Bengang Steel Plates Co., Ltd. FINANCIAL STATEMENTS (From January to June 2019) (Unaudited) 28 August 2019 INDEX PAGES FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF FINANCIAL POSITION AND STATEMENT OF FINANCIAL 1-4 POSITION CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME AND STATEMENT 5-6 OF COMPREHENSIVE INCOME CONSOLIDATED STATEMENT OF CASH FLOWS AND STATEMENT OF CASH FLOWS 7-8 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AND STATEMENT OF CHANGES IN 9-12 EQUITY NOTES TO THE FINANCIAL STATEMENTS 1-98 BENGANG S TEEL PLATES CO., LTD. CONSOLIDATED S TATEMENT OF FINANCIAL POS ITION As at 30 June 2019 (Expressed in Renminbi unless otherwise indicated) . Notes Endi ng balance Beginning bal ance Current assets Cash at bank and on hand 5(1) 16,945,772,392.43 16,567,471,755.77 Settlement provisions Financial assets held for trading Financial assets at fair value through profit or loss Derivative financial assets Notes receivable 5(2) 4,518,016,226.76 3,580,145,843.38 Accounts receivable 5 (3) 614,718,839.21 639,482,481.45 Receivables financing Prepayments 5 (4) 1,314,464,404.93 1,321,537,514.78 Premiu m receivable Reinsurance accounts receivable Receivable deposit for reinsurance contract Other receivables 5 (5) 205,466,650.77 202,763,964.98 Including: Interest receivable 13,872,107.84 11,608,705.43 Div idend receivable Inventories 5 (6) 11,967,579,023.47 10,677,747,112.40 Non-current assets due within one year Other current assets 5 (7) 247,612,982.23 292,119,771.13 Total current assets 35,813,630,519.80 33,281,268,443.89 Non-current assets Available-for-sale financial assets 5 (8) 1,041,824,829.00 Held-to-maturity investment Long-term receivables Long-term equity investments 5 (9) 2,481,589.04 2,455,681.55 Other equity investment 5 (10) 1,041,824,829.00 Investment property Fixed assets 5 (11) 22,672,967,771.15 23,924,504,539.97 Construction in progress 5 (12) 1,374,410,959.70 836,594,457.82 Productive biological assets Oil and gas assets Intangible assets 5 (13) 274,783,708.74 278,062,441.04 Develop ment expenditure Goodwill Long-term deferred expenses Deferred tax assets 5 (14) 175,524,513.32 191,452,547.21 Other non-current assets 5 (15) 68,303,165.35 76,341,975.35 Total non-current assets 25,610,296,536.30 26,351,236,471.94 Total assets 61,423,927,056.10 59,632,504,915.83 The notes to the financial statements attached form part of these financial statements. Legal Representative: Chief Financial Officer: Chief Accountant: Financial Statements Page 1 BENGANG S TEEL PLATES CO., LTD. CONSOLIDATED S TATEMENT OF FINANCIAL POS ITION (Continued) As at 30 June 2019 (Expressed in Renminbi unless otherwise indicated) Liabilities and equities Notes Ending balance Beginning balance Current Liabilities Short-term loans 5 (16) 12,298,193,000.00 11,938,490,375.85 Financial liabilities at fair value through profit or loss Notes payable 5 (17) 11,650,282,357.86 10,013,192,014.02 Accounts payable 5 (18) 5,626,838,770.27 5,522,042,811.65 Advance from customers 5 (19) 3,345,451,646.56 3,331,854,098.42 Employee benefits payable 5 (20) 50,261,386.01 51,466,231.72 Current tax liabilities 5 (21) 62,888,848.55 515,752,369.68 Other payables 5 (22) 899,997,986.06 862,511,178.96 Including: Interest payables 9,343,905.54 9,658,681.99 Dividend payables 193,768,576.60 Non-current liabilities due within one year 5 (23) 1,036,582,163.28 350,965,576.32 Other current liabilities Total current liabilities 34,970,496,158.59 32,586,274,656.62 Non-current liabilities Long-term loans 5 (24) 6,213,054,564.15 7,083,640,094.16 Bonds payable Including: Preferred stock Perpetual bond Long-term payables 5 (25) 52,733,529.65 13,686,705.92 Estimated liabilities Deferred income 5 (26) 248,232,002.97 289,499,002.97 Deferred tax liabilities Other non-current liabilities Total non-current liabilities 6,514,020,096.77 7,386,825,803.05 Total liabilities 41,484,516,255.36 39,973,100,459.67 Shareholders' equity: Share capital 5 (27) 3,875,371,532.00 3,875,371,532.00 Other equity instruments Including: Preferred stock Perpetual bond Capital reserves 5 (28) 12,343,209,847.29 12,343,209,847.29 Less: treasury shares Other comprehensive income Special reserves 5 (29) 21,013,956.29 683,937.71 Surplus reserves 5 (30) 961,105,529.85 961,105,529.85 General risk reserve Undistributed profits 5 (31) 2,205,328,308.98 1,945,887,269.82 Total equity attributable to equity holders of the parent 19,406,029,174.41 19,126,258,116.67 company Non-controlling interests 533,381,626.33 533,146,339.49 Total shareholder's equity 19,939,410,800.74 19,659,404,456.16 Total of liabilities and owners’ equity 61,423,927,056.10 59,632,504,915.83 The notes to the financial statements attached form part of these financial statements. Legal Representative: Chief Financial Officer: Chief Accountant Financial Statements Page 2 BENGANG S TEEL PLATES CO., LTD. S TATEMENT OF FINANCIAL POS ITION As at 30 June 2019 (Expressed in Renminbi unless otherwise indicated) Assets Notes Ending balance Beginning balance Current assets Cash at bank and on hand 14,845,582,986.81 15,536,305,375.00 Financial assets at fair value through profit or loss Notes receivable 4,296,253,321.51 3,356,020,598.89 Accounts receivable 13(1) 402,397,751.85 409,553,059.27 Receivables financing Prepayments 1,292,855,972.17 1,309,194,738.97 Other receivables 13(2) 228,691,383.89 235,037,391.46 Including: Interest receivable 12,222,112.07 9,815,280.04 Dividend receivable Inventories 10,420,332,375.72 8,681,362,081.72 Non-current assets due within one year Other current assets 194,348,087.50 193,989,096.20 Total current assets 31,680,461,879.45 29,721,462,341.51 Non-current assets Available-for-sale financial assets 1,041,624,829.00 Held-to-maturity investment Long-term receivables Long-term equity investment 13(3) 2,016,281,902.16 2,016,281,902.16 Other equity investment 1,041,624,829.00 Investment property Fixed assets 20,954,291,845.88 22,035,187,328.57 Construction in progress 1,357,632,503.06 825,553,510.15 Productive biological assets Oil and gas assets Intangible assets 147,123,109.32 148,776,177.96 Development expenditure Goodwill Long-term deferred expenses Deferred tax assets 80,910,940.25 96,220,003.00 Other non-current assets 68,303,165.35 76,341,975.35 Total non-current assets 25,666,168,295.02 26,239,985,726.19 Total assets 57,346,630,174.47 55,961,448,067.70 The notes to the financial statements attached form part of these financial statements. Legal Representative: Chief Financial Officer: Chief Accountant: Financial Statements Page 3 BENGANG S TEEL PLATES CO., LTD. S TATEMENT OF FINANCIAL POS ITION (Continued) As at 30 June 2019 (Expressed in Renminbi unless otherwise indicated) Liabilities and shareholders' equities Notes Ending balance Beginning balance Current liabilities Short-term loans 10,998,193,000.00 10,624,270,375.85 Financial liabilities at fair value through profit or loss Notes payable 9,985,911,079.49 9,213,748,427.22 Accounts payable 6,566,943,730.51 5,940,816,426.48 Advance from customers 3,042,304,493.12 3,189,143,565.45 Employee benefits payable 49,866,464.88 49,378,095.47 Current tax liabilities 47,720,744.95 507,003,883.57 Other payables 689,660,196.29 538,051,513.13 Including: Interest payables 7,250,794.60 7,341,833.33 Dividend payables 193,768,576.60 Liabilities held for sale Non-current liabilities due within one year 1,036,582,163.28 350,965,576.32 Other current liabilities Total current liabilities 32,417,181,872.52 30,413,377,863.49 Non-current liabilities Long term loans 6,213,054,564.15 7,083,640,094.16 Bonds payable Including: Preferred stock Perpetual bond Long-term payables 52,733,529.65 13,686,705.92 Estimated liabilities Deferred income 248,232,002.97 289,499,002.97 Deferred tax liabilities Other non-current liabilities Total non-current liabilities 6,514,020,096.77 7,386,825,803.05 Total liabilities 38,931,201,969.29 37,800,203,666.54 Shareholder’s equity: Share capital 3,875,371,532.00 3,875,371,532.00 Other equity instruments Including: Preferred stock Perpetual bond Capital reserves 11,923,058,165.17 11,923,058,165.17 Less: Treasury shares Other comprehensive income Special reserves 18,126,059.79 525,218.48 Surplus reserves 961,105,529.85 961,105,529.85 Undistributed Profits 1,637,766,918.37 1,401,183,955.66 Total shareholder's equity 18,415,428,205.18 18,161,244,401.16 Total liabilities and shareholder’s equity 57,346,630,174.47 55,961,448,067.70 The notes to the financial statements attached form part of these financial statements. Legal Representative: Chief Financial Officer: Chief Accountant: Financial Statements Page 4 BENGANG S TEEL PLATES CO., LTD. CONSOLIDATED S TATEMENT OF COMPREHENS IVE INCOME For the period Jan.-Jun. 2019 (Expressed in Renminbi unless otherwise indicated) Items Notes Jan.-Jun. 2019 Jan.-Jun. 2018 1. Total operating income 24,102,595,167.14 23,441,247,377.14 Including: Operating income 5(32) 24,102,595,167.14 23,441,247,377.14 Interest income P remium earned Income from handling charges and commission 2. Total operating cost 23,621,825,282.23 22,738,904,288.94 Including: Operating cost 5(32) 22,067,612,729.65 20,804,207,420.98 Interest expense Expenditure for handling charges and commission Surrender value Net expenditure for co mpensation Net provision for insurance contract appropriated Bonus payment for policy Reinsurance premium Ta x and surcharges 5(33) 114,125,362.97 153,307,375.64 Selling and distribution expenses 5(34) 574,445,199.14 514,038,008.95 General and administrative expenses 5(35) 446,767,811.77 461,842,424.56 Research and development expenses 5(36) 15,408,472.28 2,470,641.53 Financial expenses 5(37) 403,465,706.42 803,038,417.28 Including: Interest expense 586,490,262.69 575,001,615.20 Interest income 127,083,779.58 61,605,403.34 Add: Other income 5(38) 41,695,000.00 41,274,238.70 Inco me on investment(“ -” for loss) 5(39) 25,907.49 3,493,150.68 Including: Income fro m associates and joint ventures 25,907.49 Gains from change of fair value (“ -” for loss) Credit impairment loss (“ -” for loss) 5(40) 3,751,513.83 Asset impairment loss (“ -” for loss) 5(41) 20,917,963.64 Assets disposal gains(“ -” for loss) 5(42) 2,418,704.34 825,580.63 3. Operational profit(“ -” for loss) 528,661,010.57 768,854,021.85 Add: Non-operating income 5(43) 8,210,182.24 2,138,397.80 Less: Non-operating expenses 5(44) 57,974,322.05 1,382,402.26 4. Total profit (“ -” for loss) 478,896,870.76 769,610,017.39 Less: Income tax e xpenses 5(45) 25,962,181.73 11,636,226.04 5. Net profit(“ -” for loss) 452,934,689.03 757,973,791.35 1.Classification by continuing operating 1.Net profit fro m continuing operation 452,934,689.03 757,973,791.35 2.Net profit fro m discontinued operation 2.Classification by ownership 1. Net profit attributable to the owners of parent company 453,209,615.76 756,951,987.59 2. Net profit attributable to non-controlling shareholders -274,926.73 1,021,803.76 6.Other comprehensive income Other co mprehensive income attributable to owners of the parent company after tax 1.Other comprehensive income ite ms that will not be reclassified into gains/losses 1)Re-measurement of defined benefit plans of changes in net debt or net assets 2)Other comprehensive income under the equity method cannot be reclassified into profit or loss 2.Other comprehensive income that will be reclassified into profit or loss. 1) Other co mprehensive income under the equity method can be reclassified into profit or loss 2) Gains and losses fro m changes in fair value o f available for sale financial assets 3) Gains and losses from reclassification of held -to-maturity investments to available-for-sale financial assets 4) The e ffective portion of cash flow hedges and losses 5) Tr anslation differences in foreign currency financial statements 6) Others Other comprehensive income attributable to non-controlling shareholders’ equity after tax 7. Total co mprehensive income 452,934,689.03 757,973,791.35 Total comprehensive income attributable to the owner of the parent company 453,209,615.76 756,951,987.59 Total comprehensive income attributable to non -controlling shareholders -274,926.73 1,021,803.76 8. Earnings per share 1)Basic earnings per share 0.12 0.20 2)Diluted earnings per share 0.12 0.20 The notes to the financial statements attached form part of these financial statements. Legal Representative: Chief Financial Officer: Chief Accountant: Financial Statements Page 5 BENGANG S TEEL PLATES CO., LTD. S TATEMENT OF COMPREHENS IVE INCOME For the period Jan.-Jun. 2019 (Expressed in Renminbi unless otherwise indicated) Items Notes Jan.-Jun. 2019 Jan.-Jun. 2018 1. Total operating income 13(4) 23,447,215,857.93 23,682,865,109.14 Less: Operating cost 13(4) 21,757,289,997.18 21,401,191,962.20 Tax and surcharges 84,467,404.41 135,543,392.96 Selling and distribution expenses 335,094,548.06 265,554,867.46 General and administrative expenses 419,337,998.35 438,193,017.33 Research and development expenses 15,408,472.28 2,470,641.53 Financial expenses 388,071,914.59 774,523,490.60 Including: Interest expense 558,095,343.66 543,682,390.97 Interest income 114,189,626.94 58,304,426.91 Add: Other income 41,695,000.00 41,274,238.70 Income on investment(“-” for loss) 13(5) 3,493,150.68 Including: Income from associates and joint ventures Gains from change of fair value (“ -” for loss) Credit impairment loss (“-” for loss) 3,751,513.83 Asset impairment loss (“-” for loss) 20,917,963.64 Assets disposal gains(“-” for loss) 2,465,706.59 825,580.63 2. Operational profit (“-” for loss) 495,457,743.48 731,898,670.71 Add: Non-operating income 8,138,040.75 1,714,748.66 Less: Non-operating expenses 57,935,182.17 1,382,402.26 3. Total profit (“-” for loss) 445,660,602.06 732,231,017.11 Less: Income tax expenses 15,309,062.75 5,679,337.17 4. Net profit(“-” for loss) 430,351,539.31 726,551,679.94 1.Net profit from continuing operation 430,351,539.31 726,551,679.94 2.Net profit from discontinued operation 5.Other comprehensive income 1.Other comprehensive income items that will not be reclassified into gains/losses 1)Re-measurement of defined benefit plans of changes 2)Other comprehensive income under the equity method cannot be reclassified into profit or loss 2.Other comprehensive income that will be reclassified into profit or loss. 1) Other co mprehensive income under the equity method can be reclassified into profit or loss 2) Gains and losses fro m changes in fair value o f available for sale financial assets 3) Gains and losses fro m re classification of held -to maturity investments to available-for-sale financial assets 4) The e ffective portion of cash flow hedges and losses 5) Translation differences in foreign currency financial statements 6) Others 6. Total comprehensive income 430,351,539.31 726,551,679.94 7. Earnings per share 1)Basic earnings per share 2)Diluted earnings per share The notes to the financial statements form part of these financial statements Legal Representative: Chief Financial Officer: Chief Accountant: Financial Statements Page 6 BENGANG S TEEL PLATES CO., LTD. CONSOLIDATED S TATEMENT OF CAS H FLOWS For the period Jan.-Jun. 2019 (Expressed in Renminbi unless otherwise indicated) Items Notes Jan.-Jun. 2019 Jan.-Jun. 2018 1.Cash flow from operating activities Cash received from sale of goods or rendering of servi ces 16,357,053,782.81 15,984,735,085.76 Net increas e of customers' deposit and interbank deposit Net increas e of loan from central bank Net increas e of loans from other financial institutions Cash received for premium of original insurance cont ract Net cash received for reinsurance business Net increas e of deposit and investment of the insured Net increas e of Financial assets at fair value through profit or loss Cash from receiving interest, handling charge and commission Net increas e of loans from Borrowing funds Net increas e of fund for buy-back business Tax rebate received 247,667,635.74 246,514,404.27 Other cash received relating to operating activities 5(46) 144,904,624.34 81,782,480.19 Subtotal of cash inflows from operating activities 16,749,626,042.89 16,313,031,970.22 Cash paid for goods and services 13,876,838,386.74 14,086,077,537.47 Net increas e of customer's loan and advances Net increas e of deposit in central bank and interbank deposit Cash for payment of compensation for original insurance contract Cash for payment of interest, handling charge and commission Cash for payment of policy bonus Cash paid to and on behalf of employees 987,603,117.25 779,373,374.96 Cash paid for all types of taxes 653,208,180.03 406,064,168.90 Other cash paid relating to operating activities 5(46) 247,189,353.20 310,997,147.42 Subtotal of cash outflows from operating activities 15,764,839,037.22 15,582,512,228.75 Net cash flows from operating activities 984,787,005.67 730,519,741.47 2. Cash flows from investing activities Cash received from return on investments 500,000,000.00 Cash received from distribution of dividends or profit 3,493,150.68 Net cash received from disposal of fixed assets, intangible assets and other long-term assets Net cash received from disposal of subsidiary and other operating units Other cash paid relating to investing activities Subtotal of cash inflows from investing activities 503,493,150.68 Cash paid for acquisition of fixed assets, intangible assets and other 545,199,197.41 680,441,782.39 long-term assets Cash paid for acquisition of investments Net increas e of mortgage loan Net cash received from subsidiary and other operating unit Other cash paid relating to investing activities Subtotal of cash outflows from investing activities 545,199,197.41 680,441,782.39 Net cash flows from investing activities -545,199,197.41 -176,948,631.71 3. Cash flows from financing activities Proceeds from investment 3,965,799,988.19 Including: Proceeds from investment of non-controlling shareholders of subsidiary Proceeds from borrowings 5,828,037,190.72 9,721,396,957.08 Cash received from bond issuance Other proceeds relating to financing activities Subtotal of cash inflows from financing activities 5,828,037,190.72 13,687,196,945.27 Cash repayments of borrowings 5,653,303,509.62 14,683,452,081.71 Cash payments for distribution of dividends, profit or interest expenses 626,178,049.57 661,538,139.82 Including: Cash paid to non-controlling shareholders as dividend and profit by subsidiaries Other cash payments relating to financing activities Subtotal of cash outflows from financing activities 6,279,481,559.19 15,344,990,221.53 Net cash flows from financing activities -451,444,368.47 -1,657,793,276.26 4. Effect of foreign exchange rate changes on cash and cash 48,230,507.75 105,015,610.23 equivalents 5. Net increase in cash and cash equivalents 36,373,947.54 -999,206,556.27 Add: Cash and cash equivalents at the beginning of the period 11,752,548,621.97 17,037,713,410.49 6. Cash and cash equivalents at the ending of the period 11,788,922,569.51 16,038,506,854.22 The notes to the financial statements attached form part of these financial statements Legal Representative: Chief Financial Officer: Chief Accountant: BENGANG S TEEL PLATES CO., LTD. Financial Statements Page 7 S TATEMENT OF CAS H FLOWS For the period Jan.-Jun. 2019 (Expressed in Renminbi unless otherwise indicated) Items Notes Jan.-Jun. 2019 Jan.-Jun. 2018 1. Cash flow from operating activities Cash received from sale of goods or rendering of 15,970,406,775.11 15,778,223,117.53 services Tax rebate received 219,614,786.86 119,119,395.04 Other cash received relating to operating activities 140,536,583.70 76,026,838.22 Subtotal of cash inflows from operating activities 16,330,558,145.67 15,973,369,350.79 Cash paid for goods and services 13,842,821,616.84 13,721,886,325.25 Cash paid to and on behalf of employees 928,568,022.64 726,170,588.86 Cash paid for all types of taxes 576,260,568.31 341,018,028.32 Other cash paid relating to operating activities 165,446,890.35 222,352,157.09 Subtotal of cash outflows from operating activities 15,513,097,098.14 15,011,427,099.52 Net cash flows from operating activities 817,461,047.53 961,942,251.27 2. Cash flows from investing activities Cash received from return on investments 500,000,000.00 Cash received from distribution of dividends or profit 3,493,150.68 Net cash received from disposal of fixed assets, intangible assets and other long-term assets Net cash received from disposal of subsidiary and other operating units Other cash received relating to investing activities Subtotal of cash inflows from investing activities 503,493,150.68 Cash paid for acquisition of fixed assets, intangible 539,451,276.57 677,920,104.21 assets and other long-term assets Cash paid for acquisition of investments 259,300,000.00 Net cash paid for acquisition of subsidiary and other operating unit Other cash paid relating to investing activities Subtotal of cash outflows paid for investing activities 539,451,276.57 937,220,104.21 Net cash flows from investing activities -539,451,276.57 -433,726,953.53 3. Cash flows from financing activities Proceeds from investment 3,965,799,988.19 Cash received from borrowings 4,902,327,190.72 8,986,529,900.00 Cash received from bond issuance Other cash received relating to financing activities Subtotal of cash inflows from financing activities 4,902,327,190.72 12,952,329,888.19 Cash repayments of borrowings 4,713,373,509.62 13,939,938,977.79 Cash payments for distribution of dividends, profit or 589,497,122.29 635,530,683.74 interest Other cash payments relating to financing activities Subtotal of cash outflows from financing activities 5,302,870,631.91 14,575,469,661.53 Net cash flows from financing activities -400,543,441.19 -1,623,139,773.34 4. Effect of foreign exchange rate changes on cash 48,222,621.42 105,012,744.72 and cash equivalents 5. Net increase in cash and cash equivalents -74,311,048.81 -989,911,730.88 Add: Cash and cash equivalents at the beginning of 10,807,824,843.20 16,713,104,199.65 the period 6. Ending balance of cash and cash equivalents 10,733,513,794.39 15,723,192,468.77 The notes to the financial statements form part of these financial statements Legal Representative: Chief Financial Officer: Chief Accountant Financial Statements Page 8 BENGANG S TEEL PLATES CO., LTD. CONSOLIDATED S TATEMENT OF CHANGES IN EQUITY For the period Jan.-Jun. 2019 (Expressed in Renminbi unless otherwise indicated) Jan.-Jun. 2019 Owne r's equity attributable to parent company Items Othe r equity instrumen ts Less: Othe r Gene ral Non-controlling Total of owner's Treasu Special Undistribu ted interes t equity Share capital Preferen ce Perpe tual Capital reserves comprehensi Surplus reserves risk Othe rs ry reserves profit shares bond ve income reserve shares 1. Ending balance of last year 3,875,371,532.00 12,343,209,847.29 683,937.71 961,105,529.85 1,945,887,269.82 533,146,339.49 19,659,404,456.16 Add: Change of accounting policies Correction of errors for last period Business consolidation under common control Others 2. Beginning balance of current year 3,875,371,532.00 12,343,209,847.29 683,937.71 961,105,529.85 1,945,887,269.82 533,146,339.49 19,659,404,456.16 3. Changes in current year (“ -” for decrease) 20,330,018.58 259,441,039.16 235,286.84 280,006,344.58 1) Total comprehensive income 453,209,615.76 -274,926.73 452,934,689.03 2) Capital increase and decrease by shareholders (1) Common share invested by shareholders (2) Capital input by the holder of other equity instruments (3) Share-based payment attributable to owners' equity (4) Others 3) Profit distribution -193,768,576.60 -193,768,576.60 (1) Appropriation to surplus reserves (2) Appropriation to general risk reserve (3) Profit distribution to shareholders -193,768,576.60 -193,768,576.60 (4) Others 4) Transfers within shareholders' equity (1) Capital reserves trans ferred into paid-in capital (or stock) (2) Surplus reserves trans ferred into paid-in capital (or stock) (3) Surplus reserves to recover loss (4) Net changes of defined contribution plans transferred into Retained Earnings (5) Other comprehensive income transferred into Retained Earnings (6) Others 5) Special reserves 20,330,018.58 510,213.57 20,840,232.15 (1) Provision of special reserves 25,542,658.45 510,213.57 26,052,872.02 (2) Use of special reserves 5,212,639.87 5,212,639.87 6) Others 4. Ending balance of current year 3,875,371,532.00 12,343,209,847.29 21,013,956.29 961,105,529.85 2,205,328,308.98 533,381,626.33 19,939,410,800.74 The notes to the financial statements attached form part of these financial statement Legal Representative: Chief Financial Officer: Chief Accountant: Financial Statements Page 9 BENGANG S TEEL PLATES CO., LTD. CONSOLIDATED S TATEMENT OF CHANGES IN EQUITY (Continued) For the period Jan.-Jun. 2019 (Expressed in Renminbi unless otherwise indicated) Jan.-Jun. 2018 Owner's equity attributable to parent company Items Other equity instruments Less: Other General Non-controlling Total shareholder's Special Undistributed Share capital Prefe rence Perpetual Capital reserves Treasury comprehensive Surplus reserves risk interest equity Others reserves profit shares bond shares income reserve 1. Ending balance of last year 3,136,000,000.00 9,114,845,542.05 475,046.75 961,105,529.85 1,103,162,610.35 533,475,744.19 14,849,064,473.19 Add: Change of accounting policies Correction of errors for last period Business consolidation under common control Others 2. Beginning balance of current year 3,136,000,000.00 9,114,845,542.05 475,046.75 961,105,529.85 1,103,162,610.35 533,475,744.19 14,849,064,473.19 3. Changes in current year (“ -” for decrease) 739,371,532.00 3,228,364,305.24 208,890.96 842,724,659.47 -329,404.70 4,810,339,982.97 1) Total comprehensive income 1,036,493,236.07 -315,177.71 1,036,178,058.36 2) Capital increase and decrease by shareholders 739,371,532.00 3,228,364,305.24 3,967,735,837.24 (1) Common share invested by shareholders 739,371,532.00 3,228,364,305.24 3,967,735,837.24 (2) Capital input by the holder of other equity instruments (3) Share-based payment attributable to shareholders' equity (4) Others 3) Profit distribution -193,768,576.60 -193,768,576.60 (1) Appropriation to surplus reserves (2) Appropriation to general risk reserves (3) Profit distribution to shareholders -193,768,576.60 -193,768,576.60 (4) Others 4) Transfers within shareholders' equity (1) Capital reserves trans ferred into paid-in capital (or stock) (2) Surplus reserves trans ferred into paid-in capital (or stock) (3) Surplus reserves to recover loss (4) Net changes of defined contribution plans trans ferred into Retained Earnings (5) Other comprehensive income trans ferred into Retained Earnings (6) Others 5) Special reserves 208,890.96 -14,226.99 194,663.97 (1) Provision of special reserves 46,823,964.39 46,823,964.39 (2) Use of special reserves 46,615,073.43 14,226.99 46,629,300.42 6) Others 4. Ending balance of current year 3,875,371,532.00 12,343,209,847.29 683,937.71 961,105,529.85 1,945,887,269.82 533,146,339.49 19,659,404,456.16 The notes to the financial statements attached form part of these financial statement Legal Representative: Chief Financial Officer: Chief Accountant: Financial Statements Page 10 BENGANG S TEEL PLATES CO., LTD. S TATEMENT OF CHANGES IN EQUITY For the period Jan.-Jun. 2019 (Expressed in Renminbi unless otherwise indicated) Jan.-Jun. 2019 Other equity instruments Less: Other Items Special Undistributed Total shareholder’s Share capital Pref erence Perpetual Capital reserves Treasury comprehensive Surplus reserves Others reserves profits equity shares bond shares income 1. Ending balance of last year 3,875,371,532.00 11,923,058,165.17 525,218.48 961,105,529.85 1,401,183,955.66 18,161,244,401.16 Add: Change of accounting policies Correction of errors for last period Others 2. Beginning balance of current year 3,875,371,532.00 11,923,058,165.17 525,218.48 961,105,529.85 1,401,183,955.66 18,161,244,401.16 3. Changes in current year (“ -” for decrease) 17,600,841.31 236,582,962.71 254,183,804.02 1) Total comprehensive income 430,351,539.31 430,351,539.31 2) Capital increase and decrease by shareholders (1) Common share invested by shareholders (2) Capital input by the holder of other equity instruments (3) Share-based payment attributable to shareholders' equity (4) Others 3) Profit distribution -193,768,576.60 -193,768,576.60 (1) Appropriation of surplus reserves (2) Profit distribution to shareholders -193,768,576.60 -193,768,576.60 (3) Others 4) Transfers within shareholders' equity (1) Capital reserves trans ferred into paid-in capital (or stock) (2) Surplus reserves trans ferred into paid-in capital (or stock) (3) Surplus reserves to recover loss (4) Net changes of defined contribution plans transferred into Retained Earnings (5) Other comprehensive income trans ferred into Retained Earnings (6) Others 5) Special reserves 17,600,841.31 17,600,841.31 (1) Provision of special reserves 22,722,987.71 22,722,987.71 (2) Use of special reserves 5,122,146.40 5,122,146.40 6) Others 4. Ending balance of current year 3,875,371,532.00 11,923,058,165.17 18,126,059.79 961,105,529.85 1,637,766,918.37 18,415,428,205.18 The notes to the financial statements attached form part of these financial statements Legal Representative: Chief Financial Officer: Chie f Accountant: Financial Statements Page 11 BENGANG S TEEL PLATES CO., LTD. S TATEMENT OF CHANGES IN EQUITY (Continued) For the period Jan.-Jun. 2019 (Expressed in Renminbi unless otherwise indicated) Jan.-Jun. 2018 Other equity instruments Less: Other Items Special Undistributed Total shareholder’s Share capital Pref erence Perpetual Capital reserves Treasury comprehensive Surplus reserves Others reserves profits equity shares bond shares income 1. Ending balance of last year 3,136,000,000.00 8,694,693,859.93 276,727.96 961,105,529.85 613,351,724.38 13,405,427,842.12 Add: Change of accounting policies Correction of errors for last period Others 2. Beginning balance of current year 3,136,000,000.00 8,694,693,859.93 276,727.96 961,105,529.85 613,351,724.38 13,405,427,842.12 3. Changes in current year (“ -” for decrease) 739,371,532.00 3,228,364,305.24 248,490.52 787,832,231.28 4,755,816,559.04 1) Total comprehensive income 981,600,807.88 981,600,807.88 2) Capital increase and decrease by 739,371,532.00 3,228,364,305.24 3,967,735,837.24 shareholders (1) Common share invested by 739,371,532.00 3,228,364,305.24 3,967,735,837.24 shareholders (2) Capital input by the holder of other equity instruments (3) Share-based payment attributable to shareholders' equity (4) Others 3) Profit distribution -193,768,576.60 -193,768,576.60 (1) Appropriation of surplus reserves (2) Profit distribution to shareholders -193,768,576.60 -193,768,576.60 (3) Others 4) Transfers within shareholders' equity (1) Capital reserves trans ferred into paid-in capital (or stock) (2) Surplus reserves trans ferred into paid-in capital (or stock) (3) Surplus reserves to recover loss (4) Net changes of defined contribution plans transferred into Retained Earnings (5) Other comprehensive income trans ferred into Retained Earnings (5) Others 5) Special reserves 248,490.52 248,490.52 (1) Provision of special reserves 40,685,554.06 40,685,554.06 (2) Use of special reserves 40,437,063.54 40,437,063.54 6) Others 4. Ending balance of current year 3,875,371,532.00 11,923,058,165.17 525,218.48 961,105,529.85 1,401,183,955.66 18,161,244,401.16 The notes to the financial statements attached form part of these financial statements Legal Representative: Chief Financial Officer: Ch ief Accountant: Financial Statements Page 12 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Bengang Steel Plates Co., Ltd. Notes to the financial statements For the peri od from Jan. to J un. 2019 (Expressed in Renminbi unless otherwise indicated) 1. Basic Information of the Company (1) Company profile Bengang Steel Plates Co., Ltd. (hereinafter referred to as “the Company”), as approved in Liao-Zheng (1997) No. 57 by Liaoning People’s Government on 27 March 1997, was incorporated as a joint stock limited company through public share offer of domestic listed foreign currency denominated shares (B shares) in the People’s Republic of China (the “PRC”) on 27 June 1997 by Benxi Steel and Iron (Group) Co., Ltd. (“Bengang Group”), through reorganization of operations, assets and liabilities of its plants, namely, Steel Smelting Plant, Primary Rolling Plant and Continuous Hot Rolling Plant. As approved by China Securities Regulatory Commission (hereinafter referred to as “the CSRC”), the Company issued 400,000,000 B-shares at HKD2.38 each in Shenzhen Stock Exchange on 10 June 1997. On 3 November 1997, the Company issued another 120,000,000 A-shares (Renminbi common Shares) at RMB 5.40 each, and listed in Shenzhen Stock Exchange since 15 January 1998. The capital shares were totaled to 1,136,000,000 shares. On 14 March 2006, according to the resolutions of the Shareholders’ Meeting regarding share equity relocation, the Share Equity Relocation Scheme, Response to Bengang Steel Plate Co., Ltd. about Share Equity Relocation issued by Liaoning Provincial Government State-owned Asset Administrative Committee, Bengang Group – the only holder of non-negotiable state-owned legal person shares paid the consideration to the current shareholders to obtain the current option for the 40,800,000 shares of the total 616,000,000 shares it was holding. Shareholding positions have been registered with China Securities Depository & Clearing Corporation Ltd. Shenzhen Office. However, the total amount of capital shares of Bengang Steel Plates Co., Ltd. was not changed through the share equity relocation action. According to the approval document “Zheng-Jian-Gong-Si-Zi [2006] No. 126” by China Securities Regulatory Commission on 30 June 2006, the Company was approved to place 2 billion Renminbi common shares particularly to Bengang Group and the proceeds would be used to purchase the related assets of the Group. On the same day, Bengang Group received circular Zheng-Jian-Gong-Si-Zi [2006] No. 127 issued by China Securities Regulatory Committee, and were exempted for the liability of undertaking the purchase offer. The liability was caused by subscribing of the 2 billion new shares and the total shareholding was thus increased to 2.5752 billion shares (accounting for 82.12% of the total capital shares of the Company). On 28 August 2006, as approved by China Securities Depository & Clearing Corporation Ltd. Shenzhen Office, the registration and conditional placing procedures of the 2 billion new shares were completed. On 28 September 2006, the privately placed shares were approved by Shenzhen Stock Exchange to be placed in the stock market. The placing price was RMB4.6733 per share. Notes to the financial statements Page 1 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Approved by the China Securities Regulatory Commission [2017] No. 1476, Bengang Steel Plate Co., Ltd. privately placed no more than 739,371,534 RMB ordinary shares (A shares) to no more than 10 issuers. The non-public offering was completed on 9 February 2018, and 739,371,532 shares were actually issued. The placing price was RMB5.41 per share. As at 30 June 2019, the capital shares were totaled to 3,875,371,532 shares. The Company’s uniform social credit code: 91210000242690243E. The Company’s registered address: 16th Renmin Road, Pingshan District, Benxi, Liaoning Province. The Company’s legal representative: Gao Lie. The parent company of Bengang Steel Plates Co., Ltd is Benxi Steel and Iron (Group) Co., Ltd. and the actual controller is the State-owned Assets Supervision and Administration Commission of the State Council of Liaoning province. Bengang Steel Plates Co., Ltd. belongs to ferrous metal smelting and rolling processing industry and is mainly involved in producing and trading of ferrous metal products. Consolidation scope The financial statements have been approved for reporting by the board of directors of the Company on 28 August 2019. (2) Consolidation scope As at 30 June 2019, subsidiaries included in the Company’s consolidated financial statements are as follows: Name of the subsidiaries Guangzhou Bengang Steel & Iron Trading Co., Ltd. Shanghai Bengang M etallurgy Science and Technology Co., Ltd. Bengang Steel Plates Liaoyang Pellet Co., Ltd. Dalian Benruitong Automobile M aterial Technology Co., Ltd. Changchun Bengang Steel & Iron Sales Co., Ltd. Harbin Bengang Economic and Trading Co., Ltd. Nanjing Bengang M aterials Sales Co., Ltd. Wuxi Bengang Steel & Iron Sales Co., Ltd. Xiamen Bengang Steel & Iron Sales Co., Ltd. Yantai Bengang Steel & Iron Sales Co., Ltd. Tianjin Bengang Steel & Iron Trading Co., Ltd. Bengang Posco Cold-rolled Sheet Co., Ltd. Benxi Bengang Steel Sales Co., Ltd Shenyang Bengang M etallurgical Science and Technology Co., Ltd. Chongqing Liaoben Steel & Iron Trading Co., Ltd. Notes to the financial statements Page 2 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Bengang Baojin (Shenyang) Automobile New M aterial Technology Co., Ltd. For details of consolidation scope and change of the consolidation scope for the period, please refer to Note 6 “Equity in other entities”. 2. Basis of preparation (1) Basis of preparation The financial statements have been prepared on the going concern basis of actual trading and events in accordance with “Accounting Standards for Business Enterprises – Basic Standard” and relevant specific standards, application materials, interpretations (together hereinafter referred to as “Accounting Standards for Business Enterprises”) issued by the Ministry of Finance, and “Information Disclosure Rules for Companies of securities for public issuance No. 15 – General Regulations for Financial Statements” issued by the China Securities Regulatory Commission. (2) Going concern The Company is operating normally and in a good condition, and thus has the capability to continue to operate in the next twelve months from the end of reporting period. 3. Significant accounting policies and accounting estimates The following disclosed content covers the detailed accounting policies and accounting estimates that are adopted by the Company according to the actual features of production or operation. (1) Statement of compliance with China Accounting Standards for Business Enterprises The financial statements present truly and completely the financial position, operation results and cash flows of the Company during the reporting period in accordance with China Accounting Standards for Business Enterprises. (2) Accounting year The Accounting year is from 1 January to 31 December. (3) Operating period The operating period is twelve months. (4) Functional currency The Company’s functional currency is RMB. (5) The accounting treatment for Business combination under/not under common control Business combination under common control The assets and liabilities that the Company acquired in a business combination shall be measured on the basis of their carrying amount of aquiree’s assets, liabilities (as well as the goodwill arising from the business combination) in the consolidated financ ial statement of the ultimate controller on the combining date. As for the balance between the Notes to the financial statements Page 3 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements carrying amount of the net assets obtained by the Company and the carrying amount of the consideration paid by it (or the total par value of the shares issued), capital reserve needs to be adjusted. If the capital reserve is not sufficient, any excess shall be adjusted against retained earnings. Business combination not under common control The Company shall, on the acquisition date, measure the assets given and liabilities incurred or assumed by an enterprise for a business combination in light of their fair values, and shall record the balances between them and their carrying amounts into the profits and losses at the current period. The Company shall recognize the positive balance between the combination costs and the fair value of the identifiable net assets it obtains from the acquiree as goodwill. The Company shall treat the negative balance between the combination costs and the fair value of the identifiable net assets it obtains from the acquiree into the profits and losses of the current period. The intermediary costs and relevant fees for the business combination paid by the acquirer, including the expenses for audit, assessment and legal services, shall be recorded into the profits and losses at the current period. The transaction expenses for the issuance of equity securities for the business combination shall be recorded into the initial recognition amount of equity securities. (6) Consolidation of Financial Statements 1. Scope of consolidation The scope of consolidation of consolidated financial statements is determined based on control. All the s ubsidies (including separable sections of the investees controlled by the Company) have been consolidated into the scope of consolidation for this period ended. 2. Procedure of consolidation The consolidated financial statements shall be presented by the parent based on the financial statements of the parent and its subsidiaries, and using other related information. When preparing consolidated financial statements, the parent shall consider the entire group as an accounting entity, adopt uniform accounting policies and apply the requirements of Accounting Standard for Business Enterprises related to recognition, measurement and presentation. The consolidated financial statements shall reflect the overall financial position, operating results and cash flows of the group. The accounting policy and accounting period of the subsidiaries within the consolidation scope shall be in accordance with those of the Company. If not, it is necessary to make the adjustment according to the Company’s accounting policies and accounting period when preparing the consolidated financial statements. For subsidiaries through acquisition that are now under common control, the financial statements are adjusted according to fair value of identifiable net assets on the acquisition date. For subsidiaries through acquisition that are under common control, the assets, liabilities (as well as the goodwill aris ing from purchasing the subsidiary by the ultimate controller) are adjusted according to book value of net assets in the financial statements of the ultimate controller. Notes to the financial statements Page 4 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements The owners’ interests, profit or loss, and comprehensive income of the subsidiary attributable to the non-controlling shareholders shall be presented separately in the shareholders’ equity of the consolidated balance sheet and under the item of net profit of the consolidated statement of comprehensive income and under the item of total comprehensive income. Where losses assumed by the minority exceed the minority’s interests in the beginning equity of a subsidiary, the excess shall be charged against the minority’s interests. (1) Increasing new subsidiaries and businesses If the Company has a new subsidiary due to business combination under common control during the reporting period, it shall adjust the beginning balance in the consolidated statement of financial position when preparing consolidated statement of financial position. The revenue, expenses and profits of the subsidiaries from the acquisition date to the end of the reporting period are included in the Company’s consolidated statement of comprehensive income. The cash flow of the subsidiaries from the acquisition date to the end of the reporting period is included in the Company’s consolidated statement of cash flows. And meanwhile the Company shall adjust the relevant items of the comparative financial statements as if the reporting entity for the purpose of consolidation has been in existence since the date the ultimate controlling party first obtained control. When the Company becomes capable of exercising control over an investee under common control due to additional investment or other reasons, adjustment shall be made as if the reporting entity after the combination has been in existence since the date the ultimate controlling party first obtained control. The investment income recognized between date of previously obtaining equity investment and the date the acquiree and acquirer are under common control, which is later, and the combining date, other comprehensive income and other changes of net assets arising from the equity investment previously-held before obtaining the control the acquiree shall be adjusted against the prior retained earnings of the comparative financial statements and the current profit or loss respectively. If it is now under common control, the Company shall not adjust the beginning balance in the consolidated statement of financial position when preparing consolidated statement of financial position. The revenue, expenses and profits of the subsidiaries from the acquisition date to the end of the reporting period are included in the parent company’s consolidated statement of comprehensive income. The cash flow of the subsidiaries from the acquisition date to the end of the reporting period is included in the Company’s consolidated statement of cash flows. When the Company becomes capable of exercising control over an investee now under common control due to additional investment or other reasons, the acquirer shall remeasure its previously held equity interest in the acquiree to its fair value at the acquisition date. The difference between the fair value and the carrying amount shall be recognized as investment income for the period when the acquisition takes place. When the previously-held equity investment is accounted for under the equity method, any other comprehensive income previously recognized in relation to the acquiree’s equity changes shall be transferred to profit or loss for the current period when the acquisition takes place. Other comprehensive income arising from remeasurement of defined benefit plan is excluded. Notes to the financial statements Page 5 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements (2) Disposing subsidiaries or businesses 1. General treatment If the Company disposes a subsidiary during the reporting period, the revenue, expenses and profits of the subsidiary from the beginning of the reporting period to disposal date are included in the Company’s consolidated statement of comprehensive income. The cash flow of the subsidiaries from the beginning of the reporting period to disposal date is included in the Company’s consolidated statement of cash flows. When the Company loses control over an investee due to partial disposal or other reasons, the acquirer shall re-measure the remaining equity interests in the acquiree to its fair value at the acquisition date. The difference, between sums of consideration received for disposal equity shares and fair value of the remaining shares, and sums of share of net assets of the subsidiary calculated continuously from the acquisition date or the combination date based on the previous shareholding proportion and goodwill, shall be recognized as investment income for the period when the Company loses control over acquiree. When the previously-held equity investment is accounted for under the equity method, any other comprehensive income previously recognized in relation to the acquiree’s equity changes, and other equity changes rather than changes from net profit, other comprehensive income and profit distribution, shall be transferred to investment income for the current period when the Company loses control over acquiree. Other comprehensive income arising from re-measurement of defined benefit plan is excluded. When the Company loses control over a subsidiary due to the increase of capital from other investors and thus the shareholding ratio of the Company declines, accounting treatment shall be in accordance with the above-mentioned principles. 2. Disposing subsidiaries by multiple transactions Where the Company loses control of a subsidiary in multiple transactions in which it disposes of its subsidiary in stages, in determining whether to account for the multiple transactions as a single transaction, the Company shall consider all of the terms and conditions of the transactions and their economic effects. One or more of the following may indicate that the Company shall account for the multiple arrangements as a single transaction: (a) Arrangements are entered into at the same time or in contemplation of each other; (b) Arrangements work together to achieve an overall commercial effect; (c) The occurrence of one arrangement is dependent on the occurrence of at least one other arrangement; and (d) One arrangement considered on its own is not economically justified, but it is economically justified when considered together with other arrangements. If each of the multiple transactions forms part of a bundled transaction which eventually results in loss of control of the subsidiary, these multiple transactions shall be accounted for as a single transaction. In the consolidated financial statements, the difference between the consideration received and the corresponding proportion of the subsidiary’s net assets in each transaction prior to the loss of control shall be recognized in other comprehensive income and transferred to the profit or loss when the Company eventually loses control of the subsidiary. Notes to the financial statements Page 6 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements If each of the multiple transactions which eventually results in loss of control of the subsidiary do not form part of a bundled transaction, apply the treatment of disposing partial long-term equity investments in a subsidiary without loss of control prior to the loss of control. After the loss of control, apply the treatment of disposing the subsidiary in common cases. (3) Acquiring the subsidiaries’ equity interest held by non-controlling shareholders Where the Company has acquired a subsidiary’s equity interest held by non-controlling shareholders, the difference between the increase in the cost of long-term investments as a result of acquisition of non-controlling interests and the share of net assets of the subsidiary calculated continuous ly from the acquisition date or the combination date based on the new shareholding proportion shall be adjusted to the capital reserve( capital premium or share premium) in the consolidated financial statements. If the balance of the capital reserve is not sufficient, any excess shall be adjusted against retained earnings. (4) Disposing portion of equity investments in subsidiaries without lossing control When the Company disposes of a portion of the long-term equity investments in a subsidiary without loss of control, the difference between the amount of the consideration received and the corresponding portion of the nest assets of the subsidiary calculated continuously from the acquisition date or the combination date related to the disposal of the long-term equity investments shall be adjusted to the capital reserve (capital premium or share premium) in the consolidated financial statements. If the balance of the capital reserve is not sufficient, any excess shall be adjusted against retained earnings. (7) Recognition of cash and cash equivalents For the purpose of preparing the statement of cash flows, the term “cash” refers to the cash on hand and the unrestricted deposit. And the term “cash equivalents” refers to short-term (maturing within three months from acquisition) and highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. (8) Foreign currency transaction and translation of foreign currency financial statements 1. Foreign currency transaction Foreign currency transactions are translated into RMB at the current rate at the day of transactions. The foreign currency monetary items shall be translated at the spot exchange rate on the balance sheet date. The balance of exchange arising from the difference between the spot exchange rate on the balance sheet date and the spot exchange rate at the time of initial recognition or prior to the balance sheet date, except those arising from the raising of special foreign debt for the purchase or construction of capitalizable assets thus shall be capitalized according to the borrowing costs capitalization principle, shall be recorded into the profits and losses at the current period. 2. Translation of foreign currency financial statements Notes to the financial statements Page 7 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements The asset and liability items in the statement of financial position shall be translated at a spot exchange rate on the balance sheet date. Among the owner's equity items, except the ones as "undistributed profits", others shall be translated at the spot exchange rate at the time when they are incurred. The income and expense items in the income statement shall be translated using an exchange rate that is determined in a systematic and reasonable manner and approximates the spot exchange rate on the transaction date. When disposing an overseas business, the Company shall shift the balance, which is presented under the items of the owner's equities in the statement of financial position and arises from the translation of foreign currency financial statements related to this oversea business, into the disposal profits and losses of the current period. If the overseas business is disposed of partially, the Company shall calculate the balance arising from the translation of foreign currency statements of the part of disposal based on the disposal rate and shall shift them into the profits and losses of the current period. (9) Financial instruments Financial instruments include financial assets, financial liabilities and equity instruments. 1. Classification of financial instruments The Company shall classify financ ial assets on the basis of both the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset as: financial assets measured at amort ised cost, financial assets measured at fair value through other comprehensive income (debt instrument) and financial assets measured at fair value through profit or loss at initial measurement. A financial asset shall be measured at amortised cost if both of the following conditions are met. The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. A financial asset shall be measured at fair value through other comprehensive income if both of the following conditions are met. The financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financ ial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Other financial assets other than these are classified as financial assets measured at fair value through profit or loss. The Company may make an election at initial recognition for non-trading equity instrument investments whether it is designated as a financial asset (equity instrument) that is measured at fair value through other comprehensive income. The Company shall classify financial liabilities as financial liabilities measured at amortised cost and financial liabilities measured at fair value through profit or loss at initial measurement. Notes to the financial statements Page 8 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements The Company may, at initial recognition, des ignate a financial liability as measured at fair value through profit or loss because either: (a) it eliminates or significantly reduces an accounting mismatch; (b) a group of financial liabilities or financial assets and financial liabilities is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the entity’s key management personnel; (c) the financial liability contains embedded derivatives that need to be separated. 2. Recognition and measurement of financial instruments (1) Financial assets measured at amortised cost Financial assets measured at amortized cost include notes receivables, accounts receivables, other receivables, long-term receivables, debt investments, etc. At initial recognition, the Company shall measure a financial asset at its fair value plus or minus transaction costs that are directly attributable to the acquisition or issue of the financial asset. The Company shall measure account receivables at their transaction price if the account receivables do not contain a significant financing component and accounts receivables that the company has decided not to consider for a financing component of no more than one year. Interests calculated by using the effective interest method during the holding period shall be recognized in profit or loss. When recovering or disposing the receivables, the difference between the price obtained and the carrying value shall be recognized in current profit or loss. (2) Financial assets measured at fair value through other comprehensive income (debt instruments) Financial assets measured at fair value through other comprehensive income (debt instruments) include receivables financing, other debt investments, etc. At initial recognition, the Company shall measure a financial asset at its fair value plus transaction costs that are directly attributable to the acquisition or issuance of the financial asset. The financial assets are subsequently measured at fair value. Changes in fair value are included in other comprehensive income except for interest calculated using the effective interest method, impairment losses or gains and exchange gains and losses. When the financial assets are derecognized, the accumulated gain or loss previously recognized in other comprehensive income is transferred from other comprehensive income and recognized in profit or loss. (3) Financial assets at fair value through other comprehensive income (equity instruments) Financial assets at fair value through other comprehensive income (equity instruments) include other equity instrument investments, etc. Notes to the financial statements Page 9 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements At initial recognition, the Company shall measure a financial asset at its fair value plus transaction costs that are directly attributable to the acquisition or issue of the financial asset. The financial assets are subsequently measured at fair value. Changes in fair value are included in other comprehensive income. The dividends obtained are recognised in profit and loss. When the financial assets are derecognized, the accumulated gain or loss previously recognised in other comprehensive income is transferred from other comprehensive income and recognised in retained earnings . (4) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include transactional financial assets, derivative financial assets, other non-current financial assets, etc. The Company shall measure the financial assets at fair value at initial recognition. Transaction costs are recognised in profit or loss. Changes in fair value are included in profit or loss. When the financial assets are derecognized, the difference between the fair value and the initially recorded amount is recognized as investment income, and the gains and losses from changes in fair value are adjusted. (5) Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include current financial liabilities, derivative financial liabilities, etc. The Company shall measure the financial assets at fair value at initial recognition. Transaction costs are recognised in profit or loss. Changes in fair value are included in profit or loss. When the financial liabilities are derecognized, the difference between the fair value and the initially recorded amount is recognized as investment income, and the gains and losses from changes in fair value are adjusted. (6) Financial liabilities measured at amortised cost Financial liabilities measured at amortised cost include short-term borrowings, notes payables, accounts payables, other payables, long-term borrowings, bonds payables, long-term payables. At initial recognition, the Company shall measure a financial liability at its fair value plus transaction costs that are directly attributable to the acquisition or issue of the financial asset. Interests calculated by using the effective interest method during the holding period shall be recognized in profit or loss. Notes to the financial statements Page 10 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements When the financial liabilities are derecognized, the difference between the price obtained and the carrying value shall be recognised in profit and loss. 3. Recognition and measurement of financial assets transfer Where the Company has transferred nearly all of the risks and rewards related to the ownership of the financial asset to the transferee, it shall derecognize the financial asset. If it retained nearly all of the risks and rewards related to the ownership of the financial asset, it shall not derecognize the financial asset. To judge whether the transfer of a financial asset can satisfy the conditions as prescribed in these Standards for the derecognition of a financial asset, the Company shall follow the principle of the substance over form. Transfer of an entire financial asset can be divided into partial financ ial assets transfer and entire financial asset transfer. If the transfer of an entire financial asset satisfies the conditions for derecognition, the difference between the amounts of the following 2 items shall be recorded in the profit or loss of the current period: (1) The book value of the transferred financial asset; and (2) The sum of consideration received from the transfer, and the accumulative amount of the changes of the fair value originally recorded in the owners' equities (in the event that the financial asset involved in the transfer is a financial asset Available-for-sale). If the transfer of partial financial asset satisfies the conditions to be derecognized, the entire book value of the transferred financial asset shall, between the portion derecognized and the portion not derecognized, be apportioned according to their respective relative fair value, and the difference between the amounts of the following 2 items shall be included into the profit or loss of the current period : (1) The book value of the portion derecognized; and (2) The sum of consideration of the portion derecognized, and the portion of the accumulative amount of the changes in the fair value originally recorded in the owner's equities which is corresponding to the portion derecognized (in t he case that the financial asset involved in the transfer is a financial asset Available-for-sale). If the transfer of financial assets does not satisfy the conditions of derecognition, it shall continue to be recognized as financial assets and the consideration received shall be recognized as financial liabilities. 4. Derecognition of financial liabilities Only when the prevailing obligations of a financial liability are relieved in all or in part may the financial liability be derecognized in all or partly. Where the Company (debtor) enters into an agreement with a creditor so as to substitute the existing financial liabilities by way of any new financial liability, and if the contractual stipulations regarding the new financial liability is Notes to the financial statements Page 11 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements substantially different from that regarding the existing financial liability, it shall derecognize the existing financial liability, and shall at the same time recognize a new financial liability. Where the Company makes substantial revis ions to part or all of the contractual stipulations of the existing financial liability, it shall derecognize the existing financial liability or part of it, and at the same time recognize the financial liability after revising the contractual stipulations as a new financial liability. Where a financial liability is totally or partially derecognized, the Company shall recognize in the profit or loss of the current period the difference between the carrying amount derecognized and the considerations it has paid (including the non-cash assets it has transferred out and the new financial liabilities it has assumed). Where the Company buys back part of its financial liabilities, it shall distribute, on the date of repurchase, the carrying amount of the whole financial liabilities in light of the comparatively fair value of the part that continues to be recognized and the part recognized. The gap between the carrying amount which is distributed to the part derecognized and the considerations it has paid (inc luding the noncash assets it has transferred out and the new financial liabilities it has assumed) shall be recognized into profit or loss of the current period. 5. Determination of the fair value of the financial assets (liabilities) If active markets for the financial instruments exist, the fair value shall be measured by quoted prices in the active markets. If active markets for the financial instruments do not exist, valuation techniques shall be applied for the measurement. The Company uses valuation techniques appropriate in the circums tances and for which sufficient data are available to measure fair value. The Company chooses relevant observable inputs for identical or similar assets or liabilities. Only when relevant observable inputs are unavailable or should the Company use unobservable inputs for the asset or liability. 6. Impairment of the financial assets The Company shall recognize loss allowance for expected credit losses on financial asset measured at amortised cost, and financial assets measured at fair value through other comprehensive income, such as debt instrument investments, contract assets, financial guarantee contract, etc. The Company considers reasonable and relevant information on past events, current conditions and forecasts of future economic conditions, and takes the risk of default as a weight, and calculates the difference between the cash flow receivable from the contract and the cash flow expected to be received. The probability-weighted amount of the present value of the current value confirms the expected credit loss. At each reporting date, the Company shall measure the expected credit losses of financial instruments at different stages. If the credit risk on a financial instrument has not increased significantly since initial recognition, it is in the first stage, the Company shall measure the loss allowance for that financial instrument at an amount equal to 12-month Notes to the financial statements Page 12 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements expected credit losses. If the credit risk has increased significantly since initial recognition but the credit impairment has not occurred, it is in the second stage, and the company shall measure the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses. If the credit risk has increased significantly since initial recognition and the credit impairment has occurred, it is in the third stage, and the company shall measure the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses. The Company may assume that the credit risk on a financial instrument has not increased significantly since initial recognition if the financial instrument is determined to have low credit risk at the reporting date and measure the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses.. The Company shall recognize the amount of expected credit losses or reversal in profit or loss. For debt instruments held at fair value through other comprehensive income, the Company shall recognize the amount of expected credit losses or gains in profit or loss, and adjust other comprehensive income. For note receivables, account receivables and asset contracts, whether a significant financing component is contained or not, the Company shall always measure the loss allowance at an amount equal to lifetime expected credit losses. The impairment test shall be assessed individually for account receivables if there is evidence indicating that the receivables have been impaired, and for others applicable to individual assessments to recognise the expected credit losses and individual impairment. For accounts receivable that do not have objective evidence of impairment or when individual financial assets cannot be used to estimate expected credit losses at reasonable cost, the Company shall divide receivables based on the credit risk characteristics into different portfolio and calculate expected credit loss based on portfolios. The recognition of expected credit losses for the receivables in portfolio: Items Criteria for portfolio Recognition method for expected credit losses The Co mpany shall, based on past events, current conditions and forecasts Similar credit Account receivables – of future economic condit ions, calculate expected credit losses using characteristics for Aging analysis method comparison table of accounts receivables aging analysis and lifet ime similar ag ing expected credit loss ratio. The Co mpany shall, based on past events, current conditions and forecasts Similar credit Other receivables – of future economic condit ions, calculate expected credit losses using characteristics for Aging analysis method comparison table of other receivables aging analysis and lifetime expected similar ag ing credit loss ratio. Account receivables and other receivables - Aging analys is method for lifetime expected credit loss ratio: Notes to the financial statements Page 13 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Expected credit loss ratio for Expected credit loss ratio for Aging accounts receivable (%) other receivables (%) Within 1 year (inclusive) 1-2 years (inclusive) 5.00 5.00 2-3 years (inclusive) 20.00 20.00 Over 3 years 100.00 100.00 (10) Inventory 1. Inventory classification Inventories include material in transit, raw material, low -valued consumables, finished goods, work in process, materials for consigned processing, etc. 2. Valuation method for inventory dispatched The weighted average method is used to confirm the actual cost of the inventories dispatched. 3. The basis for confirming the net realizable value of inventories and the methods to make provision for the inventory impairment loss The net realizable value of inventories (finished products, stock commodity, material, etc.) held for direct selling in the daily business activity shall be calculated by deducting the estimated sale expense and relevant taxes from the estimated sale price of inventories; The net realizable value of inventories for further processing in the daily business activity shall be calculated by deducting the estimated cost of completion, estimated sale expense and relevant taxes from the estimated sale price of inventories; The net realiz able value of inventories held for the execution of sales contracts or labor contracts shall be calculated on the ground of the contract price. If the Company holds more inventories than the quantities subscribed in the sales contract, the net realizable value of the excessive part of the inventories shall be calculated on the ground of the general sales price. The Company shall make provis ion for loss on decline in value of inventories on the ground of each item of inventories at the year end. For inventories with large quantity and relatively low unit prices, the provision for loss on decline in value of inventories shall be made on the ground of the categories of inventories. For the inventories related to the series of products manufactured and sold in the same area, and of which the final use or purpose is identical or similar thereto, and if it is difficult to measure them by separating them from other items, the provision for loss on decline in value of inventories shall be made on a combination basis. Unless clear evidence shows that the market price is exceptionally fluctuating, the net realizable value of inventory is based on the market price at the balance sheet date. The net realizable value of inventory at the year-end is based on the market price at the balance sheet date. Notes to the financial statements Page 14 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements 4. Inventory system The Company uses perpetual inventory system. 5. Amortization of low-valued consumables and packing materials (1) Low-valued consumables shall be amortized in full amount on issuance. (2) Packing materials shall be amortized in full amount on issuance. (11) Assets hold for sales The Company classifies non-current assets or disposal asset groups when the assets meet the following criterion into holding categories for sale simultaneously: (1) According to the practice of selling such assets or disposal asset groups in similar transactions, they can be sold immediately under current conditions; (2) The sale of assets is highly probable, as the company has already made a resolution on a sale plan and obtained a certain purchase commitment, and the transaction is expected to be completed within one year. The relevant regulations that the assets can be sold have been approved by relevant authorities or regulatory authorities of the Company. (12) Long-term equity investment 1. Criteria of joint control and significant influence Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. If the Company and other joint venture have joint control of the investee and have rights to the net assets of the investee, the investee is a joint venture of the Company. Significant influence is the power to participate in the financia l and operating policy decisions of the investee but not control or join control of those policies. If the Company could exert significant influence over the investee, the investee is the associate of the Company. 2. The initial cost of long-term equity investment from business acquisition (1) Long-term equity investment from business acquisition For a business combination under common control, if the consideration of the combination is satisfied by paying cash, transfer of non-cash assets or assumption of liabilities and issue of equity securities, the initial investment cost of the long-term equity investment shall be the absorbing party’s share of the carrying amount of the owner’s equity of the party being absorbed in the consolidated financial statements of the ultimate controlling party at combination date. When an investor becomes capable of exercising control over an investee under common control due to additional investment or other reasons, the initial investment cost shall be the absorbing party’s share of the carrying amount of the owner’s equity of the party being absorbed in the consolidated financial statements of the ultimate controlling party at combination date. The difference between the initial investment cost and the carrying amount of the previously-held Notes to the financial statements Page 15 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements equity investment, together with the additional investment cost for new shares at combination date, shall be adjusted to the capital reserve. If the balance of capital reserve is not sufficient, any excess shall be adjusted to retained earnings. For a business combination not under common control, the initial investment cost of the long-term equity investment shall be the acquisition cost at the acquisition date. When an investor becomes capable of exercising control over an investee due to additional investment or other reasons, the initial investment cost under the cost method shall be the carrying amount of previously-held equity investment together with the additional investment cost. (2) The initial cost of the long-term equity investment other than from business acquisition The initial cost of a long-term equity investment obtained by making payment in cash shall be the purchase cost which is actually paid. The initial cost of a long-term equity investment obtained on the basis of issuing equity securities shall be the fair value of the equity securities issued. If the exchange of non-monetary assets is commercial in nature and the fair values of both the assets received and surrendered can be reliably measured, the fair value of the assets surrendered shall be used as the basis for determining the cost of the assets received, unless there is any exact evidence showing that the fair value of the assets received is more reliable. Where any non-monetary assets transaction does not meet the conditions as prescribed above, the carrying value and relevant payable taxes of the assets surrendered shall be the initial cost of the assets received. The initial cost of a long-term equity investment obtained by debt restructuring shall be ascertained on the basis of fair values. 3. Subsequent measurement and profit or loss recognition (1) Cost method The Company adopts cost method for the long term investment in subsidiary company. Under the cost method, an investing enterprise shall, in accordance with the attributable share of the net profits or losses of the invested entity, recognize the investment profits or losses except the dividend declared but unpaid, which is included in the payment when acquiring the investment. (2) Equity method A long-term equity investment in an associate or a joint venture shall be accounted for using the equity method. Where the initial investment cost of a long-term equity investment exceeds tan investor’s interest in the fair values of an investee’s identifiable net assets at the acquisition date, no adjustment shall be made to the initial investment cost. Where the initial cost is less than the investor’s interest in the fair values of the investee’s identifiable net assets at t he acquisition date, the difference shall be credited to profit or loss for the current period. Notes to the financial statements Page 16 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements The Company shall recognize its share of the investee’s net profits or losses, as well as its share of the investee’s other comprehensive income, as investment income or losses and other comprehensive income, and adjust the carrying amount of the investment accordingly. The carrying amount of the investment shall be reduced by the portion of any profit distributions or cash dividends declared by the investee that is attributable to the investor. The investor’s share of the investee’s owners’ equity changes, other than those arising from the investee’s net profit or loss, other comprehensive income or profit distribution, and the carrying amount of the long-term equity investment shall be adjusted accordingly. The investor shall recognize its share of the investee’s net profits or losses after making appropriate adjustments according to the Company’s accounting principles and operating period based on the fair values of the investee’s identifiable net assets at the acquisition date. During the holding period, if the investee makes consolidated financial statements, the Company shall calculate its share based on the investee’s net profit, other comprehensive income and the amount of other owners' equity attribute to the investee in the consolidated financial statements. The unrealized profits or losses resulting from transactions between the investor and its associate or joint venture shall be eliminated in proportion to the investor’s equity interest in the investee, based on which investment income or losses shall be recognized. Any losses resulting from transactions between the investor and investee which are attributable to asset impairment shall be recognized in full. If the transaction of investment or sale of assets among the Company and associate and joint venture and the assets is a business, it shall apply the treatment mentioned in Note 3 (5) “The accounting treatment for Business combination under/now under common control” and Note 3 (6) “Consolidation of Financial Statements”. When the Company recognizes the losses of invested enterprise, it shall follow the following sequence: First of all, offset the book value of long term equity investment. If the book value of long-term equity is insufficient to dilute, the investing enterprise shall recognize the net losses of the invested enterprise until the book value of the long-term equity investment and other long-term rights and interests which substantially form the net investment made to the invested entity are reduced to zero. If the company still has the obligation to undertake extra losses per contract, and then estimated liabilities shall be recognized into current profit and loss accordingly to the estimated obligation. (3) Disposal of long-term equity investment When disposing long-term equity investment, the difference between the proceeds actually received and the carrying amount shall be recognized in profit or loss for the current period. When the previously-held equity investment is accounted for under the equity method, any other comprehensive income previously recognized shall be accounted for on the same basis as would have been required if the investee had directly disposed of the related assets or liabilities. Those owner's equity recognized other than the change of net profits or loss, other comprehensive income, profit distribution of the invested entity shall be transferred proportionally into Notes to the financial statements Page 17 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements profit or loss of current period, other comprehensive income arising from the re-measurement of defined benefit plan is excluded. When an investor can no longer exercise joint control of or significant influence over an investee due to partial disposal of equity investment or other reasons, the remaining equity investment s hall be accounted for in accordance with “Accounting Standard for Business Enterprises No. 22-Financial instruments: recognition and measurement”. The difference between the fair value and the carrying amount at the date of the loss of join control or significant influence shall be charged to profit or loss for the current period. When the previously-held equity investment is accounted for under the equity method, any other comprehensive income previously recognized shall be accounted for on the same basis as would have been required if the investee had directly disposed of the related assets or liabilities for the current period upon discontinuation of the equity method. Those owner's equity recognized other than the change of net profits or loss, other comprehensive income, profit distribution of the invested entity shall be transferred into profit or loss of current period in full when the Company cease to adopt the equity method. When the Company can no longer exercise control over an investee due to partial disposal of equity investment or due to decrease of shareholding ratio because of additional investment by other investors, and with the retained interest, still has joint control of, or significant influence over, the investee, when preparing the individual financial statements, the investor shall change to the equity method and adjust the remaining equity investment as if the equity method had been applied from the date of the first acquisition. If the investor cannot exercise joint control of or significant influence over the investee after partial disposal of equity investment, the remaining equity investment shall be accounted for in accordance with “Accounting Standard for Business Enterprises No.22-Financial instruments: Recognition and Measurement”, and the difference between the fair value and carrying amount at the date of the loss of control shall be charged to profit or loss for the current period. When the equity investment disposed is acquired through business combination due to additiona l investment or other reasons, in stand-alone financ ial statement, the remaining equity investment shall adopt cost method or equity method, any other comprehensive income and other owner’s interests previously recognized of the previously-held equity investment under the equity method shall be transferred proportionally. For those remaining equity investment accounted for in accordance with “Accounting Standard for Business Enterprises No.22-Financial instruments: Recognition and Measurement” after disposal, other comprehensive income and other owner’s interests previously recognized shall be transferred to profit or loss in full. (13) Investment property Investment property refers to real estate held for the purpose of earning rent or capital appreciation, or both, including leased land use rights, land use rights held and prepared for transfer after appreciation, and leased buildings ( Buildings that are leased after completion of self-construction or development activities and buildings that are being used for rental in the future during construction or development). Notes to the financial statements Page 18 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements The company uses the cost model to measure the existing investment property. For investment property measured according to the cost model - the rental building adopts the same depreciation policy as the fixed assets of the company, and the land use right for rental is amortized according to the same amortization policy as the intangible assets. (14) Fixed assets 1. Recognition of Fixed assets The term "fixed assets" refers to the tangible assets held for the sake of producing commodities, rendering labor service, renting or business management and of which useful life is in excess of one fiscal year. No fixed asset may be recognized unless it simultaneous ly meets the conditions as follows: (1) The economic benefits pertinent to the fixed asset are likely to flow into the enterprise; and (2) The cost of the fixed asset can be measured reliably. 2. Fixed assets depreciation Fixed assets are depreciated under the straight line method. The depreciation rate is determined according to the category of assets, the useful life and the expected residual rate. If the components of the fixed assets have different useful lives or provide the economic benefits in a different way, then different depreciation rate or method shall be applied and the depreciation of the components shall be calculated separately. Fixed assets acquired under financial leas ing is depreciated over the useful life if it is reasonably certain that the ownership of the leased assets will be acquired upon expiry of lease, or over the shorter of lease term and useful life if it is not reasonably certain that the ownership of the leased assets will be acquired upon expiry of lease. Details of classification, depreciation period, residual value rate and annual depreciation rate are as follows: Depreciation Residual Value Rate Depreciation Rate Category Depreciation method Period (%) (%) Plants and Buildings straight line method 8-40 years 0.00 2.50-12.50 M achinery straight line method 4-18 years 3.00 5.39-24.25 Transportation and other straight line method 5-18 years 3.00 5.39-19.40 equipment 3. Recognition criteria for fixed asset leased in by financial leasing and its valuation Where a lease satisfies one or more of the following criteria, it shall be recognized as a financial leasing: (1) The ownership of the leased asset is transferred to the lessee when the term of lease expires; (2) The lessee has the option to buy the leased asset at a price which is expected to be far lower than the fair value of the leased asset at the date when the option becomes exercisable; (3) The lease term covers the major part of the use life of the leased asset; and (4) The present value of the minimum lease payments on the lease beginning date amounts to substantially all of the fair value of the leased asset on the lease beginning date. Notes to the financial statements Page 19 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements On the lease beginning date, the Company shall record the lower one of the fair value of the leased asset and the present value of the minimum lease payments on the lease beginning date as the initial book value, recognize the amount of the minimum lease payments as the initial book value of long-term account payable, and treat the difference between the recorded amount of the leased asset and the long-term account payable as unrecognized financing charges. (15) Construction in progress The cost of fixed assets transferred from a construction in progress includes all the necessary expenses incurred for bringing the asset to the expected conditions for use. Construction in progress is transferred to fixed asset when it has reached its working condition for its intended use. In case the final project accounts have not been completed or approved, the asset shall be transferred to fixed assets at an estimated value by considering project budget, cost or actual cost of the project and etc., and the deprecation of the said fixed assets shall be provided in accordance with the Company’s accounting policy since it has reached its working condition for its intended use. After the project accounts have been approved, the estimated values shall be adjusted based on the actual cost, but those provided deprecation shall not be adjusted. (16) Borrowing costs 1. Principle of the recognition of capitalized borrowing costs The borrowing costs shall include interest on borrowings, amortization of discounts or premiums on borrowings, ancillary expenses, and exchange balance on foreign currency borrowings. Where the borrowing costs incurred to an enterprise can be directly attributable to the ac quisition and construction or production of assets eligible for capitalization, it shall be capitalized and recorded into the costs of relevant assets. Other borrowing costs shall be recognized as expenses on the basis of the actual amount incurred, and shall be recorded into the current profits and losses. Assets eligible for capitalization refer to the fixed assets, investment real estate, inventories and other assets, of which the acquisition and construction or production may take quite a long time to get ready for its intended use or for sale. The borrowing costs shall not be capitalized unless they simultaneous ly meet the following requirements : (1) The asset disbursements have already incurred, which shall include cash, transferred non-cash assets or interest bearing debts paid for the acquisition and construction or production activities for preparing assets eligible for capitalization; (2) The borrowing costs has already incurred; and (3) The acquisition and construction or production activities which are necessary to prepare the asset for its intended use or sale have already started. 2. The capitalization period of borrowing costs Notes to the financial statements Page 20 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements The capitalization period shall refer to the period from the commencement to the cessation of capitalization of the borrowing costs, excluding the period of suspension of capitalization of the borrowing costs. When the qualified asset under acquisition and construction or production is ready for the intended use or sale, the capitalization of the borrowing costs shall be ceased. Where each part of a qualified asset under acquisition and construction or production is completed separately and is ready for use, the capitalization of the borrowing costs in relation to this part of asset shall be ceased. Where each part of an asset under acquisition and construction or production is completed separately and is ready for use or sale during the continuing construction of other parts, but it cannot be used or sold until the asset is entirely completed, the capitalization of the borrowing costs shall be ceased when the asset is completed entirely. 3. The suspension of capitalization of borrowing costs Where the acquisition and construction or production of a qualified asset is interrupted abnormally and the interruption period lasts for more than 3 months, the capitalization of the borrowing costs shall be suspended. If the interruption is a necessary step for making the qualified asset under acquisition and construction or production ready for the intended use or sale, the capitalization of the borrowing costs shall continue. The borrowing costs incurred during such period shall be recognized as expenses, and shall be recorded into the profits and losses of the current period, till the acquisition and construction or production of the asset restarts. 4. Method of calculating the capitalization rate and capitalized amount of borrowing costs For interest expense (minus the income of interests earned on the unused borrowing loans as a deposit in the bank or investment income earned on the loan as a temporary investment) and the ancillary expense incurred to a specifically borrowed loan, those incurred before a qualified asset under acquisition, construction or production is ready for the intended use or sale shall be capitalized at the incurred amount when they are incurred, and shall be recorded into the costs of the asset eligible for capitalization. The Company shall calculate and determine the to-be-capitalized amount of interests on the general borrowing by multiplying the weighted average asset disbursement of the part of the accumulative asset disbursements minus the general borrowing by the capitalization rate of the general borrowing used. The capitalization rate shall be calculated and determined in light of the weighted average interest rate of the general borrowing. (17) Intangible Assets 1. Measurement of Intangible Assets (1) Initial measurement is based on cost upon acquisition The cost of an intangible asset on acquisition inc lude the purchase price, relevant taxes and other necessary disbursements which may be directly attributable to bringing the intangible asset to the conditions for the expected Notes to the financial statements Page 21 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements purpose. If the payment for an intangible asset is delayed beyond the normal credit conditions and it is of the financing nature, the cost of the intangible asset shall be determined on the basis of the present value of the purchase price. For intangible assets obtained from debt restructuring as settlement of liabilities from debtors, initial recognition is based on its fair value, and the difference between the debt restructured and the fair value of the intangible assets are recognized in the current profit and loss. For intangible assets obtained from non-monetary transactions with commercial substance, and the fair value of the assets obtained or surrendered can be reliably measured, the initial recognition of the asset obtained is based on the fair value of the asset surrendered, unless there is strong evidence that the fair value of the asset obtained is more reliable. For intangible assets obtained through non-monetary transactions which do not meet the above criteria, the initial recognition is based on the book value of the assets surrendered and the relevant taxes payable. No gain or loss will be recognized. (2) Subsequent Measurement The Company shall analyze and judge the benefic ial period of intangible assets upon acquisition. Intangible assets with finite beneficial period shall be amortized under the straight-line method during the period when the intangible asset can bring economic benefits to the enterprise. If it is unable to estimate the beneficial period of the intangible asset, it shall be regarded as an intangible asset with uncertain service life and shall not be amortized. 2. Estimated useful lives of intangible assets with limited useful lives Item Estimated useful life Criteria Land use right 50 years Land use right certificate The Company shall review the useful lives and amortization methods of intangible assets with limited useful lives at each year end. 3. Determination of intangible assets with uncertain useful lives As at the balance sheet date, the Company has no intangible assets with uncertain useful lives. 4. Classification criteria for internal research phase and development phase The expenditures for its internal research and development projects of an enterprise shall be classified into research expenditures and development expenditures. Research phase refers to the phase of creative and planned investigation to acquire and study to acquire and understand new scientific or technological knowledge. Notes to the financial statements Page 22 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Development phase refers to the phase during which the result of research phase or other knowledge is applied into certain projects or designs for the manufacturing of new or substantially improved material, device and product. (18) Impairment of long-term assets For long-term assets under the cost model such as long-term equity investments, Investment property, fixed assets, construction in progress, intangible assets with limited useful lives etc., the Company shall perform impairment tests at the period end if there is clear indication of impairment. If the recoverable amounts of long-term assets are less than their carrying amounts, the carrying amounts of the assets shall be w ritten down to their recoverable amounts. The write-downs are recognized as impairment losses and charged to current profit and loss. The recoverable amounts of long-term assets are the higher of their fair values less costs to sell and the present values of the future cash flows expected to be derived from the assets. The Company shall estimate its recoverable amount on an individual basis. Where it is difficult to do so, it shall determine the recoverable amount of the group assets on the basis of the ass et group to which the asset belongs. The term "group assets” refers to a minimum combination of assets by which the cash flows could be generated independently The goodwill shall be subject to an impairment test at least at the end of each year. When the Company makes an impairment test of assets, it shall, as of the purchasing day, apportion the carrying value of the business reputation formed by merger of enterprises to the relevant asset groups by a reasonable method. Where it is difficult to do so, it shall be apportioned to the relevant combinations of asset groups. When apportioning the carrying value of the business reputation to the relevant asset groups or combinations of asset groups, it shall be apportioned on the basis of the proportion of the fair value of each asset group or combination of asset groups to the total fair value of the relevant asset groups or combinations of asset groups. Where it is difficult to measure the fair value reliably, it shall be apportioned on the basis of the proportion of the carrying value of each asset group or combination of asset groups to the total carrying value of the relevant asset groups or combinations of asset groups. When making an impairment test on the relevant asset groups or combination of asset groups containing business reputation, if any evidence shows that the impairment of asset groups or combinations of asset groups is possible, the Company shall first make an impairment test on the asset groups or combinations of asset groups not containing business reputation, calculate the recoverable amount, compare it with the relevant carrying value and recognize the corresponding impairment loss. Then the Company shall make an impairment test of the asset groups or combinations of asset groups containing business reputation, and compare the carrying value of these asset groups or combinations of asset groups (including the carrying value of the business reputation apportioned thereto) with the recoverable amount. Where the recoverable amount of the relevant assets or combinations of the asset groups is lower than the carrying value thereof, it shall recognize the impairment loss of the business reputation. Impairment losses on long-term assets shall not be reversed in subsequent accounting periods once recognized. Notes to the financial statements Page 23 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements (19) Long-term deferred expense The long-term deferred expense refers to the expenses incurred but shall be borne by current and subsequent accounting period, which is more than one year. The long-term deferred expense shall be amortized over its beneficiary period evenly (20) Employee benefits 1. Accounting treatment for short employee benefit The Company shall recognized, in the accounting period in which an employee provides service, actually occurred short-term employee benefits as a liability, with a corresponding charge to the profit or loss or cost of an asset for the current period. Payments made by an enterprise of social security contributions for employees, payments of housing funds, and union running costs employee education costs provided in accordance with relevant requirements shall, in the accounting period in which employees provide services, be calculated according to prescribed bases and percentages in determining the amount of employee benefits. The employee benefits which are non-monetary benefits shall be measured at fair value if it could be measured reliably. 2. Accounting treatment of post-employment benefits The Company shall recognize, in the accounting period in which an employee provides service, pension fund and unemployment fund for employees as a liability according to the local government regulations. The amount shall be calculated according to local prescribed bases and percentages in determining the amount of employee benefits, with a corresponding charge to the profit or loss or cost of an asset for the current period. 3.Accounting treatment of termination benefits The Company shall recognize an employee benefits liability for termination benefits, with a corresponding charge to the profit or loss for the current period, at the earlier of the following dates: when the Company cannot unilaterally withdraw the offer of termination benefits because of an employment termination plan or a curtailment proposal; or when the Company recognizes costs or expenses related to a restructuring that involves the payment of termination benefits. (21) Estimated liabilities 1. Recognition criteria of estimated liabilities The obligation pertinent to a Contingency (litigation, guarantees, loss contract, restructuring) shall be recognized as an estimated liability when the following conditions are satisfied simultaneously: (1) That obligation is a current obligation of the enterprise; Notes to the financial statements Page 24 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements (2) It is likely to cause any economic benefit to flow out of the enterprise as a result of performance of the obligation; and (3) The amount of the obligation can be measured in a reliable way. 2. Measurement of estimated liabilities The estimated debts shall be initially measured in accordance with the best estimate of the necessary expenses for the performance of the current obligation. To determine the best estimate, an enterprise shall take into full consideration of the risks, unc ertainty, time value of money, and other factors pertinent to the Contingencies. If the time value of money is of great significance, the best estimate shall be determined after discounting the relevant future outflow of cash. The best estimate shall be conducted in accordance with the following situations, respectively: If there is a continuous range for the necessary expenses and if all the outcomes within this range are equally likely to occur, the best estimate shall be determined in accordance with the average estimate within the range, that is, the average of the upper and lower limit. If there is not a sequent range for the necessary expenses and if the outcomes within this range are not equally likely to occur, the best estimate shall be determined as follows: (1) If the Contingencies concern a single item, it shall be determined in the light of the most likely outcome. (2) If the Contingencies concern two or more items, the best estimate shall be calculated and determined in accordance with all possible outcomes and the relevant probabilities. When all or some of the expenses necessary for the liquidation of an estimated debts of an enterprise is expected to be compensated by a third party, the compensation shall be separately recognized as an asset only when it is virtually certain that the reimbursement will be obtained. The amount recognized for the reimbursement shall not exceed the book value of the estimated debts. (22) Revenue 1.The general principle of revenue recognition and measurement The Company has transferred to the buyer the significant risks and rewards of ownership of the goods; and retained neither continuing managerial involvement which usually relates to the ownership nor exerts effective control over the goods sold. The relevant amount of revenue can be measured reliably, the economic benefits related to the transaction will flow into the enterprise; and the relevant costs incurred or to be incurred can be measured reliably. Revenue from the sale of goods may be recognized. 2.The specific criteria of revenue recognition and measurement Notes to the financial statements Page 25 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements The Company mainly sells steel and other products. Domestic sales revenue is recognized when the following conditions are met: The Company has delivered the products to buyer under the contract, amount of product sales revenue is determinable, received or the certificate of the right to receive the amount has been obtained and the relevant economic benefits are likely to flow into the entity, and related costs can be measured reliably. Export sales revenue is recognized when the following conditions are met: the Company has undertaken the Customs declaration and delivery has occurred under the contract, bill of lading has been obtained, amount of product sales revenue is determinable, received or the certificate of the right to receive the amount has been obtained and the relevant economic benefits are likely to flow into the entity, and related costs can be measured reliably. 3.Recognition Criteria for the Revenue from alienating of Assets Use Rights When it is probable that economic benefits in relation to the transaction will flow into the enterprise; and the amount of revenues can be measured reliably. The Company shall ascertain the amount of revenues from the transfer of Assets Use Right based on the following circumstances respectively: (1) Interest income shall be calculated based on the duration of which the Company's cash is used by others and the actual interest rate; or (2) Royalty revenue shall be calculated based on the period and method of charging as stipulated in the relevant contract or agreement. (23) Government Subsidies A government subsidy means the monetary or non-monetary assets obtained free of charge by the Company from the government. Government subsidies consist of the government subsidies pertinent to assets and government subsidies pertinent to income. The criteria and accounting treatment of government subsidies pertinent to assets. Government subsidies related to assets are government subsidies whose primary condition is that an entity qualifying for them should purchase, construct or otherwise acquire long-term assets. Recognition Government subsidies related to assets shall be recognized by deducting the subsidies at the caring amount of the assets or recognized as deferred income. Subsidies that recognized as deferred income shall be recognized in profit or loss over the periods during the useful lives of the relevant assets. Accounting treatment Government subsidies related to assets shall be recognized by deducting the subsidies at the caring amount of the assets or recognized as deferred income. Subsidies that recognized as deferred income shall be recognized in profit or loss on a systematic basis over the periods during the useful lives of the relevant assets (Subsidies related to daily activities should be recorded in Other Income. Subsidies that unrelated to daily activities should be recorded in Non-operating Income). The criteria and accounting treatment of government subsidies pertinent to income. Notes to the financial statements Page 26 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements The government subsidy related to income refers to the government subsidy other than the government subsidy related to the asset. Recognition The government subsidies related to incomes to compensate future expenses, shall be recognized as deferred income and transferred to current profit or loss. Government subsidies to compensate expenses or losses already incurred shall be recognized in current profit and loss. Accounting treatment The government subsidies related to incomes to compensate future expenses, shall be recognized as deferred income and transferred to current profit or loss (Subsidies related to daily activities should be recorded in Other Income. Subsidies that unrelated to daily activities should be recorded in Non-operating Income) in the period during which the expenses compensation is recognized or deduct relevant cost or loss. Government subsidies to compensate expenses or losses already incurred shall be recognized in current profit and loss (Subsidies related to daily activities should be recorded in Other Income. Subsidies unrelated to daily activities should be recorded in Non-operating Income) or deduct relevant cost or loss. (24) Deferred tax assets and deferred tax liabilities An enterprise shall recognize the deferred income tax assets arising from a deductible temporary difference to the extent of the amount of the taxable income which it is most likely to obtain and which can be deducted from the deductible temporary difference. As for any deductible loss or tax deduction that can be carried forward to the next year, the corresponding deferred income tax assets shall be determined to the extent that the amount of future taxable income to be offset by the deductible loss or tax deduction to be likely obtained. All taxable temporary differences shall be recognized as deferred tax liabilities with certain limited exceptions. Exceptions when deferred tax assets and deferred tax liabilities are not recognized include: initial rec ognition of goodwill; initial recognition of an asset or liability in a transaction or event that is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss). An entity shall offset deferred tax assets and deferred tax liabilities if, and only if: (a) the entity has a legally enforceable right to set off current tax assets against current tax liabilities; and (b) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on either:(i) the same taxable entity; or (ii) different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realize the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered. (25) Leases Notes to the financial statements Page 27 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements 1. Accounting treatment of operating lease (1) The rents paid for operating leases shall be recorded in the profits and losses of the current period by using the straight-line method over each period of the lease term. The initial direct costs paid by the Company shall be recorded into the profits and losses of the current period If the lessor has shouldered any expense related to the lease which shall have been borne by the Company, the Company shall deduct these expenses from the total rental expense and the remaining rental expense shall be allocated to each period during the lease term (2) The rents collected from operating leases shall be recorded in the profits and losses of the current period by using the straight-line method over each period of the whole lease term in which free lease period is included. The initial direct costs paid by the Company shall be recorded into the profits and losses of the current period. The initial direct costs shall be capitalized if it is material, and be allocated to each period as per the basis for rental revenue recognition. If the Company has shouldered any expense related to the lease which shall have been borne by the lessee, the company shall deduct these expenses from the total rental revenue and the remaining rental revenue shall be allocated to each period during the lease term. 2. Accounting treatment of financial leasing (1) Leased in asset On the lease beginning date, a lessee shall record the lower one of the fair value of the leased asset and the present value of the minimum lease payments on the lease beginning date as the initial book value, recognize the amount of the minimum lease payments as the initial book value of long-term account payable, and treat the balance between the recorded amount of the leased asset and the long-term account payable as unrecognized financing charges. The lessee shall adopt the effective interest rate method to calculate and recognize the financing charge in the current period. The unrecognized financing charge shall be amortized to each period during the lease term. Initial direct costs incurred by the Company shall be recorded in the value of the leased asset. (2) Leased out asset On the lease beginning date, a lessee shall record the balance between the sum of finance lease receivables plus unguaranteed residual value and the present value of the sum as unrealized financing income, and record rental as revenue when received for each period in the future Initial direct costs incurred by the Company related to the leased asset shall be recorded in the initial measurement of the finance lease receivables, and reduce the amount of revenue recognized during the lease term. (26) Discontinuing operation Notes to the financial statements Page 28 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Discontinuing operation is a component that has been disposed or classified as held for sale by the Company, and can be distinguished separately in operating and preparing financial statements when one of the following conditions is met: (1) The component stands for an independent main business or a major business area; (2) The component is a part of disposal plan of an independent main business or a major business area; (3) The component is a subsidiary which is acquired only for sale again. (27) Change of significant accounting policy and accounting estimate 1. Change of major accounting policy during this reporting period (1) New Financial Instrument guidelines Since January 1, 2019, the company has implemented the “Accounting Standards for Business Enterprises No. 22 – Recognition and Measurement of Financial Instruments”, “Accounting Standards for Business Enterprises No. 23 – Transfer of Financial Assets” and “Accounting Standards for Business Enterprises No. 24 - Hedge Accounting” and “Accounting Standards for Business Enterprises No. 37 - Financial Instruments Disclosure” (hereinafter referred to as "New Financial Instruments Guidelines ") revised by the Ministry of Finance in 2017. In terms of the classification and measurement of financial assets, the new financial instrument standard requires financial assets to be classified as subsequently measured at amortised cost, fair value through other comprehensive income or fair value through profit or loss on the basis of both the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset and eliminates the classification of loans, receivables, held to maturity investments, and available for sale financial assets in the original financ ial instruments. An investment in an equity instrument is generally classified as a financial asset at fair value through profit or loss. It also allows a non-tradable equity instrument investment to be designated as a financial asset at fair value through other comprehensive income. The designation is irrevocable and the accumulated fair value changes previously recognised in other comprehensive income are not carried forward to profit or loss. In respect of impairment, the requirements of the new financial instrument standard for impairment are applied to financial assets measured at amortised cost, financial assets measured at fair value through other comprehensive income, lease receivables and financial guarantee contracts. The new financial instrument s tandard requires the use of an expected credit loss model to confirm credit loss provisions to replace the original credit loss model. The new impairment model adopts a three-stage model. According to the relevant item, whether the credit risk has increased significantly since the initial recognition, the loss allowance is measured at an amount equal to 12-month expected credit losses or an amount equal to the lifetime expected credit losses. For receivables and long-term receivables formed by transactions regulated by the income standard, as well as the receivables of finance leases formed by transactions regulated by the “Accounting Standards for Business Enterprises No. 21 – Leases”, the Company shall measure the loss allowance at an amount equal to lifet ime expected credit losses. If the recognition and measurement of financial instruments before January 1, 2019 is inconsistent with the requirements of the new financial instruments, the company shall make retrospective adjustments in accordance Notes to the financial statements Page 29 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements with the requirements of the new financial instruments guidelines. The company does not make adjustments when it involves inconsistency between the previous comparative financial statement data and the new financial instrument guidelines. The difference between the original book value of the financial instrument and the new book value on the date of the implementation of the new financial instrument's standard is included in retained earnings or other comprehensive income as of January 1, 2019. (2) The revision of the format for the issuance of the financial statements Ministry of Finance issued “Notice of the Ministry of Finance on the revision of the format for the issuance of the financial statements of the general enterprise for the year 2019” (Cai Kuai 2019 No.6, hereinafter referred to as “Cai Kuai No. 6 Notice”) on 30 April 2019, which revised the format of financial statement for the general enterprise. The major impact of the implementation of the above regulations are as follows: The contents and reasons The items affected and the amount of accounting policy changes “Notes receivable and accounts receivable” is separated into "Notes receivable" and "Accounts receivable", amount for current year is 4,518,016,226.76 and (1) In Statement of Financial Position, 614,718,839.21, amount for previous year is 3,580,145,843.38 and “Notes receivable and accounts receivable” is 639,482,481.45. separated into "Notes receivable" and “Notes receivable and accounts receivable” is separated into "Notes receivable" "Accounts receivable"; The comparative and "Accounts receivable", amount for current year is 4,296,253,321.51 and data is adjusted accordingly. 402,397,751.85, amount for previous year is 3,356,020,598.89 and 409,553,059.27. Adjust the “asset impairment loss” in the income statement to add the operating (2) Adjust the “credit impairment loss” and profit, amount for the current year is 0.00, amount for previous year is “asset impairment loss” in the income 20,917,963.64; statement to add the operating profit, and the Adjust the “credit impairment loss” in the income statement to add the operating loss is listed as “-”. profit, amount for the current year is 3,751,513.83. 2. Change of accounting estimate during this reporting period None. 4. Taxes Major type of taxes and corresponding tax rates Tax Taxation Method Tax Rate The balance of output VAT calculated based on 6%,10%、16%(Jan to M ar in product sales and taxable services revenue in 2019) Value-added Tax(VAT) accordance with the tax laws after subtracting the 6%, 9%, 13% (Apr to Jun in deductible input VAT of the period 2019) City maintenance and construction tax Based on VAT and business tax actually paid 7%, 5% Educational surcharges Based on VAT and business tax actually paid 3%, 2% Notes to the financial statements Page 30 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Enterprise income tax Based on taxable profit 25% 5. Notes to the consolidated financial statements (1) Cash at bank and on hand Items Ending balance Beginning balance Cash on hand 5,346.25 4,839.95 Cash at bank 11,788,917,223.26 11,752,543,782.02 Other monetary funds 5,156,849,822.92 4,814,923,133.80 Total 16,945,772,392.43 16,567,471,755.77 Total amount deposited abroad The details of restricted monetary funds resulted from guarantee or pledge or freeze accounts are as follows: Items Ending balance Beginning balance M argin for bank acceptance bill 4,538,099,822.92 3,794,647,133.80 M argin for letter of credit 165,270,000.00 105,000,000.00 Time deposit or notice deposit for 453,480,000.00 915,276,000.00 guarantee Total 5,156,849,822.92 4,814,923,133.80 (2) Notes receivable 1.Notes receivable disclosed by category Items Ending balance Beginning balance Bank acceptance bill 4,361,187,029.40 3,540,317,759.10 Commercial acceptance bill 156,829,197.36 39,828,084.28 Total 4,518,016,226.76 3,580,145,843.38 2.The pledged acceptance bill at the end of the period There is no pledged acceptance bill at the end of the period. 3.The amount of Notes receivable endorsed over but not yet matured at the year-end. Items Derecognized ending balance Unrecognized ending balance Bank acceptance bill 7,280,230,450.89 Commercial acceptance bill Total 7,280,230,450.89 4.No Notes receivable has been transferred into accounts receivable due to inability of drawer to meet acceptance bill at the year-end. Notes to the financial statements Page 31 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements (3) Accounts receivable 1.Accounts receivable disclosed by category Ending balance Carrying amount Provision for bad debts Items Percentage Bad debts Book value Amount Amount (%) ratio (%) Accounts receivable tested for 47,762,337.18 6.02 47,762,337.18 100.00 impairment individually Accounts receivable tested for 745,278,892.11 93.98 130,560,052.90 17.52 614,718,839.21 impairment by portfolio Total 793,041,229.29 100.00 178,322,390.08 22.49 614,718,839.21 Beginning balance Carrying amount Provision for bad debts Items Bad debts ratio Book value Amount Percentage (%) Amount (%) Accounts receivable tested for 47,762,337.18 5.82 47,762,337.18 100.00 impairment individually Accounts receivable tested for 773,432,447.14 94.18 133,949,965.69 17.32 639,482,481.45 impairment by portfolio Total 821,194,784.32 100.00 181,712,302.87 639,482,481.45 Accounts receivables individually significant and tested for impairment individually Ending balance Company Provision for bad Bad debts ratio Carrying amount Reason debts (%) Benxi Nanfen Xinhe M etallurgical 47,762,337.18 47,762,337.18 100.00 Halt operation Furnace M aterial Co., Ltd Total 47,762,337.18 47,762,337.18 Accounts receivables disclosed by aging Ending balance Items Carrying amount Provision for bad debts Bad debts ratio (%) Within 1 year (inclusive) 538,645,725.73 1-2 years (inclusive) 56,752,847.90 2,837,642.39 5 2-3 years (inclusive) 27,697,384.96 5,539,476.99 20 Over 3 years 169,945,270.70 169,945,270.70 100 Notes to the financial statements Page 32 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Ending balance Items Carrying amount Provision for bad debts Bad debts ratio (%) Total 793,041,229.29 178,322,390.08 2.Information of provision, reversal or recovery of bad debts of current period. The provision of bad debts of current period is RMB 3,389,912.79. 3.No accounts receivable has been written off this year. 4.Top five debtors at the year-end Ending balance Company Percentage of total Accounts receivable Provision for Amount (%) bad debts The first 296,599,328.97 37.40 The second 106,438,276.12 13.42 The third 62,482,368.63 7.88 6,792,099.51 The fourth 47,762,337.18 6.02 47,762,337.18 The fifth 41,687,479.04 5.26 Total 554,969,789.94 69.98 54,554,436.69 (4) Prepayments 1. Prepayments disclosed by aging Ending balance Beginning balance Aging Amount Percentage (%) Amount Percentage (%) Within 1 year (inclusive) 1,311,404,160.39 99.77 1,318,136,339.11 99.74 1-2 years (inclusive) 2,226,256.90 0.17 2,494,489.34 0.19 2-3 years (inclusive) 833,987.64 0.06 901,900.77 0.07 Over 3 years 4,785.56 0.00 Total 1,314,464,404.93 100.00 1,321,537,514.78 100.00 Notes: As of June 30, 2019, there were no outstanding prepayments of over 1 year. 2. Top five prepaid companies at the year-end Name of the company Amount Percentage (%) The First 698,463,245.75 53.14 The Second 98,729,978.44 7.51 The Third 87,022,226.90 6.62 The Fourth 79,143,421.14 6.02 The Fifth 20,957,800.88 1.59 Total 984,316,673.11 74.88 Notes to the financial statements Page 33 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements (5) Other receivables Items Ending balance Beginning balance Interest receivables 13,872,107.84 11,608,705.43 Dividend receivables Other receivables 191,594,542.93 191,155,259.55 Total 205,466,650.77 202,763,964.98 1.Interest receivable (1) Interest receivable disclosed by category Items Ending balance Beginning balance Deposit interest 13,872,107.84 11,608,705.43 Total 13,872,107.84 11,608,705.43 2.Other receivables (1) Other receivables disclosed by category Ending balance Carrying amount Provision for bad debts Items Bad debts Book value Amount Percentage (%) Amount ratio (%) Other receivables tested for 254,437,069.84 99.32 64,582,526.91 25.38 189,854,542.93 impairment by portfolio Other receivables tested for 1,740,000.00 0.68 1,740,000.00 impairment individually Total 256,177,069.84 100.00 64,582,526.91 25.21 191,594,542.93 Beginning balance Carrying amount Provision for bad debts Items Bad debts Book value Amount Percentage (%) Amount ratio (%) Other receivables tested for 254,359,387.50 99.32 64,944,127.95 25.53 189,415,259.55 impairment by portfolio Other receivables tested for 1,740,000.00 0.68 1,740,000.00 impairment individually Total 256,099,387.50 100.00 64,944,127.95 191,155,259.55 Other receivables disclosed by Aging Ending balance Items Carrying amount Provision for bad debts Bad debts ratio (%) Within 1 year (inclusive) 158,226,535.01 Notes to the financial statements Page 34 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Ending balance Items Carrying amount Provision for bad debts Bad debts ratio (%) 1-2 years (inclusive) 4,278,962.95 213,948.15 5 2-3 years (inclusive) 34,453,741.40 6,890,748.28 20 Over 3 years 59,217,830.48 57,477,830.48 97 Total 256,177,069.84 64,582,526.91 (2) Information of provision, reversal or recovery of bad debts of current period. The provision of bad debts of current period is RMB 361,601.04. (3) No other receivables have been written off this year. (4) Other receivables disclosed by nature Nature Ending balance Beginning balance Accounts 204,915,146.72 203,695,979.62 M argin and deposit 2,286,886.27 2,238,972.26 Others 48,975,036.85 50,164,435.62 Total 256,177,069.84 256,099,387.50 (5) Top five debtors at the year-end Percentage of Provision Nature or Company Amount Aging total other for bad content receivables (%) debts The First Accounts 7,718,029.34 within 1 year 2.86 The Second Accounts 4,807,446.56 within 1 year 1.78 The Third Accounts 4,514,286.35 2-3 years 1.67 2,138,916.66 The Fourth Accounts 4,341,257.18 2-3 years 1.61 868,251.44 The Fifth Accounts 3,526,146.54 within 1 year 1.31 Total 24,907,165.97 9.23 3,007,168.10 (6) Inventories 1. Inventories disclosed by category Ending balance Beginning balance Items Carrying amount Impairment Book value Carrying amount Impairment Book value Raw material and 6,468,803,309.62 26,986,533.69 6,441,816,775.93 5,509,216,101.37 26,986,533.69 5,482,229,567.68 main material Work in process and self-made 1,402,852,181.92 1,402,852,181.92 1,365,365,191.33 29,012,489.61 1,336,352,701.72 semi-finished product Finished products 4,123,737,309.00 827,243.38 4,122,910,065.62 3,888,124,260.41 28,959,417.41 3,859,164,843.00 Notes to the financial statements Page 35 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Ending balance Beginning balance Items Carrying amount Impairment Book value Carrying amount Impairment Book value Total 11,995,392,800.54 27,813,777.07 11,967,579,023.47 10,762,705,553.11 84,958,440.71 10,677,747,112.40 2. Impairment of inventory Increase Decrease Category Beginning balance Write-back or Ending balance Provision Others Others write-off Raw material and main 26,986,533.69 26,986,533.69 material Work in process and 29,012,489.61 self-made semi-finished 29,012,489.61 product Finished products 28,959,417.41 28,132,174.03 827,243.38 Total 84,958,440.71 57,144,663.64 27,813,777.07 (7) Other current assets Items Ending balance Beginning balance Prepaid enterprise income tax 184,668,751.64 189,634,393.98 VAT input tax 62,944,230.59 102,485,377.15 Total 247,612,982.23 292,119,771.13 Notes to the financial statements Page 36 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements (8) Available-for-sale financial assets Ending balance Beginning balance Items Carrying amount Impairment Book value Carrying amount Impairment Book value Available-for-sale debt instruments Available-for-sale 1,056,239,522.00 14,414,693.00 1,041,824,829.00 equity instruments Including: M easured at fair value M easured at cost 1,056,239,522.00 14,414,693.00 1,041,824,829.00 Total 1,056,239,522.00 14,414,693.00 1,041,824,829.00 Notes to the financial statements Page 37 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements (9) Long-term equity investment Increase/decrease Investment Amount Total Beginning Gains and Ending Provision Impairment Investees Reduce Adjustment Other Declaration of Balance Add Losses Balance Total Ending Investme Comprehen Equity Cash Dividends Others Investment Recognized Impairment Balance nt sive Income Changes or Profit under the Equity Method Joint Venture Zhejiang Bengang Jingrui Steel 2,455,681.55 25,907.49 2,481,589.04 Processing Co., Ltd. Subtotal 2,455,681.55 25,907.49 2,481,589.04 Total 2,455,681.55 25,907.49 2,481,589.04 Notes to the financial statements Page 38 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements (10) Other equity investment Items Ending Balance Beginning Balance Suzhou Bengang Industrial Co., Ltd. 3,888,980.00 Sinosteel Shanghai Steel Processing Co., Ltd. 0.00 Northeast Special Steel Group Co., Ltd. 1,037,735,849.00 Guangzhou Benpu Auto Board Sales Co., Ltd. 200,000.00 Total 1,041,824,829.00 (11) Fixed assets 1. Details of fixed assets Transportation Items Buildings Machinery equipment and Total others 1.Total original value (1) Beginning balance 12,174,491,765.86 43,551,735,976.27 902,527,777.12 56,628,755,519.25 (2) Increase in current period 7,596,518.16 7,596,518.16 Including: Purchase Transferred from 7,596,518.16 7,596,518.16 construction in progress M erging Others (3) Decrease in current period 28,441,077.44 362,164,072.02 1,076,210.06 391,681,359.52 Including: Disposal 28,441,077.44 362,164,072.02 1,076,210.06 391,681,359.52 Others (4) Ending balance 12,146,050,688.42 43,197,168,422.41 901,451,567.06 56,244,670,677.89 2.Total accumulated depreciation (1) Beginning balance 5,576,027,013.36 26,526,053,819.79 560,595,347.69 32,662,676,180.84 (2) Increase in current period 188,520,413.30 932,455,392.69 78,888,442.73 1,199,864,248.72 Including: Provision 188,520,413.30 932,455,392.69 78,888,442.73 1,199,864,248.72 Others - (3) Decrease in current period 20,923,664.12 303,852,548.23 7,296,035.40 332,072,247.75 Including: Disposal 20,923,664.12 303,852,548.23 7,296,035.40 332,072,247.75 Others (4) Ending balance 5,743,623,762.54 27,154,656,664.25 632,187,755.02 33,530,468,181.81 3.Total impairment (1) Beginning balance 38,948,079.36 2,626,719.08 41,574,798.44 (2) Increase in current period Including: Provision Others (3) Decrease in current period 340,073.51 340,073.51 Including: Disposal 340,073.51 340,073.51 Others Notes to the financial statements Page 39 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Transportation Items Buildings Machinery equipment and Total others (4) Ending balance 38,608,005.85 2,626,719.08 - 41,234,724.93 4.Total net book value of Fixed assets (1) Ending book value 6,363,818,920.03 16,039,885,039.08 269,263,812.04 22,672,967,771.15 (2) Beginning book value 6,559,516,673.14 17,023,055,437.40 341,932,429.43 23,924,504,539.97 2. Temporary idle fixed assets Items Original book value Accumulated depreciation Impairment Book value Buildings 201,165,792.22 118,513,395.96 35,014,689.33 47,637,706.93 M achinery 1,224,688.89 1,149,022.46 75,666.43 Total 202,390,481.11 119,662,418.42 35,090,355.76 47,637,706.93 3. Fixed assets leased out by operating lease Items Book value Buildings 9,460,723.71 M achinery 85,459.55 Total 9,546,183.26 4. Fixed assets without property rights certificates at the end of the period Items Book value Reason Buildings 1,016,286,114.63 To be handled (12) Construction in progress 1. Construction in progress and Construction materials Beginning Items Ending balance balance Construction in progress 1,355,784,359.63 831,693,471.71 Project materials 18,626,600.07 4,900,986.11 Total 1,374,410,959.70 836,594,457.82 2. Details of construction in progress Notes to the financial statements Page 40 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Ending balance Beginning balance Total net book Items Total Total net book Total Carrying amount Carrying amount value of Fixed impairment value of Fixed assets impairment assets High Strength Cold Rolling Steel Renovation 43,856,840.06 43,856,840.06 Project The Third Cold Rolling Work Hot-Dip 4,575,442.24 4,575,442.24 Galvanizing Production Line Project The 360 Square Meter Sintering Machine 48,115,730.79 48,115,730.79 39,870,921.39 39,870,921.39 Energy Control Center Project 16,521,792.81 16,521,792.81 16,068,616.55 16,068,616.55 Renovation Project of Power Plant Three - Power 77,265,082.68 77,265,082.68 67,436,716.24 67,436,716.24 Plant. Energy Saving And Environmental Protection 107,484,022.00 107,484,022.00 81,652,336.52 81,652,336.52 Reconstruction Of No.1 Converter Project Modifying and Upgrading of No.2 Casting 71,055,463.93 71,055,463.93 67,751,518.71 67,751,518.71 machine in Hot steel plant No. 5 blast furnace overhaul project (new No. 2 205,247,220.39 205,247,220.39 79,221,161.00 79,221,161.00 blast furnace) Power plant 4-5# coke oven dry quenching waste 30,116,417.01 30,116,417.01 27,607,246.17 27,607,246.17 heat steam utilization project 1700 hot rolling perfect trans form ation 29,822,575.23 29,822,575.23 25,521,831.89 25,521,831.89 CCPP power generation project 66,004,363.05 66,004,363.05 24,961,721.54 24,961,721.54 Coking plant gas deamination and sulfur ammonia 34,800,566.05 34,800,566.05 34,300,566.05 34,300,566.05 maintenance project 360 square meter sintering machine waste heat 50,994,694.50 50,994,694.50 44,777,158.00 44,777,158.00 utilization 5#-7# Oxygen Generator Nitrogen Increase 28,911,871.30 28,911,871.30 21,715,145.18 21,715,145.18 Energy Saving Reconstruction Dry dedusting of No. 7 blast furnace and energy 27,673,848.07 27,673,848.07 22,973,276.80 22,973,276.80 saving reform of TRT power generation No. 6 blast furnace environment al protection 39,093,141.87 39,093,141.87 22,895,777.14 22,895,777.14 overhaul project Other 474,245,287.65 474,245,287.65 254,939,478.53 254,939,478.53 Total 1,355,784,359.63 1,355,784,359.63 831,693,471.71 831,693,471.71 Notes to the financial statements Page 41 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements 3. Changes in important construction projects in the current period Project Transferred Decrease cumulative Accumulated Including:Interest Interest to fixed d by investment Increase in Project amount of capitalization capitalization Items Budget(10 Beginning balance asset in others in Ending balance accounted for Sources current period progress interest amount in current rate in current thousand) current current the proportion of funds (%) capitalization period period (%) period period of the budget (%) High Strength Cold Rolling Steel Renovation 613,498.00 43,856,840.06 43,856,840.06 90% 100% 855,901,421.79 Other Project The Third Cold Rolling Work Hot-Dip Galvanizing 86,918.00 4,575,442.24 4,575,442.24 72% 100% Other Production Line Project Energy-saving and environmental protection trans formation of convert er system and 180-ton 177,864.40 1,908,118.60 1,908,118.60 87% 100% 127,847,567.31 Other dephosphorization converter project Renovation Project of Power Plant Three - Power 59,399.00 67,436,716.24 9,828,366.44 77,265,082.68 80% 90% 34,827,795.34 Other Plant. Energy Saving and Environmental Protection 21,800.00 81,652,336.52 25,831,685.48 107,484,022.00 49% 50% 336,061.23 336,061.23 3.48% Other Reconstruction Of No.1 Converter Project Modifying and Upgrading of No.2 Casting machine in 10,090.00 67,751,518.71 3,303,945.22 71,055,463.93 70% 80% 40,530.19 40,530.19 3.48% Other Hot steel plant No. 5 blast furnace overhaul project (new No. 150,000.00 79,221,161.00 126,026,059.39 205,247,220.39 14% 25% 783,807.97 783,807.97 3.48% Other 2 blast furnace) Total 1,119,569.40 296,061,732.47 215,330,457.43 511,392,189.90 1,019,737,183.83 1,160,399.39 Notes to the financial statements Page 42 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements 4. Construction materials Ending balance Beginning balance Items Carrying amount Impairment Book value Carrying amount Impairment Book value Construction materials 18,626,600.07 18,626,600.07 4,900,986.11 4,900,986.11 Total 18,626,600.07 18,626,600.07 4,900,986.11 4,900,986.11 (13) Intangible assets 1. Details of intangible assets Items Land use right S oftware Total 1.Total of original value (1)Beginning balance 327,028,797.84 310,401.55 327,339,199.39 (2)Increase Including: Purchase Including: Internal R&D Including: Increase in M ergers Including: Others (3)Decrease Including: Disposal Including: Others (4)Ending balance 327,028,797.84 310,401.55 327,339,199.39 2.Total of Accumulated Amortization (1)Beginning balance 49,176,692.15 100,066.21 49,276,758.36 (2)Increase 3,270,287.92 8,444.37 3,278,732.29 Including: Provision 3,270,287.92 8,444.37 3,278,732.29 Including: Others (3)Decrease Including: Disposal Including: Others (4)Ending balance 52,446,980.07 108,510.58 52,555,490.65 3.Total of Impairment (1)Beginning balance (2)Increase Including: Provision Including: Others (3)Decrease Including: Disposal Including: Others (4)Ending balance 4.Total of Net value (1)Ending book value 274,581,817.77 201,890.97 274,783,708.74 (2)Beginning book value 277,852,105.69 210,335.35 278,062,441.04 Notes to the financial statements Page 43 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements 2. Land use right without Certificate of Land use right at the end of the period. None. (14) Deferred tax asset and deferred tax liability 1. Undedicated deferred tax asset Ending balance Beginning balance Items Deductible temporary Deductible temporary Deferred tax asset Deferred tax asset differences differences Impairment 323,453,331.07 80,863,332.77 384,689,582.05 96,172,395.52 Internal unrealized profit 44,665,863.14 11,166,465.79 47,141,747.73 11,785,436.93 Differences of depreciation and 333,978,859.03 83,494,714.76 333,978,859.03 83,494,714.76 amortization Total 702,098,053.24 175,524,513.32 765,810,188.81 191,452,547.21 2. Unrecognized deferred tax assets Items Ending balance Beginning balance Deductible temporary differences 2,914,780.92 2,914,780.92 Deductible losses 667,057,769.20 1,112,718,371.26 Total 669,972,550.12 1,115,633,152.18 3. The deductible loss of unrecognized deferred tax assets due in the following period Items Ending balance Beginning balance Notes Year 2020 639,818,319.71 1,085,478,921.77 Year 2021 11,436,302.83 11,436,302.83 Year 2022 1,000,766.72 1,000,766.72 Year 2023 14,802,379.94 14,802,379.94 Year 2024 Total 667,057,769.20 1,112,718,371.26 (15) Other non-current assets Items Ending balance Beginning balance Prepaid of long-term assets 68,303,165.35 76,341,975.35 Total 68,303,165.35 76,341,975.35 Notes: The prepaid long-term assets at the end of the period are prepaid equipment and construction funds. (16) Short-term loans 1. Classification of short-term loans Items Ending balance Beginning balance Pledge loans 48,262,375.85 Notes to the financial statements Page 44 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Items Ending balance Beginning balance Guaranteed loans 12,078,193,000.00 10,361,008,000.00 Credit loans 220,000,000.00 1,529,220,000.00 Total 12,298,193,000.00 11,938,490,375.85 2. Overdue short-term loans (17) Notes payables Items Ending balance Beginning balance Bank acceptance bill 9,317,222,357.86 8,738,192,014.02 Domestic letter of credit 2,333,060,000.00 1,275,000,000.00 Total 11,650,282,357.86 10,013,192,014.02 Notes: There are no outstanding notes payable at the end of this period. (18) Accounts payable 1. Accounts payable disclosed by category Items Ending balance Beginning balance Accounts payable for goods 4,432,010,176.48 4,483,900,163.08 Accounts payable for labor 29,371,271.02 30,829,506.69 Accounts payable for project and equipment 509,540,291.98 424,097,390.68 Repair expense 652,340,212.43 579,971,383.23 Others 3,576,818.36 3,244,367.97 Total 5,626,838,770.27 5,522,042,811.65 2. Significant accounts payable aging over one year Items Ending balance Reason Liaoning Shenjiao International Trade Co.,Ltd 72,839,065.27 Not yet settled M CC Southern Engineering Technology Co., Ltd. 51,119,440.77 Not yet settled Hangzhou Tianshen M aterials Co., Ltd. 20,145,902.65 Not yet settled M CC Jiao Nai Engineering Technology Co., Ltd. 19,379,163.99 Not yet settled M CC Jiao Nai (Dalian) Engineering Technology Co., 17,415,300.00 Not yet settled Ltd. Shenyang Railway Construction Bridge and Tunnel 14,200,000.00 Not yet settled Engineering Co., Ltd. Jixi Huasheng Fengyuan Coal Preparation Co., Ltd. 6,485,138.18 Not yet settled Total 201,584,010.86 Notes to the financial statements Page 45 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements (19) Advance from customers 1. Advance from customers disclosed by category Items Ending balance Beginning balance Advance for goods 3,345,451,646.56 3,331,854,098.42 Total 3,345,451,646.56 3,331,854,098.42 2. Significant advance from customers aging over one year. None (20) Employee benefits payable 1. Employee benefits payable Items Beginning balance Increase Decrease Ending balance (1) Short-term employee 47,824,468.42 916,510,872.23 916,669,401.25 47,665,939.40 benefits (2) Post-employment benefits - defined 174,373.43 128,070,045.18 128,069,809.64 174,608.97 contribution plans (3) Termination benefits 3,467,389.87 1,046,552.23 2,420,837.64 (4) Other benefits due within one year Total 51,466,231.72 1,044,580,917.41 1,045,785,763.12 50,261,386.01 2. Short-term employee benefits Beginning Items Increase Decrease Ending balance balance (1) Salary, bonus, 38,282,721.78 684,822,157.27 685,422,131.12 37,682,747.93 allowance and subsidy (2) Employee welfare 47,016,070.43 47,016,070.43 (3) Social Insurance 652,400.36 71,083,855.14 71,083,855.14 652,400.36 Including: M edical 1,598.15 53,654,171.68 53,654,171.68 1,598.15 insurance Work injury 650,802.21 17,416,640.12 17,416,640.12 650,802.21 insurance M aternity 13,043.34 13,043.34 insurance (4) Housing 6,854,689.00 52,823,804.00 52,887,301.00 6,791,192.00 (5) Union funds and staff 2,034,657.28 60,764,985.39 60,260,043.56 2,539,599.11 education fee (6) Short-term compensated absences (7) Short-term profit - sharing scheme Notes to the financial statements Page 46 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Beginning Items Increase Decrease Ending balance balance Total 47,824,468.42 916,510,872.23 916,669,401.25 47,665,939.40 3. Defined contribution plans Beginning Items Increase Decrease Ending balance balance Basic pension fund 68,338.82 124,734,324.48 124,734,498.12 68,165.18 Unemployment insurance 106,034.61 3,335,720.70 3,335,311.52 106,443.79 Total 174,373.43 128,070,045.18 128,069,809.64 174,608.97 (21) Current tax liabilities Items Ending balance Beginning balance Value-added tax 35,376,964.97 442,980,368.02 Corporate income tax 4,317,717.53 2,769,293.58 City maintenance and construction tax 9,587,112.00 32,813,368.49 House property tax 3,506,456.37 3,004,878.95 Educational surcharges 4,137,761.43 23,450,632.11 Environmental tax 381,305.56 7,340,495.80 Others 5,581,530.69 3,393,332.73 Total 62,888,848.55 515,752,369.68 (22) Other payables Items Ending balance Beginning balance Interest payables 9,343,905.54 9,658,681.99 Dividends payables 193,768,576.60 Other payables 696,885,503.92 852,852,496.97 Total 899,997,986.06 862,511,178.96 1. Interest Payable Items Ending balance Beginning Balance Loan interests 9,343,905.54 9,658,681.99 Total 9,343,905.54 9,658,681.99 2. Dividends payables Items Ending balance Beginning Balance Common dividend 193,768,576.60 Preferred shares divided into equity instruments/Sustainable Debt Dividend Including: Tool 1 Tool 2 Notes to the financial statements Page 47 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Items Ending balance Beginning Balance Total 193,768,576.60 3. Other payables (1)Other payables disclosed by nature Items Ending balance Beginning Balance Deposit 6,756,148.49 6,876,696.99 M argin 131,820,736.18 129,911,043.84 Accounts 395,056,845.92 568,285,473.68 Others 163,251,773.33 147,779,282.46 Total 696,885,503.92 852,852,496.97 (2)Significant other payables ageing over one year Name Ending balance Reason Benxi Steel & Iron (Group) Co., Ltd. 101,874,612.92 Not yet settled (23) Non-current liabilities due within one year Items Ending balance Beginning balance Long-term loans due within one year 1,036,582,163.28 350,965,576.32 Bond payables due within one year Total 1,036,582,163.28 350,965,576.32 (24) Long-term loans Categories Ending balance Beginning balance Pledged loans M ortgage loan Guaranteed loans 3,195,042,608.56 3,931,317,094.16 Credit loans 3,018,011,955.59 3,152,323,000.00 Total 6,213,054,564.15 7,083,640,094.16 (25) Long-term payables Items Ending balance Beginning balance Long-term payables 52,733,529.65 13,686,705.92 Special payables Total 52,733,529.65 13,686,705.92 1. Long-term payables Items Ending balance Beginning balance Financing lease payments 52,733,529.65 13,686,705.92 Total 52,733,529.65 13,686,705.92 Notes to the financial statements Page 48 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements (26) Deferred income Beginning Ending Items Increase Decrease Reason balance balance Government 289,499,002.97 428,000.00 41,695,000.00 248,232,002.97 subsidy Total 289,499,002.97 428,000.00 41,695,000.00 248,232,002.97 Notes to the financial statements Page 49 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Projects of government subsidies: Beginning Transfer to Other Related to assets or Items Increase Ending balance balance non-operating income decrease income M ES Project Special Fund 1,720,000.00 860,000.00 860,000.00 Related to assets Industrial Enterprise Energy M anagement Center Construction Demonstration 6,960,000.00 1,160,000.00 5,800,000.00 Related to assets Project Environment Pollution Renovation Project 3,620,000.00 1,810,000.00 1,810,000.00 Related to assets Environment Renovation Project and Regional Basin Environment Protection 340,000.00 170,000.00 170,000.00 Related to assets Project Cold Rolling Steel High Strength Renovation Project 200,000,000.00 25,000,000.00 175,000,000.00 Related to assets Automobile High-class Electrolytic Zinc Steel Plate Production Line Project 16,416,000.00 4,104,000.00 12,312,000.00 Related to assets Sintering M achine Residue Heat Usage and Desulfurization Project 4,204,000.00 2,102,000.00 2,102,000.00 Related to assets 7 130t Boilers Flue Gas Desulfurization Renovation Project of Power Plant 19,200,000.00 2,400,000.00 16,800,000.00 Related to assets Overseas Advanced Technology Introduction Special Fund 6,884,000.00 1,442,000.00 5,442,000.00 Related to assets Automobile Steel Sheet Engineering Laboratory Project 1,000,000.00 1,000,000.00 Related to assets Third-generation High Strength Steels for Automobile R&D Project 2,900,000.00 2,900,000.00 Related to assets The 360 Cubic M eter Sintering M achine Flue Gas Desulfurization Renovation 200,000.00 100,000.00 100,000.00 Related to assets Project of Blast Furnace Plant Environment Protection Project Special Fund 1,160,000.00 580,000.00 580,000.00 Related to assets Advanced Treatment of Carbon Fiber Wastewater Project of Coke Plant Dongfeng 9,500,000.00 9,500,000.00 Related to assets Area Desulfurization and Denitration Projects for Coal-fired Boiler of Power Plant Related to assets 4,800,000.00 300,000.00 4,500,000.00 High-pressure Workshop Power Plant No 3 workshop Heat and Power Cogeneration Renovation Project 8,000,000.00 1,000,000.00 7,000,000.00 Related to assets Sintering M achine Energy Saving and Environmental Protection Project of Blast Related to assets 2,320,000.00 580,000.00 1,740,000.00 Furnace Plant Air Quality Automatic M onitoring System 175,000.00 35,000.00 140,000.00 Related to assets Notes to the financial statements Page 50 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Beginning Transfer to Other Related to assets or Items Increase Ending balance balance non-operating income decrease income Liaoning Grand Craftsman Subsidy and Skill M aster Workstation Grant 100,002.97 240,000.00 340,002.97 Related to income Support fund for the project of high-strength pipeline steel under low temperature 188,000.00 52,000.00 136,000.00 Related to income and high pressure service conditions Total 289,499,002.97 428,000.00 41,695,000.00 248,232,002.97 Notes to the financial statements Page 51 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements (27) Share capital Increase/decrease (+ , - ) Issuing Items Beginning balance Bonus Transferred Ending balance of new Others Subtotal shares from reserves share Capital shares 3,875,371,532.00 3,875,371,532.00 (28) Capital reserves Items Beginning balance Increase Decrease Ending balance Capital premium over par value 12,227,292,378.47 12,227,292,378.47 Other capital reserves 115,917,468.82 115,917,468.82 Total 12,343,209,847.29 12,343,209,847.29 (29) Special Reserves Items Beginning balance Increase Decrease Ending balance Safety production cost 683,937.71 25,542,658.45 5,212,639.87 21,013,956.29 Total 683,937.71 25,542,658.45 5,212,639.87 21,013,956.29 (30) Surplus Reserves Items Beginning balance Increase Decrease Ending balance Statutory surplus reserves 961,105,529.85 961,105,529.85 Total 961,105,529.85 961,105,529.85 (31) Undistributed Profits Items Current period Previous period Before adjustments: undistributed profits at last year-end 1,945,887,269.82 1,103,162,610.35 Adjustments of the beginning distributed profits (increase + / decease -) After adjustments: undistributed profit at this year-beginning 1,945,887,269.82 1,103,162,610.35 Add: undistributed profit belonging to parent company 453,209,615.76 756,951,987.59 Less: Statutory surplus reserves Notes to the financial statements Page 52 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Items Current period Previous period Discretionary reserves General risk reserves Common shares dividend payable 193,768,576.60 193,768,576.60 Common shares dividend transferred to paid-in capital Ending balance of undistributed profits 2,205,328,308.98 1,666,346,021.34 (32) Operating income and operating cost Current period Previous period Items Revenue Cost Revenue Cost Principal business 22,581,458,005.55 20,807,089,888.18 21,302,037,073.89 19,140,922,165.53 Other business 1,521,137,161.59 1,260,522,841.47 2,139,210,303.25 1,663,285,255.45 Total 24,102,595,167.14 22,067,612,729.65 23,441,247,377.14 20,804,207,420.98 (33) Tax and surcharges Items Current period Previ ous period City maintenance and construction tax 27,561,420.89 48,666,138.65 Educational surcharge 19,877,089.62 34,952,935.92 Housing property tax 38,778,891.04 36,610,915.20 Land use right tax 6,538,299.88 3,421,519.74 Stamp duty and others 14,961,858.43 15,742,454.27 Environmental tax 6,387,222.58 13,896,524.30 others 20,580.53 16,887.56 Total 114,125,362.97 153,307,375.64 (34) Selling and distribution expenses Notes to the financial statements Page 53 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Items Current period Previous period Freight 456,217,341.94 393,290,897.61 Port surcharges 52,405,847.32 56,907,191.59 Import and export agency fee 34,174,633.61 35,649,297.75 Salary and benefits 13,553,533.82 11,993,852.41 Others 13,751,821.86 12,721,174.90 Package fee 4,342,020.59 3,475,594.69 Total 574,445,199.14 514,038,008.95 (35) General and administrative expenses Items Current period Previous period Salary and benefits 122,383,642.39 116,352,823.92 Repair expense 142,464,599.50 174,107,156.65 Land use right fee 27,345,714.30 27,345,714.30 Others 62,667,766.52 57,134,166.31 Depreciation 24,216,703.47 26,164,322.31 Social insurance fee 23,532,872.66 23,452,571.91 Heating fee 22,391,441.18 20,783,413.87 Water resources fee 11,993,951.74 6,546,763.90 Housing fund 4,737,351.00 4,445,529.00 Amortization 2,970,897.50 2,982,926.09 Entertainment fee 1,070,316.75 1,527,871.52 Rental fee 643,214.78 543,240.66 Shipping fee 349,339.98 455,924.12 Total 446,767,811.77 461,842,424.56 (36) Research and development expenses Notes to the financial statements Page 54 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Items Current period Previous period Depreciation, materials and compensation, etc. 15,408,472.28 2,470,641.53 Total 15,408,472.28 2,470,641.53 (37) Financial expenses Items Current period Previous period Interest expenditure 586,490,262.69 575,001,615.20 Less: Interest income 127,083,779.58 61,605,403.34 Exchange loss -71,095,752.13 286,291,324.68 Others 15,154,975.44 3,350,880.74 Total 403,465,706.42 803,038,417.28 Notes:The financial expenses of this period were 403 million yuan, a decrease of 400 million yuan fro m the previous period of 803 million yuan, a decrease of 49.76%, mainly due to the increase in exchange income and interest income during the period. (38) Other income Related to Items Current period Previous period assets or income M ES Project Special Fund 860,000.00 860,000.00 Assets Industrial Enterprise Energy M anagement Center 1,160,000.00 1,160,000.00 Assets Construction Demonstration Project Environment Pollution Renovation Project 1,810,000.00 1,810,000.00 Assets Environment Renovation Project and Regional 170,000.00 170,000.00 Assets Basin Environment Protection Project Cold Rolling Steel High Strength Renovation 25,000,000.00 25,000,000.00 Assets Project Automobile High-class Electrolytic Zinc Steel 4,104,000.00 4,104,000.00 Assets Plate Production Line Project Sintering M achine Residue Heat Usage and 2,102,000.00 2,102,000.00 Assets Desulfurization Project 7 130t Boilers Flue Gas Desulfurization 2,400,000.00 2,400,000.00 Assets Renovation Project of Power Plant Treatment and Salt Extraction Project of 50,000.00 Assets Desulfurization Waste Liquid of Coke Plant Overseas R&D Team Introduction Special Fund 1,442,000.00 1,442,000.00 Assets Notes to the financial statements Page 55 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Related to Items Current period Previous period assets or income The 360 Cubic M eter Sintering M achine Flue Gas Desulfurization Renovation Project of Blast 100,000.00 100,000.00 Assets Furnace Plant Environment Protection Project Special Fund 580,000.00 580,000.00 Assets Bengang Power plant high pressure workshop coal burning boiler desulfurization and Assets denitrification items Bengang Power plant high pressure workshop coal burning boiler desulfurization and 300,000.00 300,000.00 Assets denitrification items Power Plant No 3 workshop Heat and Power 1,000,000.00 Assets Cogeneration Renovation Project Iron and steel plant sintering machine energy 580,000.00 580,000.00 Assets saving and environmental protection project Air quality automatic monitoring system 35,000.00 35,000.00 Assets Xihu source resource management committee 414,300.00 Income compensation Liaoning Grand Craftsman Subsidy and Skill 166,938.70 Income M aster Workstation Grant Support fund for the project of high-strength pipeline steel under low temperature and high 52,000.00 Income pressure service conditions Total 41,695,000.00 41,274,238.70 (39) Income on investment Items Current period Previous period Income on disposal of long-term equity investment by equity method 25,907.49 Income on bank short-term financial products 3,493,150.68 Total 25,907.49 3,493,150.68 (40) Credit impairment loss Items Current period Previous period Account receivable bad debt loss 3,389,912.79 Other account receivable bad debt loss 361,601.04 Long-term account receivable bad debt loss Notes to the financial statements Page 56 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Total 3,751,513.83 (41) Asset impairment loss Items Current period Previous period Bad debt loss 14,523,332.71 Inventory impairment loss 6,394,630.93 Total 20,917,963.64 (42) Assets disposal gains The amount Items Current period Previous period recognized in non-recurring profit Disposal gains or losses arising from disposal 2,418,704.34 825,580.63 2,418,704.34 of fixed assets not classified for sale Total 2,418,704.34 825,580.63 2,418,704.34 (43) Non-operating income The amount Current period Previous period recognized in Items non-recurring profit Debt restructuring gain 50,640.00 945,892.23 50,640.00 Non-current assets scrapped gains 7,955,444.40 7,955,444.40 Others 204,097.84 1,192,505.57 204,097.84 Total 8,210,182.24 2,138,397.80 8,210,182.24 (44) Non-operating expense The amount Items Current period Previous period recognized in non-recurring profit Non-current assets scrapped loss 57,974,322.05 1,382,402.26 57,974,322.05 Total 57,974,322.05 1,382,402.26 57,974,322.05 (45) Income tax expense 1. Income tax expense Items Current period Previous period Income tax payable for the current year 9,415,176.70 5,956,888.87 Notes to the financial statements Page 57 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Adjustment of deferred income tax 16,547,005.03 5,679,337.17 Total 25,962,181.73 11,636,226.04 2. Accounting profit and income tax expense adjustment process Items Current period Total profit 478,870,963.27 Income tax expense calculate according to the official or applicable tax rate 119,717,740.82 Effect of different tax rates applied by subsidiaries Effect of adjustment of the income tax expense of prior period Effect of non-taxable income Effect of undeductible costs, expenses or losses Effect of use of deductible losses of unrecognized deferred tax asset of prior period -93,755,559.09 Effect of deductible temporary differences or deductible losses of unrecognized deferred tax asset of current period Income tax expenses 25,962,181.73 (46) Notes of statement of cash flows 1. Cash received related to other operating activities Items Current period Previous period Withdraw of current accounts, advance for another 17,151,876.47 19,218,434.76 Interest income 127,083,779.58 61,605,403.34 Special subsidy income 428,000.00 694,300.00 Non-operating income 117,870.10 162,619.82 Others 123,098.19 101,722.27 Total 144,904,624.34 81,782,480.19 2. Cash paid related to other operating activities Items Current period Previous period Current accounts, advance for another 221,234,925.29 285,018,187.10 Sales expenses 4,449,939.39 4,646,000.62 Administrative expenses 17,883,394.86 18,078,644.22 Bank charges 3,255,172.22 2,896,060.69 Others 365,921.44 358,254.79 Notes to the financial statements Page 58 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Items Current period Previous period Total 247,189,353.20 310,997,147.42 (47) Supplementary details of statement of cash flows 1. Supplementary details for statement of cash flows Items Current period Previous period 1. A reconciliation of net profit to cash flows from operating activities: Net profit 452,934,689.03 757,973,791.35 Add: Credit impairment loss 3,751,513.83 Asset impairment loss -20,917,963.64 Depreciation of fixed assets and so on 1,199,864,248.72 1,144,984,195.00 Amortization of right use asset Amortization of intangible assets 3,278,732.29 3,239,455.09 Long-term deferred expenses Losses proceeds from disposal of PPE, intangible assets 57,974,322.05 556,821.63 and other long-term assets (Earnings marked“-”) Scrapped losses from fixed assets (Earnings marked“-”) Change in fair value loss (Earnings marked“-”) Financial expenses (Earnings marked“-”) 403,465,706.42 803,038,417.28 Investment losses (Earnings marked“-”) -3,493,150.68 Deferred tax assets reduction (Addition marked“-”) 15,928,033.89 5,679,337.17 Deferred tax liabilities increased (Reduction marked“-”) Reduction of inventory (Addition marked“-”) -1,289,831,911.07 -1,683,906,453.31 Operating receivable items reduction (Addition -908,736,317.08 817,004,548.19 marked“-”) Operating payable items increase (Less marked"-") 1,046,157,987.59 -1,093,639,256.61 Other Net cash flows generated from operating activities 984,787,005.67 730,519,741.47 2. Payments of investing and financing activities not - -- involving cash: Liabilities transferred to capital Convertible bonds due within one year Fixed assets financed by leasing 3. The net increase in cash and cash equivalents: -- -- Ending balance of cash 11,788,922,569.51 16,038,506,854.22 Less: Beginning balance of cash 11,752,548,621.97 17,037,713,410.49 Notes to the financial statements Page 59 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Items Current period Previous period Add: Ending balance of cash equivalents Less: Opening balance of cash equivalents The net increase in cash and cash equivalents 36,373,947.54 -999,206,556.27 2. The structure of cash and cash equivalents Items Ending balance Beginning balance 1. Cash 11,788,922,569.51 11,752,548,621.97 Including: Cash on hand 5,346.25 4,839.95 Bank deposits available on demand 11,788,917,223.26 11,752,543,782.02 Other monetary funds available on demand Central bank deposits available on demand Balances with other financial institutions Loans to other financial institutions 2. Cash equivalents Including: Investment of securities due within 3 months 3. Ending balance of cash and cash equivalents 11,788,922,569.51 11,752,548,621.97 Including: Cash and cash equivalents limited to use by the parent company of other subsidiary in the group (48) Assets of which ownership or right to use are restricted Items Ending balance Reason Cash at bank and on hand 5,156,849,822.92 Deposit for notes and letter of credit Total 5,156,849,822.92 (49) Foreign currency monetary items Exchange rate at Ending balance in Ending balance Items the end of the foreign currency translated to RMB period Cash at bank and on hand 582,105,770.06 Including: U SD 83,505,239.72 6.8747 574,073,471.50 EUR 936,843.39 7.8170 7,323,304.78 HKD 805,949.50 0.8797 708,993.78 Short-term loans 1,306,193,000.00 Including: U SD 190,000,000.00 6.8747 1,306,193,000.00 Notes to the financial statements Page 60 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Exchange rate at Ending balance in Ending balance Items the end of the foreign currency translated to RMB period Non-current liabilities due within one year 1,036,582,163.28 Including: U SD 145,000,000.00 6.8747 996,831,500.00 EUR 4,895,952.88 7.8170 38,271,663.66 JPY 23,176,000.00 0.0638 1,478,999.62 Long-term loans 1,648,495,389.11 Including: U SD 168,600,000.00 6.8747 1,159,074,420.00 EUR 61,285,400.00 7.8170 479,067,971.80 JPY 162,232,000.00 0.0638 10,352,997.31 6. Equity in other entities (1) Equity in subsidiaries 1. Constitution of enterprise group Notes Shareholding ratio Principal Register of Name of the subsidiaries place of ed Indi Acquiring method busine Direct business address rect ss Business combination Xiamen Bengang Steel & Iron Sales Co., Ltd. Xiamen Xiamen Sales 100.00 under common control Business combination Wuxi Bengang Steel & Iron Sales Co., Ltd. Wuxi Wuxi Sales 100.00 under common control Business combination Tianjin Bengang Steel & Iron Trading Co., Ltd. Tianjin Tianjin Sales 100.00 under common control Business combination Nanjing Bengang M aterials Sales Co., Ltd. Nanjing Nanjing Sales 100.00 under common control Business combination Yantai Bengang Steel & Iron Sales Co., Ltd. Yantai Yantai Sales 100.00 under common control Business combination Harbin Bengang Economic and Trading Co., Ltd. Harbin Harbin Sales 100.00 under common control Changchu Business combination Changchun Bengang Steel & Iron Sales Co., Ltd. Changchun Sales 100.00 n under common control Notes to the financial statements Page 61 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Notes Shareholding ratio Principal Register of Name of the subsidiaries place of ed Indi Acquiring method busine Direct business address rect ss Guangzhou Bengang Steel & Iron Trading Co., Guangzho Guangzhou Sales 100.00 Establishment Ltd. u Shanghai Bengang M etallurgy Science and Shanghai Shanghai Sales 100.00 Establishment Technology Co., Ltd. M anuf Bengang Steel Plates Liaoyang Pellet Co., Ltd. Liaoyang Liaoyang acturin 100.00 Establishment g M anuf Dalian Benruitong Automobile M aterial Dalian Dalian acturin 65.00 Establishment Technology Co., Ltd. g M anuf Business combination Bengang Posco Cold-rolled Sheet Co., Ltd. Benxi Benxi acturin 75.00 under common control g Benxi Bengang Steel Sales Co., Ltd Benxi Benxi Sales 100.00 Establishment Shenyang Bengang M etallurgical Science and Shenyang Shenyang Sales 100.00 Establishment Technology Co., Ltd. Chongqing Liaoben Steel & Iron Trading Co., Chongqin Chongqing Sales 100.00 Establishment Ltd. g M anuf Bengang Baojin (Shenyang) auto new material Business combination Shenyang Shenyang acturin 85.00 technology Co., Ltd. under common control g 2. Significant but not wholly-owned subsidiaries Profits and losses Dividend declared Ending Proportion of attributing to to distribute to balance of Name of the subsidiaries non-controlling non-controlling non-controlling non-controlling interests (%) shareholders shareholders interests Bengang Posco Cold-rolled Sheet Co., 25.00% 1,926,183.65 502,422,724.15 Ltd. 3. Financial information of significant but not wholly-owned subsidiaries Ending balance Name of the Non-curre Non-current Current subsidiaries Current assets Total assets nt Total liabilities assets liabilities liabilities Bengang Posco 4,223,695,815.76 1,544,857,225.81 5,768,553,041.57 3,758,862,144.98 3,758,862,144.98 Cold-rolled Sheet Notes to the financial statements Page 62 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Name of the Ending balance Co.,subsidiaries Ltd. Beginning balance Name of the Current Non-current Current Non-curren Total assets Total liabilities subsidiaries assets assets liabilities t liabilities Bengang Posco Cold-rolled Sheet 2,986,224,229.42 1,692,675,158.81 4,678,899,388.23 2,678,954,080.56 2,678,954,080.56 Co., Ltd. Current period Total Name of the subsidiaries Operating Net cash flows from Net profit comprehensive income operating activities income Bengang Posco Cold-rolled Sheet 3,720,975,482.91 7,704,734.61 7,704,734.61 1,318,506,299.45 Co., Ltd. Previous period Total Name of the subsidiaries Operating Net cash flows from Net profit comprehensive income operating activities income Bengang Posco Cold-rolled Sheet 3,971,529,847.27 5,511,711.19 5,511,711.19 686,401,003.83 Co., Ltd. (2) Equity in joint venture or associates 1. Summary of financial information of unimportant joint ventures and associates Ending balance/Current period Beginning balance/Previous period Joint ventures: Total book value of investment: 2,481,589.04 2,455,681.55 The total amount of the following items calculated according to the shareholding ratio —Net profit 25,907.49 171,488.75 —Other comprehensive income —Total comprehensive income 25,907.49 171,488.75 Notes to the financial statements Page 63 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements 7. Risks associated with financial instruments (1) Credit risk Credit risk refers to a financial loss to a party due to failure to discharge an obligation by the counterparties. The Company is exposed to credit risk arising from customers’ failure to discharge an obligation in sales on credit. In order to minimize the credit risk, the management of the Company is responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up actions are taken to recover overdue debts. In addition, the Company strictly approves the line of credit, and only sells on credit to important customers for newly-developed products. In the monitoring of credit risk of customers, the Company sorts customers into groups by their credit characteristics. Those customers which are rated as “high risk” will be put in the restricted client list. The Company can only sell to these customers on credit with additional approval; otherwise the Company must ask for a corresponding deposit in advance. (2) Market risk Market risk of financial instruments refers to fluctuations of fair value or future cash flows due to market price changes, including currency risk, interest rate risk, and other price risk. 1. Interest rate risk Interest rate risk refers to fluctuations of fair value or future cash flows due to market rate changes. The Company’s exposure to currency risk is primarily arising from variable-rate bank balances and variable-rate borrowings. Currently, the Company does not have a specific policy to manage its interest rate risk. The management will carefully choose financing methods, and combine fixed interest rate with variable interest rate, short-term obligations with long-term obligations. By using effective interest rate risk management methods, the Company closely monitors interest rate risk and will consider interest-rate swaps to acquire an expected structure of interest rates shall the need arise. Although these measures may not ensure that the Company completely avoids the risk of paying at a risk higher than market risk, or that the cash flow risk relevant to interest income fluctuations is completely eliminated, in the opinion of the management, these measures could achieve a reasonable balance among these risks. 2. Currency risk Currency risk refers to fluctuations of fair value or future cash flows due to exchange rate changes. The Company has been constantly working on the adjustment of the organizational Notes to the financial statements Page 64 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements framework of risk management and optimization of debt structures to lower the currency risk. The currency risk facing the Company originates from the assets and liabilities measured by US dollars, Euro, Hongkong dollars and Japanese Yen. The ending balance of the assets and liabilities after converted in RMB is shown as below: (In 10 Thousand Yuan) Ending balance Items Total US D Euro HKD Japanese Yen 57,407.35 732.33 70.90 58,210.58 Assets 346,209.89 51,733.96 1,183.20 399,127.06 Liabilities Total 403,617.24 52,466.29 70.90 1,183.20 457,337.63 The table below shows the sensitivity analys is of RMB vs other currencies when RMB deprecated or appreciated by 5% over other currencies under the assumption that other variables remain the same. 5% is the sensitivity rate used by the management for internal report of currency risk and it represents the estimation of the management over the possible change of foreign currency. Sensitivity analysis only includes the monetary items measured by foreign currency unpaid and will be adjusted at the year-end by 5%. The positive figures reflect the increase of profit by 5% and the negative figures indicate the reduction of profit. (In 10 Thousand Yuan) Ending balance Items Impact on Impact on Total Impact on US D Impact on Euro HKD Japanese Yen -14,440.13 -2,550.08 3.54 -59.16 -17,045.82 Appreciation by 5% 14,440.13 2,550.08 -3.54 59.16 17,045.82 Depreciation by 5% (3) Liquidity risk Liquidity risk refers to the risk of shortage of funds which occurs in fulfilling the obligation of settlement in a manner of delivering cash or other financial assets. The Company’s policy is to maintain sufficient cash to meet maturing obligations. Liquidity risk is centralized controlled by the Company’s finance department. Through the monitoring of unrestricted cash and cash equivalents, bank acceptance bills due in short time and the continues forecasting of cash flow in the next 12 months, the finance department ensures that the Company has sufficient cash to meet obligations in all predicted reasonable circumstances. Notes to the financial statements Page 65 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements The following table details the Company’s mature date of residual contract value of underivative financial liabilities to repay according to the contract terms. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The table includes both interest and principal cash flows. (In 10 Thousand Yuan) Ending balance Items Over 5 Within 1 year 1-2 years 2-5 years Total years Trade and other payables 1,797,686.94 31,109.67 135.72 94.60 1,829,026.93 Loans and interests 1,333,477.52 430,629.37 77,769.29 112,906.80 1,954,782.98 Total 3,131,164.46 461,739.04 77,905.01 113,001.40 3,783,809.91 (In 10 Thousand Yuan) Beginning balance Items Over 5 Within 1 year 1-2 years 2-5 years Total years Trade and other payables 1,638,885.92 67.12 130.65 71.79 1,639,155.48 Loans and interests 1,229,911.46 224,083.41 371,055.41 113,225.19 1,938,275.47 Total 2,868,797.38 224,150.53 371,186.06 113,296.98 3,577,430.95 8. Related party transactions (1) Details of parent company (In 100 M illion Yuan) Place of Notes of Registered Share Voting Name of parent company Registry Business capital proportion (%) rights (%) Benxi Steel (Group) Co., Ltd. Benxi M anufacturing 62.92 61.43 61.43 Note: The parent company of Benxi Steel (Group) Co., Ltd is Bengang Group Co., Ltd. The ultimate controlling party of the Company is the State-owned Assets Supervision and Administration Commission of Liaoning Province. (2) Details of the subsidiaries For details of subsidiaries of the Company please refer to Note 6 “Equity in other entities”. Notes to the financial statements Page 66 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements (3) Details of other related parties Name of Other related parties Relationship Bengang Group International Economic Both belong to Bengang Group Co., Ltd. and Trading Co., Ltd. Bengang Cold-rolled Stainless Steel Same parent company Dandong Co., Ltd. Benxi Beiying Steel & Iron (Group) Co., Both belong to Bengang Group Co., Ltd. Ltd. Bengang Electronics and Gas Co., Ltd. Both belong to Benxi Steel and Iron (Group) Co., Ltd. Benxi Steel & Iron (Group) Real-estate Same parent company Development Co., Ltd. Benxi Steel & Iron (Group) Steel & Iron Same parent company Process and Logistics Co., Ltd. Benxi Steel & Iron (Group) M achinery Same parent company M anufacture Co., Ltd. Benxi Steel & Iron (Group) Construction Same parent company Co., Ltd. Benxi Steel & Iron (Group) M ining Co., Same parent company Ltd. Benxi Steel & Iron (Group) Thermal Power Same parent company Development Co., Ltd. Benxi Steel & Iron (Group) Designing Same parent company Institute Benxi Steel & Iron (Group) Industrial Same parent company Development Co., Ltd. Benxi Steel & Iron (Group) Information Same parent company and Automatic Tech Co., Ltd. Benxi Steel & Iron (Group) Construction Same parent company Notes to the financial statements Page 67 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Name of Other related parties Relationship and Repairing Co., Ltd. Benxi Steel & Iron (Group) M etallurgy Same parent company Residues Co., Ltd. Benxi Iron and Steel (Group) Engineering Same parent company Construction Supervision Co., Ltd. Benxi Steel & Iron (Group) Zhengtai Same parent company Construction M aterials Co., Ltd. Benxi High-tech Drilling Tools Both belong to Bengang Group Co., Ltd. M anufacture Co., Ltd. Benxi New Career Development Co., Ltd. Same parent company Dalian Boluole Steel Tube Co., Ltd. Both belong to Benxi Steel and Iron (Group) Co., Ltd. Guangzhou Free Trade Zone Bengang Both belong to Benxi Steel and Iron (Group) Co., Ltd. Sales Co., Ltd. Benxi Steel & Iron (Group) General Both belong to Benxi Steel and Iron (Group) Co., Ltd. Hospital Liaoning Bengang Steel & Iron Trading Same parent company Co., Ltd. Liaoning Hengtai Heavy M achinery Co., Same parent company Ltd. Liaoning Hengtong M etallurgical Same parent company Equipment M anufacture Co., Ltd. Liaoning M etallurgy Technician College Same parent company Liaoning M etallurgy Vocational Technical Same parent company College Suzhou Bengang Industrial Co., Ltd. Shareholding company Benxi Steel & Iron (Group) M edical Related party that the parent company has significant influence on it Services Department; Bengang Group Finance Co., Ltd. Both belong to Bengang Group Co., Ltd. Notes to the financial statements Page 68 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Name of Other related parties Relationship Liaoning Hengyi Financial Leasing Co., Both belong to Bengang Group Co., Ltd. Ltd. (4) Related Party Transactions 1. Related party transactions of purchasing goods and services Company as the purchaser (In 10 Thousand Yuan) The content of related party Current Previous Name transactions period period Benxi Steel & Iron (Group) Co., Ltd. Repair expense 14,299.69 19,767.05 Benxi Steel & Iron (Group) Co., Ltd. Land lease fee 2,734.57 2,734.57 Bengang Cold-rolled Stainless Steel Dandong Co., Ltd. Products 82.25 64.19 Benxi Steel & Iron (Group) M ining Co., Ltd. Labor cost 391.41 386.75 Raw material and Benxi Steel & Iron (Group) M ining Co., Ltd. 215,655.53 203,816.33 supplementary material 85.36 - Benxi Steel & Iron (Group) M ining Co., Ltd. Freight Raw material and 11,056.03 12,852.84 Benxi Steel & Iron (Group) M etallurgy Residues Co., Ltd. supplementary material Benxi Steel & Iron (Group) Steel & Iron Process and Logistics 84.61 87.67 Processing fee Co., Ltd. 3,418.04 3,627.99 Benxi Steel & Iron (Group) Real-estate Development Co., Ltd. Raw materials 3,341.85 4,600.29 Benxi Steel & Iron (Group) M achinery M anufacture Co., Ltd. Spare parts 370.37 495.18 Benxi Steel & Iron (Group) M achinery M anufacture Co., Ltd. Repair services Benxi Steel & Iron (Group) Construction Co., Ltd. Spare parts 424.68 191.80 7,123.75 2,028.95 Benxi Steel & Iron (Group) Construction Co., Ltd. Project fee 7,085.65 11,481.87 Benxi Steel & Iron (Group) Construction Co., Ltd. Repair services Raw material and 332.06 109.40 Benxi Steel & Iron (Group) Construction Co., Ltd. supplementary material Notes to the financial statements Page 69 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements The content of related party Current Previous Name transactions period period 152.48 131.35 Benxi Steel & Iron (Group) Construction Co., Ltd. Freight 2,896.02 2,808.40 Benxi Steel & Iron (Group) Industrial Development Co., Ltd. Spare parts Raw material and 6,106.81 6,730.62 Benxi Steel & Iron (Group) Industrial Development Co., Ltd. supplementary material 940.92 1,829.45 Benxi Steel & Iron (Group) Industrial Development Co., Ltd. Repair services 349.19 101.81 Benxi Steel & Iron (Group) Industrial Development Co., Ltd. Freight 15.80 91.68 Benxi Steel & Iron (Group) Industrial Development Co., Ltd. Project fee Raw material & Benxi Steel & Iron (Group) Construction and Repairing Co., supplementary materials & 88.60 326.39 Ltd. spare parts Benxi Steel & Iron (Group) Construction and Repairing Co., Project fee 453.18 1,175.38 Ltd. Benxi Steel & Iron (Group) Construction and Repairing Co., 5,520.77 8,327.40 Repair expense Ltd. Raw material and 5,873.36 6,411.95 Bengang Electronics and Gas Co., Ltd. supplementary material 252.09 1,862.90 Bengang Electronics and Gas Co., Ltd. Repair services 4.47 31.12 Benxi High-tech Drilling Tools M anufacture Co., Ltd. Spare parts Benxi New Career Development Co., Ltd. Labor protection fee 47.20 44.20 Raw material and 48.42 - Benxi New Career Development Co., Ltd. supplementary material and food 699.54 317.07 Liaoning M etallurgy Technician College Spare parts Bengang Group International Economic and Trading Co., Ltd. Agency fee 3,417.46 3,564.93 5,240.58 5,690.72 Bengang Group International Economic and Trading Co., Ltd. Port surcharges Benxi Steel & Iron (Group) Information and Automatic Tech Spare parts 226.21 933.25 Co., Ltd. Notes to the financial statements Page 70 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements The content of related party Current Previous Name transactions period period Benxi Steel & Iron (Group) Information and Automatic Tech Project fee 2,191.45 2,335.89 Co., Ltd. Benxi Steel & Iron (Group) Thermal Power Development Co., 27.20 37.73 Heating costs Ltd. Benxi Steel & Iron (Group) Thermal Power Development Co., Raw material and 2.84 Ltd. supplementary material 29.24 231.58 Benxi Steel & Iron (Group) Designing Institute Design fees Raw material and 591,426.43 566,834.95 Benxi Beiying Steel & Iron (Group) Co., Ltd. supplementary material 31,906.75 38,865.84 Benxi Beiying Steel & Iron (Group) Co., Ltd. Energy & Power 234.47 303.15 Benxi Beiying Steel & Iron (Group) Co., Ltd. Freight 4,250.18 3,931.44 Benxi Beiying Steel & Iron (Group) Co., Ltd. Labor cost 758.28 1,064.59 Benxi Beiying Steel & Iron (Group) Co., Ltd. Spare parts Liaoning Hengtong M etallurgical Equipment M anufacture Co., Raw material and spare 4,493.46 5,398.61 Ltd. parts Raw material and spare Liaoning Hengtai Heavy M achinery Co., Ltd. 171.84 124.87 parts 1,133.13 1,477.37 Liaoning Hengtai Heavy M achinery Co., Ltd. Repair and labor cost Bengang Group Co., Ltd. House renting fee 37.61 31.07 Bengang Group Co., Ltd. Property management fee 935,481.84 923,260.58 Total Company as the seller (In 10 Thousand Yuan) The content of related party Name Current period Previous period transactions 50.42 51.90 Bengang Electronics and Gas Co., Ltd. Energy & Power Raw material & 60,230.78 116,469.29 Benxi Beiying Steel & Iron (Group) Co., Ltd. supplementary materials & Notes to the financial statements Page 71 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements The content of related party Name Current period Previous period transactions spare parts 792.19 1,230.13 Benxi Beiying Steel & Iron (Group) Co., Ltd. Products 7,565.39 5,706.89 Benxi Beiying Steel & Iron (Group) Co., Ltd. Energy & Power Benxi Steel & Iron (Group) Real-estate 6.20 6.94 Energy & Power Development Co., Ltd. Benxi Steel & Iron (Group) Steel & Iron Process Energy & Power 27.47 37.52 and Logistics Co., Ltd. Benxi Steel & Iron (Group) M achinery 995.77 973.31 Products M anufacture Co., Ltd. Benxi Steel & Iron (Group) M achinery 716.43 943.21 Energy & Power M anufacture Co., Ltd. Raw material & Benxi Steel & Iron (Group) M achinery 605.66 113.58 supplementary materials & M anufacture Co., Ltd. spare parts 19.45 94.13 Benxi Steel & Iron (Group) Construction Co., Ltd. Energy & Power Raw material & 108.13 71.24 Benxi Steel & Iron (Group) Construction Co., Ltd. supplementary materials & spare parts Benxi Steel & Iron (Group) M ining Co., Ltd. Energy & Power 34,182.02 35,940.67 Raw material & 3,156.26 2,831.52 Benxi Steel & Iron (Group) M ining Co., Ltd. supplementary materials & spare parts 487.08 402.48 Benxi Steel & Iron (Group) M ining Co., Ltd. Freight revenue Benxi Steel & Iron (Group) Thermal Power 2,289.99 2,374.96 Energy & Power Development Co., Ltd. Benxi Steel & Iron (Group) Thermal Power Raw material & 994.94 801.85 Development Co., Ltd. supplementary materials & Notes to the financial statements Page 72 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements The content of related party Name Current period Previous period transactions spare parts Benxi Steel & Iron (Group) Thermal Power 8.58 Freight revenue Development Co., Ltd. Benxi Steel & Iron (Group) Industrial 407.66 388.54 Energy & Power Development Co., Ltd. Benxi Steel & Iron (Group) Industrial Products 12.46 11.32 Development Co., Ltd. Raw material & Benxi Steel & Iron (Group) Industrial supplementary materials & 717.36 1,251.78 Development Co., Ltd. spare parts Benxi Steel & Iron (Group) Information and Energy & Power 7.68 9.01 Automatic Tech Co., Ltd. Benxi Steel & Iron (Group) Construction and 79.48 83.99 Energy & Power Repairing Co., Ltd. Raw material & Benxi Steel & Iron (Group) Construction and 248.68 12.26 supplementary materials & Repairing Co., Ltd. spare parts Benxi Steel & Iron (Group) M etallurgy Residues 302.41 260.48 Energy & Power Co., Ltd. Raw material & Benxi Steel & Iron (Group) M etallurgy Residues 9,363.79 9,045.64 supplementary materials & Co., Ltd. spare parts Benxi Steel & Iron (Group) M etallurgy Residues 711.36 Freight revenue Co., Ltd. 147.07 702.65 Benxi Steel & Iron (Group) Co., Ltd. Energy & Power Raw material & Benxi Steel & Iron (Group) Co., Ltd. 156.10 270.51 supplementary materials & Notes to the financial statements Page 73 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements The content of related party Name Current period Previous period transactions spare parts 15.13 18.10 Benxi New Career Development Co., Ltd. Energy & Power 188.32 175.76 Dalian Boluole Steel Tube Co., Ltd. Products Benxi Steel & Iron (Group) General Hospital Energy & Power 3.09 3.42 Benxi Steel & Iron (Group) Zhengtai Construction 0.27 - Energy & Power M aterials Co., Ltd. Raw material & Liaoning Hengtong M etallurgical Equipment 832.61 1,305.43 supplementary materials & M anufacture Co., Ltd. spare parts Raw material & Bengang Cold-rolled Stainless Steel Dandong Co., 24.14 supplementary materials & Ltd. spare parts 16,362.43 17,052.85 Suzhou Bengang Industrial Co., Ltd. Products Bengang Group Finance Co., Ltd. Energy & Power 0.69 0.70 7.79 9.47 Bengang Group Co., Ltd. Energy & Power 141,105.34 199,371.47 Total 2. Lease information of related parties Company as the lessor Lessee Lease capital category Lease income of current period Lease income of previous period Benxi Steel & Iron (Group) Steel & Iron Warehouse and machinery 250,000.00 250,000.00 Process and Logistics Co., Ltd. Benxi Steel & Iron (Group) M achinery Plants and machinery 245,000.00 245,000.00 M anufacture Co., Ltd. Company as the lessee Lessor Lease capital category Lease charges of current period Lease charges of previous period Notes to the financial statements Page 74 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Benxi Steel & Iron 2300 Hot rolling product line 123,426,656.64 120,000,000.00 (Group) Co., Ltd Benxi Steel & Iron Land use right 27,345,714.30 27,345,714.30 (Group) Co., Ltd Benxi Beiying Steel & Iron (Group) Co., 1780 Hot rolling product line 59,013,278.16 64,929,604.02 Ltd. Financial lease matters: During the reporting period, the company leased machinery and equipment from Liaoning Hengyi Finance Leasing Co., Ltd. in the form of financial leases. As of the end of the reporting period, the long-term accounts payable amounted to RMB 52,733,529.65. Notes to lease from or to related parties: 1. The Company leases land from Bengang Group Co., Ltd., with a monthly rent of 0.594 yuan per square meter. The leased land is 7,669,068.17 square meters and the annual rent is 54,665.10 thousand yuan. 2. For the 2300mm hot rolling product line leased from the Group to the Company, lease period lasts from 1 January 2018 to 31 December 2020. Lease charges are negotiated between the lessor and the lessee based on the original cost, depreciation, and national taxation of the product line, with consideration of conditions of production and equipment performance. 3. For the 1780 hot rolling product line leased from Benxi Beiying Steel & Iron (Group) Co., Ltd. to the Company. “Notice on Bengang Steel Plates Co., Ltd. signing a renewal agreement with Benxi Steel (group) Co., Ltd” were adopted on the sixth meeting of the seventh board of directors, it stipulated that the company leased the 1780 hot rolling product line from Benxi Beiying Steel & Iron (Group) Co., Ltd., lease period lasts from 1 January 2017 to 31 December 2019. Lease charges are negotiated between the lessor and the lessee based on the original cost, depreciation, and national taxation of the product line, with consideration of conditions of production and equipment performance. The annual rent shall not exceed RM B 150,000,000.00. Notes to the financial statements Page 75 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements 3. Information of Guarantee among related parties (1) Company as the guarantor No. (2) Company as the warrantee Guarantee of loans: Has the Ending date S tarting date guarantee Warrantor Amount of guarantee of of Guarantee been Guarantee fulfilled Bengang Group Co., Ltd. and Benxi No 200,000,000.00 2018/9/7 2019/9/5 Steel & Iron (Group) Co., Ltd. Bengang Group Co., Ltd. and Benxi No 150,000,000.00 2018/10/17 2019/10/16 Steel & Iron (Group) Co., Ltd. Bengang Group Co., Ltd. and Benxi No 200,000,000.00 2018/10/12 2019/10/10 Steel & Iron (Group) Co., Ltd. Bengang Group Co., Ltd. and Benxi No 90,000,000.00 2016/3/30 2025/3/20 Steel & Iron (Group) Co., Ltd. Bengang Group Co., Ltd. and Benxi No 610,000,000.00 2017/2/27 2025/2/20 Steel & Iron (Group) Co., Ltd. Bengang Group Co., Ltd. and Benxi No 200,000,000.00 2018/11/ 9 2019/11/ 7 Steel & Iron (Group) Co., Ltd. Bengang Group Co., Ltd. and Benxi No 200,000,000.00 2018/11/ 14 2019/11/ 13 Steel & Iron (Group) Co., Ltd. Bengang Group Co., Ltd. and Benxi No 200,000,000.00 2019/6/13 2020/6/9 Steel & Iron (Group) Co., Ltd. Bengang Group Co., Ltd. and Benxi No 200,000,000.00 2019/6/17 2020/6/17 Steel & Iron (Group) Co., Ltd. Bengang Group Co., Ltd. and Benxi No 100,000,000.00 2019/1/24 2020/1/23 Steel & Iron (Group) Co., Ltd. Notes to the financial statements Page 76 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Has the Ending date S tarting date guarantee Warrantor Amount of guarantee of of Guarantee been Guarantee fulfilled Bengang Group Co., Ltd. and Benxi No 178,000,000.00 2018/12/13 2019/12/12 Steel & Iron (Group) Co., Ltd. Bengang Group Co., Ltd. 300,000,000.00 2018/11/ 15 2019/11/ 14 No Bengang Group Co., Ltd. 140,000,000.00 2019/1/25 2020/1/25 No Bengang Group Co., Ltd. 900,000,000.00 2018/11/ 28 2019/11/ 27 No Bengang Group Co., Ltd. 100,000,000.00 2015/6/25 2021/9/21 No Bengang Group Co., Ltd. 340,000,000.00 2019/3/29 2020/3/27 No Bengang Group Co., Ltd. 520,000,000.00 2019/1/8 2019/12/14 No Bengang Group Co., Ltd. 480,000,000.00 2019/1/28 2020/1/27 No Bengang Group Co., Ltd. 310,000,000.00 2019/5/14 2020/5/13 No Bengang Group Co., Ltd. 720,000,000.00 2019/5/14 2020/5/13 No Bengang Group Co., Ltd. 24,000,000.00 2015/12/9 2022/3/21 No Bengang Group Co., Ltd. 36,450,000.00 2016/12/27 2020/6/21 No Bengang Group Co., Ltd. 87,280,000.00 2018/3/26 2024/6/21 No Bengang Group Co., Ltd. 59,570,000.00 2017/11/ 15 2021/12/21 No Bengang Group Co., Ltd. 622,600,000.00 2017/12/15 2024/8/20 No Bengang Group Co., Ltd. 390,000,000.00 2018/11/ 29 2019/11/ 28 No Bengang Group Co., Ltd. 150,000,000.00 2018/7/13 2019/7/13 No Bengang Group Co., Ltd. 150,000,000.00 2018/7/13 2019/7/13 No Bengang Group Co., Ltd. 100,000,000.00 2018/7/2 2019/7/1 No Benxi Steel & Iron (Group) Co., Ltd. 147,000,000.00 2018/12/19 2019/12/19 No Benxi Steel & Iron (Group) Co., Ltd. 330,000,000.00 2019/1/18 2020/1/18 No Benxi Steel & Iron (Group) Co., Ltd. 340,000,000.00 2019/1/25 2020/1/25 No Benxi Steel & Iron (Group) Co., Ltd. 224,000,000.00 2019/3/25 2020/3/25 No Benxi Steel & Iron (Group) Co., Ltd. 300,000,000.00 2018/12/14 2019/12/14 No Benxi Steel & Iron (Group) Co., Ltd. 373,000,000.00 2018/12/13 2019/12/13 No Notes to the financial statements Page 77 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Has the Ending date S tarting date guarantee Warrantor Amount of guarantee of of Guarantee been Guarantee fulfilled Benxi Steel & Iron (Group) Co., Ltd. 480,000,000.00 2018/12/13 2019/12/13 No Benxi Steel & Iron (Group) Co., Ltd. 500,000,000.00 2018/12/13 2019/12/13 No Bengang Group Co., Ltd. EUR 1,813,075.20 2015/6/25 2019/8/31 No Bengang Group Co., Ltd. EUR 2,311,613.67 2015/6/25 2019/10/31 No Bengang Group Co., Ltd. EUR 1,948,053.95 2015/6/25 2020/4/30 No Bengang Group Co., Ltd. EUR 483,803.97 2015/6/25 2025/6/30 No Bengang Group Co., Ltd. EUR 13,834,496.03 2015/6/25 2025/6/30 No Bengang Group Co., Ltd. EUR 609,296.41 2015/6/25 2025/8/31 No Bengang Group Co., Ltd. EUR 11,990,585.71 2015/6/25 2025/8/31 No Bengang Group Co., Ltd. EUR 233,211.78 2015/6/25 2025/9/30 No Bengang Group Co., Ltd. EUR 719,075.68 2015/6/25 2025/10/31 No Bengang Group Co., Ltd. EUR 9,901,243.51 2015/6/25 2025/10/31 No Bengang Group Co., Ltd. EUR 6,162.48 2015/6/25 2026/4/30 No Bengang Group Co., Ltd. EUR 557,460.75 2015/6/25 2026/4/30 No Bengang Group Co., Ltd. EUR 597,187.50 2015/8/20 2019/9/30 No Bengang Group Co., Ltd. EUR 7,967,631.00 2015/8/20 2025/9/30 No Bengang Group Co., Ltd. EUR 642,082.50 2015/12/28 2019/7/30 No Bengang Group Co., Ltd. EUR 239,173.64 2015/12/28 2019/8/31 No Bengang Group Co., Ltd. EUR 44,356.22 2015/12/28 2019/10/31 No Bengang Group Co., Ltd. EUR 696,676.50 2015/12/28 2020/4/30 No Bengang Group Co., Ltd. EUR 424,686.42 2015/12/28 2025/6/30 No Bengang Group Co., Ltd. EUR 253,120.00 2015/12/28 2025/8/31 No Bengang Group Co., Ltd. EUR 4,579,846.88 2015/12/28 2025/10/31 No Bengang Group Co., Ltd. EUR 4,069.11 2015/12/28 2026/4/30 No Bengang Group Co., Ltd. EUR 6,798,868.28 2015/12/28 2026/4/30 No Bengang Group Co., Ltd. EUR 410,699.25 2016/6/27 2020/4/30 No Notes to the financial statements Page 78 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Has the Ending date S tarting date guarantee Warrantor Amount of guarantee of of Guarantee been Guarantee fulfilled Bengang Group Co., Ltd. EUR 3,727,122.75 2016/6/27 2020/4/30 No Bengang Group Co., Ltd. EUR 36,617.16 2016/12/14 2020/4/30 No Bengang Group Co., Ltd. EUR 2,833,183.48 2016/12/14 2026/4/30 No Bengang Group Co., Ltd. EUR 21,690.00 2017/6/30 2025/10/31 No Bengang Group Co., Ltd. EUR 1,091,628.91 2017/6/30 2025/10/31 No Bengang Group Co., Ltd. and Benxi No Beiying Steel & Iron (Group) Co., US$20,000,000.00 2018/5/8 2020/5/7 Ltd. Bengang Group Co., Ltd. and Benxi No Beiying Steel & Iron (Group) Co., US$80,000,000.00 2018/5/2 2020/5/21 Ltd. Bengang Group Co., Ltd. and Benxi No Beiying Steel & Iron (Group) Co., US$45,000,000.00 2018/7/3 2020/7/2 Ltd. Bengang Group Co., Ltd. and Benxi No Beiying Steel & Iron (Group) Co., US$45,000,000.00 2018/8/17 2020/8/7 Ltd. Bengang Group Co., Ltd. and Benxi No Beiying Steel & Iron (Group) Co., US$100,000,000.00 2018/8/29 2020/8/28 Ltd. Benxi Steel & Iron (Group) Co., Ltd. US$90,000,000.00 2019/3/29 2020/3/29 No Benxi Steel & Iron (Group) Co., Ltd. US$100,000,000.00 2019/1/24 2020/1/24 No Benxi Steel & Iron (Group) Co., Ltd. JPY185,408,000.00 1997/10/10 2027/9/10 No 4. Other related party transactions (1) Loan from and deposits in Bengang Group Finance Co., Ltd. Notes to the financial statements Page 79 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements (In 10 Thousand Yuan) Item Beginning balance Increase Decrease Ending balance Notes Deposits 975,193.08 6,857,385.39 6,793,699.59 1,038,878.89 1. The interests of deposits in Bengang Group Finance Co., Ltd. is RMB 94,469.5 thousand from January to June in 2019. As at 30 June 2019, the interest receivable from Bengang Group Finance Co., Ltd. is RMB 13,872.1 thousand. 2. As at 30 June 2019, the restricted deposits in Bengang Group Finance Co., Ltd. is RMB 1,489,439.90 thousand. 3. From January to June in 2019, the company and its subsidiaries did not borrow money from financial companies. 4. Bengang Group Finance Co., Ltd. granted the company an unsecured credit line of RMB 2.5 billion from January to June in 2019. As at 30 June 2019, the amount of acceptance bill opened by Bengang Group Finance Co., Ltd. was RMB 2.15 billion, and the amount of the acceptance bill that had been opened and unpaid by Bengang Group Finance Co., Ltd. is RMB 1.632 billion, 1.509 billion of whic h is 100% deposit and remaining 0.123 billion exposure. 5. From January to June in 2019, the Company did not apply for bill discounting to the finance company. (2) The company's loan and interest payment to Benxi Steel and Iron (Group) Co., Ltd. (In 10 Thousand yuan). Item Beginning balance Increase Decrease Ending balance Entrusted loan through Bengang 1,422.00 0.00 1,422.00 0.00 Group Finance Co., Ltd. Capital lending 7,770.00 2,140.00 1,400.00 8,770.00 Total 9,192.00 2,140.00 2,822.00 8,770.00 Details of outstanding loans as at 30 June 2019: Related parties Lease form Lease amount S tart date Due date 32,700,000.00 2018/10/25 2019/10/25 Benxi Steel and Iron (Group) Co., Ltd. Entrusted loan 20,000,000.00 2018/12/5 2019/12//5 Benxi Steel and Iron (Group) Co., Ltd. M oney lending 10,000,000.00 2019/1/18 2020/1/18 Benxi Steel and Iron (Group) Co., Ltd. M oney lending Benxi Steel and Iron (Group) Co., Ltd. M oney lending 14,000,000.00 2019/6/14 2020/6/14 11,000,000.00 2018/7/5 2019/7/5 Benxi Steel and Iron (Group) Co., Ltd. M oney lending Notes to the financial statements Page 80 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Related parties Lease form Lease amount S tart date Due date 87,700,000.00 Total Notes: The interest accrued is RMB 2,028,394.55 during the current period, and as at 30 June 2019, the company has no interest that has not been paid. (5) Receivables and payables of the related parties 1. Receivables of the Company (in 10 thousand yuan) Ending Balance Beginning Balance Provision Provision Items Name Name Carrying Carrying for bad for bad amount amount debts debts Accounts receivable Benxi Beiying Steel & Iron 967.76 1,206.26 (Group) Co., Ltd. Bengang Electronics and 401.11 112.76 408.26 112.76 Gas Co., Ltd. Benxi Steel & Iron (Group) 52.68 Machinery Manufacture Co., Ltd. Benxi Steel & Iron (Group) 85.48 Industrial Development Co., Ltd. Benxi Steel & Iron (Group) Thermal Power 803.58 937.22 Development Co., Ltd. Bengang Cold-rolled 106.16 19.31 155.04 19.31 Stainless Steel Dandong Co., Ltd. Liaoning Hengtong 37.10 Metallurgical Equipment Notes to the financial statements Page 81 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Ending Balance Beginning Balance Provision Provision Items Name Name Carrying Carrying for bad for bad amount amount debts debts Manufacture Co., Ltd. Bengang Group 10.10 12,906.30 International Economic and Trading Co., Ltd. Benxi Steel & Iron 113.22 (Group) M etallurgy Residues Co., Ltd. Total: 2,463.97 132.08 15,726.31 132.08 Prepayments Benxi Beiying Steel & Iron 628,463.25 71,312.43 (Group) Co., Ltd. Benxi Steel & Iron (Group) 2,174.38 Machinery Manufacture Co., Ltd. Bengang Cold-rolled 120.12 4.73 Stainless Steel Dandong Co., Ltd. Total: 630,757.75 71,317.16 Other receivables Benxi Steel & Iron (Group) 255.40 72.45 261.61 72.45 Real-estate Development Co., Ltd. Liaoning M etallurgy 3.94 - 5.80 - Technician College Benxi Steel & Iron 136.62 - 259.26 - (Group) M achinery M anufacture Co., Ltd. 451.43 - 449.20 - Benxi Steel & Iron (Group) Notes to the financial statements Page 82 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Ending Balance Beginning Balance Provision Provision Items Name Name Carrying Carrying for bad for bad amount amount debts debts Construction Co., Ltd. Bengang Group 480.74 - 622.45 - International Economic and Trading Co., Ltd. Benxi Steel & Iron 223.55 - 181.50 - (Group) Industrial Development Co., Ltd. Benxi Steel & Iron (Group) Zhengtai 20.11 19.32 20.41 19.32 Construction M aterials Co., Ltd. Benxi Steel & Iron 95.51 73.32 93.95 73.32 (Group) M edical Co., Ltd. 1,667.31 165.09 1,894.19 165.09 Total: 2. Payables of the Company (in 10 thousand yuan) Items Name Ending balance Beginning balance Notes payable Benxi Steel & Iron (Group) Industrial Development Co., 0.00 190.51 Ltd. Benxi Steel & Iron (Group) M achinery M anufacture Co., 100.82 22.44 Ltd. Benxi Iron and Steel (Group) M ining Co., Ltd. 124,323.34 98,047.94 Benxi Beiying Steel & Iron (Group) Co., Ltd. 516,313.71 470,958.00 Benxi Steel & Iron (Group) M etallurgy Residues Co., Ltd. 3,000.00 0.00 Benxi Steel & Iron (Group) Real-estate Development Co., 0.00 291.70 Ltd. Total 643,737.87 569,510.58 Accounts payable Notes to the financial statements Page 83 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Items Name Ending balance Beginning balance Bengang Electronics and Gas Co., Ltd. 507.18 2,038.30 Benxi Steel & Iron (Group) Real-estate Development Co., 282.90 318.45 Ltd. Bengang Group International Economic and Trading Co., 20,040.23 151,974.50 Ltd. Benxi Steel & Iron (Group) M achinery M anufacture Co., 2,560.48 3,239.73 Ltd. Benxi Steel & Iron (Group) Construction Co., Ltd. 7,609.90 9,288.02 Benxi Steel & Iron (Group) M ining Co., Ltd. 25,294.53 46,435.71 Benxi Steel & Iron (Group) Industrial Development Co., 9,528.57 7,543.14 Ltd. Benxi New Career Development Co., Ltd. 4.40 356.98 Benxi Steel & Iron (Group) Construction and Repairing 11,268.41 10,736.73 Co., Ltd. Benxi Steel & Iron (Group) M etallurgy Residues Co., Ltd. 1,245.42 1,473.85 Benxi Steel & Iron (Group) M edical and Health 2.04 2.04 department Benxi Steel & Iron (Group) Information and Automatic 3,634.35 4,578.45 Tech Co., Ltd. Benxi High-tech Drilling Tools M anufacture Co., Ltd. 281.78 10.80 Liaoning M etallurgical Technician College 280.76 1,033.31 Benxi Steel & Iron (Group) Thermal Power Development 38.31 20.97 Co., Ltd. Benxi Steel & Iron (Group) Zhengtai Construction 0.00 0.24 M aterials Co., Ltd. Liaoning Hengtong M etallurgical Equipment M anufacture 1,644.37 529.45 Co., Ltd. Liaoning M etallurgy Vocational Technical College 341.92 531.92 Bengang Cold-rolled Stainless Steel Dandong Co., Ltd. 325.89 454.96 Liaoning Hengtai Heavy M achinery Co., Ltd. 2,454.64 2,991.38 Benxi Iron and Steel (Group) Engineering Construction 0.00 123.00 Supervision Co., Ltd. Total: 87,346.09 243,681.91 Advance from customers Benxi Steel & Iron (Group) M achinery M anufacture Co., 738.29 0.00 Ltd. Benxi Steel & Iron (Group) Industrial Development Co., 948.76 35.80 Ltd. Benxi Steel & Iron (Group) M etallurgy Residues Co., Ltd. 583.00 0.00 Benxi Steel & Iron (Group) Steel & Iron Process and 741.11 6,069.05 Logistics Co., Ltd. Dalian Boluole Steel Tube Co., Ltd. 221.80 66.42 Notes to the financial statements Page 84 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Items Name Ending balance Beginning balance Liaoning Bengang Steel & Iron Trading Co., Ltd. 0.00 50.02 Liaoning Hengtong M etallurgical Equipment M anufacture 940.85 12.91 Co., Ltd. Bengang Group International Economic and Trading Co., 758.37 786.55 Ltd. Suzhou Bengang Industrial Co., Ltd. 3,737.35 571.81 Total: 8,669.53 7,592.55 Other payables Benxi Steel & Iron (Group) Real-estate Development Co., 143.82 143.59 Ltd. Bengang Group International Economic and Trading Co., 3243.65 4948.15 Ltd. Benxi Steel & Iron (Group) M achinery M anufacture Co., 64.57 75.09 Ltd. Benxi Steel & Iron (Group) Construction Co., Ltd. 346.21 590.19 Benxi Steel & Iron (Group) Industrial Development Co., 85.16 49.15 Ltd. Benxi New Career Development Co., Ltd. 89.77 97.07 Benxi Steel & Iron (Group) M etallurgy Residues Co., Ltd. 29.00 50.15 Benxi Steel & Iron (Group) Co., Ltd. 10187.46 21832.88 Benxi Steel & Iron (Group) Thermal Power Development 299.13 307.73 Co., Ltd. Guangzhou Free Trade Zone Bengang Sales Co., Ltd. 267.44 267.44 Liaoning M etallurgical Vocational and Technical College 181.67 0.3 Bengang Group Finance Co., Ltd. 0 2.12 Liaoning M etallurgy Technician College 28.95 36.33 Benxi Beiying Steel & Iron (Group) Co., Ltd. 1,404.05 1,824.27 Total: 16,370.88 30,224.46 Long-term payables Liaoning Hengyi Financial Leasing Co., Ltd. 5,273.35 1,368.67 Total: 5,273.35 1,368.67 Notes to the financial statements Page 85 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements 9. Government subsidy (1) Governme nt subsidy related to assets Amount recognized in the profit and loss or offset related Item recognized in the Item listed on the Category Amount costs or expenses profit and loss or offset balance sheet Current Period Previous Period related costs or expenses M ES Project Special Fund 860,000.00 Deferred Income 860,000.00 860,000.00 Other Income Industrial Enterprise Energy M anagement 5,800,000.00 Deferred Income 1,160,000.00 1,160,000.00 Other Income Center Construction Demonstration Project Environment Pollution Renovation Project 1,810,000.00 Deferred Income 1,810,000.00 1,810,000.00 Other Income Environment Renovation Project and Regional 170,000.00 Deferred Income 170,000.00 170,000.00 Other Income Basin Environment Protection Project High Strength Cold Rolling Steel Renovation 175,000,000.00 Deferred Income 25,000,000.00 25,000,000.00 Other Income Project Automobile High-class Electrolytic Zinc Steel 12,312,000.00 Deferred Income 4,104,000.00 4,104,000.00 Other Income Plate Production Line Project Sintering M achine Residue Heat Usage and 2,102,000.00 Deferred Income 2,102,000.00 2,102,000.00 Other Income Desulfurization Project 7 130t Boilers Flue Gas Desulfurization 16,800,000.00 Deferred Income 2,400,000.00 2,400,000.00 Other Income Renovation Project of Power Plant Treatment and Salt Extraction Project of Deferred Income 50,000.00 Other Income Desulfurization Waste Liquid of Coke Plant Overseas Advanced Technology Introduction 5,442,000.00 Deferred Income 1,442,000.00 1,442,000.00 Other Income Special Fund Bengang Group Co., Ltd. Automotive Board 1,000,000.00 Deferred Income Other Income Notes to the financial statements Page 86 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Item listed on the Amount recognized in the profit and loss or offset related Item recognized in the Category Amount balance sheet costs or expenses profit and loss or offset Engineering Laboratory Construction Project related costs or expenses Fund R&D for the Third Generation of 2,900,000.00 Deferred Income Other Income High-strength Steel for Automobile The 360 Cubic M eter Sintering M achine Flue Gas Desulfurization Renovation Project of 100,000.00 Deferred Income 100,000.00 100,000.00 Other Income Blast Furnace Plant Environment Protection Project Special Fund 580,000.00 Deferred Income 580,000.00 580,000.00 Other Income Advanced Treatment of Carbon Fiber Wastewater Project of Coke Plant Dongfeng 9,500,000.00 Deferred Income Other Income Area Desulfurization and Denitration Projects for Coal-fired Boiler of Power Plant 4,500,000.00 Deferred Income 300,000.00 300,000.00 Other Income High-pressure Workshop Power Plant No 3 workshop Heat and Power 7,000,000.00 Deferred Income 1,000,000.00 Other Income Cogeneration Renovation Project Sintering M achine Energy Saving and Environmental Protection Project of Blast 1,740,000.00 Deferred Income 580,000.00 580,000.00 Other Income Furnace Plant Air Quality Automatic M onitoring System 140,000.00 Deferred Income 35,000.00 35,000.00 Other Income Notes to the financial statements Page 87 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements (2) Governme nt subsidy related to income Amount recognized in the profit and Item recognized in loss or offset related costs or expenses the profit and loss Category Amount or offset related Current Period Previous Period costs or expenses Xihu Resource M anagement 414,300.00 Other Income Committee Compensation Liaoning artisan subsidies and 340,002.97 166,938.70 Other Income skills master workstation subsidies High-strength pipeline steel support under low temperature and 136,000.00 52,000.00 Other Income high-pressure service conditions 10. Commitments and Contingencies (1) Commitments 1. Lease contracts in progress or to be performed and their financial impacts (1) For the land leased from the Company to the Group, price is RMB 0.594 per Square meter per month, and the area of the land is 7,669,068.17 square meters; hence annual rent is RMB 54,665.10 thousand. (2) For the 2300mm hot rolling product line leased from the Group to the Company, lease period lasts from 1 January 2018 to 31 December 2020. Lease charges are negotiated between the lessor and the lessee based on the original cost, depreciation, and national taxation of the product line, with consideration of conditions of production and equipment performance. (3) For the 1780 hot rolling product line leased from Benxi Beiying Steel & Iron (Group) Co., Ltd. to the Company. “Notice on Bengang Steel Plates Co., Ltd. signing a renewal agreement with Benxi Steel (group) Co., Ltd” were adopted on the sixth meeting of the seventh board of directors, it stipulated that the company leased the 1780 hot rolling product line from Benxi Beiying Steel & Iron (Group) Co., Ltd., lease period lasts from 1 January 2017 to 31 December 2019. Lease charges are negotiated between the lessor and the lessee based on the original cost, depreciation, and national taxation of the product line, with consideration of conditions of production and equipment performance. The annual rent shall not exceed RMB 150,000,000.00. Notes to the financial statements Page 88 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements 2. Irrevocable letter of credit As at June 30, 2019, the amount of irrevocable letter of credit that was not fulfilled is RMB 2.333 billion. (2) Contingencies At the balance sheet date, no significant contingencies need to be disclosed. 11. Subsequent events (1) Profit distribution after the reporting period On April 17, 2019, the resolution of the 24th meeting of the 7th Board of Directors passed the 2018 dividend distribution plan. Based on the total share capital of the company's 2018 annual profit distribution equity registration date, a cash dividend of 0.5 yuan (including tax) will be Proposed profit or dividend distributed to every 10 shares of all registered shareholders. The cash dividend is 193,768,576.60 yuan. The above profit distribution plan has been reviewed and approved by the shareholders meeting and was distributed on July 12, 2019. 12. Other significant events (1) Segment information Since the Company’s main product is steel with other products accounting for only a small proportion, and the main production base is located in Liaoning area, segmented reporting is not applicable. (2) Other material issues that will influence investors ’ decisions 1. Financing Lease For prioritizing the capital structure and exploring financing channel, the Company signed the “Financial lease cooperation framework” with Liaoning Hengyi Financial Leas ing Co., Ltd. with the amount of financial lease not exceeding RMB 5 billion per year. The Company obtains the fund through sales and lease back financial lease with interest rate not above the benchmark interest rate of loan over the same period published by the People’s bank of China and the Notes to the financial statements Page 89 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements interest rate will be adjusted with the changes of benchmark interest rate of loan published by the People’s bank of China over the lease term. The lease security ratio is not higher than 30% of the lease principal amount. The term of financial lease shall not exceed 12 years. 2. Shares pledged by the Controlling Shareholders As at 30 June 2019, within the total shares held by the controlling shareholder Benxi Steel & Iron (Group) Co., Ltd., 1,652,095,133 shares are pledged and 45,000,000.00 shares are frozen. 13. Notes to the financial statements of parent company (1) Accounts receivable 1. Accounts receivable disclosed by category Ending balance Carrying amount Provision for bad debts Items Percentage Bad debts Book value Amount Amount (%) ratio (%) Accounts receivable tested for impairment 47,762,337.18 8.26 47,762,337.18 100.00 individually Accounts receivable tested for impairment by 530,605,966.90 91.74 128,208,215.05 24.16 402,397,751.85 portfolio Total 578,368,304.08 100.00 175,970,552.23 402,397,751.85 Beginning balance Carrying amount Provision for bad debts Items Percentag Bad debts Book value Amount Amount e (%) ratio (%) Accounts receivable tested for impairment 47,762,337.18 8.11 47,762,337.18 100.00 individually Accounts receivable tested for impairment by 541,151,187.11 91.89 131,598,127.84 24.32 409,553,059.27 portfolio Total 588,913,524.29 100.00 179,360,465.02 409,553,059.27 Receivables individually significant and tested for impairment individually Notes to the financial statements Page 90 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Ending balance Items Provision for Bad debts Accounts receivable Reason bad debts ratio(%) Benxi Nanfen Xinhe M etallurgical 47,762,337.18 47,762,337.18 100.00 Halt operation Co., Ltd. Total 47,762,337.18 47,762,337.18 Accounts receivable disclosed by aging Ending balance Items Carrying amount Provision for bad debts Bad debts ratio (%) Within 1 year (inclusive) 326,326,994.80 1-2 years (inclusive) 56,750,367.45 2,837,518.37 5 2-3 years (inclusive) 27,697,384.96 5,539,476.99 20 Over 3 years 167,593,556.87 167,593,556.87 100 Total 578,368,304.08 175,970,552.23 2. Information of provision, reversal or recovery of bad debts of current period. The provision of bad debts of current period is RMB 3,389,912.79. 3. No accounts receivable has been written off this year. 4. Top five debtors at the year-end Ending balance Company Percentage of total Provision for Amount accounts receivable (%) bad debts No.1 206,877,478.40 35.77 62,482,368.63 10.80 6,792,099.51 No.2 47,762,337.18 8.26 47,762,337.18 No.3 41,687,479.04 7.21 No.4 10,140,717.39 1.75 1,150,024.13 No.5 368,950,380.64 63.79 55,704,460.82 Total (2) Other receivables Items Ending balance Beginning balance Notes to the financial statements Page 91 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Interest receivables 9,815,280.04 12,222,112.07 Dividend receivables Other receivables 216,469,271.82 225,222,111.42 Total 228,691,383.89 235,037,391.46 1.Interest receivable (1) Interest receivable disclosed by category Items Ending balance Beginning balance Deposit interest 12,222,112.07 9,815,280.04 Total 12,222,112.07 9,815,280.04 1. Other receivables disclosed by category Ending balance Carrying amount Provision for bad debts Items Percentage Bad debts Book value Amount Amount (%) ratio (%) Other receivables tested for impairment by 278,939,285.62 99.4 64,210,013.80 23.02 214,729,271.82 portfolio Other receivables tested for impairment 1,740,000.00 0.6 1,740,000.00 individually Total 280,679,285.62 100 64,210,013.80 216,469,271.82 Beginning balance Carrying amount Provision for bad debts Items Percentage Bad debts Book value Amount Amount (%) ratio (%) Other receivables tested for impairment by 288,053,726.26 99.4 64,571,614.84 22.42 223,482,111.42 portfolio Other receivables tested for impairment 1,740,000.00 0.6 1,740,000.00 individually Total 289,793,726.26 100 64,571,614.84 225,222,111.42 Other receivables disclosed by Aging Notes to the financial statements Page 92 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Ending balance Items Carrying amount Provision for bad debts Bad debts ratio (%) Within 1 year (inclusive) 175,866,828.59 1-2 years (inclusive) 3,202,196.37 160,109.82 5 2-3 years (inclusive) 44,775,445.85 8,955,089.17 20 Over 3 years 56,834,814.81 55,094,814.81 97 Total 280,679,285.62 64,210,013.80 2. Information of provision, reversal or recovery of bad debts of current period. Reversal of bad debts for other receivables in current period is RMB 361,601.04. 3. No other receivables have been written off this year. 4. Other receivables disclosed by Nature Nature Ending balance Beginning balance Current Accounts 269,737,685.54 278,547,233.77 Others 10,941,600.08 11,246,492.49 Total 280,679,285.62 289,793,726.26 5. Top five debtors at the year-end Percentage of total other Provision for Company Notes or content Amount Aging receivables bad debts (%) 66,559,873.88 23.71 No.1 Accounts Within 1 year 14,664,372.10 5.22 2,932,874.42 No.2 Accounts 2-3 years 7,718,029.34 2.75 No.3 Accounts Within 1 year No.4 Accounts 5,302,064.54 2-3 years 1.89 4,341,257.18 1.55 868,251.44 No.5 Accounts Within 1 year Total 98,585,597.04 35.12 3,801,125.86 (3) Long-term equity investment Ending balance Beginning balance Items Carrying Impairme Impai Book value Carrying amount Book value amount nt rment Notes to the financial statements Page 93 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Subsidiaries 2,016,281,902.16 2,016,281,902.16 2,016,281,902.16 2,016,281,902.16 Joint ventures Total 2,016,281,902.16 2,016,281,902.16 2,016,281,902.16 2,016,281,902.16 Details of investment in subsidiaries Impair Ending ment balance Ending of Name of entity Beginning balance Increase Decrease of balance curren impair t ment period Guangzhou Bengang Steel & Iron Trading 30,000,000.00 30,000,000.00 Co., Ltd. Shanghai Bengang M etallurgy Science and Technology Co., Ltd. 30,000,000.00 30,000,000.00 Bengang Steel Plates Liaoyang Pellet Co., 529,899,801.38 529,899,801.38 Ltd. Dalian Benruitong Automobile M aterial 65,000,000.00 65,000,000.00 Technology Co., Ltd. Bengang Posco Cold-rolled Sheet Co., Ltd. 1,019,781,571.10 1,019,781,571.10 Changchun Bengang Steel & Iron Sales Co., 28,144,875.36 28,144,875.36 Ltd. Harbin Bengang Economic and Trading Co., 29,923,398.23 29,923,398.23 Ltd. Nanjing Bengang M aterials Sales Co., Ltd. 2,081,400.65 2,081,400.65 Wuxi Bengang Steel & Iron Sales Co., Ltd. 29,936,718.57 29,936,718.57 Xiamen Bengang Steel & Iron Sales Co., 1,095,711.66 1,095,711.66 Ltd. Yantai Bengang Steel & Iron Sales Co., Ltd. 49,100,329.41 49,100,329.41 Tianjin Bengang Steel & Iron Trading Co., 60,318,095.80 60,318,095.80 Ltd. Benxi Bengang Steel Sales Co., Ltd 5,000,000.00 5,000,000.00 Shenyang Bengang M etallurgical Science 30,000,000.00 30,000,000.00 and Technology Co., Ltd. Chongqing Liaoben Steel & Iron Trade Co., 30,000,000.00 30,000,000.00 Ltd. Bengang Baojin (Shenyang) Automobile 76,000,000.00 76,000,000.00 New M aterials Technology Co., Ltd. Total 2,016,281,902.16 2,016,281,902.16 Notes to the financial statements Page 94 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements (4) Operating income and operating cost Current period Previous period Items Revenue Cost Revenue Cost Principal business 21,327,519,597.49 19,894,713,843.28 21,543,654,805.89 19,737,906,706.75 Other business 2,119,696,260.44 1,862,576,153.90 2,139,210,303.25 1,663,285,255.45 Total 23,447,215,857.93 21,757,289,997.18 23,682,865,109.14 21,401,191,962.20 (5) Income on investment Items Current period Previous period Income from long-term equity investment (cost method) Income from bank short-term financial products 3,493,150.68 Total 3,493,150.68 14. Supple mentary information (1) Details of non-recurring profit and loss Items Amount Notes Profit or loss from disposal of non-current assets -49,987,558.33 Government subsidy attributable to profit and loss of current period (except such government subsidy closely related to the company's normal 41,695,000.00 business operation, meeting the regulation of national policy and enjoyed constantly in certain quota or quantity according to a certain standard) Profit or loss from investment or assets entrusted to others Profit or loss from debt restructuring 50,640.00 Net profit or loss of subsidiary from the beginning to consolidation date gained from consolidation under same control Other non-operating revenue and expenditure other than above items 172,778.52 Impact of income tax 55,854.63 Impact of minority interests 3,799.93 Total -8,128,794.37 (2) Net asset yield and earnings per share Weighted average Earnings per share (Yuan) Profit in the Reporting Period net assets yield Basic EPS Diluted EPS Net profit attributable to ordinary shareholders 2.35% 0.12 0.12 Net profit attributable to ordinary shareholders 2.50% 0.12 0.12 after deducting non-recurring profit and loss Notes to the financial statements Page 95 Bengang Steel Plates Co., Ltd. For the half year ended 30 June 2019 Notes to the financial statements Bengang Steel Plates Co., Ltd. (Seal) 28 August 2019 Notes to the financial statements Page 96