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1CSC STEEL HOLDINGS BERHAD (640357-X)

ANNUAL REPORT 2012

CONTENTS

Corporate Information Group Structure Vision and Mission StatementsFinancial Highlights of the Past Five YearsProfi le of DirectorsStatement from the Group Managing DirectorCorporate Governance StatementsStatement On Risk Management and Internal ControlAudit Committee ReportStatement of the Directors’ Responsibilities in Relation to the Financial Statements

Report of the DirectorsIndependent Auditors’ ReportStatements of Comprehensive Income Statements of Financial Position Statements of Changes in Equity Statements of Cash FlowsNotes to Financial Statements Statement by Directors Declaration

Analysis of ShareholdingsList of PropertiesNotice of Ninth Annual General MeetingStatement Accompanying Notice of Annual General MeetingProxy Form

23456

1014293236

374244454748508888

89929399

Enclosed

2 CSC STEEL HOLDINGS BERHAD (640357-X)

ANNUAL REPORT 2012

AUDITORSDeloitte & Touche (Audit Firm No. 0834)Level 19 Uptown 1, No. 1 Jalan SS21/58Damansara Uptown, 47400 Petaling JayaSelangor

SOLICITORS Messrs. Koh Kim Leng & Co.No. 5-1 Lorong Hang Jebat 75200 Melaka

PRINCIPAL BANKERSMalayan Banking BerhadHong Leong Bank BerhadRHB Bank Berhad

STOCK EXCHANGE LISTINGMain Market – Industrial ProductsBursa Malaysia Securities Berhad

Stock Name : CSCSTELStock Code : 5094

AUDIT COMMITTEENOMINATING COMMITTEEPang Fee Yoon (Chairman)Chong Khim Leong @ Chong Kim LeongBrig. Gen. (R) Dato’ Mohd Zaaba @ Nik Zaaba Bin Nik Daud

COMPANY SECRETARIESTan Bee Hwee (MAICSA 7021024)Lam Sook Ching (MAICSA 7006942)

REGISTRARTricor Investor Services Sdn Bhd (118401-V)Level 17 The Gardens North Tower Mid Valley City, Lingkaran Syed Putra59200 Kuala LumpurTel : (6) 03 – 2264 3883Fax : (6) 03 - 2282 1886

BUSINESS ADDRESS180 Kawasan Industri Ayer KerohAyer Keroh, 75450 MelakaTel : (6) 06 – 231 0169Fax : (6) 06 – 231 0167

REGISTERED OFFICENo. 49-B Jalan Melaka Raya 8Taman Melaka Raya, 75000 MelakaTel : (6) 06 – 281 5300Fax : (6) 06 – 281 5332

CORPORATE INFORMATION

Executive DirectorTan Chin Teng

Independent Non-Executive DirectorsPang Fee YoonChong Khim Leong @ Chong Kim Leong

BOARD OF DIRECTORS

Group Managing DirectorChen, High-Pinn

Non-Independent Non-Executive DirectorsLiu, Jih-GangNee, Lung-YuanBrig. Gen. (R) Dato’ Mohd Zaaba @ Nik Zaaba Bin Nik Daud

www.cscmalaysia.comCORPORATE WEBSITE / INVESTOR RELATIONS

3CSC Steel HoldingS BerHad (640357-X)

annual report 2012

groUP StrUCtUre

CSC Steel HoldingS BerHad (“CHB”)(640357-X)

the structure of the CHB Group is set out below:

CHB is an investment holding company providing management services to its subsidiaries.

the principal activities of its subsidiaries are as follows:

CSCM Manufacturing and marketing of pickled and oiled steel, cold rolled steel, hot

dipped galvanised steel commonly known as GI and prepainted galvanised

steel commonly known as ppGI or colour coated steel.

CSC Bio-Coal undertaking the setting up of a pilot bio-coal plant with the purpose of

producing bio-coal from bio-mass using the torrefaction process.

CMSB Investment holding.

group Steel Dormant.

tgSC a service center for steel products.

Wholly-owned subsidiaries of CHB

● CSC Steel Sdn. Bhd. (228899-p) (“CSCM”)

● Group Steel Corporation (M) Sdn. Bhd. (327738-p) (“Group Steel”)

● CSC Bio-Coal Sdn. Bhd. (272448-p) (“CSC Bio-Coal”)

Wholly-owned subsidiary of CSCM

● Constant Mode Sdn. Bhd. (922516-W) (“CMSB”)

Company in which CHB has a 20% equity interest

● tatt Giap Steel Centre Sdn. Bhd. (310962-X) (“tGSC”)


ANNUAL REPORT 2012

To continuously improve quality and

productivity.

To constantly develop high value-

added products and environmental-

friendly products.

To continually pursue excellence in

quality and service exceeding customers’

expectations.

To fulfil commitments to corporate

social responsibility.

Mission

Vision

VISION AND MISSION STATEMENTS

To be a trustworthy and one of the best

fl at steel manufacturers in South East

Asia


ANNUAL REPORT 2012

FINANCIAL HIGHLIGHTS OF THE PAST FIVE YEARS

2008 2009 2010 2011 2012

REVENUE

1,12

7

1,37

3

1,03

5

870

1,20

6

(RM’ million)

EBITDA

69

92

127

149

71

7.51

15.6

6 18.5

4

24.4

2

7.9228

59

69

91

30

78.5

13

20

7

2.07

1.85 2.

12

2.09

2.07

2008 2009 2010 2011 2012

(RM’ million)

(RM’ million) (sen/share)

(RM/share) (sen/share)

2008 2009 2010 2011 2012 2008 2009 2010 2011 2012

2008 2009 2010 2011 2012 2008 2009 2010 2011 2012

PROFIT AFTER TAX

NET ASSETS PER SHARE

EARNINGS PER SHARE

DIVIDEND


ANNUAL REPORT 2012

Chen, High-Pinn was appointed to the CHB Board on 1 November 2012 as the Group Managing Director. He graduated from the National Tsing-Hua University, Taiwan with a Degree in Bachelor of Science.

Mr. Chen has over thirty (30) years’ experience in the steel manufacturing industry. He has been employed with China Steel Corporation, Taiwan (“CSC”) since 1978 and has served at various senior positions at CSC and its subsidiary companies. His last position prior to his appointment to the Board of CHB was General Superintendent at the Rolling Mill Department of CSC.

Mr. Chen, High-Pinn attended the last of the four (4) Board meetings that was held following his appointment to the Board of CHB during the fi nancial year ended 31 December 2012.

Training attended by Mr. Chen during the fi nancial year is as follows:-

“Mandatory Accreditation Programme for Directors of Public Listed Companies” conducted by Bursatra Sdn. Bhd.

Liu, Jih-Gang was appointed to the CHB Board on 1 April 2011 as a Non-Independent Non-Executive Director. He graduated from the National Taiwan University with a Bachelor’s Degree in Engineering.

Mr. Liu has over thirty-fi ve (35) years’ experience in the steel manufacturing industry. He has been employed with CSC since 1977 and has served at various senior positions at CSC and one of its subsidiary companies. He is presently the Vice President of Commercial Division at CSC.

Mr. Liu, Jih-Gang clocked full attendance at all four (4) of the Board meetings held during the fi nancial year ended 31 December 2012.

Trainings attended by Mr. Liu during the fi nancial year are as follows:-

“Directors and Auditors Practice and Enterprise Risk Management: Theory and Practice” conducted by Securities & Futures Institute of Taiwan.

“Functioning of Independent Directors and Practice of Audit Committee Operation” conducted by Taiwan Corporate Governance Association.

PROFILE OF DIRECTORS

CHEN, HIGH-PINN Group Managing Director(Taiwanese) Age 60

LIU, JIH-GANG Non-Independent Non-Executive Director(Taiwanese) Age 60


ANNUAL REPORT 2012

Nee, Lung-Yuan was appointed to the CHB Board on 5 July 2010 as a Non-Independent Non-Executive Director. He graduated from the College of Asian Languages of Chinese Cultural University, Taiwan majoring in Oriental Language and Literature.

Mr. Nee has been employed with CSC since 1978 and has served at various senior positions at CSC and at its group of subsidiary companies. He is presently the President of China Steel Global Trading Corporation.

Mr. Nee, Lung-Yuan clocked full attendance at all four (4) of the Board meetings held during the fi nancial year ended 31 December 2012.

Training attended by Mr. Nee during the fi nancial year is as follows:-

“2012 Insider Dealing: Law and Regulations” conducted by Securities & Futures Institute of Taiwan.

Tan Chin Teng was appointed to the CHB Board on 5 October 2004 as an Executive Director. He holds a Master of Business Administration from the Cambridge Management Institute, United Kingdom.

Mr. Tan has more than twenty-fi ve (25) years of fi nancial and accounting experience of which more than twenty (20) years were in a managerial capacity overseeing to fi nancial matters.

Mr. Tan Chin Teng clocked full attendance at all four (4) of the Board and Audit Committee meetings held during the fi nancial year ended 31 December 2012.

Trainings attended by Mr. Tan during the fi nancial year are as follows:-

“Making the Most of the CFO Role: Everyone’s Responsibility?” organised by ICAEW.

“Disclosure for CEOs and CFOs” conducted by Bursa Malaysia Berhad.

“Deloitte TaxMax - Step Up, Go for the Difference” conducted by Deloitte Tax Academy.

“The Pricing Strategy Forum” conducted by Simon-Kucher & Partners.

PROFILE OF DIRECTORS (CONT’D)

NEE, LUNG-YUAN Non-Independent Non-Executive Director(Taiwanese) Age 64

TAN CHIN TENG Executive Director(Malaysian) Age 54


ANNUAL REPORT 2012


Chong Kim Leong was appointed to the CHB Board on 5 October 2004 as an Independent Non-Executive Director. He is also a member of CHB’s Audit Committee and Nominating Committee.

Mr. Chong holds a Degree of Master of Laws from Dalhousie University, Canada and a Degree of Utter Barrister from Lincoln’s Inn, London. He was called to the Bar of England & Wales in 1978 and to the Malaysian Bar in 1980.

He has been in practice as an advocate and solicitor for over thirty (30) years and is presently the Managing Partner of Koh Kim Leng & Co., Advocates & Solicitors.

Mr. Chong Kim Leong clocked full attendance at all four (4) of the Board and Audit Committee meetings held during the fi nancial year ended 31 December 2012.

Training attended by Mr. Chong during the fi nancial year is as follows:-

“The 3rd Annual Subtropical Green Building Alliance Conference” conducted by The Malaysia Green Building Confederation (MGBC).

CHONG KHIM LEONG @ CHONG KIM LEONG Independent Non-Executive Director Member of Audit Committee andNominating Committee(Malaysian) Age 56

Pang Fee Yoon was appointed to the CHB Board on 5 October 2004 as an Independent Non-Executive Director. He is the Chairman of CHB’s Audit Committee and the Nominating Committee.

Mr. Pang is a member of the Malaysian Institute of Certifi ed Public Accountants (“MICPA”), Malaysian Institute of Accountants (“MIA”), Chartered Tax Institute of Malaysia (“CTIM”), Financial Planning Association of Malaysia, CPA Australia and the Institute for Internal Controls of America.

He has over twenty (20) years’ experience in public accounting practice and is presently the principal partner of McDonald Carter (formerly known as Merssrs. Pang Fee Yoon & Co.), an accounting practice established in 1994 which is internationally affi liated with Inpact International. He is currently Director of Inpact International, Asia Pacifi c region.

Mr. Pang Fee Yoon clocked full attendance at all four (4) of the Board and Audit Committee meetings held during the fi nancial year ended 31 December 2012.

Trainings attended by Mr. Pang during the fi nancial year are as follows:-

“National Tax Seminar 2012” conducted by Lembaga Hasil Dalam Negeri Malaysia.

“Budget 2013 – Highlights on Tax Changes and Its Implication on Business” conducted by Malaysian Institute of Accountants.

“2013 Budget Seminar – Highlights & Implications” conducted by Chartered Tax Institute of Malaysia.

“2012 Inpact World Conference, Berlin” – conducted by Inpact.

“Continuing Professional Development Seminar” organised by Institute of Approved Company Secretaries.

PANG FEE YOONIndependent Non-Executive Director, Chairman of Audit Committee andNominating Committee(Malaysian) Age 48


ANNUAL REPORT 2012

Notes:

1. Directorship in Public Companies. Save as disclosed above, none of the Directors hold any directorship in any other public companies incorporated in Malaysia or companies which are subsidiaries of public companies incorporated in Malaysia.

2. Family Relationship None of the Directors are related to each other nor has any family relationship with the major shareholders of the Company.

3. Directors’ Shareholdings Details of Directors’ shareholdings in the Company can be found in the “Analysis of Shareholdings” section on page 91 of this Annual Report.

4. Non-Conviction of Offences None of the Directors has been convicted of any offences (traf c offences not included) within the past ten (10) years.

5. No Con ict of Interest None of the Directors has any con ict of interest with the Company.


Brig. Gen. (R) Dato’ Nik Zaaba Bin Nik Daud was appointed to the CHB Board on 23 August 2006 as a Non-Independent Non-Executive Director. He is also a member of CHB’s Audit Committee and Nominating Committee.

Dato’ Nik graduated from Universiti Kebangsaan Malaysia, Malaysia with a degree in Strategic and Defence Security Studies.

He was with the Malaysian Armed Forces for thirty-seven (37) years and senior posts held by him prior to his retirement from the Armed Forces in May 2004 were the 1st Infantry Brigade Commander, Armed Forces Provost Marshall and Army Inspector General with the rank of Brigadier General. Dato’ Nik Zaaba is presently a member of the Malaysian Armed Forces Veteran Trust Fund Committee which is under the purview of the Ministry of Defense with the objective of looking after the welfare of the veterans and their families.

Brig. Gen. (R) Dato’ Nik Zaaba Bin Nik Daud attended three (3) of the four (4) Board and Audit Committee meetings held during the fi nancial year ended 31 December 2012.

Trainings attended by Dato’ Nik during the fi nancial year are as follows:-

“The Case for Diversity in the Board Room” conducted by ACA and Bursa Malaysia Berhad (“Bursa”).

“Corporate Governance Blueprint and Malaysian Code of Corporate Governance” organised by Bursa.

BRIG. GEN. (R) DATO’ MOHD ZAABA @ NIK ZAABA BIN NIK DAUDNon-Independent Non-Executive DirectorMember of Audit Committee andNominating Committee(Malaysian) Age 65


ANNUAL REPORT 2012

STATEMENT FROM THE GROUP MANAGING DIRECTOR

As Group Managing Director of the CHB

Group of Companies and on behalf of the

CHB Board of Directors (the “Board”),

I am pleased to present to you the

Annual Report and the audited Financial

Statements of the Group for the financial

year ended 31 December 2012.

BOARD CHANGES

I and my fellow board members wish to express our deep gratitude and appreciation to Mr. Liang, Hsiu-Chang, the immediate past Group Managing Director who resigned from the Company on 1 November 2012 to return to our parent company, China Steel Corporation in Taiwan (“CSC”), for his invaluable contribution and efforts to the Group. That was the same day I came onboard CHB as its Group Managing Director to assume and take over the responsibilities of Mr. Liang, Hsiu-Chang.

OVERVIEW OF THE GROUP’S BUSINESS AND OPERATIONS

The Group’s business remained resilient for the year 2012, thanks to the relatively stable demand from the domestic market. The Group’s export market however, had declined due to stiff competition from China, Korea, Japan, particularly in the Southeast Asia region.

Going forward, we expect to face more trade remedies such as “anti-dumping” and “safeguard” to be imposed against unfair competition in the region. Currently the most active countries employing trade remedies are Indonesia and Thailand. The Group will be taking all necessary steps to minimise the impact on the Group, if at all, whilst also seizing opportunities arising from these trade remedies.

In response to the rapid changes in the steel market, both domestically and internationally, the Group has undertaken various initiatives to improve its performance. These include enhancing existing product quality and new products development with the support from CSC, our parent company, and our key chemical suppliers. The Group is committed to supplying better grade materials to support the value chain of Malaysia steel industry.

Apart from strengthening its competitiveness, the Group has moved one step further in entrenching customer relationship by embarking on strategic alliances with our customers to forge stronger working relationship, aiming to better cater to the needs of downstream industries.


ANNUAL REPORT 2012

FINANCIAL REVIEW

The Group’s fi nancial performance for the year had declined marginally from the previous fi nancial year 31 December 2011. Overall revenue reduced by about 7% to RM1.127 billion due to lower selling prices of the Group’s steel products.

Generally, prices of our steel products had trended downwards in the third and the fourth quarters of 2012 despite having enjoyed a brief surge in prices in the second quarter of 2012. However, profi t before tax registered a smaller decline of about 3% to RM37.5 million. In tandem with the above results, the Group’s basic earnings per share was lower at 7.52 sen against 7.92 sen in FY2011.

Capital expenditure was RM39.1 million of which RM28.9 million went towards the upgrading of plant and equipment in our cold rolling and strip coating mills with the aim of improving steel products quality and enhancing production effi ciency. The balance RM10.2 million was invested in the pilot bio-coal plant. This is our very fi rst venture into renewable energy. The plant uses the abundant supply of palm fi bre, a waste product of palm oil mills, to produce bio-coal (charcoal) using the torrefaction process.

INITIATIVES AND STRATEGIES

Various initiatives have been undertaken to improve the Group’s market share and profi tability including enhancing existing products and introducing more new products through R&D activities by both the Company and our parent company in Taiwan as well as making better grade materials to move up the higher margin value chain. The Group is also keenly pursuing product differentiation by continuously innovating and evolving along with the changing market trends to maintain its competitive edge.

Strategies to entrench customer relationship include working closely with customers to tailor make products specifi c to their requirements and embarking on strategic alliances with local downstream players to forge stronger working relationship with its customers.

In this regard, the Group had completed the share sale and purchase agreement with Tatt Giap Group Berhad (“TGG”), to purchase 20% equity of TGG’s wholly owned subsidiary, Tatt Giap Steel Centre Sdn. Bhd. (“TGSC”). TGSC is a signifi cant customer of the Group and I believe with such a partnership, the business co-operation between the two companies could be further strengthened and enhanced thereby benefi ting both companies in the long run.

PROSPECTS AND OUTLOOK FOR THE FINANCIAL YEAR 2013

The global steel demand sentiment rose again in the fi rst quarter of 2013 and steel price recovered at the same time which may help the Group’s earnings in the fi rst half year.

Concerning the outlook for the second half year, it will still be infl uenced by key issues such as raw material prices of iron ore and coal, the euro zone debt crisis, and especially the oversupply of steel in China.


ANNUAL REPORT 2012

STATEMENT FROM THE GROUP MANAGING DIRECTOR (CONT’D)

PROSPECTS AND OUTLOOK FOR THE FINANCIAL YEAR 2013

As for the domestic steel market, the Ministry of International Trade and Industry (“MITI”) has issued “The Statement on the Iron & Steel Industry” in early 2013 as part of the restructuring of the steel industry undertaken by the Government to achieve fair steel trade practices in Malaysia. The domestic steel market will benefi t from this latest iron and steel policy as the importation of steel products will be strictly controlled, and the policy promotes local products. Once all domestic steel players comply with the Government’s mandatory standards, the Group’s products will be more competitive and this positive development should bring better results for 2013. As such, the Company is expecting to enjoy better market share in year 2013 under the new steel measures.

For the export market, the Company expects to benefi t from the Indonesian market in year 2013 because of the anti-dumping duty on cold rolled coils (“CRC”) from east Asian steel mills imposed by Indonesia. Anti-dumping measures by Thailand are not expected to impact the company as our exposure to Thailand is limited.

With the right strategy and execution, we believe there will be plentiful opportunities ahead of us in spite of the stiff competition which is expected to happen in a few years’ time as several free trade agreements such as the Malaysia-Japan Economic Partnership Agreement (“MJEPA”), will further liberalise the steel market.

Since the global steel market is expected to be volatile in the medium and long term view, we have to improve our productivity and the product quality as well as develop new value-added products, so as to stay competitive in the market.

CORPORATE SOCIAL RESPONSIBILITY (“CSR”)

CSC Steel Sdn. Bhd. has adopted ISO 50001:2011, Energy Management System, since year 2012 with the objective of reducing greenhouse gas emissions, minimising adverse environmental impacts and improving our energy performance. We obtained ISO 50001:2011 certifi cation on 4 January 2013.

Receiving ISO 50001 Certi cate from SGS (Malaysia) Sdn. Bhd.

Bio-mass pellets Bio-coal pellets Packed Bio-coal pellets

We participated in the “Occupational Safety and Health Mentor-Mentee Program” which was organised by the Department of Occupational Safety and Health, Melaka in 2012, as part of our community service. The program was aimed at promoting occupational safety and health at workplace.

We provide better lodging for our workers by giving them a more home-like accommodation with the purchased of ten (10) units of apartments in the nearby vicinity.

As green energy development is part of CSC Group‘s medium and long term strategy, we have started a venture project in 2011 through our wholly owned subsidiary, CSC Bio-Coal Sdn. Bhd., undertaking the set-up of a bio-coal pilot plant for establishing the


ANNUAL REPORT 2012

STATEMENT FROM THE GROUP MANAGING DIRECTOR (CONT’D)

key process parameters to produce an energy substitution and environmental-friendly product, bio-coal from oil palm bio-mass. When the operations successfully enter into mass production, it will help the CSC Group in obtaining new stable raw material sources for its power plants and contribute to realising the vision outlined by Malaysian National Biomass Strategy. We expect that this project will not only help in developing a new renewable green energy in Malaysia, but also further enhance the image of both Malaysia and the CSC Group.

Our other CSR activities are listed on pages 27 and 28 of this Annual Report under four main categories such as CSR at the workplace, marketplace, environment and community.

DIVIDEND

Similar to last year, the Board had recommended a total of 7% or 7 sen per share in fi nal dividend for the fi nancial year ended 31 December 2012 comprising a single tier system of dividend of 5% or 5 sen per share and a special single tier system of dividend of 2% or 2 sen per share. The quantum of dividend recommended is in line with the Group’s dividend policy of declaring not less than 50% of its annual profi t after tax as spelt out in its Prospectus issued on 29 November 2004.

The recommended dividend had been announced on 5 February 2013 and will be tabled for the shareholders’ approval at the Company’s forthcoming Ninth Annual General Meeting and if approved, will be paid on 11 July 2013.

ACKNOWLEDGEMENT AND APPRECIATION

We credit the success of the Group to the hard work and support from the diligent management team and the inimitable and united team spirit of our workforce.

We also owe our success to the tenacity and unwavering support of our valued customers, suppliers and other stakeholders who have shown understanding and gave us their undivided backing and commitment.

Our parent company, China Steel Corporation in Taiwan, continues to be our mainframe and backbone from which stems our competitive edge, advances in technology and innovative products to generate our revenue.

I together with my fellow Board members take this opportunity to extend our gratefulness, our heartfelt thanks and our sincere appreciation to all the above parties and we look forward to the continued strong working relationship in the years to come.

I in turn wish to thank my fellow Board of Directors for their cooperation and invaluable contribution to the Company and the Group and I look forward to facing the coming year with them.

Lastly, I wish to record the Group’s appreciation to the Melaka State Government, the Government of Malaysia and the various regulatory authorities for their support and assistance.

CHEN, HIGH-PINNGroup Managing Director


ANNUAL REPORT 2012

CORPORATE GOVERNANCE STATEMENTS

The Board and Management of CHB adopts high standards of professionalism and integrity and practises good corporate governance principles in fulfi lling their fi duciary duties and in the activities undertaken by the Group and the Board endeavours to comply with the best practices of the principles of good corporate governance as set out in the Malaysian Code on Corporate Governance 2012 (the “MCCG 2012”) issued by the Securities Commission Malaysia and the Main Market Listing Requirements (“MMLR”) of Bursa Malaysia Securities Berhad (“Bursa”).

Mindful of the trust and expectations placed upon their shoulders by the shareholders and stakeholders, it is hoped that through this common value system, shareholder value will not just be safeguarded but the performance of the Group further enhanced and brought up a notch higher.

The Board is pleased to report to the shareholders the manner of application of the principles contained in the MCCG 2012 and the extent of compliance with the best practises during the fi nancial year just ended.

1. DIRECTORS

1.1 Board of Directors

The Board is entrusted with and is responsible for the Group’s overall strategy, growth and direction including its fi nancial performance. The Board provides direction and guidance to management and has effective control of the Group. It maintains control of the Group’s activities through the matrix of authority fi ltered down to the various components of the Group and the Group Managing Director is responsible for ensuring the Board’s effectiveness in conducting its business and in fulfi lling its responsibilities to stakeholders.

The Group Managing Director oversees to the day-to-day operations and implementation of the Board’s corporate and operational policies and strategies.

In line with pre-set authority levels, certain issues such as approval of interim and annual results, signifi cant acquisitions and disposals, long term planning, major capital expenditure among others, are subject to approval by the Board.

Certain responsibilities are delegated to the Audit Committee, its sub-committee, which operates within clearly defi ned parameters as spelt out in the Committee’s Terms of Reference, salient terms of reference is set out on pages 32 to 33 of this Annual Report.

The setting up of the Audit Committee, which is a requirement for listed companies, is for an added degree of independence and objectivity when discussing or debating matters falling within the ambit of the Audit Committee.

1.2 Board Balance

The Board comprises members with diverse expertise, each of whom brings with them a different set of experience and management skills essential for the effective running of the Group by the coming together of their invaluable ideas, knowledge and resources.

As at the date of this Statement, there are seven (7) directors on the Board of CHB. Apart from the executive directors who are namely the Group Managing Director and the Executive Director, there are three (3) Non- Independent Non-Executive Directors and two (2) Independent Non-Executive Directors. Bursa’s MMLR stipulates that at least one-third (1/3) of the board of directors of a listed issuer, whichever is higher, must be independent directors. The Company, having two (2) independent directors on its Board, is in compliance with this requirement.

A list of the entire CHB Board and their profi les are respectively set out on page 2 and on from pages 6 to 9 of this Annual Report.


ANNUAL REPORT 2012

1. DIRECTORS (CONT’D)

1.2 Board Balance (cont’d)

The Group Managing Director together with the Executive Director is responsible for implementing policies and decisions of the Board. They are assisted and supported by a strong Management team who together, attend to the day-to-day operations as well as oversee the overall development and implementation of the Group’s business and corporate strategies.

The Non-Executive Directors, besides operating as a check and balance, bring an element of objectivity to the Board and inject the Board with their wide ranging experience, expertise and independent judgement to better manage and run the Group.

All Board decisions are collectively arrived at, after due discussion and consultation, and no individual director or group of directors has undue infl uence or dominance on the Board’s decision-making process.

1.3 Board Meetings

The Board, chaired by the Group Managing Director, meets on a quarterly basis where one of the key agenda is to review and approve the quarterly results of the Group prior to its release to the public. Additional ad-hoc meetings may be called should the need arise.

The Chairman of the Audit Committee would report to the Directors at Board meetings on decisions and key issues that have been raised at the Audit Committee meetings including any areas of emphasis that may have been expressed by the Audit Committee.

During the fi nancial year ended 31 December 2012, a total of four (4) Board meetings were held and the attendance of each Director is set out hereinbelow:-

Directors Attendance Liang, Hsiu-Chang (resigned on 1 November 2012) 3/3 Chen, High-Pin (appointed on 1 November 2012) 1/1 Liu, Jih-Gang 4/4 Tan Chin Teng 4/4 Nee, Lung-Yuan 4/4 Pang Fee Yoon 4/4 Chong Kim Leong 4/4 Brig. Gen. (R) Dato’ Nik Zaaba Bin Nik Daud 3/4

1.4 Access to and Supply of Information to the Board

Prior to the convening of a Board meeting, the notice and agenda for that Board meeting is transmitted to each Board member followed shortly with hard copies of the relevant Board Papers.

The Board Papers contain information pertinent to the matters to be deliberated at the coming meeting and any other details or information the Directors may additionally require on the agenda items, would be furnished upon request.

In a confl ict-of-interest situation, the Director(s) concerned would be required to declare his(their) interest and to abstain from both voting and partaking in the decision-making process.

CORPORATE GOVERNANCE STATEMENTS (CONT’D)


ANNUAL REPORT 2012


1.4 Access to and Supply of Information to the Board (cont’d)

The Company Secretary attends all Board and Audit Committee meetings of the Company. Besides taking minutes of the proceedings and decisions of the Board and Audit Committee meetings, the Secretary’s duties include ensuring that Board/Audit Committee proceedings are properly conducted, providing advice and ensuring that related statutory obligations namely compliance with Bursa’s MMLR, the MCCG 2012, the Companies Act 1965 and other relevant requirements as may be applicable to the Company, are complied with.

The Secretary also advises the CHB Board on matters relating to corporate governance, directors’ responsibilities in compliance with the relevant legislation and regulations and updating them of new statutory and regulatory requirements relating to the discharge of duties and responsibilities of directors.

Members of the Board have complete and unimpeded access to the services and advice of the Company Secretary. The entire Board including the Non-Executive Directors, have direct and unrestricted access to senior management of the Company for information relating to the affairs of the Group and have authority to seek external professional advice at the expense of the Company should they so require. 1.5 Appointments and Re-Elections to the Board

The Board has in compliance with Paragraph 15.08A of the MMLR and Recommendation 2.1 of the MCCG 2012 set up a Nominating Committee on 10 May 2013. Appointments of directors to the Board, as assessed and recommended by the Nominating Committee, would only take place if it has the approval of the Board. Members of the Nominating Committee are found on page 18 of this Annual Report.

The Articles of Association of the Company provides that all directors, including the managing director, shall retire from offi ce at least once every three (3) years and all retiring directors shall be eligible for re-election at the annual general meeting (“AGM”) in which they retire. A retiring director shall remain in offi ce until the close of the meeting at which he retires.

The Articles further provide that directors who are appointed by the Board during the fi nancial period before an AGM are subject to retirement and shall be eligible for re-election by the shareholders at the immediate coming AGM of the Company to be held following the new directors’ appointment.

In addition, Recommendation 3.2 of the MCCG 2012 recommends that the tenure of an independent director should not exceed a cumulative term of nine (9) years.

Upon completion of the nine (9) years, an independent director may continue to serve on the board subject to that director’s re-designation as a non-independent director. However, Recommendation 3.3 of the MCCG 2012 recommends that the board may retain as an independent director, a person who has served in that capacity for more than (9) years provided the shareholders’ approve it.

In this respect, the two (2) Independent Directors of the Company who are impacted by the above Recommendation 3.3. of the MCCG 2012 are Mr. Chong Kim Leong and Mr. Pang Fee Yoon as they would have served a cumulative term of nine (9) years come 4 October 2013. Accordingly, the Board is seeking the approval of its shareholders to retain the aforesaid directors as Independent Directors of the Company at the forthcoming Ninth AGM of the Company. Incidentally, Mr. Chong Kim Leong is also seeking for re-election pursuant to the Articles of Association of the Company.

The Directors who are due for retirement and are seeking for re-election to the Board in pursuant to the Company’s Articles of Association and to Recommendation 3.3 of the MCCG 2012 at the Company’s forthcoming Ninth AGM are listed in the “Statement Accompanying Notice of AGM” on page 99 of this Annual Report.



ANNUAL REPORT 2012


1.6 Directors’ Training

While the Board does not pre-determine formal training programmes for the Directors, each of them is aware of the need to continuously undergo training appropriate to their needs in line with Paragraph 15.08(3) of Bursa’s MMLR. The newly established Nominating Committee has been tasked to review the training programmes for the Board.

The trainings attended by each of the Directors during the fi nancial year are set out in their respective profi les on pages 6 to 9 of this Annual Report.

1.7 Directors’ Remuneration

The two (2) Directors holding executive positions in the Company are the Group Managing Director and the Executive Director (hereinafter collectively referred to as the “Executive Directors”).

The Board has not set up a Remuneration Committee and the remuneration packages of the Executive Directors of the Company generally follow the Executive Compensation Package of the Group and to a certain extent, is dictated by market competitiveness and is tailored to retain and motivate directors of the calibre needed by the Group to effectively manage the business of the CHB Group and to align the interests of the Directors with those of the shareholders.

The contribution, responsibilities and performance of each Executive Director are taken into account when determining their respective remuneration packages. The remuneration packages of both the Executive and Non-Executive Directors of the Company for the fi nancial year ended 31 December 2012 are as follows:-

Salaries & Other Bene ts- Category Fees Bonuses Emoluments in-Kind Total (RM) (RM) (RM) (RM) (RM) Executive Directors - 373,787 79,854 29,910 483,551 Non-Executive Directors 94,800 - - - 94,800

Total 94,800 373,787 79,854 29,910 578,351

Directors’ remuneration for the year ended 31 December 2012 falls within the following bands:-

Range of Remuneration Executive Non Executive Nil nil 2 Below RM50,000 1 3 RM200,001-RM250,000 2 nil

Note: Details of directors’ remuneration above include Directors who have resigned during the year ending 31 December 2012.



ANNUAL REPORT 2012


1.8 Committees Of The Board

The following are two (2) Committees set up to assist the Board:-

(a) Audit Committee

The main purpose of the Audit Committee is to assist the Board in fulfi lling its responsibilities relating to accounting and reporting practices of the Group.

The report of the Audit Committee, its salient terms of reference and the list of committee members are set out on pages 32 to 35 of this Annual Report.

(b) Nominating Committee

The role of the Nominating Committee is to recommend suitable candidates for appointment to the Board. The Committee is also required to evaluate the effectiveness of the Board as a whole, the various committees of the Board and to assess the contribution of each individual director to the effectiveness of the Board’s decision-making process on an annual basis.

The Nominating Committee of the Company was set up on 10 May 2013 comprising exclusively of Non- Executive Directors of the Company as follows:-

Pang Fee Yoon (Chairman) Chong Kim Leong (Member) Brig. Gen. (R) Dato’ Nik Zaaba Bin Nik Daud (Member)

Mr. Pang Fee Yoon, Chairman of the Nominating Committee, has been identifi ed by the Board as the senior independent director of the Company.

As at the date of this Annual Report, the Nominating Committee has not yet convened any meetings.

Chairman of the respective committees reports the outcome of decisions and recommendations to the Board and minutes of committee meetings are tabled for the Board’s notation. Notwithstanding recommendations from the committees, the ultimate decision on all matters lies with the entire Board.

2. SHAREHOLDERS

2.1 Shareholders’ Communication and Investor Relation

The Company’s annual reports, quarterly announcements of its quarterly fi nancial results, circulars to shareholders (where applicable and as and when needed), announcements on matters pertaining to corporate and other developments in the Group, are released in a timely manner to the website of Bursa Malaysia Berhad for access by the public at large and this serves as the Company’s primary medium for dissemination of information to the shareholders, stakeholders and the general public.

Such information and other updates on activities of the Group may also be accessed from the Company’s website at “http://www.cscmalaysia.com” and investors may utilise this medium to communicate interactively with the Company directly. Any queries they may have can be channelled through the Company’s website or they may fax or call the Company directly at the numbers furnished on page 2.



ANNUAL REPORT 2012

2. SHAREHOLDERS (CONT’D)

2.2 Annual General Meeting (“AGM”) and Extraordinary General Meeting (“EGM”)

The principal forum for shareholders to interact and have dialogue with the Board is during the Company’s AGM and/or EGM.

The Annual Report and Notice of AGM are sent to shareholders at least twenty-one (21) days before the date convening the AGM. Any special business items in the agenda for the AGM would be accompanied by an explanatory statement for the shareholders’ better understanding of the issues involved and for purposes of shareholders’ evaluation and decision-making.

For certain business or corporate proposals where shareholders’ approval is required, circulars are sent to shareholders within the prescribed time frame in compliance with the regulatory and statutory provisions. These circulars provide the necessary details and are suffi ciently comprehensive to enable shareholders to arrive at an informed decision on the proposals to be tabled at the AGM/EGM.

During the AGM/EGM, shareholders have the opportunity to seek clarifi cation such as the rationale for, or more information on, the approvals being sought and on any other matters pertaining to the Group. They also have the liberty to request for information pertaining to the business operations and activities, developments and direction of the Group.

Any queries raised would be attended to by the Board members present at the meeting and members of senior management would be at hand to provide the necessary information. The Company’s external auditors would also be present to address queries on the audited accounts should there be any.

3. ACCOUNTABILITY AND AUDIT

3.1 Financial Reporting

The Directors are duty bound to present a fair and accurate assessment of the Group’s fi nancial position and prospects to the shareholders and stakeholders.

The Board is responsible for the preparation of the fi nancial statements of the Company and to ensure they are drawn up in accordance with the provisions of the Companies Act, 1965 and approved accounting standards applicable in Malaysia.

The Audit Committee plays a crucial role in assisting the Board to scrutinise information for disclosure to shareholders in order to ensure accuracy, adequacy, completeness and timeliness.

The Statement of Responsibility by Directors in respect of the preparations of the annual audited fi nancial statements of CHB and the CHB Group is found on page 36 of this Annual Report.



ANNUAL REPORT 2012

3. ACCOUNTABILITY AND AUDIT (CONT’D)

3.2 Risk Management and Internal Control

The Board has overall responsibility for maintaining a sound system of risk management and internal controls, internal procedures and guidelines that together, serve to provide a reasonable assurance of an effective and efficient operation and comply with the relevant laws and regulations.

The risk management and internal controls are meant to safeguard the Group’s assets and thus, shareholders’ investments and stakeholders’ interests. A key component in carrying out this responsibility is to ensure that risks are appropriately and adequately managed within the Group.

It must however be noted that such a system is designed to manage the Group’s risks within an acceptable risk profile rather than eliminate the risk of failure to achieve the policies and business objectives of the Group. Such controls by their nature can only serve to mitigate and provide a reasonable assurance against risks but are not an absolute assurance that risks will not occur.

An overview of the risk management and state of internal controls within the Group is set out in the Statement on Risk Management and Internal Control on pages 29 to 31 of this Annual Report.

3.3 Relations with the Auditors

The Board has a formal, professional and transparent relationship with both the internal and external auditors of the Group. The external auditors have direct access to the Board and the Audit Committee and thus, contentious issues can be brought to the attention of and/or highlighted directly to the Board or Audit Committee, as the case may be, limiting interference from potential management influence. Likewise, the Audit Committee has the liberty to meet with the external auditors as and when deemed necessary. The responsibility of the Audit Committee in relation to both the internal and external auditors are described on pages 32 and 33 of this Annual Report.

3.4 Statement of Compliance with Best Practices of the MCCG 2012

Based on the above, the Board considers that it has taken steps to comply as far as possible with the Best Practices of the MCCG 2012 for the financial year ended 31 December 2012 save that the Company does not have a formal Board Charter as key decisions are made at the Head Office in Taiwan.



ANNUAL REPORT 2012

4. ADDITIONAL COMPLIANCE INFORMATION

4.1 Utilisation of Proceeds

No proceeds were raised by the Company from any corporate proposals during the fi nancial year ended 31 December 2012.

4.2 Share Buy-Back

At its Eighth AGM held last year on 21 June 2012, the Company had sought and obtained approval from its shareholders to purchase its own shares. As the approval would expire at the conclusion of its coming Ninth AGM, the Company would be seeking the approval of its shareholders at the said forthcoming AGM to renew this authority.

The Company has bought back a total of 484,100 ordinary shares of RM1.00 each (“CHB Shares”) for a total consideration of RM576,520.83 during the twelve (12) months period ended 31 December 2012, the monthly breakdown of which is as follows:-

Monthly Breakdown of

Share Buy-Backs

in 2012

Jan - JulyAugust

SeptemberOctober

NovemberDecember

Total

No. of CHB Shares

bought-back and retained as Treasury

Shares

nil37,800

130,60041,10069,300

205,300

484,100

Buy-Back Price per CHB Share (RM)

Lowest

-1.2101.1601.1801.1801.170

Highest

-1.2301.2001.2001.2001.180

Average cost per

CHB Share (including

broker fees) (RM)

-1.2281.1851.1971.2011.183

Total Cost(RM)

n/a46,417.87

154,792.8149,208.2583,223.42

242,878.45

576,520.80

As at 10 May 2013, being the latest practicable date prior to the printing of this Annual Report, the Company has a total of 8,050,500 CHB shares, all of which are retained as treasury shares, bought at a cost of RM8,909,612.42, including broker fees.

4.3 Options or Convertible Securities

The Company has not issued any options or convertible securities during the fi nancial year ended 31 December 2012.

4.4 Depository Receipt Programme

The Company has not sponsored any depository receipt programme during the fi nancial year ended 31 December 2012.

4.5 Sanctions and/or Penalties

There were no sanctions and/or penalties imposed on the Company, its subsidiaries, the Directors and the Management by the relevant regulatory bodies during the fi nancial year ended 31 December 2012.



ANNUAL REPORT 2012

4. ADDITIONAL COMPLIANCE INFORMATION (CONT'D)

4.6 Non-Audit Fees

Non-audit fees of RM3,500.00 being professional fees for the review of the “Statement of Risk Management and Internal Control” is payable to the external auditors by the Group for the fi nancial year ended 31 December 2012.

4.7 Variation in Results

The Company and its subsidiary companies did not issue any profi t forecast during the fi nancial year ended 31 December 2012.

4.8 Pro t Guarantee

The Company and its subsidiary companies did not provide any profi t guarantees during the fi nancial year ended 31 December 2012.

4.9 Material Contracts

There were no material contracts entered into or subsisting between the Company and its subsidiary companies involving the interests of directors and substantial shareholders during the fi nancial year ended 31 December 2012.

4.10 Recurrent Related Party Transactions (“RRPT”)

At the Eight AGM of the Company held on 21 June 2012, the shareholders had renewed the mandate for the CHB Group to enter into RRPT of a revenue or trading nature as well as mandated the CHB Group for additional RRPT with the related parties (collectively the “Shareholders’ Mandate”).

Details of RRPT of a revenue or trading nature conducted during the fi nancial year ended 31 December 2012 pursuant to the aforesaid Shareholders’ Mandate are as follows:-

(I) CSC Steel Sdn. Bhd.


Related Party

China Steel Corporation(“CSC”)

Nature of Transaction

Purchase of raw materials, spare parts, rollers and chemicals from CSC

Purchase of equipment from CSC

Interested Directors, Major Shareholders and Persons Connected

Interested Major Shareholder CSAP(a)(i)

Interested Directors CHP(b)(c), LJG(b)(c), NLY(b)(c), LHC(b)(c), LJK(c) and LCM(c)

Actual Value of Transactions conducted

pursuant to the Shareholders’

Mandate during FYE 2012(RM’000)

432,537

0

Estimated Value of Transactions

per the Circular to Shareholders dated

30 May 2012 and approved at the

8th AGM on 21 June2012 (RM’000)

600,000

1,000


ANNUAL REPORT 2012


4.10 Recurrent Related Party Transactions (“RRPT”) (cont’d)


Related Party

China Steel Global Trading Corporation(“CSGT”)

China Steel Machinery Corporation(“CSMC”)

China Ecotek Corporation (“CEC”)

InfoChamp Systems Corporation(“ISC”)

Chung Hung Steel Corporation (“CHSC”)


Purchase of machinery, spare parts, rollers and chemicals from CSGT

Purchase of machinery and spare parts from CSMC

Purchase of equipment from CEC

Purchase of computer hardware, software and industrial equipment and machinery from ISC

Purchase of raw materials from CHSC


Interested Major Shareholder CSAP(a)(ii)

Interested Directors CHP(b)(c), LJG(b)(c)(e), NLY(b)(c)(f), LHC (b)(c),LJK(c) and LCM(c)

Interested Major Shareholder CSAP(a)(iii)

Interested Directors CHP(b)(c), LJG(b)(c), NLY(b)(c), LHC (b)(c), LJK(c) and LCM(c)

Interested Major Shareholder CSAP(a)(iv)


Interested Major Shareholder CSAP(a)(v)


Interested Major Shareholder CSAP(a)(vi)

Interested Directors CHP(b)(c), LJG(b)(c)(e), NLY(b)(c)(f), LHC (b)(c),LJK(c) and LCM(c)




1,613

126

0

442

24,560





3,000

1,000

1,000

5,000

76,000



ANNUAL REPORT 2012




Related Party

Himag Magnetic Corporation (“HMC”)

CSGT Metals Vietnam Joint Stock Company (“CSGT Metals”)


Sales of iron oxide to HMC

Sales of fi nished goods to CSGT Metals


Interested Major Shareholder CSAP(a)(vii)


Interested Major Shareholder CSAP(a)(viii)

Interested Directors CHP(b)(c), LJG(b)(c)(e), NLY(b)(c)(f), LHC (b)(c)(d),LJK(c)(d) and LCM(c)




0

0

459,278





1,000

2,000

690,000


Total


ANNUAL REPORT 2012



(II) CSC Bio-Coal Sdn. Bhd.


Note:Figures in the column marked “Actual Value of Transactions conducted pursuant to the Shareholders’ Mandate during FYE 2012” are extracted from the Circular to Shareholders issued on 30 May 2012 and are meant for reference only and not for comparison against the gures appearing in the column marked “Estimated Value of Transactions per the Circular to Shareholders dated 30 May 2012 and approved at the 8th AGM on 21 June 2012” as the gures are in respect of different periods in time.

Interested Major Shareholder

(a) CSAP (i) CSAP being a wholly-owned subsidiary of CSC. (ii) CSAP being a wholly-owned subsidiary of CSC. CSC is the holding company of CSGT. (iii) CSAP being a wholly-owned subsidiary of CSC. CSC is the holding company of CSMC. (iv) CSAP being a wholly-owned subsidiary of CSC. CSC is a substantial shareholder of CEC. (v) CSAP being a wholly-owned subsidiary of CSC. CSC is the holding company of ISC. (vi) CSAP being a wholly-owned subsidiary of CSC. CSC is a substantial shareholder of CHSC. (vii) CSAP being a wholly-owned subsidiary of CSC. CSC is the holding company of HMC. (viii) CSAP being a wholly-owned subsidiary of CSC. CSC is the holding company of CSGT. CSGT is the holding company of CSGTI. CSGTI is the holding company of CSGT Metals.

Related Party

CSC

CEC


Sale of bio-coal to CSC

Purchase of equipment and machinery from CEC


Interested Major Shareholder CSAP(a)(i)


Interested Major Shareholder CSAP(a)(iv)

Interested Directors CHP(b)(c), LJG(b)(c), NLY(b)(c), LHC(b)(c), LJK(c) and LCM(c)

Total




0

7,420

7,420





15,000

15,000

30,000


ANNUAL REPORT 2012



Interested Directors

CHP - Chen, High-Pinn (appointed on 1 November 2012) LHC - Liang, Hsiu-Chang (resigned on 1 November 2012) LJG - Liu, Jih-Gang NLY - Nee, Lung-Yuan LJK - Leou, Jiing-Kuen LCM - Lee, Chien-Ming

(b) CHP, LJG and NLY are respectively employees and shareholders of CSC and Directors of CHB. LHC was the Group Managing Director of CHB until his resignation on 1 November 2012.

(c) CHP, LJG, NLY, LJK and LCM are Directors of CSCM, Group Steel and CSC Bio-Coal. LJK and LCM are also employees and shareholders of CSC. LHC was the Group Managing Director of CSCM, Group Steel and CSC Bio-Coal until his resignation on 1 November 2012.

(d) LHC was a director of CSGT Metals until 6 June 2012 when he was replaced by LJK as a director of CSGT Metals.

(e) LJG is also a director of CSAP, CHSC, CSGT, CSGTS and CSGT Metals.

(f) NLY is also a director of CHSC, CSGT, CSGTS, CIC and CSGT Metals.

(g) CHP is also a director of TGSC.

5. STATEMENT PERTAINING TO THE ALLOCATION OF SHARES UNDER EMPLOYEES SHARE SCHEME

To date, the Company has not established any employees share schemes (“ESS”). In the event the Company does establish such ESS, the Audit Committee would shoulder the responsibility of reviewing all allocations granted to eligible employees to ensure compliance with the criteria as would have been spelt out in the by-laws of the Company’s proposed ESS.



ANNUAL REPORT 2012

6. CORPORATE SOCIAL RESPONSIBILITY (“CSR”)

The CHB Group is a good and reputable corporate who takes great pride and diligence in preserving and sustaining the environment in the conduct of its business activities. A list of the Group’s key CSR initiatives and activities of the CHB Group, though not exhaustive, are as follows:-

Workplace

- Having a “Safety and Health Committee” which sets targets, implements, monitors and maintains a sound and comfortable working environment for employees through periodic brainstorming sessions via meetings, department internal communications and site inspections.

- Emphasis on employee health and safety issues through continuous education, training, supervision and awareness campaigns.

- Implementing an “area responsibility system” whereby employees are appointed to take charge and be responsible for the safety aspect of allocated areas.

- Health care monitoring like CHRA (Chemical Health Risk Assessment), medical check-up for employees and noise monitoring to ensure within permissible levels within the plant.

- Promoting “injury free” campaigns.

- Assisting employees to achieve a balanced work life and to nurture harmonious team spirit by providing employees with space for recreational activities by providing sport facilities as well as organising sport events for the employees.

- Conducting bi-annual employee surveys to gauge and understand employee satisfaction levels in regards to their working environment and for feedback on employees’ concerns.

- Having a well-run canteen that is clean and hygienically operated with reverse osmosis (RO) fi ltered drinking water to provide clean water. Employees are also provided with free meals to ensure employees’ continued good health.

- Implementing the “5S” Concept (an in-house housekeeping methodology which widely encompassed the principles of sorting, setting-in order, systematic cleaning, standardising and sustaining discipline) in the work place as a means to continuously improve and ensure an orderly and conducive working environment.

- Collecting recyclable items such as paper, carton boxes, etc. for sale to recycling companies and the income generated channeled towards employee welfare.

Marketplace

- Producing quality products at competitive prices to customers.

- Provision of technical services to customers as and when required.

- Organising product roadshow to share the information of our steel products with existing customers as well as potential customers.

- Always sourcing for competitively priced and better quality products and services from responsible sources and passing on the savings to customers where possible.

- Adhering to our Vision of being a trustworthy and one of the best fl at steel manufacturers in South East Asia.

- Upholding our Mission to continuously improve productivity, constantly develop higher value-added products and environmental-friendly products, to continually pursue excellence in quality and service exceeding customers’ expectation and fulfi lling our commitment to corporate social responsibility.



ANNUAL REPORT 2012

6. CORPORATE SOCIAL RESPONSIBILITY (“CSR”) (CONT’D)

Environment

- Achieving the standards of and obtaining the Energy Effi ciency Management System ISO 50001:2011 certifi cation. Having an “Energy Saving Committee” which meets regularly to come up with and implement ideas with an eye to preserve, conserve and improve the effi ciency of energy utilisation.

- Maintaining the environmental management system in line with the standards of ISO 14001 certifi cation.

- Having environmental monitoring of the quality of its treated effl uent, chimney stack emissions, boundary noise and ambient air quality to ensure compliance with the regulatory requirements and all environmental monitoring reports are submitted to the Department of Environment on a quarterly basis.

- Enhancing the 3R (Reduce, Reuse and Recycle) of waste management for instance, recycling the use of its metal hydroxide sludge as cement additive rather than disposing by way of solidifi cation

- Enhancing plant landscaping and greening the factory premises.

Community

- Having a program where selected undergraduate students from local universities are given practical training to expose them to hands-on experience in this industry.

- Holding periodic dialogues with resident associations of the neighboring residential areas.

- Making charity contribution to schools and other needful community projects such as towards victims of disaster, disabled persons, orphanages, etc.

- Participated in Occupational Safety and Health Mentor-Mentee Program which was organised by Department of Occupational Safety and Health, Melaka. The program was aimed at promoting occupational safety and health at workplace. The Mentee is Micro Nano Precision Sdn. Bhd.



ANNUAL REPORT 2012

INTRODUCTION

The Board of Directors (“the Board”) of CSC Steel Holdings Berhad (“the Company”) acknowledges the importance of maintaining a good risk management and internal control system in the Company and its subsidiaries (“the Group”) and is pleased to provide the following Internal Control Statement which outlines the nature and scope of risk management and internal control of the Group for the fi nancial year ended 31 December 2012. This Statement was prepared by taking into account of the Statement on Risk Management and Internal Control: Guidelines for Director and Listed Issuers (“The Guidelines”) pursuant to Paragraph 15.26(b) Main Market Listing Requirements.

BOARD RESPONSIBILITIES

The Board affi rms its overall responsibility for maintaining a sound risk management and internal control systems and for reviewing their adequacy and effectiveness so as to safeguard all its stakeholders’ interests and protecting the Group’s assets. The Board has delegated the review of adequacy and effectiveness of the internal control system to the Audit Committee. Through the Audit Committee, the Board is kept informed of all signifi cant control issues brought to the attention of the Audit Committee by the Management, the internal audit function and the external auditors.

However, in view of the limitations that are inherent in any system of internal controls, the system of internal controls is designed to manage, rather than to eliminate, the risk of failure to achieve the Group’s business objectives. Accordingly, the system of internal controls can only provide reasonable and not absolute assurance against material misstatement of losses and fraud.

RISK MANAGEMENT

The Board recognises that an important element of a sound system of internal control is to have in place a risk management practice for identifying, evaluating and managing signifi cant risks faced by the Group systematically during the fi nancial year under review.

On strategic level, strategic business strategies are formulated by Managing Director and Senior Management and presented to the Board for review to ensure proposed strategies are in line with the Group’s risk appetite with update of the implementation progress of the strategies approved being presented by the Senior Management in subsequent Board’s meetings for the Board to follow-up and review.

On daily basis, the respective Heads of Department are responsible for managing the risk of their department. Changes in the key business risks faced by the Group or emergence of new key business risks and the corresponding internal controls are discussed during management meetings.

INTERNAL AUDIT FUNCTION

The Group relies on internal audit mechanisms to provide the management with the required level of assurance that its business is operating adequately and effectively in order to provide reasonable assurance that the business objectives of the Group are achievable.

During the year ending 31 December 2012 The Group’s internal audit function was jointly undertaken by the Company’s external professional advisor, Messrs. Ernst & Young, together with its in-house internal auditor.

The risk-based internal audit plan is reviewed annually and as and when deemed necessary. The internal audit plan will be adjusted to refl ect signifi cant changes in the Group’s operating environment. Any signifi cant change to the plan will be referred to the Audit Committee for notifi cation prior to the commencement of the audit.

During the fi nancial year under review, internal audit reviews were performed based on the internal audit plan approved by Audit Committee and upon the completion of the internal audit works, which are conducted twice a year, internal audit reports were submitted to the Audit Committee for review and deliberation, in the presence of the Internal Audit Team. Update on the status of management action plans as identifi ed in the previous internal audit reports were also presented during the fi nancial year under review for the Audit Committee to ensure action plans were satisfactorily executed to address the individual risks associated with the fi ndings.

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL


ANNUAL REPORT 2012

The cost incurred in maintaining the outsourced internal audit function for the fi nancial year ended 31 December 2012 amounted to RM56,000.

INTERNAL CONTROL SYSTEM

The key features of the Group’s internal control systems are described below:

Board of Directors/Board Committees

Audit Committee being established to carry out duties and responsibilities delegated by the Board, governed by written terms of reference.

Meetings of Board of Directors and Audit Committee are carried out on scheduled basis to review the performance of the Group, from fi nancial and operational perspective. Business strategies are proposed by the Managing Director and Senior Management for the Board’s review and approval, after taking into risk consideration and responses.

Organisation Structure and Authorisation Procedures

The Group has a formal organisation structure in place for planning, organising and executing the business operations of the Group to ensure its objectives are met. The authorisation procedures for key processes are stated in the Group’s policies and procedure.

Policies and Procedures

The Group has documented policies and procedures that are regularly reviewed and updated to ensure its relevance to support the Group’s business activities in achieving the Group’s business objectives.

Annual Budget

Financial budget for the operating subsidiary is prepared and presented to the Board of such operating subsidiary on annual basis for approval.

Such budget is applied to every key division of such operating subsidiary for fi nancial performance measurement. The actual performances are monitored against budgets to identify signifi cant variances for prompt actions to be taken. Capital expenditure budget is compiled and approved annually prior to its execution in the following fi nancial year.

Human Resource Policy

Comprehensive guidelines on the human resource management are in place to ensure the Group’s ability to operate in an effective and effi cient manner by employing and retaining adequate competent employees possessing necessary knowledge, skill and experience in order to carry out their duties and responsibilities assigned effectively and effi ciently. Training needs of employees are identifi ed annually so that relevant trainings are provided to such employees to upgrade their knowledge and skill sets.

Information and Communication

At operational level, clear reporting lines established across the Group and operation and management reports are prepared for dissemination to relevant personnel for effective communication of critical Information throughout the Group for timely decision making and execution in pursuit of the business objectives. Matters that require the Board and Senior Management’s attention are highlighted for review, deliberation and decision on a timely basis.

External Bodies Certi cation

The operating subsidiary is certifi ed and in compliance with the ISO 9001:2008 (Quality Management System), ISO 14001:2004 (Environmental Management System) and 50001:2011 (Energy Management System) certifi cation.

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (CONT’D)


ANNUAL REPORT 2012

Monitoring and Review Activities

Key performance indicators are formulated to monitor the performance of key divisions/departments against targets established with information on actual performance against key performance indicators established being communicated to the Heads of Department on quarterly basis for corrective action to be taken. Formal half-yearly management review meeting is held to discuss and review the performance of key divisions/ departments of the Group based on the key performance indicators established.

Weekly management meetings of Heads of Department are held to review operational and fi nancial performance of key divisions/departments within the Group.

Monthly review of the management accounts of the Company and its subsidiaries by the Senior Management team

Quarterly unaudited group fi nancial reports review by Audit Committee together with management, and its subsequent report to the Board

Conducting internal audit on key risk areas identifi ed during high level risk assessment by the Internal Audit Team which reports directly to the Audit Committee. The Internal Audit Team assesses the adequacy and effectiveness of internal controls in relation to specifi c critical control processes and highlights signifi cant risks impacting the Group to the Audit Committee as well as recommending improvements to various processes to minimise the risks

The monitoring of compliance with relevant laws and regulations are further enhanced by independent review of specifi c areas of safety, health and environment by independent consultants engaged by the Group.

ASSURANCE PROVIDED BY MANAGING DIRECTOR AND EXECUTIVE DIRECTOR PRIMARILY RESPONSIBLE FOR THE MANAGEMENT OF THE FINANCIAL AFFAIRS

During the meetings of Board of Directors during the fi nancial year under review, the performance of the Group were reviewed and deliberated by the Board, including but not limited to, the adequacy and effectiveness of specifi c risk management and internal control system of the Group put in place to address potential business risks identifi ed by the Board during such reviews and deliberation. Through such reviews by the Board with the Managing Director and Senior Management of the Group and independent internal control reviews conducted and reported to the Board, the Board was of the view that the risk management and internal control systems were satisfactory and had not resulted in any material losses, contingencies or uncertainties that would require disclosure in the Company’s annual report.

In response to Paragraph 42 of the Guidelines, the Board has received assurance from the Managing Director and the Executive Director primarily responsible for the management of the fi nancial affairs on the adequacy and effectiveness of risk management and internal control system of the Group, in all material aspects, on annual basis during the fi nancial year ending 31 December 2012.

Pursuant to paragraph 15.23 of the Main Market Listing Requirements of Bursa Securities, the external auditors have reviewed this Statement for inclusion in the Annual Report of the Group for the year ended 31 December 2012 and reported to the Board that nothing has come to their attention that caused them to believe that the statement is inconsistent with their understanding of the processes adopted by the Board in reviewing the adequacy and integrity of the systems of internal controls.

CONCLUSION

The Board is committed towards maintaining an effective risk management and internal control systems throughout the Group and where necessary put in place appropriate plans to further enhance the Group’s systems of internal control. Notwithstanding this, the Board will continue to evaluate and manage the signifi cant business risks faced by the Group in order to meet its business objectives in the current and challenging business environment.

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL (CONT’D)


ANNUAL REPORT 2012

AUDIT COMMITTEE REPORT

The Audit Committee serve to assist the Board in ensuring the effectiveness of the Group’s system of internal control, risk management and fi nancial reporting practices of the Group.

1. MEMBERS AND MEETING ATTENDANCE

The Committee held a total of four (4) meetings during the year ended 31 December 2012 and the attendances of the members are as follows:-

Committee Members Attendance

Pang Fee Yoon (Chairman) 4/4 (Independent Non-Executive Director)

Chong Kim Leong (Member) 4/4 (Independent Non-Executive Director)

Brig. Gen. (R) Dato’ Nik Zaaba Bin Nik Daud (Member) 3/4 (Non-Independent Non-Executive Director)

The composition of the Audit Committee during the fi nancial year complied with the Terms of Reference of the Audit Committee which is, the Committee shall comprise not less than three (3) members where a majority of whom shall be independent directors and at least one (1) member of the Audit Committee has the required fi nancial background and experience. Mr. Pang Fee Yoon, who is a member of the Malaysian Institute of Accountants, fulfi ls this requirement.

Relevant staff in the Finance Division and both the outsourced and in-house Internal Auditors attended the Committee meetings during the fi nancial year ended 31 December 2012 on invitation by the Committee Chairman. Other senior management staff attended certain meetings as and when invited by the Chairman.

2. SALIENT TERMS OF REFERENCE

2.1 Duties and Responsibilities of the Audit Committee

The Audit Committee shall collectively discharge the following functions:

(1) review (and where appropriate, report the following to the Board of Directors):-

(a) with the external auditor:- (i) the audit plan; (ii) his evaluation of the system of internal controls; and (iii) his audit report;

(b) the assistance given by the employees of the Company to the external auditor;

(c) the adequacy of the scope, functions, competency and resources of the internal audit functions (which reports directly to the Committee) and that it has the necessary authority to carry out its work unimpeded;

(d) the internal audit programme, processes, the results of the internal audit programme, processes or investigation undertaken and whether or not appropriate action is taken on the recommendations of the internal auditors;


ANNUAL REPORT 2012

2. SALIENT TERMS OF REFERENCE (CONT’D)

2.1 Duties and Responsibilities of the Audit Committee (cont’d)

(1) review (and where appropriate, report the following to the Board of Directors) (cont’d):-

(e) the quarterly results and year end fi nancial statements, prior to the approval by the Board of Directors focusing particularly on:- (i) changes in or implementation of major accounting policy changes; (ii) signifi cant and unusual events; and (iii) compliance with accounting standards and other legal requirements;

(f) any related party transaction and confl ict of interest situation that may arise within the Company or Group including any transaction, procedure or course of conduct that raises questions of management integrity;

(g) any letter of resignation from the external auditors;

(h) whether there is reason (supported by valid grounds) to believe that the Company’s external auditor is not suitable for re-appointment; and

(i) allocation of options pursuant to a share scheme for employees.

(2) recommend the nomination of a person or persons as external auditors.

(3) report promptly to the Exchange where the Committee is of the view that a matter reported by it to the Board of Directors has not been satisfactorily resolved resulting in a breach of the Listing Requirements.

2.2 Authority of the Audit Committee

The Committee shall, at the expense of the Company, have the following authority:-

(1) to investigate any matter within its terms of reference; (2) to have the resources which are required to perform its duties; (3) to have full and unimpeded access to any information pertaining to the Company; (4) to have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity; (5) to obtain independent professional or other advice; and (6) to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other directors and employees of the Company, whenever deemed necessary.

Attendance of other directors and employees of the Company at any particular Audit Committee meeting shall be at the Audit Committee’s invitation and discretion and must be specifi c to the relevant meeting.

AUDIT COMMITTEE REPORT (CONT’D)


ANNUAL REPORT 2012


3. SUMMARY OF ACTIVITIES

A brief summary and an overall view of the activities of the Audit Committee in discharging their duties and responsibilities during the fi nancial year ended 31 December 2012 are as follows:-

i) reviewed and recommended the quarterly fi nancial results of the Group for approval by the Board of Directors prior to its release to Bursa Malaysia Securities Berhad;

ii) met with the external auditors for a private session without the presence of the executive Board members and Management personnel to discuss the scope of the statutory audit and to review the Audit Planning Memorandum prior to the commencement of the audit of the Group’s fi nancial statements for the fi nancial year ended 31 December 2012;

iii) reviewed and briefed the Board of Directors on the internal audit plan, work done and reports from the internal audit function;

iv) considered the fi ndings of internal audit investigations and Management’s responses thereon and where relevant, recommended appropriate actions or further follow-up actions to be taken by either the internal audit function or the Management;

v) reviewed recurrent related party transactions for compliance with both in-house procedures and the Main Market Listing Requirements of Bursa Malaysia Securities Berhad;

vi) reviewed on a quarterly basis the actual transacted value of recurrent related party transactions matching them against the mandate from shareholders to ensure compliance with the Listing Requirements;

vii) reviewed the Circular to Shareholders in relation to the proposed new and renewal of shareholders’ mandate for recurrent related party transactions of a revenue or trading nature prior to its approval by the Board of Directors; and

viii) reviewed the internal control statement, audit committee report and internal audit function in the annual report before the Board of Directors approve the Annual Report 2011.

4. INTERNAL AUDIT FUNCTION

Having an independent and adequately resourced internal audit function is essential in assisting the Audit Committee to obtain the assurance it needs regarding the maintenance of a sound system of internal controls.

During the fi nancial year ended 31 December 2012, the professional fi rm of Messrs. Ernst & Young led the role of the internal audit functions of the Group assisted by the Group’s own in-house internal auditor (collectively referred to as the “IA Team”) with the primary function to assist the Audit Committee in discharging their duties and responsibilities more effectively. The Audit Committee has full access to the outsourced Internal Auditors and reviews reports from them on all internal audits performed.

The main role of the internal audit function is to carry out independent assessments of the adequacy and effectiveness of the Group’s internal control systems in anticipation of any potential risk areas within key business processes of the Group.

During the fi nancial year ended 31 December 2012, internal audit activities have been carried out in accordance with the pre-approved internal audit plan.

The IA Team conducts its internal audit visits based on the approved Internal Audit Plan (“IA Plan”) for two (2) fi nancial years which will be reviewed on an annual basis and revised subsequent to the completion of the fi rst year audit, if necessary, to refl ect the changes in the Group’s operating environment. Any signifi cant changes to the IA Plan will be referred to the Audit Committee for approval prior to the commencement of the internal audit.


ANNUAL REPORT 2012

4. INTERNAL AUDIT FUNCTION (CONT’D)

In developing the IA Plan, the IA team will:

- perform a “High Level Risk Assessment” through review of documents, interviews with key management personnel and representatives from the Audit Committee to identify and highlight risks and concerns of management and members of Audit Committee

- identify auditable areas and risk signifi cance of such auditable areas.

- develop an audit plan focusing on compliance, effi ciency and effectiveness.

For each internal audit visit, the IA Team will perform the following and provide management with periodic progress updates as and when requested, and meet with management at the conclusion of each visit to review the results:-

- understand the process, key performance indicators, risks involved and controls in place through interviews with various personnel, observations and review of management reports and other documents such as corporate policies, procedures and guidelines before summarising key process risks and control design.

- evaluate control design effectiveness and discuss observations with the management.

- develop control testing programs.

- conduct testing programs, analyse root causes of fi ndings and identify improvement opportunities.

- discuss issues and improvement opportunities with process owners.

- summarise issues and recommend action plans.

The Internal Audit Report for each internal audit visit will outline procedures performed during audit fi eldworks and carries recommendations for improvements in systems, processes and procedures along with the preliminary management response and will be forwarded to Management for their attention and response for the necessary remedial actions as recommended therein. The Internal Audit Department will then be responsible to monitor the status of remedial actions formulated and implemented by Management.

In view that Messrs. Ernst & Young had served as the Company’s outsourced internal auditors to lead role of the Group’s IA Team for a period of eight (8) years, the Company had on 8 January 2013 engaged NeedsBridge Advisory Sdn. Bhd. to lead the IA Team in place of Messrs. Ernst & Young effective from 1 January 2013.



ANNUAL REPORT 2012

It is a requirement for the Directors to prepare fi nancial statements which give a true and fair view of the state of affairs of the Company and of the Group at the end of each fi nancial year and of their results and their cash fl ows for the year then ended.

In preparing the fi nancial statements, the Directors have taken steps to ensure that:-

the Company and the Group have used appropriate accounting policies which have been consistently applied.

the judgements and estimates made are reasonable and prudent; and

all approved accounting standards which are applicable in Malaysia have been complied with.

The Directors are responsible for ensuring that proper accounting records, which disclose with a reasonable degree of accuracy the fi nancial position of the Company and the Group, are maintained in compliance with the provisions of the Companies Act, 1965.

The Directors also have general responsibilities for taking steps as are reasonable towards safeguarding the assets of the Group and to prevent and detect fraud and other irregularities.

STATEMENT OF THE DIRECTORS’ RESPONSIBILITIES IN RELATION TO THE FINANCIAL STATEMENTS

REPORT OF THE DIRECTORS

The directors of CSC STEEL HOLDINGS BERHAD have pleasure in submitting their report and the audited fi nancial statements of the Group and the Company for the year ended December 31, 2012.

PRINCIPAL ACTIVITIES

The Company is principally involved in investment holding and provision of management services. The principal activities of its subsidiary companies are as disclosed in Note 14 to the Financial Statements.

There have been no signifi cant changes in the nature of the principal activities of the Company and its subsidiaries during the fi nancial year.

RESULTS OF OPERATIONS The results of operations of the Group and the Company for the fi nancial year are as follows: The The Group Company RM RM Profi t before tax 37,512,956 1,367,826Tax expense (9,505,252) (404,644) Profi t for the year 28,007,704 963,182

In the opinion of the directors, the results of operations of the Group and the Company during the fi nancial year have not been substantially affected by any item, transaction or event of a material and unusual nature.

DIVIDENDS Since the date of the last report, a fi nal single tier dividend of 5% per share, amounting to RM18,660,000 and a special single tier dividend of 2% per share, amounting to RM7,464,000 in respect of the previous fi nancial year, was declared and paid by the Company during the fi nancial year.

The directors proposed a fi nal single tier dividend of 5% per share and a special single tier dividend of 2% per share, in respect of the current fi nancial year. The proposed dividends, which are subject to approval of the shareholders at the forthcoming Annual General Meeting, have not been included as a liability in the fi nancial statements.

RESERVES AND PROVISIONS

There were no material transfers to or from reserves or provisions during the fi nancial year other than those disclosed in the Financial Statements.

ISSUE OF SHARES AND DEBENTURES

The Company has not issued any new shares or debentures during the fi nancial year.


ANNUAL REPORT 2012


ANNUAL REPORT 2012

SHARE OPTIONS No options have been granted by the Company to any parties during the fi nancial year to take up unissued shares of the Company.

No shares have been issued during the fi nancial year by virtue of the exercise of any option to take up unissued shares of the Company. As of the end of the fi nancial year, there were no unissued shares of the Company under options.

OTHER STATUTORY INFORMATION Before the statements of comprehensive income and the statements of fi nancial position of the Group and the Company were made out, the directors took reasonable steps: (a) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts, and have satisfi ed themselves that there were no known bad debts to be written off and that no allowance for doubtful debts is necessary; and (b) to ensure that any current assets which were unlikely to realise their book values in the ordinary course of business had been written down to their estimated realisable values.

At the date of this report, the directors are not aware of any circumstances: (a) which would require the writing off of bad debts or the setting up of amount of allowance for doubtful debts in the fi nancial statements of the Group and the Company; or

(b) which would render the values attributed to current assets in the fi nancial statements of the Group and the Company misleading; or

(c) which have arisen and render adherence to the existing method of valuation of assets or liabilities of the Group and the Company misleading or inappropriate; or (d) not otherwise dealt with in this report or fi nancial statements which would render any amount stated in the fi nancial statements of the Group and the Company misleading.

At the date of this report, there does not exist: (a) any charge on the assets of the Group and the Company which has arisen since the end of the fi nancial year which secures the liability of any other person; or (b) any contingent liability of the Group and the Company which has arisen since the end of the fi nancial year. No contingent or other liability has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the fi nancial year which, in the opinion of the directors, will or may substantially affect the ability of the Group and the Company to meet their obligations as and when they fall due.

In the opinion of the directors, no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the fi nancial year and the date of this report which is likely to affect substantially the results of operations of the Group and the Company for the succeeding fi nancial year.

REPORT OF THE DIRECTORS (CONT’D)


ANNUAL REPORT 2012

DIRECTORS The following directors served on the Board of the Company since the date of the last report: Tan Chin Teng Pang Fee Yoon Chong Khim Leong @ Chong Kim Leong Brig. Gen. (B) Dato’ Mohd Zaaba @ Nik Zaaba Bin Nik Daud Nee, Lung-Yuan Liu, Jih-Gang Chen, High-Pinn (appointed on November 1, 2012)Liang, Hsiu-Chang @ Liang Shu Charng (resigned on November 1, 2012)

In accordance with Article 128 of the Company’s Articles of Association, Messrs. Tan Chin Teng and Chong Khim Leong @ Chong Kim Leong retire by rotation and, being eligible, offer themselves for re-election at the forthcoming Annual General Meeting.

Mr. Chen, High-Pinn, who was appointed to the Board since the date of the last Annual General Meeting, retires under Article 133 of the Company’s Articles of Association and, being eligible, offers himself for re-election at the forthcoming Annual General Meeting.

DIRECTORS’ INTERESTS

The shareholdings in the Company and ultimate holding company of those who were directors at the end of the fi nancial year, as recorded in the Register of Directors’ Shareholdings kept by the Company under Section 134 of the Companies Act, 1965, are as follows:

No. of ordinary shares of RM1 each Balance at Balance at 1.1.2012 Bought Sold 31.12.2012

Shares in the Company Registered in the name of directors Pang Fee Yoon 20,000 - - 20,000Chong Khim Leong @ Chong Kim Leong 20,000 - - 20,000



ANNUAL REPORT 2012

DIRECTORS’ INTERESTS (CONT’D)

No. of ordinary shares of *NTD10 each Balance at 1.1.2012/ Date of Balance at appointment Bought Sold 31.12.2012 Shares in ultimate holding company, China Steel Corporation Registered in the name of directors Nee, Lung-Yuan 290,256 - - 290,256Liu, Jih-Gang 136,508 2,047 - 138,555Chen, High-Pinn 372,070 25,988 - 398,058 Deemed interest Liu, Jih-Gang 952 14 - 966**

* New Taiwan Dollar

** Indirect interest by virtue of shares held by members of the directors’ family and by companies in which the directors have interest.

By virtue of their interests in the shares of the ultimate holding company, the above directors are deemed to have an interest in the shares of the Company and of all related companies to the extent of the ultimate holding company’s interest.

DIRECTORS’ BENEFITS

Since the end of the previous fi nancial year, none of the directors of the Company has received or become entitled to receive any benefi t (other than those disclosed as directors’ remuneration in the fi nancial statements) by reason of a contract made by the Company or a related corporation with the director or with a fi rm of which the director is a member, or with a company in which the director has a substantial fi nancial interest.

During and at the end of the fi nancial year, no arrangement subsisted to which the Company was a party whereby directors of the Company might acquire benefi ts by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.



ANNUAL REPORT 2012

HOLDING COMPANIES

The Company is a subsidiary of China Steel Asia Pacifi c Holdings Pte. Ltd., a company incorporated in the Republic of Singapore. The directors regard China Steel Corporation, a company incorporated in Taiwan, as the ultimate holding company.

AUDITORS

The auditors, Messrs. Deloitte & Touche, have indicated their willingness to continue in offi ce.

Signed on behalf of the Boardin accordance with a resolution of the Directors,

CHEN, HIGH-PINN

TAN CHIN TENG

MelakaApril 8, 2013



ANNUAL REPORT 2012

INDEPENDENT AUDITORS’ REPORTto the Members of CSC Steel Holdings Berhad (Incorporated in Malaysia)

REPORT ON THE FINANCIAL STATEMENTS

We have audited the financial statements of CSC STEEL HOLDINGS BERHAD, which comprise the statements of fi nancial position of the Group and of the Company as of December 31, 2012 and the statements of comprehensive income, statements of changes in equity and statements of cash fl ows of the Group and of the Company for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, as set out on pages 44 to 86.

Directors’ Responsibility for the Financial Statements

The directors of the Company are responsible for the preparation of these fi nancial statements so as to give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia and for such internal controls as the directors determine are necessary to enable the preparation of fi nancial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the fi nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation of fi nancial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the fi nancial statements.

We believe that the audit evidence that we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the fi nancial statements give a true and fair view of the fi nancial position of the Group and of the Company as of December 31, 2012 and of their fi nancial performance and cash fl ows for the year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report that:

a) in our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and by the subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act;

b) we have considered the accounts and auditors’ report of the subsidiary of which we have not acted as auditors, as mentioned in Note 14 to the Financial Statements, being accounts that have been included in the fi nancial statements of the Group;


ANNUAL REPORT 2012

c) we are satisfi ed that the accounts of the subsidiaries that have been consolidated with the Company’s fi nancial statements are in form and content appropriate and proper for the purposes of the preparation of the fi nancial statements of the Group, and we have received satisfactory information and explanations required by us for these purposes;

d) the auditors’ reports on the accounts of the subsidiaries were not subject to any qualifi cation and did not include any adverse comment made under Section 174 (3) of the Act.

OTHER REPORTING RESPONSIBILITIES

The supplementary information set out in Note 32 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the fi nancial statements. The directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1 “Determination of Realised and Unrealised Profi ts or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements” as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.

OTHER MATTERS

As stated in Note 2 to the Financial Statements, CSC Steel Holdings Berhad adopted Malaysian Financial Reporting Standards on January 1, 2012 with a transition date of January 1, 2011. These standards were applied retrospectively by directors to the comparative information in these fi nancial statements, including the statements of fi nancial position as of December 31, 2011 and January 1, 2011, and the statement of comprehensive income, statement of changes in equity and statement of cash fl ows for the year ended December 31, 2011 and related disclosures. We were not engaged to report on the restated comparative information and it is unaudited. Our responsibilities as part of our audit of the fi nancial statements of the Group and of the Company for the year ended December 31, 2012 have, in these circumstances, included obtaining suffi cient appropriate audit evidence that the opening balances as of January 1, 2012 do not contain misstatements that materially affect the fi nancial position as of December 31, 2012 and their fi nancial performance and cash fl ows for the year then ended.

This report is made solely to the member of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the contents of this report.

DELOITTE & TOUCHE AF 0834 Chartered Accountants

HIEW KIM TIAMPartner - 1717/8/13 (J)Chartered Accountant

April 8, 2013

INDEPENDENT AUDITORS’ REPORT (CONT’D)to the Members of CSC Steel Holdings Berhad (Incorporated in Malaysia)


ANNUAL REPORT 2012

STATEMENTS OF COMPREHENSIVE INCOMEfor the year ended December 31, 2012

The Group The Company 2012 2011 2012 2011 Note RM RM RM RM Revenue 5 1,126,993,592 1,206,148,361 4,852,428 4,905,670Cost of sales (1,072,542,990) (1,150,909,872) - - Gross profi t 54,450,602 55,238,489 4,852,428 4,905,670

Investment revenue 7 7,606,864 7,501,243 371,086 599,319Other income 8,443,382 10,229,122 - -Sales and marketing expenses (20,584,265) (22,519,485) - -General and administrative expenses (11,479,062) (11,103,205) (3,855,688) (3,307,007)Finance costs 8 (144) (542) - -Other expenses (924,421) (782,220) - -

Pro t before tax 9 37,512,956 38,563,402 1,367,826 2,197,982Tax expense 10 (9,505,252) (9,012,621) (404,644) (449,809) Pro t for the year 28,007,704 29,550,781 963,182 1,748,173 Other comprehensive income Net fair value gain on available-for-sale fi nancial assets 23,666 - 23,666 - Total comprehensive income for the year 28,031,370 29,550,781 986,848 1,748,173 Basic earnings per ordinary share (sen) 11 7.51 7.92

The accompanying Notes form an integral part of the Financial Statements.


ANNUAL REPORT 2012

STATEMENTS OF FINANCIAL POSITIONas of December 31, 2012

The Group The Company December 31, December 31, January 1, December 31, December 31, January 1, 2012 2011 2011 2012 2011 2011 Note RM RM RM RM RM RM

ASSETS

Non-current assets Property, plant and equipment 12 264,207,931 263,566,732 284,141,240 944,128 1,026,256 1,075,655Prepaid lease payments 13 18,740,493 19,016,298 19,253,684 - - -Investment in subsidiary companies 14 - - - 387,032,531 387,032,531 386,032,531Other investments 15 3,207,208 2,311,200 2,311,200 3,207,208 2,311,200 2,311,200 Total non-current assets 286,155,632 284,894,230 305,706,124 391,183,867 390,369,987 389,419,386

Current assets Inventories 16 194,943,434 199,706,255 179,366,530 - - -Trade receivables 17 96,888,807 86,920,362 91,284,627 - - -Other receivables and prepaid expenses 17 9,259,952 31,904,916 11,059,679 979,465 5,000 27,357Tax recoverable 3,412,287 9,667,696 2,133,179 483,116 331,350 126,559Amount due from ultimate holding company 18 20,041,177 - 1,828,665 - - -Amount due from subsidiary company 18 - - - - 88,100,000 71,000,000Amount due from other related company 18 43,886 - - - - -Fixed income fund, fi xed deposits, short-term placements and cash and bank balances 19 236,832,965 233,190,534 291,069,262 71,819,741 11,350,894 76,466,774 Total current assets 561,422,508 561,389,763 576,741,942 73,282,322 99,787,244 147,620,690 Total Assets 847,578,140 846,283,993 882,448,066 464,466,189 490,157,231 537,040,076


ANNUAL REPORT 2012

STATEMENTS OF FINANCIAL POSITION (CONT’D)as of December 31, 2012

The Group The Company December 31, December 31, January 1, December 31, December 31, January 1, 2012 2011 2011 2012 2011 2011 Note RM RM RM RM RM RM

EQUITY AND LIABILITIES

Capital and reserves Issued capital 20 380,000,000 380,000,000 380,000,000 380,000,000 380,000,000 380,000,000Treasury shares 21 (7,992,219) (7,415,698) (7,415,698) (7,992,219) (7,415,698) (7,415,698)Retained earnings 22 368,625,284 366,741,580 385,706,799 59,464,362 84,625,180 131,393,007Reserves 22 32,464,805 32,441,139 32,441,139 32,464,805 32,441,139 32,441,139 Total equity 773,097,870 771,767,021 790,732,240 463,936,948 489,650,621 536,418,448 Non-current liability Deferred tax liabilities 23 33,375,819 36,385,607 40,905,288 - - -

Current liabilities Trade payables 24 3,255,769 3,623,695 24,646,483 - - -Other payables and accrued expenses 24 37,060,205 31,609,053 25,715,578 529,241 506,610 621,628Amount due to ultimate holding company 18 - 269,570 - - - -Amount due to other related companies 18 788,477 2,628,736 190,007 - - -Short-term borrowing (secured) 25 - - 258,470 - - -Tax liabilities - 311 - - - - Total current liabilities 41,104,451 38,131,365 50,810,538 529,241 506,610 621,628 Total liabilities 74,480,270 74,516,972 91,715,826 529,241 506,610 621,628 Total Equity and Liabilities 847,578,140 846,283,993 882,448,066 464,466,189 490,157,231 537,040,076



ANNUAL REPORT 2012

STATEMENTS OF CHANGES IN EQUITYfor the year ended December 31, 2012

Non-distributable reserves Distributable Investment reserve- Issued Treasury Share revaluation Retained capital shares premium reserve earnings Total Note RM RM RM RM RM RM

The Group

Balance as of January 1, 2011 380,000,000 (7,415,698) 32,441,139 - 385,706,799 790,732,240 Total comprehensive income for the year - - - 29,550,781 29,550,781Dividends 26 - - - - (48,516,000) (48,516,000) Balance as of December 31, 2011/January 1, 2012 380,000,000 (7,415,698) 32,441,139 - 366,741,580 771,767,021

Profi t for the year - - - - 28,007,704 28,007,704Other comprehensive income for the year - - - 23,666 - 23,666

Total comprehensive income for the year - - - 23,666 28,007,704 28,031,370Dividends 26 - - - - (26,124,000) (26,124,000)Shares buy-back 21 - (576,521) - - - (576,521) Balance as of December 31, 2012 380,000,000 (7,992,219) 32,441,139 23,666 368,625,284 773,097,870

The Company

Balance as of January 1, 2011 380,000,000 (7,415,698) 32,441,139 - 131,393,007 536,418,448Total comprehensive income for the year - - - - 1,748,173 1,748,173Dividends 26 - - - - (48,516,000) (48,516,000) Balance as of December 31, 2011/January 1, 2012 380,000,000 (7,415,698) 32,441,139 - 84,625,180 489,650,621

Profi t for the year - - - - 963,182 963,182Other comprehensive income for the year - - - 23,666 - 23,666

Total comprehensive income for the year - - - 23,666 963,182 986,848Dividends 26 - - - - (26,124,000) (26,124,000)Shares buy-back 21 - (576,521) - - - (576,521) Balance as of December 31, 2012 380,000,000 (7,992,219) 32,441,139 23,666 59,464,362 463,936,948



ANNUAL REPORT 2012

STATEMENTS OF CASH FLOWSfor the year ended December 31, 2012

The Group The Company 2012 2011 2012 2011 RM RM RM RM Cash ows from operating activities Profi t for the year 28,007,704 29,550,781 963,182 1,748,173Adjustments for: Income taxes 9,505,252 9,012,621 404,644 449,809 Depreciation of property, plant and equipment 38,454,939 40,124,991 82,128 81,987 Provision for onerous contracts 4,846,952 6,054,583 - - Impairment loss on other investments 249,200 - 249,200 - Amortisation of prepaid lease payments 237,169 237,386 - - Property, plant and equipment written off 18,337 51,264 - - Finance costs 144 542 - - Write-down of inventories 12,662,632 20,982,332 - - Interest income (7,606,864) (7,501,243) (371,086) (599,319) Gain on disposal of property, plant and equipment (3,100) (19,400) - - Dividend income (588) (53,830) (588) (53,830) Unrealised gain on foreign exchange - (219,879) - - 86,371,777 98,220,148 1,327,480 1,626,820 Movements in working capital: Increase in inventories (7,899,811) (41,322,057) - -(Increase)/Decrease in trade receivables (9,968,445) 4,364,265 - -Decrease/(Increase) in other receivables and prepaid expenses 22,911,987 (20,872,454) (893,457) 4,083(Increase)/Decrease in amount due from ultimate holding company (20,041,177) 1,828,665 - -Decrease in trade payables (367,926) (21,033,763) - -Increase/(Decrease) in other payables and accrued expenses 6,658,783 2,940,389 22,631 (115,018)(Decrease)/Increase in amount due to ultimate holding company (269,570) 269,570 - -(Decrease)/Increase in amount due to other related companies (1,840,259) 2,438,729 - - Cash from operations 75,555,359 26,833,492 456,654 1,515,885Income tax paid (6,259,942) (21,067,608) (556,410) (654,600)Provision for onerous contracts utilised (6,054,583) (3,112,497) - -Interest paid (144) (542) - - Net cash generated from/(used in) operating activities 63,240,690 2,652,845 (99,756) 861,285


ANNUAL REPORT 2012

The Group The Company 2012 2011 2012 2011 Note RM RM RM RM Cash ows from investing activities Purchase of property, plant and equipment (39,114,475) (18,851,747) - (32,588)Proceeds from disposal of property, plant and equipment 3,100 19,400 - -Proceeds from compulsory land acquisition by government 38,636 - - -Additions to investment in subsidiary company (Note 14) - - - (1,000,000)Acquisition of subsidiary company, net of cash and cash equivalents (Note 14) - (737,900) - -Additions to other investments (Note 15) (1,121,542) - (1,121,542) -Interest received 7,339,841 7,528,460 290,078 617,593Repayment from/(Advances to) subsidiary company - - 88,100,000 (17,100,000)Increase in amount due from other related company (43,886) Dividend received 588 53,830 588 53,830 Net cash (used in)/from investing activities (32,897,738) (11,987,957) 87,269,124 (17,461,165)

Cash ows from nancing activities Shares buy-back (576,521) - (576,521) -Dividends paid (26,124,000) (48,516,000) (26,124,000) (48,516,000) Net cash used in fi nancing activities (26,700,521) (48,516,000) (26,700,521) (48,516,000)

Net increase/(decrease) in cash and cash equivalents 3,642,431 (57,851,112) 60,468,847 (65,115,880) Cash and cash equivalents at beginning of year 233,190,534 290,810,792 11,350,894 76,466,774 Effect of exchange rate differences - 230,854 - - Cash and cash equivalents at end of year 29 236,832,965 233,190,534 71,819,741 11,350,894


STATEMENTS OF CASH FLOWS (CONT’D)for the year ended December 31, 2012


ANNUAL REPORT 2012

NOTES TO FINANCIAL STATEMENTSfor the year ended December 31, 2012

1. GENERAL INFORMATION

The Company is a public limited liability company, incorporated and domiciled in Malaysia and listed on the Main Market of Bursa Malaysia Securities Berhad.

The Company is principally involved in investment holding and provision of management services. The principal activities of its subsidiary companies are as disclosed in Note 14.

There have been no signifi cant changes in the nature of the principal activities of the Company and its subsidiaries during the fi nancial year.

The registered offi ce of the Company is located at 49-B, Jalan Melaka Raya 8, Taman Melaka Raya, 75000 Melaka. The principal place of business of the Company is located at 180, Kawasan Perindustrian Ayer Keroh, Ayer Keroh, 75450 Melaka.

The fi nancial statements of the Group and of the Company were authorised by the Board of Directors for issuance in accordance with a resolution of the directors on April 8, 2013.

2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS

The fi nancial statements of the Group and the Company have been prepared in accordance with the Malaysian Financial Reporting Standards (“MFRS”), International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia.

Adoption of Malaysian Financial Reporting Standards

The Group and the Company’s fi nancial statements for the fi nancial year ended December 31, 2012 have been prepared in accordance with MFRSs for the fi rst time. In the previous years, these fi nancial statements were prepared in accordance with Financial Reporting Standards (“FRSs”).

The transition to MFRSs is accounted for in accordance with MFRS 1 First-time Adoption of Malaysian Financial Reporting Standards, with January 1, 2011 as the date of transition. The transition to MFRSs does not have any impact on the reported fi nancial position, fi nancial performance and cash fl ows of the Group and the Company.

Standards in issue but not yet effective

At the date of authorisation for issue of these fi nancial statements, the new and revised Standards which were in issue but not yet effective and not early adopted by the Group and the Company are as listed below:

MFRS 7 Financial Instruments: Disclosures [Amendments relating to Mandatory Effective Date of MFRS 9 and Transition Disclosures (IFRS 9 issued by IASB in November 2009 and October 2010 respectively)]1

MFRS 7 Financial Instruments: Disclosures (Amendments relating to Disclosures - Offsetting Financial Assets and Liabilities)2 MFRS 9 Financial Instruments (IFRS 9 issued by IASB in November 2009)3 MFRS 9 Financial Instruments (IFRS 9 issued by IASB in October 2010)3 MFRS 10 Consolidated Financial Statements2 MFRS 10 Consolidated Financial Statements (Amendments relating to Transition Guidance)2 MFRS 13 Fair Value Measurement2 MFRS 101 Presentation of Financial Statements (Amendments relating to Presentation of Items of Other Comprehensive Income)4 MFRS 132 Financial Instruments: Presentation (Amendments relating to Offsetting Financial Assets and Financial Liabilities)5 Amendments to MFRSs contained in the document entitled Annual Improvements 2009-2011 cycle²

NOTES TO FINANCIAL STATEMENTS (CONT’D)for the year ended December 31, 2012


ANNUAL REPORT 2012

2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONT’D)

Standards in issue but not yet effective (cont’d)

1 Effective immediately on issuance date of March 1, 2012 2 Effective for annual periods beginning on or after January 1, 2013 3 Effective for annual periods beginning on or after January 1, 2015 instead of 1 January 2013 immediately upon the issuance of Amendments to MFRS 9 (IFRS 9 issued by IASB in November 2009 and October 2010 respectively) and MFRS 7 relating to “Mandatory Effective Date of MFRS 9 and Transition Disclosures” on March 1, 2012 4 Effective for annual periods beginning on or after July 1, 2012 5 Effective for annual periods beginning on or after January 1, 2014

The directors anticipate that the abovementioned Standards will be adopted in the annual fi nancial statements of the Group and of the Company when they become effective and that the adoption of these Standards will have no material impact on the fi nancial statements of the Group and of the Company in the period of initial application.

3. SIGNIFICANT ACCOUNTING POLICIES

Basis of accounting

The fi nancial statements of the Group and the Company have been prepared under the historical cost convention, unless otherwise indicated in this summary of signifi cant accounting policies. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

The principal accounting policies are set out below.

Revenue

Revenue from sales of goods is measured at the fair value of the consideration received or receivable and is recognised when goods are delivered and title has passed to the customers. Sales represent amounts receivable for goods sold in the normal course of business, net of returns and trade discounts.

Dividend income represents gross dividend from unquoted investments and is recognised when the shareholder’s right to receive payment is established.

Management fee is recognised on time basis, in respect of services rendered and by reference to the agreements entered into.

Foreign currencies

The fi nancial statements of the Group and the Company are presented in Ringgit Malaysia, the currency of the primary economic environment in which the Group and the Company operates (its functional currency).

In preparing the fi nancial statements of the Group and the Company, transactions in currencies other than the Group’s and the Company’s functional currency (foreign currencies) are recorded at the rates of exchange prevailing at the date of transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing on that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non- monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in profi t or loss for the year. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profi t or loss for the year except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised in other comprehensive income. For such non-monetary items, any exchange component of that gain or loss is also recognised in other comprehensive income.



ANNUAL REPORT 2012

3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

Employee bene ts

(a) Short term benefits

Wages, salaries, paid leave and bonuses are recognised in the year in which the associated services are rendered by employees of the Group and of the Company.

(b) Defined contribution plan

The Group and the Company are required by law to make monthly contributions to the Employees Provident Fund (“EPF”), a statutory defi ned contribution plan for all their eligible employees based on certain prescribed rates of the employees’ salaries. Once the contributions have been paid, the Group and the Company have no further payment obligations. The Group’s and the Company’s contribution to EPF are disclosed separately. The employees’ contributions to EPF are included in staff costs.

Income taxes

Income tax expense represents the sum of the tax currently payable and deferred tax.

(a) Current tax

The tax currently payable is based on taxable profi t for the year. Taxable profi t differs from profi t as reported in the statement of comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group’s and the Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

(b) Deferred tax

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the fi nancial statements and the corresponding tax bases used in the computation of taxable profi t. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profi ts will be available against which those deductible temporary differences, unused tax losses and unused tax credits can be utilised.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that suffi cient taxable profi ts will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets refl ects the tax consequences that would follow from the manner in which the Group and the Company expect, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group and the Company intend to settle its current tax assets and liabilities on a net basis.



ANNUAL REPORT 2012


Income taxes (cont’d)

(c) Current and deferred tax for the period

Current and deferred tax are recognised as an expense or income in profi t or loss, except when they relate to items that are recognised outside profi t or loss (whether in other comprehensive income or directly in equity), in which case the tax is also recognised outside profi t or loss.

Basis of consolidation The consolidated fi nancial statements incorporate the fi nancial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the fi nancial and operating policies of an entity so as to obtain benefi ts from its activities.

The subsidiary companies are consolidated using the acquisition method of accounting whereby, on acquisition, the assets acquired and liabilities and contingent liabilities assumed of the subsidiary companies are measured at their fair values at the date of acquisition. Any excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifi able assets, liabilities and contingent liabilities represents goodwill. Any excess of the Group’s interest in the net fair value of the identifi able assets, liabilities and contingent liabilities over the cost of acquisition is recognised immediately in profi t or loss.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition and up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the fi nancial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.

Depreciation of property, plant and equipment, except for freehold land and plant and machinery under installation which are not depreciated, is computed on the straight-line method at the following annual rates based on the estimated useful lives of the various assets. The annual depreciation rates are as follows:

Buildings under long leases 2% - 4% Plant and machinery 5% - 66.67% Motor vehicles 10% - 20% Equipment, furniture, fi xture and fi ttings 6.67% - 50%

The residual value, useful life and depreciation method are reviewed at the end of each reporting period to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of future economic benefi ts embodied in the property, plant and equipment.

A gain or loss arising from the disposal of an asset is determined as the difference between the estimated net disposal proceeds and the carrying amount of the asset, and is recognised in profi t or loss.



ANNUAL REPORT 2012


Prepaid lease payments

Lease of land with title not expected to pass to the lessee by the end of the lease term is treated as operating lease as land normally has an indefi nite economic life. The upfront payments made on entering into a lease or acquiring a leasehold land that is accounted for as an operating lease are accounted for as prepaid lease payments that are amortised over the lease term on a straight-line basis and charged to the profi t or loss for the period.

Investments

Investment in unquoted shares of subsidiary companies and other investments in unquoted shares are stated at cost. Where there is an indication of impairment in the value of the assets, the carrying amounts of the investments are assessed and written down immediately to its recoverable amount.

Inventories

Inventories are valued at the lower of cost and net realisable value. Cost is determined on the weighted average method. The cost of raw materials comprises the original purchase price plus the cost of bringing the inventories to their present location and condition. The costs of work-in-progress and fi nished goods include the cost of raw materials, direct labour and a proportion of the manufacturing overheads. Net realisable value represents the estimated selling price in the ordinary course of business less selling and distribution costs and all other estimated costs to completion.

In arriving at net realisable values, due allowance is made for all obsolete and slow moving inventories.

Provisions

Provisions are recognised when the Group and the Company have a present obligation (legal or constructive) as a result of a past event, it is probable that the Group and the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash fl ows estimated to settle the present obligation, its carrying amount is the present value of those cash fl ows.

When some or all of the economic benefi ts required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where the Company has a contract under which the avoidable costs of meeting the obligations under the contract exceed the economic benefi ts expected to be received under it. The unavoidable costs under a contract refl ect the least net cost of exiting from the contract, which is the lower of the cost of fulfi lling it and any compensation or penalties arising from failure to fulfi l it.

Financial instruments

(a) Initial recognition and measurement

A fi nancial instrument is recognised in the fi nancial statements when, and only when, the Group and the Company become a party to the contractual provisions of the instrument.

A fi nancial instrument is recognised initially, at its fair value plus, in the case of a fi nancial instrument not at fair value through profi t or loss, transaction costs that are directly attributable to the acquisition or issue of the fi nancial instrument.



ANNUAL REPORT 2012


Financial instruments (cont’d)

(a) Initial recognition and measurement (cont’d)

An embedded derivative is recognised separately from the host contract and accounted for as a derivative if, and only if, it is not closely related to the economic characteristics and risks of the host contract and the host contract is not categorised at fair value through profi t or loss. The host contract, in the event an embedded derivative is recognised separately, is accounted for in accordance with policy applicable to the nature of the host contract.

(b) Financial instrument categories and subsequent measurement

The Group and the Company categorise and measure fi nancial instruments as follows:

Financial assets

(i) Financial assets at fair value through pro t or loss

Fair value through profi t or loss category comprises fi nancial assets that are held for trading, including derivatives or fi nancial assets that are specifi cally designated into this category upon initial recognition.

Financial assets categorised as fair value through profi t or loss are subsequently measured at their fair values with the gain or loss recognised in profi t or loss.

(ii) Held-to-maturity investments

Held-to-maturity investments category comprises debt instruments that are quoted in an active market and the Group and the Company have the positive intention and ability to hold to maturity.

Financial assets categorised as held-to-maturity investments are subsequently measured at amortised cost using the effective interest method.

(iii) Loans and receivables

Loans and receivables category comprises debt instruments that are not quoted in an active market.

Financial assets categorised as loans and receivables are subsequently measured at amortised cost using the effective interest method.

(iv) Available-for-sale nancial assets

Available-for-sale category comprises non-derivative fi nancial assets that are either designated as available- for-sale or are not classifi ed as loans and receivables, held-to-maturity investments or fi nancial assets at fair value through profi t or loss.

Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of unquoted equity instruments are measured at cost. Other fi nancial assets categorised as available-for-sale are subsequently measured at their fair values with the gain or loss recognised in other comprehensive income, except for impairment losses, foreign exchange gains and losses arising from monetary items and interest calculated using the effective interest method which are recognised in profi t or loss.

On derecognition, the cumulative gain or loss recognised in other comprehensive income is reclassifi ed from equity into statement of comprehensive income.

All fi nancial assets, except for those measured at fair value through profi t or loss, are subject to review for impairment.



ANNUAL REPORT 2012


Financial instruments (cont’d)

(b) Financial instrument categories and subsequent measurement (cont’d)

Financial liabilities

All fi nancial liabilities are initially measured at fair value and subsequently measured at amortised cost other than those categorised as fair value through profi t or loss.

Fair value through profi t or loss category comprises fi nancial liabilities that are held for trading, derivatives or fi nancial liabilities that are specifi cally designated into this category upon initial recognition.

Derivatives that are linked to and must be settled by delivery of unquoted equity instruments whose fair values cannot be reliably measured are measured at cost.

Other fi nancial liabilities categorised as fair value through profi t or loss are subsequently measured at their fair values with the gain or loss recognised in profi t or loss.

(c) Derecognition

A fi nancial asset or part of it is derecognised when, and only when the contractual rights to the cash fl ows from the fi nancial asset expire or the fi nancial asset is transferred to another party without retaining control or substantially all risks and rewards of the asset. On derecognition of a fi nancial asset, the difference between the carrying amount and the sum of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised in equity is recognised in profi t or loss.

A fi nancial liability or a part of it is derecognised when, and only when, the obligation specifi ed in the contract is discharged or cancelled or expires. On derecognition of a fi nancial liability, the difference between the carrying amount of the fi nancial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profi t or loss.

Impairment of nancial assets

All fi nancial assets (except for fi nancial assets categorised as fair value through profi t or loss, and fi xed and call deposits) are assessed at each reporting date whether there is any objective evidence of impairment as a result of one or more events having an impact on the estimated future cash fl ows of the asset. Losses expected as a result of future events, no matter how likely, are not recognised.

For an equity investment classifi ed as available for sale, a signifi cant or prolonged decline in the fair value below its cost is an objective evidence of impairment.

An impairment loss in respect of loans and receivables and held-to-maturity investments is recognised in profi t or loss and is measured as the difference between the asset’s carrying amount and the present value of estimated future cash fl ows discounted at the asset’s original effective interest rate. The carrying amount of the assets is reduced by the impairment loss directly except for trade receivables where the carrying amount is reduced through the use of an allowance account.

An impairment loss in respect of available-for-sale fi nancial assets is recognised in profi t or loss. Where a decline in the fair value of an available-for-sale fi nancial asset has been recognised in other comprehensive income, the cumulative loss in other comprehensive income is reclassifi ed from equity and recognised in profi t or loss.

Impairment losses recognised in other comprehensive income for an investment in an equity instrument is not reversed through profi t or loss.



ANNUAL REPORT 2012


Impairment of nancial assets (cont’d)

With the exception of available for sale equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be objectively related to an event occurring after the impairment loss was recognised in profi t or loss, the impairment loss is reversed, to the extent that the asset’s carrying amount does not exceed what the carrying amount would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognised in profi t or loss.

Impairment of non- nancial assets

At the end of each reporting period, the Group and the Company review the carrying amounts of the non-fi nancial assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group and the Company estimate the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profi t or loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profi t or loss.

Treasury shares

Shares bought back held as treasury shares are accounted for on the cost method and presented as a deduction from equity. Should such shares be cancelled, their nominal amounts will be eliminated, and the differences between their cost and nominal amounts will be taken to reserves as appropriate.

Segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. An operating segment’s operating results are reviewed regularly by the chief operating decision maker, which is the Chief Executive Offi cer of the Group, to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete fi nancial information is available.

Statements of cash ows The Group and the Company adopt the indirect method in the preparation of the statements of cash fl ows.

Cash equivalents are short-term, highly liquid investments with maturities of three months or less from the date of acquisition and are readily convertible to cash with insignifi cant risks of changes in value.



ANNUAL REPORT 2012

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

Critical judgements in applying accounting policies

In the application of the Group’s and the Company’s accounting policies, which are described in Note 3, the directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Key sources of estimation uncertainty

The following are the key assumptions concerning the future and other key sources of estimation uncertainty at the end of reporting period that may have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year:

(a) Impairment of non- nancial assets

The Group and the Company assess whether there are any indicators of impairment for all non-fi nancial assets at the end of each reporting period, and non-fi nancial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable. When value in use calculations are undertaken, management must estimate the expected future cash fl ows from the asset or cash generating unit and choose a suitable discount rate in order to calculate the present value of those cash fl ows. The preparation of estimated future cash fl ows involves signifi cant judgement and estimations. Based on existing knowledge, the Group and the Company believe that the assumptions are appropriate and reasonable, signifi cant changes in the assumptions may materially affect the assessment of recoverable amounts and may lead to changes in impairment charges.

(b) Useful lives and residual value of property, plant and equipment

The Group and the Company estimate the useful lives of property, plant and equipment based on the period over which the assets are expected to be available for use. The estimated useful lives and residual values of property, plant and equipment are reviewed at the end of each reporting period and are updated if expectations differ from previous estimates due to physical wear and tear, technical or commercial obsolescence and legal or other limits on the use of the relevant assets. In addition, the estimation of the useful lives and residual values of property, plant and equipment are based on the internal technical evaluation, maintenance programmes and experience with similar assets in the same industry. It is possible, however, that future results of operations could be materially affected by changes in the estimates brought about by changes in the factors mentioned above. The amounts and timing of depreciation expense for any period would be affected by changes in these factors and circumstances. A reduction in the estimated useful lives and residual values of the property, plant and equipment would increase the depreciation expense and decrease the carrying amounts of property, plant and equipment.



ANNUAL REPORT 2012

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (CONT’D)

Key sources of estimation uncertainty (cont’d)

(c) Allowance for doubtful debts

The Group makes allowance for doubtful debts based on an assessment of the recoverability of trade receivables. Allowances are applied to trade receivables where events or changes in circumstances indicate that the balances may not be collectible. The identifi cation of doubtful debts requires use of judgement and estimates. Where the expectation is different from the original estimate, such difference will impact the carrying value of the trade receivables and doubtful debts expenses in the reporting period in which such estimate has been changed.

(d) Inventories

In determining the net realisable value of the inventories, an estimation of the recoverable amount of inventories on hand is performed by management based on the most reliable evidence available at the time the estimates are made. These estimates take into consideration the fl uctuations of selling price or cost, or any inventories on hand that may not be realised, as a result of events occurring after the end of the reporting period to the extent such events confi rm conditions existing at the end of the reporting period.

5. REVENUE

The Group The Company 2012 2011 2012 2011 RM RM RM RM Manufacturing and marketing of steel products 1,126,993,004 1,206,094,531 - - Dividend income from other investments 588 53,830 588 53,830 Management fee from subsidiary company (Note 18) - - 4,800,000 4,800,000 Rental income (Note 18) - - 51,840 51,840 1,126,993,592 1,206,148,361 4,852,428 4,905,670



ANNUAL REPORT 2012

6. SEGMENT REPORTING

Business segments

For management purposes, the Group is organised into the following operating divisions:

- Cold rolled and coated steel products - Investment holding - Others (including direct/indirect subsidiary company which is dormant)

Inter-segment sales are charged at cost plus a percentage profi t mark-up.

Segment revenues and results

The following is an analysis of the Group’s revenue and results by reportable segment:

The Group Segment revenue Segment pro t 2012 2011 2012 2011 RM RM RM RM Cold rolled and coated steel products 1,126,993,004 1,206,094,531 29,373,531 29,472,364 Investment holding 4,918,428 4,933,170 1,018,770 1,604,199 Others - - (486,065) (13,862) 1,131,911,432 1,211,027,701 29,906,236 31,062,701 Less: Eliminations (4,917,840) (4,879,340) - -

1,126,993,592 1,206,148,361 29,906,236 31,062,701 Investment revenue 7,606,864 7,501,243 Finance costs (144) (542) Profi t before tax 37,512,956 38,563,402 Income taxes (9,505,252) (9,012,621) Profi t for the year 28,007,704 29,550,781

Segment assets and liabilities

The following is an analysis of the Group’s assets and liabilities:

Segment assets Segment liabilities 2012 2011 2012 2011 RM RM RM RM The Group

Cold rolled and coated steel products 623,956,495 820,120,877 39,542,331 37,607,412 Investment holding 207,432,772 15,461,261 535,441 511,699 Others 12,776,586 1,034,159 1,026,679 11,943 844,165,853 836,616,297 41,104,451 38,131,054 Unallocated 3,412,287 9,667,696 33,375,819 36,385,918 Total 847,578,140 846,283,993 74,480,270 74,516,972



ANNUAL REPORT 2012

6. SEGMENT REPORTING (CONT’D)

Other segment information

Depreciation of property, Capital additions plant and equipment 2012 2011 2012 2011 RM RM RM RM

The Group Cold rolled and coated steel products 28,890,933 18,809,189 38,347,490 40,036,754 Investment holding 3,700 32,588 97,184 88,237 Others 10,219,842 9,970 10,265 -

39,114,475 18,851,747 38,454,939 40,124,991

Geographical segments

The Group’s revenue from external customers by geographical location is detailed below: Malaysia Asia Paci c Consolidated RM RM RM The Group

Year ended December 31, 2012 Revenue from external customers by location of customers 1,021,255,131 105,738,461 1,126,993,592 Segment asset by location of assets 847,578,140 - 847,578,140 Capital expenditure by location of assets 39,114,475 - 39,114,475

Year ended December 31, 2011 Revenue from external customers by location of customers 1,044,534,246 161,614,115 1,206,148,361

Segment asset by location of assets 846,283,993 - 846,283,993

Capital expenditure by location of assets 18,851,747 - 18,851,747

7. INVESTMENT REVENUE

The Group The Company 2012 2011 2012 2011 RM RM RM RM Interest income from fi xed income fund, fi xed deposits and short-term placements with licensed banks 7,606,864 7,501,243 371,086 599,319



ANNUAL REPORT 2012

8. FINANCE COSTS

The Group 2012 2011 RM RM Interest expense on bank overdraft 144 542

9. PROFIT BEFORE TAX

Profi t before tax is arrived at after crediting/(charging):

The Group The Company 2012 2011 2012 2011 RM RM RM RM Changes in inventories of fi nished goods and work-in-progress 5,327,269 14,511,910 - - Realised gain on foreign exchange 7,584,089 8,279,429 - - Unrealised gain on foreign exchange - 219,879 - - Gain on disposal of property, plant and equipment 3,100 19,400 - - Raw materials and consumables used (969,360,720) (1,064,475,140) - - Depreciation of property, plant and equipment (Note 12) (38,454,939) (40,124,991) (82,128) (81,987) Staff costs (28,016,404) (26,844,602) (2,717,169) (2,508,897) Write-down of inventories (12,662,632) (20,982,332) - - Provision for onerous contracts (4,846,952) (6,054,583) - - Directors’ remuneration: The directors of the Company (336,915) (349,603) (336,915) (349,603) The directors of the subsidiary companies (399,876) (427,371) - - Impairment loss on other investments (249,200) - (249,200) - Amortisation of prepaid lease payments (Note 13) (237,169) (237,386) - - Audit fee: Statutory (112,900) (77,400) (24,000) (18,000) Others (3,500) (18,000) (3,500) (3,000) Property, plant and equipment written off (18,337) (51,264) - - Rental of building (45,520) (5,500) - -

Staff costs include salaries, contributions to EPF, bonuses and all other related expenses. EPF contributions made during the fi nancial year by the Group and the Company amounted to RM2,789,350 (2011: RM2,567,531) and RM298,524 (2011: RM264,240) respectively.

Directors’ remuneration consists of:

The Group The Company 2012 2011 2012 2011 RM RM RM RM Executive directors: Salaries and other emoluments 587,655 625,782 241,320 253,688 Benefi ts-in-kind 54,336 56,392 795 1,115 Non-executive directors: Fees 94,800 94,800 94,800 94,800 736,791 776,974 336,915 349,603



ANNUAL REPORT 2012

10. INCOME TAXES

The Group The Company 2012 2011 2012 2011 RM RM RM RM

Estimated tax payable: Current year 11,919,135 16,109,505 404,510 509,053 Under/(Over)provision in prior years 595,905 (2,577,203) 134 (59,244) 12,515,040 13,532,302 404,644 449,809 Deferred tax (Note 23): Current year (2,978,137) (7,007,623) - - (Over)/Underprovision in prior year (31,651) 2,487,942 - - (3,009,788) (4,519,681) - - 9,505,252 9,012,621 404,644 449,809

A numerical reconciliation of income tax expense to profi t before tax at the applicable statutory income tax rate to tax expense at the effective income tax rate is as follows:

The Group The Company 2012 2011 2012 2011 RM RM RM RM

Profi t before tax 37,512,956 38,563,402 1,367,826 2,197,982 Tax at the statutory income tax rate of 25% 9,378,239 9,640,851 341,957 549,496 Tax effect of expenses not deductible in determining taxable profi t 436,382 213,681 135,387 51,333 Utilisation of investment tax allowances previously not recognised - (102,436) - - Tax effect of income not taxable in determining taxable profi t (817,513) (581,196) (72,834) (91,776) Tax effect of double deduction on import insurance (56,110) (69,018) - - Under/(Over)provision in prior years: Current tax 595,905 (2,577,203) 134 (59,244) Deferred tax (31,651) 2,487,942 - - Tax expense for the year 9,505,252 9,012,621 404,644 449,809



ANNUAL REPORT 2012

10. INCOME TAXES (CONT’D)

Tax savings from utilisation of unutilised investment tax allowances of the Group amounted to RM Nil (2011: RM102,436).

As of December 31, 2012, the subsidiary companies have the following tax-exempt income accounts amounting to about:

(a) RM229,455,000 (2011: RM229,455,000) arising from investment tax allowances claimed and utilised under the Promotion of Investment Act, 1986;

(b) RM2,113,900 (2011: RM2,113,900) arising from reinvestment allowances claimed and utilised under Schedule 7A of the Income Tax Act, 1967; and

(c) RM269,000 (2011: RM269,000) arising from chargeable income waived in 1999 in accordance with Section 12 of the Income Tax (Amended) Act, 1999.

The balances in the tax exempt income accounts, which are subject to the agreement with the tax authorities, is available for distribution of tax exempt dividends up to the shareholders of the Company.

11. EARNINGS PER ORDINARY SHARE

Basic earnings per ordinary share is calculated by dividing the Group’s profi t for the year by the weighted average number of ordinary shares in issue during the fi nancial year.

The Group 2012 2011 RM RM Profi t for the year 28,007,704 29,550,781 Weighted average number of ordinary shares of RM1 in issue 373,122,854 373,200,000 Basic earnings per ordinary share (sen) 7.51 7.92



ANNUAL REPORT 2012

12. PROPERTY, PLANT AND EQUIPMENT

The Group

Equipment, Plant and Buildings furniture, machinery Freehold under long Plant and Motor xture and under land leases machinery vehicles ttings installation Total RM RM RM RM RM RM RM

Cost Balance at January 1, 2011 4,170,809 76,663,227 468,621,091 4,337,391 22,155,051 3,378,973 579,326,542 Arising from acquisition of subsidiary company (Note 14) - 750,000 - - - - 750,000 Additions - 28,898 3,720,235 - 9,150 15,093,464 18,851,747 Disposals/Write-offs - - (1,394,830) (61,511) (228,986) - (1,685,327) Reclassifi cation - 491,895 3,910,063 56,000 1,116,629 (5,574,587) - Balance at December 31, 2011/ January 1, 2012 4,170,809 77,934,020 474,856,559 4,331,880 23,051,844 12,897,850 597,242,962 Additions - 39,290 8,568,026 233,500 2,200,437 28,073,222 39,114,475 Disposals/Write-offs - - (3,284,863) (59,231) (71,745) - (3,415,839) Reclassifi cation - - 1,142,378 - 717,953 (1,860,331) - Balance at December 31, 2012 4,170,809 77,973,310 481,282,100 4,506,149 25,898,489 39,110,741 632,941,598

Accumulated depreciation Balance at January 1, 2011 - 29,717,820 236,288,254 3,389,422 13,568,330 - 282,963,826 Charge for the year - 4,002,326 32,661,665 512,249 2,948,751 - 40,124,991 Disposals/Write-offs - - (1,344,672) (61,511) (182,958) - (1,589,141) Balance at December 31, 2011/ January 1, 2012 - 33,720,146 267,605,247 3,840,160 16,334,123 - 321,499,676 Charge for the year - 4,028,112 31,805,751 268,554 2,352,522 - 38,454,939 Disposals/Write-offs - - (3,274,657) (59,231) (60,310) - (3,394,198) Balance at December 31, 2012 - 37,748,258 296,136,341 4,049,483 18,626,335 - 356,560,417



ANNUAL REPORT 2012

12. PROPERTY, PLANT AND EQUIPMENT (CONT’D)

Equipment, Plant and Buildings furniture, machinery Freehold under long Plant and Motor xture and under land leases machinery vehicles ttings installation Total RM RM RM RM RM RM RM

Accumulated impairment loss Balance at January 1, 2011 - - 11,902,385 - 319,091 - 12,221,476 Write-offs - - (44,922) - - - (44,922)

Balance at December 31, 2011/ January 1, 2012 - - 11,857,463 - 319,091 - 12,176,554 Write-offs - - - - (3,304) - (3,304) Balance at December 31, 2012 - - 11,857,463 - 315,787 - 12,173,250

Net book value Balance at December 31, 2012 4,170,809 40,225,052 173,288,296 456,666 6,956,367 39,110,741 264,207,931 Balance at December 31, 2011 4,170,809 44,213,874 195,393,849 491,720 6,398,630 12,897,850 263,566,732

Balance at January 1, 2011 4,170,809 46,945,407 220,430,452 947,969 8,267,630 3,378,973 284,141,240



ANNUAL REPORT 2012

12. PROPERTY, PLANT AND EQUIPMENT (CONT’D)

The Company

Furniture and ttings Buildings Total RM RM RM Cost Balance at January 1, 2011 326,493 771,384 1,097,877 Additions 3,690 28,898 32,588 Balance at December 31, 2011/December 31, 2012 330,183 800,282 1,130,465

Accumulated depreciation Balance at January 1, 2011 8,782 13,440 22,222 Charge for the year 65,901 16,086 81,987 Balance at December 31, 2011/January 1, 2012 74,683 29,526 104,209 Charge for the year 66,043 16,085 82,128 Balance at December 31, 2012 140,726 45,611 186,337

Net book value Balance at December 31, 2012 189,457 754,671 944,128

Balance at December 31, 2011 255,500 770,756 1,026,256

Balance at January 1, 2011 317,711 757,944 1,075,655

Included in property, plant and equipment of the Group are fully depreciated property, plant and equipment which are still in use with an aggregate cost of approximately RM91,474,000 (2011: RM63,920,000).



ANNUAL REPORT 2012

13. PREPAID LEASE PAYMENTS

Long-term Leasehold Land The Group December 31, December 31, January 1, 2012 2011 2011 RM RM RM

Cost: At beginning of year 22,957,863 22,957,863 22,779,880 Additions during the year - - 177,983 Compulsory acquisition by the government (47,662) - - At end of year 22,910,201 22,957,863 22,957,863 Less: Cumulative amortisation At beginning of year (3,941,565) (3,704,179) (3,467,792) Amortisation for the year (Note 9) (237,169) (237,386) (236,387) Compulsory acquisition by the government 9,026 - - At end of year (4,169,708) (3,941,565) (3,704,179) Net 18,740,493 19,016,298 19,253,684

Prepaid lease payments relate to the lease of land for the Group’s factory and offi ce buildings located in Ayer Keroh. The lease will expire in year 2092 and the Group does not have an option to purchase the leased land at the expiry of the lease period.

14. INVESTMENT IN SUBSIDIARY COMPANIES

The Company December 31, December 31, January 1, 2012 2011 2011 RM RM RM Unquoted shares - at cost 415,445,306 415,445,306 414,445,306 Less: Accumulated impairment losses At beginning of year (28,412,775) (28,412,775) - Impairment loss recognised in the year - - (28,412,775) At end of year (28,412,775) (28,412,775) (28,412,775) Net 387,032,531 387,032,531 386,032,531

In prior year:

(a) CSC Steel Sdn. Bhd. (“CSCS”), a subsidiary company, transferred its entire equity interests in CSC Bio-Coal Sdn. Bhd. (formerly known as Ornaconstruction Corporation Sdn. Bhd.) (“CSCBC”) to the Company for a cash consideration of RM100,000; and subsequently, the Company subscribed for an additional 900,000 new ordinary shares of RM1 each in the share capital of CSCBC; and

(b) CSCS acquired Constant Mode Sdn. Bhd. (“CMSB”), a company incorporated in Malaysia from a third party for a total cash consideration of RM750,000.



ANNUAL REPORT 2012

14. INVESTMENT IN SUBSIDIARY COMPANIES (CONT’D)

In 2011, the effect of acquisition of CMSB on the fi nancial position of the Group was as follows: Fair value Acquirees’ recognised on carrying acquisition amount 2011 2011 RM RM Property, plant and equipment 750,000 750,000 Cash on hand 12,100 12,100 Other payables and accrued expenses (11,000) (11,000) Tax liabilities (1,100) (1,100) Fair values of net assets acquired 750,000 750,000

Less: Cash and cash equivalents (12,100) Cash outfl ow on acquisition, net of cash acquired 737,900 In 2011, the post acquisition profi t of CMSB acquired:

2011 RM Revenue 27,500 Other expense (21,964) Profi t before tax 5,536 Tax expense (5,211)

Increase in Group profi t attributable to shareholders 325



ANNUAL REPORT 2012

14. INVESTMENT IN SUBSIDIARY COMPANIES (CONT’D)

Details of the subsidiary companies, all incorporated in Malaysia, are as follows:

Effective percentage ownership Direct subsidiary December 31, December 31, January 1, company 2012 2011 2011 Principal activities

CSC Steel Sdn. Bhd. 100% 100% 100% Manufacturing and marketing of steel products. Group Steel 100% 100% 100% Ceased operations. Corporation (M) Sdn. Bhd. CSC Bio-Coal 100% 100% - Re-commenced its Sdn. Bhd. business activity in 2011 in production of bio-coal.

Indirect subsidiary company

CSC Bio-Coal - - 100% Ceased operations. Sdn. Bhd. (held through CSC Steel Sdn. Bhd.) Constant Mode 100% 100% - Investment holding Sdn. Bhd. * in real property. (held through CSC Steel Sdn. Bhd.)

* The fi nancial statements of this subsidiary company are audited by auditors other than the auditors of the Company.

15. OTHER INVESTMENTS

The Group and The Company December 31, December 31, January 1, 2012 2011 2011 RM RM RM Available-for sale investment carried at fair value In Malaysia: Quoted shares 1,145,208 - - Other investment carried at amortised cost Outside Malaysia: Unquoted shares 2,311,200 2,311,200 2,311,200 Less: Impairment loss recognised in the year (249,200) - - Net 2,062,000 2,311,200 2,311,200 3,207,208 2,311,200 2,311,200 Market value of quoted shares 1,145,208 - -



ANNUAL REPORT 2012

16. INVENTORIES

The Group December 31, December 31, January 1, 2012 2011 2011 RM RM RM

At cost: Consumables 27,352,341 25,314,388 19,721,245 At net realisable value: Raw materials 60,432,125 72,560,168 72,325,496 Work-in-progress 43,182,802 39,807,378 45,563,513 Finished goods 63,976,166 62,024,321 41,756,276 167,591,093 174,391,867 159,645,285 194,943,434 199,706,255 179,366,530

The cost of inventories recognised as an expense of the Group includes RM12,662,632 (December 31, 2011: RM20,982,332; January 1, 2011:RM12,783,465) in respect of write-downs of inventories to net realisable value.

17. TRADE RECEIVABLES, OTHER RECEIVABLES AND PREPAID EXPENSES

Trade receivables comprise amounts receivable for the sales of goods. The credit period granted on sales of goods ranges from cash terms to 60 days (December 31, 2011: cash terms to 60 days; January 1, 2011: cash terms to 60 days).

The currency exposure profi le of trade receivables of the Group is as follows:


Ringgit Malaysia 91,682,418 82,270,653 81,418,722 United States Dollar 5,206,389 4,649,709 9,865,905 96,888,807 86,920,362 91,284,627

Trade receivables disclosed above include amounts (see below for aged analysis) that are past due at the end of the reporting period but against which the Group has not recognised an allowance for doubtful debts because there has not been a signifi cant change in credit quality and the amounts are still considered recoverable.



ANNUAL REPORT 2012

17. TRADE RECEIVABLES, OTHER RECEIVABLES AND PREPAID EXPENSES (CONT’D)

To reduce potential losses related to settlement risk, the Group requires certain customers that do not meet its credit standards to post collateral in order to ensure their performance of settlement obligations arising from sales. The Group holds collateral in the form of various guarantees and letter of credit. Guarantees and letter of credit are excluded from the statements of fi nancial position. The Group maintained collateral as follows:


Personal guarantee 35,994,081 32,796,851 38,882,934 Corporate guarantee 33,242,086 29,941,335 21,798,804 Bank guarantee 2,863,072 4,405,622 5,335,379 Letter of credit 5,206,389 4,649,709 7,190,776 Total 77,305,628 71,793,517 73,207,893

Ageing of past due but not impaired:


Overdue 1 - 60 days 23,938,357 26,368,168 23,090,713 Average age (days) 30 30 30

In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the end of the reporting period. The concentration of credit risk is limited due to the customer base being large and unrelated.

Other receivables and prepaid expenses consist of:

December 31, December 31, January 1, 2012 2011 2011 RM RM RM

The Group

Deposit paid for acquisition of other investment 817,680 - - Refundable deposits 5,247,550 5,205,180 5,199,280 Other receivables 1,009,829 1,741,066 1,643,931 Advance payments to suppliers 1,563,352 24,415,655 3,595,170 Prepaid expenses 339,688 528,185 579,251 Interest receivable 281,853 14,830 42,047 9,259,952 31,904,916 11,059,679



ANNUAL REPORT 2012

17. TRADE RECEIVABLES, OTHER RECEIVABLES AND PREPAID EXPENSES (CONT’D)


The Company

Deposit paid for acquisition of other investment 817,680 - - Refundable deposits 5,000 5,000 5,000 Other receivables 74,577 - 4,083 Prepaid expenses 1,200 - - Interest receivable 81,008 - 18,274 979,465 5,000 27,357

Included in refundable deposits of the Group is a security deposit in respect of purchase of raw materials amounting to RM5,000,000 (December 31, 2011: RM5,000,000; January 1, 2011: RM5,000,000) paid to a supplier.

Advance payments to suppliers represents trade term required for purchase of raw materials by the suppliers under normal course of business of a subsidiary company.

18. HOLDING COMPANIES AND RELATED PARTY TRANSACTIONS

The Company is a subsidiary of China Steel Asia Pacifi c Holdings Pte. Ltd., a company incorporated in the Republic of Singapore. The directors regard China Steel Corporation, a company incorporated in Taiwan, as the ultimate holding company.

Amount due from/(to) ultimate holding company, which is denominated in United States Dollar, arose mainly from trade transactions and payments on behalf, is unsecured, interest-free and repayable on demand. Included in amount due from ultimate holding company is a security deposit in respect of purchase of raw materials amounting to RM16,995,000 (December 31, 2011 and January 1, 2011: RM Nil).

Amount due from subsidiary company in 2011, eliminated on consolidation, which is denominated in Ringgit Malaysia, arose mainly from unsecured advances, was interest-free and repayable on demand.

Amount due from other related company, which is denominated in United States Dollar, arose mainly from payments on behalf, is interest-free and repayable on demand.

Amount due to other related companies, which is denominated in United States Dollar, arose mainly from purchases of raw materials, purchase of property, plant and equipment, and advances, is unsecured, interest-free and repayable on demand except for liabilities arising from purchases of raw materials which are payable within the normal trade terms of 14 days (December 31, 2011: 14 days; January 1, 2011: 14 days).

Related party refer to a consultancy fi rm in which Mr. Chong Khim Leong @ Chong Kim Leong, a director of the Company, is also a member.



ANNUAL REPORT 2012

18. HOLDING COMPANIES AND RELATED PARTY TRANSACTIONS (CONT’D)

During the fi nancial year, signifi cant transactions undertaken on basis agreed with related companies are as follows:


The Group

Ultimate holding company Purchases of raw materials 432,499,521 459,173,651 557,737,867

Other related companies Sales of goods - 415,154 - Purchases of raw materials 24,560,170 77,918,112 63,655,993 Purchases of spare parts and consumables 1,794,835 2,031,880 902,958 Purchase of property, plant and equipment 8,778,454 1,084,666 688,837 Sales commission paid and payable 58,489 86,906 - Technical fees paid and payable 109,067 89,702 24,966

Related party Consultancy fee paid 1,000 7,825 -

The Company

Subsidiary companies Advances to 9,550,000 - - Management fee receivable (Note 5) 4,800,000 4,800,000 4,800,000 Rental received (Note 5) 51,840 51,840 17,680

Compensation of key management personnel

Key management personnel are defi ned as those persons having authority and responsibility for planning, directing and controlling the activities of the Group and of the Company either directly or indirectly. The key management personnel of the Group and of the Company includes Executive Directors and Non-Executive Directors of the Company and certain members of senior management of the Group and of the Company.

The remuneration of key management personnel during the year are as follows:


The Group

Short-term benefi ts 1,063,292 1,037,423 1,186,454 Post-employment benefi ts 149,229 146,185 183,633

The Company

Short-term benefi ts 304,227 315,195 286,143 Post-employment benefi ts 32,688 34,408 31,441



ANNUAL REPORT 2012

19. FIXED INCOME FUND, FIXED DEPOSITS, SHORT-TERM PLACEMENTS AND CASH AND BANK BALANCES


The Group

Fixed deposits and short- term placements with licensed banks 150,920,767 144,347,011 208,505,340 Fixed income fund with licensed fi nancial institutions 79,344,739 75,540,608 77,635,002 Cash and bank balances 6,567,459 13,302,915 4,928,920

236,832,965 233,190,534 291,069,262

The Company Fixed deposits and short- term placements with licensed banks 52,400,000 - 65,500,000 Fixed income fund with licensed fi nancial institutions 19,116,577 10,863,259 10,549,986 Cash and bank balances 303,164 487,635 416,788

71,819,741 11,350,894 76,466,774

Fixed income fund of the Group is denominated in Ringgit Malaysia. The currency exposure profi le of fi xed deposits and short-term placements, cash and bank balances of the Group is as follows:


The Group

Fixed deposits and short-term placements

Ringgit Malaysia 150,920,767 144,347,011 202,500,000 United States Dollar - - 6,005,340

150,920,767 144,347,011 208,505,340

Cash and bank balances Ringgit Malaysia 6,033,813 9,012,925 4,885,856 United States Dollar 533,646 4,289,990 43,064 6,567,459 13,302,915 4,928,920

Fixed income fund has no maturity period and a notice of 1 to 30 days is required for withdrawals. The maturity period for fi xed deposits and short-term placements of the Group ranges from overnight to 1 year (December 31, 2011: overnight to 1 year; January 1, 2011: overnight to 1 year).



ANNUAL REPORT 2012

19. FIXED INCOME FUND, FIXED DEPOSITS, SHORT-TERM PLACEMENTS AND CASH AND BANK BALANCES (CONT’D)

The interest rates are as follows:

December 31, December 31, January 1, 2012 2011 2011 % % %

The Group and The Company

Fixed deposits and short-term placements with licensed banks 2.88 - 3.72 2.70 - 3.88 1.80 - 3.50 Fixed income fund with licensed fi nancial institutions 2.75 - 3.17 2.59 - 3.84 2.25 - 3.68

20. SHARE CAPITAL



Authorised: 1,000,000,000 ordinary shares of RM1 each 1,000,000,000 1,000,000,000 1,000,000,000

Issued and fully paid: 380,000,000 ordinary shares of RM1 each 380,000,000 380,000,000 380,000,000

21. TREASURY SHARES



At cost: At beginning of year (7,415,698) (7,415,698) (7,415,698) Repurchased during the year (576,521) - - At end of year (7,992,219) (7,415,698) (7,415,698) Number of treasury shares 7,284,100 6,800,000 6,800,000 Total number of outstanding shares in issue after set off (excluding treasury shares held) 372,715,900 373,200,000 373,200,000 Total number of issued and fully paid ordinary shares 380,000,000 380,000,000 380,000,000



ANNUAL REPORT 2012

22. RESERVES


The Group Distributable reserve: Retained earnings 368,625,284 366,741,580 385,706,799 Non-distributable reserve: Share premium 32,441,139 32,441,139 32,441,139 Investment revaluation 23,666 - -

401,090,089 399,182,719 418,147,938

The Company Distributable reserve: Retained earnings 59,464,362 84,625,180 131,393,007 Non-distributable reserve: Share premium 32,441,139 32,441,139 32,441,139 Investment revaluation 23,666 - -

91,929,167 117,066,319 163,834,146

Retained earnings

Distributable reserves are those available for distribution as dividends.

In accordance with the Finance Act 2007, the single tier tax system became effective from the year of assessment 2008. Under this system, tax on a company’s profi t is a fi nal tax, and dividends paid are exempted from tax in the hands of the shareholders.

As of December 31, 2012, the Company is under the single tier tax system.

Share premium

Share premium arose from the issuance of 379,999,998 ordinary shares of RM1 each for the acquisitions of CSC Steel Sdn. Bhd. and Group Steel Corporation (M) Sdn. Bhd. at an issue price of approximately RM1.09 per ordinary share in prior years.



ANNUAL REPORT 2012

23. DEFERRED TAX LIABILITIES

Recognised in At beginning pro t or loss At end of of year (Note 10) year RM RM RM

The Group

As of December 31, 2012

Deferred tax liability: Temporary differences in respect of: Property, plant and equipment (44,365,850) 4,911,111 (39,454,739) Deferred tax assets:

Temporary differences in respect of: Inventories 5,245,583 (868,187) 4,377,396 Other payables and accrued expenses 2,734,660 (1,033,136) 1,701,524

7,980,243 (1,901,323) 6,078,920

(36,385,607) 3,009,788 (33,375,819)

As of December 31, 2011 Deferred tax liability: Temporary differences in respect of: Property, plant and equipment (46,204,231) 1,838,381 (44,365,850)

Deferred tax assets:

Temporary differences in respect of: Inventories 3,195,866 2,049,717 5,245,583 Other payables and accrued expenses 2,103,077 631,583 2,734,660

5,298,943 2,681,300 7,980,243

(40,905,288) 4,519,681 (36,385,607)



ANNUAL REPORT 2012

23. DEFERRED TAX LIABILITIES (CONT’D)

At beginning Recognised in At end of of year pro t or loss year RM RM RM

The Group As of January 1, 2011

Deferred tax liability: Temporary differences in respect of: Property, plant and equipment (46,843,928) 639,697 (46,204,231) Deferred tax assets:

Temporary differences in respect of: Inventories 589,623 2,606,243 3,195,866 Other payables and accrued expenses 2,075,877 27,200 2,103,077 2,665,500 2,633,443 5,298,943

(44,178,428) 3,273,140 (40,905,288) As mentioned in Note 3, deferred tax assets are generally recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that future taxable profi ts will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. As of December 31, 2012, the estimated amount of unused tax losses and unabsorbed capital allowances pertaining to a subsidiary company, for which deferred tax assets have not been recognised in the fi nancial statements due to uncertainty of their realisation, are as follows:

December 31, December 31, January 1, 2012 2011 2011 RM RM RM The Group

Unused tax losses 1,958,000 1,958,000 1,958,000 Unabsorbed capital allowances 6,000 6,000 6,000 1,964,000 1,964,000 1,964,000

The unused tax losses and unabsorbed capital allowances of the subsidiary company are subject to the agreement by the tax authorities.



ANNUAL REPORT 2012

24. TRADE PAYABLES, OTHER PAYABLES AND ACCRUED EXPENSES

Trade and other payables comprise amounts outstanding for trade purchases and ongoing costs. The credit period granted to the Group for trade purchases is 60 days (December 31, 2011: 60 days; January 1, 2011: 60 days).

The currency exposure profi le of trade payables of the Group is as follows:


Ringgit Malaysia 3,255,769 3,623,695 23,109,876 United States Dollar - - 1,536,607 3,255,769 3,623,695 24,646,483

Other payables and accrued expenses consist of:


The Group

Other payables 10,244,189 8,670,355 8,449,063 Advances received from customers 12,337,053 6,572,282 4,641,104 Retention sum payable to contractors for installation of plant and machinery 1,317,521 736,227 978,061 Accrued expenses 8,314,490 9,575,606 8,534,853 Provision for onerous contracts 4,846,952 6,054,583 3,112,497 37,060,205 31,609,053 25,715,578

The Company Other payables 237,031 221,397 157,200 Accrued expenses 292,210 285,213 464,428 529,241 506,610 621,628

The provision for onerous contracts represents purchase commitments for raw materials that the Group is presently obligated to make under non-cancellable onerous contracts, less revenue expected to be earned.



ANNUAL REPORT 2012

27. SHORT-TERM BORROWING (SECURED)


The Group

Bank overdraft (Note 29) - - 258,470

The Group has bank overdrafts and other credit facilities amounting to RM154,500,000 (December 31, 2011: RM200,500,000; January 1, 2011: RM207,500,000) obtained from certain local licensed banks. These credit facilities bear interest at rates ranging from 3.68% to 7.35% (December 31, 2011: 4.04% to 7.35%; January 1, 2011: 3.87% to 7.05%) per annum and are secured by a debenture covering fl oating charges over all present and future assets of the subsidiary company and a corporate guarantee from the Company. As of December 31, 2012, the said facilities remained unutilised.

26. DIVIDENDS

December 31, December 31, 2012 2011 RM RM


In respect of fi nancial year ended December 31, 2011: Final single tier dividend - 5% per share 18,660,000 - Special single tier dividend - 2% per share 7,464,000 - In respect of fi nancial year ended December 31, 2010: Final single tier dividend - 10% per share - 37,320,000 Special single tier dividend - 3% per share - 11,196,000

26,124,000 48,516,000



ANNUAL REPORT 2012

27. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

(i) Categories of Financial Instruments


The Group

Financial Assets: Other investment 2,062,000 2,311,200 2,311,200 Trade receivables 96,888,807 86,920,362 91,284,627 Amount due from ultimate holding company 3,046,177 - 1,828,665 Amount due from other related company 43,886 - - Other receivables 1,291,682 1,755,896 1,685,978 Refundable deposits 22,242,550 5,205,180 5,199,280 Fixed deposits and short- term placements, fi xed income fund, cash and bank balances 236,832,965 233,190,534 291,069,262

Total loans and receivables, at amortised cost 362,408,067 329,383,172 393,379,012

Available-for sale investment carried at fair value 1,145,208 - -

Financial Liabilities: Trade payables 3,255,769 3,623,695 24,646,483 Amount due to ultimate holding company - 269,570 - Amount due to other related companies 788,477 2,628,736 190,007 Other payables 10,244,189 8,670,355 8,449,063 Short-term borrowing (secured) - - 258,470 Accrued expenses 8,314,490 9,575,606 8,534,853

Total nancial liabilities, at amortised cost 22,602,925 24,767,962 42,078,876

The Company

Financial Assets: Other investment 2,062,000 2,311,200 2,311,200 Amount due from subsidiary company - 88,100,000 71,000,000 Other receivables 155,585 - 22,357 Refundable deposits 5,000 5,000 5,000 Fixed deposits and short-term placements, fi xed income fund, cash and bank balances 71,819,741 11,350,894 76,466,774

Total loans and receivables, at amortised cost 74,042,326 101,767,094 149,805,331

Available-for sale investment carried at fair value 1,145,208 - -

Financial Liabilities: Other payables 237,031 221,397 157,200 Accrued expenses 292,210 285,213 464,428

Total nancial liabilities, at amortised cost 529,241 506,610 621,628



ANNUAL REPORT 2012

27. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D)

(ii) The operations of the Group are subject to a variety of fi nancial risks, such as market risk (including foreign currency risk and interest rate risk), credit risk, liquidity risk and cash fl ow risk. The Group has taken measures to minimise the Group’s exposure to risk and/or costs associated with the fi nancing, investing and operating activities of the Group.

(a) Market risk

Market risk is the risk that the fair value or future cash fl ows of a fi nancial instrument will fl uctuate because of changes in market prices.

The key features of the Group’s market risk management practices and policies is a group-wide market risk policy setting out the evaluation and determination of what constitutes market risk for the Group.

(b) Foreign currency risk

The Group undertakes certain transactions in foreign currencies where the amounts outstanding are exposed to foreign currency risk. The Group monitors its foreign exchange exposure closely.

The Group did not engage in any transactions involving fi nancial derivatives instruments during the fi nancial year.

The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows:


The Group

Assets: United States Dollar (Notes 17, 18 and 19) 8,830,098 8,939,699 17,742,974

Liabilities United States Dollar (Notes 18 and 24) 893,127 2,898,306 1,726,614

Foreign currency sensitivity

The Group is mainly exposed to the currency of United States of America (USD).

The following table details the Group’s sensitivity to a 10% increase and decrease in the RM against the relevant foreign currency. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. A negative number below indicates a decrease in profi t and other equity where the RM strengthens 10% against the relevant currency. For a 10% weakening of the RM against the relevant currency, there would be a comparable impact on the profi t and other equity, and the balances below would be positive.



ANNUAL REPORT 2012


(b) Foreign currency risk (cont’d)

Impact of USD December 31, December 31, January 1, 2012 2011 2011 RM RM RM

Profi t or loss 793,697 604,139 1,601,636

This is mainly attributable to the exposure outstanding on USD receivables and payables of the Group at the end of the reporting period.

(c) Interest rate risk

The interest rate profi le of the Group’s and the Company’s signifi cant interest-earning fi nancial asset, based on carrying amounts as at the end of the reporting period are as follows:


The Group

Fixed rate instruments Financial assets 230,265,506 219,887,619 286,140,342 The Company

Fixed rate instruments Financial assets 71,516,577 10,863,259 76,049,986

The Group does not account for any fi xed rate fi nancial assets and liabilities at fair value through profi t or loss. A change in interest rates at the end of the reporting period will not have a signifi cant effect on profi t or loss.

(d) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in fi nancial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties. The Group’s exposure and the credit ratings of its counterparties are continuously monitored and the aggregate value of transactions concluded is spread amongst approved counterparties.

Trade receivables consist of a large number of customers. Ongoing credit evaluation is performed on the fi nancial condition of customers.

The Group does not have signifi cant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics, saved and except for a refundable deposit of RM5,000,000 placed with a supplier of raw materials which company’s working capital ratio for the year ended June 30, 2012 was 0.28 (June 30, 2011: 0.31) and with a negative shareholders’ fund. The Group defi nes counterparties as having similar characteristics if they are related entities. Concentration of credit risk related to few major customers did not exceed 10% of gross monetary assets at any time during the year.

The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings.



ANNUAL REPORT 2012


(e) Liquidity risk

The Group practises prudent liquidity risk management to minimise the mismatch of fi nancial assets and liabilities and to maintain suffi cient credit facilities for contingent funding requirement of working capital.

(f) Cash ow risk The Group reviews its cash fl ow position regularly to manage its exposure to fl uctuations in future cash fl ows associated with its monetary fi nancial instruments.

Fair values

The Group and The Company December 31, 2012 December 31, 2011 January 1, 2011 Carrying Fair Carrying Fair Carrying Fair Amount Value Amount Value Amount Value RM RM RM RM RM RM

Financial Assets: Other investments (Note 15): Quoted shares 1,145,208 1,145,208 - - - - Unquoted shares 2,062,000 * 2,311,200 * 2,311,200 *

* It is not practical to estimate the fair value of the unquoted shares of the Group and of the Company as there is a lack of quoted market prices and related information.

Cash and cash equivalents, short-term borrowing, inter-company indebtedness, receivables and payables

The carrying amounts approximate their fair values because of the short-term maturity of these instruments.

28. CAPITAL RISK MANAGEMENT The Group manages its capital to ensure that entities in the Group will be able to continue as going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged from 2011.

The capital structure of the Group consists of equity of the Company (comprising issued capital and retained earnings as disclosed in Notes 20 and 22).



ANNUAL REPORT 2012

29. CASH AND CASH EQUIVALENTS


Fixed deposits and short-term placements with licensed banks 150,920,767 144,347,011 208,505,340 Fixed income fund with licensed fi nancial institutions 79,344,739 75,540,608 77,635,002 Cash and bank balances 6,567,459 13,302,915 4,928,920

236,832,965 233,190,534 291,069,262

The Company Fixed deposits and short-term placements with licensed banks 52,400,000 - 65,500,000 Fixed income fund with licensed fi nancial institutions 19,116,577 10,863,259 10,549,986 Cash and bank balances 303,164 487,635 416,788

71,819,741 11,350,894 76,466,774

30. CAPITAL COMMITMENTS

As of December 31, 2012, the Group has the following capital commitments in respect of purchase of property, plant and equipment:


Approved and contracted for 4,240,962 19,528,631 5,073,000 Approved but not contracted for 16,829,405 9,119,975 22,586,000 21,070,367 28,648,606 27,659,000

31. CONTINGENT LIABILITIES - UNSECURED

As of December 31, 2012, the Company has issued corporate guarantees totalling RM154,500,000 (December 31, 2011: RM200,500,000; January 1, 2011: RM207,500,000) in respect of credit facilities granted by certain local licensed banks to its subsidiary company. Accordingly, the Company is contingently liable to the extent of the amount of the credit facilities utilised by the subsidiary company as of December 31, 2012. As of December 31, 2012, the credit facilities were unutilised.



ANNUAL REPORT 2012

32. SUPPLEMENTARY INFORMATION – DISCLOSURE ON REALISED AND UNREALISED PROFITS/ LOSSES

On March 25, 2010, Bursa Malaysia Securities Berhad (“Bursa Malaysia”) issued a directive to all listed issuers pursuant to Paragraphs 2.06 and 2.23 of the Bursa Securities Main Market Listing Requirements. The directive requires all listed issuers to disclose the breakdown of the retained earnings or accumulated losses as of the end of the reporting period, into realised and unrealised profi ts or losses.

On December 20, 2010, Bursa Malaysia further issued guidance on the disclosure and the prescribed format of disclosure.

The breakdown of the retained earnings of the Group and of the Company as of December 31, 2012 into realised and unrealised profi ts or losses, pursuant to the directive, is as follows:

Group Company 2012 2011 2012 2011 RM RM RM RM

Total retained earnings of the Company and its subsidiaries Realised 432,880,586 434,994,422 59,464,362 84,625,180 Unrealised (38,222,771) (42,220,311) - - 394,657,815 392,774,111 59,464,362 84,625,180 Less: Consolidation adjustments (26,032,531) (26,032,531) - - Total retained earnings as per statements nancial position 368,625,284 366,741,580 59,464,362 84,625,180

The determination of realised and unrealised profi ts or losses is based on Guidance of Special Matter No. 1 “Determination of Realised and Unrealised Profi ts or Losses in the Context of Disclosure Pursuant to Bursa Securities Listing Requirements” as issued by the Malaysian Institute of Accountants on December 20, 2010. A charge or a credit to the profi t or loss of a legal entity is deemed realised when it is resulted from the consumption of resource of all types and form, regardless of whether it is consumed in the ordinary course of business or otherwise. A resource may be consumed through sale or use. Where a credit or a charge to the profi t or loss upon initial recognition or subsequent measurement of an asset or a liability is not attributed to consumption of resource, such credit or charge should not be deemed as realised until the consumption of resource could be demonstrated.

This supplementary information have been made solely for complying with the disclosure requirements as stipulated in the directives of Bursa Malaysia Securities Berhad and is not made for any other purposes.


ANNUAL REPORT 2012

The directors of CSC STEEL HOLDINGS BERHAD state that, in their opinion, the accompanying fi nancial statements are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia so as to give a true and fair view of the fi nancial position of the Group and of the Company as of December 31, 2012 and of their fi nancial performance and the cash fl ows of the Group and of the Company for the year ended on that date.

The supplementary information set out in Note 32 to the Financial Statements, which is not part of the fi nancial statements, is prepared in all material respects, in accordance with Guidance on Special Matter No. 1 “Determination of Realised and Unrealised Profi ts or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements” as issued by the Malaysian Institute of Accountants and the directive of Bursa Malaysia Securities Berhad.

Signed on behalf of the Boardin accordance with a resolution of the Directors,

CHEN, HIGH-PINN TAN CHIN TENG MelakaApril 8, 2013

I, TAN CHIN TENG, the director primarily responsible for the fi nancial management of CSC STEEL HOLDINGS BERHAD, do solemnly and sincerely declare that the accompanying fi nancial statements are, in my opinion, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.

TAN CHIN TENG

Subscribed and solemnly declared by the abovenamed TAN CHIN TENG at Melaka this 8th day of April, 2013.

Before me,

COMMISSIONER FOR OATHS

STATEMENT BY DIRECTORS

DECLARATIONBy The Director Primarily Responsible for the Financial Management of the Company


ANNUAL REPORT 2012

ANALYSIS OF SHAREHOLDINGSAS AT 25 APRIL 2013

Class of Shares : Ordinary shares of RM1.00 eachNo. of Shareholders : 8,290Voting Rights : Every member of the Company present in person or by proxy shall have one vote on a show of hand and in the case of a poll, shall have one vote for every ordinary share held. A proxy need not be a member.

DISTRIBUTIONS OF SHAREHOLDINGS

Holdings No. of Holders % No. of Shares %

Less than 100 6 0.072 222 0.000 100 – 1,000 1,082 13.051 1,006,968 0.270 1,001 – 10,000 5,353 64.571 26,799,419 7.201 10,001 – 100,000 1,642 19.806 50,680,788 13.619 100, 001 – 18,659,999* 204 2.460 71,092,803 19.105 18,660,000 and above** 3 0.036 222,533,800 59.802

Total: 8,290 100.00 372,114,000 100.00

Remark : * - Less than 5% of Issued Shares : ** - 5% and above of Issued Shares

SUBSTANTIAL SHAREHOLDERS Direct No. of Indirect No. of Shareholders Shares Held %(1) Shares Held %(1)

China Steel Asia Pacifi c Holdings Pte. Ltd. (“CSAP”) 171,000,000 45.954 - -

Gan Thian Chin 31,350,000 8.425 4,704,600 1.264

Lembaga Tabung Haji 20,183,800 5.424 - -

(2) China Steel Corporation (“CSC”) - - 171,000,000 45.954

(3) Ministry of Economic Affairs, Taiwan (“MOEA”) - - 171,000,000 45.954

Notes :

(1) Excludes 7,886 ,000 CHB shares bought back as at 25 April 2013 and retained as treasury shares.

(2) Deemed interested by virtue of CSC’s substantial shareholdings in CSAP.

(3) Deemed interested by virtue of MOEA’s substantial shareholdings in CSC.


ANNUAL REPORT 2012

LIST OF TOP 30 SHAREHOLDERS

No. Name Shareholdings %

1. China Steel Asia Pacifi c Holdings Pte. Ltd. 171,000,000 45.953

2. Gan Thian Chin 31,350,000 8.424

3. Lembaga Tabung Haji 20,183,800 5.424

4. Enterlight Investments Pte. Ltd. 4,649,600 1.249

5. Lee See Jin 2,877,000 0.773

6. Citigroup Nominees (Asing) Sdn. Bhd. CBNY For Dimensional Emerging Markets Value Fund 2,469,800 0.663

7. Maybank Nominees (Tempatan) Sdn. Bhd. Pledged Securities Account for Rosli Bin Othman 2,230,000 0.599

8. Neoh Choo Ee & Company, Sdn. Berhad 1,700,000 0.456

9. How Sin Son 1,500,000 0.403

10. Nar Swee Kim & Nam Thah Tsai 1,372,900 0.368

11. Toh Kam Choy 1,338,000 0.359

12. Syed Sirajuddin Putra Jamalullail 1,000,000 0.268

13. Yong Chai Lee 925,100 0.248

14. Lim Seng Qwee 847,900 0.227

15. Tiah Thee Seng 804,100 0.216

16. Cartaban Nominees (Tempatan) Sdn. Bhd. AXA Affi n General Insurance Berhad 800,000 0.214

17. Low Mei Lan 800,000 0.214

18. DB (Malaysia) Nominee (Asing) Sdn. Bhd. Deutsche Bank AG London 781,600 0.210

19. Chong Chang Choong 754,900 0.202

20. Goh Beng Choo 712,000 0.191

21. HSBC Nominees (Asing) Sdn. Bhd. Exempt AN for JPMorgan Chase Bank, National Association (Stich Shell Pen) 703,900 0.189

22. Eng Bak Chim 700,000 0.188

23. Md Nazir Bin Md Ali 700,000 0.188

24. HSBC Nominees (Asing) Sdn. Bhd. Exempt AN for JPMorgan Chase Bank, National Association (U.S.A.) 608,127 0.163

25. Koay Keong Chye 600,000 0.161

26. Yeo Khee Huat 600,000 0.161

27. Lim Soon Huat 574,000 0.154

28. Citigroup Nominees (Asing) Sdn. Bhd. CBNY For DFA Emerging Markets Small CAP Series 564,800 0.151

29. Lee Guan Seong 563,800 0.151

30. HSBC Nominees (Asing) Sdn. Bhd. Exempt AN for JPMorgan Chase Bank, National Association (Netherlands) 539,700 0.145

Total 254,251,027 68.326

ANALYSIS OF SHAREHOLDINGS (CONT’D)As At 25 April 2013


ANNUAL REPORT 2012

ANALYSIS OF SHAREHOLDINGS (CONT’D)As At 25 April 2013

SHAREHOLDINGS OF DIRECTORS

Direct No. of Indirect No. of Names Shares Held %(1) Shares Held %(1)

1. Chen, High-Pinn - - - -

2. Liu, Jih-Gang - - - -

3. Tan Chin Teng - - (2)80,000 0.0214

4. Nee, Lung-Yuan - - - -

5. Pang Fee Yoon 20,000 0.005 - -

6. Chong Kim Leong 20,000 0.005 - -

7. Brig. Gen. (R) Dato’ Mohd Zaaba @ Nik Zaaba Bin Nik Daud - - - -

Note:

(1) Excludes 7,886,000 CHB shares bought back as at 25 April 2013 and retained as treasury shares.(2)

Deemed interested by virtue of his interest in Ace-Plus Systems & Supplies Sdn. Bhd. pursuant to Section 6A(4) of the Companies Act, 1965


ANNUAL REPORT 2012

LIST OF PROPERTIES

Audited Net Book Value/ Land/ Prepaid Built-up Operating Lease area Age of as at Description (square Building 31-12-2012 Year of & Location Existing Use Tenure metres) Year(s) (RM’000) Acquisition Lot PT Nos. 3698 Industrial land 99-year 74,805/ 15 40,887 1995 and 3699, HS (M) built upon lease 23,704 346 and 347 with a expiring respectively, both of factory block on Mukim Bukit Katil, 20.01.2092 Daerah Melaka Tengah Lot No. 5214, Industrial land 99-year 73,750/ 19 14,905 1992 PN 7009, built upon lease 36,334 Mukim Bukit Katil, with a expiring Daerah Melaka factory block on Tengah and an 20.01.2092 administration block Lot 6634, Building land Freehold 11,333 Not 4,395 1997 Mukim Bukit Katil, built with applicable Daerah Melaka tennis court, Tengah basketball court and car park

Lot PT No. 3701, Vacant 99-year 30,522/ Not 1,459 1992 HS (M) 348, industrial land lease Not applicable Mukim Bukit Katil, expiring applicable Daerah Melaka on Tengah 20.01.2092

Nos. 8-3,10-5 & Residential Freehold 447 16 755 2009 10-12 Hock Mansion, Harmony Condominium, Jalan Ujong Pasir, 75000 Melaka (3 units of condominium)

Block B Pangsapuri Residential Freehold Not 14 732 2011 Taman Pelangi, applicable/ Ayer Keroh, 1,145 Bukit Katil, 75450 Melaka (10 units of apartments)


ANNUAL REPORT 2012

NOTICE OF NINTH ANNUAL GENERAL MEETING

AGENDA

AS ORDINARY BUSINESS

1. To receive the Directors’ Report, Audited Financial Statements and the Auditors’ Report for the fi nancial year ended 31 December 2012. 2. To declare a fi nal single tier system of dividend of 5% or 5 sen per share and a special single tier system of dividend of 2% or 2 sen per share for the fi nancial year ended 31 December 2012 for payment on 11 July 2013 as recommended by the Directors. 3. To approve the payment of Directors’ fees amounting to RM94,800 for the fi nancial year ended 31 December 2012. 4. To re-elect the following Directors who retire in accordance with Article 128 and Article 133 of the Company’s Articles of Association and being eligible, have offered themselves for re-election:- i. Tan Chin Teng (Article 128) ii. Chong Khim Leong @ Chong Kim Leong (Article 128) iii. Chen, High-Pinn (Article 133) 5. To re-appoint Messrs. Deloitte & Touche as Auditors of the Company and to authorise the Board of Directors to fi x their remuneration

AS SPECIAL BUSINESS

To consider and, if thought fi t, to pass the following Ordinary Resolutions with or without modifi cations: -

6. Ordinary Resolution

Proposed Renewal of Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature

“THAT, subject to the provisions of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”), the Company and its subsidiaries (collectively the “Group”) be and are authorised to enter into and to give effect to the recurrent related party transactions of a revenue or trading nature with the related parties as set out in Section 2.1.4(a) of the Circular to Shareholders dated 29 May 2013 provided that such transactions and/or arrangements are:-

(a) necessary for the day-to-day operations of the Group;

(b) undertaken in the ordinary course of business and at arm’s length basis and on normal commercial terms which are not more favourable to the related parties than those generally available to the public; and

(c) are not prejudicial to the minority shareholders of the Company

(the “Renewed Shareholders’ Mandate”).

NOTICE IS HEREBY GIVEN that the Ninth Annual General Meeting of CSC Steel Holdings Berhad (“CHB” or the

“Company”) will be held at Level 1 of the Company’s Offi ce Block, 180 Kawasan Industri Ayer Keroh, Ayer Keroh, 75450

Melaka, Malaysia on Thursday, 20 June 2013, at 10.00 a.m., for the following purposes:

(Please refer to Explanatory Notes)

(Resolution 1)

(Resolution 2)

(Resolution 3)(Resolution 4)(Resolution 5)

(Resolution 6)

(Resolution 7)


ANNUAL REPORT 2012

AND THAT such approval shall continue to be in force until:-

(i) the conclusion of the next Annual General Meeting (“AGM”) of the Company (following the general meeting at which the Renewed Shareholders’ Mandate was passed) at which time it shall lapse unless by a resolution passed at such AGM, the authority is renewed; or

(ii) the expiration of the period within which the next AGM of the Company is required to be held pursuant to Section 143(1) of the Companies Act, 1965 (the “Act") [but must not extend to such extension as may be allowed pursuant to Section 143(2) of the Act]; or

(iii) revoked or varied by a resolution passed by the shareholders of the Company in a general meeting,

whichever is the earlier.

THAT the Directors of the Company be and are hereby authorised to complete and do all such acts and things (including executing all such documents as may be required) as they may consider expedient or necessary to give effect to the Renewed Shareholders’ Mandate.

AND THAT the estimates given in respect of the recurrent related party transactions specifi ed in Section 2.1.4(a) of the Circular being provisional in nature, the Directors and/or any of them be and are hereby authorised to agree to the actual amount(s) thereof provided that such amount or amounts comply with the procedures set out in Section 2.1.5 of the Circular.”


Proposed New Shareholders’ Mandate for Additional Recurrent Related Party Transactions of a Revenue or Trading Nature

“THAT, subject to the provisions of the Main Market Listing Requirements of Bursa Securities, the Group be and is authorised to enter into and to give effect to the additional recurrent related party transactions of a revenue or trading nature with the related parties as set out in Section 2.1.4(b) of the Circular to Shareholders dated 29 May 2013 provided that such transactions and/or arrangements are:-

(a) necessary for the day-to-day operations of the Group;

(b) undertaken in the ordinary course of business and at arm’s length basis and on normal commercial terms which are not more favourable to the related parties than those generally available to the public; and

(c) are not prejudicial to the minority shareholders of the Company

(the “New Shareholders’ Mandate”).

AND THAT such approval shall continue to be in force until:-

(i) the conclusion of the next AGM of the Company (following the general meeting at which the New Shareholders’ Mandate was passed) at which time it shall lapse unless by a resolution passed at such AGM, the authority is renewed; or

(Resolution 8)

NOTICE OF NINTH ANNUAL GENERAL MEETING (CONT’D)


ANNUAL REPORT 2012


(ii) the expiration of the period within which the next AGM of the Company is required to be held pursuant to Section 143(1) of the Act [but must not extend to such extension as may be allowed pursuant to Section 143(2) of the Act]; or


whichever is the earlier.

THAT the Directors of the Company be and are hereby authorised to complete and do all such acts and things (including executing all such documents as may be required) as they may consider expedient or necessary to give effect to the New Shareholders’ Mandate.

AND THAT the estimates given in respect of the recurrent related party transactions specifi ed in Section 2.1.4(b) of the Circular being provisional in nature, the Directors and/or any of them be and are hereby authorised to agree to the actual amount(s) thereof provided that such amount or amounts comply with the procedures set out in Section 2.1.5 of the Circular.”


Proposed Authority For the Company to Purchase its own Ordinary Shares

"THAT subject to compliance with applicable laws, regulations and the approval of all relevant authorities, approval be hereby given for the Company to purchase such amounts of ordinary shares of RM1.00 each in the Company as may be determined by the Directors of the Company from time to time through the Bursa Securities upon such terms and conditions as the Directors may deem fi t and expedient in the interest of the Company provided that:

(a) the aggregate number of shares purchased does not exceed ten percent (10%) of the total issued and paid-up share capital of the Company quoted on Bursa Securities as at the point of purchase;

(b) the maximum funds to be allocated by the Company for the purpose of purchasing its own shares shall not exceed the total retained earnings and share premium reserves of the Company at the time of the purchase(s); and

(c) at the discretion of the Directors of the Company, the shares purchased (including treasury shares currently held) may be cancelled and/or retained as treasury shares and/or distributed as dividends or resold on Bursa Securities.

AND THAT such authority conferred by this resolution shall commence immediately upon the passing of this resolution until:-

(i) the conclusion of the next AGM of the Company (following the general meeting at which such resolution was passed) at which time it shall lapse unless by a resolution passed at such AGM, the authority is renewed, either unconditionally or subject to conditions; or

(ii) the expiration of the period within which the next AGM of the Company is required to be held pursuant to Section 143(1) of the Act [but must not extend to such extension as may be allowed pursuant to Section 143(2) of the Act]; or

(Resolution 9)


ANNUAL REPORT 2012


whichever occurs fi rst.

AND THAT the Directors of the Company be and are hereby generally empowered to do all acts and things to give full effect to the aforesaid purchase with full powers to assent to any conditions, modifi cations, revaluations, variations and/or amendments (if any) as may be imposed by the relevant authorities and/or to do all such acts and things as the Directors may deem fi t and expedient in the best interest of the Company.”


Chong Khim Leong @ Chong Kim Leong - Continuing in Of ce as Independent Non-Executive Director

“THAT subject to the passing of the Ordinary Resolution 4 above, authority be and is hereby given to Chong Khim Leong @ Chong Kim Leong who will have served as an Independent Non-Executive Director of the Company for a cumulative term of nine (9) years come 4 October 2013, to continue to act as an Independent Non-Executive Director of the Company to hold offi ce until the conclusion of the next annual general meeting of the Company.”


Pang Fee Yoon - Continuing in Of ce as Independent Non-Executive Director

"THAT authority be and is hereby given to Pang Fee Yoon who will have served as an Independent Non-Executive Director of the Company for a cumulative term of nine (9) years come 4 October 2013, to continue to act as an Independent Non-Executive Director of the Company to hold offi ce until the conclusion of the next annual general meeting of the Company.”

11. To transact any other business of which due notice shall have been given in accordance with the Act.

NOTICE OF DIVIDEND ENTITLEMENT AND PAYMENT

NOTICE IS ALSO HEREBY GIVEN that a fi nal single tier system of dividend of 5% or 5 sen per share and a special single tier system of dividend of 2% or 2 sen per share for the fi nancial year ended 31 December 2012, if approved by the shareholders at the Ninth Annual General Meeting of the Company, will be paid on 11 July 2013 to the shareholders whose names appear on the Record of Depositors of the Company at the close of business on 28 June 2013.

A Depositor shall qualify for entitlement to the dividend only in respect of :-

a. shares transferred into the Depositor’s Securities Account before 4.00 p.m. on 28 June 2013 in respect of ordinary transfers; and

b. shares bought on the Bursa Malaysia Securities Berhad on a cum-entitlement basis according to the Rules of Bursa Malaysia Securities Berhad.

(Resolution 10)

(Resolution 11)



ANNUAL REPORT 2012

By Order of the BoardCSC STEEL HOLDINGS BERHAD

TAN BEE HWEE (MAICSA 7021024)LAM SOOK CHING (MAICSA 7006942)Company Secretaries

Melaka

29 May 2013


NOTES:

i. Depositors whose names appear in the Record of Depositors as at 13 June 2013 are entitled to attend, speak and vote at the meeting.

ii. Where a member of the Company who is entitled to attend and vote at the meeting is an authorised nominee as de ned under the Central Depositories Act, it may appoint at least one (1) proxy but not more than two (2) proxies in respect of each Securities Account it holds with ordinary shares of the Company standing to the credit of the said Securities Account.

iii. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple bene cial owners in one (1) securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. An exempt authorised nominee refers to an authorised nominee de ned under Securities Industry (Central Depositories) Act, 1991 (“SICDA”) which is exempted from compliance with the provisions of subsection 25A(1) of SICDA.

iv. Where a member or the authorised nominee appoints two (2) proxies, or where an exempt authorised nominee appoints two (2) or more proxies, the proportion of shareholdings to be represented by each proxy must be speci ed in the instrument appointing the proxies failing which, the appointment(s) shall be invalid.

v. A proxy may but need not be a member of the Company. If the proxy is not a member, the proxy need not be an advocate, an approved company auditor or a person approved by the Companies Commission of Malaysia.

vi. The instrument appointing a proxy or proxies, in the case of an individual, must be signed by the appointer or his/her attorney duly authorised in writing and in the case of a corporation, it must be executed either under its seal or under the hand of any of cer or attorney duly authorised.

vii. If there is no indication as to how a member wishes his/her vote to be cast, the proxy will vote or abstain from voting at his/her discretion. In the event a member duly executes the Form of Proxy but does not name any proxy, such member shall be deemed to have appointed the Chairman of the meeting as his/her proxy.

viii. To be valid, the instrument appointing a proxy or proxies shall be deposited at the registered of ce of the Company at 49-B Jalan Melaka Raya 8, Taman Melaka Raya, 75000 Melaka at least forty-eight (48) hours before the time for holding the meeting or any adjournment thereof.


ANNUAL REPORT 2012

Explanatory Notes: -

Item 1 of the Agenda

This Agenda item is meant for discussion only, as the provision of Section 169(1) of the Companies Act, 1965 does not require a formal approval of the shareholders for the Audited Financial Statements. Hence, this Agenda item is not put forward for voting.

Ordinary Resolutions 7 - 9

Shareholders are advised to refer to the Circular to Shareholders dated 29 May 2013 which was circulated together with the Annual Report 2012 when considering Resolutions 7 - 9.

Ordinary Resolution 7

The proposed Ordinary Resolution 7, if passed, will renew the authority given to the Company and its subsidiaries (the "CHB Group") to enter into recurrent related party transactions of a revenue or trading nature which are necessary for the CHB Group's day-to-day operations with the respective related parties, subject that the transactions are transacted in the ordinary course of business and on normal commercial terms which are not more favourable to the related parties than those generally available to the public and are not to the detriment of the minority shareholders of the Company.


The proposed Ordinary Resolution 8, if passed, will authorise the CHB Group to enter into new recurrent related party transactions of a revenue or trading nature which are necessary for the CHB Group's day-to-day operations with the respective related parties, subject that the transactions are transacted in the ordinary course of business and on normal commercial terms which are not more favourable to the related parties than those generally available to the public and are not to the detriment of the minority shareholders of the Company.


The proposed Ordinary Resolution 9, if passed, will empower the Directors to purchase CHB Shares through Bursa Malaysia Securities Berhad of up to 10% of the issued and paid-up share capital of the Company.


The proposed Ordinary Resolution 10, if passed, will retain Mr. Chong Khim Leong @ Chong Kim Leong as the Independent Non-Executive Director of the Company notwithstanding that he would have served the Company for a cumulative term of nine (9) years come 4 October 2013.


The proposed Ordinary Resolution 11, if passed, will retain Mr. Pang Fee Yoon as the Independent Non-Executive Director of the Company notwithstanding that he would have served the Company for a cumulative term of nine (9) years come 4 October 2013.



ANNUAL REPORT 2012

A. DIRECTORS WHO ARE:-

(a) Standing for re-election and re-appointment pursuant to the Company’s Articles of Association are:- i. Tan Chin Teng (Article 128) ii. Chong Khim Leong @ Chong Kim Leong (Article 128) iii. Chen, High-Pinn (Article 133)

(b) Seeking to continue in offi ce as Independent Non-Executive Directors pursuant to Recommendation 3.3 of the Malaysian Code of Corporate Governance 2012:- i. Chong Khim Leong @ Chong Kim Leong ii. Pang Fee Yoon

B. DETAILS OF DIRECTORS WHO ARE STANDING FOR RE-ELECTION AND RE-APPOINTMENT

Details of the above Directors who are standing for re-election and re-appointment are set out in the Directors’ profi le appearing on pages 6 to 8 of this Annual Report while their securities holdings are listed in the Analysis of Shareholdings – Shareholdings of Directors on page 91 of this Annual Report.

C. DETAILS OF ATTENDANCE OF DIRECTORS AT BOARD MEETINGS

A total of four (4) Board meetings were held during the fi nancial year ended 31 December 2012 and details of the attendance of Directors holding offi ce at the end of the fi nancial year ended 31 December 2012 are found on page 15 of this Annual Report.

D. DATE, TIME AND PLACE OF THE ANNUAL GENERAL MEETING

Date : Thursday, 20 June 2013 Time : 10.00 a.m. Place : Level 1 of the Company’s Offi ce Block 180 Kawasan Industri Ayer Keroh Ayer Keroh, 75450 Melaka, Malaysia

STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING

This page is intentionally left blank

FORM OF PROXY

I/We (NRIC/Company No: ) (full name in capital letters)

of (full address)

being a member(s) of CSC STEEL HOLDINGS BERHAD (640357-X), hereby appoint

(NRIC No: ) (full name in capital letters)

of (full address)

or failing him/her, (NRIC No: ) (full name in capital letters)

of (full address)

or failing him/her, the Chairman of the Meeting as my/our proxy to vote for me/us and on my/our behalf at the Ninth Annual General Meeting of the Company to be held on Thursday, 20 June 2013, at 10.00 a.m. at Level 1 of the Company’s Offi ce Block, 180 Kawasan Industri Ayer Keroh, Ayer Keroh, 75450 Melaka, Malaysia and any adjournment thereof.

Mark either box with “X” if you wish to direct the proxy how to vote. If no mark is made, the proxy may vote on the resolution or abstain from voting as the proxy thinks fi t. If you appoint two (2) proxies and wish them to vote differently, this should be specifi ed.

My/our proxy/proxies is/are to vote as indicated below:

ITEM AGENDA

1. To receive the Directors’ Report, Audited Financial Statements and the Auditors’ Report for the fi nancial year ended 31 December 2012. 2. To declare a fi nal single tier system of dividend of 5% or 5 sen per share and a special single tier system of dividend of 2% or 2 sen per share for the fi nancial year ended 31 December 2012. 3 To approve the payment of Directors’ fees. 4. To re-elect Tan Chin Teng (Article 128). 5. To re-elect Chong Khim Leong @ Chong Kim Leong (Article 128). 6. To re-elect Chen, High-Pinn (Article 133). 7. To re-appoint Messrs. Deloitte & Touche as Auditors of the Company and to authorise the Directors to fi x their remuneration. 8. To approve the Proposed Renewal of Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature. 9. To approve the Proposed New Shareholders’ Mandate for Additional Recurrent Related Party Transactions of a Revenue or Trading Nature. 10. To approve the Proposed Authority for the Company to Purchase its own Shares. 11. To retain Chong Khim Leong @ Chong Kim Leong as Independent Director of the Company. 12. To retain Pang Fee Yoon as Independent Director of the Company.

Signed this day of 2013

Signature Common Seal

Notes:-

i. Depositors whose names appear in the Record of Depositors as at 13 June 2013 are entitled to attend, speak and vote at the meeting.

ii. Where a member of the Company who is entitled to attend and vote at the meeting is an authorised nominee as de ned under the Central Depositories Act, it may appoint at least one (1) proxy but not more than two (2) proxies in respect of each Securities Account it holds with ordinary shares of the Company standing to the credit of the said Securities Account.

iii. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple bene cial owners in one (1) securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. An exempt authorised nominee refers to an authorised nominee de ned under Securities Industry (Central Depositories) Act, 1991 (“SICDA”) which is exempted from compliance with the provisions of subsection 25A(1) of SICDA.

iv. Where a member or the authorised nominee appoints two (2) proxies, or where an exempt authorised nominee appoints two (2) or more proxies, the proportion of shareholdings to be represented by each proxy must be speci ed in the instrument appointing the proxies failing which, the appointment(s) shall be invalid.

v. A proxy may but need not be a member of the Company. If the proxy is not a member, the proxy need not be an advocate, an approved company auditor or a person approved by the Companies Commission of Malaysia.

vi. The instrument appointing a proxy or proxies, in the case of an individual, must be signed by the appointer or his/her attorney duly authorised in writing and in the case of a corporation, it must be executed either under its seal or under the hand of any of cer or attorney duly authorised.

vii. If there is no indication as to how a member wishes his/her vote to be cast, the proxy will vote or abstain from voting at his/her discretion. In the event a member duly executes the Form of Proxy but does not name any proxy, such member shall be deemed to have appointed the Chairman of the meeting as his/her proxy.

viii. To be valid, the instrument appointing a proxy or proxies shall be deposited at the registered of ce of the Company at 49-B Jalan Melaka Raya 8, Taman Melaka Raya, 75000 Melaka at least forty-eight (48) hours before the time for holding the meeting or any adjournment thereof.

FORRESOLUTION AGAINST

CSC STEEL HOLDINGS BERHAD (640357-X)

Number of shares held

1

2

3

4

5

6

7

8

9

10

11

(Incorporated in Malaysia)

To: The Company Secretary CSC Steel Holdings Berhad (640357-X)

49-B Jalan Melaka Raya 8 Taman Melaka Raya 75000 Melaka Malaysia

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