Bengang Steel Plates Co., Ltd. Annual Report 2019 Bengang Steel Plates Co., Ltd. Annual Report 2019 April, 2020 1 Bengang Steel Plates Co., Ltd. Annual Report 2019 I. Important Notice, Table of Contents, and Definitions The Board of Directors, the Supervisory Committee and the Directors, members of the Supervisory Committee and senior management of the Company guarantee that there are no misrepresentations or misleading statements, or material omission in this report, and individually and collectively accept full responsibility for the authenticity, accuracy and integrity of the information contained in this report. Gao Lie, chairman of the Company, Shen Qiang, Chief financial officer, and Zhao Zhonghua, the person in charge of the accounting department (the person in charge of the accounting), make the pledge for the authenticity, accuracy and integrity of the attached financial statements. All the members of the Board of Directors attended the board meeting on which this report was examined. The prospective statements contained in this annual report do not constitute any substantial commitment to the investors. Investors should pay attention to the risks attached to investment decisions. This report is prepared in both of Chinese and English. The Chinese version shall prevail when there are any controversial statements in the two versions. The company has described the existing risks and countermeasures in detail in this report. Please refer to Section 4-9 “Prospects for the Future Development of the Company”. “China Securities Journal”, “Securities Times”, “Hong Kong Commercial Daily” and Juchao Information Network (www.cninfo.com.cn) are the company's selected information disclosure media. All information of the company is based on the information published in the above-mentioned designated media. Investors are advised to pay attention to investment risks. The company plans not to distribute any cash dividends, bonus shares, and not converse capital reserve to share capital. 2 Bengang Steel Plates Co., Ltd. Annual Report 2019 Table of Contents I. IMPORTANT NOTICE, TABLE OF CONTENTS, AND DEFINITIONS .......................................................... 2 II. COMPANY PROFILE AND MAIN FINANCIAL INDEX ...................................................................................... 5 III. SUMMARY OF COMPANY BUSINESS ................................................................................................................ 9 IV. MANAGEMENT DISCUSSION AND ANALYSIS .............................................................................................. 12 V. IMPORTANT EVENTS ............................................................................................................................................ 25 VI. STATUS OF SHARE CAPITAL CHANGES AND SHAREHOLDERS ............................................................ 75 VII. STATUS OF PREFERRED SHARES .................................................................................................................. 81 VIII. STATUS OF CONVERTIBLE CORPORATE BONDS ................................................................................... 82 IX. STATUS OF DIRECTORS, SUPERVISORS, SENIOR EXECUTIVES AND EMPLOYEES ........................ 83 X. CORPORATE GOVERNANCE .............................................................................................................................. 91 XI. RELEVANT INFORMATION ABOUT CORPORATE BONDS ....................................................................... 98 XII. FINANCIAL REPORT .......................................................................................................................................... 99 XIII. DOCUMENTS AVAILABLE FOR INSPECTION ......................................................................................... 241 3 Bengang Steel Plates Co., Ltd. Annual Report 2019 Definition Terms to be defined Refers to Definition Bengang Bancai, Bengang Steel, the Company, the Refers to Bengang Steel Plates Co., Ltd. Listed Company Bengang Group Refers to Bengang Group Co., Ltd. Bengang Co. Refers to Benxi Steel & Iron (Group) Co., Ltd. Liaoning Provincial State-asset Administration Refers to Liaoning State-owned Asset Supervisory and Management Committee SSE Refers to Shenzhen Stock Exchange Bengang Puxiang Refers to Bengang Puxiang Cool Rolling Steel Sheet Co., Ltd. 4 Bengang Steel Plates Co., Ltd. Annual Report 2019 II. Company Profile and Main Financial Index I. Company Information Stock abbreviation Bengang Bancai, Bengangban B Stock Code 000761, 200761 Stock exchange for listing Shenzhen Stock Exchange Company name in Chinese 本钢板材股份有限公司 Abbreviation of Company name in 本钢板材 Chinese Company name in English (If any) BENGANG STEEL PLATES CO.,LTD. Abbreviation of Company name in BSP English (If any) Legal representative Gao Lie Registration Address No.16, Renmin Road, Pingshan District, Benxi City, Liaoning Province Post Code of registration Address 117000 Office address No.16, Renmin Road, Pingshan District, Benxi City, Liaoning Province Post Code of office address 117000 Web Address None Email bgbcdm@163.com II. Contact Information Secretary of Board of Directors Representative of Securities Affairs Name Gao Desheng Chen Liwen No.16, Renmin Road, Pingshan District, No.16, Renmin Road, Pingshan District, Address Benxi City, Liaoning Province Benxi City, Liaoning Province Tel 024-47827003 024-47828980 Fax 024-47827004 024-47827004 Email bgbcdm@163.com bgbcclw@126.com III. Information Disclosure and Place for Consulting Press media for information disclosure China Securities Journal, Securities Times, Hong Kong Commercial Daily Web address for the annual report as assigned by http://www.cninfo.com.cn CSRC Place for inquiry of the annual report Secretary Office of the Board, Bengang Steel Plate Co., Ltd. IV. Change of Business Registration Organization Code 91210000242690243E Changes of principal business activities since listing (if any) No change Changes of the controlling shareholder in the past (is any) No change 5 Bengang Steel Plates Co., Ltd. Annual Report 2019 V. Other Information Accountants’ firm engaged by the Company: Name of the accountants’ firm BDO China Shu Lun Pan Certified Public Accountants LLP Address of the accountants’ firm Address: 4/F 61 Nanjing Rd. East, Huangpu, Shanghai Signing name of accountants Wu Xue, Li Guiying Sponsor engaged by the Company to conduct sustained supervision during the reporting period √ Applicable □ Not applicable Address of the sponsor Name of the sponsor Name of the sponsor institution Sustained supervision period institution representative Shenwan Hongyuan Securities No. 19, Taiping Bridge Street, March 5th, 2018 to August 8th, Underwriting Sponsoring Co., Zhang Wei, Liu Guoku Xicheng District, Beijing 2019 Ltd. Guotai Junan Securities Co., No. 768, Nanjing West Road, August 9th, 2019 to December Feng Jinjun, Chen Ze Ltd. Jingan District, Shanghai 31st, 2019 Financial consultancy institution engaged by the Company to conduct sustained supervision during the reporting period □ Applicable √ Not applicable VI. Main Accounting Data and Financial Index Whether the Company makes retroactive adjustment or restatement of the accounting data of the last years due to change of the accounting policy and correction of accounting errors □ Yes √ No Changes over last 2019 2018 2017 year Operating income(RMB) 52,741,353,582.28 50,181,869,721.54 5.10% 40,507,855,843.72 Net profit attributable to the shareholders 555,646,971.40 1,036,493,236.07 -46.39% 1,600,110,229.77 of the listed company(RMB) Net profit after deducting of non-recurring gain/loss attributable to the shareholders 549,528,817.13 1,093,065,140.59 -49.73% 1,607,675,869.15 of listed company(RMB) Net Cash flow generated by business 6,977,824,041.16 3,619,937,841.93 92.76% 2,744,243,492.51 operation(RMB) Basic earnings per share (RMB/Share) 0.143 0.272 -47.43% 0.51 Diluted earnings per share (RMB/Share) 0.143 0.272 -47.43% 0.51 Weighted average net assets yield 2.88% 5.64% -2.76% 11.84% Changed over last End of 2019 End of 2018 End of 2017 year Gross assets(RMB) 60,731,425,193.90 59,632,504,915.83 1.84% 62,998,143,513.02 Net assets attributable to shareholders of 19,487,665,261.17 19,126,258,116.67 1.89% 14,315,588,729.00 the listed company(RMB) 6 Bengang Steel Plates Co., Ltd. Annual Report 2019 VII. Differences between Domestic and Foreign Accounting Standards 1. Differences of net profit and net assets disclosed in financial reports prepared under IFRS and Chinese accounting standards. □ Applicable √ Not applicable There are no differences of net profit and net assets disclosed in financial reports prepared under IFRS and Chinese accounting standards during the reporting period. 2. Differences of net profit and net assets disclosed in financial reports prepared under overseas and Chinese accounting standards. □ Applicable √ Not applicable There are no differences of net profit and net assets disclosed in financial reports prepared under overseas and Chinese accounting standards during the reporting period. VIII. Main Financial Index by Quarters Unit: Yuan First quarter Second quarter Third quarter Fourth quarter Operation income 11,761,190,575.63 12,341,404,591.51 14,441,830,940.38 14,196,927,474.80 Net profit attributable to the 271,606,318.07 181,603,297.69 34,229,631.12 68,207,724.50 shareholders of the listed company Net profit after deducting non- recurring gain/loss attributable to 259,096,025.14 202,242,384.99 18,176,874.87 70,013,532.10 the shareholders of listed company Net cash flows generated by 2,752,557,195.47 -1,767,770,189.80 7,240,330,854.97 -1,247,293,819.48 operating activities Whether significant variances exist between the above financial index or the index with its sum and the financial index of the quarterly report as well as semi-annual report index disclosed by the Company □ Yes √ No IX. Items and Amount of Non-recurring Profits and Losses √ Applicable □ Not applicable Unit: Yuan Item 2019 2018 2017 Notes Gains and losses on disposal of non-current assets (including the write off part of the -77,292,030.26 -148,409,630.35 -65,886,612.10 provision for impairment) Government subsidy attributable to profit and loss of current period (except such government subsidy closely related to the company's normal business operation, 83,914,522.47 86,085,297.03 39,086,900.00 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 605,795.19 5,041,397.26 assets entrusted to others Gains and losses of debt restructuring 50,640.00 4,725,936.17 Net profit of loss of the current period from beginning of the period to the combination 24,668.65 date of subsidiaries generated from business combination under common control 7 Bengang Steel Plates Co., Ltd. Annual Report 2019 Other non-operating income and expenses 779,757.58 771,191.90 14,538,002.49 other than above Other profit and loss items that meet the 2,084.65 definition of non-recurring gains and losses Less: impact of income tax 1,818,703.48 22,141.38 162,375.42 impact of minority equity (after tax) 123,911.88 38,018.98 -107,840.83 Total 6,118,154.27 -56,571,904.52 -7,565,639.38 -- Explanation for defining non-recurring gains and losses items according to the "Public Offering of Securities Information Disclosure Explanatory Notice No. 1 – Non-Recurring Gains and Losses", and reasons for defining non-recurring gains and losses items listed in the document as recurring items. □ Applicable√ Not applicable There exists no situation of defining non-recurring gains and losses items listed in the document as recurring items. 8 Bengang Steel Plates Co., Ltd. Annual Report 2019 III. Summary of Company Business I. The Company's main business during the reporting period (1) During the reporting period, the Company's main business activities include steel smelting, rolling processing, power generation, coal chemical industry, special steel profiles, railways, import and export trade, scientific research, and product sales. The introduction of world advanced equipment technology has enabled the implementation of equipment upgrades for the steel industry. The Company has built a fine steel base, formed more than 60 varieties, more than 7500 series of product specifications, high value-added and high- tech product ratio reached more than 80%, automotive surface panels, household appliances, oil pipeline steel, container board Shipboard and other leading products are widely used in automobiles, home appliances, petrochemicals, aerospace, machinery manufacturing, energy transportation, construction and decoration, and metal products, and are exported to more than 60 countries and regions. During the reporting period, the main performance drivers were: implemented contractual management, improved the incentive and restraint mechanism of the close connection of "operators and managers", the linkage of results, responsibilities and rights, and promoted the integration of performance evaluation with the leadership team, the appointment and removal of leading cadres, rewards and punishments. The organization signed 18 certificates of responsibility, tracked the completion of each unit on a monthly basis, and formed a monthly notification system, which had a milestone significance in the performance evaluation and cadre management of the Company. A new round of large-scale technological transformation represented by key projects such as the new No. 5 blast furnace and CCPP green and efficient power generation was implemented. At present, the project of the transformation of the special steel plate rolling mill and the energy-saving and environmental protection transformation project of the No. 1 and No. 6 converters of the Company have been successfully completed and put into production. Strengthened capital management operations, completed cash acquisition of related party assets, and incorporated 2300mm and 1780mm hot-rolled production line equipment assets into the Company. No significant change occurred during the reporting period. (2) During the reporting period, there were many instable factors in the domestic steel market. Although the country continued to increase supply-side structural reforms and infrastructure construction, the continuous release of steel production capacity and the reasonable adjustment of upstream and downstream profits, as well as the formation of market backflow caused by China-US trade frictions, steel prices are affected to certain extent. However, from the perspective of the country as a whole, domestic steel production capacity has basically become reasonable, demand and supply has maintained balance, and the steel industry has also maintained a stable and good development trend. The company adheres to the supply-side structural reform as the main line, implements high-quality development requirements, and consistently implements the new development concepts, “four determinants” and “three advancements”. The company has achieved steady economic development, continuous improvement of its comprehensive competitiveness, and continuous consolidation of its industry position. II. Major Changes in Main Assets 1. Major Changes in Main Assets Main assets Notes to major changes The balance as of 31 December 2019 is RMB 1,833,853.6 thousand and it has increased Construction in progress by 119.2%, which is mainly because projects will be constructed during the next year. The balance as of 31 December 2019 is RMB 0 and it has decreased RMB 3,580,145.8 thousand compared to the beginning balance, which is mainly caused by the adjustment Notes receivables of notes receivable into the accounts receivable financing applying the financial instruments standards during the current period. The balance as of 31 December 2019 is RMB 235,696.3 thousand and it has decreased by 63.14% compared with the beginning balance, which is mainly caused by the Accounts receivables adjustment of part of the accounts receivables into the accounts receivable financing applying the financial instruments standards during the current period. Other non-current assets The balance as of 31 December 2019 is RMB 708,502.6 thousand and it has increased by 828.06% compared with the beginning balance, which mainly due to the increase in the 9 Bengang Steel Plates Co., Ltd. Annual Report 2019 rental deposit paid to Liaoning Hengyi Financial Leasing Co., Ltd. during the current period. 2. Main Information of Overseas Assets □ Applicable √ Not applicable III. Analysis on Core Competitiveness The company adheres to the development model of innovation-driven and “quality plus service”. With the strategic goal of building a highly competitive international high-quality plate base, domestic first-class special steel base and comprehensive service providers, it plays a strategic leading role, focusing on improving quality and efficiency. In terms of variety upgrading, technological innovation, green and intelligent manufacturing, it innovates business management ideas, enhances the company's core competitiveness, and promotes the development of high-quality, green and intelligent enterprises. 1. Manufacturing capacity The company innovates management ideas, strengthens professional management and control of the entire chain, and continuously improves corporate management efficiency. All departments and units interact with each other, continue to implement the concept of production priority, adhere to the iron system as the core, focus on the process of iron and steel. The production line and resources of the production process and the principle of rationally matches the production process of steel, to make the production process and operation continuous standardization and refinement, strive to maximize the quality, efficiency and production scale, and promote the production chain to high-end manufacturing. 2. Equipment transformation and upgrading In 2019, the Company invested fixed asset of 5.7 billion yuan. A new round of large-scale technological transformation represented by key projects such as the new No. 5 blast furnace and CCPP green and efficient power generation was implemented. At present, the special steel rolling mill renovation project, the steelmaking furnace No.1 and No.6 converter energy-saving and environmental protection transformation projects have been successfully completed and put into production. The No. 5 blast furnace energy-saving and environmental protection transformation project has completed 60% and is scheduled to be put into operation at the end of September 2020. The upgrading project will be completed and put into operation in 2021. 3. New product development capabilities In 2019, the Company successfully developed 41 new products. Among them, the high-strength martensitic steel MS1180 for rolling broke the production line capacity limit, indicating that Bengang's automotive cold-formed products already have a supply capacity of 1200 MPa. The Company successfully developed quenching steel for cold forming, high-strength bullet-proof steel, and car wheel bearing steel, which filled the company's product gap. The Chinese Society of Metals held an expert review of scientific and technological achievements in Beijing, suggested that the two scientific and technological achievements completed by the company, named “R&D of ultra-high-strength series hot stamping steel” and “Independent R&D and technology integration of electro-galvanized products”, reached advanced world standard. The ultra-high strength 2000MPa hot-formed steel technology has broken the strength limit of the hot-formed steel, with an elongation of not less than 6%, and had excellent strong plastic matching; 6mm thick specifications of 1500MPa-grade hot-formed steel, used in chassis torque Beam parts have achieved a technological breakthrough in the application of automobile chassis structural parts and met the requirements for lightweight design of the whole vehicle; the width of 1500MPa- 2000MPa ultra-high-strength series of hot-formed steel products can reach 1800mm, formed the widest domestic thermoforming Production capacity of steel products. 4. Technical innovation capability Benxi Steel and Shenyang National Research Center for Materials Science signed an agreement to build a joint R&D center, to build an “industry-university-research-use” R&D platform and actively integrate into the national technological innovation system. The construction of Bengang Shenyang Research Institute commenced the land acquisition process, and declared to be included in the national and provincial “14th Five-Year Plan” major engineering projects. And joined the executive director unit of the Corrosion Resistant Steel Technology Innovation Alliance and the Journal of Iron and Steel Research and became a member unit of the Automotive Lightweight Innovation Strategic Alliance. In 2019, 146 patents were accepted by the State Intellectual Property Office, had an increase of 11.5% compared with last year, and 93 patents of them were authorized by the State Intellectual Property Office, had an increase of 260%. The company successfully joined the China Intellectual Property Development Alliance. 5. Green development capacity The company has taken social responsibilities and relied on professional planning and research institutions to prepare environmental protection improvement plans and annual implementation plans by combining the steel industry and local ultra-low emission policy requirements. Through all-round green improvement such as clean production level, three waste management, and environmental protection management, the company can achieve "ultra-low emissions" in all directions in 2025, realize the communalization of 10 Bengang Steel Plates Co., Ltd. Annual Report 2019 environmental quality, promote the integration of industry and city, and build the company into a harmonious development with the city "Ecological Steel Factory". At present, 2 sets of coke oven flue gas desulfurization and denitrification devices have been invested and installed. The surplus gas CCPP power generation project is planned to be completed and put into operation in May 2021. The new mixing yard and the fully enclosed project of the yard are also under planning and design. It will be completed and put into operation in 2024. 6. Intelligent manufacturing capabilities The Company has steadily promoted the construction of projects related to the integration of the two industries and the intelligent factory. And invested RMB 110 million for the intelligent transformation of manufacturing management, ERP systems and other fields. It is planned to increase investment in informatization and intelligent manufacturing in 2020-2022, keep up with the pace of enterprise development in the era of big data, and achieve high-quality development. 7. Marketing competence The Company adheres to the benefit-oriented, optimizes the variety structure, achieves a steady increase in the output of leading products, and significantly enhances the core competitiveness of products. The Company developed 32 new customers, 45 new steel types and achieved the target of 100% production-sales ratio by increasing market development efforts and matching resources reasonably. Products are sold to more than 30 countries and 1 million tons along the “Belt and Road”, accounting for 42% of total exports. During 2019, the Company completed 70 brand certifications for cold-rolled, galvanized, pickled, special steel and other products, with an increase of 25% over last year, covering users such as automobile panels, home appliance panels, and special steel. Part of the company's automotive sheet products have been included in the Mercedes-Benz BQF (Global Procurement) list. The key certification work of BMW, Mercedes-Benz, Renault, etc. has achieved periodic results. The Company completed the testing of SGS, ELV and Reach products. 8. Brand Building The Company has built a symbiotic and shared quality management model of "supporting a better life with steel power", attached great importance to the construction of corporate culture, actively expanded brand influence, made great efforts to fulfill social responsibilities and enhance the social image of the enterprise, successfully won the 2019 Liaoning Provincial Quality Bonus Award, and became the only iron and steel enterprise to win this honor. 11 Bengang Steel Plates Co., Ltd. Annual Report 2019 IV. Management Discussion and Analysis I. General During the reporting period, the company adhered to Xi Jinping's new era of socialism with Chinese characteristics as the guide, in-depth study and implementation of the spirit of the important speech by Present Xi during the inspection tour in Liaoning and in the in-depth promotion of the Northeast Revitalization Symposium. The Company adheres to the supply- side structural reform as the main line, persists in the general keynote of steady progress, firmly establishes and practices new concepts of development. It implements high-quality development requirements, achieves stable growth of major economic indicators. The Company produced 9.7272 million tons of pig iron in the whole year, which increased by 14.61%, 9.9639 million tons of crude steel which increased by 11.2%, 12.22674 million tons of hot-rolled plate which increased by 6.77%, 5.6263 million tons of cold-rolled sheet which increased by 0.37%, and 0.4867 million tons of special steel which decreased by 28.44% compared to last period. The company did not have any major personal accidents, major fire accidents or major equipment accidents throughout the year. Looking back at the past year's production and operation process, we mainly completed the following work: First, management innovation. The Company implements contract management, improved the incentive and restraint mechanism of the close connection of "operators and managers", the linkage of results, responsibilities and rights, and promoted the integration of performance evaluation with the leadership team, the appointment and removal of leading cadres, rewards and punishments. The organization signed 18 certificates of responsibility, tracked the completion of each unit on a monthly basis, and formed a monthly notification system. Besides, the Company implement accountability and accountability, set up a supervision team to carry out supervision and management, continue to optimize and streamline the organization in accordance with the principles of compressing management levels and integrate similar businesses to strengthen process optimization, increase system supervision and implementation inspection. And strengthen risk management, internal control, carry out in-depth risk identification, assessment, and risk knowledge training to strengthen informatization construction to provide informatization support for refined management. Strengthen capital management operations, complete cash acquisition of related party assets, and incorporate 2300mm and 1780mm hot rolling production line equipment assets into the company. Second, technology innovation. The Company adheres to the design concept of light weight and green environmental protection, aims at stable quality, reasonable cost, high added value and strong market competitiveness, closely combines market demand and future technical development direction, considers the characteristics of its own production line, develops marketable New product. There were 41 new product brands developed throughout the year, and some automotive sheet products were included in Mercedes-Benz's global procurement list. And promote the industrial development of hot-formed steel products, achieve full coverage of products from 1300 MPa to 2000 MPa. They organized the completion of 70 brand certifications for cold rolling, galvanizing, pickling, special steel and other products. The Company cooperated and communicated with Beijing University of Science and Technology, China Iron and Steel Research Institute, Institute of Metals of Chinese Academy of Sciences, Shanghai University, etc. through multi-levels, multi-channels and multi-forms. The cooperation and communication have accelerated the transformation of scientific and technological achievements into real productivity. Moreover, a total of 146 patents were accepted by the State Intellectual Property Office, with 113 new authorized patents. They successfully joined the China Intellectual Property Development Alliance, successfully passed the annual assessment of "National Intellectual Property Advantage Enterprise" and "Liaoning Province Intellectual Property Advantage Enterprise" Third, marketing and purchasing. The company adheres to the benefit-oriented, optimizes the variety structure, reasonably matches resources, increases market development efforts, and achieves the target of 100% production and sales rate. The development and certification of OEMs has been actively promoted, sales channels are expanded continuously, orders for auto plates are gained by efforts. The comprehensive implementation of the import materials under the plate item is guaranteed by the corporate finance company guarantee letter and the tax collection business, which improves the efficiency of customs clearance. By lowering anthracite coal prices, introducing high-sulfur coal cost reduction, controlling land and mineral resources to suppress prices, and implementing benchmarking potentials to reduce prices and cost, etc. measures to reduce procurement costs. We will continue to implement special cost reductions such as resource development, variety substitution, and opportunity selection. And fully organize the development and introduction of high-quality suppliers, and constantly improve the supplier structure to carry out procurement 12 Bengang Steel Plates Co., Ltd. Annual Report 2019 benchmarking work, with procurement prices and procurement costs as the core, organize and determine benchmarking projects. Fourth, production and operation. The Company fully promotes the work of increasing production, reduces consumption and increasing efficiency, and the level of production and operation of enterprises has been continuously improved. The production organization has been further optimized, give full play to the role of dispatching and coordination, scientifically and efficiently organize the overall balance of various productions, and solidly and steadily advance the work of reducing costs and increasing efficiency. And adhere to the implementation of the cost management and control system and the daily clearing and daily settlement mechanism, carry out benchmarking and process cost analysis in an all-round manner, to realize the dynamic control of key indicators and cost operation. Fifth, party building. The Company seriously implements the deployment of the Party Central Committee, the Provincial Party Committee and the company's party committee, comprehensively and deeply carry out the education of "Remain true to our original aspiration and keep our mission firmly in mind". And revise the system of party building work, carry out the activities of "big learning, big inspection, big standardization, big promotion", to strengthen the education management of party members, promote the institutionalization of the normalization of the " studies on the theoretical and practical issues of party building" learning and education, standardize the basic party organizations, and continue to standardize Promote. Sixth, people's livelihood and social responsibility. The Company reconstructs of the three-dimensional parking lot of No.4 door, with a total construction area of 20,400 square meters, solves the difficulty of parking for employees. The foundation of safety management has been continuously consolidated, and the safety production responsibility system has been strictly implemented to achieve full coverage of the safety production responsibility system. In order to innovate safety training methods, establish a safety training base, strengthen production safety supervision, and carry out special inspections on building construction and hazardous media. II. Main Business Analysis 1. General For relevant information please refer to “Management Discussion and Analysis 1. General”. 2. Income and Cost (1) Breakdown of Operating Income Unit: Yuan 2019 2018 Change over last Amount Proportion Amount Proportion year Total operating income 52,741,353,582.28 100% 50,181,869,721.54 100% 5.10% By industries Industry 52,741,353,582.28 100.00% 50,181,869,721.54 100.00% 5.10% By products Steel plate 46,805,252,792.90 88.74% 46,228,334,211.43 92.12% 1.24% Others 5,936,100,789.38 11.26% 3,953,535,510.11 7.88% 52.25% By regions Northeast 20,024,243,641.60 37.97% 15,200,555,630.64 30.29% 32.26% North China 5,084,223,402.71 9.64% 5,695,230,806.71 11.35% -10.73% East China 20,568,857,942.71 39.00% 17,511,020,155.51 34.90% 17.46% Northwest 57,451,092.38 0.11% 68,730,984.27 0.14% -16.41% Southwest 232,028,336.48 0.44% 179,439,784.55 0.36% 29.31% Central south 26,564,062.51 0.05% 29,348,279.57 0.06% -9.49% 13 Bengang Steel Plates Co., Ltd. Annual Report 2019 Export 6,747,985,103.89 12.79% 11,497,544,080.29 22.90% -41.31% (2) Industry, Product and Regions Accounting for the Company’s Operating Income or Profit over 10% √ Applicable □ Not applicable Unit: Yuan Operating income Operating profit Gross margin Operating Income Operating profit Gross margin change over last change over last change over last year year year By industries Industry 52,741,353,582.28 49,211,414,645.62 6.69% 5.10% 8.77% -3.15% By products Steel plate 46,805,252,792.90 43,900,514,006.74 6.21% 1.25% 4.66% -3.05% Others 5,936,100,789.38 5,310,900,638.88 10.53% 50.15% 61.10% -6.09% By regions Northeast 20,024,243,641.60 18,582,038,944.70 7.20% 31.73% 34.28% -1.76% North China 5,084,223,402.71 4,757,714,575.79 6.42% -10.73% -7.74% -3.03% East China 20,568,857,942.71 19,203,256,113.50 6.64% 17.46% 21.91% -3.40% Northwest 57,451,092.38 54,150,705.94 5.74% -16.41% -14.69% -1.90% Southwest 232,028,336.48 217,118,195.58 6.43% 29.31% 33.81% -3.15% Central south 26,564,062.51 24,831,580.92 6.52% -9.49% -6.46% -3.03% Export 6,747,985,103.89 6,372,304,529.20 5.57% -41.31% -37.80% -5.33% Operating data of recent one year according to adjusted statistics caliber at the year-end in the case that the Company's main business statistics caliber has changed during the reporting period □ Applicable √Not applicable (3) Whether the Company’s Physical Sales Income Exceeded Service Income √ Yes □ No Change over last Industry classification Item Unit 2019 2018 year Sales ton 12,936,378.68 11,921,203.14 8.52% Steel rolling processing Production ton 12,753,498.73 11,778,657.64 8.28% industry Inventory ton 461,834.13 644,714.08 -28.37% The main reasons that the relevant data changed more than 30% □ Applicable √ Not applicable (4) Performance of Significant Sales Contract Signed-up in this Reporting Period □ Applicable √ Not applicable (5) Breakdown of Operating Cost Industry classification Unit: Yuan Industry 2019 2018 Change over last Item classification Amount Proportion Amount Proportion year Steel rolling Raw material 24,287,695,988.38 49.35% 21,947,301,201.20 48.51% -48.51% processing industry 14 Bengang Steel Plates Co., Ltd. Annual Report 2019 Steel rolling Supplementary 2,244,278,919.58 4.56% 2,042,667,624.99 4.51% -4.51% processing industry materials Steel rolling Spare parts and 792,470,544.15 1.61% 736,234,636.78 1.63% -1.63% processing industry tools Steel rolling Fuel 13,563,168,678.04 27.56% 12,532,214,109.19 27.70% -27.70% processing industry Steel rolling Energy 2,886,572,220.88 5.87% 2,851,020,001.46 6.30% -6.30% processing industry Steel rolling Salary and 2,132,408,812.44 4.33% 1,995,005,132.35 4.41% -4.41% processing industry benefits Steel rolling Depreciation 2,474,423,868.41 5.03% 2,346,173,478.53 5.19% -5.19% processing industry Steel rolling Others 830,395,613.74 1.69% 793,119,019.81 1.75% -1.75% processing industry Steel rolling Total 49,211,414,645.62 100.00% 45,243,735,204.31 100.00% -100.00% processing industry (6) Whether Changes Occurred in Consolidation Scope in the Reporting Period □ Yes √No (7) Relevant Information of Significant Changes or Adjustment of the Business, Product or Service in the Reporting Period □ Applicable √ Not applicable (8) Information of Main Customers and Main Suppliers Information of the Company’s main customers Total sales amount of the top five customers (Yuan) 11,215,010,475.74 22,456,322,906.01 Total sales amount of the top five customers accounted for the 21.26% 45.63% proportion of total annual sales The proportion of the total sales of the related parties in the 9.92% 34.30% top five customers Information of the top 5 customers No Name Amount (Yuan) Proportion 1 Benxi Beiying Steel & Iron (Group) Co., Ltd. 5,231,032,903.96 9.92% 2 Xiamen Jian Fa Metal Co., Ltd. 1,621,532,578.32 3.07% Shanghai Min Xing Da International Trade Co., 3 1,520,825,639.71 2.88% Ltd. 4 Ningbo AUX Trade Co., Ltd. 1,441,869,474.34 2.73% 5 Zhong Bing (Shanghai) Co., Ltd. 1,399,749,879.41 2.65% Total -- 11,215,010,475.74 21.26% Other information of principal customers □ Applicable √ Not applicable Information of the Company’s main suppliers Total purchase amount of the top five suppliers (Yuan) 22,456,322,906.01 22,456,322,906.01 Total purchase amount of the top five suppliers accounted for 45.63% 45.63% the proportion of total purchase The proportion of the total purchase of the related parties in 34.30% 34.30% the top five suppliers Information of the top 5 suppliers 15 Bengang Steel Plates Co., Ltd. Annual Report 2019 No. Name Amount (Yuan) Proportion 1 Benxi Beiying Steel & Iron (Group) Co., Ltd. 12,194,115,817.50 24.78% 2 Benxi Steel & Iron (Group) Mining Co., Ltd. 4,686,937,254.45 9.52% 3 Heilongjiang Dragon Coal Group Co., Ltd. 2,383,245,434.22 4.84% Liaoning Electric Power Co., Ltd. Benxi Electric 4 2,177,544,074.59 4.42% Power Supply Company 5 Shenyang Coking Coal Co., Ltd. Sales Branch 1,014,480,325.25 2.06% Total -- 22,456,322,906.01 45.63% Other information of principal suppliers □ Applicable √ Not applicable 3. Expenses Unit: Yuan Notes to significant 2019 2018 Change over last year change Selling and distribution expenses 1,096,688,903.70 1,135,004,470.47 -3.38% General and administrative expenses 831,945,841.56 916,341,137.85 -9.21% Loss of exchange decreases and interest Financial expenses 681,842,689.23 1,376,355,160.46 -50.46% income increases during the current period Increase in the collection of research and Research and development expenses 30,780,463.74 6,399,884.30 380.95% development expenses in this period. 4. Research and Development Input √ Applicable □ Not applicable In order to comprehensively enhance the level of technological innovation and ability to create efficiency and increase profits, strengthen variety adjustment and market development, improve product quality management, promote low-cost and green manufacturing technologies, 50 companies and 98 self-managed projects were directly managed by technology around variety, quality and cost in 2019. All projects were successfully carried out and completed over 76% on schedule. 41 new products were developed throughout the year, and costs were reduced by more than 100 million yuan through process optimization. R & D projects such as new product development, technological progress, and low-cost control technology not only create rich profits for the company, but also consolidate the company’s good corporate influence on the market. Information of research and development input by the company 2019 2018 Change over last year Number of Research and 1,632 1,712 -4.67% Development personnel Proportion of number of Research and Development 9.18% 9.51% -0.33% personnel Amount of Research and Development Investment (In 1,287,080,000.00 1,495,775,000.00 -13.95% RMB) Proportion of Research and Development investment to 2.44% 2.98% -0.54% operating income Amount of capitalized Research 0.00 0.00 0.00% and Development investment Proportion of capitalized 0.00% 0.00% 0.00% Research and Development 16 Bengang Steel Plates Co., Ltd. Annual Report 2019 investment accounted to total Research and Development investment Illustrations of the prominent change in proportion of research and development input occupying the operating income over same period last year □ Applicable √ Not applicable Illustrations of significant change in the research and development input’s capitalization rate and its reasonableness □ Applicable √ Not applicable 5. Cash Flow Unit: Yuan Item 2019 2018 Change over last year Subtotal of cash inflows from 48,140,957,956.69 42,888,958,869.76 12.25% operating activities Subtotal of cash outflows from 41,163,133,915.53 39,269,021,027.83 4.82% operating activities Net cash flows from operating 6,977,824,041.16 3,619,937,841.93 92.76% activities Subtotal of cash inflows from 53,984,827.07 684,483,213.49 -92.11% investing activities Subtotal of cash outflows paid 4,598,859,687.86 761,988,848.56 503.53% for investing activities Net cash flows from investing -4,544,874,860.79 -77,505,635.07 5,763.93% activities Subtotal of cash inflows from 17,484,678,971.97 35,061,062,441.77 -50.13% financing activities Subtotal of cash outflows from 18,304,173,598.95 39,211,589,467.82 -53.32% financing activities Net cash flows from financing -819,494,626.98 -4,150,527,026.05 -80.26% activities Net increase in cash and cash 1,688,866,366.61 -565,028,156.96 -398.90% equivalents Illustrations of key factors of significant changes over same period last year √ Applicable □Not applicable Notes: (1) Net cash flows generated from operating activities increased 92.76% compared to the previous period, mainly because the increase of cash received from sales of goods is more than the increase of cash paid for goods. (2) Subtotal of cash inflows from investing activities decreased 92.11% compared to the previous period, mainly because the decrease of cash withdrawn from purchase of financial products. (3) Subtotal of cash outflows from investing activities increased 503.53% compared to the previous period, mainly because the increase of cash paid for purchase of production line 2300 and equipment of production line 1780. (4) Net cash flows from investing activities increased 5763.93% compared to the previous year, mainly because the increase of cash paid for purchase of production line 2300 and equipment of production line 1780. (5) Subtotal of cash inflows from financing activities decreased 50.13% compared to the previous period, mainly because the decrease of cash received from financing. (6) Subtotal of cash outflows from financing activities decreased 53.32% compared to the previous period, mainly because the decrease of cash repayment. (7) Net cash flows from financing activities decreased 80.26% compared to the previous period, mainly because the decrease in cash paid for debt repayment in the current period. Illustrations of significant difference between cash flow from operating activities and net profit during the reporting period □ Applicable √Not applicable 17 Bengang Steel Plates Co., Ltd. Annual Report 2019 III. Analysis of Non-core Business √Applicable □ Not applicable Unit: Yuan Amount Proportion in total profit Explanation of cause Whether sustainable Investment income 1,058,377.90 0.18% Due to external equity investment No Due to provision of impairment of Impairment of assets -43,256,982.72 -7.51% No finished products Due to income raised from Non-operating income 10,306,462.87 1.79% No scrapping of non-current assets Due to scrapping of assets in Non-operating expenses 90,209,742.22 15.67% No current period IV. Assets and Liabilities 1. Significant Change of Assets Components Adjustment to the beginning balance of the current period due to the first adoption of new financial instruments standards, new revenue standards or new leasing standards since 2019 √ Applicable □ Not applicable Unit: Yuan Ending balance of 2019 Beginning balance of 2019 Notes to Proportion in Proportion in Proportion significant Amount the total assets Amount the total assets change change (%) (%) Cash at bank and on 18,415,844,397.77 30.32% 16,567,471,755.77 27.78% 2.54% hand Accounts receivable 235,696,265.66 0.39% 639,482,481.45 1.07% -0.68% Inventories 7,700,397,685.61 12.68% 10,677,747,112.40 17.91% -5.23% Long-term equity 2,642,998.70 0.00% 2,455,681.55 0.00% 0.00% investment Fixed assets 26,123,375,492.40 43.01% 23,924,504,539.97 40.12% 2.89% Construction in 1,833,853,572.58 3.02% 836,594,457.82 1.40% 1.62% process Short-term loans 13,151,478,000.00 21.66% 11,938,490,375.85 20.02% 1.64% Long-term loans 4,849,675,910.73 7.99% 7,083,640,094.16 11.88% -3.89% 2. Assets and Liabilities Measured at Fair Value √ Applicable □ Not applicable Unit: yuan Profit and Accumulated loss from Purchase fair value Impairment Sales amount Beginning changes in amount Other Ending Item changes accrued in the during the balance fair value in during the changes balance recognised in current period current period the current current period equity period Financial assets 3.Other debt 2,429,542,4 2,429,542,4 investments 61.88 61.88 4.Other equity 1,041,824,8 1,041,824,8 18 Bengang Steel Plates Co., Ltd. Annual Report 2019 instrument 29.00 29.00 investments Subtotal of 3,471,367,2 3,471,367,2 financial 90.88 90.88 assets 3,471,367,2 3,471,367,2 Total 0.00 90.88 90.88 Financial 0.00 0.00 liabilities 3. Restricted Assets by the End of the Period Items Ending balance Reason Cash at bank and on hand 4,974,429,409.19 Deposit for notes and L/C Accounts receivable financing 373,576,250.73 Pledged for acceptance bill Other equity instrument investments 1,037,735,849.00 Pledged for loans Total 6,385,741,508.92 V. Investment 1. General □ Applicable √ Not applicable 2. Acquiring Significant Equity Investment in the Reporting Period □ Applicable √ Not applicable 3. Undergoing Significant Non-equity Investment in the Reporting Period □ Applicable √ Not applicable 4. Investment of Financial Assets (1) Investment in Securities □ Applicable √ Not applicable There was no investment in securities during the reporting period. (2) Investment in Derivatives □Applicable √ Not applicable There was no investment in derivatives during the reporting period. 5. Use of Raised Funds √ Applicable □ Not applicable (1) Use of Raised Funds √Applicable □ Not applicable 19 Bengang Steel Plates Co., Ltd. Annual Report 2019 Unit: 10 thousand yuan The total amount of funds The Accumulat Total Used raised amount of ed amount amount of Purpose of amount Accumulat for funds Source of of funds funds fund raised Year Total amount during the ively used changin Proportion raised for funding raised for raised have not current amount g more than changing have not been used period purpose two years purposes been used s during of idle the reportin g period Private 3,183,684,09 2018 placement 3,965,799,988.19 13,006,851 4.45 0 0 0 Deposit 0 3,183,684,09 Total -- 3,965,799,988.19 13,006,851 4.45 0 0 0.00% 0 -- 0 Description of the overall use of raised funds 1. Changes in the implementation location, implementation body, and implementation of the fundraising investment project: There is no change in the company's investment projects in 2019. 2. Initial investment and replacement of fund raising projects: The 14th meeting of the 7th Board of Directors and the 10th meeting of the 7th Board of Supervisors reviewed and approved the proposal on self-raised funds for the use of raised funds to replace pre- investment funds. Before the funds raised received, in order to ensure the smooth implementation of the fundraising project, the company built the project with self-raised funds. As of February 28, 2018, the amount of pre-investment of self-raised funds with raised funds was 1,822,749,211.07 yuan, including 1,484,133,089.39 yuan for cold-rolled high-strength steel renovation project and 338,616,121.68 yuan for hot-dip galvanizing production line of three cold rolling mills. Details are as follows: (1) The replacement amount of the cold-rolled high-strength steel reconstruction engineering company with self-raised funds to raise funds for the initial investment is RMB 1,484,133,089.39, mainly for equipment purchase and construction, etc. (2) The replacement amount of the project funded for the Third Cold Rolling Mills Hot-Dip Galvanizing Production Line with self- raised funds was RMB 338,616,121.68, mainly for equipment purchase and construction. The company replaced the funds used in the construction of the fundraising project with the self-raised funds to replace the funds raised. The initial investment and replacement of the above-mentioned fundraising projects has been verified by BDO China Shu Lun Pan Certified Public Accountants LLP. Please refer to PCPAR [2018] No. ZB10101 “Verification report on the self-raised fund invested in the raised funds investment project of Bengang Steel Plates Co., Ltd”. (3) Temporary replenishment of circulating funds with idle raised funds: In 2018, the Company used 530,000,000.00 yuan of idle raised funds to temporarily supplement working capital. The period of use shall not exceed 12 months from the date of approval by the board of directors (March 13, 2018). As of March 11, 2019, the Company has returned all the above-mentioned idle raised funds for temporary supplementary liquidity of 530,000,000 yuan to the Company's special account for raised funds. During the current reporting period, according to the progress of the Company's fund-raising investment project construction and the fund-raising plan, part of the funds raised in this issuance is temporarily idle. According to the regulations of the "Procedures for the Management of Funds Raised by Listed Companies of the Shenzhen Stock Exchange", in accordance with the principle of maximizing the interests of shareholders, under the premise of ensuring the fund demand for investment projects and the investment projects for raising funds. The efficiency of fundraising will further reduce the company's financial costs, reduce financial expenses, and protect the interests of investors. The Company uses 742,000,000.00 yuan as raised funds will temporarily supplement the working capital, and the term of use will not exceed 12 months from the date of approval by the board of directors. Based on the one-year loan benchmark interest rate of 4.35%, the supplementary working capital of 742,000,000.00 yuan will save financial expenses for 32,277,000.00 yuan. The Company's usage of idle raised funds to temporarily supplement liquidity has been reviewed and approved at the 22th meeting of the 7th Board of Directors and the 14th meeting of the 7th Board of Supervisors. The company's independent directors have issued a clear statement. The consent opinion has fulfilled the necessary decision-making procedures. The use of idle raised funds to temporarily supplement the liquidity matters will change the use of raised funds or affect the normal operation of the raised funds investment plan. There is no damage to the interests of shareholder. Single replenishment of working capital is no more than 12 months. The Company has promised not to use idle raised funds for high-risk investment, in line with the provisions of the relevant laws, regulations and regulatory documents, including the “Regulatory Guidelines No. 2 of Listed Companies – Regulatory Requirements for the Management and Use of Raised Funds of Listed Companies”, “Stock Exchange Listing Rules of Shenzhen Stock Exchange” and “Shenzhen Stock Exchange the Standard Operating Guidelines for Main Board Listed Companies”. The sponsor institution agreed to use the idle raised funds to temporarily supplement the working capital and issued the “Verification Opinions of Shenwan Hongyuan Securities Underwriting and Sponsoring Co., Ltd. on the temporary replenishment of working capital by Bengang Steel Plate Co., Ltd. using idle raised funds”. 4. Usage of surplus funds raised: None. 5. Usage of over-raised funds: There is no over-raising of funds raised this time. Therefore, during the reporting period, the company 20 Bengang Steel Plates Co., Ltd. Annual Report 2019 did not use over-raising funds. 6. The purpose and destination of the unused raised funds: As of December 31, 2019, in addition to temporarily replenishing working capital with idle raised funds of RMB 742,000,000.00 in accordance with the resolution of the board of directors, the Company's remaining raised funds temporarily saved in special account for fund raising. 7. Other use of raised funds: None. (2) Fundraising commitments √Applicable □ Not applicable Unit: 10 thousand yuan Accumul Whether Investme Date of Whether Total ated the Raised Amount nt the Benefits Whether the amount investme project funds invested progress project achieved the project Committed investment of nt as of the has been promised during reaches during expected feasibility projects and over- investme amount changed total the end of the the the benefits has raised funds nt after as of the (includin investme reporting period expected reporting are changed adjustme end of the g partial nt period (3)= usable period achieved significan nt (1) period changes) (2)/(1) status tly (2) Committed invested projects High Strength Cold - 2,265,799,98 2,265,799,98 1,780,757,97 Rolling Steel No 8.19 8.19 13,006,851 2.77 78.59% 31.12.2017 117,964,83 No No Renovation Project 4.28 The Third Cold Rolling Work Hot-Dip - 402,926,121. Galvanizing No 700,000,000 700,000,000 68 57.56% 31.12.2018 106,600,00 No No Production Line 5.87 Project Repayment of bank 1,000,000,00 1,000,000,00 1,000,000,00 No 100.00% Yes No loans 0 0 0 - 3,965,799,9 3,965,799,9 3,183,684,0 Subtotal -- 88.19 88.19 13,006,851 94.45 -- -- 224,564,84 -- -- 0.15 Over-raised funds Not applicable No - 3,965,799,9 3,965,799,9 3,183,684,0 Total -- 88.19 88.19 13,006,851 94.45 -- -- 224,564,840. -- -- 15 Situation and cause of failure to meet planned The main reason is that although the fundraising project has basically reached the condition of production, progress or projected the high value-added varieties of the production line is not stable enough, and the market's recognition of earnings (disclosed by new production line products has a certain delay. project) Description of major changes in project None. feasibility Amount, use and Not applicable progress of usage of over-raised funds Change in the Not applicable implementation location of the raised funds investment project Adjustment of Not applicable implementation methods of fund- raising investment projects 21 Bengang Steel Plates Co., Ltd. Annual Report 2019 The initial investment Applicable and replacement of the fundraising investment Refer to the Contents in Special Report III 4 project Temporary Applicable replenishment of working capital with Refer to the Contents in Special Report III 5 idle raised funds The amount and reason Not applicable for the rest of raised fund in the project implementation Use and destination of raised funds that have None. not been used Problems or other situations in the use None. and disclosure of raised funds (3) The situation for raised funds change project □ Applicable √ Not applicable During the reporting period, the company did not have any changes in the fundraising project. VI. Significant Assets and Equity Sold in Reporting Period 1. Significant Assets Sold □ Applicable √ Not applicable There was no significant asset sold during the reporting period. 2. Substantial Equity Sold □ Applicable √ Not applicable VII. Analysis on Main Subsidiaries and Share Participating Companies √ Applicable □ Not applicable Main subsidiaries and the joint-stock companies influencing over 10% net profit of the Company Unit: Yuan Company Main Registered Operating Operating Company Name Total assets Net assets Net Profit type business capital income profit Bengang Processing Puxiang Cool Subsidiaries and sales 1,920,000,000.00 5,815,249,242.86 1,982,530,453.39 7,379,865,156.54 25,606,949.96 19,378,253.07 Rolling Steel of steel Sheet Co., Ltd. Acquirement and disposal of subsidiaries during the reporting period □ Applicable √ Not applicable Illustration of main joint-stock companies None VIII. Structure Entities controlled by the Company □ Applicable √ Not applicable 22 Bengang Steel Plates Co., Ltd. Annual Report 2019 IX. Prospect for Future Development of the Company 1. The development trend of the industry and the market competition 2020 is a crucial year for fully implementing the spirit of the 19th National Congress of the Party, forging ahead with reforms, accelerating development, and achieving corporate planning goals. From the domestic economic situation, China's economic development is still in a period of important strategic opportunities, and the basic trend of economic stability and long-term improvement has not changed. Reform and opening up has further expanded, technological innovation has continuously given rise to industrial upgrading, new and old domestic kinetic energy has been continuously converted, and the potential for consumption has been released, laying a solid foundation for the sustained and stable development of the economy. In 2020, China gradually entered the peak platform area of steel consumption, but a large number of capacity replacement projects have been put into operation, steel output will continue to grow, and the contradiction of overcapacity will become a problem again; the export of downstream steel industry has suffered Large impact by affected by Sino-US economic and trade frictions, at the same time due to factors such as high price fluctuations of iron ore, scrap steel and coal coke, higher environmental protection operating costs and other factors, the steel industry is facing an extremely severe development situation. 2. The Company’s development strategy The overall work idea of 2020: comprehensively implement the spirit of the 19th National Congress of the Party and the Second, Third and Fourth Plenary Sessions of the 19th CPC National Congress, implement the important speech of General Secretary Xi Jinping during the inspection tour in Liaoning and in-depth promotion of the Northeast Revitalization Symposium, adhere to the supply-side structural reform as the main line, implement the high-quality development requirements, and consistently implement the new development concept to strive to create a new situation of high-quality development of enterprises. 3. Business plan The overall goal of production and operation in 2020: strive to complete 10.42 million tons of pig iron, 10.78 million tons of crude steel, 13.24 million tons of hot rolled sheet, 5.97 million tons of cold rolled sheet, 650,000 tons of special steel, and achieve "three zeros" for safe production. In order to achieve the above objectives, we will focus on the following aspects: (1) Taking the reform of institutional mechanism as a breakthrough to further stimulate the vitality of enterprises. (2) Continuously optimize resource allocation and create new impetus for innovation and development. (3) In-depth implement benchmarking potential and comprehensively improve comprehensive competitive strength. (4) Continue to promote process optimization and build a scientific and rational management and control system. (5) Strengthen party building and ideological work, and create a new situation for enterprise development. 4. Maintaining current business and completing the required capital arrangements of invested projects under construction. The company will use its own funds and bank loans to meet the funds needed for production operations and technological transformation. 5. Potential risks (1)Operational risks: At present, the demand for steel for machinery, automobiles, home appliances and other related industries will slow down, and the contradiction between supply and demand is still outstanding, which increases the competition. Countermeasures: Maintain existing customers, increase new product development, increase investment in technology research and development, optimize product structure, and actively explore new markets for new customer resources; comprehensively improve management level, improve management effectiveness, reduce operating costs, and increase profitability. (2)Foreign trade risks: International trade protectionism is on the rise, anti-dumping cases are increasing, trade friction and trade barriers are becoming more and more serious. In addition, the new epidemic Coronavirus situation has spread globally since 2020. If the foreign epidemic situation cannot be controlled effectively in time, it may cause turmoil in the international steel market. The risk of the company's foreign trade export business has increased. Countermeasures: strengthen international market analysis, track changes in international trade policies, reduce the impact of trade policy mutations on the company's foreign trade; make a plan in trade friction response programs, resolve the adverse effects of trade friction, and enhance the competitiveness of company products in the international market. Conduct research on the market dynamics and industrial policies of the importing country, and grasp the dynamic changes in the importing country's market; find suitable partners, foster superior products, gradually increase the export ratio of high-end products, strengthen after-sales service, and increase customer satisfaction. Companies will pay close attention 23 Bengang Steel Plates Co., Ltd. Annual Report 2019 to the possible adverse effects of the Coronavirus subsequently, increase investment in technology research and development, optimize product structure, and actively expand domestic customer resources to offset possible adverse effects in the foreign trade market. (3)Environmental protection risks: China's environmental protection policies and standards are becoming more and more perfect and strict, and the environmental protection supervision of enterprises is maintaining a strict trend. The tightening of environmental protection standards will cause the company's production costs to increase. In addition, the increased awareness of environmental protection among the public has also increased the environmental protection requirements of the company, which has made the company face greater pressure on environmental protection. Countermeasures: pay attention to various national environmental protection policies, improve corporate environmental standards to meet and properly exceed national standards; strengthen the company's self-supervision and inspection of various sources of pollution, strengthen the environmental awareness of all employees; accelerate the progress of the construction of the identified environmental protection projects to ensure meet national environmental requirements. X. Researches, visits and interviews received in this reporting period 1. Registration form of researches, visits and interviews received in this reporting period □ Applicable √ Not applicable During the reporting period, the Company did not receive any research, communication, interviews and other activities. 24 Bengang Steel Plates Co., Ltd. Annual Report 2019 V. Important Events I. Profit Distribution or Capital Reserve Conversion Formulation, implementation and adjustment of profit distribution policy of common shares especially cash dividend policy during the reporting period □ Applicable √ Not applicable The profit distribution plan or proposal and the plan or proposal of conversion of the capital reserve into share capital in recent three years (including the reporting period) 1. Profit distribution proposal of 2019 As audited by BDO China Shu Lun Pan Certified Public Accountants LLP., the net profit attributable to the parent company of the year 2019 was RMB 555,646,971.4.After adding the retained profit of RMB 1,945,887,269.82 at the beginning of the year, and deducting the actual dividend of RMB 193,768,576.6 from the previous year, the balance of undistributed profit was RMB 2,307,765,664.62. Profits distribution plan of 2019: Considering the uncertainty of the Coronavirus on the economy, it is recommended that the company will not make profit distribution or convert the provident fund into capital in 2019. This plan must be submitted to the 2019 Annual General Meeting of Shareholders for consideration. 2. Profit distribution proposal of 2018 As audited by BDO China Shu Lun Pan Certified Public Accountants LLP., the net profit attributable to the parent company of the year 2018 was RMB 1,036,493,236.07. After adding the retained profit of RMB 1,103,162,610.35 at the beginning of the year, and deducting the actual dividend of RMB 193,768,576.6 from the previous year, the balance of undistributed profit was RMB 1,945,887,269.82. Profits distribution plan of 2018: The company will take existing share capital 3,875,371,532 shares as the base, distributing cash dividends RMB 0.5 per 10 shares (including tax) to shareholders. The company plans to distribute RMB193,768,576.60 dividends of ordinary shares, and the remaining RMB 1,752,118,693.22 will be carried over to next year’s undistributed profits. 3. Profit distribution plan of 2017 As audited by BDO China Shu Lun Pan Certified Public Accountants LLP., the net profit attributable to the parent company of the year 2017 was RMB 1,600,110,229.77. After adding the retained profit of RMB -496,947,619.42 at the beginning of the year, the balance of undistributed profit was RMB 1,103,162,610.35. Profits distribution plan of 2017: The company will take existing share capital 3,875,371,532 shares as the base, distributing cash dividends RMB 0.5 per 10 shares (including tax) to shareholders. The company plans to distribute RMB193,768,576.60 dividends of ordinary shares, and the remaining RMB 909,394,033.75 will be carried over to next year’s undistributed profits. 25 Bengang Steel Plates Co., Ltd. Annual Report 2019 Cash dividend distribution in recent three years Unit: Yuan Amount of cash Ratio of cash Ratio in net profit Net profit dividends in dividend in other Cash attributable to the Amount of Proportion attributable to the other ways way in net profit dividend parent company in cash of cash Year parent company in (repurchasing attributable to the (Including the consolidated dividends in dividends in the consolidated shares) parent company in Tax) financial other ways other ways financial statements the consolidated statements financial statements 2019 0.00 555,646,971.40 0.00% 0.00 0.00% 0.00 0.00% 193,768,576 2018 1,036,493,236.07 18.69% 0.00 0.00% 0.00 0.00% .60 193,768,576 2017 1,600,110,229.77 12.11% 0.00 0.00% 0.00 0.00% .60 Both the Company’s profit and the parent company’s retained earnings are positive however no proposal of cash dividend distribution was proposed during the reporting period □ Applicable √ Not applicable II. Profit Distribution or Capital Reserve Conversion Proposal in the Reporting Period □ Applicable √ Not applicable The company planed not to distribute cash dividend or bonus shares, and not to convert capital reserve into share capital. III. Performance of Committed Issues 1. The fulfilled commitments during the reporting period and under-fulfillment commitments by the end of the period made by actual controller, acquirer, director, supervisor, senior management personnel and other related parties. √ Applicable □ Not applicable Commitment Type of Commitment Commitment Commitments Contents Performance party commitment time period Commitment of shares reform 26 Bengang Steel Plates Co., Ltd. Annual Report 2019 Commitment made in the acquisition report or the equity change report Commitment made during asset restructuring According to the relevant provisions of the China Securities Regulatory Commission, the following commitments can be made to the company’s efforts to fill the rewards: During the tenure, faithfully and diligently perform duties and safeguards the legitimate rights and interests of the company and all shareholders, including but not limited to: 1. Commitment not Company to transfer benefits to Commitment made during directors, Other other units or Under normal initial public offering or Jan 26th 2016 Dec 9th 2019 senior commitment individuals without fulfillment refinancing management compensation or unfair conditions, and not to damage the company’s interests in other ways; 2. Commitment to constrain the behavior of job consumption; 3. Commitment to not use company assets to engage in investment and consumption activities unrelated to the performance of their duties; 4. Commitment to the compensation system established by the board of directors or the Remuneration and 27 Bengang Steel Plates Co., Ltd. Annual Report 2019 Appraisal Committee is linked to the implementation of the company's measures to cover the return; 5. If the company launches an equity incentive plan in the future, the terms of the exercise of the equity incentive plan are linked to the implementation of the company's measures to fill the rewards. The allocated shares will Liaoning be locked for 12 months 12 months Provincial from the date of the from the date Transportation Share sales listing of the new non- of the listing Under normal Mar 5th 2018 Investment restriction public offering of of the new fulfillment Group Co., shares, and will not be non-public Ltd. transferred during this offering period. The allocated shares will be locked for 12 months 12 months CCB Principal from the date of the from the date Asset Share sales listing of the new non- of the listing Under normal Mar 5th 2018 Management restriction public offering of of the new fulfillment Co.,Ltd. shares, and will not be non-public transferred during this offering period. The allocated shares will be locked for 12 months 12 months Beixin from the date of the from the date Ruifeng Fund Share sales listing of the new non- of the listing Under normal Mar 5th 2018 Management restriction public offering of of the new fulfillment Co., Ltd. shares, and will not be non-public transferred during this offering period. The allocated shares will 12 months China Life be locked for 12 months from the date AMP Asset Share sales Under normal from the date of the Mar 5th 2018 of the listing Management restriction fulfillment listing of the new non- of the new Co., Ltd. public offering of non-public 28 Bengang Steel Plates Co., Ltd. Annual Report 2019 shares, and will not be offering transferred during this period. According to the relevant regulations of the China Securities Regulatory Commission, all directors and senior management of the Company have made the following commitments to the Company ’ s fulfillment of the diluted immediate return measures: 1. I promise to perform my duties faithfully and diligently, and safeguard the legitimate rights and interests of the Company and all shareholders . 2. I promise not to deliver Company benefits to other units or directors, Other Under normal individuals without May 22, 2019 Long term senior commitment fulfillment compensation or under management unfair conditions, nor to use other means to damage the Company's interests. 3. I promise to restrict the position- related consumption behavior of company directors and senior management personnel. 4. I promise not to use the Company’s assets to do investment and consumption activities that are not related to the performance of my duties. 5. Within the scope of my responsibilities and authority, I promise to 29 Bengang Steel Plates Co., Ltd. Annual Report 2019 make every effort to promote the company's board of directors or the remuneration system established by the remuneration and appraisal committee to be linked to the implementation of the company's compensation measures, and vote in favor of the relevant proposals reviewed by the company's board of directors and general meeting (If I have voting rights). 6. If the company intends to implement equity incentives, I promise to, within my own responsibilities and jurisdiction, make every effort to promote the Company ’ s proposed equity incentive exercise conditions to be linked to the Company ’ s implementation of the return measures, and to review the Company’s board of directors and shareholders ’ general meetings. and vote in favor of the relevant proposals reviewed by the company's board of directors and general meeting (If I have voting rights). 7. If the future issuance of this commitment and the implementation of the Company ’ s public 30 Bengang Steel Plates Co., Ltd. Annual Report 2019 issuance of convertible corporate bonds are completed, if the China Securities Regulatory Commission makes other new regulatory provisions on the measures for filling returns and their commitments, and the above commitments cannot meet the requirements of the China Securities Regulatory Commission When other regulations are stipulated, a commitment will be issued in accordance with the latest regulations of the China Securities Regulatory Commission. The company's controlling shareholder, Benxi Iron and Steel (Group) Co., Ltd., promised not to interfere with the company's operation and management activities beyond its authority and not to infringe on the Company's interests. the sales companies of Bengang International Trade Co.,Ltd. and Benxi Steel & Bengang Steel plates in Iron (Group) the same region Co., Ltd. and Other Under normal guarantee independent July 24,2019 Long term Bengang Commitment fulfillment personnel, independent Group Co., business, independent Ltd. finance, and independent assets, and are guaranteed not to be 31 Bengang Steel Plates Co., Ltd. Annual Report 2019 in the same registration place or in the same office; The filing of foreign economic and trade operators, taking into account the need to gradually improve the qualification certification of raw material suppliers, customs import and export qualification certification, etc. In the short term, the actual conditions and capabilities for independent import and export business are still lacking. In order to ensure the normal business development of Benxi Steel Plate, the Group agrees that within the period of not more than 5 years from the date of issuance of this commitment, the main import and export business of Benxi Steel Plate will still be represented by Bengang International Trade until Bengang Steel Plates can be independently developed Import and export business, and during this period, Bengang International Trade will provide the necessary support for the establishment and improvement of Bengang's import and export business. In 32 Bengang Steel Plates Co., Ltd. Annual Report 2019 addition, the sales company under Bengang International Trade is only responsible for selling the products of Beiying Iron and Steel Group, and never sells third- party steel products. 3. The three sales companies under the Group, Shanghai Bengang Iron and Steel Sales Co., Ltd., Shanghai Bengang Iron and Steel Materials Co., Ltd., and Guangzhou Free Trade Zone Bengang Sales Co., Ltd., are currently no longer actually engaged in any business activities, as follows: (1 ) Shanghai Bengang Iron & Steel Sales Co., Ltd. filed for bankruptcy in 2014, and the Shanghai Changning District People's Court issued an announcement to appoint Guohao Lawyer (Shanghai) Office as the bankruptcy administrator. After communication with the bankruptcy administrator, it is expected that the bankruptcy and liquidation of Shanghai Bengang Iron and Steel Sales Co., Ltd. will be completed by the end of 2020. Upon completion of the aforementioned 33 Bengang Steel Plates Co., Ltd. Annual Report 2019 bankruptcy liquidation procedures, the relevant procedures for cancellation of Shanghai Bengang Iron and Steel Sales Co., Ltd. will be handled immediately. (2) Shanghai Bengang Iron & Steel Materials Co., Ltd. is a holding subsidiary of Shanghai Bengang Iron & Steel Sales Co., Ltd., and its business license has been revoked. As the shareholder Shanghai Bengang Iron & Steel Sales Co., Ltd. is in the process of bankruptcy and liquidation, Shanghai Bengang Iron & Steel Materials Co., Ltd. was unable to convene a shareholders' meeting to cancel the company and establish a liquidation group according to law. Therefore, the cancellation has not yet been completed. After the aforementioned bankruptcy and liquidation procedures of Shanghai Bengang Iron & Steel Sales Co., Ltd. are completed, the relevant procedures for cancellation of Shanghai Bengang Iron & Steel Materials Co., Ltd. will be processed immediately. (3) Guangzhou Free Trade 34 Bengang Steel Plates Co., Ltd. Annual Report 2019 Zone Bengang Sales Co., Ltd. has a contract arrears dispute with Jiedong County Trading Corporation. According to the Civil Judgment ((1999) Ben Jing No. 116), Guangzhou Free Trade Zone Bengang Sales Co., Ltd. applied to the court to seal 62 properties under the name of Jiedong County Trading Corporation. However, due to serious local protection, property rights and other factors, the content of the judgment has not been enforceable. Later, after applying again from Guangzhou Free Trade Zone Bengang Sales Co., Ltd., the Intermediate People's Court of Benxi City, Liaoning Province issued an execution ruling again, and 62 properties of Jiedong County Trading Corporation were re- sealed. As of February 4, 2022. Except for participating in the litigation activities for the purpose of realizing creditor's rights, Guangzhou Free Trade Zone Bengang Sales Co., Ltd has not carried out other business activities. After the litigation is completed, 35 Bengang Steel Plates Co., Ltd. Annual Report 2019 the relevant procedures for the cancellation of Guangzhou Free Trade Zone Bengang Sales Co., Ltd. will be handled immediately. The Group's horizontal competition with Benxi Steel Plates and the measures and commitments to solve the horizontal competition The Group's 2300mm hot rolling mill production line (hereinafter referred to The company as 'three hot rolling') has completed The main products the produced are ordinary acquisition of sheet, low carbon steel, the 2300mm automobile The use of hot rolling steel, container plates, mill oil pipeline steel, etc., production constitutes the same Benxi Steel & line, and the Other industry competition Iron (Group) July 24,2019 Long term industry Commitment with Bengang Steel Co., Ltd. competition Plates. In order to solve problem has the competition problem been in the same industry, the completely Group signed a lease resolved. agreement with Other Bengang Steel Plates, commitments and Bengang Steel continue to be Plates will be leased fulfilled using third hot rolling. During the lease period, there is no horizontal competition between the Group and Bengang Steel Plates. The Group promises: The Group will continue to permit the use of third hot- rolled steel sheets 36 Bengang Steel Plates Co., Ltd. Annual Report 2019 production line by lease, etc., and the Group will never use it itself or use the third hot-rolled steel production line by any means such as renting, selling, permitting use, entrusted operation, etc. used by any third party other than Bengang Steel Plates. Except for the above situation, there is no other industry competition between the Group and Bengang Steel Plates. 2. Other commitments to avoid inter-industry competition 1. During the period when the Group is the controlling shareholder of Bengang Steel Plates, in addition to the matters listed in Article 1 of this Commitment Letter, the Group and other enterprises controlled by the Group other than Bengang Steel Plates no longer produce or develop any products that compete or may compete with the products produced by Bengang Steel Plates and its subsidiaries at home and abroad, and do not directly or indirectly operate any business that competes with Bengang Steel Plates and its subsidiaries. Businesses 37 Bengang Steel Plates Co., Ltd. Annual Report 2019 that may constitute competition, nor are they involved in investing in any other enterprise that competes with or may compete with products or businesses produced by Bengang Steel Plates and its subsidiaries. 2. If Bengang Steel Plates and its subsidiaries further expand their business scope, the Group and other enterprises controlled by the Group will not compete with the expanded business of Bengang Steel Plates and its subsidiaries; they may compete with Bengang Steel Plates and its subsidiaries If the company's expanded business produces competition, it will withdraw from the competition with Bengang Steel Plates as follows: (1) Stop business that may or may compete with Bengang Steel Plates and its subsidiaries; (2) Will compete The business is incorporated into Bengang Steel Plates and its subsidiaries in a legal and compliant manner; (3) Competitive business is transferred to unrelated third parties. 38 Bengang Steel Plates Co., Ltd. Annual Report 2019 3. If the Group has any business opportunities to engage in or participate in the competition with Bengang Steel Plates's operations, the Group shall immediately notify Bengang Steel Plates of the above commercial opportunities. Within a reasonable period specified in the notice, Bengang Steel Plates If an affirmative answer is made to take advantage of the business opportunity, the Group will endeavour to give the business opportunity to Bengang Steel Plates on terms not less than that provided to any independent third party. 4. If the above commitments are violated, the Group is willing to bear all the responsibilities arising therefrom, and fully compensate or compensate for all direct or indirect losses caused to Bengang Steel Plates. 5. This letter of commitment continues to be effective during the period of the Group as the controlling shareholder of Bengang Steel Plates and cannot be changed or withdrawn Benxi Steel & Other The horizontal The company July 24,2019 Long term Iron (Group) Commitment competition between the has completed 39 Bengang Steel Plates Co., Ltd. Annual Report 2019 Co., Ltd. Group and Bengang the Steel Plates and acquisition of measures and the 1780mm commitments to avoid hot rolling horizontal competition mill 1. Benxi Iron and Steel production (Group) Co., Ltd. line, and the (hereinafter referred to industry as the “Benxi Iron and competition Steel Group”), a problem has subsidiary of the Group, been issues issued the completely "Commitment Letter on resolved. Solving and Avoiding Other Horizontal Competition" commitments to solve the existing continue to be horizontal competition. fulfilled The Group recognizes the commitment letter issued by Benxi Iron and Steel Group and will urge the Benxi Iron and Steel Group to fulfill the relevant commitments. 2. The products produced by the 1780mm hot rolling mill production line of Benxi Beiying Iron and Steel (Group) Co., Ltd. (hereinafter referred to as 'Beiying Iron and Steel Group'), which is a subsidiary of the Group, are the same as or similar to the products of Benxi Steel Sheet and constitute Industry competition. In order to solve the competition in the same industry, Beiying Iron and Steel Group signed a lease agreement with 40 Bengang Steel Plates Co., Ltd. Annual Report 2019 Bengang Steel Plates, and Bengang Steel Plates leased a 1780mm hot rolling mill production line. During the lease period, there is no horizontal competition between the Group and Bengang Steel Plates. The Group promises that it will continue to permit the use of the 1780mm hot rolling mill production line of Bengang Steel Sheets by leasing. And it will not used by any third party other than Bengang Steel Sheets. In addition to the aforementioned hot rolling mill production lines, the products produced by Beiying Iron and Steel Group are mainly wire rods, rebars, and cast pipes. The main products are construction steels, while Bengang Steel Platess mainly produce household electrical appliances and automotive plates. The product attributes of the two Companies, Performance, specifications, materials, and uses are substantially different. Except for the above circumstances, there is no other industry competition or potential 41 Bengang Steel Plates Co., Ltd. Annual Report 2019 industry competition between the Group and Bengang Steel Plates. 2. Other commitments to avoid competition in the industry 1. During the period when the Group is the indirect controlling shareholder of Bengang Steel Plates, in addition to the matters listed in Article 1 of this Commitment Letter, the Group and the companies controlled by the Group except Bengang Steel Plates no longer produce or develop any products that compete or may compete with the products produced by Bengang Plate and its subsidiaries in China and abroad. It may not be a business that may constitute competition, nor will it participate in investing in any other enterprise that competes with or may compete with the products or businesses produced by Bengang Plate and its subsidiaries. 2. If Bengang Steel Plates and its subsidiaries further expand their business scope, the Group and other enterprises controlled by the Group will not compete with the expanded business of 42 Bengang Steel Plates Co., Ltd. Annual Report 2019 Bengang Steel Plates and its subsidiaries; they may compete with Bengang Steel Plates and its subsidiaries If the company's expanded business produces competition, it will withdraw from the competition with Bengang Steel Plates as follows: (1) Stop business that may or may compete with Bengang Steel Plates and its subsidiaries; (2) Will compete The business is incorporated into Bengang Steel Plates and its subsidiaries in a legal and compliant manner; (3) Competitive business is transferred to unrelated third parties. 3. If the Group has any business opportunities to engage in or participate in the competition with Bengang Steel Plates's operation and operation, the Group shall immediately notify Bengang Steel Plates of the above commercial opportunities. If an affirmative answer is made to take advantage of the business opportunity, the Group will endeavour to give the business opportunity to Bengang Steel Plates on terms that are not 43 Bengang Steel Plates Co., Ltd. Annual Report 2019 worse than those provided to or any independent third party. 4. If the above commitments are violated, the Group is willing to bear all the responsibilities arising therefrom, and fully compensate or compensate for all direct or indirect losses caused to Bengang Steel Plates. 5. This letter of commitment continues to be effective during the period of the Group as the indirect controlling shareholder of Benxi Steel Plates and cannot be changed or withdrawn In order to regulate and reduce the Company ’s transactions with controlling shareholders and other related parties, and to protect the interests of the Company and small and medium Benxi Steel & shareholders, Benxi Iron Iron (Group) and Steel (Group) Co., Co., Ltd. and Other Ltd. and Bengang Group Under normal July 24,2019 Long term Bengang Commitment Co., Ltd. have issued the fulfillment Group Co., following commitments: Ltd. "Benxi Iron and Steel (Group) Co., Ltd. and Bengang Group Co., Ltd. (hereinafter collectively referred to as the "Group"), as a direct controlling shareholder and an indirect controlling 44 Bengang Steel Plates Co., Ltd. Annual Report 2019 shareholder of Bengang Steel Platess Co., Ltd. (hereinafter referred to as "Bengang Steel Plates"), in order to protect the interests of Bengang Steel Plates and other shareholders of Bengang Steel Plates, regulate The Group's related transaction with Bengang Steel Plates hereby promises: 1. The Group will fully respect the independent legal person status of Bengang Steel Plates, ensure the independent operation and independent decision-making of Bengang Steel Plates, ensure the independence of Bengang Steel Plates's business, asset integrity and personnel Independence and financial independence to avoid and reduce unnecessary related transactions; the Group will strictly control related transactions with Bengang Steel Plates and its subsidiaries. 2. The Group and other controlled companies promise not to use loans or occupy or misappropriate the funds of Bengang Steel Plates and its subsidiaries to repay debts, substitute funds or otherwise, nor We ask Bengang Steel 45 Bengang Steel Plates Co., Ltd. Annual Report 2019 Plates and its subsidiaries to provide illegal guarantees for the Group and other companies under its control. 3. The Group and other controlled companies and Bengang Steel Plates will minimize related transactions. It is indeed necessary and unavoidable to carry out in the related party transactions, strictly implement the decision- making authority, decision-making procedures, avoidance system and other contents stipulated in Bengang's "Articles of Association" and related party transaction decision-making system, give full play to the role of the board of supervisors and independent directors, and earnestly fulfill the obligation of information disclosure To ensure that transactions are conducted in accordance with the open, fair, and fair principles of market transactions and normal commercial terms, the Group and other companies under control will not require or accept Bengang Steel Sheets to give preferential 46 Bengang Steel Plates Co., Ltd. Annual Report 2019 treatment to third parties in any fair market transaction Conditions to protect other shareholders of Benxi Steel Plates and the interests of Benxi Steel Plates from damage. 4. The Group guarantees that the above commitments are continuously effective and irrevocable as long as Bengang Steel Plates is listed on the domestic stock exchange and the Group acts as its direct and indirect controlling shareholder. If any violation of the above commitments occurs, the Group therefore bear all the losses caused to Bengang Steel Plates. Stock option incentive commitment Other commitments to the company's minority shareholders Whether Commitment Yes fulfilled on time or not 2. The Company made illustrations that there are assets or projects which meet the original profit forecast and the reasons when there are assets or projects profit forecast of the Company and the reporting period is still in the forecast period □ Applicable √ Not applicable 47 Bengang Steel Plates Co., Ltd. Annual Report 2019 IV. Illustrations of Non-Operating Occupation of Funds by the Controlling Shareholder and Related Parties □ Applicable √ Not applicable There was no non-operating occupation of funds by the controlling shareholder and related parties V. Illustrations of the Supervisory Committee and Independent Directors (If Applicable) on the Qualified Audit Report Issued by the CPAs □ Applicable √ Not applicable VI. Illustrations of Changes in the Accounting Policy, Accounting Estimate and Measurement Methods as Compared with the Financial Report of Last Year √ Applicable □ Not applicable (1) Implementation of “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” and “Notice on the revision of the format for the issuance of the consolidated financial statements for the year 2019” 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) on 30 April 2019,and “Notice on the revision of the format for the issuance of the consolidated financial statements for the year 2019” (Cai-Kuai 2019 No.16) which revised the format of financial statement for the general enterprise. The following accounting policy changes have been approved by the company's board of directors and board of supervisors. The major impact of the implementation of the above regulations are as follows: 48 Bengang Steel Plates Co., Ltd. Annual Report 2019 Change of accounting Affected items and amount policy content and Consolidated Financial statement Parent company financial statement reason “Notes receivable and accounts “Notes receivable and accounts receivable” splits into “Notes In the balance sheet, receivable” splits into “Notes receivable” and “Accounts “Notes receivable and receivables” and “Accounts receivable”, the ending balance of accounts receivable” receivables”, the ending balance of last year of “Notes receivables” is splits into “Notes last year of “Notes receivables” is RMB 3,356,020,598.89, the ending receivables” and RMB 3,580,145,843.38, and the ending balance of last year of “Accounts “Accounts balance of last year of “Accounts receivables” is RMB receivables”; “Notes receivables” is RMB 639,482,481.45; 409,553,059.27; payable and accounts “Notes payable and accounts payable” “Notes payable and accounts payable” splits into splits into “Notes payable” and payable” splits into “Notes payable” “Notes payable” and “Accounts payable”, the ending balance and “Accounts payable”; the ending “Accounts payable”; of last year of “Notes payable” is RMB balance of last year of “Notes the comparative data 10,013,192,014.02, the ending balance payable” is RMB 9,213,748,427.22, is adjusted of last year of “Accounts payable” is the ending balance of last year of accordingly. RMB 5,522,042,811.65. "Accounts payable" is RMB 5,940,816,426.48. (2) Implementation of “Accounting Standards for Business Enterprises No.22-Recognition and Measurement of Financial Instruments”, “Accounting Standards for Business Enterprises No.23-Transfer of Financial Assets”, “Accounting Standards for Business Enterprises No.24-Hedging Accounting”, and “Accounting Standards for Business Enterprises No.37 - Presentation of Financial Instruments” (2017 revision). Ministry of Finance revised “Accounting Standards for Business Enterprises No.22- Recognitionand Measurement of Financial Instruments”, “Accounting Standards for Business Enterprises No.23-Transfer of Financial Assets”, “Accounting Standards for Business Enterprises No.24-Hedging Accounting”, and “Accounting Standards for Business Enterprises No.37 - Presentation of Financial Instruments” in 2017, which stipulates financial instruments that have not been derecognised on the date of initial implementation, they shall be adjusted retrospectively, if the previous recognition and measurement are inconsistent with the requirements of the revised standard. No adjustment is required, if the previous comparative financial statements are inconsistent with the requirements of the revised standard. Adjustment is required for retained earnings and other comprehensive income at the beginning of the year due to cumulative impact of retroactive adjustments. The following accounting policy changes have been approved by the company's board of. directors and 49 Bengang Steel Plates Co., Ltd. Annual Report 2019 board of supervisors. Based on adjusted ending balance of previous year in accordance with “Cai-Kuai 2019 No.6” and “Cai- Kuai 2019 No.16”, the major impact of the implementation of the above standards are as follows: Change of accounting Affected items and amount policy content and reason Consolidated Parent company The beginning balance of (1) Non-tradable available- available-for-sale financial assets The beginning balance of available-for- for-sale equity instrument decrease by RMB sale financial assets decrease by RMB investments are designated 1,041,824,829.00. 1,041,824,829.00. as "financial assets The beginning balance of other The beginning balance of other equity measured at fair value equity instrument investment: instrument investment: increase by RMB through other increase by RMB 1,041,824,829.00. comprehensive income" 1,041,824,829.00. Reclassify part of Notes Receivable: decrease by Notes Receivable: decreases by RMB “Accounts receivables” to RMB 3,580,145,843.38 at the 3,356,020,598.89 at the beginning of the “Financial assets at fair beginning of the year. year. value through other Accounts receivable financing: Accounts receivable financing: increases comprehensive income increases RMB 3,580,145,843.38 RMB 3,356,020,598.89 at the beginning (debt instruments)” at the beginning of the year. of the year. 50 Bengang Steel Plates Co., Ltd. Annual Report 2019 Based on adjusted ending balance of previous year according to Cai-Kuai 2019 No. 6 and Cai-Kuai No.16, the financial assets and liabilities recognised and measured before and after the amendment are compared as follows: Consolidated: Old Financial Instrument Standards New Financial Instrument Standards Items Measurement Method Book value Items Measurement Method Book value Cash at bank and on hand Amortized cost 16,567,471,755.77 Cash at bank and on hand Amortized cost 16,567,471,755.77 Financial assets at fair value through Financial assets held for Fair value through profit or loss Fair value through profit or loss profit or loss trading Derivative financial assets Fair value through profit or loss Derivative financial assets Fair value through profit or loss Notes receivable Amortized cost Notes receivable Amortized cost 3,580,145,843.38 Accounts Receivable Fair value through other comprehensive 3,580,145,843.38 financing income Accounts receivable Amortized cost 639,482,481.45 Accounts receivable Amortized cost 639,482,481.45 Fair value through other comprehensive Receivables financing income Other receivables Amortized cost 202,763,964.98 Other receivable Amortized cost 202,763,964.98 Held to maturity investments Debt investment (Including Amortized cost Amortized cost (Including other current assets) other current assets) Available for sale financial assets Fair value through other Debt investment (Including Amortized cost (Including other current assets) comprehensive income(Debt other current assets) 51 Bengang Steel Plates Co., Ltd. Annual Report 2019 Old Financial Instrument Standards New Financial Instrument Standards instruments) Other debt investment Fair value through other comprehensive (Including other current income assets) Fair value through other Financial assets held for comprehensive income trading Fair value through profit or loss (Equity instruments) Other non-current financial assets Other equity instruments Fair value through other comprehensive investment income Financial assets held for trading Fair value through profit or loss Other non-current financial Cost (Equity instruments) 1,041,824,829.00 assets Other equity instruments Fair value through other comprehensive 1,041,824,829.00 investment income Amortized cost Long-term account Amortized cost Long-term account receivable receivable Financial liabilities at fair value Financial liabilities held for Fair value through profit or loss Fair value through profit or loss through profit or loss trading Derivative financial Derivative financial liabilities Fair value through profit or loss Fair value through profit or loss liabilities 52 Bengang Steel Plates Co., Ltd. Annual Report 2019 Parent company Old Financial Instrument Standards New Financial Instrument Standards Items Measurement Method Book value Items Measurement Method Book value Cash at bank and on hand Amortized cost 15,536,305,375.00 Cash at bank and on hand Amortized cost 15,536,305,375.00 Financial assets at fair value Fair value through profit or loss Financial assets held for trading Fair value through profit or loss through profit or loss Derivative financial assets Fair value through profit or loss Derivative financial assets Fair value through profit or loss Notes receivable Amortized cost Notes receivable Amortized cost 3,356,020,598.89 Fair value through other Accounts receivable financing 3,356,020,598.89 comprehensive income Accounts receivable Amortized cost 409,553,059.27 Accounts receivable Amortized cost 409,553,059.27 Fair value through other Accounts receivable financing comprehensive income Other receivables Amortized cost 235,037,391.46 Other receivables Amortized cost 235,037,391.46 Held to maturity investments Debt investment (Including other Amortized cost Amortized cost (Including other current assets) current assets) Available for sale financial Fair value through other Debt investment (Including other Amortized cost 53 Bengang Steel Plates Co., Ltd. Annual Report 2019 Old Financial Instrument Standards New Financial Instrument Standards assets (Including other current comprehensive income(Debt current assets) assets) instruments) Other debt investment (Including Fair value through other other current assets) comprehensive income Fair value through other Financial assets held for trading Fair value through profit or loss comprehensive income (Equity Other non-current financial assets instruments ) Other equity instruments investment Fair value through other comprehensive income Cost (Equity instruments) Financial assets held for trading Fair value through profit or loss Other non-current financial assets 1,041,624,829.00 Other equity instruments investment Fair value through other 1,041,624,829.00 comprehensive income Long-term account receivable Amortized cost Long-term account receivable Amortized cost Financial liabilities at fair Fair value through profit or loss Financial liabilities held for trading Fair value through profit or loss value through profit or loss Derivative financial liabilities Fair value through profit or loss Derivative financial liabilities Fair value through profit or loss 54 Bengang Steel Plates Co., Ltd. Annual Report 2019 (3) Implementation of “Accounting Standards for Business Enterprises No. 7-Non-Monetary Assets Exchange” (2019 Revision) Ministry of Finance issued “Accounting Standards for Business Enterprises No. 7-Non-Monetary Assets Exchange” (Revised 2019) (Caikuai [2019] No. 8) on May 9, 2019, and came into effect on June 10, 2019. For non-monetary assets exchange occurred from January 1, 2019 to the effective date, the adjustment shall be made accordingly. For non-monetary asset exchanges occurred before January 1, 2019, retrospective adjustments are not required. The implementation of the above standards by the company has no significant impact for the reporting period. (4) Implementation of “Accounting Standards for Business Enterprises No. 12-Debt Restructuring” (2019 Revision) Ministry of Finance issued “Accounting Standards for Business Enterprises No. 12-Debt Restructuring” 2019 Revision) (Caikuai [2019] No. 9) on June 17, 2019, and came into effect on June 17, 2019. For debt restructuring occurred from January 1, 2019 to the effective date, the adjustment shall be made accordingly. For debt restructuring occurred before January 1, 2019, retrospective adjustments are not required. The implementation of the above standards by the company has no significant impact for the reporting period. Ⅶ. Illustrations of Retrospective Restatement Due to Correction of Significant Accounting Errors in the Reporting Period □ Applicable √ Not applicable There was no retrospective restatement due to correction of significant accounting errors during the reporting period VIII. Illustrations of Changes of the Consolidation Scope as Compared with the Financial Report of Last Year □ Applicable √ Not applicable There is no change of the consolidation scope during the reporting period. IX. Appointment and Dismiss of Certified Accountant’s Firm Accountant’s firm currently appointed Name of the domestic accountant’s firm BDO China Shu Lun Pan Certified Public Accountants LLP Payment to the domestic accountant’s firm (RMB 10 280 thousand) Service life of domestic accountant’s firm providing 12 audit service Name of CPAs from the domestic accountant’s firm Wu Xue, Li Guiying Service life of domestic accountants’ providing audit 5 service Name of the overseas accountant’s firm (if any) None 55 Bengang Steel Plates Co., Ltd. Annual Report 2019 Payment to overseas accountant’s firm (RMB 10 0 thousand) (if any) Service life of overseas accountant’s firm providing None audit service (if any) Name of CPAs from the overseas accountant’s firm None (if any) Whether the accountant’s firm was changed during the reporting period □ Yes √ No Engagement of accountant’s firms, financial consultants or sponsors for internal control auditing √ Applicable □ Not applicable The Company appointed BDO China Shu Lun Pan Certified Public Accountants LLP as the auditor of internal control auditing at RMB 600 thousand. During the year, due to the issue of convertible corporate bonds in this year, the company hired Guotai Junan Securities Co., Ltd. as the sponsor, and has not yet paid the fee. X. Risk of Suspension or Termination of Listing after the Disclosure of Annual Report □ Applicable √ Not applicable XI. Bankrupt and Reforming Events □ Applicable √ Not applicable There was no bankrupt and reforming event during the reporting period. XII. Significant Lawsuits and Arbitrations □ Applicable √ Not applicable There was no significant lawsuit or arbitrations during the reporting period. XIII. Punishment and Rectification □ Applicable √ Not applicable There was no punishment or rectification during the reporting period. XIV. Credit Status of the Company and its Controlling Shareholders and Actual Controllers □ Applicable √ Not applicable XV. Implementation Situation of Stock Incentive Plan of the Company, Employee Stock Ownership Plan or Other Employee Incentive Measures □ Applicable √ Not applicable There was no implementation situation of stock incentive plan of the Company, employee stock ownership plan or other employee incentive measures during the reporting period. XVI. Major Related Party Transactions 1. Related party transactions relevant to daily operations √ Applicable □ Not applicable 56 Bengang Steel Plates Co., Ltd. Annual Report 2019 The Amount approve Means Pricing Price of Whethe Availabl d of Type of Content of principle of related Proporti r exceed e trading paymen Index related related of relate party on of the market Date of Related Relation limit of t of of party party related d transacti similar approve price of disclosu parties ship transacti related disclos transacti transactio party party ons (in transacti d similar re ons (in party ure ons ns transacti transa 10 ons limited transacti 10 transacti ons ctions thousan (Y/N) ons thousan ons d) d) Execute Benxi Purchas Relate accordi Steel & Parent e of Accounts On d 27,611. ng to 2019.04 Iron Compan goods payable agreeme agree 0.56% 50,000 No No 81 the .19 (Group) y and for repair nt ment agreeme Co., Ltd. services price nt Bengang Execute Cold- Purchas Relate accordi rolled Same e of On d ng to 2019.04 Stainless controll goods Products agreeme agree 171.87 0.00% 1,000 No Yes the .19 Steel er and nt ment agreeme Dandong services price nt Co., Ltd. Benxi Execute Purchas Relate Steel & accordi Same e of On d Iron ng to 2019.04 controll goods Labor cost agreeme agree 864.66 0.02% No No (Group) the .19 er and nt ment Mining agreeme services price Co., Ltd. nt Benxi Raw Execute Purchas Relate Steel & material accordi Same e of On d Iron and 466,510 ng to 2019.04 controll goods agreeme agree 9.48% 500,000 No Yes (Group) suppleme .9 the .19 er and nt ment Mining ntary agreeme services price Co., Ltd. material nt Benxi Execute Purchas Relate Steel & accordi Same e of On d Iron 1,318.1 ng to 2019.04 controll goods Freight agreeme agree 0.03% No Yes (Group) 6 the .19 er and nt ment Mining agreeme services price Co., Ltd. nt Benxi Steel & Raw Execute Purchas Relate Iron material accordi Same e of On d (Group) and 27,932. ng to 2019.04 controll goods agreeme agree 0.57% 30,000 No No Metallurg suppleme 17 the .19 er and nt ment y ntary agreeme services price Residues material nt Co., Ltd. Benxi Steel & Iron Execute Purchas Relate (Group) accordi Same e of On d Steel & Processin ng to 2019.04 controll goods agreeme agree 127.67 0.00% 300 No No Iron g fee the .19 er and nt ment Process agreeme services price and nt Logistics Co., Ltd. Benxi Same Purchas On Relate Execute Steel & Raw 3,648.9 2019.04 controll e of agreeme d 0.07% 10,000 No accordi Yes Iron er goods materials nt agree 5 ng to .19 (Group) and ment the 57 Bengang Steel Plates Co., Ltd. Annual Report 2019 The Amount approve Means Pricing Price of Whethe Availabl d of Type of Content of principle of related Proporti r exceed e trading paymen Index related related of relate party on of the market Date of Related Relation limit of t of of party party related d transacti similar approve price of disclosu parties ship transacti related disclos transacti transactio party party ons (in transacti d similar re ons (in party ure ons ns transacti transa 10 ons limited transacti 10 transacti ons ctions thousan (Y/N) ons thousan ons d) d) Real- services price agreeme estate nt Develop ment Co., Ltd. Benxi Steel & Execute Iron Purchas Relate accordi (Group) Same e of On d Spare 11,131. ng to 2019.04 Machiner controll goods agreeme agree 0.23% 25,000 No Yes parts 68 the .19 y er and nt ment agreeme Manufact services price nt ure Co., Ltd. Benxi Steel & Execute Iron Purchas Relate accordi (Group) Same e of On d Repair 2,922.7 ng to 2019.04 Machiner controll goods agreeme agree 0.06% No No services 4 the .19 y er and nt ment agreeme Manufact services price nt ure Co., Ltd. Benxi Execute Steel & Purchas Relate accordi Iron Same e of On d Spare ng to 2019.04 (Group) controll goods agreeme agree 787.21 0.02% 50,000 No No parts the .19 Construct er and nt ment agreeme ion Co., services price nt Ltd. Benxi Execute Steel & Purchas Relate accordi Iron Same e of On d Project 18,016. ng to 2019.04 (Group) controll goods agreeme agree 0.37% No No fee 18 the .19 Construct er and nt ment agreeme ion Co., services price nt Ltd. Benxi Execute Steel & Purchas Relate accordi Iron Same e of On d Repair 21,561. ng to 2019.04 (Group) controll goods agreeme agree 0.44% No No services 78 the .19 Construct er and nt ment agreeme ion Co., services price nt Ltd. Benxi Raw Execute Steel & Purchas Relate material accordi Iron Same e of On d and ng to 2019.04 (Group) controll goods agreeme agree 236.1 0.00% No Yes suppleme the .19 Construct er and nt ment ntary agreeme ion Co., services price material nt Ltd. Benxi Same Purchas Freight On Relate Execute No 2019.04 502.47 0.01% No Steel & controll e of agreeme d accordi .19 58 Bengang Steel Plates Co., Ltd. Annual Report 2019 The Amount approve Means Pricing Price of Whethe Availabl d of Type of Content of principle of related Proporti r exceed e trading paymen Index related related of relate party on of the market Date of Related Relation limit of t of of party party related d transacti similar approve price of disclosu parties ship transacti related disclos transacti transactio party party ons (in transacti d similar re ons (in party ure ons ns transacti transa 10 ons limited transacti 10 transacti ons ctions thousan (Y/N) ons thousan ons d) d) Iron er goods nt agree ng to (Group) and ment the Construct services price agreeme ion Co., nt Ltd. Benxi Steel & Raw Execute Purchas Relate Iron material accordi Same e of On d (Group) and ng to 2019.04 controll goods agreeme agree 19,118 0.39% 30,000 No Yes Industrial suppleme the .19 er and nt ment Develop ntary agreeme services price ment Co., material nt Ltd. Benxi Steel & Execute Purchas Relate Iron accordi Same e of On d (Group) Repair 2,157.6 ng to 2019.04 controll goods agreeme agree 0.04% No No Industrial services 5 the .19 er and nt ment Develop agreeme services price ment Co., nt Ltd. Benxi Steel & Execute Purchas Relate Iron accordi Same e of On d (Group) ng to 2019.04 controll goods Freight agreeme agree 446.8 0.01% No No Industrial the .19 er and nt ment Develop agreeme services price ment Co., nt Ltd. Benxi Steel & Execute Purchas Relate Iron accordi Same e of On d (Group) Project ng to 2019.04 controll goods agreeme agree 235 0.00% No No Industrial fee the .19 er and nt ment Develop agreeme services price ment Co., nt Ltd. Benxi Raw Steel & material Execute Purchas Relate Iron & accordi Same e of On d (Group) suppleme ng to 2019.04 controll goods agreeme agree 256.76 0.01% 28,000 No Yes Construct ntary the .19 er and nt ment ion and materials agreeme services price Repairing & spare nt Co., Ltd. parts Benxi Steel & Execute Purchas Relate Iron accordi Same e of On d (Group) Project 4,998.3 ng to 2019.04 controll goods agreeme agree 0.10% No No Construct fee 4 the .19 er and nt ment ion and agreeme services price Repairing nt Co., Ltd. 59 Bengang Steel Plates Co., Ltd. Annual Report 2019 The Amount approve Means Pricing Price of Whethe Availabl d of Type of Content of principle of related Proporti r exceed e trading paymen Index related related of relate party on of the market Date of Related Relation limit of t of of party party related d transacti similar approve price of disclosu parties ship transacti related disclos transacti transactio party party ons (in transacti d similar re ons (in party ure ons ns transacti transa 10 ons limited transacti 10 transacti ons ctions thousan (Y/N) ons thousan ons d) d) Benxi Steel & Execute Purchas Relate Iron accordi Same e of Accounts On d (Group) 19,506. ng to 2019.04 controll goods payable agreeme agree 0.40% No No Construct 98 the .19 er and for repair nt ment ion and agreeme services price Repairing nt Co., Ltd. Raw Execute Purchas Relate Bengang material accordi Same e of On d Electronic and ng to 2019.04 controll goods agreeme agree 13,763 0.28% 20,000 No Yes s and Gas suppleme the .19 er and nt ment Co., Ltd. ntary agreeme services price material nt Execute Purchas Relate Bengang accordi Same e of On d Electronic Repair 1,879.3 ng to 2019.04 controll goods agreeme agree 0.04% No No s and Gas services 6 the .19 er and nt ment Co., Ltd. agreeme services price nt Benxi Execute High-tech Purchas Relate accordi Drilling Same e of On d Spare ng to 2019.04 Tools controll goods agreeme agree 26.63 0.00% 500 No Yes parts the .19 Manufact er and nt ment agreeme ure Co., services price nt Ltd. Benxi Execute Purchas Relate New accordi Same e of On d Career Repair ng to 2019.04 controll goods agreeme agree 487.81 0.01% 1,200 No No Develop services the .19 er and nt ment ment Co., agreeme services price Ltd. nt Raw Benxi Execute Purchas material Relate New accordi Same e of and On d Career ng to 2019.04 controll goods suppleme agreeme agree 907.16 0.02% No No Develop the .19 er and ntary nt ment ment Co., agreeme services material price Ltd. nt and food Execute Liaoning Purchas Relate accordi Metallurg Same e of On d Spare 1,202.0 ng to 2019.04 y controll goods agreeme agree 0.02% 1,500 No Yes parts 1 the .19 Technicia er and nt ment agreeme n College services price nt Liaoning 2019.04 Execute Metallurg Purchas Relate .19 accordi ical Same e of On d Project ng to Vocationa controll goods agreeme agree 0.00% 1,000 No Yes fee the l and er and nt ment agreeme Technical services price nt College 60 Bengang Steel Plates Co., Ltd. Annual Report 2019 The Amount approve Means Pricing Price of Whethe Availabl d of Type of Content of principle of related Proporti r exceed e trading paymen Index related related of relate party on of the market Date of Related Relation limit of t of of party party related d transacti similar approve price of disclosu parties ship transacti related disclos transacti transactio party party ons (in transacti d similar re ons (in party ure ons ns transacti transa 10 ons limited transacti 10 transacti ons ctions thousan (Y/N) ons thousan ons d) d) Liaoning 2019.04 Execute Metallurg Purchas Relate .19 accordi ical Same e of On d Repair ng to Vocationa controll goods agreeme agree 580.5 0.01% No No services the l and er and nt ment agreeme Technical services price nt College Bengang 2019.04 Group Execute .19 Purchas Relate Internatio accordi Same e of On d nal Agency 6,309.7 ng to controll goods agreeme agree 0.13% 25,000 No No Economic fee 3 the er and nt ment and agreeme services price Trading nt Co., Ltd. Bengang 2019.04 Group Execute .19 Purchas Relate Internatio accordi Same e of On d nal Port ng to controll goods agreeme agree 7,099.2 0.14% No No Economic surcharges the er and nt ment and agreeme services price Trading nt Co., Ltd. Benxi 2019.04 Steel & .19 Execute Iron Purchas Relate accordi (Group) Same e of On d Spare ng to Informati controll goods agreeme agree 785.28 0.02% 10,000 No Yes parts the on and er and nt ment agreeme Automati services price nt c Tech Co., Ltd. Benxi 2019.04 Steel & .19 Execute Iron Purchas Relate accordi (Group) Same e of On d Project 1,942.5 ng to Informati controll goods agreeme agree 0.04% No No fee 2 the on and er and nt ment agreeme Automati services price nt c Tech Co., Ltd. Benxi 2019.04 Steel & .19 Execute Iron Purchas Relate accordi (Group) Same e of On d Repair 3,483.2 ng to Informati controll goods agreeme agree 0.07% No No services 4 the on and er and nt ment agreeme Automati services price nt c Tech Co., Ltd. Benxi Same Purchas On Relate Execute 2019.04 Steel & Heating controll e of agreeme d 115.25 0.00% 500 No accordi No .19 Iron er goods costs nt agree ng to (Group) and ment the 61 Bengang Steel Plates Co., Ltd. Annual Report 2019 The Amount approve Means Pricing Price of Whethe Availabl d of Type of Content of principle of related Proporti r exceed e trading paymen Index related related of relate party on of the market Date of Related Relation limit of t of of party party related d transacti similar approve price of disclosu parties ship transacti related disclos transacti transactio party party ons (in transacti d similar re ons (in party ure ons ns transacti transa 10 ons limited transacti 10 transacti ons ctions thousan (Y/N) ons thousan ons d) d) Thermal services price agreeme Power nt Develop ment Co., Ltd. Benxi 2019.04 Steel & .19 Raw Execute Iron Purchas Relate material accordi (Group) Same e of On d and ng to Thermal controll goods agreeme agree 70.93 0.00% No Yes suppleme the Power er and nt ment ntary agreeme Develop services price material nt ment Co., Ltd. Benxi Execute 2019.04 Purchas Relate Steel & accordi .19 Same e of On d Iron Design ng to controll goods agreeme agree 1,323.4 0.03% 1,000 No No (Group) fees the er and nt ment Designing agreeme services price Institute nt Benxi Raw Execute 2019.04 Purchas Relate Beiying material accordi .19 Same e of On d Steel & and 1,154,3 1,800,0 ng to controll goods agreeme agree 23.46% No Yes Iron suppleme 78.53 00 the er and nt ment (Group) ntary agreeme services price Co., Ltd. material nt Benxi Execute 2019.04 Purchas Relate Beiying accordi .19 Same e of On d Steel & Energy & 54,489. ng to controll goods agreeme agree 1.11% No No Iron Power 91 the er and nt ment (Group) agreeme services price Co., Ltd. nt Benxi Execute 2019.04 Purchas Relate Beiying accordi .19 Same e of On d Steel & ng to controll goods Freight agreeme agree 571.46 0.01% No No Iron the er and nt ment (Group) agreeme services price Co., Ltd. nt Benxi Execute 2019.04 Purchas Relate Beiying accordi .19 Same e of On d Steel & 8,663.2 ng to controll goods Labor cost agreeme agree 0.18% No No Iron 3 the er and nt ment (Group) agreeme services price Co., Ltd. nt Benxi Execute 2019.04 Purchas Relate Beiying accordi .19 Same e of On d Steel & Spare 1,308.4 ng to controll goods agreeme agree 0.03% No Yes Iron parts 5 the er and nt ment (Group) agreeme services price Co., Ltd. nt Liaoning Same Purchas Raw On Relate 8,758.9 Execute 2019.04 Hengtong controll e of material agreeme d 6 0.18% 15,000 No accordi No .19 Metallurg er goods and spare nt agree ng to 62 Bengang Steel Plates Co., Ltd. Annual Report 2019 The Amount approve Means Pricing Price of Whethe Availabl d of Type of Content of principle of related Proporti r exceed e trading paymen Index related related of relate party on of the market Date of Related Relation limit of t of of party party related d transacti similar approve price of disclosu parties ship transacti related disclos transacti transactio party party ons (in transacti d similar re ons (in party ure ons ns transacti transa 10 ons limited transacti 10 transacti ons ctions thousan (Y/N) ons thousan ons d) d) ical and parts ment the Equipmen services price agreeme t nt Manufact ure Co., Ltd. Liaoning Execute 2019.04 Purchas Relate Hengtai Raw accordi .19 Same e of On d Heavy material ng to controll goods agreeme agree 231.09 0.00% No Yes Machiner and spare the er and nt ment y Co., parts agreeme services price Ltd. nt Liaoning Execute 2019.04 Purchas Relate Hengtai accordi .19 Same e of Repair On d Heavy 1,930.3 ng to controll goods and labor agreeme agree 0.04% 8,000 No No Machiner 5 the er and cost nt ment y Co., agreeme services price Ltd. nt Execute 2019.04 Purchas Relate accordi .19 Bengang Same e of Property On d ng to Group controll goods managem agreeme agree 0.00% No No the Co., Ltd. er and ent fee nt ment agreeme services price nt Execute 2019.04 Purchas Relate accordi .19 Bengang e of On d Controll 15,507. ng to Group goods Labor cost agreeme agree 0.32% No No er 9 the Co., Ltd. and nt ment agreeme services price nt Execute 2019.04 Relate Bengang Sales of accordi .19 Same On d Electronic goods Energy & ng to controll agreeme agree 76.74 0.00% 500 No Yes s and Gas and Power the er nt ment Co., Ltd. services agreeme price nt Raw 2019.04 Benxi material Execute .19 Relate Beiying Sales of & accordi Same On d Steel & goods suppleme 500,154 ng to controll agreeme agree 9.48% 300,000 No Yes Iron and ntary .15 the er nt ment (Group) services materials agreeme price Co., Ltd. & spare nt parts Benxi Execute 2019.04 Relate Beiying Sales of accordi .19 Same On d Steel & goods 1,286.5 ng to controll Products agreeme agree 0.02% No Yes Iron and 9 the er nt ment (Group) services agreeme price Co., Ltd. nt Benxi Same Sales of Energy & On Relate 21,662. Execute 2019.04 Beiying controll goods agreeme d 0.41% No accordi No .19 Power 54 Steel & er and nt agree ng to 63 Bengang Steel Plates Co., Ltd. Annual Report 2019 The Amount approve Means Pricing Price of Whethe Availabl d of Type of Content of principle of related Proporti r exceed e trading paymen Index related related of relate party on of the market Date of Related Relation limit of t of of party party related d transacti similar approve price of disclosu parties ship transacti related disclos transacti transactio party party ons (in transacti d similar re ons (in party ure ons ns transacti transa 10 ons limited transacti 10 transacti ons ctions thousan (Y/N) ons thousan ons d) d) Iron services ment the (Group) price agreeme Co., Ltd. nt Benxi 2019.04 Steel & .19 Execute Iron Relate Sales of accordi (Group) Same On d goods Energy & ng to Real- controll agreeme agree 10.44 0.00% 500 No No and Power the estate er nt ment services agreeme Develop price nt ment Co., Ltd. Benxi 2019.04 Steel & .19 Iron Execute Relate (Group) Sales of accordi Same On d Steel & goods Energy & ng to controll agreeme agree 36.79 0.00% 500 No No Iron and Power the er nt ment Process services agreeme price and nt Logistics Co., Ltd. Benxi 2019.04 Steel & .19 Iron Execute Relate (Group) Sales of accordi Same On d Steel & goods ng to controll Products agreeme agree 89.25 0.00% No Yes Iron and the er nt ment Process services agreeme price and nt Logistics Co., Ltd. Benxi 2019.04 Steel & .19 Execute Iron Relate Sales of accordi (Group) Same On d goods ng to Machiner controll Products agreeme agree 980.32 0.02% 8,000 No Yes and the y er nt ment services agreeme Manufact price nt ure Co., Ltd. Benxi 2019.04 Steel & .19 Execute Iron Relate Sales of accordi (Group) Same On d goods Energy & ng to Machiner controll agreeme agree 2,137.3 0.04% No No and Power the y er nt ment services agreeme Manufact price nt ure Co., Ltd. Benxi Sales of Raw Relate Execute 2019.04 Same On Steel & goods material agreeme d accordi Yes .19 controll 641.3 0.01% No Iron and & agree ng to er nt (Group) services suppleme ment the 64 Bengang Steel Plates Co., Ltd. Annual Report 2019 The Amount approve Means Pricing Price of Whethe Availabl d of Type of Content of principle of related Proporti r exceed e trading paymen Index related related of relate party on of the market Date of Related Relation limit of t of of party party related d transacti similar approve price of disclosu parties ship transacti related disclos transacti transactio party party ons (in transacti d similar re ons (in party ure ons ns transacti transa 10 ons limited transacti 10 transacti ons ctions thousan (Y/N) ons thousan ons d) d) Machiner ntary price agreeme y materials nt Manufact & spare ure Co., parts Ltd. Benxi 2019.04 Execute Steel & Relate .19 Sales of accordi Iron Same On d goods Energy & ng to (Group) controll agreeme agree 593.8 0.01% 10,000 No No and Power the Construct er nt ment services agreeme ion Co., price nt Ltd. Raw 2019.04 Benxi material Execute .19 Steel & Relate Sales of & accordi Iron Same On d goods suppleme ng to (Group) controll agreeme agree 5,781 0.11% No Yes and ntary the Construct er nt ment services materials agreeme ion Co., price & spare nt Ltd. parts Benxi Execute 2019.04 Relate Steel & Sales of accordi .19 Same On d Iron goods Energy & 64,747. ng to controll agreeme agree 1.23% 100,000 No No (Group) and Power 81 the er nt ment Mining services agreeme price Co., Ltd. nt Raw 2019.04 Benxi material Execute .19 Relate Steel & Sales of & accordi Same On d Iron goods suppleme 10,078. ng to controll agreeme agree 0.19% No Yes (Group) and ntary 34 the er nt ment Mining services materials agreeme price Co., Ltd. & spare nt parts Benxi Execute 2019.04 Relate Steel & Sales of accordi .19 Same On d Iron goods Freight 1,031.7 ng to controll agreeme agree 0.02% No No (Group) and revenue 9 the er nt ment Mining services agreeme price Co., Ltd. nt Benxi Execute 2019.04 Relate Steel & Sales of accordi .19 Same On d Iron goods ng to controll Products agreeme agree 502.82 0.01% No Yes (Group) and the er nt ment Mining services agreeme price Co., Ltd. nt Benxi Execute 2019.04 Steel & Relate .19 Sales of accordi Iron Same On d goods Energy & 2,639.7 ng to (Group) controll agreeme agree 0.05% 8,000 No No and Power 3 the Thermal er nt ment services agreeme Power price nt Develop 65 Bengang Steel Plates Co., Ltd. Annual Report 2019 The Amount approve Means Pricing Price of Whethe Availabl d of Type of Content of principle of related Proporti r exceed e trading paymen Index related related of relate party on of the market Date of Related Relation limit of t of of party party related d transacti similar approve price of disclosu parties ship transacti related disclos transacti transactio party party ons (in transacti d similar re ons (in party ure ons ns transacti transa 10 ons limited transacti 10 transacti ons ctions thousan (Y/N) ons thousan ons d) d) ment Co., Ltd. Benxi Raw Steel & material Execute Iron Relate Sales of & accordi (Group) Same On d goods suppleme 2,749.2 ng to 2019.04 Thermal controll agreeme agree 0.05% No Yes and ntary 1 the .19 Power er nt ment services materials agreeme Develop price & spare nt ment Co., parts Ltd. Benxi 2019.04 Steel & .19 Execute Iron Relate Sales of accordi (Group) Same On d goods Freight ng to Thermal controll agreeme agree 0.00% No No and revenue the Power er nt ment services agreeme Develop price nt ment Co., Ltd. Benxi 2019.04 Steel & Execute .19 Relate Iron Sales of accordi Same On d (Group) goods Energy & ng to controll agreeme agree 827.49 0.02% 5,000 No No Industrial and Power the er nt ment Develop services agreeme price ment Co., nt Ltd. Benxi 2019.04 Steel & Execute .19 Relate Iron Sales of accordi Same On d (Group) goods ng to controll Products agreeme agree 0.00% No Yes Industrial and the er nt ment Develop services agreeme price ment Co., nt Ltd. Benxi Raw 2019.04 Steel & material Execute .19 Relate Iron Sales of & accordi Same On d (Group) goods suppleme 2,295.9 ng to controll agreeme agree 0.04% No Yes Industrial and ntary 6 the er nt ment Develop services materials agreeme price ment Co., & spare nt Ltd. parts Benxi 2019.04 Steel & .19 Execute Iron Relate Sales of accordi (Group) Same On d goods Energy & ng to Informati controll agreeme agree 15.87 0.00% 300 No No and Power the on and er nt ment services agreeme Automati price nt c Tech Co., Ltd. 66 Bengang Steel Plates Co., Ltd. Annual Report 2019 The Amount approve Means Pricing Price of Whethe Availabl d of Type of Content of principle of related Proporti r exceed e trading paymen Index related related of relate party on of the market Date of Related Relation limit of t of of party party related d transacti similar approve price of disclosu parties ship transacti related disclos transacti transactio party party ons (in transacti d similar re ons (in party ure ons ns transacti transa 10 ons limited transacti 10 transacti ons ctions thousan (Y/N) ons thousan ons d) d) Benxi 2019.04 Steel & Execute .19 Relate Iron Sales of accordi Same On d (Group) goods Energy & ng to controll agreeme agree 133.05 0.00% 8,000 No No Construct and Power the er nt ment ion and services agreeme price Repairing nt Co., Ltd. Benxi Raw 2019.04 Steel & material Execute .19 Relate Iron Sales of & accordi Same On d (Group) goods suppleme ng to controll agreeme agree 93.84 0.00% No Yes Construct and ntary the er nt ment ion and services materials agreeme price Repairing & spare nt Co., Ltd. parts Benxi 2019.04 Steel & Execute .19 Relate Iron Sales of accordi Same On d (Group) goods Energy & ng to controll agreeme agree 532.33 0.01% 30,000 No No Metallurg and Power the er nt ment y services agreeme price Residues nt Co., Ltd. Benxi Raw 2019.04 Steel & material Execute .19 Relate Iron Sales of & accordi Same On d (Group) goods suppleme 25,018. ng to controll agreeme agree 0.47% No Yes Metallurg and ntary 15 the er nt ment y services materials agreeme price Residues & spare nt Co., Ltd. parts Benxi 2019.04 Steel & Execute .19 Relate Iron Sales of accordi Same On d (Group) goods Freight ng to controll agreeme agree 0.00% No No Metallurg and revenue the er nt ment y services agreeme price Residues nt Co., Ltd. Benxi 2019.04 Steel & Execute .19 Relate Iron Sales of accordi Same On d (Group) goods ng to controll Products agreeme agree 0.00% No Yes Metallurg and the er nt ment y services agreeme price Residues nt Co., Ltd. Benxi Relate Execute 2019.04 Sales of Steel & Parent On d accordi .19 goods Energy & Iron Compan agreeme agree 232.43 0.00% 1,000 No ng to No and Power (Group) y nt ment the services Co., Ltd. price agreeme 67 Bengang Steel Plates Co., Ltd. Annual Report 2019 The Amount approve Means Pricing Price of Whethe Availabl d of Type of Content of principle of related Proporti r exceed e trading paymen Index related related of relate party on of the market Date of Related Relation limit of t of of party party related d transacti similar approve price of disclosu parties ship transacti related disclos transacti transactio party party ons (in transacti d similar re ons (in party ure ons ns transacti transa 10 ons limited transacti 10 transacti ons ctions thousan (Y/N) ons thousan ons d) d) nt Raw 2019.04 material Execute .19 Benxi Relate Sales of & accordi Steel & Parent On d goods suppleme ng to Iron Compan agreeme agree 796.46 0.02% No Yes and ntary the (Group) y nt ment services materials agreeme Co., Ltd. price & spare nt parts Benxi Execute 2019.04 Relate New Sales of accordi .19 Same On d Career goods Energy & ng to controll agreeme agree 40.25 0.00% 500 No No Develop and Power the er nt ment ment Co., services agreeme price Ltd. nt Execute 2019.04 Dalian Relate Sales of accordi .19 Boluole Same On d goods ng to Steel controll Products agreeme agree 404.87 0.01% 1,000 No Yes and the Tube Co., er nt ment services agreeme Ltd. price nt Liaoning Execute 2019.04 Relate Bengang Sales of accordi .19 Same On d Steel & goods ng to controll Products agreeme agree 0.00% No Yes Iron and the er nt ment Trading services agreeme price Co., Ltd. nt Benxi Execute 2019.04 Relate Steel & Sales of accordi .19 Same On d Iron goods Energy & ng to controll agreeme agree 5.09 0.00% 50 No No (Group) and Power the er nt ment General services agreeme price Hospital nt Benxi 2019.04 Steel & .19 Execute Iron Relate Sales of accordi (Group) Same On d goods Energy & ng to Zhengtai controll agreeme agree 5.22 0.00% 500 No No and Power the Construct er nt ment services agreeme ion price nt Materials Co., Ltd. Liaoning 2019.04 Hengtong .19 Execute Metallurg Relate Sales of accordi ical Same On d goods Energy & ng to Equipmen controll agreeme agree 0.00% 5,000 No No and Power the t er nt ment services agreeme Manufact price nt ure Co., Ltd. Liaoning Same Sales of Raw On Relate 2,444.7 0.05% No Execute Yes 2019.04 Hengtong controll goods material agreeme d 6 accordi .19 68 Bengang Steel Plates Co., Ltd. Annual Report 2019 The Amount approve Means Pricing Price of Whethe Availabl d of Type of Content of principle of related Proporti r exceed e trading paymen Index related related of relate party on of the market Date of Related Relation limit of t of of party party related d transacti similar approve price of disclosu parties ship transacti related disclos transacti transactio party party ons (in transacti d similar re ons (in party ure ons ns transacti transa 10 ons limited transacti 10 transacti ons ctions thousan (Y/N) ons thousan ons d) d) Metallurg er and & nt agree ng to ical services suppleme ment the Equipmen ntary price agreeme t materials nt Manufact & spare ure Co., parts Ltd. Liaoning 2019.04 Hengtong .19 Execute Metallurg Relate Sales of accordi ical Same On d goods ng to Equipmen controll Products agreeme agree 352.89 0.01% No Yes and the t er nt ment services agreeme Manufact price nt ure Co., Ltd. Raw 2019.04 Bengang material Execute .19 Cold- Relate Sales of & accordi rolled Same On d goods suppleme ng to Stainless controll agreeme agree 46.59 0.00% No Yes and ntary the Steel er nt ment services materials agreeme Dandong price & spare nt Co., Ltd. parts Bengang 2019.04 Execute Cold- Relate .19 Sales of accordi rolled Same On d goods ng to Stainless controll Products agreeme agree 111.16 0.00% No Yes and the Steel er nt ment services agreeme Dandong price nt Co., Ltd. Execute 2019.04 Relate Suzhou Sales of accordi .19 Same On d Bengang goods 41,269. ng to controll Products agreeme agree 0.78% 50,000 No Yes Industrial and 54 the er nt ment Co., Ltd. services agreeme price nt Execute 2019.04 Relate Bengang Sales of accordi .19 Same On d Group goods Energy & ng to controll agreeme agree 1.39 0.00% 50 No No Finance and Power the er nt ment Co., Ltd. services agreeme price nt Execute Relate Sales of accordi Bengang On d Controll goods Energy & ng to 2019.04 Group agreeme agree 2.78 0.00% 500 No No er and Power the .19 Co., Ltd. nt ment services agreeme price nt 2,605,7 3,137,4 Total -- -- -- -- -- -- -- -- 09.82 00 Details of any sales return of a large Not applicable amount 69 Bengang Steel Plates Co., Ltd. Annual Report 2019 The Amount approve Means Pricing Price of Whethe Availabl d of Type of Content of principle of related Proporti r exceed e trading paymen Index related related of relate party on of the market Date of Related Relation limit of t of of party party related d transacti similar approve price of disclosu parties ship transacti related disclos transacti transactio party party ons (in transacti d similar re ons (in party ure ons ns transacti transa 10 ons limited transacti 10 transacti ons ctions thousan (Y/N) ons thousan ons d) d) Give the actual situation during the reporting period where a forecast had been made for the total amounts of Not applicable routine related-party transactions,by type to occur in the current period(if any) Reason for any significant difference between the transaction price and the Not applicable Market price for reference (if applicable) 2. Related transactions relevant to asset acquisition or sold □ Applicable √ Not applicable There was no related transaction relevant to asset acquisition or sold during the reporting period. 3. Related transactions relevant to joint investments □ Applicable √ Not applicable There was no related transaction relevant to joint investments during the reporting period. 4. Credits and liabilities with related parties □Applicable √ Not applicable There were no non-operating related credits and debts during the reporting period. 5. Other significant related transactions √ Applicable □Not applicable Related party Related transaction content Amount in current year (tax Amount in last year (tax exclusive) exclusive) Benxi Beiying Steel & Purchase 2300 hot rolling mill 3,004,988,590.00 Iron (Group) Co., Ltd. production line Benxi Steel & Iron Purchase 1780 hot rolling mill 684,727,905.00 (Group) Co., Ltd. production line Notes: On August 14, 2019, the company signed the "Asset Transfer Agreement" with Bengang Group Co., Ltd. and Benxi Beiying Steel & Iron (Group) Co., Ltd. respectively, to acquire the related equipment assets of the 2300mm hot rolling mill production line held by Bengang Group and the related equipment assets of 1780mm hot rolling mill production line held by Beiying Steel. 70 Bengang Steel Plates Co., Ltd. Annual Report 2019 XVII. Major Contracts and Their Performance 1. Trusteeship, contracting and lease (1) Trusteeship □ Applicable √ Not applicable There was no trusteeship during the reporting period. (2) Contracting □ Applicable √ Not applicable There was no contracting during the reporting period. (3) Lease √ Applicable □ Not applicable Lessee Lease capital category Lease income of 2019 Lease income of 2018 Benxi Steel & Iron (Group) Steel & 500,000.00 500,000.00 Warehouse and machinery Iron Process and Logistics Co., Ltd. Benxi Steel & Iron (Group) 122,500.03 490,000.00 Plants and machinery Machinery Manufacture Co., Ltd. Gains or losses from lease counted over 10% of total profit. □ Applicable √ Not applicable During the reporting period, there were no lease projects that resulted in a profit or loss of more than 10% of the total profit of the company during the reporting period 2. Guarantee □ Applicable √ Not applicable There was no guarantee during the reporting period. 3. Entrusting Others for Managing Cash Asset (1) Entrusted Finance √ Applicable □ Not applicable Unit:10 thousand Source of funds for Overdue amount not Type Amount Outstanding balance entrusted financing recovered Own temporarily idle Bank financial product 2,450 0 0 funds Own temporarily idle Bank financial product 2,400 0 0 funds Own temporarily idle Bank financial product 427.3 0 0 funds Total 5,277.3 0 0 71 Bengang Steel Plates Co., Ltd. Annual Report 2019 (2) Entrusted Loans □ Applicable √ Not applicable There was no entrusted loan during the reporting period. 4. Other Major Contracts □ Applicable √ Not applicable There was no other major contract during the reporting period. XVIII. Social Responsibilities 1. Performing other corporation social responsibilities During the reporting period, the company actively protected the legitimate rights and interests of creditors and all employees while pursuing the economic benefits of the company and protecting the interests of shareholders, in accordance with the spirit of corporate social responsibility, and actively treated suppliers, customers and consumers. Public welfare undertakings such as environmental protection and community building. In the business activities, consciously follow the principles of voluntariness, fairness, equal pay, honesty and credit, consciously abide by social morality, professional ethics, consciously accept the supervision of the government and the public, and actively fulfill the corporate social responsibility. 2. Performing corporation social responsibility of targeted poverty alleviation In the annual report of the company, there has been no accurate poverty alleviation work, and there is no follow-up accurate poverty alleviation plan. 3. Environmental protection-related conditions Whether the listed company and its subsidiaries belong to the key pollutant discharge units announced by the environmental protection department. Yes Main The The distribution Emission The Approved Surpass the pollutants Discharge number of Total Name of discharge concentra emission total emission and specific modes discharge emission hatch tion standard emission standard pollutants hatch Bengang Energy integral Unapproved Sewage Steel Plates COD Continuous 1 factory sewage Sewage 50 171.54 tons by the None 8-29 Co., Ltd. treatment plant. government Bengang Energy integral Unapproved Sewage Steel Plates NH3-N Continuous 1 factory sewage Sewage 5 32.43 tons by the None 1.1-4 Co., Ltd. treatment plant. government Raw material Raw Raw None dumper, transfer materials materials station, 7-25; 25; coking receiving ore coking 3- 30-50; tank, pre-batch; 30; ironmaking coke oven Ironmaki 25-50; Bengang Continuous adding coal, ng 5-48; steelmaking Unapproved Particulate pushing coke Steelmaki 20-50; 12828.10 Steel Plates and 178 by the Co., Ltd. Matter intermittent dry quenching; ng 7-14; special steel tons government ironmaking Special 20-50; tapping field, steel 7- power furnace roof, 15; generation fuel, solvent, Power 10-30; cold granulation, ore generatio rolling 20- coke tank; n 5-10; 30; hot sintering head, Cold rolling 20- 72 Bengang Steel Plates Co., Ltd. Annual Report 2019 machine Tail; rolling; 30. iron and steel 6-18 hot water rolling 6- pretreatment, 15. ferroalloy feeding, north- south infusion station, tundish, primary dust removal, secondary dust removal, refining dust removal; special steel electric furnace, refining furnace, electric slag furnace; power generation boiler desulfurization and denitrification; cold rolling acid regeneration, Pickling, drawing straightening, welding machine, smoothing, annealing, roasting; hot rolling heating furnace. Coke Unapproved None oven by the CDQ 16- government 82; Coke oven Sintering CDQ 100; CDQ; machine Sintering Ironmaking head 12- head 200; sintering head; Bengang Continuous 40; power power 5499.83 Steel Plates SO and 64 power generation generation tons Co., Ltd. intermittent generatio 100-200; boiler; cold n 10-70; cold rolling rolling roasting, cold 150; hot annealing; hot rolling rolling 150. rolling furnace. 45-141; hot rolling 51-98. Sintering Unapproved None head 110- by the Ironmaking 230; Sintering government sintering head; power head 300; power generatio power Bengang Continuous generation Oxides of n 50-140; generation 12084.69 Steel Plates and 57 boiler; cold nitrogen cold 100-200; tons Co., Ltd. intermittent rolling roasting, rolling cold rolling annealing; hot 69-172; 300; hot rolling furnace. hot rolling 300. furnace. rolling 105-188. Construction and operation of pollution prevention facility: 73 Bengang Steel Plates Co., Ltd. Annual Report 2019 The company has a total of 178 sets of environmental pollution prevention and control facilities. In addition to the hot rolling mill 2300 production line, the rough-rolling finishing rolling plastic plate dust collector which is designed for the production of stainless steel, the rest of the facilities are put into use normally. Environmental Impact Assessment and Other Environmental Protection Administrative Licensing of Construction Projects 1. Regarding of the "Environmental Impact Report Form of High-Grade High-Magnetic Induction Non-Oriented Silicon Steel Project of Bengang Steel Plates Co., Ltd." Benxi City Environmental Protection Bureau issued the environmental assessment approval: Ben-Huan-Jian-Biao-Zi [2019] No. 03, 2019-5-25; 2. Regarding of the "Environmental Impact Report Form of No. 8 Casting Machine Project of Bengang Steel Plates Co., Ltd., Ltd. Steelmaking Plant" Benxi City Environmental Protection Bureau issued the environmental assessment approval: Ben-Huan-Jian-Biao-Zi [2019] No. 04, 2019-6-18; 3. Regarding of the "Environmental Impact Report Form for the 1700 Hot Rolling Improvement Project of Bengang Steel Plates Co., Ltd. (Phase I)" Benxi City Environmental Protection Bureau issued the environmental assessment approval: Ben-Huan-Jian-Biao-Zi [2019] No. 05, 2019-7-24; 4. Regarding of the "Environmental Impact Report Form of the No. 7 Coke Oven Flue Gas Desulfurization and Denitrification Project of Bengang Steel Plates Co., Ltd. Coking Plant" Environmental Protection Bureau issued the environmental assessment approval: Ben-Huan-Jian-Biao-Zi [2019] No. 10, 2019-7-12; 5. Regarding the environmental impact report of the No. 5 blast furnace capacity replacement project of Bengang Steel Plates Co., Ltd., Liaoning Provincial Environmental Protection Bureau issued the environmental assessment approval: Liao-Huan-Han [2019] No. 171, 2019-11-27; 6. Regarding the environmental impact report of the Special Steel Electric Furnace Upgrading Project of Bengang Steel Plate Co., Ltd., Liaoning Provincial Environmental Protection Bureau issued the environmental assessment approval: Liao-Huan-Han [2019] No. 172, 2019-7-12; 7. Discharge permit, complete the discharge permit of the plate company energy plant on schedule. Emergency plan for emergency environmental incidents The company and its subordinate 13 units are revised the emergency plans for emergency environmental incidents, and carried out related work such as risk assessment and investigation of emergency resources in accordance with the "Law of the People's Republic of China on Incident Responses", "Notice on Printing and Distributing the Guidelines for Risk Assessment of Enterprises' Environmental Emergencies (Trial)", and "Emergency Preparedness for Environmental Incidents of Enterprises and Institutions" Existing laws and regulations such as the Administrative Measures (Trial). Environmental self-monitoring project. In 2019, the self-monitoring plan was carried out in accordance with the requirements of the pollutant discharge permit. The monitoring points of Bengang Steel pollution sources: 156 flue gas, 10 wastewater monitoring points, 5 noise points at the boundary of the plant, 27 atmospheric dustfall points, and newly added unorganized monitoring. The number of points is 50. From the plate factory to the mine, the monitoring is divided into weekly, monthly, seasonal, semi-annual and annual frequency monitoring. The main monitoring items of the automatic air quality monitoring station are PM10, PM2.5, sulfur dioxide and nitrogen dioxide. , O3, CO, one set of data per hour, a total of 52,560 monitoring data were obtained throughout the year; 27 steel dust points were distributed in the steel plant area, and 324 monitoring data were obtained; routine monitoring tasks for flue gas were completed, and monitoring was achieved throughout the year 936 data; 5 noise monitoring points at the boundary of the plant, 160 monitoring data; 10 wastewater monitoring points, 4,335 monitoring data; 172 temporary monitoring data, and a total of 5926 monitoring data reported by the monitoring station. Monthly, quarterly reports and separate monitoring reports for each mine are reported. Other environmental information that should be disclosed None Other environmental protection related information None XIX. Other Major Issues □ Applicable √ Not applicable There was no need for illustrating other major issue. XX. Major Issues of Subsidiaries □ Applicable √ Not applicable 74 Bengang Steel Plates Co., Ltd. Annual Report 2019 VI. Status of Share Capital Changes and Shareholders I. Share Capital Changes 1. Share capital changes Unit: Share Before the change Increase/decrease(+,-) After the Change Capitaliz ation of Percenta Issuing of new Bonus Percenta Quantity common Others Subtotal Quantity ge share shares ge reserve fund - - I. Restricted Shares 739,371,532 19.08% 739,371,53 739,371,5 0 2 32 - - 2. State-own Legal-person 184,842,883 4.77% 184,842,88 184,842,8 0 Shareholding 3 83 - - 3. Other domestic 554,528,649 14.31% 554,528,64 554,528,6 0 shareholdings 9 49 - - Including: Domestic legal 554,528,649 14.31% 554,528,64 554,528,6 0 person holding 9 49 739,371,53 739,371,5 II. Non-restricted Shares 3,136,000,000 80.92% 2 32 3,875,371,532 100.00% 1. Common shares in 739,371,53 739,371,5 2,736,000,000 70.60% 3,475,371,532 89.68% RMB 2 32 2. Foreign shares in 400,000,000 10.32% 400,000,000 10.32% domestic market III. Total shares 3,875,371,532 100.00% 3,875,371,532 100.00% Causation of share capital changes √Applicable □Not applicable The Company’s private issuance of 739,371,532(RMB) common shares to Liaoning Traffic Investment Co., Ltd., Jianxin Fund Management Co., Ltd., Beixin Ruifeng Fund Management Co., Ltd., and Guoshou Security Fund Management Co., Ltd. has expired. The Company completed the lifting of sales restrictions on April 18, 2019. Approval of share capital changes □Applicable √Not applicable Status of registration process of transferred shares □Applicable √Not applicable Progress of Share Repurchase □ Applicable √ Not applicable Implementation Progress of Reducing Holdings of Repurchase Shares by Centralized Bidding □ Applicable √ Not applicable Influences of share capital changes on financial indices such as basic earnings per share, diluted earnings per share, and net asset per share attributed to common shareholders □ Applicable √ Not applicable Other information the Company deems necessary to be disclosed or required by the authority □ Applicable √ Not applicable 2. Changes of Restricted Shares √Applicable □ Not applicable Unit: Share Number of initial Number of Increased number End-of-Term Restriction Shareholder Release date restricted shares Limited Shares of restricted Limited Shares reason 75 Bengang Steel Plates Co., Ltd. Annual Report 2019 Released in the shares in the Current Period current period 184,842,883 0 184,842,883 0 The number of Liaoning restricted shares Provincial participating in Transportation April 18th 2019 the additional Investment Group issue was Co., Ltd. 184,842,883. CCB Principal 184,842,883 0 184,842,883 0 The number of Asset Management restricted shares – ICBC – CR Trust participating in – CR Trust Xing April 18th 2019 the additional Sheng No. 5 issue was Collective Fund 184,842,883. Trust Plan Bei Xin Rui Feng 184,842,883 0 184,842,883 0 The number of Fund – China restricted shares Merchants Bank – participating in Bei Xin Rui Feng April 18th 2019 the additional Fund Feng Qing issue was No. 229 Asset 184,842,883. Management Plan China Life AMP 184,842,883 0 184,842,883 0 Fund– ICBC – The number of China Life AMP – restricted shares Hua Xin Trust participating in Targeted April 18th 2019 the additional Additional Shares issue was Issuance No. 10 184,842,883. Asset Management Plan Total 739,371,532 0 739,371,532 0 -- -- II. Securities Issuance and Listing 1. Status of Security Issuance (Excluding Preferred Shares) in the Reporting Period □ Applicable √ Not applicable 2. Total Share and Shareholder Change and Asset and Liability Structure Change □ Applicable √ Not applicable 3. Employee Shareholding Status □ Applicable √ Not applicable III. Shareholders and Actual Controller 1. Total Number of shareholders and shareholding In Shares Total The total number of Total preferred Total number of shareholders at shareholders at the common shareholders preferred shareholders end of the month from 52,294 the end of the 52,784 at the end of the voting rights restored at 0 the date of disclosing 0 month from the reporting period the end of the reporting the annual report (if date of period (See Notes 8) any) (See Notes 8) disclosing the 76 Bengang Steel Plates Co., Ltd. Annual Report 2019 annual report Shareholding of shareholders holding more than 5% or top 10 shareholders Holding Number of Changes in Number of pledged or Name of the Nature of Restricted Un-restricted frozen shares Percentage shares held at reporting shareholder shareholder shares held shares held (%) period-end period Status Number Benxi Steel & Iron State-owned Pledged 110,000,000 61.44% 2,381,105,094 25,695,831 2,381,105,094 (Group) Co., Ltd. legal person Frozen 45,000,000 Liaoning Provincial Transportation State-owned 4.77% 184,719,383 184,719,383 Investment Group legal person Co., Ltd. CCB Principal Asset Management – ICBC – CR Trust – CR Others 4.77% 184,842,883 184,842,883 Trust Xing Sheng No. 5 Collective Fund Trust Plan Bei Xin Rui Feng Fund – China Merchants Bank – Bei Xin Rui Feng Fund Others 4.77% 184,842,883 184,842,883 Feng Qing No. 229 Asset Management Plan China Life AMP Fund– ICBC – China Life AMP – Hua Xin Trust Targeted Others 4.77% 184,842,883 184,842,883 Additional Shares Issuance No. 10 Asset Management Plan Domestic Liang Zhongqing 0.65% 25,090,000 25,090,000 25,090,000 natural person Agricultural bank of China - China Securities 500 Trading Others 0.32% 12,590,111 8,532,301 12,590,111 Open Index Securities Investment Fund Domestic Liu Qiuying 0.31% 11,839,000 11,839,000 11,839,000 natural person Domestic Yi Honglu 0.24% 9,458,570 9,458,570 9,458,570 natural person VANGUARD EMERGING Foreign legal 0.21% 8,157,311 8,157,311 MARKETS STOCK person INDEX FUND Strategy investors or general legal person becomes top 10 shareholders due None to rights issued (if any) (See Notes 3) It is unknown to the Company whether there is any related connection or ‘Action in Concert’ as Notes to relationship or ‘action in described by Rules of Information Disclosing Regarding Changing of Shareholding Status of concert’ among the top 10 shareholders. Listed Companies existing among the above shareholders. Shareholding of top 10 unrestricted shareholders Un-restricted shares held at Category of shares Name of the shareholder the end of the reporting period Category of shares Quantity Benxi Steel & Iron (Group) Co., Ltd. 2,381,105,094 Common shares in RMB 2,381,105,094 Liaoning Provincial Transportation Investment 184,719,383 Common shares in RMB 184,719,383 Group Co., Ltd. CCB Principal Asset Management – ICBC – CR 184,842,883 Common shares in RMB 184,719,383 77 Bengang Steel Plates Co., Ltd. Annual Report 2019 Trust – CR Trust Xing Sheng No. 5 Collective Fund Trust Plan Bei Xin Rui Feng Fund – China Merchants Bank – Bei Xin Rui Feng Fund Feng Qing No. 184,842,883 Common shares in RMB 184,719,383 229 Asset Management Plan China Life AMP Fund– ICBC – China Life AMP – Hua Xin Trust Targeted Additional 184,842,883 Common shares in RMB 184,719,383 Shares Issuance No. 10 Asset Management Plan Liang Zhongqing 25,090,000 Common shares in RMB 25,090,000 Agricultural bank of China - China Securities 500 Trading Open Index Securities Investment 12,590,111 Common shares in RMB 12,590,111 Fund Liu Qiuying 11,839,000 Common shares in RMB 11,839,000 Yi Honglu 9,458,570 Common shares in RMB 9,458,570 VANGUARD EMERGING MARKETS 8,157,311 Foreign shares in domestic exchange 8,157,311 STOCK INDEX FUND Benxi Steel & Iron (Group) Co., Ltd., the holding shareholder, has no relationship with any of the other shareholders among the top 10 shareholders, neither being regarded as action-in-concert parties by the Information Disclosure Regulations for Change of Notes to relationship or ‘action in concert’ Shareholding in PLC. The Company is not aware of any relationship among the other among the top 10 non-restricted shareholders, shareholders, neither being regarded as action-in-concert parties by the Information and among the top 10 non-restricted Disclosure Regulations for Change of Shareholding in PLC. The Company is not aware shareholders and top 10 shareholders of any relationship among the top 10 shareholders, neither being regarded as action-in- concert parties by the Information Disclosure Regulations for Change of Shareholding in PLC. Benxi Steel & Iron (Group) Co., Ltd. Holds 2,142,105,094 shares of the Company’s stock through credit security account and holds 239,000,000 shares of the Company’s stock, Shareholders among the top 10 participating in totaling 2,381,105,094 shares. Liang Zhongqing holds 25,090,000 shares of the securities margin trading (if any) (see Note 4) Company’s stock through credit security account. Liu Qiuying holds 11,839,000 shares of the Company’s stock through credit security account. Yi Honglu holds 9,458,570 shares of the Company’s stock through credit security account. Whether top 10 common shareholders and top 10 un-restricted common shareholders have a buy-back agreement dealing in reporting period □ Yes √ No Top 10 common shareholders and top 10 un-restricted common shareholders had no buy-back agreement dealing in reporting period. 2. Controlling Shareholder Nature of Controlling Shareholders: Local state holding Type of Controlling Shareholders: Legal person Name of the Legal representative Date of Organization Controlling Principal business activities / person in charge incorporation Code shareholder Business scope: steel smelt, mine exploitation, panel rolling, oxygen manufacturing, pipe manufacturing, power generating, coal industry, special steel material manufacturing, heating, supply of the water, electricity, wind and gas, metal processing, electro mechanics builds, device manufacturing, architecture installation, railway, highway transportation, import and export trade, traveling Benxi Steel & Iron 9121050011972 industry, construction material, refractory material, Yang Chengguang July 10,1996 (Group) Co., Ltd. 6263U measuring device instrument, goods and materials supply and marketing, development of real estate, scientific research, design, information service, property management, telecommunication, processing of waste iron, property leasing, exchange of steel material, and recycling of waste oils (to the extent of licensed to the subsidiary companies) , property management; publishing of Bengang Daily; designing and making of presswork and 78 Bengang Steel Plates Co., Ltd. Annual Report 2019 advertisement, releasing, producing of TV advertisements in the country and abroad. Equity of other domestic/foreign listed company with share controlling and None share participation by controlling shareholder in reporting period Changes of controlling shareholders during the reporting period □ Applicable √ Not applicable The controlling shareholder of the company has not changed during the reporting period. 3. Actual Controller Actual controller nature: Local state owned assets management Actual controller type: Legal person Legal representative Date of Principal business Name of the controlling shareholder Organization Code / person in charge incorporation activities Liaoning Provincial State-owned Assets Unknown Unknown Unknown Supervision and Administration Commission Equity of other domestic/foreign listed company with share controlling and share The Company was not informed of the actual controller's control of the equity of other participation by controlling shareholder in domestic and foreign listed companies during the reporting period. reporting period Change of actual controller during the reporting period □ Applicable √ Not applicable There is no change of actual controller during the reporting period. Block diagram of the ownership and control relations between the Company and the actual controller Liaoning Provincial State-owned Assets Supervision and Administration Commission Liaoning Council for social security fund 80% 20% Bengang Group Co., Ltd. Huatai Securities (Shanghai) Asset Management Co., Ltd. 85.33% 14.67% Benxi Steel & Iron (Group) Co., Ltd. 61.44% Bengang Steel Plates Co., Ltd. Whether the actual controller is controlling the Company through trusteeship or other asset management service □ Applicable √ Not applicable 4. Shareholders holding More than 10% of the Shares □ Applicable √ Not applicable 79 Bengang Steel Plates Co., Ltd. Annual Report 2019 5. Status of Share Reduction Limitation of Controlling Shareholders, Actual Controller, Restructuring Party and Other Commitment Subjects □ Applicable √ Not applicable 80 Bengang Steel Plates Co., Ltd. Annual Report 2019 VII. Status of Preferred Shares □ Applicable √ Not applicable There was no preferred stock in the company during the reporting period. 81 Bengang Steel Plates Co., Ltd. Annual Report 2019 VIII. Status of Convertible Corporate Bonds □ Applicable √ Not applicable There were no convertible corporate bonds in the reporting period. 82 Bengang Steel Plates Co., Ltd. Annual Report 2019 IX. Status of Directors, Supervisors, Senior Executives and Employees I. Change in Shares held by Directors, Supervisors and Senior Executives Shares Shares Shares Starting Other Shares Expiry held at increased decreased Office Ag date of increase held at Name Position Sex date of the during the during the status e office / the year- office term year- reporting reporting term decrease end begin period period Director, March 14, May 16, Gao Lie In office Male 52 Chairman 2019 2022 Director, June 3, May 16, Cao Aimin Vice In office Male 52 2010 2022 Chairman Director, Shen May 16, May General In office Male 51 Qiang 2019 16,2022 Manager Hunag May 24, May Director In office Male 56 Xinghua 2018 16,202 Zhong Independent Femal May 20, May In office 63 Tianli Director e 2014 20,2022 Zhao Independent May 21, May In office Male 59 Xinan Director 2015 21,2021 Zhang Independent Femal May 16, May In office 64 Suxun Director e 2019 16,2022 Supervisor, Chairman of Femal February May Han Mei In office 50 Supervisory e 19, 2014 16,2022 Committee February May Li Lin Supervisor In office Male 51 19, 2014 16,2022 March 14, May Li Xiaowei Supervisor In office Male 44 2019 16,2022 Zhao June 26, May Supervisor In office Male 47 Xingtao 2018 16,2022 Zhang January May Supervisor In office Male 42 Yanlong 26, 2014 16,2022 Bao Deputy December May In office Male 56 Mingwei General 28, 2012 16,2022 83 Bengang Steel Plates Co., Ltd. Annual Report 2019 Manager Deputy Wang January May General In office Male 54 Fengmin 26, 2014 16,2022 Manager Deputy Femal March May Huo Gang General In office 46 e 14,2019 16,2022 Manager Zhao Director of Femal April 18, May In office 35 Zhonghua Finance e 2019 16,2022 Gao Secretary of Septembe May In office Male 45 Desheng the Board r 20,2018 16,2022 Director, Leaving December March Wang Shu Male 48 Chairman office 27,2016 14,2019 Independent Leaving May May Jin Yongli Male 61 Director office 17,2013 16,2019 Liu Leaving August June Supervisor Male 48 Yansong office 09, 2018 26,2019 Hu Deputy Leaving January March Guangyua General Male 59 office 26, 2014 14,2019 n Manager Total -- -- -- -- -- -- II. Change in Directors, Supervisors and Senior Executives √Applicable □ Not applicable Type of Name Position Date Reason change Wang Shu Director, Chairman Leaving office March 14,2019 Voluntary turnover Leaving office Independent Leaving office after expiry of Jin Yongli after expiry of May 16,2019 Director term term Supervisor, Chairman of Dong Liju Leaving office April 18,2018 Voluntary turnover Supervisory Committee Liu Yansong Supervisor Leaving office June 26,2019 Voluntary turnover Appointments Gao Lie General Manager March 14,2019 Job change and dismissals Deputy General Sun Yanbin Dismissal March 14,2019 Job change Manager 84 Bengang Steel Plates Co., Ltd. Annual Report 2019 III. Posts holding Work experience in the past five years of Directors, Supervisors and Senior Executives in current office Profiles of the members of the Board: Gao Lei, Male, 52, undergraduate, master of engineering, professor-level senior engineer. Once Chairman of Benxi Iron and Steel(Group)Mining Co.,Ltd; Manager of Mineral Resources Development Company; Assistant General Manager of Bengang Group Co., Ltd. and Manager of Mineral Resources Development Company; He is now Member of the Standing Committee of the company’s party committee, Deputy General Manager of Bengang Group Co.,Ltd, chairman of Bengang Steel Plate Co.,Ltd. Cao Aimin, Male, 52, undergraduate, professor-level senior accountant. Once Head of Capital Division of Finance Department; Head of Planning and Finance Division; and Chief Accountant. Director and Chief Accountant of Benxi Iron and Steel (Group) Co., Ltd., Ltd. He is now Member of the Standing Committee of the company’s party committee, Director and Chief Accountant of Bengang Group Co.,Ltd,, Vice Chairman of Bengang Steel Plates Co., Ltd. Shen Qiang, Male, 51 years old, undergraduate, master of engineering, senior engineer. He has served as Secretary of the Board of Directors and Director of the Board of Directors of Bengang Group Corporation, Director of the Office, Director of the Secretary of Secretaries, Secretary of the Party Committee of Bengang Group Corporation, Chairman of the Board of Directors of the Real Estate Company, Secretary of the Party Committee; Director of Benxi Iron and Steel Company, Deputy Secretary of the Party Committee, Deputy General Manager, Board of Directors Secretary; Assistant General Manager of Bengang Group Corporation, Minister of Human Resources Department (Organization Department); current Director and General Manager of Bengang Steel Plate Co., Ltd. Huang Xinghua, Male, 56, College degree, senior accountant. Once Deputy director of the planning and finance department of Benxi Iron and Steel (Group) Co.,Ltd; Director and Chief accountant of Benxi Iron and Steel(Group) Co.,Ltd; Director of the finance department of Bengang Group Co., Ltd. He is now the head of the finance department of Bengang Group Co., Ltd., Director of Benxi Iron and Steel (Group) Co., Ltd., Director of Bengang Steel Plate Co., Ltd. Profiles of the Supervisory Committee: Han Mei, Female, 50, undergraduate, senior accountant. Once she was the vice head of financial department of the Company; vice head of auditing department and head of administration department of the supervisory committee of Bengang Group; Provincial Government Liaison in Bengang Benxi Steel & Iron (Group) Co., Ltd. Director of Audit Dept. She now is Head of Audit Department, Director of Bengang Group Finance, and Chairman of Supervisory Committee of Bengang Steel Plates Co. Ltd. Li Lin, Female, 51, postgraduate, engineer. Once she was the administrator of HR department of Bengang Group; Vice Chief Engineer of Transportation Department of the Company; Substitute Chairman of the Trade Union of Transportation Department of the Company, Secretary of Commission for Discipline Inspection of Transportation Department and Chairman of the Labour Union of Bengang Steel Plates Co. Ltd, Group leader of Discipline Inspection and Supervision group One Assigned by Discipline Inspection Commission of Bengang Group Co., Ltd. 85 Bengang Steel Plates Co., Ltd. Annual Report 2019 She is now Party secretary of Railway company; Supervisor of Bengang Steel Plates Co. Ltd. Li Xiaowei, Male, 44, undergraduate, economist. He was once senior officer of the audit department and Division chief of the operation audit department of Bengang Group Co., Ltd. He is now the deputy director of the Audit Department of Bengang Group Co., Ltd., the supervisor of the board of supervisors of Bengang Steel Plate Co., Ltd. Zhang Yanlong, Male, 42, undergraduate, senior engineer. He once was the workshop manager of steel-making factory; Vice Chief of QC department of iron-making factory, Director of Steel-making plant, Manager of Manufacturing Department of Bengang Steel Plates Co., Ltd., Assistant of Director of Production Division of Steel- Making Plant; He is now Vice Director of Production Division of Steel-Making Plant and Supervisor of Bengang Steel Plates Co. Ltd. Zhao Xingtao, Male, 48, undergraduate, master of engineering, senior engineer. He was once Deputy Director of Cold Rolling Plant of Bengang Steel Plate Co., Ltd. He is now Secretary of Party Committee and Chairman of Labor Union of Cold Rolling Plant of Bengang Steel Plate Co., Ltd, and supervisor of Bengang Steel Plate Co., Ltd. Executives other than directors: Bao Mingwei, Male, 56 years old, Undergraduate, senior engineer. He has successively served as Secretary of the Party Committee, Vice Director and Factory Director of the Hot Strip Mill of Benxi Steel Co., Ltd., Vice General Manager of Benxi Steel Co., Ltd. and Director of the Third Cold Rolling Mill. He is now Vice General Manager of Bengang Steel Plates Co. Ltd. Wang Fengmin, Male, 54, postgraduate, professor-level senior engineer. He has been the deputy director, director and Secretary of the Party Committee of the ironmaking plant of Benxi Iron and Steel Co., Ltd., deputy general manager and manufacturing Minister of Bengang Steel Plate Co., Ltd. He is now Deputy General Manager of Bengang Steel Plate Co., Ltd. Huo Gang, Male, 46, postgraduate, PHD of engineering, professor-level senior engineer. He has been the acting general manager of Bengang Puxiang Cold Rolling Plant, the Secretary and executive vice director of the Party Committee of Bengang No. 3 Cold Rolling Plant, the Secretary and director of the Party Committee of Bengang No. 3 Cold Rolling Plant, and the current director of Bengang Cold Rolling Plant, the general manager of Puxiang Cold Rolling Plant and the deputy general manager of Bengang Steel Plate Co., Ltd. Zhao Zhonghua, Female, 35, graduate degree, master of management, accountant. She has successively been deputy director and director of the Finance Department of Bengang Steel Plate Co., Ltd., assistant director of the Finance Department of Bengang Group Co., Ltd., deputy manager of Bengang Group Finance Co., Ltd., and currently the CFO and finance minister of Bengang Steel Plate Co., Ltd. Gao Desheng, Male, 45, undergraduate, master of management, senior economist. He has been the acting director of the Business Planning Department of the Operation Improvement Department of Bengang Group Co., Ltd., the director of the Ownership Management Department of the Operation Improvement Department of Bengang Group Co., Ltd., the director of the Ownership Management Department of the Operation Improvement Department of Bengang Group Co., Ltd., the vice-chairman of the First Supervisory Board, and now he is the director of the office 86 Bengang Steel Plates Co., Ltd. Annual Report 2019 and Secretary of the board of Bengang Group Co., Ltd.. Posts holding in Shareholders √ Applicable □ Not applicable Does he /she Expiry receive Names of the Names of the Titles engaged in the Starting date of date of remuneration persons in shareholders shareholders office term office or allowance office term from the shareholder Bengang Group Co., Gao Lie Vice General Manager March 1, 2014 Yes Ltd. Bengang Group Co., November 1, Cao Aimin Director, Chief Accountant Yes Ltd. 2010 Bengang Group Co., Huang Xinghua Minister of Finance August 1, 2017 Yes Ltd. Benxi Iron and Steel Huang Xinghua Director April 1, 2018 No (Group) Co., Ltd. Bengang Group Co., February 1, Han Mei Director of Audit Department Yes Ltd. 2016 Bengang Group Co., Vice Director of Audit January 1, Li Xiaowei Yes Ltd. Department 2018 Office taking in shareholder None companies Posts holding in other companies √Applicable □Not applicable Does he /she Names of the Titles engaged Expiry receive Names of the other Starting date of persons in in other date of remuneration or companies office term office companies office term allowance from the shareholder Bengang Group Finance Han Mei Director December, 1,2016 No Co., Ltd. Office taking in other None companies Punishment by the securities regulatory authorities in last three years □ Applicable √ Not applicable 87 Bengang Steel Plates Co., Ltd. Annual Report 2019 IV. Remuneration to Directors, Supervisors and Senior Executives Decision-making procedures, basis of recognition and actual payment of the remuneration to Directors, Supervisors and Senior Executives Decision making procedures 1. The Remuneration and Assessment Committee will produce a plan or proposal, which will be implemented upon approval of the Board or the Shareholders’ Meeting; 2. According to performance assessment criteria and procedures, the Remuneration and Assessment Committee undertakes assessment on the Directors and Senior Executives; 3. Remuneration amounts and ways of rewards will be proposed according to the assessment and remuneration policies for Directors, Supervisors and Senior Executives, and adopted by voting; 4. To be implemented upon approval of the Board. Basis of recognition Remuneration scheme for a particular position is recognized basing on the range of responsibilities, duties. Remunerations are distributed based on the assessment results and remuneration policies. Actual payment of the remuneration Remuneration is paid on monthly basis according to the remuneration allocation policies. Remuneration of Directors, Supervisors and Senior Executives during the reporting period Unit: RMB 10 thousand Total Whether receive remuneration remuneration in Name Position Sex Age Office status received from the the Company's shareholder related parties Gao Lie Director, Chairman Male 52 In office 8.4 Yes Cao Aimin Director, Vice Chairman Male 52 In office Yes Shen Qiang Director, General Manager Male 51 In office 33.27 Huang Xinghua Director Male 56 In office Yes Zhong Tianli Independent Director Female 63 In office 5 Zhao Xinan Independent Director Male 59 In office 5 Zhang Suxun Independent Director Female 64 In office 5 Supervisor, supervisory Han Mei Female 50 In office Yes board chairman Li Lin Supervisor Female 51 In office 23.35 Li Xiaowei Supervisor Male 44 In office Yes Zhao Xingtao Supervisor Male 47 In office 20.96 Zhang Yanlong Supervisor Male 42 In office 25.18 Bao Mingwei Deputy General Manager Male 56 In office 31.07 Wang Fengmin Deputy General Manager Male 54 In office 30.86 Huo Gang Deputy General Manager Male 46 In office 32.87 Zhao Zhonghua CFO Female 35 In office 25.64 Gao Desheng Secretary of Board Male 45 In office 24.76 88 Bengang Steel Plates Co., Ltd. Annual Report 2019 Wang Shu Director, Chairman Male 48 Leaving office Yes Jing Yongli Independent Director Male 61 Leaving office Liu Yansong Supervisor Male 48 Leaving office 27.73 Hu Guangyuan Vice General Manager Male 59 Leaving office 3.14 Total -- -- -- -- 302.23 -- Incentive equity to Directors, Supervisors and Senior Executives during the reporting period □ Applicable √ Not applicable V. Staff Condition 1. Staff Population, Professional Structure and Education Level Population of in-service staff in parent company 17,040 Population of in-service staff in main subsidiaries 542 Total population of in-service staff 17,582 Total population of staff receiving remuneration in the current 17,582 period Population of retired staff whose expense was borne by parent 22,996 company and major subsidiary companies Professional Composition Type of Professional Composition Population Production Staff 13,932 Sales Staff 197 Technician 1,463 Financial Staff 141 Administrative Staff 1,849 Total 17,582 Educational Degree Type of Educational Degree Population PhD. 15 Postgraduate 348 Undergraduate 3,690 Junior College 5,427 Technical secondary school 371 High School and Technical School 3,119 Middle School and others 4,612 Total 17,582 89 Bengang Steel Plates Co., Ltd. Annual Report 2019 2. Remuneration Policies In 2019, the Company will further strengthen the management of salary distribution, establish a "de-administrative" broadband salary system, open up channels for the functional development of business, technology and operational posts, and improve the salary standards of employees. We should implement total compensation contract, guide all units to allocate human resources rationally, optimize the distribution mechanism and improve labor productivity, and give full play to the role of salary incentives and constraints. Simplify the annual salary structure and establish an annual salary assessment system which is linked to the group's efficiency and employee's income. Promote and strengthen the management of ERP salary, and realize the direct connection between banks and enterprises and the closed-loop management of salary. 3. Training Plan The company plans to complete 123 training projects and train 13,103 people throughout the year. Ensure that the training rate of the whole staff reaches 70%, and the implementation rate of the annual training plan reaches 85%. 4. Outsourcing □ Applicable √ Not applicable 90 Bengang Steel Plates Co., Ltd. Annual Report 2019 X. Corporate Governance I. Basic Situation of Corporate Governance Since listed in the stock exchange, the Company has been following the laws, regulations and documents such as the Company Law, Securities Law, Listed Company Governance Rules, Shareholders’ Meeting Criteria of Listed Companies, Guide of Lifting the Quality of Listed Company, and Instructions for Articles of Association of Listed Companies. The Company has been establishing and improving governance structure to protect the interests of the Company and the investors. The Shareholders’ Meeting was working with clear responsibilities and decision-making procedures. Arrangements were made to enable convenient participating of the public investors. Online voting system was introduced for material decision making processes. During the reporting period, according to the relevant laws and regulations, and combining with the actual situation of the Company, ‘Company policy’ and ‘Rules of Shareholders' General Meeting’ was formulated. Whether there exists any difference in compliance with corporate governance, PRC Company Law and relevant provisions of CSRC □ Yes √ No There exists no difference in compliance with corporate governance, PRC Company Law and relevant provisions of CSRC II. Explanation on Structural Independence of the Company on Business, Personnel, Assets, Organization and Finance from the Controlling Shareholder The Company is separated from the controlling shareholder in aspects of business, personnel, assets, organization and finance, etc. and has its own independent and complete business operation. (1) In business operation: The Company has its own production and business planning, financial affairs check and calculate, labor and personnel, raw material supplies and products selling business system independently and completely. (2) In personnel: The Company and controlling shareholder are separate in such aspects as labor, personnel and salary management. Such senior executives as company's chairman, general manager, vice general manager, secretary of Board of Directors, etc. get salary from the Company, and hold the important position other than a director in shareholder department. (3) In Asset: The Company is separated from the controlling shareholder's clearly in asset. The Company has its own independent purchase, production, and marketing system. (4) In organization: The internal operations of the Company are independent; organization structure and working function are totally independent. (5) In finance: The company has independent financial management department, the accounting and financial management system where are complete and operated independently, and has bank account 91 Bengang Steel Plates Co., Ltd. Annual Report 2019 and pay taxes independently. III. Competition Situations of the Industry □ Applicable √Not applicable IV. Annual General Meeting and Extraordinary Shareholders’ Meetings in the Reporting Period 1. Annual General Meeting Investor Index of information Sessions Type Meeting Date Date of disclosure participation ratio disclosure First Extraordinary Extraordinary Announcement No.: General Meeting of 61.37% March 14, 2019 March 15, 2019 General Meeting 2019-008 2019 Annual General Annual General Announcement No.: 61.36% May 16, 2019 May 17, 2019 Meeting of 2019 Meeting 2019-029 Second Extraordinary Extraordinary Announcement No.: General Meeting of 61.83% June 10, 2019 June 11, 2019 General Meeting 2019-038 2019 Third Extraordinary Extraordinary Announcement No.: General Meeting of 76.24% August 30, 2019 August 31, 2019 General Meeting 2019-057 2019 Forth Extraordinary Extraordinary Announcement No.: General Meeting of 62.08% November 14, 2019 November 15, 2019 General Meeting 2019-076 2019 2. Request for Extraordinary General Meeting by Preferred Stockholders Whose Voting Rights Restore □ Applicable √ Not applicable V. Duty fulfillment of Independent Directors in Reporting Period 1. The situation of independent directors attending the BOD and shareholders meeting Attendance of independent directors Number of Failure to Number of Board Number of personally Number of Number of meetings Independent meetings attendances Number of attend board general spot attended by Directors necessary to be by absence meetings meetings to be attendances Communicatio attended representative successively attended n during the twice (Yes/No) 92 Bengang Steel Plates Co., Ltd. Annual Report 2019 reporting period Zhong Tianli 12 2 10 0 0 No 5 Zhao Xinan 12 2 10 0 0 No 5 Zhang Suxun 7 1 6 0 0 No 3 Jin Yongli 5 1 4 0 0 No 2 Illustration to failure to personally attend Board Meetings Twice Successively 2. Objection of Independent Directors on Relevant Issues Objection of independent directors on some relevant issues □ Yes √ No Independent directors proposed no objection against the relevant matters during the reporting period. 3. Other Notes to Duty Fulfillment of Independent Directors Whether any independent director’s advice to the Company was accepted √ Yes □ No Illustration of acceptance of or failure to accept an independent director’s advice to the Company Independent directors have not made recommendations during the reporting period. VI. Duty Fulfillment of the Special Committees under the Board during the reporting period The Remuneration and Assessment Committee is responsible to inspect the assessment process of the executives in year 2018. The Development and Strategy Committee is responsible to examine the Board of Directors’ Work Report 2018 and the Proposal of Investment Structural Planning 2019 in advance and provide suggestions on the Company’s long-term development basing on its researches. The Auditing Committee is responsible to inspect the operation of internal auditing system, to verify the financial information disclosure, to examine the Financial Report 2018, and the Internal Control Introspective Evaluation Report, etc. Nomination Committee provided opinions on the adjustment of executive positions. VII. Duty Fulfillment of the Supervisory Committee Whether the supervisory board made any objection against the supervision issue during the reporting period □ Yes √ No The Supervisory Board made no objection against the supervision issue during the reporting period. 93 Bengang Steel Plates Co., Ltd. Annual Report 2019 VIII. Appraisal and Incentive System for Senior Executives The Company’s performance assessment scheme for executives implements a combination of daily accountability and annual comprehensive assessment and evaluation. Senior Executives shall be punished if they fail to perform their duties properly, make mistakes or neglect their duty. The annual comprehensive assessment is conducted in the form of positive evaluation, horizontal evaluation and reverse democratic evaluation. The comprehensive evaluation results are an important basis for selecting and appointing senior management personnel, cultivating education, management supervision and incentives. IX. Internal Control 1. Significant defects of the internal control found in the internal control self-assessment report in the reporting period √Yes □ No Significant Defects of The Internal Control Found In The Report Period No significant defects of the internal control were found during the reporting period 2. Self-Evaluation Report on Internal Control Disclosing date of internal control auditing April 24, 2020 report full text Index of the internal control auditing report http://www.cninfo.com.cn full text Proportion of total assets of subsidiaries belong to the scope of self-evaluation 94.00% report in the total assets of the Company’s consolidated financial statements Proportion of operation income of subsidiaries belong to the scope of self- evaluation report in the operation income 77.00% of the Company’s consolidated financial statements Standards of Defects Evaluation Category Financial Report Non-financial Report 1. Material deficiencies:The frauds made by 1. Material the directors, or supervisors, or senior deficiencies : Major management personnel that leads to errors caused by Qualitative criteria significant losses and adverse effects to the decision-making company. 2. Significant deficiencies:Not in procedure; the important accordance with generally accepted business lacks 94 Bengang Steel Plates Co., Ltd. Annual Report 2019 accounting standards selection and institutional control or application of accounting policies; ; Not has a systematic failure established anti-fraud procedures and control while lacking effective measures; Not established the corresponding compensatory control; control mechanism or not implemented the serious drain of senior corresponding compensatory control on the and middle level accounting treatment of non-conventional or management personnel special deals; there are one or more defects in and senior technical the process control of the final financial report staff; the results of and which leads to cannot reasonably internal control guaranteeing the financial report compiled to evaluation, especially achieve the goal of being true and accurate. the significant 3. General deficiencies:the internal control deficiencies have not deficiencies except those constitute the been corrected; other material deficiencies and the significant circumstances that have deficiencies. big negative impact on the company. 2. Significant deficiencies : General errors caused by decision-making procedure; there are defects in the important business regulations and system serious drain of business personnel in key posts; the results of internal control evaluation, especially the important deficiencies have not been corrected; other circumstances that have comparably big negative impact on the company. 3. General deficiencies: low-efficiency on the decision-making process; existed defects in the ordinary business institution or system; serious drain of business personnel in general posts; general 95 Bengang Steel Plates Co., Ltd. Annual Report 2019 deficiencies that have not been corrected. 1. Material deficiencies:1) misstatement≥5% of the total profits;2) misstatement≥3% of the total assets;3) misstatement≥1% of the total operating income. 1. Material deficiencies:1) 4)misstatement≥1% of misstatement≥5% of the total profits; 2) the total amount of the misstatement≥3% of the total assets; 3) owner’s equity. 5) 3% misstatement≥1% of the total operating of the total profits income; 4)misstatement≥1% of the total ≤misstatement<5% of amount of the owner’s equity. 5) 3% of the the total profits;2. total profits ≤misstatement<5% of the total Significant profits;2. Significant deficiencies:1) deficiencies:1)0.5% 0.5% of the total assets ≤misstatement<3% of the total assets of the total assets;2)0.5% of the total ≤misstatement<3% of Quantitative criteria operating income ≤misstatement<1% of the the total assets;2) total operating income; 3)0.5% of the 0.5% of the total total amount of the owner’s equity operating income ≤misstatement<1% of the total amount of ≤misstatement<1% of the owner’s equity。3. General the total operating deficiencies:1)misstatement<3% of the income;3)0.5% of total profits;2)misstatement<0.5% of the the total amount of the total assets;3)misstatement<0.5% of the owner’s equity total operating income;4)misstatement< ≤misstatement<1% of 0.5% of the total amount of the owner’s the total amount of the equity。 owner’s equity。3. General deficiencies: 1)misstatement<3% of the total profits;2) misstatement<0.5% of the total assets;3) misstatement<0.5% of the total operating income; Number of major defects in financial 0 reporting(a) Number of major defects in non-financial 0 reporting (a) Number of important defects in financial 0 96 Bengang Steel Plates Co., Ltd. Annual Report 2019 reporting(a) Number of important defects in non- 0 financial reporting(a) X. Internal Control Audit Report √ Applicable □ Not applicable Review opinions in the internal control audit report We acknowledge that internal control of Bengang Bancai is effective in all material respects and is compliance with ‘Fundamental Rules of Enterprise Internal Control’ up to December 31, 2019. Internal Control Audit Report Disclosure Status Disclosure date of audit report of April 24, 2020 internal control (full-text) Index of audit report of internal http://www.cninfo.com.cn control (full-text) Internal audit report’s opinion Standard unqualified opinion Whether there is significant defect No in non-financial report Whether the accountants’ firm issued a qualified auditor’s report of internal control □ Yes √ No Whether the internal control audit report issued by the accountants’ firm agree with the self- assessment report of the Board of Directors √ Yes □ No 97 Bengang Steel Plates Co., Ltd. Annual Report 2019 XI. Relevant Information about Corporate Bonds Whether there exists any un-matured corporate bonds public issued and listed on the Stock Exchange or any matured corporate bonds which the listed company failed to pay in full at the approval date of the annual report. No. 98 Bengang Steel Plates Co., Ltd. Annual Report 2019 XII. Financial Report Auditors’ Report PCPAR [2020] No. ZB 10666 To All Shareholders of Bengang Steel Plates Co., Ltd.: Auditor’s Opinion We have audited the accompanying financial statements of Bengang Steel Plates Co., Ltd. (hereinafter referred to as “the Company”) which comprise the consolidated statement of financial position and statement of financial position as at 31 December 2019, the consolidated statement of comprehensive income and statement of comprehensive income, the consolidated statement of changes in equity and statement of changes in equity, the consolidated statement of cash flows and statement of cash flows for the year then ended, and notes to the financial statements. In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position and financial position of the Company as at 31 December 2019, and the consolidated results of operations and results of operations and the consolidated cash flows and cash flows of the Company for the year then ended in accordance with the requirements of Accounting standards for Business Enterprises. Basis for Opinion We conducted our audit in accordance with Chinese Certified Public Accountants Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the China Code of Ethics for Certified Public Accountants, and we have fulfilled our other ethical responsibilities in accordance with China Code of Ethics for Certified Public Accountants. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters The key audit matters are matters that we consider to be the most important for the audit of the current financial statements based on professional judgment. The response to these matters is based on the overall audit of the financial statements and the formation of audit opinions. We do not express a separate opinion on these matters. We have identified the following items as key audit matters that need to be disclosed in the audit report. Key Audit Matters Audit Procedure 1. Provision for Bad Debts 99 Bengang Steel Plates Co., Ltd. Annual Report 2019 Please refer to the Note (10) Bad debt The audit process implemented for provision for accounts receivable under “3. recoverability of Accounts receivable Significant accounting policies and includes mainly: accounting estimates” and Note (3) 1. Understand, evaluate and test Accounts receivable under “5. Notes to management's aging analysis of consolidated financial statements”. receivables and determine internal control related to bad debt provision for accounts As at December 31, 2019, the carrying receivable; amount of Accounts receivable is RMB 2. Review the management's consideration 422,027,232.44 and the bad debt is RMB and objective evidence for the impairment 186,330,996,78. test of accounts receivable and pay close attention to whether the management has fully identified the items that have been The management determines the estimated impaired; recoverable amount of accounts receivable based on the assessment of the credit 3. Sample the accounts receivable tested status, financial status and actual for impairment individually, and review on repayment status of relevant customers. the assumption and reasonableness of future cash flows estimation made by the management; The management determines the estimated 4. For accounts receivable tested for recoverable amount of accounts receivable impairment by portfolio, evaluate the based on significant accounting estimation reasonableness of the bad debt provision and judgement. And impact amount is proportion; significant, we determine that the recoverability of accounts receivable is a 5. Perform confirmation procedure, and key audit matter. check the confirmation results with the amount recorded by the management; 6. Check the amount received after the reporting period and evaluate the reasonableness of provision for bad debts made by the management. 2. Impairment of Inventory Please refer to the Note (11)Inventory The procedures carried out for the under “3. Significant accounting policies impairment of inventory include: and accounting estimates” and (7) 1. Test and evaluate the effectiveness of Inventory under “5. Notes to internal control in relation to the consolidated financial statements”. impairment of inventory; 2. Supervise stock taking and check the As at December 31,2019, the carrying quantity and status of inventory, especially amount of inventory in consolidated slow-moving and aged inventory; statement is RMB 7,770,641,202.02, 3. Obtain the calculation of the impairment impairment of inventory is RMB of inventory. Check any changes of the 70,243,516.41, the book value of inventory accrual of inventory impairment in the is RMB 7,700,397,686.61. Inventory is current period and analyse the sufficiency measured at the lower of cost and net of impairment; realizable value. The sufficiency of 4. For products with open market selling impairment for inventory will exert a great price, we inquired the open market price impact on the financial statement. independently and compared with the estimated selling price. For products The net realizable value of finished without open market selling price, we products held for direct selling in the daily compare the estimated price of the business activity shall be calculated by products with the latest actual selling price deducting the estimated sale expense and or selling price after the reporting period. 5.Evaluate the estimated sales expenses 100 Bengang Steel Plates Co., Ltd. Annual Report 2019 relevant taxes from the estimated sale price and related taxes and fees made by the of inventories. management and compare with the historical data of similar products and It involves significant judgement when the compare with the actual costs occurred management determines the estimated after the balance sheet date. selling price of the finished products based on status. As at December 31, 2019, the carrying amount of inventory was significant and involves the estimation of net realizable value. Therefore, we identified it as a key audit matter. Other information The management of the Company is responsible for the other information. The other information comprises information of the Company's annual report for the period of 2019 but excludes the financial statements and our auditor's report. Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit if there appears to be a material misstatement. Based on the work we have performed, if we determine that there is a material misstatement of other information, we should report that fact. In this regard, we have nothing to report. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with requirements of Accounting Standards for Business Enterprises, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management of the Company is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for supervising the Company's financial reporting process. Auditor's Responsibilities for the Audit of the Financial Statements 101 Bengang Steel Plates Co., Ltd. Annual Report 2019 Our objectives are to obtain reasonable assurance about whether the financial statements are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with Chinese Certified Public Accountants Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with accordance with Chinese Certified Public Accountants Auditing Standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: (1) Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. (2) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. (3) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. (4) Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on Bengang Steel Plate’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause Bengang Steel Plates to cease to continue as a going concern. (5) Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. (6) Obtain sufficient and appropriate audit evidence regarding the financial information of entities or business activities within Bengang Steel Plates to express an opinion on the financial statements. We are responsible for guiding, supervising and executing the group audit and assume full responsibility for the audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide a statement to those charged with governance on compliance with the ethical requirements associated with independence and communicate with those charged with governance all relationships and other matters that may reasonably be considered to affect our independence, and related precautions (if applicable). From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in 102 Bengang Steel Plates Co., Ltd. Annual Report 2019 extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. BDO CHINA SHULUN PAN CERTIFIED Certified Public Accountants of China PUBLIC ACCOUNTANTS LLP (Engagement Partner) Certified Public Accountants of China Shanghai, the People’s Republic of China 22 April 2019 This auditor’s report and the accompanying notes to the financial statement are English translation of the Chinese auditors’ report. In case of doubt as to the presentation of these documents, the Chinese version shall prevail. 103 Bengang Steel Plates Co., Ltd. Annual Report 2019 BENGANG STEEL PLATES CO., LTD. CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 December 2019 (Expressed in Renminbi unless otherwise indicated) Asset Notes 5 20191231 20181231 Current assets Cash at bank and on hand (1) 18,415,844,397.77 16,567,471,755.77 Settlement provisions Capital lent Financial assets held for trading Financial assets at fair value through profit or loss Derivative financial assets Notes receivable (2) 3,580,145,843.38 Accounts receivable (3) 235,696,265.66 639,482,481.45 Accounts receivable financing (4) 2,429,542,461.88 Prepayments (5) 1,291,047,458.11 1,321,537,514.78 Premium receivable Reinsurance accounts receivable Receivable deposit for reinsurance contract Other receivables (6) 172,807,036.77 202,763,964.98 Redemptory financial assets for sale Inventories (7) 7,700,397,685.61 10,677,747,112.40 Assets held for sale Non-current assets due within one year Other current assets (8) 312,904,824.09 292,119,771.13 Total current assets 30,558,240,129.89 33,281,268,443.89 Non-current assets Loan and advances issued Debt Investments Available-for-sale financial assets (9) 1,041,824,829.00 Other debt investments Held-to-maturity investment Long-term receivables Long-term equity investments (10) 2,642,998.70 2,455,681.55 Other equity instrument investments (11) 1,041,824,829.00 Other non-current financial assets Investment property Fixed assets (12) 26,123,375,492.40 23,924,504,539.97 Construction in progress (13) 1,833,853,572.58 836,594,457.82 Productive biological assets Oil and gas assets 104 Bengang Steel Plates Co., Ltd. Annual Report 2019 Asset Notes 5 20191231 20181231 Intangible assets (14) 271,500,023.34 278,062,441.04 Development expenditure Goodwill Long-term deferred expenses Deferred tax assets (15) 191,485,595.49 191,452,547.21 Other non-current assets (16) 708,502,552.50 76,341,975.35 Total non-current assets 30,173,185,064.01 26,351,236,471.94 Total assets 60,731,425,193.90 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: BENGANG STEEL PLATES CO., LTD. CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Continued) As at 31 December 2019 (Expressed in Renminbi unless otherwise indicated) Liabilities and equities Notes 5 20191231 20181231 Current Liabilities Short-term loans (17) 13,151,478,000.00 11,938,490,375.85 Loan from central bank Loan from other banks Financial liability held for trading Financial liabilities at fair value through profit or loss Derivative financial liabilities Notes payable (18) 11,828,514,676.95 10,013,192,014.02 Accounts payable (19) 4,527,513,030.27 5,522,042,811.65 Advance from customers (20) 4,429,821,526.79 3,331,854,098.42 Financial assets sold for repurchase Deposits from customers and interbank Receipt from vicariously traded securities Receipt from vicariously underwriting securities Employee benefits payable (21) 23,698,174.56 51,466,231.72 Current tax liabilities (22) 284,825,814.80 515,752,369.68 Other payables (23) 662,701,744.97 862,511,178.96 Handling charges and commission payable Reinsurance accounts payable Liabilities held for sale Non-current liabilities due within one year (24) 234,474,657.99 350,965,576.32 Other current liabilities Total current liabilities 35,143,027,626.33 32,586,274,656.62 Non-current liabilities Provision for insurance contract Long-term loans (25) 4,849,675,910.73 7,083,640,094.16 Bonds payable Including: Preferred stock 105 Bengang Steel Plates Co., Ltd. Annual Report 2019 Liabilities and equities Notes 5 20191231 20181231 Perpetual bond Long-term payables (26) 516,939,408.14 13,686,705.92 Long-term employee benefits payable Estimated liabilities Deferred income (27) 208,955,407.30 289,499,002.97 Deferred tax liabilities Other non-current liabilities Total non-current liabilities 5,575,570,726.17 7,386,825,803.05 Total liabilities 40,718,598,352.50 39,973,100,459.67 Shareholders' equity: Share capital (28) 3,875,371,532.00 3,875,371,532.00 Other equity instruments Including: Preferred stock Perpetual bond Capital reserves (29) 12,343,209,847.29 12,343,209,847.29 Less: treasury shares Other comprehensive income Special reserves (30) 212,687.41 683,937.71 Surplus reserves (31) 961,105,529.85 961,105,529.85 General risk reserve Undistributed profits (32) 2,307,765,664.62 1,945,887,269.82 Total equity attributable to equity holders of the parent company 19,487,665,261.17 19,126,258,116.67 Non-controlling interests 525,161,580.23 533,146,339.49 Total shareholder's equity 20,012,826,841.40 19,659,404,456.16 Total of liabilities and owners’ equity 60,731,425,193.90 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: BENGANG STEEL PLATES CO., LTD. STATEMENT OF FINANCIAL POSITION As at 31 December 2019 (Expressed in Renminbi unless otherwise indicated) Assets Notes 14 20191231 20181231 Current assets Cash at bank and on hand 16,982,227,928.89 15,536,305,375.00 Financial assets held for trading Financial assets at fair value through profit or loss Derivative financial assets Notes receivable (1) 3,356,020,598.89 Accounts receivable (2) 388,997,108.46 409,553,059.27 Accounts receivable financing (3) 2,193,319,842.60 Prepayments 1,184,632,345.13 1,309,194,738.97 Other receivables (4) 266,663,235.81 235,037,391.46 106 Bengang Steel Plates Co., Ltd. Annual Report 2019 Assets Notes 14 20191231 20181231 Inventories 6,114,582,832.33 8,681,362,081.72 Assets held for sale Non-current assets due within one year Other current assets 191,249,460.42 193,989,096.20 Total current assets 27,321,672,753.64 29,721,462,341.51 Non-current assets Debt investments Available-for-sale financial assets 1,041,624,829.00 Other debt investments Held-to-maturity investment Long-term receivables Long-term equity investments (5) 2,016,281,902.16 2,016,281,902.16 Other equity instrument investments 1,041,624,829.00 Other non-current financial assets Investment property Fixed assets 24,447,763,305.12 22,035,187,328.57 Construction in progress 1,813,889,136.42 825,553,510.15 Productive biological assets Oil and gas assets Intangible assets 145,470,040.68 148,776,177.96 Development expenditure Goodwill Long-term deferred expenses Deferred tax assets 93,555,276.54 96,220,003.00 Other non-current assets 696,351,867.38 76,341,975.35 Total non-current assets 30,254,936,357.30 26,239,985,726.19 Total assets 57,576,609,110.94 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: BENGANG STEEL PLATES CO., LTD. STATEMENT OF FINANCIAL POSITION (Continued) As at 31 December 2019 (Expressed in Renminbi unless otherwise indicated) Liabilities and shareholders' equities Notes 14 20191231 20181231 Current liabilities Short-term loans 11,851,478,000.00 10,624,270,375.85 107 Bengang Steel Plates Co., Ltd. Annual Report 2019 Liabilities and shareholders' equities Notes 14 20191231 20181231 Financial liability held for trading Financial liabilities at fair value through profit or loss Derivative financial liabilities Notes payable 10,225,969,445.22 9,213,748,427.22 Accounts payable 4,909,389,629.86 5,940,816,426.48 Prepayments 5,597,707,687.22 3,189,143,565.45 Employee benefits payable 21,872,906.71 49,378,095.47 Current tax liabilities 274,181,048.14 507,003,883.57 Other payables 384,125,032.59 538,051,513.13 Liabilities held for sale Non-current liabilities due within one year 234,474,657.99 350,965,576.32 Other current liabilities Total current liabilities 33,499,198,407.73 30,413,377,863.49 Non-current liabilities Long term loans 4,849,675,910.73 7,083,640,094.16 Bonds payable Including: Preferred stock Perpetual bond Long-term payables 516,939,408.14 13,686,705.92 Long-term employee benefits payable Estimated liabilities Deferred income 208,955,407.30 289,499,002.97 Deferred tax liabilities Other non-current liabilities Total non-current liabilities 5,575,570,726.17 7,386,825,803.05 Total liabilities 39,074,769,133.90 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 53,330.99 525,218.48 Surplus reserves 961,105,529.85 961,105,529.85 Undistributed Profits 1,742,251,419.03 1,401,183,955.66 Total shareholder's equity 18,501,839,977.04 18,161,244,401.16 108 Bengang Steel Plates Co., Ltd. Annual Report 2019 Liabilities and shareholders' equities Notes 14 20191231 20181231 Total liabilities and shareholder’s equity 57,576,609,110.94 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: BENGANG STEEL PLATES CO., LTD. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2019 (Expressed in Renminbi unless otherwise indicated) Items Notes 5 2019 2018 1. Total operating income 52,741,353,582.28 50,181,869,721.54 Including: Operating income (33) 52,741,353,582.28 50,181,869,721.54 Interest income Premium earned Income from handling charges and commission 2. Total operating cost 52,124,252,623.88 49,034,254,641.50 Including: Operating cost (33) 49,211,414,645.62 45,243,735,204.31 Interest expense Expenditure for handling charges and commission Surrender value Net expenditure for compensation Net provision for insurance contract appropriated Bonus payment for policy Reinsurance premium Tax and surcharges (34) 271,580,080.03 356,418,784.11 Selling and distribution expenses (35) 1,096,688,903.70 1,135,004,470.47 General and administrative expenses (36) 831,945,841.56 916,341,137.85 Research and development expenses (37) 30,780,463.74 6,399,884.30 Financial expenses (38) 681,842,689.23 1,376,355,160.46 Including: Interest expense 948,799,627.90 1,278,508,985.59 Interest income 333,750,262.79 200,356,927.95 Add: Other income (39) 83,916,607.12 86,085,297.03 Income on investment(“-” for loss) (40) 1,058,377.90 5,212,886.01 Including: Income from associates and joint ventures 452,582.71 171,488.75 Income from derecognition of financial assets measured at amortized cost Exchange gains(“-” for loss) Net exposure hedge income(“-” for loss) Gains from change of fair value (“-” for loss) Credit impairment loss (“-” for loss) (41) -6,541,900.62 Asset impairment loss (“-” for loss) (42) -43,256,982.72 -37,147,168.61 Assets disposal gains(“-” for loss) (43) 3,441,646.67 213,401.13 3. Operational profit(“-” for loss) 655,718,706.75 1,201,979,495.60 Add: Non-operating income (44) 10,306,462.87 8,384,120.14 Less: Non-operating expenses (45) 90,209,742.22 156,235,959.72 4. Total profit (“-” for loss) 575,815,427.40 1,054,127,656.02 Less: Income tax expenses (46) 18,954,938.42 17,949,597.66 5. Net profit(“-” for loss) 556,860,488.98 1,036,178,058.36 1.Classification by continuing operating 1.Net profit from continuing operation(“-” for loss) 556,860,488.98 1,036,178,058.36 2.Net profit from discontinued operation(“-” for loss) 2.Classification by ownership 1. Net profit attributable to the owners of parent company (“-” for loss) 555,646,971.40 1,036,493,236.07 2. Net profit attributable to non-controlling shareholders (“-” for loss) 1,213,517.58 -315,177.71 6.Other comprehensive income 109 Bengang Steel Plates Co., Ltd. Annual Report 2019 Items Notes 5 2019 2018 Other comprehensive income attributable to owners of the parent company after tax 1.Other comprehensive income items 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 3)Changes in fair value of investments in other equity instruments 4)Changes in fair value of company's credit risk 2.Other comprehensive income that will be reclassified into profit or loss. 1)Other comprehensive income under the equity method investee can be reclassified into profit or loss 2)Changes in fair value of other debt investments 3)Gains and losses from changes in fair value available for sale financial assets 4)Amount of financial assets reclassified into other comprehensive income 5)Held-to-maturity investments reclassified to gains and losses of available for sale financial assets 6)Credit impairment provision of other debt investments 7)The effective portion of cash flow hedges and losses 8) Translation differences in foreign currency financial statements 9)Other Other comprehensive income attributable to non-controlling shareholders’ equity after tax 7. Total comprehensive income 556,860,488.98 1,036,178,058.36 Total comprehensive income attributable to the owner of the parent company 555,646,971.40 1,036,493,236.07 Total comprehensive income attributable to non-controlling shareholders 1,213,517.58 -315,177.71 8. Earnings per share 1)Basic earnings per share 0.143 0.272 2)Diluted earnings per share 0.143 0.272 The notes to the financial statements attached form part of these financial statements. Legal Representative: Chief Financial Officer: Chief Accountant: BENGANG STEEL PLATES CO., LTD. STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2019 (Expressed in Renminbi unless otherwise indicated) Items Notes 14 2019 2018 1. Total operating income (6) 52,605,113,207.02 50,425,079,247.74 Less: Operating cost (6) 49,734,189,460.60 46,181,928,781.43 Tax and surcharges 219,994,347.76 315,916,612.32 Selling and distribution expenses 640,211,381.70 649,990,454.92 General and administrative expenses 775,147,352.42 865,648,309.29 Research and development expenses 30,780,463.74 6,399,884.30 Financial expenses 654,332,095.34 1,322,508,429.72 Including: Interest expense 889,827,373.77 1,214,448,750.09 Interest income 302,622,279.00 189,652,832.19 Add: Other income 83,594,522.47 85,795,297.03 Income on investment(“-” for loss) (7) 27,594,915.42 5,041,397.26 Including: Income from associates and joint ventures Income from derecognition of financial assets measured at amortized cost Net exposure hedge income(“-” for loss) Gains from change of fair value (“-” for loss) Credit impairment loss(“-” for loss) -4,408,068.83 110 Bengang Steel Plates Co., Ltd. Annual Report 2019 Items Notes 14 2019 2018 Assets impairment loss(“-” for loss) -43,256,982.72 -40,515,739.88 Assets disposal gains(“-” for loss) 3,488,648.92 213,401.13 2. Operational profit(“-” for loss) 617,471,140.72 1,133,221,131.30 Add: Non-operating income 10,128,386.99 7,861,687.83 Less: Non-operating expenses 90,098,761.28 155,512,092.92 3. Total profit (“-” for loss) 537,500,766.43 985,570,726.21 Less: Income tax expenses 2,664,726.46 3,969,918.33 4. Net profit(“-” for loss) 534,836,039.97 981,600,807.88 1.Net profit from continuing operation (“-” for loss) 534,836,039.97 981,600,807.88 2.Net profit from discontinued operation (“-” for loss) 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 3)Changes in fair value of investments in other equity instruments 4)Changes in fair value of company's credit risk 2.Other comprehensive income that will be reclassified into profit or loss. 1)Other comprehensive income under the equity method investee can be reclassified into profit or loss 2)Changes in fair value of other debt investments 3)Gains and losses from changes in fair value available for sale financial assets 4)Amount of financial assets reclassified into other comprehensive income 5)Held-to-maturity investments reclassified to gains and losses of available for sale financial assets 6)Credit impairment provision of other debt investments 7)The effective portion of cash flow hedges and losses 8) Translation differences in foreign currency financial statements 9)Other 6. Total comprehensive income 534,836,039.97 981,600,807.88 7. Earnings per share 1)Basic earnings per share 2)Diluted earnings per share The notes to the financial statements attached form part of these financial statements. Legal Representative: Chief Financial Officer: Chief Accountant: BENGANG STEEL PLATES CO., LTD. CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31 December 2019 (Expressed in Renminbi unless otherwise indicated) Items Notes 5 2019 2018 1.Cash flow from operating activities Cash received from sale of goods or rendering of services 47,399,776,780.22 42,328,152,309.09 Net increase of customers' deposit and interbank deposit Net increase of loan from central bank Net increase of loans from other financial institutions 111 Bengang Steel Plates Co., Ltd. Annual Report 2019 Items Notes 5 2019 2018 Cash received for premium of original insurance contract Net cash received for reinsurance business Net increase of deposit and investment of the insured Cash from receiving interest, handling charge and commission Net increase of loans from borrowing funds Net increase of fund for repurchase business Net cash received from traded securities Tax rebate received 364,095,520.25 302,924,880.47 Other cash received relating to operating activities (48) 377,085,656.22 257,881,680.20 Subtotal of cash inflows from operating activities 48,140,957,956.69 42,888,958,869.76 Cash paid for goods and services 37,675,995,353.53 36,193,580,135.37 Net increase of customer's loan and advances Net increase of deposit in central bank and interbank deposit Cash for payment of compensation for original insurance contract Net increase in capital lent Cash for payment of interest, handling charge and commission Cash for payment of policy bonus Cash paid to and on behalf of employees 2,109,471,410.71 1,979,770,272.66 Cash paid for all types of taxes 1,054,705,726.35 736,309,593.47 Other cash paid relating to operating activities (48) 322,961,424.94 359,361,026.33 Subtotal of cash outflows from operating activities 41,163,133,915.53 39,269,021,027.83 Net cash flows from operating activities 6,977,824,041.16 3,619,937,841.93 2. Cash flows from investing activities Cash received from disposal of investments 52,773,000.00 679,000,000.00 Cash received from return on investments 871,060.75 5,483,213.49 Net cash received from disposal of fixed assets, intangible assets and other long- 340,766.32 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 53,984,827.07 684,483,213.49 Cash paid for acquisition of fixed assets, intangible assets and other long-term assets 4,546,086,687.86 588,988,848.56 Cash paid for acquisition of investments 52,773,000.00 173,000,000.00 Net increase 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 4,598,859,687.86 761,988,848.56 Net cash flows from investing activities -4,544,874,860.79 -77,505,635.07 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 15,913,409,000.00 30,454,154,238.01 Other proceeds relating to financing activities (48) 1,571,269,971.97 641,108,215.57 Subtotal of cash inflows from financing activities 17,484,678,971.97 35,061,062,441.77 Cash repayments of borrowings 17,121,821,388.69 37,598,204,701.96 Cash payments for distribution of dividends, profit or interest expenses 1,172,008,803.59 1,546,758,168.22 Including: Cash paid to non-controlling shareholders as dividend and profit by 9,198,305.14 subsidiaries Other cash payments relating to financing activities (48) 10,343,406.67 66,626,597.64 Subtotal of cash outflows from financing activities 18,304,173,598.95 39,211,589,467.82 Net cash flows from financing activities -819,494,626.98 -4,150,527,026.05 112 Bengang Steel Plates Co., Ltd. Annual Report 2019 Items Notes 5 2019 2018 4. Effect of foreign exchange rate changes on cash and cash equivalents 75,411,813.22 43,066,662.23 5. Net increase in cash and cash equivalents 1,688,866,366.61 -565,028,156.96 Add: Cash and cash equivalents at the beginning of the period 11,752,548,621.97 12,317,576,778.93 6. Cash and cash equivalents at the ending of the period 13,441,414,988.58 11,752,548,621.97 The notes to the financial statements attached form part of these financial statements. Legal Representative: Chief Financial Officer: Chief Accountant: BENGANG STEEL PLATES CO., LTD. STATEMENT OF CASH FLOWS For the year ended 31 December 2019 (Expressed in Renminbi unless otherwise indicated) Items Notes 14 2019 2018 1. Cash flow from operating activities Cash received from sale of goods or rendering of services 45,925,314,655.54 42,632,583,197.28 Tax rebate received 318,311,209.48 118,774,962.17 Other cash received relating to operating activities 289,883,909.31 231,198,417.23 Subtotal of cash inflows from operating activities 46,533,509,774.33 42,982,556,576.68 Cash paid for goods and services 35,992,848,593.70 37,353,692,318.60 Cash paid to and on behalf of employees 1,975,902,597.93 1,859,006,850.63 Cash paid for all types of taxes 897,467,468.84 624,727,175.93 Other cash paid relating to operating activities 231,467,233.26 283,003,821.64 Subtotal of cash outflows from operating activities 39,097,685,893.73 40,120,430,166.80 Net cash flows from operating activities 7,435,823,880.60 2,862,126,409.88 2. Cash flows from investing activities Cash received from disposal of investments 650,000,000.00 Cash received from return on investments 27,594,915.42 5,041,397.26 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 27,594,915.42 655,041,397.26 Cash paid for acquisition of fixed assets, intangible assets and 4,500,165,073.02 583,816,993.15 other long-term assets Cash paid for acquisition of investments 409,300,000.00 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 4,500,165,073.02 993,116,993.15 Net cash flows from investing activities -4,472,570,157.60 -338,075,595.89 3. Cash flows from financing activities Proceeds from investment 3,965,799,988.19 Cash received from borrowings 14,603,409,000.00 28,965,014,238.01 113 Bengang Steel Plates Co., Ltd. Annual Report 2019 Items Notes 14 2019 2018 Other cash received relating to financing activities 1,484,945,138.77 641,108,215.57 Subtotal of cash inflows from financing activities 16,088,354,138.77 33,571,922,441.77 Cash repayments of borrowings 15,794,901,388.69 36,001,575,301.96 Cash payments for distribution of dividends, profit or interest 1,101,521,395.66 1,479,949,919.63 Other cash payments relating to financing activities 8,731,273.67 1,958,720.83 Subtotal of cash outflows from financing activities 16,905,154,058.02 37,483,483,942.42 Net cash flows from financing activities -816,799,919.25 -3,911,561,500.65 4. Effect of foreign exchange rate changes on cash and cash 75,337,651.52 43,049,979.65 equivalents 5. Net increase in cash and cash equivalents 2,221,791,455.27 -1,344,460,707.01 Add: Cash and cash equivalents at the beginning of the period 10,807,824,843.20 12,152,285,550.21 6. Ending balance of cash and cash equivalents 13,029,616,298.47 10,807,824,843.20 The notes to the financial statements attached form part of these financial statements. Legal Representative: Chief Financial Officer: Chief Accountant: 114 Bengang Steel Plates Co., Ltd. Annual Report 2019 BENGANG STEEL PLATES CO., LTD. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2019 (Expressed in Renminbi unless otherwise indicated) 2019 Owner's equity attributable to parent company Items Other equity instruments Non-controlling Total of owner's Less: Other General Special Undistributed interest equity Share capital Preference Perpetual Capital reserves Treasury comprehensive Surplus reserves risk Subtotal Others reserves profit shares bond shares income reserve 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 19,126,258,116.67 533,146,339.49 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 19,126,258,116.67 533,146,339.49 19,659,404,456.16 3. Changes in current year (“-” for decrease) -471,250.30 361,878,394.80 361,407,144.50 -7,984,759.26 353,422,385.24 1) Total comprehensive income 555,646,971.40 555,646,971.40 1,213,517.58 556,860,488.98 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 -9,198,305.14 -202,966,881.74 (1) Appropriation to surplus reserves (2) Appropriation to general risk reserve (3) Profit distribution to shareholders -193,768,576.60 -193,768,576.60 -9,198,305.14 -202,966,881.74 (4) Others 4) Transfers within shareholders' equity (1) Capital reserves transferred into paid-in capital (or stock) (2) Surplus reserves transferred 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 115 Bengang Steel Plates Co., Ltd. Annual Report 2019 2019 Owner's equity attributable to parent company Items Other equity instruments Non-controlling Total of owner's Less: Other General Special Undistributed interest equity Share capital Preference Perpetual Capital reserves Treasury comprehensive Surplus reserves risk Subtotal Others reserves profit shares bond shares income reserve 5) Special reserves -471,250.30 -471,250.30 28.30 -471,222.00 (1) Provision of special reserves 47,843,133.40 47,843,133.40 28.30 47,843,161.70 (2) Use of special reserves 48,314,383.70 48,314,383.70 48,314,383.70 6) Others 4. Ending balance of current year 3,875,371,532.00 12,343,209,847.29 212,687.41 961,105,529.85 2,307,765,664.62 19,487,665,261.17 525,161,580.23 20,012,826,841.40 The notes to the financial statements attached form part of these financial statements Legal Representative: Chief Financial Officer: Chief Accountant: BENGANG STEEL PLATES CO., LTD. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Continued) For the year ended 31 December 2019 (Expressed in Renminbi unless otherwise indicated) 2018 Owner's equity attributable to parent company Items Other equity instruments Non-controlling Total of owner's Less: Other General Special interest equity Share capital Preference Perpetua Capital reserves Treasury comprehensive Surplus reserves risk Undistributed profit Subtotal Others reserves shares l bond shares income reserve 14,849,064,473.1 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 14,315,588,729.00 533,475,744.19 9 Add: Change of accounting policies Correction of errors for last period Business consolidation under common control Others 14,849,064,473.1 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 14,315,588,729.00 533,475,744.19 9 3. Changes in current year (“-” for decrease) 739,371,532.00 3,228,364,305.24 208,890.96 842,724,659.47 4,810,669,387.67 -329,404.70 4,810,339,982.97 1) Total comprehensive income 1,036,493,236.07 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 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 3,967,735,837.24 116 Bengang Steel Plates Co., Ltd. Annual Report 2019 2018 Owner's equity attributable to parent company Items Other equity instruments Non-controlling Total of owner's Less: Other General Special interest equity Share capital Preference Perpetua Capital reserves Treasury comprehensive Surplus reserves risk Undistributed profit Subtotal Others reserves shares l bond shares income reserve (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 -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 -193,768,576.60 (4) Others 4) Transfers within shareholders' equity (1) Capital reserves transferred into paid-in capital (or stock) (2) Surplus reserves transferred into paid-in capital (or stock) (3) Surplus reserves to recover loss (4) Net changes of defined contribution plans transferred into Retained Earnings (5) Others 5) Special reserves 208,890.96 208,890.96 -14,226.99 194,663.97 (1) Provision of special reserves 46,823,964.39 46,823,964.39 46,823,964.39 (2) Use of special reserves 46,615,073.43 46,615,073.43 14,226.99 46,629,300.42 6) Others 19,659,404,456.1 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 19,126,258,116.67 533,146,339.49 6 The notes to the financial statements attached form part of these financial statements Legal Representative: Chief Financial Officer: Chief Accountant: 117 Bengang Steel Plates Co., Ltd. Annual Report 2019 BENGANG STEEL PLATES CO., LTD. STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2019 (Expressed in Renminbi unless otherwise indicated) 2019 Other equity instruments Less: Other Items Special Undistributed Total shareholder’s Share capital Preferenc Perpetual Capital reserves Treasury comprehensi Surplus reserves Others reserves profits equity e shares bond shares ve 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) -471,887.49 341,067,463.37 340,595,575.88 1) Total comprehensive income 534,836,039.97 534,836,039.97 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 transferred into paid-in capital (or stock) (2) Surplus reserves transferred 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 -471,887.49 -471,887.49 (1) Provision of special reserves 45,445,975.41 45,445,975.41 118 Bengang Steel Plates Co., Ltd. Annual Report 2019 2019 Other equity instruments Less: Other Items Special Undistributed Total shareholder’s Share capital Preferenc Perpetual Capital reserves Treasury comprehensi Surplus reserves Others reserves profits equity e shares bond shares ve income (2) Use of special reserves 45,917,862.90 45,917,862.90 6) Others 4. Ending balance of current year 3,875,371,532.00 11,923,058,165.17 53,330.99 961,105,529.85 1,742,251,419.03 18,501,839,977.04 The notes to the financial statements attached form part of these financial statements Legal Representative: Chief Financial Officer: Chief Accountant: BENGANG STEEL PLATES CO., LTD. STATEMENT OF CHANGES IN EQUITY (Continued) For the year ended 31 December 2019 (Expressed in Renminbi unless otherwise indicated) 2018 Other equity instruments Less: Other Items Special Undistributed Total shareholder’s Share capital Preference Perpetual Capital reserves Treasury comprehensi Surplus reserves Others reserves profits equity shares bond shares ve 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 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 of surplus reserves (2) Profit distribution to shareholders -193,768,576.60 -193,768,576.60 119 Bengang Steel Plates Co., Ltd. Annual Report 2019 2018 Other equity instruments Less: Other Items Special Undistributed Total shareholder’s Share capital Preference Perpetual Capital reserves Treasury comprehensi Surplus reserves Others reserves profits equity shares bond shares ve income (3) Others 4) Transfers within shareholders' equity (1) Capital reserves transferred into paid-in capital (or stock) (2) Surplus reserves transferred into paid-in capital (or stock) (3) Surplus reserves to recover loss (4) Net changes of defined contribution plans transferred 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: Chief Accountant: 120 Bengang Steel Plates Co., Ltd. Annual Report 2019 Bengang Steel Plates Co., Ltd. Notes to the financial statements For the year ended 31 December 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 “Bengang Steel Plates” or “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 HKD 2.38 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. 121 Bengang Steel Plates Co., Ltd. Annual Report 2019 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 31 December 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. The financial statements have been approved for reporting by the board of directors of the Company on 22 April 2020. (2) Consolidation scope As at 31 December 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 Metallurgy Science and Technology Co., Ltd. Bengang Steel Plates Liaoyang Pellet Co., Ltd. Dalian Benruitong Automobile Material Technology Co., Ltd. Changchun Bengang Steel & Iron Sales Co., Ltd. Harbin Bengang Economic and Trading Co., Ltd. Nanjing Bengang Materials 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 Metallurgical Science and Technology Co., Ltd. Chongqing Liaoben Steel & Iron Trading Co., Ltd. 122 Bengang Steel Plates Co., Ltd. Annual Report 2019 Bengang Baojin (Shenyang) Automobile New Material Technology Co., Ltd. The scope of the consolidated financial statements in this period has not changed compared with the previous period. 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 Notes for specific accounting policies and accounting estimates: The following disclosed content covers the specific accounting policies and accounting estimates that are adopted by the Company based on the actual production and operation characteristics. Please see Note (10) Financial instruments, (11) Inventory, (15) Fixed assets, (18) Intangible assets, (23) Revenue under “3. Significant accounting policies and accounting estimates” for details. (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 123 Bengang Steel Plates Co., Ltd. Annual Report 2019 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 financial statement of the ultimate controller on the combining date. As for the balance between the 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 subsidies (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 124 Bengang Steel Plates Co., Ltd. Annual Report 2019 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 arising 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. 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 125 Bengang Steel Plates Co., Ltd. Annual Report 2019 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. (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. 126 Bengang Steel Plates Co., Ltd. Annual Report 2019 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. 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 continuously 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 losing 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 127 Bengang Steel Plates Co., Ltd. Annual Report 2019 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) Classification of joint venture arrangements and accounting treatment Joint venture arrangements are divided into joint operations and joint ventures. When the Company is a joint venture party of a joint venture arrangement and have the assets related to the arrangement and assumes the liabilities related to the arrangement, it is a joint operation. The Company confirms the following items related to the share of interest in the joint operation and performs accounting treatment in accordance with the relevant enterprise accounting standards: a. Confirm the assets held by the company separately, and confirm the assets held jointly by the Company's share; b. Recognize the liabilities assumed by the Company separately and the liabilities jointly assumed by the company's share; c. Recognize the income generated by the sale of the Company’s share of common operating output; d. Recognize the revenue generated from the sale of joint operations based on the Company's share; e. Confirm the expenses incurred separately and the expenses incurred in the joint operation according to the Company's share. For the accounting policy of the Company's investment in joint ventures, please refer to Note (13) Long-term Equity Investment under “3. Significant accounting policies and accounting estimates” (8) 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. (9) 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 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. 128 Bengang Steel Plates Co., Ltd. Annual Report 2019 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. (10) Financial instruments Financial instruments include financial assets, financial liabilities and equity instruments 1. Classification of financial instruments Accounting Policies Adopted After January 1, 2019 The Company shall classify financial 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 amortised 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 financial 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. At the initial recognition, in order to eliminate or significantly reduce accounting mismatches, financial assets can be designated as financial 129 Bengang Steel Plates Co., Ltd. Annual Report 2019 assets measured at fair value through profit or loss. According to the above conditions, the company does not have such designated financial assets. 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. In the initial recognition, in order to eliminate or significantly reduce accounting mismatches, financial assets can be designated as financial assets measured at fair value and their changes included in the current profit and loss. According to the above conditions, the Company does not have such designated financial assets. The Company may, at initial recognition, designate 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. Accounting Policies Applicable Before January 1, 2019 The classification of financial assets and financial liabilities at initial recognition are as follows: financial assets or financial liabilities designated at fair value through current profit and loss, including trading financial investment, held-to-maturity investment, loans and receivables, available-for-sale investment and other financial liabilities. 2. Recognition and measurement of financial instruments Accounting Policies Adopted After January 1, 2019 (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 130 Bengang Steel Plates Co., Ltd. Annual Report 2019 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. 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 131 Bengang Steel Plates Co., Ltd. Annual Report 2019 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. 132 Bengang Steel Plates Co., Ltd. Annual Report 2019 Interests calculated by using the effective interest method during the holding period shall be. recognized in profit or loss. When the financial liabilities are derecognized, the difference between the price obtained and. the carrying value shall be recognised in profit and loss. Accounting Policies Applicable Before January 1, 2019 (1) The financial assets (liabilities) at fair value through profit or loss The financial assets (financial liabilities) at fair value through profit or loss are recognized initially at fair value (minus cash dividends declared but not received or bond interest matured but not drawn yet). The relevant transaction cost is recognized in current profit and loss when occurred. The cash dividends or interest are recognized as investment income when the Company receives such financial assets. At the balance sheet date, the Company recognizes the fair value changes in current profit and loss. The Company recognizes the difference between initial recognition and fair value of the financial assets as investment income when disposing the financial assets and at the same time adjusts the fair value changes in current profit and loss. (2) Held-to-maturity investment The Held-to-maturity investments are recognized initially at fair value (minus bond interest matured but not drawn yet) plus any related transaction cost. The held-to-maturity investments are measured at amortized cost using the effective interest rate. The interest income is recognized as investment income. The effective interest will be determined at the initial recognition and will not be changed in the holding period or within a shorter applicable period. When disposing the held-to-maturity investment, the difference between the investing proceeds and the carrying value is recognized as investment income. (3) Receivables Receivables from selling products and rendering services or receivable of other company not including the receivables with quoted price in the active market (including: accounts receivable, other receivables, notes receivable, prepayments, long-term receivables) are measured at contract price; if the receivables is of financing nature, it shall be recognized at the present value initially. 133 Bengang Steel Plates Co., Ltd. Annual Report 2019 When disposing the receivables, the difference between the proceeds and the carrying value is recognized in current profit and loss. (4) Available-for-sale financial assets Available-for-sale financial assets are initially recorded at the sum of fair values (deducting cash dividends that have been declared but not distributed and bond interests that have matured but not been drawn) and transaction costs when acquired. The Company recognizes the interest or cash dividends as investment income. At each balance sheet date, available-for-sale financial assets are measured at fair value and the fair value changes are recognized in the capital reserve - other capital reserve. The difference between the proceeds of the disposal and the carrying value shall be recognized as investment income. And the related fair value change in the shareholders’ equity shall be transferred out and recorded as investment income. (5) Other financial liabilities For other financial liabilities, they are initially recognized at fair value plus any directly attributable transaction costs. After the initial recognition, the other financial liabilities are measured at amortized cost. 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 stop recognizing the financial asset. If it retained nearly all of the risks and rewards related to the ownership of the financial asset, it shall not stop recognizing the financial asset. To judge whether the transfer of a financial asset can satisfy the conditions as prescribed in these Standards for stopping the recognition 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 financial assets transfer and entire financial asset transfer. If the transfer of an entire financial asset satisfies the conditions for de-recognition, the difference between the amounts of the following 2 items shall be recorded in the profits and losses 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 derecognize, the entire book value of the transferred financial asset shall, between the portion whose recognition has been stopped and the portion whose recognition has not been stopped (under such circumstance, the service asset retained shall be deemed as a portion of financial asset whose recognition has not been stopped), be apportioned according to their respective relative fair value, and the difference between the amounts of the following 2 items shall be included into the profits and losses of the current period : (1) The book value of the portion whose recognition has been stopped; and (2) The sum of consideration of the portion whose recognition has been stopped, and the portion of the accumulative amount of the changes in the fair value originally recorded in the owner's equities which is corresponding to the portion whose recognition has been stopped (in the event that the financial asset involved in the transfer is a financial asset Available-for-sale). 134 Bengang Steel Plates Co., Ltd. Annual Report 2019 If the transfer of financial assets does not satisfy the conditions to stop the recognition, it shall continue to be recognized as financial assets and the consideration received shall be recognized as financial liabilities. 4. Termination of recognition of financial liabilities Only when the prevailing obligations of a financial liability are relieved in all or in part may the recognition of the financial liability be terminated 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 substantially different from that regarding the existing financial liability, it shall terminate the recognition of the existing financial liability, and shall at the same time recognize the new financial liability. Where the Company makes substantial revisions to part or all of the contractual stipulations of the existing financial liability, it shall terminated the recognition of 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 the recognition of a financial liability is totally or partially terminated, the Company shall include into the profits and losses of the current period the difference between the carrying amount which has been terminated from recognition 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 whose recognition has already been terminated. The gap between the carrying amount which is distributed to the part whose recognition has terminated and the considerations it has paid (including the noncash assets it has transferred out and the new financial liabilities it has assumed) shall be recorded into the profits and losses 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 circumstances 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 provision of the financial assets (excluding accounts receivables) Accounting Policies Adopted After January 1, 2019 The Company considers all reasonable and relevant information, including forward-looking information, to recognize the expected credit loss on financial assets measured at amortized cost, and financial assets measured at fair value through other comprehensive income (debt instruments) on the individual or portfolio basis. The measurement of expected credit loss depends on whether there is a significant increase in credit risk of financial assets since the initial recognition. If the credit risk of the financial instrument has increased significantly since the initial confirmation, 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 on a financial instrument has not increased significantly since initial recognition, the Company shall measure the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. The increase or reversal amount of loss allowance thus formed shall be included in the current profits and losses as impairment losses or gains. Generally, the Company believes that the credit risk of the financial instrument has significantly increased over 30 days after the due date, unless there is solid evidence that the credit risk of the financial instrument has not 135 Bengang Steel Plates Co., Ltd. Annual Report 2019 increased significantly since initial recognition. If the credit risk of a financial instrument at the reporting date is relatively low, the Company considers that the credit risk of the financial instrument has not increased significantly since the initial recognition. If there is objective evidence indicating that a certain financial asset has been impaired, the Company shall recognise provision for impairment of the financial asset individually. For account receivables, 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. For those accounts receivable, lease receivables, long-term receivables formed by the company through the sale of goods or rendering of services, notes receivable, accounts receivable financing, and other receivables which contains significant financing component, the Company chooses to use the general financial asset impairment method, that is, according to whether the credit risk has increased significantly or not since the initial recognition to measure the expected credit loss at an amount equal to 12-month expected credit losses (stage one) or at an amount equal to the lifetime expected credit losses (stage two and stage three). Accounting Policies Applicable before January 1, 2019 The Company shall carry out impairment review for the financial assets at the balance sheet date except for the financial assets at fair value through profit or loss. Where there is any objective evidence proving that such financial asset has been impaired, an impairment provision shall be made. (1) Impairment of available-for-sale financial assets An impairment provision shall be made where the fair value of the available-for-sale financial assets drops significantly at the balance sheet date or the trend of decrease is expected not to be temporary after taking various factors into consideration. The accumulative losses arising from the decrease of the fair value of the owners’ equity which was directly included shall be transferred out and recorded as impairment loss. Where any available-for-sale debt instruments is recognized as having suffered from any impairment loss, if there is any objective evidence proving that the value of the said debt instruments has been restored, and it is objectively related to the events that occur after such loss is recognized, the impairment-related losses as originally recognized shall be reversed and be recorded into the profits and losses of the current period. Impairment losses incurred by investment transactions of available-for-sale equity instruments shall not be reversed through profits and losses. The criteria for “significant” decrease of fair value of available-for-sale equity instruments: the book value the equity investment is lower than 50% of the fair value; The criteria for “non-temporary” decrease of fair value of available-for-sale equity instruments: available-for- sale equity instruments have been subject to material un-normal factors or the book value has been lower than the purchase price for over one year (including one year). (2) Bad debt provision for accounts receivable ① The recognition and provision for bad debts for the individually significant receivables The recognition standard for the individually significant receivables: Accounts receivable over RMB10 million or other receivables over RMB 5 million. The provision method for bad debts for the individually significant receivables: The impairment test shall be assessed individually for each individually significant receivable. If there is evidence indicating that the receivables have been impaired, the difference between the present value of the future cash flows and the book value of receivables shall be recognized as bad debts provision and shall be recorded into the profits and losses at the current period. Receivables that are assessed not to be impaired 136 Bengang Steel Plates Co., Ltd. Annual Report 2019 individually are subsequently assessed for impairment in portfolios. ② The provision for bad debts for the receivables in portfolio The provision method for bad debts for the receivables in portfolio Criteria for portfolio Individual insignificant receivables and receivables that are individually Portfolio assessed not to be impaired Provision method for bad debts for portfolio Portfolio Aging analysis method Aging analysis method for bad debts provision Bad debts ratio for Bad debts 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 ③ Individually insignificant receivables of which bad debts are provisioned individually Reasons for individual provision of bad debts Individually insignificant receivables are individually assessed to be impaired. The provision method for bad debts The difference between the present value of the future cash flows and the book value of receivables shall be recognized as bad debts provision and shall be recorded into the profits and losses at the current period. (3) Impairment of held-to-maturity investment The impairment of the held-to-maturity investment can be measured at reference to the. measurement of the impairment of accounts receivables. (11) Inventory 1. Inventory classification Inventories include material in transit, raw material, turnover materials, finished goods, work in process, issue commodity, 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 137 Bengang Steel Plates Co., Ltd. Annual Report 2019 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 realizable 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 provision 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. Specifically, if the inventory held for the execution of the sales contract or labor contract, and the sales contract order quantity is equal to the quantity of inventory held by the enterprise, the contract price of the finished product or commodity is used as the basis for calculating the net realizable value; The quantity of inventory is more than the quantity ordered by the sales contract, and the net realizable value of the excess inventory is based on the general sales price of the finished product or commodity; if the quantity of inventory held by the enterprise is less than the quantity ordered by the sales contract, the actual Contract-related inventory uses the price specified in the sales contract as the basis for calculating the net realizable value. 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. (12) 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 138 Bengang Steel Plates Co., Ltd. Annual Report 2019 relevant regulations that the assets can be sold have been approved by relevant authorities or regulatory authorities of the Company. (13) 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 financial 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 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 139 Bengang Steel Plates Co., Ltd. Annual Report 2019 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 the acquisition date, the difference shall be credited to profit or loss for the current period. 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 140 Bengang Steel Plates Co., Ltd. Annual Report 2019 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 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 shall be accounted for in accordance with financial instruments recognition and measurement standard. 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 141 Bengang Steel Plates Co., Ltd. Annual Report 2019 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 financial instruments recognition and measurement standards, 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 additional investment or other reasons, in stand-alone financial 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 investments accounted for in accordance with financial instruments recognition and measurement standard after disposal, other comprehensive income and other owner’s interests previously recognized shall be transferred to profit or loss in full. (14) 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). 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. (15) 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 simultaneously 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 142 Bengang Steel Plates Co., Ltd. Annual Report 2019 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 leasing 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 Depreciation Residual Value Category Depreciation method Rate Period Rate (%) (%) Plants and Buildings straight line method 8-40 years 0.00 2.50-12.50 Machinery straight line method 4-18 years 3.00 5.39-24.25 Transportation and straight line method 5-18 years 3.00 5.39-19.40 other 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. 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. (16) 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. 143 Bengang Steel Plates Co., Ltd. Annual Report 2019 (17) 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 acquisition and construction or production of assets eligible for capitalization, it shall be capitalized and recorded into the costs of relevant assets. Other borrowing costs shall be recognized as expenses on the basis of the actual amount incurred, and shall be recorded into the current profits and losses. 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 simultaneously 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 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 144 Bengang Steel Plates Co., Ltd. Annual Report 2019 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. (18) Intangible Assets 1. Measurement of Intangible Assets (1) Initial measurement is based on cost upon acquisition The cost of an intangible asset on acquisition include 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 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 beneficial 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 145 Bengang Steel Plates Co., Ltd. Annual Report 2019 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. 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 before commercial manufacturing and use. (19) Impairment of long-term assets For long-term assets such as long-term equity investments, Investment property under the cost model, 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 written 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 assets on the basis of the asset group to which the asset belongs. The term "assets group” refers to a minimum combination of assets by which the cash flows could be generated independently The goodwill, intangible assets with uncertain useful life and intangible assets not meeting the 146 Bengang Steel Plates Co., Ltd. Annual Report 2019 expected condition for use the 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. (20) 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 (21) Employee benefits 1. Accounting treatment for short employee benefit The Company shall recognise, 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 147 Bengang Steel Plates Co., Ltd. Annual Report 2019 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. In addition to basic pension fund, the company has also established an enterprise annuity payment system (supplementary pension fund) / enterprise annuity plan in accordance with the relevant policies of the national enterprise annuity system. The company pays a local social insurance institution's contribution / annuity plan according to a certain percentage of the total wages of employees, and the corresponding expenditure is included in the current profit and loss or related asset costs. 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. (22) 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; (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. 148 Bengang Steel Plates Co., Ltd. Annual Report 2019 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, uncertainty, time value of money, and other factors pertinent to the Contingencies. If the time value of money is of great significance, the best estimate shall be determined after discounting the relevant future outflow of cash. The 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. (23) 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. 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. The relevant costs incurred or to be incurred can be measured reliably. (2) The specific criteria of revenue recognition and measurement 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. 149 Bengang Steel Plates Co., Ltd. Annual Report 2019 (24) Government Subsidies 1. Types 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. 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. The government subsidies related to incomes refers to government subsidies other than those related to assets. The standard of the Company recognizing the government subsidies related to assets is: an entity qualifying for them should purchase, construct or otherwise acquire long-term assets. The standard of the Company recognizing the government subsidies related to income is: In addition to government subsidies related to assets, government subsidies that have been clearly targeted for subsidies. 2. 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. 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. 3. 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 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. The policy discount loans obtained by the company are divided into the following two situations and are separately accounted for: 150 Bengang Steel Plates Co., Ltd. Annual Report 2019 (a) The government allocates discounted funds to the loan bank, and the loan bank provides loans to the company at a policy preferential interest rate. The preferential interest rate is used to calculate the relevant borrowing costs. (b) If the government directly allocates the discounted funds to the company, the company will offset the relevant borrowing costs with the corresponding discounts, directly accounted for the current profit or loss or recognized as deferred income. (25) 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 be obtained 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 recognition 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. (26) Leases 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 151 Bengang Steel Plates Co., Ltd. Annual Report 2019 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. (27) Discontinuing operation 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. (28) Major accounting estimates and judgments When preparing financial statements, the Company's management needs to use estimates and assumptions, which will affect the application of accounting policies and the amount of assets, liabilities, income and expenses. Actual conditions may differ from these estimates. The management of the company continuously evaluates the judgment of key assumptions and uncertainties involved in the estimation, and the impact of changes in accounting estimates will be recognized in the current and future periods. The main uncertainties in the estimated amount are as follows: (1) Measurement of expected credit losses The company calculates the expected credit loss through the default risk exposure and the expected credit loss rate, and determines the expected credit loss rate based on the default probability and the default loss rate. When determining the expected credit loss rate, the company uses internal historical credit loss experience and other data, and adjusts the historical data in combination with current conditions and forward-looking information. When considering forward-looking information, the indicators used by the Company include the risk of economic downturn, the expected increase in unemployment rate, changes in the external market environment, technological environment and customer conditions. The Company regularly monitors and reviews assumptions related to the calculation of expected credit losses. (2) Inventory Impairment As mentioned in note (11) Inventory under “3 Significant accounting policies and accounting estimates”, the Company regularly estimates the net realizable value of the inventory, and recognizes the difference in inventory cost higher than the net realizable value. When estimating the net realizable value of inventory, the Company considers the purpose of holding the inventory and uses the available information as the basis for estimation, including the market price of the inventory and the Company's past operating costs. The actual selling price, completion cost, sales expenses and taxes of the inventory may change according to changes in market sales conditions, production technology, or the actual use of the inventory. Therefore, the amount of inventory depreciation reserve may change according to the above reasons. Adjustments to the inventory impairment will affect the current profit and loss. 152 Bengang Steel Plates Co., Ltd. Annual Report 2019 (3) Impairment of other assets except inventory and financial assets As mentioned in note (19) Long-term Asset Impairment under “3 Significant accounting policies and accounting estimates”, the company performs an impairment assessment on assets other than inventory and financial assets on the balance sheet date to determine whether the recoverable amount of the asset has fallen to a lower level than its book value. If the situation shows that the book value of the long-term assets may not be fully recovered, the relevant assets will be deemed to be impaired and the impairment loss will be recognized accordingly. The recoverable amount is the higher of the net value of the fair value of the asset (or asset group) minus the disposal expenses and the present value of the asset (or asset group) 's expected future cash flow. Because the Company can not reliably obtain the public market price of assets (or asset groups), and can not reliably and accurately estimate the fair value of assets. Therefore, the Company regards the present value of the expected future cash flow as the recoverable amount. When estimating the present value of future cash flows, it is necessary to make a significant judgment on the output, selling price, related operating costs of the products produced by the asset (or asset group), and the discount rate used in calculating the present value. The Company will use all available relevant information when estimating the recoverable amount, including the prediction of output, selling price and related operating costs based on reasonable and supportable assumptions. (4) Depreciation and amortization of assets such as fixed assets and intangible assets As described in note (15) Fixed Assets and note (18) Intangible Assets under “3 Significant accounting policies and accounting estimates”, the company shall accrue depreciation for the fixed assets and amortization for intangible assets within the useful life after considering their residual value. The company regularly reviews the useful life of related assets to determine the amount of depreciation and amortization expenses to be included in each reporting period. The useful life of assets is determined by the company based on past experience with similar assets and in combination with anticipated technological changes. If the previous estimates change significantly, the depreciation and amortization expenses will be adjusted in the future. (5) Deferred tax assets When it is estimated that sufficient taxable income can be obtained in the future to use the unrecovered tax losses and deductible temporary differences, the relevant deferred tax assets are calculated and confirmed on the basis of the applicable income tax rate during the period when the asset is expected to be recovered and the amount of taxable income is limited to deductible tax losses and deductible temporary differences likely to be obtained by the Company. The Company needs to use judgment to estimate the time and amount of future taxable income, and make reasonable estimates and judgments on the future applicable income tax rate according to the current tax policy and other related policies to determine the deferred tax assets that should be recognized. If the time and amount of profits actually generated in the future period or the actual applicable income tax rate are different from the management's estimate, the difference will have an impact on the amount of deferred tax assets. (29) Change of significant accounting policy and accounting estimate 1. Change of major accounting policy during this reporting period (2) Implementation of “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” and 153 Bengang Steel Plates Co., Ltd. Annual Report 2019 “Notice on the revision of the format for the issuance of the consolidated financial statements for the year 2019” 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) on 30 April 2019,and “Notice on the revision of the format for the issuance of the consolidated financial statements for the year 2019” (Cai-Kuai 2019 No.16) which revised the format of financial statement for the general enterprise. The following accounting policy changes have been approved by the company's board of directors and board of supervisors. The major impact of the implementation of the above regulations are as follows: Change of accounting Affected items and amount policy content and Consolidated Financial statement Parent company financial statement reason “Notes receivable and accounts “Notes receivable and accounts receivable” splits into “Notes In the balance sheet, receivable” splits into “Notes receivable” and “Accounts “Notes receivable and receivables” and “Accounts receivable”, the ending balance of accounts receivable” receivables”, the ending balance of last year of “Notes receivables” is splits into “Notes last year of “Notes receivables” is RMB 3,356,020,598.89, the ending receivables” and RMB 3,580,145,843.38, and the ending balance of last year of “Accounts “Accounts balance of last year of “Accounts receivables” is RMB receivables”; “Notes receivables” is RMB 639,482,481.45; 409,553,059.27; payable and accounts “Notes payable and accounts payable” “Notes payable and accounts payable” splits into splits into “Notes payable” and payable” splits into “Notes payable” “Notes payable” and “Accounts payable”, the ending balance and “Accounts payable”; the ending “Accounts payable”; of last year of “Notes payable” is RMB balance of last year of “Notes the comparative data 10,013,192,014.02, the ending balance payable” is RMB 9,213,748,427.22, is adjusted of last year of “Accounts payable” is the ending balance of last year of accordingly. RMB 5,522,042,811.65. "Accounts payable" is RMB 5,940,816,426.48. (5) Implementation of “Accounting Standards for Business Enterprises No.22-Recognition and Measurement of Financial Instruments”, “Accounting Standards for Business Enterprises No.23-Transfer of Financial Assets”, “Accounting Standards for Business Enterprises No.24-Hedging Accounting”, and “Accounting Standards for Business Enterprises No.37 - Presentation of Financial Instruments” (2017 revision). Ministry of Finance revised “Accounting Standards for Business Enterprises No.22- 154 Bengang Steel Plates Co., Ltd. Annual Report 2019 Recognitionand Measurement of Financial Instruments”, “Accounting Standards for Business Enterprises No.23-Transfer of Financial Assets”, “Accounting Standards for Business Enterprises No.24-Hedging Accounting”, and “Accounting Standards for Business Enterprises No.37 - Presentation of Financial Instruments” in 2017, which stipulates financial instruments that have not been derecognised on the date of initial implementation, they shall be adjusted retrospectively, if the previous recognition and measurement are inconsistent with the requirements of the revised standard. No adjustment is required, if the previous comparative financial statements are inconsistent with the requirements of the revised standard. Adjustment is required for retained earnings and other comprehensive income at the beginning of the year due to cumulative impact of retroactive adjustments. The following accounting policy changes have been approved by the company's board of. directors and board of supervisors. Based on adjusted ending balance of previous year in accordance with “Cai-Kuai 2019 No.6” and “Cai- Kuai 2019 No.16”, the major impact of the implementation of the above standards are as follows: Change of accounting Affected items and amount policy content and reason Consolidated Parent company The beginning balance of (1) Non-tradable available- available-for-sale financial assets The beginning balance of available-for- for-sale equity instrument decrease by RMB sale financial assets decrease by RMB investments are designated 1,041,824,829.00. 1,041,824,829.00. as "financial assets The beginning balance of other The beginning balance of other equity measured at fair value equity instrument investment: instrument investment: increase by RMB through other increase by RMB 1,041,824,829.00. comprehensive income" 1,041,824,829.00. Reclassify part of Notes Receivable: decrease by Notes Receivable: decreases by RMB “Accounts receivables” to RMB 3,580,145,843.38 at the 3,356,020,598.89 at the beginning of the “Financial assets at fair beginning of the year. year. value through other Accounts receivable financing: Accounts receivable financing: increases comprehensive income increases RMB 3,580,145,843.38 RMB 3,356,020,598.89 at the beginning (debt instruments)” at the beginning of the year. of the year. 155 Bengang Steel Plates Co., Ltd. Annual Report 2019 Based on adjusted ending balance of previous year according to Cai-Kuai 2019 No. 6 and Cai-Kuai No.16, the financial assets and liabilities recognised and measured before and after the amendment are compared as follows: Consolidated: Old Financial Instrument Standards New Financial Instrument Standards Items Measurement Method Book value Items Measurement Method Book value Cash at bank and on hand Amortized cost 16,567,471,755.77 Cash at bank and on hand Amortized cost 16,567,471,755.77 Financial assets at fair value Financial assets held for Fair value through profit or loss Fair value through profit or loss through profit or loss trading Derivative financial assets Fair value through profit or loss Derivative financial assets Fair value through profit or loss Notes receivable Amortized cost Notes receivable Amortized cost 3,580,145,843.38 Accounts Receivable Fair value through other comprehensive 3,580,145,843.38 financing income Accounts receivable Amortized cost 639,482,481.45 Accounts receivable Amortized cost 639,482,481.45 Fair value through other comprehensive Receivables financing income Other receivables Amortized cost 202,763,964.98 Other receivable Amortized cost 202,763,964.98 Held to maturity investments Debt investment (Including Amortized cost Amortized cost (Including other current assets) other current assets) Available for sale financial Fair value through other Debt investment (Including Amortized cost assets (Including other current comprehensive income(Debt other current assets) 156 Bengang Steel Plates Co., Ltd. Annual Report 2019 Old Financial Instrument Standards New Financial Instrument Standards assets) instruments) Other debt investment Fair value through other comprehensive (Including other current income assets) Fair value through other Financial assets held for comprehensive income(Equity trading Fair value through profit or loss instruments) Other non-current financial assets Other equity instruments Fair value through other comprehensive investment income Financial assets held for trading Fair value through profit or loss Other non-current financial Cost (Equity instruments) 1,041,824,829.00 assets Other equity instruments Fair value through other comprehensive 1,041,824,829.00 investment income Long-term account receivable Amortized cost Long-term account Amortized cost receivable Financial liabilities at fair Financial liabilities held for Fair value through profit or loss Fair value through profit or loss value through profit or loss trading Derivative financial liabilities Fair value through profit or loss Derivative financial liabilities Fair value through profit or loss 157 Bengang Steel Plates Co., Ltd. Annual Report 2019 Parent company Old Financial Instrument Standards New Financial Instrument Standards Items Measurement Method Book value Items Measurement Method Book value Cash at bank and on hand Amortized cost 15,536,305,375.00 Cash at bank and on hand Amortized cost 15,536,305,375.00 Financial assets at fair value Fair value through profit or Financial assets held for trading Fair value through profit or loss through profit or loss loss Fair value through profit or Derivative financial assets Derivative financial assets Fair value through profit or loss loss Notes receivable Amortized cost Notes receivable Amortized cost 3,356,020,598.89 Fair value through other Accounts receivable financing 3,356,020,598.89 comprehensive income Accounts receivable Amortized cost 409,553,059.27 Accounts receivable Amortized cost 409,553,059.27 Fair value through other Accounts receivable financing comprehensive income Other receivables Amortized cost 235,037,391.46 Other receivables Amortized cost 235,037,391.46 Held to maturity investments Debt investment (Including other Amortized cost Amortized cost (Including other current assets) current assets) Available for sale financial assets Fair value through other Debt investment (Including other Amortized cost 158 Bengang Steel Plates Co., Ltd. Annual Report 2019 Old Financial Instrument Standards New Financial Instrument Standards (Including other current assets) comprehensive income current assets) (Debt instruments) Other debt investment (Including Fair value through other other current assets) comprehensive income Fair value through other Financial assets held for trading Fair value through profit or loss comprehensive income Other non-current financial assets (Equity instruments ) Other equity instruments investment Fair value through other comprehensive income Cost (Equity instruments) Financial assets held for trading Fair value through profit or loss Other non-current financial assets 1,041,624,829.00 Other equity instruments investment Fair value through other 1,041,624,829.00 comprehensive income Long-term account receivable Amortized cost Long-term account receivable Amortized cost Financial liabilities at fair value Fair value through profit or Financial liabilities held for trading Fair value through profit or loss through profit or loss loss Derivative financial liabilities Fair value through profit or Derivative financial liabilities Fair value through profit or loss loss 159 Bengang Steel Plates Co., Ltd. Annual Report 2019 (6) Implementation of “Accounting Standards for Business Enterprises No. 7-Non-Monetary Assets Exchange” (2019 Revision) Ministry of Finance issued “Accounting Standards for Business Enterprises No. 7-Non- Monetary Assets Exchange” (Revised 2019) (Caikuai [2019] No. 8) on May 9, 2019, and came into effect on June 10, 2019. For non-monetary assets exchange occurred from January 1, 2019 to the effective date, the adjustment shall be made accordingly. For non- monetary asset exchanges occurred before January 1, 2019, retrospective adjustments are not required. The implementation of the above standards by the company has no significant impact for the reporting period. (7) Implementation of “Accounting Standards for Business Enterprises No. 12-Debt Restructuring” (2019 Revision) Ministry of Finance issued “Accounting Standards for Business Enterprises No. 12-Debt Restructuring” 2019 Revision) (Caikuai [2019] No. 9) on June 17, 2019, and came into effect on June 17, 2019. For debt restructuring occurred from January 1, 2019 to the effective date, the adjustment shall be made accordingly. For debt restructuring occurred before January 1, 2019, retrospective adjustments are not required. The implementation of the above standards by the company has no significant impact for the reporting period. 2. Change of accounting estimate during this reporting period None. 160 Bengang Steel Plates Co., Ltd. Annual Report 2019 3. The first implementation of the new financial instruments standard adjustment to the financial statements at the beginning of the year Consolidated Statement of Financial Position Adjusted amount Items 20181231 20190101 Reclassify Remeasure Total Current assets: Cash at bank and on hand 16,567,471,755.77 16,567,471,755.77 Settlement provisions Capital lent Financial assets held for trading Not Applicable Financial assets at fair value through profit or loss Not Applicable Derivative financial assets Notes receivable 3,580,145,843.38 -3,580,145,843.38 -3,580,145,843.38 Accounts receivable 639,482,481.45 639,482,481.45 Accounts receivable financing Not Applicable 3,580,145,843.38 3,580,145,843.38 3,580,145,843.38 Prepayments 1,321,537,514.78 1,321,537,514.78 Premium receivable Reinsurance accounts receivable Receivable deposit for reinsurance contract Other receivables 202,763,964.98 202,763,964.98 Redemptory financial assets for sale Inventories 10,677,747,112.40 10,677,747,112.40 Assets held for sale Non-current assets due within one year Other current assets 292,119,771.13 292,119,771.13 Total current assets 33,281,268,443.89 33,281,268,443.89 161 Bengang Steel Plates Co., Ltd. Annual Report 2019 Adjusted amount Items 20181231 20190101 Reclassify Remeasure Total Non-current assets: Loan and advances issued Debt investment Not Applicable Available-for-sale financial assets 1,041,824,829.00 Not Applicable -1,041,824,829.00 -1,041,824,829.00 Other debt investments Not Applicable Held-to-maturity investments Not Applicable Long-term receivables Long-term equity investments 2,455,681.55 2,455,681.55 Other equity instrument investments Not Applicable 1,041,824,829.00 1,041,824,829.00 1,041,824,829.00 Other non-current financial assets Not Applicable Investment property Fixed assets 23,924,504,539.97 23,924,504,539.97 Construction in progress 836,594,457.82 836,594,457.82 Productive biological assets Oil and gas assets Intangible assets 278,062,441.04 278,062,441.04 Development expenditure Goodwill Long-term deferred expenses Deferred tax assets 191,452,547.21 191,452,547.21 Other non-current assets 76,341,975.35 76,341,975.35 Total non-current assets 26,351,236,471.94 26,351,236,471.94 Total assets 59,632,504,915.83 59,632,504,915.83 Current liabilities: Short-term loans 11,938,490,375.85 11,938,490,375.85 162 Bengang Steel Plates Co., Ltd. Annual Report 2019 Adjusted amount Items 20181231 20190101 Reclassify Remeasure Total Loan from central bank Loan from other banks Financial liability held for trading Not Applicable Financial liabilities at fair value through profit or loss Not Applicable Derivative financial liabilities Notes payable 10,013,192,014.02 10,013,192,014.02 Accounts payable 5,522,042,811.65 5,522,042,811.65 Advance from customers 3,331,854,098.42 3,331,854,098.42 Financial assets sold for repurchase Deposits from customers and interbank Receipt from vicariously traded securities Receipt from vicariously underwriting securities Employee benefits payable 51,466,231.72 51,466,231.72 Current tax liabilities 515,752,369.68 515,752,369.68 Other payables 862,511,178.96 862,511,178.96 Handling charges and commission payable Reinsurance accounts payable Liabilities held for sale Non-current liabilities due within one year 350,965,576.32 350,965,576.32 Other current liabilities Total current liabilities 32,586,274,656.62 32,586,274,656.62 Non-current liabilities: Non-current liabilities Provision for insurance contract 7,083,640,094.16 7,083,640,094.16 Long-term loans 163 Bengang Steel Plates Co., Ltd. Annual Report 2019 Adjusted amount Items 20181231 20190101 Reclassify Remeasure Total Bonds payable Including: Preferred stock Perpetual bond 13,686,705.92 13,686,705.92 Long-term payables Long-term employee benefits payable Estimated liabilities 289,499,002.97 289,499,002.97 Deferred income Deferred tax liabilities Other non-current liabilities 7,386,825,803.05 7,386,825,803.05 Total liabilities 39,973,100,459.67 39,973,100,459.67 Shareholders' equity: Share capital 3,875,371,532.00 3,875,371,532.00 Other equity instruments Including: Preferred stock Perpetual bond Capital reserves 12,343,209,847.29 12,343,209,847.29 Less: treasury shares Other comprehensive income Special reserves 683,937.71 683,937.71 Surplus reserves 961,105,529.85 961,105,529.85 General risk reserve Undistributed profits 1,945,887,269.82 1,945,887,269.82 Total equity attributable to equity holders of the parent 19,126,258,116.67 19,126,258,116.67 company Non-controlling interests 533,146,339.49 533,146,339.49 164 Bengang Steel Plates Co., Ltd. Annual Report 2019 Adjusted amount Items 20181231 20190101 Reclassify Remeasure Total Total shareholder's equity 19,659,404,456.16 19,659,404,456.16 Total liabilities and shareholder’s equity 59,632,504,915.83 59,632,504,915.83 Statement of Financial Position for parent company Adjusted amount Items 20181231 20190101 Reclassify Remeasure Total Current assets: Cash at bank and on hand 15,536,305,375.00 15,536,305,375.00 Financial assets held for trading Not Applicable Financial assets at fair value through profit or Not Applicable loss Derivative financial assets Notes receivable 3,356,020,598.89 -3,356,020,598.89 -3,356,020,598.89 Accounts receivable 409,553,059.27 409,553,059.27 Accounts receivable financing Not Applicable 3,356,020,598.89 3,356,020,598.89 3,356,020,598.89 Prepayments 1,309,194,738.97 1,309,194,738.97 Other receivables 235,037,391.46 235,037,391.46 Inventories 8,681,362,081.72 8,681,362,081.72 Assets held for sale Non-current assets due within one year Other current assets 193,989,096.20 193,989,096.20 Total current assets 29,721,462,341.51 29,721,462,341.51 Non-current assets Debt investments Not Applicable 165 Bengang Steel Plates Co., Ltd. Annual Report 2019 Adjusted amount Items 20181231 20190101 Reclassify Remeasure Total Available-for-sale financial assets 1,041,624,829.00 Not Applicable -1,041,624,829.00 -1,041,624,829.00 Other debt investments Not Applicable Held-to-maturity investment Not Applicable Long-term receivables Long-term equity investments 2,016,281,902.16 2,016,281,902.16 Other equity instrument investments Not Applicable 1,041,624,829.00 1,041,624,829.00 1,041,624,829.00 Other non-current financial assets Not Applicable Investment property Fixed assets 22,035,187,328.57 22,035,187,328.57 Construction in progress 825,553,510.15 825,553,510.15 Productive biological assets Oil and gas assets Intangible assets 148,776,177.96 148,776,177.96 Development expenditure Goodwill Long-term deferred expenses Deferred tax assets 96,220,003.00 96,220,003.00 Other non-current assets 76,341,975.35 76,341,975.35 Total non-current assets 26,239,985,726.19 26,239,985,726.19 Total assets 55,961,448,067.70 55,961,448,067.70 Current liabilities Short-term loans 10,624,270,375.85 10,624,270,375.85 Financial liability held for trading Not Applicable Financial liabilities at fair value through profit Not Applicable or loss Derivative financial liabilities 166 Bengang Steel Plates Co., Ltd. Annual Report 2019 Adjusted amount Items 20181231 20190101 Reclassify Remeasure Total Notes payable 9,213,748,427.22 9,213,748,427.22 Accounts payable 5,940,816,426.48 5,940,816,426.48 Prepayments 3,189,143,565.45 3,189,143,565.45 Employee benefits payable 49,378,095.47 49,378,095.47 Current tax liabilities 507,003,883.57 507,003,883.57 Other payables 538,051,513.13 538,051,513.13 Liabilities held for sale Non-current liabilities due within one year 350,965,576.32 350,965,576.32 Other current liabilities Total current liabilities 30,413,377,863.49 30,413,377,863.49 Non-current liabilities Long term loans 7,083,640,094.16 7,083,640,094.16 Bonds payable Including: Preferred stock Perpetual bond Long-term payables 13,686,705.92 13,686,705.92 Long-term employee benefits payable Estimated liabilities Deferred income 289,499,002.97 289,499,002.97 Deferred tax liabilities Other non-current liabilities Total non-current liabilities 7,386,825,803.05 7,386,825,803.05 Total liabilities 37,800,203,666.54 37,800,203,666.54 Shareholder’s equity: Share capital 3,875,371,532.00 3,875,371,532.00 167 Bengang Steel Plates Co., Ltd. Annual Report 2019 Adjusted amount Items 20181231 20190101 Reclassify Remeasure Total 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 525,218.48 525,218.48 Surplus reserves 961,105,529.85 961,105,529.85 Undistributed Profits 1,401,183,955.66 1,401,183,955.66 Total shareholder's equity 18,161,244,401.16 18,161,244,401.16 Total liabilities and shareholder’s equity 55,961,448,067.70 55,961,448,067.70 168 Bengang Steel Plates Co., Ltd. Annual Report 2019 4. Taxes (1) Major type of taxes and corresponding tax rates Tax Taxation Method Tax Rate The balance of output VAT calculated 6%, 9%, 13% (April based on product sales and taxable to December in 2019) Value-added Tax (VAT) services revenue in accordance with the 6%,10%, 16%(Jan tax laws after subtracting the deductible input VAT of the period to March in 2019) Based on VAT and business tax actually City maintenance and construction tax 7%, 5% paid Based on VAT and business tax actually Educational surcharges 3%, 2% paid Enterprise income tax Based on taxable profit 25% 5. Notes to the consolidated financial statements (1) Cash at bank and on hand Items 20191231 20181231 Cash on hand 5,588.98 4,839.95 Cash at bank 13,441,409,399.60 11,752,543,782.02 Other monetary funds 4,974,429,409.19 4,814,923,133.80 Total 18,415,844,397.77 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 20191231 20181231 Margin for bank acceptance bill 4,803,950,250.12 3,794,647,133.80 Margin for letter of credit 166,527,026.07 105,000,000.00 Time deposit or notice deposit for guarantee 915,276,000.00 Loan deposit 3,330,000.00 Other 622,133.00 Total 4,974,429,409.19 4,814,923,133.80 (2) Notes receivable Notes receivable disclosed by category Items 20191231 20181231 Bank acceptance bill 3,540,317,759.10 Commercial acceptance bill 39,828,084.28 Total 3,580,145,843.38 169 Bengang Steel Plates Co., Ltd. Annual Report 2019 (3) Accounts receivable 1. Accounts receivable disclosed by aging analysis Items 20191231 20181231 Within 1 year 187,728,755.63 563,409,367.97 1-2 years 31,659,160.02 56,752,847.90 2-3 years 24,710,744.49 27,697,384.96 Over 3 years 177,928,572.30 173,335,183.49 Sub-total 422,027,232.44 821,194,784.32 Less: Provision for bad debts 186,330,966.78 181,712,302.87 Total: 235,696,265.66 639,482,481.45 2. Accounts receivable disclosed by bad debt accrual method 20191231 Carrying amount Provision for bad debts Items Bad Book value Percentage Amount Amount debts (%) ratio (%) Provision for bad debts individually 47,762,337.18 11.32 47,762,337.18 100.00 Provision for bad debts based on portfolio 374,264,895.26 88.68 138,568,629.60 37.01 235,696,265.66 Include: Portfolio 1: Aging portfolio 374,264,895.26 88.68 138,568,629.60 37.01 235,696,265.66 Total 422,027,232.44 100.00 186,330,966.78 235,696,265.66 20181231 Carrying amount Provision for bad debts Items Bad Book value Percentage Amount Amount debts (%) ratio (%) Individually significant and tested for impairment 47,762,337.18 5.82 47,762,337.18 100.00 individually Provision for bad debts 773,432,447.14 94.18 133,949,965.69 17.32 639,482,481.45 based on credit risk Individually not significant but tested for impairment individually Total 821,194,784.32 100.00 181,712,302.87 639,482,481.45 Accounts receivables tested for impairment individually: 170 Bengang Steel Plates Co., Ltd. Annual Report 2019 20191231 Company Provision for Bad debts Carrying amount Reason bad debts ratio (%) Benxi Nanfen Xinhe Metallurgical Furnace 47,762,337.18 47,762,337.18 100.00 Halt operation Material Co., Ltd Total 47,762,337.18 47,762,337.18 Provision for bad debts based on ageing portfolio: 20191231 Items Account Provision for Bad debt ratio Receivable bad debts (%) Within 1 187,728,755.63 1,877,287.56 1.00 year 1-2 year 31,659,160.02 1,582,958.01 5.00 2-3 year 24,710,744.49 4,942,148.91 20.00 Over 3 130,166,235.12 130,166,235.12 100.00 year Total 374,264,895.26 138,568,629.60 3. Information of provision, reversal or write-off of bad debts of current period The amount of provision for bad debts in the current period is RMB 4,618,663.91 4. No accounts receivable has been written off this year. 5. Top five debtors at the year-end 20191231 Company Percentage of total Accounts Provision for Amount receivable (%) bad debts The first 62,933,318.72 14.91 5,743,870.05 The second 58,923,447.74 13.96 589,234.48 The third 47,762,337.18 11.32 47,762,337.18 The fourth 15,212,648.64 3.60 152,126.49 The fifth 14,353,834.99 3.40 143,538.35 171 Bengang Steel Plates Co., Ltd. Annual Report 2019 20191231 Company Percentage of total Accounts Provision for Amount receivable (%) bad debts Total 199,185,587.27 47.19 54,391,106.55 6. Accounts receivable derecognized due to the transfer of financial assets None 7. The amount of assets and liabilities formed by transferring accounts receivable and continuing to be involved None (4) Accounts receivable financing 1. Details of accounts receivable financing Item Ending balance Notes Receivable 2,117,763,147.67 Including: Bank acceptance bill 2,108,970,139.40 Commercial acceptance bill 8,793,008.27 Accounts receivable 311,779,314.21 Total 2,429,542,461.88 Note: Accounts receivable financing reflects notes receivable and accounts receivable that are measured at fair value through other comprehensive income. 2. Provision for financing impairment of receivables None 3. The pledged acceptance bill at the year-end Item The pledged acceptance bill at the year-end Bank acceptance bill 373,576,250.73 Commercial acceptance bill Total 373,576,250.73 172 Bengang Steel Plates Co., Ltd. Annual Report 2019 4. The amount of Notes receivable endorsed over or discounted but not yet matured at the year-end Amount not Amount confirmed confirmed at Item at the end of the end of the the period period Bank acceptance bill 14,384,469,276.19 26,900,000.00 Commercial acceptance bill Total 14,384,469,276.19 26,900,000.00 5. No Notes receivable has been transferred into accounts receivable due to inability of drawer to meet acceptance bill at the year-end. (5) Prepayments 1. Prepayments disclosed by aging 20191231 20181231 Aging Amount Percentage (%) Amount Percentage (%) Within 1 year 1,284,678,069.97 99.51 1,318,136,339.11 99.74 1-2 years 6,279,487.94 0.49 2,494,489.34 0.19 2-3 years 53,900.20 901,900.77 0.07 Over 3 years 36,000.00 4,785.56 Total 1,291,047,458.11 100.00 1,321,537,514.78 100.00 Notes: As of December 31, 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 937,622,380.11 72.62 The Second 54,329,421.50 4.21 The Third 35,596,284.07 2.76 The Fourth 30,241,736.77 2.34 The Fifth 22,579,517.94 1.75 Total 1,080,369,340.39 83.68 (6) Other receivables Items 20191231 20181231 Interest receivables 20,504,422.47 11,608,705.43 Dividend receivables 173 Bengang Steel Plates Co., Ltd. Annual Report 2019 Other receivables 152,302,614.30 191,155,259.55 Total 172,807,036.77 202,763,964.98 1.Interest receivable (1) Interest receivable disclosed by category Items 20191231 20181231 Deposit interest 20,504,422.47 11,608,705.43 Subtotal 20,504,422.47 11,608,705.43 Less: provision for bad debts Total 20,504,422.47 11,608,705.43 (3) The company has no significant provision for overdue interest and bad debts. 2.Other receivables (1) Other receivables disclosed by aging Items 20191231 20181231 Within 1 year 15,306,496.22 4,278,962.95 1-2 years 3,479,413.70 36,261,746.59 2-3 years 65,222,052.19 59,217,830.48 Over 3 years 219,169,978.96 256,099,387.50 Sub-total 66,867,364.66 64,944,127.95 Less: Provision for bad debts 152,302,614.30 191,155,259.55 Total: 152,302,614.30 191,155,259.55 (2)Information of provision for bad debts Stage one Stage two Stage three lifetime expected credit lifetime expected credit Provision for bad losses losses Total debts 12-month expected credit losses (credit impairment has not (credit impairment has occurred) already occurred) Beginning balance 18,482,164.52 46,461,963.43 64,944,127.95 Provision, transfer in, transfer back, -8,988,054.83 10,911,291.54 1,923,236.71 transfer out during 174 Bengang Steel Plates Co., Ltd. Annual Report 2019 Stage one Stage two Stage three lifetime expected credit lifetime expected credit Provision for bad losses losses Total debts 12-month expected credit losses (credit impairment has not (credit impairment has occurred) already occurred) the current period Write-back during the current period Write-off during the current period Other changes Ending balance 9,494,109.69 57,373,254.97 66,867,364.66 Changes in the book value of other receivables are as follows: Stage one Stage two Stage three lifetime expected lifetime expected 12-month Book value credit losses credit losses Total expected credit (credit impairment has (credit impairment has losses not occurred) already occurred) Beginning balance 155,305,039.72 54,332,384.35 46,461,963.43 256,099,387.50 Increase 10,911,291.54 10,911,291.54 Decrease 17,793,063.61 30,047,636.47 47,840,700.08 Other changes Ending balance 137,511,976.11 24,284,747.88 57,373,254.97 219,169,978.96 (4) Other receivables disclosed by nature Nature Ending balance Beginning balance Accounts 209,700,618.22 203,695,979.62 Others 9,469,360.74 52,403,407.88 Total 219,169,978.96 256,099,387.50 175 Bengang Steel Plates Co., Ltd. Annual Report 2019 (5) Top five debtors at the year-end Percentage of total Provision Company Nature Amount Aging other receivables for bad (%) debts The First Accounts 5,840,229.02 within 1 year 2.66 The Second Accounts 5,718,029.34 1-2 year 2.61 1,143,605.87 The Third Accounts 5,329,737.80 within 1 year 2.43 The Fourth Accounts 4,325,705.39 within 1 year 1.97 The Fifth Accounts 2,701,719.84 within 1 year to over 3 year 1.23 2,465,166.01 Total 23,915,421.39 10.90 3,608,771.88 (6) There is no other receivables relates to any government subsidies at the year-end (7) There is no other receivables derecognized due to the transfer of financial assets at the year-end (8) There is no transfer of other receivables and continued involvement in the amount of assets and liabilities formed at the year-end. (7) Inventories 1. Inventories disclosed by category 20191231 20181231 Items Carrying amount Impairment Book value Carrying amount Impairment Book value Raw material 3,737,655,945.87 26,986,533.69 3,710,669,412.18 5,509,216,101.37 26,986,533.69 5,482,229,567.68 and main material Work in process and self- made semi-finished 1,302,249,713.48 25,995,508.16 1,276,254,205.32 1,365,365,191.33 29,012,489.61 1,336,352,701.72 product Finished products 2,730,735,542.67 17,261,474.56 2,713,474,068.11 3,888,124,260.41 28,959,417.41 3,859,164,843.00 Total 7,770,641,202.02 70,243,516.41 7,700,397,685.61 10,762,705,553.11 84,958,440.71 10,677,747,112.40 2. Impairment of inventory Increase Decrease Category 20181231 Write-back 20191231 Provision Others Others or write-off Raw material 26,986,533.69 26,986,533.69 and main material Work in process and 29,012,489.61 25,995,508.16 29,012,489.61 25,995,508.16 self-made semi-finished 176 Bengang Steel Plates Co., Ltd. Annual Report 2019 product Finished products 28,959,417.41 17,261,474.56 28,959,417.41 17,261,474.56 Total 84,958,440.71 43,256,982.72 57,971,907.02 70,243,516.41 (8) Other current assets Items 20191231 20181231 Prepaid enterprise income tax 182,484,616.27 189,634,393.98 Input tax to be deducted 130,420,207.82 102,485,377.15 Total 312,904,824.09 292,119,771.13 (9) Available-for-sale financial assets 20181231 Items Carrying Impairment Book value amount Available-for-sale debt instruments Available-for-sale equity instruments 1,056,239,522.00 14,414,693.00 1,041,824,829.00 Including: Measured at fair value Measured 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 1,041,824,829.00 177 Bengang Steel Plates Co., Ltd. Annual Report 2019 (10) Long-term equity investment Increase/decrease Total Investment Gains Other Investees Add Reduce Other Declaration of Impairme 20181231 and Losses Comprehen Provision 20191231 Invest Investme Equity Cash Dividends Others nt Ending Recognized under sive Income ment nt Changes or Profit Balance the Equity Method Adjustment 1.Joint Venture Subtotal 2.Associated Enterprise Zhejiang Bengang Jingrui 2,455,681.55 452,582.71 -265,265.56 2,642,998.70 Steel Processing Co., Ltd.. Subtotal 2,455,681.55 452,582.71 -265,265.56 2,642,998.70 Total 2,455,681.55 452,582.71 -265,265.56 2,642,998.70 178 Bengang Steel Plates Co., Ltd. Annual Report 2019 (11) Other equity instrument investments Item 20191231 Equity of Suzhou Bengang Industrial Co., Ltd. 3,888,980.00 Equity of Zhonggang Shanghai Steel Processing Co., Ltd. Equity of Northeast Special Steel Group Co., Ltd. 1,037,735,849.00 Equity of Guangzhou Benpu Automobile Panel 200,000.00 Sales Co., Ltd. Total 1,041,824,829.00 Notes: “Other equity instrument investment" items reflects the ending balance of non-trading equity instrument investments designated as measured at fair value through other comprehensive income. The company holds 15% equity of Zhonggang Shanghai Steel Processing Co., Ltd. 10% equity of Northeast Special Steel Group Co., Ltd. held by the company has been pledged to Bank of Dalian, Shenyang branch. (12) Fixed assets 1. Fixed assets and Disposal of fixed assets Items 20191231 20181231 Fixed assets 26,123,375,492.40 23,924,504,539.97 Disposal of fixed assets Total 26,123,375,492.40 23,924,504,539.97 2. Details of fixed assets Transportation Items Buildings Machinery equipment and Total others 1. Total original value 20181231 12,174,491,765.86 43,551,735,976.27 902,527,777.12 56,628,755,519.25 Increase 217,299,421.01 4,497,726,033.17 8,830,647.72 4,723,856,101.90 in current period Including: Purchase 3,767,753,948.48 8,591,886.65 3,776,345,835.13 179 Bengang Steel Plates Co., Ltd. Annual Report 2019 Transportation Items Buildings Machinery equipment and Total others Transferred from construction in 217,299,421.01 729,972,084.69 238,761.07 947,510,266.77 progress Merging Others Decrease in current 70,007,968.08 423,837,878.16 3,073,643.53 496,919,489.77 period Including: Disposal 70,007,968.08 423,837,878.16 3,073,643.53 496,919,489.77 Others 20191231 12,321,783,218.79 47,625,624,131.28 908,284,781.31 60,855,692,131.38 2.Total accumulated depreciation 20181231 5,576,027,013.36 26,526,053,819.79 560,595,347.69 32,662,676,180.84 Increase 297,511,396.37 2,088,488,982.35 46,266,176.08 2,432,266,554.80 in current period Including: Provision 297,511,396.37 2,088,488,982.35 46,266,176.08 2,432,266,554.80 Others Decrease in current 30,378,347.06 370,955,253.72 2,515,243.95 403,848,844.73 period Including: Disposal 30,378,347.06 370,955,253.72 2,515,243.95 403,848,844.73 Others 20191231 5,843,160,062.67 28,243,587,548.42 604,346,279.82 34,691,093,890.91 3. Total impairment 20181231 38,948,079.36 2,626,719.08 41,574,798.44 Increase in current period Including: Provision Others Decrease in current 352,050.37 352,050.37 period Including: Disposal 352,050.37 352,050.37 Others 20191231 38,596,028.99 2,626,719.08 41,222,748.07 4. Total net book value of Fixed assets 20191231 book value 6,440,027,127.13 19,379,409,863.78 303,938,501.49 26,123,375,492.40 20181231 book value 6,559,516,673.14 17,023,055,437.40 341,932,429.43 23,924,504,539.97 3. Fixed assets idled temporarily 180 Bengang Steel Plates Co., Ltd. Annual Report 2019 Accumulated Items Original value Impairment Book value Notes depreciation Buildings 93,833,538.80 58,818,849.47 35,014,689.33 Machinery 1,224,688.89 1,149,022.46 75,666.43 Transportation 1,042,125.89 1,042,125.89 and others Total 96,100,353.58 61,009,997.82 35,090,355.76 4. Fixed assets leased in through financial leasing As of the end of this reporting period, the original value of the fixed assets leased in through financial leasing was RMB 516,939,408.14, all of which were leased from the related party Liaoning Hengyi Financial Leasing Co., Ltd. For details, please refer to note (5) 2. Related leases under note 10. 5. Fixed assets leased out through financial leasing Item Ending balance Buildings 24,696,730.67 Machinery 375,387.16 Total 25,072,117.83 6. Fixed assets without property rights certificates at the year-end Items Book value Reason Buildings 1,070,014,263.61 To be handled (13) Construction in progress 1. Construction in progress and Construction materials Items 20191231 20181231 Construction in progress 1,820,264,689.19 831,693,471.71 Project materials 13,588,883.39 4,900,986.11 Total 1,833,853,572.58 836,594,457.82 2. Details of construction in progress 181 Bengang Steel Plates Co., Ltd. Annual Report 2019 20191231 20181231 Total net book Total net book Items Total Total Carrying amount value of Fixed Carrying amount value of Fixed impairment impairment assets assets Blast Furnace Overhaul of 491,069,345.30 491,069,345.30 79,221,161.00 79,221,161.00 No. 5 Special Steel Rolling Mill 126,479,522.35 126,479,522.35 19,247,154.89 19,247,154.89 Renovation Project Energy Saving and Environmental Protection 148,803,402.52 148,803,402.52 81,652,336.52 81,652,336.52 Reconstruction of No.1 Converter Project New No. 8 single-flow slab 100,460,943.24 100,460,943.24 20,079,392.09 20,079,392.09 casting machine project Renovation Project of 67,436,716.24 67,436,716.24 Power Plant Three Transformation of No. 2 Casting Machine in Steel 81,419,913.88 81,419,913.88 67,751,518.71 67,751,518.71 Plant CCPP power generation 85,320,752.59 85,320,752.59 24,961,721.54 24,961,721.54 project Environmental Protection Reform of Converter No. 4- 69,541,903.74 69,541,903.74 6,858,749.61 6,858,749.61 6 Special Steel Electric Furnace Capacity 62,311,284.01 62,311,284.01 438,638.96 438,638.96 Replacement Project 360 square meters sintering 60,930,506.79 60,930,506.79 39,870,921.39 39,870,921.39 machine 360 square meter sintering 55,089,094.50 55,089,094.50 44,777,158.00 44,777,158.00 machine waste heat 182 Bengang Steel Plates Co., Ltd. Annual Report 2019 20191231 20181231 Total net book Total net book Items Total Total Carrying amount value of Fixed Carrying amount value of Fixed impairment impairment assets assets utilization Dry dust removal of No. 7 blast furnace and energy- 40,993,916.95 40,993,916.95 22,973,276.80 22,973,276.80 saving transformation of TRT power generation 1700 hot rolling perfect 39,806,201.09 39,806,201.09 25,521,831.89 25,521,831.89 transformation Coking plant gas deamination and sulfur 34,300,566.05 34,300,566.05 ammonia maintenance project Oxygen Generator Nitrogen Increase Energy Saving 34,339,392.96 34,339,392.96 21,715,145.18 21,715,145.18 Reconstruction of No.5 and No.7 No. 6 blast furnace environmental protection 30,937,257.41 30,937,257.41 22,895,777.14 22,895,777.14 overhaul project Reconstruction of two dust collectors in the second 29,954,354.78 29,954,354.78 granulated product of iron making plant Power plant 4-5 # coke oven CDQ waste heat steam 27,607,246.17 27,607,246.17 utilization project Coke Oven Gas Project for Liao Coal Chemical Co., 21,840,791.70 21,840,791.70 19,829,530.02 19,829,530.02 Ltd. 183 Bengang Steel Plates Co., Ltd. Annual Report 2019 20191231 20181231 Total net book Total net book Items Total Total Carrying amount value of Fixed Carrying amount value of Fixed impairment impairment assets assets The overall improvement of the manufacturing 20,685,421.72 20,685,421.72 management of Benxi Steel Coke oven wastewater advanced treatment of No. 8 20,335,268.74 20,335,268.74 12,091,429.51 12,091,429.51 and 9 Other 299,945,414.92 299,945,414.92 192,463,200.00 192,463,200.00 Total 1,820,264,689.19 1,820,264,689.19 831,693,471.71 831,693,471.71 184 Bengang Steel Plates Co., Ltd. Annual Report 2019 3. The change of major construction in progress Input Accumulated Including: Capi Other of Prog Budget (in 10 Transfer to amount of capitalized taliza Source of Project 20181231 Increase decre 20191231 Budge ress thousand yuan) FA capitalized interest of tion fund ase t (%) interest current period rate (%) Blast Furnace Overhaul Self-raised 150,000.00 79,221,161.00 415,584,248.93 3,736,064.63 491,069,345.30 37% 40% 18,382,460.19 18,382,460.19 4.35 of No. 5 fund & Loan Special Steel Rolling Self-raised 59,607.00 19,247,154.89 107,232,367.46 126,479,522.35 24% 20% 1,981,926.71 1,981,926.71 4.35 Mill Renovation Project fund & Loan Energy Saving and Environmental Self-raised Protection 21,800.00 81,652,336.52 67,151,066.00 148,803,402.52 77% 70% 948,818.10 948,818.10 4.35 fund & Loan Reconstruction of No.1 Converter Project New No. 8 single-flow Self-raised slab casting machine 64,341.00 20,079,392.09 80,381,551.15 100,460,943.24 18% 30% fund project 185 Bengang Steel Plates Co., Ltd. Annual Report 2019 Input Accumulated Including: Capi Other of Prog Budget (in 10 Transfer to amount of capitalized taliza Source of Project 20181231 Increase decre 20191231 Budge ress thousand yuan) FA capitalized interest of tion fund ase t (%) interest current period rate (%) High-strength steel 104,084,214. Self-raised 613,498.00 104,084,214.65 96% 100% 857,867,059.71 1,965,637.92 4.35 reconstruction project 65 fund & Loan Renovation Project of 69,862,957.5 Self-raised 59,399.00 67,436,716.24 2,426,241.32 100% 100% 34,827,795.34 Power Plant Three 6 fund & Loan Transformation of No. 2 Self-raised Casting Machine in Steel 10,090.00 67,751,518.71 13,668,395.17 81,419,913.88 91% 85% 129,125.70 129,125.70 4.35 fund & Loan Plant CCPP power generation Self-raised 106,000.00 24,961,721.54 60,359,031.05 85,320,752.59 9% 5% 2,527,166.75 2,527,166.75 4.35 project fund & Loan Environmental Self-raised Protection Reform of 27,000.00 6,858,749.61 62,683,154.13 69,541,903.74 29% 30% 1,251,613.04 1,251,613.04 4.35 fund & Loan Converter No. 4-6 Special Steel Electric 161,761.00 438,638.96 62,908,002.69 1,035,357.64 62,311,284.01 4% 10% Self-raised 186 Bengang Steel Plates Co., Ltd. Annual Report 2019 Input Accumulated Including: Capi Other of Prog Budget (in 10 Transfer to amount of capitalized taliza Source of Project 20181231 Increase decre 20191231 Budge ress thousand yuan) FA capitalized interest of tion fund ase t (%) interest current period rate (%) Furnace Capacity fund Replacement Project 360 square meters Self-raised 128,403.20 39,870,921.39 21,059,585.40 60,930,506.79 98% 90% sintering machine fund Total 407,518,310.95 997,537,857.95 178,718,594.48 1,226,337,574.42 917,915,965.54 27,186,748.41 187 Bengang Steel Plates Co., Ltd. Annual Report 2019 4. There is no impairment of construction in progress during the current period. 5. Construction materials 20191231 20181231 Items Carrying Book Carrying Book Impairment Impairment amount Value amount Value Construction 13,588,883.39 13,588,883.39 4,900,986.11 4,900,986.11 materials Total 13,588,883.39 13,588,883.39 4,900,986.11 4,900,986.11 (14) Intangible assets 1. Details of intangible assets Items Land use right Software Total 1.Total of original value 20181231 327,028,797.84 310,401.55 327,339,199.39 Increase Including: Purchase Internal Research and Development Merger Other Decrease Including: Disposal Invalid and terminated confirmation Other 20191231 327,028,797.84 310,401.55 327,339,199.39 2. Total of Accumulated Amortization 20181231 49,176,692.14 100,066.21 49,276,758.35 Increase 6,540,575.84 21,841.86 6,562,417.70 Including: Provision 6,540,575.84 21,841.86 6,562,417.70 Other Decrease Including: Disposal Invalid and terminated confirmation Other 20191231 55,717,267.98 121,908.07 55,839,176.05 3. Total of Impairment 20181231 Increase Including: Provision Other Decrease Including: Disposal 188 Bengang Steel Plates Co., Ltd. Annual Report 2019 Invalid and terminated confirmation Other 20191231 4. Total of Net value 20191231 271,311,529.86 188,493.48 271,500,023.34 20181231 277,852,105.70 210,335.34 278,062,441.04 2. Land use right without Certificate of Land use right at the year-end None. (15) Deferred tax asset and deferred tax liability 1. Undedicated deferred tax asset 20191231 20181231 Items Deductible Deductible Deferred tax temporary Deferred tax asset temporary asset differences differences Impairment of assets 378,651,125.80 94,662,781.44 384,689,582.05 96,172,395.52 Internal unrealized profit 53,312,397.14 13,328,099.29 47,141,747.73 11,785,436.93 Depreciation of fixed assets 333,978,859.03 83,494,714.76 333,978,859.03 83,494,714.76 Total 765,942,381.97 191,485,595.49 765,810,188.81 191,452,547.21 2. Unrecognized deferred tax assets Items 20191231 20181231 Impairment of assets 428,163.12 2,914,780.92 Deductible losses 653,832,187.01 1,112,718,371.26 Total 654,260,350.13 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 2019 Year 2020 19,216,380.38 1,085,478,921.77 Year 2021 10,981,383.41 11,436,302.83 Year 2022 589,299,581.01 1,000,766.72 Year 2023 16,327,268.19 14,802,379.94 Year 2024 18,007,574.02 Total 653,832,187.01 1,112,718,371.26 189 Bengang Steel Plates Co., Ltd. Annual Report 2019 (16) Other non-current assets 20191231 20181231 Items Carrying amount Impairment Book value Carrying amount Impairment Book value Prepaid long-term 708,502,552.50 708,502,552.50 76,341,975.35 76,341,975.35 assets Total 708,502,552.50 708,502,552.50 76,341,975.35 76,341,975.35 Notes: The prepaid long-term assets at the end of the period are prepaid for equipment and construction funds, of which RMB584,197,184.92 was the financial lease deposit paid to Liaoning Hengyi Financial Leasing Co., Ltd. 190 Bengang Steel Plates Co., Ltd. Annual Report 2019 (17)Short-term loans 1. Short-term loan disclosed by type Items 20191231 20181231 Pledge loans 48,262,375.85 Mortgage loans Guaranteed loans 12,731,478,000.00 10,361,008,000.00 Credit loans 420,000,000.00 1,529,220,000.00 Total 13,151,478,000.00 11,938,490,375.85 2.There is no short-term loans that were overdue at the end of the reporting period (18)Notes payable Items 20191231 20181231 Bank acceptance bill 8,897,442,732.91 8,738,192,014.02 Commercial acceptance bill 1,174,963,839.77 Domestic letter of credit 1,756,108,104.27 1,275,000,000.00 Total 11,828,514,676.95 10,013,192,014.02 At the end of the reporting period, there is no notes payable due and unpaid. (19)Accounts payable (1) Accounts payable disclosed by category Items 20191231 20181231 Accounts payable for goods 3,481,176,373.75 4,483,900,163.08 Accounts payable for labor 56,959,052.87 30,829,506.69 Accounts payable for project and equipment 581,909,120.17 424,097,390.68 Repair expense 407,468,483.48 583,215,751.20 Total 4,527,513,030.27 5,522,042,811.65 (2) Significant accounts payable aging over one year Of which: more than Items Ending balance one year Company 1 53,069,440.77 48,559,440.77 Company 2 85,247,745.96 27,685,592.96 Company 3 19,379,163.99 19,379,163.99 Company 4 17,471,800.00 17,065,300.00 Company 5 14,200,000.00 14,200,000.00 191 Bengang Steel Plates Co., Ltd. Annual Report 2019 Company 6 33,934,563.93 13,755,825.94 Company 7 15,810,625.07 12,040,944.48 Total 239,113,339.72 152,686,268.14 Other notes: The above significant accounts payable aged over one year have not yet reached the settlement conditions. (21) Advance from customers 1. Advance from customers disclosed by category Items 20191231 20181231 Advance for goods 4,429,821,526.79 3,331,854,098.42 Total 4,429,821,526.79 3,331,854,098.42 2. There is no significant advance from customers aging over one year. (21) Employee benefits payable 1. Employee benefits payable Items 20181231 Increase Decrease 20191231 Short-term employee 47,824,468.42 1,890,861,747.38 1,916,477,772.86 22,208,442.94 benefits Post-employment benefits - defined contribution 174,373.43 241,547,065.06 241,659,126.17 62,312.32 plans Termination benefits 3,467,389.87 2,039,970.57 1,427,419.30 Other benefits due within one year Total 51,466,231.72 2,132,408,812.44 2,160,176,869.60 23,698,174.56 2. Short-term employee benefits Items 20181231 Increase Decrease 20191231 (1) Salary, bonus, 38,282,721.78 1,451,326,143.53 1,476,634,529.37 12,974,335.94 allowance and subsidy (2) Employee welfare 143,410,249.20 143,410,249.20 (3) Social Insurance 652,400.36 145,473,463.83 145,369,247.85 756,616.34 Including: Medical 1,598.15 110,280,855.51 110,175,803.36 106,650.30 insurance Work injury 650,802.21 35,169,171.68 35,170,007.85 649,966.04 insurance Maternity 23,436.64 23,436.64 insurance (4) Housing 6,854,689.00 110,891,606.00 110,890,694.00 6,855,601.00 (5) Union funds and staff 2,034,657.28 39,760,284.82 40,173,052.44 1,621,889.66 education fee (6) Short-term compensated absences (7) Short-term profit - sharing scheme Total 47,824,468.42 1,890,861,747.38 1,916,477,772.86 22,208,442.94 192 Bengang Steel Plates Co., Ltd. Annual Report 2019 3. Defined contribution plans Items 20181231 Increase Decrease 20191231 Basic pension fund 68,338.82 234,813,385.46 234,821,301.18 60,423.10 Unemployment insurance 106,034.61 6,733,679.60 6,837,824.99 1,889.22 Total 174,373.43 241,547,065.06 241,659,126.17 62,312.32 (22) Current tax liabilities Items 20191231 20181231 Value-added tax 246,921,117.21 442,980,368.02 Corporate income tax 6,565,792.19 2,769,293.58 City maintenance and construction tax 11,416,274.65 32,813,368.49 House property tax 3,445,290.84 3,004,878.95 Educational surcharges 8,146,826.78 23,450,632.11 Land holding tax 1,128,141.09 1,054,197.31 Environmental tax 5,264,008.42 7,340,495.80 Others 2,253,951.42 2,339,135.42 Total 285,141,402.60 515,752,369.68 (23) Other payables Items 20191231 20181231 Interest payables 10,818,986.30 9,658,681.99 Dividends payables Other payables 651,882,758.67 852,852,496.97 Total 662,701,744.97 862,511,178.96 1. Interests payable Items 20191231 20181231 Loan interests 10,818,986.30 9,658,681.99 Total 10,818,986.30 9,658,681.99 No due and unpaid interest during the reporting period. 2. Other payables (1) Other payables disclosed by nature Items 20191231 20181231 Deposit 1,933,435.69 6,876,696.99 193 Bengang Steel Plates Co., Ltd. Annual Report 2019 Margin 86,166,961.89 129,911,043.84 Accounts 454,536,559.31 568,285,473.68 Others 109,245,801.78 147,779,282.46 Total 651,882,758.67 852,852,496.97 (2) Significant other payables ageing over one year None (24) Non-current liabilities due within one year Items 20191231 20181231 Long-term loans due within one year 234,474,657.99 350,965,576.32 Bond payables due within one year Long-term payables due within one year Total 234,474,657.99 350,965,576.32 Notes: RMB 200,806,517.99 of long-term due within one year is guaranteed loans, and RMB 33,668,140.00 is credit loans. (25) Long-term loans Long-term loans disclosed by category Categories 20191231 20181231 Pledged loans 622,600,000.00 Mortgage loan Guaranteed loans 1,106,159,800.73 3,931,317,094.16 Credit loans 3,120,916,110.00 3,152,323,000.00 Total 4,849,675,910.73 7,083,640,094.16 (26) Long-term payables Items 20191231 20181231 Long-term payables 516,939,408.14 13,686,705.92 Special payables Total 516,939,408.14 13,686,705.92 Long-term payables Items 20191231 20181231 Financing lease payments 516,939,408.14 13,686,705.92 194 Bengang Steel Plates Co., Ltd. Annual Report 2019 Items 20191231 20181231 Other Total 516,939,408.14 13,686,705.92 Notes: At the end of the reporting period, the amount of unrealized financing expenses due to finance lease payments was RMB 427,091,325.39. The minimum financial lease payment to be paid after the balance sheet date: The company needs to pay interest on time, and the principal is paid in one lump-sum after the lease contract expires. The lease contracts that have not yet been executed are due for more than 3 years. (27) Deferred income Items 20181231 Increase Decrease 20191231 Reason Government 289,499,002.97 3,035,520.00 83,579,115.67 208,955,407.30 subsidy Total 289,499,002.97 3,035,520.00 83,579,115.67 208,955,407.30 195 Bengang Steel Plates Co., Ltd. Annual Report 2019 Projects of government subsidies: Transfer to non- Related to Other Items 20181231 Increase operating 20191231 assets or decrease income income “Steel for high-strength pipelines under low-temperature and high-pressure service conditions” Project national support 188,000.00 67,000.00 121,000.00 Assets funds 2018 Municipal Skill Master Workstation Fee 240,000.00 52,960.66 187,039.34 Assets Special funds for MES projects 1,720,000.00 1,720,000.00 Assets Advanced Treatment Project of Carbon Fiber Wastewater in 9,500,000.00 9,500,000.00 Assets Dongfeng Plant Area of Plate Coking Plant Desulfurization and Denitrification Project of Coal-fired 4,800,000.00 600,000.00 4,200,000.00 Assets Boiler in High-pressure Workshop of Bengang Power Plant Bengang Group Co., Ltd. Automotive Panel Engineering 1,000,000.00 1,000,000.00 Assets Laboratory Project Construction Construction Project of Bengang Automotive Sheet 1,000,000.00 1,000,000.00 Assets Engineering Laboratory Research and development of high-strength steel for the 2,900,000.00 2,900,000.00 Assets third generation of automobiles 7 sets of 130 tons combustion boiler flue gas desulfurization 19,200,000.00 4,800,000.00 14,400,000.00 Assets project in power plant Power plant three power plant cogeneration reform project 8,000,000.00 2,000,000.00 6,000,000.00 Assets Industrial enterprise energy management center construction 6,960,000.00 2,320,000.00 4,640,000.00 Assets demonstration project Environment Protection Project Special Fund 1,160,000.00 1,160,000.00 Assets Environmental Pollution Control Project 3,620,000.00 3,620,000.00 Assets 196 Bengang Steel Plates Co., Ltd. Annual Report 2019 Transfer to non- Related to Other Items 20181231 Increase operating 20191231 assets or decrease income income Environmental governance projects and comprehensive prevention and control projects for regional river basin 340,000.00 340,000.00 Assets environmental protection Research and development of anti-oxidation hot forming 250,000.00 250,000.00 Assets steel PHS1500A Automatic air quality monitoring system 175,000.00 70,000.00 105,000.00 Assets Cold-rolled high-strength steel reconstruction project 200,000,000.00 50,000,000.00 150,000,000.00 Assets Iron Smelter 360 Sintering Machine Flue Gas 200,000.00 200,000.00 Assets Desulfurization Project Energy saving and environmental protection project for 2,320,000.00 1,160,000.00 1,160,000.00 Assets sintering machine in ironworks Waste heat utilization project and desulfurization 4,204,000.00 4,204,000.00 Assets transformation project of sintering machine in ironworks Liaoning Artisan Subsidy 100,002.97 100,002.97 Assets Construction of professional technology innovation platform 1,000,000.00 1,000,000.00 Assets for automobile steel industry Research on the Influence Mechanism and Control of Rare 357,520.00 173,155.01 184,364.99 Assets Earth Oxide Sulfide on Automobile Steel Plasticity Introduce special funds for overseas advanced and 6,884,000.00 2,884,000.00 4,000,000.00 Assets applicable technologies Production line of high-grade electro-galvanized sheet for 16,416,000.00 8,208,000.00 8,208,000.00 Assets automobile Total 289,499,002.97 3,035,520.00 83,579,115.67 208,955,407.30 197 Bengang Steel Plates Co., Ltd. Annual Report 2019 (28) Share capital Increase/decrease (+ , - ) Items 20181231 Transferred 20191231 Issuing of new Bonus from Others Subtotal share shares reserves Capital shares 3,875,371,532.00 3,875,371,532.00 (29) Capital reserves Items 20181231 Increase Decrease 20191231 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 (30) Special Reserves Items 20181231 Increase Decrease 20191231 Safety production cost 683,937.71 47,843,133.40 48,314,383.70 212,687.41 Total 683,937.71 47,843,133.40 48,314,383.70 212,687.41 (31) Surplus Reserves Items 20181231 Increase Decrease 20191231 Statutory surplus reserves 961,105,529.85 961,105,529.85 Total 961,105,529.85 961,105,529.85 (32) Undistributed Profits Items 2019 2018 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- 1,945,887,269.82 1,103,162,610.35 beginning Add: undistributed profit belonging to parent company 555,646,971.40 1,036,493,236.07 Less: Statutory surplus reserves 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 2,307,765,664.62 1,945,887,269.82 (33) Operating income and operating cost 2019 2018 Items Revenue Cost Revenue Cost Principal business 46,805,252,792.90 43,900,514,006.74 46,228,334,211.43 41,947,082,227.94 198 Bengang Steel Plates Co., Ltd. Annual Report 2019 Other business 5,936,100,789.38 5,310,900,638.88 3,953,535,510.11 3,296,652,976.37 Total 52,741,353,582.28 49,211,414,645.62 50,181,869,721.54 45,243,735,204.31 Details for operating income: Item 2019 2018 Principal business 46,805,252,792.90 46,228,334,211.43 Including:Domestic 40,057,267,689.01 34,730,790,131.14 Abroad 6,747,985,103.89 11,497,544,080.29 Other business 5,936,100,789.38 3,953,535,510.11 Including:Domestic 5,936,100,789.38 3,953,535,510.11 Abroad Total 52,741,353,582.28 50,181,869,721.54 (34) Tax and surcharges Items 2019 2018 City maintenance and construction tax 74,291,089.29 125,302,026.98 Educational surcharge 53,346,630.36 89,864,959.52 Housing property tax 77,359,590.55 73,097,772.24 Land use right tax 13,076,581.16 9,230,553.37 Environmental tax 22,681,208.92 28,286,566.21 Stamp duty 29,816,392.95 30,364,975.91 Others 1,008,586.80 271,929.88 Total 271,580,080.03 356,418,784.11 (35) Selling and distribution expenses Items 2019 2018 Freight 912,729,271.74 891,366,784.34 Port surcharges 70,973,850.23 116,922,773.17 Import and export agency fee 63,097,328.89 76,022,775.79 Salary and benefits 25,965,599.95 23,868,787.71 Package fee 7,564,585.54 6,967,672.28 Others 16,358,267.35 19,855,677.18 Total 1,096,688,903.70 1,135,004,470.47 (36) General and administrative expenses 199 Bengang Steel Plates Co., Ltd. Annual Report 2019 Items 2019 2018 Salary and benefits 374,106,639.18 354,229,795.80 Repair expense 230,168,663.91 338,321,930.18 Land use right fee 59,957,197.92 54,691,428.60 Depreciation 44,362,834.97 51,749,401.30 Heating fee 28,855,893.31 30,017,619.41 Water resources fee 27,515,155.10 18,264,847.73 Sewage charges 11,345,616.35 6,999,787.23 Others 55,633,840.82 62,066,327.60 Total 831,945,841.56 916,341,137.85 (37) Research and development expenses Items 2019 2018 Depreciation, materials and compensation, etc. 30,780,463.74 6,399,884.30 Total 30,780,463.74 6,399,884.30 (38) Financial expenses Items 2019 2018 Interest expenditure 948,799,627.90 1,278,508,985.59 Less: Interest income 333,750,262.79 200,356,927.95 Exchange loss 44,724,851.35 288,851,132.98 Others 22,068,472.77 9,351,969.84 Total 681,842,689.23 1,376,355,160.46 (39) Other income Item 2019 2018 Government subsidy 83,914,522.47 86,085,297.03 Other 2,084.65 Total 83,916,607.12 86,085,297.03 Government subsidies included in other income: Related to Items 2019 2018 assets or income Transferred from Deferred income 83,579,115.67 83,386,000.00 Assets Service support 240,000.00 Income 200 Bengang Steel Plates Co., Ltd. Annual Report 2019 Related to Items 2019 2018 assets or income Technical support 80,000.00 Income Education-integrated enterprises reduce education 15,406.80 Income fees and local education fees Liaoning artisan subsidies 179,997.03 Income Coal-fired boiler demolition subsidy 1,815,000.00 Income Investment promotion tax incentive policy of 290,000.00 Income Baoshan district Xiyuan source resource management committee 414,300.00 Income compensation Total 83,914,522.47 86,085,297.03 Notes: For details of government subsidy transferred from deferred income, please refer to notes 5. (27). (40) Income on investment Items 2019 2018 Income on disposal of long-term equity investment by equity 452,582.71 171,488.75 method Income on bank short-term financial products 605,795.19 5,041,397.26 Other Total 1,058,377.90 5,212,886.01 (41) Credit impairment losses Items 2019 Loss from bad debts of note receivable Loss from bad debts of account receivable 4,618,663.91 Loss from bad debts of receivable financing Loss from bad debts of other receivables 1,923,236.71 Loss from bad debts of debt investment Loss from bad debts of other debt investment Loss from bad debts of long-term receivables Total 6,541,900.62 Note: loss is disclosed as positive number 201 Bengang Steel Plates Co., Ltd. Annual Report 2019 (42) Assets impairment loss Items 2019 2018 Bad debts -78,006,708.98 Inventory devaluation 43,256,982.72 80,063,521.83 Impairment of fixed assets 35,090,355.76 Total 43,256,982.72 37,147,168.61 Note: loss is disclosed as positive number (43) Asset disposal income The amount recognized Items 2019 2018 in non-recurring profit Disposal gains or losses arising from disposal of 3,441,646.67 213,401.13 3,441,646.67 fixed assets not held for sale Total 3,441,646.67 213,401.13 3,441,646.67 (44) Non-operating income The amount 2019 2018 recognized in non- Items recurring profit Non-current assets scrapped gains 9,476,065.29 5,633,553.43 9,476,065.29 Others 779,757.58 2,750,566.71 779,757.58 Debt restructuring gain 50,640.00 50,640.00 Total 10,306,462.87 8,384,120.14 10,306,462.87 (45) Non-operating expense The amount Items 2019 2018 recognized in non- recurring profit Donations 1,419,374.81 Non-current assets scrapped loss 90,209,742.22 154,256,584.91 90,209,742.22 Others 560,000.00 Total 90,209,742.22 156,235,959.72 90,209,742.22 202 Bengang Steel Plates Co., Ltd. Annual Report 2019 (46) Income tax expense 1. Income tax expense Items 2019 2018 Income tax payable for the current year 18,987,986.70 8,783,683.51 Adjustment of deferred income tax -33,048.28 9,165,914.15 Total 18,954,938.42 17,949,597.66 2. Accounting profit and income tax expense adjustment process Items 2019 Total profit 575,815,427.40 Income tax expense calculate according to the official or applicable tax rate 143,953,856.87 Effect of different tax rates applied by subsidiaries Effect of adjustment of the income tax expense of prior period -2,521,005.73 Effect of non-taxable income -113,145.69 Effect of undeductible costs, expenses or losses 308,701.59 Effect of use of deductible losses of unrecognized deferred tax asset of prior -120,996,749.60 period Effect of deductible temporary differences or deductible losses of unrecognized -1,676,719.02 deferred tax asset of current period Changes in the balance of deferred income tax assets and liabilities at the beginning of the period due to the additional deductible expenses and tax rate adjustments required by the tax law Income tax expenses 18,954,938.42 (47) Earning per share 1. Basic earnings per share The basic earnings per share is calculated by dividing the consolidated net profit attributable to the common stock shareholders of the parent company by the weighted average number of common stocks issued by the company: Items 2019 2018 Consolidated net profit attributable to 555,646,971.40 1,036,493,236.07 ordinary shareholders of parent company The weighted average number of common 3,875,371,532.00 3,813,757,237.67 shares issued by the company Basic earnings per share 0.143 0.272 Including: basic earnings per share for 0.143 0.272 continuing operations 203 Bengang Steel Plates Co., Ltd. Annual Report 2019 Items 2019 2018 Basic earnings per share discontinued 2. Diluted earnings per share Diluted earnings per share is calculated by dividing the consolidated net profit attributable. to the common shareholders of the parent company (diluted) by the weighted average number of ordinary shares issued by the company (diluted): Items 2019 2018 Consolidated net profit attributable to ordinary shareholders of parent company 555,646,971.40 1,036,493,236.07 (diluted) The weighted average number of common 3,875,371,532.00 3,813,757,237.67 shares issued by the company (diluted) Diluted earnings per share 0.143 0.272 Including: diluted earnings per share for 0.143 0.272 continuing operations Diluted earnings per share discontinued (48) Notes of statement of cash flows 1. Cash received related to other operating activities Items 2019 2018 Withdraw of current accounts, advance for another 80,209,527.36 46,433,149.15 Interest income 289,867,473.89 207,196,743.02 Special subsidy income 3,378,441.11 2,509,300.00 Non-operating income 9,799.92 452,241.66 Others 3,620,413.94 1,290,246.37 Total 377,085,656.22 257,881,680.20 2. Cash paid related to other operating activities Items 2019 2018 Current accounts, advance for another 67,238,789.58 94,760,382.17 Sales expenses 139,977,333.30 141,536,246.92 Administrative expenses 77,588,717.78 82,458,953.65 Bank charges 14,562,642.52 9,351,969.84 204 Bengang Steel Plates Co., Ltd. Annual Report 2019 Items 2019 2018 Others 23,593,941.76 31,253,473.75 Total 322,961,424.94 359,361,026.33 3. Cash received related to other financing activities Items 2019 2018 Margin for bill, letter of guarantee and letter of credit 1,571,269,971.97 641,108,215.57 Total 1,571,269,971.97 641,108,215.57 4. Cash paid related to other financing activities Items 2019 2018 Margin for bill, letter of guarantee and letter of credit 1,612,133.00 64,667,876.81 Others 8,731,273.67 1,958,720.83 Total 10,343,406.67 66,626,597.64 (49) Supplementary details of statement of cash flows 1. Supplementary details for statement of cash flows Items 2019 2018 1. A reconciliation of net profit to cash flows from operating activities: Net profit 556,860,488.98 1,036,178,058.36 Add: Credit impairment loss 6,541,900.62 Impairment of assets 43,256,982.72 37,147,168.61 Depreciation of fixed assets 2,432,266,554.80 2,346,173,478.53 Amortization of intangible assets 6,562,417.70 6,506,866.92 Amortization of long-term deferred expenses Losses proceeds from disposal of fixed assets, intangible -3,441,646.67 213,401.13 assets and other long-term assets (Earnings marked“-”) Scrapped losses from fixed assets (Earnings 80,733,676.93 148,623,031.48 marked“-”) Loss from changes in fair value (Earnings marked“-”) Financial expenses (Earnings marked“-”) 1,009,666,817.96 1,771,705,297.79 Investment losses (Earnings marked“-”) -1,058,377.90 -5,212,886.01 Deferred tax assets reduction (Addition marked“-”) -33,048.28 9,165,914.15 Deferred tax liabilities increased (Reduction marked“-”) Reduction of inventory (Addition marked“-”) 2,992,064,351.09 504,208,177.15 Operating receivable items reduction (Addition 1,617,190,398.59 491,783,316.75 marked“-”) Operating payable items increase (Less marked"-") -1,762,786,475.38 -2,726,553,982.93 205 Bengang Steel Plates Co., Ltd. Annual Report 2019 Items 2019 2018 Others Net cash flows generated from operating activities 6,977,824,041.16 3,619,937,841.93 2. Payments of investing and financing activities not involving cash: Liabilities transferred to capital Convertible cooperate bonds due within one year Fixed assets financed by leasing 3. The net increase in cash and cash equivalents: Ending balance of cash 13,441,414,988.58 11,752,548,621.97 Less: Beginning balance of cash 11,752,548,621.97 12,317,576,778.93 Add: Ending balance of cash equivalents Less: Opening balance of cash equivalents The net increase in cash and cash equivalents 1,688,866,366.61 -565,028,156.96 2. The structure of cash and cash equivalents Items 20191231 20181231 1. Cash 13,441,414,988.58 11,752,548,621.97 Including: Cash on hand 5,588.98 4,839.95 Bank deposits available on demand 13,441,409,399.60 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 13,441,414,988.58 11,752,548,621.97 Including: Cash and cash equivalents limited to use by the parent company of other subsidiary in the group (50) Assets of which ownership or right to use are restricted Items Ending balance Reason Cash at bank and on hand 4,974,429,409.19 Deposit for notes and letter of credit Accounts receivable financing 373,576,250.73 Pledged for acceptance bill and short term loan Other equity instrument 1,037,735,849.00 Pledged for loans investments Total 6,385,741,508.92 (51) Foreign currency monetary items 1. Foreign currency monetary items 206 Bengang Steel Plates Co., Ltd. Annual Report 2019 Ending balance in Exchange rate at Ending balance Items foreign currency the year-end translated to RMB Cash at bank and on hand 101,235,909.15 Including: USD 12,887,888.55 6.9762 89,908,488.12 EUR 1,420,049.00 7.8155 11,098,396.09 HKD 255,665.26 0.8958 229,024.94 Short-term loans 1,325,478,000.00 Including: USD 190,000,000.00 6.9762 1,325,478,000.00 Non-current liabilities due 116,264,657.99 within one year Including: USD 4,700,000.00 6.9762 32,788,140.00 EUR 10,490,841.04 7.8155 81,991,168.15 JPY 23,176,000.00 0.0641 1,485,349.84 Long-term loans 493,925,910.73 Including: USD 16,550,000.00 6.9762 115,456,110.00 EUR 47,095,176.49 7.8155 368,072,351.85 JPY 162,232,000.00 0.0641 10,397,448.88 207 Bengang Steel Plates Co., Ltd. Annual Report 2019 2. The Company has no overseas operating entities. (52) Government subsidies 1. Government subsidies related to assets The amount included in the current profit or loss or offsetting the loss of Items included in the current Item Amount Items listed on the balance sheet related costs profit or loss or offsetting the loss of related costs 20191231 20181231 Cold-rolled high-strength steel 250,000,000.00 Deferred income 50,000,000.00 50,000,000.00 Other income reconstruction project Production line of high-grade electro-galvanized sheet for 41,040,000.00 Deferred income 8,208,000.00 8,208,000.00 Other income automobile 7 130t Boilers Flue Gas Desulfurization Renovation 24,000,000.00 Deferred income 4,800,000.00 4,800,000.00 Other income Project of Power Plant Waste heat utilization project and desulfurization 21,020,000.00 Deferred income 4,204,000.00 4,204,000.00 Other income transformation project of sintering machine in ironworks Environmental Pollution 26,170,000.00 Deferred income 3,620,000.00 3,620,000.00 Other income 208 Bengang Steel Plates Co., Ltd. Annual Report 2019 The amount included in the current profit or loss or offsetting the loss of Items included in the current Item Amount Items listed on the balance sheet related costs profit or loss or offsetting the loss of related costs 20191231 20181231 Control Project Introduce special funds for overseas advanced and 14,420,000.00 Deferred income 2,884,000.00 2,884,000.00 Other income applicable technologies Industrial enterprise energy management center 11,600,000.00 Deferred income 2,320,000.00 2,320,000.00 Other income construction demonstration project Power plant three power plant 10,000,000.00 Deferred income 2,000,000.00 2,000,000.00 Other income cogeneration reform project MES PROJECT SPECIAL 8,600,000.00 Deferred income 1,720,000.00 1,720,000.00 Other income FUND Special funds for environmental 5,800,000.00 Deferred income 1,160,000.00 1,160,000.00 Other income protection Energy saving and environmental protection 5,800,000.00 Deferred income 1,160,000.00 1,160,000.00 Other income project for sintering machine in 209 Bengang Steel Plates Co., Ltd. Annual Report 2019 The amount included in the current profit or loss or offsetting the loss of Items included in the current Item Amount Items listed on the balance sheet related costs profit or loss or offsetting the loss of related costs 20191231 20181231 ironworks Desulfurization and Denitrification Project of Coal- Deferred income fired Boiler in High-pressure 6,000,000.00 600,000.00 600,000.00 Other income Workshop of Bengang Power Plant Environmental governance projects and comprehensive prevention and control projects 2,400,000.00 Deferred income 340,000.00 340,000.00 Other income for regional river basin environmental protection Iron Smelter 360 Sintering Machine Flue Gas 1,000,000.00 Deferred income 200,000.00 200,000.00 Other income Desulfurization Project Research on the Influence Mechanism and Control of Rare 357,520.00 Deferred income 173,155.01 Other income Earth Oxide Sulfide on 210 Bengang Steel Plates Co., Ltd. Annual Report 2019 The amount included in the current profit or loss or offsetting the loss of Items included in the current Item Amount Items listed on the balance sheet related costs profit or loss or offsetting the loss of related costs 20191231 20181231 Automobile Steel Plasticity Automatic air quality 350,000.00 Deferred income 70,000.00 70,000.00 Other income monitoring system “Steel for high-strength pipelines under low- temperature and high-pressure 188,000.00 Deferred income 67,000.00 Other income service conditions” Project national support funds 2018 Municipal Skill Master 240,000.00 Deferred income 52,960.66 Other income Workstation Fee Treatment and Salt Extraction Project of Desulfurization 500,000.00 Deferred income 100,000.00 Other income Waste Liquid of Coke Plant Total 83,579,115.67 83,386,000.00 211 Bengang Steel Plates Co., Ltd. Annual Report 2019 2. Government subsidies related to income The amount included in the current profit or loss or offsetting the Items included in the current Items Amount loss of related costs profit or loss or offsetting the loss 20191231 20181231 of related costs Service support 240,000.00 240,000.00 Other income Technical Support 80,000.00 80,000.00 Other income Education-integrated enterprises reduce education fees and local 15,406.80 15,406.80 Other income education fees Liaoning artisan subsidies 179,997.03 179,997.03 Other income Xihu Resources Management 414,300.00 414,300.00 Other income Committee Compensation Subsidies for dismantling coal- 1,815,000.00 1,815,000.00 Other income fired boilers Baoshan District Investment 290,000.00 290,000.00 Other income Promotion Tax Incentive Policy 3. Return of government subsidies during the reporting period None 212 Bengang Steel Plates Co., Ltd. Annual Report 2019 6. Changes in the scope of consolidation There is no changes to the scope of consolidation during the current period. 7.Equity in other entities (1) Equity in subsidiaries 1. Constitution of enterprise group Principal place of Registered Notes of Shareholding ratio Name of the subsidiaries Acquiring method business address business Direct Indirect Business combination under Xiamen Bengang Steel & Iron Sales Co., Ltd Xiamen Xiamen Sales 100.00 common control Business combination under Wuxi Bengang Steel & Iron Sales Co., Ltd. Wuxi Wuxi Sales 100.00 common control Tianjin Bengang Steel & Iron Trading Co., Business combination under Tianjin Tianjin Sales 100.00 Ltd. common control Business combination under Nanjing Bengang Materials Sales Co., Ltd. Nanjing Nanjing Sales 100.00 common control Business combination under Yantai Bengang Steel & Iron Sales Co., Ltd. Yantai Yantai Sales 100.00 common control Harbin Bengang Economic and Trading Co., Business combination under Harbin Harbin Sales 100.00 Ltd. common control Changchun Bengang Steel & Iron Sales Co., Business combination under Changchun Changchun Sales 100.00 Ltd. common control Guangzhou Bengang Steel & Iron Trading Guangzhou Guangzhou Sales 100.00 Establishment Co., Ltd. Shanghai Bengang Metallurgy Science and Shanghai Shanghai Sales 100.00 Establishment Technology Co., Ltd. Bengang Steel Plates Liaoyang Pellet Co., Manufacturin Liaoyang Liaoyang 100.00 Establishment Ltd. g Dalian Benruitong Automobile Material Manufacturin Dalian Dalian 65.00 Establishment Technology Co., Ltd. g Manufacturin Business combination under Bengang Posco Cold-rolled Sheet Co., Ltd. Benxi Benxi 75.00 g common control Benxi Bengang Steel Sales Co., Ltd Benxi Benxi Sales 100.00 Establishment Shenyang Bengang Metallurgical Science Shenyang Shenyang Sales 100.00 Establishment and Technology Co., Ltd. Chongqing Liaoben Steel & Iron Trading Chongqing Chongqing Sales 100.00 Establishment Co., Ltd. Bengang Baojin (Shenyang) auto new Manufacturin Business combination under Shenyang Shenyang 85.00 material technology Co., Ltd. g common control 2. Significant but not wholly-owned subsidiaries Profits and losses Dividend declared Ending Proportion of attributing to non- to distribute to non- balance of non- Name of the subsidiaries non-controlling controlling controlling controlling interests (%) shareholders shareholders interests Bengang Posco Cold-rolled Sheet 25.00 4,844,563.27 9,198,305.14 495,632,613.35 Co., Ltd. 213 Bengang Steel Plates Co., Ltd. Annual Report 2019 3. Financial information of significant but not wholly-owned subsidiaries 20191231 Name of the Non- subsidiaries Non-current Current Current assets Total assets current Total liabilities assets liabilities liabilities Bengang Posco Cold- 4,305,831,723.98 1,509,417,518.88 5,815,249,242.86 3,832,718,789.47 3,832,718,789.47 rolled Sheet Co., Ltd. 20181231 Non- Name of the Current Non-current Current Total assets current Total liabilities subsidiaries assets assets liabilities 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. 2019 Name of the subsidiaries Total Operating Net cash flows from Net profit comprehensive income operating activities income Bengang Posco Cold-rolled Sheet Co., 7,379,865,156.54 19,378,253.07 19,378,253.07 -517,602,292.64 Ltd. 2018 Name of the subsidiaries Total Operating Net cash flows from Net profit comprehensive income operating activities income Bengang Posco Cold-rolled Sheet 8,063,719,253.01 8,838,074.77 8,838,074.77 1,040,018,505.74 Co., Ltd. 4. Significant restrictions on the use of enterprise group assets and the settlement of enterprise group debts None. 5. Financial or other support provided to structured entities included in the scope of consolidated financial statements None. (2) The shareholder's equity in the subsidiary has changed and still control the subsidiary's transactions The company does not exist such matters. (3) Equity in joint venture or associates 1. Important joint ventures and associates The company has no important joint ventures or associates. 214 Bengang Steel Plates Co., Ltd. Annual Report 2019 2. Summary of financial information of unimportant joint ventures and associates 20191231/2019 20181231/2018 Joint ventures: Total book value of investment: 2,642,998.70 2,455,681.55 The total amount of the following items calculated according to the shareholding ratio —Net profit 452,582.71 171,488.75 —Other comprehensive income —Total comprehensive income 452,582.71 171,488.75 3. Explanation on the significant limitation of the ability of the joint venture or associate to transfer funds to the company The company does not exist such matters. 4. Excess losses incurred by joint ventures or associates The company does not exist such matters. 5. Unconfirmed commitments related to joint venture investment The company does not exist such matters. 6. Contingent liabilities related to joint venture or associate investment The company does not exist such matters. (4) Important joint operations The company does not exist such matters. (5) Equity in structured entities that not included in the scope of consolidated financial statements The company does not exist such matters. 215 Bengang Steel Plates Co., Ltd. Annual Report 2019 8. Risks associated with financial instruments The company faces various financial risks in its operation: credit risk, market risk and liquidity risk. The company's board of directors is fully responsible for the determination of risk management objectives and policies, and assumes ultimate responsibility for the risk management objectives and policies. However, the board of directors has authorized the company's planning and development department to design and implement procedures that ensure the effective implementation of risk management objectives and policies. The board of directors reviews the effectiveness of the implemented procedures and the rationality of risk management objectives and policies through reports submitted by the planning and development department. The company's internal auditors also audit risk management policies and procedures, and report relevant findings to the audit committee. The overall goal of the company's risk management is to formulate a risk management policy that minimizes risks without excessively affecting the company's competitiveness and resilience. (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. Before signing a new contract, the company will assess the credit risk of new customers, including external credit ratings and bank credit certificates in certain cases (when this information is available). The company has set a credit limit for each customer, which is the maximum amount that does not require additional approval. The Company ensures that the company's overall credit risk is within a controllable range through regular monitoring of existing customers' credit ratings and periodic review of aging analysis of accounts receivable. 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. 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 framework of risk management and optimization of debt structures to 216 Bengang Steel Plates Co., Ltd. Annual Report 2019 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 USD Euro HKD Japanese Yen Total Assets 8,990.85 1,109.84 22.90 10,123.59 Liabilities 147,372.23 45,006.35 1,188.28 193,566.86 Beginning balance Items USD Euro HKD Japanese Yen Total Assets 216,803.49 4,755.99 68.03 221,627.51 Liabilities 347,243.60 59,972.90 1,290.86 408,507.36 On December 31, 2019, with all other variables held constant, if the relevant currency appreciates or depreciates against RMB by 5%, the company will increase or decrease the net profit of RMB 91,721,600 (on December 31, 2018: RMB 93,452,000). Management believes that 5% reasonably reflects the reasonable range of possible currency-to-renminbi changes in the next year. (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. 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) 20191231 Items Over 5 Within 1 year 1-2 years 2-5 years Total years Trade and other payables 1,700,807.81 51,693.94 1,752,501.75 Loans and interests 1,339,677.16 328,523.94 133,765.16 22,678.49 1,824,644.75 Total 3,040,484.97 328,523.94 133,765.16 74,372.43 3,577,146.50 (In 10 Thousand Yuan) 217 Bengang Steel Plates Co., Ltd. Annual Report 2019 20181231 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 9. Disclosure of fair value The input value used in fair value measurement is divided into three levels: The input value of the first level is the unadjusted quotation of the same asset or liability that can be obtained on the measurement date in an active market. The input value of the second level is the input value of the related assets or liabilities that is directly or indirectly observable except the input value of the first level. The third level of input value is the unobservable input value of related assets or liabilities. The level to which the fair value measurement result belongs is determined by the lowest level to which the input value that is important to the fair value measurement as a whole belongs. (1) Fair value of assets and liabilities measured at fair value Fair value at the end of the period Fair value Fair value Fair value Item measurement measurement measurement in the Total in the first in the second third level level level 1. Continuous fair value measurement ◆Financial assets held for trading (1) Financial assets measured at fair value and whose changes are included in the current profit and loss (a) Investment in debt 218 Bengang Steel Plates Co., Ltd. Annual Report 2019 Fair value at the end of the period Fair value Fair value Fair value Item measurement measurement measurement in the Total in the first in the second third level level level instruments (b) Investment in equity instruments (c) Derivative financial assets (d) Others (2) Designated as a financial asset measured at fair value and its changes are included in the current profit and loss (1) Investment in debt instruments (2) Others ◆ Accounts receivable 2,429,542,461.88 2,429,542,461.88 financing ◆ Other debt investments ◆ Investment in other equity 1,041,824,829.00 1,041,824,829.00 instruments ◆ Other non-current financial assets (1) Financial assets measured at fair value and whose changes are 219 Bengang Steel Plates Co., Ltd. Annual Report 2019 Fair value at the end of the period Fair value Fair value Fair value Item measurement measurement measurement in the Total in the first in the second third level level level included in the current profit and loss (a) Investment in debt instruments (b) Investment in equity instruments (c) Derivative financial assets (d) Others (2) Designated as a financial asset measured at fair value and its changes are included in the current profit and loss (a) Investment in debt instruments (b) Others Total assets continuously measured 3,471,367,290.88 3,471,367,290.88 at fair value ◆Financial liabilites held for trading Including: Issued trading bonds Derivative financial 220 Bengang Steel Plates Co., Ltd. Annual Report 2019 Fair value at the end of the period Fair value Fair value Fair value Item measurement measurement measurement in the Total in the first in the second third level level level liabilities Others ◆Designated as a financial liability measured at fair value and its changes included in the current profit and loss Total liabilities continuously measured at fair value 2. Non-continuous fair value measurement (1) Assets held for sale Total assets not measured continuously at fair value For example: Liabilities held for sale Total liabilities not measured continuously at fair value (2) The basis for determining the market value of the continuous and non-continuous first-level fair value measurement projects 221 Bengang Steel Plates Co., Ltd. Annual Report 2019 The company has no first level fair value measurement project. (3) Continuous and non-continuous second-level fair value measurement items, using valuation techniques and qualitative and quantitative information on important parameters The company has no second level fair value measurement items. (4) Continuous and non-continuous third-level fair value measurement items, using valuation techniques and qualitative and quantitative information on important parameters The other equity instruments that continue the third level of fair value measurement are mainly unlisted equity investments held by the company. The company adopted valuation techniques for fair value measurement, mainly using valuation techniques of listed company comparison method, referring to stock prices of similar securities and considering liquidity discounts. (5) For continuous fair value measurement projects, where conversion between various levels occurs during the period, the reason for the conversion and the policy for determining the timing of conversion During the current period, there was no conversion between various levels (6) Changes in valuation techniques and reasons for changes during the period No changes during the period. (7) Fair value of financial assets and financial liabilities not measured at fair value No 10. Related party transactions (1) Details of parent company (In 100 Million Yuan) Place of Notes of Registered Share proportion Voting rights Name of parent company Registry Business capital (%) (%) Benxi Steel & Iron (Group) Benxi Manufacturing 62.92 61.44 61.44 Co., Ltd. Note: 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 7 “Equity in other entities”. 222 Bengang Steel Plates Co., Ltd. Annual Report 2019 (3) The company's joint ventures and associates Name of joint ventures and associates Relationship Zhejiang Bengang Jingrui Steel Processing Co., Ltd. Associate (4) Details of other related parties 223 Bengang Steel Plates Co., Ltd. Annual Report 2019 Name of Other related parties Relationship Bengang Group Co., Ltd. (Hereinafter Controlling shareholder of parent company. referred to as "Bengang Group") Bengang Group International Economic Belongs 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., Ltd. (Hereinafter referred to as "Beiying Belongs to Bengang Group Co., Ltd. Steel") Bengang Electronics and Gas Co., Ltd. Associate of parent company 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) Machinery Same parent company Manufacture Co., Ltd. Benxi Steel & Iron (Group) Construction Same parent company Co., Ltd. Benxi Steel & Iron (Group) Mining 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 and Repairing Co., Ltd. Benxi Steel & Iron (Group) Metallurgy 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 Materials Co., Ltd. Benxi High-tech Drilling Tools Belongs to Bengang Group Co., Ltd. Manufacture Co., Ltd. Benxi New Career Development Co., Ltd. Same parent company Dalian Boluole Steel Tube Co., Ltd. Belongs to Benxi Steel and Iron (Group) Co., Ltd. Guangzhou Free Trade Zone Bengang Belongs to Benxi Steel and Iron (Group) Co., Ltd. Sales Co., Ltd. Benxi Steel & Iron (Group) General Belongs to Benxi Steel and Iron (Group) Co., Ltd. Hospital Liaoning Bengang Steel & Iron Trading Same parent company Co., Ltd. Liaoning Hengtai Heavy Machinery Co., Same parent company Ltd. 224 Bengang Steel Plates Co., Ltd. Annual Report 2019 Liaoning Hengtong Metallurgical Same parent company Equipment Manufacture Co., Ltd. Liaoning Metallurgy Technician College Same parent company Liaoning Metallurgy Vocational Technical Same parent company College Suzhou Bengang Industrial Co., Ltd. Shareholding company Benxi Steel & Iron (Group) Medical Associate of parent company Services Department; Bengang Group Finance Co., Ltd. Belongs to Bengang Group Co., Ltd. Liaoning Hengyi Financial Leasing Co., Belongs to Bengang Group Co., Ltd. Ltd. (5) 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 Name 2019 2018 transactions Benxi Steel & Iron (Group) Co., Ltd. Repair expense 27,611.81 30,864.85 Bengang Cold-rolled Stainless Steel 171.87 362.50 Products Dandong Co., Ltd. Benxi Steel & Iron (Group) Mining Co., 864.66 2,200.17 Labor cost Ltd. Benxi Steel & Iron (Group) Mining Co., Raw material and 466,510.90 401,542.74 Ltd. supplementary material Benxi Steel & Iron (Group) Mining Co., 1,318.16 167.04 Freight Ltd. Benxi Steel & Iron (Group) Metallurgy Raw material and 27,932.17 25,866.54 Residues Co., Ltd. supplementary material Benxi Steel & Iron (Group) Steel & Iron 127.67 160.26 Processing fee Process and Logistics Co., Ltd. Benxi Steel & Iron (Group) Real-estate 3,648.95 7,757.99 Raw materials Development Co., Ltd. Benxi Steel & Iron (Group) Machinery 11,131.68 14,321.59 Spare parts Manufacture Co., Ltd. Benxi Steel & Iron (Group) Machinery 2,922.74 4,617.20 Repair services Manufacture Co., Ltd. Benxi Steel & Iron (Group) Construction 787.21 1,072.33 Spare parts Co., Ltd. Benxi Steel & Iron (Group) Construction 18,016.18 8,375.54 Project fee Co., Ltd. Benxi Steel & Iron (Group) Construction 21,561.78 21,285.38 Repair services Co., Ltd. Benxi Steel & Iron (Group) Construction Raw material and 236.10 55.12 Co., Ltd. supplementary material Benxi Steel & Iron (Group) Construction 502.47 1,469.39 Freight Co., Ltd. Benxi Steel & Iron (Group) Industrial Spare parts 19,118.00 19,722.48 225 Bengang Steel Plates Co., Ltd. Annual Report 2019 The content of related party Name 2019 2018 transactions Development Co., Ltd. Benxi Steel & Iron (Group) Industrial Raw material and 2,157.65 2,576.98 Development Co., Ltd. supplementary material Benxi Steel & Iron (Group) Industrial 446.80 581.17 Freight Development Co., Ltd. Benxi Steel & Iron (Group) Industrial 235.00 189.45 Project fee Development Co., Ltd. Raw material & Benxi Steel & Iron (Group) Construction 256.76 573.58 supplementary materials & and Repairing Co., Ltd. spare parts Benxi Steel & Iron (Group) Construction 4,998.34 2,473.26 Project fee and Repairing Co., Ltd. Benxi Steel & Iron (Group) Construction 19,506.98 20,379.63 Repair expense and Repairing Co., Ltd. Raw material and 13,763.00 14,695.97 Bengang Electronics and Gas Co., Ltd. supplementary material Bengang Electronics and Gas Co., Ltd. Repair services 1,879.36 3,085.90 Benxi High-tech Drilling Tools 26.63 61.16 Spare parts Manufacture Co., Ltd. Benxi New Career Development Co., Ltd. Labor protection fee 487.81 340.23 Raw material and Benxi New Career Development Co., Ltd. supplementary material and 907.16 630.15 food Liaoning Metallurgy Technician College Spare parts 1,202.01 1,151.38 Liaoning Metallurgy Vocational Project fee Technical College Liaoning Metallurgy Vocational 580.50 449.86 Repair services Technical College Bengang Group International Economic 6,309.73 7,602.28 Agency fee and Trading Co., Ltd. Bengang Group International Economic 7,099.20 11,692.28 Port surcharges and Trading Co., Ltd. Benxi Steel & Iron (Group) Information 785.28 2,551.21 Spare parts and Automatic Tech Co., Ltd. Benxi Steel & Iron (Group) Information 1,942.52 3,283.88 Project fee and Automatic Tech Co., Ltd. Benxi Steel & Iron (Group) Information 3,483.24 1,292.36 Repair services and Automatic Tech Co., Ltd. Benxi Steel & Iron (Group) Thermal 115.25 183.78 Heating costs Power Development Co., Ltd. Benxi Steel & Iron (Group) Thermal Raw material and 70.93 7.54 Power Development Co., Ltd. supplementary material Benxi Steel & Iron (Group) Designing 1,323.40 510.96 Design fees Institute Benxi Beiying Steel & Iron (Group) Co., Raw material and 1,154,378.53 1,507,972.99 Ltd. supplementary material Benxi Beiying Steel & Iron (Group) Co., 54,489.91 80,758.32 Energy & Power Ltd. 226 Bengang Steel Plates Co., Ltd. Annual Report 2019 The content of related party Name 2019 2018 transactions Benxi Beiying Steel & Iron (Group) Co., 571.46 588.11 Freight Ltd. Benxi Beiying Steel & Iron (Group) Co., 8,663.23 8,117.37 Labor cost Ltd. Benxi Beiying Steel & Iron (Group) Co., 1,308.45 636.62 Spare parts Ltd. Liaoning Hengtong Metallurgical 8,758.96 10,000.99 Raw material and spare parts Equipment Manufacture Co., Ltd. Liaoning Hengtai Heavy Machinery Co., 231.09 2,106.67 Raw material and spare parts Ltd. Liaoning Hengtai Heavy Machinery Co., 1,930.35 2,266.25 Repair and labor cost Ltd. Bengang Group Co., Ltd. Property management fee Bengang Group Co., Ltd. Labor cost 15,507.90 Company as the seller (In 10 Thousand Yuan) The content of related party Name 2019 2018 transactions Bengang Electronics and Gas Co., Ltd. Energy & Power 76.74 89.86 Raw material & Benxi Beiying Steel & Iron (Group) Co., 500,154.15 196,771.88 supplementary materials & Ltd. spare parts Benxi Beiying Steel & Iron (Group) Co., 1,286.59 2,143.14 Products Ltd. Benxi Beiying Steel & Iron (Group) Co., 21,662.54 23,867.61 Energy & Power Ltd. Benxi Steel & Iron (Group) Real-estate 10.44 12.15 Energy & Power Development Co., Ltd. Benxi Steel & Iron (Group) Steel & Iron 36.79 51.01 Energy & Power Process and Logistics Co., Ltd. Benxi Steel & Iron (Group) Steel & Iron 89.25 Products Process and Logistics Co., Ltd. Benxi Steel & Iron (Group) Machinery 980.32 2,009.03 Products Manufacture Co., Ltd. Benxi Steel & Iron (Group) Machinery 2,137.30 1,758.69 Energy & Power Manufacture Co., Ltd. Raw material & Benxi Steel & Iron (Group) Machinery 641.30 1,310.90 supplementary materials & Manufacture Co., Ltd. spare parts Benxi Steel & Iron (Group) Construction 593.80 467.84 Energy & Power Co., Ltd. Raw material & Benxi Steel & Iron (Group) Construction 5,781.00 5,416.38 supplementary materials & Co., Ltd. spare parts Benxi Steel & Iron (Group) Mining Co., 64,747.81 68,372.48 Energy & Power Ltd. 227 Bengang Steel Plates Co., Ltd. Annual Report 2019 The content of related party Name 2019 2018 transactions Raw material & Benxi Steel & Iron (Group) Mining Co., 10,078.34 6,421.84 supplementary materials & Ltd. spare parts Benxi Steel & Iron (Group) Mining Co., 1,031.79 1,086.25 Freight revenue Ltd. Benxi Steel & Iron (Group) Mining Co., 502.82 935.65 Products Ltd. Benxi Steel & Iron (Group) Thermal Power 2,639.73 5,825.31 Energy & Power Development Co., Ltd. Raw material & Benxi Steel & Iron (Group) Thermal Power 2,749.21 0.07 supplementary materials & Development Co., Ltd. spare parts Benxi Steel & Iron (Group) Thermal Power Freight revenue Development Co., Ltd. Benxi Steel & Iron (Group) Industrial 827.49 753.92 Energy & Power Development Co., Ltd. Benxi Steel & Iron (Group) Industrial 1,459.16 Products Development Co., Ltd. Raw material & Benxi Steel & Iron (Group) Industrial 2,295.96 1,021.16 supplementary materials & Development Co., Ltd. spare parts Benxi Steel & Iron (Group) Information 15.87 25.45 Energy & Power and Automatic Tech Co., Ltd. Benxi Steel & Iron (Group) Construction 133.05 132.20 Energy & Power and Repairing Co., Ltd. Raw material & Benxi Steel & Iron (Group) Construction 93.84 5,008.95 supplementary materials & and Repairing Co., Ltd. spare parts Benxi Steel & Iron (Group) Metallurgy 532.33 555.29 Energy & Power Residues Co., Ltd. Raw material & Benxi Steel & Iron (Group) Metallurgy 25,018.15 23,215.49 supplementary materials & Residues Co., Ltd. spare parts Benxi Steel & Iron (Group) Metallurgy Freight revenue Residues Co., Ltd. Benxi Steel & Iron (Group) Metallurgy 1,732.86 Products Residues Co., Ltd. Benxi Steel & Iron (Group) Co., Ltd. Energy & Power 232.43 132.59 Raw material & Benxi Steel & Iron (Group) Co., Ltd. supplementary materials & 796.46 300.21 spare parts Benxi New Career Development Co., Ltd. Energy & Power 40.25 43.87 Dalian Boluole Steel Tube Co., Ltd. Products 404.87 585.99 Liaoning Bengang Steel & Iron Trading Products Co., Ltd. Benxi Steel & Iron (Group) General 5.09 8.11 Energy & Power Hospital Benxi Steel & Iron (Group) Zhengtai 5.22 0.27 Energy & Power Construction Materials Co., Ltd. 228 Bengang Steel Plates Co., Ltd. Annual Report 2019 The content of related party Name 2019 2018 transactions Liaoning Hengtong Metallurgical Energy & Power Equipment Manufacture Co., Ltd. Raw material & Liaoning Hengtong Metallurgical 2,444.76 1,955.29 supplementary materials & Equipment Manufacture Co., Ltd. spare parts Liaoning Hengtong Metallurgical 352.89 1,019.91 Products Equipment Manufacture Co., Ltd. Raw material & Bengang Cold-rolled Stainless Steel 46.59 supplementary materials & Dandong Co., Ltd. spare parts Suzhou Bengang Industrial Co., Ltd. Products 111.16 Bengang Group Finance Co., Ltd. Energy & Power 41,269.54 39,596.68 Bengang Group Co., Ltd. Energy & Power 1.39 1.46 Bengang Group Co., Ltd. Energy & Power 2.78 3.93 Other instructions: The pricing policy is based on the transaction content and pricing principles specified in the "Raw Material and Service Supply Agreement" and "Land Use Right Leasing Contract" and supplementary agreements entered into between the Company and Bengang Group and Benxi Steel and Iron (Group) Co., Ltd. The main pricing principle is that if there is a market price, the market price will be used. If there is no market price, then the full cost plus the national additional tax plus a reasonable profit will be used as the pricing standard. 2. Lease information of related parties Company as the lessor Currency unit: Yuan Lease income of 2019 Lease income of 2018 Lessee Lease capital category (tax included) (tax included) Benxi Steel & Iron (Group) Steel & Iron Process and Logistics Co., Warehouse and machinery 500,000.00 500,000.00 Ltd. Benxi Steel & Iron (Group) Machinery Manufacture Co., Plants and machinery 122,500.03 490,000.00 Ltd. Company as the lessee Currency unit: Yuan Lease charges of Lease charges of Lessor Lease capital category 2019 2018 (tax excluded) (tax excluded) Land use right Benxi Steel & Iron (Group) Co., 7,669,068.17 sq.m. 54,984,486.36 54,691,428.60 Ltd Land use right 42,920.00 sq.m. Benxi Steel & Iron (Group) Co., 2300 Hot rolling product line, 167,859,103.82 247,959,966.10 Ltd related real estate Benxi Beiying Steel & Iron 1780 Hot rolling product line, 83,686,698.60 135,959,033.13 229 Bengang Steel Plates Co., Ltd. Annual Report 2019 (Group) Co., Ltd. related real estate Land use right 4,972,711.56 Bengang Group Co., Ltd. 728,282.30 sq.m. Notes to operating lease: 1. According to the "Land Use Right Leasing Contract" and subsequent supplementary agreements signed between the Company and Bengang Steel and Iron (Group) Co., Ltd. on April 7, 1997, December 30, 2005, the Company leases land from Bengang Group, 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 Bengang Steel and Iron (Group) Co., Ltd. to the Company, lease period lasts from 1 January 2018 to 31 December 2020. On August 14, 2019, the company signed an agreement with Bengang Group to purchase the aforementioned 2300mm hot rolling mill production line. For details, please refer to note ‘10. Related Party and Related Party Transactions, (5) Related Party Transactions, 4. Related Party Assets Transfers and debt restructuring’. 3. For the 1780 hot rolling product line leased from Benxi Beiying Steel & Iron (Group) Co., Ltd. to the Company. 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. On August 14, 2019, the Company signed an agreement with Beiying Steel to purchase the aforementioned 1780mm hot rolling mill production line. For details, please refer to note ‘10. Related Party and Related Party Transactions, (5) Related Party Transactions, 4. Related Party Assets Transfers and debt restructuring’. 4. On August 14, 2019, the company signed the "House Lease Agreement" with Bengang Steel and Iron (Group) Co., Ltd. and Beiying Iron and Steel Company, and leased the houses and auxiliary facilities occupied by the 2300 hot rolling mill production line and the 1780 hot rolling mill production line. The lease term of the houses and ancillary facilities is until December 31, 2038. For details, please refer to note ‘11 – (1) - 1 –(2)’. 5. On July 15, 2019, the company signed "Land Lease Agreement" with Bengang Group and Bengang Steel and Iron (Group) Co., Ltd. respectively, leased and used a total of 8 pieces of land from Bengang Group and Bengang Steel and Iron (Group) Co., Ltd., with leased areas of 42,920.00 square meters, and 728,282.30 square meters, respectively. The lease term is 20 years, the rental price is 1.138 yuan per square meter per month. For details, please refer to note ‘11 – (1) - 1 – (3)’. Financial leasing: During the reporting period, the company purchased equipment from Liaoning Hengyi Financial Leasing Co., Ltd. in the form of financial leasing. The annual purchase amount (without tax) in 2019 was 509,841,317.15 yuan, and interest and handling fees were 6,330,783.62 yuan. 3. Information of Guarantee among related parties Company as the warrantee 230 Bengang Steel Plates Co., Ltd. Annual Report 2019 Has the Starting date of Ending date of guarantee Warrantor Amount of guarantee Guarantee Guarantee been fulfilled ¥340,000,000.00 2019/12/17 2020/12/17 No Benxi Steel & Iron (Group) Co., Ltd. ¥31,000,000.00 2019/3/25 2020/3/25 No Benxi Steel & Iron (Group) Co., Ltd. ¥500,000,000.00 2019/11/19 2020/11/19 No Benxi Steel & Iron (Group) Co., Ltd. ¥480,000,000.00 2019/12/13 2020/12/13 No Benxi Steel & Iron (Group) Co., Ltd. ¥300,000,000.00 2019/12/13 2020/12/13 No Benxi Steel & Iron (Group) Co., Ltd. ¥147,000,000.00 2019/12/16 2020/12/16 No Benxi Steel & Iron (Group) Co., Ltd. Bengang Group Co., Ltd. and Benxi Steel ¥200,000,000.00 2019/9/9 2020/9/8 No & Iron (Group) Co., Ltd. Bengang Group Co., Ltd. and Benxi Steel ¥150,000,000.00 2019/10/9 2020/10/8 No & Iron (Group) Co., Ltd. Bengang Group Co., Ltd. and Benxi Steel No ¥200,000,000.00 2019/10/11 2020/10/9 & Iron (Group) Co., Ltd. Bengang Group Co., Ltd. and Benxi Steel No ¥200,000,000.00 2019/9/19 2020/9/17 & Iron (Group) Co., Ltd. Bengang Group Co., Ltd. and Benxi Steel No ¥200,000,000.00 2019/9/24 2020/9/23 & Iron (Group) Co., Ltd. Bengang Group Co., Ltd. and Benxi Steel No ¥178,000,000.00 2019/12/13 2020/12/19 & Iron (Group) Co., Ltd. Bengang Group Co., Ltd. and Benxi Steel No ¥100,000,000.00 2019/7/8 2020/7/7 & Iron (Group) Co., Ltd. ¥300,000,000.00 2019/5/31 2020/5/31 No Bengang Group Co., Ltd. Bengang Group Co., Ltd. ¥340,000,000.00 2019/3/29 2020/3/27 No Bengang Group Co., Ltd. ¥490,000,000.00 2019/9/5 2020/9/5 No Bengang Group Co., Ltd. ¥800,000,000.00 2019/11/26 2020/2/25 No Bengang Group Co., Ltd. ¥900,000,000.00 2019/11/27 2020/5/26 No ¥390,000,000.00 2019/11/28 2020/3/27 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. Bengang Group Co., Ltd.; Benxi Beiying ¥480,000,000.00 2019/12/12 2020/11/3 No Steel & Iron (Group) Co., Ltd. Bengang Group Co., Ltd. ;Benxi Beiying No ¥490,000,000.00 2019/12/12 2020/11/10 Steel & Iron (Group) Co., Ltd. Bengang Group Co., Ltd.; Benxi Beiying No ¥320,000,000.00 2019/12/13 2020/12/3 Steel & Iron (Group) Co., Ltd. 231 Bengang Steel Plates Co., Ltd. Annual Report 2019 Has the Starting date of Ending date of guarantee Warrantor Amount of guarantee Guarantee Guarantee been fulfilled Bengang Group Co., Ltd.; Benxi Beiying No ¥710,000,000.00 2019/12/16 2020/12/10 Steel & Iron (Group) Co., Ltd. Bengang Group Co., Ltd. ¥350,000,000.00 2019/10/11 2020/9/10 No Benxi Steel & Iron (Group) Co., Ltd. $90,000,000.00 2019/3/29 2020/3/29 No Benxi Steel & Iron (Group) Co., Ltd. $100,000,000.00 2019/12/18 2020/12/18 No Bengang Group Co., Ltd. and Benxi Steel ¥80,000,000.00 2016/3/30 2025/3/20 No & Iron (Group) Co., Ltd. Bengang Group Co., Ltd. and Benxi Steel ¥520,000,000.00 2017/2/27 2025/2/20 No & Iron (Group) Co., Ltd. ¥73,420,000.00 2015/6/25 2021/9/21 No Bengang Group Co., Ltd. ¥24,000,000.00 2015/12/9 2022/3/21 No Bengang Group Co., Ltd. ¥750,000.00 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. 199 895,81 2015/6/25 2025/9/30 No Bengang Group Co., Ltd. 6 829 398,00 2015/8/20 2025/9/30 No Bengang Group Co., Ltd. 482 311,00 2015/6/25 2026/4/30 No Bengang Group Co., Ltd. 5 891 809,96 2015/12/28 2026/4/30 No Bengang Group Co., Ltd. 2 455 425,68 2016/12/14 2026/4/30 No Bengang Group Co., Ltd. 6 162,48 2015/6/25 2026/4/30 No Bengang Group Co., Ltd. 4 069,11 2015/12/28 2026/4/30 No Bengang Group Co., Ltd. 935 681,93 2017/6/30 2025/10/31 No Bengang Group Co., Ltd. 3 230 173,05 2016/6/27 2020/4/30 No Bengang Group Co., Ltd. 649 351,33 2015/6/25 2020/4/30 No Bengang Group Co., Ltd. 232 225,50 2015/12/28 2020/4/30 No Bengang Group Co., Ltd. 136 899,75 2016/6/27 2020/4/30 No Bengang Group Co., Ltd. 12 205,74 2016/12/14 2020/4/30 No Bengang Group Co., Ltd. 409 373,28 2015/6/25 2025/6/30 No Bengang Group Co., Ltd. 11 706 112,02 2015/6/25 2025/6/30 No Bengang Group Co., Ltd. 359 350,10 2015/12/28 2025/6/30 No Bengang Group Co., Ltd. 8 384 055,11 2015/6/25 2025/10/31 No Bengang Group Co., Ltd. 3 925 583,04 2015/12/28 2025/10/31 No Bengang Group Co., Ltd. 719 075,68 2015/6/25 2025/10/31 No Bengang Group Co., Ltd. 232 Bengang Steel Plates Co., Ltd. Annual Report 2019 Has the Starting date of Ending date of guarantee Warrantor Amount of guarantee Guarantee Guarantee been fulfilled 10 190 602,55 2015/6/25 2025/8/31 No Bengang Group Co., Ltd. 216 960,00 2015/12/28 2025/8/31 No Bengang Group Co., Ltd. 609 296,41 2015/6/25 2025/8/31 No Bengang Group Co., Ltd. JYP 185,408,000.00 1997/10/10 2027/9/10 No Benxi Steel & Iron (Group) Co., Ltd. Bengang Group Co., Ltd. and Benxi Steel 100,000,000.00 2019/1/24 2020/1/23 No & Iron (Group) Co., Ltd. Bengang Group Co., Ltd. and Benxi Steel 100,000,000.00 2019/10/10 2020/10/9 No & Iron (Group) Co., Ltd. Bengang Group Co., Ltd. and Benxi Steel 200,000,000.00 2019/6/14 2020/6/9 No & Iron (Group) Co., Ltd. Bengang Group Co., Ltd. and Benxi Steel 200,000,000.00 2019/6/17 2020/6/17 No & Iron (Group) Co., Ltd. 140,000,000.00 2019/1/22 2020/1/22 No Bengang Group Co., Ltd. 340,000,000.00 2019/9/5 2020/9/5 No Bengang Group Co., Ltd. 220,000,000.00 2019/9/25 2020/9/25 No Bengang Group Co., Ltd. 4. Asset transfer and debt restructuring of related parties Related Current Amount Amount of last period Related Party transaction (Excluding tax) (Excluding tax) content Purchase of 2300 Benxi Beiying Steel & Iron (Group) Co., Ltd. hot rolling mill 3,004,988,590.00 production line Purchase of 1780 Benxi Steel & Iron (Group) Co., Ltd. hot rolling mill 684,727,905.00 production line Notes: On August 14, 2019, the Company signed the "Asset Transfer Agreement" with Benxi Steel (Group) and Beiying Steel, respectively, to acquire the related equipment assets of the 2300mm hot rolling mill production line held by Benxi Steel (Group) and the 1780mm held by Beiying Steel For details of the equipment assets related to the hot rolling mill production line, please see “XIII, (6) 5. Purchase of equipment assets related to the hot rolling mill production line” for details. 5.Remuneration of key management personnel (In 10 Thousand Yuan) 233 Bengang Steel Plates Co., Ltd. Annual Report 2019 Name 2019 2018 Remuneration of key management personnel 302.23 197.60 6. Other related party transactions (1) Loan from and deposits in Bengang Group Finance Co., Ltd. (In 10 Thousand Yuan) Item 20181231 Increase Decrease 20191231 Notes Deposits 975,193.08 16,894,626.27 16,505,506.84 1,364,312.51 1. The interests of deposits in Bengang Group Finance Co., Ltd. is RMB 276,972.50 thousand in 2019. As at 31 December 2019, the interest receivable from Bengang Group Finance Co., Ltd. is RMB 20,390.80 thousand. 2. As at 31 December 2019, the restricted deposits in Bengang Group Finance Co., Ltd. is RMB 2,627,650.60 thousand. 3. 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 4.5 billion in 2019. As 31 December 2019,the amount of acceptance bill opened by Bengang Group Finance Co., Ltd. was RMB 6.588 billion, and the amount of the acceptance bill that had been opened and unpaid by the Japanese company is RMB 2.671 billion, which has a 98.39% margin factor. (2) The company's loan and interest payment to Benxi steel and iron (Group) Co., Ltd. (In 10 Thousand yuan). Item 20181231 Increase Decrease 20191231 Entrusted loan through Bengang Group 1,422.00 1,422.00 Finance Co., Ltd. Capital lending 7,770.00 1,000.00 1,270.00 7,500.00 Total 9,192.00 1,000.00 2,692.00 7,500.00 Notes: In 2019, the interest accrued is RMB 4,062,205.54, and as at 31 December 2019, the company has no interest that has not been paid. 6. Receivables and payables of the related parties 1、Receivables of the Company (in 10 thousand yuan) 20191231 20181231 Items Name Name Carrying Provision for Carrying Provision for amount bad debts amount bad debts Accounts receivable Bengang Group International Economic and Trading Co., Ltd. 5,892.34 58.92 12,906.30 Benxi Steel & Iron (Group) Thermal Power Development Co., Ltd. 1,301.32 13.01 937.22 Bengang Cold-rolled Stainless Steel Dandong Co., Ltd. 188.80 1.89 155.04 19.31 Benxi Steel & Iron (Group) Machinery Manufacture Co., Ltd. 7.70 0.08 Benxi Steel & Iron (Group) Metallurgy Residues Co., Ltd. 0.14 113.22 234 Bengang Steel Plates Co., Ltd. Annual Report 2019 Benxi Beiying Steel & Iron (Group) Co., Ltd. 1,206.26 Bengang Electronics and Gas Co., Ltd. 408.26 112.76 Prepayments Benxi Beiying Steel & Iron (Group) Co., Ltd. 93,762.24 71,312.43 Benxi Steel & Iron (Group) Machinery Manufacture Co., Ltd. 3,559.63 Bengang Cold-rolled Stainless Steel Dandong Co., Ltd. 4.73 Other receivables Bengang Group International Economic and Trading Co., Ltd. 432.77 0.20 622.45 Benxi Steel & Iron (Group) Real-estate Development Co., Ltd. 270.17 246.52 261.61 72.45 Benxi Steel & Iron (Group) Medical Services Department; 94.75 85.27 93.95 73.32 Benxi Steel & Iron (Group) Zhengtai Construction Materials Co., Ltd. 24.60 12.30 20.41 19.32 Liaoning Metallurgy Technician College 5.80 5.80 5.80 Benxi Steel & Iron (Group) Industrial Development Co., Ltd. 0.02 181.50 Benxi Steel & Iron (Group) Machinery Manufacture Co., Ltd. 259.26 Benxi Steel & Iron (Group) Construction Co., Ltd. 449.20 Other non- current assets Liaoning Hengyi Financial Leasing Co., Ltd. 58,419.72 4,631.32 Notes Benxi Beiying Steel & Iron (Group) Co., receivable Ltd. 41,739.59 Benxi Steel (Group) Co., Ltd. 402.17 Zhejiang Bengang Jingrui Steel Processing Co., Ltd. 400.00 2、 Payables of the Company (in 10 thousand yuan) Items Name 20191231 20181231 Accounts payable Bengang Group International Economic and Trading Co., Ltd. 70,193.27 151,974.50 Benxi Steel & Iron (Group) Industrial Development Co., Ltd. 11,311.75 7,543.14 Benxi Steel & Iron (Group) Construction Co., Ltd. 10,331.91 9,288.02 Benxi Steel & Iron (Group) Mining Co., Ltd. 235 Bengang Steel Plates Co., Ltd. Annual Report 2019 8,524.77 46,435.71 Benxi Steel & Iron (Group) Information and Automatic Tech Co., Ltd. 6,567.06 4,578.45 Benxi Steel & Iron (Group) Construction and Repairing Co., Ltd. 4,443.69 10,736.73 Liaoning Hengtai Heavy Machinery Co., Ltd. 3,246.28 2,991.38 Bengang Group Co., Ltd. 3,148.91 Liaoning Hengtong Metallurgical Equipment Manufacture Co., Ltd. 1,487.15 529.45 Bengang Electronics and Gas Co., Ltd. 1,149.26 2,038.30 Benxi Steel & Iron (Group) Machinery Manufacture Co., Ltd. 1,143.65 3,239.73 Benxi Steel & Iron (Group) Metallurgy Residues Co., Ltd. 1,033.48 1,473.85 Liaoning Metallurgy Technician College 724.86 1,033.31 Liaoning Metallurgy Vocational Technical College 671.93 531.92 Bengang Cold-rolled Stainless Steel Dandong Co., Ltd. 521.64 454.96 Benxi New Career Development Co., Ltd. 292.66 356.98 Benxi Steel & Iron (Group) Thermal Power Development Co., Ltd. 144.24 20.97 Benxi Steel & Iron (Group) Real-estate Development Co., Ltd. 62.65 318.45 Benxi High-tech Drilling Tools Manufacture Co., Ltd. 33.77 10.80 Benxi Iron and Steel (Group) Engineering Construction Supervision Co., Ltd. 16.28 123.00 Benxi Steel & Iron (Group) Medical Services Department; 2.04 2.04 Benxi Steel & Iron (Group) Zhengtai Construction Materials Co., Ltd. 0.24 0.24 Advance from customers Suzhou Bengang Industrial Co., Ltd. 1,635.62 571.81 Benxi Steel & Iron (Group) Steel & Iron Process and Logistics Co., Ltd. 1,582.14 6,069.05 Benxi Steel & Iron (Group) Metallurgy Residues Co., Ltd. 126.57 Dalian Boluole Steel Tube Co., Ltd. 85.93 66.42 Liaoning Hengtong Metallurgical Equipment Manufacture Co., Ltd. 82.00 12.91 Benxi Steel & Iron (Group) Industrial Development Co., Ltd. 35.79 35.80 Bengang Group International Economic and Trading Co., Ltd. 786.55 Liaoning Bengang Steel & Iron Trading Co., Ltd. 50.02 Other payables 236 Bengang Steel Plates Co., Ltd. Annual Report 2019 Benxi Steel (Group) Co., Ltd. 18,278.27 21,832.88 Bengang Group International Economic and Trading Co., Ltd. 1,432.74 4,948.15 Benxi Steel & Iron (Group) Construction Co., Ltd. 526.14 590.19 Benxi Steel & Iron (Group) Thermal Power Development Co., Ltd. 437.69 307.73 Guangzhou Free Trade Zone Bengang Sales Co., Ltd. 267.44 267.44 Benxi New Career Development Co., Ltd. 223.84 97.07 Benxi Steel & Iron (Group) Real-estate Development Co., Ltd. 143.59 143.59 Benxi Steel & Iron (Group) Industrial Development Co., Ltd. 30.42 49.15 Benxi Beiying Steel & Iron (Group) Co., Ltd. 6.00 1,824.27 Liaoning Metallurgy Technician College 1.34 36.33 Benxi Steel & Iron (Group) Machinery Manufacture Co., Ltd. 1.01 75.09 Bengang Group Finance Co., Ltd. 0.60 2.12 Liaoning Hengyi Financial Leasing Co., Ltd. 0.39 Liaoning Metallurgy Vocational Technical College 0.30 Benxi Steel & Iron (Group) Metallurgy Residues Co., Ltd. 50.15 Long-term payables Liaoning Hengyi Financial Leasing Co., Ltd. 51,693.94 1,368.67 Notes payable Benxi Beiying Steel & Iron (Group) Co., Ltd. 508,775.58 470,958.00 Benxi Steel & Iron (Group) Mining Co., Ltd. 69,292.59 98,047.94 Benxi Steel & Iron (Group) Industrial Development Co., Ltd. 3,203.52 190.51 Bengang Electronics and Gas Co., Ltd. 2,285.78 Liaoning Hengyi Financial Leasing Co., Ltd. 1,758.01 Benxi Steel & Iron (Group) Real-estate Development Co., Ltd. 684.81 291.70 Liaoning Metallurgy Technician College 195.91 Benxi Steel & Iron (Group) Information and Automatic Tech Co., Ltd. 189.02 Benxi Steel & Iron (Group) Machinery Manufacture Co., Ltd. 186.51 22.44 Bengang Cold-rolled Stainless Steel Dandong Co., Ltd. 71.84 Liaoning Metallurgy Vocational Technical College 237 Bengang Steel Plates Co., Ltd. Annual Report 2019 43.55 Benxi Steel & Iron (Group) Construction and Repairing Co., Ltd. 14.82 Benxi Steel & Iron (Group) Construction Co., Ltd. 13.05 Benxi High-tech Drilling Tools Manufacture Co., Ltd. 5.71 11. Commitments and Contingencies (1) Commitments 1. Lease contracts in progress or to be performed and their financial impacts (1) According to the "Land Use Right Leasing Contract" and subsequent supplementary agreements signed by the company and Benxi Steel (Group) on April 7, 1997, December 30, 2005, the Company leased land from Benxi Steel (Group). The monthly rent is 0.594 yuan per square meters, the leased land area is 7,669,068.17 square meters, and the annual rent is 54,665,100 yuan. (2) On August 14, 2019, the Company signed the "House Lease Agreement" with Benxi Steel (Group) and Beiying Steel respectively, leasing the houses and auxiliary facilities occupied by 2300 and 1780 hot rolling mill production lines, and the lease term ends on December 31, 2038. The rental fee is based on the depreciation of the original rent value and the national additional tax, plus reasonable profit negotiation. The estimated annual rent is not more than 20 million yuan and 18 million yuan respectively. The rental fee is settled and paid monthly. This related party transaction has been reviewed and approved at the fourth meeting of the eighth board of directors of the Company. (3) On July 15, 2019, the Company signed "Land Lease Agreement" with Bengang Group and Benxi Steel (Group) respectively, and leased and used a total of 8 pieces of land of the two companies. The lease areas are 42,920.00 square meters and 728,282.30 square meters respectively, with a lease term of 20 years, and a rental price of 1.138 yuan per square meter per month. After the agreement comes into effect, considering the national law and policy adjustments every five years, both parties should determine whether the rent needs to be adjusted according to the pricing basis stipulated in Article 2 of this agreement. This related party transaction has been reviewed and approved at the third meeting of the eighth board of directors of the company. (4) As of December 31, 2019, the amount of financial lease contracts that the Company and Liaoning Hengyi Financial Leasing Co., Ltd. had signed but had not yet started to execute was 1.959 billion yuan. 2. Irrevocable letter of credit As at December 31, 2019, the amount of irrevocable letter of credit that was not fulfilled was 1.756 billion yuan. (2) Contingencies At the balance sheet date, no significant contingencies need to be disclosed. 12. Subsequent events (1) Important non-adjustment matters 1. Impact of the COVID-19 Since the outbreak of the COVID-19, the consumption, investment and exports in our country have been affected to a certain extent. The Company pays close attention to the progress of the epidemic. As of the date of this report, the situation of domestic epidemic prevention and control continues to improve, but the situation of overseas epidemic prevention and control is still grim. Iron ore imports, direct and indirect exports of products have been affected to a certain extent. The Company will continually and actively evaluate the development situation of the epidemic situation, scientifically respond to the challenges of the epidemic situation, and ensure the stability of production and operation. 238 Bengang Steel Plates Co., Ltd. Annual Report 2019 2. Adjustment of accounting estimate On January 31, 2020, the eighth meeting of the eighth session of the Board of Directors of the Company passed the "Proposal on Adjusting the Depreciation Period of Certain Fixed Assets". Reasons for changes in accounting estimates: According to Article 19 of "Accounting Standards for Business Enterprises No. 4-Fixed Assets," an enterprise should review the useful life of fixed assets, estimated net residual value and depreciation methods at least at the end of each year. If there is a difference between the estimated number and the original estimate, the service life of the fixed assets shall be adjusted. " In order to fairly reflect the Company's financial situation and operating results, the fixed asset depreciation period is closer to its actual service life, and to meet the Company's business development and fixed asset management needs, the company assessed the use of fixed assets and service life. According to the Company's evaluation of the actual status of fixed assets and the depreciation period: the technology and technical content of the Company's production equipment are high, and the maintenance status is good. From 2010 to 2019, the Company invested a total of RMB 11.959 billion in equipment maintenance costs. The depreciation period is closer to the actual service life, it is necessary to adjust the depreciation period of some fixed assets of our company. Accounting estimates used before and after the change: According to the actual situation of the Company's fixed assets, the Company decided to adjust the depreciation period of some fixed assets from January 1, 2020. The specific adjustment plan is as follows: Type of the Fixed Assets Depreciation period before Depreciation period after adjustment adjustment 1. Equipment 14 21 2. Power plant 18 19 3. Conduction equipment 18 28 4. Transportation equipment 6 12 5. Tools and other 9 14 production tools 6. Non-production equipment and appliances (1) Equipment tools 18 22 (2) Copier, word processor 5 8 7. Buildings (1) Production buildings 40 40 239 Bengang Steel Plates Co., Ltd. Annual Report 2019 (2) Corroded production 25 25 buildings (3) Strong corrosion 10 15 production buildings (4) Non-production 30 45 buildings (5) Simple buildings 8 10 (6) Buildings 25 25 (2) Profit Distribution On April 22, 2020, as approved by the tenth meeting of the eighth board of directors of the Company, the 2019 dividend distribution plan was adopted: considering the uncertainty of the COVID-19 on the domestic and foreign economies, it is Profit or dividend to be distributed recommended that the company not distribute profits in 2019, no capital reserve will be converted into capital. The above profit distribution plan still needs to be reviewed and approved by the shareholders' meeting. (3) Sales Return Not applicable. (4) Divided into assets held for sale and disposal portfolio Not applicable. (5) Other subsequent events The controlling shareholder's plan to increase the shares in the Company The Company received a notification letter from the Company's controlling shareholder (Benxi Steel (Group) Co., Ltd.) plan to increase the Company's shareholding within 6 months from 14 February, 2020. Benxi Steel (Group) plans to increase the Company's shares with its own funds through methods permitted by laws and regulations (including but not limited to centralized bidding and bulk transactions). The total amount of this plan is not less than RMB 50 million, not more than RMB 100 million, and there is no price range. 13. Other significant events 240 Bengang Steel Plates Co., Ltd. Annual Report 2019 (1) Correction of previous accounting errors None (2) Debt restructuring None (3) Asset replacement None (4) Termination of business None (5) Segment information Since the Company's main product is steel, other products account for a small proportion of sales, the main production base is in Liaoning, and the disclosure of the segment report is not applicable. (6) Other important matters that have an impact on investor decisions 1. Financial leasing matters In order to optimize the debt structure and broaden the financing channels, the Company signed the "Financial Leasing Cooperation Framework Agreement" with Liaoning Hengyi Financial Leasing Co., Ltd. in 2018. The financing amount is not more than RMB 5 billion per year. The Company obtains funds through financing after- sales leaseback. The lease interest rate is not higher than the benchmark loan interest rate announced by the People's Bank of China for the same period. The lease interest rate during the lease period is dynamically adjusted with the changes in the benchmark interest rate announced by the People's Bank of China. The ratio of lease deposit is not higher than 30% of the lease principal amount. 2. The controlling shareholder pledges the Company's shares As of the balance sheet date, the Company's controlling shareholder Benxi Iron and Steel (Group) Co., Ltd. held 2,381,105,094 shares of the Company, of which 110,000,000 shares were in pledged status and 45,000,000 shares were in restricted sales and frozen status. 3. The controlling shareholder completes the increase in the company's shares Benxi Steel (Group) Co., Ltd., the Company's controlling shareholder, plans to increase its shareholding in the Company through its own funds through the methods permitted by laws and regulations (including but not limited to centralized bidding and bulk transactions) within 6 months from May 10, 2019. The total amount of this 241 Bengang Steel Plates Co., Ltd. Annual Report 2019 shareholding increasing plan is no less than RMB 100 million, not more than RMB 200 million, and there is no price range. As of November 10, 2019, Benxi Steel (Group)'s shareholding increase plan was completed. Benxi Steel (Group) has accumulatively increased its holdings of 25,695,831 shares of the Company, accounting for 0.66% of the Company's total share capital, and the total amount of additional holdings was RMB 112.8 million. Benxi Steel (Group), the Company's controlling shareholder, plans to increase its shares in the Company within 12 months from June 1, 2018, with the capital increase not exceeding RMB 300 million. As of May 9, 2019, Benxi Steel (Group)'s shareholding increase plan was completed. Benxi Steel (Group) has accumulatively increased its holdings of 70,998,061 shares, accounting for 1.83% of the Company's total share capital, and the total amount of additional holdings was RMB 291,922,300. 4. Issuance of convertible corporate bonds The Company plans to publicly issue convertible corporate bonds that can be converted into company’s A shares. The total amount of convertible bonds issued this time will not exceed RMB 680 million (including RMB 680 million). The specific amount of funds raised is to be confirmed determined within the aforementioned quota by the Company's board of directors or persons authorized by the board of directors under the authorization of the Company's general meeting of shareholders. After deducting the issuance expenses, the proceeds will be fully invested in the following projects: No. Project Total Investment Proposed investment 1 High grade high magnetic induction non- 114,500.00 105,700.00 oriented silicon steel project 2 Steelworks No. 8 Casting Machine Project 39,500.00 33,500.00 3 Energy-saving renovation project of No. 5 150,000.00 96,000.00 blast furnace in ironworks 4 Special Steel Electric Furnace Upgrading 160,000.00 141,600.00 Project 5 CCPP power generation project 98,826.80 83,300.00 6 No. 4-No. 6 converter environmental 27,000.00 19,900.00 protection renovation project 7 Repayment of bank loan 200,000.00 200,000.00 Total 789,826.80 680,000.00 242 Bengang Steel Plates Co., Ltd. Annual Report 2019 The relevant proposal of the Company's public issuance of A-share convertible corporate bonds was reviewed and approved by the second meeting of the eighth board of directors of the Company on May 22 2019, and was resolved by the Company's second extraordinary general meeting of shareholders on June 10, 2019. In June 2019, the State-owned Assets Supervision and Administration Commission of the People ’s Government of Liaoning Province issued the "Response for the Public Issuance of Convertible Corporate Bonds of Bengang Steel Plates Co., Ltd." (Liao-Guo-Zi-Chan-Quan [2019] No. 110), which approved the Company's application for public offering of no more than RMB 6.8 billion (inclusive) convertible corporate bonds with a term of 6 years. On October 8, 2019, the Company convened the sixth meeting of the eighth board of directors, and reviewed and approved the "Proposal on the Company's Public Offering of A Share Convertible Corporate Bonds (Revised Draft). On October 28, 2019, the Company convened the seventh meeting of the eighth board of directors, and reviewed and approved the "Proposal on the Company's Public Offering of A Share Convertible Corporate Bonds (Second Revision)". On November 14, 2019, the Company convened the fourth extraordinary general meeting of shareholders in 2019, and the resolution passed the "Proposal on the Company's Public Offering of A Share Convertible Corporate Bonds (Second Revision)". On December 20, 2019, the Issuance Review Committee of the China Securities Regulatory Commission (hereinafter referred to as the "China Securities Regulatory Commission") reviewed the company's application for public issuance of A-share convertible corporate bonds. According to the results of the meeting, the company's public offering for A-share convertible corporate bonds was approved. On January 22, 2020, the Company received the “Response for Approving the Public Issuance of Convertible Corporate Bonds of Bengang Steel Plate Co., Ltd.” issued by the China Securities Regulatory Commission (Zhongjian License [2020] No. 46) (hereinafter referred to as “Response”) The approved Company publicly issued convertible corporate bonds with a total face value of RMB 6.8 billion to the public for a period of 6 years. This approval is valid for 6 months from the date of approval of the issuance. 5. Purchase related equipment assets of hot rolling mill production line 243 Bengang Steel Plates Co., Ltd. Annual Report 2019 On August 14, 2019, the Company signed the "Asset Transfer Agreement" with Benxi Steel (Group) and Beiying Steel, respectively, to acquire the related equipment assets of the 2300mm hot rolling mill production line held by Benxi Steel (Group), and the 1780mm held by Beiying Steel Related equipment assets of the hot rolling mill production line; after the above asset acquisition agreement became effective, the relevant production line lease agreement signed between the Company, Benxi Steel (Group), and Beiying Iron and Steel Group terminated. The Company has purchased the related equipment assets of the 2300mm hot rolling mill production line held by Benxi Steel (Group), and the related equipment assets of the 1780mm hot rolling mill production line held by Beiying Iron and Steel Co. The fourth meeting deliberated and passed the resolution of the company's third extraordinary general meeting in 2019. The assets acquired by the company this time mainly include 2628 items of related equipment for the 2300mm hot rolling mill production line and 801 items of related equipment for the 1780mm hot rolling mill production line. The 2300mm hot rolling mill production line is invested and constructed by Benxi Steel (Group). If the above production line is used by Benxi Steel (Group) Co., Ltd., it will cause industry competition and related transactions with the Company. Therefore, Benxi Steel (Group) Co., Ltd. has leased the 2300mm hot rolling mill production line to the Company in 2009; the 1780mm hot rolling mill production line was invested and constructed by Beiying Steel. If the above production line is used by Beiying Steel itself, it will compete with the company. Therefore, Beiying Steel has leased the 1780mm hot rolling mill production line to the Company since 2014. As of the end of the reporting period, the above acquisitions have been completed. 14. Capital management The main objectives of the company's capital management are as following: - to ensure the Company's ability to continue to operate in order to provide returns to shareholders and other stakeholders continuously; - to price the products and services accordingly according to the risk level, so as to provide sufficient returns to shareholders. The Company has set a capital amount proportional to the risk, and manages and adjusts the capital structure according to changes in the economic environment and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce liabilities. The company monitors capital based on the adjusted liability / capital ratio. Liability/capital ratio after adjustment as of the balance sheet date is showed as follows: 244 Bengang Steel Plates Co., Ltd. Annual Report 2019 Items 20191231 20181231 Shor-term loans 13,151,478,000.00 11,938,490,375.85 Long-term loans due within one year 234,474,657.99 350,965,576.32 Long-term loans 4,849,675,910.73 7,083,640,094.16 Total amount of loans 18,235,628,568.72 19,373,096,046.33 Minus: cash and cash equivalent 13,441,414,988.58 11,752,548,621.97 Net value of liabilities 4,794,213,580.14 7,620,547,424.36 Shareholder’s equity 20,012,826,841.40 19,659,404,456.16 Liability/capital ratio after 23.96% 38.76% adjustment 15. Notes to the financial statements of parent company 1. Notes receivable (1) Notes receivable disclosed by category Items 20191231 20181231 Bank acceptance bill 3,316,192,514.61 Commercial acceptance bill 39,828,084.28 Total 3,356,020,598.89 2. Accounts receivable (1) Accounts receivable disclosed by aging Items 20191231 20181231 Within 1 year (inclusive) 339,851,051.52 333,482,302.22 1-2 years (inclusive) 31,642,073.27 56,750,367.45 2-3 years (inclusive) 24,708,264.04 27,697,384.96 Over 3 years 175,744,519.91 170,983,469.66 Sub-total 571,945,908.74 588,913,524.29 Less: Provision for bad 182,948,800.28 179,360,465.02 debts Total: 388,997,108.46 409,553,059.27 (2) Accounts receivable disclosed by category 20191231 Items Carrying amount Provision for bad debts Book value Amount Percentage Amount Bad debts 245 Bengang Steel Plates Co., Ltd. Annual Report 2019 (%) ratio (%) Individually significant and tested for impairment 47,762,337.18 8.35 47,762,337.18 100.00 individually Accounts receivable tested for 524,183,571.56 91.65 135,186,463.10 25.79 388,997,108.46 impairment by portfolio Include: Portfolio 1: Aging 268,981,818.03 47.03 135,186,463.10 133,795,354.93 Portfolio 2:Combined related 255,201,753.53 44.62 255,201,753.53 party Total 571,945,908.74 100.00 182,948,800.28 388,997,108.46 20181231 Items Carrying amount Provision for bad debts Percentage Bad debts Book value Amount Amount (%) ratio (%) Individually significant and tested for impairment 47,762,337.18 8.11 47,762,337.18 100.00 individually Provision for bad debts based 541,151,187.11 91.89 131,598,127.84 24.32 409,553,059.27 on credit risk Individually not significant but tested for impairment individually Total 588,913,524.29 100.00 179,360,465.02 409,553,059.27 Receivables individually insignificant but tested for impairment individually 20191231 Items Provision for bad Bad debts Accounts receivable Reason debts ratio(%) Benxi Nanfen Benxi Nanfen Xinhe Metallurgical Co., 47,762,337.18 47,762,337.18 100.00 Xinhe has halt Ltd. operation. Total 47,762,337.18 47,762,337.18 Accounts receivable tested for impairment by portfolio Portfolio tested by aging 20191231 Items Carrying amount Provision for bad debts Bad debts ratio (%) Within 1 year 84,816,943.55 848,169.44 1.00 1-2 years 31,642,073.27 1,582,103.66 5.00 2-3 years 24,708,264.04 4,941,652.81 20.00 Over 3 years 127,814,537.17 127,814,537.17 100.00 Total 268,981,818.03 135,186,463.08 246 Bengang Steel Plates Co., Ltd. Annual Report 2019 (3) Information of provision, reversal or recovery of bad debts of current period. The provision of bad debts of current period is RMB 3,588,335.26. (4) No accounts receivable has been written off this year. (5) Top five debtors at the year-end 20191231 Company Percentage of total accounts Provision for Amount receivable (%) bad debts The first 255,034,107.97 44.59 The second 62,933,318.72 11.00 5,743,870.05 The third 47,762,337.18 8.35 47,762,337.18 The fourth 15,212,648.64 2.66 152,126.49 The fifth 14,353,834.99 2.51 143,538.35 Total 395,296,247.50 69.11 53,801,872.07 (6) Account receivables do not be derecognized due to the transfer of financial assets at year-end (7) Account receivables do not be transferred and further involved in assets and liabilities 3. Accounts receivable financing (1) Details of accounts receivable financing Items 20191231 Notes receivable 2,193,319,842.60 Include: Bank acceptance bill 2,184,526,834.33 Commercial acceptance bill 8,793,008.27 Total 2,193,319,842.60 Other information: notes receivable and accounts receivable measured at fair value through other comprehensive income are included in receivable financing at the end of period. (2) Receivable financing tested for impairment None. (3) Acceptance bills pledged by the company at the end of the period Items Pledged amount 247 Bengang Steel Plates Co., Ltd. Annual Report 2019 Bank acceptance bill 373,576,250.73 Commercial acceptance bill Total 373,576,250.73 (4) Acceptance bills have been endorsed or discounted by the company and have not expired at the accounting period Items Derecognized amount Not derecognized amount Bank acceptance bill 9,643,750,298.36 Commercial acceptance bill Total 9,643,750,298.36 (5) There are no bills converted into accounts receivable due to the failure of the issuer to perform the contract at the end of the period. 4. Other receivables Item 20191231 20181231 Interest receivables 19,658,230.77 9,815,280.04 Dividend receivables Other receivables 247,005,005.04 225,222,111.42 Total 266,663,235.81 235,037,391.46 1. Interest receivables (1) Interest receivable disclosed by category Items 20191231 20181231 Deposit interest 19,658,230.77 9,815,280.04 Subtotal 19,658,230.77 9,815,280.04 Less: provision for bad debt Total 19,658,230.77 9,815,280.04 (2) There is no significant provision for overdue interest and bad debt provision. 2. Other receivables (1) Other receivables disclosed by aging Items Ending balance Beginning balance Within 1 year (inclusive) 115,480,359.05 183,173,264.02 1-2 years (inclusive) 15,711,856.93 3,202,196.37 2-3 years (inclusive) 3,479,413.59 46,583,451.06 Over 3 years 177,724,723.88 56,834,814.81 248 Bengang Steel Plates Co., Ltd. Annual Report 2019 Sub-total 312,396,353.45 289,793,726.26 Less: Provision for bad 65,391,348.41 64,571,614.84 debts Total: 247,005,005.04 225,222,111.42 (2) Provision for bad debt provision Stage one Stage two Stage three Provision for bad debts Lifetime expected Lifetime expected credit Total 12-month expected credit losses (no losses (credit credit losses credit impairment) impairment occurred) Beginning balance 20,492,667.08 44,078,947.76 64,571,614.84 Current period -11,312,968.19 12,132,701.76 819,733.57 provision Current period reverse Current period write- off Other change Ending balance 9,179,698.89 56,211,649.52 65,391,348.41 Changes of other receivables Stage one Stage two Stage three Book value Lifetime expected credit Lifetime expected credit Total 12-month expected credit losses (no credit losses (credit impairment losses impairment) occurred) Beginning balance 182,137,456.26 63,577,322.24 44,078,947.76 289,793,726.26 Current period increase 50,391,321.37 - 12,132,701.76 62,524,023.13 Current period decrease 39,921,395.94 39,921,395.94 Current period derecognize Other change Ending balance 232,528,777.63 23,655,926.30 56,211,649.52 312,396,353.45 (3) Other receivables disclosed by nature 249 Bengang Steel Plates Co., Ltd. Annual Report 2019 Nature 20191231 20181231 Receivable and payable 308,494,447.19 278,547,233.77 Other 3,901,906.26 11,246,492.49 Total 312,396,353.45 289,793,726.26 (4) Top five debtors at the year-end Percentage of total Provision for Company Nature or content Amount Aging other receivables bad debts (%) The First Receivable and payable 5,718,029.34 1-2 years 1.83 1,143,605.87 The Second Receivable and payable 5,329,737.80 Within 1 year 1.71 1-2 years 1.39 The Third 4,333,839.78 Receivable and payable Within 1 year to 3 0.76 The Fourth Receivable and payable 2,365,538.29 2,128,984.46 years The Fifth Receivable and payable 2,261,360.00 Over 3 years 0.72 2,261,360.00 Total 20,008,505.21 6.41 5,533,950.33 (5) Other receivables do not involve in any government subsidies at year-end (6) Other receivables do not be derecognized due to the transfer of financial assets at year-end (7) Other receivables do not be transferred and further involved in assets and liabilities 5. Long-term equity investment Ending balance Beginning balance Items Impairmen Impair Carrying amount Book value Carrying amount Book value t ment Subsidiaries 2,016,281,902.16 2,016,281,902.16 2,016,281,902.16 2,016,281,902.16 Joint Venture 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 Ending Impair Ending balance Decrea ment of Name of entity Beginning balance Increase of se balance current impairme period nt Guangzhou Bengang Steel & Iron Trading Co., Ltd. 30,000,000.00 30,000,000.00 Shanghai Bengang Metallurgy Science and 30,000,000.00 30,000,000.00 Technology Co., Ltd. Bengang Steel Plates Liaoyang Pellet Co., Ltd. 529,899,801.38 529,899,801.38 250 Bengang Steel Plates Co., Ltd. Annual Report 2019 Dalian Benruitong Automobile Material 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., Ltd. 28,144,875.36 28,144,875.36 Harbin Bengang Economic and Trading Co., Ltd. 29,923,398.23 29,923,398.23 Nanjing Bengang Materials 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., Ltd. 1,095,711.66 1,095,711.66 Yantai Bengang Steel & Iron Sales Co., Ltd. 49,100,329.41 49,100,329.41 Tianjin Bengang Steel & Iron Trading Co., Ltd. 60,318,095.80 60,318,095.80 Benxi Bengang Steel Sales Co., Ltd 5,000,000.00 5,000,000.00 Shenyang Bengang Metallurgical Science and 30,000,000.00 30,000,000.00 Technology Co., Ltd. Chongqing Liaoben Steel & Iron Trade Co., Ltd. 30,000,000.00 30,000,000.00 Bengang Baojin (Shenyang) Automobile New 76,000,000.00 76,000,000.00 Materials Technology Co., Ltd. Total 2,016,281,902.16 2,016,281,902.16 6. Operating income and operating cost 2019 2018 Items Revenue Cost Revenue Cost Principal business 45,495,328,832.91 43,241,111,129.03 45,295,861,844.09 41,702,339,825.46 Other business 7,109,784,374.11 6,493,078,331.57 5,129,217,403.65 4,479,588,955.97 Total 52,605,113,207.02 49,734,189,460.60 50,425,079,247.74 46,181,928,781.43 Details of operating income Items 2019 2018 Principal business 45,495,328,832.91 45,295,861,844.09 Include: domestic 39,896,261,053.27 35,913,548,076.88 Foreign 5,599,067,779.64 9,382,313,767.21 Other business Include: domestic 7,109,784,374.11 5,129,217,403.65 Foreign 7,109,784,374.11 5,129,217,403.65 Total 52,605,113,207.02 50,425,079,247.74 7. Income on investment 251 Bengang Steel Plates Co., Ltd. Annual Report 2019 Items 2019 2018 Income from long-term equity investment (cost method) 27,594,915.42 Income from bank short-term financial products 5,041,397.26 Total 27,594,915.42 5,041,397.26 16. Supplementary information (1) Details of non-recurring profit and loss Items Amount Notes Profit or loss from disposal of non-current assets -77,292,030.26 Tax refund, reduction or exemption of unauthorized approval or no formal approval document Government subsidy attributable to profit and loss of current period (except such 83,914,522.47 government subsidy closely related to the company's normal business operation, meeting the regulation of national policy and enjoyed constantly in certain quota or quantity according to a certain standard) Fund occupation fee charged to non-financial enterprises included in current profit and loss The investment cost of an enterprise acquiring subsidiaries, associates and joint ventures is less than the income from the fair value of the identifiable net assets of the investee when obtaining the investment Non-monetary asset exchange gains and losses Profit or loss from investment or assets entrusted to others 605,795.19 Provision for asset impairment due to unavoidable factors such as natural disasters Profit or loss from debt restructuring 50,640.00 Restructuring costs, such as the cost of relocating employees, integration costs, etc. Profits and losses in excess of fair value from unfair transaction Subsidiary companies arising from business combinations under the same control Profits and losses from contingencies are not related to the company's normal business operations Profits excluded effective hedging business related to the company's normal business operations, from holding transactional financial assets, derivative financial assets, transactional financial liabilities, fair value changes in derivative financial liabilities, and disposal of transactional financial assets and derivative financial Investment income from assets, trading financial liabilities, derivative financial liabilities and other debt investments Reversal of impairment provision for individually tested impairment of receivables Profits and losses from external entrusted loans Profits and losses from changes in fair value of investment real estate that use the fair value model for subsequent measurement Profit and loss affected due to the adjustments of requirements of taxation, accounting and other laws and regulations Trustee income from trust operations Other non-operating revenue and expenditure other than above items 779,757.58 Other non-recurring profit and loss 2,084.65 Subtotal 8,060,769.63 Impact of income tax -1,818,703.48 252 Bengang Steel Plates Co., Ltd. Annual Report 2019 Items Amount Notes Impact of minority interests -123,911.88 Total 6,118,154,27 (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 2.88 0.143 0.143 Net profit attributable to ordinary shareholders 2.85 0.142 0.142 after deducting non-recurring profit and loss (3) Differences between Domestic and Foreign Accounting Standards □ Applicable √Not applicable (4) Supplement information of change of accounting standards The company bases on “Notice on Revision and Issuance of the Format of Financial Statements for General Enterprises in 2019 (Caikuai [2019] No. 6)” and Notice on the revision and issuance of the Format of Combined Financial Statements 2019.” (Cai Kuai 2019 No.16) changes the according standards and adjusted financial reports retrospectively. The restated consolidated balance sheets are as follows: Beginning balance Ending balance of Ending balance of Items of last year last year the current year Current assets: Cash at bank and on hand 17,037,713,410.49 16,567,471,755.77 18,415,844,397.77 Settlement provision Fund lent Financial assets held for trading Not applicable Not applicable Financial assets at fair value through profit or loss Not applicable Derivative financial assets Notes receivable 3,846,433,700.87 3,580,145,843.38 Accounts receivable 728,597,926.39 639,482,481.45 235,863,911.22 Accounts receivable financing Not applicable Not applicable 2,429,542,461.88 Prepayments 1,280,689,094.33 1,321,537,514.78 1,404,330,140.57 Premium receivable Cession premiums receivable Provision of cession receivable 253 Bengang Steel Plates Co., Ltd. Annual Report 2019 Beginning balance Ending balance of Ending balance of Items of last year last year the current year Other receivables 308,825,505.84 202,763,964.98 172,807,036.77 Buying back the sale of financial assets Inventories 11,209,898,096.16 10,677,747,112.40 7,700,397,685.61 Assets held for sale Non-current assets due within one year Other current assets 809,322,127.79 292,119,771.13 313,220,411.89 Total current assets 35,221,479,861.87 33,281,268,443.89 30,672,006,045.71 Non-current assets: Loans and advances Debt investment Not applicable Not applicable Available-for-sale financial assets 3,888,980.00 1,041,824,829.00 Not applicable Other debt investment Not applicable Not applicable Held-to-maturity investment Not applicable Long-term receivables Long-term equity investment 2,726,009.03 2,455,681.55 2,642,998.70 Other equity instrument investment Not applicable Not applicable 1,041,824,829.00 Other non-current financial asset Not applicable Not applicable Investment property Fixed assets 23,852,067,166.10 23,924,504,539.97 26,123,375,492.40 Construction in progress 2,396,143,330.06 836,594,457.82 1,833,853,572.58 Productive biological assets Oil and gas assets Intangible assets 253,884,881.48 278,062,441.04 271,500,023.34 Development expenditure Goodwill Long-term deferred expenses 254 Bengang Steel Plates Co., Ltd. Annual Report 2019 Beginning balance Ending balance of Ending balance of Items of last year last year the current year Deferred tax assets 200,618,461.36 191,452,547.21 191,485,595.49 Other non-current assets 1,067,334,823.12 76,341,975.35 595,219,870.04 Total non-current assets 27,776,663,651.15 26,351,236,471.94 30,059,902,381.55 Total assets 62,998,143,513.02 59,632,504,915.83 60,731,908,427.26 Current liabilities: Short-term loans 21,999,103,900.00 11,938,490,375.85 13,151,478,000.00 Borrowings from central bank Deposit funds Trading financial liabilities Not applicable Not applicable Financial liabilities at fair value through profit or loss Not applicable Derivative financial liabilities Notes payable 11,494,589,827.27 10,013,192,014.02 11,828,514,676.95 Accounts payable 3,897,668,513.77 5,522,042,811.65 4,527,680,675.83 Advance from customers 3,308,567,598.05 3,331,854,098.42 4,429,821,526.79 Sale of repurchase financial assets Deposits from customers and interbank Acting trading securities Acting underwriting securities Employee benefits payable 43,722,537.58 51,466,231.72 23,698,174.56 Current tax liabilities 87,807,128.50 515,752,369.68 285,141,402.60 Other payables 661,129,220.33 862,511,178.96 662,701,744.97 Service charges and commissions payable Cession insurance premiums payable Liabilities held for sale Non-current liabilities due within one year 3,811,540,590.84 350,965,576.32 234,474,657.99 Other current liabilities 27,979,093.21 255 Bengang Steel Plates Co., Ltd. Annual Report 2019 Beginning balance Ending balance of Ending balance of Items of last year last year the current year Total current liabilities 45,332,108,409.55 32,586,274,656.62 35,143,510,859.69 Non-current liabilities: Provision for insurance contracts Long term loans 2,444,185,630.28 7,083,640,094.16 4,849,675,910.73 Bonds payable Including: Preferred stock Perpetual bond Long-term payable 13,686,705.92 516,939,408.14 Long-term employee benefits payable Estimated liabilities Deferred income 372,785,000.00 289,499,002.97 208,955,407.30 Deferred tax liabilities Other non-current liabilities Total non-current liabilities 2,816,970,630.28 7,386,825,803.05 5,575,570,726.17 Total liabilities 48,149,079,039.83 39,973,100,459.67 40,719,081,585.86 Shareholder’s equity: Share capital 3,136,000,000.00 3,875,371,532.00 3,875,371,532.00 Other equity instruments Including: Preferred stock Perpetual bond Capital reserves 9,114,845,542.05 12,343,209,847.29 12,343,209,847.29 Less: Treasury shares Other comprehensive income Special reserves 475,046.75 683,937.71 212,687.41 Surplus reserves 961,105,529.85 961,105,529.85 961,105,529.85 Provision for normal risks 256 Bengang Steel Plates Co., Ltd. Annual Report 2019 Beginning balance Ending balance of Ending balance of Items of last year last year the current year Undistributed Profits 1,103,162,610.35 1,945,887,269.82 2,307,765,664.62 Total owners' equity belongs to parent company 14,315,588,729.00 19,126,258,116.67 19,487,665,261.17 Minority interest 533,475,744.19 533,146,339.49 525,161,580.23 Total shareholder's equity 14,849,064,473.19 19,659,404,456.16 20,012,826,841.40 Total liabilities and shareholder’s equity 62,998,143,513.02 59,632,504,915.83 60,731,908,427.26 257 Bengang Steel Plates Co., Ltd. Annual Report 2019 XIII. Documents available for inspection 1, Financial Statements signed and stamped by the legal representative, CFO, and accounting manager; 2, All of the original copies of documents and announcements that have been published on China Securities Journal, Securities Times, and Hong Kong Commercial Daily; 3, Original copy of the Auditors’ Report under the seal of the CPA and signed by and under the seal of certified accountants. 258