ANNUAL REPORT 2012 - MYCRON Steel Berhad

A N N U A L R E P O R T 2 0 1 2

ContentsNotice of Ninth (9 th ) Annual General Meeting2Statement by Directors49Chairman’s Statement5Statutory Declaration49Corporate Social Responsibility8Independent Auditors’ Report50Corporate Information9Statements of Comprehensive Income52Quality Recognition13Statements of Financial Position53Profile of Directors15Consolidated Statement of Changes in Equity54Group Financial Highlights & Financial Indicators20Company Statement of Changes in Equity55Analysis of Shareholdings21Statements of Cash Flows56Statement on Corporate Governance24Notes to the Financial Statements57Statement on Internal Control39Properties Owned by Mycron Steel Berhad & Its Subsidiaries101Audit Committee Report42Form of ProxyDirectors’ Report46

Notice of NinthAnnual General MeetingNOTICE IS HEREBY GIVEN that the Ninth (9 th ) Annual General Meeting of the Company will be held at Dewan Perdana, Bukit KiaraEquestrian & Country Resort, Jalan Bukit Kiara, Off Jalan Damansara, 60000 Kuala Lumpur on Thursday, 13 December 2012 at10.00 a.m. for the following purposes:AS ORDINARY BUSINESS1. To receive the Audited Financial Statements for the year ended 30 June 2012 together with the Reportsof the Directors and the Auditors thereon.2. To approve the payment of Directors’ fees amounting to RM603,600 for the financial year ending30 June 2013 to be payable quarterly in arrears.ResolutionPlease refer toExplanatory Note A(Resolution 1)3. To re-elect the following Directors of the Company who are retiring pursuant to Article 77 of theCompany’s Articles of Association and who, being eligible, offer themselves for re-election:(i)(ii)Dato’ Zulkifly @ Sofi bin Haji MustaphaEn Azlan bin Abdullah(Resolution 2)(Resolution 3)4. To re-elect the following Directors of the Company who are retiring pursuant to Article 83 of theCompany’s Articles of Association and who, being eligible, offer themselves for re-election:(i)(ii)Dato’ Sri Iskandar Michael bin AbdullahGeneral Dato’ Sri Hj Suleiman bin Mahmud RMAF (Rtd)(Resolution 4)(Resolution 5)5. To reappoint Messrs PricewaterhouseCoopers as Auditors of the Company and to authorise the Directorsto fix their remuneration.(Resolution 6)AS SPECIAL BUSINESS6. To consider and if thought fit, to pass the following resolutions as Ordinary Resolutions:(a)Proposed Re-election of Directors pursuant to Section 129(6) of the Companies Act, 1965 (“the Act”)“THAT the appointment of the following Directors who are over 70 years of age as Independent Non-Executive Directors of the Company pursuant to Section 129(6) of the Act be confirmed and ratifiedand that they be re-elected and to hold office until the conclusion of the next Annual General Meeting(“AGM”) to be held in 2013:(i)(ii)Dato’ Jaffar IndotDatuk Seri Razman Md Hashim”(Resolution 7)(Resolution 8)(b)Proposed Renewal of Authority for the Company to purchase its own shares“THAT subject to compliance with Section 67A of the Act, the Main Market Listing Requirementsof Bursa Malaysia Securities Berhad (“Bursa Securities”) and any prevailing laws, rules, regulations,orders, guidelines and requirements issued by any relevant authority, the Company be and is herebyunconditionally and generally authorised to purchase and hold such number of ordinary shares of RM1each in the Company (“Proposed Renewal of Share Buy-Back Authority”) as may be determined by theDirectors of the Company from time to time through Bursa Securities upon such terms and conditionsas the Directors may deem fit in the interest of the Company provided that the aggregate number ofshares to be purchased pursuant to this Ordinary Resolution does not exceed ten percent (10%) of theissued and paid-up share capital of the Company and that an amount not exceeding the Company’stotal audited retained profits of RM16,382,764 and share premium account of RM14,918,638 as at 30June 2012 would be allocated by the Company for the Proposed Renewal of Share Buy-Back Authority.(Resolution 9)AND THAT such authority shall commence immediately upon passing of this Ordinary Resolution and willexpire at the conclusion of the next AGM of the Company unless earlier revoked or varied by OrdinaryResolution of shareholders of the Company in a general meeting or upon the expiration of the periodwithin which the next AGM is required by law to be held whichever is earlier but not so as to prejudice thecompletion of purchase(s) made by the Company before the aforesaid expiry date.AND THAT the Directors be and are hereby authorised to take all steps necessary to implement, finaliseand to give full effect to the Proposed Renewal of Share Buy-Back Authority and further that authoritybe and is hereby given to the Directors to decide in their absolute discretion to either retain the shares sopurchased as treasury shares or cancel them or both.”2Mycron Steel Berhad

Notice of NinthAnnual General Meeting(continued)(c)Proposed Renewal of Shareholders’ Mandate and Proposed New Shareholders’ Mandate for RecurrentRelated Party Transactions of a Revenue or Trading Nature (“RRPTs”)(Resolution 10)“THAT the mandate granted by the shareholders of the Company on 7 December 2011 pursuant toParagraph 10.09 of the Main Market Listing Requirements of Bursa Securities, authorising the Companyand its subsidiaries (“the Mycron Group”) to enter into the RRPTs which are necessary for the MycronGroup’s day-to-day operations as set out in Section 3.3(A) and (B) of Part B of the Circular to Shareholdersdated 21 November 2012 (“the Circular”) with the related parties mentioned therein, be and is herebyrenewed, AND THAT mandate be and is hereby granted by the shareholders of the Company to apply tothe new RRPTs as set out in Section 3.3(C) of Part B of the Circular with the related party therein, providedthat:(a)(b)the transactions are in the ordinary course of business and are on terms which are not morefavourable to the related parties than those generally available to the public and on terms not tothe detriment of the minority shareholders of the Company; anddisclosure will be made in the Annual Report providing the breakdown of the aggregate value ofthe transactions conducted pursuant to the mandate during the financial year, amongst others,based on the following information:(i)(ii)the type of the RRPTs made; andthe names of the related parties involved in each type of the RRPTs made and theirrelationship with the Company.AND THAT the authority conferred by such renewed and granted mandate shall continue to be in force(unless revoked or varied by the Company in a general meeting) until:(i)(ii)(iii)the conclusion of the next AGM of the Company following the forthcoming AGM at which time itwill lapse, unless by a resolution passed at that meeting or Extraordinary General Meeting wherebythe authority is renewed; orthe expiration of the period within which the next AGM after the date it is required to be heldpursuant to Section 143(1) of the Act (but shall not extend to such extension as may be allowedpursuant to Section 143(2) of the Act); orrevoked or varied by a resolution passed by the shareholders in a general meeting;whichever is earlier.AND THAT the Directors of the Company be and are hereby authorised to complete and do all such actsand things (including executing such documents as may be required) as they may consider expedient ornecessary to give effect to the transactions contemplated and/or authorised by this Ordinary Resolution.”SPECIAL RESOLUTION 1(d) Proposed Amendments to the Articles of Association of the Company (Resolution 11)“THAT, the proposed new Articles of Association of the Company as set out in Section 1.0 of Part C ofthe Circular to Shareholders dated 21 November 2012, be and are hereby approved and adopted asthe new Articles of Association of the Company AND THAT the Directors of the Company and CompanySecretary be and are hereby authorised to take all such steps and carry out all the necessary formalitiesto give full effect to the proposed adoption of the Company’s new Articles of Association.”By Order of the BoardLILY YIN KAM MAY (MAICSA 0878038)EZZA HANIE ALIAS (LS 0009238)Company SecretariesKuala Lumpur21 November 2012Mycron Steel Berhad 3

Notice of NinthAnnual General Meeting(continued)NOTES:1. Applicable to shares held through a nominee account.2. A member entitled to attend and vote at a meeting of the Company is entitled to appoint not more than two (2) proxiesto attend and vote in his/her stead. A proxy may but need not be a member of the Company, and the provision of Section149(1)(b) of the Act shall not apply to the Company.3. Where a member appoints two (2) proxies, the appointment shall be invalid unless he/she specifies the proportion of his/hershareholdings to be represented by each proxy.4. A member of the Company who is an authorised nominee as defined under the Securities Industry (Central Depositories) Act,1991, may appoint one (1) proxy in respect of each securities account.5. The instrument appointing a proxy, shall be in writing under the hand of the appointer or his attorney duly authorised in writing,and in the case of a corporation, either under seal or under hand of an officer or attorney duly authorised.6. The instrument appointing a proxy must be deposited at the Company’s Registered Office, Suite 12.03, 12th Floor, No. 566,Jalan Ipoh, 51200 Kuala Lumpur, not less than forty eight (48) hours before the time appointed for holding the meeting or anyadjournment thereof.7. Any alteration in the Form of Proxy must be initialled.8. Form of Proxy sent through facsimile transmission shall not be accepted.9. For the purpose of determining a member who shall be entitled to attend this Ninth (9 th ) AGM, the Company shall be requestingBursa Malaysia Depository Sdn Bhd to issue a General Meeting Record of Depositors as at 10 December 2012 in accordancewith Article 54(b), 54(c) and 54(d) of the Company’s Articles of Association and Section 34(1) of the Securities Industry (CentralDepositories) Act, 1991. Only a depositor whose name appears on the Record of Depositors as at 10 December 2012 shall beentitled to attend the said meeting or appoint proxies to attend and/or vote on his/her behalf.10. (i) Explanatory note to Ordinary Business of Agenda 1 (Explanatory Note A):This Agenda item is meant for discussion only as the provision of Section 169(1) of the Act does not require a formalapproval of the shareholders and hence, is not put forward for voting.(ii) Explanatory notes to Special Business of Agenda 6:(a)(b)(c)(d)Proposed Re-election of Directors pursuant to Section 129(6) of the ActThe reappointment of Dato’ Jaffar Indot and Datuk Seri Razman Md Hashim, persons over the age of seventy (70)years as Directors of the Company to hold office until the conclusion of the next AGM of the Company shall takeeffect if the Proposed Resolutions 7 and 8 respectively have been passed by a majority of not less than three-fourth(3/4) of such members as being entitled to vote in person or, where proxies are allowed, by proxy, at a generalmeeting.Proposed Renewal of Authority for the Company to Purchase its Own SharesThe Proposed Resolution 9, if passed, would empower the Directors to exercise the power of the Company topurchase its own shares (“the Proposal”) by utilising its financial resources not immediately required. The Proposalmay have a positive impact on the market price of the Company’s shares.Proposed Renewal of Shareholders’ Mandate and Proposed New Shareholders’ Mandate for Recurrent RelatedParty TransactionsThe Proposed Resolution 10, if passed, will empower the Company to conduct recurrent related party transactionsof a revenue or trading nature which are necessary for the Group’s day-to-day operations and will eliminate theneed to convene separate general meetings from time to time to seek shareholders’ approval. This will substantiallyreduce administrative time, inconvenience and expenses associated with the convening of such meetings, withoutcompromising the corporate objectives of the Group or adversely affecting the business opportunities available tothe Group.Proposed Amendments to the Articles of Association of the CompanyThe Proposed Resolution 11, if passed, will give authority for the Company to amend its Articles of Association in linewith the recent amendments prescribed under the Main Market Listing Requirements of Bursa Securities.The detailed information on Special Business of Agenda 6 except for Agenda 6(a) as mentioned above is set out in theCircular to Shareholders of the Company dated 21 November 2012 which is dispatched together with the Company’s2012 Annual Report.STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETINGPursuant to Paragraph 8.27(2) of the Main Market Listing Requirements of Bursa Securities, the details of the Directors who are seekingfor re-election or reappointment in Agenda 3, 4 and 6(a) of the Notice of the Ninth (9 th ) Annual General Meeting of the Companyare set out in the Directors’ Profile on pages 15 to 19 of this Annual Report. Their securities holdings in the Company are set out in theDirectors’ Shareholdings which appears on page 23 of this Annual Report.4Mycron Steel Berhad

Chairman’s Statement“the Group had attained total sales revenue ofRM443 million compared to RM414 million theprevious year, an increase of RM29 million or 7%.”On behalf of the Board of Directors, I am pleased to present the Annual Report of Mycron Steel Berhad and its group of companies(“the Group”) for the financial year ended 30 June 2012.FINANCIAL RESULTSFor the financial year ended 30 June 2012, the Group had attained total sales revenue of RM443 million compared to RM414 millionthe previous year, an increase of RM29 million or 7%. Similarly, sales volume increased to 165,000 tonnes compared to 156,000 tonnesin the previous year, an increase of 9,000 tonnes or 6%.With a production capacity of 260,000 tonnes a year, this sales volume represents a utilisation rate of 63%. The low capacity utilisationwas a result of the soft market conditions that prevailed for much of the period under review, and also due to the group’s inability tosource reasonably priced, raw material feed stock.Despite the increase in sales revenue and sales tonnage, the Group recorded a Loss After Tax of RM12.4 million compared to a ProfitAfter Tax of RM0.5 million in the previous year. This loss was mainly due to a one-off impairment on other receivable/investmentamounting to RM9.1 million, being the Group’s investment in PMP Galvanizers Sdn Bhd, and a profit margin squeeze brought aboutby intense competition in the domestic market.DIVIDENDDue to the weak performance for the period under review, the Directors do not recommend the payment of any Dividend for thefinancial year ended 30 June 2012.OPERATING REVIEWFor the period under review, the flat steel industry continued to remain sluggish, amid the soft market conditions for downstreamcustomers.Domestically, the Malaysian CRC industry had to contend, with cheap duty exempted on imported CRC. Whilst CRC had beenimported on a duty exempt basis, the basic raw material for the manufacture of CRC, which is Hot Rolled Coil (“HRC”), had receivedlimited import duty exemption approval. As a result of this, domestic CRC manufacturers have had to purchase HRC, from the soledomestic HRC manufacturer, at a very high price; approximately USD120 per tonne, above international HRC prices.The impact of the Malaysian Government’s restriction on import duty exemptions for HRC, coupled by a relatively liberal import dutyexemption for CRC, caused an imbalance in the steel manufacturing supply chain.Whilst duty exempt imported CRC had pushed down the price of domestic CRC, the monopolistic sole domestic HRC manufacturerhad forced domestic CRC manufacturers to pay a high price, for their HRC supply thus; squeezing the margins of domestic CRCmanufacturers. The poor performance of the Group for the year is a direct reflection of the imbalance of the steel manufacturingsupply chain.Mycron Steel Berhad 5

Chairman’s Statement(continued)As reported earlier, the Group’s production capacity utilisation was only 63%, for the financial year under review. Fortunately, towardthe end of the financial year, the appeals of the Group was heeded by the government and the Group was permitted to increase itsimport of Iron Ore Based HRC on a duty exempt basis, which saw the level of CRC production and sales, increase to near full capacitylevels at 19,000 tonnes a month. Hopefully, the government will continue with this policy and will allow domestic CRC manufacturersto continue to compete with duty exempted imported Iron Ore Based CRC.DOMESTIC CRC INDUSTRYThe base raw material used for the production of Cold Rolled Coil (“CRC”) is Hot Rolled Coil (“HRC”). In general, CRC manufacturersproduce two main types of products, namely:1. Scrap Based CRC (made from Scrap Based HRC)2. Iron Ore Based CRC (made from Iron Ore Based HRC)In general, the lower quality Scrap Based CRC is used by downstream manufacturers in the Steel Tube and Furniture industry. Thehigher quality Iron Ore Based CRC, is used by downstream manufacturers in the Automotive, Steel Drum for petroleum and palm oil,Roofing Sheet Galvanizers, and the Electronic and Electrical Appliance (e.g. fridges, televisions, hand phones, rice cookers, etc.)industries.Currently, there are 5 CRC manufacturers in Malaysia, with estimated capacity and utilisation rates, as follows:Cold Rolled Coil (“CRC”) Industry Statistics 2011CRC *Production 2011t/yRated CapacityCRC t/yCapacityUtilisation1. CSC Steel Bhd 370,000 620,000 60%2. Mycron Steel Bhd 165,000 260,000 63%3. YKGI Bhd 120,000 250,000 48%4. Mega Steel Sdn Bhd (Lion Group Bhd) 120,000 1,500,000 8%5. Eonmetall Group Bhd 89,000 120,000 74%Total 864,000 2,750,000 31%* Estimated as no data is availableAs noted from the table above, CRC manufacturers have not been operating at full capacity, which is unfortunate, given that thelevel of duty exempted imported CRC was relatively high, at 977,048 tonnes in 2011. The inability for domestic CRC manufacturers tocompete with the supply of imported Iron Ore Based CRC, was primarily caused by their inability to import Iron Ore Based HRC on aduty exempt basis, due to limited government approvals.Appeals by the industry, to the government, to correct this imbalance, have seen some positive, if not temporary, results. The industryis, however, confident that the government will eventually see the logic of permitting more duty exempt Iron Ore Based HRC to beimported, so that the domestic CRC manufacturers can compete on a level playing field, with duty exempt imported Iron Ore BasedCRC.Although, I have highlighted that 977,048 tonnes of duty exempt CRC were imported last year, it is worth noting that the totalamount of CRC related products (e.g. colour coated CRC, galvanized CRC, metal coated CRC, etc.) that was imported last year,totalled 1.77 million tonnes. If the domestic CRC industry, were allowed to produce more high quality CRC by the government, otherMalaysian downstream manufacturers, like CRC galvanizers and colour coaters, would be able to source domestic supplies of CRC,to contend with this huge level of flat steel imports.The following table details the types and volume of CRC and HRC, that are consumed in Malaysia, for the year 2011:The Malaysian Flat Steel Industry Statistics 2011Production(tonnes)Import(tonnes)Export(tonnes)Consumption(tonnes)Hot Rolled Coil (“HRC”) 1,323,000 891,731 80,915 2,133,816Cold Rolled Coils (“CRC”) 864,158 977,048 124,754 1,716,452Galvanised Iron+Zinc-Aluminium 407,738 364,023 14,895 756,866Color Coated Sheets 226,507 36,510 42,883 220,134Other Metallic Coated Sheets - 26,477 2,776 23,701Tin Plated Sheets 140,000 64,684 65,098 139,586Electro-Galvanized Iron (“EGI”) Sheets 175,309 172,951 77,399 270,861Cold-Rolled Electrical Sheets/Tubes - 131,732 18,714 113,018CRC Related Products 1,813,712 1,773,425 346,519 3,240,618Source: MISIF6Mycron Steel Berhad

Chairman’s Statement(continued)The calendar year 2011 also proved to be a challenging year for the Malaysian Steel Industry, following the withdrawal of severalfounding steel mill members from the Malaysian Iron & Steel Industry Federation (“MISIF”), to form the Malaysia Steel Association(“MSA”), which had inadvertently, fragmented the steel industry.During the year, the government also launched the first ever safeguard investigation in the history of the Malaysian Iron and SteelIndustry. The safeguard request was petitioned by the country’s sole producer of HRC and the investigation was centred on theimport of HRC into the country, with the sole producer asking for a further increase, of import duties for HRC, from the current 25%level, to 60%. Fortunately, good sense prevailed, and government wisely decided to terminate the investigation in August 2011. Thedecision was widely lauded by the steel industry, and removed enormous anxieties, as well as uncertainties among all stakeholders.LONG-TERM OUTLOOKThe Group remains cautiously confident, in the long-term growth potential, of the flat steel sector in Malaysia, which has an impact,on downstream CRC users like the manufacturing, electronics, galvanising, construction, palm oil and petroleum industries. Theimplementation of projects under the Economic Transformation Programme (“ETP”), should see the domestic economy pick upsignificantly, which bodes well for the consumption of CRC in the country.Unfortunately, the world economy is still struggling to shake off the aftermath of the 2008 financial crisis. While the signs are positive,significant risks remain, including:• The poor financial developments in Europe and the threat of economic slow down spreading to other markets• The slow down in China and the threat of exporting excess production to ASEAN countries• The persistently high unemployment rate in the United States sapping global demand for manufactured goods even furtherMoving forward, the Group will continue to pursue an import substitution strategy, especially in the galvanising, drum and automobilesectors, which are currently using imported CRC for their feed material. With almost 1 million tonnes of CRC being imported intoMalaysia each year, the prospects for the Group to penetrate new markets is good. The plans and strategies, which we have in place,and those that we are implementing, will put us in a favourable position, to take advantage of any opportunities, which may arise inthe near future.PROSPECTS FOR THE NEW FINANCIAL YEARFor the new financial year, the Group expects the demand for CRC to be stable, which will prove to be healthy for the Group’splant capacity utilisation. However, the performance of the Group, will hinge on its ability to source Iron Ore Based HRC, on a dutyexemption basis.Although the long-term prospect for the Group remains positive at present, the overall demand for flat steel remains relatively weak,due to the concerns of the global economic environment. The steel industry historically, has always been cyclical and remains highlysensitive to global economic conditions, as well as the volatility of raw material prices, such as iron ore, scrap and coking coal.The World Steel Association forecasted that global apparent steel use will increase by 2.1% in 2012 and 3.2% in 2013, to reach a recordhigh of 1.4 billion tonnes. The steel market is expected to gradually improve in 2013, on the basis that the Euro zone crisis can becontained, the US will be successful in its fiscal tightening and the Chinese Government, will succeed in its economic stimuli measuresto secure a soft landing.Lastly, the Group will continue to maintain its cautious and conservative stance on inventory management, while remaining focusedand closely monitoring the domestic, as well as the global steel demand patterns, and its unpredictable volatility.ACKNOWLEDGEMENTOn behalf of the Board, I would like to express my thanks and gratitude, as well as sincere appreciation to all members of themanagement team and their staff, for their contribution and hard work. By ensuring that Mycron Steel remains the premier name forquality CRC, will guarantee the Group’s long-term success.To our shareholders, I look forward to your continued support in the years ahead, and thank you, for your patience and support,during these challenging times.Tunku Dato’ Ya’acob bin Tunku Tan Sri AbdullahChairmanMycron Steel Berhad 7

Corporate Social ResponsibilityAcknowledging the importance of Corporate Social Responsibility, the Group is committed to be mindful of its responsibilities to thecommunity through the practice of good corporate citizenship as well as to actively pursue policies and actions that are in the bestinterests of the community.To this end, the Group seeks to ensure that the interest of its key stakeholders from shareholders, investors, customers, employees andthe community are cared for through our conscious endeavours to integrate corporate responsibility values in all our business plansand activities.In this regard, we have undertaken the following with respect to various aspects of our business:BUSINESS GOVERNANCE ETHICSIn line with good corporate governance and transparent business practices, the Group constantly reviews its policy statementsand best management practices to ensure the Group is managed effectively and ethically with adequate control mechanisms tomanage risks and deliver accountability, sustainability and profitability. This includes the implementation of internal control systemssuch as a financial authority framework and risk management framework. Coupled with this, the Company’s Audit Committee andRisk Management Committee periodically review these internal control systems together with recommendations from Internal andExternal Auditors as well as appointed Advisors for projects undertaken by the Company.CUSTOMER SATISFACTIONThe Group is unwavering in meeting its standards of excellence by ensuring the delivery of quality in project execution and meetingall customer deliverables as detailed in our contracts.We aspire towards full realisation of ISO standards throughout our operations and the application of established quality practices andpolicies. We are currently in the process of obtaining accreditation with ISO 14001 : 2004 which is an internationally recognised standardfor the establishment of an organisation’s environmental management system. With the accreditation, the Group is committed tocontinuously taking steps to comply with product requirements and improve the effectiveness of its Quality Management System.WORKPLACEThe Group recognises the importance of employees as the most valuable asset. Towards this end, the Company constantlyenhances employees’ job-related skills, knowledge and experience via in-house and external training programmes. A structuredinternal training and development programme has been planned and implemented to improve the technical skills of the employees.This is also complemented by a clear and transparent approach that ensures all employees are fully aware of the Group’s businessobjectives and goals.The Group is progressively looking to improve and upgrade, where necessary, its factory facilities and infrastructures to provide acondusive working environment. The Group is also committed to ensure that the safety and health of employees are paramountat all times. This is reflected in the establishment of the Safety and Health Committee, tasked to conduct preventive measures andsafety training programmes in order to create safety awareness among the employees.The Company has also maintained the policy of rewarding the employees when the “Accident Frequency Rate” is kept at a minimallevel under its safety campaign named “Keep It Safe and Sound” or in Bahasa Malaysia, “Kerja Ingat Selamat dan Sempurna”.ENVIRONMENTThe Group ensures that business activities are conducted in compliance with the applicable environment regulations and laws at alltimes besides recognising the importance of good environmental management/preservation practices. In our daily operations, theGroup continues to be committed to:• recycling and reselling of waste materials;• reducing energy consumption;• reducing production waste throughout the operations by proper production planning;• undertaking measures to reduce wastages, pollution and harmful emissions;• practicing a paperless environment and reducing usage of plastic across all the factories and offices of the Group; and• encouraging employees to switch off non-essential electrical machinery, equipment and appliance when not in use.Besides the above initiatives, the Company had also undertaken a Rainwater Harvesting Project since 2011 to reduce our consumptionof water from Syabas. This project also alleviates the rainwater peak runoff and helps to prevent flooding and soil erosion of oursurrounding areas.COMMUNITYThe Group aims to add value to the community in which it operates its business, and through this engagement, enhance the longtermsustainability of the business.In recognising the above, the Company has planned to set up an Emergency Response Team (ERT). We have sent 14 employees thusfar to undergo the Emergency Response Training conducted by Bomba.The Group also encourages its employees to participate in the Neighbourhood Watch Programme in the vicinity of the factory.8Mycron Steel Berhad

Corporate InformationDomicile : MalaysiaLegal Form & Place ofIncorporation: A public listed company incorporated in Malaysia under the Companies Act, 1965 andlimited by sharesDirectors : Tunku Dato’ Ya’acob bin Tunku Tan Sri Abdullah• Non-Independent Non-Executive ChairmanEn Azlan bin Abdullah• Executive Director/Chief Executive OfficerTunku Dato’ Kamil Ikram bin Tunku Tan Sri Abdullah• Non-Independent Non-Executive DirectorDato’ Zulkifly @ Sofi bin Haji Mustapha• Non-Independent Non-Executive DirectorDato’ Jaffar Indot• Independent Non-Executive DirectorGeneral Dato’ Sri Hj Suleiman bin Mahmud RMAF (Rtd)• Independent Non-Executive DirectorDatuk Seri Razman Md Hashim• Independent Non-Executive DirectorDato’ Sri Iskandar Michael bin Abdullah• Independent Non-Executive DirectorDatuk Lim Kim Chuan• Non-Independent Non-Executive DirectorSecretaries : Ms Lily Yin Kam MayMs Ezza Hanie AliasAudit Committee : Dato’ Jaffar Indot• ChairmanDatuk Seri Razman Md Hashim• MemberGeneral Dato’ Sri Hj Suleiman bin Mahmud RMAF (Rtd)• MemberRegistrar & Transfer Office : Trace Management Services Sdn BhdSuite 12.03, 12 th FloorNo. 566 Jalan Ipoh51200 Kuala LumpurTelephone No.: 03-6252 8880Telefax No.: 03-6252 8080Registered Office : Suite 12.03, 12 th FloorNo. 566 Jalan Ipoh51200 Kuala LumpurTelephone No.: 03-6252 8880Telefax No.: 03-6252 8080Mycron Steel Berhad 9

Corporate Information(continued)Principal Place of Business : Lot 717 Jalan Sungai RasauSeksyen 1640200 Shah AlamSelangor Darul EhsanTelephone No.: 03-5510 6608Telefax No.: 03-5510 3720Solicitors : Messrs Othman Hashim & Co.Suite 18.04, 18 th FloorMenara ZurichNo. 12 Jalan Dewan Bahasa50460 Kuala LumpurTelephone No.: 03-2142 3399Telefax No.: 03-2141 4685Messrs Reddi & Co. AdvocatesLane BuildingNo. 29 Kai Joo Lane93000 KuchingSarawakTelephone No.: 082-248 866Telefax No.: 082-248 867Messrs Lee Hishammuddin Allen & GledhillLevel 16 Menara Tokio Marine LifeNo. 189 Jalan Tun Razak50400 Kuala LumpurTelephone No.: 03-2161 2330Telefax No.: 03-2161 3933Messrs Ranjit Singh & YeohD3-05-12 Solaris DutamasNo 1 Jalan Dutamas 150480 Kuala LumpurTelephone No.: 03-6205 4126Telefax No.: 03-6205 4109Auditors : Messrs PricewaterhouseCoopers (AF 1146)Level 8-15, 1 SentralJalan TraversKuala Lumpur Sentral50706 Kuala LumpurTelephone No.: 03-2173 1188Telefax No.: 03-2173 1288Principal Bankers(In alphabetical order): • DBS Bank Ltd• Natixis France• OCBC Bank (Malaysia) BerhadStock Exchange Listing : Main Market of Bursa Malaysia Securities Berhad (“Bursa Securities”)Stock Number 5087Website : www.mycronsteel.comE-mail : enquiry@mycronsteel.com10Mycron Steel Berhad

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Quality RecognitionMycron Steel constantly improves its operations and strives to meet customers’ expectations. In 1996, Mycron Steel achieved itsISO 9001 certification. Since it was established, the effectiveness of the Quality Management System has been refined to adapt toglobal challenges. 2010 marks Mycron Steel’s upgrade in its Quality Management System to ISO 9001 : 2008 and it was recognised bySIRIM with an IQNET certification. Our commitment in delivering excellent product quality and services has been duly acknowledgedthrough various accolades and awards.Mycron Steel Berhad 13

Quality Recognition(continued)14Mycron Steel Berhad

Profile of DirectorsTunku Dato’ Ya’acob bin Tunku Tan Sri AbdullahAged 52, MalaysianNon-Independent Non-Executive ChairmanMember of the Executive CommitteeAzlan bin AbdullahAged 54, MalaysianExecutive Director/Chief Executive OfficerChairman of the Executive CommitteeTunku Dato’ Ya’acob bin Tunku Tan Sri Abdullah was appointedto the Board of Directors of the Company on 30 March 2004 as aNon-Independent Non-Executive Director. Subsequently, he wasredesignated to Non-Independent Non-Executive Chairman ofthe Company on 2 May 2008. He is also a director of MycronSteel CRC Sdn Bhd. He sits on the Boards of Khyra Legacy Berhad,Melewar Industrial Group Berhad (“MIG”), MAA Group Berhad(“MAAG”), MAAKL Mutual Berhad, Melewar Group Berhad,Ithmaar Bank B.S.C. (listed on the Bahrain Stock Exchange) andseveral other private limited companies.Tunku Dato’ Ya’acob graduated with a Bachelor of Science(Hons) Degree in Economics and Accounting from City University,London. An accountant by training, he is a Fellow of the Instituteof Chartered Accountants in England & Wales and a member ofthe Malaysian Institute of Accountants.He started his career as an Auditor with Price Waterhouse,London from 1982 to 1985 and subsequently, was employedby the same firm in Kuala Lumpur from 1986 to 1987. He joinedMalaysian Assurance Alliance Berhad (now known as ZurichInsurance Malaysia Berhad) in 1987 and has been headingMAAG Group of Companies since 1999. He currently holds theposition of Executive Chairman of MAAG and the ExecutiveChairman of MIG.Tunku Dato’ Ya’acob is the Chairman of the Board of Trustees ofMAA-Medicare Kidney Charity Fund and The Budimas CharitableFoundation. He also sits on the Executive Board of the Federationof Public Listed Companies Berhad as Vice President.Tunku Dato’ Ya’acob is the brother to Tunku Dato’ Kamil Ikrambin Tunku Tan Sri Abdullah and the brother-in-law to Dato’ Zulkifly@ Sofi bin Haji Mustapha. His shareholding in the Company isdisclosed on page 23 of the Annual Report.En Azlan bin Abdullah was appointed to the Board of Directorsof the Company on 30 March 2004 as an Executive Director/Chief Executive Officer. He is also the Executive Director/ChiefExecutive Officer of Mycron Steel CRC Sdn Bhd. He is currently theManaging Director/Group Chief Executive Officer of MelewarIndustrial Group Berhad and sits on the Boards of Bandar RayaDevelopments Berhad, HSBC Amanah Malaysia Berhad andseveral other private limited companies.En Azlan holds a Bachelor of Science Degree in BusinessAdministration from Trinity University, San Antonio, Texas, USAand a Masters Degree in Business Administration from MoreheadState University, Kentucky, USA.He started his career in 1983 with Citibank N A and in 1987, hejoined United Asian Bank (“UAB”) where he started and headedthe Treasury Marketing Unit. After UAB merged with Bank ofCommerce, he was subsequently promoted to Head of PriorityBanking Division and Branch Manager of the KL Main Branch in1992. In 1994, he rejoined Citibank Berhad as Vice President andHead of Public Sector Division.En Azlan has no family ties with any of the directors and/or majorshareholders of the Company. His shareholding in the Companyis disclosed on page 23 of the Annual Report.En Azlan does not have any personal interest in any businessarrangements involving the Company.En Azlan does not have any conflict of interest with the Companyand has had no conviction for any offences within the past ten(10) years.Tunku Dato’ Ya’acob does not have any personal interest in anybusiness arrangements involving the Company.Tunku Dato’ Ya’acob does not have any conflict of interest withthe Company and has had no conviction for any offences withinthe past ten (10) years.Mycron Steel Berhad 15

Profile of Directors(continued)Tunku Dato’ Kamil Ikram bin Tunku Tan Sri AbdullahAged 56, MalaysianNon-Independent Non-Executive DirectorMember of the Risk Management CommitteeTunku Dato’ Kamil Ikram bin Tunku Tan Sri Abdullah was appointedto the Board of Directors of the Company on 10 June 2008 asa Non-Independent Non-Executive Director. He currently sits onthe Boards of Melewar Group Berhad and other several privatelimited companies.Tunku Dato’ Kamil completed his Diploma (OND) Hotel &Catering Management in 1976 and Professional (HCIMA) HotelManagement in 1978. He also went on to earn a Diploma inMarketing in 1979. In the summers, he trained and worked atthe 3-star Regent Place Hotel in London’s West End and laterat the Chewton Glen, a premium 5-star hotel in the New Forest,Hamshire. In 1990, he graduated with an Executive MBA fromBoston University, Graduate School of Management, M.A., USA.Pahang for which he has incorporated a company, RibuanBakat Sdn Bhd, a land holding company. He is the past Presidentof the Negeri Sembilan Cricket Association.Tunku Dato’ Kamil is the brother to Tunku Dato’ Ya’acob bin TunkuTan Sri Abdullah. His shareholding in the Company is disclosed onpage 23 of the Annual Report.Tunku Dato’ Kamil does not have any personal interest in anybusiness arrangements involving the Company.Tunku Dato’ Kamil does not have any conflict of interest with theCompany and has had no conviction for any offences within thepast ten (10) years.Back in Malaysia, Tunku Dato’ Kamil’s first job in 1979 was at theHyatt Regency Hotel in Kuantan, where he served as AssistantManager and later as Credit Manager. Following this, thediversified family organisation Melewar beckoned and the early80’s saw Tunku Dato’ Kamil immersed in its diverse businesses, asGroup Operations Director. Following the acquisition of two (2)public listed companies, Granite Industries Bhd and MalaysianAssurance Alliance Berhad (now known as Zurich InsuranceMalaysia Berhad) in the mid 80’s, he was appointed as theSpecial Projects Director and oversaw several projects, coveringdifferent industries and disciplines. In 1989, he went to Boston todo his MBA, returning in 1991 to continue his responsibilities withMelewar and Granite Industries Bhd. He also briefly served on theBoard of TDM Bhd.In mid 90’s, Tunku Dato’ Kamil set up a multi-conceptentertainment business in Kuala Lumpur and Penang. This thensaw him offering his expertise to start up similar businesses inSouthern Thailand and in Bangkok, where he also consulted forforeign companies in diverse areas such as communications,trading and defense.Currently, as Associate Director of Business Development,Tunku Dato’ Kamil spends his time evaluating new projects andfinalising plans to develop his beachfront land in Cherating,16Mycron Steel Berhad

Profile of Directors(continued)Dato’ Zulkifly @ Sofi bin Haji MustaphaAged 66, MalaysianNon-Independent Non-Executive DirectorDatuk Lim Kim ChuanAged 53, MalaysianNon-Independent Non-Executive DirectorMember of the Executive CommitteeDato’ Zulkifly @ Sofi bin Haji Mustapha was appointed to theBoard of Directors of the Company on 30 March 2004 as a Non-Independent Non-Executive Director. He is also a director ofMycron Steel CRC Sdn Bhd. He currently sits on the Board of TheMelewar Corporation Berhad and several other private limitedcompanies.He has extensive experience in the property and developmentsector and holds a Master of Philosophy from the University ofReading, England.Dato’ Zulkifly is the brother-in-law to Tunku Dato’ Ya’acob binTunku Tan Sri Abdullah. His shareholding in the Company isdisclosed on page 23 of the Annual Report.Dato’ Zulkifly does not have any personal interest in any businessarrangements involving the Company.Dato’ Zulkifly does not have any conflict of interest with theCompany and has had no conviction for any offences withinthe past ten (10) years.Datuk Lim Kim Chuan was appointed to the Board of Directorsof the Company on 30 March 2004 as a Non-IndependentNon-Executive Director. He is currently an Executive Director ofMelewar Industrial Group Berhad and sits on the Board of theGroup’s subsidiaries and several other private limited companies.Datuk Lim has over thirty two (32) years of experience in thefinance and manufacturing industries. He started his careerwith OCBC Finance Berhad in 1979. He left in 1983 to join MUIFinance Berhad. He joined the Melewar Group in 1985 andwas appointed as the General Manager and director of itsequipment leasing division. In 1991, he started a new credit andleasing company under the Group and was its Chief ExecutiveOfficer until 2003. He is currently the Chief Principal Officer ofKhyra Legacy Berhad, which is the ultimate holding companyof the Company.Datuk Lim has no family ties with any of the directors and/ormajor shareholders of the Company nor any shareholding in theCompany.Datuk Lim does not have any personal interest in any businessarrangements involving the Company.Datuk Lim does not have any conflict of interest with theCompany and has had no conviction for any offences withinthe past ten (10) years.Mycron Steel Berhad 17

Profile of Directors(continued)Dato’ Jaffar IndotAged 78, MalaysianSenior Independent Non-Executive DirectorChairman of the Audit CommitteeChairman of the Risk Management CommitteeMember of the Nomination CommitteeMember of the Remuneration CommitteeGeneral Dato’ Sri Hj Suleiman bin Mahmud RMAF (Rtd)Aged 65, MalaysianIndependent Non-Executive DirectorMember of the Audit CommitteeMember of the Risk Management CommitteeMember of the Nomination CommitteeMember of the Remuneration CommitteeDato’ Jaffar Indot was appointed to the Board of Directors ofthe Company on 3 September 2012 as an Independent Non-Executive Director. He currently sits on the Boards of MAA GroupBerhad, SYCAL Ventures Berhad, Prestariang Berhad, MalaysianAlliance of Corporate Directors, Cygal Berhad and several otherprivate limited companies.Dato’ Jaffar attended the Harvard Business School InternationalSenior Managers’ Programme, Vevey, Switzerland in 1983. Afterserving three (3) years with the Rural Industrial DevelopmentAuthority, he joined Shell in 1956 and retired in 1989 after thirtythree (33) years of service.During this time, he worked for Shell in Japan and London,where he served in various capacities in international oil trading,business development and public affairs. In 1980, he returned toMalaysia as the Executive Director and Director of Public Affairsfor Shell Malaysia and in 1983 was appointed Managing Directorof Shell Malaysia Trading Sdn Bhd and Shell Timur Sdn Bhd.He was the Chairman of Shell Timur Sdn Bhd from August 1989 toDecember 1997. He continued to serve Shell in Malaysia as anIndependent Non-Executive Director in Shell Refining Company(FoM) Berhad for 21 years until his retirement from the Board inMay 2010.Dato’ Jaffar has no family ties with any of the directors and/ormajor shareholders of the Company nor any shareholding in theCompany.Dato’ Jaffar does not have any personal interest in any businessarrangements involving the Company.Dato’ Jaffar does not have any conflict of interest with theCompany and has had no conviction for any offences withinthe past ten (10) years.General Dato’ Sri Hj Suleiman bin Mahmud RMAF (Rtd) wasappointed to the Board of Directors of the Company on 3September 2012 as an Independent Non-Executive Director.He is currently a Board member of MLABS Systems Berhad andseveral other private limited companies.General Dato’ Sri Suleiman is a graduate of the Royal NewZealand Air Force Command and Staff College and the UnitedStates Air Force, Air War College. He holds a Master of ScienceDegree in Operational Research and Systems Analysis, and aPost Graduate Diploma in Business Administration, both from theUniversity of Aston, United Kingdom. He has been appointed asan Honorary Fellow of the Malaysian Institute of Logistics.General Dato’ Sri Suleiman retired from the Royal Malaysian AirForce in March 2003 after serving more than 38 years. Besidesbeing a pilot, he had held several command positions at variouslevels in the Air Force. He had also served in several positionsin the Department of the Air Force and the Armed ForcesHeadquarters. He then rose to become the Chief of Air Forcebefore his retirement.General Dato’ Sri Suleiman has no family ties with any of thedirectors and/or major shareholders of the Company nor anyshareholding in the Company.General Dato’ Sri Suleiman does not have any personal interestin any business arrangements involving the Company.General Dato’ Sri Suleiman does not have any conflict of interestwith the Company and has had no conviction for any offenceswithin the past ten (10) years.18Mycron Steel Berhad

Profile of Directors(continued)Datuk Seri Razman Md HashimAged 73, MalaysianIndependent Non-Executive DirectorChairman of the Nomination CommitteeChairman of the Remuneration CommitteeMember of the Audit CommitteeDato’ Sri Iskandar Michael bin AbdullahAged 67, MalaysianIndependent Non-Executive DirectorMember of the Risk Management CommitteeDatuk Seri Razman Md Hashim was appointed to the Board ofDirectors of the Company on 1 October 2012 as an IndependentNon-Executive Director. He is currently the Deputy Chairman ofthe Sunway Group of Companies and his current directorships inother public companies include Multi-Purpose Holdings Berhad,SILK Holdings Berhad, Berjaya Land Berhad, Sunway Berhad,MAA Group Berhad and MAA Takaful Berhad.Datuk Seri Razman completed his early secondary education inAustralia and on completion, studied Accounting and Bankingwhere he became a member of the Australian Institute ofBankers.Upon his return to Malaysia, Datuk Seri Razman joined StandardChartered Bank Malaysia Berhad (“SCB”) as an Officer Trainee in1967. Throughout his 34 years of banking experience in SCB, heserved with the bank’s offices in London, Europe, Hong Kong andSingapore. In 1994, he was appointed as the Executive Director/Deputy Chief Executive of SCB until his retirement in June 1999.In the same month in 1999, Datuk Seri Razman was appointedas Chairman of MBf Finance Berhad by Bank Negara Malaysiauntil January 2002 when the finance company was sold to Arab-Malaysian Group. He was appointed to the Board of MalaysianAssurance Alliance Berhad (now known as Zurich InsuranceMalaysia Berhad) (“MAAB”) on 1 July 2006 as an IndependentNon-Executive Director and had resigned from the Board ofMAAB on 30 September 2011.Dato’ Sri Iskandar Michael bin Abdullah was appointed to theBoard of Directors of the Company on 1 August 2012 as anIndependent Non-Executive Director. He is a Board member ofMAA Bancwell Trustee Berhad and several other private limitedcompanies.Dato’ Sri Michael is the senior partner of the law firm of BalendranChong with offices in Kuantan and Kuala Lumpur. He specialisesin conveyancing and corporate law. He was born in Perak anddid his schooling in St. Michael’s Institution Ipoh. He is a Barristerat-Lawof Inner Temple, Inns of Court of London. Since 1969, hehas been practising law in Kuantan and was the Chairman of thePahang Bar from 1985 to 1987.Dato’ Sri Michael has no family ties with any of the directors and/or major shareholders of the Company nor any shareholding inthe Company.Dato’ Sri Michael does not have any personal interest in anybusiness arrangements involving the Company.Dato’ Sri Michael does not have any conflict of interest with theCompany and has had no conviction for any offences within thepast ten (10) years.Datuk Seri Razman has no family ties with any of the directorsand/or major shareholders of the Company nor any shareholdingin the Company.Datuk Seri Razman does not have any personal interest in anybusiness arrangements involving the Company.Datuk Seri Razman does not have any conflict of interest with theCompany and has had no conviction for any offences within thepast ten (10) years.Mycron Steel Berhad 19

Group Financial Highlights &Financial Indicators2008 2009 2010 2011 20121 Financial Highlights Of Statements Of Comprehensive IncomeRevenue (RM mil) 406.1 383.3 465.4 414.4 443.3EBITDA (RM mil) 28.8 (26.6) 40.3 16.5 11.9Profit/(Loss) Before Tax (RM mil) 16.7 (49.7) 32.3 0.4 (14.1)Profit/(Loss) After Tax (RM mil) 30.3 (38.4) 25.5 0.5 (12.4)Net Profit/(Loss) Attributable To Equity Holders (RM mil) 30.3 (38.4) 25.5 0.5 (12.4)2 Financial Highlights Of Statements Of Financial PositionTotal Assets (RM mil) 526.5 437.4 531.4 460.6 483.4Total Borrowings (RM mil) 213.8 183.8 196.9 155.8 179.0Shareholders Equity (RM mil) 275.9 233.8 259.4 264.7 254.03 Financial IndicatorsReturn on Equity (%) 11.0 (16.4) 9.8 0.2 (4.9)Return on Total Assets (%) 5.8 (8.8) 4.8 0.1 (2.6)Net Gearing Ratio (Times) 0.73 0.68 0.74 0.46 0.60Net Earnings/(Loss) per share (sen) 16.9 (21.5) 14.3 0.3 (7.0)Net Asset per share (RM) 1.54 1.31 1.46 1.49 1.43Gross Dividend per share (%) 2.5 - 3.5 - -PE Ratio 3.4 (2.3) 3.5 193.3 (4.4)Share Price as at FYE (RM) 0.57 0.50 0.50 0.58 0.3120Mycron Steel Berhad

Analysis of ShareholdingsAs At 31 October 2012Authorised Share Capital - RM500,000,000Issued and Paid-up Capital - RM179,000,000Class of Shares - Ordinary Shares of RM1 eachVoting Rights - 1 Vote Per Ordinary ShareNo. of Shareholders - 5,957Size of ShareholdingsNo. ofShareholders% ofShareholdersNo. of Shares% of IssuedCapitalLess than 100 440 7.39 19,632 0.01100 - 1,000 2,407 40.41 1,381,174 0.771,001 - 10,000 2,345 39.37 10,564,673 5.9010,001 - 100,000 690 11.58 20,093,630 11.23100,001 and below 5% of issued shares 74 1.24 49,436,125 27.625% and above of issued shares 1 0.02 97,504,766 54.47TOTAL 5,957 100.00 179,000,000 100.00THIRTY LARGEST SHAREHOLDERS AS AT 31 OCTOBER 2012NameOrdinary Shares ofRM1 each(1)% of IssuedCapital1. Melewar Industrial Group Berhad 97,504,766 54.792. HDM Nominees (Asing) Sdn Bhd(Beneficiary: UOB Kay Hian Pte Ltd for Bradford Securities Ltd)3. Cartaban Nominees (Asing) Sdn Bhd(Beneficiary: Exempt An for Daiwa Capital Markets Singapore Limited)4. Amsec Nominees (Tempatan) Sdn Bhd(Beneficiary: Pledged securities account for Avenue Serimas Sdn Bhd)6,320,475 3.555,370,000 3.025,129,700 2.885. Araneum Sdn Bhd 5,076,000 2.856. Tan Cheng Chai 4,134,000 2.327. Cartaban Nominees (Asing) Sdn Bhd(Beneficiary: Marubeni-Itochu Steel Inc.)8. Amanahraya Trustees Berhad(Beneficiary: Skim Amanah Saham Bumiputera)3,580,000 2.012,406,700 1.359. Avenue Serimas Sdn Bhd 1,898,900 1.0610. Citigroup Nominees (Tempatan) Sdn Bhd(Beneficiary: Pledged securities account for Chai Shiak Chai)830,000 0.4611. Lim Seng Chee 824,000 0.4612. Ng Teng Song 616,900 0.3413. Leong Kok Tai 567,800 0.3114. Yeoh Kean Hua 560,000 0.3115. Pacific Strike Sdn Bhd 544,200 0.3016. Thong Yung Khan 412,800 0.2317. Maybank Securities Nominees (Asing) Sdn Bhd(Beneficiary: Maybank Kim Eng Securities Pte Ltd for Divyesh Nagindas Doshi)385,200 0.2118. Lim Seng Qwee 374,000 0.2119. Cimsec Nominees (Tempatan) Sdn Bhd(Beneficiary: Pledged securities account for Chan Thye Thian)357,600 0.20Mycron Steel Berhad 21

Analysis of ShareholdingsAs At 31 October 2012(continued)NameOrdinary Shares ofRM1 each(1)% of IssuedCapital20. Chin Yok Lay @ Chin Yok Lin 341,900 0.1921. Cimsec Nominees (Tempatan) Sdn Bhd(Beneficiary: Pledged securities account for Ng Geok Wah)300,000 0.1622. YAM Tunku Nadzaruddin ibni Tuanku Jaafar 283,600 0.1523. Wong Yeap Min 275,000 0.1524. Teo Lai Kuang 260,000 0.1425. Chan Seng Cheong 254,000 0.1426. Kum Mun Ho 250,000 0.1427. Maybank Securities Nominees (Asing) Sdn Bhd(Beneficiary: Maybank Kim Eng Securities Pte Ltd for Quek Eng Wah)28. AmBank (M) Berhad(Beneficiary: Pledged securities account for Azlan bin Abdullah)250,000 0.14247,000 0.1329. Syarikat Hawk Soon Hin Sdn Bhd 235,000 0.1330. Lim Jit Hai 217,900 0.12TOTAL 139,763,841 78.56Note:(1)The percentages of the Thirty Largest Shareholders is calculated based on the total issued and paid up capital of the Companyexcluding a total of 1,040,300 Mycron Steel Berhad shares bought back by the Company and retained as treasury shares.LIST OF SUBSTANTIAL SHAREHOLDERS AS AT 31 OCTOBER 2012NameNumber of Shares HeldDirect % (1) Indirect % (1)Tunku Dato’ Ya’acob bin Tunku Tan Sri Abdullah - - 97,504,766 54.79 (a)Tunku Dato’ Kamil Ikram bin Tunku Tan Sri Abdullah - - 97,504,766 54.79 (b)Tunku Yahaya @ Yahya bin Tunku Tan Sri Abdullah - - 97,504,766 54.79 (b)Dato’ Zulkifly @ Sofi bin Haji Mustapha - - 97,504,766 54.79 (b)Datin Ezurin Yusnita binti Abdul Malik - - 97,504,766 54.79 (b)Melewar Industrial Group Berhad 97,504,766 54.79 - -Khyra Legacy Berhad - - 97,504,766 54.79 (c)Iternum Melewar Sdn Bhd - - 97,504,766 54.79 (d)Melewar Equities (BVI) Ltd - - 97,504,766 54.79 (e)Melewar Khyra Sdn Bhd - - 97,504,766 54.79 (e)Melewar Equities Sdn Bhd - - 97,504,766 54.79 (f)22Mycron Steel Berhad

Analysis of ShareholdingsAs At 31 October 2012(continued)DIRECTORS’ SHAREHOLDINGS AS AT 31 OCTOBER 2012NameNumber of Shares HeldDirect % (1) Indirect % (1)Tunku Dato’ Ya’acob bin Tunku Tan Sri Abdullah - - 97,504,766 54.79 (a)Tunku Dato’ Kamil Ikram bin Tunku Tan Sri Abdullah - - 97,504,766 54.79 (b)Dato’ Zulkifly @ Sofi bin Haji Mustapha - - 97,504,766 54.79 (b)Azlan bin Abdullah 247,000 0.14 - -Notes:(1)The percentages of the substantial and directors’ shareholdings are calculated based on the total issued and paid up capitalof the Company excluding a total of 1,040,300 Mycron Steel Berhad shares bought back by the Company and retained astreasury shares.(a)Deemed interested by virtue of Section 6A(4) and Section 122A(1)(b) of the Companies Act, 1965 via Melewar Industrial GroupBerhad.(b)Deemed interested by virtue of their family relationship with Tunku Dato’ Ya’acob bin Tunku Tan Sri Abdullah, who is the ultimatesubstantial shareholder of Melewar Industrial Group Berhad.(c)Deemed interested by virtue of it being the holding company of Iternum Melewar Sdn Bhd and Melewar Khyra Sdn Bhd. IternumMelewar Sdn Bhd is a substantial shareholder of Melewar Equities Sdn Bhd who in turn is the holding company of MelewarEquities (BVI) Ltd, a substantial shareholder of Melewar Industrial Group Berhad.(d)Deemed interested by virtue of it being a substantial shareholder of Melewar Equities Sdn Bhd, who in turn is the holdingcompany of Melewar Equities (BVI) Ltd, a substantial shareholder of Melewar Industrial Group Berhad.(e)Deemed interested by virtue of it being a substantial shareholder of Melewar Industrial Group Berhad.(f)Deemed interested by virtue of it being the holding company of Melewar Equities (BVI) Ltd, a substantial shareholder of MelewarIndustrial Group Berhad.Mycron Steel Berhad 23

7.- RÉGIMEN DE PAGO BÁSICO7.1.- Tipos de derechosLos derechos de pago básico se clasifican en función de su origen:• Derechos procedentes de la asignación inicial. Se asignarán derechos de pagobásico en 2015 a los agricultores activos que realicen una actividad agraria siempreque:a) Soliciten la asignación de los derechos de pago en virtud del régimen depago básico a más tardar en la fecha final de presentación de la solicitudúnica de 2015, salvo en caso de fuerza mayor o de circunstancias excepcionales,yb) Hayan tenido derecho a recibir los pagos, antes de toda reducción o exclusiónrespecto de una solicitud de ayuda de pagos directos de conformidadcon el Reglamento (CE) n.º 73/2009 en 2013, oc) Tengan derecho a recibir derechos de pago básico por situaciones excepcionalesderivadas de alegaciones a los importes cobrados o de cambios detitularidad de las explotacionesSe establece, igualmente, excepciones, derivadas de compraventa o arrendamientos delos derechos de pago único.• Derechos procedentes de la reserva nacional: aquéllos que se asignan a los agricultoresque solicitan derechos de la Reserva Nacional( 22 • 23 )

Statement onCorporate Governance(continued)Executive Director No. of Attendance %1. En Azlan bin Abdullah 5/5 100Non-Independent Non-Executive Directors No. of Attendance %1. Tunku Dato’ Ya’acob bin Tunku Tan Sri Abdullah (Chairman) 5/5 1002. Tunku Dato’ Kamil Ikram bin Tunku Tan Sri Abdullah 5/5 1003. Dato’ Zulkifly @ Sofi bin Haji Mustapha 5/5 1004. Datuk Lim Kim Chuan 5/5 100Independent Non-Executive Directors No. of Attendance %1. Dato’ Sri Iskandar Michael bin Abdullah* N/A N/A2. Dato’ Abu Talib bin Mohamed # 4/5 803. Dato’ Narendrakumar Jasani a/l Chunilal Rugnath # 4/5 804. Mr Paul Chan Wan Siew # 4/5 805. Dato’ Jaffar Indot^ N/A N/A6. General Dato’ Sri Hj Suleiman bin Mahmud RMAF (Rtd)^ N/A N/A7. Datuk Seri Razman bin Md Hashim @ N/A N/ANote:* Appointed on 1 August 2012# Resigned on 3 September 2012^ Appointed on 3 September 2012@Appointed on 1 October 2012e) Supply of InformationThe Board members are given board papers with appropriate supporting documentation in a timely manner prior to each BoardMeeting to enable them to function effectively and allow Directors to discharge their responsibilities accordingly. These include,quantitative information and other related performance factors which will enable the Directors to have a good assessment ofthe subject in hand prior to arriving to the decision.The Executive Director/Chief Executive Officer will lead the presentation of board papers and provide comprehensiveexplanation of pertinent issues. Additionally, the Board is furnished with ad hoc reports to ensure that it is apprised of keybusiness, financial, operational, corporate, legal, regulatory and industry matters, as and when the need arises.Further, the Board has unrestricted and immediate access to Senior Management and all information on the affairs of theGroup. At the request of the Board, the Management is obliged to supply all relevant information relating to the business andoperations of the Group and governance matters, including customer satisfaction and survey quality, market share and marketreaction in a timely manner for the Board to discharge its duties effectively.The Senior Management is also invited to join in Board meetings to provide explanation or engage in dialogue with Boardmembers as they may require.The Directors are regularly updated by the Company Secretary on new statutory as well as regulatory requirements relating tothe duties and responsibilities of Directors. All directors have access to the advice and services of the Company Secretary, whois responsible for ensuring that Board procedures are followed. In addition, the Directors may obtain independent professionaladvice at the Company’s expense, where necessary, in the furtherance of their duties.The proceedings and resolutions reached at each Board Meeting are recorded in the minutes of the meetings, which are keptin the Minute Book at the registered office. Besides Board Meetings, the Board also exercises control on matters that require theBoard’s approval through circulation of Directors’ Resolutions.26Mycron Steel Berhad

Statement onCorporate Governance(continued)f) Appointments to the BoardThe Board has established a Nomination Committee whose main responsibility is to recommend board appointmentsand to assess Directors on an ongoing basis. All decisions on appointments are made by the Board after considering therecommendations of the Nomination Committee.The members of the Nomination Committee currently comprises the following members:i) Datuk Seri Razman Md Hashim (Chairman) @ ;ii) Dato’ Jaffar Indot^;iii) General Dato’ Sri Hj Suleiman bin Mahmud RMAF (Rtd)^;iv) Dato’ Abu Talib bin Mohamed # ;v) Mr Paul Chan Wan Siew # ; andvi) Dato’ Narendrakumar Jasani a/l Chunilal Rugnath &Note:@Appointed as a member on 1 October 2012^ Appointed as members on 3 September 2012# Resigned as members on 3 September 2012&Appointed and resigned as a member on 28 May 2012 and 3 September 2012 respectivelyThe principle duties and functions of the Nomination Committee based on the Terms of Reference approved by the Board,are to recommend technically competent persons of integrity with a strong sense of professionalism, assisting the Board inassessing its overall effectiveness as well as to review the performance of members of the Board, the Executive Director/Chief Executive Officer and members of Board Committees as a whole and the contribution of each individual Director. TheNomination Committee has established procedures and processes towards an annual assessment of the effectiveness of theBoard as a whole, the committees of the Board, and for assessing the contribution of each Director.The Nomination Committee will hold a meeting at least once a year. Additional meetings can be scheduled if considerednecessary by the Chairman of the Committee. The Company Secretary is the Secretary to the Nomination Committee.The Nomination Committee met once during the year under review and was generally satisfied with the performance andeffectiveness of the Board and Board Committees. The assessment of the Board was based on specific criteria covering areassuch as overall business performance, Board governance, development of Management and succession plan, and Boardcomposition and structure. The specific criteria for assessment of an individual Director covers expertise, judgement, approachto conflict, commitment of time and effort in discharging duties and responsibilities. The Nomination Committee is satisfied thatall the members of the Board are suitably qualified to hold their positions as Directors of the Company in view of their respectiveacademic and professional qualifications, experience and qualities.g) Re-electionEvery Director is required by the Company’s Articles of Association to retire from office at least once every three (3) years exceptfor those who retire every year in accordance with Section 129(6) of the Companies Act, 1965, and to seek re-election by theshareholders at the Annual General Meeting.Any Director appointed by the Board during the year to fill as a casual vacancy or as an addition shall hold office only until thenext Annual General Meeting and shall also be eligible for re-election.h) Directors’ TrainingIn compliance with the MMLR, the Directors are mindful that they shall receive appropriate training which may be required fromtime to time to keep them abreast with the current developments of the industry as well as the new statutory and regulatoryrequirements. The Board will continue to evaluate and determine the training needs of its Directors on an ongoing basis, bydetermining areas that would best strengthen their contributions to the Board.The Company Secretary facilitates the organisation of internal training programmes and keeps Directors informed of relevantexternal training programmes. Details of all internal and external training programmes attended by Directors are maintained bythe Company Secretary.Mycron Steel Berhad 27

Statement onCorporate Governance(continued)Details of the seminars and training programmes attended by the Board members during the financial year ended 30 June 2012are as follows:Members of the BoardSeminars/Training ProgrammesTunku Dato’ Ya’acob bin TunkuTan Sri AbdullahTunku Dato’ Kamil Ikram bin TunkuTan Sri AbdullahDato’ Zulkifly @ Sofi bin HajiMustapha• In-House Directors’ Training: “Economic & Capital Market Review”.• In-House Directors’ Training: “Economic & Capital Market Review”.• Aram Global Directors Duties Conference 2011.• MACD Breakfast Talk: Strategic Planning and Sustainability.• MACD Directors Workshop: The Malaysian Code on Corporate Governance 2012.• Bursa Malaysia Half Day’s Governance Program: Corporate Governance Blueprintand Malaysian Code on Corporate Governance 2012.• In-House Directors’ Training: “Economic & Capital Market Review”.Datuk Lim Kim Chuan • In-House Directors’ Training: “Economic & Capital Market Review”.• FTSE Bursa Malaysia Index Series Liquidity Rule Enhancement.En Azlan bin Abdullah • MACD Directors Workshop: The Malaysian Code on Corporate Governance 2012.Dato’ Sri Iskandar Michael binAbdullah*Dato’ Abu Talib bin Mohamed # • Blue Ocean Strategy.• In-House Directors’ Training: “Economic & Capital Market Review”.Dato’ Narendrakumar Jasani a/l • Grant Thornton: Accounting & Fair Value for Financial Instruments Seminar.Chunilal Rugnath # • CTIM & LHDN: National Tax Conference 2011.• Grant Thornton: Budget 2012 & Transfer Pricing Update.• CTIM: 2012 Budget Seminar.• MIA: 17 th AFA Conference.• Grant Thornton: Recent Developments & Updates on MFRS.• CTIM: Workshop on Tax Deductible Expenses.• MIA: Public Practitioners Seminar 2012- Facing the Changing Practice Landscape.• MIA: IFAC SMP.• MASB: 6 th IFRS Regional Forum.• CTIM: Workshop on Reinvestment Allowance Industrial Building Allowance.• Bursa Malaysia: Invest Malaysia 2012.Mr Paul Chan Wan Siew # • Bursa Malaysia: Advocacy Sessions on Disclosure for CEOs and CFOs.• MAICSA Annual Conference 2011.• Developing CSR Capacity.• CG Blueprint 2011.• SID Annual Conference 2011.• NACD Board Leadership Annual Conference 2011.• Malaysian Institute of Accountants-ASEAN Federation of AccountantsConference 2011.• SC-Bursa Corporate Governance Week 2011.• Accountants in Business Symposium 2012.• IOD, UK, Annual Conference 2012.• MINDA-ASLI Directors Summit 2012.• Malaysian Code on Corporate Governance 2012.• Audit Oversight Board-Industry Consultation.Dato’ Jaffar Indot^ • Presentation at Taylor’s Executive Leadership Series: Transformational Leadership.• 1 st Professionalism in Directorship Programme.• Presentation on the topic “It Is All About Balance” at SC-Bursa CG week.• 2 nd Professionalism in Directorship Programme.• Breakfast Talk on “Nurturing Engagement for Board Effectiveness Principles” by ErnieTurner.• Presentation on “Women On Board” at Women in Leadership Forum in Asia 2012.• Breakfast Talk on “Scenario Planning & Sustainability” by Anthonie Versluis.• 3 rd Professionalism in Directorship Programme.• Panelist “Boards in the Driver’s Seat”: Minda-Asli Directors’ Summit 2012.• 4 th Professionalism in Directorship Programme.General Dato’ Sri Hj Suleiman binMahmud RMAF (Rtd)^• In-House Directors’ Training: “Economic & Capital Market Review”.Datuk Seri Razman Md Hashim @ • Sunway Managers Conference.28Mycron Steel Berhad

Statement onCorporate Governance(continued)Note:* Appointed on 1 August 2012# Resigned on 3 September 2012^ Appointed on 3 September 2012@ Appointed on 1 October 2012i) Directors’ RemunerationThe Company has adopted the principle recommended in the Code whereby the level of remuneration of the Directors issufficient to attract and retain the Directors needed to manage the Group successfully.The Board had also set up a Remuneration Committee whose main responsibility is to determine and recommend to the Boardthe framework or broad policy for the remuneration of the Directors, Executive Director/Chief Executive Officer and other SeniorManagement members of the staff.The members of the Remuneration Committee comprises of the following members:i) Datuk Seri Razman Md Hashim (Chairman) @ ;ii) Dato’ Jaffar Indot^;iii) General Dato’ Sri Hj Suleiman bin Mahmud RMAF (Rtd)^;iv) Dato’ Abu Talib bin Mohamed # ;v) Mr Paul Chan Wan Siew # ; andvi) Dato’ Narendrakumar Jasani a/l Chunilal Rugnath &Note:@Appointed as a member on 1 October 2012^Appointed as members on 3 September 2012#Resigned as members on 3 September 2012&Appointed and resigned as a member on 28 May 2012 and 3 September 2012 respectivelyNon-Executive Directors are paid annual Directors’ fees and sitting allowances for attendance to Board/Committee meetings.The members of Board Committees are also paid annual fees for additional responsibilities undertaken.The Company recognises the need to have a competitive remuneration package to attract and retain the Directors of thecalibre needed to lead the Group successfully. In the case of the Executive Director/Chief Executive Officer, his remunerationis linked to the level of responsibilities, experience, contributions and individual as well as Group performance. For the Non-Executive Directors, the level of remuneration reflects the experience and level of responsibility undertaken by them. TheCompany reimburses expenses incurred by the Directors in the course of their duties as Directors.The Directors have the benefit of the Directors and Officers (“D&O”) insurance in respect of liabilities arising from their actscommitted in their capacity as D&O of the Company. However, the said insurance policy does not indemnify a Director orOfficer if he is proven to have acted fraudulently, dishonestly, maliciously or in willful breach of any statute or regulation. Thepremium of the D&O policy is borne by the Company.The aggregate remuneration of Directors for the financial year ended 30 June 2012 is as follows:Type of Remuneration*Executive DirectorsRM’000Non-Executive DirectorsRM’000Salaries - -Allowances - -Bonuses - -Fees - 487Benefits-In-Kind - 21Other Emoluments - 39TOTAL - 547Range of RemunerationNumber of Directors*ExecutiveNon-ExecutiveLess than RM50,000 - 6RM300,001 to RM350,000 - 1Note:* The Executive Director/Chief Executive Officer is remunerated by the holding company, Melewar Industrial Group Berhad.The Remuneration Committee will hold a meeting at least once a year. Additional meetings can be scheduled if considerednecessary by the Chairman of the Committee. The Company Secretary is the Secretary to the Remuneration Committee.Mycron Steel Berhad 29

Statement onCorporate Governance(continued)RELATIONS WITH SHAREHOLDERS AND INVESTORSThe Board recognises the need to communicate with shareholders and investors on all material business matters of the Group. Theresults of the Company and the Group are published quarterly via the Bursa Securities website. In addition to various announcementsmade during the year, information on the Company is available on the Company’s website at www.mycronsteel.com. Any generalenquiries and comments can be addressed to enquiry@mycronsteel.com.The Company also encourages shareholders to attend its Annual General Meeting as this is the principal forum for dialogue andinteraction with shareholders. At each Annual General Meeting, the Directors usually provide adequate time to attend to questionsand comments of shareholders. The External Auditors are also present to provide their professional and independent clarification onissues and concerns raised by the shareholders. The status of all resolutions proposed at the Annual General Meeting is submitted toBursa Securities at the end of the meeting day. Notices of each meeting are issued on a timely manner to all the shareholders. TheBoard has ensured that where there is a special business included in the notice of the Annual or Extraordinary General Meeting, eachitem of the Special Business is accompanied by a full explanation of the effects of the proposed resolution.The Executive Director/Chief Executive Officer and Senior Management have periodical dialogues with existing and prospectiveinvestors and the analysts to enhance understanding of the Group’s objectives and provide insight on the latest developments in theGroup.Presentations based on permissible disclosures are made to explain the Group’s performance and major development programs.Price-sensitive information that may be regarded as undisclosed material information about the Group is, however, not disclosed inthese sessions until after the prescribed announcement to Bursa Securities has been made.The Board has identified Dato’ Jaffar Indot as the Senior Independent Director to whom queries or concerns regarding the Groupmay be conveyed.(i)Dato’ Jaffar Indot can be contacted as follows:Telephone number: +603-5510 6608 Facsimile number: +603-5510 8806Email address: jaffar@mycronsteel.comQueries or concerns regarding the Group may be also conveyed to the following persons:(ii)(iii)(iv)Mr Choo Kah Yean (Chief Financial Officer, for financial related matters)Telephone number: +603-5519 2455 Facsimile number: +603-5510 8618En Azlan bin Abdullah (Investor Relations, for investor relations matters)Telephone number: +603-6250 7000 Facsimile number: +603-6257 1555Email address: aazlan@mycronsteel.comMs Lily Yin Kam May (Company Secretary, for shareholders’ enquiries)Telephone number: +603-6252 8880 Facsimile number: +603-6252 8080Whistle-BlowingIn light of the requirements stipulated in the Capital Markets and Services Act, 2007, the Bursa Securities Corporate GovernanceGuide and the Companies Act, 1965, the Board recognises the importance of whistle-blowing and is committed to maintaining thehighest standards of ethical conduct within the Group.As part of its commitment to uphold the highest standards of ethics, integrity and accountability, the Group also has in place a WhistleBlowing Policy. This is essentially a mechanism to enable the employees and members of the Board to disclose internally any seriousmalpractise or misconduct without fear of reprisal. This policy provides a safe and acceptable platform for employees and othermembers of the Group to channel their concerns about illegal, unethical or improper business conduct affecting the Group.ACCOUNTABILITY AND AUDITa) Audit CommitteeThe Company has in place an Audit Committee which comprises three (3) Independent Directors. The Audit Committeeholds quarterly meetings to review matters including the Group’s financial reporting, the audit plans for the year as well as todeliberate the findings of the Internal and External Auditors.With all the members being independent, the composition of the Audit Committee is fully compliant with the Code and theMMLR, which require the majority of Directors on the Audit Committee to be independent and that one (1) member who hasthe financial background that meets the requirement set out under Paragraph 7.0 of Practice Note 13.30Mycron Steel Berhad

Statement onCorporate Governance(continued)Full details of the composition, complete terms of reference and the activities of the Audit Committee during the financial yearare set out in the Audit Committee Report included in this Annual Report.b) Financial ReportingThe Board aims to present a balanced, clear and understandable assessment of the Group’s financial positions and prospectsin the annual financial statements and quarterly announcements to the shareholders, investors and regulatory authorities.The Audit Committee deliberates and reviews the quarterly financial results to ensure accuracy, adequacy and completenessbefore the results are reviewed and approved by the Board of Directors. The details of the Company’s and the Group’s financialpositions are included in the Financial Statements section of the Annual Report.In the preparation of the financial statements, the Directors have considered the appropriate accounting policies to be usedand consistently applied and supported by reasonable and prudent judgements and estimates.c) Internal ControlThe Board recognises that it has overall responsibility for maintaining a sound system of internal control for the Group in order tosafeguard shareholders’ interest of the Group’s assets. The system of internal control not only covers financial controls but alsooperational and compliance controls as well as risk management.The Group’s Statement on Internal Control is set out on pages 39 to 41 of this Annual Report.The system of internal control involves each key business unit and its management, including the Board, and is designed tomeet the business units’ particular needs, and to manage the risks to which they are exposed. The system, by its nature, canonly provide reasonable and not absolute assurance against material misstatement, loss or fraud. The concept of reasonableassurance recognises the costing aspect, whereby the cost of control procedures is not to exceed the expected benefits.The Board further recognises that risks cannot be fully eliminated. As such, the systems, processes and procedures being put inplace are aimed at minimising and managing them. Ongoing reviews are continuously carried out to ensure the effectiveness,adequacy and integrity of the system of internal control in safeguarding the Group’s assets.The main task of the Risk Management Committee (“RMC”) is to look into the risk management of the Group. The RMC comprisesof three (3) members, the majority of whom shall be Independent Directors.The members of the RMC are as follows:i) Dato’ Jaffar Indot (Chairman) # ;ii) Dato’ Sri Iskandar Michael bin Abdullah # ;iii) General Dato’ Sri Hj Suleiman bin Mahmud (Rtd) # ;iv) Mr Paul Chan Wan Siew*;v) Dato’ Narendrakumar Jasani a/l Chunilal Rugnath*; andvi) Tunku Dato’ Kamil Ikram bin Tunku Tan Sri AbdullahNote:# Appointed as members on 3 September 2012* Resigned as members on 3 September 2012The RMC is to meet regularly, at least once every quarter in a financial year to review risk management report of the Companyand its subsidiary companies. The Company Secretary is the Secretary to the Risk Management Committee.d) Relationship with the External AuditorsThe Board through the Audit Committee has established a transparent and appropriate relationship with the Company’sExternal Auditors, Messrs PricewaterhouseCoopers (“PwC”). PwC will report to members of the Audit Committee on theirfindings which are included as part of the Company’s financial reports with respect to each year’s audit on the statutoryfinancial statements. The Audit Committee meets with the External Auditors twice during a financial year without the presenceof any Executive Director of the Board nor any Management of the Company to enable a free and honest exchange of viewson issues which the External Auditors may wish to discuss in relation to their audit and findings.The relationship between the Board and the External Auditors is also formalised through the Audit Committee’s Terms ofReference.Mycron Steel Berhad 31

Statement onCorporate Governance(continued)DIRECTORS’ RESPONSIBILITY STATEMENT IN RESPECT OF FINANCIAL STATEMENTThe Directors are required to prepare the financial statements which give a true and fair view of the state of affairs of the Companyand of the Group at the end of each financial year end of the results and cashflow for that year. The financial statements must beprepared in compliance with the Companies Act, 1965 and with applicable approved accounting standards.The Directors considered the following in preparing the financial statements:• select suitable accounting policies and apply them consistently;• make judgements and estimates that are reasonable and prudent; and• state whether applicable approved accounting standards have been followed.The Directors are of the opinion that the financial statements comply with the above requirements. The Directors are also responsiblefor ensuring the maintenance of adequate accounting records to enable them to ensure that the financial statements comply withthe requirements of the Companies Act, 1965.OTHER BURSA SECURITIES COMPLIANCE INFORMATION1. MATERIAL CONTRACTSThere were no material contracts entered into by the Company and/or its subsidiary companies involving the Company’sDirectors and/or major shareholders’ interests either still subsisting at the end of financial year, or which were entered into sincethe end of the previous financial year.2. MATERIAL CONTRACTS RELATED TO LOANThere were no material contracts related to loans entered into by the Company and/or its subsidiary companies involving theCompany’s Directors and/or major shareholders’ interests during the financial year under review.3. SHARE BUY-BACKSThere was no share buy-back during the financial year ended 30 June 2012. As at 30 June 2012, the Company had repurchasedin total 1,040,300 ordinary shares of Mycron from the open market at an average price of RM0.37 per share. All the sharesrepurchased are being held as treasury shares.4. OPTIONS, WARRANTS OF CONVERTIBLE SECURITIESThe Company has not issued any options, warrants or convertible securities during the financial year under review.5. AMERICAN DEPOSITORY RECEIPT (ADR) OR GLOBAL DEPOSITORY RECEIPT (GDR)The Group has not sponsored any ADR or GDR programme for the financial year ended 30 June 2012.6. NON-AUDIT FEESThere were no non-audit fees paid by the Group to the External Auditors during the financial year.7. PROFIT ESTIMATION, FORECAST OR PROJECTIONThere were no profit estimation, forecast or projection made or released by the Company during the financial year underreview.8. PROFIT GUARANTEESThere were no profit guarantees given by the Group.9. REVALUATION ON LANDED PROPERTIESThe Group revalued its properties comprising land and buildings periodically, with sufficient regularity. Surplus arising fromrevaluation is dealt with through the asset revaluation reserve account. Any deficit arising is set-off against the asset revaluationreserve to the extent of a previous increase for the same property. In all cases, a decrease in carrying amount will be recognisedin the profit or loss. The last revaluation of its properties was carried out in June 2012.32Mycron Steel Berhad

Statement onCorporate Governance(continued)10. IMPOSITION OF SANCTIONS AND/OR PENALTIESThere were no sanctions and/or penalties imposed on the Group, Directors or Management arising from any significant breachof rules/guidelines/legislations by any of the regulatory authorities.11. VARIATION IN RESULTSThere was no variation in results (differing by 10% or more) from unaudited results announced.12. RECURRENT RELATED PARTY TRANSACTIONS (“RRPTs”) ENTERED INTO DURING THE FINANCIAL YEAR ENDED 30 JUNE 2012On 7 December 2011, the Company sought approval for a shareholders’ mandate for Mycron Group to enter into RecurrentTransactions (as defined in the Circular to Shareholders dated 15 November 2011) in their ordinary course of business withrelated parties (“Shareholders’ Mandate”) as defined in Chapter 10 of the MMLR.The aggregate value of transactions conducted during the financial year ended 30 June 2012 in accordance with theShareholders’ Mandate obtained in the last Annual General Meeting were as follows:A. RRPTs with Melewar Group of CompaniesNo.Related PartyNature ofTransactionInterested Related PartiesManner of Relationship with theRelated PartiesDirectorMajor ShareholderValue ofTransaction(RM)1. TraceManagementServicesSdn Bhd(“Trace”)Provision ofcorporatesecretarialservicesby Traceto MycronSteel Berhad(“MSB”) andits subsidiaries(“MycronGroup”)Interested DirectorsTunku Dato’ Ya’acob binTunku Tan Sri Abdullah(“TY”), Tunku Dato’ KamilIkram bin Tunku Tan SriAbdullah (“TK”) andDato’ Zulkifly @ Sofi binHaji Mustapha (“Dato’Zulkifly”)TY and TK are deemedinterested in Trace byvirtue of their majorshareholdings in TheMelewar CorporationBerhad, the substantialshareholder of Trace.Dato’ Zulkifly is thereforedeemed interested byvirtue of his relationshipwith TY based onSection 122A(1)(d) ofthe Companies Act,1965(“the Act”).Nil 166,736B. RRPTs with MAA Group Berhad (“MAAG”) and its subsidiaries, collectivelyNo.Related PartyNature ofTransactionInterested Related PartiesManner of Relationship with theRelated PartiesDirectorMajor ShareholderValue ofTransaction(RM)1. Wira SecurityServices SdnBhd (“WSS”) (a)Provision ofsecurity guardservices byWSS to MycronGroupInterested DirectorsTY, TK and Dato’ ZulkiflyInterested MajorShareholdersMelewar Equities (BVI)Ltd (“MEBVI”), MelewarKhyra Sdn Bhd (“MKSB”),Melewar Equities SdnBhd (“MESB”), IternumMelewar Sdn Bhd(“IMSB”), Melewar GroupBerhad (“MGB”) andKhyra Legacy Berhad(“KLB”)TY was deemedinterested in WSS byvirtue of his substantialinterest in KLB who isthe ultimate majorshareholder of MAAG.TK and Dato’ Zulkiflywere therefore deemedinterested by virtue oftheir relationship with TYbased on Section 122A(1)(d) of the Act.WSS was a whollyowned subsidiary ofMAA CorporationSdn Bhd (“MAACorp”) who in turnis a wholly ownedsubsidiary of MAAGwhose ultimatemajor shareholderis KLB.171,003Mycron Steel Berhad 33

Statement onCorporate Governance(continued)No.Related PartyNature ofTransactionInterestedRelated PartiesManner of Relationship with theRelated PartiesDirectorMajor ShareholderValue ofTransaction(RM)2. MAA CorporateAdvisory SdnBhd (“MAACA”)3. MalaysianAssuranceAlliance Berhad(now known asZurich InsuranceMalaysiaBerhad)(“MAAB”) (b)4. Chelsea ParkingServices SdnBhd (“Chelsea”)Provision ofcorporateconsultancyservices byMAACA toMycron GroupProvision ofinsurancebusiness byMAAB toMycron GroupCar parksrental chargedby Chelsea toMycron GroupInterested DirectorsTY, TK and Dato’ ZulkiflyInterested MajorShareholdersMEBVI, MKSB, MESB, IMSB,MGB and KLBInterested DirectorsTY, TK and Dato’ ZulkiflyInterested MajorShareholdersMEBVI, MKSB, MESB, IMSB,MGB and KLBInterested DirectorsTY, TK and Dato’ ZulkiflyInterestedMajor ShareholdersMEBVI, MKSB, MESB, IMSB,MGB and KLBTY is deemed interestedin MAACA by virtue of hissubstantial interest in KLBwho is the ultimate majorshareholder of MAAG.TK and Dato’ Zulkiflyare therefore deemedinterested by virtue oftheir relationship with TYbased on Section 122A(1)(d) of the Act.TY was deemedinterested in MAAB byvirtue of his substantialinterest in KLB who isthe ultimate majorshareholder of MAAG.TK and Dato’ Zulkiflywere therefore deemedinterested by virtue oftheir relationship with TYbased on Section 122A(1)(d) of the Act.TY is deemed interestedin Chelsea by virtue of hissubstantial interest in KLBwho is the ultimate majorshareholder of MAAG.TK and Dato’ Zulkiflyare therefore deemedinterested by virtue oftheir relationship with TYbased on Section 122A(1)(d) of the Act.MAACA is a whollyowned subsidiaryof MAA Corp whoin turn is a whollyowned subsidiaryof MAAG whoseultimate majorshareholder is KLB.MAAB was a whollyowned subsidiaryof MAAG whoseultimate majorshareholder is KLB.Chelsea is a whollyowned subsidiaryof MAA Corp whoin turn is a whollyowned subsidiaryof MAAG whoseultimate majorshareholder is KLB.Nil928,2832,61634Mycron Steel Berhad

Statement onCorporate Governance(continued)No.RelatedPartyNature ofTransactionInterestedRelated PartiesManner of Relationship withthe Related PartiesDirectorMajor ShareholderValue ofTransaction(RM)5. MaybachLogisticsSdn Bhd(“Maybach”) (c)Transportationchargescharged byMaybach toMycronInterested DirectorsTY, TK and Dato’ ZulkiflyInterested MajorShareholdersMEBVI, MKSB, MESB, IMSB,MGB and KLBTY was deemedinterested in Maybachby virtue of his deemedsubstantial interestin MAAG, MIG andMycron, who werethe shareholders ofMaybach.TK and Dato’ Zulkiflywere therefore deemedinterested by virtue oftheir relationship with TYbased on Section 122A(1)(d) of the Act.Maybach was acompany in whichTY was deemedinterested by virtueof his substantialinterest in MAAG,MIG and Mycron,who were theshareholders ofMaybach.NilC. RRPTs with Melewar Industrial Group Berhad (“MIG”) and its subsidiaries, collectively (“MIG Group”)No.RelatedPartyNature ofTransactionInterestedRelated PartiesManner of Relationship withthe Related PartiesDirectorMajor ShareholderValue ofTransaction(RM)1. MelewarIntegratedEngineering SdnBhd (“MIE”)Provision oftechnical andconsultancyservices byMIE to MycronSteel CRC SdnBhd (“MSCRC”)for expansionprojects in coldroll millInterested DirectorsTY, TK and Dato’ ZulkiflyInterested MajorShareholdersMIG, MEBVI, MKSB, MESB,IMSB, MGB and KLBTY is deemed interested inMIE and MSCRC by virtueof his indirect substantialinterest in MIG vide theshareholdings of MEBVIand MKSB.TK are Dato’ Zulkiflyare therefore deemedinterested by virtue of theirrelationship with TY basedon Section 122A(1)(d) ofthe Act.MIE is a 70% ownedsubsidiary of MIG.MSCRC is a whollyowned subsidiary ofMycron.MIG is the substantialshareholder ofMycron by virtue of its54.8% shareholding inMycron.477,0002. Melewar SteelTube Sdn Bhd(“MST”)Provisionof finance,payroll andinformationtechnologyservices by MSTto MSCRCInterested DirectorsTY, TK and Dato’ ZulkiflyInterested MajorShareholdersMIG, MEBVI, MKSB, MESB,IMSB, MGB and KLBTY is deemed interestedin MST and MSCRC byvirtue of his indirectsubstantial interest in MIGvide the shareholdings ofMEBVI and MKSB.TK and Dato’ Zulkiflyare therefore deemedinterested by virtue oftheir relationship with TYbased on Section 122A(1)(d) of the Act.MST is a whollyowned subsidiary ofMIG.MSCRC is a whollyowned subsidiary ofMycron.MIG is thesubstantialshareholderof Mycron byvirtue of its 54.8%shareholding inMycron.72,000Mycron Steel Berhad 35

Statement onCorporate Governance(continued)No.RelatedPartyNature ofTransactionInterestedRelated PartiesManner of Relationship with theRelated PartiesDirectorMajor ShareholderValue ofTransaction(RM)3. Melewar SteelMills Sdn Bhd(“MSM”)Rentalchargedby MSCRCto MSM forusing landbelonging toMSCRCInterested DirectorsTY, TK and Dato’ ZulkiflyInterested MajorShareholdersMIG, MEBVI, MKSB, MESB,IMSB, MGB and KLBTY is deemed interestedin MSM and MSCRCby virtue of his indirectsubstantial interest in MIGvide the shareholdings ofMEBVI and MKSB.TK and Dato’ Zulkiflyare therefore deemedinterested by virtue oftheir relationship with TYbased on Section 122A(1)(d) of the Act.MSM is a whollyowned subsidiary ofMIG.MSCRC is a whollyowned subsidiary ofMycron.MIG is thesubstantialshareholderof Mycron byvirtue of its 54.8%shareholding inMycron.Nil4. MST Sale of coldrolled coils byMSCRC to MSTInterested DirectorsTY, TK and Dato’ ZulkiflyInterested MajorShareholdersMIG, MEBVI, MKSB, MESB,IMSB, MGB and KLBTY is deemed interestedin MST and MSCRC byvirtue of his indirectsubstantial interest in MIGvide the shareholdings ofMEBVI and MKSB.TK and Dato’ Zulkiflyare therefore deemedinterested by virtue oftheir relationship with TYbased on Section 122A(1)(d) of the Act.MST is a whollyowned subsidiary ofMIG.MSCRC is a whollyowned subsidiary ofMycron.MIG is thesubstantialshareholderof Mycron byvirtue of its 54.8%shareholding inMycron.23,403,4705. MSM Sale of scrapby MSCRC toMSMInterested DirectorsTY, TK and Dato’ ZulkiflyInterested MajorShareholdersMIG, MEBVI, MKSB, MESB,IMSB and KLBTY is deemed interestedin MSM and MSCRCby virtue of his indirectsubstantial interest in MIGvide the shareholdings ofMEBVI and MKSB.TK and Dato’ Zulkiflyare therefore deemedinterested by virtue oftheir relationship with TYbased on Section 122A(1)(d) of the Act.MSM is a whollyowned subsidiary ofMIG.MSCRC is a whollyowned subsidiary ofMycron.MIG is thesubstantialshareholderof Mycron byvirtue of its 54.8%shareholding inMycron.5,204,20036Mycron Steel Berhad

Statement onCorporate Governance(continued)No.RelatedPartyNature ofTransactionInterestedRelated PartiesManner of Relationship with theRelated PartiesDirectorMajor ShareholderValue ofTransaction(RM)6. MIG Sale of pipesby MIG toMSCRCInterested DirectorsTY, TK and Dato’ ZulkiflyInterested MajorShareholdersMIG, MEBVI, MKSB, MESB,IMSB, MGB and KLBTY is deemed interestedin MIG and MSCRCby virtue of his indirectsubstantial interest inMEBVI and MKSB whocollectively are thesubstantial shareholdersof MIG.TK and Dato’ Zulkiflyare therefore deemedinterested by virtue oftheir relationship with TYbased on Section 122A(1)(d) of the Act.MSCRC is a whollyowned subsidiary ofMycron.MIG is thesubstantialshareholderof Mycron byvirtue of its 54.8%shareholding inMycron.59,5497. MST Sale of secondgrade pipesand provisionof slittingservices byMST to MSCRC8. MIG Provisionof treasuryservices byMIG to MSCRCInterested DirectorsTY, TK and Dato’ ZulkiflyInterested MajorShareholdersMIG, MEBVI, MKSB, MESB,IMSB, MGB and KLBInterested DirectorsTY, TK and Dato’ ZulkiflyInterested MajorShareholdersMIG, MEBVI, MKSB, MESB,IMSB, MGB and KLBTY is deemed interestedin MST and MSCRC byvirtue of his indirectsubstantial interest in MIGvide the shareholdings ofMEBVI and MKSB.TK and Dato’ Zulkiflyare therefore deemedinterested by virtue oftheir relationship with TYbased on Section 122A(1)(d) of the Act.TY is deemed interestedin MIG and MSCRCby virtue of his indirectsubstantial interest inMEBVI and MKSB whocollectively are thesubstantial shareholdersof MIG.TK and Dato’ Zulkiflyare therefore deemedinterested by virtue oftheir relationship with TYbased on Section 122A(1)(d) of the Act.MST is a whollyowned subsidiary ofMIG.MIG is thesubstantialshareholderof Mycron byvirtue of its 54.8%shareholding inMycron.MSCRC is a whollyowned subsidiary ofMycron.MIG is thesubstantialshareholderof Mycron byvirtue of its 54.8%shareholding inMycron.NilNilMycron Steel Berhad 37

Statement onCorporate Governance(continued)D. Financial assistance between Mycron Group and classes of related partiesType ofFinancial AssistanceRelated PartyInterestedRelated PartiesManner of Relationship with theRelated PartyDirectorMajor ShareholderValue ofTransaction(RM)Provision of guarantees,indemnity or such othercollateral to or in favourof another personwhich is necessary inorder for MIE to procurea contract or securework from the otherperson or to enablethe other person tocommence and/orcomplete a contract orwork for Mycron Group.MIEInterested DirectorsTY, TK and Dato’ ZulkiflyInterested MajorShareholdersMIG, MEBVI, MKSB, MESB,IMSB, MGB and KLBTY is deemed interestedin MIE by virtue of hisindirect substantialinterest in MIG vide theshareholdings of MEBVIand MKSB.TK and Dato’ Zulkiflyare therefore deemedinterested by virtue oftheir relationship with TYbased on Section 122A(1)(d) of the Act.MIE is a 70% ownedsubsidiary of MIG.MIG is thesubstantialshareholderof Mycron byvirtue of its 54.8%shareholding inMycron.NilProvision of financialassistance to MIGGroup by the pooling offunds via a centralisedtreasury managementfunction within MycronGroup on a short ormedium term basisi.e. for a duration notexceeding three (3)years.MIG GroupInterested DirectorsTY, TK and Dato’ ZulkiflyInterested MajorShareholdersMIG, MEBVI, MKSB, MESB,IMSB, MGB and KLBTY is deemed interestedin MIG by virtue of hisindirect substantialinterest in MEBVI, andMKSB who collectivelyare the substantialshareholders of MIG.TK and Dato’ Zulkiflyare therefore deemedinterested by virtue oftheir relationship with TYbased on Section 122A(1)(d) of the Act.MIG is thesubstantialshareholderof Mycron byvirtue of its 54.8%shareholding inMycron.NilNote:(a) MAAG had disposed its entire equity interest held in the capital of WSS on 28 June 2012.Under Paragraph 10.02(f) of the MMLR, a major shareholder includes any person who is or was within the preceding six (6)months of the date on which the terms of the transaction were agreed upon. Thus, TY, TK, Dato’ Zulkifly, MEBVI, MKSB, MESB, IMSB,MGB and KLB will cease to be major shareholders with effect from 28 December 2012 in respect of the transaction with WSS andaccordingly, this transaction will no longer be regarded as related party transaction.(b)Further to the approval of MAAG’s shareholders on 22 September 2011, the disposal of the entire equity interest held in thecapital of MAAB by MAAG to Zurich Insurance Company Ltd was completed on 30 September 2011. In addition, MAAB haddisposed its entire shareholdings in Mycron in April 2011.Under Paragraph 10.02(f) of the MMLR, a major shareholder includes any person who is or was within the preceding six (6)months of the date on which the terms of the transaction were agreed upon. Thus, TY, TK, Dato’ Zulkifly, MEBVI, MKSB, MESB, IMSB,MGB and KLB had ceased to be major shareholders with effect from 1 April 2012 in respect of the transaction with MAAB andaccordingly, this transaction is no longer regarded as related party transaction.(c) MAAG, MIG and Mycron had disposed its entire equity interest held in the capital of Maybach on 27 June 2012.Under Paragraph 10.02(f) of the MMLR, a major shareholder includes any person who is or was within the preceding six (6)months of the date on which the terms of the transaction were agreed upon. Thus, TY, TK, Dato’ Zulkifly, MEBVI, MKSB, MESB,IMSB, MGB and KLB will cease to be major shareholders with effect from 27 December 2012 in respect of the transaction withMaybach and accordingly, this transaction will no longer be regarded as related party transaction.COMPLIANCE STATEMENTThe Board is satisfied that the Company has, in all material aspects, complied with the best practice of the Code for the financial yearended 30 June 2012.This statement was approved by the Board of Directors on 25 October 2012.38Mycron Steel Berhad

Statement on Internal Control1. IntroductionPursuant to Paragraph 15.26(b) of the Main Market Listing Requirements of Bursa Securities, the Board of Directors of listedcompanies is required to include in their annual report a “statement about the state of their internal control of the listed issueras a group”. The Board of Mycron Steel Berhad recognises the importance of sound internal control and has established anappropriate control environment and framework to assist, review and manage the risk issues identified for good corporategovernance.In acknowledging the above statement, the Board is pleased to disclose that there is an ongoing process for identifying,documenting, evaluating, monitoring and managing significant risks faced by the Group that could affect its ability to achievethe business objectives. The process is present throughout the financial year and up to the date of approval of these financialstatements. The internal control framework covers inter alia, financials organisational, operational, compliance controls and riskmanagement procedures.2. Board’s ResponsibilityThe Board affirms its overall responsibility for the Group’s system of internal control and is fully committed to ensure the existenceof an effective system of internal control and risk management within the Group. The Board also continuously reviews andevaluates the adequacy and integrity of those systems. However, the Board recognises that such systems are designed tomanage the Group’s risks within an acceptable risk profile. As there are limitations that are inherent in any system of internalcontrol, the Board is aware that the system is designed to manage rather than eliminate the risk of failure to achieve businessobjectives and can provide only reasonable and not absolute assurance against material misstatement or loss.Whilst the Board has an overall responsibility for the Group’s system of internal control, it has delegated the implementation ofthese internal control systems to the Management who regularly reports to the Audit and Risk Management Committees on risksidentified and action steps taken to mitigate and/or minimise these risks. The Board is also responsible for identifying the natureand extent of major business risks faced by the Group, evaluating them and to manage these risks that could inadvertentlyprevent the achievement of the Group’s business objectives.Management is responsible to implement these policies, procedures and guidelines on risk and control by identifying andevaluating the risks faced and design, operate and monitor a suitable system of internal control to manage these risks. TheBoard has extended the responsibilities of the Risk Management Committee (“RMC”) to include the role of monitoring allinternal control on behalf of the Board and in identifying and communicating critical risk areas to the Board accordingly. Thisprocess is regularly reviewed by the Board and the Internal Auditors respectively. The internal audit function is outsourced to anindependent party, Messrs Baker Tilly Monteiro Heng Governance Sdn Bhd (“BTMH”). During the financial year under review, theAudit Committee has reviewed the internal control framework for the Group and assessed the effectiveness and efficiency asreported by the Internal Auditors.3. Risk Management FrameworkThe RMC was established on 31 March 2004 and has formally adopted a Risk Management Framework for the Group. Theobjective of this framework is to provide guidance to the Group to facilitate a structured approach in identifying, evaluatingand managing significant risks, and to achieve a level of adequacy and standard reporting by the subsidiaries to the holdingcompany in a timely manner. This process is working effectively during the financial year ended 30 June 2012 and up to the dateof approval of the financial statements.The roles of the Board of Directors, Risk Management Committee, Audit Committee and the respective Division Heads are welldefined under the framework with clear lines of accountability. Management is responsible for the identification and evaluationof the key risks applicable to their areas of business units/segments on a continuous basis. Risks identified are reported in a timelymanner and discussed thoroughly with corrective measures to be taken during the periodic management meetings to ensureimplementation of corrective actions.The main duties and functions of the RMC as set out in the Terms of Reference, which has been approved by the Board, areinter-alia as follows:a. Reviewing existing controls that may reduce the risk factors of the Group;b. Reviewing and providing recommendations on risk management strategies, policies and risk tolerance for the Board’sapproval;c. Reviewing and assessing the adequacy of risk management policies and framework in identifying, measuring, monitoringand controlling risks as well as the extent to which these are operating effectively;d. Ensuring the adequacy of infrastructure, resources and systems for an effective risk management to ensure theimplementation of risk management systems are performed by the staff independently; ande. Reviewing the Management’s periodic reports on risk exposure, risk portfolio composition and risk management activities.Mycron Steel Berhad 39

Statement on Internal Control(continued)The RMC will assist and coordinate the implementation of the risk management programme for the Group. The implementationof the risk management programme will provide a consistent approach and guidelines in managing the Group’s significant riskexposures.As the economic, industrial, regulatory and operating conditions continue to change, the corresponding mechanisms inidentifying and dealing with the changing risks are of dynamic nature. Accordingly, the Group has a proactive risk managementprocess which seeks to meet the challenges arising from such changes.4. Internal Control SystemsThe Board has engaged the services of BTMH to carry out the internal audit function. The principle duty and responsibility ofBTMH is to examine and evaluate all major phases of operations of the Group and to assist the Board in the effective dischargeof the Board’s responsibilities. The fee incurred for the internal audit function in respect of the financial year ended 30 June 2012was RM73,150. The internal audit function adopts a risk-based approach in developing its audit plan which addresses all thecore auditable areas of the Group based on their risk profile.The key elements of the Group’s internal control systems include:a. The Internal Auditors prepare a ‘risk-based’ internal audit plan which considers all the critical and high impact areaswithin the business operations. During the financial year, the various audit areas as set out in the approved internal auditplan were carried out by the Internal Auditors. Any weaknesses identified during the reviews and improvement measuresrecommendations to strengthen these controls were reported to the Audit Committee. This provides an assuranceregarding the adequacy and the integrity of the internal control system.b. The Group’s operations are accredited with the prestigious ISO 9001 : 2008 international quality system standard sinceOctober 2002 and such quality management system provides the Group with an improved control of key processes anda foundation for improving quality, customer service and customer satisfaction.c. The Group has an appropriate organisational structure for planning, executing and controlling business operations whichenables adequate monitoring of the activities and ensures effective flows of information across the Group.d. Management is responsible in identifying and evaluating the key risks applicable to their areas of business on a continuousbasis. Risks identified are reported in a timely manner during the periodic management meetings to enable correctiveactions to be taken.e. Lines of responsibility and delegations of authority are clearly defined such as the approval matrix for the capitalexpenditure and investment programmes.f. The Board of Directors and Management monitor the Group’s performance via key performance indicators, monthlymanagement reports and periodic management meetings. Any significant variation identified will be duly investigatedand reported accordingly.g. Key processes of the Group are governed by the streamlined standard operating procedures across the Group.h. The Group’s Safety and Health Committee is responsible to review the occupational safety and health procedures.i. The Audit Committee meets at least four (4) times a year and, within its limit, reviews the effectiveness of the Group’ssystem of internal control. The Committee receives reports from the Internal Auditors and Management. Refer to AuditCommittee Report set out on pages 42 to 45 of this Annual Report.j. The Risk Management Unit undertakes to oversee the Group’s risk management processes as set out in the risk managementframework.k. The internal policies and procedures guidelines detailed are set out in the standard operating policies and proceduresmanuals. These systems/manuals, such as those relating to safety, environment and insurance are subject to an annualreview and updated as required to ensure the compliance with regulatory requirements and standards.l. Plant visits by members of the Board on a regular basis.m. On a monthly basis, Executive Committee meeting will be held and attended by the respective Business Unit Headstogether with the Executive Director/Chief Executive Officer. The objective of the meeting is held primarily to review theoperational performance and progress of the tasks undertaken by the Group.5. Controls WeaknessesThe Board of Directors review the adequacy and integrity of the system of internal control that provide reasonable assuranceto the Group in achieving the business objectives.40Mycron Steel Berhad

Statement on Internal Control(continued)Management continues to take measures to strengthen the control environment throughout the financial year. There were nomajor weaknesses of internal control which result in material losses, contingencies or uncertainties that would require disclosurein its financial statements.Management has carried out the following to improvise its internal control:a. Safety and Security Committee was formed to review the security and safety measures taken to reduce the risk factors,to assess the adequacy in its monitoring system and to evaluate and ensure that the system is operating effectively fromtime to time.b. Internal Control Procedure for Internal Security has been adopted with the objective of establishing a documented andcontrolled system to ensure that all the Security and Safety matters are managed effectively.During the financial year under review, the Internal Auditors carried out reviews on the following core areas to assess theadequacy and effectiveness of internal control, compliance with regulations and the Group’s policies and procedures by thesubsidiary:a. Revenue cycle, purchasing cycle and inventory management and control of Mycron Steel CRC Sdn Bhd (“MSCRC”), awholly owned subsidiary of the Company;b. Production operation and quality control and assurance for MSCRC;c. Maintenance management and property, plant and equipment management for MSCRC;d. Sales and deliveries of inventories of MSCRC; ande. Sales collections and credit control of MSCRC.Based on the Internal Auditors’ report, the Board believes that there is a reasonable assurance that the Group’s systems ofinternal control are adequate and working satisfactorily.Other Internal Control ProcessesThe Group has established a defined limit of authority as set by the Board, to govern and manage the decision process in theGroup. The formalised Authority Limits Matrix (“ALM”) sets out the matters on the approvals and authorisation by the Board andthe respective levels of Management. The ALM prescribes the system of delegation of the authority for the Group to ensureadequate checks and balances with the efficient use of the Group’s resources.The operating structure of the Group is aligned to the business requirements, with defined lines of responsibility and segregationof duties for the respective business units. In our effort to minimise risk of misstatement, the Group has identified tasks that hashigher risk of error and fraud are handled by different and qualified individuals.Documented standard operating procedures and policies to regulate the functional processes of the Group are continuouslyreviewed and updated to ensure the procedures remain relevant to the Group’s operations and are in compliant with internalcontrol and applicable rules and regulations.The performances and results of the business units are reviewed and discussed at management meetings at least on a quarterlybasis. The results are compared against their respective budgets with explanations and clarifications on the significant variancesreported, and remedial actions, if any, recommended for follow-up.6. Review of EffectivenessThe Board is of the opinion that the Group’s internal control system is satisfactory and sufficient to support all types of businessand operations within the Mycron Group of Companies.7. Review of the Statement by External AuditorsAs required by Paragraph 15.23 of the Main Market Listing Requirements of Bursa Securities, the External Auditors have reviewedthis Statement on Internal Control for the inclusion in the Annual Report for the financial year ended 30 June 2012. Their review wasperformed in accordance with Recommended Practise Guide 5: Guidance for Auditors on the Review of Directors’ Statementon Internal Control issued by the Malaysian Institute of Accountants. Based on their review, the External Auditors have reportedto the Board that nothing have come to their attention that causes them to believe that this Statement is inconsistent with theirunderstanding of the process the Board has adopted in the review of the adequacy and integrity of internal control of theGroup.Mycron Steel Berhad 41

Audit Committee ReportESTABLISHMENTThe Audit Committee was established on 31 March 2004 as a subcommittee of the Board of Directors with specific terms of referencethat have been approved by the Board. Its principle objectives are to assist the Board in discharging its statutory duties andresponsibilities relating to accounting and reporting practices of the holding company and each of its subsidiaries. In addition, theAudit Committee shall:• evaluate the quality of the audits performed by the Internal and External Auditors;• provide assurance that the financial information presented by Management is relevant, reliable and timely;• oversee compliance with relevant laws and regulations and observance of a proper code of conduct; and• determine the quality, adequacy and effectiveness of the Group’s internal control environment.The Committee comprises the following Directors, all of whom are Independent Non-Executive Directors:1. Dato’ Jaffar Indot^- Independent Non-Executive Director2. Datuk Seri Razman Md Hashim @ - Independent Non-Executive Director(Audit Committee Member who fulfills requirement underParagraph 15.09(1)(c)(i) of the MMLR)3. General Dato’ Sri Hj Suleiman bin MahmudRMAF (Rtd)^- Independent Non-Executive Director4. Dato’ Narendrakumar Jasani a/l Chunilal Rugnath # - Independent Non-Executive Director(Audit Committee Member who fulfills requirement underParagraph 15.09(1)(c)(i) of the MMLR)5. Dato’ Abu Talib bin Mohamed # - Independent Non-Executive Director6. Mr Paul Chan Wan Siew # - Independent Non-Executive DirectorNote:^ Appointed on 3 September 2012# Resigned on 3 September 2012@ Appointed on 1 October 2012The Chairman of the Audit Committee is Dato’ Jaffar Indot. The Directors’ profiles are set out on pages 15 to 19 in the Annual Report.The Chairman of the Audit Committee engages on a continuous basis with the Senior Management, Head of Internal Audit andExternal Auditors, in order to keep abreast of matters and issues affecting the Group.The Audit Committee has met up with the External Auditors without the presence of all the Executive Board members and Managementin line with the Malaysian Code on Corporate Governance twice during the financial year to encourage a greater exchange of freeand honest views between both parties. Further, the Audit Committee meets regularly with Senior Management and Internal AuditManagement and the External Auditors to review the Company’s and the Group’s financial reporting, the nature and scope of auditreviews and the effectiveness of the systems of internal control and compliance.42Mycron Steel Berhad

Audit Committee Report(continued)SUMMARY OF ACTIVITIES OF THE AUDIT COMMITTEE DURING THE FINANCIAL YEAR ENDED 30 JUNE 2012During the financial year ended 30 June 2012, five (5) Audit Committee meetings were held. The details of attendance of eachCommittee member are as follows:NameNo. of MeetingsHeldAttendedPercentage ofAttendanceDato’ Narendrakumar Jasani a/l Chunilal Rugnath # 5 5 100%Mr Paul Chan Wan Siew # 5 5 100%Dato’ Abu Talib bin Mohamed # 5 4 80%Dato’ Jaffar Indot^ N/A N/A N/ADatuk Seri Razman Md Hashim @ N/A N/A N/AGeneral Dato’ Sri Hj Suleiman bin Mahmud RMAF (Rtd)^ N/A N/A N/ANote:^ Appointed on 3 September 2012# Resigned on 3 September 2012@ Appointed on 1 October 2012During the financial year ended 30 June 2012, the main activities undertaken by the Audit Committee were carried out in accordancewith its terms of reference:i. Reviewed and recommended to the Board the reappointment of the External Auditors and the audit fee;ii.iii.iv.Reviewed the adequacy and the relevance of the scope, functions, resources, internal audit plan and results of internal auditprocesses with the Internal Audit consultants;Monitored the implementation of programmes recommended by the Internal Audit consultants arising from its audits in order toobtain assurance that all key risks and controls have been properly dealt with;Reviewed with the appropriate officers of the Group, the quarterly financial results and year-end financial statements includingthe announcements pertaining thereto before recommending to the Board for approval and the release of the Group’s resultsto Bursa Securities;v. Reviewed with External Auditors on their audit plan (including system evaluation, audit fee, issues raised and Management’sresponse) prior to the commencement of audit;vi.vii.viii.ix.Reviewed the financial statements, the audit report, the evaluation of system of internal control, issues and reservations arisingfrom audits and the Management letter with the External Auditors and recommend the same to the Board;Discussed problems and reservations arising from the interim and final external audits, and any matters the External Auditorsmay wish to discuss in the absence of Management;Reviewed and recommended to the Board the reappointment of the external service provider for internal audit services andthe audit fee;Reviewed the disclosure of related party transactions and any conflict of interest situation and questionable transactions;x. Discussed the legal procedures to recover the investment made by the Company in an associate;xi.xii.xiii.xiv.Prepared the Audit Committee Report for inclusion in the Company’s Annual Report;Reported to and updated the Board on significant issues and concerns discussed during the Committee’s meetings, and whereappropriate, made the necessary recommendations to the Board;Reviewed the disclosure statements on compliance of Malaysian Code on Corporate Governance, the Board’s responsibilityon the annual audited financial statements and the state of internal control, and other relevant documents for publication inthe Company’s Annual Report; andFollowed up on corrective actions taken by Management on the audit issues raised by the External Auditors and InternalAuditors.Mycron Steel Berhad 43

Audit Committee Report(continued)TERMS OF REFERENCEThe Terms of Reference of the Committee are as follows:1. Composition1.1 The members of the Audit Committee shall be appointed from among the Directors of the Company and composed ofno fewer than three (3) Directors of whom all must be Non-Executive Directors, with majority of them being IndependentDirectors.1.2 All members of the Audit Committee should be financially literate and at least one (1) member of the Audit Committee:(a)(b)(c)must be a member of the Malaysian Institute of Accountants; orif he is not a member of the Malaysian Institute of Accountants, he must have at least three (3) years of experienceand:i. he must have passed the examinations specified in Part 1 of the 1 st Schedule of the Accountants Act, 1967;orii. he must be a member of one of the associations of accountants specified in Part II of the 1 st Schedule of theAccountants Act, 1967; orfulfills such other requirements as prescribed or approved by Bursa Malaysia Securities Berhad (“Bursa Securities”).1.3 If a member of the Audit Committee ceases to be a member with the result that the number of members is reducedbelow three (3), the Board shall, within three (3) months, appoint such number of new member(s) as may be required tomake up the minimum number of three (3) members, the majority of whom must be Independent Directors.1.4 The members of the Audit Committee shall elect a Chairman from among their numbers who shall be an IndependentNon-Executive Director.1.5 No Alternate Director is to be appointed as a member of the Audit Committee.1.6 The term of office and performance of the Audit Committee and each of its members shall be reviewed by the Board atleast once every three (3) years to determine whether the Audit Committee and its members have carried out their dutiesin accordance with their terms of reference.2. Quorum and Procedure2.1 The Audit Committee meetings shall be conducted at least four (4) times annually, or more frequently as circumstancesdictate. The Executive Director/Chief Executive Officer and Chief Financial Officer should normally attend meetings.Other Board members, employees, a representative of the External Auditors and External Independent ProfessionalAdvisers may attend meetings upon the invitation of the Audit Committee. However, the Committee should meet withthe External Auditors without the Executive Board members’ presence at least twice a year.2.2 The quorum for any meeting of the Audit Committee shall consist of not less than two (2) members; the majority of themembers present shall be Independent Directors.2.3 In the absence of the Chairman, the Audit Committee shall appoint one (1) of the independent members present to chairthe meeting.2.4 The Secretary of the Company shall also be the Secretary of the Audit Committee. The Secretary shall be responsiblefor drawing up the agenda in consultation with the Chairperson and shall be responsible for keeping the minutes of themeeting of the Audit Committee, circulating them to Committee members and ensuring compliance with regulatoryrequirements. The agenda together with relevant explanatory papers and documents are circulated to the Committeemembers.2.5 The Chairman of the Audit Committee shall report on each meeting to the Board.2.6 Minutes of each meeting shall be kept and distributed to each member of the Audit Committee and the Board.3. Authority3.1 The Audit Committee shall, in accordance with a procedure to be determined by the Board of Directors and at theexpense of the Company:(a)have explicit authority to investigate any matters within its terms of reference. All employees shall be directed tocooperate as requested by members of the Audit Committee;44Mycron Steel Berhad

Audit Committee Report(continued)(b)(c)(d)(e)(f)(g)have full and unrestricted access to any information and resources which are required to perform its duties;be able to obtain, if it considers necessary, external independent professional advice;be able to invite outsiders with relevant experience to attend meeting if necessary;be able to convene meetings with the External Auditors, Internal Auditors or both, excluding the attendance ofother Directors and employees, whenever deemed necessary;have direct communication channels with the External Auditors and Internal Auditors; andbe able to make prompt reports to Bursa Securities when the Audit Committee is of the view that a matter reportedby it to the Board of Directors has not been satisfactorily resolved resulting in a breach of listing requirements.3.2 The Terms and Reference of the Audit Committee shall not limit in any way the responsibilities and authorities of theExecutive Director/Chief Executive Officer to institute or instruct internal audits and reviews to be undertaken from time totime. Full report must be made to the Audit Committee upon completion of such reviews.4. Duties and Responsibilities4.1 The Chairman of the Audit Committee should engage on a continuous basis with Senior Management, such as theChairman, Executive Director/Chief Executive Officer, Chief Financial Officer and the External Auditors in order to be keptinformed of matters affecting the Company.4.2 In discharging its duties and responsibilities, the Audit Committee shall perform and where appropriate, report to theBoard of Directors on the following:(a)Financial reportingi. To review the quarterly and year-end financial statements of the Board, focusing particularly on:• Any change in accounting policies and practices;• Significant adjustments arising from the audit;• The going concern assumption; and• Compliance with accounting standards and other legal requirements.(b)External auditi. To consider the appointment of the External Auditor, the audit fee and any question of resignation or dismissal;ii. To discuss with the External Auditor before the audit commences, the nature and scope of audit, and ensurecoordination where more than one (1) audit firm is involved;iii. To monitor provision of non-audit services by External Auditors;iv. To review the External Auditors’ management letter and Management’s response; andv. To discuss problems and reservations arising from the interim and final audits, and any matter the ExternalAuditor may wish to discuss (in the absence of Management where necessary).(c)Internal auditi. To do the following, in relation to Internal Audit Function:• Review the adequacy of the scope, functions competency and resources, and that it has the necessaryauthority to carry out its work;• Review the internal audit program and results of the internal audit process and, where necessary, ensurethat appropriate actions are taken on the recommendations;• Review any appraisal of the performance and compensation of staff members;• Approve any appointment or termination of senior staff members; and• Take cognisance of resignations of staff members and provide the resigning staff members anopportunity to submit their reasons for resigning.(d)Related Party Transactioni. To consider any related party transactions that may arise within the Company or Group.(e)Other Functionsi. To consider the major findings of internal investigations and Management’s response; andii. To consider other topics as defined by the Board.This statement was approved by the Board of Directors on 25 October 2012.Mycron Steel Berhad 45

Directors’ Report For The Financial Year Ended 30 June 2012The Directors hereby submit their report together with the audited financial statements of the Group and the Company for the financialyear ended 30 June 2012.PRINCIPAL ACTIVITIESThe principal activities of the Company are of an investment holding and the provision of management services to its subsidiaries. Theprincipal activities of the subsidiaries are as disclosed in Note 14 to the financial statements.There have been no significant changes in the nature of these activities during the financial year.FINANCIAL RESULTSGroup CompanyRMRMLoss for the financial year 12,424,022 9,189,686DIVIDENDSThere were no dividends declared or paid by the Company since 30 June 2011.The Directors do not recommend the payment of final dividend for the financial year ended 30 June 2012.RESERVES AND PROVISIONSAll material transfers to or from reserves or provisions during the financial year are shown in the financial statements.DIRECTORSThe Directors who have held office during the period since the date of the last report are:Tunku Dato’ Ya’acob bin Tunku Tan Sri AbdullahTunku Dato’ Kamil Ikram bin Tunku Tan Sri AbdullahDato’ Zulkifly @ Sofi bin Haji MustaphaDatuk Lim Kim ChuanAzlan bin AbdullahDato’ Sri Iskandar Michael bin Abdullah (appointed on 1 August 2012)Dato’ Jaffar Indot (appointed on 3 September 2012)General Dato’ Sri Hj Suleiman bin Mahmud RMAF (Rtd) (appointed on 3 September 2012)Datuk Seri Razman Md Hashim bin Che Din Md Hashim (appointed on 1 October 2012)Dato’ Abu Talib bin Mohamed (resigned on 3 September 2012)Dato’ Narendrakumar Jasani a/l Chunilal Rugnath (resigned on 3 September 2012)Paul Chan Wan Siew (resigned on 3 September 2012)In accordance with Article 77 of the Company’s Article of Association, Dato’ Zulkifly @ Sofi bin Haji Mustapha and Azlan bin Abdullahretire at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-election.In accordance with Section 129(6) of the Companies Act, 1965, Dato’ Jaafar Indot and Datuk Seri Razman Md Hashim bin Che DinMd Hashim retire at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-election.In accordance with Article 83 of the Company’s Article of Association, Dato’ Sri Iskandar Michael bin Abdullah and General Dato’ SriHj Suleiman bin Mahmud RMAF (Rtd) who were appointed to the Board subsequent to the date of the last Annual General Meeting,retire at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-election.46Mycron Steel Berhad

Directors’ ReportFor The Financial Year Ended 30 June 2012(continued)DIRECTORS’ INTERESTSAccording to the register of Directors‘ shareholdings, particulars of interests of Directors who held office at the end of the financialyear, in ordinary shares in the Company and its related corporations are as follows:Melewar Industrial Group Berhad(Ultimate holding company)Number of ordinary shares of RM1 eachAtAt1.7.2011 Bought Sold 30.6.2012Tunku Dato’ Ya’acobbin Tunku Tan Sri Abdullah- indirect interest 82,381,232 - - 82,381,232Tunku Dato’ Kamil Ikrambin Tunku Tan Sri Abdullah- indirect interest 82,381,232 - - 82,381,232Dato’ Zulkifly @ Sofi binHaji Mustapha- indirect interest 82,381,232 - - 82,381,232Datuk Lim Kim Chuan- direct interest 186,666 - - 186,666Azlan bin Abdullah- direct interest 133,333 - - 133,333Mycron Steel BerhadTunku Dato’ Ya’acobbin Tunku Tan Sri Abdullah- indirect interest 97,504,766 - - 97,504,766Tunku Dato’ Kamil Ikrambin Tunku Tan Sri Abdullah- indirect interest 97,504,766 - - 97,504,766Dato’ Zulkifly @ Sofibin Haji Mustapha- indirect interest 97,504,766 - - 97,504,766Azlan bin Abdullah- direct interest 247,000 - - 247,000By virtue of Tunku Dato’ Ya’acob bin Tunku Tan Sri Abdullah, Tunku Dato’ Kamil Ikram bin Tunku Tan Sri Abdullah and Dato’ Zulkifly @Sofi bin Haji Mustapha’s interests in shares in the ultimate holding company, they are deemed to have an interest in the shares in allthe subsidiaries to the extent the ultimate holding company has an interest.None of the other Directors holding office at the end of the financial year had any interest in ordinary shares in the Company and itsrelated corporation during the financial year.DIRECTORS’ BENEFITSDuring and at the end of the financial year, no arrangements subsisted to which the Company is a party, being arrangements withthe object or objects of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in, or debenturesof, the Company or any other body corporate.Since the end of the previous financial year, no Director has received or become entitled to receive a benefit (other than Directors’remuneration disclosed in Note 10 to the financial statements) by reason of a contract made by the Company or a related corporationwith the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financialinterest, except as disclosed in Note 31 to the financial statements.Mycron Steel Berhad 47

Directors’ ReportFor The Financial Year Ended 30 June 2012(continued)STATUTORY INFORMATION ON THE FINANCIAL STATEMENTSBefore the statements of comprehensive income and financial position were made out, the Directors took reasonable steps:(a)(b)to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance fordoubtful debts and satisfied themselves that all known bad debts had been written off and that adequate allowance hadbeen made for doubtful debts; andto ensure that in respect of any current assets, other than debts, which were unlikely to be realised in the ordinary courseof business, their values as shown in the accounting records of the Group and the Company had been written down to anamount which might be expected to be realised.At the date of this report, the Directors are not aware of any circumstances:(a)(b)(c)which would render the amounts written off for bad debts or the amount of the allowance for doubtful debts in the financialstatements of the Group and the Company inadequate to any substantial extent; orwhich would render the values attributed to current assets in the financial statements of the Group and the Companymisleading; orwhich have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and theCompany misleading or inappropriate.No contingent or other liability has become enforceable or is likely to become enforceable within the period of 12 months after theend of the financial year which, in the opinion of the Directors, will or may affect the ability of the Group or the Company to meettheir obligations when they fall due.At the date of this report, there does not exist:(a)(b)any charge on the assets of the Group or the Company which has arisen since the end of the financial year which securesthe liability of any other person; orany contingent liability of the Group or the Company which has arisen since the end of the financial year.At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the financialstatements which would render any amount stated in the financial statements misleading.In the opinion of the Directors:(a)(b)the results of the operations of the Group and the Company during the financial year were not substantially affected byany item, transaction or event of a material and unusual nature except as disclosed in the statements of comprehensiveincome, Notes 2(a)(i), 3 and 26 to the financial statements; andthere has not arisen in the interval between the end of the financial year and the date of this report any item, transactionor event of a material and unusual nature likely to affect substantially the results of the operations of the Group or theCompany for the financial year in which this report is made.ULTIMATE HOLDING COMPANYThe Directors regard Melewar Industrial Group Berhad, a company incorporated in Malaysia and listed on the Main Market of BursaMalaysia Securities Berhad as the ultimate holding company.AUDITORSThe auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office.Signed on behalf of the Board of Directors in accordance with their resolution dated 31 October 2012.TUNKU DATO’ YA’ACOB BIN TUNKU TAN SRI ABDULLAHCHAIRMANAZLAN BIN ABDULLAHEXECUTIVE DIRECTOR48Mycron Steel Berhad

Statement By DirectorsPursuant To Section 169(15) Of The Companies Act, 1965We, Tunku Dato’ Ya’acob bin Tunku Tan Sri Abdullah and Azlan bin Abdullah, two of the Directors of Mycron Steel Berhad, state that,in the opinion of the Directors, the financial statements set out on pages 52 to 100 are drawn up so as to give a true and fair view of thestate of affairs of the Group and Company as at 30 June 2012 and of the results and cash flows of the Group and the Company for thefinancial year ended on that date in accordance with the Malaysian Accounting Standards Board (“MASB”) Approved AccountingStandards in Malaysia for Entities Other than Private Entities and the provisions of the Companies Act, 1965.The information set out in Note 36 to the financial statements have been prepared in accordance with the Guidance on SpecialMatter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa MalaysiaSecurities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants.Signed on behalf of the Board of Directors in accordance with their resolution dated 31 October 2012.TUNKU DATO’ YA’ACOB BIN TUNKU TAN SRI ABDULLAHCHAIRMANAZLAN BIN ABDULLAHEXECUTIVE DIRECTORStatutory DeclarationPursuant To Section 169(16) Of The Companies Act, 1965I, Azlan bin Abdullah, the Director primarily responsible for the financial management of Mycron Steel Berhad, do solemnly andsincerely declare that the financial statements set out on pages 52 to 100 are, in my opinion, correct and I make this solemn declarationconscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.AZLAN BIN ABDULLAHEXECUTIVE DIRECTORSubscribed and solemnly declared by the abovenamed Azlan bin Abdullah, at Kuala Lumpur in Malaysia on 31 October 2012,before me.COMMISSIONER FOR OATHSMycron Steel Berhad 49

Independent Auditors’ ReportTo The Members Of Mycron Steel BerhadREPORT ON THE FINANCIAL STATEMENTSWe have audited the financial statements of Mycron Steel Berhad on pages 52 to 99 which comprise the statements of financialposition as at 30 June 2012 of the Group and of the Company, and the statements of comprehensive income, changes in equity andcash flows of the Group and of the Company for the financial year then ended, and a summary of significant accounting policiesand other explanatory notes, as set out on Notes 1 to 35.Directors’ Responsibility for the Financial StatementsThe Directors of the Company are responsible for the preparation of financial statements that give a true and fair view in accordancewith MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities and the provisions of the CompaniesAct, 1965 in Malaysia, and for such internal control as the Directors determine are necessary to enable the preparation of financialstatements that are free from material misstatement, whether due to fraud or error.Auditors’ ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordancewith approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan andperform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. Theprocedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements,whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation offinancial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, butnot for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluatingthe appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well asevaluating the overall presentation of the financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.OpinionIn our opinion, the financial statements have been properly drawn up in accordance with MASB Approved Accounting Standardsin Malaysia for Entities Other than Private Entities and the provisions of the Companies Act, 1965 so as to give a true and fair view ofthe financial position of the Group and of the Company as of 30 June 2012 and of their financial performance and cash flows for thefinancial year then ended.Emphasis of MatterWe draw attention to Note 2(a)(i) to the financial statements which describes certain matters indicating the existence of a materialuncertainty that may cast significant doubt about the ability of the Group and the Company to continue as going concerns. Ouropinion is not qualified in respect of this matter.REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTSIn accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:(a)(b)(c)in our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and itssubsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act;we are satisfied that the accounts of the subsidiaries that have been consolidated with the Company’s financial statementsare in form and content appropriate and proper for the purposes of the preparation of the financial statements of theGroup and we have received satisfactory information and explanations required by us for those purposes; andthe auditors’ reports on the accounts of the subsidiaries did not contain any qualification or any adverse comment madeunder Section 174(3) of the Act.50Mycron Steel Berhad

Independent Auditors’ ReportTo The Members Of Mycron Steel Berhad(continued)OTHER REPORTING RESPONSIBILITIESThe supplementary information set out in Note 36 on page 100 is disclosed to meet the requirement of Bursa Malaysia SecuritiesBerhad and is not part of the financial statements. The Directors are responsible for the preparation of the supplementary informationin accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context ofDisclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (“MIAGuidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in allmaterial respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.OTHER MATTERSThis report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 inMalaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.PRICEWATERHOUSECOOPERS(No. AF: 1146)Chartered AccountantsERIC OOI LIP AUN(No. 1517/06/14 (J))Chartered AccountantKuala Lumpur31 October 2012Mycron Steel Berhad 51

Statements of Comprehensive IncomeFor The Financial Year Ended 30 June 2012GroupCompanyNote 2012 2011 2012 2011RM RM RM RMRevenue 5 443,288,911 414,376,875 1,793,360 10,771,598Cost of sales 6 (429,321,176) (398,516,542) - -Gross profit 13,967,735 15,860,333 1,793,360 10,771,598Other operating income 191,735 28,361 - -Foreign exchange gain, net 1,038,639 939,175 - -Selling and distribution costs (2,893,728) (2,350,265) - -Administrative expenses (10,239,053) (7,717,458) (1,707,963) (1,937,908)Impairment loss on other receivables 15 (9,147,117) - (9,147,117) -Impairment loss on available-for-sale financialassets - (317,602) - (317,602)Other operating expenses (2,362) (476,005) - -Finance income 9 539,039 211,923 809 372Finance costs 9 (7,524,738) (5,825,882) - -(Loss) / profit before tax 8 (14,069,850) 352,580 (9,060,911) 8,516,460Taxation 11 1,645,828 159,211 (128,775) (2,448,436)(Loss) / profit for the financial year (12,424,022) 511,791 (9,189,686) 6,068,024Other comprehensive income:Asset revaluation reserves:- Revaluation surplus on property, plant andequipment, net of tax 1,704,324 10,999,425 - -Total comprehensive(loss) / income for the financial year (10,719,698) 11,511,216 (9,189,686) 6,068,024(Loss) / earnings per share attributable toequity holders of the Company during thefinancial year- basic and diluted (sen) 12 (6.98) 0.2952Mycron Steel Berhad

Statements of Financial PositionAs At 30 June 2012GroupCompanyNote 2012 2011 2012 2011RM RM RM RMNON-CURRENT ASSETSProperty, plant and equipment 13 281,414,102 286,898,973 137,878 213,560Investments in subsidiaries 14 - - 165,089,209 165,089,209Other receivables 15 - 9,147,117 - 9,147,117281,414,102 296,046,090 165,227,087 174,449,886CURRENT ASSETSInventories 17 51,945,718 64,936,508 - -Trade and other receivables 18 109,633,392 45,197,101 7,000 5,000Amount owing by ultimate holding company 19 - 542,202 - -Amounts owing by subsidiaries 20 - - 10,009,533 10,209,377Amounts owing by related companies 21 13,741,574 18,602,252 - -Tax recoverable 195,081 147,197 195,081 60,808Derivative financial assets 22 43,122 286,878 - -Cash and cash equivalents 23 26,476,584 34,856,397 218,369 118,060202,035,471 164,568,535 10,429,983 10,393,245TOTAL ASSETS 483,449,573 460,614,625 175,657,070 184,843,131EQUITYShare capital 27 179,000,000 179,000,000 179,000,000 179,000,000Share premium 28 14,918,638 14,918,638 14,918,638 14,918,638Asset revaluation reserves 44,040,111 42,335,787 - -Treasury shares 29 (382,685) (382,685) (382,685) (382,685)Retained earnings / (accumulated losses) 16,382,764 28,806,786 (18,183,916) (8,994,230)TOTAL EQUITY 253,958,828 264,678,526 175,352,037 184,541,723NON-CURRENT LIABILITIESDeferred tax liabilities 25 1,964,117 4,539,720 1,979 3,229Borrowings 26 8,918,604 16,221,617 - -10,882,721 20,761,337 1,979 3,229CURRENT LIABILITIESTrade and other payables 24 48,311,328 35,591,254 291,217 298,004Amount owing to ultimate holding company 19 137,418 6,967 11,837 175Amount owing to a related company 21 13,910 29,850 - -Tax payable 19,425 - - -Borrowings 26 170,125,943 139,546,691 - -218,608,024 175,174,762 303,054 298,179TOTAL LIABILITIES 229,490,745 195,936,099 305,033 301,408TOTAL EQUITY AND LIABILITIES 483,449,573 460,614,625 175,657,070 184,843,131Mycron Steel Berhad 53

Consolidated Statement of Changes In EquityFor The Financial Year Ended 30 June 2012Attributable to owners of the CompanyAssetShare Share revaluation Treasury Retainedcapital premium reserves shares earnings TotalRM RM RM RM RM RMAt 1 July 2011 179,000,000 14,918,638 42,335,787 (382,685) 28,806,786 264,678,526Comprehensive income:- Loss for the financial year - - - - (12,424,022) (12,424,022)Other comprehensive income:- Revaluation surplus on property,plant and equipment, net of tax - - 1,704,324 - - 1,704,324Total comprehensive income / (loss)for the financial year - - 1,704,324 - (12,424,022) (10,719,698)At 30 June 2012 179,000,000 14,918,638 44,040,111 (382,685) 16,382,764 253,958,828Attributable to owners of the CompanyAssetShare Share revaluation Treasury RetainedNote capital premium reserves shares earnings TotalRM RM RM RM RM RMAt 1 July 2010 179,000,000 14,918,638 31,336,362 (382,685) 34,523,585 259,395,900Comprehensive income:- Profit for the financial year - - - - 511,791 511,791Other comprehensive income:- Revaluation surplus on property,plant and equipment, net of tax - - 10,999,425 - - 10,999,425Total comprehensive incomefor the financial year - - 10,999,425 - 511,791 11,511,216Transaction with owners:Dividends for the financial yearended 30 June 2010 30 - - - - (6,228,590) (6,228,590)Total transaction with owners - - - - (6,228,590) (6,228,590)At 30 June 2011 179,000,000 14,918,638 42,335,787 (382,685) 28,806,786 264,678,52654Mycron Steel Berhad

Company Statement of Changes In EquityFor The Financial Year Ended 30 June 2012NondistributableShare Share Treasury Accumulatedcapital premium shares losses TotalRM RM RM RM RMAt 1 July 2011 179,000,000 14,918,638 (382,685) (8,994,230) 184,541,723Comprehensive income:Loss for the financial year - - - (9,189,686) (9,189,686)Total comprehensive lossfor the financial year- - - (9,189,686) (9,189,686)At 30 June 2012 179,000,000 14,918,638 (382,685) (18,183,916) 175,352,037NondistributableShare Share Treasury AccumulatedNote capital premium shares losses TotalRM RM RM RM RMAt 1 July 2010 179,000,000 14,918,638 (382,685) (8,833,664) 184,702,289Comprehensive income:Profit for the financial year - - - 6,068,024 6,068,024Total comprehensive incomefor the financial year - - - 6,068,024 6,068,024Transaction with owners:Dividends for the financial year ended30 June 2010 30 - - - (6,228,590) (6,228,590)Total transaction with owners - - - (6,228,590) (6,228,590)At 30 June 2011 179,000,000 14,918,638 (382,685) (8,994,230) 184,541,723Mycron Steel Berhad 55

Statements of Cash FlowsFor The Financial Year Ended 30 June 2012CASH FLOWS FROM OPERATING ACTIVITIESGroupCompanyNote 2012 2011 2012 2011RM RM RM RM(Loss) / profit before tax (14,069,850) 352,580 (9,060,911) 8,516,460Adjustments for:Property, plant and equipment:- depreciation 10,906,725 11,204,307 75,682 165,441- net (gain) / loss on disposals (19,651) 227,611 - 179,829- write-offs 397,500 - - -Impairment loss :- other receivables 9,147,117 - 9,147,117 -- available-for-sale financial assets - 317,602 - 317,602Net unrealised gain on foreign exchange (1,481,155) (514,003) - -Fair value gain on foreign currency exchangeforward contract (43,122) (286,878) - -Dividend income - - - (8,400,000)Interest income (539,039) (211,923) (809) (372)Interest expense 8,004,954 7,370,698 - -12,303,479 18,459,994 161,079 778,960Changes in working capital:- inventories 12,990,790 60,085,571 - -- trade and other receivables (63,379,487) 25,819,127 (2,000) -- trade and other payables 12,376,410 (34,949,992) (6,787) (458,459)- intercompanies balances 5,517,391 13,564,521 211,506 (5,485,691)Cash (used in) / generated from operations (20,191,417) 82,979,221 363,798 (5,165,190)Interest paid (7,746,085) (7,404,691) - -Interest received 539,039 211,923 809 372Tax paid (293,008) (298,270) (264,298) (231,668)Net cash (used in) / generated fromoperating activities (27,691,471) 75,488,183 100,309 (5,396,486)CASH FLOWS FROM INVESTING ACTIVITIESPurchases of plant and equipment (4,837,404) (3,557,862) - -Proceeds from disposal of plant and equipment 76,800 5,220,593 - 5,185,950Dividends received - - - 6,300,000Net cash (used in) / generated frominvesting activities (4,760,604) 1,662,731 - 11,485,950CASH FLOWS FROM FINANCING ACTIVITIESDividends paid - (6,228,590) - (6,228,590)Repayments of borrowings (205,642,738) (192,714,373) - -Proceeds from borrowings 229,715,000 152,430,000 - -Net cash generated from /(used in) financing activities 24,072,262 (46,512,963) - (6,228,590)NET MOVEMENT IN CASH AND CASH EQUIVALENTS (8,379,813) 30,637,951 100,309 (139,126)CASH AND CASH EQUIVALENTS:- at beginning of the financial year 34,856,397 4,218,446 118,060 257,186- at end of the financial year 23 26,476,584 34,856,397 218,369 118,060Included in the purchase of plant and equipment is a purchase of a motor vehicle via a hire purchase arrangement amounting toRM115,000 (2011: RM Nil).56Mycron Steel Berhad

Notes to the Financial Statements30 June 20121 GENERAL INFORMATIONThe principal activities of the Company are of an investment holding and the provision of management services to itssubsidiaries. The principal activities of the subsidiaries are as disclosed in Note 14 to the financial statements.There have been no significant changes in the nature of these activities during the financial year.The Company is a public limited liability company, incorporated and domiciled in Malaysia and listed on the MainMarket of the Bursa Malaysia Securities Berhad.The Company is a subsidiary of Melewar Industrial Group Berhad, a company incorporated in Malaysia and listed onthe Main Market of Bursa Malaysia Securities Berhad.The registered office of the Company is:Suite 12.03, 12th FloorNo. 566 Jalan Ipoh51200 Kuala LumpurThe principal place of business of the Company is:Lot 717 Jalan Sungai Rasau40706 Shah AlamSelangor Darul EhsanAs at 30 June 2012, all monetary assets and liabilities of the Group and the Company are denominated in RinggitMalaysia, unless otherwise stated.The financial statements were approved and authorised for issue in accordance with a resolution of the Board ofDirectors on 31 October 2012.2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThe following accounting policies have been applied consistently to all the financial years presented in dealing with items whichare considered material in relation to the financial statements, unless otherwise stated.(a)Basis of preparationThe financial statements of the Group and of the Company have been prepared in accordance with the provisions ofthe Companies Act, 1965, and the Malaysian Accounting Standards Board (“MASB”) Approved Accounting Standards inMalaysia for Entities Other than Private Entities.The financial statements have been prepared under the historical cost convention, unless otherwise indicated in thissummary of significant accounting policies.(i)Going concernThe preparation of financial statements in conformity with the MASB Approved Accounting Standards in Malaysiafor Entities Other than Private Entities and provisions of the Companies Act, 1965 requires the use of certain criticalaccounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues andexpenses during the financial year. It also requires Directors to exercise their judgement in the process of applyingthe Group’s and the Company’s accounting policies. Although these estimates and judgement are based on theDirectors’ best knowledge of current events and actions, actual results may differ from those estimates.The Group and the Company have incurred a net loss of RM12.4 million (2011: net profit of RM0.5 million) and RM9.2million (2011: net profit of RM6.1 million) respectively for the financial year ended 30 June 2012. The net loss for thefinancial year is mainly attributed to the impairment loss on other receivables amounting to RM9.1 million. As at 30June 2012, the Group is in a net current liabilities position of RM16.6 million (2011: RM10.6 million).The Group, had, prior to 30 June 2012, obtained indulgences for facilities from all the banks in relation to itscompliance with the covenant clauses for the financial year ended 30 June 2012. In addition, based on the cashflows projections for the financial year ending 30 June 2013, the Group may not be able to meet the said covenantMycron Steel Berhad 57

Notes to the Financial Statements30 June 2012(continued)2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(a)Basis of preparation (continued)(i)Going concern (continued)clauses and has obtained a further extension to 30 June 2013 from all the banks. However, the indulgence obtainedfrom one of the banks was approved with an inclusion of a paragraph matter on the said bank’s contractualrights to demand immediate repayment at any time at its sole discretion with or without written notice to theGroup, irrespective of whether or not any event of default has occurred and notwithstanding any other termsand conditions stated in the trade facilities agreement. The related trade facilities of the said bank amountingto RM127.0 million are classified as current liabilities as at 30 June 2012. Refer to Note 4(b) and Note 26 for furtherdetails.The Group has successfully renegotiated the restructuring of its Term Loan 2 and revolving credits to a longerrepayment term. This is an indication of continued financial support from the banks.The Group has also sought support from its customers via obtaining advances for their sales orders. This measure willimprove the Group’s credit enhancement and improve the availability of the Group’s cash flows.Accordingly, the Directors are of the view that the Group and the Company will have sufficient cash flows for the12 months from the reporting date to meet the operating and financing cash flows requirements. In the eventthat the Group and the Company experiences negative cash flows position for the 12 months ending 30 June2013, the Board is confident that the Group and the Company have sufficient funding and flexibility through theavailability of the credit facilities from the banks and continuous support from its customers. The Board of Directorstherefore believes that it is appropriate to prepare the financial statements of the Group and the Company ongoing concerns basis.If the continuous financial supports from the banks and the customers do not materialise as planned, this conditionindicates the existence of a material uncertainty which may cast significant doubt about the Group’s and theCompany’s ability to continue as going concerns and, therefore may be unable to realise their assets and dischargetheir liabilities in the normal course of business.The areas involving higher degree of judgement or complexity, or areas where assumptions and estimates aresignificant to the financial statements are disclosed in Note 3 to the financial statements.(ii)Standards, amendments and improvements to published standards and interpretations that are effective andapplicable to the Group and the CompanyThe new accounting standards, amendments and improvements to published standards and interpretations thatare applicable to the Group and the Company and are effective for the financial year beginning on or after 1 July2011 are as follows:• Amendments To FRS 1 “First-Time Adoption Of Financial Reporting Standards”• Amendment To FRS 2 “Share-Based Payment - Group Cash-Settled Share Based Payment Transactions”• Amendment To FRS 7 “Financial Instruments: Disclosures – Improving Disclosures About Financial Instruments”• IC Interpretation 4 “Determining Whether An Arrangement Contains A Lease”• IC Interpretation 18 “Transfers Of Assets From Customers”• IC Interpretation 19 “Extinguishing Financial Liabilities With Equity Instruments”• Amendment To IC 14 “Prepayment Of A Minimum Funding Requirement”• Improvements To FRSs (2010)The adoption of these new FRSs amendments and interpretations do not have any material impact on the financialperformance or financial position of the Group and the Company.58Mycron Steel Berhad

Notes to the Financial Statements30 June 2012(continued)2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(a) Basis of preparation (continued)(iii)Standards, amendments to published standards and interpretations to existing standards that are applicable to theGroup and the Company but not yet effectiveIn the next financial year, the Group and the Company will be adopting the new IFRS-compliant framework,Malaysian Financial Reporting Standards (“MFRS”). In adopting the new framework, the Group will be applyingMFRS 1 “First-Time Adoption of MFRS”.The Group and the Company will apply the new standards, amendments to standards and interpretations in thefollowing financial year:• Financial year beginning on / after 1 July 2012Applicable to the Group and the Company- MFRS 139 “Financial Instruments: Recognition And Measurement”- The revised MFRS 124 “Related Party Disclosures”- Amendment to MFRS 112 “Income Taxes”- Amendment to MFRS 7 “Financial Instruments: Disclosures On Transfers Of Financial Assets”- Amendment to MFRS 101 “Presentation Of Items Of Other Comprehensive Income”The abovementioned MFRS is not expected to have any material impact on the financial performance orfinancial position of the Group and the Company.Not applicable to the Group and the Company- MFRS 141 “Agriculture”- IC Interpretation 15 “Agreements For Construction Of Real Estates”• Financial year beginning on / after 1 July 2013Applicable to the Group and the Company- MFRS 10 “Consolidated Financial Statements”- MFRS 11 “Joint Arrangements”- MFRS 12 “Disclosures Of Interests In Other Entities”- MFRS 13 “Fair Value Measurement”- The revised MFRS 127 “Separate Financial Statements”- The revised MFRS 128 “Investments In Associates And Joint Ventures”- Amendment to MFRS 7 “Financial Instruments: Disclosures”The abovementioned MFRS is not expected to have any material impact on the financial performance orfinancial position of the Group and the Company.Mycron Steel Berhad 59

Notes to the Financial Statements30 June 2012(continued)2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(a) Basis of preparation (continued)(iii)Standards, amendments to published standards and interpretations to existing standards that are applicable to theGroup and the Company but not yet effective (continued)Not applicable to the Group and the Company- Amendment To MFRS 1 “First Time Adoption Of MFRSs: Government Loans”- Amendment to MFRS 119 “Employee Benefits”- IC Interpretation 20 “Stripping Costs In The Production Phase Of A Surface Mine”• Financial year beginning on / after 1 July 2014Applicable to the Group and the Company- Amendment to MFRS 132 “Financial instruments: Presentation”The abovementioned MFRS is not expected to have any material impact on the financial performance orfinancial position of the Group and the Company.• Financial year beginning on / after 1 July 2015Applicable to the Group and the Company- MFRS 9 “Financial Instruments – Classification and Measurement of Financial Assets and FinancialLiabilities”The abovementioned MFRS is not expected to have any material impact on the financial performance orfinancial position of the Group and the Company.(b)Basis of consolidation(i)SubsidiariesSubsidiaries are those corporations, partnerships or other entities (including special purpose entities) in which theGroup has power to exercise control over the financial and operating policies so as to obtain benefits from theiractivities, generally accompanying a shareholding of more than one half of the voting rights. The existence andeffect of potential voting rights that are currently exercisable or convertible are considered when assessing whetherthe Group controls another entity.Under the acquisition method of accounting, subsidiaries are fully consolidated from the date on which control istransferred to the Group and are deconsolidated from the date that control ceases. The cost of an acquisition ismeasured as fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the dateof exchange, plus costs directly attributable to the acquisition.(ii)Investments in subsidiariesIn the Company’s separate financial statements, investments in subsidiaries are carried at cost less accumulatedimpairment losses. On disposal of investment in subsidiaries, the difference between disposal proceeds and thecarrying amounts of the investments are recognised in the profit or loss.(iii)Changes in ownership interestsWhen the Group ceases to have control, the carrying amount of the investment at the date control ceases becomesits cost on initial measurement as a financial asset in accordance with FRS 139 “Financial Instruments: Recognitionand Measurement”. Any amounts previously recognised in other comprehensive income in respect of that entityare accounted for as if the Group had directly disposed of the related assets or liabilities.60Mycron Steel Berhad

Notes to the Financial Statements30 June 2012(continued)2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(c)Property, plant and equipment(i)Measurement basisProperty, plant and equipment are initially stated at cost. Land and buildings, plant and machinery and electricalinstallation are subsequently shown at fair value, based on periodic valuation by external valuers, less subsequentdepreciation and impairment losses, with sufficient regularity or when the fair value of the revalued assets differmaterially from its carrying value. Any accumulated depreciation at the date of revaluation is eliminated againstthe gross carrying amount of the asset, and the net amount is restated to the revalued amount of the asset. All otherproperty, plant and equipment are stated at cost less accumulated depreciation and impairment losses.The cost of an item of property, plant and equipment initially recognised includes its purchase price and any costthat is directly attributable to bringing the asset to the location and condition necessary for it to be capable ofoperating in the manner intended by management.Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate,only when it is probable that future economic benefits associated with the item will flow to the Group and thecost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All otherrepairs and maintenance are recognised as expenses in the profit or loss during the financial year in which they areincurred.When an asset’s carrying amount is increased as a result of a revaluation, the increase is recognised in othercomprehensive income as an asset revaluation reserve. When the asset’s carrying amount is decreased as a resultof a revaluation, the decrease is recognised in other comprehensive income to the extent of any credit balanceexisting in asset revaluation reserve of that asset; and other decreases are recognised in the profit or loss.Gains and losses on disposals are determined by comparing proceeds with carrying amounts and are included inthe profit or loss. The revaluation surplus included in equity is transferred directly to retained earnings when the assetis retired or disposed off.The residual values and useful lives of property, plant and equipment are reviewed, and adjusted as appropriate,at each reporting date. The effects of any revision of the residual values and useful lives are included in the profit orloss for the financial year in which the changes arise.At each reporting date, the Group assesses whether there is any indication of impairment. If such indication exists,an analysis is performed to assess whether the carrying amount of the asset is fully recoverable. A write-down ismade if the carrying amount exceeds the recoverable amount. See accounting policy Note 2(e) on impairment ofnon-financial assets.(ii)DepreciationFreehold land is not depreciated as it has infinite life. Other property, plant and equipment, are depreciated on astraight-line basis based on cost of the assets or their revalued amounts, to their residual values, over their estimateduseful lives as follows:BuildingsPlant, machinery and electrical installationMotor vehicles, furniture, fittings and equipment50 years4 – 40 years10 yearsDepreciation on assets under construction commences when the assets are ready for its intended use.Mycron Steel Berhad 61

Notes to the Financial Statements30 June 2012(continued)2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(d)LeasesA lease is an agreement whereby the lessor conveys to the lessee in return for a payment, or series of payments, the rightto use an asset for an agreed period of time.Accounting as lessee(i)Finance leasesLeases of property, plant and equipment where the Group assumes substantially all the benefits and risks ofownership are classified as finance leases.Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased propertyand the present value of the minimum lease payments. Each lease payment is allocated between the liability andfinance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rentalobligations, net of finance charges, are included in other long-term payables. The interest element of the financecharge is charged to the profit or loss over the lease period so as to produce a constant periodic rate of interest onthe remaining balance of the liability for each period.Property, plant and equipment acquired under finance lease is depreciated over the shorter of the estimated usefullife of the asset or the lease term.Initial direct costs incurred by the Group in negotiating and arranging finance leases are added to the carryingamount of the leased assets and recognised as an expense in the profit or loss over the lease term on the same basisas the lease expenses.(ii)Operating leasesLeases of assets where a significant portion of the risks and rewards of ownership are retained by the lessor areclassified as operating leases. Payments made under operating leases (net of any incentives received from thelessor) are charged to the profit or loss on a straight-line basis over the lease period.Initial direct costs incurred by the Group in negotiating and arranging operating leases are recognised in the profitor loss when incurred.(e)Impairment of non-financial assetsAssets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assetsthat are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicatethat the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’scarrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value lesscost to sell and value-in-use. For the purposes of assessing impairment, assets are grouped at the lowest levels for whichthere are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that sufferedimpairment are reviewed for possible reversal of the impairment at each reporting date.The impairment loss is charged to the profit or loss unless it reverses a previous revaluation in which case it is charged to therevaluation surplus. In respect of other assets, any subsequent increase in recoverable amount is recognised in the profitor loss unless it reverses an impairment loss on a revalued asset in which case, it is taken to asset revaluation reserve.(f)Financial instruments(i)DescriptionA financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability orequity instrument of another enterprise.A financial asset is any asset that is cash, a contractual right to receive cash or another financial asset from anotherenterprise, a contractual right to exchange financial instruments with another enterprise under conditions that arepotentially favourable, or an equity instrument of another enterprise.62Mycron Steel Berhad

Notes to the Financial Statements30 June 2012(continued)2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(f)Financial instruments (continued)(i)Description (continued)A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to anotherenterprise, or to exchange financial instruments with another enterprise under conditions that are potentiallyunfavourable.(ii)Financial assets and liabilities recognised on the statement of financial positionThe particular recognition method adopted for financial instruments recognised on the statement of financialposition is disclosed in the individual accounting policy notes associated with each item.(iii)Fair value estimationThe face values of financial assets (less any estimated credit adjustments) and financial liabilities with a maturityperiod of less than one year are assumed to approximate their fair values.The fair values for financial assets and financial liabilities with a maturity of more than one year are estimated usinga variety of methods, including estimated discounted value of future cash flows, quoted market prices or dealerquotes, and assumptions that are based on market conditions existing at each reporting date.(g)Financial assetsClassificationThe Group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, loansand receivables and available-for-sale financial assets. The classification depends on the purpose for which the financialassets were acquired. Management determines the classification of its financial assets at initial recognition andre-evaluates this at each reporting date.(i)Financial assets at fair value through profit or lossFinancial assets at fair value through profit or loss are financial assets that are designated or held for trading. Afinancial asset is classified in this category if it is acquired principally for the purpose of selling or repurchasing itin the near term. Derivatives are classified as held for trading unless they are designated as hedges. Assets in thiscategory are classified as current assets if expected to be settled within 12 months; otherwise, they are classified asnon-current.In addition, certain financial assets are designated at initial recognition as fair value through profit or loss when oneof the designation criteria is met:• Designation eliminates or significantly reduces a measurement or recognition inconsistency that wouldotherwise arise; or• Its performance is evaluated on a fair value basis, in accordance with a documented risk management orinvestment strategy(ii)Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quotedin an active market. They are included in current assets, except for maturities greater than 12 months after the endof the reporting date. These are classified as non-current assets. The Group’s loans and receivables are as disclosedin Note 35 to the financial statements.(iii)Available-for-sale financial assetsAvailable-for-sale financial assets are non-derivatives that are either designated in this category or not classified inany of the other categories. They are included in non-current assets unless management intends to dispose off theinvestment within 12 months of the end of the reporting date.Mycron Steel Berhad 63

Notes to the Financial Statements30 June 2012(continued)2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(g)Financial assets (continued)Recognition and initial measurementRegular purchases and sales of financial assets are recognised on trade date i.e. the date on which the Group and theCompany commit to purchase or sell the asset.Financial assets are initially recognised at fair value plus transaction costs for all financial assets not carried at fair valuethrough profit or loss. Financial assets carried at fair value through profit or loss is initially recognised at fair value, andtransaction costs are expense to the profit or loss.Subsequent measurement – gains and lossesAvailable-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value.Loans and receivables are subsequently carried at amortised cost using the effective interest method.Changes in the fair values of financial assets at fair value through profit or loss, including the effects of currency translation,interest and dividend income are recognised in the profit or loss in the financial year in which the changes arise.Changes in the fair value of available-for-sale financial assets are recognised in other comprehensive income, except forimpairment losses and foreign exchange gains and losses on monetary assets. The exchange differences on monetaryassets are recognised in the profit or loss, whereas exchange differences on non-monetary assets are recognised in othercomprehensive income as part of fair value change.Interest and dividend income on available-for-sale financial assets are recognised separately in the profit or loss. Dividendincome on available-for-sale equity instruments is recognised in the profit or loss when the Group’s right to receive payments isestablished.Subsequent measurement - impairment of financial assets(i)Assets carried at amortised costThe Group assesses at the end of each reporting date whether there is objective evidence that a financial asset or agroup of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment lossesare incurred only if there is objective evidence of impairment as a result of one or more events that occurred afterthe initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimatedfuture cash flows of the financial asset or the group of financial assets that can be reliably estimated.The criteria that the Group uses to determine that there is objective evidence of an impairment loss include:• Significant financial difficulty of the issuer or obligor;• A breach of contract, such as a default or delinquency in interest or principal payments;• The Group, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrowera concession that the lender would not otherwise consider;• It becomes probable that the borrower will enter bankruptcy or other financial reorganisation;• Disappearance of an active market for that financial asset because of financial difficulties; or• Observable data indicating that there is a measurable decrease in the estimated future cash flows from aportfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet beidentified with the individual financial assets in the portfolio, including:- adverse changes in the payment status of borrowers in the portfolio; and- national or local economic conditions that correlate with defaults on the assets in the portfolio.64Mycron Steel Berhad

Notes to the Financial Statements30 June 2012(continued)2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(g)Financial assets (continued)Subsequent measurement - impairment of financial assets (continued)(i)Assets carried at amortised cost (continued)The amount of the loss is measured as the difference between the asset’s carrying amount and the present value ofestimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financialasset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss isrecognised in the profit or loss. If ‘loans and receivables’ has a variable interest rate, the discount rate for measuringany impairment loss is the current effective interest rate determined under the contract. As a practical expedient,the Group may measure impairment on the basis of an instrument’s fair value using an observable market price. If,in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectivelyto an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating),the reversal of the previously recognised impairment loss is recognised in the profit or loss.When an asset is uncollectible, it is written off against the related allowance account. Such assets are written offafter all the necessary procedures have been completed and the amount of the loss has been determined.(ii)Assets classified as available-for-sale financial assetsThe Group assesses at the end of the reporting date whether there is objective evidence that a financial asset or agroup of financial assets is impaired.In the case of equity securities classified as available-for-sale financial assets, in addition to the criteria for ‘assetscarried at amortised cost’ above, a significant or prolonged decline in the fair value of the available-for-sale financialassets below its cost is also considered as an indicator that the assets are impaired. If any such evidence exists foravailable-for-sale financial assets, the cumulative loss that had been recognised directly in equity is removed fromequity and recognised in the profit or loss. The amount of cumulative loss that is reclassified to the profit or loss is thedifference between the acquisition cost and the current fair value, less any impairment loss on that financial assetpreviously recognised in the profit or loss. Impairment losses recognised in the profit or loss on equity instrumentsclassified as available-for-sale are not reversed through the profit or loss.DerecognitionFinancial assets are derecognised when the rights to receive cash flows from the investments have expired or have beentransferred and the Group has transferred substantially all risks and rewards of ownership.When available-for-sale financial assets are sold, the accumulated fair value adjustments recognised in othercomprehensive income are reclassified to the profit or loss.Offsetting financial instrumentsFinancial assets and liabilities are offset and the net amount is presented in the statement of financial position when thereis a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realisethe asset and settle the liability simultaneously.(h)Derivative financial instrumentsDerivative financial instruments are initially recognised in the statement of financial position at fair value on the date onwhich derivative contracts are entered into and are subsequently remeasured at their fair values at each reporting date.Fair values are obtained from quoted market prices in active markets, including recent market transactions and valuationtechniques, including discounted cash flow models, as appropriate. All derivatives are carried as assets when fair valuesare positive and as liabilities when fair values are negative.Derivative financial instruments that do not qualify for hedge accounting are classified as financial assets at fair valuethrough profit or loss and accounted for in accordance with accounting policy set out in Note 2(g).Mycron Steel Berhad 65

Notes to the Financial Statements30 June 2012(continued)2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(i)InventoriesInventories are stated at the lower of cost and net realisable value. Cost is determined on a weighted average cost basis.Finished goods and work-in-progress comprise cost of materials, direct labour, other direct costs and related productionoverheads (based on normal operating capabilities).Net realisable value is the estimated selling price in the ordinary course of business, less costs of completion and sellingexpenses.(j)Cash and cash equivalentsFor the purposes of the statement of cash flows, cash and cash equivalents comprise cash in hand, deposits held at callwith financial institutions, other short-term highly liquid investments with original maturities of 3 months or less.(k)Trade receivablesTrade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business.If the collection is expected within one year or less, they are classified as current assets. If not, they are presented as noncurrentassets. Trade receivables, are classified as loan and receivables as disclosed in Note 35 to the financial statements.Refer accounting policy Note 2(g) on financial assets.Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effectiveinterest method, less provision for impairment. A provision for impairment of trade receivables is established when thereis objective evidence that the Group will not be able to collect all amounts due according to the original terms of thereceivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financialreorganisation, and default or delinquency in payments (more than 120 days overdue) are considered indicators thatthe trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount andthe present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amountof the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the profit orloss within ‘selling and distribution costs’. When a trade receivable is uncollectible, it is written off against the allowanceaccount for trade receivables. Subsequent recoveries of amounts previously written off are credited against selling anddistribution costs in the profit or loss.(l)Trade payablesTrade payables are obligations to pay for goods or services that have been acquired in the ordinary course of businessfrom suppliers.Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effectiveinterest method.Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operatingcycle of the business if longer). If not, they are presented as non-current liabilities.(m)Assets acquired under hire purchase arrangementsThe cost of property, plant and equipment acquired under hire purchase arrangements which transfer substantially allthe risks and rewards of ownership to the Group are capitalised. The depreciation policy on these property, plant andequipment is similar to that of the Group. Outstanding obligations due under hire purchase arrangements after deductingfinance expenses are included as liabilities in the financial statements. Finance charges on hire purchase arrangementsare allocated to the profit or loss over the period of the respective arrangements, so as to produce a constant rate ofinterest on the remaining balance of the liability.(n)Borrowings and borrowing costsBorrowings are recognised initially at fair value, net of transaction cost incurred. Borrowings are subsequently stated atamortised cost; any difference between the proceeds (net of transaction cost) and the redemption value is recognisedin the profit or loss over the period of the borrowings using the effective interest method.66Mycron Steel Berhad

Notes to the Financial Statements30 June 2012(continued)2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(n)Borrowings and borrowing costs (continued)Borrowings are classified as current liabilities unless the Group and the Company have an unconditional right to defersettlement of the liability for at least 12 months after the reporting date.Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it isprobable that some or all of the facility will be drawn down. In this case, the fee is deferred until the drawdown occurs. Tothe extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalisedas a pre-payment for liquidity services and amortised over the period of the facility to which it relates.(o)ProvisionsProvisions are recognised when the Group has a present legal or constructive obligation as a result of past events; whenit is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliablyestimated. Provisions are not recognised for future operating losses.(p)Share capital(i)ClassificationOrdinary shares are recorded at the nominal value and proceeds in excess of the nominal value of shares issued, if any,are accounted for as share premium. Both ordinary shares and share premium are classified as equity.(ii)Share issue costsIncremental cost incurred directly attributable to the issue of new ordinary shares are deducted against sharepremium account.(iii)Dividend distributionDistributions to holders of an equity instrument are debited directly to equity, net of any related income tax benefitand the corresponding liability is recognised in the financial year in which the dividends are approved.(q)Purchase of own sharesWhen the Company or its subsidiaries purchases the Company’s equity share capital (treasury shares), the considerationpaid, including any directly attributable incremental external costs, net of tax, is included in equity attributable to thecontrolling equity holders as treasury shares until they are cancelled, reissued or disposed off. Where such shares aresubsequently sold or re-issued, any consideration received, net of any directly attributable incremental transaction costsand the related tax effects, is included in equity attributable to the controlling equity holders.(r)Revenue recognitionRevenue comprises the fair value of consideration received or receivable for the sale of goods and services in theordinary course of the Group’s activities. Revenue is shown net of value added tax, returns, rebates and discounts andafter eliminating sales within the Group.The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economicbenefits will flow to the Group and specific criteria have been met for each of the Group’s activities as described below.The amount of revenue is not considered to be reliably measureable until all contingencies relating to the sale have beenresolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type oftransaction and the specifics of each arrangement.(i)Sale of goodsRevenue from sale of goods is recognised when significant risks and rewards of ownership have been transferred tothe customers, if any, net of sales taxes and discounts and after eliminating sales within the Group.Mycron Steel Berhad 67

Notes to the Financial Statements30 June 2012(continued)2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(r)Revenue recognition (continued)(ii)Processing service and management fee incomeProcessing service and management fee income are recognised on accrual basis when services are rendered.(iii)Dividend incomeDividend income is recognised when the Group’s right to receive payment is established.(iv)Interest incomeInterest income is recognised on a time proportion basis, taking into account the principal outstanding and theeffective rate over the period to maturity, unless collectability is in doubt, in which case it is recognised on a cashreceipt basis.(v)Rental incomeRental income is recognised on a time proportion basis over the lease term, unless collectability is in doubt, in whichcase the recognition of such income is suspended.(s)Employees’ benefits(i)Short-term employee benefitsWages, salaries, paid annual leave and sick leave and bonuses are accrued in the financial year in which theassociated services are rendered by the employees of the Group.(ii)Defined contribution planThe Group contributes to the Employees’ Provident Fund, which is a defined contribution plan, regulated andmanaged by the government. The contributions are charged to the profit or loss in the financial year to which theyrelate. Once the contributions have been paid, the Group has no further payment obligations.The Group may from time to time at its sole discretion make cash contribution into a fund established under theMycron Steel Key Executive Retirement (“MSKER”) Scheme, a defined contribution plan, for the benefit of theeligible employees. The amount of cash contributed depends on the performance of the individual employeesand the profitability of the Group. The contributions are charged to the profit or loss in the financial year to whichthey relate.(t)Current and deferred income taxThe tax expense for the financial year comprises current and deferred tax. Tax is recognised in the profit or loss, except tothe extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax isalso recognised in other comprehensive income or directly in equity, respectively.The current income tax charge is calculated on the basis of the tax laws enacted at the end of the reporting date in thecountries where the Group’s subsidiaries operate and generate taxable income.Management periodically evaluates positions taken in tax returns with respect to situations in which applicable taxregulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to bepaid to the tax authorities. This liability is measured using the single best estimate of the most likely outcome.Deferred tax is recognised in full, using the liability method, on temporary differences at the reporting date arising betweenthe amounts attributed to assets and liabilities for tax purposes and their carrying amounts in the financial statements.However, deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction otherthan a business combination that at the time of the transactions affects neither accounting nor taxable profit or loss.Deferred tax is determined using tax rates (and tax laws) that have been enacted at the end of the reporting date andare expected to apply when the related deferred tax assets is realised or the deferred tax liability is settled.68Mycron Steel Berhad

Notes to the Financial Statements30 June 2012(continued)2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(t)Current and deferred income tax (continued)Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which thedeductible temporary differences, unused tax losses or unused tax credits can be utilised.Deferred tax is recognised on temporary differences arising on investments in subsidiaries except where timing of thereversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse inthe foreseeable future.Deferred and income tax assets and liabilities are offset when there is a legally enforceable right to offset current taxassets against current tax liabilities and when the deferred income tax assets and liabilities relate to taxes levied by thesame taxation authority on either the taxable entity or different taxable entities where there is an intention to settle thebalances on a net basis.(u)Foreign currencies(i)Functional and presentation currencyThe management has determined that the currency of the primary economic environment in which the Groupoperates, i.e. functional currency, to be Ringgit Malaysia. The financial statements are presented in Ringgit Malaysia,which is the Group’s functional and presentation currency.(ii)Transactions and balancesForeign currency transactions are translated into the functional currency using the exchange rates prevailing atthe dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resultingfrom the settlement of such transactions and from the translation at year-end exchange rates of monetary assetsand liabilities denominated in foreign currencies are recognised in the profit or loss.Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in theprofit or loss within ‘finance income or cost’. All other foreign exchange gains and losses are presented in the profitor loss.Translation differences on non-monetary financial assets and liabilities held at fair value through profit or loss andavailable-for-sale financial assets are reported as part of the fair value gain or loss.(v)Segment reportingOperating segments are reported in a manner consistent with the internal reporting provided to the chief operatingdecision-maker. The chief operating decision-maker of the Group responsible for allocating resources and assessingperformance of the operating segments is the Executive Committee.(w)Contingent liabilities and contingent assetsThe Group does not recognise contingent assets and liabilities but discloses its existence in the financial statements.A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by theoccurrence or non-occurence of one or more uncertain future events beyond the control of the Group or a presentobligation that is not recognised because it is not probable that an outflow of resources will be required to settle theobligation. A contingent liability also arises in the extremely rare case where there is a liability that cannot be recognisedbecause it cannot be measured reliably. However, contingent liabilities do not include financial guarantee contracts.A contingent asset is a possible asset that arises from past events whose existence will be confirmed by the occurrence ornon-occurence of one or more uncertain future events beyond the control of the Group. The Group does not recognisea contingent asset but discloses its existence where inflows of economic benefits are probably, but not virtually certain.Mycron Steel Berhad 69

Notes to the Financial Statements30 June 2012(continued)2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)(x)Financial guarantee contractsFinancial guarantee contracts are contracts that require the Group or Company to make specified payments to reimbursethe holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the termsof a debt instrument.Financial guarantee contracts are recognised as financial liabilities at the date the guarantee is issued. Liabilities arisingfrom financial guarantee contracts, including the Company’s guarantees for its subsidiaries through deeds of crossguarantee, are initially recognised at fair value and subsequently at the higher of the amount determined in accordancewith FRS 137 “Provisions, Contingent Liabilities and Contingent Assets” (refer Note 2(o)) and the amount initially recognisedless cumulative amortisation, where appropriate.The fair value of the financial guarantee is determined as the present value of the difference in net cash flows betweenthe contractual payments under the debt instrument and the payments that would be required without the guarantee,or the estimated amount that would be payable to a third party for assuming the obligation.Where financial guarantees in relation to loans or payables of subsidiaries are provided by the Company for nocompensation, the fair values are accounted for as contributions and recognised as part of the cost of investment insubsidiaries.3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTSEstimates and judgements are continually evaluated by the Directors and are based on historical experience and other factors,including expectations of future events that the Directors believe to be reasonable under the circumstances.The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarelyequal the related actual results. To enhance the information content of the estimates, certain key variables that are anticipatedto have material impact to the Group’s results and financial position are tested for sensitivity to changes in the underlyingparameters. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amountsof assets and liabilities within the next financial year are outlined below.(a)Preparation of the Group’s financial statements as a going concernThe Directors are of the view that it is appropriate to prepare the financial statements of the Group as a going concern.Refer to Note 2(a) basis of preparation for further details.(b)Valuation of property, plant and equipmentThe fair value of property, plant and equipment is individually determined periodically, with sufficient regularity to ensurethat the carrying amount does not differ materially from that which would be determined using fair value at the end ofthe reporting date. The Directors relied upon the valuations obtained during the financial year based on the followingmethodologies:(i)(ii)Freehold land and properties - open market basis by reference to observable prices in an active market or recentmarket transactions on arm’s length terms.Plant and machinery - depreciated replacement cost method, which is based on the current cost of reproductionor replacement of an asset less deductions for physical deterioration and all relevant forms of obsolescence andoptimisation.Refer to Note 13 to the financial statements for the details of the property, plant and equipment of the Group and theCompany.(c)Impairment of receivablesThe Group assesses at each reporting date whether there is any objective evidence that a financial asset is impaired.To determine whether there is objective evidence of impairment, the Group considers factors such as the probability ofinsolvency, significant financial difficulties of the debtor and default or significant delay in payments. When there is anobjective evidence of impairment, the amount of loss is measured as the difference between the receivables’ carryingamount and the recoverable amount. Refer to Note 4(c)(iii) for further details.70Mycron Steel Berhad

Notes to the Financial Statements30 June 2012(continued)3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)(d)Income taxesSignificant judgement is required in determining the provision for income taxes. There are transactions and calculationsfor which the ultimate tax determination is uncertain during the ordinary course of business. The Group and the Companyrecognise liabilities for tax based on estimates of assessment of the tax liability due. When the final tax outcome is differentfrom the amounts that were initially recorded, such differences will result in changes to the income tax and deferred taxprovisions, where applicable, in the financial year in which such determination is made.(e)Deferred tax assetsDeferred tax assets are recognised to the extent that it is probable that future taxable profit will be available againstwhich the temporary differences can be utilised. This involves Directors’ judgement and assessment of future financialperformance of the particular entity, the likely timing and level of future taxable profit together with future tax planningstrategies to support the basis of recognition of deferred tax assets.4 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIESThe operations of the Group are subject to a variety of financial risks. The Group’s overall financial risk management objective isto minimise the Group’s exposure to risks and / or costs associated with financing, investing and operating activities of the Group.Financial risk management is carried out through business risk reviews, monitoring by internal control systems, benchmarking theindustry’s best practices and adherence to the Group’s financial risk management policies.Various risk management policies that are made and approved by the Directors for application in day-to-day operations forcontrolling and managing financial risks are set out below.(a)Capital riskThe Group’s capital management objectives are to ensure the Group’s ability to continue as a going concern andmaximise shareholders’ value. The Group is committed towards optimising its capital structure, to ensure competitive costof capital. Implementation of optimal capital structure includes balancing between debt and equity by putting in placeappropriate dividend and financing policies which influence the level of debt and equity.The Group monitors the capital risk on the basis of a gearing ratio and shall maintain a debt to shareholders’ funds-ratioof not more than 1.5 times. The debt to shareholders’ funds ratio is defined as total interest-bearing borrowings overshareholders’ funds.As adopted in the prior years, the Group’s strategy in maintaining at a ratio of less than 1.5 times remained unchangedfor the financial year ended 30 June 2012. The gearing ratio at the reporting date was at 0.7 times (2011: 0.6 times).(b)Liquidity riskLiquidity risk is the risk the Group and the Company will encounter difficulty in meeting financial obligations due to shortageof funds. The Group’s and the Company’s exposure in liquidity risks arise primarily from mismatch of the maturities offinancial assets and liabilities. The Group’s and the Company’s objective is to maintain a balance in the continuity andflexibility through the use of unutilised credit facilities and stand-by credit facilities, made available by the banks.The Group will continue to monitor its liquidity requirement to ensure it has sufficient cash to meet operational needs at alltimes, in particular to ensure the Group does not breach borrowing limits or covenants on its borrowing facilities.The Group, had, prior to 30 June 2012, obtained indulgences for all credit facilities from all the banks on its compliancewith the covenant clauses for the financial year ended 30 June 2012.In addition, based on the cash flows projections for the financial year ending 30 June 2013, the Group may not be ableto meet the said covenant clauses and has subsequently obtained indulgences from the banks for further extension to30 June 2013. However, the indulgence obtained from one of the banks was approved with the inclusion of a paragraphmatter on the bank’s contractual rights clause to demand repayment at any time at its sole discretion with or withoutwritten notice to the Group, irrespective of whether or not any event of default has occurred and notwithstanding anyother terms and conditions stated in the trade facilities agreement. The related trade facilities of the said bank amountingto RM127.0 million are classified as current liabilities as at 30 June 2012.Mycron Steel Berhad 71

Notes to the Financial Statements30 June 2012(continued)4 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)(b)Liquidity risk (continued)Notwithstanding that the Group did not met certain covenant clauses set out in the respective facilities agreements, thebanks also did not request for an early repayment during the financial year. This condition was subsequently resolved whenthe Group successfully obtained indulgences from all the banks.The Group has commenced negotiations with a bank to restructure Term Loan 2 and revolving credits amounting toUSD6.1 million (approximately RM19.4 million) and RM35 million respectively to a longer repayment term and new termswere agreed on 25 October 2012 for the repayment of the Term Loan 2 and revolving credits with the said bank, whichare subject to certain covenants being met.As at 30 June 2012, the Company has acted as a corporate guarantor to banks for banking facilities extended to its mainoperating subsidiary amounting to RM144.6 million (2011: RM101.7 million). Total undrawn banking facilities at the reportingdate is RM6.8 million (2011: RM12 million).The Company does not anticipate any economic outflows arising from this guarantee.The maturity analysis of the financial liabilities at the reporting date based on contractual undiscounted repaymentobligations is set out below:GroupContractualCarrying interest Contractual 1 – 2 2 – 3 3 -4amount rate cash flows Current years years yearsRM RM RM RM RM RM RMAt 30 June 2012Non-derivativefinancial liabilitiesBankers’ acceptance 109,500,000 4.53% - 4.69% 110,785,349 110,785,349 - - -Revolving credit 35,105,254 3.77% - 3.80% 36,143,485 36,143,485 - - -Term Loan 1 14,926,381 4.81% 15,850,251 6,650,531 6,204,578 2,995,142 -Term Loan 2 19,417,082 SIBOR* + 2.4% 20,026,752 20,026,752 - - -Hire purchase creditor 95,830 2.38% 102,673 41,076 61,597 - -Advances received from customers 27,700,908 9% - 10% 27,896,740 27,896,740 - - -Trade and other payables 20,610,420 - 20,610,420 20,610,420 - - -Amount owing to ultimateholding company 137,418 - 137,418 137,418 - - -Amount owing to a relatedcompany 13,910 - 13,910 13,910 - - -227,507,203 231,566,998 222,305,681 6,266,175 2,995,142 -* SIBOR - Singapore Interbank Offered RateThe maturity analysis of the Company’s financial liabilities at the reporting date is not necessary as the financial liabilitiesare due within one year.72Mycron Steel Berhad

Notes to the Financial Statements30 June 2012(continued)4 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)(b)Liquidity risk (continued)The maturity analysis of the financial liabilities at the reporting date based on contractual undiscounted repaymentobligations is set out below:GroupCarrying Contractual Contractual 1 – 2 2 – 3 3 -4amount interest rate cash flows Current years years yearsRM RM RM RM RM RM RMAt 30 June 2011Non-derivativefinancial liabilitiesBankers’ acceptance 66,600,000 4.34% - 4.44% 67,109,957 67,109,957 - - -Revolving credit 35,105,517 3.91% - 3.95% 35,346,701 35,346,701 - - -Term Loan 1 22,949,977 4.81% 24,926,636 7,690,247 7,131,494 6,815,056 3,289,839Term Loan 2 31,112,814 SIBOR* + 2.5% 31,998,193 31,998,193 - - -Advances received from customers - 9% - 10% - - - - -Trade and other payables 35,591,254 - 35,591,254 35,591,254 - - -Amount owing to ultimateholding company 6,967 - 6,967 6,967 - - -Amount owing to a relatedcompany 29,850 - 29,850 29,850 - - -191,396,379 195,009,558 177,773,169 7,131,494 6,815,056 3,289,839The maturity analysis of the Company’s financial liabilities at the reporting date is not necessary as the financial liabilitiesare due within one year.(c)Credit riskThe Group’s exposure to credit risk arises primarily from trade receivables. The Group has a credit policy in place and theexposure to credit risk is monitored on an on-going basis through periodic review of the ageing of its receivables. Creditevaluations are performed on all customers. Write-offs of uncollectible accounts have historically not been significant;however, the Group closely monitors its customers’ financial strength to reduce the risk of loss.At the reporting date, the Group has no significant concentration of credit risk other than 10 corporate debtors whichrepresent 80% of the Group’s total trade receivables, of which these balances are monitored closely. These tradereceivables relate mainly to sales of cold rolled steel sheets in coils. The Company has no other significant concentrationof credit risk except for amounts due from subsidiaries.The maximum exposure to credit risk for each class of financial assets is the carrying amount of each class of financialassets presented in the statements of financial position. The Group’s and the Company’s major classes of financial assetsare as disclosed in Note 35 to the financial statements. The main composition of the financial assets is as follows:(i)(ii)The Group has made advance payments for purchases of raw materials to the suppliers amounting RM50,459,715(2011: RM4,398,575) as at 30 June 2012. There is no concern arising from the recoverability of these advances as thesuppliers are contractually bound to repay the Group in the event of non- performance. In addition, the Group hasreceived all the purchases subsequent to the reporting date.Nominal amounts of RM144.6 million (2011: RM101.7 million) relating to corporate guarantees provided by theCompany to a bank for a subsidiary’s bank loan.Other financial assets are of deposits with licensed banks and bank balances that are not concentrated to any particulargroup but widely dispersed across various licensed financial institutions. The Directors are of the view that the possibility ofnon-performance by these reputable financial institutions is remote.Mycron Steel Berhad 73

Notes to the Financial Statements30 June 2012(continued)4 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)(c)Credit risk (continued)Details of the financial assets before impairment (excluding cash and bank balances) are as follows:Past due not impairedNeither pastTotal pastdue nor < 30 31 – 60 61 – 90 91 -180 > 181 due notTotal Impaired impaired days days days days days impairedRM RM RM RM RM RM RM RM RMGroupAt 30 June 2012Trade receivables 57,120,791 248,301 38,127,595 12,849,676 3,775,633 924,257 - 1,195,329 18,744,895Advances made forpurchases of rawmaterials 50,459,715 - 50,459,715 - - - - - -Other receivables 9,676,782 9,147,117 529,665 - - - - - -Deposits 336,063 - 336,063 - - - - - -Amounts owing byrelated companies 13,741,574 - 5,426,802 2,960,975 1,810,050 1,135,917 - 2,407,830 8,314,772131,334,925 9,395,418 94,879,840 15,810,651 5,585,683 2,060,174 - 3,603,159 27,059,667Past due not impairedNeither pastTotal pastdue nor < 30 31 – 60 61 – 90 91 -180 > 181 due notTotal Impaired impaired days days days days days impairedRM RM RM RM RM RM RM RM RMGroupAt 30 June 2011Trade receivables 39,509,458 248,301 31,848,536 5,880,907 1,529,564 - - 2,150 7,412,621Advances made forpurchases of rawmaterials 4,398,575 - 4,398,575 - - - - - -Other receivables 9,520,317 - 9,520,317 - - - - - -Deposits 422,695 - 422,695 - - - - - -Amount owing byultimate holdingcompany 542,202 - 542,202 - - - - - -Amounts owing byrelated companies 18,602,252 - 4,094,335 2,629,267 2,313,406 3,133,790 - 6,431,454 14,507,91772,995,499 248,301 50,826,660 8,510,174 3,842,970 3,133,790 - 6,433,604 21,920,538The Company’s maturity analysis is not necessary as the financial assets are due within one year, and are neither past duenor impaired.(i)Financial assets that are past due but not impairedNo impairment has been made on certain amounts which are past due but not impaired as the Group is certainof the recoverability of these receivables. More than 95% of these balances arise from customers that have beentrading with the Group for more than three years, and based on the past trends with these customers, theseamounts are usually collectible in full with no allowance required albeit the slow payments from these customers. Asof the approval date of the financial statements, the Group has received 95% on the outstanding sums from thesecustomers subsequent to the reporting date.74Mycron Steel Berhad

Notes to the Financial Statements30 June 2012(continued)4 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)(c)Credit risk (continued)(i)Financial assets that are past due but not impaired (continued)The intercompany balance comprises trade and non-trade balances amounting to RM13,578,816 and RM162,758respectively. Management believes that these amounts are recoverable as the Group has been receiving regularpayments from these related companies with trade terms of 90 days and 60 days respectively (2011: 90 days and 60days). Total subsequent receipt as at the date of the approval of the financial statements is RM6,612,948. Accordingly,no impairment is required for the financial year.(ii)Financial assets that are neither past due nor impairedTrade and other receivables that are neither past due nor impaired are creditworthy customers with good paymentrecords with the Group and the Company. The Group’s and the Company’s trade receivables credit term rangesfrom 3 days to 60 days (2011: 3 days to 60 days).These balances mainly comprise advances provided to suppliers for purchases of raw materials during the financialyear. Management is of the view that there is minimal risk of exposure based on the past trading records with thesuppliers. In addition, the Group has received all of the purchases from the suppliers subsequent to the year end.Accordingly, no impairment is recognised on these balances as at 30 June 2012.The Group and the Company do not have any receivables that are neither past due nor impaired that have beennegotiated during the financial year.(iii)Financial assets that are impairedTrade receivables that are individually determined to be impaired at the reporting date relate to debtors that are insignificant financial difficulties and have defaulted on payments. These receivables are not secured by any collateraland the Group has taken legal action to recover these outstanding balances. Other receivables is impaired as theamount is not recoverable as at 30 June 2012. Refer Note 15 for details.Movement of the Group’s provision for impairment of trade and other receivables is as follows:TradeOtherreceivables receivables TotalGroup RM RM RMAs at 30 June 2012At nominal amounts 248,301 9,147,117 9,395,418Less: Allowance for impairment (248,301) (9,147,117) (9,395,418)- - -Allowance for impairment:1 July 248,301 - 248,301Impairment charged for the financial year - 9,147,117 9,147,117At 30 June 248,301 9,147,117 9,395,418Mycron Steel Berhad 75

Notes to the Financial Statements30 June 2012(continued)4 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)(c)Credit risk (continued)(iii)Financial assets that are impaired (continued)TradeOtherreceivables receivables TotalGroup RM RM RMAs at 30 June 2011At nominal amounts 248,301 9,147,117 9,395,418Less: Allowance for impairment (248,301) - (248,301)- 9,147,117 9,147,117Allowance for impairment:1 July 248,301 - 248,301Impairment charged for the financial year - - -At 30 June 248,301 - 248,3012012 2011RMRMCompanyOther receivablesAs at 30 JuneAt nominal amounts 9,147,117 9,147,117Less: Allowance for impairment (9,147,117) -- 9,147,1171 July - -Impairment charged for the financial year 9,147,117 -At 30 June 9,147,117 -(d)Interest rate riskInterest rate risk is the risk that the future cash flows of the Group’s and the Company’s financial instruments will fluctuatebecause of changes in market interest rates.As the Group and the Company have no significant interest-bearing assets, the Group’s and the Company’s income andoperating cash flows are substantially independent of changes in market interest rates. The Group and the Company areexposed to interest rate risk on deposits placed with financial institutions and borrowings at variable interest rate. The Groupand the Company are certain that the effects of changes in interest rate on deposits with short-term maturity of less than 3months are limited and insignificant to the financial statements.The Group and the Company monitor the interest rates fluctuations closely to ensure that the borrowings are maintainedat favourable rates. The Group is exposed to interest rate risk mainly arising from borrowings which are used to financeworking capital requirements.76Mycron Steel Berhad

Notes to the Financial Statements30 June 2012(continued)4 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)(d)Interest rate risk (continued)Details of the borrowings for the Group are as follows:Group2012 2011RMRMFixed rate borrowings 159,627,465 124,655,494Floating rate borrowings – unhedged 19,417,082 31,112,814Advances from customers 27,700,908 -206,745,455 155,768,308At the reporting date, if the floating interest rate on borrowings and advances from customers for all currencies had been1% higher, with all other variables held constant, the impact on (loss) / profit after tax for the financial year is set out below:Group2012 2011RMRMInterest expense on borrowings increases by 1% 353,385 233,346A 1% lower of the interest rate on borrowings would have the equal but opposite effect to the amount shown above, onthe basis that all other variables remain constant.(e)Foreign currency exchange riskThe Group has a natural hedge to the extent that payments for foreign currency payables are matched againstreceivables.The Company’s financial assets and financial liabilities are denominated in Ringgit Malaysia.The Group entered into foreign currency exchange forward contracts to limit its exposure on cash flows generated fromrepayment of borrowings denominated in foreign currencies.The Group does not practise hedge accounting.The Group’s exposure to foreign currencies in respect of its financial assets and financial liabilities for functional currencyin RM are as follows:Group USD EURO TotalAs at 30 June 2012Financial assetsTrade and other receivables 50,945,278 - 50,945,278Cash and bank balances 7,590,166 - 7,590,16658,535,444 - 58,535,444Less: Financial liabilitiesTrade and other payables 10,990,523 - 10,990,523Borrowings 19,417,082 14,926,381 34,343,46330,407,605 14,926,381 45,333,986Mycron Steel Berhad 77

Notes to the Financial Statements30 June 2012(continued)4 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)(e)Foreign currency exchange risk (continued)USD EURO TotalNet financial assets / (liabilities) 28,127,839 (14,926,381) 13,201,458Less: Currency forwards - 3,295,071 3,295,071Currency exposure 28,127,839 (11,631,310) 16,496,529GroupAs at 30 June 2011Financial assetsTrade and other receivables 4,425,334 - 4,425,334Cash and bank balances 8,934,349 - 8,934,34913,359,683 - 13,359,683Less: Financial liabilitiesTrade and other payables 17,075,007 - 17,075,007Borrowings 31,112,814 22,949,977 54,062,79148,187,821 22,949,977 71,137,798Net financial liabilities (34,828,138) (22,949,977) (57,778,115)Less: Currency forwards - 3,516,105 3,516,105Currency exposure (34,828,138) (19,433,872) (54,262,010)The following table demonstrates the sensitivity of the Group’s (loss) / profit after tax to a reasonably possible change in theUS Dollar (“USD”) and Euro Dollar (“EURO”) exchange rates against RM, with all other variables in particular interest ratesheld constant.2012 2011Group RM RMRM against USD increases by 3% 632,876 (783,633)RM against EURO increases by 3% (261,704) (437,262)A 3% lower of the foreign exchange rate would have the equal but opposite effect to the amount shown above, on thebasis that all other variables remain constant.(f)Fair valueThe carrying amounts of the following financial assets and liabilities approximate their fair values due to the relatively shorttermmaturity of these financial instruments: deposits, cash and bank balances, receivables and payables (including nontradeintercompany balances) except as disclosed below:78Mycron Steel Berhad

Notes to the Financial Statements30 June 2012(continued)4 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)(f)Fair value (continued)2012 2011CarryingCarryingGroup amount Fair value amount Fair valueRM RM RM RMTerm Loan 1 8,861,114 8,757,962 16,221,617 16,044,014Other receivables - - 9,147,117 9,094,031Hire purchase creditor 57,490 54,175 - -Fair value estimationThe table below analyses financial instruments carried at fair value, by valuation method. The different levels have beendefined as follows:(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);(b)inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly orindirectly (Level 2); and(c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3)The following table presents the Group’s assets that are measured fair value at the reporting date:Level 1 Level 2 Level 3 TotalGroup RM RM RM RM2012AssetsDerivative financial assets - 43,122 - 43,1222011AssetsDerivative financial assets - 286,878 - 286,878The fair value of financial instruments that are not traded in an active market (for example, foreign currency exchangeforward contracts) is determined by using valuation technique. These valuation techniques maximise the use of observablemarket data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required tofair value an instrument are observable, the instrument is included in Level 2.The fair value of foreign currency exchange forward contracts is determined using forward exchange rates at thereporting date, with the resulting value discounted back to present value.The Group does not hold any financial assets where the fair values are assessed at Level 2, except as set out below:• the derivative financial assets arising from the Group’s foreign currency exchange forward contract which was in afavourable position as at 30 June 2012 and were included in Level 2.The Company does not hold any financial assets or liabilities that are fair valued at Level 1 and Level 3.Mycron Steel Berhad 79

Notes to the Financial Statements30 June 2012(continued)5 REVENUEGroupCompany2012 2011 2012 2011RM RM RM RMSale of goods 442,080,630 413,036,722 - -Processing service income 1,208,281 1,340,153 - -Management fee income - - 1,793,360 2,371,598Dividend income - - - 8,400,000443,288,911 414,376,875 1,793,360 10,771,5986 COST OF SALESGroup2012 2011RMRMCosts of goods sold 429,321,176 398,516,5427 OPERATING COSTSExpenses by functionGroupCompany2012 2011 2012 2011RM RM RM RMCost of sales 429,321,176 398,516,542 - -Selling and distribution costs 2,893,728 2,350,265 - -Administrative expenses 10,239,053 7,717,458 1,707,963 1,937,908Impairment loss on other receivables 9,147,117 - 9,147,117 -Impairment loss on available-for-sale financial assets - 317,602 - 317,602Other operating expenses 2,362 476,005 - -451,603,436 409,377,872 10,855,080 2,255,510Expenses by natureChanges in inventories of finishedgoods and work in progress (6,075,287) (21,320,019) - -Raw materials 388,965,804 380,922,296 - -Consumables 11,890,218 9,896,168 - -Depreciation of property, plant and equipment 10,906,725 11,204,307 75,682 165,441Write-off of plant and equipment 397,500 - - -Staff costs (Note 8) 9,906,222 6,928,256 604,210 340,802Upkeep, repair and maintenanceof property, plant and equipment 8,824,931 4,970,907 39,744 126,786Other operating expenses:- Impairment loss on other receivables 9,147,117 - 9,147,117 -- Impairment loss on available-for-sale financial assets - 317,602 - 317,602Professional expenses 1,431,857 1,364,368 215,783 282,120Utilities 8,592,232 7,603,068 - -80Mycron Steel Berhad

Notes to the Financial Statements30 June 2012(continued)7 OPERATING COSTS (continued)GroupCompany2012 2011 2012 2011RM RM RM RMExpenses by nature (continued)Carriage outwards 2,762,110 2,227,748 - -Banks’ commissions 1,589,066 1,173,180 - -Directors’ remuneration (Non-Executive Directors) 526,200 564,455 526,200 564,455Insurance expenses 600,484 527,826 - -Security expenses 187,703 190,087 - -Printing and stationery expenses 175,590 218,019 98,012 139,428Entertainment expenses 179,104 312,798 4,987 155,743Other operating costs 1,595,860 2,276,806 143,345 163,133451,603,436 409,377,872 10,855,080 2,255,5108 (LOSS) / PROFIT BEFORE TAX(Loss) / profit before tax is arrived atafter charging / (crediting):GroupCompany2012 2011 2012 2011RM RM RM RMAuditors’ remuneration:- current financial year 113,500 85,605 45,500 36,400- under accruals in the prior years 27,895 2,455 9,100 -Property, plant and equipment (Note 13):- depreciation 10,906,725 11,204,307 75,682 165,441- (gain) / loss on disposals (19,651) 227,611 - 179,829- write-off 397,500 - - -Rental of buildings 8,400 8,400 - -Staff costs (including remunerationof Executive Directors):- salaries, bonus and allowances 8,154,038 5,414,042 497,381 179,919- defined contribution plan 888,333 872,277 73,157 86,760- others 863,851 840,879 33,672 98,562Impairment loss:- other receivables 9,147,117 - 9,147,117 -- available-for-sale financial assets - 317,602 - 317,602Fair value gain on foreign currencyexchange forward contract (43,122) (286,878) - -Unrealised gain on foreign exchange (1,481,156) (514,003) - -Realised loss on foreign exchange 103,792 - - -Realised gain on foreign exchange (98,370) (1,683,110) - -Dividend income - - - 8,400,000Mycron Steel Berhad 81

Notes to the Financial Statements30 June 2012(continued)9 FINANCE INCOME AND COSTSGroup2012 2011RMRMFinance income:Interest on deposits with financial institutions 539,039 211,923Finance costs:Interest on borrowings 7,358,354 7,370,698Interest on hire purchase 1,368 -Interest on advances received from customers 645,232 -8,004,954 7,370,698Fair value gain on derivatives for borrowings:- Foreign currency exchange forward contract (43,122) (286,878)Net foreign exchange gain:- realised (12,743) (743,935)- unrealised (424,351) (514,003)Total finance costs 7,524,738 5,825,88210 DIRECTORS’ REMUNERATIONThe aggregate amount of emoluments received / receivable by Directors of the Group and of the Company is as follows:GroupCompany2012 2011 2012 2011RM RM RM RMNon-Executive Directors:- fees 487,200 513,955 487,200 513,955- other emoluments 39,000 50,500 39,000 50,500Executive Directors:- salaries and other emoluments - 549,438 - -- defined contribution plan - 82,433 - -526,200 1,196,326 526,200 564,455The estimated monetary value of benefits-in-kind received and receivable by the Directors of the Group and Company areRM21,000 (2011: RM39,820) and RM21,000 (2011: RM21,995) respectively.The number of Directors whose total remuneration fall within the following bands are as follows:Number of DirectorsExecutiveNon-Executive2012 2011 2012 2011Range of remunerationNil 1 - - -RM1 to RM50,000 - - 6 7RM50,001 to RM350,000 - - 1 1RM350,001 to RM700,000 - 1 - -1 1 7 882Mycron Steel Berhad

Notes to the Financial Statements30 June 2012(continued)11 TAXATIONGroupCompany2012 2011 2012 2011RM RM RM RMCurrent tax:- current tax expense 264,550 397,253 130,025 2,449,686Deferred tax (Note 25):- origination and reversal oftemporary differences (1,390,210) (135,024) (1,250) (1,250)- over accrual in the prior years (520,168) (421,440) - -(1,910,378) (556,464) (1,250) (1,250)Tax (credit) / expense (1,645,828) (159,211) 128,775 2,448,436The explanation of the relationship between taxation and (loss) / profit before tax is as follows:Numerical reconciliation betweentaxation and the product ofaccounting (loss) / profitmultiplied by the Malaysiantax rateGroupCompany2012 2011 2012 2011RM RM RM RM(Loss) / profit before tax (14,069,850) 352,580 (9,060,911) 8,516,460Tax calculated at the Malaysiantax rate of 25% (2011: 25%) (3,517,463) 88,145 (2,265,228) 2,129,115Tax effects of:- expenses not deductible fortax purposes 2,983,647 639,416 2,394,113 319,414- tax incentive obtained fordouble deductions (100,624) (83,425) - -- income not subject to tax (491,220) (381,907) (110) (93)Over accrual in the prior years (520,168) (421,440) - -Tax (credit) / expense (1,645,828) (159,211) 128,775 2,448,436Mycron Steel Berhad 83

Notes to the Financial Statements30 June 2012(continued)12 EARNINGS PER SHARE(a)Basic earnings per shareGroup2012 2011(Loss) / profit attributable to equity holdersof the Company (RM) (12,424,022) 511,791Weighted average number of ordinary shares 177,959,700 177,959,700Basic (loss) / earnings per share (sen) (6.98) 0.29(b)Diluted earnings per shareThe average number of ordinary shares in issue has not been adjusted to assume dilution as the Group does not issue anyfinancial instruments that may entitle its holders to ordinary shares. Accordingly, the diluted (loss) / earnings per share is thesame as basic (loss) / earnings per share.13 PROPERTY, PLANT AND EQUIPMENTGroup2012Cost / ValuationPlant,Furniture,machineryfittingsFreehold and electrical Motor and office Constructionland Buildings installation vehicles equipment in progress TotalRM RM RM RM RM RM RMAt 1 July 2011- cost - - - 1,781,884 616,111 397,500 2,795,495- valuation 31,300,000 63,000,000 197,871,484 - - - 292,171,484Additions - 494,807 4,076,874 144,434 121,289 - 4,837,404Disposals - - - (456,349) - - (456,349)Write-offs - - - - - (397,500) (397,500)Revaluation duringthe financial year 3,700,000 (718,552) (1,942,349) - - - 1,039,099Effects of eliminationof accumulateddepreciation onrevaluation - (1,776,255) (8,915,325) - - - (10,691,580)At 30 June 2012 35,000,000 61,000,000 191,090,684 1,469,969 737,400 - 289,298,053Analysed by:- cost - - - 1,469,969 737,400 - 2,207,369- valuation 35,000,000 61,000,000 191,090,684 - - - 287,090,68435,000,000 61,000,000 191,090,684 1,469,969 737,400 - 289,298,05384Mycron Steel Berhad

Notes to the Financial Statements30 June 2012(continued)13 PROPERTY, PLANT AND EQUIPMENT (continued)Plant,Furniture,machineryfittingsFreehold and electrical Motor and office Constructionland Buildings installation vehicles equipment in progress TotalRM RM RM RM RM RM RMGroup2012Accumulated depreciationAt 1 July 2011 - - 6,616,486 1,059,918 391,602 - 8,068,006Charge for thefinancial year - 1,776,255 8,934,605 140,980 54,885 - 10,906,725Disposals - - - (399,200) - - (399,200)Effects of eliminationof accumulateddepreciation onrevaluation - (1,776,255) (8,915,325) - - - (10,691,580)At 30 June 2012 - - 6,635,766 801,698 446,487 - 7,883,951Net book valueAt 30 June 2012- cost - - - 668,271 290,913 - 959,184- valuation 35,000,000 61,000,000 184,454,918 - - - 280,454,91835,000,000 61,000,000 184,454,918 668,271 290,913 - 281,414,102Group2011Cost / ValuationPlant,Furniture,machineryfittingsFreehold and electrical Motor and office Constructionland Buildings installation vehicles equipment in progress TotalRM RM RM RM RM RM RMAt 1 July 2010- cost - - 4,455,835 1,777,840 526,890 - 6,760,565- valuation 28,900,000 72,002,979 221,066,227 - - - 321,969,206Additions - 27,000 3,040,098 4,044 89,221 397,500 3,557,863Disposals - (5,984,140) (844,945) - - - (6,829,085)Revaluation duringthe financial year 2,400,000 5,239,212 6,226,688 - - - 13,865,900Effects of eliminationof accumulateddepreciation onrevaluation - (8,285,051) (36,072,419) - - - (44,357,470)At 30 June 2011 31,300,000 63,000,000 197,871,484 1,781,884 616,111 397,500 294,966,979Analysed by:- cost - - - 1,781,884 616,111 397,500 2,795,495- valuation 31,300,000 63,000,000 197,871,484 - - - 292,171,48431,300,000 63,000,000 197,871,484 1,781,884 616,111 397,500 294,966,979Mycron Steel Berhad 85

Notes to the Financial Statements30 June 2012(continued)13 PROPERTY, PLANT AND EQUIPMENT (continued)Group2011Accumulated depreciationPlant,Furniture,machineryfittingsFreehold and electrical Motor and office Constructionland Buildings installation vehicles equipment in progress TotalRM RM RM RM RM RM RMAt 1 July 2010 - 7,054,338 34,304,531 892,361 350,820 - 42,602,050Charge for the financial year - 1,849,074 9,146,894 167,557 40,782 - 11,204,307Disposals - (618,361) (762,520) - - - (1,380,881)Effects of eliminationof accumulateddepreciation onrevaluation - (8,285,051) (36,072,419) - - - (44,357,470)At 30 June 2011 - - 6,616,486 1,059,918 391,602 - 8,068,006Net book valueAt 30 June 2011- cost - - - 721,966 224,509 397,500 1,343,975- valuation 31,300,000 63,000,000 191,254,998 - - - 285,554,99831,300,000 63,000,000 191,254,998 721,966 224,509 397,500 286,898,973Company2012Cost / ValuationFurniture,fittingsMotor and officevehicles equipment TotalRM RM RMAt 1 July 2011 / 30 June 2012- cost 576,291 180,512 756,803Accumulated depreciationAt 1 July 2011 427,415 115,828 543,243Charge for the financial year 57,630 18,052 75,682At 30 June 2012 485,045 133,880 618,925Net book valueAt 30 June 2012- cost 91,246 46,632 137,87886Mycron Steel Berhad

Notes to the Financial Statements30 June 2012(continued)13 PROPERTY, PLANT AND EQUIPMENT (continued)Company2011Cost / ValuationFurniture,fittingsMotor and officeBuildings vehicles equipment TotalRM RM RM RMAt 1 July 2010- cost - 576,291 180,512 756,803- valuation 5,984,140 - - 5,984,140- disposals (5,984,140) - - (5,984,140)At 30 June 2011 - 576,291 180,512 756,803Analysed by:- cost - 576,291 180,512 756,803Accumulated depreciationAt 1 July 2010 528,599 369,787 97,777 996,163Charge for the financial year 89,762 57,628 18,051 165,441Disposals (618,361) - - (618,361)At 30 June 2011 - 427,415 115,828 543,243Net book valueAt 30 June 2011- cost - 148,876 64,684 213,560Freehold land and buildings, plant, machinery and electrical installation of the Group were revalued in June 2012 by anindependent firm of professional valuers, CH Williams Talhar & Wong Sdn Bhd based on open market value and depreciatedreplacement costs method respectively.Arising from the valuation above, the total revaluation on property, plant and equipment amounting to RM1,039,099, wasrecognised during the financial year, with a corresponding revaluation reserve, net of deferred tax, amounting to RM1,704,324recognised in the other comprehensive income.Plant, machinery and electrical installation of the Group with net book value of RM77,544,200 (2011: RM79,973,000) were pledgedas security for Term Loan 1 (Note 26).Freehold land and buildings, plant, machinery and electrical installation, motor vehicles, furniture, fittings and office equipmentof the Group with net book value of RM203,636,194 (2011: RM206,712,415) were pledged for all banking facilities other than TermLoan 1 (Note 26).Mycron Steel Berhad 87

Notes to the Financial Statements30 June 2012(continued)13 PROPERTY, PLANT AND EQUIPMENT (continued)The net book value of the revalued property, plant and equipment that would have been included in the financial statementshad these assets been carried at cost less accumulated depreciation is as follows:Group2012 2011RMRMFreehold land 14,189,742 14,189,742Buildings 47,320,860 48,663,048Plant, machinery and electrical installation 147,062,177 153,736,396208,572,779 216,589,186Asset acquired under hire purchase arrangementDuring the financial year, a motor vehicle of the Group amounting to RM144,434 of which RM115,000 was acquired by meansof hire purchase. As at 30 June 2012, the net book value of the motor vehicle under hire purchase arrangement in the Group isRM136,009 (2011: Nil).14 INVESTMENTS IN SUBSIDIARIESCompany2012 2011RMRMUnquoted shares, at cost 134,062,000 134,062,000Amount owing by a subsidiary 31,027,209 31,027,209165,089,209 165,089,209The amount owing by a subsidiary was reclassified as part of the interest in a subsidiary as the amount owing is akin to investmentin a subsidiary.The details of the subsidiaries are as follows:Group’s equity interestName Principal activities 2012 2011% %Mycron Steel CRC Sdn Bhd (1)Manufacturing and trading of coldrolled steel sheets in coils 100 100Silver Victory Sdn Bhd Dormant 100 100All subsidiaries are incorporated in Malaysia and are audited by PricewaterhouseCoopers, Malaysia.(1)Financial statements for financial year ended 30 June 2012, - unmodified auditor’s report with the inclusion of emphasis ofmatter on going concern.88Mycron Steel Berhad

Notes to the Financial Statements30 June 2012(continued)15 OTHER RECEIVABLESGroup / Company2012 2011RMRMNon-currentAt 1 July 9,147,117 -Reclassification from investment in an associate - 9,147,117Less: Impairment loss for the financial year (9,147,117) -- 9,147,117The Group had commenced a legal action to recover RM17.0 million from a vendor in financial year 2009. The amount to berecovered amounting to RM17.0 million represents the Group’s rights to receive from the vendor. In the prior year, the Directorswere virtually certain that the Group was entitled to receive the amount claimed in accordance with the provisions of theshare sale agreement and this was supported by a legal advice. Accordingly, the Directors had assumed that amount will berecovered upon settlement or conclusion of the litigation in 5 years time, and the fair value of the receivables was amountingto RM9.0 million as at 30 June 2011. The recoverable amount of RM9.1 million was recognised in the financial statements in theprior year.As there is no significant development in the litigation with the vendor for the financial year, with the passage of time, theDirectors are of the view that recoverability of this amount is not virtually certain. This is supported by a legal advice. Accordingly,the amount is impaired in full at the reporting date and the case, together with the status of the litigation to be disclosed ascontingent asset (Note 34) in the financial statements.16 AVAILABLE-FOR-SALE FINANCIAL ASSETSGroup / Company2012 2011RMRMUnquoted investment:At 1 July - 317,602Less: Impairment losses - (317,602)- -In the prior year, the available-for-sale financial assets did not have the ability to continue as a going concern. Accordingly, theGroup and the Company had recognised an impairment loss of RM317,602 in the prior year.Mycron Steel Berhad 89

Notes to the Financial Statements30 June 2012(continued)17 INVENTORIESGroup2012 2011RMRMAt cost / net realisable value:- Raw materials 30,722,649 37,792,589- Consumables 1,104,301 949,864- Work-in-progress 7,986,354 7,022,336- Finished goods 12,132,414 19,171,71951,945,718 64,936,50818 TRADE AND OTHER RECEIVABLESCurrentGroupCompany2012 2011 2012 2011RM RM RM RMTrade receivables 57,120,791 39,509,458 - -Less: Accumulated impairment loss (248,301) (248,301) - -56,872,490 39,261,157 - -Advances for purchasesof raw materials 50,459,715 4,398,575 - -Other receivables 488,027 334,481 2,500 500Staff loans 41,638 38,719 - -Deposits 336,063 422,695 4,500 4,500Prepayments 1,435,459 741,474 - -Total trade and other receivables 109,633,392 45,197,101 7,000 5,000Included in trade receivables is advances made for purchases of raw materials to external suppliers amounting to RM50,459,715(2011: RM4,398,575). The substantial increase of advances to the suppliers is mainly due to short-term measure by the Group tomanage its credit facilities with the banks.19 AMOUNTS OWING BY / (TO) ULTIMATE HOLDING COMPANYAmounts owing by / (to) ultimate holding company are unsecured, interest free and repayable upon demand.20 AMOUNTS OWING BY SUBSIDIARIESAmounts owing by subsidiaries are unsecured, interest free and repayable upon demand.21 AMOUNTS OWING BY RELATED COMPANIES / (TO) A RELATED COMPANYAmount owing by related companies / (to) a related company are unsecured, interest free and repayable upon demandexcept for certain intercompany balances which are trade in nature with credit terms of 90 days and 60 days (2011: 90 daysand 60 days) respectively.90Mycron Steel Berhad

Notes to the Financial Statements30 June 2012(continued)22 DERIVATIVE FINANCIAL ASSETSGroup2012 2011RMRMForeign currency exchange forward contract – fair value 43,122 286,878The Group has entered into foreign currency exchange forward contracts to manage its foreign currency exchange exposurearising from future repayment of borrowings denominated in Euro Dollar (“EURO”). As at 30 June 2012, the Group has anoutstanding foreign currency exchange forward contract with maturity period of 5 months (2011: 10 months). The notionalprincipal amount of the foreign currency exchange forward contract was EURO0.8 million (approximately RM3.3 million). Thefair value of the foreign currency exchange forward contract amounting to RM43,122 (2011: RM286,878) is determined usingmark-to-market rate if contracted for the same notional amount at the reporting date.As the Group did not adopt hedge accounting, the changes in the fair value of the derivatives are recognised immediately inthe profit or loss.23 CASH AND CASH EQUIVALENTSGroupCompany2012 2011 2012 2011RM RM RM RMCash in hand 722 54 2 2Bank balances 11,975,862 16,756,343 218,367 118,058Deposits with a licensed bank 14,500,000 18,100,000 - -26,476,584 34,856,397 218,369 118,060The weighted average interest rates effective at the reporting date are as follows:GroupCompany2012 2011 2012 2011% % % %per annum per annum per annum per annumBank balances 2.10 2.48 2.10 2.48Deposits with a licensed bank 2.25 2.20 - -Deposits of the Group with a licensed bank have an average maturity of 5 days (2011: 4 days). Bank balances are deposits heldat call with licensed banks.24 TRADE AND OTHER PAYABLESGroupCompany2012 2011 2012 2011RM RM RM RMTrade payables 12,059,843 29,848,716 - -Other payables 4,676,430 4,402,275 89,140 37,303Advances received from customers 27,700,908 - - -Accruals 3,874,147 1,340,263 202,077 260,70148,311,328 35,591,254 291,217 298,004During the financial year, the Group received advances from the customers for sales order and bearing an effective interestrate of 9% to 10% (2011: Nil) per annum. This is an interim measure prescribed by the Directors in managing the liquidity of theGroup.Mycron Steel Berhad 91

Notes to the Financial Statements30 June 2012(continued)25 DEFERRED TAXDeferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against currenttax liabilities and when the deferred taxes relate to the same tax authority. The following amounts, determined after appropriateoffsetting, are shown in the statements of financial position:GroupCompany2012 2011 2012 2011RM RM RM RMDeferred tax liabilities (1,964,117) (4,539,720) (1,979) (3,229)At 1 July (4,539,720) (2,229,709) (3,229) (4,479)Charged to the profit or loss(Note 11):- property, plant and equipment 1,224,136 (4,878,596) 1,250 1,250- unabsorbed capital allowances 576,929 5,513,894 - -- other liabilities (21,133) (10,337) - -- unutilised reinvestment allowance 130,446 (68,497) - -1,910,378 556,464 1,250 1,250Credited / (debited) to assetsrevaluation reserve:- property, plant and equipment 665,225 (2,866,475) - -At 30 June (1,964,117) (4,539,720) (1,979) (3,229)Subject to income tax:Deferred tax assets(before offsetting):- Unabsorbed capital allowances 20,788,376 20,211,447 - -- Other liabilities 40,577 61,710 - -- Unutilised tax losses 6,396,397 6,396,397 - -- Unutilised reinvestment allowance 19,892,460 19,762,014 - -47,117,810 46,431,568 - -Offsetting (47,117,810) (46,431,568) - -Deferred tax assets (after offsetting) - - - -Deferred tax liabilities(before offsetting):Property, plant and equipment (49,081,927) (50,971,288) (1,979) (3,229)Offsetting 47,117,810 46,431,568 - -Deferred tax liabilities(after offsetting) (1,964,117) (4,539,720) (1,979) (3,229)92Mycron Steel Berhad

Notes to the Financial Statements30 June 2012(continued)26 BORROWINGSCurrentGroup2012 2011RMRMBankers’ acceptance (i) 109,500,000 66,600,000Revolving credits (i) 35,105,254 35,105,517Term Loan 2 (i) 19,417,082 31,112,814Term Loan 1 (ii) 6,065,267 6,728,360Hire purchase creditor (iii) 38,340 -170,125,943 139,546,691Non-currentTerm Loan 1 (ii) 8,861,114 16,221,617Hire purchase creditor (iii) 57,490 -8,918,604 16,221,617Bankers’ acceptance 109,500,000 66,600,000Revolving credit 35,105,254 35,105,517Term Loan 2 19,417,082 31,112,814Term Loan 1 14,926,381 22,949,977Hire purchase creditor 95,830 -Total 179,044,547 155,768,308Contractual terms of borrowingsContractualinterest rate Functionalat reporting currency/ Totaldate currency carrying (per annum) exposure amount < 1 year 1-2 years 2-3 years 3-4 years 4-5 yearsRM RM RM RM RM RMGroupAt 30 June 2012SecuredBankers’ acceptance 4.53% - 4.69% RM/RM 109,500,000 109,500,000 - - - -Revolving credits 3.77% - 3.80% RM/RM 35,105,254 35,105,254 - - - -Term Loan 2 SIBOR + 2.50% RM/USD 19,417,082 19,417,082 - - - -Term Loan 1 4.81% RM/EURO 14,926,381 6,065,267 5,907,410 2,953,704 - -Hire purchase creditor 2.38% RM/RM 95,830 38,340 57,490 - - -179,044,547 170,125,943 5,964,900 2,953,704 - -GroupAt 30 June 2011SecuredBankers’ acceptance 4.34% - 4.44% RM/RM 66,600,000 66,600,000 - - - -Revolving credits 3.91% - 3.95% RM/RM 35,105,517 35,105,517 - - - -Term Loan 2 SIBOR + 2.50% RM/USD 31,112,814 31,112,814 - - - -Term Loan 1 4.81% RM/EURO 22,949,977 6,728,360 6,488,647 6,488,647 3,244,323 -155,768,308 139,546,691 6,488,647 6,488,647 3,244,323 -Mycron Steel Berhad 93

Notes to the Financial Statements30 June 2012(continued)26 BORROWINGS (continued)(i)Term Loan 2 together with bankers’ acceptance and revolving credits are secured by a debenture creating a chargeover the fixed and floating assets of a subsidiary, excluding those assets under specific charge in respect of Term Loan 1and these banking facilities, rank pari passu with each other (refer Note 13).As at 30 June 2012, the Company has acted as a corporate guarantor to a bank for borrowings extended to its subsidiaryamounting to RM144.6 million (2011: RM101.7 million).There is no probable economic outflow arising from this arrangement of the Company.(ii)Term Loan 1 is secured by way of specific charge over the property, plant and equipment acquired under the expansionproject financed through the facility (refer Note 13).(iii)The hire purchase creditor at the reporting date is as follows:Analysis of hire purchase creditor:Group2012 2011RMRMPayable within one year 41,076 -Payable between one and two years 61,597 -102,673 -Less: Future finance charge (6,843)Present value 95,830 -Present value of hire purchase creditor:Payable within one year 38,340 -Payable between one and two years 57,490 -95,830 -The weighted average interest rates of borrowings at the reporting date are as follows:Group2012 2011% per annum % per annumBankers’ acceptance 4.59 4.36Revolving credits 3.79 3.93Term loan 2 2.74 2.75Term loan 1 4.81 4.81Hire purchase creditor 2.38 -For details on the compliance for the covenant clauses set out in all the facilities agreements the financial year, refer Note 4(b)liquidity risk for further details.94Mycron Steel Berhad

Notes to the Financial Statements30 June 2012(continued)27 SHARE CAPITALGroup / Company2012 2011Number Nominal Number Nominalof shares value of shares valueRMRMAuthorisedOrdinary shares of RM1 each- At 1 July / 30 June 500,000,000 500,000,000 500,000,000 500,000,000Issued and fully paidOrdinary shares of RM1 each- At 1 July / 30 June 179,000,000 179,000,000 179,000,000 179,000,00028 SHARE PREMIUMGroup / Company2012 2011RMRMRelating to:Ordinary shares 14,918,638 14,918,63829 TREASURY SHARESThe shareholders of the Company, by an ordinary resolution passed at the Annual General Meeting on 7 December 2011,approved the Company’s plan to purchase its own shares. The Directors of the Company are committed to enhancing thevalue of the Company and its shareholders.During the financial year, there was no repurchases of its own shares from the open market by the Company.The shares repurchased in the prior years are being held as treasury shares in accordance with Section 67A of the CompaniesAct, 1965 and carried at historical cost of repurchase. The Company has the right to reissue these shares at a later date. Astreasury shares, the rights attached as to voting, dividends and participation in other distribution are suspended. None of thetreasury shares repurchased has been sold as at 30 June 2012.At the reporting date, the number of outstanding shares in issue after excluding treasury shares against equity is 177,959,700(2011: 177,959,700).30 DIVIDENDS2012 2011GrossGrossdividend Amount of dividend Amount ofper share dividend per share dividendSen RM Sen RMFor the financial year ended 30 June 2010:- Final single tier dividend on 177,959,700ordinary shares (less treasury shares) - - 3.5 6,228,590The Directors do not recommend the payment of final dividend for the financial year ended 30 June 2012.Mycron Steel Berhad 95

Notes to the Financial Statements30 June 2012(continued)31 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCESIn addition to related party disclosures mentioned elsewhere in the financial statements, set out below are other significantrelated party transactions which were carried out on terms and conditions negotiated amongst the related parties.The Group has related party transactions with the following related companies:- Melewar Steel Mills Sdn Bhd- Melewar Steel Tube Sdn Bhd- Melewar Integrated Engineering Sdn Bhd- Mycron Steel CRC Sdn Bhd(a)Transactions with related parties during the financial year are as follows:GroupEntity Type of transaction 2012 2011RMRM(i)Trade: received / receivable- Melewar Steel Mills Sdn Bhd Sales of scrap 5,204,200 4,963,843- Melewar Steel Tube Sdn Bhd Sales of cold roll coil 23,403,470 21,418,636(ii)Trade: paid / payable- Melewar Integrated Engineering consultationEngineering Sdn Bhd fee (477,000) (397,500)(iii)Non-trade: paid / payable- Melewar Industrial Group Bhd Repayment of advances - (3,010,219)Share of staff costs (1,032,000) -CompanyEntity Type of transaction 2012 2011RMRM(i) Trade: received / receivable- Mycron Steel CRC Sdn Bhd Dividend income - 8,400,000Management fee income 1,793,360 2,371,59896Mycron Steel Berhad

Notes to the Financial Statements30 June 2012(continued)31 SIGNIFICANT RELATED PARTY TRANSACTIONS AND BALANCES (continued)(b)Significant outstanding balances arising from the above are as follows:GroupCompany2012 2011 2012 2011RM RM RM RM(i)Amount owing by subsidiaries- Mycron Steel CRC Sdn Bhd - - 9,975,116 10,181,667- Silver Victory Sdn Bhd - - 34,417 27,710(ii)Amount owing by related companies- Melewar Steel Mills Sdn Bhd 5,242,266 5,622,901 - -- Melewar Steel Tube Sdn Bhd 8,339,430 12,788,573 - -- Melewar Integrated Engineering Sdn Bhd 159,878 190,778 - -13,741,574 18,602,252 10,009,533 10,209,377(iii)Amount owing to a related company- Melewar Steel Tube Sdn Bhd (13,910) (29,850) - -(c)Key management personnel are those persons, having the authority and responsibility for planning, directing andcontrolling the activities of the Company either directly or indirectly and thus are considered related parties of theCompany. Key management personnel of the Company refers to the Directors of the Company and the key managementcompensation is as disclosed in Note 10 to the financial statements.32 SEGMENT ANALYSISNo segment analysis is presented as the Group is involved in a single industry segment relating to the manufacturing of steelproducts. In addition, geographic segment is not applicable as the business of the Group is carried out solely in Malaysia.33 CAPITAL COMMITMENTSCapital expenditure approved but not contracted for at the reporting date is as follows:Group2012 2011RMRMPlant and equipment- Capital enhancement for plant’s productivity 22,312,901 -34 CONTINGENT ASSETThe Group had, in financial year 2009, made a claim amounting to RM17,000,000 against a vendor as a result of non-complianceof certain conditions set out in the shareholders’ agreement entered into with an external party. The Directors are of the viewthat the Group has a strong case as the Group is entitled to receive the monies and recover the investment of RM17,000,000from the vendor. As the Directors are not virtually certain on the recoverability of this amount, accordingly, this will be disclosedas contingent asset in the financial statements (Refer Note 15). The case has been fixed for hearing in November 2012.Mycron Steel Berhad 97

Notes to the Financial Statements30 June 2012(continued)35 FINANCIAL INSTRUMENTS BY CATEGORY2012 2011DerivativeDerivativeLoans and financial Loans and financialreceivables assets receivables assetsRM RM RM RMGroupFinancial assets perstatement of financial position:Current assets:Derivative financial assets - 43,122 - 286,878Trade and other receivables(excluding prepayments) 108,197,933 - 44,455,627 -Cash and cash equivalents 26,476,584 - 34,856,397 -Amount owing by ultimateholding company - - 542,202 -Amount owing by relatedcompanies 13,741,574 - 18,602,252 -148,416,091 43,122 98,456,478 286,878Non-current asset:Other receivables - - 9,147,117 -Total financial assets 148,416,091 43,122 107,603,595 286,878Financial liabilities perstatement of financial position:2012 2011RMRMOther financial liabilities at amortised costCurrent liabilities:Trade and other payables 48,311,328 35,591,254Borrowings 170,125,943 139,546,691Amount owing to ultimate holding company 137,418 6,967Amount owing to a related company 13,910 29,850218,588,599 175,174,762Non-current liability:Borrowings 8,918,604 16,221,617227,507,203 191,396,37998Mycron Steel Berhad

Notes to the Financial Statements30 June 2012(continued)35 FINANCIAL INSTRUMENTS BY CATEGORY (continued)Company2012 2011RMRMFinancial assets per statement of financial position:Loans and receivablesCurrent assets:Trade and other receivables(excluding prepayments) 7,000 5,000Cash and cash equivalents 218,369 118,060Amount owing by subsidiaries 10,009,533 10,209,37710,234,902 10,332,437Non-current asset:Other receivables - 9,147,117Total financial assets 10,234,902 19,479,554Financial liabilities per statement of financial position:Other financial liabilities at amortised costCurrent liability:Trade and other payables 291,217 298,004Amount owing to ultimate holding company 11,837 175Total financial liabilities 303,054 298,179Mycron Steel Berhad 99

Notes to the Financial Statements30 June 201236 SUPPLEMENTARY INFORMATION DISCLOSED PURSUANT TO BURSA MALAYSIA SECURITIES BERHAD LISTING REQUIREMENTS(continued)The following analysis of realised and unrealised retained earnings at the legal entity level is prepared in accordance withthe Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of DisclosurePursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants whilst thedisclosure at the group level is based on the prescribed format by the Bursa Malaysia Securities Berhad.Group2012 2011RMRMTotal retained earnings of Mycron Steel Berhadand its subsidiaries:- realised 8,275,566 25,024,031- unrealised 8,064,088 3,739,64516,339,654 28,763,676Add: Consolidated adjustments 43,110 43,110Total Group’s retained earnings per consolidated accounts 16,382,764 28,806,786The disclosure of realised and unrealised retained earnings above is solely for compliance with the directive issued by the BursaMalaysia Securities Berhad and should not be used for any other purpose.100Mycron Steel Berhad

Properties Ownedby Mycron Steel Berhad & Its SubsidiariesAddress of PropertyLeaseexpiry dateBrief descriptionand existing useLand/built-upareaApproximateage of buildings(years)Net bookvalue (RM)Lot 717, Jalan Sungai Rasau,Seksyen 16,40200 Shah Alam, Selangor.FreeholdFactory cum officebuilding861,407 sq.ft.(17.94 acres)23 96,000,000Note: The above property was revalued in 2012.Mycron Steel Berhad 101

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FORM OF PROXY(please refer to the notes below)No. of ordinary shares heldI/We ___________________________________________________________________ NRIC No./Co. No./CDS No. : _______________________________________________(Full Name in block letters)of________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________(Full Address)being a member/members of MYCRON STEEL BERHAD hereby appoint *Chairman of the meeting or________________________________________________________of__________________________________________________________________________________________(Name of proxy, NRIC No.)(Full Address)_____________________________________________________________________________________________________________________________________or failing him/her________________________________________________________of __________________________________________________________________________________________(Name of proxy, NRIC No.)(Full Address)_____________________________________________________________________________________________________________________________________as *my/our proxyto vote for *me/us and on *my/our behalf at the Ninth (9th) Annual General Meeting (“AGM”) of the Company to be held at Dewan Perdana, Bukit KiaraEquestrian & Country Resort, Jalan Bukit Kiara, Off Jalan Damansara, 60000 Kuala Lumpur on Thursday, 13 December 2012, at 10.00 a.m. or at any adjournmentthereof on the following resolutions referred to in the Notice of the Ninth (9th) AGM. My/Our proxy is to vote as indicated below:RESOLUTION 1TO APPROVE THE PAYMENT OF DIRECTORS’ FEES FOR THE FINANCIAL YEAR ENDING 30JUNE 2013 TO BE PAYABLE QUARTERLY IN ARREARS.RESOLUTION 2TO RE-ELECT DATO’ ZULKIFLY @ SOFI BIN HAJI MUSTAPHA WHO IS RETIRING PURSUANT TOARTICLE 77.RESOLUTION 3 TO RE-ELECT EN AZLAN BIN ABDULLAH WHO IS RETIRING PURSUANT TO ARTICLE 77.RESOLUTION 4TO RE-ELECT DATO’ SRI ISKANDAR MICHAEL BIN ABDULLAH WHO IS RETIRING PURSUANTTO ARTICLE 83.RESOLUTION 5TO RE-ELECT GENERAL DATO’ SRI HJ SULEIMAN BIN MAHMUD RMAF (RTD) WHO ISRETIRING PURSUANT TO ARTICLE 83.RESOLUTION 6 TO REAPPOINT MESSRS PRICEWATERHOUSECOOPERS AS AUDITORS OF THE COMPANY.RESOLUTION 7TO RE-ELECT DATO’ JAFFAR INDOT WHO IS RETIRING PURSUANT TO SECTION 129(6) OFTHE COMPANIES ACT, 1965.RESOLUTION 8TO RE-ELECT DATUK SERI RAZMAN MD HASHIM WHO IS RETIRING PURSUANT TO SECTION129(6) OF THE COMPANIES ACT, 1965.RESOLUTION 9TO AUTHORISE THE RENEWAL OF AUTHORITY FOR THE COMPANY TO PURCHASE ITS OWNSHARES.RESOLUTION 10TO APPROVE THE PROPOSED RENEWAL OF SHAREHOLDERS’ MANDATE AND PROPOSEDNEW SHAREHOLDERS’ MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS.RESOLUTION 11TO APPROVE THE PROPOSED AMENDMENTS TO THE ARTICLES OF ASSOCIATION OF THECOMPANY.FIRST PROXYSECOND PROXYFor Against For Against(Please indicate with a “4” or “7” in the spaces provided above on how you wish your vote to be cast. If no instruction as to voting is given, the proxy willvote or abstain from voting at his/her discretion).The proportion of my holdings to be represented by my *proxy/proxies are as follows:Number of sharesPercentageFirst proxy %Second proxy %Total 100%In case of a vote taken by a show of hands, the First proxy shall vote on *my/our behalf. *Strike out whichever is not desired.Dated this _______________________ day of _______________________ 2012_______________________________________Signature of Shareholder(s) / Common SealNOTES:1. Applicable to shares held through a nominee account.2. A member entitled to attend and vote at a meeting of the Company is entitled to appoint not more than two (2) proxies to attend and vote in his/her stead. A proxy may butneed not be a member of the Company, and the provision of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.3. Where a member appoints two (2) proxies, the appointment shall be invalid unless he/she specifies the proportion of his/her shareholdings to be represented by each proxy.4. A member of the Company who is an authorised nominee as defined under the Securities Industry (Central Depositories) Act, 1991, may appoint one (1) proxy in respect of eachsecurities account.5. The instrument appointing a proxy, shall be in writing under the hand of the appointer or his attorney duly authorised in writing, and in the case of a corporation, either under sealor under hand of an officer or attorney duly authorised.6. The instrument appointing a proxy must be deposited at the Company’s Registered Office, Suite 12.03, 12th Floor, No. 566, Jalan Ipoh, 51200 Kuala Lumpur, not less than forty eight(48) hours before the time appointed for holding the meeting or any adjournment thereof.7. Any alteration in the Form of Proxy must be initialled.8. Form of Proxy sent through facsimile transmission shall not be accepted.9. For the purpose of determining a member who shall be entitled to attend this Ninth (9th) AGM, the Company shall be requesting Bursa Malaysia Depository Sdn Bhd to issue aGeneral Meeting Record of Depositors as at 10 December 2012 in accordance with Article 54(b), 54(c) and 54(d) of the Company’s Articles of Association and Section 34(1) ofthe Securities Industry (Central Depositories) Act, 1991. Only a depositor whose name appears on the Record of Depositors as at 10 December 2012 shall be entitled to attend thesaid meeting or appoint proxies to attend and/or vote on his/her behalf.10. Explanatory notes to Special Business of Agenda 6:(a) Proposed Re-election of Directors pursuant to Section 129(6) of the Companies Act, 1965The reappointment of Dato’ Jaffar Indot and Datuk Seri Razman Md Hashim, persons over the age of seventy (70) years as Directors of the Company to hold office until theconclusion of the next AGM of the Company shall take effect if the Proposed Resolutions 7 and 8 respectively have been passed by a majority of not less than three-fourth(3/4) of such members as being entitled to vote in person or, where proxies are allowed, by proxy, at a general meeting.(b) Proposed Renewal of Authority for the Company to Purchase its Own SharesThe Proposed Resolution 9, if passed, would empower the Directors to exercise the power of the Company to purchase its own shares (“the Proposal”) by utilising its financialresources not immediately required. The Proposal may have a positive impact on the market price of the Company’s shares.(c) Proposed Renewal of Shareholders’ Mandate and Proposed New Shareholders’ Mandate for Recurrent Related Party TransactionsThe Proposed Resolution 10, if passed, will empower the Company to conduct recurrent related party transactions of a revenue or trading nature which are necessary for theGroup’s day-to-day operations and will eliminate the need to convene separate general meetings from time to time to seek shareholders’ approval. This will substantiallyreduce administrative time, inconvenience and expenses associated with the convening of such meetings, without compromising the corporate objectives of the Group oradversely affecting the business opportunities available to the Group.(d) Proposed Amendments to the Articles of Association of the CompanyThe Proposed Resolution 11, if passed, will give authority for the Company to amend its Articles of Association in line with the recent amendments prescribed under the MainMarket Listing Requirements of Bursa Malaysia Securities Berhad.The detailed information on Special Business of Agenda 6 except for Agenda 6(a) as mentioned above is set out in the Circular to Shareholders of the Company dated21 November 2012 which is dispatched together with the Company’s 2012 Annual Report.* Strike out whichever is not desired. (Unless otherwise instructed, the proxy may vote as he thinks fit).

Fold hereSTAMPThe SecretaryMYCRON STEEL BERHADSuite 12.03, 12th FloorNo. 566 Jalan Ipoh51200 Kuala LumpurFold hereNOTICEThere will be no distribution of door gifts.

Lot 717, Jalan Sungai Rasau, Seksyen 16,P.O.Box 7168, 40706 Shah Alam, Selangor, MalaysiaTel: 603 5510 6608 Fax: 603 5510 3720enquiry@mycronsteel.comwww.mycronsteel.com