Maanshan Iron & Steel : CONNECTED TRANSACTION - CAPITAL INJECTION AGREEMENT

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馬 鞍 山 鋼 鐵 股 份 有 限 公 司

Maanshan Iron & Steel Company Limited

(A joint stock limited company incorporated in the People's Republic of China)

(Stock Code: 00323)

CONNECTED TRANSACTION

CAPITAL INJECTION AGREEMENT

On 17 September 2021, the Company and China Baowu, Magang Group, Baowu Carbon, Baosteel Chemical Zhanjiang, WISCO, Baosteel Co., Ltd., Wuhan Iron

• Steel, Zhanjiang Steel, Meishan Iron & Steel, Baosteel Engineering and Baowu Water jointly entered into the Capital Injection Agreement, which agreed the capital injection into Baowu Water by the Company. China Baowu, Magang Group, Baowu Carbon, Baosteel Chemical Zhanjiang, WISCO are the original shareholders of Baowu Water, while the Company, Baosteel Co., Ltd., Wuhan Iron & Steel, Zhanjiang Steel, Meishan Iron & Steel and Baosteel Engineering are capital injection parties under the Capital Injection Agreement to jointly increase capital into Baowu Water. The Company will make the capital injection by way of contribution in kind, accounting for 19.135% of Baowu Water's shareholding, and the amount of the capital injection by the Company is RMB661,300,000.

As at the date of this announcement, Magang Group is interested in approximately 47.59% of the issued share capital of the Company and is the controlling shareholder of the Company. China Baowu, the controlling shareholder of Magang Group, indirectly holds a total of approximately 57.48% of the Company's shares. Therefore, under Chapter 14A of the Listing Rules, Magang Group and China Baowu are connected persons of the Company, while Baowu Carbon, Baosteel Chemical Zhanjiang, WISCO, Baosteel Co., Ltd., Wuhan Iron & Steel, Zhanjiang Steel, Meishan Iron & Steel, Baosteel Engineering and Baowu Water are subsidiaries controlled by China Baowu. Under Chapter 14A of the Listing Rules, Baowu Carbon, Baosteel Chemical Zhanjiang, WISCO, Baosteel Co., Ltd., Wuhan Iron & Steel, Zhanjiang Steel, Meishan Iron & Steel, Baosteel Engineering and Baowu Water are connected persons of the Company. Therefore, the transactions under the Capital Injection Agreement would constitute connected transactions of the Company under Chapter 14A of the Listing Rules.

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As the applicable percentage ratio of the Capital Injection Agreement exceeds 0.1% but falls below 5%, such connected transactions are only subject to the reporting and announcement requirements under the Listing Rules but are exempt from independent shareholders' approval requirement under the Listing Rules.

PRINCIPAL TERMS OF CAPITAL INJECTION AGREEMENT

Date

17 September 2021

Parties

1. the Company; (2) China Baowu; (3) Magang Group; (4) Baowu Carbon; (5) Baosteel Chemical Zhanjiang; (6) WISCO; (7) Baosteel Co., Ltd.; (8) Wuhan Iron & Steel; (9) Zhanjiang Steel; (10) Meishan Iron & Steel; (11) Baosteel Engineering; and

1. Baowu Water.

Share Capital and Contribution

The Company, Baosteel Co., Ltd., Wuhan Iron & Steel, Zhanjiang Steel, Meishan Iron & Steel and Baosteel Engineering will inject capital into Baowu Water by way of contribution in kind, equity and cash.

The valuation benchmark date for the audit and valuation of all parties to the capital injection is 31 January 2021. The Company invested in its own water treatment- related fixed assets. According to the cost approach assessed by Pan-China Appraisal Co., Ltd., the book value of the water treatment-related assets of the Company was RMB478,035,300, the appraised value excluding tax was RMB606,050,600, and the value-added amount was RMB128,015,300, representing an increase of 26.78%. The appraised value including tax was RMB675,719,500. After excluding the effects of asset depreciation of the Capital Injection during the transition period, the amount of capital injection of the Company was RMB661,300,000 (subject to the final filing results), of which RMB474,080,000 was transferred to the registered capital of Baowu Water, and RMB187,210,000 was transferred to the capital reserve of Baowu Water.

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Shareholding structure of Baowu Water prior to the capital injection:

		Paid-up
	Form of	registered	Shareholding
Name of shareholder	contribution	capital	ratio
		(RMB'0,000)
China Baowu	Cash	50,000		54.36%
Magang Group	Cash	23,036	25.04%
Baowu Carbon	Contribution in
	kind and equity	12,329	13.40%
Baosteel Chemical Zhanjiang	Contribution in
	kind	4,134	4.49%
WISCO	Equity	2,479	2.70%
Total		91,978		100%

Shareholding structure of Baowu Water after the capital injection:

		Paid-up
	Form of	registered	Shareholding
Name of shareholder	contribution	capital	ratio
		(RMB'0,000)
China Baowu	Cash	50,000		20.181%
Magang Group	Cash	23,036	9.298%
Baowu Carbon	Contribution in
	kind and equity	12,329	4.976%
Baosteel Chemical Zhanjiang	Contribution in
	kind	4,134	1.669%
WISCO	Equity	2,479	1.001%
The Company	Contribution in
	kind	47,408	19.135%
Baosteel Engineering	Cash	2,361	0.953%
Baosteel Co., Ltd.	Contribution in
	kind	51,435	20.760%
Wuhan Iron and Steel	Contribution in
	kind	29,392	11.863%
Zhanjiang Steel	Contribution in
	kind	20,943	8.453%
Meishan Iron & Steel	Contribution in
	kind	4,236	1.710%
Total		247,754		100%

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The shareholding ratio of all parties shall be determined on the basis of the appraised net assets value of the final filing of Baowu Water. From the valuation benchmark date to the date of the capital injection, changes of book value of the proposed capital injection assets and net assets of Baowu Water shall be enjoyed or borne by the original shareholders of the relevant company.

All parties to the capital injection shall complete the transfer of the ownership of the assets used for capital contribution before 1 December 2021, and cooperate in the registration of changes in industry, commerce and taxation.

Conditions

After all parties have completed the approval procedures in accordance with the content of the agreement, the agreement shall come into effect upon the signing and affixing of official seals by the legal representatives (or authorized representatives) of all parties.

Reasons for and Benefits of the Capital Injection Agreement

As the State focuses on the development of ecological economy, green economy and environmental protection economy, there is strong market demand for the treatment of industrial water and reclaimed water. According to the forecast of Qianzhan Intelligence Co., Ltd. ( 前 瞻 產 業 研 究 院), the scale of industrial wastewater treatment market in the PRC will maintain rapid growth, which exceeded RMB160 billion in 2020 and is expected to exceed RMB350 billion by 2024.

Baowu Water, as a professional platform company for the water and atmospheric treatment of China Baowu, has broad development prospects. The capital injection into Baowu Water by the Company is conducive to leveraging synergy. Through professional operation and systematic problem solving capabilities, the Company may reduce the governance cost for water and gas, improve operating performance by boosting the main iron and steel business, and share the benefits of external business development of Baowu Water, so as to obtain return of investment and share capital value.

The Directors (including independent non-executive Directors) are of the view that the terms of the Capital Injection Agreement are entered into on normal commercial terms, are fair and reasonable, and are in the interest of the Company and its shareholders as a whole.

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Information about Baowu Water

Baowu Water is principally engaged in technology development, technology transfer, technical consultation and technical services in the fields of water treatment equipment and environmental technology; development of intelligent water software system; prevention and control service for water environment pollution; planning, design and consulting of water treatment, environmental engineering, and water supply and drainage; construction of environmental engineering and municipal utilities; building mechanical and electrical installation; research and development, production (limited to branches) and sales of environmental protection equipment and accessories; sales of chemical raw materials and products (excluding hazardous chemicals, controlled chemicals, fireworks and firecrackers, civil explosives and precursor chemicals); operation and maintenance of water treatment and environmental engineering facilities; manufacture (limited to branches) and sales of monitoring and detection instruments and meters for water pollution; import and export of goods and technology. (For projects subject to the administrative approval, approvals from the relevant authorities must be obtained prior to the commencement of operation).

The ultimate beneficial owner of Baowu Water is China Baowu.

The main financial data of Baowu Water in 2020: total assets of RMB1,598,574,000; operating income of RMB1,366,408,000.

The consolidated data of Baowu Water in 2019: total profit of RMB311,100 and net

profit of RMB233,300. The consolidated data in 2020: total profit of RMB66,943,600 and net profit of RMB65,068,300.

Information about the Company

The Company is one of the largest iron and steel producers and marketers in the PRC and is principally engaged in the manufacture and sale of iron and steel products.

Information about China Baowu

The main business scope of China Baowu: operating state-owned assets within the scope authorized by the State Council, as well as carrying out relevant state-owned capital investment and operation. (For projects subject to the administrative approval, approvals from the relevant authorities must be obtained prior to the commencement of operation).

China Baowu is a pilot enterprise of state-owned capital investment company with 90% equity interest owned by the State-owned Assets Supervision and Administration Commission of the State Council.

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