Bengang Steel Plates Co., Ltd. Annual Report 2020 Bengang Steel Plates Co., Ltd. Annual Report 2020 April, 2021 1 Bengang Steel Plates Co., Ltd. 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, Lin Dong, Chief financial officer, and Cong Yajuan, the person in charge of the accounting department (the person in charge of the accounting), make the pledge for the authenticity, accuracy and integrity of the attached financial statements. All the members of the Board of Directors attended the board meeting on which this report was examined. The prospective statements contained in this annual report do not constitute any substantial commitment to the investors. Investors should pay attention to the risks attached to investment decisions. This report is prepared in both of Chinese and English. The Chinese version shall prevail when there are any controversial statements in the two versions. The company has described the existing risks and countermeasures in detail in this report. Please refer to Section 4-9 “Prospects for the Future Development of the Company”. “China Securities Journal”, “Securities Times”, “Hong Kong Commercial Daily” and Juchao Information Network (www.cninfo.com.cn) are the company's selected information disclosure media. All information of the company is based on the information published in the above-mentioned designated media. Investors are advised to pay attention to investment risks. The company’s profit distribution plan is approved by the board of directors. Taking 3,875,371,532 shares as the base, a cash dividend of 0.1 yuan (tax included) will be distributed to all shareholders for every 10 shares, and stock dividend is 0. The capital reserve will not be converted into share capital. 2 Bengang Steel Plates Co., Ltd. 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 ................................................................................................................ 9 IV. MANAGEMENT DISCUSSION AND ANALYSIS .............................................................................................. 11 V. IMPORTANT EVENTS ............................................................................................................................................ 26 VI. STATUS OF SHARE CAPITAL CHANGES AND SHAREHOLDERS ............................................................ 66 VII. STATUS OF PREFERRED SHARES .................................................................................................................. 72 VIII. STATUS OF CONVERTIBLE CORPORATE BONDS ................................................................................... 73 IX. STATUS OF DIRECTORS, SUPERVISORS, SENIOR EXECUTIVES AND EMPLOYEES ........................ 75 X. CORPORATE GOVERNANCE .............................................................................................................................. 83 XI. RELEVANT INFORMATION ABOUT CORPORATE BONDS ....................................................................... 92 XII. FINANCIAL REPORT .......................................................................................................................................... 97 XIII. DOCUMENTS AVAILABLE FOR INSPECTION ......................................................................................... 253 3 Bengang Steel Plates Co., Ltd. Annual Report 2020 Definition Terms to be defined Refers to Definition Bengang Bancai, Bengang Steel, the Company, the Refers to Bengang Steel Plates Co., Ltd. Listed Company Bengang Group Refers to Bengang Group Co., Ltd. Benxi Steel & Iron CO., Bengang Co. Refers to Benxi Steel & Iron (Group) Co., Ltd. Liaoning Provincial State-asset Administration Refers to Liaoning State-owned Asset Supervisory and Management Committee SSE Refers to Shenzhen Stock Exchange Bengang Puxiang Refers to Bengang Puxiang Cool Rolling Steel Sheet Co., Ltd. 4 Bengang Steel Plates Co., Ltd. Annual Report 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 本钢板材 Chinese Company name in English (If any) BENGANG STEEL PLATES CO., LTD. Abbreviation of Company name in BSP English (If any) Legal representative Gao Lie Registration Address No.16, Renmin Road, Pingshan District, Benxi City, Liaoning Province Post Code of registration Address 117000 Office address No.16, Renmin Road, Pingshan District, Benxi City, Liaoning Province Post Code of office address 117000 Web Address None Email bgbcdm@163.com II. Contact Information Secretary of Board of Directors Representative of Securities Affairs Name Gao Desheng Chen Liwen No.16, Renmin Road, Pingshan District, No.16, Renmin Road, Pingshan District, Address Benxi City, Liaoning Province Benxi City, Liaoning Province Tel 024-47827003 024-47828980 Fax 024-47827004 024-47827004 Email bgbcdm@163.com bgbcclw@126.com III. Information Disclosure and Place for Consulting Press media for information disclosure China Securities Journal, Securities Times, Hong Kong Commercial Daily Web address for the annual report as assigned by http://www.cninfo.com.cn CSRC Place for inquiry of the annual report Secretary Office of the Board, Bengang Steel Plate Co., Ltd. IV. Change of Business Registration Organization Code 91210000242690243E Changes of principal business activities since listing (if any) No change Changes of the controlling shareholder in the past (is any) No change 5 Bengang Steel Plates Co., Ltd. Annual Report 2020 V. Other Information Accountants’ firm engaged by the Company: Name of the accountants’ firm BDO China Shu Lun Pan Certified Public Accountants LLP Address of the accountants’ firm Address: 4/F 61 Nanjing Rd. East, Huangpu, Shanghai Signing name of accountants Zhu Jinmei, Li Guiying Sponsor engaged by the Company to conduct sustained supervision during the reporting period √ Applicable □ Not applicable Address of the sponsor Name of the sponsor Name of the sponsor institution Sustained supervision period institution representative Guotai Junan Securities Co., No. 768, Nanjing West Road, August 5th, 2020 to December Chi Huitao, Yang Keyi Ltd. Jingan District, Shanghai 31st, 2021 Financial consultancy institution engaged by the Company to conduct sustained supervision during the reporting period □ Applicable √ Not applicable VI. Main Accounting Data and Financial Index Whether the Company makes retroactive adjustment or restatement of the accounting data of the last years due to change of the accounting policy and correction of accounting errors □ Yes √ No Changes over last 2020 2019 2018 year Operating income(RMB) 48,684,792,685.58 52,741,353,582.28 -7.69% 50,181,869,721.54 Net profit attributable to the shareholders 384,252,740.78 555,646,971.40 -30.85% 1,036,493,236.07 of the listed company(RMB) Net profit after deducting of non-recurring gain/loss attributable to the shareholders 381,469,784.99 549,528,817.13 -30.58% 1,093,065,140.59 of listed company(RMB) Net Cash flow generated by business -2,039,000,213.29 6,977,824,041.16 -129.22% 3,619,937,841.93 operation(RMB) Basic earnings per share (RMB/Share) 0.099 0.143 -30.77% 0.27 Diluted earnings per share (RMB/Share) 0.099 0.143 -30.77% 0.27 Weighted average net assets yield 1.90% 2.88% -0.98% 5.64% Changed over last End of 2020 End of 2019 End of 2018 year Gross assets(RMB) 65,007,470,749.20 60,731,425,193.90 7.04% 59,632,504,915.83 Net assets attributable to shareholders of 21,018,296,389.10 19,487,665,261.17 7.85% 19,126,258,116.67 the listed company(RMB) The lower of the company’s net profit before and after deduction of non-recurring gains and losses in the most recent three fiscal years is negative, and the audit report of the most recent year shows that the company’s ability to continue operations is uncertain □ Yes √ No The lower of the net profit before and after non-recurring gains and losses is negative 6 Bengang Steel Plates Co., Ltd. Annual Report 2020 □ Yes √ No VII. Differences between Domestic and Foreign Accounting Standards 1. Differences of net profit and net assets disclosed in financial reports prepared under IFRS and Chinese accounting standards. □ Applicable √ Not applicable There are no differences of net profit and net assets disclosed in financial reports prepared under IFRS and Chinese accounting standards during the reporting period. 2. Differences of net profit and net assets disclosed in financial reports prepared under overseas and Chinese accounting standards. □ Applicable √ Not applicable There are no differences of net profit and net assets disclosed in financial reports prepared under overseas and Chinese accounting standards during the reporting period. VIII. Main Financial Index by Quarters Unit: Yuan First quarter Second quarter Third quarter Fourth quarter Operation income 11,728,574,704.88 10,455,962,555.17 12,667,300,144.93 13,832,955,280.60 Net profit attributable to the 177,998,575.36 76,645,628.97 28,865,084.77 100,743,451.68 shareholders of the listed company Net profit after deducting non- recurring gain/loss attributable to 168,656,828.67 71,228,643.86 4,967,865.94 136,616,446.52 the shareholders of listed company Net cash flows generated by 684,846,620.22 -836,322,327.30 -1,256,153,637.34 -631,370,868.87 operating activities Whether significant variances exist between the above financial index or the index with its sum and the financial index of the quarterly report as well as semi-annual report index disclosed by the Company □ Yes √ No IX. Items and Amount of Non-recurring Profits and Losses √ Applicable □ Not applicable Unit: Yuan Item 2020 2019 2018 Notes Gains and losses on disposal of non-current assets (including the write off part of the -92,695,525.95 -77,292,030.26 -148,409,630.35 provision for impairment) Government subsidy attributable to profit and loss of current period (except such government subsidy closely related to the company's normal business operation, 81,193,591.56 83,914,522.47 86,085,297.03 meeting the regulation of national policy and enjoyed constantly in certain quota or quantity according to a certain standard) Profit or loss from investment or 605,795.19 5,041,397.26 assets entrusted to others Gains and losses of debt restructuring 32,800.02 50,640.00 Profits excluded effective hedging business 13,500,000.00 7 Bengang Steel Plates Co., Ltd. Annual Report 2020 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 assets, financial liabilities held for trading, derivative financial liabilities and other debt investments Other non-operating income and expenses 1,592,660.62 779,757.58 771,191.90 other than above Other profit and loss items that meet the 2,084.65 definition of non-recurring gains and losses Less: impact of income tax 786,094.20 1,818,703.48 22,141.38 impact of minority equity (after tax) 54,476.26 123,911.88 38,018.98 Total 2,782,955.79 6,118,154.27 -56,571,904.52 -- Explanation for defining non-recurring gains and losses items according to the "Public Offering of Securities Information Disclosure Explanatory Notice No. 1 – Non-Recurring Gains and Losses", and reasons for defining non-recurring gains and losses items listed in the document as recurring items. □ Applicable√ Not applicable There exists no situation of defining non-recurring gains and losses items listed in the document as recurring items. 8 Bengang Steel Plates Co., Ltd. Annual Report 2020 III. Summary of Company Business I. The Company's main business during the reporting period (1) During the reporting period, the company’s main businesses include iron and steel smelting, rolling processing, power generation, coal chemical industry, special steel profiles, railways, import and export trade, scientific research, product sales, etc. The introduction of world advanced equipment and technology to implement equipment upgrades for the main iron and steel industry and have built a high-quality steel base, formed more than 60 varieties, more than 7,500 specifications of product series, the proportion of high value- added and high-tech products reached more than 80%. The leading products for automotive surface panels, home appliance panels, petroleum pipeline steel, container panels, shipboard, etc. are widely used in the fields of automobiles, home appliances, petrochemicals, aerospace, machinery manufacturing, energy and transportation, building decoration and metal products, and are exported to more than 60 countries and regions. During the reporting period, the main performance drivers were: the implementation of a new round of technological transformation, the new fifth furnace, the eighth casting machine, and the converter environmental protection transformation and other key projects reached production and efficiency. Strengthen capital management operations, and complete the 6.8 billion yuan issuance of convertible bonds. This is the first time in 20 years that the company has achieved super-large-scale direct refinancing through public issuance. Bengang Steel Plate Co., Ltd. won the Quality Award from the Governor of Liaoning Province and was identified as "the first batch of high-value patent cultivation centers in Liaoning Province." During the reporting period, no major changes occurred in the above content. (2) Affected by the global epidemic during the reporting period, the production and operation of enterprises were severely affected at the beginning of the epidemic. With the implementation of national policies such as "six stability and six guarantees" and the success of my country's epidemic prevention and control, the production and operation of my country's iron and steel enterprises have gradually improved. The company always adheres to the supply-side structural reform as the main line, implements high-quality development requirements, resolutely implements the national, provincial, and municipal epidemic prevention and control work deployments and the "six stability and six guarantees" requirements, grasps epidemic prevention and control on the one hand, and stabilizes production and high yield on the other. , Achieved both epidemic prevention and control and production and operation, achieved stable economic development, continuously improved comprehensive competitiveness, and continued to consolidate industry status. II. Major Changes in Main Assets 1. Major Changes in Main Assets Main assets Notes to major changes The balance as of 31 December 2020 is RMB 4,189,977.9 thousand and it has increased Accounts receivable financing RMB 1,760,435.4 thousand compared to the beginning balance, which is mainly caused by the increase of notes receivable. The balance as of 31 December 2020 is RMB 5,523,646.8 thousand and it has increased Other current assets RMB 5,210,742 thousand compared to the beginning balance, which is mainly caused by the increase of time deposit. The balance as of 31 December 2020 is RMB 995,840.3 thousand and it has increased by Other non-current assets RMB 287,337.8 thousand compared to the beginning balance, which mainly due to the increase in the rental deposit. 2. Main Information of Overseas Assets □ Applicable √ Not applicable III. Analysis on Core Competitiveness The company adheres to the innovation-driven and "quality + service" development model, with the strategic goal of building an internationally competitive high-quality plate base, a domestic first-class special steel base and a comprehensive service provider, and exerts a strategic leading role, focusing on improving quality and efficiency, In terms of product upgrades, technological innovation, green and intelligent manufacturing, we will innovate management ideas, enhance the core competitiveness of enterprises, and promote 9 Bengang Steel Plates Co., Ltd. Annual Report 2020 enterprises to achieve high-quality, green and intelligent development. 1. Manufacturing capabilities. Innovate management ideas, strengthen professional management and control of the entire chain, and continuously improve corporate management efficiency. All departments and units interact with each other, continue to implement the concept of priority on output, adhere to the iron system as the core, focus on the process connection of iron and steel, and rationally match the production line and resource production organization principles of the steel post process, so that the production process and operation Continuously standardize and refine, make every effort to maximize quality, efficiency and production scale, and promote the entire production chain toward high-end manufacturing. 2. Equipment transformation and upgrading. In 2020, the company issued a fixed asset investment plan of 5.14 billion yuan. A new round of large-scale technological transformation represented by key projects such as the new No. 5 blast furnace, No. 8 casting machine, No. 4-6 converter environmental protection transformation, and special steel electric furnace upgrade and transformation. At present, the No. 5 blast furnace energy-saving and environmental protection renovation project, No. 8 casting machine, and the steelmaking 4-6 converter energy-saving and environmental protection renovation project have been successfully completed and put into production; the special steel electric furnace upgrade and renovation project, 50% of the project construction progress has been achieved in 2020. 3. New product development capabilities. Successfully developed 36 new varieties. The high-strength complex phase steel CP980 for roll forming has filled the blank of Bengang Steel Plates’s cold-rolling production; the oil drill uses steel series products to achieve mass supply in the international market, and E4340 steel is produced by continuous casting instead of die casting. It is a domestic initiative to replace imported high-end products. In terms of product certification, 33 certification projects have been carried out, involving 150 brands and 178 specifications. The 2000MPa hot-formed steel has passed the certification of AIWAYS and Great Wall Motors; the cold-rolled CR420LA and galvanized CR240LA products have passed the Pan Asia certification. 4. Technological innovation ability. In terms of scientific and technological cooperation, to undertake meetings of the Expert Committee of the Metals, establish the strategic docking between Bengang group and China Iron and Steel Research Group, strengthen cooperation with Northeastern University and other universities and research institutes, and invite national academicians and authoritative experts to discuss the latest technological progress and industry development trends. , To direct and to promote the high-quality development of Benxi Iron and Steel Group. In terms of scientific and technological achievements, it has won 4 metallurgical science and technology awards and 3 scientific and technological progress awards in Liaoning Province. Among them, "the research and development of hot stamping steel with the highest strength and extra-thick specifications and its serial development" won the first prize in the metallurgical industry. The industry's highest award. In terms of intellectual property rights, 3 national standards and 11 corporate standards were drafted; 211 patents were accepted by the National Bureau, a year-on-year increase of 21.2%; 108 patents were authorized by the National Bureau, including 16 inventions and 92 utility models. Bengang Steel Plate Co., Ltd. won the Quality Award from the Governor of Liaoning Province and was identified as "the first batch of high-value patent cultivation centers in Liaoning Province." 5. Green development capability. In combination with the steel industry and local ultra-low emission policy requirements, the company has the courage to assume social responsibilities, relying on professional planning and research institutions to prepare an environmental protection improvement plan and an annual implementation plan. Through all-round green improvement such as cleaner production level, three waste management, environmental protection management, the company is striving to achieve "ultra-low emissions", achieve community-based environmental quality, promote the integration of industry and city, and build the company into an "ecological steel" that develops harmoniously with the city. plant". At present, the two dust collectors of the second sintering product of the iron smelting plant have completed the transformation to meet the emission standards; the CCPP power generation project using surplus gas is planned to be completed and put into operation in August 2021; the new mixed material yard and the fully enclosed project of the material yard are also being planned Under design, it is expected to be completed and put into operation in 2024. 6. Intelligent manufacturing capabilities. The company has steadily promoted the construction of related projects on the integration of industrialization and industrialization, and intelligent chemical plants. In 2020, it has issued an investment plan of 63 million yuan for the upgrading of information infrastructure, production and manufacturing management, intelligent equipment for cold rolling areas, and the upgrading and transformation of railway transportation dispatching and commanding information systems Intelligent transformation in other fields. It plans to increase investment in information technology and intelligent manufacturing, keep up with the pace of enterprise development in the era of big data, and achieve high-quality development. 7. Marketing ability. The company adheres to the benefit-oriented approach, optimizes the product structure, achieves steady growth in the output of its leading products, and significantly enhances the core competitiveness of its products. Intensify market development, reasonably match resources, develop 32 new customers and 45 new steel grades, and achieve the goal of 100% production and sales rate. The products are sold to more than 30 countries along the "Belt and Road", with 1 million tons, accounting for 42% of total exports. It has completed the certification of 70 grades of cold-rolled, galvanized, pickled, and special steel products, an increase of 25% over last year, covering users of automotive sheets, home appliance sheets, and special steel. Some of the company's automotive sheet products have been included in the Mercedes-Benz BQF (Global Purchasing) list. The key certification work of BMW, Mercedes-Benz, Renault and others have achieved phased results; the inspection of SGS, ELV and Reach products has been completed. 8. Brand building. The company builds a symbiosis and shared quality management model of "supporting a better life with steel power", attaches importance to the construction of corporate culture, actively expands brand influence, strives to fulfill social responsibilities, enhances corporate social image, and successfully wins the 2019 Liaoning Provincial Governor Quality Award. The company is the only steel company to win this honor. 10 Bengang Steel Plates Co., Ltd. Annual Report 2020 IV. Management Discussion and Analysis I. General During the reporting period, the company adhered to the guidance of Xi Jinping’s Thought on Socialism with Chinese Characteristics for a New Era, thoroughly implemented the spirit of General Secretary Jinping’s important speech during his inspection in Liaoning and the seminar on deepening the revitalization of Northeast China, and insisted on supply- side structural reform as the main line. Implement high-quality development requirements, resolutely implement the national, provincial, and municipal epidemic prevention and control work deployment and the "six stability and six guarantees" requirements, focus on epidemic prevention and control on the one hand, and stabilize production and high yield on the other, and achieved both epidemic prevention and control and production and operation and realized the stable development of economic operation. The annual production of pig iron was 10.069 million tons, a year-on-year increase of 3.52%; crude steel 10.31 million tons, a year-on-year increase of 3.47%; hot-rolled plates 12.235 million tons, a year-on-year decrease of 0.26%; cold-rolled plates 5.438 million tons, a year-on-year increase of 0.4%; special steel 721,000 tons, an increase of 48.21% year-on-year, and the realization of "three zeros" in safe production with large personal accidents, large fire accidents and major equipment accidents. Reviewing the work of the year, it is mainly reflected in the following aspects: (1) Management innovation. Taking benefit as the guide, improve the assessment system of the responsibility certificate, increase the "cost rejection index" for factories and mines on the basis of the bonus coefficient of the main contract, and implement the "dual switch" assessment. Organize the signing of the letter of responsibility, and require each unit to decompose the indicators to the work area level by level, and guide the grassroots units to sign the responsibility letter indicators with the work area to achieve full coverage of the signing of the responsibility letter and no dead ends, so that the leadership team at all levels can focus more on the performance appraisal indicators and to achieve a good performance-oriented situation. The company learned from the advanced experience of steel companies such as Angang Iron and Steel Co., Ltd., formulated a "three-step" benchmarking management model of “bright indicators, select benchmarks,” “align indicators, find gaps,” “determine measures, and create benefits”, and build a comprehensive benchmarking management model and improve management level. Strengthen capital management operations, and completed the 6.8 billion yuan issuance of convertible bonds for plate companies. This is the first time in 20 years that it has achieved super-large-scale direct refinancing through a public offering. (2) Scientific and technological innovation work. Adhering to the design concept of lightweight, green and environmental protection, aiming at stable quality, reasonable cost, high added value and strong market competitiveness, closely combining market demand and future technological development, considering the characteristics of its own production line, and developing marketable products New product. Successfully developed cold-rolled complex-phase steel CP980, filled the blank in the production of cold-rolled complex-phase steel, and seized the high-end product market; oil drills used steel series products to achieve mass supply in the international market, and E4340 steel was successfully replaced by continuous casting instead of die casting production and such replacement of imported high-end products was the first case in China. Strengthen cooperation with Northeastern University and other universities and research institutes, invite national academicians and authoritative experts to jointly discuss the latest technological progress and industry development trends, and direct and to promote high-quality development. Bengang Steel Plate Co., Ltd. was identified as "the first batch of high-value patent cultivation centers in Liaoning Province". (3) Production and operation work. Adhere to the focus on smooth operation, cost, and quality, carry out hidden danger investigations, benchmark potential, increase efficiency and reduce consumption in each process, and promote stable and high output. Further optimize the production organization, give full play to the role of dispatching, command and coordination, scientifically and efficiently organize the comprehensive balance of various production, and steadily promote the work of reducing costs and increasing efficiency. Adhere to the implementation of the cost management and control system and the daily settlement mechanism, carry out comprehensive benchmarking and process cost analysis, and achieve dynamic management and control of key indicators and cost operations. (4) Party building and group work. Earnestly implement the arrangements of the Party Central Committee, the Provincial Party Committee, and the company’s party committees, and carry out the activities of "Grassroots Party Building Work Construction Year" and "Grassroots Party Building System Implementation Year". Revise and improve the party building work system, strengthen the education and management of party members, and the standardization and standardization of grassroots party organizations have been continuously improved. Organize the "Craftsman Cup" employee vocational skills competition and the "Ankang Cup" competition to continuously stimulate the labor enthusiasm and innovation vitality of the majority of employees. (5) People's livelihood and social responsibility. The multi-dimensional parking lot project at Gate 4 added 251 parking 11 Bengang Steel Plates Co., Ltd. Annual Report 2020 spaces; the bus in the factory was put into operation, which met the commuting and parking needs of employees to the greatest extent. Fully implement the three-year special rectification action for safety production, adhere to the management and control of major hazards and risk points, carry out the "clearing" of potential accidents, adhere to the "anti-three violations", and establish a sound safety assessment and evaluation system. II. Main Business Analysis 1. General For relevant information please refer to “Management Discussion and Analysis 1. General”. 2. Income and Cost (1) Breakdown of Operating Income Unit: Yuan 2020 2019 Change over last Amount Proportion Amount Proportion year Total operating income 48,684,792,685.58 100% 52,741,353,582.28 100% -7.69% By industries Industry 48,684,792,685.58 100.00% 52,741,353,582.28 100.00% -7.69% By products Steel plate 45,321,849,577.55 93.09% 46,805,252,792.90 88.74% -3.17% Others 3,362,943,108.03 6.91% 5,936,100,789.38 11.26% -43.35% By regions Northeast 20,420,940,894.42 41.95% 20,024,243,641.60 37.97% 1.98% North China 1,608,496,520.50 3.30% 5,084,223,402.71 9.64% -68.36% East China 21,783,663,312.31 44.74% 20,568,857,942.71 39.00% 5.91% Northwest 48,736,790.89 0.10% 57,451,092.38 0.11% -15.17% Southwest 241,981,145.95 0.50% 232,028,336.48 0.44% 4.29% Central south 25,508,604.19 0.05% 26,564,062.51 0.05% -3.97% Export 4,555,465,417.32 9.36% 6,747,985,103.89 12.79% -32.49% (2) Industry, Product and Regions Accounting for the Company’s Operating Income or Profit over 10% √ Applicable □ Not applicable Unit: Yuan Operating income Operating costs Gross margin Operating income Operating costs Gross margin change over last change over last change over last year year year By industries Industry 48,684,792,685.58 46,392,180,562.59 4.71% -7.69% -5.73% -1.98% By products Steel plate 45,321,849,577.55 43,322,474,075.93 4.41% -3.17% -1.32% -1.79% Others 3,362,943,108.03 3,069,706,486.66 8.72% -43.35% -42.20% -1.81% By regions Northeast 20,420,940,894.42 19,414,606,651.84 4.93% 1.98% 4.48% -2.27% 12 Bengang Steel Plates Co., Ltd. Annual Report 2020 North China 1,608,496,520.50 1,526,943,028.55 5.07% -68.36% -67.91% -1.35% East China 21,783,663,312.31 20,791,821,739.26 4.55% 5.91% 8.27% -2.09% Northwest 48,736,790.89 46,538,965.99 4.51% -15.17% -14.06% -1.24% Southwest 241,981,145.95 231,749,437.80 4.23% 4.29% 6.74% -2.20% Central south 25,508,604.19 24,194,939.67 5.15% -3.97% -2.56% -1.37% Export 4,555,465,417.32 4,356,325,799.48 4.37% -32.49% -31.64% -1.20% Operating data of recent one year according to adjusted statistics caliber at the year-end in the case that the Company's main business statistics caliber has changed during the reporting period □ Applicable √Not applicable (3) Whether the Company’s Physical Sales Income Exceeded Service Income √ Yes □ No Change over last Industry classification Item Unit 2020 2019 year Sales ton 12,968,385.12 12,936,378.68 0.25% Steel rolling processing Production ton 12,940,697.06 12,753,498.73 1.47% industry Inventory ton 489,522.19 461,834.13 6.00% The main reasons that the relevant data changed more than 30% □ Applicable √ Not applicable (4) Performance of Significant Sales Contract Signed-up in this Reporting Period □ Applicable √ Not applicable (5) Breakdown of Operating Cost Industry classification Unit: Yuan Industry 2020 2019 Change over last Item classification Amount Proportion Amount Proportion year Steel rolling Raw material 23,138,475,447.81 49.88% 24,287,695,988.38 49.35% 0.52% processing industry Steel rolling Supplementary 2,089,395,547.62 4.50% 2,244,278,919.58 4.56% -0.06% processing industry materials Steel rolling Spare parts and 737,780,144.94 1.59% 792,470,544.15 1.61% -0.02% processing industry tools Steel rolling Fuel 12,727,140,058.39 27.43% 13,563,168,678.04 27.56% -0.13% processing industry Steel rolling Energy 2,687,362,561.57 5.79% 2,886,572,220.88 5.87% -0.07% processing industry Steel rolling Salary and 1,980,205,516.91 4.27% 2,132,408,812.44 4.33% -0.06% processing industry benefits Steel rolling Depreciation 2,191,070,638.31 4.72% 2,474,423,868.41 5.03% -0.31% processing industry Steel rolling Others 840,750,647.04 1.81% 830,395,613.74 1.69% 0.12% processing industry Steel rolling Total 46,392,180,562.59 100.00% 49,211,414,645.62 100.00% 0.00% processing industry 13 Bengang Steel Plates Co., Ltd. Annual Report 2020 (6) Whether Changes Occurred in Consolidation Scope in the Reporting Period □ Yes √No (7) Relevant Information of Significant Changes or Adjustment of the Business, Product or Service in the Reporting Period □ Applicable √ Not applicable (8) Information of Main Customers and Main Suppliers Information of the Company’s main customers Total sales amount of the top five customers (Yuan) 9,461,208,019.24 Total sales amount of the top five customers accounted for the proportion of total 19.43% annual sales The proportion of the total sales of the related parties in the top five customers 3.35% Information of the top 5 customers No Name Amount (Yuan) Proportion 1 Ouyeel Cloud Trade Co., Ltd. 3,427,597,868.74 7.04% 2 Benxi Beiying Steel & Iron (Group) Co., Ltd. 1,631,630,570.63 3.35% 3 Xiamen Jian Fa Metal Co., Ltd. 1,561,111,934.43 3.21% 4 Ningbo AUX Trade Co., Ltd. 1,492,384,207.69 3.07% Shanghai Min Xing Da International Trade Co., 5 1,348,483,437.75 2.77% Ltd. Total -- 9,461,208,019.24 19.43% Other information of principal customers □ Applicable √ Not applicable Information of the Company’s main suppliers Total purchase amount of the top five suppliers (Yuan) 20,250,289,490.17 Total purchase amount of the top five suppliers accounted for the proportion of 43.65% total purchase The proportion of the total purchase of the related parties in the top five suppliers 34.29% Information of the top 5 suppliers No. Name Amount (Yuan) Proportion 1 Benxi Beiying Steel & Iron (Group) Co., Ltd. 5,482,888,445.65 11.82% Bengang Group International Economic and 2 5,237,730,233.06 11.29% Trading Co., Ltd. 3 Benxi Steel & Iron (Group) Mining Co., Ltd. 5,186,341,981.67 11.18% Liaoning Electric Power Co., Ltd. Benxi Electric 4 2,489,089,422.71 5.37% Power Supply Company 5 Heilongjiang Dragon Coal Group Co., Ltd. 1,854,239,407.08 4.00% Total -- 20,250,289,490.17 43.65% Other information of principal suppliers □ Applicable √ Not applicable 3. Expenses Unit: Yuan Notes to significant 2020 2019 Change over last year change 14 Bengang Steel Plates Co., Ltd. Annual Report 2020 Due to the application of Selling and distribution expenses 97,279,280.21 1,096,688,903.70 -91.13% new revenue standard General and administrative expenses 792,826,294.81 831,945,841.56 -4.70% Loss of exchange decreases and interest Financial expenses 364,775,155.62 681,842,689.23 -46.50% income increases during the current period Research and development expenses 37,989,623.28 30,780,463.74 23.42% 4. Research and Development Input √ Applicable □ Not applicable Comprehensively improve the level of innovation and the ability to generate profits and increase efficiency, strengthen variety adjustment and market development, improve product quality stability and assurance capabilities, promote low-cost and green manufacturing technology, and determine the company's technology project plan based on the three elements of variety, quality and cost. ; Promote school-enterprise cooperation and industry-university-research cooperation, promote the transformation of scientific and technological achievements of universities and scientific research institutes, and drive technological development of enterprises; plan to develop 30 new products and more than 10 foreign cooperation projects throughout the year; The quality has been significantly improved due to the increased R&D investment and some products have reached the leading domestic level, which has improved corporate profitability. Information of research and development input by the company 2020 2019 Change over last year Number of Research and 1,732 1,632 6.13% Development personnel Proportion of number of Research and Development 10.34% 9.18% 1.16% personnel Amount of Research and Development Investment (In 1,541,000,000.00 1,287,080,000.00 19.73% RMB) Proportion of Research and Development investment to 3.17% 2.44% 0.73% operating income Amount of capitalized Research 0.00 0.00 0.00% and Development investment Proportion of capitalized Research and Development investment accounted to total 0.00% 0.00% 0.00% Research and Development investment Illustrations of the prominent change in proportion of research and development input occupying the operating income over same period last year □ Applicable √ Not applicable Illustrations of significant change in the research and development input’s capitalization rate and its reasonableness □ Applicable √ Not applicable 5. Cash Flow Unit: Yuan Item 2020 2019 Change over last year Subtotal of cash inflows from 40,062,379,161.40 48,140,957,956.69 -16.78% operating activities Subtotal of cash outflows from 42,101,379,374.69 41,163,133,915.53 2.28% operating activities Net cash flows from operating -2,039,000,213.29 6,977,824,041.16 -129.22% 15 Bengang Steel Plates Co., Ltd. Annual Report 2020 activities Subtotal of cash inflows from 14,037,738.77 53,984,827.07 -74.00% investing activities Subtotal of cash outflows paid 6,213,928,829.62 4,598,859,687.86 35.12% for investing activities Net cash flows from investing -6,199,891,090.85 -4,544,874,860.79 36.42% activities Subtotal of cash inflows from 22,997,390,314.56 17,484,678,971.97 31.53% financing activities Subtotal of cash outflows from 18,941,067,286.47 18,304,173,598.95 3.48% financing activities Net cash flows from financing 4,056,323,028.09 -819,494,626.98 234.80% activities Net increase in cash and cash -4,211,997,393.46 1,688,866,366.61 -349.40% equivalents Illustrations of key factors of significant changes over same period last year √ Applicable □Not applicable Notes: (1) Net cash flows generated from operating activities decreased 129.22% compared to the previous period, mainly because the increase of cash received from sales of goods is less than the increase of cash paid for goods. (2) Subtotal of cash inflows from investing activities decreased 74% compared to the previous period, mainly because the decrease of cash withdrawn from purchase of financial products. (3) Subtotal of cash outflows from investing activities increased 35.12% compared to the previous period, mainly because the increase of cash paid for investment. (4) Net cash flows from investing activities increased 36.42% compared to the previous year, mainly because the increase of cash paid for investment. (5) Subtotal of cash outflows from financing activities increased 3.48% compared to the previous period, mainly because the increase of cash repayment. (6) Net cash flows from financing activities increased 234.8% compared to the previous period, mainly because the issuance of convertible corporate bonds in the current period. Illustrations of significant difference between cash flow from operating activities and net profit during the reporting period □ Applicable √Not applicable III. Analysis of Non-core Business √Applicable □ Not applicable Unit: Yuan Amount Proportion in total profit Explanation of cause Whether sustainable Investment income 13,951,362.33 3.35% Due to external equity investment No Due to provision of impairment of Impairment of assets -67,185,869.37 -16.12% No finished products Due to income raised from Non-operating income 4,328,563.52 1.04% No scrapping of non-current assets Due to scrapping of assets in Non-operating expenses 95,724,280.44 22.96% No current period IV. Assets and Liabilities 1. Significant Change of Assets Components Adjustment to the beginning balance of the current period due to the first adoption of new revenue standards or new leasing standards since 2020 √ Applicable □ Not applicable Unit: Yuan 16 Bengang Steel Plates Co., Ltd. Annual Report 2020 Ending balance of 2020 Beginning balance of 2020 Notes to Proportion in Proportion in Proportion significant Amount the total assets Amount the total assets change change (%) (%) Cash at bank and on 13,126,666,915.26 20.19% 18,415,844,397.77 30.32% -10.13% hand Accounts receivable 245,217,182.66 0.38% 235,696,265.66 0.39% -0.01% Inventories 9,040,065,342.65 13.91% 7,700,397,685.61 12.68% 1.23% Long-term equity 0.00% 0.00% investment Fixed assets 2,742,064.73 0.00% 2,642,998.70 0.00% 0.00% Construction in 26,284,567,956.44 40.43% 26,123,375,492.40 43.01% -2.58% process Short-term loans 1,839,933,715.58 2.83% 1,833,853,572.58 3.02% -0.19% Long-term loans 10,067,731,000.00 15.49% 13,151,478,000.00 21.66% -6.17% 3,502,934,427.65 5.39% 4,849,675,910.73 7.99% -2.60% 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 4.Other equity 1,042,024,829 1,042,024,8 instrument .00 29.00 investments Subtotal of 1,042,024,829 1,042,024,8 financial .00 29.00 assets 1,042,024,829 1,042,024,8 Total .00 29.00 Financial 0.00 0.00 liabilities 3. Restricted Assets by the End of the Period Items Ending balance Reason Cash at bank and on hand 3,897,249,320.14 Deposit for notes and L/C Accounts receivable financing 887,473,044.29 Pledged for acceptance bill Other equity instrument investments 1,037,735,849.00 Pledged for loans Fixed assets 94,790,118.09 Mortgage for fund lending Intangible assets 37,116,386.66 Mortgage for fund lending Total 5,954,364,718.18 17 Bengang Steel Plates Co., Ltd. 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. Investment of Financial Assets (1) Investment in Securities □ Applicable √ Not applicable There was no investment in securities during the reporting period. (2) Investment in Derivatives □Applicable √ Not applicable There was no investment in derivatives during the reporting period. 5. Use of Raised Funds √ Applicable □ Not applicable (1) Use of Raised Funds √Applicable □ Not applicable Unit: 10 thousand yuan The total amount Cumulativ The of funds Cumulativ Amount of e purpose Used The total raised e total The total funds proportion and Way of Total amount amount of used for amount of amount of raised after of total destination Year raising of raised raised amount of change funds funds being idle raised of the funds funds fund this funds of raised for raised not for more funds for raised year raised purpose change of used than two changes of funds not during purpose years purposes yet used the reportin g period Private placement 2018 396,580 9,390.49 327,758.9 68,821.1 Deposit to raise funds Issue of 246,295.9 246,295.9 2020 convertibl 675,920 429,624.03 Deposit 7 7 e bonds 255,686.4 574,054.8 Total -- 1,072,500 0 0 0.00% 498,445.13 -- 0 6 7 18 Bengang Steel Plates Co., Ltd. Annual Report 2020 Description of the overall use of raised funds 1. The company's use of idle raised funds to temporarily supplement working capital does not involve changing the use of raised funds in disguised form or affecting the normal progress of the investment plan of raised funds. The sponsor of the company's non- public offering agreed to the company's use of idle raised funds to temporarily supplement liquidity and issued the "Guotai Junan Securities Co., Ltd. Verification Opinions on the Company's Use of Idle Raised Funds to Supplement Liquidity Provisionally". As of July 27, 2020, the company has returned the above-mentioned idle raised funds of RMB 666,000,000.00 for temporary supplementary liquidity to the company's special account for raised funds. The funds raised from the non-public offering of shares in July 2020 for temporarily supplement working capital The company used idle raised funds of RMB 666,000,000.00 (RMB 370,000,000.00 for the cold-rolled high-strength steel transformation project and RMB 296,000,000.00 for the third cold-rolling plant hot-dip galvanizing production line project) to temporarily supplement the working capital. The 4th meeting and the 12th meeting of the 8th Board of Supervisors reviewed and approved. The independent directors of the company have issued clear opinions and fulfilled the necessary decision-making procedures. The use of idle raised funds to temporarily supplement liquidity matters will not change the use of raised funds or affect the normal progress of the investment plan with raised funds, there is no situation that harms the interests of shareholders, and the time for a single replenishment of liquidity does not exceed 12 months. The company has promised not to use idle raised funds for high-risk investments, which is in line with "Guidelines for the Supervision of Listed Companies". No.-Regulatory Requirements for the Management and Use of Funds Raised by Listed Companies”, the “Shenzhen Stock Exchange Stock Listing Rules” and the “Guidelines for the Normative Operation of Listed Companies on the Main Board of the Shenzhen Stock Exchange” and other relevant laws, regulations and regulatory documents. The company's use of idle raised funds to temporarily supplement working capital does not involve changing the use of raised funds in disguised form or affecting the normal progress of the investment plan of raised funds. The sponsor of the company's non-public offering agreed to the company's use of idle raised funds to temporarily supplement working capital and issued the "Guotai Junan Securities Co., Ltd. Verification Opinions on the Company's Use of Idle Raised Funds to Supplement Liquidity Provisionally". As of December 31, 2020, the company used idle funds raised from non-public issuance of stocks to temporarily supplement the balance of working capital of RMB 666,000,000.00. 2. The temporary supplement of liquidity with funds raised from the public issuance of convertible corporate bonds The company uses idle raised funds of 4,180,000,000.00 yuan (high grade high magnetic induction non-oriented silicon steel project 1,010,000,000.00 yuan, steelmaking plant No. 8 caster project 220,000,000.00 yuan, ironmaking plant No. 5 blast furnace capacity replacement project 800,000,000.00 yuan, special steel electric furnace upgrade and transformation project 1,300,000,000.00 yuan, CCPP power generation project 700,000,000.00 yuan, steelmaking plant No. 4-6 converter environmental protection renovation project 150,000,000.00 yuan) temporary supplement of working capital matters. The fourteenth meeting of the eighth board of directors of the company held on July 28, 2020, Deliberated and approved at the 12th meeting of the 8th Board of Supervisors, the independent directors of the company have issued clear consent and fulfilled the necessary decision-making procedures. This time the use of idle raised funds to temporarily supplement liquidity matters will not change the use of raised funds or affect normal plan of the investment of raised funds. There is no situation that harms the interests of shareholders, and the time for a single replenishment of liquidity does not exceed 12 months. The company has promised not to use idle raised funds for high-risk investments, which complies with the "Guidelines for Supervision of Listed Companies No. 2-Listed Companies The regulatory requirements for the management and use of raised funds”, the “Shenzhen Stock Exchange Stock Listing Rules”, and the “Guidelines for the Normative Operation of Listed Companies on the Main Board of the Shenzhen Stock Exchange” and other relevant laws, regulations and regulatory documents. The company's use of idle raised funds to temporarily supplement working capital does not involve changing the use of raised funds in disguised form or affecting the normal progress of the investment plan of raised funds. The sponsor of the company’s public issuance of convertible corporate bonds agreed to the company's use of idle raised funds to temporarily supplement liquidity and issued the "Guotai Junan Securities Co., Ltd. Verification Opinions on the Company's Use of Idle Raised Funds to Supplement Liquidity Provisionally". As of December 31, 2020, the company used idle funds raised from the public issuance of convertible corporate bonds to temporarily supplement the balance of working capital of RMB 4,180,000,000.00. 3. Use of surplus funds raised During the reporting period, the company did not use surplus funds raised. 4. The use of over-raised funds During the reporting period, the company did not use over-raised funds. 5. Purpose and destination of unused raised funds As of December 31, 2020, the company has excluded the aforementioned "Preliminary Investment and Replacement of Raised Funds Investment Projects", "Present Investment and Replacement of Funds Raised in Investment Projects with Idle Raised Funds" and "Use of Idle Raised Funds for Temporary Supplement of Working Capital". Except for the temporary supplement of working capital, the remaining funds raised are temporarily stored in a special account for raised funds. 6. Other usage of raised funds During the reporting period, the company had no other use of raised funds. 7. Change the use of funds for investment projects with raised funds During the reporting period, the company's investment projects with raised funds remained unchanged. 8. Problems in the use and disclosure of raised funds During the reporting period, the company strictly followed the "Shenzhen Stock Exchange Stock Listing Rules", the "Guidelines for 19 Bengang Steel Plates Co., Ltd. Annual Report 2020 the Standardized Operation of Companies Listed on the Main Board of the Shenzhen Stock Exchange (Revised in 2015)" (Shenzheng Shang [2015] No. 65) and the company's "Raise Funds" Management System" and other relevant regulations manage the special account of raised funds, and the investment projects of raised funds will be implemented as planned. The use and management of the company's raised funds are legal and effective, and it has strictly fulfilled its information disclosure obligations. There is no untimely, untrue, incorrect, or incomplete disclosure, and there is no violation of the management of raised funds. 9. Approval of special report This special report was approved by the board of directors on April 26, 2021. (2) Fundraising commitments √Applicable □ Not applicable Unit: 10 thousand yuan Accumul Investme Whether Date of Whether Total ated nt the Raised Amount the Benefits Whether the amount investme project funds invested progress project achieved the project Committed investment of nt has been promised during as of the reaches during expected feasibility projects and over- investme amount changed total the end of the the the benefits has raised funds nt after as of the period (includin investme reporting expected reporting are changed adjustme end of the g partial nt period (3)= usable period achieved significan nt (1) period changes) (2)/(1) status tly (2) Committed invested projects High Strength Cold 187,466.2 Rolling Steel No 226,580 226,580 9,390.49 82.74% 31.12.2017 5,357.65 No No 9 Renovation Project The Third Cold Rolling Work Hot-Dip Galvanizing No 70,000 70,000 40,292.61 57.56% 31.12.2018 8,490.1 No No Production Line Project Not Repayment of bank No 100,000 100,000 100,000 100.00% applicabl No loans e High grade, high Not magnetic induction No 101,620 101,620 123 123 0.12% applicabl No non-oriented silicon e steel project Steelmaking Plant No. 8 Casting Machine No 33,500 33,500 9,864.44 9,864.44 29.45% 31.10.2020 2,819.04 No No Project Capacity Replacement Project of No. 5 Blast No 96,000 96,000 13,322.74 13,322.74 13.88% 31.11.2020 -3,749.14 No No Furnace in Ironmaking Plant Special Steel Electric Not Furnace Upgrade No 141,600 141,600 11,703.34 11,703.34 8.27% applicabl No Project e Not CCPP power No 83,300 83,300 9,570.15 9,570.15 11.49% applicabl No generation project e Steelmaking plant No. 4-6 converter environmental No 19,900 19,900 1,712.3 1,712.3 8.60% 31.12.2020 No No protection renovation project Not Repayment of bank No 200,000 200,000 200,000 200,000 applicabl No loans e 20 Bengang Steel Plates Co., Ltd. Annual Report 2020 255,686.4 574,054.8 Subtotal -- 1,072,500 1,072,500 -- -- 12,917.65 -- -- 6 7 Over-raised funds Not applicable No 255,686.4 574,054.8 Total -- 1,072,500 1,072,500 -- -- 12,917.65 -- -- 6 7 1. The market environment has undergone major changes. Although the cold-rolled high-strength steel transformation project and the third cold-rolling plant hot-dip galvanizing production line project have basically reached production capacity and profitability has improved, there is still a need to steadily Situation and cause of increase the production of high value-added products. More customers recognized the new line of failure to meet planned products. progress or projected 2. The No. 8 caster engineering project of the steelmaking plant reached the expected usable state in earnings (disclosed by October 2020, and the capacity is in the ramp-up phase this year, and the expected profit in this period has project) not been reached; the capacity replacement project of the No. 5 blast furnace of the iron smelting plant reached the expected usable status in November 2020. This year is in a ramp-up phase of production capacity, and after considering the provision for impairment of assets related to the replacement capacity of the original No. 5 blast furnace, the expected profit has not been reached in this period. Description of major changes in project None. feasibility Amount, use and Not applicable progress of usage of over-raised funds Change in the Not applicable implementation location of the raised funds investment project Adjustment of Not applicable implementation methods of fund- raising investment projects The initial investment Applicable and replacement of the fundraising investment Refer to the Contents in Special Report III 3 project Temporary Applicable replenishment of working capital with Refer to the Contents in Special Report III 4 idle raised funds The amount and reason Applicable for the rest of raised fund in the project There was no surplus of funds raised for project implementation this year. implementation Use and destination of raised funds that have Refer to the Contents in Special Report III 7 not been used Problems or other situations in the use None. and disclosure of raised funds (3) The situation for raised funds change project □ Applicable √ Not applicable During the reporting period, the company did not have any changes in the fundraising project. 21 Bengang Steel Plates Co., Ltd. Annual Report 2020 VI. Significant Assets and Equity Sold in Reporting Period 1. Significant Assets Sold □ Applicable √ Not applicable There was no significant asset sold during the reporting period. 2. Substantial Equity Sold □ Applicable √ Not applicable VII. Analysis on Main Subsidiaries and Share Participating Companies √ Applicable □ Not applicable Main subsidiaries and the joint-stock companies influencing over 10% net profit of the Company Unit: Yuan Company Main Registered Operating Operating Company Name Total assets Net assets Net Profit type business capital income profit Bengang Processing Puxiang Cool 1,920,000,000 5,184,119,484. 2,024,536,003 7,327,060,880 Subsidiaries and sales 56,003,512.60 42,005,550.17 Rolling Steel .00 86 .56 .66 of steel Sheet Co., Ltd. Acquirement and disposal of subsidiaries during the reporting period □ Applicable √ Not applicable Illustration of main joint-stock companies None VIII. Structure Entities controlled by the Company □ Applicable √ Not applicable IX. Prospect for Future Development of the Company (1) The development trend of the industry and the market competition pattern the company faces In 2021, from the perspective of the international economic situation, there are many uncertainties in the changes in the epidemic and the external environment. Next year, the world economic situation will remain complex and severe, the recovery will be unstable and uneven, and various derivative risks caused by the impact of the epidemic cannot be ignored. From the perspective of the domestic economic situation, China will enter the "14th Five-Year Plan" period, and creating a new pattern of "dual cycles" will be the main strategic direction, and "expansion of domestic demand" has become an important strategic basis. At present, China has become the only major economy in the world to achieve positive economic growth. The three major battles have made decisive achievements. The rapid economic recovery will drive a significant increase in steel demand. At the same time, we must also see that steel production maintains high strength under the expected upward pull of demand, high steel inventories are running high, steel prices are under pressure, and other issues are more prominent, and it is also very difficult for companies to improve economic efficiency. Therefore, we must maintain a clear understanding, fully implement the national "revitalizing the Northeast" decision and deployment, firmly grasp the development opportunities of "digital Liaoning, intelligent building a strong province", give full play to the 22 Bengang Steel Plates Co., Ltd. Annual Report 2020 advantages of resources, location and other advantages, maintain strategic determination, and actively Responding to market changes, we insist on focusing on economic benefits, improve quality and increase production, reduce costs and increase efficiency, and ensure that the company achieves higher-quality development. (2) Company development strategy The overall work plan for 2021: guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, thoroughly study and implement the spirit of the 19th National Congress of the Communist Party of China and the 2nd, 3rd, 4th, and 5th Plenary Sessions of the 19th National Congress of the Communist Party of China, and earnestly implement the Party Central Committee and the State Council , Provincial and municipal epidemic prevention and control and the "six stability" and "six guarantees" work requirements, comprehensively strengthen the party's leadership, standardize corporate governance, and adhere to the principle of benefit-centered and technological innovation on the basis of normalizing epidemic prevention and control As a guide, with deepening reform as the driving force, and with stable and high output as the guarantee, we will strive to achieve a high starting point for the 14th Five-Year Plan. (3) Business plan The overall goal of production and operation in 2021: Strive to complete 10.76 million tons of pig iron, 11.303 million tons of crude steel, 13.797 million tons of hot-rolled plates, 5.82 million tons of cold-rolled plates (deducting 200,000 tons of chilled internal supply), and 700,000 tons of special steel, Safety production realizes "three for zero". In order to achieve the above goals, we will focus on the following aspects: 1. Promote the construction of smart enterprises and achieve higher quality development 2. Strengthen safety management and realize energy-saving and green development 3. Adhere to the innovation-driven strategy and promote the construction of smart factories 4. Consolidate various basic management and enhance corporate management efficiency 5. Unswervingly deepen reforms and stimulate the vitality of enterprise development 6. Adhere to the leadership of the party to the enterprise and provide strong political guarantee (4) Maintain the current business and complete the funding arrangements required for the investment projects under construction The company will use its own funds and bank loans to meet the funds required for production and operation and technological transformation. (5) Possible risks 1. The risk of raw material price fluctuations Risk: The company's main raw materials, iron ore, coal, etc., fluctuate greatly. In particular, iron ore prices continued to rise during the reporting period, which had a greater impact on the company's profitability. Response measures: In terms of bulk raw material procurement, make efforts in market analysis and judgment, increase the inventory through low-cost bulk material purchases, and strive to reduce procurement costs; adjust the inventory 23 Bengang Steel Plates Co., Ltd. Annual Report 2020 structure to improve inventory turnover; solidly carry out cost reduction and efficiency enhancement work, and actively promote the enterprise Competitiveness: Set research index items for the weak links and bottlenecks that affect the level of the index, clarify the research goals, measures, time points, and responsible persons, and steadily advance the index improvement. 2. Risks of prevention and control of the COVID-19 epidemic Risk: Since the outbreak of the COVID-19 in early 2020, the prevention and control of the epidemic has been continuing nationwide. With a series of strong epidemic prevention and control measures adopted by governments at all levels, domestic epidemic prevention and control has been effectively controlled, and various economic activities have gradually resumed, but overseas epidemics are still continuing and facing greater uncertainty. The company will effectively implement the government's requirements for epidemic prevention and control, and strengthen support for epidemic prevention and control, so as to reduce the impact of the epidemic on the company's normal production and operation activities. Response measures: Establish various strict and normalized epidemic prevention and control mechanisms, strengthen the publicity of all employees' health knowledge related to the epidemic, and highlight the supervision and inspection of internal epidemic prevention and control. 3. Environmental risks Risk: The country promotes carbon peaking and carbon neutrality. The steel industry is one of the important areas in my country to achieve emission reduction and carbon reduction. The industry faces more requirements for carbon emission restriction mechanisms and low-carbon development, making the company face greater environmental pressure. Countermeasures: Optimize the production process and further improve the recycling rate of various energy sources. Pay attention to various national environmental protection policies, improve corporate environmental protection standards, and make them meet and appropriately exceed national standards. Strengthen the self-supervision and inspection of the company's various pollution sources and strengthen the environmental protection awareness of all employees. Accelerate the construction progress of the identified environmental protection projects to ensure that the national environmental protection requirements are met. 4. Market risk Risks: The competition in the steel industry is fierce, and the industry concentration is accelerating, driven by national policies and the market. At the same time, due to the continued overseas epidemic, the export business is facing more challenges, and the company is facing fierce market competition risks. Response measures: increase the development of new products, increase investment in technology research and development, optimize product structure, and increase the market share of core products; comprehensively improve management, improve management energy efficiency, reduce operating costs, and increase profitability; improve the marketing service system and continue to optimize the company's marketing strategy to enhance brand influence. 24 Bengang Steel Plates Co., Ltd. Annual Report 2020 X. Researches, visits and interviews received in this reporting period 1. Registration form of researches, visits and interviews received in this reporting period □ Applicable √ Not applicable During the reporting period, the Company did not receive any research, communication, interviews and other activities. 25 Bengang Steel Plates Co., Ltd. Annual Report 2020 V. Important Events I. Profit Distribution or Capital Reserve Conversion Formulation, implementation and adjustment of profit distribution policy of common shares especially cash dividend policy during the reporting period √ Applicable □ Not applicable As audited by BDO China Shu Lun Pan Certified Public Accountants LLP., the company's net profit attributable to the parent company in 2020 is RMB 384,252,740.78, plus the undistributed profit at the beginning of the year of RMB 2,307,765,664.6, and the undistributed profit at the end of the year is RMB 2,692,018,405.40. Profits distribution plan of 2019: based on the company’s existing share capital of 3,875,371,532 shares, a cash dividend of 0.1 yuan (including tax) will be distributed to all shareholders for every 10 shares. The proposed distribution of ordinary share dividends is RMB 38,753,715.32, and the remaining RMB 2,653,264,690.08 will be carried forward to the next year’s undistributed profits. Special description of cash dividend policy Whether it meets the requirements of the company's articles of Yes association or the resolutions of the shareholders meeting: Whether the dividend standard and ratio are clear: Yes Whether the relevant decision-making procedures and Yes mechanisms are complete: Whether independent directors have performed their duties due Yes diligence and played their due role: Whether small and medium shareholders have sufficient opportunities to express their opinions and demands, and whether Yes their legitimate rights and interests are fully protected: If the cash dividend policy is adjusted or changed, whether the Yes conditions and procedures are compliant and transparent: The profit distribution plan or proposal and the plan or proposal of conversion of the capital reserve into share capital in recent three years (including the reporting period) 1. Profit distribution proposal of 2020 As audited by BDO China Shu Lun Pan Certified Public Accountants LLP., the company's net profit attributable to the parent company in 2020 is RMB 384,252,740.78, plus the undistributed profit at the beginning of the year of RMB 2,307,765,664.62, and the undistributed profit at the end of the year is RMB 2,692,018,405.40. Based on the company’s existing share capital of 3,875,371,532 shares, a cash dividend of 0.1 yuan (including tax) will be distributed to all shareholders for every 10 shares. The proposed distribution of ordinary share dividends is RMB 38,753,715.32, and the remaining RMB 2,653,264,690.08 will be carried forward to the next year’s undistributed profits. 2. Profit distribution proposal of 2019 As audited by BDO China Shu Lun Pan Certified Public Accountants LLP., the net profit attributable to the parent company of the year 2019 was RMB 555,646,971.4. After adding the retained profit of RMB 1,945,887,269.82 at the beginning of the year, and deducting the actual dividend of RMB 193,768,576.6 from the previous year, the balance of undistributed profit was RMB 2,307,765,664.62. Profits distribution plan of 2019: Considering the uncertainty of the Coronavirus on the economy, the company did not make profit distribution or convert the provident fund into capital in 2019. 3. Profit distribution proposal of 2018 As audited by BDO China Shu Lun Pan Certified Public Accountants LLP., the net profit attributable to the parent 26 Bengang Steel Plates Co., Ltd. Annual Report 2020 company of the year 2018 was RMB 1,036,493,236.07. After adding the retained profit of RMB 1,103,162,610.35 at the beginning of the year, and deducting the actual dividend of RMB 193,768,576.6 from the previous year, the balance of undistributed profit was RMB 1,945,887,269.82. Profits distribution plan of 2018: The company will take existing share capital 3,875,371,532 shares as the base, distributing cash dividends RMB 0.5 per 10 shares (including tax) to shareholders. The company plans to distribute RMB193,768,576.60 dividends of ordinary shares, and the remaining RMB 1,752,118,693.22 will be carried over to next year’s undistributed profits. Cash dividend distribution in recent three years Unit: Yuan Ratio in net profit Amount of cash Ratio of cash Net profit dividends in dividend in other Amount of Proportion Cash attributable to the attributable to the other ways way in net profit dividend parent company in cash of cash Year parent company in (repurchasing attributable to the dividends in dividends in (Including the consolidated the consolidated shares) parent company in other ways other ways Tax) financial financial statements the consolidated statements financial statements 38,753,715. 38,753,715. 2020 384,252,740.78 10.09% 0.00 0.00% 9.69% 32 32 2019 0.00 555,646,971.40 0.00% 0.00 0.00% 0.00 0.00% 193,768,576 193,768,576 2018 1,036,493,236.07 18.69% 0.00 0.00% 18.69% .60 .60 Both the Company’s profit and the parent company’s retained earnings are positive however no proposal of cash dividend distribution was proposed during the reporting period □ Applicable √ Not applicable II. Profit Distribution or Capital Reserve Conversion Proposal in the Reporting Period √ Applicable □ Not applicable Number of bonus shares for every 10 shares 0 (shares) Dividend per 10 shares (yuan) (tax included) 0.1 The base of the share capital of the distribution 3,875,371,532.00 plan (shares) Cash dividend amount (yuan) (tax included) 38,753,715.32 Cash dividend amount in other ways (such as share 0.00 repurchase) (yuan) Total cash dividends (including other methods) 0 (yuan) Distributable profit (yuan) 2,692,018,405.40 The ratio of total cash dividends (including other 0 methods) to total profit distribution Cash dividend of the current period If the company's development stage is in the growth period and has major capital expenditure arrangements, when the profit distribution is carried out, the proportion of cash dividends in this profit distribution should be at least 20%. Notes to the profit distribution or capital reserve transfer plan The profit distribution plan or proposal and the plan or proposal of conversion of the capital reserve into share capital in recent three years (including the reporting period) 1. Profit distribution proposal of 2020 As audited by BDO China Shu Lun Pan Certified Public Accountants LLP., the company's net profit attributable to the parent company in 2020 is RMB 384,252,740.78, plus the undistributed profit at the beginning of the year of RMB 2,307,765,664.62, and the undistributed profit at the end of the year is RMB 2,692,018,405.40. 27 Bengang Steel Plates Co., Ltd. Annual Report 2020 Profits distribution plan of 2020: based on the company’s existing share capital of 3,875,371,532 shares, a cash dividend of 0.1 yuan (including tax) will be distributed to all shareholders for every 10 shares. The proposed distribution of ordinary share dividends is RMB 38,753,715.32, and the remaining RMB 2,653,264,690.08 will be carried forward to the next year’s undistributed profits. 2. Profit distribution proposal of 2019 As audited by BDO China Shu Lun Pan Certified Public Accountants LLP., the net profit attributable to the parent company of the year 2019 was RMB 555,646,971.40. After adding the retained profit of RMB 1,945,887,269.82 at the beginning of the year, and deducting the actual dividend of RMB 193,768,576.6 from the previous year, the balance of undistributed profit was RMB 2,307,765,664.62. Profits distribution plan of 2019: Considering the uncertainty of the Coronavirus on the economy, the company did not make profit distribution or convert the provident fund into capital in 2019. 3. Profit distribution proposal of 2018 As audited by BDO China Shu Lun Pan Certified Public Accountants LLP., the net profit attributable to the parent company of the year 2018 was RMB 1,036,493,236.07. After adding the retained profit of RMB 1,103,162,610.35 at the beginning of the year, and deducting the actual dividend of RMB 193,768,576.6 from the previous year, the balance of undistributed profit was RMB 1,945,887,269.82. Profits distribution plan of 2018: The company will take existing share capital 3,875,371,532 shares as the base, distributing cash dividends RMB 0.5 per 10 shares (including tax) to shareholders. The company plans to distribute RMB193,768,576.60 dividends of ordinary shares, and the remaining RMB 1,752,118,693.22 will be carried over to next year’s undistributed profits. III. Performance of Committed Issues 1. The fulfilled commitments during the reporting period and under-fulfillment commitments by the end of the period made by actual controller, acquirer, director, supervisor, senior management personnel and other related parties. √ Applicable □ Not applicable Commitment Type of Commitment Commitment Commitments Contents Performance party commitment time period Commitment of shares reform Commitment made in the acquisition report or the equity change report Commitment made during asset restructuring According to the relevant regulations of the China Securities Regulatory Commission, all directors and senior management of the Company Company have made the Commitment made during following commitments directors, Other Under normal initial public offering or to the Company’s May 22, 2019 Long term senior commitment fulfillment refinancing fulfillment of the diluted management immediate return measures: 1. I promise to perform my duties faithfully and diligently, and safeguard the legitimate rights and interests of the Company 28 Bengang Steel Plates Co., Ltd. Annual Report 2020 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 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 29 Bengang Steel Plates Co., Ltd. Annual Report 2020 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 finance, and independent assets, and are guaranteed not to be in the same registration place or in the same Benxi Steel & office; The filing of Iron (Group) foreign economic and Co., Ltd. and Other trade operators, taking July 24,2019 Under normal Long term Bengang Commitment into account the need to fulfillment Group Co., gradually improve the Ltd. qualification certification of raw material suppliers, customs import and export qualification certification, etc. In the short term, the actual conditions and capabilities for independent import and export business are still lacking. In order to ensure the normal business development of 30 Bengang Steel Plates Co., Ltd. Annual Report 2020 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 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 31 Bengang Steel Plates Co., Ltd. Annual Report 2020 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 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 32 Bengang Steel Plates Co., Ltd. Annual Report 2020 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 Group is the controlling shareholder of Bengang Steel Plates, in addition to the matters listed in The company Article 1 of this has completed Commitment Letter, the the acquisition Group and other of the enterprises controlled by 2300mm hot the Group other than rolling mill Bengang Steel Plates no production longer produce or line, and the Benxi Steel & develop any products Other industry Iron (Group) that compete or may July 24,2019 Long term Commitment competition Co., Ltd. compete with the problem has products produced by been Bengang Steel Plates and completely its subsidiaries at home resolved. and abroad, and do not Other directly or indirectly commitments operate any business that continue to be competes with Bengang fulfilled Steel Plates and its subsidiaries. Businesses that may constitute competition, nor are they involved in investing in any other enterprise that competes with or may compete with products or businesses produced by Bengang Steel Plates and its subsidiaries. 2. If Bengang Steel Plates and 33 Bengang Steel Plates Co., Ltd. Annual Report 2020 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 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 34 Bengang Steel Plates Co., Ltd. Annual Report 2020 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 Steel Plates Co., Ltd. (hereinafter referred to as "Bengang Steel Plates"), in order to Benxi Steel & protect the interests of Iron (Group) Bengang Steel Plates and Co., Ltd. and Other other shareholders of Under normal Bengang Commitment Bengang Steel Plates, July 24,2019 Long term fulfillment Group Co., regulate The Group's Ltd. 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 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 35 Bengang Steel Plates Co., Ltd. Annual Report 2020 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 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 36 Bengang Steel Plates Co., Ltd. Annual Report 2020 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 No fulfilled on time or not 2. The Company made illustrations that there are assets or projects which meet the original profit forecast and the reasons when there are assets or projects profit forecast of the Company and the reporting period is still in the forecast period □ Applicable √ Not applicable IV. Illustrations of Non-Operating Occupation of Funds by the Controlling Shareholder and Related Parties □ Applicable √ Not applicable There was no non-operating occupation of funds by the controlling shareholder and related parties V. Illustrations of the Supervisory Committee and Independent Directors (If Applicable) on the Qualified Audit Report Issued by the CPAs □ Applicable √ Not applicable VI. Illustrations of Changes in the Accounting Policy, Accounting Estimate and Measurement Methods as Compared with the Financial Report of Last Year √ Applicable □ Not applicable A. Change of major accounting policy during this reporting period (1) Implementation of "Accounting Standards for Business Enterprises No. 14-Revenue" (revised in 2017) (hereinafter referred to as "New Revenue Standards") The Ministry of Finance revised the "Accounting Standards for Business Enterprises No. 14-Revenue" in 2017. The revised standard stipulates that for the first implementation of the standard, the amount of retained earnings and other related items in the financial statements at the beginning of the year should be adjusted according to the cumulative impact, and the information for the comparable period should not be adjusted. The Company implemented the new revenue standard from January 1, 2020. According to the standard, the Company only 37 Bengang Steel Plates Co., Ltd. Annual Report 2020 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 does not make adjustments to the comparative financial statements. The major impact of the implementation of the above regulations are as follows: Amount of impact on the balance on Jan 1, 2020 Change of accounting policy content Affected items Consolidated Financial Parent company and reason statement financial statement Advance from customers -4,429,821,526.79 -5,597,707,687.22 The Company implemented the "Accounting Standards for Business Enterprises No. 14-Revenue" (referred to as "New Revenue Contract liabilities 3,920,196,041.41 4,953,723,617.01 Standards") promulgated by the Ministry of Finance in 2017 on January 1, 2020 Other current liabilities 509,625,485.38 643,984,070.21 Compared with the original revenue standards, the impact of the implementation of the new revenue standards on the relevant items of the financial statements for the period of 2020 is as follows (increase/(decrease)): Amount of impact on the balance on Dec 31, 2020 Affected items in the statement of Consolidated Financial Parent company financial financial position statement statement Advance from customers -5,038,299,156.48 -6,016,524,270.87 Contract liabilities 4,458,671,819.90 5,324,357,761.83 Other current liabilities 579,627,336.58 692,166,509.04 Impact amounts to the period of 2020 Affected items in the statement of comprehensive income Parent company financial Consolidated Financial statement statement Operating costs 1,112,122,323.44 655,370,940.93 Selling and distribution expenses -1,112,122,323.44 -655,370,940.93 (2) Implementation of "Accounting Standards for Business Enterprises No. 13 " The Ministry of Finance issued the "Accounting Standards for Business Enterprises Interpretation No. 13" (Cai Kuai [2019] No. 21, hereinafter referred to as "Interpretation No. 13") on December 10, 2019, which will come into force on January 1, 2020. 38 Bengang Steel Plates Co., Ltd. Annual Report 2020 No requirement of retrospective adjustment. a. The recognition of related parties Interpretation No. 13 clarifies that the following circumstances constitute a related party: a joint venture or joint venture between an enterprise and other member units (including parent companies and subsidiaries) of the enterprise group to which it belongs; a joint venture of the enterprise and other joint ventures or joint ventures of the enterprise. In addition, Interpretation No. 13 also clarifies that only two or more companies that are significantly affected by one party do not constitute related parties. It also adds that joint ventures include joint ventures and their subsidiaries. b. The definition of business Interpretation No. 13 completes the three elements of business composition, refines the judgment conditions of the business composition, and introduces the "concentration test" option to simplify to a certain extent the judgment of whether a combination obtained under the same control constitutes a business, etc. The company implemented Interpretation No. 13 from January 1, 2020, and the comparative financial statements will not be adjusted. Implementation Interpretation No. 13 has not had a significant impact on the company's financial position and operating results. (3) Implementation of the "Interim Provisions on Accounting Treatment of Carbon Emissions Trading" On December 16, 2019, the Ministry of Finance issued the "Interim Provisions on the Accounting Treatment of Carbon Emissions Trading" (Cai Kuai [2019] No. 22), which is applicable to the related companies in the key emission enterprises (hereinafter referred to as key emission companies) that conduct carbon emission rights business in accordance with the "Interim Measures for the Administration of Carbon Emissions Trading" and other relevant regulations. This regulation came into effect on January 1, 2020, and key emission companies should adopt the prospective application to apply this regulation. The Company implemented the above regulation from January 1, 2020, and the comparative financial statements will not be adjusted. The implementation of this regulation has not had a significant impact on the company's financial position and operating results. (4) Implement the "Regulations on Accounting Treatment of Rental Concessions Related to the Coronavirus Pandemic" On June 19, 2020, the Ministry of Finance issued the "Regulations on Accounting Treatment of Rental Concessions Related to the Coronavirus Pandemic " (Caikuai (2020) No. 10), which came into effect on June 19, 2020, allowing companies to adjust the relevant rental concessions that occurred between Jan 1, 2020 and the implementation date of this regulation. According to the regulation, companies can choose to adopt simplified methods for accounting treatments for rent reductions and deferred payment of rents directly caused by the Coronavirus Pandemic that meet the conditions. The company chooses to adopt a simplified method for accounting treatment for all rent concessions that fall within the scope of the regulation, and adjusts the relevant rent concessions that occur between January 1, 2020 and the effective date of the regulation accordingly. 39 Bengang Steel Plates Co., Ltd. Annual Report 2020 The implementation of the regulations did not have a significant impact on the company's financial position and operating results. B. Change of accounting estimate during the reporting period Approval Application Affected Affected Items procedure date items amounts Accumulated 633,195,486.72 depreciation Operating costs 616,340,171.08 Change in Approved by the eighth General and depreciation meeting of the eighth Jan 1, 2020 administrative 16,855,315.64 period board of directors expenses Total profit 633,195,486.72 Net profit 474,896,615.04 C. The first implementation of the new revenue standard adjustment to the financial statements at the beginning of the year Consolidated Statement of Financial Position Ending balance of Beginning balance Adjusted amounts Items the last period of the current period Reclassification Remeasurement Total Advance from 4,429,821,526.79 -4,429,821,526.79 -4,429,821,526.79 customers Contract 3,920,196,041.41 3,920,196,041.41 3,920,196,041.41 liabilities Other current 509,625,485.38 509,625,485.38 509,625,485.38 liabilities Statement of Financial Position of the Parent Company Ending balance of Beginning balance Adjusted amounts Items the last period of the current period Reclassification Remeasurement Total Advance from 5,597,707,687.22 -5,597,707,687.22 -5,597,707,687.22 40 Bengang Steel Plates Co., Ltd. Annual Report 2020 Ending balance of Beginning balance Adjusted amounts Items the last period of the current period Reclassification Remeasurement Total customers Contract 4,953,723,617.01 4,953,723,617.01 4,953,723,617.01 liabilities Other current 643,984,070.21 643,984,070.21 643,984,070.21 liabilities Ⅶ. Illustrations of Retrospective Restatement Due to Correction of Significant Accounting Errors in the Reporting Period □ Applicable √ Not applicable There was no retrospective restatement due to correction of significant accounting errors during the reporting period VIII. Illustrations of Changes of the Consolidation Scope as Compared with the Financial Report of Last Year □ Applicable √ Not applicable There is no change of the consolidation scope during the reporting period. IX. Appointment and Dismiss of Certified Accountant’s Firm Accountant’s firm currently appointed Name of the domestic accountant’s firm BDO China Shu Lun Pan Certified Public Accountants LLP Payment to the domestic accountant’s firm (RMB 10 280 thousand) Service life of domestic accountant’s firm providing 13 audit service Name of CPAs from the domestic accountant’s firm Zhu Jinmei, Li Guiying Service life of domestic accountants’ providing audit 0 service Name of the overseas accountant’s firm (if any) None Payment to overseas accountant’s firm (RMB 10 0 thousand) (if any) Service life of overseas accountant’s firm providing None audit service (if any) Name of CPAs from the overseas accountant’s firm None (if any) Whether the accountant’s firm was changed during the reporting period □ Yes √ No Engagement of accountant’s firms, financial consultants or sponsors for internal control auditing √ Applicable □ Not applicable The Company appointed BDO China Shu Lun Pan Certified Public Accountants LLP as the auditor of internal control auditing at RMB 600 thousand. During the year, due to the issue of convertible corporate bonds in this year, the company hired Guotai Junan Securities Co., Ltd. as the sponsor at RMB 40.80 million. 41 Bengang Steel Plates Co., Ltd. Annual Report 2020 X. Risk of Suspension or Termination of Listing after the Disclosure of Annual Report □ Applicable √ Not applicable XI. Bankrupt and Reforming Events □ Applicable √ Not applicable There was no bankrupt and reforming event during the reporting period. XII. Significant Lawsuits and Arbitrations □ Applicable √ Not applicable There was no significant lawsuit or arbitrations during the reporting period. XIII. Punishment and Rectification □ Applicable √ Not applicable There was no punishment or rectification during the reporting period. XIV. Credit Status of the Company and its Controlling Shareholders and Actual Controllers □ Applicable √ Not applicable XV. Implementation Situation of Stock Incentive Plan of the Company, Employee Stock Ownership Plan or Other Employee Incentive Measures □ Applicable √ Not applicable There was no implementation situation of stock incentive plan of the Company, employee stock ownership plan or other employee incentive measures during the reporting period. XVI. Major Related Party Transactions 1. Related party transactions relevant to daily operations √ Applicable □ Not applicable The Amou appro Pricin Whet Mean Avail nt of ved Type Conte g Price Propo her s of able relate tradin of nt of princi of rtion excee paym marke d g Date Index Relati relate relate ple of relate of d the ent of t price Related party limit of of onshi d d relate d simila appro relate of parties transa of disclo discl p party party d party r ved d simila ctions transa sure osure transa transa party transa transa limite party r (in 10 ctions ctions ctions transa ctions ctions d transa transa thous (in 10 ctions (Y/N) ctions ctions and) thous and) Execu Bengan Sales Relat te g of same Energ on ed accor Electro goods 0.00 2020/ contro y& agree agree 72.4 500 No ding Yes nics and % 4/22 ller Power ment ment to the and servic price agree Gas es ment 42 Bengang Steel Plates Co., Ltd. Annual Report 2020 The Amou appro Pricin Whet Mean Avail nt of ved Type Conte g Price Propo her s of able relate tradin of nt of princi of rtion excee paym marke d g Date Index Relati relate relate ple of relate of d the ent of t price Related party limit of of onshi d d relate d simila appro relate of parties transa of disclo discl p party party d party r ved d simila ctions transa sure osure transa transa party transa transa limite party r (in 10 ctions ctions ctions transa ctions ctions d transa transa thous (in 10 ctions (Y/N) ctions ctions and) thous and) Co., Ltd. Raw materi Benxi Execu Sales al & Beiying Relat te of supple Steel & same on ed accor goods menta 138,4 2.84 300,0 2020/ Iron contro agree agree No ding Yes and ry 09.84 % 00 4/22 (Group) ller ment ment to the servic materi Co., price agree es als & Ltd. ment spare parts Benxi Execu Sales Beiying Relat te of Steel & same on ed accor goods produ 2,150. 0.04 2020/ Iron contro agree agree No ding Yes and cts 96 % 4/22 (Group) ller ment ment to the servic Co., price agree es Ltd. ment Benxi Execu Sales Beiying Relat te of Steel & same Energ on ed accor goods 22,60 0.46 2020/ Iron contro y& agree agree No ding Yes and 2.26 % 4/22 (Group) ller Power ment ment to the servic Co., price agree es Ltd. ment Benxi Steel & Execu Iron Sales Relat te (Group) of same Energ on ed accor Real- goods 0.00 2020/ contro y& agree agree 8.65 500 No ding Yes estate and % 4/22 ller Power ment ment to the Develo servic price agree pment es ment Co., Ltd. Benxi Steel & Iron Execu Sales (Group) Relat te of Steel & same Energ on ed accor goods 0.00 2020/ Iron contro y& agree agree 25.88 500 No ding Yes and % 4/22 Process ller Power ment ment to the servic and price agree es Logisti ment cs Co., Ltd. Benxi Relat Execu same Sales on ed Steel & produ 0.00 te 2020/ contro of agree agree No Yes Iron cts % accor 4/22 ller goods ment ment (Group) ding and price Steel & to the 43 Bengang Steel Plates Co., Ltd. Annual Report 2020 The Amou appro Pricin Whet Mean Avail nt of ved Type Conte g Price Propo her s of able relate tradin of nt of princi of rtion excee paym marke d g Date Index Relati relate relate ple of relate of d the ent of t price Related party limit of of onshi d d relate d simila appro relate of parties transa of disclo discl p party party d party r ved d simila ctions transa sure osure transa transa party transa transa limite party r (in 10 ctions ctions ctions transa ctions ctions d transa transa thous (in 10 ctions (Y/N) ctions ctions and) thous and) Iron servic agree Process es ment and Logisti cs Co., Ltd. Benxi Steel & Execu Iron Sales Relat te (Group) of same on ed accor Machin goods produ 1,898. 0.04 2020/ contro agree agree 8,000 No ding Yes ery and cts 85 % 4/22 ller ment ment to the Manufa servic price agree cture es ment Co., Ltd. Benxi Steel & Execu Iron Sales Relat te (Group) of same Energ on ed accor Machin goods 2,088. 0.04 2020/ contro y& agree agree No ding Yes ery and 72 % 4/22 ller Power ment ment to the Manufa servic price agree cture es ment Co., Ltd. Benxi Raw Steel & materi Execu Iron Sales al & Relat te (Group) of supple same on ed accor Machin goods menta 338.5 0.01 2020/ contro agree agree No ding Yes ery and ry 6 % 4/22 ller ment ment to the Manufa servic materi price agree cture es als & ment Co., spare Ltd. parts Benxi Execu Steel & Sales Relat te Iron of same Energ on ed accor (Group) goods 699.1 0.01 10,00 2020/ contro y& agree agree No ding Yes Constru and 6 % 0 4/22 ller Power ment ment to the ction servic price agree Co., es ment Ltd. Benxi Raw Execu Steel & Sales materi Relat te Iron of al & same on ed accor (Group) goods supple 6,452. 0.13 2020/ contro agree agree No ding Yes Constru and menta 06 % 4/22 ller ment ment to the ction servic ry price agree Co., es materi ment Ltd. als & 44 Bengang Steel Plates Co., Ltd. Annual Report 2020 The Amou appro Pricin Whet Mean Avail nt of ved Type Conte g Price Propo her s of able relate tradin of nt of princi of rtion excee paym marke d g Date Index Relati relate relate ple of relate of d the ent of t price Related party limit of of onshi d d relate d simila appro relate of parties transa of disclo discl p party party d party r ved d simila ctions transa sure osure transa transa party transa transa limite party r (in 10 ctions ctions ctions transa ctions ctions d transa transa thous (in 10 ctions (Y/N) ctions ctions and) thous and) spare parts Benxi Execu Sales Steel & Relat te of Iron same Energ on ed accor goods 62,02 1.27 100,0 2020/ (Group) contro y& agree agree No ding Yes and 0.89 % 00 4/22 Mining ller Power ment ment to the servic Co., price agree es Ltd. ment Raw materi Benxi Execu Sales al & Steel & Relat te of supple Iron same on ed accor goods menta 9,678. 0.20 2020/ (Group) contro agree agree No ding Yes and ry 23 % 4/22 Mining ller ment ment to the servic materi Co., price agree es als & Ltd. ment spare parts Benxi Execu Sales Steel & Relat te of Freigh Iron same on ed accor goods t 0.02 2020/ (Group) contro agree agree 743.9 No ding No and reven % 4/22 Mining ller ment ment to the servic ue Co., price agree es Ltd. ment Benxi Execu Sales Steel & Relat te of Iron same on ed accor goods produ 1,107. 0.02 2020/ (Group) contro agree agree No ding Yes and cts 48 % 4/22 Mining ller ment ment to the servic Co., price agree es Ltd. ment Benxi Steel & Execu Iron Sales Relat te (Group) of same Energ on ed accor Therma goods 2,995. 0.06 2020/ contro y& agree agree 8,000 No ding Yes l Power and 62 % 4/22 ller Power ment ment to the Develo servic price agree pment es ment Co., Ltd. Benxi Raw Execu Steel & Sales materi Relat te Iron of al & same on ed accor (Group) goods supple 1,750. 0.04 2020/ contro agree agree No ding Yes Therma and menta 62 % 4/22 ller ment ment to the l Power servic ry price agree Develo es materi ment pment als & 45 Bengang Steel Plates Co., Ltd. Annual Report 2020 The Amou appro Pricin Whet Mean Avail nt of ved Type Conte g Price Propo her s of able relate tradin of nt of princi of rtion excee paym marke d g Date Index Relati relate relate ple of relate of d the ent of t price Related party limit of of onshi d d relate d simila appro relate of parties transa of disclo discl p party party d party r ved d simila ctions transa sure osure transa transa party transa transa limite party r (in 10 ctions ctions ctions transa ctions ctions d transa transa thous (in 10 ctions (Y/N) ctions ctions and) thous and) Co., spare Ltd. parts Benxi Steel & Execu Iron Sales Relat te (Group) of Freigh same on ed accor Therma goods t 0.00 2020/ contro agree agree No ding No l Power and reven % 4/22 ller ment ment to the Develo servic ue price agree pment es ment Co., Ltd. Benxi Steel & Execu Iron Sales Relat te (Group) of same Energ on ed accor Industri goods 824.4 0.02 2020/ contro y& agree agree 5,000 No ding Yes al and 7 % 4/22 ller Power ment ment to the Develo servic price agree pment es ment Co., Ltd. Benxi Steel & Execu Iron Sales Relat te (Group) of same on ed accor Industri goods produ 0.00 2020/ contro agree agree 3.97 No ding Yes al and cts % 4/22 ller ment ment to the Develo servic price agree pment es ment Co., Ltd. Benxi Raw Steel & materi Execu Iron Sales al & Relat te (Group) of supple same on ed accor Industri goods menta 1,914. 0.04 2020/ contro agree agree No ding Yes al and ry 44 % 4/22 ller ment ment to the Develo servic materi price agree pment es als & ment Co., spare Ltd. parts Benxi Steel & Execu Iron Sales Relat te (Group) of same Energ on ed accor Informa goods 0.00 2020/ contro y& agree agree 14.64 300 No ding Yes tion and % 4/22 ller Power ment ment to the and servic price agree Automa es ment tic Tech 46 Bengang Steel Plates Co., Ltd. Annual Report 2020 The Amou appro Pricin Whet Mean Avail nt of ved Type Conte g Price Propo her s of able relate tradin of nt of princi of rtion excee paym marke d g Date Index Relati relate relate ple of relate of d the ent of t price Related party limit of of onshi d d relate d simila appro relate of parties transa of disclo discl p party party d party r ved d simila ctions transa sure osure transa transa party transa transa limite party r (in 10 ctions ctions ctions transa ctions ctions d transa transa thous (in 10 ctions (Y/N) ctions ctions and) thous and) Co., Ltd. Benxi Steel & Execu Iron Sales Relat te (Group) of same Energ on ed accor Constru goods 125.1 0.00 2020/ contro y& agree agree 8,000 No ding Yes ction and 5 % 4/22 ller Power ment ment to the and servic price agree Repairi es ment ng Co., Ltd. Benxi Raw Steel & materi Execu Iron Sales al & Relat te (Group) of supple same on ed accor Constru goods menta 368.0 0.01 2020/ contro agree agree No ding Yes ction and ry 3 % 4/22 ller ment ment to the and servic materi price agree Repairi es als & ment ng Co., spare Ltd. parts Benxi Steel & Execu Sales Iron Relat te of (Group) same Energ on ed accor goods 659.8 0.01 30,00 2020/ Metallu contro y& agree agree No ding Yes and 4 % 0 4/22 rgy ller Power ment ment to the servic Residue price agree es s Co., ment Ltd. Raw Benxi materi Steel & Execu Sales al & Iron Relat te of supple (Group) same on ed accor goods menta 26,83 0.55 2020/ Metallu contro agree agree No ding Yes and ry 9.91 % 4/22 rgy ller ment ment to the servic materi Residue price agree es als & s Co., ment spare Ltd. parts Benxi Steel & Execu Sales Iron Relat te of Freigh (Group) same on ed accor goods t 0.00 2020/ Metallu contro agree agree No ding No and reven % 4/22 rgy ller ment ment to the servic ue Residue price agree es s Co., ment Ltd. 47 Bengang Steel Plates Co., Ltd. Annual Report 2020 The Amou appro Pricin Whet Mean Avail nt of ved Type Conte g Price Propo her s of able relate tradin of nt of princi of rtion excee paym marke d g Date Index Relati relate relate ple of relate of d the ent of t price Related party limit of of onshi d d relate d simila appro relate of parties transa of disclo discl p party party d party r ved d simila ctions transa sure osure transa transa party transa transa limite party r (in 10 ctions ctions ctions transa ctions ctions d transa transa thous (in 10 ctions (Y/N) ctions ctions and) thous and) Benxi Steel & Execu Sales Iron Relat te of (Group) same on ed accor goods produ 423.5 0.01 2020/ Metallu contro agree agree No ding Yes and cts 3 % 4/22 rgy ller ment ment to the servic Residue price agree es s Co., ment Ltd. Execu Benxi Sales Relat te Steel & of Parent Energ on ed accor Iron goods 205.4 0.00 2020/ Comp y& agree agree 2,000 No ding Yes (Group) and 7 % 4/22 any Power ment ment to the Co., servic price agree Ltd. es ment Raw materi Execu Benxi Sales al & Relat te Steel & of supple Parent on ed accor Iron goods menta 1,013. 0.02 2020/ Comp agree agree No ding Yes (Group) and ry 53 % 4/22 any ment ment to the Co., servic materi price agree Ltd. es als & ment spare parts Benxi Execu Sales New Relat te of Career same Energ on ed accor goods 0.00 2020/ Develo contro y& agree agree 38.37 500 No ding Yes and % 4/22 pment ller Power ment ment to the servic Co., price agree es Ltd. ment Execu Dalian Sales Relat te Boluole of same on ed accor Steel goods produ 1,136. 0.02 2020/ contro agree agree 1,000 No ding Yes Tube and cts 33 % 4/22 ller ment ment to the Co., servic price agree Ltd. es ment Liaonin Execu g Sales Relat te Bengan of same on ed accor g Steel goods produ 0.00 2020/ contro agree agree No ding Yes & Iron and cts % 4/22 ller ment ment to the Trading servic price agree Co., es ment Ltd. Benxi same Sales Energ on Execu Relat 0.00 2020/ Steel & contro of y& agree 50 No te Yes ed % 4/22 Iron ller goods Power ment accor agree (Group) and ding 48 Bengang Steel Plates Co., Ltd. Annual Report 2020 The Amou appro Pricin Whet Mean Avail nt of ved Type Conte g Price Propo her s of able relate tradin of nt of princi of rtion excee paym marke d g Date Index Relati relate relate ple of relate of d the ent of t price Related party limit of of onshi d d relate d simila appro relate of parties transa of disclo discl p party party d party r ved d simila ctions transa sure osure transa transa party transa transa limite party r (in 10 ctions ctions ctions transa ctions ctions d transa transa thous (in 10 ctions (Y/N) ctions ctions and) thous and) General servic ment to the Hospita es price agree l ment Benxi Steel & Iron Execu Sales (Group) Relat te of Zhengt same Energ on ed accor goods 0.00 2020/ ai contro y& agree agree 2.16 500 No ding Yes and % 4/22 Constru ller Power ment ment to the servic ction price agree es Materia ment ls Co., Ltd. Liaonin g Hengto Execu ng Sales Relat te Metallu of same Energ on ed accor rgical goods 0.00 2020/ contro y& agree agree 5,000 No ding Yes Equipm and % 4/22 ller Power ment ment to the ent servic price agree Manufa es ment cture Co., Ltd. Liaonin g Raw Hengto materi Execu ng Sales al & Relat te Metallu of supple same on ed accor rgical goods menta 731.8 0.02 2020/ contro agree agree No ding Yes Equipm and ry 6 % 4/22 ller ment ment to the ent servic materi price agree Manufa es als & ment cture spare Co., parts Ltd. Liaonin g Hengto Execu ng Sales Relat te Metallu of same on ed accor rgical goods produ 908.8 0.02 2020/ contro agree agree No ding Yes Equipm and cts 9 % 4/22 ller ment ment to the ent servic price agree Manufa es ment cture Co., Ltd. 49 Bengang Steel Plates Co., Ltd. Annual Report 2020 The Amou appro Pricin Whet Mean Avail nt of ved Type Conte g Price Propo her s of able relate tradin of nt of princi of rtion excee paym marke d g Date Index Relati relate relate ple of relate of d the ent of t price Related party limit of of onshi d d relate d simila appro relate of parties transa of disclo discl p party party d party r ved d simila ctions transa sure osure transa transa party transa transa limite party r (in 10 ctions ctions ctions transa ctions ctions d transa transa thous (in 10 ctions (Y/N) ctions ctions and) thous and) Raw Bengan materi Execu g Cold- Sales al & Relat te rolled of supple same on ed accor Stainles goods menta 0.00 50,00 2020/ contro agree agree No ding Yes s Steel and ry % 0 4/22 ller ment ment to the Dandon servic materi price agree g Co., es als & ment Ltd. spare parts Bengan Execu g Cold- Sales Relat te rolled of same on ed accor Stainles goods produ 2,716. 0.06 2020/ contro agree agree No ding Yes s Steel and cts 09 % 4/22 ller ment ment to the Dandon servic price agree g Co., es ment Ltd. Execu Suzhou Sales Relat te Bengan of same on ed accor g goods produ 49,98 1.03 65,00 2020/ contro agree agree No ding Yes Industri and cts 3.82 % 0 4/22 ller ment ment to the al Co., servic price agree Ltd. es ment Execu Bengan Sales Relat te g of same Energ on ed accor Group goods 0.00 2020/ contro y& agree agree 1.3 50 No ding Yes Finance and % 4/22 ller Power ment ment to the Co., servic price agree Ltd. es ment Execu Sales Bengan Relat te of g Energ on ed accor contro goods 0.00 2020/ Group y& agree agree 7.33 No ding Yes ller and % 4/22 Co., Power ment ment to the servic Ltd. price agree es ment Raw materi Execu Sales al & Bengan Relat te of supple g on ed accor contro goods menta 1,539. 0.03 2020/ Group agree agree 500 No ding Yes ller and ry 32 % 4/22 Co., ment ment to the servic materi Ltd. price agree es als & ment spare parts 50 Bengang Steel Plates Co., Ltd. Annual Report 2020 The Amou appro Pricin Whet Mean Avail nt of ved Type Conte g Price Propo her s of able relate tradin of nt of princi of rtion excee paym marke d g Date Index Relati relate relate ple of relate of d the ent of t price Related party limit of of onshi d d relate d simila appro relate of parties transa of disclo discl p party party d party r ved d simila ctions transa sure osure transa transa party transa transa limite party r (in 10 ctions ctions ctions transa ctions ctions d transa transa thous (in 10 ctions (Y/N) ctions ctions and) thous and) Liaonin Execu Sales g Relat te of Hengtai same on ed accor goods produ 0.00 2020/ Heavy contro agree agree 29.54 No ding Yes and cts % 4/22 Machin ller ment ment to the servic ery Co., price agree es Ltd. ment Execu Benxi Purch Relat te Steel & ase of Parent on ed accor Iron goods repair 30,20 0.65 50,00 2020/ Comp agree agree No ding No (Group) and fees 6.47 % 0 4/22 any ment ment to the Co., servic price agree Ltd. es ment Raw Execu Benxi Purch materi Relat te Steel & ase of al & Parent on ed accor Iron goods supple 2,121. 0.05 2020/ Comp agree agree No ding Yes (Group) and menta 13 % 4/22 any ment ment to the Co., servic ry price agree Ltd. es materi ment als Bengan Execu g Cold- Purch Relat te rolled ase of same on ed accor Stainles goods invent 0.00 2020/ contro agree agree 22.39 500 No ding No s Steel and ory % 4/22 ller ment ment to the Dandon servic price agree g Co., es ment Ltd. Benxi Execu Purch Steel & Relat te ase of Iron same on ed accor goods labor 3,213. 0.07 650,0 2020/ (Group) contro agree agree No ding No and costs 23 % 00 4/22 Mining ller ment ment to the servic Co., price agree es Ltd. ment Raw Benxi Execu Purch materi Steel & Relat te ase of al & Iron same on ed accor goods supple 514,1 11.08 2020/ (Group) contro agree agree No ding Yes and menta 93.5 % 4/22 Mining ller ment ment to the servic ry Co., price agree es materi Ltd. ment als Purch Benxi Relat Execu ase of Steel & same on ed te goods Freigh 1,227. 0.03 2020/ Iron contro agree agree No accor No and t 47 % 4/22 (Group) ller ment ment ding servic Mining price to the es 51 Bengang Steel Plates Co., Ltd. Annual Report 2020 The Amou appro Pricin Whet Mean Avail nt of ved Type Conte g Price Propo her s of able relate tradin of nt of princi of rtion excee paym marke d g Date Index Relati relate relate ple of relate of d the ent of t price Related party limit of of onshi d d relate d simila appro relate of parties transa of disclo discl p party party d party r ved d simila ctions transa sure osure transa transa party transa transa limite party r (in 10 ctions ctions ctions transa ctions ctions d transa transa thous (in 10 ctions (Y/N) ctions ctions and) thous and) Co., agree Ltd. ment Benxi Raw Steel & Execu Purch materi Iron Relat te ase of al & (Group) same on ed accor goods supple 34,30 0.74 40,00 2020/ Metallu contro agree agree No ding Yes and menta 3.84 % 0 4/22 rgy ller ment ment to the servic ry Residue price agree es materi s Co., ment als Ltd. Benxi Steel & Iron Execu Purch (Group) Relat te ase of Steel & same Proces on ed accor goods 0.00 2020/ Iron contro sing agree agree 63.22 300 No ding No and % 4/22 Process ller fees ment ment to the servic and price agree es Logisti ment cs Co., Ltd. Benxi Steel & Execu Iron Purch Relat te (Group) ase of same Raw on ed accor Real- goods 0.00 10,00 2020/ contro materi agree agree No ding Yes estate and % 0 4/22 ller als ment ment to the Develo servic price agree pment es ment Co., Ltd. Benxi Steel & Execu Iron Purch Relat te (Group) ase of same on ed accor Machin goods spare 5,984. 0.13 25,00 2020/ contro agree agree No ding Yes ery and parts 04 % 0 4/22 ller ment ment to the Manufa servic price agree cture es ment Co., Ltd. Benxi Steel & Execu Iron Purch Relat te (Group) ase of same repair on ed accor Machin goods 2,773. 0.06 2020/ contro servic agree agree No ding No ery and 62 % 4/22 ller es ment ment to the Manufa servic price agree cture es ment Co., Ltd. 52 Bengang Steel Plates Co., Ltd. Annual Report 2020 The Amou appro Pricin Whet Mean Avail nt of ved Type Conte g Price Propo her s of able relate tradin of nt of princi of rtion excee paym marke d g Date Index Relati relate relate ple of relate of d the ent of t price Related party limit of of onshi d d relate d simila appro relate of parties transa of disclo discl p party party d party r ved d simila ctions transa sure osure transa transa party transa transa limite party r (in 10 ctions ctions ctions transa ctions ctions d transa transa thous (in 10 ctions (Y/N) ctions ctions and) thous and) Benxi Execu Steel & Purch Relat te Iron ase of same on ed accor (Group) goods spare 1,624. 0.04 50,00 2020/ contro agree agree No ding Yes Constru and parts 97 % 0 4/22 ller ment ment to the ction servic price agree Co., es ment Ltd. Benxi Execu Steel & Purch Relat te Iron ase of same on ed accor (Group) goods projec 20,27 0.44 2020/ contro agree agree No ding No Constru and t fees 4.33 % 4/22 ller ment ment to the ction servic price agree Co., es ment Ltd. Benxi Execu Steel & Purch Relat te Iron ase of same repair on ed accor (Group) goods 18,02 0.39 2020/ contro servic agree agree No ding No Constru and 2.98 % 4/22 ller es ment ment to the ction servic price agree Co., es ment Ltd. Benxi Raw Execu Steel & Purch materi Relat te Iron ase of al & same on ed accor (Group) goods supple 1,241. 0.03 2020/ contro agree agree No ding Yes Constru and menta 22 % 4/22 ller ment ment to the ction servic ry price agree Co., es materi ment Ltd. als Benxi Execu Steel & Purch Relat te Iron ase of same on ed accor (Group) goods Freigh 0.00 2020/ contro agree agree 51.39 No ding No Constru and t % 4/22 ller ment ment to the ction servic price agree Co., es ment Ltd. Benxi Steel & Raw Execu Iron Purch materi Relat te (Group) ase of al & same on ed accor Industri goods supple 21,09 0.45 30,00 2020/ contro agree agree No ding Yes al and menta 5.06 % 0 4/22 ller ment ment to the Develo servic ry price agree pment es materi ment Co., als Ltd. 53 Bengang Steel Plates Co., Ltd. Annual Report 2020 The Amou appro Pricin Whet Mean Avail nt of ved Type Conte g Price Propo her s of able relate tradin of nt of princi of rtion excee paym marke d g Date Index Relati relate relate ple of relate of d the ent of t price Related party limit of of onshi d d relate d simila appro relate of parties transa of disclo discl p party party d party r ved d simila ctions transa sure osure transa transa party transa transa limite party r (in 10 ctions ctions ctions transa ctions ctions d transa transa thous (in 10 ctions (Y/N) ctions ctions and) thous and) Benxi Steel & Execu Iron Purch Relat te (Group) ase of same repair on ed accor Industri goods 1,537. 0.03 2020/ contro servic agree agree No ding No al and 66 % 4/22 ller es ment ment to the Develo servic price agree pment es ment Co., Ltd. Benxi Steel & Execu Iron Purch Relat te (Group) ase of same on ed accor Industri goods Freigh 0.00 2020/ contro agree agree No ding No al and t % 4/22 ller ment ment to the Develo servic price agree pment es ment Co., Ltd. Benxi Steel & Execu Iron Purch Relat te (Group) ase of same projec on ed accor Industri goods 107.0 0.00 2020/ contro t agree agree No ding No al and 1 % 4/22 ller funds ment ment to the Develo servic price agree pment es ment Co., Ltd. Benxi Raw Steel & materi Execu Iron Purch al & Relat te (Group) ase of supple same on ed accor Constru goods menta 228.1 0.00 35,00 2020/ contro agree agree No ding Yes ction and ry 8 % 0 4/22 ller ment ment to the and servic materi price agree Repairi es als & ment ng Co., spare Ltd. parts Benxi Steel & Execu Iron Purch Relat te (Group) ase of same on ed accor Constru goods projec 1,911. 0.04 2020/ contro agree agree No ding No ction and t fees 38 % 4/22 ller ment ment to the and servic price agree Repairi es ment ng Co., Ltd. 54 Bengang Steel Plates Co., Ltd. Annual Report 2020 The Amou appro Pricin Whet Mean Avail nt of ved Type Conte g Price Propo her s of able relate tradin of nt of princi of rtion excee paym marke d g Date Index Relati relate relate ple of relate of d the ent of t price Related party limit of of onshi d d relate d simila appro relate of parties transa of disclo discl p party party d party r ved d simila ctions transa sure osure transa transa party transa transa limite party r (in 10 ctions ctions ctions transa ctions ctions d transa transa thous (in 10 ctions (Y/N) ctions ctions and) thous and) Benxi Steel & Execu Iron Purch Relat te (Group) ase of same on ed accor Constru goods repair 17,47 0.38 2020/ contro agree agree No ding No ction and fees 5.94 % 4/22 ller ment ment to the and servic price agree Repairi es ment ng Co., Ltd. Bengan Raw Execu g Purch materi Relat te Electro ase of al & same on ed accor nics goods supple 13,85 0.30 20,00 2020/ contro agree agree No ding Yes and and menta 6.3 % 0 4/22 ller ment ment to the Gas servic ry price agree Co., es materi ment Ltd. als Bengan Execu g Purch Relat te Electro ase of same repair on ed accor nics goods 3,063. 0.07 2020/ contro servic agree agree No ding No and and 31 % 4/22 ller es ment ment to the Gas servic price agree Co., es ment Ltd. Benxi High- Execu Purch tech Relat te ase of Drilling same on ed accor goods spare 0.00 2020/ Tools contro agree agree 39 500 No ding Yes and parts % 4/22 Manufa ller ment ment to the servic cture price agree es Co., ment Ltd. Benxi Execu Purch New Relat te ase of Career same repair on ed accor goods 0.00 2020/ Develo contro servic agree agree 1,800 No ding No and % 4/22 pment ller es ment ment to the servic Co., price agree es Ltd. ment Raw Benxi materi Execu Purch New al & Relat te ase of Career same supple on ed accor goods 1,028. 0.02 2020/ Develo contro menta agree agree No ding Yes and 9 % 4/22 pment ller ry ment ment to the servic Co., materi price agree es Ltd. als & ment food 55 Bengang Steel Plates Co., Ltd. Annual Report 2020 The Amou appro Pricin Whet Mean Avail nt of ved Type Conte g Price Propo her s of able relate tradin of nt of princi of rtion excee paym marke d g Date Index Relati relate relate ple of relate of d the ent of t price Related party limit of of onshi d d relate d simila appro relate of parties transa of disclo discl p party party d party r ved d simila ctions transa sure osure transa transa party transa transa limite party r (in 10 ctions ctions ctions transa ctions ctions d transa transa thous (in 10 ctions (Y/N) ctions ctions and) thous and) Liaonin Execu Purch g Relat te ase of Metallu same on ed accor goods spare 933.2 0.02 2020/ rgy contro agree agree 1,500 No ding Yes and parts 6 % 4/22 Technic ller ment ment to the servic ian price agree es College ment Liaonin g Execu Purch Metallu Relat te ase of rgy same on ed accor goods projec 0.00 2020/ Vocatio contro agree agree 1,000 No ding No and t fees % 4/22 nal ller ment ment to the servic Technic price agree es al ment College Liaonin g Execu Purch Metallu Relat te ase of rgy same repair on ed accor goods 648.2 0.01 2020/ Vocatio contro servic agree agree No ding No and 4 % 4/22 nal ller es ment ment to the servic Technic price agree es al ment College Bengan g Raw Execu Group Purch materi Relat te Internat ase of al & same on ed accor ional goods supple 508,9 10.97 25,00 2020/ contro agree agree No ding Yes Econo and menta 61.39 % 0 4/22 ller ment ment to the mic and servic ry price agree Trading es materi ment Co., als Ltd. Bengan g Execu Group Purch Relat te Internat ase of same on ed accor ional goods agenc 5,531. 0.12 2020/ contro agree agree No ding No Econo and y fees 64 % 4/22 ller ment ment to the mic and servic price agree Trading es ment Co., Ltd. Bengan Execu Purch g Relat te ase of Group same Port on ed accor goods 9,279. 0.20 2020/ Internat contro surcha agree agree No ding No and 98 % 4/22 ional ller rges ment ment to the servic Econo price agree es mic and ment 56 Bengang Steel Plates Co., Ltd. Annual Report 2020 The Amou appro Pricin Whet Mean Avail nt of ved Type Conte g Price Propo her s of able relate tradin of nt of princi of rtion excee paym marke d g Date Index Relati relate relate ple of relate of d the ent of t price Related party limit of of onshi d d relate d simila appro relate of parties transa of disclo discl p party party d party r ved d simila ctions transa sure osure transa transa party transa transa limite party r (in 10 ctions ctions ctions transa ctions ctions d transa transa thous (in 10 ctions (Y/N) ctions ctions and) thous and) Trading Co., Ltd. Benxi Steel & Iron Execu (Group) Purch Relat te Informa ase of same on ed accor tion goods spare 850.3 0.02 10,00 2020/ contro agree agree No ding Yes and and parts 5 % 0 4/22 ller ment ment to the Automa servic price agree tic es ment Tech Co., Ltd. Benxi Steel & Iron Execu (Group) Purch Relat te Informa ase of same on ed accor tion goods projec 1,121. 0.02 2020/ contro agree agree No ding No and and t fees 38 % 4/22 ller ment ment to the Automa servic price agree tic es ment Tech Co., Ltd. Benxi Steel & Iron Execu (Group) Purch Relat te Informa ase of same repair on ed accor tion goods 1,732. 0.04 2020/ contro servic agree agree No ding No and and 5 % 4/22 ller es ment ment to the Automa servic price agree tic es ment Tech Co., Ltd. Benxi Steel & Execu Iron Purch Relat te (Group) ase of same heatin on ed accor Therma goods 0.00 2020/ contro g agree agree 119 500 No ding No l Power and % 4/22 ller costs ment ment to the Develo servic price agree pment es ment Co., Ltd. Benxi same Purch Raw on Relat Execu 0.00 2020/ Steel & contro ase of materi agree ed 71.04 No te Yes % 4/22 Iron ller goods al & ment agree accor 57 Bengang Steel Plates Co., Ltd. Annual Report 2020 The Amou appro Pricin Whet Mean Avail nt of ved Type Conte g Price Propo her s of able relate tradin of nt of princi of rtion excee paym marke d g Date Index Relati relate relate ple of relate of d the ent of t price Related party limit of of onshi d d relate d simila appro relate of parties transa of disclo discl p party party d party r ved d simila ctions transa sure osure transa transa party transa transa limite party r (in 10 ctions ctions ctions transa ctions ctions d transa transa thous (in 10 ctions (Y/N) ctions ctions and) thous and) (Group) and supple ment ding Therma servic menta price to the l Power es ry agree Develo materi ment pment als Co., Ltd. Benxi Execu Steel & Purch Relat te Iron ase of same on ed accor (Group) goods design 125.9 0.00 2020/ contro agree agree 2,000 No ding No Designi and fees 8 % 4/22 ller ment ment to the ng servic price agree Institut es ment e Raw Benxi Execu Purch materi Beiying Relat te ase of al & Steel & same on ed accor goods supple 492,3 10.61 1,550, 2020/ Iron contro agree agree No ding Yes and menta 90.02 % 000 4/22 (Group) ller ment ment to the servic ry Co., price agree es materi Ltd. ment als Benxi Execu Purch Beiying Relat te ase of Steel & same Energ on ed accor goods 46,58 1.00 2020/ Iron contro y& agree agree No ding Yes and 9.86 % 4/22 (Group) ller Power ment ment to the servic Co., price agree es Ltd. ment Benxi Execu Purch Beiying Relat te ase of Steel & same on ed accor goods Freigh 407.5 0.01 2020/ Iron contro agree agree No ding No and t 3 % 4/22 (Group) ller ment ment to the servic Co., price agree es Ltd. ment Benxi Execu Purch Beiying Relat te ase of Steel & same on ed accor goods labor 7,190. 0.15 2020/ Iron contro agree agree No ding No and costs 62 % 4/22 (Group) ller ment ment to the servic Co., price agree es Ltd. ment Benxi Execu Purch Beiying Relat te ase of Steel & same on ed accor goods spare 1,710. 0.04 2020/ Iron contro agree agree No ding Yes and parts 81 % 4/22 (Group) ller ment ment to the servic Co., price agree es Ltd. ment 58 Bengang Steel Plates Co., Ltd. Annual Report 2020 The Amou appro Pricin Whet Mean Avail nt of ved Type Conte g Price Propo her s of able relate tradin of nt of princi of rtion excee paym marke d g Date Index Relati relate relate ple of relate of d the ent of t price Related party limit of of onshi d d relate d simila appro relate of parties transa of disclo discl p party party d party r ved d simila ctions transa sure osure transa transa party transa transa limite party r (in 10 ctions ctions ctions transa ctions ctions d transa transa thous (in 10 ctions (Y/N) ctions ctions and) thous and) Liaonin g Hengto Execu ng Purch raw Relat te Metallu ase of same materi on ed accor rgical goods 8,336. 0.18 15,00 2020/ contro al & agree agree No ding Yes Equipm and 02 % 0 4/22 ller spare ment ment to the ent servic parts price agree Manufa es ment cture Co., Ltd. Liaonin g Hengto Execu ng Purch Relat te Metallu ase of repair same on ed accor rgical goods & 661.1 0.01 2020/ contro agree agree No ding No Equipm and labor 4 % 4/22 ller ment ment to the ent servic costs price agree Manufa es ment cture Co., Ltd. Liaonin Execu Purch g raw Relat te ase of Hengtai same materi on ed accor goods 138.5 0.00 2020/ Heavy contro al & agree agree 8,000 No ding Yes and 9 % 4/22 Machin ller spare ment ment to the servic ery Co., parts price agree es Ltd. ment Liaonin Execu Purch g Relat te ase of repair Hengtai same on ed accor goods & 716.9 0.02 2020/ Heavy contro agree agree No ding No and labor 9 % 4/22 Machin ller ment ment to the servic costs ery Co., price agree es Ltd. ment Execu Purch Bengan proper Relat te ase of g ty on ed accor contro goods 0.00 20,00 2020/ Group manag agree agree No ding No ller and % 0 4/22 Co., ement ment ment to the servic Ltd. fees price agree es ment Execu Purch Bengan Relat te ase of g on ed accor contro goods labor 18,87 0.41 2020/ Group agree agree No ding No ller and costs 6.38 % 4/22 Co., ment ment to the servic Ltd. price agree es ment 59 Bengang Steel Plates Co., Ltd. Annual Report 2020 The Amou appro Pricin Whet Mean Avail nt of ved Type Conte g Price Propo her s of able relate tradin of nt of princi of rtion excee paym marke d g Date Index Relati relate relate ple of relate of d the ent of t price Related party limit of of onshi d d relate d simila appro relate of parties transa of disclo discl p party party d party r ved d simila ctions transa sure osure transa transa party transa transa limite party r (in 10 ctions ctions ctions transa ctions ctions d transa transa thous (in 10 ctions (Y/N) ctions ctions and) thous and) 2,144, 3,141, Total -- -- 591.3 -- -- -- -- -- -- 500 3 Details of any sales return of a large No applicable amount Give the actual situation during the reporting period where a forecast had been made for the total amounts of routine related-party No applicable transactions,by type to occur in the current period(if any) Reason for any significant difference between the transaction No applicable price and the Market price for reference (if applicable) 2. Related transactions relevant to asset acquisition or sold □ Applicable √ Not applicable There was no related transaction relevant to asset acquisition or sold during the reporting period. 3. Related transactions relevant to joint investments □ Applicable √ Not applicable There was no related transaction relevant to joint investments during the reporting period. 4. Credits and liabilities with related parties □Applicable √ Not applicable There were no non-operating related credits and debts during the reporting period. 5. Other significant related transactions □Applicable √ Not applicable XVII. Major Contracts and Their Performance 1. Trusteeship, contracting and lease (1) Trusteeship □ Applicable √ Not applicable There was no trusteeship during the reporting period. 60 Bengang Steel Plates Co., Ltd. Annual Report 2020 (2) Contracting □ Applicable √ Not applicable There was no contracting during the reporting period. (3) Lease √ Applicable □ Not applicable Lease income of Lease income of 2020 Lessee Lease capital category 2019 (included (included tax) tax) Benxi Steel & Iron (Group) Steel & Warehouse and Affiliated facilities Iron Process and Logistics Co., Ltd. 500,000.00 500,000.00 Benxi Steel & Iron (Group) Plants and Affiliated facilities Machinery Manufacture Co., Ltd. 122,500.03 Lessor Lease capital category Lease income of 2020 Lease income of (without tax) 2019 (without tax) Land use rights 7,669,068.17 square Benxi Steel & Iron (Group) Co., Ltd. meters, land use rights 42,920.00 55,277,544.11 54,984,486.36 square meters 2300 hot rolling mill production line, Benxi Steel & Iron (Group) Co., Ltd. related properties 16,098,161.06 167,859,103.82 Benxi Beiying Steel & Iron (Group) 1780 hot rolling mill production line, Co., Ltd. related properties 15,006,983.06 83,686,698.60 Land use rights 728,282.30 square Bengang Group Co., Ltd meters 9,945,423.08 4,972,711.56 Gains or losses from lease counted over 10% of total profit. □ Applicable √ Not applicable During the reporting period, there were no lease projects that resulted in a profit or loss of more than 10% of the total profit of the company during the reporting period 2. Guarantee □ Applicable √ Not applicable There was no guarantee during the reporting period. 3. Entrusting Others for Managing Cash Asset (1) Entrusted Finance □ Applicable √ Not applicable There was no entrusted finance during the reporting period. (2) Entrusted Loans □ Applicable √ Not applicable There was no entrusted loan during the reporting period. 4. Other Major Contracts □ Applicable √ Not applicable There was no other major contract during the reporting period. 61 Bengang Steel Plates Co., Ltd. Annual Report 2020 XVIII. Social Responsibilities 1. Performing other corporation social responsibilities During the reporting period, the company actively protected the legitimate rights and interests of creditors and all employees while pursuing the economic benefits of the company and protecting the interests of shareholders, in accordance with the spirit of corporate social responsibility, and actively treated suppliers, customers and consumers. Public welfare undertakings such as environmental protection and community building. In the business activities, consciously follow the principles of voluntariness, fairness, equal pay, honesty and credit, consciously abide by social morality, professional ethics, consciously accept the supervision of the government and the public, and actively fulfill the corporate social responsibility. 2. Performing corporation social responsibility of targeted poverty alleviation In the annual report of the company, there has been no accurate poverty alleviation work, and there is no follow-up accurate poverty alleviation plan. 3. Environmental protection-related conditions Whether the listed company and its subsidiaries belong to the key pollutant discharge units announced by the environmental protection department. Yes Main The The distribution Emission The Approved Surpass the pollutants Discharge number of Total Name of discharge concentra emission total emission and specific modes discharge emission hatch tion standard emission standard pollutants hatch Sewage COD:240 Bengang Energy integral COD24 Sewage Unapproved COD、 tons; Steel Plates Continuous 1 factory sewage 、 COD50、 by the None Ammonia Ammonia: government Co., Ltd. treatment plant. Ammonia Ammonia 8 2 5.43 tons Raw material dumper, transfer station, Raw receiving ore materials tank, pre-batch; 14-23; Raw coke oven Sintering materials adding coal, 8-40; 25; pushing coke Ironmaki Sintering dry quenching; ng 7-35; 30-50; ironmaking Steelmaki Ironmaking tapping field, ng 7-27; 25-50; furnace roof, Special Steelmaking fuel, solvent, steel 7- 20-50; Bengang Continuous granulation, ore 15; Special Unapproved Particulate coke tank; Coking steel 20-50; 13081 tons by the Steel Plates and 179 None Matter sintering head, Coking 15- Co., Ltd. intermittent 15-30; government machine Tail; 50; iron and steel Power generatio power water n 5-10; generation pretreatment, Cold 10-30; ferroalloy feeding, north- rolling; cold rolling south infusion 6-18 ; 20; hot station, tundish, hot rolling 20; primary dust rolling 6- Scrap steel removal, 15. 20. secondary dust Scrap removal, steel 20 refining dust removal; special 62 Bengang Steel Plates Co., Ltd. Annual Report 2020 steel electric furnace, refining furnace, electric slag furnace; power generation boiler desulfurization and denitrification; cold rolling acid regeneration, Pickling, drawing straightening, welding machine, smoothing, annealing, roasting; hot rolling heating furnace. Scrap steel cutting Sintering head 12- 40; Sintering head; Power Sintering Power generatio head 200; generation n boiler Power Bengang Continuous boiler; Coke 10-70; generation Unapproved 5262.76 Steel Plates SO and 64 oven chimney; Coke 100; Coke by the None tons Co., Ltd. intermittent cold rolling oven 40; oven 50; government roasting, Cold Cold rolling annealing; hot rolling 150; Hot rolling furnace. 80-100; rolling 150. Hot rolling 118-128. Sintering head 100- Sintering Sintering head; 230; head 300; power Power Coke oven generation generatio chimney Bengang Continuous Unapproved Oxides of boiler; cold n 50-140; 150; Power Steel Plates and 57 11267 tons by the None nitrogen rolling roasting, Cold generation Co., Ltd. intermittent government annealing; hot rolling 100-200; rolling furnace. 69-172; Cold rolling furnace. Hot 300; Hot rolling rolling 300. 105-124. Construction and operation of pollution prevention facility: The company has a total of 179 sets of environmental pollution prevention and control facilities. All processes are equipped with dust removal, desulfurization and denitrification, and online facilities in accordance with pollutant emission standards. Environmental protection facilities such as wet desulfurization of sintering machine head, dry desulfurization and denitrification of coke oven chimney, and wet desulfurization and SCR denitrification of power generation have been put into use normally. Environmental Impact Assessment and Other Environmental Protection Administrative Licensing of Construction Projects (1) Advanced treatment and reuse project of board water. Obtained EIA approval: Benxi City Ecological Environment Bureau, Ben Huan Jian Table Zi [2020] No. 03. (2) Special steel rolling mill renovation project (Phase II, Phase III) project. Obtained EIA approval: Benxi City Ecological Environment Bureau, Ben Huan Jian Table Zi [2020] 05. (3) Upgrade and transformation project of plate special steel electric furnace. Obtained EIA approval: Liaoning Provincial Department of Ecology and Environment, Liaohuanhan [2019] No. 172. (4) Production capacity replacement project for plate No. 5 blast furnace. Obtained EIA approval: Liaoning Provincial 63 Bengang Steel Plates Co., Ltd. Annual Report 2020 Department of Ecology and Environment, Liaohuanhan [2019] No. 171. (5) The flue gas desulfurization and denitrification project of No. 7 coke oven in the plate coking plant. Obtained EIA approval: Benxi City Ecological Environment Bureau, Ben Huan Jian Biao Zi [2019] No. 10. (6) Ultra-low emission transformation project for thermal power workshop of sheet power plant. It has completed the EIA registration form for the record, record number: 202021050200000075. (7) A new tower type desulfurization renovation project was added to the plate coking plant. It has completed the EIA registration form for the record, record number: 202021050200000081. (8) Plate steelmaking plant 1#2#3#7# converter secondary and tertiary dust removal system transformation project: It has completed the environmental assessment registration form for the record, record number: 202021050200000084. (9) The converter gas recovery and efficiency improvement project in the plate plant area has obtained the environmental impact assessment approval: Benxi City Ecological Environment Bureau, Ben Huan Jian Biao Zi [2020] No. 10. (10) The flue gas desulfurization and denitrification project of No. 8 and 9 coke ovens of the plate coking plant, obtained the environmental impact assessment approval: Benxi City Ecological Environment Bureau, Ben Huan Jian Table Zi [2020] No. 11. (11) The Caixi Special Steel Feeding Station Project of Benxi Iron and Steel Plate Scrap Plant has obtained environmental assessment approval: Benxi City Ecological Environment Bureau, Benhuan Jianbiao Zi [2020] No. 12. Emergency plan for emergency environmental incidents The company and its subordinate 13 units are revised the emergency plans for emergency environmental incidents, and carried out related work such as risk assessment and investigation of emergency resources in accordance with the "Law of the People's Republic of China on Incident Responses", "Notice on Printing and Distributing the Guidelines for Risk Assessment of Enterprises' Environmental Emergencies (Trial)", and "Emergency Preparedness for Environmental Incidents of Enterprises and Institutions" Existing laws and regulations such as the Administrative Measures (Trial). Environmental self-monitoring project. In 2020, the self-monitoring plan was carried out in accordance with the requirements of the pollutant discharge permit. The monitoring points of Bengang Steel pollution sources: 168 flue gas, 10 wastewater monitoring points, 13 noise points at the boundary of the plant, 27 atmospheric dustfall points, and 71 unorganized monitoring. From the plate factory to the mine, the monitoring is divided into weekly, monthly, seasonal, semi-annual and annual frequency monitoring. The main monitoring items of the automatic air quality monitoring station obtained total of 52,560 monitoring data throughout the year; 27 steel dust points were distributed in the steel plant area, and 324 monitoring data were obtained; routine monitoring tasks for flue gas were completed, and monitoring was achieved throughout the year 1624 data; 13 noise monitoring points at the boundary of the plant, 416 monitoring data; 10 wastewater monitoring points, 4,847 monitoring data; 251 temporary monitoring data, and a total of 7,462 monitoring data reported by the monitoring station. Monthly, quarterly reports and separate monitoring reports for each mine are reported. Other environmental information that should be disclosed None Other environmental protection related information None XIX. Other Major Issues √ Applicable □ Not applicable 1. Issuance and listing of convertible bonds Approved by the China Securities Regulatory Commission "Zheng Jian Xu Ke [2020] No. 46", the company publicly issued 68 million convertible corporate bonds on June 29, 2020, each with a face value of RMB 100 and a total issuance of RMB 6.8 billion. The convertible bonds of this public offering are given priority placement to the original shareholders of the company registered after the market close on the equity registration date, and the balance of the original shareholders' priority placement (including the portion that the original shareholders waived the priority placement) is used online to public investors through the Shenzhen Stock Exchange The way the trading system is sold. The part of the subscription amount less than 6.80 billion will be underwritten by the lead underwriter. With the approval of the “Shenzhen Stock Exchange [2020] No. 656” of the Shenzhen Stock Exchange, the company’s RMB 6.80 billion of convertible corporate bonds will be listed on the Shenzhen Stock Exchange on August 4, 2020. The abbreviation of the bonds is "Bengang Convertible Bonds" and the bond code is " 127018". 2. Benxi Iron and Steel (Group) Co., Ltd., the controlling shareholder of the company, plans to increase its own funds through methods permitted by laws and regulations (including but not limited to centralized bidding and block transactions) within 6 months from February 14, 2020. Holding company shares. The total amount of this shareholding increase plan is not less than RMB 50 million, not more than RMB 100 million, and there is no price range. The implementation of the share increase plan was completed on August 13, 2020. Benxi Iron and Steel Company has increased its holdings of the company’s shares by 28,523,000 shares, accounting for 0.74% of the company’s total share capital, the total amount of holdings increased by RMB 99,976,300, and the average holding price was 64 Bengang Steel Plates Co., Ltd. Annual Report 2020 RMB 3.51 per share. XX. Major Issues of Subsidiaries □ Applicable √ Not applicable 65 Bengang Steel Plates Co., Ltd. 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 ation of Percenta Issuing of new Bonus Percenta Quantity common Others Subtotal Quantity ge share shares ge reserve fund I. Restricted Shares 2. State-own Legal-person Shareholding 3. Other domestic shareholdings Including: Domestic legal person holding Domestic person holding II. Non-restricted Shares 3,875,371,532 100.00% 3,875,371,532 100.00% 1. Common shares in 3,475,371,532 89.68% 3,475,371,532 89.68% 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 66 Bengang Steel Plates Co., Ltd. Annual Report 2020 II. Securities Issuance and Listing 1. Status of Security Issuance (Excluding Preferred Shares) in the Reporting Period √ Applicable □ Not applicable The name of Issue price Number of Transaction the stock and (or interest Issue number Listing date approved Disclosure Disclosure Issue date termination derivative listing Index date rate) date securities transactions Stocks Convertible corporate bonds, separately traded convertible corporate bonds, corporate bonds Bengang 6,800,000,00 August 6,800,000,00 Convertible June 29 ,2020 100 June 28,2026 0 04,2020 0 Bonds Other derivative securities Notes to securities issuance (excluding preferred shares) during the reporting period Approved by the China Securities Regulatory Commission "Zheng Jian Xu Ke [2020] No. 46", the company publicly issued 68 million convertible corporate bonds on June 29, 2020, each with a face value of RMB 100 and a total issuance of RMB 6.8 billion. The convertible bonds of this public offering are given priority placement to the original shareholders of the company registered after the market close on the equity registration date, and the balance of the original shareholders' priority placement (including the portion that the original shareholders waived the priority placement) is used online to public investors through the Shenzhen Stock Exchange The way the trading system is sold. The part of the subscription amount less than RMB 6.80 billion will be underwritten by the lead underwriter. With the approval of the “Shenzhen Stock Exchange [2020] No. 656” of the Shenzhen Stock Exchange, the company’s RMB 6.80 billion of convertible corporate bonds will be listed on the Shenzhen Stock Exchange on August 4, 2020. The abbreviation of the bonds is "Bengang Convertible Bonds" and the bond code is " 127018". Bond’s term to maturity: The maturity of the convertible corporate bonds issued this time is 6 years from the date of issuance, that is, from June 29, 2020 to June 28, 2026. Coupon interest rates: 0.6% in the first year, 0.8% in the second year, 1.5% in the third year, 2.9% in the fourth year, 4.0% in the fifth year, and 5.0% in the sixth year. Conversion period: The conversion period of the convertible corporate bonds issued this time starts from six months after the first trading day issuance of the convertible corporate bonds (July 3, 2020) to the convertible corporate bonds The expiry date is from January 4, 2021 to June 28, 2026. Initial conversion price: RMB 5.03 /share. 2. Total Share and Shareholder Change and Asset and Liability Structure Change □ Applicable √ Not applicable 3. Employee Shareholding Status □ Applicable √ Not applicable III. Shareholders and Actual Controller 1. Total Number of shareholders and shareholding In Shares Total The total number of Total preferred shareholders at Total number of shareholders at the the end of the preferred shareholders common shareholders end of the month from 50,293 month from the 51,611 voting rights restored at 0 0 at the end of the the date of disclosing date of the end of the reporting reporting period the annual report (if disclosing the period (See Notes 8) any) (See Notes 8) annual report 67 Bengang Steel Plates Co., Ltd. Annual Report 2020 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 62.18% 2,409,628,094 28,523,000 2,409,628,094 (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 3.88% 150,470,883 -34,248,500 150,470,883 Investment Group legal person Co., Ltd. Shanghai Yicun Investment Management Co., Ltd.-Yicun Shenghui Others 0.31% 12,000,000 12,000,000 12,000,000 No. 3 Private Equity Securities Investment Fund Domestic Fang Lei 0.28% 10,885,300 10,885,300 10,885,300 natural person VANGUARD EMERGING Foreign legal 0.28% 10,702,004 10,702,004 10,702,004 MARKETS STOCK person INDEX FUND Domestic Fang Huaiyue 0.24% 9,205,501 9,205,501 9,205,501 natural person Shanghai Yingshui Investment Management Co., Ltd.-Yingshui Fulin Others 0.24% 9,175,030 9,175,030 9,175,030 No. 10 Private Securities Investment Fund Strategy investors or general legal person becomes top 10 shareholders due None to rights issued (if any) (See Notes 3) It is unknown to the Company whether there is any related connection or ‘Action in Concert’ as Notes to relationship or ‘action in described by Rules of Information Disclosing Regarding Changing of Shareholding Status of concert’ among the top 10 shareholders. Listed Companies existing among the above shareholders. Shareholding of top 10 unrestricted shareholders Un-restricted shares held at Category of shares Name of the shareholder the end of the reporting period Category of shares Quantity 68 Bengang Steel Plates Co., Ltd. Annual Report 2020 Benxi Steel & Iron (Group) Co., Ltd. 2,409,628,094 Common shares in RMB 2,409,628,094 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 150,470,883 Common shares in RMB 150,470,883 Group Co., Ltd. Shanghai Yicun Investment Management Co., Ltd.-Yicun Shenghui No. 3 Private Equity 12,000,000 Common shares in RMB 12,000,000 Securities Investment Fund Fang Lei 10,885,300 Common shares in RMB 10,885,300 VANGUARD EMERGING MARKETS 10,702,004 Common shares in RMB 10,702,004 STOCK INDEX FUND Fang Huaiyue 9,205,501 Common shares in RMB 9,205,501 Shanghai Yingshui Investment Management Co., Ltd.-Yingshui Fulin No. 10 Private 9,175,030 Common shares in RMB 9,175,030 Securities Investment Fund Benxi Steel & Iron (Group) Co., Ltd., the holding shareholder, has no relationship with any of the other shareholders among the top 10 shareholders, neither being regarded as action-in-concert parties by the Information Disclosure Regulations for Change of Notes to relationship or ‘action in concert’ Shareholding in PLC. The Company is not aware of any relationship among the other among the top 10 non-restricted shareholders, shareholders, neither being regarded as action-in-concert parties by the Information and among the top 10 non-restricted Disclosure Regulations for Change of Shareholding in PLC. The Company is not aware shareholders and top 10 shareholders of any relationship among the top 10 shareholders, neither being regarded as action-in- concert parties by the Information Disclosure Regulations for Change of Shareholding in PLC. Benxi Steel & Iron (Group) Co., Ltd. Holds 2,170,628,094 shares of the Company’s stock through credit security account and holds 239,000,000 shares of the Company’s stock, totaling 2,409,628,094 shares. Shanghai Yicun Investment Management Co., Ltd.-Yicun Shenghui No. 3 Private Securities Investment Fund holds 12,000,000 shares of the Shareholders among the top 10 participating in company's stock through investor credit securities account; Fang Lei holds 10,885,300 securities margin trading (if any) (see Note 4) shares of the company's stock through investor credit securities account; Fang Huaiyue holds 9,205,501 shares of the company's stock through the investor's credit securities account; Shanghai Yingshui Investment Management Co., Ltd.-Yingshui Fulin No. 10 Private Securities Investment Fund holds 9,175,030 shares of the company's stock through the investor's credit securities account. Whether top 10 common shareholders and top 10 un-restricted common shareholders have a buy-back agreement dealing in reporting period □ Yes √ No Top 10 common shareholders and top 10 un-restricted common shareholders had no buy-back agreement dealing in reporting period. 2. Controlling Shareholder Nature of Controlling Shareholders: Local state holding Type of Controlling Shareholders: Legal person Name of the Legal representative Date of Organization Controlling Principal business activities / person in charge incorporation Code shareholder Business scope: steel smelt, mine exploitation, panel Benxi Steel & Iron 9121050011972 rolling, oxygen manufacturing, pipe manufacturing, power Yang Chengguang July 10,1996 (Group) Co., Ltd. 6263U generating, coal industry, special steel material manufacturing, heating, supply of the water, electricity, 69 Bengang Steel Plates Co., Ltd. Annual Report 2020 wind and gas, metal processing, electro mechanics builds, device manufacturing, architecture installation, railway, highway transportation, import and export trade, traveling industry, construction material, refractory material, measuring device instrument, goods and materials supply and marketing, development of real estate, scientific research, design, information service, property management, telecommunication, processing of waste iron, property leasing, exchange of steel material, and recycling of waste oils (to the extent of licensed to the subsidiary companies) , property management; publishing of Bengang Daily; designing and making of presswork and advertisement, releasing, producing of TV advertisements in the country and abroad. Equity of other domestic/foreign listed company with share controlling and None share participation by controlling shareholder in reporting period Changes of controlling shareholders during the reporting period □ Applicable √ Not applicable The controlling shareholder of the company has not changed during the reporting period. 3. Actual Controller Actual controller nature: Local state owned assets management Actual controller type: Legal person Legal representative Date of Principal business Name of the controlling shareholder Organization Code / person in charge incorporation activities Liaoning Provincial State-owned Assets Unknown Unknown Unknown Supervision and Administration Commission Equity of other domestic/foreign listed company with share controlling and share The Company was not informed of the actual controller's control of the equity of other participation by controlling shareholder in domestic and foreign listed companies during the reporting period. reporting period Change of actual controller during the reporting period □ Applicable √ Not applicable There is no change of actual controller during the reporting period. Block diagram of the ownership and control relations between the Company and the actual controller Liaoning Provincial State-owned Assets Supervision and Administration Commission Liaoning Council for social security fund 80% 20% Bengang Group Co., Ltd. Huatai Securities (Shanghai) Asset Management Co., Ltd. 85.33% 14.67% Benxi Steel & Iron (Group) Co., Ltd. 62.18% Bengang Steel Plates Co., Ltd. 70 Bengang Steel Plates Co., Ltd. Annual Report 2020 Whether the actual controller is controlling the Company through trusteeship or other asset management service □ Applicable √ Not applicable 4. Shareholders holding More than 10% of the Shares □ Applicable √ Not applicable 5. Status of Share Reduction Limitation of Controlling Shareholders, Actual Controller, Restructuring Party and Other Commitment Subjects □ Applicable √ Not applicable 71 Bengang Steel Plates Co., Ltd. Annual Report 2020 VII. Status of Preferred Shares □ Applicable √ Not applicable There was no preferred stock in the company during the reporting period. 72 Bengang Steel Plates Co., Ltd. Annual Report 2020 VIII. Status of Convertible Corporate Bonds √ Applicable □ Not applicable I. Previous adjustments to the conversion price With the approval of the Shenzhen Stock Exchange "Shenzhen Securities [2020] No. 656", the company’s RMB 6.8 billion convertible corporate bonds will be listed on the Shenzhen Stock Exchange on August 4, 2020. The abbreviation of the bonds is "Bengang Convertible Bonds" and the bond code is " 127018". Since the listing of the convertible bonds, the company has not adjusted the conversion price, and the initial conversion price is RMB 5.03/share. II. Cumulative share conversion □ Applicable √ Not applicable III. Top ten holders of convertible bonds Unit: shares Number of Amount of Percentage of Nature of convertible bonds convertible bonds Convertible bond convertible bonds No. convertible bond held at the end of the held at the end of the holders held at the end of the holders reporting period reporting period reporting period (sheets) (yuan) Benxi Iron and Steel State-owned legal 1 5,500,000 550,000,000.00 8.09% (Group) Co., Ltd. person Shanghai Pudong Development Bank Co., Ltd.-Yifangda 2 Others 2,646,781 264,678,100.00 3.89% Yuxiang Return Bond Securities Investment Fund Huaxin International Trust Co., Ltd.- 3 Huaxin TrustZhidu Others 1,046,355 104,635,500.00 1.54% Investment No. 16 Single Fund Trust CITIC Securities State-owned legal 4 1,000,000 100,000,000.00 1.47% Co., Ltd. person E Fund-Minsheng 5 Bank-Bank of Others 888,048 88,804,800.00 1.31% Hangzhou Co., Ltd. Huaxin International Trust Co., Ltd.- Huaxin 6 Others 857,768 85,776,800.00 1.26% Trust Caitong Investment No. 12 Single Fund Trust 7 E Fund Stable Others 779,998 77,999,800.00 1.15% Return Fixed-income 73 Bengang Steel Plates Co., Ltd. Annual Report 2020 Pension Product- Bank of Communications Co., Ltd. Industrial and Commercial Bank of China Co., Ltd.-E 8 Fund Security Others 776,230 77,623,000.00 1.14% Return Bond Securities Investment Fund China Everbright Bank Co., Ltd.-E Fund E Fund 6- 9 month regular Others 761,925 76,192,500.00 1.12% opening of bond securities investment funds China Construction Bank Corporation-E Fund Double Bond 10 Others 733,755 73,375,500.00 1.08% Enhanced Bond Securities Investment Fund IV. Significant changes in the guarantor’s profitability, asset status, and credit status □ Applicable √ Not applicable V. At the end of the reporting period, the company’s liabilities, credit changes, and cash arrangements for debt repayment in future years For details, please refer to Section XI. VIII. As of the end of the reporting period, the company’s main accounting data and financial indicators for the past two years, the company’s convertible bond credit rating for the current year has not changed. 74 Bengang Steel Plates Co., Ltd. Annual Report 2020 IX. Status of Directors, Supervisors, Senior Executives and Employees I. Change in Shares held by Directors, Supervisors and Senior Executives Shares Shares Shares Expiry Other Shares Starting held at increased decreased Office date of increase held at Name Position Sex Age date of the during the during the status office / the year- office term year- reporting reporting term decrease end begin period period Director, Mar 14, May Gao Lie In office Male 53 Chairman 2019 16,2022 Director, Jun 03, May Cao Aimin Vice In office Male 53 2010 16,2022 Chairman Director, Shen May 16, May General In office Male 52 Qiang 2019 16,2022 Manager Huang May 24, May Director In office Male 57 Xinghua 2018 16,2022 Yuan Independent May 21, May In office Male 39 Zhizhu Director 2020 21,2023 Zhao Independent May 21, May 21, In office Male 60 Xinan Director 2015 2021 Zhang Independent Femal May 16, May In office 65 Suxun Director e 2019 16,2022 Supervisor, Chairman of Femal Feb 19, May Han Mei In office 51 Supervisory e 2014 16,2022 Committee Femal Feb 19, May Li Lin Supervisor In office 52 e 2014 16,2022 Mar 14, May Li Xiaowei Supervisor In office Male 45 2019 16,2022 Zhao Jun 26, May Supervisor In office Male 48 Xingtao 2019 16,2022 75 Bengang Steel Plates Co., Ltd. Annual Report 2020 Zhang Jan 26, May Supervisor In office Male 43 Yanlong 2014 16,2022 Deputy Bao Dec 28, May General In office Male 57 Mingwei 2012 16,2022 Manager Deputy Wang Jan 26, May General In office Male 55 Fengmin 2014 16,2022 Manager Deputy March May Huo Gang General In office Male 47 14,2019 16,2022 Manager Zhao Director of Femal April 18, May In office 36 Zhonghua Finance e 2019 16,2022 Gao Secretary of September May In office Male 46 Desheng the Board 20,2018 16,2022 Zhong Independent Leaving Femal May 64 20-May-14 Tianli Director office e 21,2020 Total -- -- -- -- -- -- II. Change in Directors, Supervisors and Senior Executives √Applicable □ Not applicable Name Position Type of change Date Reason Independent Leaving office after Leaving office after expiry of Zhong Tianli May 21, 2020 Director expiry of term term III. Posts holding Work experience, professional background and currently mainly responsibilities of Directors, Supervisors and Senior Executives in current office Gao Lei, Male, 53, undergraduate, master of engineering, professor-level senior engineer. Once Chairman of Benxi Iron and Steel(Group)Mining Co.,Ltd; Manager of Mineral Resources Development Company; Assistant General Manager of Bengang Group Co., Ltd. and Manager of Mineral Resources Development Company; He is now Member of the Standing Committee of the company's party committee, Deputy General Manager of Bengang Group Co.,Ltd, chairman of Bengang Steel Plate Co., Ltd. Cao Aimin, Male, 53, undergraduate, professor-level senior accountant. Once Head of Capital Division of Finance Department; Head of Planning and Finance Division; and Chief Accountant. Director and Chief Accountant of Benxi Iron and Steel (Group) Co., Ltd., Ltd. He is now Member of the Standing Committee of the company's party 76 Bengang Steel Plates Co., Ltd. Annual Report 2020 committee, Director and Chief Accountant of Bengang Group Co., Ltd,, Vice Chairman of Bengang Steel Plates Co., Ltd. Shen Qiang, Male, 52 years old, undergraduate, master of engineering, senior engineer. He has served as Secretary of the Board of Directors and Director of the Board of Directors of Bengang Group Corporation, Director of the Office, Director of the Secretary of Secretaries, Secretary of the Party Committee of Bengang Group Corporation, Chairman of the Board of Directors of the Real Estate Company, Secretary of the Party Committee; Director of Benxi Iron and Steel Company, Deputy Secretary of the Party Committee, Deputy General Manager, Board of Directors Secretary; Assistant General Manager of Bengang Group Corporation, Minister of Human Resources Department (Organization Department); assistant to the General Manager, Secretary of the Board of Directors, Director of the Office of the Board of Directors, and Minister of the Organization Department (Human Resources Department) of Bengang Group; current Director and General Manager of Bengang Steel Plate Co., Ltd. Huang Xinghua, Male, 57, College degree, senior accountant. Once Deputy director of the planning and finance department of Benxi Iron and Steel (Group) Co., Ltd.; Director and Chief accountant of Benxi Iron and Steel (Group) Co., Ltd.; Director of the finance department of Bengang Group Co., Ltd. He is now the head of the finance department of Bengang Group Co., Ltd., Director of Benxi Iron and Steel (Group) Co., Ltd., Director of Bengang Steel Plate Co., Ltd. Zhao Xinan, Male, 60, professor (doctoral supervisor) of Northeastern University. Served as the vice dean of the School of Business Administration of Northeastern University, and a member of the National Education Department Management Science and Engineering Teaching Steering Committee; currently a professor of the School of Business Administration of Northeastern University, independent director of Bengang Steel Plate Co. Zhang Suxun, Female, 65, bachelor degree, professor. Former Liaoning University Business School teacher; now retired. The current independent director of Bengang Steel Plate Co., Ltd. Yuan Zhizhu, male, 39, PhD degree, associate professor of accounting at Northeastern University, master supervisor, non-practicing member of Chinese certified public accountant. Served as a lecturer in the School of Business Administration of Northeastern University; currently the director of the Accounting Department of the School of Business Administration of Northeastern University, and a director of the Liaoning Accounting and Abacus Mental Arithmetic Society, and a director of the Liaoning Auditing Society; independent director of Bengang Steel Plate Co., Ltd. Profiles of the Supervisory Committee: Han Mei, Female, 50, undergraduate, senior accountant. Once she was the vice head of financial department of the Company; vice head of auditing department and head of administration department of the supervisory committee of Bengang Group; Provincial Government Liaison in Bengang Benxi Steel & Iron (Group) Co., Ltd. Director of Audit Dept. She now is Head of Audit Department, Director of Finance Company; Chairman of Board of Supervisors of Bengang Steel Plate Co., Ltd. Li Lin, Female, 52, postgraduate, engineer. Once she was the administrator of HR department of Bengang Group; Vice Chief Engineer of Transportation Department of the Company; Substitute Chairman of the Trade Union of Transportation Department of the Company, Secretary of Commission for Discipline Inspection of Transportation 77 Bengang Steel Plates Co., Ltd. Annual Report 2020 Department and Chairman of the Labour Union of Bengang Steel Plates Co. Ltd, Group leader of Discipline Inspection and Supervision group One Assigned by Discipline Inspection Commission of Bengang Group Co., Ltd. She is now Party secretary of Railway company; Supervisor of Bengang Steel Plates Co. Ltd. Li Xiaowei, Male, 45, undergraduate, economist. He was once senior officer of the audit department and Division chief of the operation audit department of Bengang Group Co., Ltd. He is now the deputy director of the Audit Department of Bengang Group Co., Ltd., the supervisor of the board of supervisors of Bengang Steel Plate Co., Ltd. Zhang Yanlong, Male, 43, undergraduate, senior engineer. He once was the workshop manager of steel-making factory; Vice Chief of QC department of iron-making factory, Director of Steel-making plant, Manager of Manufacturing Department of Bengang Steel Plates Co., Ltd., Assistant of Director of Production Division of Steel- Making Plant; He is now Vice Director of Production Division of Steel-Making Plant and Supervisor of Bengang Steel Plates Co. Ltd. Zhao Xingtao, Male, 49, university degree, master of engineering, senior engineer. Served as Deputy Director of the Cold Rolling Plant of Bengang Steel Plate Co., Ltd.; Party Secretary and Chairman of the Labor Union of the Cold Rolling Plant of Bengang Steel Plate Co., Ltd. Executives other than directors: Bao Mingwei, Male, 57 years old, Undergraduate, senior engineer. Served as Secretary of the Party Committee, Deputy Plant Manager and Plant Manager of the Hot Strip Mill of Bengang Steel Plate Co., Ltd.; Deputy General Manager and Plant Manager of the Third Cold Rolling Plant of Bengang Steel Plate Co., Ltd.; Deputy Chief Engineer, Planning and Development Department of Bengang Steel Group Co., Ltd. (Science and Technology Development Department) Minister; Deputy Chief Engineer of Bengang Group Co., Ltd.; current Deputy General Manager of Bengang Plate Co., Ltd. Wang Fengmin, Male, 55, graduate degree, professor and researcher-level senior engineer. Served as deputy director, director and party secretary of the ironmaking plant of Benxi Iron and Steel Plate Co., Ltd.; deputy general manager and head of the manufacturing department of Benxi Iron and Steel Plate Co., Ltd.; deputy chief engineer of Benxi Iron and Steel Group Co., Ltd.; The current deputy general manager of Bengang Steel Plate Co., Ltd. Huo Gang, Male, 47, graduate degree, doctor of engineering, professor and researcher-level senior engineer. Served as acting general manager and general manager of the cold rolling mill of Benxi Iron and Steel Pohang Company; Party Secretary and Executive Deputy Director of the Third Cold Rolling Plant of Bengang Steel Plate Co., Ltd.; Party Secretary and Plant Manager of the Third Cold Rolling Plant of Bengang Steel Plate Co., Ltd.; Director of Bengang Steel Plate Co., Ltd. Cold Rolling Plant and General Manager of Pohang Cold Rolling. Zhao Zhonghua, Female, 36, graduate degree, master of management, accountant. She has successively been deputy director and director of the Finance Department of Bengang Steel Plate Co., Ltd., assistant director of the Finance Department of Bengang Group Co., Ltd., deputy manager of Bengang Group Finance Co., Ltd., and currently the CFO and finance minister of Bengang Steel Plate Co., Ltd. Gao Desheng, Male, 46, undergraduate, master of management, senior economist. He has been the acting director 78 Bengang Steel Plates Co., Ltd. Annual Report 2020 of the Business Planning Department of the Operation Improvement Department of Bengang Group Co., Ltd., the director of the Ownership Management Department of the Operation Improvement Department of Bengang Group Co., Ltd., the director of the Ownership Management Department of the Operation Improvement Department of Bengang Group Co., Ltd., the vice-chairman of the First Supervisory Board, and now he is the director of the office and Secretary of the board of Bengang Group Co., Ltd.. Posts holding in Shareholders √ Applicable □ Not applicable Does he /she Expiry receive Names of the Names of the Titles engaged in the Starting date of date of remuneration persons in shareholders shareholders office term office or allowance office term from the shareholder Bengang Group Co., Gao Lie Vice General Manager March 1, 2014 Yes Ltd. Bengang Group Co., November 4, Cao Aimin Director, Chief Accountant Yes Ltd. 2010 Bengang Group Co., Huang Xinghua Minister of Finance August 1, 2017 Yes Ltd. Benxi Iron and Steel Huang Xinghua Director April 1, 2018 No (Group) Co., Ltd. Bengang Group Co., February 1, Han Mei Director of Audit Department Yes Ltd. 2016 Bengang Group Co., Vice Director of Audit January 1, Li Xiaowei Yes Ltd. Department 2018 Posts holding in other companies √Applicable □Not applicable Does he /she Names of the Titles engaged Expiry receive Names of the other Starting date of persons in in other date of remuneration or companies office term office companies office term allowance from the shareholder Bengang Puxiang Cold- Gao Lie Chairman December, 1,2019 No rolled Sheet Co., Ltd. Bengang Group Finance Cao Aimin Chairman October, 1,2016 No Co., Ltd. Zhongtian Securities Co., Cao Aimin Director December, 1,2016 No Ltd. Bengang Group Finance Han Mei Director December, 1,2016 No Co., Ltd. Punishment by the securities regulatory authorities in last three years □ Applicable √ Not applicable 79 Bengang Steel Plates Co., Ltd. Annual Report 2020 IV. Remuneration to Directors, Supervisors and Senior Executives Decision-making procedures, basis of recognition and actual payment of the remuneration to Directors, Supervisors and Senior Executives Decision making procedures 1. The Remuneration and Assessment Committee will produce a plan or proposal, which will be implemented upon approval of the Board or the Shareholders’ Meeting; 2. According to performance assessment criteria and procedures, the Remuneration and Assessment Committee undertakes assessment on the Directors and Senior Executives; 3. Remuneration amounts and ways of rewards will be proposed according to the assessment and remuneration policies for Directors, Supervisors and Senior Executives, and adopted by voting; 4. To be implemented upon approval of the Board. Basis of recognition Remuneration scheme for a particular position is recognized basing on the range of responsibilities, duties. Remunerations are distributed based on the assessment results and remuneration policies. Actual payment of the remuneration Remuneration is paid on monthly basis according to the remuneration allocation policies. Remuneration of Directors, Supervisors and Senior Executives during the reporting period Unit: RMB 10 thousand Total Whether receive remuneration remuneration in Name Position Sex Age Office status received from the the Company's shareholder related parties Gao Lie Director, Chairman Male 53 In office Yes Cao Aimin Director, Vice Chairman Male 53 In office Yes Shen Qiang Director, General Manager Male 52 In office 40.44 No Huang Xinghua Director Male 57 In office Yes Zhao Xinan Independent Director Male 60 In office 5 No Zhang Suxun Independent Director Female 65 In office 5 No Yuan Zhizhu Independent Director Male 39 In office 5 No Supervisor, supervisory Han Mei Female 51 In office Yes board chairman Li Lin Supervisor Female 52 In office 28.58 No Li Xiaowei Supervisor Male 45 In office Yes Zhao Xingtao Supervisor Male 48 In office 32.28 No Zhang Yanlong Supervisor Male 43 In office 34.64 No Bao Mingwei Deputy General Manager Male 57 In office 34.24 No 80 Bengang Steel Plates Co., Ltd. Annual Report 2020 Wang Fengmin Deputy General Manager Male 55 In office 34.44 No Huo Gang Deputy General Manager Male 47 In office 34.07 No Zhao Zhonghua CFO Female 36 In office 29.72 No Gao Desheng Secretary of Board Male 46 In office 25.63 No Zhong Tianli Independent Director Female 64 Leaving office No Total -- -- -- -- 309.04 -- Incentive equity to Directors, Supervisors and Senior Executives during the reporting period □ Applicable √ Not applicable V. Staff Condition 1. Staff Population, Professional Structure and Education Level Population of in-service staff in parent company 16,221 Population of in-service staff in main subsidiaries 524 Total population of in-service staff 16,745 Total population of staff receiving remuneration in the current 16,745 period Population of retired staff whose expense was borne by parent 23,377 company and major subsidiary companies Professional Composition Type of Professional Composition Population Production Staff 12,922 Sales Staff 188 Technician 1,532 Financial Staff 141 Administrative Staff 1,962 Total 16,745 Educational Degree Type of Educational Degree Population PhD. 14 Postgraduate 359 Undergraduate 3,765 Junior College 5,325 Technical secondary school 390 High School and Technical School 3,166 Middle School and others 3,726 Total 16,745 81 Bengang Steel Plates Co., Ltd. Annual Report 2020 2. Remuneration Policies In 2020, we will further strengthen the management of salary distribution, continue to promote the total salary contract, guide all units to rationally allocate human resources, optimize the distribution mechanism and increase labor productivity, and give full play to the role of salary incentives and constraints. Implementing a job performance wage system that determines individual salaries based on job value, personal abilities and performance contributions, opening up career development channels for business, technical and operational positions; implementing an annual salary assessment system linked to company benefits and employee income. 3. Training Plan The company plans to complete 86 training projects and train 17,402 people throughout the year. The training rate of the whole staff reaches 70%, and the implementation rate of the annual training plan reaches 85%. 4. Outsourcing □ Applicable √ Not applicable 82 Bengang Steel Plates Co., Ltd. Annual Report 2020 X. Corporate Governance I. Basic Situation of Corporate Governance During the reporting period, the Company has been following the laws, regulations and documents such as the Company Law, Securities Law, Governance Guidelines for Listed Companies, Guidelines for the Normative Operation of Listed Companies on the Shenzhen Stock Exchange and Articles of Association. Based on the actual situation of the company, the Company has been continuously improving the corporate governance structure and internal control system of the company, improves the governance level, and promotes the company's standardized operation. As of the end of the reporting period, the actual situation of corporate governance meets the requirements of the regulatory documents related to the governance of listed companies. 1. Shareholders and Shareholders' General Meeting: The company has formulated the "Rules of Procedures for General Meetings of Shareholders" in strict accordance with the "Company Law", "Rules for Shareholders' General Meetings of Listed Companies" and the company's "Articles of Association" to ensure the exercise of the rights of the company's shareholders and the standard operation of the shareholders' meeting. The company's previous shareholder meetings have provided two attendance channels, on-site voting and online voting, to facilitate shareholders. Involving major issues that affect the interests of small and medium investors, the company counts the votes of small and medium investors individually and discloses them in a timely manner to ensure that all shareholders enjoy equal status and fully exercise their rights. And by hiring lawyers to witness and ensure the legal compliance of the convening, convening and voting procedures of the meeting, the legitimate rights and interests of the company and shareholders have been safeguarded. 2. Directors and the board of directors: the company's board of directors has clear responsibilities, and the company's directors exercise their powers in strict accordance with the "Articles of Association", "Rules of Procedures of the Company's Board of Directors", "Company Independent Directors Work System" and other related systems, perform their duties with integrity and diligence, and safeguard the legitimate rights and interests of the company and shareholders. The company's board of directors has four special committees, namely audit, strategy, nomination, remuneration and assessment, each of which performs its own responsibilities and functions, and can carry out its work in accordance with the rules of procedure of each special committee. During the reporting period, the convening and holding procedures of the company's board of directors complied with the “Company Law”, “Articles of Association” and “Rules of Procedure of the Board of Directors” and other relevant laws and regulations. 3. Supervisors and Board of Supervisors: The company's supervisors can earnestly perform their duties, independently and effectively perform supervision and inspection functions. The company's supervisors attend shareholders' meetings, attend board meetings as non-voting delegates, regularly inspect the company's legal operations and financial conditions, and issue opinions from the board of supervisors. Supervise the company's finances, the performance of the company's directors and 83 Bengang Steel Plates Co., Ltd. Annual Report 2020 senior management personnel, and the capital exchanges with related parties, so as to safeguard the legal rights and interests of the company and shareholders. The number and structure of the board of supervisors meet the requirements of laws and regulations, and its convening and convening are strictly implemented in accordance with the "Articles of Association" and "Rules of Procedure of the Board of Supervisors" to ensure that the board of supervisors effectively performs its duties. 4. Controlling shareholders and the company: The company has independent and complete business and independent management capabilities, and is independent of the controlling shareholders and actual controllers in terms of business, personnel, assets, institutions, and finances; The company's board of directors, board of supervisors and other internal institutions operate independently; The company's major decisions are made by the board of directors or the general meeting of shareholders in accordance with the law. There is no direct or indirect intervention in the company's decision- making and production and operation activities beyond the general meeting of shareholders, nor does it harm the interests of the company and other shareholders. 5. Information disclosure and transparency: The company strictly complies with the requirements of the "Shenzhen Stock Exchange Stock Listing Rules" and the "Information Disclosure Management System" and other requirements, truthful, accurate, and complete, without false records, misleading statements or major omissions in performing information disclosure obligation, "China Securities Journal", "Securities Times", "Hong Kong Commercial Daily" and www.cninfo.com.cn are the designated media for company information disclosure. The company publishes regular reports and temporary announcements through the above-mentioned information disclosure media to ensure that all shareholders of the company can obtain information with equal opportunities. 6. Investor relationship management: The company continues to strengthen communication with investors to deepen investors' understanding and recognition of the company. The company appoints the secretary of the board of directors as the person in charge of investor relations management, and the office of the board of directors is the organization that undertakes the daily work of investor relations management. The company makes full use of on-site meetings, dedicated telephone calls, investor interaction platforms and other methods to communicate with the company's shareholders, listens carefully to the opinions and suggestions of investors on the company's strategic development and production and operation, and has established a good communication mechanism with investors, which enhances investors' understanding and investment confidence in the company. Whether there exists any difference in compliance with corporate governance, PRC Company Law and relevant provisions of CSRC □ Yes √ No There exists no difference in compliance with corporate governance, PRC Company Law and relevant provisions of CSRC. 84 Bengang Steel Plates Co., Ltd. Annual Report 2020 II. Explanation on Structural Independence of the Company on Business, Personnel, Assets, Organization and Finance from the Controlling Shareholder The Company is separated from the controlling shareholder in aspects of business, personnel, assets, organization and finance, etc. and has its own independent and complete business operation. (1) In business operation: The Company has its own production and business planning, financial affairs check and calculate, labor and personnel, raw material supplies and products selling business system independently and completely. (2) In personnel: The Company and controlling shareholder are separate in such aspects as labor, personnel and salary management. Such senior executives as company's chairman, general manager, vice general manager, secretary of Board of Directors, etc. get salary from the Company, and hold the important position other than a director in shareholder department. (3) In Asset: The Company is separated from the controlling shareholder's clearly in asset. The Company has its own independent purchase, production, and marketing system. (4) In organization: The internal operations of the Company are independent; organization structure and working function are totally independent. (5) In finance: The company has independent financial management department, the accounting and financial management system where are complete and operated independently, and has bank account and pay taxes independently. III. Competition Situations of the Industry □ Applicable √Not applicable IV. Annual General Meeting and Extraordinary Shareholders’ Meetings in the Reporting Period 1. Annual General Meeting Investor Index of information Sessions Type Meeting Date Date of disclosure participation ratio disclosure Annual General Annual General Announcement No.: 76.79% May 21, 2020 May 22, 2020 Meeting of 2019 Meeting 2020-030 2. Request for Extraordinary General Meeting by Preferred Stockholders Whose Voting Rights Restore □ Applicable √ Not applicable V. Duty fulfillment of Independent Directors in Reporting Period 1. The situation of independent directors attending the BOD and shareholders meeting Attendance of independent directors 85 Bengang Steel Plates Co., Ltd. Annual Report 2020 Number of Board Failure to Number of meetings Number of personally Number of Number of meetings Independent necessary to be attendances Number of attend board general spot attended by Directors attended by absence meetings meetings to be attendances Communicatio during the representative successively attended n reporting twice (Yes/No) period Zhao Xinan 9 1 8 0 0 No 1 Zhang Suxun 9 1 8 0 0 No 1 Yuan Zhizhu 6 1 5 0 0 No 1 Zhong Tianli 3 0 3 0 0 No 1 Illustration to failure to personally attend Board Meetings Twice Successively 2. Objection of Independent Directors on Relevant Issues Objection of independent directors on some relevant issues □ Yes √ No Independent directors proposed no objection against the relevant matters during the reporting period. 3. Other Notes to Duty Fulfillment of Independent Directors Whether any independent director’s advice to the Company was accepted √ Yes □ No Illustration of acceptance of or failure to accept an independent director’s advice to the Company Independent directors have not made recommendations during the reporting period. VI. Duty Fulfillment of the Special Committees under the Board during the reporting period There are four special committees under the company's board of directors, namely, the audit committee, the remuneration and appraisal committee, the nomination committee, and the development strategy committee. During the reporting period, the special committees carried out their work in accordance with the relevant laws and regulations, regulatory documents and other relevant provisions based on the principle of diligence and due diligence. (1) Performance of Audit Committee During the reporting period, the audit committee of the company's board of directors actively performed its duties in accordance with the “Company Law”, “Listed Company Governance Guidelines”, “Articles of Association”, “Rules of Procedure of Audit Committee” and other relevant regulations. Reviewed the company's regular reports, internal control self-evaluation reports, financial final accounts reports, special reports on the deposit and use of raised funds, renewal of the appointment of an accounting firm, Anticipating daily connected transactions, using raised funds to replace self-raised funds invested in investment projects with raised funds in advance and paid issuance fees, using temporarily idle funds for cash management, using idle raised funds 86 Bengang Steel Plates Co., Ltd. Annual Report 2020 to temporarily supplement working capital, etc. (2) Performance of the Remuneration and Appraisal Committee of the Board of Directors During the reporting period, the Remuneration and Appraisal Committee conscientiously performed its duties in accordance with the Articles of Association, the Rules of Procedure for the Remuneration and Appraisal Committee of the Board of Directors and other relevant regulations. The Remuneration and Appraisal Committee reviewed the remuneration of the company's directors and senior management in 2019, and believed that the remuneration system implemented by the company's senior management staff, the company's directors, supervisors, and senior management staff's remuneration during the reporting period were true and in line with the company's performance appraisal indicators. (3) Performance of the Nomination Committee During the reporting period, the Nomination Committee carried out its work and performed its duties in accordance with the Articles of Association, the Rules of Procedure for the Nomination Committee of the Board of Directors and other relevant regulations. Deliberated the company's nomination of independent director candidates, and put forward suggestions on the selection criteria and procedures for company directors and senior executives. (4) Performance of the Development Strategy Committee During the reporting period, the Development Strategy Committee conscientiously performed its duties in accordance with the Articles of Association, the Rules of Procedure for the Development Strategy Committee of the Board of Directors and other relevant regulations, and reviewed the company's 2019 Board of Directors Work Report and the 2020 Investment Framework Plan Proposal. , According to the actual situation of the company, formulate development strategies, discuss and analyze development plans and foreign investment, put forward opinions and suggestions, and make decisions. VII. Duty Fulfillment of the Supervisory Committee Whether the supervisory board made any objection against the supervision issue during the reporting period □ Yes √ No The Supervisory Board made no objection against the supervision issue during the reporting period. VIII. Appraisal and Incentive System for Senior Executives The Company’s performance assessment scheme for executives implements a combination of daily accountability and annual comprehensive assessment and evaluation. Senior Executives shall be punished if they fail to perform their duties properly, make mistakes or neglect their duty. The annual comprehensive assessment is conducted in the form of positive evaluation, horizontal evaluation and reverse democratic evaluation. The comprehensive evaluation results are an important basis for selecting and appointing senior management personnel, cultivating education, management 87 Bengang Steel Plates Co., Ltd. Annual Report 2020 supervision and incentives. IX. Internal Control 1. Significant defects of the internal control found in the internal control self-assessment report in the reporting period □ Yes √ No 2. Self-Evaluation Report on Internal Control Disclosing date of internal control auditing April 28, 2021 report full text Index of the internal control auditing report http://www.cninfo.com.cn full text Proportion of total assets of subsidiaries belong to the scope of self-evaluation 97.79% report in the total assets of the Company’s consolidated financial statements Proportion of operation income of subsidiaries belong to the scope of self- evaluation report in the operation income 74.70% of the Company’s consolidated financial statements Standards of Defects Evaluation Category Financial Report Non-financial Report 1. Material deficiencies:The frauds made by 1. Material the directors, or supervisors, or senior deficiencies : Major management personnel that leads to errors caused by significant losses and adverse effects to the decision-making company. 2. Significant deficiencies:Not in procedure; the important accordance with generally accepted business lacks accounting standards selection and institutional control or application of accounting policies; ; Not has a systematic failure established anti-fraud procedures and control while lacking effective Qualitative criteria measures; Not established the corresponding compensatory control; control mechanism or not implemented the serious drain of senior corresponding compensatory control on the and middle level accounting treatment of non-conventional or management personnel special deals; there are one or more defects in and senior technical the process control of the final financial report staff; the results of and which leads to cannot reasonably internal control guaranteeing the financial report compiled to evaluation, especially achieve the goal of being true and accurate. the significant 88 Bengang Steel Plates Co., Ltd. Annual Report 2020 3. General deficiencies:the internal control deficiencies have not deficiencies except those constitute the been corrected; other material deficiencies and the significant circumstances that have deficiencies. big negative impact on the company. 2. Significant deficiencies : General errors caused by decision-making procedure; there are defects in the important business regulations and system serious drain of business personnel in key posts; the results of internal control evaluation, especially the important deficiencies have not been corrected; other circumstances that have comparably big negative impact on the company. 3. General deficiencies: low-efficiency on the decision-making process; existed defects in the ordinary business institution or system; serious drain of business personnel in general posts; general deficiencies that have not been corrected. 1. Material deficiencies:1) 1. Material misstatement≥5% of the total profits; 2) deficiencies:1) misstatement≥3% of the total assets; 3) misstatement≥5% of the misstatement≥1% of the total operating total profits;2) income; 4)misstatement≥1% of the total misstatement≥3% of the Quantitative criteria amount of the owner’s equity. 5) 3% of the total assets;3) total profits ≤misstatement<5% of the total misstatement≥1% of the profits;2. Significant deficiencies:1) total operating income. 0.5% of the total assets ≤misstatement<3% 4)misstatement≥1% of of the total assets;2)0.5% of the total the total amount of the 89 Bengang Steel Plates Co., Ltd. Annual Report 2020 operating income ≤misstatement<1% of the owner’s equity. 5) 3% total operating income; 3)0.5% of the of the total profits total amount of the owner’s equity ≤misstatement<5% of ≤misstatement<1% of the total amount of the total profits;2. the owner’s equity。3. General Significant deficiencies:1)misstatement<3% of the deficiencies:1)0.5% total profits;2)misstatement<0.5% of the of the total assets total assets;3)misstatement<0.5% of the ≤misstatement<3% of total operating income;4)misstatement< the total assets;2) 0.5% of the total amount of the owner’s 0.5% of the total equity。 operating income ≤misstatement<1% of the total operating income;3)0.5% of the total amount of the owner’s equity ≤misstatement<1% of the total amount of the owner’s equity。3. General deficiencies: 1)misstatement<3% of the total profits;2) misstatement<0.5% of the total assets;3) misstatement<0.5% of the total operating income; Number of major defects in financial 0 reporting(a) Number of major defects in non-financial 0 reporting (a) Number of important defects in financial 0 reporting(a) Number of important defects in non- 0 financial reporting(a) X. Internal Control Audit Report √ Applicable □ Not applicable Opinion in the internal control audit report We acknowledge that internal control of Bengang Bancai is effective in all material respects and is compliance with ‘Fundamental Rules of Enterprise Internal Control’ up to December 31, 2020. Internal Control Audit Report Disclosure 90 Bengang Steel Plates Co., Ltd. Annual Report 2020 Status Disclosure date of audit report of April 28, 2021 internal control (full-text) Index of audit report of internal http://www.cninfo.com.cn control (full-text) Internal audit report’s opinion Standard unqualified opinion Whether there is significant defect No in non-financial report Whether the accountants’ firm issued a qualified opinion on report of internal control audit □ Yes √ No Whether the internal control audit report issued by the accountants’ firm agree with the self- assessment report of the Board of Directors √ Yes □ No 91 Bengang Steel Plates Co., Ltd. Annual Report 2020 XI. Relevant Information about Corporate Bonds Whether the company has publicly issued corporate bond which is listed on the stock exchange and is not due on the date of approval of the annual report or has not been fully redeemed at the due date Yes I. Basic information about corporate bonds Bond balance Repayment of Bond Bond name Bond Code Issue date Maturity Date (ten Interest rate principal and abbreviation thousand) interest The convertible bonds issued in this issuance adopt the method of paying interest once a year, and the company will Convertible pay 119% of corporate Bengang the face value bonds of Convertible 127018 29th June 2020 28th June 2026 680,000 of the Bengang Steel bond convertible Plate Co., Ltd. bonds (including the last annual interest) to investors for the unconverted convertible bond at maturity. Trading place for the listing or Shenzhen Stock Exchange transfer of corporate bonds Investor suitability Not applicable arrangements Interest payment and The interest payment date is not due during the reporting period redemption of corporate bonds 92 Bengang Steel Plates Co., Ltd. Annual Report 2020 during the reporting period The implementation of the relevant clauses during the reporting period if corporate bonds are accompanied by Not applicable special clauses such as issuer or investor option clauses, exchangeable clauses, etc. (if applicable). II. Information on bond trustees and credit rating agencies Bond trustee: 618 Shangcheng Guotai Junan Road, China Chi Huitao, Name Securities Co., Office address Contact Contact Tel 021-38676666 (Shanghai) Yang Keyi Ltd. Pilot Free Trade Zone Credit rating agencies that tracked and rated corporate bonds during the reporting period: China Chengxin International Credit Rating Co., No. 2 Nanzhugan Hutong, Dongcheng District, Name Office address Ltd. Beijing 60101 During the reporting period, the bond trustee and credit rating agency hired by the company changed, the reason for the Not applicable change, the procedures performed, the impact on the interests of investors, etc. (if applicable) III. Use of proceeds from corporate bonds The use of proceeds from corporate bonds Please refer to "5 Use of raised funds" in "Five. Analysis of Investment Status" in and the procedures for implementation "Section IV Discussion and Analysis of Business Conditions" of this report Ending balance(RMB ten thousand) 499,130.52 In order to regulate the use and management of the company’s raised funds and protect the rights and interests of small and medium-sized investors, in accordance with the China Securities Regulatory Commission’s "Listed Companies Supervision Guidelines Operation of the special account for raised No. 2-Regulatory Requirements for the Management and Use of Funds Raised by funds Listed Companies" and "Regulations for Listed Companies on the Shenzhen Stock Exchange" "Operation Guidelines" and the company’s fund-raising management system and other relevant regulations, the company will cooperate with Industrial and Commercial Bank of China Co., Ltd. Benxi Branch, Bank of China Co., Ltd. Benxi 93 Bengang Steel Plates Co., Ltd. Annual Report 2020 Branch, China Construction Bank Co., Ltd. Benxi Branch, and China Construction Bank Co., Ltd. on July 9, 2020. Benxi Branch of Bank Co., Ltd., Benxi Xinhua Sub- branch of Agricultural Bank of China Co., Ltd., and the sponsor Guotai Junan Securities Co., Ltd. signed the "Tripartite Supervision Agreement on Special Accounts for Raising Funds" and disclosed them (Announcement No.: 2020-044) whether the use of raised funds consistent with the promised purpose, use plan and Consistent other agreements in the prospectus IV. Information rating of corporate bonds On December 10, 2019, China Chengxin International Credit Rating Co., Ltd. issued the "Bengang Steel Plate Co., Ltd. Public Issuance of A-Share Convertible Corporate Bonds Credit Rating Report". The rating result: The company's main body credit rating is AA+, and the rating outlook is Stable; the corporate bond credit rating is AAA. For details, please refer to the "Credit Rating Report of Bengang Steel Plate Co., Ltd. Public Issuance of A-Share Convertible Corporate Bonds" disclosed on Juchao Information Website on June 23, 2020. On July 31, 2020, China Chengxin International Credit Rating Co., Ltd. issued the "Bengang Steel Plate Co., Ltd. Public Issuance of A-Share Convertible Corporate Bond Tracking Rating Report". The tracking rating result: maintain the company's entity credit rating at AA+, rating the outlook is stable; the credit rating of the "Bengang Convertible Bonds" is maintained at AAA. For details, please refer to the "Tracking Rating Report on the Public Issuance of A-Share Convertible Bonds of Bengang Steel Plate Co., Ltd." disclosed by the company on Juchao.com on August 6, 2020. V. Corporate bond credit enhancement mechanism, debt repayment plan and other debt repayment safeguard measures 1 、 Convertible corporate bond credit enhancement mechanism: Bengang Group Co., Ltd. provides a full unconditional and irrevocable joint liability guarantee for the convertible corporate bonds issued by the company this time. The guarantee scope includes bond principal, interest, default amount, and damages and the full cost of realizing the creditor's rights 2、Repayment plan: 1)The convertible bond issued this time adopts the interest payment method of paying interest once a year, and the start date of interest calculation is the first day of issuance of the convertible bond; 2)Interest payment date: The interest payment date of each year is the day of each full year from the first day of issuance of the convertible bonds issued this time. If that day is a legal holiday or a rest day, it will be postponed to the next trading day. The postponement period does not apply for interest payment. An interest accrual year is defined between every two adjacent interest payment dates; 3)Creditor's interest rights registration date: The annual creditor's rights registration date is the trading day before the annual interest payment date, and the company will pay the current year's interest within five trading days after the annual interest payment date. For application of conversion of convertible bonds into the company's A shares before the creditor's rights registration date (including the creditor's rights registration date), the company will no longer pay its holders the interest of this year and interests of subsequent years; 4)The tax payable on the interest income received by the holder of the convertible bond shall be borne by the holder of the convertible bond。 94 Bengang Steel Plates Co., Ltd. Annual Report 2020 3、Repayment safeguard measures From the end of 2018 to the end of 2020, the company's asset-liability ratio (consolidated basis) was 67.03%, 67.05%, and 66.85%, respectively, and the asset-liability ratio (parent company) was 67.55%, 67.87%, and 67.45%, showing a steady but declining trend; Overall, the company’s debt-to-asset ratio is still within a reasonable range. From the end of 2018 to the end of 2020, the company's current ratio was 1.02, 0.87, and 1.04, and the quick ratio was 0.69, 0.65, and 0.77, respectively. The current ratio and quick ratio are on the rise, and the company's short-term debt solvency has increased. From the end of 2018 to the end of 2020, the company's interest coverage ratio were 1.98, 1.59 and 1.4 respectively, and the interest repayment risk was relatively low. The source of funds for the interest payment and redemption of the convertible bonds mainly includes the income and cash inflows from the normal operations of the company's business. The company will formulate a fund utilization plan based on the interest payment and redemption of convertible bonds, rationally allocate funds, pay interest on schedule, and redeem relevant amounts of convertible bonds. In the past three years and the first quarter, the company has been operating well, with stable financial indicators and good debt solvency. VI. Meetings of bondholders held during the reporting period During the reporting period, the company did not hold bondholder meetings。 Ⅶ. The performance of the bond trustee's duties during the reporting period The company’s convertible corporate bond trustee is Guotai Junan Securities Co., Ltd. During the reporting period, Guotai Junan strictly performed the duties of the trustee in accordance with the agreement, continued to pay attention to the company’s production and operation, financial status and credit status, and urged the company to implement the obligations stipulated in the document of the convertible bond prospectus and have actively performed the duties of bond trustees and effectively safeguarded the legitimate rights and interests of bondholders. The trustee has issued to the Public on May 12, 2020, the 2019 sponsorship report on the continuous supervision of Bengang Steel Plates, the 2019 training report on the continuous supervision of Bengang Steel Plates, the 2019 on- site inspection report on the continuous supervision of Bengang Steel Plates, and Summary Report on Continuous Supervision and Sponsorship of the Non-public Issuance of A Shares of Bengang Steel Plates. VIII. As of the end of the reporting period, the Company's main accounting data and financial indicators for the past 2 years Unit:RMB10 thousand Item 2020 2019 Change EBITDA 299,275.63 334,839.47 -10.62% Current ratio 1.04% 0.87% 0.17% Assets and liabilities ratio 66.85% 67.05% -0.20% Quick ratio 0.77% 0.65% 0.12% EBITDA total liabilities ratio 0.07% 0.08% -0.01% Interest coverage ratio 1.4 1.59 -11.95% 95 Bengang Steel Plates Co., Ltd. Annual Report 2020 Cash interest coverage ratio -0.96 8.37 -111.47% EBITDA interest coverage ratio 7.91 10.03 -21.14% Loan repayment rate 100.00% 100.00% 0.00% Interest repayment rate 100.00% 100.00% 0.00% The main reason why the above accounting data and financial indicators have changed more than 30% year-on- year □ applicable √ Not applicable IX. Interest payment status of other bonds and debt financing instruments during the reporting period During the reporting period, the Company did not make interest payments for other bonds and debt financing instruments. X. The status of bank credits, usage, and repayment of bank loans during the reporting period At the end of the reporting period, the total bank credit of the company was 37.58 billion yuan, 28.35 billion yuan had been used, and the unused credit line was 9.23 billion yuan. The total amount of loans at the beginning of the reporting period was 18.236 billion yuan, the net repayment of loans in the current period was 3.357 billion yuan, and the loan balance at the end of the period was 14.879 billion yuan. XI. Implementation of relevant agreements or commitments in the corporate bond prospectus during the reporting period During the reporting period, the Company strictly implemented the relevant agreements and commitments in the prospectus of convertible corporate bonds, and there was no damage to the interests of bond investors. XII. Significant events occurred during the reporting period None. XIII. Whether there is any guarantor for corporate bonds √ Yes □ No Whether the guarantor of the corporate bonds is a legal person or other organization √ Yes □ No Whether to separately disclose the financial statements of the guarantor during the reporting period within 4 months from the end of each fiscal year, including the balance sheet, income statement, cash flow statement, statement of changes in owner's equity (shareholders' equity) and notes to the financial statements √ Yes □ No 96 Bengang Steel Plates Co., Ltd. Annual Report 2020 XII. Financial Report Opinion of audit report Unqualified audit opinion Date of audit report 26th April 2021 Name of CPA Firm BDO China Shu Lun Pan CPAs LLP PCPAR [2020] No. ZB10714 Audit report number Name of CPA Zhu Jinmei, Li Guiying Auditors’ Report PCPAR [2021] No. ZB10714 To All Shareholders of Bengang Steel Plates Co., Ltd.: Auditor’s Opinion We have audited the accompanying financial statements of Bengang Steel Plates Co., Ltd. (hereinafter referred to as “the Company”) which comprise the consolidated statement of financial position and statement of financial position as at 31 December 2020, the consolidated statement of comprehensive income and statement of comprehensive income, the consolidated statement of changes in equity and statement of changes in equity, the consolidated statement of cash flows and statement of cash flows for the year then ended, and notes to the financial statements. In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position and financial position of the Company as at 31 December 2020, and the consolidated results of operations and results of operations and the consolidated cash flows and cash flows of the Company for the year then ended in accordance with the requirements of Accounting standards for Business Enterprises. Basis for Opinion We conducted our audit in accordance with China Standards on Auditing for Certified Public Accountants. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the China Code of Ethics for Certified Public Accountants, and we have fulfilled our other ethical responsibilities in accordance with China Code of Ethics for Certified Public Accountants. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters 97 Bengang Steel Plates Co., Ltd. Annual Report 2020 The key audit matters are matters that we consider to be the most important for the audit of the current financial statements based on professional judgment. The response to these matters is based on the overall audit of the financial statements and the formation of audit opinions. We do not express a separate opinion on these matters. We have identified the following items as key audit matters that need to be disclosed in the audit report. Key Audit Matters Audit Procedure 1. Provision for Bad Debts Please refer to the Note (10) financial The audit process implemented for instruments under “3. Significant recoverability of Accounts receivable accounting policies and accounting includes mainly: estimates” and Note (2) Accounts 1. Understand, evaluate and test receivable under “5. Notes to consolidated management's aging analysis of financial statements”. receivables and the internal control process related to determine bad debt provision for As at December 31, 2020, the carrying accounts receivable; amount of Accounts receivable is RMB 2. Review the management's consideration 733,850,787.45 and the bad debt is RMB and objective evidence for the impairment 488,633,604.79. test of accounts receivable and pay close attention to whether the management has fully identified the items that have been The management determines the estimated impaired; recoverable amount of accounts receivable based on the assessment of the credit 3. Sample the accounts receivable tested status, financial status and actual for impairment individually, and review on repayment status of relevant customers. the assumption and reasonableness of future cash flows estimation made by the management; Because the management determines the 4. For accounts receivable tested for estimated recoverable amount of accounts impairment by portfolio, evaluate the receivable based on significant accounting reasonableness of the bad debt provision estimation and judgement, and the impact proportion; amount is significant, we determine that the recoverability of accounts receivable is 5. Perform confirmation procedure, and a key audit matter. check the confirmation results with the amount recorded by the management; 6. Check the amount received after the reporting period and evaluate the reasonableness of provision for bad debts made by the management. 2. Impairment of Inventory Please refer to the Note (11)Inventory The procedures carried out for the under “3. Significant accounting policies impairment of inventory include: and accounting estimates” and (6) 1. Evaluated the design and operation of Inventory under “5. Notes to internal control related to the impairment consolidated financial statements”. of inventory; 2. Supervise stock taking and check the As at December 31,2020, the carrying quantity and status of inventory, especially amount of inventory in consolidated the aged inventory; statement is RMB 9,073,623,111.13, 3. Obtain the calculation of the impairment impairment of inventory is RMB of inventory. Check whether it follows the 33,557,768.48, the book value of inventory requirements of related accounting 98 Bengang Steel Plates Co., Ltd. Annual Report 2020 is RMB 9,040,065,342.65. Inventory is standards of the Company, check any measured at the lower of cost and net changes of the accrual of inventory realizable value. The sufficiency of impairment in the current period and impairment for inventory will exert a great analyse the sufficiency of impairment; impact on the financial statement. 4. For products with open market selling price, we inquired the open market price The net realizable value of finished independently and compared with the products held for direct selling in the daily estimated selling price. For products business activity shall be calculated by without open market selling price, we deducting the estimated sale expense and compare the estimated price of the relevant taxes from the estimated sale price products with the latest actual selling price of inventories. or selling price after the reporting period. 5.Evaluate the estimated sales expenses It involves significant judgement when the and related taxes and fees made by the management determines the estimated management and compare with the selling price of the finished products based historical data of similar products and on status. compare with the actual costs occurred after the balance sheet date. As at December 31, 2020, the carrying amount of inventory was significant and involves the estimation of net realizable value. Therefore, we identified it as a key audit matter. Other information The management of the Company is responsible for the other information. The other information comprises information of the Company's annual report for the period of 2020 but excludes the financial statements and our auditor's report. Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit if there appears to be a material misstatement. Based on the work we have performed, if we determine that there is a material misstatement of other information, we should report that fact. In this regard, we have nothing to report. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with requirements of Accounting Standards for Business Enterprises, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management of the Company is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, 99 Bengang Steel Plates Co., Ltd. Annual Report 2020 matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for supervising the Company's financial reporting process. Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with China Standards on Auditing for Certified Public Accountants will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with accordance with Chinese Certified Public Accountants Auditing Standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: (1) Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. (2) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. (3) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. (4) Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on Bengang Steel Plate’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause Bengang Steel Plates to cease to continue as a going concern. (5) Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. (6) Obtain sufficient and appropriate audit evidence regarding the financial information of entities or business activities within Bengang Steel Plates to express an opinion on the financial statements. We are responsible for guiding, supervising and executing the group audit and assume full responsibility for the audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. 100 Bengang Steel Plates Co., Ltd. Annual Report 2020 We also provide a statement to those charged with governance on compliance with the ethical requirements associated with independence and communicate with those charged with governance all relationships and other matters that may reasonably be considered to affect our independence, and related precautions (if applicable). From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. BDO CHINA SHULUN PAN CERTIFIED Certified Public Accountants of China PUBLIC ACCOUNTANTS LLP (Engagement Partner) Certified Public Accountants of China Shanghai, the People’s Republic of China 26 April 2021 This auditor’s report and the accompanying notes to the financial statement are English translation of the Chinese auditors’ report. In case of doubt as to the presentation of these documents, the Chinese version shall prevail. 101 Bengang Steel Plates Co., Ltd. Annual Report 2020 BENGANG STEEL PLATES CO., LTD. CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 December 2020 (Expressed in Renminbi unless otherwise indicated) Assets Notes 5 31 Dec, 2020 31 Dec, 2019 Current assets Cash at bank and on hand (1) 13,126,666,915.26 18,415,844,397.77 Settlement provisions Capital lent Financial assets held for trading Derivative financial assets Notes receivable - Accounts receivable (2) 245,217,182.66 235,696,265.66 Accounts receivable financing (3) 4,189,977,871.92 2,429,542,461.88 Prepayments (4) 2,108,044,777.65 1,291,047,458.11 Premium receivable Reinsurance accounts receivable Receivable deposit for reinsurance contract Other receivables (5) 142,101,351.27 172,807,036.77 Redemptory financial assets for sale Inventories (6) 9,040,065,342.65 7,700,397,685.61 Contract assets Assets held for sale Non-current assets due within one year Other current assets (7) 5,523,646,836.01 312,904,824.09 Total current assets 34,375,720,277.42 30,558,240,129.89 Non-current assets Loan and advances issued Debt Investments Other debt investments Long-term receivables Long-term equity investments (8) 2,742,064.73 2,642,998.70 Other equity instrument investments (9) 1,042,024,829.00 1,041,824,829.00 Other non-current financial assets Investment property Fixed assets (10) 26,284,567,956.44 26,123,375,492.40 Construction in progress (11) 1,839,933,715.58 1,833,853,572.58 Productive biological assets Oil and gas assets Intangible assets (12) 264,932,652.54 271,500,023.34 Development expenditure 102 Bengang Steel Plates Co., Ltd. Annual Report 2020 Assets Notes 5 31 Dec, 2020 31 Dec, 2019 Goodwill Long-term deferred expenses Deferred tax assets (13) 201,708,932.84 191,485,595.49 Other non-current assets (14) 995,840,320.65 708,502,552.50 Total non-current assets 30,631,750,471.78 30,173,185,064.01 Total assets 65,007,470,749.20 60,731,425,193.90 The notes to the financial statements attached form part of these financial statements. Legal Representative: Chief Financial Officer: Chief Accountant: BENGANG STEEL PLATES CO., LTD. CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Continued) As at 31 December 2020 (Expressed in Renminbi unless otherwise indicated) Liabilities and equities Notes 5 31 Dec, 2020 31 Dec, 2019 Current Liabilities Short-term loans (15) 10,067,731,000.00 13,151,478,000.00 Loan from central bank Loan from other banks Financial liability held for trading Derivative financial liabilities Notes payable (16) 9,814,149,348.42 11,828,514,676.95 Accounts payable (17) 5,914,228,256.82 4,527,513,030.27 Advance from customers (18) 4,429,821,526.79 Contract liabilities (19) 4,458,671,819.90 Financial assets sold for repurchase Deposits from customers and interbank Receipt from vicariously traded securities Receipt from vicariously underwriting securities Employee benefits payable (20) 25,749,485.25 23,698,174.56 Current tax liabilities (21) 55,302,080.96 284,825,814.80 Other payables (22) 709,448,301.92 662,701,744.97 Handling charges and commission payable Reinsurance accounts payable Liabilities held for sale Non-current liabilities due within one year (23) 1,308,030,361.43 234,474,657.99 Other current liabilities (24) 579,627,336.58 Total current liabilities 32,932,937,991.28 35,143,027,626.33 Non-current liabilities Provision for insurance contract Long-term loans (25) 3,502,934,427.65 4,849,675,910.73 Bonds payable (26) 5,752,229,339.52 Including: Preferred stock Perpetual bond Long-term payables (27) 1,114,232,362.74 516,939,408.14 Long-term employee benefits payable Estimated liabilities 103 Bengang Steel Plates Co., Ltd. Annual Report 2020 Liabilities and equities Notes 5 31 Dec, 2020 31 Dec, 2019 Deferred income (28) 154,451,833.23 208,955,407.30 Deferred tax liabilities Other non-current liabilities Total non-current liabilities 10,523,847,963.14 5,575,570,726.17 Total liabilities 43,456,785,954.42 40,718,598,352.50 Shareholders' equity: Share capital (29) 3,875,371,532.00 3,875,371,532.00 Other equity instruments (30) 1,146,290,662.42 Including: Preferred stock Perpetual bond Capital reserves (31) 12,343,209,847.29 12,343,209,847.29 Less: treasury shares Other comprehensive income Special reserves (32) 300,412.14 212,687.41 Surplus reserves (33) 961,105,529.85 961,105,529.85 General risk reserve Undistributed profits (34) 2,692,018,405.40 2,307,765,664.62 Total equity attributable to equity holders of the parent company 21,018,296,389.10 19,487,665,261.17 Non-controlling interests 532,388,405.68 525,161,580.23 Total shareholder's equity 21,550,684,794.78 20,012,826,841.40 Total of liabilities and owners’ equity 65,007,470,749.20 60,731,425,193.90 The notes to the financial statements attached form part of these financial statements. Legal Representative: Chief Financial Officer: Chief Accountant: BENGANG STEEL PLATES CO., LTD. STATEMENT OF FINANCIAL POSITION As at 31 December 2020 (Expressed in Renminbi unless otherwise indicated) Assets Notes 14 31 Dec, 2020 31 Dec, 2019 Current assets Cash at bank and on hand 11,808,618,300.87 16,982,227,928.89 Financial assets held for trading Derivative financial assets Notes receivable Accounts receivable (1) 289,865,462.20 388,997,108.46 Accounts receivable financing (2) 4,143,431,412.08 2,193,319,842.60 Prepayments 2,117,204,935.75 1,184,632,345.13 Other receivables (3) 228,180,190.02 266,663,235.81 Inventories 7,420,499,172.20 6,114,582,832.33 Contract assets Assets held for sale Non-current assets due within one year 104 Bengang Steel Plates Co., Ltd. Annual Report 2020 Assets Notes 14 31 Dec, 2020 31 Dec, 2019 Other current assets 5,437,282,088.94 191,249,460.42 Total current assets 31,445,081,562.06 27,321,672,753.64 Non-current assets Debt investments Other debt investments Long-term receivables Long-term equity investments (4) 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 24,755,665,765.30 24,447,763,305.12 Construction in progress 1,798,639,941.58 1,813,889,136.42 Productive biological assets Oil and gas assets Intangible assets 142,163,903.40 145,470,040.68 Development expenditure Goodwill Long-term deferred expenses Deferred tax assets 98,480,706.23 93,555,276.54 Other non-current assets 988,475,426.53 696,351,867.38 Total non-current assets 30,841,332,474.20 30,254,936,357.30 Total assets 62,286,414,036.26 57,576,609,110.94 The notes to the financial statements attached form part of these financial statements. Legal Representative: Chief Financial Officer: Chief Accountant: BENGANG STEEL PLATES CO., LTD. STATEMENT OF FINANCIAL POSITION (Continued) As at 31 December 2020 (Expressed in Renminbi unless otherwise indicated) Liabilities and shareholders' equities Notes 14 31 Dec, 2020 31 Dec, 2019 Current liabilities Short-term loans 9,107,731,000.00 11,851,478,000.00 Financial liability held for trading Derivative financial liabilities Notes payable 8,348,607,405.21 10,225,969,445.22 Accounts payable 6,280,468,684.34 4,909,389,629.86 Prepayments 5,597,707,687.22 Contract liabilities 5,324,357,761.83 105 Bengang Steel Plates Co., Ltd. Annual Report 2020 Liabilities and shareholders' equities Notes 14 31 Dec, 2020 31 Dec, 2019 Employee benefits payable 23,981,010.53 21,872,906.71 Current tax liabilities 42,514,891.31 274,181,048.14 Other payables 368,374,954.61 384,125,032.59 Liabilities held for sale Non-current liabilities due within one year 1,308,030,361.43 234,474,657.99 Other current liabilities 692,166,509.04 Total current liabilities 31,496,232,578.30 33,499,198,407.73 Non-current liabilities Long term loans 3,502,934,427.65 4,849,675,910.73 Bonds payable 5,752,229,339.52 Including: Preferred stock Perpetual bond Long-term payables 1,108,412,163.50 516,939,408.14 Long-term employee benefits payable Estimated liabilities Deferred income 154,451,833.23 208,955,407.30 Deferred tax liabilities Other non-current liabilities Total non-current liabilities 10,518,027,763.90 5,575,570,726.17 Total liabilities 42,014,260,342.20 39,074,769,133.90 Shareholder’s equity: Share capital 3,875,371,532.00 3,875,371,532.00 Other equity instruments 1,146,290,662.42 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 120,972.62 53,330.99 Surplus reserves 961,105,529.85 961,105,529.85 Undistributed Profits 2,366,206,832.00 1,742,251,419.03 Total shareholder's equity 20,272,153,694.06 18,501,839,977.04 Total liabilities and shareholder’s equity 62,286,414,036.26 57,576,609,110.94 The notes to the financial statements attached form part of these financial statements. Legal Representative: Chief Financial Officer: Chief Accountant: BENGANG STEEL PLATES CO., LTD. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2020 (Expressed in Renminbi unless otherwise indicated) Items Notes 5 Current period Previous period 1. Total operating income 48,684,792,685.58 52,741,353,582.28 106 Bengang Steel Plates Co., Ltd. Annual Report 2020 Items Notes 5 Current period Previous period Including: Operating income (35) 48,684,792,685.58 52,741,353,582.28 Interest income Premium earned Income from handling charges and commission 2. Total operating cost 47,900,922,736.61 52,124,252,623.88 Including: Operating cost (35) 46,392,180,562.59 49,211,414,645.62 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 (36) 215,871,820.10 271,580,080.03 Selling and distribution expenses (37) 97,279,280.21 1,096,688,903.70 General and administrative expenses (38) 792,826,294.81 831,945,841.56 Research and development expenses (39) 37,989,623.28 30,780,463.74 Financial expenses (40) 364,775,155.62 681,842,689.23 Including: Interest expense 1,028,857,436.14 948,799,627.90 Interest income 378,523,984.03 333,750,262.79 Add: Other income (41) 81,305,181.92 83,916,607.12 Income on investment(“-” for loss) (42) 13,951,362.33 1,058,377.90 Including: Income from associates and joint ventures 374,119.86 452,582.71 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) (43) -304,019,761.75 -6,541,900.62 Asset impairment loss (“-” for loss) (44) -67,185,869.37 -43,256,982.72 Assets disposal gains(“-” for loss) (45) 325,651.61 3,441,646.67 3. Operational profit(“-” for loss) 508,246,513.71 655,718,706.75 Add: Non-operating income (46) 4,328,563.52 10,306,462.87 Less: Non-operating expenses (47) 95,724,280.44 90,209,742.22 4. Total profit (“-” for loss) 416,850,796.79 575,815,427.40 Less: Income tax expenses (48) 25,371,230.56 18,954,938.42 5. Net profit(“-” for loss) 391,479,566.23 556,860,488.98 1.Classification by continuing operating 1.Net profit from continuing operation(“-” for loss) 391,479,566.23 556,860,488.98 2.Net profit from discontinued operation(“-” for loss) 2.Classification by ownership 1. Net profit attributable to the owners of parent company (“-” for loss) 384,252,740.78 555,646,971.40 2. Net profit attributable to non-controlling shareholders (“-” for loss) 7,226,825.45 1,213,517.58 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 which can be reclassified into profit or loss 2) Changes in fair value of other debt investments 3) Amount of financial assets reclassified into other comprehensive income 107 Bengang Steel Plates Co., Ltd. Annual Report 2020 Items Notes 5 Current period Previous period 4) Credit impairment provision of other debt investments 5) Cash flow hedges reserve 6) Translation differences in foreign currency financial statements 7) Others Other comprehensive income attributable to non-controlling shareholders’ equity after tax 7. Total comprehensive income 391,479,566.23 556,860,488.98 Total comprehensive income attributable to the owner of the parent company 384,252,740.78 555,646,971.40 Total comprehensive income attributable to non-controlling shareholders 7,226,825.45 1,213,517.58 8. Earnings per share 1)Basic earnings per share 0.099 0.143 2)Diluted earnings per share 0.099 0.143 The notes to the financial statements attached form part of these financial statements. Legal Representative: Chief Financial Officer: Chief Accountant: BENGANG STEEL PLATES CO., LTD. STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2020 (Expressed in Renminbi unless otherwise indicated) Items Notes 14 Current period Previous period 1. Total operating income (5) 48,811,106,474.73 52,605,113,207.02 Less: Operating cost (5) 46,742,700,421.70 49,734,189,460.60 Tax and surcharges 182,486,280.99 219,994,347.76 Selling and distribution expenses 86,927,530.44 640,211,381.70 General and administrative expenses 738,689,535.43 775,147,352.42 Research and development expenses 37,989,623.28 30,780,463.74 Financial expenses 339,059,288.37 654,332,095.34 Including: Interest expense 973,520,152.09 889,827,373.77 Interest income 348,394,576.76 302,622,279.00 Add: Other income 80,671,964.84 83,594,522.47 Income on investment(“-” for loss) (6) 13,577,242.47 27,594,915.42 Including: Income from associates and joint ventures Income from derecognition of financial assets measured at amortized cost Net exposure hedge income(“-” for loss) Gains from change of fair value (“-” for loss) Credit impairment loss(“-” for loss) 1,333,341.31 -4,408,068.83 Assets impairment loss(“-” for loss) -67,185,869.37 -43,256,982.72 Assets disposal gains(“-” for loss) 325,651.61 3,488,648.92 2. Operational profit(“-” for loss) 711,976,125.38 617,471,140.72 Add: Non-operating income 3,588,687.69 10,128,386.99 Less: Non-operating expenses 95,171,437.11 90,098,761.28 3. Total profit (“-” for loss) 620,393,375.96 537,500,766.43 Less: Income tax expenses -3,562,037.01 2,664,726.46 4. Net profit(“-” for loss) 623,955,412.97 534,836,039.97 1.Net profit from continuing operation (“-” for loss) 623,955,412.97 534,836,039.97 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 108 Bengang Steel Plates Co., Ltd. Annual Report 2020 Items Notes 14 Current period Previous period 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) Amount of financial assets reclassified into other comprehensive income 4) Credit impairment provision of other debt investments 5) Cash flow hedges reserve 6) Translation differences in foreign currency financial statements 7) Others 6. Total comprehensive income 623,955,412.97 534,836,039.97 7. Earnings per share 1)Basic earnings per share 2)Diluted earnings per share The notes to the financial statements attached form part of these financial statements. Legal Representative: Chief Financial Officer: Chief Accountant: BENGANG STEEL PLATES CO., LTD. CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31 December 2020 (Expressed in Renminbi unless otherwise indicated) Items Notes 5 Current period Previous period 1.Cash flow from operating activities Cash received from sale of goods or rendering of services 38,849,024,657.06 47,399,776,780.22 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 Net increase of loans from borrowing funds Net increase of fund for repurchase business Net cash received from traded securities Tax rebate received 396,399,799.91 364,095,520.25 Other cash received relating to operating activities (48) 816,954,704.43 377,085,656.22 Subtotal of cash inflows from operating activities 40,062,379,161.40 48,140,957,956.69 Cash paid for goods and services 38,688,312,946.57 37,675,995,353.53 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 1,973,351,870.94 2,109,471,410.71 109 Bengang Steel Plates Co., Ltd. Annual Report 2020 Items Notes 5 Current period Previous period Cash paid for all types of taxes 952,434,837.20 1,054,705,726.35 Other cash paid relating to operating activities (48) 487,279,719.98 322,961,424.94 Subtotal of cash outflows from operating activities 42,101,379,374.69 41,163,133,915.53 Net cash flows from operating activities -2,039,000,213.29 6,977,824,041.16 2. Cash flows from investing activities Cash received from disposal of investments 52,773,000.00 Cash received from return on investments 13,852,296.30 871,060.75 Net cash received from disposal of fixed assets, intangible assets and other long- 185,442.47 340,766.32 term assets Net cash received from disposal of subsidiary and other operating units Other cash paid relating to investing activities Subtotal of cash inflows from investing activities 14,037,738.77 53,984,827.07 Cash paid for acquisition of fixed assets, intangible assets and other long-term assets 1,013,928,829.62 4,546,086,687.86 Cash paid for acquisition of investments 5,200,000,000.00 52,773,000.00 Net increase of mortgage loan Net cash received from subsidiary and other operating unit Other cash paid relating to investing activities Subtotal of cash outflows from investing activities 6,213,928,829.62 4,598,859,687.86 Net cash flows from investing activities -6,199,891,090.85 -4,544,874,860.79 3. Cash flows from financing activities Proceeds from investment Including: Proceeds from investment of non-controlling shareholders of subsidiary Proceeds from borrowings 21,667,514,000.00 15,913,409,000.00 Other proceeds relating to financing activities (48) 1,329,876,314.56 1,571,269,971.97 Subtotal of cash inflows from financing activities 22,997,390,314.56 17,484,678,971.97 Cash repayments of borrowings 18,115,736,896.61 17,121,821,388.69 Cash payments for distribution of dividends, profit or interest expenses 749,821,254.37 1,172,008,803.59 Including: Cash paid to non-controlling shareholders as dividend and profit by 9,198,305.14 subsidiaries Other cash payments relating to financing activities (48) 75,509,135.49 10,343,406.67 Subtotal of cash outflows from financing activities 18,941,067,286.47 18,304,173,598.95 Net cash flows from financing activities 4,056,323,028.09 -819,494,626.98 4. Effect of foreign exchange rate changes on cash and cash equivalents -29,429,117.41 75,411,813.22 5. Net increase in cash and cash equivalents -4,211,997,393.46 1,688,866,366.61 Add: Cash and cash equivalents at the beginning of the period 13,441,414,988.58 11,752,548,621.97 6. Cash and cash equivalents at the ending of the period 9,229,417,595.12 13,441,414,988.58 The notes to the financial statements attached form part of these financial statements. Legal Representative: Chief Financial Officer: Chief Accountant: BENGANG STEEL PLATES CO., LTD. STATEMENT OF CASH FLOWS For the year ended 31 December 2020 (Expressed in Renminbi unless otherwise indicated) Items Notes 14 Current period Previous period 1. Cash flow from operating activities Cash received from sale of goods or rendering of services 43,332,373,821.90 45,925,314,655.54 Tax rebate received 324,045,932.64 318,311,209.48 Other cash received relating to operating activities 786,085,304.22 289,883,909.31 Subtotal of cash inflows from operating activities 44,442,505,058.76 46,533,509,774.33 110 Bengang Steel Plates Co., Ltd. Annual Report 2020 Items Notes 14 Current period Previous period Cash paid for goods and services 43,585,984,954.05 35,992,848,593.70 Cash paid to and on behalf of employees 1,870,605,772.33 1,975,902,597.93 Cash paid for all types of taxes 824,396,654.24 897,467,468.84 Other cash paid relating to operating activities 476,274,984.82 231,467,233.26 Subtotal of cash outflows from operating activities 46,757,262,365.44 39,097,685,893.73 Net cash flows from operating activities -2,314,757,306.68 7,435,823,880.60 2. Cash flows from investing activities Cash received from disposal of investments Cash received from return on investments 13,577,242.47 27,594,915.42 Net cash received from disposal of fixed assets, intangible 1,637.16 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 13,578,879.63 27,594,915.42 Cash paid for acquisition of fixed assets, intangible assets and 1,013,911,078.29 4,500,165,073.02 other long-term assets Cash paid for acquisition of investments 5,200,000,000.00 Net cash paid for acquisition of subsidiary and other operating unit Other cash paid relating to investing activities Subtotal of cash outflows paid for investing activities 6,213,911,078.29 4,500,165,073.02 Net cash flows from investing activities -6,200,332,198.66 -4,472,570,157.60 3. Cash flows from financing activities Proceeds from investment Cash received from borrowings 20,607,514,000.00 14,603,409,000.00 Other cash received relating to financing activities 1,294,921,225.43 1,484,945,138.77 Subtotal of cash inflows from financing activities 21,902,435,225.43 16,088,354,138.77 Cash repayments of borrowings 16,715,736,896.61 15,794,901,388.69 Cash payments for distribution of dividends, profit or interest 701,262,726.60 1,101,521,395.66 Other cash payments relating to financing activities 72,689,078.37 8,731,273.67 Subtotal of cash outflows from financing activities 17,489,688,701.58 16,905,154,058.02 Net cash flows from financing activities 4,412,746,523.85 -816,799,919.25 4. Effect of foreign exchange rate changes on cash and cash -29,414,313.38 75,337,651.52 equivalents 5. Net increase in cash and cash equivalents -4,131,757,294.87 2,221,791,455.27 Add: Cash and cash equivalents at the beginning of the period 13,029,616,298.47 10,807,824,843.20 6. Ending balance of cash and cash equivalents 8,897,859,003.60 13,029,616,298.47 The notes to the financial statements attached form part of these financial statements. Legal Representative: Chief Financial Officer: Chief Accountant: 111 Bengang Steel Plates Co., Ltd. Annual Report 2020 BENGANG STEEL PLATES CO., LTD. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2020 (Expressed in Renminbi unless otherwise indicated) Current period Owner's equity attributable to parent company Items Other equity instruments Non-controlling Total of owner's Less: Other General Undistributed interest equity Share capital Preference Perpetual Capital reserves Treasury comprehensive Special reserves Surplus reserves risk Subtotal Others profit 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) 1,146,290,662.42 87,724.73 384,252,740.78 1,530,631,127.93 7,226,825.45 1,537,857,953.38 1) Total comprehensive income 384,252,740.78 384,252,740.78 7,226,825.45 391,479,566.23 2) Capital increase and decrease by 1,146,290,662.42 1,146,290,662.42 1,146,290,662.42 shareholders (1) Common share invested by shareholders (2) Capital input by the holder of other equity 1,146,290,662.42 1,146,290,662.42 1,146,290,662.42 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 112 Bengang Steel Plates Co., Ltd. Annual Report 2020 Current period Owner's equity attributable to parent company Items Other equity instruments Non-controlling Total of owner's Less: Other General Undistributed interest equity Share capital Preference Perpetual Capital reserves Treasury comprehensive Special reserves Surplus reserves risk Subtotal Others profit shares bond shares income reserve 5) Special reserves 87,724.73 87,724.73 87,724.73 (1) Provision of special reserves 54,000,536.58 54,000,536.58 54,000,536.58 (2) Use of special reserves 53,912,811.85 53,912,811.85 53,912,811.85 6) Others 4. Ending balance of current year 3,875,371,532.00 1,146,290,662.42 12,343,209,847.29 300,412.14 961,105,529.85 2,692,018,405.40 21,018,296,389.10 532,388,405.68 21,550,684,794.78 The notes to the financial statements attached form part of these financial statements Legal Representative: Chief Financial Officer: Chief Accountant: BENGANG STEEL PLATES CO., LTD. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Continued) For the year ended 31 December 2020 (Expressed in Renminbi unless otherwise indicated) Previous period Owner's equity attributable to parent company Items Other equity instruments Non-controlling Total of owner's Less: Other General Undistributed interest equity Share capital Preference Perpetual Capital reserves Treasury comprehensive Special reserves Surplus reserves risk Subtotal Others profit shares bond shares income reserve 1. Ending balance of last year 3,875,371,532.00 12,343,209,847.29 683,937.71 961,105,529.85 1,945,887,269.82 19,126,258,116.67 533,146,339.49 19,659,404,456.16 Add: Change of accounting policies Correction of errors for last period Business consolidation under common control Others 2. Beginning balance of current year 3,875,371,532.00 12,343,209,847.29 683,937.71 961,105,529.85 1,945,887,269.82 19,126,258,116.67 533,146,339.49 19,659,404,456.16 3. Changes in current year (“-” for decrease) -471,250.30 361,878,394.80 361,407,144.50 -7,984,759.26 353,422,385.24 1) Total comprehensive income 555,646,971.40 555,646,971.40 1,213,517.58 556,860,488.98 2) Capital increase and decrease by shareholders (1) Common share invested by shareholders (2) Capital input by the holder of other equity instruments (3) Share-based payment attributable to owners' equity 113 Bengang Steel Plates Co., Ltd. Annual Report 2020 Previous period Owner's equity attributable to parent company Items Other equity instruments Non-controlling Total of owner's Less: Other General Undistributed interest equity Share capital Preference Perpetual Capital reserves Treasury comprehensive Special reserves Surplus reserves risk Subtotal Others profit shares bond shares income reserve (4) Others 3) Profit distribution -193,768,576.60 -193,768,576.60 -9,198,305.14 -202,966,881.74 (1) Appropriation to surplus reserves (2) Appropriation to general risk reserve (3) Profit distribution to shareholders -193,768,576.60 -193,768,576.60 -9,198,305.14 -202,966,881.74 (4) Others 4) Transfers within shareholders' equity (1) Capital reserves transferred into paid-in capital (or stock) (2) Surplus reserves transferred into paid-in capital (or stock) (3) Surplus reserves to recover loss (4) Net changes of defined contribution plans transferred into Retained Earnings (5) Other comprehensive income transferred into Retained Earnings (6) Others 5) Special reserves -471,250.30 -471,250.30 28.30 -471,222.00 (1) Provision of special reserves 47,843,133.40 47,843,133.40 28.30 47,843,161.70 (2) Use of special reserves 48,314,383.70 48,314,383.70 48,314,383.70 6) Others 4. Ending balance of current year 3,875,371,532.00 12,343,209,847.29 212,687.41 961,105,529.85 2,307,765,664.62 19,487,665,261.17 525,161,580.23 20,012,826,841.40 The notes to the financial statements attached form part of these financial statements Legal Representative: Chief Financial Officer: Chief Accountant: 114 Bengang Steel Plates Co., Ltd. Annual Report 2020 BENGANG STEEL PLATES CO., LTD. STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2020 (Expressed in Renminbi unless otherwise indicated) Current period Other equity instruments Less: Other Items Special Undistributed Total shareholder’s Share capital Preference Perpetual Capital reserves Treasury comprehensi Surplus reserves Others reserves profits equity shares bond shares ve income 1. Ending balance of last year 3,875,371,532.00 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) 1,146,290,662.42 67,641.63 623,955,412.97 1,770,313,717.02 1) Total comprehensive income 623,955,412.97 623,955,412.97 2) Capital increase and decrease by shareholders 1,146,290,662.42 1,146,290,662.42 (1) Common share invested by shareholders (2) Capital input by the holder of other equity instruments 1,146,290,662.42 1,146,290,662.42 (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 67,641.63 67,641.63 (1) Provision of special reserves 47,926,472.22 47,926,472.22 (2) Use of special reserves 47,858,830.59 47,858,830.59 115 Bengang Steel Plates Co., Ltd. Annual Report 2020 Current period Other equity instruments Less: Other Items Special Undistributed Total shareholder’s Share capital Preference Perpetual Capital reserves Treasury comprehensi Surplus reserves Others reserves profits equity shares bond shares ve income 6) Others 4. Ending balance of current year 3,875,371,532.00 1,146,290,662.42 11,923,058,165.17 120,972.62 961,105,529.85 2,366,206,832.00 20,272,153,694.06 The notes to the financial statements attached form part of these financial statements Legal Representative: Chief Financial Officer: Chief Accountant: BENGANG STEEL PLATES CO., LTD. STATEMENT OF CHANGES IN EQUITY (Continued) For the year ended 31 December 2020 (Expressed in Renminbi unless otherwise indicated) Previous period Other equity instruments Less: Other Items Special Undistributed Total shareholder’s Share capital Preference Perpetual Capital reserves Treasury comprehensi Surplus reserves Others reserves profits equity shares bond shares ve income 1. Ending balance of last year 3,875,371,532.00 11,923,058,165.17 525,218.48 961,105,529.85 1,401,183,955.66 18,161,244,401.16 Add: Change of accounting policies Correction of errors for last period Others 2. Beginning balance of current year 3,875,371,532.00 11,923,058,165.17 525,218.48 961,105,529.85 1,401,183,955.66 18,161,244,401.16 3. Changes in current year (“-” for decrease) -471,887.49 341,067,463.37 340,595,575.88 1) Total comprehensive income 534,836,039.97 534,836,039.97 2) Capital increase and decrease by shareholders (1) Common share invested by shareholders (2) Capital input by the holder of other equity instruments (3) Share-based payment attributable to shareholders' equity (4) Others 3) Profit distribution -193,768,576.60 -193,768,576.60 (1) Appropriation of surplus reserves (2) Profit distribution to shareholders -193,768,576.60 -193,768,576.60 (3) Others 116 Bengang Steel Plates Co., Ltd. Annual Report 2020 Previous period Other equity instruments Less: Other Items Special Undistributed Total shareholder’s Share capital Preference Perpetual Capital reserves Treasury comprehensi Surplus reserves Others reserves profits equity shares bond shares ve income 4) Transfers within shareholders' equity (1) Capital reserves transferred into paid-in capital (or stock) (2) Surplus reserves transferred into paid-in capital (or stock) (3) Surplus reserves to recover loss (4) Net changes of defined contribution plans transferred into Retained Earnings (5) Other comprehensive income transferred into retained earnings (6) Others 5) Special reserves -471,887.49 -471,887.49 (1) Provision of special reserves 45,445,975.41 45,445,975.41 (2) Use of special reserves 45,917,862.90 45,917,862.90 6) Others 4. Ending balance of current year 3,875,371,532.00 11,923,058,165.17 53,330.99 961,105,529.85 1,742,251,419.03 18,501,839,977.04 The notes to the financial statements attached form part of these financial statements Legal Representative: Chief Financial Officer: Chief Accountant: 117 Bengang Steel Plates Co., Ltd. Annual Report 2020 Bengang Steel Plates Co., Ltd. Notes to the financial statements For the year ended 31 December 2020 (Expressed in Renminbi unless otherwise indicated) 1. Basic Information of the Company (1) Company profile Bengang Steel Plates Co., Ltd. (hereinafter referred to as “Bengang Steel Plates” or “the Company”), as approved in Liao-Zheng (1997) No. 57 by Liaoning People’s Government on 27 March 1997, was incorporated as a joint stock limited company through public share offer of domestic listed foreign currency denominated shares (B shares) in the People’s Republic of China (the “PRC”) on 27 June 1997 by Benxi Steel and Iron (Group) Co., Ltd. (“Bengang Group”), through reorganization of operations, assets and liabilities of its plants, namely, Steel Smelting Plant, Primary Rolling Plant and Continuous Hot Rolling Plant. As approved by China Securities Regulatory Commission (hereinafter referred to as “the CSRC”), the Company issued 400,000,000 B-shares at HKD 2.38 each in Shenzhen Stock Exchange on 10 June 1997. On 3 November 1997, the Company issued another 120,000,000 A-shares (Renminbi common Shares) at RMB 5.40 each, and listed in Shenzhen Stock Exchange since 15 January 1998. The capital shares were totaled to 1,136,000,000 shares. On 14 March 2006, according to the resolutions of the Shareholders’ Meeting regarding share equity relocation, the Share Equity Relocation Scheme, Response to Bengang Steel Plate Co., Ltd. about Share Equity Relocation issued by Liaoning Provincial Government State-owned Asset Administrative Committee, Bengang Group – the only holder of non-negotiable state-owned legal person shares paid the consideration to the current shareholders to obtain the current option for the 40,800,000 shares of the total 616,000,000 shares it was holding. Shareholding positions have been registered with China Securities Depository & Clearing Corporation Ltd. Shenzhen Office. However, the total amount of capital shares of Bengang Steel Plates Co., Ltd. was not changed through the share equity relocation action. According to the approval document “Zheng-Jian-Gong-Si-Zi [2006] No. 126” by China Securities Regulatory Commission on 30 June 2006, the Company was approved to place 2 billion Renminbi common shares particularly to Bengang Group and the proceeds would be used to purchase the related assets of the Group. On the same day, Bengang Group received circular Zheng-Jian-Gong-Si-Zi [2006] No. 127 issued by China Securities Regulatory Committee, and were exempted for the liability of undertaking the purchase offer. The liability was caused by subscribing of the 2 billion new shares and the total shareholding was thus increased to 2.5752 billion shares (accounting for 82.12% of the total capital shares of the Company). On 28 August 2006, as approved by China Securities Depository & Clearing Corporation Ltd. Shenzhen Office, the registration and conditional placing procedures of the 2 billion new shares were completed. On 28 September 2006, the privately placed shares were approved by Shenzhen Stock Exchange to be placed in the stock market. The placing price was RMB4.6733 per share. 118 Bengang Steel Plates Co., Ltd. Annual Report 2020 Approved by the China Securities Regulatory Commission [2017] No. 1476, Bengang Steel Plate Co., Ltd. privately placed no more than 739,371,534 RMB ordinary shares (A shares) to no more than 10 issuers. The non-public offering was completed on 9 February 2018, and 739,371,532 shares were actually issued. The placing price was RMB5.41 per share. As at 31 December 2020, the capital shares were totaled to 3,875,371,532 shares. The Company’s uniform social credit code: 91210000242690243E. The Company’s registered address: 16th Renmin Road, Pingshan District, Benxi, Liaoning Province. The Company’s legal representative: Gao Lie. The parent company of Bengang Steel Plates Co., Ltd is Benxi Steel and Iron (Group) Co., Ltd. and the actual controller is the State-owned Assets Supervision and Administration Commission of the State Council of Liaoning province. Bengang Steel Plates Co., Ltd. belongs to ferrous metal smelting and rolling processing industry and is mainly involved in producing and trading of ferrous metal products. The financial statements have been approved for reporting by the board of directors of the Company on 26 April 2021. (2) Consolidation scope As at 31 December 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. 119 Bengang Steel Plates Co., Ltd. Annual Report 2020 Bengang Baojin (Shenyang) Automobile New Material Technology Co., Ltd. The scope of the consolidated financial statements in this period has not changed compared with the previous period. 2. Basis of preparation (1) Basis of preparation The financial statements have been prepared on the going concern basis of actual trading and events in accordance with “Accounting Standards for Business Enterprises – Basic Standard” and relevant specific standards, application materials, interpretations (together hereinafter referred to as “Accounting Standards for Business Enterprises”) issued by the Ministry of Finance, and “Information Disclosure Rules for Companies of securities for public issuance No. 15 – General Regulations for Financial Statements” issued by the China Securities Regulatory Commission. (2) Going concern The Company is operating normally and in a good condition, and thus has the capability to continue to operate in the next twelve months from the end of reporting period. 3. Significant accounting policies and accounting estimates Notes for specific accounting policies and accounting estimates: The following disclosed content covers the specific accounting policies and accounting estimates that are adopted by the Company based on the actual production and operation characteristics. Please see Note (10) Financial instruments, (11) Inventory, (15) Fixed assets, (18) Intangible assets, (24) 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 120 Bengang Steel Plates Co., Ltd. Annual Report 2020 Business combination under common control The assets and liabilities that the Company acquired in a business combination shall be measured on the basis of their carrying amount of aquiree’s assets, liabilities (as well as the goodwill arising from the business combination) in the consolidated financial statement of the ultimate controller on the combining date. As for the balance between the carrying amount of the net assets obtained by the Company and the carrying amount of the consideration paid by it (or the total par value of the shares issued), capital reserve needs to be adjusted. If the capital reserve is not sufficient, any excess shall be adjusted against retained earnings. Business combination not under common control The Company shall, on the acquisition date, measure the assets given and liabilities incurred or assumed by an enterprise for a business combination in light of their fair values, and shall record the balances between them and their carrying amounts into the profits and losses at the current period. The Company shall recognize the positive balance between the combination costs and the fair value of the identifiable net assets it obtains from the acquiree as goodwill. The Company shall treat the negative balance between the combination costs and the fair value of the identifiable net assets it obtains from the acquiree into the profits and losses of the current period. The intermediary costs and relevant fees for the business combination paid by the acquirer, including the expenses for audit, assessment and legal services, shall be recorded into the profits and losses at the current period. The transaction expenses for the issuance of equity securities for the business combination shall be recorded into the initial recognition amount of equity securities. (6) Consolidation of Financial Statements 1. Scope of consolidation The scope of consolidation of consolidated financial statements is determined based on control. All the subsidies (including separable sections of the investees controlled by the Company) have been consolidated into the scope of consolidation for this period ended. 2. Procedure of consolidation The consolidated financial statements shall be presented by the parent based on the financial statements of the parent and its subsidiaries, and using other related information. When preparing consolidated financial statements, the parent shall consider the entire group as an accounting entity, adopt uniform accounting policies and apply the requirements of Accounting Standard for Business Enterprises related to recognition, measurement and presentation. The consolidated financial statements shall reflect the overall financial position, operating results and cash flows of the group. The accounting policy and accounting period of the subsidiaries within the consolidation scope shall be in accordance with those of the Company. If not, it is necessary to make the adjustment according to the Company’s accounting policies and accounting period when preparing the consolidated financial statements. For subsidiaries through acquisition that are now under 121 Bengang Steel Plates Co., Ltd. Annual Report 2020 common control, the financial statements are adjusted according to fair value of identifiable net assets on the acquisition date. For subsidiaries through acquisition that are under common control, the assets, liabilities (as well as the goodwill arising from purchasing the subsidiary by the ultimate controller) are adjusted according to book value of net assets in the financial statements of the ultimate controller. The owners’ interests, profit or loss, and comprehensive income of the subsidiary attributable to the non-controlling shareholders shall be presented separately in the shareholders’ equity of the consolidated balance sheet and under the item of net profit of the consolidated statement of comprehensive income and under the item of total comprehensive income. Where losses assumed by the minority exceed the minority’s interests in the beginning equity of a subsidiary, the excess shall be charged against the minority’s interests. (1) Increasing new subsidiaries and businesses If the Company has a new subsidiary due to business combination under common control during the reporting period, it shall adjust the beginning balance in the consolidated statement of financial position when preparing consolidated statement of financial position. The revenue, expenses and profits of the subsidiaries from the acquisition date to the end of the reporting period are included in the Company’s consolidated statement of comprehensive income. The cash flow of the subsidiaries from the acquisition date to the end of the reporting period is included in the Company’s consolidated statement of cash flows. And meanwhile the Company shall adjust the relevant items of the comparative financial statements as if the reporting entity for the purpose of consolidation has been in existence since the date the ultimate controlling party first obtained control. When the Company becomes capable of exercising control over an investee under common control due to additional investment or other reasons, adjustment shall be made as if the reporting entity after the combination has been in existence since the date the ultimate controlling party first obtained control. The investment income recognized between date of previously obtaining equity investment and the date the acquiree and acquirer are under common control, which is later, and the combining date, other comprehensive income and other changes of net assets arising from the equity investment previously-held before obtaining the control the acquiree shall be adjusted against the prior retained earnings of the comparative financial statements and the current profit or loss respectively. If it is now under common control, the Company shall not adjust the beginning balance in the consolidated statement of financial position when preparing consolidated statement of financial position. The revenue, expenses and profits of the subsidiaries from the acquisition 122 Bengang Steel Plates Co., Ltd. Annual Report 2020 date to the end of the reporting period are included in the parent company’s consolidated statement of comprehensive income. The cash flow of the subsidiaries from the acquisition date to the end of the reporting period is included in the Company’s consolidated statement of cash flows. When the Company becomes capable of exercising control over an investee now under common control due to additional investment or other reasons, the acquirer shall remeasure its previously held equity interest in the acquiree to its fair value at the acquisition date. The difference between the fair value and the carrying amount shall be recognized as investment income for the period when the acquisition takes place. When the previously-held equity investment is accounted for under the equity method, any other comprehensive income previously recognized in relation to the acquiree’s equity changes shall be transferred to profit or loss for the current period when the acquisition takes place. Other comprehensive income arising from remeasurement of defined benefit plan is excluded. (2) Disposing subsidiaries or businesses 1. General treatment If the Company disposes a subsidiary during the reporting period, the revenue, expenses and profits of the subsidiary from the beginning of the reporting period to disposal date are included in the Company’s consolidated statement of comprehensive income. The cash flow of the subsidiaries from the beginning of the reporting period to disposal date is included in the Company’s consolidated statement of cash flows. When the Company loses control over an investee due to partial disposal or other reasons, the acquirer shall re-measure the remaining equity interests in the acquiree to its fair value at the acquisition date. The difference, between sums of consideration received for disposal equity shares and fair value of the remaining shares, and sums of share of net assets of the subsidiary calculated continuously from the acquisition date or the combination date based on the previous shareholding proportion and goodwill, shall be recognized as investment income for the period when the Company loses control over acquiree. When the previously-held equity investment is accounted for under the equity method, any other comprehensive income previously recognized in relation to the acquiree’s equity changes, and other equity changes rather than changes from net profit, other comprehensive income and profit distribution, shall be transferred to investment income for the current period when the Company loses control over acquiree. Other comprehensive income arising from re-measurement of defined benefit plan is excluded. When the Company loses control over a subsidiary due to the increase of capital from other investors and thus the shareholding ratio of the Company declines, accounting treatment shall be in accordance with the above-mentioned principles. 123 Bengang Steel Plates Co., Ltd. Annual Report 2020 2. Disposing subsidiaries by multiple transactions Where the Company loses control of a subsidiary in multiple transactions in which it disposes of its subsidiary in stages, in determining whether to account for the multiple transactions as a single transaction, the Company shall consider all of the terms and conditions of the transactions and their economic effects. One or more of the following may indicate that the Company shall account for the multiple arrangements as a single transaction: (a) Arrangements are entered into at the same time or in contemplation of each other; (b) Arrangements work together to achieve an overall commercial effect; (c) The occurrence of one arrangement is dependent on the occurrence of at least one other arrangement; and (d) One arrangement considered on its own is not economically justified, but it is economically justified when considered together with other arrangements. If each of the multiple transactions forms part of a bundled transaction which eventually results in loss of control of the subsidiary, these multiple transactions shall be accounted for as a single transaction. In the consolidated financial statements, the difference between the consideration received and the corresponding proportion of the subsidiary’s net assets in each transaction prior to the loss of control shall be recognized in other comprehensive income and transferred to the profit or loss when the Company eventually loses control of the subsidiary. If each of the multiple transactions which eventually results in loss of control of the subsidiary do not form part of a bundled transaction, apply the treatment of disposing partial long-term equity investments in a subsidiary without loss of control prior to the loss of control. After the loss of control, apply the treatment of disposing the subsidiary in common cases. (3) Acquiring the subsidiaries’ equity interest held by non-controlling shareholders Where the Company has acquired a subsidiary’s equity interest held by non-controlling shareholders, the difference between the increase in the cost of long-term investments as a result of acquisition of non-controlling interests and the share of net assets of the subsidiary calculated continuously from the acquisition date or the combination date based on the new shareholding proportion shall be adjusted to the capital reserve( capital premium or share premium) in the consolidated financial statements. If the balance of the capital reserve is not sufficient, any excess shall be adjusted against retained earnings. (4) Disposing portion of equity investments in subsidiaries without losing control When the Company disposes of a portion of the long-term equity investments in a subsidiary without loss of control, the difference between the amount of the consideration received and the corresponding portion of the nest assets of the subsidiary calculated continuously from the acquisition date or the combination date related to the disposal of the long-term equity investments shall be adjusted to the capital reserve (capital 124 Bengang Steel Plates Co., Ltd. Annual Report 2020 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. (8) Recognition of cash and cash equivalents The term “cash” refers to the cash on hand and the unrestricted deposit. And the term “cash equivalents” refers to short-term (maturing within three months from acquisition) and highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. (9) Foreign currency transaction and translation of foreign currency financial statements 1. Foreign currency transaction Foreign currency transactions are translated into RMB at the current rate at the day of transactions. The foreign currency monetary items shall be translated at the spot exchange rate on the balance sheet date. The balance of exchange arising from the difference between the spot exchange rate on the balance sheet date and the spot exchange rate at the time of initial recognition or prior to the balance sheet date, except those arising from the raising of special foreign debt for the purchase or construction of capitalizable assets thus shall be capitalized according to the borrowing costs capitalization principle, shall be recorded into the profits and losses at the current period. 2. Translation of foreign currency financial statements The asset and liability items in the statement of financial position shall be translated at a spot exchange rate on the balance sheet date. Among the owner's equity items, except the ones as "undistributed profits", others shall be translated at the spot exchange rate at the time when they are incurred. The income and expense items in the income statement shall be translated using an exchange rate that is determined in a systematic and reasonable manner and approximates the spot exchange rate on the transaction date. 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. 125 Bengang Steel Plates Co., Ltd. Annual Report 2020 (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 and financial assets measured at fair value through profit or loss at initial measurement. A financial asset shall be measured at amortised cost if both of the following conditions are met. The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. A financial asset shall be measured at fair value through other comprehensive income if both of the following conditions are met. The financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Company may make an election at initial recognition for non-trading equity instrument investments whether it is designated as a financial asset (equity instrument) that is measured at fair value through other comprehensive income. The designation is made on the basis of a single investment, and the related investment meets the definition of an equity instrument from the issuer's perspective. Other financial assets other than these are classified as financial assets measured at fair value through profit or loss. At the initial recognition, in order to eliminate or significantly reduce accounting mismatches, financial assets that should be classified as measured at amortized value or financial assets measured at fair value through other comprehensive income can be designated as financial assets measured at fair value through profit or loss. The Company shall classify financial liabilities as financial liabilities measured at amortised 126 Bengang Steel Plates Co., Ltd. Annual Report 2020 cost and financial liabilities measured at fair value through profit or loss at initial measurement. In the initial recognition, in order to eliminate or significantly reduce accounting mismatches, financial assets can be designated as financial assets measured at fair value and their changes included in the current profit and loss. According to the above conditions, the Company does not have such designated financial assets. The Company may, at initial recognition, designate a financial liability as measured at fair value through profit or loss because either: (a) it eliminates or significantly reduces an accounting mismatch; (b) a group of financial liabilities or financial assets and financial liabilities is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and information about the group is provided internally on that basis to the entity’s key management personnel; (c) the financial liability contains embedded derivatives that need to be separated. 2. Recognition and measurement of financial instruments (1) Financial assets measured at amortised cost Financial assets measured at amortized cost include notes receivables, accounts receivables, other receivables, long-term receivables, debt investments, etc. At initial recognition, the Company shall measure a financial asset at its fair value plus or minus transaction costs that are directly attributable to the acquisition or issue of the financial asset. The Company shall measure account receivables at their transaction price if the account receivables do not contain a significant financing component and accounts receivables that the company has decided not to consider for a financing component of no more than one year. Interests calculated by using the effective interest method during the holding period shall be. recognized in profit or loss. When recovering or disposing the receivables, the difference between the price obtained and. the carrying value shall be recognized in current profit or loss. (2) Financial assets measured at fair value through other comprehensive income (debt 127 Bengang Steel Plates Co., Ltd. Annual Report 2020 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 profit or loss. Changes in fair value are included in profit or loss. 128 Bengang Steel Plates Co., Ltd. Annual Report 2020 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. Termination of recognition of financial assets and financial assets transfer When one of the following conditions is met, the company terminates the recognition of financial assets. - Termination of contractual rights to receive cash flows from financial assets; - The financial assets have been transferred, and almost all the risks and rewards in the ownership of the financial assets have been transferred to the transferee; 129 Bengang Steel Plates Co., Ltd. Annual Report 2020 - The financial assets have been transferred. Although the company has neither transferred nor retained almost all the risks and rewards of the ownership of the financial assets, it has not retained control of the financial assets. If it retained nearly all of the risks and rewards related to the ownership of the financial asset, it shall not stop recognizing the financial asset. To judge whether the transfer of a financial asset can satisfy the conditions as prescribed in these Standards for stopping the recognition of a financial asset, the Company shall follow the principle of the substance over form. Transfer of an entire financial asset can be divided into partial financial assets transfer and entire financial asset transfer. If the transfer of an entire financial asset satisfies the conditions for de-recognition, the difference between the amounts of the following 2 items shall be recorded in the profits and losses of the current period: (1) The book value of the transferred financial asset; and (2) The sum of consideration received from the transfer, and the accumulative amount of the changes of the fair value originally recorded in the owners' equities (in the event that the financial asset involved in the transfer is a financial asset Available-for-sale). If the transfer of partial financial asset satisfies the conditions to derecognize, the entire book value of the transferred financial asset shall, between the portion whose recognition has been stopped and the portion whose recognition has not been stopped (under such circumstance, the service asset retained shall be deemed as a portion of financial asset whose recognition has not been stopped), be apportioned according to their respective relative fair value, and the difference between the amounts of the following 2 items shall be included into the profits and losses of the current period : (1) The book value of the portion whose recognition has been stopped; and (2) The sum of consideration of the portion whose recognition has been stopped, and the portion of the accumulative amount of the changes in the fair value originally recorded in the owner's equities which is corresponding to the portion whose recognition has been stopped (in the event that the financial asset involved in the transfer is a financial asset Available-for-sale). If the transfer of financial assets does not satisfy the conditions to stop the recognition, it shall continue to be recognized as financial assets and the consideration received shall be recognized as financial liabilities. 4. Termination of recognition of financial liabilities Only when the prevailing obligations of a financial liability are relieved in all or in part may the recognition of the financial liability be terminated in all or partly. Where the Company (debtor) enters into an agreement with a creditor so as to substitute the existing financial liabilities by way of any new financial liability, and if the contractual stipulations regarding the new financial liability is substantially different from that regarding the existing financial liability, it shall terminate the recognition of the existing financial liability, and shall at the same time recognize the new financial liability. Where the Company makes substantial revisions to part or all of the contractual stipulations of the existing financial liability, it shall terminated the recognition of the existing financial liability or part of it, and at the same time recognize the financial liability after revising the contractual stipulations as a new financial liability. Where the recognition of a financial liability is totally or partially terminated, the Company shall include into the profits and losses of the current period the difference between the carrying amount which has been terminated from recognition and the considerations it has paid (including the non-cash assets it has transferred out and the new financial liabilities it has assumed). Where the Company buys back part of its financial liabilities, it shall distribute, on the date of repurchase, the carrying amount of the whole financial liabilities in light of the comparatively fair value of the part that continues to be recognized and the part whose recognition has already been terminated. The gap between the carrying amount which is distributed to the part whose recognition has terminated and the considerations it has paid (including the noncash assets it has transferred out and the new financial liabilities it has assumed) shall be recorded into the profits and losses of the current period. 130 Bengang Steel Plates Co., Ltd. Annual Report 2020 5. Determination of the fair value of the financial assets (liabilities) If active markets for the financial instruments exist, the fair value shall be measured by quoted prices in the active markets. If active markets for the financial instruments do not exist, valuation techniques shall be applied for the measurement. The Company uses valuation techniques appropriate in the circumstances and for which sufficient data are available to measure fair value. The Company chooses relevant observable inputs for identical or similar assets or liabilities. Only when relevant observable inputs are unavailable or should the Company use unobservable inputs for the asset or liability. 6. Impairment provision of the financial assets (excluding accounts receivables) The Company recognize the expected credit loss on financial assets measured at amortized cost, financial assets measured at fair value through other comprehensive income (debt instruments) , financial guarantee contract, and so on, on the individual or portfolio basis. The Company considers all reasonable and relevant information, including past events, current conditions, and forecasts of future economic conditions, and uses the risk of default as the weight to calculate the probability- weighted amount of present value of difference between the cash flow receivable from the contract and the cash flow expected to be received to confirm the expected credit loss. 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. The measurement of expected credit loss depends on whether there is a significant increase in credit risk of financial assets since the initial recognition. The company compares the risk of default on the balance sheet date of financial instruments with the risk of default on the date of initial recognition to determine the relative change in the risk of default during the expected life of the financial instrument to assess whether there is a significant increase in credit risk of financial assets since the initial recognition. 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. 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 and contract assets recognized according to Accounting Standards for Business Enterprises No. 14 Revenue (2017), 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. 131 Bengang Steel Plates Co., Ltd. Annual Report 2020 For lease receivables, the Company shall always measure the loss allowance at an amount equal to lifetime expected credit losses. (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. Inventory is initially measured at cost. Inventory cost includes purchase cost, processing cost and other expenditures incurred to bring inventory to its current location and state. 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 On the balance sheet date, inventories shall be measured at the lower of cost and net realizable value. When the cost of inventories is higher than its net realizable value, provision for inventory impairment loss shall be made. The net realizable value refers to the amount of the estimated selling price of the inventory minus the estimated costs that will occur at the time of completion, estimated selling expenses, and relevant taxes in daily activities. 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. After the inventory impairment is withdrawn, if the factors that previously affected the write-down of the inventory value have disappeared, causing the net realizable value of the inventory to be higher than its book value, it shall be reversed within the amount of the inventory impairment that has been withdrawn, and the reverted amount shall be included in the current profit and loss. 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. 132 Bengang Steel Plates Co., Ltd. Annual Report 2020 (12) Contract asset Accounting Policies Adopted After January 1, 2020 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” (13) Long-term equity investment 1. Criteria of joint control and significant influence Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. If the Company and other joint venture have joint control of the investee and have rights to the net assets of the investee, the investee is a joint venture of the Company. Significant influence is the power to participate in the financial and operating policy decisions of the investee but not control or join control of those policies. If the Company could exert significant influence over the investee, the investee is the associate of the Company. 2. The initial cost of long-term equity investment from business acquisition (1) Long-term equity investment from business acquisition For a business combination under common control, if the consideration of the combination is satisfied by paying cash, transfer of non-cash assets or assumption of liabilities and issue of equity securities, the initial investment cost of the long-term equity investment shall be the absorbing party’s share of the carrying amount of the owner’s equity of the party being absorbed in the consolidated financial statements of the ultimate controlling party at combination date. When an investor becomes capable of exercising control over an investee under common control due to additional investment or other reasons, the initial investment cost shall be the absorbing party’s share of the carrying amount of the owner’s equity of the party being absorbed in the consolidated financial statements of the ultimate controlling party at combination date. The difference between the initial investment cost and the carrying amount of the previously- held equity investment, together with the additional investment cost for new shares at combination date, shall be adjusted to the capital reserve. If the balance of capital reserve is not sufficient, any excess shall be adjusted to retained earnings. For a business combination not under common control, the initial investment cost of the long- 133 Bengang Steel Plates Co., Ltd. Annual Report 2020 term equity investment shall be the acquisition cost at the acquisition date. When an investor becomes capable of exercising control over an investee due to additional investment or other reasons, the initial investment cost under the cost method shall be the carrying amount of previously-held equity investment together with the additional investment cost. (2) The initial cost of the long-term equity investment other than from business acquisition The initial cost of a long-term equity investment obtained by making payment in cash shall be the purchase cost which is actually paid. The initial cost of a long-term equity investment obtained on the basis of issuing equity securities shall be the fair value of the equity securities issued. 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 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, and the cost of long-term equity investment shall be adjusted accordingly. The Company shall recognize its share of the investee’s net profits or losses, as well as its share of the investee’s other comprehensive income, as investment income or losses and other comprehensive income, and adjust the carrying amount of the investment accordingly. The carrying amount of the investment shall be reduced by the portion of any profit distributions or cash dividends declared by the investee that is attributable to the investor. The investor’s share of the investee’s owners’ equity changes, other than those arising from the investee’s net profit or loss, other comprehensive income or profit distribution, and the carrying amount of the long-term equity investment shall be adjusted accordingly. The investor shall recognize its share of the investee’s net profits or losses after making appropriate adjustments according to the Company’s accounting principles and operating period based on the fair values of the investee’s identifiable net assets at the acquisition date. During the holding period, if the investee makes consolidated financial statements, the Company shall calculate its share based on the investee’s net profit, other comprehensive income and the amount of other owners' equity attribute to the investee in the consolidated financial statements. 134 Bengang Steel Plates Co., Ltd. Annual Report 2020 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, except the transaction of investment or sale of assets is a business. Any losses resulting from transactions between the investor and investee which are attributable to asset impairment shall be recognized in full. The company’s net losses incurred by joint ventures or associates, in addition to assuming additional loss obligations, are limited to the book value of long-term equity investments and other long-term equity that essentially constitutes net investment in joint ventures or associates. If a joint venture or associated enterprise realizes net profits in the future, the company resumes recognizing its share of profits after the share of profits makes up for the share of unrecognized losses. (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. Partial disposal of long-term equity investments accounted for by the equity method, and the remaining equity is still accounted for by the equity method, the other comprehensive income recognized by the original equity method shall be carried forward according to the same basis as the direct disposal of related assets or liabilities by the investee. All other changes in the interests of the holders are carried forward to the current profit and loss on a pro rata basis. 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, 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. Other owner's equity change shall be transferred into profit or loss of current period in full when the Company cease to adopt the equity method. When an investor can no longer control the investee due to partial disposal, when the individual financial statements are prepared, the remaining equity can exercise joint control or significant influence on the investee, the equity method shall be used to account for the remaining equity. It is deemed that the equity method is adopted for adjustment since the acquisition, and the other comprehensive income recognized before the control of the investee is obtained is carried forward on the same basis as the direct disposal of related assets or liabilities by the investee, because the equity method is used for accounting. The confirmed changes in other owners’ equity are carried forward to the current profit and loss on a pro rata basis. If the remaining equity cannot exercise joint control or exert significant influence on the investee, it shall be recognized as a financial asset, and the difference between its fair value and book value on the date when control is lost shall be included in the current profit and loss, and other comprehensive income and other owner’s interests previously recognized shall be transferred to profit or loss in full. If the equity investment of a subsidiary is disposed through multiple transactions until it loses control, which is 135 Bengang Steel Plates Co., Ltd. Annual Report 2020 a package transaction, each transaction shall be accounted as a transaction that disposes of the equity investment of the subsidiary and loses control. Each transaction before the loss of control, the difference between the disposal price and the book value of the corresponding disposed part of long-term equity investment is firstly recognized as other comprehensive income in individual financial statements, and then transferred to the current profit and loss when the control is lost. If it is not a package transaction, each transaction shall be accounted separately. (14) Investment property Investment property refers to real estate held for the purpose of earning rent or capital appreciation, or both, including leased land use rights, land use rights held and prepared for transfer after appreciation, and leased buildings ( Buildings that are leased after completion of self-construction or development activities and buildings that are being used for rental in the future during construction or development). Subsequent expenditures related to investment property are included in the cost of investment property when the relevant economic benefits are likely to flow in and their costs can be reliably measured. Otherwise, they are included in the current profit and loss when incurred. The company uses the cost model to measure the existing investment property. For investment property measured according to the cost model - the rental building adopts the same depreciation policy as the fixed assets of the company, and the land use right for rental is amortized according to the same amortization policy as the intangible assets. (15) Fixed assets 1. Recognition of Fixed assets The term "fixed assets" refers to the tangible assets held for the sake of producing commodities, rendering labor service, renting or business management and of which useful life is in excess of one fiscal year. No fixed asset may be recognized unless it simultaneously meets the conditions as follows: (1) The economic benefits pertinent to the fixed asset are likely to flow into the enterprise; and (2) The cost of the fixed asset can be measured reliably. Fixed assets are initially measured at cost (and considering the impact of expected dismantling cost factors). Subsequent expenditures related to fixed assets are included in the cost of fixed assets when the related economic benefits are likely to flow in and their costs can be reliably measured; the book value of the replaced part is derecognized; all other subsequent expenditures are incurred shall be included in the current profit and loss. 2. Fixed assets depreciation Fixed assets are depreciated under the straight line method. The depreciation rate is determined according to the category of assets, the useful life and the expected residual rate. If the components of the fixed assets have different useful lives or provide the economic benefits in a different way, then different depreciation rate or method shall be applied and the depreciation of the components shall be calculated separately. 136 Bengang Steel Plates Co., Ltd. Annual Report 2020 Fixed assets acquired under financial leasing is depreciated over the useful life if it is reasonably certain that the ownership of the leased assets will be acquired upon expiry of lease, or over the shorter of lease term and useful life if it is not reasonably certain that the ownership of the leased assets will be acquired upon expiry of lease. Details of classification, depreciation period, residual value rate and annual depreciation rate are as follows: Depreciation Depreciation Residual Value Category Depreciation method Rate Period Rate (%) (%) Plants and Buildings straight line method 10-45 years 0.00 2.22-10.00 Machinery straight line method 10-28 years 3.00 3.46-9.70 Transportation and straight line method 8-22 years 3.00 4.41-12.13 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; (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; and (5) The leased assets are of a special nature, and unless major renovations are made, only the lessee can use it. 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. 4. Disposal of fixed assets When a fixed asset is disposed, or it is expected that no economic benefits will be generated through use or disposal, the recognition of fixed asset shall be de terminated. The amount of disposal income of fixed assets raising from sell, transfer, scrapping or damage shall be included in the current profit and loss after deducting its book value and related taxes. (16) Construction in progress Construction in progress is measured at the actual cost incurred. The actual cost includes construction costs, installation costs, borrowing costs that meet the capitalization conditions, and other necessary expenditures 137 Bengang Steel Plates Co., Ltd. Annual Report 2020 incurred before the construction in progress reaches its intended use status. Construction in progress is transferred to fixed asset when it has reached its working condition for its intended use and depreciation will be accrued from the next month. (17) Borrowing costs 1. Principle of the recognition of capitalized borrowing costs 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 property, 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. 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. 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. 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. 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 138 Bengang Steel Plates Co., Ltd. Annual Report 2020 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. During the capitalization period, the exchange difference between the principal and interest of the foreign currency special loan is capitalized and included in the cost of the assets that meet the capitalization conditions. Exchange differences arising from the principal and interest of foreign currency borrowings other than foreign currency special borrowings are included in the current profits and losses. (18) Intangible Assets 1. Measurement of Intangible Assets (1) Initial measurement is based on cost upon acquisition The cost of an intangible asset on acquisition include the purchase price, relevant taxes and other necessary disbursements which may be directly attributable to bringing the intangible asset to the conditions for the expected purpose. (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 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. 139 Bengang Steel Plates Co., Ltd. Annual Report 2020 Research phase refers to the phase of creative and planned investigation to acquire and study to acquire and understand new scientific or technological knowledge. Development phase refers to the phase during which the result of research phase or other knowledge is applied into certain projects or designs for the manufacturing of new or substantially improved material, device and product before commercial manufacturing and use. (19) Impairment of long-term assets For long-term assets such as long-term equity investments, Investment property under the cost model, fixed assets, construction in progress, intangible assets with limited useful lives etc., the Company shall perform impairment tests at the period end if there is clear indication of impairment. If the recoverable amounts of long-term assets are less than their carrying amounts, the carrying amounts of the assets shall be written down to their recoverable amounts. The write-downs are recognized as impairment losses and charged to current profit and loss. The recoverable amounts of long-term assets are the higher of their fair values less costs to sell and the present values of the future cash flows expected to be derived from the assets. The Company shall estimate its recoverable amount on an individual basis. Where it is difficult to do so, it shall determine the recoverable amount of the assets on the basis of the asset group to which the asset belongs. The term "assets group” refers to a minimum combination of assets by which the cash flows could be generated independently The goodwill, intangible assets with uncertain useful life and intangible assets not meeting the 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 140 Bengang Steel Plates Co., Ltd. Annual Report 2020 of these asset groups or combinations of asset groups (including the carrying value of the business reputation apportioned thereto) with the recoverable amount. Where the recoverable amount of the relevant assets or combinations of the asset groups is lower than the carrying value thereof, it shall recognize the impairment loss of the business reputation. Impairment losses on long-term assets shall not be reversed in subsequent accounting periods once recognized. (20) Long-term deferred expense The long-term deferred expense refers to the expenses incurred but shall be borne by current and subsequent accounting period, which is more than one year. The long-term deferred expense shall be amortized over its beneficiary period evenly (21) Contract liability Accounting Policies Adopted After January 1, 2020 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. (22) 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 welfare expenses incurred by the company are included in the current profit and loss or related asset costs based on the actual amount when they actually occur. Among them, non-monetary benefits are measured at fair value. 141 Bengang Steel Plates Co., Ltd. Annual Report 2020 2. Accounting treatment of post-employment benefits (1) Defined contribution plan The Company shall recognize, in the accounting period in which an employee provides service, pension fund and unemployment fund for employees as a liability according to the local government regulations. The amount shall be calculated according to local prescribed bases and percentages in determining the amount of employee benefits, with a corresponding charge to the profit or loss or cost of an asset for the current period. (2) Defined benefit plan None 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. (23) Estimated liabilities The obligation pertinent to a contingency 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. The estimated debts shall be initially measured in accordance with the best estimate of the necessary expenses for the performance of the current obligation. To determine the best estimate, an enterprise shall take into full consideration of the risks, uncertainty, time value of money, and other factors pertinent to the Contingencies. If the time value of money is of great significance, the best estimate shall be determined after discounting the relevant future outflow of cash. The best estimate shall be conducted in accordance with the following situations, respectively: If there is a continuous range for the necessary expenses and if all the outcomes within this range are equally likely to occur, the best estimate shall be determined in accordance with the average estimate within the range, that is, the average of the upper and lower limit. 142 Bengang Steel Plates Co., Ltd. Annual Report 2020 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. The company reviews the book value of the estimated liabilities on the balance sheet date. If there is conclusive evidence that the book value does not reflect the current best estimate, the book value will be adjusted according to the current best estimate. (24) Revenue Accounting policy adopted after Jan 1, 2020 (1) The general principle of revenue recognition and measurement 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 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 143 Bengang Steel Plates Co., Ltd. Annual Report 2020 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. (2) The specific criteria of revenue recognition and measurement Commodity sales contracts between companies and customers usually only include performance obligations for the transfer of steel and other commodities. This type of performance obligation is a performance obligation performed at a certain point in time. The company recognizes revenue when the customer obtains control of the relevant goods or services. When judging whether the customer has obtained control of goods or services, the company considers the following signs: The company obtains the current right of collection of receivables, the legal ownership of the goods is transferred to the customer, the physical assets of the goods are transferred to the customer, the company transfers the main risks and rewards of the ownership of the goods to the customer, and the customer has accepted the goods. Accounting policy adopted before Jan 1, 2020 (1) The general principle of revenue recognition and measurement 144 Bengang Steel Plates Co., Ltd. Annual Report 2020 The Company has transferred to the buyer the significant risks and rewards of ownership of the goods. Retained neither continuing managerial involvement which usually relates to the ownership nor exerts effective control over the goods sold. The relevant amount of revenue can be measured reliably. The economic benefits related to the transaction will flow into the enterprise. The relevant costs incurred or to be incurred can be measured reliably. (2) The specific criteria of revenue recognition and measurement The Company mainly sells steel and other products. Domestic sales revenue is recognized when the following conditions are met: The Company has delivered the products to buyer under the contract, amount of product sales revenue is determinable, received or the certificate of the right to receive the amount has been obtained and the relevant economic benefits are likely to flow into the entity, and related costs can be measured reliably. Export sales revenue is recognized when the following conditions are met: the Company has undertaken the Customs declaration and delivery has occurred under the contract, bill of lading has been obtained, amount of product sales revenue is determinable, received or the certificate of the right to receive the amount has been obtained and the relevant economic benefits are likely to flow into the entity, and related costs can be measured reliably. (3) Recognition Criteria for the Revenue from alienating of Assets Use Rights When it is probable that economic benefits in relation to the transaction will flow into the enterprise; and the amount of revenues can be measured reliably. The Company shall ascertain the amount of revenues from the transfer of Assets Use Right based on the following circumstances respectively: (1) Interest income shall be calculated based on the duration of which the Company's cash is used by others and the actual interest rate; or (2) Royalty revenue shall be calculated based on the period and method of charging as stipulated in the relevant contract or agreement. (25) Contract costs Accounting policy adopted before Jan 1, 2020 Contract costs include costs to fulfill a contract and incremental costs of obtaining a contract. 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 145 Bengang Steel Plates Co., Ltd. Annual Report 2020 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. (26) Government Subsidies 1. Types A government subsidy means the monetary or non-monetary assets obtained free of charge by the Company from the government. Government subsidies consist of the government subsidies pertinent to assets and government subsidies pertinent to income. Government subsidies related to assets are government subsidies whose primary condition is that an entity qualifying for them should purchase, construct or otherwise acquire long-term assets. The government subsidies related to incomes refers to government subsidies other than those related to assets. The standard of the Company recognizing the government subsidies related to assets is: an entity qualifying for them should purchase, construct or otherwise acquire long-term assets. The standard of the Company recognizing the government subsidies related to income is: In addition to government subsidies related to assets, government subsidies that have been clearly targeted for subsidies. 2. Recognition Government subsidies related to assets shall be recognized by deducting the subsidies at the caring amount of the assets or recognized as deferred income. Subsidies that recognized as deferred income shall be recognized in profit or loss over the periods during the useful lives of the relevant assets. 146 Bengang Steel Plates Co., Ltd. Annual Report 2020 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. (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. (27) Deferred tax assets and deferred tax liabilities Income tax includes current income tax and deferred income tax. Except for income tax arising from business mergers and transactions or events that are directly included in owner's equity (including other comprehensive income), the company will include current income tax and deferred income tax in current profit and loss. Deferred income tax assets and deferred income tax liabilities are calculated and confirmed based on the difference (temporary difference) between the tax base of assets and liabilities and their book value. 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). For taxable temporary differences related to investments in subsidiaries, associates and joint ventures, deferred income tax liabilities are recognized, unless the company can control the timing of the reversal of the 147 Bengang Steel Plates Co., Ltd. Annual Report 2020 temporary differences and the temporary differences are likely not to be transferred back in the foreseeable future. For deductible temporary differences related to investments in subsidiaries, associates and joint ventures, when the temporary differences are likely to be reversed in the foreseeable future and are likely to be used to deduct the taxable income of deductible temporary differences in the future, income tax assets are recognized. On the balance sheet date, deferred income tax assets and deferred income tax liabilities are measured at the applicable tax rate during the period when the relevant assets are expected to be recovered or the relevant liabilities are expected to be recovered in accordance with the provisions of the tax law. On the balance sheet date, the company reviews the book value of deferred income tax assets. If it is probable that sufficient taxable income cannot be obtained in the future to offset the benefits of deferred income tax assets, the book value of the deferred income tax assets shall be written down. When it is possible to obtain sufficient taxable income, the reduced amount shall be reversed. When the Company has the statutory right to offset and intend to offset or obtain assets and pay off liabilities at the same time, the current income tax assets and current income tax liabilities are presented at the net amount after offsetting. 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. (28) Leases 1. Accounting treatment of operating lease (1) The rents paid for operating leases shall be recorded in the profits and losses of the current period by using the straight-line method over each period of the lease term. The initial direct costs paid by the Company shall be recorded into the profits and losses of the current period If the lessor has shouldered any expense related to the lease which shall have been borne by the Company, the Company shall deduct these expenses from the total rental expense and the remaining rental expense shall be allocated to each period during the lease term (2) The rents collected from operating leases shall be recorded in the profits and losses of the current period by using the straight-line method over each period of the whole lease term in which free lease period is included. The initial direct costs paid by the Company shall be recorded into the profits and losses of the current period. The initial direct costs shall be capitalized if it is material, and be allocated to each period as per the basis for rental revenue recognition. If the Company has shouldered any expense related to the lease which shall have been borne by the lessee, the company shall deduct these expenses from the total rental revenue and the remaining rental revenue shall be allocated to each period during the lease term. 2. Accounting treatment of financial leasing (1) Leased in asset On the lease beginning date, a lessee shall record the lower one of the fair value of the leased asset and the present value of the minimum lease payments on the lease beginning date as the initial book value, recognize the amount of the minimum lease payments as the initial book value of long-term account payable, and treat the balance between the recorded amount of the leased asset and the long-term account payable as unrecognized financing charges. The lessee shall adopt the effective interest rate method to calculate and recognize the financing charge in the current period. The unrecognized financing charge shall be amortized to each period during the lease term. Initial direct costs incurred by the Company shall be recorded in the value of the leased asset. (2) Leased out asset On the lease beginning date, a lessee shall record the balance between the sum of finance lease receivables 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. (29) Discontinuing operation 148 Bengang Steel Plates Co., Ltd. Annual Report 2020 Discontinuing operation is a component that has been disposed or classified as held for sale by the Company, and can be distinguished separately in operating and preparing financial statements when one of the following conditions is met: (1) The component stands for an independent main business or a major business area; (2) The component is a part of disposal plan of an independent main business or a major business area; (3) The component is a subsidiary which is acquired only for sale again. The profit and loss from continuing operations and the profit and loss from discontinued operations are separately listed in the income statement. Operational gains and losses such as impairment losses and reversal amounts and disposal gains and losses from discontinued operations are reported as discontinued operation gains and losses. For the discontinued operations reported in the current period, the Company adjusts the information previously disclosed as continuing operations profits and losses in the current financial statements as the discontinued operations profits and losses for the comparable accounting period. (30) Major accounting estimates and judgments When preparing financial statements, the Company's management needs to use estimates and assumptions, which will affect the application of accounting policies and the amount of assets, liabilities, income and expenses. Actual conditions may differ from these estimates. The management of the company continuously evaluates the judgment of key assumptions and uncertainties involved in the estimation, and the impact of changes in accounting estimates will be recognized in the current and future periods. The main uncertainties in the estimated amount are as follows: 1. Measurement of expected credit losses The company calculates the expected credit loss through the default risk exposure and the expected credit loss rate, and determines the expected credit loss rate based on the default probability and the default loss rate. When determining the expected credit loss rate, the company uses internal historical credit loss experience and other data, and adjusts the historical data in combination with current conditions and forward-looking information. When considering forward-looking information, the indicators used by the Company include the risk of economic downturn, the expected increase in unemployment rate, changes in the external market environment, technological environment and customer conditions. The Company regularly monitors and reviews assumptions related to the calculation of expected credit losses. 2. Inventory Impairment As mentioned in note (11) Inventory under “3 Significant accounting policies and accounting estimates”, the Company regularly estimates the net realizable value of the inventory, and recognizes the difference in inventory cost higher than the net realizable value. When estimating the net realizable value of inventory, the Company considers the purpose of holding the inventory and uses the available information as the basis for estimation, including the market price of the inventory and the Company's past operating costs. The actual selling price, completion cost, sales expenses and taxes of the inventory may change according to changes in 149 Bengang Steel Plates Co., Ltd. Annual Report 2020 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 (19) Long-term Asset Impairment under “3 Significant accounting policies and accounting estimates”, the company performs an impairment assessment on assets other than inventory and financial assets on the balance sheet date to determine whether the recoverable amount of the asset has fallen to a lower level than its book value. If the situation shows that the book value of the long-term assets may not be fully recovered, the relevant assets will be deemed to be impaired and the impairment loss will be recognized accordingly. The recoverable amount is the higher of the net value of the fair value of the asset (or asset group) minus the disposal expenses and the present value of the asset (or asset group) 's expected future cash flow. Because the Company cannot reliably obtain the public market price of assets (or asset groups), and cannot reliably and accurately estimate the fair value of assets. Therefore, the Company regards the present value of the expected future cash flow as the recoverable amount. When estimating the present value of future cash flows, it is necessary to make a significant judgment on the output, selling price, related operating costs of the products produced by the asset (or asset group), and the discount rate used in calculating the present value. The Company will use all available relevant information when estimating the recoverable amount, including the prediction of output, selling price and related operating costs based on reasonable and supportable assumptions. 4. Depreciation and amortization of assets such as fixed assets and intangible assets As described in note (15) Fixed Assets and note (18) Intangible Assets under “3 Significant accounting policies and accounting estimates”, the company shall accrue depreciation for the fixed assets and amortization for intangible assets within the useful life after considering their residual value. The company regularly reviews the useful life of related assets to determine the amount of depreciation and amortization expenses to be included in each reporting period. The useful life of assets is determined by the company based on past experience with similar assets and in combination with anticipated technological changes. If the previous estimates change significantly, the depreciation and amortization expenses will be adjusted in the future. 5. Deferred tax assets When it is estimated that sufficient taxable income can be obtained in the future to use the unrecovered tax losses and deductible temporary differences, the relevant deferred tax assets are calculated and confirmed on the basis of the applicable income tax rate during the period when the asset is expected to be recovered and the amount of taxable income is limited to deductible tax losses and deductible temporary differences likely to be obtained by the Company. The Company needs to use judgment to estimate the time and amount of future taxable income, and make reasonable estimates and judgments on the future applicable income tax rate according to the current tax policy and other related policies to determine the deferred tax assets that should be recognized. If the time and amount of profits actually generated in the future period or the actual applicable income tax rate are different from the management's estimate, the difference will have an impact on the 150 Bengang Steel Plates Co., Ltd. Annual Report 2020 amount of deferred tax assets. (31) Change of significant accounting policy and accounting estimate A. Change of major accounting policy during this reporting period (1) Implementation of "Accounting Standards for Business Enterprises No. 14-Revenue" (revised in 2017) (hereinafter referred to as "New Revenue Standards") The Ministry of Finance revised the "Accounting Standards for Business Enterprises No. 14-Revenue" in 2017. The revised standard stipulates that for the first implementation of the standard, the amount of retained earnings and other related items in the financial statements at the beginning of the year should be adjusted according to the cumulative impact, and the information for the comparable period should not be adjusted. The Company implemented 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 does not make adjustments to the comparative financial statements. The major impact of the implementation of the above regulations are as follows: Amount of impact on the balance on Jan 1, Change of accounting policy 2020 content and reason Affected items Consolidated Parent company Financial statement financial statement The Company implemented the Advance from customers -4,429,821,526.79 -5,597,707,687.22 "Accounting Standards for Business Enterprises No. 14- Revenue" (referred to as "New Contract liabilities 3,920,196,041.41 4,953,723,617.01 Revenue Standards") promulgated by the Ministry of Finance in 2017 on January 1, 2020 Other current liabilities 509,625,485.38 643,984,070.21 Compared with the original revenue standards, the impact of the implementation of the new revenue standards on the relevant items of the financial statements for the period of 2020 is as follows (increase/(decrease)): 151 Bengang Steel Plates Co., Ltd. Annual Report 2020 Amount of impact on the balance on Dec 31, 2020 Affected items in the Parent company statement of Consolidated Financial financial financial position statement statement Advance from customers -5,038,299,156.48 -6,016,524,270.87 Contract liabilities 4,458,671,819.90 5,324,357,761.83 Other current liabilities 579,627,336.58 692,166,509.04 Impact amounts to the period of 2020 Affected items in the statement of comprehensive income Consolidated Financial Parent company financial statement statement Operating costs 1,112,122,323.44 655,370,940.93 Selling and distribution expenses -1,112,122,323.44 -655,370,940.93 (2) Implementation of "Accounting Standards for Business Enterprises No. 13 " The Ministry of Finance issued the "Accounting Standards for Business Enterprises Interpretation No. 13" (Cai Kuai [2019] No. 21, hereinafter referred to as "Interpretation No. 13") on December 10, 2019, which will come into force on January 1, 2020. No requirement of retrospective adjustment. a. The recognition of related parties Interpretation No. 13 clarifies that the following circumstances constitute a related party: a joint venture or joint venture between an enterprise and other member units (including parent companies and subsidiaries) of the enterprise group to which it belongs; a joint venture of the enterprise and other joint ventures or joint ventures of the enterprise. In addition, Interpretation No. 13 also clarifies that only two or more companies that are significantly affected by one party do not constitute related parties. It also adds that joint ventures include joint ventures and their subsidiaries. b. The definition of business Interpretation No. 13 completes the three elements of business composition, refines the judgment conditions of the business composition, and introduces the "concentration test" option to simplify to a certain extent the judgment of whether a combination obtained under the same control constitutes a business, etc. . The company implemented Interpretation No. 13 from January 1, 2020, and the comparative financial statements will not be adjusted. Implementation Interpretation No. 13 has not had a significant impact on the company's financial position and operating results. (3) Implementation of the "Interim Provisions on Accounting Treatment of Carbon Emissions Trading" 152 Bengang Steel Plates Co., Ltd. Annual Report 2020 On December 16, 2019, the Ministry of Finance issued the "Interim Provisions on the Accounting Treatment of Carbon Emissions Trading" (Cai Kuai [2019] No. 22), which is applicable to the related companies in the key emission enterprises (hereinafter referred to as key emission companies) that conduct carbon emission rights business in accordance with the "Interim Measures for the Administration of Carbon Emissions Trading" and other relevant regulations. This regulation came into effect on January 1, 2020, and key emission companies should adopt the prospective application to apply this regulation. The Company implemented the above regulation from January 1, 2020, and the comparative financial statements will not be adjusted. The implementation of this regulation has not had a significant impact on the company's financial position and operating results. (4) Implement the "Regulations on Accounting Treatment of Rental Concessions Related to the Coronavirus Pandemic" On June 19, 2020, the Ministry of Finance issued the "Regulations on Accounting Treatment of Rental Concessions Related to the Coronavirus Pandemic " (Caikuai (2020) No. 10), which came into effect on June 19, 2020, allowing companies to adjust the relevant rental concessions that occurred between Jan 1, 2020 and the implementation date of this regulation. According to the regulation, companies can choose to adopt simplified methods for accounting treatments for rent reductions and deferred payment of rents directly caused by the Coronavirus Pandemic that meet the conditions. The company chooses to adopt a simplified method for accounting treatment for all rent concessions that fall within the scope of the regulation, and adjusts the relevant rent concessions that occur between January 1, 2020 and the effective date of the regulation accordingly. The implementation of the regulations did not have a significant impact on the company's financial position and operating results. B. Change of accounting estimate during the reporting period Approval Application Affected Items Affected items procedure date amounts Accumulated Approved 633,195,486.72 depreciation by the Change in eighth Operating costs 616,340,171.08 depreciation meeting of Jan 1, 2020 General and period the eighth administrative 16,855,315.64 board of expenses directors Total profit 633,195,486.72 153 Bengang Steel Plates Co., Ltd. Annual Report 2020 Approval Application Affected Items Affected items procedure date amounts Net profit 474,896,615.04 C. The first implementation of the new revenue standard adjustment to the financial statements at the beginning of the year Consolidated Statement of Financial Position Ending balance of the Beginning balance of Adjusted amounts Items last period the current period Reclassification Remeasurement Total Advance - from 4,429,821,526.79 -4,429,821,526.79 4,429,821,526.79 customers Contract 3,920,196,041.41 3,920,196,041.41 3,920,196,041.41 liabilities Other current 509,625,485.38 509,625,485.38 509,625,485.38 liabilities Statement of Financial Position of the Parent Company Ending balance of the Beginning balance of Adjusted amounts Items last period the current period Reclassification Remeasurement Total Advance - from 5,597,707,687.22 -5,597,707,687.22 5,597,707,687.22 customers Contract 4,953,723,617.01 4,953,723,617.01 4,953,723,617.01 liabilities Other current 643,984,070.21 643,984,070.21 643,984,070.21 liabilities 4. Taxes (1) Major type of taxes and corresponding tax rates Tax Taxation Method Tax Rate Value-added Tax (VAT) The balance of output VAT calculated 6%, 10%, 13% based on product sales and taxable 154 Bengang Steel Plates Co., Ltd. Annual Report 2020 services revenue in accordance with the tax laws after subtracting the deductible input VAT of the period Based on VAT and business tax actually City maintenance and construction tax 7%, 5% paid Enterprise income tax Based on taxable profit 25% (2) Tax Preference None. 5. Notes to the consolidated financial statements (1) Cash at bank and on hand Items 20201231 20191231 Cash on hand 3,026.68 5,588.98 Cash at bank 9,229,414,568.44 13,441,409,399.60 Other monetary funds 3,897,249,320.14 4,974,429,409.19 Total 13,126,666,915.26 18,415,844,397.77 Including: Total amount deposited abroad The details of restricted monetary funds resulted from guarantee or pledge or freeze accounts are as follows: Items 20201231 20191231 Margin for bank acceptance bill 3,306,509,320.14 4,803,950,250.12 Margin for letter of credit 78,000,000.00 166,527,026.07 Time deposit or notice deposit 512,000,000.00 for guarantee Loan deposit 740,000.00 3,330,000.00 Other 622,133.00 Total 3,897,249,320.14 4,974,429,409.19 (2) Accounts receivable 1. Accounts receivable disclosed by aging analysis Items 20201231 20191231 Within 1 year (inclusive) 245,084,695.28 187,728,755.63 1-2 years (inclusive) 57,537,987.36 31,659,160.02 2-3 years (inclusive) 251,762,129.07 24,710,744.49 Over 3 years 179,465,975.74 177,928,572.30 Sub-total 733,850,787.45 422,027,232.44 Less: Provision for bad 488,633,604.79 186,330,966.78 debts Total: 245,217,182.66 235,696,265.66 155 Bengang Steel Plates Co., Ltd. Annual Report 2020 2. Accounts receivable disclosed by bad debt accrual method 20201231 Carrying amount Provision for bad debts Items Bad Book value Percentage Amount Amount debts (%) ratio (%) Provision for bad 352,985,418.30 48.10 352,985,418.30 100.00 debts individually Provision for bad debts based on 380,865,369.15 51.90 135,648,186.49 35.62 245,217,182.66 portfolio Include: Portfolio 1: Aging 380,865,369.15 51.90 135,648,186.49 35.62 245,217,182.66 portfolio Total 733,850,787.45 100.00 488,633,604.79 245,217,182.66 20191231 Carrying amount Provision for bad debts Items Bad Book value Percentage Amount Amount debts (%) ratio (%) Provision for bad debts 47,762,337.18 11.32 47,762,337.18 100.00 individually Provision for bad debts 374,264,895.26 88.68 138,568,629.60 37.01 235,696,265.66 based on portfolio Include: Portfolio 1: Aging 374,264,895.26 88.68 138,568,629.60 37.01 235,696,265.66 portfolio Total 422,027,232.44 100.00 186,330,966.78 235,696,265.66 Accounts receivables tested for impairment individually: 20201231 Items Provision for Bad debts Carrying amount Reason bad debts ratio (%) Brilliance Automotive Bankruptcy 305,223,081.12 305,223,081.12 100.00 reorganization Group Holdings Co., Ltd. Benxi Nanfen Xinhe Metallurgical Furnace 47,762,337.18 47,762,337.18 100.00 Discontinued Material Co., Ltd 156 Bengang Steel Plates Co., Ltd. Annual Report 2020 Total 352,985,418.30 352,985,418.30 Provision for bad debts by portfolio: Aging analysis 20201231 Provision for Bad debt Items Account bad ratio Receivable debts (%) Within 1 year 240,240,563.27 2,402,405.64 1.00 (inclusive) 1-2 year (inclusive) 2,420,911.77 242,091.18 10.00 2-3 year (inclusive) 6,500,255.55 1,300,051.11 20.00 Over 3 year 131,703,638.56 131,703,638.56 100.00 Total 380,865,369.15 135,648,186.49 3. The provision for bad debts accrued, reversed or recovered in the current period The amount of bad debt provision accrued in the current period is RMB 302,302,638.01. 4. No accounts receivable has been written off this year. 5. Top five debtors at the year-end 20201231 Company Percentage of total Accounts Provision for Amount receivable (%) bad debts The first 305,223,081.12 41.59 305,223,081.12 The second 104,634,496.36 14.26 1,046,344.96 The third 56,158,745.71 7.65 561,587.46 The fourth 47,762,337.18 6.51 47,762,337.18 The fifth 26,929,400.04 3.67 269,294.00 Total 540,708,060.41 73.68 354,862,644.72 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 157 Bengang Steel Plates Co., Ltd. Annual Report 2020 None. (3) Accounts receivable financing 1. Details of accounts receivable financing Items 20201231 20191231 Notes Receivable 4,189,977,871.92 2,117,763,147.67 Including: Bank acceptance bill 1,875,594,439.85 2,108,970,139.40 Commercial acceptance bill 2,314,383,432.07 8,793,008.27 Accounts receivable 311,779,314.21 Total 4,189,977,871.92 2,429,542,461.88 Notes: Accounts receivable financing reflects notes receivable and accounts receivable that are measured at fair value through other comprehensive income on the balance sheet date. 2. The pledged acceptance bill at the year-end Item The pledged acceptance bill at the year-end Bank acceptance bill 484,093,073.28 Commercial acceptance bill 403,379,971.01 Total 887,473,044.29 3. The amount of Notes receivable endorsed over or discounted but not yet matured at the year-end Amount not Amount confirmed confirmed at Item at the end of the end of the the period period Bank acceptance bill 19,140,766,051.06 Commercial acceptance bill 2,277,888,430.86 Total 19,140,766,051.06 2,277,888,430.86 158 Bengang Steel Plates Co., Ltd. Annual Report 2020 4. No Notes receivable has been transferred into accounts receivable due to inability of drawer to meet acceptance bill at the year-end. (4) Prepayments 1. Prepayments disclosed by aging 20201231 20191231 Aging Amount Percentage (%) Amount Percentage (%) Within 1 year 2,096,232,640.14 99.44 1,284,678,069.97 99.51 1-2 years 11,812,137.51 0.56 6,279,487.94 0.49 2-3 years 53,900.20 Over 3 years 36,000.00 Total 2,108,044,777.65 100.00 1,291,047,458.11 100.00 Notes: As of December 31, 2020, there were no outstanding prepayments over 1 year. 2. Top five prepaid companies at the year-end Name of the company Amount Percentage (%) The First 1,146,621,194.17 54.39 The Second 134,979,953.65 6.40 The Third 133,093,798.08 6.31 The Fourth 125,253,186.74 5.94 The Fifth 96,036,913.74 4.56 Total 1,635,985,046.38 77.60 (5) Other receivables Items 20201231 20191231 Interest receivables 33,685,359.01 20,504,422.47 Dividend receivables Other receivables 108,415,992.26 152,302,614.30 Total 142,101,351.27 172,807,036.77 1.Interest receivable (1) Interest receivable disclosed by category Items 20201231 20191231 Deposit interest 33,685,359.01 20,504,422.47 Subtotal 33,685,359.01 20,504,422.47 Less: provision for bad debts Total 33,685,359.01 20,504,422.47 (2) The company has no significant provision for overdue interest and bad debts. 159 Bengang Steel Plates Co., Ltd. Annual Report 2020 2.Other receivables (1) Other receivables disclosed by aging Items 20201231 20191231 Within 1 year (inclusive) 53,420,775.41 135,162,016.85 1-2 years (inclusive) 42,323,476.43 15,306,496.22 2-3 years (inclusive) 12,988,305.06 3,479,413.70 Over 3 years 68,267,923.76 65,222,052.19 Sub-total 177,000,480.66 219,169,978.96 Less: Provision for bad 68,584,488.40 66,867,364.66 debts Total: 108,415,992.26 152,302,614.30 (2)Information of provision for bad debts Stage one Stage two Stage three lifetime expected lifetime expected credit Provision for bad credit losses Total debts 12-month expected losses (credit credit losses (credit impairment has not impairment occurred) has already occurred) Beginning balance 9,494,109.69 57,373,254.97 66,867,364.66 --Transfer to the second stage --Transfer to the -768,390.73 768,390.73 third stage --Write-back to the second stage --Write-back to the 6,592.60 -6,592.60 first stage Accrual for the 351,990.79 2,816,265.57 656,152.83 3,824,409.19 current period 160 Bengang Steel Plates Co., Ltd. Annual Report 2020 Stage one Stage two Stage three lifetime expected lifetime expected credit Provision for bad credit losses Total debts 12-month expected losses (credit credit losses (credit impairment has not impairment occurred) has already occurred) Reversal during the 6,207.34 220,683.79 226,891.13 current period Write-back of the 1,747,858.43 132,535.89 1,880,394.32 current period Write-off during the current period Other changes Ending balance 352,376.05 9,566,849.71 58,665,262.64 68,584,488.40 Changes in the book value of other receivables are as follows: Stage one Stage two Stage three lifetime expected credit lifetime expected 12-month Book value losses credit losses Total expected credit (credit impairment has not (credit impairment has losses occurred) already occurred) Beginning balance 137,511,976.11 24,284,747.88 57,373,254.97 219,169,978.96 --Transfer to the second stage --Transfer to the -1,369,740.15 1,369,740.15 third stage --Write-back to the second stage 161 Bengang Steel Plates Co., Ltd. Annual Report 2020 Stage one Stage two Stage three lifetime expected credit lifetime expected 12-month Book value losses credit losses Total expected credit (credit impairment has not (credit impairment has losses occurred) already occurred) --Write-back to the 14,813.42 -14,813.42 first stage Increase 376,415,795.03 6,006,395.62 54,905.00 382,477,095.65 Termination of 416,212,048.83 8,302,009.23 132,535.89 424,646,593.95 confirmation Other changes Ending balance 97,730,535.73 20,604,580.70 58,665,364.23 177,000,480.66 (3) No other accounts receivable actually written off in the current period (4) Other receivables disclosed by nature Nature 20201231 20191231 Accounts 167,775,115.62 209,700,618.22 Others 9,225,365.04 9,469,360.74 Total 177,000,480.66 219,169,978.96 (5) Top five debtors at the year-end Percentage of Provision for Company Nature Amount Aging total other bad debts receivables (%) The First Accounts 6,012,104.38 within 1 year 3.40 The Second Accounts 5,492,200.00 within 1 year 3.10 54,922.00 The Third Accounts 3,408,537.26 within 1 year 1.93 The Fourth Accounts 2,783,078.98 within 1 year to over 3 year 1.57 2,538,389.24 The Fifth Accounts 2,394,571.41 within 1 year 1.35 Total 20,090,492.03 11.35 2,593,311.24 162 Bengang Steel Plates Co., Ltd. Annual Report 2020 (6) There is no other receivables relates to any government subsidies in the reporting period. (7) There is no other receivables derecognized due to the transfer of financial assets in the reporting period (8) There no assets and liabilities formed by transfer of other receivables and continued involvement in the reporting period (6) Inventories 1. Inventories disclosed by category 20201231 20191231 Items Carrying amount Impairment Book value Carrying amount Impairment Book value Raw material 4,535,270,857.67 26,986,533.69 4,508,284,323.98 3,737,655,945.87 26,986,533.69 3,710,669,412.18 and main material Work in process and self- made semi-finished 1,732,705,334.71 1,946,088.69 1,730,759,246.02 1,302,249,713.48 25,995,508.16 1,276,254,205.32 product Finished goods 2,805,646,918.75 4,625,146.10 2,801,021,772.65 2,730,735,542.67 17,261,474.56 2,713,474,068.11 Total 9,073,623,111.13 33,557,768.48 9,040,065,342.65 7,770,641,202.02 70,243,516.41 7,700,397,685.61 2. Provision for inventory impairment and provision for impairment of contract performance costs Increase Decrease Category 20191231 20200101 Write-back 20201231 Provision Others Others or write-off Raw material 26,986,533.69 26,986,533.69 26,986,533.69 and main material Work in process and self-made semi-finished 25,995,508.16 25,995,508.16 1,946,088.69 25,995,508.16 1,946,088.69 product Finished goods 17,261,474.56 17,261,474.56 4,625,146.10 17,261,474.56 4,625,146.10 Total 70,243,516.41 70,243,516.41 6,571,234.79 43,256,982.72 33,557,768.48 (7) Other current assets Items 20201231 20191231 Prepaid tax 183,320,437.20 182,484,616.27 VAT input tax 86,091,954.53 130,420,207.82 Time deposit 5,254,234,444.28 Total 5,523,646,836.01 312,904,824.09 163 Bengang Steel Plates Co., Ltd. Annual Report 2020 (8) Long-term equity investment Increase/decrease Total Investment Gains Other Investees Add Reduce Other Declaration of Impairme 20191231 and Losses Comprehen Provision 20201231 Invest Investme Equity Cash Dividends Others nt Ending Recognized under sive Income ment nt Changes or Profit Balance the Equity Method Adjustment Joint Venture Zhejiang Bengang Jingrui Steel Processing Co., Ltd.. 2,642,998.70 374,119.86 -275,053.83 2,742,064.73 Subtotal 2,642,998.70 374,119.86 -275,053.83 2,742,064.73 Total 2,642,998.70 374,119.86 -275,053.83 2,742,064.73 164 Bengang Steel Plates Co., Ltd. Annual Report 2020 (9) Other equity instrument investments Item 20201231 20191231 Equity of Suzhou Bengang 3,888,980.00 3,888,980.00 Industrial Co., Ltd. Equity of Zhonggang Shanghai Steel Processing Co., Ltd. Equity of Northeast Special 1,037,735,849.00 1,037,735,849.00 Steel Group Co., Ltd. Equity of Guangzhou Benpu Automobile Panel Sales Co., 200,000.00 200,000.00 Ltd. Equity of Wuhan Bengang 200,000.00 Yuanhong Trading Co., Ltd. Total 1,042,024,829.00 1,041,824,829.00 Notes: “Other equity instrument investment" items reflects the ending balance of non-trading equity instrument investments designated as measured at fair value through other comprehensive income. The Company holds 15% equity of Zhonggang Shanghai Steel Processing Co., Ltd. 9.93% equity of Northeast Special Steel Group Co., Ltd. held by the Company has been pledged to Bank of Dalian, Shenyang branch. (10) Fixed assets 1. Fixed assets and Disposal of fixed assets Items 20201231 20191231 Fixed assets 26,284,567,956.44 26,123,375,492.40 Disposal of fixed assets Total 26,284,567,956.44 26,123,375,492.40 165 Bengang Steel Plates Co., Ltd. Annual Report 2020 2. Details of fixed assets Transportation Houses and Mechanical Items and other Total buildings equipment equipment 1. Total original value 20191231 12,321,783,218.79 47,625,624,131.28 908,284,781.31 60,855,692,131.38 Increase 692,077,508.12 1,828,190,321.00 7,904,567.97 2,528,172,397.09 in current period Including: Purchase 14,642,922.72 3,900,232.67 18,543,155.39 Transferre d from construction in 692,077,508.12 1,813,547,398.28 4,004,335.30 2,509,629,241.70 progress Merging Decrease in current 21,686,964.04 533,554,926.88 3,269,036.43 558,510,927.35 period Including: Disposal 21,686,964.04 514,479,792.15 3,269,036.43 539,435,792.62 or scrapping Others 19,075,134.73 19,075,134.73 20201231 12,992,173,762.87 48,920,259,525.40 912,920,312.85 62,825,353,601.12 2.Total accumulated depreciation 20191231 5,843,160,062.67 28,243,587,548.42 604,346,279.82 34,691,093,890.91 Increase 300,111,149.37 1,862,985,952.81 27,973,536.13 2,191,070,638.31 in current period Including: Provision 300,111,149.37 1,862,985,952.81 27,973,536.13 2,191,070,638.31 Decrease in current 9,982,342.40 427,152,414.07 3,187,684.13 440,322,440.60 period Including: Disposal 9,982,342.40 427,152,414.07 3,187,684.13 440,322,440.60 or scrapping 20201231 6,133,288,869.64 29,679,421,087.16 629,132,131.82 36,441,842,088.62 3. Total impairment 20191231 38,596,028.99 2,626,719.08 41,222,748.07 Increase 60,614,634.58 60,614,634.58 in current period Including: accrued 60,614,634.58 60,614,634.58 Others Decrease in current 1,632,408.07 1,261,418.52 2,893,826.59 period Including: Disposal 1,632,408.07 1,261,418.52 2,893,826.59 or scrapping 20201231 36,963,620.92 61,979,935.14 98,943,556.06 4. Total net book value of Fixed assets 20201231 6,821,921,272.31 19,178,858,503.10 283,788,181.03 26,284,567,956.44 20191231 6,440,027,127.13 19,379,409,863.78 303,938,501.49 26,123,375,492.40 166 Bengang Steel Plates Co., Ltd. Annual Report 2020 3. Fixed assets idled temporarily Accumulated Net book Items Gross value Impairment Notes depreciation value Houses and buildings 94,707,444.27 59,005,241.87 35,702,202.40 Mechanical equipment 539,534,736.81 474,785,348.84 63,241,353.66 1,508,034.31 Transportation and other 1,042,125.89 1,042,125.89 equipment Total 635,284,306.97 534,832,716.60 98,943,556.06 1,508,034.31 4. Fixed assets leased in through financial leasing As of the end of this reporting period, the value of the fixed assets leased in through financial leasing was RMB 1,114,232,362.74, all of which were leased from the related party Liaoning Hengyi Financial Leasing Co., Ltd. 5. Fixed assets leased out through financial leasing Item Ending balance Houses and buildings 6,755,257.55 Total 6,755,257.55 6. Fixed assets without property rights certificates at the year-end Items Book value Reason Houses and buildings 1,145,596,922.34 Being processed (11) Construction in progress 1. Construction in progress and Construction materials Items 20201231 20191231 Construction in progress 1,837,160,389.66 1,820,264,689.19 Project materials 2,773,325.92 13,588,883.39 Total 1,839,933,715.58 1,833,853,572.58 2. Details of construction in progress 167 Bengang Steel Plates Co., Ltd. Annual Report 2020 20201231 20191231 Items Total Total Gross value Net book value Gross value Net book value impairment impairment Special Steel Electric Furnace Capacity 358,101,195.01 358,101,195.01 62,311,284.01 62,311,284.01 Replacement Project CCPP power 300,907,874.71 300,907,874.71 85,320,752.59 85,320,752.59 generation project Special steel rolling 151,433,585.06 151,433,585.06 126,479,522.35 126,479,522.35 mill renovation project Advanced Treatment and Reuse Project of 98,563,871.96 98,563,871.96 1,300,481.22 1,300,481.22 Reclaimed Water in General Energy Plant 360 square meter 82,878,409.99 82,878,409.99 60,930,506.79 60,930,506.79 sintering machine No. 7 blast furnace dry dust removal and energy-saving 70,402,228.77 70,402,228.77 40,993,916.95 40,993,916.95 transformation of TRT power generation Environmental protection overhaul 66,322,604.36 66,322,604.36 30,937,257.41 30,937,257.41 project of No. 6 blast furnace 360 square meter sintering machine 56,547,049.50 56,547,049.50 55,089,094.50 55,089,094.50 waste heat utilization One-tower desulfurization revamp 31,893,853.65 31,893,853.65 8,469,241.97 8,469,241.97 in the coking plant 168 Bengang Steel Plates Co., Ltd. Annual Report 2020 20201231 20191231 Items Total Total Gross value Net book value Gross value Net book value impairment impairment The overall improvement of Benxi 29,824,289.00 29,824,289.00 20,685,421.72 20,685,421.72 Steel's manufacturing management Flue gas desulfurization and denitrification of No. 7 28,774,283.25 28,774,283.25 17,437,798.33 17,437,798.33 coke oven in the plate coking plant Energy General Plant No. 1 Converter Gas 24,008,553.86 24,008,553.86 Tank System Transformation Project Cold rolled high- strength steel 23,961,023.15 23,961,023.15 renovation project 220kV Substation Project of General 23,302,571.03 23,302,571.03 773,057.78 773,057.78 Energy Plant Chemical Coke Oven Gas Project – Bengang 21,840,791.70 21,840,791.70 21,840,791.70 21,840,791.70 transferred to Liaoning Coal 5#Blast furnace 491,069,345.30 491,069,345.30 relocation overhaul 1700 Hot Rolling 39,806,201.09 39,806,201.09 Improvement Environmental 69,541,903.74 69,541,903.74 protection 169 Bengang Steel Plates Co., Ltd. Annual Report 2020 20201231 20191231 Items Total Total Gross value Net book value Gross value Net book value impairment impairment transformation of No. 4-6 converter 1# converter energy saving and environmental 148,803,402.52 148,803,402.52 protection transformation Newly built 8# single- strand slab caster 100,460,943.24 100,460,943.24 project 5#-7# Oxygen Generator Nitrogen- 34,339,392.96 34,339,392.96 increasing and Energy- saving Modification 8#9# Coke oven wastewater advanced 20,335,268.74 20,335,268.74 treatment Transformation of No. 2 Casting Machine in 81,419,913.88 81,419,913.88 Steelmaking Plant Other 468,398,204.66 468,398,204.66 301,919,190.40 301,919,190.40 Total 1,837,160,389.66 1,837,160,389.66 1,820,264,689.19 1,820,264,689.19 170 Bengang Steel Plates Co., Ltd. Annual Report 2020 3. The change of major construction in progress Budget Input Accumulated Including: Capi Other Prog (in 10 of amount of capitalized taliza Source of Project 20191231 Increase Transfer to FA decrea 20201231 ress thousand Budget capitalized interest of tion fund se (%) yuan) (%) interest current period rate Special Steel Electric Furnace Self-raised Capacity 161,761.00 62,311,284.01 295,789,911.00 358,101,195.01 22.00 20.00 fund Replacement Project CCPP power Self-raised 106,000.00 85,320,752.59 215,587,122.12 300,907,874.71 28.00 30.00 6,359,003.29 3,831,836.54 4.35 generation project fund & Loan Special steel Self-raised rolling mill 59,607.00 126,479,522.35 29,779,762.70 4,825,699.99 151,433,585.06 26.00 25.00 3,905,897.06 1,923,970.35 4.35 fund & Loan renovation project Advanced Self-raised Treatment and 17,000.00 1,300,481.22 97,263,390.74 98,563,871.96 57.00 60.00 fund Reuse Project of 171 Bengang Steel Plates Co., Ltd. Annual Report 2020 Budget Input Accumulated Including: Capi Other Prog (in 10 of amount of capitalized taliza Source of Project 20191231 Increase Transfer to FA decrea 20201231 ress thousand Budget capitalized interest of tion fund se (%) yuan) (%) interest current period rate Reclaimed Water in General Energy Plant No. 7 blast furnace dry dust removal and Self-raised energy-saving 9,332.00 40,993,916.95 29,408,311.82 70,402,228.77 75.00 70.00 293,980.07 123,401.63 4.35 fund & Loan transformation of TRT power generation Environmental protection Self-raised 25,225.00 30,937,257.41 35,385,346.95 66,322,604.36 75.00 70.00 overhaul project of fund No. 6 blast furnace One-tower 7,000.00 8,469,241.97 23,424,611.68 31,893,853.65 45.00 40.00 Self-raised 172 Bengang Steel Plates Co., Ltd. Annual Report 2020 Budget Input Accumulated Including: Capi Other Prog (in 10 of amount of capitalized taliza Source of Project 20191231 Increase Transfer to FA decrea 20201231 ress thousand Budget capitalized interest of tion fund se (%) yuan) (%) interest current period rate desulfurization fund revamp in the coking plant 5#Blast furnace Self-raised relocation 124,086.50 491,069,345.30 335,096,315.94 826,165,661.24 - 66.00 70.00 31,410,224.05 13,027,763.86 4.35 fund & Loan overhaul 1700 Hot Rolling Self-raised 25,000.00 39,806,201.09 139,473,010.30 179,279,211.39 - 71.00 70.00 Improvement fund No. 7 blast furnace of the plate iron 100.0 Self-raised plant builds a new 4,200.00 31,557,158.36 31,557,158.36 - 75.00 0 fund 4# hot blast furnace Perfect function of 100.0 Self-raised 6,332.00 45,544,017.06 45,544,017.06 - 71.00 hot blast stove in 0 fund 173 Bengang Steel Plates Co., Ltd. Annual Report 2020 Budget Input Accumulated Including: Capi Other Prog (in 10 of amount of capitalized taliza Source of Project 20191231 Increase Transfer to FA decrea 20201231 ress thousand Budget capitalized interest of tion fund se (%) yuan) (%) interest current period rate plate ironmaking plant Environmental protection Self-raised 27,000.00 69,541,903.74 92,467,786.33 162,009,690.07 - 60.00 95.00 2,799,798.26 1,548,185.22 4.35 transformation of fund & Loan No. 4-6 converter 1# converter energy saving and 26,54 Self-raised environmental 21,800.00 148,803,402.52 17,992,331.86 140,247,061.81 8,672. - 64.00 70.00 1,770,758.63 821,940.53 4.35 fund & Loan protection 57 transformation Newly built 8# Self-raised single-strand slab 64,341.00 100,460,943.24 249,198,752.55 349,659,695.79 - 54.00 60.00 fund caster project 5#-7# Oxygen 4,726.10 34,339,392.96 4,947,418.50 39,286,811.46 - 83.00 85.00 Self-raised 174 Bengang Steel Plates Co., Ltd. Annual Report 2020 Budget Input Accumulated Including: Capi Other Prog (in 10 of amount of capitalized taliza Source of Project 20191231 Increase Transfer to FA decrea 20201231 ress thousand Budget capitalized interest of tion fund se (%) yuan) (%) interest current period rate Generator fund Nitrogen- increasing and Energy-saving Modification The cold rolling mill (three cold process) pickling rolling and 100.0 Self-raised continuous 5,600.00 54,854,105.81 54,854,105.81 - 97.00 0 fund stripping galvanizing line have perfect functions Renewal of 2# 5,800.00 56,302,688.85 56,302,688.85 - 97.00 100.0 Self-raised 175 Bengang Steel Plates Co., Ltd. Annual Report 2020 Budget Input Accumulated Including: Capi Other Prog (in 10 of amount of capitalized taliza Source of Project 20191231 Increase Transfer to FA decrea 20201231 ress thousand Budget capitalized interest of tion fund se (%) yuan) (%) interest current period rate and 7# Casting 0 fund Machine Equipment in Plate Steelmaking Plant The cold rolling mill (first cold process) silicon 100.0 Self-raised 5,200.00 48,647,411.29 48,647,411.29 - 93.00 steel production 0 fund line has perfect functions 8#9# Coke oven wastewater 100.0 Self-raised 2,306.00 20,335,268.74 20,335,268.74 - 88.00 advanced 0 fund treatment 176 Bengang Steel Plates Co., Ltd. Annual Report 2020 Budget Input Accumulated Including: Capi Other Prog (in 10 of amount of capitalized taliza Source of Project 20191231 Increase Transfer to FA decrea 20201231 ress thousand Budget capitalized interest of tion fund se (%) yuan) (%) interest current period rate Upgrading and Transformation of 4#, 5# Converter 100.0 Self-raised 3,800.00 35,253,273.23 35,253,273.23 - 92.00 Equipment in 0 fund Plate Steelmaking Plant Transformation of No. 2 Casting Self-raised 10,090.00 81,419,913.88 1,418,076.05 82,837,989.93 - 82.00 85.00 284,551.59 155,425.89 4.35 Machine in fund & Loan Steelmaking Plant 26,54 1,077,625,213. Total 1,341,588,827.97 1,839,390,803.14 2,076,805,745.02 8,672. 46,824,212.95 21,432,524.02 52 57 177 Bengang Steel Plates Co., Ltd. Annual Report 2020 4. There is no impairment of construction in progress during the current period. 5. Construction materials 20201231 20191231 Items Net Book Net Book Gross value Impairment Gross value Impairment Value Value Construction 2,773,325.92 2,773,325.92 13,588,883.39 13,588,883.39 materials Total 2,773,325.92 2,773,325.92 13,588,883.39 13,588,883.39 (12) Intangible assets 1. Details of intangible assets Items Land use right Software Total 1.Total gross value 20191231 327,028,797.84 310,401.55 327,339,199.39 Increase Including: Purchase Internal Research and Development Merger Decrease Including: Disposal Invalid and terminated confirmation 20201231 327,028,797.84 310,401.55 327,339,199.39 2. Total of Accumulated Amortization 20191231 55,717,267.98 121,908.07 55,839,176.05 Increase 6,540,576.22 26,794.58 6,567,370.80 Including: Accrued 6,540,576.22 26,794.58 6,567,370.80 Decrease Including: Disposal Invalid and terminated confirmation 20201231 62,257,844.20 148,702.65 62,406,546.85 3. Total Impairment 20191231 Increase Including: Accrued Decrease Including: Disposal Invalid and terminated confirmation 20201231 4. Total Net value 20201231 264,770,953.64 161,698.90 264,932,652.54 20191231 271,311,529.86 188,493.48 271,500,023.34 178 Bengang Steel Plates Co., Ltd. Annual Report 2020 2. Land use right without Certificate of Land use right at the year-end None. (13) Deferred tax asset and deferred tax liability 1. Undedicated deferred tax asset 20201231 20191231 Items Deductible Deductible Deferred tax temporary Deferred tax asset temporary asset differences differences Impairment of assets 398,431,973.43 99,607,993.35 378,651,125.80 94,662,781.44 Internal unrealized 74,424,898.92 18,606,224.73 53,312,397.14 13,328,099.29 profit Depreciation of fixed 333,978,859.03 83,494,714.76 333,978,859.03 83,494,714.76 assets Total 806,835,731.38 201,708,932.84 765,942,381.97 191,485,595.49 2. Unrecognized deferred tax assets Items 20201231 20191231 Deductible temporary differences 305,702,137.30 428,163.12 Deductible losses 54,629,940.42 653,832,187.01 Total 360,332,077.72 654,260,350.13 3. The deductible loss of unrecognized deferred tax assets due in the following period Items 20201231 20191231 Notes Year 2020 19,216,380.38 Year 2021 10,945,961.04 10,981,383.41 Year 2022 1,001,166.72 589,299,581.01 Year 2023 14,114,953.21 16,327,268.19 Year 2024 17,910,573.13 18,007,574.02 Year 2025 10,657,286.32 Total 54,629,940.42 653,832,187.01 179 Bengang Steel Plates Co., Ltd. Annual Report 2020 (14) Other non-current assets 20201231 20191231 Items Gross value Impairment Net book value Gross value Impairment Net book value Prepaid long- 995,840,320.65 995,840,320.65 708,502,552.50 708,502,552.50 term assets Total 995,840,320.65 995,840,320.65 708,502,552.50 708,502,552.50 180 Bengang Steel Plates Co., Ltd. Annual Report 2020 (15) Short-term loans 1. Short-term loan disclosed by type Items 20201231 20191231 Pledge loans Mortgage loans Guaranteed loans 9,687,731,000.00 12,731,478,000.00 Credit loans 380,000,000.00 420,000,000.00 Total 10,067,731,000.00 13,151,478,000.00 2.There is no short-term loans that were overdue at the end of the reporting period (16) Notes payable Items 20201231 20191231 Bank acceptance bill 7,747,043,186.29 8,897,442,732.91 Commercial acceptance bill 857,106,162.13 1,174,963,839.77 Domestic letter of credit 1,210,000,000.00 1,756,108,104.27 Total 9,814,149,348.42 11,828,514,676.95 At the end of the reporting period, there is no notes payable due and unpaid. (17) Accounts payable (1) Accounts payable disclosed by category Items 20201231 20191231 Accounts payable for goods 5,122,416,750.84 3,481,176,373.75 Accounts payable for labor 18,697,483.74 56,959,052.87 Accounts payable for project and equipment 513,842,739.32 581,909,120.17 Repair expense and others 259,271,282.92 407,468,483.48 Total 5,914,228,256.82 4,527,513,030.27 (2) Significant accounts payable aging over one year Of which: more than Items Ending balance one year Company 1 36,218,300.00 36,218,300.00 Company 2 35,081,745.24 30,361,745.24 181 Bengang Steel Plates Co., Ltd. Annual Report 2020 Company 3 23,579,692.14 23,379,692.14 Company 4 15,810,625.07 15,810,625.07 Company 5 14,200,000.00 14,200,000.00 Company 6 14,126,435.78 12,651,035.78 Total 139,016,798.23 Other notes: The above significant accounts payable aged over one year have not yet reached the settlement conditions. (18) Advance from customers 1. Advance from customers disclosed by category Items 20201231 20191231 Advance for goods 4,429,821,526.79 Total 4,429,821,526.79 2. There is no significant advance from customers aging over one year. (19) Contract liabilities 1. Details of contract liabilities Items 20201231 Advance for goods 4,458,671,819.90 Total 4,458,671,819.90 As of December 31, 2020, the value-added tax received in advance from customers was RMB 579,627,336.58 (December 31, 2019: RMB 509,625,485.38) and disclosed as other current liabilities. (20) Employee benefits payable 1. Employee benefits payable Items 20191231 Increase Decrease 20201231 Short-term employee 22,208,442.94 1,813,558,032.80 1,810,017,573.44 25,748,902.30 benefits Post-employment benefits - defined contribution 62,312.32 166,603,750.88 166,665,480.25 582.95 plans Termination benefits 1,427,419.30 43,733.23 1,471,152.53 Other benefits due within one year Total 23,698,174.56 1,980,205,516.91 1,978,154,206.22 25,749,485.25 2. Short-term employee benefits Items 20191231 Increase Decrease 20201231 (1) Salary, bonus, 12,974,335.94 1,389,001,397.17 1,385,384,616.00 16,591,117.11 allowance and subsidy 182 Bengang Steel Plates Co., Ltd. Annual Report 2020 Items 20191231 Increase Decrease 20201231 (2) Employee welfare 137,995,433.01 137,995,433.01 (3) Social Insurance 756,616.34 131,390,670.04 131,493,573.64 653,712.74 Including: Medical 106,650.30 102,065,806.41 102,168,773.60 3,683.11 insurance Work injury 649,966.04 27,066,935.19 27,066,871.60 650,029.63 insurance Maternity 2,257,928.44 2,257,928.44 insurance (4) Housing funds 6,855,601.00 119,143,709.00 119,140,115.00 6,859,195.00 (5) Union funds and staff 1,621,889.66 36,026,823.58 36,003,835.79 1,644,877.45 education fee (6) Short-term compensated absences (7) Short-term profit - sharing scheme Total 22,208,442.94 1,813,558,032.80 1,810,017,573.44 25,748,902.30 3. Defined contribution plans Items 20191231 Increase Decrease 20201231 Basic pension fund 60,423.10 161,461,180.42 161,521,038.24 565.28 Unemployment insurance 1,889.22 5,142,570.46 5,144,442.01 17.67 Total 62,312.32 166,603,750.88 166,665,480.25 582.95 (21) Taxes payable Items 20201231 20191231 Value-added tax 22,541,925.74 246,921,117.21 Corporate income tax 9,589,798.62 6,250,204.39 City maintenance and construction tax 4,490,656.56 11,416,274.65 House property tax 3,661,600.13 3,445,290.84 Educational surcharges 3,211,296.48 8,146,826.78 Land holding tax 1,180,402.66 1,128,141.09 Environmental tax 8,398,902.77 5,264,008.42 Others 2,227,498.00 2,253,951.42 Total 55,302,080.96 284,825,814.80 (22) Other payables Items 20201231 20191231 Interest payables 10,818,986.30 Dividends payables 183 Bengang Steel Plates Co., Ltd. Annual Report 2020 Items 20201231 20191231 Other payables 709,448,301.92 651,882,758.67 Total 709,448,301.92 662,701,744.97 1. Interests payable Items 20201231 20191231 Loan interests 10,818,986.30 Total 10,818,986.30 2. Other payables (1) Other payables disclosed by nature Items 20201231 20191231 Deposit 1,713,563.89 1,933,435.69 Margin 98,316,454.89 86,166,961.89 Accounts 525,775,209.97 454,536,559.31 Others 83,643,073.17 109,245,801.78 Total 709,448,301.92 651,882,758.67 (2) No significant other payables aged over one year (23) Non-current liabilities due within one year Items 20201231 20191231 Long-term loans due within one year 1,287,630,361.43 234,474,657.99 Bond payables due within one year 20,400,000.00 Long-term payables due within one year Total 1,308,030,361.43 234,474,657.99 Notes: RMB 255,943,331.43 of long-term due within one year is guaranteed loans, and RMB 1,031,687,030.00 is credit loans. (24) Other current liabilities Items 20201231 20191231 Output tax to be transferred 579,627,336.58 509,625,485.38 Total 579,627,336.58 509,625,485.38 Please refer to “Note 3 (31) Changes in Important Accounting Policies and Accounting Estimates” for details of the difference between the beginning balance and the ending balance of the previous year (December 31, 2019). (25) Long-term loans 184 Bengang Steel Plates Co., Ltd. Annual Report 2020 Long-term loans disclosed by category Categories 20201231 20191231 Pledged loans 622,600,000.00 622,600,000.00 Mortgage loan Guaranteed loans 798,714,362.65 1,106,159,800.73 Credit loans 2,081,620,065.00 3,120,916,110.00 Total 3,502,934,427.65 4,849,675,910.73 (26) Bonds payables (1) Bonds payables disclosed by category Items 20201231 20191231 Convertible Bond 5,752,229,339.52 Total 5,752,229,339.52 185 Bengang Steel Plates Co., Ltd. Annual Report 2020 (2) Changes in Bonds payables ( Excluding other financial instruments such as preferred stocks and perpetual bonds classified as financial liabilities) Issue Term to Balance at the end Interest accrued at Premium and discount Balance at the end of Items Book value Issuance amount Current issue date maturity of the previous year face value amortization the current year Convertible Jun 29, 2 Bond (Bond 6,800,000,000.00 6 years 6,800,000,000.00 6,800,000,000.00 20,400,000.00 1,047,770,660.48 5,752,229,339.52 020 code:127018) Total 6,800,000,000.00 6,800,000,000.00 6,800,000,000.00 20,400,000.00 1,047,770,660.48 5,752,229,339.52 Description: Approved by the China Securities Regulatory Commission "Zheng Jian Xu Ke [2020] No. 46", the Company publicly issued 68 million convertible corporate bonds on June 29, 2020, each with a face value of 100 yuan and a total issuance of RMB 6.8 billion. The term to maturity is 6 years from June 29, 2020 to June 28, 2026. The bond coupon rate is 0.6% in the first year, 0.8% in the second year, 1.5% in the third year, 2.9% in the fourth year, 3.8% in the fifth year, and 5.0% in the sixth year. The interest payment method is once a year, and the starting date of interest calculation is the first day of issuance of the convertible bond, that is, June 29, 2020. The interest payment date of each year is the first day of the issuance of convertible bonds (June 29, 2020) on the day of each full year. If that day is a legal holiday or a rest day, it will be postponed to the next working day, and no interest will be paid during the postponement period. Every two adjacent interest payment dates constitute an interest calculation year. In the initial measurement of the convertible corporate bonds issued by the Company this time, the fair value of the corresponding liability component after deducting the allocated issuance expenses is RMB 5,612,624,636.40, which is included in the bonds payable; the fair value of the corresponding equity component 186 Bengang Steel Plates Co., Ltd. Annual Report 2020 after deducting the allocated issuance cost of the Company is RMB 1,146,290,662.42, which is included in other equity instruments. In the subsequent measurement, the liability part is measured and adjusted by amortized cost using the effective interest rate method. (3) Description of the conditions and time for conversion of convertible corporate bonds Approved by Shenzhen Stock Exchange "Shen Zheng Shang [2020] No. 656", the Company’s RMB 6.80 billion convertible corporate bonds will be listed on the Shenzhen Stock Exchange on August 4, 2020, and the abbreviation is "Bengang Convertible Bonds". The bond code is "127018". The conversion period of the convertible corporate bonds issued this time is from the first trading day after six months of the issuance of the convertible corporate bonds (July 3, 2020) to the maturity date of the convertible corporate bonds, that is, from January 4, 2021 to June 28, 2026. The initial conversion price of the convertible bonds is RMB 5.03 per share. (4) Notes to other financial instruments classified as financial liabilities None. 187 Bengang Steel Plates Co., Ltd. Annual Report 2020 (27) Long-term payables Items 20201231 20191231 Long-term payables 1,114,232,362.74 516,939,408.14 Special payables Total 1,114,232,362.74 516,939,408.14 Long-term payables Items 20201231 20191231 Financing lease payments 1,114,232,362.74 516,939,408.14 Including: unrealized financing 779,232,152.85 427,091,325.39 xpenses Total 1,114,232,362.74 516,939,408.14 Notes: At the end of the reporting period, the amount of unrealized financing expenses due to finance lease payments was RMB 779,232,152.85. The minimum financial lease payment to be paid after the balance sheet date was RMB 1,893,464,515.59. The Company needs to pay interest on time, and the principal is paid in one lump-sum after the lease contract expires. The lease contracts that have not yet been executed are due for more than 3 years. (28) Deferred income Items 20191231 Increase Decrease 20201231 Reason Government 208,955,407.30 27,056,919.00 81,560,493.07 154,451,833.23 subsidy Total 208,955,407.30 27,056,919.00 81,560,493.07 154,451,833.23 188 Bengang Steel Plates Co., Ltd. Annual Report 2020 Projects of government subsidies: Related Transfer to Other to assets Items 20191231 Increase current profit 20201231 decrease or and loss income Cold-rolled high-strength steel reconstruction project 150,000,000.00 50,000,000.00 100,000,000.00 Assets 7 sets of 130 tons combustion boiler flue gas desulfurization project in power plant 14,400,000.00 4,800,000.00 9,600,000.00 Assets Production line of high-grade electro-galvanized sheet for automobile 8,208,000.00 8,208,000.00 Assets Advanced Treatment Project of Carbon Fiber Wastewater in 9,500,000.00 9,500,000.00 Assets Dongfeng Plant Area of Plate Coking Plant Power plant three power plant cogeneration reform project 6,000,000.00 2,000,000.00 4,000,000.00 Assets Industrial enterprise energy management center construction demonstration project 4,640,000.00 2,320,000.00 2,320,000.00 Assets Introduce special funds for overseas advanced and applicable technologies 4,000,000.00 2,000,000.00 2,000,000.00 Assets Desulfurization and Denitrification Project of Coal-fired Boiler in High-pressure Workshop of Bengang Power Plant 4,200,000.00 600,000.00 3,600,000.00 Assets Research and development of high-strength steel for the third generation of automobiles 2,900,000.00 580,000.00 2,320,000.00 Assets Energy saving and environmental protection project for 1,160,000.00 1,160,000.00 Assets sintering machine in ironworks Bengang Group Co., Ltd. Automotive Panel Engineering 1,000,000.00 1,000,000.00 Assets Laboratory Project Construction Automatic air quality monitoring system 105,000.00 70,000.00 35,000.00 Assets Liaoning Artisan Subsidy 100,002.97 99,981.08 21.89 Assets “Steel for high-strength pipelines under low-temperature and 121,000.00 90,322.26 30,677.74 Assets high-pressure service conditions” Project national support 189 Bengang Steel Plates Co., Ltd. Annual Report 2020 Related Transfer to Other to assets Items 20191231 Increase current profit 20201231 decrease or and loss income funds 2018 Municipal Skill Master Workstation Fee 187,039.34 120,423.00 66,616.34 Assets Construction Project of Bengang Automotive Sheet Engineering Laboratory 1,000,000.00 -1,000,000.00 Assets Research and development of anti-oxidation hot forming steel PHS1500A 250,000.00 84,847.73 165,152.27 Assets Construction of professional technology innovation platform for automobile steel industry 1,000,000.00 800,000.00 200,000.00 Assets Research on the Influence Mechanism and Control of Rare Earth Oxide Sulfide on Automobile Steel Plasticity 184,364.99 184,364.99 Assets 2019 Municipal Skills Master Workstation Cost 180,000.00 180,000.00 Assets 2020 Ecological Civilization Construction Project (Special Steel Electric Furnace Upgrade Project) 20,000,000.00 20,000,000.00 Assets Liaoning Province "Hundred, Thousand, Thousand, Thousand Talents Project" funding project in 2018 250,000.00 250,000.00 Assets Supplementary Fund for Relocation of Railway Transport 1,626,919.00 1,626,919.00 Income Liaoning Provincial Local Financial Supervision and Administration Bureau to support the development of special 5,000,000.00 5,000,000.00 Income funds for enterprises to go public Total 208,955,407.30 27,056,919.00 80,560,493.07 -1,000,000.00 154,451,833.23 190 Bengang Steel Plates Co., Ltd. Annual Report 2020 (29) Share capital Increase/decrease (+ , - ) Items 20191231 Bonus Transferred from 20201231 Issuing of new share Others Subtotal shares reserves Capital shares 3,875,371,532.00 3,875,371,532.00 (30) Other equity instruments 1. Information of other financial instruments such as preferred stocks and perpetual bonds issued at the end of the period The Company’s other equity instruments at the end of the period are the equity part of convertible corporate bonds. For details, please refer to “Note 5 (26) Bonds payable”. 2. Changes in financial instruments such as preferred stocks and perpetual bonds issued at the end of the period Notes: 20191231 Increase Decrease 20201231 Items Book Number Number Book value Number Book value Number Book value value Convertible 68,000,000 1,146,290,662.42 68,000,000 1,146,290,662.42 corporate bonds Total 68,000,000 1,146,290,662.42 68,000,000 1,146,290,662.42 As of December 31, 2020, the convertible corporate bonds issued this time have not yet reached the conversion period, and there is no conversion into A-share ordinary shares in this period. 191 Bengang Steel Plates Co., Ltd. Annual Report 2020 (31) Capital reserves Items 20191231 Increase Decrease 20201231 Capital premium 12,227,292,378.47 12,227,292,378.47 Other capital reserves 115,917,468.82 115,917,468.82 Total 12,343,209,847.29 12,343,209,847.29 (32) Special Reserves Items 20191231 Increase Decrease 20201231 Safety production cost 212,687.41 54,000,536.58 53,912,811.85 300,412.14 Total 212,687.41 54,000,536.58 53,912,811.85 300,412.14 (33) Surplus Reserves Items 20191231 20200101 Increase Decrease 20201231 Statutory surplus 961,105,529.85 961,105,529.85 961,105,529.85 reserves Total 961,105,529.85 961,105,529.85 961,105,529.85 (34) Undistributed Profits Items 2020 2019 Before adjustments: undistributed profits at last year-end 2,307,765,664.62 1,945,887,269.82 Adjustments of the beginning distributed profits (increase + / decease -) After adjustments: undistributed profit at this year- 2,307,765,664.62 1,945,887,269.82 beginning Add: undistributed profit belonging to parent company 384,252,740.78 555,646,971.40 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 2,692,018,405.40 2,307,765,664.62 (35) Operating income and operating cost 2020 2019 Items Revenue Cost Revenue Cost Principal business 45,321,849,577.55 43,322,474,075.93 46,805,252,792.90 43,900,514,006.74 Other business 3,362,943,108.03 3,069,706,486.66 5,936,100,789.38 5,310,900,638.88 Total 48,684,792,685.58 46,392,180,562.59 52,741,353,582.28 49,211,414,645.62 192 Bengang Steel Plates Co., Ltd. Annual Report 2020 Details for operating income: Principal Item Other business business Classified by business area 45,321,849,577.55 3,362,943,108.03 Including:Domestic 40,766,384,160.23 3,362,943,108.03 Abroad 4,555,465,417.32 Classified by the time of commodity transfer 45,321,849,577.55 3,362,943,108.03 Including: recognize at a certain point in time 45,321,849,577.55 3,362,352,384.22 recognize over a certain period of time 590,723.81 Total 45,321,849,577.55 3,362,943,108.03 (36) Tax and surcharges Items 2020 2019 City maintenance and construction tax 39,002,807.95 74,291,089.29 Educational surcharge 28,155,477.26 53,346,630.36 Housing property tax 79,753,764.80 77,359,590.55 Land use right tax 13,090,099.93 13,076,581.16 Environmental tax 28,417,193.46 22,681,208.92 Stamp duty 26,523,801.64 29,816,392.95 Others 928,675.06 1,008,586.80 Total 215,871,820.10 271,580,080.03 (37) Selling and distribution expenses Items 2020 2019 Freight 912,729,271.74 Port surcharges 70,973,850.23 Import and export agency fee 55,316,442.53 63,097,328.89 Salary and benefits 25,955,134.20 25,965,599.95 Package fee 6,179,183.22 7,564,585.54 Others 9,828,520.26 16,358,267.35 Total 97,279,280.21 1,096,688,903.70 193 Bengang Steel Plates Co., Ltd. Annual Report 2020 (38) General and administrative expenses Items 2020 2019 Salary and benefits 368,149,507.51 374,106,639.18 Repair expense 216,309,807.28 230,168,663.91 Land use right fee 65,600,418.40 59,957,197.92 Depreciation 39,060,982.28 44,362,834.97 Heating fee 25,929,633.73 28,855,893.31 Water resources fee 18,956,412.81 27,515,155.10 Sewage charges 13,186,781.11 11,345,616.35 Others 45,632,751.69 55,633,840.82 Total 792,826,294.81 831,945,841.56 (39) Research and development expenses Items 2020 2019 Depreciation, materials and compensation, etc. 37,989,623.28 30,780,463.74 Total 37,989,623.28 30,780,463.74 (40) Financial expenses Items 2020 2019 Interest expenditure 1,028,857,436.14 948,799,627.90 Less: Interest income 378,523,984.03 333,750,262.79 Exchange loss -307,919,937.19 44,724,851.35 Others 22,361,640.70 22,068,472.77 Total 364,775,155.62 681,842,689.23 (41) Other income Items 2020 2019 Government subsidy 81,193,591.56 83,914,522.47 Others 111,590.36 2,084.65 Total 81,305,181.92 83,916,607.12 (42) Income on investment Items 2020 2019 194 Bengang Steel Plates Co., Ltd. Annual Report 2020 Income on long-term equity investment by equity method 374,119.86 452,582.71 Income on disposal of financial assets holding for trading 13,500,000.00 Dividend income obtained during the holding period of other 77,242.47 equity instrument investments Income on bank short-term financial products 605,795.19 Total 13,951,362.33 1,058,377.90 (43) Credit impairment losses Items 2020 2019 Loss from bad debts of account receivable 302,302,638.01 4,618,663.91 Loss from impairment of account receivable financing Loss from bad debts of other receivables 1,717,123.74 1,923,236.71 Total 304,019,761.75 6,541,900.62 Note: Loss is shown as positive figures (44) Assets impairment loss Items 2020 2019 Impairment of inventory and contract 6,571,234.79 43,256,982.72 performance costs Impairment of fixed assets 60,614,634.58 Total 67,185,869.37 43,256,982.72 Note: Loss is shown as positive figures (45) Asset disposal income The amount Items 2020 2019 recognized in non- recurring profit Disposal gains or losses arising from disposal of 325,651.61 3,441,646.67 325,651.61 fixed assets not held for sale 195 Bengang Steel Plates Co., Ltd. Annual Report 2020 The amount Items 2020 2019 recognized in non- recurring profit Total 325,651.61 3,441,646.67 325,651.61 (46) Non-operating income The amount Items 2020 2019 recognized in non- recurring profit Non-current assets scrapped gains 2,703,102.88 9,476,065.29 2,703,102.88 Debt restructuring gain 32,800.02 50,640.00 32,800.02 Others 1,592,660.62 779,757.58 1,592,660.62 Total 4,328,563.52 10,306,462.87 4,328,563.52 (47) Non-operating expense The amount Items 2020 2019 recognized in non- recurring profit Donations Non-current assets scrapped loss 95,724,280.44 90,209,742.22 95,724,280.44 Others Total 95,724,280.44 90,209,742.22 95,724,280.44 (48) Income tax expenses 1. Income tax expenses Items 2020 2019 Income tax payable for the current year 35,594,567.91 18,987,986.70 Adjustment of deferred income tax -10,223,337.35 -33,048.28 Total 25,371,230.56 18,954,938.42 2. Accounting profit and income tax expense adjustment process Items 2020 Total profit 416,850,796.79 Income tax expense calculate according to the official or applicable tax rate 104,212,699.20 Effect of different tax rates applied by subsidiaries Effect of adjustment of the income tax expense of prior period 2,107,736.22 196 Bengang Steel Plates Co., Ltd. Annual Report 2020 Items 2020 Effect of non-taxable income -93,529.97 Effect of undeductible costs, expenses or losses 122,123.16 Effect of use of deductible losses of unrecognized deferred tax asset of prior period -158,710,195.23 Effect of deductible temporary differences or deductible losses of unrecognized deferred tax asset of current period 77,732,397.18 Changes in the balance of deferred income tax assets and liabilities at the beginning of the period due to the additional deductible expenses and tax rate adjustments required by the tax law Income tax expenses 25,371,230.56 (49) Earnings 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 2020 2019 Consolidated net profit attributable to 384,252,740.78 555,646,971.40 ordinary shareholders of parent company The weighted average number of common 3,875,371,532.00 3,875,371,532.00 shares issued by the company Basic earnings per share 0.099 0.143 Including: basic earnings per share for 0.099 0.143 continuing 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): Since convertible bonds have caused anti-dilution, diluted earnings per share are disclosed in accordance with basic earnings per share. (50) Notes of statement of cash flows 197 Bengang Steel Plates Co., Ltd. Annual Report 2020 1. Cash received related to other operating activities Items 2020 2019 Withdraw of current accounts, advance for another 415,131,996.05 80,209,527.36 Interest income 365,343,047.49 289,867,473.89 Special subsidy income 27,624,696.63 3,378,441.11 Non-operating income 673,106.88 9,799.92 Others 8,181,857.38 3,620,413.94 Total 816,954,704.43 377,085,656.22 2. Cash paid related to other operating activities Items 2020 2019 Current accounts, advance for another 347,552,655.29 67,238,789.58 Sales expenses 72,862,184.48 139,977,333.30 Administrative expenses 44,664,338.51 77,588,717.78 Bank charges 20,710,711.34 14,562,642.52 Others 1,489,830.36 23,593,941.76 Total 487,279,719.98 322,961,424.94 3. Cash received related to other financing activities Items 2020 2019 Margin for bill, letter of guarantee and letter of credit 1,076,807,422.35 1,571,269,971.97 Proceeds from negotiation 253,068,892.21 Total 1,329,876,314.56 1,571,269,971.97 4. Cash paid related to other financing activities Items 2020 2019 Margin for bill, letter of guarantee and letter of credit 34,424,434.31 1,612,133.00 Convertible bond issuance costs 41,084,701.18 Others 8,731,273.67 Total 75,509,135.49 10,343,406.67 (51) Supplementary details of statement of cash flows 1. Supplementary details for statement of cash flows 198 Bengang Steel Plates Co., Ltd. Annual Report 2020 Items 2020 2019 1. A reconciliation of net profit to cash flows from operating activities: Net profit 391,479,566.23 556,860,488.98 Add: Credit impairment loss 304,019,761.75 6,541,900.62 Impairment of assets 67,185,869.37 43,256,982.72 Depreciation of fixed assets 2,191,070,638.31 2,432,266,554.80 Amortization of intangible assets 6,567,370.80 6,562,417.70 Amortization of long-term deferred expenses Losses proceeds from disposal of fixed assets, intangible -325,651.61 -3,441,646.67 assets and other long-term assets (Earnings marked“-”) Scrapped losses from fixed assets (Earnings 93,021,177.56 80,733,676.93 marked“-”) Loss from changes in fair value (Earnings marked“-”) Financial expenses (Earnings marked“-”) 720,937,498.95 1,009,666,817.96 Investment losses (Earnings marked“-”) -13,951,362.33 -1,058,377.90 Deferred tax assets reduction (Addition marked“-”) -10,223,337.35 -33,048.28 Deferred tax liabilities increased (Reduction marked“-”) Reduction of inventory (Addition marked“-”) -1,302,981,909.11 2,992,064,351.09 Operating receivable items reduction (Addition -2,847,086,786.29 1,617,190,398.59 marked“-”) Operating payable items increase (Less marked"-") -1,638,713,049.57 -1,762,786,475.38 Others Net cash flows generated from operating activities -2,039,000,213.29 6,977,824,041.16 2. Payments of investing and financing activities not involving cash: Liabilities transferred to capital Convertible corporate bonds due within one year Fixed assets financed by leasing 3. The net increase in cash and cash equivalents: Ending balance of cash 9,229,417,595.12 13,441,414,988.58 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 -4,211,997,393.46 1,688,866,366.61 2. The structure of cash and cash equivalents Items 20201231 20191231 1. Cash 9,229,417,595.12 13,441,414,988.58 Including: Cash on hand 3,026.68 5,588.98 Bank deposits available on demand 9,229,414,568.44 13,441,409,399.60 199 Bengang Steel Plates Co., Ltd. Annual Report 2020 Items 20201231 20191231 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 9,229,417,595.12 13,441,414,988.58 Including: Cash and cash equivalents limited to use by the parent company of other subsidiary in the group (52) Assets of which ownership or right to use are restricted Items Ending balance Reason Cash at bank and on hand 3,897,249,320.14 Deposit for notes and letter of credit Receivables financing 887,473,044.29 Pledged for acceptance bill Other equity instrument 1,037,735,849.00 Pledged for loans investments Fixed assets 94,790,118.09 Mortgage for fund borrowing Intangible assets 37,116,386.66 Mortgage for fund borrowing Total 5,954,364,718.18 (53) Foreign currency monetary items 1. Foreign currency monetary items Ending balance in Exchange rate at Ending balance Items foreign currency the year-end translated to RMB Cash at bank and on hand 470,322,450.33 Including: USD 71,983,473.35 6.5249 469,684,965.31 EUR 50,753.26 8.0250 407,294.97 HKD 273,514.80 0.8416 230,190.05 Short-term loans 1,239,731,000.00 Including: USD 190,000,000.00 6.5249 1,239,731,000.00 Non-current liabilities due within one year 108,050,361.43 Including: USD 4,700,000.00 6.5249 30,667,030.00 EUR 9,460,158.74 8.0250 75,917,773.89 JPY 23,176,000.00 0.0632 1,465,557.54 200 Bengang Steel Plates Co., Ltd. Annual Report 2020 Ending balance in Exchange rate at Ending balance Items foreign currency the year-end translated to RMB Long-term loans 388,134,427.65 Including: USD 11,850,000.00 6.5249 77,320,065.00 EUR 37,635,016.95 8.0250 302,021,017.45 JPY 139,056,000.00 0.0632 8,793,345.20 2. The Company has no overseas operating entities. 201 Bengang Steel Plates Co., Ltd. Annual Report 2020 (54) Government subsidies 1. Government subsidies related to assets Items listed on The amount included in the current profit or loss or offsetting the Items included in the current Item Amount the balance loss of related costs profit or loss or offsetting the sheet 2020 2019 loss of related costs Cold-rolled high-strength steel reconstruction Deferred 250,000,000.00 50,000,000.00 50,000,000.00 Other income project income Production line of high-grade electro- Deferred 41,040,000.00 8,208,000.00 8,208,000.00 Other income galvanized sheet for automobile income 7 130t Boilers Flue Gas Desulfurization Deferred 24,000,000.00 4,800,000.00 4,800,000.00 Other income Renovation Project of Power Plant income Waste heat utilization project and Deferred desulfurization transformation project of 21,020,000.00 4,204,000.00 Other income income sintering machine in ironworks Deferred Environmental Pollution Control Project 26,170,000.00 3,620,000.00 Other income income Introduce special funds for overseas advanced 14,420,000.00 Deferred 2,000,000.00 2,884,000.00 Other income 202 Bengang Steel Plates Co., Ltd. Annual Report 2020 Items listed on The amount included in the current profit or loss or offsetting the Items included in the current Item Amount the balance loss of related costs profit or loss or offsetting the sheet 2020 2019 loss of related costs and applicable technologies income Industrial enterprise energy management Deferred 11,600,000.00 2,320,000.00 2,320,000.00 Other income center construction demonstration project income Power plant three power plant cogeneration Deferred 10,000,000.00 2,000,000.00 2,000,000.00 Other income reform project income Deferred MES Project Special Fund 8,600,000.00 1,720,000.00 Other income income Deferred Special funds for environmental protection 5,800,000.00 1,160,000.00 Other income income Energy saving and environmental protection Deferred 5,800,000.00 1,160,000.00 1,160,000.00 Other income project for sintering machine in ironworks income Desulfurization and Denitrification Project of Deferred Coal-fired Boiler in High-pressure Workshop 6,000,000.00 600,000.00 600,000.00 Other income income of Bengang Power Plant Environmental governance projects and 2,400,000.00 Deferred 340,000.00 Other income 203 Bengang Steel Plates Co., Ltd. Annual Report 2020 Items listed on The amount included in the current profit or loss or offsetting the Items included in the current Item Amount the balance loss of related costs profit or loss or offsetting the sheet 2020 2019 loss of related costs comprehensive prevention and control projects income for regional river basin environmental protection Iron Smelter 360 Sintering Machine Flue Gas Deferred 1,000,000.00 200,000.00 Other income Desulfurization Project income Research on the Influence Mechanism and Deferred Control of Rare Earth Oxide Sulfide on 357,520.00 173,155.01 Other income income Automobile Steel Plasticity Deferred Automatic air quality monitoring system 350,000.00 70,000.00 70,000.00 Other income income “Steel for high-strength pipelines under low- Deferred temperature and high-pressure service 188,000.00 90,322.26 67,000.00 Other income income conditions” Project national support funds Deferred 2018 Municipal Skill Master Workstation Fee 240,000.00 120,423.00 52,960.66 Other income income 204 Bengang Steel Plates Co., Ltd. Annual Report 2020 Items listed on The amount included in the current profit or loss or offsetting the Items included in the current Item Amount the balance loss of related costs profit or loss or offsetting the sheet 2020 2019 loss of related costs Research and development of the third- Deferred 2,900,000.00 580,000.00 Other income generation high-strength steel for automobiles income Bengang Group Co., Ltd. Automotive Sheet Deferred Engineering Laboratory Engineering 1,000,000.00 1,000,000.00 Other income income Construction Fund Research and development of anti-oxidation Deferred 250,000.00 84,847.73 Other income hot forming steel PHS1500A income Construction of a professional technology Deferred innovation platform for the automotive steel 1,000,000.00 800,000.00 Other income income industry Deferred Liaoning craftsman subsidy 100,002.97 99,981.08 Other income income 2. Government subsidies related to income 205 Bengang Steel Plates Co., Ltd. Annual Report 2020 The amount included in the current profit or loss or Items included in the offsetting the loss of related costs current profit or loss Items Amount or offsetting the loss 2020 2019 of related costs Service support 240,000.00 240,000.00 Other income Technical Support 80,000.00 80,000.00 Other income Education-integrated enterprises reduce education 15,406.80 15,406.80 Other income fees and local education fees Supplementary Fund for Relocation of Railway 1,626,919.00 1,626,919.00 Other income Transport Liaoning Provincial Local Financial Supervision and Administration Bureau to 5,000,000.00 5,000,000.00 Other income support the development of special funds for enterprises to go public Job stabilization subsidy 19,151.07 19,151.07 Other income 206 Bengang Steel Plates Co., Ltd. Annual Report 2020 The amount included in the current profit or loss or Items included in the offsetting the loss of related costs current profit or loss Items Amount or offsetting the loss 2020 2019 of related costs Subsidy for training by work 44,400.00 44,400.00 Other income Tax refund 569,547.42 569,547.42 Other income 3. Return of government subsidies during the reporting period None 207 Bengang Steel Plates Co., Ltd. Annual Report 2020 6. Changes in the scope of consolidation There is no changes to the scope of consolidation during the current period. 7. Equity in other entities (1) Equity in subsidiaries 1. Constitution of enterprise group Principal Shareholding ratio Registered Notes of Name of the subsidiaries place of Acquiring method address business Direct Indirect business Xiamen Bengang Steel & Iron Sales Business combination Xiamen Xiamen Sales 100.00 Co., Ltd. under common control Wuxi Bengang Steel & Iron Sales Co., Business combination Wuxi Wuxi Sales 100.00 Ltd. under common control Tianjin Bengang Steel & Iron Trading Business combination Tianjin Tianjin Sales 100.00 Co., Ltd. under common control Nanjing Bengang Materials Sales Co., Business combination Nanjing Nanjing Sales 100.00 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 Pellet Manufactu Liaoyang Liaoyang 100.00 Establishment Co., Ltd. ring Dalian Benruitong Automobile Manufactu Dalian Dalian 65.00 Establishment Material Technology Co., Ltd. ring Bengang POSCO Cold-rolled Sheet Manufactu Business combination Benxi Benxi 75.00 Co., Ltd. ring under common control Benxi Bengang Steel Sales Co., Ltd Benxi Benxi Sales 100.00 Establishment 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 new Manufactu Business combination Shenyang Shenyang 85.00 material technology Co., Ltd. ring under common control 2. Significant but not wholly-owned subsidiaries Profits and Dividend Ending Proportion of losses declared to balance of non- Name of the subsidiaries attributing to distribute to non- controlling non-controlling non-controlling controlling interests (%) shareholders shareholders interests Bengang POSCO Cold- 25.00 10,501,387.54 506,134,000.89 rolled Sheet Co., Ltd. 208 Bengang Steel Plates Co., Ltd. Annual Report 2020 3. Financial information of significant but not wholly-owned subsidiaries 20201231 Name of the Non- subsidiaries Non-current Current current Current assets Total assets Total liabilities assets liabilities liabilitie s Bengang POSCO Cold-rolled Sheet 3,799,519,376.39 1,384,600,108.47 5,184,119,484.86 3,159,583,481.30 3,159,583,481.30 Co., Ltd. 20191231 Non- Name of the Current Non-current Current Total assets current Total liabilities subsidiaries assets assets liabilities liabilities Bengang POSCO Cold- 4,305,831,723.98 1,509,417,518.88 5,815,249,242.86 3,832,718,789.47 3,832,718,789.47 rolled Sheet Co., Ltd. 2020 Name of the subsidiaries Total Net cash flows Operating Net profit comprehensive from operating income income activities Bengang POSCO Cold-rolled 7,327,060,880.66 42,005,550.17 42,005,550.17 301,022,342.34 Sheet Co., Ltd. 2019 Name of the subsidiaries Total Operating Net cash flows from Net profit comprehensiv income operating activities e income Bengang POSCO Cold-rolled 7,379,865,156.54 19,378,253.07 19,378,253.07 -517,602,292.64 Sheet Co., Ltd. 4. Significant restrictions on the use of enterprise group assets and the settlement of enterprise group debts None. 5. Financial or other support provided to structured entities included in the scope of consolidated financial statements None. (2) The shareholder's equity in the subsidiary has changed and still control the subsidiary's transactions The Company does not exist such matters. 209 Bengang Steel Plates Co., Ltd. Annual Report 2020 (3) Equity in joint venture or associates 1. 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 20201231/2020 20191231/2019 Joint ventures: Total book value of investment: 2,742,064.73 2,642,998.70 The total amount of the following items calculated according to the shareholding ratio —Net profit 374,119.86 452,582.71 —Other comprehensive income —Total comprehensive income 374,119.86 452,582.71 3. Explanation on the significant limitation of the ability of the joint venture or associate to transfer funds to the company The Company does not exist such matters. 4. Excess losses incurred by joint ventures or associates The Company does not exist such matters. 5. Unconfirmed commitments related to joint venture investment The Company does not exist such matters. 6. Contingent liabilities related to joint venture or associate investment The Company does not exist such matters. (4) Important joint operations The Company does not exist such matters. 210 Bengang Steel Plates Co., Ltd. Annual Report 2020 (5) Equity in structured entities that not included in the scope of consolidated financial statements The Company does not exist such matters. 8. Risks associated with financial instruments The company faces various financial risks in its operation: credit risk, market risk and liquidity risk. The company's board of directors is fully responsible for the determination of risk management objectives and policies, and assumes ultimate responsibility for the risk management objectives and policies. However, the board of directors has authorized the company's planning and development department to design and implement procedures that ensure the effective implementation of risk management objectives and policies. The board of directors reviews the effectiveness of the implemented procedures and the rationality of risk management objectives and policies through reports submitted by the planning and development department. The company's internal auditors also audit risk management policies and procedures, and report relevant findings to the audit committee. The overall goal of the company's risk management is to formulate a risk management policy that minimizes risks without excessively affecting the company's competitiveness and resilience. (1) Credit risk Credit risk refers to a financial loss to a party due to failure to discharge an obligation by the counterparties. The Company is exposed to credit risk arising from customers’ failure to discharge an obligation in sales on credit. Before signing a new contract, the company will assess the credit risk of new customers, including external credit ratings and bank credit certificates in certain cases (when this information is available). The company has set a credit limit for each customer, which is the maximum amount that does not require additional approval. The Company ensures that the company's overall credit risk is within a controllable range through regular monitoring of existing customers' credit ratings and periodic review of aging analysis of accounts receivable. In addition, the Company strictly approves the line of credit, and only sells on credit to important customers for newly-developed products. In the monitoring of credit risk of customers, the Company sorts customers into groups by their credit characteristics. Those customers which are rated as “high risk” will be put in the restricted client list. The Company can only sell to these customers on credit with additional approval; otherwise the Company must ask for a corresponding deposit in advance. (2) Market risk Market risk of financial instruments refers to fluctuations of fair value or future cash flows due to market price changes, including currency risk, interest rate risk, and other price risk. 1. Interest rate risk Interest rate risk refers to fluctuations of fair value or future cash flows due to market rate changes. The Company’s exposure to currency risk is primarily arising from variable-rate bank balances and variable-rate borrowings. Currently, the Company does not have a specific policy to manage its interest rate risk. The 211 Bengang Steel Plates Co., Ltd. Annual Report 2020 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, Euro, Hongkong dollars and Japanese Yen. The ending balance of the assets and liabilities after converted in RMB is shown as below: (In 10 Thousand Yuan) Ending balance Items USD Euro HKD Japanese Yen Total Assets 46,968.50 40.73 23.02 47,032.25 Liabilities 134,771.81 37,793.88 1,025.89 173,591.58 Beginning balance Items USD Euro HKD Japanese Yen Total Assets 8,990.85 1,109.84 22.90 10,123.59 Liabilities 147,372.23 45,006.35 1,188.28 193,566.86 On December 31, 2020, with all other variables held constant, if the relevant currency appreciates or depreciates against RMB by 5%, the company will increase or decrease the net profit of RMB 47,459,800 (on December 31, 2018: RMB 91,721,600). Management believes that 5% reasonably reflects the reasonable range of possible currency-to-renminbi changes in the next year. (3) Liquidity risk Liquidity risk refers to the risk of shortage of funds which occurs in fulfilling the obligation of settlement in a manner of delivering cash or other financial assets. The Company’s policy is to maintain sufficient cash to meet maturing obligations. Liquidity risk is centralized controlled by the Company’s finance department. Through the monitoring of unrestricted cash and cash equivalents, bank acceptance bills due in short time and the continues forecasting of cash flow in the next 12 months, the finance department ensures that the Company has sufficient cash to meet obligations in all predicted reasonable circumstances. The following table details the Company’s mature date of residual contract value of underivative financial liabilities to repay according to the contract terms. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The table 212 Bengang Steel Plates Co., Ltd. Annual Report 2020 includes both interest and principal cash flows. (In 10 Thousand Yuan) 20201231 Items Over 5 Within 1 year 1-2 years 2-5 years Total years Trade and other payables 1,643,593.66 111,423.24 1,755,016.90 Loans and interests 1,137,576.14 25,647.04 321,586.21 3,060.20 1,487,869.59 Total 2,781,169.80 25,647.04 321,586.21 114,483.44 3,242,886.49 (In 10 Thousand Yuan) 20191231 Items Over 5 Within 1 year 1-2 years 2-5 years Total years Trade and other payables 1,700,791.05 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 9. Disclosure of fair value The input value used in fair value measurement is divided into three levels: The input value of the first level is the unadjusted quotation of the same asset or liability that can be obtained on the measurement date in an active market. The input value of the second level is the input value of the related assets or liabilities that is directly or indirectly observable except the input value of the first level. The third level of input value is the unobservable input value of related assets or liabilities. The level to which the fair value measurement result belongs is determined by the lowest level to which the input value that is important to the fair value measurement as a whole belongs. (1) Fair value of assets and liabilities measured at fair value Fair value at the end of the period Fair value Fair value Item measuremen measuremen Fair value measurement Total t in the first t in the in the third level level second level 1. Continuous fair 213 Bengang Steel Plates Co., Ltd. Annual Report 2020 Fair value at the end of the period Fair value Fair value Item measuremen measuremen Fair value measurement Total t in the first t in the in the third level level second level 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 asset measured at fair value and its changes are included in the current profit and loss (1) Investment in debt instruments (2) Others 214 Bengang Steel Plates Co., Ltd. Annual Report 2020 Fair value at the end of the period Fair value Fair value Item measuremen measuremen Fair value measurement Total t in the first t in the in the third level level second level ◆ Accounts receivable 4,189,977,871.92 4,189,977,871.92 financing ◆ Other debt investments ◆ Investment in other equity 1,042,024,829.00 1,042,024,829.00 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 215 Bengang Steel Plates Co., Ltd. Annual Report 2020 Fair value at the end of the period Fair value Fair value Item measuremen measuremen Fair value measurement Total t in the first t in the in the third level level second level value and its changes are included in the current profit and loss (a) Investment in debt instruments (b) Others Total assets continuously 5,232,002,700.92 5,232,002,700.92 measured at fair value ◆Financial liabilities held for trading Including: Issued tradin g bonds Derivative financial liabilities Others ◆Designated as a financial liability measured at fair value and its 216 Bengang Steel Plates Co., Ltd. Annual Report 2020 Fair value at the end of the period Fair value Fair value Item measuremen measuremen Fair value measurement Total t in the first t in the in the third level level second level changes included in the current profit and loss Total liabilities continuously measured at fair value 2. Non-continuous fair value measurement (1) Assets held for sale Total assets not measured continuously at fair value For example: Liabilities held for sale Total liabilities not measured continuously at fair value (2) The basis for determining the market value of the continuous and non-continuous first-level fair value measurement projects 217 Bengang Steel Plates Co., Ltd. Annual Report 2020 The Company has no first level fair value measurement project. (3) Continuous and non-continuous second-level fair value measurement items, using valuation techniques and qualitative and quantitative information on important parameters The Company has no second level fair value measurement items. (4) Continuous and non-continuous third-level fair value measurement items, using valuation techniques and qualitative and quantitative information on important parameters The other equity instruments that continue the third level of fair value measurement are mainly unlisted equity investments held by the company. The company adopted valuation techniques for fair value measurement, mainly using valuation techniques of listed company comparison method, referring to stock prices of similar securities and considering liquidity discounts. (5) For continuous fair value measurement projects, where conversion between various levels occurs during the period, the reason for the conversion and the policy for determining the timing of conversion During the current period, there was no conversion between various levels. (6) Changes in valuation techniques and reasons for changes during the period No changes during the period. (7) Fair value of financial assets and financial liabilities not measured at fair value No 10. Related party transactions (1) Details of parent company Place of Notes of Registered Share Voting Name of parent company Registry Business capital proportion (%) rights (%) Benxi Steel & Iron Benxi, Manufacturing 62.92 62.18 62.18 (Group) Co., Ltd. Liaoning Note: The ultimate controlling party of the Company is the State-owned Assets Supervision and Administration Commission of the People's Government of Liaoning Province. (2) Details of the subsidiaries 218 Bengang Steel Plates Co., Ltd. Annual Report 2020 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 219 Bengang Steel Plates Co., Ltd. Annual Report 2020 Name of Other related parties Relationship Bengang Group Co., Ltd. (Hereinafter Controlling shareholder of parent company. referred to as "Bengang Group") Bengang Group International Economic and Belongs to Bengang Group Co., Ltd. Trading Co., Ltd. Bengang Cold-rolled Stainless Steel Same parent company Dandong Co., Ltd. Benxi Beiying Steel & Iron (Group) Co., Ltd. Belongs to Bengang Group Co., Ltd. (Hereinafter referred to as "Beiying Steel") Bengang Electronics and Gas Co., Ltd. Associate of parent company Benxi Steel & Iron (Group) Real-estate Same parent company Development Co., Ltd. Benxi Steel & Iron (Group) Steel & Iron Same parent company Process and Logistics Co., Ltd. Benxi Steel & Iron (Group) Machinery Same parent company Manufacture Co., Ltd. Benxi Steel & Iron (Group) Construction Co., Same parent company Ltd. Benxi Steel & Iron (Group) Mining Co., Ltd. Same parent company Benxi Steel & Iron (Group) Thermal Power Same parent company Development Co., Ltd. Benxi Steel & Iron (Group) Designing Same parent company Institute Benxi Steel & Iron (Group) Industrial Same parent company Development Co., Ltd. Benxi Steel & Iron (Group) Information and Same parent company Automatic Tech Co., Ltd. 220 Bengang Steel Plates Co., Ltd. Annual Report 2020 Benxi Steel & Iron (Group) Construction and Same parent company Repairing Co., Ltd. Benxi Steel & Iron (Group) Metallurgy Same parent company Residues Co., Ltd. Benxi Iron and Steel (Group) Engineering Same parent company Construction Supervision Co., Ltd. Benxi Steel & Iron (Group) Zhengtai Same parent company Construction Materials Co., Ltd. Benxi High-tech Drilling Tools Manufacture Belongs to Bengang Group Co., Ltd. Co., Ltd. Benxi New Career Development Co., Ltd. Same parent company Dalian Boluole Steel Tube Co., Ltd. Belongs to Bengxi Steel and Iron (Group) Co., Ltd. Guangzhou Free Trade Zone Bengang Sales Belongs to Bengxi Steel and Iron (Group) Co., Ltd. Co., Ltd. Benxi Steel & Iron (Group) General Hospital Belongs to Bengxi Steel and Iron (Group) Co., Ltd. Liaoning Bengang Steel & Iron Trading Co., Same parent company Ltd. Liaoning Hengtai Heavy Machinery Co., Ltd. Same parent company Liaoning Hengtong Metallurgical Equipment Same parent company Manufacture Co., Ltd. Liaoning Metallurgy Technician College Same parent company Liaoning Metallurgy Vocational Technical Same parent company College Suzhou Bengang Industrial Co., Ltd. Shareholding company Benxi Steel & Iron (Group) Medical Services Associate of parent company Department; 221 Bengang Steel Plates Co., Ltd. Annual Report 2020 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 2020 2019 party transactions Benxi Steel & Iron (Group) Co., Ltd. Repair expense 30,206.47 27,611.81 Raw material and Benxi Steel & Iron (Group) Co., Ltd. supplementary material 2,121.13 Bengang Cold-rolled Stainless Steel Dandong Co., Ltd. Products 22.39 171.87 Benxi Steel & Iron (Group) Mining Co., Ltd. Labor cost 3,213.23 864.66 Raw material and Benxi Steel & Iron (Group) Mining Co., Ltd. supplementary material 514,193.50 466,510.90 Benxi Steel & Iron (Group) Mining Co., Ltd. Freight 1,227.47 1,318.16 Benxi Steel & Iron (Group) Metallurgy Residues Co., Raw material and Ltd. supplementary material 34,303.84 27,932.17 Benxi Steel & Iron (Group) Steel & Iron Process and Processing fee Logistics Co., Ltd. 63.22 127.67 Benxi Steel & Iron (Group) Real-estate Development Raw materials Co., Ltd. 3,648.95 Benxi Steel & Iron (Group) Machinery Manufacture Spare parts 5,984.04 11,131.68 Co., Ltd. Benxi Steel & Iron (Group) Machinery Manufacture Repair services 2,773.62 2,922.74 Co., Ltd. Benxi Steel & Iron (Group) Construction Co., Ltd. Spare parts 1,624.97 787.21 Benxi Steel & Iron (Group) Construction Co., Ltd. Project fee 20,274.33 18,016.18 Benxi Steel & Iron (Group) Construction Co., Ltd. Repair services 18,022.98 21,561.78 Raw material and Benxi Steel & Iron (Group) Construction Co., Ltd. 1,241.22 236.10 supplementary material Benxi Steel & Iron (Group) Construction Co., Ltd. Freight 51.39 502.47 Benxi Steel & Iron (Group) Industrial Development Co., Raw material and 21,095.06 19,118.00 222 Bengang Steel Plates Co., Ltd. Annual Report 2020 Ltd. supplementary material Benxi Steel & Iron (Group) Industrial Development Co., Repair services 1,537.66 2,157.65 Ltd. Benxi Steel & Iron (Group) Industrial Development Co., Freight 446.80 Ltd. Benxi Steel & Iron (Group) Industrial Development Co., Project fee 107.01 235.00 Ltd. Raw material & Benxi Steel & Iron (Group) Construction and Repairing supplementary 228.18 256.76 Co., Ltd. materials & spare parts Benxi Steel & Iron (Group) Construction and Repairing Project fee 1,911.38 4,998.34 Co., Ltd. Benxi Steel & Iron (Group) Construction and Repairing Repair expense 17,475.94 19,506.98 Co., Ltd. Raw material and Bengang Electronics and Gas Co., Ltd. 13,856.30 13,763.00 supplementary material Bengang Electronics and Gas Co., Ltd. Repair services 3,063.31 1,879.36 Benxi High-tech Drilling Tools Manufacture Co., Ltd. Spare parts 39.00 26.63 Benxi New Career Development Co., Ltd. Repair services 487.81 Raw material and Benxi New Career Development Co., Ltd. supplementary material 1,028.90 907.16 and food Liaoning Metallurgy Technician College Spare parts 933.26 1,202.01 Liaoning Metallurgy Vocational Technical College Project fee Liaoning Metallurgy Vocational Technical College Repair services 648.24 580.5 Bengang Group International Economic and Trading Raw material and 508,961.39 Co., Ltd. supplementary material Bengang Group International Economic and Trading Agency fee 5,531.64 6,309.73 Co., Ltd. Bengang Group International Economic and Trading Port surcharges 9,279.98 7,099.20 Co., Ltd. Benxi Steel & Iron (Group) Information and Automatic Spare parts 850.35 785.28 Tech Co., Ltd. Benxi Steel & Iron (Group) Information and Automatic Project fee 1,121.38 1,942.52 Tech Co., Ltd. Benxi Steel & Iron (Group) Information and Automatic Repair services 1,732.50 3,483.24 Tech Co., Ltd. Benxi Steel & Iron (Group) Thermal Power Heating costs 119.00 115.25 Development Co., Ltd. 223 Bengang Steel Plates Co., Ltd. Annual Report 2020 Benxi Steel & Iron (Group) Thermal Power Raw material and 71.04 70.93 Development Co., Ltd. supplementary material Benxi Steel & Iron (Group) Designing Institute Design fees 125.98 1,323.40 Raw material and 1,154,378.5 Benxi Beiying Steel & Iron (Group) Co., Ltd. 492,390.02 supplementary material 3 Benxi Beiying Steel & Iron (Group) Co., Ltd. Energy & Power 46,589.86 54,489.91 Benxi Beiying Steel & Iron (Group) Co., Ltd. Freight 407.53 571.46 Benxi Beiying Steel & Iron (Group) Co., Ltd. Labor cost 7,190.62 8,663.23 Benxi Beiying Steel & Iron (Group) Co., Ltd. Spare parts 1,710.81 1,308.45 Liaoning Hengtong Metallurgical Equipment Raw material and spare 8,336.02 8,758.96 Manufacture Co., Ltd. parts Liaoning Hengtong Metallurgical Equipment Repair services 661.14 Manufacture Co., Ltd. Raw material and spare Liaoning Hengtai Heavy Machinery Co., Ltd. 138.59 231.09 parts Liaoning Hengtai Heavy Machinery Co., Ltd. Repair and labor cost 716.99 1,930.35 Property management Bengang Group Co., Ltd. fee Bengang Group Co., Ltd. Labor cost 18,876.38 15,507.90 Company as the seller (In 10 Thousand Yuan) The content of related party Name 2020 2019 transactions Bengang Electronics and Gas Co., Ltd. Energy & Power 72.4 76.74 Raw material & Benxi Beiying Steel & Iron (Group) Co., Ltd. supplementary materials 138,409.84 500,154.15 & spare parts Benxi Beiying Steel & Iron (Group) Co., Ltd. Products 2,150.96 1,286.59 Benxi Beiying Steel & Iron (Group) Co., Ltd. Energy & Power 22,602.26 21,662.54 Benxi Steel & Iron (Group) Real-estate Energy & Power 8.65 10.44 Development Co., Ltd. Benxi Steel & Iron (Group) Steel & Iron Energy & Power 25.88 36.79 Process and Logistics Co., Ltd. Benxi Steel & Iron (Group) Steel & Iron Products 89.25 Process and Logistics Co., Ltd. Benxi Steel & Iron (Group) Machinery Products 1,898.85 980.32 224 Bengang Steel Plates Co., Ltd. Annual Report 2020 The content of related party Name 2020 2019 transactions Manufacture Co., Ltd. Benxi Steel & Iron (Group) Machinery Energy & Power 2,088.72 2,137.30 Manufacture Co., Ltd. Raw material & Benxi Steel & Iron (Group) Machinery supplementary materials 338.56 641.3 Manufacture Co., Ltd. & spare parts Benxi Steel & Iron (Group) Construction Energy & Power 699.16 593.8 Co., Ltd. Raw material & Benxi Steel & Iron (Group) Construction supplementary materials 6,452.06 5,781.00 Co., Ltd. & spare parts Benxi Steel & Iron (Group) Mining Co., Ltd. Energy & Power 62,020.89 64,747.81 Raw material & Benxi Steel & Iron (Group) Mining Co., Ltd. supplementary materials 9,678.23 10,078.34 & spare parts Benxi Steel & Iron (Group) Mining Co., Ltd. Freight revenue 743.9 1,031.79 Benxi Steel & Iron (Group) Mining Co., Ltd. Products 1,107.48 502.82 Benxi Steel & Iron (Group) Thermal Power Energy & Power 2,995.62 2,639.73 Development Co., Ltd. Raw material & Benxi Steel & Iron (Group) Thermal Power supplementary materials 1,750.62 2,749.21 Development Co., Ltd. & spare parts Benxi Steel & Iron (Group) Thermal Power Freight revenue Development Co., Ltd. Benxi Steel & Iron (Group) Industrial Energy & Power 824.47 827.49 Development Co., Ltd. Benxi Steel & Iron (Group) Industrial Products 3.97 Development Co., Ltd. Raw material & Benxi Steel & Iron (Group) Industrial supplementary materials 1,914.44 2,295.96 Development Co., Ltd. & spare parts Benxi Steel & Iron (Group) Information and Energy & Power 14.64 15.87 Automatic Tech Co., Ltd. Benxi Steel & Iron (Group) Construction and Energy & Power 125.15 133.05 Repairing Co., Ltd. Raw material & Benxi Steel & Iron (Group) Construction and supplementary materials 368.03 93.84 Repairing Co., Ltd. & spare parts 225 Bengang Steel Plates Co., Ltd. Annual Report 2020 The content of related party Name 2020 2019 transactions Benxi Steel & Iron (Group) Metallurgy Energy & Power 659.84 532.33 Residues Co., Ltd. Raw material & Benxi Steel & Iron (Group) Metallurgy supplementary materials 26,839.91 25,018.15 Residues Co., Ltd. & spare parts Benxi Steel & Iron (Group) Metallurgy Freight revenue Residues Co., Ltd. Benxi Steel & Iron (Group) Metallurgy 423.53 Products Residues Co., Ltd. Benxi Steel & Iron (Group) Co., Ltd. Energy & Power 205.47 232.43 Raw material & Benxi Steel & Iron (Group) Co., Ltd. supplementary materials 1,013.53 796.46 & spare parts Benxi New Career Development Co., Ltd. Energy & Power 38.37 40.25 Dalian Boluole Steel Tube Co., Ltd. Products 1,136.33 404.87 Liaoning Bengang Steel & Iron Trading Co., Products Ltd. Benxi Steel & Iron (Group) General Hospital Energy & Power 5.09 Benxi Steel & Iron (Group) Zhengtai Energy & Power 2.16 5.22 Construction Materials Co., Ltd. Liaoning Hengtong Metallurgical Equipment Energy & Power Manufacture Co., Ltd. Raw material & Liaoning Hengtong Metallurgical Equipment supplementary materials 731.86 2,444.76 Manufacture Co., Ltd. & spare parts Liaoning Hengtong Metallurgical Equipment Products 908.89 352.89 Manufacture Co., Ltd. Raw material & Bengang Cold-rolled Stainless Steel supplementary materials 46.59 Dandong Co., Ltd. & spare parts Bengang Cold-rolled Stainless Steel Products 2,716.09 111.16 Dandong Co., Ltd. Suzhou Bengang Industrial Co., Ltd. Products 49,983.82 41,269.54 Bengang Group Finance Co., Ltd. Energy & Power 1.3 1.39 Bengang Group Co., Ltd. Energy & Power 7.33 2.78 Raw material & Bengang Group Co., Ltd. 1,539.32 supplementary materials 226 Bengang Steel Plates Co., Ltd. Annual Report 2020 The content of related party Name 2020 2019 transactions & spare parts Liaoning Hengtai Heavy Machinery Co., products 29.54 Ltd. 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 Operating Lease Company as the lessor Currency unit: Yuan Lessee Lease capital category Lease income of 2020 Lease income of 2019 Benxi Steel & Iron (Group) Steel & Iron Warehouse and 500,000.00 500,000.00 Process and Logistics ancillary facilities Co., Ltd. Benxi Steel & Iron Plants and ancillary 122,500.03 (Group) Machinery facilities Manufacture Co., Ltd. Company as the lessee Currency unit: Yuan Lease Lease charges of Lessor Lease capital category charges of 2019 2020 Land use right Benxi Steel & Iron 7,669,068.17 sq.m. 57,383,355.31 54,984,486.36 (Group) Co., Ltd Land use right 42,920.00 sq.m Benxi Steel & Iron 2300 Hot rolling product line, 16,711,424.34 167,859,103.82 (Group) Co., Ltd related real estate 227 Bengang Steel Plates Co., Ltd. Annual Report 2020 Benxi Beiying Steel & 1780 Hot rolling product line, 15,578,677.65 83,686,698.60 Iron (Group) Co., Ltd. related real estate Bengang Group Co., Land use right 9,945,423.08 4,972,711.56 Ltd. 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 (Group)on April 7, 1997, December 30, 2005 and subsequent, the Company leases land from Benxi Steel (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 Benxi Steel (Group) 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. 3. On July 15, 2019, the Company signed "Land Lease Agreement" with Bengang Group and Bengang Steel (Group) respectively, leased and used a total of 8 pieces of land from Bengang Group and Bengang Group Company, with leased areas of 42,920.00 square meters and 728,282.30 square meters. The lease term is 20 years, the rental price is 1.138 yuan per square meter per month. Notes of Financial Leasing During the reporting period, the Company purchased equipment from Liaoning Hengyi Financial Leasing Co., Ltd. in the form of financial leasing. The annual purchase amount (including tax) in 2020 was RMB 933,008,875.20, and interest and handling fees were RMB 43,807,781.54. 3. Information of Guarantee among related parties Company as the warrantee Starting date Ending date of Has the guarantee Warrantor Amount of guarantee of Guarantee Guarantee been fulfilled Bengang Group RMB 15,000,000,000.00 2020/8/13 2022/8/12 No Co., Ltd. Bengang Group RMB 500,000,000.00 2020/6/19 2021/6/18 No Co., Ltd. Bengang Group RMB 310,000,000.00 2020/5/26 2021/5/25 No Co., Ltd. Bengang Group RMB 670,000,000.00 2020/5/26 2021/5/25 No 228 Bengang Steel Plates Co., Ltd. Annual Report 2020 Co., Ltd. Bengang Group RMB 400,000,000.00 2020/10/20 2021/10/19 No Co., Ltd. Bengang Group RMB 1,280,000,000.00 2020/11/5 2021/11/4 No Co., Ltd. Bengang Group RMB 400,000,000.00 2020/10/28 2021/10/27 No Co., Ltd. Bengang Group RMB 1,800,000,000.00 2020/12/1 2021/12/1 No Co., Ltd. Bengang Group RMB 6,024,000,000.00 2020/3/17 2021/3/17 No Co., Ltd. Benxi Steel & Iron RMB 5,024,000,000.00 2020/11/4 2021/11/4 No (Group) Co., Ltd. Bengang Steel RMB 250,000.00 2020/5/25 2021/5/25 No Plates Co., Ltd Bengang Steel RMB 490,000.00 2020/8/20 2021/8/20 No Plates Co., Ltd Bengang Steel RMB 200,000,000.00 2020/12/24 2021/12/24 No Plates Co., Ltd Bengang Group Co., Ltd. and Benxi RMB 70,000,000.00 2016/3/30 2025/3/20 No Steel & Iron (Group) Co., Ltd. Bengang Group Co., Ltd. and Benxi RMB 430,000,000.00 2017/2/27 2025/2/20 No Steel & Iron (Group) Co., Ltd. Bengang Group RMB 622,600,000.00 2017/12/15 2024/8/20 No Co., Ltd. Bengang Group RMB 87,280,000.00 2018/3/26 2024/6/21 No Co., Ltd. 229 Bengang Steel Plates Co., Ltd. Annual Report 2020 Bengang Group RMB 24,620,000.00 2017/11/15 2021/12/21 No Co., Ltd. Bengang Group RMB 30,560,000.00 2015/6/25 2021/9/21 No Co., Ltd. Bengang Group RMB 24,000,000.00 2015/12/9 2022/3/21 No Co., Ltd. Bengang Group EUR 166,579.87 2015/6/25 2025/9/30 No Co., Ltd. Bengang Group EUR 5,691,165.00 2015/8/20 2025/9/30 No Co., Ltd. Bengang Group EUR 407,161.22 2015/6/25 2026/4/30 No Co., Ltd. Bengang Group EUR 4,984,751.64 2015/12/28 2026/4/30 No Co., Ltd. Bengang Group EUR 2,077,667.88 2016/12/14 2026/4/30 No Co., Ltd. Bengang Group EUR 6,162.48 2015/6/25 2026/4/30 No Co., Ltd. Bengang Group EUR 4,069.11 2015/12/28 2026/4/30 No Co., Ltd. Bengang Group EUR 779,734.95 2017/6/30 2025/10/31 No Co., Ltd. Bengang Group EUR 2,733,223.28 2016/6/27 2020/4/30 No Co., Ltd. Bengang Group EUR 334,941.21 2015/6/25 2025/6/30 No Co., Ltd. Bengang Group EUR 9,577,728.02 2015/6/25 2025/6/30 No Co., Ltd. Bengang Group EUR 294,013.70 2015/12/28 2025/6/30 No Co., Ltd. Bengang Group EUR 7,585,942.33 2015/6/25 2025/10/31 No 230 Bengang Steel Plates Co., Ltd. Annual Report 2020 Co., Ltd. Bengang Group EUR 3,271,319.20 2015/12/28 2025/10/31 No Co., Ltd. Bengang Group EUR 8,390,619.39 2015/6/25 2025/8/31 No Co., Ltd. Bengang Group EUR 180,800.00 2015/12/28 2025/8/31 No Co., Ltd. Bengang Group EUR 609,296.41 2015/6/25 2025/8/31 No Co., Ltd. Bengang Group JPY 162,232,000.00 1997/10/10 2027/9/10 No Co., Ltd. Benxi Steel & Iron RMB 12,000,000,000.00 2019/3/16 2021/9/3 No (Group) Co., Ltd. Bengang Group RMB 740,000,000.00 2020/1/8 2021/1/8 No Co., Ltd. 4. Asset transfer and debt restructuring of related parties Currency unit: Yuan Related Current Amount Amount of last period Related Party transaction (Excluding tax) (Excluding tax) content Purchase of 2300 Benxi Steel & Iron (Group) Co., Ltd. hot rolling mill 3,004,988,590.00 production line Purchase of 1780 Benxi Beiying Steel & Iron (Group) Co., Ltd. hot rolling mill 684,727,905.00 production line Notes: On August 14, 2019, the Company signed the "Asset Transfer Agreement" with Benxi Steel (Group) and Beiying Steel, respectively, to acquire the related equipment assets of the 2300mm hot rolling mill production line held 231 Bengang Steel Plates Co., Ltd. Annual Report 2020 by Benxi Steel (Group) and the 1780mm held by Beiying Steel. 5.Remuneration of key management personnel (In 10 Thousand Yuan) Name 2020 2019 Remuneration of key management 309.04 302.23 personnel 6. 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 17,703,820.82 17,735,933.55 1,332,199.78 1. The interests income of deposits of Bengang Group Finance Co., Ltd. is RMB 308,242.3 thousand in 2020. As at 31 December 2020, the interest receivable from Bengang Group Finance Co., Ltd. is RMB 87,919.8 thousand. 2. As at 31 December 2020, the restricted deposits in Bengang Group Finance Co., Ltd. is RMB 2,408,822.8 thousand. 3. 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 in 2020. The amount of acceptance bill issued by Bengang Group Finance Co., Ltd. was RMB 4.077 billion in 2020. As of December 31, 2020, the amount of acceptance bills that the Company entrusted Finance Company had issued and not yet paid was RMB 2.409 billion, with a margin ratio of 100.00%. (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: In 2020, the interest accrued is RMB 3,545,625.00, and as of 31 December 2020, the Company has no interest that has not been paid. 6. Receivables and payables of the related parties 1、Receivables of the Company (in 10 thousand yuan) 232 Bengang Steel Plates Co., Ltd. Annual Report 2020 20201231 20191231 Provision Provision Items Name Carrying Carrying for bad for bad amount amount debts debts Accounts receivable financing Benxi Beiying Steel & Iron 230,217.55 - 42,342.56 - (Group) Co., Ltd. Benxi Steel & Iron (Group) Co., 81.99 - 402.17 - Ltd. Zhejiang Bengang Jingrui Steel - - 400.00 - Processing Co., Ltd. Accounts Receivable Bengang Group International 10,463.45 104.63 5,892.34 58.92 Economic and Trading Co., Ltd. Benxi Steel & Iron (Group) Thermal Power Development 2,692.94 26.93 1,301.32 13.01 Co., Ltd. Bengang Cold-rolled Stainless 188.46 1.88 188.80 1.89 Steel Dandong Co., Ltd. Benxi Steel & Iron (Group) 0.10 - 0.14 - Metallurgy Residues Co., Ltd. Benxi Steel & Iron (Group) Machinery Manufacture Co., - - 7.70 0.08 Ltd. Prepayments Bengang Group International 114,662.12 - - - Economic and Trading Co., Ltd. Benxi Steel & Iron (Group) Machinery Manufacture Co., 6,470.61 - 3,559.63 - Ltd. Benxi Beiying Steel & Iron - - - (Group) Co., Ltd. 93,762.24 Other receivables Bengang Group International 601.21 - 432.77 0.20 Economic and Trading Co., Ltd. 233 Bengang Steel Plates Co., Ltd. Annual Report 2020 20201231 20191231 Provision Provision Items Name Carrying Carrying for bad for bad amount amount debts debts Benxi Steel & Iron (Group) Real- 278.31 253.84 270.17 246.52 estate Development Co., Ltd. Benxi Steel & Iron (Group) Zhengtai Construction Materials 27.05 19.96 24.60 12.30 Co., Ltd. Liaoning Metallurgy Technician 5.80 5.80 5.80 5.80 College Benxi Steel & Iron (Group) - - 94.75 85.27 Medical Services Department; Benxi Steel & Iron (Group) - - 0.02 - Industrial Development Co., Ltd. Other non- current assets Liaoning Hengyi Financial 86,459.06 58,419.72 Leasing Co., Ltd. 2、 Payables of the Company (in 10 thousand yuan) Items Name 2020.12.31 2019.12.31 Notes payable Bengang Group International 345,103.76 Economic and Trading Co., Ltd. Benxi Steel & Iron (Group) Mining Co., 91,857.00 69,292.59 Ltd. Bengang Electronics 6,414.33 2,285.78 and Gas Co., Ltd. Benxi Steel & Iron (Group) Industrial 5,253.76 3,203.52 Development Co., Ltd. 234 Bengang Steel Plates Co., Ltd. Annual Report 2020 Items Name 2020.12.31 2019.12.31 Liaoning Hengyi Financial Leasing Co., 4,602.43 1,758.01 Ltd. Liaoning Hengtong Metallurgical 868.28 Equipment Manufacture Co., Ltd. Benxi Steel & Iron (Group) Machinery 255.94 186.51 Manufacture Co., Ltd. Liaoning Metallurgy 133.27 195.91 Technician College Liaoning Hengtai Heavy Machinery Co., 84.78 Ltd. Liaoning Metallurgy Vocational Technical 47.90 43.55 College Benxi Steel & Iron (Group) Metallurgy 16.62 Residues Co., Ltd. Benxi Beiying Steel & 508,775.58 Iron (Group) Co., Ltd. Benxi Steel & Iron (Group) Real-estate 684.81 Development Co., Ltd. Benxi Steel & Iron (Group) Information 189.02 and Automatic Tech Co., Ltd. Bengang Cold-rolled Stainless Steel 71.84 Dandong Co., Ltd. Benxi Steel & Iron (Group) Construction 14.82 and Repairing Co., Ltd. Benxi Steel & Iron 13.05 (Group) Construction 235 Bengang Steel Plates Co., Ltd. Annual Report 2020 Items Name 2020.12.31 2019.12.31 Co., Ltd. Benxi High-tech Drilling Tools 5.71 Manufacture Co., Ltd. Accounts payable Benxi Steel & Iron (Group) Mining Co., 20,807.68 8,524.77 Ltd. Liaoning Hengyi Financial Leasing Co., 5,799.10 Ltd. Benxi Steel & Iron (Group) Construction 5,182.75 4,443.69 and Repairing Co., Ltd. Benxi Beiying Steel & 3,172.95 Iron (Group) Co., Ltd. Benxi Steel & Iron (Group) Construction 2,394.63 10,331.91 Co., Ltd. Liaoning Hengtai Heavy Machinery Co., 2,171.25 3,246.28 Ltd. Benxi Steel & Iron (Group) Information 1,852.50 6,567.06 and Automatic Tech Co., Ltd. Benxi Steel & Iron (Group) Metallurgy 1,645.14 1,033.48 Residues Co., Ltd. Bengang Electronics 1,500.74 1,149.26 and Gas Co., Ltd. Liaoning Metallurgy 1,388.84 724.86 Technician College Liaoning Hengtong Metallurgical 1,297.91 1,487.15 Equipment Manufacture Co., Ltd. 236 Bengang Steel Plates Co., Ltd. Annual Report 2020 Items Name 2020.12.31 2019.12.31 Bengang Group Co., 1,246.38 3,148.91 Ltd. Benxi Steel & Iron (Group) Machinery 964.33 1,143.65 Manufacture Co., Ltd. Liaoning Metallurgy Vocational Technical 746.81 671.93 College Bengang Cold-rolled Stainless Steel 616.72 521.64 Dandong Co., Ltd. Bengang Group International 579.53 70,193.27 Economic and Trading Co., Ltd. Benxi New Career 415.37 292.66 Development Co., Ltd. Benxi Steel & Iron (Group) Industrial 385.20 11,311.75 Development Co., Ltd. Benxi Steel & Iron (Group) Thermal 178.73 144.24 Power Development Co., Ltd. Benxi Iron and Steel (Group) Engineering 65.51 16.28 Construction Supervision Co., Ltd. Benxi Steel & Iron (Group) Real-estate 61.52 62.65 Development Co., Ltd. Benxi High-tech Drilling Tools 38.60 33.77 Manufacture Co., Ltd. Benxi Steel & Iron (Group) Zhengtai 0.24 0.24 Construction Materials Co., Ltd. Benxi Steel & Iron 2.04 (Group) Medical 237 Bengang Steel Plates Co., Ltd. Annual Report 2020 Items Name 2020.12.31 2019.12.31 Services Department; Advance from customers Suzhou Bengang 5,374.03 1,635.62 Industrial Co., Ltd. Dalian Boluole Steel 181.60 85.93 Tube Co., Ltd. Benxi Steel & Iron (Group) Metallurgy 161.66 126.57 Residues Co., Ltd. Benxi Steel & Iron (Group) Industrial 55.77 35.79 Development Co., Ltd. Liaoning Hengtong Metallurgical 52.81 82.00 Equipment Manufacture Co., Ltd. Bengang Group International 43.70 Economic and Trading Co., Ltd. Benxi Steel & Iron (Group) Steel & Iron 1,582.14 Process and Logistics Co., Ltd. Other payables Benxi Steel & Iron 13,013.80 18,278.27 (Group) Co., Ltd. Benxi Steel & Iron (Group) Steel & Iron 1,681.17 Process and Logistics Co., Ltd. Bengang Group International 1,277.85 1,432.74 Economic and Trading Co., Ltd. Benxi Steel & Iron (Group) Thermal 561.73 437.69 Power Development Co., Ltd. 238 Bengang Steel Plates Co., Ltd. Annual Report 2020 Items Name 2020.12.31 2019.12.31 Benxi Steel & Iron (Group) Construction 436.25 526.14 Co., Ltd. Guangzhou Free Trade Zone Bengang Sales 267.44 267.44 Co., Ltd. Liaoning Hengyi Financial Leasing Co., 208.60 0.39 Ltd. Benxi New Career 197.61 223.84 Development Co., Ltd. Benxi Steel & Iron (Group) Real-estate 143.59 143.59 Development Co., Ltd. Benxi Steel & Iron (Group) Industrial 31.33 30.42 Development Co., Ltd. Liaoning Metallurgy 1.34 1.34 Technician College Benxi Steel & Iron (Group) Machinery 1.01 1.01 Manufacture Co., Ltd. Bengang Group 0.98 0.60 Finance Co., Ltd. Benxi Beiying Steel & 6.00 Iron (Group) Co., Ltd. Liaoning Hengyi Non-current Financial Leasing Co., 111,423.24 51,693.94 Payables Ltd. 11. Commitments and Contingencies (1) Commitments 1. Lease contracts in progress or to be performed and their financial impacts (1) According to the "Land Use Right Leasing Contract" and subsequent supplementary agreements signed by the company and Benxi Steel (Group) on April 7, 1997, December 30, 2005, the Company leased land from Benxi Steel (Group). The monthly rent is 0.594 yuan per square meters, the leased land area is 7,669,068.17 square meters, and the annual rent is 54,665,100 yuan. (2)On August 14, 2019, the Company signed the "House Lease Agreement" with Benxi Steel (Group) 239 Bengang Steel Plates Co., Ltd. Annual Report 2020 and Beiying Steel respectively, leasing the houses and auxiliary facilities occupied by 2300 and 1780 hot rolling mill production lines, and the lease term ends on December 31, 2038. The rental fee is based on the depreciation of the original rent value and the national additional tax, plus reasonable profit negotiation. The estimated annual rent is not more than 20 million yuan and 18 million yuan respectively. The rental fee is settled and paid monthly. This related party transaction has been reviewed and approved at the fourth meeting of the eighth board of directors of the Company. (3) On July 15, 2019, the Company signed "Land Lease Agreement" with Bengang Group and Benxi Steel (Group) respectively, and leased and used a total of 8 pieces of land of the two companies. The lease areas are 42,920.00 square meters and 728,282.30 square meters respectively, with a lease term of 20 years, and a rental price of 1.138 yuan per square meter per month. After the agreement comes into effect, considering the national law and policy adjustments every five years, both parties should determine whether the rent needs to be adjusted according to the pricing basis stipulated in Article 2 of this agreement. This related party transaction has been reviewed and approved at the third meeting of the eighth board of directors of the company. (4) As of December 31, 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 0.806 billion yuan. 2. Irrevocable letter of credit As at December 31, 2020, the amount of irrevocable letter of credit that was not fulfilled was 1.21 billion yuan. (2) Contingencies At the balance sheet date, no significant contingencies need to be disclosed. 12. Subsequent events (1) Important non-adjustment matters None (2) Profit Distribution On April 26, 2021, the seventeenth meeting of the eighth board of directors of the company passed the 2020 dividend distribution plan. It is planned to use the total share capital of 3,875,371,532 shares at the end of 2020 as the base number to Profit or distribute a cash dividend of 0.1 yuan for every 10 shares to all shareholders dividend to be Including tax), a total of 38,753,715.32 yuan of cash dividends will be distributed. distributed This distribution will not be converted from capital reserves to share capital. The above profit distribution plan needs to be reviewed and approved by the general meeting of shareholders. (3) Sales Return Not applicable. (4) Divided into assets held for sale and disposal portfolio 240 Bengang Steel Plates Co., Ltd. Annual Report 2020 Not applicable. (5) Other subsequent events Not applicable. 13. 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, other products account have a small proportion of sales, the main production base is in Liaoning, and the disclosure of the segment report is not applicable. (6) Other important matters that have an impact on investor decisions 1. Financial leasing matters In order to optimize the debt structure and broaden the financing channels, the Company signed the "Financial Leasing Cooperation Framework Agreement" with Liaoning Hengyi Financial Leasing Co., Ltd. in 2018. The financing amount is not more than RMB 5 billion per year. The Company obtains funds through financing after-sales leaseback. The lease interest rate is not higher than the benchmark loan interest rate announced by the People's Bank of China for the same period. The lease interest rate during the lease period is dynamically adjusted with the changes in the benchmark interest rate announced by the People's Bank of China. The ratio of lease deposit is not higher than 241 Bengang Steel Plates Co., Ltd. Annual Report 2020 30% of the lease principal amount. 2. The controlling shareholder pledges the Company's shares As of the balance sheet date, the Company's controlling shareholder Benxi Iron and Steel (Group) Co., Ltd. held 2,409,628,094 shares of the Company, of which 712,545,000 shares were in pledged status and 102,100,000 shares were in restricted sales and frozen status. 3. Major strategic restructuring of indirect controlling shareholders The company received a notice from Bengang Group, the controlling shareholder of the parent company, and learned that Ansteel Group Co., Ltd. is planning to reorganize the Bengang Group, which may lead to changes in the company's control. As of the audit report, the restructuring is still in the planning stage, and after the plan is determined, the approval of the relevant departments is still required. 14. Notes to the financial statements of parent company 1. Accounts receivable (1) Accounts receivable disclosed by aging Items 201201231 20191231 Within 1 year (inclusive) 283,561,303.90 339,851,051.52 1-2 years (inclusive) 2,420,511.80 31,642,073.27 2-3 years (inclusive) 6,500,255.55 24,708,264.04 Over 3 years 177,111,797.34 175,744,519.91 Sub-total 469,593,868.59 571,945,908.74 Less: Provision for bad 179,728,406.39 182,948,800.28 debts Total: 289,865,462.20 388,997,108.46 (2) Accounts receivable disclosed by category 242 Bengang Steel Plates Co., Ltd. Annual Report 2020 20201231 20191231 Carrying amount Provision for bad debts Carrying amount Provision for bad debts Items Bad Percent Book value Percentage Bad debts Book value Amount Amount debts Amount Amount age (%) (%) ratio (%) ratio (%) Provision for Bad Dept 47,762,337.18 10.17 47,762,337.18 100.00 47,762,337.18 8.35 47,762,337.18 100.00 individually Provision for Bad Dept by 421,831,531.41 89.83 131,966,069.21 31.28 289,865,462.20 524,183,571.56 91.65 135,186,463.10 25.79 388,997,108.46 portfolio Include: Portfolio 1: 245,720,903.60 52.33 131,966,069.21 53.71 113,754,834.39 268,981,818.03 47.03 135,186,463.10 50.26 133,795,354.93 Aging Portfolio 2:Combined 176,110,627.81 37.50 176,110,627.81 255,201,753.53 44.62 255,201,753.53 related party Total 469,593,868.59 100.00 179,728,406.39 289,865,462.20 571,945,908.74 100.00 182,948,800.28 388,997,108.46 243 Bengang Steel Plates Co., Ltd. Annual Report 2020 Accounts receivable tested for impairment individually 20201231 Bad debts Items Provision for Accounts receivable ratio Reason bad debts (%) Benxi Nanfen Benxi Nanfen Xinhe Metallurgical 47,762,337.18 47,762,337.18 100.00 Xinhe has halt Co., Ltd. operation. Total 47,762,337.18 47,762,337.18 Accounts receivable tested for impairment by portfolio: Portfolio tested by aging 20201231 Items Carrying amount Provision for bad debts Bad debts ratio (%) Within 1 year 107,450,676.09 1,074,506.76 1.00 1-2 years 2,420,511.80 242,051.18 10.00 2-3 years 6,500,255.55 1,300,051.11 20.00 Over 3 years 129,349,460.16 129,349,460.16 100.00 Total 245,720,903.60 131,966,069.21 (3) Information of provision, reversal or recovery of bad debts of current period. The amount of bad debt provision reversed in the current period is 3,220,393.89 yuan (4) No accounts receivable has been written off this year. (5) Top five debtors at the year-end 20201231 Company Percentage of total Provision for Amount accounts receivable (%) bad debts The first 176,110,627.81 37.50 The second 56,158,745.71 11.96 561,587.46 The third 47,762,337.18 10.17 47,762,337.18 The fourth 26,929,400.04 5.73 269,294.00 The fifth 9,008,967.00 1.92 9,008,967.00 Total 315,970,077.74 67.28 57,602,185.64 (6) There is no accounts receivable derecognized due to the transfer of financial assets in the current period. (7) There is no assets and liabilities formed by continued involvement due to the transfer of Account receivables. 244 Bengang Steel Plates Co., Ltd. Annual Report 2020 3. Accounts receivable financing (1) Details of accounts receivable financing Items 20201231 20191231 Notes receivable 4,143,431,412.08 2,193,319,842.60 Include: Bank 1,876,753,316.46 2,184,526,834.33 acceptance bill Commercial 2,266,678,095.62 8,793,008.27 acceptance bill Total 4,143,431,412.08 2,193,319,842.60 Other information: The "receivable financing" item reflects the notes and accounts receivable that are measured at fair value at the balance sheet date and whose changes are included in other comprehensive income. (2) Acceptance bills pledged by the company at the end of the period Items Pledged amount Bank acceptance bill 484,093,073.28 Commercial acceptance bill 403,379,971.01 Total 887,473,044.29 (3) Acceptance bills have been endorsed or discounted by the company and have not expired at the year end Items Derecognized amount Not derecognized amount Bank acceptance bill 13,819,427,581.34 Commercial acceptance bill 2,230,183,094.41 Total 13,819,427,581.34 2,230,183,094.41 (4) There are no bills converted into accounts receivable due to the failure of the issuer to perform the contract at the end of the period. 4. Other receivables Item 20201231 20191231 Interest receivables 23,028,942.73 19,658,230.77 Dividend receivables Other receivables 228,379,193.99 247,005,005.04 Total 251,408,136.72 266,663,235.81 1. Interest receivables (1) Interest receivable disclosed by category Items 20201231 20191231 245 Bengang Steel Plates Co., Ltd. Annual Report 2020 Deposit interest 23,028,942.73 19,658,230.77 Subtotal 23,028,942.73 19,658,230.77 Less: provision for bad debt Total 23,028,942.73 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 Ending balance Beginning balance Within 1 year (inclusive) 53,898,656.03 115,480,359.05 1-2 years (inclusive) 47,649,189.02 15,711,856.93 2-3 years (inclusive) 13,842,023.46 3,479,413.59 Over 3 years 180,717,695.14 177,724,723.88 Sub-total 296,107,563.65 312,396,353.45 Less: Provision for bad 67,728,369.66 65,391,348.41 debts Total: 228,379,193.99 247,005,005.04 (2) Provision for bad debt provision Stage one Stage two Stage three Lifetime Lifetime expected 12-month Provision for bad debts expected credit credit losses Total expected credit losses (no credit (credit losses impairment) impairment occurred) Beginning balance 9,179,698.89 56,211,649.52 65,391,348.41 Beginning balance in current period --Transfer to Stage two --Transfer to Stage three -768,390.73 768,390.73 --Reversal to Stage two --Reversal to Stage one 6,592.60 -6,592.60 Current period provision 801,959.46 2,816,265.56 601,252.83 4,219,477.85 Current period reversal 6,207.34 6,207.34 Current period write-back 1,745,713.37 130,535.89 1,876,249.26 Current period write-off Other change 246 Bengang Steel Plates Co., Ltd. Annual Report 2020 Stage one Stage two Stage three Lifetime Lifetime expected 12-month Provision for bad debts expected credit credit losses Total expected credit losses (no credit (credit losses impairment) impairment occurred) Ending balance 802,344.72 9,475,267.75 57,450,757.19 67,728,369.66 Changes of other receivables Stage one Stage two Stage three Lifetime Lifetime expected 12-month Provision for bad debts expected credit credit losses Total expected credit losses (no credit (credit losses impairment) impairment occurred) Beginning balance 232,528,777.63 23,655,926.30 56,211,649.52 312,396,353.45 Beginning balance in current period --Transfer to Stage two --Transfer to Stage three -1,369,740.15 1,369,740.15 --Reversal to Stage two --Reversal to Stage one 14,813.42 -14,813.42 Current period increase 149,569,647.91 6,006,395.62 5.00 155,576,048.53 Current period 163,877,950.90 7,856,351.54 130,535.89 171,864,838.33 derecognition Other change Ending balance 218,235,288.06 20,421,416.81 57,450,858.78 296,107,563.65 (4) Provision for bad debts accrued, reversed or recovered in the current period. (5) There is no other accounts receivable actually written off in the current period. (6) Other receivables disclosed by nature Nature 20201231 20191231 Receivable and payable 288,295,814.93 304,483,575.55 Other 7,811,748.72 7,912,777.90 247 Bengang Steel Plates Co., Ltd. Annual Report 2020 Total 296,107,563.65 312,396,353.45 (7) Top five debtors at the year-end Percentage of total Provision for Company Nature or content Amount Aging other receivables bad debts (%) Within 1 year:18,348,177.57 The First Receivable and payable 23,677,915.37 8.00 449,968.67 Remaining:1-2 years The Second Receivable and payable 5,492,200.00 Within 1 year 1.85 54,922.00 Within 1 year to 3 The Third Receivable and payable 2,446,897.43 0.83 2,202,207.69 years Over 3 years The Fourth 2,261,360.00 0.76 2,261,360.00 Receivable and payable The Fifth Receivable and payable 2,123,692.31 2-3years 0.72 424,738.46 Total 36,002,065.11 12.16 5,393,196.82 (8)No other receivables involving government subsidies in the current period. (9)There are no other receivables derecognized due to the transfer of financial assets in the current period. (10)No assets and liabilities formed by continued involvement due to the transfer of other receivables in the current period. 5. Long-term equity investment Ending balance Beginning balance Items Carrying Impairme Impair Book value Carrying amount Book value amount nt ment Subsidiaries 2,016,281,902.16 2,016,281,902.16 2,016,281,902.16 2,016,281,902.16 Joint Venture Total 2,016,281,902.16 2,016,281,902.16 2,016,281,902.16 2,016,281,902.16 Details of investment in subsidiaries 248 Bengang Steel Plates Co., Ltd. Annual Report 2020 Ending Impairme balance Ending nt of Name of entity Beginning balance Increase Decrease of balance current impairm period ent Guangzhou Bengang Steel & Iron Trading Co., 30,000,000.00 30,000,000.00 Ltd. Shanghai Bengang Metallurgy Science and 30,000,000.00 30,000,000.00 Technology Co., Ltd. Bengang Steel Plates 529,899,801.38 529,899,801.38 Liaoyang Pellet Co., Ltd. Dalian Benruitong Automobile Material 65,000,000.00 65,000,000.00 Technology Co., Ltd. Bengang POSCO Cold- 1,019,781,571.10 1,019,781,571.10 rolled Sheet Co., Ltd. Changchun Bengang Steel & Iron Sales Co., 28,144,875.36 28,144,875.36 Ltd. Harbin Bengang Economic and Trading 29,923,398.23 29,923,398.23 Co., Ltd. Nanjing Bengang 2,081,400.65 2,081,400.65 Materials Sales Co., Ltd. Wuxi Bengang Steel & 29,936,718.57 29,936,718.57 Iron Sales Co., Ltd. Xiamen Bengang Steel 1,095,711.66 1,095,711.66 & Iron Sales Co., Ltd. Yantai Bengang Steel & 49,100,329.41 49,100,329.41 Iron Sales Co., Ltd. Tianjin Bengang Steel & 60,318,095.80 60,318,095.80 Iron Trading Co., Ltd. 249 Bengang Steel Plates Co., Ltd. Annual Report 2020 Ending Impairme balance Ending nt of Name of entity Beginning balance Increase Decrease of balance current impairm period ent Benxi Bengang Steel 5,000,000.00 5,000,000.00 Sales Co., Ltd Shenyang Bengang Metallurgical Science 30,000,000.00 30,000,000.00 and Technology Co., Ltd. Chongqing Liaoben Steel & Iron Trade Co., 30,000,000.00 30,000,000.00 Ltd. Bengang Baojin (Shenyang) Automobile 76,000,000.00 76,000,000.00 New Materials Technology Co., Ltd. Total 2,016,281,902.16 2,016,281,902.16 6. Operating Income and Operating Cost Operating income and operating cost 2020 2019 Items Revenue Cost Revenue Cost Principal business 44,436,384,616.09 42,659,983,317.54 45,495,328,832.91 43,241,111,129.03 Other business 4,374,721,858.64 4,082,717,104.16 7,109,784,374.11 6,493,078,331.57 Total 48,811,106,474.73 46,742,700,421.70 52,605,113,207.02 49,734,189,460.60 Breakdown of operating income Items Principal Business Other Business Classified by business area 44,436,384,616.09 4,374,721,858.64 Including:Domestic 40,653,042,300.78 4,374,721,858.64 Abroad 3,783,342,315.31 Classified by the time of commodity 44,436,384,616.09 4,374,721,858.64 transfer 250 Bengang Steel Plates Co., Ltd. Annual Report 2020 Items Principal Business Other Business Including: recognize at a certain point 44,436,384,616.09 4,374,131,134.83 in time recognize over a certain period of time 590,723.81 合计 44,436,384,616.09 4,374,721,858.64 7. Income on investment Items 2020 2019 Income from long-term equity investment (cost method) 27,594,915.42 Dividend income obtained during the holding period of other 77,242.47 equity instrument investments Total 77,242.47 27,594,915.42 15. Supplementary information (1) Details of non-recurring profit and loss Items Amount Notes Profit or loss from disposal of non-current assets -92,695,525.95 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 operation, meeting the regulation of national policy and 81,193,591.56 enjoyed constantly in certain quota or quantity according to a certain standard) Fund occupation fee charged to non-financial enterprises included in current profit and loss The investment cost of an enterprise acquiring subsidiaries, associates and joint ventures is less than the income from the fair value of the identifiable net assets of the investee when obtaining the investment Non-monetary asset exchange gains and losses Profit or loss from investment or assets entrusted to others Provision for asset impairment due to unavoidable factors such as natural disasters Profit or loss from debt restructuring 32,800.02 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 13,500,000.00 changes in derivative financial liabilities, and disposal of transactional financial assets and derivative financial assets, trading financial liabilities, derivative financial liabilities and other debt investments 251 Bengang Steel Plates Co., Ltd. Annual Report 2020 Items Amount Notes 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 1,592,660.62 Other non-recurring profit and loss Subtotal 3,623,526.25 Impact of income tax -786,094.20 Impact of minority interests -54,476.26 Total 2,782,955.79 (2) Net asset yield and earnings per share Weighted average Earnings per share (Yuan) Profit in the Reporting Period net assets yield (%) Basic EPS Diluted EPS Net profit attributable to ordinary shareholders 1.90 0.099 0.099 Net profit attributable to ordinary shareholders 1.88 0.098 0.098 after deducting non-recurring profit and loss (3) Differences between Domestic and Foreign Accounting Standards (1)The differences in net profit and net assets in financial reports disclosed under International Financial Reporting Standards and Chinese accounting standards □ applicable √ not applicable (2)The difference between net profit and net assets in financial reports disclosed under overseas accounting standards and Chinese accounting standards □ applicable √ not applicable (3)Explanation of the reasons for differences in accounting data under domestic and foreign accounting standards. If the data that has been audited by an overseas audit institution is adjusted for differences, the name of the overseas institution should be indicated. (4) Others 252 Bengang Steel Plates Co., Ltd. Annual Report 2020 XIII. Documents available for inspection 1, Financial Statements signed and stamped by the legal representative, CFO, and accounting manager; 2, All of the original copies of documents and announcements that have been published on China Securities Journal, Securities Times, and Hong Kong Commercial Daily; 3, Original copy of the Auditors’ Report under the seal of the CPA and signed by and under the seal of certified accountants. 253