BAOSTEEL GROUP CORPORATION (Incorporated with limited liability in the People s Republic of China)

Transcription

1 BAOSTEEL GROUP CORPORATION (Incorporated with limited liability in the People s Republic of China) CNY500,000, per cent. Bonds due 2014 (the 2014 Bonds) CNY900,000, per cent. Bonds due 2015 (the 2015 Bonds) CNY1,500,000, per cent. Bonds due 2017 (the 2017 Bonds) Issue Price for the 2014 Bonds: 100 per cent. Issue Price for the 2015 Bonds: 100 per cent. Issue Price for the 2017 Bonds: 100 per cent. The CNY500,000, per cent. Bonds due 2014 (the 2014 Bonds), the CNY900,000, per cent. Bonds due 2015 (the 2015 Bonds) and the CNY1,500,000, per cent. Bonds due 2017 (the 2017 Bonds and together with the 2014 Bonds and the 2015 Bonds, the Bonds) will be issued by Baosteel Group Corporation (the Company or the Issuer). In this Offering Circular, references to the Bonds are to any of the 2014 Bonds, the 2015 Bonds and the 2017 Bonds and references to a series of Bonds or to a series are to the 2014 Bonds, the 2015 Bonds or the 2017 Bonds separately. The 2014 Bonds will bear interest from and including 29 February 2012 at the rate of per cent. per annum. The 2015 Bonds will bear interest from and including 29 February 2012 at the rate of per cent. per annum. The 2017 Bonds will bear interest from and including 29 February 2012 at the rate of per cent. per annum. Interest will be payable semi-annually in arrear on the date falling on or nearest to 1 March and 1 September in each year (each an Interest Payment Date) commencing on 1 September All payments of principal, premium and interest by or on behalf of the Issuer in respect of the Bonds shall be made free and clear of, and without withholding or deduction for, any taxes, duties, assessments or governmental charges of whatever nature imposed, levied, collected, withheld or assessed by or within the People s Republic of China (the PRC) or any authority in the PRC or thereof having power to tax, unless such withholding or deduction is required by law, in which event, the Issuer will increase the amounts paid by it to the extent required, so that the net amount received by Bondholders equals the amounts which would otherwise have been receivable by them had no such withholding or deduction been required. The 2014 Bonds will mature on the Interest Payment Date falling on or nearest to 1 March 2014 at their principal amount. The 2015 Bonds will mature on the Interest Payment Date falling on or nearest to 1 March 2015 at their principal amount. The 2017 Bonds will mature on the Interest Payment Date falling on or nearest to 1 March 2017 at their principal amount. The Bonds may be redeemed at the option of the Issuer in whole, but not in part, at their principal amount (together with interest accrued to the date of redemption) upon the occurrence of certain tax events as described under Terms and Conditions of the Bonds Redemption and Purchase Redemption for Taxation Reasons. The Bonds may also be redeemed at the option of the Bondholders (as defined in the Terms and Conditions of the Bonds) at 101 per cent. of the principal amount, together with accrued interest, upon occurrence of a Change of Control (as defined in the Terms and Conditions of the Bonds) and at 100 per cent. of the principal amount, together with accrued interest, upon the occurrence of a No Registration Event (as defined in the Terms and Conditions of the Bonds). The Bonds will constitute direct, unconditional, unsubordinated and (subject to Condition 4 of the Terms and Conditions of the Bonds) unsecured obligations of the Issuer and shall at all times rank pari passu and without any preference among themselves. The payment obligations of the Issuer under the Bonds shall, save for such exceptions as may be provided by applicable legislation and subject to Condition 4 of the Terms and Conditions of the Bonds, at all times rank at least equally with all its other present and future unsecured and unsubordinated obligations. The Company obtained approval from the National Development and Reform Commission of the PRC (NDRC) to issue the Bonds (the NDRC Approval). The Company is required by the NDRC Approval to effect registration of the Bonds with SAFE as a foreign debt in accordance with the Interim Provisions for the Management of Foreign Debt ( ) (the Foreign Debt Measures) promulgated by NDRC, SAFE and the PRC Ministry of Finance in January Before registration of the Bonds is completed, it is uncertain whether the Bonds are enforceable as a matter of PRC law. The Company intends to register the Bonds as soon as practicable and in any event before the Registration Deadline (being 30 Business Days after 29 February 2012 (the Issue Date)). If the registration is not completed on or before 28 February 2012, the Gross Proceeds (as defined in the Terms and Conditions of the Bonds) will be deposited into the Escrow Account (as defined in the Terms and Conditions of the Bonds) on the Issue Date, which may only be released to the Company after the completion of such registration on or before the Registration Deadline subject to the Terms and Conditions of the Bonds and the Account Bank Agreement (as defined in the Terms and Conditions of the Bonds). For a more detailed description of the Bonds, see Terms and Conditions of the 2014 Bonds beginning on page 36, Terms and Conditions of the 2015 Bonds beginning on page 53 and Terms and Conditions of the 2017 Bonds beginning on page 54. The Bonds will be issued in denominations of CNY1,000,000 each and integral multiples of CNY10,000 in excess thereof. The Bonds are expected to be rated A3, A, and A- by Moody s Investors Services Limited (Moody s), Standard & Poor s Rating Services, a Division of the McGraw Hill Companies Inc. (S&P) and Fitch Ratings Limited (Fitch), respectively. A security rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency. Investing in the Bonds involves risks. See Risk Factors beginning on page 15 for a discussion of certain factors to be considered in connection with an investment in the Bonds. The Bonds have not been and will not be registered under the United States Securities Act of 1933, as amended (the Securities Act) and, subject to certain exceptions, may not be offered or sold within the United States. The Bonds are being offered only outside the United States in reliance on Regulation S of the Securities Act. For a description of these and certain further restrictions on offers and sales of the Bonds and the distribution of this Offering Circular, see Subscription and Sale. Application has been made to The Stock Exchange of Hong Kong Limited (the Hong Kong Stock Exchange) for permission to deal in, and for listing of, the Bonds by way of debt issues to professional investors (as described in this Offering Circular) on the Hong Kong Stock Exchange. Approval-in-principle has been received for the listing of the Bonds on Singapore Exchange Securities Trading Limited (the SGX-ST). The SGX-ST takes no responsibility for the correctness of any of the statements made or opinions or reports contain in this Offering Circular. Admission of the Bonds to be traded on the SGX-ST is not to be taken as an indication of the merits of the Issuer, the Group or the Bonds. The Bonds will be issued in registered form and each series of the Bonds will be initially represented by a global certificate (the Global Certificate) which will be registered in the name of the Hong Kong Monetary Authority (the HKMA) as the operator of the CMU (as defined below) (the CMU Operator), and shall be deposited on or about the Issue Date with a sub-custodian for the Central Moneymarkets Unit Service (the CMU), the book-entry clearing system operated by the HKMA. Beneficial interests in the Global Certificates will be shown on, and transfers thereof will be effected only through, records maintained by the CMU Service. For persons seeking to hold a beneficial interest in the Bonds through Euroclear Bank SA/NV (Euroclear) or Clearstream Banking, société anonyme (Clearstream Luxembourg), such persons will hold their interests through an account opened and held by Euroclear or Clearstream Luxembourg (as the case may be) with the CMU Operator. Lead Manager and Bookrunner Bank of China Offering Circular dated 22 February 2012

2 IMPORTANT NOTICE The Issuer, having made all reasonable enquiries confirms that (i) this Offering Circular contains all information with respect to the Issuer and its subsidiaries (collectively, the Group or the Baosteel Group) and the Bonds which is material in the context of the issue and offering of the Bonds, (ii) the statements contained in this Offering Circular relating to the Issuer and the Group are in every material respect true and accurate and not misleading, (iii) the opinions and intentions expressed in this Offering Circular with regard to the Issuer and the Group are honestly and reasonably held, have been reached after considering all relevant circumstances and are based on reasonable assumptions, (iv) the statistical, industry and market-related data included in this Offering Circular has been accurately extracted from the various sources, (v) there are no other facts in relation to the Issuer, the Group or the Bonds the omission of which would, in the context of the issue and offering of the Bonds, make any statement, opinions or intentions expressed in this Offering Circular misleading in any material respect, (vi) all reasonable enquiries have been made by the Issuer to ascertain all facts in relation to the Issuer, the Group and the Bonds and to verify the accuracy of all such information and statements in this Offering Circular, and (vii) this Offering Circular does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements herein, in the light of the circumstances under which they were made, not misleading. Subject as provided herein, the Issuer accepts full responsibility for the accuracy of all information contained in this Offering Circular. The Issuer has prepared this Offering Circular solely for use in connection with the proposed offering of the Bonds described in this Offering Circular. This Offering Circular does not constitute an offer of, or an invitation by or on behalf of Bank of China Limited (BOC), Bank of China (Hong Kong) Limited (BOCHK), BOCI Asia Limited (BOCI, BOC and BOCHK, together, acting as the Lead Manager and Bookrunner) or the Issuer to subscribe for or purchase any of the Bonds. The distribution of this Offering Circular and the offering of the Bonds in certain jurisdictions may be restricted by law. Persons into whose possession this Offering Circular comes are required by the Issuer and the Lead Manager and Bookrunner to inform themselves about and to observe any such restrictions. No action is being taken to permit a public offering of the Bonds or the distribution of this Offering Circular in any jurisdiction where action would be required for such purposes. There are restrictions on the offer and sale of the Bonds, and the circulation of documents relating thereto, in certain jurisdictions including the United States, the European Economic Area, the United Kingdom, Singapore, the PRC and Hong Kong, and to persons connected therewith. For a description of certain further restrictions on offers and sales of the Bonds, and distribution of this Offering Circular, see Subscription and Sale. This Offering Circular is personal to each offeree and does not constitute an offer to any other person or to the public generally to subscribe for or otherwise acquire Bonds. Distribution of this Offering Circular to any other person other than the prospective investor and any person retained to advise such prospective investor with respect to its purchase is unauthorised. Each prospective investor, by accepting delivery of this Offering Circular, agrees to the foregoing and to make no photocopies of this Offering Circular or any documents referred to in this Offering Circular. No person has been or is authorised to give any information or to make any representation concerning the Issuer, the Group or the Bonds other than as contained herein and, if given or made, any such other information or representation should not be relied upon as having been authorised by the Issuer, the Lead Manager and Bookrunner, the Trustee or the Agents (as defined in the Terms and Conditions of the Bonds) or their respective affiliates. Neither the delivery of this Offering Circular nor any offering, sale or delivery made in connection with the issue of the Bonds shall, under any circumstances, constitute a representation that there has been no change or development reasonably likely to involve a change in the affairs of the Issuer, the Group, or any of them since the date hereof or create any implication that the information contained herein is correct as at any date subsequent to the date hereof. This Offering Circular does not constitute an offer of, or an invitation by or on behalf of the Issuer, the Lead Manager and Bookrunner, the Trustee or the Agents to subscribe for or purchase the Bonds and may not be used for the purpose of an offer to, or a solicitation by, anyone in any jurisdiction or in any circumstances in which such offer or solicitation is not authorised or is unlawful. ii

3 None of the Lead Manager and Bookrunner, the Trustee or the Agents or any of their respective affiliates, directors or advisors has independently verified the information contained in this Offering Circular. Accordingly, no representation, warranty or undertaking, express or implied, is made or given and no responsibility or liability is accepted, by the Lead Manager and Bookrunner, the Trustee or the Agents or any of their respective affiliates, directors or advisors, as to the accuracy, completeness or sufficiency of the information contained in this Offering Circular or any other information supplied in connection with the Bonds and nothing contained in this Offering Circular is, or shall be relied upon as, a promise, representation or warranty by the Lead Manager and Bookrunner, the Trustee or the Agents. This Offering Circular is not intended to provide the basis of any credit or other evaluation nor should it be considered as a recommendation by any of the Issuer, the Lead Manager and Bookrunner, the Trustee or the Agents that any recipient of this Offering Circular should purchase the Bonds. Each person receiving this Offering Circular acknowledges that such person has not relied on the Lead Manager and Bookrunner, the Trustee, the Agents or on any person affiliated with the Lead Manager and Bookrunner, the Trustee or the Agents in connection with its investigation of the accuracy of such information or its investment decision, and each such person must rely on its own examination of the Issuer, and the merits and risks involved in investing in the Bonds. See Risk Factors for a discussion of certain factors to be considered in connection with an investment in the Bonds. It is expected that the Bonds will, when issued, be assigned a rating of A3, A, and A- by Moody s, S&P and Fitch, respectively. The rating will relate to the timely payments of interest and principal on the Bonds. A rating is not a recommendation to buy, sell or hold securities, does not address the likelihood or timing of prepayment and may be subject to revision, qualification, suspension or withdrawal at any time by the assigning rating organisation. A revision, qualification, suspension or withdrawal of any rating assigned to the Bonds may adversely affect the market price of the Bonds. To the fullest extent permitted by law, none of the Lead Manager and Bookrunner, the Trustee or the Agents or any of their respective affiliates, directors or advisors accepts any responsibility for the contents of this Offering Circular. Each of the Lead Manager and Bookrunner, the Trustee and the Agents or any of their respective affiliates, directors or advisors accordingly disclaims all and any liability, whether arising in tort or contract or otherwise, which it might otherwise have in respect of this Offering Circular or any such statement. None of the Lead Manager and Bookrunner, the Trustee or the Agents or any of their respective affiliates, directors or advisors undertakes to review the financial condition or affairs of the Issuer or the Group during the life of the arrangements contemplated by this Offering Circular nor to advise any investor or potential investor in the Bonds of any information coming to the attention of the Lead Manager and Bookrunner, the Trustee or the Agents. IN CONNECTION WITH THIS OFFERING, BOCI ASIA LIMITED AS STABILISING MANAGER (THE STABILISING MANAGER ) OR ANY PERSON ACTING FOR THE STABILISING MANAGER MAY, SUBJECT TO ALL APPLICABLE LAWS, OVER-ALLOT BONDS OR EFFECT TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET PRICE OF THE BONDS AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL. HOWEVER, THERE IS NO ASSURANCE THAT THE STABILISING MANAGER (OR PERSONS ACTING ON BEHALF OF THE STABILISING MANAGER) WILL UNDERTAKE STABILISATION ACTION. ANY STABILISATION ACTION MAY BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE PUBLIC DISCLOSURE OF THE TERMS OF THE OFFER OF THE BONDS IS MADE AND, IF BEGUN, MAY BE ENDED AT ANY TIME AND MOST BE BROUGHT TO AN END AFTER A LIMITED PERIOD. Prospective investors should not construe anything in this Offering Circular as legal, business or tax advice. Each prospective investor should determine for itself the relevance of the information contained in this Offering Circular and consult its own legal, business and tax advisers as needed to make its investment decision and determine whether it is legally able to purchase the Bonds under applicable laws or regulations. iii

4 Unless otherwise indicated, all references in this Offering Circular to Terms and Conditions of the 2014 Bonds, Terms and Conditions of the 2015 Bonds and Terms and Conditions of the 2017 Bonds are to the terms and conditions governing the 2014 Bonds, the 2015 Bonds and the 2017 Bonds, as respectively set out in the sections titled Terms and Conditions of the 2014 Bonds, Terms and Conditions of the 2015 Bonds and Terms and Conditions of the 2017 Bonds of this Offering Circular (collectively, the Terms and Conditions of the Bonds). Hong Kong Exchanges and Clearing Limited and the Hong Kong Stock Exchange take no responsibility for the contents of this Offering Circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Offering Circular. This document includes particulars given in compliance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited for the purpose of giving information with regard to the Issuer. The Issuer accepts full responsibility for the accuracy of the information contained in this document and confirms, having made all reasonable enquiries, that to the best of its knowledge and belief there are no other facts the omission of which would make any statement herein misleading. Industry and Market Data Market data and certain industry forecasts used throughout this Offering Circular have been obtained based on internal surveys, market research, publicly available information and industry publications. Industry publications generally state that the information that they contain has been obtained from sources believed to be reliable but that the accuracy and completeness of that information is not guaranteed. Similarly, internal surveys, industry forecasts and market research, while believed to be reliable, have not been independently verified, and neither the Issuer nor the Lead Manager and Bookrunner or their respective directors and advisors make any representation as to the correctness, accuracy or completeness of that information. In addition, third-party information providers may have obtained information from market participants and such information may not have been independently verified. Presentation of Financial Information This Offering Circular contains the audited consolidated financial statements of the Issuer as of and for the two years ended 31 December 2009 and The audited consolidated financial statements of the Issuer were prepared in accordance with the Accounting Standards for Business Enterprises (the China Accounting Standards or PRC GAAP). This Offering Circular also contains the Company s unpublished unaudited consolidated interim financial results as of and for the nine months ended 30 September 2010 and Such consolidated interim financial results have not been audited or reviewed, and should not be relied upon by investors to provide the same quality of information associated with information that has been subject to an audit or review. None of the Lead Manager and Bookrunner, the Trustee or the Agents or any of their respective affiliates, directors or advisors makes any representation or warranty, express or implied, regarding the sufficiency of such consolidated interim financial results for an assessment of, and potential investors must exercise caution when using such data to evaluate, the Company s financial condition and results of operations. The consolidated interim financial results of the Company as of and for the nine months ended 30 September 2011 should not be taken as an indication of the expected financial condition or results of operations of the Company for the full financial year ending 31 December The China Accounting Standards or PRC GAAP differs in certain material respects from the International Financial Reporting Standards (IFRS). For a discussion of certain differences between PRC GAAP and IFRS, see Description of Certain Differences between PRC GAAP and IFRS. Certain monetary amounts in this Offering Circular have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which precede them. iv

5 Certain Definitions and Conventions In this Offering Circular, unless otherwise specified or the context otherwise requires, all references to the Group are to the Issuer and its subsidiaries, all references to the PRC, China and mainland China are to the People s Republic of China (excluding Hong Kong, the Macao Special Administrative Region of the People s Republic of China and Taiwan), all references to the United States and U.S. are to the United States of America, all references to Hong Kong are to the Hong Kong Special Administrative Region of the People s Republic of China; all references to Hong Kong dollars and HK$ are to the lawful currency of Hong Kong, all references to Renminbi, RMB and CNY are to the lawful currency of the PRC, all references to S$ and Singapore dollars are to the lawful currency of Singapore and all references to USD, U.S. dollars and U.S.$ are to the lawful currency of the United States of America. Historical amounts translated into Renminbi have been translated at historical rates of exchange. Such translations should not be construed as representations that the amounts referred to herein could have been or could be converted into Renminbi at those rates or any other rate at all. For further information relating to exchange rates, see Exchange Rate Information. v

6 FORWARD-LOOKING STATEMENTS The Issuer has made certain forward-looking statements in this Offering Circular. All statements other than statements of historical facts contained in this Offering Circular constitute forward-looking statements. Some of these statements can be identified by forward-looking terms, such as anticipate, target, believe, can, would, could, estimate, expect, aim, intend, may, plan, will, would or similar words. However, these words are not the exclusive means of identifying forward-looking statements. All statements regarding expected financial condition and results of operations, business plans and prospects are forward-looking statements. These forward-looking statements include but are not limited to statements as to the business strategy, revenue and profitability, planned projects and other matters as they relate to the Issuer and/or the Group discussed in this Offering Circular regarding matters that are not historical fact. These forward-looking statements and any other projections contained in this Offering Circular (whether made by the Issuer or by any third party) involve known and unknown risks, including those disclosed under the caption Risk Factors, uncertainties and other factors that may cause the actual results, performance or achievements of the Issuer or the Group to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements or other projections. These forward-looking statements speak only as of the date of this Offering Circular. The Issuer expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in the Group s expectations with regard thereto or any change of events, conditions or circumstances, on which any such statement was based. The factors that could cause the actual results, performances and achievements of the Issuer, the Group or any member of the Group to be materially different include, among others: fluctuations in prices of and demand for steel excess capacity and oversupply in the steel industry globally the supply and cost of raw materials the continued availability of capital and financing interest rates and foreign exchange rates, taxes and duties ability of the Group to control its costs changes in regulations relating to approval required for steel production, expansion of the Group s steel production facilities and its acquisition or investment plan general economic and business conditions and competitive environment in the PRC and elsewhere ability of the Group to maintain its sales contracts with its major customers on terms commercially acceptable to the Group or at all the Group s ability to finance and complete new projects on schedule and ability to manage its product development interruptions in product production and delivery, natural disasters, industrial action, terrorist attacks and other events beyond the Group s control other factors, including those discussed in Risk Factors. The Issuer does not undertake any obligation to update or revise publicly any of the opinions or forward-looking statements expressed in this Offering Circular as a result of any new information, future events or otherwise. vi

7 TABLE OF CONTENTS Page SUMMARY... 1 SUMMARY CONSOLIDATED FINANCIAL AND OTHER INFORMATION... 3 THE OFFERING RISK FACTORS TERMS AND CONDITIONS OF THE 2014 BONDS TERMS AND CONDITIONS OF THE 2015 BONDS TERMS AND CONDITIONS OF THE 2017 BONDS SUMMARY OF PROVISIONS RELATING TO THE BONDS IN GLOBAL FORM USE OF PROCEEDS THE STEEL INDUSTRY CAPITALISATION AND INDEBTEDNESS OF THE COMPANY DESCRIPTION OF THE GROUP PRINCIPAL SHAREHOLDER PRC REGULATIONS REMITTANCE OF RENMINBI INTO AND OUTSIDE THE PRC TAXATION DESCRIPTION OF CERTAIN DIFFERENCES BETWEEN PRC GAAP AND IFRS SUBSCRIPTION AND SALE GENERAL INFORMATION INDEX TO FINANCIAL STATEMENTS... F-1 vii

8 SUMMARY The summary below is only intended to provide a limited overview of information described in more detail elsewhere in this Offering Circular. As it is a summary, it does not contain all of the information that may be important to investors and terms defined elsewhere in this Offering Circular shall have the same meanings when used in this Summary. Prospective investors should therefore read this Offering Circular in its entirety. Overview The Group is the largest of the three PRC steel producers wholly-owned by and under the direct supervision of the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) and has been ranked third among global steel producers based on annual crude steel production capacity for three consecutive years since 2008, according to the World Steel Association. The Company is a wholly state-owned company under the direct supervision of SASAC at the central level, and is the holding company of the Group that principally engages in the steel business through four major subsidiaries, namely, Baoshan Iron & Steel Co., Ltd. (Baoshan Iron & Steel), Baosteel Group Xinjiang Bayi Steel Iron & Steel Co., Ltd. (Bayi Steel), Ningbo Iron & Steel Co., Ltd. (Ningbo Steel) and Shaoguan Iron & Steel Group Co., Ltd. (Shaoguan Steel). The Group enjoys a significant domestic market share in its principal product series. In addition to its primary focus on the PRC market, the Group exports steel products to more than 40 countries and has 11 overseas representative offices and 24 overseas subsidiaries. Within China, the Group has 11 trading companies and 39 marketing branches. In 2010, the Group produced million tons of crude steel, a substantial proportion of which was produced at the Group s production facilities in the Yangtze River Delta area, the Pearl River Delta area and the Xinjiang Province of the PRC. The Group has been ranked as a Fortune Global 500 company for the past eight years and ranked 276th and 212th in 2010 and 2011, respectively, by revenue. The Group manufactures and sells a diversified range of steel products across three major product series, namely carbon steel, stainless steel and special steel. The Group s products meet a broad range of customer needs in the automotive, home electrical appliances, petrochemical, machinery, nuclear, shipbuilding, electronic devices, energy, transportation, construction, aerospace and aviation industries. In addition to its core business of steel production, the Group is supplemented by six steel-related ancillary business segments: (i) resource development and logistics, (ii) secondary steel processing, (iii) engineering technology services, (iv) coal chemical, (v) financial investment and (vi) production services. Competitive Strengths The Group believes it possesses the following competitive strengths: leading industry player as the third largest steel company in the world, whose competitiveness and profitability arises from economies of scale and effective management of production costs strategic importance to the PRC steel industry, SASAC and the PRC balanced product portfolio with focus on high value-added products well-positioned to benefit from consolidation of the iron and steel industry in the PRC strong financial profile with access to multiple sources of capital 1

9 Strategies experienced and efficient management team with a strong track record stable supply of raw materials advanced technology and R&D, with the launch of technology innovation through project collaboration and centralised management strong customer relationships, with well established global and domestic marketing and sales network and material processing service system See Description of the Group Business Competitive Strengths. The Group aims to become one of the top international suppliers of iron and steel products and related technology and services. The Group also strives to enhance its overall competitiveness by having an integrated business structure and ownership and development of proprietary intellectual property rights. The key components of the Group s strategy to achieve these objectives include the following. pursue industry diversification adopt a global development strategy create a comprehensive product portfolio and increase sales of high value-added products to capitalise on the growing PRC steel market geographical coverage of the domestic and international markets increase production capacity and speed up elimination of lagging production capacity internationalisation of business operations and procurement well-managed capital investment and financing strategic acquisition for operational integration and resources and production enhancement pursue sustainable development through environmental management See Description of the Group Business Business Strategy. Related Party Transactions See Note VIII to the Company s financial statements for the year ended 31 December 2010 for a description of certain related party transactions undertaken by the Company with its related parties. 2

10 SUMMARY CONSOLIDATED FINANCIAL AND OTHER INFORMATION The summary audited consolidated financial information as of and for the years ended 31 December 2009 and 2010 set forth below is derived from the Company s audited consolidated financial statements as of and for the years ended 31 December 2009 and 2010 (which have been audited by Ernst & Young Hua Ming and Deloitte Touche Tohmatsu Certified Public Accountants Limited, respectively) and should be read in conjunction with the Company s audited consolidated financial statements as of and for the years ended 31 December 2009 and 2010, which are included elsewhere in this Offering Circular. The Company s audited consolidated financial statements were prepared in accordance with PRC GAAP. PRC GAAP differs in certain material respects from IFRS. For a discussion of certain differences between PRC GAAP and IFRS, see Description of Certain Differences Between PRC GAAP and IFRS on page 130. Consolidated Balance Sheet As of 31 December RMB RMB ASSETS CURRENT ASSETS Currency funds ,403,172, ,069,500, Settlement reserves ,946, ,150, Held-for-trading financial assets.... 2,793,464, ,842,331, Notes receivable.... 8,294,998, ,684,702, Accounts receivable... 7,146,126, ,095,820, Advances to suppliers... 6,886,584, ,417,865, Interest receivable... 10,146, ,031, Dividends receivable ,777, ,199, Other receivables... 1,970,598, ,847,236, Financial assets under repurchase agreements ,235, Inventories ,596,774, ,809,670, Other current assets ,650, ,356, Total current assets ,173,241, ,780,100, NON-CURRENT ASSETS Loans and advances to customers ,430, ,917, Available-for-sale financial assets ,030,004, ,627,909, Held-to-maturity investments... 15,261,375, ,266,892, Long-term receivables ,228, ,362, Long-term equity investments... 34,263,053, ,561,103, Investment properties... 1,931,618, ,189,761, Fixed assets ,560,155, ,598,565, Construction in progress... 21,291,761, ,030,536, Construction materials ,483, ,797, Intangible assets ,925,277, ,031,793, Goodwill... 1,317,161, ,317,687, Long-term prepayments ,120, ,518, Deferred tax assets... 2,935,739, ,607,984, Other non-current assets ,498, ,429,248, Total non-current assets ,822,908, ,350,078, TOTAL ASSETS ,996,149, ,130,179,

11 As of 31 December RMB RMB LIABILITIES AND OWNER S EQUITY CURRENT LIABILITIES Short-term loans ,720,934, ,488,721, Due to banks and other financial institutions... 35,591, ,160, Borrowed inter-bank funds... 34,141, Held-for-trading financial liabilities... 70,617, ,148, Notes payable... 9,185,085, ,413,291, Accounts payable... 27,741,820, ,411,488, Advances from customers... 16,683,384, ,550,207, Employee benefits payable... 8,800,131, ,771,011, Tax payable... (1,159,407,868.70) 809,248, Interests payable ,015, ,692, Dividends payable ,411, ,378,028, Other payables... 4,522,427, ,921,506, Securities trading customer deposits... 1,865,889, ,074,730, Non-current liabilities due within one year... 2,119,073, ,206,663, Other current liabilities... 51,260, ,925,541, Total current liabilities ,428,375, ,302,440, NON-CURRENT LIABILITIES Long-term borrowings ,237,475, ,277,331, Bonds payable... 18,067,156, ,474,795, Long-term payables... 1,755,948, ,771,712, Special payables.... 4,929,389, ,502,021, Provisions ,810, ,502, Deferred tax liabilities... 5,546,345, ,537,927, Other non-current liabilities ,051, ,697,498, Total non-current liabilities ,597,177, ,652,789, TOTAL LIABILITIES ,025,552, ,955,230, OWNER S EQUITY Paid-in capital... 51,082,620, ,082,620, Capital reserve... 49,855,695, ,849,168, Special reserve ,724, ,792, Surplus reserve... 78,169,550, ,766,082, Unappropriated profit... 26,302,864, ,412,143, Exchange differences on foreign currency translation... (31,617,308.44) (47,297,614.87) Total owner s equity attributable to equity holders of the parent ,558,839, ,326,509, Minority interests... 37,411,757, ,848,438, Total owner s equity ,970,596, ,174,948, TOTAL LIABILITIES AND OWNER S EQUITY ,996,149, ,130,179,

12 Consolidated Income Statement For the year ended 31 December RMB RMB Operating income ,307,484, ,984,086, Less: Operating cost ,622,393, ,700,865, Business tax and levies... 1,138,546, ,211,916, Selling and distribution expenses... 3,215,178, ,407,002, Administrative expenses.... 9,551,984, ,927,243, Financial expenses... 1,553,398, ,540,975, Impairment loss in respect of assets.... (376,464,602.86) 1,891,839, Add: Gains/(losses) from changes in fair values... 88,096, (16,698,453.73) Investment income... 5,697,724, ,232,626, Including: Income from investment in associates and jointly controlled entities.... 1,378,229, ,139,020, Operating profit ,388,269, ,520,170, Add: Non-operating income.... 1,113,810, ,273,845, Less: Non-operating expenses ,741, ,809, Including: Losses from disposal of non-current assets ,899, ,336, Total profit... 14,913,338, ,230,205, Less: Income tax expenses.... 2,737,268, ,353,172, Net profit... 12,176,069, ,877,033, Net profit attributable to equity holders of the parent... 9,894,696, ,098,177, Minority interests... 2,281,372, ,778,855, Other comprehensive income... 9,199,056, (635,229,495.12) Total comprehensive income... 21,375,125, ,241,804, Attributable to equity holders of the parent... 19,016,038, ,446,940, Attributable to minority shareholders... 2,359,087, ,794,863,

13 The summary consolidated financial information of the Company as of and for the nine months ended 30 September 2010 and 2011 set forth below is derived from the Company s unpublished unaudited consolidated interim financial results as of and for the nine months ended 30 September 2010 and Such consolidated interim financial results have not been audited or reviewed by the Company s independent auditors. Consequently, such consolidated interim financial results should not be relied upon by investors to provide the same quality of information associated with information that has been subject to an audit or review. None of the Lead Manager and Bookrunner, the Trustee or the Agents or any of their respective affiliates, directors or advisors makes any representation or warranty, express or implied, regarding the sufficiency of such consolidated interim financial results for an assessment of, and potential investors must exercise caution when using such data to evaluate, the Company s financial condition and results of operations, the consolidated interim financial results of the Company as of and for the nine months ended 30 September 2011 should not be taken as an indication of the expected financial condition or results of operations of the Company for the full financial year ending 31 December Consolidated Income Statement For the nine months ended 30 September 2010 For the nine months ended 30 September 2011 RMB RMB Total operating revenue ,307,871, ,119,390, Including: Revenue from operations ,340,697, ,002,346, Total cost of sales ,984,216, ,500,910, Including: Operating cost ,347,756, ,667,072, Administrative expenses... 7,892,860, ,666,288, Finance costs.... 1,473,805, ,515, Add: Gains/(loss) from changes in fair value... 51,686, ,998, Investment income.... 2,715,898, ,121,678, Operating profit... 19,091,075, ,571,051, Total profit... 19,437,592, ,130,168, Net profit... 15,958,449, ,727,556,

14 Consolidated Balance Sheet As of 31 December 2010 As of 30 September 2011 RMB RMB Assets: Currency funds... 49,069,500, ,124,801, Notes receivable... 13,684,702, ,152,079, Accounts receivable.... 8,095,820, ,284,132, Advances to suppliers... 7,417,865, ,846,317, Inventories... 60,809,670, ,539,439, Subtotal of current assets ,780,100, ,227,389, Subtotal of non-current assets ,350,078, ,225,291, Total assets ,130,179, ,452,680, Liabilities: Short-term borrowings... 45,488,721, ,086,980, Non-current liabilities due within one year... 3,206,663, ,770,653, Other current liabilities... 1,925,541, ,361,065, Subtotal of current liabilities ,302,440, ,938,079, Long-term borrowings... 18,277,331, ,594,508, Bonds payable... 18,474,795, ,994,345, Subtotal of non-current liabilities... 51,652,789, ,775,172, Total liabilities ,955,230, ,713,251, Paid-in capital ,082,620, ,082,620, Unappropriated profit... 38,412,143, ,243,539, Subtotal of owner s equity attributable to equity holders of the parent ,326,509, ,505,569, Subtotal of owners equity ,174,948, ,739,429, Total liabilities and owners equity ,130,179, ,452,680,

15 Recent Developments In the third quarter of 2011, as international financial markets remained volatile and macroeconomic policies continued to tighten in the PRC, the economic growth rate of the PRC decreased as compared with the second quarter of Demand from downstream users in key industries in the PRC such as the automotive, home electrical appliances, machinery and ship-building industries experienced a slowdown, and demand for steel rods weakened due to a decrease in the commencement of new infrastructure projects in areas such as railways, highways and property construction. However, production volumes of crude steel in the PRC remained high. Prices for steel products continued to fluctuate after the second quarter of 2011, and there was a divergence in prices for hot and cold-rolled steel plates and a decline in prices for steel rods. During the second quarter of 2011, prices for iron ore, the major raw material used in the production of steel, remained high. During the third quarter of 2011, profit decreased significantly in the domestic iron and steel industry and funding pressure increased further compared to the second quarter of 2011, in particular for the steel plates manufacturing enterprises, which continued to face higher pressure in terms of costs and margins. In the third quarter of 2011, the significant decrease in prices of long term contracts for iron ore resulted in a decrease in production costs, which had a gradual favourable effect on the results of operation of the Company. Although the prices of steel products in 2011 were higher than that of 2010, the prices of major raw materials used in the production of steel continued to increase in the fourth quarter of 2011, which had a negative impact on the profit in the domestic iron and steel industries. The Company intends to continue to strengthen the management of its cash flow and inventory, mitigate its operational risks and further implement measures to raise its production efficiency, with the aim of securing stable results of operations. Results of operations for the nine months ended 30 September 2011 compared to the nine months ended 30 September 2010 Increase in operating income and decrease in operating profit The Group s operating income for the nine months ended 30 September 2011 increased as compared to the corresponding period in 2010, which was primarily attributable to an increase in steel prices and sales volume. The Group s operating profit for the nine months ended 30 September 2011 decreased by 18% as compared to the corresponding period in 2010, which was mainly due to an increase in prices of raw materials, in particular iron ore. The net profit of the Group for the nine months ended 30 September 2011 decreased by 14% as compared to the corresponding period in 2010 which was attributable to the increase in operating costs and the loss from changes in fair values on financial assets. Increase in Operating Costs Operating costs of the Group for the nine months ended 30 September 2011 increased by 24% as compared to the corresponding period in 2010 due to a significant increase in environmental expenditures, technological development expenditures, preparation costs for projects and professional service fees, which resulted in increase of administrative expenses by RMB1.77 billion for the nine months ended 30 September 2011, as compared to the corresponding period in However, the administrative expenses/operating income ratio increased marginally for the nine months ended 30 September 2011 as compared to the corresponding period in Financial expenses decreased by RMB767 million or 52% for the nine months ended 30 September 2011 as compared to the corresponding period in 2010, which was mainly due to an increase in the amount of lower US dollar funding cost in the third quarter of 2011, as well as the appreciation of the RMB against US dollar, which resulted in an increase in foreign exchange gains. Loss from changes in fair values on financial assets and increase in investment income Loss from changes in fair values on financial assets was RMB168 million for the nine months ended 30 September 2011, as compared to a gain in fair values on financial assets of RMB51 million in 8

16 the corresponding period in 2010, which was mainly due to stock market declines in 2011, which resulted in a decrease in the fair value of held-for-trading financial assets. Investment income increased by approximately 52% or RMB1.4 billion for the nine months ended 30 September 2011 as compared to the corresponding period in 2010, which was mainly driven by an increase in dividend income from held-for-trading financial assets as well as investment income from associated companies and joint ventures. Changes in balance sheet as of 30 September 2011 as compared to as of 31 December 2010 Increase in notes receivable Notes receivable increased by RMB6.5 billion or 47% as of 30 September 2011 as compared to 31 December 2010, which was driven by an increase in sales to customers. Increase in accounts receivable Accounts receivable increased by RMB4.2 billion or 52% as of 30 September 2011 as compared to 31 December 2010, which was mainly due to an increase in the average collection period for receivables in respect of the Group s customers. In addition, some customers who used to settle invoices in cash changed their practice and instead settled invoices by letter of credit affecting the timing of receiving payment. With the increase in the average collection period for receivables, the Group was able to delay payment to suppliers to better manage its cash flow. Increase in advances to suppliers Advances to suppliers increased by RMB3.4 billion or 46% as of 30 September 2011 as compared to 31 December 2010, which was mainly due to the consolidation of two companies, namely Baosteel Desheng Stainless Steel Co., Ltd. and Baosteel Zhanjiang Iron & Steel Co., Ltd. in the Group s financial statements for the nine months ended, and as of, 30 September Advances to the suppliers from these two companies was approximately RMB3.1 billion as of 30 September Increase in inventories Inventories increased by RMB7.7 billion or 13% as of 30 September 2011 as compared with the inventories as of 31 December 2010 which was mainly due to an increase in production volumes in preparation for suspension of certain production lines during the annual maintenance of machinery scheduled to be carried out in the fourth quarter of 2011 and the opening of new production lines. The Group has sped up deliveries and clearance to shorten the inventory turnover days by two days to eighty-one days as compared with the inventory turnover days for the corresponding period in The Group intends to further improve its inventory management system, shorten inventory turnover days, adopt strict credit policies to guard against working capital risk and systematically determine its payment cycle to strengthen its cash flow management. Increase in interest-bearing liabilities Interest-bearing liabilities, comprising of short-term loans, long-term borrowings, non-current liabilities due within one year, bonds payable and other current liabilities, increased by RMB20.4 billion or 23% to RMB107.8 billion as of 30 September 2011 as compared to 31 December Short-term loans increased by RMB16.6 billion or 36% as of 30 September 2011 as compared to 31 December 2010, which was mainly due to an increase in notes receivable. Long-term borrowings, including non-current liabilities due within one year, increased by RMB1.9 billion or 9% to RMB23.4 billion as of 30 September 2011 as compared to 31 December 2010, which was mainly due to an increase in investments in project construction, namely the South Xinjiang project, the Luobao Tube project and the Meisteel product optimisation project, in order to maintain a stable supply of raw materials and its use of advanced technology. 9