ANNUAL REPORT 2016 CONTENTS Chairman’s Statement 3 Financial Information Summary 4 Corporate Profile 7 Management Discussion and Analysis 8 Corporate Milestones in 2016 35 Directors’ Report 37 Supervisory Board’s Report 60 Corporate Governance Report 63 Environmental, Social and Governance Report 81 Profiles of Directors, Supervisors and Senior Management 112 Human Resources 119 Independent Auditor’s Report 121 Consolidated Statement of Comprehensive Income 128 Consolidated Balance Sheet 130 Consolidated Statement of Changes in Equity 132 Consolidated Statement of Cash Flows 134 Notes to the Consolidated Financial Statements 136 Glossary of Terms 285 Corporate Information 290 2 China Aluminum International Engineering Corporation Limited HE Zhihui Chairman Dear Shareholders, In 2016, every staff member of Chalieco strived hard, seized the hour to overcome the difficult time and was paid back for his efforts. In view of the recovering nonferrous industry and the continuing highly competitive market of the construction industry, we focused on improving the quality and efficiency, promoting the transformation and upgrading, and pioneered for innovation to bravely face the difficulties with a steady growth. We were able to maintain stable operating results and made a good start of the “Thirteenth Five-Year Plan”. In 2016, operating revenue of the Group amounted to RMB24.8 billion, representing a year-on-year increase of 27.3%, profit attributable to owners amounted to RMB1.14 billion, representing a year-on-year increase of 111.5%, and earnings per share was RMB0.43. The aggregate amount of contracts newly signed in 2016 was RMB55.5 billion, representing an increase of 51.2% as compared to the corresponding period over last year. As at 31 December 2016, the contracts backlog amounted to RMB79.2 billion, representing an increase of 22% over the end of 2015, which was 4.7 times of the revenue as compared to the corresponding period (excluding trading business factor). As at 31 December 2016, the total assets of the Group increased from RMB14.1 billion upon Listing to RMB42.6 billion, the consolidated net assets attributable to equity owners of the Company increased from RMB2.9 billion to RMB9.4 billion, both grew over 3 times. The Company always values the return on Shareholders. Since Listing, dividends of RMB1.537 billion (including the proposed dividend for the year) were paid. The Company and stakeholders have, together, developed and achieved a win-win situation, which was recognized widely by the society. The world moves on in a never-ending process with the new replacing the old. In 2017, we shall accelerate the strategic transformation and structural adjustment by changing concept, promoting renovation and expanding the market. We shall grasp the strategic opportunities brought by the supply-side structural reform, “One Belt, One Road”, new urbanization and PPP, further our strict control over risks, be vigilant in peacetime and strive for the best, in a bid to continue to create greater return for all investors. Chairman, HE Zhihui Annual Report 2016 3 FINANCIAL INFORMATION SUMMARY TOTAL ASSETS (RMB hundred million) 500 425.73 400 330.33 308.37 300 281.67 201.03 200 100 0 2012 2013 2014 2015 2016 (Restated) (Restated) (Restated) TOTAL EQUITY (RMB hundred million) 150 140.17 120 91.71 86.88 90 65.12 60 51.93 30 0 2012 2013 2014 2015 2016 (Restated) (Restated) (Restated) 4 China Aluminum International Engineering Corporation Limited FINANCIAL INFORMATION SUMMARY REVENUE (RMB hundred million) 247.7 250 189.23 194.50 200 181.45 164.66 150 100 50 0 2012 2013 2014 2015 2016 (Restated) PROFIT BEFORE TAXATION (RMB hundred million) 50 40 30 22.85 20 15.82 13.96 10.84 8.62 10 0 2012 2013 2014 2015 2016 (Restated) (Restated) (Restated) Annual Report 2016 5 FINANCIAL INFORMATION SUMMARY EARNINGS PER SHARE (RMB) 1.0 0.8 0.64 0.6 0.43 0.43 0.4 0.27 0.20 0.2 0.0 2012 2013 2014 2015 2016 (Restated) (Restated) (Restated) RETURN ON NET ASSETS 50% 40% 29.10% 30% 27.46% 20% 10.85% 11.23% 10% 7.53% 0% 2012 2013 2014 2015 2016 (Restated) (Restated) (Restated) 6 China Aluminum International Engineering Corporation Limited CORPORATE PROFILE THE ISSUANCE AND LISTING OF THE SHARES The Company is a subsidiary of Chinalco and listed on the Main Board of the Stock Exchange (Stock Code: 2068) on 6 July 2012 with an offering price of HK$3.93 per share. As at 31 December 2016, the total number of Shares in issuance of the Group is 2,663,160,000 Shares, which is comprised of 399,476,000 H Shares, representing 15% of the issued share capital, and 2,263,684,000 Domestic Shares, representing 85% of the issued share capital. BUSINESS OVERVIEW The Group is a leading technology, engineering service and equipment provider in the nonferrous metals industry in China, capable of providing full business-chain integrated engineering solutions for various stages in nonferrous metals industry chain. Our businesses mainly include engineering design and consultancy, engineering and construction contracting, equipment manufacturing and trading. CORPORATE STRUCTURE 100% Chinalco Luoyang Institute Public Shareholders 81.74% 3.26% 15% The Company 100% 100% 100% 73.5% 100% 100% 62.5% 100% 100%100% 100% 100% 100% 100% 100% 100% 100% 100% Ninth Metallurgical Changsha Institute Changkan Institute Twelfth Metallurgical Sixth Metallurgical China Aluminum China Aluminum A Subsidiary Beijing Zichen in Hong Kong A Subsidiary Changcheng in Venezuela Construction Construction A Subsidiary Company Technology Companies Equipment Aluminum in India Company Company Company Tianjin CNPT GAMI Other SAMI (1) (2) (3) (4) (5) (6) (7) (8) Notes: (1) represents China Nonferrous Metals Processing Technology Co., Ltd, the remaining 26.5% of the equity interest is held by Suzhou Changguang Enterprises Development Co., Ltd. (蘇州長光企業發展有限公司) as to 17.5%, China Nonferrous Engineering Co., Ltd. (中國有色工程有限公司) as to 6%, Beijing General Research Institute for Nonferrous Metals (北京有色金屬研究總院) as to 2%, and Powder Metallurgy Engineering Research Centre of Central South University Co., Ltd (中南大學粉末冶金工程研究中心有限公司) as to 1%, all of which are independent third parties. (2) represents Ninth Metallurgical Construction Co., Ltd., the remaining 37.5% of the equity interest is held by natural persons as to 30.27%, and State-owned Assets Supervision and Administration Commission of Xianyang City as to 7.23%, both of them are independent third parties. (3) represents Beijing Zichen Investment Development Corporation Limited (北京紫宸投資發展有限公司) (4) represents China Aluminum International Aluminum Technological Development Co., Ltd. (中鋁國際鋁材科技產業有限公司) (5) represents China Aluminum International Engineering (India) Private Limited (中鋁國際工程(印度)私人有限公司) (6) represents Chalieco Venezuela C.A. (中鋁國際委內瑞拉股份有限公司) (7) represents Chalieco Hong Kong Corporation Limited (中鋁國際香港有限公司) (8) represents Duyun Tongda, Wenzhou Tonggang, Wenzhou Tongrun etc. Annual Report 2016 7 MANAGEMENT DISCUSSION AND ANALYSIS 1. INDUSTRY OVERVIEW AND SEGMENT BUSINESS Industry Overview in 2016 In 2016, though domestic and overseas conditions were complicated, China’s economy recorded a steady growth, with GDP increased by 6.7% as compared to last year. By implementing various macro policies based on the core principle of supply side structural reform, transformation of economic development was facilitated while growth momentum strengthened continuously. The nonferrous metals industry, as a periodical industry, showed an indication of rebound from the bottom as at the end of 2016. The production of the ten types of nonferrous metals for the whole year was 52 million tons. It still managed to record an increase compared to that of 2015. As market conditions improved, although production of some grades went down, the increasing of demand following by a significant rise on price. Domestic consumption on copper and aluminum increased by 5%-8%; the scaled-up enterprises in the nonferrous metals industry recorded a year-on-year profit growth of over 30%, whereas aluminum refining industry (including alumina, electrolytic aluminum and recycled aluminum etc.) which had been loss- making over the past few years recorded a turnover, posing a crucial effect on the improvement on the efficiency of the industry. 8 China Aluminum International Engineering Corporation Limited MANAGEMENT DISCUSSION AND ANALYSIS Annual Report 2016 9 MANAGEMENT DISCUSSION AND ANALYSIS The growth of fixed assets investment in China for 2016 eased. The completed fixed assets investment in China (excluding farmers) was RMB59.6 trillion, representing a year-on-year increase of 8.1%, slowed 1.9 percentage points as compared to last year. Investment eased in 2016, but its structure has been optimizing. Among which, the investment in infrastructure was sound, amounting to RMB11.8 trillion for the whole year, representing a growth of 17.4% as compared to last year; investment in the infrastructure accounted for 19.9% of the total investment, representing an increase of 1.5 percentage points as compared to last year. In 2016, the gross output of the construction industry in China amounted to RMB19.3 trillion, up 7.1% as compared to last year. Compared to 2015, the growth pace of the construction industry is stabilizing and adjustment and modification are likely to be seen in the future. Business Operation Overview for 2016 (I) Achieving New Growth in Marketing 1. Breakthrough in the nonferrous industry. The Group undertook several new projects in the nonferrous industry, including Southeast Copper, which further