Baosteel Group Corporation2008 Corporate Social Responsibility Report

Overview

(1) About this Report

This is the first social responsibility report released byBaosteel Group Corporation (hereinafter as“Baosteel”orthe“Company”)tothepublic.

ThereportwascompiledwithreferencetotheGuidelineon Fulfilling Social Responsibility byCentral Enterprises (2008No.1documentofState-ownedAssetsSupervisionandAdministration Commission of the State Council),theGuidetoSustainableDevelopmentReportGRI(G3version),theTenPrinciplesofUNGlobalCompact,andthetheoreticalresearchresultsofBaosteelEconomics&ManagementResearchInstitute,andtheactualconditionsofBaosteel.

(2) Scope

Unlessotherwise specified, this reportmainlydescribesBaosteel’s performance in personnel, community,environment, economy, and supply chain, etc. fromJanuary 1 toDecember 31, 2008, including a summaryof importantevents and tasksbefore2008.The reportcoverssuchbusinesssegmentsasBaosteel’siron&steel,resource development, and further processing of steel(seetheappendixfordetailsonsubsidiaries).

(3) Language and Publishing Form

ThereportispublishedinbothChineseandEnglish.TheChineseversion shallprevail in caseof anydiscrepancybetweenthetwoversions.Intheeventthatanyquestionarisesabout this report,pleasecontactusbyphoneorletteratthefollowingaddress:

CorporateCommunicationDepartment BaosteelGroupCorporation Room 1101, Baosteel Tower, No. 370 Pudian Road,

PudongNewDistrict,Shanghai,P.R.C. ZipCode:200122 Tel:+00862158350000-1129 Fax:+00862168403773 Email:csr@baosteel.com

The report is issued in the formof printing, electronicdocumentanddisc,wheretheelectronicdocumentcanbe downloaded from Baosteel’sWebsite (http://www.baosteel.com).

Contents

Chairman’s Message 1

Overview 2

CompanyProfile 2

OrganizationStructure 3

CorporateLeadership 6

CorporateStrategy 8

SocialResponsibilitySystem 9

Stakeholders 10

Employees Performance Report 12

StaffComposition 12

EmploymentOffer 13

Welfare 14

EmployeeSafetyProtection 15

TrainingandEducation 16

LegalRightsProtection 17

Social Performance Report 18

SocialContribution 18

CommunityRelations 21

Compliance 22

Anti-corruption 23

Economic Performance Report 24

EconomicPerformance 24

MergerandReorganization 24

Environmental Performance Report 26

It’sOurDutytoProtectEnvironment 26

ManagementMechanism 27

ManagementMeasures 28

Supply Chain Performance Report 32

GreenProcurementChain 32

EnvironmentallyFriendlyProducts 33

High-QualityService 36

GRI Index 37

Appendix 38

Focuson2008 38

IntroductiontoBusinessSegments 44

Reader’sFeedbackInformationForm 49

1

Chairman’s Message

OnDecember 23rd, 1978, the secondday after the conclusionof the

ThirdPlenarySessionofthe11thCentralCommitteeoftheCommunist

PartyofChina,thefirststeeltubepilewasdrivenfortheconstructionof

BaosteelatBaoshanShanghaionthecoastofEastChinaSea.Eversince

then,Baosteelhassteppedonthesustainabledevelopmentroadtobuild

a“green”Baosteel.

Asthelargestandmostmodernizedsteelcomplexwiththewidestgeo-

graphicreachinChina,Baosteelnotonlydeems“maximizationofinves-

tors’interests”asthegoalforpursuit,butalsotakes“maximizationofthe

long-term value of the enterprise” as themission and considers social

responsibilityasanimportantpartofthecorporatestrategy,inabidto

realizethedualcorporategoalsofwin-winofcorporateeconomiceffi-

ciencyandsocialbenefits.Baosteelactivelycarriesoutthestate’sindustrial

policesforsteelindustry,energeticallypromotesstrategicreorganization

andadjustmentofindustrialstructure,andfullyplaystheexemplaryrolein

enhancingthecomprehensivecompetitivenessofsteelindustry.Fromthe

perspectiveof economy, environment and social harmony,Baosteelwill

carefullythinktherelationshipbetweensocialresponsibilityandlong-term

corporatedevelopment,consideringsocialresponsibilitynotonlyasthe

obligationofanenterprise,butasanimportantopportunityofcorporate

development.

2008isanunusualandextraordinaryyearforBaosteel,inwhichBaosteel

experienced themost severeexternalenvironmentandmostcomplex

situationfordevelopmentsofar.The impactofglobalfinancialcrisis led

todrasticfluctuationsindomesticsteelmarket.Inthefaceofseverechal-

lenge and trial, Baosteel people united as one and fulfilled various so-

cial responsibilities to thebestof theirabilities. Ineconomicaspect, the

mainsteelbusinessscoredsteadydevelopmentwithsubstantialprogress

achievedinZhanjiangProjectandtheofficialunveilingofBaosteelGroup

GuangdongIron&SteelCo.,Ltd.;practicalresultswereregisteredinnew

product R&D andmarket exploration, GO silicon steel was produced

successfully; thecompetitivenessof relateddiversifiedbusinesskeptbe-

ingenhancedandtherestructuringofauxiliarybusinesswascarriedout

steadily,withacompensationmanagementsystemestablishedtofacilitate

the participation of diverse trades in industry competition. In environ-

mentalaspect,Baosteelincreasedtheinputsinenvironmentalprotection

toeffectivelyreducetheemissions,andreceivedthegloryasoneofthe

firstChinese greenenterprises forbenchmarking. In social aspect, after

“5.12”WenchuanEarthquake,onthebasisofrespondingquicklyanddo-

natingmoneyactively,Baosteelbuiltoneafteranotherresidentialquarter

ofcolor-coatedsteelsheetshousingforthedisaster-strickenpeople,and

activelyparticipatedinthepost-disasterreconstructionprojectstofaith-

fullyfulfillitssocialresponsibilities.

The 2008CorporateSocialResponsibilityReportofBaosteelGroupCor-

poration comprehensively introduces Baosteel’s philosophy, system and

practice in implementing its social responsibilities.We have recognized

thepossibilitythattheGlobalFinancialCrisismaydevelop intoaglobal

economiccrisis,whichwillbringrealchallengeofsocialresponsibilityto

enterprises.Only through furtherenhancingour interactivityandcoop-

erationwithinvestors,government,customers,suppliers,employeesand

otherstakeholders,canwesuccessfullyhandle the toughestdifficultyof

theworld.Wewillbringourthoughts intoactions.Thisreportexplicitly

expoundshowwedothings.

Chairman:

2

Amongthe2008FortuneGlobal500companies,Baosteeltookthe259th

place.Baosteelhasbeenonthelistforfiveconsecutiveyears.Accordingto

Standard&Poor’s,Baosteel’slong-termdebtratingin2008was“A-”,with

a“stable”prospect.BaosteelwasselectedbyFortuneMagazineasoneof

“theWorld’sMostRespectedCompanies”from1,500worldwell-known

corporatecandidates.

December23,1978markedthecommencementofBaosteelconstruc-

tion in Shanghai.As the first national key industrial investment project

commencedaftertheconclusionoftheThirdPlenarySessionofthe11th

CentralCommitteeoftheCommunistPartyofChinaandtheimportant

symbol that indicatedChina’smarching intoanewera focusingon the

centraltaskofeconomicconstruction,alongwiththethirty-yearprogress

ofreformandopening-up,Baosteelhasalwaysbeenundertakingthemis-

sionofstridingtowardsapowerfulironandsteelcountry,firmlystickingto

theroadofscientificdevelopment,andmarchingintothearrayofworld

first-classiron&steelmanufacturersinfirmandsoundpaces.

1998witnessedBaosteel’sjointreorganizationwithShanghaiMetallurgical

Holding(Group)CompanyandMeishanIron&SteelGroup.In2006,Bao-

steelreorganizedXinjiangBayiIronandSteelWorks,unveilingthestartof

its cross-regional strategic reorganization. In 2008,Baosteel reorganized

GuangdongIron&SteelGroupCorporationandShaoguanIronandSteel

GroupCo.,Ltd.toestablishBaosteelGroupGuangdongIron&SteelCo.,

Ltd.While eliminating the laggard production capacity, Baosteel actively

preparestoconstructtheZhanjiangManufacturingBase.Theimplementa-

tionand fulfillmentofBaosteel’s strategicobjectives allows it to rapidly

developintothelargest,mostmodernizedandmostcompetitivesuper-

largesteelcomplex,andleapintoaleadingpositionintheworldclassiron

andsteelmanufacturers.

Overview

Inrecentyears,Baosteelhasputemphasisonsteelsupplychain,technol-

ogychain,andresourceutilizationchaintoenhanceintegrationofinternal

andexternalresources,improvethecompetitiveness,andelevatethein-

dustrialposition,andpreliminarilyformedthebusinessstructurecompris-

ingthemainbusinessofironandsteelandrelevantdiversesegments.

Baosteel’smainbusinessisdedicatedtoproducinghighvalue-addedsupe-

riorironandsteelproductswithhightechnologyelements.Ithasanan-

nualsteelproductioncapacityofaround30milliontons,anditsproducts

sellwellinthedomesticandoverseasmarket.Uptonow,ithasdeveloped

threecategoriesofproducts includingplain carbon steel, stainless steel,

andspecialsteel,whicharewidelyusedinfieldsofautomobile,household

appliances,petrochemical industry,machinerymanufacturing,energyand

transportation,architectureanddecoration,metalware,aerospace,nucle-

arpower,electronicsandinstruments,etc.Whileholdingaleadingposition

in thedomesticplatemarket,Baosteel’sproductsarealsoexported to

over40countriesandregionssuchasJapan,Korea,EuropeandAmerica.

The Company attaches great significance to environmental protection,

has cleanproductionpractices, develops recycle economyandpursues

sustainabledevelopment.ItisthefirstenterpriseinChina’smetallurgical

industrytopasstheISO14001certification,andthefirstoneawardedthe

titleof“nationalenvironmentfriendlyenterprise”inChinesemetallurgical

industryandShanghai.

In2004,Baosteel acceded to“GlobalCompact”,beingoneof thefirst

three enterprises to join this treaty in China. In 2006, Baosteel joined

“WorldBusinessCouncil for SustainableDevelopment” (WBCSD), be-

comingthe2nddomesticenterprisewhichjoinedtheorganization,andis

amongthefirstwhojoinedWBCSDintheglobalSteelandIronindustry.

Company Profile

Regarding the main business of iron and steel, Baosteel has developed three categories of products including plain carbon steel, stainless steel, and special steel, which are widely used in fields of automobile, household appliances, petrochemical industry, machinery manufacturing, energy and transportation, architecture and decoration, metal ware, aerospace, nuclear power, electronics and instruments, etc.

3

Organization Structure

O v e r v i e w

Administrative Office with the Board of Directors

Functional department

Business department

Subordinate institution

Adm

inistrative Office

Strategic Developm

ent Dept.

System O

peration Improvem

ent Dept.

Hum

an Resource D

ept.

Assets O

perating Dept.

Finance Dept.

Major Engineering Projects D

ept.

Developm

ent & R

eform D

ept.

Corporate C

omm

unication Dept.

Legal Affairs D

ept.

Auditing D

ept.

Supervision Dept.

Corporate C

ulture Dept.

Safety & G

uardian Supervision Dept.

Brazilian Steel Project Coordination D

ept.

Talent Developm

ent Institute

Zhanjiang Iron & Steel Engineering Project

Headquarters (Preparatory)

Research Institute of Economics & M

anagement

Board of Supervisors

Committees

Deputy General Manager

General Manager

Board of Directors

4

Corporate Leadership

Chairman XuLejiang

DeputyChairman LiuGuosheng

Director HeWenbo

OutsideDirector FengGuojing

LiQingyan

WuYaowen

YangXianzu

XiaDawei

EmployeeDirector WangJinde

Board of Directors

Chairman: XuLejiang Deputy Chairman: LiuGuosheng Director: HeWenbo

5

O v e r v i e w

Outside Director: FengGuojing

Outside Director: YangXianzu

Outside Director: LiQingyan

Outside Director: XiaDawei

Outside Director: WuYaowen

Employee Director: WangJinde

6

Chairman XuLejiang

DeputyChairman LiuGuosheng

GeneralManager,MemberofCPCStandingCommittee HeWenbo

DeputySecretaryofPartyCommittee OuyangYingpeng

DeputyGeneralManager ZhaoKun

DeputyGeneralManager MaGuoqiang

SecretaryofDisciplineInspectionCommission LiuZhanying

DeputyGeneralManager FuZhongzhe

DeputyGeneralManager DaiZhihao

DeputyGeneralManager ZhaoXia

ChairmanofTradeUnion WangJinde

BoardSecretary,ChiefCounsel ChenDelin

Senior Management

Chairman:XuLejiang

Deputy ChairmanLiuGuosheng

General ManagerHeWenbo

Corporate Leadership

7

O v e r v i e w

Deputy Secretary of Party CommitteeOuyangYingpeng

Secretary of Discipline Inspection CommissionLiuZhanying

Deputy General ManagerZhaoXia

Deputy General ManagerZhaoKun

Deputy General ManagerFuZhongzhe

Chairman of Trade UnionWangJinde

Deputy General ManagerMaGuoqiang

Deputy General ManagerDaiZhihao

Board Secretary, Chief CounselChenDelin

8

Baosteeladherestothemissionof“BecomingaWorld-classEnterpriseandSettingupWorld-classLevel

withaFootholdintheMainBusinessofIronandSteel;DedicatedtoBecomingaWorld-classSupplier

ofSteelProducts,TechnologiesandServices”andupholdsthecorevaluesof“Credibility,Cooperation,in

PursuitofMaximizationoftheEnterprise’sValues”.

Baosteelcomprehensivelyadvancesitsleap-forwarddevelopmentbyfollowingitsdevelopmentstrategy

underthenewsituation;directedbytheConceptofScientificDevelopmentandsupportedbytheculti-

vationofsoftpower,Baosteeltakestheroadofnew-typeindustrialization,developscycleeconomy,and

realizesoverallupgradingofscale,structure,technologyandefficiency,aswellasjointdevelopmentofthe

enterprise,theemployeesandthesociety.

TheestablishedstrategicobjectiveofBaosteelis“tobecomeaworld-classinternationalpubliccompany

possessingindependentintellectualpropertyrightsandstrongcomprehensivecompetitiveness,receiving

greatrespect fromthesociety,andboasting‘oneextremelystrong industrial sectorwithconsiderable

developmentofrelevantdiversesegments’”.

Underthenewsituation,Baosteel’sdevelopmentstrategyformainbusinessisoptimizedas“OneMain

Line”,“TwoTransformations”,and“OneUltimateGoal”.

“OneMainLine”istofocuson“scaleexpansion”,themainlineoffuturedevelopment.

“TwoTransformations” refers to the transformationof strategy from“superiorproducts” to“superior

products+scale”,andthetransformationofexpansionmethodfrom“focusingonnewconstruction”to

“combinationofmergerandreorganizationwithnewconstruction”.

“OneUltimateGoal”istoenergeticallyenhanceBaosteel’scomprehensivecompetitiveness,allowitto

lead the development of China’s steel industry. Baosteel will make efforts to fulfill the change from

regionallayouttonationwidelayoutandrealizethebreakthroughininternationallayout,sothatitscom-

prehensivecompetencemayranktop3oftheworldsteelindustry.

“To become a world-class international public company possessing in-dependent intellectual property rights and strong comprehensive com-petitiveness, receiving great respect from the society, and boasting ‘one extremely strong industrial sector with considerable development of relevant diverse segments’”

Corporate Strategy

9

O v e r v i e w

Environmental AffairsEconomic AffairsSocial AffairsEmployee Affairs

CSR Committee

CSR Committee Office

Mainbusinessofironandsteel

Resourcedevelopmentindustry

Steelfurtherprocessingindustry

Technicalserviceindustry

Financialindustry

Productionserviceindustry

VerticallyunderleadershipoftheteamsHorizontallyunderleadershipofthebusinesssegments

Employee Affair Team

Social Affair Team

Economic Affair Team

Environmental Affair Team

In2008,basedon reviewingandsummarizingmanyyears’practiceand

experiencesinfulfillingsocialresponsibilities,Baosteelproposedtheguide-

line of“incorporating social responsibilities into theCompany’s routine

businessactivities”andpreliminarilyestablished theSocialResponsibility

System.

BaosteelhassetuptheCorporateSocialResponsibilityCommittee(CSR

Committee) at topmanagement level, forwhichGeneralManagerMr.

HeWenboactsastheDirector;DeputySecretaryofPartyCommittee

Mr.OuyangYingpengassumestheofficeofDeputyDirector;theleaders

offunctionaldepartmentsandtheheadsofbusinesssegmentsserveas

members.CSRCommittee is the general coordinatingorganization for

theCompany’ssocialresponsibilityaffairsandthespecialcommitteere-

sponsibleforconstructionoftheCompany’ssocialresponsibilitysystem

andworkingmechanism.

TheOfficeofCSRCommitteeissetattheCorporateCommunication

Department,andresponsiblefororganizingthedevelopmentofCSRin-

dexsystem,arrangingthepreparationandissuanceofCSRreports,and

conductingroutineaffairsoftheCommittee.

Fourteamsforenvironmental,economic,employeeandsocialaffairsare

setupbeneaththeCSRCommittee,responsibleforpromotingrespective

fieldsundertheframeworkofSocialResponsibilitySystem,thusforming

amanagement systemwithClassifiedManagement[Note] as focus and

HierarchicalManagement[Note]assupplement.

Furthermore,Baosteelhas setupaSustainableDevelopmentResearch

Center under the Research Institute of Economics &Management, re-

sponsible for researching the national and international environment

protectionpoliciesandagreements,analyzingthedevelopmenttrendand

policyorientationofdomesticandoverseasenergyindustry,andstudying

theCompany’ssustainabledevelopmentstrategy,inordertoprovidefar-

sightedtheoreticresearchfortheCompanytofulfillitssocialresponsibili-

tiesandrealizesustainabledevelopment.

[Note]Classified Management means that the functional departments of headquarters vertically propel the social responsibility tasks for respective divisions of all sub-sidiaries; Hierarchical Management means that each business segment propels their internal social responsibility tasks.

Social Responsibility System

10

On its own initiative, Baosteel undertakes the social responsibility to

promotecoordinationandharmoniousdevelopmentofsocialprogress,

employeedevelopment,economicgrowth,andenvironmentprotection.

Thisismainlyreflectedintheresponsibilitytostakeholderssuchasin-

vestors,customers,suppliers,employeesandthecommunitywithaview

torealizingjointdevelopment.FacingtherequirementofChina’smod-

ernizationconstruction,asChinadevelopsfromalargesteelproducing

countrytoapowerfulone,theCompanytakestheinitiativetounder-

takethesocialresponsibilityasanindustryleaderbychangingtraditional

high-pollution and high energy-consuming steel production modes,

becomingacyclicenterprisewhich integrates ironandsteelproducts

manufacturing, energy conversion, treatment and eliminationof staple

wasteforthesociety,aswellasenergeticallydevelopingenvironment-

friendly products. From the perspective of social, environmental and

economicharmony,Baosteelwillcarefullythinktherelationshipbetween

social responsibility and long-term corporate development, translating

social responsibilities into themomentum of corporate development

andlong-termbenefits.

In theprevious30years,Baosteelhasbeensticking to the“credibility

centric” philosophy, paying close attention to customers’ needs, mak-

inggreateffortstoenhancecustomersatisfaction,andwholeheartedly

trying tomaximize the values for customers; guidedby theprinciples

of“Benefit Sharing, Risk Pooling, andMutual Development”, Baosteel

hasalwaysconsidered“buildingthemostcompetitivesupplychain”as

theultimategoalofsupplierrelationshipmanagement,andestablished

cooperative,win-winandsustainable-developmentstrategicpartnership

withmajorsuppliers;atalltimes,Baosteelhaskeptimprovingtheinves-

torcommunicationplatformtocommunicatewithinvestorsinmultiple

channelsandlayers,andcontinuouslystrengtheningitsservicetoinves-

tors,makingactivecontributionforachievingwin-winresults.

Stakeholders CommunicationMethods Stakeholders’ExpectationsofBaosteel Baosteel’sPractice MajorIndexes

Government,investors(State-ownedAssetsSupervisionandAdmin-istrationCommissionoftheStateCouncil)

Lawsandregulations;Issuanceofpolicydirectives;MeetingsoftheStateandMinistries,andimplementingspiritofthemeetings;Distributionandimplementationofdocu-ments;Regularworkreports;Routinework-relatedcommunications;Reportsandstatements;Visits.

Persistenceinlegitimatebusinessoperationwithhonestyandtrustworthiness;Constantenhancementofsustainableprofitability;Trueimprovementofproductqualityandservicelevel;Reinforcedresourcesavingandenvironmentalprotectionef-forts;Advancementofindependentinnovationandtechnologicalprogress;Guaranteedproductionsafety;Protectionofemployees’legalrights;andParticipationinsocialpublicwelfarecause.

Insistsonhuman-orientedscientificdevelop-ment,responsibleforstakeholdersandtheenvironmentwhilepursuingeconomicef-ficiency,soastorealizetheharmonybetweenenterprisedevelopmentandthesocietyandenvironment.

Salesrevenue;Profit;Tax;Employmentvolume;andValuemaintenance/incrementrateofstate-ownedassets.

Strategicpartners Executionofcontracts;Mutualvisitsandcontactsbetweentopmanagementofthepartners;Regularmeetings.

Achievementofwin-winresultswithBaosteelthroughtightstrategiccooperation.

ExtendsthefieldsanddepthofcooperationasBaosteelexpandsthroughmergerandpurchase.

Salesrevenue;Returnoninvestedcapital;Marketshare;andBrandvalue.

Customers Satisfactionsurvey;Customersymposium;Mutualvisitsbetweenthetopmanagements;Routinecommunications.

Provisionofcontinuallyimprovedqualityproductsandservices. Conductscustomersatisfactionsurvey;andAdoptsthewayof“in-advanceintervention”tosatisfycustomers’needs.

Customersatisfaction;andAwardsgrantedbycustomers.

Employees Labourcontracts;Reasonablerecommendations;Collectivenegotiation;EmployeeForum;EmployeeRepresentativeCongress.

Mutualgrowthoftheenterpriseandemployees;Improvedbenefitsandcareeropportunities;andGoodworkingenvironment.

Careerplans;and“GreenApple”and“GoldenApple”talenttrainingplans.

Employeesatisfaction;Turnovervolumeandrate;andNumberofpersonstrainedandexpensesofemployeetraining.

Suppliers Agreementsandcontracts;Regularvisits;Meetings;Negotiations.

Establishmentoflong-termstablecooperationwithBaosteeltoobtainreasonablereward.

Implements“Under-sunshine”ProcurementPlantobuildlong-termstablesupplychainandcreatepublicandtransparentprocure-mentcircumstances.

Numberofsuppliers;andProcurementpolicies.

Community Assistcommunityconstruction;Supportcultural,sportsandartactivitiesofthecommunity;Protectcommunityenvironment;Conductvolunteeractivities.

Mutualdevelopmentofthecommunityandtheenterprise;andGuaranteedprovisionofsafeandhealthenvironmenttothecommunity.

CarriesoutYunnanpovertyalleviationandTibetsupportefforts.

Inputsincommunityconstruction.

Non-governmentorga-nizations

Participateinassociationsandservingonthem;Sponsoring;Activelyganizeandparticipateinactivities.

Playinganactiveroleinallfieldsoftheassociationororganiza-tionwhichactivelyfulfillsocialresponsibilities.

Activelyparticipatesinenvironmentprotec-tion,economicdevelopmentandsocialprog-resseffortsinvolvingsocialresponsibility.

Numberofsocialorganizationsattended;Amountofannualfee;andTotalamountofdonation.

Mediaandthepublic Pressrelease;Mediabriefing;Informationcommunicationactivities;Phonecalls,emails,andfaxcontacts;Routineletters,phonecalls,visits;Website.

Stickingtotheroadofsustainabledevelopmentandbecom-ingamodeloffulfillingsocialresponsibilityasarepresentativeenterpriseofChina’ssteelindustry.

Issuesinformationrelatedtothefulfillmentofsocialresponsibilitiesonatimelybasis.

Numberofpressreleases;andCollectionandfeedbackofpublicopinions.

From the perspective of social, environmental and economic harmony, Baosteel will carefully think the relationship between social responsibility and long-term corporate development, translating social responsibilities into the momentum of corporate development and long-term benefit.

Stakeholders

Stakeholders’ Expectations on Baosteel Communication Methods with Interested Parties

11

O v e r v i e w

Stakeholders CommunicationMethods Stakeholders’ExpectationsofBaosteel Baosteel’sPractice MajorIndexes

Government,investors(State-ownedAssetsSupervisionandAdmin-istrationCommissionoftheStateCouncil)

Lawsandregulations;Issuanceofpolicydirectives;MeetingsoftheStateandMinistries,andimplementingspiritofthemeetings;Distributionandimplementationofdocu-ments;Regularworkreports;Routinework-relatedcommunications;Reportsandstatements;Visits.

Persistenceinlegitimatebusinessoperationwithhonestyandtrustworthiness;Constantenhancementofsustainableprofitability;Trueimprovementofproductqualityandservicelevel;Reinforcedresourcesavingandenvironmentalprotectionef-forts;Advancementofindependentinnovationandtechnologicalprogress;Guaranteedproductionsafety;Protectionofemployees’legalrights;andParticipationinsocialpublicwelfarecause.

Insistsonhuman-orientedscientificdevelop-ment,responsibleforstakeholdersandtheenvironmentwhilepursuingeconomicef-ficiency,soastorealizetheharmonybetweenenterprisedevelopmentandthesocietyandenvironment.

Salesrevenue;Profit;Tax;Employmentvolume;andValuemaintenance/incrementrateofstate-ownedassets.

Strategicpartners Executionofcontracts;Mutualvisitsandcontactsbetweentopmanagementofthepartners;Regularmeetings.

Achievementofwin-winresultswithBaosteelthroughtightstrategiccooperation.

ExtendsthefieldsanddepthofcooperationasBaosteelexpandsthroughmergerandpurchase.

Salesrevenue;Returnoninvestedcapital;Marketshare;andBrandvalue.

Customers Satisfactionsurvey;Customersymposium;Mutualvisitsbetweenthetopmanagements;Routinecommunications.

Provisionofcontinuallyimprovedqualityproductsandservices. Conductscustomersatisfactionsurvey;andAdoptsthewayof“in-advanceintervention”tosatisfycustomers’needs.

Customersatisfaction;andAwardsgrantedbycustomers.

Employees Labourcontracts;Reasonablerecommendations;Collectivenegotiation;EmployeeForum;EmployeeRepresentativeCongress.

Mutualgrowthoftheenterpriseandemployees;Improvedbenefitsandcareeropportunities;andGoodworkingenvironment.

Careerplans;and“GreenApple”and“GoldenApple”talenttrainingplans.

Employeesatisfaction;Turnovervolumeandrate;andNumberofpersonstrainedandexpensesofemployeetraining.

Suppliers Agreementsandcontracts;Regularvisits;Meetings;Negotiations.

Establishmentoflong-termstablecooperationwithBaosteeltoobtainreasonablereward.

Implements“Under-sunshine”ProcurementPlantobuildlong-termstablesupplychainandcreatepublicandtransparentprocure-mentcircumstances.

Numberofsuppliers;andProcurementpolicies.

Community Assistcommunityconstruction;Supportcultural,sportsandartactivitiesofthecommunity;Protectcommunityenvironment;Conductvolunteeractivities.

Mutualdevelopmentofthecommunityandtheenterprise;andGuaranteedprovisionofsafeandhealthenvironmenttothecommunity.

CarriesoutYunnanpovertyalleviationandTibetsupportefforts.

Inputsincommunityconstruction.

Non-governmentorga-nizations

Participateinassociationsandservingonthem;Sponsoring;Activelyganizeandparticipateinactivities.

Playinganactiveroleinallfieldsoftheassociationororganiza-tionwhichactivelyfulfillsocialresponsibilities.

Activelyparticipatesinenvironmentprotec-tion,economicdevelopmentandsocialprog-resseffortsinvolvingsocialresponsibility.

Numberofsocialorganizationsattended;Amountofannualfee;andTotalamountofdonation.

Mediaandthepublic Pressrelease;Mediabriefing;Informationcommunicationactivities;Phonecalls,emails,andfaxcontacts;Routineletters,phonecalls,visits;Website.

Stickingtotheroadofsustainabledevelopmentandbecom-ingamodeloffulfillingsocialresponsibilityasarepresentativeenterpriseofChina’ssteelindustry.

Issuesinformationrelatedtothefulfillmentofsocialresponsibilitiesonatimelybasis.

Numberofpressreleases;andCollectionandfeedbackofpublicopinions.

12

Employee Performance Report

Inrecentyears,withtheCompany’sbusinessexpansion,thelaborforcehasbeencontinuouslyenhancedwiththenumberofemployeesconstantlyincreasing.

In2008,theCompanytotallyhas108,914employees,wherethenumberofmanagement,technicalandoperationpositionsrespectivelyaccountfor9.1%,

23.5%and67.4%.Amongthem,thereare28,336femaleemployees,accountingfor26.0%ofthetotalemployment.

Baosteel’soverseassubsidiariesarespreadinEurope-African,Asia-Australian,andAmericanregions.BytheendofOctober2008,thesesubsidiariestotallyhad

230employees,including93foreignemployees.

Year Y2006 Y2007 Y2008

Numberofemployees 91308 90160 108914

91308

90160

108914

Y2006

Y2007

Y2008

Managementpersonnel

Technicalpersonnel

Operationpersonnel

9%

24%

67%

Lessthan35yearsold

36~45yearsold

46~55yearsold

Over56yearsold

36%

39%

24%

1%

Master’sDegree

Bachelor’sDegree

AssociateDegree

SecondaryVocationalEducationorlower

3%

16%

24%57%

Staff Composition

13

Employee Performance Report

TheCompanyprotects the legal rightsof localpeople in theplaceswhere it runsbusiness,andproperly

handlestherelationswithlocalpeople.Employmentoflocalpeopleandpromotionofexcellentlocalemploy-

eesintothemanagementnotonlyenhancetheCompany’slaborcapital,butalsobringeconomicbenefitsto

thelocalsocietyandstrengthenBaosteel’sabilitytolearntheneedsoflocalmarket.Baosteelhasoverseas

subsidiariesinAmerica,EuropeandAsia,andemployslocalpeopleasrequiredbythebusinessofsubsidiaries

andtherulesofmarket-orientedallocationinaccordancewiththeapplicablelaws,regulationsandemploy-

mentcodesofthecountryinwhichitrunsbusiness.Duringthethreeyearsfrom2006to2008,thenumber

oflocallyrecruitedemployeesrespectivelyaccountedfor42.6%,43.5%and41%inthetotalemploymentof

overseassubsidiaries.

TheCompanyguaranteestoprotecttheemployees’freeemploymentandlaborfreedomrights,andisdedi-

catedtocreatinggoodworkingenvironmentforthem,encouragingtheirworkingenthusiasm,improvingthe

systemoftalentretentionthroughattractivebenefits,caringhearts,andpromisingcareerdevelopment,and

elevatingtheemployees’satisfactionandloyalty.Inthisway,theemployeeturnoverratehasbeenkeptatlow

levelinyears.Duringthethreeyearsfrom2006to2008,theturnoverratewasrespectively0.6%,0.9%and

1.1%;ataverage,themale-femaleratioofemployeeturnoverwas5:1;therateofemployeeturnoverunder

theageof30yearsoldwas60%,andtheratewithintheageof30-40yearsoldwas30%ataverage.

42.6%

43.5%

41%

Y2006

Y2007

Y2008

ProportionofLocallyRecruitedEmployeesintheTotalEmploymentofOverseasSubsidiaries

Baosteel has overseas subsidiaries in America, Europe and Asia, and employs local people as required by the business of subsidiaries and the rules of market-oriented allocation in accordance with the applicable laws, regulations, and employment codes of the countries where it runs business.

Employment Offer

14

BaosteelhasestablishedWorkingRulesfortheFemaleEmployeeCom-

mitteeofBaosteelGroupCorporationTradeUnion,accordingtowhich

allbranchesandsubsidiariesmustsetupandbuildtheFemaleEmployee

CommitteeofTradeUnionandtheSodalityofFemaleProfessionals to

guidethefemaleemployeesinimprovingtheirqualificationsfromtheper-

spectiveof production andbusinessoperationwith a foothold in their

ownpositions.TheCompany alsomakes efforts in perfecting the right

protectionmechanismforfemaleemployeestotrulyprotectthefemale

employees’legalrightsandspecialinterests,activelyparticipatesincollec-

tivenegotiation,andprovidesthesectionof“SpecialProtectionforFemale

Employees” incollectivecontractssignedwiththeCompany.TheCom-

panyhaspaidtoenrollallitsfemaleemployeesintheCollectiveSpecial

MedicalInsuranceforFemaleEmployeeslaunchedbyShanghaiFederation

ofTradeUnions.In2008,totally20,132femaleemployeesparticipatedin

thisinsuranceandmanyofthemobtainedcompensation.

In order to face the upcoming aging society, better undertake the en-

terprise’ssocialresponsibilityforemployeepension, improvethequality

ofemployees’post-retirementliving,eliminatetheirworriesforold-aged

pension,andencouragethemtobecomefullyengagedinBaosteel’sbusi-

nessoperation,productionandconstructionactivities,theCompanyhas

developedtheCorporateAnnuityPlanbyfollowingtheprincipleof“old

measures for aged employees, newmeasures for new employees, and

steadytransitionforemployeesotherthanthem”onthebasisoforga-

nizing and integrating the original pension and benefits programs.The

CorporateAnnuitySystemadoptsa“payment-based”method,wherethe

paymentismadebyboththeenterpriseandemployeeseverymonthas

“saving” for employees’ pension.The annuity fund consistingof foresaid

paymentisindependentoftheenterprise’sassets,recordedasitactually

accrues,anduniformlymanagedbythetrustee,trustor,accountmanager,

andinvestmentmanager.Afterretirement,theemployeesmaydrawac-

cumulatedfundsfromtheirpersonalaccountsatonetimeorindifferent

times.

TheadvantageofCorporateAnnuitySystemalsoliesinitsmanagement

modeof“payment-basedsystem”,whichavoidstheaccumulationofen-

terprise’s long-term invisible debt under the“treatment-based system”.

Theindependenceofsuchfundensuresthesafetyofannuityassetsand

thesafeguardofemployees’interests.

TheuniformityofBaosteel’sCorporateAnnuityPlanwilleffectivelypush

theharmoniouslaborrelationshipforwardtoanewstage.

Baosteelpayscloseattentiontotheemployees’healthandgrowthatall

timesasitdevelops.Inimplementingthe“prevention-based”healthmain-

tenanceplan,theCompanyarrangesphysicalexaminationforemployees

every year with 100% coverage; for the employees performing special

jobs,itarrangesspecialoccupationalphysicalexamination;forfemaleem-

ployees,itaddsgynecologicalexaminationatleastonceeverytwoyears.

Moreover,theCompanyhasdevelopedahealthmanagementinformation

systemcoveringmostemployees, for theconvenienceofemployees to

inquiretheirhealthinformation.

TheCompanydeterminesthecriterionofemployeecompensationbasedonjobvalue,andinsistsontheperformance-orientedprinciple,givinghigher

rewardstoemployeeswithbetterperformance;ittreatsallemployeesequallyandconsistentlywithoutanygenderdifference;itisalsodedicatedtoat-

tractingandretainingthemostexcellenttalentsandprovidingmarket-competitivecompensation.Allemployees’wageincomeishigherthanthelocal

minimumwagestandard.

Accordingtoapplicablepoliciesandregulations,theCompanyfullypayslegalsocialinsuranceandbenefitsforallin-serviceemployees,mainlyincluding

basicpension insurance,basicmedical insurance,unemployment insurance,work-related injury insurance,maternity insurance,andhousingprovident

fund,etc,arrangesothersupplementalinsurancelikeaccidentinsuranceforemployeeswithconsiderationtotheenterprise’scharacteristics,andprovides

suchbenefitsasbusinessmeal,personalprotectionequipments,andpaidannualleave.In2008,theCompanystartedtoimplementtheCorporateAn-

nuityPlaninordertoimprovetheemployees’post-retirementlivingstandard,furtherenhancethecorporatecohesiveness,andpromotetheenterprise’s

harmonyandstability.

The Company determines the criterion of employee compensation based on job value, and insists on the performance-oriented principle, giving higher rewards to employees with better performance; it treats all employees equally and consistently without any gender difference; it is also dedicated to attracting and retaining the most excellent talents and providing market-competitive compensation.

Welfare

Employee Health Plan Corporate Annuity Plan

Welfare of Female Employees

15

In2008,greatchangestookplaceinthesafetyprotectionmechanismof

BaosteelGroupCorporationbecausefiresafety, trafficsafety,andsecu-

rityguardwere included into the“general safetysystem”.Starting from

guaranteeingtheemployees’healthandsafety,theCompanystrengthens

fulfillmentofsafetyresponsibilityatdifferentlevels,reinforcesbasicsafety

management, empowers safety inspection, improvespertinence andef-

fectivenessofsafetyeducationandtraining,andendeavorstoexploreand

carryouttheoperationmodeof“generalsafetysystem”.

TheCompany implements the SafetyProductionResponsibility System

atdifferentlevels.GeneralManageroftheHeadquartershassignedthe

SafetyObjectiveManagementResponsibilityAgreementseparatelywith

the safety production primary responsible person of 34 branches and

subsidiarieslikeBaosteelCo.,Ltd.,andbusinessdepartments.TheRespon-

sibilityAgreementspecifiestheresponsibilities,safetyproductionassess-

mentindicesandmethods,andreward-penaltymethodsoftheprimary

responsiblepersonofeachunit.Theunitswillbreakdownthesafetyob-

jectiveresponsibilities intodifferent levels,andsigntheSafetyObjective

ResponsibilityAgreementateach level, inordertothoroughly fulfill the

safetyresponsibilitiesbothhorizontallyandvertically.

Inordertofurtherheightenthesafetyresponsibilityawarenessofman-

agementatdifferentlevels,BaosteelManagerSafetyPracticeConference

washeldonJanuary3.Attheconference,leadersoftheCompanytook

theleadingivingsafetyoath;thereweremorethan2,000managersfrom

differentlevelsparticipatinginthejurationatthemainandbranchconfer-

encesites.

To make clear the safety management responsibilities of construction

Baosteelstrictlyfollowsthenationalregulationsconcerninglaborsafetyandhealth.Inordertofurtherguaranteetheemployees’healthandsafety,the

Companyhasdevelopedtheactivityplanandevaluationmethodswithconsiderationtoitsactualsituationbystartingfromestablishmentandperfection

ofthethree-levelnetworkorganizationsystem,regulationsandrulessystem,supervisionandinspectionsystem,andworkprocessessystem.Italsofully

implementsfourrules,namelyBaosteelTradeUnion’sManagementMeasuresforThree-levelNetworkSupervisionandInspectionofLaborSafetyProtec-

tion,Baosteel’sManagementMeasuresforEmployeeOccupationalHealthandSafetyRepresentatives,Baosteel’sManagementMeasuresforTreatmentof

EmployeeSafetyandHealthInformation,andBaosteel’sManagementMeasuresforSupervision,CompliantandReportingofLaborSafetyProtection.In

addition,theCompanyconsiderstheconstructionsafety“100[Note]Team”aimingatimplementingstandardoperationandeliminatinghabitualincompliance

asthebasicconditionforteamupgradingandevaluation.

[Note]: “100” refers to put safety in the 1st place, keep peccancy and accident at zero.

Employee Safety Protection

The Company’s Safety Protection Efforts

Employees Performance Report

projects, theCompanymainly addresses their safetymanagement pro-

cessesanddepartmentresponsibilities.Itspecifiesthesafetymanagement

processes and responsibilities of eight departments such as Investment

ManagementDepartment,SafetySupervisionDepartment,ProjectOwn-

er (landplot,branchor subsidiary)ateight stages includingpreliminary

planning,feasibilityresearch,andpreliminarydesign.

Tostrengthenthetreatmentofpersonsresponsibleforvariousaccidents,

theCompanyhasdevelopedBaosteel’sGuidelinesonAccidentAssess-

mentbasedontheInterimMeasuresforInvestigatingtheResponsibilities

forIncomplianceandSafetyProductionAccidents,furtherspecifyingthe

requirementsforassessmentofaccidentresponsibilities.

2008EmployeeInjuryReport

NumberofInjuries(Numberofinjuries

permillionworkhours)

InjuryFrequency(Numberoflostdayspermillionworkhours)

RateofSevereInjury

31 0.13 61.54

Employee Performance Report

16

Intheaspectofmanagementtalents,withdecodingofstrategiesasthekey

pointandseekingtalentshortageasthestartingpoint,theCompanyhas

developedthe2008BackupPlanfor“strategicinsightbasedleadershiptal-

entdevelopment”,formingtheplanonleadershipalternates,high-potential

backupcandidates,andtalentintroduction,andfurtherheighteningtheper-

tinenceofbackupleadershiptalenttrainingactivities.Besides,theCompany

hasestablishedandimprovedthemanagementhierarchicaltrainingsystem,

deepened the concept of“Training beforeGoing onDuty”, andmainly

pushedforwardthequalificationtrainingformanagementpersonnel.

Withrespecttotechnicalbusinesstalents,theCompanyhasselectedthe

fifthgroupoftechnicalbusinessexperts,sofarformingateamconsisting

of9permanentexperts,15seniorexperts,and82technicalbusinessex-

perts;byseekingapproaches,carriersandmethodsforexpert-typetalents

toshareknowledgewithintheGroup,andestablishingrelevantincentive

mechanism,theCompanyhasdevelopedsomebranditemspopularwith

thetechnicalpersonnel,e.g.expertforum,expertblog;Baosteelhasalso

plannedandestablishedthe“GoldenApple”Plan,i.e.tobuildplatformsfor

allcorefieldsofBaosteeltotrainabatchoftechnicalleaderswhocantake

awalkontheinternationalplatform,anddrivethetechnicalprogressand

productcompetitivenessofBaosteel.

Regardingskilledtalents,theCompanyproposedtheobjectiveof“Train-

ingaThousandNewTechnicians inThreeYears”andcreated the“1+X”

trainingstandardwithBaosteelfeaturesin2004.Bytheendof2006,the

Companyaccomplishedthetrainingof1,798techniciansand312senior

techniciansfromthesteelmetallurgy,steelrolling,mechanical,electrical,in-

strument,powerandenergy,watertreatment,transportation,testingand

assay,chemical,andbuildingfurnaceandcommunicationfields,where814

technicians and 111 senior technicianswere certified as qualified. From

2007 to2009, a newcycleof“Training aThousandNewTechnicians in

ThreeYears”issmoothlyunderway,anditisreportedthat875technicians

and212seniortechnicianswerequalified.

Withregardtoyoungemployees,theCompanyhasdevelopedthe“role-

based” trainingmode for newly-coming college graduates, i.e. allow the

new-comerstobecomerapidlyadaptivetotheorganizationandtheiroc-

cupationsthroughthreestagesincludingpre-jobtraining,on-jobinternship,

andon-jobpractice.TheCompanyhasalsoadvancedbasictalenttraining

activitiesandimplementedthe“GreenApple”Plan,i.e.toselectabatchof

high-qualityandhigh-potentialtalentsfromthenewly-comingcollegegrad-

uatesintotheCompany’sbasictalentdatabaseeveryyearforthepurpose

oftrainingfutureseniormanagementandtechnicaltalentsforBaosteel,and

implementa2-yearcomprehensivetrainingplantoprovideanacceleration

racewayforbackupyoungtalents’careerdevelopment.

Asforinternationaltalents,in2008,byexcavatingandextendingthetrain-

ingresourceslikeoverseasinstitutions,enterprisesandcompaniesandfor

thepurposeofenhancing“foreign languageskills, informationprocessing

ability, cross-cultural communication ability and global perspective”, the

Companyactivelyincreasedtheemployees’overseastrainingexperiences

and selected 312 persons to attend overseas special training and on-

temporary-positiontrainingforcoremanagementpersonnelandbackup

talents,coretechnicalbusinesstalents,talentsreservedforoverseasdevel-

opment,andthekeyfunctionalmanagementtalentsoftheHeadquarters

andall industrialsectors.Thesetrainingsexpandedtheemployees’global

perspectiveandenrichedtheirlearningexperiences.

TheCompanyhassettheobjectiveto“keepenhancingtheCompany’scorecompetence,andspeedupthebuildingoffirst-classtalentteamadaptive

totheCompany’sdevelopmentstrategy”,activelyexploresthegrowthruleofmanagementtalents,technicalbusiness(skilled)talents,andotherspecial

talents,andperfectsthedualcareerpathformanagementtalentsandtechnicalbusiness(skilled)talentsaccordingtothe“dualchannel”concept,providing

paralleledpromotionladdersforbothtypesoftalents.

Also,theCompanyhasdevelopedaclassifiedandhierarchicaltrainingsystemandprovideseightcategoriesoftrainingprogramsincludingleadershipand

managementhierarchicaltraining,educationofpartyconstructionandcorporateculture,specialmanagementtraining,engineeringtechnologytraining,

operationandmaintenancetraining,computerandlanguageskilltraining,networktraining,anddegreeanddiplomatrainingfordifferentemployees,in

ordertofullyimprovethetheirjobqualificationsandabilities,andrealizemutualgrowthofemployeesandtheenterprise.In2008,theCompanytotally

carriedout6,388trainingprograms,upby7.5%overtheyear2007;from2006to2008,thenumberoftrainingpersonstrainedincreasedyearbyyear

(seethefollowingdiagramfordetails);in2008,eachpersonreceived3.2timesand58.7hoursoftrainingperyearataverage.

Y2006

Numberofpersonstrained(Unit:10thousand)

Y2007

Y2008

40

302010

Keep enhancing the Company’s core competence, andSpeed up the building of first-class talent team adaptive to the Company’s development strategy

Training and Education

17

TheCompanystrictlyobeystheapplicablenationallawsandcodesaswellastheenterprise’srulesandregulations,observesandimplementstheinternational

conventions,internationallaborstandardsandotherapplicableindustrystandardsforwhichtheChineseGovernmenthasmadecommitment,keepsitspromiseto

respecthumanrights,nottoemployanyminorworker,nottodiscriminateagainstanyemployee,andtoprotecttherightsoflocalpeople,anduncompromisingly

prohibitstheemploymentofanyminorworker.TheCompanyadoptstheemploymentmechanismofequalcareeropportunityforallemployeesand“samework

samepay”forbothmaleandfemaleemployees.

TheCompanyhasbuiltahumanresourceexchangeandallocationplatformtopromotere-employmentofworkerswhohavelosttheirjobs,insteadofpushing

redundantemployeestothesociety.TheCompanyconsidersitanimportantpartofBaosteel’ssocialresponsibilitytocomprehensivelyimplementtheLaborCon-

tractLaw,persistsinincorporatinglaborrelationshipintotheenterprise’sstrategicmanagement,andmakesgreateffortstobuildaharmoniouslaborrelationship.

BaosteelestablishedtheOpenFactoryAffairsSteeringTeamin2000.Every

year,thePartyCommittee,AdministrativeOffice,andTradeUnionissuea

jointdocumenttospecifythekeypointsof factoryaffairsopennessand

democraticmanagementefforts.TheCompanyhas issued theOpinions

onEstablishingandPerfecting theFactoryAffairsOpennessResponsibil-

itySystemofBaosteelGroupCorporation,MeasuresofBaosteelGroup

CorporationforInvestigatingtheFactoryAffairsOpennessResponsibility

(TrialImplementation),andtheFactoryAffairsOpennessAssessmentRules

ofBaosteelGroupCorporation,realizedscientificmanagementoffactory

affairsopennessefforts,andfacilitatedtheimprovementoffactoryaffairs

opennessquality.In2003and2007,theNationalFactoryAffairsOpenness

CoordinatingGroupgrantedBaosteelthetitleof“AdvancedOrganization

ofFactoryAffairsOpennessandDemocraticManagement”.

The Headquarters and subordinate independent corporations of the

Groupplus thebranchesandsubsidiarieswithcorporatecapacityhave

establishedcollectivenegotiationmechanismincompliancewiththeLa-

borLawofthePeople’sRepublicofChina,theTradeUnionLawofthe

People’sRepublicofChina,andtheCollectiveContractProvisionsissued

bytheMinistryofLaborandSocialSecurity.Representativesoftheen-

terpriseandtheTradeUnionconductequalnegotiationregardinglabor

remuneration,workinghours, rest andvacation, labor safety andhealth

protection,vocational training, insuranceandbenefits, and regularly sign

collectivecontractandsubmitittothelocallaboradministrativeagency

forreviewandarchive.Atpresent,Baosteel’scollectivenegotiationmecha-

nismandexecutionofcollectivecontractcovers100%employees.

“Baosteelwillneverletanemployeeliveahardlifeorfailtovisitadoc-

tororlethis/herchilddiscontinueschoolingbecauseofpoverty.”Thisisa

seriouscommitmentmadebyBaosteel’s leadersforallemployeeswhen

perfectingthelong-termalleviationandwarmthdeliverymechanismand

implementationmethods.

InSeptember2005,BaosteelissuedtheOpinionsonEstablishingandPer-

fecting the Long-termHelp-the-poor andWarmthDeliveryMechanism

andtheMeasuresforImplementationofHelp-the-poorandWarmthDe-

liveryActivities, and actively built themulti-layer and all-sided long-term

alleviationandwarmthdeliverymechanism.

InMay2008,incombinationwiththeactivitiesforfurtherstudyandprac-

ticeofScientificDevelopmentConcept,theCompanyproposedtheOpin-

ionsonFurtherPerfectionoftheLong-termHelp-the-poorandWarmth

DeliveryMechanism,andmadecorrespondingrevisiontotheMeasuresfor

ImplementationofHelp-the-poorandWarmthDeliveryActivities.

According tostatistics, in theprevious3years, totally51,918employees

offinancialdifficultyobtainedsubsidyofRMB30.76million;4,474families

of financial difficulty obtained study grant of RMB2.78million for their

children;medicalaidofRMB16.7529millionwasprovided.In2008,25,153

employeesoffinancialdifficultyobtainedsubsidyofRMB9.45million;1,896

familiesoffinancialdifficultyobtainedstudygrantofRMB1millionfortheir

children;2,360sickemployeesobtainedmedicalaidofRMB5.21million.

In January2004,BaosteelGroupCorporationheld thefirst sessionofEm-

ployee Representative Congress, and issued the Employee Representative

CongressSystemofBaosteelGroupCorporation.In2006,accordingtothe

management mode of subordinate organizations, Baosteel established the

multi-levelemployeerepresentativecongresssystem.TheAdministrativeOf-

ficeandthePartyCommitteejointlyissuedtheOpinionsofBaosteelGroup

CorporationonStandardizingtheEmployeeRepresentativeCongressSystem

atDifferentLevels.TheEmployeeRepresentativeCongressofBaosteelGroup

CorporationisdividedintosevencategoriesatthreelevelsincludingtheHead-

quarters,subsidiaries(branches),andsubordinatefactories,fullyguaranteeing

thedemocraticrightsofemployees.

The Company persists in incorporating labor relationship into the enterprise’s strategic man-agement, and makes great efforts to build a har-monious labor relationship.

Legal Rights Protection

Collective Labour Contract Alleviation Plan

Employee Representative Congress System

Openness of Factory Affairs

Employee Performance Report

18

Education PovertyalleviationandTibetsupport

Disasterrelief Culturalandartactivities

Other

Social Performance Report

Inpreviousyears,Baosteelhasalwayskeptcontributingandservingthe

society, supporting the charity and publicwelfare cause, protecting the

weakgroup,andpursuingtheharmonyofeconomicefficiencyandsocial

benefits.According to incomplete statistics,Baosteelhadaccumulatively

donatedRMB830millionsince2001,wherethetotalamountofdona-

tionin2008mountedRMB175million.Seethefollowingtablefordetails:

CategoryAmountofDonation

(RMB10,000)

Totaldonation 17509

Education 165

PovertyalleviationandTibetsupport 3185

Disasterrelief 11998

Culturalandartactivities 409

Other 1752

Social Contribution

On12thMay 2008, aM8.0 severe earthquake burst out inWenchuan

County,SichuanProvince.Twohoursaftertheoccurrenceofearthquake,

Baosteelmadeimmediateresponseandcarriedoutreliefandrescueactivi-

tiesasquicklyaspossibleundertheprincipleof“ConsideringtheUrgency

ofDisaster-hitAreasasOurEmergency”.Baosteelorganizedatruckfleet

tosendtents,quilts,cans,colorplatebarracksandotherdisasterreliefma-

terialstoMianyangandDujiangyanasoneofthefirstdonationsdelivered

tothedisaster-hitareas.

OnMay14,inadditiontothegrantofRMB10million,Baosteeldecided

tofullyexertitsadvantagesbydonatingandbuildingcolorplatebarracks

worthRMB50million in thedisaster-hitareas,providing shelters foraf-

fectedpeople.Inashortperiodofonemonth,theCompanybuilt6villages

includingXiangfengqiaoCommunityandJunleTownforpeopleafflictedby

thedisaster,accumulativelycoveringanareaof48,357m2.GeHonglin,the

DeputySecretaryofCPCChengduMunicipalCommitteeandMayorof

Chengdusaidatthehand-overceremonyofBaosteelcolorplatebarracks:

“thegreat lovethatBaosteelshowsduringthedisasterreliefandrescue

winstheloveandesteemoftheDujiangyanandPengzhoupeople.”

Moreover, theemployeesofBaosteelwerealsoverygenerous tomake

severalcyclesofdonation,totallyRMB44.20million.Baosteeltotallycon-

tributedgrantsanddonationsofRMB117millionfortheearthquakedi-

saster.

But thiswasnot theendofBaosteel’s support to thedisaster-hit areas.

On12thNovember2008,HappyHomeYiyuanSteel-structureResiden-

tialQuarter – the first key comfortable housingproject undertakenby

Baosteelinthepost-disasterreconstructionofSichuan–officiallylaidthe

foundationstone.Thesteel-structurehousesinthisquarterapplythere-

searchresultsofInternationalIron&steelInstituteobtainedfromitsLiving

SteelProjectinmanyyears.Characterizedbyenergysaving,environment

protection,shortconstructionperiod,occupyinglessresources,andgood

anti-earthquakeperformance,itistheidealchoiceforpost-disasterrecon-

struction comfortable housing projects. Baosteel is creating a promising

futurefordisaster-hitareasbythesupportofits“steelbackbone”.

Earthquake Relief and Rescue

19

Heixiazi Island On 14th October 2008, China and Russia held the “China-Russia Merestone Unveiling Ceremony” on Heixiazi Island, indicating that half of Heixiazi Island was returned to China. Situated in the border area, Heixiazi Island plays a very important strategic role.

Kunlun Station Kunlun Station settled down at Dome A of Antarctic Ice Sheet in January 2009 as the third scientific expedition of China in Antarctic area in succession to the Great Wall Station and Zhongshan Station. At the currently completed Phase I project of Hunlun Station, the main building is made of steel structure and covers a building area of 236m2.

Donation and Sponsorship Yunnan Poverty Alleviation and Tibet Support

Social Performance Report

Donating Color Plate Barracks for Heixiazi Island

Just before the return of Heixiazi Island to China in September 2008,

BaosteeldonatedcolorplatebarrackstotheHeixiaziIslandGarrisonof

HeilongjiangProvincialMilitaryCommand,totallycoveringbuildingareaof

1600m2andworthRMB3.5million.Thedonationofsuchbarracksshows

Baosteel’ssinceresupporttothenationaldefenseofChina.

Constructing Antarctic Kunlun Station with Donation of Main Materials

Baosteelalwayssupportsthecauseofpolarscientificexpeditionandhas

participated in the construction andexpansionofAntarcticGreatWall

StationandKunlunStation.In2008,Baosteeldonatedmainbuildingmate-

rialsworthRMB4.5milliontoKunlunStation–thefirstAntarcticscientific

expeditionstationofChinaandassigned13employeestotheSouthPole

forconstructiontasks.BaosteeldevelopedthenewgenerationofPVDF

colorsteelplatewithstrongresistancetoextremelowtemperatureand

UV radiation aswell as high-performancefire andweathering resistant

steelandnew-typestainlesssteel.

Yunnan Poverty Alleviation Efforts

TheYunnanfixed-pointpovertyalleviationprogramofBaosteelhasbeen

launchedforsixyear.TheCompanyhasaccumulativelyprovidedfundof

RMB40.9943milliontoNing’er,Jiangcheng,Mojiang,andZhenyuancoun-

tiesinPu’erCity,YunnanProvince.

Theprogrammainlycoversconstructionofhopeelementaryandmiddle

schoolsandhealthcenters,rebuildingofmud-and-strawhutsandbamboo

huts,constructionofadequatefoodandclothingvillages,andimplementa-

tionofwhole-villagepovertyalleviationadvancementandeducationsup-

port,etc,greatlybenefitingthepoverty-strickenpeopleinPu’erCity.

Duringthefixed-pointpovertyalleviationpractice,Baosteelalwayssticks

totheprincipleof“practicality”,aimsatsolvingthemostdirectandrealistic

problems, andbenefits thepoorest areasandgroupsfirst; itpersists in

highlighting important points and integrating resources and implements

whole-villagepovertyalleviationadvancementandadjacent-areadevelop-

ment, thusmagnifying themultiplier effect of assistance and support; it

adherestothecombinationof“bloodtransfusion”and“bloodformation”,

emphasizes industrial development, and enhances the poverty-stricken

areas’economicself-accumulationandself-developmentability.Baosteel’s

povertyalleviationefforts inmanyyears is fullyrecognizedbytheState

CouncilLeadingGroupOfficeofPovertyAlleviationandDevelopment

andtheGovernmentandPovertyAlleviationandDevelopmentOfficeof

YunnanProvince,andhighlypraisedbytheGovernmentofPu’erCityand

thefourcounties.

Baosteel’s Tibet Support Efforts

Sincethestartoffixed-pointTibetsupportprogramin2002,Baosteelhas

assignedthreebatchesofTibetsupportcadres,inputmorethanRMB100

million, and undertaken construction of nearly a hundredTibet support

projects.

Baosteel has accurately found out the bottleneck that restricts the eco-

nomicdevelopmentofZhongbaCountyandinputplentifulmoneyinthe

aspectsofroad,traffic,andofficefacilities.Forexample,thefarmer’smarket

constructedwithsupportfromBaosteelhassolvedthelivestockproducts

circulationproblemofZhongbaCounty.TheconstructionofFarmersand

HerdersVocationalSchool,BorderTradeMarket,ZhongbaCountyEmpoly-

eeCulturalandEntertainmentCenterandotherprojectsleadstoprogress

oflocalsociety.Theherders’comfortablehousingprojectsupportedbyBao-

steelisunderconstruction,andhasprovidednearly2,000concretehouses.

20

“Everlasting Love, Eyesight Restoring Action” is so far the largest, widest and most effective cataract-patient eyesight restoring project in China. It is jointly launched by China Disabled Persons’ Federation and China Foundation for Disabled Per-sons.

In1996,Baosteeldecidedtosavetheanniversaryceremonyexpensesfor

aprojectnamed“RetracingtheLongMarch”,whichintendedtodonate

andbuild10hopeschoolsalongtherouteofLongMarch.Sincethen,the

CompanyhasstarteditsclosetiewiththeHopeProject.

Inaperiodofovertenyears,Baosteelhasconstructedandsupported64

hopeschoolsdistributedinmanyprovincesincludingYunnan,Hunan,Sich-

uan,Gansu,Shaanxi,Anhui,Guizhou, Jiangxi,Shandong,andShanxi;along

withthereformofeducationsystem,Baosteelstillkeepsintouchwith47

hope schools, and regularly exchanges correspondenceandcarriesout

studentassistance,summercampandotheractivities.

For example, every year Baosteel branches donate hope school study

granttoYunnanYouthDevelopmentFoundation forthepurposeofas-

sistingpoorstudentsinBaosteelhopeschools.BaosteelResearchInstitute

alwayskeepsclosecontactwiththeBaosteelHopeElementarySchoolin

ShangyouCountyJiangxiProvince,andoftendonatesteachingtools;the

summercampjointlysponsoredbyBaosteelNo.1Iron&SteelCompany

andBaosteelStainlessSteelBranchisthemostexcitingexpectationofpu-

pilsofSuyuHopeElementarySchoolinHuitongCountyHunanProvince

because studentswho has excellentmoral and academic performance

willbenominatedforasummercampinShanghai;since2004,Baosteel

Internationalhasstartedtomakedonationfor100poverty-strickenstu-

dentsintheschoolsofJiangchengCountyYunnanProvince,assistingthem

toaccomplishtheirstudies.

In2008,theHopeProjectEducationSupportProgramofBaosteelselect-

ed7hopeschoolsfortrialimplementationofBaosteelHopeEducation

ScholarshipandTeachingAwardSystem.Therewere72studentswinning

scholarship,72studentsobtainingstudygrant,and19teachersattaining

teachingaward.

By now, Baosteel has accumulatively donated RMB 300million to the

HopeProject.

In1990,BaosteelEducationFundswassetup,creatingaprecedent for

enterprises tomake contribution in establishing education funds. In 19

years,theamountofBaosteelEducationFundsusedtorewardandsup-

porteducationhasexceededRMB110million,with14,198teachersand

students wining awards. In 2008, 985 teachers and students from 100

highereducation institutionsthroughoutChinaand18institutesofChi-

neseAcademyofSciencessuccessfullywonBaosteelEducationAwards.

Amongthem,9teachersincludingProfessorTianZuohuafromShanghai

JiaoTongUniversitywon2008BaosteelExcellentTeacherSpecialAward;8

teachersincludingProfessorGaoSongfromPekingUniversitywerenomi-

natedfor2008BaosteelExcellentTeacherSpecialAward;and50students

includingWuFufafromChineseAcademyofScienceswon2008Baosteel

ExcellentStudentSpecialAward.Besides, therewere679 students and

239teachersrespectivelywinningBaosteelExcellentStudentAwardand

BaosteelExcellentTeacherAward.

Baosteelalwayscaresforthedisabledandweakgroupandhaslaunched

theprojectof“EverlastingLove,EyesightRestoringAction”[Note] inPu’er

CityYunnanandZhongbaCountyTibetsince2007.In2008,1,707pov-

erty-strickencataractpatientsreceivedeyeoperationandregainedtheir

visualfunctions.Thistrulyachievedthegoalof“HealingOnePerson,Lib-

eratingOneFamily,andAffectingaLargeGroupofPeople”,andobtained

greatsocialrepercussions.HuMeiyu–a97-year-oldwomanfromTong-

guanTownMojiangCounty–whohadsufferedcataractformorethan20

years,camefortheeyeoperationonawheelchairpushedbyherfamilies.

After the successful operation, the oldwoman happily saw her grand-

grand-son.Shewassohappythatshesaidtoeverybody:“TheGovern-

mentandBaosteelaregreat.”

Baosteel’s Hope Project Education Support Baosteel’s Education Fund

“Everlasting Love, Eyesight Restoring Action”

21

Sinceitsestablishment,Baosteelhasalwaysbeensupportingtheconstructionanddevelopmentofplaceswhereitrunsbusiness,strengtheningtheinter-

activedevelopmentofregionaleconomy,participatingincommunityactivitiesofdifferentforms,activelyundertakingitssocialresponsibilities,andmaking

actualeffortsinbuildingharmoniouscommunity.

Baosteelhasmorethan10volunteerserviceteamsforco-construction

with the community, regularly providing volunteer service for nursing

homesandchildrenwelfareschools.SincethestartofHelp-the-Poorand

WarmthDeliveryProgramattheendof2005,nearly5,000youngvolun-

teersfromthevolunteerserviceteamsofBaosteelhaveparticipatedin

volunteerservices.Theyprovidevolunteerservicestothesocietyinmore

than70serviceformscloselyconnectingwiththepeople’slives.Theyhave

accumulativelyservedover10thousandresidents.

BaosteelislocatedatthemarineoutfalloftheYangtzeRiverinBaoshan

DistrictShanghaiCity.During the thirtyyears’ constructionandgrowth,

BaosteelhaspowerfullypromotedthedevelopmentofBaoshanDistrict

while obtaining great local supports. Relying on Baosteel, BaoshanDis-

tricthasshapedtheindustrialeconomycharacterizedbymetallurgyand

supportingextendedindustries,andformedtheproductionbasesforsix

categoriesofproductssuchascontainer,steelstructure,elevators,non-

ferrousmetals,metalcontainerproducts,andsteelproducts.Theabove

characteristic industriesaccount for40%ofthedistrict’sgross industrial

outputvalue.Furthermore,BaoshanDistricthasbecomeoneofthelarg-

eststeeltradecentersinChina.Intheprevious30years,Baoshanhasseen

significantlyenhancedeconomicstrength,greatchangesinvisageofurban

andruralareas,comprehensivesocialprogress,andremarkablyimproved

qualityofliving.Thedistricthaswalkedonaroadofintegrateddevelop-

mentforbothcityandcountryside.

Volunteer Activities Community Changes in 30 Years

Community Relations

Social Performance Report

22

In 2008, theCompany strictly followed the applicable laws, regulations

andothernormativedocuments.Therefore,therewasnooccurrenceof

administrative or juridical penalty as a result of incompliance with any

applicable law, regulation or other normative document during routine

businessoperation.

The Company requires its branches and subsidiaries to develop their

management rules in accordancewith the applicable national laws and

regulations andother normativedocuments, inorder to guarantee the

legitimacyandcomplianceoftheirbusinessoperation.Withregardtothe

provisionanduseofproductsandservices,theCompanyinsistsonthe

corporate culture of“credibility and cooperation” and legally fulfills its

OnJuly19,2007,BaosteelDevelopmentCo.,Ltd.andtheGovernmentof

BaoshanDistrictsignedtheAgreementonAssistanceandSupporttoSo-

cialistNewCountrysideConstruction,whichplanstoprovideassistance

andsupporttothreeeconomicallyweakvillagesincludingLuodianTown

GuangmingVillage,LuojingTownXinluVillage,andYuepuTown Juyuanq-

iaoVillageinBaoshanDistrictin3years.InJanuary2008,thefirstbatch

ofassistanceandsupportprojectswasestablished,namelyLuodianTown

GuangmingVillageVegetable Storage and Preservation Project,Yuepu

TownJuyuanqiaoVillagePublicServiceCenterProject,andLuojingTown

XinluVillageResidentialAreaRoadConstructionProject.Theprojectsre-

quiredtotalinvestmentofRMB2.4millionandagreementsweresigned

forthem.Bytheendof2008,allofthethreeprojectswerecompleted.

Baosteel’s New Countryside Development Project

Baosteel invested RMB 1.5million in LuodianTownGuangmingVillage

VegetableStorageandPreservationProject.Nowthecoldvegetablestor-

agehousewascompletedandofficiallyput intooperationonOctober

5,2008.Thishouseeffectivelymitigatestheproblemthatfarmerssellex-

cessivevegetableat lowpricesduringpeakseasonbuthaveinadequate

vegetabletosellduringoffseasonthoughthepricesarehigh.Theproject

facilitatescounter-seasonsalesofvegetableandincreasesthefarmers’in-

come.Thehousealsoprovidescoldstorageserviceforover300Chinese

acresofvegetableproducedby3surroundingvillages,i.e.ShuliqiaoVillage,

TianpingVillage,andMaojiaVillage.

Baosteel investedRMB400,000 inYuepuTownJuyuanqiaoVillagePublic

ServiceCenterProject,whichwascompletedat theendofDecember

2008.Thecentercoversbuildingareaof780m2.Afterbeingputintouse,

thecenterwillprovideconvenienceforvillagerstohandlecommunityaf-

fairs,aswellasenrichthevillagers’culturallives.

BaosteelinvestedRMB500,000inLuojingTownXinluVillageResidential

AreaRoadConstructionProject,whichwascompletedinMay2005.The

project includesrebuiltandnewly-builtwhitecementroadof2.78kilo-

meters andcovers areaof6,111.6m2.Now, theXinluVillagehaswhite

cement road“toward any house and any family”, very convenient for

people’scomingandgoing.Greatchangeshavetakenplaceinthevisage

ofthisvillage.

Compliance

obligationsspecified in thecontractswithpartners.For this reason, the

CompanyhasbeenappraisedbyShanghaiAdministrationofIndustryand

Commerceas“aContractAbiding&TrustworthyEnterprise”inconsecu-

tive18years;accordingtothecontractcreditratingconductedbyPudong

NewAreaEnterpriseContractCreditPromotionCommission,theCom-

panyhasbeenratedasAAAGradeenterprise(thehighestcreditrating)

ineachyearsince2003.

23

TheCompanyattachesgreat importancetoanti-corruptioneffortsand

hasperfectedtheorganizationalframeworkssuchasBaosteelDiscipline

InspectionCommissionandStandingCommitteeofDisciplineInspection

Commission. Inordertostrengthenthe leadershipoveranti-corruption

activities, theCompanyhassetup theParty’sWorkStyleConstruction

andAnti-corruptionResponsibilitySystemLeadingGroup,forwhichthe

Company’sViceChairmanandSecretaryofPartyCommitteeservesas

theDirector.ThesecondarysubordinateorganizationsofBaosteelhave

all established theirdiscipline inspection and supervision authorities, for

whichfull-time(part-time)SecretaryofDisciplineInspectionCommission

andDirectorofSupervisionOffice (HeadofSupervisionDepartment)

aredesignated.

AccordingtotheuniformdeploymentoftheCentralGovernment,Bao-

steel has issued theMeasures for Implementing 2008-2012Work Plan

on Establishing and Perfecting theCorruption Punishment and Preven-

tion System.This document specifiesBaosteel’s objectiveof corruption

punishmentandpreventionsystemconstructioninfuturefiveyears,and

proposestensoftasksforsevenaspectssuchaseducation,rules,supervi-

sion,sourcegovernance,andpunishment.TheCompanyhasalsofinished

responsibilitybreakdown,specifiedtheresponsibleprincipal,workcontent

and time-points of accomplishment, and ensured the fulfillment of key

tasksthroughpromotionandcheck.

In2008,Baosteelcarefullyfollowedthe“SevenRequirements”ofSelf-dis-

ciplineandCleanConductthatCPCCentralCommissionforDiscipline

Inspectionproposedforleadersofstate-ownedenterprises,includedanti-

corruptioneducationintothestudyofPartyCommitteeCenterGroup

andtrainingofleaders,andcarriedoutreportingoftendentiousproblems,

analysisoftypicalcases,educationofthree“DoNotLetItPass”[Note],plus

educationactivitiessuchascountersigningofcleanconductandprecau-

tionaryconversations.TheCompanyalsoproducedavigilanteducation

filmnamedTrack,andorganized281sessions(times)ofanti-corruption

Three “Do Not Let It Pass”: Do not let it pass if the causes and responsibilities of a case have not been accurately investigated and determined; do not let it pass if the penalty receiver and other part members, cadres and employees have not learned lessons; do not let it pass if the corrective action has not been implemented and responsibilities not investigated. “Three majors and one huge”: Major issues for decision-making, appointment and removal of major employees, arrangement of major projects, and use of huge amount capital.

Anti-corruption

themeeducation,fromwhich21,052personstrainedreceivededucation.

Apre-jobcollectiveconversationrelatedtocleanconductwasmadeto

605 leaders, andprecautionary conversationsweremade to120 lead-

ers,while1630agreementsonParty’sworkstyleconstructionandanti-

corruptionresponsibilityweresigned,thuscreatingagoodcircumstance

forcleanconduct.AttheCompany,149leadersdirectlyresponsibletothe

Headquartersmadedeclarationofmajorissues;morethan4,500persons

madecommitment tocleanconduct; and1,908persons trainedvolun-

tarily handed in cash, gifts and negotiable securities, equivalent toRMB

1.9million.

In2008,intheexperimentalactivitiesoflearningandexecutingtheCon-

ceptofScientificDevelopment,Baosteelpresentedandcarefullyexecuted

therectificationplanssuchastheMeasuresforImplementing2008-2012

WorkPlanonEstablishingandPerfectingtheCorruptionPunishmentand

PreventionSystem,SupervisionProceduresforDecision-makingofMajor

Issues,PlanonPromotingthe“Under-sunshine”ProcurementAction,and

ImplementingMeasuresforPromoting“Double-Excellence”ProjectCon-

structionpertinenttosignificantproblemsencounteredinanti-corruption

efforts, further deepened the Party’swork style construction and anti-

corruptionphilosophyof“FocusingonCenter,IncludedintoManagement,

IncorporatedintoProcesses,andPlayinganActiveRole”,andeffectively

facilitatedthesystematicanti-corruptionconstruction.

TheCompanyrevisedandperfectedthedecision-makingsystemof“three

majors and one huge” [Note], and further specified the supervision pro-

cedures fordecision-makingofmajor issues. Italsodevelopedtherules

suchasRelevantProvisionsonOptimizationofSubsidiaries’MajorIssue

Decision-makingProcedures,EightGuidelinesonBaosteelRemuneration

Management,andProvisionsonManagementofPart-timeJobsTakenby

LeadersofBaosteelGroupCorporation,enhanceditscontroloversub-

sidiaries,andstandardizedtheremunerationmanagement,part-timejob

takingandpart-timecompensation.

Social Performance Report

24

Economic Performance Report

Business IncomeUnit:RMB100millionyuan

Total ProfitUnit:RMB100millionyuan

Total AssetsUnit:RMB100millionyuan

Net AssetsUnit:RMB100millionyuan

Y2006 Y2007 Y2008

1806.81

2277.16

2468.39

1334.47

2269.59

2194.35

Y2006 Y2007 Y2008

225.77

356.47

238.13

Y2006 Y2007 Y2008

3564.04

3524.97

2361.78

Y2006 Y2007 Y2008

Baosteelhasactivelyparticipatedinthemergerandreorganizationofdo-

mesticsteelindustry.InBaosteel’sopinion,integrationofsteelindustrycan

notonly eliminate thebackward steel production capacity and achieve

theresultofenergysavingandemissionreduction,butalsopromotethe

development of regional economy and regulate themarket order. For

manyyears,Baosteelhasalwaysconsidered“trulyundertakingcorporate

socialresponsibility”asaprincipletoadvancemergerandreorganization,

andmade great efforts to realize the harmony of economic efficiency,

environmentprotectionandsocialbenefits.

[Note] The Company has started to implement the new Enterprise Accounting Standard since January 1, 2007.

Economic Performance

Merger and Reorganization

25

Baosteel has always considered “truly undertak-ing corporate social responsibility” as a principle to advance merger and reorganization, and made great efforts to realize the harmony of economic efficiency, environment protection and social benefits.

InNovember1998,BaoshanIron&SteelGroupunitedandreorganized

ShanghaiMetallurgicalHolding(Group)Company(briefly“ShanghaiMet-

allurgical”)andShanghaiMeishanGroup(briefly“Meishan”) tobeBao-

steelGroupCorporation.Atthattime,ShanghaiMetallurgicalandMeis-

hanweresufferingthedifficultiesofcapitalshortageandsevereloss.For

instance,in1998ShanghaiNo.1Iron&Steel(Group)Co.,Ltd.,Shanghai

PudongIron&Steel(Group)Co.,Ltd.,andShanghaiNo.5Iron&Steel

(Group)Co.,Ltd.,thethreesubsidiariesofShanghaiMetallurgicaltotally

registeredlossofRMB1.53billion.Afterthereorganizationin1998,due

to the significant increaseof debts and employees, the public doubted

whetherthejointreorganizationwoulddragBaosteeldown.Therefore,in

1999Standard&Poor’sloweredtheratingofBaosteelfromBBB+toBB+

withanegativeprospect,i.e.thereisthepossibilityoffurtherdegradation.

Facingthepublic’sdoubtsandaimingatthemarketneeds,Baosteelmade

re-allocationofcorporateresourcesthroughthemeansofculturalamal-

gamation,strategicunification,businessrestructuring,processesrearrange-

ment,splitandreform,anddebtsreorganization,andthereforeattained

powerfulstrengthandintegratedoperationitsironandsteelmainbusi-

ness.After the joint reorganization, theenterprise’seconomicefficiency

wasrapidlyimproved:thetotalcapitalincreasedfromRMB158.1billionin

1999toRMB193.8billionin2004;thesalesrevenuegrewfromRMB68.4

billionin1999toRMB161.8billionin2004;thetotalprofitincreasedfrom

RMB1billionin1999toRMB21.9billionin2004;thereturnonequity

grewfrom0.69%in1999to12.77%in2004.InDecember2004,Standard

&Poor’sdeclaredthatthenewcreditratingofBaosteelwasBBB+witha

“stable”prospect.ThisreflectedthatStandard&Poor’sfullyrecognizedthe

greatachievementmadebyBaosteel.

During the integration, Baosteel uncompromisingly eliminated the high

energy-consumingandhigh-pollutionbackwardtechnologiesandequip-

ments,andmadetremendousinvestmentinenvironmentcontroltoim-

provetheecologicalenvironment.TheCompanytotallyeliminated8small

blast furnaces and cupola furnaceswith total iron smelting capacity of

1.88million tons; 23 open hearth furnaces, small electric furnaces and

smallconverterfurnaceswithaccumulativesteelsmeltingcapacityof3.75

milliontons;15laggardrollinglineswithtotalsteelrollingcapacityof4.05

milliontons.

Through reorganization and integration, the steel industry resources in

ShanghaiArearealizedoptimizedallocation, layingafirmfoundationfor

Baosteeltoconstructsuperiorsteelproductbase,andleadingtotheover-

allimprovementofChina’ssteelindustry.

OnMarch11,2006,BaosteelandXinjiangBayiIron&SteelCo.,Ltd.en-

teredintoaframeworkagreementonstrategicalliance.OnApril28,2007,

BaosteelGroupXinjiangBayiIron&SteelCo.,Ltd.opened.

Soon after, Baosteel established the Bayi Iron & Steel ProjectTeam to

supporttheupgradeofmanagement,technologyandproduct,andshut

down,suspended,incorporatedandtransformedBayiIron&Steel’splants

ofhighenergyconsumptionandseverepollution.Withsuchefforts,Bayi

Iron&Steelmaderemarkableachievements:thecoldandhotrollingpro-

ductionlineshavebeencompleted;itscontinuousandsteadyproduction

andthehot-sellingproducts jointlypushedaboosttotheperformance

of theenterprise.Theconstructions inNewZoneofBayi Iron&Steel

hadstartedandpressedforward.ThankstotheoperationofNo.1blast

furnace, two coke furnaces and one converter, its production capacity

exceeded 5 million tons in 2008.The production process and energy

structurewereconstantlyoptimizedwhileoutdatedandhighenergycon-

sumingproductsandequipmentswalkedgraduallytotheendoftheirser-

vicelife,including100m3blastfurnace,1.5tconverter,5telectricalfurnace,

500mmrollingmill,three1500m30000oxygenerators,hot-stripset,250

set,3×6.5t/hboileretc.

InMarch2008,theNationalDevelopmentandReformCommissionap-

provedBaosteeltocarryoutthepreliminaryworkofZhanjiang Iron&

Steel Base project. Baosteelwill set up an iron and steel basewith an

annualsteeloutputof10milliontonsonthebasisofmergerandrestruc-

turingofthecurrentShaoguanIron&SteelGroupandGuangzhouIron

&SteelEnterprisesGroupinGuangdongProvinceandeliminationoflow

productioncapacity.

OnJune28,2008,BaosteelGroupGuangdongIron&SteelCo.,Ltd,fund-

edjointlybyBaosteel,State-ownedAssetSupervisionandAdministration

Committee of Guangdong Provincial People’s Government and State-

ownedAssetSupervisionandAdministrationCommitteeofGuangzhou

MunicipleGovernment,wasofficiallyestablished.

Joint Reorganization of Steel Enterprises in Shanghai Merger and Reorganization of Baosteel and Bayi Iron & Steel

Baosteel Group Guangdong Iron & Steel Co., Ltd

Economic Performance Report

26

Environmental Performance Report

Guidedbythedeepconcernforthesocietyandthehumanbeings,Baosteelalwayssethighgoalon

environmentalprotection.Itaimsat“buildingupaworld-topcleansteelenterprise”,andregardenvi-

ronmentalprotectionasoneofitsbasicbusinessforthepurposeofmanagement.

Sinceitwasestablished30yearsago,Baosteelhasalwaysbeenintheleadingpositioninenvironmental

protection,settingamodelfordomesticironandsteelenterprises.In2005,Baosteelwastitledthe“En-

vironmentallyFriendlyEnterpriseofChina”.In2008,Baosteelwashonoredthe“ModelEnterprisefor

CleanandEnvironmentallyFriendlyProduction”byChinaIron&SteelAssociation.Baosteelcontinues

itsenvironmentalprotectionproactivelyagainstthecurrentseveremacro-economictrouble,strength-

enstheenvironmentalimprovementformergedenterprises,improvestheuseefficiencyofenergyand

recyclingrateofwastesandreducesgenerationofwastes.Itfulfillsthescientificdevelopmentconcept

andpromotesthesustainabledevelopmentofthesociety.

Itobserveslawanddisciplineandformulatesandenforcesinternalcontrolstandardsforenvironmental

protectionwhichareevenstricterthanlawsandregulations.Theproportionofinvestmentinenviron-

mentofnewlybuilding,reconstructingandexpandingprojectsshouldbenolessthan5%ingeneral,and

ineachyear,agreatdealofmoneyis investedintechnologicaltransformationanddailymaintenance

ofequipmentsforenvironmentalprocess.Sinceitsoperation,therehasnosevereviolationoflawsand

regulations concerning environmental protection, and all the indicators related to environment and

energyconsumptionareinsteadyimprovement.

Baosteelactivelycommunicatesandcooperateswithdomesticandforeignironandsteelenterprises;

whichenhancestheenvironmentalprotectionofthecompany,introducestheadvancedenergy-saving

and environmental protection technologies andmanagement experienceof Baosteel intoother do-

mesticironandsteelenterprises,drivestheoverall improvementofenergy-savingandenvironmental

protectiontechnologiesinChina’s ironandsteel industryandthusraisestheenvironmentalmanage-

mentlevelofironandsteelenterprisesinChinaandeventheworld.

Atpresent,China’sironandsteelindustryisinthekeyphaseofindustrialrestructuringandrejuvena-

tion.Asthebellwetherinthisindustry,Baosteelundertakestheglorymissionofprovidingthecountry

withwelldeveloped ironandsteel industry.Baosteelwill takethis importanthistoricopportunityto

improvetheequipmentsandtechnologies forenergy-savingandenvironmentalprotection in there-

structuredenterprisesandtheirindicatorsforenvironmentalmanagementperformancebasedonthe

experiencesinrestructuringtheformerShanghaiMetallurgicalandBayiIron&Steelsoastomakegreat

contributionindevelopingChina’sironandsteelindustry.

Building A World-Top Clean Steel Enterprise

It’s Our Duty to Protect Environment

27

Structure of EPRU Commission, Baosteel Co., Ltd.

DirectorChairmanofBaosteelCo.,Ltd.

Committee MembersHeadofEPRUDept.andgeneralman-gersofbranchesandsubsidiaries

OfficeInEPRUDept.

Deputy DirectorGeneralManager

RelevantDeputyGeneralManagerChairmanofTradeUnion

Management Mechanism

BaosteelGroupCorporationentrustsBaosteeltomanageitsenergy-sav-

ingandemission-reductioninaccordancewiththeprincipleofstreamline

structure.

The Environmental Protection and Resource Utilization Committee is

Baosteel’stopadministrativesectorinenvironmentalprotectionandre-

sourceutilization.Itisresponsibleforformulatingrelevantpolicies,guiding,

studyinganddeterminingrelevantdevelopmentproposalsandplans,co-

ordinatingtherelationandresourcedistributionbetweensubsidiariesand

branchesandmakingdecisionsonrelevantmajorprojects.

BaosteelestablishedtheEnvironmentalProtectionandResourceUtiliza-

tionDepartment(EPRUDepartment)tostrengthentheintegratedman-

agementofenergy-saving,environmentalprotectionandcomprehensive

utilization of resources. EPRUDepartment studiesmacroscopically and

implements relevant laws, regulations and policies concerning environ-

mentalprotectionissuedbygovernments,executesprofessionalstandards

ofnationalandlocalgovernmentsconcerningenvironmentalprotection,

energy-savingandcomprehensiveutilizationofresources;formulatesrel-

evantrulesofenvironmentalprotectionandresourceutilizationfromthe

perspectiveofprofessionalmanagementandcompetencymanagement,

Environmental and Energy Management of Baosteel Group Corporation

organizes,plansandformulatesdevelopmentplanningandannualplanof

Baosteelaboutenvironmentalprotection,energy-savingandcomprehen-

siveutilizationof resources;organizesoverall evaluationoverBaosteel’s

environment,organizesandparticipates inthepreparationofBaosteel’s

sustainabledevelopmentreportandBaosteelGroupCorporation’ssocial

responsibilityreport;itisresponsibleforthecentralizedmanagementof

environmentmonitoring andenvironmental pollution control, organizes

investigationandanalysisofthecompany’smajorenvironmentalpollution

accidents; tracksthedevelopmenttrendofcomprehensiveutilizationof

domesticandforeignsecondaryresources,organizesandlaunchesman-

agement improvementandscientificeffortsofcomprehensiveresource

utilization;organizesandconvenestheannualandregularmeetingsofthe

EnvironmentalProtectionandResourceUtilizationCommittee,promotes

andfulfillstheadministrationofenvironmentalprotectionandintegrated

resourceutilization,andadvancetheconstructionofenvironment-friendly

enterprises.

The subsidiaries and branches also established relevant administrative

committeesanddepartmentsofthesamefunctiontojointlypromotethe

company’senvironmentandenergymanagementinaccordancewiththe

requirementsofISO14001environmentalmanagementsystem.

Environmental Performance Report

28

Management Measures

Baosteeladoptscentralizedenergymanagement.Allkeyproductionunits

haveestablishedEnergyManagementCenters(EMS)withdifferentsizes,

andthisishelpfulforthecompanytocomprehensivelymanagetheenergy,

efficientlyrecycleenergyaswellasreducethewasteandfugitiveuseof

energy.

Based on the 20 years’ experience in operation of EMS, the branches

ofBaosteel,byupgradingthetechnologiesandfunctionsconstantly,have

becomeamodel formodernenergymanagementamongthe ironand

steelenterprises.EMSmakestheenergymediumunderunifiedbalance

andcentralizedadjustment,distributionandmanagement. Itcoordinates

thesupplyanddemandofenergymediumamongallunitsat real time

andeffectivelyreducesthedispersion lossofenergymedium,especially

reducing the dispersion rate of blast furnace gas and emission rate of

industrialwastewater.Itreducesthecomprehensiveenergyconsumption

ofbranchesofBaosteel,improvesthecomprehensiveutilizationefficiency

ofenergyandreducestheurbanpollution.

Baosteel,afterreorganizingtheironandsteelenterprisesundertheorigi-

nalBaosteel’sJointReorganizationwithShanghaiIronandSteelWorksand

MeishanIron&SteelCo.,Ltd.,makestechnicalreformsinsuchenterprises

graduallyandestablishesEMSthatmakescontributionstoenergysaving

andemissionreductionoftheenterprise.Baosteel,afterreorganizingthe

XinjiangBayiIronandSteelWorks,isplanningtoestablisheanEMSinit.

TheEMStechnologyofBaosteelhasbeenpromotedinandexportedto

otherdomesticironandsteelenterprises.

As energy saving and emission reduction become increasingly pressing,

“end-of-pipetreatment”isfarfromourdemands.OnlywhenBaosteelre-

alizessourcecontrolandputprecautioncrucialcanitrealizeenergysaving

andemissionreductionandfurtherbecomeaworld-classcleanironand

steelenterprise.Undersuchasituation,Baosteelstrengthensmonitoring

ofenergysaving,establishesan inspectioncompany,extendsmonitoring

fromemissionmonitoring to heat engineering inspection gradually and

monitorstheproductionprocessofallthermalkilns.Sucheffortscontrib-

utetooverallenergysavingofBaosteel.BaosteelInspectionCompany,af-

terlaboratoryassessmentandmetrologyaccreditation,wasauthenticated

asaqualifiedcompanyforthermalinspectionin2008.Thermalinspection

beguntobeappliedtobranchesofBaosteelandbranchesforstainless

steelinthesameyear.Inthefollowingyear,thethermalequilibrationtest

was given to 2500-blast furnace, 100t electrical furnaces and 45t boil-

ersinbranchesforstainlesssteelandtothesteel-pipecircularfurnaces

andconvertersforsteel-makingandroastinginbranchesofBaosteel. In

addition,42 timesof routinemonitoringweregiven to23kilnsof two

branches.Itprovidestechnicalreferencetojudgetheenergyutilizationof

kilns,equipmentstatusandoptimizationofenergymanagementbydevel-

opingthermal inspectionof industrialkilnsandmeasuringthewalltem-

perature, fume temperatureandcomponentsofkilnsandenergy input

andproductoutputandheatprocessparameters.Itenablesthepersonnel

tounderstandtheoperation,energyconsumptionandemissionofkilnsin

siteatanytime.Itfacilitatestheenergymanagementcentertoestablisha

managementindexsystemforenergyconsumptionofkilnandcarryout

standardandscientificmanagementbyaccumulatingandcomparingthe

datafrominspection.

Inrecentyears,Baosteelalsoinvitedexternalunitstoinspecttheindustrial

kilnsandequipmentofBaosteel for judgingtheirefficiency,which laysa

foundationforBaosteeltodevelopenergysavingandemissionreduction

technologies.Baosteelreducestheconsumptionandemissionsofprimaryenergyvia

recyclingofresidualenergy.Theresidualenergyreferstotheenergyac-

quiredfromrecyclingoftheresidualheatandpressure(thatareproduced

duringthecourseofproduction)andinputintothesystem.Thereclaimed

residualenergymainly includeselectricity, steamandconvertergas.The

residualheatresourcesmainlyrefertothesensibleheatfromredcoke,

crudegas,sinteringore,cinderandsteelslag,fumeofheating-furnaceand

steelfeed(slab)andetc.

Thekeyrecoveryplantsandmeasures for residualenergyandheat in-

clude:DryCokeQuenchingTechnology (CDQtechnology), technology

forrecoveringwasteheatfromsinteringproces,technologyforTRTre-

sidualenergypowergenerationbyblastfurnace,recoveringgasandsteam

fromconverter,recoveringresidualheatfromcircularfurnace,recovering

residualheatfromcold-rollingprocessandevaporatingandcoolinginhot

rollingprocess.

Inordertoachieveenergysavingandemissionreduction,itisnecessary

totakemeasureswithfullunderstandingandpurposessothattwiceas

muchcanbeaccomplishedwithhalftheeffort.Inrecentyears,Baosteel

invited external bodies to carry out audit on energy consumption of

Baosteel’sscaledenterpriseswhichconsumeenergy.Inaddition,Baosteel

InspectionCompany,basedontheexperienceintheenergyaudit,was

authenticatedforbeingqualifiedforenergyauditand,accordingtothe

GeneralPrincipleofEnergyAuditon IndustrialandCommercialEnter-

prise,carriedoutenergyauditforsubsidiariesofBaosteelGroupin2007.

Theinspectioncompanyimprovestheenergymanagementsystemand

gives advises on energy savingwith regards to production process by

conscientiouslyanalyzingthestatusquoofequipment,energyconsump-

tionofsequencesandenergycostintheprocessofenterprisesandthe

energyconsumptionindexesofdomesticpeers.

Energy Center Energy Monitoring

Residual Energy Recycling

Energy Audit

29

MainmeasurestakenbyBaosteelinsavingwaterinclude:recyclingwaste-

water, applying a series ofwater saving technologies such aswater re-

sourcedistributionperquality,reasonableutilizationandconcatenateduti-

lization,reducingfreshwateruse,andsavingwaterresourceaseffectively

aspossible.TakingBaosteelbranchesasexamples,theymainlyadoptthe

followingtechnologies:

Concatenated utilization technology. Circulating water system will first

subjecttoreasonabledistributionandwatervolumecontrolsoastoguar-

anteeabalanceinthewholewatersystemandimprovecirculatingratefor

eachsystem.Then,wastewaterdischargedfromeachsystemmaybeused

inaconcatenatedmanner,i.e.,blowoffwaterofpurecirculatingwatersys-

temwillbereplenishedtowastecirculatingwatersystem;blowoffwater

ofwastecirculatingwatersystemwillbereplenishedtogranulatingslag

circulatingsystem,andthenwillbeabsorbedbyslagandbevaporized.As

aresult,thewholewatersystemwillhavenowastewaterdischargeand

willimposenohazardtoenvironment.

Wastewater reusing technology.According to actual situations,Baosteel

developsPinchtechnology,whichisabletoworkoutanoptimumwaste-

water reuse solutionbasedonadequateoperationsandreasonablear-

rangementofwastewater,andattainsawastewaterreuserateofabove

75%.

Neutralized water reusing technology. Baosteel branches originally dis-

charge domestic wastewater through sewage pipeline directly to mu-

nicipalsewagepipelinenetworkwithoutanytreatment.Since1998,Bao-

steelbranchesgraduallyestablishedmorethan30domesticwastewater

treatmentplantswithcapacityabout4milliontons/year, throughwhich,

wastewateraredischargedtofactoryenclosingriverinotherroutes.Since

2001,Baosteelhascarriedoutstudiesonneutralizedwaterreusetechnol-

ogyandsuccessfullyutilizesneutralizedwaterincleancirculatingcooling

watersystemtoreplaceindustrialmakeupwater.Baosteelbecomesthe

firstenterprisewhichutilizesneutralizedwaterinindustrialsystemamong

domesticsteelenterprises.

Itisalong-termstrategytodevelopcycleeconomyfornationaleconom-

ic and social development. Baosteel insists on sustainable development,

spendseffortsonsavingresources,completelypromotescleanproduc-

tion, doubles efforts to develop cycle economy and endeavors to cre-

ateanecologicalsteelenterpriseinharmonywithcitydevelopmentand

environmentalprotection.

Secondaryresources(or“byproduct”,commonlyreferredto“wastes”)

producedduringtheprocessofsteelproductionmainlyincludeblastfur-

nace slag, slag, cinder, fly ash, iron containing dust and industrial refuse.

IndustrialsolidresourcesofBaosteelfeaturelargevolume,diversifiedtype

andcomplexcomponents.Mostofsuchresourcesneedtobetreatedand

comprehensiveutilizedexceptafewofthemcanbedirectlyreturnedto

productionsystem.

Baosteel adopts international and domestic advanced industrial solid

secondary resources treatmentprocess and facilities tomake industrial

solid secondary resources treated in a decremented, resource friendly

andnon-hazardousmanner.Inparticular,throughdevelopmentinrecent

years,afterconstantpromotionofnewtechnologyandprocessandgrad-

ualperfectionofoptimizedconfigurationandreasonabledistributionfor

resources, Baosteel has achieved remarkable results on circulation and

utilization of industrial solid secondary resources, and has preliminarily

formedresourceintegratedutilizationindustry,hasinnovatedaseriesof

selfdevelopedtechnologies,andispreparedforscaleproductioninterms

ofmanagementsystem,technology,humanresource,processequipments

andmarketsales,andespeciallyisquitecompetitiveinnewbuildingmate-

rialandmagneticmaterialfield.

TreatmentandutilizationofBaosteelindustrialsoldsecondaryresources

hasbeenupgradedfromoriginalsimplestorage,disposalandtransporta-

tionforutilizationintocurrentnewtechnicaltreatment,returntoproduc-

tion system and high added value utilization,which effectively prevents

secondarypollutionandturnswastesintowealthandsavesalotofraw

sources.Baosteelhasspenthugeefforts tocreateanecological system

withbeneficialcycleandisalreadyrewardedwithremarkablesocialben-

efits,environmentalbenefitsandeconomicbenefits.

Cyclic Utilization of Water Developing Cycle Economy

Environmental Performance Report

30

Baosteelhasestablishedan independentenvironmentmonitoringorga-

nization tobe responsible formonitoring andanalysisof such itemsas

factory environment quality, pollution source control effect and other

environmentalprotectionrelateditemsforBaosteel(Shanghai)Co.,Ltd.

Baosteel environmentalmonitoring laboratory,with an area over 2000

square meters, is equipped with inductive coupling plasma emission

spectrometer,gaschromatograph-massspectrometer,atomicabsorption

(graphitefurnace)spectrophotometer,FT-IR,smokeandgastester,smoke

anddusttester,andotherlargemonitoringdevices.Thelaboratory,inac-

cordancewithnationalstandards,carriesoutmonitoringof15categories

and297items,suchaswaterdischarge,groundwater,drinkingwater,in-

dustrialcirculatingwater,airandexhaust,indoorair,biology,occupational

health,noise,solidwastes,hotworkingandsoon.Currently,monitored

itemshavebeenexpandedtoecologicalenvironmentanalysisforwaters

atYangtzeRiverEstuary.

BaosteelCo., Ltd. planned toestablish an automaticmonitoring system

from2005andhadcompletedPhaseIofsuchsystembytheendof2007.

PhaseIsystemallowsforon-lineautomaticenvironmentmonitoring,mon-

itoringinformationon-lineinquiryfunction,andonlinereporting,statistics,

inquiryofenvironmentalprotectiondatawithinthescopeofBaosteelCo.,

Ltd.,andinquiryandsharingofinformationregardingenvironmentalpro-

tectionlaws,regulationsandtechnology.In2008,BaosteelCo.,Ltd.initiated

thePhase II constructionof automaticenvironmentmonitoring system,

withservicescoveringMediumandHeavyPlateBranchandNanjingMei-

shanSteelCompanyinadditiontoBaosteelBranch,StainlessSteelBranch,

SpecialSteelBranch,BaosteelChemicalCo.,Ltd.alreadyincludedatPhase

I.PhaseIIprojectisexpectedtobecompletedbyJune2009.

Baosteel always focuses on ecological environment construction of

thefactoryareaandsurroundingareas.BaosteelCo.,Ltd.carriesout

greening construction for the factory areaand surroundingecology

onbasisofnewecologicalgardentheory,andendeavorstocreatean

efficientandgracefulmodernchemicalfactorywithoutanypollution

orwaste.Baosteelbrancheshaveformedamanmadeplantcommu-

nitymainlywithplantedlandscapetoimprovecirculatingfunctionand

landscapequalityforthefactoryareaandsurroundingecologicalenvi-

ronment.Since1991,BaosteelCo.,Ltd.hasbeenawardedasnational

besttrees-plantingorganizationbyNationalAfforestationCommittee

formanytimes,andbeenawardedasShanghai“GardenOrganization”

byShanghaiAfforestationCommittee,andbeenawardedas“theBest

GreeningOrganization”byNationalMetallurgyAfforestationIndustry.

BaosteelGroupXinjiangBayiIron&SteelCo.,LtdislocatedinXinji-

ang,wherethewhetherisdryandsandy,andcloudsofdustarestirred

uponce it iswindy. In order to improve the abominable ecological

environmentsurroundingtheenterprisewhereitiswildandnoplant

grows,allstaffofBaosteelGroupXinjiangBayi Iron&SteelCo.,Ltd

haveplantedmorethan100,000Chineseacresoftreesvoluntarilyat

weekendsforyears,andirrigateaswellasprotectthoseplantedtrees

ThefactoryenclosingriverisariverenclosingthefactoryareaofBaosteel

branch.Ithasatotallengthof20.7kmandhasastoragecapacity(including

stormcollectors)about1.5millionm3.Therivermainlyfunctionstocollect

stormwaterandwastewaterofthefactoryareaandthendischargethem

tooutsideinacentralizedmanner,playingaroleofadjustingpondageand

preventingflood.

Waterresourceofthefactoryenclosingriverismainlyfromproduction

wastewater discharged from production plants after appropriate treat-

ment,domesticwastewaterandstormwater. It is anaturalwater reser-

vationriverandareusablewaterresource. Inordertofurther improve

surrounding environment, and make integrated use of river resource,

Baosteelcarriesoutstudiesonecologicaltreatmentandcomprehensive

utilizationof the factoryenclosing river, andpurifieswaterbodyof the

factoryenclosingriverbymeansofsubsurface-flowwetlandtechnology.

MeishanCompanyofBaosteelGroupinvestedRMB16millionforeco-

logicalenvironmentsafetythatmightbecausedbyganguesiteofmineral

industries.Fromthesecondhalfyearof2005,environmentofHanfushan

GangueSite,whichoccupiesanareaover350Chineseacres,changeda

lotafterthreeyear’sintegratedenvironmentaltreatment:weedandgar-

bagewithin the area no long exist, but are replacedwithmeandering

garden roads and lush greenplants.The greenbelt area reachesmore

than0.2millionsquaremeters.Itoffersvaluablereferencesforintegrated

environmental treatment andutilization for later projectsofHanfushan

GangueSite.In2008,HanfushanGangueSitereclaimationisacceptedby

provincialandmunicipalnationallandresourcesauthoritieswithpositive

praise.

Environment Monitoring

Improvement of Environmental Appearance in Factory Area

Ecological Rehabilitation

withalotofmoneyandenergy,whichchangesthenakedridgeinto

verdantbarriersandachievestopreventwind,rootsand,andpurify

air.BaosteelGroupXinjiangBayiIron&SteelCo.,Ltdplanstoplant

another100,000Chinese acresof trees in future several years and

triestobuildBaosteelGroupXinjiangBayiIron&SteelCo.,Ltdasa

greensteelenterpriseinWestChina.

31

Atthebeginningof2008,ChinaInnovativeStrategicAllianceofAutomotiveLight

WeightTechnologywas founded. It is thefirst strategicalliance that thecoun-

tryintegratesautomotiveindustryandupstreamanddownstreamresourcesfor

sharedtechnicalinnovationandresultshare.BaosteelCo.,Ltd.becomestheonly

steel enterprises among 12member enterprise.The new founded innovative

strategicalliancewillcarryoutbreakthroughsconcerningautomotivelightweight

technologywithinthreeyearssoastoachieveweightforsixmodelsofselfdevel-

opedautomotivesreducedby8%to10%.

Automotivelightweightistoreduceselfweightofautomotiveunderthecondi-

tionofensuringoverallqualityandperformanceofautomotivesinordertomake

automotiveenergysaving,environmentfriendlyandtoimprovecontrollabilityand

safety.Atpresent,suchtechnologyhasbecomean importantstudysubject for

internationalanddomesticautomotiveindustrydevelopment.

Formanyyears,BaosteelCo.,Ltd.hasalwaysbeenkeenondevelopmenttrendof

internationalsteelindustryandautomotiveindustry,andhasparticipatedinthe

“SteelforSuperlightVehicleBody”projectstudyorganizedbyInternationalIron

&steelInstitute,andbecomesthefirsttodevelopsheetsteellaserjointwelding

technology.Thequalityof20newlightweightproductsin3categoriesindepen-

dentlydevelopedbyBaosteelisthesameasthatofforeignsimilarproducts.Inad-

dition,Baosteelhasobtained10patentsandmorethan20proprietarytechnical

secrets.Atpresent,Baosteel’slaserjointweldmentsanddead-hardsteelareina

leadingpositionofmarketshareindomesticmarketandalreadyappliedinmore

than30automotivemanufacturers.

Hotformingtechnologyistheadvancedtechnologyamongautosheetapplica-

tions,andleadsthetrendofautomotivemanufacturingtechnology.Thistechnol-

ogycangreatlyimprovesheetsteelstrengthandparts’dimensionaccuracy,andis

inlinewiththedemandofvehiclelightweight.In2008,BaosteelCo.,Ltd.provided

hotformingvehiclebodypartsampleforCheryAuto.ThetestresultsofChery

showthatBaosteel’shotformingpartsperformanceissuperiortointernational

standard,dimensionaccuracyisremarkablyhigherthanoriginalcoldformingparts,

andweightofpartialvehiclebodyassemblies is reducedby18%.Duetosuc-

cessfulcooperationbetweenBaosteelCo.,Ltd.andChery,manydomesticauto

manufacturersalsosignedsamplepartfabricationagreementwithBaosteel.

Inthefuture,BaosteelCo.,Ltd.willcontinuetodoubleeffortstoapplyselfde-

velopedlaserjointwelding,internalhigh-pressureforming,hotpressformingand

otherleadingtechnologyinselfdevelopedmodelofvehiclesinordertogivefull

playofsampleanddemonstrationroleandtopromotecommondevelopment

ofsteelindustryandautomotiveindustry.

Green Building Automotive Light Weight Technology

Environmental Performance Report

Withincreaseofworldpopulationandaccelerationofurbanization,

humankindsimposemoreandmoreurgentdemandsonresidences

andenvironment.Therefore, International Iron&steel Institutehas

organized and initiated the LivingSteel Project, aiming to seek for

efficient and economical solutions for global residential problems

throughsustainableresidentialdesignandarchitecturalinnovation.

Steelstructureisawardedasthe“greenbuilding”for21stcentury

duetoitsenvironmentfriendlyandsustainablefeatures.Compared

withtraditionalconcretestructure,steel-structureresidentialbuild-

ingsareadvantageousofitsenergysaving,environmentfriendlyand

100%reusablefeatures.Inaddition,steel-structureresidentialbuild-

ingscanbeprefabricatedandassembledonsite,whichwillgreatly

shortenconstructionperiodandeffectivelyreducefoundationcosts.

Steel-structureresidentialbuildingshaveacostsimilartoconcrete

buildings, but aremore catered to the positioning of economical

house.

In2005,BaosteelparticipatedintheLivingSteelProjectastheonly

authorizedmemberinChinaRegion.OnMarch5th2008,thefoun-

dation stone laying ceremony of Baosteel steel-structure demon-

strativeresidenceprojectwasheldinWuhanHuangjinkouQuarter.

All steel columns of the demonstrative project aremade of cold

bendingsquaresteelpipemanufacturedinBaosteel.Comparedwith

traditionalH-shapebarsteel,squaresteelismoreeconomical,and

is the idealproduct for steel used in residential purpose.Thisde-

monstrativeprojectconcernsabouteconomicalhouse,whichaims

tosolvehousingdifficultiesformostfamilieswithlowincome,and

safeguardsqualitylifeforusers.

32

Supply Chain Performance Report

Baosteelstrengthenedcooperationwithusersandotherindustriesineachprocedureofenterpriseoperation,fromprocurementofrawmaterialsand

equipment,toR&D,transport,usageanddisposalofproducts,andenhancedcommunicationwiththesociety.Meanwhile,Baosteelendeavoredtoreduce

theinfluenceofproductionprocessandprojectconstructionontheenvironment,activelypromotedthedevelopmentandproductionofenvironmentally

friendlyproducts,andstrengthenedthepublicityof“Greenoperation”,soastoroottheideassuchasgreendesign,greenmanufacturing,greenmarketing

andgreenproductsdeeplyinthemindofitsemployees.

Green Procurement Chain

Baosteelisthefirsttolaunch“GreenProcurementActionPlan”inthefield

ofpurchasingmaterials,goodsandequipments inChina’s steel industry.

By publicly releasing“Green ProcurementAction Plan” on Baosteel E-

businessplatform,Baosteeldeliversitsgreenprocurementpoliciestothe

publicandenhancestheawarenessofthepublicon“GreenProcurement”.

Incaseofequivalenteffectiveness,Baosteelwillgiveprioritytosupplier’s

productswhichhavebeencertifiedbyISO14001environmentalmanage-

mentsystem,soastoeffectivelyensureenvironmentalprotection,energy

savingandreutilizationofpurchasedmaterialsandgoods,andguidethe

procurementchainontothewayofsustainabledevelopment.

Bysortingoutthepurchasecatalogue,promotingthestandardizationof

purchaseforpaintandothermaterials,andsortingouttheenvironmental

requirementsofpurchasedgoods,thecompanydefinedkeycategoriesfor

greenprocurement,andorganizedusingdepartmentsandtechnicalde-

partmentstooptimizetechnicalstandardsofprocurement,andincorpo-

ratedrequirementsonenergy-savingandenvironmentalprotectioninto

thestandards.Thecompanyimprovedthemanagementonrecyclingma-

terials,integratedandoptimizedthemanagementprocess,andimproved

therecoveryproportionandefficiencyofwastematerialsandpackaging

materials.Thecompanyalsorequireditssupplierstograduallyobtainthe

certificateofenvironmentalmanagementsystems,andasked107suppli-

ersintheindustriesoffireproofmaterials,chemicalandnonferrousmetal

topassISO14001certificationbytheendof2009.

In2008,facedwiththedrasticallychangingexternalenvironmentandbased

onfurtheroptimizationofsupplier’sstructure,thecompany,bysigninglong-

term strategic cooperation agreementswith suppliers, strengthened the

controloverresourcesrisksandsupplyrisks,promotedorderlycompeti-

tiononandnormaldevelopmentofthemarket,providedsecureguarantee

forproduction,operationandprojectconstructionofBaosteel,andrealized

awin-winsituationbetweensuppliersandpurchasers.Inordertobetter

cultivateanddeepenstrategicpartnership,thecompanystrengthenedre-

ciprocalvisitandcommunicationbetweenseniormanagementofsuppliers

With sunshine procurement, Baosteel optimized its procurementmode,

anduseddifferentiatedprocurementwayfordifferentgoodsaccordingto

thematurity levelofmarketcompetition.Baosteelstrengthenedstrategic

procurement for bulk raw fuelmaterials, implemented high added-value

rawmaterialJITmodel,triesconsignmentsales,preparedandreleasedthe

“MeasuresforAdministrationofBiddingProcurementforRawandAuxiliary

Materials”,andpromotedstandardizationandtransparencyofprocurement.

Baosteel deepened cooperationwith suppliers: suppliermanagement: By

vigorouslypromotingBaosteel’sculturewhichtakesintegrityandcollabora-

tionascoreamongvastsuppliers,thecompanyfullyimplementedtheclean

collaborationsystemwithsuppliers,positivelyguidedsupplierstocarryout

legalcompetition insupplyquality,priceanddelivery,andmadevastsup-

pliersdeeply impressedwith thecommitmentofBaosteel tobuilda fair,

honestandstandardprocurement-and-supplyenvironment.Thecompany

strengthenedsocialaccountabilitymanagementonsuppliersofbulkrawfuel

materials,andrequiredISO9000certificationonproductionsuppliers,and

gaveprioritytosupplierswithmoreconsciousnessofsocialresponsibilityif

allconditionswereequal.

Baosteel implemented E-procurement: As an important means of sun-

shineprocurement, thecompanyplanedanoverall functional framework

of E-procurement and stably promoted its implementation step by step.

E-procurementhasnotonlyenabledastandardandtransparentpurchasing

process,butalsobecomeaplatformforestablishingharmoniousrelation-

shipsbetweenBaosteel and its suppliersand improvingprocurementef-

ficiencyby creating value for the companywith the collaborationof the

suppliersandpurchasers.

Green Procurement

Baosteel Strengthened Strategic Operation and Built a Long-Term and Stable Procurement & Supply Chain

Sunshine Procurement

and purchasers, established amechanism for information exchange, and

improvedtechnicalcooperationandsubjecttrainingbetweensuppliersand

purchasers.Intermsofstrategicresourcessuchasironore,coalandocean

shipping, Baosteel signed long-term strategic cooperation agreements

withsuppliersandobtainedbestprocurementefficiencyandmaximized

procurement benefits. Baosteel improved its production-supply-research

mechanism,andkeptimprovingresourceadaptabilityandsupplyguarantee

bypromotingtheproduction-supply-researchprojectssuchastheoptimi-

zationoforeandcoalproportioningstructure.

33

Baosteelisalwaysmarket-orientedandpaysgreatattentiontocustomer’ssatisfaction.Thecompanykeepsoptimizingitsproductmix,strivestoimprove

thequalityandgradeofitsproducts,vigorouslydevelopsenvironmentallyfriendlyproducts,implements“Greenoperation”andinsistsonGreenDevelop-

ment,hopingtobuild“GreenBaosteel”.

Technological innovationisakeywayofBaosteeltoimproveitscorecompetitiveness.Afteryearsofefforts,Baosteelhasdevelopedaseriesofnew

products.Thedomesticmarketshareofqualitysteelproductssuchasautomotivesteel,householdelectricalappliancesteel,pipelinesteel,stainlesssteel,

electricalsteelandpetroleumsteelhasgreatlyincreased.Meanwhile,ithasalsopromotedthedevelopmentofdownstreamindustries,andmadecontri-

butionstovastusers.

Preventing global warming Reducing risks in the management on environmental protection

Creating recycling society

Saving energy and reducing CO2 emission Environmental protection and chemical management

Recycling and prolonging service life

Automobile Light weight and high securityHigh-strengthsheet,wireandbarmaterials

Simplifying user’s processing technologyLasertailored-weldedbland

Environmentally friendly materialsLead-freehotgalvanizedsteelsheetLead-freeeasy-cuttingsteelChromium-freegalvanizedsheetforautomobile

Reducing noise and vibrationVibrationdampingcompoundplate

Prolonging service life and reducing rejects

Hotgalvanizedhigh-strengthsteel(DP)Electro-galvanizedhighstrengthsteel(TRIP,DP)

Food & Beverages Reducing the weight of beverage cansReducingthethicknessofDImaterials

Household electrical appliance

Simplifying user’s processing technologyColorprecoatedsteelusedforhouse-holdelectricalapplianceSelf-bondingcoatedelectricalsteelSelf-lubricatingfilmhotgalvanizedsteelsheet

Improving motor efficiencyHighefficientandnon-orientedelectri-calsteel

Materials containing no environmentally hazardous substances

Lead-freehotgalvanizedsteelsheetChromium-freehotgalvanizedsheetforhouseholdelectricalapplianceChromium-freeelectro-galvanizedsheetforhouseholdelectricalapplianceChromium-freehotAl-ZncoatedsheetforhouseholdelectricalapplianceChromium-freecolorprecoatedsheetforhouseholdelectricalappliance

Prolonging service life and reducing rejects

HotAl-ZncoatedseriesproductsHotgalvanizedseriesproductsElectro-galvanizedseriesproductsColorprecoatedseriesproducts

Electrical power and energy

Improving the efficiency of power generation

High-temperatureandhigh-pressureboilerpipe

Improving the efficiency of energy transport

Highstrengthandhighductilitypipelinesteel

Improving the efficiency of power generationHigh-pressureboilerpipeHighstrengthsteelpipe

Prolonging service lifeSteelforchemicalstoragetanksSteelforpetroleumstoragetanks

Building and Civil engi-neering

Improving the efficiency of constructionHighstrengthandhighductilityplateSteelplateforhighheatinputwelding

Prolonging service lifeHighstrengthenameledsteelHighstrengthstructuralsteelforbuildingsHigh-tensileStrengthwiresSelf-cleaningcolorprecoatedsteelsheetHigh-ductilityandhighstrengthstruc-turalsteelpipeHighstrengthfire-resistantandweather-ingsteelHigh-durabilitycolorprecoatedsteelsheet

Others Simplifying user’s processing technologyHotrolledhighstrengthdiesteelforplasticmaterialsforming

Downstream industry

Environmental benefits

Environmentally Friendly Products

Supply Chain Performance Report

34

[Note 1] RoHS stands for Restriction of Hazardous Substances, and is also known as lead-free compliance. It is a directive issued by EU. As for the electronic industry, it mainly involves the Restriction of 6 kinds of hazardous substances.

[Note 2] SGS: SGS is the abbreviation for SGS-CSTC Standards Technical Services Co., Ltd, a joint venture established in October 1992 by SGS (Switzerland) and China Standards Technology Development Corporation (CSTC) subordinate to the original State Bureau of Quality and Technical Supervision. It is among the first JVs which legally provide inspection, testing, certification & verification services in China.

Baosteelactivelytakesappropriatemeasurestodevelopenvironmentally friendlyproducts.Duringtheprocess

ofproductionandoperation,Baosteelgivesfullconsiderationtobeingharmoniouswiththenaturalecosystem,

triesitsbesttoprotectandimprovepeople’slivingenvironment,andproperlyfulfillsitsresponsibilitytoprotect

environment.

Bycenteringoncleanerproduction,ecologicalconstructionandenvironmentalgovernance,Baosteelmakesevery

efforttodevelopnewtechnologies,newprocessandnewproductsforgreenenvironmentalprotection.Baosteel

isthefirstonewhohaspassedISO14001environmentalcertificationinChina’smetallurgicalindustry.

Baosteeladoptsinternationallyadvancedqualitymanagement.In1995,BaosteeltooktheleadinpassingISO9001

certificationofBritish Standards Institution (BSI). Itsmainproducts havebeen recognizedby international au-

thoritativeinstitutions.Forinstance,theyhaveobtainedUSAPIemblemandJapanJIScertificateandhavepassed

QS9000certificationofworld-famouscarmakersincludingGM,FordandChrysler.Theyhavealsobeenrecognized

byclassificationsocietiesinsevencountries:China,French,USA,UK,Germany,Norway,andItaly.

BaosteelcarriesoutSGS[Note2]environmentalprotectiontestsaccordingtoROHS[Note1]Directive,andimproves

productswhichfail tomeetthisDirective.Finally,BaosteelpreparesSGSreportandLetterofUndertakingfor

relevantproducts(includingcoatingsofvariouscolorsforcolorprecoatedsteel,A/H/Kcoatingsforelectricalsteel,

variouspost-treatmentwaysforhotgalvanizedandelectro-galvanizedproducts).

35

• The corrosion-resisting property of Baosteel newmartensite stainless steel products crossed the

“GreenBarriers”ofEU.

• TheGalvanizedSteelWirefordragline,whichis7millimetersindiameter,1770Mpa,andindepen-

dentlyresearchedanddeveloped,byBaosteelwonMajorInnovativeProjectofChinaIndustry’sNew

Record jointly byCEC (China EnterpriseConfederation) andCEDA (China EnterpriseDirectors

Association).

• BaosteelbecametheonlyoneenterpriseinChinawhichproducesandoffershighstrengthsteelplates

for150000m3extra-largecrudeoilstoragetanks.

• Baosteelnickel–basealloyoiltubing/casingandunderseapipelinetubesbrokeimportmonopoliesand

supportednationalstrategyforenergysecurity.

• ThestainlesssteelpipeforultrasupercriticalpressureboilerindependentlydevelopedbyBaosteelhas

filledthedomesticblank.

• BaosteeldevelopedsuccessfullyT24high-pressureboilerpipes.

• Baosteeldevelopedsuccessfullyextra-highstrengthhotrolledengineeringmachinerysteel.

• Baosteel’senvironmentallyfriendlychrome-freeelectro-galvanizedfingerprintproofsteelsheetwas

awardedas“SecondPriceofNationalEmployees’TechnologicalInnovativeAchievements”issuedby

theMinistryofScienceandTechnology,MinistryofLaborandSocialSecurityandNationalFederation

ofTradeUnions.

• Baosteel’schrome-freeelectro-galvanizedfingerprintproofsteelsheet(SECCN5\SECDN5)waslisted

amongtop10projectsoftransformationofnewandhigh-techachievementsofShanghaiin2007.Its

“extra-deepdrawformedhighqualityautomotivesteel”and“Pipelinesteel(X70,X80)”werelisted

amongtop10insalesvolume,andthechrome-freeelectro-galvanizedfingerprintproofsteelsheet

waslistedamongtop10ingrowthpotential.

• Baosteel’senvironmentallyfriendlychrome-freephosphatedandsealedelectro-galvanizedsteelband

wasidentifiedasLevelAtransformationofnewandhigh-techachievementsinShanghai.

• Baosteelsuccessfullydeveloped600MpahotgalvanizedTRIPsteelsheet,furtherenrichingtheauto-

motivesteelfamilyofBaosteel.

• ThesteelforweatheringtrainbogieproducedbyBaosteelaccordingtoEuropeanrequirementssuc-

cessfullywentaboardandwasexportedtobeusedonIndia’slightrail.

• Baosteeldevelopedsuccessfullydouble-highsurfacefingerprintproofsheet,fillingthedomesticblank

forthishighvalueaddedandhightechnologicalcontentproduct.“Double-highsurface”mainlymeans

high surfacequality andhigh surfaceproperty.Variousproperties suchas corrosion-resistanceand

electricalconductivityareuptohighapplicationstandards.

Excerpts of Media Information on Baosteel Premium Steel in 2008

Supply Chain Performance Report

36

Baosteelisawaysadheringtoitscommitmentof“threeconsiders”:i.e.:Baosteelconsiderscustomer'sstandardasitsownstandard;Baosteelconsiders

customer'splanasitsownplan;andBaosteelconsiderscustomer'sinterestsasitsowninterests.

Baosteel considers customer’s standard as its own standard; Baosteel considers customer’s plan as its own plan; and Baosteel considers customer’s interests as its own interests.

Score of customer’s satisfaction during 2006 to 2008

80

100

90

2006/1 2006/2 2006/3 2006/4 2007/1 2007/2 2007/3 2007/4 2008/1 2008/2 2008/3 2008/4

Score

Quarter

91.89 92.12 92.38 92.2 91.95 92.07 92.45 92.57 92.45 92.31 92.96

90.07

High-Quality Service

Asaglobalpartnerof2010ShanghaiWorldExpo,Baosteelprovidedhigh-

qualitysteelproductsforWorldExpoinaneffectiveandtimelyway.

ThepavilionconstructionofWorldExpoisofhugesteelconsumption,vari-

ousspecificationsandcomparativelyshortdelivery term.Baosteelhas then

establishedtheleadingandworkingteamforWorldExpoprogramtoexert

groupsynergyandintegratedresourceadvantagesoastoinnovatethesupply

mode forkeyprojects implementthepackagecontractualexecution forall

steeldemandandconductonestationserviceincludingproduction,batching,

processingandshipping.

Asoftheendof2008,Baosteelhadsuppliedatotalof85,000tonsteelto

WorldExpo,andproppedupthesteelridgeforthelandmarkingbuilding“one

axisandfourpavilions”includingChinaPavilionandthePerformanceCenter.

In2004,Baosteellaunchedthecustomertechnicalservicerepresentative

system in which customer representatives, coupled with Baosteel’s

marketing platform, would solve problems encountered by customers

in using rapidly, reduce the period of customer service and dispute

settlement, respond to customer’s demand in an 24-hour and zero-

distancewayandprovide“One-stop”one-on-oneconsiderateservice.It

washighlypraisedbycustomers.

In2008,LiYongchun,anemployeeinBaosteelsalescenter,wasemployed

asanexpertofsteelapplicationbyQingdaoHaierCo.,Ltd,andbecame

an honorary employee of Qingdao Haier Co., Ltd. During 3-year

employment period, LiYongchun will participate in procurement and

usageofsteelproductsofHaier.Hewilldirectlytakespartinsteelusage

diagnosisintheprocurementprocessofHaier,helptosortoutexisting

steelproducts inHaier,and integrateHaier’ssteelsupplyresourcesand

process,thusenhancingthesubstitutabilityofsteelproductsandreducing

procurementcosts.

Insiders pointed out that this move showed customers gave full trust

to Baosteel, andwould have a far-reaching influence on improving the

competitiveness of both Baosteel and its customers and leading joint

developmentofupstreamanddownstreamindustries.

BeinglistedamongfirstwinnersofChinaQualityManagementAward,Baosteelstartedthe“Customer’sSatisfactionProgram”since1994.Overyearsofac-

cumulation,Baosteelhaveestablishedacompletesystemforcustomer’ssatisfactionsurveyandimprovement.Bycarryingoutcustomer’ssatisfactionsurvey

quarterly,Baosteelknowsthedetailsinthechangeofcustomer’ssatisfactionandlearnscustomersdemandandcomplaintstimely,sothatitcanputforwards

improvementplananddeterminetheimprovementdirectionforproductsandservicesprovidedtocustomers.Assurveyfindingsshow,Baosteelalways

enjoysahighlevelofcustomer’ssatisfaction.Thescore(100-scorescale)ofcustomer’ssatisfactionduring2006to2008isshowninthefollowingfigure:

Support Shanghai ExpoCustomer Representative System

Customer’s Satisfaction Program

37

GRI Indicator

Descriptionofreportindicators Page

1.1Statementfromthemostseniordecision-makeroftheorganizationabouttherelevanceofsustainabilitytotheorganizationanditsstrategy

1

1.2 Descriptionofkeyimpacts,risksandopportunities 1,8

2.1 Nameoftheorganization 2

2.2 Primarybrands,products,and/orservices 2

2.3Operationalstructureoftheorganization,includingkeydepartments,operatingcompanies,subsidiarycompaniesandJVs

3,44

2.4 Locationoftheorganization’sheadquarters Backcover

2.5 Numberofcountrieswheretheorganizationoperatesandnameofcountries Backcover

2.6 Natureofownershipandlegalform 2,44

2.7 Marketserved 2

2.8 Scaleofthereportingorganization 2,12,24

2.9 Significantchangesduringthereportingperiod,includingscale,structureandownership 24

2.10 Awardsreceivedinthereportingperiod 38

3.1 Reportingperiod Insidefrontcover

3.2 Dateofmostrecentpreviousreport Insidefrontcover

3.3 Reportingcycle Insidefrontcover

3.4 Contactpointforquestionsregardingthereportoritscontents 49

3.5 Processfordefiningreportcontent Insidefrontcover

3.6 Boundaryofthereport Insidefrontcover

3.7 Stateanyspecificlimitationsonthescopeorboundaryofthereport Insidefrontcover

3.8 Basisforreportingonjointventures,subsidiaries,leasedfacilities,outsourcedoperationsandotherentities -

3.9Datameasurementtechniquesandthebasesforcalculations,includingassumptionsappliedtocomplexindictorsinthereportandestimation

-

3.10Explanationoftheeffectofanyre-statementsofinformationprovidedinearlierreports,andreasonsforsuchre-statement

-

3.11Significantchangesfrompreviousreportingperiodsinthescope,boundary,ormeasurementmethodappliedinthereport

-

3.12 GRIcontentindex 37

3.13 Policyandcurrentpracticeswithregardtoseekingexternalassuranceforthereport 9

4.1Governancestructureoftheorganizationincludingcommitteessubordinatetothehighergovernmentbodyandresponsibleforspecialtasks

3,9

4.2 IndicatewhethertheChairofthehighestgovernancebodyisalsoanexecutiveofficer 6

4.3Statethenumberofmembersofthehighestgovernancebodythatareindependentand/ornon-executivemembers

6

4.4Mechanismsforshareholdersandemployeestoproviderecommendationsordirectiontothehighestgovern-ancebody

17

4.5Linkagebetweencompensationofhighestgovernancebodymembers,seniormanagerandadministrativestaffandtheorganization’sperformance

3,14

4.6 Processesinplaceforthehighestgovernancebodytoensureconflictsofinterestareavoided 14

4.7 Processfordeterminingthequalificationandexpertiseofhighestgovernancebodymembers 14,16

4.8Proceduresinthehighestgovernancebodyforoverseeingtheidentificationandmanagementofeconomic,environmentalandsocialperformance,includingrelevantrisksandopportunities,re-statementoforobediencetointernationallyrecognizedstandards,codeofconductandprinciples

9

4.9Proceduresinthehighestgovernancebodyforoverseeingthemanagementofeconomic,environmentalandsocialperformance,includingrelevantrisksandopportunities,re-statementoforobediencetointernationallyrecognizedstandards,codeofconductandprinciples

9

4.10Processesforevaluatingthehighestgovernancebody'sownperformance,particularlywithrespecttoeconomic,environmental,andsocialperformance

14

4.11 Explanationofwhetherandhowtheprecautionaryapproachorprincipleisaddressedbytheorganization 14

4.12Externallydevelopedeconomic,environmentalandsocialcharters,principles.orotherinitiativestowhichtheorganizationsubscribersttoorendorses

2

4.13 Membershipsinassociationsand/ornational/internationaladvocacyorganizations 2

4.14 Listofstakeholdergroupsengagedbytheorganizations 10

4.15 Basisforidentificationandselectionofstakeholderswithwhomtoengage 10

4.16 Approachestostakeholderengagement 10

4.17 Keytopicsandconcernsraisedthroughstakeholderengagementhowtheorganizationhasresponded 10

Descriptionofreportindicators Page

EC1 24

EC2 32

EC3 14

EC4 -

EC5 14

EC6 32

EC7 12

EC8

EC9 24

EN1/EN2 32

EN3-EN7 28

EN8-EN10 29

EN11-EN15 30

EN16-EN25 28,29

EN26/EN27 31,33,36

EN28 26

EN29 32

EN30 26

LA1 12

LA2 13

LA3 14

LA4 17

LA5 17

LA6 15

LA7 15

LA8 17

LA9 15

LA10 16

LA11 17

LA12 14

LA13 12

LA14 14

SO1 21

SO2 23

SO3 23

SO4 23

SO5 -

SO6 -

SO7 -

SO8 22

PR1 33

PR2 33

PR3 36

PR4 36

PR5 36

PR6 22

PR7 -

PR8 36

PR9 22

38

Appendix

Focus on 2008

(1) OnJanuary5,2008,Baosteel’sstainlesssteelprojectwonagoldmetalof“2007ChinaQualityCon-

structionAward’heldbyChinaQualityConstructionAwardEvaluationCommittee.

(2) OnJanuary7,2008,Baosteel’spaperof“EstablishmentandApplicationofDynamicAuditingDecision-

makingSupportingSystem”wonthefirstprizeof2007ShanghaiEnterpriseManagementModerniza-

tionInnovationAchievements.

(3) OnJanuary8,2008,“ANewTechnologyforSafe,EnvironmentallyFriendlyandRecycledSlagGranu-

lation” and“Technology forHigh-strength, Fully-enclosed StraighteningMachine Supporting Rollers”

mainlycreatedbyBaosteel’sChiefResearcherXiaoYongliandChiefOperatorWangJunrespectively

wonthesecondprizeofNationalAwardforTechnologicalInventionsandNationalAwardforScientific

andTechnologicalProgress.

(4) OnJanuary22,2008,Baosteel’sfiveachievementswonprizesofShanghaiMunicipalAwardsforScien-

tificandTechnologicalProgressandShanghaiMunicipalAwardsforTechnologicalInventions.ATechnol-

ogyofSelf-IntegrationofHot-dippingAl-ZnCoatingProcesswonthefirstprizeofShanghaiMunicipal

AwardsforScientificandTechnologicalProgress.TheDevelopmentofHigh-quality,Large-section,Non-

Quenched/TemperedPlasticDieSteelSeriesProductswonthesecondprizeofShanghaiMunicipal

AwardsforTechnologicalInventions;AnewAODProcessforStainlessSteelMakingandResearchon

NewProcessofWide-spacing,CentralizedPillarlessMiningwonthesecondprizeofShanghaiMunicipal

Awards for Scientific andTechnological Progress; and theDevelopment ofAutomotive 55SiCr and

55SiCrVHighStrengthSpringWireRodwonthethirdpriceofShanghaiMunicipalAwardsforScientific

andTechnologicalProgress.

(5) OnMarch5,2008, threesubjectsofBaosteel, i.e.: theApplicationofRegenerativeLadlePreheating

Technology,Water-SavingProgramduringthe“10thFive-YearPlan”PeriodofBaosteel’sSpecialSteel

BranchandApplicationofPower-savingTechnologyinWaterPumpsandCoatingProcessinBaosteel’s

Branches;respectivelywonthefirst,secondandthirdprizeofShanghaiEnergySaving&PollutionRe-

ductionOutstandingAchievementsAwards.

(6) OnJune17,Baosteelwonthetitleof“AdvancedEnergySavingUnitofShanghai2007”.

(7) OnJuly10,2008,Baosteelwasconferredwith“CorporateSocialResponsibilityContributionAward”

in the“Forum forHarmonious Society Construction andCorporate Social Responsibility (Pudong

Shanghai)2008”.

(8) OnJuly28,2008,BaosteelGroupCorporationandShanghaiBaosightSoftwareCo.,Ltdandother89

companieswereofficiallyappointedbytheMinistryofTechnology,State-ownedAssetsSupervisionand

AdministrationCommission(SASAC)andAllChinaFederationofTradeUnions(ACFTU)asthefirst

batchofexperimentalenterprisesforinnovationinChina.

Awards

39

A p p e n d i x

(9) OnJuly30,2008,Baosteelwasawardedthehonorarytitleof“ChinaIron&SteelIndustryCleanPro-

ductionandEnvironment-FriendlyEnterprise2007”byChinaIron&SteelAssociation(CISA).

(10) OnAugust30,2008,ChinaEnterpriseConfederationandChinaEnterpriseDirectorsAssociationjointly

publishedtheupdatedrankingofTop500ChineseEnterprises.BaosteelGroupCorporationranked

firstamongTop500ChineseManufacturingEnterprises.ItwasalsothefourthtimeforBaosteeltotop

thelistsincetheappraisalofTop500ChineseManufacturingEnterpriseswasinitiatedin2005.

(11) OnOctober30,2008,ShanghaiContractCreditPromotionCommission (SCCPC)announced the

Shanghai2006-2007listofContract-honoringandPromise-keepingEnterprises,and13companiesof

BaosteelwereawardedasAAA-gradeContract-honoringandPromise-keepingEnterprises.

(12) OnDecember3,2008,theawardingceremonyof“TheCorporateSocialResponsibility(CSR)Ranking

inChina”sponsoredbyChinaBusinessNewswasheld inShanghai,duringwhichBaosteel received

“OutstandingEnterprisesAward”.

(13) InDecember2008,Baosteelreceivedthespecialcontributionawardof“2006ChinaCharityAward”

heldbytheMinistryofCivilAffairsofthePeople’republicofChina.

(14) On January 9, 2009,TheComprehensiveTechnology forUtilization and EmissionReduction of By-

ProductGasesofSteelEnterprisesofBaosteel’sbranchwonthesecondpriceof2008NationalAwards

forScientificandTechnologicalProgressatthenationalscientificandtechnologicalawardingmeeting.It

wasthefirstitemwiningsuchhonorindomesticmetallurgicalindustry.

(15) In July2008,XuLejiang,ChairmanofBaosteelGroupCorporationwashonoredtobeoneof“Top

10OutstandingFiguresinChineseEconomy2008”jointlybytheAssociationofChinaEconomicPress

(ACEP),ChinaEconomicInformationMagazinePressoftheEconomicDaily,andChinaIndustryand

CommerceTimes.

(16) InOctober2008,Baosteelwon5.12EarthquakeReliefOutstandingContributionAwardbyShanghai

RedCross.

(17) InJanuary2009,Baosteelwonthe2010ShanghaiWorldExpoServiceStarAwardbytheBureauof

ShanghaiWorldExpoCoordination.

(18) InMarch2009,BaosteelGroupwaslistedamong“World’sMostAdmiredCompanies”byAmerican

“Fortune”Magazine.

(19) InMarch2009,Baosteelwonthetitleof“Top10EnergySavingandPollutionReductionEnterprisesin

China2008”jointlybyACEF(All-ChinaEnvironmentFederation)andChinaEnterpriseNewspaper.

40

OnJan.5 The2007NationalQualityConstructionAwardwasannouncedintheGreatHallofthePeople.BothBaosteel’sstainlesssteelprojectandtheNo.4BlastFurnaceProjectofBaosteel’sBranchwonthegoldenprize.

OnJan.8 Baosteel’s “A New Technology for Safe, EnvironmentallyFriendly and Recycled SlagGranulation” and“Technology forHigh-strength,Fully-enclosedStraighteningMachineSupportingRollers”respectivelywonthesecondprizeofNationalAwardforTechnological InventionsandNationalAward forScientificandTechnologicalProgressat the2007national scientificandtechnologicalawardingmeeting.

OnJan.9 ZhangDejiang,MemberofthePoliticalBureauoftheCPCCen-tralCommittee,beingaccompaniedbyYuZhengsheng,Mem-berofthePoliticalBureauoftheCPCCentralCommitteeandSecretaryof the ShanghaiMunicipalCommitteeof theCPC,inspectedBaosteel.

InJan. Baosteelwonthetitleof“2007MostTrustworthyEnterpriseinChina” jointlybyChinaAssociationofEnterprises (CAE)andChinaEntrepreneurAssociation(CEA).

OnFeb.4 2008AnnualCelebrationofBaosteelTalentAwardwasheldinShanghaiOrientalArtCenter.

OnFeb.7 WangLequan,memberofthePoliticalBureauoftheCPCCen-tralCommitteeandSecretaryofXinjiangUygurAutonomousRegionalCommitteeoftheCPC;NurBekri,ChairmanoftheXinjiangUygurAutonomousRegion,AligenYiminbahai,directoroftheStandingCommitteeoftheNationalPeople’sCongress,AshatKerimbay,ChairmanofthePeople’sPoliticalConferenceoftheautonomousregion,andotherleadersfromtheautono-mousregionvisitedBayiSteel.

OnFeb.27 Thewide-plate rollingmill of Luojing Projectwas completedandputintooperation.

OnFeb.27 Thefirst2500m3furnaceofBaosteelGroupXinjiangBayiIron&SteelCo.,Ltdwasputintooperation.

OnFeb.28 TheCentralGovernmentdesignatedBaosteelasoneofpilotenterprisesforstudyandpracticeactivitiesamongstate-ownedenterprises.

InFeb. The first blue book for intellectual property strategy amongChineseenterprises-”BlueBookofBaosteel’sStrategyforIntel-lectualProperty”finisheditscompilation.

InFeb Baosteel’sEG(electrolyticgalvanized)productshaspassedthecertificationoftheworldfamousGermanMercedes-Benz.

OnMar.17 TheNationalDevelopment & ReformCommission (NDRC)approved the Development and Reform Commission ofGuangdongProvince andBaosteel to carryout theprepara-toryworkofGuangdongZhanjiangIron&SteelBaseProject.Accordingtothestate’srequirements,Baosteelwillbuilda10milliontonsteelbaseinZhanjiangonthebasisofmergingandrestructuringShaoguanIron&SteelGroup(SGIS)andGuang-zhouIron&SteelEnterprisesGroup(GISE),theexistingsteelenterprisesinGuangdongProvince,toeliminatetheoutdatedcapacity.

OnMar.21 No.4GeneratorSetatBaosteelPowerPlant-thefirstlarge-ca-pacity,low-heatvaluegasFully-Firedonce-throughboilerturbogeneratorsetintheworld-wassuccessfullyconnectedintothepowergrid.

OnMar.28 ChinaStateShipbuildingCorporation(CSSC),BaosteelGroupCorporationandChinaShippingheldthesigningceremonyofaletterofintentforcooperationinshipbuildinginLongxueShip-buildingBase.

InApr. Themobilizationmeeting of Baosteel’s activities for in-depthstudy and practiceof scientific outlookon developmentwasheld, symbolizing the formal launchofBaosteel’s activities forstudyandpractice.

InApril Thecold-rolledsheetshapecontroltechnologyindependentlydevelopedbyBaosteelhasascendedtotheworld-leadinglevel.Baosteelwascapableofputtingthesystemintotheliveproduc-tionenvironment.

Highlights of the Year

41

OnJune14 Jacob Zuma, SouthAfrica’s rulingAfrican National Congress(ANC)visitedBaosteel.

OnJune21 NPC environmental impact assessment law enforcement in-spection group ledbyChenZhili, vice-chairmenof theNPCStandingCommittee,cametoBaosteelforinspection.

OnJune25 Baoshan Iron & Steel Co., Ltd. announced that the issuanceofRMB10billiondetachableconvertiblebondsapprovedbyChina Securities Regulatory Commission (CSRC) had beencompletedonJune20withacouponrateof0.80%.OnMay28,CSRCapprovedBaoshanIron&SteelCo.,LtdtoissuepubliclyRMB10billiondetachableconvertiblebonds,withaparvalueofRMB100andatermof6years.

OnJune28 BaosteelGroupGuangdongIron&SteelCo.,Ltd,withBaosteelasitsbiggestshareholder,wasestablished.WangYang,MemberofPoliticalBureauof theCPCCentralCommitteeandPartySecretaryofCPCGuangdongProvincialCommitteeattendedtheunveilingceremony.ThiscompanyisjointlyinvestedbyBao-steelGroupCorporation,State-ownedAssetsSupervisionandAdministrationCommission(SASAC)ofGuangdongProvinceandSASACofGuangzhouCity,markinganinterimachievementaccomplished for the assets restructuring of BaosteelGroup,Shaoguan Iron&SteelGroup (SGIS) andGuangzhou Iron&SteelEnterprisesGroup(GISE).

OnJuly4 The detachable convertible bond issued by Baoshan Iron &Steel Co., Ltd. was successfully listed on Shanghai Stock Ex-change,withTickerSymbolof“08BaosteelBond”.“08Baosteelbond”istradedbymeansofsecurityaccounttrusteeship.Un-derwrittenbyCITICSecurityCo.Ltd.,andguaranteedbyBao-steelGroupCorporation, thebondwasgivenAAAratingbyChinaChengxinSecurityRatingCo.,Ltd.theattachedwarrantswerealsolistedatthesametime.

InMay AftertheGreatSichuanEarthquake,Baosteelimmediatelytookactionstomakevariousdonationstotheearthquake-strickenarea,withatotalamountreachingRMB117millionYuan.

OnMay15 Baosteel’sorientedsiliconsteel linesuccessfullyproducedthefirstrollofacceptableorientedsiliconsteelsheet.

OnMay28 YuZhengsheng,MemberofPoliticalBureauoftheCPCCen-tralCommitteeandPartySecretaryofCPCShanghaiMunicipalCommitteeandShenJun,ViceMayorofShanghaiwenttothecolorcoatingworkshopofBaosteelBranch’sColdRollingPlantto learn about the production of color-coated sheets badlyneeded for the fabrication of light mobile houses for earth-quakevictims.

OnMay30 Thethinnestandfastestlinesforsheetsintheworld-thecon-tinuous annealing line and No.2 electrolytic tin plate line ofBaosteel Branch’s Cold-rolled Steel Sheets Plant successfullyreachedthedesignedindexesforoutput,quality,profitanden-ergy consumption after 9months and7months respectivelysincebeingputintoproduction,breakingthefastestrecordoflikelinesintheworldtoreachthese4indexes.

InMay ApprovedbytheStateCouncil, the12thmeetingof thefirstsessionofboardofdirectorsofBaosteelGroupCorporationdecidedtoemployHeWenboastheGeneralManagerofBao-steelGroupCorporation.

InMay TheresultofappraisalofthefirstyearlyChinesebenchmark-ing green corporations was announced. The appraisal wassponsored jointlybyChinaEntrepreneurMagazine,PriceWa-terhouseCoopersandClimateChangeCapital.Baosteelwasoneofthe20benchmarkingcorporationsduetoits3leadingindictors: environmental cognition and policy, environmentalperformanceandsocialparticipation.

InMay The trial production of 1400 MPa level super high strengthheavyplate,representingtopworldlevel,wassuccessfulinBao-steel.The product performances fulfilled all the technologicaldesignstandards.Baosteel thussucceeded infilling thegap indomesticproductionofsuperhighstrengthheavyplate.

InMay Baosteel finished 2008Annual Report onOverall RiskMan-agementofBaosteelGroupCorporation. Inorder to furtherpromoteCentral Enterprises to deepen overall riskmanage-ment,theState-ownedAssetsSupervisionandAdministrationCommissionoftheStateCouncil(SASAC)launchedpilotproj-ectsof“2008AnnualReportonOverallRiskmanagementofCentralEnterprises”,andBaosteelwasamongthefirst31pilotenterpriseswiththeboardofdirectors.

A p p e n d i x

42

OnAug.28 TheState-ownedAssets Supervision andCommissionof theState Council officially issued the operation performance as-sessmentresultoflargestate-ownedenterprisesin2007,Bao-steelGroup, togetherwithother39 largestate-ownedenter-prises,wasratedLevelA.

OnAug.30 OnAugust 30th, China Enterprise Confederation and ChinaEnterpriseDirectorsAssociationjointlypublishedtheupdatedrankingofTop500ChineseEnterprises.Boasting theoperat-ingrevenueofRMB227.716billion,BaosteelGroupCorpora-tionranked12thamongTop500ChineseEnterprisesandfirstamongTop 500 Chinese Manufacturing Enterprises. Baosteelranked10thamongtheBest200ChineseEnterprisesinTermsofProfitand15thamongtheBest200ChineseEnterprisesinTermsofTaxPaid.

OnSep.19 BaosteelLargeDiameterLongitudinalWeldingPipeProductionLinewasofficiallyputintoproduction

OnSep.26-28The third Baosteel Biennial Academic Conference was held.XuKuangdi,formervicechairmanofChinesePeople’sPoliticalConsultativeConference (CPPCC)andPresidentof theChi-neseAcademyofEngineeringattendedthisconference.

OnOct.7 Afterenteringthefourthquarter,theglobalsteelmarketturneddown sharply due to theU.S. financial crisis. Baosteel held amobilizationmeetingforQ4operatingsituation,urgingBaosteelpeople to take emergency actions to actively copewith thechangeonthemarket.

OnOct.18-20ThemainconstructionmaterialsworthRMB4.5milliondonat-edbyBaosteelto“KunlunStation”,China’sfirstAntarcticInlandResearchStation,wereloadedontothe“SnowDragon”.

OnOct.19 Baosteel’s84itemswonprizesonthe6thChinaInternationalInventionExhibition,withahighestaward-winning rate in thehistory,whichexceeded75%.

OnOct.31 HuaJianmin,vicechairmanoftheStandingCommitteeoftheNational People’sCongress, being accompanied byYangDin-ghua,ViceChairmanofStandingCommitteeofShanghaiMu-nicipalPeople’sCongress,cametoinspectBaosteel.

InOct The stainless steel pipe for ultra supercritical pressure boilerindependently developed by Baosteel successfully passed thetechnicalrevieworganizedbyShanghaiPowerEquipmentRe-searchInstitute(SPERI).

InOct theState-ownedAssetsSupervisionandAdministrationCom-missionoftheStateCouncil(SASAC)promulgatedtheevalua-tionoutcomeoftheinformationizationapplicationlevelofthecentralgovernment-ownedenterprises: the informationizationapplication level index of Baosteel in 2007 is 92.28 reachingLevelA.

OnJuly5 Inthe“ForumforHarmoniousSocietyConstructionandCor-porate Social Responsibility (Pudong Shanghai) 2008”, jointlyheldbyChineseAssociationofProductivityScience(CAPS)andPudongNewArea, Baosteel was conferredwith“CorporateSocialResponsibilityContributionAward”.

OnJuly9 TheAmerican Fortunemagazine issued the latest ranking oftheWorldTop500Companies.With totaloperatingrevenueofUSD29.939billionandaprofitofUSD2.858billionin2007,Baosteeljumped48placesfromlastyeartorankNo.259.

OnJuly13 LiChaoyuan,amemberofthePoliticalBureauoftheCentralCommitteeoftheCommunistPartyofChina,SecretaryoftheSecretariatoftheCentralCommitteeandHeadoftheOrga-nizationDepartmentoftheCPCCentralCommitteecametoBaosteel to investigatethepilotwork,andbelievedthatBao-steelhadimplementedtheoverallrequirementsoftheCentralCommitteeonunifyingunderstanding,improvingcapability,solv-ingproblemsandinnovationmechanism.Thestudyandpracticeprogram lasted for five and a halfmonths, and all talksweresuccessfullycompletedonAugust15.

OnJuly24 BaosteelestablishedaSteelDevelopmentPlanningCommittee.ItisBaosteel’sfirstspecialcommitteeorientedtowardsunifiedplanningofthecompilation,argumentattheearlierstageandevaluationoftheimplementationofsteeldevelopmentplanofBaosteelGroup.BaosteelGroupGeneralManagerHeWenbowasappointeddirectoroftheCommittee.

OnJuly25 Baosightwas honoredoneofChinaTop10 Innovation Soft-wareEnterprises2008byChinaSoftwareIndustryAssociation(CSIA).

OnJuly26 Xu Lejiang, Chairman of Baosteel Group Corporation washonoredtobeoneof“Top10OutstandingFiguresinChineseEconomy2008” jointlybytheAssociationofChinaEconomicPress,(ACEP),ChinaEconomicInformationMagazinePressoftheEconomicDaily,andChinaIndustryandCommerceTimes.

OnJuly28 BaosteelGroupCorporation,ShanghaiBaosightSoftwareCo.,Ltdandother89companieswereofficiallyappointedby theMinistry ofTechnology, State-owned Assets Supervision andAdministrationCommission(SASAC)andAllChinaFederationofTradeUnions (ACFTU) as the first batch of experimentalenterprisesforinnovationinChina.

OnJuly30 Inthe4thSessionofthe3rdExecutiveCouncilofCISA,Bao-steelwasawardedthehonorarytitleof“ChinaIron&SteelIn-dustryCleanProductionandEnvironment-FriendlyEnterprise”,anditshighgradesteelsheetforpassengercarwon“ChinaIron&SteelIndustryProductDevelopmentandMarketPioneeringAward”.

InJuly Baosteeltooktheleadinstarting“GreenProcurementActionPlan”onpurchasingmaterialsandsparepartsindomesticsteelindustry.Baosteelwill givepriority to the supplierswhohavepassedISO14001environmentalmanagementsystemcertifica-tion.

43

OnDec.3 Theawardingceremonyof“TheCorporateSocialResponsibil-ity(CSR)RankinginChina”sponsoredbyChinaBusinessNewswas held in Shanghai, during which Baosteel received“Out-standingEnterprisesAward”.

OnDec.13 LiKeqiang,memberofthestandingcommitteeofthePoliticalBureauoftheCentralCommitteeoftheCPCandvicepremieroftheStateCouncilcametoinspectBaosteel,duringhisinspec-tion,thevicepremiercalledonBaosteeltoplayaleadingroletomakemuchmorecontributionsforthedevelopmentofnationalindustriesandcausesofenergysavingandenvironmentalpro-tection.YuZhengsheng,memberofPoliticalBureauoftheCen-tralCommitteeof theCPC, Secretary of ShanghaimunicipalcommitteeoftheCPC,HanZheng,ViceSecretaryofShanghaimunicipalcommitteeoftheCPCandmayorofShanghaimu-nicipality,accompaniedthevicepremierduringhisinspectionofBaosteel.

OnDec.22 Grandcelebrationwasheld for the30thanniversaryofBao-steel.WuBangguo,MemberofthePolitburoStandingCommit-teeof theCPCCentralCommitteeandNPCChairman,andZhangDejiang,MemberofthePoliticalBureauoftheCPCCen-tralCommitteeandVicePremieroftheStateCouncilrespec-tivelysentamessageofcongratulation.YuZhengsheng,Mem-berofthePoliticalBureauoftheCPCCentralCommitteeandSecretaryof the ShanghaiMunicipalCommitteeof theCPC,Chen Jinhua, FormerVice-Chairman of CPPCC, Li Rongrong,SASAC Director and Party Committee Secretary attendedthe celebration.HanZheng,Deputy Secretary of the Shang-haiMunicipalCommitteeof theCPCandMayorofShanghaiNur Bekri, Deputy Secretary of XinjiangUygurAutonomousRegionalCommitteeoftheCPCandChairmanoftheXinjiangUygurAutonomousRegion,andHuangYunlong,MemberoftheStandingCommitteeoftheGuangdongProvincialCommitteeoftheCPCandFirstViceGovernorattendedtheceremony.Intheceremony,Baosteeldecidedtoaward6comrades,includingformerChairmanofBaosteelGroupLiMing,thetitleof“Bao-steelMeritFigure”.

OnDec.26 At the 1st anniversary of the contract signed between theBureauofShanghaiWorldExpoCoordination (BSWEC)andBaosteel.Thelatter’sbrandofcolorcoatedsheetstateditsviewattheceremony.Deputysecretary-generalofShanghaigovern-mentanddirectorgeneralofBSWEC,HongHao,deputydirec-torgeneralofBSWEC,ChenXianjin,deputysecretaryoftheCPCBaosteelcommittee,OuYangYingpeng,vicepresidentofBaosteelCo.Ltd, theunveilingceremony forBaosteel’sbrandofcolorcoatedsheetwasheld,OuYangYingpeng,deputysec-retaryoftheCPCBaosteelcommittee,andHongHao,directorgeneralofBSWECstarteduptheunveilingphotosphere.Theobjective vision and connotation of the brand, namely,“con-struct a colorful life”, as well as solutions of construction bysteelstructurewereelaboratedrespectivelybyZhouShichun,generalmanagerofBaosteelSalesCenter,andCaoPing,vicegeneralmanagerofBaosteelMetals.

InDec. Despiteoftheabruptchangeinmarketsituation,Baosteelhaskeptitsleadingroleinautomotivesheetproductionandsales..Thetotalsalesvolumeofthewholeyearincreased9.7%overthesameperiodofthepreviousyear.Thesalesofhighstrengthsteelandouterpanelincreased31%and25%respectivelythanlast year.The sales volume of each of these varieties for thewholeyearaccountedformorethan60%marketshare.

InDec. Baosteelsucceededinproductionoftopgradeofsiliconsteelthroughits1550mm-PL-TCMby“skippinglevel”.Thankstothis,BaosteelbecametheveryfirststeelmakerinChinaandoneoffewsteelmakersintheworldthatpossessesthetechnologyofthisprocess.

OnNov.13 YuZhengsheng,amemberoftheStandingCommitteeofthePoliticalBureauoftheCommunistPartyofChina(CPC)Cen-tralCommitteeandSecretaryofCPCCommitteeofShanghaiMunicipality,CametoinspectBaosteel.

OnNov.22 WenJiabao,amemberoftheStandingCommitteeofthePo-liticalBureauoftheCommunistPartyofChina(CPC)CentralCommittee,premieroftheStateCouncilcamedowntoBao-steelforaninspection.BeingaccompaniedbyYuZhengsheng,amemberoftheStandingCommitteeofthePoliticalBureauoftheCommunistPartyofChina(CPC)CentralCommitteeandsecretaryofCPCCommitteeofShanghaiMunicipality,ZhangPing,ChiefofNationalDevelopmentandReformCommissionof theStateCouncil,LiYizhong,ministerofMinistryof Indus-tryandInformationTechnologyofthePeople’sRepublicChina,ZhangXuren,ministerof theMinistryofFinance,XieFuzhan,chief of ResearchOffice of the State Council, Liu Mingkang,chairmanofChinaBankingRegulatoryCommission,HanZheng,MayorofShanghaiMunicipality.PremierWenJiabaogaveasuf-ficient affirmativecomplimenton themethodsandmeasuresthat Baosteel takes to deal with themarketing adversities inacalmmannerandthedecentspiritualfeaturesthatBaosteelbears foruncompromisingdevelopmentof itsown.WenalsoencouragedBaosteelpeople tobemoreconfident in copingwiththeilleconomicdeclinetoobtainabetterdevelopmentindeed.

OnNov.24 Baosteel set up a Social ResponsibityCommittee,which is aspeicalcommitteeresponsibleforoverallcoordinationfortheconstructionofBaosteel’ssystemandworkingmechanismforperforming social responsibilities.HeWenbo, BaosteelGroupGeneralManagerwasappointedasthechairmanofthecom-mittee.

OnNov.28-30 TheExpertCommitteeofGuangdongIron&SteelGroupCor-poration, with Xu Kuangdi, former vice chairman of ChinesePeople’sPoliticalConsultativeConference(CPPCC)andPresi-dentoftheChineseAcademyofEngineeringaschairman,wasestablishedinGuangzhou.

InNov HaibaoShippingCompany,co-investedbyBaosteelandChinaShippinghelditsunveilingceremony.

OnDec.1 Inorder to reward foreignexpertswhohasmadeoutstand-ing contribution to Baosteel’s project construction, operationmanagementandR&Dand technological innovation,Baosteelspecially set up the Cooperation ContributionAward, whichconsistsoftheAwardofBestCooperation,theAwardofOut-standing Contribution and theAward of Best Supervisor. 10foreignexpertshavebeenselectedasthefirstawardwinners.

OnDec.1 Baosteel won the title of Excellent Creation Corporation ofChinaIndustry’sNewRecordjointlybyCEC(ChinaEnterpriseConfederation)andCEDA(ChinaEnterpriseDirectorsAsso-ciation).Allthe30itemsselectedbyBaosteelwerenominatedinChinaIndustry’sNewRecord.

A p p e n d i x

44

Baosteel Group Guangdong Iron & Steel

Co., Ltd

BaosteelGroupGuangdong Iron&SteelCo.,

Ltd isanextra-largegroupcorporation incor-

porated in Guangzhou City in June 28, 2008

jointlybyBaosteelGroupCorporation, State-

ownedAssetsSupervisionandAdministration

Commission(SASAC)ofGuangdongProvince

and SASAC of GuangzhouCity, with a regis-

tered capital of RMB 35.86 billion yuan. Bao-

steel Group Corporation contributes in cash

and holds 80% shares. SASACofGuangdong

ProvinceandSASACofGuangzhouCitycon-

tributewiththenetstate-ownedassetsofSGIS

andGISEandhold20%sharescollectively

BaosteelGroupGuangdong Iron&SteelCo.,

LtdisleadinginthesteelindustryinGuangdong

province, and is responsible for guiding and

drivingthedevelopmentoftthesteelindustry

inGuangdongProvince,tobuildaworld-class,

green and environmentally friendly steel pro-

tectionbaseandaR&Dbaseforsteelproduct

application technologies and environmental

protection and energy saving technologies, so

astocreatemostvalueforshareholders.

Address:Floor24,CCBGuangdongBuilding,NO.509,DongfengZhonglu,YuexiuDistrict,Guangzhou

Postalcode:510045Tel:+8602083606666Fax:+8602083606095

Baoshan Iron & Steel Co., Ltd

Baoshan Iron & Steel Co., Ltd. (Baosteel Co.,

Ltd.)hasestablished its standingof theworld-

class steel complex in the global steelmarket,

thanks to its comprehensive superiority in the

fieldsofintegrity,talent,innovation,management

and technology. Its comprehensive competi-

tivenessranks third in theworldsteel industry,

according to the assessment of the“Guide to

WorldSteelIndustry”,andthecompanyistaken

asoneofthemostpromisingsteelmakersrichin

growthpotentials.

Baosteelhasbeenspecializedintheproduction

ofthehigh-techandhighvalue-addedsteels,in-

cluding the automotive steel, shipbuilding steel,

oilandgasminingsteel,pipelinesteel,appliance

steel, silicon steel, boiler steel, pressure vessel

steel, foodandbeveragepackagingsteel,metal

productprocessingsteel,stainlesssteel,specially

alloyedsteelandlivingsteelaswell.Notonlyhas

Baosteeltakentheleadinthesupplyofavari-

etyof steels in thehomemarket, but its steel

products also have been selling well to over

40 countries and regions such as Japan, South

Korea, Europe and USA. Based upon the up-

to-datetechnologiesinvolvingmodernironand

steelmetallurgy,hotrollingandcoldrolling,hy-

draulicandsensing,electroniccontrol,computer

and informationandcommunication,Baosteel’s

equipment is featuring the large scale and the

continuousandautomaticfunctions,andremains

asmodernastheworld-classtechnology,bythe

means of continued technical revamping and

upgrading.BaosteelCo.,Ltd.appliestheinterna-

tional advanced quality management practices,

andgotallitsmajorsteelproductscertifiedby

theinternationalprestigiousauthoritativeinstitu-

tions.

Address:SouthBuilding,BaoshanHotel,No.1813,MudanjiangRoad,BaoshanDistrict,Shanghai

Postalcode:201900Tel:+862126645000Saleshotline:+862126648888Fax:+862126649000Website:www.baosteel.com

Baosteel Group Xinjiang Bayi Iron & Steel

Co., Ltd

BaosteelGroupXinjiangBayiIron&SteelCo.,

Ltd(withXinjiangBayiIronandSteelCo.,Ltdas

itspredecessor,“BayiSteel”)wasfirstfounded

inSeptember1951.Itwasoriginallyabackbone

state-owned enterprise and key tax payer in

Xinjiang.InlateApril,2007,Baosteelacquiredit

andbecameitscontrollingshareholder.

BayiSteelnowhasanannualcapacityof7.45

milliontonsteel.In2008,itproduced4.84mil-

liontonsteel. Itplanstoproduce5.50million

tonthisyear.AfterbeingacquiredbyBaosteel

Group,itsequipmentlevelandproductionca-

pacity have greatly increased as a number of

newprojectshavebeenputintoproduction.

Its products are dominated by construction

steelproducts.Steelsheetandplate,high-qual-

ity steel andmetal products also account for

certainproportion.Itsproductshaveanimpor-

tantpositioninXinjiangmarket. Inadditionto

Xinjiangmarket,theyarealsosoldtoprovinces

suchasGansu,ShaanxiandSichuan,aswellas

fiveCentralAsiancountries.

Address:BayiRoad,Toutunhe,Urumqi,Xinjiang,ChinaPostalcode:830022Tel:+8609913893418Fax:+8609913891000Website:www.bygt.com.cn

Steel Industry

Introduction to Business Segments

45

Baosteel Metal Co., Ltd

BaosteelMetal Co., Ltd. (BaosteelMetal) is a

Baosteel’swholly-fundedsubsidiary,whichcame

intoexistenceafterBaosteelGroupintegrated

itsformerbusinessdevelopmentcompany,steel

products unit, automotive trade business and

wire product business in order to vigorously

develop the steel rolling and processing busi-

nessbytheendof2007.Itplaysanimportant

role of Baosteel’s steel rolling and processing

business.

BaosteelMetals’s core business includes: steel

structure,metalpackagingmaterialsandindus-

trialgas.

Theproducts and servicesof the steel struc-

ture business have almost covered all appli-

cation fields of steel structure.The business

scope includes:ClassAarchitecturalengineer-

ing design; Class A metallurgical engineering

design; lump-sum contracting of architectural

engineering and metallurgical engineering de-

sign;design, fabricationand installationofvari-

ous steel structures; cold-rolled section steel;

highfrequencyweldedHsteel;industrialdoor;

light-weightsteel-framehouses(includingcolor

platehouses);andcold-rolledribbedrebar.Itis

alreadyinfluentialinthedomesticandinterna-

tionalmarketsandhasachievedsomeachieve-

ments.

Baosteel Resources Co., Ltd

Baosteel Resources Co., Ltd. (Baosteel Re-

sources), formerly BaosteelTrade Co., Ltd., is

oneof theBaosteel’swholly-fundedsubsidiar-

ies. Foundedon July21,2006, it ismainlyen-

gagedintheinvestment,tradeandlogisticsfor

mineralresourcesincludingironore,coal,alloy,

non-ferrousmetal, stainless rawmaterials and

scrapsteel.

Baosteel Resources deals with iron ore and

metallurgical auxiliary materials including fine

ironore, lumpore,pellet, limestone,dolomite,

serpentine, olivine; coals including coking coal,

richcoal,PCIcoal,powercoal, lumpcoaland

metallurgicalcoke;stainlesssteelrawmaterials

includingnickel,nickel iron,chromium,chromi-

umiron,ruddlenickelore,chromiumore;and

scrapsteelsincludingcutmaterial,baledmate-

rial,cleanscrap.

BaosteelResourcesisnowbuildingacompre-

hensive logistics service platform with power

competitivenesstoofferscomprehensivelogis-

ticsservicessuchasshipmentagent,forwarder,

railway shipment, warehousing and storage,

loading and unloading at port. It has logistics

subsidiariessuchasQingdaoBaohanTransport

andTrade Co., Ltd. It has also expanded the

ocean-going transportation through the stra-

tegiccooperationwithChinaShippingGroup.

Address:17Fl.,BaosteelTower,No.370PudianRoad,PudongDistrict,Shanghai

Postalcode:200122Tel:+862158350000Fax:+862168403528Website:www.baosteelresources.com

Themetal packagingmaterials aredominated

bysteel two-piececansandcolorcoated tin-

plates.Thecompanyhasestablishedlong-term

strategic partnership with world-famous en-

terprises including Coca Cola and Pepsi. By

2012,itwillbecomethebiggestmakeroftwo-

piececans inChina.BaosteelMetalalsohasa

domestically-leadingUVmetalliccolorprinting

line,andisaleadingenterpriseinmetalliccolor

printinginfood&beveragefield.

Its industrial gas mainly includes oxygen, ni-

trogen, argon, hydrogen, and carbon dioxide.

Thebusiness is dominatedby theproduction

ofliquefiedgasandbottledgas,completedby

thedevelopmentandproductionofhydrogen,

carbondioxide,medicalgas,specialgasandrare

gas.These industrial gases are widely used in

manyfieldssuchasmetallurgy,steel&iron,pe-

troleum,chemical,electronics,andmedicalcare.

Address:No.2building,Lane803,ShuangchengRoad,BaoshanDistrict,Shanghai

Postalcode:200940Tel:+862161805678Fax:+862161801188Website:www.baosteelmetal.com

Resource Development Steel Processing

A p p e n d i x

46

Shanghai Baosteel Industry Inspection

Corporation

ShanghaiBaosteelIndustryInspectionCorpora-

tion(BIC),theformerShanghaiBaosteelEquip-

ment Survey Company, was founded in 1994,

andisBaosteel’swholly-ownedsubsidiary.

ThebusinessscopeofBICmainlyincludes:pro-

viding professional inspection and equipment

diagnosis service with high-tech content and

value-added to modern industrial enterprises,

operational service backed up by professional

technology,andvalue-addedserviceforrelated

technologiesandequipmentandproducts.BIC

hasinternationallyadvancedinstrument,relative-

lycompleteprofessionalqualifications,aswellas

technologicallyadvanced laboratoryandstrong

R&Dcapability. Since itsestablishment,BIChas

made significant contributions to Baosteel in

termsofsteadyoptimizationfortheproduction

chain operation system, quality control system

and scientificmanagement system through ef-

fective application of inspection and diagnosis

technologies.

Address:No.335MeipuRoad,BaosanDistrict,Shanghai

Postalcode:201900Tel:+862156787471Fax:+862156787580

Shanghai Baosight Co., Ltd. (Baosight)

ShanghaiBaosightCo.,Ltd.(Baosight)isalisted

softwareenterprisewithBaosteelCo.,Ltd.Con-

trols as its biggest shareholder.The company

was founded inApril 2000, and was listed in

April2001,headquarteredatShanghaiPudong

ZhangjiangHigh-TechPark,witharegistercapital

ofRMB262millionYuan.

Baosightadherestotheoperationphilosophyof

“ITserviceisintendedtoimprovethevalueof

information”.With30-yearexperiencesinserv-

ingBaosteel,thecompanyiscapableofprovid-

ing: information solutions, automation system

integration and operation and maintenance

for steelmaking enterprises, city intelligent traf-

ficcomprehensivesolutionandcomprehensive

monitoring for road, bridge, channel and track

traffic,andtheelectro-mechanicalpackageprod-

uctandoperationandmaintenanceaswell. Its

productsandsolutionsarefoundinmanyindus-

triessuchasmetallurgy,traffic,equipmentmanu-

facturing(includingshipbuilding),miningindustry,

finance,coal-chemical,andpublicservice.

Inrecentyears,Baosighthasowned150patents,

143 registered software products, 261 regis-

tered software copyrights and 110 identified

technological secrets. It have undertakenmany

keytechnologicalandproductprojectssuchas

NDRChigh-techindustrializationdemonstration

project,863ProgramoftheMinistryofScience

and Technology and electronic development

fundprojectof theMinistryof Information In-

dustry.In2007and2008,Baosightwashonored

asoneofChinaTop10InnovationSoftwareEn-

terprisesbyChinaSoftwareIndustryAssociation

(CSIA)for2consecutiveyears.

Address:No.515GuoshoujingRoad,ZhangjiangHigh-TechPark,PudongDistrict,Shanghai

Postalcode:201203Tel:+862150800830Fax:+862150800701Website:www.baosight.com

Shanghai Baosteel Engineering & Equip-

ment Co., Ltd (BSEE)

Founded in1999,ShanghaiBaosteelEngineer-

ing&EquipmentCo., Ltd. (BSEE) is awholly-

ownedsubsidiaryofBaosteelGroupCorpora-

tion.

The company has national A-level qualifica-

tioninmetallurgicaldesign,architecturaldesign,

project consultation, consultation of project

costandprojectsupervision,andhasrightsto

undertakeoperationofforeign(overseas)proj-

ects. Ithandlesanextensivescopeofbusiness

ranging fromsteel industry tonon-ferrous in-

dustry,lightindustry,chemicalindustry,machin-

ery, transportation, energy and environment.

The company has 7 business departments

withpowerfulcapability in thedesignofmet-

allurgicalprocessandequipmentandadozen

ofsubsidiariesthatareabletoprovidethede-

signandmanufactureoftopclassmetallurgical

equipment,Thecompanyhasmorethan1000

full-timedesigners, andboastsof strong tech-

nologicalstrength.

Address:No.2510TieliRoad,BaoshanDistrict,Shanghai

Postalcode:201900Tel:+862166786678Fax:+862156604813Website:bsee.baosteel.com

Technology Services

47

Fortune Trust & Investment Co., Ltd

Founded in November 1994, Shanghai No.5

SteelWorksInternationalTradingCo.,Ltdisthe

predecessorofFortuneTrust&InvestmentCo.,

Ltd(FTIC).InMarch2007,BaosteelGroupac-

quiredits100%stakebymeansofequitytrans-

fer,andchangeditsnameinto“FortuneTrust&

InvestmentCo.,Ltd”.

FortuneTrust& InvestmentCo., Ltd ismainly

responsibleforoptimizingtheexistingfinancial

resources of Baosteel, improving the value of

equity,andcarryingonequityinvestmentbusi-

ness by using the advantages of Baosteel in

fund,scale,andsynergyofupstreamanddown-

streamresources.

Thebusinessscopeofthecompanyincludesin-

vestmentinmetallurgyandrelevantindustries,

investmentmanagement, investment consulta-

tion, and business consultation. Its business is

mainlyorientedfor :seekinginvestmentoppor-

tunities in thefinancial industry; using itsown

funds to make long-term equity investment

in the financial industry, upstream and down-

stream steel industries, new energy, etc;mak-

ingmid-termstrategic investment forPre-IPO

andprivateplacementandnewshareplacingof

listedcompanies;performingcashmanagement

for itsownfundsbymeansofsubscriptionof

newshares,repurchaseoftreasurybonds,and

bankdeposit;andactivelycarryingonequityin-

vestmentbusiness.thecurrencymarketwitha

riskslightly lowerthanthecapitalmarket,and

tries its best to become a new type finance

investmentconglomeratewithstrongcompeti-

tivenessinChina’sfinancemarket.

Address:7/F,PuDianRoad370,PudongNewDistrict,Shanghai

Postalcode:200122Tel:+862138506666Fax:+862168403999Website:www.huabaotrust.com

Baosteel Development Co., Ltd

BaosteelDevelopmentCo.,Ltd(BaosteelDe-

velopment)isoneofBaosteel’swholly-funded

subsidiaries, with Baosteel Group Enterprise

Development Corporation as its predeces-

sor. In October 2007, Baosteel Development

Co.,LtdwasfoundedbyreorganizingBaosteel

Group Enterprise Development Corporation,

andwasputintoformaloperationonJanuary

1,2008.

Ithassetupthreedivisions,i.e.IndustrialProp-

ertyBusinessUnit,FactoryOperationBusiness

Unit,ResourceRecyclingBusinessUnit,and22

tier-1businessunits.Itsbusinessscopeincludes:

Disposingwastes generated from steelmaking

processes in a harmless way; comprehensive

utilizationof resources;manufactureand sales

of new-type building materials, magnetic ma-

terials,andSlagPowder;productiveoperation

outsourcing; equipment and facility mainte-

nanceandrepair ;steelproductpacking;manu-

facture of packagematerials;meal and bever-

agesupply;propertymanagement;commuting

bus;landscapeandgreeningmaintenance;road

cleaning;warehousing; logistics; steel trade;die

steel processing; distribution; further process-

ing of steel; automotive repair ; environmental

protection,medical care; physical examination

foremployees;hotelmanagement;tourismand

laborprotectionservices.

Address:No.889,BaoyangRoad,BaoshanDistrict.Shanghai

Postalcode:201900Tel:+862156125101Fax:+862156122654

Baosteel Group Shanghai No.1 Iron & Steel

Co., Ltd

BaosteelGroupShanghaiNo.1Iron&SteelCo.,Ltd

isawholly-ownedsubsidiaryofBaosteel.InMay2005,

itscoresteelbusinesswasincorporatedintoBaosteel

Group.Thesecondarylinesofbusinessandcorebusi-

nesswereseparatedsuccessfully,andwoulddevelop

together.

The business scope of the company is mainly in-

tendedforthestainlesssteelbusinessunit.Currently

ithas6segments:(1)Furnacemaintenancebusiness:

forbuildingandmaintenanceofindustrialfurnacesof

thestainlesssteelbusinessunit,including150Tcarbon

steelconverter,100Telectricalfurnace,120Tstainless

steelconverter,ladle,refiningladleand260Ttorpedo

tankcar;(2)Productionsupportingbusiness:forsup-

portingservicesforproduction,includingsteelpacking,

travelingcrane,loadingofrawmaterials,slagfield,de-

phosphorization anddesulphurization, pumphouse,

wastewatertreatment,preservationandmaintenance

forpipelines,aswellasrefrigerationandfirewarning;

(3)Transportationbusiness: fortransportation, load-

ingandunloadingof rawandauxiliarymaterials, in

–processproductsandfinishedproducts;(4)Com-

prehensiveutilizationofresources: includingdisposal

ofcarbonsteelslagandstainlesssteelslag,scrapsteel

processing, processing of Ni-containing waste and

sales of rejectedmaterials andwastes; (5) Logistics

services:includingdinning,greening,propertymanage-

ment,sanitationwork,buscommutation,andhealth

care;and(6)processingandmanufacturingbusiness:

mainly includingmudmilling, theprocessingofdust

settlingpocketandpackingmaterialsandtheproduc-

tionofmilitarybulbsteel.

Thecompanyhassetupanintegratedmanagement

system of “quality, environment and occupational

health and safety” according toGB/T 19001-2000,

GB/T24001-2004andGB/T28001-2001,hopingto

obtaincontinuoussatisfactionofcustomers,employ-

ees,andthesociety.

Address:No.868,ChangjiangRoad,BaoshanDistrict,Shanghai

Postalcode:200431Tel:+862156825810Fax:+862126033237

Finance Production Services

A p p e n d i x

48

Baosteel Group Shanghai Meishan Co.,

Ltd.

Baosteel Group Shanghai Meishan Co., Ltd

(BaosteelMeishan) is awholly-owned subsid-

iary of Baosteel group. In 2005, it started to

operateindependently,beingcompletelysepa-

ratedfromthemainbusinessofsteel.

The business scope of Baosteel Meishan in-

clude:Mining;oredressing;metallurgy,smelting,

rolling and processing of ferrous metal; lifting

machinery installationandmaintenanceof lift-

ing machinery, production and transport of

slagandchemicalproducts(excludinghazard-

ous substances); comprehensive utilization of

resources,collaborativeservicesforsteel.Cur-

rentlyithasmorethan10professionalqualifica-

tioncertificates,including:Level-Aqualification

ofShanghaiCityonClass IandIII0equipment

maintenanceandlevel-AlicenseofthePeople’s

RepublicofChinaonspecialequipmentinstalla-

tionandmaintenance.Inaddition,thecompany

has4keyrepairingtechnologies,i.e.:submerged

arcoverlaywelding,OpenArcOverlayWeld-

ing,Oxygen-acetylenesprayweldingand laser

remelting and 13 overlay welding lines inde-

pendentlydesignedandinstalled.Itiscapableof

testing andmonitoring thewhole production

processofrawmaterialsandsteelproducts.

Address:NewlybuiltoutsideZhonghuamen,NanjingCity,JiangsuProvince

Postalcode:210039Tel:+862586363055Fax:+862586363099Website:www.bsmeishan.com

Baosteel Group Shanghai No.5 Iron & Steel

Co., Ltd

WithShanghaiNo.5Steelworks,whichwasfound-

ed in 1958, as its predecessor, Baosteel Group

ShanghaiNo.5Iron&SteelCo.,Ltdisalargestate-

owned enterprise specializing in development,

productionand salesof special steelproduction.

It joinedBaosteelGroup inNovember1998. In

May2005,thesteelbusinessofthecompanywas

acquiredbyBaosteelGroup,andthecompanybe-

cameawholly-ownedsubsidiaryofBaosteel,with

aregisteredcapitalofRMB781million.

Thebusinessscopeofthecompanyincludespro-

ductionservices, logisticsandwarehousing, scrap

steelprocessingandlivingservices.Whilesparing

noefforts to support thedevelopmentof steel

business, the company strives tomake it bigger

andstronger.In2008,thecompanybuilt2mod-

ernindoorwarehouses,withatotalfloorareaof

50,000m2, andanoutdooryardwithanareaof

80,000m2.Itssubsidiary-BaosteelGroupShanghai

No.5 Iron&SteelLogisticsCo.,Ltd-has195ve-

hicles, an inland terminaldepotwith a lengthof

155m,13railwaylineswithatotallengthofdedi-

catedrailway lineof6kilometers,and2 internal

combustionlocomotives.Currently,ithasbecome

the transaction warehouse designated for na-

tionalsteelfutures(ferrousmetal).BaosteelGroup

ShanghaiNo.5 Iron&SteelCo.,Ltd(including its

subsidiariesandentrustedcompanies)has3773

serviceandmanagementstaffforproductionand

logistics.Thequalityofemployeeshasbeenover-

allimprovedthrough,forexample,competitionin

jobskills.Thecompanyhas1.04millionm2stock

landand450,000m2stockhousestodevelopand

utilize. In addition, themetal products, and steel

productsforbridgecablesentrustedbyBaosteel

GroupShanghaiNo.2Iron&SteelCo.,Ltdtothis

company are also leading in the same industry,

andwinpraises.BaosteelGroupShanghaiNo.10

Iron&SteelCo.,Ltd,subordinatetothiscompany

makes most use of the existing resources, and

sparesnoefforttobuildthenewinnovativeindus-

tryclusterarea,andachievesbusinessrevenueof

morethanRMB75million.

Address:No.303,TongjiRoad,BaoshanDistrict,Shanghai

Postalcode:200940Tel:+862126032130Fax:+862156671316

Baosteel Group Shanghai Pudong Iron &

Steel Co. Ltd

BaosteelGroupShanghaiPudongIron&Steel

Co.Ltd(formerlyShanghaiNo.3SteelWorks)

wasfirst founded inMarch1913,andwasre-

constructedintoShanghaiPudongIron&Steel

(Group) Co., Ltd inMay 1996. InNovember

1988,afterthegreatallianceofsteelenterprises

inShanghai, it joinedBaosteelGroup,andbe-

cameawholly-fundedsubsidiaryofthelatter.

In order tomeet the requirements ofWorld

Expoandtheurbanconstructionanddevelop-

mentofShanghai,PudongIron&SteelCo.Ltd

made theplan tomove its factory toLuojing

according to the overall plan of Shanghai ur-

banconstructionandthestrategicorientation

ofBaosteelGroup.InOctober2007,thePhase

1projectwascompletedandput intoopera-

tion.OnApril1,2008,LuojingassetsofPudong

Iron&SteelCo.LtdwasacquiredbyBaosteel

Group,andBaosteelHeavyPlateMillwas set

up.Thesecondarylinesofbusinessandrelevant

functionaldepartmentsoftheoriginalPudong

Iron&SteelCo.Ltdwerereorganizedintothe

existingBaosteelGroupShanghaiPudongIron

&SteelCo.Ltd.

The business scope of the company mainly

includes production supporting services and

logistics services. In particular, it includes: sup-

porting services for the production areas for

ironmaking, steelmaking, steel rolling and en-

ergy;supportingservices inwarehousing,trav-

elingcrane,invoiceissuingandcertificatemak-

ing,weighting,fuelfilling,sampleprocessing,fire

fightingandairconditioning,municipalmainte-

nance,wasteutilization;logisticsservicessuchas

dinning,propertymanagementandbuses;and

salesofwastes.

Address:No.777,BeichuanRoad,BaoshanDistrict,Shanghai

Postalcode:200949Tel:+862126098983Fax:+862168879116

49

ThankyouforreadingthisBaosteelSocialResponsibilityReport2008.Baosteelisgreatlyconcernedaboutyourcommentsand

opinions,sothatwecanimprovethereportaccordingly.

Pleasefaxtheformto+86-21-68403773afterfillingthequestionnaire.

Or,pleasemailitto:PublicRelationsDepartment,BaosteelTower1101,PuDianRoad370,PudongNewDistrict,Shanghai

1.Haveyoufoundalltheinformationyouneedinthisreport?

2.YourcommentsandopinionstothisReport:

YourpersonalInformation:

Name:

Occupation:

E-mail:

Phone:

Reader’s Feedback Information Form

50

Corporate Communication Department, Baosteel Tower 1101, Pu Dian Road 370,Pudong New District, Shanghai

2 0 0 1 2 2ForStamp

Followthefoldline(2)

Followthefoldline(1)

Thisreportisreleasedafterseekingopinionsfromstakeholdersthroughmanyways

includingtheinternal4Dsystem,thewebsiteforcustomersatisfactionsurveyandthe

companywebsite.Stakeholdersallrespondpositivelytothisreport.However,dueto

thelimitoftime,wehaveyetnotcollectedenoughopinionsfromstakeholderswhen

thereportisprinted.Youropinionsarewelcomed,sothatwecanimprovethisreport

accordingly.Hereissomefeedbackformourstakeholders:

This is the first social responsibility report of Baosteel Group, which is a good be-

ginning. The report discloses key responsibility practices desired by stakeholders in

an all-around, objective and timely way. This report provides full and accurate data,

with good format and clear structure. The column “Highlights of the Year” is well

designed, and helps readers to fully know the social responsibility work of Bao-

steel…It is preferable if each section is properly distinguished according the logics

of target, institutions, measures, performance and typical cases.

——Zhong Hongwu, director of the corporate social responsibility research center

of the Chinese Academy of Social Sciences

With this report, we can fully and systematically understand the efforts and achieve-

ments made by Baosteel Group in terms of social responsibility. We are pound to

have such a partner!

——Liu Li, deputy general manager of Guangdong Galanz

This report fully and clearly shows the efforts and achievements made by Baosteel

in performing social responsibilities, greatly promotes the setup of a good corpo-

rate image of Baosteel. Meanwhile, Baosteel incorporates the ideas of “performing

social responsibilities “into its management practice, which meets the requirements

of scientific outlook on development on sustainable development.

——Hong Zengli, Director of the head office of procurement of Dongfeng Com-

mercial Vehicle Company

Baosteel not only considers social responsibility as an obligation of the enterprise,

but also considers it as a big opportunity for the development of the company. It

shows that Baosteel aims at both the economic benefits of the enterprise and social

benefits, and sets up an example in improving the comprehensive competitiveness

of the steel industry. This report enables us to fully know the efforts Baosteel makes

to fulfill social responsibilities, and is worth reading.

——Shao Zhimin, director of the Office of General Manager of Shanghai Heavy

Machinery Plant Co., Ltd

It is suggested that Baosteel make a statistic on the proportion of employees from

minorities, overseas returnees, female employees and the disabled accounting for

the total number of its employees, so as to show the harmony of all nationalities,

and diversification of the enterprise. This is paid increasing attention in advanced

enterprises in other countries, and is considered as a symbol of being liberal, open,

humanistic and people-oriented. It is also suggested to add more information on

the establishment of Baosteel driving the development of Baoshan community, For

example, comparing old and new photos and various data. In addition, the informa-

tion on Baosteel directly participating in the “development of the West Regions”

should also be added, such as acquiring Bayi Iron & Steel Co., Ltd, and establishing

Chengdu Baosteel Can Making Co., Ltd and Chongqing cutting center.

——Jia Yanlin, General Manager of Baosteel Metals

ThisReportwastranslatedbyChinaTransla-

tionandPublishingCorporation,Translation

andInterpretationProjectSponsorofEXPO

2010ShanghaiChina

Baosteel Group CorporationBaosteel Tower, Pu Dian Road 370,

Pudong New District, Shanghai

Tel: 021-5835 0000 / 5835 8888

Fax: 021-68404832

Postal Code: 200122

http://www.baosteel.com