本钢板材股份有限公司
BENGANG STEEL PLATES CO.,LTD.
Annual Report 2008
(Prepared Under Chinese Accounting Standard)
April 15, 20097
Important Statement
The Board of Directors and the directors of the Company guarantee that there are no significant
omissions, fictitious or misleading statements carried in the Report and we will accept individual and
joint responsibilities for the truthfulness, accuracy and completeness of the Report.
None of the directors, supervisors, and senior executives demonstrated uncertainty or disagreement
about the truthfulness, accuracy, and completeness of this report.
All of the 7 directors presented the board meeting.
Shulun Pan Certified Public Accountants Co., Ltd. issued the standard auditing report without qualified
opinion for the Company.
Chairman of the Board – Mr. Yu Tianchen, Chief Financial Officer – Mr. Kang Wei, and Head of
Accounting Dept. – Mr. Zuo Zhanguo hereby declare: the authenticity and integrality of the report are
guaranteed.
This report is prepared both in English and Chinese. Should any conflict in interpreting, the Chinese
version shall prevail.8
Table of Contents
I. Company Profile
...............................................................................................................
................... 9
II. Financial Highlight
...............................................................................................................
............. 10
III. Particulars About the Capital Share and Shareholders
..................................................................... 13
IV. Particulars about the Directors, Supervisors, Senior Management and Employees .........................
18
V. Administrative Structure
...............................................................................................................
..... 22
VI. Particulars about the Shareholders’
Meeting.................................................................................... 25
VII. Report of the Board of Directors
.................................................................................................... 26
VIII. Report of the Supervisory Committee
........................................................................................... 38
IX. Significant Events
...............................................................................................................
............. 40
X. Financial Report
...............................................................................................................
................ 51
XI. Documents For
Reference......................................................................................................
.......... 519
I. Company Profile
1. Legal Name of the Company in Chinese: 本钢板材股份有限公司
In English: BENGANG STEEL PLATES CO., LTD
Legal name in short form: BSP
2. Legal representative Yu Tianchen
3. Secretary of the Board: Zhang Jichen, Stock Affair Representative: Lu Xiaoyong
Contact address: No.16, Renmin Road, Pingshan District, Benxi City, Liaoning
Tel: 0414－7828360 7828734 Fax: 0414－7824158 7827004
Email：bgbczjc761@126.coom
4. No.18 Guangtie Rd., Pingshan District, Benxi City, Liaoning
Office address: No.16, Renmin Road, Pingshan District, Benxi City, Liaoning, Post Code: 117000
Email: bgbctwg＠mail.bxptt.ln.cn
5. Information disclosure media stipulated by the company:
China Securities Journal, Security Times, Hong Kong Commercial Daily
Annual reports also published online at: http://www.cninfo.com.cn
Place where the annual report is prepared and ready for reference: Stock Affair Department, 16th
Renmin Rd., Pingshan, Benxi, Liaoning
6. Stock listed in: Shenzhen Stock Exchange
(1) Short Form of B-Shares: BENGANGBAN-B Stock Code: 200761
(2) Short Form of the Stock of A-Shares: BENGANGBANCAI Stock Code: 000761
7. Misc. information:
Initial business registration on: June 27 1997
Business registration renewed on: June 15, 2007
Business registration renewed with: Liaoning Commerce & Industry Administration Bureau
Business license number: 2100001049024
Taxation registration number: 210502242690243
Oraganization code: 24269024-3
Public accountant engaged by the Company:
Shulun Pan Certified Public Accountants Co., Ltd.
Address: 4/F 61 Nanjing Rd. East, Huangpu, Shanghai10
II. Financial Highlight
1. Gross profit and composition
In RMB
Items Indices
Total profit 241,303,453.08
Net profit 165,089,865.35
Net profit deducted non-recurring gain/loss 164,428,397.60
Main business profit
4,090,909,567.11
Other business profit 219,740,401.01
Operation profit
241,554,464.14
None business income / expense, net
-251,011.06
Cash flow generated by business operation, net 4,292,599,078.14
Net increasing of cash and cash equivalents -84,832,515.50
Note: Non-recurring gain/loss excluded are
Gain/loss of non-current assets -19,768,988.26
Government subsidies accounted into current
gain/loss account, other than those closely related to
the Company’s common business, comply with the
national policy and continues to enjoy at certain fixed
rate or amount.
1,722,295.00
Gain/loss from debt reorganization 6,680,217.50
Other non-business income and expenditures other
than the above 11,115,464.70
Influenced amount of income tax 912,478.81
Total 661,467.7511
2. Major accounting data and finance indices in the latest 3 years
In RMB Yuan
3.1 Major accounting data
Year 2008 Year 2007 Increase/decrease
(%) Year 2006
Not adjusted Adjusted Adjusted Not adjusted Adjusted
Turnover 38,702,329,077.52 31,351,596,494.84 31,351,596,494.84 23.45% 26,711,849,276.37 26,711,849,276.37
Total profit 241,303,453.08 2,164,911,653.58 2,164,911,653.58 -88.85% 2,031,835,341.06 2,031,835,341.06
Net profit
attributable to
the
shareholders
of the listed
company
165,089,865.35 1,698,949,701.78 1,592,000,891.26 -89.63% 1,651,359,285.62 1,625,954,120.51
Net profit
attributable to
shareholders
of listed
company after
deducting of
non-recurring
gain/loss
164,428,397.60 1,633,258,814.28 1,526,310,003.76 -89.23% 1,624,134,970.34 1,635,658,145.75
Cash flow
generated by
business
operation, net
4,292,599,078.14 2,745,350,761.29 2,745,350,761.29 56.36% 2,108,712,699.89 2,108,712,699.89
End of 2008 End of 2007 Increase/decrease
(%) End of 2006
Not adjusted Adjusted Adjusted Not adjusted Adjusted
Gross Assets 32,718,649,648.86 29,356,299,029.54 29,356,299,029.54 11.45% 26,954,121,899.21
27,164,567,536.69
Owners’
(shareholders’)
equity
15,826,633,584.69 16,740,762,529.86 16,633,813,719.34 -4.85% 16,037,701,834.45 15,982,612,828.08
Share capital 3,136,000,000.00 3,136,000,000.00 3,136,000,000.00 0.00% 3,136,000,000.00 3,136,000,000.00
2.2 Major financial indices
Year
2008 Year 2007 Increase/decrease
(%) Year 2006
Not
adjusted Adjusted Adjusted Not
adjusted Adjusted
Basic earnings per share (Yuan/share) 0.05 0.5418 0.5100 -90.20% 0.7172 0.7061
Diluted earnings per share (Yuan/share) 0.05 0.5418 0.5100 -90.20% 0.5266 0.5185
Basic earnings per share less non-recurring
gain/loss (Yuan/share) 0.05 0.5208 0.4867 -89.73% 0.7053 0.7103
Fully diluted net
income/asset ratio
(%)
1.04% 10.15% 9.57% -8.53% 10.30% 10.17%
Weighted average net
income/asset ratio (%) 1.01% 10.38% 9.76% -8.75% 11.91% 13.67%
Fully diluted net income/asset ratio less
non-recurring gain/loss (%) 1.04% 9.76% 9.18% -8.14% 10.13% 10.23%
Weighted average net
income/asset ratio less non-recurring
gain/loss(%)
1.01% 10.16% 9.36% -8.35% 11.93% 13.44%12
Net Cash flow per share generated by
business operation (yuan/share) 1.3688 0.8754 0.8754 56.36% 0.6724 0.6724
End of
2008 End of 2007 Increase/decrease
(%) End of 2006
Not
adjusted Adjusted Adjusted Not
adjusted Adjusted
Net asset per share attributable to the
shareholders of the listed company
(Yuan/share)
5.0468 5.3383 5.3041 -4.85% 5.1141 5.0965
3. Supplementary form of the Cash Flow Statement
Year 2008 Year 2007
Net return on equity
(%)
Earnings per share
(RMB)
Net return on equity
Profit of the (%) Earnings per share
report period On full
amortizing
basis
weighted
average
On full
amortizing
basis
weighted
average
On full
amortizing
basis
weighted
average
On full
amortizing
basis
weighted
average
Net profit 1.04 1.01 0.05 0.050 9.57 9.76 0.51 0.51
Earnings per
share after
deducting of
non-recurring
gain/loss 1.04 1.01 0.05 0.050 9.18 9.36 0.4867 0.4867
4. Change in shareholders’ equity
RMB Yuan
Items Share capital Capital reserves Surplus reserves Retained profit Total of shareholders’ equity
Beginning of term 3,136,000,000 8,705,011,134.76 903,594,226.77 3,889,208,357.81 16,633,813,719.34
Increased this year 31,250,000.00 17,683,282.45 165,089,865.35 214,023,147.80
Decreased this year 1,021,203,282.45 1,021,203,282.45
End of term 3,136,000,000 8,736,261,134.76 921,277,509.22 3,033,094,940.71 15,826,633,584.6913
III. Particulars About the Capital Share and Shareholders
1. Statement of change in capital shares
Statement of change in capital shares (Ended Dec. 31, 2008, in shares)
Before the change Changed (+,-) After the change
Amount Proportion
Issuing
of new
shares
Bonus
shares
Transferred
from
reserves
Others Sub-total Amount Proportion
I. Shares with
conditional
subscription
2,575,226,800 82.12% -56,803,350 -56,803,350 2,518,423,450 80.31%
1. State-owned
shares
2. State-owned
legal person
shares
2,575,200,000 82.12% -56,800,000 -56,800,000 2,518,400,000 80.31%
3. Other
domestic shares 0 0.00% 0 0 0 0.00%
Incl.
Non-government
domestic legal
person shares
Domestic
natural person
shares
4. Share held by
foreign investors
Incl. Shares
held by foreign
legal persons
Foreign
natural person
shares
5. Management
shares 26,800 0.00% -3,350 -3,350 23,450 0.00%
II. Shares with
unconditional
subscription
560,773,200 17.88% 56,803,350 56,803,350 617,576,550 19.69%
1. Common
shares in RMB 160,773,200 5.13% 56,803,350 56,803,350 217,576,550 6.94%
2. Foreign
shares in
domestic market
400,000,000 12.76% 400,000,000 12.76%
3. Foreign
shares in
overseas market
4. Others
III. Total of
capital shares 3,136,000,000 100.00% 3,136,000,000 100.00%14
Change of conditional shares
in Shares
Name of the
shareholder
Conditional
shares at
beginning of
year
Released
this year
Increased
this year
Conditional
shares at end of
year
Reason of
condition
Date of
releasing
Benxi Steel
(Group) Ltd. 2,575,200,000 56,800,000 0 2,518,400,000
Commitment in
share equity
relocation
April 29
2008
Total 2,575,200,000 56,800,000 0 2,518,400,000 － －
Current shares with limitation to sell (conditional shares) held by Bengang Group were amounted to
575,200,000 shares at the day when the share relocation scheme was implemented. On August 28, 2006,
the Company placed 2 billion shares privately to Bengang Group, the amount of current shares with
limitation to sell held by Bengang Group was increased to 2,575,200,000 shares thereon.
On April 29, 2008, there were 56,800,000 conditional shares held by Bengang Group released from the
limitation. Thus the amount of current shares with limitation to sell held by Bengang Group was
reduced to 2,518,400,000 shares thereon.
2. Share issuing and listing
The previous three times of share placing prior to the end of the report term.
(1) At June 10 – 12 1997, the Company issued 400 million domestic listing foreign shares(B-share) in
Shenzhen Stock Exchange, the placing price was HKD2.38 when listed on July 8, 1997. On November
3, 1997, issued the domestic listing RMB common stock (A-Share) 120 million shares in Shenzhen
Stock Exchange, issue price was RMB5.40, listing date was January 15th, 1998. On July 16th 1998, the
108 million employees’ shares were approved to be listed in the stock exchange.
(2) On June 30, 2006, the Company issued 2 billion A shares privately to Bengang Group and use the
proceeds to purchase the steel & iron assets of the Group. It was approved by China Securities
Regulatory Commission on June 30th 2006. On August 28 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 September 28 2006, the privately placed
shares were approved by Shenzhen Stock Exchange to be placed in the stock market on October 9th
2006. Category of the share: Renminbi common shares (A shares); amount placed: 2 billion shares;
subscribing price: RMB4.6733 yuan/share; The newly placed shares are conditional shares. They are
not able to be transferred in 36 months since the date when they are registered to the name of Bengang
Group, i.e. August 28 2006.15
3. Particulars about the shareholders and substantial controller
(1) Number of shareholders at the end of report term was 66,970
(2) Shareholding status of the top 10 shareholders
Top 10 Shareholders
Name of the shareholder Properties of
shareholder
Share
proportion % Total shares Conditional shares Pledged or
frozen
Benxi Steel (Group) Ltd. State-owned
legal person 82.12% 2,575,200,000 2,518,400,000 4,000,000
DREYFUS PIFI-DREYFUS
PREMIER GREATER CHINA
Overseas natural
person 1.43% 44,875,855 0 0
GOVERNMENT OF
SINGAPORE INV. CORP.-
A/C "C"
Overseas natural
person 1.05% 32,871,918 0 0
China Construction Bank –
Shangtou Morgan China
Advantage Securities
Investment Fund
Domestic natural
person 0.73% 22,854,983 0 0
GSIC A/C MONETARY
AUTHORITY OF
SINGAPORE
Overseas natural
person 0.46% 14,311,705 0 0
HTHK/BTDL-ASIAN
MARKET LEADERS FUND
Overseas natural
person 0.19% 6,034,082 0 0
Li Minggong Overseas natural
person 0.17% 5,276,986 0 0
APS CHINA ALPHA FUND Overseas natural
person 0.15% 4,616,701 0 0
China Industrial &
Commercial Bank – Zhongyin
Dynamic Strategy Stock
Investment Fund
Domestic natural
person 0.14% 4,500,000 0 0
RENAISSANCE CHINA
PLUS FUND
Overseas natural
person 0.12% 3,760,556 0 0
Top 10 holders of unconditional shares
Name of the shareholder Unconditional shares Category of shares
Benxi Steel (Group) Ltd. 56,800,000 RMB common shares
DREYFUS PIFI-DREYFUS PREMIER
GREATER CHINA 44,875,855 Foreign shares placed in
domestic exchange
GOVERNMENT OF SINGAPORE INV. CORP.-
A/C "C" 32,871,918 Foreign shares placed in
domestic exchange
China Construction Bank – Shangtou Morgan
China Advantage Securities Investment Fund 22,854,983 RMB common shares
GSIC A/C MONETARY AUTHORITY OF
SINGAPORE 14,311,705 Foreign shares placed in
domestic exchange
HTHK/BTDL-ASIAN MARKET LEADERS
FUND 6,034,082 Foreign shares placed in
domestic exchange
Li Minggong 5,276,986 Foreign shares placed in
domestic exchange
APS CHINA ALPHA FUND 4,616,701 Foreign shares placed in
domestic exchange
China Industrial & Commercial Bank – Zhongyin
Dynamic Strategy Stock Investment Fund 4,500,000 RMB common shares
RENAISSANCE CHINA PLUS FUND 3,760,556 Foreign shares placed in
domestic exchange
Notes to relationship or “action
in concert” among the top ten
shareholders.
It is unknown to the Company whether there is any related connection or ‘Action in
Concert’ as described by Rules of Information Disclosing Regarding Changing of
Shareholding Status of Listed Companies existing among the above shareholders.
There were 4 million shares under pledge: In the lawsuit event of China Xinda Asset Management Co.,16
Ltd. Shenyang Office against Dandong Chemical Fibre (Group) Co., Ltd. for overdue payment, China
Xinda Asset Management Co., Ltd. Shenyang Office claimed Bengang Group to undertake the
guarantee responsibility, and requested Liaoning Provincial High Court to freeze the 4 million shares of
the Company held by Bengang Group in Shenzhen Stock Exchange.
On December 25, 2008, Bengang Group signed the credit transferring contract with China Xinda Asset
Management Co., Ltd. Shenyang Office, by which Bengang Group tookover the credit held by China
Xinda Asset Management Co., Ltd. Shenyang Office in Dandong Chemical Fibre (Group) Co., Ltd.,
and the guarantee responsibilities of Bengang Group was released thereon. China Xinda Asset
Management Co., Ltd. Shenyang Office promised to release the 4 million shares said above upon
completion of consideration payment made by the Group according to the contract.
4. Particulars about the controlling shareholder
Name of controlling shareholder: Benxi Steel (Group) Co., Ltd.
Legal representative: Yu Tianchen
Incorporation date: July 10, 1996
Registration Capital: RMB5.37 billion
Business scope: steel smelt, mine exploitation, panel rolling, oxygen manufacturing, pipe
manufacturing, power generating, coal industry, special steel material manufacturing, heating, supply
of the water, electricity, wind and gas, metal processing, electro mechanics builds, device
manufacturing, architecture installation, railway, highway transportation, import and export trade,
traveling 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 (to the
extent of liscenced to the subsidiary companies), exchange of steel material, and recycling of waste
oils.
The property right and control relationship between the Company and substantial controller are shown
as the following chart:
100%
82.12%
(1) There is no legal person shareholders holding shares more than 10% (including 10%) except for the
controlling shareholder - Benxi Steel (Group) Co. Ltd.
Liao Ning State-owned Asset Administration Committee
Benxi Steel (Group) Co. Ltd.
Bengang Steel Plate Co. Ltd17
(2) Top 10 holders of conditional shares
in shares
No. Name of the holder
Shares with
conditioned
subscription
Date when
trading is
allowed
Newly added
tradable shares Conditions
2008-03-14 56,800,000
1 Benxi Steel (Group) 2009-03-14 480,000,000
Ltd. 2,575,200,000
2011-01-01 2,038,400,000
Not to place or sell the
shares in 24 months since
the day of share equity
relocation is completed.18
IV. Particulars about the Directors, Supervisors, Senior
Management and Employees
1. Profiles of the directors, supervisors and senior executives of the Company, and
their annual remunerations
Incentive shares granted
Name Position Sex Age Job
started
Job
ended
Shares
held at
the
beginning
of term
Shares
held at
the
end of
term
Cause
of
change
Remuneration
accepted
from the
company in
report term
(RMB0’000
before tax)
Executable
shares
Executed
shares
Rate
of
shares
Market
price
at end
of
term
Take
remuneration
from
shareholding
or related
parties?
Yu
Tianchen Chairman M 56 Jul 26
2003
May
18
2010
13,400 13,400 0.00 0 0 0.00 0.00 Yes
Kang
Wei
Vice
Chairman,
GM
M 54
Nov
6,
2007
May
18
2010
0 0 10.59 0 0 0.00 0.00 No
Zhang
Jichen
Director,
Secretary of
the Board
M 52
Nov
6,
2007
May
18
2010
10.59 0 0 0.00 0.00 No
Zhao
Wei Director M 49
April
26,
2007
May
18
2010
0 0 0.00 0 0 0.00 0.00 Yes
Zhong
Tianli
Independent
Director F 53 Jul 26
2003
May
18
2010
0 0 2.40 0 0 0.00 0.00 No
Xue
Xiangxin
Independent
Director M 55 Jul 26
2003
May
18
2010
0 0 2.40 0 0 0.00 0.00 No
Tian
Binfu
Independent
Director M 60
April
26,
2007
May
18
2010
0 0 2.40 0 0 0.00 0.00 No
Liu
Junyou
Chairman
of the
supervisory
committee
M 56 Jul 26
2003
May
18
2010
0 0 0.00 0 0 0.00 0.00 Yes
Cao
Aimin Supervisor M 42
May
18
2007
May
18
2010
0 0 0.00 0 0 0.00 0.00 Yes
Liu
Engquan Supervisor M 54
May
18
2007
May
18
2010
0 0 0.00 0 0 0.00 0.00 Yes
Li
Binqiang Supervisor M 43
May
25,
2004
May
18
2010
0 0 4.32 0 0 0.00 0.00 No
Wang Pu Supervisor M 46
Jun
26,
2008
May
18
2010
0 0 7.56 0 0 0.00 0.00 No
Zhang
guohua
Vice
General
Manager
M 56
Mar
17,
2005
May
18
2010
0 0 10. 59 0 0 0.00 0.00 No
Total - - - - - 13,400 13,400 - 53．85 - - -19
Note:
1. As of the end of report term, Mr. Yu Tiancheng was holding 13,400 shares of the Company, and no
change occurred in the report term. Mr. Liang Guangde was holding 13,400 shares, which had been
released from limitation to sell. None of other directors, supervisors or management is holding shares
of the Company.
2. Annual remunerations for directors, supervisors and managements were paid in accordance with
document Benbanfa (2007)56 and other regulations.
2. Profiles of directors and supervisors
Directors:
Yu Tianchen, Male, doctorial degree, senior engineer, Mr. Yu once held the position of head of PR
department of Bengang No.2 Steel Factory; secretary and vice secretary of Party Committee of
Bengang Construction Company; General Manager of No.3 Construction Company; secretary of Party
Committee and chairman of the board of Bengang Construction Co.; Vice General manager of Bengang
Group Co; Vice Chairman, vice secretary of Party Committee, General Manager of Bengang Group,
and Chairman of Bengang Steel Plate Co., Ltd. Mr. Yu is now taking the position of Chairman of the
board, general manager and vice secretary of Party Committee of Bengang Group Co. (since April
2008) and chairman of the board of Bengang Steel Plate Co., Ltd.
Mr. Kang Wei, college education. Once held the position of Vice CCP Secretary of Coke Factory; Vice
Chief of Coke Factory; Chief and Chief CCP Secretary of Coke Factory of Begang Group; Chief and
Chief CCP Secretary of Coke Factory of Bengang Steel Plate Co., Ltd.; Vice General Manager and
Chief of Coke Factory of Bengang Steel Plate Co., Ltd.; Vice General Manager and General Manager
of Bengang Steel Plate Co., Ltd.; At present he’s the Vice Chairman and General Manager of Bengang
Steel Plate Co., Ltd.
Zhang Jichen, male, postgraduate degree, senior engineer. Once vice manager of Fire-resistant Material
Factory and Company of Bengang Group, vice chief secretary of the CCP committee, manager; chief
secretary of CCP committee of Labor Service Co. of Bengang Group, chief secretary of the CCP
committee of Residue Co., of the Company, the vide director of planning department of Bengang
Group; director and substitution Secretary of the Board of Bengang Steel Plate Co., Ltd.; At present
he’s the secretary of Board of the Company.
Zhao Wei, male, master degree, certified senior engineer. Once he was the chief of mould workshop of
No.2 steel-making factory, director of technical department, office manager of chief engineer, director
of technical quality division, and head of operation planning department of Bengang Group, the head
of development strategy department of Bengang Group. He’s been the head of Planning and Finance
Division of Bengang Group since October 2008.
Independent Directors:
Zhong Tianli, Female, she is the professor of North-east University Business School and president of
Financial Management Institute. She was studied in the finance of the Northeastern finance and
economics university from September of 1978 to July of 1982, obtained the bachelor's degree of
economics; Studied as a graduate student in the Northeastern accountancy department of finance and
economics university from September of 1986 to July of 1989, obtained the economics master's degree;
Between Sept. 2000 and June 2003, she’s studying in Northeast University in doctorial course and got
doctorial degree thereafter.Took the post as Singaporean Nanyang Technology University (NTU) Asia
and commercial visiting researcher of research center from March of 1995 to March of 1996.
Xue Xiangxin, male, a steel metallurgical doctoral supervisor of Northeastern University now,
scientific and technical place division chief , Northeastern University material and metallurgical
resources of metallurgical institute and chief of research institute of environmental project of
Northeastern University. He was studied an academic program of metallurgical physical chemistry in20
the colored metallurgy of the Northeastern technical college (Northeastern University now) from 1974
to 1977. Left the school to receive training and take the post as the assistant in 1977, studied for the
master's degree in the Northeastern technical college from 1980 to 1983, and obtained the master's
degree in May of 1983; enter the Northeastern surface process technology research institute of
technical college and work, take the post as the assistant after graduating. Studied for the doctorate,
was promoted to a lecturer in 1988 in the metallurgical specialty of Northeastern technical college steel
in April of 1985, and obtained the engineering doctorate in June of 1990; Promoted to the associate
professor in June of 1991; Promoted to professor in 1998.
Tian Bingfu, male, chief secretary of Liaoning Public Company Association. 1986-1990, he’s the vice
chief of overseas Chinese office of Liaoning Provincial Government. 1990-1993, vice director of
policy study office of Shenyang CCP Committee. 1993-1999, director of Shenyang Securities
Regulatory Commission. 1999-2003, investigator of Liaoning Securities Regulatory Commission.
2003- present, Chief Secretary of Liaoning Public Company Association.
Supervisors:
Liu Junyou, male, university eduction, senior political profession. Mr. Liu once held the position of
directors of Party Committee of Benxi Subordinate Institution of municipal Party committee of the
Communist Party of China; propaganda ministers and committee members of the Benxi Communist
Party of China municipal Party subordinate committee of working committee of organization,; director
of Supervisory Bureau of Benxi , member of leading Party group; vice director of management
committee of hot spring development district, member of leading Party; director of Benxi office of
building materials industry, member of Party Committee; vice Secretary, member of leading Party
group of Benxi Gongyuan cement (group); vice secretary and director of Supervisory Bureau of
discipline inspection commission of Benxi; Mr. Liu is now taking the position of the standing
commissioner of Party Committee, ministry of office and discipline committee director of Bengang
Group (since August 2000), chairman of the Supervisory Committee of the Company.
Cao Aimin, male, postgraduate degree, senior accountant. Once head of capital division of finance
department, and director of department, the head of financial department of Bengang Group. Chief
Accountant and Head of Planning and Finance Division; He’s the Chief Accountant of Bengang Group
since April 2008.
Liu Enquan, male, college graduate, senior political profession. Once the chief of CCP committee
office of No.2 Iron Factory, director of organization division, secretary of discipline committee.
Currently he’s the vice director of personnel department of Bengang Group. (Since November 2004)
Li Bingqiang, Male, university degree, he was once held the position of vice director, director of
casting workshop and vice director of production department of the Company; director of sheet metal
mold arrangement office of casting factory. He’s now the chief of Workshop No.2 of steel making
factory.
Wang Pu, male, college education, senior political profession. Once he was the office manager of the
Trade Union of Bengang Group. At present he’s the Chairman of Trade Union of Power Plant of the
Company.
Executives:
Zhang Guohua, Male, univerisity graduate, certified accountant. Mr. Zhang was once the director ,
assistant to the Chief, and Deputy Chief of the accounting dept. of Bengang Group. Vice General
Manager and Director of Planning and Accounting Dept. of the Company. He is now the Vice General
Manager and Director of Securities Dept. of the Company.
Note: None of the current directors (independent directors are not included) and supervisors is working
full time or part time for organizations other than shareholding organizations.21
3. Directors and supervisors elected or resigned, executives employed or dismissed in
the report term
(1) As adopted at the 6th meeting of the 4th term of Board held on May 26 2008, Mr. Li Mohua was
approved to resign from the position of General Manager for his age and change of job. The Board of
Directors has assigned Mr. Kang Wai to takeover the position of General Manager. For change of job,
Mr. Li Mingwen, Mr. Zhang Qingbo, and Mr. Feng Jianmin were released from the positions of Vice
General Manager. The resolutions of the meeting were announced on China Securities Journal,
Securities Times, and Hong Kong Commercial Daily dated May 27, 2008.
(2) As elected by the Annual General Meeting 2007 held on June 26 2008, Mr. Kang Wei and Mr.
Zhang Jichen were elected the new directors of the 4th term of Board, while Mr. Wang Pu was elected
the supervisor of the 4th term of Supervisory Committee. Mr. Li Mohua was released from the position
of director for his age and change of job. Mr. Liang Guangde was released from the position of director
as applied by himself. Mr. Zhang Jichen was released from the position of supervisor for job
engagement. The resolutions of the meeting were announced on China Securities Journal, Securities
Times, and Hong Kong Commercial Daily dated June 27, 2008.
(3) As adopted by the 7th meeting of the 4th term of Board held on June 26, 2008, Mr. Li Mohua has
resigned from the position of Vice Chairman and Mr. Kang Wei was elected to takeover the position.
Mr. Liang Guangde was released from the position of secretary of board as applied by himself. The
responsibilities of secretary of board were temporarily substituted by director Mr. Zhang Jichen.
(4) On November 27, 2008, as adopted at the 11th meeting of the 4th term of Board, for Mr. Zhang
Jichen obtained the Certificate for Secretary of Board from Shenzhen Stock Exchange during his
substitution period for the position of Secretary, the Board of Directors decided to engage Mr. Zhang
Jichen the Secretary of Board officially.
4. Particulars about the employees
There are 25949 employees in position by the end of the report term.
(1) Classified by occupations: production people are 22230, count for 85.67%; sales people are 152,
count for 0.59%; technology people are 1184, count for 4.56%; finance people are 92, count for 0.35%
and administration people are 2291, count for 8.83%.
(2) Classified by education level: postgraduate graduate 297, account for 1.14%, university graduates
2954, count for 11.38%; college graduates 6242, count for 24.05%; secondary vocational, technical and
high school degree are 6057, count for 23.34%;others are 10399 and count for 40.09%.
(3) There are 15221 retired employees get pensions form the Company.22
V. Administrative Structure
1. Company Administration
The Company unceasingly makes progress on legal person administration structure, establishing
modern organization system and operation in legally by according to the regulations and requirements
of Company Law, Securities Law, Listing Company administration Principle and the Guiding Opinion
of Establishing Independent Director System in Listing Company, as well as The Notification of Lift
Up the Quality of Listed Companies issued by China Securities Regulatory Commission and
trans-approved by the National Government.
The controlling shareholder was acting its rights as sponsor legally. Basically no competition was
conducted against the Company’s business operation. The Company has established a long-term
controlling shareholder behaving system. The shareholders’ meetings have been operated with clear
responsibilities and clear meeting criteria. Regulations were established to give convenient to the
public investors to participate in decision making process. Online voting system was opened to public
shareholders to vote on major issues of the Company. Shareholders’ meetings were held legally
according to the laws, regulations, regulatory regulations, and the Articles of Association.
The Board of Directors, Supervisory Committee, and executives were working with clear
responsibilities and meeting criteria. All of the directors, supervisors, and executives were fulfilling
their duties. Administrative systems have been established regarding internal controlling, finance,
decision-making over major investment, decision-making over related transactions, and other internal
criteria. The systems are reviewed and assessed periodically, and relative information is released. The
Company has also established internal restricting mechanism and responsibility tracking mechanism.
Responsibilities are clearly undertaken and invalid decision-making is effectively restricted.
Information disclosure regulations were established and executed to ensure authentic, precise, complete,
timely, and fair information disclosure.
Special administrative operation of the Company
In March 2007, China Securities Regulatory Commission published the “Notice on Performing of
Special Administrative Operation in Listed Companies”, which was requiring the listed companies to
enhance their special administrative operations. The Company has conducted all of the three stages of
the operation which was: self inspection, public inquiry, and improving practice.
On May 21, 2007, the Company convened a meeting to make arrangement for the special operation,
and established a leading team in which the Chairman was the first responsible person. Directors,
supervisors, and executives were arranged to study the relative documents regarding the special
administrative operation.
From early June to late July 2007, the Company performed serious self-inspection and proposed
improvement measures upon analyzing on the existing problems. The self-inspection report and
improving plan were formed and submitted to Liaoning Office of China Securities Regulatory
Commission.
On August 24, 2007, at the 2nd meeting of the 4th term of Board, the Self-inspection Report and
Improving Plan were examined and passed, and disclosed by China Securities Journal, Securities
Times, Hong Kong Commercial Daily as well as the website of Shenzhen Stock Exchange.
At the end of Oct 2007, the Liaoning Office of China Securities Regulatory Commission had a special
evaluation on the Company’s administration, and issued document (Liaoning Securities Regulatory
2007.93) titled “Opinions to the Administration of the Bengang Steel Plate Co., Ltd.” in which stated
that the Board of Directors has not established professional committees, the employee representative
proportion in the supervisor committee are not more than one third, capital management system need to23
be consummated. The Company put great attention on fasten working procedures, will implement the
above works in time as required.
In the report term, the Company has performed all of the self-inspection works and undertook
improvement measures according to the opinions provide above. Works stated in the improvement plan
were accomplished on schedule.
(1) Establishing of professional committees in the Board
On April 23, 2008, the Board revised the Articles of Association to add in articles regarding the
Auditing Committee, Nominating Committee, Remuneration and Assessment Committee, and Strategy
Committee, and setout the responsibilities of each. The revising proposal was passed at the
Shareholders’ Meeting held on June 26, 2008.
According to the revised Articles of Association, the Board approved the list of members of the
Auditing Committee, Nominating Committee, Remuneration and Assessment Committee, and Strategy
Committee, as well as the meeting criteria of each committee. Announcement was released on China
Securities Journal, Securities Times and Hong Kong Commercial Daily dated July 24, 2008.
(2) Number of employee supervisors in the Supervisory Committee has satisfied the requirement,
which was one third of the total
As nominated by the Employees’ Congress, the Shareholders’ Meeting held on June 26, 2008 approved
Mr. Wang Pu as the supervisor of the Supervisory Committee. The requirement of the number of
employee supervisor should over one third of the total was satisfied. The announcement was released
on China Securities Journal, Securities Times and Hong Kong Commercial Daily dated June 27, 2008.
(3) Further improved and consummated the financing proceed administrative system
According to the requirements of CSRC and administrative departments, the Company has established
the “Financing Proceed Administrative System” which was passed at the 5th meeting of the 4th term of
Board held on April 23, 2008. The announcement was released on China Securities Journal, Securities
Times and Hong Kong Commercial Daily dated April 26, 2008.
In the report term, the Company further improved its internal controlling system and systematic
construction, performed self-assessment, and established a self-inspection mechanism.
To fully use the supervisory function of the Auditing Committee on preparing of financial reports, the
“Annual Report Criteria of Auditing Committee” was produced in accordance with the relative
regulations of CSRC.
The Company will keep following with the regulations of CSRC and Shenzhen Stock Exchange and
carry forward the special administration operation as a long-term work.
2. Performance of the Independent Directors
Independent directors attended the entire shareholder meeting and the board meeting and played an
important role on important strategy, routine work and maintenance the legality right of the Company
and entireness shareholder by according to the law, regulation and Article Association's given
responsibility in reporting term.
The independent directors were performing their duties faithfully by attending the Board meetings,
providing professional and constructive advises, supervising the executive works, and guarding the
legal interests of the Company and all of the shareholders.
As empowered by the laws, regulations and the Articles of Association, the independent directors
performed their special duties and provided independent opinions on the major issues such as related
transactions. All of the related transactions that were subject to the approval of the Shareholders’
Meeting were inspected by the independent directors and independent opinions were issued upon them.
All of the independents who were not able to attend the Board Meetings had carefully observed the
proposals and empowered another independent director to vote at the meeting on their behalf.24
Independent directors’ presenting of board meetings
Name of
Independent
Director
Times of board
meetings to present
Presented
personally
Presented by
proxy Absent Remark
Zhong Tianli 7 7 0 0
Xue Xiangxin 7 3 4 0
Out for business,
entrusted Zhong Tianli to
vote
Tian Binfu 7 6 1 0
Out for business,
entrusted Zhong Tianli to
vote
Note: No dissenting opinion was issued by the independent directors on any of the issues discussed at
the Board Meetings.
3. Separation status in such aspects as personnel, assets, financial affairs, institution,
business, etc between the Company and controlling shareholders.
The Company is separated from the controlling shareholder in aspects of personnel, assets, financial
affairs, institution, business, 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, 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 have not held the important position beyond a director in shareholder's unit.
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 structuring
and working function are totally independent.
5) In finance: The company has independent financial & accounting department, the accounting and
financial management system were are complete and operated independently, and has bank
account and pay taxes independently.
4. Self-assessment on internal controlling system of the Company
According to the Internal Control System Standard issued by the Department of Finance and China
Securities Regulatory Commission, and Instructions on Internal Control System of PLC issued by
Shenzhen Stock Exchange, the Company further improved its administrative structure and the effective
working procedures of the Board.
In construction of the internal controlling system, the Company further enhanced the internal
controlling works:
(1) The Company has established strict placement responsibility system.
(2) Internal reporting system was further improved to make sure the information flow among the Board,
the Supervisory Committee, and the executives, which reduce the risks and weaknesses to the lowest
limit.25
(3) The Company has organized a internal controlling team formed by managers and directors of key
departments of the Company.
The Company performed the followings to enhance the internal control:
(1) Meetings were held among department executives about implementing of Internal Control Basic
Rules, urge them to observe the risk controlling point enforce their ability in internal control, further
improve the business operation flow and risk controlling system.
(2) The internal control operation team helped the departments and factories to revise their business
routines and apply risk analyzing in key processes, further clarified department responsibilities to
effectively control risks.
(3) Periodic inspections were done on the details of purchasing and payment, sales and revenue,
inventory, fixed assets, expenses, capital management, investment management, and remunerations.
Effective supervisory and responding systems were established.
5. Opinions on self-evaluation on internal control system by the supervisory
Committee
(1) According to the regulations of the China Securities Regulatory Commission and the
Shenzhen Stock Exchange, the Company obeyed internal control criteria, established
complete internal control system according to own characteristics to ensure the routine
operation to keep the asset safe and integrate.
(2) The Company had a complete internal control system, and qualified employees in internal
audit department to ensure the complete supervision on the Company’s internal main
operations.
(3) In 2008 there were no disobey of the Guide for Listed Company Internal Control issued by
the Shenzhen Stock Exchange.
Overall, the Committee thought the self evaluation of the Company’s internal control system
completely, actually, accurately reflected the Company’s actual operations.
6. Opinions on self-evaluation on internal control system by the independent
directors
During the period, the Board of Directors revised and evaluated series of administrative rules, the
internal control system was complete. The Company’s internal control activities were conducted based
on the internal control rules, the Company strictly controlled on asset management, related transaction,
engineering projects, major capital raising, external sponsion, information release which completely,
effectively assured the normal operations. The self evaluation on internal control system were in
accordance with the Company’s realness.
7. During the period, the Company had not established any new evaluation and
incentive scheme for the executives.
VI. Particulars about the Shareholders’ Meeting
The Company held shareholders’ annual meeting once in the report term, and no special meeting was26
convened..
The Shareholders’ Annual Meeting 2007 was held on June 26, 2008, the resolutions were released by
China Securities Journal, Securities Times, and Hong Kong Commercial Daily dated June 27, 2008.
VII. Report of the Board of Directors
1. Review of Company’s operation during the period of report
(1) The year 2008 is the extraordinary year in company's development history. Over the past year, the
company's production and management experienced the historical unpredictable and rare challenge and
test.
I. Southern low-temperature and freezing rain and snow, causing serious damage to power
facilities, resulting in large-area power outages, disruption of rail, transport tension to the serious
impact on normal production.
II. after Wenchuan earthquake“5.12”, people in disaster areas as a result of active support to
earthquake relief, blocked the railway transport and influenced the entering of raw fuel as well as
shipping-out of the product .
III. In order to ensure the success and peace of the Olympic Games, certain goods are
embargoed. During the Olympic Games in order to ensure the stable, high-yielding and safe
production, the company stores in advance so that inventory increased. And the raise of fuel prices
and inventory increased funds occupancy.
IV. The U.S. sub-loan crisis and the global economic crisis led to a drastic drop in steel prices.
The market has no confidence, and a number of steel factories have to reduce production.
The four major aspects of the external situation led the company business in face of
unprecedented trouble and challenge. Adhere to the scientific development concept, in-depth
analysis of the situation, come up with strategies to calm the crisis in the search for life, to carry
out the situation education, so that the company's decision-making is converted into the
confidence and action of the large number of employees. In accordance with the quality, diversity
and internationalization of the overall development strategy, we study hard skills and work hard to
ensure stable production and operation. And we have made new achievements in the development.
They include as follows:
To digest a variety of constraints to achieve stability in the production, in face of the grim internal and
external situation, the company under scientific command, calmly deal with the impact to eliminate a
variety of unfavorable factors influencing the production and operation to ensure a steady production.
I. Seize the source of production and ensure fuel supply. During icy weather in the southern and a
great earthquake, procurement and transportation management departments strengthen
coordination with the rail transport to ensure the material supply, particular before the Olympics.
II. Seize the arteries of production organization; strengthen the effective functioning of
equipment. The various function departments are in charge of close coordination of the main plant,
auxiliary plant and maintenance system. Blast furnace 5#,6#,7# in iron work is completed
Converter furnace 2# in steelwork, hot rolling line 1700mm、1880mm in hot rolling mill and
rolling line and cold rolling mill equipment repair and maintenance tasks are completed,
guaranteeing the key equipment in good condition.
III. Seize new projects of the rapid production efficiency; focus on the connection between27
doing the elimination of outdated production capacity and production of new projects. Adhere to
the principle of concentrate; balance the material supply to do a good job for the new line 1#.
Make strong expansion of market space to achieve 100% order. The company considers the market
expansion as the primary measure to deal with the grave challenge.
I. Make a nationwide dragnet investigation in steel enterprises and timely grasp the customer's
dynamic operation and financial situation. Downturn in the market, the main leaders in company
led to know the market and to analyze together with the consumers. They propagandize the
equipment, products, sales and other advantages to the user. With the increase of confidence in
ourselves and the user, realize the contract.
II. Hold the double-win concept, develop new customs continuously.
III. Insist on technological innovation, further the research and development of new products。
IV. Expand international market at our best. With the success of a number of high value-added
products to the international market, special steel exports also achieved a breakthrough in the
history of zero.
Accelerate the technological transformation and achieve key project’s production efficiency. In
response to market challenges, through the course of the economic crisis, the company focused in the
new development projects. These projects must be adjusted to enhance the product structure and level.
These must provide solutions to significant resources problem with the principle of energy saving and
environmental protection and continue to accelerate the pace of transformation. Throughout the
transformation process, always based on the level of world-class equipment, a world-class product
quality, energy saving and environmental protection at world-class standard, adhere to sophisticated
design, meticulous organization, and precise management, fine construction, to ensure that the design
and construction of 100% high-quality. After entering in July, in view that the steel market had a
serious impact on the situation, the company accelerated the pace of construction projects to promote
the new No. 1 blast furnace, boiler No. 9 and 8, 9, coke oven is built one after another to complete
the transformation.
Vigorously develop the circular economy; energy-saving gas emissions targets make new
breakthroughs. In accordance with the "iron and steel industry development policy," Company makes
efforts to strengthen energy-saving emission reduction.
I. The company engages in research activities. Compared with the same period last year, overall
energy consumption reduces per ton 17kg / t, fresh water reduces consumption per ton 1.12t / t,
coke rate reduces 42kg / t.
II. Actively promote the transformation of key energy-saving projects. Compiled and organized
the implementation of the company's "Eleventh Five-Year" energy planning. Pollution abatement
has been implemented in 24 key projects and achieved emission reduction SO27000 tons and
smoke-dust emission reduction 2967 tons. In company-wide, stable operation of environmental
protection facilities achieved more than 97%. The passing rate of pollution factor increases by
0.42 percent year-on-year. Green plant building has been further strengthened.
Strengthen safety production system. The company focuses on building a secure production
environment
I. Seriously implement occupational health and safety management system, adjust the security
commission's members to re-clear the member units’ secure production duties. Bring the work of
occupational health and occupational safety management into the evaluation system. At the same
time, increase the accountability of the security incidents and serious deal with the related person.
II. Grasp the basic management of safety, strict implement safe production responsibility system,
re-assess and amend the company's management procedures manual. Every units and departments
carry out the internal audit
III. Conscientiously implement the special safety inspection requirements of the State Council,
carry out safety inspections to strengthen the secure the inspection particularly during the Olympic28
Games. 93 issue of rectification is completed.
IV. Vigorously carry out the work of safety education and publicity. Various types of security
training courses at all levels are organized about 242 times. 15621 trainers have participated.
V. Increase capital investment. Investment of 24,927,100 Yuan and 40 safety projects are
completed. Throughout the year "three zero" is achieved that no personal injury & death, no fire
incident and no major equipment accident.
Adhering to corporate management, in order to effectively deal with the crisis, the company insist on
using information technology to stimulate industrialization and to promote the ERP project. Phase 1 is
completed in due time, finance management will work in Jan.1 2010.In the same time, Increase the
performance appraisal management, comment on the performance appraisal monthly. Especially in
July after the outbreak of the global economic crisis, the company has strengthened the focus on cost
control as the center of the enterprise management.
I. Improve our production cost management. Aiming at advanced indicators of advanced iron
and steel industry at home and abroad, actively promote the standard cost management.
II. Strengthen the procurement management and strict control the procurement plan, optimize
the structure of inventory. Adhering to the dynamic market, implement scientific procurement
tender, reduce inventory reserves and move the overstock of material to be available to meet the
needs of the production of construction
III. Strengthen the budget management. All construction projects must be in accordance to
market demand and efficiency which decide the under construction and postponed construction so
as to ease the financial pressure.
IV. Strengthen quality management, implement the work of tender implementing seriously and
adopt a quality system rehabilitation assessment, CE marked product supervisory system for
monitoring, audits TS16949 and enter the control phase of Six Sigma projects.
V. Strengthen the measures management. the company primary and secondary detection rate has
achieved 100%, detection rate of the third level has achieved 90%.
VI. Strengthen the financial management of the entire cost of the production process consumption;
re-approve the cost of indicators to increase the business efficiency.
VII. Enhance site management, especially carry out comprehensive management of the
surrounding environment to ensure the plant order and reduced material wastage.
In the report term, the Company has realized iron output of 7.43 million ton, increased by 3.05%; steel
output of 7.4 million ton, increased by 0.27%; hot plate output of 6.66 million ton, decreased by 0.75%.
In the whole year, the Company realized main business turnover of RMB38.7 billion, increased by
23.45%, and net profit RMB165 million, decreased by 89.6%.
(2) Main business and operations
The Company is engaged in the production and processing of of steel smelting, panel rolling. It has not
been changed during the report term. The major businesses layout, the profitability of the major
businesses, market status, asset and profit structure, and cash flow status are as the followings:29
A. Distribution of main business on industries and products
RMB0’000
Distribution on industries
On industry or
product Turnover Operation cost Operation
profit ratio
Change of
income over
last year %
Change of
cost over last
year %
Change of
operation profit
ratio over last
year %
Industry 3,363,416.69 2,954,325.74 12.16% 20.08% 27.70% -16.10%
Distribution on products
Steel plate 3,271,082.31 2,873,559.68 12.15% 19.16% 26.49% -16.00%
Steel billet 41,198.44 36,036.80 12.53% 407.23% 470.12% 187.00%
Others 51,135.94 44,729.26 12.53% 7.01% 26.56% -49.00%
B. Geographic distribution of products
Regions Major business
turnover
Proportion in major
business income Main business profit Proportion in major
business profit
Northeast 12,454,172,469.41 37.03% 1,544,348,425.34 37.75%
North 5,201,997,092.52 15.47% 589,412,229.29 14.41%
East 7,832,075,254.91 23.29% 1,401,285,129.84 34.25%
Northwest 98,880,744.56 0.29% 12,388,497.92 0.30%
Southwest 0.00 0.00%
Mid-south 2,705,625,657.03 8.04% -125,736,075.99 -3.07%
Export 5,341,415,726.18 15.88% 669,211,360.71 16.36%
Total 33,634,166,944.61 100.00% 4,090,909,567.11 100.00%
C. Distribution on regions
In RMB 10 thousand
Yuan
Regions Turnover Change of income over last year
%
Northeast 1,245,417.25 41.85%
North 520,199.71 -10.33%
East 783,207.53 -10.22%
Northwest 9,888.07 -47.65%
Southwest 0.00 -100.00%
Mid-south 270,562.57 573.00%
Export 534,141.57 29.86%30
D. Major suppliers and clients
Total of purchases from top 5
suppliers 6,398,793,294.91 Portion in total
purchasing 22.17%
Total of sales to top 5 buyers 14,826,064,012.41 Portion in total sales 38.31%
E. Composition of assets and profit
Items Year 2008 Portion % year 2007 Portion %
Changed over
the previous
year %
Gross Assets 32,722,333,254.16 - 29,356,299,029.54 - 11.47
Account receivable 507,305,392.11 1.55 817,330,942.52 2.78 -37.93
Other account receivable 111,144,143.81 0.34 110,954,057.98 0.38 0.17
Inventories 7,859,743,442.03 24.02 4,605,043,499.66 15.69 70.68
Fixed assets 15,114,030,741.42 46.19 13,708,841,478.55 46.70 10.25
Construction in process 3,871,536,579.58 11.83 3,394,891,623.53 11.56 14.04
Short-term loans 2,887,352,200.00 8.82 2,638,685,960.00 8.99 9.42
Long-term borrowings 2,018,558,759.20 6.17 1,935,210,198.02 6.59 4.31
F. Change in three expenses and income tax
Items Year 2008 Year 2007
Changed over the previous
year %
Sales expense 738,183,045.50 56,170,341.63 32.73
Administrative
expense 2,168,897,763.93 1,738,707,568.74 24.74
Financial
expenses 328,304,259.41 07,993,829.89 6.59
Income tax 76,213,587.73 72,910,762.32 -86.70
Note: Cause of changes
Sales expense of the current year was RMB738,183,045.50, which were mainly freight, tariff, and
refunding. It increased by RMB182,012,703.87 at rate of 32.73%. It was caused by increasing of
refunding in 2008 due to market situation.
Overhead of current year was RMB2,168,897,763.93, which was mainly insurance fee, fixed asset
maintenance fee, and office expenses. It increased by RMB430,190,195.19 at 24.74% of rate, which
was caused by increasing of salaries and fixed asset repairing fees.
Financial expenses increased by RMB20.31 million, which was caused by increasing of borrowings
and interests.
Decreasing of income tax expenses was caused by decreasing of gross profit in the current year.31
F. Cash flow compositions
Items Year 2008 year 2007 Changed over last
year (%)
Cash flow generated by business operation, net 4,292,599,078.14 2,745,350,761.29 56.36
Net cash flow generated by investment -2,688,922,333.52 -2,619,662,110.59 2.64
Net cash flow generated by financing -1,892,345,482.25 -127,143,534.43 1,388.35
G. Particulars about the controlled subsidiaries
The 7 sales companies including Tianjin Bengang Steel Trade Co., Ltd., Wuxi Bengang Sales Co., Ltd.,
and Nanjin Bengang Material Co., Ltd. are fully-owned subsidiaries, or cross-owned subsidiaries
acquired in asset restructure program from Bengang Group.
Their main business are sales of metal materials and steel products.
H. During the reporting period, situations of the company's technology innovation,
energy-saving emission reduction
During the reporting period，the Company enhance the market competitiveness by accelerating the pace
of the base construction for plate products. In accordance with the scientific concept of development
"fast and good" requirement, it comprehensively promotes the optimization and upgrading of industrial
structure. It persists in using high technology to transform traditional industries through independent
innovation, digestion and absorption of new and adjustment of product structure; expanding the
domestic market and involving into the international market.
Through high-tech product development，we continuous upgrade the high-precision ratio of the total
amount of products and from low-grade products to high-product. In response to market challenges,
through the course of the economic crisis, the company focused in the new development projects.
These projects must be adjusted to enhance the product structure and level. These must provide
solutions to significant resources problem with the principle of energy saving and environmental
protection and continue to accelerate the pace of transformation.
Throughout the transformation process, always based on the level of world-class equipment, a
world-class product quality, energy saving and environmental protection at world-class standard,
adhere to sophisticated design, meticulous organization, and precise management, fine construction, to
ensure that the design and construction of 100% high-quality.
In accordance with the comprehensive, coordinated and sustainable development, the company
vigorously develops the circular economy and energy-saving gas emissions.
In accordance with the "iron and steel industry development policy," Company makes efforts to
strengthen energy-saving emission reduction.
I. The company engages in research activities in company-wide. Compared with the same period last
year, overall energy consumption reduces per ton 17kg / t, fresh water reduces consumption per ton
1.12t / t, coke rate reduces 42kg / t.
II. Actively promote the transformation of key energy-saving projects. Compiled and organized the
implementation of the company's "Eleventh Five-Year" energy planning. Pollution abatement has been
implemented in 24 key projects and achieved emission reduction SO27000 tons and smoke-dust
emission reduction 2967 tons. In company-wide, stable operation of environmental protection facilities
achieved more than 97%. The passing rate of pollution factor increases by 0.42 percent year-on-year.
Green plant building has been further strengthened.32
2. Outlook for the company's future development
(1) The development of the industry trends and the competition in the market structure
In 2009, the company either faces the test of market uncertainty, a crucial year of life and death
struggle, or management level being leapt to the image as a result of production scale over ten
million ton. The quality of plate base construction is pivotal. Therefore, to do the production and
operation in 2009 and overcome the economic crisis caused by the severe impact of the company, the
maintenance of the overall situation of reform, development and stability, the achievement of "Eleventh
Five-Year Plan" determine the objectives that of great significance.
Throughout 2009, the economic development of the situation is that challenges and opportunities and
difficulties co-exist. From the perspective of challenges, outside the enterprise, the consequences of a
slowdown in 2009 cased by the economic crisis will be deeply felt and uncertainties may arise at any
time. a serious contradiction between manufacturing cost and selling prices will not be resolved in a
short period, resulting in imbalance between production scale and economy. Inside the company，With
the commissioning of new projects, the manufacturing processes do not match, and imbalance appears
between the steel output and the rolled steel output, increasing the degree of difficulty to production
organization, raw materials transport, logistics support, product development and marketing.
(2) the company’s opportunities and challenges
I. Macro-economic environment will be improved. Capital growth, domestic demand expansion, the
structure transfer policy by Central Committee and State Council issued will effectively promote
economic and social development. It will further expand low-cost housing, nomads’ settlement, canopy
house transformation and projects such as the people's livelihood, further speed up the railways,
highways, airports, power grids, water conservancy and other infrastructure, and further intensify the
energy-saving emission reduction, ecological protection, further strengthen the reconstruction of
disaster areas, as well as the implementation of value-added tax restructuring, to encourage
technological upgrading of enterprises, encourage enterprises to upgrade. These will bring about us the
opportunities. In the same time, after the economic crisis, in iron and steel industry a number of
manufacturers have cut production. It is bound to alleviate contradiction in market supply and demand
and help us to occupy and expand market.
II. The company's strengths and potential will be brought into full play. First of all, the Benxi Group,
relying on its own mines, the advantages of self-sufficiency in raw materials, can greatly slow down
the impact of economic crisis. Secondly, the main equipment companies have reached a world-class
level, so that market competitive has significantly enhanced. Thirdly, the company created high-tech
content and high value-added products system so as to further consolidate the company's first rank in
iron and steel industry in China. Fourthly，we have a relatively perfect sales network and huge and
stable customer base covering the key areas in domestic market and in the world. Our products are not
able to occupy the domestic market but also be exported to Europe, the United States and Asia and
other countries and regions. Fifthly, due to a corporate culture of a hundred year history, there is a
troop
being able to work hard. Cadres, workers and staff members who have advanced technology are the
fundamental strength to overcome difficulties.
(3) The overall objective of production and management in 2009
Fully implement the Party's 17 and the Third Plenary Session of 17 the spirit of Deng Xiaoping Theory
and "Three Represents" as guidance, in-depth implementation of the scientific development concept. In
accordance with the quality, variety and overall international business development strategy, centering
on the economic benefits, the company speed up the market-oriented development, focusing on product
structure adjustment and capacity improvement for sustainable development. It solidly advances the
construction to ensure fast development and good company. In accordance with the guiding ideology,
the overall objective of production in 2009 is that: climbing high in production target, i.e. a pig iron
production 10 million tons, 10 million tons of crude steel, 10 million tons of hot-rolled plates, cold
rolled 1,550,000 tons; Promote high-quality, high value-added products research and development such
as car plate, X80, oil pipeline. ratio of High-performance sheet metal products over more than 80%;
ensure that the high-speed, key construction projects completed on schedule time and with sufficient33
production efficiency; achieve high growth in efficiency and the profit over the previous year; Adhere
to high management standard, low production costs and focus on energy-saving emission reduction;
achieve the advanced level in the domestic industry; achieve the "three zero." in production security.
In accordance with the above objectives, the focus in 2009 is to do the work of the following aspects.
I. Scientific organize production and ensure capital growth
II. Strengthen marketing and expand products share
III. Adhere to independent innovation, focus on R & D of new products
IV. Accelerate the construction of key projects with quality and production efficiency.
V. Study hard and comprehensively promote the management of innovation
VI. Deepen the cycle of economic development, highlight the work of energy-saving emission
reduction.
(3) Capital requirement, application plan and capital source.
In year 2009, the capital expenditures are mainly operational outflow, the expenditures are planned to
RMB35 billion, engineering project of RMB4 billion. Mainly used in reconstruction of continuous
casting line, energy saving reconstruction of converter, and 180 dephosphorization converter,
reconstruction of coke furnace, and silicon steel project.
The operation and investing capital is mainly from sales income and bank loans.
(4) Main risks and solutions.
As the result of the global financial crisis, the prices of iron ore and coal decreased, but the fuel and
marine transportation were facing fluctuating factors. These are influencing the profitability and
stability of the Company’s operation. Releasing of production capability in the country and stuck in
export made the market competition more severe. The Company has achieved great improvement in
product structure improving, though still need to upgrade its anti-risk ability. Great pressure still exist
in the whole industry.
Through years of technical reconstruction, the Company has achieved great progress in production
techniques. But there is still gap with the leading enterprises in the world.
To handle the aforesaid risks, the Company will enhance internal management, quality control, and
marketing territory. Adjust product structure, increase output of “double high” products, enrich product
lines, and develop profit-making points. Carry on cost controlling policies, further enhance initial cost
controlling, enforce process cost control, keep promote collective bidding in purchasing approach,
make sure the cost controlling system will be effectively operated in the Company, to form the
advantages in cost control and enforce the Company in market competition.34
(5) Investments
A. The controlled subsidiaries
Company invested in Reg. Add. Legal
representative Business Scope Registered
Capital
Shareholding
%
Relationship
to the
Company
Consolidated
or not
Xiamen Bengang
Steel & Iron Sales
Ltd.
Xiamen Zhang
Guoming
Wholesale and
retaining of
metal materials,
steel, pig iron,
electro-mechanic
products,
hardware,
electronics
500K
Yuan 100 Subsidiary Consolidated
Tianjin Bengang Steel
& Iron Trading Ltd. Tianjin Liu Chuang
Sales of steel,
pig iron,
chemical
materials (except
for dangerous
chemicals and
easy-to-make
poison
chemicals),
construction
materials, and
mineral products
3 mil.
Yuan 100 Subsidiary Consolidated
Wuxi Bengang Steel
& Iron Sales Co., Ltd. Wuxi Pang Zonghua
Sales of metal
materials,
chemical
materials and
products
(dangerous
products
excluded),
general
machinery and
accessory,
electronic
machinery and
instruments, and
hardware
1 mil.
Yuan 100 Subsidiary Consolidated
Nanjing Bengang
Material Sales Ltd. Nanjin Pang Zonghua
Sales of
construction
materials,
chemical
materials
(dangerous
products
excluded),
hardware,
(exclude gas
engine scooters),
electronic
products, hot
rolled plate, cool
rolled plate, and
pig iron. Process
of metal
materials.
1.15 mil
Yuan 100 Subsidiary Consolidated
Yantai Bengang Iron
and Steel Sales Ltd. Yantai Song Xingang Wholesale,
retailing,
500K
Yuan 100 Subsidiary Consolidated35
construction
materials,
fire-resistance
materials, steel,
chemical
products (except
for dangerous
products)
Harbin Bengang Steel
& Iron Sales Ltd. Harbin Fei Jixi
Metal materials,
construction
materials,
hardware
(except for
wireless phone
equipment),
electro-mechanic
products, home
electronics.
500K
Yuan 100 Subsidiary Consolidated
Changchun Bengang
Iron and Steel Sales
Ltd.
Changchun Li Zhichao
Sales of steel,
pig iron,
electronic
machinery and
instruments,
general
machinery,
construction
material
500K
Yuan 100 Subsidiary Consolidated
B. In the report term, the non-financing capital was used as the followings:
In the report term, using of non-financing funds were as the followings:
In 2008, the Company totally applied RMB4,861,980,000 in technical reconstruction.
1. Powder coal furnace reconstruction: planned for RMB78.61 million, started in 2008. Invested
RMB69.16 million as of the end of 2008. Completed in 2008.
2. Dephosphorization engineering: planned for RMB72.88 million, started in 2008. Invested
RMB71.43 million as of the end of 2008. Completed in 2008.
3. No.3 Heating furnace: planned for RMB120.60 million, started in 2006. RMB54.96 occurred in
2008, accumulated to RMB116.61 million as of the end of 2008. Completed in 2008.
4. Improving engineering of hot rolling line 1700: planned for RMB188.80 million, started in 2007.
RMB83.34 occurred in 2008, accumulated to RMB184.31 million as of the end of 2008. Completed in
2008.
5. Successive reconstruction of continues rolling: planned for RMB210.093 million, started in 2003.
Invested RMB196.99 million as of the end of 2008. Completed in 2008.
6. Super thin cool rolling plate reconstruction: planned for RMB1126.19 million, started in 2006.
RMB165.18 million invested in 2008, and accumulated to RMB970.36 million at end of 2008. Has
already transferred to fixed assets. Successive improving works will be finished in 2009.
7. Reconstruction of No.8 blast furnace: planned for RMB2179.05 million of investment, started in
2006. RMB889.6 million occurred in 2008 and accumulated to RMB1812.76 million as of the end of
2008 (including RMB1527.32 million transferred to fixed assets), will be completed in 2009.
8. Environmental reconstruction of material yard: planned for RMB703.12 million of investment,
started in 2005. RMB239.60 million occurred in 2008 and accumulated to RMB564.33 million as of
the end of 2008 (including RMB3.45 million transferred to fixed assets), will be completed in 2009.
9. IT engineering: planned for RMB185 million, started in 2005. RMB48.46 million invested in 2008,
and accumulated to RMB98.35 million at end of 2008. Will be finished in 2009.
10. 180 ton converter project: planned for RMB1500 million of investment, started in 2003. RMB89.4236
million occurred in 2008 and accumulated to RMB1433.54 million as of the end of 2008 (including
RMB1074.08 million transferred to fixed assets), will be completed in 2009.
11. Reconstruction of No.8 and 9 coke furnace: planned for RMB1335.41 million of investment,
started in 2006. RMB733.91 million occurred in 2008 and accumulated to RMB875.40 million as of
the end of 2008 (including RMB769.35 million transferred to fixed assets), will be completed in 2009.
12. Reconstruction of continues casting line: planned for RMB1552.15 million, started in 2007.
RMB1142.90 million invested in 2008, and accumulated to RMB1272.05 million at end of 2008. Will
be finished in 2009.
13. Energy saving reconstruction of converter system: planned for RMB780 million, started in 2007.
RMB42.83 million invested in 2008, and accumulated to RMB65.24 million at end of 2008. Will be
finished in 2010.
14. Ma’erlin oxide ore pellet project: planned for RMB429.37 million, started in 2007. RMB291.75
million invested in 2008, and accumulated to RMB315.72 million at end of 2008. Will be finished in
2009.
15. Packaging and loading system: planned for RMB125.29 million, started in 2008. Invested
RMB107.78 million as of the end of 2008. Will be completed 2009.
(7) Routine works of the Board
A. Particulars about the board meetings and resolutions
The Board of Directors held 7 meetings in the report term as the followings:
The 5th meeting of the 4th term of Board was held on April 23, 2008, and the resolutions were released
on April 26, 2008 by China Securities Journal, Securities Times, and Hong Kong Commercial Daily.
The 6th meeting of the 4th term of Board was held on May 26, 2008, and the resolutions were released
on May 27, 2008 by China Securities Journal, Securities Times, and Hong Kong Commercial Daily.
The 7th meeting of the 4th term of Board was held on June 26, 2008, and the resolutions were released
on June 27, 2008 by China Securities Journal, Securities Times, and Hong Kong Commercial Daily.
The 8th meeting of the 4th term of Board was held on July 22, 2008, and the resolutions were released
on July 24, 2008 by China Securities Journal, Securities Times, and Hong Kong Commercial Daily.
The 9th meeting of the 4th term of Board was held on August 19, 2008, and the resolutions were
released on August 22, 2008 by China Securities Journal, Securities Times, and Hong Kong
Commercial Daily.
The 10th meeting of the 4th term of Board was held on October 27, 2008, and the resolutions were
released on October 28, 2008 by China Securities Journal, Securities Times, and Hong Kong
Commercial Daily.
The 11th meeting of the 4th term of Board was held on November 27, 2008, and the resolutions were
released on November 29, 2008 by China Securities Journal, Securities Times, and Hong Kong
Commercial Daily.
B. Execution of the resolutions of Shareholders’ Meeting by the Board
Execution of profit distribution plan for year 2007
As approved by the Shareholders’ Annual Meeting 2007 held on June 26, 2008, the profit distribution
plan for year 2007 was: Basing on the total capital shares of 3,136,000,000 shares at present, cash
dividend of RMB3.20 will be distributed to each 10 shares (tax included. RMB2.88 was practically
distributed to each 10 shares after tax to the public individual A-share holders and investment
foundations). According to the Articles of Association, dividend for foreign investors’ shares (B-shares)
was distributed in Hong Kong Dollar at the middle rate published by People’s Bank of China at the 1st
working day after this dividend plan was adopted by the shareholders’ meeting (June 27, 2008), i.e. 1
HKD = 0. 8794 RMB. (Dividend for B-shares are free of tax temporarily.)37
The Dividend Distribution Announcement for Year 2007 was released on July 24, 2008 by China
Securities Journal, Securities Times, and Hong Kong Commercial Daily. And was implemented
thereafter.
Performance of duties by the Auditing Committee and Remuneration Committee
To fully use the active functions of the professional committees of the Board, enhance the efficiency,
quality, and scientificity of the decision-making process, on April 23, 2008, the Board revised the
Articles of Association to add in articles regarding the Auditing Committee, Nominating Committee,
Remuneration and Assessment Committee, and Strategy Committee, and setout the responsibilities of
each. The revising proposal was passed at the Shareholders’ Meeting held on June 26, 2008.
On July 22, 2008, according to the revised Articles of Association, the Board approved the list of
members of the Auditing Committee, Nominating Committee, Remuneration and Assessment
Committee, and Strategy Committee, as well as the meeting criteria of each committee. To fully use the
supervisory function of the Auditing Committee on preparing of financial reports, the “Annual Report
Criteria of Auditing Committee” was produced in accordance with the relative regulations of CSRC.
The Auditing Committee has fully inspected the financial information, the internal controlling system,
and the legality in operation of the Company during the works to prepare the Annual Report 2008. It
communicated with Shulun Pan Certified Public Accountants Co., Ltd. before they started audition
works in the Company to ensure the works would be duly completed. Meanwhile, it provided full
evaluation on the process and quality of jobs done by the CPA. The Auditing Committee agrees to
extend the services of Shulun Pan Certified Public Accountants Co., Ltd. as the public auditor of the
Company for year 2009. The Remuneration and Assessment Committee examined and inspected the
annual remunerations of the directors, supervisors and executives during preparing of the Annual
Report 2008, and agreed to submit to the Board of Directors.
(8) Profit distribution or common reserve capitalization plan of the current year
As audited by Shulun Pan Certified Public Accountants Co., Ltd., the net profit realized in 2008 was
RMB165,089,865.35. According to the Articles of Association, after providing 10% of statutory
common reserves amounted to RMB17,683,282.45, the distributable profit realized in 2008 was
RMB147,406,582.90, plus RMB3,889,208,357.81 undistributed profit retained at the beginning of year,
and less dividend of RMB1,003,520,000 distributed for the previous year, the profit distributable to the
shareholders was RMB3,033,094,940.71.
The dividend plan for year 2008 is: upon the total capital shares amounted to 3,136,000,000 shares at
December 31st 2008, RMB0.50 (tax included) of dividend will be distributed upon each 10 shares to
the whole shareholders. The dividend for common shares is totaled to RMB156,800,000 at this time.
The balance of RMB2,876,294,940.71 will be carried over to the next fiscal year.
(9) Other issues
A. The Company appoints China Securities Journal, Securities Times, and Hong Kong Commercial
Daily as the official information disclosure presses, which remain unchanged in the year.
B. Special statement of the CPA on the capital adoption by the controlling shareholder and other related
parties
Pursuant to the “Notice on regulations about capital transaction with related parties and providing of
external guarantees” (证监发「2003 」 56 号) issued by China Securities Regulatory Commission, the
CPA issued the “Special statement of the CPA on the capital adoption by the controlling shareholder
and other related parties”. As of December 31, 2008, no capital adoption by the controlling shareholder
and other related parties was discovered.
C. Opinions of the independent directors: “Through investigation, the external guarantees occurred in
2008 and accumulated there before are zero, and no illegal providing of guarantee happened. Capital
transactions with the controlling shareholder and other related parties under its control were normal
business transactions. No illegal adoption of capital happened.”38
VIII. Report of the Supervisory Committee
1. Works of the Supervisory Committee in the report term
The Supervisory Committee convened 4 meetings during the report term:
The 4th meeting of the 4th term of Supervisory Committee was held on April 23, 2008, the resolutions
adopted were the followings:
“Supervisory Committee’s Annual Report 2007”;
“Board of Directors’ Annual Report 2007”;
“Annual Report 2007 and the Summary”;
“Financial Settlement Report 2007”;
“The 1st Quarterly Report 2008”;
“Profit Distribution Plan 2007”;
“Proposal on Engaging of CPA for Year 2008”;
“The Financing Proceed Administrative System”;
“Proposal on Routine Related Transactions”;
“Proposal on Investment Framework Plan 2008”;
“Proposal on Revising of the Articles of Association”;
“Proposal on Changing of the Supervisors”;
“Proposal on Holding of Shareholders’ Annual Meeting 2007”.
The resolutions were released by China Securities Journal, Securities Times, and Hong Kong
Commercial Daily dated April 26, 2008.
The 5th meeting of the 4th term of Supervisory Committee was held on July 22, 2008. The “Report on
Administrative Improvement” was passed at the meeting, and was released by China Securities Journal,
Securities Times, and Hong Kong Commercial Daily dated July 24, 2008.
The 6th meeting of the 4th term of Supervisory Committee was held on August 19, 2008, the
resolutions adopted were the followings:
“The Interim Report 2008”
“The proposal on establishing of sales companies in Shanghai and Guangzhou”.
The resolutions were released by China Securities Journal, Securities Times, and Hong Kong
Commercial Daily dated August 22, 2008.
The 7th meeting of the 4th term of Supervisory Committee was held on October 27, 2008, the 3rd
Quarterly Report 2008 was adopted at the meeting. Resolutions were released by China Securities
Journal, Securities Times, and Hong Kong Commercial Daily dated October 28, 2008.
The 8th meeting of the 4th term of Supervisory Committee was held on November 27, 2008. The
“Proposal on selling continuous casting billet was passed at the meeting, and was released by China
Securities Journal, Securities Times, and Hong Kong Commercial Daily dated November 29, 2008.39
2. Independent opinions of the Supervisory Committee regarding the related issues
in 2008
The Supervisory Committee of the Company performed its duties according to the Company Law,
Securities Law and the Articles of Association focusing on legality of daily operation, financial
operation, etc. It was to protect the overall interests of the Company and the masses of shareholders,
the Supervisory Committee issued the independent opinion on the relevant issues in report term as
follows:
(1) Legality of business operation
The Supervisory Committee attended and observed Company's shareholder meetings and every
conference of Board of Directors, and played an important role on resolution’s formulated,
implemented guarantee function during the report term. The Supervisory Committee of the Company
considered that the production of the Company was in good condition of operation. Company directors
accorded with Company’s article and regulation while carrying out company's work and did not violate
laws and regulations, Article Association or any behavior that harmful to the interests of the Company
and shareholder. The Supervisory Committee of the Company considered, the Company’s management
of production and operation had responsible as devoted to their duty, had not violated laws and
regulations, Article Association or any behavior harmful to the interests of the Company and
shareholder while carrying out company's work, the Company made the proper strategy of business and
Company’s management is doing well and with high-efficiency.
(2) Inspection on financial operation
The finance statement was audited by Shulun Pan Certified Public Accountants Co., Ltd. and they
issued standard auditor’s report without qualified opinion, the finance report of the Company was
frankly, objectively, and precisely reflecting the status of finance and business performance of the
Company.
(3) Related transactions
Related transactions were done on fair base according to contracts or agreements, no interest of the
Company was violated.40
IX. Significant Events
1. In the report period, the Company didn’t involve in any material lawsuits or arbitrations.
2. No bankruptcy or reorganizing issues occurred in the report term needs to be disclosed.
3. In the report term, the Company holds no shares of other PLCs, nor shares of financial institutions
such as commercial banks, security dealers, insurance companies, trust companies, or future companies,
and made no trading of other PLCs’ shares.
4. In the report term, the Company conducted none of purchasing, selling of assets, nor merger of
enterprises.
5. In the report term, the Company conducted no implementation of share option incentive program.
6. Material related transactions in the report term:
(1) Relationships with the related parties
Benxi Iron & Steel (Group) Co., Ltd. is the parent company and substantial controller of the Company,
this hasn’t been changed in the report term.
1) Controlling Related Parties
Name of the subsidiaries Reg. Add. Registered
capital
Share portion
%
Voting rights
%
Organization
code
Benxi Steel (Group) Co., Ltd. Benxi 5.369 bil 82.12 82.12
Xiamen Bengang Steel Sales Ltd. Xiamen 0.5 mil 100.00 100.00
Wuxi Bengang Steel Sales Ltd. Wuxi 1 mil 100.00 100.00
Tianjin Bengang Steel Trading Ltd. Tianjin 3 mil 100.00 100.00
Nanjing Bengang Material Sales
Ltd. Nanjin 1.15 mil 100.00 100.00
Yantai Bengang Steel Sales Ltd. Yantai 0.5 mil 100.00 100.00
Harbin Bengang Steel& Iron SalesLtd. Harbin 0.5 mil 100.00 100.00
Changchun Bengang Steel Sales
Ltd. Changchun 0.5 mil 100.00 100.00
2) Registered capital of the related parties with controlling relationship and their changes
Name of the subsidiaries Beginning of termIncreased this termDecreased this termEnd of term
Benxi Steel (Group) Co., Ltd. 5.369 bil 5.369 bil
Xiamen Bengang Steel Sales Ltd. 0.5 mil 0.5 mil
Wuxi Bengang Steel Sales Ltd. 1 mil 1 mil
Tianjin Bengang Steel Trading Ltd. 3 mil 3 mil
Nanjing Bengang Material Sales Ltd. 1.15 mil 1.15 mil
Yantai Bengang Steel Sales Ltd. 0.5 mil 0.5 mil
Harbin Bengang Steel& Iron SalesLtd. 0.5 mil 0.5 mil
Changchun Bengang Steel Sales Ltd. 0.5 mil 0.5 mil41
3) Shareholding of Related Parties with Controlling Relationship
Name of the subsidiaries Beginning of termProportionIncreased
this term
Decreased
this termEnd of term Proportion
Benxi Steel (Group) Co., Ltd. 2.57520 bil 82.12 2.57520 bil 82.12
Xiamen Bengang Steel Sales Ltd. 0.5 mil 100.00 0.5 mil 100.00
Wuxi Bengang Steel Sales Ltd. 1 mil 100.00 1 mil 100.00
Tianjin Bengang Steel Trading Ltd. 3 mil 100.00 3 mil 100.00
Nanjing Bengang Material Sales Ltd. 1.15 mil 100.00 1.15 mil 100.00
Yantai Bengang Steel Sales Ltd. 0.5 mil 100.00 0.5 mil 100.00
Harbin Bengang Steel & Iron Sales Ltd. 0.5 mil 100.00 0.5 mil 100.00
Changchun Bengang Steel Sales Ltd. 0.5 mil 100.00 0.5 mil 100.00
3) Related Parties without Controlling Relationship
Names of the related parties Relation with the Company
Benxi Steel (Group) Machinery Co., Ltd. Same parent
Bengang Group International Trading Ltd. Same parent
Benxi Steel (Group) Tengda Holdings Ltd. Same parent
Guangshou Free Trade Zone Bengang Sales Co., Ltd. Same parent
Shanghai Bengang Steel & Iron Trading Co., Ltd. Same parent
Shanghai Bengang Steel Goods Ltd. Same parent
Liaoning Bengang Steel & Iron Trading Co., Ltd. Same parent
Dalian Boluole Steel Tube Ltd. Same parent
Shenyang North Bengang Sales Ltd. Same parent
Benxi Steel (Group) Steel Process and Logistics Co., Ltd. Same parent
Benxi Steel (Group) Construction & Repairing Co., Ltd. Same parent
Bengang Fire-resistance Material Co. Same parent
Benxi Steel (Group) Metallurgy Residues Co., Ltd. Same parent
Liaoning Metallurgy Technician College Same parent
Benxi Steel (Group) Industrial Development Co., Ltd. Same parent
Benxi Steel (Group) Construction Co., Ltd. Same parent
Yinkou Bengang International Logistics Co., Ltd. Same parent
Benxi Steel (Group) Real-estate Development Co., Ltd. Same parent
Benxi Steel (Group) Education Center Same parent
Benxi Steel (Group) Drilling Tools Co., Ltd. Same parent
Benxi Iron & Steel (Group) Designing and Research Institute Same parent
Benxi Iron & Steel (Group) Information and Automatic Technologies Co., Ltd. Same parent
Benxi Steel (Group) News Center Same parent
Benxi Steel (Group) New Industrial Development Co., Ltd. Same parent
Benxi Steel (Group) Mining Co., Ltd. Same parent
Benxi Steel (Group) Electronics Co., Ltd. Same parent
Benxi Steel (Group) Thermal Power Development Co., Ltd. Same parent
Bengang Puxiang Cool Rolling Steel Sheet Co., Ltd. Same parent
Benxi Steel & Iron (Group) Inspection Co., Ltd. Same parent
3. Related transactions
1) Pricing policies
Transactions between the Company and related parties were conducted according to the related
agreements or normal market trade terms.
2) Related transaction agreements
(1) On December 28, 2005, the Company entered a comprehensive service agreement with
Bengang Group, by which Bengang Group supplies the Company with raw materials, auxiliary42
materials, supporting services, and property leasing, meanwhile, the Company supplies Bengang
Group with raw materials, auxiliary materials, power, spare parts, trademark and patents,
supporting services and waste materials. According to the agreement, the pricing principles are:
A: The pricing of subjects purchased from Bengang Group :
Pricing of raw materials:
Price of fine iron ore will not higher than the average customs C&F price from countries like
Brazil and Australia in the last half year, plus inland freight, port fee, and quality adjustment price.
Quality adjustment on prices will be basing on the weighted average of imported fine iron ore in
the first half of year, and on the basis of 10 yuan per ton to 1% of quality difference.
The price for iron ore pellets shall not higher than the weighted average price offered by the 3rd
parties during the previous half-year. The price will be adjusted each half-year.
The price for recycled steel will not be higher than the weighted average of the recycled steel the
Company purchased from the independent 3rd parties in the previous month, and to be decided
upon negotiation.
Pricing of auxiliary materials: limestone, fire resistance material and auxiliary materials provided
by Bengang Group will be at market price.
Pricing of spare parts: the spare parts manufactured by the Group itself will be at market price.
Trucking service: on market price.
Pricing of the heating service of the dwelling house for staff and workers: carried out according to
the price set forth by the national government.
Workshop and equipment maintaining services: maintaining services are priced upon negotiation.
Designing and engineering service will be at national government price.
Construction service: construction services provided by Bengang Group to the Company will be at
market price.
Printing, newspapers, media and other publications: on national government price.
Education facilities and services: education facilities, vocational education programs, and onsite
training courses provided by Bengang Group are at market price.
Pricing of agency service: The export business was entrusted to Bengang Group before the
Company obtains its own export business license. All business involved are conducted according
to normal commercial practices. Agency fees are determined through negotiation between the two
parties case by case and within the range of 0.5% to 1.5% of the total value of the trade.
When the Company is authorized to do import & export trade, the agent service can be terminated
on beforehand notice. Bengang Group is not the sole agent of the Company, namely the Company
has the right to choose another party to do the agent.
Pricing of telephone, fax and the TV service: carried out according to the price set forth by the
national government.
Office spaces: on market price during the effective period of this agreement.43
Car service: on market price during the effective period of this agreement.
Property management: on market price during the effective period of this agreement.
Packing service: on market price during the effective period of this agreement.
Labor safety services: on market price during the effective period of this agreement.
Pricing of trademark: Bengang Group allows the Company to use “Bengang” trademark by free.
However the Company can’t allow any other parties to use it. The Company has the right to
register its own trademark at any time.
B: Pricing of the products sold to Bengang Group
Hot-rolled steel sheet: carried out according to the weighting average price of the same quality
products which our company sold to the independent third party in the previous month.
Pricing of public service: Power from the Group was on the market price plus transferring cost.
The supplies from the Company to Bengang Group, i.e. oxygen, nitrogen, argon, blast furnace gas,
coke furnace gas, steam, clean water, fresh water, recycling water, and soft water, are at complete
costs plus national surplus tax and reasonable profit.
Railway transportation, quality test, measuring, weighting: at national price.
Iron and steel scrap, including the iron material: carried out according to the market price.
Spare parts: spare parts provided to the Group by the Company are on purchasing price plus 1% of
purchasing expenses.
R&D service: R&D that Bengang Group can’t do by itself are provided by the Company. The
expenses shall be the national price.
(2) Land rent from Bengang Group to the Company, it was agreed to carry forward the Land Using
Right Rent Agreement” which is effective at present. Namely the price is RMB6.24 /m2/year.44
2. Related transactions of purchasing of products and accepting of services
Amount of the Current
Term
Amount of the Previous
Term
Related parties
Subjects of
the related
transactions Amount
RMB0’000
Portion
in
annual
trade %
Amount
RMB0’000
Portion in
annual
trade %
Benxi Steel & Iron (Group) Ltd. Raw materials 2,788.73 0.08 405.23 0.02
Benxi Steel & Iron (Group) Ltd. Maintaining 21,850.17 0.64 18,818.19 0.71
Benxi Steel & Iron (Group) Ltd. Labor service 1,157.80 0.03
Benxi Steel & Iron (Group) Ltd. Land rent 6,136.88 0.18 5,114.05 0.19
Benxi Steel & Iron (Group) Ltd. Acquisition
payment 25,043.93 0.95
Bengang Puxiang Cool Rolling Steel Sheet
Co., Ltd. Raw materials 110,118.01 3.20 102,643.26 3.89
Bengang Puxiang Cool Rolling Steel Sheet
Co., Ltd.
Stock
products 133,015.92 3.87
Bengang Group Mineral Co., Ltd. Labor service 1,575.49 0.05 271.46 0.01
Bengang Group Mineral Co., Ltd. Raw materials 335,489.29 9.76 336,816.71 12.76
Bengang Group Mineral Co., Ltd. Transportation 203.08 0.01 570.97 0.02
Bengang Group Metallurgy Residue Ltd. Residue
treatment 2,491.89 0.07 2,208.49 0.08
Bengang Group Metallurgy Residue Ltd. Raw materials 12,751.05 0.37 4,583.72 0.17
Bengang Group Metallurgy Residue Ltd. Repairing
services 256.53 0.01
Bengang Group Steel Process & Logistics
Ltd. Process fee 78.12 89.87
Bengang Group Property Development Ltd. Raw materials 5,352.54 0.16 3,533.02 0.13
Bengang Group Property Co., Ltd. Rental 20.79 24.45
Bengang Group Property Co., Ltd.
Property
management
fee
265.49 0.01 44.56
Bengang Group Property Co., Ltd. Project
payment 680.01 0.02 2,566.50 0.10
Bengang Group Property Co., Ltd. Freight 20.66
Bengang Group Property Co., Ltd. Repairing
services 110.94
Bengang Group Machinery Ltd. Spare part 25,760.71 0.75 27,059.69 1.03
Bengang Group Machinery Ltd. Engineering
fee 5,268.92 0.15 892.05 0.03
Bengang Group Machinery Ltd. Repairing
services 29.93 1,838.57 0.07
Bengang Group Machinery Ltd. Raw materials 358.08 0.01 114.05
Bengang Group Machinery Ltd. Industry water 50.38 88.87
Bengang Group Construction Ltd. Spare parts 8,875.08 0.26 234.32 0.01
Bengang Group Construction Ltd. Engineering
fee 8,308.12 0.24 61,264.89 2.32
Bengang Group Construction Ltd. Repairing
services 2,056.70 0.06 14,173.24 0.54
Bengang Group Construction Ltd. Raw materials 3,829.33 0.11 1,706.85 0.06
Bengang Group Construction Ltd. Transportation 267.87 0.01 666.37 0.03
Bengang Group Construction Ltd.
Fixed asset
maintenance
fee paid
430.77 0.02
Benxi Steel (Group) Industrial Development
Ltd. Spare parts 178.48 0.01 137.00 0.01
Benxi Steel (Group) Industrial Development
Ltd. Raw materials 15,216.91 0.44 10,786.22 0.41
Benxi Steel (Group) Industrial Development
Ltd.
Repairing
services 228.64 0.01 1,915.89 0.07
Benxi Steel (Group) Industrial Development
Ltd. Transportation 1,143.47 0.03 1,637.58 0.0645
Amount of the Current
Term
Amount of the Previous
Term
Related parties
Subjects of
the related
transactions Amount
RMB0’000
Portion
in
annual
trade %
Amount
RMB0’000
Portion in
annual
trade %
Benxi Steel (Group) Industrial Development
Ltd.
Project
payment 831.78 0.02 594.42 0.02
Benxi Steel (Group) Construction Ltd. Material and
parts 422.73 0.01 391.94 0.01
Benxi Steel (Group) Construction Ltd. Engineering 5,686.14 0.17 1,957.97 0.07
Benxi Steel (Group) Construction Ltd. Maintaining 1,955.53 0.06 7,111.47 0.27
Benxi Steel (Group) Construction Ltd.
Fixed asset
maintenance
fee paid
96.22
Bengang Electronics Co., Ltd. Raw materials 7,505.70 0.22 6,893.30 0.26
Bengang Electronics Co., Ltd. Engineering
fee 95.76 527.35 0.02
Bengang Electronics Co., Ltd. Spare parts 542.43 0.02 138.16 0.01
Bengang Electronics Co., Ltd. Repairing
services 85.47 1,512.50 0.06
Bengang Electronics Co., Ltd. Heating 32.13
Benxi Steel (Group) Drilling Tools Co., Ltd. Spare parts 1,659.12 0.05 1,722.07 0.07
Bengang Group New Industry Development
Co., Ltd.
Labour
security fee 757.01 0.02 536.21 0.02
Bengang Group New Industry Development
Co., Ltd.
Material and
dinner 30.78
Liaoning Metallurgy Technician College Training fee 221.29 0.01 272.94 0.01
Liaoning Metallurgy Technician College Spare parts 3,919.94 0.11 2,084.44 0.08
Liaoning Bengang Steel & Iron Trading
Co., Ltd. Raw materials 4,725.63 0.14
Bengang Group Training Center Training fee 688.21 0.02 1,748.60 0.07
Bengang Group Training Center Project
payment 222.98 0.01
Bengang Group International Trading Ltd. Raw materials 14,978.56 0.44
Bengang Group International Trading Ltd.
Import &
export agency
fee
4,215.51 0.12 3,731.93 0.14
Bengang Group International Trading Ltd. Imported
equipment 78,143.84 2.27 74,531.61 2.82
Benxi Steel (Group) Information and
Automatic Tech. Ltd. Spare parts 1,879.68 0.05 2,782.37 0.11
Benxi Steel (Group) Information and
Automatic Tech. Ltd.
Fixed asset
maintenance
fee paid
83.05
Benxi Steel (Group) Information and
Automatic Tech. Ltd.
Engineering
fee 3,604.91 0.10 2,863.17 0.11
Benxi Steel (Group) Information and
Automatic Tech. Ltd.
Repairing
services 696.24 0.03
Bengang Group Thermal Power
Development Co., Ltd. Heating fee 585.51 0.02 1,692.89 0.06
Bengang Fire-resistance Material Co. Raw materials 78,790.88 2.29 44,231.71 1.68
Bengang Group Press Center Press and
media 118.17 182.40 0.01
Bengang Group Press Center Repairing
services 10.00
Benxi Steel (Group) Designing Institute Engineering
fee 10,072.13 0.29 1,287.01 0.05
Benxi Steel (Group) Designing Institute Design 1,618.80 0.05 43.56
Benxi Steel (Group) Designing Institute Repairing
services 87.01 46.80
Yinkou Bengang International Logistics
Co., Ltd. Port service 5,343.20 0.16 17,149.03 0.65
Total 934,113.60 27.17 801,243.37 30.3446
4) Sales of products and labor services
Amount of the Current
Term
Amount of the Previous
Term
Related parties
Subjects of the
related
transactions Amount
RMB0’000
Portion in
similar
trade %
Amount
RMB0’000
Portion in
similar
trade %
Benxi Steel & Iron (Group) Ltd. Products 40,208.35 1.04 15,669.74 0.50
Benxi Steel & Iron (Group) Ltd. Material and
parts 103,722.87 2.68 22,704.53 0.72
Benxi Steel & Iron (Group) Ltd. Power supply 11,467.81 0.30 209.41 0.01
Benxi Steel & Iron (Group) Ltd. Commission 596.70 0.02
Bengang Group International Trading Ltd. Products 534,141.57 13.80 411,329.43 13.12
Dalian Boluole Steel Tube Ltd. Products 10,046.80 0.26 9,345.22 0.30
Guangshou Free Trade Zone Bengang Sales Co.,
Ltd. Products 52,548.14 1.36 43,543.24 1.39
Shanghai Bengang Steel & Iron Trading Co., Ltd. Products 92,728.22 2.40 94,212.95 3.01
Liaoning Bengang Steel & Iron Trading Co., Ltd. Products 53,423.01 1.38 63,745.23 2.03
Bengang Group Steel Process & Logistics Ltd. Products 52,715.33 1.36 38,600.98 1.23
Bengang Group Steel Process & Logistics Ltd. Power supply 32.79 64.20
Bengang Group Steel Process & Logistics Ltd. Rental 100.00
Bengang Group Dahe Industry Co., Ltd. Power supply 21.02 25.46
Benxi Steel (Group) Industrial Development Ltd. Products 217.38 0.01
Benxi Steel (Group) Industrial Development Ltd. Material and
parts 8,943.52 0.23 8,343.65 0.27
Benxi Steel (Group) Industrial Development Ltd. Power supply 43.18 76.30
Bengang Group Construction Ltd. Products 485.60 0.01
Bengang Group Construction Ltd. Material and
parts 65,570.20 1.69 32,103.99 1.02
Bengang Group Construction Ltd. Power supply 787.36 0.02 329.31 0.01
Bengang Group Construction Ltd. Rental 3.49
Bengang Group Machinery Ltd. Power supply 4,303.52 0.11 3,062.30 0.10
Bengang Group Machinery Ltd. Material and
parts 2,860.72 0.07
Bengang Group Mineral Co., Ltd. Material and
parts 113,819.87 2.94 95,854.09 3.06
Bengang Group Mineral Co., Ltd. Power supply 57,189.32 1.48 48,113.70 1.53
Bengang Group Mineral Co., Ltd. Freight
income 1,019.60 0.03 1,188.45 0.04
Bengang Group Mineral Co., Ltd. Coke income 411.7 0.01 3,581.31 0.11
Bengang Group Mineral Co., Ltd. Commission 48.04
Bengang Group New Industry Development Co.,
Ltd. Power supply 22.22 58.18
Benxi Steel (Group) Construction Ltd. Material and
parts 8,338.46 0.22 4,483.61 0.14
Benxi Steel (Group) Construction Ltd. Power supply 1,955.53 0.05 172.36 0.01
Bengang Group Metallurgy Residue Ltd. Material and
parts 6,765.02 0.17 1,565.25 0.05
Bengang Group Metallurgy Residue Ltd. Power supply 247.49 0.01 200.86 0.01
Bengang Group Metallurgy Residue Ltd. Freight
income 90.44 36.07
Bengang Electronics Co., Ltd. Power supply 118.72 162.00 0.01
Bengang Puxiang Cool Rolling Steel Sheet Co.,
Ltd. Products 664,112.33 17.16 517,480.38 16.51
Bengang Puxiang Cool Rolling Steel Sheet Co.,
Ltd.
Material and
parts 46,302.62 1.20 44,504.67 1.42
Bengang Puxiang Cool Rolling Steel Sheet Co.,
Ltd. Power supply 26,824.08 0.69 21,398.03 0.68
Bengang Puxiang Cool Rolling Steel Sheet Co.,
Ltd.
Gains from
service
providing
199.64 0.01 502.46 0.02
Bengang Puxiang Cool Rolling Steel Sheet Co.,
Ltd.
Freight
income 734.61 0.02 788.48 0.0347
Amount of the Current
Term
Amount of the Previous
Term
Related parties
Subjects of the
related
transactions Amount
RMB0’000
Portion in
similar
trade %
Amount
RMB0’000
Portion in
similar
trade %
Bengang Puxiang Cool Rolling Steel Sheet Co.,
Ltd. Commission 223.33 0.01
Bengang Group Thermal Power Development
Co., Ltd. Power supply 9,382.25 0.24 8,039.85 0.26
Bengang Group Thermal Power Development
Co., Ltd. Commission 25.97
Bengang Group Property Co., Ltd. Power supply 52.23 67.07
Bengang Group Construction Supervisory Co.,
Ltd. Power supply 0.62
Bengang Group Medical Co., Ltd. Power supply 16.77 24.70
Liaoning Metallurgy Technician College Coal 170.81
Bengang Fire-resistance Material Co. Power supply 2,163.73 0.06 1,980.58 0.06
Bengang Fire-resistance Material Co. Freight
income 393.63 0.01 65.19
Total 1,975,596.61 51.05 1,493,633.23 47.65
5) Receivable & payable with related parties
End of term RMB0’000 Beginning of year RMB0’000
Related parties Book
balance
Portion
inthe
category
%
Bad debt
provision
Book
balance
Portion
in the
category
%
Bad debt
provision
Account receivable
Bengang Group Machinery Ltd. 1,868.24 2.18 1,868.49 1.62
Bengang Group Thermal Power Development
Co., Ltd. 855.62 1.00 24,009.47 20.79
Bengang Puxiang Cool Rolling Steel Sheet Co.,
Ltd. 10,918.19 9.46
Bengang Group Construction Ltd. 309.44 0.27
Benxi Steel (Group) Industrial Development
Ltd. 4,557.41 5.32 1,824.42 1.58
Bengang Group New Industry Development
Co., Ltd. 42.47 0.05 137.50 0.12
Bengang Fire-resistance Material Co. 491.19 0.43
Bengang Group Metallurgy Residue Ltd. 5,890.44 6.88
Sub-total 13,214.18 15.43 39,558.7 34.27
Advance account
Bengang Group International Trading Ltd. 65,712.47 19.11
Benxi Steel (Group) Construction Ltd. 25.60 0.02 37.07 0.01
Bengang Group Construction Ltd. 6,002.61 3.82 19,249.99 5.60
Benxi Steel (Group) Industrial Development
Ltd. 71.67 0.02
Benxi Steel (Group) Drilling Tools Co., Ltd. 0.47
Bengang Puxiang Cool Rolling Steel Sheet Co.,
Ltd. 10,405.47 6.62 14,959.25 4.35
Benxi Steel (Group) Medical Co. Ltd. 2.00
Benxi Steel (Group) Machinery Co., Ltd. 5,943.90 3.78
Sub-total 22,380.05 14.24 100,030.45 29.09
Account payable
Bengang Fire-resistance Material Co. 11,761.35 1.71 1,091.73 0.31
Liaoning Bengang Steel & Iron Trading Co.,
Ltd. 3,221.61 0.47 43.35 0.01
Liaoning Metallurgy Technician College 1,602.20 0.23 821.27 0.23
Benxi Steel & Iron (Group) Ltd. 6,883.84 1.95
Benxi Steel (Group) Drilling Tools Co., Ltd. 713.84 0.10 765.65 0.22
Bengang Group New Industry Development
Co., Ltd. 0.89 158.71 0.05
Bengang Group Property Co., Ltd. 621.84 0.09 59.76 0.0248
Bengang Group Construction Supervisory Co.,
Ltd. 54.00 0.01
Benxi Xingye Therapy and Sanitary Co., Ltd. 56.85 0.01 32.06 0.01
Benxi Yitong Pipe Co., Ltd. 54.00 0.01 58.44 0.02
Bengang Group Machinery Ltd. 1,319.08 0.19 3,753.35 1.07
Bengang Group Construction Ltd. 546.66 0.08 23,947.71 6.80
Bengang Group Mineral Co., Ltd. 6,588.26 0.96 38,486.36 10.92
Benxi Steel (Group) Industrial Development
Ltd. 5,992.16 0.87 5,390.35 1.53
Benxi Steel (Group) Construction Ltd. 504.24 0.07 10,227.51 2.90
Bengang Group Metallurgy Residue Ltd. 6,354.47 0.92 3,115.94 0.88
Benxi Steel (Group) Information and
Automatic Tech. Ltd. 2,066.70 0.30 1,105.93 0.31
Bengang Group Electronics Co., Ltd. 780.60 0.11 463.75 0.13
Benxi Steel (Group) Designing Institute 3,823.83 0.55 106.51 0.03
Benxi Steel (Group) News Center 106.61 0.03
Benxi Steel (Group) Education Center 481.68 0.07
Benxi Steel (Group) Thermal Power
Development Co., Ltd. 7.67
Sub-total 46,551.93 6.75 96,618.83 27.42
Other account payable
Bengang Group Machinery Ltd. 12.62 0.02 28.36 0.09
Shanghai Bengang Steel & Iron Trading Co.,
Ltd. 721.10 1.03 98.50 0.33
Benxi Steel (Group) Construction Ltd. 2,734.53 3.92 531.03 1.76
Benxi Steel (Group) Industrial Development
Ltd. 1,392.92 1.99 980.79 3.25
Bengang Group Construction Ltd. 9,046.83 12.96 8,001.12 26.54
Bengang Group Property Co., Ltd. 156.50 0.22 294.50 0.98
Benxi Steel (Group) Information and
Automatic Tech. Ltd. 391.52 0.56 1,101.92 3.65
Bengang Group New Industry Development
Co., Ltd. 399.69 0.57 74.07 0.25
Benxi Electronics Co., Ltd. 874.57 1.25 770.75 2.56
Bengang Group Training Center 285.63 0.41 13.82 0.05
Dalian Boluole Steel Tube Ltd. 223.07 0.32 285.13 0.95
Bengang Fire-resistance Material Co. 298.00 0.99
Guangshou Free Trade Zone Bengang Sales
Co., Ltd. 339.81 0.49
Benxi Steel (Group) Designing Institute 139.46 0.20 750.71 2.49
Liaoning Metallurgy Technician College 6.00 0.01 25.83 0.09
Bengang Group International Trading Ltd. 11,057.04 15.84
Bengang Group Mineral Co., Ltd. 450.83 0.65 10.13 0.03
Bengang Group Steel Process & Logistics Ltd. 664.39 0.95
Benxi Steel & Iron (Group) Ltd. 2,914.85 4.17
Liaoning Bengang Steel & Iron Trading Co.,
Ltd. 968.33 1.39
Benxi Steel (Group) News Center 225.07 0.32
Bengang Puxiang Cool Rolling Steel Sheet Co.,
Ltd. 37.60 0.05
Bengang Group Thermal Power Development
Co., Ltd. 0.26
Sub-total 33,042.62 47.32 13,264.66 44.01
Account received in advance
Dalian Boluole Steel Tube Ltd. 611.63 0.30 1,353.43 0.54
Bengang Group Steel Process & Logistics Ltd. 3,030.23 1.50 539.6 0.21
Bengang Group Construction Ltd. 178.72 0.09 5.30
Benxi Steel (Group) Industrial Development
Ltd. 20.76 0.01 421.02 0.17
Guangshou Free Trade Zone Bengang Sales
Co., Ltd. 3,152.12 1.56 1,045.89 0.41
Benxi Steel & Iron (Group) Ltd. 7,753.58 3.84
Liaoning Bengang Steel & Iron Trading Co.,
Ltd. 2,822.72 1.40 7,472.55 2.9649
Shanghai Bengang Steel & Iron Trading Co.,
Ltd. 3,642.65 1.80 5,350.03 2.12
Tianjin Bengang Steel Plate Processing and
Delivery Co., Ltd. 2,850.00 1.41
Benxi Steel (Group) Drilling Tools Co., Ltd. 3.25
Bengang Puxiang Cool Rolling Steel Sheet Co.,
Ltd. 4,105.81 2.03
Bengang Group Mineral Co., Ltd. 0.67
Bengang Group New Industry Development
Co., Ltd. 0.03
Sub-total 28,168.92 13.94 16,191.07 6.41
Notes payable
Bengang Group Construction Ltd. 657.53 0.36
Benxi Steel (Group) Industrial Development
Ltd. 701.69 0.38 70.00 0.20
Liaoning Bengang Steel & Iron Trading Co.,
Ltd. 770.00 0.42
Bengang Group New Industry Development
Co., Ltd. 10.00 0.01
Bengang Fire-resistance Material Co., Ltd. 4,910.00 2.66 50.00 0.14
Benxi Steel (Group) Information and
Automatic Tech. Ltd. 80.00 0.23
Bengang Group Machinery Ltd. 2,268.30 1.23
Bengang Group Property Co., Ltd. 915.00 0.50
Bengang Group Mineral Co., Ltd. 248.00 0.13
Bengang Electronics Co., Ltd. 1,230.00 0.67
Sub-total 11,710.52 6.36 200.00 0.57
Other account receivable
Bengang Puxiang Cool Rolling Steel Sheet Co.,
Ltd. 1,025.90 6.38 950.56 6.10
Bengang Group Construction Ltd. 1.16 0.01
Bengang Group Supervisory Co., Ltd. 25.00 0.16 25.00 0.16
Bengang Group Machinery Ltd. 338.84 2.11
Bengang Group Mineral Co., Ltd. 1.41 0.01
Benxi Steel (Group) Industrial Development
Ltd. 168.59 1.05
Bengang Group Steel Process & Logistics Ltd. 0.08
Guangzhou Bengang Trade Co., Ltd. 100.00 0.62
Shanghai Bengang Metallurgy Tech. Ltd. 500.00 3.11
Sub-total 2,159.82 13.44 976.72 6.27
Long-term payable
Benxi Steel & Iron (Group) Ltd. 25,043.93 100.00
Sub-total 25,043.93 100.00
(3) Statement on the necessity and consistency of the related transactions
To keep a steady supply of resources, the Company still needs to purchase major materials such as
mineral powder from the Group. On the other hand, the power supply department and purchasing
department still provides power and parts to the Group. For some companies under the controlling of
the Group need to purchase finished products from the Company for further process. Therefore the
sales to the Group and accepting of labor and training services will last for a period of time.
To fully adopt the overseas marketing channels the Group has, the Company accepted the import &
export services from Bengang International Trading Ltd. which is under full possession of the Group.
(4) No non-operational capital adoption happened between the Company and the controlling
shareholder or other related parties.
(5) No related transactions happened in the report term in term of external joint investment with related
parties.
7. Major contracts and fulfilling
(1) The Company has never been involved in such events as keeping as custodian, contracted or50
leased any other company’s assets and vice versa in the report period.
(2) No providing of external guarantee occurred in the report term.
(3) No providing or accepting of cash asset management to or from other parties occurred during
the report term.
(4) No other material contract engaged in the report term.
8. Commitment issues made by share holders with 5% or above share equities occurred in or last to the
report term.
Shareholder Commitments Fulfilling
status
Fulfilling of commitments
Benxi Steel
(Group) Co.,
Ltd.
1. After launching of the share relocation
program, Bengang Group has committed not
to trade or transfer its shares in 24 months
since the day when they are allowed to trade
in the stock exchange, and not more than 5%
of the total capital share of the Company
between the 24th month and the 36th month.
2. Bengang Group committed not to put the newly
placed shares in the market or sell to others in 36
months since the date when the share registration is
done.
3. From completion day of this acquisition up to the
end of 2010, Bengang Group will hold not lower
than 65% of the Company’s shares (Except for
selling to strategic investors by way that is allowed
by national policies. However the acceptor shall
carry over the original commitment.)
4. When the Group is trading or transferring
the shares it holds in the Company before the
end of 2010, the prices shall not lower than
the net asset per share provided by the latest
auditing report. Bengang Group committed
that the proceeds from trading of the shares,
by breaching of faith as said above, will be
transferred to the possession of the
Company.
5. Bengang Group promises to be
responsible for the losses due to its failure or
partially failure in fulfilling of the above
responsibilities.
The above commitments are under
processing at present and no breaching of
commitment has occurred. <0}
Under
processing
From the day of the share equity relocation was
implemented till the day when this report is
released, none of the shares of the Company held
by Bengang Group was traded in the market or
transferred to others. None of the shares newly
placed to the Group for acquiring of the steel &
iron assets of the Group was traded in the market
or transferred to others. No situation occurred that
the Group is not fulfilling or not completely
fulfilling the commitments.
9. The Company extended the service of Shulun Pan Certified Public Accountants Co., Ltd. to the
report term, and paid auditing fee amounted to RMB2.8 million. Shulun Pan Certified Public
Accountants Co., Ltd. has served the Company as auditors for successively 6 years.
10. In the report term, none of the directors, supervisors, executives, shareholders, substantial
dominators, buyer of the Company was investigated by relative departments, executed by legal &
discipline departments, delivered to legal departments, appeared for crime, investigated or punished by
China Securities Regulatory Commission, restricted to security market, criticized publicly, regarded as51
improper person, punished by other executive departments, or publicly condemned by the Stock
Exchange.
11. No other significant issues occurred during the report term as determined by the Board of Directors
or as provided by Article 67 of the Securities Law, or Article 17 of Information Disclosing Rules for
Company Placed Shares Publicly
12. Reception of investigation and visiting
In the report term, the Company properly executed “Investor Management Instruction” issued by China
Securities Regulatory Commission, and “Fair Information Disclosure Instruction” issued by Shenzhen
Stock Exchange, accepted investigations, inquiring, and visiting of organization investors and
individual investors. All information provided are those have already been disclosed in regular and
provisional reports and announcements. The Company never provided, disclosed or leaked any major
information to any particular object that is closed to the public.
Time/date Place Way Visitors Main content involved and
material provided
Jan 14,
2008
Meeting room and the
production site Onsite investigation UBS Securities Business operation
Mar 16,
2008
Meeting room and the
production site Onsite investigation Dacheng Fund Business operation
April 11
2008
Meeting room and the
production site
Telephone
communication
Bisheng
Investment Business operation
May 15,
2008
Meeting room and the
production site
Telephone
communication UBS Securities Business operation
June 20,
2008
Meeting room and the
production site
Telephone
communication Lion Securities Business operation
Aug 17,
2008
Meeting room and the
production site Onsite investigation Minzu
Securities Business operation
Sept 23,
2008
Meeting room and the
production site Onsite investigation Dongxing
Securities Business operation
Nov 10,
2008
Meeting room and the
production site Onsite investigation Union
Securities Business operation
Dec 6,
2008
Meeting room and the
production site Onsite investigation Zhongyin Fund Business operation
X. Financial Report
1. Financial Statements (Attached herein)
2. Notes to the Financial Statements (Attached herein)
XI. Documents For Reference
1. Financial Statements signed and stamped by the legal representative, CFO, and accounting manager;
2. Original copy of the Auditors’ Report under the seal of the CPA and signed by and under the seal of
certified accountants.
3. All of the original copies of documents and announcements that have been published on China52
Securities Journal, Securities Times, and Hong Kong Commercial Daily.
The Board of Directors of
Bengang Steel Plate Co., Ltd.
The Chairman: Yu Tiancheng
April 15, 2009AUDITORS’ REPORT
Xin Hui Shi Bao Zi (2009) No.80488
All Shareholders of Bengang Steel Plates Co., Ltd.:
We have audited the accompanying financial statements of Bengang Steel Plates Co., Ltd.
(hereinafter referred to as “the Company”) which comprise the consolidated balance sheet
and balance sheet as at 31 December 2008, the consolidated income statement and income
statement, the consolidated statement of changes in equity and statement of changes in
equity, the consolidated cash flow statement and cash flow statement for the year then
ended, and notes to the financial statements.
Management’s Responsibility for the Financial Statements
The Company’s management is responsible for the preparation of financial statements in
accordance with China Accounting Standards for Business Enterprises (2006) issued by
the Ministry of Finance of the People’s Republic of China. This responsibility includes (1)
designing, implementing and maintaining the internal control relevant to the preparation
of the financial statements that are free from material misstatement, whether due to fraud
or error; (2) selecting and applying appropriate accounting policies; and (3) making
accounting estimates that are reasonable in the circumstances.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our
audit. We conducted our audit in accordance with the Chinese Auditing Standards issued
by the Chinese Institute of Certified Public Accountants. Those standards require that we
comply with ethical requirements and plan and perform the audit to obtain a reasonable
assurance as to whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, we consider
the internal control relevant to the entity’s preparation of financial statements in order to
design audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the company’s internal control. An audit
also includes evaluating the appropriateness of the accounting polices used and the
reasonableness of the accounting estimates made by management, as well as evaluating
the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our audit opinion.
Auditor’s opinion
In our opinion, the financial statements of Bengang Steel Plates Co., Ltd. comply with the
requirements of China Accounting Standards for Business Enterprises (2006) issued by
the Ministry of Finance of the People’s Republic of China and present fairly, in all
material aspects, the consolidated financial position and financial position of the Company
as at 31 December 2008, 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.7
SHULUN PAN CERTIFIED PUBLIC Certified Public Accountants
ACCOUNTANTS CO., LTD. Registered in the People’s Republic
Of China
Shanghai, the People’s Republic of China
15 April 2009Consolidated Balance Sheet
Prepared by: Bengang Steel Plates Co., Ltd. December 31, 2008 In RMB
Assets Note VI End of term Beginning of term
Current asset:
Monetary capital (I) 2,220,835,995.51 2,242,866,884.97
Transactional financial assets
Notes receivable (2) 849,900,747.04 834,324,393.98
Account receivable (3) 507,305,392.11 817,330,942.52
Prepayment (4) 1,572,141,296.94 3,439,282,707.53
Interest receivable 7,255,724.59
Dividend receivable
Other account receivable (5) 111,144,143.81 110,954,057.98
Inventories (6) 7,859,743,442.03 4,605,043,499.66
Non-current asset due in 1 year
Other current asset (7) 191,775,764.22
Total of current asset 13,320,102,506.25 12,049,802,486.64
Non-current assets
Disposable financial asset
Expired investment in possess
Long-term receivable
Long-term share equity investment
Investment real estate
Fixed assets (8) 15,114,030,741.42 13,708,841,478.55
Construction in process (9) 3,871,536,579.58 3,394,891,623.53
Engineering goods (10) 10,902,394.81 4,825,480.35
Fixed asset disposal
Production physical assets
Gas & petrol
Intangible assets
R&D expense
Goodwill
Long-term amortizable expenses
Differed income tax asset (11) 405,761,032.10 197,937,960.47
Other non-current asset
Total of non-current assets 19,402,230,747.91 17,306,496,542.90
Total of assets 32,722,333,254.16 29,356,299,029.547
Consolidated Balance Sheet (Cont.)
Prepared by: Bengang Steel Plates Co., Ltd. December 31, 2008 In RMB
Liabilities & shareholders’ equity Note VI End of term Beginning of term
Current liabilities
Short-term loans (13) 2,887,352,200.00 2,638,685,960.00
Trade off financial liabilities
Notes payable (14) 1,844,612,512.13 352,200,000.00
Account payable (15) 6,894,797,428.30 3,523,327,847.52
Prepayment received (16) 2,018,405,589.55 2,527,511,214.43
Employees’ wage payable (17) 321,360,373.18 328,258,399.95
Tax payable (18) -251,596,127.71 -16,132,598.27
Interest payable
Dividend payable
Other account payable (19) 698,210,191.67 301,522,320.11
Non-current liability due in 1 year (20) 448,753,264.40 875,659,146.98
Other current liability
Total of current liability 14,861,895,431.52 10,531,032,290.72
Non-current liabilities
Long-term borrowings (21) 2,018,558,759.20 1,935,210,198.02
Bond payable
Long-term payable (22) 250,439,319.71
Special payable (23) 8,500,000.00
Expected liabilities
Differed income tax liability
Other non-recurring liabilities (24) 6,745,478.75 5,803,501.75
Total of non-current liabilities 2,033,804,237.95 2,191,453,019.48
Total of liability 16,895,699,669.47 12,722,485,310.20
Shareholders’ equity
Share capital (25) 3,136,000,000.00 3,136,000,000.00
Capital reserves (26) 8,736,261,134.76 8,705,011,134.76
Less: Shares in stock
Surplus reserves (27) 921,277,509.22 903,594,226.77
Common risk provision
Retained profit (28) 3,033,094,940.71 3,889,208,357.81
Different of foreign currency translation
Total of owners’ equity attributable to the owners of parent company 15,826,633,584.69 16,633,813,719.34
Minor shareholders’ equity
Total of shareholders’ equity 15,826,633,584.69 16,633,813,719.34
Total of shareholders’ equity and liabilities 32,722,333,254.16 29,356,299,029.548
Consolidated Income Statement
Prepared by: Bengang Steel Plates Co., Ltd. Year 2008 In RMB
Items Note VI Amount of the
Current Term
Amount of the
Previous Term
I. Turnover (29) 38,702,329,077.52 31,351,596,494.84
Less: Operation cost (29) 34,391,679,109.40 26,391,344,083.89
Business tax and surcharge (30) 175,611,409.70 214,562,652.75
Sales expense (31) 738,183,045.50 556,170,341.63
Administrative expense (32) 2,168,897,763.93 1,738,707,568.74
Financial expenses (33) 328,304,259.41 307,993,829.89
Asset impairment loss (34) 658,099,025.44 12,675,234.70
Plus: Income from change of fair value
Investment income
Incl. Investment gains from affiliates
II. Operation profit 241,554,464.14 2,130,142,783.24
Plus: Non business income (35) 20,162,044.06 87,846,569.81
Less: Non-business expenses (36) 20,413,055.12 53,077,699.47
Incl. Loss from disposal of non-current assets 52,296,386.50
III. Total of profit 241,303,453.08 2,164,911,653.58
Less: Income tax expenses (37) 76,213,587.73 572,910,762.32
IV. Net profit 165,089,865.35 1,592,000,891.26
Net profit attributable to the owners of parent co. 165,089,865.35 1,592,000,891.26
Minor shareholders’ equity
V. Earnings per share
(I) Basic earnings per share 0.05 0.51
(II) Diluted earnings per share 0.05 0.519
Consolidated Cash Flow Statement
Prepared by: Bengang Steel Plates Co., Ltd. Year 2008 In RMB
Items Note VI Amount of the
Current Term
Amount of the
Previous Term
I. Net cash flow from business operation
Cash received from sales of products and providing of
services 35,268,684,060.10 27,057,159,829.10
Tax refund received 206,438,677.57 240,567,158.81
Other cash inflow related to operation (39) 74,183,458.28 89,771,156.46
Subtotal of cash inflow 35,549,306,195.95 27,387,498,144.37
Cash paid for purchasing of merchandise and services 25,992,616,213.19 20,066,733,694.26
Cash paid to staffs or paid for staffs 1,759,377,881.26 1,365,085,557.80
Taxes paid 2,529,407,796.41 2,305,348,752.61
Other cash paid related to operation (39) 975,305,226.95 904,979,378.41
Subtotal of cash outflow 31,256,707,117.81 24,642,147,383.08
Cash flow generated by business operation, net 4,292,599,078.14 2,745,350,761.29
II. Cash flow from investment activities
Cash received from returning of investment
Cash received as investment profit
Net cash received from disposal of fixed assets, intangible
assets and other long-term assets 1,145,569.82
Net cash received from disposal of subsidiaries or other
operational units
Other cash received related to investment
Subtotal of cash inflow 1,145,569.82
Cash paid to acquire fixed assets, intangible assets and
other long-term assets 2,481,628,583.63 2,402,722,790.88
Cash paid for investment 6,000,000.00
Net cash received from subsidiaries and other operational
units
Other cash paid related to investment (39) 202,439,319.71 216,939,319.71
Subtotal of cash outflow 2,690,067,903.34 2,619,662,110.59
Net cash flow generated by investment -2,688,922,333.52 -2,619,662,110.59
III. Cash flow from financing operations:
Proceeds from investments
Cash received from loans 5,125,499,600.00 4,840,731,700.00
Other cash received related to financing
Subtotal of cash inflow 5,125,499,600.00 4,840,731,700.00
Cash paid for recovering of debt 5,204,168,648.92 3,697,137,243.43
Cash paid for dividend, profit or interest 1,546,367,686.44 1,234,149,967.14
Other cash paid related to financing (39) 267,308,746.89 36,588,023.86
Subtotal of cash outflow 7,017,845,082.25 4,967,875,234.43
Net cash flow generated by financing -1,892,345,482.25 -127,143,534.43
IV. Influence of exchange rate movement -670,898.72 24,037,753.81
V. Net increase of cash and cash equivalents -289,339,636.35 22,582,870.08
Plus: Balance of cash and cash equivalents at the
beginning of term 2,141,071,651.95 2,118,488,781.87
VI. Balance of cash and cash equivalents at the end of
term 1,851,732,015.60 2,141,071,651.9510
Consolidated Statement of Change in Shareholders’ Equity
Prepared by: Bengang Steel Plates Co., Ltd. In RMB
Year 2008
Shareholders’ Items equity attributable to the parent company
Practical capital
input Capital reserves Less: Shares in
stock
Surplus
reserves
Common risk
provision Retained profit
Minor shareholders’
equity
Total of shareholders’
equity
I. Balance at the end of last year 3,136,000,000.00 8,705,011,134.76 914,289,107.82 3,985,462,287.28
16,740,762,529.86
Plus: Change of accounting policy
Correcting of previous errors -10,694,881.05 -96,253,929.47 -106,948,810.52
II. Balance at the beginning of current year 3,136,000,000.00 8,705,011,134.76 903,594,226.77
3,889,208,357.81 16,633,813,719.34
III. Changed in current year (“-“ for decrease) 31,250,000.00 17,683,282.45 -856,113,417.10 -
807,180,134.65
(I) Net profit 165,089,865.35 165,089,865.35
(II) Gains/losses accounted into owners’ equity directly 31,250,000.00 31,250,000.00
1. Change in fair value of sellable financial assets, net
2. Influence of change in other owners’ equity of invested
enterprises on equity basis
3. Influence of income tax related to owners’ equity items
4. Others 31,250,000.00 31,250,000.00
Total of (I) and (II) 31,250,000.00 165,089,865.35 196,339,865.35
(III) Investment or decreasing of capital by owners
1. Investment by owners
2. Amount of shares paid and accounted as owners’ equity
3. Others
(IV) Profit allotment 17,683,282.45 -1,021,203,282.45 -1,003,520,000.00
1. Providing of surplus reserves 17,683,282.45 -17,683,282.45
2. Providing of common risk provisions
3. Allotment to the owners (or shareholders) -1,003,520,000.00 -1,003,520,000.00
4. Others
(V) Internal transferring of owners’ equity
1. Capitalizing of capital reserves (or to capital shares)
2. Capitalizing of surplus reserves (or to capital shares)
3. Making up losses by surplus reserves
4. Others
IV. Balance at end of this year 3,136,000,000.00 8,736,261,134.76 921,277,509.22 3,033,094,940.71
15,826,633,584.6911
Consolidated Statement of Change in Shareholders’ Equity
Prepared by: Bengang Steel Plates Co., Ltd. In RMB
Year 2007
Shareholders’ Items equity attributable to the parent company
Practical capital input Capital reserves Less: Shares in
stock Surplus reserves Common risk
provision Retained profit
Minor shareholders’
equity
Total of shareholders’
equity
I. Balance at the end of last year 3,136,000,000.00 8,705,011,134.76 744,828,960.83 3,396,772,732.49
15,982,612,828.08
Plus: Change of accounting policy
Correcting of previous errors
II. Balance at the beginning of current year 3,136,000,000.00 8,705,011,134.76 744,828,960.83
3,396,772,732.49 15,982,612,828.08
III. Changed in current year (“-“ for
decrease)
158,765,265.94 492,435,625.32 651,200,891.26
(I) Net profit 1,592,000,891.26 1,592,000,891.26
(II) Gains/losses accounted into owners’
equity directly
1. Change in fair value of sellable financial
assets, net
2. Influence of change in other owners’ equity
of invested enterprises on equity basis
3. Influence of income tax related to owners’
equity items
4. Others
Total of (I) and (II) 1,592,000,891.26 1,592,000,891.26
(III) Investment or decreasing of capital by
owners
1. Investment by owners
2. Amount of shares paid and accounted as
owners’ equity
3. Others12
(IV) Profit allotment 158,765,265.94 -1,099,565,265.94 -940,800,000.00
1. Providing of surplus reserves 158,765,265.94 -158,765,265.94
2. Providing of common risk provisions
3. Allotment to the owners (or shareholders) -940,800,000.00 -940,800,000.00
4. Others
(V) Internal transferring of owners’ equity
1. Capitalizing of capital reserves (or to
capital shares)
2. Capitalizing of surplus reserves (or to
capital shares)
3. Making up losses by surplus reserves
4. Others
IV. Balance at end of this year 3,136,000,000.00 8,705,011,134.76 903,594,226.77 3,889,208,357.81
16,633,813,719.3413
Balance Sheet
Prepared by: Bengang Steel Plates Co., Ltd. December 31, 2008 In RMB
Assets Note VII End of term Beginning of term
Current asset:
Monetary capital 2,209,824,428.24 2,232,308,962.38
Transactional financial assets
Notes receivable 837,453,565.97 790,367,921.28
Account receivable (1) 518,376,780.61 822,580,593.80
Prepayment 1,466,086,612.21 3,273,435,845.05
Interest receivable 7,255,724.59
Dividend receivable
Other account receivable (2) 185,904,884.86 194,876,148.04
Inventories 7,586,045,815.48 4,327,986,246.93
Non-current asset due in 1 year
Other current asset 182,211,823.73
Total of current asset 12,993,159,635.69 11,641,555,717.48
Non-current assets
Disposable financial asset
Expired investment in possess
Long-term receivable
Long-term share equity investment (3) 56,100,529.68 56,100,529.68
Investment real estate
Fixed assets 15,111,510,961.84 13,706,373,552.50
Construction in process 3,871,536,579.58 3,394,891,623.53
Engineering goods 10,902,394.81 4,825,480.35
Fixed asset disposal
Production physical assets
Gas & petrol
Intangible assets
R&D expense
Goodwill
Long-term amortizable expenses
Differed income tax asset 403,792,692.38 188,438,950.39
Other non-current asset
Total of non-current assets 19,453,843,158.29 17,350,630,136.45
Total of assets 32,447,002,793.98 28,992,185,853.9314
Balance Sheet (Cont.)
Prepared by: Bengang Steel Plates Co., Ltd. December 31, 2008 In RMB
Liabilities & shareholders’ equity Note VII End of term Beginning of term
Current liabilities
Short-term loans 2,887,352,200.00 2,638,685,960.00
Trade off financial liabilities
Notes payable 1,844,612,512.13 352,200,000.00
Account payable 6,812,978,403.70 3,523,327,847.52
Prepayment received 1,857,162,119.04 2,276,586,322.58
Employees’ wage payable 321,360,373.18 328,258,399.95
Tax payable -254,028,564.17 -23,121,806.11
Interest payable
Dividend payable
Other account payable 674,126,990.12 212,818,530.38
Non-current liability due in 1 year 448,753,264.40 875,659,146.98
Other current liability
Total of current liability 14,592,317,298.40 10,184,414,401.30
Non-current liabilities
Long-term borrowings 2,018,558,759.20 1,935,210,198.02
Bond payable
Long-term payable 250,439,319.71
Special payable 8,500,000.00
Expected liabilities
Differed income tax liability
Other non-recurring liabilities 6,745,478.75 5,803,501.75
Total of non-current liabilities 2,033,804,237.95 2,191,453,019.48
Total of liability 16,626,121,536.35 12,375,867,420.78
Shareholders’ equity
Share capital 3,136,000,000.00 3,136,000,000.00
Capital reserves 8,736,261,134.76 8,705,011,134.76
Less: Shares in stock
Surplus reserves 921,277,509.22 903,594,226.77
Common risk provision
Retained profit 3,027,342,613.65 3,871,713,071.62
Different of foreign currency translation
Total of shareholders’ equity 15,820,881,257.63 16,616,318,433.15
Total of shareholders’ equity and liabilities 32,447,002,793.98 28,992,185,853.9315
Income Statement
Prepared by: Bengang Steel Plates Co., Ltd. Year 2008 In RMB
Items Note VII
Amount of the
Current Term
Amount of the
Previous Term
I. Turnover (4) 37,372,505,854.26 30,098,539,944.00
Less: Operation cost (4) 33,135,501,538.21 25,230,476,923.64
Business tax and surcharge 173,192,124.22 213,020,951.14
Sales expense 711,233,350.57 487,502,706.08
Administrative expense 2,153,087,102.03 1,724,182,228.11
Financial expenses 328,626,797.54 308,237,219.75
Asset impairment loss 622,845,493.53 12,601,344.06
Plus: Income from change of fair value
Investment income
Incl. Investment gains from affiliates
II. Operation profit 248,019,448.16 2,122,518,571.22
Plus: Non business income 14,441,920.88 87,473,928.78
Less: Non-business expenses 20,411,265.12 53,069,520.57
Incl. Loss from disposal of non-current assets 52,296,386.50
III. Total of profit 242,050,103.92 2,156,922,979.43
Less: Income tax expenses 65,217,279.44 569,270,320.04
IV. Net profit 176,832,824.48 1,587,652,659.39
V. Earnings per share 176,832,824.48 1,587,652,659.39
(I) Basic earnings per share
(II) Diluted earnings per shareCash Flow Statement
Prepared by: Bengang Steel Plates Co., Ltd. Year 2008 In RMB
Items Note Amount of the Current Term Amount of the Previous Term
I. Net cash flow from business operation
Cash received from sales of products and providing of services 33,255,678,139.64 25,993,005,137.35
Tax refund received 206,438,677.57 239,128,690.03
Other cash inflow related to operation 69,663,853.37 89,341,835.63
Subtotal of cash inflow 33,531,780,670.58 26,321,475,663.01
Cash paid for purchasing of merchandise and services 24,041,059,673.33 19,039,868,054.88
Cash paid to staffs or paid for staffs 1,753,911,984.34 1,359,158,521.16
Taxes paid 2,490,766,602.83 2,285,630,665.58
Other cash paid related to operation 954,673,458.79 846,821,434.56
Subtotal of cash outflow 29,240,411,719.29 23,531,478,676.18
Cash flow generated by business operation, net 4,291,368,951.29 2,789,996,986.83
II. Cash flow from investment activities
Cash received from returning of investment
Cash received as investment profit
Net cash received from disposal of fixed assets, intangible assets and other long-term assets 1,143,709.99
Net cash received from disposal of subsidiaries or other operational units
Other cash received related to investment
Subtotal of cash inflow 1,143,709.99
Cash paid to acquire fixed assets, intangible assets and other long-term assets 2,480,850,241.63
2,402,722,790.88
Cash paid for investment 6,000,000.00
Net cash received from subsidiaries and other operational units
Other cash paid related to investment 202,439,319.71 216,939,319.71
Subtotal of cash outflow 2,689,289,561.34 2,619,662,110.59
Net cash flow generated by investment -2,688,145,851.35 -2,619,662,110.59
III. Cash flow from financing operations:
Proceeds from investments
Cash received from loans 5,125,499,600.00 4,840,731,700.007
Other cash received related to financing
Subtotal of cash inflow 5,125,499,600.00 4,840,731,700.00
Cash paid for recovering of debt 5,204,168,648.92 3,697,137,243.43
Cash paid for dividend, profit or interest 1,546,367,686.44 1,234,149,967.14
Other cash paid related to financing 267,308,746.89 36,588,023.86
Subtotal of cash outflow 7,017,845,082.25 4,967,875,234.43
Net cash flow generated by financing -1,892,345,482.25 -127,143,534.43
IV. Influence of exchange rate movement -670,898.72 24,037,753.81
V. Net increase of cash and cash equivalents -289,793,281.03 67,229,095.62
Plus: Balance of cash and cash equivalents at the beginning of term 2,130,513,729.36 2,063,284,633.74
VI. Balance of cash and cash equivalents at the end of term 1,840,720,448.33 2,130,513,729.368
Statement of Change in Shareholders’ Equity
Prepared by: Bengang Steel Plates Co., Ltd. Year 2008
Amount of the Current Term
Items Practical capital
input Capital reserves Stock share
(negative item)
Surplus
reserves Retained profit Others Total of shareholders’
equity
I. Balance at the end of last year 3,136,000,000.00 8,705,011,134.76 914,289,107.82 3,967,967,001.09
16,723,267,243.67
Plus: Change of accounting policy
Correcting of previous errors -10,694,881.05 -96,253,929.47 -106,948,810.52
II. Balance at the beginning of current
year
3,136,000,000.00 8,705,011,134.76 903,594,226.77 3,871,713,071.62 16,616,318,433.15
III. Changed in current year (“-“ for
decrease)
31,250,000.00 17,683,282.45 -844,370,457.97 -795,437,175.52
(I) Net profit 176,832,824.48 176,832,824.48
(II) Gains/losses accounted into owners’
equity directly
31,250,000.00 31,250,000.00
1. Change in fair value of sellable financial
assets, net
2. Influence of change in other owners’
equity of invested enterprises on equity
basis
3. Influence of income tax related to
owners’ equity items
4. Others 31,250,000.00 31,250,000.00
Total of (I) and (II) 31,250,000.00 176,832,824.48 208,082,824.48
(III) Investment or decreasing of capital by
owners
1. Investment by owners
2. Amount of shares paid and accounted as
owners’ equity9
3. Others
(IV) Profit allotment 17,683,282.45 -1,021,203,282.45 -1,003,520,000.00
1. Providing of surplus reserves 17,683,282.45 -17,683,282.45
2. Providing of common risk provisions
3. Allotment to the owners (or shareholders) -1,003,520,000.00 -1,003,520,000.00
4. Others
(V) Internal transferring of owners’ equity
1. Capitalizing of capital reserves (or to
capital shares)
2. Capitalizing of surplus reserves (or to
capital shares)
3. Making up losses by surplus reserves
4. Others
IV. Balance at end of this year 3,136,000,000.00 8,736,261,134.76 921,277,509.22 3,027,342,613.65
15,820,881,257.6310
Statement of Change in Shareholders’ Equity
Prepared by: Bengang Steel Plates Co., Ltd. Year 2008 In RMB
Amount of the same period of last year
Items
Share capital Capital reserves Stock share
(negative item)
Surplus
reserves Retained profit Others Total of shareholders’
equity
I. Balance at the end of last year 3,136,000,000.00 8,705,011,134.76 744,828,960.83 3,383,625,678.17
15,969,465,773.76
Plus: Change of accounting policy
Correcting of previous errors
II. Balance at the beginning of current year 3,136,000,000.00 8,705,011,134.76 744,828,960.83
3,383,625,678.17 15,969,465,773.76
III. Changed in current year (“-“ for
decrease)
158,765,265.94 488,087,393.45 646,852,659.39
(I) Net profit 1,587,652,659.39 1,587,652,659.39
(II) Gains/losses accounted into owners’
equity directly
1. Change in fair value of sellable financial
assets, net
2. Influence of change in other owners’ equity
of invested enterprises on equity basis
3. Influence of income tax related to owners’
equity items
4. Others
Total of (I) and (II) 1,587,652,659.39 1,587,652,659.39
(III) Investment or decreasing of capital by
owners
1. Investment by owners11
2. Amount of shares paid and accounted as
owners’ equity
3. Others
(IV) Profit allotment 158,765,265.94 -1,099,565,265.94 -940,800,000.00
1. Providing of surplus reserves 158,765,265.94 -158,765,265.94
2. Providing of common risk provisions
3. Allotment to the owners (or shareholders) -940,800,000.00 -940,800,000.00
4. Others
(V) Internal transferring of owners’ equity
1. Capitalizing of capital reserves (or to
capital shares)
2. Capitalizing of surplus reserves (or to
capital shares)
3. Making up losses by surplus reserves
4. Others
IV. Balance at end of this year 3,136,000,000.00 8,705,011,134.76 903,594,226.77 3,871,713,071.62
16,616,318,433.15Bengang Steel Plates Co., Ltd
Notes to the Financial Statements of 2008
I. Company Profile
Bengang Steel Plates Co., Ltd. (hereinafter referred to as “the Company”), as approved in Liao-Zheng
(1997) No.57 by Liaoning People’s Government on 27 March 1997 ,was incorporated as a joint stock
limited company in the People’s Republic of China (the “PRC”) on June 27th, 1997 by Benxi Iron and
Steel (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 RMB2.38 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 RMB5.40 each, and listed in Shenzhen Stock Exchange since 15 January 1998. The capital
shares were totaled to 1,136,000,000 shares including 616,000,000 shares held by the promoter.
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. 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] 126” by China Securities
Regulatory Commission on June 30th 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]
127 issued by China Securities Regulatory Committee, and was 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 (accounts 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 new shares were placed in the
market on October 9th 2006, with face value of RMB1.00 per share and the placing price was
RMB4.6733 per share. The newly placed shares were restricted to be sold in 36 months when they
were registered to the account of Bengang Group.
Capital inputted for the newly placed shares was the main steel & iron assets of Bengang Group
amounted to RMB 10,097,917,959.13 provided by the auditing report dated May 31st 2006 (i.e. the
purchase price of the steel & iron assets). The price for each share was RMB4.6733. The balance
between the net value of inputted assets and the share capital formed capital reserves of RMB
7,346,600,000 and liability to Bengang Group of RMB 751,317,959.13.
The main steel and iron assets of Bengang Group have been appraised by Zhongzi Asset Appraisal Co.,
Ltd. based on 30 June 2005. The appraisal report was filed “Zhongzi-Ping-Bao-Zi (2005) 142.”
Up to December 31st, 2008, the capital shares of Bengang Steel Plates Co., Ltd were amounted to
3,136,000,000 shares. The business registration was renewed on December 21st, 2006. The business7
license was numbered 2100001049024. The registered address is: 18th Gangtie Road, Pingshan, Benxi,
Liaoning Province. The registered capital is RMB 3,136,000,000. The legal representative is Tianchen
Yu.
Bengang Steel Plates Co., Ltd. is mainly involved in processing and trading of recycled metal
(including color metal), steel & iron making, rolling, and trading, oxygen making, special pre-shaped
steel material, metal process, goods and technology import & export (excluding categories prohibited
by the national government, constrained products can only be traded with special certificates),
measuring instruments, electronic & mechanical equipment, sales of steel, new industrial products,
developing of technologies, recycling of gas dust and waste oil (excluding dangerous materials),
production of dangerous chemical materials.
II. Basis of Preparation and Statement of Compliance
The Financial Statements have been prepared on the assumption of continuing operation and in
accordance with the requirements of the China Accounting Standards for Business
Enterprises(CAS(2006)) issued by the Ministry of Finance(MOF).
The financial statements present truly and completely the financial position, operation results and cash
flows of the company.
III. Significant Accounting policies, Accounting Estimates and Error Correction
1. Accounting year
The Accounting year is from January 1 to December 31.
2. Standard currency for bookkeeping
The Company takes RMB as the standard currency for bookkeeping.
3. Bookkeeping basis and methods
Credit-debit method is adopted and on accrual basis.
4. Recognition of cash equivalent
Cash equivalent refers to the investments with short term, strong liquidity and small risk of value
fluctuation that are held by the Company and easily converted into cash with known amount.
Cash and cash equivalents are: cash, bank deposits that can be used for payment at anytime, other
monetary capital, and short term investment not longer than three months.
5. Foreign currencies
1) Foreign currency transactions are translated into RMB at the current rate at the day of transactions.
Balance of monetary foreign currency items are translated into RMB and adjusted at the current rate at
the day of Balance Sheet. None monetary foreign currency items measured at fair value are translated
into RMB at the exchange rate of the day when the fair value is recognized. The exchange difference of
special loans in foreign currency which is caused by purchasing or manufacturing of assets satisfied the
condition of capitalization is capitalized as asset cost. Other conversion difference thus incurred is
included in financial expenses.
Conversion differences between different foreign currencies are included in financial expenses.
2) Translation of foreign currency financial statements
Items of assets and liabilities on the balance sheet will be translated at the closing rate at the date of
that balance sheet; except for undistributed profit, other items in the category of stockholder’s equity
will be translated at the rate of transactions, income and expenses for each income statement are8
translated at the weighted averaged rate for the year. The resulting of exchange differences included in
equity under a separate item.
6. Financial instruments
1) Classification of financial assets and liabilities
The Company classified its financial assets as: financial assets held for trading; financial assets
designated at fair value through profit or loss; loans and receivables; held to maturity investments and
available for sale financial assets. Financial liabilities including: financial liabilities held for
trading;
financial assets designated at fair value through profit or loss; other financial liabilities.
Management determines the classification of its financial assets and liabilities as: The financial assets
at fair value through profit or loss, includes: financial assets held-for-trading, and those designated at
fair value through profit or loss at inception; Held-to-maturity investment; Receivables; Available for
sale financial assets;
and Other financial liabilities.
2) Measurement of financial instruments
(1) The financial assets at fair value through profit or loss includes: financial assets held-for-trading,
and those designated at fair value through profit or loss at inception.
The company purchases the stocks, bonds, funds, etc., which are the financial assets at fair value
through profit or loss which recognized at fair value initially. The relevant transaction cost recognized
in the income statement when occurred. The price includes the declared but not received cash
dividends or bond interest is recognized as a separate item.
The cash of dividends or interest are recognized as investment income when the Company received
when holding such financial assets. At the balance sheet date, the Company recognizes the fair value
changes in the income statements.
The Company recognize the difference between initial recognition and fair value of the financial assets
at investment income when dispose of the financial assets.
(2) Held-to-maturity investment
Financial assets classified as held to maturity are non-derivative financial assets with fixed or
determinable payments and fixed maturities that the Company’s management has both the positive
intention and the ability to hold to maturity.
The Company classified the fixed-rate bonds, floating rate bonds issued by corporate to
held-to-maturity investments. They are initially recorded at fair value plus any directly attributable
transaction costs and are subsequently measured at amortized cost using the effective interest rate. The
price includes the declared but not received bond interest is recognized as a separate item.
The held-to-maturity investments measured at amortized cost. The interest income was recognized in
the investment income. The effective interest will not be changed after initial recognition, if the
difference between effective rate and coupon rate is not material, it also can be measured at coupon rate,
the interest income recognized in the investment income.
When disposing the held-to-maturity investment, the difference between the investing proceeds and the
carrying value is recognized as investment income. If the Company changes the intention or ability,
this kind of held to maturity investment should be classified as available-for-sale financial assets, and
measured at fair value subsequently. On the date of reclassification, the difference between the fair
value and the carrying value should be recognized in the equity. When the available-for-sale financial
assets are impaired or de-recognized, the related amounts need to be transferred out from equity and
recognized in the income statements.9
(3) Receivables
Receivables (including accounts receivable and other receivables) are measured at contract price;
(4) Available for sale financial assets
Financial assets classified as available for sale are non-derivatives that are either designated as such or
are not classified in any of the other categories:
A. Financial assets at fair value through profit or loss
B. Held-to-maturity investments;
C. Loans and receivables
Available for sale financial assets are initially recorded at fair value plus any directly attributable
transaction costs on the trade date and subsequently re-measured at fair value. The price includes the
declared but not received bond interest or cash dividend is recognized as a separate item.
The Company recognizes the interest or cash dividends as investment income. At each balance sheet
date, available-for-sale financial assets were measured at fair value and the fair value changes are
recognized in the capital reserve - other capital reserve.
The difference between the proceeds of the disposal and the carrying value should be recognized as
investment income. And the related fair value change in the equity should be transferred out, and
recorded as investment income.
(5) The Company classifies financial liabilities at fair value through profit or loss as held-for-trading,
and those designated at fair value through profit or loss at inception. Financial liabilities are measured
at fair value, and do not deduct the future settlement transaction cost.
If the fair value is not applicable, the financial liabilities should be measured at amortized cost.
(6) Other financial liabilities
For other financial liabilities which are not at fair value through profit or loss, for example financial
guaranteed contracts, they are initially recognized at fair value plus any directly attributable
transaction
costs. After the initial recognition, the other financial liabilities are measured at the higher of the
amount measured in accordance with “Accounting Standards for Business Enterprises– Contingency”
and the amortized balance measured in accordance with “Accounting Standards for Business
Enterprises – Revenue”.
3) Determination of the fair value of financial assets and financial liabilities
The fair value of active market existed financial assets and liabilities should be on the quoted price of
the active market. The quoted price of the active market referred as the prices which can be regularly
and easily received from bourse, broker’s agency, and trade society and quotation service agency etc.,
and also referred as the actual market price in fair transactions. The fair value of non-active market
existed financial assets and liabilities should be used the estimated skill to confirm the value. The fair
value of investments that are actively traded in organized financial markets is determined by reference
to quoted market prices. For investments where there is no active market, fair value is determined using
valuation techniques. Such techniques include using recent arm’s length market transactions; reference
to the current market value of another instrument, which is substantially the same; a discounted cash
flow analysis; option pricing models and other valuation models.
4) Impairment for financial assets
The Company assesses at each balance sheet date whether there is any objective evidence that a
financial asset or a group of financial assets is impaired. Positive evidences refer to those occurred
after
the initial recognition, have effect on estimated future cash flows of the financial assets, and can be
measured reliably. An individual impairment assessment should be performed on the balances that are
individually significant. For the financial assets which are not individually significant, they should be10
allocated into asset groups which contain similar risk characteristics and assess collectively.
The followings are the impairment testing method for each main financial asset:
(1) For the available for sale financial asset whose fair value can be reliably measured, the amount that
is recognized in income statement is the difference between the book value and current fair value; for
the available for sale financial asset whose fair value cannot be reliably measured, the impairment loss
which is recognized in income statement is the difference between the book value and the present value
of estimated future cash flow (excludes credit loss that has not happened yet). When a decline in the
fair value of an available for sale financial asset has been recognized directly in equity and there is
objective evidence that the asset is impaired the cumulative loss that had been recognized directly in
capital surplus are removed from equity and recognized in profit or loss of the current period.
(2) Financial assets carried at cost
If there is objective evidence that the financial assets have been impaired, the amount of the
impairment loss is measured as the difference between the carrying amount of the financial asset and
the present value of estimated future cash flows discounted at the current market rate of return for a
similar financial asset, and recognized in the income statement of the current year.
(3) Financial assets carried at amortized cost
If objective evidence shows that the financial assets carried at amortized cost are impaired, the carrying
amount of the financial asset shall be reduced to the present value of the estimated future cash flow
(excluding future credit losses that have not been incurred). The amount of reduction is recognized as
an impairment loss in the income statement. Present value of estimated future cash flow is discounted
at the financial asset’s original effective interest rate and includes the value of any related
collateral.
7. Bad debt provision
For each individually significant receivable, the impairment test should be assessed individually.
Where there is evidence that indicates a impairment, the loss should be recognized with the respective
provision accrued, equaling to the difference between the present value of the future cash flows and the
book value of receivables.
For the receivables which are not individually significant, they together with the receivables which are
indicated not impaired during the individual assessment should be allocated into groups which contain
similar risk characteristics and accrue the bad debt provision based on the actual bad debt percentage in
experience and the situation in current period.
The Company makes the specific bad debt provision for the receivables whose collect ability is
doubtful; the Company does not make bad debt provision for the receivables which are used for
guarantee purpose; for other receivables, the Company makes the bad debt provision using the
allowance method. The Company makes the following percentages of bad debt provision for accounts
receivable and other receivables:
Age Percentage (%)
Within 1 year 0.00
1-2 years 5.00
2-3 years 20.00
Over 3 years 100.00
The Company makes no bad debt provision for receivables other than accounts receivable and other
receivables by taking into accounts of the actual situation of the Company. For some specific items
whose credit risk characteristics are obviously different, the Company performs individual analysis on
them and confirms the actual loss rate.11
The Company makes no bad debt provision for the receivables happened between subsidiaries or
between subsidiary and parent company in the scope of consolidation.
When there is objective evidence shows a specific receivable is not collectable, the Company treats it
as bad debt and write off against the bad debt provision.
A. Description of the receivable classification
(a) Individually significant item – Above RMB 10 million in accounts receivable or above RMB 5
million in other receivables;
(b) Items not individually significant but credit risk of the group which the receivables are classifying
to is high
– account aging is above 3 years except for these individually significant;
(c) Other items not individually significant – items other than specified in (a) or (b).
B. Standard of recognizing a bad debt
Debtor is discharged or bankrupt, the uncollected amount after the legal procedures; debtor dies, the
uncollected amount after the repayment by using all of the debtor’s assets or legacies; the debtor did
not fulfill his/her duty to repay the debt when it is overdue, and there is an objective evidence
indicating that the receivables is not collectible. For these receivables, the Company charges off the bad
debt in accordance with the company’s management authority.
8. Inventory
1) Inventory classification
Inventories include raw material, low-valued consumables, work-in process, and finished goods etc.
2) Valuation method for inventory issuing
Inventories should be recorded at their historical cost on acquisition; inventories requested or issued
should be accounted for at their historical cost, which should be determined using the weighted average
method to confirm the actual cost.
3) Low-valued consumables amortization
Low-valued consumables should be amortized in full amount on issuance.
4) Verifying standard for inventory provision and way for accrued
Inventories should be measured at the lower of cost and net realizable value, and a provision for
inventory write-down should be established for any difference between the cost the lower net realizable
value. Normally the Company accrued inventory provision on single item; at the end of the period, if
the reasons of past accrued inventory provision have been disappeared, the accrued amount should be
transferred back.
5) Net realizable value of the inventory
Net realizable value of the inventory is amount that the estimated sales value minus the estimated
completed cost, expenses and related taxes.
6) Inventory system
The Company use perpetual inventory system.
9. Long-term equity investment
1) Initial measurement
(1) The initial cost of long-term equity investment from business acquisition is determined by:12
A. For the acquisition under the common control, if the consideration of the acquiring enterprise is that
it makes payment in cash, transfers non-cash assets or bear its debts, it shall, on the date of
acquisition,
regard the share of the book value of the owner's equity of the acquired enterprise as the initial cost of
the long-term equity investment. The difference between the initial cost of the long-term equity
investment and the payment in cash, non-cash assets transferred as well as the book value of the debts
borne by the acquiring party shall offset against the capital reserve. If the capital reserve is
insufficient
to dilute, the retained earnings shall be adjusted.
If the consideration of the acquiring enterprise is that it issues equity securities, it shall, on the date
of
acquisition, regard the share of the book value of the owner's equity of the acquired enterprise as the
initial cost of the long-term equity investment. The total face value of the stocks issued shall be
regarded as the capital stock, while the difference between the initial cost of the long-term equity
investment and total face value of the shares issued shall offset against the capital reserve. If the
capital
reserve is insufficient to dilute, the retained earnings shall be adjusted.
B. For the combination not under the common control, the acquirer shall, on the acquisition date,
measure the assets obtained and liabilities borne or assumed 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 acquirer shall recognize the positive balance of the acquisition costs
over the fair value of the identifiable net assets it obtained from the acquiree as goodwill. When the
acquisition cost is less than the fair value of identifiable net assets it obtained, the Company should
review the fair value of the share of the acquired company’s identifiable net assets, and record the
difference into income statement if the result of review is still in negative.
(2) The initial measure of the long term equity investment other than from business acquisition:
A. 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 consists of the expenses directly relating to
acquiring the long term equity investment, taxes and other necessary expenses.
B. 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.
C. The initial cost of a long-term equity investment of an investor shall be the value stipulated in the
investment contract or agreement except the unfair value stipulated in the contract or agreement.
D. The initial cost of a long-term investment obtained by the exchange of non-monetary assets shall be
ascertained in accordance with the Accounting Standards for Enterprises No. 7 – Exchange of
Non-monetary Assets.
E. The initial cost of a long-term equity investment obtained by recombination of liabilities shall be
ascertained in accordance with Accounting Standards for Enterprises No. 12 – Debt Restructuring.
2) Subsequent measurement
The Company adopts cost method for the long term investment in the company in which the Company
has control and makes adjustment according to equity method when preparing consolidation. The
Company adopts equity method for the long term investment in the company in which the Company
has significant influence or joint control. For the long term investment in the company in which the
Company has no significant influence and joint control, the Company adopts the cost method.
Control refers to the rights to decide a company’s financial or operating policy and obtain the benefit
from this company’s business activities. Directly holding or holding through its subsidiaries more than
half of the invested company’s voting shares represent the Company can control the invested company.
Holding less than half of the invested company’s voting share, but satisfying one of the following
conditions, will be regarded as the controlling company, however, except for there is evidence
representing the parent company cannot control the invested company:
(1) Through the agreement with the other investors of the invested company, the Company holding
more than half voting rights;
(2) As per the invested company’s article of association or agreement, the Company has the right to
decide the invested company’s financial and operating policy;
(3) Has the right to remove most of the invested company’s members in board of directors or similar
institutions;13
(4) Has the most voting right in invested company’s board of directors or similar institutions Joint
control refers to the Company and other party controlling an operating activity together in accordance
with an agreement, only existing when the Company and other party both agree on the important
financial and operating decisions.
Significant influence refers the right of participating a company’s financial and operating
decision-making, however, no control or joint control on them.
3) Impairment
At the balance sheet date, there is indication of impairment such as continuous decrease of market
value or poor performance of the invested company’s operation, the net realizable value of the long
term equity investment should be determined at the higher of fair value of the long term equity
investment less any disposal charges and the net present value of the estimated future cash flow. When
the net realizable value is less than the book value, an impairment provision should be made for long
term equity investment, the impairment loss go the income statement. The impairment provision should
not be reversed in future.
The Company assesses the goodwill arisen from the business combination every year regardless
whether there is indication of impairment.
10. Goodwill
The goodwill arisen from business acquisition refers to the positive difference of consideration paid
over the share of net identifiable assets obtained. Goodwill should be measured at the cost of initial
measurement less any cumulative impairment loss.
The Company performs an impairment assessment at the end of each year.
In order to perform assessment on goodwill, the Company classifies goodwill arisen from business
combination to relevant asset groups by using a reasonable method and classifies the goodwill which is
difficult to be classified to a relevant asset group to a group of asset group. The Company apportions
the book value of goodwill to asset group or group of asset group by the ratio of the fair value of asset
group or group of asset group over the fair value of total asset group or group of asset group. When the
fair value cannot be reliably measured, apportioning by the ratio of the book value of asset group or
group of asset group over the book value of total asset group or group of asset group.
When performing the impairment test on goodwill’s relevant asset group or group of asset group, if
there is indication of impairment for the asset group or group of asset group, firstly performs an
impairment test on the asset group or group of asset group excluding goodwill and calculates the
collectible amounts and compares it to the book value to determine the impairment loss; then, performs
a further impairment test on the asset group or group of asset group including goodwill, compares the
collectible amounts to the book value of the asset group or group of asset group, if the collectible
amounts are less than the book value of the asset group or group of asset group, recognizes the
impairment loss according the following:
1) First deducts the book value of goodwill apportioned to asset group or group of asset group;
2) Then, deducts each asset’s book value by the ratio of the book value of each asset over the book
value of asset group or group of asset group excluding the goodwill
The deduction of the book value of the above assets is regarded as the impairment loss of each
individual asset and recorded in income statement. The deducted book value of the asset cannot be less
than the following: this asset’s fair value less any disposal charges; the present value of estimated
future cash flow and zero. The unallocated impairment loss resulted from the above reasons should be
allocated by the ratio of book value of other assets over the book value of asset group or group of asset
group.14
Recognized impairment loss on goodwill should not be reversed in future.
11. Fixed Assets and Accumulated Depreciation
1) Standard
The company’s fixed assets mean the intangible assets with more than one accounting year which were
held for the purpose of manufacturing commodities, rendering of service, leasing, operation and
management.
2) Valuation method of fixed assets
Fixed assets should be recorded at the cost, and consider the influence amount of the disposal cost The
cost of the procured fixed assets included the purchase price, import duties, delivery costs and
insurance, and other expenditures necessary for bring the fixed assets to working condition for its
intended use. The amount of a fixed asset contributed by an investor should be recorded on the value
agreed upon by all the investors, except
for the unfair value.
Fixed assets are recognized when related income will inflow to the Company and related cost can be
recognized. Continuing expenses related with fixed assets which can be recognized can be recorded as
the cost of fixed assets, and stop recognized the replaced book value; otherwise, these expenses should
be recorded as gain/loss of current period.
3) Fixed assets classification and depreciation
Except for fully depreciated fixed assets that are still in use; and land that is revalued separately and
recorded as a fixed asset item, other fixed assets should be depreciated. Straight line method is used.
Details of classification, depreciation period, depreciation rate and residual value rate are as follows:
Classification Depreciation Period Depreciation Rate Residual Value Rate
Plants and Buildings 8-30 years 3.33%-12.5% 0%
Machinery 2.4-9 years 10.778%-40.417% 3%
Transportation and other 3-10.8 years 8.981%-32.333% 3%
equipments
At the end of the period, the Company will check the estimated useful life, residual value rate, and
depreciation way. If the checked estimated useful life is different from the past one, the company
would change the useful of the fixed assets. If the checked estimated residual value is different from
the past one, the company would change it. If the related income that comes from the fixed assets
changes a lot, the deprecation way would be changed.
12. Construction in Progress
The construction in progress (the “CIP”) means the capital construction and Renewal improvement
project which is in progress.
1) The CIP valuation
The construction project cost shall be confirmed according to actual expend. There into:
Self-management project shall be valued according to direct materials, direct labor cost, direct
construction fee; construction transferred to others shall be valued according to the payment of project
price; Equipment setup project shall be valued according to the setup equipment price, setup expense,
expense from the running-in of the project; Renewal improvement project shall be valued according to
the book value before renewal, direct expense, running-in of the project, and administrate fee15
apportioned.
2) The time point of the CIP transfer into fixed asset
The CIP constructed by us should be transferred to fixed asset when achieve the predetermined running
condition. The cost should be confirmed according to the Project budget, actual cost of project and etc.
And it also can be confirmed by estimation, the depreciation should be accrued in next month, the
estimation should be adjusted when transacted the final accounts, but the accrued depreciation may not
be adjusted.
13. The Intangible Assets Measurement
1) Initial Valuation Measurement of intangible assets
The intangible assets shall be initially measured according to its actual cost. The cost of outsourcing
intangible assets shall be the purchase price; the cost invested into intangible assets by investors shall
be determined according to the conventional value in the investment contract or agreement, except for
those of unfair value in the contract or agreement. The expenditure for the internal research and
development shall be recognized as per the Company’s rules.
2) Amortization measurement and time of intangible assets
We analyze and judge the service life of intangible assets, when it obtains intangible assets. As for the
intangible assets with limited service life, we shall estimate the years of its service life, or the amount
of the output or any other similar measurement unit, which constitutes its service life. If it is unable to
forecast the period when the intangible asset can bring economic benefits to the enterprise, it shall be
regarded as an intangible asset with uncertain service life.
With regard to intangible assets with limited service life, its amortization amount shall be amortized
within its service life systematically and reasonably. Intangible assets with uncertain service life may
not be amortized.
We shall, at least at the end of each year, check the service life and the amortization method of
intangible assets with limited service life. When the service life and the amortization method of
intangible assets are different from those before, the years and method of the amortization shall be
changed. We shall check the service life of intangible assets with uncertain service life during each
accounting period. Where there are evidences to prove the intangible assets have limited service life, it
shall be estimated of its service life, and be treated according to these Standards.
3）The Division standard of the development expenditures for research and development
The development expenditures for its internal research and development projects of an enterprise may
be confirmed as intangible assets when they satisfy the following conditions simultaneously:
(1) It is feasible technically to finish intangible assets for use or sale;
(2) It is intended to finish and use or sell the intangible assets;
(3) The usefulness of methods for intangible assets to generate economic benefits shall be proved,
including being able to prove that there is a potential market for the products manufactured by applying
the intangible assets or there is a potential market for the intangible assets itself or the intangible
assets
will be used internally;
(4) It is able to finish the development of the intangible assets, and able to use or sell the intangible
assets, with the support of sufficient technologies, financial resources and other resources; and
(5) The development expenditures of the intangible assets can be reliably measured.16
14. Accounting Treatment of 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.
The borrowing costs shall not be capitalized unless they simultaneously meet the following
requirements:
(1) The asset disbursements have already incurred, which shall include cash, transferred non-cash
assets or interest bearing debts paid for the acquisition and construction or production activities for
preparing assets eligible for capitalization;
(2) The borrowing costs has already incurred; and
(3) The acquisition and construction or production activities which are necessary to prepare the asset
for its intended use or sale have already started.
2) The Stopped point of capitalization of borrowing costs
When the qualified asset under acquisition and construction or production is ready for the intended use
or sale, the capitalization of the borrowing costs shall be ceased. The borrowing costs incurred after the
qualified asset under acquisition and construction or production is ready for the intended use or sale
shall be recognized as expenses at the incurred amount when they are incurred, and shall be recorded
into the profits and losses of the current period.
3) Method of calculating capitalized borrowing costs
(1) Method of calculating specifically borrowing costs
As for specifically borrowed loans for the acquisition and construction or production of assets eligible
for capitalization, the to-be-capitalized amount of interests shall be determined in light of the actual
cost incurred of the specially borrowed loan at the present period minus the income of interests earned
on the unused borrowing loans as a deposit in the bank or as a temporary investment
(2) Method of calculating general borrowing costs
Where a general borrowing is used for the acquisition and construction or production of assets eligible
for capitalization, the enterprise 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.
15. Impairment of Assets
The term "impairment of assets" refers to that the recoverable amount of assets is lower than its
carrying value.
The company accrues impairment of assets for the assets expect inventory, deferred income tax,
monetary assets and the long-term investment with no bidding in the active market and no dependably
measured fair value, which was calculated according to the following method:
When recoverable value is less than carrying value, the carrying value of assets should be decreased to
the recoverable value, the decreased amount should be recognized as loss on impairment of assets,
recorded into current profit or loss, and accrue provision of impairment accordingly. The recoverable17
amount shall be determined in light of the higher one of the net amount of the fair value of the assets
minus the disposal expenses and the current value of the expected future cash flow of the assets. This
impairment cannot be reversed during the subsequent periods.
There may be an impairment of assets when one of the following signs occurs:
(1) The current market price of assets falls, and its decrease is obviously higher than the expected drop
over time or due to the normal use;
(2) The economic, technological or legal environment in which the enterprise operates, or the market
where the assets is situated will have any significant change in the current period or in the near future,
which will cause adverse impact on the enterprise;
(3) The market interest rate or any other market investment return rate has risen in the current period,
and thus the discount rate of the enterprise for calculating the expected future cash flow of the assets
will be affected, which will result in great decline of the recoverable amount of the assets;
(4) Any evidence shows that the assets have become obsolete or have been damaged substantially;
(5) The assets have been or will be left unused, or terminated for use, or disposed ahead of schedule;
(6) Any evidence in the internal report of the enterprise shows that the economic performance of the
assets have been or will be lower than the expected performance, for example, the net cash flow
created by assets or the operating profit (or loss) realized is lower (higher) than the excepted amount,
etc.; and
(7) Other evidence indicates that the impairment of assets has probably occurred.
16. Accounting Treatment for Accrued Payable
1) Principle of recognition: The obligation pertinent to a Contingency shall be recognized as an
estimated debt when the following conditions are satisfied simultaneously, such as outside guarantee,
discount of business acceptance, lawsuit for pending and Product quality guarantee:
(1) That obligation is a current obligation of the enterprise;
(2) It is likely to cause any economic benefit to flow out of the enterprise as a result of performance of
the obligation; and
(3) The amount of the obligation can be measured in a reliable way.
2) Measurement method: The estimated debts shall be initially measured in accordance with the best
estimate of the necessary expenses for the performance of the current obligation.
17. Revenue Recognition
1) Revenue from the sale of goods should be recognized when all the following conditions have been
satisfied:
a. the enterprise has transferred to the buyer the significant risks and rewards of ownership of the
goods;
b. the enterprise retains neither continuing managerial involvement to the degree usually associated
with ownership nor effective control over the goods sold;
c. it is probably that economic benefits associated with the transaction will flow to the enterprise; and
d. the relevant amount of revenue and costs can be measured reliably.
2) Rendering of services
When the provision of services is started and completed within the same accounting year, revenue
should be recognized at the time of completion of the services. When the provision of service is started
and completed in different accounting years and the outcome of a transaction involving the rendering
of services can be estimated reliably, and enterprise should recognize the service revenue at the balance
sheet date using the percentage of completion method.
3) Revenue arising from the use by others of enterprise assets should meet the following requirements:18
a. It is probable that the economic benefits associated with the transaction will flow to the enterprise;
b. When the amount of the revenue can be measured reliably, interest should be measured based on the
length of time for which the enterprise’s cash is used by others and the applicable interest rate;
royalties
fees should be measured according to the period and method of charging as specified in relevant
contract and agreement.
18. Government Grants
Government grants refers to monetary or non-monetary assets received by an enterprise from the
government, but excludes capital invested in the Group by the government that gives the government
ownership rights.
Government grants are recognized where there is reasonable assurance that the grant will be received
and all attaching conditions will be complied with.
Monetary grants are measured on the basis of the amount received or the amount receivable.
Non-monetary grants are being measured based on the fair value of relevant assets.
Where the grant relates to an asset, the fair value is credited to a deferred income account and is
released to the income statement over the expected useful life of the relevant asset by equal annual
installments.
Government grants relating to income are handled accordingly as follows:
(i) Those to be used as compensation for future expenses or losses are recognized as deferred income
and are be recorded in the profit and loss account for the period where the relevant expenses are
recognized; or
(ii) Those to be used as compensation for relevant expenses or losses already incurred are recorded
directly in the profit and loss account for the current period.
19. Income tax
The measurement of income tax adopts the balance sheet liability method. The tax base is determined
when the assets and liabilities are initially recognized. A deferred tax asset or liability is recognized
for
the temporary difference arisen between the carrying amount and its tax base.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period
when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been
enacted or substantively enacted at the balance sheet date. When the applied tax rate is changes, the
recognized deferred tax asset or liability should be re-measured. The influence of the tax rate change
should be recorded as income tax expense, except for the deferred tax asset or liability arisen from the
transactions or events which are directly recognized in equity.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the
extent that it is no longer probable that sufficient taxable profit will be available to allow all or part
of
the deferred tax asset to be utilized. Conversely, previously unrecognized deferred tax assets are
reassessed at each balance sheet date and are recognized to the extent that it is probable that sufficient
taxable profit will be available to allow all or part of the deferred tax asset to be utilized.
20. Accounting Methods of Employees’ Benefits
Employee benefits refer to all kinds of remunerations and other relevant reimbursements made by
enterprises to their employees in exchange for services of employees. It includes wages and salaries,
bonuses, allowances and subsidies, welfare expenses, Medical insurance, endowment insurance,
unemployment insurance and other social insurances, housing benefits, Labor union expenditure and
employee education expenses, non-monetary benefits, termination benefits, and other pension benefits
directly relevant to services provided.
1) Share based payment19
Some employees have been granted by share base payment, which is measured by the fair value of the
share. For these awarded that can be exercised immediately, it needs to be recognized as relevant costs
or expenses according to equity instruments and increase share premium accordingly. For these only
can be exercised when service fulfilled in the waiting period or met the defined performance condition,
on each balance sheet date in the waiting period, based on the best estimate to quantity of equity
instrument and the fair value on the date equity instruments awarded, the service obtained in the
current period is recognized as relevant costs or expenses and share premium. The recognized relevant
costs or expenses and owner’s equity will not be adjusted any longer after the date of exercise.
2) Termination Benefits
Our company will terminate the employment of an employee or group of employees before the normal
retirement date; or provide termination benefits as a result of an offer made in order to encourage
voluntary redundancy. The enterprise will be demonstrably committed to a termination when, and only
when, it has a detailed formal plan for the termination and is without realistic possibility of withdrawal.
The provision incurred from compensation for the termination of labor relationship will be recognized
to income statement of the current period.
The treatment for the early retirement planning is on the same basis to that of the termination benefits.
The salaries and the social insurance expenses for the period from the employee’s termination of
service and the normal retirement of these staffs are recognized as employee benefits payable when
meeting the above said retirement benefits recognition requirements, and recognized to income
statement of the current period.
3) Other employee benefits
During the accounting periods that our company is providing service, the benefits payable to
employees are recognized as liabilities. Except termination benefits, according costs of products, costs
of services and costs of assets will be recognized based on benefited objects where employee provide
services.
21. Business combination
(1) Business combination under common control
As for business combination under common control, pooling of interest method is adopted. Except the
adjustments for different accounting policies, the assets and liabilities obtained by the acquirer shall be
measured on the basis of the carrying amount in the acquiree's accounts as at the date of combination.
Where there is a difference between the carrying amount of the net assets acquired by the acquirer and
the carrying amount of the consideration paid by it (or the total par value of the shares issued), capital
surplus shall be adjusted. If the capital surplus is not sufficient to offset the value of the net assets
acquired, retained earnings shall be adjusted.
Any costs directly attributable to the combination are recognized as expenses when incurred.
(2) Business combination involving entities not under common control
As for business combination involving entities not under common control, combination by purchase
method is adopted. The cost of combination is the aggregate of the fair values, at the acquisition date,
of the assets given, liabilities incurred or assumed, and equity securities issued by the acquirer, in
exchange for control of the acquiree. The acquirer shall measure the acquiree’s identifiable assets,
liabilities and contingent liabilities acquired in the business combination at their fair values on the
acquisition date.
Where the cost of a business combination exceeds the acquirer’s interest in the fair value of the
acquiree’s identifiable net assets, the difference shall be recognized as goodwill and the value shall be
recognized as the cost of a business combination after deducting accumulated impairment provision.
Where the cost of combination is less than the acquirer’s interest in the fair value of the acquiree’s20
identifiable net assets, the difference shall be accounted as expenses after review.
Any costs directly attributable to the combination are recognized as expenses when incurred.
22. Consolidation of Financial Statements
The consolidation of consolidated financial statements is based on the financial statements of the
Parent Company and its subsidiaries. Based on other relevant information, it is prepared by the Parent
Company after adjustment to long-term equity investment to its subsidiaries according to equity
method.
1) Scope of consolidation of consolidated financial statements
The scope of consolidation of consolidated financial statements is determined based on control.
A. The parent company directly, or indirectly, owns over more than one half of the voting rights,
indicating the parent company can control the invested companies and recognize the invested
companies as subsidiaries and to consolidate the invested companies into the scope of consolidation;
but it excludes where the control not be evidenced by the parent company.
B. The Parent Company owns over more than one half of the voting rights, and if one of the following
conditions is met, it regarded that Parent Company can control the invested companies; the invested
companies will be recognized as subsidiaries and to be consolidated into the scope of consolidation.
But it excludes where the control not be evidenced by the parent company:
a. over more than one half of the voting rights by virtue of an agreement with other investors; or
b. to govern the financial and operating policies of the other enterprise under a statute or an agreement;
or
c. to appoint or remove the majority of the members of the board of directors; or
d. to cast the majority of votes at a meeting of the board of directors.
All the subsidies have been consolidated into the scope of consolidation for this period ended.
2) Method of Accounting for the consolidation of financial statements.
The consolidation of financial statements are in accordance with the requirement of ‘Accounting
Standards for Business Enterprises No. 31 – Financial statements consolidation’ and application
guidance published by Ministry of Finance. All significant inter-company transactions and balances
within the Group are eliminated on consolidation.
23. Significant accounting policies, changes to accounting estimates and Accounting
Error Rectification
1) Changes to accounting policies
No accounting policy change with the Company.
2) Changes to accounting estimates
No accounting estimates change with the Company.
3) Correction of prior period errors
According to the Benxi Tax bureau’s reply for “Tax deduction for purchasing domestically made
equipment for Technology reformation of Bengang Steel Plates Co., Ltd”, the deductible tax for
purchasing domestically-produced equipment in 2007 was RMB 160.989.130.60. When the enterprise
did the settlement and payments of the yearly income tax, the actual deductible tax for purchasing
domestically-produced equipment is RMB 54,040,320.08. Therefore the beginning balances of
Owner’s equity and surplus reserves were adjusted retrospectively, reducing owner’s equity and surplus21
reserves by RMB 96,253,929.47 and RMB 10,694,881.05 respectively.
V. Taxes
1. Major Taxes and Rates
1. Value added tax
The taxes should be paid by taxable sales at 17% to allow the deduction of input tax.
Export tax rebate rate: According to the Ministry of Finance, Development and Reform Commission,
Ministry of Commerce, General Administration of Customs, State Administration of Taxation, "on the
reorientation of some of the goods and the export tax rebate rate and the addition of the processing
trade of goods prohibited directory notice" ([2006] 139 and taxation) there are 142 tariff heading from
the steel export tax rebate rate from 11% to 8% from September 15, 2006. According to the Ministry of
Finance, State Administration of Taxation, "Finance Ministry State Administration of Taxation on
adjustment of the export tax rebate rate for steel notice" ([2007] 64 and taxation) import and export
taxes (2007 version), Chapter 72 of some of the special steel and stainless steel plate, cold-rolled
products, such as duty paragraphs 76, the export tax rebate rate fell to 5%; another 83 steel tariff
heading the elimination of export tax rebates from April 15, 2007 onwards.
2. City maintenance and construction taxes: The tax should be paid at 7% of VAT actually paid.
3. Enterprise income tax: The tax should be paid at 25% of taxable profit
4. Housing property tax: The tax should be paid at 1.2% of the building’s original costs after deduction
of 30% of that.
5. Other taxes: To be calculated and paid according to the relevant tax laws.
2. Tax Preference
1. There is no tax preference this year.
V. Consolidated Financial Statements
The consolidated financial statements are the structural report on the financial status, business
performance and cash flow statement of the whole enterprise including parent company and its
subsidiaries. According to the accounting standards No.33- Consolidated Financial Statement, the
subsidiaries under the control and the subsidiaries for special purposes are combined into the
consolidated financial statements.
The consolidation of consolidated financial statements is based on the financial statements of the
Parent Company and its subsidiaries. Based on other relevant information, it is prepared by the Parent
Company after adjustment to long-term equity investment to its subsidiaries according to equity
method.
The consolidation of financial statements is in accordance with the requirement of ‘Accounting
Standards for Business Enterprises No. 31 – Financial statements consolidation and application
guidance published by Ministry of Finance. In preparing the consolidated financial statements, all
intercompany balances and transactions, and unrealized profits arising within the consolidated entities
are eliminated in full.
The difference which the costs of combination are more than the assessable net asset of the acquiree is
goodwill. The difference which the costs of combination are less than the assessable net asset of the
acquiree is regarded as expense.
Consistent accounting policies are employed in the preparation and presentation of the consolidated22
financial statement.
The monetary unit in this chapter is in RMB0’000 unless otherwise stated.
I. Subsidiaries
1. The subsidiaries acquired through combination under common control
In RMB0’000
Name Subsidiaries type Registered
place
Business
scope
Registered
capital Business scope
Xiamen Bengang
Steel Sales Ltd.
Wholly-owned
subsidiary Xiamen Sales 50
Metal, steel, pig iron &
mechanical wholesale and
retail.
Wuxi Bengang Steel
Sales Ltd.
Wholly-owned
subsidiary Wuxi Sales 100 Metal materials, chemical raw
materials and products sales
Tianjin Bengang
Steel Trading Ltd.
Wholly-owned
subsidiary Tianjin Sales 300 Steel, pig iron, chemical raw
material sales
Nanjing Bengang
Material Sales Ltd.
Wholly-owned
subsidiary Nanjing
Sales
115
Construction material,
chemical product sales and
metal material processing
Yantai Bengang Steel
Sales Ltd.
Wholly-owned
subsidiary Yantai Sales 50 Construction material, metal
material wholesales and retail
Harbin Bengang Steel &
Iron Sales Ltd.
Wholly-owned
subsidiary Harbin Sales 50 Metal material wholesales
and retail
Changchun Bengang
Steel Sales Ltd.
Wholly-owned
subsidiary Changchun Sales 50 steel and pig iron sales
Name Investment Shares (%) Voting shares
(%) Consolidation
Xiamen Bengang Steel Sales Ltd. 109.57 100.00 100.00 Yes
Wuxi Bengang Steel Sales Ltd. 94.80 100.00 100.00 Yes
Tianjin Bengang Steel Trading
Ltd. 3,330.68 100.00 100.00 Yes
Nanjing Bengang Material Sales
Ltd. 208.14 100.00 100.00 Yes
Yantai Bengang Steel Sales Ltd. 1,960.03 100.00 100.00 Yes
Harbin Bengang Steel & Iron
Sales Ltd. 42.34 100.00 100.00 Yes
Changchun Bengang Steel Sales
Ltd. -135.51 100.00 100.00 Yes
The judgment of the subsidiaries acquired under the same control:
The above subsidiary companies are acquired by the company through direct issue of the stock to
Bengang Group in 2006 to purchase the companies under the range of the principle work asset of
Bengang Group.
2. The subsidiaries acquired through business combination not under the common
control
No subsidiaries acquired through combination not under the common control
3. Subsidiaries acquired not through Business Combination23
No subsidiaries acquired not through business combination
II.The change of subsidiaries
There is no change of subsidiaries.
III.Consolidated subsidiaries which the parent company owns half or less than half
of voting rights and the reason
No consolidated subsidiaries which the parent company owns half or less than half voting rights.
IV.The invested company which the parent company owns more than half of voting
rights without control.
No above matters.
V. The change in the scope of the consolidation
No change in the scope of the consolidation this year.
VI.The limited capability of the subsidiaries to transfer capital to the parent
company
The situation above does not exist.
VII. The operating activities of the consolidated subsidiaries for special purposes
entities
No consolidated subsidiaries for special purpose entities.
VIII.The situation which the special purpose entities are not consolidated
No above situation.
VI.Notes to the consolidated financial statements
As below, The “beginning balance” means 31 December 2007, “Ending balance” means 31 December
2008, “This period” means from 1 January 2008 to 31 December 2008. The following amount is
expressed in RMB unless otherwise stated.24
I. Cash at bank and on hand
Ending balance Beginning balance
Item Original
amount
Exchang
e rate RMB amount Original
amount
Exchange
rate RMB amount
Cash
RMB 20,031.44 1.0000 20,031.44 23,946.00 1.0000 23,946.00
Subtotal 20,031.44 23,946.00
Cash at
bank
RMB 1,033,339,855.7
7 1.0000 1,033,339,855.77 1,914,759,983.21 1.0000 1,914,759,983.21
USD 11,291.45 6.8346 77,172.54 80,084.22 7.3046 584,983.20
EUR 13,250.17 9.6590 127,983.39 70,561.66 10.6669 752,674.17
HK 16,262.33 0.8819 14,341.75 473,029.18 0.9364 442,944.52
Subtotal 1,033,559,353.45 1,916,540,585.10
Other
monetary
funds
RMB 1,187,256,610.6
2 1.0000 1,187,256,610.62 326,302,353.87 1.0000 326,302,353.87
Subtotal 1,187,256,610.62 326,302,353.87
Total 2,220,835,995.51 2,242,866,884.97
The details of other monetary funds are as follows:
Item Ending balance Beginning balance
Fixed deposit 818,152,630.71 224,507,120.85
credit letter deposit 815,770.17
Bank acceptance bill deposit 369,103,979.91 100,979,462.85
Total 1,187,256,610.62 326,302,353.87
Up to the balance sheet date, there is no bank deposit freeze, pledged deposit, oversea deposits or
deposits under the potential risk of uncollectibility.
II.Notes receivable
Item Ending balance Beginning balance
Bank acceptance bill 849,900,747.04 834,324,393.98
Total 849,900,747.04 834,324,393.98
1. No pledged acceptance bill at the year end.
2. The amount of notes receivable which have been discounted but not yet matured is RMB 547,662,086.50. The
maturity period is from one to six months.25
3. No notes receivable has been transferred into accounts receivable due to the endorsement dispute.
4. The amount of notes receivable which have endorsed over but not yet matured is RMB 590,522,989.79. The
maturity period is from one to six months.
5. On 31 December 2008, within the aforesaid balance, there is no amount due from the shareholders who
holds
5% or more the voting shares of the Company.
6. There is no notes receivable from related parties at the end of the year.
III.Accounts receivable
1. Structure of accounts receivable
(1).Accounts receivable presented by aging
Ending balance Beginning balance
Item
Amount Percentage
(%)
Bad
debt
ratio
Provision for
bad debt Amount Percentage
(%)
Bad
debt
ratio
(%)
Provision for
bad debt
Within
1 year 366,401,519.00 42.79 651,245,195.32 56.40
1-2 year 126,302,174.48 14.75 5.00 6,315,108.72 116,254,627.79 10.07 5.00 5,812,731.40
2-3 year 26,146,009.20 3.05 20.00 5,229,201.85 69,554,813.51 6.02 20.00 13,910,962.70
Over 3
years 337,365,961.50 39.41 100.00 337,365,961.50 317,609,505.20 27.51 100.00 317,609,505.20
Total 856,215,664.18 100.00 348,910,272.07 1,154,664,141.82 100.00 337,333,199.30
(2).Accounts receivable presented by the level of materiality
Ending balance
Item
Amount Percentage
(%)
Bad debt
ratio
Provision for
bad debt
1.individually significant and make provision
individually
2.individually significant and make provision
individually
3.other items with similar credit risk characteristics
judged by aging 856,215,664.18 100.00 40.75 348,910,272.07
including: Individually significant 266,474,413.39 31.12 5.52 14,714,238.02
Individually insignificant 589,741,250.79 68.88 56.67 334,196,034.05
including：Group of insignificant items with similar
credit risk characteristic that has significant risk 322,711,873.07 37.69 100.00 322,711,873.07
Total 856,215,664.18 100.00 348,910,272.07
Continued…26
Beginning balance
Item
Amount Percentage
(%)
Bad
debt
ratio
Provision for bad
debt
1.individually significant and make provision
individually
2.individually significant and make provision
individually
3.other items with similar credit risk
characteristics judged by aging 1,154,664,141.82 100.00 29.21 337,333,199.30
including: Individually significant 571,689,210.66 49.51 1.92 10,993,106.42
Individually insignificant 582,974,931.16 50.49 55.98 326,340,092.88
including：Group of insignificant items with
similar credit risk characteristic that has
significant risk
293,124,817.77 25.39 99.29 291,044,718.86
Total 1,154,664,141.82 100.00 337,333,199.30
2. The change of provision for bad debt is as follow:
Item Beginning Decrease
balance Increase Reversal Write-off Ending balance
2007 305,844,554.45 31,488,644.85 337,333,199.30
2008 337,333,199.30 11,577,072.77 348,910,272.07
3. No accounts receivable has been written off this year.
4. Within the aforesaid balance, there is no amount due from the shareholders that hold 5% or more of the
company’s voting shares
5. The accounts receivable of related parties is disclosed in Notes VIII.II.4
6. The top five debtors at the year end:
Ranking
Relationship with
company
Amount owed Aging
Percentage of total
accounts receivable
No.1 Client 24,842,849.86 1－2years 2.90%
No.2 Client 17,255,614.26 1－2years 2.02%
No.3 Client 14,961,654.90 Within 1 year 1.75%
No.4 Client 12,573,989.52 Over 3 years 1.47%
No.5 Client 11,836,309.06 1-2 years 1.38%
7. The amount of accounts receivable at the year end has decreased by RMB 298,448,477.64 compared
with the beginning balance of the year. The decrease rate is 25.85% and is mainly caused by the
Company’s efforts to get the money back.
IV.Prepayments
1. Aging Analysis of the Company’s prepayments is as follows:
Aging Ending balance Beginning balance27
Amount Percentage
(%) Amount Percentage
(%)
Within 1 year 1,535,402,152.40 97.66 3,370,355,474.23 98.00
1-2years 36,739,144.54 2.34 68,927,233.30 2.00
2-3years
Over 3years
Total 1,572,141,296.94 100.00 3,439,282,707.53 100.00
2. Top five companies of prepayments:
Ending balance Beginning balance
Name
Amount Percentage
(%) Amount Percentage
(%)
No.1 204,349,306.87 13.00% 294,702,474.11 8.57%
No.2 177,999,816.37 11.32% 128,835,548.36 3.75%
No.3 159,840,701.17 10.17% 100,109,631.22 2.91%
No.4 105,122,903.98 6.69% 102,528,645.12 2.98%
No.5 100,406,764.50 6.39% 37,000,000.00 1.08%
3. On 31 December 2008, within the aforesaid balance, there is no amount due from the shareholders
that hold 5% or more of the Company’s voting shares
4. As to the ending balance of prepayments with regard to related parties, please refer to the Notes VIII
(2) 4.
5. The balance of prepayments has reduced by RMB 1,867,141,410.59 at the year end compared with
the beginning balance. The decrease rate is 54.29% and is mainly caused by settlement of prepayments
related to the raw materials, spare parts and construction projects.
V. Other receivables
1. The structure of other receivable
(1) Other receivables presented by aging
Ending balance Beginning balance
Item
Amount
Percent
age
(%)
Bad
debt
ratio
Provision for
bad debt Amount
Percent
age
(%)
Bad
debt
ratio
Provision for
bad debt
Within
1year 69,960,551.83 43.53 59,697,680.24 38.33
1-2years 4,842,728.73 3.01 5.00 242,136.44 32,072,253.37 20.59 5.00 1,603,612.67
2-3years 43,553,749.60 27.10 20.00 8,710,749.91 23,809,671.29 15.29 20.00 4,761,934.25
Above
3years 42,363,250.41 26.36 95.89 40,623,250.41 40,173,615.63 25.79 95.68 38,433,615.63
Total 160,720,280.57 100.00 49,576,136.76 155,753,220.53 100.00 44,799,162.55
(2) Other receivables presented by significance28
Ending balance
Item
Amount Percentage
(%)
Bad
debt
ratio
Provision for
bad debt
1.individually significant and make provision
individually
2.individually significant and make provision
individually 1,740,000.00 1.08
3.other items with similar credit risk characteristics
judged by aging 158,980,280.57 98.92 31.18 49,576,136.76
including: Individually significant 5,000,000.00 3.11
Individually insignificant 153,980,280.57 95.81 32.20 49,576,136.76
including：Group of insignificant items with similar
credit risk characteristic that has significant risk 40,576,422.96 25.25 100.00 40,576,422.96
Total 160,720,280.57 100.00 49,576,136.76
Continued…
Beginning balance
Item
Amount Percentage
(%)
Bad debt
ratio
Provision for
bad debt
1.individually significant and make provision
individually
2.individually significant and make provision
individually 1,740,000.00 1.12
3.other items with similar credit risk
characteristics judged by aging 154,013,220.53 98.88 29.09 44,799,162.55
including: Individually significant 40,695,171.57 26.13 8.87 3,610,314.64
Individually insignificant 113,318,048.96 72.75 36.35 41,188,847.91
including ： Group of insignificant items with
similar credit risk characteristic that has
significant risk
36,647,337.52 23.53 95.25 34,907,337.52
Total 155,753,220.53 100.00 44,799,162.55
2. The change of provision for bad debt is as follows:
Decrease in this year
Item Beginning balance Accrued in this
year Reversal Write-off
Ending balance
2007 39,788,674.33 5,079,952.41 69,464.19 44,799,162.55
2008 44,799,162.55 4,776,974.21 49,576,136.76
3. Up to 31 December 2008, other receivables which are individually significant and with individual
bad debt provision totaled RMB 1,740,000.00, which is deposit of Japanese loan. According to the
nature of the funds, we do not make any provision for it.
4. No write-off of other receivables this year.
5. On 31 December 2008, within the aforesaid balance, there is no amount due from the shareholders29
who holds 5% or more the voting shares of the Company.
6. As to the balance of other receivables of related parties, please refer to the Notes VIII.II.4
7. Top five debtors at the year end.
Ranking
Relationship
with the
company
Nature/Content Amount owed Aging Proportion
No.1 Subsidiary Investment 5,000,000.00 Within
1year 3.11%
No.2 Client Goods 4,341,257.18 over 3years 2.70%
No.3 Client Goods 3,824,589.76 2-3years 2.38%
No.4 Client Goods 3,780,999.56 2-3years 2.35%
No.5 Client Goods 3,405,987.87 2-3years 2.12%
8. The Ending balance of other receivable has increased by RMB 193,502,363.26 compared with the
beginning balance. The increase rate is 124.24% and is mainly caused by increase of maintenance fee.
VI.Inventories and Impairment
Ending balance Beginning balance
Item
Amount Impairment Amount Impairment
Raw material 6,277,155,574.02 345,919,253.96 3,024,838,808.45 18,468,775.47
Semi-finished Products 617,854,304.29 123,153,835.91 437,842,827.13 40,991,924.62
Commodity Stock 1,666,065,796.62 232,259,143.03 1,276,245,357.41 74,422,793.24
Total 8,561,075,674.93 701,332,232.90 4,738,926,992.99 133,883,493.33
1. There are no inventories used as mortgage and guarantee at the end of the year.
2. Impairment of Inventory
Item Beginning Decrease
balance
Increase
Reversal Write-off
Ending balance
Raw material 18,468,775.47 327,450,478.49 345,919,253.96
Semi-finished
Products 40,991,924.62 82,161,911.29 123,153,835.91
Commodity
Stock 74,422,793.24 157,836,349.79 232,259,143.03
Total 133,883,493.33 567,448,739.57 701,332,232.9030
3. The amount of inventory has increased by RMB 3,822,148,681.94 at the year-end compared with the
beginning balance. The increase rate is 80.65% and is mainly caused by increase of raw materials and
commodity stock.
VII.Other current assets
The ending balance of other current assets is RMB 191,775,764.22, which is the prepayment of
enterprise income tax.
VIII.Fixed Assets and accumulated depreciation
1. Original value
Item Beginning balance Increase in this
period
Decrease in this
period Ending balance
Buildings 5,247,986,821.77
1,685,629,946.76
46,259,355.87
6,887,357,412.66
Machinery 19,131,472,332.77
2,746,901,977.27
71,913,842.54
21,806,460,467.50
Transportation equipment 583,550,143.43
82,611,328.68
4,151,382.00
662,010,090.11
Total 24,963,009,297.97 4,515,143,252.71 122,324,580.41 29,355,827,970.27
Including: fixed asset transferred from construction in progress totaled RMB4, 385,339,748.12.
2. Accumulated depreciation
Item Beginning balance Increase Accrued Decrease Ending balance
Buildings 1,191,092,082.34 369,514,483.07 27,564,159.50 1,533,042,405.91
Machinery 9,743,433,288.18 2,569,988,975.95 70,798,276.01 12,242,623,988.12
Transportation
equipment 319,642,448.90 76,066,873.08 3,874,726.05 391,834,595.93
Total 11,254,167,819.42 3,015,570,332.10 102,237,161.56 14,167,500,989.96
3. Impairment
Item Beginning
balance Increase Decrease Ending balance Reason
Buildings 29,136,311.38 29,136,311.38 Ready for disposal
Machinery 45,159,927.51 45,159,927.51 Ready for disposal
Total 74,296,238.89 74,296,238.89
4. Carrying value of Fixed Assets
Item Beginning balance Increase Decrease Ending balance
Buildings 4,056,894,739.43 1,286,979,152.31 18,695,196.37 5,325,178,695.37
Machinery 9,388,039,044.59 131,753,073.81 1,115,566.53 9,518,676,551.87
Transportation
equipment 263,907,694.53 6,544,455.60 276,655.95 270,175,494.18
Total 13,708,841,478.55 1,425,276,681.72 20,087,418.85 15,114,030,741.42
5. The book value and accumulated depreciation of Fixed Assets without property rights certificates is31
RMB 2,083,316,216.53 and RMB 273,080,438.27 respectively and the property rights certificates is
still in process.
6. No fixed assets are under the condition of Guarantee or mortgage.
IX.Construction in progress
Ending balance Beginning balance
Item
Amount Impairment Carried amount Amount Impairment Carried amount
Converter
4#5#6# 359,761,566.92 359,761,566.92 413,465,568.47 413,465,568.47
1# blast furnace
reconstruction 285,439,847.72 285,439,847.72 923,159,490.47 923,159,490.47
Super thin cool
rolling plate
reformation
805,181,136.46 805,181,136.46
Material factory
reforming 560,886,192.35 560,886,192.35 324,729,600.09 324,729,600.09
3# furnace 61,652,069.39 61,652,069.39
Follow up
reforming 197,490,906.43 197,490,906.43
IT project of the
Company 98,352,813.39 98,352,813.39 49,896,450.59 49,896,450.59
Steel forging
moving project 22,267,776.36 22,267,776.36
Moving and
reforming of
coking
furnace(8#and9#)
106,048,378.39 106,048,378.39 141,487,962.00 141,487,962.00
Xing’an cargo
yard 39,498,027.68 39,498,027.68
Energy saving
and
environmental
protection
reconstruction of
the converter
system
65,239,550.37 65,239,550.37 22,407,455.75 22,407,455.75
Plate-billet
continuous
casting machine
reformation
1,272,048,916.36 1,272,048,916.36 129,143,704.24 129,143,704.24
Improving of hot
rolling 1700 line 100,969,893.25 100,969,893.25
Dust removing
and southern
station
67,489,170.26 67,489,170.26 26,033,785.64 26,033,785.64
Ma’erlin pellet 315,717,467.24 315,717,467.24 23,967,164.23 23,967,164.23
Energy saving
reconstruction of
special steel
factory
105,876,251.63 105,876,251.63 10,693,862.25 10,693,862.25
Upgrading of
continuous
casting
62,803,330.54 62,803,330.54 38,016,895.46 38,016,895.46
Environmental
reengineering
and Manufacture
Tech. Project
37,048,283.40 37,048,283.40 11,817,566.59 11,817,566.5932
Improving of
special steel
800/650
88,389,064.61 88,389,064.61
Packaging of
transportation
line
107,781,374.12 107,781,374.12
stainless steel
cool rolling 84,974,807.31 84,974,807.31
Coking furnace
reconstruction
Taizi river
transformer
substation 66KV
line
38,868,693.00 38,868,693.00
4#RH 110,452,466.67 110,452,466.67
Coking Plant
Desulphurization
Project
Scrap steel plant
phase II
Reforming
19,534,335.98 19,534,335.98
60000 cubic
meter oxygen
generator
37,676,900.73 37,676,900.73
Other small
projects 47,147,168.59 47,147,168.59 53,012,308.18 53,012,308.18
Total 3,871,536,579.58 3,871,536,579.58 3,394,891,623.53 3,394,891,623.53
1. The change of CIP
Decrease
Project Budget Beginning
Balance Increase
Transfer to FA Other
decrease
Converter4#&5#&6# 1,500,000,000.00 413,465,568.47 89,416,150.20 143,120,151.75
1#blast furnace
reconstruction 2,179,050,000.00 923,159,490.47 889,597,691.19 1,527,317,333.94
Super thin cool rolling
plate reformation 1,126,190,000.00 805,181,136.46 165,180,660.30 970,361,796.76
Material factory
reforming 703,120,000.00 324,729,600.09 239,606,592.26 3,450,000.00
3# furnace
120,600,000.00 61,652,069.39 54,964,600.84 116,616,670.23
Following up
reforming 210,930,000.00 197,490,906.43 -1,338,513.81 196,152,392.62
IT project of the
Company 185,000,000.00 49,896,450.59 48,456,362.80 0.00
Steel forging moving
project 24,000,000.00 22,267,776.36 0.00 22,267,776.36
Moving and
reforming of coking
furnace(8#and9#) 1,335,410,000.00 141,487,962.00 733,906,887.95 769,346,471.56
Xing’an cargo yard
41,770,000.00 39,498,027.68 257,284.14 39,755,311.82
Energy saving and
environmental
protection
reconstruction of the
converter system 780,000,000.00 22,407,455.75 42,832,094.62 0.00
Plate-billet continuous 1,552,150,000.00 129,143,704.24 1,142,905,212.12 0.0033
casting machine
reformation
Improving of hot
rolling 1700 line 188,800,000.00 100,969,893.25 83,344,260.53 184,314,153.78
Dust removing and
southern station 75,560,000.00 26,033,785.64 46,105,533.98 4,650,149.36
Ma’erlin pellet
429,370,000.00 23,967,164.23 291,750,303.01 0.00
Energy saving
reconstruction of
special steel factory 174,500,000.00 10,693,862.25 95,182,389.38 0.00
Upgrading of
continuous casting 110,260,000.00 38,016,895.46 24,786,435.08 0.00
Environmental
reengineering and
Manufacture Tech.
Project 400,000,000.00 11,817,566.59 198,834,798.28 173,604,081.47
Improving of special
steel 800/650 138,090,000.00 0.00 88,389,064.61 0.00
Packaging of
transportation line 125,290,000.00 0.00 107,781,374.12 0.00
stainless steel cool
rolling 1,707,950,000.00 0.00 84,974,807.31 0.00
Coking furnace
reconstruction 78,610,000.00 0.00 69,166,008.98 69,166,008.98
Taizi river
transformer substation
66KV line 120,000,000.00 0.00 38,868,693.00 0.00
4#RH
119,280,000.00 0.00 110,452,466.67 0.00
Coking Plant
Desulphurization
Project 72,880,000.00 0.00 71,434,374.51 71,434,374.51
Scrap steel plant
phase II Reforming 100,000,000.00 0.00 19,534,335.98 0.00
60000 cubic meter
oxygen generator 693,240,000.00 0.00 37,676,900.73 0.00
Other small projects
53,012,308.18 87,917,935.39 93,783,074.98
TOTAL 3,394,891,623.53 4,861,984,704.17 4,385,339,748.12
PROJECT ENDING
BALANCE PROGESS Source
of funds Percentage.
Converter4#&5#&6# 359,761,566.92 90% Self
funded 96%
1# blast furnace reconstruction 285,439,847.72 90% Self
funded 83%
Super thin cool rolling plate reformation 100% Self
funded 86%
Material factory reforming 560,886,192.35 90% Self
funded 80%
3#furnace 100% Self
funded 97%
Following up reforming 100% Self
funded 93%
IT project of the Company 98,352,813.39 70% Self
funded 53%
Steel forging moving project 100% Self
funded 93%
Moving and reforming of coking
furnace(8#and9#) 106,048,378.39 90% Self
funded 66%34
Xing’an cargo yard 100% Self
funded 95%
Energy saving and environmental protection
reconstruction of the converter system 65,239,550.37 20% Self
funded 8%
Plate-billet continuous casting machine
reformation 1,272,048,916.36 95% Self
funded 82%
Improving of hot rolling 1700 line 100% Self
funded 98%
Dust removing and southern station 67,489,170.26 95% Self
funded 95%
Ma’erlin pellet 315,717,467.24 80% Self
funded 74%
Energy saving reconstruction of special steel
factory 105,876,251.63 95% Self
funded 61%
Upgrading of continuous casting 62,803,330.54 90% Self
funded 57%
Environmental reengineering and
Manufacture Tech. Project 37,048,283.40 65% Self
funded 53%
Improving of special steel 800/650 88,389,064.61 60% Self
funded 64%
Packaging of transportation line 107,781,374.12 50% Self
funded 86%
stainless steel cool rolling 84,974,807.31 10% Self
funded 5%
Coking furnace reconstruction 100% Self
funded 88%
Taizi river transformer substation 66KV line 38,868,693.00 90% Self
funded 32%
4#RH 110,452,466.67 90% Self
funded 93%
Coking Plant Desulphurization Project 100% Self
funded 98%
Scrap steel plant phase II Reforming 19,534,335.98 20% Self
funded 20%
60000 cubic meter oxygen generator 37,676,900.73 20% Self
funded 5%
Other small projects 47,147,168.59 90% Self
funded
Total 3,871,536,579.58
2. Capitalized interest expense
Project Beginning
balance Increase Transfer to
Fixed assets
Other
decrease
Ending
balance
Capitalized
rate
Converter4#&5#&6# 9,077,100.00 15,114,200.00 24,191,300.00 100%
Outdated coking
furnace
reconstruction
1,346,000.00 43,480,500.00 44,826,500.00 100%
Plate-billet
continuous casting 16,081,000.00 69,001,991.59 85,082,991.59 100%35
machine reformation
Total 26,504,100.00 127,596,691.59 44,826,500.00 109,274,291.59
3. No impairment of CIP this year.
4. The ending balance of CIP has increased by RMB 476,644,956.05 compared with the beginning
balance with the increase rate 14.04 %, which is mainly caused by increase of reconstruction projects.
X. Project material
Beginning balance Increase Decrease Ending balance
Items
Amount
Impair
ment
Amount
Impairm
ent
Amount
Impairm
ent
Amount
Impair
ment
Special
equipment
4,825,480.3
5 812,553,079.89 806,476,165.4
3
10,902,394.
81
Total
4,825,480.3
5 812,553,079.89 806,476,165.4
3
10,902,394.
81
The ending balance of project material has increased by RMB 6,076,914.46 compared with the
beginning balance with the increase rate125.93%. The reason for the increase is that the equipments
purchased for the projects have not been installed yet.
XI.Deferred tax asset and deferred tax liability
1. Recognized deferred tax asset
Item Ending balance Beginning balance
Impairment 293,528,720.16 129,003,963.80
Welfare for retired employee 58,129,713.14 59,980,236.12
Unrealized profit in inter-company sales 725,131.57 8,953,760.55
Employee benefits payable 10,801,040.63
Accrued expense 42,576,426.60
Total 405,761,032.10 197,937,960.47
The breakdown of temporary difference:
Item Ending balance Beginning balance
Impairment 1,174,114,880.62 516,015,855.1836
Welfare for retired employee 232,518,852.56 239,920,944.46
Unrealized profit in inter-company sales 2,900,526.26 35,815,042.19
Employee benefits payable 43,204,162.52
Accrued expense 170,305,706.41
Total 1,623,044,128.37 791,751,841.83
XII.Impairment of assets
Decrease
Item Beginning
balance Accrued amount
Reverse Offsetting
Ending balance
1. allowance for bad
debt 382,132,361.85 16,354,046.98 398,484,408.83
2.mpairment for
inventories 133,883,493.33 567,448,739.57 701,332,232.90
3. impairment for
fixed asset 74,296,238.89 74,296,238.89
4. impairment for CIP
Total 516,013,855.18 658,099,025.44 1,174,112,880.62
XIII.Short-term loan
1. Short-term loan
Item Ending balance Beginning balance
Credit loan 1,759,842,200.00 1,931,175,960.00
Guaranteed loan 1,127,510,000.00 707,510,000.00
Total 2,887,352,200.00 2,638,685,960.00
In which the details of foreign currency loan is as follows:
Item Original currency Original amount Ex. rate RMB
Credit loan USD 7,000,000.00 6.8346 47,842,200.00
TOTAL 47,842,200.00
2. There is no overdue short-term loan which has not been paid back at the year end.
XIV.Notes payable
Item Ending balance Beginning balance
Bank acceptance bill 1,844,612,512.13 352,200,000.00
Commercial acceptance bill37
Total 1,844,612,512.13 352,200,000.00
1. There is no notes payable owed to shareholders who hold 5% or above voting shares at the end of
this year.
2. As to the ending balance of notes payable with regard to related parties, please See details in Notes
VIII.II.4
3. The ending balance of notes payable increased 1,492,412,512.13 compared with the beginning
balance with the increase rate of 423.74%, which is mainly caused by increase of bank acceptance bill
settlement.
XV.Accounts payable
Item Ending balance Beginning balance
Within 1year 6,598,605,920.00 3,246,102,725.43
1-2years 226,481,745.81 173,135,726.96
2-3years 27,661,224.84 45,561,573.26
Over 3years 42,048,537.65 58,527,821.87
Total 6,894,797,428.30 3,523,327,847.52
1. There is no accounts payable owed to shareholders who hold 5% or above voting shares at the end of
this year.
2. As to the ending balance of accounts payable with regard to related parties, please refer to the details
in Notes VIII.II.4
3. The amount of notes payable whose aging exceeds 1 year totaled RMB 704, 544,057.82, which is
mainly the final contract amount.
4. The ending balance of notes payable has increased by RMB 3,371,469,580.78 compared with the
beginning balance with the increase rate of 95.69%. The increase of raw materials accounts for the
increase of accounts payable.
XVI.Advance from customers
Item Ending balance Beginning balance
Within 1year 1,956,527,067.01 2,511,361,438.78
1-2 years 46,639,486.69 4,079,579.55
2-3 years 6,728,213.77 9,778,729.30
Over 3 years 8,510,822.08 2,291,466.80
Total 2,018,405,589.55 2,527,511,214.4338
1. Within the above balance, the amount of RMB 77,535,777.43 owed to Benxi Steel & Iron (Group) Co., Ltd.
who
holds 5% or above voting shares at the end of this year.
2. As to the ending balance of Advance from customers with regard to related parties, please refer to
the details in Notes VIII.II.4
3. There is no significant advance from customers with aging above one year and those above one year
are mainly deposits of the clients.
XVII.Employee compensation payable
1. Employee compensation payable
Item Beginning
balance Increase Decrease Ending
balance
(1)Salary, bonus, allowance and
subsidy 54,347,901.76 1,100,541,538.34 1,111,685,277.58 43,204,162.52
(2)Employee welfare 35,988,445.04 35,988,445.04
(3)Social Insurance 635,423.26 430,436,601.15 430,172,195.81 899,828.60
Including:：A. Pension fund -47,609.31 281,947,805.48 281,900,196.17
B. Annual fee 7,541.60 7,541.60
C. Medical insurance 33,389.17 92,448,870.73 92,481,229.90 1,030.00
D. Medical insurance premiums 2,564,264.04 2,564,264.04
E. Unemployment insurance
expense 36,393.70 28,241,866.61 28,278,157.41 102.90
F. Compensation of employee 613,249.70 25,226,252.69 24,940,806.69 898,695.70
G. Maternity insurance
(4) Housing accumulation funds -23,699.00 144,575,680.00 135,700,228.00 8,851,753.00
(5)Labor union fee and training for
employee fee 33,377,829.47 52,942,124.30 50,434,177.27 35,885,776.50
(6)Non-monetary welfare
(7)Compensation of relieving the
work relations 239,920,944.46 93,558,108.55 100,960,200.45 232,518,852.56
(8)employee allowance funds
(9)others 103,820,688.63 103,820,688.63
There into ： shares account by
monetary
Total 328,258,399.95 1,961,863,186.01 1,968,761,212.78 321,360,373.18
2. The scope of the termination benefit is the early retired employees who have signed the agreement of
retirement with the company and no longer bring economic benefits into the company but have not yet
terminate the working relationship with company. To confirm the termination benefit, the company
refers to the recent interest rate of bank loan to recognize the discount rate which is 5.94%. Up to 31
December 2008, the unrealized financing expense balance is 28,395,380.24 due to recognizing
termination benefits.
3. Other items include heating subsidy, transportation subsidy, aging salary of retired employee,
housing subsidy and subsidy of harmful influence to bodies because of bad working environment.39
XVIII.Tax payable
Item Ending balance Beginning balance Tax rate
Value added tax 68,157,773.55 106,444,784.53 17%、13%
Deductible fixed assets
VAT -329,469,485.93 -143,125,270.46
Business tax 38,324.40 33,310.54 5%
City construction tax 5,920,742.67 10,661,982.74 7%
Enterprise income tax 148,804.77 1,907,233.65
House Property tax 1,117,752.43 846,954.33 25%
Educational surcharges 1,180,629.16 4,728,172.06 3%
Local educational
surcharges 1,209,633.48 1,550,835.97 1%
Others 99,697.76 819,398.37
Total -251,596,127.71 -16,132,598.27
The ending balance of tax payable has decreased by RMB 235,463,529.44 compared with the
beginning balance, which is mainly caused by increase of deductible input tax of Fixed Asset and
prepayment of income tax.
XIX.Other payable
Item Ending balance Beginning balance
Within 1 year 594,808,276.33 245,862,044.17
1-2years 65,952,416.92 27,872,460.78
2-3years 21,716,518.16 7,326,903.00
Above 3years 15,732,980.26 20,460,912.16
Total 698,210,191.67 301,522,320.11
There into: accrued expense 170,305,706.41
1. No other accounts payable owed to shareholders who held 5% or above voting shares at the end
of year.
2. Please refer to the Notes VIII.II.4 for details of other payable about related parties
3. No other payable exceeds the aging of 1year.
4. The main content of accrued expense at the end of the year: unpaid refund profit in 2008.
XX.Non-current liabilities due within one year
Item Ending balance Beginning balance40
Long-term loan 448,753,264.40 875,659,146.98
Total 448,753,264.40 875,659,146.98
1. Long-term loans due in one year
Categories Ending balance Beginning balance
Credit loan 447,000,000.00 672,476,231.72
Guaranteed loan 1,753,264.40 203,182,915.26
Total 448,753,264.40 875,659,146.98
Ending balance
Bank Start date End date
Interest Rate Currency Foreign
currency RMB
Ben steel Benxi
branch of bank of
china
2004-05-20 2009-12-20 6.39% RMB 50,000,000.00
Ben steel Benxi
branch of bank of
china
2005-03-25 2009-09-25 5.58% RMB 50,000,000.00
Ben steel Benxi
branch of china
construction bank
2006-12-07 2009-11-06 7.56% RMB 170,000,000.00
Ben steel Benxi
branch of ICBC 2006-12-13 2009-10-12 7.56% RMB 177,000,000.00
Ben steel Benxi
branch of bank of
china
1997-09-10 2027-09-10 2.10% JPY 23,176,000.00 1,753,264.40
TOTAL 448,753,264.40
Beginning balance
Bank Start date End date Interest
rate currency Foreign
currency RMB
Ben steel Benxi branch of
bank of china 1997-09-10 2027-09-10 2.10% JPY 23,176,000.00 1,484,747.26
Ben steel Benxi branch of
bank of china 2003-01-28 2008-01-27 5.85% RMB 82,200,000.00
Ben steel Benxi branch of
bank of china 2003-01-28 2008-01-27 5.85% RMB 60,000,000.00
Ben steel Benxi branch of
bank of china 2004-05-20 2008-12-20 6.12% RMB 50,000,000.00
Ben steel Benxi branch of
bank of china 2005-03-25 2008-09-25 5.85% RMB 50,000,000.00
Benxi branch of ICBC 1994-06-01 2008-09-01 7.92% EUR 982,125.24 10,476,231.72
Benxi branch of ICBC 2006-11-14 2008-11-12 6.30% RMB 50,000,000.00
Benxi branch of ICBC 2006-11-15 2008-11-13 6.30% RMB 50,000,000.00
Benxi branch of ICBC 2006-11-16 2008-11-14 6.30% RMB 50,000,000.00
Benxi branch of ICBC 2006-11-17 2008-11-15 6.30% RMB 50,000,000.00
Benxi branch of ICBC 2006-11-21 2008-11-20 6.30% RMB 50,000,000.0041
Benxi branch of ICBC 2006-10-13 2008-10-10 6.30% RMB 30,000,000.00
Benxi branch of ICBC 2006-10-19 2008-10-17 6.30% RMB 50,000,000.00
Benxi branch of ICBC 2006-10-20 2008-10-17 6.30% RMB 50,000,000.00
Benxi branch of ICBC 2006-07-26 2008-07-24 6.03% RMB 30,000,000.00
Benxi branch of ICBC 2006-07-27 2008-07-25 6.03% RMB 50,000,000.00
Benxi branch of ICBC 2006-07-25 2008-07-23 6.03% RMB 50,000,000.00
Benxi branch of ICBC 2006-12-08 2008-12-05 6.30% RMB 42,000,000.00
Benxi branch of ICBC 2006-08-18 2008-08-14 5.76% RMB 10,000,000.00
Ben steel Benxi branch of
china construction bank 2005-11-14 2008-11-13 6.30% RMB 37,000,000.00
Ben steel Benxi branch of
ICBC 2002-12-30 2008-12-30 2.94% USD 3,080,000.00 22,498,168.00
TOTAL 875,659,146.98
XXI.Long-term loans
Categories Ending balance Beginning balance
Credit loan 1,087,000,000.00 1,407,000,000.00
Guarantee loan 931,558,759.20 528,210,198.02
Total 2,018,558,759.20 1,935,210,198.02
1. The breakdown of Credit loans is as follows:
Ending balance
Bank Start date End date
Interest rate currency Foreign currency RMB
Bank of china 2004-05-20 2010-12-20
6.39% RMB 63,500,000.00
Bank of china 2005-03-25 2010-03-24 5.85% RMB 36,500,000.00
China construction
bank
2007-11-23 2010-11-22 Floating rate RMB 100,000,000.00
China construction
bank
2007-12-03 2012-07-25 Floating rate RMB 200,000,000.00
China construction
bank
2007-04-30 2014-04-29 7.11% RMB 200,000,000.00
China construction
bank 2008-04-29 2013-04-15 7.74% RMB 400,000,000.00
China construction
bank 2008-11-18 2011-11-17 6.75% RMB 37,000,000.00
China construction
bank 1997-09-10 2027-09-10 2.10% JPY 417,168,000.00 31,558,759.20
ICBC 2007-09-14 2010-09-09 7.20% RMB 520,000,000.00
ICBC 2007-07-23 2010-07-22 7.20% RMB 200,000,000.0042
ICBC 2008-01-23 2015-01-20 7.83% RMB 230,000,000.00
TOTAL 2,018,558,759.20
2. The breakdown of Guarantee loans is as follows:
Beginning balance
Bank Start date End date Interest
rate currency Foreign
currency RMB
Bank of china 2004-05-20 2009-12-20 6.39% RMB 50,000,000.00
Bank of china 2004-05-20 2010-12-20 6.39% RMB 63,500,000.00
Bank of china 2005-03-25 2009-09-25 5.85% RMB 50,000,000.00
Bank of china 2005-03-25 2010-03-24 5.85% RMB 36,500,000.00
China construction
bank 2006-12-07 2009-11-06 7.56% RMB 170,000,000.00
China construction
bank 2006-12-13 2009-10-12 7.56% RMB 177,000,000.00
China construction
bank 2007-11-23 2010-11-22 Floating
rate RMB 100,000,000.00
China construction
bank 2007-12-03 2012-07-25 Floating
rate RMB 200,000,000.00
China construction
bank 2007-04-30 2014-04-29 7.11% RMB 200,000,000.00
ICBC 1997-09-10 2027-09-10 2.10% JPY 440,344,000.00 28,210,198.02
ICBC 2007-09-14 2010-09-09 7.20% RMB 520,000,000.00
ICBC 2007-07-23 2010-07-22 7.20% RMB 200,000,000.00
ICBC 2007-01-17 2009-01-14 6.30% RMB 50,000,000.00
ICBC 2007-01-18 2009-01-15 6.30% RMB 50,000,000.00
ICBC 2007-01-16 2009-01-13 6.30% RMB 40,000,000.00
Total 1,935,210,198.02
XXII.Long-term payables
Item Payment period Ending balance Beginning balance
Bengang groups Three years 250,439,319.71
Total 250,439,319.71
Long-term account payable is the amount for the acquisition of main industry assets of Benxi Iron and Steel
Group Company and it is paid evenly in 3 years as agreed.
XXIII.Special accounts payable
Item Beginning balance Increase Decrease Ending balance notes
6#7#coke oven of
dry Quenching
coke
8,500,000.00 8,500,000.00
Total 8,500,000.00 8,500,000.00
Funds for the project of dry extinguishing coke of 6#、7#coke furnace were issued by the Liaoning
province Finance Administration Department “2008 the budget of energy saving project notice”43
XXIV.Other non-current liabilities
Item Ending balance Beginning balance
High grade directionless silicon steel project 700,951.75 700,951.75
Iron Ore Resources Comprehensive Utilization 4,044,527.00 3,102,550.00
Funding of three technology items 2,000,000.00 2,000,000.00
Total 6,745,478.75 5,803,501.75
“Funding of three technology items” was used for “three technologies”, namely, thin slab, continuous
casting and
continuous rolling with a short process according to the notice of Liaoning Province “ The notice for
funding of
three technologies”(Liao cai zhi qi 341 [2006]).
XXV.Share capital
The paid-in share capital of the company is as follows:
Ending balance Beginning balance
Item
shares Amount Shares Amount
Share capital –A shares 2,736,000,000.00 2,736,000,000.00 2,736,000,000.00 2,736,000,000.00
Share capital –B shares 400,000,000.00 400,000,000.00 400,000,000.00 400,000,000.00
The change of share capital is as follows:
Beginning balance Changes ( increase “+”decrease “-” ) Ending balance
Item
Amount
Percent
age
(%)
New
shares
Share
Dividend
Capital
reserves
transfers
Others Subtotal Amount
Percent
age
(%)
1.Shares with
restricted sales
condition
257,522.01 82.12 -5,680.335 251,841.675 80.31
(1) State-owned
shares
(2) Shares held
by State-owned
corporation
257,520.00 82.12 -5,680.00 251,840.00 80.31
(3) Shares held
by other
domestically
invested
Corporation
2.01 -0.335 1.675
There into：
Shares held by
domestic
non-state-owned
Corporation
Shares held by 2.01 -0.335 1.67544
Beginning balance Changes ( increase “+”decrease “-” ) Ending balance
Item
Amount
Percent
age
(%)
New
shares
Share
Dividend
Capital
reserves
transfers
Others Subtotal Amount
Percent
age
(%)
domestic
individuals
(4) Shares held
by foreign
invested
Corporation
There into：
Shares held by
oversea
Corporation
Shares held by
individual
foreigners
Subtotal 257,522.01 82.12 -5,680.335 251,841.675 80.31
2.Shares without
sales restriction 56,077.99 17.88 5,680.335 61,758.33 19.69
(1)RMB
Common stock 16,077.99 5.13 5,680.335 21,758.33 6.93
(2).Foreign
shares listed in
domestic stock
market
40,000.00 12.75 40,000.00 12.76
(3).Foreign
shares listed in
oversea stock
market
(4) others
Subtotal 56,077.99 17.88 5,680.335 61,758.33 19.69
TOTAL 313,600.00 313,600.00
XXVI.Capital reserves
Item Beginning balance Increase decrease Ending balance
Additional paid-in capital 8,706,903,665.94 8,706,903,665.94
Other capital surplus -1,892,531.18 31,250,000.00 29,357,468.82
Total 8,705,011,134.76 31,250,000.00 8,736,261,134.76
Other capital surplus transferred from prior accounting system is from three projects, namely, hot
continuous mill 3# heating furnace, 240ton coke oven of power plant reconstruction and saturated
steam power engine. They were listed in the plan of “Reform of Energy Saving Technology” of
National Development and Reform Commission in 2007 and were awarded special funds in Jan, 2008.
XXVII.Surplus Reserves
Item Beginning balance Increase Decrease Ending balance45
Statutory Reserves 903,594,226.77 17,683,282.45 921,277,509.22
Total 903,594,226.77 17,683,282.45 921,277,509.22
XXVIII.Retained earnings
Item Amount Distribution rate
Retained earnings 3,985,459,510.48
Add: change in accounting policy
Correction of prior period errors -96,251,152.67
Beginning balance 3,889,208,357.81
Add ：retained earnings belongs to parent company 165,089,865.35
Minus ：statutory reserves 17,683,282.45 10.00%
Surplus reserves
Deposit funds
Enterprise expansion funds
Employee allowance funds
Common shares dividend payable 1,003,520,000.00 3.2Yuan/10 shares
Common shares dividend transfer to paid in capital
Add ：others transfer
Add ：loss compensation of surplus reserves
Ending balance 3,033,094,940.71
The details of the prior-period error correction is in Notes III.23
XXIX.Operating income and operating cost
Year of 2008 Year of 2007
Item
Revenue Cost Revenue Cost
Operating revenue from
principal business 33,634,166,944.61 29,543,257,377.50 28,010,165,557.34 23,134,390,283.36
Other operating revenue 5,068,162,132.91 4,848,421,731.90 3,341,430,937.50 3,256,953,800.53
Total 38,702,329,077.52 34,391,679,109.40 31,351,596,494.84 26,391,344,083.89
1. Principal operating revenue classified by business industry:
Year of 2008 Year of 2007
Item Principal
operating revenue
Principal
operating cost
Principal
operating revenue
Principal
operating cost46
Industry 33,634,166,944.61 29,543,257,377.50 28,010,165,557.34 23,134,390,283.36
Total 33,634,166,944.61 29,543,257,377.50 28,010,165,557.34 23,134,390,283.36
2. Principal operating revenue classified by products variety:
2008 2007
Item Principal operating
revenue
Principal operating
cost
Principal operating
revenue
Principal operating
cost
Steel Plates 32,710,823,149.85 28,735,596,800.26 27,451,073,395.75 22,717,765,115.51
Steel Billet 411,984,402.36 360,368,003.89 81,221,731.78 63,209,156.68
Others 511,359,392.40 447,292,573.35 477,870,429.81 353,416,011.17
Total 33,634,166,944.61 29,543,257,377.50 28,010,165,557.34 23,134,390,283.36
3. Principal operating revenue classified by areas:
Year of 2008 Year of 2007
Areas Principal
operating revenue
Principal
operating cost
Principal
operating revenue
Principal
operating cost
Northeast 12,454,172,469.41 10,909,824,044.07 8,779,635,692.50 7,145,237,980.41
North China 5,201,997,092.52 4,612,584,863.23 5,801,154,816.67 5,003,938,286.92
East China 7,832,075,254.91 6,430,790,125.07 8,723,320,764.07 7,158,471,160.72
Northwest 98,880,744.56 86,492,246.64 188,887,141.19 155,859,529.01
South west - 1,850,625.69 1,527,036.97
Middle south 2,705,625,657.03 2,831,361,733.02 402,022,250.61 275,286,671.65
Export 5,341,415,726.18 4,672,204,365.47 4,113,294,266.61 3,394,069,617.68
Total 33,634,166,944.61 29,543,257,377.50 28,010,165,557.34 23,134,390,283.36
4. Top five clients’ principal operating revenue is as follows:
Ranking Principal operating revenue Percentage of total operating revenue
No.1 6,641,123,321.19 19.75%
No.2 5,341,418,146.64 15.88%
No.3 927,279,638.48 2.76%
No.4 640,653,833.86 1.90%
No.5 527,153,312.03 1.57%
5. The amount of operating income has increased by RMB 7,350,732,582.68 in 2008 compared with
balance of last year. The increase rate is 23.45 %, which is mainly caused by the increase of sales
volume of steel plates and steel billets47
XXX.Business tax and Surcharges
Item Tax rate Year of 2008 Year of 2007
Business tax 5% 1,244,375.06 1,315,075.15
City maintenance and
construction surtax 7% 110,953,397.89 135,434,656.06
Educational surcharge 3% 47,269,665.21 58,203,430.34
Local Educational surcharge 1% 15,690,266.49 19,201,119.69
Floodwater prevention fee 453,705.05 408,371.51
Total 175,611,409.70 214,562,652.75
XXXI.Selling expenses
Selling expenses is RMB 738,183,045.50 this year, which comprise distribution expense, customs tariff
and so on. Compared with the last year, it has increased by RMB 182,012,703.87 with increase rate of
32.73%, which is mainly caused by the increase of distribution expense.
XXXII.General and administrative expenses
The G&A expense is RMB 2,168,897,763.93 in the year of 2008. The increase amount is RMB 430,190,195.19 an
increase of 24.74% compared with last year，mainly due to the increase of salaries and maintenance expense
of
fixed assets.
XXXIII.Financial expenses
Item 2008 2007
（1）Net interest expense 340,053,510.62 330,877,224.33
Including：Interest expense 364,672,811.93 352,580,196.32
Interest income -24,619,301.31 -21,702,971.99
（2）Exchange loss -15,544,406.23 -24,036,207.64
（3）Others 3,795,155.02 1,152,813.20
Including：Bank charges 3,795,155.02 1,059,972.44
Total: 328,304,259.41 307,993,829.89
XXXIV.Impairment loss on assets
Item 2008 2007
1. Allowance for accounts receivable 16,354,046.98 36,621,416.1648
2. Impairment of inventories 567,448,739.57 -6,674,266.27
3、Fixed asset impairment losses 74,296,238.89 -17,271,915.19
Total 658,099,025.44 12,675,234.70
The impairment loss on assets has increased compared with last year, which is mainly caused by
devaluation of steel plates and iron ore affected by the international economic crisis.
XXXV.Non-operating revenue
Item 2008 2007
1．Non-current assets disposal income 42,847.86 60,758.84
There into：fixed assets disposal income 42,847.86 60,758.84
intangible assets disposal income
2．Non-monetary assets exchange income
3. Debt restructuring profits 6,680,217.50 49,853,832.64
4. Government grants 1,722,295.00 4,816,987.03
5．Make inventory of earning
6．Denotation income -
7．Genuinely unable to pay the amounts due 30,388,892.80
8．Fine and the default 4,100,000.00
9．Others 7,616,683.70 2,726,098.50
Total 20,162,044.06 87,846,569.81
The amount of non-operating income has decreased by RMB 67,684,525.75 in 2008 compared with the
last year. The rate of decrease is 77.05%, which is caused by recognizing “gain of debt restructuring” in
2007 and “accounts payable shall never be paid”
XXXVI.Non-operating expense
Item 2008 2007
1．Non-current assets disposal loss 19,811,836.12 52,296,386.50
There into：fixed assets disposal loss 19,811,836.12 52,296,386.50
intangible assets disposal loss
2．Non-monetary assets exchange loss
3. Debt restructuring loss
4．Denotation
5．Uncommon loss
6．Fine 600,069.00 403,857.53
7．Compensation 187,735.27
8．Breach of faith 185,146.80
9．Make inventory of loss
10．Others 1,150.00 4,573.3749
Total 20,413,055.12 53,077,699.47
The amount of non-operating expenses has decreased by RMB 32,664,644.35 in 2008 compared with
the last year. The rate of decrease is 61.54 %, which was caused by the disposal of assets in 2007
XXXVII.Income tax expense
Item 2008 2007
Income tax payable for the current year 284,036,659.36 517,875,191.54
Deferred income tax expense (income)of
current year -207,823,071.63 55,035,570.78
Total 76,213,587.73 572,910,762.32
The income tax expense has reduced by RMB 496,697,174.59 with the decrease rate of 86.70%,
mainly caused by the decline of company’s profits and the increase of impairment loss on assets.
XXXVIII.Government grants
Item 2008 2007
1．Government grant relevant to assets
6#、7#coke oven of dry extinguish coke 8,500,000.00
Energy saving technology reformation project 31,250,000.00
2．Government grant relevant to earnings
High grade directionless silicon steel project 700,951.75 700,951.75
Iron ore comprehensive utilization 4,044,527.00 3,102,550.00
Three technology government fund 2,000,000.00 2,000,000.00
Total 46,495,478.75 5,803,501.75
XXXIX.Notes of Cash flow statement
1. Cash received relating to other operating activities
Item 2008
1. Special compensation 40,750,000.00
2. Interest income 16,324,553.57
3. others 17,108,904.71
Total 74,183,458.28
2. Cash paid for other operating activities
Item 2008
1、Trading between companies 28,018,934.88
2、selling expenses 248,048,825.94
3、general administration expenses 665,251,050.5850
4、others 33,986,415.55
Total 975,305,226.95
3. Cash paid related to the other investing activities.
Item 2008
Payment for the acquisition of assets 202,439,319.71
Total 202,439,319.71
4. Cash paid related to the other financing activities.
Item 2008
Deposits for the acceptance bill, Guarantee and Letter of Credit 267,308,746.89
Total 267,308,746.89
5. Supplementary information for Cash Flow Statement
Item 2008 2007
1、A reconciliation of net profit to cash flows from operating activities：
Net profit 165,089,865.35 1,592,000,891.26
Add：Asset impairment losses 658,099,025.44 12,675,234.70
Depreciation and amortization 3,015,570,332.10 3,265,108,081.90
Amortization of intangible assets
Long-term prepayment amortization
Losses proceeds from disposal of PPE、intangible assets and other
long-term assets (Earnings marked“－”） -111,558.25 -60,758.84
Scrapped losses from fixed assets, real estate investment 19,880,546.51 52,296,386.50
Fair value losses（Earnings marked“－”）
Financial expenses（Earnings marked“－”） 365,343,710.65 328,543,988.68
Investment losses（Earnings marked“－”）
Deferred tax assets reduction（Addition marked“－”） -207,823,071.63 55,035,570.78
Deferred tax liabilities increased（Reduce marked“－”）
Reduction of inventory（Addition marked“－”） -3,822,148,681.94 -780,164,144.08
Operating receivable items reduction（Addition marked“－”） 293,481,417.60 -1,451,352,734.60
Operating payable items increase（Minus marked“－”） 3,805,217,492.31 -328,731,755.01
Others
Net cash flow Generated from operating activities 4,292,599,078.14 2,745,350,761.29
2、Payments of investment and fund-raising activities do not involve cash：
Liabilities transferred to capital
Convertible bonds due within one year
Fixed assets financed by leasing
3、The net increase in cash and cash equivalents：
Ending balance of the monetary funds 1,851,732,015.60 2,141,071,651.95
Minus：Opening balance of the monetary funds 2,141,071,651.95 2,118,488,781.8751
Item 2008 2007
Add：Ending balance of cash equivalents
Minus：Opening balance of cash equivalents
The net increase in cash and cash equivalents -289,339,636.35 22,582,870.08
8. The structure of cash and cash equivalents
Item Ending balance Beginning balance
1. Cash 1,851,732,015.60 2,141,071,651.95
including: cash on hand 20,031.44 1,056,034.34
Cash at bank 1,033,559,353.45 1,915,508,496.76
Other monetary funds 818,152,630.71 224,507,120.85
2. Cash equivalents
There into: investment of securities mature within 3 months
3. Ending balance of the monetary funds 1,851,732,015.60 2,141,071,651.95
There into：the restricted cash and cash equivalents of parent
company or subsidiaries
VII、NOTES TO THE FINANCIAL STATEMENTS OF PARENT COMPANY
I. Accounts receivable
(1) The structure of Accounts receivable
1) Listing of accounts receivable according to the aging of accounts receivable:
31 December 2008 31 December 2007
Aging
Amount
Percentage
of total
amount
(%)
Bad debts
provision
Proportion
of
Provision
Amount
Percentage
of total
amount
(%)
Bad debts
provision
Percentage
of
Provision
(%)
Within
1 year 377,559,970.79 43.64 656,598,234.25 56.71
1-2
years 126,302,174.48 14.60 6,315,108.72 5.00 116,145,798.68 10.03 5,807,289.94 5.0052
2-3
years 26,037,180.09 3.01 5,207,436.03 20.00 69,554,813.51 6.01 13,910,962.70 20.00
Over
3
years
335,285,862.59 38.75 335,285,862.59 100.00 315,529,406.29 27.25 315,529,406.29 100.00
Total 865,185,187.95 100.00 346,808,407.34 1,157,828,252.73 335,247,658.93
2) Listing of accounts receivable according to the level of materiality:
On December 31, 2008, the accounts receivable are listed as follows according to level of materiality:
Item Amount % of total balance bad debts
Percentage of
bad debts
(%)
1.Individually significant with individual bad
debt provision
2.Individually insignificant with individual bad
debt provision
3.Other Group of similar credit risk
characteristics 865,185,187.95 100.00 346,808,407.34 40.08
Including:
3.1.Individually significant 266,474,413.39 30.80 14,714,238.02 5.52
3.2.Individually insignificant 598,710,774.56 69.20 332,094,169.32 55.47
including:
Individually insignificant but with a material
portfolio credit risk
322,711,873.07 37.30 322,711,873.07 100.00
Total 865,185,187.95 100.00 346,808,407.34 40.08
On December 31, 2007, the accounts receivable are listed as follows according to level of materiality:
Item Amount % of total balance bad debts
provision
for bad
debts
1.Individually significant with individual bad
debt provision
2.Individually insignificant with individual bad
debt provision
3.Other Group of similar credit risk
characteristics 1,157,828,252.73 100.00 335,247,658.93 28.95
Including:
3.1.Individually significant
571,689,210.66 49.38 10,993,106.42 1.92
3.2.Individually insignificant 586,139,042.07 50.62 324,254,552.51 55.32
including:
Individually insignificant but with a material
portfolio credit risk
293,124,817.77 25.32 291,044,718.86 99.29
Total 1,157,828,252.73 100.00 335,247,658.93
(2) The change of Bad debt Provision
Decrease in 2008
Item 31 December
2007
Provision in
2008 Reversal Write-off
31 December
2008
2007 303,764,455.54 31,483,203.39 335,247,658.93
2008 335,247,658.93 11,560,748.41 346,808,407.34
(3) No accounts receivable has been written off this year
(4) No amount due from shareholders who hold 5% or more of the voting shares of the Company is53
included in the ending balance of accounts receivable.
(5) The top 5 of the accounts receivable:
Debtor Ranking Relationship with
the Company
The amount of
arrears Aging Percentage
N0.1 Client 24,842,849.86 1－2 years 2.87%
N0.2 Client 17,255,614.26 1－2 years 1.99%
N0.3 Client 14,961,654.90 Within 1 year 1.73%
N0.4 Client 12,573,989.52 Over 3 years 1.45%
N0.5 Subsidiary 12,217,286.65 Within 1 year 1.41%
(6) The accounts receivable has decreased by RMB 292,643,064.78(the decrease rate is 25.28%)
compared with the beginning balance, which is caused by the Company’s efforts to get the money
back.
II、Other receivables
(1) The structure of other receivable
1) Listing of other receivables according to the aging:
31 December 2008 31 December 2007
Aging
Amount
Percentage
of total
amount
(%)
Bad debts
provision
Proportion
of
Provision
Amount
Percentage
of total
amount
(%)
Bad debts
provision
Percentage of
bad debt
Provision(%)
Within
1 year 145,069,997.05 61.64 143,865,745.66 60.05
1 - 2
years 4,673,873.73 1.99 233,693.69 5.00 31,827,647.73 13.28 1,591,382.38 5.00
2 - 3
years 43,318,384.70 18.41 8,663,676.93 20.00 23,792,671.29 9.93 4,758,534.26 20.00
Over 3
years 42,276,422.96 17.96 40,536,422.96 95.88 40,093,788.18 16.74 38,353,788.18 100.00
Total 235,338,678.44 100.00 49,433,793.58 239,579,852.86 100.00 44,703,704.82
2) Listing of other receivables according to the level of materiality:
On December 31, 2008, the other receivables were listed as follows according to level of materiality:
Item Amount % of total balance Bad debts Provision for
bad debts
1.Individually significant with individual bad
debt provision
2.Individually insignificant with individual bad
debt provision 1,740,000.00 0.74
3.Other Group of similar credit risk
characteristics 233,598,678.44 99.26 49,433,793.58 21.16
Including:
3.1.Individually significant
126,419,778.77 53.7254
3.2.Individually insignificant 107,178,899.67 45.54 49,433,793.58 46.12
including:
Individually insignificant but with a material
portfolio credit risk
40,576,422.96 17.24 40,576,422.96 100.00
Total 235,338,678.44 100.00 49,433,793.58
On December 31, 2007, the other receivables were listed as follows according to level of materiality:
Item Amount % of total balance bad debts provision for
bad debts
1.Individually significant with individual bad
debt provision
2.Individually insignificant with individual bad
debt provision 1,740,000.00 0.73
3.Other Group of similar credit risk
characteristics 237,839,852.86 99.27 44,703,704.82 18.80
Including:
3.1.Individually significant 163,392,136.71 68.20 3,610,314.64 2.21
3.2.Individually insignificant 74,447,716.15 31.07 41,093,390.18 55.20
including:
Individually insignificant but with a material
portfolio credit risk
34,907,337.52 14.57 34,907,337.52 100.00
Total 239,579,852.86 100.00 44,703,704.82
(2) Changes of the other receivables
Decrease in 2008
Item 31 December 2007 Provision in
2008 Reversal Write-off
31 December
2008
2007 39,708,846.88 5,064,322.13 69,464.19 44,703,704.82
2008 44,703,704.82 4,721,491.67 49,425,196.49
(3) At the year end, the other receivable which are individually insignificant and with individual
provision totaled RMB 1,740,000.00, which is the deposit for the loan.
(4) Other receivables have not been written off this year.
(5) On 31 December 2008, within the aforesaid balance, there is no amount due from the
shareholders who hold 5% or more of the Company’s voting shares.
(6) Refer to the Note VIII, 4 for the details of other receivables of related parties.
(7) The top 5 of other receivables:
Debtor
Ranking
Relationship
with the
Company
The nature or
content
The amount of
arrears Aging Percentage of total
other receivables
N0.1 subsidiary Intercompany
receivables 58,127,128.68 Within 1 year 24.70%
N0.2 subsidiary Intercompany
receivables 15,225,999.59 1-2 years 6.47%
N0.3 subsidiary Intercompany
receivables 13,703,800.97 1-2 years 5.82%
N0.4 subsidiary Intercompany
receivables 13,290,914.42 1-2 years 5.65%
N0.5 subsidiary Intercompany
receivables 11,872,820.97 1-2 years 5.04%
III、Long-term equity investments55
31 December 2008 31 December 2007
Item
Book value Impairment Book value Impairment
Long-term equity investment on
subsidiaries 56,100,529.68 56,100,529.68
long-term equity investment by equity
method
Joint ventures
Associates
Subtotal
Other long-term equity investment by
cost method
Total 56,100,529.68 56,100,529.68
(1) Investment on subsidiaries
Name of subsidiaries Initial
Amount
Balance at the
beginning of year Increase Decrease Balance at the year
end
Harbin Bengang Steel & Iron
Sales Ltd. 500,000.00 423,398.23 423,398.23
Changchun Bengang Steel Sales
Ltd. 500,000.00 -1,355,124.64 -1,355,124.64
Tianjin Bengang Steel Trading
Ltd. 3,000,000.00 33,306,820.76 33,318,095.80
Yantai Bengang Steel Sales Ltd. 500,000.00 19,600,329.41 19,600,329.41
Nanjing Bengang Steel Sales Ltd. 1,150,000.00 2,081,400.65 2,081,400.65
Wuxi Bengang Steel Sales Ltd. 1,000,000.00 947,993.61 936,718.57
Xiamen Bengang Steel Sales Ltd. 500,000.00 1,095,711.66 1,095,711.66
Total 7,150,000.00 56,100,529.68 56,100,529.68
Subsidiaries of the Company have increased this year. Please refer to NoteV.2 for details.
IV、Operating revenue and cost
2008 2007
Item
Revenue cost Revenue cost
Revenue from principal
operational activities 32,304,343,721.35 28,287,079,806.31 26,757,109,006.50 21,973,523,123.11
Other operational revenue 5,068,162,132.91 4,848,421,731.90 3,341,430,937.50 3,256,953,800.53
Total 37,372,505,854.26 33,135,501,538.21 30,098,539,944.00 25,230,476,923.64
(1) The principal operational revenue listed below is based on business category:
2008 2007
Item
Revenue cost Revenue cost
Industry 32,304,343,721.35 28,287,079,806.31 26,757,109,006.50 21,973,523,123.11
Total 32,304,343,721.35 28,287,079,806.31 26,757,109,006.50 21,973,523,123.11
(2) The principal operational revenue listed below is based on the category of products
2008 2007
Item
Revenue Cost Revenue cost56
Steel plate 31,380,999,926.59 27,479,419,229.07 26,198,016,844.91 21,556,897,955.26
Steel billet 411,984,402.36 360,368,003.89 81,221,731.78 63,209,156.68
Others 511,359,392.40 447,292,573.35 477,870,429.81 353,416,011.17
Total 32,304,343,721.35 28,287,079,806.31 26,757,109,006.50 21,973,523,123.11
(3) The principal operational revenue listed below is based on the area of selling
2008 2007
Item
Revenue cost Revenue cost
Northeast 12,375,840,901.76 10,855,364,574.98 8,739,311,554.70 7,120,736,078.74
North China 4,424,356,521.49 3,870,040,999.20 4,205,636,010.15 3,457,492,876.97
East China 6,876,666,040.46 6,015,107,368.75 8,764,949,616.41 7,230,605,915.19
Northwest 98,880,744.56 86,492,246.64 188,887,141.19 155,859,529.01
Southwest 1,850,625.69 1,527,036.97
South China 3,187,183,786.90 2,787,870,251.27 743,179,791.75 613,232,068.55
Export 5,341,415,726.18 4,672,204,365.47 4,113,294,266.61 3,394,069,617.68
Total 32,304,343,721.35 28,287,079,806.31 26,757,109,006.50 21,973,523,123.11
(4) The principal operational revenue from the top five Clients is as follows:
Client name or Ranking Revenue from principal operations Proportion of total revenue from
main operations (%)
N0.1 6,641,123,321.19 20.56
N0.2 5,341,418,146.64 16.53
N0.3 927,279,638.48 2.87
N0.4 640,653,833.86 1.98
N0.5 527,153,312.03 1.63
(5) Due to the increase of the sales volume, Operating income has increased by RMB 7,273,965,910 26
with the increase rate of 24.17 %.
V. Supplementary information for cash flow statement of parent company
Item 2008 2007
1.Reconciliation of net profit to cash flows from operating activities:
Net profit 176,832,824.48 1,587,652,659.39
Add: provision for impairment of assets 622,845,493.53 12,601,344.06
Depreciation of fixed assets, depletion of oil and gas assets,
productive biological assets depreciation 3,015,025,485.63 3,264,443,160.89
Amortization of intangible assets
amortization of long-term prepayments
Losses on disposal of fixed assets, intangible assets and other
long-term assets ( gain marked as “-“)
-112,198.25 -60,758.84
Losses on scrapping of fixed assets(gain marked as “-“) 19,880,546.51 52,296,386.5057
Item 2008 2007
Losses on changing of fair value ( gain marked as “-“)
Financial expenses ( gain marked as “-“) 365,343,710.65 295,975,275.73
Losses on investment ( gain marked as “-“)
Decrease of deferred income tax (increase marked as “-“) -215,353,741.99 62,253,891.57
Increase of deferred tax liabilities (decrease marked as “-“)
Inventory decrease (increase marked as “-“) -3,790,317,986.02 -932,956,381.04
Decrease in operating receivables ( increase marked as “-“) 201,027,898.81 -1,371,746,856.61
Increase in operating payables ( decrease marked as “-“) 4,084,289,076.86 -180,461,734.82
Other
Net cash flow from operating activities 4,291,368,951.29 2,789,996,986.83
2.Investing and financing activities that do not involve in cash
receipts and payments
Conversion of debt into capital
Convertible bonds to be mature within one year
Fixed assets under finance lease
3. Net increase in cash and cash equivalents
Cash at the end of the period 1,840,720,448.33 2,130,513,729.36
Less: Cash at the beginning of the period 2,130,513,729.36 2,063,284,633.74
Add: Cash equivalents at the end of the period
Less: Cash equivalents at the beginning of the period
Net increase in cash and cash equivalents -289,793,281.03 67,229,095.62
VIII、Related party transactions
I. Information of related parties
(1) Information of the parent company
(IN RMB 100 million)
Name of parent
company
Relationship with
the Company
Business
Type
Registered
Place
Legal
Representative
Nature of
Business
Registered
capital
Benxi Steel (Group)
Co., Ltd. Parent company Wholly
state-owned Benxi Tianchen Yu Manufacture 53.69
Name of parent
company Share proportion % Voting rights % The ultimate
controlling party
Organization
Code
Benxi Steel (Group)
Co., Ltd. 82.12 82.12 SASAC of
Liaoning Province 11972626-3
(2) Information of the subsidiaries
Name of the subsidiaries
Type of
subsidiary
Business
Type
Registered
Place
Legal
Representative
Nature
of58
Business
Xiamen Bengang Steel Sales Ltd. Wholly-owned
subsidiary
Limited
liability Xiamen Guoming
Zhang
Sales
Wuxi Bengang Steel Sales Ltd. Wholly-owned
subsidiary
Limited
liability Wuxi Zonghua Pang Sales
Tianjin Bengang Steel Trading Ltd. Wholly-owned
subsidiary
Limited
liability Tianjin Chuang Liu Sales
Nanjing Bengang Material Sales Ltd. Wholly-owned
subsidiary
Limited
liability Nanjing Zonghua Pang Sales
Yantai Bengang Steel Sales Ltd. Wholly-owned
subsidiary
Limited
liability Yantai Xingang Song Sales
Harbin Bengang Steel & Iron Sales Ltd. Wholly-owned
subsidiary
Limited
liability Harbin Jixi Fei Sales
Changchun Bengang Steel &Iron Sales Ltd. Wholly-owned
subsidiary
Limited
liability Changchun Zhichao Li Sales
Name of the subsidiaries
Registered
capital
Effective
equity
held
Voting Right Organization
Code
Xiamen Bengang Steel Sales Ltd. 50.00 100.00% 100.00% 73788827-8
Wuxi Bengang Steel Sales Ltd. 100.00 100.00% 100.00% 73654820-4
Tianjin Bengang Steel Trading Ltd. 300.00 100.00% 100.00% 74135658-1
Nanjing Bengang Material Sales Ltd. 115.00 100.00% 100.00% 75945466-5
Yantai Bengang Steel Sales Ltd. 50.00 100.00% 100.00% 74451514-6
Harbin Bengang Steel & Iron Sales Ltd. 50.00 100.00% 100.00% 73137417-X
Changchun Bengang Steel Sales Ltd. 50.00 100.00% 100.00% 74841484-4
Changes of the Paid-in capital of subsidiaries are as follows:
(In RMB0’000)
Name of the subsidiaries Beginning balance Increase Decrease Ending balance
Xiamen Bengang Steel Sales Ltd. 50.00 50.00
Wuxi Bengang Steel Sales Ltd. 100.00 100.00
Tianjin Bengang Steel Trading Ltd. 300.00 300.00
Nanjing Bengang Material Sales
Ltd. 115.00 115.00
Yantai Bengang Steel Sales Ltd. 50.00 50.00
Harbin Bengang Steel & Iron Sales
Ltd. 50.00 50.00
Changchun Bengang Steel & Iron
Sales Ltd. 50.00 50.00
(3) Information of the Joint Venture and Associates
The company has no Joint Venture or Associate
(4) Other related parties information
Name of Other related parties Relationship
Benxi Steel (Group) Machinery Co., Ltd. The same Parent Company
Bengang Group International Trading Ltd. The same Parent Company
Benxi Steel (Group) Tengda Holdings Ltd. The same Parent Company59
Name of Other related parties Relationship
Guangzhou Free Trade Zone Bengang Sales Co., Ltd. The same Parent Company
Shanghai Bengang Steel & Iron Trading Co., Ltd. The same Parent Company
Liaoning Bengang Steel & Iron Trading Co., Ltd The same Parent Company
Dalian Boluole Steel Tube Ltd. The same Parent Company
Shenyang North Bengang Sales Ltd. The same Parent Company
Benxi Steel (Group) Steel Process and Logistics Co., Ltd. The same Parent Company
Benxi Steel (Group) Construction & Repairing Co., Ltd. The same Parent Company
Bengang Fire-resistance Material Co. The same Parent Company
Benxi Steel (Group) Metallurgy Residues Co., Ltd. The same Parent Company
Liaoning Metallurgy Technician College The same Parent Company
Benxi Steel (Group) Industrial Development Co., Ltd. The same Parent Company
Benxi Steel (Group) Construction Co., Ltd. The same Parent Company
Yinkou Bengang International Logistics Co., Ltd. The same Parent Company
Benxi Steel (Group) Real-estate Development Co., Ltd. The same Parent Company
Benxi Steel (Group) Education Center The same Parent Company
Benxi Steel (Group) Drilling Tools Co., Ltd. The same Parent Company
Benxi Steel (Group) Designing Institute The same Parent Company
Benxi Steel (Group) Information and Automatic Tech. Ltd. The same Parent Company
Benxi Steel (Group) News Center The same Parent Company
Benxi Steel (Group) New Industrial Development Co., Ltd. The same Parent Company
Benxi Steel (Group) Mining Co., Ltd. The same Parent Company
Benxi Steel (Group) Electronics and Gas Co., Ltd. The same Parent Company
Benxi Steel (Group) Thermal Power Development Co., Ltd. The same Parent Company
Bengang Puxiang Cool Rolling Steel Sheet Co., Ltd. The same Parent Company
Benxi Steel & Iron (Group) Inspection Co., Ltd. The same Parent Company
II. Transactions with related parties
(1).The Inter-subsidiary and parent-subsidiary transactions of the subsidiaries which has been
controlled by the parent company and incorporated into the consolidated financial statements have
been offset.
(2) Related party transactions of selling goods or rendering services are as follows:
2008 2007
Name
The content of
related party
transactions
Amount
(10
thousand)
Ratio
(%)
Amount
(10
thousand)
Ratio
(%)
Benxi Steel (Group) Co., Ltd. Products 40,208.35 1.04 15,669.74 0.50
Benxi Steel (Group) Co., Ltd. Raw material
and spare parts 103,722.87 2.68 22,704.53 0.72
Benxi Steel (Group) Co., Ltd. Energy and
Power 11,467.81 0.30 209.41 0.01
Benxi Steel (Group) Co., Ltd. Agency fees 596.7 0.02
Bengang Group International Trading Ltd. Products 534,141.57 13.80 411,329.43 13.12
Dalian Boluole Steel Tube Ltd. Products 10,046.80 0.26 9,345.22 0.3060
2008 2007
Name
The content of
related party
transactions
Amount
(10
thousand)
Ratio
(%)
Amount
(10
thousand)
Ratio
(%)
Guangzhou Free Trade Zone Bengang
Sales Co., Ltd. Products 52,548.14 1.36 43,543.24 1.39
Shanghai Bengang Steel & Iron Trading
Co., Ltd. Products 92,728.22 2.40 94,212.95 3.01
Liaoning Bengang Steel & Iron Trading
Co., Ltd Products 53,423.01 1.38 63,745.23 2.03
Benxi Steel (Group) Steel Process and
Logistics Co., Ltd. Products 52,715.33 1.36 38,600.98 1.23
Benxi Steel (Group) Steel Process and
Logistics Co., Ltd.
Energy and
Power 32.79 64.2
Benxi Steel (Group) Steel Process and
Logistics Co., Ltd. Rent 100
Benxi Steel (Group) Dahe Industrial
Development Co., Ltd.
Energy and
Power 21.02 25.46
Benxi Steel (Group) Industrial
Development Co., Ltd. Products 217.38 0.01
Benxi Steel (Group) Industrial
Development Co., Ltd.
Raw material
and spare parts 8,943.52 0.23 8,343.65 0.27
Benxi Steel (Group) Industrial
Development Co., Ltd.
Energy and
Power 43.18 76.3
Benxi Steel (Group) Construction Co., Ltd. Products 485.6 0.01
Benxi Steel (Group) Construction Co., Ltd. Raw material
and spare parts 65,570.20 1.69 32,103.99 1.02
Benxi Steel (Group) Construction Co., Ltd. Energy and
Power 787.36 0.02 329.31 0.01
Benxi Steel (Group) Construction Co., Ltd. Rent 3.49
Benxi Steel (Group) Machinery Co., Ltd. Energy and
Power 4,303.52 0.11 3,062.30 0.10
Benxi Steel (Group) Machinery Co., Ltd. Raw material
and spare parts 2,860.72 0.07
Benxi Steel (Group) Mining Co., Ltd. Raw material
and spare parts 113,819.87 2.94 95,854.09 3.06
Benxi Steel (Group) Mining Co., Ltd. Energy and
Power 57,189.32 1.48 48,113.70 1.53
Benxi Steel (Group) Mining Co., Ltd. Freight revenue 1,019.60 0.03 1,188.45 0.04
Benxi Steel (Group) Mining Co., Ltd.
Revenue of
Metallurgical
coke
411.7 0.01 3,581.31 0.11
Benxi Steel (Group) Mining Co., Ltd. Agency fees 48.04
Benxi Steel (Group) New Industrial
Development Co., Ltd.
Energy and
Power 22.22 58.18
Benxi Steel (Group) Construction Co., Ltd. Raw material
and spare parts 8,338.46 0.22 4,483.61 0.14
Benxi Steel (Group) Construction Co., Ltd. Energy and
Power 1,955.53 0.05 172.36 0.01
Benxi Steel (Group) Metallurgy Residues
Co., Ltd.
Raw material
and spare parts 6,765.02 0.17 1,565.25 0.05
Benxi Steel (Group) Metallurgy Residues
Co., Ltd.
Energy and
Power 247.49 0.01 200.86 0.01
Benxi Steel (Group) Metallurgy Residues
Co., Ltd. Freight revenue 90.44 36.07
Benxi Steel (Group) Electronics and Gas
Co., Ltd.
Energy and
Power 118.72 162 0.01
Bengang Puxiang Cool Rolling Steel Sheet
Co., Ltd. Products 664,112.33 17.16 517,480.38 16.51
Bengang Puxiang Cool Rolling Steel Sheet
Co., Ltd.
Raw material
and spare parts 46,302.62 1.20 44,504.67 1.4261
2008 2007
Name
The content of
related party
transactions
Amount
(10
thousand)
Ratio
(%)
Amount
(10
thousand)
Ratio
(%)
Bengang Puxiang Cool Rolling Steel Sheet
Co., Ltd.
Energy and
Power 26,824.08 0.69 21,398.03 0.68
Bengang Puxiang Cool Rolling Steel Sheet
Co., Ltd. Labor income 199.64 0.01 502.46 0.02
Bengang Puxiang Cool Rolling Steel Sheet
Co., Ltd. Freight revenue 734.61 0.02 788.48 0.03
Bengang Puxiang Cool Rolling Steel Sheet
Co., Ltd. Agency fees 223.33 0.01
Benxi Steel (Group) Thermal Power
Development Co., Ltd.
Energy and
Power 9,382.25 0.24 8,039.85 0.26
Benxi Steel (Group) Thermal Power
Development Co., Ltd. Agency fees 25.97
Benxi Steel (Group) Real-estate
Development Co., Ltd.
Energy and
Power 52.23 67.07
Benxi Steel (Group) Engineering
supervision Co., Ltd.
Energy and
Power 0.62
Benxi Steel (Group) Medical Service Co.,
Ltd.
Energy and
Power 16.77 24.7
Liaoning Metallurgy Technician College coal 170.81
Bengang Fire-resistance Material Co. Energy and
Power 2,163.73 0.06 1,980.58 0.06
Bengang Fire-resistance Material Co. Freight revenue 393.63 0.01 65.19
Total 1,975,596.61 51.05 1,493,633.23 47.65
The principles for guiding the related party transactions are as follows:
①On 28 December 2005, the Company entered into an agreement of raw material supply and
services rendering with the Group, with a supplementary agreement signed on 25 May 2008. Those
agreements include the Group’s providing the raw material, supplementary, supporting services, rent
and so on, to the Company and the Company’s sale of the raw materials, supplementary, energy,
accessories, usage of the trade mark, supporting services, waste materials to the Group. The following
are the pricing policies:
A: The pricing of subjects purchased from Bengang Group
Pricing of raw materials:
Price of fine iron ore shall not be higher than the average customs C&F price from countries like Brazil
and Australia in the last half year, plus inland freight, port fee, and quality price adjustment.
Quality Price adjustment shall be based on the weighted average of imported fine iron ore in the first
half of year, and on the basis of 10 Yuan per ton to 1% of quality difference.
The transaction price of pellet ore is based on the market price for the same quality pellet ore
Price of scrap steel is co-determined by two transaction parties within the scale of the weighted average
price of purchasing from independent third parties by the company during the last month.
The price of chill plate is based on the weighted average price of selling price to the independent third
parties by the company during the last month plus RMB 335 processing fee and processing fee shall be
adjusted every year.62
Supplementary materials: As to the supplementary materials, such as lime, Fire-resistance materials,
ancillary materials, etc. provided by the Group is determined by market price
Accessories: the accessories produced by and purchased from the Group are carried out on market
price.
Auto transportation: based on Market price.
Heating service of staff residence: based on National price.
Repairs and maintenance of plant and equipment: Negotiable according to the complexity and
workload.
Designing and engineering: based on National price.
Engineering construction: the Price of the engineering construction service provided by the Group is
carried out on market price.
Copies, newspaper, media and other publications: based on National price.
Education facilities: the education facilities rental service, professional technical education and staff
training are carried out on market price.
Agency services: Before the import and export permission is obtained, the import and export business
of the Company are deputized by the Group. This business is conducted as the normal business
behavior. The agency fee determined by the Group and the Company according to the specific affair is
charged at 0.5%-1.5% of the total value of import or export goods.
After obtaining the export rights, the Company has the right to inform the Group to terminate the
agency relationship. The Group is not the sole agency, so the Company has the right to choose
independent third party as an agent.
Telephone, fax, television services: based on National price.
Use of Office Building: based on Market price.
Business transportation: based on Market price.
Property management service: based on Market price.
Packing service: based on Market price.
Labor protection service: based on Market price.
Trademark: the trademark “Bengang” which is free to the Company permitted by The Group and the
Company should not allow others to use the trademark. The Company has the right to register its own
trade mark at any time.
B: The pricing of the sales to The Group:
Hot rolling of thin steel plates: The weighted average price of selling goods with same quality to third
parties in the preceding month.
Coke products and chemical products: based on market price.
Public services: Public services provided to the Group by the Company such as the oxygen, nitrogen,63
argon, blast furnace gas、converter gas、COG、stream、purified water、new water、central water、
soft water and so on are priced at full cost plus the national additional tax and rational profit. The
electricity provided to the Group is based on the National price plus the cost of transfer the electricity.
Railway transportation, quality control, measuring and weighting: based on National price.
Scrap steel (containing iron): based on Market price.
Raw material, supplementary material and spare parts: based on purchase price of the Company plus
0.5%-1.5% purchasing fee.
Research and development service: the service provided by the Company, which could not be finished
by The Group, is priced on National price.
②As to the leasing service of land use right provided by The Group, the two parties agree to determine
the price at 6.24 Yuan per square meter per year in accordance with the “Land Use Right Leasing
Agreement” which is been carried out by the Company and The Group.
C. The subsidiaries of the Company have sold cold plates to Bengang Puxiang Cool Rolling Steel Sheet
Co., Ltd. The price of the chill plates is based on market price.
(3).Related party transactions of purchasing goods and rendering services
2008 2007
Name
The content of
related party
transactions
Amount
(10
thousand)
Ratio%
Amount
(10
thousand)
Ratio%
Benxi Steel (Group) Co., Ltd. Raw materials 2,788.73 0.08 405.23 0.02
Benxi Steel (Group) Co., Ltd. Repair 21,850.17 0.64 18,818.19 0.71
Benxi Steel (Group) Co., Ltd. Labor 1,157.80 0.03
Benxi Steel (Group) Co., Ltd. Land lease fee 6,136.88 0.18 5,114.05 0.19
Benxi Steel (Group) Co., Ltd. Payment for
purchasing 25,043.93 0.95
Bengang Puxiang Cool Rolling Steel
Sheet Co., Ltd. Raw materials 110,118.01 3.20 102,643.26 3.89
Bengang Puxiang Cool Rolling Steel
Sheet Co., Ltd. stock 133,015.92 3.87
Benxi Steel (Group) Mining Co., Ltd. Labor 1,575.49 0.05 271.46 0.01
Benxi Steel (Group) Mining Co., Ltd. Raw materials 335,489.29 9.76 336,816.71 12.76
Benxi Steel (Group) Mining Co., Ltd. Transportation 203.08 0.01 570.97 0.02
Benxi Steel (Group) Metallurgy Residues
Co., Ltd. Tap fee 2,491.89 0.07 2,208.49 0.08
Benxi Steel (Group) Metallurgy Residues
Co., Ltd. Raw materials 12,751.05 0.37 4,583.72 0.17
Benxi Steel (Group) Metallurgy Residues
Co., Ltd. Repair fee 256.53 0.01
Benxi Steel (Group) Steel Process and
Logistics Co., Ltd. Processing fee 78.12 89.87
Benxi Steel (Group) Real-estate
Development Co., Ltd. Raw materials 5,352.54 0.16 3,533.02 0.13
Benxi Steel (Group) Real-estate
Development Co., Ltd. Rental fee 20.79 24.45
Benxi Steel (Group) Real-estate
Development Co., Ltd.
Property
management fees 265.49 0.01 44.56
Benxi Steel (Group) Real-estate
Development Co., Ltd.
Cost of the
project 680.01 0.02 2,566.50 0.1064
2008 2007
Name
The content of
related party
transactions
Amount
(10
thousand)
Ratio%
Amount
(10
thousand)
Ratio%
Benxi Steel (Group) Real-estate
Development Co., Ltd. Transportation 20.66
Benxi Steel (Group) Real-estate
Development Co., Ltd. Repair fee 110.94
Benxi Steel (Group) Machinery Co., Ltd. Spare parts 25,760.71 0.75 27,059.69 1.03
Benxi Steel (Group) Machinery Co., Ltd. Project fee 5,268.92 0.15 892.05 0.03
Benxi Steel (Group) Machinery Co., Ltd. Repair fee 29.93 1,838.57 0.07
Benxi Steel (Group) Machinery Co., Ltd. Raw materials 358.08 0.01 114.05
Benxi Steel (Group) Machinery Co., Ltd. Industrial water 50.38 88.87
Benxi Steel (Group) Construction Co.,
Ltd. Spare parts 8,875.08 0.26 234.32 0.01
Benxi Steel (Group) Construction Co.,
Ltd. Project fee 8,308.12 0.24 61,264.89 2.32
Benxi Steel (Group) Construction Co.,
Ltd. Repair fee 2,056.70 0.06 14,173.24 0.54
Benxi Steel (Group) Construction Co.,
Ltd. Raw material 3,829.33 0.11 1,706.85 0.06
Benxi Steel (Group) Construction Co.,
Ltd. Transportation 267.87 0.01 666.37 0.03
Benxi Steel (Group) Construction Co.,
Ltd. Maintenance fee 430.77 0.02
Benxi Steel (Group) Industrial
Development Co., Ltd. Spare parts 178.48 0.01 137 0.01
Benxi Steel (Group) Industrial
Development Co., Ltd. Raw material 15,216.91 0.44 10,786.22 0.41
Benxi Steel (Group) Industrial
Development Co., Ltd. Repair fee 228.64 0.01 1,915.89 0.07
Benxi Steel (Group) Industrial
Development Co., Ltd. Transportation 1,143.47 0.03 1,637.58 0.06
Benxi Steel (Group) Industrial
Development Co., Ltd. Project fee 831.78 0.02 594.42 0.02
Benxi Steel (Group) Construction &
Repairing Co., Ltd.
Raw material and
spare parts 422.73 0.01 391.94 0.01
Benxi Steel (Group) Construction Co.,
Ltd. Project fee 5,686.14 0.17 1,957.97 0.07
Benxi Steel (Group) Construction Co.,
Ltd. Repair fee 1,955.53 0.06 7,111.47 0.27
Benxi Steel (Group) Construction Co.,
Ltd. Maintenance fee 96.22
Benxi Steel (Group) Electronics and Gas
Co., Ltd. Raw material 7,505.70 0.22 6,893.30 0.26
Benxi Steel (Group) Electronics and Gas
Co., Ltd. Project fee 95.76 527.35 0.02
Benxi Steel (Group) Electronics and Gas
Co., Ltd. Spare parts 542.43 0.02 138.16 0.01
Benxi Steel (Group) Electronics and Gas
Co., Ltd.
Maintenance fee
of fixed assets 85.47 1,512.50 0.06
Benxi Steel (Group) Electronics and Gas
Co., Ltd. Heating costs 32.13
Benxi Steel (Group) Drilling Tools Co.,
Ltd. Supplementary 1,659.12 0.05 1,722.07 0.07
Benxi Steel (Group) New Industrial
Development Co., Ltd. Labor safety fee 757.01 0.02 536.21 0.02
Benxi Steel (Group) New Industrial
Development Co., Ltd. Raw materials 30.78
Liaoning Metallurgy Technician College Training costs 221.29 0.01 272.94 0.0165
2008 2007
Name
The content of
related party
transactions
Amount
(10
thousand)
Ratio%
Amount
(10
thousand)
Ratio%
Liaoning Metallurgy Technician College Spare parts 3,919.94 0.11 2,084.44 0.08
Liaoning Bengang Steel & Iron Trading
Co., Ltd Raw materials 4,725.63 0.14
Benxi Steel (Group) Education Center Training fee 688.21 0.02 1,748.60 0.07
Benxi Steel (Group) Education Center Project fee 222.98 0.01
Bengang Group International Trading
Ltd. Raw material 14,978.56 0.44
Bengang Group International Trading
Ltd. Agency fees 4,215.51 0.12 3,731.93 0.14
Bengang Group International Trading
Ltd.
Import of
equipment 78,143.84 2.27 74,531.61 2.82
Benxi Steel (Group) Information and
Automatic Tech. Ltd. Spare parts 1,879.68 0.05 2,782.37 0.11
Benxi Steel (Group) Information and
Automatic Tech. Ltd. Maintenance fee 83.05
Benxi Steel (Group) Information and
Automatic Tech. Ltd. Project fee 3,604.91 0.10 2,863.17 0.11
Benxi Steel (Group) Information and
Automatic Tech. Ltd. Repair 696.24 0.03
Benxi Steel (Group) Thermal Power
Development Co., Ltd. Heating fee 585.51 0.02 1,692.89 0.06
Bengang Fire-resistance Material Co. Raw Material 78,790.88 2.29 44,231.71 1.68
Benxi Steel (Group) News Center Print media fees 118.17 182.4 0.01
Benxi Steel (Group) News Center Repair fees 10
Benxi Steel (Group) Designing Institute Project fee 10,072.13 0.29 1,287.01 0.05
Benxi Steel (Group) Designing Institute Design fees 1,618.80 0.05 43.56
Benxi Steel (Group) Designing Institute Repair 87.01 46.8
Yinkou Bengang International Logistics
Co., Ltd. Port charge 5,343.20 0.16 17,149.03 0.65
Total 934,113.60 27.17 801,243.37 30.34
(4) Receivable and payable of related party transactions
Ending bal. (10 thousand) Beginning bal. (10 thousand)
Name
Book value Percentage
(%)
Prov
ision
for
bad
debt
Book
value
Percen
tage(
%)
Provisio
n for
bad debt
Accounts receivable
Benxi Steel (Group) Machinery
Co., Ltd. 1,868.24 2.18 1,868.49 1.62
Benxi Steel (Group) Thermal
Power Development Co., Ltd. 855.62 1.00 24,009.47 20.79
Bengang Puxiang Cool Rolling
Steel Sheet Co., Ltd. 10,918.19 9.46
Benxi Steel (Group) Construction
Co., Ltd. 309.44 0.27
Benxi Steel (Group) Industrial
Development Co., Ltd. 4,557.41 5.32 1,824.42 1.58
Benxi Steel (Group) New
Industrial Development Co., Ltd. 42.47 0.05 137.5 0.12
Bengang Fire-resistance Material
Co. 491.19 0.4366
Benxi Steel (Group) Metallurgy
Residues Co., Ltd. 5,890.44 6.88
Subtotal 13,214.18 15.43 39,558.7 34.27
Prepayments
Bengang Group International
Trading Ltd. 65,712.47 19.11
Benxi Steel (Group) Construction
Co., Ltd. 25.6 0.02 37.07 0.01
Benxi Steel (Group) Construction
Co., Ltd. 6,002.61 3.82 19,249.99 5.60
Benxi Steel (Group) Industrial
Development Co., Ltd. 71.67 0.02
Benxi Steel (Group) Drilling
Tools Co., Ltd. 0.47
Bengang Puxiang Cool Rolling
Steel Sheet Co., Ltd. 10,405.47 6.62 14,959.25 4.35
Benxi Steel (Group) Medical
Service Co., Ltd. 2.00
Benxi Steel (Group) Machinery
Co., Ltd. 5,943.90 3.78
Subtotal 22,380.05 14.24 100,030.45 29.09
Accounts payable
Bengang Fire-resistance Material
Co. 11,761.35 1.71 1,091.73 0.31
Liaoning Bengang Steel & Iron
Trading Co., Ltd 3,221.61 0.47 43.35 0.01
Liaoning Metallurgy Technician
College 1,602.20 0.23 821.27 0.23
Benxi Steel (Group) Co., Ltd. 6,883.84 1.95
Benxi Steel (Group) Drilling
Tools Co., Ltd. 713.84 0.10 765.65 0.22
Benxi Steel (Group) New
Industrial Development Co., Ltd. 0.89 158.71 0.05
Benxi Steel (Group) Real-estate
Development Co., Ltd. 621.84 0.09 59.76 0.02
Benxi Steel (Group) Engineering
supervision Co., Ltd. 54.00 0.01
Benix XingyeHujie Operating
Co., Ltd. 56.85 0.01 32.06 0.01
Benxi Yitong Tube Co., Ltd 54.00 0.01 58.44 0.02
Benxi Steel (Group) Machinery
Co., Ltd. 1,319.08 0.19 3,753.35 1.07
Benxi Steel (Group) Construction
Co., Ltd. 546.66 0.08 23,947.71 6.80
Benxi Steel (Group) Mining Co.,
Ltd. 6,588.26 0.96 38,486.36 10.92
Benxi Steel (Group) Industrial
Development Co., Ltd. 5,992.16 0.87 5,390.35 1.53
Benxi Steel (Group) Construction
Co., Ltd. 504.24 0.07 10,227.51 2.90
Benxi Steel (Group) Metallurgy
Residues Co., Ltd. 6,354.47 0.92 3,115.94 0.88
Benxi Steel (Group) Information
and Automatic Tech. Ltd. 2,066.70 0.30 1,105.93 0.31
Benxi Steel (Group) Electronics
Co., Ltd. 780.6 0.11 463.75 0.13
Benxi Steel (Group) Designing
Institute 3,823.83 0.55 106.51 0.03
Benxi Steel (Group) News Center 106.61 0.03
Benxi Steel (Group) Education
Center 481.68 0.0767
Benxi Steel (Group) Thermal
Power Development Co., Ltd. 7.67
Subtotal 46,551.93 6.75 96,618.83 27.42
Other payable
Benxi Steel (Group) Machinery
Co., Ltd. 12.62 0.02 28.36 0.09
Shanghai Bengang Steel & Iron
Trading Co., Ltd. 721.1 1.03 98.5 0.33
Benxi Steel (Group) Construction
Co., Ltd. 2,734.53 3.92 531.03 1.76
Benxi Steel (Group) Industrial
Development Co., Ltd. 1,392.92 1.99 980.79 3.25
Benxi Steel (Group) Construction
Co., Ltd. 9,046.83 12.96 8,001.12 26.54
Benxi Steel (Group) Real-estate
Development Co., Ltd. 156.5 0.22 294.5 0.98
Benxi Steel (Group) Information
and Automatic Tech. Ltd. 391.52 0.56 1,101.92 3.65
Benxi Steel (Group) New
Industrial Development Co., Ltd. 399.69 0.57 74.07 0.25
Benxi Steel (Group) Electronics
Co., Ltd. 874.57 1.25 770.75 2.56
Benxi Steel (Group) Education
Center 285.63 0.41 13.82 0.05
Dalian Boluole Steel Tube Ltd. 223.07 0.32 285.13 0.95
Bengang Fire-resistance Material
Co. 298 0.99
Guangzhou Free Trade Zone
Bengang Sales Co., Ltd. 339.81 0.49
Benxi Steel (Group) Designing
Institute 139.46 0.20 750.71 2.49
Liaoning Metallurgy Technician
College 6.00 0.01 25.83 0.09
Bengang Group International
Trading Ltd. 11,057.04 15.84
Benxi Steel (Group) Mining Co.,
Ltd. 450.83 0.65 10.13 0.03
Benxi Steel (Group) Steel Process
and Logistics Co., Ltd. 664.39 0.95
Benxi Steel (Group) Co., Ltd. 2,914.85 4.17
Liaoning Bengang Steel & Iron
Trading Co., Ltd 968.33 1.39
Benxi Steel (Group) News Center 225.07 0.32
Bengang Puxiang Cool Rolling
Steel Sheet Co., Ltd. 37.6 0.05
Benxi Steel (Group) Thermal
Power Development Co., Ltd. 0.26
Subtotal 33,042.62 47.32 13,264.66 44.01
Advance from customers
Dalian Boluole Steel Tube Ltd. 611.63 0.30 1,353.43 0.54
Benxi Steel (Group) Steel Process
and Logistics Co., Ltd. 3,030.23 1.50 539.6 0.21
Benxi Steel (Group) Construction
Co., Ltd. 178.72 0.09 5.3
Benxi Steel (Group) Industrial
Development Co., Ltd. 20.76 0.01 421.02 0.17
Guangzhou Free Trade Zone
Bengang Sales Co., Ltd. 3,152.12 1.56 1,045.89 0.41
Benxi Steel (Group) Co., Ltd. 7,753.58 3.8468
Liaoning Bengang Steel & Iron
Trading Co., Ltd 2,822.72 1.40 7,472.55 2.96
Shanghai Bengang Steel & Iron
Trading Co., Ltd. 3,642.65 1.80 5,350.03 2.12
Tianjin Bengang Steel Plates
Process and Logistics Co., Ltd 2,850.00 1.41
Benxi Steel (Group) Drilling
Tools Co., Ltd. 3.25
Bengang Puxiang Cool Rolling
Steel Sheet Co., Ltd. 4,105.81 2.03
Benxi Steel (Group) Mining Co.,
Ltd. 0.67
Benxi Steel (Group) New
Industrial Development Co., Ltd. 0.03
Subtotal 28,168.92 13.94 16,191.07 6.41
Notes payable
Benxi Steel (Group) Construction
Co., Ltd. 657.53 0.36
Benxi Steel (Group) Industrial
Development Co., Ltd. 701.69 0.38 70.00 0.20
Liaoning Bengang Steel & Iron
Trading Co., Ltd 770 0.42
Benxi Steel (Group) New
Industrial Development Co., Ltd. 10 0.01
Bengang Fire-resistance Material
Co. 4,910.00 2.66 50.00 0.14
Benxi Steel (Group) Information
and Automatic Tech. Ltd. 80.00 0.23
Benxi Steel (Group) Machinery
Co., Ltd. 2,268.30 1.23
Benxi Steel (Group) Real-estate
Development Co., Ltd. 915 0.50
Benxi Steel (Group) Mining Co.,
Ltd. 248 0.13
Benxi Steel (Group) Electronics
and Gas Co., Ltd. 1,230.00 0.67
Subtotal 11,710.52 6.36 200.00 0.57
Other receivable
Bengang Puxiang Cool Rolling
Steel Sheet Co., Ltd. 1,025.90 6.38 950.56 6.10
Benxi Steel (Group) Construction
Co., Ltd. 1.16 0.01
Benxi Steel (Group) Engineering
supervision Co., Ltd. 25.00 0.16 25 0.16
Benxi Steel (Group) Machinery
Co., Ltd. 338.84 2.11
Benxi Steel (Group) Mining Co.,
Ltd. 1.41 0.01
Benxi Steel (Group) Industrial
Development Co., Ltd. 168.59 1.05
Benxi Steel (Group) Steel Process
and Logistics Co., Ltd. 0.08
Guangzhou Benxi Iron & Steel
Trading Co., Ltd 100.00 0.62
Shanghai Benxi Iron and Steel
Metallurgy Science and
Technology Co., Ltd.
500.00 3.11
Subtotal 2,159.82 13.44 976.72 6.27
Long term payable
Benxi Steel (Group) Co., Ltd. 25,043.93 100.0069
Total 25,043.93 100.00
IX.CONTINGENCIES
At the balance sheet date, no significant contingencies need to be disclosed.
X.COMMITMENT
Operating Lease Commitment: at the balance sheet date, the Company had commitment for future
minimum lease payments in respect of land and buildings rented under non-cancelable operating leases
which fall due as follows: RMB 6.24 per square meter per year. The total area of land is 8,195,621.67
square meters and the total annual rent is RMB 61,368,800.00
XI.Subsequent event
1. By the end of reporting day, the Company have received all Accounts receivables as expected
2. On 15th April 2009, on the 14th meeting of board of directors, the Company decides to dispatch the
cash dividend of 0.5Yuan (before tax) for every ten shares to all shareholders based on the year-end
shares of 3,136,000,000. The cash dividend totaled RMB 156,800,000.00. The above proposal will be
carried out after approval by general meetings of the shareholders.
3、Except for the above matter, no other subsequent events of non-adjusting event need to be disclosed.
XII.Others
I、Non-monetary transaction
There is no Non-Monetary transaction
II、Other important Items
(1) The company invested two subsidiaries this year, details are as follows:
Guangzhou Benxi Iron & Steel Trading Co., Ltd., set up in Guangzhou by the company on 13 January
2009 and obtained Business license (Registration No. 4401062050196) from Guangzhou Tianhe
Branch Administration of Industry and Commerce on 13 January 2009. The Paid-in capital is 1 million
Yuan and has been verified by Guangzhou Zhongqing Accountant Firm with Capital verification report
“Zhongqing Yan Zi No. 2008011050”.
Shanghai Benxi Iron and Steel Metallurgy Science and Technology Co., Ltd., which was set up in
Guangzhou by the company on 17 February 2009, obtained Business license （Registration No.
310230000378285）from Shanghai Chongming Branch Administration of Industry and Commerce on
February 17th,2009. The paid in capital is 5 million Yuan, and has been verified by Shanghai
Yongdexin Accountant Firm with the Capital verification report “Yongdexin Yan Zi No. 2008011050”.
(2) Leasing between Related parties
On March 18th, 2009, “The proposal of leasing 2300mm hot rolling mill production line from Benxi
Steel (Group) Co., Ltd” had been passed on the thirteenth meeting by the Fourth Board of Directors.70
According to the proposal, the company will lease the 2300mm hot rolling mill production line
invested and constructed by Benxi Steel (Group) Co., Ltd, Including but not limited to plants,
machinery and equipment, subsidiary buildings, ancillary facilities and assets invested in testing by the
lessor, which are related to the 2300mm hot rolling mill production line.
The rent was agreed by both parties as follows:
The first stage: From the effective date of the lease contract to December 31st, 2009. This stage is a
testing period for the lease subject. Benxi Steel (Group) Co., Ltd will charge no rent and any loss
related to the lease subject will be borne by Benxi Steel (Group) Co., Ltd and the profit belongs to the
company if there is any.
The second stage: From January 1st 2009 to the end of the lease period, the company will pay 30% of
the profit to Benxi Steel (Group) Co., Ltd as rent, and the annual rent will be no more than
5%(excluding 5%) of the audited net assets, and any loss related to the lease subject will be borne by
the company.
The period of the lease contract is from the effective date to December 31st 2011. If the test of the
lease subject is still unfinished before December 31st 2009, or should catastrophic failure occur during
2009 and the test can not be successfully finished on time, the company has the right to terminate the
agreement unilaterally
(3) Others
Benxi Group International Economic and Trade Co., Ltd is a wholly-owned subsidiary of Benxi Steel
(Group) Co., Ltd, which is the import agent of the company. In 2008, because of its lack of credit limit,
Benxi Group International Economic and Trade Co., Ltd used the 800 million Yuan credit limit of the
Company in the Industrial and Commercial Bank of China Benxi branch. Up to the date of issuing this
report, the amount of letters of credit not due is RMB 52,882,407.07.
XIII、Supplementary information
I、Non-recurring gains and losses attributable to ordinary shareholders this year are listed as
follows: (gain marked as “+” and loss marked as “-“)
II. Net asset yield and Earnings per Share
Item Amount
1.Gains and losses from disposal of non-current assets including the
written-off of the provision of asset impairment
-19,768,988.26
2.Gains and losses included in the current period of government subsidies,
excluding those government grants which are closely related to normal business
and in line with national policy , or in accordance with fixed standards or quantities
1,722,295.00
3.Gain from debt restructuring 6,680,217.50
4.Non-operating income and expenditure in addition to the above items 11,115,464.70
5.The impact of income tax -912,478.81
Total 661,467.7571
Net assets yield（%） Earnings per share
Item Fully
Dilution
Weight
average Basic EPS Diluted
EPS
2008
Net profit attributable to ordinary shareholders 1.04 1.01 0.05 0.05
Net profit attributable to ordinary shareholders after
deducting non-recurring profit and loss 1.04 1.01 0.05 0.05
2007
Net profit attributable to ordinary shareholders 9.57 9.76 0.51 0.51
Net profit attributable to ordinary shareholders after
deducting non-recurring profit and loss 9.18 9.36 0.49 0.49
XIV.Difference between financial statements prepared under the PRC GAAP and
IFRS
Other than the differences in the classifications of certain financial accounts and the difference
described below, there are no material differences between the Company’s financial statements
prepared under the PRC GAAP and IFRS. The major differences are the revalued assets and its
depreciation. Certain assets of the Company are stated at their revalued value in the financial
statements prepared under IFRS while they are stated at cost in the financial statements prepared under
the PRC GAAP. Therefore the depreciation of these assets under IFRS and the PRC Accounting Rules
and Regulations differs. The effects of the differences are as follows:
Effects of major differences between the PRC GAAP and IFRS on net profit are analyzed as
follows:
Note 2008 2007
RMB’000 RMB’000
Profit under the PRC GAAP 165,090 1,592,001
Adjustment:
- Depreciation on revalued assets -19,253 -33,377
- Disposal of revalued assets -7,028
-26,281 -33,377
Profit under IFRS 138,809 1,558,624
Effects of major differences between the PRC GAAP and IFRS on total equity are analyzed as
follows:
Note 2008 2007
RMB’000 RMB’000
Total equity under the PRC GAAP 15,826,634 16,633,81472
Adjustments:
- Revaluation of assets 321,764 321,764
- Depreciation on revalued assets -263,091 -243,838
- Disposal of revalued assets -11,653 -4,625
47,020 73,301
Total equity under IFRS 15,873,654 16,707,115
XV.The approval of the financial statements
The Financial Statements and Notes of the Company have been approved by the board of directors of
the Company on April 15th, 2009
Bengang Steel Plates Co., Ltd.
15 April 2009
