of delivery.
Aluminium fabrication products The Group primarily uses a 45,000 tonne cast-rolling coil production line and a 50,000 tonne aluminium billet production line to produce its fabricated aluminium products. For the years ended 31 December 2014, 2015 and 2016, the Group produced 49,400 tonnes, 49,400 tonnes and 132,200 tonnes of aluminium plate products respectively. For the same periods, the Group produced 51,800 tonnes, 51,800 tonnes and 58,000 tonnes of fabricated aluminium products respectively. These products are primarily used by downstream customers for automobiles, construction, metalware, electronics and packaging.
68 The following table sets out the Group’s top five customers of fabricated aluminium products for the year ended 31 December 2016:
For the year ended 31 December 2016 Quantity Sales (RMB Percentage (tonnes) in thousands) (%) Qinghai State-Owned Assets Holding Co., Ltd. （青海省國有資產投資控股有限公司）...... 62,200.00 761,318.60 17.71 Qinghai Minguang Coal Industry Sales Co., Ltd. （青海民光煤業銷售有限公司）...... 48,000.00 598,300.50 13.92 Hangzhou shengyuan Hungtu Industry Co., Ltd. （杭州盛元鴻圖實業有限公司）...... 34,000.00 589,947.70 13.72 Sichuan Neng Tou Liang Li Logistics Development Co., Ltd. （四川能投量力物流發展有限公司）...... 27,900.00 310,600.90 7.23 Lanzhou Qingfeng Aluminium Industry Co., Ltd （蘭州慶豐鋁業有限公司）...... 17,900.00 230,785.60 5.37 Total...... 190,000.00 24,940,953.40 57.95
The Group procures a large portion of its raw materials used for its fabricated aluminium products through its subsidiaries. A small amount of the raw materials are purchased from third party sources when there is a large demand for fabricated aluminium products.
The following tables set out the main suppliers of raw materials for the production of fabricated aluminium for the years ended 31 December 2015 and 2016:
For the year ended 31 December 2015 Quantity Amount (RMB Percentage (tonnes) in thousands) (%) Chongqing West Aluminium Qingfeng Metals Co., Ltd. （重慶西鋁慶豐金屬材料有限公司）...... 42,834.69 475,877.0 35.52 Qinghai Minguang Coal Sales Co., Ltd. （青海民光煤業銷售有限責任公司）...... 34,000.00 350,025.6 26.13 QinghaiBridgehead...... 22,029.81 234,747.2 17.52 XiningDevelopment...... 15,800.00 174,222.2 13.00 Qingtou International Trade (Shanghai) Co., Ltd. （青投國際貿易（上海）有限公司）...... 4,105.43 44,219.1 3.30 Total...... 118,769.92 1,279,091.2 95.47
For the year ended 31 December2016 Quantity Amount (RMB Percentage (tonnes) in thousands) (%) Qinghai State-Owned Assets Holding Co., Ltd. （青海省國有資產投資控股有限公司）...... 112,200.00 1,586,156.10 41.73 Qinghai Minguang Coal Industry Sales Co., Ltd. （青海民光煤業銷售有限公司）...... 48,000.00 598,352.80 15.74 Sichuan Neng Tou Liang Li Logistics Development Co., Ltd. （四川能投量力物流發展有限公司) ...... 35,400.00 408,742.40 10.75 Chongqing West Aluminum Qingfeng Metal Materials Co., Ltd. （重慶西鋁慶豐金屬材料有限公司）...... 28,300.00 323,240.90 8.50 Lanzhou Qingfeng Aluminium Industry Co., Ltd （蘭州慶豐鋁業有限公司）...... 17,900.00 230,785.60 6.07 Total...... 241,700.00 3,147,277.80 82.79
As at the date of this Offering Circular, the Group has finalised projects to produce, on an annual basis, 20,000 tonnes of refined aluminium through Qinghai Bridgehead and 200,000 tonnes of refined aluminium plates through Qinghai Ping An. The project to produce 200,000 tonnes of refined aluminium plates annually is a key industrial project for ‘‘the 11th Five-Year Plan’’ in Qinghai province. As at the date of this Offering Circular, the actual production capacity for refined aluminium products is still low as the production facilities are still going through a pilot production phase.
69 The Group has also invested in and established a project to produce 12,000 tonnes of aluminum foil and 24,000,000 square meters of formed aluminium foil. As at the date of this Offering Circular, 30 production lines for formed aluminium foil and 20 production lines for etched aluminum foils have been put into production. For the year ended 31 December 2015, the Group produced 2,750,000 square meters of etched aluminium foils and 2,200,000 square meters of formed aluminium foils. For the year ended 31 December 2016, the Group produced 74,400 square meters of etched aluminium foils and 11,200 square meters of formed aluminium foils.
The Group has established a research and development institute under its wholly-owned subsidiary, Qinghai Gao Yuan, to among other things, provide technical support for the Group’s aluminium business, enhance technological innovation, reduce production costs and improve product quality. The institute is responsible for the research and application of key production process materials (such as lubricating oil and liquids) and the development and provision of on-site technical guidance for selecting, testing and applying suitable technology. The institute is also responsible for the methods, standards and operational procedures used to analyse and test the raw materials, products, oils and chemicals used by the Group’s aluminium business. As part of the research and development effort, the Group is exploring the development of fabricated aluminium products. Due to the relatively low profit margin from its primary aluminium business and the higher profit margin which can be generated from the sale of fabricated aluminium products, the Group’s aim is to increase the number of fabricated aluminium products in order to increase the overall profitability of the Group’s aluminium business.
Electricity generation The Group operates an electricity generation business which includes both hydroelectricity and thermal power generation. For the years ended 31 December 2014, 2015 and 2016, the Group generated 8,596.0 gigawatt hours (‘‘GWh’’), 7,440.0 GWh and 4,083.0 GWh of total electricity respectively. For the same periods, thermal power generation accounted for 7,689.0 GWh, 6,494.0 GWh and 3,130.0 GWh of the electricity generated respectively and hydroelectric power generation accounted for 907.0 GWh, 946.0 GWh, and 1,129.0 GWh of the electricity generated respectively.
Each of the Group’s hydropower and thermal power stations has entered into an electricity sale and purchase contract with Qinghai Power Company（青海省電力公司）, which is a wholly-owned subsidiary of State Grid Corporation of China. According to the terms of the contract, Qinghai Power Company will transmit the hydroelectricity and thermoelectricity generated by the Group to the electricity grid. At the end of each month, Qinghai Power Company issues a statement to the Group for the cost of transmitting the electricity onto the grid which is then verified and settled by the Group. Once the Group has paid the costs of transmission to Qinghai Power Company, Qinghai Power Company will transfer the funds received from the electricity fees generated from the transmitted electricity to the Group’s account.
Hydroelectric generation For the years ended 31 December 2014, 2015 and 2016, the Group’s hydroelectric generation capacity was 329,000 kWh, 509,000 kWh and 651,000 kWh respectively.
For the year For the year For the year ended 31 ended ended December 31 December 31 December 2016 2015 2014 Hydroelectricity generation capacity (ten thousand kWh)...... 65.10 50.90 32.90 Hydroelectricityoutput(hundredGWh)...... 11.29 9.46 9.07 Hydroelectricity supplied to the grid（hundred GWh）...... 11.02 9.14 8.88 Average price of hydroelectricity supplied to the grid (RMB per kWh) . . 0.23 0.23 0.23 Average time of hydroelectricity facilities used (hour) ...... 3,826.00 2,838.03 2,756.00
70 The Group primarily generates hydroelectricity through the Kangyang Hydropower Station（康揚水電 站）, Huangfeng Hydropower Station（黃豐水電站）and Dahejia Hydropower Station（大河家水電站）, each of which are located on the Yellow River. The Yellow River runs through seven provinces and two autonomous regions from Qinghai to the eastern province of Shandong. During the ‘‘12th Five-Year Plan’’, Qinghai has accelerated the construction of large to medium-sized hydropower stations around the upstream of the Yellow River, including the Yangqu hydropower station and Maerdang hydropower station. The hydroelectricity generated by the Group is primarily supplied to areas within Qinghai with only a small amount supplied to provinces outside of Qinghai.
Hydropower Generating Capacity (per ten Hydropower Station thousand kWh) Kangyang Hydropower Station ...... 28.4 HuangfengHydropowerStation...... 22.5 Dahejia Hydropower Station ...... 14.2
The Group is currently undertaking the construction of the Erduo Hydropower Station（爾多水電站）and the Dahejia 2nd Cascade Power Plant（大河家二級電站）. The Erduo Hydropower Station will have an installed capacity of 1 GW and will cost a total of RMB9,711 million. The station is expected to be fully completed in 2024. The Dahejia 2nd Cascade Power Plant will have an installed capacity of 100,000 KW and will cost a total of RMB1,500 million. The power plant is expected to be fully completed in 2020.
Installed Capacity (ten thousand Expected year Hydropower Station KW) Total Costs of completion Erduo Hydropower Station ...... 100 RMB9,711 million 2024 Dahejia2ndCascadePowerPlant...... 10 RMB1,500million 2020
Thermal power generation The Group’s thermal power generation units are operated by Qinghai Ningbei. Qinghai Ningbei operates 4×135,000 kilowatts power generating units. The Group has also purchased a 45% shareholding of Qinghai Huadian Datong Power Generation Company Limited（青海華電大通發電有限公司）(‘‘Huadian Datong’’) which operates 2×300,000 kilowatts power generating units.
For the year For the year For the year ended ended ended 31 December 31 December 31 December 2016 2015 2014 Thermoelectricity generation capacity (ten thousand kWh)...... 54.00 116.50 116.50 Thermoelectricity output (hundred GWh）...... 31.30 64.94 76.89 Thermoelectricitysuppliedtothegrid(hundredGWh)...... 28.09 28.62 32.38 Average price of thermoelectricity supplied to the grid (RMB per kWh) . 0.30 0.33 0.34 Average time of thermoelectricity facilities used (hour)...... 5,803 5,918 6,857
The Group is currently undertaking the construction of the 3x660,000 kilowatts ‘‘Shangdayaxiao’’ coal- fired project (3×66萬千瓦燃煤機組「上大壓小」項目）. The new installation is expected to have an installed capacity of 1.98 GW and will cost a total of RMB7,000 million.
71 For the years ended 31 December 2014, 2015 and 2016, the Group generated approximately 29%, 33% and 15% respectively, of the coal used for its thermal power generation internally within the Group (procured from its wholly-owned subsidiary Xihai Coal) with the remaining amount procured from other coal manufacturing enterprises and distributors.
For the year For the year For the year ended ended ended 31 December 31 December 31 December 2016 2015 2014 Coal purchased (ten thousand tonnes)...... 152.73 351.55 454.01 Average price of coal purchased (RMB per tonne) ...... 262.83 312.92 295.00
Coal production The Group operates its coal business primarily through Xihai Coal. For the years ended 31 December 2014, 2015 and 2016, the Group’s total coal output was 2,130,000 tonnes, 1,503,200 tonnes, and 1,000,000 tonnes respectively. For the same periods, the Group’s coal sales amounted to 2,037,600 tonnes, 1,419,600 tonnes and 1,077,600 tonnes respectively.
As at the date of this Offering Circular, the Group’s main coal mines are the ChaiDaer Coal Mine（柴達 爾煤礦）and the HaiTaer Coal Mine（海塔爾煤礦）. The annual production capacity of ChaiDaer Coal Mine and HaiTaer Coal Mine is 900,000 tonnes and 600,000 tonnes respectively. The Group also operates the ChaiDaer Coal Xianfeng Jing（柴達爾礦先鋒井）, the Molei Coal Mine No.2（默勒二礦） and Molei Coal Mine No.3（默勒三礦）, which has an annual production capacity of 450,000 tonnes, 600,000 tonnes and 300,000 tonnes respectively.
Estimated Designed number of production Recoverable years of capacity (ten reserves (ten recoverable thousand thousand reserves tonnes per Coal Mine tonnes) (years) year） Main coal type ChaiDaerCoalMine...... 90 10,120.88 24.50 Lean coal ChaiDaerCoalXianfengJing...... 45 HaiTaer Coal Mine ...... 3,695.42 21.67 60 Non-caking coal Molei Coal Mine No.2 ...... 3,587.20 42.70 60 Non-caking coal Molei Coal Mine No.3 ...... 800.60 20.50 30 Non-caking coal Total...... 18,204.10 285
The coal produced by the Group is primarily sold to Qinghai Ningbei for use at its thermal power generating units. For the year ended 31 December 2014, the Group sold 80.67% of its coal internally to Qinghai Bridgehead and Qinghai Ningbei with the remaining amount sold to the market. The Group decreased its coal sales internally to Qinghai Bridgehead and Qinghai Ningbei to approximately 50% during the year ended 31 December 2015. For the year ended 31 December 2016, the Group sold 52,000 tonnes of coal to Qinghai Ningbei and purchased coal at an average price of RMB262.83 per tonne.
The Group sells coal to its other affiliated subsidiaries based on market price. If there is no market price, then the price is determined by a cost-plus pricing methodology and if there is no market price or if it is not possible to determine the price using a cost-plus pricing methodology, the price is determined through agreement between the parties.
72 The Group also sells coal to third party clients including Huadian Datong, Gansu Jingyuan Yongqing Commercial Co. Ltd.（甘肅靖遠永清商貿有限公司）and Qinghai Nuoya Mining Co. Ltd.（青海諾亞礦 業有限公司）and is used for their thermal power generating operations. Typically, purchasers will need to settle payment for any coal purchase within one month following delivery with any outstanding payments due to be settled by the end of the year.
For the year For the year For the year ended ended ended 31 December 31 December 31 December 2016 2015 2014 Averagesaleprice(RMBpertonne)...... 167.92 219.00 229.78 Miningcosts(RMBpertonne)...... 165.57 164.85 163.55
The Group primarily relies on rail to transport the coal. If deliveries need to be made to areas near the coal mines, the Group relies on trucks. The Group also relies on ships to deliver coal when needed.
Other businesses The Group has been actively participating in a number of other businesses, including guarantee and leasing services, real estate development and sales and real estate management.
Guarantee and leasing services The Group primarily operates its guarantee and leasing services through non-bank financial institutions including Qinghai Tiancheng and Qinghai Kunlun. Through Qinghai Tiancheng, the Group provides guarantees to enterprises for bank loans, financial leases and other economic contracts for a fee.
The following table sets out the details of the outstanding guarantees provided by the Group as at 31 December 2016:
Guaranteed Premium Default Claim Guarantee Number of guarantees provided amount Income Rate leverage ratio 134 RMB4,521 million RMB246 million 2.18% 3.52
Real estate development The Group has operated its real estate development business primarily through Qinghai Chentai Real Estate Development Co., Ltd.（青海辰泰房地產開發有限公司）(‘‘Qinghai Chentai’’).Asatthedateof this Offering Circular, the Group has completed the development and sale of, the Jingyue Apartments Phase I（景岳公寓一期）in the Chengbei district of Xining City.
Construction Saleable Average Address Property type area area sales price Jingyue Apartments No. 9, Haihu Boulevard, Commercial and 700,000 566,212.52 RMB3000.70 PhaseI...... Chengbei District, residential square square per square Xining meters meters meter
The Group currently has a hotel project under development in the Sanya Bay resort district of Sanya City.
Construction Occupied Address Property type area area Sanya Qinghai Building Hotel ...... Fengxiang Road, Commercial and 33,330 16,660 Sanya Bay Resort residential square square District, Sanya meters meters
73 Real estate management The Group primarily operates its real estate management business through Qinghai Xiangguang Real Estate Management Co., Ltd.（青海翔光物業有限公司）(‘‘Qinghai Xiangguang’’). Qinghai Xiangguang primarily provides real estate management services for a number of properties including the Group’s office building, Sanjiang Residential District（三江住宅社區）and Jinyue Apartments Residential District （景岳公寓住宅社區）.
Airport construction and aeronautical operations management The Group operates its airport construction and aeronautical operations management business through its majority-owned subsidiary, Qinghai Tongyong Aviation Group Limited（青海省通用航空集團有限公 司）(‘‘Qinghai Tongyong’’). Pursuant to a share transfer agreement entered into between the Group and Qinghai Hanfei Tongyong Aviation Group Limited（青海漢飛通用航空集團有限公司）on 8 October 2016 (the ‘‘Aviation Share Transfer Agreement’’), the Group acquired 67% of the equity interest in Qinghai Tongyong for an aggregate consideration of RMB67 million. The aforementioned acquisition was completed on 31 December 2016. Qinghai Tongyong provides a range of airport construction and aeronautical related services including aeronautical operations management, training for private and commercial aircraft licensing, aircraft escrow services, short haul transportation, emergency rescue and medical assistance.
Insurance The Group purchases insurances in amounts that it believes are consistent with its risks of loss and customary practice in the relevant industry. The Group purchases pension insurance, medical insurance, unemployment insurance, workplace injury insurance and maternity insurance for its employees and personal injury insurance pursuant to the relevant PRC laws and regulations. The Group believes that the existing insurance coverage is both reasonable and adequate. The Group’s operations and assets still face threats from fire, floods, explosions, power outages and other natural disasters, which may have a significant adverse impact on the Group’s financial and operations.
Employees As at 31 December 2016, the Group had 15,029 employees. The Group believes that its employees are critical to its success and is committed to investing in the development of its employees through continuing education and training, as well as the creation of opportunities for career growth. The Group considers its relationship with its workforce to be good and the Group has not experienced a work stoppage or strike. In accordance with regulations applicable to enterprises and the relevant requirements of various local governments in areas in which the Group operates, the Group makes contributions to the pension contribution plan, employees’ medical insurance, unemployment insurance, maternity insurance and workers’ compensation injury insurance.
Litigation From time to time, the Group may be involved in legal proceedings or other disputes in the ordinary course of its business. As at the date of this Offering Circular, the Group is not aware of any material legal proceedings, investigations, claims, disputes, penalties or liabilities currently existing or pending against it that may have a material adverse impact on its business, financial condition or results of operations.
74 MANAGEMENT OF THE GROUP
The Issuer has set up a board of directors (the ‘‘Board of Directors’’) and a supervisory committee and appointed general managers to oversee the management of the Group. The following chart sets out the simplified organisational structure for the Group as at 31 December 2016:
Qinghai Provincial Investment Group Co., Ltd (Issuer)
Chairman
General Manager
Assistant General Assistant General Assistant General Assistant General Assistant General Assistant General Assistant Secretary Manager Manager Manager Manager Manager Manager Office Department Department Department Department Planning Department Party Group Working Working Group Party Technology Department Technology Safety and Environment Safety and Environment Operations Management Investment Management Investment Audit Supervision Department Financial Resources Department Assets Management Department
Directors The Board of Directors currently consists of seven directors and one chairman. Each of the directors is appointed and confirmed by Qinghai SASAC. The chairman’s term of office is three years, which may be renewed for another term of three years upon the expiration of the first term.
The Board of Directors is responsible to Qinghai SASAC and has the power to: (i) decide on the the Group’s operation and investment plans; (ii) decide the Group’s annual financial budget and final accounts; (iii) decide plans for the Group’s profit distribution and loss recovery; (iv) plan for mergers, divisions, dissolution, increase or decrease of capital and issue of bonds; (v) appoint or dismiss a general manager of the Group according to the recommendations by the directors; (vi) appoint or dismiss a vice general manager of the Group according to the recommendation of a general manager; (vii) decide on the appointment and dismissal of directors and the chairman of wholly-owned subsidiaries; (viii) recommend potential candidates for directors, supervisors and chief financial officer of the subsidiaries in which the Group has a shareholding interest in; (ix) setup working committees to carry out decisions by the Board of Directors; (x) decide on the setup of the Group’s internal management; (xi) formulate the basic management systems of the Group; (xii) amend the Group’s articles of association according to market conditions and the Group’s development; (xiii) file a bankruptcy petition; (xiv) draft amendments to the articles of association of the Group; and (xv) pass resolutions on other major business and administrative matters of the Group.
75 The members of the Board of Directors of the Issuer as of 31 December 2016 are as follows:
Name Age Position(s) Mr. HONG Wei 58 Chairman of the Board Mr. CHENG Guoxun 54 Director and general manager Mr. ZHOU Gan 60 Director Mr. XIAO Haisheng 53 Director and deputy general manager Mr. LI Xinlou 52 Director and deputy general manager Mr. KANG Yanyong 50 Director Mr. ZHAO Shengmao 46 Employee Director
Mr.HONG Wei（洪偉）, aged 58 is the chairman of the Board of Directors. He graduated from the Party School of Qinghai Provincial Committee of the Communist Party of China with a master’sdegreein economic management. Previously, he served in various capacities at the Bridgehead Power Plant（橋頭 發電廠）including as head of the electric operations team, as deputy and head of the operation department, as head of office of the phase V construction headquarters and as vice general manager. He has also served as vice general manager of Bridgehead Power Company Limited（橋頭發電有限公司）, as general manager and chairman of Qinghai Bridgehead, as chairman of Xihai Coal and as vice general manager and general manager of the Issuer.
Mr. CHENG Guoxun（程國勳）, aged 54, is a director and general manager of the Issuer. He graduated with a bachelor’s degree in mathematics from Qinghai Normal University School of Mathematics and a bachelor’s degree in accounting from Zhongnan University of Economics and Law School of Accounting. Previously, he served as a lecturer and senior lecturer of mathematics and as a deputy at the Qinghai School of Finance and Economics（青海財經學校）. He was a manager of the finance department of Qinghai Xiadu Tourism Group Company（青海夏都旅游集團公司）and has served in various capacities for the Issuer including as vice manager and manager of the financial funds department, vice manager and manager of the auditing & supervision division and vice general manager (in charge of finance).
Mr. ZHOU Gan（周淦）, aged 60, is a director of the Issuer. He holds a Master of Business Administration from Qinghai Nationalities University. Previously, he was a director for Qinghai Western Mining Baihe Aluminium Limited Liability Company（青海西部礦業百河鋁業有限責任公司）,vice president (general manager of the metallurgical division) of West Mining and deputy of Sinochem Fertilizer Center（中化集團化肥中心）. He is a director of LanZhou Engineering & Research Institute of Nonferrous Metallurgy Co., Ltd（蘭州有色冶金設計研究院有限公司）, Qinghai Copper Industry Limited Liability Company（青海銅業有限責任公司）and Qinghai Xiyu Nonferrous Metals Company Limited （青海西豫有色金屬有限公司）and chairman of Qinghai Xianghe Nonferrous Metals Limited Liability Company（青海湘和有色金屬有限責任公司）.
Mr. XIAO Haisheng（肖海生）, aged 53, is a director and deputy general manager of the Issuer. He has a bachelor’s degree in hydrodynamics from Hohai University. He has previously worked in Qinghai Hydroelectric-designing Engineering Corporation（青海省水電設計研究院）and served as deputy general engineer, deputy manager, general manager and chairman of the board in Qinghai Sanjiang. He is the chairman of the board and the general manager of Qinghai Pingan.
Mr. LI Xinlou（李新樓）, aged 52, is a director and deputy general manager of the Issuer. He graduated from Chengdu University of Science and Technology with a degree in metals casting and holds a Master in Business Administration. He is an engineer and has served as a deputy director and the chairman of a milling company（銑床公司）, general manager of Qinghai No.1 Machine Tool Plant（青海第一機床廠）, general manager and chairman of the Qinghai No.1 CNC Machine Tools Co., Ltd（青海一機數控機床有 限責任公司）, and deputy manager of the Qinghai Huading Industries Co., Ltd.（青海華鼎股份公司）. He has also been seconded to China Huadian Corporation（中國華電集團公司）as a deputy leader of the strategy planning department.
76 Mr. KANG Yanyong（康岩勇）, aged 50, is a director of the Issuer. He graduated from Central Radio and Television University with a degree in accounting. He has previously worked in the finance department of Xining Steel Works（西寧鋼廠）including as deputy chief, as assistant finance minister, deputy minister, deputy secretary of finance, deputy director, director of financial assets audit department, chief financial officer and deputy director of finance and assets department at Xining Special Steel Co. Ltd.（西寧特殊鋼股份有限責任公司）, as chief financial officer of Xigang Mining Development Co., Ltd.（西鋼礦業開發有限責任公司）, as chief financial officer of Hami Bolun Mining Co., Ltd.（哈密博倫礦業有限責任公司）, as chief financial officer of Subei Boren Mining Co., Ltd.（肅 北博倫礦業有限責任公司）, chief accountant of Qinghai Jiangcang Energy Development Co., Ltd.（青海 江倉能源發展有限公司）, deputy general manager and finance controller of Qinghai Equity Trading Center Co., Ltd.（青海股權交易中心有限公司）, as audit minister at Qinghai SAIMC and vice president and chief financial officer of West Mining.
Mr. ZHAO Shengmao（趙生茂）, aged 46, is the employee director of the Issuer. He graduated from Changchun Electric Power College and is an engineer. He has previously worked as a shift chief operator at Bridgehead Power Plant No.1, shift chief operator, deputy supervisor and supervisor at Bridge Power Plant No.2, as head of the safety supervision department, deputy manager, supervisor and head of the production technology department, party secretary of the production branch of Qinghai Bridgehead. He is currently the general manager and chairman of Qinghai Bridgehead.
Supervisory Committee The supervisory committee consists of eight supervisors, including two employees’ representatives elected by the employees of the Issuer. The other members of the supervisory committee are appointed by Qinghai SASAC. Each supervisor’s term of office is three years, which may be renewed for another term of three years upon the expiration of the first term. SASAC Qinghai appoints a chairman for the supervisory committee. The supervisory committee has the power to: (i) check the financial affairs of the Issuer; (ii) to supervise compliance by directors, general managers and vice general managers with the laws and regulations and the Issuer’s articles of association; (iii) request directors, general managers or vice general managers to remedy acts which may harm the interests of the Issuer; and (iv) propose the convening of an interim shareholders’ meeting.
Name Age Position(s) Mr. ZHANG Shoujie 61 Supervisor and chairman of the supervisory committee Mr. CHEN Yong 59 Full-time supervisor Mr. LI Xingcai 40 Supervisor Mr. JIANG Ying 45 Employee supervisor Mr. LI Gang 44 Employee supervisor Mr. YANG Zhengxiu 36 Employee supervisor Mr. WANG Xiaoxuan 49 Employee supervisor Mr. ZHANG Yi 53 Employee supervisor
Mr. ZHANG Shoujie（張守傑）, aged 61, is a supervisor and chairman of the supervisory committee of the Issuer. He studied at the Qinghai University School of Finance and Economics. Previously and served as an accountant for the Mutual Commercial Supply & Distribution System（互助商業供銷系統）, department chief of the audit bureau in the city of Haidong, supervisor, deputy and division head of the audit office of Qinghai and head of the department of performance evaluation and board of supervisors of Qinghai SASAC. He currently serves as second chairman on the board of supervisors in Qinghai SASAC.
Mr. CHEN Yong（陳勇）, aged 59 is a supervisor of the Issuer. He studied at the Amateur Open University of China and Qinghai Radio & Television University. Previously, he served as a full-time supervisor at the department level of Qinghai SASAC, as technician, section chief and vice director of Xining First Furniture Factory（西寧市第一木器廠）and as head of the savings department of China Construction Bank, Qinghai Branch. He also worked in the office of resources industry of the small and
77 medium enterprises division of the Commission of Economy and Trade of Qinghai, the Office of Information Industry of the Commission of Economy and Trade of Qinghai and the Department of performance and evaluation & board of supervisors of Qinghai SASAC. He currently serves as an external supervisor of Qinghai SASAC（青海省國資委外派國有企業專職監事）.
Mr. LI Xingcai（李興財）, aged 40 is a supervisor of the Issuer. He graduated from Qinghai University for Nationalities（青海民族大學）with a Master of Business Administration. He is a senior accountant and has previously worked in the finance department and as chief of the finance department of Qinghai Aluminum Factory（青海鋁廠）, as finance manager of China Aluminium Qinghai Guomao（中鋁青海國 貿）and Western China Guomao（西部國貿）, as deputy director of the finance department of China Aluminium Qinghai Branch, as deputy general manager of Qinghai Haiyuan Aluminum Company（青海 海源鋁業公司）, as financial controller at Tibet Yulong Copper Industry Co., Ltd.（西藏玉龍銅業股份有 限公司）and as accounting director and as financial management director in the financial management department of West Mining.
Mr. JIANG Ying（蔣穎）, aged 45 is an employee supervisor and a manager in the finance department of the Issuer. He graduated from Qinghai University specialising in farming and animal husbandry management at the university’s college of agriculture and animal husbandry. Mr. Jiang has participated in China’s hotel industry registered senior professional managers training, the Qinghai Party School in- service postgraduate economic management professional learning programme and the chief financial officer training organised by the Ministry of Labor and Social Security. He is an accountant and has previously worked in the finance department of Qinghai Bridge Electric, in the finance department at Qinghai Bridgehead, as the financial controller and as chief financial officer at Qinghai Hotel Tourism Group（青海賓館旅游集團）, in the audit and supervision department of the Issuer, as vice president in charge of finance and management at Qinghai Hotel（青海賓館）, as deputy head in setting up a micro- loan project, as chairman and general manager at Xining City Investment Micro-loan Company（西寧城 投小額貸款公司）and general manager at City Investment Rent Company Limited（城投租賃公司）.
Mr. LI Gang（李剛）, aged 44 is an employee supervisor of the Issuer. He specialised in physics at the Qinghai Higher Teachers College（青海高等師範專科學院）and is a senior administration engineer. He has previously worked at the Qinghai Wujiaohua Company（青海省五交化公司）, Qinghai Jinding, as office supervisor at Qinghai Sanjiang, as deputy party secretary, party secretary, trade union chairman and secretary of the discipline inspection commission at Qinghai Bridgehead and as office deputy supervisor and office supervisor at the Issuer.
Mr. YANG Zhengxiu（楊正秀）, aged 36 is an employee supervisor of the Issuer. He graduated from the Inner Mongolia Baotou Iron and Steel Institute（內蒙古包頭鋼鐵學院）with a degree in Water Supply and Sewerage Engineering and is a senior administration engineer. He previously worked as a technician, deputy director and deputy secretary in the carbon branch at Qinghai Bridgehead and as secretary of the office of the general manager at Qinghai Bridgehead. He is currently the deputy party secretary of the work bureau, branch deputy party secretary, vice chairman of the trade union and member of the commission for discipline inspection at Qinghai Bridgehead.
Mr. WANG Xiaoxuan（王曉暄）, aged 49, is a supervisor of the Issuer. He studied agricultural irrigation at Qinghai University. Previously, he worked in the finance department of the former Qinghai Shanchuan Group（青海山川集團）and in the finance department of Qinghai Bridge Electric. He currently works in the finance department of the Issuer.
Mr. Zhang Yi（張翼）, aged 53, is a supervisor of the Issuer. He is a senior engineer and has worked in the material office and engineering office at the 4th Branch of Longyaxia of Hydropower Engineering Bureau Four（水電四局龍羊峽四處）, in the faculty secretary office and management office of Hydropower Engineering Bureau Four（水電四局技工技校）, in the engineering office and management
78 office at the Zhouzhou base of Hydropower Engineering Bureau Four（水電四局涿洲基地）andinthe construction technology department of Lijiaxia Hydropower Engineering Bureau Four（水電四局李家 峽）. He currently works in the engineering technology management department of Qinghai Sanjiang.
Senior Management Name Age Position(s) Mr. CHENG Guoxun 54 Director and general manager Mr. XIAO Haisheng 53 Director and deputy general manager Mr. LI Xinlou 52 Director and deputy general manager Mr. ZHANG Huming 55 Deputy general manager Mr. WAN Yaping 57 Deputy general manager Mr. YU Qiuping 45 Deputy general manager
For details regarding Mr. Cheng Guoxun, see ‘‘– Directors’’ above.
For details regarding Mr. Xiao Haisheng, see ‘‘– Directors’’ above.
For details regarding Mr. Li Xinlou, see ‘‘– Directors’’ above.
Mr. ZHANG Huming（張虎明）, aged 55, is a deputy general manager of the Issuer. He has a bachelor’s degree in hydraulic engineering from Qinghai University. He has previously worked on the Hydroelectric Board of Tu Autonomous County of Huzhu（互助縣水電局）and the Institute of Water Resources and Hydropower Research（水電設計研究院）of Qinghai. He has also served as deputy director of the project construction department, and also as director, general engineer, deputy general manager, general manager and chairman of Qinghai Sanjiang.
Mr. WAN Yaping（萬押平）, aged 57, is a deputy general manager of the Issuer. He has a master’s degree in mechanical engineering from Northeastern University（東北工學院）. Previously, he has worked in various capacities at the Qinghai Branch of Aluminium Corporation of China Limited（中國 鋁業青海分公司）including as a technician and workshop director at the No.1 Electrolysis Plant（第一 電解廠）, as a director in the personnel division and as a deputy general manager.
Mr. YU Qiuping（俞秋平）, aged 45, is a deputy general manager of the Issuer. He graduated from Beijing Agricultural Engineering University with a degree in mechanical manufacturing and design, graduate and from Lanzhou University School of Management with an Executive Master Of Business Administration. He is a senior engineer. He previously worked as a technician and deputy supervisor at Qinghai Jiafei Chang No.2 Concentration Plant（青海鉀肥廠第二選礦廠）, as a member in the planning department, deputy director, section staff and principal staff member Qinghai Salt Lake Industrial Group Co., Ltd.（青海鹽湖工業集團有限公司）, as chief engineer at Qinghai Salt Lake Technology Center（青 海鹽湖技術中心）, as chief engineer and deputy director of the research and development department at Qinghai Salt Lake Joint Stock Company（青海鹽湖股份公司）and as project manager of the Phase I of the Comprehensive Potash Utilization Project（鉀肥綜合利用項目一期鉀碱項目）, the Phase II Caustic Soda Project（二期燒鹼項目）, One Million Potash Fertilizer System Barge Project (100萬噸鉀肥系統采 船專案）and Processing Plant Controls Automotive Project（加工廠自控專業項目）.
79 PRC REGULATIONS
This section is a high-level overview of the PRC legal system and a summary of the principal PRC laws and regulations relevant to the issue of the Bonds by the Issuer. As this is a summary, it does not contain a detailed analysis of the PRC laws and regulations.
Regulations regarding record filing and registration of the Bonds The NDRC Circular relates to the matters as listed below:
• remove the quota review and approval system for the issuance of foreign debts by enterprises, reform and innovate the ways that foreign debts are managed, and implement the administration of record-filing and the registration system. Realise the supervision and administration of the size of foreign debts borrowed on a macro level with the record-filing, registration, and information reporting of the issuance of foreign debts by enterprises;
• before the issuance of foreign debts, enterprises shall first apply to NDRC for the handling of the record-filing and registration procedures and shall report the information on the issuance to NDRC within 10 working days of completion of each issuance;
• record-filing and registration materials to be submitted by an enterprise for the issuance of foreign debts shall include: application report for the issuance of foreign debts and issuance plan, including the currency, size, interest rate, and maturity of foreign debts, the purpose of the funds raised, back flow of funds, etc. The applicant shall be responsible for the authenticity, legality, and completeness of the application materials and information;
• NDRC shall decide whether to accept the application for record-filing and registration within 5 working days of receiving it and shall issue a Certificate for Record-filing and Registration of the Issuance of Foreign Debts by Enterprises within 7 working days of accepting the application and within the limit of the total size of foreign debts;
• the issuer of foreign debts shall handle the procedures related to the outflow and inflow of foreign debt funds with the Certificate for Record-filing and Registration according to the regulations. When the limit of the total size of foreign debts is exceeded, NDRC shall make a public announcement and no longer accept applications for record-filing and registration;
• if there is a major difference between the actual situation of the foreign debts issued by the enterprises and the situation indicated in the record-filing and registration, an explanation shall be given when reporting relevant information. NDRC shall enter the poor credit record of an enterprise which maliciously and falsely reports the size of its foreign debts for record-filing and registration into the national credit information platform.
In accordance with the Foreign Debt Registration Measures issued by SAFE on 28 April 2013, which came into effect on 13 May 2013, an issuer of foreign debts shall complete the foreign debt registration in respect of its issue of foreign debts with the local branch of SAFE in accordance with applicable laws and regulations. According to the Operation Guidelines for Administration of Foreign Debt Registration （外債登記管理操作指引）promulgated together with the Foreign Debt Registration Measures, the Issuer is required to register its foreign debt issue within 15 working days after the execution of the financing documents and to complete such registration in accordance with the Foreign Debt Registration Measures. In the unlikely event that having exercised its best endeavours, the Issuer is unable to complete such registration within the abovementioned time period, investors will have the right to require the Issuer to redeem their holding of Bonds.
80 Regulations Regarding Environmental Protection The State Environmental Protection Administration is responsible for the overall supervision and management of environmental protection in the PRC. All manufacturers in the PRC must comply with environmental laws and regulations including the Environmental Protection Law of the PRC, Prevention and Control of Water Pollution Law of the PRC, Prevention and Control of Air Pollution Law of the PRC and Prevention and Control of Environmental Pollution by Solid Waste Law of the PRC, and relevant environmental regulations such as provisions regarding the treatment and disposal of pollutants and sewage, discharge of polluted fumes and the prevention of industrial pollution. Depending on the circumstances and the seriousness of the violation of the environmental regulations, the local authorities are authorised to impose various types of penalties on the persons or entities in violation of the environmental regulations. The penalties which could be imposed include the issue of warning, suspension of operation or installation and use of preventive facilities which are incomplete and fail to meet the prescribed standard, reinstallation of preventive facilities which have been dismantled or left idle, administrative sanction against office-in-charge, suspension of business operations or shut-down of the enterprise or institution. Fines could also be levied together with these penalties. The relevant local authorities may apply to the court for compulsory enforcement of environmental compliance. The persons or entities in violation of the applicable laws and regulations may also be liable to pay damages to the victims and/or result in criminal liability.
Other environmental protection laws applicable to the Group include the Regulations of Environmental Protection Management on Construction Project（建設項目環境保護管理條例）, the Regulations of Environmental Protection Acceptance Inspection on Completion of Construction Projects（建設項目竣工 環境保護驗收管理辦法）and the Environmental Impact Evaluation Law of the PRC.
Regulations on Hydropower Station Dams The Regulations on Administration of Safety of Reservoir Dams promulgated by the State Council on 22 March 1991 and amended on 8 January 2011, the Regulations on the Administration and Supervision of Safe Operation of Hydropower Station Dams promulgated by the State Electricity Regulatory Commission (‘‘SERC’’)on1December2004whichwasreplacedbytheRegulationsonthe Administration and Supervision of Safe Operation of Hydropower Station Dams promulgated by the NDRC on 1 April 2015, and relevant rules issued there under, provide for the regulations on the administration and supervision of the safe operation of large and medium-sized hydropower station dams. The dam operator shall conduct supervision and analysis during the construction period and the first stage of water storage, conduct safety appraisals at the time of water storage and project completion, and file the supervision and analysis documents, safety appraisal report and acceptance report with the Large Dam Safety Supervision Center administered by the SERC (now the National Energy Administration (‘‘NEA’’)) (the ‘‘Dam Center’’) for record. The dam operator is responsible for the daily and annual inspection while the Dam Center is responsible for periodic inspections and non- routine inspections. The periodic inspection shall be conducted every five years and non-routine inspections shall be conducted upon the occurrence of any large flood, strong earthquake and other unusual circumstances that may affect the safety of the dam.
According to their safety status, dams are classified as normal, defective and dangerous. A defective and dangerous dam shall be reinforced, reconstructed or maintained within a prescribed period, and its operation will be altered, limited or stopped before being reclassified as a normal dam. Within one year after the safety appraisal for project completion, or six months after the first periodic inspection, the dam operator shall file the safety registration with the Dam Center, which will issue the Certificate of Safety Registration of Power Station Dam based on the safety and management conditions.
81 Regulations on Work Safety and Labor Protection Pursuant to the Work Safety Law of the PRC, effective on 1 November 2002 and amended on 31 August 2014, and the Regulation on Work Safety License, effective on 13 January 2004 and amended on 18 July 2013, and other relevant laws and regulations, the State Administration of Work Safety shall regulate and supervise work safety in the PRC.
Pursuant to the Regulations on the Administration and Supervision of Work Safety in the Electric Power Generation Industry issued by NDRC on 17 February 2015, any electric-power related enterprises shall establish a strict safety responsibility distribution scheme and a work safety supervision scheme. The NEA is responsible for the specific supervision and administration of electric power-related enterprises in the PRC, while the State Administration of Work Safety is responsible for the comprehensive administration of electric power-related enterprises in the PRC. Electric power-related enterprises are responsible for maintaining their safe operation, so they must strictly comply with the relevant laws and regulations, industrial code and standards.
Pursuant to the Interim Provisions on the Investigation into Electric Power Generation Accidents, promulgated by the SERC on 28 December 2004 and effective as of 1 March 2005, in the case of any major personal injury, power grid accident, equipment accident, fire incident, dam-collapse incident, or any power breakdown that results in serious harm to the public, the electric power enterprise involved shall promptly, but in any case within 24 hours, report to the SERC (now the NEA) the time and place of the accident and the emergency measures being taken. The Circular on the Issue of Interim Provisions on Submission of the Information of Work Safety in Electricity Industry, issued by the SERC on March 10, 2004, provides for the rules for counting and reporting electric power-related accidents.
Regulations on Water Drawing Pursuant to the Water Law of the PRC promulgated by the Standing Committee of the Ninth National People’s Congress on 29 August 2002 and amended on 27 August 2009, and the Regulations on Administration of Water Drawing Permit and the Levy of Water Resource Fees (the ‘‘Water Drawing Regulations’’) promulgated by the State Council on 21 February 2006 and effective as of 15 April 2006, any entity or individual drawing water directly from rivers, lakes or underground through water drawing engineering structures or facilities shall apply to the water resources authority or the river basin administration authority for a water drawing permit and pay the water resource fees in order to obtain the water drawing rights. A water-drawing entity or individual shall draw water according to the government-approved annual water drawing plan. For water drawing exceeding the plan or quota, water resource fees shall be charged progressively on the excess. In accordance with the Water Drawing Regulations, the amount of water resource fees due shall be determined based on the standard of water resource fees at the locality of the water intake and the actual volume of water drawing. As to water drawing for the purpose of hydropower generation, the amount of water resource fees may be determined based on the standard of water resource fees at the locality of the water intake and the actual quantity of electricity generated.
Pursuant to the Administrative Measures on the Collection and Use of Water Resource Fees (the ‘‘Water Resource Fees Measures’’) jointly promulgated by the Ministry of Finance (‘‘MOF’’), the NDRC and the Ministry of Water Resources (‘‘MWR’’) on 10 November 2008 and effective as of 1 January 2009, the water resource fees shall be levied on a monthly basis. A water-drawing entity or individual shall submit the volume of water drawn (or the quantity of electricity generated) to the competent water resources authority in charge of collection of water resource fees on a monthly basis and shall make payment of water resource fees within seven days after receiving the Water Resource Fees Payment Notice issued by the competent water resources authority in charge of collecting of water resource fees. The Water Resource Fees Measures further clarify that the standard of water resource fees shall be set by the NDRC jointly with the MOF and the MWR with respect to the water conservancy projects directly under the administration of the PRC national government or covering different provinces, autonomous regions, or municipalities, which water drawing shall be subject to examination
82 and approval of the river basin administration authority. In addition, the Water Resource Fees Measures stipulate that the levied water resource fees are to be exclusively used for water conservation protection and administration, as well as for the reasonable development of water resources.
Pursuant to the Notice on Adjustment of Water Resource Fee Collection Standard for Hydropower Generation from Central and Interprovincial Hydroelectric Power Plants, jointly promulgated by the NDRC, the MOF and the MWR on 26 August 2014, after 1 January 2015, the water resource fee for hydropower generation from national and interprovincial hydroelectric power plants was increased to RMB0.5 cent per kWh if the then current fee was lower than RMB0.5 cent per kWh, and remain unchanged if the then current fee was higher than RMB0.5 cent per kWh, provided that the fee shall not exceed RMB0.8 cent per kWh.
83 TAXATION
The following is a general description of certain tax considerations relating to the Bonds is based upon laws and relevant interpretations thereof in effect as at the date of this Offering Circular, all of which are subject to change (possibly with retroactive effect). This discussion does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase, own or dispose of the Bonds and does not purport to deal with consequences applicable to all categories of investors, some of which may be subject to special rules. Neither these statements nor any other statements in this Offering Circular are to be regarded as advice on the tax position of any holder of the Bonds or any persons acquiring, selling or otherwise dealing in the Bonds or on any tax implications arising from the acquisition, sale or other dealings in respect of the Bonds.
Persons considering the purchase of the Bonds should consult their own tax advisers concerning the possible tax consequences of buying, holding or selling any Bonds under the laws of their country of citizenship, residence or domicile.
Hong Kong Withholding tax No withholding tax is payable in Hong Kong in respect of payments of principal or interest on the Bonds or in respect of any capital gains arising from the sale of the Bonds.
Profits tax Hong Kong profits tax is chargeable on every person carrying on a trade, profession or business in Hong Kong in respect of profits arising in or derived from Hong Kong from such trade, profession or business (excluding profits arising from the sale of capital assets).
Under the Inland Revenue Ordinance (Cap. 112) of Hong Kong (the ‘‘Inland Revenue Ordinance’’)as it is currently applied by the Inland Revenue Department, interest on the Bonds may be deemed to be profits arising in or derived from Hong Kong from a trade, professional or business carried on in Hong Kong in the following circumstances:
(a) interest on the Bonds is received by or accrues to a financial institution (as defined in the Inland Revenue Ordinance) and arises through or from the carrying on by the financial institution of its business in Hong Kong; or
(b) interest on the Bonds is derived from Hong Kong and is received by or accrues to a company carrying on a trade, profession or business in Hong Kong; or
(c) interest on the Bonds is derived from Hong Kong and is received by or accrues to a person other than a company (such as a partnership), carrying on a trade, profession or business in Hong Kong and is in respect of the funds of the trade, profession or business.
Sums derived from the sale, disposal or redemption of the Bonds will be subject to Hong Kong profits tax where received by or accrued to a person, other than a financial institution, who carries on a trade, profession or business in Hong Kong and the sums have a Hong Kong source unless otherwise exempted. The source of such sums will generally be determined by having regard to the manner in which the Bonds are acquired and disposed of.
Sums received by or accrued to a financial institution by way of gains or profits arising through or from the carrying on by the financial institution of its business in Hong Kong from the sale, disposal and redemption of the Bonds will be subject to profits tax.
84 Stamp duty No Hong Kong stamp duty will be chargeable upon the issue or transfer of a Bond.
PRC
The following summary is a general description of the principal PRC tax consequences of ownership of the Bonds by beneficial owners who, or which, are not residents of mainland China for PRC tax purposes.
These beneficial owners are referred to as non-PRC Bondholders in this ‘‘PRC’’ section. In considering whether to invest in the Bonds, investors should consult their individual tax advisors with regard to the application of PRC tax laws to their particular situations as well as any tax consequences arising under the laws of any other tax jurisdiction. Reference is made to PRC taxes from the taxable year beginning on or after 1 January 2008.
Withholding on interest Pursuant to the EIT Law and its implementation regulations and Individual Income Tax Law of the PRC (‘‘IIT Law’’), which was amended on 30 June 2011 and took effect on 1 September 2011, and its implementation regulations, an income tax is imposed on payment of interest by way of withholding in respect of debt securities, issued by PRC enterprises to non-PRC Bondholders, including non-PRC resident enterprises and non-PRC resident individuals. The current rates of such income tax are 10 per cent. for non-PRC resident enterprises and 20 per cent. for non-PRC resident individuals.
Such income tax shall be withheld by the Issuer that is acting as the obligatory withholder and such PRC enterprise shall withhold the tax amount from each payment due. To the extent that the PRC has entered into arrangements relating to the avoidance of double taxation with any jurisdiction, such as Hong Kong, that allow a lower rate of withholding tax, such lower rate may apply to qualified non-PRC resident enterprise Bondholders. The tax so charged on interests paid on the Bonds to non-PRC Bondholders who, or which are residents of Hong Kong (including enterprise holders and individual holders) as defined in the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income（內地和香港特別行政區關於對所得避免雙重徵稅和防止偷漏稅的安排） which was promulgated on 21 August 2006 (the ‘‘Arrangement’’) will be 7 per cent. of the gross amount of the interest pursuant to the Arrangement and relevant interpretation of the Arrangement formulated by SAT. To enjoy this preferential tax rate of 7 per cent., the Issuer could apply, on behalf of the Bondholders, to the State Administration of Taxation of the PRC for the application of the tax rate of 7 per cent. in accordance with the Arrangement on the interest payable in respect of the Bonds.
Value-add Tax (‘‘VAT’’) On 23 March 2016, the Ministry of Finance and the SAT issued the Circular of Full Implementation of Business Tax to VAT Reform（關於全面推開營業稅改徵增值稅試點的通知）(‘‘Circular 36’’)which confirms that business tax will be completely replaced by VAT from 1 May 2016. Since then, the income derived from the provision of financial services which attracted business tax will be entirely replaced by, and subject to, VAT.
According to Circular 36, the entities and individuals providing the services within China shall be subject to VAT. The services are treated as being provided within China where either the service provider or the service recipient is located in China. The services subject to VAT include the provision of financial services such as the provision of loans. It is further clarified under Circular 36 that the ‘‘loans’’ refers to the activity of lending capital for another’s use and receiving the interest income thereon. Based on the definition of ‘‘loans’’ under Circular 36, the issuance of Bonds is likely to be treated as the holders of the Bonds providing loans to the Issuer, which thus shall be regarded as financial services subject to VAT. Further, given that the Issuer is located in the PRC, the holders of the
85 Bonds would be regarded as providing the financial services within China and consequently, the holders of the Bonds shall be subject to VAT at the rate of 6% when receiving the interest payments under the Bonds. In addition, the holders of the Bonds shall be subject to the local levies at approximately 12% of the VAT payment and consequently, the combined rate of VAT and local levies would be around 6.72%. Given that the Issuer pays interest income to Bondholders who are located outside of the PRC, the Issuer, acting as the obligatory withholder in accordance with applicable law, shall withhold VAT and local levies from the payment of interest income to Bondholders who are located outside of the PRC.
Where a holder of the Bonds who is an entity or individual located outside of the PRC resells the Bonds to an entity or individual located outside of the PRC and derives any gain, since neither the service provider nor the service recipient is located in the PRC, theoretically Circular 36 does not apply and the Issuer does not have the obligation to withhold the VAT or the local levies. However, there is uncertainty as to the applicability of VAT if either the seller or buyer of Bonds is located inside the PRC.
Circular 36 has been issued quite recently, the above statement may be subject to further change upon the issuance of further clarification rules and/or different interpretation by the competent tax authority. There is uncertainty as to the application of Circular 36.
Pursuant to the EIT Law, IIT Law and the VAT reform detailed above, the Issuer shall withhold EIT or IIT (should such tax apply) from the payments of interest in respect of the Bonds for any non-PRC resident enterprise or non-PRC resident individual Bondholder and the Issuer shall withhold VAT (should such tax apply) from the payments of interest in respect of the Bonds for any Bondholders located outside of the PRC. However, in the event that the Issuer is required to make such a deduction or withholding (whether by way of EIT, IIT, VAT or otherwise), the Issuer has agreed to pay such additional amounts as will result in receipt by the Bondholders of such amounts after such withholding or deduction as would have been received by them had no such withholding or deduction been required. For more information, see ‘‘Terms and Conditions of the Bonds – Condition 8 (Taxation)’’.
Capital gains Under the EIT Law and its implementation rules, any gains realised on the transfer of the Bonds by holders who are deemed under the EIT Law as non-resident enterprises may be subject to PRC enterprise income tax if such gains are regarded as income derived from sources within the PRC. Under the EIT Law, a ‘‘non‑resident enterprise’’ means an enterprise established under the laws of a jurisdiction other than the PRC and whose actual administrative organisation is not in the PRC, which has established offices or premises in the PRC, or which has not established any offices or premises in the PRC but has obtained income derived from sources within the PRC. There remains uncertainty as to whether the gains realised on the transfer of the Bonds by enterprise holders would be treated as incomes derived from sources within the PRC and be subject to PRC enterprise income tax. In addition, under the IIT Law, any individual who has no domicile and does not live within the territory of the PRC or who has no domicile but has lived within the territory of China for less than one year shall pay individual income tax for any income obtained within the PRC. There is uncertainty as to whether gains realised on the transfer of the Bonds by individual holders who are not PRC citizens or residents will be subject to PRC individual income tax. If such gains are subject to PRC income tax, the 10 per cent. enterprise income tax rate and 20 per cent. individual income tax rate will apply respectively unless there is an applicable tax treaty or arrangement that reduces or exempts such income tax. The taxable income will be the balance of the total income obtained from the transfer of the Bonds minus all costs and expenses that are permitted under PRC tax laws to be deducted from the income. According to the Arrangement, Bondholders who are Hong Kong residents, including both enterprise holders and individual holders, will be exempted from PRC income tax on capital gains derived from a sale or exchange of the Bonds if such capital gains are not connected with an office or establishment that the Bondholders have in the PRC and all the other relevant conditions are satisfied.
86 Stamp Duty No PRC stamp duty will be imposed on non-PRC Bondholders either upon issuance of the Bonds or upon a subsequent transfer of Bonds to the extent that the register of holders of the Bonds is maintained outside the PRC and the issuance and the sale of the Bonds is made outside of the PRC.
Singapore Taxation The statements made herein regarding Singapore taxation are general in nature and based on certain aspects of the current tax laws of Singapore, administrative guidelines and circulars issued by the Monetary Authority of Singapore (‘‘MAS’’) in force as of the date of this Offering Circular and are subject to any changes in such laws, administrative guidelines or circulars, or in the interpretation of these laws, guidelines or circulars, occurring after such date, which changes could be made on a retrospective basis. These laws, guidelines and circulars are also subject to various interpretations and the relevant tax authorities or the courts could later disagree with the explanations or conclusions set out below. Neither these statements nor any other statements in this Offering Circular are intended or are to be regarded as advice on the tax position of any holder of the Bonds or of any person acquiring, selling or otherwise dealing with the Bonds or on any tax implications arising from the acquisition, sale or other dealings in respect of the Bonds. The statements made herein do not purport to be a comprehensive or exhaustive description of all the tax considerations that may be relevant to a decision to subscribe for, purchase, own or dispose of the Bonds and do not purport to deal with the tax consequences applicable to all categories of investors some of which (such as dealers in securities or financial institutions in Singapore which have been granted the relevant Financial Sector Incentive(s)) may be subject to special rules or tax rates. Prospective Bondholders are advised to consult their own tax advisers as to the Singapore or other tax consequences of the acquisition, ownership or disposition of the Bonds, including, in particular, the effect of any foreign, state or local tax laws to which they are subject to. It is emphasised that none of the Issuer, the Sole Lead Manager and any other persons involved in the issuance of the Bonds accepts responsibility for any tax effects or liabilities resulting from the subscription for, purchase, holding or disposal of the Bonds.
Interest and other payments Subject to the following paragraphs, under Section 12(6) of the Income Tax Act, Chapter 134 of Singapore (‘‘ITA’’), the following payments are deemed to be derived from Singapore:
(a) any interest, commission, fee or any other payment in connection with any loan or indebtedness or with any arrangement, management, guarantee, or service relating to any loan or indebtedness which is (i) borne, directly or indirectly, by a person resident in Singapore or a permanent establishment in Singapore (except in respect of any business carried on outside Singapore through a permanent establishment outside Singapore or any immovable property situated outside Singapore) or (ii) deductible against any income accruing in or derived from Singapore; or
(b) any income derived from loans where the funds provided by such loans are brought into or used in Singapore.
Such payments, where made to a person not known to the paying party to be a resident in Singapore for tax purposes, are generally subject to withholding tax in Singapore. The rate at which tax is to be withheld for such payments (other than those subject to the 15% final withholding tax described below) to non-resident persons (other than non-resident individuals) is currently 17%. The applicable rate for non-resident individuals is currently 22%. However, if the payment is derived by a person not resident in Singapore otherwise than from any trade, business, profession or vocation carried on or exercised by such person in Singapore and is not effectively connected with any permanent establishment in Singapore of that person, the payment is subject to a final withholding tax of 15%. The rate of 15% may be reduced by applicable tax treaties.
87 Certain Singapore-sourced investment income derived by individuals from financial instruments is exempt from tax, including:
(a) interest from debt securities derived on or after 1 January 2004;
(b) discount income (not including discount income arising from secondary trading) from debt securities derived on or after 17 February 2006; and
(c) prepayment fee, redemption premium and break cost from debt securities derived on or after 15 February 2007, except where such income is derived through a partnership in Singapore or is derived from the carrying on of a trade, business or profession in Singapore.
As the issue of the Bonds is solely lead-managed by DBS Bank Ltd., which is a Financial Sector Incentive (Capital Market) Company or Financial Sector Incentive (Standard Tier) Company (as defined in the ITA) at such time, and the Bonds are issued as debt securities prior to 31 December 2018, the Bonds would be qualifying debt securities (‘‘QDS’’) for the purposes of the ITA, to which the following treatment shall apply:
(a) subject to certain prescribed conditions having been fulfilled (including the submission by the Issuer, or such other person as the MAS may direct, to the MAS of a return on debt securities for the Bonds in the prescribed format within such period as the MAS may specify and such other particulars in connection with the Bonds as the MAS may require and subject to the Issuer including in all offering documents relating to the Bonds of a statement to the effect that where interest, discount income, prepayment fee, redemption premium or break cost is derived from the Bonds by any person who is not resident in Singapore and who carries on any operation in Singapore through a permanent establishment in Singapore, the tax exemption for qualifying debt securities shall not apply if the non-resident person acquires the Bonds using the funds and profits of such person’s operations through the Singapore permanent establishment), interest, discount income (not including discount income arising from secondary trading), prepayment fee, redemption premium and break cost (collectively, the ‘‘Qualifying Income’’) from the Bonds paid by the Issuer and derived by a holder who is not resident in Singapore and who (aa) does not have any permanent establishment in Singapore or (bb) carries on any operation in Singapore through a permanent establishment in Singapore but the funds used by that person to acquire the Bonds are not obtained from such person’s operation through a permanent establishment in Singapore, are exempt from Singapore income tax;
(b) subject to certain conditions having been fulfilled (including the submission by the Issuer, or such other person as the MAS may direct, to the MAS of a return on debt securities for the Bonds in the prescribed format within such period as the MAS may specify and such other particulars in connection with the Bonds that the MAS may require), Qualifying Income from the Bonds paid by the Issuer and derived by any company or a body of persons (as defined in the ITA) in Singapore is subject to Singapore income tax at a concessionary rate of 10% (except for holders of the relevant Financial Sector Incentive(s) who may be taxed at different rates); and
(c) subject to:
(i) the Issuer including in all offering documents relating to the Bonds a statement to the effect that any person whose interest, discount income, prepayment fee, redemption premium or break cost derived from the Bonds is not exempt from tax shall include such income in a return of income made under the ITA; and
88 (ii) the submission by the Issuer, or such other person as the MAS may direct, to the MAS of a return on debt securities for the Bonds in the prescribed format within such period as the MAS may specify and such other particulars in connection with the Bonds that the MAS may require,
payments of Qualifying Income derived from the Bonds are not subject to withholding of Singapore tax (if any) by the Issuer.
Notwithstanding the foregoing:
(a) if during the primary launch of the Bonds, the Bonds are issued to fewer than four persons and 50% or more of the issue of the Bonds are beneficially held or funded, directly or indirectly, by related parties of the Issuer, the Bonds would not qualify as QDS; and
(b) even though the Bonds are QDS, if, at any time during the tenure of the Bonds, 50% or more of the Bonds which are outstanding at any time during the life of their issue is beneficially held or funded, directly or indirectly, by any related party(ies) of the Issuer, Qualifying Income derived from the Bonds held by:
(i) any related party of the Issuer; or
(ii) anyotherpersonwherethefundsusedbysuchpersontoacquiretheBondsareobtained, directly or indirectly from any related party of the Issuer,
shall not be eligible for the tax exemption or concessionary rate of tax described above.
The term ‘‘related party’’, in relation to a person, means any other person who, directly or indirectly, controls that person, or is controlled, directly or indirectly, by that person, or where he and that other person directly or indirectly are under the control of a common person.
The terms ‘‘break cost’’, ‘‘prepayment fee’’ and ‘‘redemption premium’’ are defined in the ITA as follows:
‘‘break cost’’, in relation to debt securities and qualifying debt securities, means any fee payable by the issuer of the securities on the early redemption of the securities, the amount of which is determined by any loss or liability incurred by the holder of the securities in connection with such redemption;
‘‘prepayment fee’’, in relation to debt securities and qualifying debt securities, means any fee payable by the issuer of the securities on the early redemption of the securities, the amount of which is determined by the terms of the issuance of the securities; and
‘‘redemption premium’’, in relation to debt securities and qualifying debt securities, means any premium payable by the issuer of the securities on the redemption of the securities upon their maturity.
References to ‘‘break cost’’, ‘‘prepayment fee’’ and ‘‘redemption premium’’ in this Singapore tax disclosure have the same meaning as defined in the ITA.
Where interest, discount income, prepayment fee, redemption premium and break cost (i.e. the Qualifying Income) is derived from any of the Bonds by any person who is not resident in Singapore and who carries on any operations in Singapore through a permanent establishment in Singapore, the tax exemption available for QDS under the ITA (as mentioned above and if applicable) shall not apply if such person acquires such Bonds using the funds and profits of such person’s operations through a permanent establishment in Singapore. Any person whose interest, discount income, prepayment fee, redemption premium and break cost (i.e. the Qualifying Income) derived from the Bonds is not exempt from tax is required to include such income in a return of income made under the ITA.
89 Gains on disposal of the Bonds Any gains considered to be in the nature of capital made from the disposal of the Bonds will not be taxable in Singapore. However, any gains derived by any person from the disposal of the Bonds which are gains from any trade, business, profession or vocation carried on by that person, if accruing in or derived from Singapore, may be taxable as such gains are considered revenue in nature.
Bondholders who apply or are required to apply Singapore Financial Reporting Standard 39–Financial Instruments: Recognition and Measurement (‘‘FRS 39’’), may for Singapore income tax purposes be required to recognize gains or losses (not being gains or losses in the nature of capital) on the Bonds, irrespective of disposal, in accordance with FRS 39. Please see the section below on ‘‘Adoption of FRS 39 Treatment for Singapore Income Tax Purposes’’.
Adoption of FRS 39 treatment for Singapore income tax purposes The Inland Revenue Authority of Singapore has issued a circular entitled ‘‘Income Tax Implications Arising from the Adoption of FRS 39–Financial Instruments: Recognition and Measurement’’ (the ‘‘FRS 39 Circular’’). The ITA has since been amended to give effect to the FRS 39 Circular.
The FRS 39 Circular generally applies, subject to certain ‘‘opt-out’’ provisions, to taxpayers who are required to comply with FRS 39 for financial reporting purposes.
Bondholders who may be subject to the tax treatment under the FRS 39 Circular should consult their own accounting and tax advisers regarding the Singapore income tax consequences of their acquisition, holding or disposal of the Bonds.
Estate duty Singapore estate duty has been abolished with respect to all deaths occurring on or after 15 February 2008.
90 SUBSCRIPTION AND SALE
The Issuer has entered into a subscription agreement with the Sole Lead Manager on [•] 2017 (the ‘‘Subscription Agreement’’), pursuant to which and subject to certain conditions contained therein, the Issuer has agreed to sell to the Sole Lead Manager, and the Sole Lead Manager has agreed to subscribe and pay for, or to procure subscribers to subscribe and pay for, the Bonds in the principal amounts set out opposite their names respectively in the Subscription Agreement.
The Subscription Agreement provides that the Sole Lead Manager and its affiliates, and their respective directors, officers and employees will be indemnified against certain liabilities in connection with the offer and sale of the Bonds. The Subscription Agreement provides that the obligations of the Sole Lead Manager is subject to certain conditions precedent, and entitles the Sole Lead Manager to terminate it in certain circumstances prior to payment being made to the Issuer.
In addition, the Issuer has agreed to pay a rebate to certain private banks based on the principal amount of the Bonds placed with the clients of such private banks.
The Sole Lead Manager and certain of its subsidiaries or affiliates have performed certain investment banking and advisory services for, and entered into certain commercial banking transactions with, the Issuer and/or its subsidiaries, from time to time, for which they have received customary fees and expenses. The Sole Lead Manager and its subsidiaries or affiliates may, from time to time, engage in transactions with and perform services for the Issuer and/or its subsidiaries in the ordinary course of business.
In connection with the offering of the Bonds, the Sole Lead Manager and/or its affiliate(s) may act as an investor for its own account and may take up Bonds in the offering and in that capacity may retain, purchase or sell for its own account such securities and any securities of the Issuer and may offer or sell such securities or other investments otherwise than in connection with the offering. Accordingly, references herein to the Bonds being ‘‘offered’’ should be read as including any offering of the Bonds to the Sole Lead Manager and/or its affiliates acting in such capacity. Such persons do not intend to disclose the extent of any such investment or transactions otherwise than in accordance with any legal or regulatory obligation to do so. The Sole Lead Manager or its affiliates may purchase the Bonds for its own account or for the accounts of their customers and enter into transactions, including credit derivative, such as asset swaps, repackaging and credit default swaps relating to the Bonds and/or other securities of the Issuer or its subsidiaries or associates at the same time as the offer and sale of the Bonds or in secondary market transactions. Such transactions would be carried out as bilateral trades with selected counterparties and separately from any existing sale or resale of the Bonds to which this Offering Circular relates (notwithstanding that such selected counterparties may also be purchasers of the Bonds).
In connection with the issue of the Bonds, the Sole Lead Manager appointed or acting as Stabilising Manager or any person acting on behalf of the Stabilising Manager may, to the extent permitted by applicable laws and regulations, over-allot the Bonds or effect transactions with a view to supporting the market price of the Bonds at a level higher than that which might otherwise prevail, but in so doing, the Stabilising Manager or any person acting on behalf of the Stabilising Manager shall act as principal and not as agent of the Issuer. However, there is no assurance that the Stabilising Manager or any person acting on behalf of the Stabilising Manager will undertake stabilisation action. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the Bonds is made and, if begun, may be ended at any time, but it must end no later than the earlier of 30 days after the issue date of the Bonds and 60 days after the date of allotment of the Bonds such stabilising shall be in compliance with all applicable laws, regulations and rules.
91 General The distribution of this Offering Circular or any offering material and the offering, sale or delivery of the Bonds is restricted by law in certain jurisdictions. Therefore, persons who may come into possession of this Offering Circular or any offering material are advised to consult their own legal advisers as to what restrictions may be applicable to them and to observe such restrictions. This Offering Circular may not be used for the purpose of an offer or invitation in any circumstances in which such offer or invitation is not authorised.
No action has been or will be taken in any jurisdiction by the Issuer or the Sole Lead Manager that would permit a public offering, or any other offering under circumstances not permitted by applicable law, of the Bonds, or possession or distribution of this Offering Circular, any amendment or supplement thereto issued in connection with the proposed resale of the Bonds or any other offering or publicity material relating to the Bonds, in any country or jurisdiction where action for that purpose is required. Accordingly, the Bonds may not be offered or sold, directly or indirectly, and neither this Offering Circular nor any other offering material or advertisements in connection with the Bonds may be distributed or published, by the Issuer or the Sole Lead Manager, in or from any country or jurisdiction, except in circumstances which will result in compliance with all applicable rules and regulations of any such country or jurisdiction and will not impose any obligations on the Issuer or the Sole Lead Manager. If a jurisdiction requires that an offering of Bonds be made by a licenced broker or dealer and the Sole Lead Manager or any affiliate of the Sole Lead Manager is a licenced broker or dealer in that jurisdiction, such offering shall be deemed to be made by the Sole Lead Manager or such affiliate on behalf of the Issuer in such jurisdiction.
United States The Bonds have not been and will not be registered under the Securities Act and, subject to certain exceptions, may not be offered or sold within the United States.
The Bonds are being offered and sold outside of the United States in reliance on Regulation S.
In addition, until 40 days after the commencement of the offering of the Bonds, an offer or sale of Bonds within the United States by any dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act. Terms used in this paragraph have the meanings given to them by Regulation S.
United Kingdom The Sole Lead Manager has represented, warranted and agreed that:
(a) it has only communicated or caused to be communicated, and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (the ‘‘FSMA’’)) received by it in connection with the issue or sale of any Bonds in circumstances in which Section 21(1) of the FSMA does not apply to the Issuer; and
(b) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Bonds in, from or otherwise involving the United Kingdom.
Hong Kong The Sole Lead Manager has represented, warranted and undertaken that
(i) it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, any Bonds other than (a) to ‘‘professional investors’’ as defined in the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (the ‘‘SFO’’) and any rules made under the SFO; or (b) in other circumstances which do not result in the document being a ‘‘prospectus’’ as defined in the
92 Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong) or which do not constitute an offer to the public within the meaning of that Ordinance; and
(ii) it has not issued or had in its possession for the purposes of issue, and will not issue or have in its possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the Bonds, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the Bonds which are or are intended to be disposed of only to persons outside Hong Kong or only to ‘‘professional investors’’ as defined in the SFO and any rules made thereunder.
The People’s Republic of China The Sole Lead Manager has represented, warranted and undertaken that the Bonds are not being offered or sold and may not be offered or sold, directly or indirectly, in the PRC (for such purposes, not including the Hong Kong and Macau Special Administrative Regions or Taiwan), except as permitted by the securities laws of the PRC.
Singapore The Sole Lead Manager has acknowledged that this Offering Circular has not been and will not be registered as a prospectus with the Monetary Authority of Singapore. Accordingly, the Sole Lead Manager has represented, warranted and undertaken that it has not offered or sold any Bonds or caused such Bonds to be made the subject of an invitation for subscription or purchase, and will not offer or sell such Bonds or cause such Bonds to be made the subject of an invitation for subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute this Offering Circular or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of such Bonds, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of the Laws of Singapore (the ‘‘SFA’’), (ii) to a relevant person pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the Bonds are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or
(b) a trust (where is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries’ rights and interests (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the Bonds pursuant to an offer made under Section 275 of the SFA except:
(1) to an institutional investor or to a relevant person as defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;
(2) where no consideration is or will be given for the transfer;
(3) where the transfer is by operation of law;
93 (4) as specified in Section 276(7) of the SFA; or
(5) as specified in Regulation 32 of the Securities and Futures (Offers of Investments), (Shares and Debentures) Regulations 2005 of Singapore.
Japan The Bonds have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Law No. 25 of 1948, as amended) (the ‘‘Financial Instruments and Exchange Act’’)and, accordingly, the Sole Lead Manager has represented, warranted and undertaken that it has not, directly or indirectly, offered or sold and will not, directly or indirectly, offer or sell any Bonds in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organised under the laws of Japan) or to others for re- offering or re-sale, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan except pursuant to an exemption from the registration requirements of, and otherwise in compliance with the Financial Instruments and Exchange Act and other relevant laws, regulations and ministerial guidelines of Japan.
94 SUMMARY OF CERTAIN DIFFERENCES BETWEEN PRC GAAP AND IFRS
The consolidated financial statements of the Issuer included in this Offering Circular were prepared and presented in accordance with PRC GAAP. PRC GAAP is substantially in line with IFRS, except for certain modifications between PRC GAAP and IFRS. The following is a general summary of certain differences between PRC GAAP and IFRS on recognition and presentation as applicable to the Issuer. The Issuer is responsible for preparing the summary below. Since the summary is not meant to be exhaustive, there is no assurance regarding the completeness of the financial information and related footnote disclosure between PRC GAAP and IFRS and no attempt has been made to quantify such differences. Had any such quantification or reconciliation been undertaken by the Issuer, other potentially significant accounting and disclosure differences may have been required that are not identified below. Additionally, no attempt has been made to identify possible future differences between PRC GAAP and IFRS as a result of prescribed changes in accounting standards. Regulatory bodies that promulgate PRC GAAP and IFRS have significant ongoing projects that could affect future comparisons or events that may occur in the future.
Government Grant Under PRC GAAP, an assets-related government grant is only required to be recognised as deferred income, and evenly amortised to profit or loss over the useful life of the related asset. However, under IFRS, such assets-related government grants are allowed to be presented in the statement of financial position either by setting up the grant as deferred income or by deducting the grant in arriving at the carrying amount of the asset. Under PRC GAAP, the relocation compensation for public interests is required to be recognised as special payables. The income from compensation attributable to losses of fixed assets and intangible assets, related expenses, losses from production suspension incurred during the relocation and reconstruction period and purchases of assets after the relocation shall be transferred from special payables to deferred income and accounted for in accordance with the government grants standard. The surplus reached after deducting the amount transferred to deferred income shall be recognised in capital reserve. Under IFRS, if an entity relocates for reasons of public interests, the compensation received shall be recognised in profit or loss.
Reversal of an Impairment Loss Under PRC GAAP, once an impairment loss is recognised for a long term asset (including investment property valued under cost model, long-term equity investments, fixed assets, intangible assets and goodwill, etc.), it shall not be reversed in any subsequent period. Under IFRS, an impairment loss recognised in prior periods for an asset other than goodwill could be reversed if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. The increased carrying amount due to reversal should not be more than what the depreciated historical cost would have been if the impairment had not been recognised.
Fixed Assets and Intangible Assets Under PRC GAAP, only the cost model is allowed. Under IFRS, an entity can choose either the cost model or the revaluation model as its accounting policy.
Related Party Disclosures Under PRC GAAP, only state-controlled and without other related party relationship’s companies are not treated as related parties. Under IFRS, state-controlled companies are not treated as related parties.
95 GENERAL INFORMATION
1. Clearing Systems: The Bonds have been accepted for clearance through Euroclear and Clearstream. The securities codes for the Bonds are as follows:
ISIN: XS1613685475
Common Code: 161368547
2. Authorisations: The Issuer has obtained all necessary consents, approvals and authorisations in connection with the issue of and performance of its obligations under the Bonds and the Trust Deed. The issue of the Bonds was authorised by resolutions of the board of directors of the Issuer on 3 March 2017.
3. No Material and Adverse Change: Save as disclosed in this Offering Circular, there has not occurred any change (nor any development or event involving a prospective change), in the condition (financial or other), prospects, results of operations or general affairs of the Issuer or the Group, which is material and adverse in the context of the issue and offering of the Bonds since 31 December 2016.
4. Litigation: Save as disclosed in this Offering Circular, none of the Issuer or any member of the Group is involved in any litigation or arbitration proceedings which could have a material and adverse effect on their businesses, results of operations and financial condition nor is the Issuer aware that any such proceedings are pending or threatened. The Issuer may from time to time become a party to various legal or administrative proceedings arising in the ordinary course of its business.
5. Available Documents: Copies of the Issuer’s audited consolidated financial statements as at and for the years ended 31 December 2015 and 2016, the Trust Deed and the Agency Agreement relating to the Bonds and the articles of association of the Issuer will be available for inspection from the Issue Date upon prior written request and satisfactory proof of holding at the principal place of business of the Trustee or the specified office of the Principal Paying Agent at all reasonable times during normal business hours (being 9.00 a.m. to 3.00 p.m.), so long as any Bond is outstanding.
6. Financial Statements: The consolidated financial statements of the Issuer as at and for the years ended 31 December 2015 and 2016, which are included elsewhere in this Offering Circular, have been audited by Beijing Yongtuo, as stated in its reports appearing herein.
7. Listing of Bonds: Approval in principle has been obtained from the SGX-ST for the listing and quotation of the Bonds on the Official List of the SGX-ST. The Bonds will be traded on the SGX- ST in a minimum board lot size of U.S.$200,000 (or is equivalent in other currencies) for as long as any of the Bonds are listed on the SGX-ST and the rules of SGX-ST so require. For so long as the Bonds are listed on the SGX-ST and the rules of the SGX-ST so require, the Issuer will appoint and maintain a paying agent in Singapore, where the Bonds may be presented or surrendered for payment or redemption, in the event that the Global Note Certificate is exchanged for Bonds in definitive form. In addition, in the event that the Global Note Certificate is exchanged for Bonds in definitive form, an announcement of such exchange shall be made by or on behalf of us through the SGX-ST and such announcement will include all material information with respect to the delivery of the Bonds in definitive form, including details of the paying agent in Singapore.
96 INDEX TO FINANCIAL STATEMENTS
The audited consolidated financial statements of the Issuer as at and for the year ended 31 December 2016
Independent Auditor’sReport ...... F-2
ConsolidatedBalanceSheet ...... F-4
ConsolidatedProfitStatement ...... F-6
ConsolidatedCashFlowStatement ...... F-7
Consolidated Statement of Change in Owners’ Equity ...... F-8
BalanceSheet ...... F-10
ProfitStatement ...... F-12
CashFlowStatement ...... F-13
Statement of Change in Owners’ Equity ...... F-14
NotestoFinancialStatements ...... F-16
The audited consolidated financial statements of the Issuer as at and for the year ended 31 December 2015
Independent Auditor’sReport ...... F-120
ConsolidatedBalanceSheet ...... F-122
ConsolidatedProfitStatement ...... F-124
ConsolidatedCashFlowStatement ...... F-125
Consolidated Statement of Change in Owners’ Equity ...... F-126
BalanceSheet ...... F-128
ProfitStatement ...... F-130
CashFlowStatement ...... F-131
Statement of Change in Owners’ Equity ...... F-132
NotestoFinancialStatements ...... F-134
F-1
Audit Report
Jingyongshenzi (2017) No.11001 All shareholders of Qinghai Provincial Investment Group Co., Ltd: We have audited the attached financial statement of Qinghai Provincial Investment Group Co., Ltd, including the Consolidated & Parent Company Balance Sheet as of December 31, 2016, the Consolidated & Parent Company Profit Statement in 2016, the Consolidated & Parent Company Cash Flow Statement, the Consolidated & Parent
Company Owner Equity Change Statement and the Financial Statement Notes. Ⅰ. Management liabilities for financial statement
The management of Qinghai Provincial Investment Group Co., Ltd is responsible for preparation and fair presentation of financial statement; this responsibility includes: (1) prepare financial statement pursuant to provisions of the Accounting Standards for
Business Enterprises, and ensure its fair presentation; (2) design, implement and maintain necessary internal control, so that the financial statement is free from material misstatement, due to fraud or error; Ⅱ. Liabilities of Certified Public Accountant
Our responsibility is to express audit opinions on financial statement based on execution of audit work. We conducted audit work pursuant to the China Registered Accountants Auditing Standards. The CRAAS requires that we comply with occupational code of conduct, plan and perform audit work to acquire reasonable assurance for whether the financial statement is free from material misstatement. The audit work involves performing audit procedures, to obtain audit evidence related to the amount and disclosure of financial statement. The selected audit procedures shall depend on certified accountant’s judgment, including assessment on material
F-2 F-3 Consolidated Balance Sheet
Prepared by: Qinghai Provincial Investment Group Co., Ltd 31-Dec-16 Unit: yuan, currency: RMB
Assets Note Ending balance Beginning balance
Current assets: Monetary funds 8.1 2,252,578,072.51 4,393,934,490.26 Financial assets which are measured based on fair value and whose 30,000,000.00 change is recorded into profit/loss of current year Notes receivable 8.2 821,039,522.98 143,423,395.60 Accounts receivable 8.3 907,926,987.51 985,285,118.70 Advances to suppliers 8.4 1,183,382,246.88 602,688,935.53 Interest receivable 8.5 220,173.61 Dividends receivable 8.6 8,960,000.00 Other receivables 8.7 502,897,228.15 445,387,244.37 Inventories 8.8 2,896,742,722.03 2,963,991,084.80 Non-current assets maturing within one year Other current assets 8.9 1,097,822,582.19 31,000,000.00
Total current assets 9,671,349,362.25 9,595,930,442.88 Non-current assets: Financial assets available for sale 8.1 2,525,097,760.04 2,466,102,928.92 Held-to-maturity investment 8.11 410,000,000.00 131,000,000.00 Long-term receivables 8.12 54,032,464.13 55,477,327.13 Long-term equity investment 8.13 0.00 59,600,000.00 Long-term equity investment 8.14 391,906,966.74 352,935,197.74 Fixed assets 8.15 13,360,798,670.44 11,446,358,749.37 Construction in progress 8.16 25,547,001,960.95 23,366,607,371.30 Construction supplies 8.17 39,081,947.17 46,791,732.80 Fixed assets pending disposal 8.18 1,937,430,763.69 90,593.27 Productive biological assets Oil-and-gas assets Intangible assets 8.19 1,216,427,321.58 765,730,025.19 Development expenditures 3,153,042.40 324,174.52 Goodwill 8.2 817,122,119.26 815,061,248.20 Long-term deferred expenses 8.21 123,978,150.13 102,664,623.07 Deferred income tax assets 8.22 116,509,384.02 112,614,585.27 Other non-current assets 8.23 752,458,993.72 557,309,521.59
Total non-current assets 47,294,999,544.27 40,278,668,078.36 Total assets 56,966,348,906.52 49,874,598,521.23 Legal representative: Chief Financial Officer:
F-4 Consolidated Balance Sheet
Prepared by: Qinghai Provincial Investment Group Co., Ltd 31-Dec-16 Unit: yuan, currency: RMB
Liabilities and shareholders’ equity Note Ending balance Beginning balance
Current liabilities:
Short-term borrowings 8.24 11,077,481,618.58 8,586,967,548.87
Financial liabilities which are measured based on fair value and whose change is recorded into profit/loss of current year
Notes payable 8.25 1,825,977,378.82 1,085,505,899.03 Accounts payable 8.26 3,306,834,640.95 3,182,900,148.81 Advances from customers 8.27 664,181,789.98 329,322,279.30 Accrued payroll 8.28 135,344,175.96 73,557,096.97 Taxes payable 8.29 153,087,098.09 -964,250,381.93 Interest payable 8.3 221,833,489.26 353,865,495.35 Dividends payable 8.31 21,465,480.00 14,547,746.67 Other payables 8.32 995,796,630.07 990,352,330.58 Non-current liabilities maturing within one year 8.33 7,144,018,136.84 6,578,478,908.52 Other current liabilities 8.34 494,285,207.74 664,760,890.93 Total current liabilities 26,040,305,646.29 20,896,007,963.10
Non-current liabilities:
Long-term borrowings 8.35 11,648,216,966.35 9,647,492,651.69 Bonds payable 8.36 3,100,000,000.00 4,167,419,560.14 Long-term payables 8.37 2,634,781,357.95 3,929,147,435.03 Special payables 8.38 34,189,800.00 453,249,800.00 Estimated liabilities 0.00 Deferred income 8.39 227,795,264.99 195,153,904.51 Deferred income tax liabilities 8.22 9,734,216.60 1,713,743.20 Other non-current liabilities 0.00 Total non-current liabilities 17,654,717,605.89 18,394,177,094.57
Total liabilities 43,695,023,252.18 39,290,185,057.67
Shareholders' equity
Share capital 8.4 6,419,200,180.11 4,016,690,000.00 Capital reserve 8.41 2,915,057,387.73 2,952,790,206.60 Less: Treasury stock 0.00
Other consolidated incomes
Special reserve 8.42 11,458,542.05 14,266,607.54 Surplus reserve 8.43 66,627,843.19 66,627,843.19 General risk reserve 0.00 Undistributed profits 8.44 399,625,330.06 380,255,175.44
Foreign currency statement translation difference
Total owners’ equity attributable to parent company 9,811,969,283.14 7,430,629,832.78 Minority interest 3,459,356,371.20 3,153,783,630.79 Total shareholders' equity 13,271,325,654.34 10,584,413,463.57 Total liabilities and shareholders' equity 56,966,348,906.52 49,874,598,521.23
Responsible person of accounting institution:
F-5 Consolidated Profit Statement
Prepared by: Qinghai Provincial Investment Group Co., Ltd 2016 Unit: yuan, currency: RMB
Item Note Current year Last year
I.Operating income 8.45 16,387,124,347.59 14,094,075,714.86
Less: Operating cost 8.45 15,028,644,241.55 13,313,950,485.33
tax and surcharge 73,623,936.76 72,216,950.66
Selling expenses 165,248,846.60 171,802,122.95
Management expenses 591,447,159.31 663,819,388.38
Financial expenses 8.46 532,362,027.63 382,144,601.64
Loss on impairment of assets 8.47 29,567,266.50 51,977,739.45
Add: Income from fair value changes (Loss represented by a “-” sign) 8.48 38,141,362.00 2,805,767.00
Investment income (Loss represented by a “-” sign) 8.49 27,962,782.57 54,047,975.49
Including: Income from investment in affiliates and joint ventures
II. Operating income (Loss represented by a “-” sign) 32,335,013.81 -504,981,831.06
Add: Non-operating income 8.5 146,016,428.60 609,853,506.21
Including: Profits from disposal of non-current assets
Less: non-operating expenditure 8.51 18,767,164.47 27,628,808.10
Including: Loss on disposal of non-current assets
III. Total profits (Total losses represented by a “-” sign) 159,584,277.94 77,242,867.05
Less: Income tax expense 8.52 56,932,087.62 32,444,961.80
IV. Net profits (Net loss represented by a “-” sign) 102,652,190.32 44,797,905.24
Net profits attributable to owners of parent company 19,505,454.62 902,246.42
Profit/loss of minority shareholders 83,146,735.70 43,895,658.83
V. After-tax net amount of other consolidated income
After-tax net amount of other consolidated income attributable to owners of parent company
1. Other consolidated incomes which cannot be re-classified as profit/loss in the following years
(1). Change in net liabilities or net assets of the defined benefit plan re-measured
(2). Share enjoyed in other consolidated incomes which cannot be re-classified as profit/loss in the invested entity with the equity method
2. Other consolidated incomes which will be re-classified into profit/loss in the following years
(1) Share enjoyed in other consolidated incomes which cannot be re-classified as profit/loss in the invested entity with the equity method
(2) Profit/loss of changes in fair value of financial assets available for sale
(3) Held-to-maturity investment re-classified as profit/loss of financial assets available for sale
(4) Effective part of profit/loss of cash flow hedging
(5) Translation differences from foreign currency financial statements
(6) Others
After-tax net amount of other consolidated income attributable to minority shareholders
VI. Total consolidated income 102,652,190.32 44,797,905.24
Total consolidated income attributable to owners of parent company 19,505,454.62 902,246.42
Total consolidated income attributable to minority shareholders 83,146,735.70 43,895,658.83
Legal representative: Chief Financial Officer: Responsible person of accounting institution:
F-6 Consolidated Cash Flow Statement
Prepared by: Qinghai Provincial Investment Group Co., Ltd 2016 Unit: yuan, currency: RMB
Item Note Current year Last year I. Cash flows of operating activities: Cash received from sales of commodities or rendering of labor service 17,012,098,185.75 12,908,024,349.28 Tax rebates received 2,200,727.18 17,207,235.05 Other cash received relating to operating activities 2,048,564,442.07 1,316,657,966.17 Subtotal of cash inflows of operating activities 19,062,863,355.00 14,241,889,550.50 Cash paid for purchasing commodities or receiving labor services 15,201,009,392.91 11,425,581,105.79 Cash paid to and for employees 1,071,420,682.84 1,288,710,520.61 Cash paid for taxes and surcharges 308,279,755.36 546,446,988.63 Cash paid for other operating activities 2,102,344,609.34 520,846,386.32 Subtotal of cash outflows of operating activities 18,683,054,440.45 13,781,585,001.35 Net cash flows from operating activities 379,808,914.55 460,304,549.16 II. Cash flows from investing activities: Cash received from return of investments 481,845,168.88 1,541,803,375.33 Cash received from investment income 18,315,834.80 50,707,927.30 Net cash received from disposal of fixed assets, intangible assets and other long-term 32,163.36 4,544,238.15 assets Net cash received from disposal of subsidiaries and other business units Other cash received relating to investing activities 140,892.83 334,599,283.86 Subtotal of cash inflows of investing activities 500,334,059.87 1,931,654,824.64 Cash paid from purchase and construction of fixed assets, intangible assets and other 1,407,023,498.19 4,557,342,603.20 long-term assets Cash paid for investments 815,012,564.14 431,240,000.00 Net cash paid for acquisition of subsidiaries and other business units Other cash paid relating to investing activities 3,700,000.00 Subtotal of cash outflows of investing activities 2,222,036,062.33 4,992,282,603.20 Net cash flows from investing activities -1,721,702,002.46 -3,060,627,778.56 III. Cash flows from financing activities: Cash received from attracting investment 200,000,000.00 134,064,297.90 Including: Cash received by subsidiaries from attracting the investment of minority shareholders Cash received from borrowings 27,206,804,584.47 25,435,207,362.76 Other cash received relating to financing activities 5,899,285,802.35 562,961,991.50 Subtotal of cash inflows of financing activities 33,306,090,386.82 26,132,233,652.16 Cash repayments of amounts borrowed 24,723,151,368.53 19,418,519,531.48 Cash payments for distribution of dividends or profit or cash payments of interest 2,848,674,410.73 2,747,463,800.50 Including: Dividend and profits paid by subsidiaries to minority shareholders Other cash payments relating to financing activities 5,483,372,754.69 1,570,000,773.77 Subtotal of cash outflows of financing activities 33,055,198,533.95 23,735,984,105.75 Net cash flows from financing activities 250,891,852.87 2,396,249,546.41 IV. Effect of exchange rate change upon cash and cash equivalent 3,922,320.76 2,237,233.95 V. Net increase of cash and cash equivalents -1,087,078,914.28 -201,836,449.04 Add: Beginning balance of cashes and cash equivalents 3,339,656,986.79 3,541,493,435.83 VI. Ending balance of cashes and cash equivalents 2,252,578,072.51 3,339,656,986.79 Legal representative: Chief Financial Officer: Responsible person of accounting institution:
F-7 Consolidated Statement of Change in Owners’ Equity
Prepared by: Qinghai Provincial Investment Group Co., Ltd 2016 Unit: yuan, currency: RMB
Current year
Item Shareholders’ equity attributable to parent company Minority interest Total shareholders’ equity Share capital Capital reserve Less: Treasury stock Other consolidated income Special reserve Surplus reserve Undistributed profits Others
I. Ending balance of last year 4,016,690,000.00 2,952,790,206.60 14,266,607.54 66,627,843.19 380,255,175.44 3,153,783,630.79 10,584,413,463.56
Add: Change in accounting policies
Correction of previous error
Others
II. Beginning balance of current year 4,016,690,000.00 2,952,790,206.60 14,266,607.54 66,627,843.19 380,255,175.44 3,153,783,630.79 10,584,413,463.56 III. Change in increase and decrease of current year (Decrease represented 2,686,912,190.78 by a “-” sign) 2,402,510,180.11 -37,732,818.87 -2,808,065.49 19,370,154.62 305,572,740.41 1. Total consolidated income 19,505,454.62 83,146,735.70 102,652,190.32
2. Capital contributed and decreased by shareholders 2,402,510,180.11 232,328,340.10 2,634,838,520.21
(1)． Capital contributed by owners 2,402,510,180.11 231,984,944.10 2,634,495,124.21 F-8
(2). Amount of share-based payment charged to shareholders’ equity
3．Others 343,396.00 343,396.00
4. Profit distribution -135,300.00 -27,083,973.69 -27,219,273.69
(1)．Allocated surplus reserve
(2)．Allocation of general risk reserve
(3)．Distribution to shareholders
(4)．Others -135,300.00 -27,083,973.69 -27,219,273.69
5. Internal carry-over of shareholders’ equity
(1). Capital reserve converted into the increased capital stock
(2). Surplus reserve converted into the increased capital stock
(3) Surplus reserve used for covering the deficit
(4)．Others
6. Special reserve -11,663,159.50 -11,663,159.50
(1). Allocated special reserve 40,207,809.10 40,207,809.10
(2). Used special reserve 51,870,968.60 51,870,968.60
7. Others -37,732,818.87 8,855,094.01 17,181,638.30 -11,696,086.56
IV. Ending balance of current year 6,419,200,180.11 2,915,057,387.73 11,458,542.05 66,627,843.19 399,625,330.06 3,459,356,371.20 13,271,325,654.34
Legal representative: Chief Financial Officer: Responsible person of accounting institution: Consolidated Statement of Change in Owners’ Equity
Prepared by: Qinghai Provincial Investment Group Co., Ltd 2016 Unit: yuan, currency: RMB
Last year
Item Shareholders’ equity attributable to parent company Minority interest Total shareholders’ equity Share capital Capital reserve Less: Treasury stock Other consolidated income Special reserve Surplus reserve Undistributed profits Others
I. Ending balance of last year 4,016,690,000.00 1,989,121,461.45 596,225.49 60,482,736.12 66,627,843.19 381,265,929.02 2,598,441,536.45 9,113,225,731.72
Add: Change in accounting policies
Correction of previous error
Others
II. Beginning balance of current year 4,016,690,000.00 1,989,121,461.45 596,225.49 60,482,736.12 66,627,843.19 381,265,929.02 2,598,441,536.45 9,113,225,731.72 III. Change in increase and decrease of current year (Decrease 1,471,187,731.84 represented by a “-” sign) 963,668,745.15 -596,225.49 -46,216,128.58 -1,010,753.58 555,342,094.34
1. Total consolidated income -596,225.49 902,246.42 43,895,658.83 44,201,679.75
2. Capital contributed and decreased by shareholders -22,122,185.05 513,509,635.52 491,387,450.47
(1)． Capital contributed by owners 337,831,515.05 337,831,515.05 F-9
(2). Amount of share-based payment charged to shareholders’ equity
3．Others -22,122,185.05 175,678,120.47 153,555,935.42
4. Profit distribution -1,913,000.00 -2,063,200.00 -3,976,200.00
(1)．Allocated surplus reserve
(2)．Allocation of general risk reserve
(3)．Distribution to shareholders -1,913,000.00 -2,063,200.00 -3,976,200.00
(4)．Others
5. Internal carry-over of shareholders’ equity
(1). Capital reserve converted into the increased capital stock
(2). Surplus reserve converted into the increased capital stock
(3) Surplus reserve used for covering the deficit
(4) Others
6. Special reserve -46,216,128.58 -46,216,128.58
(1). Allocated special reserve 37,245,924.37 37,245,924.37
(2). Used special reserve 83,462,052.95 83,462,052.95
7. Others 985,790,930.20 985,790,930.20
IV. Ending balance of current year 4,016,690,000.00 2,952,790,206.60 14,266,607.54 66,627,843.19 380,255,175.44 3,153,783,630.79 10,584,413,463.57
Legal representative: Chief Financial Officer: Responsible person of accounting institution: Balance Sheet
Prepared by: Qinghai Provincial Investment Group Co., Ltd 31/12/2016 Unit: yuan, currency: RMB Assets Note Ending balance Beginning balance Current assets: Monetary funds 251,054,161.45 1,923,274,498.53
Financial assets which are measured based on fair value and whose change is recorded into profit/loss of current year
Notes receivable Accounts receivable 44,260.69 44,260.69 Advances to suppliers Interest receivable Dividends receivable Other receivables 10,539,649,198.52 10,739,560,248.52 Inventories Non-current assets maturing within one year Other current assets
Total current assets 10,790,747,620.66 12,662,879,007.74 Non-current assets: Financial assets available for sale 2,381,905,328.64 2,384,905,328.64 Held-to-maturity investment 26,500,000.00 10,000,000.00 Long-term receivables Long-term equity investment 16,394,420,927.29 11,403,754,623.39 Long-term equity investment Fixed assets 294,986,820.78 297,675,708.60 Construction in progress Construction supplies Fixed assets pending disposal Productive biological assets Oil-and-gas assets Intangible assets Development expenditures Goodwill Long-term deferred expenses Deferred income tax assets 3,815,384.54 3,887,544.35 Other non-current assets 23,844,300.00 23,844,300.00
Total non-current assets 19,125,472,761.25 14,124,067,504.98 Total assets 29,916,220,381.91 26,786,946,512.72 Legal representative: Chief Financial Officer:
F-10 Balance Sheet
Prepared by: Qinghai Provincial Investment Group Co., Ltd 31/12/2016 Unit: yuan, currency: RMB Liabilities and shareholders’ equity Note Ending balance Beginning balance Current liabilities: Short-term borrowings 6,038,160,000.00 2,232,774,100.00
Financial liabilities which are measured based on fair value and whose change is recorded into profit/loss of current year
Notes payable 100,000,000.00 Accounts payable Advances from customers 134,592.24 134,592.24 Accrued payroll 446,538.56 343,590.87 Taxes payable 3,439,918.29 1,744,426.88 Interest payable 213,310,049.48 347,088,893.83 Dividends payable Other payables 4,741,639,919.40 4,841,902,715.20 Non-current liabilities maturing within one year 3,740,996,272.40 5,203,000,000.00 Other current liabilities Total current liabilities 14,738,127,290.37 12,726,988,319.02 Non-current liabilities: Long-term borrowings 1,629,756,966.35 1,644,093,251.69 Bonds payable 3,100,000,000.00 4,100,000,000.00 Long-term payables 255,058,318.39 Special payables 19,949,800.00 419,949,800.00 Estimated liabilities Deferred income Deferred income tax liabilities Other non-current liabilities Total non-current liabilities 5,004,765,084.74 6,164,043,051.69 Total liabilities 19,742,892,375.11 18,891,031,370.71 Shareholders' equity Share capital 6,419,200,180.11 4,016,690,000.00 Capital reserve 3,679,140,011.08 3,784,275,836.29 Less: Treasury stock Other consolidated incomes Special reserve Surplus reserve 66,627,843.19 66,627,843.19 General risk reserve Undistributed profits 8,359,972.42 28,321,462.53 Foreign currency statement translation difference
Total shareholders' equity 10,173,328,006.80 7,895,915,142.01 Total liabilities and shareholders' equity 29,916,220,381.91 26,786,946,512.72 Legal representative: Chief Financial Officer:
F-11 Income Statement
Prepared by: Qinghai Provincial Investment Group Co., Ltd 2016 Unit: yuan, currency: RMB
Item Note Current year Last year
I.Operating income 4,237,598.00 3,182,139.64
Less: Operating cost
tax and surcharge 2,567,992.97 179,790.89
Selling expenses
Management expenses 34,976,538.17 31,818,917.17
Financial expenses -13,811,959.74 -5,293,214.82
Loss on impairment of assets -288,639.22 -2,504,328.21
Add: Income from fair value changes (Loss represented by a “-” sign)
Investment income (Loss represented by a “-” sign) 1,230,000.00 480,000.00
Including: Income from investment in affiliates and joint ventures
II. Operating income (Loss represented by a “-” sign) -17,976,334.18 -20,539,025.39
Add: Non-operating income 20,391.82
Including: Profits from disposal of non-current assets
Less: non-operating expenditure 1,798,087.94 5,043,220.83
Including: Loss on disposal of non-current assets
III. Total profits (Total losses represented by a “-” sign) -19,754,030.30 -25,582,246.22
Less: Income tax expense 72,159.81 626,082.05
IV. Net profits (Net loss represented by a “-” sign) -19,826,190.11 -26,208,328.27
Net profits attributable to owners of parent company
Profit/loss of minority shareholders
V. After-tax net amount of other consolidated income
After-tax net amount of other consolidated income attributable to owners of parent company
1. Other consolidated incomes which cannot be re-classified as profit/loss in the following years
(1). Change in net liabilities or net assets of the defined benefit plan re-measured
(2). Share enjoyed in other consolidated incomes which cannot be re-classified as profit/loss in the invested entity with the equity method
2. Other consolidated incomes which will be re-classified into profit/loss in the following years
(1) Share enjoyed in other consolidated incomes which cannot be re-classified as profit/loss in the invested entity with the equity method
(2) Profit/loss of changes in fair value of financial assets available for sale
(3) Held-to-maturity investment re-classified as profit/loss of financial assets available for sale
(4) Effective part of profit/loss of cash flow hedging
(5) Translation differences from foreign currency financial statements
(6) Others
After-tax net amount of other consolidated income attributable to minority shareholders
VI. Total consolidated income -19,826,190.11 -26,208,328.27
Total consolidated income attributable to owners of parent company
Total consolidated income attributable to minority shareholders
Legal representative: Chief Financial Officer: Responsible person of accounting institution:
F-12 Cash Flow Statement
Prepared by: Qinghai Provincial Investment Group Co., Ltd 2016 Unit: yuan, currency: RMB
Item Note Current year Last year I. Cash flows of operating activities: Cash received from sales of commodities or rendering of labor service 4,237,598.00 3,158,545.93 Tax rebates received Other cash received relating to operating activities 92,786,027.25 406,494,072.23 Subtotal of cash inflows of operating activities 97,023,625.25 409,652,618.16 Cash paid for purchasing commodities or receiving labor services Cash paid to and for employees 9,591,852.86 10,640,858.43 Cash paid for taxes and surcharges 3,061,631.81 6,930,004.38 Cash paid for other operating activities 41,099,007.70 422,598,949.08 Subtotal of cash outflows of operating activities 53,752,492.37 440,169,811.89 Net cash flows from operating activities 43,271,132.88 -30,517,193.73 II. Cash flows from investing activities: Cash received from return of investments 3,000,000.00 1,500,000,000.00 Cash received from investment income 1,230,000.00
Net cash received from disposal of fixed assets, intangible assets and other long-term assets
Net cash received from disposal of subsidiaries and other business units Other cash received relating to investing activities Subtotal of cash inflows of investing activities 4,230,000.00 1,500,000,000.00 Cash paid from purchase and construction of fixed assets, intangible assets and other long-term 619,088.33 286,290.00 assets Cash paid for investments 418,012,500.00 1,413,941,853.00 Net cash paid for acquisition of subsidiaries and other business units Other cash paid relating to investing activities 3,700,000.00 Subtotal of cash outflows of investing activities 418,631,588.33 1,417,928,143.00 Net cash flows from investing activities -414,401,588.33 82,071,857.00 III. Cash flows from financing activities: Cash received from attracting investment Including: Cash received by subsidiaries from attracting the investment of minority shareholders Cash received from borrowings 12,530,800,000.00 10,692,774,100.00 Other cash received relating to financing activities 12,359,359,545.58 6,001,113,939.03 Subtotal of cash inflows of financing activities 24,890,159,545.58 16,693,888,039.03 Cash repayments of amounts borrowed 12,509,037,154.92 8,622,802,164.87 Cash payments for distribution of dividends or profit or cash payments of interest 1,444,617,855.33 940,287,393.47 Including: Dividend and profits paid by subsidiaries to minority shareholders Other cash payments relating to financing activities 12,237,594,416.96 5,576,871,759.00 Subtotal of cash outflows of financing activities 26,191,249,427.21 15,139,961,317.34 Net cash flows from financing activities -1,301,089,881.63 1,553,926,721.69 IV. Effect of exchange rate change upon cash and cash equivalent -778,640.16 V. Net increase of cash and cash equivalents -1,672,220,337.08 1,604,702,744.80 Add: Beginning balance of cashes and cash equivalents 1,923,274,498.53 318,571,753.73 VI. Ending balance of cashes and cash equivalents 251,054,161.45 1,923,274,498.53 Legal representative: Chief Financial Officer: Responsible person of accounting institution:
F-13 Statement of Changes in Shareholders’ Equity
Prepared by: Qinghai Provincial Investment Group Co., Ltd 2016 Unit: yuan, currency: RMB
Last year
Item Shareholders’ equity attributable to parent company Total shareholders’ equity Share capital Capital reserve Less: Treasury stock Other consolidated income Special reserve Surplus reserve Undistributed profits Others
I. Ending balance of last year 4,016,690,000.00 3,784,275,836.29 66,627,843.19 28,321,462.53 7,895,915,142.01
Add: Change in accounting policies
Correction of previous error
Others
II. Beginning balance of current year 4,016,690,000.00 3,784,275,836.29 66,627,843.19 28,321,462.53 7,895,915,142.01 III. Change in increase and decrease of current year (Decrease represented by a “-” sign) 2,402,510,180.11 -105,135,825.21 -19,961,490.11 2,277,412,864.79
1. Total consolidated income -19,826,190.11 -19,826,190.11
2. Capital contributed and decreased by shareholders 2,402,510,180.11 -105,135,825.21 2,297,374,354.90
F-14 (1)． Capital contributed by owners 2,402,510,180.11 2,402,510,180.11
(2). Amount of share-based payment charged to shareholders’ equity
3．Others -105,135,825.21 -105,135,825.21
4. Profit distribution -135,300.00 -135,300.00
(1)．Allocated surplus reserve
(2)．Allocation of general risk reserve
(3)．Distribution to shareholders -135,300.00 -135,300.00
(4)．Others
5. Internal carry-over of shareholders’ equity
(1). Capital reserve converted into the increased capital stock
(2). Surplus reserve converted into the increased capital stock
(3) Surplus reserve used for covering the deficit
(4)．Others
6. Special reserve
(1). Allocated special reserve
(2). Used special reserve
7. Others
IV. Ending balance of current year 6,419,200,180.11 3,679,140,011.08 66,627,843.19 8,359,972.42 10,173,328,006.80
Legal representative: Chief Financial Officer: Responsible person of accounting institution: Statement of Changes in Shareholders’ Equity (Continued)
Prepared by: Qinghai Provincial Investment Group Co., Ltd 2016 Unit: yuan, currency: RMB
Last year
Item Shareholders’ equity attributable to parent company Total shareholders’ equity Share capital Capital reserve Less: Treasury stock Other consolidated income Special reserve Surplus reserve Undistributed profits Others
I. Ending balance of last year 4,016,690,000.00 2,798,484,906.09 66,627,843.19 56,442,790.80 6,938,245,540.08
Add: Change in accounting policies
Correction of previous error
Others
II. Beginning balance of current year 4,016,690,000.00 2,798,484,906.09 66,627,843.19 56,442,790.80 6,938,245,540.08 III. Change in increase and decrease of current year (Decrease represented by a “-” sign) 985,790,930.20 -28,121,328.27 957,669,601.93 1. Total consolidated income -26,208,328.27 -26,208,328.27
2. Capital contributed and decreased by shareholders
F-15 (1)． Capital contributed by owners
(2). Amount of share-based payment charged to shareholders’ equity
3．Others
4. Profit distribution -1,913,000.00 -1,913,000.00
(1)．Allocated surplus reserve
(2)．Allocation of general risk reserve
(3)．Distribution to shareholders -1,913,000.00 -1,913,000.00
(4)．Others
5. Internal carry-over of shareholders’ equity
(1). Capital reserve converted into the increased capital stock
(2). Surplus reserve converted into the increased capital stock
(3) Surplus reserve used for covering the deficit
(4) Others
6. Special reserve
(1). Allocated special reserve
(2). Used special reserve
7. Others 985,790,930.20 985,790,930.20
IV. Ending balance of current year 4,016,690,000.00 3,784,275,836.29 66,627,843.19 28,321,462.53 7,895,915,142.01
Legal representative: Chief Financial Officer: Responsible person of accounting institution:
Qinghai Provincial Investment Group Co., Ltd
Notes to Financial Statements
As of the Year of 2016
(Expressed in RMB unless otherwise specified)
I. Basic Profile Qinghai Provincial Investment Group Co., Ltd (hereafter referred to as the Company) is the state-owned investment company approved and established by Qinghai Provincial People’s Government in 1993. It’s registered capital was originally the amount of 250 million Yuan and afterwards changed to the amount of RMB 1 billion Yuan in April 2004. Accoridng to the file (Shang Zi Pi No.1103) issued by the Ministry of Commerce of the People's Republic of China, the Company was restructured to the Sino-foreign joint venture invested by Qinghai Provincial State-owned Assets Supervision and Administration Commission, Ace Honest Group Limited and Pearl Bright Holdings Limited with the registered capital further being increased to the amount of 3.4 billion Yuan, of which the amount of 1.359 billion Yuan, 40 percent of registered capital, was invested by Qinghai Provincial State-owned Assets Supervision and Administration Commission on the basis of the evaluation of the Company’s net assets as of December 31 2004, the amount of 1.0205 billion Yuan, 30 percent of registered capital, by Ace Honest Group Limited in the form of the equivalent USD amount in cash, the amount of 1.0205 billion Yuan, 30 percent of registered capital, by Pearl Bright Holdings Limited in the form of the equivalent USD amount in cash. The total foreign investment in the Company reached the equivalent amount of RMB 639.1876 million Yuan. The Company’s paid-in capital reached the amount of 1998.1876 million Yuan after capital increase. The Company applied for the industrial and commercial registration of changes to Qinghai Province Administration for Industry on May 24, 2006 including the business license number of No.0420 Qi He Qin Zong Zi and the company nature of Sino-foreign joint
F-16 venture. The Company made the public capital reduction announcement on December 24, 2008 according to the File issued by the Department of Commerce of Qinghai Province (Qing Shang Zi Zi [2008] No.420) concerning the forwarding of the File of Reply of Ministry of Commerce on Approving Capital Reduction of Qinghai Provincial Investment Group Co., Ltd in Principle (Shang Zi Pi [2008] No.1471) and therefore refunded the amount of equivalent amount of 639.1876 US dollars to Ace Honest Group Limited and Pearl Bright Holdings Limited. The Company’s registered capital was changed to the amount of 1359 million Yuan after capital reduction with the company nature being restored to state-owned. According to the file of Official Reply of Qinghai Provincial State-owned Assets Supervision and Administration Commission (Qing Guo Zi Chan [2012] No.132) on the Increase of Qinghai Provincial Investment Group Co., Ltd’s Registered Capital, Qinghai Provincial State-owned Assets Co., Ltd contributed the investment of RMB 500 million Yuan in Qinghai Provincial Investment Group Co., Ltd on June 15, 2012. The registered capital reached the amount of 1859 million Yuan after capital increase. According to the Company’s modified articles of association and the file of Official Reply of Qinghai Provincial State-owned Assets Supervision and Administration Commission (Qing Guo Zi Chan [2012] No.198) on the Cross-holding between Qinghai Provincial Investment Group Co., Ltd and Xining Economic Development Zone Investment Holding Group Co., Ltd, Xining Economic Development Zone Investment Holding Group Co., Ltd contributed the investment of RMB 465 million Yuan in Qinghai Provincial Investment Group Co., Ltd on October 22, 2012. The registered capital reached the amount of 2324 million Yuan after capital increase. According to the Company’s modified articles of association and the file of Official Reply of Qinghai Provincial State-owned Assets Supervision and Administration Commission (Qing Guo Zi Chan [2013] No.184) on the Share-holding of West Mining Co., Ltd, the Subsidiary of West Mining Group Co., Ltd, in Qinghai Provincial Investment Group Co., Ltd with its Coal Power Assets and Alumina-Carbon Assets, the Company applied for the increase of registered capital by RMB 1300.69 million Yuan on November 5, 2013. The registered capital reached the amount of 3624.69 million Yuan after capital increase. According to the capital increase and stock expansion agreement and the file of Official Reply of Qinghai Provincial State-owned Assets Supervision and Administration Commission (Qing Guo Zi Chan [2014] No.307) on the Cross-holding
F-17 between Qinghai Provincial Investment Group Co., Ltd and Xining Economic Development Zone Investment Holding Group Co., Ltd. The Company applied for the increase of registered capital by RMB 392 million Yuan on November 5, 2013. The registered capital reached the amount of 4016.69 million Yuan after capital increase. On December 29, 2016, according to the document of Qinghai Province Government State-owned Assets Supervision and Administration Committee The Reply on Qinghai Province Investement Group Co., Ltd Application of Capital Injection (Qinghai State-owned Assets 【2016】No. 331), the company increases the registered capital of 2 Billion 402 Million 510 Thousand and 200 RMB, the changed registered capital is 6 Billion 419 Million 200 Thousand and 200 RMB. Domicile: No.36 Xinning Road, Chengxi District, Xining; Legal person representative: Hong Wei; Company nature: limited liability company (state-owned holding). Unified social credit code: 91630000226586921N; business term: until November 8, 2036. Scope of business: operation of state-owned assets authorized by the state-owned assets supervision and administration commission; ownership- linked capital operation; full-course management of investment project as the investor; handling of equipment leasing, fund raising, financing (except for the projects forbidden or restricted by government); project investment, bonds investment and equity investment; credit guarantee trusteeship, investment consulting service; raw materials sourcing; production and sales of carbon, aluminum and aluminum alloy products (unless otherwise specified by the state); coal wholesale. The Company sets up the investment management department, assets management department, operation department, financial department, audit department, general affairs department, business planning department and party-mass relation department. II. Preparation basis of financial statement The Company recognizes and measures the transactions and events actually incurred according to the accounting standards for business enterprises and prepares the financial statements on the going concern basis. III. Statements concerning the compliance with accounting standards for business enterprises The financial statements prepared by the Company meet the requirements of accounting standards for business enterprises and truthfully and completely reflects the Company’s financial position, operation results, changes in ownership’ s interests,
F-18 cash flows, etc. I V. Notes to significant accounting policies and estimates (I) Fiscal year The fiscal years starts on January 1 and ends on December 31 every year on the calendar basis. (II) Bookkeeping currency The Company adopts the RMB as bookkeeping currency. (III) Bookkeeping Basis and Pricing Principle The company adopts the accrual system as the bookkeeping base. The financial assets measured at fair value and changes recorded into current period profit or loss, the financial assets available for sales, the assets and liabilities acquired in a combination not under the same control, the assets acquired or delivered through debts restructuring, and the assets acquired or delivered through the non-monetary assets exchange with commercial substance shall be measured at the far value, and the other assets or liabilities at the historical cost. (IV) Foreign currency transaction and foreign currency statement translation The foreign currency transaction should be initially measured at the spot exchange rate between the foreign currency and bookkeeping currency on the transaction date and converted to the bookkeeping amount. On the balance sheet date, the foreign currency assets should be recorded at the spot exchange rate between the foreign currency and bookkeeping currency on the balance sheet date. The exchange profit or loss thus incurred should be recorded in the current period profit or loss except for the exchange balance arising from the foreign currency borrowing in connection to the construction or purchase of assets eligible for capitalization. The asset and liability items in the balance sheets shall be translated at a spot exchange rate on the balance sheet date. Among the owner's equity items, except the ones as "undistributed profits", others shall be translated at the spot exchange rate at the time when they are incurred. The income and expense items in the profit statements shall be translated at the spot exchange rate of the transaction date. The balance thus incurred shall be presented separately as translation reserve under the owner's equity item of the consolidated balance sheets. (V) Cash and cash equivalents Cash refers to cash on hand and deposits free of pledge and freezing and available for payment at any time. Cash equivalents refers to short-term and highly liquid
F-19 investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. (VI) Financial assets and financial liabilities 1. Classification of financial assets Financial assets acquired by the Company shall be classified into the following four categories: 1) the financial assets which are measured at their fair values and the variation of which is recorded into the profits and losses of the current period; 2) the investments which will be held to their maturity 3) account receivables 4) financial assets available for sale 2. Recognition and measurement of financial assets 1) Recognition and measurement of financial assets which are measured at their fair values and the variation of which is recorded into the profits and losses of the current period A. The fair value of financial assets which are measured at their fair values and the variation of which is recorded into the profits and losses of the current period shall be included into the initially recognized amount when acquired, and the relevant transaction expenses thus incurred be included into the current period profit and loss. The cash dividend or bonds interest declared for distribution contained in the actual payment for the acquisition of financial assets which are measured at their fair values and the variation of which is recorded into the profits and losses of the current period shall be included in the initially recognized amount rather than the accounts receivable. The cash dividend or bonds interest subsequently received shall directly offset the initially recognized amount of such financial assets. The interest or cash dividend calculated according to contract during the term of holding shall offset the carrying amount of such financial assets when actually received. B. On the balance sheet date, the profits and losses, arising from the change in the fair value of the financial asset or financial liability which is measured at its fair value and of which the variation is recorded into the profits and losses of the current period, shall be recorded into the profits and losses of the current period。 On disposal of the financial assets or liabilities, the difference between the fair value of the financial assets and initially recognized amount shall be recorded as the current period
F-20 investment income and the profits and losses on the changes in fair value be adjusted. 2) the investments which will be held to their maturity A. The held-to-maturity investment refers to a non-derivative financial asset with a fixed date of maturity, a fixed or determinable amount of repo price and which the enterprise holds for a definite purpose or the enterprise is able to hold until its maturity. Where an enterprise re-classifies its outstanding held-to-maturity investment as the amount of available-for-sale financial asset, and such amount accounts for at least 5 percent of the amount before such investment is sold or re-classified, the surplus of such investment shall be re-classified as an available-for-sale financial asset which shall not be classified as a held-to-maturity investment within the current accounting year and the following two complete accounting years. B. The fair value and relevant total transaction costs of held-to-maturity investment shall be included in the initially recognized amount when acquired. The bonds interest included in the actual payment for the acquisition of held-to-maturity investment shall be included in the initially recognized amount rather than the account receivables. Such interests shall directly offset the initially recognized amount when received. C. The interest income of the held-to-maturity investment shall be recognized with the real interest method during the term of holding and added to the carrying amount of held-to-maturity investment. The real interest rate shall be determined at the time of the acquisition of held-to-maturity investment and kept stable during the subsequent period. On the balance sheet date, the held-to-maturity investment shall be recorded at the amortized cost. D. On disposal of held-to-maturity investment, the difference between the fair value of the actual payment for the held-to-maturity investment and the carrying amount of such investment shall be recognized as the invesmnt gains. 3) Accounts receivable A. Accounts receivable refers to the non-derivative financial assets for which there is no quoted price in the active market and of which the repo amount is fixed or determinable, including the notes receivable, accounts receivable and long-term receivables arising out of the sales of commodities or the rendering of services, and the other receivables from the other units or individuals. B. The initially recognized amount of the accounts receivable from the sales of commodity or the rendering of services shall be based on the amounts receivable of
F-21 the contract or agreement concluded by and between the Company and the buyer unless the amounts receivables above are not fair. If the collection of the price as stipulated in the contract or agreement is delayed and if it has the financing nature (normally three years above), the revenue incurred by selling goods shall be ascertained in accordance with the fair value of the receivable price as stipulated in the contract or agreement. C. On the balance sheet date, the Company’s accounts receivable shall be measured at the amortized cost. On the collection or disposal of the amount receivable, the difference between fair value of the actual payment and the carrying value shall be included in the current period profit or loss. 4) Financial assets available for sale A. Available-for-sale financial assets refers to the financial assets not classified into financial assets which are measured at their fair values and the variation of which is recorded into the profits and losses of the current period, held-to-maturity investment and accounts receivable, including the available-for-sale equity investment and debt investment. B. The fair value and relevant total transaction costs of available-for-sale financial assets shall be included in the initially recognized amount when acquired. The bonds interest included in the actual payment for the acquisition of held-to-maturity investment shall be included in the initially recognized amount rather than the account receivables. Such interests shall directly offset the initially recognized amount when received. C. The interest or cash dividend of the available-for-sale financial assets shall be included in the Company’s investment income during the term of holding. On the balance sheet date, the available-for-sale financial assets shall be measured at the fair value with the change to the fair value being included in the other comprehensive income. D. On disposal of available-for-sale financial assets, the difference between the actual payment together with amount of disposal corresponding to the accumulative amount of the changes of the fair value originally recorded in the other comprehensive income and carrying value of financial assets shall be recognized as investment income. 3. Recognition and measurement of transfer of financial assets 1) The Company’s transfer of financial assets include the entire transfer and partial
F-22 transfer of financial assets. 2) Where the Company has transferred nearly all of the risks and rewards related to the ownership of the financial asset to the transferee, it shall stop recognizing the financial asset. If it retained nearly all of the risks and rewards related to the ownership of the financial asset, it shall not stop recognizing the financial asset. Where the Company does not transfer or retain nearly all of the risks and rewards related to the ownership of a financial asset, but gives up its control over the financial asset, the Company shall stop recognizing the financial asset. If the Company does not give up its control over the financial asset, it shall, according to the extent of its continuous involvement in the transferred financial asset, recognize the related financial asset and recognize the relevant liability accordingly. 3) If the transfer of an entire financial asset satisfies the conditions for stopping recognition, the difference between the amounts of the following 2 items shall be recorded in the profits and losses of the current period: A. The book value of the transferred financial asset; B. The sum of consideration received from the transfer, and the accumulative amount of the changes of the fair value originally recorded in the owner's equities (in the event that the financial asset involved in the transfer is a financial asset available for sale). Where the Company obtains a new financial asset or undertakes a new financial liability due to the transfer of a financial asset, it shall, on the date of transfer, recognize the financial asset or liability according to its fair value, and shall treat the net amount as an integral part of the aforesaid consideration through deducting the financial liability from the financial asset. Where the Company concludes a service contract with the transferee of a financial asset on providing relevant services (including receiving cash flow of the financial asset and delivering the received cash flow to the fund preservation institution as designated), it shall recognize a service asset or liability based on the service contract. The service liability shall be subject to the initial measurement according to its fair value and shall be treated as an integrate part of the aforesaid consideration. 4) If the transfer of partial financial asset satisfies the conditions to stop the recognition, the entire book value of the transferred financial asset shall, between the portion whose recognition has been stopped and the portion whose recognition has not been stopped (under such circumstance, the service asset retained shall be deemed as
F-23 a portion of financial asset whose recognition has not been stopped), be apportioned according to their respective relative fair value, and the difference between the amounts of the following 2 items shall be included into the profits and losses of the current period: A. The book value of the portion whose recognition has been stopped; B. The sum of consideration of the portion whose recognition has been stopped, and the portion of the accumulative amount of the changes in the fair value originally recorded in the owner's equities which is corresponding to the portion whose recognition has been stopped (in the event that the financial asset involved in the transfer is a financial asset available for sale). The portion of the accumulative amount of changes in the fair value originally recorded in the owner's equities which corresponds to the portion whose recognition has been stopped, shall be recognized after the apportionment of the accumulative amount according to the relative fair values of the portion of financial asset whose recognition has been stopped and the portion of financial asset whose recognition has not been stopped. 5) If the Company still retains nearly all of the risks and rewards related to the ownership of the transferred financial asset, it shall continue to recognize the entire financial asset to be transferred and shall recognize the consideration it receives as a financial liability. The financial asset shall not be used to offset the relevant financial liabilities it has recognized. In the subsequent accounting periods, the enterprise shall continue to recognize the income generated by the financial asset and the expenses generated by the financial liability. 4. Recognition method of fair value of major financial assets 1) As for the financial assets or financial liabilities for which there is an active market, the quoted prices in the active market shall be used to determine the fair values thereof. 2) Where there is no active market for a financial instrument, the enterprise concerned shall adopt value appraisal techniques to determine its fair value. 3) As for the financial assets initially obtained or produced at source and the financial liabilities assumed, the fair value thereof shall be determined on the basis of the transaction price of the market. 4) Where an enterprise adopts the method of future cash flow capitalization to
F-24 determine the fair value of a financial instrument, it shall use the market returns ratio of other financial instruments with essentially the same contractual stipulations and features as the rate of capitalization. Where there is little difference between the current value of the short-term accounts receivable and accounts payable whose interest rate has not been indicated and the actual transaction price, it may be measured at the actual transaction price. 5. Impairment of major financial assets (not including the accounts receivable) Where there is any objective evidence proving that the financial assets other than those measured at their fair values and of which the variation is recorded into the profits and losses of the current period has been impaired, an impairment provision shall be made as follows. 1) Impairment of held-to-maturity investment Where there is any objective evidence proving that the held-to-maturity financial assets are impaired on each balance sheet date,, the carrying amount of the said financial asset shall be written down to the current value of the predicted future cash flow (excluding the loss of future credits not yet occurred), and the amount as written down shall be recognized as loss of the impairment of the asset and shall be recorded into the profits and losses of the current period. Where any held-for-maturity financial asset is recognized as having suffered from any impairment loss, if there is any objective evidence proving that the value of the said financial asset has been restored, and it is objectively related to the events that occur after such loss is recognized (e.g., the credit rating of the debtor has been elevated, etc.), the impairment-related losses as originally recognized shall be reversed and be recorded into the profits and losses of the current period. However, the reversed carrying amount shall not be any more than the post-amortization costs of the said financial asset on the day of reverse under the assumption that no provision is made for the impairment. 2) Impairment of available-for-sale financial assets If the fair value of the Company’s available-for-sale financial assets experiences the significant fall, or such downward trend is expected not to be temporary after the consideration of all relevant factors on the balance sheet date, the difference between the fair value and carry value of such financial assets shall be recognized as the impairment. Where an available-for-sale financial asset is impaired, even if the recognition of the
F-25 financial asset has not been terminated, the accumulative losses arising from the decrease of the fair value of the owner’s equity which was directly included shall be transferred out and recorded into the profits and losses of the current period. As for the available-for-sale debt instruments whose impairment-related losses have been recognized, if, within the accounting period thereafter, the fair value has risen and are objectively related to the subsequent events that occur after the originally impairment-related losses were recognized, the originally recognized impairment-related losses shall be reversed and be recorded into the profits and losses of the current period. The impairment-related losses incurred to an available-for-sale equity instrument investment shall not be reversed through profits and losses. 6. Financial liabilities 1) The Company’s financial liabilities are classified into the financial liability measured at its fair value and of which the variation is recorded into the profits and losses of the current period and other financial liability. 2) The initial and subsequent measurement of the financial liability measured at its fair value and of which the variation is recorded into the profits and losses of the current period shall be based on the fair value. 3) Other financial liability includes those other than the financial liability measured at its fair value and of which the variation is recorded into the profits and losses of the current period, including the bonds issued by the Company, accounts payable from the purchase of commodity, long-term payable, etc. Fair value and other total relevant transaction costs of other financial liability shall be included in the initially recognized amount and subsequently measured at the amortized cost. 4) The determination of fair value of the Company’s major financial liability is the same as the determination of fair value of the major financial assets. (VII) Provision for bad debts of accounts receivable 1. Recognition criteria Accounts receivable that cannot not be collected after the liquidation of bankruptcy debtor according to law, due to the death of debtor who doesn’t leave any legacy or have any compulsory bearer or since the debtor is unable to make the repayment within three years, should be recognized as the provision for bad debts after the approval by the shareholders’ meeting or board of directors. 2. Accounting method: the Company adopts the allowance method to record the
F-26 provision for bad debts 3. Recognition method: the Company will make the reasonable estimate about relevant information such as the previous amount and proportion of provision of bad debts, actual financial situation and cash flow of debtor. 4. Recognition method and proportion of provision for bad debts The Company records the provision for bad debts according to the percentage of year-end balance (normally 3 percent) except for the subsidiaries Qinghai Qiaotou Aluminum Electricity Co.,Ltd, Qinghai Sanjiang Hydroelectric Development Co.,Ltd, Qinghai Jinrui Mining Co.,Ltd, Qinghai Xihai Coal Power Co., Ltd, Qinghai Baihe Aluminum Co., Ltd. If the conclusive evidence shows that the aforementioned accounting method for the provision for bad debts is not suitable to the certain kind of accounts receivable, the individual identification method shall be applicable. The Company’s subsidiary Qinghai Qiaotou Aluminum Electricity Co., Ltd adopts the accounts receivable aging method and the individual identification method to set up the provision for bad debts according to the following proportion:
Aging Proportion (%)
Within 6 months 0
6 months ~ 1 year 1
1 ~ 2 years 3
2 ~ 3 years 10
3 years above 30
The Company’s subsidiary Qinghai Sanjiang Hydroelectric Development Co., Ltd adopts the accounts receivable aging method and the individual identification method to set up the provision for bad debts according to the following proportion:
Aging Proportion (%)
Within 1 year 1
1 ~ 2 years 5
2 ~ 3 years 10
3 years above 30
The Company’s subsidiary Qinghai Jinrui Mining Development Co., Ltd sets up the provision for bad debts according to the following method: recognition criteria and
F-27 accounting method for the provision for bad debts of single-item high-amount accounts receivable
Recognition criteria Exceeds 100 thousand Yuan
An impairment test shall be separately made on the single-item Accounting method high-amount accounts receivable. If any objective evidence shows that it has been impaired, the provision for bad debts shall be recognized
Aging of accounts receivable method
Age Proportion (%) Proportion (%) Within 1 year (including 1 year) 5 5
1-2 years 15 15
2-3 years 30 30
3-4 years 50 50
4 years above 80 80
The Company’s subsidiaries Qinghai Xihai Coal Power Co., Ltd and Qinghai Baihe Aluminum Co., Ltd adopt the combination setup of provision for bad debts on basis of aging of accounts receivable.
Age Proportion (%) Proportion (%) Within 1 year (including 1 year, the same 5 5 as below) 1-2 years 20 20
2-3 years 50 50
3 years above 100 100
The accounts receivable that cannot be collected after the repayment of the property or legacy of bankruptcy or obituary debtor or after the debtor is unable to make the repayment within the prescribed time limit, should be written off after the approval by the Company’s board of directors. (VIII) Inventory 1. The Company’s inventories mainly include raw materials, low-value perishable, packaging articles, in-process products and finished products. 2. The Company’s inventories shall be measured at historic cost method when acquired. The raw materials, in-process products and finished product shall be accounted at the weighted average method when issued, and the packaging articles
F-28 and low-value perishables at the one-off amortization method. 3. the inventories shall be measured whichever is lower in accordance with the cost and the net realizable value at the end of fiscal year. If the cost of inventories is higher than the net realizable value, the provision for the loss on decline in value of inventories shall be made and be included in the current profits and losses. If the factors causing any write-down of the inventories have disappeared, the amount of write-down shall be resumed and be reversed from the provision for the loss on decline in value of inventories that has been made. The reversed amount shall be included in the current profits and losses. (IX) Long-term equity investment 1. The Company’ long-term equity investments include the equity investment in the subsidiaries, joint ventures and associated entities. The equity investment in the subsidiary means that the Company is able to control an invested entity. The equity investment in the joint venture means that the Company and other parties do joint control over an invested entity. The equity investment in the associated entity means that the Company is able to have significant influences on an invested entity. 2. The Company’s long-term equity investment measured shall be measured at its initial investment cost when acquired. If the initial investment cost of long-term equity investment measured at the equity method is less than the investing enterprise' attributable share of the fair value of the invested entity's identifiable net assets for the investment, the difference shall be included in the non-operation income. If the initial investment cost of long-term equity investment measured at the equity method is more than the investing enterprise' attributable share of the fair value of the invested entity's identifiable net assets for the investment, the initial cost of the long-term equity investment may not be adjusted. 3. The Company’s equity investment in the subsidiaries is accounted for at the cost method and adjusted to the equity method when the preparation of consolidated financial statements; the equity investment in the joint venture and associated entity at the equity method. After the Company obtains a long-term equity investment of joint venture and associated entity, it shall, in accordance with the attributable share of the net profits or losses of the invested entity, recognize the investment profits or losses and other comprehensive income and adjust the book value of the long-term equity investment.
F-29 The Company shall, on the ground of the fair value of all identifiable assets of the invested entity when it obtains the investment, recognize the attributable share of the net profits and losses of the joint venture and associated entity after it adjusts the net profits of the invested entity. The Company shall, in the light of the profits or cash dividends declared to distribute by the invested entity, calculate the proportion it shall obtain, and shall reduce the book value of the long-term equity investment correspondingly. The share of other change of owner’s equity than net profit or loss, other comprehensive income and profit distribution shall be recorded in the capital reserve at the time of the adjustment of book value of long-term equity investment. The Company shall recognize the net losses of the invested enterprise until the book value of the long-term equity investment and other long-term rights and interests which substantially form the net investment made to the invested entity are reduced to zero, unless the Company has the obligation to undertake extra losses or substantially constitute the long-term equity investment in invested entity. 4. Where there is any evidence indicating that the recoverable amount of long-term equity investment is lower than the carrying value, the Company shall made the impairment test of long-term equity investment on the balance sheet date. If the test result indicates that the recoverable amount of long-term equity investment is less than its book value, the carry value shall be reduced to the recoverable amount, and the written-off amount shall be recognized as loss of the impairment of the asset and shall be recorded into the profits and losses of the current period. Once any loss of asset impairment is recognized, it shall not be switched back before the impaired long-term equity investment is disposed of. (X) Investment property 1. The investment property refers to the real estates held for generating rent and/or capital appreciation, including the right to use any building which has already been rented, the right to use any land which has already been rented and the right to use any land which is held and prepared for transfer after appreciation. 2. The initial measurement of the investment property shall be made at its cost. For the follow-up expenses pertinent to an investment property, if they meet the capitalization conditions, they shall be included in the cost of the investment property; otherwise, if they fail to meet the capitalization conditions, they shall be included in the current profits and losses when they are incurred. 3. Where the Company adopts the follow-up measurement of the investment
F-30 property through the fair value pattern, the specific assets valuation company shall evaluate the change of fair value of investment property. Where the Company adopts the follow-up measurement of the investment property through the cost pattern and there is the evidence indicating the recoverable amount of investment property is less than its carrying value, it shall make the impairment test of investment property on the balance sheet date. If the test result indicates that the recoverable amount of investment property is lower than its carrying value, the carrying value shall be written off to the recoverable amount, and the written-off amount shall be recognized as both the impairment loss of assets in the current period profit or loss and the provision of impairment of investment property. Once any loss of asset impairment is recognized, it shall not be switched back before the impaired long-term equity investment is disposed of. (XI) Fixed assets 1. The Company recognizes the tangible assets held for the sake of producing commodities, rendering labor service, renting or business management and whose life is in excess of one fiscal year, including building, special equipment, general equipment, transport equipment, mining equipment, machinery, electric equipment, monitoring equipment, office equipment and other equipment. 2. No fixed asset may be recognized by the Company unless it simultaneously meets the conditions as follows: 1) The economic benefits pertinent to the fixed asset are likely to flow into the Company; and 2) The cost of the fixed asset can be measured reliably. The components of a fixed asset have different useful lives or cause economic benefits for the enterprise in different ways and to which different depreciation rates or depreciation methods apply, and they shall be recognized as fixed assets on an individual component basis. The subsequent expenses related to a fixed asset refers to the routine repair expenses and overhaul expenses and renovation expenses of fixed assets in its usage process. If the subsequent expenses related to a fixed asset meet the recognition conditions, they shall be included in the cost of fixed asset and the book value of replaced part be deducted; otherwise, they shall be included in the current profits and losses. 3. The fixed assets shall be accounted for at cost when acquired 4. The Company adopts the straight-line method to record the depreciation of fixed
F-31 assets. However, the fixed assets that have been fully depreciated but are still in use and the land that is separately measured shall be excluded. The estimated useful life, expected net salvage value and depreciation rate of different kinds of fixed assets shall be as follows:
Estimated net salvage Annual depreciation rate Category Estimated useful live value (%) (%) Building 8—40 3-10 2.25—11.25
Special equipment 12—32 0-10 3.13—8.08
General equipment 4—18 0-10 5.39—25
Transport equipment 6—10 0-3 9.7—16.17
Mining equipment 5—15 10 18-6
Machinery equipment 25 5-10 3.6-3.8
Electronic equipment 5 5-10 18-19
Monitoring equipment 5 5-10 18-19
Office equipment 5 5-10 18-19
Other equipment 5 5-10 18-19
5. Where there is any evidence indicating that the recoverable amount of fixed assets is lower than the carrying value, the Company shall made the impairment test of fixed assets on the balance sheet date. If the test result indicates that the recoverable amount of fixed assets is less than its book value, the carry value shall be reduced to the recoverable amount, and the written-off amount shall be recognized as loss of the impairment of the asset and recorded into the profits and losses of the current period. Once any loss of asset impairment is recognized, it shall not be switched back before the impaired fixed assets is disposed of. (XII) Construction in progress 1. Pricing of construction in progress and the criteria of the conversion of construction in progress to fixed assets Construction in progress should be recorded at actual costs incurred and be accounted for separately. If a constructed fixed asset has reached the working condition for its intended use but the final project accounts have not been completed and approved, the asset should be transferred to fixed assets at an estimated value based on project budget, contracted construction price or actual project costs. Depreciation should also be provided in
F-32 accordance with relevant requirements under this System. After the project accounts have been approved, the estimated values should be adjusted accordingly. 2. The Company conducts the comprehensive assessment of construction in progress at the end of every fiscal year. Where the construction in progress is assessed to be impaired, for instance, where the performance of construction work is lagged in performance or technology so that it is very uncertain to bring the economic interest to the Company, or construction work has been suspended for a long period of time and is not expected to re-commence within three years, the Company should recognize a provision for impairment loss in accordance with the above principles. Once any loss of asset impairment is recognized, it shall not be switched back before the impaired construction in progress is disposed of. (XIII) Borrowing cost 1. Borrowing costs refers to the interest and other relevant costs, which are incurred by the Company in the borrowing of loans, including interest on borrowings, amortization of discounts or premiums on borrowings, ancillary expenses, and exchange balance on foreign currency borrowings. 2. Where the borrowing costs incurred to the Company can be directly attributable to the acquisition and construction or production of assets eligible for capitalization, it shall be capitalized and recorded into the costs of relevant assets. Other borrowing costs shall be recognized as expenses on the basis of the actual amount incurred, and shall be recorded into the current profits and losses. The term "assets eligible for capitalization" shall refer to the fixed assets, investment real estate, inventories and other assets, of which the acquisition and construction or production may take quite a long time to get ready for its intended use or for sale. 3. Where the asset disbursements have already incurred, the borrowing costs has already incurred and the acquisition and construction or production activities which are necessary to prepare the asset for its intended use or sale have already started, the Company shall start to capitalize the assets-related borrowing cost which meets the capitalization conditions. Where the acquisition and construction or production of a qualified asset is interrupted abnormally and the interruption period lasts for more than 3 months, the capitalization of the borrowing costs shall be suspended. The borrowing costs incurred during such period shall be recognized as expenses, and shall be recorded into the profits and losses of the current period, till the acquisition and construction or production of the asset restarts. When the qualified asset under
F-33 acquisition and construction or production is ready for the intended use or sale, the capitalization of the borrowing costs shall be ceased. The borrowing costs incurred after the qualified asset under acquisition and construction or production is ready for the intended use or sale shall be recognized as expenses at the incurred amount when they are incurred, and shall be recorded into the profits and losses of the current period. 4. As for specifically borrowed loans for the acquisition and construction or production of assets eligible for capitalization, the to-be-capitalized amount of interests shall be determined in light of the actual cost incurred of the specially borrowed loan at the present period minus the income of interests earned on the unused borrowing loans as a deposit in the bank or as a temporary investment. Where a general borrowing is used for the acquisition and construction or production of assets eligible for capitalization, the enterprise shall calculate and determine the to-be-capitalized amount of interests on the general borrowing by multiplying the weighted average asset disbursement of the part of the accumulative asset disbursements minus the general borrowing by the capitalization rate of the general borrowing used. Where there is any discount or premium, the amount of discounts or premiums that shall be amortized during each accounting period shall be determined by the real interest rate method, and an adjustment shall be made to the amount of interests in each period. 5. During the period of capitalization, the exchange balance on foreign currency borrowings shall be capitalized, and shall be recorded into the cost of assets eligible for capitalization. 6. For the ancillary expense incurred to a specifically borrowed loan, those incurred before a qualified asset under acquisition, construction or production is ready for the intended use or sale shall be capitalized at the incurred amount when they are incurred, and shall be recorded into the costs of the asset eligible for capitalization. Those incurred after a qualified asset under acquisition and construction or production is ready for the intended use or sale shall be recognized as expenses on the basis of the incurred amount when they are incurred, and shall be recorded into the profits and losses of the current period. The ancillary expenses arising from a general borrowing shall be recognized as expenses at their incurred amount when they are incurred, and shall be recorded into
F-34 the profits and losses of the current period. (XIV) Intangible assets 1. The term "intangible asset" refers to the identifiable non-monetary assets possessed or controlled by enterprises which have no physical shape, including patent, non-patent, trademark, land use right and franchise. 2. Identifiable non-monetary assets which have no physical shape may be confirmed when it meets the conditions simultaneously as follows: 1) The economic benefits related to intangible assets are likely to flow into the enterprise; and 2) The cost of intangible assets can be measured reliably. 3. The expenditures for its internal research and development projects of the Company shall be classified into research expenditures and development expenditures. The research expenditures for its internal research and development projects of an enterprise shall be recorded into the profit or loss for the current period. The development expenditures for its internal research and development projects of an enterprise may be confirmed as intangible assets when they satisfy the following conditions simultaneously: 1) It is feasible technically to finish intangible assets for use or sale; 2) It is intended to finish and use or sell the intangible assets; 3) The Company has the conclusive evidence indicating that there is a potential market for the products manufactured by applying the intangible assets or there is a potential market for the intangible assets itself. 4) It is able to finish the development of the intangible assets, and able to use or sell the intangible assets, with the support of sufficient technologies, financial resources and other resources. 5) The development expenditures of the intangible assets can be reliably measured. 4. The intangible assets shall be initially measured by the Company according to its cost. 5. The Company shall amortize the cost of intangible assets with the straight-line method within its estimated service life. 6. The Company conducts the comprehensive assessment of intangible assets at the end of every fiscal year. Where the intangible assets is assessed to be impaired, for instance, where the performance of construction work is lagged in performance or technology so that it is very uncertain to bring the economic interest to the Company,
F-35 or construction work has been suspended for a long period of time and is not expected to re-commence within three years, the Company should recognize a provision for impairment loss in accordance with the above principles. Once any loss of asset impairment is recognized, it shall not be switched back before the impaired intangible assets is disposed of. (XV) Long-term deferred expenses Long-term deferred expenses are other expenses paid by the Company, for which the amortization period is more than one year. The long-term deferred expenses are evenly amortized over the respective beneficial periods, including: The rental of fixed assets acquired under pre-payment pattern shall be evenly amortized within the prescribed time limit of lease contract. Costs of improvements to a leased asset under the operating lease should be amortized over the shorter of the lease term and the useful life of the leased asset. Decoration expenses of fixed assets acquired under the finance lease which meet the capitalization conditions shall be evenly amortized over the shorter of the interval between two decoration, the remaining lease term and the remaining service life of fixed assets. (XVI) Employee compensation 1. The term " employee compensation " refers to all kinds of payments and other relevant expenditures given by the Company in exchange of the services offered by the employees, or the termination of employment contract relationship, including the short-term remuneration, after-service benefit, dismissal benefit and other long-term employee benefits. 2. Short-term remuneration refers to the employee compensation to be paid by the Company to the employees within 12 months after the reporting period where the employee renders the relevant service to the Company, except for the labor compensation from the termination of employee contract. Short-term remuneration includes employee wage, bonus, stipend and allowance, employee welfare fee, medical insurance premium, work-related injury insurance premium, maternity insurance premium, housing provident fund, trade union fee and staff’s education fund, short-term paid absence from work, short-term profit share scheme, non-monetary benefit and other short-term remuneration. The Company shall record the short-term remuneration actually incurred as the liability and the current period profit or loss during the service period which the employees render the service, except
F-36 for those required under the other accounting standards or for the accounting of cost of assets. Profit sharing scheme refers to the agreement whereby the Company concludes with the employees about the payment of employee remuneration on the basis of the profit or other operating result due to the services rendered by the employee. The profit sharing scheme can be recognized as the employee remuneration payable if it meets the following conditions: 1) The Company bears the legitimate obligation or constructive obligation for payment of employee remuneration as a result of past event; 2) the amount of employee remuneration payable from the profit sharing scheme can be reliably estimated. The amount of such obligation can be reliably estimated if one of the following three situations can be met: A. The Company has determined the amount of employee remuneration payable prior to the approval of the financial statements; B. The formal provisions for the profit sharing scheme contain the method of how to determine the amount of employee remuneration. C. the past practices provide the obvious evidence of the Company’s constructive obligation. Paid absence from work refers to the employee’s absence from leave paid by the Company, including paid leave, sick leave, short-term disability, marriage leave, maternity leave, funeral leave, family visit leave, etc. Profit sharing scheme refers to the agreement whereby the Company concludes with the employees about the payment of employee remuneration on the basis of the profit or other operating result due to the services rendered by the employee. The paid absence from work is classified into the accumulative paid absence from work and the non-accumulative paid absence from work. The Company recognizes the employee remuneration related to the accumulative paid absence from work when the Company’s employees render the services to increase their rights to the future absence from work, which shall be recognized at the expected payment by the Company for the unexercised rights to the future absence from work. The employee remuneration related to the non-accumulative paid absence from work during the accounting period when the employees claim the paid absence from work. 3. After-service benefit refers to the kinds of remunerations and benefits to the employees who already retire or resign from the Company after the Company obtains the services rendered by such employees. Such benefit doesn’t include the short-term remuneration and dismissal benefit. The Company classifies the after-service benefits into the vested contribution plan and
F-37 vested benefit plan. The Company shall recognize the payable calculated according to the vested contribution plan as the liability and record into the current period profit & loss or relevant asset costs during the accounting period when the employees render the service. The accounting method for benefit plan shall be classified into the following four steps: 1) make the estimate of the relevant population variable and financial variable on the basis of unbiased, consistent actuarial assumption according to the expected accumulative benefit unit method to measure the obligations of benefit plan and determine the attributable period of relevant obligations; 2) if the vested benefit plan contains the assets, the surplus or deficit from the difference between the fair value of vested benefit plan assets from the fair value of vested benefit plan obligation shall be recognized the net liability or net asset of the vested benefit plan. In case of the surplus of the vested benefit plan, the lower of the surplus of vested benefit plan and upper limit thereof shall be the net assets of benefit plan; 3) At the end of reporting period, the Company shall record the employee remuneration of defined benefit plan into the current period profit & loss; 4) The re-measured change of net assets of vested benefit plan or net obligations thereof shall be recognized in the other comprehensive income and not be converted to the profit or loss afterwards. 4. Dismissal benefit refers to the compensation to the employees who are dismissed by the Company prior to the expiry of the employee labor contract or encouraged thereby to voluntarily accept the lay-off. The dismissal benefit offered by the Company to the employees shall be recognized into the current period profit or loss and as the obligation of employee remuneration on the earlier of the following dates : 1) when the Company is unable to unilaterally cancel the dismissal benefit because it cancels the labor relationship with the employee or the employee voluntarily accept the layout offered by the Company; 2) when the Company recognizes the restructuring costs or expenses related to the payment of dismissal benefit. 5. Other long-term employee benefit refers to the other employee remuneration than short-term remuneration, after-service benefit and dismissal benefit, including the long-term paid absence from work, long-term disability benefit and long-term profit sharing scheme. Where the other long-term employee benefit meets the vested contribution plan, refer to the accounting method of previous vested contribution plan. Otherwise, refer to the accounting method of defined benefit plan. (XVII) Share-based payment 1. Category of share-based payment
F-38 The share-based payments shall consist of equity-settled share-based payments and cash-settled share-based payments. The equity instrument of equity incentive shall be measured at the fair value of grant date. 2. Determination of fair value of equity instrument If the equity settlement involves the equity-settled share-based payment by the employees, the fair value of equity instrument on the grant date shall be recognized to the costs & expenses and capital reserve (other capital reserve), and its subsequent change of value shall not be recognized. If the equity settlement involves the cash-settled share-based payment by the employees, the fair value of equity instrument shall be recalculated on each balance sheet date to determine the costs & expenses and employee remuneration payable. Where there exists the active market of equity instrument such as option granted, its fair value shall be determined on the quoted price of active market. Where there doesn’t exist the active market, the option pricing Black-Scholes-Merton model etc., can be applicable to determine its fair value. The option pricing model should consider the following factors: 1) strike price of option; 2) validity period of option; 3) applicable price of underlying stocks; 4) expected volatility of stock price; 5) expected dividend of stock; 6) risk-free interest during the validity period of option. 3. Determination basis of best estimate of vested equity instrument On each balance sheet date during the vesting period, the Company shall make the best estimate on the basis of subsequent information such as the change of number of employees that can exercise the rights to modify the quantity of vested equity instrument. On the vesting date, the expected quantity of vesting equity instrument shall be the same as the actual quantity of vesting quantity. 4. Relevant accounting treatment of implementing, modifying and terminating share-based payment plan On the basis of fair value of the aforementioned equity instrument and the expected quantity of vested equity instrument, calculate the accumulative expenses and costs after the deduction of the recognized expenses and costs of prior periods as the expenses and costs that should be recognized during the current period. (XVIII) Accrued liability The accrued liability should be recognized where there is a present obligation of the Company as a result of the pending litigation, guarantee of production quality, loss-making contract and discard of oil & gas assets, it is likely to cause any economic
F-39 benefit to flow out of the Company as a result of performance of the obligation and the amount of the obligation can be measured in a reliable way. The estimated debts shall be initially measured in accordance with the best estimate of the necessary expenses for the performance of the current obligation and take into full consideration of the risks, uncertainty, time value of money, and other factors pertinent to the Contingencies. If the time value of money is of great significance, the best estimate shall be determined after discounting the relevant future outflow of cash. The discard liability of oil & gas assets which meets the conditions of accrued liability shall be recognized as accrued liability and included in the original price of such oil & gas assets. The amount of accrued liability shall be the present value of estimated future expenses according to local conditions and relevant requirements. If the conditions for accrued liability are not met, the removal, dismantlement and site cleaning expenses at the time of discard shall be recognized as the current period profit or loss. (XIX) Revenue 1. The term "revenue" refers to the gross inflow of economic benefits formed during the course of the ordinary activities of an enterprise, which may increase the owner's equities and is irrelevant to the invested capital of the owner. The Company’s revenue consist of those from selling goods, providing labor services, and abalienating the right to use assets. 2. The Company shall ascertain the revenue incurred by selling goods in accordance with the received or receivable price stipulated in the contract or agreement signed between the enterprise and the buyer, unless the received or receivable amount as stipulated in the contract or agreement is unfair. No revenue from selling goods may be recognized unless the following conditions are met simultaneously: 1) The significant risks and rewards of ownership of the goods have been transferred to the buyer by the enterprise; 2) The enterprise retains neither continuous management right that usually keeps relation with the ownership nor effective control over the sold goods; 3) The relevant amount of revenue can be measured in a reliable way; 4) The relevant economic benefits may flow into the enterprise; and 5) The relevant costs incurred or to be incurred can be measured in a reliable way. If the collection of the price as stipulated in the contract or agreement is delayed and if it has the financing nature, the revenue incurred by selling goods shall be
F-40 ascertained in accordance with the fair value of the receivable price as stipulated in the contract or agreement. The difference between the price stipulated in the contract or agreement and its fair value shall be amortized within the period of the contract or agreement employing the real interest method and shall be included in the current profits and losses. 3. If the Company shall recognize the revenue from providing services employing the percentage-of-completion method if the following conditions can be met simultaneously. The Company shall ascertain the total revenue from the providing of labor services in accordance with the received or to-be-received price of the party that receives the labor services as stipulated in the contract or agreement, unless the received or to-be-received price as stipulated in the contract or agreement is unfair. 1) The amount of revenue can be measured in a reliable way; 2) The relevant economic benefits are likely to flow into the enterprise; 3) The schedule of completion under the transaction can be confirmed in a reliable way; and 4) The costs incurred or to be incurred in the transaction can be measured in a reliable way. The Company employs the percentage-of-completion method where the schedule of the project is ascertained on the basis of the proportion of accumulative actual contract costs incurred against the expected total contract costs (or the proportion of services performed to the total services to be performed). 4. If the Company cannot, on the date of the balance sheet, measure the result of a transaction concerning the providing of labor services in a reliable way, but the cost of labor services incurred is expected to be compensated, the revenue from the providing of labor services shall be recognized in accordance with the amount of the cost of labor services incurred, and the cost of labor services shall be carried forward at the same amount. If the cost of labor services incurred is not expected to compensate, the cost incurred should be included in the current profits and losses, and no revenue from the providing of labor services may be recognized. (XX) Government subsidy 1. A government subsidy means the monetary or non-monetary assets obtained free by an enterprise from the government, but excluding the capital invested by the government as the owner of the enterprise. Government subsidies consist of the government subsidies pertinent to assets and government subsidies pertinent to
F-41 income. The government subsidies pertinent to assets mean the government assets that are obtained by enterprises used for purchase or construction, or forming the long-term assets by other ways. The government subsidies pertinent to income refer to all the government subsides except those pertinent to assets. 2. No government subsidy may be recognized unless the certain conditions for the government subsidies are met simultaneously. If a government subsidy is a monetary asset, it shall be measured in the light of the received or receivable amount. If a government subsidy is a non-monetary asset, it shall be measured at its fair value. If its fair value cannot be obtained in a reliable way, it shall be measured at its nominal amount. 3. The government subsidies pertinent to assets shall be recognized as deferred income, equally distributed within the useful lives of the relevant assets, and included in the current profits and losses. But the government subsidies measured at their nominal amounts shall be directly included in the current profits and losses. Those subsidies used for compensating the related future expenses or losses of the Company shall be recognized as deferred income and shall be included in the current profits and losses during the period when the relevant expenses are recognized. Those subsidies used for compensating the related expenses or losses incurred to the Company shall be directly included in the current profits and losses. (XXI) Deferred Income Tax Assets and Deferred Income Tax Liabilities Deferred income tax assets and deferred income tax liabilities are computed and recognized based on the temporary differences arising from assets and liabilities and the applicable tax rates. Temporary differences comprise taxable temporary differences and deductible temporary differences. 1. A deferred income tax asset is recognized for deductible temporary differences, carry-forward of unused tax-deductible loss and tax credits from future years, to the extent that it is probable that taxable profits will be available against which the deductible temporary differences, carry-forward of tax-deductible loss and tax credits can be utilized. Deferred income tax assets are not recognized where deductible temporary differences: Are related to transactions that neither involve business combinations, nor affect accounting profit or taxable profit when occurred; or Are related to investments in subsidiaries, joint-ventures and associates and are
F-42 unlikely to be reversed in the foreseeable future. 2. All taxable temporary differences shall be recognized as deferred income tax liabilities, except where taxable temporary differences: (1) Are related to initial recognition of goodwill; or (2) Are related to initial recognition of assets or liabilities arising from transactions that neither involve business combinations, nor affect accounting profit or taxable profit when occurred; or (3)Taxable temporary differences are related to investments in subsidiaries, joint-ventures and associates, the Company can control the time of reversal of the temporary differences, and the temporary differences are unlikely to be reversed in the foreseeable future. Deferred income tax assets or deferred income tax liabilities are measured at the applicable tax rates that are expected to apply to the period when the assets are recovered or the liabilities are settled. 3．Impairment of deferred income tax assets The Company shall review the carrying amount of deferred income tax assets on the balance sheet date. The carrying amount of deferred income tax assets shall be reduced to the extent that it is no longer probable that sufficient taxable profits will be available in future periods to allow the deferred income tax assets to be utilized. The amount of write-down shall be included in current income tax expenses. The amount of write-down arising from the portion of deferred income tax assets charged to owners’ equity on initial recognition shall also be included in owners’ equity. The amount of write-down shall be reversed when it is probable that sufficient taxable profits will be available. （XXII）Leases 1．A lease is an agreement whereby the lessor conveys to the lessee in return for payment the right to use an asset for an agreed period of time. A lease may be classified as a finance lease or an operating lease. All leases the Company is involved in are operating leases. 2. The Company shall recognize all rentals paid as lessee in the cost of the underlying assets or current profit or loss on a straight-line basis over the lease term; and recognize all rentals received as lessor in current profit or loss on a straight-line basis over the lease term.
F-43 3. Initial direct costs arising from operating leases are recorded into current profit or loss. Contingent rental under operating lease agreements is taken to current profit or loss when incurred. （XXIII）Accounting of Income Tax The Company measures income tax expenses using the balance sheet liability method. （XXIV）Business Combinations 1. Business combinations under the same control A business combination under the same control is a business combination wherein all parties to the combination are ultimately controlled by the same entity or the same entities both before and after the business combination and such control is not temporary. Business combinations under the same control usually refer to combinations of businesses that belong to the same group; otherwise, they are business combinations not under the same control. The assets and liabilities the Company, as the acquirer, obtains in a business combination shall be measured on the basis of their carrying amounts in the combined entity on the combining date. For a long-term equity investment acquired through a business combination under the same control involving a controlling interest, the Company recognizes the share of the carrying value of owners’ equity of the acquired entity on the combining date as its initial investment cost. For details on accounting, please see Long-term Equity Investments. The Company accounts for all assets and liabilities obtained in a merger under the same control at their carrying amounts in the combined entity. The difference between the carrying amount of net assets obtained in a business combination and the carrying amount of the consideration paid for the combination (or the aggregate face value of shares issued as consideration) by the Company is adjusted to capital surplus. If the capital surplus is not sufficient to absorb the difference, any excess shall be adjusted against retained earnings. All direct costs for business combinations incurred upon the Company as the acquirer shall be recorded into current profit or loss when incurred, inclusive of fees paid to auditors, appraisers and lawyers. Handling charges and commissions, among other costs, paid to issue bonds or assume other debts under a business combination shall be included in initial measurement of such bonds and other debts. Handling charges and commissions, among other costs, arising from the offering of equity securities under a business combination shall be
F-44 deducted from the premium income on such equity securities. Where the premium income is insufficient, retained earnings shall be reduced accordingly. Where a business combination under the same control involving a controlling interest gives rise to a parent-subsidiary relationship, the parent company shall prepare consolidated financial statements, including consolidated balance sheet, consolidated income statement and consolidated cashflow statement, on the combining date. In the consolidated balance sheet, the assets and liabilities of the combined entity shall be consolidated at their carrying amounts. All transactions concluded between the combining entity and the combined entity on and before the combining date shall be offset as intra-group transactions pursuant to the accounting standards of Consolidated Financial Statements. Consolidated income statement and consolidated cashflow statement include net profit realized and cashflows incurred by both the combining entity and the combined entity from the beginning of the period of combination to the combining date. Cashflows arising from transactions involving both entities and intra-group transactions in the current period shall be offset pursuant to the accounting standards of Consolidated Financial Statements. 2. Business combinations not under the same control A business combination not under the same control is a business combination wherein all parties to the combination are not ultimately controlled by the same entity or the same entities neither before nor after the business combination. Determination of the cost of business combinations: the cost of business combinations is the aggregate of the fair values, at the acquisition date, of monetary or non-monetary assets paid, debts issued or assumed, and equity securities issued by the acquirer for the purpose of business combinations and all direct costs incurred by business combinations. For business combinations realized by several transactions step by step, the cost of business combinations is the sum of the cost of each transaction. For a long-term equity investment acquired through a business combination not under the same control involving a controlling interest, the initial investment cost of the long-term equity investment in the acquired entity is the cost of combination determined at the acquisition date (exclusive of cash dividends and profit receivable from the invested entity); all identifiable assets and liabilities obtained through a merger not under the same control and qualifying for recognition shall be recognized as assets and liabilities of the Company at fair value at the acquisition date. Where the
F-45 Company pays non-monetary assets as consideration for obtaining control over or identifiable assets and liabilities of the acquired entity, the difference between the fair value and carrying value of such non-monetary assets at the acquisition date shall be recognized as gains/losses on disposal of assets in income statement in the period of combination. Where the cost of a business combination not under the same control is in excess of the share of the identifiable net assets of the acquired entity obtained at fair value at the acquisition date, the Company shall recognize the difference as goodwill; in the event of mergers, the difference is recognized as goodwill in the parent company’s separate financial statements; in the event of combinations involving a controlling interest, the difference is recognized as goodwill in consolidated financial statements. Where the cost of a business combination is less than the share of the identifiable net assets of the acquired entity obtained at fair value, the Company shall record the difference into current profit or loss (non-operating income) in the period of combination. In the event of mergers, the difference is recognized in the parent company’s separate income statement in the period of combination; in the event of combinations involving a controlling interest, the difference is recognized in consolidated income statement in the period of combination. (XXV) Preparation of Consolidated Financial Statements 1. Determination of scope of consolidation (1)The scope of consolidation for the preparation of consolidated financial statements is determined on the basis of control. Where the Company owns more than one half of the voting rights of an invested entity, or owns less than one half of the voting rights but is able to exercise effective control over an invested entity, the Company treats the invested entity as a subsidiary and includes it in consolidation. (2) A subsidiary added to the Company through a business combination under the same control shall be included in consolidation from the beginning of the period in which such combination happens and the beginning balances or amounts reported in the prior year in the consolidated financial statements shall be adjusted accordingly; a subsidiary added through a business combination not under the same control shall be included in consolidation from the acquisition date. Where the Company transfers its controlling interest in a subsidiary during the reporting period, the subsidiary shall be removed from consolidated financial statements from the date of loss of control. 2. Consolidation principles, procedures and methods
F-46 (1) In preparing consolidated financial statements, the Company shall make adjustments as necessary to the accounting policies and accounting periods of subsidiaries to make sure they are consistent with those adopted by the Company. Where the fair values of the identifiable assets and liabilities of a subsidiary acquired by the Company through a business combination not under the same control are discrepant with their carrying values at the acquisition date, the Company shall adjust the subsidiary’s financial statements based on the fair values of the identifiable assets and liabilities at the time of acquisition before consolidation. The Company shall measure its long-term equity investments in subsidiaries using the equity method instead of the cost method before the preparation of consolidated financial statements. (2)All significant balances, transactions and unrealized gains/losses between the Company and subsidiaries and between subsidiaries shall be offset in preparing consolidated financial statements. Where the cost of combination incurred when the Company acquires a subsidiary is in excess of the share of the identifiable net assets of the subsidiary at fair value at the acquisition date, the Company shall recognize the difference as goodwill in consolidated balance sheet; where the cost of combination is less than the share of the identifiable net assets of the subsidiary at fair value at the acquisition date, the Company shall include the difference in non-operating income in the period of combination. The share of a subsidiary’s net assets enjoyed by other investors in the subsidiary shall be presented separately as minority interests under owners’ equity in consolidated balance sheet; the minority’s share of current net profit or loss of a subsidiary shall be presented as minority profit or loss under net profit in consolidated income statement. (3) Where losses applicable to the minority exceed the minority interest in the opening equity of the relevant subsidiary, the excess shall be accounted for circumstantially: A. The excess shall be offset against minority interests where the minority has a binding obligation to under the Articles of Association or relevant agreement, and is able to, make good the losses; B. The excess shall be offset against the parent company’s owners’ equity where the Articles of Association or relevant agreement has not imposed a binding obligation on the minority. If the subsidiary in question subsequently reports profits, all such profits are attributed to the parent company until the minority's share of losses previously
F-47 absorbed by the parent company has been recovered. V. Notes on Changes in Accounting Policies and Accounting Estimates and Error Corrections (I) Nature, Content, Causes and Impact of Changes in Accounting Policies There was no change in any accounting policy of the Company during the reporting period. (II) Content, Causes and Impact of Changes in Accounting Estimates There was no change in any accounting estimate of the Company during the reporting period. (III) Nature, Content and Impact of Error Corrections The Company made no error correction during the reporting period. VI. Taxes 1. Value Added Tax: the net difference between output VAT, which is 17% of revenue from goods sold, and input VAT that is allowed to be offset against in the same period. 2. Business tax: 5% of taxable revenue from services rendered. After business tax replaced by value-added tax, stop payment. 3. City maintenance and construction tax: at 5%-7% of VAT or business tax payable. 4. Education surtax: at 3.5% of VAT or business tax payable. 5．Income tax：at 25% of taxable profit. The Company’s subsidiaries are entitled to some tax incentives as follows: Qinghai Sanjiang Hydro Power Development Co., Ltd enjoys a lower enterprise income tax rate at 15% according to the Circular on Deepening Policies for the Western Development Strategy ([2011] No.58) released by the Ministry of Finance and State Administration of Taxation. Qinghai Ping’an Aluminum High Precision Machining Co., Ltd: according to Some Policies of Qinghai Province for the Implementation of the Western Development Strategy, production-oriented startups enjoy exemption from enterprise income tax for five years from the start of business and a lower enterprise income tax rate at 15% for five years after that. The year of 2016 falls within the period of exemption. Qinghai Ruihe Aluminum Foil Co., Ltd: according to Some Policies of Qinghai Province for the Implementation of the Western Development Strategy, production-oriented startups enjoy exemption from enterprise income tax for five years from the start of business and a lower enterprise income tax rate at 15% for five
F-48 years after that. In 2016, enjoy discount rate of 15%. Qinghai Baihe Aluminum Co., Ltd.:according to the Notification on Identification of Qinghai Measuring & Cutting Tools Co., Ltd and Other 34 Enterprises as New High-tech Enterprise (Qinghai Science & Technology issue High-tech 【2015】No. 177 Document) that issued by Qinghai Science & Technology Department,Qinghai Financial Department, Qinghai Provincial State Taxation Bureau and Qinghai Province Local Taxation Bureau on December 20, 2015, Qinghai Baihe Aluminum Co., Ltd. is identified as new high-tech enterprise, validity period starts from October 21, 2015, for three years. Enterprise income tax applies to new high-tech enterprise preferential tax rate of 15%. Qinghai Tiancheng Credit Guaranty Co., Ltd: according to the Circular on Some Tax Policy Issues for the Deeper Implementation of the Western Development Strategy released by the Ministry of Finance, a lower enterprise income tax rate at 15% applies to entities located in west China and engaged in encouraged industries, effective between 1 January 2011 and 31 December 2020. The Company enjoys this tax incentive this year as it falls under the category of credit guaranty service in the financial service industry, Article 31 of the Catalogue for Guiding Industry Restructuring (2011 Version) . VII. Enterprise merger and consolidated financial statements (I) Basic information on the subsidiaries included in the scope of consolidated financial statements in the current year Unit: RMB million Yuan Proportion Voting Name of Place of Nature of Registered of rights to be Amount of Mode of No. Level enterprise incorporation business capital shareholding enjoyed investment acquisition (%) (%) Xining Manufactur Qinghai Jinxing Class Economic 1 ing Investment Mining Co., Ltd II Developmen 11,208.37 40.00 40.00 4,615.35 enterprise t Zone Qinghai Sanjiang Manufactur Hydropower Class 108,938.0 2 Xining City ing Investment Development II 54.10 54.10 60,612.91 enterprise 0 Co., Ltd. Qinghai Qiaotou Datong Manufactur Aluminum & Class 141,344.6 3 County of ing Investment Electric Power II 89.39 96.90 341,356.06 Qinghai enterprise 1 Co., Ltd. Qinghai Jinrui Manufactur Mineral Class 4 Xining City ing Investment Development Co. II 28,817.63 42.50 48.32 49,599.15 enterprise Ltd Xining Qinghai Kunlun Class Service 100,000.0 5 Economic Investment Leasing Co., Ltd. II enterprise 100.00 100.00 99,405.49 Developmen 0
F-49 Proportion Voting Name of Place of Nature of Registered of rights to be Amount of Mode of No. Level enterprise incorporation business capital shareholding enjoyed investment acquisition (%) (%) t Zone
Qinghai Ping'an Ping'an Manufactur High - Precision Class 200,000.0 6 County of ing Investment Aluminum II 84.89 100.00 169,777.70 Qinghai enterprise 0 Industry Co., Ltd. Qinghai Chentai Manufactur Real Estate Class 7 Xining City ing Investment Development II 20,691.90 100.00 100.00 20,691.90 enterprise Co., Ltd. Qinghai Class Service 8 Xiangguang Xining City Investment II enterprise 300.00 100.00 100.00 300.00 Property Co., Ltd. Xining Qinghai Ruihe Manufactur Class Economic 9 Aluminum Foil ing Investment II Developmen 59,378.47 100.00 100.00 59,378.47 Co., Ltd. enterprise t Zone Qinghai Ningbei Qinghai Manufactur Class 171,336.6 10 Power Generation Biotechnolo ing Acquisition II 70.82 70.82 124,540.88 Co., Ltd. gy Park enterprise 4 Qinghai Bridge Datong Manufactur Class 11 Electric Industrial County of ing Transfer II 36,669.61 96.72 100.00 40,814.12 Co., Ltd. Qinghai enterprise Qinghai Yihe Xining Maintenanc Maintenance & Class Economic e & 12 Merger Installation Co., II Developmen installation 10,000.00 100.00 100.00 10,000.00 Ltd. t Zone enterprise Qinghai Datong Tiancheng Credit Class Financial 110,500.0 13 County of Investment Guarantee Co., II enterprise 22.63 22.63 25,000.00 Qinghai 0 Ltd. Qinghai Xihai Haibei Class Coal 14 Coal & Electricity Prefecture of Merger II enterprise 36,322.45 100.00 100.00 138,962.99 Co., Ltd. Qinghai Aluminum Qinghai Baihe Huangzhong product Class 15 Aluminum County of manufacturi Merger II 95,000.00 100.00 100.00 141,365.61 Industry Co., Ltd. Qinghai ng enterprise Qingtou International Class Trading 16 Shanghai Investment Trade (Shanghai) II enterprise 80,000.00 100.00 100.00 80,000.00 Co., Ltd. Product Qinghai Plateau Xining research Non-ferrous Class Economic and 17 Metal Research Investment II Developmen developme 1,500.00 100.00 100.00 1,400.00 & Development t Zone nt Co., Ltd. enterprise Aluminum Qinghai Guoxin product Class 18 Aluminum Xining City manufacturi Merger II 60,000.00 58.88 58.88 35,329.19 Industry Co., Ltd. ng enterprise Qinghai Zhengyi Testing Class Testing 19 Xining City Investment Technology Co., II enterprise 980.00 40.56 100.00 394.19 Ltd. General Qinghai General Class Xining City aviation Merger 20 II 10,000.00 67.00 67.00 6,700.00 Aviation Co., Ltd airport
F-50 Proportion Voting Name of Place of Nature of Registered of rights to be Amount of Mode of No. Level enterprise incorporation business capital shareholding enjoyed investment acquisition (%) (%) investment and managemen t Aluminum Qinghai Baihe Huangzhong product Recycling Class County, 100,000.0 manufacturi Investment 21 II Qinghai 100.00 100.00 240,251.02 Aluminum ng 0 Province Industry Co., Ltd. enterprise
(II) The entities newly included in the scope of consolidation in the current year
Name of enterprise Net assets at the end of the year Net profit for the current year
Qinghai General Aviation Co., Ltd 123,524,073.04 634,068.82
Qinghai Baihe Recycling Aluminum Industry Co., Ltd. 2,601,566,758.79 -3,121,952.67
1. Through enterprise combination under different control, the company obtained the
equity interest of 67% of Qinghai General Aviation Co., Ltd. On Octomber 8, 2016,
this company signed equity interest transfer agreement with Qinghai Hanfei General
Aviation Group Co., Ltd., which is the original shareholder of Qinghai General
Aviation Co., Ltd, meanwhile purchased the equity interest of 67% of 67,000,000.00
RMB that it holds, and completed business registration on Octomber 11, 2016;
according to agreement, this company paid equity transfer funds 30,000,000.00 RMB
on December 30, 2016, completed paying the remaining 37,000,000.00 RMB equity
transfer funds on January 24, 2017; at the end of December 2016, this company
completed equity settlement procedure, relevant management personnel dispatched in
place, realized the control on Qinghai General Aviation Co., Ltd, therefore company
confirmed December 31, 2016 as the date of purchase. This transaction is the enterprise merger that realize in an exchange transaction, the purchase price of this transaction underlying assets is RMB 67,000,000.00 RMB, without or has valuable consideration, namely the merger consideration is 67000000.00 RMB; on purchase date, the company obtained the identifiable net assets fair value of Qinghai General Aviation Co., Ltd (due to the establishment time of Qinghai General Aviation Co., Ltd is short, formation of assets is mainly in this year,
F-51 the fair value of its identifiable net assets is confirmed according to its book value), share of 64,939,128.94 RMB (96,924,073.04×67%), the combined cost exceeds the fair value of the identifiable net assets of 2,060,871.06 RMB, according to the regulation of accounting standards, to be included in the consolidated goodwill.
On date of purchase, balance sheet brief table of Qinghai General Aviation Co., Ltd
Items Book value Fair value
Monetary capital 140,892.83 140,892.83
Account receivable 2,450,000.00 86,752,964.64
Other receivables 86,096,315.85 1,793,351.21
Inventory 148,337.93 148,337.93
Fixed assets 36,904,998.78 36,904,998.78
Construction in process 1,542,364.19 1,542,364.19
Intangible assets 353,000.00 353,000.00
Long-term unamortized expenses 5,873,839.48 5,873,839.48
Accounts payable 4,125,383.41 4,125,383.41
Employee pay payable 29,783.25 29,783.25
Tax payable 42,062.36 42,062.36
Other payables 32,388,447.00 32,388,447.00
Net assets (owner’s equity) 96,924,073.04 96,924,073.04
2. On May 18, 2016, this company invested and set up Qinghai Baihe Recycling
Aluminum Industry Co., Ltd., this company holds 100% voting power, Qinghai Baihe
Recycling Aluminum Industry Co., Ltd. is included in the scope of the current period
consolidated statements.
(III) The reason why the parent company has less than half of the voting rights of the invested entities but can control the invested entities Unit: RMB million Yuan Proportion Reasons for being Proportion of of voting Registered Amount of included in the No. Name of enterprise shareholding Level （ ） capital investment scope of （%） rights % consolidation
F-52 The maximum Qinghai Jinxing Mining proportion of 1 40.00 40.00 11,208.37 4,615.35 Class II Co., Ltd equities and the right of control The maximum Qinghai Tiancheng proportion of 2 Credit Guarantee Co., 22.63 22.63 110,500.00 25,000.00 Class II equities and the Ltd. right of control The maximum Qinghai Jinrui Mineral proportion of 3 42.50 48.32 28,817.63 49,599.15 Class II Development Co. Ltd equities and the right of control (IV) Within this report period, there is no longer the subject that excluded in scope of consolidation, reduction of sub-company without selling equity interest of losing control rights, no reverse purchase and merger events.
VIII. Description of key items as listed in the consolidated financial statements 1. Monetary fund
Balance at the beginning of Item Balance at the end of period year
Cash 2,035,554.08 2,403,118.66
Deposit at bank 1,193,656,981.35 2,047,954,887.26
Other monetary funds 1,056,885,537.08 2,343,576,484.34
2,252,578,072.51 4,393,934,490.26 Total
2. Notes / bills receivable
Balance at the end of Item Balance at the beginning of year period
Bank acceptance bill 820,449,317.72 143,423,395.60
Commercial acceptance bill 590,205.26
821,039,522.98 143,423,395.60 Total
3. Accounts receivable
Amount at end of period Amount at beginning of year
Categories Book Value Bad debt reserves Book Value Bad debt reserves Propor Propor Propo Proport Amount tion Amount tion Amount Amount rtion ion（%） （%） （%） （%） Accounts receivable from significant single amount of 1,383,151. 121,077,389.21 11.94 6,324,584.30 5.22 1,383,151.00 0.14 100 individually counted and 00 drawn bad debt reserves
F-53 Accounts receivable from bad debt reserves counted 10,307,482 805,575,973.48 86.61 12,527,502.72 1.56 995,592,600.83 99.23 1.04 and drawn according to the .13 combination
1. Accounts receivable from bad debt reserves counted 10,293,742 703,049,941.49 75.58 12,219,924.63 1.74 991,012,860.83 98.77 1.04 and drawn by using the .91 aging analysis method 2. Accounts receivable from bad debt reserves counted and drawn by using the 102,526,031.99 10.11 307,578.09 0.30 4,579,740.00 0.46 13,739.22 0.30 method for the percentage of balance Accounts receivable from non-significant single 6,378,634. amount of individually 3,502,024.19 0.35 3,376,312.35 96.41 6,378,634.80 0.63 100 80 counted and drawn bad debt reserves 18,069,267 Total 930,155,386.88 100.00 22,228,399.37 1,003,354,386.63 100 .93
(1) Accounts receivable from bad debt reserves counted and drawn according to the combination A. Accounts receivable from bad debt reserves counted and drawn by using the aging analysis method
Amount at end of period Amount at beginning of year
Account age Book Value Book Value Bad debt Bad debt Proportion reserves Proportion reserves Amount Amount （%） （%） Less than 1 year 529,788,161.46 75.35 5,146,406.46 772,432,875.80 77.94 4,084,266.82
1-2 years 46,832,132.05 6.66 3,667,756.92 194,511,659.70 19.63 2,416,948.31
2-3 years 122,367,969.52 17.41 1,245,374.14 20,156,352.58 2.03 2,547,385.90
More than 3 years 4,061,678.46 0.58 2,160,387.11 3,911,972.75 0.40 1,245,141.88
Total 703,049,941.49 100.00 12,219,924.63 991,012,860.83 100.00 10,293,742.91
B. Accounts receivable from bad debt reserves counted and drawn by using the method for the percentage of balance
Amount at end of period Amount at beginning of year Proportion Proportion Account age of counting Bad debt of counting Bad debt Book Value Book Value and drawing reserves and drawing reserves （%） （%） Method for the percentage of balance at the end of 102,526,031.99 0.30 307,578.09 4,579,740.00 0.30 13,739.22 year
F-54 Amount at end of period Amount at beginning of year Proportion Proportion Account age of counting Bad debt of counting Bad debt Book Value Book Value and drawing reserves and drawing reserves （%） （%） 102,526,031.99 0.30 307,578.09 4,579,740.00 0.30 13,739.22 Total
(2) Accounts receivable from single amount of counted and drawn bad debt reserves A. Accounts receivable from significant single amount of bad debt reserves individually counted and drawn at the end of the year
Proportion Reason for Bad debt Account of counting Name of debtor Book Value counting and reserves age and drawing drawing （%） Lose Accounts receivable from strontium More than contact/touch 3,244,286.44 3,244,286.44 carbonate 3 years 100.00 because of the long years. More than Account-age Chongqing Guosheng Aluminum Products 1,100,297.86 1,100,297.86 5 years exceeds 5 years, Col, Ltd. 100.00 uncollectible More than Stay on account Wuxi Kaida Company 1,980,000.00 1,980,000.00 5 years 100.00 for long time After the Less than 1 Qinghai Electric Power Company 114,752,804.91 0.00 - period, has been year recovered. Total 121,077,389.21 6,324,584.30
B. Accounts receivable from non-significant single amount of bad debt reserves individually counted and drawn at the end of the period
Proportion of Reason for Bad debt Name of debtor Book Value Account age counting and counting and reserves drawing（%） drawing Qinghai Yuka Coal and More than 5 Company 128,581.72 128,581.72 100.00 Electricity Co., Ltd. years revoked Qinghai Jinding Loans More than 5 Company 8,916.00 8,916.00 100.00 Guarantees Co., Ltd. years cancelled Supply of heat without counting Supply of Heat Management Less than 1 125,711.84 0.00 and drawing of Department, supply of heat hall year bad debts preparation More than 5 The units don't Suzhou Hongsen Metal Co., Ltd. 759,263.40 759,263.40 100.00 years exist. Lanzhou Great Wall Industrial More than 5 The units don't 71,007.08 71,007.08 100.00 Co., Ltd. years exist. Guangda Plant of Qinghai More than 5 The units don't 794,491.85 794,491.85 100.00 Electric Power Company years exist. Account-age More than 5 Qinghai Aluminum Factory 251,449.82 251,449.82 100.00 exceeds 5 years, years uncollectible Account-age Xining Aluminum Products More than 5 10,256.00 10,256.00 100.00 exceeds 5 years, Factory years uncollectible Zhuozhou Xinheng Aluminum 19,105.64 19,105.64 More than 5 100.00 Account-age
F-55 Proportion of Reason for Bad debt Name of debtor Book Value Account age counting and counting and reserves drawing（%） drawing Co., Ltd. years exceeds 5 years, uncollectible Account-age More than 5 Ma Yifeng 23,499.72 23,499.72 100.00 exceeds 5 years, years uncollectible Account-age More than 5 Jinan Jinzhaoweiye Company 33,000.00 33,000.00 100.00 exceeds 5 years, years uncollectible Account-age More than 5 Civilian products retail funds 78,547.81 78,547.81 100.00 exceeds 5 years, years uncollectible Account-age Weifang Sanyuan Aluminum Co., More than 5 35,381.28 35,381.28 100.00 exceeds 5 years, Ltd. years uncollectible Account-age More than 5 State owned No. 5409 Factory 17,961.00 17,961.00 100.00 exceeds 5 years, years uncollectible Xinjiang Shenhuo Coal & More than 5 50,000.00 50,000.00 100.00 Uncollectible Electricity Co., Ltd. years Qinghai Litong Eletric Power More than 5 Time is long, 979,795.03 979,795.03 100.00 Company years uncollectible More than 5 Time is long, Qinghai Hotel Co., Ltd. 65,165.23 65,165.23 100.00 years uncollectible Run up an Jiangyin Huiyuan Industrial Co., More than 5 49,890.77 49,890.77 100.00 account for a long Ltd. years time. Total 3,502,024.19 3,376,312.35
(3) Conditions on the transfer or collection of accounts receivable during the current period There was no transfer or collection of accounts receivable from the Company during the current period. (4) Accounts receivable actually written off during the current reporting period In this period, the company has no actual write-off account receivable situation 4. Prepayments (1) Prepayments listed according to the account age
Amount at end of period Amount at beginning of year
Account age Book Value Book Value Bad debt Bad debt Proportion reserves Proportion reserves Amount Amount （%） （%）
Less than 1 year 1,066,349,763.24 89.39 398,467,166.89 65.52 650,981.75
1-2 years 34,061,996.61 2.86 46,470,761.42 7.64
2-3 years 42,584,040.39 3.57 64,590,421.55 10.62 19,499.73
More than 3 years 49,866,017.42 4.18 9,479,570.78 98,623,430.27 16.22 4,792,363.12
1,192,861,817.66 100.00 9,479,570.78 608,151,780.13 100.00 5,462,844.60 Total
F-56 (2) At the end of period, the prepayment with single significant amount and separate counting and drawing of bad debts prepration. Proportion of Reason for counting and Name of debtor Book Value Bad debt reserves counting and drawing
Shanxi Taixing Industrial Company Small collectible 2,177,712.09 2,177,712.09 100.00 (Second Branch) possibilities
Total 2,177,712.09 2,177,712.09 100.00
(2) Prepayments for non-significant single amount of bad debt reserves individually counted and drawn at the end of the period
Proportion of Reason for counting and Name of debtor Book Value Bad debt reserves counting and drawing drawing（%） Hunan CSU Yeshine Science & Technology Collectible possibility is 981,900.00 294,570.00 30.00 Ltd. 70% Dalian Institute of Explosion (Second Small collectible 950,000.00 950,000.00 100.00 Branch) possibilities Qinghai Xining Trade Co., Ltd 887,000.00 887,000.00 100.00 Uncollectible Small collectible Henan Dafei Industrial Co., Ltd. 774,725.46 774,725.46 100.00 possibilities Qinghai Yourong Electronics Engineering 411,594.52 411,594.52 100.00 Funds uncollectible Co., Ltd. Small collectible Inner Mongolia Jitai Aluminum Co., Ltd. 339,220.47 339,220.47 100.00 possibilities Shanxi Haihui Electromechanical Collectible possibility is 331,777.08 99,533.12 30.00 Technology Co.,Ltd. 70% Xian Electrical Equipment Factor (Second Small collectible 300,000.00 300,000.00 100.00 Branch) possibilities General Research Institute for Nonferrous Collectible possibility is 217,120.00 65,136.00 30.00 Metals 70% Tianshui Great Wall Low Voltage Electrical Small collectible 215,468.76 215,468.76 100.00 Applicances (Second Branch) possibilities Shandong Zhaoyuan Automation Small collectible 207,285.80 207,285.80 100.00 Instrument Factroy (Second Branch) possibilities Gaoquan Coal Mine 164,528.72 164,528.72 100.00 Funds uncollectible Collectible possibility is Wang Hai 158,864.00 47,659.20 30.00 70% Shenyang Ludao Research Institute Small collectible 150,000.00 150,000.00 100.00 (Second Branch) possibilities Xigang Machinery Manufactory (Second Small collectible 140,000.00 140,000.00 100.00 Branch) possibilities Qinghai Yima Coal Industry Yihai Energy 135,256.30 135,256.30 100.00 Funds uncollectible Co., Ltd Small collectible Jia Congcong 130,979.00 130,979.00 100.00 possibilities Jiangsu Yaohua Material Factory (Second Small collectible 120,000.00 120,000.00 100.00 Branch) possibilities Gangcha County Committee of Economy 100,000.00 100,000.00 100.00 Uncollectible and Trade Small collectible Xining Power Supply Company (Ruian) 100,000.00 100,000.00 100.00 possibilities Other small amounts uncollectible 1,641,377.20 1,641,377.20 100.00 Funds uncollectible funds Other small amounts collectible funds Collectible possibility is 91,747.11 27,524.14 30.00 of possiblility of 70% 70% Total 8,548,844.42 7,301,858.69
F-57 (3) Conditions on the large amount of prepayments over a year (account age)
Book Value at the Debtor Account age Reason for outstanding end of period China 22MCC Group Corporation Ltd.-- Refined More than The balance payment has 19,530,241.05 aluminum 3 years been settled. Pay project payment in advance, project has not Zhenzhou Hydraulic Machinery Co., Ltd 11,968,748.10 2-3 years been completed, have not been settled yet Pay agent construction Huangfeng Project Department, Sinohydro 7,293,250.20 1-2 years project funds in advance, Engineering Bureau 4 Co., Ltd have not be settled. Pay project payment in 1-2 years, advance, project has not China 22MCC Group Corporation Ltd. 7,012,948.88 2-3 years been completed, have not been settled yet Pay project payment in Baotou Tianze Aluminum Electric Equipment 1-2 years advance, project has not 4,932,357.49 Technology Co., Ltd. 2-3 years been completed, have not been settled yet Pay project payment in 1-2 years, Changfeng, Sanya Marine Gas Engineering advance, project has not 3,769,781.00 more than Company been completed, have not 3 years been settled yet Pay project payment in More than advance, project has not Jiangxi Province Hoisting Machinery Plant 3,645,000.00 3 years been completed, have not been settled yet Pay project payment in More than advance, project has not Xining Baosheng Industrial Co., Ltd. 3,610,000.00 3 years been completed, have not been settled yet Total 61,762,326.72
5. Interest receivable
Item Balance at the end of year Balance at the beginning of year
Interest on time deposits 220,173.61
Total 220,173.61
6. Dividends receivable
Investee Ending balance Initial balance
Qinghai Hexing Carbon Co., Ltd 1,960,000.00 Minhe Wankang Aluminum Co., 3,000,000.00 Ltd. Qinghai Qingfeng Aluminum Co., 4,000,000.00 Ltd.
Total 8,960,000.00
F-58
7. Other receivables
Amount at end of period Amount at beginning of year
Categories Book Value Bad debt reserves Book Value Bad debt reserves Proporti Proportio Proporti Proportion Amount Amount Amount Amount on（%） n（%） on（%） （%） Other accounts receivable from significant single 119,430, 72,361,784. 54,648,389. 53,845,93 amount of individually 18.65 60.59 9.48 98.53 237.38 26 73 8.66 counted and drawn bad debt reserves Other accounts receivable from bad debt reserves 518,914, 63,864,442. 507,817,88 63,233,08 counted and drawn 81.03 12.31 88.09 12.45 306.69 95 1.49 8.19 according to the combination 1. Other accounts receivable from bad debt 268,798, 63,114,096. 464,803,04 63,104,04 reserves counted and 41.98 23.48 80.63 13.58 694.72 11 6.49 3.69 drawn by using the aging analysis method 2. Other accounts receivable from bad debt reserves counted and 250,115, 43,014,835. 129,044.5 39.06 750,346.84 0.30 7.46 0.30 drawn by using the 611.97 00 1 method for the percentage of balance Other accounts receivable from non-significant 2,017,48 1,238,571.8 14,035,342. 14,035,34 single amount of 0.32 61.39 2.43 100.00 3.13 4 97 2.98 individually counted and drawn bad debt reserves 640,362, 137,464,799. 576,501,61 131,114,3 Total 100.00 100.00 027.20 05 4.19 69.82
(1) Other accounts receivable from bad debt reserves counted and drawn according to the combination A. Other accounts receivable from bad debt reserves counted and drawn by using the aging analysis method
Amount at end of period Amount at beginning of year Bad debt Bad debt Book Value Book Value Account age reserves reserves Proportion Proportion Amount Amount （%） （%） Less than 1 year 106,874,432.63 39.76 11,626,363.16 351,673,712.46 75.66 2,724,961.77 1-2 years 65,957,496.08 24.54 8,658,385.70 42,259,918.17 9.09 7,606,785.27 2-3 years 36,992,603.71 13.76 854,484.49 17,364,434.48 3.74 7,293,062.48 More than 3 years 58,974,162.30 21.94 41,974,862.76 53,504,981.38 11.51 45,479,234.17 Total 268,798,694.72 100.00 63,114,096.11 464,803,046.49 100.00 63,104,043.69
B. Other accounts receivable from bad debt reserves counted and drawn by using the method for the percentage of balance
Account age Amount at end of period Amount at beginning of year
F-59 Proportion Proportion of counting Bad debt of counting Bad debt Book Value Book Value and drawing reserves and drawing reserves （%） （%） Method for the percentage of balance 250,115,611.97 0.30 750,346.84 43,014,835.00 0.3 129,044.51 at the end of year Total 250,115,611.97 0.30 750,346.84 43,014,835.00 0.3 129,044.51
(2) Other accounts receivable from single amount of counted and drawn bad debt reserves A. Other accounts receivable from significant single amount of bad debt reserves individually counted and drawn at the end of the year
Proportion of Reason for Bad debt Account counting Name of debtor Book Value counting and reserves age and drawing drawing（ %） Qinghai Province Credit Guarantee Less than 1 10,000,000.00 Security deposit Group Limited Liability Company year New village, Zhoujia Village, Dahejia Less than 1 1,613,456.08 Security deposit Town, Jishishan County year Less than 1 Zhao Yun 1,516,600.00 Petty cash year Less than 1 Labor union Labor union 1,215,355.60 year expenditure Islamic International Trust and More than Bankruptcy 25,330,483.78 25,330,483.78 100.00 Investment Corporation 3 years liquidation According to Less than 1 regulation to Export drawback receivable 2,315,007.61 year handle tax rebate. Revolving fund Less than 1 without Bao Meitai 4,333,180.00 year counting and drawing Qinghai Shanchuan Foundry Ferroalloy More than 13,290,488.18 13,290,488.18 100.00 Uncollectible Group Co., Ltd. 3 years Qinghai Ganhe Industry Park More than Can restructure 19,677,760.00 Development and Construction Co. Ltd. 3 years and recover Debt paying More than Qinghai Xingde Mining Co., Ltd. 26,027,417.77 26,027,417.77 100.00 ability 3 years decreased Less than 1 Company employee 4,509,313.17 Staff petty cash year More than Company has Shanchuan Group 3,992,534.47 3,992,534.47 100.00 5 years been cancelled. Stay on account Xining City Urban and Rural Planning More than 2,000,000.00 2,000,000.00 100.00 for long time, Construction Bureau 5 years uncollectible Less than 1 Security deposit 1,887,780.66 Security deposit year More than Funds Material, project funds 1,720,860.06 1,720,860.06 100.00 3 years uncollectible
Total 119,430,237.38 72,361,784.26
F-60
B. Other accounts receivable from non-significant single amount of bad debt reserves individually counted and drawn at the end of the period
Proportion of Bad debt counting Reason for counting and Name of debtor Book Value Account age reserves and drawing drawing（ %） Run up an account for a Gansu Jinda Abrasives Co., More than 5 830,000.00 830,000.00 100 long time. Ltd. years Uncollectible Sinohydro Engineering Less than 1 460,038.59 Security deposit Bureau 4 Co., Ltd. year More than 3 The accounts can not be Rental fees 282,158.23 282,158.23 100 years received. Social insurance should be Less than 1 158,872.70 Can be deducted from salary withheld year Qinghai Huzhu Highland Less than 1 Barley Wine Sales Co., 100,000.00 Deposit year Ltd. Run up an account for a Leading Group for More than 5 77,116.01 77,116.01 100 long time. Liquidation years Uncollectible Employee dormitory rent Less than 1 Employee dormitory rent 60,000.00 invoice has been issued and year remains to be amortized More than 3 The accounts can not be Personal loans 29,297.60 29,297.60 100 years received. Run up an account for a Hainan Office Hotel More than 5 20,000.00 20,000.00 100 long time. Margin years Uncollectible Total 2,017,483.13 1,238,571.84
(3) Conditions on the transfer or collection of accounts receivable during the current period There was no transfer or collection of accounts receivable from the Company during the current period. (4) Other account receivable situation of the actual write-off during the report period Other account receivable situations of the current actual write-off. 8. Inventories
Amount at end of period Amount at beginning of year Type of inventory falling price falling price Book Value Book value Book Value Book value reserves reserves
Raw materials 1,075,999,110.63 12,594,361.42 1,063,404,749.21 943,426,994.02 10,716,275.52 932,710,718.50 Merchandise inventory 440,319,129.99 58,459,447.45 381,859,682.54 707,935,920.32 39,704,022.87 668,231,897.45 Unfinished products 890,211,505.94 4,344,684.89 885,866,821.05 759,223,454.57 759,223,454.57 Cost of development 391,289,142.08 391,289,142.08 441,178,979.96 441,178,979.96
F-61 Amount at end of period Amount at beginning of year Type of inventory falling price falling price Book Value Book value Book Value Book value reserves reserves Goods shipped in transit 113,688,335.26 113,688,335.26 119,738,337.75 13,760,383.28 105,977,954.47 Consigned processing 5,129,422.02 5,129,422.02 18,454,475.43 18,454,475.43 materials Cost of production 44,236,153.84 44,236,153.84 37,232,020.57 37,232,020.57 Turnover materials 349,646.95 349,646.95 322,913.90 322,913.90 Low-value 275,375.17 275,375.17 consumables 526,742.17 526,742.17 Packing 43,532.92 43,532.92 materials 51,576.88 51,576.88 Project 10,599,860.99 10,599,860.99 construction 80,350.90 80,350.90
2,972,141,215.79 75,398,493.76 2,896,742,722.03 3,028,171,766.47 64,180,681.67 2,963,991,084.80 Total
9. Other current assets
Item Balance at the end of year Balance at the beginning of year
Entrusted Loan 31,000,000.00
Natural gas bill
Pending deduct VAT on purchase 1,082,822,582.19
Bubushengjin 8688 Financial product 15,000,000.00
Total 1,097,822,582.19 31,000,000.00
10. Available-for-sale financial assets
Item Balance at the end of year Balance at the beginning of year
Available-for-sale securities
Available-for-sale equity instruments 2,526,368,943.11 2,476,102,928.92
Including: Measured at fair value
Measured at cost 2,526,368,943.11 2,476,102,928.92
Others Minus: Provision for impairment of available-for-sale financial assets 1,271,183.07 10,000,000.00
Total 2,525,097,760.04 2,466,102,928.92
11. Held-to-maturity investments
F-62 Item Balance at the end of period Balance at the beginning of year
Commissioned financial management 250,000,000.00 30,000,000.00
Trust fund 160,000,000.00 127,000,000.00
Bonds 4,000,000.00 Minus: Provision for impairment of
held-to-maturity investments Total 410,000,000.00 161,000,000.00
12. Long-term receivables
Item Year-end balance Amount at beginning of year
Guangzhou Zhiguang Electric Control Co., Ltd. 24,161.84 519,858.17
Yantai Longyuan Electric Power Technology Co., Ltd. 717,777.77 1,666,944.44
Xining City Investment Management Co., Ltd. 28,739,579.87 28,739,579.87
Qinghai Northwest Industrial Group Co., Ltd. 18,182,726.97 18,182,726.97 Xining Economic and Technological Development 6,368,217.68 6,368,217.68 Zone Development Group Co., Ltd. Total 54,032,464.13 55,477,327.13
13. Long-term equity investment (1) Classification of long-term equity investment
Amount of Amount of Balance at the investment investment Balance at the end Item beginning of year increased in this decreased in this of period year year Investment in joint ventures
Investment in associates 59,600,000.00 59,600,000.00
Investment in other enterprises
Subtotal 59,600,000.00 59,600,000.00 Minus: Provision for impairment of
long-term equity
Total 59,600,000.00 59,600,000.00
(2) List of long-term equity investment
Provision for Cash Cost Balance Proportio Provisi impairment Account Changes in Balance at dividends Invested of at the n of on for counted and ing increase or the end of during the entities invest beginnin sharehold impair drawn during method decrease period current ment g of year ing ment the current period period
F-63 Qinghai Equity Hexing accounti 19,600,0 19,600,00 19,600,000.0
Carbon Co., ng 00.00 0.00 0 Ltd. method Qinghai Equity Qingfeng accounti 40,000,0 40,000,00 40,000,000.0 Aluminum ng 00.00 0.00 0 Industry method Co., Ltd. 59,60 59,600,0 59,600,000. Total 0,000. 00.00 00 00
The reduction of this current long-term equity interest is because this company’s sub-company Qinghai Sanjiang Hydroelectricity Development Co. Ltd. no longer implements significant impact on Qinghai Hexing Carbon Co., Ltd and Qinghai Qingfeng Aluminum Co., Ltd., every year only charges fixed dividend according to 10% of its amount of investment, so due to be transferred to the accounting for financial assets available for sale. 14. Investment real estate
Item Balance at the end of period Balance at the beginning of year Investment real estate measured at fair 391,628,200.00 352,642,550.00 value Investment real estate measured at cost 278,766.74 292,647.74
Total 391,906,966.74 352,935,197.74
(1) Investment real estate measured at fair value
Decrements at the Increments at the current period current period Real estate Fair value at the Changes in Real estate Fair value at the Item Acqu for private beginning of the year fair value Dispos transferred end of the period isitio use or recognised in al for private n inventory profit or loss use transfer 844,2 1. Total cost 325,889,134.68 326,733,422.68 88.00 Housing & buildings 325,889,134.68 325,889,134.68 844,2 Land use rights 844,288.00 88.00 2. Changes in total fair value recognized in profit or 26,753,415.32 38,141,362.00 64,894,777.32 loss Housing & buildings 26,753,415.32 38,141,362.00 64,894,777.32
Land use rights 3. Total book value 844,2 of investment real 352,642,550.00 38,141,362.00 391,628,200.00 estate 88.00 Housing & buildings 352,642,550.00 38,141,362.00 390,783,912.00
F-64 Fair value at the Decrements at the Fair value at the Item Increments at the current period beginning of the year current period end of the period 844,2 Land use rights 844,288.00 88.00
① The company’s sub-company Qinghai Qiaodian Industrial Co., Ltd entrusts Xining Dezheng Assets Appraisal Co., Ltd to conduct assessment on its investment property for the purpose of financial report, meanwhile issues assessment report, number of assessment report 2016 No.（12A-16） and 2016 No. （12A-15）, according to assessment report, confirms the fair value of 38,141,362.00 RMB on investment property. ② This period increased land-use right of 844,288.00 RMB is the housing land-use right cost of No. 5, Haixi Road. (2) Investment real estate measured at cost
Balance at the Increments at the Decrements at the Balance at the end of Item beginning of year current period current period period
1. Original total book value: 444,904.80 444,904.80
Including: Housing and buildings 444,904.80 444,904.80
2. Total accumulated depreciation 152,257.06 13,881.00 166,138.06
Including: Housing and buildings 152,257.06 13,881.00 166,138.06 3. Total net book value of fixed 292,647.74 278,766.74 assets Including: Housing and buildings 292,647.74 278,766.74
4. Total provision for impairment
Including: Housing and buildings
5. Total book value of fixed assets 292,647.74 278,766.74
Including: Housing and buildings 292,647.74 278,766.74
15. Fixed assets
Balance at the Increments at the Decrements at the Balance at the end of Item beginning of year current period current period period
1. Original value
Housing and buildings 5,674,178,090.55 3,835,065,923.68 2,057,850,836.32 7,451,393,177.91
Structures and ancillary 606,677,209.50 22,195,345.29 603,810,193.00 25,062,361.79 facilities
Special equipment 2,605,304,474.04 22,960,855.50 2,137,030,524.65 491,234,804.89
F-65 Balance at the Increments at the Decrements at the Balance at the end of Item beginning of year current period current period period
General equipment 607,827,733.46 65,528,569.75 426,881,447.75 246,474,855.46
Smelting equipment 2,759,170,038.46 525,990,992.18 - 3,285,161,030.64
Mechanical equipment 5,432,494,332.22 2,897,804,540.20 1,803,611,002.16 6,526,687,870.26
Transportation Equipment 210,969,856.86 30,434,870.95 66,641,540.32 174,763,187.49
Electronic equipment 70,678,428.51 9,618,893.71 7,500,437.75 72,796,884.47
Office equipment 185,077,005.71 13,920,018.03 1,334,431.76 197,662,591.98
Total 18,152,377,169.31 7,423,520,009.29 7,104,660,413.71 18,471,236,764.89
2. Accumulated depreciation
Housing and buildings 1,436,868,406.91 223,745,831.52 569,597,881.72 1,091,016,356.71 Structures and ancillary 75,613,340.34 12,693,443.38 81,614,847.72 6,691,936.00 facilities
Special equipment 1,260,733,406.93 21,330,540.83 1,040,955,941.45 241,108,006.31
General equipment 335,363,018.56 7,090,365.19 182,360,936.18 160,092,447.57
Smelting equipment 1,275,857,797.47 118,605,400.88 1,394,463,198.35
Mechanical equipment 1,624,272,212.67 406,967,353.97 445,402,886.71 1,585,836,679.93
Transportation Equipment 126,724,777.77 22,268,734.03 46,871,197.39 102,122,314.41
Electronic equipment 49,672,299.05 8,655,305.09 6,132,374.98 52,195,229.16
Office equipment 62,169,181.62 8,857,330.22 825,177.56 70,201,334.28
Total 6,247,274,441.32 830,214,305.11 2,373,761,243.71 4,703,727,502.72
3. Provision for impairment
Housing and buildings 121,165,399.71 12,028,148.49 109,137,251.22 Structures and ancillary facilities Special equipment
General equipment
Smelting equipment
Mechanical equipment 335,505,622.27 39,566,544.27 295,939,078.00
Transportation Equipment 1,173,780.57 136,666.89 1,037,113.68
Electronic equipment
备 Office equipment 899,176.07 302,027.24 597,148.83
F-66 Balance at the Increments at the Decrements at the Balance at the end of Item beginning of year current period current period period
Total 458,743,978.62 52,033,386.89 406,710,591.73
4. Total book value
Housing and buildings 4,116,144,283.93 3,611,320,092.16 1,476,224,806.11 6,251,239,569.98 Structures and ancillary 531,063,869.16 9,501,901.91 522,195,345.28 18,370,425.79 facilities
Special equipment 1,344,571,067.11 1,630,314.67 1,096,074,583.20 250,126,798.58
General equipment 272,464,714.90 58,438,204.56 244,520,511.57 86,382,407.89
Smelting equipment 1,483,312,240.99 407,385,591.30 1,890,697,832.29
Mechanical equipment 3,472,716,497.28 2,490,837,186.23 1,318,641,571.18 4,644,912,112.33
Transportation Equipment 83,071,298.52 8,166,136.92 19,633,676.04 71,603,759.40
Electronic equipment 21,006,129.46 963,588.62 1,368,062.77 20,601,655.31
Office equipment 122,008,648.02 5,062,687.81 207,226.96 126,864,108.87
Total 11,446,358,749.37 6,593,305,704.18 4,678,865,783.11 13,360,798,670.44
16. Construction in process
Proportion Amount of project Budget Balance at the Increments at the Other Project name transferred to fixed investment (RMB 10,000) beginning of year current period decrease assets in budget （%） Huangfeng Hydropower Station of 231,400.00 3,155,525,399.61 228,090,654.55 146.41 Hualong County Grid-Connected Photovoltaic (Pv) 5,927.00 35,130,126.40 54,752.63 59.36 Power Project of Huangfeng Factory Shanping Hydropower Station of Guide 155,925.00 20,225,660.55 - 1.30 County Da Hejia Hydropower Station of Minhe 156,000.00 1,565,418,107.97 265,125,032.23 117.95 County Erduo Hydropower 881,500.00 178,405,545.87 261,342,535.06 4.99 Station Ealier Stage of 5,025,410.44 - Mentang Zhognchuan 109,000.00 31,259,883.31 13,969,244.99 4.15 Hydropower Station The First Phase of 181,600.00 610,664,759.47 19,103,509.62 34.68 Electrolysis The Second Phase of 300,000.00 3,710,607,979.06 372,027,979.82 136.13 Electrolysis Aluminium alloy extrusion project 270,000.00 68,482,172.18 2,823,000.00 2.64 specially used by new rail transit, with annual
F-67 Proportion Amount of project Budget Balance at the Increments at the Other Project name transferred to fixed investment (RMB 10,000) beginning of year current period decrease assets in budget （%） output of 100,000 tons
Anode Carbon 156,500.00 78,299.25 - 0.01 Sanya Sea Lake Hotel 40,390.38 332,490,148.74 100,571,010.93 107.22 Project The Maintenance 9,617,869.00 - Building The fifth phase seepage control and 250,000.00 - 250,000.00 100.00 renovation project of transit ash field Tianyuan Line 490,000.00 - 485,098.53 485,098.53 99.00 Reconstruction Productin Line Reform of Foundry Industry 100,000.00 - 92,639.35 92,639.35 92.64 Old Factory 10KV Box-Type 10,000.00 - 10,000.00 100.00 Substation Sewage Treatment Station of 10,000,000.00 - 9,744,183.76 97.44 Environment Renovation Project Technical 10,850,000.00 70,751,919.45 81,601,919.45 100.00 Modification Project Lead tube condenser manufacture of 250,000.00 193,492.28 49,751.03 243,243.31 97.30 fluoride salt and acid accumulator plant Forging Machine Modification of Ring 50,000.00 41,136.73 - 41,136.73 82.27 Making Class Technical Innovation of Fluoride Salt 7,000,000.00 - 7,099,371.08 7,099,371.08 101.42 Sewage Station Cooling System Innovation of Foundry 9,024.43 - 9,024.43 Furnace Electric Appliance Danger Solid Waste Project of 105,000 202,180,000.00 2,098,188.68 32,481,468.45 17.10 Tons Heavy Repair of Shot Blasting 60,000.00 54,239.31 - 54,239.31 90.40 Machine-Q3789E Heavy Repair of Aerated Block 9,899.00 - 9,899.00 Production System Facility Installation of Renewable Resources 100,000.00 73,614.95 - 73.61 Company Heavy Repair of Foundry Kneading 50,000.00 33,490.59 - 33,490.59 66.98 Machine 2005--JX-Foundry-004 Heavy Repair of Ring Making Hydraulic 60,000.00 56,772.47 - 56,772.47 94.62 Press
F-68 Proportion Amount of project Budget Balance at the Increments at the Other Project name transferred to fixed investment (RMB 10,000) beginning of year current period decrease assets in budget （%） Fabrication and Update of 320,000.00 10,141.88 310,000.00 320,141.88 100.04 Hydrofluoric Acid Storage Tank Maintenance of Acid-Making Reaction 57,861.87 - 57,861.87 Furnace Electrical Control Cabinet Modification 15,000.00 11,373.60 - 11,373.60 75.82 of 8# and 9# Deep-Well Pump Condensate Water 20,000.00 16,397.28 - 16,397.28 81.99 Modification Dust Pelletizing 2,017.10 - 2,017.10 System of Factory I Equipment Upgrading of Electrical Distribution Facilities 250,000.00 21,000.00 - 8.40 of Family Area in Haiyan Road Aluminum Electric Demolition Engineer 55,235.35 - 55,235.35 of Bridge Vacuum Pump Update and Water Cycle 31,000.00 - 21,756.30 70.18 Pipeline Update of 2016-GZ-Foundry-030 Sand Treatment System of Foundry 87,600.00 - 35,580.07 40.62 Industry JG-Foundry-001 Vehicle Purchase of 2,710,000.00 - 330,492.35 289,808.59 1.50 Transport Company Relocation Project of 3,831,000.00 - 70,000.00 1.83 Jian’an
Formed Foil Project 122,200.00 1,583,183,581.83 95,421,598.73 135.33 Electron Aluminum 26,700.00 328,813,311.39 3,886,884.45 217.42 Foil Project Project Engineering of 370,000.00 5,765,350,497.29 400,275,901.70 156.00 Aluminium Sheet Strip High Precision Aluminum Tube Rods 50,000.00 704,403,418.86 85,003,577.41 5,636,287.05 156.75 Profile Project Industry Revitalization-Annual Output of 25,000 Tons of High-Strength 33,930.00 541,574,043.39 115,617,336.53 193.69 Aluminum Alloy Extruding Tube, Rod and Profile Project Renovation Project of Lily Melting and 806.30 15,659,179.69 3,911,564.72 242.72 Casting Line Technical Innovation of Qinglong Strontium - 5,853,237.52 5,497,163.57 Salt Production 1,150,422,319.71 304,096,093.95 Engineering of Main
F-69 Proportion Amount of project Budget Balance at the Increments at the Other Project name transferred to fixed investment (RMB 10,000) beginning of year current period decrease assets in budget （%） and Subsidiary
Technical 69,485,876.65 15,715,753.61 Modification Project Single Project Related 81,149,003.16 - to Site Desulfurization Project 11,172,273.67 3,217,300.86 of Unit Wind-Break Wall 787,500.00 - 787,500.00 Project Maintenance and 5,869,759.88 - 5,869,759.88 Repair Project
Denitration Project 52,821,365.24 2,970,000.00 Electrostatic Precipitator Equipment 17,223,238.18 2,614,679.04 Modification Optothermal Energy 73,600.00 2,678,647.81 Project Encourage large projects and discourage small energy-inefficient 29,667,407.76 88,524,298.16 power plants of fossil power generation unit 3*660MW 20Kt/A Refined 35,755.65 872,259,713.59 183,714,244.42 295.33 Aluminium Project Busbar Processing Engineering of 2,171.51 17,921,569.14 - 17,921,569.14 82.53 Switching Station OtherTechnical 586,454,777.36 421,057,316.96 578,558,435.06 Modification Projects Fragmentary Technical 530,856.67 3,792,638.23 2,424,228.43 Modification Projects Electrolytic Project of 822,879,060.54 341,382,826.06 986,543,491.00 100,000 Tons Strorage area of 1,057,012.91 aluminium oxide is flat Hardening Project for 1,630,000.00 Part of New Floors Newly Increased Plants and Supporting 406,969.56 Facility in Techonology Garage Add Interbus between 6# and 7# Rectifier 6,022,008.38 Unit of Heating System Modification of 5,327,150.51 Molding Conduction Oil Technical Innovation 200,000,000.00 of Electrolytic Tank Others (Baihe 21,836,330.95 Recycling Aluminum)
F-70 Proportion Amount of project Budget Balance at the Increments at the Other Project name transferred to fixed investment (RMB 10,000) beginning of year current period decrease assets in budget （%） Pioneer Well in Qaidar 25,456.00 Mine Horizontal and East-West Direction 27,219.38 274,927,636.27 23,786,053.29 109.88 Transport Alley Project of Qaidar Mine The 102th Mining Area of Hai Ta’er Mine and the 303th 8,864.30 27,655,232.80 3,792,436.44 35.05 Mining Area of Qaidar Mine the Second Mine of 288.77 1,571,574.76 54.42 Moeller Technical Innovation of the Third Mine of 29,240.00 551,878,810.44 92,078,044.37 Moeller Safety Renovation 115,055,511.10 50,463,411.98 Project (821) Others（West Sea Coal 2,685,395.32 - Power） The Airport Project in 177,184.00 - Guide
Total - 1,542,364.19
231,060,018.29 23,366,607,371.30 3,874,112,693.70 1,686,928,823.52 6,789,280.53
(Continued)
Including: Interest Project Accumulated Interest capitalizati Capital Balance at the Project name schedu amount interest capitalization on rate in source end of period le（%） capitalization amount in current current period period (%) Huangfeng Hydropower 1,313,981,691. 177,239,583.9 3,383,616,054. 90.00 Bank Loan Station of Hualong 37 7 16 County Grid-Connected Photovoltaic (Pv) 59.36 35,184,879.03 Power Project of Huangfeng Factory Shanping Hydropower 1.30 20,225,660.55 Station of Guide County Da Hejia Hydropower 734,055,396.0 168,854,955.6 1,830,543,140. 90.00 Bank Loan Station of Minhe 9 7 20 County Erduo Hydropower 4.99 439,748,080.93 Station Ealier Stage of 0.00 5,025,410.44 Mentang Zhognchuan Hydropower 4.15 45,229,128.30 Station
F-71 Including: Interest Project Accumulated Interest capitalizati Capital Balance at the Project name schedu amount interest capitalization on rate in source end of period le（%） capitalization amount in current current period period (%) Enterprise The First Phase of 242,497,484.5 Self-financi 34.68 2,289,142.83 629,768,269.09 Electrolysis 7 ng, Bank Loan Enterprise The Second Phase 1,364,693,782. 331,261,907.8 Self-financi 4,082,635,958. 90.00 of Electrolysis 50 5 ng, Bank 88 Loan Aluminium alloy extrusion project Enterprise specially used by Self-financi 2.64 71,305,172.18 new rail transit, ng, Bank with annual output Loan of 100,000 tons Anode Carbon 0.01 78,299.25 Enterprise Sanya Sea Lake 90.00 Self-financi 433,061,159.67 Hotel Project ng The Maintenance 9,617,869.00 Building The fifth phase seepage control and Self-financi 100.00 250,000.00 renovation project ng of transit ash field Tianyuan Line Self-financi 99.00 - Reconstruction ng Productin Line Reform of Foundry Self-financi 92.64 - Industry Old ng Factory 10KV Box-Type Self-financi 100.00 10,000.00 Substation ng Sewage Treatment Station of Self-financi 97.44 9,744,183.76 Environment ng Renovation Project Technical Self-financi Modification 100.00 - Project ng Lead tube condenser manufacture of Self-financi 97.30 - fluoride salt and ng acid accumulator plant Forging Machine Self-financi Modification of 82.27 - Ring Making Class ng Technical Innovation of Self-financi 90.00 - Fluoride Salt ng Sewage Station Cooling System Innovation of - Foundry Furnace Electric Appliance Danger Solid Waste Self-financi Project of 105,000 17.10 34,579,657.13 Tons ng Heavy Repair of Self-financi 90.40 - Shot Blasting ng
F-72 Including: Interest Project Accumulated Interest capitalizati Capital Balance at the Project name schedu amount interest capitalization on rate in source end of period le（%） capitalization amount in current current period period (%) Machine-Q3789E
Heavy Repair of Aerated Block - Production System Facility Installation of Renewable Self-financi 73.61 73,614.95 Resources ng Company Heavy Repair of Foundry Kneading Self-financi Machine 66.98 - 2005--JX-Foundry- ng 004 Heavy Repair of Self-financi Ring Making 94.62 - Hydraulic Press ng Update of Hydrofluoric Acid Self-financi 90.00 - Storage Tank ng Fabrication Acid-Making Reaction Furnace - Maintenance Electrical Control Cabinet Self-financi Modification of 8# 75.82 - ng and 9# Deep-Well Pump Condensate Water Self-financi 81.99 - Modification ng Dust Pelletizing Self-financi - System of Factory ng Equipment Upgrading of Electrical Self-financi Distribution 8.40 21,000.00 ng Facilities of Family Area in Haiyan Road Aluminum Electric Self-financi Demolition - ng Engineer of Bridge Vacuum Pump Update and Water Cycle Pipeline Self-financi 70.18 21,756.30 Update of ng 2016-GZ-Foundry- 030 Sand Treatment System of Foundry Self-financi 40.62 35,580.07 Industry ng JG-Foundry-001 Vehicle Purchase of Self-financi 1.50 40,683.76 Transport Company ng Relocation Project Self-financi 1.83 70,000.00 of Jian’an ng Formed Foil 693,105,346.7 201,546,706.4 Self-financi 1,678,605,180. 95.00 23.65 Project 0 9 ng 56 Electron Aluminum 216,205,306.2 Self-financi 95.00 41,996,891.73 40.22 332,700,195.84 Foil Project 6 ng
F-73 Including: Interest Project Accumulated Interest capitalizati Capital Balance at the Project name schedu amount interest capitalization on rate in source end of period le（%） capitalization amount in current current period period (%) Borrowing Project Engineering 2,487,108,553. 530,734,008.4 money, 6,165,626,398. of Aluminium 90.00 96.44 36 2 Self-financi 99 Sheet Strip ng High Precision Aluminum Tube Self-financi 77,183,887.24 783,770,709.22 Rods Profile ng Project Industry Revitalization-Ann ual Output of 25,000 Tons of 385,727,237.1 Self-financi High-Strength 96.00 657,191,379.92 9 ng Aluminum Alloy Extruding Tube, Rod and Profile Project Renovation Project Self-financi of Lily Melting and 164,685.38 19,570,744.41 ng Casting Line Technical Innovation of Fund-raise 356,073.95 Qinglong Strontium Salt Production Engineering of Self-financi 1,454,518,413. 99.00 Main and ng 66 Subsidiary Technical Self-financi Modification 90.00 85,201,630.26 ng Project Single Project Self-financi 90.00 81,149,003.16 Related to Site ng Desulfurization Self-financi 90.00 14,389,574.53 Project of Unit ng Wind-Break Wall Self-financi - Project ng Maintenance and Self-financi - Repair Project ng Self-financi Denitration Project 90.00 55,791,365.24 ng Electrostatic Precipitator Self-financi 90.00 19,837,917.22 Equipment ng Modification Optothermal Self-financi 2,752,247.81 Energy Project ng Encourage large projects and discourage small energy-inefficient Self-financi 118,191,705.92 power plants of ng fossil power generation unit 3*660MW 20Kt/A Refined 1,055,973,958. 88,412,020.80 2,142,986.11 0.93 Loan Aluminium Project 01 Busbar Processing Self-financi 100.00 - Engineering of ng
F-74 Including: Interest Project Accumulated Interest capitalizati Capital Balance at the Project name schedu amount interest capitalization on rate in source end of period le（%） capitalization amount in current current period period (%) Switching Station
OtherTechnical Self-financi Modification 428,953,659.26 ng Projects Fragmentary Technical Self-financi 1,899,266.47 Modification ng Projects Electrolytic Project Borrowing 76,516,126.75 26,912,127.61 47.44 177,718,395.60 of 100,000 Tons Money Strorage area of aluminium oxide is 80.00 1,057,012.91 flat Hardening Project for Part of New 80.00 1,630,000.00 Floors Newly Increased Plants and Supporting Facility 80.00 406,969.56 in Techonology Garage Add Interbus between Rectifier 90.00 6,022,008.38 Unit of 6# and 7# Heating System Modification of 90.00 5,327,150.51 Molding Conduction Oil Multi-Parameter Balance System 30.00 Technology of 200,000,000.00 Aluminium Cell Technical Innovation of 30.00 21,836,330.95 Electrolytic Tank Others (Baihe Recycling 25,456.00 Aluminum) Pioneer Well in Self-financi 96.00 56,392,101.17 1,441,256.28 0.13 298,713,689.56 Qaidar Mine ng Horizontal and East-West Self-financi Direction Transport 15.80 31,447,669.24 ng Alley Project of Qaidar Mine The 102th Mining Area of Hai Ta’er Self-financi Mine and the 303th 54.00 1,571,574.76 ng Mining Area of Qaidar Mine the Second Mine of 643,956,854.81 Moeller Technical Innovation of the 165,518,923.08 Third Mine of Moeller Safety Renovation 2,685,395.32 Project (821)
F-75 Including: Interest Project Accumulated Interest capitalizati Capital Balance at the Project name schedu amount interest capitalization on rate in source end of period le（%） capitalization amount in current current period period (%) Others（West Sea 177,184.00 Coal Power） The Airport Project 1,542,364.19 in Guide 7,736,043,619. 1,484,419,566. 25,547,001,960 Total 38 96 .95
17．Project material
Balance at the Increments at the Decrements at the Balance at the end Item beginning of year current period current period of period
Special material 21,280,712.69 7,916,187.52 8,422,618.43 20,774,281.78
Spare part 3,361,089.62 228,456.63 241,619.68 3,347,926.57
Main material 14,894,878.88 17,102,981.81 23,424,883.23 8,572,977.46
Auxiliary material 1,791,567.27 - 804,868.24 986,699.03
Tool and instrument 41,939.99 17,378.49 18,908.83 40,409.65
Experiment equipment 72,857.38 446.57 388.87 72,915.08
Other 1,417,494.03 - - 1,417,494.03
Wrappage 301,409.76 148,179.70 72,101.60 377,487.86 Low priced and easily worn 287,799.53 125,488.41 106,151.00 307,136.94 articles Labor protection appliances 109,612.55 82,053.70 96,471.44 95,194.81
Oils 962,862.19 764,279.30 863,613.12 863,528.37
Pumps 667,287.05 55.56 - 667,342.61
Electric equipment 568,368.46 52,866.98 75,141.74 546,093.70
Cable 242,210.19 4,829.07 3,888.90 243,150.36 Balance goods of 754,240.36 - 21,840.00 732,400.36 Engineering
Experimental drug 37,402.85 2,511.98 3,006.27 36,908.56
Total 46,791,732.80 26,445,715.72 34,155,501.35 39,081,947.17
18．Liquidation of fixed assets
Book Value at the end Book Value at the Item Reason of liquidation of period beginning of year Ash can, electric lock and 90,593.27 Retirement of fixed assets other equipments
F-76 Book Value at the end Book Value at the Item Reason of liquidation of period beginning of year
Vehicle Scrapping 192,000.00 Retirement of fixed assets Demolition of 5×125MW Generating set update Generator Set 1,937,238,763.69
Total 1,937,430,763.69 90,593.27
19．Intangable assets
Balance at the Increments at the Decrements at the Balance at the end of Item beginning of year current period current period period I. Original cost of intangible assets Land usage right 659,253,533.75 776,678,179.33 345,871,046.38 1,090,060,666.70
Hightower’s right of mining 3,416,610.00 3,416,610.00 3,416,610.00 3,416,610.00
Qaidar mine’s right of mining 24,145,810.00 24,145,810.00 24,145,810.00 24,145,810.00 Qaidar Xianfeng coal mine’s 30,226,960.00 30,226,960.00 30,226,960.00 30,226,960.00 right of mining Dafengshan strontium mine ’s 72,859,421.50 - - 72,859,421.50 right of mining Use right of exploration right (Xihai Coal and Electricity Co., 137,102,000.00 - - 137,102,000.00 Ltd.) Software 4,329,724.87 448,559.78 55,440.00 4,722,844.65
Patent right 380,266.30 - - 380,266.30
Trademark 6,000.00 - - 6,000.00
Total 931,720,326.42 834,916,119.11 403,715,866.38 1,362,920,579.15
II. Accumulated amortization
Land usage right 94,562,388.75 15,440,199.81 44,826,893.77 65,175,694.79
Hightower’s right of mining 1,139,070.48 1,319,391.50 1,205,504.54 1,252,957.44
Qaidar mine’s right of mining 8,828,835.88 10,103,197.99 9,298,337.71 9,633,696.16 Qaidar Xianfeng coal mine’s 8,987,469.27 10,582,780.90 9,575,215.66 9,995,034.51 right of mining Dafengshan strontium mine ’s 29,861,323.32 2,263,057.80 - 32,124,381.12 right of mining Use right of exploration right (Xihai Coal and Electricity Co., 21,245,672.81 5,203,021.92 - 26,448,694.73 Ltd.) Software 1,037,113.11 499,824.91 29,568.00 1,507,370.02
Patent right 325,777.61 26,401.19 - 352,178.80
Trademark 2,650.00 600.00 - 3,250.00
Total 165,990,301.23 45,438,476.02 64,935,519.68 146,493,257.57
F-77 Balance at the Increments at the Decrements at the Balance at the end of Item beginning of year current period current period period III. Impairment provision for intangible assets Land usage right
Exploration right
Hightower’s right of mining
Qaidar mine’s right of mining Qaidar Xianfeng coal mine’s right of mining Dafengshan strontium mine ’s right of mining Software
Patent right
Trademark
Total IV. Total book value of intangible assets Land usage right 564,691,145.00 1,024,884,971.91
Exploration right 2,277,539.52 2,163,652.56
Hightower’s right of mining 15,316,974.12 14,512,113.84
Qaidar mine’s right of mining 21,239,490.73 20,231,925.49 Qaidar Xianfeng coal mine’s 42,998,098.18 40,735,040.38 right of mining Dafengshan strontium mine ’s 115,856,327.19 110,653,305.27 right of mining Software 3,292,611.76 3,215,474.63
Patent right 54,488.69 28,087.50
Trademark 3,350.00 2,750.00
Total 765,730,025.19 1,216,427,321.58
20． Goodwill
Impairm ent Impairme Decrements Investee name or provisio Increments at nt Balance at the at the Balance at the matters generating n at the the current provision beginning of year current end of period goodwill beginni period at the end period ng of of period year Qinghai Western Water and Electricity 19,676,403.66 19,676,403.66 Co., Ltd. Qinghai Ningbei Power Generation Co.,
Ltd., Tanghu Power 82,703,050.57 82,703,050.57 Branch
F-78 Impairm ent Impairme Decrements Investee name or provisio Increments at nt Balance at the at the Balance at the matters generating n at the the current provision beginning of year current end of period goodwill beginni period at the end period ng of of period year Qinghai Jinxing 1,320,000.00 1,320,000.00 Mining Co., Ltd Qinghai Ningbei Power Generation Co., 15,000,000.00 15,000,000.00 Ltd. Qinghai Xihai Coal and Electricity Co., 314,101,848.86 314,101,848.86 Ltd. Qinghai Baihe Aluminium Industry 379,924,249.45 379,924,249.45 Co., Ltd. Qinghai Guoxin Aluminium Industry 2,335,695.66 2,335,695.66 Co., Ltd. Qinghai General 2,060,871.06 2,060,871.06 Aviation Co., Ltd Total 815,061,248.20 2,060,871.06 817,122,119.26
21. Long-term deferred and prepaid expenses
Balance at the Increments at Reasons Amortization Other Balance at the Items beginning of the current for other of the period losses end of period year period losses Organization expense 928,975.75 862,655.43 657,248.16 1,134,383.02 Decoration Engineering of Office Building
Technical service fee 2,381,333.41 303,999.96 2,077,333.45 Expenditure on 52,350,622.05 10,540,897.77 12,051,494.34 50,840,025.48 renovation projects Cost of sale-leaseback 14,142,736.73 3,164,403.34 10,978,333.39 implementation
Others 37,634,547.73 37,634,547.73
55,660,931.21 63,180,837.66 15,519,897.64 657,248.16 102,664,623.07 Total
22. Deferred tax assets and deferred tax liabilities The confirmed deferred tax assets
Balance at the end of period Balance at the beginning of year Items Deductible Deductible temporary Deferred tax assets temporary Deferred tax assets difference difference Provision for impairment of 35,046,424.55 151,761,667.00 48,188,150.39 143,936,083.84 assets Guarantee compensation reserve 59,344,199.17 395,627,994.51 49,142,188.64 327,614,590.93 and unearned premium reserve
Deferred revenue 13,869,578.68 55,478,314.69 12,702,991.60 50,811,966.37
F-79 Balance at the end of period Balance at the beginning of year Items Deductible Deductible temporary Deferred tax assets temporary Deferred tax assets difference difference Wages incurred but not paid 3,182,073.45 12,728,293.79 480,306.75 1,921,227.00
Withholding account payable 2,057,438.06 8,293,935.42 2,033,369.36 8,133,477.45
Maintenance cost accrued but 67,578.53 270,314.11 not used Water resource fee that has been 2,664,049.31 17,760,328.68 counted and drawn but unpaid
Others 345,620.80 1,382,483.21
Total 116,509,384.02 643,033,017.30 112,614,585.27 532,687,659.70
The confirmed deferred tax liabilities
Balance at the end of period Balance at the beginning of year Items Taxable Deferred tax Taxable temporary Deferred tax liabilities temporary liabilities differences differences Changes in the fair value of investment property accounted 9,734,216.60 64,894,777.32 1,713,743.20 11,424,954.67 with fair value Total 9,734,216.60 64,894,777.32 1,713,743.20 11,424,954.67
23. Other non-current Assets
Items Balance at the end of period Balance at the beginning of year
Up-front fees for Yuka coal-fired power project 23,844,300.00 23,844,300.00
Geological (mineral) Survey (Scale: 1:50 000) 169,751,626.19 87,088,439.82
Danai Haigongka project 55,892,879.45 53,031,234.01
Diaosu multimetal project 1,562,852.67 1,562,852.67
Diaosu project 1,026,303.51 1,026,303.51
Galinha project 51,467,760.37 51,460,372.35
Golmud Bangedaidong multimetal project 44,736,246.17 44,736,246.17
Golmud Bangedaidong multimetal project 522,018.32 522,018.32
Golmud Kaimudou multimetal project 5,102,612.11 5,056,522.11
Golmud Yidaogou multimetal project 7,414,994.21 7,693,006.27
Haolaitu gold deposit 267,481.69 267,481.69
F-80 Items Balance at the end of period Balance at the beginning of year
Hudasi project 30,890,324.92 30,855,290.92
Laning Zaohuo project 2,819,481.36 2,819,481.36
Shinaihai project 10,916,642.51 10,916,642.51
Tuolugou project 7,059,735.90 7,016,866.90
Qingquangou copper polymetal project 7,081,782.60 7,817,496.85
Zhahalaren polymetal project 7,152,648.90 3,792,998.59
Naomuhun Goukou gold deposit 6,286,523.73 5,967,945.73
Qiujigou multimetal project 7,573,448.84 6,985,814.84
Qiuji Donggou multimetal project 2,289,330.27 1,742,174.03
Naomuhun gold-copper polymetal project 8,800,000.00 8,800,000.00
Advance payment for projects 150,000,000.00
Trust fund 300,000,000.00
Entrusted loan 44,306,032.94
Others 752,458,993.72 557,309,521.59
Total 557,309,521.59 511,057,076.53
24. Short-term loans
Type of borrowings Balance at the end of period Balance at the beginning of year
Pledge borrowings 1,744,000,000.00 165,000,000.00
Mortgage borrowings 607,000,000.00 1,324,000,000.00
Guaranteed borrowings 4,257,321,618.58 5,747,253,448.87
Fiduciary borrowings 4,469,160,000.00 1,350,714,100.00
Total 11,077,481,618.58 8,586,967,548.87
25. Notes payable
Loan classification Balance at the end of period Balance at the beginning of year
Bank's acceptance bill 1,788,292,648.87 1,085,505,899.03
Commercial acceptance bill 37,684,729.95
Total 1,825,977,378.82 1,085,505,899.03
F-81 26. Accounts payable
Account receivable age Balance at the end of period Balance at the beginning of year
Within one year 2,580,800,659.99 2,813,564,909.41
One year ~ two years 383,224,640.94 94,230,807.40
Two years ~ three years 82,086,109.66 116,866,802.61
Over three years 260,723,230.36 158,237,629.39
Total 3,306,834,640.95 3,182,900,148.81
Accounts payable with significant amount and age of more than one year
Reasons for outstanding accounts Name of creditors Outstanding amount payable
Qinghai Minguang Coal Sale Co., Ltd. 38,632,023.00 Unfinished settlement
Guiyang Branch of China Aluminum International Project payments，the project is not 29,180,000.00 Engineering Corporation Limited completed Herun Group 20,000,000.00 Unfinished settlement
Transportation expenses，unfinished Shanxi Hong Shegnkai Commercial and Trading Co.,Ltd 15,307,610.11 settlement The project is not completed ， Northwest Power Construction Company IV 13,414,755.82 unfinished settlement Payments for equipment, the project Harbin Electric Machinery Company Ltd. 10,086,398.49 is not completed Shanghai Jianghe Real Estate Development Co.,Ltd. 10,000,000.00 Not yet settled
Total 136,620,787.42
27. Advance receipts
Account receivable age Balance at the end of period Balance at the beginning of year
Within one year 642,925,870.73 301,003,503.01
Over one year 21,255,919.25 28,318,776.29
Total 664,181,789.98 329,322,279.30
Advance receipts with significant amount and age of more than one year
Reasons for advance receipts not Name of creditors Outstanding amount carried forward Qinghai Xinheng Carbon Products Co., Ltd. 5,362,657.60 Unbalanced National Development and Reform Payment for purchases that are settled 2,000,000.00 Commission of SRB at the time of delivery Li Tong Aluminium (Qinghai) Co., Ltd 1,757,324.47 Unbalanced
Shun Fu Development Group Co., Ltd 912,523.79 Invoice is not received
F-82 Reasons for advance receipts not Name of creditors Outstanding amount carried forward Qinghai Lufeng Hengxin Aluminium Co., Ltd 680,000.00 Unbalanced
Total 10,712,505.86
28. Accrued payroll
Balance at the Increase in the Decrease in the Balance at the end of Items beginning of year current year current year year I. Short-term employee 49,127,014.78 1,114,579,853.99 1,097,734,492.22 65,972,376.55 benefits II. Post-employment benefits- defined 14,253,437.11 220,462,051.15 191,273,621.13 43,441,867.13 contribution plans III. Termination benefits 10,176,645.08 18,175,779.13 2,422,491.93 25,929,932.28 IV. Other benefits due within - - - - one year
Total 73,557,096.97 1,353,217,684.27 1,291,430,605.28 135,344,175.96
(1)Short-term employee benefits
Balance at the Increments at the Decrements at the Balance at the end of Items beginning of year current period current period period I. Wages, bonuses, 31,940,696.67 799,790,360.81 787,761,259.52 43,969,797.96 allowances and subsidies
II. Staff welfare expenses 856,906.36 121,509,584.77 121,945,689.66 420,801.47
III. Social insurance charges 121,913.04 68,575,987.24 67,771,429.69 926,470.59
1. Basic medical insurance 120,096.52 55,007,245.92 54,490,918.81 636,423.63 premium 2. Supplementary medical -370.80 394,669.72 394,298.92 - insurance 3. Work-related injury 1,350.32 10,577,140.53 10,371,587.02 206,903.83 insurance premiums 4.Maternity insurance 837.00 2,596,931.07 2,514,624.94 83,143.13 premiums IV. Housing provident fund 2,809,926.55 100,817,614.68 99,203,673.43 4,423,867.80 V. Labor union expenditure and employee education 13,397,572.16 23,886,306.49 21,052,439.92 16,231,438.73 expenses VI. Short-term paid absences - - - - VII. Short-term profit - - - - sharing plan VIII.Other short-term - - - - employee benefits
Total 49,127,014.78 1,114,579,853.99 1,097,734,492.22 65,972,376.55
(2)Post-employment benefits- defined contribution plans
Balance at the Increase in the Decrease in the Balance at the end of Items beginning of year current year current year year
F-83 Balance at the Increase in the Decrease in the Balance at the end of Items beginning of year current year current year year 1. Basic endowment insurance 484,877.23 180,197,914.21 171,113,741.06 9,569,050.38 premium 2. Supplementary endowment -5,756.18 5,756.18 - insurance 3. Unemployment insurance 2,435,164.63 8,201,996.21 8,019,098.10 2,618,062.74 premium
4. Annuity payment 11,339,151.43 32,056,384.55 12,140,781.97 31,254,754.01
Total 14,253,437.11 220,462,051.15 191,273,621.13 43,441,867.13
(3)Termination benefits-early retirement
Balance at the Increase in the Decrease in the Balance at the end of Items beginning of year current year current year year Compensations for the cancellation of the labor - - - - relationship with The estimated compensation 10,176,645.08 18,175,779.13 2,422,491.93 25,929,932.28 for early retirement personnel Total 10,176,645.08 18,175,779.13 2,422,491.93 25,929,932.28
29. Taxes and dues payable
Items Balance at the end of period Balance at the beginning of year
Added-value tax 54,903,452.91 -1,113,198,197.93
Business tax 5,085,238.18 14,471,604.84
Corporate income tax 52,649,785.14 103,904,006.62 Urban maintenance and construction 1,607,291.66 1,690,134.10 tax
Real estate tax 1,364,138.43 140,350.29
Land use tax 3,534,593.50 -830,383.80
Individual income tax 2,502,454.37 682,983.64
Stamp tax 3,815,675.52 3,341,725.27
Land appreciation tax - -644,411.06
Withhold and remit tax 4,241,886.93 6,567,957.05
Resources tax 7,408,520.91 3,269,356.32
Educational surcharges 911,404.85 702,887.93
Local educational surcharges 571,686.93 816,118.62
Price regulation fund 3,643,597.42 3,982,339.84
Mineral resources compensation fees 10,847,318.84 10,847,318.84
F-84 Items Balance at the end of period Balance at the beginning of year
Withhold and remit construction and 52.50 5,827.50 installation tax Total 153,087,098.09 -964,250,381.93
30. Accrued interest payable
Items Balance at the end of period Balance at the beginning of year The interest of long-term borrowings that the interest is repaid in installment 956,104.77 4,474,697.00 the principal is repaid at maturity Interest on debenture 215,065,982.49 348,844,826.84
Accrued interest payable of 5,811,402.00 545,971.51 short-term borrowings
Total 221,833,489.26 353,865,495.35
31. Dividends payable
Balance at the beginning Reasons for non-payment Organization name Balance at the end of period of year more than a year Guangzhou Hongdao Investment 3,240,000.00 3,240,000.00 Management Co., Ltd Hainan Runda Industry Co., Ltd 8,641,080.00 8,641,080.00
Qinghai Quanwang Investment 850,000.00 2,666,666.67 Management Co., Ltd. Xining Economic and Technological Development Zone 4,579,200.00 Development Group Co., Ltd Qinghai Ganhe Industry Park Development and Construction 4,155,200.00 Co. Ltd. 21,465,480.00 14,547,746.67 Total
32. Other payables
Account receivable age Balance at the end of period Balance at the beginning of year
Within one year 575,982,841.53 790,970,639.68
One year ~ two years 281,921,095.50 110,185,850.71
Two years ~ three years 60,921,156.87 50,371,980.35
Over three years 76,971,536.17 38,823,859.84
995,796,630.07 990,352,330.58 Total
Description of other payables with significant amount and age of more than one year
Name of creditors Outstanding amount Reasons for the outstanding payables
F-85 Name of creditors Outstanding amount Reasons for the outstanding payables
Qinghai Jiarun Mining Co., Ltd 50,000,000.00 Unbalanced Qinghai Investment and Development 40,000,000.00 Intercourse funds Co., Ltd. Village committees of Nanguan village, 18,432,040.00 Unbalanced Qiaotou Township, Datong County Village committees of Houzhuang village, Qiaotou Township, Datong 8,011,674.00 Unbalanced County Qinghai Yuka Coal-fired Power Co., 6,963,391.55 Intercourse funds Ltd. Village committees of Xincheng village, Qiaotou Township, Datong 6,672,357.00 Unbalanced County Total 130,079,462.55
33. Non-current assets maturing within one year
Type of loan Balance at the end of period Balance at the beginning of year Long-term loans maturing within one year 3,505,777,800.00 1,316,756,034.71 Bonds payable maturing within one year 2,068,303,036.68 5,200,000,000.00 Long-term payables maturing within one year 1,569,937,300.16 61,722,873.81 Long-term liabilities maturing within one year
Total 7,144,018,136.84 6,578,478,908.52
34. Other current liabilities
Items Balance at the end of period Balance at the beginning of year
Unearned premium reserve 111,157,757.39 89,000,794.93
Guarantee compensation reserve 383,127,450.35 340,768,096.00
Guarantee deposit received 234,992,000.00
Total Items 494,285,207.74 664,760,890.93
35. Long-term borrowings
Type of borrowings Balance at the end of period Balance at the beginning of year Borrowings from treasury bond fund in way of lending 4,560,000.00 4,560,000.00
Pledge borrowings 3,659,000,000.00 2,900,000,000.00
Mortgage borrowings 5,384,400,000.00 3,689,839,400.00
Guaranteed borrowings 2,248,256,966.35 3,044,000,000.00
F-86 Type of borrowings Balance at the end of period Balance at the beginning of year
Fiduciary borrowings 352,000,000.00 9,093,251.69
Total 11,648,216,966.35 9,647,492,651.69
36. Bonds payable
Interest Interest adjustment at payables Actual interest Nominal Issuing Bond Name of bonds Circulation the beginning at charges at value date period of current current current period year period Bonds issues by Qinghai Provincial RMB 1000 Yuan/hundre Sep.28,2012 10 years 600,000,000.00 Investment Group d Yuan Co., Ltd. in 2012 The first phase of private placement RMB 100 note (PPN)of Qinghai Mar.25, Yuan/hundre 3 years 2014 1,000,000,000.00 Provincial Investment d Yuan Group Co., Ltd. in 2014 The second phase of private placement note (PPN)of Qinghai RMB 100 Yuan/hundre Mar.23,2015 3 years 600,000,000.00 Provincial Investment d Yuan Group Co., Ltd. in 2015 The third phase of private placement note (PPN)of Qinghai RMB 100 Yuan/hundre Sep.29,2015 3 years 500,000,000.00 Provincial Investment d Yuan Group Co., Ltd. in 2015 The first phase of medium-term notes RMB 100 of Qinghai Provincial Yuan/hundre Apr.2,2015 3 years 1,400,000,000.00 Investment Group d Yuan Co., Ltd. in 2015 Corporate bonds of RMB 150 Qinghai Jinrui Aug.29, Yuan/hundre 5 years 2012 68,995,000.00 -1,575,439.86 883,476.54 Mineral Development d Yuan Co. Ltd. in 2012
Total 4,168,995,000.00 -1,575,439.86 883,476.54
Continued Table
Interest Other adjustme Principal reduction at Bond Balance at Nominal nt at the returned at current period Name of bonds Issuing date perio the end of valu beginning current d year of current period year
F-87 Interest Other adjustme Principal reduction at Bond Balance at Nominal nt at the returned at current period Name of bonds Issuing date perio the end of valu beginning current d year of current period year
Bonds issues by Qinghai RMB 1000 10 600,000,000 Yuan/hundr Sep.28, 2012 Provincial Investment Group years Co., Ltd. in 2012 ed Yuan .00
The first phase of private placement note (PPN)of RMB 100 Qinghai Provincial Yuan/hundr Mar.25,2014 3 years 1,000,000,000.00 Investment Group Co., Ltd. ed Yuan in 2014 The second phase of private placement note (PPN)of RMB 100 600,000,000 Qinghai Provincial Yuan/hundr Mar.23,2015 3 years Investment Group Co., Ltd. ed Yuan .00 in 2015 The third phase of private placement note (PPN)of RMB 100 500,000,000 Qinghai Provincial Yuan/hundr Sep.29, 2015 3 years Investment Group Co., Ltd. ed Yuan .00 in 2015 The first phase of medium-term notes of RMB 100 nd 1,400,000,0 Qinghai Provincial Yuan/hundr Apr. 2 , 2015 3 years Investment Group Co., Ltd. ed Yuan 00.00 in 2015
Corporate bonds of Qinghai RMB 150 Jinrui Mineral Development Yuan/hundr Aug. 29, 2012 5 years -691,963.32 68,303,036.68 Co. Ltd. in 2012 ed Yuan
3,100,000,0
Total -691,963.32 1,068,303,036.68 00.00
The relevant information of the debt financing instruments issued by this Company is as follows: 1. Bonds issues by Qinghai Provincial Investment Group Co., Ltd. in 2012 Abbreviation of bond: 12 Qinghai investment bond; total issuance: RMB 600,000,000; annual nominal interest rate: 7.08 %; bond duration: 10 years; issuing way: to issue publicly to institutional investors through the issuing branches set by the members of underwriting group and to issue to institutional investors with agreement through Shanghai Stock Exchange; face value: RMB 100; issue price: RMB 100/ face value of RMB 100; interest accrual method: pay interest once per year, repay principal once when expiring, and pay the interest of last phase with the cashing of principal; issue date: September 28, 2012; value date: October 8, 2012; due (cashing) date: October 7, 2022.
F-88 2. The non-public directional tool for debt financing of Qinghai Provincial Investment Group Co., Ltd. of the first phase in 2014; Code of directional tool: 031490185; abbreviation of directional tool: 14 Qinghai investment PPN001; duration: 3 years; total issuance: RMB 1,000,000,000; issuing interest rate: 8.40%; face value: RMB 100; issue price: RMB 100/ face value of RMB 100; interest accrual method: fixed interest bearing; issue date: March 25, 2014; value date: March 26, 2014; due (cashing) date: March 26, 2017. This bond reports non-current liability due within one year. 3. The non-public directional tool for debt financing of Qinghai Provincial Investment Group Co., Ltd. of the second phase in 2015; Code of directional tool: 031558007; abbreviation of directional tool: 15 Qinghai investment PPN002; duration: 3 years; total issuance: RMB 600,000,000; issuing interest rate: 7.40%; face value: RMB 100; issue price: RMB 100/ face value of RMB 100; interest accrual method: fixed interest bearing; issue date: March 23, 2015; value date: March 24, 2015; due (cashing) date: March 24, 2018. 4. Medium term note of Qinghai Provincial Investment Group Co., Ltd. of the first phase in 2015 Abbreviation of bond: 15 Qinghai investment MTN001; total issuance: RMB 1,400,000,000; annual nominal interest rate: 6%; bond duration: 3 years; issuing way: bookkeeping and filing; issue price: RMB 100/ face value of RMB 100; interest accrual method: pay interest once per year, repay principal once when expiring, and pay the interest of last phase with the cashing of principal; issue date: April 2, 2015; value date: April 3, 2015; due (cashing) date: April 3, 2018. 5. The non-public directional tool for debt financing of Qinghai Provincial Investment Group Co., Ltd. of the third phase in 2015 Code of directional tool: 031564141; abbreviation of directional tool: 15 Qinghai investment PPN003; duration of directional tool: 3 years; total issuance: RMB 500,000,000; issuing interest rate: 6.20%; face value: RMB 100; issue price: RMB 100/ face value of RMB 100; interest accrual method: fixed interest bearing; issue date: September 29, 2015; value date: September 29, 2015; due (cashing) date: September 29, 2018. 6. After approved by China Securities Regulatory Commission (CSRC) with the document of Z.J.X.K. [2012] No. 997 in 2012, the subsidiary of the company, Jinrui Mineral obtains permission to issue the corporation bonds with face value of RMB
F-89 100 to society publicly for 1,500,000 pieces and with total issuance for RMB 150,000,000.00. Abbreviation of bond: 12 Jinrui bond; nominal interest rate: 7.9%; actual interest rate: 8.57%; bond duration: 5 years started from issue date; pay interest once per year, to repay principal once when expiring, and pay the interest of last phase with the cashing of principal; value date: August 29, 2012. The subsidiary of the company, Jinrui Mineral, will confirm the total bond issue cost for RMB 3,980,000.00 as unacknowledged financial charge. Based on the Raise Specification for Publicly Issuing Bonds by Qinghai Jinrui Mineral Development Co. Ltd. in 2012, the subsidiary of the company, Jinrui Mineral, has right to increase the nominal interest rate of the these corporation bonds during follow-up duration on the interest date of the 3rd interest accrual year in the duration of these corporation bonds and the bondholders have right to sell all or partial bonds held back to the issuer at par on the interest date of the 3rd interest accrual year in the duration of these corporation bonds. The bonds in current period are guaranteed by Qinghai Provincial Investment Group Co., Ltd. unconditionally and irrepealably with full amount and joint liability. On July 30, 2015, the subsidiary of the company, Jinrui Mineral, published the Announcement of Implementation Measures for Adjustment of Nominal interest rate for “12 Jinrui Bond” and Sales-back of Investors by Qinghai Jinrui Mineral Development Co. Ltd., which decided not to increase the nominal interest rate of current year, and the annual nominal interest rate in the later 2 years of bond duration still was 7.9%. Moreover, it would not be changed in the follow-up bond duration and investors had right to sell all or partial bonds held back to the issuer at par. On August 6, 2015, the subsidiary of the company, Jinrui Mineral, received the payment notice for recycling fund of bonds from Shanghai Branch of China Securities Depository and Clearing Corporation Limited (CSDC) with total sales-back amount for RMB 81,005,000. After completing sales-back, the residual creditor's rights of the subsidiary of the company, Jinrui Mineral, was RMB 68,995,000.00. This bond reports non-current liability due within one year at current period. 37．Long-term payables
Balance at the beginning of Item Balance at the end of period year
Shanghai Guoneng Logistics Co., Ltd. 165,231,864.26 210,000,000.00
China Jianyin Investment Lease Co., Ltd. 204,723,918.06 161,994,264.19
F-90 Balance at the beginning of Item Balance at the end of period year
Shanghai Guoneng Logistics Co., Ltd. 165,231,864.26 210,000,000.00
China Foreign Trade and Financial Leasing Co., Ltd. 61,147,919.66 265,000,000.00
Wanjiang Financial Leasing Co., Ltd. 132,487,462.29 255,256,610.49
Anhui Xingtai Financial Leasing Co., Ltd 62,666,666.67
Sicuan Jinshi Leasing Co., Ltd 104,953,914.53
Jiaoyin Financial Leasing Co., Ltd 11,824,712.40
Pingan International Financial Leasing Co., Ltd. 26,214,673.70
China Huatong Financial Leasing Co., Ltd. 523,795,089.96 250,090,320.42
Yingda Huitong Financial Leasing Co., Ltd. 93,134,464.53
Qinghai Investment and Trade Union Committee 133,667,111.12
China Minmetals Aluminium Industry Co., Ltd. 4,476,384.36
CMB Financial Leasing Co., Ltd. 5,324,961.09 340,497,381.24
Other account payables on financial leasing equipment 853,587,411.06 1,687,879,657.31
Expenses payable for right of mining 8,590,000.00
China Huarong Assets Management Co., Ltd., Shanghai Branch 144,241,372.70 200,000,000.00
AVIC International Leasing Co., Ltd. 177,164,851.90 152,262,384.48
Pingan International Financial Leasing Co., Ltd. 76,047,030.18 Beijing State Assets Financial Leasing Limited-Liability 95,000,000.00 Company
Youbo Financial Leasing (Shanghai) Co., Ltd 3,800,000.00
Other 12,784,183.19 140,084,183.19
Total 2,634,781,357.95 3,929,147,435.03
38．Special payables
Balance at the Increments at the Decrements at the Balance at the end Item beginning of year current period current period of period Development of 3104 tank 17,699,000.00 17,699,000.00 material products Transformation of casting production line of Baihe 2,250,800.00 2,250,800.00 Aluminium Industry Co., Ltd. Government subsidy aluminum alloy annually new produced 100,000.00 100,000.00 extruded material item for traffic transport
F-91 Balance at the Increments at the Decrements at the Balance at the end Item beginning of year current period current period of period Qinghai Development and 8,800,000.00 6,380,000.00 2,420,000.00 Reform Commission Funds for electronic information industry revitalization and 11,880,000.00 11,880,000.00 technical reformation Special middle and small sized 5,000,000.00 5,000,000.00 funds Transformation of 160,000 100,000,000.00 100,000,000.00 ton/year casting production line Item of “application of large generator set and closedown of 300,000,000.00 300,000,000.00 small generator set” of 3*660,000 kw Financial East-river Industrial Park of Xining Economic and 1,800,000.00 1,800,000.00 Technological Development Zone Guarantee funds for middle and 3,000,000.00 3,000,000.00 small enterprises Flue gas waste heat project 1,000,000.00 1,000,000.00 allowance
Other 2,720,000.00 2,720,000.00
Total 453,249,800.00 1,000,000.00 420,060,000.00 34,189,800.00
39．Deferred income
Balance at the Increments at the Decrements at the Balance at the end Item beginning of year current period current period of period Funds for 2004 safety transformation 866,959.85 491,000.00 375,959.85 project Funds for 2005 coal mine ventilation 208,925.20 104,462.60 104,462.60 system transformation Funds for 2006 coal mine safety 672,000.00 336,000.00 336,000.00 transformation project Funds for 2007 Qaidar mine safety 1,812,149.53 515,000.00 1,297,149.53 transformation Funds for 2008 Qaidar mine safety 377,666.67 103,000.00 274,666.67 transformation Funds for 2008 Hightower mine 300,000.00 100,000.00 200,000.00 technology transformation Special funds for 2008 safety 400,000.00 100,000.00 300,000.00 production Subsidy funds for ore resources 2,700,000.00 900,000.00 1,800,000.00 project Subsidy funds for technology reformation project of Qaidar mine 9,000,000.00 9,000,000.00 improving percentage recovery Subsidy funds for recovery project of private-mining lean strontium ore in 4,200,000.00 4,200,000.00 Ming Area I of Dafengshan strontium ore Subsidy funds for technical research project of Qaidar mine improving top 1,000,000.00 1,000,000.00 coal recovery ratio Supplementary geology exploration 2,260,000.00 2,260,000.00 project of Qaidar mine
F-92 Balance at the Increments at the Decrements at the Balance at the end Item beginning of year current period current period of period Safety transformation project of 3,848,000.00 481,000.00 3,367,000.00 Qaidar mine Safety transformation project of 3,344,000.00 418,000.00 2,926,000.00 Qaidar mine Upgrading and transformation project 3,330,000.00 3,330,000.00 of Xianfeng coal mine Strontium carbonate removal and 500,000.00 500,000.00 transformation project Subsidy funds for direct financial 215,200.00 107,600.00 107,600.00 charges Maintenance and new excavation of Qaidar mine ventilation channel 2,115,000.00 282,000.00 1,833,000.00 (funds for safety transformation) Maintenance and new excavation of sea mine ventilation channel (funds 4,430,000.00 4,430,000.00 for safety transformation) Funds for Qaidar mine safety 4,160,000.00 4,160,000.00 transformation project Funds for safety transformation 3,340,000.00 3,340,000.00 project of new-dug mining area Subsidy for technical transformation project of middle and small 1,512,000.00 168,000.00 1,344,000.00 enterprises Subsidy funds for energy and water 1,900,000.00 100,000.00 2,000,000.00 saving project Transformation of Klockner-Moeller 11,180,000.00 11,180,000.00 Mining Area II and III Qinghai coal mine safety 8,210,000.00 8,210,000.00 transformation project Centralized heating- heat source rebuilding and extension project of 6,750,000.00 6,750,000.00 Xihai Town Equipment capital of mine rescue 2,148,375.00 143,225.00 2,005,150.00 crew
Coal mine safety funds 31,600,000.00 31,600,000.00
Funds for coal ash research 150,000.00 150,000.00 Special funds for sewage charge (construction of flue gas 2,000,000.00 2,000,000.00 desulfurization facilities) Special funds for waste heat recovery 5,270,000.00 5,270,000.00 and application item Special funds for denitration 240,000.00 240,000.00 transformation project Special funds for newly-constructed 1,580,000.00 1,580,000.00 energy-saving heat pump Special funds for energy-saving heat 520,000.00 520,000.00 pump transformation project Subsidy funds for renewal of No. 2 unit desulfuration monitoring 200,000.00 200,000.00 facilities Special funds for desulfuration transformation and construction 4,000,000.00 300,000.00 4,300,000.00 project Technical transformation project of 2,000,000.00 2,000,000.00 flue gas denitration Unrealized leaseback profits and 31,100,506.99 14,585,811.65 45,686,318.64 losses
F-93 Balance at the Increments at the Decrements at the Balance at the end Item beginning of year current period current period of period
Subsidy of Datong Bureau of Finance 2,500,000.00 2,500,000.00
Subsidy funds for equipment renewal 400,000.00 400,000.00
Special funds for sewage charge 3,500,000.00 3,500,000.00 Special funds for squatter settlements 3,088,145.89 106,182.67 2,981,963.22 transformation Comprehensive treatment of mining 1,000,000.00 1,000,000.00 subsidence areas Development and application of new aluminum cold rolling water soluble 2,400,000.00 2,400,000.00 lubricants made of complete synthesis Research and application item of key preparation technologies of 7N01 new 590,000.00 590,000.00 aldural train body materials for high-speed train short process preparation technology and industrialization of 2,012,700.00 143,950.00 1,868,750.00 high-strength and high-toughness 7 series of aluminum alloy New ultrahigh-strength and ultrahigh-toughness aerial aluminum 1,000,000.00 1,000,000.00 alloy material item Research and development of preheating top casting technology made of multiple intensive and 286,348.15 23,862.63 262,485.52 hollow aluminum alloy ingot on the same level Intensive and hard aluminum alloy 236,208.00 19,684.00 216,524.00 with multiple tubes on the same level
Industrial aluminum tube bar item 840,000.00 17,777.86 822,222.14 Industry revitalization and technology 11,770,000.00 11,770,000.00 transformation project Energy-saving technology transformation of high-strength 330,600.00 8,700.00 321,900.00 aluminum alloy smelting and casting Government grants (Qiaotou 5,759,119.23 12,222,000.00 5,209,206.41 12,771,912.82 aluminum electric) Electronic information industry revitalization and technical 11,880,000.00 1,188,000.00 10,692,000.00 transformation fund Comprehensive improvement fund of 5,200,000.00 5,200,000.00 construction bureau Update and subsidy funds of unit one 200,000.00 200,000.00 desulfurization monitoring facilities Subsidy funds of energy-saving 920,000.00 920,000.00 technological transformation project Renovation project of cathode steel 1,500,000.00 1,500,000.00 bar of electrolytic cell Development and extension application project of double juggle 3,000,000.00 3,000,000.00 energy-saving aluminum electrolytic cell Disaster accident emergency rescue team construction project in provincial regions- equipment 696,000.00 5,800.00 690,200.00 procurement (rescue team equipment procurement of Qinghai West Coal Development Co., Ltd)
F-94 Balance at the Increments at the Decrements at the Balance at the end Item beginning of year current period current period of period
Total 195,153,904.51 50,603,811.65 17,962,451.17 227,795,264.99
Explanation of main deferred income: (1) The company got subsidy funds for technical transformation project of Qaidar mine improving top coal recovery ratio, i.e. RMB 9,000,000.00, appropriated by Department of Finance of Qinghai Province in May 2010 in accordance with Notice of Subsidy Funds for Ore Resources Protection Project (Q. C. J. Z. [2010] No. 447) issued by Department of Finance of Qinghai Province. The project has not been completed yet. (2) The company got subsidy funds for technical transformation project of Qaidar mine improving top coal recovery ratio, i.e. 1,000,000.00, appropriated by Department of Finance of Qinghai Province in September 2010 in accordance with Notice of Budget Funds for Ore Resources Protection Project (Q. C. J. Z. [2010] No. 696) issued by Department of Finance of Qinghai Province. The project has not been completed yet. (3) The company got subsidy funds for supplementary geology exploration project of Qaidar mine, i.e. RMB 2,260,000.00, appropriated by Department of Finance of Qinghai Province on January 19, 2012 in accordance with Notice of Basic Construction Expense Budget in Central Budget for Supplementary Geology Exploration Project of Qinghai Province in 2011 (Q. C. J. Z. [2011] No. 2367) issued by Department of Finance of Qinghai Province. The project has not been completed yet. (4) The company got subsidy funds for upgrading and transformation of Xianfeng coal mine, i.e. RMB 3,330,000.00, appropriated by Department of Finance of Qinghai Province on November 7, 2012 in accordance with Notice of Basic Construction Investment Expense Budget in Central Budget for Mining Industry Upgrading and Transformation of Qinghai Province in 2011 (Q. C. J. Z. [2012] No. 2220) issued by
Department of Finance of Qinghai Province. The project has not been completed yet. (5) The company got subsidy funds for maintaining and newly excavating ventilation channel, i.e. RMB 7,500,000.00 (RMB 4,160,000.00 for Qaidar mine and RMB 3,340,000.00 for Hightower mine), appropriated by Department of Finance of Qinghai Province on October 16, 2014 in accordance with Notice of Basic Construction Investment Expense Budget in Central Budget for Coal Mine Safety Transformation in
F-95 2014 (Q. C. J. Z. [2014] No. 1213) issued by Department of Finance of Qinghai Province. The project has not been completed yet. (6) The company got subsidy funds for squatter settlements reconstruction, i.e. RMB 3,185,480.00 in accordance with Notice of Haibei State Local Financial Work on Basic Construction Investment Expense Budget in Central Budget for Second Batch of Haibei State State-owned Mining Squatter Settlements in 2010 (B. C. [2010] No. 765). The subsidy income of RMB 106,182.67 is confirmed in current period.
(7) The company got comprehensive treatment funds for comprehensive treatment of Qaidar mining subsidence areas, i.e. RMB 500,000.00 in accordance with Notice of Haibei State Local Financial Work on Basic Construction Investment Expense Budget in Provincial Budget for Third Batch of Earlier Project in 2015 (B. C. [2015] No. 610). The project has no expenses as at December 31, 2015. (8) The company got investment in central budget for upgrading and transformation of Klockner-Moeller Mining Area II and III, i.e. RMB 11,180,000 in accordance with Q. C. J. Z. [2009] No. 1218. The project has been completed generally, and the general project has not met service condition, so it is not amortized. (9) The company got investment in central budget for upgrading and transformation of coal mine safety transformation project in 2010, i.e. RMB 8,210,000 in accordance with B. C. [2010] No. 790. The project has been completed generally, and the general project has not met service condition, so it is not amortized. (10) The company used the transfer charges, RMB 9,000,000 for construction of facilities such as 30 tons of heating boilers of coal power companies in accordance with an equity transfer agreement signed with the company on centralized heating- heat source rebuilding and extension project. The project was completed in December 2010, and main building will be amortized within 20 years. (11) The company got two batches of funds for mine rescue crew equipments in accordance with documents Q. A. J. K. [2007] No. 114 and Q. A. J. K. [2008] No. 85. The project was completed in December 2010, and main building will be amortized within 20 years. The subsidy income of RMB 143,225.00 is confirmed in current period. (12) The company got coal mine safety funds in 2011, i.e. RMB 8,540,000 for reconstruction of Mine Area II and III safety facilities in accordance with document Q. C. J. Z. [2011] No. 2387, coal mine safety funds in 2012, i.e. RMB 6,140,000 in accordance with document Q. C. J. Z. [2012] No. 917, and coal mine safety funds in
F-96 2013, i.e. RMB 7,990,000 in accordance with document Q. C. J. Z. [2013] No. 1619. In 2014, according to the document of Qinghai Development and Reform Commission - Qinghai Development and Reform Energy Sources (2014) NO. 740, the company received the central budget for investment of coal mine safety modification of 8.93 million RMB (including Moeller mine II of 5.87 million RMB and Moeller mine III of 3.06 million RMB). The project has not been constructed yet. (13) The company got earlier subsidy funds of Qinghai Development and Reform Commission for comprehensive treatment project of Klockner-Moeller mining subsidence areas, i.e. RMB 1,000,000 only. The project is in progress and is not amortized. （14）According to Ningxia and Gansu financial figures【2016】No. 163 – Notice on appropriating subsidy funds of Qinghai energy conservation and comprehensive utilization of water resources and other projects in 2016, the company received project subsidy funds of 1.5 million RMB in November 2016. The project has not been completed, and its amortization has not been conducted. 40．Paid-in capital
Balance at the beginning of year Decrements Balance at the end of year Name of Increase at the at the investor Proportion current year current Proportion Amount invested Amount invested （%） period （%） Qinghai State-owned Assets Supervision 1,359,000,000.00 33.83 2,402,510,180.11 3,761,510,180.11 58.59 and Administration Commission Qinghai State-owned Assets 500,000,000.00 7.79 Investment 500,000,000.00 12.45 Management Co., Ltd. Xining Economic Development Zone 857,000,000.00 21.34 857,000,000.00 13.35 Investment Holding Group Co., Ltd. Western Mining Co., 1,300,690,000.00 32.38 1,300,690,000.00 20.27 Ltd. Total 4,016,690,000.00 100.00 2,402,510,180.11 6,419,200,180.11 100.00 According to the document of State Owned Assets Supervision and Administration Commission - Approval about Qinghai Provincial Investment Group Co., LTD, Apply
F-97 for Funding (Qing owned asset 【2016】No. 331) on December 29th, 2016, the company increased its registered capital of 2.4025102 billion RMB, after changing, the registered capital was 6.4192002 billion RMB. 41．Capital reserve
Balance at the Increments at the Decrements at the Balance at the end Item beginning of year current period current period of period
I. Capital (stock) premium 1,920,413,408.84 1,920,413,408.84
II. Other capital reserve 1,032,376,797.76 37,732,818.87 994,643,978.89 1. Other rights and interests change in the invested unit
2, Other 1,032,376,797.76 37,732,818.87 994,643,978.89 III. Capitals transferred from capital reserve under original principle Total 2,952,790,206.60 37,732,818.87 2,915,057,387.73
The balance in consolidated offset, i.e. RMB -37,732,818.87, shall be accounted into capital reserve due to change in equity investment ratio in current period. 42. Special reserves
Balance at the Decrements at Increments at the Combined Balance at the Item beginning of the current current period Increase end of period year period Safety production costs 8,531,126.98 28,271,145.51 8,715,395.68 41,317,161.15 4,200,507.02
Maintenance cost 130,615.78 11,097,401.89 139,698.33 10,553,807.44 813,908.56
Risk reserves 5,604,864.78 839,261.69 6,444,126.47
Total 14,266,607.54 40,207,809.09 8,855,094.01 51,870,968.59 11,458,542.05
43. Surplus reserves
Balance at the Increments at the Decrements at the Balance at the end Item beginning of year current period current period of period
Statutory surplus reserves 66,627,843.19 66,627,843.19
Free surplus reserves
Reserve funds
Enterprise development funds
Capital redemption
Other
Total 66,627,843.19 66,627,843.19
F-98
44．Undistributed Profit
Item Amount at the current period Amount at the last year
Balance at the beginning of year in current year 380,255,175.44 381,265,929.02
Increments at the current year 19,505,454.62 902,246.42
Including: Transferred from net profit at current year 19,505,454.62 902,246.42
Other adjustment factors
Amount decreased at current year 135,300.00 1,913,000.00
Including: Surplus reserves withdrawn at current year
Cash dividends distributed at current year 135,300.00 1,913,000.00
Transfer to paid-in capital
Other decreases
Balance at the end of period at the current year 399,625,330.06 380,255,175.44
45．Operating income / operating cost
Total amount accounted for the current year Total amount accounted for last year period Item Income Cost Income Cost
1. Main operating coast
Sales of electric power 863,499,537.82 714,038,067.19 1,049,575,638.46 860,818,109.96
Electrolytic aluminium 9,671,707,251.95 9,165,811,950.76 7,529,485,538.69 7,885,164,930.76
Aluminium fabrication 4,298,555,651.57 3,801,336,173.91 3,368,633,582.47 3,399,138,545.07
Income from guarantee 103,000,026.43 67,231,600.00
Income from water supply 16,174,659.27 9,955,316.86 12,842,372.79 9,935,829.45
Coal sales 158,839,371.66 147,948,216.09 199,581,876.83 149,482,943.44
Sales of chemical products 86,421,166.21 68,839,632.90 56,684,308.36 40,567,874.72
Sales of commercial 28,782,110.57 57,057,888.99 41,054,399.78 41,194,056.53 housing Property management fee 6,462,213.69 11,589,395.32 6,149,162.40 11,999,486.54
Receipts from service 49,036,596.42 54,836,900.23 57,085,178.66 54,411,976.61
Income from construction 4,649,998.55 12,575,456.44 37,748,679.77 37,320,887.48 installation
House rent 4,503,681.98 4,752,498.70
F-99 Total amount accounted for the current year Total amount accounted for last year period Item Income Cost Income Cost
Interest income
Income of heating fee 23,811,377.06 16,400,109.75 Income from claim compensation
Other 104,725,185.94 81,716,829.29 217,565,125.05 201,802,474.69
Subtotal 15,420,168,829.12 14,142,105,937.73 12,648,389,961.96 12,691,837,115.25
2. Other business incime
Leasing 1,105,000.00 5,783.75 2,612,577.77 25,547.50 Sales of raw materials and 923,470,600.16 885,241,438.63 1,419,265,676.06 620,815,970.65 scrap materials
Other 3,182,139.64
Income from insurance 687,548.68 3,680,485.84 agent Fee for technical service 41,692,369.63 1,291,081.44 16,944,873.59 1,271,851.93
Subtotal 966,955,518.47 886,538,303.82 1,445,685,752.90 622,113,370.08
Total 16,387,124,347.59 15,028,644,241.55 14,094,075,714.86 13,313,950,485.33
46. Financial Expenses
Total amount accounted for the Total amount accounted for last Item current period year Interest expense 579,531,277.65 365,430,001.17
Less: Interest income 84,371,524.60 59,142,796.83
Handling charge 24,974,025.07 37,615,501.37
Profit or loss on exchange 8,364,678.35 21,702,463.53
Other 410,571.44 18,185,461.74
Interest discount of acceptance draft 452,999.72 4,236,270.66
Guarantee fee 3,000,000.00 -5,882,300.00
Total 532,362,027.63 382,144,601.64
47. Provision for assets impairment
Total amount accounted for the Total amount accounted for last Item current period year
I. Bad debt loss 14,526,286.85 32,317,717.39
F-100 Total amount accounted for the Total amount accounted for last Item current period year
II. loss on inventory valuation 15,040,979.65 19,614,169.92 III. Loss on impairment of available-for-sale financial assets IV. Loss on impairment of held-to-maturity investment V. Loss on impairment of long-term equity investment
VI. Loss on impairment of investment real estate
VII. Loss on impairment of fixed assets 45,852.14
VIII. Loss on impairment of engineering materials
IX. Loss on impairment of construction in process
Total 29,567,266.50 51,977,739.45
48. Variable profit and loss of fair value
Total amount accounted for the Total amount accounted for last Item current period year I. Financial assets measured by fair value and counting the variation into the current profit and 2,805,767.00 loss II. Financial assets measured by fair value and counting the variation into the current profit and loss III. Investment real estate measured by fair value 38,141,362.00
IV. Other
Total 38,141,362.00 2,805,767.00
49．Income from investment
Total amount accounted for the Total amount accounted for last Item current period year Long-term equity investment income accounted 404,157.60 cost method 229,800.00 Long-term equity investment income accounted by the equity method Investment income from disposal of long-term equity investment 217,147.77 5,665,815.19 Investment income from period during holding trading financial assets Investment income during holding held-to-maturity 1,125,964.60 investment 41,500.00 Investment income during holding 9,200,000.00 available-for-sale financial assets 720,000.00
Investment income from trading financial assets 50,739.72 Investment income from disposing held-to-maturity investment
F-101 Investment income from disposing 1,230,000.00 available-for-sale financial assets 19,423,324.65
Income from entrusting financial management 13,793,950.97 27,778,646.76
Other 1,940,821.91 188,888.89
Total 27,962,782.57 54,047,975.49
50. Non-operating income (1) Listed by item
Total amount accounted for the Total amount accounted for last Item current period year Gain from disposing non-current assets 2,193,057.52 2,612,613.43
Including: Gain from disposing fixed assets 2,193,057.52 2,612,613.43
Gain from disposing intangible assets
Gain from debt restructuring 486,720.58 1,516,289.72
Gain from non-monetary assets exchange 30,871,688.65 385,627.16
Gain from donation
Government subsidy 97,388,861.54 542,378,024.83
Transferred from funds unable to be paid 505,309.22 15,091,686.66
Funds for land compensation 34,457,536.11
Compensation by litigation 4,521,174.91
Insurance compensation 3,365,000.00
Penalty 1,588,618.77
Return of handling charges of tax bureau 266,275.88
Other 4,829,721.53 13,411,728.30
Total 146,016,428.60 609,853,506.21
(2) Non-operating incomes of other items are insurance indemnity and confiscated incomes, etc. (3) Details of government subsidy
Total amount Total amount Item accounted for the accounted for last Statement current period year
Q. R. S. T. F.【2010】 No. 85 Subsidy to enterprises employing 1,854,645.40 college graduates Opinion on Further Promoting Employment of Graduates Fund subsidy for key enterprises’ Q. T. Z.【2014】No. 117 increase keeping, production 387,633,400.00 Notice on promotion and employment promotion Qinghai Investment Group Co., Ltd.
F-102 Total amount Total amount Item accounted for the accounted for last Statement reserve capital id Transmitting Provisional Interim Procedures on Use of Key Enterprises’ Increase Keeping, Production Stabilization and Employment Promotion Reserve Capitals Subsidy for ten thousand people Q. Y. P. H.【2014】No. 8 training Qinghai Employment Service Bureau’s social insurance subsidy for college 453,827.54 Q. R. S. T. F.【2010】No. 85 students Notice about issuing project plan of small and medium-sized enterprise development special funds (new Special funds for development of 100,000.00 increase of above-scale enterprises middle an small enterprises and demonstration base reward ) in 2016 (Qinghai economy information medium [2016] No. 244 ) Produce and process products via Tax-free income 753,606.30 crap materials
Reward subsidy funds 400,000.00
Tax returns 490,000.00 5,048,213.60 Centralized heating- heat source rebuilding and extension project of 6,750,000.00 450,000.00 Amortization of deferred income Xihai Town Special funds for security 2,000.00 143,225.00 Amortization of deferred income
Financial subsidy 220,000.00 361,992.00 Subsidy capital of ore resources 3,079,487.60 2,930,462.00 protection project Special capital for ore resources saving 1,007,600.00 1,007,600.00 and comprehensive utilization D. C. J. Z.【2015】No. 451 Notice on Capital loan interest discount project central infrastructure investment subsidy, energy saving and circulation 9,990,000.00 budget of major projects (the first and resource saving project subsidy batch) of energy saving and recycling economy and resource saving in 2015 Q. C. J. Z.【2014】No. 1860 Capital for industrial transformation and Subsidy funds for technical transformation of double cathode steel 4,900,000.00 upgrading in 2015 as well as capital for follow-up subject project- bar of electrolytic cell technical transformation of double cathode steel bar of electrolytic cell Subsidy funds for industrial infrastructure and technical transformation as well as technical Subsidy funds for transformation of 58,540,000.00 transformation of partial equipments, Minhe Industrial Park interest discount subsidy of water purifying plant and maintenance of approach roads for pipe change Qinghai Economy and Information Committee（Q. J. X. Z.【2014】No. Reward fund of energy-saving 376 Notice on projects planned to be 2,500,000.00 technology transformed with special financial reward funds for energy-saving technology Subsidy funds for secondary batch of Q. C. J. Z.【2015】No. 527 Notice on energy-saving and water-saving 680,000.00 subsidy capital for projects such as resource in 2015 comprehensive utilization of second
F-103 Total amount Total amount Item accounted for the accounted for last Statement id batch of energy-saving and water-saving resource in 2015 Notice on Department of Finance of Direct financing subsidy capital Qinghai Province on appropriation of appropriated by Department of 18,600.00 direct financing subsidy capital, Finance of Qinghai Province to 【2015】No. 932 enterprises
Research funds for desulfuration 600,000.00 transformation project 20Kt/a refined aluminum project 725,000.00 research Comprehensive technical innovation of energy conservation and emission 1,300,000.00 reduction of electrolytic cell with low voltage Industrial technology research and 4,613,700.00 development Transformation of 4# boiler 1,500,000.00 low-nitrogen burner 3104 aluminum alloy slab ingot casting technology research and 372,206.41 372,206.41 development Technical transformation of casting 1,000,000.00 1,000,000.00 production line 240ka aluminum cell research and 300,000.00 300,000.00 application project Technical transportation project of 247,500.00 247,500.00 aluminum electrolysis display system
Subsidy for on-post staff training 102,000.00 2,473,200.00
Subsidy of employment board 1,223,891.88 Multiple-objective coordination to optimize and control technical development and application of 70,000.00 Qinghai Productivity Promotion Center Reward funds for Qinghai high-tech 200,000.00 enterprises Unemployment insurance fund subsidy of Department of Human Resources 3,770,000.00 and Social Security of Qinghai Province Subsidy capital of 2014 Qinghai large scientific instruments sharing service 80,000.00 50,000.00 of Qinghai Science and Technology Department Funds for energy-saving projects such 1,727,500.00 9,860,000.00 as 1# furnace smelting, etc. in 2015 Capital subsidy of Datong Bureau of 1,540,000.00 Economy and Commerce Funds for 2015 energy-saving and water-saving resources comprehensive 230,000.00 2,810,000.00 utilization project of Datong Bureau of Economy and Commerce Capital subsidy of Datong Bureau of 1,900,000.00 Environmental Protection Subsidy funds for technical transformation of double cathode steel 1,680,000.00 bar of electrolytic cell
F-104 Total amount Total amount Item accounted for the accounted for last Statement Subsidy for industrial economic id 720,000.00 transformation and upgrading Notice on Department of Finance of Qinghai Province on earlier-stage capital of industrial “double hundred” and industrial structure adjustment and revitalization, Research and development of 1,800,000.00 recycling economy industry, high-silicon aluminum alloy enterprise technology innovation and key industrial projects recycling economy industry, enterprise technology innovation and key industrial projects in 2013 Research and development of preheating top casting technology Notice on funds for the first batch of made of multiple intensive and hollow 95,449.00 technical projects in 2010 aluminum alloy ingot on the same level Notice on budget index of special Intensive and hard aluminum alloy capital for development of middle 78,736.00 with multiple tubes on the same level and small enterprises with Qinghai local color Notice on special capital plan and Industrial aluminum tube project 200,000.00 160,000.00 budget index of the first batch of middle and enterprises development Notice of Dongchuan Industrial Park Financial Bureau in Xining Economic and Technical Development Zone about Issuing Appropriation of Key Industrial Energy-saving technology Projects Prophase Funds of 2016 transformation project of high-strength 3,638,000.00 60,900.00 (Xining Development Dongchuan aluminum alloy smelting and casting Finance【2016】No. 99), Notice of Qinghai finance department about issuing a special fund of dissolving excess capacity of 2016 (Qinghai Finance Word【2016】No. 2209) Notice on Department of Finance of Funds for high-strength and Qinghai Province on the second high-toughness 7 series of aluminum 387,300.00 batch of technical plan project funds alloy in 2013 Funds received from high-speed rail 1,510,000.00 7N01 new aldural train body project Funds for science and technology project of science and technology 130,000.00 bureau Social insurance subsidy 40,421.53 Special funds for emergency exercise of provincial safety supervision 30,000.00 department Special funds for rebuilding of squatter 106,182.67 97,334.11 settlements Patent subsidy 59,200.00 96,000.00
Levy-refund added-value tax 94,852.53 35,690.06 Tax subsidy of external enterprises in 122,700.00 2014 Reward and subsidy of Tongliang 603,900.00 Bureau of Finance
F-105 Total amount Total amount Item accounted for the accounted for last Statement Subsidy and reward of Tongliang id 215,000.00 150,000.00 Technology Committee
Subsidy for post stability 5,917,288.00 250,524.00 Q. R. S. T. F.【2010】No. 85 On-line monitoring subsidy funds for environmental monitoring pollution 50,000.00 100,000.00 Q. H. J. Z.【2014】 No. 48 resources Energy conservation and emission 7,000,000.00 reduction project Development and application item of “multiple-parameter balance” control 9,990,000.00 technology of electrolytic aluminum cell Management informatization system 500,000.00
Calcinatory burning system 320,000.00 transformation project Waste-heat utilization project of 620,000.00 exhaust gas after electrolysis Power transformation rectification 1,920,000.00 system transformation Development and generalization of “multiple-parameter balance” control 1,440,000.00 technology of electrolytic aluminum cell Technical transformation project of 50,000m3 powder ash air-entrained 168,000.00 168,000.00 concrete Reward funds for industrial enterprise 50,000.00 operation block The letter of Qinghai Province Economy and Informationization Committee on Disbursement of Electric power counterpart subsidy 59,062,779.39 January Electric Power Direct funds Transaction Related Counterpart Funds to the aluminum electrolysis enterprises. Decision of the CPC Minhe Hui and Tu Autonomous Committees, Minhe Hui and Tu Autonomous Government on Commending of Annual Advanced unit funds in 2015 10,000.00 Performance Assessment Outstanding Leadership and Advanced Units (Minhe Issue [2016] No.2) Notification of Qinghai Province Environmental Monitoring Corps on the Issue of The Whole Province Pollution sources automatic Pollution Sources Automatic monitoring facilities operaion 160,000.00 Monitoring Facility Operation expenditure appropriation Appropriation Funds in 2015 (Qinghai Environmental Monitoring [2016] No.9) Finance Bureau grant of social security 63,849.00 subsidy Finance Bureau grant of yellow – label 18,000.00 cars subsidy Annual production capacity of 12,000 tons of electronic aluminum foil 1,188,000.00 project funding
F-106 Total amount Total amount Item accounted for the accounted for last Statement Key enterprise production factor id 150,000.00 subsidy of the first quarter in 2016 Energy saving and water saving resource comprehensive utilization 900,000.00 project subsidy funding in 2016 National control and provincial control key pollution sources initial emission 12,000.00 rights approval work special subsidy funding East-river Industrial Park recycling transformation subsidy funding in 1,800,000.00 2015 Dissolve excess capacity Special 2,000,000.00 funding in 2016 Dissolve excess capacity Special 1,250,000.00 funding Online monitoring, operation and 360,000.00 maintenance funds
Subsidies for the handicapped 304,928.00 Subsidies for people with job hunting 104,261.00 difficulties Taxation incentive 11,195.94
Pollution running expenditure subsidy 120,000.00
Special subsidy funding 28,000.00
Feed-in tariffs 150,000.00 Pollution source discharge special 12,000.00 subsidy funding Equipment subsidy 2,647,031.00 Notification of Haidong City Environmental Superivision and Management Station on Pollution sources automatic appropriation of pollution source monitoring facilities operation cost 200,000.00 automatic monitoring facility the appropriation third Party operation subsidy (Haidong Environmental monitoring [2016] No.28) Automatic monitoring facility subsidy 200,000.00
High and new technology reward 200,000.00 Qinghai Province Science and Technology Office Science Research 200,000.00 Condition and Finance Office project funding Environmental monitoring subsidy 80,000.00
Total 97,388,861.54 542,378,024.83
51. Non-operating expenditure
Total amount accounted for the Item Total amount accounted for last year current period
F-107 Loss on disposal of non-current assets 507,813.97 770,240.00
Including: Loss on disposal of fixed assets 507,813.97 770,240.00
Loss on disposal of intangible capital
Loss on arrangement
Loss on non-monetary assets exchange
External domination 784,340.00 2,101,000.00
Other 17,475,010.50 24,757,568.10
Total 18,767,164.47 27,628,808.10 Other items of non-operating expenditure are amercement outlay, litigation losses etc. 52. Income tax expense
Total amount accounted for the Item Total amount accounted for last year current period Current income tax accumulated based on 52,806,412.97 tax and relevant regulations 43,962,583.78
Adjustment of deferred income taxes 4,125,674.65 -11,517,621.98
Total 56,932,087.61 32,444,961.80
53. Note to relevant matters on consolidated statement of cash flow (1) Information of net profits adjusted to operating cash flow
Amount at the current Item Amount at the last year period
I. Adjusting net profits to operating cash flow:
Net profit 102,652,190.32 44,797,905.24
Add: Loss from asset devaluation 29,567,266.50 51,977,739.45
Depreciation of fixed assets 830,228,186.11 760,611,438.84
Amortization of intangible assets 26,483,100.39 28,213,319.77
Amortization of long-term unamortized expenses 23,397,257.61 15,519,897.64 Loss from disposing fixed assets, intangible assets and other long-term -32,556,932.20 assets 607,382.67
Loss from retirement of fixed assets 110,478.33
Loss on fair value variation -38,141,362.00 2,805,767.00
Financial expense 579,531,277.65 382,144,601.64
Investment loss -27,962,782.57 54,047,975.49
Reduction of deferred income tax assets -4,620,975.87 11,517,621.98
Increase in deferred income tax liabilities 8,020,473.40
F-108 Amount at the current Item Amount at the last year period
Reduction of inventory 67,248,362.77 683,133,857.12
Reduction of operational items receivables -2,806,771,600.11 1,235,545,667.56
Increase of operational items payable 1,622,734,452.54 1,157,734,187.46
Other 6,853,252.61
Net amount of cash flow generated by business activities 379,808,914.55 460,304,549.16 II. Significant investing and financing activities that do not involve cash receipts and payments: Conversion of debt into capital
Convertible bonds expiring within one year as current liability
Fixed assets acquired under finance leases
III. Change in cash and cash equivalents:
Balance of cash at the end of period 2,252,578,072.51 3,339,656,986.79
Less: Balance of cash at the beginning of period 3,339,656,986.79 3,541,493,435.83
Add: Balance of cash equivalents at the end of period
Less: Balance of cash equivalents at the beginning of period
Net amount increased of cash and cash equivalents -1,087,078,914.28 -201,836,449.04 In company’s last year consolidated statement of cash flow, the cash ending balance is 3,339,656,986.79 RMB, balance sheet monetary funds ending balance is 4,393,934,490.26 RMB, balance of 1,054,277,503.47 RMB, it is the deposit that cannot be paid at any time in monetary funds of Qinghai Qiaotou Aluminum & Power Co., Ltd, which is the sub-company of this company. (2) Relevant information of cash and cash equivalents
Balance at the end of Balance at the Item period beginning of year 1. Cash 2,252,578,072.51 3,339,656,986.79
Including: cash in hand 2,035,554.08 2,403,118.66
Usable to pay bank deposit at any time 1,193,656,981.35 2,047,954,887.26
Usable to pay other monetary funds at any time 1,056,885,537.08 1,289,298,980.87
2. Cash equivalents
Including: Bond investment which becomes due in three months
3. Cash and cash equivalents at the end of period 2,252,578,072.51 3,339,656,986.79
F-109 Including: Parent company and subsidiaries in the group limited to be used
IX. Explanation of contingencies The company hereby guarantees the following matters:
Guarantee Borrowing unit Guaranteeing unit amount （RMB Guarantee term 10,000） Qinghai Qiaotou Qinghai Ganhe Water Supplies Limited Aluminum & Power Co., 6,400.00 2013/6/24 2018/6/23 Liability Company Ltd. Xining Economic Development Zone Qinghai investment group 15,000.00 2012/8/21 2018/8/30 Investment Holding Group Co., Ltd. Xining Economic Development Zone Qinghai investment group 17,000.00 2014/3/21 2024/3/20 Investment Holding Group Co., Ltd. Xining Economic Development Zone Qinghai investment group 39,000.00 2015/6/29 2018/6/29 Investment Holding Group Co., Ltd. Xining Economic Development Zone Qinghai investment group 44,000.00 2015/12/22 2027/12/21 Investment Holding Group Co., Ltd. Qinghai Province Energy Development Group Qinghai investment group 7,500.00 2016/11/24 2017/11/23 Co., Ltd Qinghai Province Energy Development Group Qinghai investment group 10,000.00 2016/11/10 2017/11/9 Co., Ltd Qinghai Sanjiang Gansu Longjiang Mineral Resources Co., Ltd Hydroelectricity 10,000.00 2016/10/20 2017/10/20 Development Co. Ltd. Total 148,900.00
As at December 31, 2015, the balance of loan guarantee provided by Qinghai Tiancheng Credit Guarantee Co., Ltd.， a subsidiary of the company, is RMB
452,072.00 except for contingencies listed in the table above. X. Events after the balance sheet date As at April 12, 2017, the company has no non-adjusting events that should be explained after the balance sheet date. XI. Related party relationships and transactions (I) Related party relationships 1. Parent company of the company
The parent The parent company’s Registration Business Registered company’s voting Name of parent company shareholding place property capital power proportion in proportion in the company the company No. 36, Qinghai State-owned Assets Huanghe Administrative Supervision and Administration 33.83% 33.83% Road, organ Commission Xining City 2. Sub-company of this company
F-110 Enjoy
the Nature of Registered Shareholding Name of enterprise Level Registration place voting business capital proportion power （%） （%） Xining Level economic Manufacturing Qinghai Jinxing Mining Co., Ltd. 11,208.37 40.00 40.00 2 development enterprises zone Qinghai Sanjiang Hydroelectricity Level Manufacturing Xining City 108,938.00 54.10 54.10 Development Co. Ltd. 2 enterprises Datong County, Qinghai Qiaotou Aluminum & Level Manufacturing Qinghai 141,344.61 89.39 96.90 Power Co., Ltd 2 enterprises Province Qinghai Jinrui Mining Level Manufacturing Xining City 28,817.63 42.50 48.32 Development Co., Ltd 2 enterprises Xining Qinghai Kunlun Leasing Limited Level economic Service 100,000.00 100.00 100.00 Liability Company 2 development enterprise zone Pingan County, Qinghai Pingan High-precision Level Manufacturing Qinghai 200,000.00 84.89 100.00 Aluminum Industry Co., Ltd 2 enterprises Province Qinghai Chentai Estate Level Manufacturing Xining City 20,691.90 100.00 100.00 Development Co., Ltd. 2 enterprises
Qinghai Xiangguang Property Co., Level Service Xining City 300.00 100.00 100.00 Ltd. 2 enterprise Xining Qinghai Ruihe Aluminum Foil Co., Level economic Manufacturing 59,378.47 100.00 100.00 Ltd. 2 development enterprises zone Qinghai Biological Qinghai Ningbe Power Generation Level Manufacturing Scientific and 171,336.64 70.82 70.82 Co., Ltd. 2 enterprises Technological Park Datong County, Qinghai Qiaodian Industrial Co., Level Manufacturing Qinghai 36,669.61 96.72 100.00 Ltd. 2 enterprises Province Xining Qinghai Yihe Repair and Level economic Repair and 10,000.00 100.00 100.00 Installation Co., Ltd. 2 development installation zone Qinghai Tianchen Credit Datong County, Level Financial Guarantee Limited Liability Qinghai 110,500.00 22.63 22.63 2 enterprise Company Province Tibetan Autonomous Qinghai West Sea Coal Level Coal Prefecture of 36,322.45 100.00 100.00 Development Co., Ltd. 2 enterprise Haibei, Qinghai Province Huangzhong Production of Qinghai Baihe Aluminum Limited Level County, Qinghai aluminum 95,000.00 100.00 100.00 Liability Company 2 Province products Qingtou International Trade Level Shanghai Trade 80,000.00 100.00 100.00 (Shanghai) Co., Ltd. 2 Xining Qinghai Plateau Non-ferrous Product Level economic Metals Research & Development research & 1,500.00 100.00 100.00 2 development Co., Ltd. development zone
F-111 Enjoy
the Nature of Registered Shareholding Name of enterprise Level Registration place voting business capital proportion power （%） （%） Qinghai Guoxin Aluminum Co., Level Aluminum Xining City 60,000.00 58.88 58.88 Ltd. 2 production
Qinghai Zhengyi Detection Level Xining City Detection 980.00 40.56 100.00 Technology Co., Ltd. 2 Huangzhong Qinghai Baihe Recycling Level Aluminum County, Qinghai 100,000.00 100.00 100.00 Aluminum Industry Co., Ltd. 2 production Province General Level aviation airport Qinghai General Aviation Co., Ltd Xining City 10,000.00 67.00 67.00 2 investment and management
(II) Transaction of related party The company has no transactions of related parties in current period. XII. Annotation to main items in the parent company’s financial statement 1. Receivables
Amount at end of period Amount at beginning of year
Category Book Value Bad debt reserves Book Value Bad debt reserves Proportion Proportion Proportion Proportion Amount Amount Amount Amount （%） （%） （%） （%） Receivables with major single amount and single withdrawing bad debt reserves Withdrawing bad debt reserves in line with credit 44,393.87 2.14 133.18 0.03 44,393.87 2.14 133.18 0.03 risk feature combination 1 ． Receivables of withdrawing bad debt reserves via account analytical method 2. Receivables of withdrawing bad debt 44,393.87 2.14 133.18 0.03 44,393.87 2.14 133.18 0.03 reserves via percentage balance method Unimportant single amount but single 2,029,890.7 2,029,890 2,029,890.7 2,029,890. 97.86 100.00 97.86 100.00 withdrawing bad debt 7 .77 7 77 reserves 2,074,284.6 2,030,023 2,074,284.6 2,030,023. Total 100.00 97.87 100.00 97.87 4 .95 4 95
（1）Withdrawing bad debt reserves in line with credit risk feature combination Receivables of withdrawing bad debt reserves via percentage balance method
Aging Amount at end of period Amount at beginning of year
F-112 Proportion of Proportion of Bad debt Bad debt Book Value counting and Book Value counting and reserves reserves drawing（%） drawing（%） Balance at the end of year in line with 44,393.87 0.30 133.18 44,393.87 0.30 133.18 percentage method Total 44,393.87 0.30 133.18 44,393.87 0.30 133.18
（2）Receivables with single withdrawing bad debt reserves Receivables with unimportant single amount and single withdrawing bad debt reserves at the end of period
Proportion of Bad debt Reason of Debtor name Book Value Aging counting and reserves withdrawal drawing（%） More than 5 Overlong charge Wuxi Kaida Co., Ltd. 1,980,000.00 1,980,000.00 100.00 years account Jiangyin Huiyuan Industrial More than 5 Overlong charge 49,890.77 49,890.77 100.00 Co., Ltd. years account
Total 2,029,890.77 2,029,890.77
2．Other receivables
Amount at end of period Amount at beginning of year
Catogery Book Value Bad debt reserves Book Value Bad debt reserves Proportio Proportio Proportio Proportio Amount Amount Amount Amount n（%） n（%） n（%） n（%） Receivables with major single amount 10,323,191,290. and single 97.87 10,429,479,747.46 97.05 15 withdrawing bad debt reserves Withdrawing bad debt reserves in line 214,800,468.84 2.04 644,401.41 0.30 311,013,541.69 2.89 933,040.63 0.30 with credit risk feature combination 1．Receivables of withdrawing bad debt
reserves via account analytical method 2. Receivables of withdrawing bad debt 214,800,468.84 2.04 644,401.41 0.30 311,013,541.69 2.89 933,040.63 0.30 reserves via percentage balance method
F-113 Amount at end of period Amount at beginning of year
Catogery Book Value Bad debt reserves Book Value Bad debt reserves Proportio Proportio Proportio Proportio Amount Amount Amount Amount n（%） n（%） n（%） n（%） Unimportant single amount but single 6,919,650.4 6,919,650.4 9,221,491.42 0.09 75.04 6,919,650.48 0.06 100 withdrawing 8 8 bad debt reserves 10,547,213,250. 7,564,051.8 10,747,412,939. 7,852,691.1 100.00 100 Total 41 9 63 1
(1) Other receivables of withdrawing bad debt reserves via percentage balance method
Amount at end of period Amount at beginning of year Aging Proportion of Proportion of Bad debt Book Value counting and Book Value counting and Bad debt reserves reserves drawing（%） drawing（%） Balance at the end of 214,800,468.8 year in line with 0.30 644,401.41 311,013,541.69 0.30 933,040.63 4 percentage method 214,800,468.8 Total 0.30 644,401.41 311,013,541.69 0.30 933,040.63 4
（2）Other bad receivables with single withdrawing bad debt reserves Receivables with major single amount and single withdrawing bad debt reserves at the end of period
Proportion of Bad debt Reason of Debtor name Book Value Aging counting and reserves withdrawal drawing（%） Subsidiry in consolidation 10,323,191,290.15 1-3 years Not withdraw scope
Total 10,323,191,290.15
Receivables with unimportant single amount and single withdrawing bad debt reserves at the end of period
Proportion of Reason of Debtor name Book Value Bad debt reserves Aging counting and withdrawal drawing（%） Cannot be gotten back Gansu Jinda Grinding More than 5 830,000.00 830,000.00 100.00 due to Material Co., Ltd. years overlong charge account Cannot be gotten back Cash deposit of Hainan Office More than 5 20,000.00 20,000.00 100.00 due to Hotel years overlong charge account Cannot be gotten back Xining Bureau of Urban and More than 5 2,000,000.00 2,000,000.00 100.00 due to Rural Planning Construction years overlong charge account
F-114 Cannot be gotten back More than 5 Shanchuan Group 3,992,534.47 3,992,534.47 100.00 due to years overlong charge account Cannot be gotten back More than 5 Leading group for liquidation 77,116.01 77,116.01 100.00 due to years overlong charge account Company employee 2,301,840.94 1-4 years Not withdraw
Total 9,221,491.42 6,919,650.48
3. Long-term equity investment (1) Category
Balance at the Increments at the Decrements at the Balance at the end of Item beginning of year current period current period period
Investment to subsidiaries 11,409,148,193.73 5,909,296,190.43 918,629,886.53 16,399,814,497.63 Investment to cooperative
enterprise Investment to joint venture
11,409,148,193.73 5,909,296,190.43 918,629,886.53 16,399,814,497.63 Subtotal Less: Impairment of long-term equity 5,393,570.34 5,393,570.34 investment Total 11,403,754,623.39 5,909,296,190.43 918,629,886.53 16,394,420,927.29
(2) Details of long-term equity investment
Accou Balance at the Change in increase Balance at the end of Invested unit nting Investment cost beginning of year and decrease period method I. Subsidiary Qinghai Jinxing Cost 46,153,480.00 46,153,480.00 Mining Co., Ltd method Qinghai Qiaotou Cost Aluminium & 1,413,560,606.98 2,000,000,000.00 3,413,560,606.98 method Power Co., Ltd. Qinghai Sanjiang Hydropower Cost 606,129,083.12 606,129,083.12 Development Co., method Ltd. Qinghai Kunshan Cost 994,054,913.02 994,054,913.02 Lease Co., Ltd. method Qinghai Jinrui Mineral Cost 495,991,516.13 495,991,516.13 Development Co. method Ltd Pingan High Precision Cost 1,697,777,000.00 1,697,777,000.00 Aluminum method Industry Co., Ltd. Qinghai Ruihe Cost Aluminum Foil 593,784,700.00 593,784,700.00 method Co., Ltd.
F-115 Accou Balance at the Change in increase Balance at the end of Invested unit nting Investment cost beginning of year and decrease period method Qinghai Ningbei Cost Power Generation 1,245,408,815.66 1,245,408,815.66 method Co., Ltd. Qinghai Chentai Real Estate Cost 206,919,009.00 206,919,009.00 Development Co., method Ltd. Qinghai Cost Xiangguang Real 3,000,000.00 3,000,000.00 method Estate Co., Ltd. Qinghai Bridge Cost Electric Industrial 408,141,230.90 408,141,230.90 method Co., Ltd. Qinghai Yihe Installation Cost 100,000,000.00 100,000,000.00 Engineering Co., method Ltd. Qinghai Tiancheng Cost Credit Guarantee 250,000,000.00 250,000,000.00 method Co., Ltd. Qinghai Xihai Coal and Cost 918,629,886.53 918,629,886.53 Electricity Co., method Ltd. Qinghai Baihe Cost Aluminium 1,413,656,099.39 1,413,656,099.39 method Industry Co., Ltd. Qinghai Western Cost 800,000,000.00 800,000,000.00 Carbon Co., Ltd. method Qingtou International Trade Cost 12,000,000.00 2,000,000.00 14,000,000.00 (Shanghai) Co., method Ltd. Qinghai Plateau Cost Nonferrous Metals 153,291,949.00 353,291,949.00 method 200,000,000.00 Co., Ltd. Qinghai Guoxin Cost Aluminium 3,941,853.00 method 3,941,853.00 Industry Co., Ltd. Qinghai Zhengyi Detecting Cost 1,284,494,061.32 1,284,494,061.32 Technology Co., method Ltd. Qinghai West Sea Cost Coal Development 2,402,510,180.11 2,402,510,180.11 method Co., Ltd. Qinghai Baihe Recycling Cost 67,000,000.00 67,000,000.00 Aluminum method Industry Co., Ltd. Qinghai General Cost 5,393,570.34 Aviation Co., Ltd method 5,393,570.34 Impairment: according to original policy to counting and 11,403,754,623.39 5,909,296,190.43 918,629,886.53 16,394,420,927.29 drawing impairment for long-term equity investment Total 10,304,344,763.53 10,095,009,340.19 1,308,745,283.20 11,403,754,623.39
F-116 Continued
Impairment provision Shareholding Cash bonus in current Invested unit Impairment provision withdrawn in current proportion（%） period period
I. Subsidiaries Qinghai Jinxing 40.00 Mining Co., Ltd Qinghai Qiaotou Aluminium & 89.39 Power Co., Ltd. Qinghai Sanjiang Hydropower 54.10 Development Co., Ltd. Qinghai Kunshan 100.00 Lease Co., Ltd. Qinghai Jinrui Mineral 42.50 Development Co. Ltd Pingan High Precision 84.89 Aluminum Industry Co., Ltd. Qinghai Ruihe Aluminum Foil 100.00 Co., Ltd. Qinghai Ningbei Power Generation 70.82 Co., Ltd. Qinghai Chentai Real Estate 100.00 Development Co., Ltd. Qinghai Xiangguang Real 100.00 Estate Co., Ltd. Qinghai Bridge Electric Industrial 96.72 Co., Ltd. Qinghai Yihe Installation 100.00 Engineering Co., Ltd. Qinghai Tiancheng Credit Guarantee 22.63 Co., Ltd. Qinghai Xihai Coal and 100.00 Electricity Co., Ltd. Qinghai Baihe Aluminium 100.00 Industry Co., Ltd. Qingtou International Trade 100.00 (Shanghai) Co., Ltd. Qinghai Plateau Nonferrous Metals 100.00 Co., Ltd. Qinghai Guoxin 58.88 Aluminium
F-117 Impairment provision Shareholding Cash bonus in current Invested unit Impairment provision withdrawn in current proportion（%） period period Industry Co., Ltd.
Qinghai Zhengyi Detecting 40.56 Technology Co., Ltd. Qinghai Baihe Recycling 100.00 Aluminum Industry Co., Ltd. Qinghai General Aviation Co., Ltd 67.00 Less: Impairment provision of long-term equity investment 5,393,570.34 withdrawn in line with original policy 5,393,570.34 Total
4. Operating income and operating cost
Total amount accounted for the current Total amount accounted for last year period Item Income Cost Income Cost
1. Main business income
2. Other business income
Income from insurance agency 4,237,598.00 3,182,139.64
Subtotal 4,237,598.00 3,182,139.64
Total 4,237,598.00 3,182,139.64
5．Income from investment
Total amount accounted for Total amount accounted for Item the current period last year
Long-term equity investment income accounted cost method
Long-term equity investment income accounted by the equity method Investment income from disposing long-term equity investment
Investment income during holding financial assets measured by fair value and counting the variation into the current profit and loss Investment income during holding held-to-maturity investment
Investment income from disposing available-for-sale financial assets 480,000.00
F-118 Total amount accounted for Total amount accounted for Item the current period last year Investment from disposing financial assets measured by fair value and counting the variation into the current profit and loss Investment income from disposing held-to-maturity investment
Investment income from disposing available-for-sale financial 1,230,000.00 assets Other
Total 1,230,000.00 480,000.00
XIV. Other major matters to be explained As of December 31, 2016, the company has no other major matters to be explained. XV. Date of approving and issuing financial statement The financial statement was approved and issued by the company’s board of directors on April 18, 2017. (The following has no text)
Qinghai Provincial Investment Group Co., Ltd. April 18, 2017
F-119 Audit Report
YTESZ (2016) No. 01098
All shareholders of Qinghai Provincial Investment Group Co., Ltd.,
We have audited the attached financial statements of Qinghai Provincial Investment Group Co., Ltd., including the consolidated balance sheet dated December 31, 2015, consolidated statement of income, consolidated statement of cash flows and consolidated statement of changes in owner’s equity, and notes to financial statements of FY2015.
I. Responsibility of the Management for Financial Statements Preparation and fair presentation of financial statements is the responsibility of the Management of Qinghai Provincial Investment Group Co., Ltd., including: (1) prepare financial statements in accordance with the provisions of accounting standards for business enterprises, and make them realize fair presentation; (2) design, implement and maintain necessary internal control to ensure financial statements are free of material misstatements caused by fraud or error.
II. Responsibility of Certified Public Accountant Our responsibility is to express audit opinion on financial statements on the basis of carrying out audit work. We have carried out audit work in accordance with the provisions of audit standards for Chinese certified public accountants. These standards require us to observe the code of professional ethics in planning for and carrying out audit work to obtain reasonable assurance that financial statements are free of material misstatements. The audit work involves performing audit procedures to obtain audit evidence concerning the amounts and disclosures of financial statements. The selected audit procedures depend on the judgment of certified public accountant, including the assessment on risks of material misstatements caused by fraud or error. At the time of risk assessment, the certified public accountant has given consideration to internal control associated with the preparation and fair presentation of financial statements in order to design proper audit procedures. The audit work also includes an evaluation on the appropriateness of accounting policy and the reasonableness of accounting estimation made by the Management, as well as on the overall presentation of financial statements. We believe, the audit evidence we have obtained is adequate and appropriate to provide basis for expressing audit opinion.
F-120 F-121 Consolidated Balance Sheet
Prepared by Qinghai Provincial Investment Group Co., Ltd 31-Dec-15 Unit: yuan, currency: RMB
Assets Note Ending balance Beginning balance
Current assets:
Monetary funds 8.1 4,393,934,490.26 4,475,826,967.28
Financial assets which are measured based on fair value and whose change is recorded 30,000,000.00 into profit/loss of current year
Notes receivable 8.2 143,423,395.60 251,325,170.47
Accounts receivable 8.3 985,285,118.70 923,764,730.89
Advances to suppliers 8.4 602,688,935.53 1,936,944,358.07
Interest receivable 8.5 220,173.61 5,507,180.83
Dividends receivable
Other receivables 8.6 445,387,244.37 1,168,119,529.97
Inventories 8.7 2,963,991,084.80 2,280,857,227.68
Non-current assets maturing within one year
Other current assets 8.8 31,000,000.00 41,000,000.00
Total current assets 9,595,930,442.88 11,083,345,165.19
Non-current assets:
Financial assets available for sale 8.9 2,466,102,928.92 2,513,951,505.45
Held-to-maturity investment 8.1 131,000,000.00 1,000,000.00
Long-term receivables 8.11 55,477,327.13 1,707,418.68
Long-term equity investment 8.12 59,600,000.00 1,837,460.14
Investment real estate 8.13 352,935,197.74 352,949,078.74
Fixed assets 8.14 11,446,358,749.37 10,033,401,245.98
Construction in progress 8.15 23,366,607,371.30 16,548,434,156.26
Construction supplies 8.16 46,791,732.80 45,704,153.98
Fixed assets pending disposal 8.17 90,593.27 70,593.27
Productive biological assets
Oil-and-gas assets
Intangible assets 8.18 765,730,025.19 815,836,508.68
Development expenditures 324,174.52
Goodwill 8.19 815,061,248.20 730,022,501.97
Long-term deferred expenses 8.2 102,664,623.07 55,660,931.21
Deferred income tax assets 8.21 112,614,585.27 101,096,963.29
Other non-current assets 8.22 557,309,521.59 511,057,076.53
Total non-current assets 40,278,668,078.36 31,712,729,594.18
Total assets 49,874,598,521.23 42,796,074,759.37
Legal representative: Chief Financial Officer: Responsible person of accounting institution:
F-122 Consolidated Balance Sheet
Prepared by Qinghai Provincial Investment Group Co., Ltd 31-Dec-15 Unit: yuan, currency: RMB
Liabilities and shareholders’ equity Note Ending balance Beginning balance
Current liabilities:
Short-term borrowings 8.23 8,586,967,548.87 7,805,019,718.54
Financial liabilities which are measured based on fair value and whose change is recorded into profit/loss of current year
Notes payable 8.24 1,085,505,899.03 709,457,534.86
Accounts payable 8.25 3,182,900,148.81 2,793,772,833.69
Advances from customers 8.26 329,322,279.30 549,355,974.83
Accrued payroll 8.27 73,557,096.97 41,128,011.39
Taxes payable 8.28 -964,250,381.93 -746,398,998.11
Interest payable 8.29 353,865,495.35 273,006,145.59
Dividends payable 8.3 14,547,746.67 11,881,080.00
Other payables 8.31 990,352,330.58 1,747,501,026.89
Non-current liabilities maturing within one year 8.32 6,578,478,908.52 4,862,170,000.00
Other current liabilities 8.33 664,760,890.93 573,436,090.93
Total current liabilities 20,896,007,963.10 18,620,329,418.61
Non-current liabilities:
Long-term borrowings 8.34 9,647,492,651.69 6,889,846,556.72
Bonds payable 8.35 4,167,419,560.14 4,147,611,132.29
Long-term accrued payroll 8.36 10,750,500.50
Long-term payables 8.37 3,929,147,435.03 3,711,567,586.84
Special payables 8.38 453,249,800.00 111,449,800.00
Estimated liabilities
Deferred income 8.39 195,153,904.51 189,580,289.49
Deferred income tax liabilities 8.21 1,713,743.20 1,713,743.20
Other non-current liabilities
Total non-current liabilities 18,394,177,094.57 15,062,519,609.04
Total liabilities 39,290,185,057.67 33,682,849,027.65
Shareholders' equity
Share capital 8.4 4,016,690,000.00 4,016,690,000.00
Capital reserve 8.41 2,952,790,206.60 1,989,121,461.45
Less: Treasury stock
Other consolidated incomes 596,225.49
Special reserve 8.42 14,266,607.54 60,482,736.12
Surplus reserve 8.43 66,627,843.19 66,627,843.19
General risk reserve
Undistributed profits 8.44 380,255,175.44 381,265,929.02
Foreign currency statement translation difference
Total owners’ equity attributable to parent company 7,430,629,832.78 6,514,784,195.27
Minority interest 3,153,783,630.79 2,598,441,536.45
Total shareholders' equity 10,584,413,463.57 9,113,225,731.72
Total liabilities and shareholders' equity 49,874,598,521.23 42,796,074,759.37
Legal representative: Chief Financial Officer: Responsible person of accounting institution:
F-123 Consolidated Profit Statement
Prepared by Qinghai Provincial Investment Group Co., Ltd 2015 Unit: yuan, currency: RMB
Item Note Current year Last year
I. Total operating income 14,094,075,714.86 12,895,028,119.67
Including: Operating income 8.45 14,094,075,714.86 12,895,028,119.67
II. Total operating cost 14,655,911,288.41 12,904,584,752.38
Including: Operating cost 8.45 13,313,950,485.33 11,707,838,684.83
Business tax and surcharge 72,216,950.66 70,019,925.28
Selling expenses 171,802,122.95 305,546,822.85
Management expenses 663,819,388.38 523,489,589.25
Financial expenses 8.46 382,144,601.64 284,784,434.17
Loss on impairment of assets 8.47 51,977,739.45 12,905,296.00
Add: Income from fair value changes (Loss represented by a “-” sign) 8.48 2,805,767.00 4,359,950.00
Investment income (Loss represented by a “-” sign) 8.49 54,047,975.49 26,915,922.86
Including: Income from investment in affiliates and joint ventures
III. Operating income (Loss represented by a “-” sign) -504,981,831.06 21,719,240.15
Add: Non-operating income 8.5 609,853,506.21 162,108,815.35
Including: Profits from disposal of non-current assets 2,612,613.43 1,174,415.19
Less: non-operating expenditure 8.51 27,628,808.10 66,842,443.18
Including: Loss on disposal of non-current assets 770,240.00 524,690.75
IV. Total profits (Total losses represented by a “-” sign) 77,242,867.05 116,985,612.32
Less: Income tax expense 8.52 32,444,961.80 24,612,936.54
V. Net profits (Net loss represented by a “-” sign) 44,797,905.24 92,372,675.78
Net profits attributable to owners of parent company 902,246.42 15,941,337.70
Profit/loss of minority shareholders 43,895,658.83 76,431,338.08
VI. After-tax net amount of other consolidated income -596,225.49 188,281.59
After-tax net amount of other consolidated income attributable to owners of parent company -596,225.49 188,281.59
1. Other consolidated incomes which cannot be re-classified as profit/loss in the following years
(1). Change in net liabilities or net assets of the defined benefit plan re-measured
(2). Share enjoyed in other consolidated incomes which cannot be re-classified as profit/loss in the invested entity with the equity method
2. Other consolidated incomes which will be re-classified into profit/loss in the following years
(1) Share enjoyed in other consolidated incomes which cannot be re-classified as profit/loss in the invested entity with the equity method
(2) Profit/loss of changes in fair value of financial assets available for sale -596,225.49 188,281.59
(3) Held-to-maturity investment re-classified as profit/loss of financial assets available for sale
(4) Effective part of profit/loss of cash flow hedging
(5) Translation differences from foreign currency financial statements
(6) Others
After-tax net amount of other consolidated income attributable to minority shareholders
VII. Total consolidated income 44,201,679.75 92,560,957.37
Total consolidated income attributable to owners of parent company 306,020.93 16,129,619.29
Total consolidated income attributable to minority shareholders 43,895,658.83 76,431,338.08 Legal representative: Chief Financial Officer: Responsible person of accounting institution:
F-124 Consolidated Cash Flow Statement
Prepared by Qinghai Provincial Investment Group Co., Ltd 2015 Unit: yuan, currency: RMB
Item Line No. Current year Last year
I. Cash flows of operating activities: 1 Cash received from sales of commodities or rendering of labor service 2 12,908,024,349.28 11,428,778,691.04 Tax rebates received 3 17,207,235.05 2,030,827.74 Other cash received relating to operating activities 4 1,316,657,966.17 1,537,820,187.33 Subtotal of cash inflows of operating activities 5 14,241,889,550.50 12,968,629,706.11 Cash paid for purchasing commodities or receiving labor services 6 11,425,581,105.79 10,103,997,813.32 Cash paid to and for employees 7 1,288,710,520.61 1,120,036,257.07 Cash paid for taxes and surcharges 8 546,446,988.63 538,197,439.13 Cash paid for other operating activities 9 520,846,386.32 497,392,435.79 Subtotal of cash outflows of operating activities 10 13,781,585,001.35 12,259,623,945.31 Net cash flows from operating activities 11 460,304,549.16 709,005,760.80 II. Cash flows from investing activities: 12 Cash received from return of investments 13 1,541,803,375.33 70,000,000.00 Cash received from investment income 14 50,707,927.30 27,221,040.44 Net cash received from disposal of fixed assets, intangible assets and other long-term 15 4,544,238.15 5,646,331.92 assets Net cash received from disposal of subsidiaries and other business units 16 Other cash received relating to investing activities 17 334,599,283.86 146,608.20 Subtotal of cash inflows of investing activities 18 1,931,654,824.64 103,013,980.56 Cash paid from purchase and construction of fixed assets, intangible assets and other long- 19 4,557,342,603.20 1,773,981,204.92 term assets Cash paid for investments 20 431,240,000.00 1,951,866,112.00 Net cash paid for acquisition of subsidiaries and other business units 21 Other cash paid relating to investing activities 22 3,700,000.00 60,370,459.78 Subtotal of cash outflows of investing activities 23 4,992,282,603.20 3,786,217,776.70 Net cash flows from investing activities 24 -3,060,627,778.56 -3,683,203,796.14 III. Cash flows from financing activities: 25 Cash received from attracting investment 26 134,064,297.90 1,501,500,000.00 Including: Cash received by subsidiaries from attracting the investment of minority 27 shareholders Cash received from borrowings 28 25,435,207,362.76 18,520,420,443.36 Other cash received relating to financing activities 29 562,961,991.50 740,483,698.19 Subtotal of cash inflows of financing activities 30 26,132,233,652.16 20,762,404,141.55 Cash repayments of amounts borrowed 31 19,418,519,531.48 13,876,500,937.98
Cash payments for distribution of dividends or profit or cash payments of interest 32 2,747,463,800.50 1,857,386,092.73
Including: Dividend and profits paid by subsidiaries to minority shareholders 33 Other cash payments relating to financing activities 34 1,570,000,773.77 2,935,860,173.73 Subtotal of cash outflows of financing activities 35 23,735,984,105.75 18,669,747,204.44 Net cash flows from financing activities 36 2,396,249,546.41 2,092,656,937.11 IV. Effect of exchange rate change upon cash and cash equivalent 37 2,237,233.95 130,193.22 V. Net increase of cash and cash equivalents 38 -201,836,449.04 -881,410,905.01 Add: Beginning balance of cashes and cash equivalents 39 3,541,493,435.83 4,422,904,340.84 VI. Ending balance of cashes and cash equivalents 40 3,339,656,986.79 3,541,493,435.83 Legal representative: Chief Financial Officer: Responsible person of accounting institution:
F-125 Consolidated Statement of Change in Owners’ Equity
Prepared by: For the year ended December 31, 2015 Unit: yuan, currency: RMB
Current year
Item Shareholders’ equity attributable to parent company Minority interest Total shareholders’ equity Share capital Capital reserve Less: Treasury stock Other consolidated income Special reserve Surplus reserve Undistributed profits Others
I. Ending balance of last year 4,016,690,000.00 1,989,121,461.45 596,225.49 60,482,736.12 66,627,843.19 381,265,929.02 2,598,441,536.45 9,113,225,731.72
Add: Change in accounting policies
Correction of previous error
Others
II. Beginning balance of current year 4,016,690,000.00 1,989,121,461.45 596,225.49 60,482,736.12 66,627,843.19 381,265,929.02 2,598,441,536.45 9,113,225,731.72 III. Change in increase and decrease of current year 963,668,745.15 -596,225.49 -46,216,128.58 -1,010,753.58 555,342,094.34 1,471,187,731.84 (Decrease represented by a “-” sign)
1. Total consolidated income -596,225.49 902,246.42 43,895,658.83 44,201,679.75
2. Capital contributed and decreased by shareholders -22,122,185.05 513,509,635.52 491,387,450.47
(1)ˊ Capital contributed by owners 337,831,515.05 337,831,515.05 F-126 (2). Amount of share-based payment charged to shareholders’ equity
3ˊOthers -22,122,185.05 175,678,120.47 153,555,935.42
4. Profit distribution -1,913,000.00 -2,063,200.00 -3,976,200.00
(1)ˊAllocated surplus reserve
(2)ˊAllocation of general risk reserve
(3)ˊDistribution to shareholders -1,913,000.00 -2,063,200.00 -3,976,200.00
(4)ˊOthers
5. Internal carry-over of shareholders’ equity
(1). Capital reserve converted into the increased capital stock
(2). Surplus reserve converted into the increased capital stock
(3) Surplus reserve used for covering the deficit
(4)ˊOthers
6. Special reserve -46,216,128.58 -46,216,128.58
(1). Allocated special reserve 37,245,924.37 37,245,924.37
(2). Used special reserve 83,462,052.95 83,462,052.95
7. Others 985,790,930.20 985,790,930.20
IV. Ending balance of current year 4,016,690,000.00 2,952,790,206.60 14,266,607.54 66,627,843.19 380,255,175.44 3,153,783,630.79 10,584,413,463.56
Legal representative: Chief Financial Officer: Responsible person of accounting institution: Consolidated Statement of Change in Owners’ Equity
Prepared by: 2015 Unit: yuan, currency: RMB
Last year
Item Shareholders’ equity attributable to parent company Minority interest Total shareholders’ equity Share capital Capital reserve Less: Treasury stock Other consolidated income Special reserve Surplus reserve Undistributed profits Others
I. Ending balance of last year 3,624,690,000.00 1,868,590,552.61 407,943.90 47,552,824.84 66,627,843.19 370,589,604.47 2,825,390,427.21 8,803,849,196.22
Add: Change in accounting policies
Correction of previous error
Others
II. Beginning balance of current year 3,624,690,000.00 1,868,590,552.61 407,943.90 47,552,824.84 66,627,843.19 370,589,604.47 2,825,390,427.21 8,803,849,196.22
III. Change in increase and decrease of current year 392,000,000.00 120,530,908.84 188,281.59 12,929,911.28 10,676,324.55 -226,948,890.76 309,376,535.50 (Decrease represented by a “-” sign)
1. Total consolidated income 188,281.59 15,941,337.70 76,431,338.08 92,560,957.37
2. Capital contributed and decreased by shareholders 392,000,000.00 120,530,908.84 -265,880,228.84 246,650,680.00
(1)ˊ Capital contributed by owners 392,000,000.00 608,000,000.00 500,000,000.00 1,500,000,000.00 F-127 (2). Amount of share-based payment charged to shareholders’ equity
3ˊOthers -487,469,091.16 -765,880,228.84 -1,253,349,320.00
4. Profit distribution -2,375,900.00 -37,500,000.00 -39,875,900.00
(1)ˊAllocated surplus reserve
(2)ˊAllocation of general risk reserve
(3)ˊDistribution to shareholders -2,375,900.00 -37,500,000.00 -39,875,900.00
(4)ˊOthers
5. Internal carry-over of shareholders’ equity
(1). Capital reserve converted into the increased capital stock
(2). Surplus reserve converted into the increased capital stock
(3) Surplus reserve used for covering the deficit
(4) Others
6. Special reserve 12,929,911.28 12,929,911.28
(1). Allocated special reserve 79,861,427.19 79,861,427.19
(2). Used special reserve 66,931,515.91 66,931,515.91
7. Others -2,889,113.15 -2,889,113.15
IV. Ending balance of current year 4,016,690,000.00 1,989,121,461.45 596,225.49 60,482,736.12 66,627,843.19 381,265,929.02 2,598,441,536.45 9,113,225,731.72
Legal representative: Chief Financial Officer: Responsible person of accounting institution: Balance Sheet
Prepared by Qinghai Provincial Investment Group Co., Ltd 31-Dec-15 Unit: yuan, currency: RMB
Assets Note Ending balance Beginning balance
Current assets:
Monetary funds 1,923,274,498.53 318,571,753.73
Financial assets which are measured based on fair value and whose change is recorded into profit/loss of current year
Notes receivable
Accounts receivable 12.1 44,260.69 20,737.76
Advances to suppliers
Interest receivable
Dividends receivable
Other receivables 12.2 10,739,560,248.52 6,732,072,673.94
Inventories
Non-current assets maturing within one year
Other current assets
Total current assets 12,662,879,007.74 7,050,665,165.43
Non-current assets:
Financial assets available for sale 2,384,905,328.64 2,384,425,328.64
Held-to-maturity investment 10,000,000.00
Long-term receivables
Long-term equity investment 12.3 11,403,754,623.39 10,095,009,340.19
Investment real estate
Fixed assets 297,675,708.60 297,250,329.37
Construction in progress
Construction supplies
Fixed assets pending disposal
Productive biological assets
Oil-and-gas assets
Intangible assets
Development expenditures
Goodwill
Long-term deferred expenses
Deferred income tax assets 3,887,544.35 4,513,626.40
Other non-current assets 23,844,300.00 23,844,300.00
Total non-current assets 14,124,067,504.98 12,805,042,924.60
Total assets 26,786,946,512.72 19,855,708,090.03
Legal representative: Chief Financial Officer: Responsible person of accounting institution:
F-128 Balance Sheet
Prepared by Qinghai Provincial Investment Group Co., Ltd 31-Dec-15 Unit: yuan, currency: RMB
Liabilities and shareholders’ equity Note Ending balance Beginning balance
Current liabilities:
Short-term borrowings 2,232,774,100.00 2,707,210,000.00
Financial liabilities which are measured based on fair value and whose change is recorded into profit/loss of current year
Notes payable 100,000,000.00
Accounts payable
Advances from customers 134,592.24 134,592.24
Accrued payroll 343,590.87 355,307.97
Taxes payable 1,744,426.88 1,352,151.18
Interest payable 347,088,893.83 262,376,768.26
Dividends payable
Other payables 4,841,902,715.20 1,582,619,873.58
Non-current liabilities maturing within one year 5,203,000,000.00 3,995,000,000.00
Other current liabilities
Total current liabilities 12,726,988,319.02 8,549,048,693.23
Non-current liabilities:
Long-term borrowings 1,644,093,251.69 348,464,056.72
Bonds payable 4,100,000,000.00 4,000,000,000.00
Long-term accrued payroll
Long-term payables
Special payables 419,949,800.00 19,949,800.00
Estimated liabilities
Deferred income
Deferred income tax liabilities
Other non-current liabilities
Total non-current liabilities 6,164,043,051.69 4,368,413,856.72
Total liabilities 18,891,031,370.71 12,917,462,549.95
Shareholders' equity
Share capital 4,016,690,000.00 4,016,690,000.00
Capital reserve 3,784,275,836.29 2,798,484,906.09
Less: Treasury stock
Other consolidated incomes
Special reserve
Surplus reserve 66,627,843.19 66,627,843.19
General risk reserve
Undistributed profits 28,321,462.53 56,442,790.80
Foreign currency statement translation difference
Total shareholders' equity 7,895,915,142.01 6,938,245,540.08
Total liabilities and shareholders' equity 26,786,946,512.72 19,855,708,090.03
Legal representative: Chief Financial Officer: Responsible person of accounting institution:
F-129 Profit Statement
Prepared by Qinghai Provincial Investment Group Co., Ltd 2015 Unit: yuan, currency: RMB
Item Note Current year Last year
I. Total operating income 3,182,139.64 2,864,588.74
Including: Operating income 12.4 3,182,139.64 2,864,588.74
II. Total operating cost 24,201,165.03 34,279,921.57
Including: Operating cost
Business tax and surcharge 179,790.89 161,849.27
Selling expenses
Management expenses 31,818,917.17 31,300,547.10
Financial expenses -5,293,214.82 2,051,655.11
Loss on impairment of assets -2,504,328.21 765,870.09
Add: Income from fair value changes (Loss represented by a “-” sign)
Investment income (Loss represented by a “-” sign) 12.5 480,000.00 73,194,232.45
Including: Income from investment in affiliates and joint ventures
III. Operating income (Loss represented by a “-” sign) -20,539,025.39 41,778,899.62
Add: Non-operating income 203,000.00
Including: Profits from disposal of non-current assets
Less: non-operating expenditure 5,043,220.83 8,624,740.30
Including: Loss on disposal of non-current assets
IV. Total profits (Total losses represented by a “-” sign) -25,582,246.22 33,357,159.32
Less: Income tax expense 626,082.05 -191,483.11
V. Net profits (Net loss represented by a “-” sign) -26,208,328.27 33,548,642.43
Net profits attributable to owners of parent company
Profit/loss of minority shareholders
VI. After-tax net amount of other consolidated income
After-tax net amount of other consolidated income attributable to owners of parent company
1. Other consolidated incomes which cannot be re-classified as profit/loss in the following years
(1). Change in net liabilities or net assets of the defined benefit plan re-measured
(2). Share enjoyed in other consolidated incomes which cannot be re-classified as profit/loss in the invested entity with the equity method
2. Other consolidated incomes which will be re-classified into profit/loss in the following years
(1) Share enjoyed in other consolidated incomes which cannot be re-classified as profit/loss in the invested entity with the equity method
(2) Profit/loss of changes in fair value of financial assets available for sale
(3) Held-to-maturity investment re-classified as profit/loss of financial assets available for sale
(4) Effective part of profit/loss of cash flow hedging
(5) Translation differences from foreign currency financial statements
(6) Others
After-tax net amount of other consolidated income attributable to minority shareholders
VII. Total consolidated income -26,208,328.27 33,548,642.43
Total consolidated income attributable to owners of parent company
Total consolidated income attributable to minority shareholders Legal representative: Chief Financial Officer: Responsible person of accounting institution:
F-130 Cash Flow Statement
Prepared by Qinghai Provincial Investment Group Co., Ltd 2015 Unit: yuan, currency: RMB
Item Line No. Current year Last year
I. Cash flows of operating activities: 1 Cash received from sales of commodities or rendering of labor service 2 3,158,545.93 2,864,588.74 Tax rebates received 3 Other cash received relating to operating activities 4 406,494,072.23 27,255,448.30 Subtotal of cash inflows of operating activities 5 409,652,618.16 30,120,037.04 Cash paid for purchasing commodities or receiving labor services 6 Cash paid to and for employees 7 10,640,858.43 9,971,582.51 Cash paid for taxes and surcharges 8 6,930,004.38 10,494,515.87 Cash paid for other operating activities 9 422,598,949.08 23,540,607.28 Subtotal of cash outflows of operating activities 10 440,169,811.89 44,006,705.66 Net cash flows from operating activities 11 -30,517,193.73 -13,886,668.62 II. Cash flows from investing activities: 12 Cash received from return of investments 13 1,500,000,000.00 Cash received from investment income 14 Net cash received from disposal of fixed assets, intangible assets and other long-term 15 assets Net cash received from disposal of subsidiaries and other business units 16 Other cash received relating to investing activities 17 Subtotal of cash inflows of investing activities 18 1,500,000,000.00 Cash paid from purchase and construction of fixed assets, intangible assets and other long- 19 286,290.00 3,314,787.00 term assets Cash paid for investments 20 1,413,941,853.00 1,984,366,112.00 Net cash paid for acquisition of subsidiaries and other business units 21 Other cash paid relating to investing activities 22 3,700,000.00 54,810,989.78 Subtotal of cash outflows of investing activities 23 1,417,928,143.00 2,042,491,888.78 Net cash flows from investing activities 24 82,071,857.00 -2,042,491,888.78 III. Cash flows from financing activities: 25 Cash received from attracting investment 26 1,000,000,000.00 Including: Cash received by subsidiaries from attracting the investment of minority 27 shareholders Cash received from borrowings 28 10,692,774,100.00 10,480,553,639.00 Other cash received relating to financing activities 29 6,001,113,939.03 5,848,780,000.00 Subtotal of cash inflows of financing activities 30 16,693,888,039.03 17,329,333,639.00 Cash repayments of amounts borrowed 31 8,622,802,164.87 5,452,653,175.94
Cash payments for distribution of dividends or profit or cash payments of interest 32 940,287,393.47 519,034,852.29
Including: Dividend and profits paid by subsidiaries to minority shareholders 33 Other cash payments relating to financing activities 34 5,576,871,759.00 9,471,842,707.99 Subtotal of cash outflows of financing activities 35 15,139,961,317.34 15,443,530,736.22 Net cash flows from financing activities 36 1,553,926,721.69 1,885,802,902.78 IV. Effect of exchange rate change upon cash and cash equivalent 37 -778,640.16 V. Net increase of cash and cash equivalents 38 1,604,702,744.80 -170,575,654.62 Add: Beginning balance of cashes and cash equivalents 39 318,571,753.73 489,147,408.35 VI. Ending balance of cashes and cash equivalents 40 1,923,274,498.53 318,571,753.73 Legal representative: Chief Financial Officer: Responsible person of accounting institution:
F-131 Statement of Change in Owners’ Equity
Prepared by: For the year ended December 31, 2015 Unit: yuan, currency: RMB
Current year
Item Shareholders’ equity attributable to parent company Total shareholders’ equity Share capital Capital reserve Less: Treasury stock Other consolidated income Special reserve Surplus reserve Undistributed profits Others
I. Ending balance of last year 4,016,690,000.00 2,798,484,906.09 66,627,843.19 56,442,790.80 6,938,245,540.08
Add: Change in accounting policies
Correction of previous error
Others
II. Beginning balance of current year 4,016,690,000.00 2,798,484,906.09 66,627,843.19 56,442,790.80 6,938,245,540.08 III. Change in increase and decrease of current year 985,790,930.20 -28,121,328.27 957,669,601.93 (Decrease represented by a “-” sign)
1. Total consolidated income -26,208,328.27 -26,208,328.27
2. Capital contributed and decreased by shareholders
(1)ˊ Capital contributed by owners F-132 (2). Amount of share-based payment charged to shareholders’ equity
3ˊOthers
4. Profit distribution -1,913,000.00 -1,913,000.00
(1)ˊAllocated surplus reserve
(2)ˊAllocation of general risk reserve
(3)ˊDistribution to shareholders -1,913,000.00 -1,913,000.00
(4)ˊOthers
5. Internal carry-over of shareholders’ equity
(1). Capital reserve converted into the increased capital stock
(2). Surplus reserve converted into the increased capital stock
(3) Surplus reserve used for covering the deficit
(4)ˊOthers
6. Special reserve
(1). Allocated special reserve
(2). Used special reserve
7. Others 985,790,930.20 985,790,930.20
IV. Ending balance of current year 4,016,690,000.00 3,784,275,836.29 66,627,843.19 28,321,462.53 7,895,915,142.01
Legal representative: Chief Financial Officer: Responsible person of accounting institution: Statement of Change in Owners’ Equity
Prepared by: 2015 Unit: yuan, currency: RMB
Last year
Item Shareholders’ equity attributable to parent company Total shareholders’ equity Share capital Capital reserve Less: Treasury stock Other consolidated income Special reserve Surplus reserve Undistributed profits Others
I. Ending balance of last year 3,624,690,000.00 2,263,949,913.26 66,627,843.19 30,965,846.52 5,986,233,602.97
Add: Change in accounting policies
Correction of previous error
Others
II. Beginning balance of current year 3,624,690,000.00 2,263,949,913.26 66,627,843.19 30,965,846.52 5,986,233,602.97
III. Change in increase and decrease of current year 392,000,000.00 534,534,992.83 25,476,944.28 952,011,937.11 (Decrease represented by a “-” sign)
1. Total consolidated income 33,548,642.43 33,548,642.43
2. Capital contributed and decreased by shareholders 392,000,000.00 534,534,992.83 926,534,992.83
(1)ˊ Capital contributed by owners 392,000,000.00 534,534,992.83 926,534,992.83 F-133 (2). Amount of share-based payment charged to shareholders’ equity
3ˊOthers
4. Profit distribution -2,375,900.00 -2,375,900.00
(1)ˊAllocated surplus reserve
(2)ˊAllocation of general risk reserve
(3)ˊDistribution to shareholders -2,375,900.00 -2,375,900.00
(4)ˊOthers
5. Internal carry-over of shareholders’ equity
(1). Capital reserve converted into the increased capital stock
(2). Surplus reserve converted into the increased capital stock
(3) Surplus reserve used for covering the deficit
(4) Others
6. Special reserve
(1). Allocated special reserve
(2). Used special reserve
7. Others -5,695,798.15 -5,695,798.15
IV. Ending balance of current year 4,016,690,000.00 2,798,484,906.09 66,627,843.19 56,442,790.80 6,938,245,540.08
Legal representative: Chief Financial Officer: Responsible person of accounting institution: Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Qinghai Provincial Investment Group Co., Ltd
Notes to Financial Statements
As of the Year of 2015
(Expressed in RMB unless otherwise specified)
I. Basic Profile Qinghai Provincial Investment Group Co., Ltd (hereafter referred to as the Company) is the state-owned investment company approved and established by Qinghai Provincial People’s Government in 1993. It’s registered capital was originally the amount of 250 million Yuan and afterwards changed to the amount of RMB 1 billion Yuan in April 2004.Accoridng to the file (Shang Zi Pi No.1103) issued by the Ministry of Commerce of the People's Republic of China, the Company was restructured to the Sino-foreign joint venture invested by Qinghai Provincial State-owned Assets Supervision and Administration Commission, Ace Honest Group Limited and Pearl Bright Holdings Limited with the registered capital further being increased to the amount of 3.4 billion Yuan, of which the amount of 1.359 billion Yuan, 40 percent of registered capital, was invested by Qinghai Provincial State-owned Assets Supervision and Administration Commission on the basis of the evaluation of the Company’s net assets as of December 31 2004, the amount of 1.0205 billion Yuan, 30 percent of registered capital, by Ace Honest Group Limited in the form of the equivalent USD amount in cash, the amount of 1.0205 billion Yuan, 30 percent of registered capital, by Pearl Bright Holdings Limited in the form of the equivalent USD amount in cash. The total foreign investment in the Company reached the equivalent amount of RMB 639.1876 million Yuan. The Company’s paid-in capital reached the amount of 1998.1876 million Yuan after capital increase. The Company applied for the industrial and commercial registration of changes to Qinghai Province Administration for Industry on May 24, 2006 including the business license number of No.0420 Qi He Qin Zong Zi and the company nature of Sino-foreign joint
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F-134 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement venture. The Company made the public capital reduction announcement on December 24, 2008 according to the File issued by the Department of Commerce of Qinghai Province (Qing Shang Zi Zi [2008] No.420) concerning the forwarding of the File of Reply of Ministry of Commerce on Approving Capital Reduction of Qinghai Provincial Investment Group Co., Ltd in Principle (Shang Zi Pi [2008] No.1471) and therefore refunded the amount of equivalent amount of 639.1876 US dollars to Ace Honest Group Limited and Pearl Bright Holdings Limited. The Company’s registered capital was changed to the amount of 1359 million Yuan after capital reduction with the company nature being restored to state-owned. According to the file of Official Reply of Qinghai Provincial State-owned Assets Supervision and Administration Commission (Qing Guo Zi Chan [2012] No.132) on the Increase of Qinghai Provincial Investment Group Co., Ltd’s Registered Capital, Qinghai Provincial State-owned Assets Co., Ltd contributed the investment of RMB 500 million Yuan in Qinghai Provincial Investment Group Co., Ltd on June 15, 2012. The registered capital reached the amount of 1859 million Yuan after capital increase. According to the Company’s modified articles of association and the file of Official Reply of Qinghai Provincial State-owned Assets Supervision and Administration Commission (Qing Guo Zi Chan [2012] No.198) on the Cross-holding between Qinghai Provincial Investment Group Co., Ltd and Xining Economic Development Zone Investment Holding Group Co., Ltd, Xining Economic Development Zone Investment Holding Group Co., Ltd contributed the investment of RMB 465 million Yuan in Qinghai Provincial Investment Group Co., Ltd on October 22, 2012. The registered capital reached the amount of 2324 million Yuan after capital increase. According to the Company’s modified articles of association and the file of Official Reply of Qinghai Provincial State-owned Assets Supervision and Administration Commission (Qing Guo Zi Chan [2013] No.184) on the Share-holding of West Mining Co., Ltd, the Subsidiary of West Mining Group Co., Ltd, in Qinghai Provincial Investment Group Co., Ltd with its Coal Power Assets and Alumina-Carbon Assets, the Company applied for the increase of registered capital by RMB 1300.69 million Yuan on November 5, 2013. The registered capital reached the amount of 3624.69 million Yuan after capital increase. According to the capital increase and stock expansion agreement and the file of Official Reply of Qinghai Provincial State-owned Assets Supervision and Administration Commission (Qing Guo Zi Chan [2014] No.307) on the Cross-holding
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F-135 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement between Qinghai Provincial Investment Group Co., Ltd and Xining Economic Development Zone Investment Holding Group Co., Ltd. The Company applied for the increase of registered capital by RMB 392 million Yuan on November 5, 2013. The registered capital reached the amount of 4016.69 million Yuan after capital increase. Domicile: No.36 Xinning Road, Chengxi District, Xining Legal person representative: Hong Wei Company nature: limited liability company (state-owned holding) Scope of business: operation of state-owned assets authorized by the state-owned assets supervision and administration commission; ownership- linked capital operation; full-course management of investment project as the investor; handling of equipment leasing, fund raising, financing (except for the projects forbidden or restricted by government); project investment, bonds investment and equity investment; credit guarantee trusteeship, investment consulting service; raw materials sourcing; production and sales of carbon, aluminum and aluminum alloy products (unless otherwise specified by the state); coal wholesale (expiry date of business license: June 11, 2016). The Company sets up the investment management department, assets management department, operation department, financial department, audit department, general affairs department, business planning department and party-mass relation department. II. Preparation basis of financial statement The Company recognizes and measures the transactions and events actually incurred according to the accounting standards for business enterprises and prepares the financial statements on the going concern basis. III. Statements concerning the compliance with accounting standards for business enterprises The financial statements prepared by the Company meet the requirements of accounting standards for business enterprises and truthfully and completely reflects the Company’s financial position, operation results, changes in ownership’ s interests, cash flows, etc. IV. Notes to significant accounting policies and estimates (I) Fiscal year The fiscal years starts on January 1 and ends on December 31 every year on the calendar basis. (II) Bookkeeping currency
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F-136 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
The Company adopts the RMB as bookkeeping currency. (III) Bookkeeping Basis and Pricing Principle The company adopts the accrual system as the bookkeeping base. The financial assets measured at fair value and changes recorded into current period profit or loss, the financial assets available for sales, the assets and liabilities acquired in a combination not under the same control, the assets acquired or delivered through debts restructuring, and the assets acquired or delivered through the non-monetary assets exchange with commercial substance shall be measured at the far value, and the other assets or liabilities at the historical cost. (IV) Foreign currency transaction and foreign currency statement translation The foreign currency transaction should be initially measured at the spot exchange rate between the foreign currency and bookkeeping currency on the transaction date and converted to the bookkeeping amount. On the balance sheet date, the foreign currency assets should be recorded at the spot exchange rate between the foreign currency and bookkeeping currency on the balance sheet date. The exchange profit or loss thus incurred should be recorded in the current period profit or loss except for the exchange balance arising from the foreign currency borrowing in connection to the construction or purchase of assets eligible for capitalization. The asset and liability items in the balance sheets shall be translated at a spot exchange rate on the balance sheet date. Among the owner's equity items, except the ones as "undistributed profits", others shall be translated at the spot exchange rate at the time when they are incurred. The income and expense items in the profit statements shall be translated at the spot exchange rate of the transaction date. The balance thus incurred shall be presented separately as translation reserve under the owner's equity item of the consolidated balance sheets. (V) Cash and cash equivalents Cash refers to cash on hand and deposits free of pledge and freezing and available for payment at any time. Cash equivalents refers to short-term and highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. (VI) Financial assets and financial liabilities 1. Classification of financial assets Financial assets acquired by the Company shall be classified into the following four categories:
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F-137 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
1) the financial assets which are measured at their fair values and the variation of which is recorded into the profits and losses of the current period; 2) the investments which will be held to their maturity 3) account receivables 4) financial assets available for sale 2. Recognition and measurement of financial assets 1) Recognition and measurement of financial assets which are measured at their fair values and the variation of which is recorded into the profits and losses of the current period A. The fair value of financial assets which are measured at their fair values and the variation of which is recorded into the profits and losses of the current period shall be included into the initially recognized amount when acquired, and the relevant transaction expenses thus incurred be included into the current period profit and loss. The cash dividend or bonds interest declared for distribution contained in the actual payment for the acquisition of financial assets which are measured at their fair values and the variation of which is recorded into the profits and losses of the current period shall be included in the initially recognized amount rather than the accounts receivable. The cash dividend or bonds interest subsequently received shall directly offset the initially recognized amount of such financial assets. The interest or cash dividend calculated according to contract during the term of holding shall offset the carrying amount of such financial assets when actually received. B. On the balance sheet date, the profits and losses, arising from the change in the fair value of the financial asset or financial liability which is measured at its fair value and of which the variation is recorded into the profits and losses of the current period, shall be recorded into the profits and losses of the current periodDŽ On disposal of the financial assets or liabilities, the difference between the fair value of the financial assets and initially recognized amount shall be recorded as the current period investment income and the profits and losses on the changes in fair value be adjusted. 2) the investments which will be held to their maturity A. The held-to-maturity investment refers to a non-derivative financial asset with a fixed date of maturity, a fixed or determinable amount of repo price and which the enterprise holds for a definite purpose or the enterprise is able to hold until its maturity.
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F-138 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Where an enterprise re-classifies its outstanding held-to-maturity investment as the amount of available-for-sale financial asset, and such amount accounts for at least 5 percent of the amount before such investment is sold or re-classified, the surplus of such investment shall be re-classified as an available-for-sale financial asset which shall not be classified as a held-to-maturity investment within the current accounting year and the following two complete accounting years. B. The fair value and relevant total transaction costs of held-to-maturity investment shall be included in the initially recognized amount when acquired. The bonds interest included in the actual payment for the acquisition of held-to-maturity investment shall be included in the initially recognized amount rather than the account receivables. Such interests shall directly offset the initially recognized amount when received. C. The interest income of the held-to-maturity investment shall be recognized with the real interest method during the term of holding and added to the carrying amount of held-to-maturity investment. The real interest rate shall be determined at the time of the acquisition of held-to-maturity investment and kept stable during the subsequent period. On the balance sheet date, the held-to-maturity investment shall be recorded at the amortized cost. D. On disposal of held-to-maturity investment, the difference between the fair value of the actual payment for the held-to-maturity investment and the carrying amount of such investment shall be recognized as the invesmnt gains. 3) Accounts receivable A. Accounts receivable refers to the non-derivative financial assets for which there is no quoted price in the active market and of which the repo amount is fixed or determinable, including the notes receivable, accounts receivable and long-term receivables arising out of the sales of commodities or the rendering of services, and the other receivables from the other units or individuals. B. The initially recognized amount of the accounts receivable from the sales of commodity or the rendering of services shall be based on the amounts receivable of the contract or agreement concluded by and between the Company and the buyer unless the amounts receivables above are not fair. If the collection of the price as stipulated in the contract or agreement is delayed and if it has the financing nature (normally three years above), the revenue incurred by selling goods shall be ascertained in accordance with the fair value of the receivable price as stipulated in the contract or agreement.
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F-139 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
C. On the balance sheet date, the Company’s accounts receivable shall be measured at the amortized cost. On the collection or disposal of the amount receivable, the difference between fair value of the actual payment and the carrying value shall be included in the current period profit or loss. 4) Financial assets available for sale A. Available-for-sale financial assets refers to the financial assets not classified into financial assets which are measured at their fair values and the variation of which is recorded into the profits and losses of the current period, held-to-maturity investment and accounts receivable, including the available-for-sale equity investment and debt investment. B. The fair value and relevant total transaction costs of available-for-sale financial assets shall be included in the initially recognized amount when acquired. The bonds interest included in the actual payment for the acquisition of held-to-maturity investment shall be included in the initially recognized amount rather than the account receivables. Such interests shall directly offset the initially recognized amount when received. C. The interest or cash dividend of the available-for-sale financial assets shall be included in the Company’s investment income during the term of holding. On the balance sheet date, the available-for-sale financial assets shall be measured at the fair value with the change to the fair value being included in the other comprehensive income. D. On disposal of available-for-sale financial assets, the difference between the actual payment together with amount of disposal corresponding to the accumulative amount of the changes of the fair value originally recorded in the other comprehensive income and carrying value of financial assets shall be recognized as investment income. 3. Recognition and measurement of transfer of financial assets 1) The Company’s transfer of financial assets include the entire transfer and partial transfer of financial assets. 2) Where the Company has transferred nearly all of the risks and rewards related to the ownership of the financial asset to the transferee, it shall stop recognizing the financial asset. If it retained nearly all of the risks and rewards related to the ownership of the financial asset, it shall not stop recognizing the financial asset. Where the Company does not transfer or retain nearly all of the risks and rewards
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F-140 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement related to the ownership of a financial asset, but gives up its control over the financial asset, the Company shall stop recognizing the financial asset. If the Company does not give up its control over the financial asset, it shall, according to the extent of its continuous involvement in the transferred financial asset, recognize the related financial asset and recognize the relevant liability accordingly. 3) If the transfer of an entire financial asset satisfies the conditions for stopping recognition, the difference between the amounts of the following 2 items shall be recorded in the profits and losses of the current period: A. The book value of the transferred financial asset; B. The sum of consideration received from the transfer, and the accumulative amount of the changes of the fair value originally recorded in the owner's equities (in the event that the financial asset involved in the transfer is a financial asset available for sale). Where the Company obtains a new financial asset or undertakes a new financial liability due to the transfer of a financial asset, it shall, on the date of transfer, recognize the financial asset or liability according to its fair value, and shall treat the net amount as an integral part of the aforesaid consideration through deducting the financial liability from the financial asset. Where the Company concludes a service contract with the transferee of a financial asset on providing relevant services (including receiving cash flow of the financial asset and delivering the received cash flow to the fund preservation institution as designated), it shall recognize a service asset or liability based on the service contract. The service liability shall be subject to the initial measurement according to its fair value and shall be treated as an integrate part of the aforesaid consideration. 4) If the transfer of partial financial asset satisfies the conditions to stop the recognition, the entire book value of the transferred financial asset shall, between the portion whose recognition has been stopped and the portion whose recognition has not been stopped (under such circumstance, the service asset retained shall be deemed as a portion of financial asset whose recognition has not been stopped), be apportioned according to their respective relative fair value, and the difference between the amounts of the following 2 items shall be included into the profits and losses of the current period: A. The book value of the portion whose recognition has been stopped; B. The sum of consideration of the portion whose recognition has been stopped, and
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F-141 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement the portion of the accumulative amount of the changes in the fair value originally recorded in the owner's equities which is corresponding to the portion whose recognition has been stopped (in the event that the financial asset involved in the transfer is a financial asset available for sale). The portion of the accumulative amount of changes in the fair value originally recorded in the owner's equities which corresponds to the portion whose recognition has been stopped, shall be recognized after the apportionment of the accumulative amount according to the relative fair values of the portion of financial asset whose recognition has been stopped and the portion of financial asset whose recognition has not been stopped. 5) If the Company still retains nearly all of the risks and rewards related to the ownership of the transferred financial asset, it shall continue to recognize the entire financial asset to be transferred and shall recognize the consideration it receives as a financial liability. The financial asset shall not be used to offset the relevant financial liabilities it has recognized. In the subsequent accounting periods, the enterprise shall continue to recognize the income generated by the financial asset and the expenses generated by the financial liability. 4. Recognition method of fair value of major financial assets 1) As for the financial assets or financial liabilities for which there is an active market, the quoted prices in the active market shall be used to determine the fair values thereof. 2) Where there is no active market for a financial instrument, the enterprise concerned shall adopt value appraisal techniques to determine its fair value. 3) As for the financial assets initially obtained or produced at source and the financial liabilities assumed, the fair value thereof shall be determined on the basis of the transaction price of the market. 4) Where an enterprise adopts the method of future cash flow capitalization to determine the fair value of a financial instrument, it shall use the market returns ratio of other financial instruments with essentially the same contractual stipulations and features as the rate of capitalization. Where there is little difference between the current value of the short-term accounts receivable and accounts payable whose interest rate has not been indicated and the actual transaction price, it may be measured at the actual transaction price.
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F-142 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
5. Impairment of major financial assets (not including the accounts receivable) Where there is any objective evidence proving that the financial assets other than those measured at their fair values and of which the variation is recorded into the profits and losses of the current period has been impaired, an impairment provision shall be made as follows. 1) Impairment of held-to-maturity investment Where there is any objective evidence proving that the held-to-maturity financial assets are impaired on each balance sheet date,, the carrying amount of the said financial asset shall be written down to the current value of the predicted future cash flow (excluding the loss of future credits not yet occurred), and the amount as written down shall be recognized as loss of the impairment of the asset and shall be recorded into the profits and losses of the current period. Where any held-for-maturity financial asset is recognized as having suffered from any impairment loss, if there is any objective evidence proving that the value of the said financial asset has been restored, and it is objectively related to the events that occur after such loss is recognized (e.g., the credit rating of the debtor has been elevated, etc.), the impairment-related losses as originally recognized shall be reversed and be recorded into the profits and losses of the current period. However, the reversed carrying amount shall not be any more than the post-amortization costs of the said financial asset on the day of reverse under the assumption that no provision is made for the impairment. 2) Impairment of available-for-sale financial assets If the fair value of the Company’s available-for-sale financial assets experiences the significant fall, or such downward trend is expected not to be temporary after the consideration of all relevant factors on the balance sheet date, the difference between the fair value and carry value of such financial assets shall be recognized as the impairment. Where an available-for-sale financial asset is impaired, even if the recognition of the financial asset has not been terminated, the accumulative losses arising from the decrease of the fair value of the owner’s equity which was directly included shall be transferred out and recorded into the profits and losses of the current period. As for the available-for-sale debt instruments whose impairment-related losses have been recognized, if, within the accounting period thereafter, the fair value has risen and are objectively related to the subsequent events that occur after the originally
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F-143 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement impairment-related losses were recognized, the originally recognized impairment-related losses shall be reversed and be recorded into the profits and losses of the current period. The impairment-related losses incurred to an available-for-sale equity instrument investment shall not be reversed through profits and losses. 6. Financial liabilities 1) The Company’s financial liabilities are classified into the financial liability measured at its fair value and of which the variation is recorded into the profits and losses of the current period and other financial liability. 2) The initial and subsequent measurement of the financial liability measured at its fair value and of which the variation is recorded into the profits and losses of the current period shall be based on the fair value. 3) Other financial liability includes those other than the financial liability measured at its fair value and of which the variation is recorded into the profits and losses of the current period, including the bonds issued by the Company, accounts payable from the purchase of commodity, long-term payable, etc. Fair value and other total relevant transaction costs of other financial liability shall be included in the initially recognized amount and subsequently measured at the amortized cost. 4) The determination of fair value of the Company’s major financial liability is the same as the determination of fair value of the major financial assets. (VII) Provision for bad debts of accounts receivable 1. Recognition criteria Accounts receivable that cannot not be collected after the liquidation of bankruptcy debtor according to law, due to the death of debtor who doesn’t leave any legacy or have any compulsory bearer or since the debtor is unable to make the repayment within three years, should be recognized as the provision for bad debts after the approval by the shareholders’ meeting or board of directors. 2. Accounting method: the Company adopts the allowance method to record the provision for bad debts 3. Recognition method: the Company will make the reasonable estimate about relevant information such as the previous amount and proportion of provision of bad debts, actual financial situation and cash flow of debtor. 4. Recognition method and proportion of provision for bad debts The Company records the provision for bad debts according to the percentage of
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F-144 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
year-end balance (normally 3 percent) except for the subsidiaries Qinghai Qiaotou Aluminum Electricity Co.,Ltd, Qinghai Sanjiang Hydroelectric Development Co.,Ltd, Qinghai Jinrui Mining Co.,Ltd, Qinghai Xihai Coal Power Co., Ltd, Qinghai Baihe Aluminum Co., Ltd. If the conclusive evidence shows that the aforementioned accounting method for the provision for bad debts is not suitable to the certain kind of accounts receivable, the individual identification method shall be applicable. The Company’s subsidiary Qinghai Qiaotou Aluminum Electricity Co., Ltd adopts the accounts receivable aging method and the individual identification method to set up the provision for bad debts according to the following proportion:
Aging Proportion (%)
Within 6 months 0
6 months ~ 1 year 1
1 ~ 2 years 3
2 ~ 3 years 10
3 years above 30
The Company’s subsidiary Qinghai Sanjiang Hydroelectric Development Co., Ltd adopts the accounts receivable aging method and the individual identification method to set up the provision for bad debts according to the following proportion:
Aging Proportion (%)
Within 1 year 1
1 ~ 2 years 5
2 ~ 3 years 10
3 years above 30
The Company’s subsidiary Qinghai Jinrui Mining Development Co., Ltd sets up the provision for bad debts according to the following method: recognition criteria and accounting method for the provision for bad debts of single-item high-amount accounts receivable
Recognition criteria Exceeds 100 thousand Yuan
An impairment test shall be separately made on the single-item Accounting method high-amount accounts receivable. If any objective evidence shows that it has been impaired, the provision for bad debts shall be recognized
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F-145 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Aging of accounts receivable method
Age Proportion (%) Proportion (%) Within 1 year (including 1 year) 5 5
1-2 years 15 15
2-3 years 30 30
3-4 years 50 50
4 years above 80 80
The Company’s subsidiaries Qinghai Xihai Coal Power Co., Ltd and Qinghai Baihe Aluminum Co., Ltd adopt the combination setup of provision for bad debts on basis of aging of accounts receivable.
Age Proportion (%) Proportion (%) Within 1 year (including 1 year, the same 55 as below) 1-2 years 20 20
2-3 years 50 50
3 years above 100 100
The accounts receivable that cannot be collected after the repayment of the property or legacy of bankruptcy or obituary debtor or after the debtor is unable to make the repayment within the prescribed time limit, should be written off after the approval by the Company’s board of directors. (VIII) Inventory 1. The Company’s inventories mainly include raw materials, low-value perishable, packaging articles, in-process products and finished products. 2. The Company’s inventories shall be measured at historic cost method when acquired. The raw materials, in-process products and finished product shall be accounted at the weighted average method when issued, and the packaging articles and low-value perishables at the one-off amortization method. 3. the inventories shall be measured whichever is lower in accordance with the cost and the net realizable value at the end of fiscal year. If the cost of inventories is higher than the net realizable value, the provision for the loss on decline in value of inventories shall be made and be included in the current profits and losses. If the factors causing any write-down of the inventories have
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F-146 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement disappeared, the amount of write-down shall be resumed and be reversed from the provision for the loss on decline in value of inventories that has been made. The reversed amount shall be included in the current profits and losses. (IX) Long-term equity investment 1. The Company’ long-term equity investments include the equity investment in the subsidiaries, joint ventures and associated entities. The equity investment in the subsidiary means that the Company is able to control an invested entity. The equity investment in the joint venture means that the Company and other parties do joint control over an invested entity. The equity investment in the associated entity means that the Company is able to have significant influences on an invested entity. 2. The Company’s long-term equity investment measured shall be measured at its initial investment cost when acquired. If the initial investment cost of long-term equity investment measured at the equity method is less than the investing enterprise' attributable share of the fair value of the invested entity's identifiable net assets for the investment, the difference shall be included in the non-operation income. If the initial investment cost of long-term equity investment measured at the equity method is more than the investing enterprise' attributable share of the fair value of the invested entity's identifiable net assets for the investment, the initial cost of the long-term equity investment may not be adjusted. 3. The Company’s equity investment in the subsidiaries is accounted for at the cost method and adjusted to the equity method when the preparation of consolidated financial statements; the equity investment in the joint venture and associated entity at the equity method. After the Company obtains a long-term equity investment of joint venture and associated entity, it shall, in accordance with the attributable share of the net profits or losses of the invested entity, recognize the investment profits or losses and other comprehensive income and adjust the book value of the long-term equity investment. The Company shall, on the ground of the fair value of all identifiable assets of the invested entity when it obtains the investment, recognize the attributable share of the net profits and losses of the joint venture and associated entity after it adjusts the net profits of the invested entity. The Company shall, in the light of the profits or cash dividends declared to distribute by the invested entity, calculate the proportion it shall obtain, and shall reduce the book value of the long-term equity investment
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F-147 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement correspondingly. The share of other change of owner’s equity than net profit or loss, other comprehensive income and profit distribution shall be recorded in the capital reserve at the time of the adjustment of book value of long-term equity investment. The Company shall recognize the net losses of the invested enterprise until the book value of the long-term equity investment and other long-term rights and interests which substantially form the net investment made to the invested entity are reduced to zero, unless the Company has the obligation to undertake extra losses or substantially constitute the long-term equity investment in invested entity . 4. Where there is any evidence indicating that the recoverable amount of long-term equity investment is lower than the carrying value, the Company shall made the impairment test of long-term equity investment on the balance sheet date. If the test result indicates that the recoverable amount of long-term equity investment is less than its book value, the carry value shall be reduced to the recoverable amount, and the written-off amount shall be recognized as loss of the impairment of the asset and shall be recorded into the profits and losses of the current period. Once any loss of asset impairment is recognized, it shall not be switched back before the impaired long-term equity investment is disposed of. (X) Investment property 1. The investment property refers to the real estates held for generating rent and/or capital appreciation, including the right to use any building which has already been rented, the right to use any land which has already been rented and the right to use any land which is held and prepared for transfer after appreciation. 2. The initial measurement of the investment property shall be made at its cost. For the follow-up expenses pertinent to an investment property, if they meet the capitalization conditions, they shall be included in the cost of the investment property; otherwise, if they fail to meet the capitalization conditions, they shall be included in the current profits and losses when they are incurred. 3. Where the Company adopts the follow-up measurement of the investment property through the fair value pattern, the specific assets valuation company shall evaluate the change of fair value of investment property. Where the Company adopts the follow-up measurement of the investment property through the cost pattern and there is the evidence indicating the recoverable amount of investment property is less than its carrying value, it shall make the impairment test of investment property on the balance sheet date. If the test result indicates that the
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F-148 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement recoverable amount of investment property is lower than its carrying value, the carrying value shall be written off to the recoverable amount, and the written-off amount shall be recognized as both the impairment loss of assets in the current period profit or loss and the provision of impairment of investment property. Once any loss of asset impairment is recognized, it shall not be switched back before the impaired long-term equity investment is disposed of. (XI) Fixed assets 1. The Company recognizes the tangible assets held for the sake of producing commodities, rendering labor service, renting or business management and whose life is in excess of one fiscal year, including building, special equipment, general equipment, transport equipment, mining equipment, machinery, electric equipment, monitoring equipment, office equipment and other equipment. 2. No fixed asset may be recognized by the Company unless it simultaneously meets the conditions as follows: 1) The economic benefits pertinent to the fixed asset are likely to flow into the Company; and 2) The cost of the fixed asset can be measured reliably. The components of a fixed asset have different useful lives or cause economic benefits for the enterprise in different ways and to which different depreciation rates or depreciation methods apply, and they shall be recognized as fixed assets on an individual component basis. The subsequent expenses related to a fixed asset refers to the routine repair expenses and overhaul expenses and renovation expenses of fixed assets in its usage process. If the subsequent expenses related to a fixed asset meet the recognition conditions, they shall be included in the cost of fixed asset and the book value of replaced part be deducted; otherwise, they shall be included in the current profits and losses. 3. The fixed assets shall be accounted for at cost when acquired 4. The Company adopts the straight-line method to record the depreciation of fixed assets. However, the fixed assets that have been fully depreciated but are still in use and the land that is separately measured shall be excluded. The estimated useful life, expected net salvage value and depreciation rate of different kinds of fixed assets shall be as follows:
Estimated net salvage Annual depreciation rate Category Estimated useful live value (%) (%)
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F-149 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Building 8—40 3-10 2.25—11.25
Special equipment 12—32 0-10 3.13—8.08
General equipment 4—18 0-10 5.39—25
Transport equipment 6—10 0-3 9.7—16.17
Mining equipment 5—15 10 18-6
Machinery equipment 25 5-10 3.6-3.8
Electronic equipment 5 5-10 18-19
Monitoring equipment 5 5-10 18-19
Office equipment 5 5-10 18-19
Other equipment 5 5-10 18-19
5. Where there is any evidence indicating that the recoverable amount of fixed assets is lower than the carrying value, the Company shall made the impairment test of fixed assets on the balance sheet date. If the test result indicates that the recoverable amount of fixed assets is less than its book value, the carry value shall be reduced to the recoverable amount, and the written-off amount shall be recognized as loss of the impairment of the asset and recorded into the profits and losses of the current period. Once any loss of asset impairment is recognized, it shall not be switched back before the impaired fixed assets is disposed of. (XII) Construction in progress 1. Pricing of construction in progress and the criteria of the conversion of construction in progress to fixed assets Construction in progress should be recorded at actual costs incurred and be accounted for separately. If a constructed fixed asset has reached the working condition for its intended use but the final project accounts have not been completed and approved, the asset should be transferred to fixed assets at an estimated value based on project budget, contracted construction price or actual project costs. Depreciation should also be provided in accordance with relevant requirements under this System. After the project accounts have been approved, the estimated values should be adjusted accordingly. 2. The Company conducts the comprehensive assessment of construction in progress at the end of every fiscal year. Where the construction in progress is assessed to be impaired, for instance, where the performance of construction work is lagged in performance or technology so that it is very uncertain to bring the economic interest
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F-150 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement to the Company, or construction work has been suspended for a long period of time and is not expected to re-commence within three years, the Company should recognize a provision for impairment loss in accordance with the above principles. Once any loss of asset impairment is recognized, it shall not be switched back before the impaired construction in progress is disposed of. (XIII) Borrowing cost 1. Borrowing costs refers to the interest and other relevant costs, which are incurred by the Company in the borrowing of loans, including interest on borrowings, amortization of discounts or premiums on borrowings, ancillary expenses, and exchange balance on foreign currency borrowings. 2. Where the borrowing costs incurred to the Company can be directly attributable to the acquisition and construction or production of assets eligible for capitalization, it shall be capitalized and recorded into the costs of relevant assets. Other borrowing costs shall be recognized as expenses on the basis of the actual amount incurred, and shall be recorded into the current profits and losses. The term "assets eligible for capitalization" shall refer to the fixed assets, investment real estate, inventories and other assets, of which the acquisition and construction or production may take quite a long time to get ready for its intended use or for sale. 3. Where the asset disbursements have already incurred, the borrowing costs has already incurred and the acquisition and construction or production activities which are necessary to prepare the asset for its intended use or sale have already started, the Company shall start to capitalize the assets-related borrowing cost which meets the capitalization conditions. Where the acquisition and construction or production of a qualified asset is interrupted abnormally and the interruption period lasts for more than 3 months, the capitalization of the borrowing costs shall be suspended. The borrowing costs incurred during such period shall be recognized as expenses, and shall be recorded into the profits and losses of the current period, till the acquisition and construction or production of the asset restarts. When the qualified asset under acquisition and construction or production is ready for the intended use or sale, the capitalization of the borrowing costs shall be ceased. The borrowing costs incurred after the qualified asset under acquisition and construction or production is ready for the intended use or sale shall be recognized as expenses at the incurred amount when they are incurred, and shall be recorded into the profits and losses of the current period.
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F-151 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
4. As for specifically borrowed loans for the acquisition and construction or production of assets eligible for capitalization, the to-be-capitalized amount of interests shall be determined in light of the actual cost incurred of the specially borrowed loan at the present period minus the income of interests earned on the unused borrowing loans as a deposit in the bank or as a temporary investment. Where a general borrowing is used for the acquisition and construction or production of assets eligible for capitalization, the enterprise shall calculate and determine the to-be-capitalized amount of interests on the general borrowing by multiplying the weighted average asset disbursement of the part of the accumulative asset disbursements minus the general borrowing by the capitalization rate of the general borrowing used. Where there is any discount or premium, the amount of discounts or premiums that shall be amortized during each accounting period shall be determined by the real interest rate method, and an adjustment shall be made to the amount of interests in each period. 5. During the period of capitalization, the exchange balance on foreign currency borrowings shall be capitalized, and shall be recorded into the cost of assets eligible for capitalization. 6. For the ancillary expense incurred to a specifically borrowed loan, those incurred before a qualified asset under acquisition, construction or production is ready for the intended use or sale shall be capitalized at the incurred amount when they are incurred, and shall be recorded into the costs of the asset eligible for capitalization. Those incurred after a qualified asset under acquisition and construction or production is ready for the intended use or sale shall be recognized as expenses on the basis of the incurred amount when they are incurred, and shall be recorded into the profits and losses of the current period. The ancillary expenses arising from a general borrowing shall be recognized as expenses at their incurred amount when they are incurred, and shall be recorded into the profits and losses of the current period. (XIV) Intangible assets 1. The term "intangible asset" refers to the identifiable non-monetary assets possessed or controlled by enterprises which have no physical shape, including patent, non-patent, trademark, land use right and franchise. 2. Identifiable non-monetary assets which have no physical shape may be confirmed
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F-152 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement when it meets the conditions simultaneously as follows: 1) The economic benefits related to intangible assets are likely to flow into the enterprise; and 2) The cost of intangible assets can be measured reliably. 3. The expenditures for its internal research and development projects of the Company shall be classified into research expenditures and development expenditures. The research expenditures for its internal research and development projects of an enterprise shall be recorded into the profit or loss for the current period. The development expenditures for its internal research and development projects of an enterprise may be confirmed as intangible assets when they satisfy the following conditions simultaneously: 1) It is feasible technically to finish intangible assets for use or sale; 2) It is intended to finish and use or sell the intangible assets; 3) The Company has the conclusive evidence indicating that there is a potential market for the products manufactured by applying the intangible assets or there is a potential market for the intangible assets itself. 4) It is able to finish the development of the intangible assets, and able to use or sell the intangible assets, with the support of sufficient technologies, financial resources and other resources. 5) The development expenditures of the intangible assets can be reliably measured. 4. The intangible assets shall be initially measured by the Company according to its cost. 5. The Company shall amortize the cost of intangible assets with the straight-line method within its estimated service life. 6. The Company conducts the comprehensive assessment of intangible assets at the end of every fiscal year. Where the intangible assets is assessed to be impaired, for instance, where the performance of construction work is lagged in performance or technology so that it is very uncertain to bring the economic interest to the Company, or construction work has been suspended for a long period of time and is not expected to re-commence within three years, the Company should recognize a provision for impairment loss in accordance with the above principles. Once any loss of asset impairment is recognized, it shall not be switched back before the impaired intangible assets is disposed of. (XV) Long-term deferred expenses
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F-153 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Long-term deferred expenses are other expenses paid by the Company, for which the amortization period is more than one year. The long-term deferred expenses are evenly amortized over the respective beneficial periods, including: The rental of fixed assets acquired under pre-payment pattern shall be evenly amortized within the prescribed time limit of lease contract. Costs of improvements to a leased asset under the operating lease should be amortized over the shorter of the lease term and the useful life of the leased asset. Decoration expenses of fixed assets acquired under the finance lease which meet the capitalization conditions shall be evenly amortized over the shorter of the interval between two decoration, the remaining lease term and the remaining service life of fixed assets. (XVI) Employee compensation 1. The term " employee compensation " refers to all kinds of payments and other relevant expenditures given by the Company in exchange of the services offered by the employees, or the termination of employment contract relationship, including the short-term remuneration, after-service benefit, dismissal benefit and other long-term employee benefits. 2. Short-term remuneration refers to the employee compensation to be paid by the Company to the employees within 12 months after the reporting period where the employee renders the relevant service to the Company, except for the labor compensation from the termination of employee contract. Short-term remuneration includes employee wage, bonus, stipend and allowance, employee welfare fee, medical insurance premium, work-related injury insurance premium, maternity insurance premium, housing provident fund, trade union fee and staff’s education fund, short-term paid absence from work, short-term profit share scheme, non-monetary benefit and other short-term remuneration. The Company shall record the short-term remuneration actually incurred as the liability and the current period profit or loss during the service period which the employees render the service, except for those required under the other accounting standards or for the accounting of cost of assets. Profit sharing scheme refers to the agreement whereby the Company concludes with the employees about the payment of employee remuneration on the basis of the profit or other operating result due to the services rendered by the employee. The profit sharing scheme can be recognized as the employee remuneration payable if it meets
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F-154 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement the following conditions: 1) The Company bears the legitimate obligation or constructive obligation for payment of employee remuneration as a result of past event; 2) the amount of employee remuneration payable from the profit sharing scheme can be reliably estimated. The amount of such obligation can be reliably estimated if one of the following three situations can be met: A. The Company has determined the amount of employee remuneration payable prior to the approval of the financial statements; B. The formal provisions for the profit sharing scheme contain the method of how to determine the amount of employee remuneration. C. the past practices provide the obvious evidence of the Company’s constructive obligation. Paid absence from work refers to the employee’s absence from leave paid by the Company, including paid leave, sick leave, short-term disability, marriage leave, maternity leave, funeral leave, family visit leave, etc. Profit sharing scheme refers to the agreement whereby the Company concludes with the employees about the payment of employee remuneration on the basis of the profit or other operating result due to the services rendered by the employee. The paid absence from work is classified into the accumulative paid absence from work and the non-accumulative paid absence from work. The Company recognizes the employee remuneration related to the accumulative paid absence from work when the Company’s employees render the services to increase their rights to the future absence from work, which shall be recognized at the expected payment by the Company for the unexercised rights to the future absence from work. The employee remuneration related to the non-accumulative paid absence from work during the accounting period when the employees claim the paid absence from work. 3. After-service benefit refers to the kinds of remunerations and benefits to the employees who already retire or resign from the Company after the Company obtains the services rendered by such employees. Such benefit doesn’t include the short-term remuneration and dismissal benefit.
The Company classifies the after-service benefits into the vested contribution plan and vested benefit plan. The Company shall recognize the payable calculated according to the vested contribution plan as the liability and record into the current period profit & loss or relevant asset costs during the accounting period when the employees render the service. The accounting method for benefit plan shall be classified into the following four steps: 1) make the estimate of the relevant population variable and
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F-155 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement financial variable on the basis of unbiased, consistent actuarial assumption according to the expected accumulative benefit unit method to measure the obligations of benefit plan and determine the attributable period of relevant obligations; 2) if the vested benefit plan contains the assets, the surplus or deficit from the difference between the fair value of vested benefit plan assets from the fair value of vested benefit plan obligation shall be recognized the net liability or net asset of the vested benefit plan. In case of the surplus of the vested benefit plan, the lower of the surplus of vested benefit plan and upper limit thereof shall be the net assets of benefit plan; 3) At the end of reporting period, the Company shall record the employee remuneration of defined benefit plan into the current period profit & loss; 4) The re-measured change of net assets of vested benefit plan or net obligations thereof shall be recognized in the other comprehensive income and not be converted to the profit or loss afterwards. 4. Dismissal benefit refers to the compensation to the employees who are dismissed by the Company prior to the expiry of the employee labor contract or encouraged thereby to voluntarily accept the lay-off. The dismissal benefit offered by the Company to the employees shall be recognized into the current period profit or loss and as the obligation of employee remuneration on the earlier of the following dates : 1) when the Company is unable to unilaterally cancel the dismissal benefit because it cancels the labor relationship with the employee or the employee voluntarily accept the layout offered by the Company; 2) when the Company recognizes the restructuring costs or expenses related to the payment of dismissal benefit. 5. Other long-term employee benefit refers to the other employee remuneration than short-term remuneration, after-service benefit and dismissal benefit, including the long-term paid absence from work, long-term disability benefit and long-term profit sharing scheme. Where the other long-term employee benefit meets the vested contribution plan, refer to the accounting method of previous vested contribution plan. Otherwise, refer to the accounting method of defined benefit plan. (XVII) Share-based payment 1. Category of share-based payment The share-based payments shall consist of equity-settled share-based payments and cash-settled share-based payments. The equity instrument of equity incentive shall be measured at the fair value of grant date. 2. Determination of fair value of equity instrument If the equity settlement involves the equity-settled share-based payment by the
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F-156 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement employees, the fair value of equity instrument on the grant date shall be recognized to the costs & expenses and capital reserve (other capital reserve), and its subsequent change of value shall not be recognized. If the equity settlement involves the cash-settled share-based payment by the employees, the fair value of equity instrument shall be recalculated on each balance sheet date to determine the costs & expenses and employee remuneration payable. Where there exists the active market of equity instrument such as option granted, its fair value shall be determined on the quoted price of active market. Where there doesn’t exist the active market, the option pricing Black-Scholes-Merton model etc., can be applicable to determine its fair value. The option pricing model should consider the following factors: 1) strike price of option; 2) validity period of option; 3) applicable price of underlying stocks; 4) expected volatility of stock price; 5) expected dividend of stock; 6) risk-free interest during the validity period of option. 3. Determination basis of best estimate of vested equity instrument On each balance sheet date during the vesting period, the Company shall make the best estimate on the basis of subsequent information such as the change of number of employees that can exercise the rights to modify the quantity of vested equity instrument. On the vesting date, the expected quantity of vesting equity instrument shall be the same as the actual quantity of vesting quantity. 4. Relevant accounting treatment of implementing, modifying and terminating share-based payment plan On the basis of fair value of the aforementioned equity instrument and the expected quantity of vested equity instrument, calculate the accumulative expenses and costs after the deduction of the recognized expenses and costs of prior periods as the expenses and costs that should be recognized during the current period. (XVIII) Accrued liability The accrued liability should be recognized where there is a present obligation of the Company as a result of the pending litigation, guarantee of production quality, loss-making contract and discard of oil & gas assets, it is likely to cause any economic benefit to flow out of the Company as a result of performance of the obligation and the amount of the obligation can be measured in a reliable way. The estimated debts shall be initially measured in accordance with the best estimate of the necessary expenses for the performance of the current obligation and take into full consideration of the risks, uncertainty, time value of money, and other factors
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F-157 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement pertinent to the Contingencies. If the time value of money is of great significance, the best estimate shall be determined after discounting the relevant future outflow of cash. The discard liability of oil & gas assets which meets the conditions of accrued liability shall be recognized as accrued liability and included in the original price of such oil & gas assets. The amount of accrued liability shall be the present value of estimated future expenses according to local conditions and relevant requirements. If the conditions for accrued liability are not met, the removal, dismantlement and site cleaning expenses at the time of discard shall be recognized as the current period profit or loss. (XIX) Revenue 1. The term "revenue" refers to the gross inflow of economic benefits formed during the course of the ordinary activities of an enterprise, which may increase the owner's equities and is irrelevant to the invested capital of the owner. The Company’s revenue consist of those from selling goods, providing labor services, and abalienating the right to use assets. 2. The Company shall ascertain the revenue incurred by selling goods in accordance with the received or receivable price stipulated in the contract or agreement signed between the enterprise and the buyer, unless the received or receivable amount as stipulated in the contract or agreement is unfair. No revenue from selling goods may be recognized unless the following conditions are met simultaneously: 1) The significant risks and rewards of ownership of the goods have been transferred to the buyer by the enterprise; 2) The enterprise retains neither continuous management right that usually keeps relation with the ownership nor effective control over the sold goods; 3) The relevant amount of revenue can be measured in a reliable way; 4) The relevant economic benefits may flow into the enterprise; and 5) The relevant costs incurred or to be incurred can be measured in a reliable way. If the collection of the price as stipulated in the contract or agreement is delayed and if it has the financing nature, the revenue incurred by selling goods shall be ascertained in accordance with the fair value of the receivable price as stipulated in the contract or agreement. The difference between the price stipulated in the contract or agreement and its fair value shall be amortized within the period of the contract or agreement employing the real interest method and shall be included in the current profits and losses.
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F-158 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
3. If the Company shall recognize the revenue from providing services employing the percentage-of-completion method if the following conditions can be met simultaneously. The Company shall ascertain the total revenue from the providing of labor services in accordance with the received or to-be-received price of the party that receives the labor services as stipulated in the contract or agreement, unless the received or to-be-received price as stipulated in the contract or agreement is unfair. 1) The amount of revenue can be measured in a reliable way; 2) The relevant economic benefits are likely to flow into the enterprise; 3) The schedule of completion under the transaction can be confirmed in a reliable way; and 4) The costs incurred or to be incurred in the transaction can be measured in a reliable way. The Company employs the percentage-of-completion method where the schedule of the project is ascertained on the basis of the proportion of accumulative actual contract costs incurred against the expected total contract costs (or the proportion of services performed to the total services to be performed). 4. If the Company cannot, on the date of the balance sheet, measure the result of a transaction concerning the providing of labor services in a reliable way, but the cost of labor services incurred is expected to be compensated, the revenue from the providing of labor services shall be recognized in accordance with the amount of the cost of labor services incurred, and the cost of labor services shall be carried forward at the same amount. If the cost of labor services incurred is not expected to compensate, the cost incurred should be included in the current profits and losses, and no revenue from the providing of labor services may be recognized. (XX) Government subsidy 1. A government subsidy means the monetary or non-monetary assets obtained free by an enterprise from the government, but excluding the capital invested by the government as the owner of the enterprise. Government subsidies consist of the government subsidies pertinent to assets and government subsidies pertinent to income. The government subsidies pertinent to assets mean the government assets that are obtained by enterprises used for purchase or construction, or forming the long-term assets by other ways. The government subsidies pertinent to income refer to all the government subsides except those pertinent to assets.
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F-159 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
2. No government subsidy may be recognized unless the certain conditions for the government subsidies are met simultaneously. If a government subsidy is a monetary asset, it shall be measured in the light of the received or receivable amount. If a government subsidy is a non-monetary asset, it shall be measured at its fair value. If its fair value cannot be obtained in a reliable way, it shall be measured at its nominal amount. 3. The government subsidies pertinent to assets shall be recognized as deferred income, equally distributed within the useful lives of the relevant assets, and included in the current profits and losses. But the government subsidies measured at their nominal amounts shall be directly included in the current profits and losses. Those subsidies used for compensating the related future expenses or losses of the Company shall be recognized as deferred income and shall be included in the current profits and losses during the period when the relevant expenses are recognized. Those subsidies used for compensating the related expenses or losses incurred to the Company shall be directly included in the current profits and losses. (XXI) Deferred Income Tax Assets and Deferred Income Tax Liabilities Deferred income tax assets and deferred income tax liabilities are computed and recognized based on the temporary differences arising from assets and liabilities and the applicable tax rates. Temporary differences comprise taxable temporary differences and deductible temporary differences. 1. A deferred income tax asset is recognized for deductible temporary differences, carry-forward of unused tax-deductible loss and tax credits from future years, to the extent that it is probable that taxable profits will be available against which the deductible temporary differences, carry-forward of tax-deductible loss and tax credits can be utilized. Deferred income tax assets are not recognized where deductible temporary differences: Are related to transactions that neither involve business combinations, nor affect accounting profit or taxable profit when occurred; or Are related to investments in subsidiaries, joint-ventures and associates and are unlikely to be reversed in the foreseeable future. 2. All taxable temporary differences shall be recognized as deferred income tax liabilities, except where taxable temporary differences: (1) Are related to initial recognition of goodwill; or (2) Are related to initial recognition of assets or liabilities arising from transactions
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F-160 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement that neither involve business combinations, nor affect accounting profit or taxable profit when occurred; or (3)Taxable temporary differences are related to investments in subsidiaries, joint-ventures and associates, the Company can control the time of reversal of the temporary differences, and the temporary differences are unlikely to be reversed in the foreseeable future. Deferred income tax assets or deferred income tax liabilities are measured at the applicable tax rates that are expected to apply to the period when the assets are recovered or the liabilities are settled. 3ˊImpairment of deferred income tax assets The Company shall review the carrying amount of deferred income tax assets on the balance sheet date. The carrying amount of deferred income tax assets shall be reduced to the extent that it is no longer probable that sufficient taxable profits will be available in future periods to allow the deferred income tax assets to be utilized. The amount of write-down shall be included in current income tax expenses. The amount of write-down arising from the portion of deferred income tax assets charged to owners’ equity on initial recognition shall also be included in owners’ equity. The amount of write-down shall be reversed when it is probable that sufficient taxable profits will be available. ˄XXII˅Leases 1ˊA lease is an agreement whereby the lessor conveys to the lessee in return for payment the right to use an asset for an agreed period of time. A lease may be classified as a finance lease or an operating lease. All leases the Company is involved in are operating leases. 2. The Company shall recognize all rentals paid as lessee in the cost of the underlying assets or current profit or loss on a straight-line basis over the lease term; and recognize all rentals received as lessor in current profit or loss on a straight-line basis over the lease term. 3. Initial direct costs arising from operating leases are recorded into current profit or loss. Contingent rental under operating lease agreements is taken to current profit or loss when incurred. ˄XXIII˅Accounting of Income Tax The Company measures income tax expenses using the balance sheet liability method.
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F-161 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
˄XXIV˅Business Combinations 1. Business combinations under the same control A business combination under the same control is a business combination wherein all parties to the combination are ultimately controlled by the same entity or the same entities both before and after the business combination and such control is not temporary. Business combinations under the same control usually refer to combinations of businesses that belong to the same group; otherwise, they are business combinations not under the same control. The assets and liabilities the Company, as the acquirer, obtains in a business combination shall be measured on the basis of their carrying amounts in the combined entity on the combining date. For a long-term equity investment acquired through a business combination under the same control involving a controlling interest, the Company recognizes the share of the carrying value of owners’ equity of the acquired entity on the combining date as its initial investment cost. For details on accounting, please see Long-term Equity Investments. The Company accounts for all assets and liabilities obtained in a merger under the same control at their carrying amounts in the combined entity. The difference between the carrying amount of net assets obtained in a business combination and the carrying amount of the consideration paid for the combination (or the aggregate face value of shares issued as consideration) by the Company is adjusted to capital surplus. If the capital surplus is not sufficient to absorb the difference, any excess shall be adjusted against retained earnings. All direct costs for business combinations incurred upon the Company as the acquirer shall be recorded into current profit or loss when incurred, inclusive of fees paid to auditors, appraisers and lawyers. Handling charges and commissions, among other costs, paid to issue bonds or assume other debts under a business combination shall be included in initial measurement of such bonds and other debts. Handling charges and commissions, among other costs, arising from the offering of equity securities under a business combination shall be deducted from the premium income on such equity securities. Where the premium income is insufficient, retained earnings shall be reduced accordingly. Where a business combination under the same control involving a controlling interest gives rise to a parent-subsidiary relationship, the parent company shall prepare consolidated financial statements, including consolidated balance sheet, consolidated
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F-162 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement income statement and consolidated cashflow statement, on the combining date. In the consolidated balance sheet, the assets and liabilities of the combined entity shall be consolidated at their carrying amounts. All transactions concluded between the combining entity and the combined entity on and before the combining date shall be offset as intra-group transactions pursuant to the accounting standards of Consolidated Financial Statements. Consolidated income statement and consolidated cashflow statement include net profit realized and cashflows incurred by both the combining entity and the combined entity from the beginning of the period of combination to the combining date. Cashflows arising from transactions involving both entities and intra-group transactions in the current period shall be offset pursuant to the accounting standards of Consolidated Financial Statements. 2. Business combinations not under the same control A business combination not under the same control is a business combination wherein all parties to the combination are not ultimately controlled by the same entity or the same entities neither before nor after the business combination. Determination of the cost of business combinations: the cost of business combinations is the aggregate of the fair values, at the acquisition date, of monetary or non-monetary assets paid, debts issued or assumed, and equity securities issued by the acquirer for the purpose of business combinations and all direct costs incurred by business combinations. For business combinations realized by several transactions step by step, the cost of business combinations is the sum of the cost of each transaction. For a long-term equity investment acquired through a business combination not under the same control involving a controlling interest, the initial investment cost of the long-term equity investment in the acquired entity is the cost of combination determined at the acquisition date (exclusive of cash dividends and profit receivable from the invested entity); all identifiable assets and liabilities obtained through a merger not under the same control and qualifying for recognition shall be recognized as assets and liabilities of the Company at fair value at the acquisition date. Where the Company pays non-monetary assets as consideration for obtaining control over or identifiable assets and liabilities of the acquired entity, the difference between the fair value and carrying value of such non-monetary assets at the acquisition date shall be recognized as gains/losses on disposal of assets in income statement in the period of combination.
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F-163 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Where the cost of a business combination not under the same control is in excess of the share of the identifiable net assets of the acquired entity obtained at fair value at the acquisition date, the Company shall recognize the difference as goodwill; in the event of mergers, the difference is recognized as goodwill in the parent company’s separate financial statements; in the event of combinations involving a controlling interest, the difference is recognized as goodwill in consolidated financial statements. Where the cost of a business combination is less than the share of the identifiable net assets of the acquired entity obtained at fair value, the Company shall record the difference into current profit or loss (non-operating income) in the period of combination. In the event of mergers, the difference is recognized in the parent company’s separate income statement in the period of combination; in the event of combinations involving a controlling interest, the difference is recognized in consolidated income statement in the period of combination. (XXV) Preparation of Consolidated Financial Statements 1. Determination of scope of consolidation (1)The scope of consolidation for the preparation of consolidated financial statements is determined on the basis of control. Where the Company owns more than one half of the voting rights of an invested entity, or owns less than one half of the voting rights but is able to exercise effective control over an invested entity, the Company treats the invested entity as a subsidiary and includes it in consolidation. (2) A subsidiary added to the Company through a business combination under the same control shall be included in consolidation from the beginning of the period in which such combination happens and the beginning balances or amounts reported in the prior year in the consolidated financial statements shall be adjusted accordingly; a subsidiary added through a business combination not under the same control shall be included in consolidation from the acquisition date. Where the Company transfers its controlling interest in a subsidiary during the reporting period, the subsidiary shall be removed from consolidated financial statements from the date of loss of control. 2. Consolidation principles, procedures and methods (1) In preparing consolidated financial statements, the Company shall make adjustments as necessary to the accounting policies and accounting periods of subsidiaries to make sure they are consistent with those adopted by the Company. Where the fair values of the identifiable assets and liabilities of a subsidiary acquired by the Company through a business combination not under the same control are
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F-164 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement discrepant with their carrying values at the acquisition date, the Company shall adjust the subsidiary’s financial statements based on the fair values of the identifiable assets and liabilities at the time of acquisition before consolidation. The Company shall measure its long-term equity investments in subsidiaries using the equity method instead of the cost method before the preparation of consolidated financial statements. (2)All significant balances, transactions and unrealized gains/losses between the Company and subsidiaries and between subsidiaries shall be offset in preparing consolidated financial statements. Where the cost of combination incurred when the Company acquires a subsidiary is in excess of the share of the identifiable net assets of the subsidiary at fair value at the acquisition date, the Company shall recognize the difference as goodwill in consolidated balance sheet; where the cost of combination is less than the share of the identifiable net assets of the subsidiary at fair value at the acquisition date, the Company shall include the difference in non-operating income in the period of combination. The share of a subsidiary’s net assets enjoyed by other investors in the subsidiary shall be presented separately as minority interests under owners’ equity in consolidated balance sheet; the minority’s share of current net profit or loss of a subsidiary shall be presented as minority profit or loss under net profit in consolidated income statement. (3) Where losses applicable to the minority exceed the minority interest in the opening equity of the relevant subsidiary, the excess shall be accounted for circumstantially: A. The excess shall be offset against minority interests where the minority has a binding obligation to under the Articles of Association or relevant agreement, and is able to, make good the losses; B. The excess shall be offset against the parent company’s owners’ equity where the Articles of Association or relevant agreement has not imposed a binding obligation on the minority. If the subsidiary in question subsequently reports profits, all such profits are attributed to the parent company until the minority's share of losses previously absorbed by the parent company has been recovered. V. Notes on Changes in Accounting Policies and Accounting Estimates and Error Corrections (I) Nature, Content, Causes and Impact of Changes in Accounting Policies There was no change in any accounting policy of the Company during the reporting
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F-165 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement period. (II) Content, Causes and Impact of Changes in Accounting Estimates There was no change in any accounting estimate of the Company during the reporting period. (III) Nature, Content and Impact of Error Corrections The Company made no error correction during the reporting period. VI. Taxes 1. Value Added Tax: the net difference between output VAT, which is 17% of revenue from goods sold, and input VAT that is allowed to be offset against in the same period. 2. Business tax: 5% of taxable revenue from services rendered. 3. City maintenance and construction tax: at 5%-7% of VAT or business tax payable. 4. Education surtax: at 3.5% of VAT or business tax payable. 5ˊIncome tax˖at 25% of taxable profit. The Company’s subsidiaries are entitled to some tax incentives as follows: Qinghai Sanjiang Hydro Power Development Co., Ltd enjoys a lower enterprise income tax rate at 15% according to the Circular on Deepening Policies for the Western Development Strategy ([2011] No.58) released by the Ministry of Finance and State Administration of Taxation. Qinghai Ping’an Aluminum High Precision Machining Co., Ltd: according to Some Policies of Qinghai Province for the Implementation of the Western Development Strategy, production-oriented startups enjoy exemption from enterprise income tax for five years from the start of business and a lower enterprise income tax rate at 15% for five years after that. The year of 2015 falls within the period of exemption. Qinghai Ruihe Aluminum Foil Co., Ltd: according to Some Policies of Qinghai Province for the Implementation of the Western Development Strategy, production-oriented startups enjoy exemption from enterprise income tax for five years from the start of business and a lower enterprise income tax rate at 15% for five years after that. The year of 2015 falls within the period of exemption. Qinghai Tiancheng Credit Guaranty Co., Ltd: according to the Circular on Some Tax Policy Issues for the Deeper Implementation of the Western Development Strategy released by the Ministry of Finance, a lower enterprise income tax rate at 15% applies to entities located in west China and engaged in encouraged industries, effective between 1 January 2011 and 31 December 2020. The Company enjoys this tax
33
F-166 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
incentive this year as it falls under the category of credit guaranty service in the financial service industry, Article 31 of the Catalogue for Guiding Industry Restructuring (2011 Version) . VII. Enterprise merger and consolidated financial statements (1) Basic information on the subsidiaries included in the scope of consolidated financial statements in the current year Unit: RMB million Yuan Proportion Voting Name of Place of Nature of Registered of rights to be Amount of Mode of No. Level enterprise incorporation business capital shareholding enjoyed investment acquisition (%) (%) Xining Manufactur Qinghai Jinxing Class Economic 1 ing 11,208.37 40.00 40.00 4,615.35 Investment Mining Co., Ltd II Developmen enterprise t Zone Qinghai Sanjiang Manufactur Hydropower Class 108,938.0 2 Xining City ing 54.10 54.10 60,612.91 Investment Development II 0 enterprise Co., Ltd. Qinghai Qiaotou Datong Manufactur Aluminum & Class 121,344.6 3 County of ing 87.6396 96.39 141,356.06 Investment Electric Power II 1 Qinghai enterprise Co., Ltd. Qinghai Jinrui Manufactur Mineral Class 4 Xining City ing 28,817.63 42.50 48.32 49,599.15 Investment Development Co. II enterprise Ltd Xining Qinghai Kunlun Class Economic Service 100,000.0 5 100.00 100.00 99,405.49 Investment Leasing Co., Ltd. II Developmen enterprise 0 t Zone Qinghai Ping'an Ping'an Manufactur High - Precision Class 200,000.0 6 County of ing 84.89 100.00 169,777.70 Investment Aluminum II 0 Qinghai enterprise Industry Co., Ltd. Qinghai Chentai Manufactur Real Estate Class 7 Xining City ing 20,691.90 100.00 100.00 20,691.90 Investment Development II enterprise Co., Ltd. Qinghai Class Service 8 Xiangguang Xining City 300.00 100.00 100.00 300.00 Investment II enterprise Property Co., Ltd. Xining Qinghai Ruihe Manufactur Class Economic 9 Aluminum Foil ing 59,378.47 100.00 100.00 59,378.47 Investment II Developmen Co., Ltd. enterprise t Zone Qinghai Ningbei Qinghai Manufactur Class 171,336.6 10 Power Generation Biotechnolo ing 70.82 70.82 124,540.88 Acquisition II 4 Co., Ltd. gy Park enterprise Qinghai Bridge Datong Manufactur Class 11 Electric Industrial County of ing 36,669.61 96.72 100.00 40,814.12 Transfer II Co., Ltd. Qinghai enterprise Qinghai Yihe Xining Maintenanc Maintenance & Class Economic e & 12 10,000.00 100.00 100.00 10,000.00 Merger Installation Co., II Developmen installation Ltd. t Zone enterprise Qinghai Datong Tiancheng Credit Class Financial 110,500.0 13 County of 22.63 22.63 25,000.00 Investment Guarantee Co., II enterprise 0 Qinghai Ltd.
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F-167 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Proportion Voting Name of Place of Nature of Registered of rights to be Amount of Mode of No. Level enterprise incorporation business capital shareholding enjoyed investment acquisition (%) (%) Qinghai Xihai Haibei Class Coal 14 Coal & Electricity Prefecture of 9,874.91 100.00 100.00 91,862.99 Merger II enterprise Co., Ltd. Qinghai Aluminum Qinghai Baihe Huangzhong product Class 15 Aluminum County of manufacturi 95,000.00 100.00 100.00 141,365.61 Merger II Industry Co., Ltd. Qinghai ng enterprise Qingtou International Class Trading 16 Shanghai 80,000.00 100.00 100.00 80,000.00 Investment Trade (Shanghai) II enterprise Co., Ltd. Product Qinghai Plateau Xining research Non-ferrous Class Economic and 17 Metal Research 1,500.00 100.00 100.00 1,200.00 Investment II Developmen developme & Development t Zone nt Co., Ltd. enterprise Aluminum Qinghai Guoxin product Class 18 Aluminum Xining City manufacturi 15,000.00 55.75 55.75 20,000.00 Merger II Industry Co., Ltd. ng enterprise Qinghai Zhengyi Testing Class Testing 19 Xining City 980.00 40.56 100.00 394.19 Investment Technology Co., II enterprise Ltd.
(2) The reason why the parent company has less than half of the voting rights of the invested entities but can control the invested entities Unit: RMB million Yuan Proportion Reasons for being Proportion of of voting Registered Amount of included in the No. Name of enterprise shareholding Level ˄ ˅ capital investment scope of ˄%˅ rights % consolidation The maximum Qinghai Jinxing Mining proportion of 1 40.00 40.00 11,208.37 4,615.35 Class II Co., Ltd equities and the right of control The maximum Qinghai Tiancheng proportion of 2 Credit Guarantee Co., 22.63 22.63 110,500.00 25,000.00 Class II equities and the Ltd. right of control The maximum Qinghai Jinrui Mineral proportion of 3 42.50 48.32 28,817.63 49,599.15 Class II Development Co. Ltd equities and the right of control
(3) The entities newly included in the scope of consolidation in the current year
Name of enterprise Net assets at the end of the year Net profit for the current year
Qinghai Guoxin Aluminum Industry Co., Ltd. 354,576,338.69 21,532.69
Qinghai Zhengyi Testing Technology Co., Ltd. 9,807,427.90 7,427.90
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F-168 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
VIII. Description of key items as listed in the consolidated financial statements 1. Monetary fund
Balance at the beginning of Item Balance at the end of period year Cash 2,403,118.66 3,012,204.65
Deposit at bank 2,047,954,887.26 3,993,315,439.69
Other monetary funds 2,343,576,484.34 479,499,322.94
4,393,934,490.26 4,475,826,967.28 Total
2. Notes / bills receivable
Balance at the end of Item Balance at the beginning of year period Bank acceptance bill 143,423,395.60 251,325,170.47
Commercial acceptance bill
143,423,395.60 251,325,170.47 Total
3. Accounts receivable
Amount at end of period Amount at beginning of year
Categories Book Value Bad debt reserves Book Value Bad debt reserves Propor Propor Proporti Proportion Amount tion Amount Amount Amount tion on˄%˅ ˄%˅ ˄%˅ ˄%˅ Accounts receivable from 1,383,151. 139,587,2 7,396,73 significant single amount of 1,383,151.00 0.14 100 14.67 5.30 individually counted and 00 26.80 8.40 Accounts receivable from 10,307,48 800,678,6 9,104,36 995,592,600.83 99.23 1.04 84.15 1.14 bad debt reserves counted 2.13 05.29 2.80 and drawn according to the 1. Accounts receivable from 10,293,74 796,944,0 9,093,15 bad debt reserves counted 991,012,860.83 98.77 1.04 83.76 1.14 and drawn by using the 2.91 15.29 9.03 2. ilihdAccounts receivable from bad debt reserves counted 3,734,590. 11,203.7 4,579,740.00 0.46 13,739.22 0.30 0.39 0.30 and drawn by using the 00 7 method for the percentage Accounts receivable from non-significant single 6,378,634. 11,191,92 11,191,9 6,378,634.80 0.63 100 1.18 100 amount of individually 80 8.63 28.63 counted and drawn bad debt 18,069,26 951,457,7 27,693,0 Total 1,003,354,386.63 100 100 7.93 60.72 29.83
(1) Accounts receivable from bad debt reserves counted and drawn according to the combination A. Accounts receivable from bad debt reserves counted and drawn by using the aging
36
F-169 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
analysis method
Amount at end of period Amount at beginning of year
Account age Book Value Book Value Bad debt Bad debt Proportion reserves Proportion reserves Amount Amount ˄%˅ ˄%˅ Less than 1 year 772,432,875.80 77.94 4,084,266.82 736,982,903.99 92.48 3,954,068.53
1-2 years 194,511,659.70 19.63 2,416,948.31 55,474,076.58 6.96 3,033,501.86
2-3 years 20,156,352.58 2.03 2,547,385.90 2,023,445.17 0.25 1,135,839.62
More than 3 years 3,911,972.75 0.40 1,245,141.88 2,463,589.55 0.31 969,749.02
Total 991,012,860.83 100.00 10,293,742.91 796,944,015.29 100.00 9,093,159.03
B. Accounts receivable from bad debt reserves counted and drawn by using the method for the percentage of balance
Amount at end of period Amount at beginning of year Proportion Proportion Account age of counting Bad debt of counting Bad debt Book Value Book Value and drawing reserves and drawing reserves ˄%˅ ˄%˅ Method for the percentage of balance at the end of 4,579,740.00 0.30 13,739.22 3,734,590.00 0.30 11,203.77 year 4,579,740.00 0.30 13,739.22 3,734,590.00 0.30 11,203.77 Total
(2) Accounts receivable from single amount of counted and drawn bad debt reserves A. Accounts receivable from significant single amount of bad debt reserves individually counted and drawn at the end of the year
Proportion Reason for Bad debt Account of counting Name of debtor Book Value counting and reserves age and drawing drawing ˄%˅ Lose Accounts receivable from strontium More than contact/touch 1,383,151.00 1,383,151.00 100% carbonate 3 years because of the long years. Total 1,383,151.00 1,383,151.00
B. Accounts receivable from non-significant single amount of bad debt reserves individually counted and drawn at the end of the period
Proportion of Reason for Bad debt Name of debtor Book Value Account age counting and counting and reserves drawing˄%˅ drawing More than 5 The units don't Suzhou Hongsen Metal Co., Ltd. 759,263.40 759,263.40 100.00 years exist. Lanzhou Great Wall Industrial 71,007.08 71,007.08 More than 5 100.00 The units don't
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F-170 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Proportion of Reason for Bad debt Name of debtor Book Value Account age counting and counting and reserves drawing˄%˅ drawing Co., Ltd. years exist. Guangda Plant of Qinghai More than 5 The units don't 794,491.85 794,491.85 100.00 Electric Power Company years exist. Accounts receivable from More than 5 The accounts can 1,629,021.44 1,629,021.44 100.00 strontium carbonate years not be received. Accounts receivable from coal More than 5 The accounts can 1,044,960.26 1,044,960.26 100.00 sales years not be received. Run up an Jiangyin Huiyuan Industrial Co., More than 5 49,890.77 49,890.77 100.00 account for a long Ltd. years time. Run up an Xinjiang Shenhuo Coal & More than 5 50,000.00 50,000.00 100.00 account for a long Electricity Co., Ltd. years time. Run up an More than 5 Wuxi Kaida Industrial Co., Ltd. 1,980,000.00 1,980,000.00 100.00 account for a long years time. Total 6,378,634.80 6,378,634.80
(3) Conditions on the transfer or collection of accounts receivable during the current period There was no transfer or collection of accounts receivable from the Company during the current period. (4) Accounts receivable actually written off during the current reporting period During the current period, in accordance with the "Proposal on Writing off the Partial Creditor's Rights and Debts of the Company" passed by the resolution at the fifth session of the seventh Board of Directors, The Company's subsidiary, Qinghai Jinrui Mineral Development Co. Ltd., wrote off the accounts receivable (RMB 10,881,917.02 Yuan). 4. Prepayments (1) Prepayments listed according to the account age
Amount at end of period Amount at beginning of year
Account age Book Value Book Value Bad debt Bad debt Proportion reserves Proportion reserves Amount Amount ˄%˅ ˄%˅ Less than 1 year 398,467,166.89 65.52 650,981.75 976,016,218.70 50.29
1-2 years 46,470,761.42 7.64 412,834,731.86 21.26 32,929.23
2-3 years 64,590,421.55 10.62 19,499.73 126,491,943.12 6.52 702,676.24
More than 3 years 98,623,430.27 16.22 4,792,363.12 425,570,555.63 21.93 3,233,485.77
608,151,780.13 100.00 5,462,844.60 1,940,913,449.31 100.00 3,969,091.24 Total
(2) Prepayments for non-significant single amount of bad debt reserves individually
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F-171 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
counted and drawn at the end of the period
Proportion of Reason for counting and Name of debtor Book Value Bad debt reserves counting and drawing drawing˄%˅ Henan Dafei Industrial Co., Ltd. 774,725.46 619,780.36 80.00 Uncollectible Inner Mongolia Jitai Aluminum Industry 339,220.47 271,376.38 80.00 Uncollectible Co., Ltd. Qingdao Dongfang Youwei Freight 67,856.71 67,856.71 100.00 Uncollectible Forwarding Co., Ltd. Shanghai Hongyu Silicate Composite Small collectible 13,440.00 6,720.00 50.00 Material Co., Ltd. possibilities Binzhou High - Tech Aluminum & Small collectible 38,999.46 19,499.73 50.00 Electric Power Co., Ltd. possibilities Qinghai Qiaotou Aluminum & Electric Small collectible 52,845.94 52,845.94 100.00 Power Co., Ltd. possibilities CNPC Qinghai Xining Sales Branch 60,989.45 60,989.45 100.00 Carbon clearing bad debts Company Shenyang Gongda Electrical Equipment 55,610.00 55,610.00 100.00 Carbon clearing bad debts Co., Ltd. Beijing Creative Technology Co., Ltd. 4,600.00 4,600.00 100.00 Carbon clearing bad debts Henan Bangwei Machinery Equipment Co., 32,000.00 32,000.00 100.00 Carbon clearing bad debts Ltd. Zhongyingxinye Culture Media (Beijing) 5,000.00 5,000.00 100.00 Carbon clearing bad debts Co, Ltd. Transportation Income Households of Xining West Railway Station of Qinghai - 84,391.10 84,391.10 100.00 Carbon clearing bad debts Tibet Railway Storage and Transportation Branch of Qinghai Materials Industry Chemical Co, 42,092.20 42,092.20 100.00 Carbon clearing bad debts Ltd. China Mobile Communications Corporation 8,697.81 8,697.81 100.00 Carbon clearing bad debts Huangzhong Telecom Co, Ltd. 13,429.50 13,429.50 100.00 Carbon clearing bad debts Ganhe Industrial Park Branch of Xining 41,438.00 41,438.00 100.00 Carbon clearing bad debts City Environmental Protection Bureau Qinghai Metrology, Verification and Testing 440.00 440.00 100.00 Carbon clearing bad debts Institute Beijing Zhongjingboyuan Cultural 1,280.00 1,280.00 100.00 Carbon clearing bad debts Exchange Center China Unicom 2,234.69 2,234.69 100.00 Carbon clearing bad debts Beijing Times Beacon Cultural Exchange 1,800.00 1,800.00 100.00 Carbon clearing bad debts Center Huangzhong County Bureau of Labor and 26,000.00 26,000.00 100.00 Carbon clearing bad debts Social Security for the Disabled Ding Dahong 60,000.00 60,000.00 100.00 Carbon clearing bad debts Jia Cong Cong 130,979.00 130,979.00 100.00 Carbon clearing bad debts He Guangzhen 80,000.00 80,000.00 100.00 Carbon clearing bad debts Advance payment for materials 869,133.97 869,133.97 100.00 Uncollectible accounts Advance payment for materials of Bridge Relatively great difficulty Electric Industrial Co., Ltd. for more than 3 5,430,754.41 1,629,226.32 30.00 of accounts receivable years collection Ma Liangming 11,100.60 11,100.60 100.00 Uncollectible Hot Water Power Supply Office of Gangcha 110.64 110.64 100.00 Uncollectible County Power Supply Company Beijing Guofen Instrumentation Co., Ltd. 55,000.00 55,000.00 100.00 Uncollectible Henan Xuji Electric Co., Ltd. 23,427.00 23,427.00 100.00 Uncollectible Juguang Technology Co., Ltd. 10,000.00 10,000.00 100.00 Uncollectible China Financial Certification Center Co., 3,240.00 3,240.00 100.00 Uncollectible Ltd. Gangcha Local Taxation Bureau 32,510.20 32,510.20 100.00 Uncollectible Haibei Prefecture Office, SAT 312.00 312.00 100.00 Uncollectible Qinghai Security Science and Technology 30,000.00 30,000.00 100.00 Uncollectible Research Center
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F-172 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Proportion of Reason for counting and Name of debtor Book Value Bad debt reserves counting and drawing drawing˄%˅ Gangcha Public Security Bureau 19,200.00 19,200.00 100.00 Uncollectible Zhengzhou Steam Turbine Co., Ltd. 37,596.00 37,596.00 100.00 Uncollectible Qingdao Dingli Boiler Equipment Co., Ltd. 5,940.00 5,940.00 100.00 Uncollectible Ma Cunhai (Land Acquisition 8,900.00 8,900.00 100.00 Uncollectible Compensation) Nu Ke (Land Acquisition Compensation) 17,500.00 17,500.00 100.00 Uncollectible Haibei Prefecture Economic and Trade 10,000.00 10,000.00 100.00 Uncollectible Commission Qilian County Finance Bureau 3,560.00 3,560.00 100.00 Uncollectible Qinghai Xining Trading Co., Ltd. 887,000.00 887,000.00 100.00 Uncollectible Villagers' Committee of Jintan Village, 20,000.00 20,000.00 100.00 Uncollectible Jintan Township, Haiyan County Liu Yanxing 27.00 27.00 100.00 Uncollectible Gangcha County Economic and Trade 100,000.00 100,000.00 100.00 Uncollectible Commission Total 9,513,381.61 5,462,844.60
(3) Conditions on the large amount of prepayments over a year (account age)
Book Value at the Debtor Account age Reason for outstanding end of period Since the project has not More than 3 Zhongyu Industrial Development Co., Ltd. 70,410,628.79 been completed, the invoice years has not been yet received. The balance payment has China 22MCC Group Corporation Ltd. 36,300,382.36 2-3 years been settled. Since the project has not More than 3 Nanfeng Shaft of No. 2 Mine (Zhang Zhiyu) 23,420,182.33 been completed, the invoice years has not been yet received. The prepayment for Qinghai Electric Power Company 14,587,760.00 2-3 years substitute engineering has not been settled. The prepayment for Zhengzhou Hydraulic Machinery Co., Ltd. 11,968,748.10 2-4 years equipment has not been settled. Since the project has not More than 3 been completed, the Shenyang Hengxing Industrial Co., Ltd. 11,587,200.00 years payment has not been settled. The prepayment for Hyundai Heavy Industries (China) Electric Co., Ltd. 10,131,284.40 2-3 years equipment has not been settled. Baotou Tianze Aluminum Electric Equipment Technology The payment for equipment 9,647,602.90 2-3 years Co., Ltd. has not been settled. Total 188,053,788.88
5. Interest receivable
Item Balance at the end of year Balance at the beginning of year
Interest on time deposits 220,173.61 5,507,180.83
Total 220,173.61 5,507,180.83
6. Other receivables
Categories Amount at end of period Amount at beginning of year
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F-173 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Book Value Bad debt reserves Book Value Bad debt reserves Proporti Proportio Proporti Proportion Amount Amount Amount Amount on˄%˅ n˄%˅ on˄%˅ ˄%˅ Other accounts receivable from significant single 54,648,3 53,845,938. 38,620,971. 37,818,5 amount of individually 9.48 98.53 3.11 97.92 89.73 66 96 20.89 counted and drawn bad debt reserves Other accounts receivable from bad debt reserves 507,817, 63,233,088. 1,190,556,4 23,756,9 counted and drawn 88.09 12.45 95.78 5.55 881.49 19 21.33 47.34 according to the combination 1. Other accounts receivable from bad debt 464,803, 63,104,043. 408,036,75 21,416,9 reserves counted and 80.63 13.58 32.82 5.25 046.49 69 1.44 96.51 drawn by using the aging analysis method 2. Other accounts receivable from bad debt reserves counted and 43,014,8 782,519,66 2,339,95 7.46 129,044.51 0.30 62.96 0.30 drawn by using the 35.00 9.89 0.83 method for the percentage of balance Other accounts receivable from non-significant 14,035,3 14,035,342. 13,805,721. 13,288,1 single amount of 2.43 100.00 1.11 96.25 42.97 97 19 16.28 individually counted and drawn bad debt reserves 576,501, 131,114,369 1,242,983,1 74,863,5 Total 100 100 6.02 614.19 .82 14.48 84.51
(1) Other accounts receivable from bad debt reserves counted and drawn according to the combination A. Other accounts receivable from bad debt reserves counted and drawn by using the aging analysis method
Amount at end of period Amount at beginning of year Bad debt Bad debt Book Value Book Value Account age reserves reserves Proportion Proportion Amount Amount ˄%˅ ˄%˅ Less than 1 year 351,673,712.46 75.66 2,724,961.77 257,156,881.26 63.02 2,223,210.34 1-2 years 42,259,918.17 9.09 7,606,785.27 107,277,717.09 26.29 3,018,613.83 2-3 years 17,364,434.48 3.74 7,293,062.48 30,390,660.34 7.45 3,880,231.49 More than 3 years 53,504,981.38 11.51 45,479,234.17 13,211,492.75 3.24 12,294,940.85 Total 464,803,046.49 100.00 63,104,043.69 408,036,751.44 100.00 21,416,996.51
B. Other accounts receivable from bad debt reserves counted and drawn by using the method for the percentage of balance
Amount at end of period Amount at beginning of year Proportion Proportion Account age of counting Bad debt of counting Bad debt Book Value Book Value and drawing reserves and drawing reserves ˄%˅ ˄%˅
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F-174 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Method for the percentage of balance 43,014,835.00 0.3 129,044.51 782,519,669.89 0.30 2,339,950.83 at the end of year Total 43,014,835.00 0.3 129,044.51 782,519,669.89 0.30 2,339,950.83
(2) Other accounts receivable from single amount of counted and drawn bad debt reserves A. Other accounts receivable from significant single amount of bad debt reserves individually counted and drawn at the end of the year
Proportion Reason for Bad debt of counting Name of debtor Book Value Account age counting and reserves and drawing drawing ˄%˅ Qinghai Shanchuan Foundry More than 5 13,290,488.18 13,290,488.18 100.00 Uncollectible Ferroalloy Group Co., Ltd. years Islamic International Trust and More than 3 Bankruptcy 25,330,483.78 24,528,032.71 96.83 Investment Corporation years liquidation More than 3 Debt paying Qinghai Xingde Mining Co., Ltd. 16,027,417.77 16,027,417.77 100.00 years ability decreased Total 54,648,389.73 53,845,938.66
B. Other accounts receivable from non-significant single amount of bad debt reserves individually counted and drawn at the end of the period
Proportion Bad debt of counting Reason for counting and Name of debtor Book Value Account age reserves and drawing drawing ˄%˅ More than 3 The accounts can not be Materials and project funds 6,444,464.36 6,444,464.36 100% years received. More than 3 The accounts can not be Rental fees 258,758.23 258,758.23 100% years received. More than 3 The accounts can not be Personal loans 412,469.90 412,469.90 100% years received. Run up an account for a Gansu Jinda Abrasives Co., More than 5 830,000.00 830,000.00 100% long time. Ltd. years Uncollectible Run up an account for a More than 5 Hainan Office Hotel Margin 20,000.00 20,000.00 100% long time. years Uncollectible Urban and Rural Planning Run up an account for a More than 5 and Construction Bureau of 2,000,000.00 2,000,000.00 100% long time. years Xining City Uncollectible The accounts receivable More than 5 Shanchuan Group 3,992,534.47 3,992,534.47 100% have been canceled by the years Company. Run up an account for a Leading Group for More than 5 77,116.01 77,116.01 100% long time. Liquidation years Uncollectible Total 14,035,342.97 14,035,342.97
(3) Conditions on the transfer or collection of accounts receivable during the current period
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F-175 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
There was no transfer or collection of accounts receivable from the Company during the current period. (4) Accounts receivable actually written off during the current reporting period During the current period, in accordance with the "Proposal on Writing off the Partial Creditor's Rights and Debts of the Company" passed by the resolution at the fifth session of the seventh Board of Directors, The Company's subsidiary, Qinghai Jinrui Mineral Development Co. Ltd., wrote off the other accounts receivable (RMB 4,298,996.82 Yuan). 7. Inventories
Amount at end of period Amount at beginning of year Type of inventory falling price falling price Book Value Book value Book Value Book value reserves reserves Raw 943,426,994.02 10,716,275.52 932,710,718.50 707,951,700.17 35,988,556.67 671,963,143.50 materials Merchandise 707,935,920.32 39,704,022.87 668,231,897.45 458,164,980.54 6,325,972.38 451,839,008.16 inventory Unfinished 759,223,454.57 759,223,454.57 651,218,467.28 651,218,467.28 products Cost of 438,941,106.51 438,941,106.51 382,118,296.78 382,118,296.78 development Goods shipped in 119,738,337.75 13,760,383.28 105,977,954.47 97,193,835.70 97,193,835.70 transit Consigned processing 18,454,475.43 18,454,475.43 12,070,305.00 12,070,305.00 materials Materials in - 9,412,217.82 9,412,217.82 transit Cost of 37,232,020.57 37,232,020.57 4,671,689.11 4,671,689.11 production Turnover 322,913.90 322,913.90 370,264.33 370,264.33 materials R & D 2,237,873.45 2,237,873.45 expenditure Low-value 526,742.17 526,742.17 consumables Packing 51,576.88 51,576.88 materials Project 80,350.90 80,350.90 construction
3,028,171,766.47 64,180,681.67 2,963,991,084.80 2,323,171,756.73 42,314,529.05 2,280,857,227.68 Total
8. Other current assets
Item Balance at the end of year Balance at the beginning of year
Entrusted Loan 31,000,000.00 41,000,000.00
Total 31,000,000.00 41,000,000.00
43
F-176 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
In this year, Qinghai Tiancheng Credit Guarantee Co., Ltd., a subsidiary of the Company, granted the entrusted loan (amount of loan: RMB 31 million Yuan; length of maturity: 12 months; mode of interest payment: "Repayment of principal with interest") to Qinghai Haxi Chemical Building Materials Co., Ltd. through Xining West Street Branch of China Merchants Bank Co., Ltd. 9. Available-for-sale financial assets
Item Balance at the end of year Balance at the beginning of year
Available-for-sale securities
Available-for-sale equity instruments 2,476,102,928.92 2,515,222,688.52
Including: Measured at fair value
Measured at cost 2,476,102,928.92 2,515,222,688.52
Others Minus: Provision for impairment of 10,000,000.00 1,271,183.07 available-for-sale financial assets
Total 2,466,102,928.92 2,513,951,505.45
10. Held-to-maturity investments
Item Balance at the end of period Balance at the beginning of year
Commissioned financial management 30,000,000.00 1,000,000.00
Trust fund 127,000,000.00
Bonds 4,000,000.00 Minus: Provision for impairment of held-to-maturity investments Total 161,000,000.00 1,000,000.00
11. Long-term receivables
Item Year-end balance Amount at beginning of year
Guangzhou Zhiguang Electric Control Co., Ltd. 519,858.17 1,707,418.68
Yantai Longyuan Electric Power Technology Co., Ltd. 1,666,944.44
Xining City Investment Management Co., Ltd. 28,739,579.87
Qinghai Northwest Industrial Group Co., Ltd. 18,182,726.97 Xining Economic and Technological Development 6,368,217.68 Zone Development Group Co., Ltd.
Total 55,477,327.13 1,707,418.68
44
F-177 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
12. Long-term equity investment (1) Classification of long-term equity investment
Amount of Amount of Balance at the investment investment Balance at the end Item beginning of year increased in this decreased in this of period year year Investment in joint ventures
Investment in associates 1,337,460.14 59,600,000.00 1,337,460.14 59,600,000.00
Investment in other enterprises 500,000.00 500,000.00
Subtotal 1,837,460.14 59,600,000.00 1,837,460.14 59,600,000.00
Minus: Provision for impairment of long-term equity
Total 1,837,460.14 59,600,000.00 1,837,460.14 59,600,000.00
(2) List of long-term equity investment
Provision for Cash Cost Balance Proportio Provisi impairment Account Changes in Balance at dividends Invested of at the n of on for counted and ing increase or the end of during the entities invest beginnin sharehold impair drawn during method decrease period current ment gof year ing ment the current period period Qinghai Bridge Electric Constructio Cost 500,0 500,000. 500,000.00 100% n and method 00.00 00 Installation Industrial Co., Ltd. Qinghai Equity 2,500, Chuanheng accounti 1,337,46 1,337,460.1 000.0 25% Gas Co., ng 0.14 4 0 Ltd. method Qinghai Equity 19,60 Hexing accounti 19,600,000. 19,600,00 0,000. 49% Carbon Co., ng 00 0.00 00 Ltd. method Qinghai Equity Qingfeng 40,00 accounti 40,000,000. 40,000,00 Aluminum 0,000. 40% ng 00 0.00 Industry 00 method Co., Ltd. 62,60 1,837,46 61,437,460. 59,600,00 Total 0,000. 0.14 14 0.00 00
Qinghai Bridge Electric Construction and Installation Industrial Co., Ltd., a subsidiary of Qinghai Bridge Electric Industrial Co., Ltd., a subsidiary of the Company, already planned to liquidate and cancel the said investment in the previous year, which was not included in the scope of consolidation in the previous year, but already disposed during the current period.
45
F-178 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
13. Investment real estate
Item Balance at the end of period Balance at the beginning of year Investment real estate 352,642,550.00 352,642,550.00 measured at fair value Investment real estate 292,647.74 306,528.74 measured at cost Total 352,935,197.74 352,949,078.74
(1) Investment real estate measured at fair value
Decrements at the Increments at the current period current period Real estate Fair value at the Changes in Real estate Fair value at the Item Acqu for private beginning of the year fair value Dispos transferred end of the period isitio use or recognised in al for private n inventory profit or loss use transfer 1. Total cost 5,889,134.68 5,889,134.68 Housing & 5,889,134.68 5,889,134.68 buildings Land use rights 2. Changes in total fair value recognized in profit or 346,753,415.32 346,753,415.32 loss Housing & 346,753,415.32 346,753,415.32 buildings Land use rights 3. Total book value of investment real 352,642,550.00 352,642,550.00 estate Housing & 352,642,550.00 352,642,550.00 buildings Land use rights
ķ The investment real estate (RMB 320,000,000.00 Yuan) owned by Qinghai Sanjiang Hydropower Development Co., Ltd. (a subsidiary of the Company) should be regarded as the assets invested by Huizhou Yecheng Industry Group Co., Ltd. in Hong Kong Yincheng Co., Ltd., which was assessed by Vigers Asset Evaluation Consultant Co., Ltd. which issued the assets evaluation report. The assessment results showed that, as of Dec. 31, 2015, the value of the investment real estate was still up to RMB 320,000,000.00 Yuan , and there was no any change in the fair value. ĸThere was also no any change in the fair value of the external real estate owned by Qinghai Bridge Electric Industrial Co., Ltd., one of the Company's subsidiaries. (2) Investment real estate measured at cost
Balance at the Increments at the Decrements at the Balance at the end of Item beginning of year current period current period period
46
F-179 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Balance at the Increments at the Decrements at the Balance at the end of Item beginning of year current period current period period 1. Original total book value: 444,904.80 444,904.80
Including: Housing and buildings 444,904.80 444,904.80
2. Total accumulated depreciation 138,376.06 13,881.00 152,257.06
Including: Housing and buildings 138,376.06 13,881.00 152,257.06
3. Total net book value of fixed 306,528.74 -13,881.00 292,647.74 assets Including: Housing and buildings 306,528.74 -13,881.00 292,647.74
4. Total provision for impairment
Including: Housing and buildings
5. Total book value of fixed assets 306,528.74 -13,881.00 292,647.74
Including: Housing and buildings 306,528.74 -13,881.00 292,647.74
14. Fixed assets
Balance at the Increments at the Decrements at the Balance at the end of Item beginning of year current period current period period 1. Original value
Housing and buildings 5,161,956,248.80 544,134,293.70 31,912,451.95 5,674,178,090.55
Structures and ancillary 606,677,209.50 606,677,209.50 facilities Special equipment 1,979,442,728.10 625,861,745.94 2,605,304,474.04
General equipment 616,579,622.70 8,751,889.24 607,827,733.46
Smelting equipment 2,489,620,969.16 269,549,069.30 2,759,170,038.46
Mechanical equipment 4,726,780,758.04 1,123,489,957.02 418,554,353.08 5,431,716,361.98
Transportation Equipment 213,616,552.68 6,110,757.59 8,761,203.41 210,966,106.86
Electronic equipment 33,164,136.30 40,307,640.69 2,015,378.24 71,456,398.75
Office equipment 69,020,724.23 116,573,974.83 513,943.35 185,080,755.71
Total 15,896,858,949.51 2,726,027,439.07 470,509,219.27 18,152,377,169.31
2. Accumulated depreciation
Housing and buildings 1,243,549,190.90 200,405,605.89 7,086,389.88 1,436,868,406.91 Structures and ancillary 62,944,153.18 12,669,187.16 75,613,340.34 facilities Special equipment 1,244,622,856.30 16,110,550.63 1,260,733,406.93
General equipment 323,679,650.19 17,775,814.42 6,092,446.05 335,363,018.56
47
F-180 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Balance at the Increments at the Decrements at the Balance at the end of Item beginning of year current period current period period Smelting equipment 1,071,781,274.63 204,076,522.84 1,275,857,797.47
Mechanical equipment 1,440,248,387.24 220,535,910.72 37,193,039.50 1,623,591,258.46
Transportation Equipment 110,434,183.27 21,371,131.33 5,080,536.83 126,724,777.77
Electronic equipment 21,349,425.08 30,741,227.22 1,737,399.04 50,353,253.26
Office equipment 25,566,849.51 36,911,607.62 309,275.51 62,169,181.62
Total 5,544,175,970.30 760,597,557.83 57,499,086.81 6,247,274,441.32
3. Provision for impairment
Housing and buildings 85,259,224.19 35,906,175.52 121,165,399.71
Structures and ancillary facilities Special equipment
General equipment
Smelting equipment
Mechanical equipment 231,829,855.11 103,675,767.16 335,505,622.27
Transportation Equipment 1,264,840.09 91,059.52 1,173,780.57
Electronic equipment
༷ Office equipment 927,813.84 28,637.77 899,176.07
Total 319,281,733.23 139,581,942.68 119,697.29 458,743,978.62
4. Total book value
Housing and buildings 3,833,147,833.71 4,116,144,283.93
Structures and ancillary 543,733,056.32 531,063,869.16 facilities Special equipment 734,819,871.80 1,344,571,067.11
General equipment 292,899,972.51 272,464,714.90
Smelting equipment 1,417,839,694.53 1,483,312,240.99
Mechanical equipment 3,054,702,515.69 3,472,619,481.25
Transportation Equipment 101,917,529.32 83,067,548.52
Electronic equipment 11,814,711.22 21,103,145.49
Office equipment 42,526,060.88 122,012,398.02
Total 10,033,401,245.98 11,446,358,749.37
48
F-181 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
15. Construction in process
Proportion of Balance at the Increments at Budget Amount transferred Other project Project name beginning of the current (RMB 10,000) to fixed assets decrease investment in year period budget˄%˅ Office and life 66,520.00 66,520.00 area project Reciprocating friction wear 180,000.00 180,000.00 tester Desulfurization 18,207.93 362,705,227.58 328,907,648.91 691,612,876.49 project 20Kt/a refined 95,505,443 35,755.65 747,473,800.50 131,885,913.09 221.26 aluminum project .75 Switching station busbar processing 2,171.51 17,921,569.14 project Transformation project of 200,132,917.12 electrolytic cell lining Other technical 111,727,47 transformation 541,976,534.75 507,413,945.85 433,268,295.48 3.37 project Klockner-Moeller 4,567,470. 29,240.00 435,039,293.53 121,406,987.46 188.74 Mining Area II 55 Klockner-Moeller 81,447,009.81 33,608,501.29 Mining Area III Safety transformation 2,568,178.73 117,216.59 project (821) Other 177,184.00 Technical transformation 56,394,908.51 55,864,051.84 project of piecemeal project 100,000 tons of 391,206,467.16 431,672,593.38 electrolyte project Xianfeng Cell of 1,400,000. 27,219.38 234,979,461.74 41,348,174.53 98.96 Qaidar 00 3570 horizontal east-Total main 2,873.94 39,750,764.22 28,835,262.44 40,930,793.86 77.37 haulage roadway of Qaidar mine Squatter settlements 3,759.80 42,257,196.04 2,760,226.00 45,017,422.04 transformation project Auxiliary production 12,500.00 335,455,293.97 815,589,395.81 622,370.07 project Technical transformation 10,850,000.00 69,485,876.65 project Single construction 78,004,293.93 3,144,709.23 related to site Unit desulfurization 7,727.00 9,569,152.84 1,603,120.83 project Wind break wall 225,000.00 562,500.00 project
49
F-182 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Proportion of Balance at the Increments at Budget Amount transferred Other project Project name beginning of the current (RMB 10,000) to fixed assets decrease investment in year period budget˄%˅ Maintenance 6,094,759.88 225,000.00 project Denitration 27,386,180.54 25,435,184.70 project Combined heat and power 37,847,735.11 5,654,905.43 43,502,640.54 generation project Electric dust 10,688,518.30 6,534,719.88 remover project Oxygen enrichment 1,266,599.00 2,329,743.60 3,596,342.60 project Photothermal 73,600.00 energy project Aluminum plate 4,851,507,489.9 5,588,760. 260,000.00 919,431,768.00 project 8 69 Formed foil 1,287,433,260.5 122,000.00 295,750,321.26 project 7 Annual 12kt electronic 1,079,400. 26,700.00 268,173,561.97 61,719,149.42 aluminum foil 00 project Maintenance 9,617,869.00 building Sanya Haihu 11,329,091 40,390.38 158,070,295.31 185,748,945.37 85.12 Hotel project .94 Maintenance project of sea 3,823,776.66 3,823,776.66 miner lamp room Mining building 714,996.88 714,996.88 Technical transformation of 28,953,589.10 28,953,589.10 Qinglong strontium salt Huangfeng Hydropower 2,648,094,377.3 231,400.00 507,431,022.31 136.52 Station in 0 Hualong County Photovoltaic grid connected power generation project 5,900.00 27,761,987.93 7,368,138.47 59.27 in Huangfeng Plant Area Shanping Hydropower 155,900.00 20,225,660.55 1.30 Station in Guide County Dahejia Hydropower 1,252,459,052.3 156,000.00 312,959,055.66 1.00 Station in Minhe 1 County Erduo Power 881,500.00 93,084,954.60 85,320,591.27 2.02 Station Earlier project of 0.00 5,029,112.20 Mentang Earlier project of Bingling Grade I 109,000.00 18,085,934.06 13,170,247.49 2.87 project
50
F-183 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Proportion of Balance at the Increments at Budget Amount transferred Other project Project name beginning of the current (RMB 10,000) to fixed assets decrease investment in year period budget˄%˅ (Zhongchuan Hydropower Station) Phase I of 3,200,000. electrolytic 181,600.00 530,177,189.75 83,687,569.72 33.80 00 aluminum Phase II of 1,858,253,866.3 1,873,229,976.1 20,778,427 electrolytic 300,000.00 97,435.90 124.38 2 5 .51 aluminum Annual output of 100,000 tons of special extruded 2,760,000. 270,000.00 68,972,738.22 2,269,433.96 2.64 aluminum alloy 00 material project for rail transport Anode carbon 156,500.00 78,299.25 0.01 Annual output of 250,000 tons of 16,748,387 54,000.00 16,748,387.21 prebaked anode .21 carbon project Installation project of Jingyue 6,511,439.00 6,141,907.10 12,653,346.10 Hostel Transmit ash field seepage proofing transformation 250,000.00 250,000.00 project of Phase V Transformation of 485,098.53 485,098.53 Tianyuan line Transformation of old casting 81,688.05 10,951.30 92,639.35 factory production line 1 0KV box transformer 10,000.00 10,000.00 project Sewage treatment station of 2,683,555. 2,274,242.27 409,313.29 environmental 56 treatment project Technical 10,850,000 transformation 9,557,778.43 1,292,221.57 .00 project Preparation of lead drainage tube condenser of 243,243.31 49,751.03 acid making workshop with fluoride salt Transformation of forging machine 27,264.94 13,871.79 of ring making group Transformation of electric cooling 9,024.43 system of casting furnace Technical 6,873,046. 6,873,046.30 transformation of 30
51
F-184 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Proportion of Balance at the Increments at Budget Amount transferred Other project Project name beginning of the current (RMB 10,000) to fixed assets decrease investment in year period budget˄%˅ fluoride salt sewage treatment station Dangerous solid 2,098,188.68 waste project Overhaul of Q378E shot 54,239.31 blasting machine Overhaul of aerated concrete 9,899.00 block production system Equipment installation of renewable 73,614.95 resource companies Overhaul of casting kneading machine 33,490.59 2015-JX-casting- 004 Overhaul of ring making hydraulic 56,772.47 machine Grade level of 170,880.00 170,880.00 particle plant Renewal of making of 10,141.88 hydrofluoric acid of storage tank Maintenance of acid reacting 57,861.87 furnace Transformation of electric control cabinet of 8# and 11,373.60 9# deep-well pump Transformation of 16,397.28 condensate water Dust removing system of first 2,017.10 plant Equipment transformation power distribution room 21,000.00 in Dependant’s Area in Haiyan Road Bridge aluminum electricity 55,235.35 removal project High-strength aluminum tubes, 1,102,684. 50,000.00 709,598,898.59 4,092,795.73 140.88 bars and materials 00 project Industry 17,823,750 revitalization 33,930.00 559,397,793.55 159.62 .16 –annually
52
F-185 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Proportion of Balance at the Increments at Budget Amount transferred Other project Project name beginning of the current (RMB 10,000) to fixed assets decrease investment in year period budget˄%˅ output 25,000 tons of high-strength extruded aluminum alloy tubes, bars and materials project Baihe casting production line 806.30 16,367,085.33 137,600.00 570,305.64 194.21 project 16,548,434,156. 8,499,179,233.9 316,322,65 Total 3,175,081.89 1,364,683,363.22 26 2 5.66 ˄Continued˅
Including: Interest Interest Project Accumulated capitalization capitalization Balance at the end Project name schedule amount interest Capital source amount in rate in current of period ˄%˅ capitalization current period (%) period Office and life area Self-financing project ,lending Reciprocating Self-financing friction wear tester ,lending Self-financing Desulfurization project 100 45,516,925.15 454,633.61 ,lending 20Kt/a refined aluminum 4,896,902.7 Self-financing 92 87,417,715.24 783,854,269.84 project 8 ,lending Switching station busbar Self-financing 17,921,569.14 processing project Transformation project of Self-financing 200,132,917.12 electrolytic cell lining Other technical Self-financing 504,394,711.75 transformation project ,lending Klockner-Moeller Mining Self-financing 98 88,117,349.77 551,878,810.44 Area II ,lending Klockner-Moeller Mining 98 Self-financing 115,055,511.10 Area III Safety transformation 98 Self-financing 2,685,395.32 project (821)
Other 98 Self-financing 177,184.00 Technical transformation project of piecemeal Self-financing 530,856.67 project 100,000 tons of 33,992,568. Self-financing 47,681,870.75 822,879,060.54 electrolyte project 63 ,lending 6,939,913.9 Self-financing Xianfeng Cell of Qaidar 96 54,950,844.89 274,927,636.27 6 ,lending 3570 horizontal east-Total main haulage 100 Self-financing 27,655,232.80 roadway of Qaidar mine Squatter settlements Lending 0.00 transformation project Auxiliary production 986,997,826.2 345,968,600 99 Self-financing 1,150,422,319.71 project 0 .90 Technical transformation 90 Self-financing 80,335,876.65 project
53
F-186 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Including: Interest Interest Project Accumulated capitalization capitalization Balance at the end Project name schedule amount interest Capital source amount in rate in current of period ˄%˅ capitalization current period (%) period Single construction 90 Self-financing 81,149,003.16 related to site Unit desulfurization Self-financing 11,172,273.67 project Wind break wall project Self-financing 787,500.00
Maintenance project Self-financing 5,869,759.88
Denitration project Self-financing 52,821,365.24
Combined heat and Self-financing 0.00 power generation project Electric dust remover Self-financing 17,223,238.18 project Oxygen enrichment Self-financing 0.00 project Photothermal energy Self-financing 73,600.00 project 1,864,744,825 525,047,754 Aluminum plate project Lending 5,765,350,497.29 .62 .15 491,558,640.2 177,321,469 Formed foil project 95 Self-financing 1,583,183,581.83 1 .68 Annual 12kt electronic 174,208,414.5 36,318,855. 95 Self-financing 328,813,311.39 aluminum foil project 3 24
Maintenance building Self-financing 9,617,869.00
Sanya Haihu Hotel 85.12 Self-financing 332,490,148.74 project Maintenance project of Self-financing sea miner lamp room
Mining building Self-financing Technical transformation of Qinglong strontium Fund raising salt Huangfeng Hydropower 1,140,255,912 243,058,196 Station in Hualong 6.43 Bank lending 3,155,525,399.61 .79 .26 County Photovoltaic grid Enterprise connected power self-raised 35,130,126.40 generation project in fund,bank Huangfeng Plant Area lending Enterprise Shanping Hydropower self-raised 20,225,660.55 Station in Guide County fund,bank lending Minhe county Dahejia 554,735,440.4 142,159,927 6.43 Bank lending 1,565,418,107.97 hydropower station 2 .98 Enterprise Dahejia Hydropower self-raised 178,405,545.87 Station in Minhe County fund,bank lending Enterprise self-raised Erduo Power Station 5,029,112.20 fund,bank lending
54
F-187 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Including: Interest Interest Project Accumulated capitalization capitalization Balance at the end Project name schedule amount interest Capital source amount in rate in current of period ˄%˅ capitalization current period (%) period Enterprise Earlier project of self-raised 31,256,181.55 Mentang fund,bank lending Earlier project of Enterprise Bingling Grade I project 240,208,341.7 self-raised 610,664,759.47 (Zhongchuan 4 fund,bank Hydropower Station) lending Enterprise Phase I of electrolytic 1,033,431,874 513,904,562 self-raised 3,710,607,979.06 aluminum .65 .68 fund,bank lending Annual output of 100,000 Enterprise tons of special extruded self-raised 68,482,172.18 aluminum alloy material fund,bank project for rail transport lending Enterprise self-raised Anode carbon 78,299.25 fund,bank lending Enterprise Annual output of 250,000 self-raised tons of prebaked anode 0.00 fund,bank carbon project lending Enterprise Installation project of self-raised 0.00 Jingyue Hostel fund,bank lending Transmit ash field Enterprise seepage proofing self-raised 0.00 transformation project of fund,bank Phase V lending Enterprise Transformation of self-raised 0.00 Tianyuan line fund,bank lending Enterprise Transformation of old self-raised casting factory 0.00 fund,bank production line lending Enterprise 1 0KV box transformer self-raised 0.00 project fund,bank lending Enterprise Sewage treatment station self-raised of environmental 0.00 fund,bank treatment project lending Enterprise Technical transformation self-raised 0.00 project fund,bank lending Preparation of lead Enterprise drainage tube condenser self-raised 193,492.28 of acid making workshop fund,bank with fluoride salt lending Enterprise Transformation of forging self-raised machine of ring making 41,136.73 fund,bank group lending
55
F-188 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Including: Interest Interest Project Accumulated capitalization capitalization Balance at the end Project name schedule amount interest Capital source amount in rate in current of period ˄%˅ capitalization current period (%) period Enterprise Transformation of electric self-raised cooling system of casting 9,024.43 fund,bank furnace lending Enterprise Technical transformation self-raised of fluoride salt sewage 0.00 fund,bank treatment station lending Enterprise Dangerous solid waste self-raised 2,098,188.68 project fund,bank lending Enterprise Overhaul of Q378E shot self-raised 54,239.31 blasting machine fund,bank lending Enterprise Overhaul of aerated self-raised concrete block production 9,899.00 fund,bank system lending Enterprise Equipment installation of self-raised renewable resource 73,614.95 fund,bank companies lending Enterprise Overhaul of casting self-raised kneading machine 33,490.59 fund,bank 2015-JX-casting-004 lending Enterprise Overhaul of ring making self-raised 56,772.47 hydraulic machine fund,bank lending Enterprise Grade level of particle self-raised 0.00 plant fund,bank lending Enterprise Renewal of making of self-raised hydrofluoric acid of 10,141.88 fund,bank storage tank lending Enterprise Maintenance of acid self-raised 57,861.87 reacting furnace fund,bank lending Enterprise Transformation of electric self-raised control cabinet of 8# and 11,373.60 fund,bank 9# deep-well pump lending Enterprise Transformation of self-raised 16,397.28 condensate water fund,bank lending Enterprise Dust removing system of self-raised 2,017.10 first plant fund,bank lending Equipment Enterprise transformation power self-raised 21,000.00 distribution room in fund,bank Dependant’s Area in lending
56
F-189 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Including: Interest Interest Project Accumulated capitalization capitalization Balance at the end Project name schedule amount interest Capital source amount in rate in current of period ˄%˅ capitalization current period (%) period Haiyan Road
Enterprise Bridge aluminum self-raised electricity removal 55,235.35 fund,bank project lending High-strength aluminum tubes, bars and materials 70,288,530.10 Lending 704,403,418.86 project Industry revitalization –annually output 25,000 tons of 276,033,313.7 Lending 541,574,043.39 high-strength extruded 8 aluminum alloy tubes, bars and materials project Baihe casting production 164,685.38 Lending 15,659,179.69 line project 23,366,607,371.3 Total 0
16ˊProject material
Balance at the Increments at the Decrements at the Balance at the end Item beginning of year current period current period of period
Special material 23,666,321.81 13,403,819.06 15,789,428.18 21,280,712.69
Fireproofing material 1,322,224.06 1,322,224.06
Spare part 3,335,983.51 2,403,445.77 2,378,339.66 3,361,089.62
Main material 10,605,694.75 50,905,107.12 46,615,922.99 14,894,878.88
Auxiliary material 2,543,648.65 13,272,584.23 14,024,665.61 1,791,567.27
Tool and instrument 35,837.83 42,654.77 36,552.61 41,939.99
Experiment equipment 59,974.10 57,807.90 44,924.62 72,857.38
Other 270,000.00 1,147,494.03 1,417,494.03
Wrappage 288,938.80 943,603.11 931,132.15 301,409.76
Low priced and easily worn 256,121.32 502,184.60 470,506.39 287,799.53 articles Labor protection appliances 110,572.22 169,813.18 170,772.85 109,612.55
Oils 944,146.61 575,168.47 556,452.89 962,862.19
Pumps 647,765.70 129,273.51 109,752.16 667,287.05
Electric equipment 420,650.29 615,045.59 467,327.42 568,368.46
Cable 258,710.43 47,457.27 63,957.51 242,210.19
57
F-190 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Balance at the Increments at the Decrements at the Balance at the end Item beginning of year current period current period of period Polyethylene (pipe industry) 762,230.36 7,990.00 754,240.36 Electronic foil waste materials of Pingan High 146,511.10 146,511.10 Precision Aluminum Industry Co., Ltd. Experimental drug 28,822.44 78,617.74 70,037.33 37,402.85
Total 45,704,153.98 84,294,076.35 83,206,497.53 46,791,732.80
17ˊLiquidation of fixed assets
Book Value at the end of Book Value at the Item Reason of liquidation period beginning of year Ash can, electric lock and 90,593.27 70,593.27 Retirement of fixed assets other equipments 90,593.27 70,593.27 Total
18ˊIntangable assets
Balance at the Increments at the Decrements at the Balance at the end of Item beginning of year current period current period period I. Original cost of intangible assets Land usage right 682,146,556.61 30,644,413.10 53,537,435.96 659,253,533.75
Hightower’s right of mining 3,416,610.00 3,416,610.00
Qaidar mine’s right of mining 24,145,810.00 24,145,810.00
Qaidar Xianfeng coal mine’s 30,226,960.00 30,226,960.00 right of mining Dafengshan strontium mine ’s 72,859,421.50 72,859,421.50 right of mining Use right of exploration right (Xihai Coal and Electricity Co., 137,102,000.00 137,102,000.00 Ltd.) Software 3,716,132.03 613,592.84 4,329,724.87
Patent right 380,266.30 380,266.30
Trademark 6,000.00 6,000.00
Total 953,613,490.14 31,644,272.24 53,537,435.96 931,720,326.42
II. Accumulated amortization
Land usage right 76,590,820.15 19,264,852.98 1,300,504.52 94,555,168.61
Hightower’s right of mining 1,025,183.52 113,886.96 1,139,070.48
Qaidar mine’s right of mining 8,023,975.60 804,860.28 8,828,835.88 Qaidar Xianfeng coal mine’s 7,979,904.03 1,007,565.24 8,987,469.27 right of mining
58
F-191 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Balance at the Increments at the Decrements at the Balance at the end of Item beginning of year current period current period period Dafengshan strontium mine ’s 27,598,265.52 2,263,057.80 29,861,323.32 right of mining Use right of exploration right (Xihai Coal and Electricity Co., 16,042,650.89 5,203,021.92 21,245,672.81 Ltd.) Software 516,181.75 528,151.50 1,044,333.25
Patent right 325,777.61 325,777.61
Trademark 2,650.00 2,650.00
Total 137,776,981.46 29,513,824.29 1,300,504.52 165,990,301.23 III. Impairment provision for intangible assets Land usage right
Exploration right
Hightower’s right of mining
Qaidar mine’s right of mining Qaidar Xianfeng coal mine’s right of mining Dafengshan strontium mine ’s right of mining Software
Patent right
Trademark
Total IV. Total book value of intangible assets Land usage right 605,555,736.46 564,698,365.14
Exploration right 2,391,426.48 2,277,539.52
Hightower’s right of mining 16,121,834.40 15,316,974.12
Qaidar mine’s right of mining 22,247,055.97 21,239,490.73 Qaidar Xianfeng coal mine’s 45,261,155.98 42,998,098.18 right of mining Dafengshan strontium mine ’s 121,059,349.11 115,856,327.19 right of mining Software 3,199,950.28 3,285,391.62
Patent right 54,488.69
Trademark 3,350.00
Total 815,836,508.68 765,730,025.19
19ˊ Goodwill
59
F-192 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Impairment Impairment Investee name or Balance at the Increments at Decrements at provision at Balance at the provision at matters generating beginning of the current the current the beginning end of period the end of goodwill year period period of year period Qinghai Western Water 19,676,403.66 19,676,403.66 and Electricity Co., Ltd. Qinghai Ningbei Power Generation Co., Ltd., 82,703,050.57 82,703,050.57 Tanghu Power Branch Qinghai Jinxing Mining 1,320,000.00 1,320,000.00 Co., Ltd Qinghai Ningbei Power 15,000,000.00 15,000,000.00 Generation Co., Ltd. Qinghai Xihai Coal and 314,101,848.8 314,101,848.86 Electricity Co., Ltd. 6 Qinghai Baihe 379,924,249.4 Aluminium Industry 286,428,916.06 93,495,333.39 5 Co., Ltd. Qinghai Western 93,495,333.39 93,495,333.39 Carbon Co., Ltd. Qinghai Guoxin Aluminium Industry 2,335,695.66 2,335,695.66 Co., Ltd. 178,534,079.6 815,061,248.2 730,022,501.97 93,495,333.39 Total 2 0
20. Long-term deferred and prepaid expenses
Balance at the Increments at Reasons Amortization Other Balance at the Items beginning of the current for other of the period losses end of period year period losses Organization expense 928,975.75 862,655.43 657,248.16 1,134,383.02
Technical service fee 2,381,333.41 303,999.96 2,077,333.45
Expenditure on 52,350,622.05 10,540,897.77 12,051,494.34 50,840,025.48 renovation projects Cost of sale-leaseback 14,142,736.73 3,164,403.34 10,978,333.39 implementation Others 37,634,547.73 37,634,547.73
55,660,931.21 63,180,837.66 15,519,897.64 657,248.16 102,664,623.07 Total
21. Deferred tax assets and deferred tax liabilities The confirmed deferred tax assets
Balance at the end of period Balance at the beginning of year Items Deductible Deductible temporary Deferred tax assets temporary Deferred tax assets difference difference Provision for impairment of 48,188,150.39 143,936,083.84 38,261,491.40 163,223,758.19 assets Guarantee compensation reserve 49,142,188.64 327,614,590.93 34,881,213.59 235,347,190.93 and unearned premium reserve
Deferred revenue 12,702,991.60 50,811,966.37 15,821,472.37 63,285,889.49
Wages incurred but not paid 480,306.75 1,921,227.00 1,925,999.98 7,703,999.90
60
F-193 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Balance at the end of period Balance at the beginning of year Items Deductible Deductible temporary Deferred tax assets temporary Deferred tax assets difference difference
Withholding account payable 2,033,369.36 8,133,477.45 1,982,285.80 7,929,143.20
Maintenance cost accrued but 67,578.53 270,314.11 8,224,500.15 32,898,000.58 not used Total 112,614,585.27 532,687,659.70 101,096,963.29 510,387,982.29
The confirmed deferred tax liabilities
Balance at the end of period Balance at the beginning of year Items Taxable Deferred tax Taxable temporary Deferred tax liabilities temporary liabilities differences differences Changes in the fair value of investment property accounted 1,713,743.20 11,424,954.67 1,713,743.20 11,424,954.67 with fair value Total 1,713,743.20 11,424,954.67 1,713,743.20 11,424,954.67
22. Other non-current Assets
Items Balance at the end of period Balance at the beginning of year
Up-front fees for Yuka coal-fired power project 23,844,300.00 23,844,300.00
Geological (mineral) Survey (Scale: 1:50 000) 87,088,439.82 85,487,839.82
Danai Haigongka project 53,031,234.01 52,456,631.01
Diaosu multimetal project 1,562,852.67 1,562,852.67
Diaosu project 1,026,303.51 1,026,303.51
Galinha project 51,460,372.35 50,715,204.34
Golmud Bangedaidong multimetal project 44,736,246.17 44,711,826.17
Golmud Bangedaidong multimetal project 522,018.32 522,018.32
Golmud Kaimudou multimetal project 5,056,522.11 5,043,797.11
Golmud Yidaogou multimetal project - 3,729,375.55
Haolaitu gold deposit 7,693,006.27 7,678,736.27
Hudasi project 267,481.69 267,481.69
Laning Zaohuo project 30,855,290.92 30,811,040.92
Shinaihai project 2,819,481.36 2,819,481.36
61
F-194 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Items Balance at the end of period Balance at the beginning of year
Tuolugou project 10,916,642.51 10,916,642.51
Qingquangou copper polymetal project 7,016,866.90 7,000,396.90
Zhahalaren polymetal project 7,817,496.85 7,807,146.85
Naomuhun Goukou gold deposit 3,792,998.59 3,751,868.59
Qiujigou multimetal project 5,967,945.73 4,214,903.73
Qiuji Donggou multimetal project 6,985,814.84 6,204,834.84
Naomuhun gold-copper polymetal project 1,742,174.03 1,684,394.37
Advance payment for projects 8,800,000.00 8,800,000.00
Trust fund 150,000,000.00 150,000,000.00
Others 44,306,032.94
Total 557,309,521.59 511,057,076.53
23. Short-term loans
Type of borrowings Balance at the end of period Balance at the beginning of year
Pledge borrowings 165,000,000.00 526,000,000.00
Mortgage borrowings 1,324,000,000.00 4,967,609,718.54
Guaranteed borrowings 5,747,253,448.87 1,911,210,000.00
Fiduciary borrowings 1,350,714,100.00 400,200,000.00
Total 8,586,967,548.87 7,805,019,718.54
24. Notes payable
Loan classification Balance at the end of period Balance at the beginning of year
Bank's acceptance bill 1,085,505,899.03 709,457,534.86
Commercial acceptance bill
Total 1,085,505,899.03 709,457,534.86
25. Accounts payable
Account receivable age Balance at the end of period Balance at the beginning of year
Within one year 2,813,564,909.41 2,198,687,011.61
One year ~ two years 94,230,807.40 426,239,073.05
62
F-195 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Account receivable age Balance at the end of period Balance at the beginning of year
Two years ~ three years 116,866,802.61 41,450,666.40
Over three years 158,237,629.39 127,396,082.63
Total 3,182,900,148.81 2,793,772,833.69
Accounts payable with significant amount and age of more than one year
Reasons for outstanding accounts Name of creditors Outstanding amount payable
Qinghai Minguang Coal Sale Co., Ltd. 83,981,361.05 Unfinished settlement
Payments for equipment, the project Toshiba Hydropower Equipment ( Hangzhou ) Co., Ltd., 33,247,944.00 is not completed
Herun Group 20,000,000.00 Not yet settled
Guiyang Branch of China Aluminum International Construction payments, the project is 14,300,000.00 Engineering Corporation Limited not completed Payments for equipment, the project Harbin Electric Machinery Company Ltd. 10,086,398.49 is not completed Guiyang Branch of China Aluminum International 10,000,000.00 Unbalanced Engineering Corporation Limited (infrastructural project) Shanghai Jianghe Real Estate Development Co.,Ltd. 10,000,000.00 Not yet settled
Tianjin Alstom Hydro Co., Ltd. 9,804,267.00 Payments for equipment,
Total 191,419,970.54
26. Advance receipts
Account receivable age Balance at the end of period Balance at the beginning of year
Within one year 301,003,503.01 493,530,402.76
Over one year 28,318,776.29 55,825,572.07
Total 329,322,279.30 549,355,974.83
Advance receipts with significant amount and age of more than one year
Reasons for advance receipts not Name of creditors Outstanding amount carried forward Guarantee fee received in advance 19,315,000.00 Unbalanced
Qinghai Xinheng Carbon Products Co., Ltd. 109,042.38 Unbalanced
Nanhai Aluminium Section Factory 30,015.01 Unbalanced Payment for purchases that are settled Qinghai Ruijia Material Co., Ltd. 183,878.60 at the time of delivery Payment for purchases that are settled Jincheng Panlong Chemical Co., Ltd. 135,000.00 at the time of delivery Ningbei Project Department of Qinghai 400,000.00 Not yet settled Coal-fired Power Engineering Company
63
F-196 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Reasons for advance receipts not Name of creditors Outstanding amount carried forward Kangyang Branch of Qinghai West 220,000.00 Not yet settled Hydropower Co., Ltd. State Reserve Bureau of National Development 217,120.00 Not yet settled and Reform Commission of PRC Zhang Baoing (Ruian) 142,896.00 Not yet settled Nanjing Tongda Alloy Material Factory (No. 2 100,000.00 Not yet settled Subsidiary) Usufruct outlay of mining right in Qinghai Caidaer Deposit Co., Ltd. 200,000.00 collection and payment Qinghai Guangneng Commercial and Trading 74,382.80 Unbalanced payment for coal Co., Ltd. Qinghai Jindacheng Commercial and Trading 54,489.00 Unbalanced payment for coal Co., Ltd. Ma Shaohua et al 27,552.90 Unbalanced payment for coal
Ye Chengyun 27,089.55 Unbalanced payment for coal
Gonghe Limin Heating Co., Ltd. 10,000.00 Unbalanced payment for coal
Total 21,246,466.24
27. Accrued payroll
Balance at the Increase in the Decrease in the Balance at the end of Items beginning of year current year current year year I. Short-term employee 35,924,535.89 1,093,884,829.28 1,080,682,350.39 49,127,014.78 benefits II. Post-employment benefits- defined 5,203,475.50 243,794,421.76 234,744,460.15 14,253,437.11 contribution plans III. Termination benefits 55,000.00 55,000.00
IV. Other benefits due within one year Total 41,128,011.39 1,337,734,251.04 1,315,481,810.54 63,380,451.89
(1)Short-term employee benefits
Balance at the Increments at the Decrements at the Balance at the end of Items beginning of year current period current period period I. Wages, bonuses, 19,298,364.99 790,683,027.54 778,040,695.86 31,940,696.67 allowances and subsidies
II. Staff welfare expenses 186,045.10 121,421,301.09 120,750,439.83 856,906.36
III. Social insurance charges 51,901.79 75,989,933.23 75,919,921.98 121,913.04 1. Basic medical insurance 49,397.25 51,972,079.58 51,901,380.31 120,096.52 premium 2. Supplementary medical - 7,797,107.13 7,797,477.93 -370.80 insurance 3. Work-related injury 12,294.32 10,391,050.60 10,401,994.60 1,350.32 insurance premiums 4.Maternity insurance -9,789.78 5,829,695.92 5,819,069.14 837.00 premiums
IV. Housing provident fund 641,731.25 86,586,425.27 84,418,229.97 2,809,926.55
64
F-197 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Balance at the Increments at the Decrements at the Balance at the end of Items beginning of year current period current period period V. Labor union expenditure and employee education 15,392,268.68 18,745,840.46 20,740,536.98 13,397,572.16 expenses VI. Short-term paid absences - - -
VII. Short-term profit - - - sharing plan VIII.Other short-term 354,224.08 458,301.69 812,525.77 - employee benefits Total 35,924,535.89 1,093,884,829.28 1,080,682,350.39 49,127,014.78
(2)Post-employment benefits- defined contribution plans
Balance at the Increase in the Decrease in the Balance at the end of Items beginning of year current year current year year 1. Basic endowment insurance 11,730.23 153,968,341.45 153,495,194.45 484,877.23 premium 2. Supplementary endowment 14,260,357.40 14,266,113.58 -5,756.18 insurance 3. Unemployment insurance 2,300,073.84 18,312,223.31 18,177,132.52 2,435,164.63 premium 4. Annuity payment 2,891,671.43 57,253,499.60 48,806,019.60 11,339,151.43
Total 5,203,475.50 243,794,421.76 234,744,460.15 14,253,437.11
(3)Termination benefits-early retirement
Balance at the Increase in the Decrease in the Balance at the end of Items beginning of year current year current year year Compensations for the cancellation of the labor 55,000.00 55,000.00 relationship with Total 55,000.00 55,000.00
28. Taxes and dues payable
Items Balance at the end of period Balance at the beginning of year
Added-value tax -1,113,198,197.93 -919,193,016.17
Business tax 14,471,604.84 24,664,751.49
Corporate income tax 103,904,006.62 105,843,691.87 Urban maintenance and construction 1,690,134.10 2,530,822.57 tax Real estate tax 140,350.29 261,296.53
Land use tax -830,383.80 -830,383.80
Individual income tax 682,983.64 1,165,752.93
Stamp tax 3,341,725.27 2,914,201.66
65
F-198 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Items Balance at the end of period Balance at the beginning of year
Land appreciation tax -644,411.06
Withhold and remit tax 6,567,957.05 7,401,596.55
Resources tax 3,269,356.32 2,407,039.86
Educational surcharges 702,887.93 1,918,704.08
Local educational surcharges 816,118.62 462,834.20
Price regulation fund 3,982,339.84 4,496,305.28
Mineral resources compensation fees 10,847,318.84 19,557,404.84
Withhold and remit construction and 5,827.50 installation tax Total -964,250,381.93 -746,398,998.11
29. Accrued interest payable
Items Balance at the end of period Balance at the beginning of year The interest of long-term borrowings that the interest is repaid in installment 4,474,697.00 the principal is repaid at maturity Interest on debenture 348,844,826.84 273,006,145.59
Accrued interest payable of 545,971.51 short-term borrowings Total 353,865,495.35 273,006,145.59
30. Dividends payable
Balance at the beginning Reasons for non-payment Organization name Balance at the end of period of year more than a year Guangzhou Hongdao 3,240,000.00 3,240,000.00
Hainan Runda 8,641,080.00 8,641,080.00
Qinghai Quanwang Investment 2,666,666.67 Management Co., Ltd. 14,547,746.67 11,881,080.00 Total
31. Other payables
Account receivable age Balance at the end of period Balance at the beginning of year
Within one year 790,970,639.68 1,411,470,327.65
One year ~ two years 110,185,850.71 190,857,305.82
Two years ~ three years 50,371,980.35 105,056,309.22
66
F-199 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Account receivable age Balance at the end of period Balance at the beginning of year
Over three years 38,823,859.84
990,352,330.58 1,747,501,026.89 Total
Description of other payables with significant amount and age of more than one year
Name of creditors Outstanding amount Reasons for the outstanding payables Baihe Project Department of Project Contracting Co., Ltd. of Guiyang 54,745,868.78 Unbalanced Aluminum Magnesium Design & Research Institute Qinghai Investment and Development 40,000,000.00 Intercourse funds Co., Ltd. Village committees of Nanguan village, 18,432,040.00 Over three years Qiaotou Township, Datong County Village committees of Houzhuang village, Qiaotou Township, Datong 8,011,674.00 Over three years County Qinghai Yuka Coal-fired Power Co., 6,963,391.55 Intercourse funds Ltd. Village committees of Xincheng village, Qiaotou Township, Datong 6,672,357.00 Over three years County Total 134,825,331.33
32. Non-current assets maturing within one year
Type of loan Balance at the end of period Balance at the beginning of year
Long-term loans maturing within one 1,316,756,034.71 1,162,170,000.00 year Bonds payable maturing within one 5,200,000,000.00 3,700,000,000.00 year Long-term payables maturing within 61,722,873.81 one year Long-term liabilities maturing within one year
Total 6,578,478,908.52 4,862,170,000.00
33. Other current liabilities
Items Balance at the end of period Balance at the beginning of year
Unearned premium reserve 89,000,794.93 94,014,494.93
Guarantee compensation reserve 340,768,096.00 272,229,596.00
Guarantee deposit received 234,992,000.00 207,192,000.00
Total Items 664,760,890.93 573,436,090.93
34. Long-term borrowings
67
F-200 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Type of borrowings Balance at the end of period Balance at the beginning of year Borrowings from treasury bond fund in 4,560,000.00 4,560,000.00 way of lending
Pledge borrowings 2,900,000,000.00 632,000,000.00
Mortgage borrowings 3,689,839,400.00 3,598,342,500.00
Guaranteed borrowings 3,044,000,000.00 2,644,480,000.00
Fiduciary borrowings 9,093,251.69 10,464,056.72
Total 9,647,492,651.69 6,889,846,556.72
35. Bonds payable
Interest Interest adjustment at payables Actual interest Nominal Issuing Bond Name of bonds Circulation the beginning at charges at value date period of current current current period year period Bonds issues by RMB 1000 Qinghai Provincial 42,480,00 Yuan/hundre Sep.28,2012 10 years 600,000,000.00 42,480,000.00 0.00 Investment Group d Yuan Co., Ltd. in 2012 The first phase of private placement RMB 100 note (PPN)of Qinghai Mar.25, 84,000,00 Yuan/hundre 3 years 1,000,000,000.00 84,000,000.00 2014 0.00 Provincial Investment d Yuan Group Co., Ltd. in 2014 The second phase of private placement note (PPN)of Qinghai RMB 100 Yuan/hundre Mar.23,2015 3 years 600,000,000.00 Provincial Investment d Yuan Group Co., Ltd. in 2015 The third phase of private placement note (PPN)of Qinghai RMB 100 Yuan/hundre Sep.29,2015 3 years 500,000,000.00 Provincial Investment d Yuan Group Co., Ltd. in 2015 The first phase of medium-term notes RMB 100 of Qinghai Provincial Yuan/hundre Apr.2,2015 3 years 1,400,000,000.00 Investment Group d Yuan Co., Ltd. in 2015 Corporate bonds of RMB 150 Qinghai Jinrui Aug.29, 9,588,296 Yuan/hundre 5 years 150,000,000.00 -2,388,867.71 10,401,723.86 2012 .01 Mineral Development d Yuan Co. Ltd. in 2012
136,068,2 4,250,000,000.00 -2,388,867.71 136,881,723.86 Total 96.01
Continued Table
68
F-201 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Interest Bond Principal Balance at Nominal adjustment at the Name of bonds Issuing date perio returned at the end of valu beginning of d current period year current year
Bonds issues by Qinghai RMB 1000 10 600,000,000.0 Yuan/hundr Sep.28, 2012 0.00 Provincial Investment Group years 0 Co., Ltd. in 2012 ed Yuan
The first phase of private placement note (PPN)of RMB 100 1,000,000,000. Yuan/hundr Mar.25,2014 3 years 0.00 Qinghai Provincial 00 Investment Group Co., Ltd. ed Yuan in 2014 The second phase of private placement note (PPN)of RMB 100 600,000,000.0 Yuan/hundr Mar.23,2015 3 years 0.00 Qinghai Provincial 0 Investment Group Co., Ltd. ed Yuan in 2015 The third phase of private placement note (PPN)of RMB 100 500,000,000.0 Yuan/hundr Sep.29, 2015 3 years 0.00 Qinghai Provincial 0 Investment Group Co., Ltd. ed Yuan in 2015 The first phase of medium-term notes of RMB 100 1,400,000,000. Yuan/hundr Apr. 2nd, 2015 3 years 0.00 Qinghai Provincial 00 Investment Group Co., Ltd. ed Yuan in 2015
Corporate bonds of Qinghai RMB 150 Jinrui Mineral Development Yuan/hundr Aug. 29, 2012 5 years -1,575,439.86 81,005,000.00 67,419,560.14 Co. Ltd. in 2012 ed Yuan
4,167,419,560. -1,575,439.86 81,005,000.00 Total 14
The relevant information of the debt financing instruments issued by this Company is as follows: 1. Bonds issues by Qinghai Provincial Investment Group Co., Ltd. in 2012 Abbreviation of bond: 12 Qinghai investment bond; total issuance: RMB 600,000,000; annual nominal interest rate: 7.08 %; bond duration: 10 years; issuing way: to issue publicly to institutional investors through the issuing branches set by the members of underwriting group and to issue to institutional investors with agreement through Shanghai Stock Exchange; face value: RMB 100; issue price: RMB 100/ face value of RMB 100; interest accrual method: pay interest once per year, repay principal once when expiring, and pay the interest of last phase with the cashing of principal; issue date: September 28, 2012; value date: October 8, 2012; due (cashing) date: October 7, 2022. 2. The non-public directional tool for debt financing of Qinghai Provincial Investment
69
F-202 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Group Co., Ltd. of the first phase in 2014; Code of directional tool: 031490185; abbreviation of directional tool: 14 Qinghai investment PPN001; duration: 3 years; total issuance: RMB 1,000,000,000; issuing interest rate: 8.40%; face value: RMB 100; issue price: RMB 100/ face value of RMB 100; interest accrual method: fixed interest bearing; issue date: March 25, 2014; value date: March 26, 2014; due (cashing) date: March 26, 2017. 3. The non-public directional tool for debt financing of Qinghai Provincial Investment Group Co., Ltd. of the second phase in 2015; Code of directional tool: 031558007; abbreviation of directional tool: 15 Qinghai investment PPN002; duration: 3 years; total issuance: RMB 600,000,000; issuing interest rate: 7.40%; face value: RMB 100; issue price: RMB 100/ face value of RMB 100; interest accrual method: fixed interest bearing; issue date: March 23, 2015; value date: March 24, 2015; due (cashing) date: March 24, 2018. 4. Medium term note of Qinghai Provincial Investment Group Co., Ltd. of the first phase in 2015 Abbreviation of bond: 15 Qinghai investment MTN001; total issuance: RMB 1,400,000,000; annual nominal interest rate: 6%; bond duration: 3 years; issuing way: bookkeeping and filing; issue price: RMB 100/ face value of RMB 100; interest accrual method: pay interest once per year, repay principal once when expiring, and pay the interest of last phase with the cashing of principal; issue date: April 2, 2015; value date: April 3, 2015; due (cashing) date: April 3, 2018. 5. The non-public directional tool for debt financing of Qinghai Provincial Investment Group Co., Ltd. of the third phase in 2015 Code of directional tool: 031564141; abbreviation of directional tool: 15 Qinghai investment PPN003; duration of directional tool: 3 years; total issuance: RMB 500,000,000; issuing interest rate: 6.20%; face value: RMB 100; issue price: RMB 100/ face value of RMB 100; interest accrual method: fixed interest bearing; issue date: September 29, 2015; value date: September 29, 2015; due (cashing) date: September 29, 2018. 6. After approved by China Securities Regulatory Commission (CSRC) with the document of Z.J.X.K. [2012] No. 997 in 2012, the subsidiary of the company, Jinrui Mineral obtains permission to issue the corporation bonds with face value of RMB 100 to society publicly for 1,500,000 pieces and with total issuance for RMB 150,000,000.00. Abbreviation of bond: 12 Jinrui bond; nominal interest rate: 7.9%;
70
F-203 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
actual interest rate: 8.57%; bond duration: 5 years started from issue date; pay interest once per year, to repay principal once when expiring, and pay the interest of last phase with the cashing of principal; value date: August 29, 2012. The subsidiary of the company, Jinrui Mineral, will confirm the total bond issue cost for RMB 3,980,000.00 as unacknowledged financial charge. Based on the Raise Specification for Publicly Issuing Bonds by Qinghai Jinrui Mineral Development Co. Ltd. in 2012, the subsidiary of the company, Jinrui Mineral, has right to increase the nominal interest rate of the these corporation bonds during follow-up duration on the interest date of the 3rd interest accrual year in the duration of these corporation bonds and the bondholders have right to sell all or partial bonds held back to the issuer at par on the interest date of the 3rd interest accrual year in the duration of these corporation bonds. The bonds in current period are guaranteed by Qinghai Provincial Investment Group Co., Ltd. unconditionally and irrepealably with full amount and joint liability. On July 30, 2015, the subsidiary of the company, Jinrui Mineral, published the Announcement of Implementation Measures for Adjustment of Nominal interest rate for “12 Jinrui Bond” and Sales-back of Investors by Qinghai Jinrui Mineral Development Co. Ltd., which decided not to increase the nominal interest rate of current year, and the annual nominal interest rate in the later 2 years of bond duration still was 7.9%. Moreover, it would not be changed in the follow-up bond duration and investors had right to sell all or partial bonds held back to the issuer at par. On August 6, 2015, the subsidiary of the company, Jinrui Mineral, received the payment notice for recycling fund of bonds from Shanghai Branch of China Securities Depository and Clearing Corporation Limited (CSDC) with total sales-back amount for RMB 81,005,000. After completing sales-back, the residual creditor's rights of the subsidiary of the company, Jinrui Mineral, was RMB 68,995,000.00. 36ˊLong-term employee pay payable
Balance at the Increase in current Decrease in current Balance at the end Item beginning of year year year of year Compensation to early 10,750,500.50 1,204,762.06 1,778,617.48 10,176,645.08 retirement personnel Total 10,750,500.50 1,204,762.06 1,778,617.48 10,176,645.08
37ˊLong-term payables
Balance at the beginning of Item Balance at the end of period year
71
F-204 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Balance at the beginning of Item Balance at the end of period year Shanghai Guoneng Logistics Co., Ltd. 210,000,000.00 300,000,000.00
China Jianyin Investment Lease Co., Ltd. 161,994,264.19 220,243,283.07
China Foreign Trade and Financial Leasing Co., Ltd. 265,000,000.00 225,000,000.00
Wanjiang Financial Leasing Co., Ltd. 255,256,610.49 330,055,505.42
Xining Business Department of Gansu Branch of China 280,000,000.00 Huarong Asset Management Co., Ltd. Pingan International Financial Leasing Co., Ltd. 26,214,673.70 42,350,011.64
China Huatong Financial Leasing Co., Ltd. 250,090,320.42 307,496,148.53
Yingda Huitong Financial Leasing Co., Ltd. 93,134,464.53 150,000,000.00
Qinghai Investment and Trade Union Committee 133,667,111.12 125,827,111.12
China Minmetals Aluminium Industry Co., Ltd. 4,476,384.36 93,753,509.22
SPDB Financial Leasing Co., Ltd. - 277,220,234.66
CMB Financial Leasing Co., Ltd. 340,497,381.24 260,281,880.68
Payment for financial leasing equipments 1,687,879,657.31 1,078,779,902.5
Expenses payable for right of mining 8,590,000.00 20,560,000.00
China Huarong Assets Management Co., Ltd., Shanghai Branch 200,000,000.00
AVIC International Leasing Co., Ltd. 152,262,384.48
Other 140,084,183.19
Total 3,929,147,435.03 3,711,567,586.84
38ˊSpecial payables
Balance at the Increments at the Decrements at the Balance at the end Item beginning of year current period current period of period Development of 3104 tank 17,699,000.00 17,699,000.00 material products Transformation of casting production line of Baihe 2,250,800.00 2,250,800.00 Aluminium Industry Co., Ltd. Government subsidy aluminum alloy annually new produced 100,000.00 100,000.00 extruded material item for traffic transport Qinghai Development and 8,800,000.00 8,800,000.00 Reform Commission Funds for electronic information industry revitalization and 11,880,000.00 11,880,000.00 technical reformation Special middle and small sized 5,000,000.00 5,000,000.00 funds
72
F-205 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Balance at the Increments at the Decrements at the Balance at the end Item beginning of year current period current period of period Transformation of 160,000 100,000,000.00 100,000,000.00 ton/year casting production line Item of “application of large generator set and closedown of 300,000,000.00 300,000,000.00 small generator set” of 3*660,000 kw Financial East-river Industrial Park of Xining Economic and 1,800,000.00 1,800,000.00 Technological Development Zone Guarantee funds for middle and 63,000,000.00 60,000,000.00 3,000,000.00 small enterprises Other 2,720,000.00 2,720,000.00
Total 111,449,800.00 401,800,000.00 60,000,000.00 453,249,800.00
39ˊDeferred income
Balance at the Increments at the Decrements at the Balance at the end Item beginning of year current period current period of period Government subsidy aluminum alloy annually new produced extruded 42,500,000.00 42,500,000.00 - material project for traffic transport Capital subsidy project high-precision 4,000,000.00 4,000,000.00 - acieral bar project Research of high-performance aluminum profile protection 1,500,000.00 1,500,000.00 - technology Funds for 2004 safety transformation 1,357,959.85 491,000.00 866,959.85 project Funds for 2005 coal mine ventilation 313,387.80 104,462.60 208,925.20 system transformation Funds for 2006 coal mine safety 1,008,000.00 336,000.00 672,000.00 transformation project Funds for 2007 Qaidar mine safety 2,327,149.53 515,000.00 1,812,149.53 transformation Funds for 2008 Qaidar mine safety 480,666.67 103,000.00 377,666.67 transformation Funds for 2008 Hightower mine 400,000.00 100,000.00 300,000.00 technology transformation Special funds for 2008 safety 500,000.00 100,000.00 400,000.00 production Subsidy funds for ore resources 3,600,000.00 900,000.00 2,700,000.00 project Subsidy funds for technology reformation project of Qaidar mine 9,000,000.00 9,000,000.00 improving percentage recovery Subsidy funds for recovery project of private-mining lean strontium ore in 4,200,000.00 4,200,000.00 Ming Area I of Dafengshan strontium ore Subsidy funds for technical research project of Qaidar mine improving top 1,000,000.00 1,000,000.00 coal recovery ratio Technical transformation project of 2,000,000.00 2,000,000.00 flue gas denitration Special funds for waste heat recovery 5,270,000.00 5,270,000.00 project
73
F-206 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Balance at the Increments at the Decrements at the Balance at the end Item beginning of year current period current period of period Supplementary geology exploration 2,260,000.00 2,260,000.00 project of Qaidar mine Safety transformation project of 4,329,000.00 481,000.00 3,848,000.00 Qaidar mine Safety transformation project of 3,762,000.00 418,000.00 3,344,000.00 Qaidar mine Upgrading and transformation project 3,330,000.00 3,330,000.00 of Xianfeng coal mine Strontium carbonate removal and 500,000.00 500,000.00 transformation project Subsidy funds for direct financial 322,800.00 107,600.00 215,200.00 charges Maintenance and new excavation of Qaidar mine ventilation channel 2,397,000.00 282,000.00 2,115,000.00 (funds for safety transformation) Maintenance and new excavation of sea mine ventilation channel (funds 4,430,000.00 4,430,000.00 for safety transformation) Special funds for denitration 240,000.00 240,000.00 - transformation project Funds for Qaidar mine safety 4,160,000.00 4,160,000.00 transformation project Funds for safety transformation 3,340,000.00 3,340,000.00 project of new-dug mining area Subsidy for technical transformation project of middle and small 1,680,000.00 168,000.00 1,512,000.00 enterprises Subsidy funds for energy and water 1,900,000.00 1,900,000.00 saving project Transformation of Klockner-Moeller 11,180,000.00 11,180,000.00 Mining Area II and III Qinghai coal mine safety 8,210,000.00 8,210,000.00 transformation project Centralized heating- heat source rebuilding and extension project of 7,200,000.00 450,000.00 6,750,000.00 Xihai Town Special funds for security 2,291,600.00 143,225.00 2,148,375.00
Coal mine safety funds 31,600,000.00 31,600,000.00
Funds for coal ash research 150,000.00 150,000.00
Special funds for sewage charge (construction of flue gas 2,000,000.00 2,000,000.00 desulfurization facilities) Special funds for waste heat recovery 5,270,000.00 5,270,000.00 and application item Special funds for denitration 240,000.00 240,000.00 transformation project Special funds for newly-constructed 1,580,000.00 1,580,000.00 energy-saving heat pump Special funds for energy-saving heat 520,000.00 520,000.00 pump transformation project Subsidy funds for renewal of No. 2 unit desulfuration monitoring 200,000.00 200,000.00 facilities Special funds for desulfuration transformation and construction 4,000,000.00 4,000,000.00 project
74
F-207 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Balance at the Increments at the Decrements at the Balance at the end Item beginning of year current period current period of period Technical transformation project of 2,000,000.00 2,000,000.00 flue gas denitration Unrealized leaseback profits and 31,100,506.99 31,100,506.99 losses Subsidy of Datong Bureau of Finance 2,500,000.00 2,500,000.00
Subsidy funds for equipment renewal 400,000.00 400,000.00
Special funds for sewage charge 3,500,000.00 3,500,000.00
Special funds for squatter settlements 3,185,480.00 97,334.11 3,088,145.89 transformation Comprehensive treatment of mining 500,000.00 500,000.00 subsidence areas Comprehensive treatment of Qaidar mining subsidence areas of Qinghai 500,000.00 500,000.00 Xihai Coal and Electricity Co., Ltd. Development and application of new aluminum cold rolling water soluble 2,400,000.00 2,400,000.00 lubricants made of complete synthesis Research and application item of key preparation technologies of 7N01 new 1,600,000.00 1,010,000.00 590,000.00 aldural train body materials for high-speed train short process preparation technology and industrialization of 2,000,000.00 250,000.00 1,750,000.00 high-strength and high-toughness 7 series of aluminum alloy short process preparation technology and industrialization of 300,000.00 37,300.00 262,700.00 high-strength and high-toughness 7 series of aluminum alloy New ultrahigh-strength and ultrahigh-toughness aerial aluminum 1,000,000.00 1,000,000.00 alloy material item Research and development of preheating top casting technology made of multiple intensive and 381,797.15 95,449.00 286,348.15 hollow aluminum alloy ingot on the same level Intensive and hard aluminum alloy 314,944.00 78,736.00 236,208.00 with multiple tubes on the same level Industrial aluminum tube bar item 1,000,000.00 160,000.00 840,000.00
Industry revitalization and technology 11,770,000.00 11,770,000.00 transformation project Energy-saving technology transformation of high-strength 391,500.00 60,900.00 330,600.00 aluminum alloy smelting and casting Industrial technology research and 4,613,700.00 4,613,700.00 development Transformation of 4# boiler 1,500,000.00 1,500,000.00 low-nitrogen burner
Subsidy for on-post staff training 2,473,200.00 2,473,200.00 Technical transportation project of 990,000.00 247,500.00 742,500.00 aluminum electrolysis display system Research and development of 3104 aluminum alloy slab ingot casting 1,488,825.64 372,206.41 1,116,619.23 technology
75
F-208 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Balance at the Increments at the Decrements at the Balance at the end Item beginning of year current period current period of period Technical transformation of casting 4,000,000.00 1,000,000.00 3,000,000.00 production line Research and application item of 1,200,000.00 300,000.00 900,000.00 240ka aluminum cell Desulfuration transformation funds 600,000.00 600,000.00
20KT/A refined aluminum project 725,000.00 725,000.00
Total 189,580,289.49 80,704,228.14 75,130,613.12 195,153,904.51
Explanation of main deferred income: (1) The company got subsidy funds for technical transformation project of Qaidar mine improving top coal recovery ratio, i.e. RMB 9,000,000.00, appropriated by Department of Finance of Qinghai Province in May 2010 in accordance with Notice of Subsidy Funds for Ore Resources Protection Project (Q. C. J. Z. [2010] No. 447) issued by Department of Finance of Qinghai Province. The project has not been completed yet. (2) The company got subsidy funds for technical transformation project of Qaidar mine improving top coal recovery ratio, i.e. 1,000,000.00, appropriated by Department of Finance of Qinghai Province in September 2010 in accordance with Notice of Budget Funds for Ore Resources Protection Project (Q. C. J. Z. [2010] No. 696) issued by Department of Finance of Qinghai Province. The project has not been completed yet. (3) The company got subsidy funds for supplementary geology exploration project of Qaidar mine, i.e. RMB 2,260,000.00, appropriated by Department of Finance of Qinghai Province on January 19, 2012 in accordance with Notice of Basic Construction Expense Budget in Central Budget for Supplementary Geology Exploration Project of Qinghai Province in 2011 (Q. C. J. Z. [2011] No. 2367) issued by Department of Finance of Qinghai Province. The project has not been completed yet. (4) The company got subsidy funds for upgrading and transformation of Xianfeng coal mine, i.e. RMB 3,330,000.00, appropriated by Department of Finance of Qinghai Province on November 7, 2012 in accordance with Notice of Basic Construction Investment Expense Budget in Central Budget for Mining Industry Upgrading and Transformation of Qinghai Province in 2011 (Q. C. J. Z. [2012] No. 2220) issued by Department of Finance of Qinghai Province. The project has not been completed yet.
76
F-209 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
(5) The company got subsidy funds for maintaining and newly excavating ventilation channel, i.e. RMB 7,500,000.00 (RMB 4,160,000.00 for Qaidar mine and RMB 3,340,000.00 for Hightower mine), appropriated by Department of Finance of Qinghai Province on October 16, 2014 in accordance with Notice of Basic Construction Investment Expense Budget in Central Budget for Coal Mine Safety Transformation in 2014 (Q. C. J. Z. [2014] No. 1213) issued by Department of Finance of Qinghai Province. The project has not been completed yet. (6) The company got subsidy funds for squatter settlements reconstruction, i.e. RMB 3,185,480.00 in accordance with Notice of Haibei State Local Financial Work on Basic Construction Investment Expense Budget in Central Budget for Second Batch of Haibei State State-owned Mining Squatter Settlements in 2010 (B. C. [2010] No. 765). The subsidy income of RMB 97,334.11 is confirmed in current period.
(7) The company got comprehensive treatment funds for comprehensive treatment of Qaidar mining subsidence areas, i.e. RMB 500,000.00 in accordance with Notice of Haibei State Local Financial Work on Basic Construction Investment Expense Budget in Provincial Budget for Third Batch of Earlier Project in 2015 (B. C. [2015] No. 610). The project has no expenses as at December 31, 2015. (8) The company got investment in central budget for upgrading and transformation of Klockner-Moeller Mining Area II and III, i.e. RMB 11,180,000 in accordance with Q. C. J. Z. [2009] No. 1218. The project has been completed generally, and the general project has not met service condition, so it is not amortized. (9) The company got investment in central budget for upgrading and transformation of coal mine safety transformation project in 2010, i.e. RMB 8,210,000 in accordance with B. C. [2010] No. 790. The project has been completed generally, and the general project has not met service condition, so it is not amortized. (10) The company used the transfer charges, RMB 9,000,000 for construction of facilities such as 30 tons of heating boilers of coal power companies in accordance with an equity transfer agreement signed with the company on centralized heating- heat source rebuilding and extension project. The project was completed in December 2010, and main building will be amortized within 20 years. (11) The company got two batches of funds for mine rescue crew equipments in accordance with documents Q. A. J. K. [2007] No. 114 and Q. A. J. K. [2008] No. 85. The project was completed in December 2010, and main building will be amortized within 20 years.
77
F-210 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
(12) The company got coal mine safety funds in 2011, i.e. RMB 8,540,000 for reconstruction of Mine Area II and III safety facilities in accordance with document Q. C. J. Z. [2011] No. 2387, coal mine safety funds in 2012, i.e. RMB 6,140,000 in accordance with document Q. C. J. Z. [2012] No. 917, and coal mine safety funds in 2013, i.e. RMB 7,990,000 in accordance with document Q. C. J. Z. [2013] No. 1619. The project has not been constructed yet. (13) The company got investment in central budget for coal mine safety, i.e. RMB 8,930,000 (RMB 5,870,000 for Klockner-Moeller Mining Area II and RMB 3,060,000 for Klockner-Moeller Mining Area III) in accordance with the document issued by Qinghai Development and Reform Commission-Q. F. G. Energy (2014) No. 740. (14) The company got earlier subsidy funds of Qinghai Development and Reform Commission for comprehensive treatment project of Klockner-Moeller mining subsidence areas, i.e. RMB 500,000 only. The project is in progress and is not amortized. 40ˊPaid-in capital
Balance at the beginning of year Increase Decrements Balance at the end of year at the at the Name of investor Proportion current current Proportion Amount invested Amount invested ˄%˅ year period ˄%˅ Qinghai State-owned Assets Supervision and 1,359,000,000.00 33.83 1,359,000,000.00 33.83 Administration Commission Qinghai State-owned Assets Investment 500,000,000.00 12.45 500,000,000.00 12.45 Management Co., Ltd. Xining Economic Development Zone 857,000,000.00 21.34 857,000,000.00 21.34 Investment Holding Group Co., Ltd. Western Mining Co., 1,300,690,000.00 32.38 1,300,690,000.00 32.38 Ltd. Total 4,016,690,000.00 100.00 4,016,690,000.00 100.00
41ˊCapital reserve
Balance at the Increments at the Decrements at the Balance at the end Item beginning of year current period current period of period I. Capital (stock) premium 1,920,413,408.84 1,920,413,408.84
II. Other capital reserve 68,708,052.61 985,790,930.20 22,122,185.05 1,032,376,797.76
1. Other rights and interests change in the invested unit 2, Other 68,708,052.61 985,790,930.20 22,122,185.05 1,032,376,797.76
78
F-211 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Balance at the Increments at the Decrements at the Balance at the end Item beginning of year current period current period of period III. Capitals transferred from capital reserve under original principle Total 1,989,121,461.45 985,790,930.20 22,122,185.05 2,952,790,206.60
The balance in consolidated offset, i.e. RMB 22,122,185.05, shall be accounted into capital reserve due to change in equity investment ratio in current period. 42.Special reserves
Balance at the Increments at the Decrements at the Balance at the end Item beginning of year current period current period of period Safety production costs 20,402,350.71 25,119,043.57 36,990,267.30 8,531,126.98
Maintenance cost 19,874,422.91 11,094,625.33 30,838,432.46 130,615.78
Risk reserves 20,205,962.50 1,032,255.47 15,633,353.19 5,604,864.78
Total 60,482,736.12 37,245,924.37 83,462,052.95 14,266,607.54
43. Surplus reserves
Balance at the Increments at the Decrements at the Balance at the end Item beginning of year current period current period of period Statutory surplus reserves 66,627,843.19 66,627,843.19
Free surplus reserves
Reserve funds
Enterprise development funds
Capital redemption
Other
Total 66,627,843.19 66,627,843.19
44ˊUndistributed Profit
Item Amount at the current period Amount at the last year
Balance at the beginning of year in current year 381,265,929.02 370,589,604.47
Increments at the current year 902,246.42 15,941,337.70
Including: Transferred from net profit at current year 902,246.42 15,941,337.70
Other adjustment factors
Amount decreased at current year 1,913,000.00 5,265,013.15
79
F-212 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Item Amount at the current period Amount at the last year
Including: Surplus reserves withdrawn at current year
Cash dividends distributed at current year 1,913,000.00 2,375,900.00
Transfer to paid-in capital
Other decreases 2,889,113.15
Balance at the end of period at the current year 380,255,175.44 381,265,929.02
45ˊOperating income / operating cost
Total amount accounted for the current year Total amount accounted for last year period Item Income Cost Income Cost
1. Main operating coast
Sales of electric power 1,049,575,638.46 860,818,109.96 1,139,559,851.48 951,838,764.42
Aluminum product, casting 10,898,119,121.16 11,284,303,475.83 9,942,487,937.11 9,646,631,037.23 and block, etc. Income from guarantee 67,231,600.00 - 116,774,000.00
Income from water supply 12,842,372.79 9,935,829.45 12,149,366.87 9,163,078.57
Coal sales 199,581,876.83 149,482,943.44 489,428,449.17 302,340,430.27
Sales of chemical products 56,684,308.36 40,567,874.72 780,797.20 640,085.70
Sales of commercial 41,054,399.78 41,194,056.53 112,989,712.88 58,931,547.37 housing
Property management fee 6,149,162.40 11,999,486.54 6,787,010.82 5,919,747.39
Receipts from service 57,085,178.66 54,411,976.61 26,286,978.95 55,013,560.78
Income from construction 37,748,679.77 37,320,887.48 53,088,618.70 29,893,931.71 installation
House rent 4,752,498.70 1,839,962.60
Interest income 22,962,639.73
Income of heating fee 9,736,238.82 8,798,142.15
Income from claim 379,239.82 compensation Other 217,565,125.05 201,802,474.69 19,768,284.79 28,556,913.98
Subtotal 12,648,389,961.96 12,691,837,115.25 11,955,019,088.94 11,097,727,239.57
2. Other business incime
Leasing 2,612,577.77 25,547.50 30,000.00
Sales of raw materials and 1,419,265,676.06 620,815,970.65 662,231,179.74 609,122,782.06 scrap materials
80
F-213 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Total amount accounted for the current year Total amount accounted for last year period Item Income Cost Income Cost
Other 16,944,873.59 1,271,851.93 271,173,910.38 988,663.20
Income from insurance 3,182,139.64 - 2,864,588.74 agent Fee for technical service 3,680,485.84 - 3,709,351.87
Subtotal 1,445,685,752.90 622,113,370.08 940,009,030.73 610,111,445.26
Total 14,094,075,714.86 13,313,950,485.33 12,895,028,119.67 11,707,838,684.83
46. Financial Expenses
Total amount accounted for the Total amount accounted for last Item current period year Interest expense 1,611,068,523.35 296,751,020.93
Less: Interest income 1,304,781,319.01 14,788,938.45
Handling charge 37,615,501.37 17,130,707.31
Profit or loss on exchange 21,702,463.53 -139,848.51
Other 18,185,461.74 4,461,255.63
Interest discount of acceptance draft 4,236,270.66 29,709,387.26
Guarantee fee -5,882,300.00 -48,339,150.00
Total 382,144,601.64 284,784,434.17
47. Provision for assets impairment
Total amount accounted for the Total amount accounted for last Item current period year I. Bad debt loss 32,317,717.39 10,377,612.48
II. loss on inventory valuation 19,614,169.92
III. Loss on impairment of available-for-sale financial assets IV. Loss on impairment of held-to-maturity investment V. Loss on impairment of long-term equity investment VI. Loss on impairment of investment real estate
VII. Loss on impairment of fixed assets 45,852.14 2,527,683.52
VIII. Loss on impairment of engineering materials
IX. Loss on impairment of construction in process
81
F-214 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Total amount accounted for the Total amount accounted for last Item current period year Total 51,977,739.45 12,905,296.00
48. Variable profit and loss of fair value
Total amount accounted for the Total amount accounted for last Item current period year I. Financial assets measured by fair value and counting the variation into the current profit and 2,805,767.00 loss II. Financial assets measured by fair value and counting the variation into the current profit and loss III. Investment real estate measured by fair value 4,359,950.00
IV. Other
Total 2,805,767.00 4,359,950.00
49ˊIncome from investment
Total amount accounted for the Total amount accounted for last Item current period year Long-term equity investment income accounted 229,800.00 1,620,600.00 cost method Long-term equity investment income accounted by the equity method -305,117.58 Investment income from disposal of long-term equity investment 5,665,815.19 Investment income from period during holding trading financial assets Investment income during holding held-to-maturity 41,500.00 41,500.00 investment Investment income during holding 720,000.00 available-for-sale financial assets
Investment income from trading financial assets
Investment income from disposing held-to-maturity investment Investment income from disposing 19,423,324.65 2,650,721.27 available-for-sale financial assets
Income from entrusting financial management 27,778,646.76 22,908,219.17
Other 188,888.89
Total 54,047,975.49 26,915,922.86
50ˊNon-operating income (1) Listed by item
Total amount accounted for the Total amount accounted for last Item current period year Gain from disposing non-current assets 2,612,613.43 1,174,415.19
82
F-215 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Total amount accounted for the Total amount accounted for last Item current period year Including: Gain from disposing fixed assets 2,612,613.43 1,174,415.19
Gain from disposing intangible assets
Gain from debt restructuring 1,516,289.72
Gain from non-monetary assets exchange 385,627.16
Gain from donation
Government subsidy 542,378,024.83 69,962,398.51
Transferred from funds unable to be paid 15,091,686.66
Funds for land compensation 34,457,536.11
Other 13,411,728.30 90,972,001.65
Total 609,853,506.21 162,108,815.35
(2) Non-operating incomes of other items are insurance indemnity and confiscated incomes, etc. (3) Details of government subsidy
Total amount Total amount Item accounted for the accounted for last Statement current period year
Q. C. J. Z. [2014] Document No. Funds of financial award 100,000.00 111 201 Subsidy funds of enterprise’s Q. D. Z. J.[2014] Document No. 103,000.00 annual direct financial agency fee 2069 Q. C. J. Z.Ǐ2013ǐ No. 1990 Q. C. J. Z.Ǐ2014ǐNo. 1398, Notice on Earlier Funds of “Double Hundred” Aluminum alloy extruded material 5,000,000.00 Industrial Structure Adjustment and project Revitalization, Recycling Economy Industry, Enterprise Technology Innovation and Key Industrial Projects in 2013 Q. R. S. T. F.Ǐ2010ǐ No. 85 Subsidy to enterprises employing 1,854,645.40 1,415,314.56 Opinion on Further Promoting college graduates Employment of Graduates Q. T. Z.Ǐ2014ǐNo. 117 Notice on Qinghai Investment Group Co., Ltd. Fund subsidy for key enterprises’ Transmitting Provisional Interim increase keeping, production 387,633,400.00 40,190,000.00 Procedures on Use of Key promotion and employment promotion Enterprises’ Increase Keeping, reserve capital Production Stabilization and Employment Promotion Reserve Capitals Subsidy for ten thousand people 465,600.00 Q. Y. P. H.Ǐ2014ǐNo. 8 training Qinghai Employment Service Bureau’s social insurance subsidy for college 453,827.54 307,574.68 Q. R. S. T. F.Ǐ2010ǐNo. 85 students Industrial technical research and 100,000.00 N. K. D. C.Ǐ2011ǐNo. 79 development item
83
F-216 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Total amount Total amount Item accounted for the accounted for last Statement Subsidy funds for key industrial id 200,000.00 N. K. D. G. J.Ǐ2009ǐNo. 9 projects Special funds for development of 500,000.00 N. K. D. G. J.Ǐ2008ǐNo. 30 middle an small enterprises
Earlier expenses of projects 300,000.00 N. K. D. G. J.Ǐ2008ǐNo. 6 Earlier expenses of key industrial 300,000.00 Q. C. J. Z.Ǐ2007ǐNo. 491 projects Commercialization of research Contract of Qinghai technology 300,000.00 findings and promotion funds project Outsourcing electrovalency balance and key industrial product combined 300,000.00 N. K. D. C.Ǐ2011ǐNo. 134 transport Produce and process products via Tax-free income 753,606.30 996,669.17 crap materials Reward subsidy funds 400,000.00 400,000.00
Tax returns 5,048,213.60 5,202,952.50 Centralized heating- heat source rebuilding and extension project of 450,000.00 450,000.00 Amortization of deferred income Xihai Town Special funds for security 143,225.00 143,225.00 Amortization of deferred income
Financial subsidy 361,992.00 30,000.00
Subsidy for bond issuance 107,600.00
Subsidy capital of ore resources 2,930,462.00 900,000.00 protection project Funds for coal mine safety rebuilding 3,150,462.60 project Subsidy for open cut mining pit filling 2,000,000.00
Special capital for ore resources saving 1,007,600.00 7,000,000.00 and comprehensive utilization D. C. J. Z.Ǐ2015ǐNo. 451 Notice on Capital loan interest discount project central infrastructure investment subsidy, energy saving and circulation 9,990,000.00 budget of major projects (the first and resource saving project subsidy batch) of energy saving and recycling economy and resource saving in 2015 Q. C. J. Z.Ǐ2014ǐNo. 1860 Capital for industrial transformation and Subsidy funds for technical transformation of double cathode steel 4,900,000.00 upgrading in 2015 as well as capital bar of electrolytic cell for follow-up subject project- technical transformation of double cathode steel bar of electrolytic cell Subsidy funds for industrial infrastructure and technical transformation as well as technical Subsidy funds for transformation of 58,540,000.00 transformation of partial equipments, Minhe Industrial Park interest discount subsidy of water purifying plant and maintenance of approach roads for pipe change Qinghai Economy and Information Committee˄Q. J. X. Z.Ǐ2014ǐNo. Reward fund of energy-saving 376 Notice on projects planned to be 2,500,000.00 technology transformed with special financial reward funds for energy-saving technology
84
F-217 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Total amount Total amount Item accounted for the accounted for last Statement id Q. C. J. Z.Ǐ2015ǐNo. 527 Notice on Subsidy funds for secondary batch of subsidy capital for projects such as energy-saving and water-saving 680,000.00 comprehensive utilization of second resource in 2015 batch of energy-saving and water-saving resource in 2015 Notice on Department of Finance of Direct financing subsidy capital Qinghai Province on appropriation of appropriated by Department of 18,600.00 direct financing subsidy capital, Finance of Qinghai Province to Ǐ2015ǐNo. 932 enterprises Research funds for desulfuration 600,000.00 transformation project 20Kt/a refined aluminum project 725,000.00 research Comprehensive technical innovation of energy conservation and emission 1,300,000.00 reduction of electrolytic cell with low voltage Industrial technology research and 4,613,700.00 development Transformation of 4# boiler 1,500,000.00 low-nitrogen burner 3104 aluminum alloy slab ingot casting technology research and 372,206.41 development Technical transformation of casting 1,000,000.00 production line 240ka aluminum cell research and 300,000.00 application project Technical transportation project of 247,500.00 aluminum electrolysis display system Subsidy for on-post staff training 2,473,200.00
Subsidy of employment board 1,223,891.88 Multiple-objective coordination to optimize and control technical development and application of 70,000.00 Qinghai Productivity Promotion Center Reward funds for Qinghai high-tech 200,000.00 enterprises Unemployment insurance fund subsidy of Department of Human Resources 3,770,000.00 and Social Security of Qinghai Province Subsidy capital of 2014 Qinghai large scientific instruments sharing service 50,000.00 of Qinghai Science and Technology Department Funds for energy-saving projects such 9,860,000.00 as 1# furnace smelting, etc. in 2015 Capital subsidy of Datong Bureau of 1,540,000.00 Economy and Commerce Funds for 2015 energy-saving and water-saving resources comprehensive 2,810,000.00 utilization project of Datong Bureau of Economy and Commerce Capital subsidy of Datong Bureau of 1,900,000.00 Environmental Protection
85
F-218 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Total amount Total amount Item accounted for the accounted for last Statement Subsidy funds for technical id transformation of double cathode steel 1,680,000.00 bar of electrolytic cell Subsidy for industrial economic 720,000.00 transformation and upgrading Notice on Department of Finance of Qinghai Province on earlier-stage capital of industrial “double hundred” and industrial structure adjustment and revitalization, Research and development of 1,800,000.00 recycling economy industry, high-silicon aluminum alloy enterprise technology innovation and key industrial projects recycling economy industry, enterprise technology innovation and key industrial projects in 2013 Research and development of preheating top casting technology Notice on funds for the first batch of made of multiple intensive and hollow 95,449.00 technical projects in 2010 aluminum alloy ingot on the same level Notice on budget index of special Intensive and hard aluminum alloy capital for development of middle 78,736.00 with multiple tubes on the same level and small enterprises with Qinghai local color Notice on special capital plan and Industrial aluminum tube project 160,000.00 budget index of the first batch of middle and enterprises development Energy-saving technology Notice on budget index of special transformation project of high-strength 60,900.00 capital for Qinghai energy-saving aluminum alloy smelting and casting technology transformation in 2010 Notice on Department of Finance of Funds for high-strength and Qinghai Province on the second high-toughness 7 series of aluminum 387,300.00 batch of technical plan project funds alloy in 2013 Funds received from high-speed rail 1,510,000.00 7N01 new aldural train body project Funds for science and technology project of science and technology 130,000.00 bureau Social insurance subsidy 40,421.53 Special funds for emergency exercise of provincial safety supervision 30,000.00 department Special funds for rebuilding of squatter 97,334.11 settlements
Patent subsidy 96,000.00
Levy-refund added-value tax 35,690.06
Tax subsidy of external enterprises in 122,700.00 2014 Reward and subsidy of Tongliang 603,900.00 Bureau of Finance Subsidy and reward of Tongliang 150,000.00 Technology Committee
Subsidy for post stability 250,524.00 Q. R. S. T. F.Ǐ2010ǐNo. 85 On-line monitoring subsidy funds for environmental monitoring pollution 100,000.00 Q. H. J. Z.Ǐ2014ǐ No. 48 resources
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F-219 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Total amount Total amount Item accounted for the accounted for last Statement Energy conservation and emission id 7,000,000.00 reduction project Development and application item of “multiple-parameter balance” control 9,990,000.00 technology of electrolytic aluminum cell Management informatization system 500,000.00 Calcinatory burning system 320,000.00 transformation project Waste-heat utilization project of 620,000.00 exhaust gas after electrolysis Power transformation rectification 1,920,000.00 system transformation Development and generalization of “multiple-parameter balance” control 1,440,000.00 technology of electrolytic aluminum cell Technical transformation project of 50,000m3 powder ash air-entrained 168,000.00 concrete Reward funds for industrial enterprise 50,000.00 operation block Total 542,378,024.83 69,962,398.51
51ˊNon-operating expenditure
Total amount accounted for the Item Total amount accounted for last year current period 770,240.00 524,690.75 Loss on disposal of non-current assets 770,240.00 524,690.75 Including: Loss on disposal of fixed assets
Loss on disposal of intangible capital
Loss on arrangement
Loss on non-monetary assets exchange 2,101,000.00 7,817,943.07 External domination 24,757,568.10 58,499,809.36 Other 27,628,808.10 66,842,443.18 Total
52ˊIncome tax expense
Total amount accounted for the Item Total amount accounted for last year current period Current income tax accumulated based on 43,962,583.78 38,178,838.95 tax and relevant regulations Adjustment of deferred income taxes -11,517,621.98 -13,565,902.41
Total 32,444,961.80 24,612,936.54
53. Note to relevant matters on consolidated statement of cash flow
87
F-220 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
(1) Information of net profits adjusted to operating cash flow
Amount at the current Item Amount at the last year period I. Adjusting net profits to operating cash flow:
Net profit 44,797,905.24 92,372,675.78
Add: Loss from asset devaluation 51,977,739.45 12,905,296.00
Depreciation of fixed assets 760,611,438.84 553,078,564.80
Amortization of intangible assets 28,213,319.77 21,648,517.53
Amortization of long-term unamortized expenses 15,519,897.64 3,759,820.12
Loss from disposing fixed assets, intangible assets and other long-term -607,382.67 -1,157,897.74 assets Loss from retirement of fixed assets 110,478.33 508,173.30
Loss on fair value variation -2,805,767.00 -4,359,950.00
Financial expense 382,144,601.64 282,582,513.82
Investment loss -54,047,975.49 -26,915,922.86
Reduction of deferred income tax assets -11,517,621.98 -14,086,990.26
Increase in deferred income tax liabilities - 653,992.50
Reduction of inventory -683,133,857.12 -122,429,517.72
Reduction of operational items receivables -1,235,545,667.56 -1,979,070,228.18
Increase of operational items payable 1,157,734,187.46 1,880,713,149.98
Other 6,853,252.61 8,803,563.73
Net amount of cash flow generated by business activities 460,304,549.16 709,005,760.80
II. Significant investing and financing activities that do not involve cash receipts and payments: Conversion of debt into capital
Convertible bonds expiring within one year as current liability
Fixed assets acquired under finance leases
III. Change in cash and cash equivalents:
Balance of cash at the end of period 3,339,656,986.79 3,541,493,435.83
Less: Balance of cash at the beginning of period 3,541,493,435.83 4,422,904,340.84
Add: Balance of cash equivalents at the end of period
Less: Balance of cash equivalents at the beginning of period
Net amount increased of cash and cash equivalents -201,836,449.04 -881,410,905.01
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F-221 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
(2) Relevant information of cash and cash equivalents
Balance at the end of Balance at the Item period beginning of year 1. Cash 3,339,656,986.79 3,541,493,435.83
Including: cash in hand 2,403,118.66 3,012,204.65
Usable to pay bank deposit at any time 2,047,954,887.26 3,058,981,908.24
Usable to pay other monetary funds at any time 1,289,298,980.87 479,499,322.94
2. Cash equivalents
Including: Bond investment which becomes due in three months
3. Cash and cash equivalents at the end of period 3,339,656,986.79 3,541,493,435.83 Including: Parent company and subsidiaries in the group limited to be used
The balance of cash at the end of period in consolidated statement of cash flow of the company in current period is RMB 3,339,656,986.79; balance of monetary capital at the end of period in balance sheet is RMB 4,393,934,490.26; and the balance is RMB 1,054,277,503.47, which are deposits unable to be paid at any time, such as cash deposit, that are paid and deposited by the company in monetary capital. IX. Explanation of contingencies The company hereby guarantees the following matters:
Guarantee Borrowing unit Guaranteeing unit amount ˄RMB Guarantee term 10,000˅ Xining Economic Development Zone Qinghai investment group 17,000.00 2012/8/21 2018/8/30 Investment Holding Group Co., Ltd. Xining Economic Development Zone Qinghai investment group 20,000.00 2014/3/21 2024/3/20 Investment Holding Group Co., Ltd. Bank of China, Ganhe Qinghai Ganhe Water Co., Ltd. 9,500.00 2013/6/24 2018/6/23 Industrial Park Branch Xining Economic Development Zone Qinghai investment group 10,000.00 2015/6/30 2016/6/29 Investment Holding Group Co., Ltd. Xining Economic Development Zone Qinghai investment group 5,000.00 2015/12/22 2027/12/21 Investment Holding Group Co., Ltd. Xining Agriculture and Business Construction Development and Management Qinghai investment group 5,000.00 2015/6/15 2016/6/14 Co., Ltd. Xining Agriculture and Business Construction Development and Management Qinghai investment group 5,000.00 2015/7/31 2016/7/31 Co., Ltd. Total 71,500.00
As at December 31, 2015, the balance of loan guarantee provided by Qinghai Tiancheng Credit Guarantee Co., Ltd.ˈ a subsidiary of the company, is RMB
89
F-222 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
685,385.00 except for contingencies listed in the table above. X. Events after the balance sheet date As at March 15, 2016, the company has no non-adjusting events that should be explained after the balance sheet date. XI. Related party relationships and transactions (I) Related party relationships 1. Parent company of the company
The parent The parent company’s Registration Business Registered company’s voting Name of parent company shareholding place property capital power proportion in proportion in the company the company No. 36, Qinghai State-owned Assets Huanghe Administrative Supervision and Administration 33.83% 33.83% Road, organ Commission Xining City
(II) Transaction of related party The company has no transactions of related parties in current period. (III) Current balance of related party The company has no current balance of related parties that should be disclosed in current period. XII. Annotation to main items in the parent company’s financial statement 1. Receivables
Amount at end of period Amount at beginning of year
Category Book Value Bad debt reserves Book Value Bad debt reserves Proportion Proportion Proportion Proportion Amount Amount Amount Amount ˄%˅ ˄%˅ ˄%˅ ˄%˅ Receivables with major single amount and single withdrawing bad debt reserves Withdrawing bad debt reserves in line with credit 44,393.87 2.14 133.18 0.03 20,800.16 1.01 62.40 0.03 risk feature combination 1 ˊ Receivables of withdrawing bad debt reserves via account analytical method 2. Receivables of withdrawing bad debt 44,393.87 2.14 133.18 0.03 20,800.16 1.01 62.40 0.03 reserves via percentage balance method Unimportant single amount but single 2,029,890.7 2,029,890 2,029,890.7 2,029,890. 97.86 100.00 98.99 100.00 withdrawing bad debt 7 .77 7 77 reserves 2,074,284.6 2,030,023 2,050,690.9 2,029,953. Total 100.00 97.87 100.00 98.17 4 .95 3 17
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F-223 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
˄1˅Withdrawing bad debt reserves in line with credit risk feature combination Receivables of withdrawing bad debt reserves via percentage balance method
Amount at end of period Amount at beginning of year Aging Proportion of Proportion of Bad debt Bad debt Book Value counting and Book Value counting and reserves reserves drawing˄%˅ drawing˄%˅ Balance at the end of year in line with 44,393.87 0.30 133.18 20,800.16 0.30 62.40 percentage method Total 44,393.87 0.30 133.18 20,800.16 0.30 62.40
˄2˅Receivables with single withdrawing bad debt reserves Receivables with unimportant single amount and single withdrawing bad debt reserves at the end of period
Proportion of Bad debt Reason of Debtor name Book Value Aging counting and reserves withdrawal drawing˄%˅ More than 5 Overlong charge Wuxi Kaida Co., Ltd. 1,980,000.00 1,980,000.00 100.00 years account Jiangyin Huiyuan Industrial More than 5 Overlong charge 49,890.77 49,890.77 100.00 Co., Ltd. years account
Total 2,029,890.77 2,029,890.77
2ˊOther receivables
Amount at end of period Amount at beginning of year
Catogery Book Value Bad debt reserves Book Value Bad debt reserves Proportio Proportio Proportio Proportio Amount Amount Amount Amount n˄%˅ n˄%˅ n˄%˅ n˄%˅ Receivables with major single amount 10,429,479,747. 5,589,696,906.9 and single 97.05 82.90 46 0 withdrawing bad debt reserves Withdrawing bad debt reserves in line 1,145,813,206.6 311,013,541.69 2.89 933,040.63 0.30 16.99 3,437,439.62 0.30 with credit risk 6 feature combination 1ˊReceivables of withdrawing bad debt reserves via account analytical method
91
F-224 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Amount at end of period Amount at beginning of year
Catogery Book Value Bad debt reserves Book Value Bad debt reserves Proportio Proportio Proportio Proportio Amount Amount Amount Amount n˄%˅ n˄%˅ n˄%˅ n˄%˅ 2. Receivables of withdrawing bad debt 1,145,813,206.6 311,013,541.69 2.89 933,040.63 0.30 16.99 3,437,439.62 0.30 reserves via 6 percentage balance method Unimportant single amount but single 6,919,650.4 6,919,650.48 0.06 100 6,919,650.48 0.11 6,919,650.48 100.00 withdrawing 8 bad debt reserves 10,747,412,939. 7,852,691.1 6,742,429,764.0 10,357,090.1 100 100.00 Total 63 1 4 0
(1) Other receivables of withdrawing bad debt reserves via percentage balance method
Amount at end of period Amount at beginning of year Aging Proportion of Proportion of Bad debt Book Value counting and Book Value counting and Bad debt reserves reserves drawing˄%˅ drawing˄%˅ Balance at the end of 311,013,541.6 1,145,813,206.6 year in line with 0.30 933,040.63 0.30 3,437,439.62 9 6 percentage method 311,013,541.6 1,145,813,206.6 Total 0.30 933,040.63 0.30 3,437,439.62 9 6
˄2˅Other bad receivables with single withdrawing bad debt reserves Receivables with major single amount and single withdrawing bad debt reserves at the end of period
Proportion of Bad debt Reason of Debtor name Book Value Aging counting and reserves withdrawal drawing˄%˅ Subsidiry in consolidation 10,429,479,747.46 Not withdraw scope Total 10,429,479,747.46
Receivables with unimportant single amount and single withdrawing bad debt reserves at the end of period
Proportion of Reason of Debtor name Book Value Bad debt reserves Aging counting and withdrawal drawing˄%˅ Cannot be gotten back Gansu Jinda Grinding More than 5 830,000.00 830,000.00 100.00 due to Material Co., Ltd. years overlong charge account
92
F-225 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Cannot be gotten back Cash deposit of Hainan Office More than 5 20,000.00 20,000.00 100.00 due to Hotel years overlong charge account Cannot be gotten back Xining Bureau of Urban and More than 5 2,000,000.00 2,000,000.00 100.00 due to Rural Planning Construction years overlong charge account Cannot be gotten back More than 5 Shanchuan Group 3,992,534.47 3,992,534.47 100.00 due to years overlong charge account Cannot be gotten back More than 5 Leading group for liquidation 77,116.01 77,116.01 100.00 due to years overlong charge account Total 6,919,650.48 6,919,650.48
3. Long-term equity investment (1) Category
Balance at the Increments at the Decrements at the Balance at the end of Item beginning of year current period current period period
Investment to subsidiaries 10,100,402,910.53 1,977,733,513.23 668,988,230.03 11,409,148,193.73
Investment to cooperative enterprise
Investment to joint venture
10,100,402,910.53 1,977,733,513.23 668,988,230.03 11,409,148,193.73 Subtotal Less: Impairment of long-term equity 5,393,570.34 5,393,570.34 investment Total 10,095,009,340.19 1,977,733,513.23 668,988,230.03 11,403,754,623.39
(2) Details of long-term equity investment
Accou Balance at the Change in increase Balance at the end of Invested unit nting Investment cost beginning of year and decrease period method I. Subsidiary Qinghai Jinxing Cost 46,153,480.00 46,153,480.00 46,153,480.00 Mining Co., Ltd method Qinghai Qiaotou Cost Aluminium & 1,413,560,606.98 1,413,560,606.98 1,413,560,606.98 method Power Co., Ltd. Qinghai Sanjiang Hydropower Cost 705,325,652.92 705,325,652.92 -99,196,569.80 606,129,083.12 Development Co., method Ltd. Qinghai Kunshan Cost 294,054,913.02 294,054,913.02 700,000,000.00 994,054,913.02 Lease Co., Ltd. method Qinghai Jinrui Cost Mineral 495,991,516.13 495,991,516.13 495,991,516.13 method Development Co.
93
F-226 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Accou Balance at the Change in increase Balance at the end of Invested unit nting Investment cost beginning of year and decrease period method Ltd Pingan High Precision Cost 1,697,777,000.00 1,697,777,000.00 1,697,777,000.00 Aluminum method Industry Co., Ltd. Qinghai Ruihe Cost Aluminum Foil 593,784,700.00 593,784,700.00 593,784,700.00 method Co., Ltd. Qinghai Ningbei Cost Power Generation 1,245,408,815.66 1,245,408,815.66 1,245,408,815.66 method Co., Ltd. Qinghai Chentai Real Estate Cost 206,919,009.00 206,919,009.00 206,919,009.00 Development Co., method Ltd. Qinghai Cost Xiangguang Real 3,000,000.00 3,000,000.00 3,000,000.00 method Estate Co., Ltd. Qinghai Bridge Cost Electric Industrial 408,141,230.90 408,141,230.90 408,141,230.90 method Co., Ltd. Qinghai Yihe Installation Cost 100,000,000.00 100,000,000.00 100,000,000.00 Engineering Co., method Ltd. Qinghai Tiancheng Cost Credit Guarantee 250,000,000.00 250,000,000.00 250,000,000.00 method Co., Ltd. Qinghai Xihai Coal and Cost 918,629,886.53 918,629,886.53 918,629,886.53 Electricity Co., method Ltd. Qinghai Baihe Cost Aluminium 1,244,667,869.36 1,244,667,869.36 168,988,230.03 1,413,656,099.39 method Industry Co., Ltd. Qinghai Western Cost 168,988,230.03 168,988,230.03 -168,988,230.03 Carbon Co., Ltd. method Qingtou International Trade Cost 300,000,000.00 300,000,000.00 500,000,000.00 800,000,000.00 (Shanghai) Co., method Ltd. Qinghai Plateau Cost Nonferrous Metals 8,000,000.00 8,000,000.00 4,000,000.00 12,000,000.00 method Co., Ltd. Qinghai Guoxin Cost Aluminium 200,000,000.00 200,000,000.00 200,000,000.00 method Industry Co., Ltd. Qinghai Zhengyi Detecting Cost 3,941,853.00 3,941,853.00 3,941,853.00 Technology Co., method Ltd. Less: Impairment provision of long-term equity investment 5,393,570.34 5,393,570.34 withdrawn in line with original policy Total 10,304,344,763.53 10,095,009,340.19 1,308,745,283.20 11,403,754,623.39
Continued
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F-227 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Impairment provision Shareholding Cash bonus in current Invested unit Impairment provision withdrawn in current proportion˄%˅ period period
I. Subsidiaries Qinghai Jinxing 40.00 Mining Co., Ltd Qinghai Qiaotou Aluminium & 87.6396 Power Co., Ltd. Qinghai Sanjiang Hydropower 54.10 Development Co., Ltd. Qinghai Kunshan 100.00 Lease Co., Ltd. Qinghai Jinrui Mineral 42.50 Development Co. Ltd Pingan High Precision 84.89 Aluminum Industry Co., Ltd. Qinghai Ruihe Aluminum Foil 100.00 Co., Ltd. Qinghai Ningbei Power Generation 70.82 Co., Ltd. Qinghai Chentai Real Estate 100.00 Development Co., Ltd. Qinghai Xiangguang Real 100.00 Estate Co., Ltd. Qinghai Bridge Electric Industrial 96.72 Co., Ltd. Qinghai Yihe Installation 100.00 Engineering Co., Ltd. Qinghai Tiancheng Credit Guarantee 22.63 Co., Ltd. Qinghai Xihai Coal and 100.00 Electricity Co., Ltd. Qinghai Baihe Aluminium 100.00 Industry Co., Ltd. Qinghai Western 51.00 Carbon Co., Ltd. Qingtou International Trade 100.00 (Shanghai) Co., Ltd. Qinghai Plateau Nonferrous Metals 100.00 Co., Ltd. Qinghai Guoxin 55.75 Aluminium
95
F-228 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Impairment provision Shareholding Cash bonus in current Invested unit Impairment provision withdrawn in current proportion˄%˅ period period Industry Co., Ltd.
Qinghai Zhengyi Detecting 40.56 Technology Co., Ltd. Less: Impairment provision of long-term equity investment 5,393,570.34 withdrawn in line with original policy 5,393,570.34 Total
4. Operating income and operating cost
Total amount accounted for the current Total amount accounted for last year period Item Income Cost Income Cost
1. Main business income
Subtotal
2. Other business income
Income from insurance agency 3,182,139.64 2,864,588.74
Subtotal 3,182,139.64 2,864,588.74
Total 3,182,139.64 2,864,588.74
5ˊIncome from investment
Total amount accounted for Total amount accounted for Item the current period last year Long-term equity investment income accounted cost method 73,194,232.45 Long-term equity investment income accounted by the equity method
Investment income from disposing long-term equity investment Investment income during holding financial assets measured by fair value and counting the variation into the current profit and loss Investment income during holding held-to-maturity investment
Investment income from disposing available-for-sale financial 480,000.00 assets Investment from disposing financial assets measured by fair value and counting the variation into the current profit and loss
96
F-229 Qinghai Provincial Investment Group Co., Ltd Footnote on financial statement
Total amount accounted for Total amount accounted for Item the current period last year Investment income from disposing held-to-maturity investment
Investment income from disposing available-for-sale financial assets Other
Total 480,000.00 73,194,232.45
XIII. Other major matters to be explained As of December 31, 2015, the company has no other major matters to be explained. XIV. Date of approving and issuing financial statement The financial statement was approved and issued by the company’s board of directors on April 12, 2016.
Qinghai Provincial Investment Group Co., Ltd.
March 15, 2016
97
F-230 ISSUER
Qinghai Provincial Investment Group Co., Ltd （青海省投資集團有限公司） No.36 Xinning Road, Chengxi District Xining, Qinghai Province PRC
TRUSTEE
The Bank of New York Mellon, London Branch One Canada Square London E14 5AL United Kingdom
PRINCIPAL PAYING AGENT REGISTRAR AND TRANSFER AGENT
The Bank of New York Mellon, The Bank of New York Mellon London Branch SA/NV, Luxembourg Branch One Canada Square Vertigo Building − Polaris London E14 5AL 2-4, rue Eugène Ruppert United Kingdom L-2453 Luxembourg
LEGAL ADVISERS
To the Issuer To the Sole Lead Manager To the Sole Lead Manager as to English law as to English law as to PRC law
Herbert Smith Freehills Linklaters DeHeng Law Offices 23rd Floor 10th Floor 12/F, Tower B, Focus Place Gloucester Tower Alexandra House No. 19 Finance Street 15 Queen’s Road Central Chater Road Xicheng District Hong Kong Hong Kong Beijing People’s Republic of China
To the Trustee as to English law
Linklaters 10th Floor Alexandra House Chater Road Hong Kong
AUDITORS OF THE ISSUER
Beijing Yongtuo Certified Public Accountants LLP 18th Floor, Mingchuang Building Greenland Financial City No. 840 Peace Avenue Wuchang District Wuhan, Hubei Province People’s Republic of China A.Plus International FINANCIAL PRESS LIMITED 170480181