Baoshan Iron & Steel Co., Ltd.

As prescribed in the 5th provision of Article 3 of "INDIVIDUAL INCOME TAX LAW OF THE PEOPLE'S REPUBLIC OF CHINA": For incomes from royalties, interests, dividends and extra dividends,leasing property, transfer of property, chance income and other incomes, a proportional tax rate of 20% shall be applied. And the 6th provision of Article 6 prescribes: Incomes from interests, dividends and extra dividends shall be taxed at the full amount of each payment.. The LAW became effective on 1 January 2006

As prescribed in "The Ministry of Finance and the State Administration of Taxation Notice on the Policies Relating to the Individual Income Tax on Dividends and Bonuses" which took effect on 13 June, 2005: The individual income taxes on the incomes of individual investors from the dividends and bonuses of listed companies shall be levied in accordance with the current tax laws after temporarily deducting 50% of individual taxable incomes.

Rapid economic growth, industrialization and urbanization in China bring tremendous development opportunities for Chinese steel players, however, the industry is at its cyclical valley; the market becomes more and more oversupplied. Dropping steel price and soaring raw material cost squeeze the profit margin of steel companies. Domestic players are accelerating expansion, and overseas players are about to penetrate through acquisition, which all factor in tighter competition. Chinese steel industry is confronting challenges one after another.

Under the instruction of "Steel Industry Policy", Chinese steel industry is to eliminate obsolete facility, optimize structure and boost recycle economy.

In such a context, Baosteel emphasizes not only capacity expansion, but also competency enhancement driven by independent innovation. On one hand the company accelerates development, on the other hand, it eliminates leg-behind facility, reduces energy consumption, develops recycle economy. Baosteel will take initiative to address challenges, so as to obtain its strategic target.

As the primary steel assets of Baosteel Group have been acquired by Baoshan Iron & Steel Co., Ltd (the public company), Baosteel became the major entity of Baosteel Group to operate steel business. Aiming at becoming the most competitive iron & steel enterprise in the world, Baosteel is fully engaged in steel operation from planning, production, purchasing, to R&D, sales and marketing, and other related businesses.

Baosteel Group strategically aims to be extremely competitive in core business steel business, and properly diversified into related businesses. The role of the Group is to set up overall strategic development plan; build up industrial synergy framework, manipulate resources at group level, promote coordinated development among subsidiaries, back up the expansion and optimization of steel business.

Baosteel Group has already installed a BOD with more than half of the members from outside the Group. Through the BOD, Baosteel Group exercises the right as the state shareholder of Baosteel, ensuring Baosteel to operate independently and conform to regulations. Based on strategic development plan, and the principle of maximizing enterprise value, preserving and increasing the value of state-owned assets, the Group also helps to promote Baosteel`s cooperation with strategic investors and consolidation with domestic peers; and prepare premium resources for Baosteel to consolidate. Baosteel Group and Baosteel are complementary and supplementary to each other for common development.

The company will realize leap-forward development on the basis of production scale and technology. Focusing on high-end market, the company will grow through internal expansion as well as M&A, aiming at 30 million tons in terms of production capacity by 2010, developing core proprietary intellectual property right, highly secured and efficient supply chain, reliable customer base. The company shall also obtain ISO14000 environment certification, becoming a comprehensively competitive and highly respected company of world class.

Expect for the trading and transfer of those shares bought by Baosteel Group for stake increase after the reform of non-tradable shares, all the shares of Baosteel owned by Baosteel Group, once become tradable, shall:

• Not be traded or transferred within 12 months
• Not be traded within 24 months since the date of becoming tradable
• Within 12 months after the above-mentioned 24 months expired, the Group shall not sell more than 5% shares of Baosteel though stock exchange, and the transaction price shall not be lower than RMB 5.63.
• Within 3 years after the share held by Baosteel Group become tradable, the share holding by Baosteel Group shall not be lower than 67% of the current total share of Baosteel

Baosteel advocates: sustainable development; energy saving; clean production; recycle economy, building Baosteel into an environment-friendly and eco-friendly enterprise, which develops in harmony with the metropolitan.

The company set up Management Committee for environment protection and resources application as the top decision-making body to draw up guidelines for environment protection and resources application, work on the related strategic plan, co-ordinate resources distribution among subsidiaries and branches, make decision on major environment and resources projects.

Baosteel is the first A-share company to issue Environment Report for two consecutive years to disclose information related to environment protection investment, environment management, and pollution exhaustion and monitoring. By constant improvement of environment management, Baosteel won the title of "National Environmental Friendly Enterprise" in May 2005.

The communication channel between investors and the company can be multiple and multi-level, which including but not limited to:

• By telephone or fax:
  Investor Hot Line: +86 21 2664 7000 or Fax: +86 21 2664 6999
• By research visit or site tour, you may contact BOD Office to make an appointment;
• By online road shows of operating results usually after release of a report, you may refer to Company Announcement for further information;
• By IR pages on the website: www.baosteel.com
• By email to: ir@baosteel.com
• By asking for printed materials, the company provides Annual Report, Fact Book, Company Brochure either in Chinese or English, you may contact BOD Office to get a copy
• By attending Annual General Meetings