2012 Annual Report - nfc.com.cn · PDF fileStock Abbreviation NFC Stock Code 000758 Stock exchange listed with Shenzhen Stock Exchange Chinese ... E-mail [email protected] II

China Nonferrous Metal Industry’s Foreign

Engineering and Construction Co., Ltd.

Stock Abbreviation: NFC

Stock Code: 000758

2012 Annual Report

April 12, 2013

Full text of 2012 Annual Report of China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd.

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Section I Important Notices, Contents and Term Explanation The Board of Directors and the Board of Supervisors of China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd. (hereinafter referred to as “the Company”), along with their directors, supervisors and senior executives, hereby guarantee that this Annual Report (hereinafter referred to as “the Report”) is free from false statement, misleading representation or major omission, and assume relevant joint and several responsibilities in regard to the truth, the accuracy and the completeness of the contents of the Report.

Luo Tao, the Chairman of the Company, Wang Hongqian, the President, Gong Xinyong, CFO in charge of the accounting affairs and Liu Yibin, Head of Accounting Department (Chief Accountant), attest to the truth, accuracy and completeness of the financial statements in this Report.

All members of the Board of Directors except the following directors attended the board meeting.

Name of Absent Director Designation of Absent Director Reason for Absence Name of Assignee Yang Youhong Independent director On official business Wang Gongmin

The proposed profit distribution plan adopted by the resolution of the Board of Directors: the Company plans to pay all shareholders a cash dividend of RMB 1.00 (tax inclusive) for every 10 shares with its total share capital as of March 26, 2013 as the basis.

The forward looking representations (if any) in this Report do not constitute actual commitments to investors; it is kindly reminded that all investors shall notice the investment risks.


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Contents

Section I Important Notices, Contents and Term Explanation .......................................................................... 1Section II Company Profile ................................................................................................................................ 5Section III Accounting and Financial Highlights ................................................................................................ 7Section IV Board of Directors’ Report ................................................................................................................. 9Section V Significant Events ............................................................................................................................ 34Section VI Changes in Share Capital and Shareholders .................................................................................... 46Section VII Directors, Supervisors, Senior Executives and Employees ............................................................. 51Section VIII Corporate Governance ..................................................................................................................... 60Section IX Internal Control ................................................................................................................................ 67Section X Financial Statements ........................................................................................................................ 69Section XI Documents Available for Reference .............................................................................................. 181


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Term Explanation

Explanation Item Refers to Explanation Content

The Company, NFC Refers to China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd.

CNMC, the Group Company Refers to China Nonferrous Metal Mining (Group) Co., Ltd.

SASAC Refers to State-owned Assets Supervision and Administration Commission of the State Council

CSRC Refers to China Securities Regulatory Commission SZSE Refers to Shenzhen Stock Exchange Hongye Investment, CHIC Refers to Chifeng Hongye Investment Co., Ltd. ST Shengda Refers to Shengda Mining Co., Ltd. Yindu Mining Refers to Inner Mongolia Yindu Mining Co., Ltd. Tsairt Mineral Refers to Tsairt Mineral Co., Ltd. NFC Zinc Refers to Chifeng NFC Zinc Industry Co, Ltd. SMMC Refers to NFC (Shenyang) Metallurgical Machinery Co., Ltd. NFC Pump Refers to NFC (Shenyang) Pump Industry Co., Ltd. Zhujiang Rare Earth Refers to Guangdong Zhujiang Rare Earths Co., Ltd. Southern Rare Earth Refers to NFC Southern Rare Earths (Xinfeng) Co., Ltd. NFC Rare Earth Refers to NFC Rare Earths Company Limited NFC Mineral Refers to Chifeng NFC Baiyinnuo’er Mineral Industry Co., Ltd. Mekong Mineral Refers to Laos Ciac Mekong Mineral Co., Ltd. Orient Tantalum Refers to Ningxia Orient Tantalum Industry Co., Ltd. China Nonferrous Mining Refers to China Nonferrous Mining Corporation Limited China Daye Refers to China Daye Non-ferrous Metals Mining Limited Yuan, ’0000 yuan Refers to RMB yuan, RMB ten thousand yuan


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Major Risk Warning 1. China Securities News, Securities Times and www.cninfo.com.cn are designated by the Company as the

media for information disclosure in 2013, and all information of the Company were published by the above three media shall be considered as official. It is kindly reminded that the investors shall notice the investment risks.

2. Please refer to the part of “Outlook on Future Development” in Section IV Board of Directors’ Reports for possible business risks that the Company may be exposed to and the work plan for 2013.


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Section II Company Profile I. Company Information

Stock Abbreviation NFC Stock Code 000758 Stock exchange listed with Shenzhen Stock Exchange Chinese name of the Company China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd. Chinese abbreviation of the Company NFC

Foreign name of the Company (if any) China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd.

Foreign name abbreviation of the Company (if any) NFC

Legal representative Luo Tao

Registered address CNFC Building, Block B, Tower #1, Representative Office in Beijing, Beijing West Railway Station South Square, Fengtai District, Beijing

Zip code of registered address 100055 Official address NFC Building, 10 Anding Road, Chaoyang District, Beijing , China Zip code of official address 100029 Company website http://www.nfc.com.cn E-mail [email protected]

II. Contact Information

Secretary to Board of Directors Representative for Securities Affairs Name Du Bin Liu Yibin

Address Floor 16th, South Tower, NFC Building, 10 Anding Road, Chaoyang District, Beijing 100029, China

Floor 15th, South Tower, NFC Building, 10 Anding Road, Chaoyang District, Beijing 100029, China

Telephone 010-84427227 010-84427227 Fax 010-84427222 010-84427222 E-mail [email protected] [email protected]

III. Company Disclosures & Copies of the Report

Newspaper designated by the Company for information disclosure China Securities News and Securities Times

Internet website designated by CSRC for publishing this Report http://www.cninfo.com.cn

Copies of the Report are available at Room 1502 South Tower, NFC Building, 10 Anding Road, Chaoyang District, Beijing 100029, China

IV. Changes in Registration Information

Date of Registration Place of Registration

Business License for Enterprise Legal

Person Tax ID No. Organization Code

Initial registration Sept. 16, 1983 B12 Fuxing Road, Haidian District, Beijing 01126 110106100001262 10000126-2

Registration at the end of the reporting period

May. 11, 2012

CNFC Building, Block B, Tower #1, Representative Office in Beijing, Beijing West Railway Station South Square, Fengtai District, Beijing

100000000001269 110106100001262 10000126-2


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Changes of its main businesses since listing

(1) Pursuant to the revised Articles of Association as adopted at the 1999 Annual General Meeting of Shareholders dated May 25, 2000, the Company’s scope of main businesses was supplemented by: 1. lease of self-owned houses; 2. self-operation or agency import & export of various goods and technologies, except for those subject to operation limitation or import & export embargo (No Catalogue of Import and Export Commodities is attached); 3. processing with supplied materials/samples, assembling with supplied components, compensation trade, and processing with imported materials; 4. counter trade and carrying trade. (2) Subject to the resolution adopted at the 2001 Extraordinary General Meeting of Shareholders dated August 20, 2001, the Article 13 of the original Articles of Association providing that “ ‘customs brokerage and commodity inspection businesses brokerage’ are deleted from the scope of secondary businesses” was revised to: “secondary businesses: undertaking exhibitions/ trade fairs, warehousing & transportation, automobile repair, interior decoration; wholesales & retails of automobiles (sedans exclusive) and auto parts; sales of approved wireless communication products; home sales of optional imported goods (except otherwise specially regulated by the State).” (3) Subject to the resolution adopted at the 2001 Annual General Meeting of Shareholders dated May 20, 2002, the scope of main businesses specified in the original Articles of Association was supplemented by “sales of electromechanical and electronic products and devices, hardware & minerals, chemical materials, furniture, metallic materials, communication equipment, photographic apparatus and general merchandise”. (4) Subject to the resolution adopted at the 2003 First Extraordinary General Meeting of Shareholders dated December 15, 2003, the scope of main businesses specified in the original Articles of Association was supplemented by "mining of non-ferrous metal resources (mainly aluminum and zinc) in global market”. (5) Subject to the resolution approving the revision of the Articles of Association adopted at the 2005 Annual General Meeting of Shareholders dated May 12, 2006, the item “automobile repair” was deleted from the scope of main businesses. (6) Subject to the resolution approving the revision of the Articles of Association adopted at the 2010 First Extraordinary General Meeting of Shareholders dated June 4, 2010, the item “minerals” contained in the scope of main businesses was revised as “metals and minerals”.

Changes of the controlling shareholders since listing (if any) Unchanged

V. Other Information

The CPAs employed by the Company

Name Jonten Certified Public Accountants Office Address 7/F, Block B1, No.5 Building, 9 Chegongzhuang Street, Xicheng District, Beijing Signing Accountants Liu Hongwei, Fan Li

The sponsor institution performing continuous supervision duties employed by the Company in the reporting period:

√ APPL □ N/A

Name Office Address Sponsor Representative Consistent Supervision Period

Guotai Junan Securities Co., Ltd.

9/F, Tower 2, Yingtai Center, 28 Financial Street, Xicheng District, Beijing

Shui Yaodong, Shi Jijun From March 18, 2013 to December 31, 2014

The financial adviser performing continuous supervision duties employed by the Company in the reporting period:

□ APPL √ N/A


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Section III Accounting and Financial Highlights I. Accounting and Financial Highlights

May the Company make retroactive adjustment or restatement of the accounting data of last years due to change in the accounting policy and correction of accounting errors?

√ Yes □ No

Year 2012 Year 2011

Increase/ Decrease of

this year than last year

(%)

Year 2010

Before adjustment After adjustment After

adjustment Before

adjustment After adjustment

Total operating revenue (Yuan) 14,505,999,729.62 10,016,757,208.62 10,016,757,208.62 44.82% 5,954,332,058.89 5,954,332,058.89

Net profit attributable to shareholders of the listed Company (Yuan)

202,592,256.83 383,640,688.52 393,289,296.38 -48.49% 49,231,119.82 53,296,167.82

Net profit attributable to shareholders of the listed Company after deducting non-recurring profits and losses (Yuan)

24,207,289.43 144,746,632.29 154,395,240.15 -84.32% 10,134,816.67 14,199,864.67

Net cash flow from operating activities (Yuan) -1,138,047,815.43 -314,013,871.82 -314,013,871.82 262.42% 23,989,091.86 23,989,091.86

Basic earnings per share (Yuan/share) 0.264 0.50 0.513 -48.54% 0.077 0.069

Diluted earnings per share (Yuan/share) 0.264 0.50 0.513 -48.54% 0.077 0.069

Return on equity (%) 8.31% 17.58% 17.99% -9.68% 2.68% 2.89%

End of 2012 End of 2011

Increase/ Decrease of this year end than last year

end (%)

End of 2010

Before adjustment After adjustment After

adjustment Before

adjustment After adjustment

Total assets (Yuan) 15,597,133,137.21 12,548,677,955.17 12,548,677,955.17 24.29% 10,012,745,646.88 10,012,745,646.88

Net assets/owners’ equity attributable to shareholders of the listed Company (Yuan)

2,513,974,209.97 2,368,930,590.98 2,378,579,198.84 5.69% 1,980,074,831.91 1,988,342,078.81

II. Accounting data differences between domestic and international accounting standards

□ APPL √ N/A


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III. Non-recurring Profits and Losses

Unit: Yuan

Item 2012 2011 2010 Notes Profits and losses from disposal of non-current assets (including write-off of accrued provision for asset impairment)

236,099,551.09 -1,552,939.43 76,730,655.08

Government subsidies recognized into current profits and losses, except for those of certain quotas or amounts, closely associated with the enterprise business and under the States’ unified standards

26,497,956.43 11,676,369.31 34,431,110.93

Profits and losses from non-monetary asset exchange 311,029,345.12

Profits and losses from debt restructuring 18,060.00 119,857,450.12 Profits and losses arising from change in fair values of held-for-trading financial assets and liabilities, and investment incomes from disposal of held-for-trading financial assets and liabilities and available-for-sale financial assets, apart from hedging businesses relating to normal operations of the company,

442,171.31

Non-operating incomes and expenses other than above items 5,270,644.87 125,201.49 -75,042,714.84

Impact on income taxes 82,523,488.20 78,576,485.16 19,585,210.56 Impact on minority shareholders’ equity (after tax) 6,977,756.79 3,807,435.10 97,737,158.89

Total 178,384,967.40 238,894,056.23 39,096,303.15 --

Explain the reasons if the Company classifies an item as a non-recurring profits and losses in accordance with the definition in the Explanatory Announcement No.1 on Information Disclosure for Companies Publicly Offering Securities – Non-recurring Profits and Losses, or classifies a non-recurring profits and losses item mentioned in the said explanatory announcement as a recurrent profits and losses item.

□ APPL √ N/A


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Section IV Board of Directors’ Report I. Business Review

2012 witnessed an economic downturn in the world and continued low price of nonferrous metals. Faced with these complicated challenges, the Company adopted many active countermeasures, guaranteeing the stable development of production and operation. In the reporting period, the Company achieved operating revenues of RMB 14,505,999,700 and net profits attributable to the parent company owners of RMB 202,592,300, with YoY (year-on-year) increase of 44.82% and YoY decrease of 48.49% respectively.

(1) Businesses of nonferrous metal resources: during the reporting period, the revenues from mining, ore dressing and smelting of nonferrous metals totaled RMB 3,748,819,200, with YoY increase of 11.59%; and the gross profit reached RMB 791,629,600, with YoY decrease of 20.20%. Under the influences of the European debt crisis coupled by real estate macro-control in China, the prices of lead and zinc, main products of the Company, fell to a level below their average costs of the industry, triggering an industry-wide loss. Confronted with such a severe industrial environment, NFC timely adjusted its production and operation strategies, intensified production organization and optimized technical indexes, so as to ensure the steady development of the Company’s operation. During the reporting period, NFC accelerated the pace of building up storage and production capacities of NFC Mineral and Tsairt Mineral with the aim of expanding the Company’ productivity of lead and zinc minerals and harvesting the resultant profits as the industry came out from depression. Moreover, by taking the initiatives to continue the development of Mongolia, Chifeng, Southern Rare Earth and Laos bauxite resource bases, diversifying resources development regions and varieties, and practicing novel mining modes of resources, the Company continued with its intensive efforts in enlarging the cooperation scope of resources mining projects.

During recent years, the nonferrous metal (including lead and zinc) industry remained gloomy, creating a golden time for business investment and M&A. NFC will firmly grasp the bottoming opportunities for investment and M&A at home and abroad in an effort to expand and promote the Company’s resources development business.

(2) Project contracting: during the reporting period, NFC reported revenues of RMB 397,427,900 and gross profit of RMB 23,932,100 from international project contracting, declining by 27.85 % and 12.40% respectively on a YoY basis. This is mainly attributable to continued downturn of global nonferrous industry and the fierce competition among market players in the field of nonferrous metal project contracting on a worldwide stage. In the reporting period, NFC organized a series of seminars discussing on project contracting business titled “challenge, survive and evolve” and actively quest for a new project contracting mechanism and mode summarized as follows: 1) step up market development efforts to solidify traditional markets in Iran, Kazakhstan, India etc.; track and cultivate emerging markets in Russia, South America and other regions; and vigorously explore the markets in developed countries such as Australia, US, etc. 2) attempt the project contracting businesses outside nonferrous metals industry; 3) make breakthroughs in business development and push forward development of the project contracting business.

(3) Equipment manufacture: in the reporting period, NFC registered revenues of RMB 1,381,313,800 and gross profit of RMB 250,399,100 from equipment manufacture, up by 17.84% and 20.05% respectively on a YoY basis. As the growth of fixed investments in China slowed down, the machinery industry suffered a decline in the first half of 2012. Despite of its main product demands severely constrained by oversupply of electrolytic aluminum industry, NFC (Shenyang) Metallurgical Machinery Co., Ltd., a subsidiary of the Company, took its initiatives to open up overseas markets of aluminum electrolysis equipment and mining & smelting equipment, and made steady progress in product structure adjustment and technological edge enhancement, which enabled it to keep best performance among domestic peers in market share of aluminum electrolysis equipment and effectively minimize the operating losses caused by industry recession. NFC (Shenyang) Pump Industry Co., Ltd. (NFC Pump), another subsidiary of the Company, executed the Diaphragm Pump Supply Contract for Shenwei (Shenmu-Weinan) Coal Slurry Project of Shaanxi Coal and Chemical Industry Group Co., Ltd., successfully entering the market of energy


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resource transportation; in addition, the subsidiary signed the Supply Contract for Transportation of Tailings from Kyrgyzstan Gold Dressing Plant, indicating the start of export business of packaged diaphragm pumps; furthermore, it made major breakthroughs in independent production and market development.

(4) Trade: in the reporting period, NFC registered revenues of RMB 8,815,614,400 and gross profit of RMB 144,982,000 from trade services, up by 83.70% and 32.62% respectively on a YoY basis. Trade service is an emerging business developed on the basis of and constitutes a beneficial supplement to the two main businesses: international project contracting and nonferrous metals mining. The development of trade service allows the Company to bring the overall advantage of the Company and the investors into full play, enhances the Company’s bargaining power in purchase of raw materials and sales of products, and ultimately promotes the Company’s operating performance. In the reporting period, the Company, in cooperation with the investors, endeavored to carry out raw material procurement and product sales in a well-organized fashion, reducing procurement cost to elevate sales margin, introducing innovated modes of raw materials procurement and product sales, expanding customers at home and abroad and trying to overcome the difficulties under the background of global and domestic economic downturn, to maintain a relative steady overall operation scale of the Company.

II. Analysis of Main Business

1. Business Review

In the reporting period, the Company focused on the two main businesses, namely worldwide nonferrous metal resource mining and international project contracting, to actively push the development of the four blocks including resource development, international project contracting, equipment manufacturing and trade. In the reporting period, the Company reported income of RMB 14,350,765,900 from main businesses, with a YoY increase of 45.16%; the cost of main business amounted to RMB13,135,124,200 with YoY increase of 55.58%; while the gross profit from main businesses suffered a YoY decrease of 15.79% to RMB1,215,641,700 which mainly due to the drop of nonferrous metal price.

Review and summary of the progress of the development strategy and business plan disclosed in previous period

Faced with the ever-changing economic environment and severe industrial environment in 2012, the Company managed to maintain the normal running in production and operation by adhering to the overall development strategy targets and the general requirements of “1 Major Line + 7 Development Targets” put forward in early 2012, keeping a keen eye on the economic and market trends, giving equal emphasis to corporate management and market development, timely adjusting production and operation strategies and product structure, accelerating technical innovation and creating new profit growth point. NFC people exerted united efforts to orderly carry forward all the tasks outlined in the Annual Work Plan 2012. The Company took the initiatives to overcome the difficulties brought by the drop of nonferrous metal price and decline in international project contracting business, accelerated the pace of building up storage, expanding productivity and resources exploration capacities and organized a series of seminars debating on project contracting business titled “challenge, survive and evolve”, all of which secured the sound development of NFC. The Board of Directors seriously performed duties as specified by relevant laws and the Company’s Articles of Association, to continuously improve the standardization construction of the Company and secure the Company’s development in a sound, steady and safe way, and fulfilled the Annual Work Plan 2012 substantially.

State the reasons why the Company’s actual operating result is 20% lower/higher than the forecast profit of this year which has been disclosed earlier:

□ APPL √ N/A

2. Revenue

Industry Year 2012 Year 2011 YoY increase/decrease

Total operating revenue Total operating revenue Project contracting 397,405,489.57 550,698,636.47 -27.84%


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Nonferrous metal resources 3,748,819,169.57 3,359,371,592.38 11.59%

Equipment manufacture 1,381,313,779.76 1,172,187,652.62 17.84%

Trade 8,815,614,426.38 4,798,809,101.63 83.70% Others 7,613,040.10 5,359,646.59 42.04% Total 14,350,765,905.38 9,886,426,629.69 45.16%

Notes:

In the reporting period, the Company made a steady progress as planned in key projects in connection with the two main businesses. The Company reported significant increases in revenues from nonferrous metal ore mining, ore dressing and smelting and the trade service while the project contracting business remained gloomy.

Are the revenues from sales of goods higher than that from rendering of services?

√ Yes □ No

Industry Item Year 2012 Year 2011 YoY increase/decrease (%)

Zinc ingot and zinc alloy (t)

Sales volume 189,814 148,300 27.99% Output 185,549 161,813 14.67% Stock 27,562 17,298 59.34%

Zn-Pb concentrate (t) Sales volume 78,335 48,559 61.32% Output 94,399 83,769 12.69% Stock 14,237 21,398 -33.47%

Rare earth oxide (t) Sales volume 943 1,392 -32.26% Output 1,383 2,016 -31.40% Stock 1,764 1,321 33.54%

Aluminum electrolysis equipment (set)

Sales volume 134 97 38.14% Output 117 101 15.84% Stock 17 -100.00%

Metallurgical equipment (set)

Sales volume 51 49 4.08% Output 50 47 6.38% Stock 1 -100.00%

Diaphragm pump (set) Sales volume 87 95 -8.42% Output 92 90 2.22% Stock 4

Reasons for YoY change of over +/-30% in the above data:

1. The significant increase of 61.32% in sales volume of Zn-Pb concentrate in the reporting period is mainly attributable to the increase in sales volume of the products by relevant subsidiaries to external companies in the reporting period instead of internal transactions in the same period of last year.

2. The YoY decrease of over 30% in both output and sales volume of rare earth oxide is mainly attributable to the combined effects of the long shutdown period of Guangdong Zhujiang Rare Earth Co., Ltd. due to technology upgrading and the sharp drop of rare earth price compared with last year.

3. The increase of 38.14% in sales volume of aluminum production equipment for the reporting period is caused by a remarkable increase of orders.

Major orders held:

□ APPL √ N/A

Major change or adjustment of the Company’s products or services during the reporting period:

□ APPL √ N/A


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Major customers:

Total sales to the top five customers (Yuan) 5,237,339,459.59 Percentage of total sales to the top five customers in the annual total sales (%) 36.10%

Information on the top five customers:

√ APPL □ N/A

S/N Name of Customer Sales (Yuan) Percentage in the annual total sales (%)

1 Shanghai Xinshi International Trading Co., Ltd. 1,494,118,989.74 10.30% 2 Shanghai Woneng Metal Resources Co., Ltd. 1,470,921,851.22 10.14% 3 Shanghai Juyi International Trading Co., Ltd. 1,438,220,834.63 9.91% 4 Shanghai Rongyuan Nonferrous Metal Co., Ltd. 424,270,321.41 2.92%

5 Shaanxi Zinc Industry Co., Ltd. Shangluo Zinc Smelter 409,807,462.59 2.83%

Total —— 5,237,339,459.59 36.10%

3. Cost

Unit: Yuan

Industry Item

Year 2012 Year 2011 YoY increase /decrease (%) Amount

Percentage in operating cost

(%) Amount


(%) Project contracting Item cost 373,495,791.61 100.00% 523,512,370.51 100.00% -28.66%

Nonferrous metal ore mining, ore dressing and

smelting

Raw materials 2,268,145,135.18 76.70% 1,896,867,761.24 80.13% 19.57% Employees’ remuneration 115,380,474.58 3.90% 78,101,789.87 3.30% 47.73%

Depreciation 62,108,349.18 2.10% 46,194,134.92 1.95% 34.45% Fuel and energy 401,350,613.19 13.57% 291,535,742.35 12.31% 37.67%

Others 110,205,031.29 3.73% 54,662,683.88 2.31% 101.61% Subtotal 2,957,189,603.42 100.00% 2,367,362,112.26 100.00% 24.91%

Equipment manufacture

Raw materials 856,145,879.72 75.70% 776,500,723.19 80.58% 10.26% Employees’ remuneration 32,883,100.17 2.91% 31,386,331.12 3.26% 4.77%

Depreciation 40,552,347.77 3.59% 28,407,363.49 2.95% 42.75% Fuel and energy 17,874,114.16 1.58% 25,246,038.25 2.62% -29.20%

Others 183,459,242.08 16.22% 102,063,978.55 10.59% 79.75% Subtotal 1,130,914,683.90 100.00% 963,604,434.60 100.00% 17.36%

Trade Trade Cost 8,670,632,461.34 100.00% 4,583,637,809.87 100.00% 89.16% Others 2,891,630.00 100.00% 4,688,728.00 100.00% -38.33%

Product classification:

Unit: Yuan

Product: Item

Year 2012 Year 2011 YoY

increase/decrease (%) Amount


(%) Amount


(%) Project contracting Item cost 373,495,791.61 100.00% 523,512,370.51 100.00% -28.66%


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Nonferrous metal resources

Raw materials 2,268,145,135.18 76.70% 1,896,867,761.24 80.13% 19.57% Employees’ remuneration 115,380,474.58 3.90% 78,101,789.87 3.30% 47.73%

Depreciation 62,108,349.18 2.10% 46,194,134.92 1.95% 34.45% Fuel and energy 401,350,613.19 13.57% 291,535,742.35 12.31% 37.67%

Others 110,205,031.29 3.73% 54,662,683.88 2.31% 101.61% Subtotal 2,957,189,603.42 100.00% 2,367,362,112.26 100.00% 24.91%

Mechanical equipment

Raw materials 856,145,879.72 75.70% 776,500,723.19 80.58% 10.26% Employees’ remuneration 32,883,100.17 2.91% 31,386,331.12 3.26% 4.77%

Depreciation 40,552,347.77 3.59% 28,407,363.49 2.95% 42.75% Fuel and energy 17,874,114.16 1.58% 25,246,038.25 2.62% -29.20%

Others 183,459,242.08 16.22% 102,063,978.55 10.59% 79.75% Subtotal 1,130,914,683.90 100.00% 963,604,434.60 100.00% 17.36%

Mechanical equipment Trade Cost 70,607,384.01 100.00% 79,741,130.54 100.00% -11.45%

Nonferrous metal products Trade Cost 8,599,926,074.88 100.00% 4,497,640,558.79 100.00% 91.21%

Others 2,990,632.45 100.00% 10,944,848.54 100.00% -72.68%

Notes:

1. The depreciation of nonferrous metals and mechanical equipments has a significant increase mainly due to transfer of the construction works of the subsidiaries NFC Zinc and NFC Pump into fixed assets upon completion.

2. The remarkable increase in the cost of nonferrous metal trade service is mainly caused by expansion of the trade service of the Company in this reporting period.

Major suppliers:

Total procurement from the top five suppliers (Yuan) 5,870,600,759.09 Percentage of total procurement from the top five suppliers in the annual total procurement (%) 21.50%

Information about the top five suppliers:

√ APPL □ N/A

S/N Name of supplier Procurement volume (Yuan) Percentage in the annual total procurement (%)

1 Zhejiang Ledi Electronic Technology Co., Ltd. 2,296,472,232.72 8.41% 2 Dongfang Hongda International Trade Co., Ltd. 2,270,782,905.17 8.31% 3 Shanghai Juyi International Trading Co., Ltd. 550,826,308.18 2.02% 4 Hao Yue Holdings Ltd. 379,501,736.14 1.39% 5 Shanghai Xinshi International Trading Co., Ltd. 373,017,576.88 1.37%

Total —— 5,870,600,759.09 21.5%

4. Expense

Item Amount of this year

Amount of last year Difference +/-% Reason of change

Selling expenses 239,231,831.73 208,952,517.15 30,279,314.58 14.49%


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Management expenses 466,404,385.46 498,449,933.44 -32,045,547.98 -6.43%

Financial expenses 365,819,113.81 266,019,337.29 99,799,776.52 37.52% Increase of borrowings and rise of interest

rates

5. R&D Expenditures

NFC initiatively organized independent innovational activities to integrate and optimize internal technology resources allocation and enhance independent innovational capability and level. By focusing on making technical breakthrough and innovation in the improvement of nonferrous metal smelting process and expansion of products application fields, so as to elevate its core competitive edge and optimize product structure.

As for R&D expenditures in 2012, the Company conducted R&D in such projects as comprehensive recovery of residues, novel rare earth extraction technology, diaphragm pumps for long-distance CWS (coal water slurry) pipeline and large-tonnage multi-functional units. In 2012, the Company invested RMB13,651,100 in R&D, accounting for 0.54% of its latest audited net assets and 0.09% of its latest audited operating revenues. The R&D expenditures of this year increased by 203.03% compared with RMB4,504,800 in last year.

In the reporting period, the subsidiary NFC Pump entered into the Diaphragm Pump Supply Contract for Shenwei Coal Slurry Project with Shaanxi Coal and Chemical Industry Group Co., Ltd., marking a major breakthrough of the subsidiary as to the application of diaphragm pumps, the featured product of NFC pump, in long-term coal transportation. Furthermore, the Project of Silver Recovery out of Zinc Acid-Leaching Slag undertaken by the subsidiary NFC Zinc is expected to be completed by 2013, whereby the recovery of silver from residues will be realized.

6. Cash Flow

Unit: Yuan Item 2012 2011 YoY increase/decrease (%)

Subtotal of cash inflows from operating activities 15,500,758,628.56 11,124,239,673.48 39.34%

Subtotal of cash outflows from operating activities 16,638,806,443.99 11,438,253,545.30 45.47%

Net cash flow from operating activities -1,138,047,815.43 -314,013,871.82 262.42% Subtotal of cash inflows from investment activities 626,692,063.39 120,532,731.85 419.94%

Subtotal of cash inflows from investment activities 398,510,401.34 636,281,320.55 -37.37%

Net cash flow from investment activities 228,181,662.05 -515,748,588.70 -144.24%

Subtotal of cash inflows from financing activities 5,362,748,707.22 3,597,670,473.32 49.06%

Subtotal of cash outflows from financing activities 4,050,938,671.76 2,413,969,130.78 67.81%

Net cash flow from financing activities 1,311,810,035.46 1,183,701,342.54 10.82% Net increase in cash and cash equivalents 397,851,324.68 329,818,810.95 20.63%

Reasons for YoY change of over +/-30% in the above data:

Notes to cash inflows/outflows and net cash flows from operating activities: in the reporting period, the cash inflows and outflows from operating activities increased significantly on a YoY basis compared with the same period of last year due to the expansion of trade service and zinc product productions and sales; the increase of cash outflows was larger than that of cash inflows, both from operating activities, due to more inventories and advance payments, leading to significantly reduced net cash flows from operating activities


15

compared with the same period of last year.

Notes to cash inflows/outflows and net cash flows from investment activities: during this reporting period, the cash inflows from investment activities showed a substantial YoY increase mainly attributable to transfer of part of equity held by the Company in Shengda Mining Co., Ltd.; the cash outflows from investment activities experienced a sharp drop as a result of the decrease in external equity activities in this period than those in the same period of last year. All the above factors together contributed to the substantial increase in net cash flows from investment activities.

Notes to cash inflows/outflows and net cash flows from financing activities: during this reporting period, cash inflows/outflows from financing activities elevated greatly as a result of the combined effects of more borrowings and repayments as well as rise of interest rates.

Reasons for the major difference between the cash flows from operating activities and the net profits of this year during the reporting period:

The incomes from equity disposal took a substantial part of the net profits during this reporting period and the cash outflows from operating activities increased more significantly due to business expansion.

III. Breakdown of Main Business

Unit: Yuan

Total operating revenue Operating cost Gross profit rate

(%)

YoY increase/decrease

of operating revenue (%)

YoY increase/decrease of operating cost

(%)

YoY increase/decrease

of gross profit rate (%)

By industry: Project contracting 397,405,489.57 373,495,791.61 6.02% -27.84% -28.66% 1.08%

Nonferrous metals 3,748,819,169.57 2,957,189,603.42 21.12% 11.59% 24.91% -8.41%

Equipment manufacture 1,381,313,779.76 1,130,914,683.90 18.13% 17.84% 17.36% 0.33%

Trade 8,815,614,426.38 8,670,632,461.34 1.64% 83.7% 89.16% -2.84% Others 7,613,040.10 2,891,630.00 62.02% 42.04% -38.33% 49.5% By product Project contracting 397,405,489.57 373,495,791.61 6.02% -27.84% -28.66% 1.08%

Nonferrous metal products

12,488,746,441.96

11,557,115,678.30 7.46% 54.87% 68.35% -7.41%

Metallurgic machinery 1,456,221,457.44 1,201,522,067.91 17.49% 15.55% 15.16% 0.28%

Others 8,392,516.41 2,990,632.45 64.37% -28.21% -72.68% 57.99% By region

China 13,820,127,854.14

12,666,150,347.53 8.35% 50.88% 61.13% -5.83%

Other countries 530,638,051.24 468,973,822.74 11.62% -26.99% -19.44% -8.28%

If the statistical criteria of main businesses of the Company are adjusted during the past reporting periods, for the recent one year, the data of main businesses after adjustment of statistical criteria at the end of reporting period shall be adopted.

□ APPL √ N/A

IV. Analysis of Assets and Liabilities

1. Significant changes of assets

Unit: Yuan End of 2012 End of 2011 YoY Explanations for significant


16

Amount Percentage

in total assets (%)

Amount Percentage

in total assets (%)

Increase/decrease in percentage (%)

change

Monetary funds 1,869,311,468.09 11.98% 1,513,015,108.33 12.06% -0.08%

Accounts receivable 1,689,760,614.70 10.83% 1,033,374,012.88 8.23% 2.60%

Expansion of trade service and zinc products production and sales business

Inventory 3,213,724,149.84 20.60% 2,416,946,946.45 19.26% 1.34% Expansion of trade service and zinc products production and sales business

Investment real estate 528,184,527.34 3.39% 536,460,986.55 4.28% -0.89%

Long-term equity investments 1,016,582,601.11 6.52% 1,231,232,828.02 9.81% -3.29%

Transfer of some equities held by the Company in Shengda Mining Co., Ltd.

Fixed assets 2,725,038,071.95 17.47% 2,639,895,223.06 21.04% -3.57% The percentage of other items increased while that of this item has no significant change.

Construction in progress 227,875,183.10 1.46% 138,647,784.58 1.10% 0.36%

2. Significant changes of liabilities

Unit: Yuan

Year 2012 Year 2011 YoY

increase/decrease in percentage (%)

Explanations for significant changes Amount

Percentage in total

assets(%) Amount

Percentage in total assets

(%) Short-term loans 3,353,330,644.15 21.50% 2,396,916,600.00 19.10% 2.40% Business expansion Long-term loans 957,174,551.72 6.14% 420,158,251.00 3.35% 2.79% Business expansion

3. Assets and liabilities at fair value

Unit: Yuan

Item Beginning balance

Profits and losses arising

from fair value change in this

period

Cumulative fair value

change charged to equity

Impairment provisions accrued in this period

Purchase in this period

Sales in this period

Ending balance

Financial assets 1. Financial assets at fair values through profit or loss (excluding derivative financial assets)

2. Derivative financial assets

3. Available-for-sale financial assets 5,556,800.00 -7,794,299.01 4,975,300.00

Subtotal of financial assets 5,556,800.00 -7,794,299.01 4,975,300.00

Investment real estate Capitalized biological assets

Others Total of above 5,556,800.00 -7,794,299.01 4,975,300.00 Financial liabilities


17

Did any significant change occur to the Company’s asset measurement attributes during the reporting period?

□ Yes √ No

V. Analysis of Core Competitiveness

In respect of Project contracting: backed by the experience in overseas project development and a team of employees with outstanding business development expertise, the Company has forged “NFC” into a project contracting brand with high reputation; In respect of resources development: boasting nearly two decades of experience in nonferrous metal resources industry both home and abroad, the Company has fostered a great number of talents highly experienced in resources development and operation and developed four resource bases including Mongolia base, Chifeng base, Southern Rare Earth base and Laos Bauxite base while extending to Myanmar and Russia for nonferrous metal resources development; In respect of technical innovation: the subsidiary NFC Zinc has developed a zinc smelting technology with state-level economic and technical indexes and significant energy conservation and emission reduction advantages; NFC Pump, one subsidiary of the Company, is the earliest manufacturer in China to develop large diaphragm pumps with successful application in metallurgy industry, chemical engineering, mining and other sectors; the subsidiary Zhujiang Rare Earth is among the first batch of enterprises to develop the complete separation technology of rare earth, leading the rare earth extraction and separation technology in China.

In February 2012, NFC obtained the prospecting and exploration permit in Chifeng Xiaolaogua Forest Mine, covering an area of 92.8km2. As at the end of this reporting period, NFC has acquired 16 prospecting permits in Mongolia and Chifeng. Mekong Mineral, a shareholding subsidiary of the Company, has obtained the exploration permit (approval document No.131 issued by Department of Minerals under the Ministry of Energy and Mines of Laos) for bauxite mine in Pakxong County, Champasak Province, Laos, covering an area of 28.15km2. As stipulated in the Mineral Resources Law of the Lao People's Democratic Republic, a mine project comprises the phases of prospecting, exploration, technical & economic feasibility study, minerals exploitation and processing. At present, Mekong Mineral has started the phase of technical & economic feasibility study for the bauxite mine following prospecting and exploration completed earlier, and is expected to apply for exploration permit upon closure of the feasibility study.

In the reporting period, no such event as equipment or technology upgrading and loss of royalty,that may damage the Company's core competitiveness occured.

VI. Investment Analysis

1. Equity investments outside NFC

(1) Investments outside NFC Investments outside NFC

Investment amount in 2012 (Yuan) Investment amount in 2011 (Yuan) Change (%) 211,000,000.00 695,621,847.33 -69.67%

Information of the investees

Name of company Main business Equity percentage of the Company in the investees (%)

NFC (Shenyang) Pump Industry Co., Ltd. Design and sales of diaphragm pumps 96.00% NFC Rare Earths Company Limited Rare earth smelting 51.00% Baotou Rare Earth Product Exchange Co., Ltd. Rare earth products trading 8.33%

(2) Equities held in financial enterprises

Name of company

Type of business

Initial investment cost

(Yuan)

Beginning shares held

(shares)

Beginning shareholding percentage

(%)

Ending shares held

(shares)

Ending shareholding percentage

(%)

Ending nominal value

(Yuan)

Profit and loss in the reporting

period (Yuan)

Accounting classification

Source of shares


18

Minsheng Life

Insurance Co., Ltd.

Insurance company 384,310,000.00 370,200,00

0 9.26% 370,200,000 6.17% 384,310,000.00 0.00

Long-term equity investments

Corporate shares

Total 384,310,000.00 370,200,000 -- 370,200,000 -- 384,310,000.0

0 0.00 -- --

(3) Equities held in other listed companies

Type of securities

Stock code Stock name

Initial investment cost

(Yuan)

Beginning shares held

(shares)

Beginning shareholding percentage

(%)

Ending shares held

(shares)

Ending shareholding percentage

(%)

Ending nominal

value (Yuan)

Profit and loss in the

reporting period (Yuan)

Accounting classification

Source of shares

Stock 000410 Shenyang Machine Tool

650,000.00 750,000 0.14% 750,000 0.14% 4,642,500.00 Available-for-sale financial assets

Corporate shares

Stock 600808

Magang (Group) Holding Co., Ltd.

602,166.60 160,000 0% 160,000 0% 332,800.00 Available-for-sale financial assets

Purchase

Stock 000603 ST Shengda 404,357,442.32 53,628,000 10.62% 29,128,0

00 5.77% 231,251,659.28

267,326,189.35

Long-term equity investments

Assets exchange

Total 405,609,608.92 54,538,000 -- 30,038,000 -- 236,226,959.

28 267,326,

189.35 -- --

Notes: In the reporting period, Chifeng Hongye Investment C., Ltd., a subsidiary of the Company, transferred 24.5 million shares held by it in Shengda Mining Co., Ltd., from which Hongye Investment realized an income of RMB230,768,600.


19

2. Analysis of major subsidiaries and shareholding companies

Situation of major subsidiaries and shareholding companies

Name of company Type of business Industry Main products/services Registered capital Total asset (Yuan) Net assets (Yuan)

Total operating revenue

(Yuan)

Operating profit (Yuan) Net profit (Yuan)

Tsairt Mineral Co., Ltd. Subsidiary Mining

Mining, processing, import

& export USD100,000 482,161,447.10 450,569,302.24 532,971,405.80 287,626,325.65 216,237,675.59

Chifeng NFC Zinc Industry Co, Ltd. Subsidiary Smelting

Nonferrous metal investment,

development, production and

marketing

RMB1,908,000,000 5,569,834,443.46 3,011,322,441.33 2,940,902,739.83 -115,465,709.23 -84,694,500.62

Chifeng Hongye Investment Co.,

Ltd. Subsidiary Service

Investment operation,

management and consulting

RMB 10,000,000 611,342,540.36 304,895,103.93 60,000.00 262,168,742.97 205,839,351.36

Guangdong Zhujiang Rare

Earths Co., Ltd. Subsidiary Smelting

Rare earth products

production RMB 90,585,100 630,630,985.21 289,922,297.74 626,957,766.19 44,630,586.09 32,493,607.54

NFC Southern Rare Earths

(Xinfeng) Co., Ltd.

Subsidiary Smelting

Rare earth minerals

processing and production

RMB 300,000,000 127,944,429.17 119,722,134.11 259,522,321.47 29,922,062.84 29,028,382.16

NFC (Shenyang) Metallurgical

Machinery Co., Ltd.

Subsidiary Manufacturing Manufacturing of

equipment and spare parts

RMB 283,369,300 1,619,468,224.25 173,847,760.53 925,227,601.33 -76,617,113.77 -49,832,697.62

NFC (Shenyang) Pump Industry

Co., Ltd. Subsidiary Manufacturing

Diaphragm pump design, R&D, manufacturing

and sales

RMB 150,000,000 982,830,892.55 188,880,682.62 512,496,749.49 27,950,785.50 25,675,073.42

Beijing NFC Ansha Real Estate Management LLC.

Subsidiary Service Property management RMB 1,100,000 19,601,219.84 16,629,673.36 28,087,730.68 7,132,699.42 5,343,054.52

CNFC Equipment Co., Ltd Subsidiary Wholesales &

retails

Distribution of metallurgical and

materials RMB 14,000,000 42,440,447.43 24,865,234.73 100,062,803.90 2,843,212.54 2,291,721.48


20

China International

Alumina Development Co.,

Ltd.

Subsidiary Service

Technological development and agency import &

export

RMB 50,000,000 47,424,738.21 44,686,803.99 -1,337,484.28 -1,339,454.54

Kaifeng Resources Holding C., Ltd. Subsidiary Service

Nonferrous metal resources

development USD800,000 75,472,786.40 -19,000,406.62 -2,577,422.02 -2,594,235.49

NFC Rare Earths Company Limited Subsidiary Smelting

Wholesales of rare earth and other

metal minerals as well as

mechanical equipment;

external investment

RMB 1,000,000,000 275,456,683.98 293,328,317.07 40,639,658.17 -8,885,323.95 -6,671,682.93

China Nerin Engineering Co.,

Ltd.

shareholding company Service

Project survey, design and EPC

contracting RMB 90,000,000.00 1,519,920,312.65 543,902,117.56 1,425,062,711.27 177,353,415.02 151,364,378.60

Terramin Australia Limited

Shareholding company Mining Mine

development RMB

134,090,000.00 526,884,979.20 92,792,640.60 466,620,290.40 -425,879,553.40 -425,879,553.40

Northeastern University Design

Institute (Co., Ltd.)

Shareholding company Service

Architectural design,

metallurgic works design

RMB 10,000,000.00 264,522,973.94 205,204,092.95 135,199,981.37 12,475,456.63 11,753,495.69

Baotou Rare Earth Product Exchange

Co., Ltd.


Trading services of rare earth and related products

RMB 120,000,000.00 120,000,000.00 120,000,000.00

Xiamen Shengjiong Trade

Co., Ltd.

Shareholding company

Wholesales & retails

Import & export trades, processing

trade RMB 4,000,000.00 0.00

United Assets and Equity Exchange


Equity auction & provision of trade

information RMB 6,800,000.00 0.00

Shengda Mining Co., Ltd.

Shareholding company Mining

Lead & zinc mining and ore

dressing

RMB 504,988,700.00 1,050,721,048.05 793,001,467.30 922,846,493.38 714,720,887.39 542,777,599.18


21

Situation explanation for controlled subsidiaries and shareholding companies

1. Tsairt Mineral Co., Ltd.

Tsairt Mineral Co., Ltd. is a joint venture co-invested by NFC and Metalimpex Company, with a registered capital of USD 100,000, for the purpose of developing the Tumurttin-Ovoo zinc mine in Mongolia. This company operates a 300,000t/a zinc dressing plant for production of zinc concentrate which was put into operation on August 28, 2005.

Pursuant to the contract regarding the establishment of the joint venture entered into by NFC and Metalimpex Company on December 7, 1997 and related provisions of the Articles of Association, NFC shall transfer, without consideration, 1% of the total equity held by it in Tsairt Mineral to Metalimpex Company after Tsairt Mineral repaid in full the principal and interests of the construction loans of NFC for construction of the Tumurttin-Ovoo zinc mine. As at March 31, 2012, Tsairt Mineral has discharged the said loans and interests, forming a shareholding structure of 50% (NFC) : 50% (Metalimpex Company) since April 1, 2012.

In the reporting period, Tsairt Mineral completed production and sales of 61,900 tons and 70,000 tons of zinc concentrate respectively, and registered RMB532,971,400 and RMB216,237,700 in turnover and net profit respectively. Tsairt Mineral is expected to become one of the major profit-making subsidiaries of the Company in 2013.

2. Chifeng NFC Zinc Industry Co, Ltd.

Chifeng NFC Zinc Industry Co., Ltd. (formerly Chifeng NFC Mining Investment Co., Ltd.) was incorporated in accordance with the Agreement on Capital Increment and Restructuring of Baiyinnuoer Lead and Zinc Mine executed by and between NFC and Chifeng Municipal People's Government. The company was renamed as Chifeng NFC Zinc Industry Co., Ltd. on November 2010. So far, NFC has contributed an aggregate capital of RMB998 million in the company, holding 52.31% of the equity. The company reported a turnover of RMB2,940,902,700 and operating loss of RMB84,694,500 in the reporting period. The zinc smelting business took up a substantial part of the loss due to the drop of zinc price.

The company is mainly engaged in Zn-Pb mining & ore dressing and zinc smelting.

Zn-Pb mining & ore dressing section: Chifeng NFC Baiyinnuoer Mining Co., Ltd., the wholly-owned subsidiary of the company, is mainly engaged in this field. In this reporting period, the company produced 24,300 tons of zinc concentrate and 8,200 tons of lead concentrate. The total metals contained in Pb-Zn concentrate sold amounted to 32,500 tons, including 9,060kg of silver-containing lead concentrate. In 2013, the company will continue to serve as a frontier for NFC to advance mine productivity and the development of mine prospecting in the surrounding areas.

Zinc smelting section: NFC Zinc operates and manages Chifeng Hongye Zinc Smelting Company (phase-I project), Chifeng Kumba Hongye Investment Zinc Co., Ltd. (phase-II project), Chifeng NFC Kumba Hongye Zinc Co., Ltd. (phase-III project), and the phase-IV project, generating an aggregate zinc smelting capacity of 210,000t/a. In the reporting period, NFC Zinc produced 185,500 tons and sold 189,800 tons of zinc products in total.

3. Chifeng Hongye Investment Co., Ltd.

Chifeng Hongye Investment Co., Ltd. was incorporated in 2006 in Chifeng City, Inner Mongolia, with a registered capital of RMB10 million. The company is specialized in investment operation, management and consulting. NFC acquired 100% equity of the company in December 2009, becoming the parent company of Hongye Investment. In 2011, Hongye Investment acquired 53,628,000 shares of Shengda Mining Co., Ltd. (formerly Weida Medical Application Technology Co., Ltd.) with 9.26% equity interests held by it in Inner Mongolia Yingdu Mining Co., Ltd. by means of private placement. In this way, Hongye Investment had a 10.62% shareholding of Shengda Mining. In December 2012, Hongye Investment transferred 24.50 million shares held by it in Shengda Mining by way of block trade, from which Hongye Investment realized an income of RMB230,768,600. So far, Hongye Investment held 29,128,000 shares of Shengda Mining, having a shareholding percentage of 5.77%. As at the end of the reporting period, Hongye Investment had a total asset size of RMB611,342,500 and reported a net profit of RMB205,839,400 .

4. Guangdong Zhujiang Rare Earths Co., Ltd.


22

With a registered capital of RMB90,585,100, Guangdong Zhujiang Rare Earth Co., Ltd. is an export-oriented enterprise specialized in separation of 15 rare earth elements and in-depth processing and production of some separation products. It sustains best performance in terms of productivity and sales volume among its peers in the filed of ion-absorbed rare earth minerals in South China.

In the reporting period, the company suffered significant YoY decreases in product output and sales volume as well as gross profit, and obvious YoY decreases in turnover and operating profit because of dramatic drop in the price of rare earth products. In the reporting period, the company produced 1,382.64 tons of rare earth oxide and compound in total, and registered a turnover of RMB626,957,700 and a net profit of RMB32,493,600 respectively.

5. NFC Southern Rare Earths (Xinfeng) Co., Ltd.

For the purpose of effectively integrating rare earth resource utilization in South China, the National Development and Reform Commission approved the relocation plan put forward by Zhujiang Rare Earth, pursuant to which Zhujiang Rare Earth is planned to be relocated in Xinfeng County. NFC Southern Rare Earth (Xinfeng) Co., Ltd. was jointly established by NFC and other enterprises (as stated in the Company’s announcement published on China Securities News and www.cninfo.com.cn August 2, 2008) by restructuring Zhujiang Rare Earth on the basis of South Rare Earth. Southern Rare Earth has a design capacity of 7,000t/a in rare earth separation. By far, NFC has contributed a capital of RMB90 million in accordance with the related contribution agreement. Since its incorporation, Southern Rare Earth has been continuing with its intensive efforts in advancing the development of the relocation project. In the reporting period, the Ministry of Environmental Protection of the People’s Republic of China issued the letter of approval on the environment assessment report of the relocation plan. For more details, please refer to the announcement published by the Company on China Securities News and www.cninfo.com.cn on April 26, 2011. Presently, the company has submitted the relocation plan to the National Development and Reform Commission for approval and other procedures concerned are carried out as planned.

6. NFC (Shenyang) Metallurgical Machinery Co., Ltd.

With a registered capital of RMB283,369,300, NFC (Shenyang) Metallurgic Machinery Co., Ltd. was transferred to NFC by China Nonferrous Metal Mining (Group) Co., Ltd. by way of capital commitments for the purpose of equity division reform, with NFC holding 51.9% equity in the company. The incorporation of SMMC enhances NFC’s equipment manufacturing capacity and raises its competitive edge in contracting of overseas projects. In the reporting period, SMMC registered a turnover of RMB925,227,600 and an operating loss of RMB49,832,700, and the underlying reason for the loss lies in the State’s macro-control on the industry.

7. NFC (Shenyang) Pump Industry Co., Ltd.

NFC (Shenyang) Pump Industry Co., Ltd. was co-invested by NFC and NFC (Shenyang) Metallurgic Machinery Co., Ltd. in Shenyang, Liaoning, with a registered capital of RMB100 million. NFC and SMMC contributed RMB96 million and RMB4 million respectively, forming a shareholding structure of 96% (NFC) : 4% (SMMC).

In January 2012, NFC and SMMC entered into an arrangement regarding capital increment of NFC Pump, aiming at optimizing its capital structure, lowering the asset-liability ratio and enhancing operation efficiency. Subject to the arrangement, both parties participated in the capital rise of RMB50 million pro rata to the original shareholding ratio, whereby the registered capital was increased to RMB150 million. NFC Pump is mainly engaged in the design, production and sales of diaphragm pumps and plays an important role in expanding NFC's diaphragm pump business and bringing more benefits to shareholders. In the reporting period, NFC Pump reported a turnover of RMB512,496,800 and a net profit of RMB25,675,100.

8. Beijing NFC Ansha Real Estate Management LLC.

Founded in 1998, Beijing NFC Ansha Real Estate Management LLC. is a holding subsidiary of NFC with registered capital of RMB1.1 million, which is mainly engaged in letting and management of the properties owned by NFC. In the reporting period, NFC Real Estate focused on property management and letting services for NFC Building (formerly Guodian Mansion), the new office address of the Company. In the reporting period, the company reported a turnover of RMB28,087,700 and a net profit of RMB5,343,100.

9. CNFC Equipment Co., Ltd


23

CNFC Equipment Co., Ltd. has a registered capital of RMB14 million, including RMB8 million contributed by NFC and the rest contributed by CNMC International Trade Ltd., forming a shareholding structure of 57.14% (NFC) : 42.86% (CNIT). CNFC Equipment is mainly engaged in EPC contracting and subcontracting for supply of packaged engineering equipment; automobiles sales, warehousing, undertaking of exhibitions/trade fairs; import of electromechanical products, packaged equipment and technologies; automobiles leasing and renting; allocation and transfer of idle electromechanical equipment, etc.

In the reporting period, the company reported a turnover of RMB100,062,800 and a net profit of RMB2,291,700.

10. NFC Beijing Metal Resources Co., Ltd.

NFC Beijing Metal Resources Co., Ltd. has registered capital of RMB11 million, in which NFC held 72.73% of total equity interests. Over the years, the Company mainly engaged in the trade of nonferrous metals. In the reporting period, trade service is put under unified operation by NFC, so the Company has suspended the trade services and will be disposed of by NFC.

11. China International Alumina Development Co., Ltd.

China International Alumina Development Co., Ltd. (the “CIAC Alumina”) was co-invested by NFC and other domestic businesses in the sector of nonferrous metal resources, with registered capital of RMB50 million. NFC contributed RMB22.5 million in the company and had a shareholding of 45%. CIAC Alumina was established mainly for the purpose of exploring the bauxite mine in Champasak Province, Laos and realizing NFC’s resources development strategy. In 2008, CIAC Alumina applied for and obtained the prospecting permit for the bauxite mine pursuant to the agreement in respect of prospecting and exploration of the bauxite mine in Pakxong County, Champasak Province, Laos entered into by and between the Company and the Laos Government and applicable laws and regulations of China and Laos. Meanwhile, the company established a wholly-owned subsidiary named Laos Ciac Mekong Mineral Co., Ltd. with registered capital of RMB1 million.

12. Kaifeng Resources Holding C., Ltd.

Kaifeng Resources Holding Co., Ltd. (the “Kaifeng Resources”) is a wholly-owned subsidiary of NFC transferred by China Nonferrous Metal Mining (Group) Co., Ltd. by way of capital commitments for the purpose of equity division reform. The company was incorporated in British Virgin Islands, with registered capital of USD800,000, and mainly engaged in investment and acquisition of overseas resources. Sino-Australia Resources (Laos) Company, Hong Kong Limited, a subsidiary of Kaifeng Resources, has equity interests in the two bauxite mines in Pakxong Region and Pakxong County respectively in Champasak Province, Laos co-invested with third parties in Laos. The geological prospecting project of these two bauxite mines in Laos was commenced in March 2010.

These two bauxite mines owned by Kaifeng Resources are under prospecting and exploration simultaneously with the bauxite mine suited on the same plot and owned by CIAC Alumina. As at the end of the reporting period, the geological prospecting reports for the self-owned bauxite mine operated by Mekong Mineral China, a subsidiary of CIAC Alumina, and the Yuqida bauxite mine run by Kaifeng Resources had been approved by the competent local government of Laos. Presently, the design consultancy has set about to prepare the feasibility study reports of self-owned bauxite tenement, the Yuqida bauxite tenement and the LST tenement.

13. Equimark-NFC Development Corporation

The equity investment of NFC in Equimark-NFC Development Corporation got approved in August 1997 with the resolution by the 5th meeting of the first Board of Directors and with the order (Z.Q.F. [1997]No. 257) issued by the State-Owned Assets Supervision and Administration Commission of the State Council (Abbr. SASAC), and started at the end of October of the same year. The remaining equities were invested by Equimark-PCI Bank, one of the top ten banks in Philippine. The main scope of its business includes real estate development, mine and trade. The 6,400 sqm2 land purchased in 1989 at Makati, which is near the financial street of the downtown Manila, constitutes its main assets. At present, the company is working together with a well-known local real estate developer on the joint development of this project. The houses build in the project have been sold up substantially, the final payments for which are being collected.

14. NFC Rare Earths Company Limited


24

NFC Rare Earths Company Limited was established on January 6, 2012, with registered capital of RMB1 billion and paid-in capital of RMB300 million. Pursuant to the contribution agreement of the company, NFC holds 51% equity interests and the rest 49% is held by Yixing Xinwei Group Co., Ltd. Business scope of the company: wholesales & retails of rare earth and other metal minerals, metallic materials, construction materials, mechanical equipment, instruments, electronic devices; foreign investment with self-owned capitals; business management consulting; commodity information consulting; import & export of products and technologies, etc.

Subsidiaries acquired or disposed of during the reporting period

√ APPL □ N/A

Name of company Subsidiaries acquired or disposed objective of during the reporting period

Subsidiaries acquired or disposed way of during the reporting

period

Impact on the overall production and operating

results

NFC Rare Earths Company Limited

The investment was made with the aim to integrate the rare earth separation capacities in Jiangsu and Guangdong and achieve scale operation in this field. After the assets investment, NFC Rare Earth is expected to have a rare earth separation capacity of up to 17,000t/a, thus securing its leading position in the domestic market and creating favorable conditions for the company to get industrial supports from governments of all levels.

Holding 51% equity interests

No significant influence during the reporting period

Baotou Rare Earth Product Exchange Co., Ltd.

As a part of NFC's participation in setting up a nationwide rare earth products exchange featured by modern management technology, the company plays an important role in integrating a variety of resources in the circulation domain of rare earth. In compliance with the State’s strategy on development of rare earth development, the company is of great significant for NFC to increase its say and influence in the industry and counter the adverse impacts by dramatic fluctuation of rare earth price.

Making a contribution of RMB10 million in cash and holding 8.33% equity interests


Sino-America Network Consulting Co., Ltd.

The company is a joint venture co-invested by NFC and the University of Southern California in October 1998, in which NFC held 70% equity interests. It is mainly engaged in internet communications and system integration. Owing to the difficulties for the company to establish its market presence, its businesses in China were disposed of in 2007 and no operating activity occurred thereafter. The company will be wound up by NFC as approved by the resolution adopted at the 17th meeting of the fifth Board of Directors.

The company has gone into liquidation and excluded from consolidation scope.


VII. Outlook on Future Development

1. Trends of market development and perspectives from the BOD

2012 witnessed a complicated global economic environment. The world economy grew at a low speed, the European debt crisis deteriorated continuously, and the intensity of macro-control on domestic real estate market was ever growing. In such a complex environment, the non-ferrous metal market remained gloomy and the price of lead and zinc, our main non-ferrous metal products, hit record low level of the past five years, imposing the Company with great operating pressure. However, the overall trend of global economic development remained unchanged. Since the fourth quarter of 2012, the European debt crisis got alleviated, investment in the domestic real estate market heated up and the deterioration of export was effectively curbed. With the slow recovery of the global and Chinese economy, the Company’s operation environment is anticipated to be better in future.


25

Non-ferrous metal industry is a typical cyclical industry. With the slow recovery of the global economy, the demand on zinc and lead, the Company's main non-ferrous metal products, will grow slowly and the price will fluctuate in upward trend, which will contribute significantly to profit-making of the Company’s resources business. Such demand growth will stimulate worldwide investments in the non-ferrous metal industry, creating favorable conditions for non-ferrous metal project contracting business of the Company.

2. Future strategy

The Company’s development strategy will be focused on the two main businesses, namely the "domestic and foreign non-ferrous metal resources development" and the "international project contracting" which promote the development of each other. For supporting the trades of two main businesses, in terms of resources development, the Company will tap its potential in smelting so as to optimize the resources industry chain; and in terms of international project contracting, it will moderately explore equipment manufacturing business and actively cultivate nonferrous engineering capacity so as to perfect the project contracting industry chain and improve project contracting technical content.

On one hand, the Company will make more efforts to explore nonferrous metal resources inside and outside China, striving for more non-ferrous metal resources with lower cost; it will carry forward the upgrade of project contracting business through the resource development, while actively advancing the progress of building up storage capacity and risk exploration in Mongolia and Chifeng, so as to enlarge the Company’s resources reserves; on the other hand, the Company will accelerate the pace of reform and development of the project contracting business, and actively optimize business flows and mechanisms; and it will do business in some other selected sectors while consolidating its edges in the non-ferrous metal market, so that the two main businesses can develop hand in hand to promote the Company’s development by leaps and bounds.

3. Work plan for 2013

(1) Adopt a holistic view in production and management to expand the Company's scale and further the economic efficiency

Persisting in economic efficiency orientation, the Company will spare no effort to improve the profit-making ability by fully exercising it functions with specific measures. With regard to mining enterprises, a specific focus must be placed on carrying forward technical management, intensifying key process control, and constantly optimizing production technical indicators. In order to address the external risks resulting from zinc price fluctuation in the market, mining enterprises should exert dedicated efforts in product sales in combination with market researches, so as to seize every opportunity to market and maximize sales profits. In respect of smelting enterprises, it is of great importance to cultivate a keen market insight and grasp every market opportunity, so as to accommodate production needs while implementing effective risk control and cutting production cost. In terms of adjustment of product structure, smelting enterprises should be committed to exploring new markets, developing and solidifying long-term customers and key accounts group so as to ensure ample source of orders. Finally, the enterprises should try best to secure money recovery and tighten budget so to reduce operational risk. With regard to equipment manufacturing enterprises, priority must be given to actively expanding its market share, strengthening technological innovation by focusing on high-tech high-end equipment, adjusting product structure to adapt to market changes, carrying out sales at high standards and grasping appropriate marketing opportunities to realize maximum benefit. In respect of project contracting business, it is required to innovate operating mode and mechanism, facilitate the implementation of divisional organization system, conduct contract review, budget audit and technical assessment, fortify project budget control, and strive to quickly restore profitability.

(2) Exert intensive efforts on resource development and enlarge resources reserves

With continued growth of the company, limited resource reserves have gradually become the development bottleneck of the Company. Although the resources development department has been actively exploring proper resources projects, it always takes time to demonstrate the feasibility of the investment due to considerable investment capitals. In the future, by sticking to the concept of prudent investment, the Company will put more efforts on resource development so to fully tap its development potential.

(3) Fortify budget control and cut operating cost to raise benefit and achieve business goals

Firstly, the Company will further improve the comprehensive budget control practices and rolling budget control mode, and endeavor to optimize information technology-based budget, so as to achieve an organic


26

integration of comprehensive budget control and ERP system, and continuously elevate the scientific level of budgeting and execution analysis. Secondly, it will strengthen the coordination among annual business plan, day-to-day operation scheduling and financial budget, increase budget reliability and assessment, thus improving the guiding function of the overall budget for the enterprise management. Finally, the Company will attach great importance to the complexity of the operating environment in 2013 and adopt the risk prevention and control measures in market, prices, taxes, and other operational aspects.

(4) Strengthen capital management and enhance corporate value

The Company will make full use of its capital platform to further intensify the operations in the capital market, and strive for establishing its market presence by share capitalization, placement and other activities. It will grasp the proper opportunities to raise funds based on liquidity needs in resource development, international project contracting and daily operations, so as to enhance corporate value.

(5) Pay close attention to safety management and secure foundation for development

Safe production is closely related to the life and health of employees, the operating results and overall development of the Company, so it is the red line which we must resolutely defend. First, pay close attention to accountability and system implementation and advance execution of safety production by taking the following measures: adhere to the principle stating that the key management are the first persons responsible and facilitate the full implementation of safe production responsibility system; strengthen the rectification process control and results assessment to ensure the real and proper rectification and solution once for all; identify weaknesses, strengthen the management of key facilities, major hazards and hazardous operations and enhance the safety management on non-local workers, outsourcing teams and overseas project contracting. emphasize leadership exemplary effect in safety management and deficiencies rectification; Second, intensify security standardization, strengthen security risk control and improve the level of intrinsic safety; The Company will focus on job site safety management, equipment and facilities management, further improve the compliance of the safety production activities to its standard safety production system and ensure effective operation of the system; Third, strengthen risk control for mining, metallurgy and equipment manufacturing enterprises by taking the following actions: fortify safety supervision and management system and professional team building and effectively improve its security capability; carry forward the establishment of risk prevention and control system, strictly enforce the leadership-based shift system, and strengthen monitoring in key positions and aspects so to effectively prevent the occurrence of accidents.

(6) Identify the responsibility goals, and maintain high standard in energy conservation and emission reduction

The Company will further strengthen its responsibilities on energy conservation and emission reduction. The execution plan of "10,000 enterprises low-carbon energy conservation action" and the "twelfth five-year plan" energy conservation and emission reduction targets will be broken down to each year and each enterprise so as to provide scientific arrangement of equipment management and modification, work out the financial and technical solutions and realize proper implementation item by item to ensure safety, quality and effectiveness. It will further focus on promoting the "heavy metal contamination control" project; strengthen on-site inspection; highlight the examination of enterprise energy utilization, environmental control equipment running, networking monitoring equipment running, environmental risk management and control and so on.

4. Refinancing

After being listed, the Company gets the funds needed by the development mainly through debt financing and its own accumulation, which limits the Company's rapid development and results in high asset-liability ratio and financial costs. As such, the capital structure is in urgent need for improvement. To optimize the Company's capital structure and meet the growing demand for funds, a share placement plan was deliberated at the 14th Meeting of the Sixth Session of the Board of Directors on November 11, 2011 and adopted at the 2011 Fifth Extraordinary General Meeting of Shareholders dated December 8, 2011. In order to maintain the continuity and effectiveness of this placement, the Proposal on Extension of Valid Term of NFC’s Resolution on Share Placement and the Proposal on Request with General Meeting of Shareholders for Renewal of Authorization to Directors for Dealing With the Share Placement were adopted at the 32nd Meeting of the Sixth Session of the Board of Directors on November 13, 2012 and further adopted at the 2012 Fourth Extraordinary General Meeting of Shareholders on December 6, 2012. As at the date of the Report, this


27

placement has been fully implemented. 3 shares were placed for every 10 shares at price of RMB8.26/share, with raised aggregate capital of RMB1,800,954,331.12 and raised net capital of 1,760,076,734.12. The funds raised from the placement will be used to repay bank loans and replenish revolving funds, which is beneficial to improve the company's capital structure.

5. Possible risks and countermeasures

(1) Resource reserves need to be further expanded and resource variety to be enriched. Form 2002, the company started to foster this resource development business as a supplement to the existing project contracting business, and has significantly improved its control of resources and set up at home and abroad several non-ferrous metal industrial bases since then. However, compared with large international mining companies, the Company is still lack of resource reserves, especially in respect of smelting capacity. With the Company's future growth, it needs to accumulate more resources to support the Company's rapid development. Operating multiple varieties of non-ferrous metals is an important means to resist the market risk. The Company now still focuses on zinc, lead and rare earth but involves less in other varieties, which is not conducive to diversify market risk. In the future the Company will actively develop other non-ferrous metals to enhance the risk resistance capability.

The Company has taken a number of measures to expand resource reserves: first, place more efforts in exploration around existing mines for increasing the reserves, especially for NFC Mineral which has great potential in mine prospecting, it will strive to have a substantial expansion in reserves and extend the mine life; second, actively carry out mergers and acquisitions and exploration work in the existing mines, especially in Mongolia and Chifeng, and make full use of existing mining team to achieve economies of scale; third, advance the progresses of the project in Chifeng related to 15 prospecting rights and the bauxite mine prospecting project in Laos to replenish the Company’s resources reserves; fourth, actively carry out resource development business and conduct worldwide acquisition of suitable non-ferrous resources mining companies.

(2) Faced with very slow recovery of project contracting market and continued tensions in Middle East, the Company's many existing contracting projects are postponed for long. Although the Company is actively exploring project contracting market outside the Middle East, the progress of the cultivation of new markets has been slowed down by the shrinking of the global investment in non-ferrous metals industry in short term. To speed up the recovery of the construction contracting operations, first of all, the Company will actively maintain the signed contracts, and use various diplomatic opportunities to actively create the conditions for the validation of the signed contracts and strive for the commencement of the projects as early as possible; second, the Company will take full advantage of the opportunity of the world economic recovery to place greater efforts to develop new markets; third, it will make full use of the accumulated experience of overseas non-ferrous project contracting and business contacts, and gradually enter into the project contracting business beyond the nonferrous metals industry; fourth, it will do innovation to the international project contracting mode, i.e. general contracting plus product sales and manufacturing operations integrated mode, to achieve new breakthroughs in construction contracting business.

(3) Equipment manufacturing business is facing the pressure of industrial transformation and upgrading. Overcapacity is lasting in the domestic electrolytic aluminum industry, and the slowdown of fixed asset investment growth due to real estate market regulation further suppresses the investment in electrolytic aluminum industry. The demand of product tending machine, the leading product of SMMC, the Company’s holding subsidiary is shrinking and the accounts receivable continue to increase. Although the Company has taken a number of measures to cope with the industry downturn, losses still occur during the reporting period. Currently, our equipment manufacturing business is facing the pressures of industrial upgrading and transformation, and only by fully utilize the talents and technological advantages accumulated in several decades, and the opportunity of the relocation and the transformation, and actively developing high-end equipment and marketable products can we reverse the trend.

(4) The profitability of the Company needs to be further improved. Since 2007, non-ferrous metal industry has been struggling in a six-year downward trend, and the Company's earnings declined accordingly. Under the industrial pressure, the Company continues to adhere to the business strategy of "controlling costs, cutting expenses and tapping the potentialities and increasing the profits", and through the scientific assessment, lean management, process reengineering and other methods further improves the management efficiency, increases per capita output, and improves the profitability; through the technological innovation, it accesses to major breakthroughs and creates new development space, and


28

promotes the transform of the research results into productivity, creates the benefits from innovation and improves product profitability.

VIII. Explanations for Changes in Accounting Policies, Accounting Estimates and Calculation Methods in Comparison with the Last Annual Fiscal Report

N/A

IX. Explanations for Correction of Significant Accounting Errors Requiring Retrospective Restatement during the Reporting Period

The Company's subsidiary Chifeng NFC Baiyinnuoer Mining Co., Ltd. was entitled to enjoy the Preferential Policy on Enterprise Income Tax under the Development Strategy for Western Region in 2011 pursuant to the competent local tax authority’s approval, so the 2011 enterprise income tax payable was adjusted by reducing an amount of RMB18,445,054.22. The Company made a retrospective adjustment to the accounting errors of previous period in this regard and the owner’s equity was adjusted accordingly, in which: the undistributed profit and minority shareholders’ equity as at December 31, 2011 were increased by RMB9,648,607.86 and RMB8,796,446.36 respectively, taxes payable as at December 31, 2011 was decreased by RMB18,445,054.24; and the net profit in 2011 was increased by RMB18,445,054.22, including RMB9,648,607.86 attributable to the parent company and RMB8,796,446.36 of the minority equity.

X. Explanations for Changes in Scope of Consolidated Statement in Comparison with the Last Annual Fiscal Report

During the reporting period, a new subsidiary NFC Southern Rare Earth (Xinfeng) Co., Ltd. was established, with registered address at Building 35, No. 18 Yard, Henglu Road, North Fengle Road, Huangpu District, Guangzhou, and registered capital of RMB 1 billion, with the Company holding 51% of equity of the subsidiary.

During the reporting period, the former subsidiary Sino-America Network Consulting Co., Ltd. went into liquidation, so it is excluded from the consolidation scope.

XI. Profit Distribution and Dividend Payout

Formulation, implementation and adjustment of profit distribution policies, in particular cash dividend distribution policy during the reporting period:

In the reporting period, the Company set out the detailed terms for cash dividend distribution policy and specified the decision-making and supervision mechanisms of dividend distribution in compliance with the applicable provisions of CSRC and SZSE, taking into consideration the actual operating conditions of the Company. The profit distribution provisions stipulated in the Articles of Association of the Company were revised twice by the resolutions adopted at the 2012 Second Extraordinary General Meeting of Shareholders held on July 16, 2012 and the 2012 Third Extraordinary General Meeting of Shareholders held on September 4, 2012, respectively. For more details, please refer to the Article 150 Profit Distribution provided in the Articles of Association.

(I) Basic principles of profit distribution

1. The Company shall implement continuous and stable profit distribution policy and ensure that the distribution proposal is in line with the overall interests of all shareholders and the long-term interests and sustainable development of the Company. The distribution shall be made to the extent of not exceeding the aggregate profit available for distribution, nor shall it affect the operation of the Company as a going concern The opinions of the independent shareholders, directors and minority shareholders shall be full taken into account in decision-making and demonstration for the profit distribution policy at the meetings of Board of Directors and Board of Supervisors and the General Meeting of Shareholders.

2. To secure returns to the investors, the Company shall distribute dividends to all shareholders at the specified percentage of the aggregate profit available for distribution for the year.

3. Profits may be distributed by cash, stocks or both cash and stocks, or otherwise as stipulated by applicable laws and regulations, provided however that the form of cash dividend distribution may be preferred whenever possible.


29

4. The Board of Directors shall have the right to propose interim profit distribution plan, depending on the actual operating conditions of the Company.

(II) Specific conditions for dividend distribution in cash

1. The Company may adopt cash dividend distributions subject to the following conditions:

1) The Company has reported distributable profits attributable to the parent company for the year (namely profits after taxation after making up the losses and allocations for reserve funds);

2) The Company has no significant investment plans or cash expenditure that may be considered to exert material impact on the Company;

3) The Company has ample cash flow and the distribution of cash dividends will not prejudice the normal operation and long-term development of the Company;

2. If the aforesaid conditions for cash dividend distribution are satisfied, the Company shall distribute cash dividends on an annual basis in principle, provided that the Board of Directors may propose interim profit distribution plan depending on the profits and capital demands of the Company.

3. The profits distributed in cash every year shall be no less than 10% of the distributable profits of the same year, and the aggregate profits distributed in cash within every three consecutive years shall be no less than 30% of the annual average distributable profits in these three years. For any failure to meet such percentage requirement, the Board of Directors shall make special explanations at the General Meeting of Shareholders.

(III) Specific conditions for dividends distribution in form of stock

Based on the actual conditions of the Company’s long-term and sustainable development, operating profits and cash flows, stock dividend distribution may be considered in accordance with the distribution plan to the extent that the cash dividend distribution percentage, the share capital size and shareholding structure are all rational and compliant with the specified requirements.

(IV) Approval procedures of profit distribution proposal

1. The management shall propose reasonable advices on profit distribution to the Board of Directors and the Board of Supervisors by taking into full consideration the operating profits and capital demands of the Company.

2. The Board of Directors shall have extensive discussions with independent and non-independent directors and collect the opinions from minority shareholders by all means before reaching at a draft profit distribution plan that addresses returns to all shareholders in a continuous, reliable and scientific manner.

3. The resolution of draft profit distribution plan shall be passed at the meeting of Board of Directors by a majority of the vote cast and approved by independent directors representing more than one half of the total voting rights as well as independent opinions expressed independent directors in this regard; meanwhile, the resolution, when deliberated at the Board of Supervisors, shall be adopted by a majority of the vote cast.

4. The profit distribution proposal approved by the Board of Directors and the Board of Supervisor shall then be submitted to the General Meeting of Shareholders for reviewing and internet voting. It shall be passed by the General Meeting of Shareholders by a majority of not less than two thirds of the vote cast.

5. Where no cash dividend distribution is proposed for implementation, the Board of Directors shall explain the specific reasons for the decision and state the purpose of retaining the profits and anticipated investment income. Independent directors shall furnish opinions on the decision, which shall then be presented to the General Meeting of Shareholders for deliberation and disclosed on the specified media after approval.

(V) Implementation of profit distribution proposal

Dividends (or stocks) shall be paid out by the Board of Directors within two (2) month after adoption of profit distribution proposal at the General Meeting of Shareholders.


30

(VI) Adjustment to the profit distribution policy

The Company shall not modify the profit distribution policy without approval so as to secure the specified rate of returns to shareholders. Where it is necessary to adjust the profit distribution policy in the event of promulgation of new provisions on profit distribution policy of listed companies by national laws and regulations and securities regulators, significant changes in the external operation environment or the operating conditions of the Company, wars, acts of God (collectively referred to as the "force majeure”), such adjustments, made for safeguarding the rights and interests of all shareholders and supported by sufficient demonstration and explanation, shall be approved by the Board of Directors (with the independent directors furnishing clear and independent opinions) and the Board of Supervisors by following the specified approval procedures and then submitted to the General Meeting of Shareholders for deliberation and approval by a special resolution.

The resolution concerning adjustment to the profit distribution policy shall be voted online or otherwise by minority shareholders at the General Meeting of Shareholders and approved by attended shareholders representing more than two thirds of voting rights.

The Profit Distribution Plan for 2011 adopted at the 2011 Annual General Meeting of Shareholders was completed on May 18, 2012.

The Company has implemented the profit distribution policy in strict compliance with the Articles of Association; the cash dividend distribution policy has been formulated and executed in line with the Articles of Association and requirements of the decisions of General Meeting of Shareholders, with clear standard and percentage requirements; the related decision-making procedures and mechanism are complete; the independent directors had explicit responsibilities and played active roles in the dividend distribution planning; it was also ensured that the minority shareholders could fully express their opinions and concerns; and measures were taken to protect the legal rights of the minority shareholders.

The plans of profit distribution and capitalization of capital reserve for the reporting period were in line with the provisions in Articles of Association of the Company.

Profit distribution or capitalization of capital reserves in the past three years (including the reporting period)

Profit distribution plan for 2012: the Company paid to all shareholders a cash dividend of RMB 1.00 (tax inclusive) for every 10 shares with its total share capital of 984,689,212 as of March 26, 2013.

Profit distribution plan for 2011: payment of RMB1.00 (before tax) in cash on the basis of 766,656,000 shares (the Company’s current total share capital), totaling RMB76,665,600.00 (before tax). The plan was completed on May 18, 2012.

Profit distribution plan for 2010: 2 bonus shares for every 10 shares held were issued to all shareholders on the basis of 638,880,000 shares (the Company’s current total share capital ), and RMB0.30 (before tax; actually RMB0.070 to individuals, securities investment funds and eligible overseas investors after taxation; for other non-resident enterprises, the income taxes were paid by taxpayers to the competent local taxation administration instead of being withheld by the Company) in cash for every 10 shares were paid. The total registered capital of the Company increased from 638,880,000 shares to 766,656,000 shares after the distribution. The plan was completed on July 12, 2011.

Cash dividend distribution in the past three years

Unit: Yuan

Year Amount of cash dividend (before tax)

Net profits attributable to shareholders of the listed

company in annual distribution consolidated statement

Ratio of net profit attributable to shareholders of the listed

company in annual distribution consolidated statement (%)

2012 98,468,921.20 202,592,256.83 48.60% 2011 76,665,600.00 393,289,296.38 19.49% 2010 19,166,400.00 53,296,167.82 35.96%

The Company made profits and the parent company reported positive undistributed profits but did not propose a pre-plan for cash dividend distribution.

□ APPL √ N/A


31

XII. Performance of Social Responsibility

For details of performance of the Company’s social responsibility, please refer to the Corporate Social Responsibility Report 2012 passed at the 41st Meeting of the Sixth Session of Board of Directors of the Company and disclosed in full text on China Securities News, Securities Times and www.cninfo.com.cn. on April 16, 2013

XIII. Registration Table for Reception of Investigations, Communications and Press Interviews of the Company during the Reporting Period

Date Location Mode Type of

audience received

Audience received Key contents of discussion and materials furnished

Jan. 18, 2012 NFC Headquarter Field research Institution UBS Securities Co.

Company operation conditions; no documented materials were furnished.

Jan. 18, 2012 NFC Headquarter Field research Institution Yinhua Fund

Management Co., Ltd.


Feb. 14, 2012 NFC Headquarter Field research Institution Essence Securities Co.,

Ltd.


Feb. 14, 2012 NFC Headquarter Field research Institution

China International Capital Corporation Limited


Feb. 14, 2012 NFC Headquarter Field research Institution China Securities Co., Ltd.


Feb. 14, 2012 NFC Headquarter Field research Institution China Life Management

Company Limited


Feb. 21, 2012 NFC Headquarter Field research Institution TX Investment

Consulting Co.


May. 23, 2012 NFC Headquarter Field research Institution Huatai Asset



May. 23, 2012 NFC Headquarter Field research Institution Everbright Securities

Limited by Share Ltd


May. 23, 2012 NFC Headquarter Field research Institution China Life Pension

Company Limited


May. 23, 2012 NFC Headquarter Field research Institution Rongtong Fund



May. 23, 2012 NFC Headquarter Field research Institution Huashang Fund



May. 23, 2012 NFC Headquarter Field research Institution Cinda Securities Co., Ltd.


May. 23, 2012 NFC Headquarter Field research Institution China Securities Co., Ltd.


May. 23, 2012 NFC Headquarter Field research Institution Huabao Investment Co.,

Ltd.


May. 23, 2012 NFC Headquarter Field research Institution UBS Securities Co.,

Limited


http://www.cninfo.com.cn/�


32

May. 23, 2012 NFC Headquarter Field research Institution CITIC Securities Limited

by Share Ltd


May. 23, 2012 NFC Headquarter Field research Institution Zhongyin Fund



May. 23, 2012 NFC Headquarter Field research Institution

Beijing StarRock Investment Management Co., Ltd.


Jun. 21, 2012 NFC Headquarter Field research Institution Yinfangda Fund



Jun. 21, 2012 NFC Headquarter Field research Institution TX Investment

Consulting Co.


Aug. 27, 2012 NFC Headquarter

Telephone communication Institution Terra Firma Asset

Management LLC.



Telephone communication Institution Donghai Securities Co.,

Ltd.



Telephone communication Institution Dongwu Fund




Telephone communication Institution Dongxing Securities Co.,

Ltd.



Telephone communication Institution Founder Securities

Limited by Share Ltd



Telephone communication Institution ICBC Credit Suisse Asset




Telephone communication Institution GF Fund Management

Co., Ltd.



Telephone communication Institution GF Securities Co., Ltd.



Telephone communication Institution

Franklin Templeton Sealand Fund Management Co., Ltd.



Telephone communication Institution UBS SDIC Fund




Telephone communication Institution Hongyuan Securities Co.,

Ltd.



Telephone communication Institution China Asset Management

Co



Telephone communication Institution China Universal Asset





Invesco Great Wall Fund Management Company Limited



Telephone communication Institution Lord Abbett China Asset




33


Telephone communication Institution Rixin Securities Co., Ltd.



Telephone communication Institution Shanxi Securities Co.,

Ltd.



Telephone communication Institution Yinhua Fund




Telephone communication Institution Guotai Junan Securities

Co., Ltd.



Telephone communication Institution China Life Management

Company Limited



Telephone communication Institution China Securities Co., Ltd.



Telephone communication Institution UBS Securities Co.,

Limited



Telephone communication Institution Zhongyin Fund





China Merchants Securities Limited by Share Ltd


Nov. 9, 2012 NFC Headquarter Field research Institution Beijing Gaohua

Securities Company Ltd.


Nov. 9, 2012 NFC Headquarter Field research Institution Fullgoal Fund



Nov. 9, 2012 NFC Headquarter Field research Institution

Korean Investment Fund Management Company Limited


Nov. 9, 2012 NFC Headquarter Field research Institution Huaan Fund Management

Co., Ltd.


Nov. 9, 2012 NFC Headquarter Field research Institution China Asset Management

Co


Nov. 9, 2012 NFC Headquarter Field research Institution Guotai Fund



Nov. 9, 2012 NFC Headquarter Field research Institution Jiashi Fund Management

Co., Ltd.


Nov. 22, 2012 NFC Headquarter Field research Institution

Shanghai Shenyin & Wanguo Securities Co., Ltd.



34

Section V Significant Events I. Major Lawsuit and Arbitration

□ APPL √ N/A

Wide criticism from the media

□ APPL √ N/A

The Company was not involved in any criticism from the media in this year.

II. Asset Transactions

1. Disposal of assets

Counterparty Assets sold Selling date

Transaction price

(’0000 yuan)

Net profit contributions to the Company by the assets from

the beginning of this period to

the selling date (’0000 yuan)

Profits and losses from sales

(’0000 yuan)

Percentage of net profit

contributions of the assets sales to the Company in total profit

(%)

Pricing principle

Related party

transaction or not

Relationship with the

counterparty (applicable to related party transaction)

Are titles to the assets involved

transferred in full?

Are creditor’s rights and

debts transferred

in full?

Disclosure date

Disclosure index

Block trade ST

Shengda Equity

December 17, 2012 to December 25, 2012

42,571.20 1,670.14 23,076.86 57.57%

Price quoted at

Block Exchange

No N/A Yes Yes Nov. 20, 2012

Announcement No.: 2012-041

Overview of disposal assets

Chifeng Hongye Investment Co., Ltd., a subsidiary of the Company, acquired 53,628,000 shares of Shengda Mining Co., Ltd. on October 18, 2011. During the period from December 17, 2012 to December 25, 2012, Hongye Investment transferred 24,500,000 shares held by it in Shengda Mining by block trade, from which Hongye Investment realized an income of RMB230,768,600 (net income after deducting investment cost). The net profit contributions of the equity sales to the Company took up 57.57 %of total profit.

As at the end of the reporting period, Hongye Investment held 29,128,000 shares of Shengda Mining, having a shareholding of 5.77%.

III. Significant Related Party Transactions

1. Related party transactions associated with daily operation

Unit: ’0000 Yuan

Related parties Nature of connection Classification Subject matter Pricing

principle Price Amount

Percentage of transaction amount in

total amount of

transactions in same type

(%)

Settlement mode Market price Disclosure

date Disclosure

index

CNMC International Trade Co., Ltd.

Under common control of an actual controller

Sales of products

Sales of electromechanical equipment and spare parts

Market price 1,575.81 1,575.81 0.42% Bank

transfer 1,575.81 March 31, 2012


Xinyang Trade Co., Ltd.


Sales of products

Sales of zinc concentrate


transfer 15,169.94 March 31, 2012



35

Chifeng Dajingzi Tin Co., Ltd.


Sales of products

Sales equipment and spare parts

Market price 164.10 164.10 0.04% Bank

transfer 164.10

Tieling Beneficiation Reagent Co., Ltd.


Sales of products

Sales equipment and spare parts


transfer 131.69

Zambia-China Economic & Trade Cooperation Zone


Sales of products Sales of materials Market

price 97.43 97.43 0.03% Bank transfer 97.43 Nov. 28,

2011


China Nonferrous Hongtoushan Fushun Mining Group Co., Ltd.


Purchase of products

Purchase of zinc concentrate fines


transfer 1,887.59 March 31, 2012


NFC (Shenyang) Xinyue Trade Co., Ltd.



Purchase of raw materials


transfer 1,104.52

CNMC Developing Investment Co., Ltd.



Purchase of material


transfer 57.12 Nov. 28, 2011





Purchase of material


transfer 35.04

China Nonferrous Metal Mining (Group) Co., Ltd.

Controlling shareholder Leasing Leasing of houses Market

price 3,398.04 3,398.04 59.47% Bank transfer 3,398.04 March 31,

2012


China Nonferrous Mining Corporation Limited


Leasing Leasing of houses Market price 14.86 14.86 0.26% Bank

transfer 14.86

China Nonferrous Metals Int’l Mining Co., Ltd.



transfer 252.58 March 31, 2012







Chambishi Copper Smelter Co., Ltd.


Leasing Leasing of houses Market price 56.90 56.90 1% Bank








CNMC Nickel Co., Ltd.,











36

Kryso Resources PLC.





Golden Bright Insurance Broker Co., Ltd.





China Nonferrous Kabwe Mining Co., Ltd.





China Nerin Engineering Co., Ltd.

Associate Receipt of services Project design Market

price 279.94 279.94 0.75% Bank transfer 279.94



Receipt of services Bid cost Market


China No.15 Metallurgical Construction Co., Ltd.


Receipt of services

Construction works of diaphragm pump project of NFC Pump


transfer 2,467.02 December 15, 2009




Receipt of services

100kt/a zinc smelting project of NFC Zinc


transfer 2,546.83 July 9, 2009


15MCC International Engineering Co., Ltd.


Receipt of services

Equipment installation of Kyrgyzstan Dressing Plant


transfer 621.19 Jun. 17, 2010


Shenyang Research Institute of Nonferrous Metals


Receipt of services Technical services Market


Shenyang Nonferrous Metallurgy Engineering Research Institute


Receipt of services

Receipt of services


transfer 49.24

Northeastern University Design Institute (Co., Ltd.)

Associate Receipt of services Design charge Market


Xincheng Construction Supervision & Consulting Co., Ltd.


Receipt of services

NFC Headquarters office construction; supervision of intelligent reconstruction project of diaphragm pumps of NFC Pump


transfer 21.40

Wanxiang Resources Co., Ltd.

The second largest shareholder of the Company

Sales of products

Sales of zinc ingot metal





Controlling shareholder Leasing Property fee Market

price 1,299.13 1,299.13 46.25% Bank transfer 1,299.13 March 31,

2012




Leasing Property fee Market price 3.13 3.13 0.11% Bank

transfer 3.13


37































Kryso Resources PLC.















Inner Mongolia Yindu Mining Co., Ltd.

Subsidiary of associate


Purchase of zinc concentrate fines

Market price 6027.68 6,027.68 1.83% Bank

transfer 6,027.68

Total -- -- 39,570.63 -- -- -- -- Details of substantial sales return None.

Necessity and continuity of related party transactions and reasons for choosing to conduct transactions with the related parties (rather than other parties in the market)

The aforesaid related party transactions are normal transactions required for principal business activities or secondary productions of the Company. Purchase of raw materials from related parties not only supplies some materials for the Company but is also a part of ordinary business course of the related parties (or subsidiaries), which is an important means for profit sharing; receipt of labor services and other services from related parties minimizes overlapping investment of the Company; sales of products to related parties is a necessity of improving operating performance and accomplishing related tasks and constitutes an integral part of marketing business of the Company. Lease of houses to, among others, China Nonferrous Metal Mining (Group) Co., Ltd. secures both asset yields and ample cash inflows.

Impacts of related party transactions on independency of the Company

All the aforesaid transactions were settled at market fair value based on the principles of consensus, fairness and equity without any compromise to the interests of the Company and its shareholders.

The Company’s dependence on the related parties and relevant solutions (if any) None.

Reason for the substantial difference between transaction prices and referential market prices None.

2. Related transactions involving asset acquisition and disposal

None.

3. Significant related transactions involving joint investments in third parties


38

None.

4. Claims and liabilities between the Company and related parties

Are non-operating claims and liabilities between the Company and related parties used?

□ Yes √ No

Related party Nature of connection Classification

Reason for incurring

claims and liabilities

Are non- operating

funds used?

Beginning balance (’0000 yuan)

Amount in this period

(’0000 yuan)

Ending balance (’0000 yuan)

NFCA Mining Co., Ltd.


Claims receivable from related parties

Sales of products No 1.39 0 1.39




Sales of products No 3,048.4 -1,885.17 1,163.23




Sales of products No 876.95 -876.95 0




Sales of products No 38.50 -31.29 7.21

Xinyang Trade Co., Ltd.



Sales of products No 66.94 612.38 679.32




Sales of products No 0 15.41 15.41


Controlling shareholder


Rendering of services No 47.32 543.81 591.13

Chifeng Dajingzi Tin Co., Ltd.



Sales of products No 38.40 38.40



Liabilities payable to related parties

Purchase of products No 331.91 0.45 332.36




Receipt of services No 397.00 -397.00 0




Receipt of services No 575.48 746.48 1,321.96


The second largest shareholder of the Company


Transfer of equities No 0 770.49 770.49





China Nerin Engineering Co., Ltd. Associate Claims receivable from related parties


Northeastern University Design Institute (Co., Ltd.) Associate Claims receivable

from related parties Rendering of services No 143.72 -143.72 0

Inner Mongolia Yindu Mining Co., Ltd. Subsidiary of associate


Purchase of products No 500.00 1,192.68 1,692.68


39




Receipt of services No 557.29 -76.48 480.81

Shenyang Youyan Industrial Minerals Co., Ltd.



Purchase of products No 0.10 0 0.10




Purchase of products No 886.37 -678.32 208.04




Receipt of services No 0 219.46 219.46




Receipt of services No 0 221.28 221.28




Purchase of products No 0 1,232.29 1,232.29




Rendering of services No 42.99 -42.99 0




Rendering of services No 0 37.51 37.51




Sales of products No 0 194.47 194.47



Liabilities payable to related parties Loans No 241,431.6

8 -10,886.79 230,544.9








Receipt of services No 6.40 0 6.40





Effect of claims and liabilities between the Company and related parties on the operating results and financial positions of the Company

Beneficial to the development of related parties (or subsidiaries)

5. Other Significant Related Party Transactions

In the reporting period, NFC (Shenyang) Metallurgic Machinery Co., Ltd., a subsidiary of the Company, borrowed RMB100 million and RMB60 million as revolving funds from the parent company CNMC for a term of 1 year and 3 years respectively, both with interests accrued at the benchmark interest rate quoted by the PBC (People’s Bank of China). Such loans from related parties were approved after deliberation at the 17th Meeting of the Sixth Session of Board of Directors and the 32nd Meeting of the Sixth Session of Board of Directors respectively.

In the reporting period, the Company borrowed from CNMC RMB200 million as a replenishment of revolving fund for a term of 1 year, with interests accrued at PBC benchmark rate minus 10%.

Such loans from related parties were approved after deliberation at the 32th Meeting of the Sixth Session of Board of Directors and the 35nd Meeting of the Sixth Session of Board of Directors respectively.


40

In the reporting period, Chifeng NFC Zinc Industry Co., Ltd., a subsidiary of the Company, borrowed RMB35 million as revolving funds from the parent company CNMC for a term of one year, with interests accrued at the benchmark interest rate quoted by the PBOC.

As at the end of 2012, the Company totally borrowed RMB2.234 million from CNMC. And the borrowing expenses accrued in the reporting period amounted to RMB117,053,100.

The website to disclose the interim announcements on significant related transactions Title of announcement Disclosure date Disclosure website

Announcement No.1 on Related Party November 14, 2012 www.cninfo.com.cn Announcement No.2 on Related Party November 14, 2012 www.cninfo.com.cn

IV. Major Contracts and Performance Thereof

1. Trusteeships, contractings and leases

(1) Trusteeships

Notes of trusteeships

Chifeng NFC Zinc Industry Co., Ltd., a subsidiary of the Company, owns four phases of the zinc smelting project. After four phases of project was put into operation, NFC Zinc entered into a new entrusted operation agreement jointly with Chifeng Hongye Zinc Smelting Company (phase-I company), Chifeng Kumba Hongye Investment Zinc Co., Ltd. (phase-II company) and Chifeng NFC Kumba Hongye Zinc Co., Ltd. (phase-III company) in respect of putting all the four zinc smelting assets under unified operation of NFC Zinc, with the mechanism of unified procurement, marketing, accounting and profit distribution based on the capacity of each companies. With such an entrusted operation agreement, NFC Zinc realized unified management of all the four zinc smelters with an aggregate capacity of 210,000t/a, which is beneficial to avoid competition among different companies and create the scale operation effect.

The project from which the profits and losses account for 10% of the total profits of the Company in the reporting period

□ APPL √ N/A

(2) Contracts

Notes of contracts

N/A.


□ APPL √ N/A

(3) Leasing

Notes of leasing

N/A.


□ APPL √ N/A

2. Guarantees

Unit: ’0000 Yuan External guarantees provided by the Company (excluding guarantees for subsidiaries)


41

Guaranteed party

Disclosure date of

announcement regarding the

guarantee limit

Guarantee limit

Date of incurrence (date of execution of

agreement)

Actual amount guaranteed

Guarantee type

Term of guarantee

Fully performed

or not?

Related party

guarantee or not?

Guarantees provided by the Company to subsidiaries

Guaranteed party

Disclosure date of

announcement regarding the

guarantee limit

Guarantee limit

Date of incurrence (date of execution of

agreement)

Actual amount guaranteed

Guarantee type

Term of guarantee

Fully performed

or not?

Related party

guarantee or not?

NFC (Shenyang) Pump Industry Co., Ltd.

July 2, 2010 11,500.00 June 29, 2010 4,943.00 Joint liability guarantee 2015-12-02 No No


July 24, 2010 13,000.00 July 23, 2010 5,478.32 Joint liability guarantee 2019-08-05 No No


August 18, 2012 10,000.00 August 17,

2012 3,500.00 Joint liability guarantee 2015-10-23 No No


June 29, 2012 5,000.00 July 11, 2012 5,000.00 Joint liability guarantee 2015-7-11 No No

Total guarantee limits provided on behalf of subsidiaries approved during the reporting period (B1)

15,000.00

Total amount of guarantee provided on behalf of subsidiaries and actually incurred during the period (B2)

8,500.00

Total guarantee limits provided on behalf of subsidiaries approved at the end of the reporting period (B3)

39,500.00

Total amount of subsidiary guarantee actually incurred as at the end of the reporting period (B4)

18,921.32

Total amount of guarantee by the Company (sum of the aforesaid two categories)

Total guarantee limits approved during the reporting period (A1+B1) 15,000.00

Total amount of guarantee actually incurred during the reporting period (A2+B2)

8,500.00

Total guarantee limits approved as at the end of the reporting period (A3+B3)

39,500.00

Total amount of guarantee actually incurred as at the end of the reporting period (A4+B4)

18,921.32

Percentage of total amount of guarantee (A4+B4) in net assets of the Company 7.53%

Including: Amount of guarantee provided on behalf of shareholders, actual controllers and their related parties (C) 0

Amount of debt guarantee provided directly or indirectly to parties with a asset-liability ratio exceeding 70% (D) 18,921.32

Amount of total guarantee exceeding 50% of net assets (E) 0 Aggregate amount of the three guarantee amounts stated above (C+D+E) 18,921.32

Explanations for potential joint liability involved in outstanding guarantees None.

Explanations for provision of external guarantee in violation of stipulated procedures None.

Explanations for guarantees by complex ways.

(1) External guarantees in violation of stipulated procedures

None.


42

3. Other major contracts

Name of the party executing the

contract

Name of the counterparty

Pricing principle

Transaction price

Related party transaction or

not Performance as at end of the reporting period

China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd.

Kazakhmys (Kyrgyzstan) Gold Company

Market price USD67,604,200 No

As at the end of the reporting period, the Company has entered into project contracting agreement with Kazakhmys Gold (Kyrgyzstan) Company with an aggregate contract price of USD67,604,200. In the reporting period, civil works and steel structures installation were carried out as planned. The project reported a turnover of RMB18,639,100 in the reporting period.


Egyptian Carbon Company

Market price USD62,415,000 No

The Egyptian Carbon Project is carried out as planned, entering the phase of detailed drawings design and enquiry for equipment installation works. The project reported a turnover of RMB111,192,900 in the reporting period.


Khuzestan Aluminum

Market price

RMB 5,958,900,000 No Hasn’t come into force


South Aluminum Co.

Market price



ALPHA Company

Market price


V. Performance of Commitments

1. Commitments of the Company or shareholders with over 5% equity in and to the reporting period

Commitment Subject Description Effective date Valid term Performance

Equity division reform


For the purpose of enhancing internal cohesion and encouraging the management to play an active role in advancing the sound, steady and sustainable development of the Company, CNMC, the largest shareholder of the Company, undertakes to provide assistance, upon implementation of the equity division reform, in the Company’s preparation and implementation of the management stock incentive plan, in compliance with applicable laws and regulations of the State.

June 5, 2006

The Company is not ready yet to prepare and implement the management stock incentive plan in light of relevant provisions specified by SASAC.


43


When having some of its restricted shares circulated on the share market, CNMC undertook that: it will not transfer through the securities exchange system 5% or more of its shares within six months upon lifting of restriction on sales of shares, and if its controlling shareholders sell tradable shares after lifting of restriction on sales, and reduced 5% or more shares within six months after the first reduction transaction, CNMC shall, within two business days prior to the first reduction transaction, release through a listed company the indicative announcements regarding the transaction, specifying number of shares to be sold, date of transaction, proposed price range, reason for reduction, etc.

July 26, 2011 Long-term effective

So far, no violation of the commitments has been discovered.

Commitments in the acquisition report or the report of equity changes

Commitments made upon assets restructuring

Chifeng Hongye Investment Co., Ltd.

Hongye Investment will not reduce more than 50% of total shares subscribed from ST Shengda within 24 months after the expiration of 12 months of time limit of restriction of sales.

November 3, 2010

until November 9, 2014

On December 11, 2012, the restriction on trading of 26,814,154 restricted shares of ST Shengda held by Hongye Investment was lifted. As at December 31, 2012, Hongye Investment held 29,128,308 shares of ST Shengda, accounting for 5.77% of total equities. So the reduced shares accounted for less than 50%. So far, no violation of the commitments has been discovered.


44


Pursuant to the Profits Compensation Agreement entered into by CHIC, Beijing Shengda Zhenxing Industrial Co., Ltd., Wang Yanfeng and Wang Wei (“the Reorganizer”), on one side, and Shengda Mining Co., Ltd. (“ST Shengda”), on the other side, the Reorganizer makes a joint commitment regarding the net profits (after deducting non-recurring profits and losses) realized by the Asset Replaced within three years (i.e. 2011, 2012 and 2013) after completion of the asset subscription of ST Shengda’s equity with 62.96% equity (“the Assets Replaced”) held by the Reorganizer in YINDU Mining, detailed as follows: in 2011, the net profits of Assets Replaced shall be no less than RMB219,682,100; the aggregate net profits realized in 2011 and 2012 shall be no less than RMB439,321,000; the aggregate net profits realized in 2011, 2012 and 2013 shall be no less than RMB771,894,700. If the net profits realized by the Assets Replaced fail to meet the above minimum requirements for continuously 3 years from 2011, the Reorganizer agreed to effect a share-based compensation in full to ST Shengda for the unrealized profits. Meanwhile, ST Shengda will do an impairment assessment on the assets received at the end of 2013. If the ration of impairment amount at the end of the period of the Asset Replaced to the consideration of the Asset Replaced is found to be higher than the ratio of number of shares compensated during the compensation period to total number of shares subscribed, the Reorganizer will make a share-based compensation for that.

November 3, 2010

until December 31, 2013

As at December 31, 2012, the aggregate net profits (after deducting non-recurring profits and losses) realized by Yindu Mining in 2011 and 2012 was RMB681,759,300 which satisfied the commitment requirements. So far, no violation of the commitments has been discovered.

NFC and Hongye Investment

The Company, together with CHIC, undertook that they (1) will continue to comply with the market pricing principles of openness, fairness and justness and conduct the transactions with Yindu Mining based on the market fair values, will not engage in any activity or behavior that may impair the benefits of Yindu Mining and ST Shengda by utilizing such transactions, , and (2) will not seek any privilege over a third party in the market in routine transactions with Yindu Mining by means of its positions and influence as the second largest shareholder of ST Shengda.

November 3, 2010

Long-term effective

So far, no violation of the commitments has been discovered.

Commitments made upon IPO or re-financing


For the Issuance Plan for Shares Placement adopted at the NFC’s 14th Meeting of the Sixth Session of Board of Directors, CNMC issued the Commitment on Subscription of the Shares Offered by NFC. As at the date of issuance of the Commitment of Subscription, NFC had registered capital of RMB766,656,000 or 766,656,000 shares, with 255,620,474 shares held by CNMC, accounting for 33.34%. Pursuant to the aforesaid Issuance Plan for Shares Placement specifying that no more than 3 shares shall be placed for every 10 shares, an aggregate of 76,686,142 shares shall be placed to the Company, and CNMC undertook to subscribe all of them in cash in full and perform its contribution obligations in good faith.

November 11, 2011

Valid until closure of the placement

So far, the commitments have been fulfilled.

Other commitments made to minority shareholders


45

Are the commitments performed in due time

Yes

Detailed explanations for failure in fulfilling commitments and next plan

N/A

Are there any commitments on horizontal competition and related party transactions

No

Valid term N/A Way of resolution N/A

Performance conditions N/A

2. Explanations for reaching original profit forecasts for assets or projects and the reasons therefor, where such profit forecasts have been made and the reporting period falls within the profit forecast period.

□ APPL √ N/A

VI. Other Significant Events

The Company launched shares placement financing to repay bank loans and replenish revolving funds, which is detailed as follows: on November 11, 2011, the Issuance Plan for the Shares Placement was deliberated and adopted at the 14th Meeting of the Sixth Session of Board of Directors; on December 8, 2011, the Issuance Plan for the Shares Placement was deliberated and passed on the 2011 Fifth Extraordinary General Meeting of Shareholders; on June 15, 2012, the Company’s shares placement application was approved conditionally at the 116th Meeting of Main Board Market Issuance Examination Committee under China Securities Regulatory Commission in 2012; on February 21, 2013, the Company received the Letter of Approval on Shares Placement Application by China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd. (Z.J.X.K. [2013] No. 173) from CSRC. As of March 19, 2013, the aforesaid placement had been proceeding as planned. The shares placed were listed at SZSE on March 26, 2013. As audited and examined by CPA, 218,033,212 RMB-denominated common stocks have been issued at price of RMB8.26/share, with aggregate capital of RMB1,800,954,331.12 and net capital of 1,760,076,734.12.

VII. Significant Events of Subsidiaries

Chifeng Hongye Investment Co., Ltd., a subsidiary of the Company, acquired 53,628,000 shares of Shengda Mining Co., Ltd. on October 18, 2011. During the period from December 17, 2012 to December 25, 2012, Hongye Investment transferred 24,500,000 shares held by it in Shengda Mining by block trade, from which Hongye Investment realized an income of RMB230,768,600 (net income after deducting investment cost). As at the end of the reporting period, Hongye Investment held 29,128,000 shares of Shengda Mining, having a shareholding of 5.77%.


46

Section VI Changes in Share Capital and Shareholders I. Changes in Share Capital

Before change Increase/decrease of the change (+, -) After change

Number of shares

Percentage (%)

New issue

Bonus issue

Transfer from

capital reserve

Others Subtotal Number of shares

Percentage (%)

I. Restricted shares 63,944,331 8.34% 63,944,331 8.34% 2. State-owned corporate shares 63,905,118 8.33% 63,905,118 8.33%

5. Senior executive shares 39,213 0.01% 39,213 0.01%

II. Unrestricted shares 702,711,669 91.66% 702,711,669 91.66% 1. RMB ordinary shares 702,711,669 91.66% 702,711,669 91.66% III. Total 766,656,000 100% 766,656,000 100%

Reason for difference

Approval situation

□ APPL √ N/A

Transfer situation

Effects of changes in share capital on the basic EPS, diluted EPS, net assets per share attributable to ordinary shareholders of the Company and other financial indicators over the last year and last accounting period

□ APPL √ N/A

Other necessary information disclosures that the Company considers necessary or required by securities regulatory authorities

on November 11, 2011, the Issuance Plan for the Shares Placement was deliberated and adopted at the 14th Meeting of the Sixth Session of Board of Directors; on December 8, 2011, the Issuance Plan for the Shares Placement was deliberated and adopted at the 2011 Fifth Extraordinary General Meeting of Shareholders; on February 21, 2013, the Company received the Letter of Approval on Shares Replacement Application by China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd. (Z.J.X.K. [2013] No. 173) from CSRC As at March 19, 2013, the aforesaid placement had been proceeding as planned. The shares placed were listed at SZSE on March 26, 2013. As audited and examined by CPA, 218,033,212 RMB-denominated common stocks have been issued, and the registered capital of the Company increased to 984,689,212 shares, including 83,127,629 restricted tradable shares.

II. Issue and Listing of Securities

1. Changes in the Company’s total shares, shareholding structure, and asset-liability structure

During the reporting period, there is no change in total shares or shareholding structure.

As at the date of the report, the total shares of the Company increased by 218,033,212 to 984,689,212 as a result of the shares replacement plan mentioned above. The shares held by CNMC, the largest shareholder of NFC, increased to 332,306,616 shares, with a shareholding of 33.75%.

2. Status of existing employee stocks

Date of issue Issuing price (Yuan) Quantity of employee stocks issued (shares) Status explanation for existing employee stocks The company now has no employee stocks


47

III. Shareholders and Actual Controllers

1. Total number of shareholders and their shareholding conditions

Unit: share Total number of shareholders as at the end of the reporting period 132,913 Number of shareholders in the end of the fifth trading

day before disclosure of the Annual Report 139550

Shareholders holding 5% or more of the Company’s equity

Name of shareholders Nature of shareholders

Shareholding percentage

(%)

Shares held at the end of the reporting

period

Decrease/increase during

the reporting

period

Restricted shares held

Unrestricted shares held

Shares pledged or frozen

Status Number of shares


State-owned corporate 33.34% 255,620,474 None. 63,905,118 191,715,356


China non-state-owned corporate

7.77% 59,595,525 None. 0 59,595,525

China Life Insurance Company Limited – Traditional – General Insurance Products - 005L- CT001 Shen


1.01% 7,741,728 0 7,741,728

Bank of China – E Fund Shenzhen Stock Exchange 100 Exchange-Traded Fund


0.99% 7,584,129 0 7,584,129

China Life Insurance Company Limited – Dividend – Individual Dividend - 005L - FH002Shen


0.95% 7,288,945 0 7,288,945

Industrial and Commercial Bank of China – Rongtong Shenzhen Stock Exchange 100 Index Securities Investment Fund


0.70% 5,360,206 0 5,360,206

China Minsheng Bank – Yinhua Shenzhen Stock Exchange 100 Index Classified Securities Investment Fund


0.66% 5,090,133 0 5,090,133

Shenyin & Wanguo Securities – Customer Credit Guarantee Securities Account


0.56% 4,301,197 0 4,301,197

Industrial and Commercial Bank of China – SWS MU Shenzhen Stock Exchange Classified Securities Investment Fund


0.51% 3,929,024 0 3,929,024

Bank of China – Jiashi Shanghai Shenzhen Stock Exchange 300 Exchange-Traded Fund


0.48% 3,645,632 0 3,645,632


48

Placement of new shares to any strategic investor or ordinary legal persons, turning them into one of top 10 shareholders (if any)

None.

Explanation for related party relationship or acting in concert among the aforementioned shareholders

The first and the second majority shareholders have no related party relationship with other top ten shareholders. It is unknown whether there is any related party relationship among other shareholders of tradable shares and whether there are persons acting in concert as provided for in the Measures for the Administration of Acquisitions by Listed Companies.

Top 10 shareholders of unrestricted shares

Name of shareholders Unrestricted shares held at the year-end (Note 4) Share type

Share type Number of shares

China Nonferrous Metal Mining (Group) Co., Ltd. 191,715,356 RMB ordinary

shares 191,715,35

6

Wanxiang Resources Co., Ltd. 59,595,525 RMB ordinary shares 59,595,525

China Life Insurance Company Limited – Traditional – General Insurance Products - 005L- CT001 Shen

7,741,728 RMB ordinary shares 7,741,728

Bank of China – E Fund Shenzhen Stock Exchange 100 Exchange-Traded Fund 7,584,129 RMB ordinary

shares 7,584,129

China Life Insurance Company Limited – Dividend – Individual Dividend - 005L - FH002Shen


Industrial and Commercial Bank of China – Rongtong Shenzhen Stock Exchange 100 Index Securities Investment Fund


China Minsheng Bank – Yinhua Shenzhen Stock Exchange 100 Index Classified Securities Investment Fund


Shenyin & Wanguo Securities – Customer Credit Guarantee Securities Account 4,301,197 RMB ordinary

shares 4,301,197

Industrial and Commercial Bank of China – SWS MU Shenzhen Stock Exchange Classified Securities Investment Fund


Bank of China – Jiashi Shanghai Shenzhen Stock Exchange 300 Exchange-Traded Fund 3,645,632 RMB ordinary

shares 3,645,632

Explanations for related party relationship or persons acting in concert among the top 10 shareholders of unrestricted tradable shares and between the top 10 shareholders of unrestricted tradable shares and the top 10 shareholders

The first and the second majority shareholders have no related party relationship with other top ten shareholders of tradable shares. It is unknown whether there is any related party relationship among other shareholders of tradable shares and whether there are persons acting in concert as provided for in the Measures for the Administration of Acquisitions by Listed Companies.

Explanation for shareholders participating in the margin trading business (if any) None.

2. Controlling shareholder of the Company

Corporate

Name of controlling shareholder

Legal representative

/ person in charge

Date of incorporation

Organization Code Registered capital Main business


49

China Nonferrous Metal Mining (Group) Co., Ltd. Luo Tao January 30,

1997 10002491-5 RMB 5,020,962,872.32

Investment and operation management of metal mines at home and abroad; EPC contracting of projects in the field of nonferrous metal industry and other types of industries, energy, transportation, public utility, civil engineering, municipal engineering and mechanical & electronic equipment installation; contracting of highway, railway, bridge, hydropower works; real estate development and operation; R&D and sales of power supply and distribution equipment and automation equipment; self-operation or agency import & export of products and technologies except for those subject to unified operation by the government or limitation on operation; processing with supplied materials/samples, assembling with supplied components, compensation trade, and processing with imported materials; counter trade and carrying trade; undertaking of China-based international bidding for overseas projects; dispatching of labor service workers (exclusive of seamen); technical consulting and services related with the aforesaid businesses; automobiles warehousing and exhibition; sales of automobiles (sedans are distributed directly to terminal users).

Operating results, financial position, cash flows and future strategy

Future development strategy: strive to become a world-class mining group company with significant presence in the global market featured by outstanding main businesses and advanced management technology by implementing the “going global” strategy, expanding overseas development businesses, solidifying project contracting business, initiatively developing trade business and services, and advocating innovation in technology and management.

Holding of any controlling or non-controlling stakes in other domestic or overseas listed companies by the controlling shareholder in the reporting period

CNMC holds 60% equity of China Ningxia Orient Group Co., Ltd., while the latter holds 45.80% of shares of Ningxia Orient Tantalum Industry Co., Ltd. (stock code: 000962). CNMC holds 100% equity of CNMC Mining Development Co., Ltd., while the latter holds 74.52% of shares of China Nonferrous Mining Corporation Limited (stock code: 01258.HK). CNMC holds 49% of shares of Daye Non-Ferrous Metals Group Holdings Limited, while the latter holds 72.25% of shares of China Daye Non-Ferrous Metals Mining Limited (stock code: 0661.HK). NFC holds 65.866% shares of China Nonferrous Metals Int'l Mining Co., Ltd., while the latter holds 38.5% of shares of Kryso Resources PLC., 8.97% of shares of Chaarat Gold Holing Limited, and 4.11% of shares of ORD River Resources Limited.

Changes in the controlling shareholders of the Company in the reporting period

□ APPL √ N/A

3. The actual controller of the Company

Corporate

Name of actual controller


/ person in charge

Date of incorporation Organization Code Registered capital Main business


50

State-owned Assets Supervision and Administration Commission of the State Council

Operating results, financial position, cash flows and future development strategy

N/A

Holding of other domestic or overseas listed companies by the actual controllers in the reporting period

N/A

Changes in the actual controllers of the Company in the reporting period

□ APPL √ N/A

The enterprise property rights and controlling relationship between the Company and its actual controller

Note: As at the date of the Report, CNMC, the controlling shareholder of the Company, increased its shareholding ratio to 33.75% as a result of implementation of the shares replacement plan.

The actual controller controls the Company via trusteeship or other ways of asset management

□ APPL √ N/A


51

Section VII Directors, Supervisors, Senior Executives and Employees I. Changes in Shareholding of Directors, Supervisors and Senior Executives

Name Position Status of office Gender Age Beginning date of office Ending date of office Beginning shares

held (shares)

Increase of shares held in this period

(shares)

Decrease of shares held in this

period (shares)

Ending shares held (shares)

Luo Tao Chairman Incumbent Male 59 April 8, 2011 April 7, 2014 Zhang Keli Deputy chairman Incumbent Male 55 April 8, 2011 April 7, 2014

Wu Xiang Director Incumbent Male 47 April 8, 2011 April 7, 2014 Wang Hongqian Director and President Incumbent Male 54 April 8, 2011 April 7, 2014 22,276 0 0 22,276

Han Youhong Director Incumbent Male 48 April 8, 2011 April 7, 2014

Nie Junxiang Director Incumbent Male 47 April 8, 2011 April 7, 2014

Wang Gongmin Independent director Incumbent Male 71 April 8, 2011 April 7, 2014

Feng Genfu Independent director Incumbent Male 55 April 8, 2011 April 7, 2014

Yang Youhong Independent director Incumbent Male 49 April 8, 2011 April 7, 2014

Liu Wenjun

Chairman of Board of Supervisors Incumbent Male 49 April 8, 2011 April 7, 2014

Xie Zhehua Supervisor Incumbent Male 42 April 8, 2011 April 7, 2014

Zhu Xiaoming Supervisor Incumbent Male 48 April 8, 2011 April 7, 2014

Xie Yaheng

Secretary of Party Committee and Vice President

Incumbent Male 55 April 15, 2011 April 14, 2014

Qin Junman Vice President Incumbent Male 49 April 15, 2011 April 14, 2014 12,375 0 0 12,375

Du Bin Vice President and Secretary to Board of Directors Incumbent Male 56 April 15, 2011 April 14, 2014 17,634 0 0 17,634


52

Wang Xinyu Vice President Incumbent Male 42 April 15, 2011 April 14, 2014

Ma Jinping Vice President Incumbent Male 49 April 15, 2011 April 14, 2014

Gong Xinyong Chief Financial Officer Incumbent Male 50 April 15, 2011 April 14, 2014

Gao Dehua Vice President Incumbent Male 53 April 15, 2011 April 14, 2014

Zhang Shili Vice President Incumbent Male 50 April 15, 2011 April 14, 2014

Total -- -- -- -- -- -- 52,285 0 0 52,285

Note: The ages of directors, supervisors and senior executives in the above table are recorded as at the date of the Report (April 16, 2013).


53

II. Details of Employment

Major work experience of incumbent directors, supervisors and senior executives in the past five years

(1) Director

Luo Tao, Senior Economist, expert awarded the State Council Special Allowance, is currently the President and Deputy Secretary to Party Leadership Group of China Nonferrous Metal Mining (Group) Co., Ltd., and the Chairman of the Board of Directors of China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd. Mr. Luo has successively held the positions of Cadre, Deputy Division Chief, Division Chief, Assistant to President, Deputy Secretary of Party Leadership Group and Vice President in General Research Institute for Nonferrous Metals; Deputy Chief of Human Resources Department in China National Nonferrous Metals Industry Corporation; Head of Human Resources Department in the State Administration of Non-ferrous Metals Industry; Preparatory Group Member, Member of Party Leadership Group and Leader of Discipline Inspection Team under the Party Leadership Group in Aluminum Corporation of China.

Zhang Keli, Senior Engineer of Professor Level, expert awarded the State Council Special Allowance, is currently Secretary of Party Committee and Vice President of China Nonferrous Metal Mining (Group) Co., Ltd., and Deputy Chairman of China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd. Mr. Zhang ever acted as Vice-Manager, Manager of Hujiayu Copper Mine, and Deputy President of Zhongtiaoshan Non-Ferrous Metals Group Co., Ltd.; Deputy General Manager of China Copper-Lead-Zinc Corporation; Assistant Counsel and Deputy Chief of Department of Enterprise Reform of State Trade and Economic Commission; and Deputy Director General of Enterprise Reform Administration under State-owned Assets Supervision and Administration Commission of the State Council.

Wu Xiang, Senior Accountant, is currently the Chief Accountant of China Nonferrous Metal Mining (Group) Co., Ltd. and a BOD (Board of Directors) member of China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd. Mr. Wu ever served as Cadre in China Non-Ferrous Metal Foreign Engineering Corp.; Assistant Manger of Financial Department in China Nonferrous Metal Mining (Group) Co., Ltd., Assistant Manger, Manger of Financial Department and Chief Financial Officer in China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd.

Wang Hongqian, Senior Engineer of Professor Level, is currently President, Deputy Secretary to Party Leadership Group and a BOD member of China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd. Prior to his current position, Mr. Wang ever worked as Cadre and Secretary of Youth League Committee with Beijing Coal Design & Research Institute (Group). After returning from US where he studied during November 1986 and March 1987, Mr. Wang served successively as Team Leader, Deputy Division Chief and Division Chief of the General Transportation Division and the Vice-President of Beijing Coal Design & Research Institute (Group), the Vice-president of Sinocoal International Engineering Design & Research Institute, the Chief Engineer of China Nonferrous Metal Mining (Group) Co., Ltd., and the General Manager of NFC Real Estate Development Co.

Han Youhong, Senior Economist, Excellent Entrepreneur of Zhejiang Province, is currently the President of Wanxiang Resources Co., Ltd. and a BOD member of China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd. Mr. Han ever took the positions General Manager of Hainan Wanwu Industrial Co., Ltd., GM of Zhejiang Wanwu Industrial Co., Ltd., GM of Wanxiang Group Zhejiang Trading Co., Ltd., and GM of Shanghai Wanxiang Investment Co., Ltd.

Nie Junxiang, served successively as Section Chief of China National Nonferrous Metals Industry Eastern Supply Marketing Corp., Assistant President of Shanghai Oriental Futures Brokerage Co., Ltd. and Vice-president of China National Nonferrous Metals Industry Eastern Supply Marketing Corp.

Assistant to President of Wanxiang Resources Co., Ltd. and a BOD member of China Nonferrous Metal Industry’s Foreign Engineering

Wang Gongmin, Senior Engineer of Professor Level. Mr. Wang is now serving as Consultant of China Nonferrous Metals Industry Association Recycling Metal Branch, Chairman of China Mining Association Presidium, Independent Director of Shanghai Lingyun Industries Development Co., Ltd., Independent Director of Henan Shenhuo Coal & Power Co., Ltd. and Independent Director of China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd. He has successively held the positions of General Manager of CNMC Shenyang Branch, the Project Planning and Development Department Head of China National Nonferrous Metals


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Industry Corporation, the Secretary of Party Leadership Group of China Copper-Lead-Zinc Corporation, the Vice-president of China Nonferrous Metals Industry Association and a member of China Promotion Commission for Brand-name Strategy.

Feng Genfu, Ph.D. Economics, Professor, National Young & Middle-Aged Expert with Outstanding Contribution and expert awarded the State Council Special Allowance, is currently the Dean of School of Finance and Economics of Xi’an Jiaotong University, the Independent Director of Shaanxi Aerospace Power Co., Ltd., Xi’an Aircraft International Corporation, Shaanxi Broadcast & TV Network Intermediary (Group) Co., Ltd., Shaanxi Fenghuo Electronics Co., Ltd. and China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd. He is concurrently acting as Executive Vice-president of China Industry Economic Research Institute, Managing Director of Chinese Institute of Business Administration, a member of Advisory Committee for Policy Decision of Shaanxi, Managing Director of Shaanxi Provincial Federation of Social Sciences, and Vice-president of Shaanxi Economics Association.

Yang Youhong, Professor, Post-doctorate from Chinese Academy of Social Sciences, Chinese Certified Public Accountant, and a member of Accounting Society of China, is currently the President of School of Business of Beijing Technology and Business University, the Independent Director of Hebei Jinniu Energy Resources Co., Ltd., of China International Travel Service Corporation Limited, of Beijing Haohua Energy Resource Co., Ltd. and of China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd. Mr. Yang ever worked as teacher in Department of Accounting of Beijing Technology and Business University, Head of the Teaching and Research Section under the School of Accounting of Beijing Technology and Business University, Deputy President of Beijing Technology and Business University and the Party Committee Secretary of School of Accounting of Beijing Technology and Business University.

(2) Supervisor

Liu Wenjun, Senior Accountant, is currently the Deputy Chief Account of China Nonferrous Metal Mining (Group) Co., Ltd., a BOD member of Xincheng Construction Supervision & Consulting Co., Ltd. and the Chairman of Board of Supervisors of China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd. Mr. Liu has successively held the positions Chief Account and then Supervisor of Financial Department, and Deputy Chief of Enterprise Division under Auditing Department of China National Nonferrous Metals Industry Corporation, Financial Department Assistant Manager, Auditing Department Manager and Financial Department Manager of China Nonferrous Metal Mining (Group) Co., Ltd., a BOD member of China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd., a BOD member of NFC Africa Mining PLC., a BOD member of China Nonferrous Metals Int'l Mining Co., Ltd. and Assistant General Manager of China Nonferrous Metal Mining (Group) Co., Ltd.

Xie Zhehua, currently the Vice-president of Tonglian Capital Management Co., Ltd. and a BOS member of China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd., ever took the positions of Investment Department Manager of Wanxiang Group Settlement Center and Deputy Secretary to Party Leadership Group of same ranking with Bond Department Manager of Shenzhen Wanxiang Investment Co., Ltd.

Zhu Xiaoming, Senior Engineer, is currently the Chief Economist of Enterprise Development Department and Employee Supervisor of China Nonferrous Metal Industry’s Foreign Engineering and Construction Co. Ltd. Mr. Zhu ever worked with Beijing Central Engineering and Research Incorporation of Iron and Steel Industry and China Great Wall Asset Management Corporation and acted as Vice-president and Chief Appraiser of Beijing Tiandixin Assets Appraisal Co., Ltd.

(3) Senior Executives

Xie Yaheng, Senior Engineer of Professor Level, is currently the Secretary of Party Committee and Vice-president of China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd. Mr. Xie ever served as Power Engineer and Chief Engineer of Beijing Design Institute of Mechanical Industry, Vice-manager of Overseas Project Section of China Non-Ferrous Metal Foreign Engineering Corp., Assistant GM and Overseas Department Manager of China Nonferrous Metal Mining (Group) Co. Ltd., and Assistant GM and Project Management Team Lead of Iranian Zinc Plant of China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd.

Qin Junman, ever acting as Cadre and Business Manager of Iran Representative Office of China Non-Ferrous Metal Foreign Engineering Corp., Overseas Project Department Vice-manager of China Nonferrous Metal Mining (Group) Co., Ltd., Chief Interpreter, Overseas Project Department Vice-manager, Assistant GM and Iran Office Representative of China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd.


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Currently Qin is Vice-president of China Nonferrous Metal Industry’s Foreign Engineering and Construction Co. Ltd.

Du Bin, Senior Accountant, currently Vice-president and Secretary to BOD of China Nonferrous Metal Industry’s Foreign Engineering and Construction Co. Ltd. Mr. Du has successively held the positions of Cadre of Finance Division under Capital Construction Department of former Ministry of Metallurgical Industry, Financial Department Manager of Thailand Representative Office, Deputy Chief of Finance Section and Philippine Representative Office Manager of China Non-Ferrous Metal Foreign Engineering Corp., Preparatory Office Chief of China Nonferrous Metal Mining (Group) Co., Ltd., Vice-GM and Secretary to BOD of NFC Real Estate Development Co.

Wang Xinyu, Senior Engineer, ever serving as Cadre of China Non-Ferrous Metal Foreign Engineering Corp., Project Management Department Vice-manager of Iran Zinc Plant of China Nonferrous Metal Mining (Group) Co., Ltd., Project Management Department Manager of Iran Zinc Plant, Iran Yazd Zinc Smelter Project Manager, #1 Overseas Project Department Manager, Iran Zinc Project Manager, Iran Arak Aluminum Smelter Project Manager and Assistant GM of China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd., currently Vice-president of China Nonferrous Metal Industry’s Foreign Engineering and Construction Co. Ltd.

Ma Jinping, Senior Engineer, ever working as Deputy Director of 6th Section under Alloy Steel Department of Beijing Central Engineering and Research Incorporation of Iron and Steel Industry. He joined in the Overseas Business Department I of China Nonferrous Metal Industry’s Foreign Engineering and Construction Co. Ltd. in 1997. Then he successively took the positions of Vice-president and Interim Secretary of Party Committee NFC Africa Mining PLC. and China Nonferrous Metals Int'l Mining Co., Ltd.

Currently, Ma is Vice-president of China Nonferrous Metal Industry’s Foreign Engineering and Construction Co. Ltd.

Gong Xinyong, Senior Accountant, having taken successively the posts of Financial Department Assistant Manager, Manager, and Chief Representative of Thailand Representative Office of China Nonferrous Metal Industry’s Foreign Engineering and Construction Co. Ltd. and Chief Financial Officer of Zhuhai Xinguang Group Shareholding Co., Ltd.

Currently, Gong is Chief Financial Officer of China Nonferrous Metal Industry’s Foreign Engineering and Construction Co. Ltd.

Gao Dehua, Senior Engineer, Constructor. Prior to his current role, Mr. Gao ever served as Cadre, Thailand Branch GM, Overseas Business Department III Assistant Manager and Finland Office Chief Representative of China Non-Ferrous Metal Foreign Engineering Corp., Singapore Office Chief Representative and Guangcai Center Project Manager of China Nonferrous Metal Industry’s Foreign Engineering and Construction Co. Ltd., Overseas Project Manager of China Everbright Limited Company for International Economic & Technical Cooperation, the Head of Foreign Economic Cooperation Section under International Cooperation Department of China Rare Earth Metals (Group) Co., Ltd., and President of Beijing NFC Ansha Real Estate Management Co., Ltd.

Currently Gao is Vice-president of China Nonferrous Metal Industry’s Foreign Engineering and Construction Co. Ltd.

Zhang Shili, Senior Engineer, currently the Vice-president of China Nonferrous Metal Industry’s Foreign Engineering and Construction Co. Ltd. Mr. Zhang ever acted as Cadre, Geological Survey Section Deputy Chief, Iran Office Project Manager of Beijing Coal Design & Research Institute, International Project Department Manager of Sinocoal International Engineering Design & Research Institute, Project Manager of China Nonferrous Metals Int’l Mining Co., Ltd., and General Manager of Tsairt Mineral Co., Ltd.

Posts held in shareholding company

√ APPL □ N/A

Name Name of shareholders Post held Beginning of office End of office

Is remuneration received from shareholding company

Luo Tao China Nonferrous Metal Mining (Group) Co., Ltd.

General manager, deputy secretary June 23, 2005 Yes


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Zhang Keli China Nonferrous Metal Mining (Group) Co., Ltd.

Secretary of party committee, deputy general manager

November 1, 2007 Yes

Wu Xiang China Nonferrous Metal Mining (Group) Co., Ltd. Chief Accountant November 1, 2007 Yes

Liu Wenjun China Nonferrous Metal Mining (Group) Co., Ltd. Vice Chief Accountant November 28, 2007 Yes

Han Youhong Wanxiang Resources Co., Ltd. general manager May 24, 2004 Yes Nie Junxiang Wanxiang Resources Co., Ltd. Assistant to President May 04, 2010 Yes

Xie Zhehua Tonglian Capital Management Co., Ltd. a Vice-president July 1, 2004 Yes

Posts held in shareholding company

None.

Posts held in other entities

√ APPL □ N/A

Name Name of other entities Post held Beginning of office End of office

Is remuneration received from other

company

Wang Gongmin China Nonferrous Metals Industry Association Recycling Metal Branch Consultant January 04, 2011 Yes

Feng Genfu School of Finance and Economics of Xi’an Jiaotong University, Dean May 08, 2010 Yes

Yang Youhong Science and Technology Division of School of Business of Beijing Technology and Business University

Division Chief April 23, 2012 Yes

Posts held in other company None.

III. Directors, Supervisors, Senior Executives and Remuneration

Decision-making process, basis for determination and actual payment of remuneration for directors, supervisors and senior executives of the Company

The remuneration for directors, supervisors and senior executives shall be determined upon approval by the Remuneration and Evaluation Committee of the Board of Directors based on the Work Rules for Remuneration and Evaluation Committee. In this year, Luo Tao, Zhang Keli, Wu Xiang, Han Youhong, Nie Junxiang, Liu Wenjun and Xie Zhehua received remuneration from the shareholding company instead of NFC. The allowance for the three independent directors was RMB8,000 per month for each.

The remuneration for the senior executives receiving remuneration from the Company consists of basis salary and bonus which were paid in advance on the basis of the corresponding grades as specified in the Company’s remuneration management system. The aggregate annual remunerations are settled in the following year upon recognition of operating results as at the year-end in accordance with the performance evaluation procedures laid down by the Board of Directors.

Remuneration (before tax) of directors, supervisors and senior executives of the Company in the reporting period

Unit: Yuan

Name Position Gender Age Status of office

Total remuneration received from the Company

Total remuneration received from

the shareholding

company

Actual remuneration at the end of the

reporting period


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Luo Tao Chairman Male 59 Incumbent 0.00 742,960.00 742,960.00

Zhang Keli Deputy chairman Male 55 Incumbent 0.00 742,960.00 742,960.00

Wu Xiang Director Male 47 Incumbent 0.00 645,660.00 645,660.00 Wang Hongqian

Director and President Male 54 Incumbent 794,070.00 0.00 794,070.00

Han Youhong Director Male 48 Incumbent 0.00 600,000.00 600,000.00 Nie Junxiang Director Male 47 Incumbent 0.00 490,000.00 490,000.00

Wang Gongmin Independent director Male 71 Incumbent 96,000.00 0.00 96,000.00

Feng Genfu Independent director Male 55 Incumbent 96,000.00 0.00 96,000.00

Yang Youhong Independent director Male 49 Incumbent 96,000.00 0.00 96,000.00

Liu Wenjun Chairman of Board of Supervisors

Male 49 Incumbent 0.00 639,630.00 639,630.00

Xie Zhehua Supervisor Male 42 Incumbent 0.00 300,000.00 300,000.00 Zhu Xiaoming Supervisor Male 48 Incumbent 310,820.00 0.00 310,820.00

Xie Yaheng

Secretary of Party Committee and Vice President

Male 55 Incumbent 794,070.00 0.00 794,070.00

Qin Junman Vice President Male 49 Incumbent 635,260.00 0.00 635,260.00

Du Bin

Vice President and Secretary to Board of Directors

Male 56 Incumbent 635,260.00 0.00 635,260.00

Wang Xinyu Vice President Male 42 Incumbent 635,260.00 0.00 635,260.00 Ma Jinping Vice President Male 49 Incumbent 635,260.00 0.00 635,260.00

Gong Xinyong Chief Financial Officer Male 50 Incumbent 635,260.00 0.00 635,260.00

Gao Dehua Vice President Male 53 Incumbent 623,740.00 0.00 623,740.00 Zhang Shili Vice President Male 50 Incumbent 624,480.00 0.00 624,480.00

Total -- -- -- -- 6,611,480.00 4,161,210.00 10,772,690.00

Note: Subject to the applicable regulations on performance evaluation and remuneration management for top management of central enterprise as promulgated by the State-owned Assets Supervision and Administration Commission of the State Council, the remuneration for top management of central enterprises shall be paid upon completion of performance evaluation. As at the date of the Report, the approval of remuneration of Luo Tao, Zhang Keli and Wu Xiang for 2012 is pending results of their annual performance evaluation which is not yet completed.

Share incentives granted to directors, supervisors and senior executives of the Company in the reporting period

□ APPL √ N/A

IV. Personnel Changes (Resignation and Removal) in Directors, Supervisors and Senior Executives in the Reporting Period

There was no change in the directors, supervisors or senior executives of the Company in the reporting period.

V. Personnel Changes in Core Technology Team or Key Technical Employees (excluding directors, supervisors and senior executives)

There was no significant change in the team of core technology in the reporting period.

VI. Employees of the Company


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As at the end of the reporting period, the Company and its controlling shareholder employed 9,005 members in total, who are classified by specialization and academic qualification as follows:

1. Classification by specialization:

Specialization Headcount Percentage in total headcount

Executives 771 8.56%

Finance 150 1.67%

Technology 660 7.33%

Administration 433 4.81%

Production 5,941 65.97%

Marketing and sales 168 1.87%

Others 882 9.79%

Total 9,005 100.00%

2. Academic qualification:

Academic qualifications Headcount Percentage in total headcount

Master’s degree 137 1.52%

Bachelor’s degree 1,050 11.66%

Junior college degree 1,353 15.02%

Vocational school education 830 9.22%

Others 5,635 62.58%

Total 9,005 100.00%


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3. As at the end of the reporting period, the retired employees entitled to retirement benefits totaled 3,394.


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Section VIII Corporate Governance I. Actuality of Corporate Governance

The Company has continuously, by means of a series of self-exams on corporate governance, improve its corporate governance structure, establish a modern corporate management system and regulate its operation in strict compliance with the Company Law, the Securities Law, as well as relevant rules and regulations issued by China Securities Regulatory Commission The Company has prepared the Articles of Association, Proceedings of Shareholder’s General Meeting of Shareholders, Proceedings at Board of Directors Meeting, General Manager’s Work Instructions, Accounting Management Rules, Proceedings of Board of Supervisors, Financing Management Regulations, Management Rules on Investor Relationship, Internal Reporting System of Significant Information, Management Rules on Corporate Information Disclosure, Management Rules on Shareholding and Changes of Directors, Supervisors and Senior Executives, Accountability System for Material Errors in Information Disclosed in Annual Reports, Management Rules on External Information Users, Management Rules on Insiders, Working Instructions on Secretary to Board of Directors, Management Rules on Third-Party Investments, Management Rules on Regulating Fund Transactions with Related Parties, Budget Control Rules and other rules and regulations regarding operation of the Company in compliance with regulations promulgated by CSRC and SZSE as well as other applicable laws and regulations of the State. Those rules and regulations are all in line with the Code of Corporate Governance for Listed Companies.

In the reporting period, the Company revised some provisions regarding profit distribution policy and decision-making procedures provided for in the Articles of Associations in accordance with Circular on Further Implementation of Proceedings Pertaining to Cash Dividend Distributions by Listed Companies (Z.J.F. [2012] No.37) issued by CSRC and Circular on Further Improvement of Proceedings Pertaining to Cash Dividend Distributions by Listed Companies (J.Z.G.S.F. [2012] No.101) issued by CSRC Beijing Bureau, taking into account its actual operating conditions. These two revisions were made for the purpose of safeguarding the interests of investors and securing investors’ benefits from operating results.

In the reporting period, the Company updated its Registration System of Insiders in compliance with the requirements of Regulations on Establishment of System of Registration and Administration of Insiders by Listed Companies (CSRC Announcement [2011] No.30) issued by CSRC and Circular on Establishment and Improvement of System of Registration and Administration of Insiders (J.Z.G.S.F. [2011] No.209) issued by CSRC Beijing Bureau to further regulate the administration of inside information.

In the reporting period, the Company formulated the Management Rules of Receivables and the Management Rules on Assets Impairment in line with the requirements of the Company Law and the Articles of Association in light of the actuality of business development over the years. Furthermore, the Company amended the Corporate Financial System in effective to mitigate the risks of assets impairment and regulate its operation and management so as to adapt to the actual conditions and demands of the Company.

The activities mentioned above are constructive to enhance the management’s corporate governance awareness and improve the Company’s governance system. In the reporting period, the General Meeting of Shareholders, Board of Directors and Board of Supervisors played its proper and due role in safeguarding the interests of the Company and its shareholders in an efficient and standardized manner. No substantial difference from the normative documents issued by CSRS regarding corporate governance of listed companies was found in the actual conditions of corporate governance of the Company.

The Company will continue its efforts in solidifying the achievements made in corporate governance over the years, further regulating operating activities, bettering the corporate governance structure, drawing on past experience and optimizing the internal control system, in compliance with the requirements of Circular on Implementing Special Campaign on Furthering Corporate Governance of Listed Companies and the Code of Corporate Governance for Listed Companies as well as other documents, so as to ensure sustained, sound and steady development of the Company.

Is there any difference between the corporate governance and the Company Law and relevant rules of CSRC?

□ Yes √ No

No difference exists between the corporate governance and the Company Law and relevant rules of CSRC.


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Implementation of specific corporate governance activities and the establishment and implementation of the system of registration of insiders

The Company formulated the Management Rules on Inisders pursuant to the Company Law, the Securities Law, the Administrative Measures on Information Disclosure by Listed Companies and other applicable rules and regulations. In the reporting period, the Company executed the Management Rules on Insiders in a stringent manner. Upon self-exams, no instance of insider trading in the Company’s shares with the benefit of inside information during the year has been identified. Neither the Company nor its relevant personnel have been subject to regulatory measures or administrative punishment by regulatory authorities as a result of implementation of the registration system of insiders or alleged involvement in inside trading. In the reporting period, to further regulate the Company’s management of inside information, enhance confidentiality of inside information and safeguard fairness in information disclosure, the Company amended the Management Rules on Insiders in accordance with the regulations of Company Law, the Securities Law, the Administrative Measures on Information Disclosure by Listed Companies, the Rules of Shenzhen Stock Exchange for Listing of Stocks and the provisions of Articles of Association, which was deliberated and adopted at the 28th Meeting of the Sixth Session of Board of Directors. (For details, please refer to the announcements published by the Company on China Securities News, Securities Times and www.cninfo.com.cn. on August 18, 2012.)

II. Annual General Meeting of Shareholders and Extraordinary General Meeting of Shareholders Convened in the Reporting Period

1. Annual General Meetings of Shareholders

Session Date of meeting Proposals Resolution Disclosure date Disclosure index

2011 Annual General Meeting of Shareholders

May 09, 2012

1. 2011 Board of Directors' Report; 2. 2011 Board of Supervisors’ Report; 3. 2011 Final Account Report; 4. 2011 Profit Distribution Proposal and Plan for Capitalization of Capital Reserves; 5. 2011 Annual Report (Report and Abstract); 6. Proposal on Renewal of Service of Jonten Certified Public Accountants as the Auditing Firm for 2012; 7. Proposal on Independent Directors’ Work Report for 2010.

Adopted May 10, 2012

Announcement on Resolutions at 2011 Annual

General Meeting of Shareholders published on

China Securities News, Securities Times and www.cninfo.com.cn.


2. Extraordinary General Meetings of Shareholders

Session Date of meeting Proposals Resolution Disclosure date Disclosure index


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2012 First Extraordinary General Meeting of Shareholders

April 20, 2012

1. Proposal on Related Party Transactions Associated with Daily Operation between CNFC Equipment Co., Ltd. and CNMC International Trade Co., Ltd. for 2012; 2. Proposal on Related Party Transactions Associated with Daily Operation between Chifeng NFC Zinc Industry Co., Ltd. and China Nonferrous Hongtoushan Fushun Mining Group Co., Ltd. for 2012; 3. Proposal on Related Party Transactions Associated with Daily Operation between Tsairt Mineral Co., Ltd. and Xinyang Trade Co., Ltd. for 2012; 4. Proposal on Related Party Transactions Associated with Daily Operation between NFC and Nine Entities Including China Nonferrous Metal Mining (Group) Co., Ltd. for 2012; 5. Proposal on Related Party Transactions Associated with Daily Operation between Chifeng NFC Zinc Industry Co., Ltd. and Wanxiang Resources Co., Ltd. for 2012

Adopted April 21, 2012

Announcement on Resolutions at 2012 First Extraordinary General Meeting of Shareholders published on China Securities News, Securities Times and www.cninfo.com.cn. Announcement No.: 2012-012

2012 Second Extraordinary General Meeting of Shareholders

July 16, 2012

1. Proposal on Amendment to Articles of Association; 2. Proposal on Employment of Internal Control Auditing Firm for 2012; 3. Proposal on NFC Providing Guarantee to NFC (Shenyang) Pump Industry Co., Ltd. for Application with Guangdong Development Bank for Loans of RMB50 Million Used as Revolving Fund; 4. Proposal on NFC Providing Guarantee to NFC (Shenyang) Pump Industry Co., Ltd. for Application with Shanghai Pudong Development Bank for Loans of RMB60 Million Used for Fixed Assets Project.

Adopted July 17, 2012

Announcement on Resolutions at 2012 Second Extraordinary General Meeting of Shareholders published on China Securities News, Securities Times and www.cninfo.com.cn. Announcement No.: 2012-020

2012 Third Extraordinary General Meeting of Shareholders

September 4, 2012

1. Proposal on Amendments to Articles of Association; 2. Proposal on NFC Providing Guarantee to NFC (Shenyang) Pump Industry Co., Ltd. for Application with China Citic Bank Shenyang Branch for 1-Year General Credit Limit of RMB100 Million.

Adopted September 5, 2012

Announcement on Resolutions at 2012 Third Extraordinary General Meeting of Shareholders published on China Securities News, Securities Times and www.cninfo.com.cn. Announcement No.: 2012-030

2012 Fourth Extraordinary General Meeting of Shareholders

December 6, 2012

1. Proposal on Extension of Valid Term of NFC’s Resolution on Issuance Plan for Share Placement; 2. Proposal on Request with General Meeting of Shareholders for Renewal of Authorization to Directors for Dealing With the Share Placement; 3. Proposal on Unloading Shares Held in Shengda Mining Co., Ltd.

Adopted December 7, 2012

Announcement on Resolutions at 2012 Fourth Extraordinary General Meeting of Shareholders published on China Securities News, Securities Times and www.cninfo.com.cn. Announcement No.: 2012-046


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III. Independent Directors’ Duty Fulfillment in the Reporting Period

1. Attendance of Board of Directors’ Meetings and General Meetings of Shareholders

Attendance of Board of Directors’ Meetings

Independent director name

Number of BOD meetings

required to attend

Attendance in person

Attendance by correspondence

Attendance by proxy Absence

Two successive absences (Yes/No)

Wang Gongmin 20 1 19 0 0 No Feng Genfu 20 1 19 0 0 No Yang Youhong 20 1 19 0 0 No Attendance at General Meetings of Shareholders 2

Explanations for failure to attend in person at two successive sessions

None.

2. Dissents from independent directors

Did independent directors voice their dissents on proposals of the Company?

□ Yes √ No

The independent directors raised no objections to the proposals in the reporting period.

3. Other explanations for independent directors’ duty fulfillment

Did the Company adopt any recommendations in respect of the Company proposed by the independent directors?

√ Yes □ No

Explanations for adoption or rejection of recommendations proposed by the independent directors

The Company’s Board of Directors has formulated the Proceedings of Board of Directors’ Meeting and Management Rules for Independent Directors in compliance with the relevant requirements of Guiding Opinions on Establishment of Independent Directors System by Listed Companies issued by CSRC. The three independent directors elected by the Company have played due role in management and operation of the Company in strict accordance with the foregoing two rules since assumption of office. For important matters deliberated at Board of Directors, the independent directors have diligently reviewed the matters concerned and presented their independent opinions. They played an important role in safeguarding the interests of the Company, particular those of minority shareholders.

IV. Duty Fulfillment of Special Committees Attached to the Board of Directors During the Reporting Period

1. Performance of principal duties by the Audit Committee

In the reporting period, the Audit Committee exercised due supervision through auditing functions over operational activities, financial revenues and expenditures and management activities of the Company. By sticking to the principles of “beforehand prevention and professional auditing”, the Audit Committee has devoted to fortify the decision-making function of the Board of Directors, regulate the Company’s operations and practice risk precautions in an effort to support the Directors' efficient supervision on the Company’s management and optimize its corporate governance system.

The Audit Committee has performed the following tasks while auditing the Annual Report in compliance with the Guideline for Work of the Audit Committee Relating to Annual Reports formulated by the Company:

(1) Finalized the audit timetable for 2012 Annual Financial Report after discussion with the accountants’ firm,


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and requested the latter to submit the Audit Report before the specified time;

(2) Audited the financial statements prepared by the Company prior to arrival of CPAs for annual report and formulated its written opinions;

(3) Held discussions and exchanged opinions with CPAs for annual report in regard to the problems identified in the audit process after arrival of the latter;

(4) Reviewed the 2012 Annual Report again upon presentation of preliminary audit opinions by the CPAs. After the review, the Audit Committee believed that the report was a true, complete and accurate presentation of the overall operating conditions of the Company. Thereafter, the Audit Committee held another round of discussions with the independent directors and the CPAs for audit report and read the draft 2012 Annual Report presented by the CPAs.

After exchanging preliminary audit opinions with the CPAs, the Audit Committee believed that the Company has been always maintaining its prudence in adjusting accounting policy and estimates, no instance was discovered in adjusting operating profits by utilizing or misuse of accounting policy changes or accounting estimation errors, and the accounting information in Financial Statement 2012 are true, accurate and complete, all of which guaranteed the quality of the report. There’s no discrepancy, in material aspects, between the Company and CPAs.

(5) Audit Committee’s summary of annual audit for 2012 performed by Jonten Certified Public Accountants

Board of Directors of NFC:

We have reviewed the 2012 Audit Plan prepared and submitted by the Financial Department of the Company and Jonten Certified Public Accountants, and agreed the plan following extensive discussions with the principal officers from Jonten Certified Public Accountants in charge of the project on November 5, 2012. We believe that the plan was prepared in satisfactory details and accountability to ensure the annual audit for 2012 can be completed as scheduled.

After arrival on the site on December 3, 2012, Jonten CPAs completed on-site audit of certain subsidiaries not residing in Beijing which are included into the scope of consolidated statement prior to Spring Festival of 2013, and the audits of the remaining subsidiaries and the parent company were completed before March 10, 2013 and the end of the same month, respectively. The principal officers in charge of the project have held sustained and sufficient discussions with the Company’s management and the members of the Audit Committee with regard to, among others, consolidation of financial statements, accounting difference adjustment, adoption of accounting policy and the audit processes to be improved.

During the course of on-site audit by the CPAs, we were highly concerned with the problems identified in the audit process and have brought such problems to the attention of the CPAs for discussion and exchange by phone or face-to-face communication. The key matters communicated are listed as follows:

A. Whether the financial statements have been prepared in accordance with the updated Accounting Standards for Business Enterprise, the by-laws laid down by competent securities regulatory authorities and the Company’s accounting rules;

B. Whether the Financial Department have complied with the applicable laws and regulations, other external requirements, the policies and instructions laid down by the management, and other internal requirements;

C. Whether the internal control system is established and maintained in good conditions;

D. Whether sufficient and appropriate audit materials and data have been acquired by CPAs with due assistance from all the departments concerned;

E. Whether the retrospective adjustments are appropriate and proper.

All the aforesaid matters have been ascertained by the annual review CPAs in a satisfactory manner, who proposed preliminary audit opinions on April 1, 2013, that is, the audit report with the conclusion of standard unqualified audit opinions is proposed to be issued.

In our opinions, the CPAs have performed the audit in sufficient time in strict accordance with the provisions of Independent Auditing Criteria for Chinese Certified Public Accounts, with appropriate staffing and full qualification for practice, the CPAs are capable of and have prepared the Audit Report of 2012 that presents fairly and completely, in all material aspects, the Company’s financial position as of December 31, 2012, the operating


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results and cash flows for 2012. And the audit conclusions presented are in line with the actual conditions of the Company.

Audit Committee

April 11, 2013

Meanwhile, the Audit Committee submitted to the Board of Directors the proposals in relation to the audit report and the employment of accountants’ firm for 2013, detailed as follows:

Upon prudent review, we deem that Jonten Certified Public Accountants Co., Ltd. employed by the Company has performed its due functions in a satisfactory manner during the course of audit for the year ended December 31, 2012 based on the practicing principles of “independence, objectiveness, and fairness”.

Unless otherwise noted, we recommend the Board of Directors to re-employ Jonten Certified Public Accountants Co., Ltd. as the auditors for 2013.

2. Performance of principal duties by the Remuneration and Evaluation Committee

The Remuneration and Evaluation Committee under the Board of Directors is responsible for formulating the remuneration and performance evaluation plan for 2012 in accordance with the Remuneration and Performance Evaluation Procedures for Senior Executives formulated by the Company, taking into account their respective roles, responsibilities and job significance. In the reporting period, Remuneration and Evaluation Committee has conducted detailed examination of work reports submitted by the senior executives and is in the opinions that the disclosed remuneration of senior executives is appropriate and objective. As such, the Committee concurred with the remuneration plan.

The allowances for independent directors are subject to the Management Rules on Allowances for Directors and Supervisors.

3. Performance of principal duties by the Nomination Committee

The Nomination Committee consists of three directors, including two independent directors. In 2012, the Nomination Committee has performed its functions in a satisfactory and diligent manner, proposing valuable recommendations and suggestions for directors and management.

4. Performance of principal duties by the Strategic Development Committee

The Strategic Development Committee consists of three directors, including one independent director, with the Chairman of the Company acting as the convener. In 2012, the Strategic Development Committee has performed its functions in a satisfactory and diligent manner including, among others, reviewing the 2011 Board of Directors’ Report and offering suggestions on long-term development strategic planning of the Company after extensive research.

V. Duty Fulfillment of Board of Supervisors

Did the Board of Directors identify any risks for the Company in the course of its supervision during the reporting period?

□ Yes √ No

The Board of Directors expressed no dissent as a result of its supervision during the reporting period.

VI. The Company’s Independence from the Controlling Shareholder and Completeness in Business, Staffing, Assets, Organization and Finance

The Company is independent of its controlling shareholders in respect of the business, assets, staffing, organization and finance. It operates independently and assumes its own responsibilities and risks.

1. Staffing: As at the end of the reporting period, none of members of the senior management such as president and vice-presidents took up concurrent posts in the Company or the shareholding entity except that the Company’s chairman acted as the legal representative of the largest shareholder CNMC. The Company’s president and vice-presidents received their remunerations from the Company. The Company’s financial staff did not assume


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concurrent post in any related parties. The Company is fully independent in the matters including the management of labor, human resources and salaries.

2. Assets: The Company’s assets are fully independent and the Company has clear ownership to its assets. The principal operating assets of the former company have been transferred as a whole to the Company upon restructuring. As such, all the assets are independently owned by the Company, without any dispute in assets ownership between the Company and the controlling shareholders.

3. Finance: the Company has an independent financial department. It has established an independent financial calculating system, standardized and independent financial accounting systems, and a financial management system for branches and subsidiaries. In additions, it maintains an independent bank account.

4. Business: the Company has an independent system of project development, design, and operation as well as an independent procurement and marketing system; all the intangible assets are owned by the Company independently.

5. Organization: the Company’s governing bodies are set up by the Company in complete independence from the controlling shareholder.

VII. Horizontal Competition

No horizontal competition existed between the Company and its controlling shareholder.

VIII. Performance Evaluation and Incentive Mechanism for Senior Executives

The Remuneration and Performance Evaluation Committee under Board of Directors is responsible for conducting performance appraisals for senior executives that is dependent upon the Company’s annual operating results and their individual performances. The Remuneration and Performance Evaluation Committee has developed an annual compensation incentive plan for senior executives based on actual performance of the Company as well as the compensation standards offered by other listed companies in the industry. The compensations of senior executives are dependent upon and adjusted accordingly with operating results of the Company, which will encourage senior executives to try their best to improve performance of the Company.


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Section IX Internal Control I. Internal Control System and Its Construction

The Company has established a reasonable corporate governance structure and internal control regime and formulated the Handbook of China Nonferrous Metal Industry’s Foreign Engineering and Construction Co. Ltd. on Internal Control Appraisal, and issued it on May 15, 2012, in accordance with the Company Law, the Securities Law, Code of Corporate Governance for Listed Companies, Guidelines for Articles of Association of Listed Companies, SZSE Guidelines for Internal Control of Listed Companies, Implementation Guidelines for Enterprise Internal Control promulgated by five ministries including the Ministry of Finance and other applicable laws and regulations. The Company has been dedicated to fortifying the internal control as required by the Handbook, providing strong assurance for effective and standardized corporate governance and internal control and ultimately elevating the Company’s operating efficiency.

In the reporting period, the Company set up the Internal Control Project Leadership Group and a subordinated execution team and prepared the Implementation Guidelines of Internal Control 2012. Furthermore, the Company has employed an independent specialist agency to assist in construction of its internal control, focusing on streamlining business flows, identifying internal control deficiencies, laying down deficiencies evaluation standards and effecting rectification of deficiencies. In the reporting period, the Company conducted examination and self-assessment to the internal control system for the head office and key investors. The problems discovered in the examination were rectified in accordance with the specified requirements by specified person in charge within given time limit. In this way, the internal control system operated in an orderly way featured by self-examination, self-assessment, and improvement on ongoing basis.

So far, the Company has developed an operating environment and corporate governance structure favorable for implementation of internal control and established and maintained an internal control system covering all aspects and links of operation and management and complying with the relevant national laws and rules. Such an appropriate internal control system meeting management requirements and company development demands served as an important means for the Company to exercise an effective control on operational risks of all business activities and provided proper assurance for true and fair presentation of financial statements. In the course of internal control, sufficient consideration has been given to the features of the industry and years of management experience. Corporate internal control is a long term work, the Company will continue its efforts in adjusting and optimizing its internal control rules, ensuring the implementation, and strengthening the supervision of its internal controls, so as to enhance the Company’s operating performance and risk aversion capability.

The Company's Internal Control Self-assessment Report was disclosed simultaneously but separately with the Annual Report 2012, in which the Board of Supervisors and independent directors have expressed their independent opinions.

II. Declaration of the Directors on Internal Control Responsibility

(1) Following an independent assessment on the internal control pertaining to financial declarations in line with Implementation Guidelines for Enterprise Internal Control, the Board of Directors believes that the Company has established and maintained, in all material aspects, an effective internal control in compliance with Implementation Guidelines for Enterprise Internal Control on December 31, 2012.

(2) Following an independent review of effectiveness of the internal control pertaining to financial statements, Jonten Certified Public Accountants believes that the Company has established and maintained, in all material aspects, an effective internal control in compliance with Implementation Guidelines for Enterprise Internal Control on December 31, 2012.

(3) The Company has not discovered any material defects in internal control pertaining to other aspects as a result of internal control self-assessment.

III. Basis for Establishment of Financial Reporting Internal Control

The Company has established the financial reporting internal control system in accordance with the Company Law, the Accounting Law, Accounting Standards for Business Enterprise, Accounting System for Business Enterprises and other laws and regulations as well as supplementary provisions.

IV. Internal Control Self-assessment Report


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Material defects of internal control discovered in the reporting period as specified in the Internal Control Self-assessment Report No material defect of internal control was discovered in the reporting period. Disclosure date of Internal Control Self-assessment Report April 16, 2013

Disclosure index of Internal Control Self-assessment Report

The Internal Control Self-assessment Report 2012 published on China Securities News, Securities Times and www.cninfo.com.cn

V. Audit Report on Internal Control

√ APPL □ N/A Review comments section of Audit Report on Internal Control

In our opinions, as at December 31, 2012, NFC has established and maintained, in all material aspects, an effective internal control pertaining to financial reporting, in accordance with Implementation Guidelines for Enterprise Internal Control and other applicable rules and regulations. Disclosure date of Audit Report on Internal Control April 16, 2013

Disclosure index of Audit Report on Internal Control

The Audit Report on Internal Control published on China Securities News, Securities Times and www.cninfo.com.cn

Did CPAs issue a non-standard Audit Report on Internal Control?

□ Yes √ No

Is the Audit Report on Internal Control issued by CPAs consistent with the BOD’s Self-assessment Report?

√ Yes □ No

VI. Establishment and Implementation of the System of Accountability for Significant Errors in Information Disclosure of Annual Reports

The Company has established the Accountability for Significant Errors in Information Disclosure of Annual Reports in line with applicable laws and regulations as well as the Articles of Association and by reference to the specific conditions of the Company, for the purpose of further regulating its operation level, strengthening the truth, accuracy, completeness and timeliness of information disclosed and safeguarding the quality and transparency of information disclosure. In the reporting period, the Company has strictly implemented the system and was not involved in any violation of the system.


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Section X Financial Statements I. Auditor's Report

Type of audit opinion Standard unqualified audit opinions Date for signing the Auditor's Report April 12, 2013 Name of auditing firm Jonten Certified Public Accountants Auditor's Report number Z.T.Y. [2013] S.Z. No. 90001

Text of Audit Report

Audit Report

Z.T.Y. [2013] S.Z. No. 90001

To all shareholders of China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd.:

We have audited the attached financial statements of China Non-ferrous Metal Industry’s Foreign Engineering and Construction Co.., Ltd. (the “Company”), which comprises the Company’s balance sheets and consolidated balance sheets as at December 31, 2012, and the Company’s income statements and consolidated income statements, the Company’s statements of changes in shareholders’ equity and consolidated statements of changes in shareholders’ equity, and the Company’s cash flow statements and consolidated cash flow statements for 2012, and the notes to the financial statements.

I. Management’s responsibility for the financial statements

The management of the Company is responsible for the preparation and fair presentation of these financial statements. These responsibilities include: (1) preparing the financial statements in accordance with Accounting Standards for Business Enterprises for fair presentation of the financial statements; (2) designing, implementing and maintaining necessary internal control to ensure that the financial statements are free from significant misstatement, whether due to fraud or error.

II. Auditor’s responsibilities

Our responsibilities are to express opinions on these financial statements based on our audit. We conducted our audit in accordance with Auditing Standards for Chinese Certified Public Accountants. Auditing Standards for Chinese Certified Public Accountants require that we comply with the Code of Ethics for Chinese Certified Public Accountants, and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from significant misstatement.

Audit work involves performing audit procedures to obtain audit evidences about the amounts and disclosures in the financial statements. The procedures selected depend on the certified public accountants’ (CPAs’) judgment, including the assessment of the risks of significant misstatement in the financial statements, whether due to fraud or error. In making those risk assessments, certified public accountants (CPAs) consider the internal control relevant with the preparation and fair presentation of the financial statements, so as to design proper audit procedures, but not for the purpose of expressing opinions on the effectiveness of the internal control. Audit work also includes evaluating the adequacy of accounting policies adopted and the rationality of accounting estimates made by the management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidences we have obtained are sufficient and adequate to provide a basis for our opinions.

III. Audit Opinions

In our opinions, the financial statements of the Company present fairly, in all material aspects, the Company’s financial position and consolidated financial position as of December 31, 2012, and the Company’s operation results and consolidated operation results and cash flows and consolidated cash flows of 2012 in accordance with the Accounting Standards for Business Enterprises.


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Jonten Certified Public Accountants Chinese Certified Public Accountant: Liu Hongwei

Beijing, China

April 12, 2013 Chinese Certified Public Accountant: Fan Li

II. Financial Statements

The currency unit used in the Notes to Financial Statements is RMB Yuan.

1. Consolidated Balance Sheet

Prepared by: China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd.

Unit: Yuan Item Ending balance Beginning balance

Current Assets Monetary funds 1,869,311,468.09 1,513,015,108.33 Deposit reservation for balance Lendings to banks and other financial institutions

Trading financial assets 0.00 0.00 Notes receivable 420,972,926.68 181,781,266.49 Accounts receivable 1,689,760,614.70 1,033,374,012.88 Advance payment 1,897,979,193.16 793,381,651.31 Insurance premium receivable Reinsurance accounts receivable Reserves for reinsurance contracts receivable

Interests receivable 114,575.63 Dividends receivable Other receivables 344,440,938.83 587,044,993.49 Repurchasing of financial assets Inventory 3,213,724,149.84 2,416,946,946.45 Non-current assets due within one year

Other current assets Subtotal of current assets 9,436,303,866.93 6,525,543,978.95 Non-current Assets:

Loans and advance Available-for-sale financial assets 4,975,300.00 5,556,800.00 Held-to-maturity investment Long-term receivables Long-term equity investments 1,016,582,601.11 1,231,232,828.02 Investment real estate 528,184,527.34 536,460,986.55 Fixed assets 2,725,038,071.95 2,639,895,223.06 Construction in progress 227,875,183.10 138,647,784.58 Construction materials 1,298,218.12 6,208,783.37 Disposal of fixed assets Capitalized biological assets Oil and gas assets Intangible assets 1,208,652,949.07 1,153,395,870.54 Development expenditure 9,097,017.07 Goodwill 9,302,569.90 9,607,021.75 Long-term deferred expenses 59,524,335.52 53,880,445.78 Deferred income tax assets 276,844,772.03 176,325,725.25 Other non-current assets 93,453,725.07 71,922,507.32

Subtotal of non-current assets 6,160,829,270.28 6,023,133,976.22 Total assets 15,597,133,137.21 12,548,677,955.17

Legal representative: Luo Tao President: Wang Hongqian CFO: Gong Xinyong Chief Accountant: Liu


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Yibin


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Consolidated Balance Sheet (continued)


Unit: Yuan Current liabilities: Ending balance Beginning balance

Short-term loans 3,353,330,644.15 2,396,916,600.00 Borrowings from Central Bank (PBC) Customer deposits and deposits from banks and other financial institutions

borrowings from banks and other financial institutions

Trading financial liabilities Notes payable 1,631,963,418.09 421,775,912.10 Accounts payable 1,487,145,926.91 1,115,701,679.76 Advance receipts 604,906,958.68 564,920,194.08 Financial assets sold for repurchase Fees and commissions payable Employees’ remuneration payable 33,967,875.81 64,110,725.65 Taxes payable -111,897,669.11 -73,068,665.57 Interests payable 13,772,975.50 10,634,159.02 Dividends payable 4,247,364.74 9,864.74 Other payables 718,203,051.08 889,201,645.01 Reinsurance accounts payables Reserves for insurance contract Funds from securities trading agency Funds from underwriting securities agency

Non-current liabilities due within one year 693,775,612.00 262,500,000.00

Other current liabilities Subtotal of current liabilities 8,429,416,157.85 5,652,702,114.79 Non-current liabilities:

Long-term loans 957,174,551.72 420,158,251.00 Bonds payable Long-term payables 1,298,796,583.44 1,757,639,833.36 Special payables Estimated liabilities 7,992,113.61 7,244,813.12 Deferred income tax liabilities 109,116,009.58 190,367,144.86 Other non-current liabilities 126,790,310.56 99,218,041.69

Subtotal of non-current liabilities 2,499,869,568.91 2,474,628,084.03 Subtotal of liabilities 10,929,285,726.76 8,127,330,198.82 Owners’ equity (or shareholders’ equity):

Paid-up capital (share capital) 766,656,000.00 766,656,000.00 Capital reserves 367,312,197.83 369,904,280.57 Less: treasury stock Special reserve 38,992,192.01 28,896,210.64 Surplus reserve 220,436,443.87 207,499,587.61 Provision for ordinary risks Undistributed profits 1,213,038,150.95 1,100,048,350.38 Translation differences of foreign currency statements -92,460,774.69 -94,425,230.36

Total shareholders’ equity attributable to the parent company owners 2,513,974,209.97 2,378,579,198.84

Minority shareholders' equity 2,153,873,200.48 2,042,768,557.51 Total of Owners’ equity (or shareholders’ equity) 4,667,847,410.45 4,421,347,756.35

Total of Liabilities and Owners’ equity (or shareholders’ equity) 15,597,133,137.21 12,548,677,955.17

Legal representative: Luo Tao President: Wang Hongqian CFO: Gong Xinyong Chief Accountant: Liu Yibin


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2. Parent Company Balance Sheet



Current Assets Monetary funds 774,383,400.82 771,712,165.94 Trading financial assets Notes receivable 149,870,986.00 60,500,000.00 Accounts receivable 826,889,486.98 539,072,678.42 Advance payment 1,876,585,338.05 435,926,800.94 Interests receivable Dividends receivable 260,762,500.00 Other receivables 1,670,609,555.39 1,108,853,446.30 Inventory 719,686,917.34 406,356,038.06 Non-current assets due within one year

Other current assets Subtotal of current assets 6,278,788,184.58 3,322,421,129.66 Non-current Assets:

Available-for-sale financial assets Held-to-maturity investment Long-term receivables Long-term equity investments 2,212,255,685.89 2,042,927,014.24 Investment real estate 527,252,979.58 533,484,925.11 Fixed assets 492,914,443.15 506,754,755.49 Construction in progress Construction materials Disposal of fixed assets Capitalized biological assets Oil and gas assets Intangible assets 4,785,803.02 5,137,034.19 Development expenditures Goodwill Long-term deferred expenses Deferred income tax assets 148,403,708.87 94,113,154.04 Other non-current assets 34,367,718.04 21,980,919.04

Subtotal of non-current assets 3,419,980,338.55 3,204,397,802.11 Total assets 9,698,768,523.13 6,526,818,931.77



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Parent Company Balance Sheet (continued)


Unit: Yuan Current liabilities: Ending balance Beginning balance

Short-term loans 2,660,330,644.15 1,480,000,000.00 Trading financial liabilities Notes payable 1,471,757,359.40 134,000,000.00 Accounts payable 826,194,540.85 422,292,132.40 Advance receipts 302,954,733.73 322,603,230.22 Employees’ remuneration payable 1,392,093.54 9,000,000.00 Taxes payable -57,022,485.79 -51,200,995.97 Interests payable 13,772,975.50 10,634,159.02 Dividends payable Other payables 371,113,186.44 676,768,799.16 Non-current liabilities due within one year 644,345,625.00 182,500,000.00

Other current liabilities Subtotal of current liabilities 6,234,838,672.82 3,186,597,324.83 Non-current liabilities:

Long-term loans 902,391,300.72 315,375,000.00 Bonds payable Long-term payables 1,218,796,583.44 1,737,639,833.36 Special payables Estimated liabilities Deferred income tax liabilities Other non-current liabilities

Subtotal of non-current liabilities 2,121,187,884.16 2,053,014,833.36 Subtotal of liabilities 8,356,026,556.98 5,239,612,158.19 Owners’ equity (or shareholders’ equity):

Paid-up capital (share capital) 766,656,000.00 766,656,000.00 Capital reserve 158,130,164.16 155,585,922.30 Less: treasury stock Special reserve Surplus reserve 220,436,443.87 207,499,587.61 Provision for ordinary risks Undistributed profits 223,150,738.56 183,384,632.24 Translation differences of foreign currency statements -25,631,380.44 -25,919,368.57

Total of Owners’ equity (or shareholders’ equity) 1,342,741,966.15 1,287,206,773.58

Total of Liabilities and Owners’ equity (or shareholders’ equity) 9,698,768,523.13 6,526,818,931.77



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3. Consolidated Income Statement


Unit: Yuan Item Amount of this period Amount of last year

I. Total operating revenue 14,505,999,729.62 10,016,757,208.62 Including: operating revenue 14,505,999,729.62 10,016,757,208.62

Interest revenue Insurance premium earned Incomes from fees and commissions

II. Total operating cost 14,482,153,508.29 9,701,125,908.43 Including: operating cost 13,249,781,343.51 8,528,629,865.00

Interest expenditures Fee and commission expenses Surrender value Net claim amount paid Net reserves for insurance contracts Insurance policy dividend paid Reinsurance expenses Business taxes and surcharges 86,173,765.55 100,193,644.49 Selling expenses 239,231,831.73 208,952,517.15 Management expense 466,404,385.46 498,449,933.44 Financial expenses 365,819,113.81 266,019,337.29 Assets impairment loss 74,743,068.23 98,880,611.06

Add: gains from change in fair value (“-” indicates loss)

Investment income (“-” indicates loss) 235,481,219.18 372,281,821.73 Including: incomes from investments in associates and joint ventures -2,482,961.66 62,943,829.45

Exchange income (“-” indicates loss) III. Operating profit (“-” indicates loss) 259,327,440.51 687,913,121.92

Add: non-operating income 48,893,089.84 19,502,367.66 Less: non-operating expenses 11,775,458.25 7,230,928.66

Including: losses from disposal of non-current assets 408,082.94 3,448,514.11

IV. Total profit (“-” indicates total loss) 296,445,072.10 700,184,560.92 Less: income tax expenses 70,922,966.58 193,433,270.78

V. Net profit (“-” indicates net loss) 225,522,105.52 506,751,290.14 Including: net profit realized by the entity taken over before the takeover

Net profit attributable to the parent company owners 202,592,256.83 393,289,296.38 Profits and losses of minority shareholders’ 22,929,848.69 113,461,993.76

VI. Earnings per share -- -- (I) Basic earnings per share 0.264 0.513 (II) Diluted earnings per share 0.264 0.513

VII. Other comprehensive income 3,504,019.65 -53,908,659.82 VIII. Total comprehensive income 229,026,125.17 452,842,630.32

Total comprehensive income attributable to parent company owners 207,517,221.48 369,169,073.26

Total comprehensive income attributable to minority shareholders 21,508,903.69 83,673,557.06



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4. Parent Company Income Statement


Unit: Yuan

Item Amount of this period Amount of previous period

I. Total operating revenue 10,460,124,619.79 6,455,843,767.48 Less: operating cost 10,159,236,952.77 6,127,067,884.94

Business taxes and surcharges 4,745,033.64 4,068,770.08 Selling expenses 7,597,874.85 7,679,078.78 Management expense 141,968,395.09 172,577,995.85 Financial expenses 245,125,404.54 205,697,834.44 Assets impairment loss 127,666,501.60 35,446,190.76

Add: gains from change in fair value (“-” indicates loss) Investment income (“-” indicates loss) 295,873,325.70 88,651,159.93 Including: income from investments in associates and joint ventures -39,040,570.21 15,200,520.68

II. Operating profit (“-” indicates loss) 69,657,783.00 -8,042,827.44 Add: non-operating income 6,554,053.04 230,147.81 Less: non-operating expenses 66,467.36 1,107,809.25

Including: losses from disposal of non-current assets 16,495.62 329,216.81 III. Total profit (“-” indicates total loss) 76,145,368.68 -8,920,488.88

Less: income tax expenses -53,223,193.90 6,962,276.12 IV. Net profit (“-” indicates net loss) 129,368,562.58 -15,882,765.00 V. Earnings per share -- --

(I) Basic earnings per share 0.169 -0.021 (II) Diluted earnings per share 0.169 -0.021

VI. Other comprehensive income 2,832,229.99 6,570,215.51 VII. Total comprehensive income 132,200,792.57 -9,312,549.49



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5. Consolidated Cash Flow Statement


Unit: Yuan Item Amount of this period Amount of previous period

I. Cash flow from operating activities: Cash receipts from sales of goods and the rendering of services 15,339,799,691.63 10,975,606,910.74 Receipts of tax refunds 26,497,303.89 13,536,077.12 Other cash receipts relating to operating activities 134,461,633.04 135,096,685.62

Subtotal of cash inflows from operating activities 15,500,758,628.56 11,124,239,673.48 Cash payments for goods purchased and services received 15,127,202,318.00 9,868,658,047.91 Cash payments to and on behalf of employees 624,164,609.55 582,533,370.42 Cash paid for taxes 510,793,689.81 509,622,382.26 Other cash payment relating to operating activities 376,645,826.63 477,439,744.71

Subtotal of cash outflows from operating activities 16,638,806,443.99 11,438,253,545.30 Net cash flows from operating activities -1,138,047,815.43 -314,013,871.82 II. Cash flow from investment activities:

Cash receipts from disposals of investments 436,119,911.96 112,000,000.00 Cash receipts from investment income 37,044,432.43 5,506,454.79 Net cash receipts from disposals of fixed assets, intangible assets and other long-term assets 527,719.00 3,026,277.06

Net cash receipts from disposals of subsidiaries and other business units Other cash receipts from investment activities 153,000,000.00

Subtotal of cash inflows from investment activities 626,692,063.39 120,532,731.85 Cash payments to acquire and construct fixed assets, intangible assets and other long-term assets 351,659,012.26 284,221,770.95

Cash payments for investments 29,204,904.17 352,059,549.60 Net increase of pledge loans Net cash payment from acquisition of subsidiaries and other business units

Other cash payments relating to investment activities 17,646,484.91 Subtotal of cash inflows from investment activities 398,510,401.34 636,281,320.55 Net cash flow from investment activities 228,181,662.05 -515,748,588.70 III. Cash flow from financing activities:

Cash receipts from capital contributions 147,000,000.00 277,631.64 Including: cash receipts from capital contributions from minority shareholders of subsidiaries 147,000,000.00 277,631.64

Cash receipts from borrowings 5,158,369,766.25 3,539,475,521.12 Cash receipts from issue of bonds Other cash receipts from financing activities 57,378,940.97 57,917,320.56

Subtotal of cash inflows from financing activities 5,362,748,707.22 3,597,670,473.32 Cash repayment of borrowings 3,550,196,539.95 2,019,682,859.33 Cash payments for distribution of dividends or profits or interest expenditures 484,911,183.72 343,442,205.71

Including: payments for distribution of dividends or profits to minority owners of subsidiaries 55,875,190.98 95,321,742.19

Other cash payments relating to financing activities 15,830,948.09 50,844,065.74 Subtotal of cash outflows from financing activities 4,050,938,671.76 2,413,969,130.78 Net cash flow from financing activities 1,311,810,035.46 1,183,701,342.54 IV. Effect of foreign Exchange rate changes on cash and cash equivalents -4,092,557.40 -24,120,071.07 V. Net increase in cash and cash equivalents 397,851,324.68 329,818,810.95

Add: beginning balance of cash and cash equivalents 1,347,623,326.47 1,017,804,515.52 VI. Ending balance of cash and cash equivalents 1,745,474,651.15 1,347,623,326.47



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6. Parent Company Cash Flow Statement


Unit: Yuan Item Amount of this period Amount of previous period

I. Cash flow from operating activities: Cash receipts from sales of goods and the rendering of services 11,648,542,957.75 7,441,507,124.01 Receipts of tax refunds 22,803,696.76 6,119,896.15 Other cash receipts relating to operating activities 134,869,613.73 134,449,988.70

Subtotal of cash inflows from operating activities 11,806,216,268.24 7,582,077,008.86 Cash payments for goods purchased and services received 12,132,290,064.85 7,280,073,873.05 Cash payments to and on behalf of employees 96,188,838.26 110,600,251.33 Cash paid for taxes 34,835,996.95 36,398,459.41 Other cash payment relating to operating activities 872,571,173.81 750,489,177.02

Subtotal of cash outflows from operating activities 13,135,886,073.87 8,177,561,760.81 Net cash flow from operating activities -1,329,669,805.63 -595,484,751.95 II. Cash flow from investment activities:

Cash receipts from disposals of investments Cash receipts from investment income 78,259,034.98 107,086,427.71 Net cash receipts from disposals of fixed assets, intangible assets and other long-term assets 380.00 1,831,648.66

Net cash receipts from disposals of subsidiaries and other business units

Other cash receipts from investment activities Subtotal of cash inflows from investment activities 78,259,414.98 108,918,076.37

Cash payments to acquire and construct fixed assets, intangible assets and other long-term assets 23,306,387.90 14,895,961.16

Cash payments for investments 65,704,904.17 290,060,196.76 Net cash payment from acquisition of subsidiaries and other business units

Other cash payment relating to investment activities Subtotal of cash inflows from investment activities 89,011,292.07 304,956,157.92 Net cash flow from investment activities -10,751,877.09 -196,038,081.55 III. Cash flow from financing activities:

Cash receipts from capital contributions Cash receipts from borrowings 3,917,369,766.25 2,604,558,921.12 Cash receipts from issue of bonds Other cash receipts from financing activities 25,125,050.22

Subtotal of cash inflows from financing activities 3,942,494,816.47 2,604,558,921.12 Cash repayment of borrowings 2,202,500,000.00 1,267,058,921.12 Cash payments for distribution of dividends or profits or interest expenditures 365,954,558.57 211,760,124.01

Other cash payment relating to financing activities 2,191,774.86 Subtotal of cash outflows from financing activities 2,568,454,558.57 1,481,010,819.99 Net cash flow from financing activities 1,374,040,257.90 1,123,548,101.13 IV. Effect of foreign Exchange rate changes on cash and cash equivalents -5,815,318.04 -23,641,927.62

V. Net increase in cash and cash equivalents 27,803,257.14 308,383,340.01 Add: beginning balance of cash and cash equivalents 725,647,974.17 417,264,634.16

VI. Ending balance of cash and cash equivalents 753,451,231.31 725,647,974.17


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7. Consolidate Statement of Changes in Owners’ Equity


Unit: Yuan

Item

Amount of this period Shareholders’ equity attributable to the parent company owners

Minority shareholders’

equity

Total of Owners’ equity Paid-up capital

(share capital) Capital reserve Less:

treasury stock

Special reserve Surplus reserve

Provision for

ordinary risks

Undistributed profits Others

I. Ending balance of last year 766,656,000.00 369,904,280.57 28,896,210.64 207,499,587.61 1,100,048,350.38 -94,425,230.36 2,042,768,557.51 4,421,347,756.35 Add: changes of accounting policy

Correction of errors in previous period

Others II. Beginning balance of this year 766,656,000.00 369,904,280.57 28,896,210.64 207,499,587.61 1,100,048,350.38 -94,425,230.36 2,042,768,557.51 4,421,347,756.35 III. Changes of this period (“-” indicates decrease) -2,592,082.74 10,095,981.37 12,936,856.26 112,989,800.57 1,964,455.67 111,104,642.97 246,499,654.10

(I) Net profit 202,592,256.83 22,929,848.69 225,522,105.52 (II) Other comprehensive incomes 2,960,508.98 1,964,455.67 -1,420,945.00 3,504,019.65 Subtotal of (I) and (II) 2,960,508.98 202,592,256.83 1,964,455.67 21,508,903.69 229,026,125.17 (III) Owner’s contribution and reduction in capital -4,950,754.13 151,950,754.13 147,000,000.00

1. Capital contribution from owners 147,000,000.00 147,000,000.00 2. Amount of share payment charged to shareholders’ equity

3. Others -4,950,754.13 4,950,754.13 (IV) Profit distribution 12,936,856.26 -89,602,456.26 -70,187,565.17 -146,853,165.17 1. Withdrawal of surplus reserve 12,936,856.26 -12,936,856.26 2. Withdrawal of provision for ordinary risks 3. Distribution to owners (shareholders) -76,665,600.00 -70,187,565.17 -146,853,165.17 4. Others (V) Transfers within owners’ equity 1. Capitalization of capital reserve 2. Capitalization of surplus reserve 3. Surplus reserve make up losses 4. Others (VI) Special reserve 10,095,981.37 7,826,114.82 17,922,096.19 1. Amount withdrawn in this period 24,106,056.10 18,897,168.12 43,003,224.22 2. Amount utilized in this period -14,010,074.73 -11,071,053.30 -25,081,128.03 (VII) Others -601,837.59 6,435.50 -595,402.09 IV. Ending balance of this period 766,656,000.00 367,312,197.83 38,992,192.01 220,436,443.87 1,213,038,150.95 -92,460,774.69 2,153,873,200.48 4,667,847,410.45



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Consolidate Statement of Changes in Owners’ Equity (continued)


Unit: Yuan

Item

Last year Shareholders’ equity attributable to the parent company owners Minority

shareholders’ equity

Total of owners’ equity Paid-up capital (share

capital) Capital reserve Less:

treasury stock

Special reserve Surplus reserve Provision

for ordinary risks

Undistributed profits Others

I. Ending balance of last year 638,880,000.00 342,044,475.30 18,089,977.27 207,499,587.61 853,946,883.68 -72,118,845.05 2,073,064,169.85 4,061,406,248.66 Add: retrospective adjustment generated by merger of entities under common control

Add: changes of accounting policy Correction of errors in previous period

Others II. Beginning balance of this year 638,880,000.00 342,044,475.30 18,089,977.27 207,499,587.61 853,946,883.68 -72,118,845.05 2,073,064,169.85 4,061,406,248.66 III. Changes for this period (“-” indicates decrease) 127,776,000.00 27,859,805.27 10,806,233.37 246,101,466.70 -22,306,385.31 -30,295,612.34 359,941,507.69

(I) Net profit 393,289,296.38 113,461,993.76 506,751,290.14 (II) Other comprehensive incomes -1,813,837.81 -22,306,385.31 -29,788,436.70 -53,908,659.82 Subtotal of (I) and (II) -1,813,837.81 393,289,296.38 -22,306,385.31 83,673,557.06 452,842,630.32 (III) Owner’s contribution and reduction in capital 31,277,644.43 -28,972,681.64 2,304,962.79

1. Capital contribution from owners 31,277,644.43 -28,972,681.64 2,304,962.79 2. Amount of share payment charged to shareholders’ equity

3. Others (IV) Profit distribution 127,776,000.00 -147,187,829.68 -95,321,742.19 -114,733,571.87 1. Withdrawal of surplus reserve 2. Withdrawal of provision for ordinary risks

3. Distribution to owners (shareholders) -19,166,400.00 -95,321,742.19 -114,488,142.19 4. Others 127,776,000.00 -128,021,429.68 -245,429.68 (V) Transfers within owners’ equity 1. Capitalization of capital reserve 2. Capitalization of capital reserve 3. Surplus reserve make up losses 4. Others (VI) Special reserve 10,806,233.37 10,325,254.43 21,131,487.80 1. Amount withdrawn in this period 12,647,808.87 12,033,858.43 24,681,667.30 2. Amount utilized in this period -1,841,575.50 -1,708,604.00 -3,550,179.50 (VII) Others -1,604,001.35 -1,604,001.35 IV. Ending balance of this period 766,656,000.00 369,904,280.57 28,896,210.64 207,499,587.61 1,100,048,350.38 -94,425,230.36 2,042,768,557.51 4,421,347,756.35


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8. Parent company Statement of Changes in Owners’ Equity


Unit: Yuan

Item

Amount of this period

Paid-up capital (share capital) Capital reserve Less: treasury

stock Special reserve Surplus reserve

Provision for ordinary

risks Undistributed profits Others Total of Owners’

equity

I. Ending balance of last year 766,656,000.00 155,585,922.30 207,499,587.61 183,384,632.24 -25,919,368.57 1,287,206,773.58 Add: changes of accounting policy


Others II. Beginning balance of this year 766,656,000.00 155,585,922.30 207,499,587.61 183,384,632.24 -25,919,368.57 1,287,206,773.58 III. Changes of this period (“-” indicates decrease) 2,544,241.86 12,936,856.26 39,766,106.32 287,988.13 55,535,192.57

(I) Net profit 129,368,562.58 129,368,562.58 (II) Other comprehensive income 2,544,241.86 287,988.13 2,832,229.99 Subtotal of (I) and (II) 2,544,241.86 129,368,562.58 287,988.13 132,200,792.57 (III) Owner’s contribution and reduction in capital

1. Capital contribution from owners 2. Amount of share payment charged to shareholders’ equity

3. Others (IV) Profit distribution 12,936,856.26 -89,602,456.26 -76,665,600.00 1. Withdrawal of surplus reserve 12,936,856.26 -12,936,856.26 2. Withdrawal of provision for ordinary risks

3. Distribution to owners (shareholders) -76,665,600.00 -76,665,600.00 4. Others (V) Transfers within owners’ equity 1. Capitalization of capital reserve 2. Capitalization of capital reserve 3. Surplus reserve make up losses 4. Others (VI) Special reserve 1. Amount withdrawn in this period 2. Amount utilized in this period (VII) Others IV. Ending balance of this period 766,656,000.00 158,130,164.16 220,436,443.87 223,150,738.56 -25,631,380.44 1,342,741,966.15



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Parent company Statement of Changes in Owners’ Equity (continued)


Unit: Yuan

Item Last year

Paid-up capital (share capital) Capital reserve Less: treasury

stock Special reserve Surplus reserve Provision for

ordinary risks Undistributed profits Others Total of Owners’ equity

I. Ending balance of last year 638,880,000.00 155,817,925.96 207,499,587.61 346,209,797.24 -32,721,587.74 1,315,685,723.07 Add: changes of accounting policy


Others II. Beginning balance of this year 638,880,000.00 155,817,925.96 207,499,587.61 346,209,797.24 -32,721,587.74 1,315,685,723.07 III. Changes of this period (“-” indicates decrease) 127,776,000.00 -232,003.66 -162,825,165.00 6,802,219.17 -28,478,949.49

(I) Net profit -15,882,765.00 -15,882,765.00 (II) Other comprehensive incomes -232,003.66 6,802,219.17 6,570,215.51 Subtotal of (I) and (II) -232,003.66 -15,882,765.00 6,802,219.1 -9,312,549.49 (III) Owner’s contribution and reduction in capital

1. Capital contribution from owners 2. Amount of share payment charged to shareholders’ equity

3. Others (IV) Profit distribution 127,776,000.00 -146,942,400.00 -19,166,400.00 1. Withdrawal of surplus reserve 2. Withdrawal of provision for ordinary risks 3. Distribution to owners (shareholders) -19,166,400.00 -19,166,400.00 4. Others 127,776,000.00 -127,776,000.00 (V) Transfers within owners’ equity 1. Capitalization of capital reserve 2. Capitalization of capital reserve 3. Surplus reserve make up losses 4. Others (VI) Special reserve 1. Amount withdrawn in this period 2. Amount utilized in this period (VII) Others IV. Ending balance of this period 766,656,000.00 155,585,922.30 207,499,587.61 183,384,632.24 -25,919,368.57 1,287,206,773.58



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III. Company Profile

China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd. (the “Company”) was incorporated as a company limited by shares by means of public share offering, with an aggregate share capital of 140 million shares. The Company was established by China Nonferrous Metal Mining (Group) Co., Ltd., as the sole investor, under the Approval Document Z.S.Y.Z (1997) No. 0060 as issued by China National Nonferrous Metals Industry Corporation and the official Approval Document T.G.Z. (1997) No.20 as issued by the Academy of Chinese Economic System Reform. Other general information of the Company: registered address: CNFC Building, Block B, Tower #1, Representative Office in Beijing, Beijing West Railway Station South Square, Fengtai District, Beijing; official address: NFC Building, 10 Anding Road, Chaoyang District, Beijing 100029, China; legal representative: Luo Tao; Business License No.: 100000000001269; type of ownership: shareholding limited company; parent company and ultimate controlling shareholder: China Nonferrous Metal Mining (Group) Co., Ltd.

Pursuant to the resolution adopted at the meeting of Board of Directors dated August 26, 1997 and that adopted at the Extraordinary General Meeting of Shareholders dated October 4, 1997, and under the Approval Document J.Z.H. (1997) No.66 as issued by CSRC, the share capital of the Company was increased by 84,000,000 shares by capitalization with the issue of 6 shares for every 10 shares on the basis of the Company’s share capital of 140,000,000 shares as at June 30, 1997. The registered capital of the Company was increased to 224,000,000 shares upon completion of the capitalization.

Pursuant to the resolution regarding the Company’s profit distribution plan 1998 adopted at the meeting of Board of Directors dated April 26, 1999 and that adopted at the General Meeting of Shareholders dated June 2, 1999, 2 bonus shares for every 10 shares held, totally 44,800,000 shares were issued to all shareholders based on the Company’s share capital of 224,000,000 shares as at the end of 1998; meanwhile, 4 shares were capitalized for every 10 shares held by all shareholders on the basis of the Company’s share capital of 224,000,000 shares as at the end of 1998, totaling 89,600,000. And the total share capital increased to 358,400,000 shares as a result.

The implementation of the Company’s share placement plan 2000 was implemented in February 2001 in accordance with the Approval Document Z.J.G.S.Z. [2000] No.218 as issued by CSRC, whereby the state-owned legal persons waived the share placement rights and 28,800,000 shares were issued to the public. The total share capital after the placement was 387,200,000 shares. Pursuant to the resolution adopted at the meeting of Board of Directors dated March 31, 2004 and that adopted at the General Meeting of Shareholders dated May 18, 2004, the share capital of the Company was increased by 193,600,000 shares by capitalization with the issue of 5 shares for every 10 shares on the basis of the Company’s share capital of 387,200,000 shares as at the end of 2003. The share capital of the Company increased to 580,800,000 shares after the capitalization.

Pursuant to the resolution regarding the Company’s profit distribution plan 2008 adopted at the meeting of Board of Directors dated April 27, 2009 and that adopted at the General Meeting of Shareholders dated May 21, 2009, 1 bonus share for every 10 shares held were issued to all shareholders based on the Company’s share capital of 580,800,000 shares as at the end of 2008, totaling 58,080,000 shares. And the share capital is 638,880,000 shares as a result.

Pursuant to the resolution regarding the Company’s profit distribution plan 2010 adopted at the meeting of Board of Directors dated April 21, 2011 and that adopted at the General Meeting of Shareholders dated May 19, 2011, 2 bonus share for every 10 shares held were issued to all shareholders based on the Company’s share capital of 638,880,000 shares as at the end of 2010, totaling 127,776,000 shares. And the share capital is 766,656,000 shares after that.

The Company is an overseas economic cooperation enterprise specialized in international project contracting and labor service cooperation, supplemented by various secondary businesses including domestic and overseas trades. The Company has its representative offices set up in a number of countries and regions including Japan, Iran, Philippine, Zambia, Vietnam, Mongolia, Kazakhstan, Kyrghyzstan Laos, etc.

The business scope of the Company covers contracting of overseas projects in the same industry and foreign-funded projects in China; consulting, survey and design of overseas nonferrous metal projects; resources exploitation, import & export trades; EPC contracting of projects in the field of nonferrous metal resources, other industries, energy, transportation and public utilities; undertaking exhibitions/ trade fairs, warehousing, interior decoration; wholesale & retail of automobiles and auto parts; sales of approved wireless communication products; lease of self-owned houses; sales of mechanical and electric products and devices, hardware and electrical equipment, minerals, chemical materials (exclusive of hazardous chemicals), building materials, metallic


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materials and metalware, furniture, communication equipment, general merchandise and photographic apparatus. The Company is also engaged in dispatching of labor service workers (exclusive of seamen, valid until March 19, 2013).

IV. The Company’s Significant Accounting Policies, Accounting Estimates and Previous Period Errors

1. Preparation Basis of Financial Statements

The Company prepares its financial statements based on the assumption of going concern and the transactions actually occurred and in accordance with relevant regulations of the Accounting Standards for Business Enterprise (ASBE) and its application guidelines issued by the Ministry of Finance (MOF) on February 15, 2006, as well as the following significant accounting policies:

2. Declaration of Compliance with Accounting Standards for Business Enterprise

The financial statements of the Company have been prepared in accordance with the ASBE and its application guidelines issued by the MOF on February 15, 2006, and present truly and completely the Company’s financial position, operating results, cash flows and relevant information.

In addition, the Company has disclosed relevant financial information in accordance with Information Disclosure and Presentation Rules for Companies Offering Securities to the Public No.15 – General Provisions on Financial Reporting (Revised in 2010) issued by China Securities Regulatory Commission (the “CSRC”).

3. Accounting Year

The Company has adopted the calendar year as its accounting year, i.e. from January 1st to December 31st.

4. Local Currency

The Company and its domestic subsidiaries and representative offices choose Renminbi (“RMB”) as their local currency.

Local currency of domestic subsidiaries

The Company’s foreign subsidiaries choose their local currencies on the basis of the primary economic environment in which they operate, and when preparing its financial statements, all amounts are converted into RMB.

5. Accounting Process for Business Combinations Involving Enterprises under and Those not under Common Control

(1) Business combinations involving enterprises under common control

Pooling of interests method is adopted for accounting calculation for business combinations involving enterprises under common control. Assets and liabilities obtained are measured at their respective book values as recorded by the acquiree at the date of combination. The difference between the book values of the net assets obtained and the aggregate book values of cash paid, non-cash assets transferred and the liabilities assumed is adjusted into capital reserve. If the balance of capital reserve is insufficient to offset the difference, retained profit is adjusted. If the consideration of business combination is satisfied by the issue of equity securities, the initial investment cost of long-term equity investment is the acquirer’s share of the owners’ equity of the acquiree at the date of combination. The aggregate book value of the shares issued is accounted for as share capital. The difference between the initial investment cost and the aggregate face value of the shares issued is adjusted into capital reserve. If the balance of capital reserve is insufficient to offset the difference, retained profit is adjustedCosts directly generated from the combination are charged to current profits and losses.

(2) Business combinations involving enterprises not under common control

Acquisition method is adopted for the accounting of business combinations involving enterprises not under common control.

For business combination involving enterprises not under common control that is achieved in a single transaction, the cost of combination is the aggregate of the fair values (on the acquisition date) of the assets paid, liabilities


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incurred or assumed, and equity securities issued by the acquirer in exchange for control of the acquiree. For business combination involving enterprises not under common control that is achieved in stages and multiple transactions, the cost of combination is the sum of the costs paid for each single transaction. The intermediary expenses incurred by the Company in respect of auditing, legal services, valuation and consultancy services, etc. and other associated management expenses attributable to the business combination are charged into current profits and losses. For equity securities or debt securities issued as the consideration of combination, their trading expenses are charged to the initial recognized amount of equity securities or debt securities. The contingent consideration, if any, is charged to the cost of combination at the fair value on the acquisition date. The Company will adjust combination goodwill accordingly if, within 12 months after the acquisition, new or further evidence indicates that the contingent consideration recorded at the acquisition date shall be adjusted.

The difference between the fair value and the book value of the assets transferred is charged to current profits and losses. The acquiree’s identifiable asset, liabilities and contingent liabilities are recognized at their fair value on the acquisition date.

Where the cost of combination exceeds the fair values of the acquiree’s identifiable net assets obtained from the combination, the difference is recognized as goodwill. After initial recognition, such goodwill is measured at the cost less subsequent accumulated impairment provisions.

Where the cost of combination is less than the fair value of the acquiree’s identifiable assets obtained from the combination, then, after the measurement of the fair values of the acquiree’s identifiable assets, liabilities and contingent liabilities is rechecked, if the cost of combination is still less than the fair value of the acquiree’s identifiable net assets obtained from the combination, the difference is charged to current profits and losses.

The minority shareholders’ equity in the acquiree are measured by minority shareholders’ interests sharing proportion in the fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities

6. Preparation of Consolidated Financial Statements

(1) Preparation of Consolidated Financial Statements

A. Determination of consolidation scope

Where the Company holds, directly or indirectly through a subsidiary, the majority of the voting rights in an investee, it shows that the Company has the control over the investee. The investee is then regarded as a subsidiary of the Company and its financial statements are included into the consolidated financial statements, unless any counter evidence supports that no effective control of the Company exists over the investee.

Under any of the following circumstances, despite that the Company holds half or less than half of the voting rights in an investee, the entity are also regarded as a subsidiary of the Company and its financial statements are included into the consolidated financial statements, unless any counter evidence supports that no effective control exists over the entity:

a) The Company owns more than half of the voting rights by virtue of an agreement with other investors of the investee;

b) The Company has the right to determine the financial and operating policies of the investee in accordance with Articles of Association or an agreement;

c) The Company has the right to appoint or remove most of the members of the Board of Directors or similar governing bodies; or

d) The Company owns the majority of votes at the Board of Directors or similar governing bodies.

While determining whether the Company has the control over the investee, potential voting rights such as convertible bonds held by the Company and other enterprises in the investees that are convertible in this period and the equity warrants exercisable in this period, are taken into account.

All subsidiaries of the Company are included into the consolidated financial statements.

B. Preparation of Consolidated Financial Statements

The consolidated financial statements are prepared on the basis of the respective financial statements of the parent company and the subsidiaries after adjustments and combined offset made to long-term equity investment of the


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subsidiaries with the equity method.

All internal equity investments, owners’ equity of subsidiaries, internal transactions and credits/ debts are offset for consolidation.

(2) Disclosures of accounting method for resale or repurchase of equity in the same subsidiary in two consecutive reporting periods.

Not applicable.

7. Recognition Criteria of Cash and Cash Equivalents

(1) Cash comprises cash on hand and bank deposits as well as other monetary funds that can be readily withdrawn on demand.

(2) Cash equivalents represent the Company’s short-term, highly liquid investments, with original maturities of 3 months or less from the date of purchase, which are both readily convertible to known amounts of cash and subject to small risks of changes in value.

8. Translation of Foreign Currency Businesses and Financial Statements

(1) Foreign currency businesses

Foreign currency economic businesses are, on the initial recognition, translated into local currency using the spot exchange rates (the average foreign exchange rates publicized by the People’s Bank of China) on the dates of transactions. On the balance sheet date, these foreign currency monetary items and non-foreign currency monetary items are distinguished for the accounting process as follows:

A. Foreign currency monetary items are translated into RMB using the spot exchange rates at the balance sheet date. Exchange differences arising from the differences between the spot exchange rates on the balance sheet date and those on initial recognition or on the previous balance sheet date are charged into current profits and losses, except for those attributable to borrowings in foreign currency relevant with the acquisition and construction of fixed assets, which are capitalized as part of borrowing costs.

B. Foreign currency non-monetary items measured at historical cost are translated into the amounts in local currency at the spot exchange rates on the dates of the transactions and the amounts in local currency remain unchanged. Foreign currency non-monetary items carried at fair value are translated at the spot exchange rate on the determination date of the fair value. Difference between is treated as changes in fair value (including changes of exchange rate) and charge to current profits and losses.

(2) Translation of financial statements denominated in foreign currencies

For the purpose of preparing the consolidated financial statements, financial statements expressed by foreign currency are translated financial statements expressed by RMB using the following methods:

A. Assets and liabilities in the balance sheet are translated with the spot exchange rate of the balance sheet date. Owners’ equity items except undistributed profits are translated at the spot exchange rates of the dates on which such items arose.

B. Income and expense items in the income statement are translated at the average exchange rate for the reporting period when transactions occur.

The difference arising from the above translations is separately expressed as the translation differences of financial statements denominated in foreign currency under the owners’ equity.

C. All items in the cash flow statement are translated at the average exchange rate of the reporting period when cash flows occur. The impact on cash by the fluctuation of exchange rates is listed as a separate item in the cash flow statement.

9. Financial Instruments

Financial instruments of the Company comprise financial assets, financial liabilities and equity instruments.

(1) Classification of Financial Instruments

The Company classifies its financial assets into four categories: financial assets at ‘fair values through profit or


89

loss’ (“FVTPL”) (including financial assets held for trading and those designated as at FVTPL), held-to-maturity investments, loans and receivables, and ‘available-for-sale’ (AFS) financial assets

The Company classifies its financial liabilities into: financial liabilities at ‘fair value through profit or loss’ (“FVTPL”) (including financial liabilities held for trading and those designated as at FVTPL) and other financial liabilities.

(2) Recognition basis and measurement method of financial instruments

Recognition of financial instruments

A. A financial asset or liability may be designated as at fair values through profit or loss (FVTPL) upon initial recognition when any of the following conditions is satisfied:

a. Such designation eliminates or significantly reduces the inconsistency in recognition or measurement of relevant gains or losses resulted from the difference in measurement basis of the financial asset or financial liability; or

b. The formal written documents of the enterprise about risk management and investment strategy have recorded that, the financial asset portfolio, financial liability portfolio or financial asset & liability portfolio are managed and evaluated based on fail values and reported to key management personnel.

B. Held-to-maturity investments are non-derivative financial assets with fixed maturity dates and fixed or determinable recovery amount, and the enterprise management has explicit intention and ability to hold to maturity, the following non-derivative assets are not classified as hold-to-maturity investments:

a. non-derivative financial assets that are designated as at fair values through profit or loss (FVTPL) upon initial recognition;

b. non-derivative financial assets that are designated as available for sale upon initial recognition;

c. loans and receivables

C. Loans and receivables are non-derivative financial assets that are not quoted in active market and have fixed or determinable recovery amount.

D. Available-for-sale (AFS) financial assets refer to non-derivative financial assets that are designated on initial recognition as available for sale; stocks, bonds and funds acquired that are quoted in active market; and financial assets that are not classified as financial assets at fair values through profit or loss (FVTPL) or held-to-maturity investments are classified into AFS financial assets.

E. Other financial liabilities refer to financial liabilities other than those at fair values through profit or loss (FVTPL), including accounts payable and long-term payables arising from purchase of goods.

Measurement of financial assets of the Company

A. Financial assets and financial liabilities are initially recognized at fair value. For financial assets and financial liabilities at fair values through profit or loss (FVTPL), relevant transaction costs are directly charged to current profits and losses; for financial assets and financial liabilities classified as other categories, relevant transaction costs are included into their initial recognized amounts.

B. Financial assets are subsequently measured at fair value, without any deduction for transaction costs it may incur on disposal of the financial assets, except for the following conditions:

a. held-to-maturity investments, loans and receivables are subsequently measured at amortized cost with the effective interest method; and

b. for investments in equity instruments that are not quoted in an active market and whose fair value cannot be reliably measured, and derivative financial assets that are linked to and must be settled by delivery of such equity instruments, they are measured at cost.

(3) Recognition and measurement of financial asset transfer

A. The Company derecognizes a financial asset when it transfers substantially all the risks and rewards of ownership of the asset to the transferee.


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For a transfer of a financial asset in its entirety that satisfies the derecognition criteria, the difference between the two amounts below is charged to current profits and losses:

a) the book value of the financial asset transferred; and

b) the sum of the consideration received from the transfer and any cumulative change in fair value that has been previously charged to the owners’ equity.

If a part of the transferred financial asset qualifies for derecognition, the book value of the transferred financial asset is allocated between the part that continues to be recognized and the part that is derecognized, based on the respective fair values of those parts. The difference between the two amounts below is recognized into current profits and losses:

① the book value allocated to the part derecognized; and

② the sum of the consideration for the part derecognized and the part derecognized of any cumulative change in fair value which has been previously charged to the owners’ equity.

B. If the transfer of a financial asset does not qualify for derecognition, the financial asset is further recognized, and the consideration received is recognized as a financial asset item.

C. For financial asset transfer with continuous involvement, the Company recognizes the financial asset to the extent of its continuing involvement and recognizes a financial liability item at the same time.

(4) Derecognition conditions of financial assets

A financial asset or financial liability is recognized when the Company becomes a party to a financial instrument contract.

The Company will derecognize a financial asset if one of the following conditions is satisfied:

A. the contractual right to receive the cash flows from the financial asset is terminated;

B. the financial asset has been transferred, and satisfies the derecognition conditions for transferred financial assets.

C. if the obligation of a financial liability has been fulfilled, cancelled or expired, the financial liability will be derecognized. If the present financial liability is substituted by the same debtor with another financial liability different in substance, or the terms of the present liability have been substantially modified, this substitution or modification is treated as derecognition of a present liability and recognition of a new liability, with any arising differences charged to current profits and losses.

(5) Determination of fair values of a financial asset and a financial liability

For a financial asset or financial liability which has an active market, the Company uses the price quoted in the active market to establish its fair value. For a financial instrument which has no active market, the Company establishes fair value by valuation technique. Valuation techniques include referring to the prices used recent arm’s length market transactions between knowledgeable and willing parties, reference to the current fair value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models.

(6) Methods of impairment assessment and determining the provision accrual for impairment loss of financial assets (receivables exclusive)

A. The Company assesses at each balance sheet the book values of financial assets other than those at fair values through profit or loss (FVTPL). If objective evidence shows that a financial asset is impaired, the Company will accrue an impairment provision.

B. Measurement of impairment losses of held-to-maturity investments and AFS financial assets:

The impairment provision is accrued as per the difference between the present value of estimated future cash flow and ending book value.

If AFS financial assets measured at fair value are impaired, the accumulated losses due to decreases in fair value previously charged directly to owners’ equity are reversed and charged to current profits and losses, even if the financial assets are not derecognized. The reversed accumulated losses are the balance of AFS financial assets’


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initial acquisition costs deducting the principals recovered and amortized amount, current fair values and impairment losses previously charged to profits and losses.

C. Reversal of impairment losses of financial assets

For the financial asset measured by amortized cost whose impairment loss is recognized, if objective evidence proves that the value of the financial asset is recovered and the recovery of value is objectively relevant with the event occurring after the impairment event (such as the improvement in the debtor’s credit rating), the previously recognized impairment loss shall be reversed and charged to current profits and losses. However, The reversed book value shall not exceed the amortized cost of the financial asset at the reversal date under the assumption of no impairment accrued.

Impairment losses incurred by investments in equity instruments that are not quoted in an active market and whose fair value cannot be reliably measured, or derivative financial assets that are linked to such equity instruments and must be settled by delivery of such equity instruments are not reversed.

For AFS debt instruments measured at fair value whose impairment losses have been recognized, if the fair value of AFS debt instruments increases in a subsequent reporting period and the increase can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment losses are reversed, and the reversal is recognized into current profits and losses.

The reversal of impairment losses of AFS equity instruments carried at fair value is not reversed by profits and losses.

(7) For reclassification of held-to-maturity investments before maturity as available for sale, explain the basis of a change in intention or ability to hold the investments until maturity.

The Company reclassifies an investment that is now not eligible for classification as held-to-maturity investment as available for sale if a change in intention or ability to hold the investment until maturity occurs.

10. Accrual Criteria and Provision Methods for Bad Debt of Receivables

Recognition criteria of bad debts:

Bad debts are recognized and the corresponding provision for bad debts is written off if there is clear evidence that the recovery of receivables is impossible. Such evidences include:

A. inability to recover the debts after repayments from the bankruptcy assets or the estate upon the bankruptcy or death of the debtor;

B. default on or non-payment of debts when they fall due and objective indication of irrecoverability.

For the receivables for which there is clear evidence of irrecoverability, bad debts are recognized and the corresponding provision for bad debts is written off after the approval of the Board of Directors with reference to different management authorities.

Accrual methods of provision for bad debts:

A. For receivables that are individually significant and for which bad debt provision is individually accrued, if there is objective indication of impairment, the difference between the book value and the present value of estimated future cash flows is recognized as impairment loss and corresponding provision for bad debts is accrued. An account receivable is considered individually significant if its individual balance amounts to over RMB 8 million (inclusive) or accounts to 5% or more of the Company’s total receivables. Other receivables are the receivables of which the individual balance amounts to over RMB 5 million (inclusive) or accounts to 5% or more of the Company’s total other receivables.

B. For receivables that are individually insignificant but for which bad debt provision is individually accrued, if there is objective indication of impairment, the difference between the book value and the present value of estimated future cash flows is recognized as impairment loss and corresponding provision for bad debts is accrued.

C. For receivables other than those specified in the aforesaid two types and the receivables for which no impairment is discovered after individual assessment (excluding those without recovery risk), they are first grouped by aging as credit risk feature. The bad debt provision is accrued for grouped receivables of different


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agings based on respective balances of the receivables on the balance sheet date and the corresponding percentages.

(1) Bad debt provisions for receivables those are individually significant

Basis or threshold amount for determining an individually significant receivable

Its individual balance amounts to over RMB 8 million (inclusive) or accounts to 5% or more of the corporate’s total receivables. Other receivables are the receivables of which the individual balance amounts to over RMB 5 million (inclusive) or accounts to 5% or more of the corporate’s total other receivables.

Method of determining provision for receivables that are individually significant and for which bad debt provision if individually accrued

For receivables that are individually significant, the corporate assesses the receivables for impairment on balance sheet date. If any objective evidence shows that the receivables are impaired, the difference between the book value and the present value of estimated future cash flows is recognized as impairment loss and corresponding provision for bad debts is accrued.

(2) Receivables for which bad debt provision is collectively accrued on a portfolio basis

Portfolio Methods of provision for receivables collectively accrued on a portfolio basis Basis of portfolio determination

Accounts receivable Aging analysis Aging analysis Other receivables Aging analysis Aging analysis

Receivables in portfolios that bad debt provision is accrued based on aging analysis:

√ APPL □ N/A

Aging Provision as a portion of accounts receivables (%)

Provision as a portion of other accounts receivables (%)

Within 1 year (inclusive) 0% 0% 1-2 years 3% 10% 2-3 years 10% 30% 3-4 years 30% 50% 4-5 years 30% 50% More than 5 years 50% 80%

Receivables in portfolios that bad debt provision is accrued based on balance percentage method:

□ APPL √ N/A

Receivables in portfolios that bad debt provision is accrued by other methods

□ APPL √ N/A

(3) Receivables that are individually insignificant but for which bad debt provision is individually accrued Reasons for accrual of individual provision for receivables

There is objective evidence of impairment but the provision for bad debts accrued based on aging analysis does not reflect the effects of the current conditions.

Method of accrual of provision for receivables

The difference between the book value and the present value of estimated future cash flows is recognized as impairment loss and corresponding provision for bad debts is accrued.

11. Inventory

(1) Classification of inventories

The Company’s inventories mainly include raw materials, turnover materials, low-value consumables, work-in-process products, semi-finished products, finished products, stock merchandises, etc.

(2) Pricing of inventories upon delivery


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Pricing method:

Inventories are initially recorded at acquisition cost, if individual items can be individually identified, the specific identification valuation method is adopted, otherwise the weighted average valuation is adopted.

(3) Basis for determining net realizable value of accrual methods for inventory devaluation provision

Inventories are measured at the lower of cost and net realizable value. Net realizable value represents the estimated selling price in the ordinary course of business less any estimated costs to be incurred till completion, the estimated costs necessary to make the sales and relevant taxes. If the net realizable value is below the cost of inventories due to damage or obsolescence in whole or in part or selling at prices below cost, a provision for inventory devaluation is made based on the excess part of cost of inventory over its net realizable value on an item-by-item basis.

The net realizable value of the inventories is measured at the balance sheet date. If the circumstances that previously caused inventory values to be written down no longer exist, the provision for inventory devaluation is reversed from originally accrued provision for inventory devaluation and the reversed amount is charged to current profits and losses.

(4) Stock count system

The perpetual inventory system is maintained for stock system.

Inventories are valued using the perpetual inventory system, and the accuracy of perpetual records is verified by physical inventory count on a periodic basis.

(5) Amortization method for low-value consumables and packaging materials

For low-value consumables

Amortized using one-off amortization method.

For packaging materials

Amortized using one-off amortization method.

12. Long-term Equity Investments

(1) Determination of investment cost

A. For a long-term equity investment acquired through a business combination involving enterprises under common control for which cash was paid, non-cash assets transferred or liabilities assumed as consideration, the investment cost of the long-term equity investment is the attributable share of the book value of the owners’ equity of the acquiree on the date of combination.

B. For a long-term equity investment acquired through business combination involving enterprises not under common control, the investment cost of the long-term equity investment is the acquisition cost.

C. Long-term equity investments acquired by the methods other than business combination

a. Where the acquisition is made by cash payment, the initial investment cost is measured at the actual payment amount, which includes the expenses directly relevant with the acquisition of the long-term equity investment, taxes and other necessary expenses.

b. Where equity securities are issued as the consideration of the long-term equity investment, the initial investment cost is measured at the fair value for issuing of the equity securities.

c. Where the acquisition is funded by investors, the initial investment cost is measured at the value stipulated in the investment contract or agreement, unless the value so agreed is deemed unfair.

d. Where the Company acquires the minority equity from a subsidiary’s minority shareholders, when preparing the consolidated financial statements, for the difference between the long-term equity investment cost added for acquiring the minority equity and the Company’s sharing proportion in the fair value of the identifiable net assets of the subsidiary on the transaction date (which is determined pursuant to newly obtained equity proportion) is adjusted into capital reserve. If the balance of capital reserve is insufficient to offset the difference, retained profit is adjusted.


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(2) Subsequent measurement and recognition of profits and losses

A. Cost method. For long-term equity investments in investees over which the Company may exercise control and long-term equity investments in investees (over which the Company is not under common control or has no significant influence) without quoted prices in an active market and whose fair values cannot be reliably measured, the cost method is adopted for accounting calculation. The investees over which the Company exercises control are deemed as subsidiaries which are included in the scope of consolidated financial statements, and the equity method is adopted for the adjustment when preparing consolidated financial states. The recognition of investment profits under the cost method: the cash dividends or profit distributions declared by the investee are recognized as current profits and losses. The investment profit recognized by the Company is only limited to the sharing proportion of the accumulated net profit realized by the investee after receiving the investment. The excess of cash dividends or profit distributions received over the share is recognized in recovery of initial investment cost.

B) Equity method. The Company accounts for long-term equity investment in investees over which the Company exercises joint control or significant influence using the equity method. Under the equity method, where the initial investment cost of a long-term equity investment exceeds the Company’s share of the fair value of the investee’s identifiable net assets at the time of acquisition, no adjustment is made to the initial investment cost. Where the initial investment cost is less than the Company’s share of the fair value of the investee’s identifiable net assets at the time of acquisition, the difference is recognized in non-operating income for the period, and the cost of the long-term equity investment is adjusted accordingly. Under the equity method, the Company recognizes its share of the investee’s net profits and losses based on the fair value of the investee’s individual separately identifiable assets at the date of acquisition after making appropriate adjustments to the investee’s net profit. If the accounting policies or accounting periods of the investees are different from those of the Company, when preparing the Consolidated Financial Statements, the Company makes necessary adjustments to the financial statements of the investees based on its own accounting policies and accounting period and investment profits and losses are recognized on that basis. The net losses incurred to the investee that have been recognized by the Company shall be written down by the book values of long-term equity investment together with other long-term interests that substantially forms part of the Company’s net investment of the investee till the limit of zero, except to the extent that the Company has obligations to assume additional losses. Where net profits are subsequently realized by the investee, the Company may resume recognizing its share of profits only after its share of profits exceeds the share of losses previously not recognized. When recognizing the Company’s share of the profits and losses of associates and joint ventures, the profits and losses incurred from internal transactions (except asset impairment loss) are set off pro rata on the basis of share percentage held. For long-term equity investments in associates and joint ventures which had been held by the Company before its first-time adoption of Accounting Standards for Business Enterprise (ASBE), if there exists the debit balance associated with the equity investment, the investment profits and losses shall be recognized after deducting the portion of debit balance of equity investment amortized on a straight line basis over the original remaining life.

(3) Basis for determining common control and significant influence over the investee

A. Basis for determining common control over the investee

Common control is the contractually agreed sharing of control over an economic activity, and exists only when the strategic financial and operating policy decisions relating to the activity require the unanimous consent of the parties sharing control. All investees over which the Company has common control with other parties are deemed as joint ventures.

B. Basis for determining significant influence over the investee

Significant influence is the right to participate in the financial and operating policy decisions of the investee but not the control or common control over those policies. All investees over which the Company has significant influence are deemed as associates.

(4) Methods for impairment assessment and accrual for impairment provision

The Company accrues impairment provision based on long-term equity investment projects.

A. For long-term equity investments calculated by cost method which are not quoted in an active market and whose fair values cannot be reliably measured, the impairment losses are recognized into current profits and losses and measured as the difference between the book values and the present value of estimated future cash flows discounted at the current market rate of return for similar financial assets.


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B. For the Company’s long-term equity investments in subsidiaries, associates and joint ventures, the recoverable amount is the higher of the fair value of the long-term equity investment less disposal costs and its prevent value of estimated future cash flows. If the measurement result of the recoverable amount indicates that the recoverable amount of the long-term equity investment is less than its book value, the book value of long-term equity investment is written down to its recoverable amount. That amount written down is recognized as the impairment loss of asset and charged to current profits and losses. And an impairment provision of the long-term equity investment is accrued accordingly.

C. For goodwill generated from business combination, impairment tests are performed annually regardless of whether there are indications of impairment.

Once an impairment loss is recognized for a long-term equity investment of the Company, it will not be reversed in any subsequent period.

13. Investment Real Estate

(1) Standard of investment real estate

Investment real estate is the real estate held to earn rentals or for capital appreciation or both. It includes the land use right that is leased out, the building that is leased out and the land use right that is held for capital appreciation before being transferred.

(2) Initial measurement

The investment real estate is measured initially at cost.

(3) Subsequent measurement

The Company uses the cost method for subsequent measurement of investment real estate, and adopts the depreciation or amortization method for the investment real estate which is similar to that for fixed assets and intangible assets.

(4) Basis for accrual of impairment provision: the Company assesses the investment real estate at each balance sheet date to determine whether there is any indication of impairment. If the recoverable amount is less than its book value, the book value of the investment property is reduced to its recoverable amount, and the reduction is charged to current profits and losses and an impairment provision of the investment property is made accordingly. Once an impairment provision is accrued for an investment real estate, it will not be reversed in any subsequent period.

14. Fixed Assets

(1) Recognition criteria for fixed assets

Fixed assets are tangible assets that are held for use in the production of products or supply of services, for leasing, or for administrative purposes, and have useful lives of more than one accounting year. A fixed asset is recognized only when it is probable that economic benefits associated with the asset will flow back to the Company and the cost of the asset can be reliably measured.

(2) Recognition criteria and pricing method for fixed assets leased in under finance leases

(1) Recognition criteria:

A. The leasor transfers the ownership of the asset to the leasee by the end of the lease term;

B. The lease contains a bargain purchase option rested upon the leasee to purchase the leased asset at a price which is expected to be sufficiently lower than the fair value at the date the option becomes exercisable, therefore, at the beginning of the lease, it is reasonably certain that the option will be exercised;

C. The lease term accounts for the major part of the asset’s service life even if ownership is not transferred;

D. At the beginning date of the lease, the present value of the minimum lease payment almost equivalent to the fair value of the leased asset at the beginning date of the lease; and at the beginning date of the lease, the present value of the minimum amount received almost equivalent to the fair value of the leased asset at the beginning date of the lease.


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E. The leased asset is of a specialized nature such that only the leasee can use it without major modifications being made.

(2) Pricing method: At the beginning of the lease, the fixed asset is initially measured at an amount equal to aggregate of the fair value of the leased-in fixed asset or the present value of the minimum lease payments (whichever is lower) and the initial direct costs such as commissions, legal fees, travel expenses and stamp tax that are attributable to the lease.

(3) Depreciation of various fixed assets.

A. Other than the fixed assets and lands whose depreciation provisions have been accrued in full but still in use, the Company accrues depreciation provisions for all of the fixed assets.

B. The fixed asset is depreciated over its service life using the straight-line method form the month subsequent to the month in which it is ready for intended use. The depreciation rate and amount are calculated based on the category of the fixed asset, the estimated service life and the estimated net residual value rate, and charged to the costs of relevant assets or current profits and losses according to its use.

Category of fixed assets Depreciation aging (year) Residual value (%) Annual depreciation rate (%)

Buildings and structures 40 3% 2.43% Machinery and equipment 20 3% 4.85% Electronic equipment 8 3% 12.13% Transportation vehicles 20 3% 4.85%

(4) Methods for impairment assessment and accrual of impairment provision

The Company assesses at the end of each fiscal year whether there is any indication that the fixed assets may be impaired.

If such indication exists, recoverable amounts are estimated for such assets. Recoverable amount is the higher of the net amount of the fair value of an asset less disposal costs and its present value of the estimated future cash flows.

If the recoverable amount of an asset is less than its book value, the book value is reduced to its recoverable amount. The reduction is recognized as an impairment loss and charged to current profits and losses, and an impairment provision of the asset is accrued accordingly.

After the recognition of an impairment loss, the depreciation (amortization) expenses for the asset is adjusted in future periods to allocate the adjusted intangible asset's book value (less its estimated residual value) systematically over its remaining service life.

If there is any indication that an asset may be impaired, the Company estimates its recoverable amount based on individual basis.

Once the impairment loss of a fixed asset is recognized, it will not be reversed in any subsequent period.

(5) Notes

The Company reviews the service life and estimated net residual value of a fixed asset and the depreciation method applied at each fiscal year end. If there is any inconsistency between the estimates of useful lives and estimates of estimated net residual values and the originally estimates, the useful lives and estimated net residual values will be adjusted according to the review result. If there is any significant change to the expected method of realizing the economic benefits associated with the fixed asset, the depreciation method applied will be adjusted.

Decoration and repair expenses of fixed assets which qualify for capitalization are depreciated individually using the straight-line method for the shorter of the duration between two decorations or repairs or the remaining service life of fixed assets.

Safe production costs withdrawn and used by the Company that belong to costs and expenses are directly offset against special reserve. If safe production costs withdrawn and used by the Company generate fixed assets, expenses arising therefrom are classified into “construction in progress” account, and recognized as fixed assets


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until safety projects are completed and ready for its intended use; meanwhile, the cost of fixed assets are used to offset special reserve, and accumulated depreciation is recognized in an equal amount. Such fixed assets will not be depreciated any more in any future period. The aforesaid accounting principle applies to maintenance costs withdrawn by the Company.

15. Construction in Progress

(1) Category of construction in progress

Construction in progress is classified and calculated by project item, and priced at its actual cost and transferred into a fixed asset for calculation when it is ready for intended use. A construction whose final cost has not yet been finalized is carried forward at the estimated value which is then adjusted at the actual cost after completion finalization. Construction in progress of the Company comprises civil engineering and equipment installation engineering.

(2) Standards and time for carrying forward of construction in progress to fixed assets

Items classified as construction in progress are transferred to fixed assets at actual cost when such assets are ready for their intended use The fixed asset that are ready for intended use but whose completion final calculation has not been handled is accounted at estimated value, and then the estimated value will be adjusted after the final calculation, but the depreciation accrued will not be adjusted. For the purpose of this clause, a fixed asset is "ready for intended use” if the asset has reached working condition for the use intended by the Company. A fixed asset is deemed to reach the working condition for its intended use under any of the following circumstances: A. the physical construction (including installation) of the fixed asset is completed or substantially completed; B. the results of the trial production or test run prove that the fixed asset can produce qualified products in a stable way or the trial run result proves that the fixed asset can run or operate normally; C. expenditure incurred from the construction of the fixed asset is minimal or virtually disappears; D. the fixed asset acquired or constructed meets the specification or requirements of design or in the contract, or substantially meets such specification or requirements, and the non-compliance, if any, will not affect the normal use of the fixed asset.

Items classified as construction in progress are carried forward to fixed assets at actual cost when such assets are ready for their intended use. The fixed asset that are ready for intended use but whose completion final calculation has not been handled is accounted at estimated value, and then the estimated value will be adjusted after the final calculation, but the depreciation accrued will not be adjusted.

(3) Methods for impairment assessment and accrual of impairment provision

A. Impairment assessment of constructions in progress

a. The Company assesses at each balance sheet date whether there is any indication that construction in progress may be impaired. If such indication exists, recoverable amounts are estimated for such assets. Recoverable amount is the higher of the net amount of the fair value of a construction in progress less disposal costs and its present value of the estimated future cash flows.

b. If the recoverable amount of a construction in progress is less than its book value, the book value is reduced to its recoverable amount. The reduction is recognized as an impairment loss and charged to current profits and losses, and an impairment provision of the construction in progress is accrued accordingly.

c. Once the impairment loss of a construction in progress is recognized, it will not be reversed in any subsequent period.

B. Accrual of impairment provision of construction in progress

a. If there is any indication that a construction in progress may be impaired, the Company estimates its recoverable amount on individual basis.

b. If it is hard to estimate the recoverable amount of an individual construction in progress, the recoverable amount of the asset group to which the construction in progress belongs will be estimated and adopted as the basis for determining the recoverable amount of the asset group.

16. Borrowing Costs

(1) Recognition criteria for capitalization of borrowing costs


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Borrowing costs directly attributable to the acquisition, construction or production of assets eligible for capitalization, either of a specific-purpose borrowing or of a general-purpose borrowing, are capitalized as part of the cost of relevant assets when all of the followings are satisfied:

A. expenditures for such asset have incurred;

B. borrowing costs have incurred;

C. acquisition, construction or production activities necessary for the asset to reach its intended use or sale have commenced.

The borrowing costs incurred to a common borrowing are recognized as an expense when it is incurred pursuant to its amount incurred and charged to current profits and losses.

(2) Capitalization period of borrowing costs

The special borrowing costs attributable to specific-purpose borrowings for acquisition, construction or production of an asset are capitalized when they are incurred if such costs are incurred before the asset reaches intended using or sale conditions. The borrowing costs incurred thereafter are recognized as an expense when it is incurred pursuant to its amount incurred and charged to current profits and losses.

Borrowing interests incurred during the periods in which the acquisition, construction or production activities of an asset are interrupted is computed as follows:

A. Where the activities are interrupted abnormally for 3 months or longer continuously, the capitalization of borrowing costs is suspended. The interests incurred during such period are recognized as an expense for the current period until such activities are resumed.

B. Capitalization of borrowing costs will continue if the interruption is a necessary part of the process of bringing the asset under acquisition, construction or production to working condition for its intended use.

(3) Capitalization suspension period

A. Capitalization of borrowing costs suspends when the acquisition, construction or production of an asset eligible for capitalization is interrupted abnormally for 3 months or longer continuously.

B. Capitalization of borrowing costs ceases when the acquisition, construction or production of an asset eligible for capitalization reaches intended using or sale conditions.

C. When the acquisition, construction or production of an asset eligible for capitalization is completed in parts and a completed part can be individually utilized, capitalization of borrowing costs in relation to this part ceases.

(4) Computation of capitalization for borrowing costs

A. For a specific-purpose borrowing for acquisition, construction or production of an asset eligible for capitalization, the amount of borrowing costs is determined as the actual interest expense incurred on that borrowing for the current period less any bank interest earned from depositing the borrowed funds before being used by the asset or any investment income from the temporary investment of those funds.

B. Where general-purpose borrowings for acquisition, construction or production of an asset eligible for capitalization are occupied during the period of capitalization of borrowing costs of the Company, the amount of interests to be capitalized on such general-purpose borrowings is computed by the following formula:

The amount of interests to be capitalized for general-purpose borrowings = The weighted average of the excess of cumulative asset expenditures over the asset expenditures of specific-purpose borrowings × capitalization rate of general-purpose borrowings occupied.

The capitalization rate of general-purpose borrowings = The weighted average interest rate of general-purpose borrowings occupied = “Sum of the actual amounts of interests on general-purpose borrowings occupied” ÷ “The weighted average of principals of general-purpose borrowings occupied”.

The weighted average of principals of specific-purpose borrowings occupied = ∑(principal of each general-purpose borrowing occupied × “number of days occupied by each general-purpose borrowing during the current period” ÷ “number of days of the current period”).


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C. If there is a discount or premium on the borrowings of the Company, the interest cost is adjusted for each accounting period by the amount of such discount or premium to be amortized using the effective interest method.

D. The amount of interest to be capitalized for each accounting period will not exceed the actual amount of interests incurred on relevant borrowings for the current period.

17. Biological Assets

Not applicable.

18. Oil and gas assets

Not applicable.

19. Intangible Assets

(1) Pricing of intangible assets

Intangible assets of the Company are measured initially at cost method, and the cost is determined as follows:

A. The costs of any purchased intangible asset include the purchase price, the relevant taxes and other expenditures directly attributable to the purpose of making the asset reaches its intended use. Where the payment for an intangible asset is delayed beyond the normal credit terms, which is of financing nature, the cost of the intangible asset is determined based on the present value of purchase price. The difference between actual payment price and the present value of purchase price, except that eligible for capitalization shall be capitalized, is charged to current profits and losses of credit period.

B. Expenditure during the development phase of internal R & D projects of the Company that meets all of the following conditions is recognized as intangible asset:

a. it is technically feasible to complete the intangible asset so that it will be available for use or sale;

b. the Company has the intention to complete the intangible asset and use or sell it;

c. the Company can demonstrate the ways in which the intangible asset will generate economic benefits, including the evidence of the existence of a market for the output of the intangible asset or the intangible asset itself or, if the intangible asset will be used internally, the usefulness of the intangible asset;

d. the availability of adequate technical, financial and other resources to complete the development and the ability to use or sell the intangible asset;

e. the expenditure attributable to the intangible asset during its development phase can be reliably measured.

C. For an intangible asset received as a capital contribution by an investor, its cost is measured at the value stipulated in the investment contract or agreement, unless the value so agreed is deemed unfair.

(2) Estimation of service life of an intangible asset with finite service life

A. For an intangible asset coming from contractual or other legal rights, the service life shall not exceed the period of the contractual or other legal rights;

B. If the contractual or other legal rights may be renewed, and there is evidence showing that the renewal by the Company needs no significant cost, the renewal period is also included into the service life;

C. If the contractual or other legal service life is not available, service life shall be determined as the period over which it is expected to bring economic benefits to the Company through a comprehensive analysis including comparison with counterparts, reference to historical experience, expert argumentation, etc.

D. For an intangible asset with no foreseeable limit to the period over which it is expected to bring economic benefits to the Company, it is treated as an intangible asset with indefinite service life.

Item Estimated service life Basis Land use rights 35-50 Legal use rights

Mining and prospecting rights 5-20 Contractual or inferred period over which it is expected to bring economic benefits to the Company.


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Non-patented technologies 10 Contractual or inferred period over which it is expected to bring economic benefits to the Company.

Patented technologies 10 Contractual or inferred period over which it is expected to bring economic benefits to the Company.

Software 10 Contractual or inferred period over which it is expected to bring economic benefits to the Company.

(3) Determination criteria of service life of an intangible asset with indefinite service life

A. For an intangible asset arising from contractual or other legal rights, the service life shall not exceed the period of the contractual or other legal rights; if the contractual or other legal rights may be renewed, and there is evidence showing that the renewal by the Company needs no significant cost, the renewal period is also included into the service life

B. If the contractual or other legal service life is not available, service life shall be determined by the period over which it is expected to bring economic benefits to the Company through a comprehensive analysis including comparison with counterparts, reference to historical experience, expert argumentation, etc;

C. For an intangible asset with no foreseeable limit to the period over which it is expected to bring economic benefits to the Company, it is treated as an intangible asset with indefinite service life.

(4) Accrual of impairment provision of intangible assets

A. Impairment assessment of intangible assets

a. The Company assesses at each balance sheet date the impairment loss of intangible assets with a finite service life if there is indication that the intangible assets are impaired. Intangible assets with indefinite service life are tested for impairment at each balance sheet, irrespective of whether there is any indication of impairment.

b. After the impairment test, the Company estimates the recoverable amount of an intangible asset. Recoverable amount is the higher of the fair value of an intangible asset less disposal costs and its present value of the estimated future cash flows.

c. If the recoverable amount of the intangible asset is less than its book value, the book value is reduced to its recoverable amount. The reduction is recognized as an impairment loss of intangible asset and charged to current profits and losses, and an impairment provision of the intangible asset is accrued accordingly.

d. After the recognition of an impairment loss, the depreciation (amortization) expenses for the intangible asset is adjusted in future periods to allocate the adjusted intangible asset's book value (less its estimated residual value) systematically over its remaining service life.

e. Once the impairment loss of an intangible asset is recognized, it will not be reversed in any subsequent period.

B. Accrual of impairment provision of intangible assets. If there is any indication that an intangible asset may be impaired, the Company estimates its recoverable amount on individual basis. If it is hard to estimate the recoverable amount of an individual intangible asset, the recoverable amount of the asset group to which the intangible asset belongs will be estimated and adopted as the basis for determining the recoverable amount of the asset group.

(5) Criteria for classification of research phase and development phase of internal R&D projects

The Company classified an internal R&D project into research phase and development phase based on the actual circumstances of R&D.

A. Research phase

The term "research phase" refers to the phase of innovative and planned investigation and research activities undertaken for the purpose of gaining new scientific or technological knowledge.

B. Development

The term "development phase" refers to the phase of application of research findings or other knowledge to a plan or design for the production of new or substantially improved materials, devices or products before the start of commercial production or use.


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(6) Calculation of expenditures for internal R&D projects

The research expenditures for internal R&D projects of the Company are charged to the current profits and losses.

Expenditure during the development phase of internal R & D projects that meets all of the following conditions is recognized as intangible asset:

A. it is technically feasible to complete the intangible asset so that it will be available for use or sale;

B. the Company has the intention to complete the intangible asset and use or sell it;

C. the Company can demonstrate the ways in which the intangible asset will generate economic benefits, including the evidence of the existence of a market for the output of the intangible asset or the intangible asset itself or, if the intangible asset will be used internally, the usefulness of the intangible asset;

D. the availability of adequate technical, financial and other resources to complete the development and the ability to use or sell the intangible asset;

E. the expenditure attributable to the intangible asset during its development phase can be reliably measured.

20. Long-term Deferred Expenses

Long-term deferred expenses refer to the expenses incurred but shall be borne and amortized in the current period and subsequent periods in more than one year, including modification expenses for fixed assets leased in manner of operating leases.

Long-term deferred expenses are entered into the book at actual costs and amortized in equal installments over the expected beneficiary periods. If certain long-term deferred expense fails to benefit the Company any more, it is charged to current profits and losses.

21. Assets Transferred under Repurchase Agreements

Not applicable.

22. Estimated liabilities

(1) Recognition criteria of estimated liabilities

An obligation (including the obligation arising from an executory contract that becomes onerous and that restructuring obligation) related to a contingency is recognized as an estimated liability when all of the following conditions are satisfied:

A. the obligation is a present obligation of the enterprise;

B. the performance of this obligation is very likely to result in outflow of economic interest of the enterprise;

C. the amount of the obligation can be measured reliably.

Recognition criteria of restructuring obligation:

A. A detailed formal restructuring plan is provided, identifying the businesses involved by the restructuring, the principal locations, the number of employees who will be compensated and their position nature, estimated restructuring expenditure, and the implementation time of the plan;

B. The restructuring plan has been declared to the general public.

(2) Measurement of estimated liabilities

The estimated liability is initially measured at the best estimate of the expenditure required to perform related present obligation. If the contingencies involve only a single item, the best estimate is determined in the light of the most likely outcome. If the contingencies involve two or more items, the best estimate is calculated and determined according to all possible outcomes and the relevant probabilities.

In reaching its best estimate, the Company takes into account the factors pertaining to a contingency such as the risks, uncertainties and time value of money when ascertaining the best estimate. Where the effect of time value of


102

money is significant, the best estimate is determined by discounting the expected future cash flows.

If some or all of the expenditure to settle an estimated liability is expected to be reimbursed by another party, the reimbursement is recognized as a separate asset when, and only when, it is virtually certain that reimbursement will be received if the Company discharges the estimated liability. The reimbursement amount recognized will not exceed the book value of the estimated liability.

23. Share-based Payments and Equity Instruments

(1) Category of Share-based Payment

Share-based payments can be distinguished into equity-settled share-based payments and cash-settled share-based payments.

(2) Methods for determining fair value of equity instruments

For an equity instrument like stock option which has an active market, the Company uses the quoted price in the active market to establish its fair value. For an equity instrument like stock option which has no active market, the Company establishes its fair value by using the option pricing model.

(3) Basis for determining the best estimate of the number of executable equity instruments

At each balance sheet date during the waiting period, the Company makes the best estimate according to the latest information of the number of executable employees and revises the number of executable equity instruments. On vesting date, the final estimate of number of executable equity instruments shall be equal to the real number of executable equity instruments.

(4) Accounting process pertaining to implementation, modification and termination of share-based payment scheme

Not applicable.

24. Repurchase of Share Capitals

Not applicable.

25. Revenue

(1) Recognition criteria of revenue from sales of goods

Revenue from sales of goods is recognized only when all the following conditions are met: A. the enterprise has transferred to the buyer the significant risks and rewards of ownership of the goods; B. the enterprise retains neither continuing managerial involvement that is usually associated with the ownership nor effective control over the goods sold; C. the amount of revenue can be measured reliably; C. it is probable that the associated economic benefits will flow into the Company; and E. the associated costs incurred or to be incurred can be measured reliably. Revenue from sales of goods is measured at the prices stipulated in the sales contract or agreement received or receivable from the buyer, unless such prices are deemed unfair. Where the receipt of prices under the contract or agreement is effected on a deferred basis, which is of financing intention, the revenue is measured at the fair value of the prices stipulated in the sales contract or agreement. The difference between the prices receivable under the contract or agreement and their fair value is amortized using the effective interest method over the term of the contract or agreement and charged to current profits and losses. If any cash discount is involved in the sales of goods, the revenue is ascertained according to the amount prior to the deduction of the cash discount. If any trade discount is involved in the sales of goods, the revenue is ascertained according to the amount after the deduction of the trade discount. As to any sales discount arising from the goods sold whose revenue from the sales has been recognized by the Company, the revenue is offset against the sales income of goods in current period.

As to any sales discount arising from any the goods sold whose revenue from the sales has been refunded by the Company, the revenue is offset against the sales income of goods in current period.

(2) Recognition criteria of revenue from abalienating the right to use assets

The revenue from abalienating the right to use assets comprises interest revenue and royalty revenue.

Revenue from abalienating the right to use assets can be recognized when all of the following conditions are


103

satisfied:

A. it is very likely that the associated economic benefits will flow into the Company;

B. the amount of the revenue can be measured reliably.

(3) Recognition criteria of revenue from rendering of services

(4) The basis and method of determining the stage of completion of a transaction when recognizing the revenue from rendering services and revenue from construction contracts by percentage of completion

At the balance sheet date, where the outcome of a transaction involving the rendering of services can be estimated reliably, the revenue from the rendering of services is recognized using the percentage of completion method, i.e. revenue and expenses in association with the rendering of services are recognized by reference to the stage of completion of the transaction.

The outcome of a transaction can be reliably estimated when all of the following conditions are satisfied:

A. the amount of the revenue can be measured reliably;

B. it is very likely that the associated economic benefits will flow into the enterprise;

C. the stage of completion of the transaction can be determined reliably;

D. the costs incurred or to be incurred from the transaction can be measured reliably.

When the rendering of services is started and completed within the same accounting year, the revenue is recognized at the time of completion of the services as the total prices under the contract or agreement.

Where the outcome of a transaction involving the rendering of services cannot be estimated reliably:

A. if the service costs incurred are expected to be recoverable, service revenues are recognized as the costs incurred, and the service cost shall be carried forward at the same amount;

B. if the service costs incurred are not expected to be recoverable, the service costs incurred are charged to current profits and losses and no service revenue is recognized.

When a contract or agreement signed between the Company and another enterprise contains both sales of goods and rendering of services, if possible, the sales of goods and the rendering of services are distinguished from each other and measured separately. If the sales of goods and the rendering of services cannot be distinguished from each other, or when the two can be distinguished from each other but cannot be measured respectively, they are both treated as the sales of goods.

26. Government Subsidies

(1) Classification

Government subsidies are recognized when meeting the conditions attached to government subsidies and two conditions that the Company can receive the government subsidies, and include financial appropriations, financial discounts, tax refunds and non-monetary assets from the government at no considerations.

(2) Accounting process

Government subsidies to the Company for purchasing, constructing or otherwise acquiring a fixed asset are measured at fair value or, if such fair value cannot be measured reliably, at nominal value. The government subsidies related to the assets are recognized as deferred incomes and evenly distributed over the service life of the related assets and charged to current profits and losses. However, a government subsidies measured at nominal value is directly charged to current profits and losses.

Government subsidies other than those related to an asset are measured at the amount received or receivable. The government subsidies for compensating related expenses or losses to be incurred in subsequent periods are recognized as deferred incomes, and charged to current profits and losses of the period in which the related costs are recognized. The government subsidies for compensating related expenses or losses already incurred are directly charged to current profits and losses.

For the government subsidies recognized by the Company that must be repaid:


104

A. If there is related deferred income, the repayment is offset against the book balance of the deferred income, and any excess is charged to current profits and losses.

B. If there is no related deferred income, the repayment is directly charged to current profits and losses.

27. Deferred Income Tax Assets and Deferred Income Tax Liabilities

(1) Basis for determination of deferred income tax assets

A. Deferred income tax assets arising from deductible temporary differences are recognized to the extent that it is very likely that taxable profits will be available against which the deductible temporary differences can be utilized in future periods. Future taxable incomes that will very likely be available include the taxable incomes arising from the ordinary course of business and the increased taxable incomes attributable to the taxable temporary differences carried forward during the period in which deductible temporary differences are reversed. B. For deductible losses and tax credits that can be carried forward, deferred income tax assets are recognized to the extent that it is very likely that future taxable profits will be available against which the deductible losses and tax credits can be utilized. C. At the balance sheet date, the book values of deferred income tax assets are reviewed and reduced to the extent that it is very unlikely that sufficient taxable incomes will be available in the future to deduct the benefit of deferred income tax assets. Such deduction amount is reversed when it is very likely that sufficient taxable profits will be available.

(2) Basis for determination of deferred income tax liabilities

Deferred income tax liabilities are recognized for all taxable temporary differences due but not settled arising in current and prior periods except where the taxable temporary difference arises from goodwill or a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable incomes.

28. Operating Leases and Finance Leases

(1) Accounting process for operating leases

A. Leased-in assets under operating leases

Operating lease rents are recognized on a straight-line basis over relevant lease term, and charged to the cost of related asset or current profits and losses. Initial direct costs incurred are charged to current profits and losses.

Contingent rents are charged to current profits and losses when incurred.

B. Leased-out assets under operating leases

Operating lease rents are recognized on a straight-line basis over relevant lease term, and charged to current profits and losses. Initial direct costs incurred are charged to current profits and losses.

Fixed assets leased out under operating leases are depreciated in accordance with the depreciation policy which is consistent with that for assets. Other leased-out assets under operating leases are amortized on a systematic and rational basis.


Where a sale and leaseback transaction is determined as an operating lease, the balance between the sales price and the book value of the asset is deferred and amortized as an adjustment to the lease payments in light of the recognition method of rents during the lease term However, in case there is concrete evidence showing that the sale and leaseback transaction is based on the fair value, the balance between the sales price and the book value of the asset is charged to current profits and losses.

(2) Accounting process for finance leases

A. Finance leases are recognized when one or more of the following conditions are satisfied:

a. The leasor transfers ownership of the asset to the leasee by the end of the lease term;

b. The lease contains a bargain purchase option rested upon the leasee to purchase the leased asset at a price which is expected to be sufficiently lower than the fair value at the date the option becomes exercisable, therefore,


105

at the beginning of the lease, it is reasonably certain that the option will be exercised;

c. The lease term is for the major part of the asset’s service life even if ownership is not transferred;

d. At the beginning date of the lease, the present value of the minimum lease payments almost equivalent to the fair value of the leased asset at the beginning date of the lease; and at the beginning date of the lease, the present value of the minimum amount received almost equivalent to the fair value of the leased asset at the beginning date of the lease.

e. The leased asset is of a specialized nature such that only the leasee can use it without major modifications being made.

B. Leased-in asset under finance leases

When the Company acquires an asset under a finance lease, the asset is measured at an amount equal to the lower of fair value of leased asset and the present value of the minimum lease payments, each determined at the beginning of the lease. The minimum lease payments are recorded as long-term payables, and the difference between the value of the leased asset and the minimum lease payments is recognized as unrecognized finance charges. Initial direct costs that are attributable to a finance lease incurred by the Company during the course of negotiation and execution of the lease contract, such as commissions, legal fees, travel expenses and stamp tax, are charged to the value of leased-in asset.

Unrecognized finance charge is charged to finance charge for current period using the effective interest method over the lease term.

Assets acquired under finance leases are depreciated in accordance with the depreciation policy which is consistent with that for self-owned fixed assets:

a. if it can be rationally determined that the Company will gain ownership of the leased asset at the end of the lease term, the leased asset will be depreciated over its service life;

b. if it can not be rationally determined that the Company will gain ownership of the leased asset at the end of the lease term, the leased asset will be depreciated over the shorter of the lease term and the service life.


C. Leased-out asset under finance leases

At the commencement of the lease term, the aggregate of the minimum lease receivable at the beginning of the lease and the initial direct costs is recognized as the entry value of finance lease receivable, and the unguaranteed residual value is recorded at the same time. The difference between the aggregate of the minimum lease receivable, the initial direct costs and the unguaranteed residual value and the aggregate of their present values is recognized as unearned finance income.

Unearned finance income is recognized as finance income for the period using the effective interest method over the lease term.


Where a sale and leaseback transaction is determined as a finance lease, the balance between the sales price and the book value of the asset is deferred and amortized as an adjustment to depreciation in light of the depreciation pattern of the leased asset.

(3) Accounting process for sale and leaseback transactions

Not applicable.

29. Assets Held for Sale

(1) Recognition criteria of Assets Held for Sale

Not applicable.

(2) Accounting process for assets held for sale

Not applicable.


106

30. Asset Securitization

Not applicable.

31. Hedge Accounting

(1) Recognition of Hedge Accounting

Hedge accounting is applied only when the following conditions are satisfied concurrently: A) the Company formally designates the hedge relationship at the beginning of a hedge; B) the hedge is expected to be highly effective and is compliant with the risk management strategy set by the Company for such hedge relationship at the very beginning; C) it is very likely that the forecast transaction of the Company will occur and will ultimately expose the Company to risks of changes in cash flows affecting the profits and losses; D) the effectiveness of the hedge can be measured the Company reliably; and E) the hedge effectiveness can be continuously assessed by the Company and the hedge can be guaranteed as highly effective throughout the accounting periods during which the hedge relationship was designated.

(2) Classification of Hedge Accounting

For the purpose of hedge accounting, hedges are classified as:

A. fair value hedges, which are hedges of the risk to changes in the fair value of a recognized asset or liability or a previously unrecognized firm commitment, or to changes in the fair value of the identifiable portion of a recognized asset or liability or a previously unrecognized firm commitment. Such changes in value are attributable to a particular risk and could affect the Company’s profits and losses.

B. cash flow hedges, which are hedges of the risk to changes in cash flows that is attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction and could affect the Company’s profits and losses.

(3) Hedging instrument

A hedging instrument is a designated derivative whose changes in fair value or cash flows are expected to offset changes in fair value or cash flows of the hedged item.

(4) Hedged risk

Price risk in purchase of raw materials and sales of products attributable to market pricing mechanisms (including but not limited to spot price, average price and price designated by certain party).

(5) Criteria for determining effectiveness of hedges

A hedge is regarded as highly effective if both of the following conditions are satisfied:

A. at the beginning and in subsequent periods, the hedge is expected to be highly effective in offsetting the changes in fair value or cash flows attributable to the hedged risk during the period for which the hedge is designated;

B. the actual offsetting results are within a range of 80% to 125%.

The effectiveness of hedge is assessed by the Company when preparing annual financial reports.

(6) Hedge accounting process

A. Fair value hedges

The changes in fair value of the derivative hedging instrument is charged to current profits and losses. The changes in fair value of the hedged item attributable to the hedging risk are charge to current profits and losses, and the book value of the hedged item is adjusted accordingly. If a hedged item is an unrecognized firm commitment, the accumulative change in the fair value of the firm commitment attributable to the hedged risk is recognized as an asset or liability and the related gain or loss is charged to current profits and losses. The changes in fair value of the hedging instrument is also charged to current profits and losses. When a hedging instrument expires or is sold, terminated or exercised, or if the fair value hedge no longer meets the criteria for hedge accounting or its designation as a hedge is revoked, the Company discontinues the hedge accounting.

B. Cash flow hedges


107

The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognized directly as owners’ equity. If a hedge of a forecast transaction subsequently results in the recognition of a financial asset or a financial liability of the Company, the associated profits or losses previously recognized as owner’s equity are transferred out and charged to current profits and losses of the same period during which the financial asset or financial liability affects the profits and losses of the Company. However, if the Company expects that all or a part of net losses recognized immediately into owner’s equity is unrecoverable in future accounting periods, the part that is expected to be unrecoverable shall be transferred out and charged to current profits and losses. The part of the profits or losses in the hedging instrument that is determined to be an ineffective hedge, i.e. the remaining profits and losses after deducting the profits and losses recognized directly into owner’s equity, is recognized into current profits and losses. When a hedging instrument expires or is sold, contractually terminated or exercised, or if the cash flow hedge no longer meets the criteria for hedge accounting, the forecast transaction is no longer expected to occur, or its designation of a hedge relationship is revoked by the Company, the cash flow hedge will be terminated.

32. Changes in Significant Accounting Policies and Estimates

Are principal accounting policies and accounting estimates changed in the reporting period?

□ Yes √ No

(1) changes of accounting policy

Are principal accounting policies changed in the reporting period?

□ Yes √ No

(2) Change of accounting estimates

Are principal accounting estimates changed in the reporting period?

□ Yes √ No

33. Correction of accountant errors in previous period

Are previous period accounting errors discovered in the reporting period?

√ Yes □ No

(1) Retrospective restatement

Are previous period accounting errors discovered in the reporting period that must be retrospectively restated?

√ Yes □ No

Notes:

The Company's subsidiary Chifeng NFC Baiyinnuoer Mining Co., Ltd. was entitled to the Preferential Policy on Enterprise Income Tax under the Development Strategy for Western Region in 2011 pursuant to the competent local tax authority’s approval, so the 2011 enterprise income tax payable was adjusted by reducing an amount of RMB18,445,054.22. The Company made a retrospective adjustment to the accounting errors of previous period in this regard and the owner’s equity was adjusted accordingly, in which: the undistributed profit and minority shareholders’ equity as at December 31, 2011 were increased by RMB9,648,607.86 and RMB8,796,446.36 respectively, taxes payable as at December 31, 2011 were decreased by RMB18,445,054.24; and the net profit in 2011 was increased by RMB18,445,054.22, including RMB9,648,607.86 attributable to the parent company and RMB8,796,446.36 of the minority equity.

(2) Prospective application

Are previous period accounting errors discovered in the reporting period that must be prospective application?

□ Yes √ No

34. Other Significant Accounting Policies and Estimates and Preparation Method of Financial Statements

(1) Income taxes accounting process


108

Income taxes are calculated using the balance sheet liability method.

The Company recognizes the income tax accrued but unpaid for the current and previous periods as a liability, and recognizes the part of the income tax already paid less the payable amount as an asset.

A. Recognition

a. The Company determines the tax base when recognizing an asset or liability. Deferred income tax assets or liabilities are recognized for all differences between the book value of an asset or liability and their tax base.

b. For deductible temporary differences associated with investments in subsidiaries, associates and joint ventures, the Company recognizes the corresponding deferred income tax asset if all the following conditions are satisfied:

① it is very likely that the temporary difference will be reversed in the foreseeable future;

② it is very likely that taxable incomes will be available in the future, against which the temporary difference can be utilized.

③ for deductible losses and tax credits that can be carried forward, deferred income tax assets are recognized to the extent that it is very likely that future taxable incomes will be available against which the deductible losses and tax credits can be utilized.

B. Measurement

a. Deferred income tax assets and liabilities are measured at the tax rates and bases that are expected to apply to the period when the asset is recovered or the liability is settled.

b. Current and deferred income taxes are recognized as income tax expenses or incomes and charged to current profits and losses, except for those incurred under the following circumstances:

① business combinations;

② transactions or events recognized directly in owners’ equity.

Current and deferred income taxes associated with transactions or events recognized directly in shareholders’ equity are charged to shareholders’ equity.

c. The sum of current income taxes (payable) and deferred income tax expenses (or incomes) are recognized as income tax expenses (or incomes) in the income statement except for the tax effect of transactions or events charged directly to owners’ equity.

(2) Non-monetary asset exchange

Where an exchange of non-monetary assets satisfies both of the following conditions, the cost of the asset received is recorded at an amount equal to its fair value plus related tax payments, and the difference between the cost of the asset received and the sum of the book value of the asset surrendered and related taxes payable plus (minus) any boot paid (received) is recognized into profits and losses of the non-monetary assets exchange.

A. the exchange is commercial in nature; and

B. the fair value the asset received or surrendered can be measured reliably.

If the fair values of both the assets received and surrendered can be reliably measured, the fair value of the asset surrendered is taken as the basis for determining the cost of the asset received, unless there is any exact evidence showing that the fair value of the asset received is more reliable.

Where any non-monetary asset transaction does not meet the foregoing conditions, the cost of the asset received is measured at the sum of book value and related taxes payable plus (minus) any boot paid (received); and no profit and loss is recognized.

Debt restructuring

Debt restructuring events are measured at fair value.

Where a debt restructuring event involves contingent payable, such contingent payable is recognized as estimated


109

liability if it satisfies the criteria for recognition of estimated liabilities.

Where a debt restructuring event involves contingent receivable, such contingent payable is charged to current profits and losses when the payment is actually received.

(3) Segment Reporting

Reportable segments are identified based on operating segments which are determined based on the structure of the Company’s internal organization, management requirements and internal reporting system.

An operating segment is a component of the Company that meets the following conditions:

A. it engages in business activities from which it may earn revenues and incur expenses;

B. its operating results are regularly reviewed by the enterprise’s management to make decisions about resource to be allocated to the segment and assess its performance;

C. the enterprise is able to obtain its accounting information regarding financial position, operating results and cash flows, etc.

The Company’s reporting segments include:

A. nonferrous metal mining, ore dressing and smelting;

B. project contracting;

C. equipment manufacturing;

D. trade; and

E. others.

Accounting policies for operating segments are consistent with main accounting policies of the Company.

(4) Significant accounting estimates and judgments

The preparation of financial statements requires the management to make estimates and assumptions about the impact of uncertainties of subsequent events on the balance sheet date. Actual results may differ from these estimates. The aforesaid estimates and key assumptions and uncertainties are reviewed on a going concern basis. The impacts to accounting estimates are recognized in the period in which the estimate is revised, if the changes in accounting estimates affect that period only, or recognized in the period of the changes and future periods, if the change in accounting estimates affects both.

Determination of income tax involves judgment on the future tax treatment of certain transactions. The Company carefully evaluates tax implications of transactions and tax provisions are accrued accordingly. The tax implications of such transactions are reconsidered periodically to accommodate all changes in tax laws and rules. Deferred income tax assets are recognized for deductible tax losses and temporary deductible differences. As deferred income tax assets can only be recognized to the extent that it is very likely that future taxable incomes will be available to offset relevant deferred income tax assets, therefore the Company is required to assess the probability of obtaining future taxable incomes. The Company continuously reviews the judgment to deferred income assets, and corresponding deferred income tax assets are recognized if it is very likely that future taxable incomes available can be obtained.

V. Taxation

1. Main Taxes and Taxes Rates

Tax type Tax base Tax rate Value added tax (VAT) Added value 17%, 10%, 13%, 6% Consumption tax N/A N/A Business tax Taxable operating revenue 3% or 5% Urban maintenance and construction tax Turnover tax payable 5% or 7% Income tax Taxable income 25%


110

Resource tax Assessable volume of the taxable product or unit tax amount or tax rate

Education surcharge Turnover tax payable 3% or 5% Property tax Property value less 10%-30% 1.2% Land use tax Land grading

2. Tax Concession and Approval Documents

NFC (Shenyang) Pump Industry Co., Ltd., one of the subsidiaries of the Company and which was assessed as a high-tech enterprise with the approval document S.K.G.S.B.Z. [2012] X04020, is entitled to 15% preferential rate of enterprise income tax pursuant to applicable preferential tax policies.

Chifeng NFC Baiyinnuoer Mining Co., Ltd. has been enjoying the Preferential Policy on Enterprise Income Tax under the Development Strategy for Western Region since 2009. The applicable tax rate for the reporting period is 15%.

Chifeng NFC Kumba Hongye Zinc Co., Ltd., a foreign-funded enterprise, is entitled to the tax holiday of “two-year exemption and three-year half reduction” from 2008. A 50% reduction in enterprise income tax is applicable for the reporting period.

Tsairt Mineral Co., Ltd. is subject to 10% tax rate on enterprise income tax for taxable income up to MNT 3 billion and 25% tax rate for taxable profit exceeding MNT 3 billion.


111

VI. Business Combinations and Consolidated Financial Statements

1. Information of Subsidiaries

The parent company, China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd. and Yixing Xinwei Group Co., Ltd. established the joint venture NFC Southern Rare Earth (Xinfeng) Co., Ltd., with a registered capital of RMB1 billion, including paid-in capital RMB300 million. The Company holds 51% of the equity.

(1) Newly established or invested subsidiaries

Unit: Yuan

Full name of subsidiaries

Type of subsidiary

Registered address

Nature of business Registered capital Scope of business

Ending actual capital

contribution

Balance of other items

that in substance constitutes

in the subsidiary


(%)

Percentage of voting

power (%)

Consolidated or not? (Y/N)


equity

Amount of minority

shareholders’ equity to absorb profits or losses attributable to

minority interests

The part of owner’s equity of parent company for offsetting the

balance of the proportion of losses of this period that is

borne pro rata by minority

shareholders of a subsidiary after deducting the

owners’ equity of such subsidiary at the beginning of

the year Beijing NFC Ansha Real Estate Management LLC.

Shareholding subsidiary Beijing Service 1,100,000.00 Property

management 1,100,000.00 100.00% 100.00% Yes

CNFC Equipment Co., Ltd

Shareholding subsidiary Beijing Trade 14,000,000.00

Distribution of metallurgical and materials

8,000,000.00 57.14% 57.14% Yes 10,657,239.61

Tsairt Mineral Co., Ltd.

Shareholding subsidiary Mongolia Mining USD 100,000.00

Mining, processing, import & export

51,000.00 50.00% 50.00% Yes 225,896,662.96

Chifeng NFC Zinc Industry Co, Ltd.

Shareholding subsidiary

Chifeng, Inner Mongolia

Smelting 1,908,000,000.00

Nonferrous metals investment, development and marketing

998,000,000.00 52.31% 52.31% Yes 1,608,617,230.64 -52,065,981.28

NFC Beijing Metal Resources Co., Ltd.

Shareholding subsidiary Beijing Trading &

investment 11,000,000.00

Project investment management & marketing of metallic materials and minerals

7,235,900.00 72.73% 72.73% Yes 1,886,818.57 -44,652.08


112

China International Alumina Development Co., Ltd.

Shareholding subsidiary Beijing Trade 50,000,000.00

Technological development, technological, products and agency import & export

22,760,000.00 45.00% 45.00% Yes 24,577,742.19 -736,700.00

Chifeng NFC Kumba Hongye Zinc Co., Ltd.,



Smelting 170,000,000.00

Processing and sales of nonferrous metals and by-product

105,400,000.00 62.00% 62.00% Yes

China Nonferrous Metal (Erenhot) Co., Ltd.

Wholly-owned subsidiary

Erenhot, Inner Mongolia

Trade 1,000,000.00

Contracting of project equipment, import of materials and general trade

1,000,000.00 100.00% 100.00% Yes

NFC Southern Rare Earths (Xinfeng) Co., Ltd.


Xinfeng County, Guangdong

Smelting 300,000,000.00

Rare earth minerals processing and production

90,000,000.00 100.00% 100.00% Yes

Tsairt Freight Co., Ltd.

Shareholding subsidiary Mongolia Transportation USD 10,000.00 Transportation of

products USD 5,100.00 51.00% 51.00% Yes

Laos Ciac Mekong Mineral Co., Ltd.

Shareholding subsidiary Laos Mining USD

1,000,000.00

Bauxite mine prospecting & exploration

USD 1,000,000.00 100.00% 100.00% Yes



Shenyang, Liaoning Manufacturing 150,000,000.00

Diaphragm pumps design, R&D, manufacturing and sales

150,000,000.00 100.00% 100.00% Yes 748,064.32

Chifeng NFC Baiyinnuo’er Mineral Industry Co., Ltd.



Mining 50,000,000.00 Lead & zinc mining, ore dressing and sales

50,000,000.00 100.00% 100.00% Yes

Mongolia Industrial Engineering Co., Ltd.

Shareholding subsidiary Mongolia Investment USD 143,000.00

Mineral resources prospecting & exploration

USD 100,100.00 70.00% 70.00% Yes 9,453.03 -168,909.28

Sino-Australia Resources (Laos) Company, Hong Kong Limited

Shareholding subsidiary Hong Kong Investment HKD10,000.00


HKD 5,100.00 51.00% 51.00% Yes



Guangzhou, Guangdong

Smelting 1,000,000,000.00 Rare earth products manufacturing

153,000,000.00 51.00% 51.00% Yes 149,052,803.05

Other notes to established or invested subsidiaries: none


113

(2) Subsidiaries acquired through business combination involving enterprises under common control

Unit: Yuan


Type of subsidiary

Registered address

Nature of business Registered capital Scope of

business


contribution


that in substance

constitutes in the subsidiary


(%)

Percentage of voting power

(%)



equity

Amount of minority

shareholders’ equity to

offset profits and losses of

minority interests





owners’ equity of such subsidiary at the beginning

of the year NFC (Shenyang) Metallurgical Machinery Co., Ltd.


Shenyang, Liaoning

Manufacturing 283,369,300.00

Manufacturing of equipment and spare parts

113,124,100.00 51.90% 51.90% Yes 83,402,231.44 -24,089,654.13

Kaifeng Resources Holding C., Ltd.


British Virgin Islands

Investment USD 800,000.00

Nonferrous metal resources development

124,856,100.00 100.00% 100.00% Yes -7,135,661.95 -1,379,350.27

Sino-Australia Resources (Laos) Company, Holdings Limited

Shareholding subsidiary Laos Investment USD 975,000.00


USD 99,450.00 51.00% 51.00% Yes

Other notes to subsidiaries acquired through business combination involving enterprises under common control

None.


114

(3) Subsidiaries acquired through business combination involving enterprises not under common control

Unit: Yuan


Type of subsidiary

Registered address

Nature of business

Registered capital Scope of business


contribution


that in substance constitutes

in the subsidiary


(%)

Percentage of voting power

(%)



equity

Amount of minority

shareholders’ equity to

offset profits and losses of

minority interests





owners’ equity of such subsidiary at the beginning of

the year Guangdong Zhujiang Rare Earths Co., Ltd.


Guangzhou, Guangdong Smelting 90,585,100.00 Rare earth products

manufacturing 67,198,400.00 71.75% 71.75% Yes 56,160,616.60 -9,923,979.21

Chifeng Hongye Zinc Smelting Company



Smelting 335,073,000.00

Manufacturing and processing of zinc ingot metal, sulfuric acid and other nonferrous metals

131,349,000.00 42.61% 42.61% Yes




Smelting 154,000,000.00

Manufacturing and processing of nonferrous metals

135,177,100.00 62.00% 62.00% Yes




Investment 10,000,000.00 Investment operation, management and consulting

10,000,000.00 100.00% 100.00% Yes

Other notes to subsidiaries acquired through business combination involving enterprises not under common control: none


115

2. Entities set up for special purpose or operating entities controlled through entrusted operation and lease

None.

3. Changes in consolidation scope

Changes in the scope of consolidated statement

During the reporting period, a new subsidiary NFC Southern Rare Earth (Xinfeng) Co., Ltd. was established, with registered address at Building 35, No. 18 Yard, Henglu Road, North Fengle Road, Huangpu District, Guangzhou, and registered capital of RMB 1 billion. And the Company holds 51% of equity of the subsidiary.


√ APPL □ N/A

There is one subsidiary newly included into the consolidation scope in this year, the details are:

In the reporting period, the Company and Yixing Xinwei Group Co., Ltd. established the joint venture NFC Southern Rare Earth (Xinfeng) Co., Ltd. in Guangzhou, Guangdong. The Company and Xinwei Group contributed RMB153,000,000 and RMB147,000,000 respectively in the joint venture, forming a shareholding structure of 51% (NFC) : 49% (Xinwei Group). The joint venture mainly engages in manufacturing and marketing of rare earth products.

There is one subsidiary decreased in the consolidation scope in this year, the details are:


4. Subsidiaries newly included into the consolidation scope and excluded from the consolidation scope for the reporting period

Subsidiaries newly included into the consolidation scope in this period, special purpose entities, business entities that having control through entrusted operation or leasing

Unit: Yuan Name Ending net assets Net profit in this period

NFC Rare Earths Company Limited 293,328,317.07 -6,671,682.93

Subsidiaries no longer included into the consolidation scope in this period, special purpose entities, business entities that having control through entrusted operation or leasing

Unit: Yuan

Name Net assets on disposal date Net profit between the beginning of the year and the date of disposal

Sino-America Network Consulting Co., Ltd. -21,451.68

5. Business combinations involving enterprises under common control for the reporting period

None.

6. Business combinations involving enterprises not under common control for the reporting period

None.

7. Reduction of subsidiaries through sales of equity losing control in the subsidiaries for the reporting period

None.

8. Reverse acquisition for the reporting period

None.


116

9. Consolidation by merger for the reporting period

None.

10. Exchange rate for translating major financial statement items of overseas entities

Balance Sheet: all items presented under Net Asset are translated at historical rate except undistributed profits and other items stated in the Balance Sheet are translated at the USD to CNY exchange rate of 6.2855 prevailing at the end of 2012; Income Statement: all the items are translated at the average rate of 6.3125 for the period from January 1, 2012 to December 31, 2012.

VII. Notes to Items in Consolidated Financial Statements

1. Monetary funds

Unit: Yuan

Item Ending balance Beginning balance

Amount in foreign currency

Exchange Rate Amount in RMB Amount in

foreign currency Exchange

Rate Amount in RMB

Cash: -- -- 3,360,743.80 -- -- 2,433,138.38 RMB -- -- 201,663.22 -- -- 514,206.57 USD 408,442.21 628.55% 2,567,263.51 254,165.39 630.09% 1,601,470.68 Others 591,817.07 317,461.13 Bank deposits: -- -- 1,737,977,915.61 -- -- 1,341,095,820.93 RMB -- -- 1,483,425,746.01 -- -- 922,632,016.05 USD 32,199,996.50 628.55% 202,393,077.98 45,266,430.32 630.09% 285,219,250.83 EUR 4,404,972.34 831.76% 36,638,797.93 14,849,418.40 816.25% 121,208,377.68 Others 15,520,293.69 12,036,176.37 Other monetary funds: -- -- 127,972,808.68 -- -- 169,486,149.02 RMB -- -- 114,086,619.87 -- -- 163,599,329.68 USD 502,137.81 628.55% 3,156,187.21 922,919.77 630.09% 5,815,225.18 EUR 1,290,035.78 831.76% 10,730,001.60 Others 71,594.16 Total -- -- 1,869,311,468.09 -- -- 1,513,015,108.33

Notes:

1. As at the end of the reporting period, USD23,637,191.38 was deposited in overseas banks.

2. As at the end of the reporting period, other currency funds of the Company consist of bank acceptance bill’s guarantee deposit of RMB87,624,747.43 and performance deposit of RMB36,212,069.51.

2. Trading financial assets

None.

3. Notes receivable

(1) Classification of notes receivable

Unit: Yuan Category Ending balance Beginning balance

Bank acceptance bills 300,972,926.68 181,781,266.49 Commercial acceptance bills 120,000,000.00 Total 420,972,926.68 181,781,266.49

(2) Pledged notes receivable at the end of reporting period


117

Unit: Yuan Drawer Date of Issue Maturity Amount Remarks

NFC (Shaanxi) Yulin New Materials Co., Ltd. October 30, 2012 April 30, 2013 6,732,000.00

Jiangsu Ruiming Steels Group Co., Ltd. November 12, 2012 April 14, 2013 4,411,000.00 NFC (Shaanxi) Yulin New Materials Co., Ltd. July 3, 2012 January 3, 2013 4,050,000.00

Chengchun (Changzhou) Metal Materials Co., Ltd. October 22, 2012 April 22, 2013 4,000,000.00

Inner Mongolia Baotou Steel Union Co., Ltd. September 3, 2012 March 3, 2013 3,000,000.00

Total -- -- 50,333,000.00 --

(3) Particulars of notes receivables reclassified to accounts receivable due to non-performance of the issuers or that were endorsed but outstanding

None.

Outstanding notes receivables endorsed by the Company

Unit: Yuan Drawer Date of Issue Maturity Amount Remarks

Shanghai Qianglian Logistics Co., Ltd. July 27, 2012 January 27, 2013 28,100,000.00 Shou Gang Casey Steel Co., Ltd. July 17, 2012 January 17, 2013 20,000,000.00 Hefei Midea Refrigeration Equipment Marketing Co., Ltd. August 28, 2012 February 28, 2013 20,000,000.00

Gree Electric Appliances (Hefei) Co., Ltd. July 13, 2012 January 13, 2013 11,770,986.00

Shougang Jingtang United Iron and Steel Co., Ltd. July 03, 2012 January 3, 2013 10,000,000.00

Total -- -- 710,811,077.85 --

4. Dividend receivable

None.

5. Interest receivable

(1) Interest receivable

Unit: Yuan Item Beginning balance Increase in this period Decrease in this period Ending balance

Interest of 7-day call deposits 0.00 114,575.63 0.00 114,575.63

Total 114,575.63 114,575.63

(2) Overdue interest

None.

6. Accounts receivable

(1) Disclosure of accounts receivable by categories:

Unit: Yuan

Category

Ending balance Beginning balance Book balance Bad debt provision Book balance Bad debt provision

Amount Percentage (%) Amount Percentage

(%) Amount Percentage (%) Amount Percentage

(%)


118

Receivables that are individually significant and for which bad debt provision is individually accrued

23,487,637.36 1.29% 23,487,637.36 18.73% 23,545,184.03 2.05% 23,545,184.03 20.71%

Receivables for which bad debt provision is collectively accrued on a portfolio basis Receivables for which bad debt provision is collectively accrued on a portfolio basis

1,735,956,064.55 95.64% 46,195,449.85 36.83% 1,077,439,863.63 93.93% 44,065,850.75 38.76%

Subtotal of portfolios 1,735,956,064.55 95.64% 46,195,449.85 36.83% 1,077,439,863.63 93.93% 44,065,850.75 38.76% Receivables that are individually insignificant but for which bad debt provision is individually accrued

55,731,592.56 3.07% 55,731,592.56 44.44% 46,091,389.98 4.02% 46,091,389.98 40.54%

Total 1,815,175,294.47 -- 125,414,679.77 -- 1,147,076,437.64 -- 113,702,424.76 --

Explanations for categories of accounts receivable: none

Receivables that are individually significant at the end of the period and for which bad debt provision is individually assessed

√ APPL □ N/A

Unit: Yuan

Accounts receivable Book balance Bad debt provision Receivables percentage (%) Reasons for provision

National Iranian Copper Industries Company 23,487,637.36 23,487,637.36 100% Slim chance of

recovery Total 23,487,637.36 23,487,637.36 -- --

Receivables in portfolios that bad debt provision is accrued based on aging analysis method:

√ APPL □ N/A

Unit: Yuan

Aging

Ending balance Beginning balance Book balance

Bad debt provision Book balance

Bad debt provision Amount Percentage

(%) Amount Percentage (%)

Within 1 year Including: -- -- -- -- -- -- 1,434,626,469.09 82.64% 739,355,489.87 68.62% Subtotal of within 1 year 1,434,626,469.09 82.64% 739,355,489.87 68.62%

1-2 years 140,361,048.73 8.09% 4,210,831.46 178,604,456.10 16.58% 5,358,133.69 2- 3 years 67,791,376.38 3.91% 6,779,137.64 89,135,733.51 8.27% 8,913,573.35 3- 4 years 45,448,705.78 2.62% 13,634,611.74 12,237,800.61 1.14% 3,671,340.19 4- 5 years 11,466,816.50 0.66% 3,440,044.95 14,651,941.21 1.36% 4,395,582.37 More than 5 years 36,261,648.07 2.08% 18,130,824.06 43,454,442.33 4.03% 21,727,221.15 Total 1,735,956,064.55 -- 46,195,449.85 1,077,439,863.63 -- 44,065,850.75

Receivables in portfolios that bad debt provision is accrued based on balance percentage method

□ APPL √ N/A

Receivables in portfolios that bad debt provision is accrued based on other methods

□ APPL √ N/A

Receivables those are individually insignificant at the end of the period but for which bad debt provision is individually assessed


119

√ APPL □ N/A

Unit: Yuan

Accounts receivable Book balance Bad debt provision Provision percentage (%) Reasons for provision

Project contracting accounts 16,313,944.29 16,313,944.29 100% Slim chance of recovery

Labor service project accounts 16,631,277.42 16,631,277.42 100% Slim chance of recovery

Trade accounts 15,554,204.29 15,554,204.29 100% Slim chance of recovery Equipment sales accounts 360,817.55 360,817.55 100% Slim chance of recovery Nonferrous metal resources sales accounts 6,871,349.01 6,871,349.01 100% Slim chance of recovery

100% Slim chance of recovery Total 55,731,592.56 55,731,592.56 -- --

(2) Write-back and recovery of accounts receivables in the reporting period

None.

(3) Actual written-off accounts receivables in the reporting period

Unit: Yuan

Name of entities Nature of accounts receivable Write-off date Written-off amount Reason

Arising From Related Party

Transaction or Not Qinghai Aluminum Huatong Carbon Co., Ltd.

Loan February 13, 2012 34,440.00 Debt restructuring No

Total -- -- 34,440.00 -- --

Notes for write-off of receivables:

The aforesaid accounts receivables were written off due to a debt restructuring agreement executed by and between NFC (Shenyang) Metallurgic Machinery Co., Ltd., one of the subsidiaries of the Company, and Qinghai Aluminum Huatong Carbon Co., Ltd. The original book balance was RMB49,200.00, among which bad debt provision of RMB14,760.00 has been accrued and the remaining RMB34,440.00 has been written off.

(4) Account receivables due from shareholders holding 5% or more of voting rights of the Company in the reporting period

Unit: Yuan

Name of entities Ending balance Beginning balance

Book balance Amount of Provision for Bad Debt Book balance Amount of Provision

for Bad Debt China Nonferrous Metal Mining (Group) Co., Ltd. 5,911,260.41 473,165.00

Total 5,911,260.41 473,165.00

(5) Top five debtors of accounts receivable due

Unit: Yuan

Name of entity Relationship with the Company Amount Aging Percentage in total

accounts receivables (%) National Regulation Center of Supplies Reserve Customer 161,194,058.59 Within 1 year 8.88%

Chiping Xingfa Materials Supply Service Co., Ltd. Customer 110,599,000.00 Within 1 year, 1-3 years 6.09%

ZISCO Customer 64,801,459.58 Within 1 year 3.57%


120

Shanghai Rongyuan Nonferrous Metal Co., Ltd. Customer 54,098,000.01 Within 1 year 2.98%

Egypt Anode Block Co.(S.A.E) Customer 51,130,989.98 Within 1 year 2.82% Total -- 441,823,508.16 -- 24.34%

(6) Accounts receivable due from related parties

Unit: Yuan

Name of entities Relationship with the Company Amount Percentage in total accounts receivable (%)

CNMC International Trade Co., Ltd. Entity under common control with the Company 11,632,291.65 0.64% Xinyang Trade Co., Ltd. Entity under common control with the Company 6,793,201.33 0.37% China Nonferrous Metal Mining (Group) Co., Ltd. Actual Controllers 5,911,260.41 0.33%

Chifeng Dajingzi Tin Co., Ltd. Entity under common control with the Company 384,000.00 0.02% Tieling Beneficiation Reagent Co., Ltd. Entity under common control with the Company 154,080.00 0.01%

CNMC Nickel Co., Ltd., Entity under common control with the Company 72,070.00 0% NFCA Mining Co., Ltd. Entity under common control with the Company 13,924.20 0% Total -- 24,960,827.59 1.37%

(7) Accounts receivables derecognized

None.

(8) Amount of assets and liabilities arising from continuing involvement of securitized accounts receivable

None.

7. Other receivables

(1) Disclosure of other accounts receivable by categories

Unit: Yuan

Category


Amount Percentage (%) Amount Percentage

(%) Amount Percentage (%) Amount Percentage

(%) Other receivables that are individually significant and for which bad debt provision is individually accrued

197,461,805.69 46.95% 5,270,000.00 6.93% 243,665,350.86 37.25% 5,270,000.00 7.86%

Other receivables for which bad debt provision is collectively accrued on a portfolio basis 206,802,646.15 49.18% 56,165,843.24 73.81% 395,510,531.46 60.47% 50,342,834.16 75.1% Subtotal of portfolios 206,802,646.15 49.18% 56,165,843.24 73.81% 395,510,531.46 60.47% 50,342,834.16 75.1% Other receivables that are individually insignificant but for which bad debt provision is individually accrued

16,272,092.76 3.87% 14,659,762.53 19.26% 14,906,113.78 2.28% 11,424,168.45 17.04%

Total 420,536,544.60 -- 76,095,605.77 -- 654,081,996.10 -- 67,037,002.61 --

Explanations for categories of other accounts receivable: none

Other receivables that are ending individually significant and for which bad debt provision is individually assessed


121

√ APPL □ N/A

Unit: Yuan

Other receivables Book balance Amount for Bad Debt

Receivables percentage (%) Reason

Sichuan Chishui River Trading Company No.2 Branch 5,270,000.00 5,270,000.00 100% Slim chance of recovery

Chifeng Economic and Information Commission 175,339,805.69 0.00 0% Good chance and no risk of

collection Inner Mongolia Capital Construction Investment and Consulting Co., Ltd.

16,852,000.00 0.00 0% Good chance and no risk of collection

Total 197,461,805.69 5,270,000.00 -- --

Other receivables in portfolios that bad debt provision is accrued by aging analysis

√ APPL □ N/A

Unit: Yuan

Aging


Bad debt provision

Book balance Bad debt provision Amount

Percentage (%)

Amount Percentage

(%) Within 1 year Including: 118,303,481.41 57.21% 319,766,723.83 80.85% Subtotal of within 1 year 118,303,481.41 57.21% 319,766,723.83 80.85% 1-2 years 14,728,302.61 7.12% 1,472,830.26 5,199,453.49 1.31% 519,945.34 2- 3 years 4,121,618.80 1.99% 1,236,485.64 2,382,312.91 0.6% 714,693.90 3- 4 years 1,806,419.37 0.87% 903,209.69 6,695,755.06 1.69% 3,347,877.59 4- 5 years 5,736,471.79 2.77% 2,868,235.89 11,375,696.67 2.88% 5,687,845.71 More than 5 years 62,106,352.17 30.03% 49,685,081.76 50,090,589.50 12.66% 40,072,471.62 Total 206,802,646.15 -- 56,165,843.24 395,510,531.46 -- 50,342,834.16

Other receivables in portfolios that bad debt provision is accrued based on balance percentage method

□ APPL √ N/A

Other receivables in portfolios that bad debt provision is accrued by other methods

□ APPL √ N/A

Other receivables that are individually insignificant at the end of this period but for which bad debt provision is individually assessed

√ APPL □ N/A

Unit: Yuan

Other receivables Book balance Bad debt provision Receivables percentage (%) Reasons for provision

Beijing Huahai Nantong Trading Center 3,000,000.00 3,000,000.00 100% Slim chance of recovery China Nonferrous Metal No.3 Branch 2,815,413.18 2,815,413.18 100% Slim chance of recovery Xiamen Jiangjun Company 2,000,000.00 2,000,000.00 100% Slim chance of recovery NFC (Hebei) Import and Export Co., Ltd. 2,340,113.71 2,340,113.71 100% Slim chance of recovery Others 4,504,235.64 4,504,235.64 100% Slim chance of recovery


122

Others 1,612,330.23 0% Good chance and no risk of collection

Total 16,272,092.76 14,659,762.53 -- --

(2) Write-back and recovery of other receivables in the reporting period:

None.

(3) Actual written-off other receivables in the reporting period:

None.

(4) Other account receivables due from shareholders holding 5% or more of voting rights of the Company in the reporting period

Unit: Yuan


Book balance Amount of Bad Debt Provision Book balance Amount of Bad

Debt Provision Wanxiang Resources Co., Ltd. 7,704,904.17

Total 7,704,904.17

(5) Other receivables (nature or description) with significant balances

Unit: Yuan

Name of entities Amount Nature or description Percentage in

total other receivables (%)

Chifeng Economic and Information Commission 175,339,805.69

In 2007, Chifeng NFC Zinc Industry Co., Ltd. (formerly Chifeng NFC Mining Investment Co., Ltd.) was established jointly by the Company and Chifeng Economic and Information Commission (“CEIC”), of which the Baiyinnuoer lead and zinc mine invested by CEIC was discovered to appreciate in assets valuation. And CEIC undertook to pay the resulting additional tax amounting to RMB175,339,805.69.

41.69%

(6) Top five debtors of other receivables due

Unit: Yuan

Name of entities Relationship with the Company Amount Aging

Percentage in total other receivables

(%)

Chifeng Economic and Information Commission

Minority shareholder of subsidiary

175,339,805.69 More than 5 years 41.69%

Export rebates receivable Non-related party 33,902,964.39 Within 1 year 8.06% Inner Mongolia Capital Construction Investment and Consulting Co., Ltd.

Minority shareholder of subsidiary

16,852,000.00 Within 1 year; 2-3 years; 4-5 years 4.01%

Wanxiang Resources Co., Ltd. The second largest shareholder of the Company

7,704,904.17 Within 1 year 1.83%

Inner Mongolia Xinwang Renewable Resources Co., Ltd. Non-related party 5,850,000.00 Within 1 year, 1-2 years 1.39%

Total -- 239,649,674.25 -- 56.98%

(7) Other accounts receivable due from related parties


123

Unit: Yuan

Name of entities Relationship with the Company Amount Percentage in total other receivables (%)

Wanxiang Resources Co., Ltd. The second largest shareholder of the Company 7,704,904.17 1.83%

Total -- 7,704,904.17 1.83%

(8) Other account receivables derecognized

None.

(9) Amount of assets and liabilities arising from continuing involvement of securitized other accounts receivable

None.

8. Advance payment

(1) Disclosure of advance payments by aging

Unit: Yuan

Aging Ending balance Beginning balance

Amount Percentage (%) Amount Percentage (%)

Within 1 year 1,824,509,294.53 96.13% 714,271,074.90 90.03% 1-2 years 34,328,303.08 1.81% 30,641,698.19 3.86% 2- 3 years 4,998,318.84 0.26% 5,919,281.67 0.75% More than 3 years 34,143,276.71 1.8% 42,549,596.55 5.36%

Total 1,897,979,193.16 -- 793,381,651.31 --

Notes to aging of advance payments:

As at the end of the reporting period, advance payments with aging of more than 1 year totals RMB73,469,898.63. The advance payments are not settled because the supplier has not delivered the goods due to the long manufacturing cycle.

(2) Top five payers of advance payments

Unit: Yuan

Name of entities Relationship with the Company Amount Aging Reason for Unsettlement

Zhejiang Ledi Electronic Technology Co., Ltd. Supplier 664,501,488.94 Goods not supplied yet

Zhejiang Yangming Copper Industry Co., Ltd. Supplier 227,273,993.91 Goods not supplied yet

Dongfang Hongda International Trade Co., Ltd.

Supplier 202,800,936.91 Goods not supplied yet

Hao Yue Holdings Ltd. Supplier 64,420,951.18 Goods not supplied yet Shanghai Rongyuan Nonferrous Metal Co., Ltd.

Supplier 55,309,617.45 Goods not supplied yet

Total -- 1,214,306,988.39 -- --

(3) Advance payments made to shareholders holding 5% or more voting rights of the Company in the reporting period

None.


124

(4) Notes to advance payments

Advance payments of the Company increased by RMB1,104,597,541.85 (up by 139.23%) from the beginning to the end of the year, resulting mainly from the expansion of trade service.

9. Inventory

(1) Classification of inventories

Unit: Yuan


Book balance Devaluation provision Book value Book balance Devaluation

provision Book value

Raw materials 705,242,577.00 2,991,733.29 702,250,843.71 565,955,782.03 16,119,174.32 549,836,607.71 Work-in-process products 901,817,091.64 5,308,531.17 896,508,560.47 724,706,045.14 30,485,271.87 694,220,773.27

Merchandise inventory 1,733,626,541.75 121,485,874.75 1,612,140,667.00 1,224,582,999.67 61,212,360.57 1,163,370,639.10

Turnover material 1,546,537.40 0.00 1,546,537.40 1,326,657.74 0.00 1,326,657.74 Others 1,277,541.26 0.00 1,277,541.26 8,192,268.63 0.00 8,192,268.63 Total 3,343,510,289.05 129,786,139.21 3,213,724,149.84 2,524,763,753.21 107,816,806.76 2,416,946,946.45

(2) Inventory devaluation provision

Unit: Yuan

Type of inventories Beginning book balance

Amount in this period

Decrease in this period Ending book balance

Reversals Written-off Raw materials 16,119,174.32 2,438,929.14 15,566,370.17 0.00 2,991,733.29 Work-in-process products 30,485,271.87 43,539.23 25,220,279.93 0.00 5,308,531.17

Merchandise inventory 61,212,360.57 94,456,853.08 2,493,586.96 31,689,751.94 121,485,874.75 Turnover material 0.00 0.00 0.00 0.00 0.00 Total 107,816,806.76 96,939,321.45 43,280,237.06 31,689,751.94 129,786,139.21

(3) Inventory devaluation provision

Item Inventory devaluation provision basis

Reasons for reversal of inventory devaluation provision

for this period

Percentage of amount of reversal for this period to the

ending balance of relevant category of inventories (%)

Raw materials

Difference between the book amount and the amount of market price deducting processing cost, selling expenses and taxes

Increase in price 2.22%

Merchandise inventory

Difference between the book amount and the amount of market price deducting selling expenses and taxes


Work-in-process products

Difference between the book amount and the amount of market price deducting processing cost, selling expenses and taxes


Notes to inventories:


125

Inventories of the Company increased by RMB796,777,203.39 (up 32.97%) from the beginning to end of the year, resulting mainly from the expansion of trade service and zinc products manufacturing and marketing business.

10. Other current assets

None.

11. Available-for-sale financial assets

(1) Available-for-sale financial assets

Unit: Yuan Item Ending fair value Beginning fair value

Available-for-sale bonds 0.00 0.00 Available-for-sale equity instruments 4,975,300.00 5,556,800.00 Total 4,975,300.00 5,556,800.00

Available-for-sale financial assets:

Held-for-sale financial assets of the Company decreased by RMB581,500.00 from the beginning to end of the reporting period mainly due to share drop of NFC (Shenyang) Metallurgic Machinery Co., Ltd.

(2) Long-term liabilities investment of available-for-sale financial assets

None.

12. Held-to-maturity investment

None.

13. Long-term receivables

None.


126

14. Investments in Joint Ventures and Associates

Unit: Yuan

Name of investees Shareholding percentage (%)

Percentage of voting power in the investee held

by the Company (%)

Ending balance of total assets

Ending balance of total liabilities

Ending balance of total net assets

Total operating revenue for the period

Net profit in this period

I. Joint ventures II. Associate China Nerin Engineering Co., Ltd. 23.00% 23.00% 1,519,920,312.65 976,018,195.09 543,902,117.56 1,425,062,711.27 151,364,378.60 Terramin Australia Limited 5.26% 5.26% 526,884,979.20 434,092,338.60 92,792,640.60 466,620,290.40 -425,879,553.40 Northeastern University Design Institute (Co., Ltd.) 20.00% 20.00% 264,522,973.94 59,318,880.99 205,204,092.95 135,199,981.37 11,753,495.69

Baotou Rare Earth Product Exchange Co., Ltd. 8.33% 8.33% 120,000,000.00 0.00 120,000,000.00 0.00 0.00

Xiamen Shengjiong Trade Co., Ltd. 50.00% 50.00% 0.00 0.00 0.00 0.00 0.00

United Assets and Equity Exchange 29.41% 29.41% 0.00 0.00 0.00 0.00 0.00

Shengda Mining Co., Ltd. 5.77% 5.77% 1,050,721,048.05 257,719,580.75 793,001,467.30 922,846,493.38 344,233,602.12


127

15. Long-term equity investments

(1) Long-term equity investments

Unit: Yuan

Investees Accounting method Investment cost Beginning

balance Decrease/increase Ending balance

Percentage of equity interest in

the investee

held by the Company (%)

Percentage of voting power in

the investee

held (%)

Explanation for the

inconsistency between the

percentage of equity

interest and the

percentage of voting power

Impairment provision

Impairment provisions in this period

Cash dividends for this period

Equimark-NFC Development Corporation

Cost method 19,756,386.00 19,756,386.00 0.00 19,756,386.00 40.00% 40.00% 0.00 0.00 7,146,260.31

Minsheng Life Insurance Co., Ltd. Cost method 384,310,000.00 384,310,000.00 0.00 384,310,000.00 6.17% 6.17% 0.00 0.00 0.00


Equity method 29,280,000.00 98,010,268.58 29,638,807.08 127,649,075.66 23.00% 23.00% 0.00 0.00 5,175,000.00

Terramin Australia Limited Equity method 128,424,592.10 98,845,312.68 -73,660,834.57 25,184,478.11 5.26% 5.26% 0.00 0.00 0.00


Equity method 47,400,000.00 50,020,056.07 2,350,699.14 52,370,755.21 20.00% 20.00% 0.00 0.00 0.00


Equity method 10,000,000.00 0.00 10,000,000.00 10,000,000.00 8.33% 8.33% 0.00 0.00 0.00

Xiamen Shengjiong Trade Co., Ltd.

Equity method 2,000,000.00 545,433.95 0.00 545,433.95 50.00% 50.00% 545,433.95 0.00 0.00


Equity method 2,000,000.00 645,256.41 0.00 645,256.41 29.41% 29.41% 645,256.41 0.00 0.00

Chifeng NFC Baiyinnuo’er Mineral Industry Co., Ltd. Cost method 278,147.06 278,147.06 0.00 278,147.06 0.33% 0.33% 0.00 0.00 0.00


128

Chifeng mountain gold lead Ltd. Cost method 130,197,944.00 130,197,944.00 0.00 130,197,944.00 68.42% 20%

Other shareholders haven’t pay in full their subscribed capital contributions

0.00 0.00 0.00

Shenyang Jiacheng Industrial Co., Ltd. Cost method 300,000.00 300,000.00 0.00 300,000.00 85.72% 85.72% 0.00 0.00 0.00

Shenyang Nuocheng Business Consulting Co., Ltd. Cost method 100,000.00 100,000.00 0.00 100,000.00 50.00% 50.00% 0.00 0.00 0.00

Shengda Mining Co., Ltd. Equity method 404,357,442.32 414,144,353.73 -182,892,694.45 231,251,659.28 5.77% 5.77% 0.00 0.00 25,741,587.84

Hong Kong Yuqida S.A. Limited Cost method 37,071,690.16 35,270,359.90 -86,204.11 35,184,155.79 35.00% 35.00% 0.00 0.00 0.00

Sino-America Network Consulting Co., Ltd. Cost method 27,821,980.30 0.00 27,821,980.30 27,821,980.30 70.00% 70.00% 27,821,980.

30 27,821,980.30 0.00

Total -- 1,223,298,181.94

1,232,423,518.38 -186,828,246.61 1,045,595,271.7

7 -- -- -- 29,012,670.66 27,821,980.30 38,062,848.15


129

(2) Restrictions on the ability of the Company to transfer funds to the investees

None.

Long-term equity investments:

Long-term equity investments of the Company increased by RMB214,650,226.91 (17.43%) from the beginning to end of the reporting period mainly attributable to disposal of some equities of Shengda Mining Co., Ltd.

16. Investment real estate

(1) Investment real estate measured at cost

Unit: Yuan Item Beginning book balance Increase in this period Decrease in this period Ending book balance

I. Total original book value 577,570,128.66 8,050,210.71 2,260,701.58 583,359,637.79

1. Buildings and structures 577,570,128.66 8,050,210.71 2,260,701.58 583,359,637.79

2. Land use rights 0.00 II. Total accumulated depreciation and amortization

41,109,142.11 14,383,742.74 317,774.40 55,175,110.45

1. Buildings and structures 41,109,142.11 14,383,742.74 317,774.40 55,175,110.45

2. Land use rights 0.00 III. Total net book value of investment real estate

536,460,986.55 -6,333,532.03 1,942,927.18 528,184,527.34

1. Buildings and structures 536,460,986.55 -6,333,532.03 1,942,927.18 528,184,527.34

2. Land use rights 0.00 0.00 0.00 0.00 IV. Total accumulated impairment provision of investment real estate

0.00 0.00 0.00 0.00

1. Buildings and structures 0.00 0.00 0.00 0.00

2. Land use rights 0.00 V. Total book value of investment real estate

536,460,986.55 -6,333,532.03 1,942,927.18 528,184,527.34

1. Buildings and structures 536,460,986.55 -6,333,532.03 1,942,927.18 528,184,527.34

2. Land use rights 0.00 0.00 0.00 0.00

Unit: Yuan This period

Amount of Depreciation and Amortization for this Period 14,383,742.74 Amount for impairment provision of investment real estate in this period 0.00

(2) Investment real estate measured at fair value

None.


130

17. Fixed assets

(1) Fixed assets

Unit: Yuan Item Beginning book

balance Increase in this period Decrease in this period Ending book balance

I. Total original book value: 3,860,398,497.70 313,067,625.78 24,541,535.19 4,148,924,588.29 Including: Buildings and structures

2,190,167,116.72 203,488,051.08 6,867,426.87 2,386,787,740.93

Machinery and equipment 1,541,845,601.29 88,831,273.86 11,702,465.29 1,618,974,409.86

Transportation Instruments 82,222,293.79 12,953,707.81 3,193,077.51 91,982,924.09

General-purpose equipment 38,989,419.40 7,794,593.03 2,778,565.52 44,005,446.91

Lands 7,174,066.50 7,174,066.50

-- Beginning book balance

newly included in this period Provision in this period Decrease in this period Ending balance of

this period II. Total accumulated depreciation: 1,110,361,993.02 0.00 220,122,793.77 16,739,552.07 1,313,745,234.72

Including: Buildings and structures

442,421,695.68 85,622,855.90 2,266,473.84 525,778,077.74

Machinery and equipment 595,742,764.48 117,786,293.68 10,031,749.63 703,497,308.53

Transportation Instruments 51,961,353.29 12,169,196.30 2,294,599.06 61,835,950.53

General-purpose equipment 20,236,179.57 4,544,447.89 2,146,729.54 22,633,897.92

Lands

-- Beginning book balance -- Ending balance of

this period III. Total net book value of fixed assets 2,750,036,504.68 -- 2,835,179,353.57

Including: Buildings and structures

1,747,745,421.04 -- 1,861,009,663.19

Machinery and equipment 946,102,836.81 -- 915,477,101.33

Transportation Instruments 30,260,940.50 -- 30,146,973.56

General-purpose equipment 18,753,239.83 -- 21,371,548.99

Lands 7,174,066.50 -- 7,174,066.50 IV. Total impairment provision 110,141,281.62 -- 110,141,281.62

Including: Buildings and structures 40,870,932.09 -- 40,870,932.09


Transportation Instruments 711,949.64 -- 711,949.64


Lands -- V. Total book value of fixed assets 2,639,895,223.06 -- 2,725,038,071.95

Including: Buildings and structures 1,706,874,488.95 -- 1,820,138,731.10


Transportation Instruments 29,548,990.86 -- 29,435,023.92


Lands 7,174,066.50 -- 7,174,066.50

Depreciation for this period totaled RMB220,122,793.77, and the original value of construction in progress transferred into fixed assets in this period totaled RMB281,907,115.00.


131

(2) Temporary idle fixed assets

Unit: Yuan

Item original book value accumulated depreciation

Impairment provision Net book value Remarks

Buildings and structures 1,858,680.54 1,707,451.81 0.00 151,228.73

Machinery and equipment 14,505,417.03 10,474,894.70 0.00 4,030,522.33

Transportation Instruments 130,300.00 107,587.49 0.00 22,712.51

General-purpose equipment 173,051.42 167,859.87 0.00 5,191.55

(3) Fixed assets leased in by finance lease

None.

(4) Fixed assets leased out by operating lease

None.

(5) Fixed assets held for sale at the end of this period

None.

(6) Fixed assets of which certificates of title have not been obtained

Item Reasons for having not obtaining the certificates

Anticipated date of obtaining the certificates

Plant buildings of NFC (Shenyang) Pump Industry Co., Ltd.

Registration formalities are under processing By the end of 2013

Plant buildings of Chifeng NFC Zinc Industry Co., Ltd.

Registration formalities are under processing By the end of 2013

Real estate and lands of Guangdong Zhujiang Rare Earth Co., Ltd. Pending due to restructuring


132

18. Construction in progress

(1) Construction in progress

Unit: Yuan


Book balance Impairment provision Book value Book balance Impairment

provision Book value

Zinc smelting project - NFC Zinc 0.00 0.00 0.00 863,706.28 0.00 863,706.28

Kt/a smelting project - NFC Mineral 69,155,940.77 0.00 69,155,940.77 27,788,519.21 0.00 27,788,519.21

New office buildings and apartments - NFC Mineral 15,708,107.89 0.00 15,708,107.89 259,526.00 0.00 259,526.00

Comprehensive recovery project (phase-II) - NFC Zinc 0.00 0.00 0.00 332,133.54 0.00 332,133.54

Lead-silver residue recovery project - NFC Zinc 17,988,298.99 0.00 17,988,298.99 839,357.53 0.00 839,357.53

Flue gas desulphurization project - NFC Zinc 10,594,855.82 0.00 10,594,855.82 0.00 0.00 0.00

Technology upgrading project - SMMC Machinery 6,870,919.63 0.00 6,870,919.63 7,048,219.71 0.00 7,048,219.71

Plant relocation and transformation project - SMMC Machinery

4,687,988.32 0.00 4,687,988.32 3,718,838.29 0.00 3,718,838.29

Government loan - SMMC Machinery 3,818,659.16 0.00 3,818,659.16 2,954,773.16 0.00 2,954,773.16

casting relocation - SMMC Machinery 7,062,842.63 0.00 7,062,842.63 8,751,797.93 0.00 8,751,797.93

Plant relocation - SMMC Machinery 21,753,248.10 0.00 21,753,248.10 1,130,359.55 0.00 1,130,359.55

Diaphragm pump project – NFC Pump 19,254,976.85 0.00 19,254,976.85 80,752,608.00 0.00 80,752,608.00

Technology upgrading project of intelligent diaphragm manufacturing process - NFC PUMP

26,372,066.28 0.00 26,372,066.28 336,500.00 0.00 336,500.00

Others 24,607,278.66 0.00 24,607,278.66 3,871,445.38 0.00 3,871,445.38 Total 227,875,183.10 0.00 227,875,183.10 138,647,784.58 0.00 138,647,784.58


133

(2) Changes of major construction in progress

Unit: Yuan

Name Budget Beginning balance

Increase in this period

Transferred to fixed assets Other decreases

Percentage of amount

invested in budget amount

(%)

Progress

Amount of accumulated capitalized interests

Including: capitalized

interests for this period

Capitalization rate for this

period (%)

Source of funds Ending balance

Zinc smelting project - NFC Zinc

778,170,000.00 863,706.28 80,896,666.91 81,760,373.19 0.00 99% Completed 6,858,506.82 2,439,858.30 6.56% Loans and self-raised

funds 0.00

Kt/a smelting project - NFC Mineral

202,265,900.00 27,788,519.21 57,592,644.22 16,225,222.66 0.00 53.25% Not

completed 743,507.22 743,507.22 6.56% Loans and self-raised funds

69,155,940.77

New office buildings and apartments - NFC Mineral 22,538,000.00 259,526.00 15,448,581.89 0.00 0.00 69.7% Not

completed 265,152.60 265,152.60 6.56% Loans and self-raised funds

15,708,107.89

Comprehensive recovery project (phase-II) - NFC Zinc

85,000,000.00 332,133.54 75,865,392.59 76,197,526.13 0.00 89.25% Not completed 1,349,310.05 1,349,310.05 6.56% Loans and self-raised

funds 0.00

Lead-silver residue recovery project - NFC Zinc

168,340,000.00 839,357.53 17,148,941.46 0.00 0.00 10.69% Not

completed 0.00 0.00 0% Self-raised funds 17,988,298.99

Flue gas desulphurization project - NFC Zinc 17,200,000.00 0.00 10,594,855.82 0.00 0.00 61.6% Not


Technology upgrading project - SMMC Machinery 10,000,000.00 7,048,219.71 32,400.00 0.00 209,700.08 68.71% Not


Plant relocation and transformation project - SMMC Machinery

23,250,000.00 3,718,838.29 969,150.03 0.00 0.00 20.16% Not completed 0.00 0.00 0% Self-raised funds 4,687,988.32

Government loan - SMMC Machinery 92,000,000.00 2,954,773.16 863,886.00 0.00 0.00 4.15% Not

completed 0.00 0.00 0%

State funding of RMB12 million, loans of RMB26 million from the Group Company, and self-raised funds for the remaining

3,818,659.16

casting relocation - SMMC Machinery 15,799,257.15 8,751,797.93 14,511,787.55 16,200,742.85 0.00 44.7% Not


Plant relocation - SMMC Machinery

1,413,967,000.00 1,130,359.55 20,622,888.55 0.00 0.00 1.54% Not

completed 3,308,908.13 3,308,908.13 6.15% Loans and self-raised funds

21,753,248.10

Diaphragm pump project – NFC Pump

437,030,000.00 80,752,608.00 27,622,914.43 85,420,510.94 3,700,034.64 97.5% Not

completed 12,437,308.8

2 0.00 0% Loans and self-raised funds

19,254,976.85

Intelligent technology upgrading project of diaphragm pump manufacturing process - NFC PUMP

88,160,000.00 336,500.00 30,068,044.79 4,032,478.51 0.00 58.99% Not completed 0.00 0.00 0% Loans and self-raised

funds 26,372,066.2

8

Others 3,871,445.38 26,023,678.47 2,070,260.72 3,217,584.47 Not completed 0.00 0.00 0% Loans and self-raised

funds 24,607,278.6

6

Total 3,353,720,157.15 138,647,784.58 378,261,832.71 281,907,115.00 7,127,319.19 -- -- 24,962,693.6

4 8,106,736.30 -- -- 227,875,183.10


134

(3) Impairment provision of construction in progress

None.

(4) Notes to construction in progress

Construction in progress of the Company increased by RMB89,227,398.52 (up by 64.36%) from the beginning to ending of the year mainly attributable to the investment in this period in kt/a level smelting project – NFC Zinc, the intelligent technology upgrading project of diaphragm pump manufacturing process of NFC PUMP and the plant relocation project – SMMC Machinery.

19. Construction materials

Unit: Yuan

Item Beginning balance Increase in this period

Decrease in this period Ending balance

Equipment 2,940,952.58 10,740,851.12 12,783,128.31 898,675.39 Material 3,267,830.79 13,791,725.63 16,660,013.69 399,542.73 Total 6,208,783.37 24,532,576.75 29,443,142.00 1,298,218.12

Notes to engineering materials:

Engineering materials of the Company decreased by RMB4,910,565.25 (down by 79.09%) during the reporting period mainly attributable to requisition of such materials for construction in progress.

20. Disposal of fixed assets

None.

21. Capitalized biological assets

None.

22. Oil and gas assets

None.

23. Intangible assets

(1) Intangible assets

Unit: Yuan Item Beginning book balance Increase in this period Decrease in this period Ending book balance

I. Total original book balance 1,415,495,130.16 111,364,689.31 0.00 1,526,859,819.47

House use rights 9,857,500.00 0.00 0.00 9,857,500.00 office software 3,963,071.78 1,232,983.67 0.00 5,196,055.45 Land use rights 663,516,258.38 109,531,705.64 0.00 773,047,964.02 mining right 735,658,300.00 0.00 0.00 735,658,300.00 Patent rights 2,500,000.00 600,000.00 0.00 3,100,000.00 II. Total accumulated amortization 262,099,259.62 56,107,610.78 0.00 318,206,870.40

House use rights 4,811,360.62 328,583.28 0.00 5,139,943.90 office software 1,409,492.51 447,635.68 0.00 1,857,128.19 Land use rights 50,878,878.79 14,066,486.19 0.00 64,945,364.98 mining right 204,349,527.70 40,869,905.55 0.00 245,219,433.25 Patent rights 650,000.00 395,000.08 0.00 1,045,000.08 III. Total net book value of intangible asset 1,153,395,870.54 55,257,078.53 0.00 1,208,652,949.07

House use rights 5,046,139.38 -328,583.28 0.00 4,717,556.10 office software 2,553,579.27 785,347.99 0.00 3,338,927.26


135

Land use rights 612,637,379.59 95,465,219.45 0.00 708,102,599.04 mining right 531,308,772.30 -40,869,905.55 0.00 490,438,866.75 Patent rights 1,850,000.00 204,999.92 0.00 2,054,999.92 IV. Total impairment provision

House use rights office software Land use rights mining rights Patent rights Total of book values of intangible assets 1,153,395,870.54 55,257,078.53 0.00 1,208,652,949.07

House use rights 5,046,139.38 -328,583.28 0.00 4,717,556.10 office software 2,553,579.27 785,347.99 0.00 3,338,927.26 Land use rights 612,637,379.59 95,465,219.45 0.00 708,102,599.04 mining right 531,308,772.30 -40,869,905.55 0.00 490,438,866.75 Patent rights 1,850,000.00 204,999.92 0.00 2,054,999.92

The amount of intangible assets amortization for this period totaled RMB56,107,610.78.

(2) Development cost

Unit: Yuan


Decrease in this period Ending balance Charged to current

profits and losses Intangible assets

Novel rare earth extraction technology 0.00 278,553.62 278,553.62 0.00 0.00

Silver recovery 0.00 2,600,000.00 2,600,000.00 0.00 0.00 11YF026 modular electrolyzer shell 0.00 163,717.12 163,717.12 0.00 0.00

09YF11 large-tonnage & heavy-current multi-functional aluminum electrolysis set

0.00 620,000.00 620,000.00 0.00 0.00

Aligning equipment for 12YF021 steel casting and gating system

0.00 6,594.84 6,594.84 0.00 0.00

11YF009 CWS rod mill 0.00 20,000.00 20,000.00 0.00 0.00 12YF007 Automatic aligning technology 0.00 1,603.38 1,603.38 0.00 0.00

11YF013 High-melting cast cooling jacket for smelting furnace

0.00 749.86 749.86 0.00 0.00

R&D project of high-pressure diaphragm pump, core equipment of coal-to-oil system

0.00 257,193.32 257,193.32 0.00 0.00

Design experiment and research of 4-cylinder single-actuator high-pressure diaphragm pump

0.00 385,660.10 385,660.10 0.00 0.00


136

Selection of diaphragm pump for pipeline transport

0.00 220,000.00 220,000.00 0.00 0.00

Development of heavy duty diaphragm pump for long-distance CWS pipeline for Shaanxi Coal and Chemical Industry Group Co., Ltd.

0.00 9,097,017.07 0.00 0.00 9,097,017.07

Total 0.00 13,651,089.31 4,554,072.24 0.00 9,097,017.07

Development cost for this period accounted for 66.64% of the total R&D project costs for this period.

24. Goodwill

Unit: Yuan

Name of investee or goodwill items Beginning balance Increase in this

period Decrease in this

period Ending balance Ending

impairment provision

NFC Beijing Metal Resources Co., Ltd. 304,451.85 0.00 304,451.85 0.00 304,451.85

CNFC Equipment Co., Ltd 14,916.47 0.00 0.00 14,916.47 0.00 China International Alumina Development Co., Ltd. 39,148.19 0.00 0.00 39,148.19 0.00

Guangdong Zhujiang Rare Earths Co., Ltd. 256,006.68 0.00 0.00 256,006.68 0.00

Chifeng Hongye Zinc Smelting Company 8,992,498.56 0.00 0.00 8,992,498.56 0.00

Total 9,607,021.75 0.00 304,451.85 9,302,569.90 304,451.85

Methods of impairment assessment and determining the impairment provision

If there is any indication that the investments in investees may be impaired, the Company performs impairment test based on the investment cost and goodwill and estimates the recoverable amount. If the recoverable amount is less than the book value, the difference between the two is recognized as an impairment loss.

25. Long-term deferred expenses

Unit: Yuan

Item Beginning balance

Increase for this Period

Amortization for this Period Other decreases Ending balance Other reasons for

decreasing

Environmental protection technical transformation

0.00 17,896,767.89 1,027,339.28 3,807,543.52 13,061,885.09

Long-term deferred expenses arising from use of special reserve funds are amortized in full over this year

Accelerant 3,005,462.04 1,452,991.46 2,799,871.38 0.00 1,658,582.12 0 Office buildings maintenance cost 152,116.53 0.00 152,116.53 0.00 0.00 0

Plant greening 0.00 522,533.27 156,759.98 0.00 365,773.29 0 exploration development expenditure

27,441,141.11 0.00 2,728,907.77 0.00 24,712,233.34 0

Road maintenance 1,414,326.53 0.00 964,070.43 0.00 450,256.10 0


137

Slope engineering 21,867,399.57 6,028,610.46 8,620,404.45 0.00 19,275,605.58 0 Total 53,880,445.78 25,900,903.08 16,449,469.82 3,807,543.52 59,524,335.52 --

26. Deferred Income Tax Assets and Deferred Income Tax Liabilities

(1) Deferred income tax assets or liabilities were not presented as a net amount after offsetting

Deferred Income Tax Assets and Deferred Income Tax Liabilities that already recognized


Deferred income tax expenses: Assets impairment preparation 106,113,930.86 93,379,309.08 Deductible losses 121,171,940.45 41,831,726.25 Depreciation and amortization 0.00 525,579.93 Salary balances and surcharges 0.00 5,289,837.52 Termination benefits 1,020,695.54 1,841,250.76 Estimated liabilities 1,167,900.10 1,811,203.27 Unrealized profit from inter-group transactions 46,739,257.15 31,646,818.44 Special reserve 631,047.93 0.00 Subtotal 276,844,772.03 176,325,725.25 Deferred income tax liabilities: Changes in fair value of held-for-sale financial assets recognized in capital reserve 943,554.06 1,088,929.06

Profit from debt restructuring 22,349,050.00 33,523,575.00 Disposal cost of fixed assets 14,740.11 36,850.27 Asset evaluation appreciation 85,808,665.41 155,717,790.53 Subtotal 109,116,009.58 190,367,144.86

Details of unrecognized deferred income tax assets


Deductible temporary differences 483,642.12 2,345,526.78 Deductible losses 203,620,077.26 166,521,344.46 Total 204,103,719.38 168,866,871.24

Deductible losses, for which no deferred income tax assets are recognized, will expire in the following years

Unit: Yuan Year Ending balance Beginning balance Remarks 2012 1,859,931.70 2013 3,341,335.92 3,341,335.92 2014 12,982,898.34 12,982,898.34 2015 93,048,917.19 93,048,917.19 2016 55,288,261.31 55,288,261.31 2017 38,958,664.50 Total 203,620,077.26 166,521,344.46 --

Details of taxable temporary differences and deductible temporary differences


138

Unit: Yuan

Item Amount

Ending Beginning Taxable temporary differences Available-for-sale financial assets 3,774,216.25 4,355,716.25 Disposal cost of fixed assets 98,267.41 147,401.09 evaluation appreciation 343,234,661.64 622,871,162.12 Profit from debt restructuring 89,396,200.00 134,094,300.00 Subtotal 436,503,345.30 761,468,579.46 deductible temporary differences Accounts receivable 125,414,679.73 112,159,094.75 Other receivables 75,611,963.66 66,234,805.86 Inventory 129,786,139.23 107,816,806.76 Long-term equity investments 29,012,670.66 1,190,690.36 Fixed assets 76,935,371.11 88,218,158.26 Unrealized profit from inter-group transactions 186,957,028.46 126,587,273.72 Other assets 2,941,945.93 0.00 Employees’ remuneration payable 6,804,636.96 28,524,353.02 Estimated liabilities 7,786,000.64 7,244,813.08 Losses in previous years carried over 484,687,761.80 167,326,904.99 Subtotal 1,125,938,198.18 705,302,900.80

27. Assets impairment provision

Unit: Yuan

Item Beginning book balance

Increase in this period

Decrease in 2012 Ending book balance Reversals Written-off

I. Bad debt provision 180,739,427.37 20,823,364.80 52,506.63 201,510,285.54 II. Inventory devaluation provision 107,816,806.76 96,939,321.45 43,280,237.06 31,689,751.94 129,786,139.21

III. Available-for-sale financial assets impairment provision

IV. Held-to-maturity investment impairment provision

V. Long-term equity investments impairment provision

1,190,690.36 27,821,980.30 29,012,670.66

VI. investment real estate impairment provision

VII. Fixed assets impairment provision 110,141,281.62 110,141,281.62

VIII. Impairment provisions of engineering materials

IX. Impairment provisions of construction in progress

X. Capitalized biological assets impairment provision

Including: Mature capitalized biological assets impairment provision


139

XI. Oil and gas assets impairment provision

XII. Intangible assets impairment provision

XIII. Goodwill impairment provision 2,693,012.79 304,451.85 2,693,012.79 304,451.85

XIV. Others Total 402,581,218.90 145,889,118.40 43,280,237.06 34,435,271.36 470,754,828.88

Notes to impairment provisions of assets:

In the reporting period, bad debt provision of RMB14,760.00 was written off due to restructuring of NFC (Shenyang) Metallurgic Machinery Co., Ltd. and RMB37,746.63 was written off for the former subsidiary Sino-America Network Consulting Co., Ltd. is excluded from the consolidation scope.

28. Other non-current assets


Mining and exploration development expenditure 93,453,725.07 71,922,507.32 Total 93,453,725.07 71,922,507.32

Other non-current assets

Other non-current assets of the Company increased by RMB21,531,217.75 (up by 29.94%) during the reporting period mainly attributable to the increase of exploration and development expenditures in Chifeng and Laos resource bases.

29. Short-term loans

(1) Classification of short-term loans


Pledge loans 145,000,000.00 20,916,600.00 Mortgage loan 341,000,000.00 291,000,000.00 Guaranteed loan 115,000,000.00 413,000,000.00 Credit loan 2,752,330,644.15 1,672,000,000.00 Total 3,353,330,644.15 2,396,916,600.00

(2) Outstanding short-term borrowings due

None.

30. Trading financial liabilities

None.

31. Notes payable

Unit: Yuan Category Ending balance Beginning balance

Commercial acceptance bills 510,000,000.00 134,000,000.00 Bank acceptance bills 1,121,963,418.09 287,775,912.10 Total 1,631,963,418.09 421,775,912.10


140

The notes payable due in the next accounting period (2013) amount to RMB1,631,963,418.09.

Notes to payable:

Notes payable of the Company increased by RMB1,210,187,505.99 (up by 286.93%) from the beginning to end of the reporting period mainly attributable to the change in means of settlement for trade service of the parent company.

32. Accounts payable

(1) Accounts payable


Within 1 year 1,247,049,333.84 935,787,039.07 1-2 years 148,076,880.02 99,234,306.16 2-3 years 34,503,938.75 21,640,866.89 3-4 years 12,684,678.93 9,399,191.99 4-5 years 5,727,717.95 6,166,332.47 More than 5 years 39,103,377.42 43,473,943.18 Total 1,487,145,926.91 1,115,701,679.76

(2) Accounts payable to shareholders holding 5% or more voting rights of the Company in the reporting period

None.

(3) Notes to accounts payable with significant balances and aging of more than one year

As at the year end, accounts payable aged over one year, RMB240,096,593.07, are outstanding final payments of engineering projects.

33. Advance receipts

(1) Advance receipts


Within 1 year 586,818,074.03 528,856,477.31 1-2 years 3,870,015.99 11,227,831.34 2-3 years 745,804.20 798,869.71 3-4 years 795,095.31 307,708.65 4-5 years 67,337.54 4,123,269.87 More than 5 years 12,610,631.61 19,606,037.20 Total 604,906,958.68 564,920,194.08

(2) Advance receipts from shareholders holding 5% or more voting rights of the Company in the reporting period

None.

(3) Notes to advance receipts with significant balances and aging of more than one year

As at the year end, advance receipts aged over one year amount to RMB18,088,884.65, which have not been carried forward due to long manufacturing cycle of large-scale equipment with demanding manufacturing technology.

34. Employees’ remuneration payable

Unit: Yuan


141

Item Beginning book balance Increase in this period Decrease in this period Ending book balance I. Wages or salaries, bonuses, allowances and subsidies

25,980,107.65 418,026,523.78 443,942,069.94 64,561.49

II. Staff welfare 9,124,098.50 22,087,990.13 22,087,990.13 9,124,098.50 III. Social security contributions 9,069,340.76 105,746,142.01 112,113,736.58 2,701,746.19

Including: Medical insurance 807,092.31 26,931,090.74 27,621,528.45 116,654.60

Endowment insurance 8,081,718.11 66,114,652.39 71,774,604.78 2,421,765.72

Unemployment insurance 180,408.04 4,839,875.84 4,857,071.31 163,212.57

Industrial injury insurance 39.90 6,099,707.11 6,099,716.11 30.90

Birth insurance 82.40 1,760,815.93 1,760,815.93 82.40 IV. Housing funds 226,510.00 26,227,991.80 25,822,164.80 632,337.00 V. Termination benefits 7,365,003.04 3,388,684.48 5,206,680.71 5,547,006.81

VI. Others 12,345,665.70 23,251,541.15 19,699,081.03 15,898,125.82 Labor union and education expenses 12,345,665.70 11,905,974.83 8,353,514.71 15,898,125.82

Non-monetary benefits 0.00 206,873.45 206,873.45 0.00

Labor protection costs 0.00 828,385.40 828,385.40 0.00

Others 10,310,307.47 10,310,307.47 Total 64,110,725.65 598,728,873.35 628,871,723.19 33,967,875.81

There is no overdue employee benefit payable.

Labor union and education expense amount to RMB11,905,974.83, non-monetary benefits RMB206,873.45, and termination benefits RMB3,388,684.48.

35. Taxes payable


Value added tax (VAT) -216,896,506.26 -177,448,315.46 Consumption tax 0.00 0.00 Business tax 1,183,682.40 440,186.91 Income tax 65,388,158.42 68,633,347.54 Personal income tax 5,418,475.86 8,778,070.47 Urban maintenance and construction tax 1,223,096.63 731,671.66 Property tax 268,467.41 265,096.19 Resource tax 3,270,825.44 103,482.04 Mineral resources compensation 22,617,402.01 21,855,260.19 Land use tax 630,541.49 377,100.36 Water conservancy fund 848,792.01 820,572.50 Education surcharge 978,323.04 620,543.03 Others 3,171,072.44 1,754,319.00 Total -111,897,669.11 -73,068,665.57


142

36. Interests payable


Interests payable on long-term borrowings with one-off repayment of principal on due and interests to be paid in installments

2,226,977.74 1,400,895.14

Interests payable on short-term borrowings 11,545,997.76 9,233,263.88 Total 13,772,975.50 10,634,159.02

Notes to interests payable: none

37. Dividends payable

Unit: Yuan

Name of entities Ending balance Beginning balance Reason for outstanding for more than 1 year

Ganzhou Qiandong Rare Earth Group Co., Ltd. 3,787,500.00 0.00 0

Guangdong Rising Nonferrous Metals Share Co., Ltd. 450,000.00 0.00 0

Exxaro Base Metals International B.V. 9,864.74 9,864.74 Outstanding

Total 4,247,364.74 9,864.74 --

Notes to dividends payable: none

38. Other payables

(1) Other payables


Within 1 year 594,157,868.31 731,611,969.91 1-2 years 23,557,410.63 27,660,108.15 2-3 years 14,861,470.21 50,479,796.48 3-4 years 41,737,284.80 15,695,852.94 4-5 years 7,108,392.45 28,720,571.95 More than 5 years 36,780,624.68 35,033,345.58 Total 718,203,051.08 889,201,645.01

(2) Other payables to shareholders holding 5% or more voting rights of the Company in the reporting period

Unit: Yuan Name of entities Ending balance Beginning balance

China Nonferrous Metal Mining (Group) Co., Ltd. 525,806,765.65 676,676,996.30 Total 525,806,765.65 676,676,996.30

(3) Notes to other accounts payable with significant balances and aging of more than one year

None.

(4) Notes to other payables with significant balances


143

None.

39. Estimated liabilities


Others 7,244,813.12 747,300.49 0.00 7,992,113.61 Total 7,244,813.12 747,300.49 0.00 7,992,113.61

Estimated liabilities:

The estimated liabilities include disposal cost of RMB7,786,000.65 for the tailings dam owned by the subsidiary Chifeng NFC Baiyinnuoer Mining Co., Ltd. and RMB206,112.96 for the subsidiary Sino-America Network Consulting Co., Ltd. is excluded from the consolidation scope

40. Non-current liabilities due within one year

(1) Non-current liabilities due within one year


Long-term borrowings due within 1 year 192,929,987.00 262,500,000.00 Bonds payable due within 1 year 0.00 0.00 Long-term payables due within 1 year 500,845,625.00 0.00 Total 693,775,612.00 262,500,000.00

(2) Long-term borrowings due within one year

Long-term borrowings due within one year


Pledge loans 0.00 0.00 Mortgage loan 38,500,000.00 157,500,000.00 Guaranteed loan 74,429,987.00 105,000,000.00 Credit loan 80,000,000.00 Total 192,929,987.00 262,500,000.00

There is no rollover of overdue long-term borrowings included in the balance of long-term borrowings due within one year.

Top five long-term borrowings due within one year

Unit: Yuan

Lender Beginning date of borrowing End of borrowing Currency

rate (%)

Ending balance Beginning balance Amount in

foreign currency

Amount in local currency

Amount in foreign

currency

Amount local in currency

Anding Road Sub-branch of Bank of China

April 1, 2012 October 1, 2013 RMB Yuan 6.15% 0.00 60,000,000.00 0.00 0.00


144

Beijing Branch of Guangdong Development Bank

July 1, 2010 July 1, 2013 RMB Yuan 5.985% 0.00 49,429,987.00 0.00 50,000,000.00

Jinrong Street Sub-branch of Industrial and Commercial Bank of China

June 27, 2008 June 26, 2013 RMB Yuan 5.76% 0.00 38,500,000.00 0.00 70,000,000.00

Export-Import Bank of China Head Office

January 20, 2001 July 12, 2013 RMB Yuan 3% 0.00 21,250,000.00 0.00 21,250,000.00


May 25, 2012 October 1, 2013 RMB Yuan 6.15% 0.00 20,000,000.00 0.00 0.00

Total -- -- -- -- -- 189,179,987.00 -- 141,250,000.00

Overdue loans from long-term borrowings due within one year

None.

(3) Bonds payable due within one year

None.

(4) Long-term payables due within one year

Unit: Yuan Borrower Term Initial amount Rate (%) Interest accrued Ending balance Loan condition


June 7, 2010-June 6, 2013 500,000,000.00 5.535% 845,625.00 500,845,625.00 0.00

Notes to long-term payables due within one year: The above long-term payables due within one year are the engineering revolving fund borrowings payable by the parent company to China Nonferrous Metal Mining (Group) Co., Ltd.

41. Other current liabilities

None.

42. Long-term loans

(1) Classification of long-term loans


Pledge loans 0.00 33,350,000.00 Mortgage loan 70,516,300.72 38,500,000.00 Guaranteed loan 56,658,251.00 98,308,251.00 Credit loan 830,000,000.00 250,000,000.00 Total 957,174,551.72 420,158,251.00

(2) Top five balances of long-term borrowings


145

Unit: Yuan

Lender Beginning

date of borrowing

Ending date of borrowing Currency

Rate (%)

Ending balance Beginning balance Amount

in foreign currency


Amount in foreign

currency



April 1, 2012 March 31, 2015 RMB Yuan 6.15% 270,000,000.00

Export-Import Bank of China Head Office

March 3, 2011

March 2, 2014 RMB Yuan 4.20% 250,000,000.00 250,000,000.00

Beijing Branch of Shengjing Bank

December 11, 2012

December 10, 2015 RMB Yuan 5.535% 200,000,000.00

China Development Bank

March 29, 2012

March 28, 2015 RMB Yuan 6.65% 100,000,000.00


May 25, 2012 May 24, 2015 RMB Yuan 6.15% 90,000,000.00

Total -- -- -- -- -- 910,000,000.00 -- 250,000,000.00

43. Bonds payable

None.

44. Long-term payables

(1) Top five balances of long-term payables

Unit: Yuan

Unit Term Initial amount Rate (%)

Interest accrued Ending balance Loan condition


April 29, 2009 to April 28, 2014 500,000,000.00 4.90% 9,125,000.09 509,125,000.09


April 28, 2014 to April 27, 2015 500,000,000.00 4.48% 9,333,333.35 509,333,333.35


January 6, 2011 to January 5, 2014 200,000,000.00 5.535% 338,250.00 200,338,250.00


January 13, 2013 to January 12, 2015

60,000,000.00 6.15% 60,000,000.00

China Cinda Asset Management Co., Ltd.

30,983,938.21 20,000,000.00

(2) Details of finance lease payables

None.

45. Special payables

None.


146

46. Other non-current liabilities

Unit: Yuan Item Ending book balance Beginning book balance

Overseas mineral resources risk exploration expenditure 11,713,830.00 0.00

Subsidies to bauxite mine project in southern Laos 11,000,000.00 11,000,000.00 Comprehensive recovery project 24,302,634.45 17,003,274.37 Supporting infrastructure investment 50,603,846.11 44,254,767.32 Petrochemical engineering diaphragm pump project 28,980,000.00 23,200,000.00

Special subsidy to metallurgical technology upgrading 190,000.00 3,760,000.00

Total 126,790,310.56 99,218,041.69

47. Share Capital

Unit: Yuan

Beginning balance

Increase/decrease as a result of the change in this period (+, -) Ending balance New issue of

shares Bonus shares Transfer from capital reserve Others Subtotal

Total 766,656,000.00 766,656,000.00

48. Treasury stock

None.

49. Special reserve


Decrease in this period Ending balance

Safe production cost 28,896,210.64 24,106,056.10 14,010,074.73 38,992,192.01 Others 0.00 Total 28,896,210.64 24,106,056.10 14,010,074.73 38,992,192.01

50. Capital reserve


Capital (share capital) premium 282,008,151.42 5,552,591.72 276,455,559.70 Other capital reserve 87,896,129.15 3,186,857.86 226,348.88 90,856,638.13 Total 369,904,280.57 3,186,857.86 5,778,940.60 367,312,197.83

Capital reserve

1. The decrease of capital premium in this year totals RMB5,552,591.72, including RMB4,950,754.13 attributable to reduction in proportion of equity interest of the Company in the subsidiary Tsairt Mineral Co., Ltd. pursuant to the related agreement and RMB601,837.59 due to excluding the subsidiary Sino-America Network Consulting Co., Ltd. from the consolidation scope.

2. The increase of other capital reserves in this year totals RMB3,186,857.86, including the Company’s proportion of changes in other equities of the investee Terramin Australia Limited amounting to RMB2,544,241.86 calculated by using equity method and proportion of the subsidiary Chifeng Hongye Investment Co., Ltd. of changes in other equities of the investee Shengda Mining Co., Ltd. amounting to


147

RMB642,616.00 calculated by using equity method. The decrease of other capital reserves in this period totaling RMB226,348.88 is attributable to changes in fair value of held-for-sale financial assets of NFC (Shenyang) Metallurgic Machinery Co., Ltd as at the year end.

51. Surplus reserve


Legal surplus reserve 207,499,587.61 12,936,856.26 220,436,443.87 Total 207,499,587.61 12,936,856.26 220,436,443.87

Surplus reserve: none

52. Provision for ordinary risks

53. Undistributed profits

Unit: Yuan

Item Amount Withdrawal or distribution percentage

Ending undistributed profits of last year before adjustment 1,090,399,742.52 --

Total adjustment of beginning undistributed profits (“+” indicates increase and “-” indicates decrease) 9,648,607.86 --

Beginning undistributed profits after adjustment 1,100,048,350.38 -- Add: net profit attributable to the parent company owners in this period 202,592,256.83 --

Less: Legal surplus reserve 12,936,856.26 Ordinary shares dividends payable 76,665,600.00 Ending undistributed profits 1,213,038,150.95 --

Notes to adjustment of beginning undistributed profits:

The beginning undistributed profits adjusted due to correction of significant accounting errors amount to RMB9,648,607.86.

54. Operating Revenue and Operating Cost

(1) Operating revenue and Operating Cost

Unit: Yuan Item Amount in this period Amount in last period

Principal operating revenue 14,350,765,905.38 9,886,426,629.69 Other operating incomes 155,233,824.24 130,330,578.93 Operating cost 13,249,781,343.51 8,528,629,865.00

(2) Main Business (By industry)

Unit: Yuan

Industry Amount in this period Amount in last period

Total operating revenue Operating cost Total operating

revenue Operating cost

Project contracting 397,405,489.57 373,495,791.61 550,698,636.47 523,512,370.51 Nonferrous metal resources 3,748,819,169.57 2,957,189,603.42 3,359,371,592.38 2,367,362,112.26 Equipment manufacture 1,381,313,779.76 1,130,914,683.90 1,172,187,652.62 963,604,434.60


148

Trade 8,815,614,426.38 8,670,632,461.34 4,798,809,101.63 4,583,637,809.87 Others 7,613,040.10 2,891,630.00 5,359,646.59 4,688,728.00 Total 14,350,765,905.38 13,135,124,170.27 9,886,426,629.69 8,442,805,455.24

(3) Main Businesses (By product)

Unit: Yuan

Name Amount in this period Amount in last period



Project contracting 397,405,489.57 373,495,791.61 550,698,636.47 523,512,370.51 Nonferrous metal resources 12,488,746,441.96 11,557,115,678.30 8,063,818,947.71 6,865,002,671.05 Metallurgic machinery 1,456,221,457.44 1,201,522,067.91 1,260,218,486.50 1,043,345,565.14 Others 8,392,516.41 2,990,632.45 11,690,559.01 10,944,848.54 Total 14,350,765,905.38 13,135,124,170.27 9,886,426,629.69 8,442,805,455.24

(4) Main Business (By region)

Unit: Yuan




China 13,820,127,854.14 12,666,150,347.53 9,159,622,390.08 7,860,629,360.64 Other countries 530,638,051.24 468,973,822.74 726,804,239.61 582,176,094.60 Total 14,350,765,905.38 13,135,124,170.27 9,886,426,629.69 8,442,805,455.24

(5) Operating revenue from the Company’s top 5 customers

Unit: Yuan

Name of Customer Principal operating revenue Percentage to total operating revenue of the Company (%)

Xinshi International Trading Co., Ltd. 1,494,118,989.74 10.3%

Shanghai Woneng Metal Resources Co., Ltd. 1,470,921,851.22 10.14%

Shanghai Juyi International Trading Co., Ltd. 1,438,220,834.63 9.91%

Shanghai Rongyuan Nonferrous Metal Co., Ltd. 424,270,321.41 2.92%

Shaanxi Zinc Industry Co., Ltd. Shangluo Zinc Smelter 409,807,462.59 2.83%

Total 5,237,339,459.59 36.1%

Notes to operating revenue: the Company’s operating revenue in this year increases by RMB4,489,242,521.00 (up by 44.82%) on a YoY basis mainly attributable to trade service expansion of the parent company and sales increment after the NFC Zinc phase-IV project went into operation.

55. Revenue from contractual items

N/A.

56. Business taxes and surcharges


149

Unit: Yuan Item Amount in this period Amount in last period Basis of calculation

Business tax 4,958,367.56 5,556,987.95 3% or 5% Urban maintenance and construction tax 9,546,201.71 12,299,010.76 5% or 7%

Education surcharge 7,202,189.40 8,168,923.91 3% or 5% Resource tax 58,312,825.31 48,441,952.12 Taxable volume or amount Others 6,154,181.57 25,726,769.75 Total 86,173,765.55 100,193,644.49 --

57. Selling expenses


Transportation and handling charges 134,841,809.45 137,577,148.40 Employees’ remuneration 31,632,364.01 27,346,039.06 Operating expense 60,729,296.12 27,075,718.03 Others 12,028,362.15 16,953,611.66 Total 239,231,831.73 208,952,517.15

58. Management expense


Employees’ remuneration 214,935,134.84 240,244,378.92 Office expenditure 34,910,094.06 35,463,743.40 Taxes 49,612,495.20 38,041,134.88 Depreciation and amortization 51,677,173.50 48,436,720.48 Traveling expenses 23,384,705.71 24,318,527.76 Others 91,884,782.15 111,945,428.00 Total 466,404,385.46 498,449,933.44

59. Financial expenses


Interest expenditures 366,878,149.78 268,699,119.41 Interest revenue -17,141,056.73 -15,155,291.54 Exchange losses 26,158,460.75 14,073,434.82 Exchange gains -22,354,525.26 -5,400,440.03 Others 12,278,085.27 3,802,514.63 Total 365,819,113.81 266,019,337.29

60. Gains from Changes in Fair Values

None.

61. Investment income

(1) Details of investment income


150


Incomes from long-tern equity investments under cost method 7,146,260.31

Incomes from long-tern equity investments under equity method -2,482,961.66 62,943,829.45

Investment incomes from disposal of long-term equity investments 230,768,580.80 309,006,537.49

Investment incomes from available-for-sale financial assets 45,000.00 8,000.00

Others 4,339.73 323,454.79 Total 235,481,219.18 372,281,821.73

(2) Income from long-tern equity investments under cost method

Unit: Yuan

Investees Amount in this period Amount in last period Reason for change in this period


7,146,260.31 There is no dividend distribution in the same period of last year

Total 7,146,260.31 --

(3) Income from long-tern equity investments under equity method

Unit: Yuan Investees Amount in this period Amount in last period Reason for change in this period

China Nerin Engineering Co., Ltd. 34,813,807.08 33,913,421.84 Terramin Australia Limited -76,205,076.43 -21,332,957.23 Northeastern University Design Institute (Co., Ltd.) 2,350,699.14 2,620,056.07

Yindu Mining Co., Ltd. 37,499,096.37 Shengda Mining Co., Ltd. 36,557,608.55 10,244,212.40 Total -2,482,961.66 62,943,829.45 --

Notes to investment incomes: investment incomes in this reporting period decrease by 36.75% on a YoY basis mainly attributable to the significant income from equity swap and restructuring in the same period of last year and the significant provision for assets impairment of the shareholding subsidiary Terramin Australia Limited in this period. No significant limitation exists regarding investment income repatriation.

62. Assets impairment loss


I. Bad debt provision 20,779,531.99 10,635,127.21 II. Provision for inventory devaluation 53,659,084.39 88,245,483.85 XIII. Goodwill impairment provision 304,451.85 Total 74,743,068.23 98,880,611.06

63. Non-operating revenues

(1) Non-operating revenues


151

Unit: Yuan

Item Amount in this period Amount in last period Amount charged to current non-recurring profits and

losses Total gains from disposal of non-current assets 5,739,053.23 1,895,574.68 5,739,053.23

Including: Gains from disposal of fixed assets 5,739,053.23 1,895,574.68 5,739,053.23

Gains from debt restructuring 52,500.00 52,500.00 Gain on asset exchange 2,022,807.63 Donations 182,602.50 Government Subsidies 26,870,010.39 11,676,369.31 26,870,010.39 Others 16,231,526.22 3,725,013.54 16,231,526.22 Total 48,893,089.84 19,502,367.66

(2) Detail of government Subsidies

Unit: Yuan Item Amount in this period Amount in last period Notes

Import discount interest funds and subsidies for central enterprises 2,429,556.00 C.Q. [2011] No. 295; C.Q. [2012] No.

275 Special subsidy to projects of economic and technological cooperation with foreign countries

380,000.00 C.Q. [2012] No. 387

Incentive funds granted by Beijing Municipal Commission of Commerce to eligible enterprises

375,000.00 J.S.W.Y.X.Z. [2011] No.31

Overseas mineral resources risk exploration expenditure 3,366,170.00 C.Q. [2012] No. 84

Subsidies for patented technologies 80,000.00 12,000.00 S.J.M.H. [2012] No. 1117 “Strengthening Districts through Quality” award 250,000.00 P.Q.Q.B.H. (2012) No.3

Disability employment service in Guangdong 6,332.26 Disability employment service in

Guangdong (Guangzhou policy) Environment protection funds 800,000.00 Z.Z.F. [2010] No. 88

Comprehensive recovery project 1,581,046.92 1,629,525.70 C.J. [2009] No. 951; C.J. [2010] No. 237

Recognition award funds 1,300,000.00 C.C.Z.G. [2011] No.585 Financial appropriation from the Group (scientific research funds) 2,220,000.00 1,500,000.00 Z.S.K. [2011] No.13, Z.S.K. [2010]

No.11 Special funds of Shenyang Province for introduction of overseas R&D expert teams

1,000,000.00 100,000.00 L.W.Z.T.B. [2012] No.1; L.R.S. [2010] No.320

Financial appropriation from Shenyang Finance Bureau 400,000.00 S.K.F. [2012] No.29

Scientific and technical development funds of Liaoning Provincial Administration of Quality and Technology Supervision

50,000.00 Liaoning Provincial Administration of Quality and Technology Supervision

Rewards granted by Shenyang Municipal Administration of Science and Technology

10,000.00 S.Z.F. [2012] No.46

Funds of Shenyang Finance Bureau for technological innovation 281,984.00 Funds of Shenyang Finance Bureau for

technological innovation

Supporting infrastructure investment 2,129,921.21 2,056,052.96 Minutes of Urban Planning Commission 70th Meeting [2009]


152

Patented technology transformation funds of Liaoning Province 2011 300,000.00 L.Z.F. [2011] No.34

Key project of Liaoning Province for introduction of overseas technology managerial experts

100,000.00 L.W.Z. [2011] No.70

Special funds for diaphragm pump R&D 2,400,000.00 1,100,000.00

“Government financing” 9,110,000.00 3,545,206.00 Government subsidies of Xinfeng County and Erenhot business contract

Mongolia subsidies for foot-and-mouth disease 33,584.65

Total 26,870,010.39 11,676,369.31 --

Non-operating revenue:

The YoY increase of the Company’s non-operating income in this reporting period, RMB29,390,722.18 (up by 150.7%), is mainly attributable to the increase in government subsidies and the income from disposal of fixed assets of the subsidiary NFC (Shenyang) Metallurgic Machinery Co., Ltd.

64. non-operating expenses

Unit: Yuan

Item Amount in this period Amount in last period Amount charged to

current non-recurring profits and losses

Total losses from disposal of non-current assets 408,082.94 3,448,514.11 408,082.94 Including: losses from disposal of fixed assets 321,046.23 3,437,349.14 321,046.23

Losses from disposal of intangible assets Losses from debt restructuring 34,440.00 34,440.00 Donations to third parties 4,559,028.96 1,604,414.93 4,559,028.96 Others 6,773,906.35 2,177,999.62 6,773,906.35 Total 11,775,458.25 7,230,928.66 11,775,458.25

Non-operating expenses:

The YoY increase of the Company’s non-operating expenses in this year, RMM4,544,529.59 (up by 62.85%) is mainly attributable to individual account losses of the subsidiary NFC (Shenyang) Metallurgic Machinery Co., Ltd. carried forward.

65. Income tax expenses


Current income tax calculated according to tax laws and relevant specifications 196,344,228.48 259,603,405.66

Adjustment to deferred income tax -125,421,261.90 -66,170,134.88 Total 70,922,966.58 193,433,270.78

66. Calculation Process of Basic Earnings Per Share and Diluted Earnings Per Share

(1) Calculation Process of Basic Earnings Per Share

Item Basic earnings per share

This period Last year


153

Net profit attributable to ordinary shareholders (P0-1) 202,592,256.83 393,289,296.38 Non-recurring profits and losses 178,384,967.40 238,894,056.23 Net profits attributable to ordinary shareholders after deducting non-recurring profits and losses (P0-2) 24,207,289.43 154,395,240.15

Total number of months of the reporting period (M0) 12.00 12.00 Beginning total shares (S0) 766,656,000.00 638,880,000.00 Shares added due to capitalization of reserves or stock dividend distribution in the reporting period (S1) 0.00 127,776,000.00

Shares added due to new issue of shares or conversion of bonds to shares in the reporting period (Si)

Accumulated number of months from the month following share increment to the end of the reporting period (Mi)

Shares decreased in the reporting period due to repurchase or other reasons (Sj)

Accumulated number of months from the month following share decrease to the end of the reporting period (Mj)

Shares involved in reverse stock split in the reporting period (Sk) Weighted average number of outstanding ordinary shares (S=S0+S1+Si×Mi÷M0-Sj×Mj÷M0-Sk) 766,656,000.00 766,656,000.00

Basic earnings per share (P0-1÷S) 0.264

0.513

Earnings per share after deducting non-recurring profits and losses (P0-2÷S)

0.032

0.201

(2) Calculation Process of diluted earnings per share

Item Diluted earnings per share

This period Last year Net profit attributable to ordinary shareholders (P1-1) 202,592,256.83 393,289,296.38 Non-recurring profits and losses 178,384,967.40 238,894,056.23 Net profits attributable to ordinary shareholders after deducting non-recurring profits and losses (P1-2) 24,207,289.43 154,395,240.15

Interests on potentially dilutive ordinary shares recognized as expenses Conversion expenses Income tax rate 25.00% 25.00% Total number of months of the reporting period (M0) 12.00 12.00 Beginning total shares (S0) 766,656,000.00 638,880,000.00 Shares added due to capitalization of reserves or stock dividend distribution in the reporting period (S1) 0.00 127,776,000.00

Shares added due to new issue of shares or conversion of bonds to shares in the reporting period (Si)

Accumulated number of months from the month following share increment to the end of reporting period (Mi)

Shares decreased in the reporting period due to repurchase or other reasons (Sj)

Accumulated number of months from the month following share decrease to the end of reporting period (Mj)

Shares involved in reverse stock split in the reporting period (Sk) Weighted average number of ordinary shares increased under equity warrants, stock options and convertible bonds

Weighted average number of outstanding ordinary shares (S=S0+S1+Si×Mi÷M0-Sj×Mj÷M0-Sk+ weighted average number of ordinary shares increased under equity warrants, stock options and convertible bonds)

766,656,000.00 766,656,000.00

Diluted earnings per share =[P1-1+(Interests on potentially dilutive ordinary shares recognized as expenses – Conversion expenses) ×(1- Income tax rate))]÷S

0.264

0.513


154

Diluted earnings per share after deducting non-recurring profits and losses =[P1-2+(Interests on potential dilutive ordinary shares recognized as expenses – Conversion expenses) ×(1- Income tax rate))]÷S

0.032

0.201

67. Other comprehensive income


1. Gains (losses) arising from available-for-sale financial assets -581,500.00 -4,063,800.00

Less: impact on income taxes from available-for-sale financial assets -145,375.00 -1,015,950.00

Subtotal -436,125.00 -3,047,850.00 2. Share of other comprehensive income of the investee accounted for using the equity method 3,186,857.86 -232,003.66

Subtotal 3,186,857.86 -232,003.66 4. Translation differences on financial statements denominated in foreign currencies 753,286.79 -50,628,806.16

Subtotal 753,286.79 -50,628,806.16 Total 3,504,019.65 -53,908,659.82

68. Notes to Items in the Cash Flow Statement

(1) Other cash receipts relating to operating activities

Unit: Yuan Item Amount

Cash received from current accounts 69,729,044.30 Interest revenue 17,026,481.10 Subsidies 34,117,463.62 Others 13,588,644.02

Total 134,461,633.04

(2) Other cash payments relating to operating activities


Administrative expenses 121,424,131.31 Selling expenses 173,666,250.69 Current accounts 65,140,486.69 Service charges 12,278,085.27 Others 4,136,872.67

Total 376,645,826.63

(3) Other cash receipts from investment activities


Adjustment to investments paid regarding establishment of NFC Southern Rare Earth (Xinfeng) Co., Ltd. pending registration excluded from the consolidation scope in the same period of last year when preparing the consolidated financial statements

153,000,000.00


155

Total 153,000,000.00

(4) Other cash payment relating to investment activities


Outstanding expenses associated with assets input into Shengda Mining Co., Ltd in 2011. 17,646,484.91

Total 17,646,484.91

(5) Other cash received from financing activities


Bank deposit pledge received 57,378,940.97 Total 57,378,940.97

(6) Other cash payment relating to financing activities


Monetary capital for guarantee 15,830,948.09 Total 15,830,948.09

69. Supplementary Information to the Cash Flow Statement

(1) Supplementary Information to the Cash Flow Statement

Unit: Yuan Supplementary information Amount of this period Amount of last year

1. Reconciliation of net profit to cash flow from operating activities -- --

Net profit 225,522,105.52 506,751,290.14 Add: assets impairment provision 74,743,068.23 98,880,611.06 Depreciation of fixed assets, oil & gas assets, and capitalized biological assets 234,506,536.51 192,099,183.15

Intangible assets amortization 56,107,610.78 55,645,876.32 Long-term deferred expenses amortization 16,449,469.82 18,545,180.39 Losses from disposal of fixed assets, intangible assets and other long-term assets (“-” indicates gains) -236,099,551.09 -309,487,570.66

Losses from retirement of fixed assets (“-” indicates gains) 82,686.59 11,164.97 Financial expenses (“-” indicates income) 370,682,085.27 277,372,114.20 Investment losses (“-” indicates gains) -4,708,298.65 -63,275,284.24 Decrease in deferred income tax assets (“-” indicates increase) -100,519,046.78 -13,766,778.80

Increase in deferred income tax liabilities (“-” indicates decrease) -24,902,215.12 -35,413,525.43

Decrease in inventories (-” indicates increase) -818,746,535.84 -944,932,441.93 Decrease in receivables from operating activities (-” indicates increase) -1,834,546,152.54 -716,851,664.85


156

Increase in payables from operating activities (-” indicates decrease) 903,380,421.87 620,407,973.86

Net cash flow from operating activities -1,138,047,815.43 -314,013,871.82 2. Significant investment and financing activities not involving cash receipts / payments -- --

3. Net changes in cash and cash equivalents -- -- Ending balance of cash 1,745,474,651.15 1,347,623,326.47 Less: ending balance of cash 1,347,623,326.47 1,017,804,515.52 Net increase in cash and cash equivalents 397,851,324.68 329,818,810.95

(2) Acquisition or disposal of subsidiaries and other operating entities in the reporting period

Unit: Yuan Supplementary information Amount in this period Amount in last period

I. Acquisition of subsidiaries and other operating entities: -- --

II. Disposal of subsidiaries and other operating entities: -- --

(3) Composition of cash and cash equivalents


I. Cash 1,745,474,651.15 1,347,623,326.47 Including: cash on hand 3,360,743.80 2,433,138.38

Bank deposits readily available 1,737,977,915.61 1,341,095,820.93 Other monetary capitals readily available 4,135,991.74 4,094,367.16

III. Ending balance of cash and cash equivalents 1,745,474,651.15 1,347,623,326.47

Supplementary Information to the Cash Flow Statement: none

70. Notes to Items in the Statement of Changes in Owners’ Equity

Notes: none

VIII. Accounting Process of Asset Securitization

1. Explanations for major arrangement of asset securitization, corresponding accounting process and bankruptcy terms

None.

2. Special purpose entities over which the Company has no control but undertakes risk

None.

IX. Related party and related party transaction

1. Parent company

Unit: Yuan


157

Parent company

name

Nature of connection

Company type

Registered address


Nature of business

Registered capital

Percentage of the

Company’s equity

interest held by the parent

company (%)

Percentage of the

Company’s voting

power held by the parent

company (%)

Ultimate controlling party of the Company

Organization Code



Limited company Beijing Luo Tao

Metal mines investment, operating management and EPC contracting

5,020,962,900.00 33.34% 33.34%


100024915

Notes to Parent company: none

2. Parent company

Unit: Yuan


Type of subsidiary

Company type

Registered address


Nature of business

Registered capital


(%)


power (%)

Organization Code



Limited liability company

Beijing Gao Dehua Property management 1,100,000.00 100.00% 100.00% 63368967X



Limited company Beijing Xie Yaheng

Distribution of metallurgical and materials

14,000,000.00 57.14% 57.14% 63370891-4

Guangdong Zhujiang Rare Earths Co., Ltd.


Limited company

Guangzhou, Guangdong Xie Yaheng

Rare earth products manufacturing

90,585,100.00 71.75% 71.75% 19044799-6



Limited company Mongolia Zhang Shili

Mining, processing, import & export

USD 100,000.00 50.00% 50.00%

NFC (Shenyang) Metallurgical Machinery Co., Ltd.


Limited company

Shenyang, Liaoning

Wang Hongqian

Manufacturing of equipment and spare parts

283,369,300.00 51.90% 51.90% 731037296



Limited company

British Virgin Islands

Qin Junman


USD 800,000.00 100.00% 100.00%



Limited company


Wang Hongqian

Nonferrous metals investment, development and marketing

1,908,000,000.00 52.31% 52.31% 667345402



Limited company Beijing Du Bin

Investment management, marketing of metallic materials, etc.

11,000,000.00 72.73% 72.73% 633653749

China International Alumina Development Co., Ltd.


Limited company Beijing Wang

Hongqian

Technological development and agency import & export

50,000,000.00 45.00% 45.00% 76094074-0


158

Chifeng NFC Kumba Hongye Zinc Co., Ltd.,


Limited company


Wang Hongqian

Nonferrous metals manufacturing, processing and marketing

170,000,000.00 62.00% 62.00% 783023435



Limited company

Erenhot, Inner Mongolia

Gong Xinyong

Export of equipment and materials & general trade

1,000,000.00 100.00% 100.00% 660984172



Limited company

Xinfeng County, Guangdong

Xie Yaheng

Rare earth minerals processing and production

300,000,000.00 100.00% 100.00% 67883997-7

Sino-Australia Resources (Laos) Company, Limited


Limited company Laos Qin Junman


USD 975,000.00 51.00% 51.00%

Tsairt Freight Co., Ltd.


Limited company Mongolia Xu Hongwei Transportation

of products USD 10,000.00 51.00% 51.00%

Laos Ciac Mekong Mineral Co., Ltd.


Limited company Laos Qin Junman


USD 1,000,000.00 100.00% 100.00%



Limited company

Shenyang, Liaoning

Wang Hongqian

Diaphragm pumps design, R&D, manufacturing and sales

150,000,000.00 100.00% 100.00% 68330609-1



Limited company


Wang Hongqian


335,073,000.00 42.61% 42.61% 747908199



Limited company


A Lan


154,000,000.00 62.00% 62.00% 239909427



Limited company


Gong Xinyong

Investment operation, management and consulting

10,000,000.00 100.00% 100.00% 78302886-9

Chifeng NFC Baiyinnuo’er Mineral Industry Co., Ltd.


Limited company


Wang Hongqian

Lead & zinc mining, ore dressing and sales

50,000,000.00 100.00% 100.00% 783009561



Limited company Mongolia Wang

Hongqian

Mineral resources prospecting & exploration

USD 143,000.00 70.00% 70.00%

Sino-Australia Resources (Laos) Company, Hong Kong Limited


Limited company Hong Kong Qin Junman


HKD10,000.00 51.00% 51.00%



Limited company

Guangzhou, Guangdong

Wang Hongqian

Rare Earth manufacturing and processing

1,000,000,000.00 51.00% 51.00% 58950581-X

3. Associates and joint ventures of the Company

Unit: Yuan


159

Name of investees

Company type

Registered address


Nature of business Registered capital


(%)


power in the investee held

by the Company

(%)

Nature of connection

Organization Code

I. Joint ventures II. Associate Xiamen Shengjiong Trade Co., Ltd.

Limited company

Xiamen, Fujian Wang Baolin

Import & export trades, processing trade

4,000,000.00 50.00% 50.00% Shareholding company

United Assets and Equity Exchange Limited Company

Limited company Beijing Gao Yangyu

Equity auction & provision of trade information

6,800,000.00 29.41% 29.41% Shareholding company 10002330-6


Limited company

Nanchang, Jiangxi Zhang Xiaobo

Project survey, design and EPC contracting



Limited company Australia Mine

development AUD

133,882,000.00 5.26% 5.26% Shareholding company

Shengda Mining Co., Ltd.

Limited company Beijing Zhu Shengli

Lead & zinc mining, ore dressing and sales



Limited company Shenyang Tu Ganfeng

Project design & technical consultation



Limited company Baotou Zhang Zhong

Trading services of rare earth and related products

120,000,000.00 8.33% 8.33% Shareholding company 057801482

4. Other related parties of the Company

Name of other related parties Relationship with the Company Organization Code Wanxiang Resources Co., Ltd. The second largest shareholder of the Company 76300777-X CNMC International Trade Co., Ltd. Under common control of a group company 710934932 Xinyang Trade Co., Ltd. Under common control of a group company 220522345 NFCA Mining Co., Ltd. Under common control of a group company China Nonferrous Hongtoushan Fushun Mining Group Co., Ltd. Under common control of a group company 119615379 China No.15 Metallurgical Construction Co., Ltd. Under common control of a group company 177573461 CNMC Developing Investment Co., Ltd. Under common control of a group company 102043239 Xincheng Construction Supervision & Consulting Co., Ltd. Under common control of a group company 102094159 CNMC Nickel Co., Ltd., Under common control of a group company 710935249 China Nonferrous Metals Int’l Mining Co., Ltd. Under common control of a group company 710930202 Zambia-China Economic & Trade Cooperation Zone Under common control of a group company NFC (Congo) Mining Co., Ltd. Under common control of a group company Chambishi Copper Smelter Co., Ltd. Under common control of a group company 79405291X Shenyang Youyan Industrial Minerals Co., Ltd. Under common control of a group company 662548024 Tianjin Jialong Nonferrous Metal Wire Drawing Co., Ltd. Under common control of a group company 735452411 15MCC International Engineering Co., Ltd. Under common control of a group company 673699573 North China Branch of Aluminum Corporation of China Under common control of a group company 103064277


160

Kryso Resources PLC. Under common control of a group company Tieling Beneficiation Reagent Co., Ltd. Under common control of a group company 122712882 Shenyang Nonferrous Metallurgy Engineering Research Institute Under common control of a group company 240553755

Chifeng Dajingzi Tin Co., Ltd. Under common control of a group company 743885612 NFC (Shenyang) Xinyue Trade Co., Ltd. Under common control of a group company 691980115 Golden Bright Insurance Co., Ltd. Under common control of a group company 717832242 Inner Mongolia Yindu Mining Co., Ltd. Subsidiary of associate 75667577-X China Nonferrous Kabwe Mining Co., Ltd. Under common control of a group company

Notes to other related parties of the Company

5. Related party transaction

(1) Purchase of goods and receipt of services

Unit: Yuan

Related party Subject matter

Pricing mechanism and decision-making

procedures

Amount in this period Amount in last period

Amount

Percentage of transaction

amount in total amount of

transactions in same

classification (%)

Amount


total amount of


classification (%)


Purchase of products Market price 18,875,884.36 0.57% 40,358,019.67 1.02%


Purchase of products Market price 11,045,190.27 0.34%


Purchase of products Market price 571,204.45 0.02% 15,395,777.64 0.39%


Purchase of products Market price 350,427.35 0.01% 305,641.03 0.01%

Inner Mongolia Yindu Mining Co., Ltd.

Purchase of products Market price 60,276,754.24 1.84% 115,586,532.84 2.91%

China Nerin Engineering Co., Ltd. Receipt of services Market price 2,799,425.00 0.75% 2,202,835.50 0.42%


Receipt of services Market price 76,497.85 0.02% 1,470,505.00 0.88%


Receipt of services Market price 50,138,399.51 13.36% 57,402,787.40 11.5%




Receipt of services Market price 205,000.00 0.05%


Receipt of services Market price 492,375.00 0.13% 180,000.00 0.03%


Receipt of services Market price 1,350,000.00 0.81%



Xincheng Construction Supervision & Consulting Co., Ltd.

Receipt of services Market price 214,000.00 0.06% 1,409,950.00 0.27%


161

Sales of goods and provision of services

Unit: Yuan

Related party Subject matter

Pricing mechanism and decision-making

procedures

Amount in this period Amount in last period

Amount

Percentage of transaction

amount in total amount of


classification (%)

Amount


total amount of


classification (%)

Wanxiang Resources Co., Ltd. Sales of products Market price 2,973,512.90 0.08% 7,795,477.73 0.23%


Sales of products Market price 15,758,053.20 0.42% 122,997,175.77 2.57%

Xinyang Trade Co., Ltd. Sales of products Market price 151,699,378.04 4.00% 76,740,907.72 2.28%

Chifeng Dajingzi Tin Co., Ltd. Sales of products Market price 1,641,025.64 0.04%


Sales of products Market price 1,316,923.08 0.03%

North China Branch of Aluminum Corporation of China

Sales of products Market price 45,091,556.18 1.34%

CNMC Nickel Co., Ltd., Sales of products Market price 787,521.38 0.02%


Sales of products Market price 974,295.89 0.03% 21,314,952.80 0.44%


Rendering of services Market price 12,991,339.94 46.25% 7,298,800.04 37.33%


Rendering of services Market price 31,291.29 0.11%


Rendering of services Market price 531,738.38 1.89% 492,560.20 2.52%







CNMC Nickel Co., Ltd., Rendering of services Market price 399,488.52 1.42% 421,881.60 2.16%



Kryso Resources PLC. Rendering of services Market price 34,466.05 0.12% 27,772.84 0.14%





(2) Trusting/contracting with related parties

None.

(3) Related leasing

Leasing with related parties


162

Unit: Yuan

Name of leasor Name of leasee Category of

property leased

Beginning date of leasing End of leasing

Measurement basis for lease

income

Lease income recognized for the reporting period



Premise January 1, 2012 December 31, 2012 Market price 33,980,407.29



Premise January 1, 2012 December 31, 2012 Market price 148,633.62











CNMC Nickel Co., Ltd., Premise January 1, 2012 December 31, 2012 Market price 1,794,565.38








Kryso Resources PLC. Premise January 1, 2012 December 31, 2012 Market price 163,713.70





163




Notes to related leasing:

In the reporting period, the controlling shareholder China Nonferrous Metal Mining (Group) Co., Ltd. and some of its subsidiaries leased some houses of NFC Building owned by the Company for office use.

(4) Related guarantees

Unit: Yuan

Guarantor Guarantee Amount guaranteed Beginning date of guarantying

Maturity of guarantying Is it fully performed?



30,000,000.00 March 30, 2013 March 29, 2015 No

(5) Loans from/to related parties

Unit: Yuan Related party Amount of lending Start date Maturity Notes

Loans from related parties: China Nonferrous Metal Mining (Group) Co., Ltd. 500,000,000.00 June 07, 2010 June 6, 2013

China Nonferrous Metal Mining (Group) Co., Ltd. 500,000,000.00 April 29, 2009 April 28, 2014

China Nonferrous Metal Mining (Group) Co., Ltd. 500,000,000.00 April 28, 2010 April 27, 2015

China Nonferrous Metal Mining (Group) Co., Ltd. 200,000,000.00 January 6, 2011 January 5, 2014



China Nonferrous Metal Mining (Group) Co., Ltd. 55,420,000.00 February 3, 2012 February 02, 2013

China Nonferrous Metal Mining (Group) Co., Ltd. 57,700,000.00 June 16, 2012 June 15, 2013

China Nonferrous Metal Mining (Group) Co., Ltd. 100,000,000.00 June 28, 2012 June 27, 2013

China Nonferrous Metal Mining (Group) Co., Ltd. 100,000,000.00 November 8, 2012 November 7, 2013

China Nonferrous Metal Mining (Group) Co., Ltd. 100,000,000.00 December 10, 2012 December 9, 2013

China Nonferrous Metal Mining (Group) Co., Ltd. 35,000,000.00 August 21, 2012 August 20, 2013

(6) Assets transfer and debt restructuring with related parties

None.


164

(7) Other related party transactions

At the end of the reporting period, loans of the Company from the parent company China Nonferrous Metal Mining (Group) Co., Ltd. totaled RMB2.234 billion and the accrued expenses for using funds amounted to RMB117,053,094.30.

6. Accounts Due from/to Related Parties

Accounts receivable

Unit: Yuan

Name Related party Ending Beginning

Book balance Bad debt provision Book balance Bad debt

provision Accounts receivable NFCA Mining Co., Ltd. 13,924.20 4,177.26 13,924.20 4,177.26

Accounts receivable CNMC International Trade Co., Ltd. 11,632,291.65 828,733.34 30,484,023.35

Accounts receivable

Zambia-China Economic & Trade Cooperation Zone 8,769,517.96

Accounts receivable CNMC Nickel Co., Ltd., 72,070.00 384,980.00

Accounts receivable Xinyang Trade Co., Ltd. 6,793,201.33 669,407.30

Accounts receivable Tieling Beneficiation Reagent Co., Ltd. 154,080.00

Accounts receivable

China Nonferrous Metal Mining (Group) Co., Ltd. 5,911,260.41 473,165.00

Accounts receivable Chifeng Dajingzi Tin Co., Ltd. 384,000.00 2,162.10

Advance payment

China Nonferrous Hongtoushan Fushun Mining Group Co., Ltd. 3,323,581.30 3,319,128.61

Advance payment

China No.15 Metallurgical Construction Co., Ltd. 3,970,000.00

Advance payment

15MCC International Engineering Co., Ltd. 13,219,618.84 5,754,815.66

Other receivables Wanxiang Resources Co., Ltd. 7,704,904.17

Advance payment

Shenyang Nonferrous Metallurgy Engineering Research Institute 189,027.00

Advance payment China Nerin Engineering Co., Ltd. 600,000.00 693,840.00

Advance payment

Northeastern University Design Institute (Co., Ltd.) 1,437,219.31

Advance payment Inner Mongolia Yindu Mining Co., Ltd. 16,926,755.83 5,000,000.00

Accounts payable

Unit: Yuan Name Related party Ending amount Beginning amount

Accounts payable China No.15 Metallurgical Construction Co., Ltd. 4,808,138.91 5,572,940.80

Accounts payable Shenyang Youyan Industrial Minerals Co., Ltd. 969.00 969.00

Accounts payable CNMC Developing Investment Co., Ltd. 2,080,432.99 8,863,662.09

Accounts payable 15MCC International Engineering Co., Ltd. 2,194,567.42


165

Accounts payable Northeastern University Design Institute (Co., Ltd.) 2,212,780.69

Accounts payable NFC (Shenyang) Xinyue Trade Co., Ltd. 12,322,872.62 Advance receipts CNMC International Trade Co., Ltd. 429,887.90

Advance receipts China No.15 Metallurgical Construction Co., Ltd. 375,128.18

Advance receipts Shenyang Research Institute of Nonferrous Metals 1,929,658.12

Long-term payables China Nonferrous Metal Mining (Group) Co., Ltd. 1,779,642,208.44 1,737,639,833.36

Other payables China Nonferrous Metal Mining (Group) Co., Ltd. 525,806,765.65 676,676,996.30

Other payables China Nonferrous Metals Int’l Mining Co., Ltd. 1,219,414.03 1,222,401.69

Other payables Chambishi Copper Smelter Co., Ltd. 64,000.00 64,000.00 Other payables CNMC Developing Investment Co., Ltd. 1,350,000.00

Other payables Shenyang Research Institute of Nonferrous Metals 15,000.00

Other payables CNMC International Trade Co., Ltd. 76,497.85 1,470,505.00

X. Share-based Payment

1. Information on share-based payment

None.

2. Information on equity-settled share-based payment

None.

3. Information on cash-settled share-based payment

None.

4. Information on services received through share-based payment

None.

5. Revision to and termination of share-based payment

None.

XI. Contingencies

1. Contingent liabilities incurred by pending lawsuits and arbitrations and financial impacts

None.

2. Contingent liabilities incurred by providing debt guarantee for other entities and financial impacts

Other contingent liabilities and financial impacts: in the reporting period, the balance of the banking facility guarantee provide by the Company for NFC (Shenyang) Pump Industry Co., Ltd. amounted to RMB189,213,200. The borrower is a wholly-owned subsidiary of the Company, over which the Company exercises control, therefore, the guarantee will not have any material adverse impact on the Company.

XII. Commitment

1. In July 26, 2012 when China Nonferrous Metal Mining (Group) Co., Ltd. (“CNMC”), the controlling shareholder of the Company, had some of its restricted shares circulated on the share market, CNMC stated that: it will not transfer through the securities exchange system 5% or more of its shares within six months upon lifting of restriction on sales of shares, and if its controlling shareholders sell tradable shares after lifting of restriction on sales, and reduced 5% or more shares within six months after the first reduction transaction, CNMC shall, within


166

two business days prior to the first reduction transaction, release through a listed company the indicative announcements regarding the transaction, specifying number of shares to be sold, date of transaction, proposed price range, reason for reduction, etc. The commitment is being executed.

2. CNMC undertook that: For the purpose of enhancing internal cohesion and encouraging the management to play an active role in advancing the sound, steady and sustainable development of the Company, CNMC, the largest shareholder of the Company, undertakes to provide assistance, upon execution of the equity division reform, in the Company’s preparation and implementation of the management stock incentive plan, in compliance with applicable laws and regulations of the State. At present, however, the Company is not ready yet to prepare and implement the management stock incentive plan.

3. For the Issuance Plan for Shares Placement adopted at the NFC’s 14th Meeting of the Sixth Session of Board of Directors, CNMC issued the Commitment on Subscription of the Shares Offered by FNC. As at the date of issuance of the Commitment of Subscription, NFC had registered capital of RMB766,656,000 or 766,656,000 shares, with 255,620,474 shares held by CNMC, accounting for 33.34%. According to the aforesaid Shares Placement Plan specifying that no more than 3 shares shall be placed for every 10 shares, an aggregate of 76,686,142 shares shall be placed to the Company, and CNMC undertook to subscribe all of them in cash in full and perform its contribution obligations in good faith. So far, the commitments have been fulfilled.

4. Chifeng Hongye Investment Co., Ltd. (“CHIC”), a wholly-owned subsidiary of the Company, entered into a restructuring arrangement regarding CHIC’s subscription for the shares of Shengda Mining Co., Ltd. (“ST Shengda”) with the equity held by it in Inner Mongolia Yindu Mining Co., Ltd. (“YDMC”) as the consideration, whereby CHIC undertook that:

① CHIC will not transfer the aforesaid shares of ST Shengda subscribed by it within twelve months upon closure of the issuance on November 9, 2011, nor will it reduce more than 50% of total shares (53,628,308.00) subscribed within twenty-four moths after the expiration of time limit for share trading.

The commitment is being executed.

② Pursuant to the Profits Compensation Agreement entered into by CHIC, Beijing Shengda Zhenxing Industrial Co., Ltd., Wang Yanfeng and Wang Wei (“the Reorganizer”), on one side, and ST Shengda (formerly ST Weida), on the other side, the Reorganizer makes a joint commitment regarding the net profits (after deducting non-recurring profits and losses) realized by the asset replacement within three years (i.e. 2011, 2012 and 2013) after completion of the asset subscription of ST Shengda’s equity with 62.96% equity (“the Assets Replaced”) held by the Reorganizer in YDMC, detailed as follows: in 2011, the net profits of Assets replaces shall be no less than RMB219,682,100; the aggregate net profits realized in 2011 and 2012 shall be no less than RMB439,321,000; the aggregate net profits realized in 2011, 2012 and 2013 shall be no less than RMB771,894,700. If the net profits realized by the Assets Replaced fail to meet the above minimum requirements for continuously 3 years from 2011, the Reorganizer agrees to compensate in full in the form of shares to ST Shengda for the unrealized Assets Replaced.

Meanwhile, ST Shengda will effect an impairment test on the asset received at the end of 2013. If the impairment amount of the asset exchanged by the price of the asset is found to be higher than the number of shares compensated exchanged by the total shares subscribed, the Reorganizer agreed to make a share-based compensation for that.

As at December 31, 2012, the aggregate net profits after deducting non-recurring profits and losses realized by the Asset Surrendered in 2011 and 2012 are higher than RMB439,321,000. Other commitments are being executed.

③ Subject to the foregoing Profits Compensation Agreement entered into by the Reorganizer and ST Shengda (formerly ST Weida), the value of Asset Surrendered by the Reorganizer for subscription of ST Shengda’s equity is RMB2,385,566,000 on the basis of 600,000t/a capability in the service life indicated on the mining permit by reference to the Special Instructions on Influence of Mining Right-Related Productivity Change on Assessment Results for Inner Mongolia Yindu Mining Co., Ltd. issued by China Faith Appraisers Co., Ltd. This value is RMB473,961,000 lower than the assessed price RMB2,859,527,000 of the asset received in the transaction. The Reorganizer undertook that if YDMC should fail to obtain the renewed mining permit and realize capacity expansion up to 900,000t/a through technology upgrading prior to December 31, 2012, ST Weida shall repurchase the 62,854,550 shares corresponding to the difference of the asset value at the price of RMB1.00 and write off the transaction. As at December 31, 2012, YDMC has obtained the renewed 900,000t/a capacity-based mining permit and is having the technology upgrading & capacity expansion project underway as planned.


167

④ The Company, together with CHIC, undertakes that they will (A) continue to comply with the market pricing principles of openness, fairness and justness and conduct the transactions with YDMC based on the market fair values; will not engage in any activity or behavior that may impair the benefits of YDMC and ST Shengda by utilizing such transactions, and (B) will not seek any privilege over a third party in the market in routine transactions with YDMC by means of its position and influence as the second largest shareholder of ST Shengda. This commitment is being executed

XIII. Events after the Balance Sheet Date

1. Notes to events after the Major Balance Sheet Date

None.

2. Profit distribution after the balance sheet date

Profit distribution plan for 2012: the Company plans to pay to all shareholders a cash dividend of RMB 1.00 (tax inclusive) for every 10 shares with its total share capital 984,689,212 as of March 26, 2013.

3. Notes to events after the Other Balance Sheet Date

On November 11, 2011, the Issuance Plan for the Shares Placement was deliberated and adopted at the 14th Meeting of the Sixth Session of Board of Directors; on December 8, 2011, the Issuance Plan for the Shares Placement was deliberated and adopted at the 2011 Fifth Extraordinary General Meeting of Shareholders; on June 15, 2012, the Company’s shares placement application was approved conditionally at the 116th meeting of Main Board Market Issuance Examination Committee under China Securities Regulatory Commission in 2012; on February 21, 2013, the Company received the Letter of Approval on Shares Placement Application by China Nonferrous Metal Industry’s Foreign Engineering and Construction Co., Ltd. (Z.J.X.K. [2013] No. 173) from CSRC.

As at March 19, 2013, the aforesaid placement had been proceeding as planned. The shares placed were listed at SZSE on March 26, 2013. As audited and examined by CPA, 218,033,212 RMB-denominated common stocks have been issued at price of RMB8.26/share, resulting in cashing of aggregate capital of RMB1,800,954,331.12 and net capital of 1,760,076,734.12.

XIV. Other significant Events

1. Non-monetary asset exchange

None.

2. Debt restructuring

In the reporting period, the subsidiary NFC (Shenyang) Metallurgic Machinery Co., Ltd. entered into a debt restructuring agreement with Qinghai Aluminum Huatong Carbon Co., Ltd., whereby some accounts receivable are written off. The original book balance of the accounts receivable is RMB49,200.00 before writing off, among which bad debt provision of RMB14,760.00 has been accrued and the RMB34,440.00 recognized as losses of debt restructuring.

3. Business combinations

None.

4. Leasing

None.

5. Financial instruments convertible into shares and outstanding at the end of the reporting period

None.

6. Assets and liabilities at fair value

Unit: Yuan


168

Item Beginning amount

Profits and losses arising

from fair value change in this

period

Cumulative fair value change

charged to equity

Impairment provisions in this

period Ending amount



3. Available-for-sale financial assets 5,556,800.00 -7,794,299.01 4,975,300.00

Subtotal of financial assets 5,556,800.00 -7,794,299.01 4,975,300.00 Total of above 5,556,800.00 -7,794,299.01 4,975,300.00 Financial liabilities

7. Financial assets and liabilities denominated in foreign currencies

Unit: Yuan

Item Beginning amount

Profits and losses arising from fair

value change in this period

Cumulative fair value change

charged to equity

Impairment provisions in this

period Ending amount



3. loans and receivables 236,446,740.66 4,216,609.09 344,637,122.60 Subtotal of financial assets 236,446,740.66 4,216,609.09 344,637,122.60 Financial liabilities 248,155,166.98 764,678,361.17

8. Main contents and significant changes of annuity plan

None.

9. Others

None.

XV. Notes to Items in Parent Company Financial Statements

1. Accounts receivable

(1) Accounts receivable

Unit: Yuan

Category


Amount Percentage

(%) Amount

Percentage (%)

Amount Percentage

(%) Amount

Percentage (%)

Receivables that are individually significant and for which bad debt provision is individually accrued

23,487,637.36 2.57% 23,487,637.36 26.78% 23,545,184.03 3.81% 23,545,184.03 29.86%


169

Receivables for which bad debt provision is collectively accrued on a portfolio basis Receivables for which bad debt provision is collectively accrued on a portfolio basis

843,426,326.66 92.22% 16,536,839.68 18.86% 554,117,971.05 89.67% 15,045,292.63 19.08%

Subtotal of portfolios 843,426,326.66 92.22% 16,536,839.68 18.86% 554,117,971.05 89.67% 15,045,292.63 19.08% Receivables that are individually insignificant but for which bad debt provision is individually accrued

47,678,080.15 5.21% 47,678,080.15 54.36% 40,262,520.84 6.52% 40,262,520.84 51.06%

Total 914,592,044.17 -- 87,702,557.19 -- 617,925,675.92 -- 78,852,997.50 --

Explanations for categories of accounts receivable: none

Receivables that are individually significant at the end of this period and for which bad debt provision is individually accrued

√ APPL □ N/A

Unit: Yuan


National Iranian Copper Industries Company 23,487,637.36 23,487,637.36 100% Slim chance of

recovery Total 23,487,637.36 23,487,637.36 -- --

Receivables in portfolios that bad debt provision is accrued based on aging analysis method:

√ APPL □ N/A

Unit: Yuan

Aging



Bad debt provision Amount

Percentage (%)

Amount Percentage

(%) Within 1 year Including: -- -- -- -- -- -- Within 1 year 761,333,611.64 90.27% 475,530,099.37 85.82% Subtotal of within 1 year 761,333,611.64 90.27% 990,116.14 475,530,099.37 85.82% 298,625.13

1-2 years 33,003,871.41 3.91% 990,116.14 9,954,170.94 1.8% 298,625.13 2- 3 years 9,005,064.13 1.07% 900,506.41 48,359,454.40 8.73% 4,835,945.44 3- 4 years 26,978,363.09 3.2% 8,093,508.93 57,976.97 0.01% 17,393.09 4- 5 years 0% 1,074,028.60 0.19% 322,208.58 More than 5 years 13,105,416.39 1.55% 6,552,708.20 19,142,240.77 3.45% 9,571,120.39

Total 843,426,326.66 -- 16,536,839.68 554,117,971.05 -- 15,045,292.63

Receivables in portfolios that bad debt provision is accrued based on balance percentage method

□ APPL √ N/A

Receivables in portfolios that bad debt provision is accrued by other methods

□ APPL √ N/A

Receivables that are individually insignificant at the end of this period but for which bad debt provision is


170

individually accrued

√ APPL □ N/A

Unit: Yuan


Project contracting accounts 16,313,944.29 16,313,944.29 100% Slim chance of recovery

Labor service project accounts 16,631,277.42 16,631,277.42 100% Slim chance of recovery

Trade accounts 14,732,858.44 14,732,858.44 100% Slim chance of recovery Total 47,678,080.15 47,678,080.15 -- --

(2) Write-back and recovery of accounts receivables in the reporting period

None.

(3) Actual written-off accounts receivables in the reporting period

None.

(4) Account receivables due from shareholders holding 5% or more of voting rights of the Company in the reporting period

None.


(6) Top five debtors of accounts receivable due

Unit: Yuan

Name of entities Relationship with the Company Amount Aging

Percentage in total accounts receivable

(%) Chifeng NFC Zinc Industry Co, Ltd. Subsidiary 338,862,601.24 Within 1 year 37.05%

Guangdong Zhujiang Rare Earths Co., Ltd. Subsidiary 101,262,020.31 Within 1 year 11.07%

ZISCO Customer 64,801,459.58 Within 1 year 7.09% Shanghai Rongyuan Nonferrous Metal Co., Ltd.

Customer 54,098,000.01 Within 1 year 5.91%

Egypt Anode Block Co.(S.A.E) Customer 51,130,989.98 Within 1 year 5.59%

Total -- 610,155,071.12 -- 66.71%

(7) Accounts receivable due from related parties

Unit: Yuan

Name of entities Relationship with the Company Amount Percentage in total accounts receivable (%)

Chifeng NFC Zinc Industry Co, Ltd. Subsidiary 338,862,601.24 37.05%

Guangdong Zhujiang Rare Earths Co., Ltd. Subsidiary 101,262,020.31 11.07%

Total -- 440,124,621.55 48.12%


171

(8)

There is no transfer of accounts receivable not eligible for derecognition.

(9) Summarized description of transaction arrangements associated with securitized accounts receivable

None.

2. Other receivables

(1) Other receivables

Unit: Yuan

Category


Amount Percentage

(%) Amount

Percentage (%)

Amount Percentage

(%) Amount

Percentage (%)

Other receivables that are individually significant and for which bad debt provision is individually accrued

413,696,275.74 23.97% 5,270,000.00 9.52% 5,270,000.00 0.45% 5,270,000.00 9.77%

Other receivables for which bad debt provision is collectively accrued on a portfolio basis Other receivables for which bad debt provision is collectively accrued on a portfolio basis

1,302,094,117.58 75.44% 39,910,837.93 72.12% 1,147,373,911.99 98.67% 38,520,465.69 71.4%

Subtotal of portfolios 1,302,094,117.58 75.44% 39,910,837.93 72.12% 1,147,373,911.99 98.67% 38,520,465.69 71.4% Other receivables that are individually insignificant but for which bad debt provision is individually accrued

10,155,526.89 0.59% 10,155,526.89 18.35% 10,161,155.07 0.87% 10,161,155.07 18.83%

Total 1,725,945,920.21 -- 55,336,364.82 -- 1,162,805,067.06 -- 53,951,620.76 --

Explanations for categories of other accounts receivable: none

Other receivables that are individually significant at the end of this period and for which bad debt provision is individually accrued

√ APPL □ N/A

Unit: Yuan

Other receivables Book balance Amount for Bad Debt Provision percentage (%) Reason

Sichuan Chishui River Trading Company No.2 Branch

5,270,000.00 5,270,000.00 100% Slim chance of recovery


408,426,275.74 0% Good chance and no risk of collection

Total 413,696,275.74 5,270,000.00 -- --

Other receivables in portfolios that bad debt provision is accrued based on aging analysis method:

√ APPL □ N/A

Unit: Yuan

Aging



Bad debt provision Amount

Percentage (%)

Amount Percentage

(%) Within 1 year


172

Including: -- -- -- -- -- -- Within 1 year 1,218,419,822.52 93.58% 1,061,646,886.58 92.52% Subtotal of within 1 year 1,218,419,822.52 93.58% 1,061,646,886.58 92.52%

1-2 years 16,888,070.39 1.3% 1,688,807.04 29,116,283.11 2.54% 2,911,628.31 2- 3 years 22,563,439.99 1.73% 6,769,032.00 10,546,683.36 0.92% 3,164,005.01 3- 4 years 4,456,200.71 0.34% 2,228,100.36 14,515,234.54 1.27% 7,257,617.27 4- 5 years 8,627,895.49 0.66% 4,313,947.75 172,814.75 0.02% 86,407.38 More than 5 years 31,138,688.48 2.39% 24,910,950.78 31,376,009.65 2.73% 25,100,807.72

Total 1,302,094,117.58 -- 39,910,837.93 1,147,373,911.99 -- 38,520,465.69

Other receivables in portfolios that bad debt provision is accrued based on balance percentage method

□ APPL √ N/A

Other receivables in portfolios that bad debt provision is accrued by other methods

□ APPL √ N/A

Other receivables that are individually insignificant at the end of this period but for which bad debt provision is individually assessed

√ APPL □ N/A

Unit: Yuan

Other receivables Book balance Bad debt provision Provision percentage (%) Reasons for provision

Beijing Huahai Nantong Trading Center 3,000,000.00 3,000,000.00 100% Slim chance of recovery

China Nonferrous Metal No.3 Branch 2,815,413.18 2,815,413.18 100% Slim chance of recovery

Xiamen Jiangjun Company 2,000,000.00 2,000,000.00 100% Slim chance of recovery

NFC (Hebei) Import and Export Co., Ltd. 2,340,113.71 2,340,113.71 100% Slim chance of recovery

Total 10,155,526.89 10,155,526.89 -- --

(2) Write-back and recovery of other receivables in the reporting period

None.

(3) Actual written-off other receivables in the reporting period

None.

(4) Other account receivables due from shareholders holding 5% or more of voting rights of the Company in the reporting period

Unit: Yuan


Book balance Amount of Bad Debt Provision Book balance Amount of Bad Debt

Provision Wanxiang Resources Co., Ltd. 7,704,904.17

Total 7,704,904.17


173


None.

(6) Top five debtors of other receivables due

Unit: Yuan

Name of entities Relationship

with the Company

Amount Aging Percentage in total other receivables (%)

Chifeng NFC Zinc Industry Co, Ltd. Subsidiary 1,137,509,861.07 Within 1 year 65.91% NFC (Shenyang) Metallurgical Machinery Co., Ltd. Subsidiary 408,426,275.74 Within 1 year, 1- 5

years 23.66%

Sino-Australia Resources (Laos) Company, Limited Subsidiary 44,881,216.32 Within 1 year, 1-3

years 2.60%

NFC (Shenyang) Pump Industry Co., Ltd. Subsidiary 30,049,500.00 Within 1 year 1.74%

Export rebates receivable Others 25,828,158.23 Within 1 year 1.50% Total -- 1,646,695,011.36 -- 95.41%

(7) Other accounts receivable due from related parties

Unit: Yuan

Name of entities Relationship with the Company Amount Percentage in total other receivables (%)

Chifeng NFC Zinc Industry Co, Ltd. Subsidiary 1,137,509,861.07 65.91%

NFC (Shenyang) Metallurgical Machinery Co., Ltd. Subsidiary 408,426,275.74 23.66%

Sino-Australia Resources (Laos) Company, Limited Subsidiary 44,881,216.32 2.6%

NFC (Shenyang) Pump Industry Co., Ltd. Subsidiary 30,049,500.00 1.74%

Kaifeng Resources Holding C., Ltd. Subsidiary 12,366,247.95 0.72%

Laos Ciac Mekong Mineral Co., Ltd. Subsidiary 156,992.93 0.01%

Total -- 1,633,390,094.01 94.64%

(8) There is no transfer of other receivables not eligible for derecognition.

None.

(9) Summarized description of transaction arrangements associated with securitized accounts receivable

None.


174

3. Long-term equity investments

Unit: Yuan

Investees Accounting method Investment cost Beginning

balance Decrease/ increase Ending balance

Percentage of equity

interest in the investee held

by the Company

(%)

Percentage of voting power in the investee

held (%)

Explanation for the inconsistency

between the percentage of equity interest

and the percentage of voting power

Impairment provision

Impairment provisions in this period

Cash dividends for this period


Cost method 800,000.00 800,000.00 0.00 800,000.00 72.73% 72.73% 0.00 0.00 0.00


Cost method 8,000,000.00 8,000,000.00 0.00 8,000,000.00 57.14% 57.14% 0.00 0.00 0.00

Guangdong Zhujiang Rare Earths Co., Ltd.

Cost method 67,198,391.00 66,740,191.76 0.00 66,740,191.76 71.75% 71.75% 0.00 0.00 10,762,500.00


Cost method 7,235,900.00 7,235,900.00 0.00 7,235,900.00 72.73% 72.73% 0.00 0.00 0.00


Cost method 1,000,000.00 1,000,000.00 0.00 1,000,000.00 100.00% 100.00% 0.00 0.00 0.00

China International Alumina Co., Ltd.

Cost method 22,769,910.00 22,769,910.00 0.00 22,769,910.00 45.00% 45.00% 0.00 0.00 0.00


Cost method 998,000,000.00 998,000,000.00 0.00 998,000,000.00 52.31% 52.31% 0.00 0.00 0.00


Cost method 113,124,146.00 84,026,350.98 0.00 84,026,350.98 51.90% 51.90% 0.00 0.00 0.00


Cost method 144,000,000.00 96,000,000.00 48,000,000.00 144,000,000.00 96.00% 96.00% 0.00 0.00 0.00


Cost method 90,000,000.00 90,000,000.00 0.00 90,000,000.00 100.00% 100.00% 0.00 0.00 0.00


Cost method 10,000,000.00 10,000,000.00 0.00 10,000,000.00 100.00% 100.00% 0.00 0.00 250,000,000.00


175


Cost method 422,280.00 422,280.00 0.00 422,280.00 50.00% 50.00% 0.00 0.00 67,005,135.60


Cost method 124,856,100.00 6,306,891.01 0.00 6,306,891.01 100.00% 100.00% 0.00 0.00 0.00

Sino-America Network Consulting Co., Ltd.

Cost method 27,821,980.30 27,821,980.30 0.00 27,821,980.30 70.00% 70.00% 27,821,980.

30 0.00 0.00


Cost method 682,820.00 683,467.16 0.00 683,467.16 70.00% 70.00% 0.00 0.00 0.00


Cost method 153,000,000.00 0.00 153,000,000.00 153,000,000.00 51.00% 51.00% 0.00 0.00 0.00


Cost method 19,756,386.00 19,756,386.00 0.00 19,756,386.00 40.00% 40.00% 0.00 0.00 7,146,260.31

Minsheng Life Insurance Co., Ltd.

Cost method 384,310,000.00 384,310,000.00 0.00 384,310,000.00 6.17% 6.17% 0.00 0.00 0.00


Equity method 29,280,000.00 98,010,268.58 29,638,807.08 127,649,075.66 23.00% 23.00% 0.00 0.00 5,175,000.00


Equity method 128,424,592.10 98,845,312.68 -73,660,834.57 25,184,478.11 5.26% 5.26% 0.00 0.00 0.00


Equity method 47,400,000.00 50,020,056.07 2,350,699.14 52,370,755.21 20.00% 20.00% 0.00 0.00 0.00


Equity method 10,000,000.00 0.00 10,000,000.00 10,000,000.00 8.33% 8.33% 0.00 0.00 0.00

Xiamen Shengjiong Trade Co., Ltd.

Equity method 2,000,000.00 545,433.95 0.00 545,433.95 50.00% 50.00% 545,433.95 0.00 0.00


Equity method 2,000,000.00 645,256.41 0.00 645,256.41 29.41% 29.41% 645,256.41 0.00 0.00

Total -- 2,362,082,505.40 2,071,939,684.90 169,328,671.65 2,241,268,356.55 -- -- -- 29,012,670.66 0.00 340,088,895.91


176

4. Operating revenue and Operating Cost

(1) Total operating revenue


Principal operating revenue 10,401,974,115.15 6,401,531,107.14 Other operating income 58,150,504.64 54,312,660.34 Total 10,460,124,619.79 6,455,843,767.48 Operating cost 10,159,236,952.77 6,127,067,884.94

(2) Main Business (By industry)

Unit: Yuan

Industry Amount in this period Amount in last period

Total operating revenue Operating cost Total operating revenue Operating cost Project contracting 397,405,489.57 375,559,082.57 550,698,636.47 524,332,778.23 Trade 9,996,955,585.48 9,761,067,208.78 5,845,472,824.08 5,578,314,838.55 Others 7,613,040.10 2,891,630.00 5,359,646.59 4,688,728.00 Total 10,401,974,115.15 10,139,517,921.35 6,401,531,107.14 6,107,336,344.78

(3) Main Business (By product)

Unit: Yuan


Total operating revenue Operating cost Total operating revenue Operating cost Project contracting 397,405,489.57 375,559,082.57 550,698,636.47 524,332,778.23 Nonferrous metal resources 9,996,176,109.17 9,760,968,206.33 5,845,472,824.08 5,578,314,838.55 Others 8,392,516.41 2,990,632.45 5,359,646.59 4,688,728.00 Total 10,401,974,115.15 10,139,517,921.35 6,401,531,107.14 6,107,336,344.78

(4) Main Business (By region)

Unit: Yuan


Total operating revenue Operating cost Total operating revenue Operating cost China 10,005,905,267.64 9,769,360,357.41 5,849,554,362.68 5,582,941,553.31 Other countries 396,068,847.51 370,157,563.94 551,976,744.46 524,394,791.47 Total 10,401,974,115.15 10,139,517,921.35 6,401,531,107.14 6,107,336,344.78

(5) Operating revenue from the Company’s top 5 customers

Unit: Yuan

Name of Customer Total operating revenue Percentage to total operating revenue of the Company (%)

Shanghai Juyi International Trading Co., Ltd. 1,494,118,989.74 14.28% Xinshi International Trading Co., Ltd. 1,470,921,851.22 14.06% Shanghai Woneng Metal Resources Co., Ltd. 1,438,220,834.63 13.75% Chifeng NFC Zinc Industry Co, Ltd. 497,783,321.00 4.76% Shanghai Rongyuan Nonferrous Metal Co., Ltd. 424,270,321.41 4.06%


177

Total 5,325,315,318.00 50.91%

Notes to operating revenue

The parent company's operating revenue in the reporting period increases by RMB4,004,280,852.31 (up by 62.03%) on a YoY basis mainly attributable to its trade service expansion.

5. Investment income

(1) Details of investment income


Income from long-tern equity investments under cost method 334,913,895.91 101,911,427.71 Income from long-tern equity investments under equity method -39,040,570.21 15,200,520.68

Investment income from disposal of long-term equity investments -28,460,788.46

Total 295,873,325.70 88,651,159.93

(2) Income from long-tern equity investments under cost method

Unit: Yuan



7,146,260.31

Tsairt Mineral Co., Ltd. 67,005,135.60 94,736,427.71 Guangdong Zhujiang Rare Earths Co., Ltd. 10,762,500.00 7,175,000.00 Chifeng Hongye Investment Co., Ltd. 250,000,000.00 Total 334,913,895.91 101,911,427.71 --

(3) Income from long-tern equity investments under equity method

Unit: Yuan


China Nerin Engineering Co., Ltd. 34,813,807.08 33,913,421.84 Terramin Australia Limited -76,205,076.43 -21,332,957.23 Northeastern University Design Institute (Co., Ltd.) 2,350,699.14 2,620,056.07

Total -39,040,570.21 15,200,520.68 --

Notes to investment income

The investment income accounted for using equity method suffered a remarkable decline during the reporting period due to the significant amount of impairment provision for the subsidiary Terramin Australia Limited.

No significant limitation exists regarding investment income repatriation.

6. Supplementary Information to the Cash Flow Statement

Unit: Yuan Supplementary information Amount of this period Amount of last year


178

1. Reconciliation of net profit to cash flow from operating activities -- --

Net profit 129,368,562.58 -15,882,765.00 Add: assets impairment provision 127,666,501.60 35,446,190.76 Depreciation of fixed assets, oil & gas assets, and capitalized biological assets 30,973,708.48 30,429,714.66

Intangible assets amortization 351,231.17 346,039.26 Losses from disposal of fixed assets, intangible assets and other long-term assets (“-” indicates gains) 16,115.62 28,768,856.00

Losses from retirement of fixed assets (“-” indicates gains) 11,164.97 Financial expenses (“-” indicates income) 294,839,349.92 212,047,421.76 Investment loss (“-” indicates gains) -295,873,325.70 -117,111,948.39 Decrease in deferred income tax assets (“-” indicates increase) -54,290,554.83 6,873,292.57 Decrease in inventories (-” indicates increase) -411,285,502.62 -26,370,298.31 Decrease in receivables from operating activities (-” indicates increase) -2,535,252,849.13 -1,101,338,304.84

Increase in payables from operating activities (-” indicates decrease) 1,383,816,957.28 351,295,884.61 Net cash flow from operating activities -1,329,669,805.63 -595,484,751.95 2. Significant investment and financing activities not involving cash receipts / payments -- --

3. Net changes in cash and cash equivalents -- -- Ending balance of cash 753,451,231.31 725,647,974.17 Less: ending balance of cash 725,647,974.17 417,264,634.16 Net increase in cash and cash equivalents 27,803,257.14 308,383,340.01

XVI. Supplementary information

1. Return on equity and earnings per share

Unit: Yuan

Profits in the reporting period Weighted average of return on equity of weighted (%)

Earnings per share Basic earnings per share Diluted earnings per share

Net profit attributable to ordinary shareholders 8.31% 0.264 0.264 Net profits attributable to ordinary shareholders after deducting non-recurring profits and losses 0.99% 0.032 0.032

2. Analysis of abnormalities in key financial statement items

Item End of the reporting period

Beginning of the reporting period +/- % Reason for change

Notes receivable 420,972,926.68 181,781,266.49 131.58%

Mainly attributable to the increase of notes receivable as a result of business expansion of the parent company and the subsidiary Chifeng (NFC) Zinc Industry Co., Ltd.

Accounts receivable 1,689,760,614.70 1,033,374,012.88 63.52% Mainly attributable to the expansion of trade service and zinc products manufacturing and marketing business of the Company

Advance payment 1,897,979,193.16 793,381,651.31 139.23% Mainly attributable to the expansion of trade service of the Company

Other receivables 344,440,938.83 587,044,993.49 -41.33%

Mainly attributable to reduction in accounts receivable from Chifeng Economic and Information Commission and the investment in NFC Southern Rare Earth (Xinfeng) Co., Ltd. carried forward at the end of last year but reclassified into investment in this period.


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Inventory 3,213,724,149.84 2,416,946,946.45 32.97% Mainly attributable to the expansion of trade service and zinc products manufacturing and marketing business of the Company

Construction in progress 227,875,183.10 138,647,784.58 64.36%

Mainly attributable to the investments in this period in kt/a level smelting project-NFC Zinc, the technology upgrading project of intelligent diaphragm pump manufacturing process – NFC PUMP and the plant relocation project – SMMC Machinery.

Construction materials 1,298,218.12 6,208,783.37 -79.09% Mainly attributable to acquisition for construction in progress.

Deferred income tax expenses 276,844,772.03 176,325,725.25 57.01%

Mainly attributable to the increase of deferred income tax assets recognized for deductible losses.

Short-term loans 3,353,330,644.15 2,396,916,600.00 39.90% Mainly attributable to the increase of current fund loans in this period

Notes payable 1,631,963,418.09 421,775,912.10 286.93% Mainly attributable to the expansion of trade service of the Parent Company

Accounts payable 1,487,145,926.91 1,115,701,679.76 33.29% Mainly attributable to the expansion of trade of the Parent Company

Employees’ remuneration payable 33,967,875.81 64,110,725.65 -47.02% Attributable to salary balances of previous

period used in this period

Taxes payable -111,897,669.11 -73,068,665.57 53.14%

Mainly attributable to the increase of remaining input value-added tax credit of Chifeng (NFC) Zinc Industry Co., Ltd. and deduction of income tax payable by Chifeng Hongye Investment Co., Ltd.

Dividends payable 4,247,364.74 9,864.74 42956.02% Mainly attributable to outstanding dividends of Guangdong Zhujiang Rare Earth Co., Ltd.

Non-current liabilities due within one year 693,775,612.00 262,500,000.00 164.30%

Mainly attributable to the engineering revolving funds, 500 million Yuan borrowings payable by the parent company to China Nonferrous Metal Mining (Group) Co., Ltd. that are reclassified into this item.

Long-term loans 957,174,551.72 420,158,251.00 127.81% Mainly attributable to the increase in long-term current fund loans of the parent company

Deferred income tax liabilities 109,116,009.58 190,367,144.86 -42.68%

Mainly attributable to decrease in deferred income tax liabilities of Chifeng (NFC) Zinc Industry Co., Ltd. and NFC (Shenyang) Metallurgic Machinery Co., Ltd.

Special reserve 38,992,192.01 28,896,210.64 34.94%

Mainly attributable to more trades for which safe production cost must be withdrawn by the Company according to the document C.Q. [2012] No.16

Total operating revenue 14,505,999,729.62 10,016,757,208.62 44.82%

Mainly attributable to trade service expansion of the parent company and sales increment after the NFC Zinc phase-IV project went into operation.

Operating cost 13,249,781,343.51 8,528,629,865.00 55.36%

Mainly attributable to trade service expansion of the parent company and sales increment after the NFC Zinc phase-IV project went into operation.

Financial expenses 365,819,113.81 266,019,337.29 37.52%

Mainly attributable to significant increment of interest expenditures as a result of increase in borrowings in this period and rise in interest rate

Investment income 235,481,219.18 372,281,821.73 -36.75%

Mainly attributable to the significant income from equity swap and reshuffle in last period and the significant provision in this period for assets impairment of the subsidiary Terramin Australia Limited.


180

Non-operating revenue 48,893,089.84 19,502,367.66 150.70% Mainly attributable to significant increase in government subsidies and gains from disposal of non-current assets for this period

non-operating expenses 11,775,458.25 7,230,928.66 62.85%

Mainly attributable to individual account losses of the subsidiary NFC (Shenyang) Metallurgic Machinery Co., Ltd. carried forward.

Income tax expenses 70,922,966.58 193,433,270.78 -63.33% Mainly attributable to decrease in profits and increase in deductible losses for this period

Net cash flow from operating activities -1,138,047,815.43 -314,013,871.82 262.42%

In this reporting period, the cash inflows and outflows from operating activities increased significantly on a YoY basis compared with last year resulting from the expansion of trade service and zinc products manufacturing and marketing business; the increase of cash outflows was larger than that of cash inflows, both from operating activities, due to more inventories and advance payments, leading to reduced net cash flows of this reporting period from operating activities compared with the same period last year.

Net cash flow from investment activities 228,181,662.05 -515,748,588.70 -144.24%

Mainly attributable to transfer of part of equity held by the Company in Shengda Mining Co., Ltd. in this reporting period and the decrease in external equity activities in this period than those in the same period of last year.

Net cash flow from financing activities 1,311,810,035.46 1,183,701,342.54 10.82%

During this reporting period, cash inflows/outflows from financing activities increased on YoY basis greatly as a result of the combined effects of more borrowings and repayments as well as rise of interest rates.


181

Section XI Documents Available for Reference 1. The text of annual report signed by the Chairman of the Board of Directors.

2. The financial statements for the year ended December 31, 2012 duly signed and sealed by the Company’s legal representative, CFO, chief accountant and the Head of Accounting Department.

3. Original copies of all of the Company’s documents and announcements published on the newspapers designated by the China Regulatory Committee for the reporting period.

4. Articles of Association of the Company.

5. The annual report published on other securities markets.

6. The aforesaid documents are available at the Office of Secretary to the Board of Directors for reference by the public and shareholders.

Chairman: Luo Tao

Date of approval by BOD: April 12, 2013