本钢板Ｂ：2026年半年度报告（英文版）

Bengang Steel Plates Co., Ltd.

Interim Report 2026

【August 2026】

Ⅰ. Important Notice, Table of Contents, and Definitions

The Board of Directors, the Supervisory Board, and all Directors, Supervisors, and Senior Management of the Company ensure the authenticity, accuracy, and completeness of this annual report and confirm that there are no false records, misleading statements, or material omissions. They assume individual and joint legal responsibility for the report.

Wang Zhanwei, the person in charge of the company, Liu Tiecheng, the person in charge of accounting work, and E Jianan, the person in charge of the accounting organization (accounting officer), hereby confirm that the financial report in this annual report is true, accurate and complete. All directors have attended the board meeting for reviewing this report.

This report involves forward-looking statements such as future plans, which do not constitute a substantial commitment of the company to investors. Investors are advised to pay attention to investment risks. This report is prepared in Chinese and English respectively. In the event of discrepancies in the interpretation of Chinese and foreign texts, the Chinese version shall prevail.

The Company has described the existing risks and countermeasures in detail in this report, please refer to the content of Section 3-10 "Risks Faced by the Company and Countermeasures". "China Securities Journal", "Securities Times", "Hong Kong Commercial Daily" and Juchao Information Network (www.cninfo.com.cn) are selected as the company's information disclosure media. All information of the company is subject to the information published in the above-mentioned designated media. Investors are kindly advised to pay attention to investment risks.

The Company plans not to pay cash dividends, issue bonus shares, or convert capital reserves into share capital.

Table of Contents

I. Important Notice, Table of Contents, and Definitions....2

II. Company Profile and Main Financial Index....6

III. Management Discussion and Analysis....9

IV. Corporate Governance, Environment and Society....28

V. Important Events....30

VI. Status of Share Capital Changes and Shareholders....66

VII. Status of Bonds....71

VIII. Financial Report....75

Reference File Directory

1. Financial statements containing the signatures and seals of legal representative, chief financial officer, and chief accountant;

2. The originals of all company documents and announcements publicly disclosed during the reporting period;

3. Interim reports published in other securities markets.

Definition

Ⅱ. Company Profile and Main Financial Index

I. Company Information

II. Contact Information

III. Other Information

1. Company Contact Information

Whether there are any changes in the Company's registered address, office address and its postal code, official website, and email address during the reporting period

□Applicable Not applicable

There were no changes to the company's registered address, office address (including postal code), website, or email address during the reporting period; for details, please refer to the 2025 annual report.

2. Locations for Information Disclosure and Availability of Documents

Whether there are any changes in information disclosure media and location for document inspection during the reporting period

□Applicable Not applicable

There were no changes during the reporting period regarding the websites and media outlets (including their URLs) where the company discloses its semi-annual reports, nor regarding the location where the semi-annual reports are kept available; for details, please refer to the 2025 annual report.

3. Other Relevant Information

Changes in other relevant information during the reporting period

□Applicable Not applicable

IV. Key accounting data and financial indicators

Whether the Company needs to retrospectively adjust or restate the accounting data of previous years

□Yes No

V. Differences between CAS and IFRS

1. Differences of net profit and net assets disclosed in financial reports prepared under IFRS and Chinese accounting standards.

□Applicable Not applicable

There are no differences of net profit and net assets disclosed in financial reports prepared under IFRS and Chinese accounting standards during the reporting period.

2. Differences of net profit and net assets disclosed in financial reports prepared under IFRS and Chinese accounting standards.

□Applicable Not applicable

There are no differences of net profit and net assets disclosed in financial reports prepared under IFRS and Chinese accounting standards during the reporting period.

VI. Items and Amount of Non-recurring Profits and Losses

Applicable □Not applicable

Unit：RMB

Specific circumstances of other items that meet the definition of non-recurring gains and losses:

□Applicable Not applicable

The company has no other specific circumstances that meet the definition of non-recurring gains and losses. 1g 8

Explanation of situations where non-recurring gains and losses items listed in the "Public Offering of Securities Information Disclosure Explanatory Notice No. 1 – Non-Recurring Gains and Losses" are defined as recurring gains and losses items.

□Applicable Not applicable

The company has no situations where non-recurring gains and losses items listed in the "Public Offering of Securities Information Disclosure Explanatory Notice No. 1 – Non-Recurring Gains and Losses" are defined as recurring gains and losses items.

III. Management Discussion and Analysis

I. Main Business Operations During the Reporting Period

1. Industry Development Status

The company operates within the iron and steel industry—a fundamental sector of China's national economy that serves as a crucial pillar for building a modern, powerful nation and a key area for achieving green, low-carbon development.

In the first half of 2026, the domestic steel industry was characterized by contracting supply, structurally divergent demand, high costs, and profit pressures, with a distinct pattern of "strong flat products versus weak long products." Guided by policies to "control total volume, optimize supply, strengthen foundations, and drive transformation," the industry continued to regulate crude steel output and accelerate structural upgrades; however, uneven downstream demand recovery and an inverted relationship between raw material costs and product prices squeezed profit margins, intensifying overall operational pressure. Data from the National Bureau of Statistics and the China Iron and Steel Association indicate that national output for crude steel, pig iron, and finished steel products all declined year-on-year during the first six months of 2026. Cumulative crude steel output reached 500 million tonnes (down 3.0% year-on-year); pig iron output was 427 million tonnes (down 2.8%); and finished steel output was 719 million tonnes (down 0.9%). The China Steel Price Index (CSPI) fluctuated within a narrow range during the first half of the year, with the average price edging down; steel price increases failed to offset the rise in raw material costs. On the cost side, the market showed a trend of "strong coke versus weak ore": iron ore prices declined slightly, while prices for coking coal and coke surged, driving up full-process smelting costs and widening the scope of industry-wide losses. Regarding market demand, domestic steel consumption showed significant divergence; the real estate market remained at a low ebb, causing a sharp drop in demand for long steel products used in construction. Conversely, demand for flat steel products remained resilient, driven by sectors such as shipbuilding, offshore wind power, new energy vehicles, and equipment manufacturing; the share of steel consumed by the manufacturing sector continued to rise, serving as a core pillar of industry demand. Import and export activities faced pressure; overseas trade barriers and the implementation of carbon tariff policies hampered steel exports, resulting in a year-on-year decline in total export volume — though high-end flat steel exports demonstrated greater resilience than ordinary carbon construction steel—while steel imports continued to contract.

2. Main business, main products and their uses

During the reporting period, the Company’s primary business activities included iron and steel smelting, rolling and processing, power generation, coal chemicals, special steel profiles, railway operations, import and export trade, scientific research, and produc sales. It has essentially established a premium steel production base centered on automotive steel, offering a product portfolio comprising over 60 varieties and more than 7,500 specifications. Its flagship products—such as automotive exterior panels, home appliance sheets, oil pipeline steel, container plates, and shipbuilding plates—are widely used in sectors including automotive manufacturing, home appliances, petrochemicals, aerospace, machinery manufacturing, energy and transportation, construction and decoration, and metal products, and are exported to over 60 countries and regions. There were no significant changes to the Company's core business during the reporting period.

3. Business model

Procurement Model: The Company's procurement model encompasses both domestic and international procurement. Domestic procurement is conducted through collaborative purchasing, centralized tendering (both public and invited), price inquiries and comparisons, competitive bidding, and negotiations. International procurement is carried out via long-term agreements, direct purchasing, public and invited tendering, price inquiries and comparisons, competitive negotiations, and consultative purchasing; these activities are primarily handled by Angang International Trade, Benxi Branch.

Sales Model: The company's sales operations are divided into domestic and export markets. Domestic sales primarily focus on futures-based transactions, utilizing distribution channels centered on direct supply, general distribution, and engineering projects. Contract orders are organized in advance on a monthly basis, and production is subsequently scheduled in accordance with these orders. Tailored to the specific characteristics of different regions, distribution channels, and industries, the company implements a variety of pricing strategies and sales methods—including deferred settlement for futures, "one factory, one policy" approaches, and index-based pricing. Export sales are handled by Ansteel International Trade, Benxi Branch, which acts as the company's export agent, with the company covering the associated agency fees.

4.Main Performance Drivers

During the reporting period, the Company closely adhered to the strategic deployment of "concentrating efforts to tackle five key priorities and achieving new starts in three areas." It fully implemented the requirements to "focus on one central theme, anchor development in three transformations, enhance four key capabilities, and achieve five new breakthroughs," while steadfastly advancing the "0115" guiding principles and maintaining a work style characterized by rigor, meticulousness, and pragmatism.

(1) By prioritizing technological innovation, the company has achieved new breakthroughs in high-end development. Anchored in technological innovation and a strategy focused on high-end products, the company has tackled the challenges of developing "extreme-specification" products and concentrated on enhancing quality and efficiency through core controlled-rolling and controlled-cooling processes. It has continuously refined its process systems, optimized production line performance, and expanded its presence in high-end markets. Significant breakthroughs were achieved in mastering technologies for extreme specifications Through targeted R&D efforts—including optimizing coil properties, redesigning alloy compositions, and iterating rolling processes—the company successfully established a production workflow on its 2300 hot-rolling line for ultra-wide, ultra-thick plates (ranging from 20–28 mm in thickness and 2,000–2,190 mm in width). The launch of the 2,190 mm extreme-width product marked a global first, creating a flagship domestic product in this category and filling a gap in the industry.

(2) By harnessing the power of digital enablement, the company has achieved significant new milestones in intelligent development. Committed to driving industrial model transformation through intelligence, the company has upgraded from an "experience-driven" approach to a dual-driver model powered by both data and algorithms, earning the AAAA-level certification for the nationa management system for the integration of industrialization and information technology. Efforts to accelerate industria digital-intelligence integration have been intensified; by establishing a "smart model matrix" that connects the entire data chain—spanning steelmaking, hot rolling, and cold rolling—the company now covers five key dimensions: process optimization, predictive equipment maintenance, precision energy management, marketing decision support, and precise quality traceability. Smart models are being implemented and delivering results in a phased, categorized manner. Focusing on core areas such as cos accounting, lean operations, and value creation, the company has successfully developed and deepened the application of 41 smart models.

(3) Focusing on the "Dual Carbon" strategy, the company has made significant strides in its green transformation. Guided by thi strategy and targeting key production processes—coking, sintering, ironmaking, steelmaking, and rolling—the company has intensified management upgrades, process improvements, and the optimization of its energy structure. It has continued to consolidate the results of its ultra-low emission retrofitting. By implementing comprehensive ultra-low emission controls covering organized emissions, fugitive emissions, and clean transportation, the company has substantially elevated its environmental management standards, achieving a 25.7% year-on-year reduction in pollutant emissions. Efforts to achieve world-class energy efficiency have accelerated; key energy projects were successfully executed, with two 135MW power generation units successfully connected to the grid. Production operations were reorganized with a focus on energy efficiency; in June, the self-generated powe ratio exceeded 80% and utility costs (water and electricity) fell below 80 yuan per unit, marking the first time the "Double 80" targets were surpassed and setting a historic record. Energy conversion efficiency improved dramatically, with the self-generated power ratio reaching the industry's 90th percentile, and cumulative converter gas recovery hitting a record high of 139.2 m³/t.

II. Core Competence Analysis

The company adheres to an innovation-driven approach and a "premium + service" development model, with strategic goals to build an internationally competitive premium steel plate base, a leading domestic special steel base, and a comprehensive service provider. By playing a leading role in strategy, the company focuses on quality improvement, efficiency enhancement, product upgrades, technological innovation, and green and smart manufacturing. These efforts aim to innovate business management strategies, enhance core competitiveness, and drive high-quality, green, and smart development.

1. Production and Manufacturing Capacity: Guided by the philosophy of "prioritizing efficiency and creating value," the company deepened the operation of "virtual business units," extending cost-conscious management to every production line, product variety, and job role. Efforts focused on enhancing "eight key efficiency metrics" and optimizing production line positioning to ensure high-efficiency output for active lines while minimizing expenses for idle ones. The company advanced efficiency improvements across the entire value chain, implementing an operational model defined by "extreme satisfaction, extreme efficiency, and extreme cost control." First, production efficiency improved; in the first half of the year, the company broke various production records 151 times, setting an all-time high. Second, production costs continued to decline. Third, technical and quality capabilities advanced, with cumulative production of automotive steel sheets reaching 1.2308 million tons.

2. Equipment Transformation and Upgrading: For 2026, the company issued a fixed-asset investment plan totaling RMB 1.492 billion. Projects implemented include the rainwater-sewage separation upgrade for the Steelmaking Plant and Fujinhe River area; the quality and efficiency enhancement upgrade for the No. 5 galvanizing line at the Cold Rolling Plant (targeting high-grade products); the upgrade of the Bengang-POSCO No. 3 galvanizing line for high-grade automotive sheet production; and a new round of large-scale technological, IT, and environmental upgrades—exemplified by the "smart factory" transformation of the Hot Strip Mill's 2300 line. Currently, the rainwater-sewage separation project at the Ironmaking Plant's coking section, the environmental upgrade (vibrating screens and passive dust removal) at the Resource Service Branch, and the enclosure of conveyor belt head/tail pulleys and feed points at the Ironmaking Plant have all been put into operation; meanwhile, the quality and efficiency enhancement project for the Hot Strip Mill's 2300 line is proceeding steadily.

3. New Product Development Capability: The company completed the development of 20 new products and secured orders totaling 73.5 thousand tonnes. It advanced the iterative upgrading of high-strength automotive steels, successfully producing a trial batch of 1,000 MPa-grade hot-dip galvanized dual-phase steel. Focusing on the home appliance steel market, the company developed pickled enameling steel, thereby filling a gap in its product portfolio. Through targeted technical breakthroughs, it achieved stable production of CCSB-grade shipbuilding plate steel in an ultra-thick specification (26.0 mm); the product has passed China Classification Society (CCS) certification and is qualified for supply. Significant progress was made in expanding overseas markets; regarding exported high-end grinding ball steel, process optimization resolved technical bottlenecks in ultrasonic Class A flaw detection for large-specification products and overcame issues such as high defect rates during the straightening of high-carbon steel.

4. Technological Innovation Capability: To strengthen industry-academia collaboration, the company partnered with Xi'an Jiaotong University on the project "Research on Edge Cracking in DP980-DH980 High-Strength Steel Under Complex Loading Conditions," facilitating the transfer of mature technological achievements from universities and research institutes to the enterprise. Regarding standards, the company is currently developing four international standards, nine national standards, and one group standard; the revision of the ISO 9681 international standard, led by the company, has been completed and is undergoing pre-publication review, while the revision of three national standards—including GB/T 17600—has also been completed and submitted to the Standardization Administration of China for review. In terms of intellectual property, the company filed 69 patent applications (including 47 for inventions) and was granted 37 patents (including 28 for inventions). Regarding technological achievements, the company won two provincial- or ministerial-level Science and Technology Progress Awards: the project "Collaborative Technology for Digital-Enabled Automotive Steel Forming, Crash Safety, and Lightweighting, and Its Full-Chain Engineering Transformation" received the Second Prize of the Liaoning Province Science and Technology Award, and the project "Development and Large-Scale Engineering Application of Key Technologies for Precision Forming and Crash Safety of High-Performance Automotive Steel Unde Complex Loads" won the Third Prize of the Science and Technology Innovation Award from the China Industry-University-Research Institute Collaboration Association.

5. Green Development Capability: The company is prioritizing initiatives such as the trial production of "green steel" products, the certification of low-carbon steel grades, and the development of a carbon management platform. It has successfully secured certification for three low-carbon steel grades—including pickled steel SPH270D—for Toyota’s technical reserve projects, as well as for deep-drawing steel St04D+Z and 590DPD+Z for FAW’s technical reserve projects; additionally, it obtained certification for hot-dip galvanized green steel DC53D+Z intended for use in Sony TV back panels. By pioneering a combined process route utilizing "blast furnace hot metal + electric arc furnace (EAF) molten steel (100% scrap)," the company has launched the production of low-carbon automotive steel. Three process models have been explored: a 220t hot metal + 120t special steel molten steel mode (35% scrap ratio); a 170t hot metal + 170t special steel molten steel model (50% scrap ratio); and a 50t hot metal + 200t molten steel model (80% scrap ratio). These models enable carbon emission reductions ranging from 30% to 60%. To enhance its competitiveness in product carbon management and meet the requirements of high-end supply chains, the company is collaborating with Baosight Software to build a carbon management platform; the project has currently entered the implementation phase.

6. Intelligent Manufacturing Capability: Adhering to a strategy driven by the "Smart Index" and supported by the digital and intelligent transformation of production processes, the company has steadily implemented smart manufacturing. Intelligent projects launched in 2025—including the smart factory in the No. 3 Cold Rolling area, Phase II of the integrated quality data management platform, and the adaptation of the plate information system for independent and controllable operation—have already seen full or partial functional deployment. Plans for 2026 include investments in Phase II of the plate information system adaptation and the smart factory upgrade for the 2300mm hot continuous rolling line. Driven by digital and intelligent technological innovation, the company has achieved a data assetization rate of 92%. It has deployed 26 robotic units for "3D" tasks (dirty, dangerous, and demanding)—such as blast furnace inspections, temperature measurement and sampling, and slag removal—raising the automation substitution rate from 9% to 32%. The Smart Index score reached 82.67, marking a transition from the "integration" level to the "optimization" level—a 19.36% increase from the previous 69.26—thereby accelerating the pace of smart manufacturing for its plate products. The company has been recognized as an "Excellent-Level Smart Factory" by the Ministry of Industry and Information Technology (MIIT) and an "Advanced-Level Smart Factory" by the Liaoning Provincial Department of Industry and Information Technology; it was also named a "Smart Steel Demonstration Unit" at the 10th Smart Steel Technology and Equipment Development Conference and a benchmark enterprise for digital transformation in Liaoning Province, while successfully obtaining AAAA-leve certification for the integration of industrialization and informationization.

III. Main Business Analysis

Overview

Please refer to the section "I. Main Business Operations During the Reporting Period."

Year-over-year changes in key financial data

Unit: RMB

Significant changes in the composition or sources of the Company's profits during the reporting period.

□Applicable Not applicable

There were no significant changes in the composition or sources of the company's profit during the reporting period.

Breakdown of Operating Revenue

Unit：RMB

Industries, products, regions, or sales models accounting for more than 10% of the company's revenue or operating profit

Applicable □Not applicable

Unit：RMB

In the case where the statistical scope of the company's main business data has been adjusted during the reporting period, the company's main business data for the most recent year, adjusted according to the reporting period's scope.

□Applicable Not applicable

IV. Analysis of Non-core Business

Applicable Not applicable

Unit：RMB

V. Assets and Liabilities

1. Significant Change of Assets Components

Unit：RMB

2. Overview of Major Overseas Assets.

ApplicableNot applicable

3. Assets and Liabilities Measured at Fair Value

ApplicableNot applicable

Unit：RMB

Other changes

Whether there has been a significant change in the measurement attributes of the company's main assets during the reporting period □Yes No

4. Restricted Assets by the End of the Period

VI. Analysis of Investment Status

1. Overview

ApplicableNot applicable

2. Significant equity investment obtained during the reporting period

ApplicableNot applicable

3. Major non-equity investments ongoing during the reporting period.

ApplicableNot applicable

4. Financial asset investments

(1) Securities investment

Applicable Not applicable

The company did not have any securities investments during the reporting period.

(2) Derivative investment situation

Applicable Not applicable

The company did not have any derivative investments during the reporting period.

5. Use of Raised Funds

√ Applicable □ Not applicable

(1) Use of Raised Funds

√Applicable □ Not applicable

Unit: 10 thousand yuan

Explanation of the overall use of raised funds

1. Use of Funds Raised for Investment Projects

For details regarding the actual use of raised funds by the Company from January to June 2026, please refer to Appendix 1, "Comparison Table of the Use of Raised Funds."

2. Changes in the Implementation Location or Method of Investment Projects

During the reporting period, there were no changes in the investment projects funded by the raised funds, nor were there any changes in their implementation locations or methods.

3. Initial investment and replacement of raised funds investment projects

The 13th meeting of the 8th Board of Directors and the 11th meeting of the 8th Board of Supervisors of the Company reviewed and approved the "Proposal on Using Raised Funds to Replace Self-raised Funds Pre-invested in Raised Fund Investment Projects and Paid Issuance Expenses", agreeing that the company will use raised funds to replace self-raised funds pre-invested in raised funds investment projects and paid issuance expenses, with a total replacement amount of RMB 366,180,860.17. This replacement does not involve a disguised change in the use of raised funds, does not affect the normal progress of raised funds investment projects, and the replacement time is no more than 6 months from the time the raised funds arrive, which is in compliance with relevant laws and regulations.

Before the raised funds were received, the company had used self-raised funds to pre-invest in the raised projects according to the project progress. As of May 31, 2020, the amount of self-raised funds pre-invested was RMB 365,630,860.17, including the steel plant No. 8 casting machine project was RMB 76,278,945.59, the iron plant No. 5 blast furnace capacity replacement project was RMB 119,043,290.09, the special steel electric furnace upgrade and transformation project was RMB 59,948,807.90, the CCPP power generation project was RMB 95,098,084.16, and the steel plant No. 4-6 converter environmental protection transformation project was RMB 15,261,732.43. As of July 6, 2020, the above-mentioned issuance expenses of RMB 55,000.00 paid by the company's own funds were replaced with raised funds.

From March 1, 2019 to May 31, 2021, the company used self-raised funds to pay for the construction of projects funded by the raised funds, amounting to RMB 1,082,356,809.47, including RMB 180,000.00 for the high-grade high-magnetic induction non-oriented silicon steel project, RMB 55,364,729.08 for the No. 8 casting machine project of the steelmaking plant, RMB 628,049,033.12 for the capacity replacement project of the No. 5 blast furnace of the ironmaking plant, RMB 253,298,156.22 for the upgrading and transformation project of the special steel electric furnace, RMB 115,353,050.36 for the CCPP power generation project, and RMB 30,111,840.69 for the environmental protection transformation project of the No. 4-6 converters of the steelmaking plant. The company has transferred the above amounts from the raised funds account to the general deposit account in 2021.

From June 1, 2021 to May 31, 2022, the company used self-raised funds to pay for the construction of projects funded by the raised funds, amounting to RMB 614,208,698.23, including: RMB 12,881,890.61 for the No. 8 Casting Machine Project of the Steelmaking Plant, RMB 17,508,088.97 for the Capacity Replacement Project of the No. 5 Blast Furnace of the Ironmaking Plant, RMB 364,155,482.35 for the Upgrading and Reconstruction Project of the Special Steel Electric Furnace, RMB 186,441,497.75 for the CCPP Power Generation Project, and RMB 33,221,738.55 for the Environmental Protection Reconstruction Project of the No. 4 and No. 6 Converters of the Steelmaking Plant. The company has transferred the above amounts from the raised funds account to the general deposit account in 2022.

From June 1, 2022 to May 31, 2023, the company used self-raised funds to pay for the construction of the raised funds investment projects, amounting to RMB 494,502,583.01, of which RMB 15,316,136.52 was used for the capacity replacement project of No. 5 blast furnace of the ironmaking plant, RMB 19,796,661.74 for the CCPP power generation project, RMB 429,392,157.76 for the upgrading and transformation project of the special steel electric furnace, RMB 21,452,968.70 for the environmental protection transformation project of No. 4-6 converters of the steelmaking plant, and RMB 8,544,658.29 for the No. 8 casting machine project of the steelmaking plant. As of December 31, 2023, the company has transferred the funds from the raised funds account to the general deposit account.

From June 1, 2023 to May 31, 2024, the company used self-raised funds to pay for the construction of the raised investment projects, amounting to RMB 102,185,736.55, of which RMB 24,887,030.75 was used for the No. 8 casting machine project of the steelmaking plant, RMB 5,111,121.59 for the capacity replacement project of the No. 5 blast furnace of the ironmaking plant, RMB 60,162,375.13 for the upgrading and transformation project of the special steel electric furnace, RMB 5,454,868.60 for the CCPP power generation project, and RMB 6,570,340.48 for the environmental protection transformation project of the No. 4-6 converters of the steelmaking plant. As of December 31, 2024, the company has transferred the funds from the raised funds account to the general deposit account.

From June 1, 2024 to May 31, 2025, the company has no prior investment or replacement of raised funds in investment projects. From June 1, 2025 to May 31, 2026, the company has no prior investment or replacement of raised funds in investment projects.

4. Using idle raised funds to temporarily supplement working capital

During the reporting period, the Company did not use temporarily idle raised funds to temporarily supplement working capital.

(1) Status of the temporary use of idle raised funds to supplement working capital in 2020

The company used idle raised funds of RMB4,180,000,000.00 (RMB1,010,000,000.00 for high-grade and high-magnetic induction non-oriented silicon steel project, RMB220,000,000.00 for the No. 8 casting machine project of the steel plant, RMB800,000,000.00 for the capacity replacement project of No. 5 blast furnace of the iron plant, RMB1,300,000,000.00 for the special steel electric furnace upgrading and renovation project, RMB700,000,000.00 for the CCPP power generation project, and RMB150,000,000.00 for the environmental protection renovation project of No. 4-6 converters of the steel plant) to temporarily supplement working capital. The matter was reviewed and approved at the 14th meeting of the 8th Board of Directors and the 12th meeting of the 8th Board of Supervisors held on July 28, 2020. The company's independent directors have expressed their clear consent. The time for supplementing working capital shall not exceed 12 months.

The sponsor of the company's public issuance of convertible corporate bonds agreed that the company could use idle raised funds to temporarily supplement working capital and issued the "Guotai Junan Securities Co., Ltd.'s Verification Opinion on the Company's Use of Idle Raised Funds to Temporarily Supplement Working Capital".

As of July 27, 2021, the Company has returned all of the idle raised funds used to temporarily supplement working capital to the Company's special account for raised funds.

(2) Status of the temporary use of idle raised funds to supplement working capital in 2021

The company used idle raised funds of RMB 3,030,000,000.00 (RMB 1,010,000,000.00 for high-grade and high-magnetic induction non-oriented silicon steel project, RMB 150,000,000.00 for the No. 8 casting machine project of the steel plant, RMB 160,000,000.00 for the capacity replacement project of No. 5 blast furnace of the iron plant, RMB 1,000,000,000.00 for the special steel electric furnace upgrade and renovation project, RMB 590,000,000.00 for the CCPP power generation project, and RMB 120,000,000.00 for the environmental protection renovation project of No. 4-6 converters of the steel plant) to temporarily supplement working capital. The matter was reviewed and approved at the 19th meeting of the 8th Board of Directors and the 17th meeting of the 8th Board of Supervisors held on July 28, 2021. The company's independent directors have expressed their clear consent. The time for replenishing working capital shall not exceed 12 months.

The sponsor of the company's public issuance of convertible corporate bonds agreed that the company could use idle raised funds to temporarily supplement working capital and issued the "Guotai Junan Securities Co., Ltd.'s Verification Opinion on the Company's Use of Idle Raised Funds to Temporarily Supplement Working Capital".

As of July 26, 2022, the Company has returned all of the idle raised funds used to temporarily supplement working capital to the Company's special account for raised funds.

(3) Status of the temporary use of idle raised funds to supplement working capital in 2022

The company used idle raised funds of RMB 3,014,000,000.00 (RMB 1,015,000,000.00 for high-grade and high-magnetic induction non-oriented silicon steel project, RMB 165,000,000.00 for the No. 8 casting machine project of the steel plant, RMB 175,000,000.00 for the capacity replacement project of No. 5 blast furnace of the iron plant, RMB 933,000,000.00 for the special steel electric furnace upgrade and renovation project, RMB 578,000,000.00 for the CCPP power generation project, and RMB 148,000,000.00 for the environmental protection renovation project of No. 4-6 converters of the steel plant) to temporarily supplement working capital. The matter was reviewed and approved at the third meeting of the ninth board of directors and the third meeting of the ninth board of supervisors held on July 28, 2022. The company's independent directors have expressed their clear consent. The time for replenishing working capital shall not exceed 12 months.

The sponsor of the company's public issuance of convertible corporate bonds agreed that the company could use idle raised funds to temporarily supplement working capital and issued the "Guotai Junan Securities Co., Ltd.'s Verification Opinion on the Company's Use of Idle Raised Funds to Temporarily Supplement Working Capital".

As of July 17, 2023, the Company has returned all of the idle raised funds used to temporarily supplement working capital to the Company's special account for raised funds.

(4) Status of the temporary use of idle raised funds to supplement working capital in 2023

The company used idle raised funds of RMB 1,961,200,000.00 (RMB 1,015,000,000.00 for high-grade and high-magnetic induction non-oriented silicon steel project, RMB 125,000,000.00 for the No. 8 casting machine project of the steel plant, RMB 145,000,000.00 for the capacity replacement project of No. 5 blast furnace of the iron plant, RMB 188,000,000.00 for the special steel electric furnace upgrade and renovation project, RMB 393,200,000.00 for the CCPP power generation project, and RMB 95,000,000.00 for the environmental protection renovation project of No. 4-6 converters of the steel plant) to temporarily supplement working capital. The matter was reviewed and approved at the 17th meeting of the 9th Board of Directors and the 12th meeting of the 9th Board of Supervisors held on July 19, 2023. The company's independent directors have expressed their clear consent. The time for supplementing working capital shall not exceed 12 months.

The sponsor of the company's public issuance of convertible bonds agreed that the company could use idle raised funds to temporarily supplement working capital and issued the "Guotai Junan Securities Co., Ltd.'s Verification Opinion on the Company's Use of Idle Raised Funds to Temporarily Supplement Working Capital".

As of July 17, 2024, the Company has returned all of the idle raised funds used to temporarily supplement working capital to the Company's special account for raised funds.

(5) Status of the temporary use of idle raised funds to supplement working capital in 2024

The company used idle raised funds of RMB 1,860,000,000.00 (RMB 1,015,000,000.00 for high-grade and high-magnetic induction non-oriented silicon steel project, RMB 100,000,000.00 for the No. 8 casting machine project of the steel plant, RMB 140,000,000.00 for the capacity replacement project of No. 5 blast furnace of the iron plant, RMB120,000,000.00 for the special steel electric furnace upgrade and renovation project, RMB 397,000,000.00 for the CCPP power generation project, and RMB 88,000,000.00 for the environmental protection renovation project of No. 4-6 converters of the steel plant) to temporarily supplement working capital. The matter was reviewed and approved at the 26th meeting of the 9th Board of Directors and the 17th meeting of the 9th Board of Supervisors held on July 18, 2024. The company's independent directors have expressed their clear consent. The time for supplementing working capital shall not exceed 12 months.

The sponsor of the company's public issuance of convertible bonds agreed that the company could use idle raised funds to temporarily supplement working capital and issued the "Guotai Junan Securities Co., Ltd.'s Verification Opinion on the Company's Use of Idle Raised Funds to Temporarily Supplement Working Capital".

As of July 15, 2025, the Company has returned the aforementioned idle raised funds, which were utilized to temporarily supplement working capital, to the Company's designated special account for raised funds.

(6) Status of the temporary use of idle raised funds to supplement working capital in 2025

The proposal regarding the temporary use of RMB 1,015,000,000.00 in idle raised funds—originally designated for the "High-Grade, High-Magnetic-Induction Non-Oriented Silicon Steel Project" — to supplement working capital was reviewed and approved at the Second Meeting of the 10th Board of Directors and the Second Meeting of the 10th Board of Supervisors, held on July 16, 2025. The Company's Independent Directors have issued an explicit opinion of consent regarding this matter; the duration of this working capital supplementation shall not exceed 12 months.

The sponsor of the company's public issuance of convertible bonds agreed that the company could use idle raised funds to temporarily supplement working capital and issued the "Guotai Junan Securities Co., Ltd.'s Verification Opinion on the Company's Use of Idle Raised Funds to Temporarily Supplement Working Capital".

On April 23, 2026, the Company fully returned the idle raised proceeds of RMB 1,015 million—which had been used to temporarily supplement working capital—to the Company’s designated account for raised proceeds, and notified its sponsor and sponsor representatives.

5. Cash management using idle raised funds

The company did not use idle raised funds for cash management during the reporting period.

6. Use of surplus raised funds

On April 2, 2025, the company held the 35th meeting of the 9th Board of Directors and the 21st meeting of the 9th Board of Supervisors to review and approve the "Proposal on Completing Some Fundraising Projects and Using the Surplus Fundraising Funds to Permanently Supplement Working Capital". Given that the Company's 2020 public issuance of convertible corporate bonds, which raised funds for investment projects including the "Steel Plant No. 8 Casting Machine Project," the "Iron Plant No. 5 Blast Furnace Capacity Replacement Project," the "Special Steel Electric Furnace Upgrading and Reconstruction Project," the "CCPP Power Generation Project," and the "Steel Plant No. 4-6 Converter Environmental Reconstruction Project," have essentially completed investment, in order to rationally utilize the raised funds, reduce the Company's financial expenses, enhance the Company's sustainable operating capacity, and fully utilize the raised funds, and in accordance with the requirements of relevant laws, regulations, and normative documents such as the "Guidelines for the Supervision of Listed Companies No. 2 - Regulatory Requirements for the Management and Use of Raised Funds by Listed Companies" and the "Shenzhen Stock Exchange Guidelines for Self-Regulatory Supervision of Listed Companies No. 1 - Standardized Operations of Main Board Listed Companies," the Company intends to use the remaining raised funds of RMB 870.18 million (the specific amount will be based on the bank interest balance settled on the date the funds are transferred) from these completed investment projects to permanently supplement its working capital for the Company's daily operations.

In addition, the company does not use the surplus funds from the raised funds investment projects for other raised funds investment projects or non-raised funds investment projects.

The sponsor of the company's public offering of convertible bonds agreed that the company would use the remaining raised funds to permanently supplement its working capital and issued the "Guotai Junan Securities Co., Ltd.'s Verification Opinion on the Completion of Some Fundraising Projects of Bengang Plate Co., Ltd. and the Use of the Surplus Raised Funds to Permanently Supplement Working Capital".

7. Changes in the Use of Raised Funds

On April 24, 2026, the Company convened the ninth meeting of the tenth Board of Directors, where the "Proposal on Changing the Use of Certain Raised Funds to Permanently Supplement Working Capital" was approved with 9 votes in favor, 0 against, and 0 abstentions. The Board agreed to terminate the raised-fund investment project titled "High-Grade, High-Magnetic-Induction Non-Oriented Silicon Steel Project" and to utilize the entire remaining balance of the project's raised funds— amounting to RMB 1,014.79 million—to permanently supplement working capital.

Apart from this, the Company has not used the remaining funds from raised-fund investment projects for other raised-fund investment projects or for projects not funded by raised proceeds.

The sponsor for the Company's public issuance of convertible bonds consented to the Company's use of the remaining raised funds to permanently supplement working capital and issued the "Verification Opinion of Guotai Haitong Securities Co., Ltd. on Bengang Plate Co., Ltd.'s Change of Use of Certain Raised Funds to Permanently Supplement Working Capital."

8. Utilization of excess raised funds

The Company has no instances of utilizing excess raised funds.

(2) Fundraising commitments

√Applicable □ Not applicable

Unit: 10 thousand yuan

(3) The situation for raised funds change project

□ Applicable √ Not applicable

During the reporting period, the company did not have any changes in the fundraising project.

VII. Significant Assets and Equity Sold

1. Significant Assets Sold

ApplicableNot applicable

There were no significant asset sold during the reporting period.

2. Substantial Equity Sold

ApplicableNot applicable

VIII. Analysis of Major Subsidiaries and Affiliates

ApplicableNot applicable

Details of Major Subsidiaries and Affiliates that Contribute More Than 10% to the Company's Net Profit

Unit：RMB

Acquisition and Disposal of Subsidiaries During the Reporting Period

Applicable Not applicable

IX. Structured Entities Controlled by the Company

ApplicableNot applicable

X. Risks Faced by the Company and Countermeasures

1. Market and Operational Risks

In the first half of the year, the steel industry as a whole showed an overall trend of weak demand, loose supply, falling prices, shrinking profits, and intensified competition. The company's operations are facing multiple substantive pressures, specifically concentrated in the continued weakness of terminal demand and insufficient market growth; steel prices have fluctuated downwards, and profit margins have continued to be compressed; industry production capacity has been fully released, and market competition has been viciously involved.

Countermeasures: In response to the severe downturn in the industry in the first half of the year, the company made a comprehensive shift, actively expanded the market, refined operations, and comprehensively hedged market risks through a series of targeted response measures such as stabilizing orders, adjusting structure, controlling risks, improving services, expanding channels, and ensuring cash flow.

2. Financial and Capital Risks

The company faces significant short-term debt repayment pressure; compounded by persistent operating losses and rising financia costs, its capital chain is strained, operating cash flow lacks stability, and the level of funds tied up in receivables and inventories remains high. This ongoing capital tie-up further constricts available liquidity, reduces capital turnover efficiency, and places significant strain on cash flow.

Countermeasures: Implement a multi-pronged approach to mitigate risks associated with maturing debt, establish a dedicated mechanism for debt repayment, and ensure capital security through a dual strategy: on one hand, actively expand diversified financing channels—such as securing bank credit lines and executing debt swaps—to build up repayment funds in advance; on the other, boost operating cash flow by cutting costs and increasing efficiency, improving quality and profitability, and revitalizing existing assets. Strictly control the volume of funds tied up in receivables and inventories, enforce rigorous cash flow management, set annual reduction targets for these items, continuously revitalize existing capital, and enhance capital turnover efficiency.

3. Environmental Protection and Regulatory Compliance Risks

Environmental inspections and ultra-low emission controls within the domestic steel industry are intensifying, with regulatory standards for pollutant emissions, solid waste management, and "dual control" of energy consumption (limiting both total energy consumption and energy intensity) constantly rising. Policies regarding capacity replacement, energy consumption controls, low-carbon transformation, and industrial upgrading are continuously updated, raising the threshold for industry entry.

Countermeasures: The Company strictly implements rectification measures addressing issues identified during central environmenta inspections and has established robust standards for the routine operation, inspection, and maintenance of environmental protection facilities to ensure pollutant emissions consistently meet compliance standards. The Company continues to advance energy conservation, carbon reduction, and clean production upgrades; it reduces the emission intensity of major pollutants, standardizes the disposal processes for solid and hazardous waste, and fully complies with all industry environmental regulations.

XI. The Formulation and Implementation of Market Value Management System and Valuation Enhancement Plan.

Whether the company established a market value management System

YesNo

Whether the company disclosed its valuation enhancement plan

Yes No

During the reporting period, the Company enhanced operational efficiency and profitability by focusing on its core business, setting multiple historical records through efficiency improvements, boosting the technological content and added value of high-end products, accelerating the intelligent upgrading of production lines, optimizing structure and addressing weaknesses to improve quality and efficiency, and expediting the acceptance process for ultra-low emissions as part of its green transition. The Company actively pursued high-quality development goals and continued to advance major asset restructuring. Committed to serving investors, the Company expanded communication channels by adding a dedicated investor hotline and establishing a dedicated investor email address; it achieved a 100% response rate on the "Hudong-e" (Interactive E) platform, conducted eight investor communication events, hosted over 50 institutional site visits, and held an annual earnings briefing, thereby institutionalizing the practice of regular earnings briefings. Adhering to the principles of "truthfulness, accuracy, completeness, timeliness, and fairness" in information disclosure, the Company diligently fulfilled its disclosure obligations, completing 32 disclosure events and releasing 77 documents—including periodic reports and ESG reports—during the first half of the year. The Company's stock price has successfully moved out of the long-standing "trading below net asset value" (breaking-net) range.

XII. Implementation of the "Quality Return Dual Improvement" Action Plan

Whether the company has disclosed the announcement of the "Quality Return Dual Improvement" action plan

Yes No

IV. Corporate Governance, Environment and Society

I. Changes in directors, supervisors and senior management of the Company

√Applicable □Not applicable

II. Profit distribution and capital reserve conversion into share capital during the reporting period

□ Applicable √ Not applicable

The company plans not to distribute cash dividends, issue bonus shares, or convert capital reserves into share capital during the current period.

III. Implementation of the company's equity incentive plan, employee stock ownership plan or other employee incentive measures

□ Applicable √ Not applicable

The company had no equity incentive plan, employee stock ownership plan or other employee incentive measures and their implementation during the reporting period.

IV. Status of Environmental Information Disclosure

Whether the listed company and its subsidiaries belong to the key pollutant discharge units announced by the environmental protection department

√ Yes □ No

V. Social responsibility

The company actively selects and dispatches outstanding personnel to support rural revitalization efforts; currently, two employees are serving as resident village officials. Adhering to the requirements of consolidating poverty alleviation achievements and advancing agricultural and rural modernization, these officials coordinate industrial development with livelihood support. They focus on strengthening village economies and increasing local incomes by fostering industries and expanding revenue streams for both collective entities and individual residents, while also implementing robust, routine monitoring to prevent a return to poverty. Upholding a pragmatic and incorruptible work style and remaining committed to serving the people, they rally collective efforts for rural development. The company has formulated its 2026 assistance plan, which includes a target of 4.6947 million yuan for "consumption-based assistance" (purchasing goods from assisted areas) for the year—a commitment already incorporated into the company's comprehensive budget management. Additionally, in accordance with the Notice on Continuously Carrying Out "Workwear Support for Xinjiang" Initiatives, the company plans to procure 2,000 sets of workwear from Xinjiang at an estimated cost of 226 thousand yuan; these plans are scheduled for implementation in the second half of the year.

V. Important Events

I. Commitments that the actual controller, shareholders, related parties, acquirers and the company and other related parties have fulfilled during the reporting period and have not yet fulfilled by the end of the reporting period

Applicable □Not applicable

II. Non-operating capital occupation of listed companies by controlling shareholders and other related parties

□Applicable Not applicable

During the reporting period, there was no non-operating capital occupation of the listed company by the controlling shareholder or other related parties.

III. Illegal external guarantees

□Applicable Not applicable

The company did not provide any illegal external guarantees during the reporting period.

IV. Appointment and dismissal of accounting firms

Whether the semi-annual financial report has been audited

□Yes No

The company's semi-annual report is unaudited.

V. Board of Directors' Explanation on the Non-Standard Audit Report Issued by the Accounting Firm for the Reporting Period

□Applicable Not applicable

VI. Board of Directors' Explanation on Matters Related to the Non-Standard Audit Report of the Previous Year

□Applicable Not applicable

VII. Bankruptcy and reorganization related matters

□Applicable Not applicable

The company did not have any bankruptcy reorganization related matters during the reporting period.

VIII. Litigation and arbitration matters

Major Litigation and Arbitration Matters

□Applicable Not applicable

During the reporting period, the Company had no major litigation or arbitration matters.

Other litigation matters

☑Applicable Not applicable

IX. Penalties and Rectification

Applicable ☑ Not applicable

The Company was not subject to any penalties or rectification requirements during the reporting period.

X. Integrity of the company and its controlling shareholders and actual controllers

□Applicable Not applicable

XI. Major Related-Party Transactions

1. Related-party transactions related to daily operations

☑Applicable Not applicable

2. Related party transactions relevant to asset acquisition or sold

□ Applicable √ Not applicable

During the reporting period, the Company did not engage in any related-party transactions involving the acquisition or disposal of assets or equity interests.

3. Related party transactions relevant to joint investments

□ Applicable √ Not applicable

During the reporting period, the Company did not engage in any related-party transactions involving joint external investments.

4. Credits and liabilities with related parties

□ Applicable √ Not applicable

There were no related credits and debts during the reporting period.

5. Transactions with related financial companies

√ Applicable □ Not applicable

Deposit business

Loans

Credit or other financial services

6. Transactions between the company's holding financial company and related parties

□ Applicable √ Not applicable

There were no deposits, loans, credit or other financial businesses between the financial company controlled by the company and its related parties.

7. Other significant related transactions

□ Applicable √ Not applicable

There were no other significant related transactions during the reporting period.

XII. Significant Contracts and Their Performance

1. Trusteeship, Contracting, and Lease Arrangements

(1) Trusteeship

☐ Applicable ☑ Not Applicable

During the reporting period, the Company had no trusteeship arrangements.

(2) Contracting

☐ Applicable ☑ Not Applicable

During the reporting period, the Company had no contracting arrangements.

(3) Leasing

☑ Applicable ☐ Not Applicable

Details of leasing

The Company as Lessee

Items with Profit/Loss Impact Exceeding 10% of the Company’s Total Profit for the Reporting Period

☐ Applicable ☑ Not Applicable

During the reporting period, there were no lease arrangements that generated profit/loss exceeding 10% of the Company’s total profit.

2. Significant Guarantees

☐ Applicable ☑ Not Applicable

During the reporting period, there were no significant guarantees provided by the Company.

3. Entrusted Cash Asset Management

☐ Applicable ☑ Not Applicable

During the reporting period, the Company did not engage in entrusted wealth management.

4. Other Significant Contracts

☐ Applicable ☑ Not Applicable

During the reporting period, there were no other significant contracts.

XIII. Research, visits and interviews received in this reporting period

ApplicableNot applicable

XIV. Other Major Events

☑ Applicable ☐ Not Applicable

On June 20, 2023, the company disclosed the "Major Asset Replacement and Related Transaction Plan" to carry out asset replacement with Benxi Iron and Steel Company, intending to acquire 100% equity of Benxi Iron and Steel (Group) Mining Co., Ltd., and intending to dispose of all assets and liabilities of the listed company except for retained assets and liabilities. The difference between the assets to be acquired and the assets to be disposed of shall be made up by one party to the other in cash. At present, the company is conducting further demonstration and communication and negotiation on the transaction plan. After the relevant matters are determined, the company will convene the board of directors again for deliberation.

XV. Major Events of Subsidiaries

☐ Applicable ☑ Not Applicable

VI. Status of Share Capital Changes and Shareholders

I. Share Capital Changes

1. Share capital changes

Unit: Share

Reason for share capital changes

√Applicable □Not applicable

During the reporting period, 5,071 convertible bonds were converted into shares and the company's total share capital increased by 153,849 shares.

Approval of share capital changes

□ Applicable √ Not applicable

Status of registration process of transferred shares

□ Applicable √ Not applicable

Progress of the Share Buyback Implementation

□ Applicable √ Not applicable

Progress update on the reduction of repurchased shares via centralized bidding

□ Applicable √ Not applicable

Influences of share capital changes on financial indices such as basic earnings per share, diluted earnings per share, and net assets per share attributed to common shareholders

□ Applicable √ Not applicable

Other information the Company deems necessary to be disclosed or required by the authority

□ Applicable √ Not applicable

2. Changes of Restricted Shares

□Applicable √Not applicable

II. Securities Issuance and Listing

□Applicable √Not applicable

III. Shareholders and Actual Controller

1. Total Number of shareholders and shareholding

Unit: Share

Shareholders holding more than 5% of the shares, the top 10 shareholders and the top 10 shareholders of unrestricted tradable shares participating in the refinancing business and lending shares

□ Applicable √ Not Applicable

The top 10 shareholders and the top 10 shareholders of unrestricted tradable shares have changed compared with the previous period due to lending/repayment of refinancing

□ Applicable √ Not Applicable

Whether top 10 common shareholders and top 10 un-restricted common shareholders have a buy-back agreement dealing in reporting period

□ Yes √ No

Top 10 common shareholders and top 10 un-restricted common shareholders had no buy-back agreement dealing in reporting period.

IV. Changes in Shareholdings of Directors and Senior Management

□ Applicable √ Not Applicable

There were no changes in the shareholdings of the company's directors and senior management during the reporting period; for details, please refer to the 2025 annual report.

V. Changes in the controlling shareholder or actual controller

If the company has previously disclosed that its actual controller is planning a change in control but the process has not yet been completed, please provide an update on the progress of the change in control.

□ Applicable √ Not Applicable

Change of controlling shareholders during the reporting period

□ Applicable √ Not Applicable

There was no change in the company's controlling shareholder during the reporting period.

Change of actual controller during the reporting period

□ Applicable √ Not Applicable

There was no change in the actual controller of the company during the reporting period.

VI. Information Regarding Preferred Shares

□ Applicable √ Not Applicable

The Company had no preferred shares during the reporting period.

VII. Status of Bonds

√ Applicable □ Not applicable

I. Enterprise bonds

□ Applicable √ Not applicable

During the reporting period, the company did not have Enterprise bonds.

II. Corporate bonds

□ Applicable √ Not applicable

During the reporting period, the company did not have corporate bonds.

III. Debt financing tools for non-financial companies

□ Applicable √ Not applicable

During the reporting period, the company did not have non-financial corporate debt financing instruments.

IV. Convertible corporate bonds

√ Applicable □ Not applicable

1. Convertible bond issuance

(1) Convertible Bond Issuance Status

Approved by the China Securities Regulatory Commission's "Securities Regulatory License [2020] No. 46", the company publicly issued 68 million convertible corporate bonds on June 29, 2020, with a face value of RMB 100 each, a total issuance amount of RMB 6.80 billion, and a term of 6 years.

(2) Listing Status of Convertible Bonds

Pursuant to the approval granted by the Shenzhen Stock Exchange (SZSE) in document "Shen Zheng Shang [2020] No. 656," the Company's convertible corporate bonds, with an aggregate principal amount of RMB 6.8 billion, commenced trading on the SZSE on August 4, 2020; the bonds are abbreviated as " Bengang Convertible Bond" and bear the stock code "127018."

(3) Conversion period for convertible bonds

In accordance with the stipulations of the “Prospectus for the Public Issuance of A-Share Convertible Corporate Bonds by Bengang Plate Co., Ltd.”, the conversion period for the convertible corporate bonds issued in this offering commences on the first trading day following the expiration of six months from the completion of the issuance and extends to the maturity date of the bonds, specifically, from January 4, 2021, to June 28, 2026.

(4) Redemption Status of Convertible Corporate Bonds at Maturity

The conversion period for the “Bengang Convertible Bonds” commenced on January 4, 2021. As of June 26, 2026 (the final conversion date), a total of 11,695,500 convertible bonds had been converted into the Company’s shares, resulting in the issuance of 233,018,570 shares. The outstanding balance of “Bengang Convertible Bonds” not converted by maturity amounted to 56,304,420 bonds, with a total redemption value of RMB 6,700,225,980 (inclusive of tax and the final interest payment); this amount was fully redeemed on June 29, 2026. Effective June 29, 2026, the conversion of “Bengang Convertible Bonds” ceased, and the bonds were delisted from the Shenzhen Stock Exchange. For further details, please refer to the “Announcement on the Redemption Results and Share Capital Changes of Bengang Convertible Bonds” (Announcement No.: 2026-044) published by the Company on June 30, 2026, in designated information disclosure media.

2. Guarantors and top ten holders of convertible bonds

3. Changes in convertible bonds during the reporting period

√Applicable □ Not applicable

Unit: RMB Yuan

4. Cumulative share conversion

√Applicable □ Not applicable

5. Previous adjustments and revisions of the conversion price

6. At the end of the reporting period, the company's liabilities, changes in credit standing, and cash arrangements for debt repayment in future years

Not applicable.

V. The loss of the consolidated financial statements during the reporting period exceeds 10% of the net assets at the end of the previous year

√ Applicable □ Not applicable

VI. The company’s main accounting data and financial indicators for the past two years as of the end of the reporting period

Unit: 10 thousand yuan

VIII. Financial Report

1. Auditor’s report

Whether the interim report is audited

□ Yes √ No

The interim report is unaudited.

2. Financial Statements

The unit of the financial statements is: RMB yuan

Legal Representative: Chief Financial Officer: ChiefAccountant:

BENGANG STEEL PLATES CO., LTD. CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30 June 2026 (Expressed in Renminbi unless otherwise indicated)

The notes to the financial statements attached form part of these financial statements.

Legal Representative：

Chief Financial Officer:

ChiefAccountant:

BENGANG STEEL PLATES CO., LTD STATEMENT OF FINANCIAL POSITION As at 30 June 2026 (Expressed in Renminbi unless otherwise indicated)

The notes to the financial statements attached form part of these financial statements.

ChiefAccountant:

BENGANG STEEL PLATES CO., LTD. STATEMENT OF FINANCIAL POSITION (Continued) As at 30 June 2026 (Expressed in Renminbi unless otherwise indicated)

The notes to the financial statements attached form part of these financial statements.

Legal Representative:

Chief Financial Officer:

ChiefAccountant:

BENGANG STEEL PLATES CO., LTD CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the period ended 30 June 2026 (Expressed in Renminbi unless otherwise indicated)

The notes to the financial statements attached form part of these financial statements.

ChiefAccountant:

BENGANG STEEL PLATES CO., LTD. STATEMENT OF COMPREHENSIVE INCOME For the period ended 30 June 2026 (Expressed in Renminbi unless otherwise indicated)

The notes to the financial statements attached form part of these financial statements.

Chief Financial Officer:

ChiefAccountant:

BENGANG STEEL PLATES CO., LTD. CONSOLIDATED STATEMENT OF CASH FLOWS For the period ended 30 June 2026 (Expressed in Renminbi unless otherwise indicated)

The notes to the financial statements attached form part of these financial statements.

Chief Financial Officer:

Legal Representative:

BENGANG STEEL PLATES CO., LTD. STATEMENT OF CASH FLOWS For the period ended 30 June 2026 (Expressed in Renminbi unless otherwise indicated)

The notes to the financial statements attached form part of these financial statements.

ChiefAccountant:

BENGANG STEEL PLATES CO., LTD. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the period ended 30 June 2026 (Expressed in Renminbi unless otherwise indicated)

The notes to the financial statements attached form part of these financial statements

Legal Representative:

Chief Financial Officer:

ChiefAccountant:

BENGANG STEEL PLATES CO., LTD. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Continued) For the period ended 30 June 2026 (Expressed in Renminbi unless otherwise indicated)

The notes to the financial statements attached form part of these financial statements

Legal Representative:

Chief Financial Officer:

BENGANG STEEL PLATES CO., LTD. STATEMENT OF CHANGES IN EQUITY For the period ended 30 June 2026 (Expressed in Renminbi unless otherwise indicated)

The notes to the financial statements attached form part of these financial statements

Legal Representative:

ChiefAccountant:

BENGANG STEEL PLATES CO., LTD. STATEMENT OF CHANGES IN EQUITY (Continued) For the period ended 30 June 2026 (Expressed in Renminbi unless otherwise indicated)

Legal Representative:

ChiefAccountant:

The notes to the financial statements attached form part of these financial statements

Bengang Steel Plates Co., Ltd.

For the period from Jan. to Jun. 2026

(Expressed in Renminbi unless otherwise indicated)

1. Basic Information of the Company

(1) Company profile

Bengang Steel Plates Co., Ltd. (hereinafter referred to as “Bengang Steel Plates” or “the Company”), as approved in Liao-Zheng (1997) No. 57 by Liaoning People’s Government on 27 March 1997, was incorporated as a joint stock limited company through public share offer of domestic listed foreign currency denominated shares (B shares) in the People’s Republic of China (the “PRC”) on 27 June 1997 by Benxi Steel and Iron (Group) Co., Ltd. (“Bengang Group”), through reorganization of operations, assets and liabilities of its plants, namely, Steel Smelting Plant, Primary Rolling Plant and Continuous Hot Rolling Plant.

As approved by China Securities Regulatory Commission (hereinafter referred to as “the CSRC”), the Company issued 400,000,000 B-shares at HKD 2.38 each in Shenzhen Stock Exchange on 10 June 1997. On 3 November 1997, the Company issued another 120,000,000 A-shares (Renminbi common Shares) at RMB 5.40 each, and listed in Shenzhen Stock Exchange since 15 January 1998. The capital shares were totaled to 1,136,000,000 shares.

On 14 March 2006, according to the resolutions of the Shareholders’ Meeting regarding share equity relocation, the Share Equity Relocation Scheme, Response to Bengang Steel Plate Co., Ltd. about Share Equity Relocation issued by Liaoning Provincial Government State-owned Asset Administrative Committee, Bengang Group – the only holder of non-negotiable state-owned legal person shares paid the consideration to the current shareholders to obtain the current option for the 40,800,000 shares of the total 616,000,000 shares it was holding. Shareholding positions have been registered with China Securities Depository & Clearing Corporation Ltd. Shenzhen Office. However, the total amount of capital shares of Bengang Steel Plates Co., Ltd. was not changed through the share equity relocation action.

On July 6, 2006, the Company received Document No. Zhengjian Gongsi Zi (2006) 126, issued by the China Securities Regulatory Commission (CSRC) on June 30, 2006. This document approved the issuance by the Company of 2 billion RMB-denominated ordinary shares to Bengang Group for the purpose of acquiring relevant assets from Bengang Group. On the same day, Bengang Group received circular Zheng-Jian-Gong-Si-Zi [2006] No. 127 issued by China Securities Regulatory Committee, and were exempted for the liability of undertaking the purchase offer. The liability was caused by subscribing of the 2 billion new shares and the total shareholding was thus increased to 2.5752 billion shares (accounting for 82.12% of the total capital shares of the Company). On 28 August 2006, as approved by China Securities Depository & Clearing Corporation Ltd. Shenzhen Office, the registration and conditional placing procedures of the 2 billion new shares were completed. On 28 September 2006, the privately placed shares were approved by Shenzhen Stock Exchange to be placed in the stock market. The placing price was RMB4.6733 per share.

Approved by the China Securities Regulatory Commission [2017] No. 1476, Bengang Steel Plate Co., Ltd. privately placed no more than 739,371,534 RMB ordinary shares (A shares) to no more than 10 issuers. The non-public offering was completed on 9 February 2018, and 739,371,532 shares were actually issued. The placing price was RMB5.41 per share.

On August 20, 2021, the State-owned Assets Supervision and Administration Commission of the People's Government of Liaoning Province (hereinafter referred to as Liaoning SASAC) and Ansteel Group Co., Ltd. (hereinafter referred to as Ansteel) signed the "Agreement on the Gratuitous Transfer of State-owned Equity in Bengang Group Co., Ltd. between the State-owned Assets Supervision and Administration Commission of the People's Government of Liaoning Province and Ansteel Group Co., Ltd." According to the agreement, Liaoning SASAC will transfer its 51% equity in Bengang Group Co., Ltd. (hereinafter referred to as Bengang Group) to Ansteel Group Co., Ltd. for free. After the completion of this free transfer, Ansteel became the controlling shareholder of Bengang Group, and Ansteel indirectly hold 76.67% of the total share capital of Bengang Steel Plates.

As at 30 June 2026, the capital shares were totaled to 4,108,390,102.00 shares.

The Company’s uniform social credit code: 91210000242690243E.

The Company’s registered address: 16th Renmin Road, Pingshan District, Benxi, Liaoning Province.

The Company’s legal representative: Wang Zhanwei.

The parent company of Bengang Steel Plates Co., Ltd is Benxi Steel and Iron (Group) Co., Ltd. and the actual controller is Ansteel Group Co., Ltd..

Bengang Steel Plates Co., Ltd. belongs to ferrous metal smelting and rolling processing industry and is mainly involved in producing and trading of ferrous metal products.

The financial statements have been approved for reporting by the board of directors of the Company on 27 August 2026.

2. Basis of preparation

(1) Basis of preparation

The financial statements have been prepared in accordance with “Accounting Standards for Business Enterprises – Basic Standard” and relevant specific standards, application materials, interpretations (together hereinafter referred to as “Accounting Standards for Business Enterprises”) issued by the Ministry of Finance, and “Information Disclosure Rules for Companies of securities for public issuance No. 15 – General Regulations for Financial Statements” issued by the China Securities Regulatory Commission.

(2) Going concern

The financial statements have been prepared on a going concern basis.

3. Significant accounting policies and accounting estimates

The following disclosed content covers the specific accounting policies and accounting estimates that are adopted by the Company based on the actual production and operation characteristics. Please see Note (10) Financial instruments, (12) Inventory, (15) Fixed assets, (18) Intangible assets, (24) Revenue under “3. Significant accounting policies and accounting estimates” for details.

(1) Statement of compliance with China Accounting Standards for Business Enterprises

The financial statements present truly and completely the financial position, operation results and cash flows of the consolidated and parent company during the reporting period in accordance with China Accounting Standards for Business Enterprises.

(2) Accounting year

The Accounting year is from 1 January to 31 December.

(3) Operating period

The operating period is twelve months.

(4) Functional currency

The Company’s functional currency is RMB.

(5) The accounting treatment for Business combination under/not under common control Business combination under common control

The assets and liabilities that the Company acquired in a business combination shall be measured on the basis of their carrying amount of acquiree’s assets, liabilities (as well as the goodwill arising from the business combination) in the consolidated financial statement of the ultimate controller on the combining date. As for the balance between the carrying amount of the net assets obtained by the Company and the carrying amount of the consideration paid by it (or the total par value of the shares issued), capital reserve needs to be adjusted. If the capital reserve is not sufficient, any excess shall be adjusted against retained earnings.

Business combination not under common control

The Company shall, on the acquisition date, measure the assets given and liabilities incurred or assumed by an enterprise for a business combination in light of their fair values, and shall record the balances between them and their carrying amounts into the profits and losses at the current period. The Company shall recognize the positive balance between the combination costs and the fair value of the identifiable net assets it obtains from the acquiree as goodwill. The Company shall treat the negative balance between the combination costs and the fair value of the identifiable net assets it obtains from the acquiree into the profits and losses of the current period. All identifiable assets, liabilities and contingent liabilities of the acquiree that meet the recognition criteria acquired in the merger are measured at fair value on the acquisition date.

Directly related expenses incurred for a business combination are recorded in the current period's profit or loss when incurred; transaction costs of equity securities or debt securities issued for a business combination are included in the initial recognition amount of the equity securities or debt securities.

(6) Scope of consolidation and Consolidation of Financial Statements

1. Scope of consolidation

The scope of consolidation of consolidated financial statements is determined based on control and the scope of consolidation includes the Company and all its subsidiaries. Control means that the Company has power over the investee, enjoys variable returns through participation in the relevant activities of the investee, and has the ability to use the power over the investee to influence the amount of its returns.

2. Procedure of consolidation

When preparing consolidated financial statements, the parent shall consider the entire group as an accounting entity, adopt uniform accounting policies to prepare the consolidated financial statements which reflect the overall financial position, operating results and cash flows of the group. The impact of internal transactions between the Company and its subsidiaries and between subsidiaries shall be offset. If internal transactions indicate that relevant assets have suffered impairment losses, such losses shall be fully recognized. The accounting policy and accounting period of the subsidiaries within the consolidation scope shall be in accordance with those of the Company. If not, it is necessary to make the adjustment according to the Company’s accounting policies and accounting period when preparing the consolidated financial statements.

The owners’ interests, profit or loss, and comprehensive income of the subsidiary attributable to the non-controlling shareholders shall be presented separately in the shareholders’ equity of the consolidated balance sheet and under the item of net profit of the consolidated statement of comprehensive income and under the item of total comprehensive income. Where losses assumed by the minority exceed the minority’s interests in the beginning equity of a subsidiary, the excess shall be charged against the minority’s interests.

(1) Increasing new subsidiaries and businesses

If the Company has a new subsidiary due to business combination under common control during the reporting period, it shall adjust the beginning balance in the consolidated statement of financial position when preparing consolidated statement of financial position. The revenue, expenses and profits of the subsidiaries from the acquisition date to the end of the reporting period are included in the Company’s consolidated statement of comprehensive income. The cash flow of the subsidiaries from the acquisition date to the end of the reporting period is included in the Company’s consolidated statement of cash flows. And meanwhile the Company shall adjust the relevant items of the comparative financial statements as if the reporting entity for the purpose of consolidation has been in existence since the date the ultimate controlling party first obtained control.

When the Company becomes capable of exercising control over an investee under common control due to additional investment or other reasons, adjustment shall be made as if the reporting entity after the combination has been in existence since the date the ultimate controlling party first obtained control. The investment income recognized between date of previously obtaining equity investment and the date the acquiree and acquirer are under common control, which is later, and the combining date, other comprehensive income and other changes of net assets arising from the equity investment previously held before obtaining the control the acquiree shall be adjusted against the prior retained earnings of the comparative financial statements and the current profit or loss respectively.

If it is not under common control, it will be included in the consolidated financial statements from the date of acquisition based on the fair value of each identifiable asset, liability and contingent liability determined on the date of acquisition.

When the Company becomes capable of exercising control over an investee not under common control due to additional investment or other reasons, the acquirer shall remeasure its previously held equity interest in the acquiree to its fair value at the acquisition date. The difference between the fair value and the carrying amount shall be recognized as investment income for the period when the acquisition takes place. When the previously held equity investment is accounted for under the equity method, any other comprehensive income previously recognized in relation to the acquiree’s equity changes shall be transferred to profit or loss for the current period when the acquisition takes place.

(2) Disposing subsidiaries or businesses

1. General treatment

When the Company loses control over an investee due to partial disposal or other reasons, the acquirer shall re-measure the remaining equity interests in the acquiree to its fair value at the acquisition date. The difference, between sums of consideration received for disposal equity shares and fair value of the remaining shares, and sums of share of net assets of the subsidiary calculated continuously from the acquisition date or the combination date based on the previous shareholding proportion and goodwill, shall be recognized as investment income for the period when the Company loses control over acquiree. When the previously held equity investment is accounted for under the equity method, any other comprehensive income previously recognized in relation to the acquiree’s equity changes, and other equity changes rather than changes from net profit, other comprehensive income and profit distribution, shall be transferred to investment income for the current period when the Company loses control over acquiree.

(7) Classification of joint venture arrangements and accounting treatment

Joint venture arrangements are divided into joint operations and joint ventures.

When the Company is a joint venture party of a joint venture arrangement and have the assets related to the arrangement and assumes the liabilities related to the arrangement, it is a joint operation.

The Company confirms the following items related to the share of interest in the joint operation and performs accounting treatment in accordance with the relevant enterprise accounting standards:

a. Confirm the assets held by the company separately, and confirm the assets held jointly by the Company's share;

b. Recognize the liabilities assumed by the Company separately and the liabilities jointly assumed by the company's share;

c. Recognize the income generated by the sale of the Company’s share of common operating output;

d. Recognize the revenue generated from the sale of joint operations based on the Company's share;

e. Confirm the expenses incurred separately and the expenses incurred in the joint operation according to the Company's share.

The Company's investment in joint ventures is accounted for using the equity method. For details, see Note (14) Long-term equity investments under “ 3. Significant accounting policies and accounting estimates”.

(8) Recognition of cash and cash equivalents

The term “cash” refers to the cash on hand and the unrestricted deposit. And the term “cash equivalents” refers to short-term and highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.

(9) Foreign currency transaction and translation of foreign currency financial statements

1. Foreign currency transactions

Foreign currency transactions are translated into RMB at the current rate at the day of transactions.

The foreign currency monetary items shall be translated at the spot exchange rate on the balance sheet date. The balance of exchange arising from the difference between the spot exchange rate on the balance sheet date and the spot exchange rate at the time of initial recognition or prior to the balance sheet date, except those arising from the raising of special foreign debt for the purchase or construction of capitalizable assets thus shall be capitalized according to the borrowing costs capitalization principle, shall be recorded into the profits and losses at the current period.

2. Translation of foreign currency financial statements

The asset and liability items in the statement of financial position shall be translated at a spot exchange rate on the balance sheet date. Among the owner's equity items, except the ones as "undistributed profits", others shall be translated at the spot exchange rate at the time when they are incurred. The income and expense items in the income statement shall be translated using an exchange rate that is determined in a systematic and reasonable manner and approximates the spot exchange rate on the transaction date.

When disposing an overseas business, the Company shall shift the balance, which is presented under the items of the owner's equities in the statement of financial position and arises from the translation of foreign currency financial statements related to this oversea business, into the disposal profits and losses of the current period.

(10)Financial instruments

The Company recognizes a financial asset, financial liability or equity instrument when it becomes a party to a financial instrument contract.

1. Classification of financial instruments

The Company shall classify financial assets on the basis of both the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial asset as: financial assets measured at amortised cost, financial assets measured at fair value through other comprehensive income and financial assets measured at fair value through profit or loss at initial measurement.

A financial asset which is not designated as a financial asset measured at fair value through profit or loss shall be measured at amortised cost if both of the following conditions are met.

\- The financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows.

\- The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A financial asset shall be measured at fair value through other comprehensive income if both of the following conditions are met.

\- The financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets.

\- The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

The Company may make an election at initial recognition for non-trading equity instrument investments whether it is designated as a financial asset (equity instrument) that is measured at fair value through other comprehensive income. The designation is made on the basis of a single investment, and the related investment meets the definition of an equity instrument from the issuer's perspective.

Other financial assets other than these are classified as financial assets measured at fair value through profit or loss. At the initial recognition, in order to eliminate or significantly reduce accounting mismatches, financial assets that should be classified as measured at amortized value or financial assets measured at fair value through other comprehensive income can be designated as financial assets measured at fair value through profit or loss.

The Company shall classify financial liabilities as financial liabilities measured at amortised cost and financial liabilities measured at fair value through profit or loss at initial measurement.

2. Recognition and measurement of financial instruments

(1) Financial assets measured at amortised cost

Financial assets measured at amortized cost include notes receivables, accounts receivables, other receivables, long-term receivables, debt investments, etc. At initial recognition, the Company shall measure a financial asset at its fair value plus or minus transaction costs that are directly attributable to the acquisition or issue of the financial asset. The Company shall measure account receivables at their transaction price if the account receivables do not contain a significant financing component and accounts receivables that the company has decided not to consider for a financing component of no more than one year.

Interests calculated by using the effective interest method during the holding period shall be recognized in profit or loss.

When recovering or disposing the receivables, the difference between the price obtained and the carrying value shall be recognized in current profit or loss.

(2) Financial assets measured at fair value through other comprehensive income (debt instruments)

Financial assets measured at fair value through other comprehensive income (debt instruments) include receivables financing, other debt investments, etc. At initial recognition, the Company shall measure a financial asset at its fair value plus transaction costs that are directly attributable to the acquisition or issuance of the financial asset. The financial assets are subsequently measured at fair value. Changes in fair value are included in other comprehensive income except for interest calculated using the effective interest method, impairment losses or gains and exchange gains and losses.

When the financial assets are derecognized, the accumulated gain or loss previously recognized in other comprehensive income is transferred from other comprehensive income and recognized in profit or loss.

(3) Financial assets at fair value through other comprehensive income (equity instruments)

Financial assets at fair value through other comprehensive income (equity instruments). include other equity instrument investments, etc. At initial recognition, the Company shall measure a financial asset at its fair value plus transaction costs that are directly attributable to the acquisition or issue of the financial asset. The financial assets are subsequently measured at fair value. Changes in fair value are included in other comprehensive income. The dividends obtained are recognised in profit and loss.

When the financial assets are derecognized, the accumulated gain or loss previously recognised in other comprehensive income is transferred from other comprehensive income and recognised in retained earnings.

(4)Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include transactional financial assets, derivative financial assets, other non-current financial assets, etc. The Company shall measure the financial assets at fair value at initial recognition. Transaction costs are recognised in profit or loss. Changes in fair value are included in profit or loss.

(5) Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include current financial liabilities, derivative financial liabilities, etc. The Company shall measure the financial assets at fair value at initial recognition. Transaction costs are recognised in profit or loss. Changes in fair value are included in profit or loss.

When the financial liabilities are derecognized, the difference between the fair value and the initially recorded amount is recognized as investment income, and the gains and losses from changes in fair value are adjusted.

(6) Financial liabilities measured at amortised cost

Financial liabilities measured at amortised cost include short-term borrowings, notes payables, accounts payables, other payables, long-term borrowings, bonds payables, long-term payables. At initial recognition, the Company shall measure a financial liability at its fair value plus transaction costs that are directly attributable to the acquisition or issue of the financial asset.

Interests calculated by using the effective interest method during the holding period shall be recognized in profit or loss.

When the financial liabilities are derecognized, the difference between the price obtained and the carrying value shall be recognised in profit and loss.

3. Termination of recognition of financial assets and financial assets transfer

When one of the following conditions is met, the company terminates the recognition of financial assets.

\- Termination of contractual rights to receive cash flows from financial assets;

\- The financial assets have been transferred, and almost all the risks and rewards in the ownership of the financial assets have been transferred to the transferee;

The financial assets have been transferred. Although the company has neither transferred nor retained almost all the risks and rewards of the ownership of the financial assets, it has not retained control of the financial assets.

If the Company modifies or renegotiates a contract with its counterparty and the modification constitutes a substantial modification, the original financial asset will be derecognized and a new financial asset will be recognized in accordance with the modified terms.

If it retained nearly all of the risks and rewards related to the ownership of the financial asset, it shall not stop recognizing the financial asset.

To judge whether the transfer of a financial asset can satisfy the conditions as prescribed in these Standards for stopping the recognition of a financial asset, the Company shall follow the principle of the substance over form.

Transfer of an entire financial asset can be divided into partial financial assets transfer and entire financial asset transfer. If the transfer of an entire financial asset satisfies the conditions for de-recognition, the difference between the amounts of the following 2 items shall be recorded in the profits and losses of the current period:

(1) The book value of the transferred financial asset; and

(2) The sum of consideration received from the transfer, and the accumulative amount of the changes of the fair value originally recorded in the owners' equities (in the event that the financial asset involved in the transfer is a financial asset Available-for-sale).

If the transfer of partial financial asset satisfies the conditions to derecognize, the entire book value of the transferred financial asset shall, between the portion whose recognition has been stopped and the portion whose recognition has not been stopped (under such circumstance, the service asset retained shall be deemed as a portion of financial asset whose recognition has not been stopped), be apportioned according to their respective relative fair value, and the difference between the amounts of the following 2 items shall be included into the profits and losses of the current period :

(1) The book value of the portion whose recognition has been stopped; and

(2) The sum of consideration of the portion whose recognition has been stopped, and the portion of the accumulative amount of the changes in the fair value originally recorded in the owner's equities which is corresponding to the portion whose recognition has been stopped (in the event that the financial asset involved in the transfer is a financial asset Available-for-sale).

If the transfer of financial assets does not satisfy the conditions to stop the recognition, it shall continue to be recognized as financial assets and the consideration received shall be recognized as financial liabilities.

4. Termination of recognition of financial liabilities

Only when the prevailing obligations of a financial liability are relieved in all or in part may the recognition of the financial liability be terminated in all or partly. Where the Company (debtor) enters into an agreement with a creditor so as to substitute the existing financial liabilities by way of any new financial liability, and if the contractual stipulation regarding the new financial liability is substantially different from that regarding the existing financial liability, it shall terminate the recognition of the existing financial liability, and shall at the same time recognize the new financial liability.

Where the Company makes substantial revisions to part or all of the contractual stipulations of the existing financial liability, it shall terminated the recognition of the existing financial liability or part of it, and at the same time recognize the financial liability after revising the contractual stipulations as a new financial liability.

Where the recognition of a financial liability is totally or partially terminated, the Company shall include into the profits and losses of the current period the difference between the carrying amount which has been terminated from recognition and the considerations it has paid (including the non-cash assets it has transferred out and the new financial liabilities it has assumed).

Where the Company buys back part of its financial liabilities, it shall distribute, on the date of repurchase, the carrying amount of the whole financial liabilities in light of the comparatively fair value of the part that continues to be recognized and the part whose recognition has already been terminated. The gap between the carrying amount which is distributed to the part whose recognition has terminated and the considerations it has paid (including the noncash assets it has transferred out and the new financial liabilities it has assumed) shall be recorded into the profits and losses of the current period.

5. Determination of the fair value of the financial assets (liabilities)

If active markets for the financial instruments exist, the fair value shall be measured by quoted prices in the active markets. If active markets for the financial instruments do not exist, valuation techniques shall be applied for the measurement. The Company uses valuation techniques appropriate in the circumstances and for which sufficient data are available to measure fair value. The Company chooses relevant observable inputs for identical or similar assets or liabilities. Only when relevant observable inputs are unavailable or should the Company use unobservable inputs for the asset or liability.

6. Impairment provision of the financial assets

The Company recognize the expected credit loss on financial assets measured at amortized cost, financial assets measured at fair value through other comprehensive income (debt instruments) , financial guarantee contract, and so on, on the individual or portfolio basis.

The Company considers all reasonable and relevant information, including past events, current conditions, and forecasts of future economic conditions, and uses the risk of default as the weight to calculate the probability-weighted amount of present value of difference between the cash flow receivable from the contract and the cash flow expected to be received to confirm the expected credit loss.

For account receivables and contract assets recognized according to Accounting Standards for Business Enterprises No. 14 Revenue, whether a significant financing component is contained or not, the Company shall always measure the loss allowance at an amount equal to lifetime expected credit losses.

For lease receivables recognized according to Accounting Standards for Business Enterprises No. 21 Lease, the Company shall always measure the loss allowance at an amount equal to lifetime expected credit losses.

For other financial instruments, the Company shall assess changes in the credit risk of the relevant financial instruments since initial recognition at each balance sheet date.

The company compares the risk of default on the balance sheet date of financial instruments with the risk of default on the date of initial recognition to determine the relative change in the risk of default during the expected life of the financial instrument to assess whether there is a significant increase in credit risk of financial assets since the initial recognition. Generally, the Company believes that the credit risk of the financial instrument has significantly increased over 30 days after the due date, unless there is solid evidence that the credit risk of the financial instrument has not increased significantly since initial recognition.

If the credit risk of a financial instrument at the reporting date is relatively low, the Company considers that the credit risk of the financial instrument has not increased significantly since the initial recognition.

If the credit risk of the financial instrument has increased significantly since the initial confirmation, the Company shall measure the loss allowance for a financial instrument at an amount equal to the lifetime expected credit losses. If the credit risk on a financial instrument has not increased significantly since initial recognition, the Company shall measure the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses. The increase or reversal amount of loss allowance thus formed shall be included in the current profits and losses as impairment losses or gains. For financial assets at fair value through other comprehensive income (debt instruments), loss provisions are recognised in other comprehensive income and impairment losses or gains are recognised in profit or loss at the current period without reducing the carrying amount of the financial asset in the balance sheet.

(11) Recognition criteria and measurement methods for expected credit losses on receivables

1. Receivables with expected credit losses measured on a portfolio basis

2. Provision matrix of aging and expected credit loss rates for aging portfolios

3. Criteria for Identifying Receivables for Which Expected Credit Losses Are Recognized on an Individual Basis

For receivables where the credit risk differs significantly from the credit risk of the portfolio, the Company recognizes expected credit losses on an individual basis.

(12) Inventory

1. Inventory classification and costs of inventory

Inventories include material in transit, raw material, turnover materials, finished goods, work in process, issue commodity, materials for consigned processing, etc.

Inventory is initially measured at cost. Inventory cost includes purchase cost, processing cost and other expenditures incurred to bring inventory to its current location and state.

2. Valuation method for inventory dispatched

The weighted average method is used to confirm the actual cost of the inventories dispatched.

3. Inventory system

The Company uses perpetual inventory system.

4. Amortization of low-valued consumables and packing materials

(1) Low-valued consumables shall be amortized in full amount on issuance.

(2) Packing materials shall be amortized in full amount on issuance.

5. The basis for confirming the net realizable value of inventories and the methods to make provision for the inventory impairment loss

On the balance sheet date, inventories shall be measured at the lower of cost and net realizable value. When the cost of inventories is higher than its net realizable value, provision for inventory impairment loss shall be made. The net realizable value refers to the amount of the estimated selling price of the inventory minus the estimated costs that will occur at the time of completion, estimated selling expenses, and relevant taxes in daily activities.

The net realizable value of inventories (finished goods, stock commodity, material, etc.) held for direct selling in the daily business activity shall be calculated by deducting the estimated sale expense and relevant taxes from the estimated sale price of inventories; The net realizable value of inventories for further processing in the daily business activity shall be calculated by deducting the estimated cost of completion, estimated sale expense and relevant taxes from the estimated sale price of inventories; The net realizable value of inventories held for the execution of sales contracts or labor contracts shall be calculated on the ground of the contract price. If the Company holds more inventories than the quantities subscribed in the sales contract, the net realizable value of the excessive part of the inventories shall be calculated on the ground of the general sales price.

After the inventory impairment is withdrawn, if the factors that previously affected the write-down of the inventory value have disappeared, causing the net realizable value of the inventory to be higher than its book value, it shall be reversed within the amount of the inventory impairment that has been withdrawn, and the reverted amount shall be included in the current profit and loss.

(13) Contract asset

1. Recognition methods and criteria of contract assets

When either party to a contract has performed, the Company shall present the contract in the statement of financial position as a contract asset or a contract liability, depending on the relationship between the Company’s performance and the customer’s payment. If the Company have the rights to receive consideration (the right is conditioned on factors other than the passage of time) by transferring goods or services to a customer, the entity shall present the contract as a contract asset. Contract assets and contract liabilities under the same contract are disclosed in net amount. An entity shall present any unconditional rights to consideration (only the passage of time is required) separately as a receivable.

2. Expected credit loss of contract assets

For the accounting policy of the expected credit loss of contract assets, please refer to Note (10) 6. Impairment provision of the financial assets under “3. Significant accounting policies and accounting estimates”

(14) Long-term equity investment

1. Criteria of joint control and significant influence

Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. If the Company and other joint venture have joint control of the investee and have rights to the net assets of the investee, the investee is a joint venture of the Company.

Significant influence is the power to participate in the financial and operating policy decisions of the investee but not control or join control of those policies. If the Company could exert significant influence over the investee, the investee is the associate of the Company.

2. The initial cost of long-term equity investment from business acquisition

(1) Long-term equity investment from business acquisition

For a business combination under common control, the initial investment cost of the long-term equity investment shall be the absorbing party’s share of the carrying amount of the owner’s equity of the party being absorbed in the consolidated financial statements of the ultimate controlling party at combination date. The difference between the initial investment cost and the carrying amount of the previously held equity investment, together with the additional investment cost for new shares at combination date, shall be adjusted to the capital reserve. If the balance of capital reserve is not sufficient, any excess shall be adjusted to retained earnings. When an investor becomes capable of exercising control over an investee due to additional investment or other reasons, the difference between the initial investment cost recognized in accordance with the above principles and the sum of the book value of the long-term equity investment before the merger plus the book value of the cost for the further shares acquired on the merger date, shall be adjusted to the capital reserve. If the balance of capital reserve is not sufficient, any excess shall be adjusted to retained earnings.

For a business combination not under common control, the initial investment cost of the long-term equity investment shall be the acquisition cost at the acquisition date. When an investor becomes capable of exercising control over an investee due to additional investment or other reasons, the initial investment cost under the cost method shall be the carrying amount of previously held equity investment together with the additional investment cost.

(2) The initial cost of the long-term equity investment other than from business acquisition

The initial cost of a long-term equity investment obtained by making payment in cash shall be the purchase cost which is actually paid.

The initial cost of a long-term equity investment obtained on the basis of issuing equity securities shall be the fair value of the equity securities issued.

3. Subsequent measurement and profit or loss recognition

(1) Cost method

The Company adopts cost method for the long term investment in subsidiary company unless the investment qualifies as held for sale. An investing enterprise shall, in accordance with the attributable share of the net profits or losses of the invested entity, recognize the investment profits or losses except the dividend declared but unpaid, which is included in the payment when acquiring the investment.

(2) Equity method

A long-term equity investment in an associate or a joint venture shall be accounted for using the equity method. Where the initial investment cost of a long-term equity investment exceeds investor’s interest in the fair values of an investee’s identifiable net assets at the acquisition date, no adjustment shall be made to the initial investment cost. Where the initial cost is less than the investor’s interest in the fair values of the investee’s identifiable net assets at the acquisition date, the difference shall be credited to profit or loss for the current period, and the cost of long-term equity investment shall be adjusted accordingly.

The Company shall recognize its share of the investee’s net profits or losses, as well as its share of the investee’s other comprehensive income, as investment income or losses and other comprehensive income, and adjust the carrying amount of the investment accordingly. The carrying amount of the investment shall be reduced by the portion of any profit distributions or cash dividends declared by the investee that is attributable to the investor. The investor’s share of the investee’s owners’ equity changes, other than those arising from the investee’s net profit or loss, other comprehensive income or profit distribution, and the carrying amount of the long-term equity investment shall be adjusted accordingly.

During the holding period, if the investee makes consolidated financial statements, the Company shall calculate its share based on the investee’s net profit, other comprehensive income and the amount of other owners' equity attribute to the investee in the consolidated financial statements. The investor shall recognize its share of the investee’s net profits or losses after making appropriate adjustments according to the Company’s accounting principles and operating period based on the fair values of the investee’s identifiable net assets.

The unrealized profits or losses resulting from transactions between the investor and its associate or joint venture shall be eliminated in proportion to the investor’s equity interest in the investee, based on which investment income or losses shall be recognized, except the transaction of investment or sale of assets is a business. Any losses resulting from transactions between the investor and investee which are attributable to asset impairment shall be recognized in full.

The company’s net losses incurred by joint ventures or associates, in addition to assuming additional loss obligations, are limited to the book value of long-term equity investments and other long-term equity that essentially constitutes net investment in joint ventures or associates. If a joint venture or associated enterprise realizes net profits in the future, the company resumes recognizing its share of profits after the share of profits makes up for the share of unrecognized losses.

(3) Disposal of long-term equity investment

When disposing long-term equity investment, the difference between the proceeds actually received and the carrying amount shall be recognized in profit or loss for the current period.

Partial disposal of long-term equity investments accounted for by the equity method, and the remaining equity is still accounted for by the equity method, the other comprehensive income recognized by the original equity method shall be carried forward according to the same basis as the direct disposal of related assets or liabilities by the investee. All other changes in the interests of the holders are carried forward to the current profit and loss on a pro rata basis.

When an investor can no longer exercise joint control of or significant influence over an investee due to disposal of equity investment or other reasons, any other comprehensive income previously recognized shall be accounted for on the same basis as would have been required if the investee had directly disposed of the related assets or liabilities for the current period upon discontinuation of the equity method. Other owner's equity change shall be transferred into profit or loss of current period in full when the Company cease to adopt the equity method.

When an investor can no longer control the investee due to partial disposal, when the individual financial statements are prepared, the remaining equity can exercise joint control or significant influence on the investee, the equity method shall be used to account for the remaining equity. It is deemed that the equity method is adopted for adjustment since the acquisition, and the other comprehensive income recognized before the control of the investee is obtained is carried forward on the same basis as the direct disposal of related assets or liabilities by the investee, because the equity method is used for accounting. The confirmed changes in other owners’ equity are carried forward to the current profit and loss on a pro rata basis. If the remaining equity cannot exercise joint control or exert significant influence on the investee, it shall be recognized as a financial asset, and the difference between its fair value and book value on the date when control is lost shall be included in the current profit and loss, and other comprehensive income and other owner’s interests previously recognized shall be transferred to profit or loss in full.

If the equity investment of a subsidiary is disposed through multiple transactions until it loses control, which is a package transaction, each transaction shall be accounted as a transaction that disposes of the equity investment of the subsidiary and loses control. Each transaction before the loss of control, the difference between the disposal price and the book value of the corresponding disposed part of long-term equity investment is firstly recognized as other comprehensive income in individual financial statements, and then transferred to the current profit and loss when the control is lost. If it is not a package transaction, each transaction shall be accounted separately.

(15) Fixed assets

1. Recognition of Fixed assets

The term "fixed assets" refers to the tangible assets held for the sake of producing commodities, rendering labor service, renting or business management and of which useful life is in excess of one fiscal year. No fixed asset may be recognized unless it simultaneously meets the conditions as follows:

(1) The economic benefits pertinent to the fixed asset are likely to flow into the enterprise; and

(2) The cost of the fixed asset can be measured reliably.

Fixed assets are initially measured at cost (and considering the impact of expected dismantling cost factors).

Subsequent expenditures related to fixed assets are included in the cost of fixed assets when the related economic benefits are likely to flow in and their costs can be reliably measured; the book value of the replaced part is derecognized; all other subsequent expenditures are incurred shall be included in the current profit and loss.

2. Fixed assets depreciation

Fixed assets are depreciated under the straight line method. The depreciation rate is determined according to the category of assets, the useful life and the expected residual rate. If the components of the fixed assets have different useful lives or provide the economic benefits in a different way, then different depreciation rate or method shall be applied and the depreciation of the components shall be calculated separately.

Details of classification, depreciation period, residual value rate and annual depreciation rate are as follows:

3. Disposal of fixed assets

When a fixed asset is disposed, or it is expected that no economic benefits will be generated through use or disposal, the recognition of fixed asset shall be de terminated. The amount of disposal income of fixed assets raising from sell, transfer, scrapping or damage shall be included in the current profit and loss after deducting its book value and related taxes.

(16) Construction in progress

Construction in progress is measured at the actual cost incurred. The actual cost includes construction costs, installation costs, borrowing costs that meet the capitalization conditions, and other necessary expenditures incurred before the construction in progress reaches its intended use status. Construction in progress is transferred to fixed asset when it has reached its working condition for its intended use and depreciation will be accrued from the next month.

(17) Borrowing costs

1. Principle of the recognition of capitalized borrowing costs

Where the borrowing costs incurred to an enterprise can be directly attributable to the acquisition and construction or production of assets eligible for capitalization, it shall be capitalized and recorded into the costs of relevant assets. Other borrowing costs shall be recognized as expenses on the basis of the actual amount incurred, and shall be recorded into the current profits and losses.

Assets eligible for capitalization refer to the fixed assets, investment property, inventories and other assets, of which the acquisition and construction or production may take quite a long time to get ready for its intended use or for sale.

2. The capitalization period of borrowing costs

The capitalization period shall refer to the period from the commencement to the cessation of capitalization of the borrowing costs, excluding the period of suspension of capitalization of the borrowing costs.

The borrowing costs shall not be capitalized unless they simultaneously meet the following requirements:

(1) The asset disbursements have already incurred, which shall include cash, transferred non-cash assets or interest bearing debts paid for the acquisition and construction or production activities for preparing assets eligible for capitalization;

(2) The borrowing costs has already incurred; and

(3) The acquisition and construction or production activities which are necessary to prepare the asset for its intended use or sale have already started.

When the qualified asset under acquisition and construction or production is ready for the intended use or sale, the capitalization of the borrowing costs shall be ceased.

3. The suspension of capitalization of borrowing costs

Where the acquisition and construction or production of a qualified asset is interrupted abnormally and the interruption period lasts for more than 3 months, the capitalization of the borrowing costs shall be suspended. If the interruption is a necessary step for making the qualified asset under acquisition and construction or production ready for the intended use or sale, the capitalization of the borrowing costs shall continue. The borrowing costs incurred during such period shall be recognized as expenses, and shall be recorded into the profits and losses of the current period, till the acquisition and construction or production of the asset restarts.

4. Method of calculating the capitalization rate and capitalized amount of borrowing costs For interest expense (minus the income of interests earned on the unused borrowing loans as a deposit in the bank or investment income earned on the loan as a temporary investment) and the ancillary expense incurred to a specifically borrowed loan, those incurred before a qualified asset under acquisition, construction or production is ready for the intended use or sale shall be capitalized at the incurred amount when they are incurred, and shall be recorded into the costs of the asset eligible for capitalization.

The Company shall calculate and determine the to-be-capitalized amount of interests on the general borrowing by multiplying the weighted average asset disbursement of the part of the accumulative asset disbursements minus the general borrowing by the capitalization rate of the general borrowing used. The capitalization rate shall be calculated and determined in light of the weighted average interest rate of the general borrowing.

During the capitalization period, the exchange difference between the principal and interest of the foreign currency special loan is capitalized and included in the cost of the assets that meet the capitalization conditions. Exchange differences arising from the principal and interest of foreign currency borrowings other than foreign currency special borrowings are included in the current profits and losses.

(18) Intangible Assets

1. Measurement of Intangible Assets

(1) Initial measurement is based on cost upon acquisition

The cost of an intangible asset on acquisition include the purchase price, relevant taxes and other necessary disbursements which may be directly attributable to bringing the intangible asset to the conditions for the expected purpose.

(2) Subsequent Measurement

The Company shall analyze and judge the beneficial period of intangible assets upon acquisition.

Intangible assets with finite beneficial period shall be amortized under the straight-line method during the period when the intangible asset can bring economic benefits to the enterprise. If it is unable to estimate the beneficial period of the intangible asset, it shall be regarded as an intangible asset with uncertain service life and shall not be amortized.

2. Estimated useful lives of intangible assets with limited useful lives

2. Estimated useful lives of intangible assets with limited useful lives Item Estimated useful life Amortization method Residual value (%) Criteria Land use right 50 years Straight line method Land use right certificate Software 10 years Straight line method Estimated useful life

3. Classification criteria for internal research phase and development phase

The expenditures for its internal research and development projects of an enterprise shall be classified into research expenditures and development expenditures.

Research phase refers to the phase of creative and planned investigation to acquire and study to acquire and understand new scientific or technological knowledge.

Development phase refers to the phase during which the result of research phase or other knowledge is applied into certain projects or designs for the manufacturing of new or substantially improved material, device and product before commercial manufacturing and use.

4. Criteria of capitalization of development phase expenditures

Expenditures incurred during the research phase are recognized in profit or loss for the period when incurred. Expenditures incurred during the research phase shall be capitalized if they meet the following conditions at the same time. If the expenditures incurred during the development phase do not meet the following conditions, they shall be included in the current period's profit and loss.

(1) It is technically feasible to complete the intangible asset so that it can be used or sold.

(2) The Company intent to complete the intangible asset and use or sell it.

(3) The way intangible assets generate economic benefits, including being able to prove that there is a market for the products produced by using the intangible assets or the intangible assets themselves has market. If the intangible assets will be used internally, it should be able to prove that the intangible assets will be useful.

(4) The company has sufficient technical, financial and other resources to complete the development of the intangible asset and is able to use or sell the intangible asset.

(5) The expenditure attributable to the development phase of the intangible asset can be measured reliably.

If it is impossible to distinguish between expenditures in the research phase and expenditures in the development phase, all research and development expenditures incurred shall be included in the current period's profit and loss.

(19) Impairment of long-term assets

For long-term assets such as long-term equity investments, investment property under the cost model, fixed assets, construction in progress, right-of-use assets, intangible assets with limited useful lives and oil gas assets etc., the Company shall perform impairment tests at the period end if there is clear indication of impairment. If the recoverable amounts of long-term assets are less than their carrying amounts, the carrying amounts of the assets shall be written down to their recoverable amounts. The write-downs are recognized as impairment losses and charged to current profit and loss. The recoverable amounts of long-term assets are the higher of their fair values less costs to sell and the present values of the future cash flows expected to be derived from the assets. The Company shall estimate its recoverable amount on an individual basis. Where it is difficult to do so, it shall determine the recoverable amount of the assets on the basis of the asset group to which the asset belongs. The term "assets group”

refers to a minimum combination of assets by which the cash flows could be generated independently

The goodwill, intangible assets with uncertain useful life and intangible assets not meeting the expected condition for use shall be subject to an impairment test at least at the end of each year.

When the Company makes an impairment test of assets, it shall, as of the purchasing day, apportion the carrying value of the business reputation formed by merger of enterprises to the relevant asset groups by a reasonable method. Where it is difficult to do so, it shall be apportioned to the relevant combinations of asset groups. A related group of assets or combination of asset groups is an asset group or combination of asset groups that can benefit from the synergy effect of a business combination.

When making an impairment test on the relevant asset groups or combination of asset groups containing business reputation, if any evidence shows that the impairment of asset groups or combinations of asset groups is possible, the Company shall first make an impairment test on the asset groups or combinations of asset groups not containing business reputation, calculate the recoverable amount, compare it with the relevant carrying value and recognize the corresponding impairment loss. Then the Company shall make an impairment test of the asset groups or combinations of asset groups containing business reputation, and compare the carrying value of these asset groups or combinations of asset groups (including the carrying value of the business reputation apportioned thereto) with the recoverable amount. Where the recoverable amount of the relevant assets or combinations of the asset groups is lower than the carrying value thereof, it shall recognize the impairment loss of the business reputation.

Impairment losses on long-term assets shall not be reversed in subsequent accounting periods once recognized.

(20) Long-term deferred expense

The long-term deferred expense refers to the expenses incurred but shall be borne by current and subsequent accounting period, which is more than one year.

(21) Contract liability

When either party to a contract has performed, the Company shall present the contract in the statement of financial position as a contract asset or a contract liability, depending on the relationship between the Company’s performance and the customer’s payment. If a customer pays consideration, or the Company has a right to an amount of consideration before the

Company transfers a good or service to the customer, the Company shall present the contract as a contract liability. Contract assets and contract liabilities under the same contract are disclosed in net amount.

(22) Employee benefits

1. Accounting treatment for short employee benefit

The Company shall recognise, in the accounting period in which an employee provides service, actually occurred short-term employee benefits as a liability, with a corresponding charge to the profit or loss or cost of an asset for the current period.

Payments made by an enterprise of social security contributions for employees, payments of housing funds, and union running costs employee education costs provided in accordance with relevant requirements shall, in the accounting period in which employees provide services, be calculated according to prescribed bases and percentages in determining the amount of employee benefits.

The employee welfare expenses incurred by the company are included in the current profit and loss or related asset costs based on the actual amount when they actually occur. Among them, non-monetary benefits are measured at fair value.

2. Accounting treatment of post-employment benefits

(1) Defined contribution plan

The Company shall recognize, in the accounting period in which an employee provides service, pension fund and unemployment fund for employees as a liability according to the local government regulations. The amount shall be calculated according to local prescribed bases and percentages in determining the amount of employee benefits, with a corresponding charge to the profit or loss or cost of an asset for the current period. In addition, the Company also participates in the enterprise annuity plan/supplementary pension insurance fund approved by relevant state departments. The Company pays a certain proportion of the total salary of employees to the annuity plan/local social insurance agency, and the corresponding expenses are included in the current profit and loss or related asset cost.

(2) Defined benefit plan

In accordance with the formula determined by the Projected Unit Credit Method, the Company attributes the benefit obligations arising from defined benefit plans to the periods during which employees render services, and records them in current profit or loss or as part of the cost of relevant assets.

The deficit or surplus resulting from the present value of the defined benefit plan obligations less the fair value of the defined benefit plan assets is recognized as a net defined benefit liability or net defined benefit asset. Where a defined benefit plan has a surplus, the Company measures the net defined benefit asset at the lower of the plan surplus and the asset ceiling.

All defined benefit obligations—including those expected to be settled within twelve months after the end of the reporting period in which employees render the related service—are discounted using market yields at the balance sheet date on government bonds or high-quality corporate bonds in an active market that match the currency and term of the defined benefit obligations.

Service costs arising from defined benefit plans, as well as the net interest on the net defined benefit liability or asset, are recognized in current profit or loss or included in the cost of relevant assets. Changes arising from the remeasurement of the net defined benefit liability or asset are recognized in other comprehensive income and are not subsequently reclassified to profit or loss in future accounting periods; upon the termination of the defined benefit plan, the amounts originally recognized in other comprehensive income are transferred in full within equity to retained earnings.

Upon the settlement of a defined benefit plan, a settlement gain or loss is recognized based on the difference between the present value of the defined benefit obligation and the settlement price, both determined as of the settlement date.

3. Accounting treatment of termination benefits

The Company shall recognize an employee benefits liability for termination benefits, with a corresponding charge to the profit or loss for the current period, at the earlier of the following dates: when the Company cannot unilaterally withdraw the offer of termination benefits because of an employment termination plan or a curtailment proposal; or when the Company recognizes costs or expenses related to a restructuring that involves the payment of termination benefits.

(23) Estimated liabilities

The obligation pertinent to a contingency shall be recognized as an estimated liability when the following conditions are satisfied simultaneously:

(1) That obligation is a current obligation of the enterprise;

(2) It is likely to cause any economic benefit to flow out of the enterprise as a result of performance of the obligation; and

(3) The amount of the obligation can be measured in a reliable way.

The estimated debts shall be initially measured in accordance with the best estimate of the necessary expenses for the performance of the current obligation.

To determine the best estimate, an enterprise shall take into full consideration of the risks, uncertainty, time value of money, and other factors pertinent to the Contingencies. If the time value of money is of great significance, the best estimate shall be determined after discounting the relevant future outflow of cash.

When all or some of the expenses necessary for the liquidation of an estimated debts of an enterprise is expected to be compensated by a third party, the compensation shall be separately recognized as an asset only when it is virtually certain that the reimbursement will be obtained. The amount recognized for the reimbursement shall not exceed the book value of the estimated debts.

The company reviews the book value of the estimated liabilities on the balance sheet date. If there is conclusive evidence that the book value does not reflect the current best estimate, the book value will be adjusted according to the current best estimate.

(24) Revenue

(1) The general principle of revenue recognition and measurement

The company shall recognise revenue when (or as) the company satisfies a performance obligation when (or as) the customer obtains control of a promised good or service. Control of a promised good or service refers to the ability to direct the use of, and obtain substantially all of the remaining benefits from it.

If the contract contains two or more performance obligations, the company shall allocate the transaction price to each individual performance obligation based on the relative proportion of the stand-alone selling price of the goods or services promised by each individual performance obligation on the date of the contract. The company measures revenue based on the transaction price allocated to each individual performance obligation.

The transaction price is the amount of consideration to which the company expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties or amounts expected to be returned to customers. The company shall consider the terms of the contract and its customary business practices to determine the transaction price. When determining the transaction price, the company shall consider the effects of all of the following: variable consideration, the existence of a significant financing component in the contract, non-cash consideration, and consideration payable to a customer. The company determines the transaction price that includes variable consideration at an amount that does not exceed the amount of accumulated recognized revenue that is unlikely to be materially reversed when the relevant uncertainty is eliminated. If there is a significant financing component in the contract, the company shall recognise revenue at an amount that reflects the price that a customer would have paid for the promised goods or services if the customer had paid cash for those goods or services when (or as) they transfer to the customer, and use the effective interest method to amortize the difference between the transaction price and the contract consideration during the contract period.

The company transfers control of a good or service over time and, therefore, satisfies a performance obligation and recognises revenue over time, if one of the following criteria is met. Otherwise, the company satisfies the performance obligation at a point in time.

(a) the customer simultaneously receives and consumes the benefits provided by the company’s performance as the company performs;

(b) the company’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or

(c) the company’s performance does not create an asset with an alternative use to the company and the company has an enforceable right to payment for performance completed to date.

The company shall recognise revenue over time by measuring the progress towards complete satisfaction of that performance obligation, except where the performance progress cannot be reasonably determined. The company considers the nature of the goods or services and adopts the output method or the input method to determine the progress of performance. Where the performance progress cannot be reasonable determined, but the company expects to recover the costs incurred in satisfying the performance obligation, the company shall recognise revenue only to the extent of the costs incurred until such time that it can reasonably measure the outcome of the performance obligation.

For performance obligations satisfied at a certain point in time, the company shall recognises revenue at the point when the customer obtains control of the relevant goods or services. To determine the point in time at which a customer obtains control of a promised goods or services, the company shall consider requirements as follows:

(a) The company has a present right to payment for the promised goods or services and the customer is presently obliged to pay for that;

(b) The company has transferred the legal title of the goods to the customer, that is, the customer has the legal title to the goods;

(c) The company has transferred physical possession of the goods to the customer, that is, the customer has taken possession of the goods;

(d) The company has transferred the significant risks and rewards of ownership of the goods to the customer, that is, the customer has the significant risks and rewards of ownership of the goods;

(e) The customer has accepted the promised goods or services.

The Company determines whether it is the principal or agent when engaging in a transaction based on whether it has control over the goods or services before transferring them to the customer. If the Company is able to control the goods or services before transferring them to the customer, the Company is the principal and recognizes revenue based on the total consideration received or receivable; otherwise, the Company is the agent and recognizes revenue based on the amount of commissions or fees it expects to be entitled to receive.

(2) The specific criteria of revenue recognition and measurement

Commodity sales contracts between companies and customers usually only include performance obligations for the transfer of steel and other commodities. This type of performance obligation is a performance obligation performed at a certain point in time. The Company recognizes revenue when the customer obtains control of the relevant goods or services. When judging whether the customer has obtained control of goods or services, the company considers the following signs:

The company obtains the current right of collection of receivables, the legal ownership of the goods is transferred to the customer, the physical assets of the goods are transferred to the customer, the company transfers the main risks and rewards of the ownership of the goods to the customer, and the customer has accepted the goods.

(25) Contract costs

Contract costs include costs to fulfill a contract and incremental costs of obtaining a contract.

If the costs incurred in fulfilling a contract with a customer are not within the scope of another Standard, for example, Inventories, Property, Plant and Equipment or Intangible Assets, the company shall recognise an asset from the costs incurred to fulfil a contract only if those costs meet all of the following criteria:

(a) the costs relate directly to a contract or to an expected contract;

(b) the costs generate or enhance resources of the Company that will be used in satisfying performance obligations in the future; and

(c) the costs are expected to be recovered.

The company shall recognise as an asset the incremental costs of obtaining a contract with a customer if the company expects to recover those costs.

An asset recognised in accordance with contract costs shall be amortised in consistent with the transfer to the customer of the goods or services to which the asset relates. The company may recognise the incremental costs of obtaining a contract as an expense when incurred if the amortisation period of the asset is one year or less.

The company shall recognise an impairment loss in profit or loss to the extent that the carrying amount of an asset related to contract assets exceeds:

(a) the remaining amount of consideration that the company expects to receive in exchange for the goods or services to which the asset relates; less

(b) the costs that relate directly to providing those goods or services and that have not been recognised as expenses.

The company shall recognise in profit or loss a reversal of some or all of an impairment loss previously recognised when the impairment conditions no longer exist or have improved. The increased carrying amount of the asset shall not exceed the carrying amount that if no impairment loss had been recognised previously.

(26) Government Subsidies

1. Types

A government subsidy means the monetary or non-monetary assets obtained free of charge by the Company from the government. Government subsidies consist of the government subsidies pertinent to assets and government subsidies pertinent to income.

Government subsidies related to assets are government subsidies whose primary condition is that an entity qualifying for them should purchase, construct or otherwise acquire long-term assets. The government subsidies related to incomes refers to government subsidies other than those related to assets.

2. Recognition

Government subsidies are recognized when the Company is able to meet the conditions attached to them and is able to receive them.

3. Accounting treatment

Government subsidies related to assets shall be recognized by deducting the subsidies at the carrying amount of the assets or recognized as deferred income. Subsidies that recognized as deferred income shall be recognized in profit or loss on a systematic basis over the periods during the useful lives of the relevant assets (Subsidies related to daily activities should be recorded in Other Income. Subsidies that unrelated to daily activities should be recorded in Non-operating Income).

The government subsidies related to incomes to compensate future expenses, shall be recognized as deferred income and transferred to current profit or loss (Subsidies related to daily activities should be recorded in Other Income. Subsidies that unrelated to daily activities should be recorded in Non-operating Income) in the period during which the expenses compensation is recognized or deduct relevant cost or loss. Government subsidies to compensate expenses or losses already incurred shall be recognized in current profit and loss (Subsidies related to daily activities should be recorded in Other Income. Subsidies unrelated to daily activities should be recorded in Non-operating Income) or deduct relevant cost or loss.

The policy discount loans obtained by the company are divided into the following two situations and are separately accounted for:

(a) The government allocates discounted funds to the loan bank, and the loan bank provides loans to the company at a policy preferential interest rate. The preferential interest rate is used to calculate the relevant borrowing costs.

(b) If the government directly allocates the discounted funds to the company, the company will offset the relevant borrowing costs with the corresponding discounts, directly accounted for the current profit or loss or recognized as deferred income.

(27) Deferred tax assets and deferred tax liabilities

Income tax includes current income tax and deferred income tax. Except for income tax arising from business combinations and transactions or events directly recorded in owners equity (including other comprehensive income), the Company records current income tax and deferred income tax in current profit or loss.

Deferred income tax assets and deferred income tax liabilities are calculated and confirmed based on the difference (temporary difference) between the tax base of assets and liabilities and their book value.

An enterprise shall recognize the deferred income tax assets arising from a deductible temporary difference to the extent of the amount of the taxable income which it is most likely to be obtained and which can be deducted from the deductible temporary difference. As for any deductible loss or tax deduction that can be carried forward to the next year, the corresponding deferred income tax assets shall be determined to the extent that the amount of future taxable income to be offset by the deductible loss or tax deduction to be likely obtained.

All taxable temporary differences shall be recognized as deferred tax liabilities with certain limited exceptions.

Exceptions when deferred tax assets and deferred tax liabilities are not recognized include:

\- Initial recognition of goodwill;

\- A transaction or event that is neither a business combination nor affects accounting profit and taxable income (or deductible loss) when it occurs, and the assets and liabilities initially recognized do not result in equal taxable temporary differences and deductible

temporary differences.

For taxable temporary differences related to investments in subsidiaries, associates and joint ventures, deferred income tax liabilities are recognized, unless the company can control the timing of the reversal of the temporary differences and the temporary differences are likely not to be transferred back in the foreseeable future. For deductible temporary differences related to investments in subsidiaries, associates and joint ventures, when the temporary differences are likely to be reversed in the foreseeable future and are likely to be used to deduct the taxable income of deductible temporary differences in the future, income tax assets are recognized.

At the balance sheet date, deferred income tax assets and deferred income tax liabilities are measured at the applicable tax rate during the period when the relevant assets are expected to be recovered or the relevant liabilities are expected to be recovered in accordance with the provisions of the tax law.

At the balance sheet date, the company reviews the book value of deferred income tax assets. If it is probable that sufficient taxable income cannot be obtained in the future to offset the benefits of deferred income tax assets, the book value of the deferred income tax assets shall be written down. When it is possible to obtain sufficient taxable income, the reduced amount shall be reversed.

When the Company has the statutory right to offset and intend to offset or obtain assets and pay off liabilities at the same time, the current income tax assets and current income tax liabilities are presented at the net amount after offsetting.

An entity shall offset deferred tax assets and deferred tax liabilities if, and only if: (a) the entity has a legally enforceable right to set off current tax assets against current tax liabilities; and (b) deferred income tax assets and deferred income tax liabilities are related to income taxes levied by the same tax collection and administration department on the same taxpayer or to different taxpayers, but in each future period of significant deferred income tax assets and liabilities reversal, the taxpayers involved intend to settle the current income tax assets and liabilities on a net basis or to acquire assets and settle liabilities at the same time.

(28) Leases

Lease refers to a contract in which the lessor transfers the right to use the asset to the lessee within a certain period of time to obtain consideration.

On the starting date of the contract, the company assesses whether the contract is a lease or contains a lease. If the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration, the contract is, or contains, a lease.

For a contract that contains a lease component and one or more additional lease or non-lease components, a lease shall allocate the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand-alone price of the non-lease components.

1. The company as the lessee

(1) Right-of-use assets

On the start date of the lease term, the company recognizes the right-of-use asset for leases other than short-term leases and low-value asset leases. Right-of-use assets are initially measured at cost.

This cost includes:

 The initial measurement amount of the lease liability;

 If there is a lease incentive for the lease payment paid on or before the start of the lease term, the relevant amount of the lease incentive already enjoyed shall be deducted;

 The initial direct expenses incurred by the company;

 The company expects to incur costs for dismantling and removing leased assets, restoring the site where leased assets are located, or restoring leased assets to the state agreed upon in the lease terms, but does not include the costs incurred for the production of inventory.

The company uses the straight-line method to depreciate the right-of-use assets. If it can be reasonably determined that the ownership of the leased asset will be obtained at the end of the lease term, the company shall depreciate the leased asset during the remaining useful life; otherwise, the leased asset will be depreciated during the shorter period of the lease term and the remaining useful life of the leased asset .

The company determines whether the right-of-use asset has been impaired in accordance with the principles described in "3. (19) Long-term asset impairment" in this note, and conducts accounting treatment for the identified impairment loss.

(2) Lease liabilities

At the beginning of the lease term, the company recognizes lease liabilities for leases other than short-term leases and leases of low-value assets. Lease liabilities are initially measured based on the present value of the payments that are not paid at that date. Lease payments include:

1) Fixed payment (including in-substance fixed payment), less any lease incentives receivable;

2) Variable lease payments that depend on an index or a ratio;

3) Amounts expected to be payable by the lease under residual value guarantees;

4) The exercise price of the purchase option if the lease is reasonably certain to exercise that option;

5) Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease;

The company uses the interest rate implicit in the lease as the discount rate, but if the interest rate implicit in the lease cannot be reasonably determined, the company's incremental borrowing interest rate is used as the discount rate.

The company calculates the interest expense of the lease liability during each period of the lease term according to a fixed periodic interest rate, and includes it in the current profit and loss or the cost of related assets.

Variable lease payments that are not included in the measurement of lease liabilities are included in the current profit and loss or the cost of related assets when they occur.

After the start of the lease term, if the following circumstances occur, the company re-measures the lease liability and adjusts the corresponding right-of-use asset. If the book value of the right-of-use asset has been reduced to zero, but the lease liability still needs to be further reduced, the difference shall be included in the current profit and loss:

• When the evaluation result or actual exercise situation of the purchase option, renewal option or termination option changes, the company remeasures the lease liability based on the present value calculated by the lease payment after the change and the revised discount rate;

• When the actual fixed payment changes, the expected payable amount of the guarantee residual value changes, or the index or ratio used to determine the lease payment changes, the company calculates the present value based on the changed lease payment and the original discount rate to remeasure the lease liability. However, if changes in lease payments originate from changes in floating interest rates, the revised discount rate is used to calculate the present value.

(3) Short-term leases and low-value asset leases

The company chooses not to recognize right-of-use assets and lease liabilities for short-term leases and low-value asset leases, and calculates the relevant lease payments in the current profit and loss or related asset costs on a straight-line basis during each period of the lease term. Short-term lease refers to a lease that does not include purchase options for a lease period not exceeding 12 months at the beginning of the lease period. Low-value asset leasing refers to a lease with a lower value when a single leased asset is a new asset. If the company subleases or expects to sublease the leased assets, the original lease is not a low-value asset lease.

(4) Lease modifications

The lease shall account for a lease modification as a separate lease if both:

 The modification increases the scope of the lease by adding the right to use one or more underlying assets; and

 the consideration for the lease increases by an amount commensurate with the stand-alone price for the increase in scope and any appropriate adjustment to that stand-alone price to reflect the circumstances of the particular contract.

For a lease modification that is not accounted for as a separate lease, at the effective date of the lease modification a lessee shall allocate the consideration in the modified contract, determine the lease term of the modified lease and remeasure the lease liabilities by discounting the revised lease payments using a revised discount rate.

For a lease modification that is not accounted for as a separate lease, the lessee shall account for the remeasurement of the lease liabilities by decreasing the carrying amount of the right-of-use assets to reflect the partial or full termination of the lease for lease modifications that decrease the scope of the lease. The lessee shall recognize in profit or loss any gain or loss relating to the partial or full termination of the lease; or by making a corresponding adjustment to the right-of-use asset for all other lease modifications.

2. The company as the lessor

On the commencement date of the lease, the company divides the lease into finance lease and operating lease. Finance lease refers to a lease in which almost all the risks and rewards related to the ownership of the leased asset are transferred regardless of whether the ownership is ultimately transferred. Operating leases refer to leases other than financial leases. When the company acts as a sublease lessor, it classifies subleases based on the right-of-use assets generated from the original lease.

(1) Accounting treatment of operating leases

The lease receipts of operating leases are recognized as rental income in each period of the lease term according to the straight-line method. The company capitalizes the initial direct costs incurred related to operating leases, and allocates them to the current profit and loss on the same basis as the recognition of rental income during the lease term. Variable lease payments that are not included in the lease receipts are included in the current profit and loss when they actually occur.

(2) Accounting treatment of finance leasing

On the start date of the lease, the company recognizes the finance lease receivables for the finance lease and terminates the recognition of the finance lease assets. When the company initially measures the finance lease receivables, the net lease investment is taken as the entry value of the financial lease receivables. The net lease investment is the sum of the unguaranteed residual value and the present value of the lease payment not yet received at the beginning of the lease term, discounted at the interest rate implicit in the lease.

The company calculates and recognizes the interest income for each period of the lease term based on a fixed periodic interest rate. The derecognition and impairment of finance lease receivables shall be accounted for in accordance with "3. (10) Financial Instruments" in this Note.

Variable lease payments that are not included in the measurement of the net lease investment

are included in the current profit or loss when they actually occur.

A lessor shall account for a modification to a finance lease as a separate lease if both:

• The modification increases the scope of the lease by adding the right to use one or more underlying assets;

• The consideration for the lease increases by an amount commensurate with the stand-alone price for the increase in scope and any appropriate adjustments to that stand-alone price to reflect the circumstances of the particular contract.

For a modification to a finance lease that is not accounted for as a separate lease, a lessor shall account for the modification as follows:

• If the lease would have been classified as an operating lease had the modification been in effect at the inception date, the lessor shall account for the lease modification as a new lease from the effective date of the modification; and measure the carrying amount of the underlying assets as the net investment in the lease immediately before the effective date of the lease modification.

• If the change takes effect on the lease start date, the lease will be classified as a financial lease, and the company will perform accounting treatment in accordance with the policy of “3. (10) Financial Instruments” in this Note on the modification or re-negotiation of the contract.

3. Sale and leaseback transaction

The company evaluates and determines whether the asset transfer in the sale and leaseback transaction is a sale in accordance with the principles described in "3. (24) Revenue" of this Note.

(1) As the lessee

If the transfer of an asset in the sale and leaseback transaction is a sale, the company as the lessee measures the right-of-use asset arising from the leaseback at the proportion of the previous carrying amount of the asset that relates to the right-of-use retained by the lessee and recognize only the amount of any gain or loss that relates to the rights transferred to the lessor.

For details on the subsequent measurement of right-of-use assets and lease liabilities and lease changes after the commencement date of the lease term, please refer to Note 3 (28) Leases 1. The Company as Lessee. When subsequently measuring the lease liabilities arising from a sale and leaseback, the Company determines the lease payments or the modified lease payments in a manner that does not result in the recognition of gains or losses related to the

right of use acquired through the leaseback.

If the asset transfer in the sale and leaseback transaction does not belong to the sale, the company as the lessee continues to recognize the transferred assets and at the same time recognize a financial liability equal to the transfer proceeds. For the accounting treatment of financial liabilities, please refer to "3. (10) Financial Instruments" in this note.