(H Share Stock Code: 1053) (A Share Stock Code: 601005)

2021 Interim Report

Section I Section II Section III Section IV Section V Section VI Section VII Section VIII Section IX Section X	Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Company Profile and Major Financial Indicator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Management Discussion and Analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Environmental and Social Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Significant Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Movement of Shares and the Particulars of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . 68 Relevant Information on Preference Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 Relevant Information on Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Financial Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Documents Available for Inspection	A copy of interim report, containing the signature of the current head of the Company and company seal
	A copy of interim financial accounting report, containing signatures of the head of the Company, the person in charge of the accounting function and the person in charge of the accounting department and company seal
	Originals of all documents and announcements of the Company disclosed in the media designated by China Securities Regulatory Commission for information disclosure purpose and on the websites of SSE and the HKEx during the Reporting Period
	Copies of other relevant documents

Chongqing Iron & Steel Company Limited

IMPORTANT NOTICE

I. The Board, the Supervisory Committee and directors, supervisors and senior management of the Company warrant that there are no false representations, misleading statements contained in or material omissions from this interim report and individually and collectively accept full responsibility for the truthfulness, accuracy and completeness of the contents hereof.

II. All directors of the Company attended Board meetings.
III. This interim report has not been audited.
IV. Mr. Zhang Wenxue, head of the Company, and Mr. Zou An, the Chief Financial Officer and Ms. Lei Xiaodan, the Chief Accountant, have declared that they guarantee the truthfulness, accuracy and completeness of the financial statements in the interim report.
V. The profit distribution proposal or proposal to transfer capital reserve to share capital for the Reporting Period as approved by the Board by way of resolution

Nil

VI. Risk warning in respect of forward-looking statements

✓ Applicable Not applicable

The forward-looking statements in this interim report, such as the future plans, are subject to uncertainties and do not constitute the Company’s substantive undertakings to investors. Investors should pay attention to investment risks.

VII. Is there any non-operational fund occupancy by the controlling shareholder or its related party?

VIII. Is there any provision of external guarantee by the Company in violation of the stipulated decision making procedure?

No

IX. Whether more than half of the directors cannot guarantee the truthfulness, accuracy and completeness of the interim report disclosed by the Company or not

X. Major Risk Warning

XI. Others

Applicable ✓ Not applicable

2021 Interim Report

Section I Definitions

Unless the context otherwise requires, the following expressions have the following meanings in this report:

DEFINITIONS OF COMMON TERMS

CSRC	China Securities Regulatory Commission
SSE	Shanghai Stock Exchange
HKEx	The Stock Exchange of Hong Kong Limited
China Baowu, Baowu Group	China Baowu Steel Group Corporation Limited
Strategic Emerging Fund	Chongqing Strategic Emerging Equity Investment Fund Partnership
	(Limited Partnership), a limited partnership incorporated under the
	laws of the PRC
Desheng Group	Sichuan Desheng Group Vanadium & Titanium Co., Ltd.
Siyuanhe Investment	Siyuanhe Equity Investment Management Co., Ltd.
Siyuanhe Fund	Siyuanhe (Shanghai) Steel Industry Equity Investment Fund Center
	(Limited Partnership)
Siyuanhe Industrial Development	Siyuanhe (Chongqing) Iron & Steel Industrial Development and Equity
Fund	Investment Fund Partnership (LP)
Changshou Iron & Steel, controlling	Chongqing Changshou Iron & Steel Company Limited
shareholder
Company, Chongqing Iron & Steel	Chongqing Iron & Steel Company Limited
Group	Chongqing Iron & Steel Company Limited and its subsidiaries
General Meeting	the general meeting of Chongqing Iron & Steel Company Limited
Board	the board of directors of Chongqing Iron & Steel Company Limited
Supervisory Committee	the supervisory committee of Chongqing Iron & Steel Company
	Limited
Companies Law	the Companies Law of the People’s Republic of China
Securities Law	the Securities Law of the People’s Republic of China
Articles of Association	Articles of Association of Chongqing Iron & Steel Company Limited
Reporting Period	From 1 January 2021 to 30 June 2021
RMB, RMB’000, RMB0’000,	RMB yuan, RMB thousand yuan, RMB ten thousand yuan, RMB
RMB00’000’000	hundred million yuan

Chongqing Iron & Steel Company Limited

Section II Company Profile and Major Financial Indicator

I. COMPANY INFORMATION

Chinese name 重慶鋼鐵股份有限公司 Abbreviation of Chinese name 重慶鋼鐵 English name Chongqing Iron & Steel Company Limited Abbreviation of English name CISC Legal representative Zhang Wenxue

II. CONTACT INFORMATION

Secretary to the Board

Securities Representative

Name Zou An Peng Guoju Correspondence No.2 Jiangnan Avenue, Jiangnan Street, No.2 Jiangnan Avenue, Jiangnan Street, address Changshou District, Chongqing Changshou District, Chongqing Telephone 86–23–6898 3318 86–23–6898 3482 Fax 86–23–6887 3189 86–23–6887 3189 E-mail [email protected] [email protected]

III. CHANGES IN BASIC INFORMATION

Registered address No.2 Jiangnan Avenue, Jiangnan Street, Changshou District, Chongqing Historical changes in registered No. 30 Gangtie Road, Dadukou District, Chongqing address No. 1 Gangcheng Avenue, Changshou Economic Development Zone, Chongqing, Office address No.2 Jiangnan Avenue, Jiangnan Street, Changshou District, Chongqing Postal code of office address 401258 Website http://www.cqgt.cn E-mail [email protected] Query index for the change Announcement on the Change of E-mail (Announcement No.: during the Reporting Period 2021–028) published on the official website of SSE (http:// www.sse.com.cn)

Registered address

2021 Interim Report

Section II Company Profile and Major Financial Indicator (Continued)

IV. CHANGE IN DISCLOSURE OF INFORMATION AND PLACE FOR INSPECTION

Name of newspapers designated China Securities Journal, Shanghai Securities News, Securities by the Company for information Times and Securities Daily disclosure Website for posting the interim http://www.sse.com.cn (SSE) report https://sc.hkex.com.hk (HKEx) Place for inspection of the interim Secretariat of the Board of the Company report Query index for the change There was no change during the Reporting Period during the Reporting Period

V. BASIC INFORMATION ABOUT THE SHARES OF THE COMPANY

Class of		Abbreviated		Stock name0
shares	Place of listing	name	Stock code	before change
A shares	Shanghai Stock Exchange	Chongqing Iron & Steel	601005	N/A
H shares	The Stock Exchange of	Chongqing Iron	01053	N/A
	Hong Kong Limited

VI. OTHER RELATED INFORMATION

Applicable ✓ Not applicable

Chongqing Iron & Steel Company Limited

Section II Company Profile and Major Financial Indicator (Continued)

VII. KEY ACCOUNTING DATA AND FINANCIAL INDICATORS OF THE COMPANY

(I) Key Accounting Data

==> picture [414 x 365] intentionally omitted <==

----- Start of picture text -----

Unit: RMB’000 Currency: RMB
Change from the
This Reporting same period of
Period (January Same period last year to this
Key accounting data to June) last year Reporting Period
(%)
Revenue 22,669,939 10,927,367 107.46
Net profit attributable to
shareholders of the Company 2,697,041 121,355 2,122.44
Net profit attributable to
shareholders of the Company
after deducting non-recurring
profit or loss 2,834,482 107,793 2,529.56
Net cash flow from operating
activities 1,546,388 82,586 1,772.46
Change from the
end of last year
At the end of the At the end of to the end of the
Reporting Period last year Reporting Period
(%)
Net assets attributable to
shareholders of the Company 22,743,007 20,038,467 13.50
Total assets 45,151,053 39,949,856 13.02
----- End of picture text -----

6 2021 Interim Report

Section II Company Profile and Major Financial Indicator (Continued)

VII. KEY ACCOUNTING DATA AND FINANCIAL INDICATORS OF THE COMPANY (CONTINUED)

(II) Key Financial Indicators

==> picture [412 x 73] intentionally omitted <==

----- Start of picture text -----

Change from the
This Reporting same period of
Period (January Same period last year to this
Key financial indicators to June) last year Reporting Period
(%)
----- End of picture text -----

Basic earnings per share (RMB per
share)	0.30	0.01	2,900.00
Diluted earnings per share (RMB
per share)	0.30	0.01	2,900.00
Basic earnings per share after non-
recurring profit or loss (RMB per
share)	0.32	0.01	3,100.00
Weighted average return on net			Increased by 11.99
assets (%)	12.61	0.62	percentage points
Weighted average return on net
assets after deducting non-			Increased by 12.70
recurring profit or loss (%)	13.25	0.55	percentage points

Explanation on the major financial data and financial indicators

Applicable ✓ Not applicable

VIII. DIFFERENCE IN ACCOUNTING DATA BETWEEN THE PRC ACCOUNTING STANDARDS AND OVERSEAS ACCOUNTING STANDARDS

Applicable ✓ Not applicable

Chongqing Iron & Steel Company Limited 7

Section II Company Profile and Major Financial Indicator (Continued)

IX. NON-RECURRING PROFIT OR LOSS ITEMS AND AMOUNTS

✓Applicable	Not applicable
		Unit: RMB’000 Currency: RMB
Non-recurring profit or loss		Amount Note (if applicable)
Government grants charged in the profit or loss for the
current period (except for those closely related to the
ordinary operation and gained constantly at a fixed
amount or quantity according to certain standard based
on state policies)		28,149
Capital occupied income from non-financial entities
recognized through profit or loss		1,000
Non-operating income	and expenses other than the above
items		-166,590
Total		-137,441

X. OTHERS

Applicable ✓ Not applicable

2021 Interim Report

Section III Management Discussion and Analysis

I. EXPLANATION ON THE SITUATION OF THE COMPANY’S INDUSTRY AND MAIN BUSINESS DURING THE REPORTING

(I) Explanation on the Main Business

The Company, belonging to the manufacturing industry/ferrous metal smelting and rolling processing industry, is mainly engaged in the production and sale of hot rolled sheets, medium plates, rebars, wire rods, billets, steel by-products and coking and coal chemical products, etc. The Company has the following main production lines: 4,100mm wide and thick plate, 2,700mm medium plate, 1,780mm hot rolled sheet, high speed wire rods and bar materials.

The Company’s products are applied in various industries, such as machinery, architecture, engineering, automobile, motorbike, shipbuilding, offshore oil, gas cylinder, boiler as well as oil and gas pipelines. The Company’s steel products used in hull structure, boilers and pressure vessels were rewarded the title of “Chinese brand products” and four other products were rewarded the title of “Chongqing’s brand products”. The Company successively obtained the following titles of honor: national Labor Day certificate, national implementation of performance excellence model advanced enterprises, Chongqing famous trademark, Chongqing quality benefit enterprise and Chongqing contract-abiding and trustworthy Enterprises. The Company ranks No. 400 in 2021 Fortune China 500.

Chongqing Iron & Steel, which has integrated into China Baowu, is marching forward with a new attitude towards the goal of high-quality development, striving to build itself into a highquality green and smart steel manufacturing enterprise, shaping “Chongqing Iron & Steel to be beautiful and picturesque”, and becoming a leader in the steel industry in Southwest China. The Company practices the major strategy of “Belt and Road Initiative” and facilitates the win-win cooperation in the iron & steel area, thus promoting the formation of the new advantage and new pattern of mutual promotion of the “dual circulation” between South China and Southwest China and Southeast Asia, and enhancing the competitiveness, innovative ability, controlling force, influence and ability to resist risks. Taking “benchmarking and finding differences from excellent enterprises comprehensively, paying close attention to reducing costs and increasing efficiency, promoting the implementation of plans and achieving the scale benefits” as its basic work, the Company copied the successful models of excellent enterprises to optimize its organizational structure and business process, enhance its lower and basic management, initiate the smart manufacturing and improve its systematic construction, by which actively promoting various corporate operation tasks.

Chongqing Iron & Steel Company Limited

Section III Management Discussion and Analysis (Continued)

I. EXPLANATION ON THE SITUATION OF THE COMPANY’S INDUSTRY AND MAIN BUSINESS DURING THE REPORTING (CONTINUED)

(II) Explanation on the Industry

In the first half of 2021, under the favorable environment of the continuous and steady recovery of the national economy, the operation of the iron and steel industry was in good phase, showing a situation that both production and marketing thrived and the benefits increased. As to the production and marketing, iron and steel industry actively adapted the strong increase in the demand for iron and steel, realizing relative balance of overall demand and supply. As to the operating results, facing the situation that the increase of prices of raw materials such as iron ore exceeded the increase of price of steel, the whole industry still achieved good performance by deeply tapping potential and lowering costs, thus further increasing operating quality.

In the first half of the year, the domestic production of pig iron, crude steel and steel products reached 456 million tonnes, 563 million tonnes and 698 million tonnes, representing a yearon-year increase of 4.0%, 11.8% and 13.9%, respectively; it was expected to equivalent to the crude steel apparent consumption of 537 million tonnes, representing a year-on-year increase of 10.2%; the cumulative exports of steel products reached 37.38 million tonnes, representing a year-on-year increase of 30.2%; the cumulative imports of steel products reached 7.35 million tonnes, representing a year-on-year increase of 0.1%; the domestic key iron and steel enterprises realized operating revenue of RMB3,459.3 billion, representing a year-on-year increase of 51.5%; operating cost was RMB3,042.6 billion, representing a year-on-year increase of 46.9%, which was 4.6 percentage points lower than the increase of revenue; total profit was RMB226.8 billion, representing a year-on-year increase of 2.2 times; profit ratio of sales was 6.56%, representing a year-on-year increase of 3.4 percentage points; as at the end of June, the asset to liability ratio of key iron and steel enterprises was 62.09%, representing a year-on-year decrease of 1.23 percentage points.

In the first half of the year, the average value of the composite index of China’s steel price index (CSPI) was 137.85 points, representing a year-on-year increase of 36.56%. Among which, the average value of long product index was 140.90 points, representing a year-on-year increase of 32.89%; the average value of plate index was 138.08 points, representing a year-on-year increase of 41.23%, exceeding that of long product index by 8.34 percentage points. The average price of imported iron ore was US$165.88/tonne, representing a year-on-year increase of US$74.15/tonne or 80.84%, which was 44.28 percentage points higher than the increase of steel price.

(Sources of above data: the National Bureau of Statistics, the General Administration of Customs, the China Iron and Steel Association, etc.)

10 2021 Interim Report

Section III Management Discussion and Analysis (Continued)

II. ANALYSIS OF CORE COMPETITIVENESS DURING THE REPORTING PERIOD

✓ Applicable Not applicable

(I) Flexible system and mechanism advantage

As a company with mixed ownership, the Company gave full play to the advantages of the system and mechanism, established a streamlined and efficient operation system and a marketoriented incentive mechanism for the Company, which resulted in a high level of consistency in respect of interests among staff, management and shareholders, truly allowed the staff to share profits and risks and responsibilities with the Company, and injected vitality and momentum to the sustainable development of the Company.

(II) Relative targeted market and logistic advantages

The Company is strategically located in Chongqing, an important city in Southwest China, close to the gold fairway of Yangtze River with good transport, and owns unique advantages in geographical location. In the face of various opportunities such as “the western development”, “Belt and Road Initiative”, “the Yangtze River Economic Belt” and “the Chengdu-Chongqing economic rim”, the strong demand of the steel market has made Chongqing and southwestern regions the areas with net inflows of steel while local supply cannot meet its own demand. The Company is the only iron and steel conglomerate meeting national policies on the industry in Chongqing. With its proximity to the Yangtze River, the Company enjoys favourable logistic conditions of the port for self-owned raw material and finished products transportation with its products mainly sold in Chongqing and southwestern regions. It boasts obvious comparable advantages in regional markets and enjoys bright development prospects.

(III) Cost competitive ability

With the capacity of over 10 million tonnes of steel, the Company strictly strengthens the management and controlling of production and operation, leading the steady improvement of economic and technological indicators, with certain indicators such as utilization coefficient of blast furnaces and hot charge ratio having strong competitiveness in the industry.

(IV) Brand advantage

With rich production lines, the Company is able to provide a diversified portfolio of products. The products includes the varieties of medium plates, heavy plates, hot coil and long products, which meets the development demands in northwestern regional markets and the products are highly recognized in regional markets. The Company has established extensive cooperation relationships with various central enterprises such as China State Construction Engineering Chengdu Co, Ltd. (中建科工成都有限公司), China Railway Materials Chengdu Co, Ltd. (中鐵物資成都有限公司) and China Communications Materials.

Chongqing Iron & Steel Company Limited

Section III Management Discussion and Analysis (Continued)

III. DISCUSSION AND ANALYSIS ON OPERATION

In the first half of 2021, the Company seized the favorable opportunity of steel market, closely centered on the mainline of “refining management, minimizing resource consumption, conducting comprehensive benchmarking to identify areas for improvement, and increasing efforts in cost reduction and efficiency enhancement”. The Company proactively and comprehensively identified differences with benchmark enterprises, paid close attention to reducing costs and increasing efficiency, constantly improved the technical and economic indicators, aimed at the market gaps of the purchase and sales, continuously strengthened the purchase system and optimized the marketing model, and therefore achieved steady improvement in production and sales efficiency with continuous improvement in production and operation. In the first half of 2021, the Company produced 4,661,100 tonnes of iron, 5,030,500 tonnes of steel and 4,856,600 tonnes of commodity billet, representing a year-on-year increase of 62.76%, 53.36% and 54.68%, respectively.

In the first half of 2021, the Company achieved a record high in the production of iron in March and the production of steel in May by leveling up and updating the processing equipment, optimizing the model of production and organization and maintaining a stable and efficient rolling process and production of iron and steel; the main technical and economic indicators repeatedly set new records, the dry coking coal proportion, coal powder injection ratio, utilization coefficient, steel and iron material consumption, hot charge ratio, and rolling operation efficiency set new records; 1# and 2# blast furnaces were continuously rewarded the first prize of Baowu Group in the first and second quarters; iron and steel materials consumption indices had continuously ranked first in Baowu Group, and had become a role model in Baowu Group; in May, the hot charging rate of 1,780mm hot-coil production line ranked first in Baowu Group.

In the first half of 2021, the Company’s major technical and economic indicators have seen a significant improvement, all sorts of consumptions significantly decreased, and thus achieving a decrease of RMB979 million in process costs by benchmarking with the industry, within Baowu Group and with excellent private enterprises.

The Company strives to create a high-quality green and smart steel manufacturing enterprise, shaping “Chongqing Iron & Steel to be beautiful and picturesque”, and becoming a leader in the steel industry in Southwest China. The Company continues to improve its competitiveness by focusing on the main philosophy of “refining management, minimizing resource consumption, conducting comprehensive benchmarking to identify areas for improvement, and increasing efforts in cost reduction and efficiency enhancement”. The Company plans to produce 8.50 million tonnes of pig iron, 10 million tonnes of steel and 9.58 million tonnes of commodity billets, and has realized sales volume of 9.58 million tonnes of commodity billets and revenue of RMB34.5 billion (tax exclusive) in the year of 2021. There has been no significant change in the Company’s possible future business development and outlook for the financial year of 2021 since the publication of the Company’s annual report for the year ended 31 December 2020.

Material change in the operation of the Company during the Reporting Period and the events occurred in the Reporting Period which have and are expected to have in the future a significant effect on the operation of the Company

Applicable ✓ Not applicable

2021 Interim Report

Section III Management Discussion and Analysis (Continued)

IV. MAJOR OPERATIONS DURING THE REPORTING PERIOD

(I) Main business analysis

1 Analysis of changes in certain items from financial statements

Unit: RMB’000 Currency: RMB

==> picture [383 x 46] intentionally omitted <==

----- Start of picture text -----

Corresponding
Item Current period period of last year Change
(%)
----- End of picture text -----

Revenue	22,669,939	10,927,367	107.46
Cost of sales	19,185,057	10,342,993	85.49
Distribution and selling
expenses	42,999	53,355	-19.41
General and administrative
expenses	245,709	244,093	0.66
Finance expenses	207,597	90,148	130.28
Research and development
expenses	75,591	–	N/A
Net cash flow from operating
activities	1,546,388	82,586	1,772.46
Net cash flow from investing
activities	-1,864,545	251,153	-842.39
Net cash flow from financing
activities	354,050	1,039,510	-65.94

Reasons for change in revenue: The increase in revenue was mainly due to the increase in sales volume and rise in sales price of commodity billet.

Reasons for change in cost of sales: The increase in cost of sales was mainly due to the rise in the prices of raw materials and fuels.

Reasons for change in distribution and selling expenses: The decrease in distribution and selling expenses was mainly due to the decrease in sales transportation fee as a result of the change of sales model of the Company.

Reasons for change in finance expenses: The increase in finance expenses was mainly due to the increase in financing and interest expenses.

Reasons for change in research and development expenses: The Company’s total investment in research and development amounted to RMB622 million in the first half of the year, in which direct input amounting to RMB546 million resulted from product sales.

Chongqing Iron & Steel Company Limited

Section III Management Discussion and Analysis (Continued)

IV. MAJOR OPERATIONS DURING THE REPORTING PERIOD

(CONTINUED)

(I) Main business analysis (Continued)

1 Analysis of changes in certain items from financial statements (Continued)

Reasons for change in net cash flow from operating activities: The increase in net cash flow from operating activities was mainly due to the increase in profit.

Reasons for changes in net cash flow from investing activities: The decrease in net cash flow from investing activities was mainly due to the increase in investment in fixed assets, wealth management products, etc.

Reasons for change in net cash flow from financing activities: The decrease in net cash flow from financing activities was mainly due to repayment of borrowings.

2 Detailed description of the major changes in the Company’s business types, profits structure or profits sources in the period

✓ Applicable Not applicable

In the first half of 2021, the Group realized a total profit of RMB2,697 million, representing a year-on-year increase of 21 times, which was mainly due to the following reasons: the selling price of commodity billet amounted to RMB4,555/tonne, representing a year-onyear increase of 36.05%, and achieving an increase of RMB4,854 million in profit; the sales volume of commodity billet reached 4.7542 million tonnes, representing a yearon-year increase of 51.55%, and achieving an increase of RMB648 million in profit; the increase in prices of raw materials such as ore, coal, alloy and scrap steel resulted in a decrease of RMB3,452 million in profit; the Company significantly increased its production scale and continuously promoted cost reduction plan, thus key technical and economic indicators such as utilization coefficient of blast furnace, fuel consumption of blast furnace, steel and iron material consumption for steelmaking improved significantly, all consumption obviously reduced, thus resulting in a cost reduction of RMB979 million in the aspect of process; provision made for carbon emission compliance costs resulted in a decrease of RMB167 million in profit; in order to eliminate the fire-control and structural safety hazard and improve working environment for employees, the Company carried out special rectification, leading to provision made for special repair costs and resulting in a decrease of RMB103 million in profit.

14 2021 Interim Report

Section III Management Discussion and Analysis (Continued)

IV. MAJOR OPERATIONS DURING THE REPORTING PERIOD (CONTINUED)

(I) Main business analysis (Continued)

2 Detailed description of the major changes in the Company’s business types, profits structure or profits sources in the period (Continued)

In the first half of 2021, the Group’s revenue from main business amounted to RMB22.410 billion, representing a year-on-year increase of 106.06%. In particular, the income from sales of commodity billet amounted to RMB21.656 billion, representing an increase of RMB11.154 billion as compared with the corresponding period of last year. Firstly, the sales volume of commodity billet was 4.7542 million tonnes, representing a year-on-year increase of 51.55%, resulting in an increase in the sales income of RMB6,300 million; secondly, the average sales price of commodity billet was RMB4,555/tonne, representing a year-on-year increase of 36.05%, resulting in an increase in the sales income of RMB4,854 million.

Composition of revenue from principal operations:

==> picture [385 x 49] intentionally omitted <==

----- Start of picture text -----

Type First half of 2021 First half of 2020 Year-on-year
Amount Percentage Amount Percentage growth
(RMB’000) (%) (RMB’000) (%) (%)
----- End of picture text -----

Plates	6,112,700	27.28	3,456,117	31.78	76.87
Hot rolling	11,050,037	49.30	5,313,138	48.85	107.98
Bars	134	0.001	958,786	8.82	-99.99
Wire rods	–	–	773,514	7.11	-100.00
Billet	4,493,015	20.05	–	–	–
Sub-total	21,655,886	96.63	10,501,555	96.56	106.22
Other	754,398	3.37	374,200	3.44	101.60
Total of commodity billet	22,410,284	100.00	10,875,755	100.00	106.06

Chongqing Iron & Steel Company Limited

Section III Management Discussion and Analysis (Continued)

IV. MAJOR OPERATIONS DURING THE REPORTING PERIOD

(CONTINUED)

(I) Main business analysis (Continued)

2 Detailed description of the major changes in the Company’s business types, profits structure or profits sources in the period (Continued)

Sales prices of commodity billet:

Item Sales price in the first half of 2021 Sales price in the first half of 2020 (RMB/tonne) (RMB/tonne)	Year-on-year Growth (%)	Income increase (RMB’000)
Plates 4,779 3,508	36.23	1,625,872
Hot rolling 4,594 3,252	41.27	3,228,062
Bars 4,763 3,337	42.73	40
Wire rods – 3,356	–	–
Billet 4,201 –	–	–
Total of commodity billet 4,555 3,348	36.05	4,853,974

Sales volumes of commodity billet:

Item	Sales volume for the first half of 2021 (Ten thousand tonnes)	Sales volume for the first half of 2020 (Ten thousand tonnes)	Year-on-year Growth (%)	Income increase (RMB’000)
Plates	127.92	98.53	29.83	1,030,711
Hot rolling	240.54	163.39	47.22	2,508,837
Bars	0.003	28.73	-99.99	-958,692
Wire rods	–	23.05	-100.00	-773,514
Billet	106.96	–	–	4,493,015
Total of commodity billet	475.42	313.70	51.55	6,300,357

16 2021 Interim Report

Section III Management Discussion and Analysis (Continued)

IV. MAJOR OPERATIONS DURING THE REPORTING PERIOD (CONTINUED)

(I) Main business analysis (Continued)

2 Detailed description of the major changes in the Company’s business types, profits structure or profits sources in the period (Continued)

Principal operations by sectors, products and regions

Unit: RMB’000 Currency: RMB

==> picture [385 x 303] intentionally omitted <==

----- Start of picture text -----

Main operations by sectors
Year- Year-
Year- on-year on-year
on-year increase/ increase/
increase/ decrease decrease
Cost of Gross decrease in cost in gross
By sectors Revenue sales Margin in revenue of sales margin
(%) (%) (%) (%)
Iron and steel 22,410,284 18,896,675 15.68 106.06 83.16 10.54
Main operations by products
Year- Year-
Year- on-year on-year
on-year increase/ increase/
increase/ decrease decrease
Cost of Gross decrease in cost in gross
By products Revenue sales Margin in revenue of sales margin
(%) (%) (%) (%)
Commodity billet 21,655,886 18,191,947 16.00 106.22 83.12 10.60
Other 754,398 704,728 6.58 101.60 84.26 8.79
----- End of picture text -----

Chongqing Iron & Steel Company Limited

Section III Management Discussion and Analysis (Continued)

IV. MAJOR OPERATIONS DURING THE REPORTING PERIOD

(CONTINUED)

(I) Main business analysis (Continued)
2 Detailed description of the major changes in the Company’s business types, profits structure or profits sources in the period (Continued)

By regions	Revenue	Main operations by regions Cost of sales Gross Margin (%)	Main operations by regions Cost of sales Gross Margin (%)	Year- on-year increase/ decrease in revenue (%)	Year- on-year increase/ decrease in cost of sales (%)	Year- on-year increase/ decrease in gross margin (%)
Southwest	13,592,893	11,382,871	16.26	32.21	16.54	11.26
Other regions	8,817,391	7,513,804	14.78	1,383.45	1,266.55	7.29
Total	22,410,284	18,896,675	15.68	106.06	83.16	10.54

(II) Explanation on material change in profit due to non-principal business

Applicable ✓ Not applicable

18 2021 Interim Report

Section III Management Discussion and Analysis (Continued)

IV. MAJOR OPERATIONS DURING THE REPORTING PERIOD (CONTINUED)

(III) Analysis of assets and liabilities

✓ Applicable Not applicable

Assets and liabilities

Unit: RMB’000

==> picture [383 x 84] intentionally omitted <==

----- Start of picture text -----

Percentage Percentage
of the of the amount
amount at Amount at at the end of
Amount at the end of the end of the previous
the end of the period in the previous year in total Year-on-year
Item the period total assets year assets change Explanation
(%) (%) (%)
----- End of picture text -----

Financial assets held for	550,000	1.22	–	–	N/A	Purchase of wealth management
trading						products
Trade receivables	8,965	0.02	35,041	0.09	-74.42	Recovery of spread settlement
Receivables financing	3,605,463	7.99	2,068,546	5.18	74.30	Increase in sales volume
Inventories	6,761,902	14.98	5,054,908	12.65	33.77	Rise in prices of raw materials
Other current assets	98,003	0.22	394,153	0.99	-75.14	Decrease in excess VAT paid
Long-term equity	51,236	0.11	79,494	0.20	-35.55	Completion of the acquisition of
investments						72% equity interest in Xingang
						Changlong who became a wholly-
						owned subsidiary of the Company
Construction in progress	4,229,714	9.37	2,844,665	7.12	48.69	Progress payments for fixed
						investment projects
Short-term borrowings	1,979,336	4.38	700,788	1.75	182.44	Increase in bank borrowings
Notes payable	1,880,137	4.16	1,272,291	3.18	47.78	Increase in bills payment
Trade payables	3,884,132	8.60	2,652,728	6.64	46.42	Rise in prices of raw materials
Contract liabilities	3,322,929	7.36	2,554,165	6.39	30.10	Increase in order quantity and
						proportion of advance receipts
Employee benefits	96,137	0.21	283,969	0.71	-66.15	Transfer to incentive funds for 2020
payable
Taxes payable	22,902	0.05	9,177	0.02	149.56	Increase in stamp duty and
						environmental protection tax for
						June
Other payables	1,062,032	2.35	1,567,618	3.92	-32.25	Payment of construction fees
Non-current liabilities	2,552,245	5.65	4,056,471	10.15	-37.08	Repayment of borrowings from
due within one year						Changshou Iron & Steel
Other current liabilities	431,981	0.96	332,041	0.83	30.10	Increase in advance receipts and
						taxes involved
Long-term payables	2,615,946	5.79	1,352,264	3.38	93.45	New finance lease
Other non-current	–	–	445,480	1.12	-100.00	Reclassification of financial
liabilities						borrowings due within one year

Others

Applicable ✓ Not applicable

Chongqing Iron & Steel Company Limited

Section III Management Discussion and Analysis (Continued)

IV. MAJOR OPERATIONS DURING THE REPORTING PERIOD (CONTINUED)

(III) Analysis of assets and liabilities (Continued)
Overseas assets

Applicable ✓ Not applicable

Major restricted assets at the end of the Reporting Period

✓ Applicable Not applicable

Unit: RMB’000 Currency: RMB

==> picture [384 x 35] intentionally omitted <==

----- Start of picture text -----

30 June 31 December
Item 2021 2020 Notes
----- End of picture text -----

Cash and bank balances	524,874	245,141	Note 1
Receivables financing	172,465	1,343,223	Note 2
Property, plant and equipment
– houses and buildings	1,724,265	987,609	Note 3
Property, plant and equipment
– machinery and equipment	4,119,855	2,542,304	Note 3
Intangible assets	1,617,133	1,027,708	Note 4
Total	8,158,592	6,145,985

Note 1: As at 30 June 2021, the Group’s ownership of cash and bank balances with carrying amount of RMB524,874,000 (31 December 2020: RMB245,141,000) was restricted for issuing bank acceptances and letters of credit.
Note 2: As at 30 June 2021, the Group issued bank acceptances by pledging bank acceptances with carrying amount of RMB172,465,000 (31 December 2020: the Group issued bank acceptances by pledging bank acceptances with carrying amount of RMB1,343,233,000).
Note 3: As at 30 June 2021, the Group’s houses and buildings with carrying amount of RMB1,724,265,000 (31 December 2020: RMB987,609,000) and machinery equipments with carrying amount of RMB4,119,855,000 (31 December 2020: RMB2,542,304,000) were pledged for obtaining bank borrowing and working capital loan facilities.
Note 4: As at 30 June 2021, the Group’s land use right with carrying amount of RMB1,617,133,000 (31 December 2020: RMB1,027,708,000) was pledged for obtaining bank borrowing and working capital loan facilities, and the amortised amount of the land use right was RMB22,054,000 during the current year.

2021 Interim Report

Section III Management Discussion and Analysis (Continued)

IV. MAJOR OPERATIONS DURING THE REPORTING PERIOD (CONTINUED)

(III) Analysis of assets and liabilities (Continued)

Others Applicable ✓ Not applicable

(IV) Investment Analysis

General analysis of external equity investment

==> picture [171 x 16] intentionally omitted <==

In the first half of 2021, the Company completed equity investment projects of RMB126,420,000, representing an increase of RMB116,420,000 as compared to the same period last year. The Resolution in Relation to Acquisition of 72% Equity Interest of Xingang Changlong through Online Bidding was considered and approved at the 30th meeting of the eighth session of the Board of the Company, which approved the Company’s acquisition of 60% and 12% equity interest in Chongqing Xingang Changlong Logistics Co., Ltd. (“Xingang Changlong”) held by Chongqing Qiancheng Industrial Development Co., Ltd. (重慶千誠實業發展有限公司) (“Qiancheng Industrial”) and Minsheng Shipping Co., Ltd. (民生輪船股份有限公司) (“Minsheng Shipping”), respectively, through online bidding. On 31 December 2020, the Company entered into the Equity Transaction Agreements with Qiancheng Industrial and Minsheng Shipping, respectively. For details, please refer to the Announcement on the Progress of Acquisition of 72% Equity Interest of Xingang Changlong through Online Bidding (Announcement No.: 2020–071) disclosed by the Company on 4 January 2021. On 15 January 2021, Xingang Changlong completed the change of industrial and commercial registration and became a wholly-owned subsidiary of the Company.

(1) Significant Equity Investment Applicable ✓ Not applicable
(2) Significant Non-Equity Investment

==> picture [171 x 16] intentionally omitted <==

----- Start of picture text -----

Applicable ✓ Not applicable
----- End of picture text -----

(3) Financial Assets Measured at Fair Value ✓ Applicable Not applicable

Chongqing Iron & Steel Company Limited

Section III Management Discussion and Analysis (Continued)

IV. MAJOR OPERATIONS DURING THE REPORTING PERIOD (CONTINUED)

(IV) Investment Analysis (Continued)
General analysis of external equity investment (Continued)
- (3) Financial Assets Measured at Fair Value (Continued)

Unit: RMB’000 Currency: RMB

Item	Opening balance	Closing balance	Changes in the reporting period	Effects on the profit for the reporting period
Financial assets held for	–	550,000	550,000	–
trading
Other equity investments	5,000	5,000	–	–
Receivables financing	2,068,546	3,605,463	1,536,917	–
Total	2,073,546	4,160,463	2,086,917	–

(V) Major Assets and Equity Disposal

Applicable ✓ Not applicable

2021 Interim Report

Section III Management Discussion and Analysis (Continued)

IV. MAJOR OPERATIONS DURING THE REPORTING PERIOD (CONTINUED)

(VI) Analysis of principal controlled and investee companies

✓ Applicable Not applicable

==> picture [412 x 43] intentionally omitted <==

----- Start of picture text -----

Name of the subsidiary/ Principal place of Place of Business Acquisition
investee companies business registration nature Shareholdings method
(%)
----- End of picture text -----

Chongqing Iron & Steel Energy	Changshou Economic	Changshou Economic	Electricity	100	Acquisition of
Environmental Protection	Development Zone,	Development Zone,	production and		equity
Company Limited (重慶鋼鐵	Chongqing	Chongqing	sales
能源環保有限公司)
Chongqing Xingang Changlong	Changshou Economic	Changshou Economic	Transportation and	100	Acquisition of
Logistics Co., Ltd.	Development Zone,	Development Zone,	warehouse		equity
	Chongqing	Chongqing
Chongqing Jian Wei Intelligent	Changshou District,	Changshou District,	Software and	50	Establishment
Technology Co.,Ltd* (重慶鑒	Chongqing	Chongqing	information		by capital
微智能科技有限公司)			technology
			services
Chongqing Baocheng Carbon	Changshou District,	Changshou District,	Manufacturing	10	Acquisition of
Material Co. Ltd. (重慶寶丞炭	Chongqing	Chongqing			equity
材有限公司)
Baowu Raw Material Supply Co.,	Pilot Free Trade Zone,	Pilot Free Trade Zone,	Trading	8	Establishment
Ltd.* (寶武原料供應有限公司)	Shanghai	Shanghai			by capital

(VII) Structured entities under the control of the Company

Applicable ✓ Not applicable

Chongqing Iron & Steel Company Limited

Section III Management Discussion and Analysis (Continued)

V. OTHER DISCLOSURE

(I) Potential Risks

✓ Applicable Not applicable

The uncertainties for the domestic and international macroeconomy are increasing, coupled with the persistent existence of uncertain factors such as repeated pandemics brings about a lot of challenges on the development of the iron and steel industry.
The iron and steel industry is a highly cyclical industry, and the domestic and international situation, macro-economy, industrial policies, etc. may have certain effects on the Company's operations.
The implementation of new environmental protection laws, pollutant emission standards, "carbon peak" and "carbon neutralization" and other relevant laws and regulations and national policies have further increased the environmental protection pressure on the steel industry.
The Company faces certain risks from fluctuations in raw material prices and sales prices of steel products. The Company acquires iron ore mainly through import, which is greatly affected by fluctuations in prices of bulk raw materials.

(II) Other disclosure

Applicable ✓ Not applicable

24 2021 Interim Report

Section IV Corporate Governance

I. INTRODUCTION OF GENERAL MEETINGS

==> picture [442 x 43] intentionally omitted <==

----- Start of picture text -----

Website designated Date of
for publication of publication of
Meeting Date resolutions resolutions Resolutions
----- End of picture text -----

2021 First	10 March 2021	Announcement of	11 March 2021	Considering and passing:	Considering and passing:
Extraordinary		Resolutions Passed		1.	Resolution on the Service and
General Meeting		at the 2021 First			Supply Agreement and its
		Extraordinary General			supplemental agreement and
		Meeting (Ann. No.: 2021–			the continuing connected
		015) published on the			transactions (including the
		official website of SSE			proposed caps) entered into
		(http://www.sse.com.cn)			between the Company and
					China Baowu
				2.	Resolution on the election
					of Mr. Zhang Wenxue as a
					Director of the Company
				3.	Resolution on the
					amendments to the Articles
					of Association and its
					appendices
2020 Annual General	29 June 2021	Announcement of	30 June 2021	Considering and passing:
Meeting		Resolutions Passed at		1.	The final financial accounts
		the 2020 Annual General			report for the year 2020
		Meeting (Ann. No.: 2021–		2.	The 2020 annual report (full
		046) published on the			text and summary)
		official website of SSE		3.	The profit distribution plan for
		(http://www.sse.com.cn)			the year 2020
				4.	The report of the board of
					directors for the year 2020
				5.	The report of the supervisory
					committee for the year 2020
				6.	The proposal for the re-
					appointment of the financial
					and internal control auditor
					for the year 2021
				7.	The proposal for the
					proposed budget for the year
					2021
				8.	The proposal for the
					signing of the Financial
					Service Agreement
					and the connected
					transactions between the
					Company and Baowu
					Finance Company
				9.	The proposal for the
					entering into of the
					2021- 2023 Service and
					Supply Agreement and
					the continuing connected
					transactions (including
					the annual caps) between
					the Company and China
					Baowu

Chongqing Iron & Steel Company Limited

Section IV Corporate Governance (Continued)

I. INTRODUCTION OF GENERAL MEETINGS (CONTINUED)

==> picture [442 x 43] intentionally omitted <==

----- Start of picture text -----

Website designated Date of
for publication of publication of
Meeting Date resolutions resolutions Resolutions
----- End of picture text -----

2021 Second	Announcement of	Considering and passing:	Considering and passing:
Extraordinary	Resolutions Passed	1.	Resolution on the connected
General Meeting	at the 2021 Second		transactions in relation to
	Extraordinary General		the purchase of assets from
	Meeting (Ann. No.: 2021–		Changshou Iron & Steel
	059) published on the	2.	Resolution on the
	official website of SSE		remuneration of the members
	(http://www.sse.com.cn)		of the ninth session of the
			Board and the Supervisory
			Committee
		3.	Resolution on the election of
			non-independent Directors
			of the ninth session of the
			Board
		4.	Resolution on the election of
			the independent Directors
			of the ninth session of the
			Board
		5.	Resolution on the election
			of the non-employee
			representative supervisors
			of the ninth session of the
			Supervisory Committee

Preferred shareholders with restored voting rights request convening extraordinary general meetings

Applicable ✓ Not applicable

Explanation on general meeting

Applicable ✓ Not applicable

2021 Interim Report

Section IV Corporate Governance (Continued)

II. C H A N G E S I N D I R E C T O R S, S U P E R V I S O R S A N D S E N I O R MANAGEMENT OF THE COMPANY

✓ Applicable Not applicable

==> picture [440 x 19] intentionally omitted <==

----- Start of picture text -----

Name Position Change
----- End of picture text -----

Zhang Wenxue	Director, Chairman	Election
Song De An	Director, Vice Chairman	Election
Xie Zhixiong	Director	Election
Lai Xiaomin	Director	Election
Zou An	Director	Election
Zhou Ping	Director	Election
Sheng Xuejun	Independent Director	Election
Zhang Jinruo	Independent Director	Election
Guo Jiebin	Independent Director	Election
Wu Xiaoping	Supervisor, Chairman of the	Election
	Supervisory Committee
Li Huaidong	Supervisor	Election
Zhu Xing'an	Supervisor	Election
Zhou Ya Ping	Staff Representative Supervisor	Election
Zhang Li Quan	Staff Representative Supervisor	Election
Xie Zhixiong	President	Appointment
Zou An	Secretary to the Board	Appointment
Yao Xiaohu	Senior Vice President	Appointment
Liu Jianrong	Director, Chairman	Resigned
Tu De Ling	Director	Resigned
Xin Qing Quan	Independent Director	Resigned
Xu Yi Xiang	Independent Director	Resigned
Wong Chun Wa	Independent Director	Resigned
Wang Cunlin	Supervisor	Resigned
Xu Xudong	Supervisor	Resigned
Zhao Wei	Staff Representative Supervisor	Resigned
Zhang Wenxue	President	Resigned
Meng Xiang Yun	Senior Vice President, Secretary	Resigned
	to the Board

Details on changes in directors, supervisors and senior management of the Company

✓ Applicable Not applicable

Chongqing Iron & Steel Company Limited

Section IV Corporate Governance (Continued)

II. C H A N G E S I N D I R E C T O R S, S U P E R V I S O R S A N D S E N I O R MANAGEMENT OF THE COMPANY (CONTINUED)

(I) Details on changes in directors

The Company convened the 31th meeting of the eighth session of the Board on 30 December 2020 and convened the 2021 first extraordinary general meeting on 10 March 2021, at which Mr. Zhang Wenxue was elected as a director of the eighth session of the Board of the Company.
On 5 July 2021, the Company received a written resignation tendered by Mr. Liu Jianrong, the chairman. Mr. Liu Jianrong tendered his resignation to the Board of the Company as the chairman, a director and a member of the special committee under the Board due to work adjustment.
On 7 July 2021, the Company convened the 40th meeting of the eighth session of the Board, at which Mr. Zhang Wenxue was elected as the chairman of the eighth session of the Board of the Company.
On 12 August 2021, the Company convened the 2021 second extraordinary general meeting, at which the re-election of members of the Board was conducted. Mr. Zhang Wenxue, Mr. Song De An, Mr. Xie Zhixiong, Mr. Lai Xiaomin, Mr. Zou An and Mr. Zhou Ping were elected as non-independent directors of the ninth session of the Board of the Company for a term of three years; Mr. Sheng Xuejun, Mr. Zhang Jinruo and Mr. Guo Jiebin were elected as independent (non-executive) directors for the ninth session of the Board of the Company for a term of three years; Mr. Tu Deling, Mr. Xin Qingquan, Mr. Xu Yixiang and Mr. Wong Chunwa resigned due to the expiry of the term of office.
On 20 August 2021, the Company convened the first meeting of the ninth session of the Board, at which Mr. Zhang Wenxue was elected as the chairman of the ninth session of the Board of the Company and Mr. Song De An was elected as a vice chairman of the ninth session of the Board of the Company; Mr. Zhang Wenxue, Mr. Song De An, Mr. Xie Zhixiong, Mr. Lai Xiaomin, Mr. Zou An and Mr. Zhou Ping were appointed as members of the Strategy Committee under the ninth session of the Board, and Mr. Zhang Wenxue was appointed as the chairman; Mr. Zhang Jinruo, Mr. Zhou Ping, Mr. Sheng Xuejun and Mr. Guo Jiebin were appointed as members of the Audit Committee under the ninth session of the Board, and Mr. Zhang Jinruo was appointed as the chairman; Mr. Sheng Xuejun, Mr. Song De An, Mr. Zhang Jinruo and Mr. Guo Jiebin were appointed as members of the Nomination Committee under the ninth session of the Board, and Mr. Sheng Xuejun was appointed as the chairman; Mr. Guo Jiebin, Mr. Song De An, Mr. Sheng Xuejun and Mr. Zhang Jinruo were appointed as members of the Remuneration and Evaluation Committee under the ninth session of the Board, and Mr. Guo Jiebin was appointed as the chairman.

28 2021 Interim Report

Section IV Corporate Governance (Continued)

II. C H A N G E S I N D I R E C T O R S, S U P E R V I S O R S A N D S E N I O R MANAGEMENT OF THE COMPANY (CONTINUED)

(II) Details on changes in supervisors

On 12 August 2021, the Company convened the 2021 second extraordinary general meeting, at which the re-election of members of the Supervisory Committee was conducted. Mr. Wu Xiaoping, Mr. Li Huaidong and Mr. Zhu Xing'an were elected as nonemployee representative supervisors of the ninth session of the Supervisory Committee of the Company for a term of three years; on the same date, the Company convened the 8th meeting of the first session of staff congress, at which Mr. Zhou Ya Ping and Mr. Zhang Li Quan were elected as staff representative supervisors of the ninth session of the Supervisory Committee of the Company for a term of three years.
On 20 August 2021, the Company convened the first meeting of the ninth session of the Board, at which Mr. Wu Xiaoping was elected as the chairman of the ninth session of the Supervisory Committee of the Company.

(III) Changes in senior management

On 19 January 2021, the Company received a written resignation letter from Ms. Meng Xiang Yun, a senior vice president and secretary to the Board. Due to work adjustments, Ms. Meng Xiang Yun applied to the Board of the Company for resignation as a senior vice president and secretary to the Board.
On 11 June 2021, the Company received a written resignation letter from Mr. Zhang Wenxue, the president. Due to work adjustments, Mr. Zhang Wenxue applied to the Board of the Company for resignation as the president.

On the same date, the Company convened the 39th meeting of the eighth session of the Board, at which Mr. Xie Zhixiong was appointed as the president of the Company, Mr. Yao Xiaohu was appointed as a senior vice president of the Company, and Mr. Zou An was appointed as a secretary to the Board and joint company secretary.

Chongqing Iron & Steel Company Limited

Section IV Corporate Governance (Continued)

III. SCHEME FOR PROFIT DISTRIBUTION OR TRANSFER OF CAPITAL RESERVE TO SHARE CAPITAL

Interim proposals on profit distribution and the proposal on transferring capital reserve to share capital

Profit distribution or transfer of capital reserve to share capital No Number of bonus shares for every 10 shares (share) / Dividends for every 10 shares (RMB) (tax inclusive) / Number of shares transferred for every 10 shares (share) / Relevant explanation on proposals on profit distribution and transfer of capital reserve to share capital Not applicable

IV. EQUITY INCENTIVE PLAN, EMPLOYEE SHARE OWNERSHIP PLAN OR OTHER EMPLOYEE INCENTIVES AND EFFECTS THEREOF

(I) Relevant incentive events disclosed in extraordinary announcements but without subsequent development or changes during implementation

Applicable ✓ Not applicable

(II) Incentive events not disclosed in extraordinary announcements or with subsequent development

Equity incentive

Applicable ✓ Not applicable Applicable ✓ Not applicable

Other explanations

Employee share ownership plan

✓ Applicable Not applicable

2021 Interim Report

Section IV Corporate Governance (Continued)

VI. EQUITY INCENTIVE PLAN, EMPLOYEE SHARE OWNERSHIP PLAN OR OTHER EMPLOYEE INCENTIVES AND EFFECTS THEREOF (CONTINUED)

(II) Incentive events not disclosed in extraordinary announcements or with subsequent development (Continued)

In order to establish and improve the mechanism of sharing the benefits and risks of employees and owners of the Company, and to improve the cohesion of employees and the competitiveness of the Company, to retain core employees, and to integrate the interests of the management, the core and mainstay personnel and the shareholders, aiming to facilitate the long-term and stable development of the Company and improvement of the shareholder value, the Company has prepared the Employee Share Ownership Plan from 2018 to 2020 (Draft) and its summary in accordance with relevant laws, regulations as well as the Articles of Association.

The Company convened the 15th meeting of the seventh session of the Board and the 18th meeting of the seventh session of the Supervisory Committee on 20 March 2018 and the 2017 annual general meeting on 15 May 2018, at which the Proposal for the Employee Share Ownership Plan from 2018 to 2020 (Draft) of Chongqing Iron & Steel Company Limited and its Summary (《關於〈重慶鋼鐵股份有限公司2018年至2020年員工持股計劃（草案)〉及其摘要的議案》), the Proposal for the proposed authorisation to the board of directors by the general meeting to handle relevant matters regarding employee share ownership plan(《關於提請股東大會授權董事會辦理公司員工持股計劃相關事宜的議案》) and other proposals were considered and approved.

According to the authorization by the 2017 annual general meeting of the Company, the Resolution in relation to Employee Share Ownership Plan Phase I of the Company was considered and approved at the fifth meeting of the eighth session of the Board held on 18 December 2018.

As at 14 May 2019, according to the Single Asset Management Plan of Huatai Asset Management for Employee Share Ownership Plan No. 1 of Chongqing Iron & Steel (華泰資管重慶鋼鐵員工持股計劃1號單一資產管理計劃), an aggregate of 24,791,400 A shares of the Company, representing approximately 0.28% of the total share capital of the Company, have been purchased by way of centralized bidding in the secondary market at an average transaction price of approximately RMB1.97 per share for the first phase of employee share ownership plan, and the transaction amount was approximately RMB48.7831 million. So far, the Company has completed the share purchase for the first phase of employee share ownership plan, and the shares purchased for the share ownership plan shall be subject to a lock-up period commencing from 15 May 2019 to 14 May 2020 according to regulations.

Chongqing Iron & Steel Company Limited

Section IV Corporate Governance (Continued)

VI. EQUITY INCENTIVE PLAN, EMPLOYEE SHARE OWNERSHIP PLAN OR OTHER EMPLOYEE INCENTIVES AND EFFECTS THEREOF (CONTINUED)

(II) Incentive events not disclosed in extraordinary announcements or with subsequent development (Continued)

The Company convened 2018 annual general meeting, 2019 first class meeting of A shareholders and the 2019 first class meeting of H shareholders on 21 May 2019, at which the Proposal for the grant of general mandate to the board of directors to repurchase A Shares of the Company(《授予董事會回購本公司A股股份的一般性授權》), the Proposal for the grant of general mandate to the board of directors to repurchase H Shares of the Company (《授予董事會回購本公司H股股份的一般性授權》)and other proposals were considered and approved. As authorized at the 2018 annual general meeting, the 2019 first class meeting of A shareholders and the 2019 first class meeting of H shareholders, the Resolution on Repurchase of the Shares of the Company through Centralized Bidding Trading was considered and approved at the 10th meeting of the eighth session of the Board of the Company convened on 21 May 2019.

As at 27 June 2019, the Company repurchased a total of 31,500,000 shares through centralized bidding trading, representing approximately 0.3532% of its total share capital. The highest, lowest and average price transacted for such shares were RMB2.13 per share, RMB1.88 per share and RMB1.975 per share, respectively. The total amount paid for such shares was RMB62,223,734 (excluding transaction costs). The shares repurchased are deposited in the Company’s securities account designated for share repurchase and will be used for the employee share ownership plans of the Company.

As authorized at the 2017 annual general meeting of the Company, the written resolutions of the 14th meeting of the eighth session of the Board and the 10th meeting of the eighth session of the Supervisory Committee have been signed and issued in writing on 25 September 2019, by which the Proposal in relation to the Implementation of the Second Phase of Employee Share Ownership Plan of the Company(《關於公司實施第二期員工持股計劃的議案》) was considered and approved.

As at 28 November 2019, according to the Single Asset Management Plan of Huatai Asset Management for Employee Share Ownership Plan No. 2 of Chongqing Iron & Steel (華泰資管重慶鋼鐵員工持股計劃2號單一資產管理計劃), an aggregate of 25,135,600 A shares of the Company, representing approximately 0.28% of the total share capital of the Company, have been purchased by way of centralized bidding in the secondary market at an average transaction price of RMB1.798 per share for the second phase of employee share ownership plan, and the transaction amount was RMB45,194,969. So far, the Company has completed the share purchase for the second phase of employee share ownership plan, and the shares purchased for the share ownership plan shall be subject to a lock-up period commencing from 29 November 2019 to 28 November 2020 according to regulations.

32 2021 Interim Report

Section IV Corporate Governance (Continued)

VI. EQUITY INCENTIVE PLAN, EMPLOYEE SHARE OWNERSHIP PLAN OR OTHER EMPLOYEE INCENTIVES AND EFFECTS THEREOF (CONTINUED)

(II) Incentive events not disclosed in extraordinary announcements or with subsequent development (Continued)

As authorized at the 2017 annual general meeting of the Company, the Company convened the16th meeting of the eighth session of the Board and the 12th meeting of the eighth session of the Supervisory Committee have been signed and issued in writing on 27 December 2019, by which the Proposal in relation to the Third Phase of the Employee Share Ownership Plan of the Company(《關於公司第三期員工持股計劃的議案》) was considered and approved.

As authorized at the 2018 annual general meeting, the 2019 first class meeting of A shareholders and the 2019 first class meeting of H shareholders, the Resolution on Repurchase of the Shares of the Company through Centralized Bidding Trading was considered and approved at the 18th meeting of the eighth session of the Board of the Company convened and circulated in writing on 26 February 2020.

As at close time on 12 March 2020, the Company repurchased a total of 50,000,000 shares through centralized bidding trading, representing approximately 0.56% of its total share capital. The highest, lowest and average price transacted for such shares were RMB1.71 per share, RMB1.65 per share and RMB1.69 per share, respectively. The total amount paid for such shares was RMB84,333,550.00 (excluding transaction costs). So far, the Company has repurchased a total of 81,500,000 shares accumulatively, representing approximately 0.91% of its total share capital.

On 11 June 2020, the Company received the Confirmation of Transfer Registration (《過戶登記確認書》) issued by China Securities Depository and Clearing Corporation Limited. The number of A shares of the Company deposited in the Company’s securities account designated for share repurchase was 44,837,800, representing approximately 0.50% of the Company’s total share capital, which were transferred into the securities account designated for the Third Phase of the Employee Share Ownership Plan through a non-transaction way on 9 June 2020, at a transfer price of RMB1.80 per share. The shares purchased for the share ownership plan shall be subject to a lock-up period commencing from 9 June 2020 to 8 June 2021 according to regulations.

Chongqing Iron & Steel Company Limited

Section IV Corporate Governance (Continued)

VI. EQUITY INCENTIVE PLAN, EMPLOYEE SHARE OWNERSHIP PLAN OR OTHER EMPLOYEE INCENTIVES AND EFFECTS THEREOF (CONTINUED)

(II) Incentive events not disclosed in extraordinary announcements or with subsequent development (Continued)

As authorized at the 2017 annual general meeting of the Company, the Company convened the 31st meeting of the eighth session of the Board and the 20th meeting of the eighth session of the Supervisory Committee on 30 December 2020, at which the Proposal in relation to the Fourth Phase of Employee Share Ownership Plan and Adjustment to the Way of Distribution of Rights and Interests under the First, Second and Third Phases of Employee Share Ownership Plan (《關於公司第四期員工持股計劃及調整第一、二、三期員工持股計劃權益分配方式的議案》) was considered and approved. On the same day, the Company convened the second holders’ meeting of the first phase of the employee share ownership plan, the second holders’ meeting of the second phase of the employee share ownership plan and the second holders’ meeting of the third phase of the employee share ownership plan. According to the Management Measures on Employee Share Ownership Plan of Chongqing Iron & Steel Company Limited and the first, second and third phases of the employee share ownership plan, by taking account of the complexity and flexibility for implementing the employee share ownership plan, it was approved to adjust the way of distribution of rights and interests under the first, second and third phases of employee share ownership plan from the original statement of “disposing of the underlying shares held under the employee share ownership plan” to “disposing of the underlying shares held under the employee share ownership plan or transferring the shares held under the employee share ownership plan to the employees’ personal securities accounts by nontransaction transfer upon payment of relevant taxes and fees (if any)”.

As at 25 March 2021, the Company has completed the shares realization and distribution of interests under the first and second phases of employee share ownership plan by means of non-transaction transfers and transactions in the secondary market. At this point, the first and second phases of employee share ownership plan of the Company are terminated.

As at 2 July 2021, the Company has completed the shares realization and distribution of interests under the third phase of employee share ownership plan by means of non-transaction transfers and transactions in the secondary market. At this point, the third phase of employee share ownership plan of the Company is terminated.

According to the authorisation by the 2017 annual general meeting of the Company and the requirements of the 2018-2020 Employee Share Ownership Plan of the Company and relevant management documents, the Company convened the 41st meeting of the eighth session of the Board on 20 July 2021, at which the Proposal in relation to the Adjustment to the Scale of the Fourth Phase of Employee Share Ownership Plan (《關於調整第四期員工持股計劃規模的議案》) was considered and approved. The scale of the fourth phase of the employee share ownership plan of the Company is hereby rounded down to 45,724,000 shares so as to facilitate the completion of purchase of the shares under the fourth phase of the employee share ownership plan of the Company.

2021 Interim Report

Section IV Corporate Governance (Continued)

VI. EQUITY INCENTIVE PLAN, EMPLOYEE SHARE OWNERSHIP PLAN OR OTHER EMPLOYEE INCENTIVES AND EFFECTS THEREOF (CONTINUED)

(II) Incentive events not disclosed in extraordinary announcements or with subsequent development (Continued)

As at 3 August 2021, according to the “Single Asset Management Plan of Huatai Asset Management for Employee Share Ownership Plan No. 4 of Chongqing Iron & Steel (華泰資管重慶鋼鐵員工持股計劃4號單一資產管理計劃)”, an aggregate of 9,061,800 A shares of the Company, representing approximately 0.102% of the total share capital of the Company, have been purchased by way of centralized bidding in the secondary market at an average transaction price of approximately RMB3.131 per share for the fourth phase of employee share ownership plan, and the aggregate transaction amount was approximately RMB28,372,606.80. 36,662,200 A shares of the Company held by its securities account designated for share repurchase, representing approximately 0.411% of its total share capital, were transferred to the respective securities account designated for the fourth phase of employee share ownership plan of the Company by non-transaction transfer on 3 August, at a transfer price of RMB1.800 per share. As of this date, the Company has completed the share purchase and non-transaction transfer for the fourth phase of employee share ownership plan, and the fourth phase of employee share ownership plan of the Company held a total of 45,724,000 shares of the Company, representing 0.513% of the total share capital of the Company. The shares held for the share ownership plan shall be subject to a lock-up period commencing from 3 August 2021 to 2 August 2022 according to the regulations.

Other incentive measures

Applicable ✓ Not applicable

Chongqing Iron & Steel Company Limited

Section V Environmental and Social Responsibility

I. ENVIRONMENTAL INFORMATION

(I) Explanation on the performance of environmental protection of companies and its key subsidiaries under the classification of key pollutant discharging entity as published by the environmental protection department

✓ Applicable Not applicable

1. Pollutant discharging

✓ Applicable Not applicable

The Company has strictly implemented the permit management system for pollutant discharging, and fully carried out the enterprise self-monitoring and information disclosure, achieving pollutant discharging according to the law and regulations and with permit. The Company has strictly implemented pollutant reduction and discharging control by strengthening the operation and management of environmental protection facilities. In the first half of 2021, the total amount of pollutant discharging did not exceed the total permitted index. During the Reporting Period, there was no accident caused by the Company which was subject to environmental protection administrative penalty. The major pollutants discharged by the Company are as follows:

==> picture [469 x 57] intentionally omitted <==

----- Start of picture text -----

Approved Are there
Major Emission Number of Total Pollutant emission total excessive
No. pollutants method vent ports Distribution Emission concentration emissions standards implemented emissions emissions
(mg/Nm3) (tonnes)
----- End of picture text -----

1	Particulate matter	Continuous	10	Goods transportation	Less than Emission Standard of Air	83.7	Emission Standard of Air Pollutants for	Nil	No
					Pollutants for Ironmaking Industry		Ironmaking Industry GB28663–
					GB28663–2012		2012
2	Particulate matter	Continuous	30	Coking	Less than Emission Standard of	757.7	Emission Standard for Pollutants	Nil	No
3	Sulfur dioxide	Continuous			Pollutants for Coking Chemical	405.29	for Coking Chemical Industry	Nil	No
4	Nitrogen oxides	Continuous			Industry GB16171–2012	536.3	GB16171–2012	Nil	No
5	Particulate matter	Continuous	17	Sintering	Less than Emission Standard of Air	1,562.1	Emission Standard of Air Pollutants	Nil	No
6	Sulfur dioxide	Continuous			Pollutants for Iron and Steel Sintering	1,292.4	for Iron and Steel Sintering and	Nil	No
7	Nitrogen oxides	Continuous			and Pelletizing Industry GB28662- 2012	2,487	Pelletizing Industry GB28662-2012	Nil	No
8	Particulate matter	Continuous	27	Ironmaking	Less than Emission Standard of Air	1,300.9	Emission Standard of Air Pollutants for	Nil	No
9	Sulfur dioxide	Continuous			Pollutants for Ironmaking Industry	320.75	Ironmaking Industry GB28663–	Nil	No
10	Nitrogen oxides	Continuous			GB28663–2012	322.8	2012	Nil	No
11	Particulate matter	Continuous	18	Steelmaking	Less than Emission Standard of Air	1,197.6	Emission Standard of Air Pollutants for	Nil	No
					Pollutants for Steelmaking Industry		Steelmaking Industry GB28664–
					GB28664–2012		2012

2021 Interim Report

Section V Environmental and Social Responsibility (Continued)

I. INTRODUCTION OF GENERAL MEETINGS (CONTINUED)

(I) Explanation on the performance of environmental protection of companies and its key subsidiaries under the classification of key pollutant discharging entity as published by the environmental protection department (Continued)

1. Pollutant discharging (Continued)

==> picture [468 x 57] intentionally omitted <==

12	Particulate matter	Continuous	13	Steel Rolling	Less than Emission Standard of Air	172.4	Emission Standard of Air Pollutants	Nil	No
13	Sulfur dioxide	Continuous			Pollutants for Steel Rolling Industry	269.56	for Steel Rolling Industry GB28665–	Nil	No
14	Nitrogen oxides	Continuous			GB28665–2012	325.2	2012	Nil	No
15	COD	Continuous	1	Central wastewater	Less than Emission Standard of Water	80.95	Emission Standard of Water Pollutant	Nil	No
16	Nitrox	Continuous		treatment station	Pollutant for Iron and Steel Industry	7.47	for Iron and Steel Industry	Nil	No
					GB13456–2012		GB13456–2012
17	Total	Particulate	5,074.4	Sulfur dioxide	2,288	Nitrogen	3,671.3	COD	80.95
		matter				oxides		Nitrox	7.47
18	Permitted emissions	Particulate	11,635	Sulfur dioxide	6,137	Nitrogen	11,155	COD	472
	under the pollutant	matter				oxides		Nitrox	47.2
	discharging permit

2. Construction and operation of pollution control facilities

✓ Applicable Not applicable

The Company’s various pollution control facilities are fully equipped, technically qualified, and operating normally. The environmental protection facilities currently in operation include: 11 wastewater treatment facilities, 115 exhaust gas and dust treatment facilities, of which main outlets of waste water and exhaust gas are installed with online monitoring and supervisory facilities, and networking has been implemented in accordance with government requirements. Blast furnace water slag, converter steel slag, iron dust and other industrial solid waste disposal facilities are available. All production processes of the Company have facilities such as noise elimination, noise reduction, sound insulation and isolation, which effectively control environmental noise. We strengthen the management and control of environmental protection facilities, clarify the main body of responsibility, implement synchronous operation and maintenance of environmental protection facilities and main facilities, and promptly organize emergency repairs for abnormalities or failures. The environmental protection facilities are under sound operating condition.

Chongqing Iron & Steel Company Limited

Section V Environmental and Social Responsibility (Continued)

I. ENVIRONMENTAL INFORMATION (CONTINUED)

(I) Explanation on the performance of environmental protection of companies and its key subsidiaries under the classification of key pollutant discharging entity as published by the environmental protection department (Continued)

2. Construction and operation of pollution control facilities (Continued)

The wastewater treatment system expansion and quality improvement and comprehensive wastewater utilization projects have been completed and put into operation, which increased the processing capacity by 20,000 cubic meters per day, and the indicators of COD and ammonia nitrogen in the wastewater pollutants have met the emission requirements. All of the existing pollution control facilities are under sound operating condition with a stable emission up to the standard.

3. Environmental impact assessment of construction projects and other environmental protection administrative licensing

✓ Applicable Not applicable

The Company’s bar materials production line upgrade and transformation project, the wire rods production line upgrade and transformation project, the raw material terminal equipment upgrade and transformation project, the energy efficiency improvement project of waste heat power generation, the surplus gas power generation project, the surplus gas power consumption, steam cascade utilization and other projects have obtained the environmental assessment approvals.

4. Environmental emergency plan

✓ Applicable Not applicable

In order to implement the requirements of the laws and regulations on strengthening the environmental protection of enterprises promulgated by the central and local government, and establish a sound environmental risk prevention system, the Company has formulated the Environmental Emergency Plan of Chongqing Iron & Steel Company Limited (《重慶鋼鐵股份有限公司突發環境事件應急預案》) and carried out environmental protection filing with a period of validity until 16 December 2023 and filling No. of 500115–2020-103-H.

38 2021 Interim Report

Section V Environmental and Social Responsibility (Continued)

I. ENVIRONMENTAL INFORMATION (CONTINUED)

(I) Explanation on the performance of environmental protection of companies and its key subsidiaries under the classification of key pollutant discharging entity as published by the environmental protection department (Continued)

5. Self-monitoring program on environmental protection

✓ Applicable Not applicable

According to the requirements of the Measures for Self-monitoring and Information Disclosure by the Enterprises Subject to Intensive Monitoring and Control of the State (Trial Implementation) (《國家重點監控企業自行監測及信息公開辦法（試行) 》) and the General Rules for Technical Guidance on Self-monitoring of Pollutant Discharging Organizations (《排污單位自行監測技術指南總則（發佈稿)》), the Self-monitoring Program on Environmental Protection of Chongqing Iron & Steel in 2021 (《重慶鋼鐵2021年環境自行監測方案》) was formulated and filed with the ecology and environment bureau in order to regulate the self-monitoring and information disclosure of the Company and ensure the conscious fulfillment of its legal obligations and social responsibilities. The Company has carried out its self-monitoring and information disclosure in accordance with such program in the first half of 2021.

Any administrative penalties caused by environmental problems during the Reporting Period

Applicable ✓ Not applicable

Other environmental information required to be disclosed

Applicable ✓ Not applicable

Chongqing Iron & Steel Company Limited

Section V Environmental and Social Responsibility (Continued)

I. ENVIRONMENTAL INFORMATION (CONTINUED)

(II) Explanation on environmental protection of companies beyond the classification of key pollutant discharging entity

Applicable ✓ Not applicable

(III) Explanation on subsequent development or changes in environmental information disclosed during the Reporting Period

✓ Applicable Not applicable

On 9 May 2020, the Ministry of Ecological Environment published The Feedback of the Supervision from the Fourth Ecological and Environmental Protection Supervision Team of the Central Government to Chongqing City, in which, the illegal pile and storage of steel slag of the Company has been reported. In order to effectively rectify the illegal pile and storage of steel slag, the Company has formulated a special rectification plan, completed material removal and sale and re-greened the site, and a standardized pile and storage yard for steel slag has been completed and put into operation. Pursuant to the Working Rules for Chongqing Ecological and Environmental Protection Supervision and Rectification and Check-off (for trial implementation) (Yu Huan Du Ban Fa [2020] No. 2), the Company completed rectification and check-off, and passed the filing and review.

(Ⅳ) Relevant information conducive to ecological protection, pollution control and fulfillment of environmental responsibilities

✓ Applicable Not applicable

In 2021, the Company formulated the Environmental Protection Plan for “Great Protection of the Yangtze River” of Chongqing Iron & Steel, Working Plan for Ultra-low Emissions of Waste Gas, Working Plan for Specific Action of Zero Sewage Discharge in 2021, Working Plan for Specific Action of No Solid Waste Leaving Factory in 2021, clarified work objectives and specific measures of implementation of Great Protection of the Yangtze River by Chongqing Iron & Steel, and the treatment projects of waste gas, waste water and solid waste shall be moved forward and implemented as planned.

40 2021 Interim Report

Section V Environmental and Social Responsibility (Continued)

I. ENVIRONMENTAL INFORMATION (CONTINUED)

(Ⅴ) Measures taken to reduce carbon emissions and its results during the Reporting Period

✓ Applicable Not applicable

There were 17 new energy conservation projects in 2021. A set of dehumidification air-blast systemic project has been built in 4# blast furnace blower and put into operation. The annual amount of coke can be saved by 9,600 tonnes, the power consumption of the blower can be reduced by 3.78 million kWh and the annual carbon emission can be reduced by 24,000 tonnes based on the calculation that each reduction of the moisture content of the blower by 1g/Nm³ can reduce the coke ratio by 0.8~1kg/tFe. For the existing projects of 2020, the surplus gas consumption and steam cascade utilization projects, which consumed the surplus gas of the Company and increased the self-generated power of 10,000 kWh/h, decreased the purchased electricity, and reduced the annual carbon emission of 22,100 tonnes.

Ⅱ . D E T A I L S O F C O N S O L I D A T I O N A N D E X P A N S I O N O F ACHIEVEMENTS IN POVERTY ALLEVIATION AND OTHER WORKS SUCH AS RURAL REVITALIZATION

✓ Applicable Not applicable

To fulfill corporate social responsibility, actively participate in social welfare undertakings, promote rural revitalization, and contribute to social development, during the Reporting Period, the Company used its own funds to make external donations of RMB142,440. The specific plan is as follows:

==> picture [440 x 49] intentionally omitted <==

----- Start of picture text -----

Donation and
Time sponsorship objects Method Introduction of projects participated in Amount
(RMB 0’000)
----- End of picture text -----

Tianxing Village, Jiangnan	Fund	To promote the “strategy of effective connection
Street, Changshou District,	donation	between poverty alleviation and rural
Chongqing		revitalization” in Tianxing Village, accelerate
		the construction of urban and rural civilization,
		improve the cultural and sports facilities and
		environment in rural areas, and enhance the
		awareness of national fitness. The new six
		fitness path projects can provide convenient
		public cultural services for rural residents.

Chongqing Iron & Steel Company Limited

Section VI Significant Events

I. FULFILLMENT OF COMMITMENTS

(I) Commitment of de facto controller, shareholders, related parties, acquirer and the Company during or sustained to the Reporting Period ✓ Applicable Not applicable

==> picture [469 x 48] intentionally omitted <==

----- Start of picture text -----

Performed
Commitment Time and term of Performance in time and
Background Type party Contents commitment term or not strictly or not
----- End of picture text -----

Commitment	To solve the	1. In view of the overlap of the business of Baoshan Iron & Steel
made in	horizontal	Co., Ltd. (寶山鋼鐵股份有限公司) (“Baosteel”), WISCO Echeng
acquisition	competition	Steel Company Limited (武漢鋼鐵集團鄂城鋼鐵有限責任公司)
report or		(“Echeng Steel”) and Chongqing Iron & Steel upon completion of
equity change		the acquisition, in accordance with the requirements of current
report		laws and regulations and relevant policies, China Baowu will,
		within five years from the date of this commitment letter or within
		a shorter period of time, and in accordance with the requirements
		of the relevant securities regulatory authorities and subject to the
		applicable laws and regulations and relevant regulatory rules at that
		time, steadily promote the integration of relevant business to solve
		the problem of the horizontal competition by comprehensively using
		various methods such as asset reorganization, business adjustment
		and entrusted management based on the principle of facilitating
		the development of the Company and safeguarding the interests of
		shareholders, minority shareholders in particular.
		The aforesaid settlement methods include, but are not limited to:
		(1) Asset reorganization: to gradually sort out and reorganize the
		assets of the overlapping business of Baosteel, Echeng Steel
		and Chongqing Iron & Steel by way of asset purchase at cash
		consideration, share issuance consideration or other methods as
		permitted by relevant laws and regulations, or by way of assets
		swap, assets transfer or other feasible reorganization methods,
		so as to eliminate some of the overlapping business;

2021 Interim Report

Section VI Significant Events (Continued)

I. FULFILLMENT OF COMMITMENTS (CONTINUED)

(I) Commitment of de facto controller, shareholders, related parties, acquirer and the Company during or sustained to the Reporting Period (Continued)

Commitment Background Type party Contents

Performed Time and term of Performance in time and commitment term or not strictly or not

(2) Business adjustment: to sort out the business boundaries of Baosteel, Echeng Steel and Chongqing Iron & Steel, and to try its best to achieve differentiated operations among the three listed companies. For example, business differentiation can be realized in different ways, such as asset trading and business division, including but not limited to differentiation in terms of business composition, product grade, application areas and customer groups;
(3) Entrusted management: one party entrusts the decision-making and management rights related to the operation of certain relevant assets of the overlapping business to the other party for unified management through the signing of an entrustment agreement;
(4) Other feasible solutions within the scope permitted by laws and regulations and relevant policies.

The implementation of the above solutions is subject to the fulfillment of the necessary procedures for consideration by listed companies and approval by the securities regulatory authorities and relevant competent authorities in accordance with relevant laws and regulations.

The company has not yet formulated specific implementation plans or time schedule for solving the overlapping business between Baosteel, Echeng Steel and Chongqing Iron & Steel. The company will fulfill its information disclosure obligations in accordance with the relevant laws and regulations in a timely manner after specific feasible plans are formulated;
In addition to the above, when the company or other subsidiaries are offered business opportunities that may compete with the business of Chongqing Iron & Steel, the company will try its best to give Chongqing Iron & Steel the right of priority to develop such opportunities and the right of first refusal to acquire the projects, promote the price of the relevant transactions to be fair and reasonable, and take the commercial practices followed for conducting normal commercial transactions with independent third parties as its pricing basis;

Chongqing Iron & Steel Company Limited

Section VI Significant Events (Continued)

I. FULFILLMENT OF COMMITMENTS (CONTINUED)

(I) Commitment of de facto controller, shareholders, related parties, acquirer and the Company during or sustained to the Reporting Period (Continued)

==> picture [469 x 48] intentionally omitted <==

		4. The company undertakes to strictly comply with the laws and
		regulations as well as the provisions of the articles of association of
		the Company and its relevant management system and not to use
		its position as an indirect controlling shareholder of the Company
		to seek unjustified benefits which may further impair the rights and
		interests of other shareholders of the Company;
		5. The above commitments shall remain in force during the period
		when China Baowu has de facto control over Chongqing Iron &
		Steel.
To solve the	Strategic	1. During the period when Strategic Emerging Fund and China Baowu	16 September 2020	No	Yes
horizontal	Emerging	are acting in concert and China Baowu has de facto control over
competition	Fund	Chongqing Iron & Steel, Strategic Emerging Fund will not take
		advantage of China Baowu’s control over the Company to obtain
		unjustified benefits and will not prejudice the legitimate interests of
		the Company and other shareholders;
		2. After the completion of change in equity, Strategic Emerging Fund
		will reasonably integrate the business development direction of
		its wholly-owned and holding subsidiaries and other enterprises
		under its de facto control in accordance with the main business
		development characteristics of each enterprise, and avoid itself
		and enterprises under its control from engaging in business that
		is in substantial horizontal competition with the main business of
		Chongqing Iron & Steel;
		3. If, during the period when Strategic Emerging Fund and China
		Baowu are acting in concert and China Baowu has de facto
		control over Chongqing Iron & Steel, Strategic Emerging Fund
		and the enterprises under its control obtain business opportunities
		that may constitute horizontal competition with the Company,
		Strategic Emerging Fund will facilitate the transfer of such business
		opportunities to the Company. If such business opportunities
		are not yet available for transfer to the Company, or if for other
		reasons the Company is temporarily unable to obtain such business
		opportunities, the Company shall have the right to request the
		Strategic Emerging Fund to adopt other means permitted by laws,
		regulations and the CSRC to solve the problem.

2021 Interim Report

Section VI Significant Events (Continued)

I. FULFILLMENT OF COMMITMENTS (CONTINUED)

(I) Commitment of de facto controller, shareholders, related parties, acquirer and the Company during or sustained to the Reporting Period (Continued)

==> picture [468 x 48] intentionally omitted <==

To solve the	Changshou	1. As of 1 December 2017, Changshou Iron & Steel has not engaged	1 December 2017	No	Yes
horizontal	Iron & Steel	in any business that is the same as or similar to the existing core
competition		business of Chongqing Iron & Steel.
		2. During the period when Changshou Iron & Steel is the controlling
		shareholder of Chongqing Iron & Steel, if Changshou Iron & Steel
		obtains a business opportunity of engaging in the same business
		as Chongqing Iron & Steel, Changshou Iron & Steel shall concede
		the business opportunity to Chongqing Iron & Steel and can invest
		only after Chongqing Iron & Steel has given up such business
		opportunity. (“engaged/engaging in” refers to any situations in
		which the business is conducted directly or indirectly through a
		controlling entity, excluding minority equity investments that do not
		generate a controlling position.)
To solve the	Siyuanhe	1. As of 21 December 2018, Siyuanhe Industrial Development Fund	21 December 2018	No	Yes
horizontal	Industrial	has not engaged in any business that is the same as or similar to
competition	Development	the existing core business of Chongqing Iron & Steel.
	Fund
		2. During the period when Siyuanhe Industrial Development Fund is
		the controlling shareholder of Chongqing Iron & Steel, if Siyuanhe
		Industrial Development Fund obtains a business opportunity
		of engaging in the same business as Chongqing Iron & Steel,
		Siyuanhe Industrial Development Fund shall concede the business
		opportunity to Chongqing Iron & Steel and can invest only after
		Chongqing Iron & Steel has given up such business opportunity.
		(“engaged/engaging in” refers to any situations in which the
		business is conducted directly or indirectly through a controlling
		entity, excluding minority equity investments that do not generate a
		controlling position.) (Note)

Chongqing Iron & Steel Company Limited

Section VI Significant Events (Continued)

I. FULFILLMENT OF COMMITMENTS (CONTINUED)

(I) Commitment of de facto controller, shareholders, related parties, acquirer and the Company during or sustained to the Reporting Period (Continued)
Performed
Commitment Time and term of Performance in time and
Background Type party Contents commitment term or not strictly or not To solve the China Baowu 1. China Baowu will ensure the business independence and asset 16 September 2020 No Yes related party integrity of Chongqing Iron & Steel, as well as independent and transactions integral production, supply and marketing system and other auxiliary and supporting systems.
1. China Baowu and other enterprises under its control will not seek the priority to conclude transactions with Chongqing Iron & Steel and its subsidiaries by utilizing its control over Chongqing Iron & Steel.
1. China Baowu and other enterprises under its control will avoid and reduce unnecessary transactions with Chongqing Iron & Steel and its subsidiaries. In the case of indeed necessary and unavoidable transactions, China Baowu and other enterprises under its control and Chongqing Iron & Steel and its subsidiaries shall enter into agreement by following the principles of justice, fairness, valuable consideration, etc., according to law, perform legal procedures, and in accordance with the requirements of laws, regulations and regulatory documents and the provisions of the Articles of Association of Chongqing Iron & Steel, perform the obligation of information disclosure according to law and related procedures for internal decision-making and reporting for approval, and undertake to neither conduct transactions with Chongqing Iron & Steel and its subsidiaries on unfair terms as compared with market prices, nor engage in activities impairing the legitimate interests of Chongqing Iron & Steel and its shareholders by utilizing such transactions.
2. In case of violation of any of the above commitments, China Baowu will undertake the liability according to law and compensate Chongqing Iron & Steel for loss caused thereby.

2021 Interim Report

Section VI Significant Events (Continued)

I. FULFILLMENT OF COMMITMENTS (CONTINUED)

(I) Commitment of de facto controller, shareholders, related parties, acquirer and the Company during or sustained to the Reporting Period (Continued)

==> picture [468 x 48] intentionally omitted <==

To solve the	Strategic	1. The Strategic Emerging Fund will ensure the business
related party	Emerging	independence and asset integrity of Chongqing Iron & Steel, as
transactions	Fund	well as independent and integral production, supply and marketing
		system and other auxiliary and supporting systems.
		2. Strategic Emerging Fund and the enterprises under its control
		will not seek the priority to conclude transactions with Chongqing
		Iron & Steel and its subsidiaries by utilizing the concerted action
		relationship between Strategic Emerging Fund and China Baowu
		and China Baowu’s control over Chongqing Iron & Steel.
		3. Strategic Emerging Fund and the enterprises under its control
		will avoid and reduce unnecessary transactions with Chongqing
		Iron & Steel and its subsidiaries. In the case of indeed necessary
		and unavoidable transactions, Strategic Emerging Fund and the
		enterprises under its control and Chongqing Iron & Steel and its
		subsidiaries shall enter into agreement by following the principles
		of justice, fairness, valuable consideration, etc., according to law,
		perform legal procedures, and in accordance with the requirements
		of laws, regulations and regulatory documents and the provisions of
		the Articles of Association of Chongqing Iron & Steel, perform the
		obligation of information disclosure according to law and related
		procedures for internal decision-making and reporting for approval,
		and undertake to neither conduct transactions with Chongqing
		Iron & Steel and its subsidiaries on unfair terms as compared with
		market prices, nor engage in activities impairing the legitimate
		interest of Chongqing Iron & Steel and its shareholders by utilizing
		such transactions.

In case of violation of any of the above commitments, Strategic Emerging Fund will undertake the liability according to law and compensate Chongqing Iron & Steel for loss caused thereby.

Chongqing Iron & Steel Company Limited

Section VI Significant Events (Continued)

I. FULFILLMENT OF COMMITMENTS (CONTINUED)

(I) Commitment of de facto controller, shareholders, related parties, acquirer and the Company during or sustained to the Reporting Period (Continued)

==> picture [469 x 47] intentionally omitted <==

To solve the	Changshou	1. After the implementation of the bankruptcy reorganisation plan
related party	Iron & Steel	of Chongqing Iron & Steel, Changshou Iron & Steel will, in strict
transactions		accordance with the requirements of laws and regulations such
		as the Company Law and the relevant provisions of the Articles
		of Association of Chongqing Iron & Steel, exercise the rights of
		shareholders, or urge the directors nominated by Changshou Iron
		& Steel to exercise the rights of directors according to law and to
		fulfill the obligation to abstain from voting when the general meeting
		and the Board vote on the related party transactions involving
		Changshou Iron & Steel.
		2. After the implementation of the bankruptcy reorganisation plan of
		Chongqing Iron & Steel, for the possible related party transactions
		arising from various reasonable reasons, Changshou Iron & Steel
		will, according to applicable laws and regulations and on the
		principles of justice and equity, sign agreements according to
		law, perform relevant procedures, and perform its obligation of
		information disclosure in a timely manner, so as to ensure that
		such transactions will not harm the legitimate rights and interests of
		Chongqing Iron & Steel and other shareholders.

2021 Interim Report

Section VI Significant Events (Continued)

I. FULFILLMENT OF COMMITMENTS (CONTINUED)

(I) Commitment of de facto controller, shareholders, related parties, acquirer and the Company during or sustained to the Reporting Period (Continued)

==> picture [468 x 47] intentionally omitted <==

Others	China Baowu	1. China Baowu and its concerted party, Strategic Emerging Fund,	16 September 2020	No	Yes
	and Strategic	undertake to maintain separation from Chongqing Iron & Steel in
	Emerging	terms of assets, personnel, finance, organization and business,
	Fund	and to strictly comply with the relevant provisions of the CSRC
		regarding the independence of listed companies, and not to
		use their controlling position to violate the regulated operating
		procedures of Chongqing Iron & Steel, interfere with the operating
		decisions of Chongqing Iron & Steel or harm the legitimate interests
		of Chongqing Iron & Steel and other shareholders. The promisees
		and other subsidiaries under their control guarantee that they will
		not misappropriate the funds of Chongqing Iron & Steel and its
		subsidiaries under its control in any way.
		2. The above commitments shall remain in force during the period
		when China Baowu has control over Chongqing Iron & Steel and
		Strategic Emerging Fund is acting in concert with China Baowu. In
		the event of any loss to Chongqing Iron & Steel as a result of the
		failure to perform the above undertakings by the promisees, the
		promisees will bear the corresponding liability for compensation.
Others	Changshou	During the period when Changshou Iron & Steel holds the shares	1 December 2017	No	Yes
	Iron & Steel	of Chongqing Iron & Steel, Changshou Iron & Steel will, in strict
		compliance with the rules of CSRC, Stock Exchanges, as well as
		those of the management system of Chongqing Iron & Steel such
		as the Articles of Association, exercise the shareholders’ rights
		and fulfill the shareholders’ obligations in the same manner as
		other shareholders. Changshou Iron & Steel will not seek improper
		interests by using the position of shareholders but respect the
		independence of Chongqing Iron & Steel in terms of its personnel,
		assets, business, finance, and organization.

Chongqing Iron & Steel Company Limited

Section VI Significant Events (Continued)

I. FULFILLMENT OF COMMITMENTS (CONTINUED)

(I) Commitment of de facto controller, shareholders, related parties, acquirer and the Company during or sustained to the Reporting Period (Continued)
Note: On 16 September 2020, Siyuanhe Industrial Development Fund, China Baowu and Desheng Group signed an Equity Transfer Agreement in respect of the distribution in kind of the 75% equity interests in Changshou Iron & Steel held by Siyuanhe Industrial Development Fund. On the same day, China Baowu entered into an Acting in Concert Agreement with Strategic Emerging Fund and Chongqing Yufu Assets Equity Investment Fund Management Co., Ltd. The change in equity interests is due to Siyuanhe Investment, the original de facto controller of Chongqing Iron & Steel, will transfer the partnership equity in Siyuanhe Industrial Development Fund to Desheng Group. Meanwhile, Siyuanhe Industrial Development Fund will be dissolved and will make distribution in kind to China Baowu and Desheng Group with 75% equity interests in Changshou Iron & Steel in proportion to their respective paid-in capital contributions. China Baowu will be allocated 40% equity interests in Changshou Iron & Steel and enter into an acting in concert agreement with Strategic Emerging Fund to obtain control over Changshou Iron & Steel, thereby indirectly controlling 2,096,981,600 shares of Chongqing Iron & Steel, representing 23.51% of the total share capital of Chongqing Iron & Steel. On 2 December 2020, China Baowu officially became the de facto controller of Chongqing Iron & Steel.

In view of the above, according to Rule 10.1.6 (II) of the Rules Governing the Listing of Stocks on the Shanghai Stock Exchange, Siyuanhe Industrial Development Fund was the related party of the Company in the past twelve months.

II. USE OF CAPITAL BY THE CONTROLLING SHAREHOLDER AND OTHER RELATED PARTIES FOR NON-OPERATING PURPOSES DURING THE REPORTING PERIOD

Applicable ✓ Not applicable

III. GUARANTEE IN VIOLATION OF REGULATION

Applicable ✓ Not applicable

IV. AUDIT ON INTERIM REPORT

Applicable ✓ Not applicable

2021 Interim Report

Section VI Significant Events (Continued)

V. CHANGES AND HANDLING OF MATTERS INVOLVED IN NONSTANDARD AUDIT OPINIONS OF 2020 ANNUAL REPORT

Applicable ✓ Not applicable

VI. MATTERS RELATING TO INSOLVENCY OR RESTRUCTURING

Applicable ✓ Not applicable

VII. MATERIAL LITIGATION AND ARBITRATION

Material litigations and arbitrations occur during the Reporting Period

✓ No material litigations and arbitrations occur during the Reporting Period

VIII. SUSPECTED VIOLATIONS OF LAWS AND REGULATIONS OF, PUNISHMENTS TO AND RECTIFICATION OF THE COMPANY AND ITS DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT, CONTROLLING SHAREHOLDERS, AND DE FACTO CONTROLLERS

Applicable ✓ Not applicable

IX. I N T E G R I T Y O F T H E C O M P A N Y A N D I T S C O N T R O L L I N G SHAREHOLDERS AND DE FACTO CONTROLLERS DURING THE REPORTING PERIOD

Applicable ✓ Not applicable

Chongqing Iron & Steel Company Limited

Section VI Significant Events (Continued)

X. MATERIAL RELATED PARTY TRANSACTIONS

(I) Related party transactions related to day-to-day operation
Events disclosed in provisional announcements but without subsequent development or changes during implementation

Applicable ✓ Not applicable

Events disclosed in provisional announcements with subsequent development or changes during implementation

✓ Applicable Not applicable

On 16 November 2020, the Resolution on the Lease Renewal and the Final Purchase of the Assets from Changshou Iron & Steel was considered and approved at the 28th meeting of the eighth session of the Board and the 19th meeting of the eighth session of the Supervisory Committee of the Company, pursuant to which, the Company was approved to enter into the Asset Leasing Contract with Changshou Iron & Steel. On the same day, the Company entered into the Asset Leasing Contract with Changshou Iron & Steel, which agreed on the lease renewal of production equipment and facilities from Changshou Iron & Steel for the year 2021, with the lease term from 1 January 2021 to 31 December 2021, and pursuant to which, the parties agreed to enter into a purchase agreement for the leased asset during the lease term of the contract or upon the expiry of the lease term of the contract for the Company to purchase the leased asset from Changshou Iron & Steel, at which time the parties would confirm the purchase price with reference to the appraised value of the leased asset.. For details, please refer to the “Announcement on the Related Party Transaction in relation to the Lease Renewal and Final Purchase of Assets from A Related Party” (Announcement No.: 2020–055).

In order to ensure the stable and continuous running of the production and operation of the Company, on 25 August 2020, the Resolution in relation to the Entering into of the Service and Supply Agreement between the Company and China Baowu and the Continuing Related Party Transaction (Including the Proposed Cap thereunder) was considered and approved at the 26th meeting of the eighth session of the Board of the Company, pursuant to which, the Company was approved to enter into the Service and Supply Agreement (the “Original Agreement”) with China Baowu, and the total amount of services and/or materials provided by the Company and its subsidiaries (the “Group”) to China Baowu and its subsidiaries (“China Baowu Group”) and the total amount of services and/or materials provided by the China Baowu Group to the Group shall not exceed RMB966,710,000 and RMB7,211,620,000, respectively, for the period from the effective date of the Original Agreement to 31 March 2021. For details, please refer to the Announcement on Continuing Related Party Transactions (2020–047) disclosed by the Company on 26 August 2020.

52 2021 Interim Report

Section VI Significant Events (Continued)

X. MATERIAL RELATED PARTY TRANSACTIONS (CONTINUED)

(I) Related party transactions related to day-to-day operation (Continued)

2. Events disclosed in provisional announcements with subsequent development or changes during implementation (Continued)

On 20 November 2020, the Company entered into the Service and Supply Agreement with China Baowu. For details, please refer to the Announcement on the Progress of Continuing Related Party Transactions (Announcement No.: 2021–058) disclosed by the Company on 21 November 2020.

In view of the enlarged production scale of the Company and the increase of China Baowu’s demand, the Company intends to enter into the Supplemental Service and Supply Agreement with China Baowu, which agreed that the item “pig iron” shall be added to the products sold by the Group to China Baowu Group, and the total amount from provision of services and/or materials by the Group to China Baowu Group shall not exceed RMB2,537,100,000 for the period from the effective date of the Original Agreement to 31 March 2021. Save for the changes aforesaid, all other terms under the Original Agreement remain unchanged. On 29 January 2021, the Resolution in relation to the Entering into of the Service and Supply Agreement and its Supplemental Agreement between the Company and China Baowu and the Continuing Related Party Transaction (Including the Proposed Cap thereunder) entered into was considered and approved at the 33rd meeting of the eighth session of the Board of the Company, and on the same day, the Company entered into the Supplemental Service and Supply Agreement with China Baowu. For details, please refer to the Announcement on the Progress of Continuing Related Party Transactions (Announcement No.: 2021–008) disclosed by the Company on 30 January 2021.

In order to ensure the stable and continuous running of the production and operation of the Company, on 19 March 2021, the Resolution in relation to the Entering into of the Service and Supply Agreement from 2021 to 2023 between the Company and China Baowu and the Continuing Related Party Transactions (Including the Annual Cap) was considered and approved at the 35th meeting of the eighth session of the Board of the Company, pursuant to which, the Company was approved to enter into the Service and Supply Agreement (the “Agreement”) with China Baowu, and the total amount of products provided by the Company and its subsidiaries (the “Group”) to China Baowu and its subsidiaries (“China Baowu Group”) and the total amount of products, materials and/or services provided by China Baowu Group to the Group shall not exceed RMB49,741,000,000 and RMB87,990,000,000, respectively, for the period from 1 April 2021 to 31 December 2023. For details, please refer to the Announcement on 2021–2023 Continuing Related Party Transactions (Announcement No.: 2021–021) disclosed by the Company on 20 March 2021. On 1 April 2021, the Company and China Baowu entered into the Service and Supply Agreement for a period from 1 April 2021 to 31 December 2023.

Chongqing Iron & Steel Company Limited

Section VI Significant Events (Continued)

X. MATERIAL RELATED PARTY TRANSACTIONS (CONTINUED)

(I) Related party transactions related to day-to-day operation (Continued)

Events disclosed in provisional announcements with subsequent development or changes during implementation (Continued)

During the Reporting Period, the actual amount of the related party transaction was within the annual caps, the details of which are as follows:

Type of related party transaction	Pricing principle	Transaction amount (Unit: RMB’000)
Renting	Market price	94,912
Procurement of goods and	Market price	4,713,473
acceptance of services
Sale of goods	Market price	3,188,577

Matters not disclosed in provisional announcements

✓ Applicable Not applicable

Unit: RMB’000 Currency: RMB

Related party	Related relationship	Type of related party transaction	Content of related party transaction	Pricing principle of related party transaction	Transaction price of related party Transaction amount of related party	Transaction price of related party Transaction amount of related party	As a percentage of the amount of similar transactions (%)	Settlement method of related party transaction	Market price	Reason for the difference between Transaction price and market reference price
Baowu Raw Material Supply Co., Ltd.	Joint-stock	Purchase of	Purchase of	With reference to	/	2,038,876	10.68	/	/	/
	subsidiary	goods	goods	market price
Baosteel Resources Holdings (Shanghai)	Other related	Purchase of	Purchase of	With reference to	/	795,636	4.17	/	/	/
Co., Ltd.	party	goods	goods	market price
Shanghai Baoding Energy Co., Ltd.	Other related	Purchase of	Purchase of	With reference to	/	409,959	2.15	/	/	/
	party	goods	goods	market price
Baosteel Engineering & Technology Group	Other related	Purchase of	Purchase of	With reference to	/	359,082	1.88	/	/	/
Co., Ltd.	party	goods	goods	market price
Wugang Resources Group Ezhou	Other related	Purchase of	Purchase of	With reference to	/	224,396	1.18	/	/	/
Qiutuan Co., Ltd. (武鋼資源集團鄂州球團	party	goods	goods	market price
有限公司)
Ouye Lianjin Renewable Resources Co.,	Other related	Purchase of	Purchase of	With reference to	/	170,733	0.89	/	/	/
Ltd.	party	goods	goods	market price

2021 Interim Report

Section VI Significant Events (Continued)

X. MATERIAL RELATED PARTY TRANSACTIONS (CONTINUED)

(I) Related party transactions related to day-to-day operation (Continued)
Matters not disclosed in provisional announcements (Continued)

==> picture [469 x 98] intentionally omitted <==

----- Start of picture text -----

Reason for
As a Settlement the difference
Transaction percentage of method between
Type of Content of Pricing principle Transaction amount the amount of related Transaction
Related related party related party of related party price of related of related of similar party Market price and market
Related party relationship transaction transaction transaction party party transactions transaction price reference price
(%)
----- End of picture text -----

Shanghai Baosight Software Co., Ltd.	Other related	Purchase of	Purchase	With reference to	/	67,174	0.35	/	/	/
	party	goods	of goods,	market price
			acceptance of
			services
Baowu Equipment Intelligent Technology	Other related	Purchase of	Purchase	With reference to	/	62,013	0.32	/	/	/
Co., Ltd.	party	goods	of goods,	market price
			acceptance of
			services
Baowu Water Technology Co., Ltd. (寶武水	Other related	Purchase of	Purchase of	With reference to	/	44,955	0.24	/	/	/
務科技有限公司)	party	goods	goods	market price
Shanghai Baosteel Shipping Co., Ltd.	Other related	Purchase of	Purchase of	With reference to	/	26,407	0.14	/	/	/
	party	goods	goods	market price
Wuhan Iron and Steel Group Logistics Co.,	Other related	Purchase of	Acceptance of	With reference to	/	14,800	0.08	/	/	/
Ltd. (武漢鋼鐵集團物流有限公司)	party	goods	services	market price
Zhejiang Zhoushan Wugang Terminal Co.,	Other related	Purchase of	Purchase of	With reference to	/	8,735	0.05	/	/	/
Ltd. (浙江舟山武港碼頭有限公司)	party	goods	goods	market price
Shanghai Meishan Industrial Civil	Other related	Purchase of	Purchase of	With reference to	/	6,350	0.03	/	/	/
Engineering Design Research Institute	party	goods	goods	market price
Co., Ltd.
Shanghai Ouyeel Purchasing Information	Other related	Purchase of	Purchase	With reference to	/	5,395	0.03	/	/	/
Technology Co., Ltd.	party	goods	of goods,	market price
			acceptance of
			services
Others	Other related	Purchase of	/	With reference to	/	3,449	/	/	/	/
	party	goods		market price
Shanghai Ouyeel Material Technology Co.,	Other related	Sale of goods	Sale of goods	With reference to	/	1,926,112	8.63	/	/	/
Ltd.	party			market price
Ouyeel Cloud Commerce Corporation	Other related	Sale of goods	Sale of goods	With reference to	/	551,353	2.47	/	/	/
Limited	party			market price

Chongqing Iron & Steel Company Limited

Section VI Significant Events (Continued)

X. MATERIAL RELATED PARTY TRANSACTIONS (CONTINUED)

(I) Related party transactions related to day-to-day operation (Continued)
Matters not disclosed in provisional announcements (Continued)

==> picture [470 x 98] intentionally omitted <==

Wuhan Baosteel Huazhong Trade Co., Ltd.	Other related	Sale of goods	Sale of goods	With reference to	/	161,618	0.72	/	/	/
	party			market price
Chongqing Baocheng Carbon Material Co.	Joint-stock	Sale of goods	Sale of products,	With reference to	/	149,113	0.66	/	/	/
Ltd.	subsidiary		energy media	market price
Baosteel Resources Holdings (Shanghai)	Other related	Sale of goods	Sale of goods	With reference to	/	125,326	0.56	/	/	/
Co., Ltd.	party			market price
Baowu Group Echeng Iron and Steel Co.,	Other related	Sale of goods	Sale of goods	With reference to	/	113,169	0.51	/	/	/
Ltd.	party			market price
Ouyeel Blockchain (Pingxiang) Finance	Other related	Sale of goods	Sale of goods	With reference to	/	98,861	0.44	/	/	/
and Metal Recycling Resources Co.,	party			market price
Ltd. (歐冶鏈金（萍鄉）再生資源有限公司)
Baosteel Huangshi Coated Plate Co., Ltd.	Other related	Sale of goods	Sale of goods	With reference to	/	51,895	0.23	/	/	/
(寶鋼股份黃石塗鍍板有限公司)	party			market price
Chengdu Baosteel West Trade Co., Ltd.	Other related	Sale of goods	Sale of goods	With reference to	/	10,891	0.05	/	/	/
	party			market price
Others	Other related	Sale of goods	/	With reference to	/	239	/	/	/	/
	party			market price
Total				/	/	7,902,050	/	/	/	/

Particulars of substantial sales return

Nil

Explanation on related party transactions

They enabled the Company to obtain stable and reliable service supply at a reasonable price, which is vital to the Company to keep stable production, improve production efficiency and increase production output

2021 Interim Report

Section VI Significant Events (Continued)

X. MATERIAL RELATED PARTY TRANSACTIONS (CONTINUED)

(II) Connected transactions related to acquisition of assets or acquisition or disposal of equity interests
Events disclosed in provisional announcements but without subsequent development or changes during implementation

Applicable ✓ Not applicable

Events disclosed in provisional announcements with subsequent development or changes during implementation

✓ Applicable Not applicable

On 16 November 2020, the Resolution on the Lease Renewal and the Final Purchase of the Assets from Changshou Iron & Steel was considered and approved at the 28th meeting of the eighth session of the board of directors and the 19th meeting of the eighth session of the Supervisory Committee of the Company, pursuant to which the Company was approved to enter into the Asset Lease Agreement with Changshou Iron & Steel. On the same date, the Company entered into the Asset Lease Agreement with Changshou Iron & Steel, agreeing to renew the lease of Changshou Iron & Steel’s production equipment and facilities in 2021 with a lease period commencing on 1 January 2021 and ending up on 31 December 2021, pursuant to which the parties agreed to enter into a purchase agreement for the leased asset during the lease term of the agreement or upon the expiry of the lease term of the agreement for the Company to purchase the leased asset from Changshou Iron & Steel, at which time the parties would confirm the purchase price with reference to the appraised value of the leased asset. For details, please refer to the “Announcement on the Related Party Transaction in relation to the Lease Renewal and Final Purchase of Assets from A Related Party” (Announcement No.: 2020–055) disclosed by the Company on 17 November 2020.

On 11 June 2021, the Resolution on Related Party Transaction in relation to the Purchase of the Assets from Changshou Iron & Steel was considered and approved at the 39th meeting of the eighth session of the board of directors and the 26th meeting of the eighth session of Supervisory Committee of the Company, to approve the Company to purchase pre-ironmaking assets from Changshou Iron & Steel. The pre-ironmaking assets which the Company may purchase from Changshou Iron & Steel will be used for the Company’s own production and operation, which is necessary for the Company’s normal production and operation and can ensure the consistent and stable production of the Company. For details, please refer to the “Announcement on the Related Party Transaction in relation to the Purchase of Assets from A Related Party” (Announcement No.: 2021–044) disclosed by the Company on 12 June 2021.

On 23 June 2021, the Company entered into the Asset Acquisition Agreement with Changshou Iron & Steel in respect of the related party transaction for the purchase of preironmaking assets. The aforesaid related party transaction was considered and approved by the Company at the 2021 second extraordinary general meeting held on 21 August 2021

Chongqing Iron & Steel Company Limited

Section VI Significant Events (Continued)

X. MATERIAL RELATED PARTY TRANSACTIONS (CONTINUED)

(II) Connected transactions related to acquisition of assets or acquisition or disposal of equity interests (Continued)
Events not disclosed in provisional announcements

Applicable ✓ Not applicable

Disclosure of the performance of the results relating to the results agreement during the Reporting Period

Applicable ✓ Not applicable

(III) Material connected transactions related to joint external investment
Events disclosed in provisional announcements without subsequent development or changes during implementation

Applicable ✓ Not applicable

Events disclosed in provisional announcements with subsequent development or changes during implementation

Applicable ✓ Not applicable

Events not disclosed in provisional announcements

Applicable ✓ Not applicable

(IV) Amounts due to or from related parties
Events disclosed in provisional announcements without subsequent development or changes during implementation

Applicable ✓ Not applicable

2021 Interim Report

Section VI Significant Events (Continued)

X. MATERIAL RELATED PARTY TRANSACTIONS (CONTINUED)

(IV) Amounts due to or from related parties (Continued)

2. Events disclosed in provisional announcements with subsequent development or changes during implementation

✓ Applicable Not applicable

According to the Announcement of the Administrator of Chongqing Iron & Steel Company Limited in Relation to the Progress of Implementation of the Reorganisation Plan (Announcement No.: 2017–111) disclosed on 25 November 2017, Changshou Iron & Steel shall lend RMB2.4 billion to Chongqing Iron & Steel for implementing the reorganization plan. As of 30 June 2021, the Company has repaid the loan in full in advance.

At the 23rd meeting of the eighth session of the Board of the Company held on 16 June 2020, the Resolution in Relation to the Provision of the Facilities by Chongqing Changshou Iron & Steel Company Limited to the Company was considered and approved. Changshou Iron & Steel intended to offer the credit facilities to the Company in an amount of not more than RMB1,000,000,000 for a term of 3 years, bearing interest calculated at the Loan Prime Rate (LPR). For a loan with a term of one year or less, the interest was calculated at LPR for one-year loan; and for a loan with a term of more than one year, the interest was calculated at the average of LPR for one-year loan and LPR for five-year loan, applicable at the time of application for the facilities. The Company was not required to provide any guarantee for such facilities.

Related party	Amount borrowed (Unit: RMB’000)	Interest in the current period (Unit: RMB’000)
Changshou Iron & Steel	561,880	13,151

3. Events not disclosed in provisional announcements

Applicable ✓ Not applicable

Chongqing Iron & Steel Company Limited

Section VI Significant Events (Continued)

X. MATERIAL RELATED PARTY TRANSACTIONS (CONTINUED)

(V) Financial businesses between the Company and related financial companies, the Company’s controlling financial companies and related parties

==> picture [199 x 126] intentionally omitted <==

----- Start of picture text -----

✓ Applicable Not applicable
1. Deposit business
Applicable ✓ Not applicable
2. Loan business
Applicable ✓ Not applicable
----- End of picture text -----

==> picture [414 x 233] intentionally omitted <==

----- Start of picture text -----

3. Credit granting business or other financial services
✓ Applicable Not applicable
Unit: RMB’000 Currency: RMB
Actual
Related Business amount
Related party relationship type Total amount occurred
Baowu Group Finance Other related Credit granting
Co., Ltd. party business 2,000,000 –
4. Others
Applicable ✓ Not applicable
----- End of picture text -----

(VI) Other material related party transactions

Applicable ✓ Not applicable Applicable ✓ Not applicable

(VII) Others

60 2021 Interim Report

Section VI Significant Events (Continued)

XI. MATERIAL CONTRACTS AND THE IMPLEMENTATION

1 Trust, contracted businesses and leasing affairs ✓ Applicable Not applicable (1) Trust Applicable ✓ Not applicable (2) Contracted businesses Applicable ✓ Not applicable (3) Leasing affairs ✓ Applicable Not applicable

Unit: RMB’000 Currency: RMB

Name of lessor Chongqing Iron & Steel	Name of lessee The Company	Status of leased assets Equipment	Amount of leased assets /	Date of commencement of lease 2021.01.01	Expiry date of lease 2025.12.31	Gain on lease 73,009	Basis of determination of such gain Contract	Effect of gain on lease on the Company Affecting the costs	Whether a related party transaction No	Connected relationship
Company (Group)
Limited
Changshou Iron & Steel	The Company	Equipment	/	2021.01.01	2021.12.31	94,912	Contract	Affecting the costs	Yes	Controlling
										shareholder

Explanations on leasing affairs

Applicable ✓ Not applicable

2 Significant guarantees that were performed or not yet performed during the Reporting Period

Applicable ✓ Not applicable

3 Other significant contracts

Applicable ✓ Not applicable

Chongqing Iron & Steel Company Limited

Section VI Significant Events (Continued)

XII. EXPLANATION OF OTHER SIGNIFICANT EVENTS

✓ Applicable Not applicable

(I) Relevant disclosure made according to the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange

1. Compliance of Corporate Governance Code

To the best of knowledge of the Board, the Company had complied with the requirements of the “Corporate Governance Code” as set out in Appendix 14 of the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange during the Reporting Period, and was not aware of any deviation from the Code.

2. Model Code for Securities Transactions by Directors

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as set out in Appendix 10 of the Listing Rules as the code for trading of the Company’s securities by directors. All directors of the Company confirmed upon specific enquiries that they had complied with the required standards as set out in the Model Code for the six months ended 30 June 2021.

3. Interim dividend

Given the fact that the accumulated undistributed profit of the Company remained negative as of the end of the Reporting Period, the Company does not recommend distribution of any interim dividend for the six months ended 30 June 2021 pursuant to the provision of Article 250 of the Articles of Association.

4. Purchase, Sale or Redemption of Listed Securities of the Company

No purchase, sale and redemption of the listed securities of the Company during the Reporting Period.

5. Major acquisition and disposal of subsidiaries and affiliates

No major acquisition and disposal of subsidiaries and affiliates occurred during the Reporting Period.

62 2021 Interim Report

Section VI Significant Events (Continued)

XII. EXPLANATION OF OTHER SIGNIFICANT EVENTS (CONTINUED)

(I) Relevant disclosure made according to the Rules Governing the Listing of Securities on the Hong Kong Stock Exchange (Continued)

6. Audit Committee

The Audit Committee is comprised of three independent non-executive directors and one non-executive director, namely, Mr. Xin Qingquan, Mr. Xu Yixiang, Mr. Wong Chunwa and Mr. Zhou Ping with Mr. Xin Qingquan acting as the chairman of the Audit Committee as at 30 June 2021; as an election was held by the Board of the Company on 12 August 2021, the new members of the Audit Committee are Mr. Zhang Jinruo, Mr. Sheng Xuejun, Mr. Guo Jiebin and Mr. Zhou Ping with Mr. Zhang Jinruo acting as the chairman of the Audit Committee.

The unaudited interim financial report of the Company for the six months ended 30 June 2021 had been reviewed by the members of the Audit Committee before being submitted to the Board for approval.

7. Interests or Short Positions

As at 30 June 2021, the interests or short positions (including interests or short positions which they were taken or deemed to have under relevant provisions of the Securities and Futures Ordinance (“SFO”)) of the directors, supervisors or senior management members of the Company in the shares or underlying shares or debentures of the Company and any of its associated corporations (within the meaning of Part XV of the SFO), which were required to be recorded in the register required to be kept by the Company pursuant to Section 352 of the SFO, or which were required, pursuant to the Rules Governing the Listing of Securities on the Stock Exchange and the Model Code for Securities Transactions by Directors of Listed Companies, to be notified to the Company and the Stock Exchange, were as follows:

Name	The Company/ associated corporations	Capacity	Nature of interests	Total number of interested shares held (share)	Percentage in the share capital of A shares of the Company (%)	Percentage in the total share capital of the Company (%)	Class of shares
Tu Deling	The Company	Director	Beneficial interests	1,148,000	0.014	0.013	A share
				(long position)
Zhou Yaping	The Company	Supervisor	Beneficial interests	299,300	0.004	0.003	A share
		representing staff		(long position)
Zhao Wei	The Company	Supervisor	Beneficial interests	176,800	0.002	0.002	A share
		representing staff		(long position)
Yao Xiaohu	The Company	Senior vice president	Beneficial interests	314,900	0.004	0.004	A share
				(long position)

Chongqing Iron & Steel Company Limited

Section VI Significant Events (Continued)

XII. EXPLANATION OF OTHER SIGNIFICANT EVENTS (CONTINUED)

(II) Related party transactions

1. 2020–2021 continuing related party transaction

In order to ensure the stable and continuous running of the production and operation of the Company, on 25 August 2020, the Resolution in relation to the Entering into of the Service and Supply Agreement between the Company and China Baowu and the Continuing Related Party Transaction (including the Proposed Cap thereunder) was considered and approved at the 26th meeting of the eighth session of the Board of the Company, pursuant to which, the Company was approved to enter into the Service and Supply Agreement (the “Original Agreement”) with China Baowu, and the total amount of services and/or materials provided by the Company and its subsidiaries (the “Group”) to China Baowu and its subsidiaries (“China Baowu Group”) and the total amount of services and/or materials provided by China Baowu Group to the Group shall not exceed RMB966,710,000 and RMB7,211,620,000, respectively, for the period from the effective date of the Original Agreement to 31 March 2021. For details, please refer to the Announcement on Continuing Related Party Transaction (2020–047) disclosed by the Company on 26 August 2020.

On 20 November 2020, the Company entered into the Services and Supply Agreement with China Baowu. For details, please refer to the Announcement on the Progress of Continuing Related Party Transactions (Announcement No.: 2020–058) disclosed by the Company on 21 November 2020.

In view of the enlarged production scale of the Company and the increase of China Baowu’s demand, the Company intends to enter into the Supplemental Service and Supply Agreement with China Baowu, which agreed that the item “pig iron” shall be added to the products sold by the Group to China Baowu Group, and the total amount from provision of services and/or materials by the Group to China Baowu Group shall not exceed RMB2,537,100,000 for the period from the effective date of the Original Agreement to 31 March 2021. Except for the changes aforesaid, other terms under the Original Agreement remain unchanged. On 29 January 2021, the Resolution in relation to the Entering into of the Service and Supply Agreement and its Supplemental Agreement between the Company and China Baowu and the Continuing Related Party Transaction (including the Proposed Cap thereunder) was considered and approved at the 33rd Meeting of the eighth session of the Board of the Company, and on the same day, the Company entered into the Supplemental Service and Supply Agreement with China Baowu. For details, please refer to the Announcement on the Progress of the Continuing Related Party Transactions (Announcement No.: 2021–008) disclosed by the Company on 30 January 2021.

The above-mentioned related party transactions were considered and approved at the 2021 first extraordinary general meeting of the Company held on 10 March 2021.

64 2021 Interim Report

Section VI Significant Events (Continued)

XII. EXPLANATION OF OTHER SIGNIFICANT EVENTS (CONTINUED)

(II) Related party transactions (Continued)

2. 2021–2023 continuing connected transactions

In order to ensure the stable and continuous running of production and operation of the Company, on 19 March 2021, the Resolution in relation to the Service and Supply Agreement for the Period from 2021 to 2023 and the continuing connected transactions (Including the annual caps) entered into between the Company and China Baowu was approved by voting at the 35th meeting of the eighth session of the Board of the Company, pursuant to which, the Company was approved to enter into the Service and Supply Agreement (the “Agreement”) with China Baowu. The Company and its subsidiaries (the “Group”) shall provide China Baowu and its subsidiaries (“China Baowu Group”) with products in an aggregate amount of not exceeding RMB49,741 million for the period from 1 April 2021 to 31 December 2023, while China Baowu Group shall provide the Group with products, materials and services in an aggregate amount of not exceeding RMB87,990 million for the period from 1 April 2021 to 31 December 2023. For details, please refer to the Announcement on 2021–2023 Continuing Connected Transactions (Announcement No.: 2021–021) disclosed by the Company on 20 March 2021.

On 1 April 2021, the Company entered into the Service and Supply Agreement with China Baowu for a period from 1 April 2021 to 31 December 2023. The aforesaid connected transactions were considered and approved at the 2020 annual general meeting of the Company held on 29 June 2021.

3. Financial service agreement and connected transaction

In order to optimize financial management, improve the efficiency of capital utilization and reduce financing costs, the Company intended to cooperate with Baowu Finance Company in financial business based on the principles of legal compliance, equality and voluntariness, controllable risk and mutual benefit, and Baowu Group Finance Co., Ltd. (Baowu Finance Company) would provide relevant financial services to the Company and enter into the Financial Service Agreement with the Company. On 19 March 2021, the Resolution in relation to the Financial Service Agreement and the Related Party Transaction entered into between the Company and China Baowu was approved by voting at the 35th meeting of the eighth session of the Board of the Company.

The Financial Service Agreement provides for: (1) comprehensive credit services, with a maximum daily credit limit of RMB2 billion provided to the Company; (2) deposit service under the treasury management services, with a maximum daily balance limit of RMB2 billion for deposit cash of deposit service provided to the Company; and (3) treasury management services (other than the deposit service) and the other financial services, with a maximum annual cap of the service charges for services provided to the Company would be RMB1 million (other than acceptance charge, settlement handling fee, handling fee for opening letter of credit and other fees charged by banks on behalf).

Chongqing Iron & Steel Company Limited

Section VI Significant Events (Continued)

XII. EXPLANATION OF OTHER SIGNIFICANT EVENTS (CONTINUED)

(II) Related party transactions (Continued)

3. Financial service agreement and connected transaction (Continued)

On 1 April 2021, the Company entered into the Financial Service Agreement with Baowu Finance Company for a service term from 1 April 2021 to 31 December 2023. The aforesaid connected transaction was considered and approved at the 2020 annual general meeting of the Company held on 29 June 2021.

4. Purchase of the assets of related party

On 16 November 2020, the Resolution on the Lease Renewal and the Final Purchase of the Assets from Changshou Iron & Steel was considered and approved at the 28th meeting of the eighth session of the Board and the 19th meeting of the eighth session of the Supervisory Committee of the Company, pursuant to which the Company was approved to enter into the Asset Lease Agreement with Chongqing Changshou Iron & Steel Company Limited (“Changshou Iron & Steel”). On the same date, the Company entered into the Asset Lease Agreement with Changshou Iron & Steel, pursuant to which the parties agreed to enter into a purchase agreement for the leased asset during the lease term of the agreement or upon the expiry of the lease term of the agreement for the Company to purchase the leased asset from Changshou Iron & Steel, at which time the parties would confirm the purchase price with reference to the appraised value of the leased asset. For details, please refer to the Announcement on the Related Party Transaction in relation to the Lease Renewal and Final Purchase of Assets from A Related Party (Announcement No.: 2020–055) disclosed by the Company on 17 November 2020.

On 11 June 2021, the Resolution on Related Party Transaction in relation to the Purchase of the Assets from Changshou Iron & Steel was considered and approved at the 39th meeting of the eighth session of the Board and the 26th meeting of the eighth session of Supervisory Committee of the Company, pursuant to which, the Company was approved to purchase pre-ironmaking assets from Changshou Iron & Steel. The pre-ironmaking assets which the Company may purchase from Changshou Iron & Steel will be used for the Company’s own production and operation, which is necessary for the Company’s normal production and operation and can ensure the consistent and stable production of the Company. For details, please refer to the Announcement on the Connected Transaction in relation to the Purchase of Assets from a Related Party (Announcement No.: 2021–044) disclosed by the Company on 12 June 2021.

On 23 June 2021, the Company entered into the Asset Purchase Agreement with Changshou Iron & Steel in respect of the connected transaction in relation to the purchase of pre-ironmaking assets. The aforesaid connected transaction was considered and approved at the 2021 second extraordinary general meeting of the Company held on 12 August 2021.

66 2021 Interim Report

Section VI Significant Events (Continued)

XII. EXPLANATION OF OTHER SIGNIFICANT EVENTS (CONTINUED)

(III) Release of Share Pledge

On 12 January 2018, the Company received a notice from Changshou Iron & Steel that Changshou Iron & Steel had pledged the 2,096,981,600 unrestricted tradable shares of the Company held by it to China Development Bank Corporation (“CDB”), with Changshou Iron & Steel as the pledger and CDB as the pledgee. The date of registration of the pledge was 11 January 2018.

On 30 March 2021, the Company received from China Securities Depository and Clearing Corporation Limited the Notice on Registration of the Release of Pledged Securities (《證券質押登記解除通知書》), which stated that the registration of the pledge of 2,096,981,600 unrestricted tradable shares to CDB by the Company has been discharged. The time of pledge release was 24 March 2021. The number of accumulative pledged shares of the Company was 0 after Changshou Iron & Steel released the aforesaid share pledge. For details, please refer to the Announcement on Release of Share Pledge (Announcement No.: 2021–023) disclosed by the Company on 31 March 2021.

Chongqing Iron & Steel Company Limited

Section VII Movement of Shares and the Particulars of Shareholders

I. INFORMATION ON CHANGES IN SHARE CAPITAL

(I) Table of movement of shares

Table of movement of shares

During the Reporting Period, the total number of shares and the structure of the share capital of the Company remained unchanged.

2. Explanation on movement of shares

Applicable ✓ Not applicable

Impact on financial indicators such as earnings per share and net assets per share from change in shares occurred from the Reporting Period up to the disclosure date of the interim report (if applicable)

Applicable ✓ Not applicable

Other information considered necessary by the Company or required by regulators to be disclosed

Applicable ✓ Not applicable

(II) Information on Changes in Lock-up Shares

Applicable ✓ Not applicable

II. PARTICULARS OF SHAREHOLDERS

(I) Total number of shareholders:

Total number of ordinary shareholders as of the end of the Reporting Period 194,546

Total number of preferential shareholders with resumed voting rights as of the end of the Reporting Period 0

2021 Interim Report

Section VII Movement of Shares and the Particulars of Shareholders (Continued)

II. PARTICULARS OF SHAREHOLDERS (CONTINUED)

(II) Table of Shareholdings of the Top Ten Shareholders, Top Ten Tradable Share Holders (or Shareholders Without Trading Limitations) as of the End of the Reporting Period

Unit: share

Shareholdings of top ten shareholders

==> picture [412 x 102] intentionally omitted <==

----- Start of picture text -----

Number of Pledged, marked or frozen
Increase/ shares held Number
Decrease as at the of shares
during end of the held subject
Name of shareholder Reporting Reporting to trading Status of Type of
(full name) Period Period Percentage moratorium shares Number shareholder
(%)
----- End of picture text -----

Chongqing Changshou Iron &	0	2,096,981,600	23.51	0	Nil	0	Domestic non-
Steel Company Limited							state-owned
							legal person
HKSCC NOMINEES LIMITED	1,037,200	532,277,821	5.97	0	Unknown	－	Foreign legal
							person
Chongqing Qianxin Group Co.,	0	427,195,760	4.79	0	Pledged	427,190,070	State-owned legal
Ltd.							person
Chongqing Rural Commercial	0	289,268,939	3.24	0	Nil	0	State-owned legal
Bank Co., Ltd.							person
Chongqing Guochuang	0	278,288,059	3.12	0	Nil	0	State-owned legal
Investment and Management							person
Co., Ltd.
Bank of Chongqing Co., Ltd.	0	226,042,920	2.53	0	Nil	0	State-owned legal
							person
Industrial Bank Co., Ltd.	0	219,633,096	2.46	0	Nil	0	State-owned legal
Chongqing Branch							person
Agricultural Bank of China	0	216,403,628	2.43	0	Nil	0	Unknown
Limited Chongqing Branch
China Shipbuilding Industry	0	211,461,370	2.37	0	Nil	0	State-owned legal
Complete Logistics Co., Ltd.							person
(中船工業成套物流有限公司)
Chongqing Huanya Construction	209,573,120	209,573,120	2.35	0	Pledged	100,000,000	State-owned legal
Materials Company Limited							person

Chongqing Iron & Steel Company Limited

Section VII Movement of Shares and the Particulars of Shareholders (Continued)

II. PARTICULARS OF SHAREHOLDERS (CONTINUED)

(II) Table of Shareholdings of the Top Ten Shareholders, Top Ten Tradable Share Holders (or Shareholders Without Trading Limitations) as of the End of the Reporting Period (Continued)

Shareholdings of Top Ten Shareholders Without Trading Limitations

==> picture [412 x 75] intentionally omitted <==

----- Start of picture text -----

Shareholdings Type and number of shares
of tradable
shares without
trading
Name of shareholder limitations Type Number
----- End of picture text -----

Chongqing Changshou Iron & Steel Company Limited		2,096,981,600	RMB denominated	2,096,981,600
			ordinary shares
HKSCC NOMINEES LIMITED		532,277,821	Overseas listed	532,277,821
			foreign shares
Chongqing Qianxin Group Co., Ltd.		427,195,760	RMB denominated	427,195,760
			ordinary shares
Chongqing Rural Commercial Bank Co., Ltd.		289,268,939	RMB denominated	289,268,939
			ordinary shares
Chongqing Guochuang Investment and Management		278,288,059	RMB denominated	278,288,059
Co., Ltd.			ordinary shares
Bank of Chongqing Co., Ltd.		226,042,920	RMB denominated	226,042,920
			ordinary shares
Industrial Bank Co., Ltd. Chongqing Branch		219,633,096	RMB denominated	219,633,096
			ordinary shares
Agricultural Bank of China Limited Chongqing Branch		216,403,628	RMB denominated	216,403,628
			ordinary shares
China Shipbuilding Industry Complete Logistics Co.,		211,461,370	RMB denominated	211,461,370
Ltd. (中船工業成套物流有限公司)			ordinary shares
Chongqing Huanya Construction Materials		209,573,120	RMB denominated	209,573,120
Company Limited			ordinary shares
Description of accounts designated for share	N/A
repurchase among the top ten shareholders
Description of the entrusting/being entrusted voting	N/A
rights or waiving voting rights of the above
shareholders

2021 Interim Report

Section VII Movement of Shares and the Particulars of Shareholders (Continued)

II. PARTICULARS OF SHAREHOLDERS (CONTINUED)

(II) Table of Shareholdings of the Top Ten Shareholders, Top Ten Tradable Share Holders (or Shareholders Without Trading Limitations) as of the End of the Reporting Period (Continued)

The above shareholders’ connected relationship or There is no connection between Chongqing Changshou Iron concerted action & Steel Company Limited, the controlling shareholder of the Company, and the other 9 shareholders, nor are they persons acting in concert regulated in Measures for Management on Information Disclosure of Changes in Shareholdings of Listed Companies’ Shareholders. The Company is not aware of any connected relationship among the other 9 shareholders or whether they are acting in concert.

Preferential shareholders with resumed voting rights N/A and their shareholding

Shareholdings and Trading Limitations of Top Ten Shareholders with Trading Limitations

Applicable ✓ Not applicable

(III) Strategic investors or ordinary legal persons who became top ten shareholders due to placing of new shares

Applicable ✓ Not applicable

Chongqing Iron & Steel Company Limited

Section VII Movement of Shares and the Particulars of Shareholders (Continued)

III. DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT

(I) Changes in shareholdings of directors, supervisors and senior management currently holding office or having resigned during the Reporting Period

✓ Applicable Not applicable

Unite: share

==> picture [412 x 87] intentionally omitted <==

----- Start of picture text -----

Increase/
Shareholding Shareholding Decrease in
at the at the shareholding
beginning of end of the during the
the Reporting Reporting Reporting Reason for changes
Name Title Period Period Period in shareholding
----- End of picture text -----

Tu Deling	Director	0	1,148,000	1,148,000	Allocated to individual accounts
					under the first and second phase
					of the employee share ownership
					plans of the Company
Zhou Ya Ping	Supervisor	0	299,300	299,300	Allocated to individual accounts
					under the first and second phase
					of the employee share ownership
					plans of the Company
Zhao Wei	Supervisor	0	176,800	176,800	Allocated to individual accounts
					under the first and second phase
					of the employee share ownership
					plans of the Company
Yao Xiaohu	Senior	900	314,900	314,900	Allocated to individual accounts
	management				under the first and second phase
					of the employee share ownership
					plans of the Company
Meng Xiang Yun	Senior	0	668,800	668,800	Allocated to individual accounts
	management				under the first and second phase
					of the employee share ownership
					plans of the Company

2021 Interim Report

Section VII Movement of Shares and the Particulars of Shareholders (Continued)

III. DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT (CONTINUED)

(I) Changes in shareholdings of directors, supervisors and senior management currently holding office or having resigned during the Reporting Period (Continued)

Other information

✓ Applicable Not applicable

The 900 shares initially held by Mr. Yao Xiaohu, a senior vice president of the Company, were purchased through the secondary market before he became a senior management member of the Company.

(II) Information on incentive share option granted to directors, supervisors and senior management during the Reporting Period

Applicable ✓ Not applicable

(III) Other information

Applicable ✓ Not applicable

IV. CHANGES IN THE CONTROLLING SHAREHOLDER OR THE DE FACTO CONTROLLER

Applicable ✓ Not applicable

Chongqing Iron & Steel Company Limited

Section VIII Relevant Information on Preference Shares

Applicable ✓ Not applicable

2021 Interim Report

Section IX Relevant Information on Bonds

I. CORPORATE BONDS, COMPANY BONDS AND DEBT FINANCING INSTRUMENTS OF NON-FINANCIAL ENTERPRISES

✓ Applicable Not applicable

(I) Corporate bonds Applicable ✓ Not applicable
(II) Company bonds Applicable ✓ Not applicable
(III) Debt financing instruments of non-financial enterprises in inter-bank bond market

✓ Applicable Not applicable

Basic information on debt financing instruments of non-financial enterprises

Unit: RMB’000 Currency: RMB

Name of bond	Abbreviated name	Stock code	Issuance date	Value date	Due date	Balance of bonds	Interest rate (%)	Method of principal repayment and interest payment	Trading market	Eligibility arrangement of investors (if any)	Trading mechanism	Whether there is risk of termination of listing for trading
Chongqing Iron & Steel	20 Chongqing	102000390	19 March	19 March	19 March	498,984	4.64	Payment of	National inter-	N/A	Inter-bank bond	No
Company Limited 2020	Iron & Steel		2020	2020	2023			interest every	bank bond		market trading
first tranche of medium-	MTN001A							year and	market		mechanism
term notes (Type 1)								prepayment
								of principal on
								due date
Chongqing Iron & Steel	20 Chongqing	102000391	19 March	19 March	19 March	497,569	5.13	Payment of	National inter-	N/A	Inter-bank bond	No
Company Limited 2020	Iron & Steel		2020	2020	2023			interest every	bank bond		market trading
first tranche of medium-	MTN001B							year and	market		mechanism
term notes (Type 2)								prepayment
								of principal on
								due date

Chongqing Iron & Steel Company Limited

Section IX Relevant Information on Bonds (Continued)

I. CORPORATE BONDS, COMPANY BONDS AND DEBT FINANCING INSTRUMENTS OF NON-FINANCIAL ENTERPRISES (CONTINUED)

(III) Debt financing instruments of non-financial enterprises in inter-bank bond market (continued)
Basic information on debt financing instruments of non-financial enterprises (continued)

Measures taken by the Company to respond to the risk of termination of bond listing for trading

Applicable ✓ Not applicable

Overdue and outstanding bonds

Applicable ✓ Not applicable

Notes on overdue debts

Applicable ✓ Not applicable

Information on the trigger and implementation of issuer or investor option articles and investor protection articles

Applicable ✓ Not applicable

Information on the adjustment to credit rating results

Applicable ✓ Not applicable

Information on the implementation of and changes in guarantees, debt repayment plans and other measures to ensure repayment during the Reporting Period and their impact

Applicable ✓ Not applicable

Other information on debt financing instruments of non-financial enterprises

Applicable ✓ Not applicable

2021 Interim Report

Section IX Relevant Information on Bonds (Continued)

I. CORPORATE BONDS, COMPANY BONDS AND DEBT FINANCING INSTRUMENTS OF NON-FINANCIAL ENTERPRISES (CONTINUED)
(IV) Loss in consolidated statements of the Company for the Reporting Period exceeds 10% of the net assets at the end of last year

Applicable ✓ Not applicable

(V) Major accounting data and financial indicators

✓ Applicable Not applicable

Unit: RMB’000 Currency: RMB

Major Indicators		At the end of the Reporting Period	At the end of last year	Change from the end of last year to the end of the Reporting Period	Reasons
Current ratio		1.10	0.97	13.40	/
Quick Ratio		0.66	0.60	10.00	/
Gearing Ratio (%)		49.63	49.84	Deceased by	/
				0.21 percentage
				point
	This Reporting Period (January to June)		Same period last year	Change from the same period of last year to this Reporting Period	Reasons
Net profit after deducting non-		2,834,482	107,793	2,529.56	An increase in profits
recurring profit or loss
Debt-to-EBITDA ratio		0.26	0.13	100.00	An increase in profits
Interest coverage (times)		11.81	2.10	462.38	An increase in profits
Cash interest coverage (times)		7.20	1.75	311.43	An increase in net cash flow
EBITDA interest coverage		14.23	5.39	164.01	An increase in profits
(times)
Loan repayment ratio		100.00	100.00	0.00	/
Interest payment ratio		100.00	100.00	0.00	/

II. PARTICULARS OF CONVERTIBLE BOND OF THE COMPANY

Applicable ✓ Not applicable

Chongqing Iron & Steel Company Limited

Section X Financial Report Consolidated Balance Sheets

As at 30 June 2021

I. AUDITOR’S REPORT

Applicable ✓ Not applicable

II. FINANCIAL STATEMENTS

Unit: RMB ’000

==> picture [441 x 21] intentionally omitted <==

----- Start of picture text -----

Assets Note V 30 June 2021 31 December 2020
----- End of picture text -----

Current assets Cash and bank balances Financial assets held for trading Trade receivables Receivables financing Prepayments Other receivables Inventories Other current assets	1 2 3 4 5 6 7 8	5,268,501 550,000 8,965 3,605,463 449,740 16,959 6,761,902 98,003	4,943,231 – 35,041 2,068,546 534,516 18,013 5,054,908 394,153
Total current assets		16,759,533	13,048,408
Non-current assets Long-term equity investments Other equity investments Property, plant and equipment Construction in progress Right-of-use assets Intangible assets Goodwill Long-term prepaid expenses Deferred tax assets Other non-current assets	9 10 11 12 13 14 16 17 15 18	51,236 5,000 16,788,978 4,229,714 3,913,459 2,407,767 353,907 378,952 131,468 131,039	79,494 5,000 16,630,788 2,844,665 4,095,211 2,394,593 295,407 299,730 131,468 125,092
Total non-current assets		28,391,520	26,901,448
Total assets		45,151,053	39,949,856

The accompanying notes form an integral part of these financial statements

2021 Interim Report

Section X Financial Report Consolidated Balance Sheets (Continued)

As at 30 June 2021

II. FINANCIAL STATEMENTS (CONTINUED)

==> picture [441 x 21] intentionally omitted <==

----- Start of picture text -----

Liabilities and shareholders’ equity Note V 30 June 2021 31 December 2020
----- End of picture text -----

Current liabilities Short-term borrowings Notes payable Trade payables Contract liabilities Employee benefits payable Taxes payable Other payables Non-current liabilities due within one year Other current liabilities	19 20 21 22 23 24 25 26	1,979,336 1,880,137 3,884,132 3,322,929 96,137 22,902 1,062,032 2,552,245 431,981	700,788 1,272,291 2,652,728 2,554,165 283,969 9,177 1,567,618 4,056,471 332,041
Total current liabilities		15,231,831	13,429,248
Non-current liabilities Long-term borrowings Bonds payable Lease liabilities Long-term payables Long-term employee benefits payable Deferred income Deferred tax liabilities Other non-current liabilities	27 28 29 30 31 32 15	435,000 996,553 2,939,683 2,615,946 150,258 37,717 1,058 33	450,000 995,150 3,022,612 1,352,264 179,557 35,902 1,176 445,480
Total non-current liabilities		7,176,215	6,482,141
Total liabilities		22,408,046	19,911,389

The accompanying notes form an integral part of these financial statements

Chongqing Iron & Steel Company Limited

Section X Financial Report

Consolidated Balance Sheets (Continued)

As at 30 June 2021

II. FINANCIAL STATEMENTS (CONTINUED)

==> picture [441 x 20] intentionally omitted <==

----- Start of picture text -----

Liabilities and shareholders’ equity Note V 30 June 2021 31 December 2020
----- End of picture text -----

Owners’ equity: Share capital Capital reserves Less: Treasury shares Special reserves Surplus reserves Unappropriatedprofit	34 35 36 37 38 39	8,918,602 19,282,147 65,940 29,683 606,991 (6,028,476)	8,918,602 19,282,147 65,940 22,184 606,991 (8,725,517)
Total owners’ equity		22,743,007	20,038,467
Total liabilities and owners’ equity		45,151,053	39,949,856

The financial statements have been signed by:

Legal Representative: Zhang Wenxue

Chief accountant: Head of the accounting department: Zou An Lei Xiaodan

The accompanying notes form an integral part of these financial statements

2021 Interim Report

Section X Financial Report Consolidated Income Statement

For the six months ended 30 June 2021

II. FINANCIAL STATEMENTS (CONTINUED)

Unit: RMB ’000

==> picture [441 x 48] intentionally omitted <==

----- Start of picture text -----

For the For the
six months ended six months ended
Note V 30 June 2021 30 June 2020
----- End of picture text -----

Revenue	40	22,669,939	10,927,367
Less: Cost of sales	40	19,185,057	10,342,993
Taxes and surcharges	41	77,932	88,595
Distribution and selling expenses	42	42,999	53,355
General and administrative expenses	43	245,709	244,093
R&D expenses	44	75,591	–
Finance expenses	45	207,597	90,148
Including: Interest expenses		249,514	110,693
Interest income		47,270	23,202
Add: Other income	46	28,149	6,515
Investment income	47	310	6,791
Operating profit		2,863,513	121,489
Add: Non-operating income	48	966	684
Less: Non-operatingexpenses	49	167,556	747
Total profit		2,696,923	121,426
Less: Income tax expenses/(credit)	50	-118	71

The accompanying notes form an integral part of these financial statements

Chongqing Iron & Steel Company Limited

Section X Financial Report

Consolidated Income Statement (Continued)

For the six months ended 30 June 2021

II. FINANCIAL STATEMENTS (CONTINUED)

==> picture [441 x 48] intentionally omitted <==

----- Start of picture text -----

For the For the
six months ended six months ended
Note V 30 June 2021 30 June 2020
----- End of picture text -----

Net Profit		2,697,041	121,355
Breakdown by continuity of operations
Net profit from continuing operations		2,697,041	121,355
Breakdown by attributable interests
Net profit attributable to shareholders of the
parent		2,697,041	121,355
Non-controllinginterests
Other comprehensive income after tax
Total comprehensive income		2,697,041	121,355
Including:
Total comprehensive income attributable to
shareholders of the parent		2,697,041	121,355
Total comprehensive income attributable to
non-controllinginterests
Earnings per share	51
Basic earnings per share (RMB/share)		0.30	0.01
Diluted earnings per share (RMB/share)		0.30	0.01

The accompanying notes form an integral part of these financial statements

2021 Interim Report

Section X Financial Report Consolidated Statement of Changes in Equity

For the six months ended 30 June 2021

II. FINANCIAL STATEMENTS (CONTINUED)

Unit: RMB’000

==> picture [441 x 66] intentionally omitted <==

----- Start of picture text -----

For the six months ended 30 June 2021
Less: Other Total
Share Capital Treasury comprehensive Special Surplus Unappropriated shareholders’
Item capital reserves shares income reserves reserves profit equity
----- End of picture text -----

I.	Clo sing balances of the preceding	Clo sing balances of the preceding
		year and opening balances of
		the current year	8,918,602	19,282,147	65,940	–	22,184	606,991	(8,725,517)	20,038,467
II.	Changes in the current year
	(I)	Total comprehensive income	–	–	–	–	–	–	2,697,041	2,697,041
	(II)	Sh areholders’ contribution and
		decrease in share capital
		1. Am ount increased during
		the year	–	–	–	–	–	–	–	–
		2. Am ount increased during
		the year	–	–	–	–	–	–	–	–
	(III)	Special reserves
		1. Am ount established during
		the year	–	–	–	–	15,202	–	–	15,202
		2. Am ount utilized during the
		year	–	–	–	–	(7,703)	–	–	(7,703)
III.	Closing balance for the year		8,918,602	19,282,147	65,940		29,683	606,991	(6,028,476)	22,743,007

The accompanying notes form an integral part of these financial statements

Chongqing Iron & Steel Company Limited

Section X Financial Report

Consolidated Statement of Changes in Equity (Continued)

For the six months ended 30 June 2021

II. FINANCIAL STATEMENTS (CONTINUED)

==> picture [441 x 67] intentionally omitted <==

----- Start of picture text -----

For the six months ended 30 June 2020
Less: Other Total
Share Capital Treasury comprehensive Special Surplus Unappropriated shareholders’
Item capital reserves shares income reserves reserves profit equity
----- End of picture text -----

I.	Clo sing balances of the preceding	Clo sing balances of the preceding
		year and opening balances of
		the current year	8,918,602	19,282,147	62,314	–	14,573	606,991	(9,363,996)	19,396,003
II.	Changes in the current year
	(I)	Total comprehensive income	–	–	–	–	–	–	121,355	121,355
	(II)	Sh areholders’ contribution and
		decrease in share capital
		1. Am ount increased during
		the year			84,334	–	–	–	–	(84,334)
		2. Am ount increased during
		the year	–	–	(80,708)	–	–	–	–	80,708
	(III)	Special reserves
		1. Am ount established during
		the year	–	–	–	–	12,954	–	–	12,954
		2. Am ount utilized
		during the year	–	–	–	–	(6,502)	–	–	(6,502)
III.	Closing balance for the year		8,918,602	19,282,147	65,940	–	21,025	606,991	(9,242,641)	19,520,184

The accompanying notes form an integral part of these financial statements

2021 Interim Report

Section X Financial Report Consolidated Statement of Cash Flows

For the six months ended 30 June 2021

II. FINANCIAL STATEMENTS (CONTINUED)

Unit: RMB’000

==> picture [441 x 49] intentionally omitted <==

----- Start of picture text -----

Six months Six months
ended 30 ended 30
Note V June 2021 June 2020
----- End of picture text -----

I. Cash flows from operating activities: Ca sh received from sale of goods and rendering of services Receipts of taxes refunds Other cash received relating to operating activities	52	21,176,838 15,546 73,678	9,248,203 – 188,980
Su b-total of cash inflows from operating activities		21,266,062	9,437,183
Ca sh paid for purchase of goods and services Cash paid to and on behalf of employees Cash paid for all types of taxes Ot her cash paid relating to operating activities	52	18,673,079 837,948 89,146 119,501	8,155,684 650,980 279,479 268,454
Sub-total of cash outflows from operating activities		19,719,674	9,354,597
Net cash flows from operatingactivities	53	1,546,388	82,586

The accompanying notes form an integral part of these financial statements

Chongqing Iron & Steel Company Limited

Section X Financial Report

Consolidated Statement of Cash Flows (Continued)

For the six months ended 30 June 2021

II. FINANCIAL STATEMENTS (CONTINUED)

==> picture [441 x 50] intentionally omitted <==

----- Start of picture text -----

Six months Six months
ended 30 ended 30
Note V June 2021 June 2020
----- End of picture text -----

II. Cash flows from investing activities: Cash received from disposal of investments Cash received from return on investments Ot her cash received relating to investing activities 52	II. Cash flows from investing activities: Cash received from disposal of investments Cash received from return on investments Ot her cash received relating to investing activities 52	– 310 –	433,000 6,791 –
Su b-total of cash inflows from investing activities		310	439,791
Ca sh paid for acquisition of property, plant and equipment, intangible assets and other long-term assets Cash paid for investments Ne t cash payments for acquisition of subsidiaries and other business units	53	1,200,406 550,000 114,449	145,638 43,000 –
Su b-total of cash outflows from investing activities		1,864,855	188,638
Net cash flows from investingactivities		(1,864,545)	251,153

The accompanying notes form an integral part of these financial statements

2021 Interim Report

Section X Financial Report

Consolidated Statement of Cash Flows (Continued)

For the six months ended 30 June 2021

II. FINANCIAL STATEMENTS (CONTINUED)

==> picture [441 x 50] intentionally omitted <==

----- Start of picture text -----

Six months Six months
ended 30 ended 30
Note V June 2021 June 2020
----- End of picture text -----

III. Cash flows from financing activities: Cash received from borrowings Ot her cash received relating to financing activities	52	3,794,465 65,992	2,004,500 –
Su b-total of cash inflows from financing activities		3,860,457	2,004,500
Cash repayments of borrowings Ca sh paid for distribution of dividends or profits, and for interest expenses Ot her cash paid relating to financing activities	52	3,054,910 172,115 279,382	870,000 85,445 9,545
Su b-total of cash outflows from financing activities		3,506,407	964,990
Net cash flows from financingactivities		354,050	1,039,510
IV. Ef fect of changes in exchange rate on cash and cash equivalents		9,644	–
V. Ne t increase/(decrease) in cash and cash equivalents Add: C ash and cash equivalents at the beginningof theyear		45,537 4,698,090	1,373,249 1,595,323
VI. Ca sh and cash equivalents at the end of the year	53	4,743,627	2,968,572

The accompanying notes form an integral part of these financial statements

Chongqing Iron & Steel Company Limited

Section X Financial Report Balance Sheet

As at 30 June 2021

II. FINANCIAL STATEMENTS (CONTINUED)

==> picture [441 x 57] intentionally omitted <==

----- Start of picture text -----

RMB’000
30 June 31 December
Assets Note XIII 2021 2020
----- End of picture text -----

Current assets Cash and bank balances Financial assets held for trading Trade receivables Receivables financing Prepayments Other receivables Inventories Other current assets	1 2	5,267,573 550,000 10,978 3,605,463 568,136 49,625 6,726,689 90,599	4,925,021 – 39,503 2,062,046 516,190 17,181 5,015,067 383,123
Total current assets		16,869,063	12,958,131
Non-current assets Long-term equity investments Other equity investments Property, plant and equipment Construction in progress Right-of-use assets Intangible assets Long-term prepaid expenses Deferred tax assets Other non-current assets	3	1,043,524 5,000 15,683,182 4,228,751 3,913,459 2,333,494 378,952 87,897 96,120	917,104 5,000 15,705,686 2,844,665 4,095,211 2,329,901 299,730 87,653 87,173
Total non-current assets		27,770,379	26,372,123
Total assets		44,639,442	39,330,254

The accompanying notes form an integral part of these financial statements

2021 Interim Report

Section X Financial Report Balance Sheet (Continued)

As at 30 June 2021

II. FINANCIAL STATEMENTS (CONTINUED)

==> picture [441 x 34] intentionally omitted <==

----- Start of picture text -----

30 June 31 December
Liabilities and shareholders’ equity 2021 2020
----- End of picture text -----

Current liabilities Short-term borrowings Notes payable Trade payables Contract liabilities Employee benefits payable Taxes payable Other payables Non-current liabilities due within one year Other current liabilities	1,979,336 1,880,137 3,955,293 3,322,929 94,680 18,660 1,061,043 2,235,977 431,981	700,788 1,256,400 2,692,577 2,554,123 280,322 6,822 1,565,471 3,711,113 332,036
Total current liabilities	14,980,036	13,099,652
Non-current liabilities Long-term borrowings Bonds payable Lease liabilities Long-term payables Long-term employee benefits payable Deferred income Other non-current liabilities	435,000 996,553 2,939,683 2,529,167 150,258 37,717 –	450,000 995,150 3,022,612 1,125,491 179,557 35,902 445,480
Total non-current liabilities	7,088,378	6,254,192
Total liabilities	22,068,414	19,353,844

The accompanying notes form an integral part of these financial statements

Chongqing Iron & Steel Company Limited

Section X Financial Report Balance Sheet (Continued)

As at 30 June 2021

II. FINANCIAL STATEMENTS (CONTINUED)

==> picture [441 x 34] intentionally omitted <==

----- Start of picture text -----

30 June 31 December
Liabilities and shareholders’ equity 2021 2020
----- End of picture text -----

Shareholders’ equity Share capital Capital reserves Less: Treasury shares Special reserves Surplus reserves Unappropriatedprofit		8,918,602 19,313,090 65,940 25,466 577,012 (6,197,202)	8,918,602 19,313,090 65,940 19,398 577,012 (8,785,752)
Total shareholders’ equity		22,571,028	19,976,410
Total liabilities and shareholders’ equity		44,639,442	39,330,254

The accompanying notes form an integral part of these financial statements

2021 Interim Report

Section X Financial Report Income Statement

For the six months ended 30 June 2021

II. FINANCIAL STATEMENTS (CONTINUED)

RMB’000

==> picture [441 x 49] intentionally omitted <==

----- Start of picture text -----

Six months Six months
ended 30 ended 30
Note XIII June 2021 June 2020
----- End of picture text -----

Revenue	4	22,669,481	10,933,097
Less: Operating cost	4	19,339,473	10,350,437
Taxes and surcharges		73,484	88,528
Distribution and selling expenses		42,999	53,116
General and administrative expenses		228,471	244,093
R&D expenses		75,591
Finance expenses		191,301	90,157
Including: Interest expenses		236,212	110,693
Interest income		47,236	23,193
Add: Other income		3,766	6,515
Investment income	5	310	6,791
Operating profit		2,722,238	120,072
Add: Non-operating income		817	684
Less: Non-operatingexpenses		139,238	747
Total profit		2,583,817	120,009
Less: Income tax expenses/(credit)
Net Profit		2,583,817	120,009
Including: Netprofit from continuingoperations		2,583,817	120,009
Other comprehensive income after tax
Total comprehensive income		2,583,817	120,009

The accompanying notes form an integral part of these financial statements

Chongqing Iron & Steel Company Limited

Section X Financial Report Statement of Changes in Equity

For the six months ended 30 June 2021

II. FINANCIAL STATEMENTS (CONTINUED)

RMB’000

==> picture [469 x 66] intentionally omitted <==

----- Start of picture text -----

Six months ended 30 June 2021
Less: Other Total
Share Capital treasury comprehensive Special Surplus Unappropriated shareholders’
capital reserves shares income reserves reserves profit equity
----- End of picture text -----

I.	Clo	sing balances of the preceding year and
		opening balances of the current year	8,918,602	19,313,090	65,940	–	19,398	577,012	(8,785,752)	19,976,410
II.	Changes in the current year
	(I)	Total comprehensive income							2,583,817	2,583,817
	(II)	Sh areholders’ contribution and decrease
		in share capital
		1. Amount increased during the year
		2. Amount decreased during the year
	(III)	Special reserves
		1. Amount established during the year					13,200			13,200
		2. Amount utilized during the year					(7,132)			(7,132)
	(IV)	Others							4,733	4,733
III.	Closing balance for the year		8,918,602	19,313,090	65,940		25,466	577,012	(6,197,202)	22,571,028

The accompanying notes form an integral part of these financial statements

2021 Interim Report

Section X Financial Report Statement of Changes in Equity (Continued)

For the six months ended 30 June 2021

II. FINANCIAL STATEMENTS (CONTINUED)

==> picture [470 x 67] intentionally omitted <==

----- Start of picture text -----

Six months ended 30 June 2020
Less: Other Total
Share Capital treasury comprehensive Special Surplus Unappropriated shareholders’
capital reserves shares income reserves reserves profit equity
----- End of picture text -----

I.	Clo	sing balances of the preceding year and
		opening balances of the current year	8,918,602	19,313,090	62,314	–	14,573	577,012	(9,368,166)	19,392,797
II.	Changes in the current year
	(I)	Total comprehensive income	–	–	–	–	–	–	120,009	120,009
	(II)	sh areholders’ contribution and decrease
		in share capital
		1. Amount increased during the year			84,334					(84,334)
		2. Amount decreased during the year	–	–	(80,708)	–	–	–	–	80,708
	(III)	Special reserves
		1. Amount established during the year	–	–	–	–	12,954	–	–	12,954
		2. Amount utilized during the year	–	–	–	–	(6,502)	–	–	(6,502)
III.	Closing balance for the year		8,918,602	19,313,090	65,940	–	21,025	577,012	(9,248,157)	19,515,632

The accompanying notes form an integral part of these financial statements

Chongqing Iron & Steel Company Limited

Section X Financial Report Statement of Cash Flows

For the six months ended 30 June 2021

II. FINANCIAL STATEMENTS (CONTINUED)

==> picture [441 x 71] intentionally omitted <==

----- Start of picture text -----

RMB’000
Six months Six months
ended 30 ended 30
June 2021 June 2020
----- End of picture text -----

I. Cash flows from operating activities: Cash received from sale of goods and rendering of services Other cash received relatingto operatingactivities	21,155,212 73,428	8,975,505 187,118
Sub-total of cash inflows from operatingactivities	21,228,640	9,162,623
Cash paid for purchase of goods and services Cash paid to and on behalf of employees Cash paid for all types of taxes Other cashpaid relatingto operatingactivities	19,007,414 802,956 58,970 117,337	7,885,766 650,980 278,758 266,302
Sub-total of cash outflows from operatingactivities	19,986,677	9,081,806
Net cash flows from operatingactivities	1,241,963	80,817
II. Cash flows from investing activities: Cash received from disposal of investments Cash received from return on investments Other cash received relatingto investingactivities	– 310 –	433,000 6,791 –
Sub-total of cash inflows from investingactivities	310	439,791
Cash paid for acquisition of property plant and equipment, intangible assets and other long-term assets Cash paid for investments Cash payments for acquisition of subsidiaries and other business units	1,193,206 550,000 114,449	145,638 43,000 –
Sub-total of cash outflows from investingactivities	1,857,655	188,638
Net cash flows from investingactivities	(1,857,345)	251,153

The accompanying notes form an integral part of these financial statements

2021 Interim Report

Section X Financial Report Statement of Cash Flows (Continued)

For the six months ended 30 June 2021

II. FINANCIAL STATEMENTS (CONTINUED)

==> picture [441 x 50] intentionally omitted <==

----- Start of picture text -----

Six months Six months
ended 30 ended 30
June 2021 June 2020
----- End of picture text -----

III. Cash flows from financing activities: Cash received from borrowings Other cash received relatingto financingactivities	3,794,465 65,992	2,004,500 –
Sub-total of cash inflows from financingactivities	3,860,457	2,004,500
Cash repayments of borrowings Cash paid for distribution of dividends or profits, and for interest expenses Other cashpaid relatingto financingactivities	2,960,000 153,576 87,904	870,000 85,445 9,545
Sub-total of cash outflows from financingactivities	3,201,480	964,990
Net cash flows from financingactivities	658,977	1,039,510
IV. Ef fect of changes in foreign exchange rate on cash and cash equivalents	9,644	–
V. Net increase/(decrease) in cash and cash equivalents Add: Ca sh and cash equivalents at the beginning of the year	53,239 4,689,461	1,371,480 1,591,312
VI. Ca sh and cash equivalents at the end of the year	4,742,700	2,962,792

The accompanying notes form an integral part of these financial statements

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements

For the six months ended 30 June 2021

I. BASIC INFORMATION

According to the approval of Ti Gai Sheng Zi [1997] No. 127 issued by the State Commission for Restructuring Economic Systems and the approval of Guo Zi Qi Fa [1997] No. 156 issued by the Stateowned Assets Administration Bureau, Chongqing Iron & Steel Company Limited (the “Company”) was established as a limited liability company by Chongqing Iron & Steel (Group) Co., Ltd. (“CISG”) as the sole promoter. The Company was incorporated and registered with Chongqing Municipal Administration of Industry and Commerce on 11 August 1997, whose headquarter is located in Changshou Economic Development Zone of Chongqing. The Company holds the business license with unified social credit code of 91500000202852965T, with the registered capital of RMB8,918,602,000 and the sum of 8,918,602,000 shares with par value of RMB1 each, including 36,662,000 A shares with restricted condition, 8,343,813,000 A shares without any restricted condition and 538,127,000 H shares. The Company’s shares were listed in the Stock Exchange of Hong Kong Ltd. and listed in Shanghai Stock Exchange on 17 October 1997 and 28 February 2007, respectively.

Pursuant to the reorganization plan, 2,096,981,600 shares of the Company held by CISG were transferred to Chongqing Changshou Iron and Steel Co., Ltd. (重慶長壽鋼鐵有限公司) (“Changshou Iron & Steel”) on 27 December 2017, and the share transfer procedures were completed with China Securities Depository and Clearing Corporation Limited. Subsequent to the completion of the share transfer, Changshou Iron & Steel holds 2,096,981,600 shares of the Company, with a shareholding percentage of 23.51%, and became the controlling shareholder of the Company.

The Company and its subsidiaries (collectively the “Group”) are mainly engaged in the production, processing and sale of steel plates, steel sections, wire rods, bar materials, billets and thin plates, and in the production and sale of coking and coal chemical products, pig iron & grain slag, steel slag, and steel scrap.

The financial statements were approved by the Board of Directors of the Company on 28 August 2021. In accordance with the Articles of Association of the Company, these financial statements will be proposed to the general meeting for consideration.

The scope of consolidation of the consolidated financial statements is determined on the basis of control, and refer to Note VI for the changes in this year.

II. PREPARATION BASIS OF THE FINANCIAL STATEMENTS

These financial statements have been prepared in accordance with the “Accounting Standards for Business Enterprises – Basic Standards” promulgated by the Ministry of Finance and the specific accounting standards, subsequent practice notes, interpretations and other relevant regulations as subsequently announced and revised (collectively “CAS”).

These financial statements are prepared on a going concern basis.

Other than certain financial instruments, these financial statements have been prepared at historical cost convention. If the assets are impaired, corresponding provisions for impairment shall be made according to relevant provisions.

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

III. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

The Group has determined the specific accounting policies and accounting estimates based on the characteristics of the operation, especially those related to provision for bad debt of receivables, inventory pricing method, depreciation of property, plant and equipment (“PPE”), amortization of intangible assets, and recognition and measurement of revenue, etc.

1. Statement of compliance

These financial statements have been prepared in accordance with CAS, and present truly and completely the financial position of the Group and the Company as at 30 June 2021 and the results of their operations and cash flows for the six months ended 30 June 2021.

2. Accounting period

The accounting year of the Group is from 1 January to 31 December of each calendar year. The current accounting period starts on 1 January 2021 and ends on 30 June 2021.

3. Functional currency

The functional currency of the Group and the currency used in preparing the financial statements are Renminbi. The amounts in the financial statements were denominated in thousands of Renminbi, unless otherwise stated.

4. Business combination

Business combinations are classified into business combinations involving entities under common control and business combinations not involving entities under common control.

Business combination involving entities under common control

A business combination involving entities under common control is a business combination in which all of the combining entities are ultimately controlled by the same party or parties both before and after the combination, and that control is not transitory. For a business combination involving entities under common control, the party that, on the combination date, obtains control of another entity participating in the combination is the absorbing party, while that other entity participating in the combination is a party being absorbed. Combination date is the date on which the absorbing party effectively obtains control of the party being absorbed.

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

III. S I G N I F I C A N T A C C O U N T I N G P O L I C I E S A N D E S T I M A T E S (CONTINUED)

4. Business combination (Continued)

Business combination involving entities under common control (Continued)

Assets and liabilities that are obtained by the absorbing party in a business combination involving entities under common control, including goodwill arising from the acquisition of the party being absorbed by the ultimate controller, shall be accounted for on the basis of the carrying amounts on the financial statements of the ultimate controller at the combination date. The difference between the carrying amount of the net assets obtained and the carrying amount of the consideration paid for the combination (or the aggregate face value of shares issued as consideration) shall be adjusted to share premium under capital reserves and the balance transferred from capital reserves under the old accounting system. If the share premium is not sufficient to absorb the difference, any excess shall be adjusted against retained earnings.

Business combination not involving entities under common control

A business combination not involving entities under common control is a business combination in which all of the combining entities are not ultimately controlled by the same party or parties both before and after the combination. For a business combination not involving entities under common control, the party that, on the acquisition date, obtains control of another entity participating in the combination is the acquirer, while that other entity participating in the combination is the acquiree. Acquisition date refers to the date on which the acquirer effectively obtains control of the acquiree.

The acquirer shall measure the acquiree’s identifiable assets, liabilities and contingent liabilities acquired in the business combination not involving entities under common control at their fair values on the acquisition date.

The excess of the fair value of the sum of the consideration paid (or the fair value of equity securities issued) for business combination and equity interests in the acquiree held prior to the date of acquisition over the share of the attributable net identifiable assets of the acquiree, measured at fair value, was recognized as goodwill, which is subsequently measured at cost less cumulative impairment loss. In case the fair value of the sum of the consideration paid (or fair value of equity securities issued) and equity interests in the acquiree held prior to the date of acquisition is less than the fair value of the share of the attributable net identifiable assets of the acquiree, a review of the measurement of the fair values of the identifiable assets, liabilities and contingent liabilities, the consideration paid for the combination (or fair value of equity securities issued) and the equity interests in the acquiree held prior to the date of acquisition is conducted. If the review indicates that the fair value of the sum of the consideration paid (or the fair value of equity securities issued) and equity interests in the acquiree held prior to the date of acquisition is indeed less than the fair value of the share of the attributable net identifiable assets of the acquiree, the difference is recognized in current profit or loss.

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

III. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (CONTINUED)

5. Consolidated financial statements

The consolidation scope of consolidated financial statements is determined on the basis of control, including the financial statements of the Company and all of its subsidiaries. A subsidiary is an entity that is controlled by the Company, including separable parts of an enterprise or investee and structured entities controlled by the Company, etc.

In preparation of consolidated financial statements, the subsidiaries use the same accounting year and accounting policies as those of the Company. All intra-group assets, liabilities, equity interests, income, expenses and cash flow are eliminated in full on consolidation.

Where the amount of losses of a subsidiary attributable to the non-controlling shareholders in the current period exceeds their share of the opening balance of owner’s equity of the subsidiary, the excess shall be allocated against non-controlling interests.

For subsidiaries acquired through business combinations not involving entities under common control, the operating results and cash flows of the acquiree shall be included in the consolidated financial statements, from the day on which the Group gains control, till the Group ceases the control of it. While preparing the consolidated financial statements, the acquirer shall adjust the subsidiary’s financial statements, on the basis of the fair values of the identifiable assets, liabilities and contingent liabilities recognized on the acquisition date.

For subsidiaries acquired through business combinations involving entities under common control, the operating results and cash flows of the acquiree shall be included in the consolidated financial statements from the beginning of the period in which the combination occurs. While preparing the comparative consolidated financial statements, adjustments are made to related items in the financial statements for the prior period as if the reporting entity established through combination has been existing since the ultimate controller begins to exercise control.

The Group’s control over an investee is re-assessed if change in relevant facts and situations causes changes in one or more of the control substances.

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

III. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (CONTINUED)

6. Classification of joint arrangement and joint operation

A joint arrangement is classified as either a joint operation or a joint venture. A joint operation is a joint arrangement whereby the joint operators have rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the joint operators have rights to the net assets of the arrangement.

A joint operator recognizes the following items in relation to its interest in a joint operation: its solely-held assets, and its share of any assets held jointly; its solely-assumed liabilities, and its share of any liabilities incurred jointly; its revenue from the sale of its share of the output arising from the joint operation; its share of the revenue from the sale of the output by the joint operation; its solely-incurred expenses, and its share of any expenses incurred jointly.

7. Cash and cash equivalents

Cash comprises the Group’s cash on hand and deposits that can be readily withdrawn on demand. Cash equivalents are short-term, highly liquid investments held by the Group, that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

8. Foreign currency translation and translation of foreign currency statements

The Group translates the amount of foreign currency transactions occurred into its functional currency.

Foreign currency transactions are recorded, on initial recognition, in the functional currency, by applying to the foreign currency amount the spot exchange rate prevailing on the transaction dates. At the balance sheet date, foreign currency monetary items are translated using the spot exchange rate prevailing on the balance sheet date. All the resulting differences on settlement and monetary item translation are taken to profit or loss in the current period, except for those relating to foreign currency borrowings specifically for acquisition and construction of qualifying assets, which are capitalized in accordance with the principle of capitalization of borrowing costs. Non-monetary foreign currency items measured at historical cost shall still be translated at the spot exchange rate prevailing on the transaction date, and the amount denominated in the functional currency is not changed. Non-monetary foreign currency items measured at fair value are translated at the spot exchange rate prevailing at the date on which the fair values are determined. The difference thus resulted are recognized in profit or loss or as other comprehensive income based on the nature of the non-monetary items.

Foreign currency cash flows are translated using the average exchange rate for the period during which the cash flows occur. The effect of exchange rate changes on cash is separately presented as an adjustment item in the cash flow statement.

100

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

III. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (CONTINUED)

9. Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity, and a financial liability or equity instrument of another entity.

Recognition and derecognition of financial instruments

The Group recognizes a financial asset or a financial liability when it becomes a party to the contractual provisions of a financial instrument.

The Group derecognizes and writes off a financial asset (or part of a financial asset, or part of a group of similar financial assets) from its account and balance sheet when the following conditions are met:

(1) the rights to receive cash flows from the financial asset have expired;
(2) the Group has transferred its rights to receive cash flows from the financial asset, or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through arrangement”; and either (a) the Group has transferred substantially all the risks and rewards of the financial asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the financial asset, but has transferred control of the financial asset.

If the underlying obligation of a financial liability has been discharged or cancelled or has expired, the financial liability is derecognized. If an existing financial liability is replaced by the same creditor with a new financial liability that has substantially different terms, or if the terms of an existing financial liability are substantially revised, such replacement or revision is accounted for as the derecognition of the original liability and the recognition of a new liability, and the resulting difference is recognized in profit or loss.

Regular way purchases or sales of financial assets are recognized and derecognized on the trade date. Regular way purchases or sales of financial assets mean that the financial assets are received or delivered under the terms of a contract within a period established by regulations or conventions in the marketplace. Trade date is the date that the Group commits to purchase or sell the financial asset.

101

Chongqing Iron & Steel Company Limited

Section X Financial Report

Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

III. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (CONTINUED)

9. Financial instruments (Continued)

Classification and measurement of financial assets

According to the Group’s corporate business model for managing financial assets and the contractual cash flow characteristics of the financial assets, the Group’s financial assets are, on initial recognition, classified into the following categories: financial assets at fair value through profit or loss, financial assets at amortized cost, and financial assets at fair value through other comprehensive income. Only when the business model for managing financial assets is changed by the Group, the Group will reclassify the related financial assets affected.

A financial asset is recognized initially at fair value. The trade receivables or notes receivable generated from sales of goods or services, which do not contain significant financing component or do not consider financing component over one year, initially are measured at trading price.

In the case of financial assets at fair value through profit or loss, relevant transaction costs are directly charged to profit or loss; transaction costs relating to financial assets of other categories are included in the amounts initially recognized.

The subsequent measurement of financial assets depends on their classification as follows:

Debt instrument investment at amortized cost

Financial assets are classified as financial assets at amortized cost if the financial assets meet the following conditions: the objective of the Group’s business model for managing such financial assets is to collect contractual cash flows; the contractual terms of the financial assets stipulate that cash flows generated on a specific date are solely payment of the principal and the interest based on the outstanding principal amount. Such financial assets recognize interest income by using the effective interest rate method. The gains or losses arising from derecognition, adjustment or impairment are recognized in profit or loss.

Debt instrument investment at fair value through other comprehensive income

Financial assets are classified as financial assets at fair value through other comprehensive income if the financial assets meet the following conditions: the objective of the Group’s business model for managing such financial assets is both to collect contractual cash flows and to dispose of the financial assets; the contractual terms of the financial assets stipulate that cash flows generated on a specific date are solely payment of the principal and the interest based on the outstanding principal amount. Such financial assets recognize interest income by using the effective interest rate method. Except for interest income, impairment losses and exchange difference recognized as profit or loss, other changes in fair value are recognized as other comprehensive income. When such financial asset is derecognized, the accumulated gain or loss previously recognized in other comprehensive income is transferred from other comprehensive income to profit or loss.

102

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

III. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (CONTINUED)

9. Financial instruments (Continued)

Equity instrument investment at fair value through other comprehensive income

The Group irrevocably elects to designate certain equity instrument investments not held for trading as financial assets at fair value through other comprehensive income, such that only relevant dividend income (excluding the dividends recovered as part of the investment cost) is recognized as profit or loss and the subsequent changes in fair value are recognized as other comprehensive income, and the provision for impairment is not accrued. When such financial asset is derecognized, the accumulated gain or loss previously recognized in other comprehensive income is transferred from other comprehensive income to retained earnings.

Financial assets at fair value through profit or loss

Apart from the financial assets at amortized cost and financial assets at fair value through other comprehensive income mentioned above, other financial assets are classified as financial assets at fair value through profit or loss. Such financial assets are subsequently measured at fair value. All changes in fair value are recognized in profit or loss.

Classification and measurement of financial liabilities

The Group’s financial liabilities are, on initial recognition, classified into other financial liabilities, and the related transaction costs are included in the amounts initially recognized. Such kinds of financial liabilities are subsequently measured at amortized cost by using the effective interest rate method.

Impairment of financial instruments

On the basis of expected credit losses (“ECLs”), the Group makes impairment provisions and recognizes loss provisions for the financial assets carried at amortized cost and investments on debt instrument at fair value through other comprehensive income.

For trade receivables that do not contain significant financing components, the Group uses a simplified measurement method to measure loss provision based on the amount of ECLs throughout the lifetime.

In addition to the abovementioned financial assets for which the simplified measurement method are used, the Group assesses whether its credit risk has increased significantly since the initial recognition on each balance sheet date. Financial instruments for which credit risk has not increased significantly since initial recognition, at stage 1, and for which the loss allowance is measured at an amount equal to 12-month ECLs, calculated by carrying amount and effective interest rate; financial instruments for which credit risk has increased significantly since initial recognition but that are not credit-impaired financial assets, at stage 2, and for which the loss allowance is measured at an amount equal to lifetime ECLs, calculated by carrying amount and effective interest rate; financial instruments that are credit-impaired since initial recognition, at stage 3, and for which the loss allowance is measured at an amount equal to lifetime ECLs, calculated at amortized cost and by effective interest rate. For these financial instruments with lower credit risk on the balance sheet date, the Group assumes the related credit risk has not increased significantly since initial recognition.

103

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

III. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (CONTINUED)

9. Financial instruments (Continued)

Impairment of financial instruments (Continued)

The Group assesses the ECLs of financial instruments by individual or group. Considering the characteristics of different customers’ credit risk, the Group assesses the ECLs of trade receivables and other receivables based on the ageing portfolio. The Group assesses the ECLs of receivables financing, by considering the characteristics of the acceptors’ credit risk.

The disclosure of the criteria for judging significant increase in credit risk, the definition of credit-impaired assets, and the assumption of ECLs measurement, please refer to Note VIII.3.

When the Group no longer reasonably expects to be able to recover, in full or in part, the contractual cash flows of financial assets, the Group directly writes down the carrying amount of the financial assets.

Offset of financial instruments

Financial assets and financial liabilities are offset and the net amount is presented in the balance sheet to the extent that there is a currently enforceable legal right to offset the recognized amounts and that there is an intention to settle on a net basis, or to realize the financial assets and settle the financial liabilities simultaneously.

Financial guarantee contracts

Financial guarantee contracts are those contracts that require a payment to be made by the issuer to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are measured, on initial recognition, at fair value. For financial guarantee contracts that are not designated as at fair value through profit or loss, they are, after initial recognition, subsequently measured at the higher of: the amount of the ECLs settled at the balance sheet date, and the amount initially recognized less the cumulative amortization recognized in accordance with the guidance for revenue recognition.

Transfers of financial assets

If the Group transfers substantially all the risks and rewards of ownership of the financial asset, the Group derecognizes the financial asset; if the Group retains substantially all the risks and rewards of ownership of the financial asset, the Group does not derecognize the financial asset.

If the Group neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset, it accounts for the transactions as follows: if the Group has not retained control, it derecognizes the financial asset and recognizes any resulting assets or liabilities; if the Group has retained control, it continues to recognize the financial asset to the extent of its continuing involvement in the transferred financial asset and recognizes an associated liability.

104

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

III. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (CONTINUED)

10. Inventories

Inventories include hold-for-sale stock goods in the ordinary course of business, working in progress in the process of production, raw materials to be consumed in the production process or in the rendering of services, lower valued consumables and repaired spare parts, etc.

Inventories are initially carried at cost. Cost of inventories comprises all costs of purchase, costs of conversion and other costs. The actual cost of inventories transferred out is assigned by using weighted average method. Revolving materials comprise lower valued consumables and packing materials and others, lower valued consumables and packing materials shall be amortized on the immediate written-off or amortization in stage basis.

At the balance sheet date, inventories are measured at the lower of cost and net realizable value. If the cost of inventories is higher than the net realizable value, a provision for decline in value of inventories is recognized in profit or loss. If factors that previously resulted in the provision for decline in value of inventories no longer exist, so that the net realizable value is higher than the carrying amount, the amount of the write-down is reversed. The reversal is limited to the amount originally provided for the decline in value of inventories. The amount of the reversal is recognized in current profit or loss.

Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale and relevant amounts after taxes. The provision for decline in value of inventories is made on an individual basis.

The Group adopts the perpetual inventory system.

105

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

III. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (CONTINUED)

11. Long-term equity investments

Long-term equity investments consist of equity investments in subsidiaries, joint ventures and associates.

Long-term equity investments are recognized at initial investment cost upon acquisition. For a long-term equity investment acquired through 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 owners’ 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 consideration for combination shall be adjusted to capital reserves. If the balance of capital reserves is not sufficient, any excess shall be adjusted to retained earnings. Any other comprehensive income previously recognized before combination date 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. The portion recognized based on changes in the investee’s equity (other than net profit or loss, other comprehensive income and profit appropriation) is charged to profit or loss upon disposal of such long-term equity investment. For those partially disposed equity investments, gains or losses upon disposal are proportionately recognized in profit or loss when they still constitute long-term equity investments after the disposal and are fully charged to profit or loss when they are reclassified to financial instruments after the disposal. For a long-term equity investment acquired through a business combination involving entities not under common control, the initial investment cost should be the cost of acquisition (for a business combination through step acquisitions not under common control, the initial investment cost is the sum of the carrying amount of the equity investment in the acquiree held before the acquisition date and the additional investment cost paid on the acquisition date), which is the sum of the fair value of assets transferred, liabilities incurred or assumed and equity securities issued. If the equity investments in the acquiree involve other comprehensive income prior to the acquisition date, when disposing of the investments, the relevant other comprehensive income will be accounted for on the same basis as would have been required if the investee had directly disposed of the related assets or liabilities. The portion recognized based on changes in the investee’s equity (other than net profit or loss, other comprehensive income and profit appropriation) is charged to profit or loss upon disposal of such long-term equity investment. For those partially disposed equity investments, gains or losses upon disposal are proportionately recognized in profit or loss when they still constitute long-term equity investments after the disposal and are fully charged to profit or loss when they are reclassified to financial instruments after the disposal. The initial investment cost of a long-term equity investment acquired otherwise than through a business combination shall be determined as follows: for a long-term equity investment acquired by paying cash, the initial investment cost shall be the actual purchase price has been paid plus those costs, taxes and other necessary expenditures directly attributable to the acquisition of the long-term equity investment; for those acquired by the issue of equity securities, the initial investment cost shall be the fair value of the equity securities issued.

106

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

III. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (CONTINUED)

11. Long-term equity investments (Continued)

The cost method is applied for long-term equity investments in the financial statements of the Parent Company when the investee is controlled by the Company. Control refers to the power over the investee such that the Company is able to direct the relevant activities, has exposure or rights to variable returns from its involvement with the investee and has the ability to use its power over the investee to affect the amount of the investor’s returns.

When the cost method is adopted, long-term equity investments are recorded at initial investment cost. Adjusting the cost of long-term equity investment by adding or withdrawing investment. Cash dividends or profits declared to be distributed by the investee should be recognized as investment income for the period.

The equity method is adopted when the Group has joint control, or exercises significant influence over the investee. 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. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

Under the equity method, where the initial investment cost of a long-term equity investment exceeds the investing entity’s interest in the fair values of the investee’s identifiable net assets at the acquisition date, the excess is included in the initial investment cost. Where the initial investment cost is less than the investing entity’s interest in the fair values of the investee’s identifiable net assets at the acquisition date, the difference is charged to profit or loss, and the cost of the long-term equity investment is adjusted accordingly.

107

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

III. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (CONTINUED)

11. Long-term equity investments (Continued)

When the equity method is adopted, the investor recognizes its investment profit or loss and other comprehensive income and adjusts the carrying amount of the investment based on the post-acquisition change in the investor’s share of net profit or loss and other comprehensive income of the investee. The recognition of the investee’s results should be based on the fair values of the individual identifiable assets of the investee at the acquisition date according to the Group’s accounting policies and accounting period. The gains and losses resulting from inter-company transactions with its associates and joint ventures should be eliminated to the extent of the amount attributable to the investor according to the shareholding (but if the losses from intergroup transactions belong to asset impairment losses, they should be entirely recognized). The recognition should be based on the adjusted net profit of the investee, except for that the assets investment or disposal constitutes a business. The investor’s share of profit distributions or cash dividends declared by the investee is deducted from the carrying amount of the long-term equity investment. The Group recognizes net losses incurred by the investee to the extent that the carrying amount of the long-term equity investment and other long-term equity interests that are net investment in the investee in substance is reduced to zero, except for which the Group has an extra obligation to assume loss of it. For the changes of equity in an investee other than net profit or loss, other comprehensive income and profits appropriation, the investor adjusts the carrying amount of the investment and recognized it in shareholders’ equity.

When long-term equity investments are disposed of, the difference between the carrying amount and the actual proceeds received should be charged to profit or loss. For long-term equity investments under the equity method, if the method would not be adopted after the disposal, the basis of the accounting treatment on the related other comprehensive income under original equity method is the same as that on disposal of related assets or liabilities by the investee, the amount recognized in the equity on the changes in other equity movements except for the net profit or loss, other comprehensive income and profit appropriation, should be all charged to the profit or loss; if the equity method would continue to be adopted after the disposal, the basis of the accounting treatment on the related other comprehensive income under the original equity method is the same as that on disposal of related assets or liabilities by the investee, the amount recognized in the equity on the changes in other equity movements except for the net profit or loss, other comprehensive income and profit distribution, should be charged to profit or loss in proportion.

108

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

III. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (CONTINUED)

12. Property, plant and equipment

PPE are recognized in situations when it is probable that their related future economic benefits will flow into the Group, and their cost can be measured reliably. The subsequent expenditure related to PPE is recorded in the cost of PPE only if the conditions above are met and the carrying amount of parts which had been replaced shall be derecognized; otherwise, is charged to profit or loss.

PPE are initially recorded taking discard expenses into consideration. The purchase cost of PPE comprises its purchase price, related taxes, and any directly attributable expenditure for bringing the asset to its working condition for its intended use.

Except for the source from work safety fund, the depreciation of PPE is calculated on the straight-line basis. The useful lives, estimated residual values, and the annual depreciation rates of each category of PPE are as follows:

	Useful life (years)	Estimated residual rate	Annual depreciation rate
Plant and buildings	25-50	3%-5%	1.90%-3.88%
Machinery and other equipment	5-22	3%-5%	4.32%-19.40%
Motor vehicles	6-8	3%-5%	11.88%-16.17%

If the various components of fixed assets have different useful lives or provide economic benefits to the enterprise in different ways, different depreciation rates and depreciation methods are applicable.

The Group reviews the useful life and estimated net residual value of a PPE and the depreciation method applied at least at the end of each year and makes adjustments if necessary.

13. Construction in progress

The cost of construction in progress is determined according to the actual expenditure for the construction, including all necessary construction expenditure incurred during the construction period, borrowing costs that should be capitalized before the construction reaches the condition for intended use and other relevant expenses.

Construction in progress is transferred to PPE or long-term prepaid expense when the asset is ready for its intended use.

109

Chongqing Iron & Steel Company Limited

Section X Financial Report

Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

III. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (CONTINUED)

14. Borrowing costs

Borrowing costs are interests and other expenses arising from borrowings of the Group, including borrowing interest, amortization of discounts or premiums, ancillary expenses and exchange differences arising from foreign currency borrowings.

All the borrowing costs that are directly attributable to construction or production of all qualifying assets are capitalized and other borrowing costs are charged in profit or loss. A qualifying asset is defined as a PPE, investment property or inventory and other assets that necessarily takes a substantial period of time to get ready for its intended use or sale.

The capitalization of borrowing costs commences only when all of the following conditions are satisfied:

(1) Expenditures for the assets are incurred;
(2) Borrowing costs are incurred;
(3) The acquisition and construction activities that are necessary to bring the assets to get ready for their intended use or sale have commenced.

The capitalization of borrowing costs ceases when the asset being acquired or constructed or produced is substantially ready for its intended use or sale and borrowing costs incurred thereafter are charged to profit or loss.

Within the capitalization period, the amounts of capitalized borrowing costs for each accounting period are determined by the following methods:

(1) For specific borrowings, the borrowing costs eligible for capitalization are the actual interest expenses incurred during the current period after deducting any temporary interest or investment income.
(2) For general borrowings, the borrowing costs eligible for capitalization are determined by multiplying the weighted average of capital expenditure that exceeds the specific borrowings and weighted average interest rate of the general borrowings.

Capitalization of borrowing costs is suspended during extended periods in which the acquisition or construction or production of a PPE is interrupted abnormally and the interruption lasts for more than three months until the acquisition or construction is resumed. The borrowing costs incurred during such period are recognized as expenses, and are included in profit or loss, till the acquisition and construction or production of the asset restarts.

110

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

III. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (CONTINUED)

15. Right-of-use assets

The right-of-use assets of the Group mainly include plants and buildings and machineries and other equipment.

At the commencement date of the lease, the Group recognises a right-of-use asset. The cost of the right-of-use asset comprises: the amount of the initial measurement of the lease liability; any lease payments made at or before the commencement date of the lease less any lease incentives received; any initial direct cost incurred; an estimate of costs incurred by the lessee in dismantling and removing the underlying asset, restoring the site on which it is located or restoring the underlying asset to the condition required by the terms and conditions of the lease. The right-of-use assets are depreciated on a straight-line basis subsequently by the Group. If the Group is reasonably certain that the ownership of the underlying asset will be transferred to the Group at the end of the lease term, the Group depreciates the asset from the commencement date to the end of the useful life of the asset. Otherwise, the Group depreciates the assets from the commencement date to the earlier of the end of the useful life of the asset or the end of the lease term.

The Group remeasures the lease liability at the present value of the changed lease payments and adjusts the carrying amount of the right-of-use assets accordingly, when the carrying amount of the right-of-use asset is reduced to zero, and there is a further reduction in the measurement of the lease liability, the Group recognises the remaining amount of the remeasurement in profit or loss.

111

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

III. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (CONTINUED)

16. Intangible assets

Intangible assets are recognized only if it is probable that the related economic benefits will flow into the Group and the costs of which can be measured reliably. Intangible assets are measured at cost initially. However, for an intangible asset acquired in the business combination not under common control whose fair value can be reliably measured, it is separately recognized as intangible assets and is measured at its fair value.

The useful lives of intangible assets are assessed based on economic benefit periods. Those intangible assets without foreseeable economic benefit periods are classified as intangible assets with indefinite useful lives.

The useful lives of the Group’s intangible assets are as follows:

	Useful life (years)
Patent and non-patent technology	3.4
Land use rights	50

Land use rights that are acquired by the Group are generally accounted for as intangible assets. Buildings, such as plants that are developed and constructed by the Group, and relevant land use rights and buildings, are accounted for as intangible assets and PPE, respectively. Payments for the land and buildings acquired are allocated between the land use rights and the buildings; if they cannot be reasonably allocated, all of the land use rights and buildings are accounted for as PPE.

Intangible assets with finite useful lives are amortized over the useful lives on the straight-line basis. The Group reviews the useful lives and amortization method of intangible assets with finite useful lives, and adjusts then if appropriate, at least at the end of each year.

The Group classifies the expenditure on an internal research and development project into expenditure on the research phase and expenditure on the development phase. Expenditure on the research phase is recognized in profit or loss in which it is incurred. Expenditure on the development phase is capitalized when the Group can demonstrate all of the following: the technical feasibility of completing the intangible asset so that it will be available for use or sale; the intention to complete the intangible asset and use or sell it; how the intangible asset will generate probable future economic benefits. Among other things, the Group can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset; the availability of adequate technical, financial and other resources aids to complete the development and the ability to use or sell the intangible asset; and its ability to measure reliably the expenditure attributable to the intangible asset during its development. Expenditure in the development phase that does not meet the above criteria is recognized in profit or loss in which it is incurred.

112

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

III. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (CONTINUED)

17. Impairment of assets

Except for inventories, deferred tax assets and financial assets, the Group determines the impairment of assets according to the following method:

The Group assesses whether an indication of impairment exists at the end of each reporting period, and performed impairment test on estimation of the asset’s recoverable amount if such indications exist. Goodwill arising from a business combination is tested for impairment at least at each year end, irrespective of whether there is any indication that the asset may be impaired. Intangible assets that unavailable for use are tested for impairment annually.

An asset’s recoverable amount is calculated as the higher of the asset’s fair value less the net amount of costs of sale and the present value of estimated future cash flows of the assets. The recoverable amount is calculated for an individual asset unless it is not applicable, in which case the recoverable amount is determined for the asset groups to which the asset belongs. An asset group is recognized based on whether the cash inflows generated by the asset group are largely independent to those of other assets or asset groups.

When the recoverable amount of an asset or an asset group is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction amount is charged to profit or loss and an impairment allowance of assets is provided accordingly.

For the purpose of impairment testing, the carrying amount of goodwill acquired in a business combination is allocated from the acquisition date on a reasonable basis, to each of the related asset groups unless it is impossible to allocate to the related asset groups, in which case it is allocated to each of the related sets of asset groups. Each of the related asset groups or sets of asset groups is an asset group or a set of asset groups that is expected to benefit from the synergies of the business combination and shall not be larger than a reportable segment determined by the Group.

When testing an asset group to which goodwill has been allocated for impairment, if there is any indication of impairment, the Group firstly tests the asset group, excluding the amount of goodwill allocated, for impairment, i.e., the Group determines and compares the recoverable amount with the related carrying amount and recognises any impairment loss. After that, the Group tests the asset, including goodwill, for impairment, the carrying amount of the related asset group is compared to its recoverable amount. If the carrying amount of the asset group is higher than its recoverable amount, the amount of the impairment loss is firstly used to reduce the carrying amount of the goodwill allocated to the asset group, and then used to reduce the carrying amount of other assets (other than the goodwill) within the asset group, on a pro-rata basis of the carrying amount of each asset.

Impairment losses of assets cannot be reversed in subsequent accounting periods upon recognition.

113

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

III. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (CONTINUED)

18. Long-term prepaid expenses

Long-term prepaid expenses are amortised using the straight-line method as follows:

==> picture [413 x 21] intentionally omitted <==

----- Start of picture text -----

Amortisation period
----- End of picture text -----

Leasehold improvement	The shorter period of
	the lease term and the
	economic service life of the
	leased assets

19. Payroll and employee benefits payable

Employee benefits are all forms of consideration or compensation given by the Group in exchange for service rendered by employees or the termination of employment, including short-term employee benefits, incentive fund, post-employment benefits, termination benefits and other long-term employee benefits. The benefits that the Group provides to the spouses, children and dependents of employees, the late employees’ family and other beneficiaries also shall be deemed as employee benefits.

Short-term employee benefits payable

The Company recognizes, in the accounting period in which an employee provides service, short-term employee benefits actually incurred as liabilities, with a corresponding charge to profit or loss or the cost of a relevant asset.

Post-employment benefits (defined contribution plans)

Expenditures for employees’ endowment insurance and unemployment insurance managed by the local government established by the Group are capitalized in the related assets or charged to profit or loss.

114

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

III. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (CONTINUED)

19. Payroll and employee benefits payable (Continued)

Post-employment benefits (defined benefit plan)

The Group operates a defined benefit pension plan, which includes providing retirees of the Group with living allowance monthly, and the amount of benefit allowance is based on the period the employee serves the Group and the related allowance policy. No capital has been injected into the plan. The benefits cost under the defined benefit plan is calculated using the projected accumulative benefit unit method.

The items to be remeasured as a result of the defined benefit pension plan, which include actuarial gains or losses, are immediately recognized in the balance sheet, and are included in shareholders’ equity through other comprehensive income during the period in which they are incurred. They will not be reversed to profit or loss in subsequent periods.

The past service costs are recognized as expenses for the current period when the defined benefit plan is modified or when the Group recognizes relevant restructuring costs or termination benefits, whichever occurs earlier.

Net interest is calculated by multiplying net liabilities or net assets of the defined benefit plan by the discount rate. The Group recognizes changes in net liabilities of the defined benefit plan under administrative expenses in the income statement: Service costs include current service costs, past service costs and gains or losses on settlement; net interest includes interest expenses on plan obligations.

Termination benefits

Termination benefits provided by the Group to its employees are recognized as an employee benefit liability for termination benefits, with a corresponding charge to profit or loss at the earlier of the following two dates: when the entity cannot unilaterally withdraw the offer of termination benefits because of an employment termination plan or a curtailment proposal; or when the entity recognizes cost or expenses related to a restructuring that involves the payment of termination benefits.

Other long-term employee benefits

When other long-term employee benefits provided by the Group to the employees satisfied the conditions for classifying as post-employment benefits, the Company recognizes and measures the net liability or net asset of other long-term employee benefits in accordance with the requirements relation to post-employment benefits. And all changes in the carrying amount of liabilities for other long-term employment benefits are recognized in profit or loss, or included in the cost of a relevant asset.

115

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

III. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (CONTINUED)

20. Lease liabilities

At the commencement date of the lease, the Group measures the lease liability at the present value of the lease payments that are not paid at that date, except for short-term leases and leases of low-value assets. In calculating the present value of the lease payments, the Group uses the interest rate implicit in the lease as the discount rate. If that rate cannot be readily determined, the Group uses the lessee’s incremental borrowing rate. The Group calculates the interest expenses of the lease liability in each period during the lease term using the constant periodic rate of interest, and recognises such interest expenses in profit or loss, except those in the costs of the related asset as required. Variable lease payments that are not included in the measurement of the lease liabilities are recognised in profit or loss as incurred, except those in the costs of the related asset as required.

After the start of the lease term, when the actual fixed payment changes, the expected amount payable of the guarantee residual value changes, the index or ratio used to determine the lease payment changes, the purchase option, the renewal option, or the evaluation of the termination option When the result or actual exercise situation changes, the Group remeasures the lease liability based on the present value of the lease payment after the change.

21. Provisions for liabilities

Except for contingent considerations or contingent liabilities assumed for business combination not under common control, a provision for liabilities is recognized if:

(1) The obligation is a present obligation assumed by the Group;
(2) It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation;
(3) A reliable estimate can be made of the amount of the obligation.

Provisions for liabilities are initially measured at the best estimate of the expenditure required to settle the present obligation, after considering risks, uncertainties, time value of currency, etc. related to the contingencies. Book value of provisions for liabilities shall be reviewed at each balance sheet date. If there is a conclusive evidence indicating that the book value does not reflect the current best estimate, then adjustment shall be made accordingly to the book value based on the current best estimate..

116

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

III. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (CONTINUED)

22. Share-based payments

A share-based payment is classified as either an equity-settled share-based payment or a cashsettled share-based payment. An equity-settled share-based payment is a transaction in which the Group receives services and uses shares or other equity instruments as consideration for settlement.

An equity-settled share-based payment in exchange for services received from employees is measured at the fair value of the equity instruments granted to the employees. If such equitysettled share-based payment could vest immediately, related costs or expenses at an amount equal to the fair value on the grant date are recognised, with a corresponding increase in capital reserves; if such equity-settled share-based payment could not vest until the completion of services for a vesting period, or until the achievement of a specified performance condition, the Group at each balance sheet date during the vesting period recognises the services received for the current period as related costs and expenses, with a corresponding increase in capital reserves, at an amount equal to the fair value of the equity instruments at the grant date, based on the best estimate of the number of equity instruments expected to vest. The fair value is determined using the binomial model.

For awards that do not ultimately vest because non-market performance and/or service conditions have not been met, no expense is recognised. Where awards include a market or non-vesting condition, the transactions are treated as vesting irrespective of whether the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.

Where the terms of an equity-settled share-based award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any modification that increases the total fair value of the share-based payments, or is otherwise beneficial to the employee as measured at the date of modification.

Where an equity-settled share-based award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. This includes any award where non-vesting conditions within the control of either the Group or the employee are not met. However, if a new award is substituted for the cancelled award, and is designated as a replacement on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award.

117

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

III. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (CONTINUED)

22. Share-based payments (Continued)

The cost of cash-settled transactions is measured at the fair value of the liability which is determined on the basis of shares or other equity instruments of the Group. It is initially recognised at the fair value on the grant date together with the consideration of terms and conditions on which the equity instruments are granted. If the rights under a cash-settled sharebased payment could vest immediately, related costs or expenses at an amount equal to the fair value on the grant date are recognised, with a corresponding increase in liability. If the rights under a cash-settled share-based payment could not vest until the completion of services for a vesting period, or until achievement of a specified performance condition, the Group at each balance sheet date during the vesting period recognises the services received for the current period as related costs and expenses, with a corresponding increase in liability, at an amount equal to the fair value of the liability based on the best estimate of the outcome of vesting. The liability is measured at each balance sheet date up to and including the settlement date, with changes in fair value recognised in profit or loss.

23. Revenue from contracts with customers

The revenue is recognized when the Group has fulfilled its performance obligations of the contract, i.e. when the customers take control of the relevant goods or services. Taking control of the relevant goods or services means being able to dominate the use of the goods or the provision of the services and obtain almost all of the economic benefits from them.

Contracts for the sale of goods

Sales contracts of goods between the Group and its customers generally include the performance obligation of transferred steel products only. Generally, upon taking account of all the following factors, namely, receipt of the current payment rights of goods, transfer of major risks and rewards in relation to the ownership of goods, transfer of the legal ownership of goods, transfer of physical assets of goods and receipt of delivery of such goods by the customers, the Group recognizes it as revenue when customers sign the receipts.

Royalty income

According to terms of relevant contracts or agreements, the Group has transferred the use right of trade mark to customers, and settles based on the customers’ actual steel production, and recognizes royalty income accordingly.

118

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

III. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (CONTINUED)

24. Contract liabilities

The Group recognizes a contract liability based on the relationship between performance of obligations and customer payments.

A contract liability is the obligation to transfer goods or services to a customer for which the Group has received a consideration or an amount of consideration that is due from the customer, in the case that the entity has received the consideration before transferring the promised goods or services.

25. Government grants

Government grants are recognized, when all the conditions attached are fulfilled and they are highly probable to be received. If a government grant is in form of monetary asset, it is measured at the amount received or receivable. If a government grant is in form of non-monetary asset, it is measured at fair value of the grants. If the fair value cannot be reliably determined, it is measured at the nominal amount.

Asset-related government grants are recognized when the government document designates that the government grants are used for constructing or forming long-term assets through other methods other than constructing. If the government document is inexplicit, the Company should make a judgement based on the basic conditions to obtain the government grants, and recognizes them as asset-related government grants if the conditions are to form longterm assets through construction or other method. Otherwise, the government grants should be income-related.

A government grant related to income is accounted for as follows: if the grant is a compensation for related costs or expenses or losses to be incurred in subsequent periods, the grant is recognized as deferred income, and recognized in profit or loss or offset against relevant costs over the periods in which the related costs or losses are recognized; if the grant is a compensation for related costs or expenses or losses already incurred, it is recognized immediately in profit or loss or offset against relevant costs for the current period.

A government grant related to asset is recognized as deferred income, and evenly amortized systematically and reasonably to profit or loss over the useful life of the related asset (government grants measured at the nominal amount should be recognized in profit or loss immediately for the period). When the asset is sold, transferred, discarded or destroyed within the useful life, the undistributed deferred income should be recognized in profit or loss of assets disposal immediately for the period.

119

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

III. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (CONTINUED)

26. Income tax

Income tax comprises current tax and deferred tax, and is normally recognized as income tax expense or credit in profit or loss, except for goodwill arising from a business combination or items that have been recognized directly in equity of shareholders.

Current tax or liabilities assets for the current and prior periods are measured at the amount expected to be paid or recovered according to the taxation laws and regulations.

Based on the differences between the carrying amount of an asset or liability on the balance sheet date and its tax base, and the differences between the carrying amounts of some items that have a tax base according to the taxation laws and regulations. but are not recognized as assets and liabilities and their tax base, the Group adopts the balance sheet liability method for the provision of deferred tax.

A deferred tax liability is recognized in respect of all taxable temporary differences except those arising from:

(1) the initial recognition of goodwill; or the initial recognition of an asset or liability in a transaction which is not a business combination, and at the time of the transaction, affects neither accounting profit, taxable profit nor deductible losses; and
(2) as to temporary differences associated with investments in subsidiaries, joint ventures and associates: the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

As to deductible temporary differences, deductible losses that can be carried forward for future years and tax credits, the deferred tax asset is recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, deductible losses and tax credits can be utilized, except:

(1) is not a business combination, and at the time of the transaction, affects neither accounting profit, taxable profit nor deductible losses; and
(2) as to deductible temporary differences associated with investments in subsidiaries, joint ventures and associates: a deferred tax asset is recognized to the extent that it is probable that the temporary difference will reverse in the foreseeable future, and taxable profit will be available against which the temporary difference can be utilized.

At the end of each reporting period, deferred tax assets and liabilities are measured, based on taxation laws and regulations, at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, taking into account the income tax effect of expected asset realization or liability settlement at the end of each reporting period.

120

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

III. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (CONTINUED)

26. Income tax (Continued)

The carrying amount of a deferred tax asset is reviewed at the end of each reporting period and is reduced to the extent that it is no longer probable that sufficient taxable profits will be available in future periods to allow the related tax benefit to be utilized. At each balance sheet date, the Group reassesses the unrecognized deferred tax assets and recognizes deferred tax assets to the extent that it has become probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be reversed.

Deferred tax assets and liabilities should be offset and disclosed in net after offsetting if and only if: the entity has a legally enforceable right to set off current income tax assets and income tax liabilities on a net basis; and the deferred tax assets and liabilities concerned related to income taxes raised by the same authority on the same taxable entity, or different taxable entities which intend, in each future period in which significant amounts of deferred tax assets and liabilities are expected to be recovered, to settle their current income tax assets and liabilities either on a net basis or obtain assets and pay off the debts simultaneously.

27. Leases

Identification of lease

At the commencement date, the Group assesses whether a contract is or contains a lease. A contract is or contains a lease if the contract conveys a right to control the use of one or more identified asset for a period of time in exchange for consideration. To assess whether a contract conveys a right to control the use of an identified asset for a period of time, the Group assess whether a control is conveyed where the customer has both the right to obtain substantially all of the economic benefits from use of the identified asset and the right to direct the use of the identified asset during the period of the use.

Identification of a separate lease

For a contract that contains multiple separate lease components, the Group separates the components of the contract and accounts for each separate lease component. The right to use an underlying asset is a separate lease component if both:

(1) The lessee can benefit from use of the underlying asset either on its own or together other resources that are readily available to the lessee;
(2) The underlying asset is neither highly dependent on, nor highly interrelated with, the other underlying assets in the contract.

121

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

III. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (CONTINUED)

27. Leases (Continued)

Assessment of lease term

The lease term is the non-cancellable period of a lease for which the Group has the right to use an underlying asset. If the Group has an option to extend the lease, that is, the Group has the right to extend the lease, and is reasonably certain to exercise that option, the lease term also includes periods covered by an option to extend the lease. If the Group has an option to terminate the lease, that is, the Group has the right to terminate the lease, but is reasonably certain not to exercise that option, the lease term includes periods covered by an option to terminate the lease. The Group reassesses whether it is reasonably certain to exercise an extension option, purchase option, or not to exercise a termination option, upon the occurrence of either a significant event or a significant change in the circumstances that is within the control of the Group and affects whether the Group is reasonably certain to exercise an option not previously included in its determination of the lease term.

As a lessee

For the general accounting treatment of the Group as a lessee, please refer to Note XII. 2.

Short-term leases

The Group considers a lease that, at the commencement date of the lease, has a lease term of 12 months or less, and does not contains any purchase option as a short-term lease. The Group does not recognize the right-of-use assets and lease liabilities for machinery and motor vehicles short-term leases. The Group recognizes lease payments on short-term leases in the costs of the related asset or profit or loss on a straight-line basis over the lease term.

As a lessor

A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership of an underlying asset at the inception date, except that a lease is classified as an operating lease.

As lessor of an operating lease

Rent income under an operating lease is recognized on a straight-line basis over the lease term, through profit or loss. Variable lease payments that are not included in the measurement of lease receivables are charged to profit or loss as incurred.

The Group accounts for a modification to an operating lease as a new lease from the effective date of the modification, considering any prepaid or accrued lease payments relating to the original lease as part of the lease income for the new lease.

122

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

III. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (CONTINUED)

27. Leases (Continued)

Leaseback transactions

The Group determines whether the transfer of assets in a leaseback transaction should be classified as sales in accordance with Note III. 23.

As lessee

If the transfer of assets in a leaseback transaction is classified as sales, the Group, as lessee, measures the right-of-use assets formed by the leaseback based on the portion of the original book value of the assets relating to the right-of-use acquired in the leaseback and recognises profit or loss only to the extent of the rights transferred to the lessor. If the transfer of assets in a leaseback transaction is not classified as sales, the Group, as lessee, continues to recognise the transferred assets and at the same time also recognises financial liabilities equivalent in amount to the transfer income. Such financial liabilities are accounted for in accordance with Note III. 9.

28. Share repurchase

The consideration and transaction costs paid for the repurchase of the Company’s equity instruments are deducted from shareholders’ equity. The issuance (including refinancing), repurchase, sale or cancellation of the Company’s equity instruments shall be treated as changes in equity.

29. Safety reserve fund

The safety reserve fund extracted by the Group in accordance with the provisions shall be recognized as the cost of the related products or included in profit or loss for the period, while be recognized as special reserves. When using safety reserve fund, it shall be distinguished whether it will form PPE or not and shall be treated separately. The expenditure shall write down the special reserves; the capital expenditure shall be recognized as PPE when meet the expected conditions for use, and write down the special reserves while recognizing accumulated depreciation with the same amount.

123

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

III. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (CONTINUED)

30. Fair value measurement

The Group measures held financial assets held for trading, receivables financing and other equity investments at fair value at the end of each reporting period. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place in the principal market for the asset or liability or in the most advantageous market for the asset or liability when a principal market is absent. The principal or the most advantageous market must be accessible to by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data and other supporting information are available to measure fair value, giving priority to the use of relevant observable inputs, and using unobservable inputs only when observable inputs are unavailable or not feasible to obtain.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: Level 1 inputs – Quoted (unadjusted) market prices in active markets that are available at the measurement date for identical assets or liabilities; Level 2 inputs – Inputs other than Level 1 inputs that are either directly or indirectly observable for the assets or liabilities; Level 3 inputs – Inputs that are unobservable for the assets or liabilities.

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Group reassesses them and determines whether transfers have occurred between levels in the hierarchy at each balance sheet date.

124

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

III. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (CONTINUED)

31. Significant accounting judgements and estimates

The preparation of the Group’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the balance sheet date. Uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amounts of the assets or liabilities affected in the future.

Judgements

In the process of applying the Group’s accounting policies, management has made the following judgements which have a significant effect on the amounts recognised in the financial statements:

Business model

The classification of financial assets on initial recognition is based on the Group’s business model for managing the financial assets. When assessing the business model, the Group considers matters including how the performance of the financial assets is evaluated and reported to the key management personnel, the risks that affect the performance of the financial assets and the way those risks are managed, and how managers of the business are compensated. When evaluating whether the objective is to collect contractual cash flows, the Group needs to analyze and evaluate the reasons, time, frequency and value of sales before the maturity date of the financial assets.

Characteristic of the contractual cash flow

The classification of financial assets on initial recognition is based on the contractual cash flow characteristics of the financial assets. When assessing whether the contractual cash flows are solely payments of the principal and the interest based on the outstanding principal amount, including assessing the modification of the time value of money element, it needs to assess whether there is a significant difference when compared with the benchmark cash flow. For the financial assets including the prepayment feature, it needs to assess whether the fair value of the prepayment feature is insignificant.

125

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

III. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (CONTINUED)

31. Significant accounting judgements and estimates (Continued)

Estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the future accounting periods, are discussed below.

Impairment of financial instruments

The Group uses ECLs model to conduct assessment on the impairment of financial instruments. The application of ECLs model requires significant judgement and estimation and takes into account all reasonable and reliable information, including forward looking information. When making such judgement and estimation, the Group predicts the expected changes in credit risk of the obligor based on its historical data of repayment together with factors such as economic policy, macroeconomic indicators and industry risk. The different estimates may impact the impairment assessment, and the provision for impairment may also not be representative of the actual impairment loss in the future.

Impairment of non-current assets other than financial assets (other than goodwill)

The Group assesses whether there are any indications of impairment for all non-current assets other than financial assets at the balance sheet date. Intangible assets with indefinite useful lives are tested for impairment annually and at other times when such an indication exists. Other noncurrent assets other than financial assets are tested for impairment when there are indications that the carrying amounts may not be recoverable. An impairment exists when the carrying amount of an asset or asset group exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and the present value of the future cash flows expected to be derived from it. The calculation of the fair value less costs of disposal based on available data from binding sales transactions in an arm’s length transaction of similar assets or observable market prices less incremental costs for disposing of the assets. When the calculations of the present value of the future cash flows expected to be derived from an asset or asset group are undertaken, management must estimate the expected future cash flows from the asset or asset group and choose a suitable discount rate in order to calculate the present value of those cash flows.

126

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

III. SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES (CONTINUED)

31. Significant accounting judgements and estimates (Continued)

Estimation uncertainty (Continued)

Impairment of goodwill

The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the present value of the future cash flows expected to be derived from the asset to which the goodwill is allocated. Estimating the present value requires the Group to make an estimate of the expected future cash flows from the asset groups and also to choose a suitable discount rate in order to calculate the present value of those cash flows. Further details are included in Note V.16

Deferred tax assets

Deferred tax assets are recognized for all unused deductible losses to the extent that it is probable that taxable profit will be available against which the deductible losses can be utilized. Significant management judgement is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and level of future taxable profits together with tax planning strategies.

Net realisable values of inventories

At the balance sheet date, inventories are measured at the lower of cost and net realisable value and the provision for inventory write-down is made on the difference between the cost and the net realisable value. The net realisable value of inventories held for sale is determined based on the amount of the estimated selling price less the estimated selling expenses and relevant taxes and surcharges in the ordinary course of business; the net realisable value of materials to be processed is determined based on the amount of the estimated selling price less the estimated costs of completion, selling expenses and relevant taxes and surcharges in the ordinary course of business.

Lessee’s incremental borrowing rate

If the interest rate implicit in the lease cannot be readily determined, the Group measures the lease liability at the present value of the lease payments discounted using the lessee’s incremental borrowing rate. According to the economic environment, the Group takes the observable interest rate as the reference basis for determining the incremental borrowing rate, then adjusts the observable interest rate based on its own circumstances, underlying assets, lease terms and amounts of lease liabilities to determine the applicable incremental borrowing rate.

127

Chongqing Iron & Steel Company Limited

Section X Financial Report

Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

IV. TAXES

Main taxes and tax rates

==> picture [414 x 553] intentionally omitted <==

----- Start of picture text -----

Taxes Tax bases Tax rates
Value-added tax The taxable revenue from sale of goods VAT output has been
(“VAT”) calculated by applying
a rate of 13% to the
taxable value for sales
of steel products, and
VAT payable is the
difference of VAT output
less deductible VAT
input for the current
period.
Other tax rate: 6%,
9%,10%
Housing property For housing property levied on the basis of price, 1.2%, 12%
tax housing property tax is levied at the rate of
1.2% of the balance after deducting 30% of the
cost; for housing property levied on the basis of
rent,housing property tax is levied at the rate of
12%
City maintenance Amount of commodity turnover tax paid 7%
and
construction
tax
Education Amount of commodity turnover tax paid 3%
surcharge
Local education Amount of commodity turnover tax paid 2%
surcharge
Corporate Taxable income 15%, 25%
income tax
(“CIT”)
Environmental The actual emission of air pollutants RMB3–3.5 per
protection tax pollution equivalent
The applicable CIT rates of the Company and its subsidiaries are analyzed as follows:
Name of subject of taxation Income tax rate
The Company 15%
Ch ongqing Iron and Steel Energy and Environmental Protection Co.,
Ltd. (“Chongqing Iron & Steel Energy”) 15%
Ch ongqing Xingang Changlong Logistics Co., Ltd (“Xingang
Changlong”) 15%
----- End of picture text -----

128

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

IV. TAXES (CONTINUED)

2. Tax benefits

Pursuant to the requirement of the Announcement on the Continuation of the Corporate Income Tax Policy for the Western Development (《關於延續西部大開發企業所得稅政策的公告》) promulgated by the MOF, the State Administration of Taxation and the National Development and Reform Commission, enterprises located in the western region that fall into the Catalogue of Encouraged Industries are subject to a reduced Corporate Income Tax rate of 15% from 1 January 2021 to 31 December 2030. These enterprises refer to the enterprises that are mainly engaged in the industrial projects stipulated in the Catalogue of Encouraged Industries, and whose main business income accounts for more than 60% of the total income of the enterprises. Pursuant to the Catalogue of Encouraged Industries in the Western Region issued by the National Development and Reform Commission on 26 January 2021, the Company and its subsidiary Chongqing Iron & Steel Energy and Xingang Changlong have qualified to implement preferential tax policy of 15% for the Western Development as the business operations belong to the encouraged industries in the western region, and all of them are stipulated in the Catalogue of Encouraged Industries in the Western Region.

Chongqing Iron & Steel Energy obtained the “Comprehensive Certificate 2014 No. 016” Resource Comprehensive Utilization Certificate in January 2014, according to the MOF and the State Administration of Taxation “Notice on Implementation of the Enterprise Income Tax Preferential Catalog for Comprehensive Utilization of Resources (Cai Shui [2008] No. 47)” (《關於執行資源綜合利用企業所得稅優惠目錄有關問題的通知》（財稅[2008]47號）), when calculating taxable income, Chongqing Iron & Steel Energy used 90% of its total income for the year.

According to the notice of the MOF and the State Administration of Taxation on “Adjusting and Improving the Policy of Value-added Tax on Products and Services of Comprehensive Utilization of Resources (Cai Shui [2011] No. 115)” (《關於調整完善資源綜合利用產品及勞務增值稅政策的通知》（財稅[2011]115號）), Chongqing Iron & Steel Energy can enjoy the policy of value-added tax refund.

According to the Announcement on Relevant Policies for Deepening Value-Added Tax Reform (《關於深化增值稅改革有關政策的公告》) (No. 39 Announcement of MOF, State Administration of Taxation and General Administration of Customs in 2019), Chongqing Xingang Changlong Logistics Co., Ltd. is entitled to a VAT deduction for the provision of four services, the sales from which accounted for more than 50% of the total sales in 2020, and is entitled to deduct additional 10% of the deductible input tax from VAT payable in 2021.

129

Chongqing Iron & Steel Company Limited

Section X Financial Report

Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS

1. Cash and bank balances

==> picture [414 x 35] intentionally omitted <==

----- Start of picture text -----

30 June 31 December
2021 2020
----- End of picture text -----

Bank deposits	4,743,627	4,698,090
Other monetaryfunds	524,874	245,141
	5,268,501	4,943,231
Including: th e total amount of restricted cash and bank
balances due to mortgage, pledge or
freeze.	524,874	245,141

As at 30 June 2021, the Group had restricted cash and bank balances for notes and letter of credit, details refer to Note V. 54.

Interest income is generated from current savings as determined by the interest rate for the savings in banks.

2. Financial assets held for trading

	30 June 2021	31 December 2020
Financial assets at fair value through profit or loss
Debt instrument investments	550,000	–
	550,000	–

As at 30 June 2021, debt instrument investments the Group held were non-guaranteed trust products ; as at 31 December 2020, the Group does not hold investment in debt instruments.

130

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. Trade receivables

Credit period of trade receivables is generally within one-month. Trade receivables are non-interest-bearing.

Ageing analysis of trade receivables is as follows:

==> picture [413 x 34] intentionally omitted <==

----- Start of picture text -----

30 June 31 December
2021 2020
----- End of picture text -----

Within 3 months (third month inclusive)	4,726	32,929
4–12 months (first year inclusive)	2,970	1,956
1–2 years	1,138	25
2–3 years	204	204
Above 3years	975	975
	10,013	36,089
Less: Provision for bad debts	1,048	1,048
	8,965	35,041

The ageing analysis was based on the month when incurred. The trade receivables recognized firstly will be firstly settled.

	Book Amount	30 June 2021 value Bad debt Proportion Amount (%)	30 June 2021 value Bad debt Proportion Amount (%)	provision Provision proportion (%)	Book Amount	31 December 2020 value Bad debt Proportion Amount (%)	31 December 2020 value Bad debt Proportion Amount (%)	provision Provision proportion (%)
Receivables that are subject to
provision by group with similar
credit risk characteristics	10,013	100	1,048	10	36,089	100	1,048	3

As at 30 June 2021 and at 31 December 2020, the Group have no individually trade receivables to separate provision for bad debts.

131

Chongqing Iron & Steel Company Limited

Section X Financial Report

Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. Trade receivables (Continued)

Trade receivables that are subject to provision by group with similar credit risk characteristics are as follows:

Aging Within 3 months (third month inclusive)	Estimated doubtful book value 4,726	30 June 2021 ECLs proportion (%)	Lifetime ECLs	31 December 2020 Estimated doubtful book value ECLs proportion Lifetime ECLs (%) 32,929 – –	31 December 2020 Estimated doubtful book value ECLs proportion Lifetime ECLs (%) 32,929 – –	31 December 2020 Estimated doubtful book value ECLs proportion Lifetime ECLs (%) 32,929 – –
4-12 months (first year inclusive)	2,970	1,956	–	–	–	–
1–2 years	1,138	1	6	25	24	6
2–3 years	204	33	67	204	33	67
Over 3 years	975	100	975	975	100	975
	10,013		1,048	36,089		1,048

Steel products customers usually need advance payment, main customers are also provided with 30 days credit period. For other product customers, the contract price of the group is usually due within 30 days after the delivery of products, and the risk of expected credit loss of trade receivables is low.

The movement for provision of bad debt of trade receivables is as follows:

		Opening balance	Other increase	Provision	Reversal	Written- off	Closing balance
30	June 2021	1,048	–	–	–	–	1,048
31	December 2020	1,000	25	23	–	–	1,048

As at 30 June 2021, the top five closing balances in respect of trade receivables aggregating RMB4,718,000 (as at 31 December 2020: RMB33,689,000), accounting for 47% (as at 31 December 2020: 93%) of the total of closing balance of trade receivables. The closing balance in respect of the provision for bad debts made for the top five balances amounted to RMB0.

132 2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. Receivables financing

	30 June 2021	31 December 2020
Notes receivable	3,605,463	2,068,546

For the purposes of obtaining contractual cash flow and disposition, the Group managed the business model of the aforesaid notes receivable through the endorsement and discount of some bank acceptances during its daily capital management. Therefore, the Group reclassified such notes receivable as financial assets at fair value through other comprehensive income, presented as receivables financing.

	30 June 2021	31 December 2020
Commercial acceptance notes	200	200
Bank acceptance notes	3,605,263	2,068,346
	3,605,463	2,068,546

Pledged notes receivable as follows:

	30 June 2021	31 December 2020
Bank acceptance notes	172,465	1,343,223

Chongqing Iron & Steel Company Limited 133

Section X Financial Report

Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. Receivables financing (Continued)

Please refer to Note V. 54. for restricted notes receivable at the end of the period.

Notes receivable endorsed or discounted but not yet mature at the balance sheet date are as follows:

	30 June 2021 Amount derecognized at the end of the period Amount remained to be recognized at the end of the period	30 June 2021 Amount derecognized at the end of the period Amount remained to be recognized at the end of the period	31 December 2020 Amount derecognized at the end of the period Amount remained to be recognized at the end of the period
Bank acceptance notes	3,565,053	–	371,545 –

As at 30 June 2021, there was no transfer of notes receivable into trade receivables due to default on the part of the drawer of the Group (31 December 2020: Nil).

5. Prepayments

Ageing analysis of prepayments is as follows:

	31 December 2021 Book value Proportion (%)	31 December 2021 Book value Proportion (%)	31 December 2020 Book value Proportion (%)	31 December 2020 Book value Proportion (%)
Within 1 year	417,317	93	527,781	99
1–2 years	32,041	7	6,729	1
2–3 year	376	–	–	–
Over 3years	6	–	6	–
	449,740	100	534,516	100

As at 30 June 2021, the closing balances of the top five prepayments were RMB317,697,000 (as at 31 December 2020: RMB244,398,000) in aggregate, representing 71% (as at 31 December 2020: 46%) of the total closing balances of prepayments.

134 2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. Other receivables

	30 June 2021	31 December 2020
Other receivables	16,959	18,013
An ageing analysis of other receivables is as follows:
	30 June 2021	31 December 2020
Within 3 months	9,910	13,137
4 to 12 months (within 1 year)	5,102	3,059
1 – 2 years	366	236
2 – 3 years	2,011	2,011
Above 3years	3,078	3,078
Less: Provision for bad debts	3,508	3,508
	16,959	18,013
Other receivables presented by nature:
	30 June 2021	31 December 2020
Government grant receivables	8,827	–
Guarantee deposits, staff advances, etc.	7,368	18,352
Prepayments for trading	1,808	1,733
Others	2,464	1,436
	20,467	21,521

135

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. Other receivables (Continued)

Changes in impairment allowance recognized for the 12-month expected credit losses and lifetime expected credit losses on other receivables are as follows:

January to June 2021 Opening balance	Stage 1 12-month expected credit losses –	Stage 2 Lifetime expected credit losses 430	Stage 3 Credit-impaired financial assets (Lifetime expected credit losses) 3,078	Total 3,508
Changes due to the opening
balance
– Transfer to Stage 2	–	–	–	–
– Transfer to Stage 3	–	–	–	–
– Turn back stage 2	–	–	–	–
– Turn back stage 1	–	–	–	–
Accrual	–	–	–	–
Reversal	–	–	–	–
Resale	–	–	–	–
Write-off	–	–	–	–
Balance on 30 June 2021	–	430	3,078	3,508

136

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. Other receivables (Continued)

2020	Stage 1 12-month expected credit losses	Stage 2 Lifetime expected credit losses	Stage 3 Credit-impaired financial assets (Lifetime expected credit losses)	Total
Opening balance	–	430	3,078	3,508
Changes due to the
opening balance
– Transfer to Stage 2	–	–	–	–
– Transfer to Stage 3	–	–	–	–
– Turn back stage 2	–	–	–	–
– Turn back stage 1	–	–	–	–
Accrual	–	–	–	–
Reversal	–	–	–	–
Resale	–	–	–	–
Write-off	–	–	–	–
Closing balance	–	430	3,078	3,508

137

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. Other receivables (Continued)

Movements in the book value of other receivables:

January to June 2021	Stage 1 12-month expected credit losses	Stage 2 Lifetime expected credit losses	Stage 3 Credit-impaired financial assets (Lifetime expected credit losses)	Total
Opening balance	16,196	2,247	3,078	21,521
Changes due to the opening
balance
– Transfer to Stage 2
– Transfer to Stage 3
– Turn back stage 2
– Turn back stage 1
Addition	26,766	130		26,896
Derecognition	(27,950)			(27,950)
Write-off
Balance on 30 June 2021	15,012	2,377	3,078	20,467

138

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. Other receivables (Continued)

2020	Stage 1 12-month expected credit losses	Stage 2 Lifetime expected credit losses	Stage 3 Credit-impaired financial assets (Lifetime expected credit losses)	Total
Opening balance	76,315	2,247	3,078	81,640
Changes due to the opening
balance
– Transfer to Stage 2	–	–	–	–
– Transfer to Stage 3	–	–	–	–
– Turn back stage 2	–	–	–	–
– Turn back stage 1	–	–	–	–
Addition	16,196	–	–	16,196
Derecognition	(76,315)	–	–	(76,315)
Write-off	–	–	–	–
Closing balance	16,196	2,247	3,078	21,521

The movements in impairment allowance for other receivables are as follows:

	Opening balance	Provision	Reversal	Write-off	Closing balance
30 June 2021	3,508	–	–	–	3,508
2020	3,508	–	–	–	3,508

139

Chongqing Iron & Steel Company Limited

Section X Financial Report

Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. Other receivables (Continued)

As at 30 June 2021, the five largest other receivables are as follows:

==> picture [413 x 52] intentionally omitted <==

----- Start of picture text -----

Ratio in other Provision for
30 June 2021 receivables Nature Aging bad debts
(%)
----- End of picture text -----

The first	8,827	43	Government grant	Within 1 year
			receivables
The second	1,500	7	Guarantee deposits	Within 1 year
The third	1,026	5	Petty cash	0 to 3 years	1,026
The fourth	598	3	Guarantee deposits	Within 1 year
The fifth	500	2	Guarantee deposits	Within 1year
	12,451	60			1,026

As at 31 December 2020, the five largest other receivables are as follows:

	31 December 2020	Ratio in other receivables (%)	Nature	Aging	Provision for bad debts
The first	12,000	55	Guarantee deposits	Within 1 year	–
The second	1,500	7	Guarantee deposits	Within 1 year	–
The third	1,026	5	Petty cash	0 to 3 years	1,026
The fourth	598	3	Guarantee deposits	Within 1 year	–
The fifth	426	2	Guarantee deposits	Within 1year	–
	15,550	72			1,026

140

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. Other receivables (Continued)

As at 30 June 2021, the government subsidies receivable are as follows:

==> picture [412 x 62] intentionally omitted <==

----- Start of picture text -----

Estimated receiving
time, amount and
Subsidiary supporting
Programs Amount Aging documents
----- End of picture text -----

State Taxation Administration,	Immediate levy and	Fully received on 26 July
Changshou District Sub-	refund of VAT	2021 in accordance
branch	for products and	with the Notice of the
	services generated	MOF and State Taxation
	from comprehensive	Administration on
	utilisation of	Publishing the Catalogue
	resources	of Preferential VAT for
		Products and Services
		Generated from
		Comprehensive Utilisation
		of Resources (Cai Shui
		[2015] No. 78) (《財政部國
		家稅務總局關於印發<資源
		綜合利用產品和勞務增值
		稅優惠目錄>的通知》財稅
		[2015]78號)

As at 31 December 2020, there were no government subsidies receivable.

141

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. Inventories

Raw materials	Book value 4,678,742	30 June 2021 Provision for decline in value/ impairment 136,616	Carrying amount 4,542,126	Book value 3,374,493	31 December 2020 Provision for decline in value/ impairment Carrying amount 136,616 3,237,877	31 December 2020 Provision for decline in value/ impairment Carrying amount 136,616 3,237,877
Work in progress	1,296,115	–	1,296,115	1,228,511	–	1,228,511
Finished goods	695,270	–	695,270	316,818	–	316,818
Low value
consumables
and maintenance
and spare parts	356,218	127,827	228,391	419,562	147,860	271,702
	7,026,345	264,443	6,761,902	5,339,384	284,476	5,054,908

Provision for inventories:

30 June 2021 Raw materials	Opening balance 136,616	Provision	Decrease Reversal or Write-off Others	Decrease Reversal or Write-off Others	Closing balance 136,616
Low value consumables and
maintenance and spareparts	147,860		20,033		127,827
	284,476		20,033		264,443
2020	Opening balance	Provision	Decrease Reversal or Write-off Others		Closing balance
Raw materials	136,616	–	–	–	136,616
Low value consumables and
maintenance and spareparts	135,984	13,342	1,466	–	147,860
	272,600	13,342	1,466	–	284,476

142

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. Inventories (Continued)

Determination basis of net realizable value and reasons for the reversal or written-off of provision for inventories:

==> picture [412 x 88] intentionally omitted <==

----- Start of picture text -----

Reasons for the
reversal
Determination basis or the written-off of
for provision for Basis for provision for decline
decline in value of determination of in value of inventories
inventories net realizable value in the current period
----- End of picture text -----

Raw materials	Provision for inventories on	The amount of the estimated selling	Nil
	an individual basis	price less the estimated costs of
		completion, selling expenses and
		relevant taxes and surcharges
Work in progress	Provision for inventories on	The amount of the estimated selling	Nil
	an individual basis	price less the estimated costs of
		completion, selling expenses and
		relevant taxes and surcharges
Finish goods	Provision for inventories on	The amount of the estimated selling	Nil
	an individual basis	price less the estimated selling
		expenses and relevant taxes and
		surcharges
Low value	Provision for inventories on	The amount of the estimated selling	Relevant inventories
consumables and	an individual basis	price less the estimated selling	sold
maintenance and		expenses and relevant taxes and
spare parts		surcharges

8. Other current assets

==> picture [413 x 34] intentionally omitted <==

----- Start of picture text -----

30 June 31 December
2021 2020
----- End of picture text -----

Prepaid stamp duty	–	2,323
Prepaid corporate income tax	5,912	5,912
Input VAT to be credited	92,091	385,918
	98,003	394,153

143

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. Long-term equity investments

Investments in joint ventures	Book value –	30 June 2021 Provision for impairments Carrying amount – –	30 June 2021 Provision for impairments Carrying amount – –	31 Book value –	December 2020 Provision for impairments Carrying amount – –	December 2020 Provision for impairments Carrying amount – –
Investments in associates	51,236	–	51,236	79,494	–	79,494
	51,236	–	51,236	79,494	–	79,494
30 June 2021
Investees Joint venture	Opening balance	Increase/(decrease) Investments increased Investments decreased Investment income recognised through equity method				Closing balance
Chongqing Jianwei Intelligent
Technology Co., Ltd (“Chongqing
Jianwei”)（Note 1）	–		–	–	–	–
Associate
Chongqing Baocheng Carbon
Material Co., Ltd. (“Baocheng
Carbon”) (Note 2)	11,236		–	–	–	11,236
Baowu Raw Material Supply Co.,
Ltd. (“Baowu Raw Material”)
(Note 3)	40,000		–	–	–	40,000
	51,236		–	–	–	51,236

144

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Long-term equity investments (Continued)

2020

==> picture [413 x 90] intentionally omitted <==

----- Start of picture text -----

Increase/(decrease)
Investment
income
recognized
Opening Investments Investments through Closing
Investees balance increased decreased equity method balance
----- End of picture text -----

Joint venture
Chongqing Jian Wei Intelligent
Technology Co., Ltd* (重慶鑒微智能科
技有限公司) (“Jian Wei Intelligent”)	–	–	–	–	–
Associate
Chongqing Xingang Changlong Logistics
Co., Ltd. (重慶新港長龍物流有限責任公
司) (“Xingang Changlong”) (Note 4)	28,258	–	–	–	28,258
Chongqing Baocheng Carbon Material
Co., Ltd. (“Baocheng Carbon”)	–	11,236	–	–	11,236
Baowu Raw Material Supply Co., Ltd.
(“Baowu Raw Material”)	–	40,000	–	–	40,000
	28,258	51,236	–	–	79,494

145

Chongqing Iron & Steel Company Limited

Section X Financial Report

Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Long-term equity investments (Continued)
Note 1: The Proposal of Chongqing Steel together with Siyuanhe Intelligent Manufacturing Fund to establish joint venture was approved at the 12th meeting of the eighth session of the board of directors of the Company by voting. It approved the Company and Jianwei digital technology (Chongqing) Co., Ltd contribute RMB2,500,000 to establish Chongqing Jianwei (重慶鑒微智慧科技有限公司) individually. Up to 31 December 2020, the Company has not paid such contributions. According to the Article of Chongqing Jianwei, the Company possesses 50% equity voting right.
Note 2: The 18th meeting of the eighth board of directors of the Company deliberated and passed the “proposal on purchasing 10% equity of Luyang Chemical”, and agreed to purchase 10% equity of Chongqing Luyang Chemical Co., Ltd. (重慶路洋化工有限公司) (hereinafter referred to as “Luyang Chemical”) with RMB11,236,000. The Company has paid for equity transaction in 2020, and Luyang chemical changed its name to Baocheng Carbon this year. According to the articles of association of Baocheng Carbon, the Company has the corresponding voting rights in the Company.
Note 3: The 20th meeting of the eighth session of the Company’s board of directors deliberated and approved the “Proposal on Contributing Capital to Participate in the Establishment of Baowu Raw Material Supply Co., Ltd.”, and agreed to the Company’s cooperation with Baoshan Iron and Steel Co., Ltd. (寶山鋼鐵股份有限公司) (hereinafter referred to as “Baosteel Co., Ltd.”) and Maanshan Iron and Steel Co., Ltd. (Group) Holding Co., Ltd. (馬鋼（集團）控股有限公司), China Baowu Iron and Steel Group Co., Ltd. (中國寶武鋼鐵集團有限公司) hereinafter referred to as “Baowu Group”), Baowu Group Echeng Iron and Steel Co., Ltd. (寶武集團鄂城鋼鐵有限公司) and Guangdong Shaogang Songshan Co., Ltd. (廣東韶松山股份有限公司) to jointly establish Baowu Raw Material. The Company invested RMB40,000,000 in August 2020 and holds an 8% equity interest in Baowu Raw Material. According to the “Articles of Association” of Baowu Raw Material, the Company has the right to vote on the corresponding equity in the Company. On 21 June 2021, the Company received a cash dividend of RMB310,000 from Baowu Raw Material.
Note 4: In March 2019, the Company acquired 28% of equity interest in Xingang Changlong with RMB28,482,000 (exclusive of trading service charges). The Resolution in Relation to Acquisition of 72% Equity Interest of Xingang Changlong through Online Bidding was considered and approved at the 30th meeting of the eighth session of the Board of the Company, which approved the Company’s acquisition of 60% and 12% equity interest in Xingang Changlong held by Chongqing Qiancheng Industrial Development Co., Ltd. (重慶千誠實業發展有限公司) and Minsheng Shipping Co., Ltd. (民生輪船股份有限公司), respectively, through online bidding. As of January 2021, the Company contributed RMB126,449,000 to acquire 72 % of equity interest in Xingang Changlong. On 15 January 2021, Xingang Changlong completed the change of industrial and commercial registration and became a wholly-owned subsidiary of the Company.

146

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. Other equity investments

Non-tradable equity instruments measured at fair value and the changes of which are included in other comprehensive income at the end of the period

30 June 2021 and 31 December 2020

Xiamen Shipbuilding Industry Co., Ltd.	Accumulated fair value changes recorded in other comprehensive income Fair value Dividends Income Reason for being designated as fair value through other comprehensive income Equity instruments derecognized Equity instruments that are still held – 5,000 – – Intended to hold in
(廈門船舶重工股份有限公司)	long-term and earn
	investment income

11. Property, plant and equipment

	30 June 2021	31 December 2020
Property, plant and equipment	16,759,467	16,605,635
Property,plant and equipment to be disposed of	29,511	25,153
	16,788,978	16,630,788

147

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Property, plant and equipment (Continued)

January to June 2021

==> picture [414 x 43] intentionally omitted <==

----- Start of picture text -----

Machineries
Plants and and other
buildings equipment Motor vehicles Total
----- End of picture text -----

Cost
Opening balance	13,632,365	8,592,665	10,807	22,235,837
Purchase	–	22,689	–	22,689
Transfers from construction in
progress	–	282,877	–	282,877
Business combinations not
involving entities under
common control	181,494	38,230	176	219,900
Disposal or retirements	–	–	–	–
Transfer into property, plant and
equipment to be disposed of	–	(6,799)	(1,267)	(8,066)
Closing balance	13,813,859	8,929,662	9,716	22,753,237
Accumulated depreciation
Opening balance	2,634,356	2,990,535	5,311	5,630,202
Provided	161,967	204,831	478	367,276
Disposal or retirements	–	–	–	–
Transfer into property, plant and
equipment to be disposed of	–	(2,726)	(982)	(3,708)
Closing balance	2,796,323	3,192,640	4,807	5,993.770
Provision for impairment
Opening balance	–	–	–	–
Provided	–	–	–	–
Disposal or retirements	–	–	–	–
Transfer into property, plant and
equipment to be disposed of	–	–	–	–
Opening and closing balance	–	–	–	–
Carrying amount
At the end of the period	11,017,536	5,737,022	4,909	16,759,467
At the beginning of the period	10,998,009	5,602,130	5,496	16,605,635

148

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Property, plant and equipment (Continued)

2020

==> picture [414 x 42] intentionally omitted <==

----- Start of picture text -----

Machineries
Plants and and other
buildings equipment Motor vehicles Total
----- End of picture text -----

Cost
Opening balance	13,630,917	7,917,445	10,911	21,559,273
Purchase	–	26,619	–	26,619
Transfers from construction in
progress	–	276,301	–	276,301
Business combinations not
involving entities under
common control	170,730	779,776	287	950,793
Disposal or retirements	(23,547)	(25)	(216)	(23,788)
Transfer into property, plant and
equipment to be disposed of	(145,735)	(407,451)	(175)	(553,361)
Closing balance	13,632,365	8,592,665	10,807	22,235,837
Accumulated depreciation
Opening balance	2,343,907	2,768,312	4,790	5,117,009
Provided	314,356	378,150	777	693,283
Disposal or retirements	(3,371)	–	(86)	(3,457)
Transfer into property, plant and
equipment to be disposed of	(20,536)	(155,927)	(170)	(176,633)
Closing balance	2,634,356	2,990,535	5,311	5,630,202
Provision for impairment
Opening balance	–	–	–	–
Provided	125,199	226,372	4	351,575
Disposal or retirements	–	–	–	–
Transfer into property, plant and
equipment to be disposed of	(125,199)	(226,372)	(4)	(351,575)
Opening and closing balance	–	–	–	–
Carrying amount
At the end of the year	10,998,009	5,602,130	5,496	16,605,635
At the beginning of the year	11,287,010	5,149,133	6,121	16,442,264

149

Chongqing Iron & Steel Company Limited

Section X Financial Report

Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. Property, plant and equipment (Continued)

PPE leased out under operating lease are as follows:

	30 June 2021	2020
Plant and buildings	11,131	11,125

PPE without certificates of ownership as at 30 June 2021 are as follows:

	Carrying amount	Reason for lacking certificates of ownership
Workshop in Changshou district	994,335	Application materials in preparation

For details of PPE with ownership restricted, please refer to Note V.54.

Property, plant and equipment to be disposed of

	30 June 2021	2020
Machineries and other equipment	29,511	25,153

150

2021 Interim Report

Section X Financial Report

Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Construction in progress

==> picture [413 x 49] intentionally omitted <==

----- Start of picture text -----

30 June 2021 2020
Provision for Carrying Provision for Carrying
Book value impairment amount Book value impairment amount
----- End of picture text -----

Reconstruction from section steel into double
high rods	545,835	–	545,835	467,058	–	467,058
Upgrading of rolling mill	930,505	–	930,505	597,109	–	597,109
Upgrading and transformation project of raw
material terminal equipment for logistics
transportation	484,852	–	484,852	189,082	–	189,082
Sintering machine upgrade and
transformation and waste heat power
generation project	247,852	–	247,852	249,345	–	249,345
High-efficiency transformation project of
the second series of converters in the
steelmaking plant	208,703	–	208,703	199,768	–	199,768
Upgrading of blast furnace process	226,904	–	226,904	246,666	–	246,666
Improvement of continuous caster	288,330	–	288,330	127,389	–	127,389
Newly built 50000m3/h oxygen generator	127,329	–	127,329	38,833	–	38,833
High efficiency utilization of surplus gas and
steam cascade utilization project	186,967	–	186,967	73,688	–	73,688
No 2&3 Sintering flue gas desulfurization
upgrading project	5,353	–	5,353	–	–	–
Upgrading of blast furnace blast system	113,069	–	113,069	82,746	–	82,746
Transformation of pellet desulfurization and
denitrification	3,778	–	3,778	3,778	–	3,778
Plant road function improvement project	2,145	–	2,145	–	–	–
Upgrading of wastewater treatment system
and environmental protection	93,635	–	93,635	83,057	–	83,057
Upgrading of coking process	40,494	–	40,494	37,345	–	37,345
Others	723,963	–	723,963	448,801	–	448,801
	4,229,714	–	4,229,714	2,844,665	–	2,844,665

151

Chongqing Iron & Steel Company Limited

Section X Financial Report

Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Construction in progress (Continued)

Changes in significant construction in progress from January to June 2021:

==> picture [413 x 57] intentionally omitted <==

----- Start of picture text -----

Transferred
Current to long- Invest
Opening period Transferred term prepaid Closing proportion Source
Name of project Budget balance additions to PPE expenses balance of budget of funds
----- End of picture text -----

Reconstruction from section steel into	632,170	467,058	78,777	–	–	545,835	86%	Self-owned
double high rods								funds
Upgrading of rolling mill	1,825,740	597,109	616,273	282,877	–	930,505	66%	Self-owned
								funds
Upgrading and transformation project	692,180	189,082	295,770	–	–	484,852	70%	Self-owned
of raw material terminal equipment for								funds
logistics transportation
Sintering machine upgrade and	324,890	249,345	9,648	–	11,141	247,852	80%	Self-owned
transformation and waste heat power								funds
generation project
High-efficiency transformation project of	219,134	199,768	8,935	–	–	208,703	95%	Self-owned
the second series of converters in the								funds
steelmaking plant
Upgrading of blast furnace process	775,785	246,666	66,706	–	86,468	226,904	40%	Self-owned
								funds
Improvement of continuous caster	773,340	127,389	160,941	–	–	288,330	37%	Self-owned
								funds
Newly built 50000m3/h oxygen generator	450,000	38,833	88,496	–	–	127,329	28%	Self-owned
								funds
High efficiency utilization of surplus gas	811,000	73,688	113,279	–	–	186,967	23%	Self-owned
and steam cascade utilization project								funds
No 2&3 Sintering flue gas desulfurization	168,207	–	5,353	–	–	5,353	3%	Self-owned
upgrading project								funds
Upgrading of blast furnace blast system	151,660	82,746	30,323	–	–	113,069	75%	Self-owned
								funds
Transformation of pellet desulfurization and	100,000	3,778	–	–	–	3,778	4%	Self-owned
denitrification								funds
Plant road function improvement project	8,324	–	2,145	–	–	2,145	26%	Self-owned
								funds
Upgrading of wastewater treatment system	167,950	83,057	10,578	–	–	93,635	56%	Self-owned
and environmental protection								funds
Upgrading of coking process	80,415	37,345	3,149	–	–	40,494	50%	Self-owned
								funds
Others	4,067,603	448,801	276,589	–	1,427	723,963	18%	Self-owned
								funds
		2,844,665	1,766,962	282,877	99,036	4,229,714

152

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021
V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Construction in progress (Continued)

Changes in significant construction in progress for 2020:

==> picture [413 x 49] intentionally omitted <==

----- Start of picture text -----

Transferred
to long- Invest
Opening Current year Transferred term prepaid Closing proportion Source
Name of project Budget balance additions to PPE expenses balance of budget of funds
----- End of picture text -----

Reconstruction from section steel into double	632,170	60	466,998	–	–	467,058	74%	Self-owned
high rods								funds
Upgrading of rolling mill	1,825,740	–	597,109	–	–	597,109	33%	Self-owned
								funds
Upgrading and transformation project of raw	209,007	15,539	174,953	(1,410)	–	189,082	91%	Self-owned
material terminal equipment for logistics								funds
transportation
Sintering machine upgrade and transformation	324,890	–	276,377	(15,928)	(11,104)	249,345	85%	Self-owned
and waste heat power generation project								funds
High-efficiency transformation project of	219,134	270	218,864	–	(19,366)	199,768	100%	Self-owned
the second series of converters in the								funds
steelmaking plant
Upgrading of blast furnace process	775,785	2,620	499,454	(17,300)	(238,108)	246,666	65%	Self-owned
								funds
Improvement of continuous caster	773,340	38	173,845	(46,494)	–	127,389	22%	Self-owned
								funds
Newly built 50000m3/h oxygen generator	450,000	–	38,833	–	–	38,833	9%	Self-owned
								funds
High efficiency utilization of surplus gas and	811,000	198	73,490	–	–	73,688	9%	Self-owned
steam cascade utilization project								funds
No 2&3 Sintering flue gas desulfurization	168,207	104,208	63,999	(168,207)	–	–	100%	Self-owned
upgrading project								funds
Upgrading of blast furnace blast system	151,660	–	82,746	–	–	82,746	55%	Self-owned
								funds
Ironmaking plant sintering No. 2 Ironmaking	15,950	7,866	4,174	–	(12,040)	–	75%	Self-owned
plant sintering								funds
Transformation of the main pumping	6,474	5,928	198	–	(6,126)	–	95%	Self-owned
frequency conversion system of the third								funds
sintering plant
Transformation of pellet desulfurization and	100,000	3,705	73	–	–	3,778	4%	Self-owned
denitrification								funds
Upgrading and reconstruction of continuous	3,650	3,147	–	(3,147)	–	–	86%	Self-owned
caster breakout detection system								funds
Plant road function improvement project	8,324	3,040	3,707	(6,747)	–	–	81%	Self-owned
								funds
Upgrading of wastewater treatment system	167,950	1,306	81,751	–	–	83,057	49%	Self-owned
and environmental protection								funds
Upgrading of coking process	80,415	–	50,048	(12,703)	–	37,345	62%	Self-owned
								funds
Others	1,704,649	23,933	456,200	(4,365)	(26,967)	448,801	28%	Self-owned
								funds
		171,858	3,262,819	(276,301)	(313,711)	2,844,665

Chongqing Iron & Steel Company Limited 153

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Right-of-use assets

January to June 2021

==> picture [414 x 34] intentionally omitted <==

----- Start of picture text -----

Plants and Machineries and
buildings other equipment Total
----- End of picture text -----

Cost
Opening balance	16,483	4,100,325	4,116,808
Additions	–	–	–
Closing balance	16,483	4,100,325	4,116,808
Accumulated depreciation
Opening balance	532	21,065	21,597
Provided	1,596	180,156	181,752
Closing balance	2,128	201,221	203,349
Provision for impairment
Opening and closing balance	–	–	–
Carrying amount
At the end of theperiod	14,355	3,899,104	3,913,459
At the beginning of the period	15,951	4,079,260	4,095,211

154

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Right-of-use assets (Continued)

==> picture [414 x 55] intentionally omitted <==

----- Start of picture text -----

2020
Plants and Machineries and
buildings other equipment Total
----- End of picture text -----

Cost
Opening balance	–	–	–
Currentyear additions	16,483	4,100,325	4,116,808
Closing balance	16,483	4,100,325	4,116,808
Accumulated depreciation
Opening balance	–	–	–
Provided	532	21,065	21,597
Closing balance	532	21,065	21,597
Provision for impairment
Opening and closing balance	–	–	–
Carrying amount
At the end of theyear	15,951	4,079,260	4,095,211
At the beginning of the year	–	–	–

In 2020, the Group signed a long-term lease agreement and a lease agreement with purchase rights. The Group treated this as lease modifications, and recognised the right-of-use assets on the date of the lease agreement and the approval date of the lease agreement by the shareholders meeting (whichever is later).

155

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14. Intangible assets

January to June 2021

==> picture [414 x 48] intentionally omitted <==

----- Start of picture text -----

Patent and
Land non-patent Software
use rights technology use right Total
----- End of picture text -----

Cost
Opening balance	2,921,830	16,500	–	2,938,330
Business combinations
not involving entities
under common control	12,844	–	–	12,844
Purchase	34,699	–	–	34,699
Closing balance	2,969,373	16,500	–	2,985,873
Accumulated amortization
Opening balance	541,725	2,012	–	543,737
Provided	31,955	2,414	–	34,369
Closing balance	573,680	4,426	–	578,106
Provision for impairment
Opening and closing
balance	–	–	–	–
Carrying amount
At end of the period	2,395,693	12,074	–	2,407,767
At beginning of the period	2,380,105	14,488	–	2,394,593

156

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Intangible assets (Continued)

2020

==> picture [414 x 48] intentionally omitted <==

----- Start of picture text -----

Patent and
Land non-patent Software
use rights technology use right Total
----- End of picture text -----

Cost
Opening balance	2,871,067	–	–	2,871,067
Business combinations
not involving entities
under common control	50,763	16,500	–	67,263
Closing balance	2,921,830	16,500	–	2,938,330
Accumulated amortization
Opening balance	478,953	–	–	478,953
Provided	62,772	2,012	–	64,784
Closing balance	541,725	2,012	–	543,737
Provision for impairment
Opening and closing
balance	–	–	–	–
Carrying amount
At end of the year	2,380,105	14,488	–	2,394,593
At beginning of the year	2,392,114	–	–	2,392,114

As at 30 June 2021, there was no land use right for which the Group had not obtained title certificates (31 December 2020: Nil). For details of intangible assets with ownership restricted as at the end of the period, please refer to Note V.54.

157

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

15. Deferred tax assets/liabilities

Details of deferred tax assets and deferred tax assets and liabilities without offset are as follows:

	30 June 2021 Deductible temporary differences Deferred tax assets	30 June 2021 Deductible temporary differences Deferred tax assets	31 December 2020 Deductible temporary differences Deferred tax assets	31 December 2020 Deductible temporary differences Deferred tax assets
Deferred tax assets
Deductible losses	290,473	43,571	290,473	43,571
Provision for assets
impairment	342,267	51,340	312,867	46,930
Post-employment and
termination benefits	201,442	30,216	232,657	34,899
Deferred income	37,717	5,658	35,902	5,385
ECLs	4,556	683	4,556	683
	876,455	131,468	876,455	131,468
	30 June 2021 Taxable temporary differences Deferred tax liabilities		31 December 2020 Taxable temporary differences Deferred tax liabilities
Deferred tax liabilities
Fair value adjustments
arising from business
combinations not
involving entities under
common control	7,053	1,058	7,840	1,176
	7,053	1,058	7,840	1,176

158 2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

15. Deferred tax assets (Continued)

Particulars of deferred tax assets unrecognized are presented as follows:

	30 June 2021	31 December 2020
Deductible losses	814,481	3,414,427
Deductible temporarydifferences	710,828	673,480
	1,525,309	4,087,907

Deferred tax assets have not been recognized in respect of these losses and deductible temporary differences as it is not considered probable that future taxable profits will be available against which the above items can be utilized.

The aforesaid unrecognized deductible losses will be due in the following years:

	30 June 2021	31 December 2020
2021	813,183	3,413,129
2022	1,298	1,298
	814,481	3,414,427

159

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

16. Goodwill

January to June 2021

Goodwill	Opening balance	Increase Acquisition of a subsidiary	Decrease Disposal of a subsidiary	Closing balance
Chongqing Iron & Steel Energy	295,407	–	–	295,407
XingangChanglong	–	58,500	–	58,500
Less: Provision for impairments (a)
Chongqing Iron & Steel Energy	–	–	–	–
XingangChanglong	–	–	–	–
Total	295,407	58,500	–	353,907
2020
	Opening balance	Increase Acquisition of a subsidiary	Decrease Disposal of a subsidiary	Closing balance
Goodwill
ChongqingIron & Steel Energy	–	295,407	–	295,407
Less: Provision for impairments
ChongqingIron & Steel Energy	–	–	–	–
Total	–	295,407	–	295,407

160

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

16. Goodwill (Continued)

The Group acquired 72% equity interest in Xingang Changlong in January 2021, and goodwill of RMB58,500,000 thus arose. Refer to Note VI.1 for the calculation of goodwill.

(a) Impairment

The goodwill allocated to the asset group of the Group is summarised as follows according to the operating segment:

	30 June 2021	31 December 2020
Electric power processing group	295,407	295,407
Transportation loadingand unloading group	58,500	–
Total	353,907	295,407

The goodwill of the electric power processing group is formed when purchasing Chongqing Iron & Steel Energy. The original book value was RMB295,407,000 on 30 June 2021. The goodwill of the transportation loading and unloading group is formed when purchasing Xingang Changlong. The original book value was RMB58,500,000 on 30 June 2021. The recoverable amount is determined by the present value of the estimated future cash flow and the cash flow forecast based on the five-year financial budget approved by the management. The cash flow over the five-year period is calculated using the estimated growth rate described below.

The main assumptions for using the discounted future cash flow method:

	30 June 2021
Sales growth rate during the forecast period	0%
Sustainable growth rate	0%
Discount rate	14%

The management determined the budgeted gross profit margin and weighted average growth rate based on historical experience and forecasts of market development, and applied a pre-tax interest rate that can reflect the specific risks of the relevant asset group as the discount rate. The above assumptions are used to analyze the recoverable amount of the electric power processing asset group and transportation loading and unloading group.

161

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

17. Long-term prepaid expenses

January to June 2021

==> picture [414 x 161] intentionally omitted <==

----- Start of picture text -----

Opening Closing
balance Increase Amortization Other decrease balance
–
Leasehold improvement 299,730 99,036 (19,814) 378,952
2020
Opening Other Closing
balance Increase Amortization decrease balance
– –
Leasehold improvement 313,711 (13,981) 299,730
----- End of picture text -----

18. Other non-current assets

	30 June 2021	31 December 2020
Prepaid for construction	96,120	87,173
Leasingrisk fund	34,919	37,919
	131,039	125,092

162

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

19. Short-term borrowings

==> picture [413 x 35] intentionally omitted <==

----- Start of picture text -----

30 June 31 December
2021 2020
----- End of picture text -----

Guarantee and mortgage loan	900,595	200,211
Credit loan	1,078,741	500,577
Pledged loan	–	–
	1,979,336	700,788

As at 30 June 2021, the Group mortgaged land use rights with a net book value of RMB786,254,000 and buildings with a net book value of RMB885,915,000 to obtain mortgage loans of RMB900,000,000 from the bank. As at 31 December 2020, the Group mortgaged land use rights with a net book value of RMB185,625,000 and buildings with a net book value of RMB135,255,000 to obtain mortgage loans of RMB200,000,000 from the bank.

As at 30 June 2020, the annual interest rate for the above borrowings was 3.4%-3.83% (31 December 2020: 3.80%-5.22%).

As at 30 June 2021, none of the short-term borrowings were overdue (31 December 2020: Nil).

20. Notes payable

	30 June 2021	31 December 2020
Bank acceptance notes	1,880,137	1,272,291

As at 30 June 2021 and 31 December 2020, the age of notes payable of the Group was all within 6 months and none of the notes payable overdue. As at 30 June 2021, the Group’s notes payable was issued with a pledge of notes receivable of RMB172,465,000 (2020: RMB1,343,223,000, a pledge of notes receivable).

163

Chongqing Iron & Steel Company Limited

Section X Financial Report

Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

21. Trade payables

Trade payable bear no interest and normally would liquidate within one month.

==> picture [413 x 35] intentionally omitted <==

----- Start of picture text -----

30 June 31 December
2021 2020
----- End of picture text -----

Within 1 year	3,854,614	2,642,743
1–2 years	18,955	6,107
2–3 years	100	100
Over 3years	10,463	3,778
	3,884,132	2,652,728

As at 30 June 2021, accounts payable aged over 1 year amounted to RMB29,518,000 (31 December 2020: RMB9,985,000), mainly due to payment for goods, and these amounts are still in the process of settlement.

22. Contract liabilities

	30 June 2021	31 December 2020
Contract for goods	3,322,929	2,554,165

As at 30 June 2021, VAT of advances of BMB431,981,000 were disclosed as other current liabilities (31 December 2020: RMB332,041,000)

164 2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

23. Employee benefits payable

January to June 2021

==> picture [413 x 35] intentionally omitted <==

----- Start of picture text -----

Opening Closing
balance Increase Decrease balance
----- End of picture text -----

Short-term employee benefits	230,842	578,822	766,990	42,674
Post-employment benefits – defined
contribution plans	27	61,073	60,737	363
Termination benefits and defined
benefitplans	53,100	478	478	53,100
	283,969	640,373	828,205	96,137

2020

==> picture [413 x 35] intentionally omitted <==

----- Start of picture text -----

Opening Closing
balance Increase Decrease balance
----- End of picture text -----

Short-term employee benefits	206,046	1,086,622	1,061,826	230,842
Post-employment benefits – defined
contribution plans	27	93,949	93,949	27
Termination benefits and defined
benefitplans	51,070	53,330	51,300	53,100
	257,143	1,233,901	1,207,075	283,969

165

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

23. Employee benefits payable (Continued)

Details of short-term employee benefits:

January to June 2021 Salaries, bonuses, allowances and	Opening balance	Increase	Decrease	Closing balance
subsidies	23,127	437,380	456,781	3,726
Staff welfare	–	13,728	13,387	341
Social security contributions	–	41,597	41,411	186
Including: Medical insurance	–	35,967	35,809	158
Work injury insurance	–	5,630	5,602	28
Maternity insurance
premium	–	–	–	–
Housing fund	44,124	43,763	361
Labor union funds and employee
education funds	41,485	10,569	13,994	38,060
Incentive fund(Note)	166,230	31,424	197,654	–
	230,842	578,822	766,990	42,674
2020	Opening balance	Increase	Decrease	Closing balance
Salaries, bonuses, allowances and
subsidies	–	719,735	696,608	23,127
Staff welfare	–	18,239	18,239	–
Social security contributions	–	72,682	72,682	–
Including: Medical insurance	–	63,921	63,921	–
Work injury insurance	–	8,761	8,761	–
Maternity insurance
premium	–	–	–	–
Housing fund	–	78,815	78,815	–
Labor union funds and employee
education funds	25,701	30,921	15,137	41,485
Incentive fund(Note)	180,345	166,230	180,345	166,230
	206,046	1,086,622	1,061,826	230,842

Note: On 15 May 2018, the 2017 Annual General Meeting passed “the Employee Share Ownership Plan from 2018 to 2020 (draft) of Chongqing Iron and Steel Company Limited” and authorized the board of directors to deal with relevant matters regarding employee share ownership plan. In the current period, the Company has accrued the incentive fund for 2020 with an amount of RMB31,424,000 and has transferred incentive fund for 2020 with an amount of RMB197,654,000 to the special fund account of the incentive fund. The special fund account is fully isolated from the Company’s own funds and does not belong to the Company’s disposable funds.

166 2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Employee benefits payable (Continued)

Details of defined contribution plans:

January to June 2021 Basic pension insurance	Opening balance 27	Increase 59,276	Decrease 58,955	Closing balance 348
Unemployment insurance	–	1,797	1,782	15
	27	61,073	60,737	363
2020	Opening balance	Increase	Decrease	Closing balance
Basic pension insurance	27	91,230	91,230	27
Unemployment insurance	–	2,719	2,719	–
	27	93,949	93,949	27

According to “the Labor Law of the People’s Republic of China” and relevant laws and regulations, the Company and its subsidiaries paid basic pension insurance for employees. And the local government authorities were responsible for the entire pension obligations payable to retired employees who reached retirement age pursuant to relevant regulations or quitted the work force due to other reasons.

167

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

24. Taxes payable

==> picture [413 x 35] intentionally omitted <==

----- Start of picture text -----

30 June 31 December
2021 2020
----- End of picture text -----

Value-added tax (VAT)	4,037	1,189
Environmental protection tax	10,590	6,823
Stamp duty	7,940	–
Individual income tax	147	737
Corporate income tax	–	–
Others	188	428
	22,902	9,177

25. Other payables

	30 June 2021	31 December 2020
Other payables	1,062,032	1,567,618
	30 June 2021	31 December 2020
Reserve funds for the reorganization	145,798	146,371
Guarantee deposits	148,154	125,989
Rural network loan repayment	138,276	114,581
Project payment payable	264,072	1,079,523
carbon emission	172,053	37,689
Large and medium-sized reservoir resettlement
support fund	44,632	36,664
Others	149,047	26,801
	1,062,032	1,567,618

168 2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Non-current liabilities due within one year

==> picture [413 x 35] intentionally omitted <==

----- Start of picture text -----

30 June 31 December
2021 2020
----- End of picture text -----

Long-term borrowings due within 1 year (Note V.27)	119,121	166,271
Bonds payable due within 1 year (Note V.28)	13,785	38,411
Other non-current liabilities due within 1 year
(Note V.33)	562,534	2,255,572
Including: loan of judicial reorganization	–	2,255,002
financial loan	562,534	570
Long-term payables due within 1 year (Note V.30)	768,234	521,205
Lease liabilities due within 1year(Note V.29)	1,088,571	1,075,012
	2,552,245	4,056,471

Long-term borrowings

==> picture [413 x 35] intentionally omitted <==

----- Start of picture text -----

30 June 31 December
2021 2020
----- End of picture text -----

Pledge loan	490,570	500,646
Mortgage and guaranteed loan	63,551	115,625
Less: Long-term borrowings due within 1 year
(Note V.26)	119,121	166,271
Closing balance	435,000	450,000

As at 30 June 2021, the annual interest rate of the above long-term borrowings was 4.65% (31 December 2020: 4.650%-5.635%).

As at 30 June 2021, none of the long-term borrowings overdue (31 December 2020: Nil).

As at 30 June 2021, the Group pledged 100% equity interest in Chongqing Iron & Steel Energy to obtain pledged loans of RMB500,000,000 from the bank. Up to 30 June 2021, the balance of the loan was RMB490,570,000; Chongqing Iron & Steel provided a full third party joint liability guarantee for the Group to obtain guarantees and mortgage loans from the bank. Up to 30 June 2021, the balance of the loan was RMB63,551,000 (As at 31 December 2020, the Group pledged 100% equity interest in Chongqing Iron & Steel Energy to obtain pledged loans of RMB500,000,000 from the bank; Chongqing Qianxin Group Co., Ltd. (“Qianxin Group”) provided a full third party joint liability guarantee for the Group to obtain guarantees and mortgage loans from the bank. Up to 31 December 2020, the balance of the loan was RMB115,625,000).

169

Chongqing Iron & Steel Company Limited

Section X Financial Report

Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

27. Long-term borrowings (Continued)

Analysis on due date of long-term borrowings is as follows:

==> picture [413 x 35] intentionally omitted <==

----- Start of picture text -----

30 June 31 December
2021 2020
----- End of picture text -----

Spot or within 1 year	119,121	166,271
1–2 years	80,000	75,000
2–5years	355,000	375,000
	554,121	616,271

28. Bonds payable

	30 June 2021	31 December 2020
Medium-term notes	1,010,338	1,033,561
Less: Bondspayable due within 1year(Note V.26)	13,785	38,411
Closing balance	996,553	995,150

170

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021 V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

28. Bonds payable (Continued)

As at 30 June 2021, the balance of bonds payable is listed as follows:

Name Medium-term notes	Face value	Issuance date	Maturity	Issuance amount	Opening balance	Issued	Interest accrued	Less: interest paid in this year	Less: due within 1 year	Closing balance
(20Chongqing Iron & Steel
MTN001A)	0.1	2020/3/19	3 years	500,000	498,131	–	30,600	(23,200)	(6,547)	498,984
Medium-term notes
(20Chongqing Iron & Steel
MTN001B)	0.1	2020/3/19	3 years	500,000	497,019	–	33,438	(25,650)	(7,238)	497,569
Total				1,000,000	995,150	–	64,038	(48,850)	(13,785)	996,553

Analysis on due date of bonds payable is as follows:

	30 June 2021	31 December 2020
Spot or within 1 year	13,785	38,411
2–3years	996,553	995,150
	1,010,338	1,033,561

According to the China Association of Banking Market Exchanges China Municipal Association Note [2020] MTN106, the Company issued the first tranche of 2020 medium-term notes on 19 March 2020, totaling RMB1 billion, with a maturity of 3 years and a coupon rate of 4.64%-5.13%.

Chongqing Iron & Steel Company Limited 171

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

29. Lease liabilities

==> picture [413 x 33] intentionally omitted <==

----- Start of picture text -----

30 June 31 December
2021 2020
----- End of picture text -----

Opening balance Increase Interest Payment	4,097,624 – 98,550 167,920	– 4,116,808 5,151 24,335
	4,028,254	4,097,624
Less: Lease liabilities due within 1year(Note V.26)	1,088,571	1,075,012
Closing amount	2,939,683	3,022,612

30. Long-term payables

==> picture [414 x 202] intentionally omitted <==

----- Start of picture text -----

30 June 31 December
2021 2020
Long-term payables 3,384,180 1,873,469
Less: Long-term payables due within 1 year (Note V.26) 768,234 521,205
Closing balance 2,615,946 1,352,264
Long-term payables
30 June 31 December
2021 2020
Leaseback 2,615,946 1,352,264
----- End of picture text -----

172

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

30. Long-term payables (Continued)

Long-term payables (Continued)

As at 30 June 2021, the annual interest rate of the above long-term payables was 4.00%-5.46% (31 December 2020: 4.00%-5.46%).

As at 30 June 2021, none of the long-term payables overdue (31 December 2020: Nil).

As at 30 June 2021, the Group and the leasing company carried out the leaseback business and financed RMB3,384,180,000 in total. The Group used machinery and equipment with a book value of RMB4,119,855,000 as the subject matter. The lease period is 3–5 years. Up to 31 December 2020, the balance of leaseback payables was RMB1,873,469,000.

Analysis on due date of long-term payables as follows:

==> picture [413 x 34] intentionally omitted <==

----- Start of picture text -----

30 June 31 December
2021 2020
----- End of picture text -----

Spot or within 1 year	768,234	521,205
1–2 years	590,946	518,315
2–5years	2,025,000	833,949
Total	3,384,180	1,873,469

31. Long-term employee benefits payable

	30 June 2021	31 December 2020
Long-term termination benefits	107,948	137,077
Net liabilities of the defined benefitplan	42,310	42,480
Total	150,258	179,557

173

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

31. Long-term employee benefits payable (Continued)

Long-term termination benefits

Termination benefits scheme was implemented by the Group due to the implementation of the human resource optimization policy, which allowed qualified employees to early retire on a voluntary basis. The Group undertakes obligation to pay the early retirement employees’ living expenses, social insurance and housing fund during the early retirement period until the employees meet official retirement age (male: 60, female: 50 or 55). The amounts of contributions to social insurance and housing fund are determined on the basis of the contributions, and the proportion of contributions payable by the Group in accordance with local social security requirement.

As at the balance sheet date, key actuarial assumptions used are as follows:

==> picture [412 x 21] intentionally omitted <==

----- Start of picture text -----

30 June 2021 31 December 2020
----- End of picture text -----

Discount rate	2.75%	2.75%
Retirement age
Male	60	60
Female	50/55	50/55
Wealth increase rate	4.00-8.00%	4.00-8.00%

The Group adjusted the payment responsibility based on average mortality of Chinese residents from “China Life Insurance Mortality Table (2010 to 2013)”. The adjusted payment responsibility was discounted by the treasure bond rate of 30 June 2021 and accounted in profit or loss. As at 30 June 2021, the current portion of the payment responsibility was accounted for in short-term employee benefits.

Net liabilities of the defined benefit plan

The Group started to operate a defined benefit plan that has yet to receive capital injection for all eligible employees since 2018. Under the plan, an employee is entitled to retirement benefits comprising RMB38 and working age salary, apart from the basic pension insurance. The scheme is subject to interest rate risks, turnover rate and the risk of change in the life expectancy of the pension beneficiary.

174

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

31. Long-term employee benefits payable (Continued)

The following table sets forth the principal actuarial assumptions used as at the balance sheet date:

	30 June 2021	31 December 2020
Discount rate	3.75%	3.75%
Turnover rate	1.50%	1.50%

32. Deferred income

Government grants	Opening balance	Increase	Decrease	Closing balance
January to June 2021	35,902	3,000	1,185	37,717
2020	38,271	–	2,369	35,902

175

Chongqing Iron & Steel Company Limited

Section X Financial Report

Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

32. Deferred income (Continued)

As at 30 June 2021, details of government grants are as follows:

==> picture [413 x 60] intentionally omitted <==

----- Start of picture text -----

Recognition
during the Related
Opening period as Closing to assets/
balance Increase other income balance income
----- End of picture text -----

Grants for construction
of environmental
protection equipment					Related to
and facilities	5,714	–	(60)	5,654	assets
Grants for recycle heat					Related to
power station	30,188	–	(1,125)	29,063	assets
Intelligent roller grinding					Related to
workspace	–	3,000	–	3,000	assets
	35,902	3,000	(1,185)	37,717

As at 31 December 2020, details of government grants are as follows:

	Opening balance	Increase	Recognition during the period as other income	Closing balance	Related to assets/income
Grants for construction	5,833	–	(119)	5,714	Related to
of environmental					assets
protection equipment
and facilities
Grants for recycle heat	32,438	–	(2,250)	30,188	Related to
power station					assets
	38,271	–	(2,369)	35,902

For details of government grants credited to the current profit or loss or offset against the related cost in the current period, please refer to explanation of government grants in Note V. 46 Other income to these financial statements.

176 2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

33. Other non-current liabilities

	30 June 2021	31 December 2020
Other non-current liabilities	562,534	2,701,052
Less: O ther non-current liabilities due within 1 year
(Note V.26)	562,534	2,255,572
Closing balance	–	445,480
	30 June 2021	31 December 2020
Borrowings from non-financial institutions
－loan of judicial reorganization	–	–
－financial loan	–	445,480
	–	445,480

According to the reorganization plan, Changshou Iron & Steel provided loan of RMB2.4 billion to the Company for the execution of the reorganization plan. The loan term is 7 years, which is from 24 November 2017 to 23 November 2024, and bears interest at the rate of 4.90% per annum. The Company decided in December 2020 to repay the loan in full in advance, and the repayment was completed on 8 January, 2021.

Changshou Iron & Steel provided financing facilities of RMB1 billion to the Company for 3 years, from 1 July 2020 to 30 June 2023, with interest rate of 4.25% per annum. As at 30 June 2021, the Company had utilized financing facilities of RMB561,880,000, and decided to repay the loan in full in advance, which was presented as other non-current liabilities due within one year. The repayment was completed on 13 August 2021.

177

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

33. Other non-current liabilities (Continued)

Analysis on due date of other non-current liabilities is as follows:

==> picture [413 x 35] intentionally omitted <==

----- Start of picture text -----

30 June 31 December
2021 2020
----- End of picture text -----

Spot or within 1 year	562,534	2,255,572
1-2 years	–	–
2-5years	–	445,480
	562,534	2,701,052

34. Share capital

January to June 2021 Restricted shares	Opening balance 36,662	Increase/(decrease) during the current period New shares issued Bonus shares Reserve transferred to shares Others Sub-total – – – – –	Increase/(decrease) during the current period New shares issued Bonus shares Reserve transferred to shares Others Sub-total – – – – –	Increase/(decrease) during the current period New shares issued Bonus shares Reserve transferred to shares Others Sub-total – – – – –	Increase/(decrease) during the current period New shares issued Bonus shares Reserve transferred to shares Others Sub-total – – – – –	Increase/(decrease) during the current period New shares issued Bonus shares Reserve transferred to shares Others Sub-total – – – – –	Closing balance 36,662
A shares	36,662	–	–	–	–	–	36,662
Non-restricted shares	8,881,940	–	–	–	–	–	8,881,940
A shares	8,343,813	–	–	–	–	–	8,343,813
H shares	538,127	–	–	–	–	–	538,127
	8,918,602	–	–	–	–	–	8,918,602

178

2021 Interim Report

Section X Financial Report

Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Share capital (Continued)

2020 Restricted shares	Opening balance 31,500	New shares issued –	Increase/(decrease) during the current year Bonus shares Reserve transferred to shares Others Sub-total – – 5,162 5,162	Increase/(decrease) during the current year Bonus shares Reserve transferred to shares Others Sub-total – – 5,162 5,162	Increase/(decrease) during the current year Bonus shares Reserve transferred to shares Others Sub-total – – 5,162 5,162	Increase/(decrease) during the current year Bonus shares Reserve transferred to shares Others Sub-total – – 5,162 5,162	Closing balance 36,662
A shares	31,500	–	–	–	5,162	5,162	36,662
Non-restricted shares	8,887,102	–	–	–	(5,162)	(5,162)	8,881,940
A shares	8,348,975	–	–	–	(5,162)	(5,162)	8,343,813
H shares	538,127	–	–	–	–	–	538,127
	8,918,602	–	–	–	–	–	8,918,602

On 11 January 2018, Changshou Iron & Steel pledged 2,096,981,600 non-restricted shares of the Company to China Development Bank. The pledge period started from 11 January 2018, to the pledge registration is released through China Securities Depository and Cleaning Co., Ltd. (中國證券登記結算有限責任公司). The purpose of this pledge was to provide guarantee for Changshou Iron & Steel to borrow RMB2.4 billion from China Development Bank. The loan term is 7 years, which is from 30 November 2017 to 29 November 2024. In January 2021, Changshou Iron & Steel repaid the loan in advance and completed the procedures of release of share pledge with China Securities Depository and Clearing Corporation Limited. The Notice on Registration of the Release of Pledged Securities (《證券質押登記解除通知書》) from China Securities Depository and Clearing Corporation Limited was received on 30 March 2021 and the registration of the pledge of 2,096,981,600 unrestricted tradable shares which originally pledged to China Development Bank by Changshou Iron & Steel was discharged.

The Company considered and approved the Resolution on Repurchase of the Shares of the Company through Centralized Bidding Trading at the 18th meeting of the eighth session of the board of directors of the Company. The Company repurchased a total of 50,000,000 A shares, representing approximately 0.56% of its total share capital. In June 2020, 44,838,000 shares were transferred to the Company’s third-phase employee stock ownership plan related special securities accounts by non-trading transfer. The remaining repurchased shares are all deposited in the company’s special repurchase securities account. Up to 31 December 2021, the number of A shares repurchased was 36,662,000 shares. If the Company fails to use all shares repurchased within 36 months after the completion of the repurchase of shares, the outstanding shares repurchased will be cancelled.

179

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

35. Capital reserve

January to June 2021 Share premium	Opening balance 18,454,409	Increase –	Decrease –	Closing balance 18,454,409
Other capital reserves	827,738	–	–	827,738
	19,282,147	–	–	19,282,147
2020	Opening balance	Increase	Decrease	Closing balance
Share premium	18,454,409	–	–	18,454,409
Other capital reserves	827,738	–	–	827,738
	19,282,147	–	–	19,282,147

36. Treasury shares

	Opening balance	Increase	Decrease	Closing balance
Treasury shares	65,940	–	–	65,940
Special reserves
Safety production funds Opening balance		Increase Decrease		Closing balance
For the six months ended
30 June 2021	22,184	15,202	7,703	29,683
2020	14,573	29,564	21,953	22,184

37. Special reserves

Special reserves was the safety fund accrued according to article of “The Regulation on the Accrual and Usage of Enterprise’s Safety Production Fee” (Cai Qi [2012] No.16) promulgated by the MOF and the State Administration of Work Safety (國家安全生產監管總局) on February 14, 2012.

180 2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

38. Surplus reserves

For the six months ended 30 June 2021 and 2020

==> picture [412 x 58] intentionally omitted <==

----- Start of picture text -----

|||||
|---|---|---|---|
|Opening|Closing|
|balance|Increase|Decrease|balance|
|–|–|
|Statutory surplus reserves|606,991|606,991|

----- End of picture text -----

In accordance with Articles of Association of the Company, the net profits should be used first to make up for the previous year’s losses. The Company should appropriate 10% of the net profit which had been offset for the previous year’s losses to the statutory surplus reserves, where the appropriation can be ceased when the statutory surplus reserves reaches 50% of the registered capital.

39. Unappropriated profits

==> picture [413 x 34] intentionally omitted <==

----- Start of picture text -----

30 June 31 December
2021 2020
----- End of picture text -----

==> picture [413 x 80] intentionally omitted <==

----- Start of picture text -----

||||
|---|---|---|
|Opening balance|(8,725,517)|(9,363,996)|
|Add: Net profit attributable to the shareholders of the|
|parent company|2,697,041|638,479|
|Closing balance|(6,028,476)|(8,725,517)|

----- End of picture text -----

40. Revenue and cost

==> picture [413 x 142] intentionally omitted <==

----- Start of picture text -----

||||||
|---|---|---|---|---|
|For the six months ended|For the six months ended|
|30 June 2021|30 June 2020|
|Revenue|Cost|Revenue|Cost|
|Revenue from principal|
|operations|22,410,284|18,896,675|10,875,755|10,316,945|
|Revenue from other|
|operations|259,655|288,382|51,612|26,048|
|22,669,939|19,185,057|10,927,367|10,342,993|

----- End of picture text -----

181

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

40. Revenue and cost of sales (Continued)

Details of revenue as follows:

==> picture [414 x 48] intentionally omitted <==

----- Start of picture text -----

For the six For the six
months ended months ended
30 June 2021 30 June 2020
----- End of picture text -----

Revenue from contracts with customers	22,669,824	10,927,319
Rentals	115	48
	22,669,939	10,927,367
Details of disaggregation of revenue from contracts with	customers as follows:
For the six months ended 30 June 2021

==> picture [413 x 35] intentionally omitted <==

----- Start of picture text -----

Sale of steel
Main Product products Others Total
----- End of picture text -----

Hot rolling	11,050,037	–	11,050,037
Wide and thick plate	5,112,310	–	5,112,310
Medium plate	1,000,390	–	1,000,390
Bars	134	–	134
Commodity billet	4,493,015	–	4,493,015
Others	–	1,013,938	1,013,938
	21,655,886	1,013,938	22,669,824

182

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

40. Revenue and cost of sales (Continued)

For the six months ended 30 June 2020

==> picture [413 x 35] intentionally omitted <==

----- Start of picture text -----

Sale of steel
Type of Main Product products Others Total
----- End of picture text -----

Hot rolling	5,313,138	–	5,313,138
Plate	3,456,117	–	3,456,117
Bars	958,786	–	958,786
Wire rods	773,514	–	773,514
Others	–	425,764	425,764
	10,501,555	425,764	10,927,319

All the Group’s revenue was recognized at a certain point.

The details of revenue recognized in the opening carrying amount of contract obligation for the period:

	For the six months ended 30 June 2021	For the six months ended 30 June 2020
Contract for goods	2,554,165	1,145,615

183

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

41. Taxes and surcharges

==> picture [413 x 48] intentionally omitted <==

----- Start of picture text -----

For the six For the six
months ended months ended
30 June 2021 30 June 2020
----- End of picture text -----

Environmental protection tax	21,863	20,952
Land use right tax	21,288	16,744
Housing property tax	16,875	12,000
Stamp duty	14,757	6,781
City maintenance and construction tax	1,831	18,732
Education surcharge	785	8,028
Local education surcharge	523	5,352
Others	10	6
	77,932	88,595

42. Distribution and selling expenses

==> picture [413 x 48] intentionally omitted <==

----- Start of picture text -----

For the six For the six
months ended months ended
30 June 2021 30 June 2020
----- End of picture text -----

Transportation expenses	20,089	39,969
Labor costs	18,563	9,175
Incentive fund	–	431
Depreciation expenses	195	191
Others	4,152	3,589
	42,999	53,355

184

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
General and administrative expenses

==> picture [413 x 48] intentionally omitted <==

----- Start of picture text -----

For the six For the six
months ended months ended
30 June 2021 30 June 2020
----- End of picture text -----

Labor costs	69,428	86,086
Incentive funds	–	2,586
Depreciation and amortization	50,781	60,187
Loss on suspension of production	65,658	34,381
Consulting fee	9,335	10,861
Safety expense	7,236	9,623
Environmental protection cost	11,211	6,128
Repair cost	2,899	10,103
Others	29,161	24,138
	245,709	244,093

Research and development expenses

	For the six months ended 30 June 2021	For the six months ended 30 June 2020
Power expenses	22,034	–
Employee benefits	47,400	–
Depreciation and amortization	6,157	–
	75,591	–

185

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

45. Finance Expenses

	For the six months ended 30 June 2021	For the six months ended 30 June 2020
Interest expense	249,514	110,693
Less: Interest income	47,270	23,202
Exchange loss/(gain)	(6,514)	(575)
Others	11,867	3,232
	207,597	90,148

46. Other income

	For the six months ended 30 June 2021	For the six months ended 30 June 2020
Government grants related to daily operating activities	28,149	6,515

Government grants related to daily operating activities are as follows:

==> picture [413 x 47] intentionally omitted <==

----- Start of picture text -----

For the six For the six
months ended months ended Relate to assets/
30 June 2021 30 June 2020 income
----- End of picture text -----

Grants for recycle heat power project	1,125	1,125 Relate to assets
Others	60	60 Relate to assets
Position stability subsidies	–	3,257 Relate to income
Hong Kong construction subsidies	–	1,329 Relate to income
Subsidies for product R & D	669	150 Relate to income
Tax refund	24,223	– Relate to income
Industrial internet subsidy start-up fund	1,500	– Relate to income
Others	572	594 Relate to income
	28,149	6,515

186

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

47. Investment Income

	For the six months ended 30 June 2021	For the six months ended 30 June 2020
Long-term equity investment income under the equity
method	310	–
Investment income from financial assets held for
trading	–	6,791
	310	6,791

48. Non-operating income

		For the six months ended 30 June 2021	For the six months ended 30 June 2020	Amount included in non-recurring profit or loss
	Others	966	684	966
		966	684	966

49. Non-operating expenses

	For the six months ended 30 June 2021	For the six months ended 30 June 2020	Amount included in non-recurring profit or loss
Carbon emission fees	167,270	–	167,270
Expenses from disposal of non-current assets	–	197	–
Expenses from fines	30	510	30
Donation expenses	142	–	142
Others	114	40	114
	167,556	747	167,556

187

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

50. Income tax expenses

	For the six months ended 30 June 2021	For the six months ended 30 June 2020
Current income tax	–	71
Deferred tax	(118)	–
	(118)	71

Income tax expense reconciliation from profit before tax:

==> picture [413 x 48] intentionally omitted <==

----- Start of picture text -----

For the six For the six
months ended months ended
30 June 2021 30 June 2020
----- End of picture text -----

Profit before tax	2,696,923	121,426
Tax rate	15%	15%
Income tax expenses calculated at the applicable tax
rate	404,538	18,214
Effect of different tax rate for subsidiary	(3,548)	(141)
Expenses not deductible for tax purposes	1,254	3,367
Adjustment of income tax in the prior year	–	–
Utilization of deductible losses and deductible
temporary differences from prior years	(407,965)	(93)
Recognized unrecognized deductible losses and
deductible temporary differences from prior years	–	–
Effect of unrecognized deductible temporary
differences	5,603	(21,276)
Income tax expenses	(118)	71

All the Group’s profit is from Mainland China.

188 2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021 V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

51. Earnings per share

Basic earnings per share is calculated by dividing the net profit for the current period attributable to the ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding. Shares are usually included in the weighted average number of shares from the date of their issuance according to the terms of contract of issuance.

The Group does not hold potential shares that are dilutive.

	For the six months ended 30 June 2021	For the six months ended 30 June 2020
Basic earnings per share
Continuing operations	0.30	0.01
	For the six months ended 30 June 2021	For the six months ended 30 June 2020
Earnings
Profit attributable to ordinary shareholders of the
Company
Continuing operations (RMB)	2,697,041,000	121,355,000
Number of shares
Weighted average number of ordinary shares
outstanding (Note)	8,881,940,267	8,862,102,267

Note: During the current period, the Company had not incurred any changes that may result in changes in the number of ordinary shares or potential ordinary shares outstanding. The weighted average number of ordinary shares outstanding during the period was 8,881,940,267 shares, which was used by the Company to calculate the current earnings per share.

No change occurred in the period from the balance sheet date to the date of approval of the financial statements, resulting in changes in the number of ordinary shares or potential ordinary shares outstanding on the balance sheet date.

Chongqing Iron & Steel Company Limited 189

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

52. Notes to items of the consolidated cash flow statement

Other cash received relating to operating activities

	For the six months ended 30 June 2021	For the six months ended 30 June 2020
Interest income	47,270	22,882
Guarantees and deposit	17,799	8,313
Others	8,609	157,785
	73,678	188,980

Other cash paid relating to operating activities

	For the six months ended 30 June 2021	For the six months ended 30 June 2020
General and administrative expenses	65,708	98,310
Distribution and selling expenses	28,566	43,557
Others	25,227	126,587
	119,501	268,454

190

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

52. Notes to items of the consolidated cash flow statement (Continued)

Other cash received relating to financing activities

	For the six months ended 30 June 2021	For the six months ended 30 June 2020
Receipt of non-trading transfer payment for
treasuryshares	65,992	–
	65,992	–
Other cash paid relating to financing activities
	For the six months ended 30 June 2021	For the six months ended 30 June 2020
Repurchase of shares	–	–
Repayment of operating ordinary obligations from
the reorganization	574	2,045
Payment of leaseback	198,798	–
Others	80,010	7,500
	279,382	9,545

191

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Supplementary information to the consolidated cash flow statement

(1) Supplement information to the consolidated cash flow statement

Reconciliation from net profit to cash flows from operating activities:

==> picture [386 x 48] intentionally omitted <==

----- Start of picture text -----

For the six For the six
months ended months ended
30 June 2021 30 June 2020
----- End of picture text -----

Net profit	2,697,041	121,355
Add: Impairment losses of assets	–	–
De preciation of property plant and
equipment	568,842	333,238
Amortization of intangible assets	34,369	31,106
Amortization of deferred income	(1,185)	(1,185)
Losses on retirement of PPE	–	197
Financial expenses	249,514	100,819
Investment income	(310)	(6,791)
increase in inventories	(1,686,961)	952,194
Increase in operating receivables	(1,128,862)	(1,460,443)
Increase/(decrease) in operating payables	806,441	5,644
Others	7,499	6,452
Net cash flow from operating activities	1,546,388	82,586
Net changes in cash and cash equivalents:
Cash at the end of the period	4,743,627	2,968,572
Less: cash at the beginningof theperiod	4,698,090	1,595,323
Net increase/(decrease) in cash and cash
equivalents	45,537	1,373,249

192

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V. NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Supplementary information to the consolidated cash flow statement (Continued)
- (2) Cash and cash equivalents

==> picture [385 x 51] intentionally omitted <==

----- Start of picture text -----

For the six For the six
months ended months ended
30 June 2021 30 June 2020
----- End of picture text -----

Cash	4,743,627	2,968,572
Wherein: Cash on hand	–	2
Bank deposit available on demand
forpayment	4,743,627	2,968,570
Ca sh and cash equivalents at the end of the
period	4,743,627	2,968,572

(3) Endorsement amount of notes receivable with no cash receipts and payments:

	For the six months ended 30 June 2021	For the six months ended 30 June 2020
Endorsement amount of notes receivable	5,149,521	1,715,029
Including: Payment for goods and labor	2,235,653	1,321,978
Payment for equipment and
construction	2,762,950	–
Payment for others	150,918	393,051

(4) Major financing activities not involving cash receipts and payments:

For the six months ended 30 June 2021	For the six months ended 30 June 2020
Bank acceptance bill collected from leaseback –	100,000

193

Chongqing Iron & Steel Company Limited

Section X Financial Report

Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Supplementary information to the consolidated cash flow statement (Continued)

(5) Information about subsidiaries and other business units acquired:

==> picture [384 x 39] intentionally omitted <==

----- Start of picture text -----

For the six For the six
months ended months ended
30 June 2021 30 June 2020
----- End of picture text -----

Prices paid to acquire subsidiaries and other
business units	114,449	–
Including: Se curity deposit paid for acquiring 72%
equity interest in Xingang Changlong	114,449	–
Cash and cash equivalents paid to acquire
subsidiaries and other business units	114,449	–
Less: Ca sh and cash equivalents held by
subsidiaries and other business units
when acquired	–	–
Net cash paid to acquire subsidiaries and other
business units	114,449	–

54. Assets with ownership or use right restricted

==> picture [413 x 30] intentionally omitted <==

----- Start of picture text -----

30 June 31 December
2021 2020
----- End of picture text -----

Cash and bank balances	524,874	245,141	Note 1
Receivables financing	172,465	1,343,223	Note 2
PPE–Plants and buildings	1,724,265	987,609	Note 3
PPE–Machinery and equipment	4,119,855	2,542,304	Note 3
Intangible assets	1,617,133	1,027,708	Note 4
	8,158,592	6,145,985

Note 1: As at 30 June 2021, the Group had cash and bank balances amounted to RMB524,874,000 (31 December 2020: RMB245,141,000) restricted for bank acceptance notes and letter of credit.

Note 2: As at 30 June 2021, the Group pledged bank acceptance notes with a book value of RMB172,465,000 for issuing bank acceptance (As at 31 December 2020, the Group pledged bank acceptance notes with a book value of RMB1,343,233,000 for issuing bank acceptance).

Note3: As at 30 June 2021, the plant and buildings with a book value of RMB1,724,265,000 (31 December 2020: RMB987,609,000) and machinery and equipment with a book value of RMB4,119,855,000 (31 December 2020: RMB2,542,304,000) were pledged to banks to secure the bank loans and working capital loan facilities granted to the Group.

Note4: As at 30 June 2021, the land use right with a book value of RMB1,617,133,000 (31 December 2020: RMB1,027,708,000) were pledged to banks to secure the bank loans and working capital loan facilities granted to the Group. The amortization of the above land use right for the current year was RMB22,054,000.

194

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

V NOTES TO MAJOR ITEMS IN THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Foreign currency monetary items

Cash and bank	Original currency	30 June 2021 Exchange rate	RMB equivalent	31 December 2020 Original currency Exchange rate RMB equivalent	31 December 2020 Original currency Exchange rate RMB equivalent	31 December 2020 Original currency Exchange rate RMB equivalent
balances
Wherein: USD	1,062	6.4601	6,863	672	6.5249	4,385
HKD	6	0.8321	5	6	0.8416	5
			6,868			4,390
Trade payables	Original currency	30 June 2021 Exchange rate	RMB equivalent	31 December 2020 Original currency Exchange rate RMB equivalent
Wherein: USD	2,818	6.4601	18,202	156,920	6.5249	1,023,887
			18,202			1,023,887

195

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

VI. CHANGES IN THE SCOPE OF CONSOLIDATION

1. Business combinations not involving entities under common control

In March 2019, the Company acquired 28% equity interest of Xingang Changlong from a non-related party for RMB28,258,000; as at January 2021, the Company had contributed RMB126,420,000 and acquired 72% equity interest of Xingang Changlong, and on 15 January 2021, Xingang Changlong completed the change of industrial and commercial registration and became a wholly-owned subsidiary of the Company.

The book value of the identifiable assets and liabilities of Xingang Changlong on the purchase date are as follows:

Unit: RMB '000

==> picture [414 x 46] intentionally omitted <==

----- Start of picture text -----

31 December
2020
Book value
----- End of picture text -----

	Assets:
	Cash and bank balances		59
	Trade receivables		10,930
	Prepayments		62
	Other receivables		4
	Property, plant and equipment		219,901
	Construction in process		793
	Intangible assets		12,844
	Total assets		244,593
	Liabilities:
	Trade payables		23,935
	Advances from customers		10
	Employee benefits payable		1,331
	Taxes payable		342
	Other payables		79,797
	Non-current liabilities due within one year		21,000
	Long-term borrowings		22,000
	Total liabilities		148,415
	Net assets		96,178
	Goodwill		58,500
			154,678

Note: The amount is RMB154,678,000 in cash paid by the Company in the business combination.

196 2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

VI. CHANGES IN THE SCOPE OF CONSOLIDATION (CONTINUED)

1. Business combinations not involving entities under common control (Continued)

The assets of Xingang Changlong that could not be separately recognised formed goodwill of RMB58,500,000.

The operating results and cash flow of Xingang Changlong from the date of purchase to the end of the period are listed as follows:

	From 15 January 2021 to 30 June 2021
Revenue	48,969
Net profit	12,379
Net cash flow	(13)

VII. INTERESTS IN OTHER ENTITIES

1. Equity in subsidiary

Composition of significant subsidiaries:

==> picture [412 x 56] intentionally omitted <==

----- Start of picture text -----

Main Shareholding ratio (%)
operating Business Registered Acquisition
Name of the subsidiary place Place of registration nature capital Direct Indirect method
RMB 0'000)
----- End of picture text -----

Chongqing Iron and Steel	Changshou Economic	Changshou Economic	Electricity	52,569.49	100	–	Business
Energy Environmental	Development	Development District,	production				combinations
Protection Co., Ltd.	District, Chongqing	Chongqing	and sales				not involving
							entities under
							common
							control
Chongqing Xingang	Changshou Economic	Changshou Economic	Transportation	110,000	100	–	Business
Changlong Logistics	Development	Development District,	and				combinations
Co., Ltd.	District, Chongqing	Chongqing	warehouse				not involving
							entities under
							common
							control

On 30 June 2021, there were no subsidiaries with material interests of non-controlling shareholders.

197

Chongqing Iron & Steel Company Limited

Section X Financial Report

Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

VII. INTERESTS IN OTHER ENTITIES (CONTINUED)

Equity in joint venture and associate

==> picture [412 x 49] intentionally omitted <==

----- Start of picture text -----

Shareholding ratio(%)
Principal place of Registered Accounting
business Domicile Business nature capital Direct Indirect policy
----- End of picture text -----

Joint venture
Chongqing	Changshou District,	Changshou District,	Software and information	5,000	50	–	Equity method
Jianwei	Chongqing	Chongqing	technology services
Associate
Baocheng	Changshou Economic	Changshou Economic	Manufacturing	33,333	10	–	Equity method
Carbon	Development Zone,	Development Zone,
	Chongqing	Chongqing
Baowu Raw	Shanghai Free Trade	Shanghai Free Trade	Trading industry	500,000	8	–	Equity method
Materials	Zone	Zone

The Company’s subscription to Chongqing Jianwei is RMB2,500,000. As at the balance sheet date, the company has not paid such contributions, and Chongqing Jianwei has not begun to operate.

The Company holds 10% equity interest in Baocheng Carbon and dispatches a director to the board of directors of Baocheng Carbon, who accordingly enjoys substantive right to participate in decision-making, and has a significant influence on Baocheng Carbon.

The Company holds 8% equity interest in Baowu Raw Materials and dispatched a director to the Baowu Raw Materials Board of Directors, who accordingly enjoys substantive right to participate in decision-making, and has a significant impact on Baowu Raw Materials.

Financial information of associate is as follows:

==> picture [412 x 34] intentionally omitted <==

----- Start of picture text -----

30 June 31 December
2021 2020
----- End of picture text -----

Associate
Book value of investment	51,236	79,494
Total amount calculated by shareholding ratio as
follows	–	–
Net profit	–	–
Other comprehensive income	–	–
Total comprehensive income	–	–

198 2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

VIII. RISKS RELATED TO FINANCIAL INSTRUMENTS

1. Classification of financial instruments

Carrying amounts of each category of financial instruments at the balance sheet date are as follows:

financial assets

30 June 2021	Financial assets at fair value through other comprehensive income	Financial assets at fair value through profit or loss	Financial assets at amortized cost	Total
Cash and bank balances	–	–	5,268,501	5,268,501
Financial assets held for trading
(acquired by standards)	–	550,000	–	550,000
Trade receivables	–	–	8,965	8,965
Receivables financing (acquired
by standards)	3,605,463	–	–	3,605,463
Other receivables	–	–	16,959	16,959
Other equity investment
(designated)	5,000	–	–	5,000
	3,610,463	550,000	5,294,425	9,454,888
31 December 2020	Financial assets at fair value through other comprehensive income	Financial assets at fair value through profit or loss	Financial assets at amortized cost	Total
Cash and bank balances	–	–	4,943,231	4,943,231
Trade receivables	–	–	35,041	35,041
Receivables financing (acquired
by standards)	2,068,546	–	–	2,068,546
Other receivables	–	–	18,013	18,013
Other equity investment
(designated)	5,000	–	–	5,000
	2,073,546	–	4,996,285	7,069,831

199

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

VIII. RISKS RELATED TO FINANCIAL INSTRUMENTS (CONTINUED)

1. Classification of financial instruments (Continued)

Financial liabilities

==> picture [413 x 66] intentionally omitted <==

----- Start of picture text -----

Financial liabilities measured
at amortized cost
30 June 31 December
2021 2020
----- End of picture text -----

Short-term borrowings	1,979,336	700,788
Notes payable	1,880,137	1,272,291
Trade payables	3,884,132	2,652,728
Other payables	1,062,032	1,567,618
Non-current liabilities due within one year	2,552,245	4,056,471
Long-term borrowings	435,000	450,000
Bonds payable	996,553	995,150
Lease liabilities	2,939,683	3,022,612
Long-term payables	2,615,946	1,352,264
Other non-current liabilities	–	445,480
	18,345,064	16,515,402

2. Transfer of financial assets

Financial assets transferred but fully derecognized and transferred but still continuing involved

As at 30 June 2021, the Group endorsed bank acceptance bills to its suppliers for settlement of trade payables and discounted bank acceptance bills to banks with a carrying amount of RMB3,565,053,000 (31 December 2020: RMB386,783,000). As of 30 June 2021, the maturity date is within 6 months. According to the relevant provisions of the “Negotiable Instruments Law”, if the accepting bank refuses to pay, its holder has the right to recourse against the Group (“continued involvement”). The Group believes that the Group has transferred almost all of its risks and rewards, and therefore, derecognizes the book value of it and its related settled accounts payable. The maximum loss and undiscounted cash flow of continuing involvement and repurchase are equal to its book value. The Group believes that continued involvement in fair value is not significant.

From January to June 2021, the Group has not recognized gains or losses on the transfer date. The Group had no current or accumulated gain or expense arising from the continuing involvement in financial assets which had been derecognized. Endorsements were incurred evenly throughout this period.

200

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

VIII. RISKS RELATED TO FINANCIAL INSTRUMENTS (CONTINUED)

3 Risk of financial instruments

The Group is exposed to various types of risks from financial instruments during its ordinary course of business, mainly including credit risk, liquidity risk and market risk with foreign exchange risk and interest rate risk inclusive. Financial instruments of the Group are mainly comprised of cash and bank balances, financial assets held for trading, trade receivables, receivables financing, notes payable, trade payables, loans etc. Risks related to these financial instruments and the Group’s risk management policies adopted to reduce such risks are described as follows.

Directors are responsible for planning and establishing the risk management structure of the Group, designating the risk management policies and the related guidance for the Group, and monitoring the implementation of risk management measures. The Group has risk management policies in place to identify and analyze the risk exposure of the Group. These risk management policies have defined particular risks, covering the aspects of the management of market risk, credit risk and liquidity risk. The Group will decide whether it is necessary to update the risk management policies and system by regularly evaluating changes in market environment and the operating activities of the Group. Risk management of the Group is carried out by the board. The board identifies, evaluates and mitigates the relevant risks by closely working with other business departments. Internal audit department of the Group will conduct audit regularly on risk management control and procedures and submit the audit results to the audit committee of the Group.

The Group spreads the risks from financial instruments by diversified investment and business portfolio and develops risk management policies accordingly to mitigate the risk of over concentration on any single industry, particular region or particular counterparties.

Credit risk

The Group trades only with recognized and creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, balances of trade receivables are monitored on an ongoing basis to ensure that the Group’s exposure to bad debt is not significant.

Since the counterparties of cash and bank balances and bank acceptance notes receivables are placed in the well-established banks and with high credit ratings, these financial instruments are exposed to lower credit risk.

The credit risk of the Group’s other financial assets, which comprise trade receivables, other receivables, and other equity investments, arises from default of the counterparty, with a maximum exposure equal to the carrying amounts of these instruments.

201

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

VIII. RISKS RELATED TO FINANCIAL INSTRUMENTS (CONTINUED)

3 Risk of financial instruments (Continued)

Credit risk (Continued)

Maximum credit risk exposure the Group faced at each balance sheet date is the total amount received from customer less impairment.

The Group is also exposed to credit risk through the granting of financial guarantees, further details of which are disclosed in Note XI. 2.

Since the Group traded only with recognized and creditworthy third parties, there was no requirement for collateral. Credit risk was managed in accordance with customer and industry. At the end of the reporting year, the Group had a certain concentration of credit risk as 47% (31 December 2020: 93%) of the Group’s trade receivables were due from the Group’s five largest customers in terms of trade receivables. The Group did not hold any collateral or credit enhancements for the balance of trade receivables.

Criteria for judging significant increase in credit risk

The Group assesses whether or not the credit risk of the relevant financial instruments has increased significantly since the initial recognition at each balance sheet date. While determining whether the credit risk has significantly increased since initial recognition or not, the Group takes into account the reasonable and substantiated information that is accessible without exerting unnecessary cost or effort, including qualitative and quantitative analysis based on the historical data of the Group, external credit risk rating, and forward-looking information. Based on the single financial instrument or the combination of financial instruments with similar characteristics of credit risk, the Group compares the risk of default of financial instruments on the balance sheet date with that on the initial recognition date in order to figure out the changes of default risk in the expected lifetime of financial instruments.

The Group considers a financial instrument to have experienced a significant increase in credit risk when one or more of the following quantitative, qualitative or backstop criteria have been met:

(1) Quantitative criteria mainly comprise of the circumstance that at the reporting date exceeds a certain number of days overdue;
(2) Qualitative criteria mainly comprise of the circumstances that significant adverse change in debtor’s operation, etc.

202

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

VIII. RISKS RELATED TO FINANCIAL INSTRUMENTS (CONTINUED)

3 Risk of financial instruments (Continued)

Credit risk (Continued)

Definition of credit-impaired asset

The standard adopted by the Group to determine whether a credit impairment occurs is consistent with the internal credit risk management objectives of the relevant financial instrument, taking into account quantitative and qualitative criteria. When the Group assesses whether the credit impairment of debtor occurred, the following factors are mainly considered:

(1) Significant financial difficulty of the issuer or the debtor;
(2) Debtors are in breach of contract, such as defaulting on interest or becoming overdue on interest or principal payments overdue;
(3) The creditor of the debtor, for economic or contractual reasons relating to the debtor’s financial difficulty, having granted to the debtor a concession that the creditor would not otherwise consider;
(4) It is becoming probable that the debtor will enter bankruptcy or other financial restructuring;
(5) The disappearance of an active market for that financial asset because of financial difficulties of the issuer or the debtor;
(6) The purchase or origination of a financial asset at a deep discount that reflects the incurred credit losses;

The credit impairment on a financial asset may be caused by the combined effect of multiple events and may not be necessarily due to a single event.

203

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

VIII. RISKS RELATED TO FINANCIAL INSTRUMENTS (CONTINUED)

3. Risk of financial instruments (Continued)

Credit risk (Continued)

The assessment of a significant increase in credit risk and the calculation of ECLs both involve forward looking information. Through the analysis of historical data, the Group identifies the key economic indicators that affect the credit risk and ECLs of various business types.

As at 30 June 2021, the analysis of gross carrying amounts and credit risk exposure of financial assets are as follows:

Cash and bank balance	12- month ECLs Stage 1 5,268,501	Stage 2 –	Lifetime ECLs Stage 3 Simplified approach – –	Lifetime ECLs Stage 3 Simplified approach – –	Total 5,268,501
Trade receivables	–	–	–	10,013	10,013
Receivables financing	3,605,463	–	–	–	3,605,463
Other receivables	15,012	2,377	3,078	–	20,467
	8,888,976	2,377	3,078	10,013	8,904,444

As at 31 December 2020, the analysis of gross carrying amounts and credit risk exposure of financial assets are as follows:

	12-month ECLs Stage 1	Stage 2	Lifetime ECLs Stage 3 Simplified approach	Lifetime ECLs Stage 3 Simplified approach	Total
Cash and bank balance	4,943,231	–	–	–	4,943,231
Trade receivables	–	–	–	36,089	36,089
Receivables financing	2,068,546	–	–	–	2,068,546
Other receivables	16,196	2,247	3,078	–	21,521
	7,027,973	2,247	3,078	36,089	7,069,387

204 2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

VIII. RISKS RELATED TO FINANCIAL INSTRUMENTS (CONTINUED)

3. Risk of financial instruments (Continued)

Liquidity risk

Liquidity risk is the risk that the Group may encounter deficiency of funds in meeting obligations associated with cash or other financial assets settlement, which is possibly attributable to failure in collecting liabilities from counterparts of contracts; or early redemption of debts; or failure in achieving estimated cash flows.

The Company and its subsidiaries were responsible for their own cash management, including the short term investment of cash surpluses and the raising of loans to cover expected cash demands (subject to approval by the Board of the Company when the borrowings exceeded certain predetermined levels of authority). The Group’s liquidity management method was to make sure enough liquidity for the performance of matured debts, so as not to cause any unacceptable losses or any damage to its reputation. As at 30 June 2021, the Group’s current assets already exceeded current liabilities by RMB1,527,702,000 (31 December 2020: current liabilities exceeded current assets by RMB380,840,000).

205

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

VIII. RISKS RELATED TO FINANCIAL INSTRUMENTS (CONTINUED)

3. Risk of financial instruments (Continued)

Liquidity risk (Continued)

The rest maturity date analysis of financial liabilities measured at undiscounted contract cash flows is as follows:

Short-term borrowings		Carrying amount 1,979,336	Undiscounted contract amount 2,025,115		30 June 2021 Within 1 year 2,025,115	1–2 years –	2 to 5 years –	Over 5 years –
Notes payable		1,880,137	1,880,137		1,880,137	–	–	–
Trade payables		3,884,132	3,884,132		3,884,132	–	–	–
Other payables		1,062,032	1,062,032		1,062,032	–	–	–
Non-current liabilities due within one year		2,552,245	2,563,188		2,563,188	–	–	–
Long-term borrowings		435,000	493,246		84,568	115,915	292,763	–
Bonds payables		996,553	1,048,850		16,820	1,032,030	–	1,836,404
Lease liabilities		2,939,683	3,140,201		140,139	2,635,018	365,044	–
Long-term payables		2,615,946	2,844,544		675,340	754,064	1,415,140	–
		18,345,064	18,941,445		12,331,471	4,537,027	2,072,947	–
	Carrying amount		Undiscounted contract amount	31 December 2020 Within 1 year 1–2 years			2 to 5 years	Over 5 years
Short-term borrowings		700,788	705,378		705,378	–	–	–
Notes payable		1,272,291	1,272,291		1,272,291	–	–	–
Trade payables		2,652,728	2,652,728		2,652,728	–	–	–
Other payables		1,567,618	1,567,618		1,567,618	–	–	–
Non-current liabilities due within one year		4,056,471	4,092,290		4,092,290	–	–	–
Long-term borrowings		450,000	528,077		21,216	95,865	410,996	–
Bonds payables		995,150	1,108,139		10,439	48,850	1,048,850	–
Lease liabilities		3,022,612	3,289,586		142,782	1,399,332	1,747,472	–
Long-term payables		1,352,264	1,547,724		70,864	573,576	903,284	–
Other non-current liabilities		445,480	492,255		18,060	19,196	454,999	–
		16,515,402	17,256,086		10,553,666	2,136,819	4,565,601	–

206

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

VIII. RISKS RELATED TO FINANCIAL INSTRUMENTS (CONTINUED)

3. Risk of financial instruments (Continued)

Market risk

Market risk refers to the risk of fluctuation in the fair value or the future cash flow of financial instruments due to the market price variation. Market risk mainly includes interest risk and foreign exchange risk.

Interest risk

Interest risk refers to the risk of fluctuation in the fair value or the future cash flow of financial instruments due to the market interest variation. The market interest rate variation risk faced by the Group mainly correlated with its loans with the interest measured by the floating interest rate.

The Group’s revenue and operating cash flows are largely unaffected by fluctuation in market interest rate. As at 30 June 2021, all the Group’s bank loans were calculated by stable interest rate.

Foreign exchange risk

The Group has currency exposures arising from purchases by operating units in currencies other than the units’ functional currencies.

During this year, the Group’s operating activities were carried out in Mainland China. Majority of transactions are denominated in RMB, the transactions of sales are denominated in RMB, and approximately 17.93% (2020: 40.17%) of purchase were denominated in US dollars for the purchase of iron ores. The finance department of the Group is responsible for monitoring the scale of foreign currency transactions and assets and liabilities in foreign currencies of the Group to reduce the foreign exchange risks to the largest extent. Fluctuations in the exchange rate of USD against RMB will affect the Group’s operating results.

For the book value and exchange rate risk exposure of the Group’s cash and bank balances and accounts payable, please refer to Note V. 55 to these financial statements.

The following table shows the sensitivity analysis of exchange rate risk, reflecting that under the assumption that all other variables remain unchanged, when the US dollar exchange rate changes reasonably and possibly, it will affect the net profit and loss (due to the change in the fair value of monetary assets and monetary liabilities).

207

Chongqing Iron & Steel Company Limited

Section X Financial Report

Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

VIII. RISKS RELATED TO FINANCIAL INSTRUMENTS (CONTINUED)

3. Risk of financial instruments (Continued)

Market risk (Continued)

Foreign exchange risk (Continued)

January to June 2021

==> picture [414 x 313] intentionally omitted <==

----- Start of picture text -----

Total
shareholders’
Exchange Net profit equity
rate Increase/ Increase/ Increase/
(Decrease) (Decrease) (Decrease)
%
RMB depreciation against the U.S. dollar 1 (251) (251)
RMB appreciation against the U.S. dollar (1) 251 251
2020
Total
shareholders’
Exchange Net profit equity
rate Increase/ Increase/ Increase/
(Decrease) (Decrease) (Decrease)
%
RMB depreciation against the U.S. dollar 1 (10,285) (10,285)
RMB appreciation against the U.S. dollar (1) 10,285 10,285
----- End of picture text -----

208

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

VIII. RISKS RELATED TO FINANCIAL INSTRUMENTS (CONTINUED)

4. Capital management

The primary objectives of the Group’s capital management are to safeguard the Group’s ability to continue as a going concern and to maintain healthy capital ratios in order to support its business development and maximize shareholders’ value.

The Group manages its capital structure and makes adjustments according to changes in economic conditions and the risk characteristics of the relevant assets. In order to maintain or adjust the capital structure, the Group may adjust the distribution of profits to shareholders, return capital to shareholders or issue new shares. The Group is not subject to externally imposed capital requirements constraints and monitors capital using debt-to-asset ratio. In 2020 and 2019, there had been no change in the objectives, policies or procedures of capital management of the Group.

	30 June 2021 31 December 2020
Debt-to-asset ratio	49.63% 49.84%

209

Chongqing Iron & Steel Company Limited

Section X Financial Report

Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

IX. DISCLOSURE OF FAIR VALUE

1. Assets and liabilities measured at fair value

As at 30 June 2021

==> picture [414 x 382] intentionally omitted <==

----- Start of picture text -----

Fair value measurement using
Quoted
prices Significant Significant
in active observable unobservable
markets inputs inputs
(Level 1) (Level 2) (Level 3) Total
Financial assets held for
– –
trading 550,000 550,000
– –
Other equity investments 5,000 5,000
Receivables financing – 3,605,463 – 3,605,463
–
3,605,463 555,000 4,160,463
As at 31 December 2020
Fair value measurement using
Quoted prices Significant Significant
in active observable unobservable
markets inputs inputs
(Level 1) (Level 2) (Level 3) Total
– –
Other equity investments 5,000 5,000
Receivables financing – 2,068,546 – 2,068,546
–
2,068,546 5,000 2,073,546
----- End of picture text -----

210

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

IX. DISCLOSURE OF FAIR VALUE (CONTINUED)

2. Assets and liabilities disclosed at fair value

As at 30 June 2021

	Quoted prices in active markets (Level 1)	Fair value measurement using Significant observable inputs (Level 2) Significant unobservable inputs (Level 3) Total	Fair value measurement using Significant observable inputs (Level 2) Significant unobservable inputs (Level 3) Total	Fair value measurement using Significant observable inputs (Level 2) Significant unobservable inputs (Level 3) Total
Long-term borrowings	–	432,330	–	432,330
Bonds payables	–	953,014	–	953,014
Lease liabilities	–	–	2,803,921	2,803,921
Long-termpayables	–	2,476,131	–	2,476,131
	–	3,861,475	2,803,921	6,665,396

As at 31 December 2020

	Quoted prices in active markets (Level 1)	Fair value measurement using Significant observable inputs (Level 2) Significant unobservable inputs (Level 3)	Fair value measurement using Significant observable inputs (Level 2) Significant unobservable inputs (Level 3)	Total
Long-term borrowings	–	437,244	–	437,244
Bonds payables	–	948,283	–	948,283
Lease liabilities	–	–	3,004,650	3,004,650
Long-term payables	–	1,122,827	–	1,122,827
Other non-current liabilities	–	408,607	–	408,607
	–	2,916,961	3,004,650	5,921,611

211

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

IX. DISCLOSURE OF FAIR VALUE (CONTINUED)

3. Fair value estimation

The carrying amounts and fair values of the Group’s financial instruments, other than those with carrying amounts that reasonably approximate to fair values due to short term to maturity, are as follows:

==> picture [413 x 50] intentionally omitted <==

----- Start of picture text -----

Carrying amount Fair value
30 June 31 December 30 June 31 December
2021 2020 2021 2020
----- End of picture text -----

Long-term borrowings	435,000	450,000	432,330	437,244
Bonds payable	996,553	995,150	953,014	948,283
Lease liabilities	2,939,683	3,022,612	2,803,921	3,004,650
Long-term payables	2,615,946	1,352,264	2,476,131	1,122,827
Other non-current liabilities	–	445,480	–	408,607
	6,987,182	6,265,506	6,665,396	5,921,611

Management has assessed that the fair values of cash and bank balances, financial assets held for trading, trade receivables, receivables financing, other receivables, short-term borrowings, notes payable, trade payables, other payables, non-current liabilities due within one year, etc., approximate to their carrying amounts due to short remaining period.

The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The fair values of the long-term borrowings, bonds payable, lease liabilities, long-term payables and other non-current liabilities are determined using discount cash flows, at rates equal to market interest rate of other financial instruments with similar contract terms, credit risks and remaining Term. As at 30 June 2021, non-performance risks underlying other non-current liabilities were appraised as immaterial.

212

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

IX. DISCLOSURE OF FAIR VALUE (CONTINUED)

4. Unobservable input value

Below is a summary of significant unobservable inputs of fair value measurements within Level 3:

==> picture [412 x 36] intentionally omitted <==

----- Start of picture text -----

Valuation Unobservable Weighted
technique inputs average Fair value
----- End of picture text -----

Trust products	30 June	Discounted	Yield of similar	January to
classified as	2021: 550,000	cash flow	products in	June 2021:
financial assets		method	private market	4.2%
held for trading
	2020:－			2020:－

5. Adjustment of fair value measurement

Reconciliation of recurring fair value measurements within Level 3 is as follows:

January to June 2021

==> picture [412 x 179] intentionally omitted <==

----- Start of picture text -----

Transfer into Transfer out Total gains or losses
Change in
unrealized
gains or
losses
included in
profit or
Through loss for
Through other assets held
Opening profit comprehensive Closing at end
balance Stage 3 Stage 3 or loss income Purchase Issue Sale Settlements balance of year
– – – – – – – – –
Financial assets held for trading 550,000 550,000
----- End of picture text -----

213

Chongqing Iron & Steel Company Limited

Section X Financial Report

Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

IX. DISCLOSURE OF FAIR VALUE (CONTINUED)

Adjustment of fair value measurement (Continued)

2020

==> picture [412 x 180] intentionally omitted <==

----- Start of picture text -----

Transfer into Transfer out Total gains or losses
Changes in
unrealized
gains or
losses
included in
profit or
Through loss for
Through other assets held
Opening profit comprehensive Closing at end
balance Stage 3 Stage 3 or loss income Purchase Issue Sale Settlements balance of year
– – – – – – –
Financial assets held for trading 400,000 6,803 33,000 (439,803)
----- End of picture text -----

X. RELATED PARTY AND RELATED PARTY TRANSACTIONS

Controlling shareholder

==> picture [412 x 61] intentionally omitted <==

----- Start of picture text -----

Shareholding Voting right
Name of the controlling Place of Registered proportion over proportion over
shareholder registration Business nature capital the Company the Company
(%) (%)
----- End of picture text -----

Chongqing Changshou Iron &	Chongqing	Technology development, technology transfer,	4,000,000	23.51	23.51
Steel Company Limited		technology service and management
		consultancy services of the fields of iron and
		steel, metallurgy and mining, coal, chemical
		industry, electricity and transportation; sales
		of raw materials, namely steel; operation of
		terminals; warehouse services; leases of
		owned property and equipment; import and
		export of goods and technology; corporate
		management and consultancy services

Changshou Iron & Steel is the controlling shareholders of the Company.

214

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021 X. RELATED PARTY AND RELATED PARTY TRANSACTIONS (CONTINUED)

2. Subsidiary

Please refer to note VII. Interests in other entities for details of the Company’s subsidiaries.

3. Information about other related parties of the Company

==> picture [412 x 75] intentionally omitted <==

----- Start of picture text -----

Relationship
between the
Company and
other related
Company name parties
----- End of picture text -----

Baocheng Carbon	Associate
Baowu Raw Material	Associate
Chongqing Jianwei	Joint venture
Baowu Group	Major shareholder
	of Changshou Iron
	& Steel
Baowu Equipment Intelligent Technology Co., Ltd. (“Baowu Equipment”)	China Baowu’s
寶武裝備智慧科技有限公司(“寶武裝備”)	subsidiary
Shanghai Baosight Software Co.,Ltd. (“Baosight Software”)	China Baowu’s
上海寶信軟件股份有限公司(“寶信軟件”)	subsidiary
Shanghai Meishan Industrial Civil Engineering Design Research Institute	China Baowu’s
Co., Ltd. (“Meishan Research Institute”)上海梅山工業民用工程設計研究院	subsidiary
有限公司(“梅山研究院”)
Shanghai Baosteel Shipping Co., Ltd. (“Baosteel Shipping”)	China Baowu’s
上海寶鋼航運有限公司(“寶鋼航運”)	subsidiary
Shanghai Baoding Energy Co., Ltd. (“Baoding Energy”)	China Baowu’s
上海寶頂能源有限公司(“寶頂能源”)	subsidiary
Baosteel Resources Holdings (Shanghai) Co., Ltd.	China Baowu’s
(“Baosteel Resources”)寶鋼資源控股（上海）有限公司(“寶鋼資源”)	subsidiary
Shanghai Ouyeel Logistics Co., Ltd. (“Ouyeel Logistics”)	China Baowu’s
上海歐冶物流股份有限公司(“歐冶物流”)	subsidiary
Shanghai Ouyeel Purchasing Information Technology Co., Ltd.	China Baowu’s
(“Ouyeel Purchasing”)上海歐冶採購資訊科技有限責任公司(“歐冶採購”)	subsidiary
Wuhan Huafeng Sensing Technology Co.,Ltd. (“Huafeng Sensing”)	China Baowu’s
武漢華楓傳感技術股份有限公司(“華楓傳感”)	subsidiary
Ouyeel International E-commerce Co., Ltd. (“Ouyeel International”)	China Baowu’s
歐冶國際電商有限公司(“歐冶國際”)	subsidiary
Baosteel Co., Ltd.寶鋼股份	China Baowu’s
	subsidiary
Ouyeel Blockchain Finance and Metal Recycling Resources Co., Ltd.	China Baowu’s
(“Ouyeel Blockchain Finance”)歐冶鏈金再生資源有限公司(“歐冶鏈金”)	subsidiary

Chongqing Iron & Steel Company Limited 215

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

X. RELATED PARTY AND RELATED PARTY TRANSACTIONS (CONTINUED)

Information about other related parties of the Company (Continued)

==> picture [412 x 65] intentionally omitted <==

----- Start of picture text -----

Relationship
between the
Company and
other related
Company name parties
----- End of picture text -----

Wuhan Baosteel Huazhong Trade Co., Ltd. (“Baosteel Huazhong”)	China Baowu’s
武漢寶鋼華中貿易有限公司(“寶鋼華中”)	subsidiary
Ouyeel Cloud Commerce Corporation Limited (“Ouyeel Cloud”)	China Baowu’s
歐冶雲商股份有限公司(“歐冶雲商”)	subsidiary
Shanghai Ouyeel Material Technology Co., Ltd. (“Ouyeel Material”)	China Baowu’s
上海歐冶資料科技有限責任公司(“歐冶材料”)	subsidiary
Chengdu Baosteel West Trade Co., Ltd. (“Baosteel West”)	China Baowu’s
成都寶鋼西部貿易有限公司(“寶鋼西部”)	subsidiary
Baosteel Engineering & Technology Group Co., Ltd.	China Baowu’s
(“Baosteel Engineering”)寶鋼工程技術集團有限公司(“寶鋼工程”)	subsidiary
Baosteel Huangshi Coating Sheet Co., Ltd. (“Huangshi Coating Sheet”)	China Baowu’s
寶鋼股份黃石塗鍍板有限公司(“黃石鍍板”)	subsidiary
Baowu Group Echeng Iron and Steel Co., Ltd. (“Echeng Iron and Steel”)	China Baowu’s
寶武集團鄂城鋼鐵有限公司(“鄂城鋼鐵”)	subsidiary
Baowu Water Technology Co., Ltd. (“Baowu Water”)	China Baowu’s
寶武水務科技有限公司(“寶武水務”)	subsidiary
Guangdong Kunlun Information Technology Co., Ltd.	China Baowu’s
(“Kunlun Technology”)廣東昆侖信息科技有限公司(“昆侖科技”)	subsidiary
Shanghai Baosteel Casting Corporation (“Baosteel Casting”)	China Baowu’s
上海寶鋼鑄造股份有限公司(“寶鋼鑄造”)	subsidiary
Shanghai Baohui Environmental Technology Co., Ltd.	China Baowu’s
(“Baohui Environment”)上海寶滙環境科技有限公司(“寶滙環境”)	subsidiary
Shanghai Baoscape Information Technology Co., Ltd.	China Baowu’s
(“Baoscape Information”)上海寶景信息技術發展有限公司(“寶景信息”)	subsidiary
Wugang Resources Group Ezhou Pelletizing Co., Ltd.	China Baowu’s
(“Wugang Resources”)武鋼資源集團鄂州球團有限公司(“武鋼資源”)	subsidiary
Wuhan Wugang Port Affairs Foreign Trade Dock Co., Ltd.	China Baowu’s
(“Wugang Port Affairs”)武漢武鋼港務外貿碼頭有限公司(“武鋼港務”)	subsidiary
Wuhan Wugang Green City Technology Development Co., Ltd.	China Baowu’s
(“Wugang Green”)武漢武鋼綠色城市技術發展有限公司(“武鋼綠色”)	subsidiary
Zhejiang Zhoushan Wugang Terminal Co., Ltd. (“Wugang Terminal”)	China Baowu’s
浙江舟山武港碼頭有限公司(“武港碼頭”)	subsidiary
Wuhan Iron and Steel Group Logistics Co., Ltd.	China Baowu’s
(“Wuhan Iron and Steel Logistics”)武漢鋼鐵集團物流有限公司(“武鋼物流”)	subsidiary
Shanghai Baosteel Energy Service Co., Ltd. (“Baosteel Energy Service”)	China Baowu’s
上海寶鋼節能環保科技有限公司(“寶鋼節能環保”)	subsidiary
Wuhan Iron and Steel Company Limited (“Wuhan Iron & Steel”)	China Baowu’s
武漢鋼鐵有限公司(“武漢鋼鐵”)	subsidiary
Shanghai Huagongbao E-commerce Co., Ltd. (“Huagongbao”)	China Baowu’s
上海歐冶化工寶電子商務有限公司(“歐冶化工”)	subsidiary
Shanghai Baoneng Information Technology Co., Ltd.	China Baowu’s
(“Baoneng Information”)上海寶能信息科技有限公司(“寶能信科”)	subsidiary

216

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

X. RELATED PARTY AND RELATED PARTY TRANSACTIONS (CONTINUED)

4. Information about related party transactions

(1) Transaction of services with related parties

The related party transactions between Baowu Group and its subsidiaries and the Group are as follows:

==> picture [385 x 21] intentionally omitted <==

----- Start of picture text -----

Related party Content of transaction January to June 2021
----- End of picture text -----

Baowu Equipment	Receiving of services	31,656
Baowu Group	Receiving of services	5
Baosight Software	Receiving of services	6,904
Ouyeel Logistics	Receiving of services	155
Ouyeel Purchasing	Receiving of services	1,434
Wuhan Iron and Steel Logistics	Receivingof services	14,800
Total		54,954

The price of receiving related party services shall be determined by reference to the price of similar transactions between the related party and other third parties, or the cost plus profit premium, or the bidding price of the supplier.

217

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

X. RELATED PARTY AND RELATED PARTY TRANSACTIONS (CONTINUED)

4. Information about related party transactions (Continued)

(2) Related party transactions of purchased goods

The related party transactions between Baowu Group and its subsidiaries and the Group are as follows:

==> picture [384 x 21] intentionally omitted <==

----- Start of picture text -----

Related party Content of transaction January to June 2021
----- End of picture text -----

Baocheng Carbon	Supply production materials	1,642
Baowu Equipment	Su pply production materials
	and project construction	30,357
Baoscape Information	Supply production materials	300
Baosteel Casting	Supply production materials	320
Baosteel Engineering	Supply engineering services	359,082
Baosight Software	Supply production materials
	and project construction	60,270
Meishan Research Institute	Supply engineering services	6,350
Baosteel Shipping	Supply raw materials	26,407
Baoding Energy	Supply raw materials	409,959
Kunlun Technology	Supply engineering services	88
Baosteel Resources	Supply raw materials	795,636
Ouyeel Purchasing	Su pply production materials
	and project construction	3,961
Huafeng Sensing	Supply production materials	601
Ouyeel International	Supply raw materials	127
Wugang Terminal	Supply raw materials	8,735
Baosteel	Supply raw materials	475,513
Wugang Green	Supply production materials	72
Wugang Resources	Supply raw materials	224,396
Wugang Port Affairs	Supply raw materials	139
Baowu Water	Supply engineering services	44,955
Baowu Raw Material	Supply raw materials	2,038,876
Ouyeel Blockchain Finance	Supplyraw materials	170,733
Total		4,658,519

The price of goods purchased from a related party shall be determined by reference to the price or cost plus profit premium of similar transactions between the related party and other third parties, or the bidding price of the supplier.

218

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

X. RELATED PARTY AND RELATED PARTY TRANSACTIONS (CONTINUED)

4. Information about related party transactions (Continued)

(3) Sale of goods and energy medium to related parties

The related party transactions between Baowu Group and its subsidiaries and the Group are as follows:

==> picture [385 x 21] intentionally omitted <==

----- Start of picture text -----

Related party Content of transaction January to June 2021
----- End of picture text -----

Baocheng Carbon	Sa le of goods and energy medium	149,113
Baosteel Engineering	Sale of energy medium	28
Baosteel Huazhong	Sale of goods	161,618
Huangshi Coating Sheet	Sale of goods	51,895
Baosteel Resources	Sale of goods	125,326
Ouyeel Cloud	Sale of goods	551,353
Ouyeel Blockchain Finance	Sale of goods	98,861
Baohui Environment	Sale of goods	211
Ouyeel Material	Sale of goods	1,926,112
Baosteel West	Sale of goods	10,891
EchengIron and Steel	Sale ofgoods	113,169
Total		3,188,577

The price of goods sold to related parties shall be determined according to the price charged by the Company to other third party customers or the price stipulated by relevant departments of Chongqing government.

The transactions stated above constitute the transactions or continuing transactions with connected parties according to Chapter 14A of the Listing Rules of the Stock Exchange of Hong Kong. The Company confirms that it has complied with the disclosure requirements under Chapter 14A of the Listing Rules.

219

Chongqing Iron & Steel Company Limited

Section X Financial Report

Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

X. RELATED PARTY AND RELATED PARTY TRANSACTIONS (CONTINUED)

Information about related party transactions (Continued)
(4) Leases

As a lessee

Related party	Content of transaction	January to June 2021	January to June 2020
Changshou Iron & Steel	Ma chinery and
	equipment (Note1)	94,912	94,912

Note 1: On 16 November 2020, the Proposal on Renewal and Final Purchase of Changshou lron & Steel Assets was considered and approved at the 28th meeting of the eighth session of the Board and the 19th meeting of the eighth session of the Supervisory Committee of the Company, and the Company was authorized to enter into the Asset Lease Contract with Changshou Iron & Steel, pursuant to which it was agreed to renew the lease of production equipment and facilities of Changshou Iron and Steel in 2021 and subsequently purchase these assets with reference to the fair value assessed by the appraisal institution. In 2021, the monthly rent was RMB17,875,000, and the lease term was from 1 January 2021 to 31 December 2021. As at 30 June 2021, the relevant right-of-use assets of the Group were RMB3,330,351,000.

(5) Guarantee

Guarantee provided by related parties:

As at 30 June 2021, no related parties provided guarantees for the Company and its subsidiaries.

31 December 2020

	Amount guaranteed	Commencement date	Maturity date	Performance of guarantee completed or not
Siyuanhe Investment	300,000	2017/12/27	2020/12/26	Yes
Changshou Iron & Steel	1,000,000	2019/10/08	2020/10/08	Yes

220

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021 X. RELATED PARTY AND RELATED PARTY TRANSACTIONS (CONTINUED)

4. Information about related party transactions (Continued)

(6) Interest fee paid to a related party

Borrowings from a related party

Related party	Amount borrowed	Interest in the current year
Changshou Iron & Steel	561,880	13,151

Pursuant to the reorganization plan in 2017, Changshou Iron & Steel provided loans of RMB2.4 billion to the Company for its execution of the reorganization plan. The loans had a term of 7 years, which was from 24 November 2017 to 23 November 2024, and borne interest at the rate of 4.9% in 2020 (31 December 2019: 4.9%). As of 30 June 2021, the loans were fully repaid.

Changshou Iron & Steel provided the Company with a financing facility of RMB1 billion in 2020 with a financing period of 3 years. The financing interest rate was 4.25% from 1 July 2020 to 30 June 2023. As of 30 June 2021, the Group borrowed RMB561,880,000 from Changshou Iron & Steel.

(7) Remuneration of key management personnel

Related party	January to June 2021	January to June 2020
Remuneration of key management personnel	5,066	18,331

Chongqing Iron & Steel Company Limited 221

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

X. RELATED PARTY AND RELATED PARTY TRANSACTIONS (CONTINUED)

5. Balance due to or from related parties

(1) Trade receivables

As at 30 June 2021, the trade receivables between Baowu Group and its subsidiaries and the Group are as follows:

==> picture [384 x 21] intentionally omitted <==

----- Start of picture text -----

30 June 2021 31 December 2020
----- End of picture text -----

Baocheng Carbon	911	–
Baosteel Engineering	69	38
Ouyeel Blockchain Finance	–	18,327
Wuhan Iron and Steel	–	13,177
Total	980	31,542

(2) Receivables financing

As at 30 June 2021, the receivables financing between Baowu Group and its subsidiaries and the Group are as follows:

==> picture [384 x 22] intentionally omitted <==

----- Start of picture text -----

Related party 30 June 2021 31 December 2020
----- End of picture text -----

Baocheng Carbon	126,947	44,144
Huangshi Coating Sheet	15,210	–
Ouyeel Material	209,286	111
Total	351,443	44,255

222

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

X. RELATED PARTY AND RELATED PARTY TRANSACTIONS (CONTINUED)

5. Balance due to or from related parties (Continued)

(3) Other receivables

Related party	30 June 2021	31 December 2020
Changshou Iron & Steel	500	500

(4) Prepayments

As at 30 June 2021, the balances of prepayments between Baowu Group and its subsidiaries and the Group are as follows:

==> picture [385 x 21] intentionally omitted <==

----- Start of picture text -----

Related party 30 June 2021 31 December 2020
----- End of picture text -----

Baosteel Casting	564	42
Baosteel Engineering	28,506	–
Baosight Software	1,968	–
Baoding Energy	63,105	35,369
Baowu Raw Material	112,360	5,960
Baosteel Resources	–	45,181
Baosteel	–	7,963
Total	206,503	94,515

(5) Contract liabilities

As at 30 June 2021, the balances of contractual liabilities between Baowu Group and its subsidiaries and the Group are as follows:

==> picture [385 x 22] intentionally omitted <==

----- Start of picture text -----

Related party 30 June 2021 31 December 2020
----- End of picture text -----

Baocheng Carbon	25,758	12,108
Huangshi Coating Sheet	12	–
Ouyeel Cloud	71,193	11,279
Ouyeel Material	268,734	219,316
Baosteel West	–	1,919
Huagongbao	–	420
Baosteel Huazhong	–	13,347
Total	365,697	258,389

223

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

X. RELATED PARTY AND RELATED PARTY TRANSACTIONS (CONTINUED)
Balance due to or from related parties (Continued)

(6)	Trade payables
	Related party	30 June 2021	31 December 2020
	Changshou Iron & Steel	17,875	17,875

As at 30 June 2021, the balances of trade payables between Baowu Group and its subsidiaries and the Group are as follows:

==> picture [384 x 21] intentionally omitted <==

----- Start of picture text -----

30 June 2021 31 December 2020
----- End of picture text -----

Baowu Equipment	29,583	6,365
Baosight Software	6,846	1,074
Baosteel Shipping	14,138	29,076
Baoding Energy	5,097	–
Baosteel Resources	406,355	–
Ouyeel Purchasing	1,657	1,033
Huafeng Sensing	78	7,026
Wugang Terminal	1,128	–
Baosteel	7,233	–
Wugang Green	59	–
Ouyeel Blockchain Finance	31,375	–
Baosteel Energy Service	–	150
Baosteel Engineering	–	94
Meishan Research Institute	–	12
Wuhan Iron & Steel	–	6
Ouyeel International	–	1,368
Total	503,549	46,204

224

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

X. RELATED PARTY AND RELATED PARTY TRANSACTIONS (CONTINUED)

5. Balance due to or from related parties (Continued)

(7) Notes payable

As at 30 June 2021, the balances of notes payable between Baowu Group and its subsidiaries and the Group are as follows:

==> picture [385 x 21] intentionally omitted <==

----- Start of picture text -----

Related party 30 June 2021 31 December 2020
----- End of picture text -----

Baocheng Carbon	133	600
Baowu Equipment	19,727	10,030
Baosteel Casting	64	–
Baosteel Engineering	40,667	174,774
Baosight Software	962	1,659
Meishan Research Institute	619	3,106
Kunlun Technology	93	–
Ouyeel Purchasing	373	412
Baosteel	94	–
Baowu Water	750	–
Baowu Raw Material	353,445	–
Huafeng Sensing	–	1,070
BaonengInformation	–	513
Total	416,927	192,164

225

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

X. RELATED PARTY AND RELATED PARTY TRANSACTIONS (CONTINUED)

5. Balance due to or from related parties (Continued)

(8) Other payables

As at 30 June 2021, the balances of other payables between Baowu Group and its subsidiaries and the Group are as follows:

==> picture [384 x 21] intentionally omitted <==

----- Start of picture text -----

Related party 30 June 2021 31 December 2020
----- End of picture text -----

Baosteel Engineering	189	208
Meishan Research Institute	20	3,918
Ouyeel Logistics	50	3,000
Wuhan Iron and Steel Logistics	200	–
Baowu Water	60	–
Baowu Equipment	7,035	1,621
Huafeng Sensing	720	–
Wugang Green	15	–
Baoneng Information	–	354
Baosight Software	430	330
Ouyeel Purchasing	656	217
Ouyeel Material	–	50
Total	9,375	9,698

226

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

X. RELATED PARTY AND RELATED PARTY TRANSACTIONS (CONTINUED)

Balance due to or from related parties (Continued)

==> picture [414 x 339] intentionally omitted <==

----- Start of picture text -----

(9) Non-current liabilities due within one year
Related party 30 June 2021 31 December 2020
Changshou Iron & Steel 1,529,396 1,402,214
(10) Lease liabilities
Related party 30 June 2021 31 December 2020
Changshou Iron & Steel 2,468,881 2,490,580
(11) Other noncurrent liabilities
Related party 30 June 2021 31 December 2020
–
Changshou Iron & Steel 445,480
(12) Right-of-use assets
Related party 30 June 2021 31 December 2020
Changshou Iron & Steel 3,330,351 3,447,314
----- End of picture text -----

227

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

XI. COMMITMENTS AND CONTINGENCIES

1. Significant commitments

==> picture [413 x 22] intentionally omitted <==

----- Start of picture text -----

30 June 2021 31 December 2020
----- End of picture text -----

Contracted, but not provided for
Capital commitment	6,390,993	5,371,446
Investment commitment	25,000	116,445
	6,415,993	5,487,891

2. Contingencies

On 26 February 2018, all the independent directors of the Company issued the Special Statement and Independent Opinion of Independent Directors on External Guarantees which stated the Company’s guarantees in 2017. A supplementary statement is as follows:

In 2012, each of China Development Bank and Agricultural Bank of China Taizhou Branch provided San Feng Jingjiang Port Logistics Company Limited (三峰靖江港務物流有限責任公司, “San Feng Jingjiang”) with syndicated loans (loan contract no.: 3200577162012540569, “Syndicated Loan”), for which the Company assumed joint guarantee liability. After the Company underwent judicial reorganization, Qianxin Group submitted an “Alternative Guarantee Commitment Letter” to the Company’s Reorganization Administrator on 13 November 2017, confirming that it would communicate with China Development Bank and Agricultural Bank of China Taizhou Branch and go through relevant procedures and undertaking to pay off debt to assume its guarantee liability in case they claim compensation when the principal debtor San Feng Jingjiang defaults.

On 28 December 2017, Qianxin Group, China Development Bank, Agricultural Bank of China Taizhou Branch and San Feng Jingjiang jointly signed the Change of RMB Syndicated Loan Contract (contract no.: 3200577162012540569004) which provided that Qianxin Group, as the guarantor of Syndicated Loan, assumed joint guarantee liability. On the same day, Qianxin Group, as the guarantor, entered into the Syndicated Loan Guarantee Contract with San Feng Jingjiang, China Development Bank and Agricultural Bank of China Taizhou Branch which served as a guarantee contract of Syndicated Loan (contract No. 3200577162012540569).

228

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

XII. OTHER SIGNIFICANT EVENTS

1. Segment report

(1) Identification basis and accounting policies for reportable segments

The Group will determine different segments based on the internal organizational structure, management requirements and internal report system. The Group’s operation segments refer to those components meeting the following conditions at the same time:

1) The segment may generate revenue and incur expenses in daily activities;
2) Management of the Group can regularly evaluate the operating results of the segment to decide on the allocation of resources to it and evaluate its performance;
3) The segment’s financial position, operation result, cash flow and other accounting information can be obtained by analysis.

(2) Financial information of reportable segments

The Group’s revenue and profit are mainly comprised of steel manufacturing and domestic sales. The Group’s major assets are all in China. The management of the Company evaluates the Group’s operating results as a whole. Therefore, no segment report has been prepared in the current period.

(3) Information of significant customers

The Group generated revenue from no customer (for the six months ended 30 June 2020: one, which accounted for 19% of the Group’s revenue) that reached or exceeded 10% of the Group’s revenue.

229

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

XII. OTHER SIGNIFICANT EVENTS (CONTINUED)

2. Lease

(1) As a lessor

The Group rent partial of plants and buildings with lease term of 1 to 5 years, which develops into operating lease. According to the lease contracts, the yearly rental required to adjust based on market rental. The revenue related to plants and buildings lease for the six months ended 30 June 2021 was RMB115,000 (for the six months ended 30 June 2020: RMB48,000). Please refer to Note V.11 for more details.

Operating lease

The profit/loss relating to operating lease is as follows:

	For the six months ended 30 June 2021	For the six months ended 30 June 2020
Lease income	115	48

The Group had total future minimum lease receivables under non-cancellable leases with its tenants falling due as follows:

==> picture [384 x 35] intentionally omitted <==

----- Start of picture text -----

30 June 31 December
2021 2020
----- End of picture text -----

Within 1 year (first year inclusive)	265	344
1 – 2 years (second year inclusive)	89	174
2 – 3 years (third year inclusive)	81	81
3 – 4 years (fourth year inclusive)	44	61
4 – 5years(fifthyear inclusive)	–	–
	479	660

Please refer to Note V.11 for more details about PPE leased out under operating lease.

230

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

XII. OTHER SIGNIFICANT EVENTS (CONTINUED)

2. Lease (Continued)

(2) As a lessee

	For the six months ended 30 June 2021	For the six months ended 30 June 2020
Lease liability interest expense	98,550	–
Short-term lease expenses through profit or loss
subject to simplified treatment	–	167,920
Total cash outflows related to lease	69,370	167,920

The Group has lease contracts for various items of machineries and other equipment, motor vehicles and plants and buildings used in its operations. Generally, the Group is restricted from subleasing the underlying assets. Part of the lease contracts contains terms of purchase.

Leases that have been promised but not yet commenced

The leases that the Group has promised but have not yet commenced are expected to have future cash outflows (tax included) as follows:

	30 June 2021	31 December 2020
Within 1 year	–	–
Leaseback
	30 June 2021	31 December 2020
Cash inflow from leaseback	1,700,000	500,000
Cash outflow from leaseback	264,009	–

Other information

For right-of-use assets, please refer to Note V.13; For simplified treatment of short-term leases, please refer to Note III.27; For lease liabilities, please refer to Notes V.29.

231

Chongqing Iron & Steel Company Limited

Section X Financial Report

Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

XIII. NOTES TO MAJOR ITEMS IN THE PARENT COMPANY’S FINANCIAL STATEMENTS

1. Trade receivables

Credit period of trade receivables is generally within one-month. Trade receivables are noninterest-bearing.

Ageing Analysis of trade receivables is as follows:

==> picture [413 x 22] intentionally omitted <==

----- Start of picture text -----

30 June 2021 31 December 2020
----- End of picture text -----

Within 3 months (third month inclusive)	6,800	37,218
4 to 12 months (first year inclusive)	2,970	2,190
1–2 years	1,113	–
2–3 years	120	120
Above 3years	975	–
	11,978	39,528
Less: Provision for bad debts of trade receivables	1,000	25
	10,978	39,503

The ageing analysis was based on the month when incurred. The trade receivables recognized firstly will be firstly settled.

	Book Amount	30 June 2021 value Bad debt Proportion Amount (%)	30 June 2021 value Bad debt Proportion Amount (%)	provision Provision proportion (%)	Book Amount	31 December 2020 value Bad debt Proportion Amount (%)	31 December 2020 value Bad debt Proportion Amount (%)	provision Provision proportion (%)
Receivables that are subject to
provision by group with similar
credit risk characteristics	11,978	100	1,000	8	39,528	100	25	–

As at 30 June 2021 and at 31 December 2020, the Company had no trade receivables with separate provision for bad debts.

232 2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021 XIII. NOTES TO MAJOR ITEMS IN THE PARENT COMPANY’S FINANCIAL STATEMENTS (CONTINUED)

1. Trade receivables (Continued)

Receivables that are subject to provision by group with similar credit risk characteristics are as follows:

Within 3 months	Estimated doubtful book value	30 June 2021 ECLs proportion (%)	Lifetime ECLs	31 Estimated doubtful book value	December 2020 ECLs proportion Lifetime ECLs (%)	December 2020 ECLs proportion Lifetime ECLs (%)
(third month inclusive)	6,800	–	–	37,218	–	–
4–12 months
(first year inclusive)	2,970	–	–	2,190	–	–
1–2 years	1,113	–	–	–	–	–
2–3 years	120	21	25	120	21	25
Over 3years	975	100	975	–	–	–
	11,978		1,000	39,528		25

For steel product customers, it is usually necessary to receive payment in advance, and major customers are also provide with a 30-day credit period. For customers of other products, the Group's contract price usually expires within 30 days after the delivery of the product, and the expected credit loss risk of accounts receivable is relatively low.

The movement for provision of bad debt of trade receivables is as follows:

	Opening balance	Provision	Reversal	Written-off	Closing balance
For the six months ended 30 June 2021	25	975	－	－	1,000
2020	25	–	－	－	25

As at 30 June 2021, the closing balance of the top five trade receivable of the Company amounted to RMB9,238,000 (31 December 2020: RMB38,203,000) in aggregate, accounting for 77% (31 December 2020: 97%) of the total of closing balance of trade receivables, without provision for bad debts (31 December 2020: nil).

233

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

XIII. NOTES TO MAJOR ITEMS IN THE PARENT COMPANY’S FINANCIAL STATEMENTS (CONTINUED)

2. Other receivables

	30 June 2021	31 December 2020
Other receivables	49,625	17,181
Ageing analysis of other receivables is as follows:
	30 June 2021	31 December 2020
Within 3 months (third month inclusive)	1,259	12,306
4 to 12 months (first year inclusive)	46,703	3,059
1–2 years	83	236
2–3 years	2,011	2,011
Above 3years	3,077	3,077
	53,133	20,689
Less: Provision for bad debts	3,508	3,508
	49,625	17,181

Other receivables presented by nature:

==> picture [413 x 35] intentionally omitted <==

----- Start of picture text -----

30 June 31 December
2021 2020
----- End of picture text -----

Guarantee deposits, staff advances, etc.	7,054	18,956
Prepayments for trading	44,808	1,733
Others	1,271	–
	53,133	20,689

234

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

XIII. NOTES TO MAJOR ITEMS IN THE PARENT COMPANY’S FINANCIAL STATEMENTS (CONTINUED)

2. Other receivables (Continued)

The movement of bad debt provision of other receivables based on 12-month and lifetime ECLs are as follows:

30 June 2021	Stage 1 12-month ECLs	Stage 2 Lifetime ECLs	Stage 3 Credit- impaired financial assets (Lifetime ECLs)	Total
Opening balance	–	430	3,078	3,508
Opening balance for the period
– Transfer to stage 2	–	–	–	–
– Transfer to stage 3	–	–	–	–
– Turn back stage 2	–	–	–	–
– Turn back stage 1	–	–	–	–
Provision	–	–	–	–
Reversal	–	–	–	–
Transfer	–	–	–	–
Write-off	–	–	–	–
Closing balance	–	430	3,078	3,508

235

Chongqing Iron & Steel Company Limited

Section X Financial Report

Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

XIII. NOTES TO MAJOR ITEMS IN THE PARENT COMPANY’S FINANCIAL STATEMENTS (CONTINUED)

2. Other receivables (Continued)

2020	Stage 1 12-month ECLs	Stage 2 Lifetime ECLs	Stage 3 Credit- impaired financial assets (Lifetime ECLs)	Total
Opening balance	–	430	3,078	3,508
Changes due to the opening balance
– Transfer to stage 2	–	–	–	–
– Transfer to stage 3	–	–	–	–
– Turn back stage 2	–	–	–	–
– Turn back stage 1	–	–	–	–
Provision	–	–	–	–
Reversal	–	–	–	–
Transfer	–	–	–	–
Write-off	–	–	–	–
Closing balance	–	430	3,078	3,508

236

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

XIII. NOTES TO MAJOR ITEMS IN THE PARENT COMPANY’S FINANCIAL STATEMENTS (CONTINUED)

2. Other receivables (Continued)

The movement of book value of other receivables:

30 June 2021	Stage 1 12-month ECLs	Stage 2 Lifetime ECLs	Stage 3 Credit- impaired financial assets (Lifetime ECLs)	Total
Opening balance	15,366	2,245	3,078	20,689
Changes due to the opening balance
– Transfer to Stage 2	–	–	–	–
– Transfer to Stage 3	–	–	–	–
– Turn back stage 2	–	–	–	–
– Turn back stage 1	–	–	–	–
Addition	77,368			77,368
Derecognition	(44,773)	(151)		(44,924)
Write-off	–	–	–	–
Closing balance	47,961	2,094	3,078	53,133
2020	Stage 1 12-month ECLs	Stage 2 Lifetime ECLs	Stage 3 Credit- impaired financial assets (Lifetime ECLs)	Total
Opening balance	76,212	2,245	3,078	81,535
Changes due to the opening balance
– Transfer to stage 2	–	–	–	–
– Transfer to stage 3	–	–	–	–
– Turn back stage 2	–	–	–	–
– Turn back stage 1	–	–	–	–
Addition	15,366	–	–	15,366
Derecognition	(76,212)	–	–	(76,212)
Write-off	–	–	–	–
Closing balance	15,366	2,245	3,078	20,689

237

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

XIII. NOTES TO MAJOR ITEMS IN THE PARENT COMPANY’S FINANCIAL STATEMENTS (CONTINUED)

2. Other receivables (Continued)

The movements in impairment allowance for other receivables are as follows:

==> picture [414 x 35] intentionally omitted <==

----- Start of picture text -----

Opening Closing
balance Increase Reversal Write-off balance
----- End of picture text -----

For the six months
ended 30 June
2021	3,508	–	–	–	3,508
2020	3,508	–	–	–	3,508

As at 30 June 2021, the five largest other receivables are as follows:

	30 June 2021	Ratio in other receivables (%)	Nature	Aging	Provision for bad debts
The first	43,000	81	Tr ansactions with	Within 1 year	–
			subsidiaries
The second	1,500	3	Guarantee deposits	Within 1 year	–
The third	1,026	2	Petty cash	0–3 years	1,026
The fourth	598	1	Guarantee deposits	Within 1 year	–
The fifth	500	1	Guarantee deposits	Within 1year	–
	46,624	88			1,026

238

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

XIII. NOTES TO MAJOR ITEMS IN THE PARENT COMPANY’S FINANCIAL STATEMENTS (CONTINUED)

2. Other receivables (Continued)

As at 31 December 2020, the five largest other receivables are as follows:

	31 December 2020	Ratio in other receivables (%)	Nature	Aging	Provision for bad debts
The first	12,000	58	Guarantee deposits	Within 1 year	–
The second	1,500	7	Guarantee deposits	Within 1 year	–
The third	1,026	5	Petty cash	0–3 years	1,026
The fourth	598	3	Guarantee deposits	Within 1 year	–
The fifth	426	2	Guarantee deposits	Within 1 year	–
	15,550	75			1,026

3. Long-term equity investments

	30 June 2021 Book Value Provision for impairments	Carrying Amount	Book Value	31 December 2020 Provision for impairments Carrying Amount	31 December 2020 Provision for impairments Carrying Amount
Subsidiary	992,288 –	992,288	837,610	–	837,610
Joint ventures	– –	–	–	–	–
Associate	51,236 –	51,236	79,494	–	79,494
	1,043,524 –	1,043,524	917,104	–	917,104

239

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

XIII. NOTES TO MAJOR ITEMS IN THE PARENT COMPANY’S FINANCIAL STATEMENTS (CONTINUED)

Long-term equity investments (Continued)

2021

Investees Subsidiary	Opening balance	Investments increased	Increase/(decrease) Investments decreased Investment income recognized through equity method	Increase/(decrease) Investments decreased Investment income recognized through equity method	Closing balance
Chongqing Iron & Steel Energy (Note 3)	837,610	–	–	–	837,610
Xingang Changlong (Note 2)	28,258	126,420	–	–	154,678
	865,868	126,420	–	–	992,288
Joint venture
Chongqing Jianwei (Note 2)	–	–	–	–	–
Associate
Baowu Raw Material (Note 2)	40,000	–	–	–	40,000
Baocheng Carbon (Note 2)	11,236	–	–	–	11,236
	51,236	–	–	–	51,236

240

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

XIII. NOTES TO MAJOR ITEMS IN THE PARENT COMPANY’S FINANCIAL STATEMENTS (CONTINUED)

3. Long-term equity investments (Continued)

2020

==> picture [414 x 93] intentionally omitted <==

----- Start of picture text -----

Increase/(decrease)
Investment
income
recognized
Opening Investments Investments through equity Closing
Investees balance increased decreased method balance
----- End of picture text -----

Subsidiary
Chongqing Iron & Steel Energy
Environmental Protection Company
Limited (Note 3)	–	837,610	–	–	837,610
Chongqing CIS Building Materials
Sales Co., Ltd. (Note 1)	–	–	–	–	–
	–	837,610	–	–	837,610
Joint venture
Chongqing Jianwei (Note 2)	–	–	–	–	–
Associate
Baowu Raw Material (Note 2)	–	40,000	–	–	40,000
Xingang Changlong (Note 2)	28,258	–	–	–	28,258
Baocheng Carbon (Note 2)	–	11,236	–	–	11,236
	28,258	51,236	–	–	79,494

Note 1: The Company incorporated Chongqing CIS Building Materials Sales Co., Ltd., and the amount of the subscribed contribution is RMB10 million. The Company has not yet paid the above capital contribution. In January 2021, the subsidiary has been de-registered from the industrial and commercial bureau.

Note 2: Please refer to Note VII for details.

Note 3: On 30 June 2021, the Company pledged 100% equity of Chongqing Iron and Steel Energy Environmental Protection Co., Ltd. to obtain a working capital loan of RMB500,000,000.

241

Chongqing Iron & Steel Company Limited

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

XIII. NOTES TO MAJOR ITEMS IN THE PARENT COMPANY’S FINANCIAL STATEMENTS (CONTINUED)

4. Revenue and cost of sales

	For the six months ended 30 June 2021 Revenue Cost	For the six months ended 30 June 2021 Revenue Cost	For the six months ended 30 June 2020 Revenue Cost	For the six months ended 30 June 2020 Revenue Cost
Revenue from principal operations	22,407,576	19,048,742	10,881,485	10,324,389
Revenue from other operations	261,905	290,731	51,612	26,048
	22,669,481	19,339,473	10,933,097	10,350,437

Details of revenue are as follows:

	For the six months ended 30 June 2021	For the six months ended 30 June 2020
Revenue from contracts with customers	22,669,366	10,933,049
Revenue from lease	115	48
	22,669,481	10,933,097

Disaggregation of revenue from contracts with customers are as follows:

For the six months ended 30 June 2021

==> picture [413 x 35] intentionally omitted <==

----- Start of picture text -----

Steel
Main Product products Others Total
----- End of picture text -----

Hot roll	11,050,037	–	11,050,037
Wide and thick plate	5,112,310	–	5,112,310
Medium plate	1,000,390	–	1,000,390
Bars
Wire rods	134	–	134
Commodity billet	4,493,015	–	4,493,015
Others	–	1,013,480	1,013,480
	21,655,886	1,013,480	22,669,366

242

2021 Interim Report

Section X Financial Report Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

XIII. NOTES TO MAJOR ITEMS IN THE PARENT COMPANY’S FINANCIAL STATEMENTS (CONTINUED)

Revenue and cost of sales (Continued)

For the six months ended 30 June 2020

==> picture [413 x 34] intentionally omitted <==

----- Start of picture text -----

Steel
Main Product products Others Total
----- End of picture text -----

Hot roll	5,313,435	–	5,313,435
Plate	3,461,606	–	3,461,606
Bars	958,852	–	958,852
Wire rods	773,392	–	773,392
Others	–	425,764	425,764
	10,507,285	425,764	10,933,049

All the Group's revenue was recognized at a certain point.

The details of revenue recognized from the opening carrying amount of contract liabilities for the period:

	For the six months ended 30 June 2021	For the six months ended 30 June 2020
Contract for goods	2,554,123	1,105,972

Investment income

	For the six months ended 30 June 2021	For the six months ended 30 June 2020
Investment income of financial assets held for trading	–	6,791
Investment income from long-term equity investments
under equitymethod	310	–
	310	6,791

243

Chongqing Iron & Steel Company Limited

Section X Financial Report

Notes to Financial Statements (Continued)

For the six months ended 30 June 2021

XIV. OTHER SUPPLEMENTARY INFORMATION

1. Non-recurring profit or loss

==> picture [414 x 19] intentionally omitted <==

----- Start of picture text -----

Amount
----- End of picture text -----

	Gains/(losses) from disposal of non-current assets, including offset portion
	of impairment provision for such asset	–
	Government grants charged in profit or loss, except for those closely
	related to the ordinary operation and gained constantly at a fixed amount
	or quantity according to certain standard based on state policies	28,149
	Capital occupied income from non-financial entities charged in profit or
	loss	1,000
	Income from disposal of financial assets held for trading	–
	Non-operatingincome and expenses other than the above items	-166,590
	Sub-total	-137,441
	Less: Impact of corporate income tax(decreases represented by“-”)	–
	Net non-recurring profit or loss attributable to the owners	-137,441

Note: The items of non-recurring profit or loss were stated at the pre-tax amount. The Group recognized nonrecurring profit and loss items in accordance with the provisions in Explanatory Announcement on Information Disclosure for Companies Offering their Securities to the Public No. 1 – Extraordinary Items (CSRC Announcement [2008] No. 43).

2. Return on net assets and earnings per share

For the six months ended 30 June 2021	Weighted average return on net assets (%)	Earnings per share (RMB per share) Basic earnings per share Diluted earnings per share	Earnings per share (RMB per share) Basic earnings per share Diluted earnings per share
Net profit attributable to ordinary
shareholders of the Company	12.61	0.30	0.30
Net profit after deducting non-recurring
profit or loss attributable to ordinary
shareholders of the Company	13.25	0.32	0.32

Chairman: Zhang Wenxue

The date of approval of the Board for submission: 28 August 2021

REVISION

Applicable ✓ Not applicable

2021 Interim Report

244

AI assistant

XD Inc. — Interim / Quarterly Report 2021

50574_rns_2021-09-23_f012270e-1027-41f4-8476-febafc9cc839.pdf

Contents

IMPORTANT NOTICE

Nil

No

DEFINITIONS OF COMMON TERMS

I. COMPANY INFORMATION

II. CONTACT INFORMATION

Secretary to the Board

Securities Representative

III. CHANGES IN BASIC INFORMATION

IV. CHANGE IN DISCLOSURE OF INFORMATION AND PLACE FOR INSPECTION

V. BASIC INFORMATION ABOUT THE SHARES OF THE COMPANY

VI. OTHER RELATED INFORMATION

VII. KEY ACCOUNTING DATA AND FINANCIAL INDICATORS OF THE COMPANY

VII. KEY ACCOUNTING DATA AND FINANCIAL INDICATORS OF THE COMPANY (CONTINUED)

(II) Key Financial Indicators

VIII. DIFFERENCE IN ACCOUNTING DATA BETWEEN THE PRC ACCOUNTING STANDARDS AND OVERSEAS ACCOUNTING STANDARDS

IX. NON-RECURRING PROFIT OR LOSS ITEMS AND AMOUNTS

X. OTHERS

I. EXPLANATION ON THE SITUATION OF THE COMPANY’S INDUSTRY AND MAIN BUSINESS DURING THE REPORTING

(I) Explanation on the Main Business

I. EXPLANATION ON THE SITUATION OF THE COMPANY’S INDUSTRY AND MAIN BUSINESS DURING THE REPORTING (CONTINUED)

(II) Explanation on the Industry

II. ANALYSIS OF CORE COMPETITIVENESS DURING THE REPORTING PERIOD

(I) Flexible system and mechanism advantage

(II) Relative targeted market and logistic advantages

(III) Cost competitive ability

(IV) Brand advantage

III. DISCUSSION AND ANALYSIS ON OPERATION

IV. MAJOR OPERATIONS DURING THE REPORTING PERIOD

(I) Main business analysis

IV. MAJOR OPERATIONS DURING THE REPORTING PERIOD

(CONTINUED)

(I) Main business analysis (Continued)

1 Analysis of changes in certain items from financial statements (Continued)

2 Detailed description of the major changes in the Company’s business types, profits structure or profits sources in the period

IV. MAJOR OPERATIONS DURING THE REPORTING PERIOD (CONTINUED)

(I) Main business analysis (Continued)

IV. MAJOR OPERATIONS DURING THE REPORTING PERIOD

(CONTINUED)

(I) Main business analysis (Continued)

IV. MAJOR OPERATIONS DURING THE REPORTING PERIOD (CONTINUED)

(I) Main business analysis (Continued)

IV. MAJOR OPERATIONS DURING THE REPORTING PERIOD

(CONTINUED)

IV. MAJOR OPERATIONS DURING THE REPORTING PERIOD (CONTINUED)

(III) Analysis of assets and liabilities

Others

IV. MAJOR OPERATIONS DURING THE REPORTING PERIOD (CONTINUED)

IV. MAJOR OPERATIONS DURING THE REPORTING PERIOD (CONTINUED)

(III) Analysis of assets and liabilities (Continued)

(IV) Investment Analysis

IV. MAJOR OPERATIONS DURING THE REPORTING PERIOD (CONTINUED)

IV. MAJOR OPERATIONS DURING THE REPORTING PERIOD (CONTINUED)

V. OTHER DISCLOSURE

(I) Potential Risks

(II) Other disclosure

I. INTRODUCTION OF GENERAL MEETINGS

Section IV Corporate Governance (Continued)

I. INTRODUCTION OF GENERAL MEETINGS (CONTINUED)

II. C H A N G E S I N D I R E C T O R S, S U P E R V I S O R S A N D S E N I O R MANAGEMENT OF THE COMPANY

II. C H A N G E S I N D I R E C T O R S, S U P E R V I S O R S A N D S E N I O R MANAGEMENT OF THE COMPANY (CONTINUED)

(I) Details on changes in directors

II. C H A N G E S I N D I R E C T O R S, S U P E R V I S O R S A N D S E N I O R MANAGEMENT OF THE COMPANY (CONTINUED)

(II) Details on changes in supervisors

(III) Changes in senior management

Section IV Corporate Governance (Continued)

III. SCHEME FOR PROFIT DISTRIBUTION OR TRANSFER OF CAPITAL RESERVE TO SHARE CAPITAL

IV. EQUITY INCENTIVE PLAN, EMPLOYEE SHARE OWNERSHIP PLAN OR OTHER EMPLOYEE INCENTIVES AND EFFECTS THEREOF

Other explanations

Employee share ownership plan

VI. EQUITY INCENTIVE PLAN, EMPLOYEE SHARE OWNERSHIP PLAN OR OTHER EMPLOYEE INCENTIVES AND EFFECTS THEREOF (CONTINUED)

VI. EQUITY INCENTIVE PLAN, EMPLOYEE SHARE OWNERSHIP PLAN OR OTHER EMPLOYEE INCENTIVES AND EFFECTS THEREOF (CONTINUED)

VI. EQUITY INCENTIVE PLAN, EMPLOYEE SHARE OWNERSHIP PLAN OR OTHER EMPLOYEE INCENTIVES AND EFFECTS THEREOF (CONTINUED)

VI. EQUITY INCENTIVE PLAN, EMPLOYEE SHARE OWNERSHIP PLAN OR OTHER EMPLOYEE INCENTIVES AND EFFECTS THEREOF (CONTINUED)

VI. EQUITY INCENTIVE PLAN, EMPLOYEE SHARE OWNERSHIP PLAN OR OTHER EMPLOYEE INCENTIVES AND EFFECTS THEREOF (CONTINUED)

Other incentive measures

XD Inc. Interim / Quarterly Report 2021