Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 August, 2020 1 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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, the principal in charge of the accounting, and Zhao Zhonghua, Chief of Accounting Affairs, 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 semi-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 planned not to distribute cash dividend or bonus shares, and not to convert capital reserve into share capital. 2 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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 .................................................................................................... 8 IV. Management Discussion and Analysis ........................................................................................ 10 V. Important Events ........................................................................................................................... 17 VI. Status of Share Capital Changes and Shareholders ..................................................................... 45 VII. Status of Preferred Shares .......................................................................................................... 48 VIII. Status of Convertible Corporate Bonds..................................................................................... 49 IX. Status of Directors, Supervisors, and Senior Executives ............................................................. 50 X. Relevant Information about Corporate Bonds .............................................................................. 51 XI. Financial Report ........................................................................................................................... 52 XII. Documents available for inspection ......................................................................................... 195 3 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Definition Terms to be defined Refers to Content of Definition Bengang Bancai, Bengang Steel, the Refers to Bengang Steel Plates Co., Ltd. Company, the Listed Company Bengang Group Refers to Bengang Group Co., Ltd. Bengang Co. Refers to Benxi Steel & Iron (Group) Co., Ltd. Liaoning Provincial State-asset Liaoning State-owned Asset Supervisory and Refers to Administration Management Committee SSE Refers to Shenzhen Stock Exchange Bengang Posco Refers to Bengang Posco Cold-rolled Sheet Co., Ltd. 4 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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 Chinese 本钢板材 Company name in English (If any) BENGANG STEEL PLATES CO., LTD. Abbreviation of Company name in English (If any) BSP Legal representative Gao Lie II. Contact Information Secretary of the Board Representative of Stock Affairs Name Gao Desheng Chen Liwen No.16, Renmin Road, Pingshan No.16, Renmin Road, Pingshan District, Address District, Benxi City, Liaoning Benxi City, Liaoning Province Province Tel 024-47827003 024-47828980 Fax 024-47827004 024-47827004 Email bgbcdm@163.com bgbcdm@126.com III. Other Information 1.Contact Information of the Company Whether the information disclosure and place for consulting have changed □ Applicable √ Not applicable Name of newspaper selected by the Company for information release, website appointed by CSRC for publishing semi-annual report and lodging address of semi-annual report of the Company have not changed during the reporting period. Please refer to Annual Report 2018 for details. 5 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 2. Place for information disclosure Whether the information disclosure and place for consulting have changed □ Applicable √ Not applicable Name of newspaper selected by the Company for information release, website appointed by CSRC for publishing semi-annual report and lodging address of semi-annual report of the Company have not changed during the reporting period. Please refer to Annual Report 2019 for details IV. Summary of Accounting data and Financial index Whether the Company makes retroactive adjustment or restatement of the accounting data of the previous year □ Yes √ No Unit: Yuan Increase or decrease in this Same period in previous This reporting period reporting period over the year previous year Operating income 22,184,537,260.05 24,102,595,167.14 -7.96% Net profit attributable to the shareholders 254,644,204.33 453,209,615.76 -43.81% of the listed company Net profit attributable to the shareholders of listed company after deducting non- 239,885,472.54 481,928,450.94 -50.22% recurring gain/loss Net cash flows generated by operating -151,475,707.08 984,787,005.67 -115.38% activities Basic earnings per share 0.07 0.12 -41.67% Diluted earnings per share 0.07 0.12 -41.67% ROE 1.30% 2.35% -1.05% Increase or decrease at the At the end of this reporting At the end of previous end of this reporting period period reporting period over the previous year Total assets 62,710,402,910.64 60,731,425,193.90 3.26% Net assets attributable to shareholders of 19,764,576,963.53 19,487,665,261.17 1.42% the listed company V. 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 6 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 2. Differences of net profit and net assets disclosed in financial reports prepared under overseas and Chinese accounting standards. □ Applicable √ Not applicable VI. Items and Amount of Non-recurring Gains and Losses √ Applicable □ Not applicable Unit: yuan Items Amount Notes Profit or loss from disposal of non-current assets (including the write-off part for which assets impairment -19,733,108.62 provision is made) Details of government subsidies recorded into current profits and loss(except such government subsidy closely related to the company’s normal business operation,, 38,587,332.40 meeting the regulation of national policy and enjoyed constantly in certain quota or quantity according to a certain standard) Other non-operating revenue and expenditure other than 838,001.32 above items Less: Impact of income tax 4,923,056.28 Impact of non-controlling interests (after tax) 10,437.03 Total 14,758,731.79 -- 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. 7 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 III. Summary of Company Business I. The Company's main business during the reporting period 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 company made historic breakthroughs in product development and technological progress. "Development and serialized development of hot stamping steel with the highest strength and extra-thick specifications" won the first prize of the industry. The company successfully developed 15 grades of new products. E4340 steel is produced by continuous casting instead of die casting, which is a domestic initiative. The company’s low-yield-strength- ratio, thin-gauge, high-grade pipeline steel X70 provides a guarantee for its full penetration into the petroleum engineering market in India and the Middle East. BMW certification progressed smoothly. The Board Inspection and Testing Center actively strives for the right to formulate national and industry standards, and the two national standards have passed the approval of the National Standardization Committee. The grade of large bar produced by the special steel plant has been increased from the national standard group III to the national standard group I, and the surface quality qualification rate has been increased from 60% to over 96%. During the reporting period, the main performance driving factors were: innovative management model, management continued to be refined and efficient, and through strengthening the top-level design, the three major regulations of "production, equipment, and safety" were unified and standardized. The plate storage and transportation center firmly establishes the concept of "Management of materials is management of funds", adds "materials without dynamic increase in storage" data statistics, and accurately divides the material storage age structure. The board measurement and control center provides scientific data support for the company's decision-making through special measurement supervision and inspection and weighing equipment transformation. No significant change occurred during the reporting period. 8 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 II. Major Changes in Main Assets 1. Major Changes in Main Assets Main assets Notes to major changes The balance as of 30 June 2020 is RMB 256,930.87 thousand and it has increased by 40.1% compared to the beginning of the period, which is mainly Construction in progress due to the new construction of the company's construction projects in the current period. As of 30 June 2020, the ending balance of accounts receivable financing is Accounts receivable financing 438,212.29 thousand, and it has increased by 80.37% compared to the beginning of the period, which is mainly due to the increase in receiving notes receivable. 2. Main Information of Overseas Assets □ Applicable √ Not applicable III. Analysis on Core Competitiveness In the first half of 2020, Bengang Steel Plate Co., Ltd. and Wafangdian Bearing Co., Ltd., the Institute of Metal Research of the Chinese Academy of Sciences, Huazhong University of Science and Technology, Shenyang Institute of Automation, Chinese Academy of Sciences, Shanghai Jiaotong University, Jiangnan University and other units jointly applied for one key special item of the national key research and development plan "Manufacturing Basic Technology and Key Components" for 2020. The company and Northeastern University jointly applied for 2 NSFC-Liaoning joint fund projects of the Liaoning Provincial Department of Science and Technology, and received financial support of RMB 512,000. The company applied for 14 key enterprise technological innovation plans of the Liaoning Provincial Department of Industry and Information Technology in 2020. In order to comprehensively improve the level of technological innovation and product quality, and promote low-cost and green manufacturing technology, the company issued 40 company-level technology projects in 2020, and completed 29 projects in the first half of the year. In the first half of the year, six brands have passed the certification of Shenlong Automobile, and the hot-pressed steel PHS2000 has passed the certification of Great Wall Motor and AIWAYS. In the first half of the year, 15 brands of new products were successfully developed, and 8 of them were supplied in small quantities. In the first half of the year, a total of 86 patents were accepted by the State Intellectual Property Office, including 40 invention patents and 46 utility models. 46 patents were authorized by the State Intellectual Property Office, including 6 invention patents and 40 utility models. "Bengang Steel Plate Co., Ltd." was identified as one of the 14 units of "the first batch of high-value patent cultivation centers in Liaoning Province". The company won the first prize and the third prizes of the 2020 Metallurgical Science and Technology Awards. The highest strength hot stamping forming steel won the first prize of metallurgical science and technology for the first time which achieved a historic breakthrough of the company. 9 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 IV. Management Discussion and Analysis I. General In the first half of 2020, the company's overall performance was generally outstanding, production and management had a new improvement, and the reform tasks were solidly promoted. The main indicators achieved steady growth, including: 5.11 million tons of pig iron, an increase of 352.8 thousand tons, an increase of 7.41%; crude steel of 5.13 million tons, an increase of 259.8 thousand tons, an increase of 5.33%; hot rolled sheet of 5.87 million tons, a decrease of 232.1 thousand tons, a decrease of 3.8%; cold rolled sheet of 2.78 million tons, a decrease of 120.1 thousand tons, a decrease of 4.14%; special steel of 0.36 million tons, an increase of 130 thousand tons, an increase of 57.62%. During the reporting period, the company took "Overall Every Control and Clear" as the starting point, carefully organized special research, and took multiple measures to reduce costs. The output of some varieties and the records of daily and monthly production were continuously refreshed. A series of indicators have reached the best level in history. The quality of development has been significantly improved. Through the establishment of an all-round benchmarking management system, the coke ratio of plates into the furnace was 381kg in the first half of the year, which is the best level in history. The No. 7 caster of the plate steelmaking plant has realized the online narrowing function and the online width adjustment of the chamfering mold, reaching the domestic advanced level. The 2# pickling mill and silicon steel pickling mill set the best operating record in history. The plate scrap mill matched the material type reasonably, and the number of straight batching hoppers created the highest records in a single day and a single month, respectively. II. Main Business Analysis 1. General For relevant information please refer to “Management Discussion and Analysis 1. General”. Year-on-year changes in major financial data: Unit: Yuan Increase or decrease in Same period in This reporting period this reporting period over Reason for change previous year the previous year Operating Income 22,184,537,260.05 24,102,595,167.14 -7.96% Operating Cost 20,440,246,362.67 22,067,612,729.65 -7.37% Selling and 642,393,218.78 574,445,199.14 11.83% distribution expenses General and administrative 380,828,316.41 446,767,811.77 -14.76% expenses Financial expenses 355,036,640.40 403,465,706.42 -12.00% Due to the decrease of Income tax expense 9,237,815.08 25,962,181.73 -64.42% deferred income tax expenses during the 10 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 current period. Research & Due to the increase of Development 20,202,985.20 15,408,472.28 31.12% input in research and Expenses development. Net cash flows Due to the increase of generated from -151,475,707.08 984,787,005.67 -115.38% cash paid for operating operating activities activities. Net cash flow generated from -706,681,059.07 -545,199,197.41 29.62% investment activities Net cash flow Due to the increase of generated from -1,164,534,893.48 -451,444,368.47 157.96% net repayment. financing activities Due to the increase of cash paid for operating Net increase in cash -2,023,822,325.06 36,373,947.54 -5,663.93% activities and the and cash equivalents increase of net repayment. Whether the Company’s profit composition or source of profit during the reporting period changed significantly □ Applicable √ Not applicable The Company’s profit composition or source of profit during the reporting period did not change significantly. Breakdown of operating income: Unit: Yuan This reporting period Same period in previous year Increase or decrease in this Proportion in the Proportion in the reporting period Amount total operating Amount total operating over the previous income income year Total 22,184,537,260.05 100% 24,102,595,167.14 100% -7.96% By industries Industry 22,184,537,260.05 100.00% 24,102,595,167.14 100.00% -7.96% By products Steel plate 20,241,192,221.39 91.24% 22,258,028,765.53 92.35% -9.06% Billet Steel 310,652.98 0.00% Others 1,943,034,385.68 8.76% 1,844,566,401.61 7.65% 5.34% By region Northeast 7,575,795,193.58 34.15% 7,127,354,821.85 29.57% 6.29% North China 2,351,380,897.12 10.60% 2,740,664,946.06 11.37% -14.20% East China 8,731,546,106.40 39.36% 9,115,871,237.78 37.82% -4.22% Northwest 50,847,000.22 0.23% 52,280,532.42 0.22% -2.74% Central south 857,102,813.02 3.86% 999,070,769.35 4.15% -14.21% Export 2,617,865,249.71 11.80% 4,067,352,859.68 16.88% -35.64% Industry, product or region that accounts for more than 10% of the company's operating income or operating profit √ Applicable □ Not applicable The composition of main business: 11 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Unit: Yuan Operating income Operating cost Gross margin change over same change over same change over same Operating Income Operating Cost Gross margin period in previous period in previous period in previous year year year By industries Industry 22,184,537,260.05 20,440,246,362.67 7.86% -1.76% -1.79% 0.01% By products Steel plate 20,241,192,221.39 18,683,363,849.79 7.70% -9.06% -8.97% -0.09% Billet Steel 310,652.98 276,553.12 10.98% Others 1,943,034,385.68 1,756,605,959.76 9.59% 5.34% 13.81% -2.91% By regions Northeast 7,575,795,193.58 6,934,504,300.57 8.46% 6.29% 7.75% 0.78% North China 2,351,380,897.12 2,150,410,930.83 8.55% -14.20% -14.78% 0.62% East China 8,731,546,106.40 8,055,274,330.13 7.75% -4.22% -3.93% -0.28% Northwest 50,847,000.22 47,433,648.74 6.71% -2.74% -2.63% -0.11% Central south 857,102,813.02 801,137,376.55 6.53% -14.21% -13.71% -0.54% Export 2,617,865,249.71 2,451,485,775.85 6.36% -35.64% -34.57% -1.53% Subtotal 22,184,537,260.05 20,440,246,362.67 7.86% -7.96% -7.37% 0.01% 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 Notes to data changed more than 30% over the last period □ Applicable √ Not applicable III. Analysis of Non-core Business √ Applicable □ Not applicable Unit: Yuan Proportion in total Amount Explanation of cause Sustainable (yes or no) profit Income on investment 29,304.00 0.01% Assets disposal gains -15,321,598.62 -5.77% No Non-operating income 1,140,364.12 0.43% No Non-operating expenses 20,035,471.42 7.54% No IV. Assets and Liabilities 1. Significant Change of Assets Components Unit: Yuan At the end of this reporting At the end of the Same period Proportion Notes to significant changes period in previous year 12 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Proportio Proportio change n in the n in the Amount Amount total total assets assets Cash at bank and 16,788,479,305.93 26.77% 18,415,844,397.77 30.32% -3.55% on hand Accounts 234,795,887.35 0.37% 235,696,265.66 0.39% -0.02% receivable Inventories 9,586,039,375.52 15.29% 7,700,397,685.61 12.68% 2.61% Long-term equity 2,672,302.70 0.00% 2,642,998.70 0.00% 0.00% investments Fixed assets 24,952,427,383.86 39.79% 26,123,375,492.40 43.01% -3.22% Construction in 2,569,308,708.27 4.10% 1,833,853,572.58 3.02% 1.08% progress Short-term loans 12,506,705,000.00 19.94% 13,151,478,000.00 21.66% -1.72% Long-term loans 3,810,463,934.18 6.08% 4,849,675,910.73 7.99% -1.91% 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 2,429,542,461 1,952,579,4 4,382,121,9 investments .88 88.09 49.97 4.Other equity 1,041,824,829 1,042,024,8 instrument 200,000.00 .00 29.00 investments Subtotal of 3,471,367,290 1,952,779,4 5,423,946,7 financial .88 88.09 78.97 assets 3,471,367,290 1,952,779,4 5,423,946,7 Total .88 88.09 78.97 Financial 0.00 0.00 liabilities 3. Restricted Assets by the End of the Period Book value at the end of this Items Reason of restriction reporting period Cash at bank and on hand 5,370,886,642.41 Deposit for notes and L/C Accounts receivable financing 759,753,834.45 Pledged for acceptance bills Other equity instrument investment 1,037,735,849.00 Pledged for loans Total 7,168,376,325.86 13 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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. Financial assets measured at fair value □ Applicable √ Not applicable 5. Investment of Financial Assets (1) Investment in Securities □ Applicable √ Not applicable There is no investment in securities during the reporting period. (2) Investment in Derivatives □ Applicable √ Not applicable There is no investment in derivatives during the reporting period. VI. Significant Assets and Equity Sold in Reporting Period 1. Significant Assets Sold □ Applicable √ Not applicable 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 Company Main Registered Operating Total assets Net assets Turnover Net Profit Name type business capital profit Bengang Puxiang Processing 1,920,000,000 5,768,553,041 2,009,690,896 3,720,975,482 10,280,800. Cool Subsidiary and sales of 7,704,734.61 .00 .57 .59 .91 04 Rolling steel Steel Sheet 14 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Co., Ltd. Acquirement and disposal of subsidiaries during the reporting period □ Applicable √ Not applicable Illustration of main joint-stock companies None. VIII. Structured Entities controlled by the Company □ Applicable √ Not applicable IX. Forecast of operating performance for January to September 2020 Warning and reason for that forecast of the cumulative net profit from the beginning of the year to the end of the next reporting period might be a loss or due to significant change compared to the previous year □ Applicable √ Not applicable X. Risks and countermeasures for the Company 1. Marketing risk Risks: The market demand of the steel industry is uncertain, and there will still be risks of market fluctuations in the future, such as policy orientation and changes in supply and demand. In addition, COVID-19 has spread globally, causing damage to the global industrial chain, or triggering turbulence in the international steel market, which may adversely affect the company's user demand, raw material supply, and steel product exports. Countermeasures: The company should pay close attention to the international and domestic situation and adjust its business strategy in a timely manner based on the actual situation. The company should improve its ability to purchase resources in the international market to ensure a stable supply of raw materials and fuels, strengthen sales-side market research and judgment, adjust production in a timely manner, and ensure smooth product sales and timely delivery of orders. The company should accelerate independent innovation, improve product quality, and enhance their market competitiveness. 2. Environmental protection risk Risks: As the country pays more and more attention to environmental protection issues in the iron and steel industry, it will further strengthen the environmental protection supervision of relevant enterprises, and the environmental protection standards will continue to increase. Iron and steel enterprises are facing greater environmental pressure. Countermeasures: The company will continue to improve the level of environmental management, increase internal environmental protection supervision and inspection, and strengthen the implementation of environmental responsibilities. The company will strengthen the efficient recycling of energy, keep environmental protection facilities in good operation, and focus on the control of wastewater, waste gas and waste residues generated in the production process, and comprehensive control of pollution. The company will continue to increase investment in environmental protection, realize clean production, make the enterprise harmonious and unify with nature and society, and realize sustainable development. 15 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 3. Raw fuel cost fluctuation risk Risks: The bulk raw fuels such as iron ore and coal required for steel production account for a relatively large part of the cost. Fluctuations in the price of raw materials and fuels in the future may have a greater impact on the company's operating costs and affect the company's profitability to a certain extent. Countermeasures: The company will further strengthen procurement management, keep abreast of raw and fuel market information, adjust procurement strategies in a timely manner, and reduce procurement costs. While taking advantage of its own mines, the company should establish stable supply channels, strengthen cooperation with suppliers, and improve its ability to respond to fluctuations in raw material and fuel prices. 16 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 V. Important Events I. Annual General Meeting of Shareholders and Temporary General Meeting of Shareholders held during the Reporting Period 1. General meeting of shareholders during the reporting period Investors’ Meeting session Meeting type Date of convening Date of disclosure Disclosure index participation ratio The annual general Annual general Announcement No.: 76.79% 21 May 2020 22 May 2020 meeting of 2019 meeting 2020-030 2. Temporary general meeting Request by preferred stockholders whose voting rights restore □ 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 during the reporting period. III. 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 Commitment made in the acquisition report or the equity change report Commitment made during asset restructuring According to the relevant regulations of Company the China Securities Commitment made during directors, Other Regulatory Commission, May 22, 2019 Long term Under normal initial public offering or senior commitment all directors and senior fulfillment refinancing management management of the Company have made the following commitments 17 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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 benefits to other units or individuals without compensation or under 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 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 18 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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 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 Bengang Steel plates in the same region guarantee independent personnel, independent business, independent Benxi Steel & finance, and independent Iron (Group) assets, and are Co., Ltd. and Other guaranteed not to be in Under normal Bengang Commitment the same registration July 24,2019 Long term fulfillment Group Co., place or in the same Ltd. 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 19 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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 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 20 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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 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 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 21 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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, 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 avoid inter-industry competition 1. During the period when the The company Group is the controlling has completed shareholder of Bengang the acquisition Steel Plates, in addition of the to the matters listed in 2300mm hot Article 1 of this rolling mill Commitment Letter, the production Group and other line, and the Benxi Steel & Other enterprises controlled by July 24,2019 industry Iron (Group) Long term Commitment the Group other than competition Co., Ltd. Bengang Steel Plates no problem has longer produce or been develop any products completely that compete or may resolved. compete with the Other products produced by commitments Bengang Steel Plates and continue to be its subsidiaries at home fulfilled and abroad, and do not directly or indirectly operate any business that competes with Bengang Steel Plates and its subsidiaries. Businesses that may constitute 22 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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. 3. If the Group has any business opportunities to engage in or participate in the competition with Bengang Steel Plates’ 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 endeavor 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 23 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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 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 shareholders, Benxi Iron and Steel (Group) Co., Ltd. and Bengang Group Co., Ltd. have issued the following commitments: "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 shareholder of Bengang Benxi Steel & Steel Plates Co., Ltd. Iron (Group) (hereinafter referred to Co., Ltd. and Other as "Bengang Steel July 24,2019 Under normal Long term Bengang Commitment Plates"), in order to fulfillment Group Co., protect the interests of Ltd. 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’ business, asset integrity and personnel Independence and financial independence to avoid and reduce unnecessary related transactions; the Group 24 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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 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 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 25 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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 IV. Appointment and Dismiss of Certified Accountant’s Firm Is the semi-annual financial report audited? □ Yes √ No The semi-annual report has not been audited. V. Illustrations of the Board of Directors and Supervisory Committee on the Modified Audit Report Issued by the CPAs □ Applicable √ Not applicable VI. Illustrations of the Board of Directors on the Modified Audit Report Issued by the CPAs for Previous Reporting Period □ Applicable √ Not applicable Ⅶ. Bankrupt and Reforming Events □ Applicable √ Not applicable There was no bankrupt and reforming event during the reporting period. VIII. Lawsuits and Arbitrations Significant lawsuits and arbitrations □ Applicable √ Not applicable There is no Significant lawsuits and arbitrations during the reporting period. Other Lawsuits and Arbitrations 26 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 □ Applicable √ Not applicable IX. Media questioning □ Applicable √ Not applicable There is no media questioning issues during the reporting period. X. Punishment and Rectification □ Applicable √ Not applicable There was no punishment or rectification during the reporting period. XI. Credit Status of the Company and its Controlling Shareholders and Actual Controllers □ Applicable √ Not applicable XII. Implementation Situation of Stock Incentive Plan of the Company, Employee Stock Ownership Plan or Other Employee Incentive Measures □ Applicable √ Not applicable There was no stock incentive plan, employee stock ownership plan or other employee incentives that have been implemented. XIII. Major Related Party Transactions 1. Related party transactions relevant to daily operations √ Applicable □ Not applicable 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 15,947. ng to 2019/4/ Iron Compan goods payable agreeme agree 0.32% 50,000 No No 21 the 24 (Group) y and for repair nt ment agreeme Co., Ltd. services price nt Execute Benxi Purchas Relate 0 accordi Steel & Parent e of On d . Land 3,261.1 ng to 2019/4/ Iron Compan goods agreeme agree 0 No No lease fee 5 the 24 (Group) y and nt ment 7 agreeme Co., Ltd. services price % nt Bengang Execute Purchas Relate Cold- accordi Same e of On d rolled ng to 2019/4/ controll goods Products agreeme agree 7.95 0.00% 500 No Yes Stainless er the 24 and nt ment Steel agreeme services price Dandong nt 27 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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) Co., Ltd. Benxi Execute Purchas Relate Steel & accordi Same e of On d Iron ng to 2019/4/ controll goods Labor cost agreeme agree 361.1 0.01% No Yes (Group) the 24 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 280,270 ng to 2019/4/ controll goods agreeme agree 5.70% 650,000 No Yes (Group) suppleme .14 the 24 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 ng to 2019/4/ controll goods Freight agreeme agree 87.47 0.00% No Yes (Group) the 24 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 14,869. ng to 2019/4/ controll goods agreeme agree 0.30% 40,000 No Yes Metallurg suppleme 84 the 24 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 2019/4/ controll goods agreeme agree 23.81 0.00% 300 No No Iron g fee the 24 er and nt ment Process agreeme services price and nt Logistics Co., Ltd. Benxi Steel & Execute Iron Purchas Relate accordi (Group) Same e of On d Raw ng to 2019/4/ Real- controll goods agreeme agree 0.00% 10,000 No Yes materials the 24 estate er and nt ment agreeme Develop services price nt ment Co., Ltd. Benxi Execute Steel & Purchas Relate accordi Iron Same e of On d Spare 2,296.7 ng to 2019/4/ (Group) controll goods parts agreeme agree 3 0.05% 25,000 No the Yes 24 Machiner er and nt ment agreeme y services price nt Manufact 28 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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) ure Co., Ltd. Benxi Steel & Execute Iron Purchas Relate accordi (Group) Same e of On d Repair ng to 2019/4/ Machiner controll goods agreeme agree 330.54 0.01% No No services the 24 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 2019/4/ (Group) controll goods agreeme agree 19.75 0.00% No Yes parts the 24 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 7,490.5 ng to 2019/4/ (Group) controll goods agreeme agree 0.15% 50,000 No No fee 9 the 24 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 3,660.0 ng to 2019/4/ (Group) controll goods agreeme agree 0.07% No No services 9 the 24 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 2019/4/ (Group) controll goods agreeme agree 367.31 0.01% No Yes suppleme the 24 Construct er and nt ment ntary agreeme ion Co., services price material nt Ltd. Benxi Execute Steel & Purchas Relate accordi Iron Same e of On d ng to 2019/4/ (Group) controll goods Freight agreeme agree 87.94 0.00% No No the 24 Construct er and nt ment agreeme ion Co., services price nt Ltd. Benxi Execute Steel & Purchas Relate accordi Iron Same e of On d Spare 2,568.9 ng to 2019/4/ (Group) controll goods parts agreeme agree 0 0.05% No the Yes 24 Industrial er and nt ment agreeme Develop services price nt ment Co., 29 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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) Ltd. Benxi Steel & Raw Execute Purchas Relate Iron material accordi Same e of On d (Group) and 5,906.0 ng to 2019/4/ controll goods agreeme agree 0.12% 30,000 No Yes Industrial suppleme 2 the 24 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 ng to 2019/4/ controll goods agreeme agree 790.53 0.02% No No Industrial services the 24 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 2019/4/ controll goods Freight agreeme agree 188.69 0.00% No No Industrial the 24 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 2019/4/ controll goods agreeme agree 332 0.01% No No Industrial fee the 24 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 2019/4/ controll goods agreeme agree 128.19 0.00% No Yes Construct ntary the 24 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 ng to 2019/4/ controll goods agreeme agree 2992.87 0.06% 35000 No No Construct fee the 24 er and nt ment ion and agreeme services price Repairing nt Co., Ltd. Benxi Same Purchas Accounts On Relate Execute Steel & e of 2,673.0 2019/4/ controll payable agreeme d 0.05% No accordi No Iron goods for repair nt agree 4 ng to 24 er (Group) and ment the 30 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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) Construct services price agreeme ion and nt Repairing Co., Ltd. Raw Execute Purchas Relate Bengang material accordi Same e of On d Electronic and 6,886.4 ng to 2019/4/ controll goods agreeme agree 0.14% 20,000 No Yes s and Gas suppleme 0 the 24 er and nt ment Co., Ltd. ntary agreeme services price material nt Execute Purchas Relate Bengang accordi Same e of On d Electronic Repair ng to 2019/4/ controll goods agreeme agree 1168.35 0.02% No No s and Gas services the 24 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 2019/4/ Tools controll goods agreeme agree 6.22 0.00% 500 No Yes parts the 24 Manufact er and nt ment agreeme ure Co., services price nt Ltd. Benxi Execute Purchas Relate New accordi Same e of Labour On d Career ng to 2019/4/ controll goods protection agreeme agree 22.45 0.00% No No Develop the 24 er and fee 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 2019/4/ controll goods suppleme agreeme agree 107.92 0.00% 1800 No Yes Develop the 24 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 ng to 2019/4/ y controll goods agreeme agree 117.57 0.00% 1,500 No Yes parts the 24 Technicia er and nt ment agreeme n College services price nt Bengang Group Execute Purchas Relate Internatio accordi Same e of On d nal Agency 3,067.8 ng to 2019/4/ controll goods agreeme agree 0.06% No No Economic fee 2 the 24 er and nt ment and agreeme services price Trading nt Co., Ltd. Bengang Same Purchas Port On Relate 5,381.2 Execute 2019/4/ Group controll e of agreeme d 0.11% 25,000 No accordi No surcharges 4 24 Internatio er goods nt agree ng to 31 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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) nal and ment the Economic services price agreeme and nt Trading Co., Ltd. Benxi Steel & Execute Iron Purchas Relate accordi (Group) Same e of On d Spare ng to 2019/4/ Informati controll goods agreeme agree 285.13 0.01% No Yes parts the 24 on and er and nt ment agreeme Automati services price nt c Tech Co., Ltd. Benxi Steel & Execute Iron Purchas Relate accordi (Group) Same e of On d Project 1,368.2 ng to 2019/4/ Informati controll goods agreeme agree 0.03% 10,000 No No fee 4 the 24 on and er and nt ment agreeme Automati services price nt c Tech Co., Ltd. Benxi Steel & Execute Iron Purchas Relate accordi (Group) Same e of On d Heating ng to 2019/4/ Thermal controll goods agreeme agree 18.98 0.00% No No costs the 24 Power er and nt ment agreeme Develop services price nt ment Co., Ltd. Benxi Steel & Raw Execute Iron Purchas Relate material accordi (Group) Same e of On d and ng to 2019/4/ Thermal controll goods agreeme agree 55 0.00% 500 No Yes suppleme the 24 Power er and nt ment ntary agreeme Develop services price material nt ment Co., Ltd. Benxi Execute Purchas Relate Steel & accordi Same e of On d Iron Design ng to 2019/4/ controll goods agreeme agree 28.77 0.00% 2,000 No No (Group) fees the 24 er and nt ment Designing agreeme services price Institute nt Benxi Raw Execute Purchas Relate Beiying material accordi Same e of On d Steel & and 466,858 1,550,0 ng to 2019/4/ controll goods agreeme agree 9.49% No Yes Iron suppleme .50 00 the 24 er and nt ment (Group) ntary agreeme services price Co., Ltd. material nt 32 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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 Execute Purchas Relate Beiying accordi Same e of On d Steel & Energy & 21,856. ng to 2019/4/ controll goods agreeme agree 0.44% No Yes Iron Power 41 the 24 er and nt ment (Group) agreeme services price Co., Ltd. nt Benxi Execute Purchas Relate Beiying accordi Same e of On d Steel & ng to 2019/4/ controll goods Freight agreeme agree 166.79 0.00% No No Iron the 24 er and nt ment (Group) agreeme services price Co., Ltd. nt Benxi Execute Purchas Relate Beiying accordi Same e of On d Steel & 2,016.3 ng to 2019/4/ controll goods Labor cost agreeme agree 0.04% No No Iron 5 the 24 er and nt ment (Group) agreeme services price Co., Ltd. nt Benxi Execute Purchas Relate Beiying accordi Same e of On d Steel & Spare ng to 2019/4/ controll goods agreeme agree 897.66 0.02% No Yes Iron parts the 24 er and nt ment (Group) agreeme services price Co., Ltd. nt Liaoning Hengtong Execute Metallurg Purchas Relate Raw accordi ical Same e of On d material 5,120.0 ng to 2019/4/ Equipmen controll goods agreeme agree 0.10% 15,000 No Yes and spare 5 the 24 t er and nt ment parts agreeme Manufact services price nt ure Co., Ltd. Liaoning Execute Purchas Relate Hengtai Raw accordi Same e of On d Heavy material ng to 2019/4/ controll goods agreeme agree 43.48 0.00% No Yes Machiner and spare the 24 er and nt ment y Co., parts agreeme services price Ltd. nt Liaoning Execute Purchas Relate Hengtai accordi Same e of Repair On d Heavy ng to 2019/4/ controll goods and labor agreeme agree 509.57 0.01% 8,000 No No Machiner the 24 er and cost nt ment y Co., agreeme services price Ltd. nt Execute Purchas Relate accordi Bengang e of On d Controll House ng to 2019/4/ Group goods agreeme agree 37.61 0.00% 20000 No No er rental fee the 24 Co., Ltd. and nt ment agreeme services price nt Bengang Purchas Property On Relate 0.00% No Execute No Controll 2019/4/ Group e of managem agreeme d accordi 33 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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) Co., Ltd. er goods ent fee nt agree ng to 24 and ment the services price agreeme nt Execute Relate Bengang Sales of accordi Same On d Electronic goods Energy & ng to 2019/4/ controll agreeme agree 38.1 0.00% 500 No Yes s and Gas and Power the 24 er nt ment Co., Ltd. services agreeme price nt Raw Benxi material Execute Relate Beiying Sales of & accordi Same On d Steel & goods suppleme 135,340 ng to 2019/4/ controll agreeme agree 2.57% 300,000 No Yes Iron and ntary .23 the 24 er nt ment (Group) services materials agreeme price Co., Ltd. & spare nt parts Benxi Execute Relate Beiying Sales of accordi Same On d Steel & goods ng to 2019/4/ controll Products agreeme agree 1271.42 0.02% No Yes Iron and the 24 er nt ment (Group) services agreeme price Co., Ltd. nt Benxi Execute Relate Beiying Sales of accordi Same On d Steel & goods Energy & 6,882.6 ng to 2019/4/ controll agreeme agree 0.13% No Yes Iron and Power 5 the 24 er nt ment (Group) services agreeme price Co., Ltd. nt Benxi Steel & Execute Iron Relate Sales of accordi (Group) Same On d goods Energy & ng to 2019/4/ Real- controll agreeme agree 6.25 0.00% 500 No Yes and Power the 24 estate er nt ment services agreeme Develop price nt ment Co., Ltd. Benxi Steel & Iron Execute Relate (Group) Sales of accordi Same On d Steel & goods Energy & ng to 2019/4/ controll agreeme agree 20.39 0.00% 500 No Yes Iron and Power the 24 er nt ment Process services agreeme price and nt Logistics Co., Ltd. Benxi Sales of Relate Execute Same On Steel & goods 2019/4/ controll Products agreeme d 1014.55 0.02% No accordi Yes Iron and agree ng to 24 er nt (Group) services ment the 34 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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 price agreeme y nt Manufact ure Co., Ltd. Benxi Steel & Execute Iron Relate Sales of accordi (Group) Same On d goods Energy & ng to 2019/4/ Machiner controll agreeme agree 1216.43 0.02% 8000 No Yes and Power the 24 y er nt ment services agreeme Manufact price nt ure Co., Ltd. Benxi Raw Steel & material Execute Iron Relate Sales of & accordi (Group) Same On d goods suppleme ng to 2019/4/ Machiner controll agreeme agree 139.52 0.00% No Yes and ntary the 24 y er nt ment services materials agreeme Manufact price & spare nt ure Co., parts Ltd. Benxi Execute Steel & Relate Sales of accordi Iron Same On d goods Energy & ng to 2019/4/ (Group) controll agreeme agree 335.07 0.01% 10,000 No Yes and Power the 24 Construct er nt ment services agreeme ion Co., price nt Ltd. Raw Benxi material Execute Steel & Relate Sales of & accordi Iron Same On d goods suppleme ng to 2019/4/ (Group) controll agreeme agree 15.12 0.00% No Yes and ntary the 24 Construct er nt ment services materials agreeme ion Co., price & spare nt Ltd. parts Benxi Execute Relate Steel & Sales of accordi Same On d Iron goods Energy & 33,585. ng to 2019/4/ controll agreeme agree 0.64% 100,000 No Yes (Group) and Power 45 the 24 er nt ment Mining services agreeme price Co., Ltd. nt Raw Benxi material Execute Relate Steel & Sales of & accordi Same On d Iron goods suppleme ng to 2019/4/ controll agreeme agree 512.75 0.01% No Yes (Group) and ntary the 24 er nt ment Mining services materials agreeme price Co., Ltd. & spare nt parts Benxi Same Sales of Freight On Relate 497.33 0.01% No Execute No 2019/4/ 35 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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) Steel & controll goods revenue agreeme d accordi 24 Iron er and nt agree ng to (Group) services ment the Mining price agreeme Co., Ltd. nt Benxi Steel & Execute Iron Relate Sales of accordi (Group) Same On d goods Energy & 2,264.6 ng to 2019/4/ Thermal controll agreeme agree 0.04% 8,000 No Yes and Power 5 the 24 Power er nt ment services agreeme Develop price nt ment Co., Ltd. Benxi Raw Steel & material Execute Iron Relate Sales of & accordi (Group) Same On d goods suppleme ng to 2019/4/ Thermal controll agreeme agree 682.22 0.01% No Yes and ntary the 24 Power er nt ment services materials agreeme Develop price & spare nt ment Co., parts Ltd. Benxi Steel & Execute Iron Relate Sales of accordi (Group) Same On d goods Freight ng to 2019/4/ Thermal controll agreeme agree 0.00% No No and revenue the 24 Power er nt ment services agreeme Develop price nt ment Co., Ltd. Benxi Steel & Execute Relate Iron Sales of accordi Same On d (Group) goods Energy & ng to 2019/4/ controll agreeme agree 409.62 0.01% No Yes Industrial and Power the 24 er nt ment Develop services agreeme price ment Co., nt Ltd. Benxi Steel & Execute Relate Iron Sales of accordi Same On d (Group) goods ng to 2019/4/ controll Products agreeme agree 912.1 0.02% No Yes Industrial and the 24 er nt ment Develop services agreeme price ment Co., nt Ltd. Benxi Raw Relate Sales of Execute Steel & Same material On d goods accordi 2019/4/ Iron controll & agreeme agree 936.7 0.02% 5000 No Yes and ng to 24 (Group) er suppleme nt ment services the Industrial ntary price agreeme Develop materials 36 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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., & spare nt Ltd. parts Benxi Steel & Execute Iron Relate Sales of accordi (Group) Same On d goods Energy & ng to 2019/4/ Informati controll agreeme agree 11.69 0.00% 300 No Yes and Power the 24 on and er nt ment services agreeme Automati price nt c Tech Co., Ltd. Benxi Steel & Execute Relate Iron Sales of accordi Same On d (Group) goods Energy & ng to 2019/4/ controll agreeme agree 66.6 0.00% 8,000 No Yes Construct and Power the 24 er nt ment ion and services agreeme price Repairing nt Co., Ltd. Benxi Raw Steel & material Execute Relate Iron Sales of & accordi Same On d (Group) goods suppleme ng to 2019/4/ controll agreeme agree 0.00% No Yes Construct and ntary the 24 er nt ment ion and services materials agreeme price Repairing & spare nt Co., Ltd. parts Benxi Steel & Execute Relate Iron Sales of accordi Same On d (Group) goods Energy & ng to 2019/4/ controll agreeme agree 105.91 0.00% No Yes Metallurg and Power the 24 er nt ment y services agreeme price Residues nt Co., Ltd. Benxi Raw Steel & material Execute Relate Iron Sales of & accordi Same On d (Group) goods suppleme 13,364. ng to 2019/4/ controll agreeme agree 0.25% 30000 No Yes Metallurg and ntary 82 the 24 er nt ment y services materials agreeme price Residues & spare nt Co., Ltd. parts Benxi Steel & Execute Relate Iron Sales of accordi Same On d (Group) goods Freight ng to 2019/4/ controll agreeme agree 0.00% No No Metallurg and revenue the 24 er nt ment y services agreeme price Residues nt Co., Ltd. Benxi Parent Sales of Energy & On Relate 430.55 0.01% 2000 No Execute Yes 2019/4/ Steel & Compan goods Power agreeme d accordi 24 37 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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 y and nt agree ng to (Group) services ment the Co., Ltd. price agreeme nt Raw material Execute Benxi Relate Sales of & accordi Steel & Parent On d goods suppleme ng to 2019/4/ Iron Compan agreeme agree 308.79 0.01% No Yes and ntary the 24 (Group) y nt ment services materials agreeme Co., Ltd. price & spare nt parts Benxi Execute Relate New Sales of accordi Same On d Career goods Energy & ng to 2019/4/ controll agreeme agree 381.86 0.01% 500 No Yes Develop and Power the 24 er nt ment ment Co., services agreeme price Ltd. nt Execute Dalian Relate Sales of accordi Boluole Same On d goods ng to 2019/4/ Steel controll Products agreeme agree 279.34 0.01% 1,000 No Yes and the 24 Tube Co., er nt ment services agreeme Ltd. price nt Liaoning Execute Relate Bengang Sales of accordi Same On d Steel & goods ng to 2019/4/ controll Products agreeme agree 0.00% No Yes Iron and the 24 er nt ment Trading services agreeme price Co., Ltd. nt Benxi Execute Relate Steel & Sales of accordi Same On d Iron goods Energy & ng to 2019/4/ controll agreeme agree 1.06 0.00% 50 No Yes (Group) and Power the 24 er nt ment General services agreeme price Hospital nt Benxi Steel & Execute Iron Relate Sales of accordi (Group) Same On d goods Energy & ng to 2019/4/ Zhengtai controll agreeme agree 3.2 0.00% 500 No Yes and Power the 24 Construct er nt ment services agreeme ion price nt Materials Co., Ltd. Liaoning Hengtong Execute Relate Metallurg Same Sales of accordi On d ical goods Energy & ng to 2019/4/ controll agreeme agree 0.00% No Yes Equipmen er and Power the 24 nt ment t services agreeme price Manufact nt ure Co., 38 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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) Ltd. Liaoning Raw Hengtong material Execute Metallurg Relate Sales of & accordi ical Same On d goods suppleme ng to 2019/4/ Equipmen controll agreeme agree 493.65 0.01% 5000 No Yes and ntary the 24 t er nt ment services materials agreeme Manufact price & spare nt ure Co., parts Ltd. Liaoning Hengtong Execute Metallurg Relate Sales of accordi ical Same On d goods ng to 2019/4/ Equipmen controll Products agreeme agree 0.00% No Yes and the 24 t er nt ment services agreeme Manufact price nt ure Co., Ltd. Bengang Execute Cold- Relate Sales of accordi rolled Same On d goods ng to 2019/4/ Stainless controll Products agreeme agree 736.33 0.01% 50000 No Yes and the 24 Steel er nt ment services agreeme Dandong price nt Co., Ltd. Execute Relate Suzhou Sales of accordi Same On d Bengang goods 19,082. ng to 2019/4/ controll Products agreeme agree 0.36% 65,000 No Yes Industrial and 32 the 24 er nt ment Co., Ltd. services agreeme price nt Execute Relate Bengang Sales of accordi Same On d Group goods Energy & ng to 2019/4/ controll agreeme agree 0.65 0.00% 50 No Yes Finance and Power the 24 er nt ment Co., Ltd. services agreeme price nt Execute Relate Sales of accordi Bengang On d Controll goods Energy & ng to 2019/4/ Group agreeme agree 8.82 0.00% 500 No Yes er and Power the 24 Co., Ltd. nt ment services agreeme price nt 1,082,0 3,140,5 Total -- -- -- -- -- -- -- -- 38.51 00 Details of any sales return of a large N/A amount Give the actual situation during the reporting period where a forecast had been made for the total amounts of N/A routine related-party transactions,by 39 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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) type to occur in the current period(if any) Reason for any significant difference between the transaction price and the N/A 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 related credits and debts during the reporting period. 5. Other significant related transactions □ Applicable √ Not applicable There was no other significant related transaction during the reporting period. XIV. Non-operating capital occupation of listed companies by controlling shareholders and their related parties □ Applicable √ Not applicable There was no non-operating capital occupation of listed companies by controlling shareholders and their related parties during the reporting period. XV. Major Contracts and Performance 1. Trusteeship, contracting, and leasing matters (1) Trusteeship □ Applicable √ Not applicable There was no trusteeship during the reporting period. 40 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 (2) Contracting □ Applicable √ Not applicable There was no contracting during the reporting period. (3) Lease □ Applicable √ Not applicable There was no lease during the reporting period. 2. Major Guarantee □ Applicable √ Not applicable There was no guarantee during the reporting period. 3. Entrusted Finance □ Applicable √ Not applicable There was no other entrusted finance during the reporting period. 4. Other Major Contracts □ Applicable √ Not applicable There was no other major contract during the reporting period. XVI. Social Responsibilities 1. 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 number Emission The Approved Surpass the pollutants Discharge distribution Total Name of discharge concentratio emission total emission and specific modes of discharge emission hatch n standard emission standard pollutants hatch Energy integral Bengang Unapproved factory Steel Plates COD Continuous 1 Sewage 24 Sewage 50 110 tons by the None sewage Co., Ltd. government treatment plant. Energy integral Bengang Unapproved factory Steel Plates NH3-N Continuous 1 0.82 8 5.4 tons by the None sewage Co., Ltd. government treatment plant. Bengang Continuous Raw Raw Raw Unapproved Particulate Steel Plates Matter and 178 material materials material 25; 6286 tons by the Co., Ltd. intermittent dumper, 14-23; Sintering government 41 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 transfer Sintering 8- 50-30; station, 40; Ironmaking mine pit, Ironmaking 25; pre-mixing; 7-35; Steelmaking ironmaking Steelmaking 20-50; iron and 7-27; Special steel field, Special steel 20; furnace top, steel 7-15; Coking 20- fuel, Coking 20- 50; Power solvent, 30; Power generation whole grain, generation 30; Cold ore coke 5-10; Cold rolling 20; tank, rolling; 6- Hot rolling sintering 18 Hot 20. head dust rolling 6-15. removal, desulfurizati on, machine tail dust removal; steelmaking water pretreatmen t, iron alloy feeding , North-South inverted irrigation stations, primary dust removal, secondary dust removal, refining and dust removal; special steel furnace, refining furnace; coking coal, pushing coke, dry quenching, chimney desulfurizati on and denitrificati on; power boiler dust removal, desulfurizati on and denitrificati on; cold- rolling acid regeneration , pickling, pulling straightenin g, welding machine, leveling, annealing, roasting; 42 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 hot-rolling heating furnace. Ironmaking Sintering sintering machine Sintering head; power head 12-40; head 200; generation power power Bengang Continuous Unapproved boiler; cold generation generation 3033.86 Steel Plates SO and 64 by the rolling 10-70; cold 100-200; tons Co., Ltd. intermittent government roasting, rolling 80- cold rolling annealing; 74-141; hot 150; hot hot rolling rolling 95- rolling 150. furnace. 147. Ironmaking sintering Sintering Sintering head; power head 110- head 300; generation 230; power power Bengang Continuous boiler; cold generation Unapproved Oxides of generation 6181.68 Steel Plates and 57 rolling 50-140; by the nitrogen 100-200; tons Co., Ltd. intermittent roasting, cold rolling government cold rolling annealing; 69-172; hot 300; hot hot rolling rolling 105- rolling 300. furnace. 124. furnace. Construction and operation of pollution prevention facility: The Company has 178 sets of environmental pollution prevention and control facilities, and each process is equipped with dust removal, desulfurization and denitrification, and online facilities in accordance with pollutant emission standards. Wet desulfurization of sintering machine head, dry desulfurization and denitrification of coke oven chimney, wet desulfurization and SCR denitrification of power generation, etc., and environmental protection facilities have been put into use normally. Environmental Impact Assessment and Other Environmental Protection Administrative Licensing of Construction Projects: 1. The energy integral factory's reclaimed water treatment and reuse project obtained environmental assessment approval documents: (Ben-Huan -Biao-Zi [2020] No. 03, March 31, 2020) 2. The special steel rolling mill renovation project of the Company (Phase II and Phase III) obtained the environmental assessment approval document: (Ben-Huan-Jian-Biao-Zi [2020] No. 05, April 20, 2020); 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 43 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Incidents of Enterprises and Institutions" Existing laws and regulations such as the Administrative Measures (Trial). At the same time, all units formulate drill plans, carry out and complete corresponding drills in accordance with the plan, and will continue to gradually carry out the remaining emergency plan drills in the second half of the year. Environmental self-monitoring project. In 2020, the self-monitoring plan was carried out in accordance with the requirements of the pollutant discharge permit. The monitoring points of Benxi Steel pollution sources: 168 flue gas, 10 wastewater monitoring points, 13 noise points at the boundary of the plant, 27 atmospheric dust fall points, and newly added unorganized monitoring. The number of points is 71. From the Company’s factory to mines, the monitoring is divided into weekly, monthly, seasonal, semi-annual and annual frequency monitoring. 27 steel dust points were distributed in the Company’s area, and 162 monitoring data were obtained; routine monitoring tasks for flue gas were completed, and 424 monitoring data was achieved throughout the half yea; 13 noise monitoring points at the boundary of the plant, acquiring 208 monitoring data; 10 wastewater monitoring points, acquiring 1945 monitoring data; 111 temporary monitoring data, and a total of 2850 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 2. Performing corporation social responsibility of targeted poverty alleviation During the current reporting period, there has been no accurate poverty alleviation work, and there is no follow-up accurate poverty alleviation plan. XVII. Other Major Issues □ Applicable √ Not applicable There was no need for illustrating other major issue. XVIII. Major Issues of Subsidiaries □ Applicable √ Not applicable 44 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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 Issuing ation of Percenta Bonus Percenta Quantity of new common Others Subtotal Quantity ge shares ge share reserve fund II. Non-restricted 3,875,371,532 100.00% 3,875,371,532 100.00% Shares 1. Common shares 3,475,371,532 89.68% 3,475,371,532 89.68% in RMB 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 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 45 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 II. Securities Issuance and Listing □ Applicable √ Not applicable III. Total Number of shareholders and shareholding Unit: Shares The total number of Total number of common shareholders preferred shareholders 0 54,074 voting rights restored at at the end of the reporting period the end of the reporting period (See Notes 8) 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 712,545,000 62.11% 2,407,002,394 25,897,300 2,407,002,394 (Group) Co., Ltd. legal person Frozen 102,100,000 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 Liaoning Provincial Transportation State-owned 4.74% 183,785,283 -934,100 183,785,283 Investment Group legal person Co., Ltd. Fang Lei Domestic 0.36% 14,126,600 1,086,890 14,126,600 natural person Fang Huaiyue Domestic 0.24% 9,205,501 7,718,901 9,205,501 natural person Zhang Peng Domestic 0.21% 8,287,900 8,287,900 8,287,900 natural person VANGUARD EMERGING Overseas legal 0.21% 8,157,311 8,157,311 MARKETS STOCK person INDEX FUND Chen Jinhong Domestic 0.18% 7,120,375 244,000 7,120,375 natural person Strategy investors or general legal person becomes top 10 shareholders due None to rights issued (if any) (See Notes 3) 46 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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. 2,407,002,394 Common shares in RMB 2,407,002,394 CCB Principal Asset Management – ICBC – CR Trust – CR Trust Xing Sheng No. 5 Collective 184,842,883 Common shares in RMB 184,842,883 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 184,842,883 229 Asset Management Plan China Life AMP Fund– ICBC – China Life AMP – Hua Xin Trust Targeted Additional 184,842,883 Common shares in RMB 184,842,883 Shares Issuance No. 10 Asset Management Plan Liaoning Provincial Transportation Investment 183,785,283 Common shares in RMB 183,785,283 Group Co., Ltd. Fang Lei 14,126,600 Common shares in RMB 14,126,600 Fang Huaiyue 9,205,501 Common shares in RMB 9,205,501 Zhang Peng 8,287,900 Common shares in RMB 8,287,900 VANGUARD EMERGING MARKETS 8,157,311 Foreign shares in domestic exchange 8,157,311 STOCK INDEX FUND Chen Jinhong 7,120,375 Common shares in RMB 7,120,375 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 2,168,022,394 shares of the Company’s stock through ordinary account and holds 239,000,000 shares of the Company’s stock through Shareholders among the top 10 participating in credit security account totaling 2,407,002,394 shares. Fang Lei holds 14,126,600 shares securities margin trading (if any) (see Note 4) of the Company’s stock through credit security account. Fang Huaiyue holds 9,205,501 shares of the Company’s stock through credit security account. Zhang Peng holds 8,287,900through 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. IV. Change of controlling shareholder or actual controller Change of controlling shareholder during the reporting period □ Applicable √ Not applicable There was no change of holding shareholder in the report period. Change of actual controller during the reporting period □ Applicable √ Not applicable There was no change of substantial controller in the report period. 47 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 VII. Status of Preferred Shares □ Applicable √ Not applicable There were no preferred shares during the reporting period. 48 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 VIII. Status of Convertible Corporate Bonds □ Applicable √ Not applicable There were no convertible corporate bonds during the reporting period. 49 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 IX. Status of Directors, Supervisors, and Senior Executives I. Change in Shares held by Directors, Supervisors and Senior Executives □ Applicable √ Not applicable The company’s directors, supervisors and senior executives did not change their shareholdings during the reporting period. For details, please refer to the 2019 annual report. II. Change in Directors, Supervisors and Senior Executives √Applicable □ Not applicable Name Position Type of change Date Reason Leaving office at the Zhong Tianli Independent Director May 21h ,2020 Term expired end of the term Yuan Zhizhu Independent Director Elected May 21h ,2020 Elected 50 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 X. 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 semi-annual report No 51 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 XI. Financial Report I. Audit report Whether the semi-annual report is audited □ Yes √ No The semi-annual report is not audited. II. Financial Statements Statement in Notes are carried in RMB Yuan 1. CONSOLIDATED STATEMENT OF FINANCIAL POSITION Prepared by: Bengang Steel Plates Co., Ltd. Unit: Yuan Assets 30 June 2020 31 December 2019 Current assets Cash at bank and on hand 16,788,479,305.93 18,415,844,397.77 Settlement provisions Capital lent Financial assets held for trading Financial assets at fair value through profit or loss Derivative financial assets Notes receivable Accounts receivable 234,795,887.35 235,696,265.66 Accounts receivable financing 4,382,121,949.97 2,429,542,461.88 Prepayments 1,283,589,312.47 1,291,047,458.11 Premium receivable Reinsurance accounts receivable Receivable deposit for reinsurance contract Other receivables 158,407,131.71 172,807,036.77 Redemptory financial assets for sale Inventories 9,586,039,375.52 7,700,397,685.61 Contract assets Assets held for sale Non-current assets due within one year Other current assets 284,207,048.62 312,904,824.09 Total current assets 32,717,640,011.57 30,558,240,129.89 Non-current assets Loan and advances issued Debt Investments Available-for-sale financial assets Other debt investments Held-to-maturity investment 52 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Assets 30 June 2020 31 December 2019 Long-term receivables Long-term equity investments 2,672,302.70 2,642,998.70 Other equity instrument investments 1,042,024,829.00 1,041,824,829.00 Other non-current financial assets Investment property Fixed assets 24,952,427,383.86 26,123,375,492.40 Construction in progress 2,569,308,708.27 1,833,853,572.58 Productive biological assets Oil and gas assets Intangible assets 268,216,337.94 271,500,023.34 Development expenditure Goodwill Long-term deferred expenses Deferred tax assets 194,873,971.63 191,485,595.49 Other non-current assets 963,239,365.67 708,502,552.50 Total non-current assets 29,992,762,899.07 30,173,185,064.01 Total assets 62,710,402,910.64 60,731,425,193.90 Liabilities and equities 30 June 2020 31 December 2019 Current Liabilities Short-term loans 12,506,705,000.00 13,151,478,000.00 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 14,234,728,488.05 11,828,514,676.95 Accounts payable 4,076,415,267.57 4,527,513,030.27 Advance from customers 4,429,821,526.79 Contract liabilities 4,658,022,515.99 Financial assets sold for repurchase Deposits from customers and interbank Receipt from vicariously traded securities Receipt from vicariously underwriting securities Employee benefits payable 41,172,677.24 23,698,174.56 Current tax liabilities 21,947,711.98 284,825,814.80 Other payables 644,059,870.61 662,701,744.97 Handling charges and commission payable Reinsurance accounts payable Liabilities held for sale Non-current liabilities due within one year 1,201,524,980.80 234,474,657.99 Other current liabilities Total current liabilities 37,384,576,512.24 35,143,027,626.33 Non-current liabilities Provision for insurance contract Long-term loans 3,810,463,934.18 4,849,675,910.73 Bonds payable Including: Preferred stock Perpetual bond Long-term payables 1,050,748,776.34 516,939,408.14 Long-term employee benefits payable Estimated liabilities Deferred income 172,691,452.54 208,955,407.30 Deferred tax liabilities Other non-current liabilities 53 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Assets 30 June 2020 31 December 2019 Total non-current liabilities 5,033,904,163.06 5,575,570,726.17 Total liabilities 42,418,480,675.30 40,718,598,352.50 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 22,480,185.44 212,687.41 Surplus reserves 961,105,529.85 961,105,529.85 General risk reserve Undistributed profits 2,562,409,868.95 2,307,765,664.62 Total equity attributable to equity holders of the parent company 19,764,576,963.53 19,487,665,261.17 Non-controlling interests 527,345,271.81 525,161,580.23 Total shareholder's equity 20,291,922,235.34 20,012,826,841.40 Total of liabilities and owners’ equity 62,710,402,910.64 60,731,425,193.90 Legal Representative: Gao Lie Person in charge of accounting: Shen Qiang Accounting Dept. Leader: Zhao Zhonghua 2. BALANCE SHEET OF THE PARENT COMPANY Unit: Yuan Assets 30 June 2020 31 December 2019 Current assets Cash at bank and on hand 15,366,186,440.19 16,982,227,928.89 Financial assets held for trading Financial assets at fair value through profit or loss Derivative financial assets Notes receivable Accounts receivable 373,473,831.10 388,997,108.46 Accounts receivable financing 3,997,787,483.35 2,193,319,842.60 Prepayments 1,180,298,578.04 1,184,632,345.13 Other receivables 257,932,409.77 266,663,235.81 Inventories 8,140,296,769.10 6,114,582,832.33 Contract assets Assets held for sale Non-current assets due within one year Other current assets 233,073,377.39 191,249,460.42 Total current assets 29,549,048,888.94 27,321,672,753.64 Non-current assets Debt investments Available-for-sale financial assets Other debt investments Held-to-maturity investment Long-term receivables 54 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Assets 30 June 2020 31 December 2019 Long-term equity investments 2,016,281,902.16 2,016,281,902.16 Other equity instrument investments 1,041,624,829.00 1,041,624,829.00 Other non-current financial assets Investment property Fixed assets 23,390,496,921.43 24,447,763,305.12 Construction in progress 2,540,492,204.43 1,813,889,136.42 Productive biological assets Oil and gas assets Intangible assets 143,816,972.04 145,470,040.68 Development expenditure Goodwill Long-term deferred expenses Deferred tax assets 96,728,691.51 93,555,276.54 Other non-current assets 962,009,985.58 696,351,867.38 Total non-current assets 30,191,451,506.15 30,254,936,357.30 Total assets 59,740,500,395.09 57,576,609,110.94 Liabilities and shareholders' equities 30 June 2020 31 December 2019 Current liabilities Short-term loans 11,606,705,000.00 11,851,478,000.00 Financial liability held for trading Financial liabilities at fair value through profit or loss Derivative financial liabilities Notes payable 12,332,093,817.33 10,225,969,445.22 Accounts payable 4,685,781,414.11 4,909,389,629.86 Advance from customers 5,597,707,687.22 Contract liabilities 5,736,618,018.47 Employee benefits payable 39,903,242.02 21,872,906.71 Current tax liabilities 4,507,444.81 274,181,048.14 Other payables 360,650,090.66 384,125,032.59 Liabilities held for sale Non-current liabilities due within one year 1,201,524,980.80 234,474,657.99 Other current liabilities Total current liabilities 35,967,784,008.20 33,499,198,407.73 Non-current liabilities Long term loans 3,810,463,934.18 4,849,675,910.73 Bonds payable Including: Preferred stock Perpetual bond Long-term payables 1,050,748,776.34 516,939,408.14 Long-term employee benefits payable Estimated liabilities 55 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Assets 30 June 2020 31 December 2019 Deferred income 172,691,452.54 208,955,407.30 Deferred tax liabilities Other non-current liabilities Total non-current liabilities 5,033,904,163.06 5,575,570,726.17 Total liabilities 41,001,688,171.26 39,074,769,133.90 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 19,768,253.55 53,330.99 Surplus reserves 961,105,529.85 961,105,529.85 Undistributed Profits 1,959,508,743.26 1,742,251,419.03 Total shareholder's equity 18,738,812,223.83 18,501,839,977.04 Total liabilities and shareholder’s equity 59,740,500,395.09 57,576,609,110.94 3. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Unit: Yuan Items Jan – Jun 2020 Jan – Jun 2019 1. Total operating income 22,184,537,260.05 24,102,595,167.14 Including: Operating income 22,184,537,260.05 24,102,595,167.14 Interest income Premium earned Income from handling charges and commission 2. Total operating cost 21,927,105,960.14 23,621,825,282.23 Including: Operating cost 20,440,246,362.67 22,067,612,729.65 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 88,398,436.68 114,125,362.97 Selling and distribution expenses 642,393,218.78 574,445,199.14 General and administrative expenses 380,828,316.41 446,767,811.77 Research and development expenses 20,202,985.20 15,408,472.28 Financial expenses 355,036,640.40 403,465,706.42 Including: Interest expense 439,861,353.93 586,490,262.69 Interest income 154,882,284.33 127,083,779.58 Add: Other income 38,587,332.40 41,695,000.00 Income on investment(“-” for loss) 29,304.00 25,907.49 Including: Income from associates and joint ventures 29,304.00 25,907.49 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) 3,487,783.42 3,751,513.83 Asset impairment loss (“-” for loss) -15,321,598.62 - Assets disposal gains(“-” for loss) 325,651.61 2,418,704.34 56 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Items Jan – Jun 2020 Jan – Jun 2019 3. Operational profit(“-” for loss) 284,539,772.72 528,661,010.57 Add: Non-operating income 1,140,364.12 8,210,182.24 Less: Non-operating expenses 20,035,471.42 57,974,322.05 4. Total profit (“-” for loss) 265,644,665.42 478,896,870.76 Less: Income tax expenses 9,237,815.08 25,962,181.73 5. Net profit(“-” for loss) 256,406,850.34 452,934,689.03 1.Classification by continuing operating 1.Net profit from continuing operation(“-” for loss) 2.Net profit from discontinued operation(“-” for loss) 2.Classification by ownership 1. Net profit attributable to the owners of parent company (“-” for loss) 254,644,204.33 453,209,615.76 2. Net profit attributable to non-controlling shareholders (“-” for loss) 1,762,646.01 -274,926.73 6.Other comprehensive income 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 256,406,850.34 452,934,689.03 Total comprehensive income attributable to the owner of the parent company 254,644,204.33 453,209,615.76 Total comprehensive income attributable to non-controlling shareholders 1,762,646.01 -274,926.73 8. Earnings per share 1)Basic earnings per share (Yuan/share) 0.07 0.12 2)Diluted earnings per share (Yuan/share) 0.07 0.12 The current business combination under common control, the net profits of the combined party before achieved: Yuan, net profit of previous period of the combined party realized: Yuan. Legal Representative: Gao Lie Person in charge of accounting: Shen Qiang Accounting Dept. Leader: Zhao Zhonghua 4. INCOME STATEMENT OF THE PARENT COMPANY Unit: Yuan Items Jan – Jun 2020 Jan – Jun 2019 1. Total operating income 21,759,781,682.12 23,447,215,857.93 Less: Operating cost 20,379,148,281.27 21,757,289,997.18 Tax and surcharges 74,240,782.35 84,467,404.41 Selling and distribution expenses 386,932,932.93 335,094,548.06 General and administrative expenses 354,627,152.28 419,337,998.35 Research and development expenses 20,202,985.20 15,408,472.28 Financial expenses 337,504,255.84 388,071,914.59 Including: Interest expense 410,264,451.89 558,095,343.66 Interest income 141,297,649.84 114,189,626.94 Add: Other income 38,002,345.53 41,695,000.00 Income on investment(“-” for loss) Including: Income from associates and joint ventures Income from derecognition of financial assets measured at amortized cost Net exposure hedge income(“-” for loss) 57 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Items Jan – Jun 2020 Jan – Jun 2019 Gains from change of fair value (“-” for loss) Credit impairment loss(“-” for loss) 2,627,938.73 3,751,513.83 Assets impairment loss(“-” for loss) -15,321,598.62 - Assets disposal gains(“-” for loss) 325,651.61 2,465,706.59 2. Operational profit(“-” for loss) 232,759,629.50 495,457,743.48 Add: Non-operating income 811,659.87 8,138,040.75 Less: Non-operating expenses 19,487,380.11 57,935,182.17 3. Total profit (“-” for loss) 214,083,909.26 445,660,602.06 Less: Income tax expenses -3,173,414.97 15,309,062.75 4. Net profit(“-” for loss) 217,257,324.23 430,351,539.31 1.Net profit from continuing operation (“-” for loss) 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 217,257,324.23 430,351,539.31 7. Earnings per share 1)Basic earnings per share (Yuan/share) 2)Diluted earnings per share (Yuan/share) 5. CONSOLIDATED STATEMENT OF CASH FLOWS Unit: Yuan Items Jan – Jun 2020 Jan – Jun 2019 1.Cash flow from operating activities Cash received from sale of goods or rendering of services 15,423,965,198.05 16,357,053,782.81 Net increase of customers' deposit and interbank deposit Net increase of loan from central bank Net increase of loans from other financial institutions 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 58 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Items Jan – Jun 2020 Jan – Jun 2019 Net increase of loans from borrowing funds Net increase of fund for repurchase business Net cash received from traded securities Tax rebate received 310,509,228.43 247,667,635.74 Other cash received relating to operating activities 174,016,797.00 144,904,624.34 Subtotal of cash inflows from operating activities 15,908,491,223.48 16,749,626,042.89 Cash paid for goods and services 14,428,717,102.76 13,876,838,386.74 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 884,844,841.18 987,603,117.25 Cash paid for all types of taxes 520,116,275.37 653,208,180.03 Other cash paid relating to operating activities 226,288,711.25 247,189,353.20 Subtotal of cash outflows from operating activities 16,059,966,930.56 15,764,839,037.22 Net cash flows from operating activities -151,475,707.08 984,787,005.67 2. Cash flows from investing activities Cash received from disposal of investments Cash received from return on investments Net cash received from disposal of fixed assets, intangible assets and other long-term assets Net cash received from disposal of subsidiary and other operating units Other cash paid relating to investing activities Subtotal of cash inflows from investing activities Cash paid for acquisition of fixed assets, intangible assets and other long-term assets 706,681,059.07 545,199,197.41 Cash paid for acquisition of investments 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 706,681,059.07 545,199,197.41 Net cash flows from investing activities -706,681,059.07 -545,199,197.41 3. Cash flows from financing activities Proceeds from investment Including: Proceeds from investment of non-controlling shareholders of subsidiary Proceeds from borrowings 4,987,194,000.00 5,828,037,190.72 Other proceeds relating to financing activities Subtotal of cash inflows from financing activities 4,987,194,000.00 5,828,037,190.72 Cash repayments of borrowings 5,671,544,896.99 5,653,303,509.62 Cash payments for distribution of dividends, profit or interest expenses 480,183,996.49 626,178,049.57 Including: Cash paid to non-controlling shareholders as dividend and profit by subsidiaries Other cash payments relating to financing activities Subtotal of cash outflows from financing activities 6,151,728,893.48 6,279,481,559.19 Net cash flows from financing activities -1,164,534,893.48 -451,444,368.47 4. Effect of foreign exchange rate changes on cash and cash equivalents -1,130,665.43 48,230,507.75 5. Net increase in cash and cash equivalents -2,023,822,325.06 36,373,947.54 Add: Cash and cash equivalents at the beginning of the period 13,441,414,988.58 11,752,548,621.97 59 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Items Jan – Jun 2020 Jan – Jun 2019 6. Cash and cash equivalents at the ending of the period 11,417,592,663.52 11,788,922,569.51 6. CASH FLOW STATEMENT OF THE PARENT COMPANY Unit: Yuan Items Jan – Jun 2020 Jan – Jun 2019 1. Cash flow from operating activities Cash received from sale of goods or rendering of services 15,003,373,098.45 15,970,406,775.11 Tax rebate received 260,246,235.34 219,614,786.86 Other cash received relating to operating activities 163,299,247.34 140,536,583.70 Subtotal of cash inflows from operating activities 15,426,918,581.13 16,330,558,145.67 Cash paid for goods and services 14,323,769,183.95 13,842,821,616.84 Cash paid to and on behalf of employees 840,886,166.89 928,568,022.64 Cash paid for all types of taxes 465,606,411.99 576,260,568.31 Other cash paid relating to operating activities 159,126,577.28 165,446,890.35 Subtotal of cash outflows from operating activities 15,789,388,340.11 15,513,097,098.14 Net cash flows from operating activities -362,469,758.98 817,461,047.53 2. Cash flows from investing activities Cash received from disposal of investments Cash received from return on investments 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 Cash paid for acquisition of fixed assets, intangible assets 696,005,001.44 539,451,276.57 and other long-term assets Cash paid for acquisition of investments 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 696,005,001.44 539,451,276.57 Net cash flows from investing activities -696,005,001.44 -539,451,276.57 3. Cash flows from financing activities Proceeds from investment Cash received from borrowings 4,747,194,000.00 4,902,327,190.72 Other cash received relating to financing activities Subtotal of cash inflows from financing activities 4,747,194,000.00 4,902,327,190.72 Cash repayments of borrowings 5,051,544,896.99 4,713,373,509.62 Cash payments for distribution of dividends, profit or 433,692,125.89 589,497,122.29 interest Other cash payments relating to financing activities Subtotal of cash outflows from financing activities 5,485,237,022.88 5,302,870,631.91 Net cash flows from financing activities -738,043,022.88 -400,543,441.19 60 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Items Jan – Jun 2020 Jan – Jun 2019 4. Effect of foreign exchange rate changes on cash and -1,134,392.87 48,222,621.42 cash equivalents 5. Net increase in cash and cash equivalents -1,797,652,176.17 -74,311,048.81 Add: Cash and cash equivalents at the beginning of the 13,029,616,298.47 10,807,824,843.20 period 6. Ending balance of cash and cash equivalents 11,231,964,122.30 10,733,513,794.39 61 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 7. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Unit: Yuan Jan – Jun 2020 Owner's equity attributable to parent company Items Other equity instruments Less: Other General Non-controlling Total of owner's Special Undistributed Share capital Preferenc Perpetual Capital reserves Treasury comprehensive Surplus reserves risk Subtotal interest equity Others reserves profit e shares bond shares income reserve 1. Ending balance of last 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 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 12,343,209,847.29 212,687.41 961,105,529.85 2,307,765,664.62 19,487,665,261.17 525,161,580.23 20,012,826,841.40 3. Changes in current year (“-” for decrease) 22,267,498.03 254,644,204.33 276,911,702.36 2,183,691.58 279,095,393.94 1) Total comprehensive income 254,644,204.33 254,644,204.33 1,762,646.01 256,406,850.34 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 (1) Appropriation to surplus reserves (2) Appropriation to general risk reserve (3) Profit distribution to shareholders (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 5) Special reserves 22,267,498.03 22,267,498.03 421,045.57 22,688,543.60 (1) Provision of special reserves 26,575,861.58 26,575,861.58 421,045.57 26,996,907.15 (2) Use of special reserves 4,308,363.55 4,308,363.55 4,308,363.55 6) Others 4. Ending balance of current year 3,875,371,532.00 12,343,209,847.29 22,480,185.44 961,105,529.85 2,562,409,868.95 19,764,576,963.53 527,345,271.81 20,291,922,235.34 62 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Jan – Jun 2019 Owner's equity attributable to parent company Items Other equity instruments Less: Other General Non-controlling Total of owner's Special Share capital Preferenc Perpetual Capital reserves Treasury comprehensi Surplus reserves risk Undistributed profit Subtotal interest equity Others reserves e shares bond shares ve 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) Others 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 8. STATEMENT OF CHANGE IN OWNER’S EQUITY OF THE PARENT COMPANY Unit: Yuan 63 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Jan – Jun 2020 Other equity instruments Less: Other Items Special Undistributed Total shareholder’s Share capital Preferen Perpetual Capital reserves Treasury comprehens Surplus reserves Others reserves profits equity ce shares bond shares ive income 1. Ending balance of last 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 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 53,330.99 961,105,529.85 1,742,251,419.03 18,501,839,977.04 3. Changes in current year (“-” for decrease) 19,714,922.56 217,257,324.23 236,972,246.79 1) Total comprehensive income 217,257,324.23 217,257,324.23 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 (1) Appropriation of surplus reserves (2) Profit distribution to shareholders (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 19,714,922.56 19,714,922.56 (1) Provision of special reserves 23,963,236.11 23,963,236.11 (2) Use of special reserves 4,248,313.55 4,248,313.55 6) Others 4. Ending balance of current year 3,875,371,532.00 11,923,058,165.17 19,768,253.55 961,105,529.85 1,959,508,743.26 18,738,812,223.83 Jan – Jun 2019 Other equity instruments Less: Other Items Special Undistributed Total shareholder’s Share capital Preference Perpetual Capital reserves Treasury comprehens Surplus reserves Others reserves profits equity shares bond shares ive 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 64 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Jan – Jun 2019 Other equity instruments Less: Other Items Special Undistributed Total shareholder’s Share capital Preference Perpetual Capital reserves Treasury comprehens Surplus reserves Others reserves profits equity shares bond shares ive income 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) Others 5) Special reserves -471,887.49 -471,887.49 (1) Provision of special reserves 45,445,975.41 45,445,975.41 (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 65 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 III. Basic Information of the Company (1) Company profile Bengang Steel Plates Co., Ltd. (hereinafter referred to as “the Company”), as approved in Liao-Zheng (1997) No. 57 by Liaoning People’s Government on 27 March 1997, was incorporated as a joint stock limited company through public share offer of domestic listed foreign currency denominated shares (B shares) in the People’s Republic of China (the “PRC”) on 27 June 1997 by Benxi Steel and Iron (Group) Co., Ltd. (“Bengang Group”), through reorganization of operations, assets and liabilities of its plants, namely, Steel Smelting Plant, Primary Rolling Plant and Continuous Hot Rolling Plant. As approved by China Securities Regulatory Commission (hereinafter referred to as “the CSRC”), the Company issued 400,000,000 B-shares at HKD2.38 each in Shenzhen Stock Exchange on 10 June 1997. On 3 November 1997, the Company issued another 120,000,000 A-shares (Renminbi common Shares) at RMB 5.40 each, and listed in Shenzhen Stock Exchange since 15 January 1998. The capital shares were totaled to 1,136,000,000 shares. On 14 March 2006, according to the resolutions of the Shareholders’ Meeting regarding share equity relocation, the Share Equity Relocation Scheme, Response to Bengang Steel Plate Co., Ltd. about Share Equity Relocation issued by Liaoning Provincial Government State-owned Asset Administrative Committee, Bengang Group – the only holder of non-negotiable state-owned legal person shares paid the consideration to the current shareholders to obtain the current option for the 40,800,000 shares of the total 616,000,000 shares it was holding. Shareholding positions have been registered with China Securities Depository & Clearing Corporation Ltd. Shenzhen Office. However, the total amount of capital shares of Bengang Steel Plates Co., Ltd. was not changed through the share equity relocation action. According to the approval document “Zheng-Jian-Gong-Si-Zi [2006] No. 126” by China Securities Regulatory Commission on 30 June 2006, the Company was approved to place 2 billion Renminbi common shares particularly to Bengang Group and the proceeds would be used to purchase the related assets of the Group. On the same day, Bengang Group received circular Zheng-Jian-Gong-Si-Zi [2006] No. 127 issued by China Securities Regulatory Committee, and were exempted for the liability of undertaking the purchase offer. The liability was caused by subscribing of the 2 billion new shares and the total shareholding was thus increased to 2.5752 billion shares (accounting for 82.12% of the total capital shares of the Company). On 28 August 2006, as approved by China Securities Depository & Clearing Corporation Ltd. Shenzhen Office, the registration and conditional placing procedures of the 2 billion new shares were completed. On 28 September 2006, the privately placed shares were approved by Shenzhen Stock Exchange to be placed in the stock market. The placing price was RMB4.6733 per share. Approved by the China Securities Regulatory Commission [2017] No. 1476, Bengang Steel Plate Co., Ltd. privately placed no more than 739,371,534 RMB ordinary shares (A shares) to no more than 10 issuers. The non-public offering was completed on 9 February 2018, and 739,371,532 shares were actually issued. The placing price was RMB5.41 per share. As at 30 June 2020, the capital shares were totaled to 3,875,371,532 shares. 66 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 The Company’s uniform social credit code: 91210000242690243E. The Company’s registered address: 16th Renmin Road, Pingshan District, Benxi, Liaoning Province. The Company’s legal representative: Gao Lie. The parent company of Bengang Steel Plates Co., Ltd is Benxi Steel and Iron (Group) Co., Ltd. and the actual controller is the State-owned Assets Supervision and Administration Commission of the State Council of Liaoning province. Bengang Steel Plates Co., Ltd. belongs to ferrous metal smelting and rolling processing industry and is mainly involved in producing and trading of ferrous metal products. Consolidation scope The financial statements have been approved for reporting by the board of directors of the Company on 24 August 2020. (2) Consolidation scope As at 30 June 2020, 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. 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. 67 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 IV. 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. V. 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, (16) Fixed assets, (19) Intangible assets, (25) 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 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 68 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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 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 69 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 item of net profit of the consolidated statement of comprehensive income and under the item of total comprehensive income. Where losses assumed by the minority exceed the minority’s interests in the beginning equity of a subsidiary, the excess shall be charged against the minority’s interests. (1) Increasing new subsidiaries and businesses If the Company has a new subsidiary due to business combination under common control during the reporting period, it shall adjust the beginning balance in the consolidated statement of financial position when preparing consolidated statement of financial position. The revenue, expenses and profits of the subsidiaries from the acquisition date to the end of the reporting period are included in the Company’s consolidated statement of comprehensive income. The cash flow of the subsidiaries from the acquisition date to the end of the reporting period is included in the Company’s consolidated statement of cash flows. And meanwhile the Company shall adjust the relevant items of the comparative financial statements as if the reporting entity for the purpose of consolidation has been in existence since the date the ultimate controlling party first obtained control. When the Company becomes capable of exercising control over an investee under common control due to additional investment or other reasons, adjustment shall be made as if the reporting entity after the combination has been in existence since the date the ultimate controlling party first obtained control. The investment income recognized between date of previously obtaining equity investment and the date the acquiree and acquirer are under common control, which is later, and the combining date, other comprehensive income and other changes of net assets arising from the equity investment previously-held before obtaining the control the acquiree shall be adjusted against the prior retained earnings of the comparative financial statements and the current profit or loss respectively. If it is now under common control, the Company shall not adjust the beginning balance in the consolidated statement of financial position when preparing consolidated statement of financial position. The revenue, expenses and profits of the subsidiaries from the acquisition date to the end of the reporting period are included in the parent company’s consolidated statement of comprehensive income. The cash flow of the subsidiaries from the acquisition date to the end of the reporting period is included in the Company’s consolidated statement of cash flows. When the Company becomes capable of exercising control over an investee now under common control due to additional investment or other reasons, the acquirer shall remeasure its previously held equity interest in the acquiree to its fair value at the acquisition date. The difference between the fair value and the carrying amount shall be recognized as investment income for the period when the acquisition takes place. When the previously-held equity investment is accounted for under the equity method, any other comprehensive income previously recognized in relation to the acquiree’s equity changes shall be transferred to profit or loss for the current period when the acquisition takes place. Other comprehensive income arising from remeasurement of defined benefit plan is excluded. (2) Disposing subsidiaries or businesses 1. General treatment 70 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 If the Company disposes a subsidiary during the reporting period, the revenue, expenses and profits of the subsidiary from the beginning of the reporting period to disposal date are included in the Company’s consolidated statement of comprehensive income. The cash flow of the subsidiaries from the beginning of the reporting period to disposal date is included in the Company’s consolidated statement of cash flows. When the Company loses control over an investee due to partial disposal or other reasons, the acquirer shall re-measure the remaining equity interests in the acquiree to its fair value at the acquisition date. The difference, between sums of consideration received for disposal equity shares and fair value of the remaining shares, and sums of share of net assets of the subsidiary calculated continuously from the acquisition date or the combination date based on the previous shareholding proportion and goodwill, shall be recognized as investment income for the period when the Company loses control over acquiree. When the previously-held equity investment is accounted for under the equity method, any other comprehensive income previously recognized in relation to the acquiree’s equity changes, and other equity changes rather than changes from net profit, other comprehensive income and profit distribution, shall be transferred to investment income for the current period when the Company loses control over acquiree. Other comprehensive income arising from re-measurement of defined benefit plan is excluded. When the Company loses control over a subsidiary due to the increase of capital from other investors and thus the shareholding ratio of the Company declines, accounting treatment shall be in accordance with the above-mentioned principles. 2. Disposing subsidiaries by multiple transactions Where the Company loses control of a subsidiary in multiple transactions in which it disposes of its subsidiary in stages, in determining whether to account for the multiple transactions as a single transaction, the Company shall consider all of the terms and conditions of the transactions and their economic effects. One or more of the following may indicate that the Company shall account for the multiple arrangements as a single transaction: (a) Arrangements are entered into at the same time or in contemplation of each other; (b) Arrangements work together to achieve an overall commercial effect; (c) The occurrence of one arrangement is dependent on the occurrence of at least one other arrangement; and (d) One arrangement considered on its own is not economically justified, but it is economically justified when considered together with other arrangements. If each of the multiple transactions forms part of a bundled transaction which eventually results in loss of control of the subsidiary, these multiple transactions shall be accounted for as a single transaction. In the consolidated financial statements, the difference between the consideration received and the corresponding proportion of the subsidiary’s net assets in each transaction prior to the loss of control shall be recognized in other comprehensive income and transferred to the profit or loss when the Company eventually loses control of the subsidiary. 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. 71 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 (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 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 72 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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. 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 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. 73 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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 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. 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. According to the above conditions, the Company does not have such designated financial assets. 2. Recognition and measurement of financial instruments (1) Financial assets measured at amortised cost Financial assets measured at amortized cost include notes receivables, accounts receivables, other receivables, long-term receivables, debt investments, etc. At initial recognition, the Company shall measure a financial asset at its fair value 74 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 plus or minus transaction costs that are directly attributable to the acquisition or issue of the financial asset. The Company shall measure account receivables at their transaction price if the account receivables do not contain a significant financing component and accounts receivables that the company has decided not to consider for a financing component of no more than one year. Interests calculated by using the effective interest method during the holding period shall be. recognized in profit or loss. When recovering or disposing the receivables, the difference between the price obtained and. the carrying value shall be recognized in current profit or loss. (2) Financial assets measured at fair value through other comprehensive income (debt instruments) Financial assets measured at fair value through other comprehensive income (debt instruments) include receivables financing, other debt investments, etc. At initial recognition, the Company shall measure a financial asset at its fair value plus transaction costs that are directly attributable to the acquisition or issuance of the financial asset. The financial assets are subsequently measured at fair value. Changes in fair value are included in other comprehensive income except for interest calculated using the effective interest method, impairment losses or gains and exchange gains and losses. When the financial assets are derecognized, the accumulated gain or loss previously recognized in other comprehensive income is transferred from other comprehensive income and recognized in profit or loss. (3) Financial assets at fair value through other comprehensive income (equity instruments) Financial assets at fair value through other comprehensive income (equity instruments). include other equity instrument investments, etc. At initial recognition, the Company shall measure a financial asset at its fair value plus transaction costs that are directly attributable to the acquisition or issue of the financial asset. The financial assets are subsequently measured at fair value. Changes in fair value are included in other comprehensive income. The dividends obtained are recognised in profit and loss. When the financial assets are derecognized, the accumulated gain or loss previously. recognised in other comprehensive income is transferred from other comprehensive income and recognised in retained earnings. (4) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include transactional financial assets, derivative financial assets, other non-current financial assets, etc. The Company shall measure the financial assets at fair value at initial recognition. Transaction costs are recognised in 75 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 profit or loss. Changes in fair value are included in profit or loss. When the financial assets are derecognized, the difference between the fair value and the. initially recorded amount is recognized as investment income, and the gains and losses from changes in fair value are adjusted. (5) Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include current financial liabilities, derivative financial liabilities, etc. The Company shall measure the financial assets at fair value at initial recognition. Transaction costs are recognised in profit or loss. Changes in fair value are included in profit or loss. When the financial liabilities are derecognized, the difference between the fair value and the. initially recorded amount is recognized as investment income, and the gains and losses from changes in fair value are adjusted. (6) Financial liabilities measured at amortised cost Financial liabilities measured at amortised cost include short-term borrowings, notes. payables, accounts payables, other payables, long-term borrowings, bonds payables, long-term payables. At initial recognition, the Company shall measure a financial liability at its fair value plus. transaction costs that are directly attributable to the acquisition or issue of the financial asset. Interests calculated by using the effective interest method during the holding period shall be. recognized in profit or loss. When the financial liabilities are derecognized, the difference between the price obtained and. the carrying value shall be recognised in profit and loss. 3. Recognition and measurement of financial assets transfer Where the Company has transferred nearly all of the risks and rewards related to the ownership of the financial asset to the transferee, it shall 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 76 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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). 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. 77 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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 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 increased significantly since initial recognition. 78 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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). (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 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 79 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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) Contract asset 1. Recognition methods and criteria of contract assets When either party to a contract has performed, the Company shall present the contract in the statement of financial position as a contract asset or a contract liability, depending on the relationship between the Company’s performance and the customer’s payment. If the Company have the rights to receive consideration (the right is conditioned on factors other than the passage of time) by transferring goods or services to a customer, the entity shall present the contract as a contract asset. Contract assets and contract liabilities under the same contract are disclosed in net amount. An entity shall present any unconditional rights to consideration (only the passage of time is required) separately as a receivable. 2. Expected credit loss of contract assets For the accounting policy of the expected credit loss of contract assets, please refer to Note (10) 6. Impairment provision of the financial assets under “3. Significant accounting policies and accounting estimates” 80 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 (13) Assets hold for sales The Company classifies non-current assets or disposal asset groups when the assets meet the following criterion into holding categories for sale simultaneously: (1) According to the practice of selling such assets or disposal asset groups in similar transactions, they can be sold immediately under current conditions; (2) The sale of assets is highly probable, as the company has already made a resolution on a sale plan and obtained a certain purchase commitment, and the transaction is expected to be completed within one year. The relevant regulations that the assets can be sold have been approved by relevant authorities or regulatory authorities of the Company. (14) 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 81 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 The initial cost of a long-term equity investment obtained by making payment in cash shall be the purchase cost which is actually paid. The initial cost of a long-term equity investment obtained on the basis of issuing equity securities shall be the fair value of the equity securities issued. If the exchange of non-monetary assets is commercial in nature and the fair values of both the assets received and surrendered can be reliably measured, the fair value of the assets surrendered shall be used as the basis for determining the cost of the assets received, unless there is any exact evidence showing that the fair value of the assets received is more reliable. Where any non-monetary assets transaction does not meet the conditions as prescribed above, the carrying value and relevant payable taxes of the assets surrendered shall be the initial cost of the assets received. The initial cost of a long-term equity investment obtained by debt restructuring shall be ascertained on the basis of fair values. 3. Subsequent measurement and profit or loss recognition (1) Cost method The Company adopts cost method for the long term investment in subsidiary company. Under the cost method, an investing enterprise shall, in accordance with the attributable share of the net profits or losses of the invested entity, recognize the investment profits or losses except the dividend declared but unpaid, which is included in the payment when acquiring the investment. (2) Equity method A long-term equity investment in an associate or a joint venture shall be accounted for using the equity method. Where the initial investment cost of a long-term equity investment exceeds tan investor’s interest in the fair values of an investee’s identifiable net assets at the acquisition date, no adjustment shall be made to the initial investment cost. Where the initial cost is less than the investor’s interest in the fair values of the investee’s identifiable net assets at 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 82 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 identifiable net assets at the acquisition date. During the holding period, if the investee makes consolidated financial statements, the Company shall calculate its share based on the investee’s net profit, other comprehensive income and the amount of other owners' equity attribute to the investee in the consolidated financial statements. The unrealized profits or losses resulting from transactions between the investor and its associate or joint venture shall be eliminated in proportion to the investor’s equity interest in the investee, based on which investment income or losses shall be recognized. Any losses resulting from transactions between the investor and investee which are attributable to asset impairment shall be recognized in full. If the transaction of investment or sale of assets among the Company and associate and joint venture and the assets is a business, it shall apply the treatment mentioned in Note 3 (5) “The accounting treatment for Business combination under/now under common control” and Note 3 (6) “Consolidation of Financial Statements”. When the Company recognizes the losses of invested enterprise, it shall follow the following sequence: First of all, offset the book value of long term equity investment. If the book value of long-term equity is insufficient to dilute, the investing enterprise shall recognize the net losses of the invested enterprise until the book value of the long-term equity investment and other long-term rights and interests which substantially form the net investment made to the invested entity are reduced to zero. If the company still has the obligation to undertake extra losses per contract, and then estimated liabilities shall be recognized into current profit and loss accordingly to the estimated obligation. (3) Disposal of long-term equity investment When disposing long-term equity investment, the difference between the proceeds actually received and the carrying amount shall be recognized in profit or loss for the current period. When the previously-held equity investment is accounted for under the equity method, any other comprehensive income previously recognized shall be accounted for on the same basis as would have been required if the investee had directly disposed of the related assets or liabilities. Those owner's equity recognized other than the change of net profits or loss, other comprehensive income, profit distribution of the invested entity shall be transferred proportionally into 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. 83 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 When the Company can no longer exercise control over an investee due to partial disposal of equity investment or due to decrease of shareholding ratio because of additional investment by other investors, and with the retained interest, still has joint control of, or significant influence over, the investee, when preparing the individual financial statements, the investor shall change to the equity method and adjust the remaining equity investment as if the equity method had been applied from the date of the first acquisition. If the investor cannot exercise joint control of or significant influence over the investee after partial disposal of equity investment, the remaining equity investment shall be accounted for in accordance with 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. (15) 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. (16) 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 84 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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 Residual Value Rate Depreciation Rate Category Depreciation method Period (%) (%) 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. (17) 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 85 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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. (18) 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. 86 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Where each part of an asset under acquisition and construction or production is completed separately and is ready for use or sale during the continuing construction of other parts, but it cannot be used or sold until the asset is entirely completed, the capitalization of the borrowing costs shall be ceased when the asset is completed entirely. 3. The suspension of capitalization of borrowing costs Where the acquisition and construction or production of a qualified asset is interrupted abnormally and the interruption period lasts for more than 3 months, the capitalization of the borrowing costs shall be suspended. If the interruption is a necessary step for making the qualified asset under acquisition and construction or production ready for the intended use or sale, the capitalization of the borrowing costs shall continue. The borrowing costs incurred during such period shall be recognized as expenses, and shall be recorded into the profits and losses of the current period, till the acquisition and construction or production of the asset restarts. 4. Method of calculating the capitalization rate and capitalized amount of borrowing costs For interest expense (minus the income of interests earned on the unused borrowing loans as a deposit in the bank or investment income earned on the loan as a temporary investment) and the ancillary expense incurred to a specifically borrowed loan, those incurred before a qualified asset under acquisition, construction or production is ready for the intended use or sale shall be capitalized at the incurred amount when they are incurred, and shall be recorded into the costs of the asset eligible for capitalization. The Company shall calculate and determine the to-be-capitalized amount of interests on the general borrowing by multiplying the weighted average asset disbursement of the part of the accumulative asset disbursements minus the general borrowing by the capitalization rate of the general borrowing used. The capitalization rate shall be calculated and determined in light of the weighted average interest rate of the general borrowing. (19) 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. 87 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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 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. 88 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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. (20) 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 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 89 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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. (21) 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. (22) Contract liability When either party to a contract has performed, the Company shall present the contract in the statement of financial position as a contract asset or a contract liability, depending on the relationship between the Company’s performance and the customer’s payment. If a customer pays consideration, or the Company has a right to an amount of consideration before the Company transfers a good or service to the customer, the Company shall present the contract as a contract liability. Contract assets and contract liabilities under the same contract are disclosed in net amount. (23) 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 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 90 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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. (24) 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. 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: 91 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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. (25) Revenue The company shall recognise revenue when (or as) the company satisfies a performance obligation when (or as) the customer obtains control of a promised good or service. Control of a promised good or service refers to the ability to direct the use of, and obtain substantially all of the remaining benefits from it. If the contract contains two or more performance obligations, the company shall allocate the transaction price to each individual performance obligation based on the relative proportion of the stand-alone selling price of the goods or services promised by each individual performance obligation on the date of the contract. The company measures revenue based on the transaction price allocated to each individual performance obligation. The transaction price is the amount of consideration to which the company expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties or amounts expected to be returned to customers. The company shall consider the terms of the contract and its customary business practices to determine the transaction price. When determining the transaction price, the company shall consider the effects of all of the following: variable consideration, the existence of a significant financing component in the contract, non-cash consideration, and consideration payable to a customer. The company determines the transaction price that includes variable consideration at an amount that does not exceed the amount of accumulated recognized revenue that is unlikely to be materially reversed when the relevant uncertainty is eliminated. If there is a significant financing component in the contract, the company shall recognise revenue at an amount that reflects the price that a customer 92 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 would have paid for the promised goods or services if the customer had paid cash for those goods or services when (or as) they transfer to the customer, and use the effective interest method to amortize the difference between the transaction price and the contract consideration during the contract period. If the interval between the transfer of control and the payment by the customer does not exceed one year, the financing component will not be considered. The company transfers control of a good or service over time and, therefore, satisfies a performance obligation and recognises revenue over time, if one of the following criteria is met. Otherwise, the company satisfies the performance obligation at a point in time. (a) the customer simultaneously receives and consumes the benefits provided by the company’s performance as the company performs; (b) the company’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or (c) the company’s performance does not create an asset with an alternative use to the company and the company has an enforceable right to payment for performance completed to date. The company shall recognise revenue over time by measuring the progress towards complete satisfaction of that performance obligation, except where the performance progress cannot be reasonably determined. The company considers the nature of the goods or services and adopts the output method or the input method to determine the progress of performance. Where the performance progress cannot be reasonable determined, but the company expects to recover the costs incurred in satisfying the performance obligation, the company shall recognise revenue only to the extent of the costs incurred until such time that it can reasonably measure the outcome of the performance obligation. For performance obligations satisfied at a certain point in time, the company shall recognises revenue at the point when the customer obtains control of the relevant goods or services. To determine the point in time at which a customer obtains control of a promised goods or services, the company shall consider requirements as follows: (a) The company has a present right to payment for the promised goods or services and the customer is presently obliged to pay for that; (b) The company has transferred the legal title of the goods to the customer, that is, the customer has the legal title to the goods; (c) The company has transferred physical possession of the goods to the customer, that is, the customer has taken possession of the goods; (d) The company has transferred the significant risks and rewards of ownership of the goods to the customer, that is, the customer has the significant risks and rewards of ownership of the goods; (e) The customer has accepted the promised goods or services. (26) Contract costs Contract costs include costs to fulfill a contract and incremental costs of obtaining a contract. 93 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 If the costs incurred in fulfilling a contract with a customer are not within the scope of another Standard, for example, Inventories, Property, Plant and Equipment or Intangible Assets, the company shall recognise an asset from the costs incurred to fulfil a contract only if those costs meet all of the following criteria: (a) the costs relate directly to a contract or to an expected contract; (b) the costs generate or enhance resources of the Company that will be used in satisfying performance obligations in the future; and (c) the costs are expected to be recovered. The company shall recognise as an asset the incremental costs of obtaining a contract with a customer if the company expects to recover those costs. An asset recognised in accordance with contract costs shall be amortised in consistent with the transfer to the customer of the goods or services to which the asset relates. The company may recognise the incremental costs of obtaining a contract as an expense when incurred if the amortisation period of the asset is one year or less. The company shall recognise an impairment loss in profit or loss to the extent that the carrying amount of an asset related to contract assets exceeds: (a) the remaining amount of consideration that the company expects to receive in exchange for the goods or services to which the asset relates; less (b) the costs that relate directly to providing those goods or services and that have not been recognised as expenses. The company shall recognise in profit or loss a reversal of some or all of an impairment loss previously recognised when the impairment conditions no longer exist or have improved. The increased carrying amount of the asset shall not exceed the carrying amount that if no impairment loss had been recognised previously. (27) 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. 94 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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: (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. 95 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 (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. (28) 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. (29) 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 96 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 (2) The rents collected from operating leases shall be recorded in the profits and losses of the current period by using the straight-line method over each period of the whole lease term in which free lease period is included. The initial direct costs paid by the Company shall be recorded into the profits and losses of the current period. The initial direct costs shall be capitalized if it is material, and be allocated to each period as per the basis for rental revenue recognition. If the Company has shouldered any expense related to the lease which shall have been borne by the lessee, the company shall deduct these expenses from the total rental revenue and the remaining rental revenue shall be allocated to each period during the lease term. 2. Accounting treatment of financial leasing (1) Leased in asset On the lease beginning date, a lessee shall record the lower one of the fair value of the leased asset and the present value of the minimum lease payments on the lease beginning date as the initial book value, recognize the amount of the minimum lease payments as the initial book value of long-term account payable, and treat the balance between the recorded amount of the leased asset and the long-term account payable as unrecognized financing charges. The lessee shall adopt the effective interest rate method to calculate and recognize the financing charge in the current period. The unrecognized financing charge shall be amortized to each period during the lease term. Initial direct costs incurred by the Company shall be recorded in the value of the leased asset. (2) Leased out asset On the lease beginning date, a lessee shall record the balance between the sum of finance lease receivables plus unguaranteed residual value and the present value of the sum as unrealized financing income, and record rental as revenue when received for each period in the future. Initial direct costs incurred by the Company related to the leased asset shall be recorded in the initial measurement of the finance lease receivables, and reduce the amount of revenue recognized during the lease term. (30) 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: The component stands for an independent main business or a major business area; The component is a part of disposal plan of an independent main business or a major business area; The component is a subsidiary which is acquired only for sale again. (31) 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 97 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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. (3) Impairment of other assets except inventory and financial assets As mentioned in note (20) 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 98 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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 (16) Fixed Assets and note (19) 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. (32) Change of significant accounting policy and accounting estimate 1. Change of major accounting policy during the current reporting period Implementation of the "Accounting Standards for Business Enterprises No. 14 - Revenue" (revised in 2017) (hereinafter referred to as the "New Revenue Standards") The Ministry of Finance revised the "Accounting Standards for Business Enterprises No. 14 - Revenue" in 2017. The revised standard stipulates that the initial implementation of the standard should adjust the amount of retained earnings and other related items in the financial statements at the beginning of the year based on the cumulative impact, and no adjustments should be made to comparable period information. 99 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 The company implements the new revenue standard from January 1, 2020. According to the standard, the company only adjusts the retained earnings at the beginning of 2020 and the amount of other related items in the financial statements for the cumulative impact of contracts that have not been completed on the date of first implementation, and the comparative financial statements do not adjust. The major impact of the implementation of the regulation are as follows: January 1, 2020 Change of accounting policy content Affected items Consolidated Financial Parent company and reason statement financial statement Reclassify advance from customers to Advance from customers -4,429,821,526.79 -5,597,707,687.22 contract liabilities. Contract liabilities 4,429,821,526.79 5,597,707,687.22 Compared with the previous revenue standards, the impact of the implementation of the new revenue standards on the relevant items for the period from January to June in 2020 is as follows: June 30, 2020 Affected items Consolidated Financial statement Parent company financial statement Contract liabilities 4,658,022,515.99 5,736,618,018.47 Advance from customers -4,658,022,515.99 -5,736,618,018.47 There is no impact to the items in the comprehensive income statement. 2. Change of accounting estimation (1) The company’s principle for determining the applicable point of time for changes in accounting estimates: According to Article 19 of the "Accounting Standards for Business Enterprises No. 4 - Fixed Assets", the enterprise should review the useful life, estimated net residual value and depreciation method of fixed assets at least at the end of each year. If the estimated useful life is different from the original estimate, the useful life of the fixed asset shall be adjusted. (2) Major change of accounting estimate during the current reporting period Change of accounting estimation Date of Approval procedure Affected items and amount content and reason application Content: The company adjusted the On January 31, 2020, the Accumulative depreciation: RMB - useful life of some of the fixed eighth meeting of the January 1, 2020 206,452,050.12; assets since January 1, 2020. company's eighth board of Operating cost : RMB - 100 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Change of accounting estimation Date of Approval procedure Affected items and amount content and reason application Reason: At the end of 2019, the directors reviewed and 206,452,050.12. company evaluated the actual approved the "Proposal on condition and depreciation period of Adjusting the Useful Life of fixed assets, and believed that the Certain Fixed Assets" company’s production equipment had a relatively high level of equipment and technical content, and maintained good conditions. The company’s cumulative investment in equipment maintenance costs from 2010 to 2019 was RMB 11.959 billion. To make the depreciation period of fixed assets closer to the actual service life, it is necessary to adjust the useful life of some fixed assets. 3. Adjustments of the beginning balance due to the first implementation of new revenue standards: Consolidated statement of financial position: Adjustment Ending balance of Beginning balance Items the previous year of the current year Reclassification Remeasurement Total Advance from 4,429,821,526.79 -4,429,821,526.79 -4,429,821,526.79 customers Contract 4,429,821,526.79 4,429,821,526.79 4,429,821,526.79 liabilities Statement of financial position of the parent company 101 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Ending balance of Beginning balance Adjustment Items the previous year of the current year Reclassification Remeasurement Total Advance from 5,597,707,687.22 -5,597,707,687.22 -5,597,707,687.22 customers Contract 5,597,707,687.22 5,597,707,687.22 5,597,707,687.22 liabilities VI. Taxes 1. Major type of taxes and corresponding tax rates Tax Taxation Method Tax Rate (%) The balance of output VAT calculated based on product sales and taxable services revenue in Value-added Tax (VAT) 6, 9, 13 accordance with the tax laws after subtracting the deductible input VAT of the period City maintenance and construction tax Based on VAT and business tax actually paid 7, 5 Educational surcharges Based on VAT and business tax actually paid 3, 2 Enterprise income tax Based on taxable profit 25 Notes to whether there is different income tax rate Tax payer Income tax rate VII. Notes to the consolidated financial statements (1) Cash at bank and on hand Items 30 June 2020 31 December 2019 Cash on hand 7,110.40 5,588.98 Cash at bank 11,417,585,553.12 13,441,409,399.60 Other monetary funds 5,370,886,642.41 4,974,429,409.19 Total 16,788,479,305.93 18,415,844,397.77 Total amount deposited abroad The details of restricted monetary funds resulted from guarantee or pledge or freeze accounts are as follows: Items 30 June 2020 31 December 2019 Margin for bank acceptance bill 4,947,574,509.41 4,803,950,250.12 Margin for letter of credit 419,360,000.00 166,527,026.07 102 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Items 30 June 2020 31 December 2019 Loan margin 3,330,000.00 3,330,000.00 Others 622,133.00 622,133.00 Total 5,370,886,642.41 4,974,429,409.19 (2) Accounts receivable 1. Accounts receivable disclosed by aging Items 30 June 2020 31 December 2019 Within 1 year (inclusive) 186,365,796.17 187,728,755.63 1-2 years (inclusive) 32,428,477.61 31,659,160.02 2-3 years (inclusive) 24,358,369.27 24,710,744.49 Over 3 years 174,707,324.46 177,928,572.30 Total 417,859,967.51 422,027,232.44 Less: Provision for bad debts 183,064,080.16 186,330,966.78 Total 234,795,887.35 235,696,265.66 2. Accounts receivable disclosed by category 30 June 2020 Gross carrying amount Provision for bad debts Items Percentage Bad debts Book value Amount Amount (%) ratio (%) Tested for impairment 47,762,337.18 11.43 47,762,337.18 100.00 individually Tested for impairment by 370,097,630.33 88.57 135,301,742.98 36.56 234,795,887.35 portfolio Include: Portfolio 1: Aging portfolio 370,097,630.33 88.57 135,301,742.98 36.56 234,795,887.35 Total 417,859,967.51 100.00 183,064,080.16 234,795,887.35 103 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 31 December 2019 Gross carrying amount Provision for bad debts Items Percentage Bad debts Book value Amount Amount (%) ratio (%) Individually significant and tested for impairment 47,762,337.18 11.32 47,762,337.18 100.00 individually Accounts receivable tested 374,264,895.26 88.68 138,568,629.60 37.01 235,696,265.66 for impairment by portfolio Other insignificant items but tested for impairment individually Total 422,027,232.44 100.00 186,330,966.78 235,696,265.66 Accounts receivables tested for impairment individually 30 June 2020 Company Gross carrying Provision for bad Bad debts ratio Reason amount debts (%) Benxi Nanfen Xinhe Metallurgical Furnace Material 47,762,337.18 47,762,337.18 100.00 Halt operation Co., Ltd Total 47,762,337.18 47,762,337.18 Accounts receivable tested for impairment by aging portfolio: 30 June 2020 Items Gross carrying amount Provision for bad debts Bad debts ratio (%) Within 1 year (inclusive) 186,365,796.17 1,863,657.96 1.00 1-2 years (inclusive) 32,428,477.61 1,621,423.88 5.00 2-3 years (inclusive) 24,358,369.27 4,871,673.85 20.00 Over 3 years 126,944,987.28 126,944,987.28 100.00 Total 370,097,630.33 135,301,742.98 3. Information of provision, reversal or recovery of bad debts of current period. The reversal of bad debts of current period is RMB 3,266,886.60. 104 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 4. No accounts receivable has been written off during the current period. 5. Top five debtors at the end of period 30 June 2020 Company Percentage of total Accounts Provision for Gross carrying amount receivable (%) bad debts The first 51,186,799.05 12.25 589,234.48 The second 47,762,337.18 11.43 47,762,337.18 The third 14,246,791.47 3.41 The fourth 13,192,766.29 3.16 The fifth 11,524,466.74 2.76 130,131.74 Total 137,913,160.74 33.01 48,481,703.40 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 (3) Accounts receivable financing 1. Accounts receivable financing by category Item 30 June 2020 31 December 2019 Notes Receivable 4,072,660,868.85 2,117,763,147.67 Including: Bank acceptance bill 4,059,350,868.85 2,108,970,139.40 Commercial acceptance bill 13,310,000.00 8,793,008.27 Accounts receivable 309,461,081.12 311,779,314.21 Total 4,382,121,949.97 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 impairment of accounts receivable financing None 3. The pledged acceptance bill at the end of the period 105 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Items 30 June 2020 Bank acceptance bill 759,753,834.45 Commercial acceptance bill Total 759,753,834.45 4. The amount of notes receivable endorsed over but not yet matured at the end of the period Items Derecognized ending balance Unrecognized ending balance Bank acceptance bill 4,879,438,530.74 Commercial acceptance bill Total 4,879,438,530.74 5. No notes receivable has been transferred into accounts receivable due to inability of drawer to meet acceptance bill at the end of the period (4) Prepayments 1. Prepayments disclosed by aging 30 June 2020 31 December 2019 Aging Amount Percentage (%) Amount Percentage (%) Within 1 year (inclusive) 1,277,487,430.52 99.52 1,284,678,069.97 99.51 1-2 years (inclusive) 6,011,981.75 0.48 6,279,487.94 0.49 2-3 years (inclusive) 53,900.20 53,900.20 Over 3 years 36,000.00 36,000.00 Total 1,283,589,312.47 100.00 1,291,047,458.11 100.00 Notes: As of June 30, 2020, there were no outstanding prepayments over 1 year. 2. Top five prepaid companies at the end of the period Name of the company Amount Percentage (%) The First 813,856,225.94 63.40 The Second 75,732,564.05 5.90 The Third 35,489,495.22 2.76 The Fourth 27,512,085.89 2.14 The Fifth 22,368,060.00 1.74 Total 974,958,431.09 75.96 106 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 (5) Other receivables Items 30 June 2020 31 December 2019 Interest receivables 32,395,784.72 20,504,422.47 Dividend receivables Other receivables 126,011,346.99 152,302,614.30 Total 158,407,131.71 172,807,036.77 1.Interest receivable (1) Interest receivable disclosed by category Items 30 June 2020 31 December 2019 Deposit interest 32,395,784.72 20,504,422.47 Subtotal 32,395,784.72 20,504,422.47 Less: provision for bad debts Total 32,395,784.72 20,504,422.47 (2) The company has no significant overdue interest and provision for bad debts. 2.Other receivables (1) Other receivables disclosed by aging Items 30 June 2020 31 December 2019 Within 1 year (inclusive) 108,817,588.26 135,162,016.85 1-2 years (inclusive) 15,087,613.32 15,306,496.22 2-3 years (inclusive) 3,530,561.08 3,479,413.70 Over 3 years 65,222,052.19 65,222,052.19 Total 192,657,814.85 219,169,978.96 Less: Provision for bad debts 66,646,467.86 66,867,364.66 Total 126,011,346.99 152,302,614.30 (2) Information of provision for bad debts 107 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Stage one Stage two Stage three lifetime expected credit lifetime expected credit Provision for bad 12-month losses losses Total debts expected credit (credit impairment has not (credit impairment has losses occurred) already occurred) Beginning balance 9,494,109.69 57,373,254.97 66,867,364.66 Provision, transfer in, transfer back, -220,896.80 -220,896.80 transfer out during the current period Write-back during the current period Write-off during the current period Other changes Ending balance 9,273,212.89 57,373,254.97 66,646,467.86 Changes in the gross carrying amount of other receivables are as follows: Stage one Stage two Stage three lifetime expected lifetime expected credit Provision for bad 12-month expected credit losses losses Total debts credit losses (credit impairment (credit impairment has has not occurred) already occurred) Beginning balance 137,511,976.11 24,284,747.88 57,373,254.97 219,169,978.96 Increase Decrease 26,291,267.31 220,896.80 26,512,164.11 Other changes Ending balance 111,220,708.80 24,063,851.08 57,373,254.97 192,657,814.85 (3) Other receivables disclosed by nature Nature 30 June 2020 31 December 2019 Accounts 183,332,767.17 209,700,618.22 Others 9,325,047.68 9,469,360.74 Total 192,657,814.85 219,169,978.96 108 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 (4) Top five debtors at the end of the period Percentage of total other Provision for bad Company Nature or content Amount Aging receivables (%) debts The First Accounts 9,648,111.00 within 1 year 5.01 The Second Accounts 9,505,576.53 within 1 year 4.93 The Third Accounts 6,804,946.27 2-3 years 3.53 The Fourth Accounts 3,756,448.28 1-2 years 1.95 2,000.00 within 1 year to The Fifth Accounts 2,661,194.04 1.38 2,465,166.01 over 3 years Total 32,376,276.12 16.81 2,467,166.01 (5) There is no other receivables relates to government subsidies at the end of the reporting period. (6) There is no other receivables derecognized due to the transfer of financial assets at the end of the reporting period. (7) There is no transfer of other receivables and continued involvement in the amount of assets and liabilities formed at the end of the reporting period. (6) Inventories 1. Inventories disclosed by category 30 June 2020 31 December 2019 Items Gross carrying Gross carrying Impairment Book value Impairment Book value amount amount Raw material and main 3,486,744,568.70 26,986,533.69 3,459,758,035.01 3,737,655,945.87 26,986,533.69 3,710,669,412.18 material Work in process and self-made 1,455,369,031.61 32,278,622.48 1,423,090,409.13 1,302,249,713.48 25,995,508.16 1,276,254,205.32 semi- finished product Finished 4,729,490,890.24 26,299,958.86 4,703,190,931.38 2,730,735,542.67 17,261,474.56 2,713,474,068.11 products Total 9,671,604,490.55 85,565,115.03 9,586,039,375.52 7,770,641,202.02 70,243,516.41 7,700,397,685.61 109 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 2. Impairment of inventory Increase Decrease Category 31 December 2019 Write-back or 30 June 2020 Provision Others Others write-off Raw material and main 26,986,533.69 26,986,533.69 material Work in process and self-made semi-finished 25,995,508.16 32,278,622.48 25,995,508.16 32,278,622.48 product Finished products 17,261,474.56 26,299,958.86 17,261,474.56 26,299,958.86 Total 70,243,516.41 58,578,581.34 43,256,982.72 85,565,115.03 (7) Other current assets Items 30 June 2020 31 December 2019 Prepaid enterprise income tax 182,484,352.23 182,484,616.27 VAT input tax 101,722,696.39 130,420,207.82 Total 284,207,048.62 312,904,824.09 110 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 (8) Long-term equity investment Increase/decrease 31 Income or loss on Other Declaration of Other 30 June Total Investees December Add Reduce investment Comprehensive Cash Equity Others 2020 Impairment 2019 Investment Investment recognized under Income Dividends or Provision Changes the equity method Adjustment Profit 1.Joint Venture Subtotal 2.Associated Enterprise Zhejiang Bengang Jingrui 2,642,998.70 29,304.00 2,672,302.70 Steel Processing Co., Ltd.. Subtotal 2,642,998.70 29,304.00 2,672,302.70 Total 2,642,998.70 29,304.00 2,672,302.70 111 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 (9) Other equity instrument investment Items 30 June 2020 31 December 2019 Suzhou Bengang Industrial Co., Ltd. 3,888,980.00 3,888,980.00 Sinosteel Shanghai Steel Processing Co., Ltd. Northeast Special Steel Group Co., Ltd. 1,037,735,849.00 1,037,735,849.00 Guangzhou Benpu Auto Board Sales Co., Ltd. 200,000.00 200,000.00 Wuhan Bengang Yuanhong Trading Co., Ltd 200,000.00 Total 1,042,024,829.00 1,041,824,829.00 Notes: The item "Other equity instrument investment" reflects the ending book value of the non-trading equity instrument investment designated by the company as measured at fair value at fair value through other comprehensive income on the balance sheet date. The company holds 15% equity in Sinosteel Shanghai Steel Processing Co., Ltd. The 10% equity of Northeast Special Steel Group Co., Ltd. held by the company has been pledged to Bank of Dalian Co., Ltd., Shenyang branch. (10) Fixed assets 1. Fixed assets and Disposal of fixed assets Items 30 June 2020 31 December 2019 Fixed assets 24,952,427,383.86 26,123,375,492.40 Disposal of fixed assets Total 24,952,427,383.86 26,123,375,492.40 2. Details of fixed assets Transportation Items Buildings Machinery equipment and Total others 1.Gross carrying amount (1) 31 December 2019 12,321,783,218.79 47,625,624,131.28 908,284,781.31 60,855,692,131.38 (2) Increase in current period 8,162,112.36 22,887,140.10 19,679,682.35 50,728,934.81 Including: Purchase Transferred 8,162,112.36 22,887,140.10 19,679,682.35 50,728,934.81 from construction in progress 112 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Transportation Items Buildings Machinery equipment and Total others Merging Others (3) Decrease in current period 6,057,064.23 70,745,410.85 10,856,244.37 87,658,719.45 Including: Disposal 6,057,064.23 70,745,410.85 10,856,244.37 87,658,719.45 Others (4) 30 June 2020 12,323,888,266.92 47,577,765,860.53 917,108,219.29 60,818,762,346.74 2.Total accumulated depreciation (1) 31 December 2019 5,843,160,062.67 28,243,587,548.42 604,346,279.82 34,691,093,890.91 (2) Increase in current period 148,749,130.68 959,941,877.91 92,572,359.88 1,201,263,368.47 Including: Provision 148,749,130.68 959,941,877.91 92,572,359.88 1,201,263,368.47 Others (3) Decrease in current period 2,826,190.62 51,865,091.34 12,553,762.61 67,245,044.57 Including: Disposal 2,826,190.62 51,865,091.34 12,553,762.61 67,245,044.57 Others (4) 30 June 2020 5,989,083,002.73 29,151,664,334.99 684,364,877.09 35,825,112,214.81 3.Total impairment (1) 31 December 2019 38,596,028.99 2,626,719.08 41,222,748.07 (2) Increase in current period Including: Provision Others (3) Decrease in current period Including: Disposal Others (4) 30 June 2020 38,596,028.99 2,626,719.08 41,222,748.07 4.Total net book value of Fixed assets (1) 30 June 2020 6,296,209,235.20 18,423,474,806.46 232,743,342.20 24,952,427,383.86 (2) 31 December 2019 6,440,027,127.13 19,379,409,863.78 303,938,501.49 26,123,375,492.40 3. Fixed assets idled temporarily 113 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Items Gross carrying amount Accumulated depreciation Impairment Book value 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 equipment 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 the current reporting period, the original value of the fixed assets leased in through financial leasing was RMB 1,050,748,776.34, all of which were leased from the related party Liaoning Hengyi Financial Leasing Co., Ltd. For details, please refer to note (5) 2. Lease under note 10. 5. Fixed assets leased out by operating lease Items Book value Buildings 8,479,821.37 Machinery Total 8,479,821.37 6. Fixed assets without property rights certificates at the end of the period Items Book value Reason Buildings 1,070,014,263.61 To be handled (11) Construction in progress 1. Construction in progress and Construction materials Items 30 June 2020 31 December 2019 Construction in progress 2,560,710,384.30 1,820,264,689.19 Project materials 8,598,323.97 13,588,883.39 Total 2,569,308,708.27 1,833,853,572.58 114 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 2. Details of construction in progress 30 June 2020 31 December 2019 Items Total Gross carrying amount Book value Gross carrying amount Total impairment Book value impairment Energy-saving renovation project of No. 5 blast furnace in 756,972,673.01 756,972,673.01 491,069,345.30 491,069,345.30 ironworks Special steel mill renovation project 135,994,865.49 135,994,865.49 126,479,522.35 126,479,522.35 1# converter energy saving and environmental protection 132,515,955.85 132,515,955.85 148,803,402.52 148,803,402.52 transformation Steelmaking Plant No. 8 Casting Machine Project 193,625,008.01 193,625,008.01 100,460,943.24 100,460,943.24 Reconstruction project of three power plant workshop 3,861,154.59 3,861,154.59 Transformation of No. 2 Casting Machine in Steelmaking 82,682,564.04 82,682,564.04 81,419,913.88 81,419,913.88 Plant CCPP power generation project 115,133,501.01 115,133,501.01 85,320,752.59 85,320,752.59 Environmental protection renovation project of No. 4-6 95,177,941.15 95,177,941.15 69,541,903.74 69,541,903.74 converter Special Steel Electric Furnace Upgrade Project 88,959,809.91 88,959,809.91 62,311,284.01 62,311,284.01 360 square meter sintering machine 73,248,631.59 73,248,631.59 60,930,506.79 60,930,506.79 360 square meter sintering machine waste heat utilization 56,547,049.50 56,547,049.50 55,089,094.50 55,089,094.50 No. 7 blast furnace dry dust removal and energy-saving 70,288,456.71 70,288,456.71 40,993,916.95 40,993,916.95 transformation of TRT power generation 1700 Hot Rolling Improvement 88,288,386.41 88,288,386.41 39,806,201.09 39,806,201.09 Coking plant gas deamination and sulfur ammonia 48,543.69 48,543.69 maintenance project 5#-7# Oxygen Generator Nitrogen Increasing and Energy 38,600,796.92 38,600,796.92 34,339,392.96 34,339,392.96 Saving Renovation 6#Blast furnace environmental protection overhaul project 65,177,829.19 65,177,829.19 30,937,257.41 30,937,257.41 Two sets of dust collectors for the second sintered finished 1,255,783.76 1,255,783.76 29,954,354.78 29,954,354.78 product in ironworks Power plant 4-5# coke oven dry quenching waste heat 27,358.49 27,358.49 steam utilization project Plate transfer to Liaoning Coal Chemical Coke Oven Gas 21,840,791.70 21,840,791.70 21,840,791.70 21,840,791.70 Project Overall improvement of Benxi Steel's manufacturing 22,104,039.00 22,104,039.00 20,685,421.72 20,685,421.72 management 8#9# Coke oven wastewater advanced treatment 20,335,268.74 20,335,268.74 20,335,268.74 20,335,268.74 Others 498,023,975.54 498,023,975.54 299,945,414.92 299,945,414.92 Total 2,560,710,384.30 2,560,710,384.30 1,820,264,689.19 1,820,264,689.19 115 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 3. Changes in important construction projects in the current period Project Transferred Other cumulative Including: Interest Accumulated to fixed asset decrease investment Interest capitalizatio Increase during Project amount of Sources Items Budget 31 December 2019 during during 30 June 2020 accounted for capitalization n rate in current period progress interest of current current the proportion amount in current (%) capitalization funds period period of the budget current period period (%) (%) Energy-saving renovation Self- project of No. 5 1,500,000,000.00 491,069,345.30 265,985,896.52 82,568.81 756,972,673.01 50% 50% 22,681,832.49 4,299,372.31 4.35 raised& blast furnace in Other ironworks Special steel Self- mill renovation 596,070,000.00 126,479,522.35 9,515,343.14 135,994,865.49 24% 25% 2,780,476.54 798,549.83 4.35 raised& project Other 1# converter energy saving Self- and 218,000,000.00 148,803,402.52 -16,287,446.67 132,515,955.85 61% 70% 1,244,218.10 295,400.00 4.35 raised& environmental Other protection transformation Steelmaking Self- Plant No. 8 643,410,000.00 100,460,943.24 93,164,064.77 193,625,008.01 30% 40% raised& Casting Other Machine Project Cold rolled high-strength Self- 6,134,980,000.00 34,614,140.91 2,037,588.85 32,576,552.06 96% 100% 857,867,059.71 raised& steel renovation Other project Reconstruction Self- project of three 593,990,000.00 3,861,154.59 3,861,154.59 99% 98% 34,827,795.34 raised& power plant Other workshop Transformation of No. 2 Casting Self- Machine in 100,900,000.00 81,419,913.88 1,262,650.16 82,682,564.04 82% 85% 129,125.71 raised& Steelmaking Other Plant 116 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Project Transferred Other cumulative Including: Interest Accumulated to fixed asset decrease investment Interest capitalizatio Increase during Project amount of Sources Items Budget 31 December 2019 during during 30 June 2020 accounted for capitalization n rate in current period progress interest of current current the proportion amount in current (%) capitalization funds period period of the budget current period period (%) (%) CCPP power Self- generation 1,060,000,000.00 85,320,752.59 29,812,748.42 115,133,501.01 11% 10% 2,587,646.72 60,479.95 4.35 raised& project Other Environmental protection Self- renovation 270,000,000.00 69,541,903.74 25,636,037.41 95,177,941.15 35% 40% 1,800,233.51 548,620.48 4.35 raised& project of No. 4- Other 6 converter Special Steel Self- Electric Furnace 1,617,610,000.00 62,311,284.01 26,648,525.90 88,959,809.91 5% 10% raised& Upgrade Project Other 360 square Self- meter sintering 1,284,032,000.00 60,930,506.79 12,318,124.80 73,248,631.59 98% 90% raised& machine Other Total 14,018,992,000.00 1,226,337,574.42 486,531,239.95 2,120,157.66 1,710,748,656.71 923,918,388.12 6,002,422.57 117 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 4. There is no impairment of construction in progress during the current period. 5. Construction materials 30 June 2020 31 December 2019 Items Gross carrying Gross carrying Impairment Book value Impairment Book value amount amount Construction 8,598,323.97 8,598,323.97 13,588,883.39 13,588,883.39 materials Total 8,598,323.97 8,598,323.97 13,588,883.39 13,588,883.39 (12) Intangible assets 1. Details of intangible assets Items Land use right Software Total 1.Total of original value (1) 31 December 2019 327,028,797.84 310,401.55 327,339,199.39 (2) Increase Including: Purchase Internal R&D Increase in Mergers Others (3) Decrease Including: Disposal Others (4) 30 June 2020 327,028,797.84 310,401.55 327,339,199.39 2.Total of Accumulated Amortization (1) 31 December 2019 55,717,267.98 121,908.07 55,839,176.05 (2) Increase 3,270,287.94 13,397.46 3,283,685.40 Including: Provision 3,270,287.94 13,397.46 3,283,685.40 Others (3) Decrease Including: Disposal Others (4) 30 June 2020 58,987,555.92 135,305.53 59,122,861.45 3.Total of Impairment 118 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Items Land use right Software Total (1) 31 December 2019 (2) Increase Including: Provision Others (3) Decrease Including: Disposal Others (4) 30 June 2020 4. Total of Net value (1) 31 December 2019 268,041,241.92 175,096.02 268,216,337.94 (2) 30 June 2020 271,311,529.86 188,493.48 271,500,023.34 2. Land use right without Certificate of Land use right at the end of the period. None. (13) Deferred tax asset and deferred tax liability 1. Deferred tax assets before taking into consideration of the balance offsetting 30 June 2020 31 December 2019 Items Deductible temporary Deferred tax Deductible temporary Deferred tax differences asset differences asset Impairment 390,913,104.12 97,728,276.03 378,651,125.80 94,662,781.44 Internal unrealized profit 54,603,923.36 13,650,980.84 53,312,397.14 13,328,099.29 Differences of depreciation 333,978,859.03 83,494,714.76 333,978,859.03 83,494,714.76 and amortization Total 779,495,886.51 194,873,971.63 765,942,381.97 191,485,595.49 2. There is no deferred tax liabilities before taking into consideration the offsetting of balances at the end of the period. 3. At the end of the reporting period, there are no deferred tax assets or liabilities listed as net value after offsetting. 4. Unrecognized deferred tax assets 119 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Items 30 June 2020 31 December 2019 Deductible losses 388,187,521.59 653,832,187.01 Impairment of assets 410,479.98 428,163.12 Total 388,598,001.57 654,260,350.13 5. The deductible loss of unrecognized deferred tax assets due in the following period Items 30 June 2020 31 December 2019 Notes Year 2020 341,870,529.25 607,515,194.67 Year 2021 10,981,383.41 10,981,383.41 Year 2022 1,000,766.72 1,000,766.72 Year 2023 16,327,268.19 16,327,268.19 Year 2024 18,007,574.02 18,007,574.02 Total 388,187,521.59 653,832,187.01 (14) Other non-current assets 30 June 2020 31 December 2019 Items Gross carrying Impair Gross carrying Impair Book value Book value amount ment amount ment Prepayment for long-term 963,239,365.67 963,239,365.67 708,502,552.50 708,502,552.50 assets Total 963,239,365.67 963,239,365.67 708,502,552.50 708,502,552.50 Notes: The prepayment for long-term assets at the end of the period are prepaid for equipment and construction funds, of which RMB 841,113,071.18 was the financial lease deposit paid to Liaoning Hengyi Financial Leasing Co., Ltd. (15) Short-term loans 1. Classification of short-term loans Items 30 June 2020 31 December 2019 Pledge loans Mortgage loans Guaranteed loans 12,086,705,000.00 12,731,478,000.00 Credit loans 420,000,000.00 420,000,000.00 120 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Items 30 June 2020 31 December 2019 Total 12,506,705,000.00 13,151,478,000.00 2. There is no short-term loans that were overdue at the end of the reporting period (16) Notes payables Items 30 June 2020 31 December 2019 Bank acceptance bill 752,290,000.00 8,897,442,732.91 Domestic letter of credit 10,603,620,199.39 1,174,963,839.77 Domestic letter of credit 2,878,818,288.66 1,756,108,104.27 Total 14,234,728,488.05 11,828,514,676.95 Notes: There are no outstanding notes payable at the end of this period. (17) Accounts payable 1. Accounts payable disclosed by category Items 30 June 2020 31 December 2019 Accounts payable for goods 3,122,246,744.39 3,481,176,373.75 Accounts payable for labor 49,716,139.71 56,959,052.87 Accounts payable for project and equipment 457,345,653.91 581,909,120.17 Repair expense 349,444,971.43 407,468,483.48 Total 3,978,753,509.44 4,527,513,030.27 2. Significant accounts payable aging over one year Items Ending balance Amount aging over one year Company 1 50,416,440.77 45,906,440.77 Company 2 93,653,173.71 27,685,592.96 Company 3 14,200,763.99 14,200,763.99 Company 4 14,200,000.00 14,200,000.00 Company 5 32,153,162.29 11,977,425.94 Company 6 15,810,625.07 12,040,944.48 Total 220,434,165.83 126,011,168.14 Notes: The above significant accounts payable aged over one year have not yet reached the settlement conditions. (18) Advance from customers 121 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Items 30 June 2020 31 December 2019 Advance for goods 4,429,821,526.79 Total 4,429,821,526.79 (19) Contract liabilities Items 30 June 2020 31 December 2019 Advance for goods 4,658,022,515.99 Total 4,658,022,515.99 (20) Employee benefits payable 1. Employee benefits payable Items 31 December 2019 Increase Decrease 30 June 2020 (1) Short-term employee 22,208,442.94 947,883,058.17 929,828,911.45 40,262,589.66 benefits (2) Post-employment benefits - defined 62,312.32 79,852,867.66 79,517,956.70 397,223.28 contribution plans (3) Termination benefits 1,427,419.30 914,555.00 512,864.30 (4) Other benefits due within one year Total 23,698,174.56 1,027,735,925.83 1,010,261,423.15 41,172,677.24 2. Short-term employee benefits Items 31 December 2019 Increase Decrease 30 June 2020 (1) Salary, bonus, 12,974,335.94 682,125,744.78 667,433,631.49 27,666,449.23 allowance and subsidy (2) Employee welfare 42,088,821.33 42,088,821.33 (3) Social Insurance 756,616.34 151,522,095.49 148,532,398.75 3,746,313.08 Including: Medical 106,650.30 54,080,133.64 54,133,936.64 52,847.30 insurance Work injury 649,966.04 15,341,554.21 12,632,965.43 3,358,554.82 insurance Maternity insurance 122 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Items 31 December 2019 Increase Decrease 30 June 2020 (4) Housing 6,855,601.00 56,644,301.00 56,644,301.00 6,855,601.00 (5) Union funds and staff 1,621,889.66 15,502,095.57 15,129,758.88 1,994,226.35 education fee (6) Short-term compensated absences (7) Short-term profit - sharing scheme Total 22,208,442.94 947,883,058.17 929,828,911.45 40,262,589.66 3. Defined contribution plans Items 31 December 2019 Increase Decrease 30 June 2020 Basic pension fund 60,423.10 77,455,966.53 77,127,366.80 389,022.83 Unemployment insurance 1,889.22 2,396,901.13 2,390,589.90 8,200.45 Total 62,312.32 79,852,867.66 79,517,956.70 397,223.28 (21) Current tax liabilities Items 30 June 2020 31 December 2019 Value-added tax 6,341,821.09 246,921,117.21 Corporate income tax 5,326,863.20 6,250,204.39 City maintenance and construction tax 523,353.68 11,416,274.65 House property tax 3,676,391.46 3,445,290.84 Educational surcharges 421,669.65 8,146,826.78 Land use right tax 1,128,142.41 1,128,141.09 Environmental tax 251,080.35 5,264,008.42 Others 4,278,390.14 2,253,951.42 Total 21,947,711.98 284,825,814.80 (22) Other payables Items 30 June 2020 31 December 2019 Interest payables 20,582,111.30 10,818,986.30 Dividends payables Other payables 623,477,759.31 651,882,758.67 Total 644,059,870.61 662,701,744.97 123 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 1. Interest Payable Items 30 June 2020 31 December 2019 Loan interests 20,582,111.30 10,818,986.30 Total 20,582,111.30 10,818,986.30 At the end of the reporting period, there is no significant overdue interest 2. Other payables (1) Other payables disclosed by nature Items 30 June 2020 31 December 2019 Deposit 1,975,288.77 1,933,435.69 Margin 84,938,221.01 86,166,961.89 Accounts 431,828,769.92 454,536,559.31 Others 104,735,479.61 109,245,801.78 Total 623,477,759.31 651,882,758.67 (2) There is no significant other payables aged over one year at the end of the reporting period. (23) Non-current liabilities due within one year Items 30 June 2020 31 December 2019 Long-term loans due within one year 1,201,524,980.80 234,474,657.99 Bond payables due within one year Long-term payables due within one year Total 1,201,524,980.80 234,474,657.99 Notes: Among the long-term loans due within one year, RMB 1,200,000,000.00 is credit loan and RMB 1,524,980.80 is guaranteed loan. (24) Long-term loans Items 30 June 2020 31 December 2019 Pledged loans 622,600,000.00 622,600,000.00 Mortgage loan Guaranteed loans 1,313,560,767.82 1,106,159,800.73 Credit loans 1,874,303,166.36 3,120,916,110.00 Total 3,810,463,934.18 4,849,675,910.73 (25) Long-term payables 124 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Items 30 June 2020 31 December 2019 Long-term payables 1,050,748,776.34 516,939,408.14 Special payables Total 1,050,748,776.34 516,939,408.14 Long-term payables Items 30 June 2020 31 December 2019 Financing lease payments 1,050,748,776.34 516,939,408.14 Total 1,050,748,776.34 516,939,408.14 Notes: At the end of the reporting period, the amount of unrealized financing expenses payable for financing leases was RMB 824,818,755.27. The company needs to pay interest on time, the principal is a one-time payment after the lease contract expires, and expiry date of each lease contract that has not been completely executed is more than 3 years. (26) Deferred income Items 31 December 2019 Increase Decrease 30 June 2020 Reason Government 208,955,407.30 1,626,919.00 37,890,873.76 172,691,452.54 subsidy Total 208,955,407.30 1,626,919.00 37,890,873.76 172,691,452.54 125 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Projects of government subsidies: Transfer to non- Other Items 31 December 2019 Increase 30 June 2020 Related to assets or income operating income decreaseproject national support funds Municipal Skills Master Workstation Expenses in 2018 (Special Steel, Steelmaking, and Energy General Plant 80,000 187,039.34 120,423.00 66,616.34 Related to income each) Carbon Fiber Wastewater Advanced Treatment Project in 9,500,000.00 9,500,000.00 Related to assets Dongfeng Plant Area of Plate Coking Plant Coal-fired boiler desulfurization and denitrification project in 4,200,000.00 300,000.00 3,900,000.00 Related to assets high-pressure workshop of Bengang Power Plant Bengang Group Co., Ltd. Automotive Sheet Engineering 1,000,000.00 1,000,000.00 Related to assets Laboratory Engineering Construction Fund Benxi Iron and Steel Automotive Sheet Engineering Laboratory 1,000,000.00 160,206.60 839,793.40 Related to assets Project Research and development of the third-generation high- 2,900,000.00 2,900,000.00 Related to assets strength steel for automobiles Flue gas desulfurization project of 7 130-ton combustion 14,400,000.00 2,400,000.00 12,000,000.00 Related to assets boilers in power plant Project fund for cogeneration transformation project of power 6,000,000.00 1,000,000.00 5,000,000.00 Related to assets plant's three-electric workshop Demonstration project of construction of energy management 4,640,000.00 1,160,000.00 3,480,000.00 Related to assets center for industrial enterprises Research and development of anti-oxidation hot forming steel 250,000.00 0.10 249,999.90 Related to income PHS1500A Air quality automatic monitoring system 105,000.00 35,000.00 70,000.00 Related to assets Cold rolled high-strength steel renovation project 150,000,000.00 25,000,000.00 125,000,000.00 Related to assets 126 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Transfer to non- Other Items 31 December 2019 Increase 30 June 2020 Related to assets or income operating income decrease Energy saving and environmental protection project of 1,160,000.00 580,000.00 580,000.00 Related to assets sintering machine in ironworks Liaoning craftsman subsidy 100,002.97 14,002.80 86,000.17 Related to income Construction of a new platform for professional technology in 1,000,000.00 300,000.00 700,000.00 Related to assets the automotive steel industry Study on the Effect Mechanism and Control of Rare Earth 184,364.99 -3,252.74 187,617.73 Related to income Oxysulfide on Plasticity of Automobile Steel Introduce special funds for overseas advanced applicable technologies (progress in production technology of high-end 4,000,000.00 1,000,000.00 3,000,000.00 Related to assets electro-galvanized sheet) High-grade electro-galvanized sheet production line project for 8,208,000.00 4,104,000.00 4,104,000.00 Related to assets automobiles Compensation for closing city construction service center 1,626,919.00 1,626,919.00 Related to income Total 208,955,407.30 1,626,919.00 37,890,873.76 172,691,452.54 127 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 (27) Share capital Increase/decrease (+ , - ) 31 December Issuing Transferred Items Bonus 30 June 2020 2019 of new from Others Subtotal shares share reserves Capital 3,875,371,532.00 3,875,371,532.00 shares (28) Capital reserves Items 31 December 2019 Increase Decrease 30 June 2020 Capital premium over par 12,227,292,378.47 12,227,292,378.47 value Other capital reserves 115,917,468.82 115,917,468.82 Total 12,343,209,847.29 12,343,209,847.29 (29) Special Reserves Items 31 December 2019 Increase Decrease 30 June 2020 Safety production 212,687.41 26,575,861.58 4,308,363.55 22,480,185.44 cost Total 212,687.41 26,575,861.58 4,308,363.55 22,480,185.44 (30) Surplus Reserves Items 31 December 2019 Increase Decrease 30 June 2020 Statutory surplus 961,105,529.85 961,105,529.85 reserves Total 961,105,529.85 961,105,529.85 (31) Undistributed Profits Items Current period Previous period Before adjustments: undistributed profits at last 2,307,765,664.62 1,945,887,269.82 year-end Adjustments of the beginning distributed profits (increase + / decease -) 128 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Items Current period Previous period After adjustments: undistributed profit at this year- 2,307,765,664.62 1,945,887,269.82 beginning Add: undistributed profit belonging to parent 254,644,204.33 555,646,971.40 company Less: Statutory surplus reserves Discretionary reserves General risk reserves Common shares dividend payable 193,768,576.60 Common shares dividend transferred to paid-in capital Ending balance of undistributed profits 2,562,409,868.95 2,307,765,664.62 (32) Operating income and operating cost Current period Previous period Items Revenue Cost Revenue Cost Principal 20,470,526,587.62 18,886,384,469.92 22,581,458,005.55 20,807,089,888.18 business Other business 1,714,010,672.43 1,553,861,892.75 1,521,137,161.59 1,260,522,841.47 Total 22,184,537,260.05 20,440,246,362.67 24,102,595,167.14 22,067,612,729.65 Details for operating income: Items Current period Previous period Principal business 20,470,526,587.62 22,581,458,005.55 Including:Domestic 17,852,661,337.91 18,514,105,145.87 Abroad 2,617,865,249.71 4,067,352,859.68 Other business 1,714,010,672.43 1,521,137,161.59 Including:Domestic 1,714,010,672.43 1,521,137,161.59 Abroad Total 22,184,537,260.05 24,102,595,167.14 (33) Tax and surcharges Items Current period Previous period City maintenance and construction tax 13,467,815.13 27,561,420.89 129 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Items Current period Previous period Educational surcharge 9,674,693.55 19,877,089.62 Housing property tax 40,089,186.70 38,778,891.04 Land use right tax 6,457,679.78 6,538,299.88 Stamp duty and others 5,619,563.86 6,387,222.58 Environmental tax 12,962,357.84 14,961,858.43 others 127,139.82 20,580.53 Total 88,398,436.68 114,125,362.97 (34) Selling and distribution expenses Items Current period Previous period Freight 532,184,917.51 456,217,341.94 Port surcharges 53,812,369.10 52,405,847.32 Import and export agency fee 30,678,165.54 34,174,633.61 Salary and benefits 12,735,597.76 13,553,533.82 Others 9,404,066.26 13,751,821.86 Package fee 3,578,102.61 4,342,020.59 Total 642,393,218.78 574,445,199.14 (35) General and administrative expenses Items Current period Previous period Salary and benefits 110,662,138.91 122,383,642.39 Repair expense 102,044,859.99 142,464,599.50 Land use right fee 32,611,483.62 27,345,714.30 Others 58,119,763.89 62,667,766.52 Depreciation 18,573,834.52 24,216,703.47 Social insurance fee 18,957,667.84 23,532,872.66 Heating fee 18,050,334.83 22,391,441.18 Water resources fee 12,470,097.22 11,993,951.74 Housing fund 5,056,476.00 4,737,351.00 Amortization 2,975,850.60 2,970,897.50 Entertainment fee 369,545.17 1,070,316.75 Rental fee 661,452.72 643,214.78 Shipping fee 274,811.10 349,339.98 130 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Items Current period Previous period Total 380,828,316.41 446,767,811.77 (36) Research and development expenses Items Current period Previous period Depreciation, materials and compensation, etc. 20,202,985.20 15,408,472.28 Total 20,202,985.20 15,408,472.28 (37) Financial expenses Items Current period Previous period Interest expenditure 439,861,353.93 586,490,262.69 Less: Interest income 154,882,284.33 127,083,779.58 Exchange loss 45,932,418.60 -71,095,752.13 Others 24,125,152.20 15,154,975.44 Total 355,036,640.40 403,465,706.42 (38) Other income Items Current period Previous period Government subsidy 37,894,126.40 41,695,000.00 Others 693,206.00 Total 38,587,332.40 41,695,000.00 131 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Government subsidies included in other income: Items Current period Previous period Related to assets or income Steel for high-strength pipelines under low-temperature and high-pressure service 93,575.00 52,000.00 income conditions>Project State Support Fund 2018 municipal skill master workstation costs 120,423.00 income Coal-fired boiler desulfurization and denitrification project in high-pressure workshop of 300,000.00 300,000.00 assets Bengang Power Plant Benxi Iron and Steel Automotive Sheet Engineering Laboratory Project 160,206.60 assets Flue gas desulfurization project of 7 130-ton combustion boilers in power plant 2,400,000.00 2,400,000.00 assets Project fund for cogeneration transformation project of power plant's three-electric workshop 1,000,000.00 1,000,000.00 assets Demonstration project for the construction of energy management center for industrial 1,160,000.00 1,160,000.00 assets enterprises Air quality automatic monitoring system 35,000.00 35,000.00 assets Cold rolled high-strength steel renovation project 25,000,000.00 25,000,000.00 assets Energy saving and environmental protection project of sintering machine in ironworks 580,000.00 580,000.00 assets Liaoning craftsman subsidy 14,002.80 income Construction of a new platform for professional technology in the automotive steel industry 300,000.00 income Special funds for introducing overseas advanced and applicable technologies 1,000,000.00 1,442,000.00 assets High-grade electro-galvanized sheet production line project for automobiles 4,104,000.00 4,104,000.00 assets 132 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Items Current period Previous period Related to assets or income Compensation for closing city construction service center 1,626,919.00 income MES project special funds 860,000.00 assets Environmental pollution control project 1,810,000.00 assets Environmental governance project and regional watershed environmental protection 170,000.00 assets comprehensive prevention and control project Sintering machine waste heat utilization project and desulfurization renovation project 2,102,000.00 assets Ironworks 360 Sintering Machine Flue Gas Desulfurization Project 100,000.00 assets Environmental protection special fund 580,000.00 assets Others 693,206.00 income Total 38,587,332.40 41,695,000.00 133 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 (39) Income on investment Items Current period Previous period Income on disposal of long-term equity investment by 29,304.00 25,907.49 equity method Income on bank short-term financial products Others Total 29,304.00 25,907.49 (40) Credit impairment loss Items Current period Previous period Loss from bad debts of note receivable Loss from bad debts of account receivable 3,266,886.62 3,389,912.79 Loss from bad debts of receivable financing Loss from bad debts of other receivables 220,896.80 361,601.04 Loss from bad debts of debt investment Loss from bad debts of other debt investment Loss from bad debts of long-term receivables Total 3,487,783.42 3,751,513.83 (41) Asset impairment loss Items Current period Previous period Bad debt loss Inventory impairment loss -15,321,598.62 Impairment of fixed assets Total -15,321,598.62 (42) Assets disposal gains Previous The amount recognized in Items Current period period non-recurring profit Disposal gains or losses arising from disposal of fixed 325,651.61 2,418,704.34 325,651.61 assets not classified for sale Total 325,651.61 2,418,704.34 325,651.61 (43) Non-operating income 134 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 The amount Items Current period Previous period recognized in non- recurring profit Non-current assets scrapped 302,362.80 7,955,444.40 302,362.80 gains Others 805,201.30 204,097.84 805,201.30 Debt restructuring gain 32,800.02 50,640.00 32,800.02 Total 1,140,364.12 8,210,182.24 1,140,364.12 (44) Non-operating expense The amount Items Current period Previous period recognized in non- recurring profit Non-current assets scrapped 20,035,471.42 57,974,322.05 20,035,471.42 loss Total 20,035,471.42 57,974,322.05 20,035,471.42 (45) Income tax expense 1. Income tax expense Items Current period Previous period Income tax payable for the current year 12,626,191.22 9,415,176.70 Adjustment of deferred income tax -3,388,376.14 16,547,005.03 Total 9,237,815.08 25,962,181.73 2. Accounting profit and income tax expense adjustment process Items Current period Total profit 265,644,665.42 Income tax expense calculate according to the official or applicable tax rate 66,411,166.35 Effect of different tax rates applied by subsidiaries Effect of adjustment of the income tax expense of prior period Effect of non-taxable income Effect of undeductible costs, expenses or losses Effect of use of deductible losses of unrecognized deferred tax asset of prior -54,648,936.33 period 135 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Items Current period Effect of deductible temporary differences or deductible losses of unrecognized 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 additional deductible expenses and tax rate adjustments required by the tax law Income tax expenses 9,237,815.08 (46) 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 Current period Previous period Consolidated net profit attributable to ordinary 254,644,204.33 453,209,615.76 shareholders of parent company The weighted average number of common shares 3,875,371,532.00 3,813,757,237.67 issued by the company Basic earnings per share 0.07 0.12 Including: basic earnings per share for continuing 0.07 0.12 operations Basic earnings per share for discontinued operations 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 Current period Previous period Consolidated net profit attributable to ordinary 254,644,204.33 453,209,615.76 shareholders of parent company (diluted) The weighted average number of common shares 3,875,371,532.00 3,813,757,237.67 issued by the company (diluted) 136 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Items Current period Previous period Basic earnings per share 0.07 0.12 Including: basic earnings per share for continuing 0.07 0.12 operations Basic earnings per share discontinued (47) Notes of statement of cash flows 1. Cash received related to other operating activities Items Current period Previous period Withdraw of current accounts, advance for another 16,851,204.08 17,151,876.47 Interest income 154,882,284.33 127,083,779.58 Special subsidy income 1,626,919.00 428,000.00 Non-operating income 503,009.25 117,870.10 Others 153,380.34 123,098.19 Total 174,016,797.00 144,904,624.34 2. Cash paid related to other operating activities Items Current period Previous period Current accounts, advance for another 199,605,380.27 221,234,925.29 Sales expenses 4,545,479.59 4,449,939.39 Administrative expenses 18,446,185.30 17,883,394.86 Bank charges 3,331,343.25 3,255,172.22 Others 360,322.84 365,921.44 Total 226,288,711.25 247,189,353.20 (48) Supplementary details of statement of cash flows 1. Supplementary details for statement of cash flows Items Current period Previous period 1. A reconciliation of net profit to cash flows from operating activities: Net profit 256,406,850.34 452,934,689.03 Add: Credit impairment loss 3,487,783.42 3,751,513.83 Asset impairment loss -15,321,598.62 Depreciation of fixed assets and so on 1,201,263,368.47 1,199,864,248.72 137 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Items Current period Previous period Amortization of intangible assets 3,283,685.40 3,278,732.29 Long-term deferred expenses Losses proceeds from disposal of PPE, intangible assets and other long-term assets (Earnings 19,733,108.62 57,974,322.05 marked“-”) Scrapped losses from fixed assets (Earnings marked“-”) Change in fair value loss (Earnings marked“-”) Financial expenses (Earnings marked“-”) 355,036,640.40 403,465,706.42 Investment losses (Earnings marked“-”) Deferred tax assets reduction (Addition -3,388,376.14 15,928,033.89 marked“-”) Deferred tax liabilities increased (Reduction marked“-”) Reduction of inventory (Addition marked“-”) -1,885,641,689.91 -1,289,831,911.07 Operating receivable items reduction (Addition -1,938,821,059.08 -908,736,317.08 marked“-”) Operating payable items increase (Less marked"- 1,852,485,580.02 1,046,157,987.59 ") Other Net cash flows generated from operating activities -151,475,707.08 984,787,005.67 2. Payments of investing and financing activities - not involving cash: Liabilities transferred to capital Convertible bonds due within one year Fixed assets financed by leasing 3. The net increase in cash and cash equivalents: -- Ending balance of cash 11,417,592,663.52 11,788,922,569.51 Less: Beginning balance of cash 13,441,414,988.58 11,752,548,621.97 Add: Ending balance of cash equivalents Less: Opening balance of cash equivalents The net increase in cash and cash equivalents -2,023,822,325.06 36,373,947.54 138 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 2. The structure of cash and cash equivalents Items 30 June 2020 31 December 2019 1. Cash 11,417,592,663.52 13,441,414,988.58 Including: Cash on hand 7,110.40 5,588.98 Bank deposits available on demand 11,417,585,553.12 13,441,409,399.60 Other monetary funds available on demand Central bank deposits available on demand Balances with other financial institutions Loans to other financial institutions 2. Cash equivalents Including: Investment of securities due within 3 months 3. Ending balance of cash and cash equivalents 11,417,592,663.52 13,441,414,988.58 Including: Cash and cash equivalents limited to use by the parent company of other subsidiary in the group (49) Assets of which ownership or right to use are restricted Items 30 June 2020 Reason Cash at bank and on hand 5,370,886,642.41 Deposit for notes and letter of credit Accounts receivable Pledged for acceptance bill and short term 759,753,834.45 financing loan Other equity instrument 1,037,735,849.00 Pledged for loans investments Total 7,168,376,325.86 (50) Foreign currency monetary items 1. Foreign currency monetary items Ending balance in Exchange rate at the Ending balance Items foreign currency end of the period translated to RMB Cash at bank and on hand 62,843,510.18 Including: USD 8,723,365.02 7.0795 61,757,062.66 EUR 105,097.02 7.9610 836,677.38 HKD 273,451.00 0.9134 249,770.14 139 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Ending balance in Exchange rate at the Ending balance Items foreign currency end of the period translated to RMB Short-term loans 1,345,105,000.00 Including: USD 190,000,000.00 7.0795 1,345,105,000.00 Non-current liabilities due 1,524,980.80 within one year Including: JPY 23,176,000.00 0.0658 1,524,980.80 Long-term loans 556,295,833.99 Including: USD 18,900,000.00 7.0795 133,802,550.00 EUR 51,825,261.75 7.9610 412,580,908.79 JPY 150,644,000.00 0.0658 9,912,375.20 2. The Company has no overseas operating entities. 140 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 (51) Government subsidy 1. Related to assets Balance sheet The amount included in the current profit and loss or offset the loss of Items Amount presentation related costs items Current period Previous period Items Coal-fired boiler desulfurization and denitrification project in high-pressure 3,900,000.00 Deferred income 300,000.00 300,000.00 Other income workshop of Bengang Power Plant Benxi Iron and Steel Automotive Sheet 1,000,000.00 Deferred income 160,206.60 Other income Engineering Laboratory Project Flue gas desulfurization project of 7 130- 12,000,000.00 Deferred income 2,400,000.00 2,400,000.00 Other income ton combustion boilers in power plant Project fund for cogeneration transformation project of power plant's 5,000,000.00 Deferred income 1,000,000.00 1,000,000.00 Other income three-electric workshop Demonstration project of construction of energy management center for industrial 3,480,000.00 Deferred income 1,160,000.00 1,160,000.00 Other income enterprises Air quality automatic monitoring system 70,000.00 Deferred income 35,000.00 35,000.00 Other income 141 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Balance sheet The amount included in the current profit and loss or offset the loss of Items Amount presentation related costs items Current period Previous period Items Cold rolled high-strength steel renovation 125,000,000.00 Deferred income 25,000,000.00 25,000,000.00 Other income project Energy saving and environmental protection project of sintering machine in 580,000.00 Deferred income 580,000.00 580,000.00 Other income ironworks Construction of a new platform for professional technology in the automotive 700,000.00 Deferred income 300,000.00 Other income steel industry Special funds for introducing overseas 3,000,000.00 Deferred income 1,000,000.00 1,442,000.00 Other income advanced and applicable technologies High-grade electro-galvanized sheet 4,104,000.00 Deferred income 4,104,000.00 4,104,000.00 Other income production line project for automobiles MES project special funds Deferred income 860,000.00 Other income Environmental pollution control project Deferred income 1,810,000.00 Other income Environmental governance project and Deferred income 170,000.00 Other income regional watershed environmental 142 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Balance sheet The amount included in the current profit and loss or offset the loss of Items Amount presentation related costs items Current period Previous period Items protection comprehensive prevention and control project Sintering machine waste heat utilization project and desulfurization renovation Deferred income 2,102,000.00 Other income project Ironworks 360 Sintering Machine Flue Deferred income 100,000.00 Other income Gas Desulfurization Project Environmental protection special fund Deferred income 580,000.00 Other income Total 158,834,000.00 36,039,206.60 41,643,000.00 2. Related to income The amount included in the current profit and loss or offset the loss of related costs Items Amount Current period Previous period Items project national support funds 2018 municipal skill master workstation costs 66,616.34 120,423.00 Other income 143 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 The amount included in the current profit and loss or offset the loss of related costs Items Amount Current period Previous period Items Liaoning craftsman subsidy 86,000.17 14,002.80 Other income other 693,206.00 Other income Total 180,041.51 921,206.80 52,000.00 3. Return of government subsidies during the reporting period None 144 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 VIII. Equity in other entities (1) Equity in subsidiaries 1. Constitution of enterprise group Principal Shareholding ratio Registered Notes of Name of the subsidiaries place of Acquiring method address business Direct Indirect business Xiamen Bengang Steel & Iron Business combination Xiamen Xiamen Sales 100.00 Sales Co., Ltd. under common control Wuxi Bengang Steel & Iron Sales Business combination Wuxi Wuxi Sales 100.00 Co., Ltd. under common control Tianjin Bengang Steel & Iron Business combination Tianjin Tianjin Sales 100.00 Trading Co., Ltd. under common control Nanjing Bengang Materials Sales Business combination Nanjing Nanjing Sales 100.00 Co., Ltd. under common control Yantai Bengang Steel & Iron Sales Business combination Yantai Yantai Sales 100.00 Co., Ltd. under common control Harbin Bengang Economic and Business combination Harbin Harbin Sales 100.00 Trading Co., Ltd. under common control Changchun Bengang Steel & Iron Business combination Changchun Changchun Sales 100.00 Sales Co., Ltd. under common control Guangzhou Bengang Steel & Iron Guangzhou Guangzhou Sales 100.00 Establishment Trading Co., Ltd. Shanghai Bengang Metallurgy Shanghai Shanghai Sales 100.00 Establishment Science and Technology Co., Ltd. Bengang Steel Plates Liaoyang Manufact Liaoyang Liaoyang 100.00 Establishment Pellet Co., Ltd. uring Dalian Benruitong Automobile Manufact Dalian Dalian 65.00 Establishment Material Technology Co., Ltd. uring Bengang Posco Cold-rolled Sheet Manufact Business combination Benxi Benxi 75.00 Co., Ltd. uring under common control Benxi Bengang Steel Sales Co., Benxi Benxi Sales 100.00 Establishment Ltd 145 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Principal Shareholding ratio Registered Notes of Name of the subsidiaries place of Acquiring method address business Direct Indirect business Shenyang Bengang Metallurgical Shenyang Shenyang Sales 100.00 Establishment Science and Technology Co., Ltd. Chongqing Liaoben Steel & Iron Chongqing Chongqing Sales 100.00 Establishment Trading Co., Ltd. Bengang Baojin (Shenyang) auto Manufact Business combination Shenyang Shenyang 85.00 new material technology Co., Ltd. uring under common control The proportion of shares held in subsidiaries is different from the proportion of voting rights: the company does not have such matters. Basis for holding half or less of the voting rights but still controlling the investee, and holding more than half of the voting rights but not controlling the investee: The company does not have such matters. For important structured entities included in the scope of consolidation, the basis for control: The company does not have such matters. 2. Significant but not wholly-owned subsidiaries Dividend Profits and losses Ending Proportion of declared to attributing to balance of non- Name of the subsidiaries non-controlling distribute to non-controlling controlling interests (%) non-controlling shareholders interests shareholders Bengang Posco Cold-rolled Sheet 25.00 3,121,127.48 499,174,786.40 Co., Ltd. The minority shareholder’s shareholding ratio is different from the voting rights ratio: the company does not have such matters. 3. Financial information of significant but not wholly-owned subsidiaries 146 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 30 June 2020 Name of the Non- Current Non-current Current subsidiaries Total assets current Total liabilities assets assets liabilities liabilities Bengang Posco Cold-rolled Sheet 3,576,435,100.80 1,409,255,518.34 4,985,690,619.14 2,988,991,473.55 2,988,991,473.55 Co., Ltd. Name of the 31 December 2019 subsidiaries Non- Name of the Current Non-current Current Total assets current Total liabilities subsidiaries assets assets liabilities liabilities Bengang Posco Cold-rolled Sheet 4,305,831,723.982 1,509,417,518.88 5,815,249,242.86 3,832,718,789.47 3,832,718,789.47 Co., Ltd. Current period Total Name of the subsidiaries Operating Net cash flows from Net profit comprehensive income operating activities income Bengang Posco Cold-rolled 3,483,712,504.36 12,484,509.92 12,484,509.92 389,115,477.57 Sheet Co., Ltd. Previous period Total Name of the subsidiaries Operating Net cash flows from Net profit comprehensive income operating activities income Bengang Posco Cold-rolled 3,720,975,482.91 7,704,734.61 7,704,734.61 1,318,506,299.45 Sheet Co., Ltd. 4. Significant restrictions on the use of corporate group assets and the settlement of corporate group debts None. 5. Financial support or other support provided to structured entities included in the scope of consolidated financial statements None. (2) The share of owner's equity in the subsidiary changes and the subsidiary still controls the transaction 147 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 None. (3) Equity in joint venture or associates 1. Summary of financial information of important joint ventures and associates The company has no important joint ventures or associates. 2. Summary of financial information of unimportant joint ventures and associates Items 30 June 2020/Current period 31 December 2019/Previous period Joint ventures: Total book value of investment: 2,672,302.70 2,642,998.70 The total amount of the following items calculated according to the shareholding ratio —Net profit 29,304.00 452,582.71 —Other comprehensive income —Total comprehensive income 29,304.00 452,582.71 3. Explanation of significant restrictions on the ability of joint ventures or associates to transfer funds to the company None. 4. Excess losses incurred by joint ventures or associates None. 5. Unconfirmed commitments related to joint venture investment None. 6. Contingent liabilities related to investment in joint ventures or associates None. (4) Important joint operations None. (5) Equity in structured entities not included in the scope of consolidated financial statements None. 148 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 IX. 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 evaluate the credit risk of the new customer, including the external credit rating and in some cases the bank credit certificate (when this information is available). The company has set a credit sales limit for each customer, which is the maximum amount without additional approval. The Company ensures that the company's overall credit risk is within a controllable range through regular monitoring of existing customer credit ratings and regular review of accounts receivable aging analysis. 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. 149 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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 lower the currency risk. The currency risk facing the Company originates from the assets and liabilities measured by US dollars and Euro. The ending balance of foreign currency financial assets and foreign currency financial liabilities after converted in RMB is shown as below: (In 10 Thousand) 30 June 2020 Items USD Euro HKD Japanese Yen Total Assets 6,175.71 83.67 24.98 6,284.35 Liabilities 147,890.76 41,258.09 1,143.74 190,292.58 31 December 2019 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 On June 30, 2020, with all other variables remaining unchanged, if the relevant currency appreciates or depreciates against the RMB by 5%, the company will increase or decrease its net profit by RMB 92,041 (on December 31, 2019: RMB 91,721,600). Management believes that 5% reasonably reflects a reasonable range of possible changes in the relevant currency 150 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 against RMB 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) 30 June 2020 Items Over 5 Within 1 year 1-2 years 2-5 years Total years Trade and other payables 1,958,097.40 50,904.06 2,009,001.46 Loans and interests 1,186,571.99 281,545.02 144,198.26 19,401.64 1,631,716.89 Total 3,144,669.38 281,545.02 144,198.26 70,305.69 3,640,718.35 (In 10 Thousand Yuan) 31 December 2019 Items Over 5 Within 1 year 1-2 years 2-5 years Total years Trade and other payables 1,700,791.05 51,693.94 1,752,484.99 Loans and interests 1,339,677.16 328,523.94 133,765.16 22,678.49 1,824,644.75 Total 3,040,468.21 328,523.94 133,765.16 74,372.43 3,577,129.74 151 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 X. 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 in measurement in the measurement in the Total the first level second level third 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 instruments (b) Investment in equity instruments (c) Derivative financial assets (d) Others (2) Designated as a financial 152 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Fair value at the end of the period Fair value Fair value Fair value Item measurement in measurement in the measurement in the Total the first level second level third level 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 4,382,121,949.97 4,382,121,949.97 financing ◆ Other debt investments ◆ Investment in other 1,041,824,829.00 1,041,824,829.00 equity instruments ◆ Other non-current financial assets (1) Financial assets measured at fair value and whose changes are 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 153 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Fair value at the end of the period Fair value Fair value Fair value Item measurement in measurement in the measurement in the Total the first level second level third level in the current profit and loss (a) Investment in debt instruments (b) Others Total assets continuously 5,423,946,778.97 5,423,946,778.97 measured at fair value ◆ Financial liabilites held for trading Including: Issued trading bonds Derivative financial 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 154 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Fair value at the end of the period Fair value Fair value Fair value Item measurement in measurement in the measurement in the Total the first level second level third level 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 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 155 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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 XI. Related party transactions (1) Details of parent company (In 100 Million Yuan) Place of Notes of Registered Share Voting Name of parent company Registry Business capital proportion (%) rights (%) Benxi Steel (Group) Co., Ltd. Benxi Manufacturing 62.92 62.11 62.11 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”. (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 Name of Other related parties Relationship Bengang Group Co., Ltd. (Hereinafter referred to as Controlling shareholder of parent company. "Bengang Group") Bengang Group International Economic and Trading Co., Belongs to Bengang Group Co., Ltd. Ltd. 156 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Name of Other related parties Relationship Bengang Cold-rolled Stainless Steel Dandong Co., Ltd. Same parent company Benxi Beiying Steel & Iron (Group) Co., Ltd. (Hereinafter Belongs to Bengang Group Co., Ltd. referred to as "Beiying Steel") Bengang Electronics and Gas Co., Ltd. Associate of parent company Benxi Steel & Iron (Group) Real-estate Development Co., Same parent company Ltd. Benxi Steel & Iron (Group) Steel & Iron Process and Same parent company Logistics Co., Ltd. Benxi Steel & Iron (Group) Machinery Manufacture Co., Same parent company Ltd. Benxi Steel & Iron (Group) Construction Co., Ltd. Same parent company Benxi Steel & Iron (Group) Mining Co., Ltd. Same parent company Benxi Steel & Iron (Group) Thermal Power Development Same parent company Co., Ltd. Benxi Steel & Iron (Group) Designing Institute Same parent company Benxi Steel & Iron (Group) Industrial Development Co., Same parent company Ltd. Benxi Steel & Iron (Group) Information and Automatic Same parent company Tech Co., Ltd. Benxi Steel & Iron (Group) Construction and Repairing Same parent company Co., Ltd. Benxi Steel & Iron (Group) Metallurgy Residues Co., Ltd. Same parent company Benxi Iron and Steel (Group) Engineering Construction Same parent company Supervision Co., Ltd. Benxi Steel & Iron (Group) Zhengtai Construction Same parent company Materials Co., Ltd. Benxi High-tech Drilling Tools Manufacture Co., Ltd. Belongs to Bengang Group 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 Sales Co., Ltd. Belongs to Benxi Steel and Iron (Group) Co., Ltd. Benxi Steel & Iron (Group) General Hospital Belongs to Benxi Steel and Iron (Group) Co., Ltd. Liaoning Bengang Steel & Iron Trading Co., Ltd. Same parent company Liaoning Hengtai Heavy Machinery Co., Ltd. Same parent company 157 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Name of Other related parties Relationship Liaoning Hengtong Metallurgical Equipment Manufacture Same parent company Co., Ltd. Liaoning Metallurgy Technician College Same parent company Liaoning Metallurgy Vocational Technical College Same parent company Suzhou Bengang Industrial Co., Ltd. Shareholding company Benxi Steel & Iron (Group) Medical Services Department Associate of parent company Bengang Group Finance Co., Ltd. Belongs to Bengang Group Co., Ltd. Liaoning Hengyi Financial Leasing Co., Ltd. Belongs to Bengang Group Co., 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 Name Current period Previous period party transactions Benxi Steel & Iron (Group) Co., Ltd. Repair expense 15,947.21 14,299.69 Benxi Steel & Iron (Group) Co., Ltd. Land lease fee 3,261.15 2,734.57 Bengang Cold-rolled Stainless Steel Products 7.95 82.25 Dandong Co., Ltd. Benxi Steel & Iron (Group) Mining Co., Labor cost 361.10 391.41 Ltd. Benxi Steel & Iron (Group) Mining Co., Raw material and 280,270.14 215,655.53 Ltd. supplementary material Benxi Steel & Iron (Group) Mining Co., Freight 87.47 85.36 Ltd. Benxi Steel & Iron (Group) Metallurgy Raw material and 14,869.84 11,056.03 Residues Co., Ltd. supplementary material Benxi Steel & Iron (Group) Steel & Iron Processing fee 23.81 84.61 Process and Logistics Co., Ltd. Benxi Steel & Iron (Group) Real-estate Raw materials 3,418.04 Development Co., Ltd. 158 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 The content of related Name Current period Previous period party transactions Benxi Steel & Iron (Group) Machinery Spare parts 2,296.73 3,341.85 Manufacture Co., Ltd. Benxi Steel & Iron (Group) Machinery Repair services 330.54 370.37 Manufacture Co., Ltd. Benxi Steel & Iron (Group) Construction Spare parts 19.75 424.68 Co., Ltd. Benxi Steel & Iron (Group) Construction Project fee 7,490.59 7,123.75 Co., Ltd. Benxi Steel & Iron (Group) Construction Repair services 3,660.09 7,085.65 Co., Ltd. Benxi Steel & Iron (Group) Construction Raw material and 367.31 332.06 Co., Ltd. supplementary material Benxi Steel & Iron (Group) Construction Freight 87.94 152.48 Co., Ltd. Benxi Steel & Iron (Group) Industrial Spare parts 2,568.90 2,896.02 Development Co., Ltd. Benxi Steel & Iron (Group) Industrial Raw material and 5,906.02 6,106.81 Development Co., Ltd. supplementary material Benxi Steel & Iron (Group) Industrial Repair services 790.53 940.92 Development Co., Ltd. Benxi Steel & Iron (Group) Industrial Freight 188.69 349.19 Development Co., Ltd. Benxi Steel & Iron (Group) Industrial Project fee 332.00 15.80 Development Co., Ltd. Raw material & Benxi Steel & Iron (Group) Construction supplementary materials 128.19 88.60 and Repairing Co., Ltd. & spare parts 159 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 The content of related Name Current period Previous period party transactions Benxi Steel & Iron (Group) Construction Project fee 2,992.87 453.18 and Repairing Co., Ltd. Benxi Steel & Iron (Group) Construction Repair expense 2,673.04 5,520.77 and Repairing Co., Ltd. Raw material and Bengang Electronics and Gas Co., Ltd. 6,886.40 5,873.36 supplementary material Bengang Electronics and Gas Co., Ltd. Repair services 1,168.35 252.09 Benxi High-tech Drilling Tools Spare parts 6.22 4.47 Manufacture Co., Ltd. Benxi New Career Development Co., Ltd. Labor protection fee 22.45 47.20 Raw material and Benxi New Career Development Co., Ltd. supplementary material 107.92 48.42 and food Liaoning Metallurgy Technician College Spare parts 117.57 699.54 Bengang Group International Economic Agency fee 3,067.82 3,417.46 and Trading Co., Ltd. Bengang Group International Economic Port surcharges 5,381.24 5,240.58 and Trading Co., Ltd. Benxi Steel & Iron (Group) Information Spare parts 285.13 226.21 and Automatic Tech Co., Ltd. Benxi Steel & Iron (Group) Information Project fee 1,368.24 2,191.45 and Automatic Tech Co., Ltd. Benxi Steel & Iron (Group) Thermal Heating costs 18.98 27.20 Power Development Co., Ltd. Benxi Steel & Iron (Group) Thermal Raw material and 55.00 2.84 Power Development Co., Ltd. supplementary material 160 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 The content of related Name Current period Previous period party transactions Benxi Steel & Iron (Group) Designing Design fees 28.77 29.24 Institute Benxi Beiying Steel & Iron (Group) Co., Raw material and 466,858.50 591,426.43 Ltd. supplementary material Benxi Beiying Steel & Iron (Group) Co., Energy & Power 21,856.41 31,906.75 Ltd. Benxi Beiying Steel & Iron (Group) Co., Freight 166.79 234.47 Ltd. Benxi Beiying Steel & Iron (Group) Co., Labor cost 2,016.35 4,250.18 Ltd. Benxi Beiying Steel & Iron (Group) Co., Spare parts 897.66 758.28 Ltd. Liaoning Hengtong Metallurgical Raw material and spare 5,120.05 4,493.46 Equipment Manufacture Co., Ltd. parts Liaoning Hengtai Heavy Machinery Co., Raw material and spare 43.48 171.84 Ltd. parts Liaoning Hengtai Heavy Machinery Co., Repair and labor cost 509.57 1,133.13 Ltd. Bengang Group Co., Ltd. House renting fee 37.61 37.61 Company as the seller (In 10 Thousand Yuan) The content of related Name Current period Previous period party transactions Bengang Electronics and Gas Co., Ltd. Energy & Power 38.10 50.42 Raw material & Benxi Beiying Steel & Iron (Group) Co., supplementary materials 135,340.23 60,230.78 Ltd. & spare parts 161 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 The content of related Name Current period Previous period party transactions Benxi Beiying Steel & Iron (Group) Co., Products 1,271.42 792.19 Ltd. Benxi Beiying Steel & Iron (Group) Co., Energy & Power 6,882.65 7,565.39 Ltd. Benxi Steel & Iron (Group) Real-estate Energy & Power 6.25 6.20 Development Co., Ltd. Benxi Steel & Iron (Group) Steel & Iron Energy & Power 20.39 27.47 Process and Logistics Co., Ltd. Benxi Steel & Iron (Group) Machinery Products 1,014.55 995.77 Manufacture Co., Ltd. Benxi Steel & Iron (Group) Machinery Energy & Power 1,216.43 716.43 Manufacture Co., Ltd. Raw material & Benxi Steel & Iron (Group) Machinery supplementary materials 139.52 605.66 Manufacture Co., Ltd. & spare parts Benxi Steel & Iron (Group) Construction Energy & Power 335.07 19.45 Co., Ltd. Raw material & Benxi Steel & Iron (Group) Construction supplementary materials 15.12 108.13 Co., Ltd. & spare parts Benxi Steel & Iron (Group) Mining Co., Energy & Power 33,585.45 34,182.02 Ltd. Raw material & Benxi Steel & Iron (Group) Mining Co., supplementary materials 512.75 3,156.26 Ltd. & spare parts Benxi Steel & Iron (Group) Mining Co., Freight revenue 497.33 487.08 Ltd. 162 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 The content of related Name Current period Previous period party transactions Benxi Steel & Iron (Group) Thermal Energy & Power 2,264.65 2,289.99 Power Development Co., Ltd. Raw material & Benxi Steel & Iron (Group) Thermal supplementary materials 682.22 994.94 Power Development Co., Ltd. & spare parts Benxi Steel & Iron (Group) Industrial Energy & Power 409.62 407.66 Development Co., Ltd. Benxi Steel & Iron (Group) Industrial Products 912.10 12.46 Development Co., Ltd. Raw material & Benxi Steel & Iron (Group) Industrial supplementary materials 936.70 717.36 Development Co., Ltd. & spare parts Benxi Steel & Iron (Group) Information Energy & Power 11.69 7.68 and Automatic Tech Co., Ltd. Benxi Steel & Iron (Group) Construction Energy & Power 66.60 79.48 and Repairing Co., Ltd. Raw material & Benxi Steel & Iron (Group) Construction supplementary materials - 248.68 and Repairing Co., Ltd. & spare parts Benxi Steel & Iron (Group) Metallurgy Energy & Power 105.91 302.41 Residues Co., Ltd. Raw material & Benxi Steel & Iron (Group) Metallurgy supplementary materials 13,364.82 9,363.79 Residues Co., Ltd. & spare parts Benxi Steel & Iron (Group) Co., Ltd. Energy & Power 430.55 147.07 Raw material & Benxi Steel & Iron (Group) Co., Ltd. supplementary materials 308.79 156.10 & spare parts 163 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 The content of related Name Current period Previous period party transactions Benxi New Career Development Co., Ltd. Energy & Power 381.86 15.13 Dalian Boluole Steel Tube Co., Ltd. Products 279.34 188.32 Benxi Steel & Iron (Group) General Energy & Power 1.06 3.09 Hospital Benxi Steel & Iron (Group) Zhengtai Energy & Power 3.20 0.27 Construction Materials Co., Ltd. Raw material & Liaoning Hengtong Metallurgical supplementary materials 493.65 832.61 Equipment Manufacture Co., Ltd. & spare parts Raw material & Bengang Cold-rolled Stainless Steel supplementary materials 736.33 24.14 Dandong Co., Ltd. & spare parts Suzhou Bengang Industrial Co., Ltd. Products 19,082.32 16,362.43 Bengang Group Finance Co., Ltd. Energy & Power 0.65 0.69 Bengang Group Co., Ltd. Energy & Power 8.82 7.79 Notes: 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 Lease capital Lease income of Lease income of Lessee category current period previous period Benxi Steel & Iron (Group) Steel & Warehouse and 250,000.00 250,000.00 Iron Process and Logistics Co., Ltd. machinery Benxi Steel & Iron (Group) Machinery Plants and 245,000.00 Manufacture Co., Ltd. machinery 164 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Company as the lessee Lease charges of Lease charges of Lessor Lease capital category current period previous period (Without tax) (Without tax) Land use right 7,669,068.17 sq.m. Benxi Steel & Iron (Group) Co., Ltd. 8,049,080.52 123,426,656.64 Land use right 42,920.00 sq.m. 2300 Hot rolling product Benxi Steel & Iron (Group) Co., Ltd. 27,638,772.06 27,345,714.30 line, related real estate Benxi Beiying Steel & Iron (Group) Co., 1780 Hot rolling product 5,002,327.68 59,013,278.16 Ltd. line, related real estate Land use right Bengang Group Co., Ltd. 4,972,711.56 728,282.30 sq.m. Notes: 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. 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)’. 3. 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: 165 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 During the reporting period, the company leased machinery and equipment from Liaoning Hengyi Finance Leasing Co., Ltd. in the form of financial leasing. From January to June 2020, the purchase amount is RMB 509,841,317.15, and the amount of interest and commission is RMB 8,880,409.61 (The aforementioned amounts are all include tax.) 3. Information of Guarantee among related parties (1) Company as the warrantee Guarantee of loans: Has the Amount of Starting date of Ending date guarantee Warrantor guarantee Guarantee of Guarantee been fulfilled Bengang Group Co., Ltd. 183,237.83 2015/6/25 2025/9/30 No Bengang Group Co., Ltd. 6,162.48 2015/6/25 2026/4/30 No Bengang Group Co., Ltd. 444,736.12 2015/6/25 2026/4/30 No Bengang Group Co., Ltd. 372,157.59 2015/6/25 2025/6/30 No Bengang Group Co., Ltd. 10,641,920.02 2015/6/25 2025/6/30 No Bengang Group Co., Ltd. 719,075.68 2015/6/25 2025/10/31 No Bengang Group Co., Ltd. 7,625,460.88 2015/6/25 2025/10/31 No Bengang Group Co., Ltd. 609,296.41 2015/6/25 2025/8/31 No Bengang Group Co., Ltd. 9,290,610.97 2015/6/25 2025/8/31 No Bengang Group Co., Ltd. 6,260,281.50 2015/8/20 2025/9/30 No Bengang Group Co., Ltd. 198,880.00 2015/12/28 2025/8/31 No Bengang Group Co., Ltd. 3,598,451.12 2015/12/28 2025/10/31 No Bengang Group Co., Ltd. 326,681.92 2015/12/28 2025/6/30 No Bengang Group Co., Ltd. 5,438,280.80 2015/12/28 2026/4/30 No Bengang Group Co., Ltd. 4,069.11 2015/12/28 2026/4/30 No Bengang Group Co., Ltd. 2,981,698.20 2016/6/27 2026/4/30 No Bengang Group Co., Ltd. 2,266,546.78 2016/12/14 2026/4/30 No Bengang Group Co., Ltd. 857,708.44 2017/6/30 2025/10/31 No Bengang Group Co., Ltd. $18,900,000 2016/12/27 2024/6/21 No Bengang Group Co., Ltd. 75,990,000.00 2015/6/25 2021/9/21 No Bengang Group Co., Ltd. 129,750,000.00 2016/12/27 2024/6/21 No 166 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Has the Amount of Starting date of Ending date guarantee Warrantor guarantee Guarantee of Guarantee been fulfilled Bengang Group Co., Ltd. and Benxi Steel & Iron (Group) 75,000,000.00 2016/3/30 2025/3/20 No Co., Ltd. Bengang Group Co., Ltd. and Benxi Steel & Iron (Group) 475,000,000.00 2017/2/27 2025/2/20 No Co., Ltd. Benxi Steel & Iron (Group) 340,000,000.00 2019/12/17 2020/12/17 No Co., Ltd. Benxi Steel & Iron (Group) 31,000,000.00 2020/3/20 2021/3/20 No Co., Ltd. Benxi Steel & Iron (Group) 500,000,000.00 2019/11/19 2020/11/19 No Co., Ltd. Benxi Steel & Iron (Group) 480,000,000.00 2019/12/13 2020/12/13 No Co., Ltd. Benxi Steel & Iron (Group) 300,000,000.00 2019/12/13 2020/12/13 No Co., Ltd. Benxi Steel & Iron (Group) 147,000,000.00 2019/12/16 2020/12/16 No Co., Ltd. Benxi Steel & Iron (Group) $90,000,000.00 2020/3/17 2021/3/17 No Co., Ltd. Benxi Steel & Iron (Group) $100,000,000.00 2019/12/18 2020/12/18 No Co., Ltd. Bengang Group Co., Ltd. and Benxi Steel & Iron (Group) 200,000,000.00 2019/9/9 2020/9/8 No Co., Ltd. Bengang Group Co., Ltd. and Benxi Steel & Iron (Group) 150,000,000.00 2019/10/10 2020/10/8 No Co., Ltd. 167 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Has the Amount of Starting date of Ending date guarantee Warrantor guarantee Guarantee of Guarantee been fulfilled Bengang Group Co., Ltd. and Benxi Steel & Iron (Group) 200,000,000.00 2019/10/11 2020/10/9 No Co., Ltd. Bengang Group Co., Ltd. and Benxi Steel & Iron (Group) 200,000,000.00 2019/9/19 2020/9/17 No Co., Ltd. Bengang Group Co., Ltd. and Benxi Steel & Iron (Group) 200,000,000.00 2019/9/24 2020/9/23 No Co., Ltd. Bengang Group Co., Ltd. and Benxi Steel & Iron (Group) 178,000,000.00 2019/12/12 2020/12/12 No Co., Ltd. Bengang Group Co., Ltd. and Benxi Steel & Iron (Group) 100,000,000.00 2019/7/8 2020/7/7 No Co., Ltd. Bengang Group Co., Ltd. 1,200,000,000.00 2020/4/30 2020/12/8 No Bengang Group Co., Ltd. 490,000,000.00 2019/9/5 2020/9/5 No Bengang Group Co., Ltd. 480,000,000.00 2020/1/20 2020/10/19 No Bengang Group Co., Ltd. 800,000,000.00 2020/3/4 2020/9/3 No Bengang Group Co., Ltd. 500,000,000.00 2020/6/19 2021/6/18 No Bengang Group Co., Ltd. 310,000,000.00 2020/5/27 2021/5/25 No Bengang Group Co., Ltd. 670,000,000.00 2020/5/27 2021/5/25 No Bengang Group Co., Ltd.; Benxi Beiying Steel & Iron 480,000,000.00 2019/12/12 2020/11/3 No (Group) Co., Ltd. Bengang Group Co., Ltd.; Benxi Beiying Steel & Iron 490,000,000.00 2019/12/12 2020/11/10 No (Group) Co., Ltd. 168 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Has the Amount of Starting date of Ending date guarantee Warrantor guarantee Guarantee of Guarantee been fulfilled Bengang Group Co., Ltd.; Benxi Beiying Steel & Iron 320,000,000.00 2019/12/13 2020/12/3 No (Group) Co., Ltd. Bengang Group Co., Ltd.; Benxi Beiying Steel & Iron 710,000,000.00 2019/12/16 2020/12/10 No (Group) Co., Ltd. Bengang Group Co., Ltd. 350,000,000.00 2019/10/11 2020/9/10 No Bengang Group Co., Ltd. 15,600,000.00 2020/1/16 2020/7/16 No Benxi Steel & Iron (Group) JPY 173,820,000 1997/10/10 2027/9/10 No Co., Ltd. Bengang Group Co., Ltd. and Benxi Steel & Iron (Group) 100,000,000.00 2020/1/9 2020/10/9 No Co., Ltd. Bengang Group Co., Ltd. and Benxi Steel & Iron (Group) 100,000,000.00 2019/10/11 2020/10/9 No Co., Ltd. Bengang Group Co., Ltd. 220,000,000.00 2019/9/25 2020/9/25 No Bengang Group Co., Ltd. 340,000,000.00 2019/9/6 2020/9/6 No Bengang Group Co., Ltd. 140,000,000.00 2020/1/17 2021/1/17 No 4. Other related party transactions (1) Loan from and deposits in Bengang Group Finance Co., Ltd. (In 10 Thousand Yuan) Item Beginning balance Increase Decrease Ending balance Notes Deposits 1,364,312.51 9,638,807.40 9,774,864.22 1,228,255.69 1. The interests of deposits in Bengang Group Finance Co., Ltd. is RMB 148,923 thousand from January to June in 2020. As at 30 June 2020, the interest receivable from Bengang Group Finance Co., Ltd. is RMB 32,395.8 thousand. 2. As at 30 June 2020, the restricted deposits in Bengang Group Finance Co., Ltd. is 169 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 RMB 1,886,440 thousand. 3. From January to June in 2020, 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 from January to June in 2020. As at 30 June 2020, the amount of acceptance bill opened by Bengang Group Finance Co., Ltd. was RMB 2.71 billion, and the amount of the acceptance bill that had been opened and unpaid by Bengang Group Finance Co., Ltd. is RMB 3.099 billion, and the proportion of deposit is 98.61%. 5. From January to June in 2020, the Company did not apply for bill discounting to the finance company. (2) The company's loan and interest payment to Benxi Steel and Iron (Group) Co., Ltd. (In 10 Thousand yuan). Item Beginning balance Increase Decrease Ending balance Capital lending 7,500.00 7,500.00 Total 7,500.00 7,500.00 Notes: The interest accrued is RMB 1,763,125.00 during the current period, and as at 30 June 2020, the interest that has not been paid is RMB 1,763,125.00. (6) Receivables and payables of the related parties 1. Receivables of the Company (in 10 thousand yuan) 30 June 2020 31 December 2019 Gross Provision Gross Provision Items Name Name carrying for bad carrying for bad amount debts amount debts Accounts receivable Bengang Group International Economic 5,118.68 58.92 5,892.34 58.92 and Trading Co., Ltd. Benxi Steel & Iron (Group) Thermal Power 1,152.45 13.01 1,301.32 13.01 Development Co., Ltd. 170 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 30 June 2020 31 December 2019 Gross Provision Gross Provision Items Name Name carrying for bad carrying for bad amount debts amount debts Bengang Cold-rolled Stainless Steel Dandong 185.97 1.89 188.8 1.89 Co., Ltd. Benxi Steel & Iron (Group) Machinery 6.68 0.08 7.7 0.08 Manufacture Co., Ltd. Benxi Steel & Iron (Group) Metallurgy 0.14 0.14 Residues Co., Ltd. Prepayments Benxi Beiying Steel & 81,385.62 93,762.24 Iron (Group) Co., Ltd. Benxi Steel & Iron (Group) Machinery 3,548.95 3,559.63 Manufacture Co., Ltd. Other receivables Bengang Group International Economic 375.64 0.2 432.77 0.2 and Trading Co., Ltd. Benxi Steel & Iron (Group) Real-estate 266.12 246.52 270.17 246.52 Development Co., Ltd. Benxi Steel & Iron (Group) Medical 94.46 85.27 94.75 85.27 Services Department; Benxi Steel & Iron (Group) Zhengtai 18.26 12.3 24.6 12.3 Construction Materials Co., Ltd. 171 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 30 June 2020 31 December 2019 Gross Provision Gross Provision Items Name Name carrying for bad carrying for bad amount debts amount debts Liaoning Metallurgy 14.15 4.58 14.2 4.58 Technician College Benxi Steel & Iron (Group) Industrial 0.01 0.02 Development Co., Ltd. Other non-current assets Liaoning Hengyi Financial Leasing Co., 84,111.31 58,419.72 Ltd. Notes receivable Benxi Beiying Steel & 39,958.98 41,739.59 Iron (Group) Co., Ltd. Benxi Steel (Group) Co., 402.17 Ltd. Zhejiang Bengang Jingrui Steel Processing 400 Co., Ltd. 2. Payables of the Company (in 10 thousand yuan) Items Name 30 June 2020 31 December 2019 Accounts payables Bengang Group International Economic and 78,932.33 70,193.27 Trading Co., Ltd. Benxi Steel & Iron (Group) Industrial 10,768.78 11,311.75 Development Co., Ltd. Benxi Steel & Iron (Group) Construction 12,253.65 10,331.91 Co., Ltd. 172 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Items Name 30 June 2020 31 December 2019 Benxi Steel & Iron (Group) Mining Co., 9,365.32 8,524.77 Ltd. Benxi Steel & Iron (Group) Information and 7,302.57 6,567.06 Automatic Tech Co., Ltd. Benxi Steel & Iron (Group) Construction 4,430.36 4,443.69 and Repairing Co., Ltd. Liaoning Hengtai Heavy Machinery Co., 3,213.82 3,246.28 Ltd. Bengang Group Co., Ltd. 3,139.46 3,148.91 Liaoning Hengtong Metallurgical 1,432.13 1,487.15 Equipment Manufacture Co., Ltd. Bengang Electronics and Gas Co., Ltd. 998.36 1,149.26 Benxi Steel & Iron (Group) Machinery 1,012.81 1,143.65 Manufacture Co., Ltd. Benxi Steel & Iron (Group) Metallurg 1,197.39 1,033.48 Residues Co., Ltd. Liaoning Metallurgy Technician College 629.17 724.86 Liaoning Metallurgy Vocational Technical 650.43 671.93 College Bengang Cold-rolled Stainless Steel 520.07 521.64 Dandong Co., Ltd. Benxi New Career Development Co., Ltd. 217.15 292.66 Benxi Steel & Iron (Group) Thermal Power 171.46 144.24 Development Co., Ltd. Benxi Steel & Iron (Group) Real-estate 54.38 62.65 Development Co., Ltd. Benxi High-tech Drilling Tools 32.15 33.77 Manufacture Co., Ltd. Benxi Iron and Steel (Group) Engineerin 15.68 16.28 Construction Supervision Co., Ltd. Benxi Steel & Iron (Group) Medical 1.78 2.04 Services Department; 173 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Items Name 30 June 2020 31 December 2019 Benxi Steel & Iron (Group) Zhengtai 0.21 0.24 Construction Materials Co., Ltd. Advance from customers Suzhou Bengang Industrial Co., Ltd. 5,387.92 1,635.62 Benxi Steel & Iron (Group) Steel & Iro 741.11 1,582.14 Process and Logistics Co., Ltd. Benxi Steel & Iron (Group) Metallurgy 126.57 Residues Co., Ltd. Dalian Boluole Steel Tube Co., Ltd. 99.58 85.93 Liaoning Hengtong Metallurgical 82.00 Equipment Manufacture Co., Ltd. Benxi Steel & Iron (Group) Industrial 23.36 35.79 Development Co., Ltd. Other payables Benxi Steel (Group) Co., Ltd. 16,187.24 18,278.27 Bengang Group International Economic and 1,411.25 1,432.74 Trading Co., Ltd. Benxi Steel & Iron (Group) Construction 456.69 526.14 Co., Ltd. Benxi Steel & Iron (Group) Thermal Power 423.69 437.69 Development Co., Ltd. Guangzhou Free Trade Zone Bengang Sales 266.64 267.44 Co., Ltd. Benxi New Career Development Co., Ltd. 166.09 223.84 Benxi Steel & Iron (Group) Real-estate 127.36 143.59 Development Co., Ltd. Benxi Steel & Iron (Group) Industrial 26.40 30.42 Development Co., Ltd. Benxi Beiying Steel & Iron (Group) Co., 4.45 6.00 Ltd. Liaoning Metallurgy Technician College 1.19 1.34 174 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Items Name 30 June 2020 31 December 2019 Benxi Steel & Iron (Group) Machinery 0.97 1.01 Manufacture Co., Ltd. Bengang Group Finance Co., Ltd. 0.52 0.60 Liaoning Hengyi Financial Leasing Co., 0.35 0.39 Ltd. Long-term payables Liaoning Hengyi Financial Leasing Co., 105,074.88 51,693.94 Ltd. Notes payables Benxi Beiying Steel & Iron (Group) Co., 625,805.90 508,775.58 Ltd. Benxi Steel & Iron (Group) Mining Co., 53,545.40 69,292.59 Ltd. Benxi Steel & Iron (Group) Industrial 691.00 3,203.52 Development Co., Ltd. Bengang Electronics and Gas Co., Ltd. 6,116.16 2,285.78 Liaoning Hengyi Financial Leasing Co., 6,126.45 1,758.01 Ltd. Benxi Steel & Iron (Group) Real-estate 684.81 Development Co., Ltd. Liaoning Metallurgy Technician College 195.91 Benxi Steel & Iron (Group) Information and 189.02 189.02 Automatic Tech Co., Ltd. Benxi Steel & Iron (Group) Machinery 254.75 186.51 Manufacture Co., Ltd. Bengang Cold-rolled Stainless Steel 71.84 71.84 Dandong Co., Ltd. Liaoning Metallurgy Vocational Technical 43.55 College Benxi Steel & Iron (Group) Construction 22.04 14.82 and Repairing Co., Ltd. Benxi Steel & Iron (Group) Construction 13.05 Co., Ltd. 175 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Items Name 30 June 2020 31 December 2019 Benxi High-tech Drilling Tools 5.71 5.71 Manufacture Co., Ltd. XII. 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. 176 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 (4) As of June 30, 2020, 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 2.108 billion yuan. 2. Irrevocable letter of credit As at June 30, 2020, the amount of irrevocable letter of credit that was not fulfilled is RMB 2.599 billion. (2) Contingencies At the balance sheet date, no significant contingencies need to be disclosed. XIII. Subsequent events (1) Important non-adjustment matters 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. (2) Profit distribution Not applicable. (3) Sales Return Not applicable. (4) Divided into assets held for sale and disposal portfolio Not applicable. (5) Other subsequent events 177 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Not applicable. XIV. Other significant events (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 with other products accounting for only a small proportion of sales, and the main production base is located in Liaoning area, segmented reporting is not applicable. (6) Other material issues that will influence investors’ decisions 1. Financing Lease For prioritizing the capital structure and exploring financing channel, the Company signed the “Financial lease cooperation framework” with Liaoning Hengyi Financial Leasing Co., Ltd. with the amount of financial lease not exceeding RMB 5 billion per year. The Company obtains the fund through sales and lease back financial lease with interest rate not above the benchmark interest rate of loan over the same period published by the People’s bank of China and the interest rate will be adjusted with the changes of benchmark interest rate of loan published by the People’s bank of China over the lease term. The lease security ratio is not higher than 30% of the lease principal amount. 2. Shares pledged by the Controlling Shareholders 178 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 As at 30 June 2020, the total 2,407,002,394 shares were held by the controlling shareholder Benxi Steel & Iron (Group) Co., Ltd., of which 712,545,000 shares were pledged and 102,100,000 shares were frozen. 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 within 6 months from February 14, 2020. The total amount of this shareholding increasing plan is no more than RMB 100 million. As of August 12, 2020, Benxi Steel (Group)'s shareholding increase plan was completed. Benxi Steel (Group) has accumulatively increased its holdings of 28,523,000 shares of the Company, accounting for 0.66% of the Company's total share capital, and the total amount of additional holdings was RMB 99.98 million. 4. Accounting estimates adjustment On January 31, 2020, the eighth meeting of the eighth session of the company's board of directors passed a resolution of the "Proposal on Adjusting the Depreciation Period of Certain Fixed Assets." Reasons for changes in accounting estimates: According to Article 19 of the "Accounting Standards for Business Enterprises No. 4 - Fixed Assets", "Enterprises should review the useful life, estimated net residual value and depreciation method of fixed assets at least at the end of each year. If there is a difference between the estimated amount and the original estimated amount, the useful life of the fixed asset shall be adjusted". In order to fairly reflect the company's financial status and operating results, make the fixed asset depreciation life closer to its actual useful life, and adapt to the company's business development and fixed asset management needs, the company assessed the use and useful life of fixed assets. After the company’s evaluation of the actual status and depreciation period of fixed assets, it is concluded that the company’s production equipment has a high level of equipment and technical content, and the maintenance is in good condition. During the period from 2010 to 2019, the company’s cumulative investment in equipment maintenance costs was 11.959 billion yuan. In order to make the depreciation life of fixed assets closer to the actual service 179 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 life, it is necessary to adjust the depreciation life of some fixed assets of the company. Accounting estimates used before and after the change: The company decided to adjust the useful life of some fixed assets from January 1, 2020. The specific adjustment plan is as follows: Accounting estimates used before and after the change: Original depreciation period Adjusted depreciation period Fixed asset category (years) (years) 1. Mechanical equipment 14 21 2. Power equipment 18 19 3. Conduction equipment 18 28 4. Transportation equipment 6 12 5. Tools and other production 9 14 utensils 6. Non-production equipment and appliances (1) Equipment and tools 18 22 (2) Copiers, word processors 5 8 7. Houses and buildings (1) Houses for production 40 40 (2) Corroded production houses 25 25 (3) Production houses subject to 10 15 strong corrosion (4) Non-production houses 30 45 (5) Simple houses 8 10 (6) Buildings 25 25 5. 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 6.8 billion (inclusive RMB 6.8 billion). The specific amount of funds raised is to be 180 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 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: Unit: in 10 thousand yuan No. Projects 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 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. 181 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 The "Proposal on the Company's Public Offering of A Share Convertible Corporate Bonds (Revised Draft) was reviewed and approved by the sixth meeting of the eighth board of directors on October 8, 2019. The "Proposal on the Company's Public Offering of A Share Convertible Corporate Bonds (Second Revision)" was reviewed and approved by the seventh meeting of the eighth board of directors on October 28, 2019. The "Proposal on the Company's Public Offering of A Share Convertible Corporate Bonds (Second Revision)" was passed by the resolution made by the fourth extraordinary general meeting of shareholders in 2019 on November 14, 2019. 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”) ,which approved Company’s publicly issuance of 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. RMB 6.8 billion convertible bonds of the Company, each with a face value of RMB 100, totaling 68 million in quantity, are issued at face value. 14. Capital management The main objectives of the company's capital management are as following: 182 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 - 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: Items 30 June 2020 31 December 2019 Shor-term loans 12,506,705,000.00 13,151,478,000.00 Long-term loans due within one 1,201,524,980.80 234,474,657.99 year Long-term loans 3,810,463,934.18 4,849,675,910.73 Total amount of loans 17,518,693,914.98 18,235,628,568.72 Minus: cash and cash equivalent 11,417,592,663.52 13,441,414,988.58 Net value of liabilities 6,101,101,251.46 4,794,213,580.14 Shareholder’s equity 20,291,922,235.34 20,012,826,841.40 Liability/capital ratio after 30.07% 23.96% adjustment XV. Notes to the financial statements of parent company (1) Accounts receivable 1. Accounts receivable disclosed by aging Items 30 June 2020 31 December 2019 Within 1 year (inclusive) 326,463,297.85 339,851,051.52 1-2 years (inclusive) 32,410,975.65 31,642,073.27 2-3 years (inclusive) 24,355,924.19 24,708,264.04 183 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Items 30 June 2020 31 December 2019 Over 3 years 170,785,391.75 175,744,519.91 Sub-total 554,015,589.45 571,945,908.74 Less: Provision for bad 180,541,758.35 182,948,800.28 debts Total: 373,473,831.10 388,997,108.46 2. Accounts receivable disclosed by category 30 June 2020 Gross carrying amount Provision for bad debts Items Bad Percentage Book value Amount Amount debts (%) ratio (%) Individually significant and tested for 47,762,337.18 8.62 47,762,337.18 100.00 impairment individually Accounts receivable tested 506,253,252.27 91.38 132,779,421.17 25.79 373,473,831.10 for impairment by portfolio Include: Portfolio 1: Aging 253,577,229.31 45.77 132,779,421.17 52.36 Portfolio 2: Related party within 252,676,022.96 45.61 consolidation scope Total 554,015,589.45 100.00 180,541,758.35 373,473,831.10 184 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 31 December 2019 Gross carrying amount Provision for bad debts Items Percenta Bad debts Book value Amount Amount ge (%) ratio (%) Individually significant and tested 47,762,337.18 8.35 47,762,337.18 100.00 for impairment 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 50.26 133,795,354.93 Portfolio 2: Related party within 255,201,753.53 44.62 255,201,753.53 consolidation scope Total 571,945,908.74 100.00 182,948,800.28 388,997,108.46 Receivables individually insignificant but tested for impairment individually: 30 June 2020 Bad Items Accounts Provision for debts Reason receivable bad debts ratio (%) Benxi Nanfen Benxi Nanfen Xinhe 47,762,337.18 47,762,337.18 100.00 Xinhe has halt Metallurgical Co., Ltd. operation. Total 47,762,337.18 47,762,337.18 Accounts receivable tested for impairment by portfolio Portfolio tested by aging 185 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 30 June 2020 Items Gross carrying amount Provision for bad debts Bad debts ratio (%) Within 1 year 326,463,297.86 3,264,632.98 1.00 1-2 years 32,410,975.65 1,620,548.78 5.00 2-3 years 24,355,924.19 4,871,184.84 20.00 Over 3 years 123,023,054.57 123,023,054.57 100.00 Total 506,253,252.27 132,779,421.17 3. Information of provision, reversal or recovery of bad debts of current period. The reversal of bad debts of current period is RMB 2,407,041.93. 4. No accounts receivable has been written off this year. 5. Top five debtors at the end of the period 30 June 2020 Percentage of total Company Provision for Amount accounts receivable bad debts (%) No.1 51,186,799.05 12.25 589,234.48 No.2 47,762,337.18 11.43 47,762,337.18 No.3 14,246,791.47 3.41 No.4 13,192,766.29 3.16 No.5 11,524,466.74 2.76 130,131.74 Total 137,913,160.74 33.00 48,481,703.40 6. There is no account receivables be derecognized due to the transfer of financial assets at the end of the period. 7. There is no account receivables be transferred and further involved in assets and liabilities during the current period. (2) Accounts receivable financing 1. Details of accounts receivable financing 186 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Items 30 June 2020 31 December 2019 Notes receivable 3,997,787,483.35 2,193,319,842.60 Include: Bank acceptance bill 3,984,477,483.35 2,184,526,834.33 Commercial acceptance bill 13,310,000.00 8,793,008.27 Total 3,997,787,483.35 2,193,319,842.60 Notes: 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 end of the period Items Pledged amount Bank acceptance bill 759,753,834.45 Commercial acceptance bill Total 759,753,834.45 4.The amount of notes receivable endorsed over or discounted but not yet matured at the end of the period Items Derecognized amount Not derecognized amount Bank acceptance bill 4,879,438,530.74 Commercial acceptance bill Total 4,879,438,530.74 5. There is no notes receivable has been transferred into accounts receivable due to inability of drawer to meet acceptance bill at the year-end. (3) Other receivables Items 30 June 2020 31 December 2019 Interest receivables 31,655,295.18 19,658,230.77 Dividend receivables Other receivables 226,277,114.59 247,005,005.04 Total 257,932,409.77 266,663,235.81 1. Interest receivable 187 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 (1) Interest receivable disclosed by category Items 30 June 2020 31 December 2019 Deposit interest 31,655,295.18 19,658,230.77 Subtotal 31,655,295.18 19,658,230.77 Less: provision for bad debt Total 31,655,295.18 19,658,230.77 (2) There is no significant provision for overdue interest and bad debt provision. 2. Other receivables (1) Other receivables disclosed by Aging Items 30 June 2020 31 December 2019 Within 1 year (inclusive) 96,502,772.71 115,480,359.05 1-2 years (inclusive) 16,100,882.51 15,711,856.93 2-3 years (inclusive) 3,394,063.57 3,479,413.59 Over 3 years 175,449,847.41 177,724,723.88 Sub-total 291,447,566.20 312,396,353.45 Less: Provision for bad 65,170,451.61 65,391,348.41 debts Total 226,277,114.59 247,005,005.04 (2) Provision for bad debt provision Stage one Stage two Stage three Lifetime expected Provision for bad 12-month Lifetime expected credit losses Total debts expected credit losses (no (credit impairment credit losses credit impairment) occurred) Beginning balance 9,179,698.89 56,211,649.52 65,391,348.41 Current period provision, write- -220,896.80 -220,896.80 back, transfer-in. transfer-out Current period reversal 188 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Stage one Stage two Stage three Lifetime expected Provision for bad 12-month Lifetime expected credit losses Total debts expected credit losses (no (credit impairment credit losses credit impairment) occurred) Current period write-off Other changes Ending balance 8,958,802.09 56,211,649.52 65,170,451.61 Changes in the gross carrying amount of other receivables are as follows Stage one Stage two Stage three Gross Lifetime expected Lifetime expected carrying 12-month expected credit losses (credit Total credit losses (no amount credit losses impairment credit impairment) occurred) Beginni ng 232,528,777.63 23,655,926.30 56,211,649.52 312,396,353.45 balance Current period - increase Current period 20,727,890.45 220,896.80 20,948,787.25 decrease Other change Ending 211,800,887.18 23,435,029.50 56,211,649.52 291,447,566.20 balance (3) Other receivables disclosed by nature Nature 30 June 2020 31 December 2019 Receivable and payable 283,339,342.69 304,483,575.55 189 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Nature 30 June 2020 31 December 2019 Other 8,108,223.51 7,912,777.90 Total 291,447,566.20 312,396,353.45 (4) Top five debtors at the year-end Percentage of Nature or total other Provision for Company Amount Aging content receivables bad debts (%) Receivable Within 1 The First 9,648,111.00 3.31 and payable year Receivable Within 1 The Second 9,505,576.53 3.26 and payable year Receivable Within 1 The Third 6,804,946.27 2.33 and payable year Receivable The Fourth 3,756,448.28 1-2 years 1.29 2,000.00 and payable Within 1 Receivable The Fifth 2,661,194.04 year and 0.91 2,465,166.01 and payable over 3 years Total 32,376,276.12 11.11 2,467,166.01 (5) There is no other receivables relates to government subsidies at the end of the reporting period. (6) There is no other receivables derecognized due to the transfer of financial assets at the end of the reporting period. (7) There is no transfer of other receivables and continued involvement in the amount of assets and liabilities formed at the end of the reporting period. (4) Long-term equity investment 30 June 2020 31 December 2019 Items Gross carrying Gross carrying Impairment Book value Impairment Book value amount amount 190 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Subsidiaries 2,016,281,902.16 2,016,281,902.16 2,016,281,902.16 2,016,281,902.16 Joint ventures Total 2,016,281,902.16 2,016,281,902.16 2,016,281,902.16 2,016,281,902.16 Details of investment in subsidiaries Impair Ending ment balance Ending of Name of entity Beginning balance Increase Decrease of balance curren impair t ment period Guangzhou Bengang Steel & Iron 30,000,000.00 30,000,000.00 Trading Co., Ltd. Shanghai Bengang Metallurgy 30,000,000.00 30,000,000.00 Science and Technology Co., Ltd. Bengang Steel Plates Liaoyang 529,899,801.38 529,899,801.38 Pellet Co., Ltd. Dalian Benruitong Automobile 65,000,000.00 65,000,000.00 Material Technology Co., Ltd. Bengang Posco Cold-rolled Sheet 1,019,781,571.10 1,019,781,571.10 Co., Ltd. Changchun Bengang Steel & Iron 28,144,875.36 28,144,875.36 Sales Co., Ltd. Harbin Bengang Economic and 29,923,398.23 29,923,398.23 Trading Co., Ltd. Nanjing Bengang Materials Sales 2,081,400.65 2,081,400.65 Co., Ltd. Wuxi Bengang Steel & Iron Sales 29,936,718.57 29,936,718.57 Co., Ltd. Xiamen Bengang Steel & Iron 1,095,711.66 1,095,711.66 Sales Co., Ltd. Yantai Bengang Steel & Iron 49,100,329.41 49,100,329.41 Sales Co., Ltd. Tianjin Bengang Steel & Iron 60,318,095.80 60,318,095.80 Trading Co., Ltd. Benxi Bengang Steel Sales Co., 5,000,000.00 5,000,000.00 Ltd Shenyang Bengang Metallurgical 30,000,000.00 30,000,000.00 Science and Technology Co., Ltd. Chongqing Liaoben Steel & Iron 30,000,000.00 30,000,000.00 Trade Co., Ltd. 191 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Bengang Baojin (Shenyang) Automobile New Materials 76,000,000.00 76,000,000.00 Technology Co., Ltd. Total 2,016,281,902.16 2,016,281,902.16 (5) Operating income and operating cost Current period Previous period Items Revenue Cost Revenue Cost Principal business 19,591,244,860.47 18,369,564,255.82 21,327,519,597.49 19,894,713,843.28 Other business 2,168,536,821.65 2,009,584,025.45 2,119,696,260.44 1,862,576,153.90 Total 21,759,781,682.12 20,379,148,281.27 23,447,215,857.93 21,757,289,997.18 Details of operating income: Items Current period Previous period Principal business 19,591,244,860.47 21,327,519,597.49 Including: Domestic 17,433,565,833.49 18,051,675,852.17 Overseas 2,157,679,026.98 3,275,843,745.32 Other business 2,168,536,821.65 2,119,696,260.44 Including: Domestic 2,168,536,821.65 2,119,696,260.44 Overseas Total 21,759,781,682.12 23,447,215,857.93 XVI. Supplementary information (1) Details of non-recurring profit and loss Items Amount Notes Profit or loss from disposal of non-current assets -19,733,108.62 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 government subsidy closely related to the company's normal business 38,587,332.40 operation, meeting the regulation of national policy and enjoyed constantly in certain quota or quantity according to a certain standard) 192 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Items Amount Notes 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 Provision for asset impairment due to unavoidable factors such as natural disasters Profit or loss from debt restructuring 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 838,001.32 Other non-recurring profit and loss 193 Bengang Steel Plates Co., Ltd. Semi-Annual Report 2020 Items Amount Notes Subtotal 19,692,225.10 Impact of income tax 4,923,056.28 Impact of minority interests 10,437.03 Total 14,758,731.79 (2) Net asset yield and earnings per share Weighted average net Earnings per share (Yuan) Profit in the Reporting Period assets yield (%) Basic EPS Diluted EPS Net profit attributable to ordinary shareholders 1.30 0.07 0.12 Net profit attributable to ordinary shareholders 1.22 0.06 0.12 after deducting non-recurring profit and loss (3) Differences between Domestic and Foreign Accounting Standards Not applicable. 194