China Aluminum International Engineering : ANNOUNCEMENT IN RELATION TO PROVISION FOR IMPAIRMENT OF ASSETS FOR 2020

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CHALIECO

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China Aluminum International Engineering Corporation Limited

(A joint stock limited company incorporated in the People's Republic of China with limited liability)

(Stock Code: 2068)

ANNOUNCEMENT IN RELATION TO PROVISION FOR IMPAIRMENT OF ASSETS FOR 2020

This announcement is made by China Aluminum International Engineering Corporation Limited (the "Company") pursuant to Rule 13.09 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and the Inside Information Provisions under Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).

The board of directors (the "Board") of the Company hereby announces that at the meeting of the Board and the meeting of the board of supervisors (the "Board of Supervisors") convened on 29 March 2021, the Proposal on the Provision for Impairment of Assets of China Aluminum International Engineering Corporation Limited for 2020 was considered and approved. The provision for impairment of assets for the current period shall be submitted to the general meeting for consideration, and the details of which are as follows:

I. BASIC INFORMATION OF THE PROVISION FOR IMPAIRMENT OF ASSETS FOR THE CURRENT PERIOD

The Company evaluated the carrying amount of assets as of 31 December 2020 in accordance with the Accounting Standards for Business Enterprises and relevant provisions of the accounting policies of the Company, and the provision for impairment of assets was made based on the principle of prudence. After the calculation of the Company, the provision for impairment of assets for 2020 was RMB1.625 billion in total, and the details of which are as follows:

(I) PROVISION FOR IMPAIRMENT OF INVENTORY

The Company carried out a comprehensive inventory check on the balance sheet date. The provision for impairment of inventory will be made at the lower of cost and net realizable value when its net realizable value is lower than the cost. The provision for impairment of inventory will be made based on the difference between the cost of a single inventory item and the net realizable value. After making the provision for impairment of inventory, in case the factors causing impairment of inventory no longer exist, and the net realizable value of an inventory is higher than its carrying amount, the original provision for impairment of inventory shall be released to the profit or loss for the current period.

In 2020, certain raw materials and inventory of the Company showed signs of impairment due to reasons such as suspension of production and design changes. Based on the above method, the Company made provision for impairment of inventory of RMB89 million in total.

• (II) PROVISION FOR BAD DEBTS OF RECEIVABLES

  Given the impact of the epidemic, certain customers of the Company encountered difficulties in payment and therefore delayed their payment. The Company reassessed the expected credit losses on the receivables and made relevant provision for impairment in accordance with the accounting policies of the Company. The Company made provisions in accordance with the calculation method of provision for bad debts under the Accounting Standards for Business Enterprises. Such method is mainly divided into single provision for bad debts and a provision based on aging analysis. For aging analysis method, a provision of 0.5% is made for items due within 1 year, 10% for items due within 1-2 years, 20% for items due within 2-3 years, 30% for items due within 3-4 years, 50% for items due within 4-5 years and 100% for items due for over 5 years. The Company will continue to make provisions for bad debts in accordance with the above method in future.

  Based on the above method for provision for bad debts, the Company made provisions for bad debts of RMB1.059 billion in total in 2020.

• (III) PROVISION FOR IMPAIRMENT OF CONTRACT ASSETS

  The Company used individual identification method and expected credit loss method to make provisions for impairment of contract assets in accordance with the Accounting Standards for Business Enterprises and based on the current conditions and future forecasts of contract assets at the end of 2020. The expected credit loss method is divided into two situations: (1) for contract assets not delivered to customers for use, the Company makes provisions for impairment of contract assets at 0.5% of the balance; (ii) for contract assets delivered to customers for use, the Company makes provisions in accordance with aging analysis method. Provision of 0.5% is made for items due within 1 year, 10% for items due within 1-2 years, 20% for items due within 2-3 years, 30% for items due within 3-4 years, 50% for items due within 4-5 years and 100% for items due for over 5 years. The Company will continue to make provisions for bad debts in accordance with the above method in future.

Given the impact of the COVID-19 epidemic and the real estate industry, certain customers delayed their settlement and payment. Based on the principle of prudence, according to the aforementioned calculation method of provision for bad debts, the Company made provisions for impairment of contract assets of RMB437 million in 2020, and the original value of contract assets involved was RMB7.968 billion.

(IV) PROVISION FOR IMPAIRMENT OF LONG-TERM EQUITY INVESTMENT

The long-term equity investment as of 31 December 2020 was measured by the Company at the lower of carrying amount and recoverable amount, and provisions for impairment of long-term equity investment was made for the shortfall between the recoverable amount and the carrying amount. Through an impairment test, a provision for impairment of RMB39.8463 million in total was made in 2020, among which China Nonferrous Metals Processing Technology Co., Ltd., a subsidiary, made provisions for impairment of RMB27.8445 million on its investment in Luoyang Hua Zhong Aluminum Co., Ltd., and made provisions for impairment of RMB12.0018 million on its investment in Jiangsu Nonferrous Metal Rabily Industrial Co., Ltd. The main reason is that Luoyang Hua Zhong Aluminum Co., Ltd. and Jiangsu Nonferrous Metal Rabily Industrial Co., Ltd. incurred continuous losses in recent years, and it is expected that the Company is unlikely to recover the investment in the future. Based on the principle of prudence, the Company made a provision for impairment of RMB39.8463 million.

II. IMPACT OF PROVISION FOR IMPAIRMENT OF ASSETS ON THE COMPANY'S FINANCIAL POSITION

The Company's provision for impairment of assets for the current period was RMB1.625 billion, which in turn reduced the Company's total profit under its consolidated statements by RMB1.625 billion.

III. OPINIONS OF THE BOARD ON THE PROVISION FOR IMPAIRMENT OF ASSETS

The Board is of the view that the Company's provision for impairment of assets for the current period was in compliance with the Accounting Standards for Business Enterprises and the accounting policies of the Company. Such provision was made based on the principle of prudence, which could fairly reflect the position of the Company's assets. The Board agreed that the provision for impairment of assets for the current period should be made.

IV. OPINIONS OF INDEPENDENT NON-EXECUTIVE DIRECTORS ON THE PROVISION FOR IMPAIRMENT OF ASSETS

Independent non-executive directors are of the view that the Company's provision for impairment of assets for 2020 was in compliance with the relevant accounting policies, which fairly reflected the position of the Company's assets. In addition to the approval at the general meeting, the necessary decision-making procedures have been fulfilled and were in compliance with the relevant regulations of the China Securities Regulatory Commission, the Shanghai Stock Exchange, and The Stock Exchange of Hong Kong Limited. Such provision was in line with the actual position of the Company, and would not harm the interests of the Company and its minority shareholders. Independent non-executive directors agreed that the provision for impairment of assets for the current period should be made.

V. OPINIONS OF THE BOARD OF SUPERVISORS ON THE PROVISION FOR IMPAIRMENT OF ASSETS

The Board of Supervisors is of the view that the Company's provision for impairment of assets for the current period was in compliance with the relevant provisions under the Accounting Standards for Business Enterprises and the accounting policies of the Company, and was in line with the actual position of the Company. Such provision could fairly reflect the position of the Company's assets. The decision-making procedures for the provision for impairment was legal. The Board of Supervisors agreed that the provision for impairment of assets for the current period should be made.

By Order of the Board

China Aluminum International Engineering Corporation Limited

ZHANG Jian

Joint Company Secretary

Beijing, the PRC, 29 March 2021

As at the date of this announcement, the non-executive director is Mr. LI Yihua; the executive directors are Mr. WU Jianqiang, Mr. LIU Jing and Mr. ZHANG Jian; and the independent non-executive directors are Mr. GUI Weihua, Mr. CHEUNG Hung Kwong and Mr. FU Jun.