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1CSC STEEL HOLDINGS BERHAD (640357-X)

ANNUAL REPORT 2011

Corporate Information Group Structure Vision and Mission StatementsFinancial Highlights of the Past Five YearsProfi le of DirectorsStatement from the Group Managing DirectorCorporate Governance StatementsInternal Control StatementAudit Committee ReportStatement of the Directors’ Responsibilities

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

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

23456

1013262832

333840414243457878

79828388

Enclosed

CONTENTS


ANNUAL REPORT 2011

AUDITORS

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

SOLICITORS

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

PRINCIPAL BANKERS

Malayan Banking BerhadHong Leong Bank BerhadRHB Bank Berhad

STOCK EXCHANGE LISTING

Main Market – Industrial ProductsBursa Malaysia Securities Berhad

Stock Name : CSCSTELStock Code : 5094

AUDIT COMMITTEE

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

COMPANY SECRETARIES

Tan Bee Hwee (MAICSA 7021024)Lam Sook Ching (MAICSA 7006942)

REGISTRAR

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

BUSINESS ADDRESS

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

REGISTERED OFFICE

No. 49-B Jalan Melaka Raya 8Taman Melaka Raya, 75000 MelakaTel : (6) 06 – 281 5300Fax : (6) 06 – 281 5332

CORPORATE INFORMATION

Executive Director

Tan Chin Teng

Independent Non-Executive Directors

Pang Fee YoonChong Khim Leong @ Chong Kim Leong

BOARD OF DIRECTORS

Group Managing Director

Liang, Hsiu-Chang @ Liang Shu Charng

Non-Independent Non-Executive Directors

Liu, Jih-GangNee, Lung-YuanBrig. Gen. (R) Dato’ Mohd Zaaba @ Nik Zaaba Bin Nik Daud

www.cscmalaysia.comCORPORATE WEBSITE


ANNUAL REPORT 2011

GROUP STRUCTURE

CSC STEEL HOLDINGS BERHAD (“CHB”)(640357-X)

GROUP STEEL CORPORATION (M) SDN. BHD.(“Group Steel”)(327738-P)

CSC STEEL SDN. BHD.(“CSCM”)(228899-P)

CONSTANT MODE SDN. BHD.(“CMSB”)(922516-W)

CSC BIO-COAL SDN. BHD.(“CSC Bio-Coal”)(formerly Ornaconstruction Corporation Sdn. Bhd.)(272448-P)

100% 100%

100%

100%

The structure of the CHB Group is set out below:

CHB is an investment holding company providing management services to its subsidiaries. The principal activities of its subsidiaries are as follows:

CSCM Manufacturing and marketing of pickled and oiled steel, cold rolled steel, hot dipped galvanised steel commonly known as GI and prepainted galvanised steel commonly known as PPGI or colour coated steel. CSC Bio-Coal Production of bio-coal from bio-mass.

CMSB Investment holding. Group Steel Dormant.


ANNUAL REPORT 2011

• To continuously improve quality and productivity.

• To constantly develop high value-added products and environmental-friendly products.

• To continually pursue excellence in quality and service exceeding customers’ expectations.

• To fulfil commitments to corporate social responsibility.

Mission

Vision

VISION AND MISSION STATEMENTS

• To be a trustworthy and one of the best fl at steel manufacturers in South East Asia.


ANNUAL REPORT 2011

FINANCIAL HIGHLIGHTS OF THE PAST FIVE YEARS

1400

1120

840

560

280

0’07 ’08 ’09 ’10 ’11

REVENUE1,

302 1,

373

1,03

5

870

1,20

6

(12 Mths)

(RM’ million)

(12 Mths) (12 Mths) (12 Mths) (12 Mths)

150

120

90

60

30

0’07 ’08 ’09 ’10 ’11

EBITDA

131

92

127

149

71

(12 Mths)

(RM’ million)


30

24

18

12

6

0’07 ’08 ’09 ’10 ’11

EARNINGS PER SHARE

21.1

5

15.6

6 18.5

4

24.4

2

7.92

(12 Mths)

(sen/share)


100

80

60

40

20

0’07 ’08 ’09 ’10 ’11

PROFIT AFTER TAX

80

59

69

91

30

(12 Mths)

(RM’ million)


30

24

18

12

6

0’07 ’08 ’09 ’10 ’11

DIVIDEND

12

8.5

13

20

7

(12 Mths)

(sen/share)


2.5

2

1.5

1

0.5

0’07 ’08 ’09 ’10 ’11

NET ASSETS PER SHARE

1.83 1.85

2.12

2.09

2.07

(12 Mths)

(RM/share)



ANNUAL REPORT 2011

Liang, Hsiu-Chang was appointed to the CHB Board on 1 May 2010 as the Group Managing Director. He graduated from the Chun-Yuan University, Taiwan with a degree in Mechanical Engineering.

Mr. Liang has over twenty-fi ve (25) years’ experience in the steel manufacturing industry. Prior to his appointment to the Board of CHB, he was General Superintendent at the Rolling Mill Department of China Steel Corporation (“CSC”).

Mr. Liang, Hsiu-Chang clocked full attendance at all four (4) of the Board meetings held during the fi nancial year ended 31 December 2011.

Training attended by Mr. Liang during the fi nancial year is as follows:- • Seminar on “2011 SEAISI Economic, Environmental and Safety” organised by South East Asia Iron & Steel Institute.

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

Mr. Liu has been employed with CSC since 1977 and has served at various senior positions at CSC and one of its subsidiary companies. He is presently Vice President of Commercial Division at CSC.

Mr. Liu, Jih-Gang attended two (2) of the three (3) Board Meetings that were held subsequent to his appointment during the fi nancial year ended 31 December 2011.

Training attended by Mr. Liu during the fi nancial year is as follows:- • “Mandatory Accreditation Programme for Directors of Public Listed Companies” conducted by Bursatra Sdn. Bhd.

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

Mr. Tan has more than twenty-fi ve (25) years of fi nancial and accounting experience of which more than fi fteen (15) years were in a managerial capacity overseeing to fi nancial matters.

Mr. Tan Chin Teng clocked full attendance at all four (4) of the Board and Audit Committee meetings held during the fi nancial year ended 31 December 2011.

Trainings attended by Mr. Tan during the fi nancial year are as follows:- • “The Expanded Governance Role of the Audit Committee, and Recent Changes to the Financial Reporting Standards” organised by Ernst & Young, Malaysia.

• “Deloitte TaxMax” conducted by Deloitte Tax Academy.

• “Developing Corporate Merger & Acquisition Plan” conducted by Bursatra Sdn. Bhd.

PROFILE OF DIRECTORS

LIANG, HSIU-CHANG @ LIANG SHU CHARNG

Group Managing Director(Taiwanese) Age 60

LIU, JIH-GANG

Non-Independent Non-Executive Director(Taiwanese) Age 59

TAN CHIN TENG

Executive Director(Malaysian) Age 53


ANNUAL REPORT 2011

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

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

Mr. Nee, Lung-Yuan clocked full attendance at all four (4) of the Board meetings held during the fi nancial year ended 31 December 2011.

Training attended by Mr. Nee during the fi nancial year is as follows:-• “The Function of Remuneration Committee and How to Manage a Company” organised by the Association of Corporate Representatives of Companies.

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

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

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

Mr. Pang Fee Yoon clocked full attendance at all four (4) of the Audit Committee meetings held during the fi nancial year ended 31 December 2011 but attended three (3) of the four (4) Board Meetings held during the fi nancial year ended 31 December 2011.

Trainings attended by Mr. Pang during the fi nancial year are as follows:- • “Optimising Corporate Tax Planning Strategies” organised by MIA.

• “COMTRAC – IACS Seminar 2011 – Voluntary Winding-Up, Registration of Documents for Winding-Up by Court & Striking-Off Application and its Procedures” conducted by COMTRAC, IACS & SSM.

• “National Tax Conference 2011” conducted by LHDN & CTIM.

• “Seminar on 2012 Budget Proposals & Recent Tax Developments” conducted by CTIM.

• “Advanced Corporate Tax Planning” conducted by MICPA.

• “International Accountants Conference 2011” organised by Inpact International.

PROFILE OF DIRECTORS (CONT’D)

NEE, LUNG-YUAN

Non-Independent Non-Executive Director(Taiwanese) Age 63

PANG FEE YOON

Independent Non-Executive Director Chairman of Audit Committee(Malaysian) Age 47


ANNUAL REPORT 2011


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

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

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

Mr. Chong Kim Leong clocked full attendance at all four (4) of the Board and Audit Committee meetings held during the fi nancial year ended 31 December 2011.

Due to time constraints and a tight working schedule, Mr. Chong did not attend any training during the fi nancial year just ended.

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

Dato’ Nik graduated from Universiti Kebangsaan Malaysia, Malaysia with a degree in Strategic and Defence Security Studies. His career with the Malaysian Armed Forces spanned thirty-seven (37) years. Senior posts held by him prior to his retirement from the Armed Forces in May 2004 were the 1st Infantry Brigade Commander, Armed Forces Provost Marshall and Army Inspector General with the rank of Brigadier General. Dato’ Nik Zaaba is presently Secretary-General of the Ex-Services Association of Malaysia.

Dato’ Nik Zaaba clocked full attendance at all four (4) of the Board and Audit Committee meetings held during the fi nancial year ended 31 December 2011.

Trainings attended by Dato’ Nik during the fi nancial year are as follows:- • “Forum on Sustainability Programme for Corporate Malaysia – Sustainability Session for Directors” conducted by Bursa Malaysia Berhad (“Bursa”).

• “Seminar on Governance Programme – Assessing the Risk & Control Environment” organised by Bursa.

• “Forum on Bridging a Gap in Developing CSR Capacity” conducted by Bursa.

CHONG KHIM LEONG @ CHONG KIM LEONG

Independent Non-Executive Director Member of Audit Committee(Malaysian) Age 55

BRIG. GEN. (R) DATO’ MOHD ZAABA @ NIK ZAABA BIN NIK DAUD

Non-Independent Non-Executive DirectorMember of Audit Committee(Malaysian) Age 64


ANNUAL REPORT 2011

Notes:

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

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

3. Directors’ Shareholdings Details of Directors’ shareholdings in the Company can be found in the “Analysis of Shareholdings” section on page 81 of this Annual Report.

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

5. No Conflict of Interest None of the Directors has any confl ict of interest with the Company.



ANNUAL REPORT 2011

FINANCIAL REVIEW

The Group’s operating result in the fi rst quarter of 2011 was boosted by strong buying sentiments in that quarter which also saw prices of raw materials such as iron ore, coking coal and our feedstock, hot roll coil (HRC), rising in tandem with the demand.

Second quarter onwards saw sales dipping and margins thinning as the global steel demand started softening in mid of second quarter 2011 and we were unable to pass on the higher feedstock cost to our customers because of the weak market.

Hopes of an improvement in the market conditions in the second half year 2011 were dashed as the global market continued to be plagued by unfavourable market conditions due to the European debt crisis, sluggish US economy and the after effects of the devastating tsunami and earthquake in Japan, impacting the Group’s margins negatively.

Sales in the domestic market too, which forms the bulk of the Group’s turnover, had been affected by the surging of import especially for cold rolled and galvanized steel products. This phenomenon combined with the unfavourable external factors had formed a strong barrier for the Group to fully refl ect the increased costs in steel prices.

The Group ended fi scal year 2011 with growth in revenue of 17% but with a drop of 59% in profi t before tax from the year before. Turnover for the fi nancial year ended 31 December 2011 was RM1.206 billion compared to RM1.035 billion the year before and profi t before tax of RM38.56 million versus RM94.78 million. Basic earnings per share was 7.92 sen against 18.54 sen previously.

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

STATEMENT FROM THE GROUP MANAGING DIRECTOR

As Group Managing Director of the CHB Group

of Companies and on behalf of the CHB Board of

Directors (the “Board”), I am pleased to present

to you the Annual Report and the audited Financial

Statements of the Group for the financial year

ended 31 December 2011.


ANNUAL REPORT 2011

STATEMENT FROM THE GROUP MANAGING DIRECTOR (CONT’D)

The recommended dividend had been announced on 10 February 2012 and will be tabled for your approval at the Company’s forthcoming Eighth Annual General Meeting and if approved, will be paid on 11 July 2012.

PROSPECTS AND OUTLOOK FOR THE FINANCIAL YEAR 2012

Operating environment in the fi rst quarter of 2012 has not seen much improvement in the steel market sentiment even though there had been attempts by steel makers to stimulate the pick up in selling prices.

Although hopes are high for an uptrend in market demand to take place in the second half year, the positive outlook for the second half year is very much dependent on the outcome of the world economy especially efforts taken by the European Union to resolve its debt crisis which till now, is still not quite out of the woods yet, and China’s economic slowdown which is expected to impact the global economic growth.

Another external risk is that tensions in the Middle East will cause another oil price spike which may exacerbate the already fragile global economy.

On the domestic front, we expect the on-going high impact projects under the Malaysian Government’s Economic Transformation Programme (“ETP”) to have a stronger positive effect on the local steel industry and unleash more demand for our steel products as more projects promised by the government under the ETP comes on stream as planned and implementation of the ETP projects picks up momentum.

On the bigger picture, the Group has to prepare itself to face stiffer competition from the on-going liberalisation of the Free Trade Agreements in the ASEAN region and the effect it will have and the changes that it may bring to Malaysia’s Iron and Steel Policy.

Several signifi cant revamping projects are in the pipeline to further heighten the Group’s competitiveness.

The Group continues to look into available opportunities to broaden its market reach such as tapping into the regional steel markets especially Indonesia, which has huge growth potential in steel consumption for years to come.

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

DIVIDEND

In line with the Group’s dividend policy, the Board had recommended a total of 7% or 7 sen per share in fi nal dividend for the fi nancial year ended 31 December 2011 comprising a single tier system of dividend of 5% or 5 sen per share and a special single tier system of dividend of 2% or 2 sen per share.


ANNUAL REPORT 2011

CORPORATE SOCIAL RESPONSIBILITY (“CSR”)

Being a responsible and venerable corporate citizen, the Group takes much pride in its CSR activities which are listed on pages 23 to 25 of this Annual Report under four main categories such as CSR at the workplace, marketplace, environment and community.

We are proud of our latest venture into the production of renewable green energy through our wholly-owned subsidiary, CSC Bio-Coal Sdn. Bhd. The move is consistent with the Government’s clarion call to create a new strategic bio-economy industry for Malaysia. In this context, the launching of Malaysia’s National Biomass Strategy on 21 November 2011 augurs well for us.

Our pilot plant is slated to produce bio-coal from oil palm bio-mass for use to power plants and we shall be starting production by July 2012 with an initial production target of 13,000 tonnes per annum. This project shall form the foundation for processing other types of bio-mass into bio-coal in the future.

ACKNOWLEDGEMENT AND APPRECIATION

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

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

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

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

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

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

Liang, Hsiu-Chang

Group Managing Director

STATEMENT FROM THE GROUP MANAGING DIRECTOR (CONT’D)


ANNUAL REPORT 2011

CORPORATE GOVERNANCE STATEMENTS

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

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

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

1. DIRECTORS

1.1 Board of Directors

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

The Group Managing Director oversees to the day-to-day operations and implementation of the Board’s corporate and operational policies and strategies. In line with pre-set authority levels, certain issues such as approval of interim and annual results, signifi cant acquisitions and disposals, long term planning, major capital expenditure among others, are subject to approval by the Board.

Certain responsibilities are delegated to the Audit Committee, its sub-committee, which operates within clearly defi ned parameters as spell out in the Committee’s Terms of Reference, salient terms of reference is set out on pages 28 to 29 of this Annual Report.

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

The Board has not set up a Nominating Committee or a Remuneration Committee, preferring instead to carry out the functions associated thereto on a collective basis as explained below.


ANNUAL REPORT 2011

1. DIRECTORS (CONT’D)

1.2 Board Balance

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

As at the date of this Statement, there are seven (7) directors on the Board of CHB. Apart from the Group Managing Director and the Executive Director, there are three (3) Non-Independent Non-Executive Directors and two (2) Independent Non-Executive Directors. This complies with the Main Market Listing Requirements of Bursa Malaysia Securities Berhad that stipulates that at least two (2) direction or one-third (1/3) of the board of directors of a listed issuer, whichever is the higher, are independent directors.

A list of the entire CHB Board is set out on page 2 and their profi les on pages 6 to 8 of this Annual Report.

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

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

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

1.3 Board Meetings

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

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

During the fi nancial year ended 31 December 2011, a total of four (4) Board meetings were held and the attendance of each Director is set out hereinbelow:-

Directors Attendance

Liang, Hsiu-Chang 4/4 Huang, Tsong-Ying (resigned on 1 April 2011) 1/1 Liu, Jih-Gang (appointed on 1 April 2011) 2/3 Tan Chin Teng 4/4 Nee, Lung-Yuan 4/4 Pang Fee Yoon 3/4 Chong Kim Leong 4/4 Brig. Gen. (R) Dato’ Nik Zaaba Bin Nik Daud 4/4

CORPORATE GOVERNANCE STATEMENTS (CONT’D)


ANNUAL REPORT 2011


1.4 Access to and Supply of Information to the Board

Prior to the convening of a Board meeting, the notice and agenda for that Board meeting is faxed to each Board member followed shortly with hard copies of the relevant Board Papers. The Board Papers contain information pertinent to the matters to be deliberated at the coming meeting and any other details or information the Directors may additionally require on the agenda items, would be furnished upon request.

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

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

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

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

1.5 Appointments and Re-Elections to the Board

The Company has not set up a Nominating Committee and appointments of directors to the Board only takes place if it has the approval of the Board.

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

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

Directors who are due for retirement and are seeking for re-election to the Board at the Company’s forthcoming Eighth AGM are listed in the “Statement Accompanying Notice of AGM” on page 88 of this Annual Report.



ANNUAL REPORT 2011


1.6 Directors’ Training

While the Board does not pre-determine formal training programmes for the Directors, each of them is aware of the need to continuously undergo training appropriate to their needs in line with the Main Market Listing Requirements of Bursa Malaysia Securities Berhad.

Trainings attended by the Directors during the fi nancial year are set out in their respective profi les on pages 6 to 8 of this Annual Report.

1.7 Directors’ Remuneration

The Company has not established a Remuneration Committee. The two (2) Directors holding executive positions in the Company are the Group Managing Director and the Executive Director (hereinafter collectively referred to as the “Executive Directors”).

The remuneration package of the Executive Directors of the Company generally follows the Executive Compensation Package of the Group and to a certain extent, is dictated by market competitiveness and is tailored to retain and motivate directors of the calibre needed by the Group to effectively manage the business of the CHB Group and to align the interests of the Directors with those of the shareholders. The contribution, responsibilities and performance of each Executive Director are taken into account when determining their respective remuneration packages.

The remuneration packages of both the Executive and Non-Executive Directors of the Company for the fi nancial year ended 31 December 2011 are as follows:

Salaries & Other Benefi ts-

Category Fees Bonuses Emoluments in-Kind Total

(RM) (RM) (RM) (RM) (RM)

Executive Directors - 406,537 70,147 27,526 504,210 Non-Executive Directors 94,800 - - - 94,800

Total 94,800 406,537 70,147 27,526 599,010

The number of Directors whose total remuneration falls within the following bands is as follows:

Range of Remuneration Executive Non Executive

Nil nil 3 Below RM50,000 nil 3 RM200,001-RM250,000 1 nil RM250,001-RM300,000 1 nil

Note: Details of directors’ remuneration above include Directors who have resigned during the year ending 31 December 2011.



ANNUAL REPORT 2011

2. SHAREHOLDERS

2.1 Shareholders’ Communication and Investor Relation

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

Such information and other updates on activities of the Group may also be accessed from the Company’s website at “www.cscmalaysia.com” and investors may utilise this medium to communicate interactively with the Company directly.

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

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

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

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

During the AGM/EGM, shareholders have the opportunity to seek clarifi cation such as the rationale for or more information on the approvals being sought, and on any other matters pertaining to the Group. They also have the liberty to request for information pertaining to the business operations and activities, developments and direction of the Group. Any queries raised would be attended to by the Board members present at the meeting and members of senior management would be at hand to provide the necessary information. The Company’s external auditors would also be present to address queries on the audited accounts should there be any.

3. ACCOUNTABILITY AND AUDIT

3.1 Financial Reporting

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

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

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

The Statement of Responsibility by Directors in respect of the preparations of the annual audited fi nancial statements of CHB and the CHB Group is found on page 32 of this Annual Report.



ANNUAL REPORT 2011

3. ACCOUNTABILITY AND AUDIT (CONT’D)

3.2 Internal Control and Risk Management

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

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

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

An overview of the state of internal controls within the Group is set out in the Internal Control Statement on pages 26 and 27 of this Annual Report.

3.3 Relations with the Auditors

The Board has a formal, professional and transparent relationship with both the internal and external auditors of the Group. The external auditors have direct access to the Board and the Audit Committee and thus, contentious issues can be brought up/highlighted directly to the Board or Audit Committee, as the case may be, limiting interference from potential management infl uence.

Conversely, the Audit Committee has the liberty to meet with the external auditors as and when deemed necessary. The responsibility of the Audit Committee in relation to both the internal and external auditors are described on pages 30 and 31 of this Annual Report.

3.4 Statement of Compliance with Best Practices of the Code

Save for the non-setting up of the Nominating Committee and the Remuneration Committee, the Board considers that it has complied with the Best Practices of the Code throughout the fi nancial year ended 31 December 2011.

4. ADDITIONAL COMPLIANCE INFORMATION

4.1 Utilisation of Proceeds

No proceeds were raised by the Company from any corporate proposals during the fi nancial year ended 31 December 2011.

4.2 Share Buy-Backs

The Company did not seek for a renewal of shareholders’ authority to buy-back its own shares at the Company’s Seventh AGM held on 21 June 2011 and thus, did not conduct any share buy-back activities during the twelve (12) months period ended 31 December 2011.

As at 10 May 2012, being the latest practicable date prior to the printing of this Annual Report, the Company has a total of 6,800,000 CHB shares, all of which are retained as treasury shares, bought at a cost of RM7,415,698.07, including broker fees.



ANNUAL REPORT 2011

4. ADDITIONAL COMPLIANCE INFORMATION (CONT’D)

4.3 Options or Convertible Securities

The Company has not issued any options or convertible securities during the financial year ended 31 December 2011.

4.4 Depository Receipt

The Company has not sponsored any depository receipt programme during the financial year ended 31 December 2011.

4.5 Sanctions and/or Penalties

There were no sanctions and/or penalties imposed on the Company, its subsidiaries, the Directors and the Management by the relevant regulatory bodies during the fi nancial year ended 31 December 2011.

4.6 Non-Audit Fees

There were no non-audit fees paid or payable to the external auditors by the Group for the fi nancial year ended 31 December 2011.

4.7 Variation in Results

The Company and its subsidiary companies did not issue any profi t forecast during the fi nancial year ended 31 December 2011.

4.8 Profi t Guarantee

The Company and its subsidiary companies did not provide any profi t guarantees during the fi nancial year ended 31 December 2011.

4.9 Material Contracts

There were no material contracts entered into or subsisting between the Company and its subsidiary companies involving the interests of directors and substantial shareholders during the fi nancial year ended 31 December 2011.

4.10 Recurrent Related Party Transactions (“RRPT”)

At the Seventh AGM of the Company held on 21 June 2011, the shareholders had renewed the mandate for the CHB Group to enter into RRPT of a revenue or trading nature as well as mandated the CHB Group for additional RRPT with the related parties (collectively the “Shareholders’ Mandate”).



ANNUAL REPORT 2011


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

Details of RRPT of a revenue or trading nature conducted during the fi nancial year ended 31 December 2011 between CSC Steel Sdn. Bhd. and the following related parties pursuant to the aforesaid Shareholders’ Mandate are as follows:-

Related

Party

China Steel Corporation(“CSC”)

China Steel Global Trading Corporation(“CSGT”)

China Steel Machinery Corporation(“CSMC”)

China Ecotek Corporation (“CEC”)

Nature of

Transaction

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

Payment of technical fees to CSC*(1)

Purchase of equipment from CSC

Payment of training fees to CSC

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

Sales of fi nished goods to CSGT

Payment of sales commission to CSGT

Purchase of machinery and spare parts from CSMC

Purchase of equipment from CEC

Interested Directors,

Major Shareholders

and Persons Connected

Interested Major Shareholder CSAP(a)(i)

Interested Directors LHC(b)(c), LJG(b)(c), NLY(b)(c),HTY(b)(c), CLM(c), WSJ(c)

and SWJ(c)

Interested Major Shareholder CSAP(a)(ii)

Interested Directors LHC(b)(c), LJG(b)(c)(e), NLY(b)(c)(f), HTY(b)(c)(g), CLM(c), WSJ(c) and SWJ(c)

Interested Major Shareholder CSAP(a)(iii)

Interested Directors LHC(b)(c), LJG(b)(c), NLY(b)(c), HTY(b)(c), CLM(c), WSJ(c) and SWJ(c)

Interested Major Shareholder CSAP(a)(iv)


and SWJ(c)

Actual Value of

Transactions

conducted

pursuant to the

Shareholders’

Mandate during

FYE 2011

(RM’000)

459,174

0

0

0

2,587

0

87

0

0

Estimated Value

on Transactions

per the Circular to

Shareholders dated

30 May 2011 and

approved at the

7th AGM on 21 June

2011 (RM’000)

700,000

100

1,000

80

5,000

2,600

250

700

500



ANNUAL REPORT 2011

Related

Party

InfoChamp Systems Corporation(“ISC”)

Chung Hung Steel Corporation (“CHSC”)

CSGT (Singapore) Pte. Ltd.(“CSGTS”)

Himag Magnetic Corporation (“HMC”)

Dragon Steel Corporation (“DSC”)

Nature of

Transaction

Purchase of Enterprise Resource Planning System from ISC

Payment of system maintenance fee to ISC

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

Purchase of raw materials from CHSC

Payment of sales commission to CSGTS

Purchase of chemicals from HMC

Sales of iron oxide to HMC

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


Major Shareholders


Interested Major Shareholder CSAP(a)(v)

Interested Directors LHC(b)(c), LJG(b)(c), NLY(b)(c),HTY(b)(c), CLM(c), WSJ(c) and SWJ(c)

Interested Major Shareholder CSAP(a)(vi)

Interested Directors LHC(b)(c), LJG(b)(c)(e), NLY(b)(c)(f), HTY(b)(c), CLM(c), WSJ(c) and SWJ(c)

Interested Major Shareholder CSAP(a)(vii)

Interested Directors LHC(b)(c)(d), LJG(b)(c)(e), NLY(b)(c)(f), HTY(b)(c)(g), CLM(c),WSJ(c) and SWJ(c)

Interested Major Shareholder CSAP(a)(viii)

Interested Directors LHC(b)(c), LJG(b)(c), NLY(b)(c),HTY(b)(c), CLM(c), WSJ(c) and SWJ(c)

Interested Major Shareholder CSAP(a)(ix)

Interested Directors LHC(b)(c), LJG(b)(c), NLY(b)(c),

HTY(b)(c), CLM(c), WSJ(c)

and SWJ(c)

Actual Value of

Transactions

conducted

pursuant to the

Shareholders’

Mandate during

FYE 2011

(RM’000)

2

91

446

77,918

0

80

0

0

Estimated Value

on Transactions

per the Circular to

Shareholders dated

30 May 2011 and

approved at the

7th AGM on 21 June

2011 (RM’000)

300

100

5,000

76,000

100

250

1,000

200,000





ANNUAL REPORT 2011




Note:*(1) Payment of technical fees pursuant to a Technical Service Agreement entered into between CSC Steel Sdn. Bhd. and CSC dated 1 February 2006.

Interested Major Shareholder

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

Related

Party

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

China Steel Machinery Corporation(“CSVC”)

Nature of

Transaction

Sales of fi nished goods to CSGT Metals

Sales of fi nished goods to CSVC


Major Shareholders


Interested Major Shareholder CSAP(a)(x)

Interested Directors LHC(b)(c)(d), LJG(b)(c)(e), NLY(b)(c)(f), HTY(b)(c)(g), CLM(c), WSJ(c) and SWJ(c)

Interested Major Shareholder CSAP(a)(xi)


and SWJ(c)

Total

Actual Value of

Transactions

conducted

pursuant to the

Shareholders’

Mandate during

FYE 2011

(RM’000)

415

0

540,800

Estimated Value

on Transactions

per the Circular to

Shareholders dated

30 May 2011 and

approved at the

7th AGM on 21 June

2011 (RM’000)

2,300

5,000

1,000,280


ANNUAL REPORT 2011



Interested Directors

LHC - Liang, Hsiu-Chang @ Liang Shu Charng LJG - Liu, Jih-Gang NLY - Nee, Lung-Yuan HTY - Huang, Tsong-Ying CLM - Chung, Lo-Min WSJ - Wu, Shyan-Jenq SWJ - Su, Wei-Jin

(b) LHC, LJG (appointed on 1 April 2011), NLY and HTY (resigned on 1 April 2011) are respectively employees and shareholders of CSC and Directors of CHB. LJG is also a director of CSC and CSAP. (c) LHC, LJG (appointed on 1 April 2011), NLY, HTY (resigned on 1 April 2011), CLM (resigned on 1 April 2011), WSJ (resigned on 1 March 2012) and SWJ (appointed on 1 April 2011 / resigned on 13 March 2012) are respectively employees of CSC and Directors of CSCM, Group Steel and CSC Bio-Coal. The above listed persons are also shareholders of CSC.

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

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

(g) HTY is also a director of CSGT, CSGTI and CSGTS.

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

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

6. CORPORATE SOCIAL RESPONSIBILITY (“CSR”)

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

Workplace

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

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



ANNUAL REPORT 2011

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

Workplace (cont’d)

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

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

- Promoting “injury free” campaigns.

- Organising quarterly “Environment, Safety and Health” competitions so as to continuously maintain a clean and safe workplace.

- Assisting employees to achieve a balanced work life and to nurture harmonious team spirit by providing employees with space for recreational activities by building tennis and basketball courts and renting of badminton courts for use by staff on a weekly basis and sponsoring the shuttlecocks used.

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

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

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

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

Marketplace

- Producing quality products at competitive prices to customers.

- Ensuring prompt and timely delivery of goods to customers.

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

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

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

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



ANNUAL REPORT 2011

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

Environment

- Achieving the standards of and obtaining the Environmental Management System ISO 14001:2004 certifi cation which is a series of international standards on environmental management.

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

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

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

- Having an “Energy Saving Committee” which meets regularly to come up with and implement ideas with an eye to preserve, conserve and improve the effi ciency of energy utilisation.

- Adopting the energy management system in accordance to the standards of ISO 50001:2011 by the end of year 2012.

- Enhancing plant landscaping and greening the factory premises.

Community

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

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

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



ANNUAL REPORT 2011

The Board acknowledges the importance of maintaining a good internal control system covering risk management practices, and fi nancial, operational and compliance controls, as set out under Part 1D II of the Malaysian Code On Corporate Governance, to safeguard shareholders’ investments and the Group’s assets.

RESPONSIBILITY

The Board of Directors is responsible for the Group’s system of internal controls and its effectiveness. However such a system is designed to manage the Group’s risks within an acceptable risk profi le rather than eliminate the risk of failure to achieve the policies and business objectives of the Group. Accordingly, it can only provide reasonable assurance but not absolute assurance against material misstatement of management and fi nancial information and records or against fi nancial losses or fraud.

RISK MANAGEMENT

The Board recognises that an important element of a sound system of internal control is to have in place a risk management framework in order to identify principal risks and implement appropriate controls to manage such risks. The present process of identifying and addressing risk is conducted continuously during weekly management meetings.

INTERNAL AUDIT FUNCTION

The internal audit function is jointly undertaken by the Company’s external professional advisor, Messrs. Ernst & Young, together with its in-house internal auditor (hereinafter collectively referred to as the “Internal Audit Team”).

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

For the fi nancial year under review, internal audits have been carried out in accordance to the approved Internal Audit Plan and the total cost incurred for the services from the external professional advisor amounted to RM56,000.

Upon completion of each internal audit, which is conducted twice yearly, the internal audit observations, recommendations and management comments are reported to the AC by the Internal Audit Team. At subsequent AC meetings, the Internal Audit Team would update the AC on the timeliness and effectiveness of actions taken by Management in relation to the internal audit observations.

KEY ELEMENTS OF INTERNAL CONTROL

• The Group has an appropriate organisation structure for planning, organising and executing the business operations of the Group to ensure its objectives are met.

• Lines of responsibility and delegation of authority covering areas such as approval of capital expenditure, investment, procurement, fi nance, etc., are clearly defi ned.

• Policies and procedures are in place to govern key processes to ensure smooth running of the Group’s day-to-day operations.

• The Group has a Health and Safety Committee to review and ensure compliance with occupational safety and health policies and procedures on a continuous basis.

INTERNAL CONTROL STATEMENT


ANNUAL REPORT 2011

• A monitoring and reporting system which highlights signifi cant variances against key performance indicators is in place to monitor business performance. Key variances are investigated on and followed-up by Management.

• CSC Steel Sdn. Bhd. has an established quality management system which is in accordance with the ISO 9001:2008 standards that serves as a foundation for improving quality, customer services as well as customer satisfaction.

For the fi nancial year under review, there were no material losses incurred as a result of any weaknesses in internal control. Management is committed to continuously take measures to strengthen the control environment.

MONITORING ACTIVITIES

The Board confi rms that there is a continuous process for identifying, evaluating and managing signifi cant risks faced by the Group. Key activities that the Directors have established in reviewing the adequacy and integrity of the system of internal control are as follows: • Weekly meetings by the management team on operational and fi nancial matters.

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

• Quarterly review of the unaudited fi nancial results of the Group by the AC and Board of Directors.

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

This Statement was made in accordance with a resolution of the Board of Directors passed on 5 April 2012 and has been reviewed by the external auditors of the Company, Messrs. Deloitte & Touche.

INTERNAL CONTROL STATEMENT (CONT’D)


ANNUAL REPORT 2011

AUDIT COMMITTEE REPORT

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

1. MEMBERS AND MEETING ATTENDANCE

The Committee held a total of four (4) meetings during the year ended 31 December 2011 and all three (3) Committee members clocked full attendance as follows:-

Committee Members Attendance

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

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

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

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

Relevant staff in the Finance Division and both the outsourced and in-house Internal Auditors attended the Committee meetings during the fi nancial year ended 31 December 2011 on invitation by the Committee Chairman. Other senior management staff attended certain meetings as and when invited by the Chairman.

2. SALIENT TERMS OF REFERENCE

2.1 Duties and Responsibilities of the Audit Committee

The Audit Committee shall collectively discharge the following functions:

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

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

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

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

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


ANNUAL REPORT 2011

2. SALIENT TERMS OF REFERENCE (CONT’D)

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

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

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

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

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

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

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

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

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

2.2 Authority of the Audit Committee

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

(1) to investigate any matter within its terms of reference;

(2) to have the resources which are required to perform its duties;

(3) to have full and unimpeded access to any information pertaining to the Company;

(4) to have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity;

(5) to obtain independent professional or other advice; and

(6) to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other directors and employees of the Company, whenever deemed necessary.

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

AUDIT COMMITTEE REPORT (CONT’D)


ANNUAL REPORT 2011


3. SUMMARY OF ACTIVITIES

A brief summary and an overall view of the activities of the Audit Committee in discharging their duties and responsibilities during the fi nancial year ended 31 December 2011 are as follows:-

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

ii) met with the external auditors for a private session without Management presence to discuss the scope of the statutory audit and to review the audit plan prior to the commencement of the audit of the Group’s fi nancial statements for the fi nancial year ended 31 December 2011;

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

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

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

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

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

viii) reviewed the internal control statement, audit committee report and internal audit function in the annual report before the Board of Directors approve the Annual Report 2010.

4. INTERNAL AUDIT FUNCTION

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

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

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

During the fi nancial year ended 31 December 2011, internal audit activities have been carried out in accordance with the pre-approved internal audit plan.

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


ANNUAL REPORT 2011

4. INTERNAL AUDIT FUNCTION (CONT’D)

In developing the IA Plan, the IA team will:

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

- identify auditable areas and risk signifi cance of processes.

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

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

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

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

- develop control testing programs.

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

- discuss issues and improvement opportunities with process owners.

- summarise issues, improvement opportunities and recommended next steps.

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



ANNUAL REPORT 2011

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

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

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

• the judgements and estimates made are reasonable and prudent; and

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

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

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

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


ANNUAL REPORT 2011

DIRECTORS’ REPORTfor the year ended December 31, 2011

The directors of CSC STEEL HOLDINGS BERHAD have pleasure in submitting their report and the audited fi nancial statements of the Group and the Company for the year ended December 31, 2011.

PRINCIPAL ACTIVITIES

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

There have been no signifi cant changes in the nature of the principal activities of the Company and its subsidiaries during the fi nancial year other than as disclosed in Note 14 to the Financial Statements.

RESULTS OF OPERATIONS

The results of operations of the Group and the Company for the fi nancial year are as follows: The The

Group Company

RM RM

Profi t before tax 38,563,402 2,197,982Income taxes (9,012,621) (449,809) Profi t for the year 29,550,781 1,748,173

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

DIVIDENDS

Since the date of the last report, a fi nal single tier dividend of 10% per share, amounting to RM37,320,000 and a special single tier dividend of 3% per share, amounting to RM11,196,000 in respect of the previous fi nancial year, was declared and paid by the Company during the fi nancial year.

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

RESERVES AND PROVISIONS

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

ISSUE OF SHARES AND DEBENTURES

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


ANNUAL REPORT 2011

DIRECTORS’ REPORT (CONT’D)

for the year ended December 31, 2011

SHARE OPTIONS

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

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

OTHER STATUTORY INFORMATION

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

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

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

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

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

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


ANNUAL REPORT 2011



DIRECTORS

The following directors served on the Board of the Company since the date of the last report: Tan Chin Teng Pang Fee Yoon Chong Khim Leong @ Chong Kim Leong Brig. Gen. (B) Dato’ Mohd Zaaba @ Nik Zaaba Bin Nik Daud Liang, Hsiu-Chang @ Liang Shu Charng Nee, Lung-Yuan Liu, Jih-Gang (appointed on April 1, 2011)Huang, Tsong-Ying (resigned on April 1, 2011)

In accordance with Article 128 of the Company’s Articles of Association, Messrs. Brig. Gen. (B) Dato’ Mohd Zaaba @ Nik Zaaba Bin Nik Daud and Liang, Hsiu-Chang @ Liang Shu Charng retire by rotation and, being eligible, offer themselves for re-election at the forthcoming Annual General Meeting.

Mr. Liu, Jih-Gang, who was appointed to the Board since the date of the last report, retired under Article 133 of the Company’s Articles of Association at the last Annual General Meeting held on June 21, 2011 and, being eligible, was duly re-elected.

DIRECTORS’ INTERESTS

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

No. of ordinary shares of RM1 each

Balance at Balance at

1.1.2011 Bought Sold 31.12.2011

Shares in the Company

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


ANNUAL REPORT 2011

DIRECTORS’ INTERESTS (CONT’D)

No. of ordinary shares of *NTD10 each

Balance at

1.1.2011/

Date of Balance at

appointment Bought Sold 31.12.2011

Shares in ultimate holding company,

China Steel Corporation

Registered in the name of directors

Liang, Hsiu-Chang @ Liang Shu Charng 183,849 340,701 - 524,550Nee, Lung-Yuan 268,256 22,000 - 290,256Liu, Jih-Gang 136,508 - - 136,508 Deemed interest Liang, Hsiu-Chang @ Liang Shu Charng 395 13 - 408**Liu, Jih-Gang 952 - - 952**

* New Taiwan Dollar

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

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

DIRECTORS’ BENEFITS

Since the end of the previous fi nancial year, none of the directors of the Company has received or become entitled to receive any benefi t (other than those disclosed as directors’ remuneration in the fi nancial statements) by reason of a contract made by the Company or a related corporation with the director or with a fi rm of which the director is a member, or with a company in which the director has a substantial fi nancial interest except for any benefi t which may be deemed to have arisen by virtue of the transactions between the Company and a consultancy fi rm in which Mr. Chong Khim Leong @ Chong Kim Leong, a director of the Company, is also a member, as disclosed in Note 18 to the Financial Statements.

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




ANNUAL REPORT 2011

HOLDING COMPANIES

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

AUDITORS

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

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

LIANG, HSIU-CHANG

@ LIANG SHU CHARNG

TAN CHIN TENG

MelakaApril 6, 2012




ANNUAL REPORT 2011

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

REPORT ON THE FINANCIAL STATEMENTS

We have audited the fi nancial statements of CSC STEEL HOLDINGS BERHAD, which comprise the statements of fi nancial position of the Group and of the Company as of December 31, 2011 and the statements of comprehensive income, statements of changes in equity and statements of cash fl ows of the Group and of the Company for the year then ended, and a summary of signifi cant accounting policies and other explanatory information, as set out on pages 40 to 76.

Directors’ Responsibility for the Financial Statements

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

Auditors’ Responsibility

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

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

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

Opinion

In our opinion, the fi nancial statements have been properly drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the fi nancial position of the Group and of the Company as of December 31, 2011 and of their fi nancial performance and cash fl ows for the year then ended.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

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

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

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


ANNUAL REPORT 2011

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

d) The auditors’ reports on the accounts of the subsidiary companies were not subject to any qualifi cation or any adverse comment made under Sub-section (3) of Section 174 of the Act.

OTHER REPORTING RESPONSIBILITIES

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

OTHER MATTERS

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

DELOITTE & TOUCHE

AF 0834

Chartered Accountants

NG YEE HONG

Partner - 2886/04/13 (J)

Chartered Accountant

April 6, 2012

INDEPENDENT AUDITORS’ REPORT (CONT’D)

to the Members of CSC Steel Holdings Berhad (Incorporated in Malaysia)


ANNUAL REPORT 2011

STATEMENTS OF COMPREHENSIVE INCOMEfor the year ended December 31, 2011

The Group The Company

2011 2010 2011 2010

Note RM RM RM RM

Revenue 5 1,206,148,361 1,034,733,738 4,905,670 172,817,680Cost of sales (1,150,909,872) (935,295,617) - - Gross profi t 55,238,489 99,438,121 4,905,670 172,817,680 Investment revenue 7 7,501,243 7,382,105 599,319 524,772Other income 10,229,122 14,479,896 - 291,894Sales and marketing expenses (22,519,485) (16,416,884) - -General and administrative expenses (11,103,205) (9,773,105) (3,307,007) (31,555,288)Finance costs 8 (542) (44,529) - -Other expenses (782,220) (290,262) - -

Profi t before tax 38,563,402 94,775,342 2,197,982 142,079,058Income taxes 9 (9,012,621) (25,595,087) (449,809) (2,643,441) Profi t for the year, representing total

comprehensive income for the year 10 29,550,781 69,180,255 1,748,173 139,435,617 Basic earnings per ordinary share (sen) 11 7.92 18.54

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


ANNUAL REPORT 2011

STATEMENTS OF FINANCIAL POSITIONas of December 31, 2011


2011 2010 2011 2010

Note RM RM RM RM

ASSETS Non-current assets Property, plant and equipment 12 263,566,732 284,141,240 1,026,256 1,075,655Prepaid lease payments 13 19,016,298 19,253,684 - -Investment in subsidiary companies 14 - - 387,032,531 386,032,531Other investment 15 2,311,200 2,311,200 2,311,200 2,311,200 Total non-current assets 284,894,230 305,706,124 390,369,987 389,419,386 Current assets Inventories 16 199,706,255 179,366,530 - -Trade receivables 17 86,920,362 91,284,627 - -Other receivables and prepaid expenses 17 31,904,916 11,059,679 5,000 27,357Tax recoverable 9,667,696 2,133,179 331,350 126,559Amount due from ultimate holding company 18 - 1,828,665 - -Amount due from subsidiary company 18 - - 88,100,000 71,000,000Fixed income fund, fi xed deposits, short-term placements and cash and bank balances 19 233,190,534 291,069,262 11,350,894 76,466,774 Total current assets 561,389,763 576,741,942 99,787,244 147,620,690 Total Assets 846,283,993 882,448,066 490,157,231 537,040,076

EQUITY AND LIABILITIES Capital and reserves Issued capital 20 380,000,000 380,000,000 380,000,000 380,000,000Treasury shares 21 (7,415,698) (7,415,698) (7,415,698) (7,415,698)Retained earnings 22 366,741,580 385,706,799 84,625,180 131,393,007Share premium 22 32,441,139 32,441,139 32,441,139 32,441,139 Total equity 771,767,021 790,732,240 489,650,621 536,418,448 Non-current liability Deferred tax liability 23 36,385,607 40,905,288 - - Current liabilities Trade payables 24 3,623,695 24,646,483 - -Other payables and accrued expenses 24 31,609,053 25,715,578 506,610 621,628Amount due to ultimate holding company 18 269,570 - - -Amount due to other related companies 18 2,628,736 190,007 - -Short-term borrowing (secured) 25 - 258,470 - -Tax liabilities 311 - - - Total current liabilities 38,131,365 50,810,538 506,610 621,628 Total liabilities 74,516,972 91,715,826 506,610 621,628 Total equity and liabilities 846,283,993 882,448,066 490,157,231 537,040,076



ANNUAL REPORT 2011

STATEMENTS OF CHANGES IN EQUITYfor the year ended December 31, 2011

Non -

distributable Distributable

reserve - reserve -

Issued Treasury Share Retained

Note capital shares premium earnings Total

RM RM RM RM RM

The Group

Balance as of

January 1, 2010 380,000,000 (7,415,698) 32,441,139 373,439,544 778,464,985Total comprehensive income for the year - - - 69,180,255 69,180,255Dividends 26 - - - (56,913,000) (56,913,000) Balance as of

December 31, 2010/

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

The Company

Balance as of


December 31, 2010/


December 31, 2011 380,000,000 (7,415,698) 32,441,139 84,625,180 489,650,621



ANNUAL REPORT 2011

STATEMENTS OF CASH FLOWSfor the year ended December 31, 2011


2011 2010 2011 2010

RM RM RM RM

Cash fl ows from operating activities Profi t for the year 29,550,781 69,180,255 1,748,173 139,435,617 Adjustments for: Income taxes 9,012,621 25,595,087 449,809 2,643,441 Depreciation of property, plant and equipment 40,124,991 39,760,514 81,987 21,240 Write-down of inventories 8,198,867 12,783,465 - - Provision for onerous contracts 6,054,583 3,112,497 - - Amortisation of prepaid lease payments 237,386 236,387 - - Property, plant and equipment written off 51,264 16,078 - - Finance costs 542 44,529 - - Interest income (7,501,243) (7,382,105) (599,319) (524,772) Unrealised (gain)/loss on foreign exchange (219,879) 283,779 - - Dividend income (53,830) - (53,830) (168,000,000) Gain on disposal of property, plant and equipment (19,400) (13,108) - - Impairment loss on investment in a subsidiary company - - - 28,412,775

85,436,683 143,617,378 1,626,820 1,988,301

Movements in working capital: Increase in inventories (28,538,592) (73,273,673) - - Decrease/(Increase) in trade receivables 4,364,265 (12,097,119) - - (Increase)/Decrease in other receivables and prepaid expenses (20,872,454) (1,881,235) 4,083 (206) Decrease/(Increase) in amount due from ultimate holding company 1,828,665 (1,788,249) - -(Decrease)/Increase in trade payables (21,033,763) 19,068,780 - - Increase/(Decrease) in other payables and accrued expenses 2,940,389 (4,159,388) (115,018) (22,217) Increase in amount due to ultimate holding company 269,570 - - -Increase in amount due to other related companies 2,438,729 10,206 - -

Cash from operations 26,833,492 69,496,700 1,515,885 1,965,878 Income tax paid (21,067,608) (23,772,569) (654,600) (587,841) Provision for onerous contracts utilised (3,112,497) - - -Interest paid (542) (94,473) - - Net cash generated from operating activities 2,652,845 45,629,658 861,285 1,378,037


ANNUAL REPORT 2011


2011 2010 2011 2010

Note RM RM RM RM

Cash fl ows from investing activities Interest received 7,528,460 7,396,031 617,593 541,274Proceeds from disposal of property, plant and equipment 19,400 21,900 - - Purchase of property, plant and equipment (18,851,747) (8,061,853) (32,588) (508,877) Additions to prepaid lease payments - (177,983) - -Additions to investment in subsidiary company 14 - - (1,000,000) - Acquisition of subsidiary company, net of cash and cash equivalents 14 (737,900) - - - Increase in amount due from subsidiary company - - (17,100,000) (40,500,000)Decrease in amount due to subsidiary company - - - (31,750,000) Dividend received 53,830 - 53,830 166,000,000 Net cash (used in)/from investing activities (11,987,957) (821,905) (17,461,165) 93,782,397

Cash fl ows from fi nancing activities Dividends paid (48,516,000) (56,913,000) (48,516,000) (56,913,000) Repayment of term loan - (9,000,000) - - Net cash used in fi nancing activities (48,516,000) (65,913,000) (48,516,000) (56,913,000)

Net (decrease)/increase in cash and cash equivalents (57,851,112) (21,105,247) (65,115,880) 38,247,434

Cash and cash equivalents at beginning of year 290,810,792 312,046,934 76,466,774 38,219,340

Effect of exchange rate differences 230,854 (130,895) - -

Cash and cash equivalents at end of year 29 233,190,534 290,810,792 11,350,894 76,466,774


STATEMENTS OF CASH FLOWSfor the year ended December 31, 2011


ANNUAL REPORT 2011

NOTES TO FINANCIAL STATEMENTSfor the year ended December 31, 2011

1. GENERAL INFORMATION

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

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

There have been no signifi cant changes in the nature of the principal activities of the Company and its subsidiaries during the fi nancial year other than as disclosed in Note 14.

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

The fi nancial statements of the Group and of the Company were authorised by the Board of Directors for issuance in accordance with a resolution of the directors on April 6, 2012.

2. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS

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

Adoption of Revised FRSs and Amendments to FRSs

In the current fi nancial year, the Group and the Company have adopted all the new and revised Standards and Issues Committee Interpretations (“IC Int.”) issued by the Malaysian Accounting Standards Board (“MASB”) that are relevant and applicable to their operations and effective for annual periods beginning on or after January 1, 2011 as follows:

FRS 3 Business Combinations (revised) FRS 5 Non-current Assets held for Sale and Discontinued Operations (Amendments relating to plan to sell controlling interest in a subsidiary) FRS 7 Financial Instruments: Disclosures (Amendments relating to improving disclosures about fi nancial instruments) FRS 127 Consolidated and Separate Financial Statements (revised) FRS 132 Financial Instruments: Presentation (Amendments relating to classifi cation of rights issue) FRS 139 Financial Instruments: Recognition and Measurement (Amendments relating to additional consequential amendments arising from revised FRS 3 and revised FRS 127) Improvements to FRSs 2010 IC Int. 4 Determining whether an Arrangement contains a Lease IC Int. 9 Reassessment of Embedded Derivatives (Amendments relating to additional consequential amendments arising from revised FRS 3)

The adoption of these new and revised Standards and IC Interpretations have not affected the amounts reported on the fi nancial statements of the Group and of the Company.

In addition, on November 19, 2011, the MASB issued a new MASB approved accounting framework, the Malaysian Financial Reporting Standards Framework (“MFRS Framework”) in conjunction with its planned convergence of FRSs with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board on January 1, 2012.


ANNUAL REPORT 2011

NOTES TO FINANCIAL STATEMENTS (CONT’D)


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

The MFRS Framework is a fully IFRS-compliant framework, equivalent to IFRSs which is mandatory for adoption by all Entities Other than Private Entities for annual periods beginning on or after January 1, 2012, with the exception for Transitioning Entities. Transitioning Entities, being entities which are subject to the application of MFRS 141 Agriculture and/or IC Interpretation 15 Agreements for the Construction of Real Estate are given an option to defer adoption of the MFRS Framework for an additional one year. Transitioning Entities also includes those entities that consolidates, equity accounts or proportionately consolidates an entity that has chosen to continue to apply the FRS Framework for annual periods beginning on or after January 1, 2012.

Accordingly, the Group and the Company which are not Transitioning Entities will be required to apply MFRS 1 First-time Adoption of Malaysian Financial Reporting Standards (MFRS 1) in their fi nancial statements for the fi nancial year ending December 31, 2012, being the fi rst set of fi nancial statements prepared in accordance with the new MFRS Framework. Further, an explicit and unreserved statement of compliance with IFRSs will be made in these fi nancial statements.

The Group and the Company are currently assessing the impact of adoption of MFRS 1, including identifi cation of the differences in existing accounting policies as compared to the new MFRSs and the use of optional exemptions as provided for in MFRS 1. As at the date of authorisation of issue of the fi nancial statements, accounting policy decisions or elections have not been fi nalised. Thus, the impact of adopting the new MFRS Framework on the Group’s and the Company’s fi rst set of fi nancial statements prepared in accordance with the MFRS Framework cannot be determined and estimated reliably until the process is complete.

3. SIGNIFICANT ACCOUNTING POLICIES

Basis of accounting

The fi nancial statements of the Group and the Company have been prepared under the historical cost convention. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

The principal accounting policies are set out below.

Revenue

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

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

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

Foreign currencies

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

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


ANNUAL REPORT 2011



3. SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

Foreign currencies (cont’d)

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

Employee benefi ts

(a) Short term benefi ts

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

(b) Defi ned contribution plan

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

Income taxes

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

(a) Current tax

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

(b) Deferred tax

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the fi nancial statements and the corresponding tax bases used in the computation of taxable profi t. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profi ts will be available against which those deductible temporary differences, unused tax losses and unused tax credits can be utilised and they are expected to reverse in the foreseeable future. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition of other assets and liabilities in a transaction that affects neither the taxable profi t nor the accounting profi t.

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

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


ANNUAL REPORT 2011




Income taxes (cont’d)

(b) Deferred tax (cont’d)

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

(c) Current and deferred tax for the period

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

Basis of consolidation

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

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

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

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

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

Property, plant and equipment

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

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

Buildings under long leases 2% - 4% Plant and machinery 5% - 66.67% Motor vehicles 10% - 20% Equipment, furniture, fi xture and fi ttings 6.67% - 33.33%

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

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


ANNUAL REPORT 2011




Prepaid lease payments

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

Investments

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

Inventories

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

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

Provisions

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

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

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

Financial instruments

(a) Initial recognition and measurement

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

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

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


ANNUAL REPORT 2011




Financial instruments (cont’d)

(b) Financial instrument categories and subsequent measurement

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

Financial assets

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

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

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

(ii) Held-to-maturity investments

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

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

(iii) Loans and receivables

Loans and receivables category comprises debt instruments that are not quoted in an active market (including fi xed deposits with fi nancial institutions).

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

(iv) Available-for-sale fi nancial assets

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

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

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

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


ANNUAL REPORT 2011




Financial instruments (cont’d)

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

Financial liabilities

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

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

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

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

(c) Derecognition

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

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

Impairment of fi nancial assets

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

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

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

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

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


ANNUAL REPORT 2011




Impairment of fi nancial assets (cont’d)

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

Impairment of non-fi nancial assets

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

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

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

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

Treasury shares

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

Segment reporting

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

Statements of cash fl ows

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

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


ANNUAL REPORT 2011



4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

Critical judgements in applying accounting policies

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

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

Key sources of estimation uncertainty

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

(a) Impairment of non-fi nancial assets

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

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

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


ANNUAL REPORT 2011



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

Key sources of estimation uncertainty (cont’d)

(c) Allowance for doubtful debts

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

(d) Inventories

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

5. REVENUE


2011 2010 2011 2010

RM RM RM RM

Manufacturing and marketing of steel products 1,206,094,531 1,034,733,738 - - Dividend income from subsidiary companies - - - 168,000,000 Dividend income from other investments 53,830 - 53,830 - Management fee from subsidiary companies (Note 18) - - 4,800,000 4,800,000 Rental income (Note 18) - - 51,840 17,680 1,206,148,361 1,034,733,738 4,905,670 172,817,680


ANNUAL REPORT 2011



6. SEGMENT REPORTING

Business segments

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

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

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

Segment revenues and results

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

The Group

Segment revenue Segment profi t

2011 2010 2011 2010

RM RM RM RM

Cold rolled and coated steel products 1,206,094,531 1,034,733,738 29,472,364 85,483,885 Investment holding 4,933,170 172,817,680 1,604,199 141,554,286 Others - - (13,862) (13,180) 1,211,027,701 1,207,551,418 31,062,701 227,024,991 Less: Eliminations (4,879,340) (172,817,680) - (139,587,225) 1,206,148,361 1,034,733,738 31,062,701 87,437,766 Investment revenue 7,501,243 7,382,105 Finance costs (542) (44,529) Profi t before tax 38,563,402 94,775,342 Income taxes (9,012,621) (25,595,087) Profi t for the year 29,550,781 69,180,255

Segment assets and liabilities

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

Segment assets Segment liabilities

2011 2010 2011 2010

RM RM RM RM

The Group

Cold rolled and coated steel products 820,120,877 800,296,153 37,607,412 50,180,511 Investment holding 15,461,261 79,880,986 511,699 621,628 Others 1,034,159 137,748 11,943 8,399 836,616,297 880,314,887 38,131,054 50,810,538 Unallocated 9,667,696 2,133,179 36,385,918 40,905,288 Total 846,283,993 882,448,066 74,516,972 91,715,826


ANNUAL REPORT 2011



6. SEGMENT REPORTING (CONT’D)

Other segment information

Depreciation of property,

Capital additions plant and equipment

2011 2010 2011 2010

RM RM RM RM

The Group

Cold rolled and coated steel products 18,809,189 7,552,976 40,036,754 39,739,274 Investment holding 32,588 508,877 88,237 21,240 Others 9,970 - - - 18,851,747 8,061,853 40,124,991 39,760,514

Geographical segments

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

RM RM RM

The Group

Year ended December 31, 2011 Revenue from external customers by location of customers 1,044,534,246 161,614,115 1,206,148,361 Segment asset by location of assets 846,283,993 - 846,283,993 Capital expenditure by location of assets 18,851,747 - 18,851,747

Year ended December 31, 2010 Revenue from external customers by location of customers 971,545,777 63,187,961 1,034,733,738

Segment asset by location of assets 882,448,066 - 882,448,066

Capital expenditure by location of assets 8,061,853 - 8,061,853

7. INVESTMENT REVENUE


2011 2010 2011 2010

RM RM RM RM

Interest income from fi xed income fund, fi xed deposits and short-term placements with licensed banks 7,501,243 7,382,105 599,319 524,772


ANNUAL REPORT 2011



8. FINANCE COSTS

The Group

2011 2010

RM RM

Interest expense on: Long-term loans - 44,078 Bank overdraft 542 451

542 44,529

9. INCOME TAXES


2011 2010 2011 2010

RM RM RM RM

Estimated tax payable: Current year 16,109,505 28,419,791 509,053 2,643,441 (Over)/Underprovision in prior years (2,577,203) 448,436 (59,244) -

13,532,302 28,868,227 449,809 2,643,441 Deferred tax (Note 23): Current year (7,007,623) (5,343,472) - -

Underprovision in prior year 2,487,942 2,070,332 - -

(4,519,681) (3,273,140) - - 9,012,621 25,595,087 449,809 2,643,441

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


2011 2010 2011 2010

RM RM RM RM

Profi t before tax 38,563,402 94,775,342 2,197,982 142,079,058 Tax at the statutory income tax rate of 25% 9,640,851 23,693,836 549,496 35,519,765 Tax effect of expenses not deductible in determining taxable profi t 213,681 26,285 51,333 7,123,676 Utilisation of investment tax allowances previously not recognised (102,436) (101,750) - - Tax effect of income not taxable in determining taxable profi t (581,196) (466,092) (91,776) (40,000,000) Tax effect of double deduction on import insurance (69,018) (75,960) - - (Over)/Underprovision in prior years: Current tax (2,577,203) 448,436 (59,244) - Deferred tax 2,487,942 2,070,332 - - Tax expense for the year 9,012,621 25,595,087 449,809 2,643,441


ANNUAL REPORT 2011



9. INCOME TAXES (CONT’D)

Tax savings from utilisation of unutilised investment tax allowances of the Group amounted to RM102,436 (2010: RM101,750).

As of December 31, 2011, the subsidiary companies have the following tax-exempt income accounts amounting to about:

(a) RM229,455,000 (2010: RM229,045,000) arising from investment tax allowances claimed and utilised under the Promotion of Investment Act, 1986;

(b) RM2,113,900 (2010: RM2,113,900) arising from reinvestment allowances claimed and utilised under Schedule 7A of the Income Tax Act, 1967; and

(c) RM269,000 (2010: RM269,000) arising from chargeable income waived in 1999 in accordance with Section 12 of the Income Tax (Amended) Act, 1999.

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

10. PROFIT FOR THE YEAR

Profi t for the year is arrived at after crediting/(charging):


2011 2010 2011 2010

RM RM RM RM

Changes in inventories of fi nished goods and work-in-progress 14,511,910 28,102,044 - - Realised gain on foreign exchange 8,279,429 10,269,416 - - Unrealised gain/(loss) on foreign exchange 219,879 (283,779) - - Gain on disposal of property, plant and equipment 19,400 13,108 - - Raw materials and consumables used (1,064,475,140) (871,492,564) - - Depreciation of property, plant and equipment (Note 12) (40,124,991) (39,760,514) (81,987) (21,240) Impairment loss on investment in a subsidiary company - - - (28,412,775) Staff costs (26,844,602) (26,397,826) (2,508,897) (2,432,174) Write-down of inventories (8,198,867) (12,783,465) - - Provision for onerous contracts (6,054,583) (3,112,497) - - Directors’ remuneration: The directors of the Company (349,603) (315,609) (349,603) (315,609) The directors of the subsidiary companies (427,371) (556,341) - - Amortisation of prepaid lease payments (Note 13) (237,386) (236,387) - - Audit fee: Statutory (77,400) (76,000) (18,000) (18,000) Others (18,000) (18,000) (3,000) (3,000) Property, plant and equipment written off (51,264) (16,078) - - Rental of building (5,500) (69,600) - -


ANNUAL REPORT 2011



10. PROFIT FOR THE YEAR (CONT’D)

Staff costs include salaries, contributions to EPF, bonuses and all other related expenses. EPF contributions made during the fi nancial year by the Group and the Company amounted to RM2,567,531 (2010: RM2,669,124) and RM264,240 (2010: RM259,431) respectively.

Directors’ remuneration consists of:


2011 2010 2011 2010

RM RM RM RM

Executive directors: Salaries and other emoluments 625,782 710,068 253,688 229,714 Benefi ts-in-kind 56,392 76,982 1,115 995 Non-executive directors: Fees 94,800 84,900 94,800 84,900 776,974 871,950 349,603 315,609

11. EARNINGS PER ORDINARY SHARE

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

The Group

2011 2010

RM RM

Profi t for the year 29,550,781 69,180,255 Weighted average number of ordinary shares of RM1 in issue 373,200,000 373,200,000 Basic earnings per ordinary share (sen) 7.92 18.54


ANNUAL REPORT 2011



12. PROPERTY, PLANT AND EQUIPMENT

The Group

Equipment, Plant and

Buildings furniture, machinery

Freehold under long Plant and Motor fi xture and under

land leases machinery vehicles fi ttings installation Total

RM RM RM RM RM RM RM

Cost

Balance at January 1, 2010 4,170,809 75,907,798 466,808,738 4,199,569 21,378,670 3,005,903 575,471,487 Additions - 755,429 5,636,864 221,089 1,075,401 373,070 8,061,853 Disposals/Write-offs - - (3,824,511) (83,267) (299,020) - (4,206,798) Balance at December 31, 2010/ January 1, 2011 4,170,809 76,663,227 468,621,091 4,337,391 22,155,051 3,378,973 579,326,542 Arising from acquisition of subsidiary company (Note 14) - 750,000 - - - - 750,000 Additions - 28,898 3,720,235 - 9,150 15,093,464 18,851,747 Disposals/Write-offs - - (1,394,830) (61,511) (228,986) - (1,685,327) Reclassifi cation - 491,895 3,910,063 56,000 1,116,629 (5,574,587) - Balance at December 31, 2011 4,170,809 77,934,020 474,856,559 4,331,880 23,051,844 12,897,850 597,242,962

Accumulated

depreciation Balance at January 1, 2010 - 25,767,569 207,635,905 2,947,989 11,033,777 - 247,385,240 Charge for the year - 3,950,251 32,476,860 524,700 2,808,703 - 39,760,514 Disposals/Write-offs - - (3,824,511) (83,267) (274,150) - (4,181,928) Balance at December 31, 2010/ January 1, 2011 - 29,717,820 236,288,254 3,389,422 13,568,330 - 282,963,826 Charge for the year - 4,002,326 32,661,665 512,249 2,948,751 - 40,124,991 Disposals/Write-offs - - (1,344,672) (61,511) (182,958) - (1,589,141) Balance at December 31, 2011 - 33,720,146 267,605,247 3,840,160 16,334,123 - 321,499,676


ANNUAL REPORT 2011



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

Equipment, Plant and

Buildings furniture, machinery

Freehold under long Plant and Motor fi xture and under

land leases machinery vehicles fi ttings installation Total

RM RM RM RM RM RM RM

Accumulated

impairment loss Balance at January 1, 2010 - - 11,902,385 - 319,091 - 12,221,476 Charge for the year - - - - - - -

Balance at December 31, 2010/ January 1, 2011 - - 11,902,385 - 319,091 - 12,221,476 Charge for the year - - - - - - - Write-offs - - (44,922) - - - (44,922) Balance at December 31, 2011 - - 11,857,463 - 319,091 - 12,176,554 Net book value Balance at December 31, 2011 4,170,809 44,213,874 195,393,849 491,720 6,398,630 12,897,850 263,566,732 Balance at December 31, 2010 4,170,809 46,945,407 220,430,452 947,969 8,267,630 3,378,973 284,141,240


ANNUAL REPORT 2011



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

The Company

Furniture

and fi ttings Buildings Total

RM RM RM

Cost Balance at January 1, 2010 - 589,000 589,000 Additions 326,493 182,384 508,877 Balance at December 31, 2010/January 1, 2011 326,493 771,384 1,097,877 Additions 3,690 28,898 32,588 Balance at December 31, 2011 330,183 800,282 1,130,465 Accumulated depreciation Balance at January 1, 2010 - 982 982 Charge for the year 8,782 12,458 21,240 Balance at December 31, 2010/January 1, 2011 8,782 13,440 22,222 Charge for the year 65,901 16,086 81,987 Balance at December 31, 2011 74,683 29,526 104,209 Net book value Balance at December 31, 2011 255,500 770,756 1,026,256

Balance at December 31, 2010 317,711 757,944 1,075,655

Included in property, plant and equipment of the Group are fully depreciated property, plant and equipment which are still in use with an aggregate cost of approximately RM63,920,000 (2010: RM64,195,000).


ANNUAL REPORT 2011



13. PREPAID LEASE PAYMENTS

Long-term

Leasehold Land

The Group

2011 2010

RM RM

Cost: At beginning of year 22,957,863 22,779,880 Additions during the year - 177,983

At end of year 22,957,863 22,957,863

Less: Cumulative amortisation At beginning of year (3,704,179) (3,467,792) Amortisation for the year (Note 10) (237,386) (236,387)

At end of year (3,941,565) (3,704,179)

Net 19,016,298 19,253,684

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

14. INVESTMENT IN SUBSIDIARY COMPANIES

The Company

2011 2010

RM RM

Unquoted shares - at cost 415,445,306 414,445,306

Less: Accumulated impairment losses At beginning of year (28,412,775) - Impairment loss recognised in the year - (28,412,775) At end of year (28,412,775) (28,412,775)

Net 387,032,531 386,032,531

During the fi nancial year:

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

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


ANNUAL REPORT 2011



14. INVESTMENT IN SUBSIDIARY COMPANIES (CONT’D)

The effect of acquisition of the subsidiary company on the fi nancial position of the Group is as follows: Fair value Acquirees’

recognised on carrying

acquisition amount

RM RM

Property, plant and equipment 750,000 750,000 Cash on hand 12,100 12,100 Other payables and accrued expenses (11,000) (11,000) Tax liabilities (1,100) (1,100) Fair values of net assets acquired 750,000 750,000

Less: Cash and cash equivalents (12,100) Cash outfl ow on acquisition, net of cash acquired 737,900

The post acquisition profi t of subsidiary company acquired:

RM

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

Increase in Group profi t attributable to shareholders 325

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

Effective Percentage

Ownership Principal Activities

Direct subsidiary companies 2011 2010

CSC Steel Sdn. Bhd. 100% 100% Manufacturing and marketing of steel products. Group Steel Corporation (M) Sdn. Bhd. 100% 100% Ceased operations. CSC Bio-Coal Sdn. Bhd. 100% - Re-commenced its business (Formerly known as Ornaconstruction activity in 2011 in production Corporation Sdn. Bhd.) of bio-coal. Indirect subsidiary company CSC Bio-Coal Sdn. Bhd. - 100% Ceased operations. (Formerly known as Ornaconstruction Corporation Sdn. Bhd.) (held through CSC Steel Sdn. Bhd.) Constant Mode Sdn. Bhd. * 100% - Investment holding in real property. (held through CSC Steel Sdn. Bhd.)

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


ANNUAL REPORT 2011



15. OTHER INVESTMENT

The Group and

The Company

2011 2010

RM RM

Outside Malaysia: Unquoted shares - at cost 2,311,200 2,311,200

16. INVENTORIES

The Group

2011 2010

RM RM

At cost: Consumables 25,314,388 19,721,245

At net realisable value: Raw materials 72,560,168 72,325,496 Work-in-progress 39,807,378 45,563,513 Finished goods 62,024,321 41,756,276

174,391,867 159,645,285

199,706,255 179,366,530

The cost of inventories recognised as an expense of the Group includes RM8,198,867 (2010: RM12,783,465) in respect of write-downs of inventories to net realisable value.

17. TRADE RECEIVABLES, OTHER RECEIVABLES AND PREPAID EXPENSES

Trade receivables comprise amounts receivable for the sales of goods. The credit period granted on sales of goods ranges from cash terms to 60 days (2010: cash terms to 60 days).

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

The Group

2011 2010

RM RM

Ringgit Malaysia 82,270,653 81,418,722 United States Dollar 4,649,709 9,865,905 86,920,362 91,284,627

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


ANNUAL REPORT 2011



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

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

The Group

2011 2010

RM RM

Personal guarantee 32,796,851 38,882,934 Corporate guarantee 29,941,335 21,798,804 Bank guarantee 4,405,622 5,335,379 Letter of credit 4,649,709 7,190,776 Total 71,793,517 73,207,893

Ageing of past due but not impaired:

The Group

2011 2010

RM RM

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

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

Other receivables and prepaid expenses consist of:


2011 2010 2011 2010

RM RM RM RM

Refundable deposits 5,205,180 5,199,280 5,000 5,000 Other receivables 1,741,066 1,643,931 - 4,083 Advance payments to suppliers 24,415,655 3,595,170 - - Prepaid expenses 528,185 579,251 - - Interest receivable 14,830 42,047 - 18,274

31,904,916 11,059,679 5,000 27,357

Included in refundable deposits of the Group is a security deposit of RM5,000,000 (2010: RM5,000,000) paid to a supplier.

Advance payments to suppliers amounting to RM24,415,655 (2010: RM3,595,170) represents trade term required by the suppliers under normal course of business of a subsidiary company.


ANNUAL REPORT 2011



18. HOLDING COMPANIES AND RELATED PARTY TRANSACTIONS

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

Amount due to ultimate holding company, equivalent to USD84,083 (2010: Amount due from ultimate holding company, equivalent to USD585,377), which arose mainly from trade transactions and payments on behalf, is unsecured, interest-free and repayable on demand.

Amount due from subsidiary company, eliminated on consolidation, which arose mainly from unsecured advances, is interest-free and repayable on demand.

Amount due to other related companies, which is denominated in United States Dollar, arose mainly from purchases of raw materials, purchase of property, plant and equipment, and advances, is unsecured, interest-free and repayable on demand except for liabilities arising from purchases of raw materials which is payable within the normal trade terms of 14 days (2010: 14 days).

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

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


2011 2010 2011 2010

RM RM RM RM

Ultimate holding company Purchases of raw materials 459,173,651 557,737,867 - - Subsidiary companies Management fee receivable (Note 5) - - 4,800,000 4,800,000 Rental received (Note 5) - - 51,840 17,680 Other related companies Sales of goods 415,154 - - - Purchases of raw materials 77,918,112 63,655,993 - - Purchases of spare parts and consumables 2,031,880 902,958 - - Purchases of property, plant and equipment 1,084,666 688,837 - - Sales commission paid and payable 86,906 - - - Technical fee paid and payable 89,702 24,966 - -

Related party Consultancy fee paid 7,825 - - -


ANNUAL REPORT 2011



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

Compensation of key management personnel

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

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


2011 2010 2011 2010

RM RM RM RM

Short-term benefi ts 1,037,423 1,186,454 315,195 286,143 Post employment benefi ts 146,185 183,633 34,408 31,441

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


2011 2010 2011 2010

RM RM RM RM

Fixed deposits and short-term placements with licensed banks 144,347,011 208,505,340 - 65,500,000 Fixed income fund with licensed fi nancial institutions 75,540,608 77,635,002 10,863,259 10,549,986 Cash and bank balances 13,302,915 4,928,920 487,635 416,788 233,190,534 291,069,262 11,350,894 76,466,774

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

Fixed deposits and Cash and bank

short-term placements balances

2011 2010 2011 2010

RM RM RM RM

The Group Ringgit Malaysia 144,347,011 202,500,000 9,012,925 4,885,856 United States Dollar - 6,005,340 4,289,990 43,064 144,347,011 208,505,340 13,302,915 4,928,920

Fixed deposits and short-term placements, fi xed income fund, cash and bank balances of the Company are all denominated in Ringgit Malaysia.


ANNUAL REPORT 2011



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

(CONT’D)

Fixed income fund has no maturity period and a notice of 1 to 30 days is required for withdrawals. The maturity period for fi xed deposits and short-term placements of the Group ranges from overnight to 1 year (2010: overnight to 1 year).

The interest rates are as follows:

The Group and

The Company

2011 2010

% %

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

20. SHARE CAPITAL

The Group and

The Company

2011 2010

RM RM

Authorised: 1,000,000,000 ordinary shares of RM1 each 1,000,000,000 1,000,000,000 Issued and fully paid: 380,000,000 ordinary shares of RM1 each 380,000,000 380,000,000

21. TREASURY SHARES

The Group and

The Company

2011 2010

RM RM

At cost: At beginning and end of the year (7,415,698) (7,415,698) Number of treasury shares 6,800,000 6,800,000 Total number of outstanding shares in issue after set off (excluding treasury shares held) 373,200,000 373,200,000 Total number of issued and fully paid ordinary shares 380,000,000 380,000,000


ANNUAL REPORT 2011



22. RESERVES


2011 2010 2011 2010

RM RM RM RM

Distributable reserve: Retained earnings 366,741,580 385,706,799 84,625,180 131,393,007 Non-distributable reserve: Share premium 32,441,139 32,441,139 32,441,139 32,441,139

399,182,719 418,147,938 117,066,319 163,834,146

Retained earnings

Distributable reserves are those available for distribution as dividends.

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

As of December 31, 2011, the Company is under the single tier tax system.

Share premium

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

23. DEFERRED TAX LIABILITIES

The Group

2011 2010

RM RM

At beginning of year (40,905,288) (44,178,428) Credit/(Charge) to statements of comprehensive income (Note 9): Current year: Property, plant and equipment 4,326,323 2,710,029 Inventories 2,049,717 2,606,243 Other payables and accrued expenses 631,583 27,200 7,007,623 5,343,472 Underprovision in prior year: Property, plant and equipment (2,487,942) (2,070,332) At end of year (36,385,607) (40,905,288)


ANNUAL REPORT 2011



23. DEFERRED TAX LIABILITIES (CONT’D)

Deferred tax assets/(liabilities) provided in the fi nancial statements are in respect of the tax effects of the following:

The Group

2011 2010

RM RM

Deferred tax liability (before offsetting): Temporary differences arising from property, plant and equipment (44,365,850) (46,204,231) Offsetting 7,980,243 5,298,943 Deferred tax liability (after offsetting) (36,385,607) (40,905,288) Deferred tax assets (before offsetting): Temporary differences arising from: Inventories 5,245,583 3,195,866 Other payables and accrued expenses 2,734,660 2,103,077 7,980,243 5,298,943 Offsetting (7,980,243) (5,298,943) Deferred tax assets (after offsetting) - -

As mentioned in Note 3, deferred tax assets are generally recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that future taxable profi ts will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. As of December 31, 2011, the estimated amount of unused tax losses and unabsorbed capital allowances pertaining to a subsidiary company, for which deferred tax assets have not been recognised in the fi nancial statements due to uncertainty of their realisation, are as follows:

The Group

2011 2010

RM RM

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

1,964,000 1,964,000

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


ANNUAL REPORT 2011



24. TRADE PAYABLES, OTHER PAYABLES AND ACCRUED EXPENSES

Trade and other payables comprise amounts outstanding for trade purchases and ongoing costs. The credit period granted to the Group for trade purchases is 60 days (2010: 60 days).

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

The Group

2011 2010

RM RM

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

Other payables and accrued expenses consist of:


2011 2010 2011 2010

RM RM RM RM

Other payables 8,670,355 8,449,063 221,397 157,200 Advances received from customers 6,572,282 4,641,104 - - Retention sum payable to contractors for installation of plant and machineries 736,227 978,061 - - Accrued expenses 9,575,606 8,534,853 285,213 464,428 Provision for onerous contracts 6,054,583 3,112,497 - - 31,609,053 25,715,578 506,610 621,628

The provision for onerous contracts represents purchase commitments for raw materials that the Group is presently obligated to make under non-cancellable onerous contracts, less revenue expected to be earned. During the fi nancial year, provision for onerous contracts made in the fi nancial statements of the Group amounted to RM6,054,583 (2010: RM3,112,497).

25. SHORT-TERM BORROWING (SECURED)

The Group

2011 2010

RM RM

Bank overdraft (Note 29) - 258,470

The Group has bank overdrafts and other credit facilities amounting to RM200,500,000 (2010: RM207,500,000) obtained from certain local licensed banks. These credit facilities bear interest at rates ranging from 4.04% to 7.35% (2010: 6.80% to 7.05%) per annum and are secured by a debenture covering fl oating charges over all present and future assets of the subsidiary company and a corporate guarantee from the Company.


ANNUAL REPORT 2011



26. DIVIDENDS

The Group and

The Company

2011 2010

RM RM

In respect of fi nancial year ended December 31, 2010: Final single tier dividend – 10% per share 37,320,000 - Special single tier dividend – 3% per share 11,196,000 - In respect of fi nancial year ended December 31, 2009: Special dividend - 6% per share, less 25% tax - 16,794,000 Single tier dividend – 1% per share - 3,732,000 Final dividend - 13% per share, less 25% tax - 36,387,000 48,516,000 56,913,000

27. FINANCIAL RISK MANAGEMENT OBJECTIVE AND POLICIES

(i) Categories of Financial Instruments


2011 2010 2011 2010

RM RM RM RM

Trade receivables 86,920,362 91,284,627 - - Amount due from ultimate holding company - 1,828,665 - - Amount due from subsidiary company - - 88,100,000 71,000,000 Other receivables 1,755,896 1,685,978 - 22,357 Refundable deposits 5,205,180 5,199,280 5,000 5,000 Fixed deposits and short-term placements, fi xed income fund, cash and bank balances 233,190,534 291,069,262 11,350,894 76,466,774

Total loans and receivables,

at amortised cost 327,071,972 391,067,812 99,455,894 147,494,131

Trade payables 3,623,695 24,646,483 - - Amount due to ultimate holding company 269,570 - - - Amount due to other related companies 2,628,736 190,007 - - Other payables 8,670,355 8,449,063 221,397 157,200 Short-term borrowing (secured) - 258,470 - - Total fi nancial liabilities,

at amortised cost 15,192,356 33,544,023 221,397 157,200


ANNUAL REPORT 2011



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

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

(a) Market risk

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

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

(b) Foreign currency risk

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

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

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

The Group

Assets Liabilities

2011 2010 2011 2010

RM RM RM RM

United States Dollar 8,939,699 17,742,974 2,898,306 1,726,614 Foreign currency sensitivity

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

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

Impact of USD

2011 2010

RM RM

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

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


ANNUAL REPORT 2011



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

(c) Interest rate risk

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


2011 2010 2011 2010

RM RM RM RM

Fixed rate instruments Financial assets 219,887,619 286,140,342 10,863,259 76,049,986

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

(d) Credit risk

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

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

The Group does not have signifi cant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The Group defi nes counterparties as having similar characteristics if they are related entities. Concentration of credit risk related to few major customers did not exceed 10% of gross monetary assets at any time during the year.

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

(e) Liquidity risk

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

(f) Cash fl ow risk

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

Fair values

The Group and The Company

2011 2010

Carrying Fair Carrying Fair

Amount Value Amount Value

RM RM RM RM

Financial Asset Other investment (Note 15) 2,311,200 * 2,311,200 *

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

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

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


ANNUAL REPORT 2011



28. CAPITAL RISK MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged from 2010.

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

29. CASH AND CASH EQUIVALENTS


2011 2010 2011 2010

RM RM RM RM

Fixed income fund with licensed fi nancial institutions 75,540,608 77,635,002 10,863,259 10,549,986 Fixed deposits and short- term placements with licensed banks 144,347,011 208,505,340 - 65,500,000 Cash and bank balances 13,302,915 4,928,920 487,635 416,788 Bank overdraft (Note 25) - (258,470) - - 233,190,534 290,810,792 11,350,894 76,466,774

30. CAPITAL COMMITMENTS

As of December 31, 2011, the Group has the following capital commitments in respect of purchase of property, plant and equipment:

The Group

2011 2010

RM RM

Approved and contracted for 19,528,631 5,073,000 Approved but not contracted for 9,119,975 22,586,000 28,648,606 27,659,000

31. CONTINGENT LIABILITIES - UNSECURED

As of December 31, 2011, the Company has issued corporate guarantees totalling RM200,500,000 (2010: RM207,500,000) in respect of credit facilities granted by certain local licensed banks to its subsidiary company. Accordingly, the Company is contingently liable to the extent of the amount of the credit facilities utilised by the subsidiary company as of December 31, 2011. As of December 31, 2011, the credit facilities were unutilised.


ANNUAL REPORT 2011



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

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

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

The breakdown of the retained earnings of the Group and of the Company as of December 31, 2011 into realised and unrealised profi ts or losses, pursuant to the directive, is as follows:

Group Company

2011 2010 2011 2010

RM RM RM RM

Total retained earnings of the Company and

its subsidiaries Realised 434,994,422 456,040,894 84,625,180 131,393,007 Unrealised (42,220,311) (44,301,564) - - 392,774,111 411,739,330 84,625,180 131,393,007 Less: Consolidation adjustments (26,032,531) (26,032,531) - - Total retained earnings as per statements

fi nancial position 366,741,580 385,706,799 84,625,180 131,393,007

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

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


ANNUAL REPORT 2011

The directors of CSC STEEL HOLDINGS BERHAD state that, in their opinion, the accompanying fi nancial statements are drawn up in accordance with Financial Reporting Standards and the provisions of the Companies Act, 1965 in Malaysia so as to give a true and fair view of the fi nancial position of the Group and of the Company as of December 31, 2011 and of their fi nancial performance and the cash fl ows of the Group and of the Company for the year ended on that date.

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

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

LIANG, HSIU-CHANG

@ LIANG SHU CHARNG TAN CHIN TENG

MelakaApril 6, 2012

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

TAN CHIN TENG

Subscribed and solemnly declared by the abovenamed TAN CHIN TENG at Melaka this 6th day of April, 2012.

Before me,

COMMISSIONER FOR OATHS

STATEMENT BY DIRECTORS

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


ANNUAL REPORT 2011

ANALYSIS OF SHAREHOLDINGSAS AT 25 APRIL 2012

Class of Shares : Ordinary shares of RM1.00 eachNo. of Shareholders : 8,589Voting Rights : Every member of the Company present in person or by proxy shall have one vote on a show of hand and in the case of a poll, shall have one vote for every ordinary share held. A proxy need not be a member.

DISTRIBUTIONS OF SHAREHOLDINGS

Holdings No. of Holders % No. of Shares %

Less than 100 6 0.069 248 0.000 100 – 1,000 1,148 13.365 1,072,651 0.287 1,001 – 10,000 5,581 64.978 27,764,286 7.439 10,001 – 100,000 1,656 19.280 51,051,538 13.679 100, 001 – 18,659,999* 195 2.270 70,991,677 19.022 18,660,000 and above** 3 0.034 222,319,600 59.571

Total: 8,589 100.00 373,200,000 100.00

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

SUBSTANTIAL SHAREHOLDERS Direct No. of Indirect No. of

Shareholders Shares Held %(1) Shares Held %(1)

China Steel Asia Pacifi c Holdings Pte. Ltd. (“CSAP”) 171,000,000 45.819 - -

Gan Thian Chin 31,350,000 8.400 4,704,600 1.2606

Lembaga Tabung Haji 19,969,600 5.350 - -

(2) China Steel Corporation (“CSC”) - - 171,000,000 45.819

(3) Ministry of Economic Affairs, Taiwan (“MOEA”) - - 171,000,000 45.819

Notes :

(1) Excludes 6,800,000 CHB shares bought back as at 25 April 2012 and retained as treasury shares.

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

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


ANNUAL REPORT 2011

LIST OF TOP 30 SHAREHOLDERS

No. Name Shareholdings %

1. China Steel Asia Pacifi c Holdings Pte. Ltd. 171,000,000 45.819

2. Gan Thian Chin 31,350,000 8.400

3. Lembaga Tabung Haji 19,969,600 5.350

4. Enterlight Investments Pte Ltd 4,649,600 1.245

5. Lee See Jin 2,801,600 0.750

6. Citigroup Nominees (Asing) Sdn. Bhd. CBNY For Dimensional Emerging Markets Value Fund 2,370,500 0.635

7. Neoh Choo Ee & Company, Sdn. Berhad 1,700,000 0.455

8. Maybank Nominees (Tempatan) Sdn. Bhd. Pledged Securities Account for Rosli Bin Othman 1,571,000 0.420

9. How Sin Son 1,500,000 0.401

10. Nar Swee Kim 1,372,900 0.367

11. Toh Kam Choy 1,338,000 0.358

12. HSBC Nominees (Tempatan) Sdn. Bhd. HSBC (M) Trustee Bhd For MaaKL Al-Faid (4389) 1,246,300 0.333

13. HSBC Nominees (Asing) Sdn. Bhd. Exempt AN for Morgan Stanley & Co. LLC (Client) 1,160,000 0.310

14. Mercsec Nominees (Tempatan) Sdn. Bhd. Pledged Securities Account for Tiong Nam Logistics Holdings Berhad 1,000,000 0.267

15. RHB Capital Nominees (Tempatan) Sdn. Bhd. Pledged Securities Account for Fong Siling (CEB) 1,000,000 0.267

16. CIMSEC Nominees (Tempatan) Sdn. Bhd. CIMB Bank for Tuanku Syed Sirajuddin Ibni Syed Putra Jamalullail (PB Retail Banking) 982,800 0.263

17. Yong Chai Lee 925,100 0.247

18. Lim Seng Qwee 847,900 0.227

19. Tiah Thee Seng 804,100 0.215

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

21. Low Mei Lan 800,000 0.214

22. DB (Malaysia) Nominee (Asing) Sdn. Bhd. Deutsche Bank AG London 781,600 0.209

23. HSBC Nominees (Asing) Sdn. Bhd. Exempt AN for JPMorgan Chase Bank, National Association (Stich Shell Pen) 703,900 0.188

24. Goh Beng Choo 702,000 0.188

25. Md Nazir Bin Md Ali 700,000 0.187

ANALYSIS OF SHAREHOLDINGS (CONT’D)

As At 25 April 2012


ANNUAL REPORT 2011

LIST OF TOP 30 SHAREHOLDERS (CONT’D)

No. Name Shareholdings %

26. Cartaban Nominees (Asing) Sdn. Bhd. SSBT Fund 04RN For Xerox Corporation Retirement & Savings Plan 630,200 0.168

27. HSBC Nominees (Asing) Sdn. Bhd. Exempt AN for JPMorgan Chase Bank, National Association (U.S.A.) 608,127 0.162

28. Koay Keong Chye 600,000 0.160

29. Yeo Khee Huat 600,000 0.160

30. Lim Soon Huat 574,000 0.153

Total 255,089,227 68.332

ANALYSIS OF SHAREHOLDINGS (CONT’D)

As At 25 April 2012

SHAREHOLDINGS OF DIRECTORS

Direct No. of Indirect No. of

Names Shares Held %(1) Shares Held %(1)

1. Liang, Hsiu-Chang - - - -

2. Liu, Jih-Gang - - - -

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

4. Nee, Lung-Yuan - - - -

5. Pang Fee Yoon 20,000 0.005 - -

6. Chong Kim Leong 20,000 0.005 - -

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

(1) Excludes 6,800,000 CHB shares bought back as at 25 April 2012 and retained as treasury shares.(2)

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


ANNUAL REPORT 2011

LIST OF PROPERTIES

Audited Net

Book Value/

Land/ Prepaid

Built-up Operating Lease

area Age of as at

Description (square Building 31-12-2011 Year of

& Location Existing Use Tenure metres) Year(s) (RM’000) Acquisition

Lot PT Nos. 3698 Industrial land 99-year 74,805/ 14 43,313 1995 and 3699, HS (M) built upon lease 23,704 346 and 347 with a expiring respectively, both of factory block on Mukim Bukit Katil, 20.01.2092 Daerah Melaka Tengah Lot No. 5214, Industrial land 99-year 74,590/ 18 16,688 1992 PN 7009, built upon lease 36,334 Mukim Bukit Katil, with a expiring Daerah Melaka factory block on Tengah and an 20.01.2092 administration block Lot PT No. 6108, Building land Freehold 11,347 Not 4,408 1997 HS (D) 30872, built with applicable Mukim Bukit Katil, tennis court, Daerah Melaka basketball Tengah court and car park

Lot PT No. 3701, Vacant 99-year 30,522/ Not 1,478 1992 HS (M) 348, industrial land lease Not applicable Mukim Bukit Katil, expiring applicable Daerah Melaka on Tengah 20.01.2092

Nos. 8-3,10-5 & Residential Freehold 447 15 770 2009 10-12 Hock Mansion, Harmony Condominium, Jalan Ujong Pasir (3 units of condominium)

Block B Pangsapuri Residential Freehold Not 13 744 2011Taman Pelangi, applicable/Ayer Keroh, 1,145Bukit Katil, 75450 Melaka(10 units of apartments)


ANNUAL REPORT 2011

NOTICE OF EIGHTH ANNUAL GENERAL MEETING

AGENDA

AS ORDINARY BUSINESS

1. To receive the Directors’ Report, Audited Financial Statements and the Auditors’ Report for the fi nancial year ended 31 December 2011. 2. To declare a fi nal single tier system of dividend of 5% or 5 sen per share and a special single tier system of dividend of 2% or 2 sen per share for the fi nancial year ended 31 December 2011 for payment on 11 July 2012 as recommended by the Directors. 3. To approve the payment of Directors’ fees amounting to RM94,800 for the fi nancial year ended 31 December 2011. 4. To re-elect the following Directors who retire in accordance with Article 128 of the Company’s Articles of Association and being eligible, have offered themselves for re-election:- i. Liang, Hsiu-Chang @ Liang Shu Charng (Article 128) ii. Brig. Gen. (R) Dato’ Mohd Zaaba @ Nik Zaaba Bin Nik Daud (Article 128) 5. To re-appoint Messrs. Deloitte & Touche as Auditors of the Company and to authorise the Board of Directors to fi x their remuneration.

AS SPECIAL BUSINESS

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

6. Ordinary Resolution

Proposed Renewal of Shareholders’ Mandate for Recurrent Related Party

Transactions of a Revenue or Trading Nature

“THAT, subject to the provisions of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”), the Company and its subsidiaries (collectively the “Group”) be and are authorised to enter into and to give effect to the recurrent related party transactions of a revenue or trading nature with the related parties as set out in Section 2.1.4(a) of the Circular to Shareholders dated 30 May 2012 provided that such transactions and/or arrangements are:-

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

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

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

(the “Renewed Shareholders’ Mandate”).

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

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

Melaka, Malaysia on Thursday, 21 June 2012, at 10.00 a.m., for the following purposes:

(Please refer to

Explanatory Notes)

(Resolution 1)

(Resolution 2)

(Resolution 3)

(Resolution 4)

(Resolution 5)

(Resolution 6)


ANNUAL REPORT 2011

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

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

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

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

whichever is the earlier.

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

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


Proposed New Shareholders’ Mandate for Additional Recurrent Related Party

Transactions of a Revenue or Trading Nature

“THAT, subject to the provisions of the Main Market Listing Requirements of Bursa Securities, the Group be and is authorised to enter into and to give effect to the additional recurrent related party transactions of a revenue or trading nature with the related parties as set out in Section 2.1.4(b) of the Circular to Shareholders dated 30 May 2012 provided that such transactions and/or arrangements are:-

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

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

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

(the “New Shareholders’ Mandate”).

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

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

(Resolution 7)

NOTICE OF EIGHTH ANNUAL GENERAL MEETING (CONT’D)


ANNUAL REPORT 2011

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


whichever is the earlier.

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

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


Proposed Authority For the Company to Purchase its own Ordinary Shares

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

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

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

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

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

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

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

(Resolution 8)



ANNUAL REPORT 2011



whichever occurs fi rst.

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

9. Special Resolution

Proposed Amendment to the Articles of Association (“Proposed Amendment”)

“THAT approval be and is hereby given for the Articles of Association of the Company to be amended in the manner as set out in Section 2.3 of the Company’s Circular to Shareholders dated 30 May 2012 AND THAT the Directors of the Company be and are hereby authorised to do all acts, deeds and things as are necessary and/or expedient to give effect to the Proposed Amendment with full powers to assent to any conditions, modifi cations and/or amendments as may be required by any relevant authorities.”

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

NOTICE OF DIVIDEND ENTITLEMENT AND PAYMENT

NOTICE IS ALSO HEREBY GIVEN that a fi nal single tier system of dividend of 5% or 5 sen per share and a special single tier system of dividend of 2% or 2 sen per share for the fi nancial year ended 31 December 2011, if approved by the shareholders at the Eighth Annual General Meeting of the Company, will be paid on 11 July 2012 to the shareholders whose names appear on the Record of Depositors of the Company at the close of business on 29 June 2012.

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

a. shares transferred into the Depositor’s Securities Account before 4.00 p.m. on 29 June 2012 in respect of ordinary transfers; and

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

By Order of the BoardCSC STEEL HOLDINGS BERHAD

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

Melaka

30 May 2012

(Resolution 9)


ANNUAL REPORT 2011


NOTES:

i. Depositors whose names appear in the Record of Depositors as at 14 June 2012 are entitled to attend, speak and vote at the meeting.

ii. A member of the Company entitled to attend and vote at the meeting may appoint up to two (2) proxies to attend and vote in his/her stead. A proxy may but need not be a member of the Company. If the proxy is not a member, the proxy need not be an advocate, an approved company auditor or a person approved by the Companies Commission of Malaysia.

iii. If a member appoints up to two (2) proxies, the appointments shall be invalid unless he/she specifi es the proportions of his/her holding to be represented by each proxy.

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

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

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

Explanatory Notes: -

Item 1 of the Agenda

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

Ordinary/Special Resolutions 6 - 9

Shareholders are advised to refer to the Circular to Shareholders dated 30 May 2012 which was circulated together with the Annual Report 2011 when considering Resolutions 6 - 9.

Ordinary Resolution 6

Ordinary Resolution 6 proposed under Item No. 6, if passed, will renew the authority given to the Company and its subsidiaries (the “CHB Group”) to enter into recurrent related party transactions of a revenue or trading nature which are necessary for the CHB Group’s day-to-day operations with the respective related parties, subject that the transactions are transacted in the ordinary course of business and on normal commercial terms which are not more favourable to the related parties than those generally available to the public and are not to the detriment of the minority shareholders of the Company.


Ordinary Resolution 7 proposed under Item No. 7, if passed, will authorise the CHB Group to enter into new recurrent related party transactions of a revenue or trading nature which are necessary for the CHB Group’s day-to-day operations with the respective related parties, subject that the transactions are transacted in the ordinary course of business and on normal commercial terms which are not more favourable to the related parties than those generally available to the public and are not to the detriment of the minority shareholders of the Company.


Ordinary Resolution 8 proposed under Item No. 8, if passed, will empower the Directors to purchase CHB Shares through Bursa Malaysia Securities Berhad of up to 10% of the issued and paid-up share capital of the Company.


Special Resolution 9 proposed under Item No. 9, if passed, will incorporate the latest amendments to the Main Market Listing Requirements of Bursa Malaysia Securities Berhad.


ANNUAL REPORT 2011

A. DIRECTORS STANDING FOR RE-ELECTION AND RE-APPOINTMENT

1. Liang Hsiu-Chang @ Liang Shu Charng (Article 128) 2. Brig. Gen. (R) Dato’ Mohd Zaaba @ Nik Zaaba Bin Nik Daud (Article 128)

B. DETAILS OF DIRECTORS WHO ARE STANDING FOR RE-ELECTION AND RE-APPOINTMENT

Details of the Directors who are standing for re-election and re-appointment are set out in the Directors’ profi le appearing on pages 6 to 8 of this Annual Report while their securities holdings are listed in the Analysis of Shareholdings – Shareholdings of Directors on page 81 of this Annual Report.

C. DETAILS OF ATTENDANCE OF DIRECTORS AT BOARD MEETINGS

A total of four (4) Board meetings were held during the fi nancial year ended 31 December 2011.

Details of attendance of Directors holding offi ce at the end of the fi nancial year ended 31 December 2011 are on page 14 of this Annual Report.

D. DATE, TIME AND PLACE OF THE ANNUAL GENERAL MEETING

Date : Thursday, 21 June 2012 Time : 10.00 a.m. Place : Level 1 of the Company’s Offi ce Block 180 Kawasan Industri Ayer Keroh Ayer Keroh, 75450 Melaka, Malaysia

STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING

FORM OF PROXY

I/We (NRIC/Company No: ) (full name in capital letters)

of (full address)

being a member(s) of CSC STEEL HOLDINGS BERHAD (640357-X), hereby appoint

(NRIC No: ) (full name in capital letters)

of (full address)

or failing him/her, (NRIC No: ) (full name in capital letters)

of (full address)

or failing him/her, the Chairman of the Meeting as my/our proxy to vote for me/us and on my/our behalf at the Eighth Annual General Meeting of the Company to be held on Thursday, 21 June 2012, at 10.00 a.m. at Level 1 of the Company’s Offi ce Block, 180 Kawasan Industri Ayer Keroh, Ayer Keroh, 75450 Melaka, Malaysia and any adjournment thereof.

Mark either box with “X” if you wish to direct the proxy how to vote. If no mark is made, the proxy may vote on the resolution or abstain from voting as the proxy thinks fi t. If you appoint two (2) proxies and wish them to vote differently, this should be specifi ed.

My/our proxy/proxies is/are to vote as indicated below:

ITEM AGENDA

1. To receive the Directors’ Report, Audited Financial Statements and the Auditors’ Report for the fi nancial year ended 31 December 2011. 2. To declare a fi nal single tier system of dividend of 5% or 5 sen per share and a special single tier system of dividend of 2% or 2 sen per share for the fi nancial year ended 31 December 2011. 3 To approve the payment of Directors’ fees. 4. To re-elect Liang Hsiu-Chang @ Liang Shu Charng (Article 128) 5. To re-elect Brig. Gen. (R) Dato’ Mohd Zaaba @ Nik Zaaba Bin Nik Daud (Article 128). 6. To re-appoint Messrs. Deloitte & Touche as Auditors of the Company and to authorise the Directors to fi x their remuneration. 7. To approve the Proposed Renewal of Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature. 8. To approve the Proposed New Shareholders’ Mandate for Additional Recurrent Related Party Transactions of a Revenue or Trading Nature. 9. To approve the Proposed Authority for the Company to Purchase its own Shares. 10. To approve the Proposed Amendment to the Articles of Association of the Company.

Signed this day of 2012

Signature Common Seal

Notes:-

i. Depositors whose names appear in the Record of Depositors as at 14 June 2012 are entitled to attend, speak and vote at the meeting.

ii. A member of the Company entitled to attend and vote at the meeting may appoint up to two (2) proxies to attend and vote in his/her stead. A proxy may but need not be a member of the Company. If the proxy is not a member, the proxy need not be an advocate, an approved company auditor or a person approved by the Companies Commission of Malaysia.

iii. If a member appoints up to two (2) proxies, the appointments shall be invalid unless he/she specifi es the proportions of his/her holding to be represented by each proxy.

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

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

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

FORRESOLUTION AGAINST

CSC STEEL HOLDINGS BERHAD (640357-X)

Number of shares held

1

2

3

4

5

6

7

8

9

(Incorporated in Malaysia)

To: The Company Secretary CSC Steel Holdings Berhad

49-B Jalan Melaka Raya 8 Taman Melaka Raya 75000 Melaka Malaysia

Fold along this line (2)

Fold along this line (1)

Stamp