MIRA INFORM REPORT

Report Date :

23.09.2014

IDENTIFICATION DETAILS

Name :	DRAGON STEEL CORPORATION
Registered Office :	No.100, Lung Chang Rd., Longjing Dist., Taichung City 434,
Country :	Taiwan
Financial Data :	31.12.2013
Date of Incorporation :	18.11.1993
Com. Reg. No.:	84613756
Legal Form :	Joint Stock Company
Line of Business :	Manufacturing and sale of steel products
No. of Employees	3,000

RATING & COMMENTS

MIRA’s Rating :

Ba

RATING		STATUS	PROPOSED CREDIT LINE
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory

Status :	Satisfactory
Payment Behaviour :	No Complaints
Litigation :	Clear

NOTES:

Any query related to this report can be made on e-mail: infodept@mirainform.com while quoting report number, name and date.

ECGC Country Risk Classification List – June 1, 2014

Country Name	Previous Rating (31.03.2014)	Current Rating (01.06.2014)
Taiwan	A2	A2

Risk Category	ECGC Classification
Insignificant	A1
Low	A2
Moderate	B1
High	B2
Very High	C1
Restricted	C2
Off-credit	D

TAIWAN ECONOMIC OVERVIEW

Taiwan has a dynamic capitalist economy with gradually decreasing government guidance of investment and foreign trade. Exports, led by electronics, machinery, and petrochemicals have provided the primary impetus for economic development. This heavy dependence on exports exposes the economy to fluctuations in world demand. Taiwan's diplomatic isolation, low birth rate, and rapidly aging population are other major long-term challenges. Free trade agreements have proliferated in East Asia over the past several years, and following the landmark Economic Cooperation Framework Agreement (ECFA) signed with China in June 2010, Taiwan in July 2013 signed a free trade deal with New Zealand—Taipei’s first-ever with a country with which it does not maintain diplomatic relations—and in November inked a trade pact with Singapore. Negotiations continue on follow-on components of ECFA regarding trade in goods and a dispute resolution mechanism; a trade in services agreement is under review in the legislature. Taiwan's Total Fertility rate of just over one child per woman is among the lowest in the world, raising the prospect of future labor shortages, falling domestic demand, and declining tax revenues. Taiwan's population is aging quickly, with the number of people over 65 accounting for 11.2% of the island's total population as of 2012. The island runs a large overall trade surplus largely because of its surplus with China, and its foreign reserves are the world's sixth largest, behind China, Japan, Saudi Arabia, Russia, and Switzerland. In 2006 China overtook the US to become Taiwan's second-largest source of imports after Japan. China is also the island's number one destination for foreign direct investment. Taiwan since 2009 has gradually loosened rules governing Chinese investment on the island, and has also secured greater market access for its investors in the mainland. In August 2012, Taiwan Central Bank signed a memorandum of understanding on cross-Strait currency settlement with its Chinese counterpart. The MOU allows for the direct settlement of Chinese RMB and the New Taiwan dollar across the Strait, which could help develop Taiwan into a local RMB hub. Closer economic links with the mainland bring greater opportunities for the Taiwan economy, but also poses new challenges as the island becomes more economically dependent on China while political differences remain unresolved

Source : CIA

Company name and address

Company Name:	DRAGON STEEL CORPORATION
Supplied Name:	DRAGON STEEL CORPORATION
Trading Address:	No.100, Lung Chang Rd., Longjing Dist., Taichung City 434, Taiwan (R.O.C.)
Supplied Address:	100 lung Chang ROad Lung Jing Dist Taichung Taiwan 43401
Telephone Number:	+886-4-2630-6088
Fax Number:	+886-4-2630-6066
E-mail:	ds@dragonsteel.com.tw
Website:	www.dragonsteel.com.tw

Notes: The exact name and address are as above.

Company Identification Details

Registered Name:	DRAGON STEEL CORPORATION
Registered Address:	No.100, Lung Chang Rd., Longjing Dist., Taichung City 434, Taiwan (R.O.C.)
Date of Foundation:	1993-11-18
Registration Number:	84613756
Registry:	Department of Commerce, Ministry of Economic Affairs, R.O.C.
Registered Capital:	NTD 90,000,000,000 (USD 3,060,000,000) (As of 2014.09, 1 NTD = 0.0340 USD)
Paid-up Capital:	NTD 86,125,861,230 (USD 2,928,279,282)
Legal Representatives:	Zhiyu Song
Legal Form:	Joint Stock Company (public offer without listing)
Principal Activities:	Manufacturing and sale of steel products, etc
Staff:	About 3,000 Employees
Listed at Stock Exchange:	No
Date of Last Annual Return:	2014-7-10

History

Subject was incorporated on 1993-11-18 with registered number 84613756 as Joint Stock Company in Taiwan.

Subject was public offer without listing on 1995-11-27 with company code 2048.

Change of Name

Former Chinese Name:	桂裕企業股份有限公司
Current Chinese Name:	中龍鋼鐵股份有限公司

Former English Name:	Kuei Yi Industrial Co., Ltd.
Current English Name:	Dragon Steel Corporation

Corporate Structure

Parent Company

Registered Name:	China Steel Corporation
Registered Address:	No.1, Chung Kang Road, Lin Hai Ind. Dist., Hsiao Kang, Kaohsiung 81233, Taiwan, R.O.C.
Date of Foundation:	1971-12-3
Registration Number:	30414175
Registry:	Department of Commerce, Ministry of Economic Affairs, R.O.C.
Registered Capital:	NTD 170,000,000,000 (USD 5,780,000,000) (As of 2014.09, 1 NTD = 0.0340 USD)
Paid-up Capital:	NTD 157,731,289,960 (USD 5,362,863,859)
Legal Representatives:	Ruoqi Zou
Legal Form:	Joint Stock Company
Date of Last Annual Return:	2014-9-2

Shareholders

Major Shareholders

Name	Subscription Shares
China Steel Corporation
8,612,586,123

Management Information

Core Management

Directors

1
Name		Zhiyu Song
Position		Board Chairman
2
Name	Ruoqi Zou
Position		Director
3
Name	Minzheng Dai
Position		Director
4
Name	Xiuchang Liang
Position		Director
Date of Appointment		2014-2-1
5
Name	Junlong Wu
Position		Director
6
Name	Hongnan Lin
Position		Director
7
Name	Xiong Li
Position		Director
8
Name	Changrong Xu
Position		Supervisor
9
Name	Zhongyi Lin
Position		Supervisor

Personnel Structure

Total Employees

About 3,000 Employees

Operation Information

Offices & Factories

	Headquarters
Add	No.100, Lung Chang Rd., Longjing Dist., Taichung City 434, Taiwan (R.O.C.)

Production Information

Subject is engaged in manufacturing of steel products, etc.

Subject has factories (total land area is about 280 hectare) in Taichung City, Taiwan for production.

We obtained some subject’s annual production capacity information in 2013 as follows for reference.

Product	Annual Production Capacity in 2013
Billet Steel	741,345 MT
H-Shaped Steel	439,554 MT
Hot Rolled Steel	2,836,616 MT

Subject obtained the certification of ISO 9001, ISO 9002 and ISO 14001.

Purchase Information

The registered activities of subject:

Business Code	Details
CA01010	Steel smelting industry
CA01020	Steel rolling and extruding industry
CA01030	Steel foundry industry
CA01050	Steel secondary processing industry
CA02990	Manufacturing of other metal products
C901990	Manufacturing of nonmetallic mineral
CB01010	Manufacturing of machinery
D101050	Cogeneration industry
F107990	Wholesale of other chemical products
F111090	Wholesale of building materials
F199990	Wholesale of other products
F401010	International trade business
G801010	Warehousing industry
G406061	Ship cargoes assemble and unassembled business
C802170	Manufacturing of toxic chemicals
F107060	Wholesale of toxic chemicals
F207060	Retail of toxic chemicals
ZZ99999	Besides licensed business, all other business items those are not banned or restricted.

The raw materials for production are purchased from both home and abroad.

Subject’s major foreign suppliers are Superior Metals Trading (Pty) Ltd and Aldex America Inc, etc.

Sales Information

Subject is engaged in sale of steel products, etc.

The major products sold by subject include H-shaped steel, steel plate, billet, hot rolled coil and so on.

The products are applied to the industries of pipe, building, ironware and chemicals, etc.

Subject’s sales regions include Asia, Europe and America, etc.

One of subject’s customers is Thyssenkrupp Steel.

Import and export right:

Import right	Yes
Export right	Yes

Settlements

Purchase

Domestic Purchase

Products	Raw materials, etc
Payment Terms	Cash, T/T, etc

Import

Products	Raw materials, etc
Payment Terms	T/T, etc

Sales

Domestic Markets

Product	Steel products, etc
Selling Terms	Cash, T/T, etc

Export

Product	Steel products, etc
Selling Terms	L/C, T/T, etc

Balance Sheet

Unit: NTD/000

	2013-12-31	2012-12-31
Current Assets
Cash and cash equivalents	75,306	127,583
Derivative financial assets for hedging – current	10,428	11,473
Notes receivable - net	0	0
Accounts receivable - net	1,318,986	1,119,775
Accounts receivable - related parties - net	1,226,456	401,732
Other receivables- net	175,712	15,411
Total current tax assets	5,347	6,234
Inventories	18,121,625	13,926,224
Prepayment	484,607	780,454
Other current assets	420,093	1,122,086
Total current assets	21,838,560	17,510,972
Non-Current Assets
Derivative financial assets for hedging – non current	35,951	1,841
Investments under equity method	95,175	96,495
Property, plant and equipment	187,020,539	179,833,025
Deferred income tax assets	560,986	2,012,350
Other non-current assets	359,564	277,430
Non-current assets	188,072,215	182,221,141
Assets	209,910,775	199,732,113
Assets (USD/000)	7,136,966	6,790,892
Current Liabilities
Short-term borrowing	800,000	2,000,000
Short-term notes and bills payable	12,455,156	8,678,045
Derivative financial liability for hedging - current	3,634	47,674
Notes payable	0	21
Accounts payable	685,032	1,025,729
Accounts payable - related parties	303,482	221,218
Other payables	4,628,222	4,026,932
Total current tax liabilities	676,204	0
Liability reserve - current	826,754	181,787
Other current liability	11,451,496	11,434,760
Total current liability	31,829,980	27,616,166
Non-Current Liability
Derivative financial liability for hedging - non current	0	64,954
Long-term loan	81,382,704	78,816,826
Deferred income tax liabilities	74,832	40,353
Other non-current liabilities	299,641	280,200
Non-current liabilities	81,757,177	79,202,333
Total Liabilities	113,587,157	106,818,499
Capital
Common stock	86,125,861	86,125,861
Capital stock	86,125,861	86,125,861
Capital Surplus
Capital surplus - share premium	8,210,103	8,210,103
Capital surplus - net value equity of profit (loss) of associates and joint ventures accounted for using equity method	488	238
Capital surplus	8,210,591	8,210,341
Retained Earnings
Legal reserve	809,811	809,811
Special Reserve	823	823
Inappropriate retained earnings	1,139,793	-2,119,110
Retained earnings	1,950,427	-1,308,476
Other Equity Interest
Exchange differences	234	-390
Unrealized gain or loss on financial assets in available-for-sale	2,245	1,727
The profit (loss) of effective hedging instrument of cash flow hedge	34,260	-115,449
Other equity interest	36,739	-114,112
Treasury stock	0	0
Total equity	96,323,618	92,913,614
Total equity (USD/000)	3,275,003	3,159,063

(As of 2014.09, 1 NTD = 0.0340 USD)

Profit and Loss Account

Unit: NTD/000

	2013	2012
Sales revenue	83,024,569	64,500,750
Sales revenue (USD/000)	2,822,835	2,193,026
Sales return	2,840	2,325
Sales discounts and allowances	967,446	580,323
Sales revenue, net	82,054,283	63,918,102
Technical services revenue, net	2,678	4,381
Processing revenue, net	245,253	108,805
Labor service revenue, net	247,931	113,186
Other operating revenue, net	376,181	23,226
Operating revenue	82,678,395	64,054,514
Selling costs	74,321,788	64,377,806
Technical service expenses	589	506
Processing costs	168,383	106,384
Labor cost	168,972	106,890
Other operating costs	376,338	31,857
Total operating costs	74,867,098	64,516,553
Gross profit (loss) from operations	7,811,297	-462,039
Gross profit (loss) from operations, net	7,811,297	-462,039
Operating expenses
Selling expenses	1,357,551	980,500
Administrative expenses	546,391	442,388
Research and development expenses	4,769	15,300
Total operating expenses	1,908,711	1,438,188
Net operating income (loss)	5,902,586	-1,900,227
Non-operating income and expenses
Other income	57,208	43,071
Other gains and losses, net	-7,603	-22,433
Finance costs, net	928,570	890,101
Share of profit (loss) of associates and joint ventures accounted for using equity method, net	5,268	8,682
Total non-operating income and expenses	-873,697	-860,781
Profit (loss) from continuing operations before tax	5,028,889	-2,761,008
Total tax expense (income)	1,735,184	-504,059
Profit (loss) from continuing operations	3,293,705	-2,256,949
Profit (loss)	3,293,705	-2,256,949
Profit (loss) (USD/000)	111,986	-76,736
Other comprehensive income
Cash flow hedge	180,371	-169,923
Actuarial gains (losses) on defined benefit plans	-41,171	-52,414
Share of other comprehensive income of associates and joint ventures accounted for using equity method, net	512	-326
Income tax related to other comprehensive income	23,663	-37,797
Other comprehensive income, net	116,049	-184,866
Total comprehensive income	3,409,754	-2,441,815

Cash Flows

Unit: NTD/000

	2013	2012
Cash Flows from Operating Activities - Indirect Method
Profit (loss) from continue operating before income tax	5,028,889	-2,761,008
Net Income (Loss)	5,028,889	-2,761,008
Depreciation Expense	7,198,187	5,941,051
Amortization Expense	78,339	43,902
Interest expense	928,570	890,101
Interest income	-7,261	-12,007
Share of loss (profit) of associates and joint ventures accounted for using equity method	-5,268	-8,682
Loss (gain) on disposal of property, plant and equipment	57,711	46,936
Impairment loss on non-financial assets	1,232,657	719,075
Other items	1,226,697	217,505
Non cash income and expense items	10,709,632	7,837,881
Decrease (increase) in notes receivable	0	650
Decrease (increase) in accounts receivable	-199,211	-104,269
Decrease (increase) in accounts receivable – related parties	-824,724	-187,794
Decrease (increase) in other receivable	243,221	1,004,228
Decrease (increase) in inventories	-5,410,658	6,784,786
Decrease (increase) in prepayment	295,847	824,367
Total changes in operating assets	-5,895,525	8,321,968
Increase (decrease) in notes payable	-21	-8,815
Increase (decrease) in accounts payable	-340,697	116,106
Increase (decrease) in accounts payable – related parties	82,264	6,136
Increase (decrease) in other payable	443,850	-88,590
Increase (decrease) in liability reserve	-310,767	-50,553
Increase (decrease) in other current liabilities	16,736	853
Increase (decrease) in accrued pension liabilities	-10,943	-6,541
Total changes in operating liabilities	-119,578	-31,404
Total changes in operating assets and liabilities	-6,015,103	8,290,564
Total adjustments	4,694,529	16,128,445
Cash inflow (outflow) generated from operations	9,723,418	13,367,437
Interest received	0	0
Dividend received	0	0
Interest paid	0	0
Dividend paid	0	0
Income taxes refund (paid)	-784	-141,389
Net cash flows from (used in) operating activities	9,722,634	13,226,048
Cash flows from (used in) investing activities
Acquisition of property, plant and equipment	-14,180,482	-21,330,519
Increase in guaranteed deposits paid	3,681	18,103
Increase in other financial assets	740,306	-4,997
Increase in other non-current assets	-164,626	-8,121
Acquisition of interest	7,864	10,288
Acquisition of Dividend	7,350	7,000
Net cash flows from (used in) investing activities	-13,585,907	-21,308,246
Cash flows from (used in) financing activities
Decrease in short-term loans	-1,200,000	-29,459,942
Increase in short-term notes and bills payable	3,777,111	0
Decrease in short-term notes and bills payable	0	-3,298,689
Long-term borrowing	24,820,000	26,487,500
Repay long-term borrowing	-25,176,000	-9,386,000
Increase in other borrowings	3,400,000	14,410,000
Decrease in other borrowings	-500,000	-5,340,000
Decrease in guarantee deposit received	-10,787	-6,435
Capital increase	0	16,000,000
Interest payment	-1,299,328	-1,257,456
Net cash flows from (used in) financing activities	3,810,996	8,148,978
Net increase (decrease) in cash and cash equivalents	-52,277	66,780
Cash and cash equivalents at beginning of period	127,583	60,803
Cash and cash equivalents at end of period	75,306	127,583
Cash and cash equivalents reported in the statement of balance sheet	75,306	127,583

Note: Figures are based on the IFRSs Accounting System.

Bankers

Subject declined to disclose its bank details; from other source we could not obtain the relevant information, either.

Public Record

Mortgage

1
Case Type:	Chattel Mortgage
File No.:	104039
Debtor Name:	Dragon Steel Corporation
Document Number:	10030348450
Date of Registration:	2011-6-17
2
Case Type:	Chattel Mortgage
File No.:	101411
Debtor Name:	Dragon Steel Corporation
Document Number:	09930347870
Date of Registration:	2010-9-23

Lawsuit

Up to date of reporting, no existing or latent litigation of the subject has been found.

Special Note

Interview Details

Name	Mr. Liu
Department	Sales Department

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs.60.79
UK Pound	1	Rs.99.30
Euro	1	Rs.78.16

INFORMATION DETAILS

Analysis Done by :	SUB
Report Prepared by :	NIT

RATING EXPLANATIONS

RATING		STATUS	PROPOSED CREDIT LINE
>86	Aaa	Possesses an extremely sound financial base with the strongest capability for timely payment of interest and principal sums	Unlimited
71-85	Aa	Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums	Large
56-70	A	Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums	Fairly Large
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory
26-40	B	Capability to overcome financial difficulties seems comparatively below average.	Small
11-25	Ca	Adverse factors are apparent. Repayment of interest and principal sums in default or expected to be in default upon maturity	Limited with full security
<10	C	Absolute credit risk exists. Caution needed to be exercised	Credit not recommended
--	NB	New Business	--

This score serves as a reference to assess SC’s credit risk and to set the amount of credit to be extended. It is calculated from a composite of weighted scores obtained from each of the major sections of this report. The assessed factors and their relative weights (as indicated through %) are as follows:

Financial condition (40%) Ownership background (20%) Payment record (10%)

Credit history (10%) Market trend (10%) Operational size (10%)

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This report is issued at your request without any risk and responsibility on the part of MIRA INFORM PRIVATE LIMITED (MIPL) or its officials.