Group 1: Capacity Reduction - The company plans to eliminate iron capacity of 1.56 million tons and steel capacity of 2.86 million tons from 2016 to 2017 [1] - In 2016, the company completed a reduction of iron capacity by 520,000 tons and steel capacity by 1.66 million tons, with the remaining reductions to be completed by the end of September 2017 [2] Group 2: Impact on Production - In 2016, the steel output of Hebei Steel Group decreased by approximately 2.6% compared to 2015, primarily due to capacity reduction and environmental restrictions [2] Group 3: Employee Placement - All employees affected by capacity reduction will be internally reassigned within Hebei Steel Group, with no layoffs to the public, except for those retiring internally [2] Group 4: Provincial Capacity Reduction Targets - According to official information from the Hebei provincial government, the target for steel capacity reduction in 2017 is 15.62 million tons and for iron capacity is 16.24 million tons [2] Group 5: Relocation of Xuan Steel Company - Xuan Steel is scheduled to close by 2020, with capacity transfer projects set to begin construction by the end of April 2017, and production expected to start by June 2019 [2] Group 6: Product Composition and Sales - Currently, plate products account for about two-thirds of the company's steel products, with significant sales growth in automotive steel and home appliance plates in 2016 [2] Group 7: Vanadium Products - The company has a vanadium production capacity of 22,000 tons, with successful development of high-end vanadium products and entry into European and North American markets in 2016 [3] Group 8: Debt-to-Equity Plans - The company currently has no plans for debt-to-equity swaps [3]

Group 1: Capacity Reduction - The company plans to eliminate iron capacity of 1.56 million tons and steel capacity of 2.86 million tons from 2016 to 2017, in response to national and provincial capacity reduction requirements [1] - In 2016, the company completed the reduction of one 450m³ blast furnace and two 55t converters, reducing pig iron capacity by 520,000 tons and steelmaking capacity by 830,000 tons [1] - The remaining capacity reduction will be completed by the end of September 2017 as per requirements [1] Group 2: Vanadium-Titanium Product Development - The company has rich vanadium-titanium resources and advanced production processes in the vanadium-titanium technology field [2] - A vanadium-titanium subsidiary has been established to separate vanadium-titanium from the steel main business, focusing on research and industrial investment [2] - Significant breakthroughs were achieved in the development, testing, and production of high-purity vanadium powder and aerospace-grade vanadium-aluminum alloy in 2016 [2] Group 3: Iron Ore Import and Debt Management - Over 80% of the iron ore used in production is imported, with procurement managed by the international trade company of Hebei Iron and Steel Group [2] - The company is in discussions with financial institutions regarding the possibility of debt-to-equity swaps, but no results have been achieved yet [2] Group 4: Steel Product Exports - In 2016, the company's steel product exports decreased compared to 2015, primarily due to increased international trade friction and price factors [2] - The main export markets include Southeast Asia, Europe, the Middle East, and the United States [2] Group 5: Automotive Steel Production - The automotive steel produced by the company is primarily supplied to well-known enterprises such as Audi, Toyota, Hyundai, Dongfeng Peugeot, FAW, SAIC, and Great Wall [3] - The production volume of automotive steel in 2016 saw a significant increase compared to 2015, with the Handan branch achieving complete vehicle manufacturing [3]

Group 1: Capacity Reduction - The company plans to eliminate iron capacity of 1.56 million tons and steel capacity of 2.86 million tons between 2016 and 2017 [1] - In 2016, the company completed a reduction of 520,000 tons in iron capacity and 830,000 tons in steel capacity, with the remaining reductions scheduled to be completed by September 2017 [2] Group 2: Employee Placement - All employees affected by the capacity reduction will be internally reassigned within the Hebei Steel Group, with no layoffs directed towards the public [2] Group 3: Provincial Capacity Goals - The Hebei provincial government aims to reduce steel capacity by 15.62 million tons and iron capacity by 16.24 million tons in 2017 [2] Group 4: Product Sales Composition - The company's steel products consist of approximately two-thirds plates and one-third long products, with direct sales being the primary method of distribution [2] Group 5: Relocation of Xuan Steel - Xuan Steel is scheduled to cease operations by 2020, with capacity transfer projects set to begin construction in April 2017 and production expected to start by June 2019 [2]

[Important Notice, Table of Contents, and Definitions](index=2&type=section&id=%E7%AC%AC%E4%B8%80%E8%8A%82%20%E9%87%8D%E8%A6%81%E6%8F%90%E7%A4%BA%E3%80%81%E7%9B%AE%E5%BD%95%E5%92%8C%E9%87%8A%E4%B9%89) This section provides the important notice, table of contents, and definitions for the semi-annual report [Important Notice](index=2&type=section&id=%E9%87%8D%E8%A6%81%E6%8F%90%E7%A4%BA) The company's board of directors, supervisory board, and senior management ensure the truthfulness, accuracy, and completeness of this semi-annual report and assume legal responsibility, with all directors attending the review meeting. The company plans no profit distribution for the period, including no cash dividends, bonus shares, or capital increase from capital reserves - Company management guarantees the **truthfulness, accuracy, and completeness** of the report content, assuming corresponding legal responsibilities[2](index=2&type=chunk) - The company plans no cash dividends, no bonus shares, or no capital increase from capital reserves for the **2022 semi-annual period**[2](index=2&type=chunk) [Company Profile and Key Financial Indicators](index=5&type=section&id=%E7%AC%AC%E4%BA%8C%E8%8A%82%20%E5%85%AC%E5%8F%B8%E7%AE%80%E4%BB%8B%E5%92%8C%E4%B8%BB%E8%A6%81%E8%B4%A2%E5%8A%A1%E6%8C%87%E6%A0%87) This section introduces the company and presents its key financial data and performance metrics for the reporting period [Company Profile](index=5&type=section&id=%E4%B8%80%E3%80%81%E5%85%AC%E5%8F%B8%E7%AE%80%E4%BB%8B) Hebei Iron & Steel Co., Ltd. (stock code: 000709) is a company listed on the Shenzhen Stock Exchange, with Wang Lanyu as its legal representative Company Information | Item | Content | | :--- | :--- | | Stock Abbreviation | HBIS | | Stock Code | 000709 | | Listing Exchange | Shenzhen Stock Exchange | | Legal Representative | Wang Lanyu | [Key Accounting Data and Financial Indicators](index=5&type=section&id=%E5%9B%9B%E3%80%81%E4%B8%BB%E8%A6%81%E4%BC%9A%E8%AE%A1%E6%95%B0%E6%8D%AE%E5%92%8C%E8%B4%A2%E5%8A%A1%E6%8C%87%E6%A0%87) In the first half of 2022, the company's performance declined, with revenue decreasing by 4.05%, net profit attributable to shareholders by 35.98%, and non-recurring net profit by 54.32%, alongside a 40.74% reduction in net cash flow from operating activities Key Financial Performance | Key Financial Indicator | Current Period (CNY) | Prior Year Period (CNY) | YoY Change | | :--- | :--- | :--- | :--- | | Operating Revenue | 71,994,339,359.53 | 75,030,623,557.55 | -4.05% | | Net Profit Attributable to Shareholders | 973,805,813.49 | 1,521,137,569.20 | -35.98% | | Net Profit Attributable to Shareholders (Excluding Non-Recurring Items) | 689,761,725.89 | 1,509,987,206.57 | -54.32% | | Net Cash Flow from Operating Activities | 5,045,439,973.61 | 8,514,790,800.48 | -40.74% | | Basic Earnings Per Share (CNY/share) | 0.094 | 0.13 | -27.69% | | Weighted Average Return on Net Assets | 1.89% | 2.66% | -0.77% | | **Asset Indicators** | **Current Period End (CNY)** | **Prior Year End (CNY)** | **Change from Prior Year End** | | Total Assets | 242,377,520,849.58 | 243,419,433,508.61 | -0.43% | | Net Assets Attributable to Shareholders | 51,029,814,256.41 | 51,036,297,850.42 | -0.01% | [Non-Recurring Gains and Losses and Amounts](index=6&type=section&id=%E5%85%AD%E3%80%81%E9%9D%9E%E7%BB%8F%E5%B8%B8%E6%80%A7%E6%8D%9F%E7%9B%8A%E9%A1%B9%E7%9B%AE%E5%8F%8A%E9%87%91%E9%A2%9D) During the reporting period, the company's total non-recurring gains and losses amounted to CNY 284.04 million, primarily from net non-operating income and expenses, including CNY 26.71 million from government subsidies Non-Recurring Items | Item | Amount (CNY) | | :--- | :--- | | Gains/Losses from Disposal of Non-Current Assets | -869,222.00 | | Government Subsidies Recognized in Current Profit/Loss | 26,712,875.77 | | Net Other Non-Operating Income and Expenses | 355,256,515.72 | | **Total** | **284,044,087.60** | [Management Discussion and Analysis](index=8&type=section&id=%E7%AC%AC%E4%B8%89%E8%8A%82%20%E7%AE%A1%E7%90%86%E5%B1%82%E8%AE%A8%E8%AE%BA%E4%B8%8E%E5%88%86%E6%9E%90) This section provides an in-depth analysis of the company's operations, financial condition, and future outlook, including key business activities, competitive advantages, and risk factors [Principal Business](index=8&type=section&id=%E4%B8%80%E3%80%81%E6%8A%A5%E5%91%8A%E6%9C%9F%E5%86%85%E5%85%AC%E5%8F%B8%E4%BB%8E%E4%BA%8B%E7%9A%84%E4%B8%BB%E8%A6%81%E4%B8%9A%E5%8A%A1) In the first half of 2022, the company primarily engaged in the production and sale of high-quality steel and vanadium-titanium products, with an annual capacity of 30 million tons of steel and 22,000 tons of vanadium products, serving various high-end sectors - In H1 2022, the steel industry faced challenges including a **6.5% decline in crude steel output**, lower-than-expected market demand, falling steel prices, and high raw material costs, leading to a significant decline in industry profitability[14](index=14&type=chunk) - The company's main businesses are steel and vanadium-titanium products, with an annual production capacity of **30 million tons of high-quality steel** and **22,000 tons of vanadium products**, serving high-end markets such as automotive, home appliances, construction, aerospace, and new energy[14](index=14&type=chunk) [Core Competitiveness Analysis](index=8&type=section&id=%E4%BA%8C%E3%80%81%E6%A0%B8%E5%BF%83%E7%AB%9E%E4%BA%89%E5%8A%9B%E5%88%86%E6%9E%90) The company's core competitiveness stems from its advanced process equipment, rich product structure, leadership in energy conservation and green transformation, strong technological innovation, and strategic geographical location in North China - The company possesses **world-leading process equipment**, including the world's first "sub-molten salt method for efficient vanadium extraction and clean production line," offering a rich product structure renowned domestically and internationally[15](index=15&type=chunk) - The company has achieved significant results in green development, with its **ultra-low emission control technology for multiple steel pollutants** recognized, and Laoting Steel Co. rated as an A-level environmental performance enterprise[16](index=16&type=chunk) - The company's technological advantages are prominent, with several high-end products like **high-strength galvanized steel** and **thick-zinc-layer galvanized sheets** filling domestic gaps, and it has received multiple awards including the National Science and Technology Progress First Prize[17](index=17&type=chunk)[18](index=18&type=chunk) - Located in North China, the company benefits from its proximity to Beijing-Tianjin and the Bohai Sea, allowing it to fully capitalize on development opportunities arising from **Beijing-Tianjin-Hebei coordinated development** and the construction of Xiong'an New Area[19](index=19&type=chunk) [Main Business Analysis](index=9&type=section&id=%E4%B8%89%E3%80%81%E4%B8%BB%E8%90%A5%E4%B8%9A%E5%8A%A1%E5%88%86%E6%9E%90) In H1 2022, the company's operating revenue decreased by 4.05% to CNY 71.99 billion, and net profit attributable to shareholders fell by 35.98% to CNY 974 million, with steel products, particularly plates, remaining the primary revenue source Production Indicators | Production Indicator | H1 2022 Output | | :--- | :--- | | Pig Iron Production | 14.36 million tons | | Crude Steel Production | 13.83 million tons | | Steel Product Production | 13.10 million tons | | Vanadium Slag Production | 79,200 tons | Key Financial Data | Key Financial Data | Current Period (CNY) | Prior Year Period (CNY) | YoY Change | Main Reasons for Change | | :--- | :--- | :--- | :--- | :--- | | Operating Revenue | 71,994,339,359.53 | 75,030,623,557.55 | -4.05% | - | | Income Tax Expense | 237,350,552.60 | 503,620,776.79 | -52.87% | Lower operating profit this year | | Net Cash Flow from Operating Activities | 5,045,439,973.61 | 8,514,790,800.48 | -40.74% | Decreased cash inflow due to price decline | | Net Cash Flow from Investing Activities | -683,279,491.59 | -3,185,402,448.78 | -78.55% | Reduced long-term asset expenditures | | Net Cash Flow from Financing Activities | -4,756,051,894.51 | 765,208,122.00 | -721.54% | Increased repayment of financing | Revenue Composition (by Product) | Revenue Composition (by Product) | Current Period Revenue (CNY) | Proportion | YoY Change | | :--- | :--- | :--- | :--- | | Plates | 48,342,551,923.78 | 67.15% | -8.18% | | Bars and Sections | 10,019,740,428.10 | 13.92% | 9.07% | | Wire Rods, Strips, etc. | 3,187,861,608.84 | 4.43% | 61.94% | | Vanadium Products | 905,193,816.80 | 1.26% | 21.64% | [Non-Principal Business Analysis](index=11&type=section&id=%E5%9B%9B%E3%80%81%E9%9D%9E%E4%B8%BB%E8%90%A5%E4%B8%9A%E5%88%86%E6%9E%90) Non-principal business activities significantly impacted total profit during the reporting period, with investment income and non-operating income contributing 26.40% and 27.55% respectively, and investment income from associates being sustainable Impact of Non-Principal Business on Total Profit | Item | Amount (CNY) | Proportion of Total Profit | Reason for Formation | Sustainability | | :--- | :--- | :--- | :--- | :--- | | Investment Income | 348,110,708.98 | 26.40% | Profit from associate companies | Yes | | Non-Operating Income | 363,227,623.64 | 27.55% | - | No | [Assets and Liabilities Analysis](index=11&type=section&id=%E4%BA%94%E3%80%81%E8%B5%84%E4%BA%A7%E5%8F%8A%E8%B4%9F%E5%80%BA%E7%8A%B6%E5%86%B5%E5%88%86%E6%9E%90) As of the reporting period end, total assets slightly decreased by 0.43% to CNY 242.38 billion, with fixed assets being the largest component and construction in progress increasing, while short-term borrowings constituted the primary liability - Construction in progress as a percentage of total assets increased from **8.71%** at the end of the previous year to **11.04%**, indicating ongoing investment activities by the company[28](index=28&type=chunk) Restricted Assets | Restricted Asset Item | Restricted Amount (CNY) | Reason for Restriction | | :--- | :--- | :--- | | Monetary Funds | 9,223,532,701.78 | Letter of credit margin, bill margin | | Fixed Assets | 10,600,023,719.30 | Finance lease assets | | Intangible Assets | 11,883,726.88 | Mortgage loan | | **Total** | **19,835,440,147.96** | - | [Analysis of Major Holding and Associate Companies](index=13&type=section&id=%E5%85%AB%E3%80%81%E4%B8%BB%E8%A6%81%E6%8E%A7%E8%82%A1%E5%8F%82%E8%82%A1%E5%85%AC%E5%8F%B8%E5%88%86%E6%9E%90) During the reporting period, the company's major subsidiaries, primarily engaged in steel and billet processing, all achieved profitability, with Hebei Laoting Iron & Steel Co., Ltd. being the top performer in revenue and net profit Major Subsidiaries' Performance | Company Name | Type | Operating Revenue (CNY) | Net Profit (CNY) | | :--- | :--- | :--- | :--- | | Handan Baosteel Co. | Subsidiary | 16,840,547,389.02 | 60,002,981.91 | | Medium-Thick Plate Co. | Subsidiary | 8,200,954,622.13 | 18,073,038.64 | | Hebei Laoting Iron & Steel Co., Ltd. | Subsidiary | 15,903,025,562.73 | 168,373,409.47 | [Risks and Countermeasures](index=14&type=section&id=%E5%8D%81%E3%80%81%E5%85%AC%E5%8F%B8%E9%9D%A2%E4%B8%B4%E7%9A%84%E9%A3%8E%E9%99%A9%E5%92%8C%E5%BA%94%E5%AF%B9%E6%8E%AA%E6%96%BD) The company faces significant environmental, operational, and financial risks, including production restrictions due to environmental regulations, declining steel prices amidst high raw material costs, and a high asset-liability ratio, for which it has developed corresponding mitigation strategies - The company faces key risks including: - **Environmental Protection Risk**: Located in the key air pollution control area of Beijing-Tianjin-Hebei, facing production restrictions during heavy pollution and challenges from "carbon peaking and carbon neutrality" initiatives - **Operational Risk**: Dual pressure from continuously falling steel prices and high raw material costs - **Financial Risk**: High asset-liability ratio, susceptible to changes in national credit policies[37](index=37&type=chunk)[38](index=38&type=chunk) - Company countermeasures include: - **Environmental**: Optimizing production organization under restricted output, accelerating ultra-low emission upgrades, and researching carbon emission policies - **Operational**: Deepening efficiency improvements, optimizing product structure, and strengthening strategic cooperation with suppliers to reduce procurement costs - **Financial**: Enhancing integrated capital management, adjusting debt structure through various financing methods, and ensuring cash flow safety[37](index=37&type=chunk)[38](index=38&type=chunk) [Corporate Governance](index=15&type=section&id=%E7%AC%AC%E5%9B%9B%E8%8A%82%20%E5%85%AC%E5%8F%B8%E6%B2%BB%E7%90%86) This section outlines the company's corporate governance structure and activities, including shareholder meetings, management stability, and profit distribution policies [Overview of Corporate Governance](index=15&type=section&id=%E5%85%AC%E5%8F%B8%E6%B2%BB%E7%90%86%E6%A6%82%E5%86%B5) During the reporting period, the company held two shareholder meetings, maintained stable board and management personnel, and decided against semi-annual profit distribution or equity incentive plans - Two shareholder meetings were held during the reporting period: the **2022 First Extraordinary General Meeting** and the **2021 Annual General Meeting**[39](index=39&type=chunk) - There were **no changes** in the company's directors, supervisors, or senior management during the reporting period[39](index=39&type=chunk) - The company's semi-annual profit distribution plan is **no cash dividends, no bonus shares, and no capital increase from capital reserves**[40](index=40&type=chunk) [Environmental and Social Responsibility](index=16&type=section&id=%E7%AC%AC%E4%BA%94%E8%8A%82%20%E7%8E%AF%E5%A2%83%E5%92%8C%E7%A4%BE%E4%BC%9A%E8%B4%A3%E4%BB%BB) This section details the company's environmental performance, including its status as a key pollutant emitter, compliance with emission standards, and efforts in pollution control and carbon reduction, along with its social responsibility initiatives [Major Environmental Issues](index=16&type=section&id=%E4%B8%80%E3%80%81%E9%87%8D%E5%A4%A7%E7%8E%AF%E4%BF%9D%E9%97%AE%E9%A2%98%E6%83%85%E5%86%B5) The company and its subsidiaries are designated key pollutant emitters, but all emissions comply with ultra-low standards, with no exceedances reported, and the company actively implements environmental protection measures and emergency plans - The company and its subsidiaries (e.g., Hebei Laoting, Medium-Thick Plate Co., Handan Branch) are classified as **key pollutant-discharging entities**, with primary pollutants being particulate matter, sulfur dioxide, and nitrogen oxides[42](index=42&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk) - During the reporting period, pollutant emission concentrations and total amounts for all units were **within the approved emission standards**, with no instances of exceeding limits[42](index=42&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk) - The company actively promotes environmental governance; Laoting Steel Co.'s air pollution control facilities fully meet **ultra-low emission requirements**, and multiple comprehensive air pollution control projects have been implemented. All subsidiaries have obtained pollution discharge permits and established emergency response plans for environmental incidents[46](index=46&type=chunk)[48](index=48&type=chunk) - To reduce carbon emissions, the company employs technical measures such as **sintering flue gas recirculation** and **new energy vehicle substitution**[49](index=49&type=chunk) [Significant Matters](index=22&type=section&id=%E7%AC%AC%E5%85%AD%E8%8A%82%20%E9%87%8D%E8%A6%81%E4%BA%8B%E9%A1%B9) This section covers important events and ongoing commitments, including the fulfillment of past promises, significant related-party transactions, and other material developments [Fulfillment of Commitments](index=22&type=section&id=%E4%B8%80%E3%80%81%E6%89%BF%E8%AF%BA%E4%BA%8B%E9%A1%B9%E5%B1%A5%E8%A1%8C%E6%83%85%E5%86%B5) During the reporting period, the controlling shareholder, HBIS Group, and related parties continued to fulfill historical commitments regarding avoiding horizontal competition and land/property rights, stemming from the 2010 asset restructuring - HBIS Group's long-term commitment to resolve horizontal competition with the listed company through **asset injection, entrusted management**, and other means is currently ongoing[51](index=51&type=chunk) [Significant Related-Party Transactions](index=24&type=section&id=%E5%8D%81%E4%B8%80%E3%80%81%E9%87%8D%E5%A4%A7%E5%85%B3%E8%81%94%E4%BA%A4%E6%98%93) The company engaged in significant daily related-party transactions totaling CNY 71.86 billion in H1 2022, primarily for raw material procurement and product sales, remaining within the approved annual limit, and maintained substantial deposits with an affiliated finance company - In H1 2022, the company's total daily related-party transactions amounted to **CNY 71.86 billion**, approximately **49.9%** of the annual approved limit of CNY 144.055 billion, primarily involving the procurement and sale of steel, ore, coke, and other raw materials and products[53](index=53&type=chunk)[54](index=54&type=chunk) Related-Party Financial Company Transactions | Related-Party Financial Company Transactions | Period-End Balance (CNY 10,000) | | :--- | :--- | | Deposit Business | 1,116,505.61 | | Loan Business | 0 | | Actual Credit Line Utilization | 190,763 | [Other Significant Matters](index=26&type=section&id=%E5%8D%81%E4%B8%89%E3%80%81%E5%85%B6%E4%BB%96%E9%87%8D%E5%A4%A7%E4%BA%8B%E9%A1%B9%E7%9A%84%E8%AF%B4%E6%98%8E) As of the reporting period end, the company received CNY 14.17 billion in compensation for the Tangshan Branch relocation, representing 42.42% of the total due, with delayed land disposal leading to a slower collection pace and triggering penalty payments - Compensation for the Tangshan Branch relocation totaled **CNY 14.17 billion** received, representing **42.42%** of the total amount due, with collection progress lagging behind the original schedule[61](index=61&type=chunk) [Share Changes and Shareholder Information](index=28&type=section&id=%E7%AC%AC%E4%B8%83%E8%8A%82%20%E8%82%A1%E4%BB%BD%E5%8F%98%E5%8A%A8%E5%8F%8A%E8%82%A1%E4%B8%9C%E6%83%85%E5%86%B5) This section details the company's share capital structure, any changes during the period, and information on its shareholders, including the total number of shareholders and major holdings [Share Changes](index=28&type=section&id=%E4%B8%80%E3%80%81%E8%82%A1%E4%BB%BD%E5%8F%98%E5%8A%A8%E6%83%85%E5%86%B5) As of the reporting period end, the company's total share capital remained unchanged at 10,618,607,852 shares, with unrestricted shares accounting for 99.98% - The company's total share capital remained **unchanged** at **10,618,607,852 shares** during the reporting period[64](index=64&type=chunk) [Shareholder Numbers and Shareholding Structure](index=29&type=section&id=%E4%B8%89%E3%80%81%E5%85%AC%E5%8F%B8%E8%82%A1%E4%B8%9C%E6%95%B0%E9%87%8F%E5%8F%8A%E6%8C%81%E8%82%A1%E6%83%85%E5%86%B5) As of the reporting period end, the company had 286,258 common shareholders, with the top three shareholders, all state-owned legal entities, collectively holding over 61% of the shares, led by Handan Iron & Steel Group Co., Ltd. at 39.73% Top Shareholders | Shareholder Name | Shareholder Nature | Shareholding Proportion | | :--- | :--- | :--- | | Handan Iron & Steel Group Co., Ltd. | State-owned Legal Entity | 39.73% | | Tangshan Iron & Steel Group Co., Ltd. | State-owned Legal Entity | 17.45% | | Chengde Iron & Steel Group Co., Ltd. | State-owned Legal Entity | 4.07% | | Hong Kong Securities Clearing Company Limited | Overseas Legal Entity | 1.70% | | China Securities Finance Corporation Limited | Domestic Non-State-owned Legal Entity | 1.24% | - Handan Iron & Steel Group, Tangshan Iron & Steel Group, Chengde Iron & Steel Group, and Hebei Iron & Steel Group Mining Co., Ltd. among the top ten shareholders are **related parties**, all controlled by HBIS Group Co., Ltd[68](index=68&type=chunk) [Bond-Related Information](index=32&type=section&id=%E7%AC%AC%E4%B9%9D%E8%8A%82%20%E5%80%BA%E5%88%B8%E7%9B%B8%E5%85%B3%E6%83%85%E5%86%B5) This section provides details on the company's outstanding corporate and enterprise bonds, including their balances, interest rates, maturity dates, and an analysis of key financial indicators related to debt [Enterprise Bonds](index=32&type=section&id=%E4%B8%80%E3%80%81%E4%BC%81%E4%B8%9A%E5%80%BA%E5%88%B8) As of the reporting period end, the company had one outstanding enterprise bond, "18 HBIS G1," with a balance of CNY 700 million and an interest rate of 5.42%, maturing on March 26, 2023 Outstanding Enterprise Bonds | Bond Abbreviation | Bond Code | Bond Balance (CNY) | Interest Rate | Maturity Date | | :--- | :--- | :--- | :--- | :--- | | 18 HBIS G1 | 111071 | 700,000,000.00 | 5.42% | 2023-03-26 | [Corporate Bonds](index=32&type=section&id=%E4%BA%8C%E3%80%81%E5%85%AC%E5%8F%B8%E5%80%BA%E5%88%B8) As of the reporting period end, the company had five outstanding corporate bonds totaling CNY 7.5 billion, including four regular corporate bonds and one newly issued perpetual bond, "22 HBIS Y1," in July 2022 Outstanding Corporate Bonds | Bond Abbreviation | Bond Code | Bond Balance (CNY) | Interest Rate | Maturity Date | | :--- | :--- | :--- | :--- | :--- | | 19 HBIS 01 | 112999 | 1,500,000,000.00 | 4.08% | 2024-11-26 | | 19 HBIS 02 | 149011 | 1,500,000,000.00 | 4.11% | 2024-12-12 | | 20HBIS01 | 149099 | 1,500,000,000.00 | 3.38% | 2025-04-20 | | 20HBIS02 | 149181 | 1,500,000,000.00 | 4.20% | 2025-07-30 | | 22 HBIS Y1 | 149971 | 1,500,000,000.00 | 3.40% | 2024-07-05 | [Key Financial Indicators for the Past Two Years](index=34&type=section&id=%E5%85%AD%E3%80%81%E6%88%AA%E8%87%B3%E6%8A%A5%E5%91%8A%E6%9C%AB%E5%85%AC%E5%8F%B8%E8%BF%91%E4%B8%A4%E5%B9%B4%E7%9A%84%E4%B8%BB%E8%A6%81%E4%BC%9A%E8%AE%A1%E6%95%B0%E6%8D%AE%E5%92%8C%E8%B4%A2%E5%8A%A1%E6%8C%87%E6%A0%87) As of the reporting period end, the company's asset-liability ratio was 74.31%, a 0.67 percentage point decrease from the previous year-end, while interest coverage ratios declined, indicating increased short-term debt pressure Key Financial Indicators | Item | Current Period End/Current Period | Prior Year End/Prior Year Period | Change | | :--- | :--- | :--- | :--- | | Asset-Liability Ratio | 74.31% | 74.98% | -0.67% | | Interest Coverage Ratio | 1.42 | 1.66 | -14.46% | | Cash Interest Coverage Ratio | 2.94 | 4.34 | -32.26% | | Loan Repayment Rate | 100.00% | 100.00% | 0.00% | [Financial Report](index=35&type=section&id=%E7%AC%AC%E5%8D%81%E8%8A%82%20%E8%B4%A2%E5%8A%A1%E6%8A%A5%E5%91%8A) This section presents the company's unaudited semi-annual financial statements, including the balance sheets, income statements, cash flow statements, and statements of changes in owners' equity for both consolidated and parent company levels, along with detailed notes [Audit Report](index=35&type=section&id=%E4%B8%80%E3%80%81%E5%AE%A1%E8%AE%A1%E6%8A%A5%E5%91%8A) The company's 2022 semi-annual financial report was not audited - The company's semi-annual financial report was **unaudited**[79](index=79&type=chunk) [Financial Statements](index=35&type=section&id=%E4%BA%8C%E3%80%81%E8%B4%A2%E5%8A%A1%E6%8A%A5%E8%A1%A8) This section provides the company's key financial statements for the first half of 2022, including consolidated and parent company balance sheets, income statements, cash flow statements, and statements of changes in owners' equity [Consolidated Balance Sheet](index=35&type=section&id=1%E3%80%81%E5%90%88%E5%B9%B6%E8%B5%84%E4%BA%A7%E8%B4%9F%E5%80%BA%E8%A1%A8) [Parent Company Balance Sheet](index=37&type=section&id=2%E3%80%81%E6%AF%8D%E5%85%AC%E5%8F%B8%E8%B5%84%E4%BA%A7%E8%B4%9F%E5%80%BA%E8%A1%A8) [Consolidated Income Statement](index=39&type=section&id=3%E3%80%81%E5%90%88%E5%B9%B6%E5%88%A9%E6%B6%A6%E8%A1%A8) [Parent Company Income Statement](index=40&type=section&id=4%E3%80%81%E6%AF%8D%E5%85%AC%E5%8F%B8%E5%88%A9%E6%B6%A6%E8%A1%A8) [Consolidated Cash Flow Statement](index=41&type=section&id=5%E3%80%81%E5%90%88%E5%B9%B6%E7%8E%B0%E9%87%91%E6%B5%81%E9%87%8F%E8%A1%A8) [Parent Company Cash Flow Statement](index=42&type=section&id=6%E3%80%81%E6%AF%8D%E5%85%AC%E5%8F%B8%E7%8E%B0%E9%87%91%E6%B5%81%E9%87%8F%E8%A1%A8) [Consolidated Statement of Changes in Owners' Equity](index=43&type=section&id=7%E3%80%81%E5%90%88%E5%B9%B6%E6%89%80%E6%9C%89%E8%80%85%E6%9D%83%E7%9B%8A%E5%8F%98%E5%8A%A8%E8%A1%A8) [Parent Company Statement of Changes in Owners' Equity](index=48&type=section&id=8%E3%80%81%E6%AF%8D%E5%85%AC%E5%8F%B8%E6%89%80%E6%9C%89%E8%80%85%E6%9D%83%E7%9B%8A%E5%8F%98%E5%8A%A8%E8%A1%A8) [Notes to Financial Statements](index=52&type=section&id=%E8%B4%A2%E5%8A%A1%E6%8A%A5%E8%A1%A8%E9%99%84%E6%B3%A8) The notes to the financial statements detail the company's general information, basis of preparation, significant accounting policies and estimates, taxation, and provide comprehensive explanations for major consolidated financial statement items, related party disclosures, contingencies, and other significant matters

[Important Notice, Table of Contents, and Definitions](index=1&type=section&id=Item%201.%20Important%20Notice%2C%20Table%20of%20Contents%2C%20and%20Definitions) [Important Notice](index=1&type=section&id=Important%20Notice) The board ensures the report's accuracy and proposes a cash dividend of 1.00 CNY per 10 shares based on repurchased-adjusted share capital 2021 Profit Distribution Plan | Item | Content | | :--- | :--- | | Distribution Basis | 10.34 billion shares (total share capital after repurchases) | | Cash Dividend per 10 Shares | 1.00 CNY (tax inclusive) | | Bonus Shares per 10 Shares | 0 shares | | Capitalization from Reserves | Not implemented | [Definitions](index=3&type=section&id=Definitions) This section defines key terms and abbreviations used throughout the report, including company, regulatory, and affiliate entities - The report clarifies that "**Company/This Company**" refers to **HBIS Co., Ltd.**, "**HBIS Group**" refers to the controlling shareholder **HBIS Group Co., Ltd.**, and defines other major subsidiaries and affiliates[5](index=5&type=chunk) [Company Profile and Key Financial Indicators](index=4&type=section&id=Item%202.%20Company%20Profile%20and%20Key%20Financial%20Indicators) [Company Information](index=4&type=section&id=1.%20Company%20Information) This section provides the company's basic registration, contact, and disclosure information, including its stock abbreviation "HBIS Co." and code "000709" listed on the Shenzhen Stock Exchange Company Basic Information | Item | Content | | :--- | :--- | | Stock Abbreviation | HBIS Co. | | Stock Code | 000709 | | Listing Exchange | Shenzhen Stock Exchange | | Legal Representative | Wang Lanyu | | Company Website | http://www.hebgtgf.com | [Key Accounting Data and Financial Indicators](index=5&type=section&id=6.%20Key%20Accounting%20Data%20and%20Financial%20Indicators) The company achieved strong 2021 performance with operating revenue up **38.98%** to **149.63 billion CNY**, net profit attributable to shareholders up **58.32%** to **2.69 billion CNY**, and operating cash flow up **91.30%** to **14.70 billion CNY** 2021 Key Financial Indicators | Indicator | 2021 | 2020 (Restated) | YoY Change | | :--- | :--- | :--- | :--- | | Operating Revenue (CNY) | 149,626,213,823.78 | 107,657,058,670.48 | 38.98% | | Net Profit Attributable to Shareholders (CNY) | 2,688,119,978.62 | 1,697,854,409.52 | 58.32% | | Net Cash Flow from Operating Activities (CNY) | 14,701,808,666.23 | 7,685,281,412.59 | 91.30% | | Basic Earnings Per Share (CNY/share) | 0.24 | 0.12 | 100.00% | | Weighted Average Return on Net Assets | 4.94% | 2.15% | Increased by 2.79 percentage points | | Total Assets (CNY) | 243,419,433,508.61 | 241,229,868,166.70 | 0.91% | [Key Quarterly Financial Indicators](index=6&type=section&id=8.%20Key%20Quarterly%20Financial%20Indicators) The company's 2021 quarterly performance fluctuated, with Q3 operating revenue peaking at **46.72 billion CNY** and Q4 net profit attributable to shareholders declining to **319 million CNY**, with negative non-recurring net profit 2021 Quarterly Financial Data (Unit: CNY) | Indicator | Q1 | Q2 | Q3 | Q4 | | :--- | :--- | :--- | :--- | :--- | | Operating Revenue | 33,033,207,507.16 | 41,997,416,050.39 | 46,716,268,893.90 | 27,879,321,372.33 | | Net Profit Attributable to Shareholders | 481,528,047.49 | 1,039,609,521.71 | 847,551,825.26 | 319,430,584.16 | | Net Profit Attributable to Shareholders (Excl. Non-recurring Items) | 476,366,537.79 | 1,033,620,668.78 | 844,682,227.75 | -171,995,064.83 | | Net Cash Flow from Operating Activities | 3,136,231,442.52 | 5,378,559,357.96 | 14,091,728,646.36 | -7,904,710,780.61 | [Non-recurring Gains and Losses Items and Amounts](index=6&type=section&id=9.%20Non-recurring%20Gains%20and%20Losses%20Items%20and%20Amounts) In 2021, total non-recurring gains and losses significantly increased to **505 million CNY**, primarily due to a turnaround in "other non-operating income and expenses" and higher government subsidies Non-recurring Gains and Losses Items (Unit: CNY) | Item | 2021 Amount | 2020 Amount | | :--- | :--- | :--- | | Government Subsidies | 250,703,828.56 | 83,185,826.31 | | Other Non-operating Income and Expenses | 398,972,418.70 | -10,358,048.51 | | **Total** | **505,445,609.13** | **79,143,003.13** | [Management Discussion and Analysis](index=8&type=section&id=Item%203.%20Management%20Discussion%20and%20Analysis) [Industry Overview and Main Business](index=8&type=section&id=1.%20Industry%20Overview%20During%20the%20Reporting%20Period) In 2021, China's crude steel output decreased by **3%** to **1.033 billion tons**; the company, a key player, has an annual capacity of **30 million tons** of steel and leads in vanadium-titanium technology - In 2021, China's crude steel output decreased by **3%** to **1.033 billion tons**, steel product exports increased by **24.6%** year-on-year, and industry profitability remained favorable[19](index=19&type=chunk) - The company has an annual production capacity of **30 million tons** of high-quality steel products and **22,000 tons** of vanadium products, widely used in high-end markets such as automotive, home appliances, and aerospace[20](index=20&type=chunk) [Analysis of Core Competencies](index=8&type=section&id=3.%20Analysis%20of%20Core%20Competencies) The company's core competencies include advanced equipment, a comprehensive product line, strong green development with Leigang Company achieving environmental A-grade, significant technological innovation, and a strategic geographical advantage in the Beijing-Tianjin-Hebei region - The company possesses the world's first "sub-molten salt method high-efficiency vanadium extraction clean production line," leading globally in vanadium-titanium smelting technology[21](index=21&type=chunk) - The company has achieved significant results in green transformation, with **Leigang Company** being recognized as an environmental **A-grade performance enterprise**, setting a benchmark for the industry[23](index=23&type=chunk) - Located in North China, surrounding Beijing-Tianjin and bordering the Bohai Sea, the company will benefit from continuous development opportunities brought by Beijing-Tianjin-Hebei coordinated development and Xiongan New Area construction[25](index=25&type=chunk) [Main Business Analysis](index=9&type=section&id=4.%20Main%20Business%20Analysis) In 2021, the company achieved strong operating results with **149.6 billion CNY** in revenue and **2.7 billion CNY** in net profit, driven by advancements in production, marketing, technology, and integrated operations 2021 Key Production and Operation Data | Indicator | 2021 Output/Amount | | :--- | :--- | | Iron Production | 25.31 million tons | | Steel Production | 25.68 million tons | | Steel Product Production | 25.21 million tons | | Operating Revenue | 149.6 billion CNY | | Total Profit | 3.7 billion CNY | | Net Profit Attributable to Parent | 2.7 billion CNY | - The company fully launched a "marketing center + regional company" marketing model reform, forming an integrated marketing system that enhanced its market influence[28](index=28&type=chunk) - The company developed nearly a hundred new products, with many filling domestic gaps or achieving import substitution, and high-end products applied in key projects such as "Hualong One" and Winter Olympics venues[29](index=29&type=chunk) [Revenue and Cost](index=10&type=section&id=2.%20Revenue%20and%20Cost) In 2021, operating revenue grew **38.98%**, with steel industry revenue up **35.44%**; plates were the main product revenue source, while wire rods and strips saw the largest growth of **110.62%**; North and East China were key markets, and the steel industry's gross profit margin was **11.08%** 2021 Operating Revenue Composition (Unit: CNY) | Category | 2021 Amount | % of Operating Revenue | YoY Change | | :--- | :--- | :--- | :--- | | **By Industry** | | | | | Steel Industry | 139,171,537,944.81 | 93.02% | 35.44% | | **By Product** | | | | | Plates | 101,828,156,083.90 | 68.06% | 48.19% | | Bars and Sections | 17,746,430,617.56 | 11.86% | 7.43% | | **By Region** | | | | | North China | 95,274,340,991.40 | 63.68% | 31.31% | | East China | 35,165,679,020.09 | 23.50% | 56.33% | 2021 Key Segment Gross Profit Margin | Category | Operating Revenue (CNY) | Operating Cost (CNY) | Gross Profit Margin | YoY Change in Gross Profit Margin | | :--- | :--- | :--- | :--- | :--- | | Steel Industry | 139,171,537,944.81 | 123,751,780,444.12 | 11.08% | -0.79% | | Plates | 101,828,156,083.90 | 89,009,461,282.02 | 12.59% | 0.06% | | North China | 95,274,340,991.40 | 84,230,942,893.45 | 11.59% | -1.15% | - Sales to the company's top five customers accounted for **58.79%** of total annual sales, with the largest customer, **HBIS Group Co., Ltd.**, accounting for **49.06%**; purchases from the top five suppliers accounted for **65.85%** of total annual purchases, with the largest supplier, **HBIS Group Co., Ltd.**, accounting for **60.95%**, indicating a high degree of related party transactions with the controlling shareholder[42](index=42&type=chunk)[43](index=43&type=chunk) [Expenses](index=14&type=section&id=3.%20Expenses) The company's expense structure changed significantly, with selling expenses down **68.60%** due to business model changes, while administrative, financial, and R&D expenses increased by **25.02%**, **16.11%**, and **31.20%** respectively 2021 Period Expenses (Unit: CNY) | Expense Item | 2021 | 2020 | YoY Change | Significant Change Explanation | | :--- | :--- | :--- | :--- | :--- | | Selling Expenses | 88,792,991.02 | 282,799,913.66 | -68.60% | Business model change | | Administrative Expenses | 3,272,479,362.19 | 2,617,617,015.79 | 25.02% | | | Financial Expenses | 5,851,683,500.29 | 5,039,950,629.79 | 16.11% | | | R&D Expenses | 3,700,740,784.42 | 2,820,729,671.94 | 31.20% | | [R&D Investment](index=14&type=section&id=4.%20R%26D%20Investment) In 2021, R&D investment totaled **3.701 billion CNY**, up **31.20%**, focusing on high-end technologies to enhance product competitiveness and achieve import substitution, with an increased proportion of highly educated R&D personnel R&D Investment Overview | Indicator | 2021 | 2020 | Change Percentage | | :--- | :--- | :--- | :--- | | R&D Investment Amount (CNY) | 3,700,740,784.42 | 2,820,729,671.94 | 31.20% | | R&D Investment as % of Operating Revenue | 2.47% | 2.62% | -0.15% | | Number of R&D Personnel (persons) | 477 | 494 | -3.44% | [Cash Flow](index=17&type=section&id=5.%20Cash%20Flow) The company's 2021 cash flow significantly improved, with operating cash flow surging **91.30%** to **14.70 billion CNY**, investing cash flow turning positive with a **5.40 billion CNY** net inflow, and overall cash and cash equivalents increasing by **10.26 billion CNY** Key Cash Flow Statement Items (Unit: CNY) | Item | 2021 | 2020 | YoY Change | | :--- | :--- | :--- | :--- | | Net Cash Flow from Operating Activities | 14,701,808,666.23 | 7,685,281,412.59 | 91.30% | | Net Cash Flow from Investing Activities | 5,400,017,687.97 | -12,655,750,912.34 | -142.67% | | Net Cash Flow from Financing Activities | -9,790,683,188.59 | 7,379,662,587.28 | -232.67% | | Net Increase in Cash and Cash Equivalents | 10,256,322,646.60 | 2,404,600,034.12 | 326.53% | [Analysis of Assets and Liabilities](index=18&type=section&id=6.%20Analysis%20of%20Assets%20and%20Liabilities) As of 2021 year-end, total assets were **243.42 billion CNY**, with fixed assets decreasing to **54.91%** and construction in progress increasing to **8.71%**, reflecting a significant project construction phase Key Balance Sheet Items Change Analysis | Item | 2021 Year-end Amount (CNY) | % of Total Assets | 2021 Beginning Amount (CNY) | % of Total Assets | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Cash and Cash Equivalents | 35,016,461,423.12 | 14.39% | 28,419,897,297.11 | 11.78% | 2.61% | | Fixed Assets | 133,650,011,960.28 | 54.91% | 148,507,538,030.83 | 59.12% | -4.21% | | Construction in Progress | 21,212,527,252.42 | 8.71% | 13,953,232,969.09 | 5.78% | 2.93% | | Short-term Borrowings | 67,592,324,073.26 | 27.77% | 61,817,984,446.34 | 25.63% | 2.14% | - Of the cash and cash equivalents at period-end, **10.88 billion CNY** were restricted funds, primarily for bank acceptance bill deposits, letter of credit deposits, and frozen funds[54](index=54&type=chunk) [Analysis of Investment Status](index=19&type=section&id=7.%20Analysis%20of%20Investment%20Status) The company made significant equity investments totaling **5.69 billion CNY**, including a **5 billion CNY** capital increase in Leigang Company and establishing two new joint ventures with **51%** stakes 2021 Significant Equity Investments | Investee Company | Investment Method | Investment Amount (CNY) | Shareholding Percentage | | :--- | :--- | :--- | :--- | | Leigang Company | Capital Increase | 5,000,000,000.00 | 51.00% | | HBIS Group Finance Company | Capital Increase | 294,000,000.00 | 49.00% | | Handan Energy Steel Co., Ltd. | New Establishment | 255,000,000.00 | 51.00% | | Handan Huafeng Energy Co., Ltd. | New Establishment | 142,800,000.00 | 51.00% | [Analysis of Major Holding and Participating Companies](index=20&type=section&id=9.%20Analysis%20of%20Major%20Holding%20and%20Participating%20Companies) All major subsidiaries were profitable in 2021, with Handan Baosteel Company contributing **671 million CNY** in net profit, and the company established two new controlled subsidiaries Major Subsidiaries' 2021 Operating Performance (Unit: CNY) | Company Name | Operating Revenue | Operating Profit | Net Profit | | :--- | :--- | :--- | :--- | | Leigang Company | 24,318,602,898.04 | 553,380,195.53 | 499,272,292.35 | | Handan Baosteel Company | 35,803,069,658.60 | 889,305,208.31 | 670,687,418.21 | | Medium-Thick Plate Company | 14,621,090,230.50 | 108,022,443.46 | 94,927,028.64 | [Outlook on Company's Future Development](index=21&type=section&id=11.%20Outlook%20on%20Company%27s%20Future%20Development) The company plans to produce **25.68 million tons** of iron and **26.36 million tons** of crude steel in 2022, focusing on enhancing steel business efficiency and profitability while addressing environmental, cost, financial, and pandemic risks 2022 Operating Plan | Product | Planned Output | | :--- | :--- | | Iron | 25.68 million tons | | Crude Steel | 26.36 million tons | | Steel Products | 25.10 million tons | | Vanadium Slag | 0.17 million tons | - The main risks faced by the company include: - **Environmental Risk**: National "carbon peak and carbon neutrality" goals and strict environmental requirements in the Beijing-Tianjin-Hebei region - **Cost Risk**: High prices for major raw materials such as iron ore and coking coal - **Financial Risk**: High asset-liability ratio, and potential impact of national credit policy adjustments on interest expenses - **Epidemic Risk**: Recurring domestic epidemics may affect normal production and operations[69](index=69&type=chunk)[70](index=70&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk) [Corporate Governance](index=24&type=section&id=Item%204.%20Corporate%20Governance) [Overview of Corporate Governance](index=24&type=section&id=1.%20Basic%20Status%20of%20Corporate%20Governance) The company maintains a sound corporate governance structure, revising nine internal systems and conducting self-inspection and rectification in 2021 to enhance compliance and governance standards - The company's corporate governance structure is sound, with clear responsibilities and effective checks and balances among the general meeting of shareholders, board of directors, supervisory board, and management[74](index=74&type=chunk) - In 2021, the company revised **nine** internal systems and completed self-inspection and rectification for the special action on listed company governance, in accordance with regulatory requirements[74](index=74&type=chunk)[112](index=112&type=chunk) [Information on Directors, Supervisors, and Senior Management](index=25&type=section&id=5.%20Information%20on%20Directors%2C%20Supervisors%2C%20and%20Senior%20Management) Changes occurred in the company's directors, supervisors, and senior management during the period, with former chairman Liu Jian resigning, and the report details current executives' backgrounds, experiences, and remuneration, including those with roles in related parties - During the reporting period, former Chairman **Liu Jian**, Director **Tian Xin**, Director **Zhu Huaming**, and former Employee Supervisor **Zhang Jianzhong** resigned due to work reasons[79](index=79&type=chunk)[81](index=81&type=chunk) Total Pre-tax Remuneration for Selected Senior Executives in 2021 (Unit: Ten Thousand CNY) | Name | Position | Total Remuneration | | :--- | :--- | :--- | | Xu Bin | General Manager | 106.28 | | Jia Guosheng | Deputy General Manager | 84.5 | | Li Maoguang | Deputy General Manager | 85.5 | | Chang Guangshen | Director, Chief Accountant | 73.37 | | Zhu Huaming | Chairman of Supervisory Board | 78.03 | [Performance of Board of Directors and Special Committees](index=30&type=section&id=6.%20Performance%20of%20Directors%20During%20the%20Reporting%20Period) In 2021, the Board of Directors held **10** meetings, with good attendance, and its special committees actively fulfilled their duties, reviewing major proposals including investments and audits - The Board of Directors held **10** meetings throughout the year, with all directors diligently performing their duties and raising no objections to company matters[91](index=91&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk) - The Audit Committee held **5** meetings, reviewing matters such as the annual audit plan, reappointment of audit firms, and quarterly financial reports[95](index=95&type=chunk) [Internal Control](index=34&type=section&id=12.%20Construction%20and%20Implementation%20of%20Internal%20Control%20System%20During%20the%20Reporting%20Period) The company's 2021 internal control self-assessment found effective implementation with no material deficiencies, covering **97.10%** of consolidated assets and **96.22%** of revenue, and the accounting firm issued an unqualified internal control audit report - The company's internal control self-assessment report concluded that effective internal controls over financial reporting were maintained in all material respects, with no material or significant deficiencies found[106](index=106&type=chunk)[109](index=109&type=chunk) - The accounting firm issued a standard unqualified internal control audit report, consistent with the board's self-assessment report[110](index=110&type=chunk)[111](index=111&type=chunk) [Environmental and Social Responsibility](index=37&type=section&id=Item%205.%20Environmental%20and%20Social%20Responsibility) [Significant Environmental Issues](index=37&type=section&id=1.%20Significant%20Environmental%20Issues) The company and its major subsidiaries are key pollutant emitters; Leigang Company achieved environmental A-grade, but Tangshan Medium-Thick Plate Company received significant administrative penalties for multiple environmental violations - All of the company's subsidiaries and branches have established comprehensive pollution control facilities, and **Leigang Company** has been recognized as an environmental **A-grade performance enterprise**[117](index=117&type=chunk) - During the reporting period, subsidiary **Tangshan Medium-Thick Plate Company** received administrative penalties totaling over **ten million CNY** and had its pollutant discharge permit revoked due to various reasons, including unactivated dust collectors, failure to implement heavy pollution weather controls, exceeding online monitoring limits, and evading supervision for atmospheric pollutant discharge[122](index=122&type=chunk)[123](index=123&type=chunk)[124](index=124&type=chunk)[125](index=125&type=chunk) [Significant Matters](index=45&type=section&id=Item%206.%20Significant%20Matters) [Fulfillment of Commitments](index=45&type=section&id=1.%20Fulfillment%20of%20Commitments) The controlling shareholder, HBIS Group, is fulfilling long-term commitments from asset restructuring, including avoiding horizontal competition and resolving land and property title issues - **HBIS Group** committed to resolving horizontal competition issues with the listed company through asset injection, entrusted management, and other means, and this commitment is currently being fulfilled[128](index=128&type=chunk) [Significant Related Party Transactions](index=49&type=section&id=14.%20Significant%20Related%20Party%20Transactions) In 2021, the company conducted large-scale daily related party transactions totaling **159.19 billion CNY**, primarily for raw material procurement and product sales, with significant transactions involving the ultimate controlling party, HBIS Group - The actual amount of daily related party transactions in 2021 was **159.19 billion CNY**, accounting for **98.79%** of the approved limit; transactions primarily involved the purchase and sale of goods, and the provision and acceptance of services[150](index=150&type=chunk)[151](index=151&type=chunk) Key Transactions with HBIS Group Co., Ltd. (Ultimate Controlling Party) (Unit: Ten Thousand CNY) | Transaction Type | Transaction Content | Transaction Amount | | :--- | :--- | :--- | | Purchase of Goods | Coal, Steel Products, Iron Concentrate | 2,286,704.04 | | Sale of Goods | Vanadium Products, Steel Billets and Steel Products, Utilities, etc. | 2,181,925.08 | - The company, together with Hebei Steel Industry Transformation and Upgrading Fund, jointly increased capital in **Leigang Company**, and together with **HBIS Group**, jointly increased capital in **HBIS Group Finance Company**[157](index=157&type=chunk) [Significant Litigation and Arbitration Matters](index=48&type=section&id=11.%20Significant%20Litigation%20and%20Arbitration%20Matters) The company is involved in a significant ongoing lawsuit with Asia Union (Hong Kong) International Investment Co., Ltd. for **762 million CNY** and recognized **5.66 million CNY** in trusteeship fees from managing HBIS Group assets - The company was sued by **Asia Union (Hong Kong) International Investment Co., Ltd.** for a contract dispute, involving an amount of **761.56 million CNY**; after the first instance ruling dismissed the case, the plaintiff appealed, and the Hebei Provincial High Court ruled for a retrial[137](index=137&type=chunk) - The company managed equity and assets of related parties such as Xuansteel Group, Wuyang Iron & Steel, and Tangshan Stainless Steel under trusteeship, recognizing **5.66 million CNY** in trusteeship fee income in 2021[159](index=159&type=chunk)[160](index=160&type=chunk) [Share Changes and Shareholder Information](index=63&type=section&id=Item%207.%20Share%20Changes%20and%20Shareholder%20Information) [Share Changes and Shareholder Information](index=63&type=section&id=1.%20Share%20Changes) As of 2021 year-end, total share capital remained unchanged at **10.62 billion shares**; Handan Iron & Steel Group is the controlling shareholder with **39.73%**, and the top three shareholders, all HBIS Group subsidiaries, collectively hold **61.25%** - The company's total share capital remained unchanged during the reporting period, totaling **10,618,607,852 shares**[164](index=164&type=chunk) Top Three Shareholders' Shareholding | Shareholder Name | Shareholding Percentage | Number of Shares Held | | :--- | :--- | :--- | | Handan Iron & Steel Group Co., Ltd. | 39.73% | 4,218,763,010 | | Tangshan Iron & Steel Group Co., Ltd. | 17.45% | 1,853,409,753 | | Chengde Iron & Steel Group Co., Ltd. | 4.07% | 432,063,701 | - The company's actual controller is the **Hebei Provincial People's Government State-owned Assets Supervision and Administration Commission**[174](index=174&type=chunk) [Bond-Related Information](index=69&type=section&id=Item%209.%20Bond-Related%20Information) [Bond Information](index=69&type=section&id=1.%20Corporate%20Bonds) As of period-end, the company had **5** outstanding bonds totaling **7.4 billion CNY**, including a green bond, all listed on the Shenzhen Stock Exchange, with proceeds used as committed for environmental projects and working capital Overview of Outstanding Bonds | Bond Abbreviation | Bond Code | Maturity Date | Bond Balance (CNY) | Interest Rate | | :--- | :--- | :--- | :--- | :--- | | 18 HBIS G1 | 111071 | 2023-03-26 | 700,000,000.00 | 5.42% | | 19 HBIS 01 | 112999 | 2024-11-26 | 1,500,000,000.00 | 4.08% | | 19 HBIS 02 | 149011 | 2024-12-12 | 1,500,000,000.00 | 4.11% | | 20HBIS01 | 149099 | 2025-04-20 | 1,500,000,000.00 | 3.38% | | 20HBIS02 | 149181 | 2025-07-30 | 1,500,000,000.00 | 4.20% | - All bond proceeds have been used as planned, with no instances of non-compliant use[180](index=180&type=chunk)[185](index=185&type=chunk) [Financial Report](index=74&type=section&id=Item%2010.%20Financial%20Report) [Audit Report](index=74&type=section&id=1.%20Audit%20Report) Zhongxingcai Guanghua Certified Public Accountants issued a standard unqualified audit opinion on the 2021 financial statements, with steel product and billet revenue recognition identified as a key audit matter - The audit opinion type is a **standard unqualified opinion**[189](index=189&type=chunk) - A key audit matter is "revenue recognition for steel products and billets," for which auditors performed procedures including internal control testing, contract examination, confirmations, fair value analysis, and cut-off testing[191](index=191&type=chunk) [Main Financial Statements](index=76&type=section&id=2.%20Financial%20Statements) As of 2021 year-end, total assets were **243.42 billion CNY**, total liabilities **182.53 billion CNY**, and total equity attributable to the parent was **51.04 billion CNY**, with **149.63 billion CNY** in total operating revenue and **2.69 billion CNY** in net profit Consolidated Balance Sheet Summary (2021-12-31) | Item | Amount (CNY) | | :--- | :--- | | Total Assets | 243,419,433,508.61 | | Total Liabilities | 182,527,663,181.04 | | Total Equity Attributable to Parent Company Owners | 51,036,297,850.42 | Consolidated Income Statement Summary (2021) | Item | Amount (CNY) | | :--- | :--- | | Total Operating Revenue | 149,626,213,823.78 | | Operating Profit | 3,269,016,975.75 | | Total Profit | 3,667,989,394.45 | | Net Profit Attributable to Parent Company Shareholders | 2,688,119,978.62 | Consolidated Cash Flow Statement Summary (2021) | Item | Amount (CNY) | | :--- | :--- | | Net Cash Flow from Operating Activities | 14,701,808,666.23 | | Net Cash Flow from Investing Activities | 5,400,017,687.97 | | Net Cash Flow from Financing Activities | -9,790,683,188.59 | | Net Increase in Cash and Cash Equivalents | 10,256,322,646.60 |