Sapphire Corporation Limited Annual Report 2013

8/12/2019 Sapphire Corporation Limited Annual Report 2013

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Sharpening Focus Expanding PossibilitiesSapphire Corporation Limited Annual Repor t 2013


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01 Financial Highlights

02 Corporate Prole

04 Chairmans Message

08 Group CEOs Review

14 Board of Directors & Key Executive

18 Results At A Glance

20 Corporate Structure

CONTENTS


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FINANCIALHIGHLIGHTS

Sapphire Corporate LimitedAnnual Report 2013 1

2009 2010 2011 2012 2013*Group $000 $000 $000 $000 $000

Revenue 133,828 119,861 135,538 137,199 174,489

Gross Prot 17,582 25,499 24,198 18,865 2,247

Prot / (Loss) Before Income Tax 45,416 85,593 (25,060) (23,394) (157,931)

Shareholders Funds 209,065 285,696 268,230 224,749 73,485

REVENUE($000)

SHAREHOLDERS FUNDS($000) 13

12

11

10

09

224,749

73,485

268,230

285,69

13

12

11

10

09

137,199

174,489

135,538

119,861

133,828

209,065

* Including discontinued operations

PROFIT / (LOSS)BEFORE INCOME TAX($000)

13

12

11

10

09

(23,394)

(157,931)

(25,060)

85,593

45,416

GROSS PROFIT($000) 13

12

11

10

09

18,865

2,247

24,198

25,299

17,583


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CORPORATEPROFILE

2 Sharpening Focus Expanding Possibilities

Sapphire Corporation Limited (Sapphire or the Group) is principally engaged in themining services business and investment holding following its recent plan to exit thesteel business. Sapphire now owns 100% in the capital of Mancala Holdings Pty Ltd(Mancala), a specialist mining services company based in Australia that provides raisedbore, shaft excavation, engineering services and other mining services.

Mancala has a strong track record, having completed more than 100 projects both inAustralia and internationally since its incorporation in 1990. It is now operating thelargest nickel mine in Son La Province, Vietnam.

The Group is and has also been exploring other investment opportunities, which includeexpanding its business in the resource sector, diversifying its investment base andembarking on a Merger & Acquisition spree when the opportunities arise.

Sapphire is based in Singapore and has been listed on the Singapore Exchangesince 1999.

Mancala

Mancala100% Mancala

1990 Manca la 100

1999


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CHAIRMANSMESSAGE


Change of Board Members

I am honoured to be appointed as the Non-Executive Chairmanof the Company in October 2013. Refreshing and renewing boardmembers will bring a diversied expertise for the Group and thusI am pleased to welcome Mr. Teh Wing Kwan as Group ChiefExecutive Ofcer, Mr. Tao Yeoh Chi and Mr. Fong Heng Boo asIndependent Directors.

I would like to thank Mr. Teo Cheng Kwee and Mr. Roger Foo,the Groups previous top management, who have continued to

serve the Group as Non-Executive Direc tors. At the same time,I would like to thank my predecessor, Dr. Tan Eng Liang as wellas Independent Director Mr. Roger Chan and Non IndependentDirector Mr. Dai Bin, who retired from the Board, for their pastcontributions to the Group.

2013 10

Steven Lim

Non-Executive Chairman

DearShareholders,

Translated Version


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Year Under Review

The Group had just recorded its third year of losses in FY2013,continued from the previous two nancial years. In FY2013, therewere signicant losses arising from assets impairment and a fall infair value of the steel business reecting the severity of the steelmarket condition. As a result, the Group recorded another yearof losses and there is an increasingly urgent need to streamlineoperations for improvement and recovery.

The appointment of new board members has also seen the Groupannouncing certain important s trategic plans and one of whichwas the Boards decision to exit the loss-making steel businessafter issuing a prot warning to shareholders in October 2013.

The steel market remains weak and the independent steel industryspecialists hold the same views. They have advised us that themarket condition in China is challenging and warned that theuncertainties can severely cripple us going forward. Particularly,steel prices continue to fall and yet costs are escalating due tohigher imported materials price and local operating expenses.Given these factors, we do agree that there will be limitedexpansion opportunity in China over the medium term, promptingan even weaker industrial outlook.

As reected in the nancial performance of our steel business,there was no improvement towards the end of FY2013. As such,the Boards decision to streamline the steelmaking operationscame just in time as the production lines had not been able toachieve optimal capacity utilization rates and following which, ourintention to sell the steel business have unanimously been agreedby the Board members.

New Acquisition

In October 2013, we invested in an Australia-based miningservices company . The mining sector in Australia is facing a

downturn with signicant excess of production capacity andthe commodity prices have been volatile. This has impactedmany junior miners which often need recurring working capitalto continue their production . In this aspect, we see thosemining services companies which could (i) provide good logisticmanagement in deploying resources and (ii) manage projecttimeline in meeting production targets, fall within our investmentparameters. These mining services companies could help tocreate greater economic value by bringing mining resources intoproduction and Mancala is one of them. The recent depreciationof Australian dollars also posts an opportunity to acquire thoselocal companies at better valuation.

2013 2013

2013 10

2013

2013 10

(i) (i i)

Mancala


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CHAIRMANSMESSAGE


Mancala is a specialist mining services company which providesraised bore, shaft excavation, engineering services and otherrelated mining services. Mancala has signicant experience anda strong track record, having completed more than 100 projectssince its incorporation in 1990. It also has international experiencein countries specically in Botswana, New Zealand, Papua NewGuinea, Fiji and more recently, Vietnam where Mancala is currentlyoperating the largest nickel mine in Son La Province. Mancalabecame our wholly-owned subsidiary in January 2014.

Going Forward

In 2014, while we are consolidating the Groups businesses,we also need to effectively navigate the current market volatilitywithin the industry which we are operating. The top managementteams have been proactive in assessing the situation. They are alsoexperienced in recommending and executing impor tant strategicplans for the Group. As such, we urge your continual suppor t forour business plans and we will work towards getting the Groupback on track to protability. We strive to deliver long-termshareholder value.

The Board will meet you in the upcoming AGM. Thank you.

Steven LimNon-Executive Chairman

MancalaMancala

1990 100

MancalaMancala 2014 1

2014


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GROUP CEO'SREVIEW


When I was rst asked to join Sapphire as Group CEO, I waswell aware of its position it had recorded consecutive years ofsignicant losses and this loss-making trend appeared to continue in2013 amid the weak steel marke t condition, which made its strugglefor prots seemed quite tiring. Whilst I know this was obviously abackbreaking job to t ake on, there were compelling reasons to workso and I am now almost 6 months at the helm. Since then, I knowyou the owners of Sapphire have probably read what we havedone strategically and are certainly keen to see Whats Next forSapphire.

During the last quarter of the year, with meet ings all round the year-end holiday season, I spent my Christmas and New Year Eve withmy MacBook. We directed key strategic reviews, trimmed budgets,cut capex, rationalized assets, streamlined businesses, keep enoughcash and have since invested in Australia. It was a rather eventful butfruitful period indeed.

In this annual report, I have gone to some length to write aboutthose key factors affecting our steel business, the rationale leadingto our key decisions and the strategies being executed, as yet. I thinkit is important to keep you informed. I hope you nd this report together with Results at a Glance and Quick Review of Operations useful. You may also write to me via email if you wish so. Please alsond email address of my CFO on the Corporate Information page.

- --

6-- --

2013

DearShareholders,

Translated Version

Teh Wing Kwan

Group Chief Executive Ofcer


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Overview

The importance of steel in China is no doubt. More often thannot, industry analysts do take growth of the steelmaking industryas an indicative sign of economic s trength in one way or another.

Yet impor tance sometime does not translate into meaningfuldollars-and-cents for the smaller scale steelmakers and morerecently, this is quite apparent in China. The most pressing concernhere is overcapacity, a massive overcapacity. Overcapacity causesdestocking, destock ing results in falling prices and falling pricesmeans declining margins while costs are increasingly higher whichgive it the latest blow. It seems that too lit tle has been done toaddress the root cause and there also seems to be othernon-commercial reasons for the local steelmakers to just keep theirfacilities busy; or possibly just to earn a ve ry, very thin margin, atbest. There is uncertainty as to when this chain reaction will last.

Against this context, I learned that some sectors within the steel

industry could be quite attractive as they have differentiatedcharacteristics of higher growth and better margins potential. Siliconsteels are one such area of oppor tunity. However, to upgrade andexpand ours into this segment, we ne ed signicant amount of cashor a much larger asset base to leverage. A quick internal analysis alsoshows that the estimated cap ital commitment is huge and that isto say, the expected investment recovery could stretch longer thanwhat we would have liked.

Considering these commercial factors, we shut down and scaledback a signicant part of our steel business capacity. We also heldback expansion plans given the weak market condition. Followingthe operational streamlining, we made a decision to sell our steel

business and we are now in active discussions. To be transparent,we now call our steel business Discontinued Operation andAssets Held-For-Sale on the face of our Prot & Loss and BalanceSheet respectively. You would also note that our full-year resultsannouncement eshed out with de tails explaining our basis, groundsand assumptions for the signicant impairment and fair value lossesgiven our plan to exit the steel industry. The decision to sell has notbeen easy and it was not made without strenuous efforts. The Boardmembers agrees with me unanimously in this regard.

Post year end, we completed the acquisition of a specialist miningservices company the Australia-based Mancala when New Year2014 had just star ted and we now own 100% of this company. Mostnotably, Mancalas previous track record had been convincing, ofwhich it had been protable consecutively for more than 20 years.In 2013, it however recorded it s rst ever loss and quite obviously,attributed to the fall in commodity prices. Mancala now operatesthe largest nickel mine in Vietnam and has st arted to quote more

jobs outside Australia. Their exist ing orders book of some S$75million is healthy.

--

2013

2014 Mancala100%

Mancala 202013

Mancala7500


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GROUP CEO'SREVIEW


The Board-Change

Just to share a bit of history of our recent board- change DrTan, our ex-Chairman, Teo, our ex-CEO and Roger Chan, our ex-independent director, had been searching for new faces in the pastto refresh the board members after their many years of service withSapphire they had ser ved Sapphire since 1985. Their many years ofexperience meant relevant knowledge and good leadership, whichhelped to lead the Group during both the explosive growth andcyclical period of the ste el business. I need to thank Dr Tan, Teo andRoger here and the PRC-based directors, who know the steel industrywell.

Following that, Steven Lim is now our newly appointed non-executive Chairman. Tao and Heng Boo have also been appointedas our new independent directors. They are all corporate veterans.Both Teo and Foo have continued to serve Sapphire as non-executivedirectors. My discussions with the PRC-based director, Yang Jian,have also been constructive. Working closely with the currentboard members, my COO (Emma) and CFO (Kit), I will bring morenew investment perspectives to evaluate and drive the next boardconversation. The board members and my management team havebeen very supportive.

Financial Performance

For your easy reference, you may want to read this review notestogether with Re sults At a Glance on Page 18. You may also ndbelow Quick Review of Operations useful. In line with our plans tosell the steel business, we have presented our nancials under thesegments of Continuing and Discontinued. The explanatory notesbelow follow these through.

1985

)

18

- Completed acquisition on7 January 2014

- As part of our recentstrategic reviews, we hadceased the loss-makingminerals trading operation

- We recorded net losses of: FY2013 ($ 4.7m) FY2012 ($14.0m)

- Shut down operations - Scaled down capacity - Held back expansion plan

Result 2013 2012

Assets impairment - due mainly to a fall in (i) 'value- in-use' of plant andequipment and (ii) fair value of available-for-sale investments in China $87.3m $9.6mLoss on re-measurement of Assets-Held-For-Sale $58.0m -Loss from discontinued operations $7.2m $5.8m

Net Loss from discontinued operations $152.5m $15.4m

Group's Operations

Continuing Operations Discontinued Operations(Steel Business)

Mancala Holdings Pty Ltd Corporate and Others Hot Roll Coil Rebar/Vanadium Cold Roll Coil

Quick Review of Operations

- Streamlined operations- Trimmed budget- Cut capex - Rationalised assets

We had done these during 4Q13


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Continuing Operations

Continuing operations was previously our trading business (which we hadsince ceased); and are now our corporate ofce functions and Mancalasoperation (which we owned in 2014). You may take comfort that:

we had ceased operations of the loss-making minerals tradingsegment entirely, as part of our recent strategic decisions; and

we kept our administrative costs relatively unchanged despitehigher professional fees for our new acquisition and those one-offcompensation paid on our rationalization exercise meaning that ourcorporate expenses (ex such non-recurring expenses) fell given ourcost-cutting measures. We will continue to monitor these budgetsclosely for you.

Given that and with an exchange gain arising from a stronger US$(against our book currency in S$), net loss from continuing operationsin FY2013 narrowed to S$4.7 million from S$14.0 million.

Discontinuing Operations

This segment is a stressful one the steel business. More specically

revenues for steel business rose due largely to higher trade volume.The higher revenues base was however achieved at lower averageunit selling prices and further burdened by higher unit productioncosts thereby resulting in signicantly lower gross margin;

there was a provision for obsolete stocks for Hot Roll Coil followingour decision to shut down this loss-making production line entirely;

other income fell sharply in the absence of dividend income, interestincome and other fair value gain despite additional rent from thelease of industrial properties in China;

both distribution and administrative expenses rose, given higher salestransactions, inationary effects and additional land taxes; and

nance costs fell sharply on the back of lower borrowings. We heldback expansion plans and capped borrowings for capex.

Given the signicant movements in other expenses, it requiresdetailed explanations. Other expenses comprised

loss on disposal of quoted shares investment of S$0.6 million;

impairment loss of S$60.9 million provided for the plant andequipment and intangibles of the steel business. The value-in-use ofthese operating assets was expected to be signicantly lower givenour decision to shut down the operation of Hot Roll Coil and scaledown the capacity of Rebar and Vanadium;

impairment loss of S$26.4 million provided for our available-for-saleinvestments in China, which are loss-making business units;

impairment loss of S$58.0 million provided for re-measurement offair value (in accounting terms) of the steel business based on a rangeof market values as suggested by an independent professional valuer.The steel business is now an Assets Held-For-Sale and has since beenmarked to market in our books.

Mancala 2014

) 2013 1400 470

;

:

60 ;

6090

2640

5800


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GROUP CEO'SREVIEW


Given the above, net loss for discontinued operations the steel business rose sharply to S$152.5 million from S$15.4 million. Excluding thoseimpairment and fair value accounting losses, operating net loss for thesteel business rose by 24.1% to S$7.2 million.

Financial Position

We recorded a net asset of S$73.5 million as at 31 December 2013,after accounting for the signicant impairment and fair value losses.There were signicant changes in those itemized assets and liabilitieson the face of our balance sheet as we have since reclassied theseitems to Assets and Liabilities Held-For-Sale. Please also nd otherexplanatory details for nancial position in 'Results at a glance' onPage 19.

You may also note the following positions as at 31 December 2013:

the Assets Held-For-Sale was valued at S$66.0 million, marked to marketat close to its lowest range as suggested by the professional valuer;

for every dollar of liabilities the Group (including the held-for-salesteel business) incurred, it had invested in S$1.32 worth of asset s;

net assets or shareholders equity means assets and monies you haveentrusted with us. Your entrusted funds with us was $73.5 million orS$0.091 per share; and

out of the total net assets you have entrusted with us, we kept some$6.7 million in cash.

Moving Forward

It is important to tell you a lot more here what we have done sofar, why did we do that and how are we going to execute variousplans in mind, going forward.

We have just invested in mining sec tor. In this sector, whilst manyof us might have read goods news with a glimmer of hope now andthen, there are still many mixed signals here and there. So, we mustbe specic in our parameter we acquired a specialist mining servicecompany and not a mining concession owner. But we are speakingto mining concession owners who could and would outsource theirproduction to those mining service companies. We also noted thatcash ows of some of these mining services companies are morepredictable and their orders book is still largely visible.

What is even more relevant, the recent volatility in commodity priceshas further accelerated operational streamlining of many junior miners(some have since fagged out), resulted in more friendlier expectation,less aggressive capex decision and better cost-control discipline.Given the push factors, we hope to exploit this pricing anomaly in themining sector. Specically that, the purchase price for our investmentin Mancala was structured as tranches of secured loan and deferred

154015250 .

24.1% 720

2013 12 317350

19

2013 12 31

6600

1.32

7350 0.091

670

Mancala800

Mancala


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consideration (which tie to a 2-year accumulated net prot target ofnot less than A$8 million). The good news is, we are also getting agiant equipment-leasing house to evaluate if they could support theequipment nancing needs for Mancala and our discussions with themhave so far been very encouraging.

The current board members are backed by strong corporate nancebackground and proven restructuring track records with signicantcommercial experience in negotiating and executing proposedcorporate investment, acquisition and divestment plans. We speakto each other very often and work very closely together. We areand have also been exploring other investment propositions whichinclude expanding our resource business, diversifying our investmentbase and embarking on a more active M&A spree as and when suchopportunities arise.

In doing so, there are many strategies. We may be of the same thoughtthat focusing on a combination of stable-income and high-growth

would still be practically ideal. After all, these strategies aim to buildwealth. More specically, those targets which we have evaluated andwould evaluate, exhibit the following combined characteristics:

targets which record modest but rm protability. This strategy aimsto stabilize our earnings base and reduce earnings uctuation;

targets which generate stable cash ows but require more workingcapital to fund their increasingly higher trade volume. This strategyaims to make a protable target even more protable; and

well-run but undervalued targets which face a cyclical industrydownturn and urgently require nancial turnaround. This strategyaims to potentially tag along with their strong growth prospects.

The implementation of these strategies also means we couldpotentially explore one or more industries and spread risks across.As and when required, we will seek your approval in generalmeetings. Whilst it does take us time to rm up the proposed saledeal, support Mancala, expand new initiatives, evaluate variousinvestment propositions and sharpen our focus, we assure you that,in doing so, our strategic decisions will seek to unlock and enhanceshareholder value.

Meanwhile, I do agree that if there are ongoing uncer tainties, therecould be opportunities. While there are always good reasons to becautious in the current state of ux, I believe I could root on mycautious optimism to steer the business back into prots-making.In point of fact, while I am exploring other earnings accretive deals,I want our turnaround initiatives to gain traction. In this aspect, Iremain quietly condent and I will write to update you soon.

Thank you, my management and our very faithful shareholders.Many thanks indeed.

Regards

Teh Wing KwanGroup Chief Executive OfcerEmail: [email protected]

Mancala

[email protected]


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BOARD OF DIRECTORS& KEY EXECUTIVE


Mr Lim Jun Xiong StevenNon-Executive Chairman and Independent Director

Mr Lim Xun Xiong Steven has been appointed as the Non-ExecutiveChairman and Non-Executive Director of the Company with effectfrom 1 October 2013. Mr. Lim is currently the Chief ExecutiveOfcer of SG Trust (Asia) Ltd, a subsidiary of Societe GeneralePrivate Banking. He has more than 30 years experience in thenancial, trust and wealth management industry. He holds severaldirectorships in companies listed on Singapore Stock Exchange (SGX)including Bund Center Investment Ltd, Mirach Energy Ltd and KeongHong Holdings Ltd. He has a Bachelors degree in Commerce fromthe University Of Newcastle, Australia.

2013 10 1

30 Mirach Energy Ltd

1. Mr Lim Jun Xiong Steven 2. Mr Teh Wing Kwan 3. Mdm Emma Cheung Kam Wa4. Mr Teo Cheng Kwee 5. Mr Foo Tee Heng 6. Mr Yang Jian7. Mr Fong Heng Boo 8. Mr Tao Yeoh Chi 9. Mr Ng Hoi Gee, Kit

(Non-board member)


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Mr Teh Wing KwanGroup Chief Executive Ofcer and Executive Director

Mr Teh Wing Kwan has been appointed as the Group Chief Execut iveOfcer (CEO) and Executive Director of the Company with effect

from 3 Oc tober 2013.

Mr Teh specializes in corporate nance, corporate restructuring andmerger & acquisition. He has had signicant experience having beena nancial professional advising and investing in companies, family-owned enterprises and regional asset owners with their businesseslisted in and preparing to list in Singapore, Hong Kong, Australia,Malaysia, Vietnam and Taiwan. He is currently a non-executive andnon-independent director of Heng Fai Enterprises Limited (listedon the Hong Kong Stock Exchange and previously known as XpressGroup Limited), CCM Group Limited (listed on the C atalist of theSGX-ST) and Asian American Medical Group Limited (listed on theAustralian Securities Exchange and previously known as Asian CentreFor Liver Diseases And Transplantation Limited). Mr Teh is also asophisticated investor, a Director of BMI Capital Partners Limited(Hong Kong), and appointed Advisor to the Board of Koda Ltd (listedon the Main Board of the SGX-ST). He was also previously appointedAudit Committee Chairman and Independent Director of otherpublic companies listed on the SGX-ST.

Mr Teh is a Fellow of the Association of Chartered CertiedAccountants (United Kingdom), a Chartered Accountant of Instituteof Singapore Chartered Accountant, a Chartered Accountant ofMalaysian Institute of Accountants and a Full Member of SingaporeInstitute of Directors.

Madam Emma Cheung Kam WaChief Operating Ofcer and Executive Director

Mdm Cheung Kam Wa Emma has been appointed as a Memberof the Board with effect from 14 November 2012. She joined theCompany as Chief Operating Ofcer on 1 January 2012. She hasmore than 20 years of company management experience mainly inthe area of commodity trading, logistics, merger and acquisition andis familiar with China and Hong Kong commercial and accountingregulations. Prior to joining the Company, Mdm Cheung held seniormanagement position in Sichuan TranVic Group in China and asthe General Manager of HSC Resources Ltd in Hong Kong. Nowshe assists the Chief Executive Ofcer in the Companys day-to-dayoperations. She holds a Master Degre e in law from the GraduateSchool, Chinese Academy of Social Sciences.

Mr Teo Cheng KweeNon-Executive Director

Mr Teo Cheng Kwee has been re-designated as Non-ExecutiveDirector of the Company with ef fect from 3 October 2013. He wasthe founder of the Group and was the Companys CEO for nearly 40years before his re- designation. During his reign, he was responsiblefor charting the Companys direction and has led a series ofsuccessful acquisitions that enhances the value of the company. Healso brought the Company to the Mainboard of SGX in 2011 from itsCatalist listing. Mr Teos vast experience and acute business acumenwould value-add to the Company going forward.

2013 10 3

, AsianAmer ican Med ical Group Limited

Asian Centre For Liver Dise ases And Transp lantat ionLimitedBMI

2012 11 14 20121 3 20

.

2013 10 3, 40

2011


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BOARD OF DIRECTORS& KEY EXECUTIVE


Mr Foo Tee HengNon-Executive Director

Mr Foo Tee Heng has been re-designated as Non-Executive Directorof the Company with effec t from 3 October 2013. Prior to the re-designation, he was its Executive Director overseeing the marketing,administration and human resource matters. Mr Foo has more than30 years of experience in the building and construction industry andhas led the Company to set foot in Myanmar as early as 1978 for itsconstruction business.

Mr Yang JianNon-Executive and Non Independent Director

Mr Yang Jian has been appointed to the Board with effec t from20 July 2009. He was last re -elec ted on 24 April 2012. Mr Yangholds directorships in several other companies including TrisonicInternational Limited (since 2006) and Sichuan Chuanwei Group Co.,Ltd (since 2001). Prior to that, he was also the Company Secretaryof Sichuan Chuanwei Group Co., Ltd (since 1998). Mr Yang holds aMasters Degree in Administration from Chongqing Universit y.

Mr Fong Heng BooNon-Executive and Independent Director

Mr Fong Heng Boo has been appointed to the Board on 15 January2014 as a Non-Executive and Independent Director. Mr Fongs career

started in 1975 as an Auditor in Singapore Auditor- Generals Ofce.He was holding the appointment of Assistant Auditor General whenhe left in 1993. He later joined Amcol Holdings as General Manger(Corporate Development) and then Easy Call International Pte Ltdas Chief Financial Ofcer. In 1998, he was Deputy General Manager(Corporate Serv ice) in Singapore Turf Club and was later promoted toSenior Vice President (Corporate Service). In 2004, he was secondedto Singapore Totalisator Board as Director (Special Duties) where heled the Boards nance & Investment functions. Mr Fongs expertiselies in the area of audit, nance and corporate management. Heholds directorship in three other public-listed companies. Mr Fonggraduated in 1973 from National University of Singapore witha Second Class Honours Degree in Bachelor of Accountancy. Heis also a Fellow member of the Institute of Singapore Char tered

Accountant.

Mr Tao Yeoh ChiIndependent Director

Mr Tao Yeoh Chi has been appointed to the Board with effec t from1 October 2013 as an Independent Director. Mr Tao starte d hiscareer in the public ser vice sector, held senior positions in variousministries and the Prime Ministers ofce. He later joined a fewmulti-national companies before he started his own business. Heholds directorship in several companies liste d on SGX, includingHanwell Corporation, Eratat Lifestyle, Next Generation, CCM Groupand ST Telecommunications (Beijing). Mr Tao graduated in 1975

2013 10 3

30 1978

2009 7 2 0 2012 4 24

2006 2001 ( 1998 )

2014 1 151975

1993 Amcol ( ) Easy Call Internationa l Pte Ltd 1998

2004

1973

2013 10 1


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RESULTS AT A GLANCE


Group

Results of Continuing Operations 2013 $000 2012$000Revenue 6 29,429Cost of sales (5) (30,189)Gross prot 1 (760)

Other income 1,845 290Distribution costs - (79)Administrative expenses (6,104) (6,108)Other expenses (490) (7,149)Loss from operations (4,748) (13,806)

Finance costs - (2)Share of results of associates 44 (173)Loss before income tax (4,704) (13,981)

Income tax expense - -Loss from continuing operations (4,704) (13,981)

Discontinued operationsLoss from discontinued operations (net of tax) (152,472) (15,434)Loss for the year (157,176) (29,415)

GroupResults of Discontinued Operations 2013

$0002012$000

Revenue 174,483 107,770

Cost of sales (172,237) (88,145)Gross prot 2,246 19,625

Other income 4,452 9,621Distribution costs (963) (856)Administrative expenses (5,931) (4,742)Other expenses - Other operating expenses (3,869) (10,339) - Assets impairment (87,349) (9,641) - Loss on re-measurement of

Assets Held-For-Sale (58,001) -(Loss)/prot from operations (149,415) 3,668

Finance costs (3,812) (6,713)Share of results of associates - (6,368)Loss before income tax (153,227) (9,413)

Income tax expense 755 (6,021)Loss from discont inued operat ions (152,472) (15,434)

Net operating loss after tax (7,122) (5,793)Assets impairment and loss onre-measurement of Assets Held-For-Sale (145,350) (9,641)Loss from discont inued operat ions (152,472) (15,434)

Revenue

Fell on cessation of the loss-making mineral trading business.Other income Increased by $1.6 million mainly due to exchange gain arising from a

stronger US$ against the S$.

Administrative expenses Relatively unchanged operating costs were lower after cost-cutting

but burdened by one-off redundancy and other rationalization cost;and higher professional fees for new acquisition.

Other expenses Fell by $6.7 million due to lower provision of doubtful debts of $5.1

million, in the absence of loss on inventory of $0.8 million and otherNRV adjustment on development proper ties of $0.6 million.

Loss from continuing operations Given the above, net loss for Continuing Operations narrowed to

$4.7 million.

Discontinued operations Discontinued operations (steel business) comprise the Groups

investments in its 100%-owned subsidiaries Sapphire MineralResources (HK) Ltd and Lucky Art Holdings Limited and available-for-sale financial assets in 16% Prime Empire Limited (PEL) and 16%Precise Skill Limited (PSL). We plan to sell the entire steel business.

Revenue Increased due to additional revenue stream from sale of cold rolled

coil and higher sales for vanadium products.

Gross prot Fell sharply despite higher revenue due to lower average unit selling

price, higher unit production costs and provision for obsolete stockfor HRC.

Other income Fell in the absence of dividend income, interest income and fair value

hedge gain despite additional rental income from lease of Longweisindustrial land, building and equipment.

Other operating expenses Fell in the absence of goodwill write-off.

Assets impairment The impairment loss of $87.3 million consists of $26.4 million loss from

fair value assessment of investment in PEL and PSL, impairment loss of$59.8 million on property, plant & equipment and impairment loss of$ 1.1 million on intangibles for the HRC, rebar and V2O5 CGU : theseimpairment losses were due mainly to a fall in value-in-use given the

weak steel market condition which caused lower capacity utilization.Loss on re-measurement of Assets Held-For-Sale Assets Held-For-Sale is now recorded at $66 million with an

impairment loss of $58 million on marked to market valuation .

Finance costs Fell due to lower interest expense on back of lower bank borrowings

(we capped borrowings for capex).

Share of results of associates This relates to the share of loss of PEL, which was reclassified to

available for sale financial assets when the Company lost significantinfluence over it s operations in 2012.

Net operating loss after tax Increased due mainly to significantly lower gross margin.


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CORPORATESTRUCTURE


SapphireCorporation

Limited

Sapphire MineralResources Pte Ltd

Sapphire MineralResources (HK) Ltd

100%

100%

Mancala HoldingsPty Ltd

Mancala Pty Ltd

Mancala Asia Ltd (HK)

Mancala MiningPty Ltd

Mancala Mine

Services Pty Ltd

Spectrum ResourcesAustralia Pty Ltd

100%

100%

100%

100%

100%

100%

Lucky ArtHoldings Ltd

Neijiang ChuanweiSpecial Steel Co Ltd

Sichuan LongweiMetal Product

Co., Ltd

Chengdu LuckyFortune Trading

Co., Ltd

Chengdu Sapphire

Cellar I/E Co., Ltd

100%

100%

100%

100%

100%

Assets held for Sale

Industrial ContractsMarketing

(2001) Pte Ltd

Hainan IRE LetianConstruction

SapphireConstruction &

Development Pte Ltd

36.67%

49%

100%

100%

Tudor JayaSdn Bhd


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22 CORPORATE GOVERNANCE REPORT

38 DIRECTORS REPORT

43 STATEMENT BY DIRECTORS

44 INDEPENDENT AUDITORS REPORT

45 BALANCE SHEETS

46 CONSOLIDATED INCOME STATEMENT

47 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

48 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

50 STATEMENT OF CHANGES IN EQUITY

51 CONSOLIDATED CASH FLOW STATEMENT

53 NOTES TO THE FINANCIAL STATEMENTS

115 ADDITIONAL INFORMATION

116 SHAREHOLDINGS STATISTIC

118 NOTICE OF GENERAL MEETING

PROXY FORM

CONTENTS


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22 Sapphire Corporate LimitedAnnual Report 2013

CORPORATE GOVERNANCE REPORT

The Company recognises the importance of good corporate governance and the o ering of high standards of accountability to shareholders.

This report describes the Companys corporate governance framework and practices in compliance with the principles and guidelines of theCode of Corporate Governance 2012 (the Code).

THE CODE

The Code is divided into four main sections:

(A) Board Matters(B) Remuneration Matters(C) Accountability and Audit

(D) Shareholder Rights and Responsibilities

(A) BOARD MATTERS

BOARDS CONDUCT OF ITS AFFAIRS (PRINCIPLE 1)

The Board conducts at least four meetings a year and where necessary, additional board meetings are held to address signi cant issues ortransactions. The Companys Articles of Association allow a board meeting to be conducted by way of a telephone conference or by meansof similar communication equipment whereby all directors participating in the meeting are able to hear each other. The attendance of thedirectors at meetings of the Board and Board committees during the nancial year ended 31 December 2013 is as follows:

BOARD AUDIT AND RISKCOMMITTEE

NOMINATINGCOMMITTEE

REMUNERATIONCOMMITTEE

No. of Meeting No. of Meeting No. of Meeting No. of MeetingHeld Attended Held Attended Held Attended Held Attended

Mr Lim Jun Xiong Steven 5 2 (1) 4 1 (1) 1 - (1) 1 - (1)

Mr Teh Wing Kwan 5 2 (2) 4 1 # 1 - 1 -Madam Cheung Kam Wa 5 5 4 4 # 1 - 1 -Mr Teo Cheng Kwee 5 5 4 4 # 1 1 # 1 1 #

Mr Foo Tee Heng 5 5 4 4 # 1 - 1 -Mr Yang Jian 5 4 4 4 # 1 1 (3) 1 1 (3)

Mr Duan Bing 5 4 4 4 # 1 1 (4) 1 1 (4)

Mr Tao Yeoh Chi 5 2 (5) 4 1 (5) 1 - (5) 1 - (5)

Mr Wei Jian Ping 5 4 4 1 1 1 (6) 1 1Mr Fong Heng Boo 5 - (7) 4 - (7) 1 - (7) 1 - (7)

Besides the formal Board meetings, the directors also speak on speci c subjects, discussed major transactions and decisions including theintention to dispose the steel business and other business plans.

# By invitation

(1) Appointed as a Director, Chairman of Board and NC and a member of the ARC and RC on 1 October 2013(2) Appointed as a Director on 3 October 2013(3) Resigned as a member of NC on 3 October 2013(4) Resigned as a member of the RC and NC on 3 October 2013(5) Appointed as a Director, Chairman of RC and a member of the ARC and NC on 1 October 2013(6) Resigned as a member of NC and appointed as a member of ARC on 3 October 2013(7) Appointed as a Director, Chairman of ARC and a member of the NC and RC on 15 January 2014


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The key roles of the Board are:

to guide the corporate strategy and directions of the Group, approve the broad policies, strategies and nancial objectives ofthe Group and monitoring the performance of management;

to ensure e ective management leadership of the highest quality and integrity;

to approve annual budgets, major funding proposals, investment and divestment proposals; and

to provide overall insight in the proper conduct of the Groups business.

Matters which are speci cally reserved for decision by the Board include those involving mergers and acquisitions, material acquisitions and

disposals of assets, corporate or nancial restructuring, major investments, declaration and proposal of dividends, major corporate policieson key areas of operations, the release of the Groups quarterly and full-year results, and substantial transactions which have a material e ecton the Group.

When new Directors are appointed to the Board, they are provided with a formal letter setting out the Directors duties and responsibilities. Theorientation programme for a new director includes brie ngs by the Chief Executive O cer on the Groups business, policies and governancepractices; on-site visits to the various overseas places of operations; continous and ongoing training programmes were made available,including participaton at courses, seminars and talks on directors duties and responsibilities.

To keep pace with regulatory changes, the directors own initiatives are supplemented from time to time with information, updates andsponsored seminars conducted by external professionals, including any changes in legislation and nancial reporting standards, governmentpolicies and regulations and guidelines from SGX-ST that a ect the Company and/or the directors in discharging their duties. The directorsare informed of developments relevant to the Group, including changes in laws, regulations and risks that may impact the Group.

Non-executive directors are encouraged to purchase shares in the Company and to hold them until they leave the Board.

BOARD COMPOSITION AND BALANCE (PRINCIPLE 2)

The Board comprises 10 directors of whom 8 are Non-Executive Directors. Of the 8 Non-Executive directors, 4 are independent of themanagement and the substantial shareholders.

The Board now comprises the following:-

Mr Lim Jun Xiong Steven - Chairman, Independent and Non-Executive DirectorMr Teh Wing Kwan - Executive Director and Group Chief Executive O cerMadam Cheung Kam Wa - Executive Director and Group Chief Operating O cerMr Tao Yeoh Chi - Independent and Non-Executive DirectorMr Wei Jian Ping - Independent and Non-Executive DirectorMr Fong Heng Boo - Independent and Non-Executive DirectorMr Teo Cheng Kwee - Non-Executive and Non Independent DirectorMr Foo Tee Heng - Non-Executive and Non Independent DirectorMr Duan Bing - Non-Executive and Non Independent DirectorMr Yang Jian - Non-Executive and Non Independent Director

There is no alternate director on the Board.


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The Nominating Committee reviews the independence of each director annually. Each independent director is required to complete aDirectors Independence Form annually to con rm his independence based on the guidelines as set out in the Code. The directors must alsocon rm whether they consider themselves independent despite not having any relationship identi ed in the Code.

There is a clear separation of the role of the Chairman and the Chief Executive O cer. This will provide a healthy professional relationshipbetween the Board and Management to shape the strategic process. The Board is also supported by other board key committees to provideindependent oversight of Management. These key committees are the Audit and Risk Committee (ARC), Remuneration Committee (RC)and Nominating Committee (NC) and are mainly made up of independent or non-executive directors. The non-executivve independentdirectors are encouraged to communicate amongst themselves with the Companys Auditor and Senior Management directly.

Board Composition and Committees

Audit and RiskCommittee

NominatingCommittee

RemunerationCommittee

Board Member

Lim Jun Xiong Steven M C M Teh Wing Kwan

Cheung Kam Wa

Tao Yeoh Chi M M C

Wei Jian Ping M M

Fong Heng Boo C M M

Teo Cheng Kwee M MFoo Tee Heng

Duan Bing Yang Jian M

Note: C: Chairman M: Member

Membership in the di erent committees are carefully managed to ensure that there is equitable distribution of responsibilities among theBoard members. This is to maximise the e ectiveness of the Board and to foster active participation and contribution from the Boardmembers. Diversity of experience and appropriate skills are also considered.

The Board comprises business leaders and professionals with industry and nancial background. The Board is of the view that the currentboard size of 10 directors is appropriate after taking into consideration the nature and scope of the Groups operations for the e ectiveconduct of the Groups a airs. The Board believes that the Board and its board committees have a good balance of directors who haveextensive business, nancial, accounting, human resource and management experience. Details of the Directors academic and professionalquali cations are set out in the Board of Directors section of this Annual Report.

CHAIRMAN AND CHIEF EXECUTIVE OFFICER (PRINCIPLE 3)

There is a clear separation of the roles and responsibilities between the Chairman and the Chief Executive O cer of the Company. TheChairman who is Independent and Non-Executive is responsible for the functioning of the Board and is free to act independently in the bestinterests of the Group and shareholders while the Chief Executive O cer is responsible for the Groups corporate strategies, developmentand execution of such corporate and operational decisions. The Chairman ensures that the members of the Board work together with theManagement and have the capability and authority to engage Management in constructive views on various matters, including strategicissues and business planning processes.


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NOMINATING COMMITTEE (PRINCIPLE 4 AND 5)

The key roles of the NC are:

to review and make recommendations to the Board on all appointments and re-appointment of members of the Board;

to evaluate and assess the e ectiveness of the Board as a whole, and the contribution by each director to the e ectiveness ofthe Board; and

to determine the independence of directors in accordance with Guideline 2.3 of the Code.

The NC comprises the following 4 Non-Executive Directors:

Mr Lim Jun Xiong Steven - Chairman, Independent and Non-Executive DirectorMr Tao Yeoh Chi - Independent and Non-Executive DirectorMr Fong Heng Boo - Independent and Non-Executive DirectorMr Teo Cheng Kwee - Non-Independent and Non-Executive Director

The NC evaluated the Boards performance as a whole in FY2013 based on performance criteria set by the Board. Each individual directorassessed the performance of the Board. The assessment parameters include amongst others, Board team spirit, quality of decision making,performance against speci c targets, Directors independence and quality and timeliness of board papers. KPIs used to assess individualDirectors include chairmanship/membership of Board Committees, attendance record at the meetings of the Board and the relevantcommittees, intensity of participation at meetings, quality of discussions, helping to gain access to new businesses and/or new markets andany special contributions. The performance measurements ensure that the mix of skills and experience of the directors continue to meet theneeds of the Group. The NC is of the view that each individual director has contributed to the e ectiveness of the Board as a whole.

The NC has in place a selection and nomination process for the appointment of new Director. For appointment of new directors to theBoard, the NC would, in consultation with the Board, evaluate and determine the selection criteria with due consideration to the mix of skills,knowledge and experience of the existing Board. The NC does so by rst evaluating the existing strengthens and capabilities of the Board,before it proceeds to assess the likely future needs of the Board, assess whether this need can be ful lled by the appointment of one personand if not, then to consult the Board with respect to the appointment of two persons, seek likely candidates widely and source resumes forreview, undertake background checks on the resumes received, narrow this list of resumes to a short list and then to invite the shortlistedcandidates to an interview which may include a brie ng of the duties required to ensure that there are no expectations gap, and to ensurethat any new director appointed has the ability and capacity to adequately carry out his duties as a director of the Company, taking intoconsideration the number of listed company board representations he holds and other principal commitments he may have. The NC will seekcandidates widely and beyond persons directly known to the Directors and is empowered to engage professional search rms and also givedue consideration to candidates identi ed by any persons. The NC will interview all potential candidates in frank and detailed meetings andmake recommendations to the Board for approval.

The NC, in determining whether to recommend a director for reappointment, will have regard to such directors contribution and performanceto the Group and whether such director has been adequately carrying out his or her duties as a director, taking into consideration thatdirectors number of listed company board representations and other principal commitments. The NC notes that directors with multiple listedcompany board representation have been taking independent actions to address the issue, and it is satis ed that adequate time and attentionhave been given to the a airs of the Company, through attendance at meetings of the Board and Board Committees, including electronic andtelephone communications, by all Directors.


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Past directorship with other public listed companies (held in the last 5 years)

Company Listed on PositionChina Titanium Ltd SGX Independent Director

Mr Teo Cheng Kwee Other directorship with public listed companies

Company Listed on Position

China Vanadium Titano-Magnetite Mining

Company Limited

HKEx Non-Executive and Non Independent

Director


Company Listed on PositionNIL

Mr Fong Heng Boo

Other directorship with public listed companies

Company Listed on PositionCapitaRetail China Trust ManagementLimited

SGX Independent Director

Pteris Global Limited SGX Independent Director Asian American Medical Group Limited ASX Independent Director

Colex Holdings Limited SGX Independent Director


Company Listed on PositionNIL

Mdm Cheung Kam Wa Emma (COO), Mr Foo Tee Heng (Non-Executive Director), Mr Yang Jian (Non-Executive Director), Mr Duan Bing(Non-Executive Director) and Mr Wei Jian Ping (Independent Director) do not hold directorship with other public listed companies and alsodid not hold such directorship in the past 5 years.

Although the non-executive directors and the CEO hold directorships in other companies which are not in the Group, the Board is of the viewthat such multiple board representations did not hinder them from carrying out their duties as directors. These directors would contributetheir invaluable experiences to the Board and give it a broader perspective. The Companys current policy stipulates that if a director is anexecutive director or a key management personnel, he/she should not hold more than six listed company board representation concurrently.During the year, no Director held more than six board seats in other listed companies concurrently.


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ACCESS TO INFORMATION (PRINCIPLE 6)

The Management will provide quarterly management accounts and other relevant information to the Board. The Management will submit theperiodical group performance report and other relevant information to the Board. In addition, all other relevant information on material eventsand transactions are circulated by electronic mail and facsimile to the directors for review and approval. The senior management sta maybe invited to attend the Board and Audit and Risk Committee Meetings to answer queries and to provide insights into its Groups operations.

The Board has separate and independent access to the senior management and the Company Secretary at all times. The Board will consultindependent professional advice where appropriate. The Company Secretary attends all board meetings and most committee meetings andis responsible to ensure that board procedures are followed. The Company Secretary assists the Board to ensure that applicable rules andregulations (in particular the Companies Act, Cap. 50 and SGX-ST Listing Manual) are complied with.

The appointment and removal of the Company Secretary are subject to the Boards approval.

(B) REMUNERATION MATTERS

PROCEDURES FOR DEVELOPING REMUNERATION POLICIES (PRINCIPLE 7 AND 8)

The RC has adopted speci c terms of reference. The RC will seek independent professional advice, if necessary.

The RC comprises the following 6 Non-Executive Directors:

Mr Tao Yeoh Chi - Chairman, Independent and Non-Executive DirectorMr Lim Jun Xiong Steven - Independent and Non-Executive DirectorMr Wei Jian Ping - Independent and Non-Executive DirectorMr Fong Heng Boo - Independent and Non-Executive DirectorMr Teo Cheng Kwee - Non-Independent and Non-Executive DirectorMr Yang Jian - Non-Independent and Non-Executive Director

RCs main functions are:

to review and recommend to the Board in consultation with Management and Chairman of the Board, a framework ofremuneration and to determine speci c remuneration packages and terms of employment for each of the executive directorsof the Group including those employees related to executive directors and substantial/controlling shareholders of the Group;

to recommend to the Board in consultation with management and the Chairman of the Board, the Sapphire Share AwardScheme or any long term incentive schemes which may be set up from time to time and to do all acts necessary in connectiontherewith; and

to carry out its duties in the manner that it deemed expedient, subject always to any regulations or restrictions that may beimposed upon the RC by the Board of Directors from time to time.


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As part of its review, the RC shall ensure that:

all aspects of remuneration including directors fees, salaries, allowances, bonuses, options and bene ts in-kinds should becovered;

the remuneration packages should be comparable within the industry practices and norms and shall include a performancerelated element coupled with appropriate and meaningful measures of assessing individual executive directors performances;and

the remuneration package or employees related to executive directors and controlling shareholders of the Group are in line withthe Groups sta remuneration guidelines and commensurate with their respective job scopes and levels of responsibilities.

No director is involved in deciding his own remuneration.

The remuneration of non-executive directors should be appropriate to the level of contribution, taking into account factors such as e ort andtime spent and responsibilities of the directors. Non-executive directors shall not be over-compensated to the extent that their independencemay be compromised. The non-executive and independent directors do not have any service contracts. They are paid a basic fee andadditional fees for serving on any of the Committees. The Board recommends payment of such fees to be approved by shareholders as alump sum payment at the AGM of the Company.

The executive directors do not receive directors fees. Service contracts for Executive Directors are for a xed appointment period and arenot to be excessively long or with onerous removal clauses. The RC considers what compensation the directors contracts of service wouldentail in the event of early termination and aims to be fair and avoid rewarding poor performance. The service contracts will be reviewedby the RC before expiry. Executive Directors remuneration packages consist of salary, allowances and bonuses. There are no onerouscompensation commitments on the part of the Company in the event of termination of services of the executive directors.

The RC also reviews the remuneration of senior management.

The RC also administers the Sapphire Shares Award Scheme (the Scheme). The Scheme is based on the principle of strengthening theCompanys competitiveness in attracting and retaining superior local and foreign talent. The scheme allows the Company to target speci cperformance objectives and to provide an incentive for participants to achieve these targets. The purpose of the Scheme is to improvethe Companys exibility and e ectiveness in rewarding, retaining and motivating its employees (including Directors) and to improve theirperformance.

Persons eligible to participate in the Scheme are as follows:

(i) Group Employees who have been employed for a minimum of one year or such shorter period as the Committee may determine;

(ii) Executive Directors; and

(iii) Non-Executive Directors.

Other information relating to the Scheme is set out below:

(i) The aggregate number of shares to be delivered (Award Shares) on any date shall not exceed fteen percent (15%) of the issuedshares of the Company on the day preceding that date;

(ii) The Committee may grant Award Shares at any time during the nancial year of the Company;


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(iii) The awards of performance shares are conditional on performance target set within the prescribed performance period;

(iv) The selection of a participant, the number of shares to be awarded, the performance target(s) and other conditions of the award shallbe determined at the absolute discretion of the Committee, which shall take into account criteria such as rank, job performance, yearsof service, potential for future development, contribution to the success of the Company and its subsidiaries (the Group) and extentof e ort required to achieve the performance targets within the performance period set;

(v) The participant has continued to be in employment with the Group from the date of the Award; and

(vi) The participant who met the performance targets but had ceased to be employed by the Company will receive the shares as allowedby the Scheme.

During the nancial year ended 31 December 2013, no shares award was granted.

DISCLOSURE OF REMUNERATION (PRINCIPLE 9)

Since the commencement of the Scheme to 31 December 2013, the aggregate number of shares granted to the Directors of the Companywere as follows:-

Shares Award granted to the Directors on 11 August 2008

Number of Shares Awarded (1)

Former executive Directors

Teo Cheng Kwee (2) 2,880,000

Foo Tee Heng (2) 600,000

Former Non-executive Directors

Dr Tan Eng Liang (3) 660,000

Chan Kum Onn Roger (3) 595,000Goh Chee Whui (4) 400,000

5,135,000

Note:(1) Equivalent number of shares after consolidation of twenty (20) ordinary shares into one (1) ordinary share in the capital of the Company

on 28 February 2011(2) Re-designated as non-executive on 3 October 2013(3) Resigned on 2 October 2013(4) Resigned on 20 July 2009

Since the commencement of the Scheme, no shares award have been granted to controlling shareholders of the Company or associates ofthe Company and no employees have received 5% or more of the total share awards available under the Scheme.


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Annual Remuneration (excluding compensation) of Board of Directors and Key Executive

Name of Director Remuneration

Band Salary BonusOther

Benefts

DirectorsFees (1) Total

$ % % % % %Executive Directors

Mr Teh Wing Kwan(appointed on 3 October 2013)

500,000 to749,999 (2)

99 0 1 0 100

Mdm Cheung Kam Wa Emma 250,000 to499,999

66 10 24 0 100

Independent DirectorsMr Lim Jun Xiong Steven(appointed on 1 October 2013)

0 to 249,999 0 0 0 100 100

Mr Tao Yeoh Chi(appointed on 1 October 2013)

0 to 249,999 0 0 0 100 100

Mr Wei Jian Ping 0 to 249,999 0 0 0 100 100

Non-Executive Directors

Mr Teo Cheng Kwee (3) 250,999 to499,999

68 25 6 1 100

Mr Foo Tee Heng (3) 0 to 249,999 77 10 12 1 100

Mr Yang Jian 0 to 249,999 0 0 0 100 100Mr Duan Bing 0 to 249,999 0 0 0 100 100

Former Independent Directors

Dr Tan Eng Lian(resigned on 2 October 2013)

0 to 249,999 0 0 0 100 100

Chan Kum Onn Roger(resigned on 2 October 2013)

0 to 249,999 0 0 0 100 100

Former Non-Executive Directors

Dai Bin (4)

(resigned on 2 October 2013)0 to 249,999 21 46 23 10 100

Key Executive (5)

Mr Ng Hoi Gee Kit 0 to 249,999 75 11 14 100

Due to con dentiality, the Company only disclosed the remuneration (excluding compensation) of the Board of Directors and key executivein bands of $250,000. The Company believes the disclosure of further details is disadvantageous to its business interests, given the highlycompetitive industry conditions, where poaching has become common place in a liberalised environment.


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The ARC has appointed PricewaterhouseCoopers LLP as the internal auditor of the Group to perform internal audit work under a 2 yearinternal audit plan. The internal auditors report directly to the Chairman of the ARC. The internal auditors will submit a report on their ndingsto the ARC for review and approval yearly. The ARC has reviewed the internal audit reports and based on the controls in place, is satis edthat there are adequate internal controls in the Group.

The Company con rms that it has complied with SGX Listing Rules 712 and Rule 715 for the Year 2013.

NON AUDIT FEES

The audit fees paid to the Auditors of the Company for FY2013 was approximately $380,000. The non audit fees paid to the Auditors of the Company for FY2013 was approximately $54,000.

RISK MANAGEMENT

The Board with the oversight of the ARC is responsible for the Groups risk management framework and policies. During the year 2013,the ARC had engaged KPMG Services Pte. Ltd. to assist in developing and establishing an enterprise risk management framework toidentify, evaluate and monitor the Groups material and signi cant risks. The Groups material and signi cant risks are proactively identi edand addressed thought implementation of e ective internal controls. The Company has also de ned and documented clear roles andresponsibilities for the Board and Management in risk mitigation, monitoring and reporting.

KPMG Services Pte. Ltd. and the internal auditors will review policies and procedures as well as key controls and will highlight any issuesto the Directors and the ARC. Additionally, in performing their audit of the nancial statements, the external auditors perform tests overoperating e ectiveness of certain controls that the auditors intend to rely on that are relevant to the Groups preparation of its nancialstatements. The external auditors also report any signi cant de ciencies in such internal controls to the Directors and the ARC.

Action plans to manage the risks are continuously being monitored and re ned by management and the ARC. Any material non-complianceor lapses in internal controls together with corrective measures are reported to the Directors and the ARC.

The Board has received assurance from the CEO and CFO:

(a) that the nancial records have been properly maintained and the nancial statements give a true and fair view of the companysoperations and nances; and

(b) the companys risk management and internal control systems are both adequate and e ective.

Based on the framework established and the reviews conducted, the Board opines, with the concurrence of the ARC, that there are adequateand e ective internal controls in place within the Group addressing nancial, operational and compliance risks.

KEY OPERATIONAL RISKS

The Board is aware of the operational risks which may adversely a ect the Groups steel business if any of these risk factors and uncertaintiesdevelops into actual events (Please note that most, if not all, of the following events have occurred during the year under review and it shouldalso be noted that the followings are a non-exhaustive list of those key operational risks, which may a ect or have a ected the Groupsoperations). Despite the fact that the Group has reclassi ed the steel business as discontinued operation and Assets Held-for-Sale on theface of Pro t and Loss Account and Balance Sheet respectively, the management is of the opinion that highlight of the following risks factoris important.
http://rulebook.sgx.com/en/display/display.html?rbid=3271&element_id=5082http://rulebook.sgx.com/en/display/display.html?rbid=3271&element_id=5085http://rulebook.sgx.com/en/display/display.html?rbid=3271&element_id=5085http://rulebook.sgx.com/en/display/display.html?rbid=3271&element_id=5082


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General economic condition the Groups steel business may be a ected by global economic conditions and is particularly sensitive to theeconomic growth in China. Slowing down in such economic activities may result in weaker demand for overall steel products in China anda ect the revenues growth of the steel business.

Overcapacity the steel industry in China has a high level of overcapacity as a result of weaker-than-expected demand, which continuesto lag far behind supply. The overcapacity issue has caused steel prices to fall. The overcapacity issues have adversely a ected the Groupsoperations.

Lower factory utilization rate the Groups steel business has not been able to achieve optimal capacity utilization due mainly to weakerdemand for its steel products and given its lower-than-expected utilization rate, the Groups steel business does not appear to be competitivein its pricing.

Higher raw materials costs some steelmakers in China in the industry is heavily dependent on the need to import raw materials such as ironore and metallurgical coal, which mean these steelmakers may have little in uence over their raw materials prices. If such costs are gettingincreasingly higher, the operating margins for the steelmakers will be adversely a ected. The Groups operations are in no exception.

Higher compliance cost more recently, the steelmaking industry is subject to more stringent environmental control, which means the relatedcompliance costs have since become increasingly higher. The Groups operations are thus required to invest for better pollution and emissioncontrol and these investments require huge capital outlay.

High debts level the steelmaking industry is capital intensive and most of the capital investments have been funded by borrowings. Somestatistics suggested that the debts level per metric ton produced is now at historic high on average. The high gearing position has furtherbeen burdened by higher cost of fund. The gearing for the Groups steel business is high.

Capacity upgrade while excess capacity remains a signi cant issue in the China steel industry, the country continues to urbanise which

need more steel, but this will be in di erent proportions, forms and speci cations. To a larger extent, the steel industry is thus expected tomove up the value chain by upgrading their facilities but such upgrade means heavier capital expenditure at higher cost of funds with longerinvestment recovery period in meeting such long-term demand growth. The Groups expansion capability under such circumstances ishowever limited.

Currency risk Foreign currency exchange e ects could be volatile. The Group is exposed to currencies movements such as US$/S$ andChinese Renminbi/S$. Any adverse movements in these currencies will a ect the Groups nancial performance. The Group will continueto monitor the foreign currency exchange exposure closely and may hedge the exposure by either entering into relevant foreign exchangeforward contracts or relying on natural hedge or a combination of both.

(D) SHAREHOLDER RIGHTS AND RESPONSIBIITIES (PRINCIPLE 14, 15 AND 16)

The Company recognizes the need to communicate with the shareholders on all material matters a ecting the Group and does not practiseselective disclosure.

Price sensitive announcements including quarterly and full year results are released through SGXNET and make available on the Companyswebsite. A copy of the Annual Report and Notice of AGM will be sent to every shareholder.

The Company supports active shareholder participation at general meetings. At AGMs, shareholders are given the opportunity to air theirviews and ask questions regarding the Group and its businesses. If shareholders are unable to attend the meetings, the Companys Articlesof Association allow a shareholder of the Company to appoint up to two proxies to attend and vote in place of the shareholder. The Companycurrently does not have the appropriate provisions in its Articles of Association to allow for absentia voting by mail, facsimile or email toensure proper authentication of the identity of shareholders and their voting intent. Separate resolutions on each distinct issue are proposedat general meetings for approval.


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The Chairman of the Board and the respective Chairman of the various board committees are in attendance at the AGMs to addressshareholders queries. The external auditors are also present to assist the directors to address any queries raised by shareholders aboutthe conduct of the audit and the preparation and content of the auditors report. Minutes of general meetings which include substantial andrelevant comments or queries from shareholders relating to the agenda of the meeting, and responses from the Board and Management,were prepared and made available to shareholders upon request.

The Directors are mindful of their obligation to provide shareholders with timely disclosure of material information that is presented in a fairand objective manner. Shareholders and other investors are provided regularly with:

a. an Annual Report;b. quarterly nancial results and other nancial announcements as required;c. other announcements on important developments (such as business update); and

d. a website and portal ( http://www.sapphirecorp.com.sg/ ); and

On the Companys website, investors will nd information about the Companys contact details as well as all publicly disclosed nancialinformation, corporate announcements, annual reports and pro les of the Group.

To enable shareholders to contact the top management more easily, the email address of the CEO and CFO can be found in the Group CEOsReview and on Corporate Information page respectively.

The nancial statements are released onto the SGX-ST website. All shareholders will receive the annual report of the Company and noticeof AGM by post and through notices published in the newspapers within the mandatory period.

The Group does not have a concrete dividend policy at present. The form, frequency and amount of dividends declared each year will takeinto consideration the Groups pro t growth, cash position, positive cash ow from generated from operations, projected capital requirementsfor business growth and other factors as the Board may deem appropriate.

DEALINGS IN SECURITIES

The Company has in place a policy prohibiting share dealings by directors and employees of the Company during the period commencingtwo weeks before the announcement of the Companys nancial statements for each of the rst three quarters of its nancial year and onemonth before the announcement of the Companys full year nancial statements. Directors and employees are also prohibited to deal in theCompanys securities on short-term considerations, and are expected to observe the insider trading laws at all times even when dealing insecurities within permitted trading period. The incumbent employees are also required to report to the directors whenever they deal in theCompanys shares.
http://www.sapphirecorp.com.sg/http://www.sapphirecorp.com.sg/


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INTERESTED PERSON TRANSACTIONS

The Company has in place a policy in respect of any transactions with interested person and has established procedures for review andapproval of the interested person transactions entered into by the Group. The ARC has reviewed the rationale and terms of the Groupsinterested person transactions and is of the view that the interested person transactions are on normal commercial terms and are notprejudicial to the interests of the shareholders.

The ARC and Board have reviewed all transactions conducted with interested persons as tabled under Additional Information and haveascertained that these transactions were carried out accordingly to the Shareholders Mandate.

MATERIAL CONTRACTS

Other than transactions mentioned under lnterested Person Transactions above, and save for the disclosures made in the Directors Report,there were no material contracts involving the Group with the CEO, Directors, Controlling Shareholder nor their associates during FY2013.


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DIRECTORS REPORT

We are pleased to submit this annual report to the members of the Company together with the audited nancial s tatements for the nancialyear ended 31 December 2013.

DIRECTORS

The directors in o ce at the date of this report are as follows:

Mr Lim Jun Xiong, Steven (Chairman) (Appointed on 1 October 2013)Mr Teh Wing Kwan (Chief Executive O cer) (Appointed on 3 October 2013)Ms Cheung Kam Wa, Emma (Chief Operating O cer)

Mr Teo Cheng KweeMr Foo Tee Heng

Mr Yang Jian

Mr Wei Jian Ping

Mr Duan Bing

Mr Tao Yeoh Chi (Appointed on 1 October 2013)

Mr Fong Heng Boo (Appointed on 15 January 2014)

DIRECTORS INTERESTS

According to the register kept by the Company for the purposes of Section 164 of the Companies Act, Chapter 50 (the Act), particulars ofinterests of directors who held o ce at the end of the nancial year (including those held by their spouses and infant children) in shares in theCompany (other than wholly-owned subsidiaries) are as follows:

Name of director and corporationin which interests are held

Holdingsat beginningof the year/

date ofappointment

Holdingsat end

of the year

Company

Ordinary shares

Yang Jian 8,005,050 8,005,050 Teo Cheng Kwee- interests held 7,009,581 7,009,581

- deemed interest 870,125 870,125

Foo Tee Heng 1,021,887 1,021,887Cheung Kam Wa, Emma 437,750 437,750

Except as disclosed in this report, no director who held o ce at the end of the nancial year had interests in shares or debentures of theCompany or of related corporations, either at the beginning/date of appointment or at the end of the nancial year.

There were no changes in any of the above mentioned interests in the Company between the end of the nancial year and 21 January 2014.


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DIRECTORS REPORT

Except as disclosed under the Shares Award Scheme of this report, neither at the end of, nor at any time during the nancial year, was theCompany a party to any arrangement whose objects are, or one of whose objects is, to enable the directors of the Company to acquirebene ts by means of acquisition of shares in or debentures of the Company or any other body corporate.

Except for salaries, bonuses and fees and those bene ts that are disclosed in this report and in note 34 to the nancial statements, since theend of the last nancial year, no director has received or become entitled to receive, a bene t by reason of a contract made by the Companyor a related corporation with the director, or with a rm of which he is a member, or with a company in which he has a substantial nancialinterest.

SAPPHIRE SHARES AWARD SCHEME

The Sapphire Shares Award Scheme (the Scheme) of the Company was approved and adopted by its members at an Extraordinary GeneralMeeting held on 25 April 2008. The Scheme is administered by the Companys Remuneration Committee (the Committee) whose functionis to assist the Board of Directors in reviewing remuneration and related matters. The Committee is responsible for the administration of theScheme and comprises ve directors, Tao Yeoh Chi, Lim Jun Xiong Steven, Fong Heng Boo, Wei Jian Ping, Teo Cheng Kwee and Yang Jian.

The purpose of the Scheme is to improve the Companys exibility and e ectiveness in rewarding, retaining and motivating its employees(including Directors) and to improve their performance.

Persons eligible to participate in the Scheme are as follows:

(i) Group Employees who have been employed for a minimum of one year or such shorter period as the Committee may determine;

(ii) Executive Directors; and

(iii) Non-Executive Directors.

Other information relating to the Scheme is set out below:

(i) The aggregate number of shares to be delivered (Award Shares) on any date shall not exceed fteen percent (15%) of the issuedshares of the Company on the day preceding that date;

(ii) The Committee may grant Award Shares at any time during the nancial year of the Company;

(iii) The awards of performance shares are conditional on performance targets set within the prescribed performance period;

(iv) The selection of a participant, the number of shares to be awarded, the performance targets and other conditions of the award shallbe determined at the absolute discretion of the Committee, which shall take into account criteria such as rank, job performance, yearsof service, potential for future development, contribution to the success of the Company and its subsidiaries (the Group) and extentof e ort required to achieve the performance targets within the performance period set;

(v) The participant has continued to be in employment with the Group from the date of the Award; and

(vi) The participant who met the performance targets but had ceased to be employed by the Company will receive the shares as allowedby the Scheme.


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DIRECTORS REPORT

The details of shares awarded to participants of the Company under the Scheme are as follows:

Participants Award Shares grantedduring the nancial year

Aggregate number of sharesawarded since commencement

of Scheme to31 December 2013

Former Executive Directors, who are now non-executive directors 3,480,000Former non-Executive Directors 1,655,000

Key Executives 2,200,000Group Employees 1,232,000

Total Award Shares granted 8,567,000

The Company consolidated twenty (20) ordinary shares into one (1) ordinary share in the capital of the Company in 2011.

No share award was given to any participant during the nancial year. Since the commencement of the Scheme, no share has been grantedto the controlling shareholders of the Company or their associates and no participant under the Scheme has received 5% or more of the totalshare awards available under the Scheme.

During the nancial year, there were:

(i) no options granted by the Company or its subsidiaries to any person to take up unissued shares in the Company or its subsidiaries;and

(ii) no shares issued by virtue of any exercise of option to take up unissued shares of the Company or its subsidiaries.

As at the end of the nancial year, there were no unissued shares of the Company or its subsidiaries under option.


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DIRECTORS REPORT

AUDIT AND RISK COMMITTEE

The Audit Committee was renamed the Audit and Risk Committee with e ect from 15 January 2013. The Audit and Risk Committeemembers at the date of this report are:

Fong Heng Boo (Chairman, Independent and Non-Executive Director)Lim Jun Xiong, Steven (Independent and Non-Executive Director)

Tao Yeoh Chi (Independent and Non-Executive Director)Wei Jian Ping (Independent and Non-Executive Director)

The Audit and Risk Committee performs the functions speci ed in Section 201B of the Act, the SGX Listing Manual and the Code ofCorporate Governance.

The Audit and Risk Committee has held four meetings since the last directors report. In performing its functions, the Audit and RiskCommittee also reviewed the overall scope of the internal and external audits, the independence of the external auditors and the assistancegiven by the Companys o cers to the auditors. It met with the Companys external and internal auditors to discuss the results of theirexaminations and their evaluation of the Companys system of internal accounting controls over nancial reporting as part of their audit.

The consolidated nancial statements of the Group and the nancial statements of the Company were reviewed by the Audit and RiskCommittee prior to their submission to the directors of the Company for adoption. The Audit and Risk Committee also reviewed interestedperson transactions conducted under a Shareholders Mandate during the nancial year. The Audit and Risk Committee has full access tomanagement and is given the resources for it to discharge its functions. The external and internal auditors have unrestricted access to the

Audit and Risk Committee.

The Audit and Risk Committee is satis ed with the independence and objectivity of the external auditors and has recommended to the Boardof Directors that the auditors, KPMG LLP, be nominated for re-appointment as auditors at the forthcoming Annual General Meeting of theCompany.

In appointing our auditors for the Company, subsidiaries and signi cant associated companies, we have complied with Rules 712 and 715of the SGX Listing Manual.


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DIRECTORS REPORT

The auditors, KPMG LLP, have indicated their willingness to accept re-appointment.

On behalf of the Board of Directors

Teh Wing Kwan

Director

Cheung Kam Wa, EmmaDirector

31 March 2014


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INDEPENDENT AUDITORS REPORTMEMBERS OF THE COMPANY

SAPPHIRE CORPORATION LIMITED

Report on the nancial statements

We have audited the accompanying nancial statements of Sapphire Corporation Limited (the Company) and its subsidiaries (the Group), whichcomprise the balance sheets of the Group and the Company as at 31 December 2013, the income statement, statement of comprehensiveincome, statement of changes in equity and cash ow statement of the Group, and the statement of changes in equity of the Company forthe year then ended, and a summary of signi cant accounting policies and other explanatory information, as set out on pages 45 to 114.

Managements responsibility for the nancial statements

Management is responsible for the preparation and fair presentation of nancial statements that give a true and fair view in accordancewith the provisions of the Singapore Companies Act, Chapter 50 (the Act) and Singapore Financial Reporting Standards, and for devisingand maintaining a system of internal accounting controls su cient to provide a reasonable assurance that assets are safeguarded againstloss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the

preparation of true and fair pro t and loss accounts and balance sheets and to maintain accountability of assets.

Auditors responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the nancial statements. Theprocedures selected depend on the auditors judgement, including the assessment of the risks of material misstatement of the nancialstatements, whether due to fraud or error. In making those risk assess

Sapphire Corporation Limited Annual Report 2013

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