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(Company Number 640357-X)

Ornasteel HOldings BerHad (Company No. 640357-X)

180, Kawasan Industri Ayer Keroh, Ayer Keroh, 75450 Melaka, Malaysia.tel : 606-231 9990 Fax : 606-231 5310email : [email protected] : www.ornagroup.com.my

annual repOrt 2007


A member of CSC Group

A member of CSC Group

ORNASTEEL HOLDINGS BERHAD (640357-X)

ANNuAL REpORT 2007

Contents

2Corporate InformatIon

3Group StruCture

4profIle of DIreCtorS

7Statement from the Group manaGInG DIreCtor

9Corporate GovernanCe StatementS

19Internal Control Statement

20auDIt CommIttee report

24Statement of the DIreCtorS’ reSponSIbIlItIeS

Financial StatementS

25DIreCtorS’ report

30report of the auDItorS

31InCome StatementS

32balanCe SheetS

34StatementS of ChanGeS In equIty

36CaSh flow StatementS

38noteS to the fInanCIal StatementS

65Statement by DIreCtorS

65DeClaratIon

66analySIS of ShareholDInGS

68lISt of propertIeS

69notICe of fourth annual General meetInG

74Statement aCCompanyInG notICe of annual General meetInG

Proxy Form

oRnAsteeL HoLDInGs BeRHAD (640357-X)

2Corporate Information

BoARD oF DIReCtoRs AUDItoRs• Group Managing Director Deloitte & touche (audit firm no. 0834) Su, wei-Jin level 19 uptown 1, no. 1 Jalan SS21/58

Damansara uptown, 47400 petaling Jaya• executive Directors Selangor Darul ehsan tan Chin teng wang, hwa-min @ martin wang soLICItoRs

messrs. Koh Kim leng & Co.• non-Independent non-executive Directors no. 5-1 lorong hang Jebat huang, tsong-ying 75200 melaka brig. Gen. (r) Dato’ mohd Zaaba @ nik Zaaba bin nik Daud

PRInCIPAL BAnKeRs• Independent non-executive Directors malayan banking berhad pang fee yoon hong leong bank berhad Chong Khim leong @ Chong Kim leong rhb bank berhad

united overseas bank (malaysia) berhadAUDIt CoMMItteepang fee yoon (Chairman)Chong Khim leong @ Chong Kim leong ReGIsteReD oFFICetan Chin teng no. 49-b Jalan melaka raya 8

taman melaka raya, 75000 melakaCoMPAnY seCRetARIes tel: 06 – 281 5300wong wei fong (maICSa 7006751) fax: 06 – 281 5332lam Sook Ching (maICSa 7006942)

BUsIness ADDRess180 Kawasan Industri ayer Kerohayer Keroh, 75450 melaka

ReGIstRARspfa registration Services Sdn bhd (19234-w)level 13 uptown 1, no. 1 Jalan SS21/58Damansara uptown, 47400 petaling JayaSelangor Darul ehsantel: 03 - 7718 6000fax: 03 -7722 2311

stoCK eXCHAnGe LIstInGmain board – Industrial productsbursa malaysia Securities berhad

Stock name: onastelStock Code: 5094

3ANNuAL REpORT 2007

Group Structure


(ohb)

ornasteel enterprise Corporation (M) sdn Bhd(228899-p)(“ornasteel”)

Group steel Corporation (M) sdn Bhd(327738-p)(“Group Steel”)

ornaconstructionCorporation sdn Bhd(272448-p)(“ornaconstruction”)

ornasteel manufacturing and marketing of cold rolled steel products.

Group steel manufacturing and marketing of hot dipped galvanised steel, commonly known as GI steel, and prepainted galvanised steel, commonly known as ppGI steel or colour coated steel.

ornaconstruction Dormant company

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

100%

100%

100%


4

Su, wei-Jin was appointed to the ohb board on 1 october 2007 as the Group managing Director. he holds a master of business administration from the national Sun yat-Sen university, taiwan.

he has over thirty (30) years experience in the steel manufacturing industry. prior to his appointment as the Group managing Director of the Company, he was the General manager of marketing Department of China Steel Corporation.

there was only one (1) board meeting in 2007 that was held subsequent to mr. Su’s appointment to the ohb board which mr. Su had duly attended.

training attended by mr. Su during the financial year end are as follows:- - “mandatory accreditation programme” organised by bursatra Sdn. bhd.- “technical engineering forum” conducted by Corporate Synergy Development Centre.- “ISo 14001 emS awareness” conducted by novo quality Services (m) Sdn. bhd.

huang, tsong-ying was appointed to the ohb board on 5 october 2004 and is currently the non-Independent non-executive Director. he graduated from the national Cheng-Chi university, taiwan with a degree in business administration.

he has about thirty (30) years experience in the steel manufacturing industry of which during more than the last fifteen (15) years, he was part of the senior management team. he was the president of China Steel Global trading Corporation, taiwan, a sister steel trading company, prior to his appointment to the board of ohb.

huang, tsong-ying attended all four (4) of the board meetings held in the financial year ended 31 December 2007.

mr. huang has not attended any training during the financial year due to time constraints and a hectic work schedule.

tan Chin teng was appointed to the ohb board on 5 october 2004 as an executive Director and became a member of the audit Committee on 31 July 2007. he holds a master of business administration from the Cambridge management Institute, united Kingdom.

he has over twenty (20) years of financial and accounting experience with an almost equal number of years in a managerial capacity overseeing to financial matters.

tan Chin teng attended all four (4) of the board meetings held in the financial year ended 31 December 2007.

training attended by mr. tan during the financial year end are as follows:- - “updates on listing requirements – Issues and Challenges” organised under bursa

malaysia-maICSa roadshow 2007. - “tax management Seminar” conducted by Deloitte KassimChan.- “Sustainable CSr management System framework” conducted by lean Sigma

International Centre Sdn. bhd.

Profile of Directors

sU, WeI-JIn Group managing Directortaiwanese, age 56

HUAnG, tsonG-YInGnon-Independent non-executive Directortaiwanese, age 56

tAn CHIn tenG executive Directormember of audit Committeemalaysian, age 49

5ANNuAL REpORT 2007

martin wang was appointed to the ohb board on 31 July 2007 as an executive Director. he graduated from the ming Chi Institute of technology with a diploma in mechanical engineering.

prior to joining the ohb Group in 2004, mr. wang was an employee of China Steel Corporation (“CSC”) which he joined in 1976. whilst at CSC, he had served in various capacities, such as engineer, general foreman, assistant superintendent and superintendent of the rolling mill department (hot rolled and cold rolled products).

there were two (2) board meetings in 2007 that were held subsequent to mr. wang’s appointment to the ohb board which mr. wang had duly attended.

training attended by mr. wang during the financial year end is as follows:- - “mandatory accreditation programme” organised by bursatra Sdn. bhd.

pang fee yoon was appointed to the ohb board on 5 october 2004 as an Independent non-executive Director. he is a member of the malaysian Institute of Certified public accountants, malaysian Institute of accountants (“mIa”), malaysian Institute of taxation (“mIt”) and the financial planning association of malaysia.

he has almost twenty (20) years in the public practice and is presently the principal partner of pang fee yoon & Co., an accounting practice established in 1994 which is internationally affiliated with Inpact International.

pang fee yoon attended all four (4) of the board meetings held in the financial year ended 31 December 2007.

training attended by mr. pang during the financial year end is are as follows:- - “understand how bank Consider $ haircut on Difficult loan” organised by mIa.- “updates on listing requirements – Issues and Challenges” organised under bursa

malaysia-maICSa roadshow 2007. - “8th Seminar on taxation” organised by lembaga hasil Dalam negeri malaysia and

Inland revenue officers’ union.

Chong Kim leong was appointed to the ohb board on 5 october 2004 as an Independent non-executive Director. he 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 twenty-five (25) years. he is presently the managing partner of Koh Kim leng & Co., advocates & Solicitors.

Chong Kim leong attended all four (4) of the board meetings held in the financial year ended 31 December 2007.

training attended by mr. Chong during the financial year end is as follows:- - “updates on listing requirements – Issues and Challenges” organised under bursa

malaysia-maICSa roadshow 2007.

Profile of Directors (cont’d)

WAnG, HWA-MIn @ MARtIn WAnG executive Directortaiwanese, age 53

PAnG Fee YoonIndependent non-executive DirectorChairman of audit Committeemalaysian, age 43

CHonG KHIM LeonG @CHonG KIM LeonG Independent non-executive Directormember of audit Committeemalaysian, age 51


6

brig. Gen. (r) Dato’ mohd Zaaba @ nik Zaaba bin nik Daud was appointed to the ohb board on 23 august 2006 as a non-Independent non-executive Director. he 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. Since January 2007, Dato’ nik Zaaba was appointed the Secretary-General of the ex-Services association of malaysia.

Dato’ nik Zaaba attended all four (4) of the board meetings held in the financial year ended 31 December 2007.

training attended by Dato’ nik during the financial year end is as follows:- - “updates on listing requirements – Issues and Challenges” organised under bursa

malaysia-maICSa roadshow 2007.

notes:

1. Directorship in Public Companies. none of the Directors hold any directorship in any public companies incorporated in malaysia or companies which are

the 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 substantial shareholder of the

Company. they each do not have any personal interest in any business arrangement involving the Company.

3. Directors’ shareholdings Details of Directors’ shareholdings in the Company can be found in the “analysis of Shareholdings” section on page 67

of this annual report.

4. non-Conviction of offences none of the Directors has been convicted of any offences, other than traffic offences, within the past ten (10) years.

5. no Conflict of Interest none of the Directors has any conflict of interest with the Company.

BRIG. Gen. (R) DAto’ MoHD ZAABA @ nIK ZAABA BIn nIK DAUDnon-Independent non-executive Directormalaysian, age 60

Profile of Directors (cont’d)

7ANNuAL REpORT 2007

statement from the Group Managing Director

FInAnCIAL RevIeWyear 2007 has been a good year for the Group.

for the financial year ended 31 December 2007, Group revenue surged to rm1.302 billion, increasing by 27% or rm277.4 million from last year (2006: rm1.025 billion). profit before tax registered a double digit growth of 14.4% to rm93.1 million (2006: rm81.4 million). basic earnings per share rose to 21.15 sen from 18.97 sen the year before, a respectable reading for our sector of the steel industry.

a number of factors led to last year’s robust performance namely, the favourable market conditions following strong worldwide demand for steel and the resultant higher selling prices, commissioning of the Group’s new four feet cold rolling mill (“the new Crm“) which raised production capacity by an additional 180,000 metric tons and last but not least, the supporting role played by the Company’s controlling shareholder, China Steel Corporation of taiwan through the provision of strong r&D and technical know-how.

the new Crm has enabled the production of high drawing quality cold rolled steel (“CrC”) and thin gauge CrC (thickness of 0.176 mm to 0.30 mm) and had served to position the Group as a leading producer of high quality CrC in malaysia. production of these CrC has served to enlarge our market share especially in the component, appliance and car-making sectors.

the new Crm came onstream at the right time, at a time when demand picked up, thus the Group was well positioned to reap market opportunities that came its way during the financial year just ended.

on behalf of the Board of Directors of oHB (the “Board”), I am pleased to present the Annual Report and the audited financial statements of the Group for the

financial year ended 31 December 2007.

sU, WeI-JIn GRoUP MAnAGInG DIReCtoR

21 May 2008


8

DIvIDenDIn line with our dividend promise of at least half of our profit after tax as set out in the prospectus issued four (4) years ago, the board has recommended a first and final dividend of 12% or 12 sen per share less income tax of 26% for the financial year ended 31 December 2007. the proposed dividend will be tabled for your approval at ohb’s forthcoming fourth annual General meeting (“aGm”).

BoARD CHAnGesDuring the year, two of our fellow Directors, Dr. Chung, yeong-huei and mr. Chang, Shu-aun, stepped down from the board to return back to taiwan. I was appointed to take over the role of Group managing Director from Dr. Chung and the other position, was filled by mr. martin wang. you can find our respective profiles on pages 4 and 5 of this annual report.

CoRPoRAte soCIAL ResPonsIBILItY (“CsR”) being in the steel industry where the core raw material is an exhaustible and limited resource, the Group is ever conscious of the need to conserve resources and protect the natural environment.

Some of the environmental friendly measures includes taking steps to ensure that industrial discharge are kept to the minimum; in fact, the quality of effluents discharged by the Group surpassed the permitted requirements imposed by the authorities. noise emissions are being kept as low as possible and there has been an instance where a workshop was shifted to another location with the objective to reduce noise pollution to the neighbouring community. more on our CSr activities on page 18 of this annual report.

PRosPeCts AnD oUtLooK FoR tHe CoMInG FInAnCIAL YeAR the Group enters year 2008 against a backdrop of continued high and volatile steel prices, a spillover from the previous year, and expects business conditions to remain challenging.

prices of raw materials such as iron ore and coking coal, key components in steel making, are expected to soar following the recent 65% increase in iron ore prices and over 200% increase in coking coal prices. price of another key component, scrap iron, has also increased as demand outstrips supply.

other challenges anticipated in 2008 are the escalating transportation and fuel charges in tandem with high oil prices. as a result, the upward trend in steel prices is expected to continue unabated, even though prices are already at record levels, at least through the first half of 2008. however, the downside is that the worldwide economy may slow down.

on the local front, bank negara malaysia has projected the malaysian economy to grow by 5 – 6% in 2008 (6.3% in 2007) with the domestic demand being the key growth driver; this augurs well for the Group.

Going forward, the Group is looking at investing in companies for downstream integration. we will continue with the ongoing strategy to work closely with our customers and suppliers alike for development of products that are tailored to suit each need and request. the Group, having a strong reputation for being swift to respond to market changes, would also be intensely monitoring the latest market trends, locally and worldwide, so as to be amongst the first to evolve to changes in fashion, tastes and trend.

ACKnoWLeDGeMent AnD APPReCIAtIon the Group’s strong performance this year was a potent combination of having a dynamic management, outstanding team spirit and staff workforce, supportive customers, suppliers and other stakeholders while not forgetting the strong support and commitment from our major shareholder, China Steel Corporation.

thus, my fellow Directors and I extend them our sincere and heartfelt thanks and appreciation and we look forward to a continued good working relationship and of course, to another record breaking year despite the many challenges ahead.

I in turn take this opportunity to thank my fellow board members, past and present, for their invaluable contribution to the Company and the Group.

I also take this opportunity to record my appreciation to the melaka State Government, the Government of malaysia and the various regulatory authorities for their support and assistance.

stateMent froM the GrouP ManaGinG Director (cont’d)

9ANNuAL REpORT 2007

corporate Governance statements

the Board and management of oHB recognise the importance of good corporate governance in running the operations of the Group and in all of its dealings and are ever mindful of the trust and expectations placed upon their shoulders by the shareholders and stakeholders.

In fulfilling the respective fiduciary duties, the principles of transparency, integrity and professionalism are incorporated into all levels of the Group’s corporate hierarchy. 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 a notch higher.

Corporate governance principles are adopted in activities undertaken by the Group and the board has initiated moves to comply with the best practices of principles of good corporate governance as set out in the malaysian Code of Corporate Governance (the “Code”) and the listing requirements of bursa Securities.

the board is now pleased to report to the shareholders on the manner of application of these principles contained in the Code and the extent of compliance with the best practises set out therein during the financial year just ended.

1. DIReCtoRs

1.1 Board of Directors the board is entrusted with and is fully responsible for the Group’s overall strategy, growth and direction including

its financial performance.

the board provides direction and guidance and has effective control of the Group. It maintains full control of the Group’s activities through the matrix of authority filtering down to the various components of the Group.

the Group managing Director is responsible for ensuring the board’s effectiveness in conducting its business and in fulfilling its responsibilities to stakeholders. he oversees the day-to-day operations and implementation of the board’s corporate and operational policies and strategies. In line with pre-determined authority levels, certain issues such as approval of interim and annual results, significant acquisitions and disposals, long term planning and major capital expenditure are subjected to collective decision by the board.

Certain responsibilities are delegated to the audit Committee which operates within clearly defined parameters as set out in the Committee’s terms of reference, details of which are set out on pages 20 to 22 of this annual report. this is for an added degree of independence and objectivity on matters within the ambit of the audit Committee.

the board has not set up a nomination Committee nor a remuneration Committee preferring instead to carry out the functions associated thereto on a collective basis as elaborated further below.

1.2 Board Balance the board comprises of members of diverse expertise, each of whom has 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 ohb of whom two (2) are Independent non-executive Directors, two (2) are non-Independent non-executive Directors and the rest, executive Directors.


10corPorate Governance stateMents (cont’d)

the profile of each Director is set out on pages 4 to 6 of this annual report.

the Group managing Director together with the executive Directors are responsible for implementing policies and decisions of the board. assisted and supported by a strong management team, they are tasked with the respective day-to-day operations and oversee to the overall development and implementation of the Group’s business and corporate strategies.

the non-executive Directors, besides functioning as a check and balance, brings an element of objectivity to the board and provides the board with a diverse set of experience, expertise and independent judgement to better manage and run the Group.

all board decisions are arrived at after due discussion and consultation and no individual director or group of directors has any undue influence or dominance on the board’s decision making process.

1.3 Board Meetings the board meets at least once on a quarterly basis to review and approve the results of each financial quarter.

additional ad-hoc meetings will be called if needed.

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

following his appointment to the board, mr. Su, wei-Jin, the Group managing Director, chairs the board meetings.

During the financial year ended 31 December 2007, a total of four (4) board meetings were held and the attendances of Directors thereat is set out below:-

Directors attendance

Dr. Chung, yeong-huei (resigned on 1 october 2007) 2 of 3

Su, wei-Jin (appointed on 1 october 2007) 1 of 1

huang, tsong-ying 4 of 4

Chang, Shu-aun (resigned on 31 July 2007) 2 of 2

tan Chin teng 4 of 4

wang, hwa-min @ martin wang (appointed on 1 July 2007) 2 of 2

pang fee yoon 4 of 4

Chong Khim leong @ Chong Kim leong 4 of 4

brig. Gen. (r) Dato’ mohd Zaaba @ nik Zaaba bin nik Daud 4 of 4

1.4 Access to and supply of Information to the Board prior to the convening of a board meeting, the notice and agenda for that board meeting are transmitted to each

board member to be followed by a full set of the board papers for their perusal. the board papers contains information pertinent to the matters to be deliberated at the meeting. any other details or clarifications that may be needed by the Directors on the meeting agenda items would be furnished upon request. In a potential conflict of interest situation, the Director concerned would be required to declare his interest and abstain from the decision making.

11ANNuAL REpORT 2007

corPorate Governance stateMents (cont’d)

the Company Secretaries attend all board meetings as well as audit Committee meetings of the Company. one of their duties includes the minuting of the proceedings at all board meetings together with decisions taken by way of resolutions passed. these minutes are tabled for the confirmation of the Directors at the subsequent board meeting and signed by the Chairman presiding at such subsequent board meeting. the minutes are then kept at the registered office of the Company.

the Company Secretaries are tasked with ensuring that board proceedings are properly adhered to during meetings and that all statutory obligations such as compliance with the listing requirements of bursa Securities, the Companies act, 1965 as well as any other regulatory requirements as may be applicable to the Company falling under their ambit are duly complied with.

they would advise the board on matters relating to corporate governance issues, directors’ responsibilities in compliance with the relevant legislation and regulations and regularly keep them updated on 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 Secretaries. each member also have direct and unrestricted access to senior management of the Company for information relating to the affairs of the Group and they have the authority to seek external professional advice at the expense of the Company if they so require.

1.5 Appointments and Re-elections to the Board matters relating to the appointment of directors are dealt with by the entire board collectively. the Company has

not set up a nomination Committee as the Directors are of the view that given the current size and composition of the board, the nomination of directors is more effectively dealt with by the entire board. In considering appointments of new directors, the board takes into consideration the mix of skills and expertise, experience and potential contributions of the potential incoming director.

the articles of association of the Company provides that all directors including the managing director shall retire from office 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 office until the close of the meeting at which he retires.

the articles further provides that directors who are appointed by the board during the financial period before an aGm are subject to retirement and shall be eligible for re-election by the shareholders at the next aGm of the Company to be held following their appointments.

names of the Directors seeking for re-election at the fourth aGm of the Company are disclosed in the “Statement accompanying notice of aGm” found on page 74 of this annual report.

1.6 Directors’ training mr. Su, wei-Jin and mr. martin wang, hwa-min , the only two (2) Directors of the Company appointed during the financial

year just ended, has each undergone the mandatory accreditation programme conducted by bursatra Sdn. bhd.

while the board has not set in place formal training programmes for the Directors, each of them is aware of the need to undergo appropriate continuous training to broaden their perspectives and to keep abreast of latest developments in the market place and with new statutory and regulatory requirements.

training that the Directors have attended during the financial year is set out on pages 4 to 6 of this annual report.



1.7 Directors’ Remuneration the Company has not established a remuneration Committee. there are presently three (3) Directors holding

executive positions and drawing salaries from the Group.

the remuneration packages for the executive Directors of the Company are to a certain extent, dictated by market competitiveness and are tailored to retain and motivate directors of the quality required to manage the business of the ohb Group and to align the interests of the Directors with those of the shareholders. the contribution, responsibilities and performance of each executive director are also taken into account when determining their respective remuneration packages.

the remuneration packages of the executive directors for the financial year ended 31 December 2007 are as follows:

category Fees(rm)

Salaries & Bonuses

(rm)

other emolu-ments(rm)

Benefits-in-Kind

(rm)total(rm)

executive Directors - 515,860 29,021 91,731 636,612non-executive Directors 69,600 - - - 69,600total 69,600 515,860 29,021 91,731 706,212

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

range of remuneration executive non executive

below rm50,000 - 4rm50,001 to rm100,000 2 -rm100,001 to rm150,000 2 -rm150,001 to rm200,000 - -rm200,001-rm250,000 1 -

note: Details of Directors’ remuneration include directors who have resigned during the year.

2. sHAReHoLDeRs

2.1 shareholders’ Communication and Investor Relation the Company’s annual reports, quarterly announcements of quarterly financial results, circulars to shareholders

(where applicable) and announcements on matters pertaining to corporate and other developments in the Group serve as the primary means of dissemination of information between the board, shareholders, stakeholders and the general public.

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 at the aGm of the Company.

notice of aGm and the annual report are sent to shareholders at least twenty-one (21) days before the date of the aGm. any special business items which have been included in the agenda for the aGm would be accompanied by an explanatory statement in order for the shareholders to have a better understanding on the issues involved and thereby, better evaluation and decision-making.



for certain business/corporate proposals where shareholders’ approval is required, circulars are sent to shareholders within the prescribed time frame in compliance with regulatory and statutory provisions. these circulars provide the necessary details and are sufficiently 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 clarification pertaining to the Group or to request for information regarding operations, business activities, developments and direction of the Group. any queries raised would be attended to by the board and members of senior management would be at hand to provide the necessary information.

3. ACCoUntABILItY AnD AUDIt

3.1 Financial Reporting the Directors are duty bound to present a fair and accurate assessment of the Group’s financial 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 financial statements of the Company and ensuring that 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 financial statements of ohb and the ohb Group is found on page 24 of this annual report.

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 serve to provide a reasonable assurance of an effective and efficient operation and constant compliance with the relevant laws and regulations.

the internal controls in place are meant to safeguard the Group’s assets and thus, shareholders’ investments. a key component in carrying out this responsibility is to ensure that risks are appropriately and adequately managed within the Group. however, it must be noted that such controls by their nature can only provide reasonable assurance but are not absolute assurance against the risk of material errors, frauds or losses occurring.

an overview of the state of internal controls within the Group is set out in the Internal Control Statement on page 19 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 auditors have direct access to the board and to the audit Committee thus ensuring that issues highlighted are treated objectively and are free from any potential management influence.

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 20 to 23 of this annual report.

3.4 statement of Compliance with Best Practices of the Code except for the setting up of the nomination and remuneration Committees, the board considers that it has

complied with the best practices of the Code throughout the financial year ended 31 December 2007.



4. ADDItIonAL CoMPLIAnCe InFoRMAtIon

4.1 Utilisation of Proceeds no proceeds were raised by the Company from any corporate proposals.

4.2 shares Buy-Back at its third aGm held on 15 June 2007, the Company had obtained approval from its shareholders for the

purchase of its own shares. as this approval would expire at the conclusion of the fourth aGm, the Company would be seeking the approval of shareholders at the said forthcoming aGm to renewal this authority.

the Company has bought back a total of 1,539,800 shares of rm1.00 each (“ohb shares”) for a total consideration of rm1,718,999.21 during the financial year ended 31 December 2007, the monthly breakdown as follows:-

monthly Breakdown

no. of oHB shares bought back and retained

as treasury Shares

Buy Back Price per oHB Share (rm)

average cost per oHB Share

(rm)total cost

(rm)lowest Highest

January 10,000 1.06 1.06 1.06 10,678.84february 30,000 1.21 1.21 1.21 36,569.32march 1,499,800 1.04 1.22 1.11 1,671,751.05

total 1,539,800 1,718,999.21

as at 12 may 2007, being the latest practicable date prior to the printing of this annual report, the Company had bought-back a total of 3,567,500 ohb shares, all of which are retained as treasury shares, for a total cost of rm3,519,870.70.

4.3 options, Warrants or Convertible securities the Company has not issued any options, warrants or convertible securities during the financial year.

4.4 American Depository Receipt (“ADR”) or Global Depository Receipt (“GDR”) the Company has not sponsored any aDr or GDr programme during the financial year.

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 financial year.

4.6 non-Audit Fees there were no non-audit fees paid or payable to the external auditors by the Group for the financial year.

4.7 variation in Results there was no profit forecast issued by the Company and its subsidiary companies during the financial year.

4.8 Profit Guarantee there were no profit guarantees given by the Company and its subsidiary companies during the financial year.

4.9 Material Contracts there were no material contracts (not being contracts entered into in the ordinary course of business) entered into

by the Company and its subsidiary companies involving the interests of directors and substantial shareholders which subsisted at the end of the financial year or entered into since the end of the previous financial year.



4.10 Revaluation Policy on Landed Properties the Group does not revalue its landed properties classified as property and equipment unless the need arises.

the existing policy of showing the assets at cost less accumulated depreciation and impairment losses as disclosed in note 3 to the financial statements is a generally accepted accounting practise as well as a cost-saving measure.

4.11 Recurrent Related Party transactions (“RRPt”) at the third aGm of the Company held on 15 June 2007, the Company had obtained from its shareholders a

renewal of the mandate to allow the ohb Group to enter into rrpt of a revenue or trading nature.

Details of the rrpt of a revenue or trading nature conducted during the financial year ended 31 December 2007 pursuant to the said shareholders’ mandate are as follows:-

(I) ornasteel

related Party nature of transactioninterested Directors, major Sharehold-ers and Persons connected

Value of transactions

(rm’000)

China Steel Corporation(“CSC”)

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

Interested Shareholder CSap(a)(i)

Interested Directors SwJ (b), hty (b), whm (b), Cyh(c), CSa(c) and Clm (d)

450,362

payment of technical fees to CSC*(1)

36

purchase of equipment from CSC

273

China Steel Global trading Corporation(“CSGt”)

purchase of machinery, spare parts, rollers and chemicals from CSGt

Interested Shareholder CSap(a)(ii)


5,976

Sales of finished goods to CSGt

0

0payment of sales commission to CSGt

China Steel machinery Corporation(“CSmC”)

purchase of machinery from CSmC

Interested Shareholder CSap(a)(iii)


0

China ecotek Corporation (“CeC”)

purchase of equipment from CeC

Interested Shareholder CSap(a)(iv)


0

InfoChamp Systems Corporation(“ISC”)

purchase of enterprise resource planning System from ISC

Interested Shareholder CSap(a)(v)


1,460


16

related Party nature of transactioninterested Directors, major Shareholders and Persons connected


(rm’000)

Chung hung Steel Corporation (“ChSC”)

purchase of raw materials from ChSC

Interested Shareholder CSap(a)(vi)


73,024

CSGt (Singapore) pte. ltd.(“CSGtS”)

payment of sales commission to CSGtS

Interested Shareholder CSap(a)(vii)

Interested Directors SwJ(b)(e) , hty (b)(e), whm (b), Cyh(c)(e), CSa(c) and Clm (d)

0

(II) Group steel



(rm’000)

CSC purchase of raw materials from CSC

Interested Shareholder CSap(a)(i)


44,184

payment of technical fees to CSC*(2)

13

payment of training fees to CSC

0

CSGt purchase of spare parts, rollers and chemicals from CSGt

Interested Shareholder CSap(a)(ii)


2,490

Sales of finished goods to CSGt

0

payment of sales commission to CSGt

650

CSmC purchase of machinery and spare parts from CSmC

Interested Shareholder CSap(a)(iii)


0

CeC purchase of spare parts and equipment from CSmC

Interested Shareholder CSap(a)(iv)


0

ChSC purchase of raw materials from ChSC

Interested Shareholder CSap(a)(vi)


9,287






(rm’000)

CSGTS Payment of sales commission to CSGTS

Interested Shareholder CSAP(a)(vii)

Interested Directors SWJ (b)(e), HTY (b)(e), WHM (b), CYH(c)

(e), CSA(c) and CLM (d)

92

notes :*(1) payment of technical fees pursuant to a technical Service agreement entered into between Group

Steel and CSC dated 1 february 2006.*(2) payment of technical fees pursuant to a technical Service agreement entered into between

ornasteel 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.

Interested DirectorsSwJ - Su, wei-Jin hty - huang, tsong-yingwhm - wang, hwa-min @ martin wang Clm - Chung, lo-min Cyh - Dr. Chung, yeong-huei CSa - Chang, Shu-aun

(b) Su, wei-Jin, huang, tsong-ying and martin wang, hwa-min, respectively being employees and shareholders of CSC and also directors and shareholders ohb. they are also directors of ornasteel, Group Steel and ornaconstruction (collectively “ohb Subsidiaries”).

(Su, wei-Jin was appointed the Group managing Director of ohb and the managing Director of ohb Subsidiaries on 1 october 2007 while martin wang, hwa-min was appointed a Director of ohb and ohb subsidiaries on 31 July 2007).

(c) Dr. Chung, yeong-huei and Chang, Shu-aun, respectively being employees and shareholders of CSC. they were also directors and shareholders of the Company and directors of ohb Subsidiaries until their resignation from the ohb Group on 1 october 2007 and 31 July 2007 respectively.

(d) Chung, lo-min being a director ohb Subsidiaries and also an employee, director and shareholder of CSC.

(e) Su, wei-Jin, huang, tsong-ying and Dr. Chung, yeong-huei (resigned on 31 august 2007) being directors of CSGtS.



5. stAteMent PeRtAInInG to tHe ALLoCAtIon oF sHARe oPtIons to eMPLoYees

to date, the Company has not established any share options for employees.

In the event the Company establishes such employees share options scheme (“eSoS”), the audit Committee would carry 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 eSoS.

6. CoRPoRAte soCIAL ResPonsIBILItY (“CsR”)

CSr is a concept whereby organisations consider the interests of society by taking responsibility for the impact of their activities on customers, suppliers, employees, shareholders, communities and the environment in all aspects of their operations. this obligation is seen to extend beyond the statutory obligation to comply with legislation and sees organisations voluntarily taking further steps to improve the quality of life for employees and their families as well as for the local community and society at large. In other words, the extent of the CSr of an organisation is measured not in what they do or “give back” to society but how they run their businesses, generate their revenue and utilise their profits.

as stressed by the Group managing Director in his Statement on page 8, the ohb Group places great importance on being a good corporate citizen with special emphasis given to preserving the environment in the conduct of its business.

Initiatives by the ohb Group in terms of CSr during the year just ended are as follows:-

environment as many of the Group’s production processes involve heating, the Group has since 2005 converted from the use of lpG

to natural gas which is safer and less polluting. In addition, the Group has engaged an accredited laboratory as well as a consultant to assist in monitoring the quality of its treated water, chimney emissions and factory air to ensure compliance with the regulatory requirements at all times. an environmental monitoring report will then be prepared and submitted to the Department of environment on a quarterly basis.

we have also densely planted trees along our factory surroundings and as part of our commitment towards safeguarding the environment, we are in the midst of applying for certification under ISo 14001. the ISo 14000 is a series of international standards on environmental management to help organisations minimise how their operations negatively affect the environment (cause adverse changes to air, water, or land) and comply with applicable laws and regulations.

Workplace the Group believes strongly in providing its employees with a safe, conducive and comfortable working environment. In

pursuing continual improvements to safety and health management, we work together with our employees, government agencies, suppliers and sub-contractors to promote the awareness of safety and health. a truly safe working environment will benefit everyone and such a level of safety could only be achieved through the cooperation from all parties.

to assist our employees to achieve a balanced work life, regular recreational activities have been organised, such get-togethers have also served in enhancing rapport between staff and the management. Surveys on employees’ satisfaction are carried out bi-annually to gauge employees’ satisfaction and to obtain feedback on employees’ concerns.

Community every year, the Group provides opportunities for practical training for undergraduates from local universities to expose

them to hands-on experience in this industry.

as there are some residential areas nearby our factory, we have conducted a factory tour for the nearby residents to assuage them and to address their concerns on our factory operations by showing them our high level of compliance with environmental regulatory requirements.


internal control statement

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 profile 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 financial information and records or against financial losses or fraud.

RIsK MAnAGeMentthe 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 informally.

InteRnAL AUDIt FUnCtIonthe internal audit function is jointly undertaken by the Company’s external professional advisor, messrs. ernst & young, together with its in-house internal auditor (collectively referred to as the “Internal audit team”).

the internal audit plan is reviewed annually and if necessary, adjusted to reflect the changes in the Group’s operating environment. any significant change to the plan will be referred to the audit Committee (“aC”) for notification prior to the commencement of the audit. for the financial year under review, internal audits have been carried out in accordance to the approved plan.

on completion of each internal audit, the Internal audit team would submit and discuss the internal audit report with the aC. the internal audit report contains observations and recommendations of the Internal audit team as well as the management’s responses. at subsequent aC meetings, the Internal audit team would update the aC on the timeliness and effectiveness of actions taken by the Group’s management in relation to the internal audit findings.

KeY eLeMents oF InteRnAL ContRoL• TheGrouphasanappropriateorganisationstructurefor

planning, organising and executing the business operations to ensure the Group’s objectives are achieved.

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

• Lines of responsibility and delegations of authority areclearly defined covering areas such as approval of capital expenditure, investment, procurement, finance, etc.

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

• TheGrouphasestablishedaHealthandSafetyCommitteeto review and ensure compliance with occupational safety and health policies and procedures on a continuous basis.

• A monitoring and reporting system, which highlightssignificant variances against key performance indicators, is in place to monitor business performance. Key variances are investigated and followed up by the management.

• Ornasteel and Group Steel have established qualitymanagement system in accordance with ISo 9001:2000 standards, which serves as a foundation for improving quality, customer services as well as customer satisfaction.

for the financial year under review, there were no material losses incurred as a result of any weaknesses in internal control. the management is committed to continuously taking measures to strengthen the control environment.

MonItoRInG ACtIvItIesthe board confirms that there is a continuous process for identifying, evaluating and managing the significant 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: • MonthlyreviewofthemanagementaccountsoftheGroup

by the Senior management team.• Quarterlyreviewoftheunauditedfinancialresultsofthe

Group by the aC and board of Directors.• Conducting internal audit on key risks areas identified

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 specific critical control processes and highlights significant risks impacting the Group to the aC.

this statement was made in accordance with a resolution of the board of Directors passed on 7 may 2008.


20audit 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 financial reporting practices of the Group.

1. CoMPosItIon oF tHe AUDIt CoMMIttee

the audit Committee of ohb comprises of the following members:-

- pang fee yoon (Chairman) (Independent non-executive Director)- Chong Khim leong @ Chong Kim leong (Independent non-executive Director)- Chang, Shu-aun (executive Director) (resigned on 31 July 2007)- tan Chin teng (executive Director) (appointed on 31 July 2007)

2. teRMs oF ReFeRenCe

2.1 Composition of the Audit Committee members of the audit Committee shall be appointed by the board from amongst themselves and the Committee

must fulfil the following requirements:

(a) must compose of no fewer than three (3) members;(b) the majority shall be independent directors;(c) at least one member of the audit Committee:-

(i) must be a member of the malaysian Institute of accountants (“mIa”); or (ii) if he is not a member of the mIa, he must have at least three (3) years’ working experience and:-

(aa) he must have passed the examinations specified in part I of the 1st Schedule of the accountants act 1967; or

(bb) he must be a member of one of the associations of accountants specified in part lI of the 1st Schedule of the accountants act 1967; or

(iii) fulfils such other requirements as prescribed or approved by the exchange.

(d) shall not comprise of any alternate director of the Company.

In the event there arise any vacancy in the audit Committee resulting in the non-compliance of the above, the Company must fill the vacancy within three (3) months.

members of the audit Committee shall elect a Chairman from amongst themselves who shall be an Independent Director.

all members of the audit Committee, including the Chairman, will hold office only so long as they serve as Directors of the Company.

the board of Directors must review the term of office and performance of the audit Committee and each of its members at least once every three (3) years to determine whether the audit Committee and its members have carried out their duties in accordance with its terms of reference.

2.2 secretary of the Audit Committee any one of the Company Secretaries of the Company shall act as Secretary of the audit Committee.


auDit coMMittee rePort (cont’d)

2.3 Duties and Responsibilities of the Audit Committee the audit Committee shall collectively discharge the following functions:

(1) review the following and report the same 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;

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

(f) any related party transaction and conflict 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 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.

2.4 Authority of the Audit Committee the Committee shall, in accordance with a procedure to be determined by the board of directors and at the cost

of the Company,:-

(1) have authority to investigate any matter within its terms of reference;(2) have the resources which are required to perform its duties;(3) have full and unrestricted access to any information pertaining to the Company;(4) have direct communication channels with the external auditors and person(s) carrying out the internal

audit function or activity;


22auDit coMMittee rePort (cont’d)

(5) be able to obtain independent professional or other advice; and(6) be able 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 any particular audit Committee meeting by other directors and employees of the Company shall be at the audit Committee’s invitation and discretion and must be specific to the relevant meeting.

2.5 Conduct of Meetings

i) the audit Committee shall meet at least four (4) times per annum or more frequently as circumstances dictate. additional meetings may be called at any time at the discretion of the Chairman of the audit Committee. the external auditors may request for a meeting if they consider it necessary.

ii) the quorum shall consist of a majority of independent non-executive committee members and shall be not less than two (2).

iii) recommendations to the audit Committee are submitted to the board for approval.

iv) the Company Secretaries shall be in attendance at each audit Committee meeting and record the proceedings of the meeting thereat.

v) minutes of each meeting shall be kept as part of the statutory record of the Company upon confirmation by the members at the subsequent Committee meeting and a copy shall be distributed to each member of the audit Committee.

vi) the managing Director and other appropriate officer may be invited to attend where their presence are considered appropriate as determined by the Chairman of the audit Committee.

vii) the internal and/or external auditors may be invited to appear and be heard at any meeting of the audit Committee.

viii) on the request of the auditor(s), the Chairman of the audit Committee shall also convene a meeting of the audit Committee to consider any matters the auditor(s) believed should be brought to the attention of the board or the shareholders.

ix) where the audit Committee is of the view that a matter reported by it to the board has not been satisfactorily resolved resulting in a breach of the requirements of the bursa Securities, the audit Committee must promptly report such matter to bursa Securities.

3. MeetInGs

During the year ended 31 December 2007, the Committee held a total of four (4) meetings, details of attendance of each Committee member are as follows:

committee members attendancepang fee yoon (Chairman) 4 of 4Chong Khim leong @ Chong Kim leong 4 of 4Chang, Shu-aun (resigned on 31 July 2007) 2 of 2tan Chin teng (appointed on 31 July 2007) 2 of 2


auDit coMMittee rePort (cont’d)

relevant staff in the finance Division, both the outsourced and in-house Internal auditors and a representative of the Company’s controlling shareholder attended all the Committee meetings upon invitation by the Chairman of the Committee. other senior management staff attended certain meetings upon invitation by the Chairman.

4. 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 financial year ended 31 December 2007 are as follows:-

i) reviewed the quarterly financial results of the Group prior to their release to the bursa Securities; ii) reviewed the audit plan and scope of the statutory audit of the Group’s financial statements for the financial year

ended 31 December 2007 with the external auditors;iii) reviewed the annual audited financial statements of the Group and attended to issues arising from the audit of the

financial statements together with the letter from the external auditors to the management and the management’s response thereon;

iv) reviewed the internal audit plan, work done and reports from the internal audit function and considered the findings of internal audit investigations and management’s responses thereon;

v) ensure that appropriate actions are taken on the recommendations raised by the outsourced Internal auditors; and

vi) reviewed related party transactions for compliance with both in-house procedures and the listing requirements of bursa Securities.

5. InteRnAL AUDIt FUnCtIon

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

an external professional advisor, messrs. ernst & young, leads the role of internal audit functions of the Group assisted by the Group’s own in-house internal auditor (collectively referred to as the “Internal audit team”) with the primarily function to assist the audit Committee in discharging their duties and responsibilities more effectively.

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

once the internal control systems have been assessed, the Internal audit team will report their findings to the Committee and provide recommendations for improvements/rectifications.

their findings are embodied in the Internal audit reports and forwarded to the management team for their attention and for the necessary remedial actions as recommended therein.

the audit Committee has full access to the outsourced Internal auditors and receives and reviews reports from them on all internal audits performed. the internal audit department continuously monitors the status of the remedial actions being undertaken by the management.

During the financial year ended 31 December 2007, internal audit activities have been carried out in accordance with the pre-approved internal audit plan.


24statement of the Directors’ responsibilitiesin relation to the financial stateMents

It is a requirement for the Directors to prepare financial 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 financial year and of their results and their cash flows for the year then ended.

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

• theCompanyandtheGrouphaveusedappropriateaccountingpolicieswhichhavebeenconsistentlyapplied.• thejudgementsandestimatesmadearereasonableandprudent;and• allapprovedaccountingstandardswhichareapplicableinMalaysiahavebeencompliedwith.

the Directors are responsible for ensuring that proper accounting records, which disclose with a reasonable degree of accuracy the financial 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.


Directors’ reportfor the year enDeD DeceMber 31, 2007

DirectorS’ rePort the directors of ornaSteel holDInGS berhaD have pleasure in submitting their report and the audited financial statements of the Group and the Company for the year ended December 31, 2007.

PrinciPal actiVity

the Company is principally involved in investment holding and provision of management services. the principal activities of the subsidiary companies are as disclosed under note 13 to the financial Statements.

there have been no significant changes in the nature of the principal activities of the Company and its subsidiary companies during the financial year.

reSUltS oF oPerationS the results of operations of the Group and the Company for the financial year are as follows:

the Group the companyrm rm

Profit before tax 93,089,245 173,745,799

income tax expense (13,433,762) (47,011,612)

net profit for the year 79,655,483 126,734,187

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

DiViDenDS a first and final dividend of 10%, less tax, amounting to rm27,479,573, approved by the shareholders in respect of the previous financial year, was paid by the Company during the financial year.

Subsequent to the financial year, the directors proposed a first and final dividend of 12%, less tax, amounting to rm33,427,206 in respect of the current financial year. the proposed dividend is subject to approval by shareholders at the forthcoming annual General meeting of the Company and has not been included as a liability in the financial statements.

reSerVeS anD ProViSionS there were no material transfers to or from reserves or provisions during the financial year.


26

iSSUe oF SHareS anD DeBentUreS

the Company has not issued any new shares or debentures during the financial year.

treaSUry SHareS

During the financial year, the Company had repurchased a total of 1,539,800 ordinary shares of rm1 each from the open market at an average price of rm1.12 per ordinary share.

Details of the treasury shares are set out in note 19 to the financial Statements.

SHare oPtionS no options have been granted by the Company to any parties during the financial year to take up unissued shares of the Company.

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

otHer Financial inFormation before the balance sheets and income statements 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 satisfied themselves that there were no known bad debts to be written off and that adequate allowances have been made for doubtful debts; and

(b) to ensure that any current assets which were unlikely to realise their book values in the ordinary course of business have

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 necessitate the writing off of bad debts or render the amount of allowance for doubtful debts in the financial

statements of the Group and the Company inadequate to any substantial extent; or (b) which would render the values attributed to current assets in the financial 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 financial statements which would render any amount stated in the financial

statements of the Group and the Company misleading.

Directors’ rePort (cont’d)


otHer Financial inFormation (cont’d)

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 financial year and

secures the liability of any other person; or (b) any contingent liability of the Group and the Company which has arisen except those disclosed in note 28 to the financial

statements since the end of the financial 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 financial year which, in the opinion of the directors, will or may substantially affect the ability of the Group and the Company to meet its 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 financial 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 financial year.

DirectorS the following directors served on the board of the Company since the date of the last report: huang, tsong-ying tan Chin teng pang fee yoon Chong Khim leong @ Chong Kim leong brig. Jen. (b) Dato’ mohd Zaaba @ nik Zaaba bin nik Daud wang, hwa-min @ martin wang (appointed on July 31, 2007)Su, wei-Jin (appointed on october 1, 2007)Chang, Shu-aun (resigned on July 31, 2007)Dr. Chung, yeong-huei (resigned on october 1, 2007)

messrs. Su, wei-Jin and wang, hwa-min @ martin wang who were appointed to the board since the last annual General meeting, retire under article 133 of the Company’s articles of association and, being eligible, offer themselves for re-election.

In accordance with article 128 of the Company’s articles of association, messrs. tan Chin teng and Chong Khim leong @ Chong Kim leong retire by rotation and, being eligible, offer themselves for re-election at the forthcoming annual General meeting of the Company.

DirectorS’ intereStS

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



28

DirectorS’ intereStS (cont’d)

no. of ordinary shares of rm1 eachBalance at

1.1.2007/ date Balance atof appointment Bought Sold 31.12.2007

Shares in the company

registered in the name of directors

huang, tsong-ying 80,000 - - 80,000tan Chin teng 80,000 - - 80,000pang fee yoon 20,000 - - 20,000Chong Khim leong @ Chong Kim leong 20,000 - - 20,000brig. Jen. (b) Dato’ mohd Zaaba @ nik Zaaba bin nik Daud 20,000 - - 20,000wang, hwa-min @ martin wang 65,000 15,000 - 80,000Su, wei-Jin - 80,000 - 80,000

no. of ordinary shares of *ntD10 eachBalance at


Shares in ultimate holding company,china Steel corporation

registered in the name of directors

huang, tsong-ying 224,686 - (116,686) 108,000wang, hwa-min @ martin wang - 41,000 - 41,000Su, wei-Jin - 132,000 (98,000) 34,000

no. of ordinary shares of *ntD10 eachBalance at


Shares in ultimate holding company,china Steel corporation

Deemed interest

huang, tsong-ying - 60,000 - 60,000**wang, hwa-min @ martin wang - 62,000 (32,000) 30,000**Su, wei-Jin 16,000 87,000 (95,000) 8,000**



DirectorS’ intereStS (cont’d)

* 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 Company, all the directors are deemed to have an interest in the shares of the subsidiary companies to the extent of the Company’s interest.

DirectorS’ BeneFitS Since the end of the previous financial year, none of the directors of the Company has received or become entitled to receive any benefit (other than those disclosed as directors’ remuneration in the financial statements) by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member, or with a company in which he has a substantial financial interest.

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

HolDinG comPanieS

the Company is a subsidiary of China Steel asia pacific holdings pte. ltd., incorporated in the republic of Singapore, and the directors regard China Steel Corporation, incorporated in taiwan, as the ultimate holding company.

aUDitorS the auditors, messrs. Deloitte & touche, have indicated their willingness to continue in office. Signed on behalf of the boardin accordance with a resolution of the Directors,

SU, Wei-Jin

WanG, HWa-min @ martin WanG

melakamarch 11, 2008



30

we have audited the accompanying balance sheets as of December 31, 2007 and the related statements of income, cash flows and changes in equity for the year then ended. these financial statements are the responsibility of the Company’s directors. It is our responsibility to form an independent opinion, based on our audit, on these financial statements and to report our opinion to you, as a body, in accordance with Section 174 of the Companies act, 1965 and for no other purpose. we do not assume responsibility towards any other person for the contents of this report.

we conducted our audit in accordance with approved standards on auditing in malaysia. these standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. an audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. an audit also includes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overall financial statements presentation. we believe that our audit provides a reasonable basis for our opinion.

In our opinion: (a) the financial statements are properly drawn up in accordance with the provisions of the Companies act, 1965 and the

applicable malaysian accounting Standards board approved accounting standards in malaysia so as to give a true and fair view of:

(i) the state of affairs of the Group and the Company as of December 31, 2007 and of the results and the cash flows

of the Group and the Company for the year ended on that date; and (ii) the matters required by Section 169 of the act to be dealt with in the financial statements and consolidated

financial statements; and

(b) the accounting and other records and the registers required by the act to be kept by the Company and by the subsidiary companies have been properly kept in accordance with the provisions of the act.

we are satisfied that the financial statements of the subsidiary companies that have been consolidated with the financial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements, and we have received satisfactory information and explanations as required by us for these purposes.

the auditors’ reports on the financial statements of the subsidiary companies were not subject to any qualification and did not include any comment made under Sub-section (3) of Section 174 of the act.

Deloitte & toUcHe af 0834 Chartered accountants

HieW Kim tiam 1717/08/09 (J)partner

march 11, 2008

report of the auditorsto the MeMbers of ornasteel holDinGs berhaD (incorporated in Malaysia)


the Group the company2007 2006 2007 2006

note rm rm rm rm

revenue 5 1,302,009,182 1,024,627,278 176,400,000 25,600,000Cost of sales (1,183,975,065) (914,664,430) - -

Gross profit 118,034,117 109,962,848 176,400,000 25,600,000other operating income 21,545,335 18,005,827 26,823 15,470Sales and marketing expenses (30,947,950) (17,588,890) - -General and administrative expenses (8,319,750) (9,517,939) (2,681,024) (2,505,813)other operating expenses (5,060,835) (18,184,441) - -

profit from operations 7 95,250,917 82,677,405 173,745,799 23,109,657finance cost 8 (2,161,672) (1,320,929) - -

profit before tax 93,089,245 81,356,476 173,745,799 23,109,657Income tax expense 9 (13,433,762) (9,390,133) (47,011,612) (6,513,967)

net profit for the year 79,655,483 71,966,343 126,734,187 16,595,690

basic earnings per ordinary share (sen) 10 21.15 18.97

the accompanying notes form an integral part of the financial Statements.

income statementsfor the year enDeD DeceMber 31, 2007


32


note rm rm rm rm

aSSetS

non-current assetsproperty, plant and equipment 11 370,588,270 369,275,665 - -prepaid lease payments 12 19,774,340 20,009,455 - -Investment in subsidiary companies 13 - - 414,445,306 414,445,306

390,362,610 389,285,120 414,445,306 414,445,306current assetsInventories 14 207,115,695 220,332,765 - -trade receivables 15 108,264,561 105,680,901 - -other receivables, deposits and prepaid expenses 15 7,757,726 8,580,343 13,000 13,000tax recoverable 6,381,469 4,612,179 37,802 11,955amount due from subsidiary company 16 - - 94,800,000 -fixed income fund, fixed deposits, short-term placements and cash and bank balances 17 113,200,413 82,757,160 2,928,307 131,212

442,719,864 421,963,348 97,779,109 156,167

total aSSetS 833,082,474 811,248,468 512,224,415 414,601,473

balance sheetsas of DeceMber 31, 2007



note rm rm rm rm

eQUity anD liaBilitieS

capital and reservesIssued capital 18 380,000,000 380,000,000 380,000,000 380,000,000unappropriated profit 19 280,587,833 228,411,923 102,971,075 3,716,461Share premium 19 32,441,139 32,441,139 32,441,139 32,441,139treasury shares 19 (3,519,871) (1,800,871) (3,519,871) (1,800,871)

total equity 689,509,101 639,052,191 511,892,343 414,356,729

non-current liabilitieslong-term loan 20 37,665,640 37,665,640 - -Deferred tax liability 21 51,319,319 54,014,773 - -

88,984,959 91,680,413 - -

current liabilitiestrade payables 22 6,240,625 6,942,515 - -other payables and accrued expenses 22 26,146,112 25,220,511 332,072 244,744amount due to ultimate holding company 16 52,697 19,415 - -amount due to other related companies 16 443,461 6,647,433 - -Short-term borrowings 23 21,705,519 41,685,990 - -

54,588,414 80,515,864 332,072 244,744

total liabilities 143,573,373 172,196,277 332,072 244,744

total eQUity anD liaBilitieS 833,082,474 811,248,468 512,224,415 414,601,473


balance sheets (cont’d)


34

non-Distributable reservesDistributable

reserve -issued capital

Share Premium

treasuryShares

UnappropriatedProfit total

the Group note rm rm rm rm rm

Balance as of January 1, 2006 380,000,000 32,441,139 - 170,125,580 582,566,719net profit for the year - - - 71,966,343 71,966,343

380,000,000 32,441,139 - 242,091,923 654,533,062Shares buy-back 19 - - (1,800,871) - (1,800,871)Dividends 24 - - - (13,680,000) (13,680,000)

Balance as of December 31, 2006 380,000,000 32,441,139 (1,800,871) 228,411,923 639,052,191

Balance as of January 1, 2007 380,000,000 32,441,139 (1,800,871) 228,411,923 639,052,191net profit for the year - - - 79,655,483 79,655,483

380,000,000 32,441,139 (1,800,871) 308,067,406 718,707,674Shares buy-back 19 - - (1,719,000) - (1,719,000)Dividends 24 - - - (27,479,573) (27,479,573)


statement of changes in equityfor the year enDeD DeceMber 31, 2007


non-Distributable reservesDistributable

reserve –issued capital

Share Premium

treasuryShares

UnappropriatedProfit total

the company note rm rm rm rm rm

Balance as of January 1, 2006 380,000,000 32,441,139 - 800,771 413,241,910net profit for the year - - - 16,595,690 16,595,690

380,000,000 32,441,139 - 17,396,461 429,837,600Shares buy-back 19 - - (1,800,871) - (1,800,871)Dividends 24 - - - (13,680,000) (13,680,000)


Balance as of January 1, 2007 380,000,000 32,441,139 (1,800,871) 3,716,461 414,356,729net profit for the year - - - 126,734,187 126,734,187

380,000,000 32,441,139 (1,800,871) 130,450,648 541,090,916Shares buy-back 19 - - (1,719,000) - (1,719,000)Dividends 24 - - - (27,479,573) (27,479,573)


the accompanying notes from an integral part of the financial Statements.

stateMent of chanGes in equity (cont’d)


36cash flow statementsfor the year enDeD DeceMber 31, 2007


note rm rm rm rmcaSH FloWS From/ (USeD in) oPeratinG actiVitieSprofit before tax 93,089,245 81,356,476 173,745,799 23,109,657adjustments for: Depreciation of property, plant and equipment 38,098,973 31,652,370 - - write-down of inventories 5,592,835 5,326,784 - - finance costs 2,161,672 1,320,929 - - provision for product quality claim 2,000,000 - - - property, plant and equipment written off 1,784,643 14,846,492 - - unrealised loss on foreign exchange 348,153 13,605 - - amortisation of prepaid lease payments 235,115 235,116 - - (Gain)/loss on disposal of property, plant and equipment 159,135 (521,992) - - allowance for doubtful debts no longer required (2,573,249) (7,959,902) - - Interest income (2,485,328) (2,087,784) (26,823) (15,370) Dividend income - - (171,000,000) (20,200,000)

operating profit before working Capital Changes 138,411,194 124,182,094 2,718,976 2,894,287

(Increase)/Decrease in: Inventories 7,624,235 (74,294,600) - - trade receivables (91,409) 31,663,522 - - other receivables, deposits and prepaid expenses 764,248 15,469,064 - (7,643) amount due from ultimate holding company - 2,788,826 - - amount due from subsidiary company - - (44,500,000) -

Increase/(Decrease) in: trade payables (618,902) 4,660,439 - - other payables and accrued expenses (1,731,763) 6,695,767 87,328 102,009 amount due to ultimate holding company 33,282 19,415 - - amount due to subsidiary company - - - (1,091,225) amount due to other related companies (5,595,414) 6,647,433 - -

net Cash from/(used In) operations 138,795,471 117,831,960 (41,693,696) 1,897,428

Income tax paid (17,898,506) (17,615,562) (867,459) (914,922)Interest paid (2,421,435) (1,856,693) - -

net Cash from/(used In) operating activities 118,475,530 98,359,705 (42,561,155) 982,506

caSH FloWS From/(USeD in) inVeStinG actiVitieSInterest received 2,489,023 2,032,342 26,823 15,370proceeds from disposal of property, plant and equipment 73,633 533,878 - -purchase of property, plant and equipment (41,065,748) (78,165,554) - -Dividend received from subsidiary companies - - 74,530,000 14,544,000

net Cash from/(used In) Investing activities (38,503,092) (75,599,334) 74,556,823 14,559,370


cash flow stateMents (cont’d)


note rm rm rm rm

caSH FloWS From/(USeD in) FinancinG actiVitieSproceeds from short-term borrowings 194,400,000 154,900,000 - -proceeds from long-term loan - 37,665,640 - -Short-term borrowings repaid (214,000,000) (163,774,200) - -Dividend paid (27,479,573) (13,680,000) (27,479,573) (13,680,000)repayment of long-term loans - (7,618,000) - -Shares buy-back (1,719,000) (1,800,871) (1,719,000) (1,800,871)

net Cash from/(used In) financing activities (48,798,573) 5,692,569 (29,198,573) (15,480,871)

net increaSe in caSH anD caSH eQUiValentS 31,173,865 28,452,940 2,797,095 61,005

caSH anD caSH eQUiValentS at BeGinninG oF year 82,371,170 53,918,230 131,212 70,207

effect of exchange rate differences (350,141) - - -

caSH anD caSH eQUiValentS at enD oF year 26 113,194,894 82,371,170 2,928,307 131,212

During the financial year, the Group’s additions to property, plant and equipment amounted to rm41,428,989 (2006: rm78,665,149) of which rm363,241 (2006: rm499,595) represents borrowing costs capitalized and the remaining additions of the Group of rm41,065,748 (2006: rm78,165,554) were paid in cash.



38

1. General inFormation

the Company is a public limited liability company, incorporated and domiciled in malaysia.

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 13. there have been no significant changes in the nature of the principal activities of the Company and of its subsidiary companies during the financial year.

the registered office 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 financial statements of the Company have been approved by the board of Directors for issuance on march 11, 2008.

2. BaSiS oF PreParation oF Financial StatementS

the financial statements of the Group and the Company have been prepared in accordance with the provision of the Companies act, 1965 and the applicable malaysian accounting Standards board approved accounting standards in malaysia.

changes in accounting Policies

the Group and the Company adopted financial reporting Standard (“frS”), no. 124 “related party Disclosures” issued by maSb which became effective during the financial year. the adoption of frS 124 did not have any financial impact on the Group’s and the Company’s financial statements for the current and prior years. the impact of frS 124 has been to expand the identification of related parties and related party disclosures, including the disclosure of the compensation of key management personnel as set out in note 16.

accounting Standards issued But not effective

the following new and revised frSs, amendments, Interpretations have been issued but not yet effective until future periods:

relevant to the Group’s and the Company’s operations

frS 107 Cash flow StatementsfrS 112 Income taxesfrS 118 revenuefrS 134 Interim financial reportingfrS 137 provisions, Contingent liabilities and Contingent assets

the revised frSs above are effective for accounting periods beginning on or after 1 July 2007. the directors anticipate that these revised frSs will not have any significant impact on the financial statements of the Group and the Company when the Group and the Company adopt these standards for the financial year beginning on 1 January 2008.

notes to the financial statements


notes to the financial stateMents (cont’d)

2. BaSiS oF PreParation oF Financial StatementS (cont’d)

not relevant to the Group’s and the Company’s operations

frS 111 Construction Contracts (effective 1 July 2007)frS 120 accounting for Government Grants and Disclosure of Government assistance (effective 1 July 2007) frS 121 amendments to frS 121 the effects of Changes in foreign exchange rates - net Investment in a

foreign operation (effective 1 July 2007)

IC Interpretation 1 Changes in existing Decommissioning, restoration & Similar liabilities (effective 1 July 2007)

IC Interpretation 2 members’ Shares in Co-operative entities & Similar Instruments (effective 1 July 2007)

IC Interpretation 5 rights to Interests arising from Decommissioning, restoration & environmental rehabilitation funds (effective 1 July 2007)

IC Interpretation 6 liabilities arising from participating in a Specific market - waste electrical & electronic equipment (effective 1 July 2007)

IC Interpretation 7 applying the restatement approach under frS 1292004 financial reporting in hyperinflationary economies (effective 1 July 2007)

IC Interpretation 8 Scope of frS 2 (effective 1 July 2007)

3. SiGniFicant accoUntinG PolicieS

Basis of accounting

the financial statements of the Group and the Company have been prepared under the historical cost convention.

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, by reference to the agreements entered.

Foreign currencies

the financial 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).


40

3. SiGniFicant accoUntinG PolicieS (cont’d)

Foreign currencies (cont’d)

In preparing the financial 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 on the dates of the transactions. at each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

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

employee Benefits

the Group and the Company are required by law to make monthly contributions to the employees provident fund (“epf”), a statutory defined contribution plan for all their eligible employees based on certain prescribed rates of the employees’ salaries. the Group’s and the Company’s contributions to epf are disclosed separately. the employees’ contributions to epf are included in staff costs. once these contributions have been made, the Group and the Company have no further payment obligations.

Borrowing costs

borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use are capitalised and included as part of the property, plant and equipment. Capitalisation of borrowing cost will cease when the assets are ready for their intended use.

all other borrowing costs are recognised in income statements in the period in which they are incurred.

taxation

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

tax currently payable is based on taxable profit for the year. taxable profit differs from profit as reported in the income statements because it excludes items of income or expense that are taxable or deductible in other years and it further excludes 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 balance sheet date.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and are accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which deductible temporary differences, unutilised tax losses and unused tax credits can be utilised.





taxation (cont’d)

the carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the year when the liability is settled or the asset realised. Deferred tax is charged or credited to the income statements, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

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 intends to settle its current tax assets and liabilities on a net basis.

Basis of consolidation

the consolidated financial statements incorporate the financial statements of the Company and all its subsidiary companies controlled by the Company made up to December 31, 2007. Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

the subsidiary companies are consolidated using the acquisition method of accounting whereby, on acquisition, the assets and liabilities of the subsidiary companies are measured at the fair value at the date of acquisition.

the results of subsidiaries acquired or disposed of during the year are included in the consolidated financial statements from the effective date of acquisition or up to the effective date of disposal, as appropriate.

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

all significant intercompany transactions, balances, income and expenses are eliminated on consolidation.

Property, Plant and equipment and Depreciation

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 4%plant and machinery 5% - 66.67%motor vehicles 6.67% - 20%equipment, furniture, fixture and fittings 6.67% - 33.33%

the residual value, useful life and depreciation method are reviewed at each financial 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 benefits embodied in the property, plant and equipment.


42notes to the financial stateMents (cont’d)


Property, Plant and equipment and Depreciation (cont’d)

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 the income statements.

leases

leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. all other leases are classified as operating leases.

rentals payable under operating leases are charged to the income statements on a straight-line basis over the term of the relevant lease. benefits received and receivable as an incentive to enter into an operating lease are also spread evenly over the lease term.

Prepaid lease Payments on leasehold land

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 indefinite 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 and are amortised over the lease term on a straight-line basis and charged to the income statements for the period.

impairment of assets

at each balance sheet date, the Group and the Company review the carrying amounts of its 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 flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the car-rying amount of the asset (cash-generating unit) is reduced to its recoverable amount. an impairment loss is recognised immediately in the income statements unless the relevant asset is carried at a revalued amount, in which case the impair-ment loss is treated as a revaluation decrease.

where an impairment loss subsequently reverses, the carrying amount of the asset (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 (cash-generating unit) in prior years. a reversal of an impairment loss is recognised immediately in the income statements unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.




investment in Subsidiary companies

Investment in unquoted shares of subsidiary companies are stated at cost. where there is an indication of impairment in the value of the assets, the carrying amount of the investment is 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 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 finished 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.

receivables

receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. appropriate allowances for estimated irrecoverable amounts are recognised in the income statements when there is objective evidence that the asset is impaired. the allowance recognised is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.

Payables

trade and other payables are stated at their nominal values of the consideration to be paid in the future for goods and services received.

Provisions

provisions are made when the Group and the Company has a present legal or constructive obligation arising from past events, where it is and the Company probable that an outflow of resources will be required to settle the obligation and the amount of the provisions can be estimated with reasonable certainty.

Financial instruments

(a) Description

a financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise.

a financial asset is any asset that is cash, a contractual right to receive cash or another financial asset from another enterprise, a contractual right to exchange financial instruments with another enterprise under conditions that are potentially favourable, or an equity instrument of another enterprise. the Group’s principal financial assets are trade and other receivables, intercompany indebtedness, fixed income fund, fixed deposits, short-term placements and cash and bank balances.




Financial instruments (cont’d)

(a) Description (cont’d)

a financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another enterprise, or to exchange financial instruments with another enterprise under conditions that are potentially unfavourable. the Group’s significant financial liabilities include trade and other payables and borrowings, which are stated at their nominal values.

Debt and equity instruments are classified as either liabilities or equity in accordance with the substance of the contractual arrangement.

equity instruments are recorded at the proceeds received, net of direct issue costs.

(b) Financial instruments recognised on the balance sheet

the particular recognition method adopted for financial instruments recognised on the balance sheet is disclosed in the individual accounting policy statements associated with each item.

(c) Fair value estimation for disclosure purpose

In assessing the fair value of financial instruments, the Group and the Company use a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. In particular, the fair value of financial liabilities is estimated by discounting the future contractual cash flows at the current market interest rates available to the Group and the Company for similar financial instruments.

the face value, less any estimated credit adjustments, for financial assets and liabilities with tenure to maturity of less than one financial year are assumed to approximate their fair values.

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.

cash Flow Statement the Group and the Company adopts the indirect method in the preparation of the cash flow statement.

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 insignificant risks of changes in value.



4. critical accoUntinG JUDGementS anD Key SoUrceS oF eStimation Uncertainty

critical judgements in applying the Group’s and the company’s accounting policies

In the process of applying the Group’s and the Company’s accounting policies, which are described in note 3 above, the management is 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 believed to be relevant and reasonable under the circumstances. actual results may differ from these estimates.

estimates and underlying assumptions are reviewed on an ongoing basis. revisions to accounting estimates are recognised in the period in which 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.

critical accounting estimates and assumptions

the following are the key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year:

(i) Impairment of non-financial assets

the Group and the Company assess whether there are any indicators of impairment for all non-financial assets at each balance sheet date, and non-financial 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 flows from the asset or cash generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows. the preparation of estimated future cash flows involves significant judgement and estimations. based on existing knowledge, the Group and the Company believe that the assumptions are appropriate and reasonable, significant changes in the assumptions may materially affect the assessment of recoverable amounts and may lead to changes in impairment charges.

(ii) 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. residual values of property, plant and equipment are estimated by the management based on the assets commercial value at the end of their useful lives. the estimated useful lives and residual values of property, plant and equipment are reviewed at each financial 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.



5. reVenUe


rm rm rm rm

manufacturing and marketing of steel products 1,302,009,182 1,024,627,278 - -Dividend income (gross) from subsidiary companies (note 16) - - 171,000,000 20,200,000management fee from subsidiary companies (note 16) - - 5,400,000 5,400,000

1,302,009,182 1,024,627,278 176,400,000 25,600,000

6. SeGment rePortinG

Business Segments

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

- Cold rolled steel products- Galvanised steel products- Investment holding- others (consist of indirect subsidiary company which is dormant)

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


SeGment analySiS

Business Segment

the Group cold rolled

SteelGalvanised

Steelinvestment

Holding others eliminations consolidatedyear ended December 31, 2007 rm rm rm rm rm rm

revenue external sales 610,922,622 691,086,560 - - - 1,302,009,182Inter-segment sales 362,728,222 - 176,400,000 - (539,128,222) -

total revenue 973,650,844 691,086,560 176,400,000 - (539,128,222) 1,302,009,182

resultsSegment result 57,411,266 28,915,592 173,718,976 (7,403) (167,272,842) 92,765,589

profit from operations 92,765,589finance cost (2,161,672)Income from other investments 2,485,328

profit before tax 93,089,245Income tax expense (13,433,762)

net profit for the year 79,655,483

other informationCapital additions 35,634,340 5,794,649 - - - 41,428,989Depreciation of property, plant and equipment 25,108,670 12,990,178 - 125 - 38,098,973

consolidated Balance Sheet assetsSegment assets 491,145,191 338,699,477 2,979,109 258,697 - 833,082,474

Consolidated total assets 833,082,474

liabilities Segment liabilities 97,917,488 45,173,986 332,072 149,827 - 143,573,373

Consolidated total liabilities 143,573,373 Geographical Segments

the Group year ended December 31, 2007 malaysia asia Pacific europe others consolidated

revenue from external customers by location of customers 961,795,384 192,774,444 131,978,485 15,460,869 1,302,009,182

Segment asset by location of assets 833,082,474 - - - 833,082,474

Capital expenditure by location of assets 41,428,989 - - - 41,428,989



48

SeGment analySiS

Business Segment

the Group cold rolled

SteelGalvanised

Steelinvestment

Holding others eliminations consolidatedyear ended December 31, 2006 rm rm rm rm rm rm

revenue external sales 457,679,504 566,947,774 - - - 1,024,627,278Inter-segment sales 261,493,371 - 25,600,000 - (287,093,371) -

total revenue 719,172,875 566,947,774 25,600,000 - (287,093,371) 1,024,627,278

resultsSegment result 52,402,536 30,219,815 23,094,287 (8,380) (25,118,637) 80,589,621

profit from operations 82,589,621finance cost (1,320,929)Income from other investments 2,087,784

profit before tax 81,356,476Income tax expense (9,390,133)

net profit for the year 71,966,343

other informationCapital additions 75,711,573 3,108,759 - - (155,183) 78,665,149Depreciation of property, plant and equipment 17,171,817 14,480,339 - 214 - 31,652,370

consolidated Balance Sheet assetsSegment assets 459,183,968 351,650,428 156,167 257,905 - 811,248,468

Consolidated total assets 811,248,468

liabilities Segment liabilities 109,411,308 62,391,238 244,744 148,987 - 172,196,277

Consolidated total liabilities 172,196,277

Geographical Segments the Group

year ended December 31, 2006 malaysia asia Pacific europe others consolidated

revenue from external customers by location of customers 894,457,281 76,132,108 49,005,474 5,032,415 1,024,627,278

Segment asset by location of assets 811,248,468 - - - 811,248,468

Capital expenditure by location of assets 78,665,149 - - - 78,665,149




7. ProFit From oPerationS

profit from operations is arrived at after crediting/(charging):


rm rm rm rm

Changes in inventories of finished goods and work-in-progress 17,792,965 42,113,937 - -realised gain on foreign exchange 15,830,242 6,697,821 - -allowance for doubtful debts no longer required - net 2,573,249 7,959,902 - -Interest income from fixed income fund, fixed deposits and short-term placements with licensed banks 2,485,328 2,087,784 26,823 15,370raw materials and consumables used (1,103,285,964) (874,480,905) - -Depreciation of property, plant and equipment (38,098,973) (31,652,370) - -Staff costs (22,335,625) (20,156,836) (2,056,950) (2,122,617)write-down of inventories (5,592,835) (5,326,784) - -provision for product quality claim (note 22) (2,000,000) - - -property, plant and equipment written off (1,784,643) (14,846,492) - -Directors’ remuneration (706,212) (603,523) (283,178) (260,899)unrealised loss on foreign exchange (348,153) (13,605) - -amortisation of prepaid lease payments (235,115) (235,116) - -Gain/(loss) on disposal of property, plant and equipment (159,135) 521,992 - -rental of building (99,200) (98,200) - -audit fee (87,200) (87,200) (18,000) (18,000)Dormitory rental (25,200) (43,200) - -

Staff costs include salaries, contributions to epf, bonuses and all other related expenses. epf contributions made during the financial year by the Group and the Company amounted to rm2,062,028 (2006: rm1,787,763) and rm212,348 (2006: rm216,287) respectively.

Directors’ remuneration consist of:


rm rm rm rmexecutive directors: Salaries and other emoluments 544,881 474,842 210,410 195,659 benefits-in-kind 91,731 66,807 3,168 3,366non-executive directors: fees 69,600 61,874 69,600 61,874

706,212 603,523 283,178 260,899



8. Finance coSt

the Group2007 2006

rm rmInterest expense on: long-term loans 1,204,774 - bankers acceptances 952,639 792,220 bank overdrafts 4,259 12,683 Short-term loan - 504,377 others - 11,649

2,161,672 1,320,929

9. income tax exPenSe


rm rm rm rm

estimated current tax payable: Current year 16,146,439 18,052,456 46,962,198 6,494,044 (over)/underprovision in prior years (17,223) (248,179) 49,414 19,923

16,129,216 17,804,277 47,011,612 6,513,967

Deferred tax (note 21): Current year (816,961) (8,048,712) - - overprovision in prior years (1,878,493) (365,432) - -

(2,695,454) (8,414,144) - -

13,433,762 9,390,133 47,011,612 6,513,967

a numerical reconciliation of income tax expense to profit before tax at the applicable statutory income tax rate to income tax expense at the effective income tax rate is as follows:


9. income tax exPenSe (cont’d)


rm rm rm rm

profit before tax 93,089,245 81,356,476 173,745,799 23,109,657

tax at the statutory income tax rate of 27% (2006: 28%) 25,134,096 22,779,813 46,911,366 6,470,704tax effect of expenses not deductible in determining taxable profit 271,802 544,371 50,832 23,340utilisation of investment tax allowances (7,697,832) (12,940,674) - -tax effect of income not taxable in determining taxable profit (318,548) (262,778) - -tax effect of double deduction on import insurance (165,057) (116,988) - -effect due to change in income tax rate (1,894,983) - - -(over)/underprovision in prior year (1,895,716) (613,611) 49,414 19,923

tax expense for the year 13,433,762 9,390,133 47,011,612 6,513,967

as of December 31, 2007, a subsidiary company has unutilised investment tax and reinvestment allowances carry forward amounting to approximately rm27,955,000 (2006: rm56,465,000) and rm109,458,000 (2006: rm25,158,000) respectively, which subject to the agreement of the tax authorities, are available for set-off against future taxable income of the subsidiary company.

as of December 31, 2007, the subsidiary companies have the following tax-exempt income accounts amounting to about:

(a) rm129,792,000 (2006: rm101,281,000) arising from investment tax allowance claimed and utilised under the promotion of Investment act, 1986;

(b) rm2,113,900 (2006: rm2,113,900) arising from reinvestment allowances claimed and utilised under Schedule 7a of the Income tax act, 1967; and

(c) rm269,000 (2006: rm269,000) arising from chargeable income waived in 1999 in accordance with Section 12 of the Income tax (amended) act, 1999.

these tax-exempt income accounts, which are subject to agreement of the tax authorities, are available for distribution as tax-exempt dividends to the Company.

10. earninGS Per orDinary SHare

basic earnings per ordinary share is calculated by dividing the Group’s net profit for the year by the weighted average number of ordinary shares in issue during the financial year.




10. earninGS Per orDinary SHare (cont’d)

the Group2007 2006

rm rm

net profit for the year 79,655,483 71,966,343

weighted average number of ordinary shares of rm1 in issue 376,699,219 379,333,829

basic earnings per ordinary share (sen) 21.15 18.97

11. ProPerty, Plant anD eQUiPment

the Group

cost Freehold landBuildings Under

long leasesPlant and

machinery motor Vehicles

equipment, Furniture,

Fixtures and Fittings

Plant and machinery

Under installation total

rm rm rm rm rm rm rm

Balance at January 1, 2006 4,170,809 86,769,666 504,531,276 3,220,114 14,507,376 10,150,763 623,350,004additions - 88,000 8,028,304 56,224 2,765,335 67,727,286 78,665,149Disposals/write offs - - (36,793,231) (138,942) (768,065) - (37,700,238)reclassification - - 2,602,440 - - (2,602,440) -

Balance at December 31, 2006 / January 1, 2007 4,170,809 86,857,666 478,368,789 3,137,396 16,504,646 75,275,609 664,314,915additions - - 12,887,830 1,421,109 1,119,873 26,000,177 41,428,989Disposals/write offs - - (4,016,284) (690,340) (628,548) - (5,335,172)reclassification - 7,191,293 72,607,563 - 4,661,360 (84,460,216) -

Balance at December 31, 2007 4,170,809 94,048,959 559,847,898 3,868,165 21,657,331 16,815,570 700,408,732

accumulated Depreciation

Balance at January 1, 2006 - 31,208,905 241,602,512 2,752,737 5,061,746 - 280,625,900Charge for the year - 3,175,527 26,540,333 92,178 1,844,332 - 31,652,370Disposals/write offs - - (21,168,517) (133,541) (539,802) - (21,841,860)

Balance at December 31, 2006 / January 1, 2007 - 34,384,432 246,974,328 2,711,374 6,366,276 - 290,436,410Charge for the year - 3,370,807 32,035,836 238,452 2,453,878 - 38,098,973Disposals/write offs - - (2,260,130) (669,973) (383,352) - (3,313,455)

Balance at December 31, 2007 - 37,755,239 276,750,034 2,279,853 8,436,802 - 325,221,928


11. ProPerty, Plant anD eQUiPment (cont’d)

accumulated impairment loss Freehold land

Buildings Under long

leasesPlant and

machinery motor Vehicles

equipment, Furniture,

Fixtures and Fittings

Plant and machinery

Under installation total

rm rm rm rm rm rm rm

Balance at January 1, 2006 - - 5,581,169 - 21,671 - 5,602,840Disposals/write offs - - (1,000,000) - - - (1,000,000)

Balance at December 31, 2006 / January 1, 2007 - - 4,581,169 - 21,671 - 4,602,840Disposals/write offs - - - - (4,306) - (4,306)

Balance at December 31, 2007 - - 4,581,169 - 17,365 - 4,598,534

net Book Value

2007 4,170,809 56,293,720 278,516,695 1,588,312 13,203,164 16,815,570 370,588,270

2006 4,170,809 52,473,234 226,813,292 426,022 10,116,699 75,275,609 369,275,665

buildings under long leases of a subsidiary company with carrying amount of approximately rm30,813,000 (2006: rm32,608,000) are charged to certain licensed banks for credit facilities granted to the Group as disclosed in note 23.

Included in property, plant and equipment of the Group are fully depreciated property, plant and equipment with a cost of approximately rm12,472,000 (2006: rm8,385,000) which are still in use as of December 31, 2007.

Included within additions of the Group during the financial year is borrowing costs of rm363,241 (2006: rm499,595) specifically related to plant and machinery under installation which were capitalised at capitalisation rates of 4.25% to 4.40% (2006: 4.45% to 4.57%).

12. PrePaiD leaSe PaymentS

prepaid lease payments for land under long lease are as follows:

the Group2007 2006

rm rm

Cost 22,771,803 22,771,803

less: Cumulative amortisation at beginning of year (2,762,348) (2,527,232) amortisation for the year (235,115) (235,116)

at end of year (2,997,463) (2,762,348)

19,774,340 20,009,455



54

12. PrePaiD leaSe PaymentS (cont’d)

prepaid lease payments relate to the lease of land for the Group’s factory and office 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.

land leased by the Group with carrying amount of rm14,797,661 (2006: rm14,973,824) are charged to certain licensed banks for credit facilities granted to a subsidiary company as disclosed in note 23.

13. inVeStment in SUBSiDiary comPanieS

the company2007 2006

rm rm

unquoted shares - at cost 414,445,306 414,445,306

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

effective Percentage ownership Principal activities

2007 2006Direct subsidiary companiesornasteel enterprise Corporation (m) Sdn. bhd. 100% 100% manufacturing and marketing of

steel products

Group Steel Corporation (m) Sdn. bhd. 100% 100% manufacturing and marketing of steel products

indirect subsidiary company

ornaconstruction Corporation Sdn. bhd. 100% 100% Ceased operations (held through ornasteel enterprise Corporation (m) Sdn. bhd.)

14. inVentorieS

the Group2007 2006

rm rm

at cost: raw materials 62,938,459 92,643,943 finished goods 84,250,093 71,138,622 Consumables 14,484,359 15,788,910 work-in-progress 48,622,989 45,384,101

210,295,900 224,955,576less: Inventories written down (3,180,205) (4,622,811)

207,115,695 220,332,765




15. traDe receiVaBleS, otHer receiVaBleS, DePoSitS anD PrePaiD exPenSeS

the Group2007 2006

rm rm

trade receivables 108,290,631 108,280,220allowance for doubtful debts (26,070) (2,599,319)

108,264,561 105,680,901

trade receivables comprise amounts receivable for the sales of goods. the credit period granted on sales of goods is 60 days (2006: 30 days). an allowance has been made for estimated irrecoverable amounts from the sales of goods of rm26,070 (2006: rm2,599,319). this allowance has been determined by reference to past default experience of the Group.

the currency exposure profile of trade receivables of the Group is as follows:

ringgitmalaysia

United StatesDollar total

rm rm rm

2007 98,904,443 9,386,188 108,290,631

2006 103,108,645 5,171,575 108,280,220

other receivables, deposits and prepaid expenses consist of:


rm rm rm rm

other receivables 1,635,248 6,507,822 - -prepaid expenses 831,056 1,772,239 8,000 8,000refundable deposits 5,291,422 300,282 5,000 5,000

7,757,726 8,580,343 13,000 13,000

other receivables of the Group comprise mainly advance payments to suppliers for purchase of property, plant and equipment, raw materials, spare parts and consumables.

Included in refundable deposits of the Group is a security deposit of rm5,000,000 (2006: rm nil) paid to a supplier.



16. HolDinG comPanieS anD relateD Party tranSactionS

the Company is a subsidiary of China Steel asia pacific holdings pte. ltd., incorporated in the republic of Singapore, and the directors regard China Steel Corporation, incorporated in taiwan, as the ultimate holding company.

amount due to ultimate holding company, equivalent to uSD15,754 (2006: uSD5,446), arose mainly from purchases of property, plant and equipment and is unsecured, interest-free and has no fixed terms of repayment.

amount due from subsidiary company, eliminated on consolidation, which arose mainly from advances is unsecured, interest-free and has no fixed terms of repayment.

amount due to other related companies, equivalent to uSD132,574 (2006: uSD1,908,436), arose mainly from purchases of raw materials and property, plant and equipment and is payable within the normal trade term of 14 days (2006: 14 days).

During the financial year, significant related party transactions are as follows:

the Group the Group2007 2006 2007 2006

rm rm rm rm

Ultimate holding company purchases of raw materials 494,546,127 310,919,227 - -purchases of property, plant and equipment 273,121 - - -technical fees payable 48,824 140,482 - -

Subsidiary companiesDividend income - - 171,000,000 20,200,000management fee receivable - - 5,400,000 5,400,000

other related companiespurchases of raw materials 82,311,852 167,715,893 - -purchases of property, plant and equipment 5,253,897 6,112,717 - -purchases of spare parts and consumables 4,671,760 1,541,036 - -other sales commissions 742,359 394,762 - -

compensation of key management personnel

the remuneration of key management personnel, including directors during the year are as follows:


rm rm rm rm

Short-term benefits 1,149,591 1,037,103 255,415 234,939post employment benefits 68,993 57,659 29,021 26,987



17. FixeD income FUnD, FixeD DePoSitS, SHort-term PlacementS anD caSH anD BanK BalanceS


rm rm rm rm

fixed deposits and short-term placements with licensed banks 70,711,200 12,100,000 2,500,000 -fixed income fund with licensed financial institutions 36,823,108 30,388,892 - -Cash and bank balances 5,666,105 40,268,268 428,307 131,212

113,200,413 82,757,160 2,928,307 131,212

fixed income fund has no maturity period and a notice of 1 to 7 days is required for withdrawals up to rm2,000,000 and a notice of 30 days is required for withdrawals above rm2,000,000.

the maturity period for fixed deposits and short-term placements of the Group range from overnight to 30 days (2006: 30 to 60 days).

the interest rates are as follows:

the Group2007 2006

% %

fixed deposits and short-term placements with licensed banks 3.00 - 3.35 2.60 - 3.30fixed income fund with licensed financial institutions 2.90 - 3.30 2.79 - 3.33

the currency exposure profile of fixed income fund, fixed deposits, short-term placements and cash and bank balances of the Group is as follows:

ringgit malaysia

United StatesDollar total

2007 rm rm rm

fixed deposits and short-term placements with licensed banks 63,200,000 7,511,200 70,711,200fixed income fund with licensed financial institutions 36,823,108 - 36,823,108Cash and bank balances 5,524,266 141,839 5,666,105

105,547,374 7,653,039 113,200,413

2006

fixed deposits and short-term placements with licensed banks 12,100,000 - 12,100,000fixed income fund with licensed financial institutions 30,388,892 - 30,388,892Cash and bank balances 37,065,235 3,203,033 40,268,268

79,554,127 3,203,033 82,757,160

the cash and bank balances of the Company are all denominated in ringgit malaysia.



18. SHare caPital

2007 2006rm rm

authorised: ordinary shares of rm1 each at beginning and end of year 1,000,000,000 1,000,000,000

issued and fully paid:ordinary shares of rm1 each at beginning and end of year 380,000,000 380,000,000

19. reSerVeS


rm rm rm rm

Distributable reserve: unappropriated profit 280,587,833 228,411,923 102,971,075 3,716,461

non-distributable reserves: Share premium 32,441,139 32,441,139 32,441,139 32,441,139 treasury shares (3,519,871) (1,800,871) (3,519,871) (1,800,871)

309,509,101 259,052,191 131,892,343 34,356,729

Distributable reserves are those available for distribution as dividends. based on the estimated tax credit available and the prevailing tax rate applicable to dividends, the Company has sufficient tax credits under Section 108 of the Income tax act, 1967 to frank payment of dividend out of its entire unappropriated profit as of December 31, 2007 without additional tax liabilities being incurred.

the malaysian budget 2008 introduced a single tier dividend system with effect from year of assessment 2008. as such, the Company is given an irrevocable option to disregard the balance of dividend franking credit that is available in order to switch to the new single tier system from the year of assessment 2008. upon such election, the Company will only be allowed to distribute single tier exempt dividend (without tax credit attached) to shareholders and the recipient of the dividend will not be able to claim tax credit as in the previous imputation system. as at the end of the financial year, the Company has not elected to switch to the single tier tax system.

Share Premium

Share premium arose from the issuance of rm379,999,998 ordinary shares of rm1 each pursuant to the acquisitions of ornasteel enterprise Corporation (m) Sdn. bhd. and Group Steel Corporation (m) Sdn. bhd. at an issue price of approximately rm1.09 per ordinary share.



19. reSerVeS (cont’d)

treasury Shares

2007 2006rm rm

at cost: beginning of the year (1,800,871) - repurchased during the year (1,719,000) (1,800,871)

end of the year (3,519,871) (1,800,871)

number of treasury shares: beginning of the year 2,027,700 - repurchased during the year 1,539,800 2,027,700

end of the year 3,567,500 2,027,700

total number of outstanding shares in issue after set off (excluding treasury shares held) 376,432,500 377,972,300

total number of issued and fully paid ordinary shares 380,000,000 380,000,000

During the financial year, the Company had repurchased a total of 1,539,800 (2006: 2,027,700) ordinary shares of rm1 each from the open market at an average price of rm1.12 (2006: rm0.89) per ordinary share which were held as treasury shares in accordance with the requirement of Section 67a of the Companies act, 1965. the share buy-back transactions were financed by internally generated funds.

20. lonG-term loan

the Group2007 2006

rm rm

long-term loan - secured 37,665,640 37,665,640

the Group’s long-term loan from a local licensed bank bears interest at 4.23% to 4.40% (2006: 4.45% to 4.57%) per annum and is repayable in 8 equal quarterly instalments of rm4,500,000 and a final instalment of rm1,665,640, commencing two and a half years after the date of first drawdown on July 10, 2006.

the long-term loan is secured by a corporate guarantee of rm45,000,000 issued by the Company.



21. DeFerreD tax liaBility

the Group2007 2006

rm rm

at beginning of year 54,014,773 62,428,917transfer to income statements (note 9) (2,695,454) (8,414,144)

at end of year 51,319,319 54,014,773

the deferred tax liability of the Group is in respect of the tax effects of temporary differences arising from:

the GroupDeferred tax liability/(asset)

2007 2006rm rm

property, plant and equipment 53,519,655 56,349,591others (2,200,336) (2,334,818)

51,319,319 54,014,773

as mentioned in note 3, deferred tax assets are generally recognised for all deductible temporary differences, unutilised tax losses and unused tax credits to the extent that it is probable that future taxable profits will be available against which the deferred tax assets can be utilised. as of December 31, 2007, the estimated amount of deferred tax asset calculated at current tax rate pertaining to a subsidiary company not recognised in the financial statements, is as follows:

2007 2006rm rm

unutilised tax losses 392,000 392,000property, plant and equipment 1,300 1,300

393,300 393,300

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



22. 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 ranges from 5 to 60 days (2006: 5 to 60 days).

the currency exposure profile of trade payables of the Group is as follows:

ringgit malaysia

United States Dollar total

rm rm rm

2007 4,425,097 1,815,528 6,240,625

2006 3,579,169 3,363,346 6,942,515

other payables and accrued expenses consist of:


rm rm rm rm

other payables 14,807,686 14,644,663 161,819 104,558accrued expenses 11,338,426 10,575,848 170,253 140,186

26,146,112 25,220,511 332,072 244,744

Included in the accrued expenses of the Group is a provision of rm2,000,000 (2006: rm nil) for product quality claim made by a customer.

23. SHort-term BorroWinGS

the company2007 2006

rm rm

bankers acceptances 21,700,000 41,300,000bank overdrafts (note 26) 5,519 385,990

21,705,519 41,685,990

the Group has bank overdrafts and other credit facilities amounting to rm254,000,000 (2006: rm254,000,000) obtained from certain local licensed banks. these credit facilities bear interest at rates ranging from 3.58% to 7.5% (2006: 3.46% to 7.5%) per annum and are secured by a debenture covering fixed and floating charges over the present and future assets of the subsidiary companies and a corporate guarantee from the Company.



24. DiViDenDS

the Group2007 2006

rm rm

first and final dividend paid - 10%, less tax for 2006 (2006: 5%, less tax for 2005) 27,479,573 13,680,000

Subsequent to the financial year, the directors proposed a first and final dividend of 12%, less tax, amounting to rm33,427,206 in respect of the current financial year. the proposed dividend is subject to approval by shareholders at the forthcoming annual General meeting of the Company and has not been included as a liability in the financial statements.

25. Financial riSK manaGement oBJectiVe anD PolicieS

the operations of the Group are subject to a variety of financial risks, including foreign currency risk, interest rate risk, credit risk, liquidity risk and cash flow risk. the Group has taken measures to minimise the Group’s exposure to risk and/or costs associated with the financing, investing and operating activities of the Group.

Foreign Currency Risk

the Group undertakes certain transactions in united States Dollar 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 financial derivatives instruments during the financial year.

Interest Rate Risk

the Group is exposed to interest rate risk through the impact of rate changes on fixed income fund, fixed deposits, short-term placements, short-term borrowings and long-term loans as disclosed in notes 17, 20 and 23.

Credit Risk

the Group has no major concentration of credit risk and manage these risks by monitoring credit ratings and limiting the aggregate financial exposure to any individual counter party. the Group extends credit to its customers based upon careful evaluation of the customers’ financial condition and credit history.

the Group places fixed income fund, fixed deposits and short-term placements with credit-worthy institutions.

Liquidity Risk

the Group practises prudent liquidity risk management to minimise the mismatch of financial assets and liabilities and to maintain sufficient credit facilities for contingent funding requirement of working capital.

Cash Flow Risk the Group reviews its cash flow position regularly to manage its exposure to fluctuations in future cash flows associated

with its monetary financial instruments.



25. Financial riSK manaGement oBJectiVe anD PolicieS (cont’d)

Fair Values

the directors consider that the carrying amount of long-term loan recorded at amortised cost in the financial statements approximate their fair values as follows:

the Group2007 2006

carrying amount Fair Value

carrying amount

Fair Value

rm rm rm rm

Financial liabilitylong-term loan (note 20) 37,665,640 33,470,693 37,665,640 31,860,194

the fair value of long-term loan was estimated using the discounted cash flow analysis based on current borrowing rates for similar types of borrowing arrangements and adjusted for inflation rate.

Cash and Cash Equivalents, Trade and Other Receivables, Trade and Other Payables, Inter-Company Indebtedness and Short-Term Borrowings

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

26. caSH anD caSH eQUiValentS

Cash and cash equivalents included in the cash flow statements comprise the following:


rm rm rm rm

fixed income fund with licensed financial institutions 36,823,108 30,388,892 - -fixed deposits and short- term placements with licensed banks 70,711,200 12,100,000 2,500,000 -Cash and bank balances 5,666,105 40,268,268 428,307 131,212bank overdrafts (note 23) (5,519) (385,990) - -

113,194,894 82,371,170 2,928,307 131,212



27. caPital commitmentS

as of December 31, 2007, the Group has the following capital commitments in respect of purchase of property, plant and equipment:

the Group 2007 2006

rm rm

approved and contracted for 15,661,000 15,519,000approved but not contracted for 6,584,000 20,818,000

22,245,000 36,337,000

28. continGent liaBilitieS - UnSecUreD

as of December 31, 2007, the Company has issued corporate guarantees totalling rm254,000,000 (2006: rm254,000,000) in respect of credit facilities granted by certain local licensed banks to its subsidiary companies. accordingly, the Company is contingently liable to the extent of the amount of the credit facilities utilised by the subsidiary companies as of December 31, 2007.


statement by Directors

the directors of ornaSteel HolDinGS BerHaD state that, in their opinion, the accompanying balance sheets and the related statements of income, cash flows and changes in equity are drawn up in accordance with the provisions of the Companies act, 1965 and the applicable malaysian accounting Standards board approved accounting standards in malaysia so as to give a true and fair view of the state of affairs of the Group and the Company as of December 31, 2007 and of the results of their businesses and the cash flows of the Group and the Company for the year ended that date.

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

SU, Wei-Jin

WanG, HWa-min @martin WanG

melakamarch 11, 2008

I, tan cHin tenG, the Director primarily responsible for the financial management of ornaSteel HolDinGS BerHaD, do solemnly and sincerely declare that the accompanying balance sheets and the related statements of income, cash flows and changes in equity 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 11th day of march, 2008.

before me,

ommiSSioner For oatHS

Declarationby the Director PriMarily resPonsible for the financial ManaGeMent of the coMPany


66

Class of Shares : ordinary shares of rm1.00 eachno. of Shareholders : 6,391voting 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

no. of no. ofHoldings Holders % Shares %less than 100 4 0.062 240 0.000100 – 1,000 1,122 17.555 1,075,335 0.2851,001 – 10,000 3,977 62.228 18,714,600 4.97110,001 – 100,000 1,118 17.493 34,972,425 9.290100, 001 – 18,821,624* 167 2.613 86,964,600 23.10218,821,625 and above** 3 0.046 234,705,300 62.349

total: 6,391 100.00 376,432,500 100.00

remark : * - less than 5% of Issued Shares: ** - 5% and above of Issued Shares

SUBStantial SHareHolDerS

Direct no. of indirect no. ofShareholders Shares Held %(1) Shares Held %(1)

China Steel asia pacific holdings pte. ltd. (“CSap”) 171,000,000 45.426 - -lembaga tabung angkatan tentera 38,077,700 10.115 - -lembaga tabung haji 25,627,600 6.808 - -(2) China Steel Corporation (“CSC”) - - 171,000,000 45.426(3) ministry of economic affairs, taiwan (“moea”) - - 171,000,000 45.426

notes : (1) excludes 3,567,500 ohb shares bought back as at 18 april 2008 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.

liSt oF toP 30 SHareHolDerS

no. name Shareholdings %

1. China Steel asia pacific holdings pte. ltd. 171,000,000 45.4262. lembaga tabung angkatan tentera 38,077,700 10.1153. lembaga tabung haji 25,627,600 6.8084. hSbC nominees (asing) Sdn. bhd.

exempt an for morgan Stanley & Co. International plC 9,069,600 2.409

5. amanah raya nominees (tempatan) Sdn. bhd. public Islamic opportunities fund 3,880,900 1.0306. Db (malaysia) nominee (tempatan) Sdn. bhd.

exempt an for amara Investment management Sdn. bhd. (t95745/17210tSt)3,400,800 0.903

analysis of shareholdings as at 18 aPril 2008


liSt oF toP 30 SHareHolDerS (cont’d)

no. name Shareholdings %

7. malaysia nominees (tempatan) Sdn. bhd. Great eastern life assurance (malaysia) berhad (par 2)

2,827,200 0.751

8. lim Seng qwee 2,780,000 0.7389. malaysia nominees (tempatan) Sdn. bhd.

Great eastern life assurance (malaysia) berhad (par 1)2,651,400 0.704

10. amanah raya nominees (tempatan) Sdn. bhd. amanah Saham wawasan 2020 2,339,800 0.621 11. amanah raya nominees (tempatan) Sdn. bhd. Sekim amanah Saham national 2,093,700 0.556 12. permodalan nasional berhad 2,000,000 0.53113. amanah raya nominees (tempatan) Sdn. bhd. public Islamic Dividend fund 1,988,100 0.52814. bank Kerjasama rakyat malaysia berhad as beneficial owner 1,900,000 0.50415. malaysia nominees (tempatan) Sdn. bhd. Great eastern life assurance (malaysia)

berhad (non par 1)1,565,600 0.415

16. allianceGroup nominees (tempatan) Sdn. bhd. pledge Securities account for Kee wai fun (8036998)

1,400,000 0.371

17. Kurnia Insurans (malaysia) berhad 1,320,000 0.350 18. hDm nominees (tempatan) Sdn. bhd.

pledged Securities account for wong yoke fong @ wong nyok fing (m09)1,314,000 0.349

19. toh Kam Choy 1,141,900 0.30320. hSbC nominees (tempatan) Sdn. bhd. hSbC (m) trustee bhd for maaKl al-faid (4398) 1,030,000 0.27321. Cimsec nominees (tempatan) Sdn. bhd. CImb bank for tuanku Syed Sirajuddin

Ibni Syed putra Jamalullail (pb retail banking)982,800 0.261

22. amanah raya nominees (tempatan) Sdn. bhd. public Islamic Sector Select fund 978,800 0.26023. tiah thee Seng 948,300 0.25124. nar Swee Kim 922,700 0.24525. lim Kian wat 906,800 0.24026. yeo Khee huat 900,000 0.23927. low mei lan 800,000 0.21228. md nazir bin md ali 700,000 0.18529 Goh thong beng 670,000 0.17730. amanah raya nominees (tempatan) Sdn. bhd. public Smallcap fund 660,000 0.175

total 285,877,700 75.943

SHareHolDinGS oF DirectorS

Direct no. of indirect no. ofnames Shares Held %(1) Shares Held %(1)

1. Su, wei-Jin 80,000 0.021 - -2. huang, tsong-ying 80,000 0.021 - -3. tan Chin teng 80,000 0.021 80,000 0.0214. wang, hwa-min @ martin wang 80,000 0.021 - -5. pang fee yoon 20,000 0.005 - -6. Chong Khim leong @ Chong Kim leong 20,000 0.005 - -7. brig. Gen. (r) Dato’ mohd Zaaba @ nik Zaaba bin nik Daud 20,000 0.005 - -

Note: (1) excludes 3,567,500 ohb shares bought back as at 18 april 2008 and retained as treasury shares.

analysis of shareholDinGs (cont’d)


68list of Propertiesfor the year enDeD DeceMber 31, 2007

location & Description existing Use tenure

land/ Built-up area

(square metres)

age of Buildingyear(s)

audited net Book Value/

Prepaid operating lease

as at31.12.2007

(rm’000)year of

acquisition

lot no. 5214, pn 7009, mukim bukit Katil, Daerah melaka tengah

Industrial land built upon with a factory block and an administration block

99-year lease expiring on 20.01.2092

74,590/36,334

14 21,548 1992

lot pt no. 3701, hS (m) 348, mukim bukit Katil, Daerah melaka tengah

vacant industrial land


30,522/not applicable

not applicable 1,368 1992

lot pt no. 6108, hS (D) 30872, mukim bukit Katil, Daerah melaka tengah

building land built upon with a temporary showhouse

freehold 11,347/1,029

10 4,171 1997

lot pt nos. 3698 and 3699, hS (m) 346 and 347 respectively, both of mukim bukit Katil, Daerah melaka tengah

Industrial land built upon with a factory block


74,805/17,892

10 45,611 1995


notICe IS hereby GIven that the fourth annual General meeting of ornasteel holdings berhad (“ohb” or the “Company”) will be held at level 2 of the Company’s office block, 180 Kawasan Industri ayer Keroh, ayer Keroh, 75450 melaka, malaysia on thursday, 12 June 2008, at 10.00 a.m., for the following purposes:

aGenDa

aS orDinary BUSineSS

1. to receive the audited financial Statements for the financial year ended 31 December 2007 and the reports of the Directors and auditors thereon.

(resolution 1)

2. to declare a first and final dividend of 12% or 12 sen per share less 26% income tax in respect of the financial year ended 31 December 2007 as recommended by the Directors.

(resolution 2)

3. to approve the payment of Directors’ fees amounting to rm69,600 for the financial year ended 31 December 2007.

(resolution 3)

4. to re-elect the following Directors who retire in accordance with article 128 and 133 of the Company’s articles of association and being eligible, have offered themselves for re-election:-i. tan Chin teng (article 128) (resolution 4)ii. Chong Khim leong @ Chong Kim leong (article 128) (resolution 5)iii. Su, wei-Jin (article 133) (resolution 6)iv. wang, hwa-min @ martin wang (article 133) (resolution 7)

5. to re-appoint messrs. Deloitte & touche as auditors of the Company and to authorise the board of Directors to fix their remuneration.

(resolution 8)

aS SPecial BUSineSS

to consider and, if thought fit, to pass the following ordinary/Special resolutions with or without modifications: -

6. ordinary resolutionProposed renewal of Shareholders’ mandate for recurrent related Party transactions of a revenue or trading nature

“that, subject to the provisions of the listing requirements of bursa malaysia Securities berhad, 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 21 may 2008 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”)

(resolution 9)

notice of fourth annual General Meeting


70

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 shall 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 specified 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.”

7. ordinary resolutionProposed new Shareholders’ mandate for additional recurrent related Party transactions of a revenue or trading nature

“that, subject to the provisions of the listing requirements of bursa malaysia Securities berhad, 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(b) of the Circular to Shareholders dated 21 may 2008 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 annual General meeting (“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

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

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

whichever is the earlier.

(resolution 10)

notice of fourth annual General MeetinG (cont’d)


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 specified 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.”

8. ordinary resolutionProposed renewal of authority for the Purchase by the company of its own Shares

“that, subject always to the act, the provisions of the memorandum and articles of association of the Company, the listing requirements of bursa Securities and the approvals of all relevant governmental and/or regulatory authorities, the Company be and is hereby authorised to purchase such amount 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 fit 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 may be cancelled and/or retained as treasury shares and/or distributed as dividends or resold on the bursa Securities;

(resolution 11)

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 shall 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 occurs first.

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, modifications, 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 fit and expedient in the best interest of the Company.”



72

9. Special resolutionProposed change of name of company

“that the name of the Company be changed from ‘ornasteel holdings berhad’ to ‘CSC Steel holdings berhad’ with effect from the date of issuance of the “Certificate of Incorporation on Change of name of Company” by the Companies Commission of malaysia;

anD that the memorandum and articles of association of the Company be amended accordingly wherever the name of the Company appears;

anD that the Directors be and are hereby authorised to carry out all the necessary documentations and actions in effecting the change of name of the Company.”

(resolution 12)

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 first and final dividend of 12% or 12 sen per share (less income tax of 26%) in respect of the financial year ended 31 December 2007, if approved by the shareholders at the fourth annual General meeting of the Company, will be paid on 11 July 2008 to the shareholders whose names appear on the record of Depositors of the Company at the close of business on 30 June 2008.

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 30 June 2008 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 boardornaSteel HolDinGS BerHaD

WonG Wei FonG (maicSa 7006751)lam SooK cHinG (maicSa 7006942)Company Secretaries

melaka21 may 2008




NOTES:i. 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 Commissioner of Malaysia.

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

iii. 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 officer or attorney duly authorised.

iv. 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.

v. To be valid, the instrument appointing a proxy or proxies shall be deposited at the registered office 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 on Special Business: -

Resolutions No. 9 - 12

Shareholders are advised to refer to the Circular to Shareholders dated 21 May 2008 which was circulated together with the Annual Report 2007 when considering Resolutions No. 9 - 12.

Ordinary Resolution Nos. 9 and 10

The Ordinary Resolution Nos. 9 and 10 proposed under Item No. 6 and 7 if passed, will authorise the Company and its subsidiaries (the “OHB Group”) to enter into recurrent related party transactions of a revenue or trading nature which are necessary for the OHB 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 No. 11

The Ordinary Resolution No. 11 proposed under Item No. 8, if passed, will authorise the purchase by the Company of up to 10% of its issued and paid-up share capital through the Bursa Securities.

Special Resolution No. 12

The Special Resolution No. 12 proposed under Item No. 9, if passed, will be effective from the date of the ““Certificate of Incorporation on Change of Name of Company” to be issued by the Companies Commission of Malaysia.


74

a. Directors standing for re-election and re-appointment

1. tan Chin teng (article 128)2. Chong Khim leong @ Chong Kim leong (article 128)3. Su, wei-Jin (article 133)4. wang, hwa-min @ martin wang (article 133)

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’ profile appearing on pages 4 to 6 of this annual report while their securities holdings are set out in the analysis of Shareholdings – Shareholdings of Directors on page 67 of this annual report.

c. Details of attendance of Directors at Board meetings

a total of four (4) board meetings were held during the financial year ended 31 December 2007.

Details of attendance of Directors holding office at the end of the financial year ended 31 December 2007 are on page 10 of this annual report.

D. Date, time and Place of the annual General meeting

Date : thursday, 12 June 2008 time : 10.00 a.m. place : level 2 of the Company’s office block 180 Kawasan Industri ayer Keroh ayer Keroh 75450 melaka, malaysia

Statement accompanyingnotice of annual General Meeting

form of Proxy

ORNASTEEL HOLDINGS BERHAD (640357-X)

(Incorporated in Malaysia)

number of shares held

I/we ................................................................................................................ (nrIC/Company no: ………............…………………..) (full name in capital letters)

of……………..………………………………………………………………………………………………………………….……………….…. (full address)

being a member(s) of ornaSteel 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 fourth annual General meeting of the Company to be held on thursday, 12 June 2008, at 10.00 a.m. at the level 2 of the Company’s office 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 fit. If you appoint two (2) proxies and wish them to vote differently, this should be specified.

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

no. reSolUtion For aGainSt1. to receive the audited financial Statements for the financial year ended 31 December 2007

and the reports of the Directors and auditors thereon.

2. to declare a first and final dividend of 12% or 12 sen per share less 26% income tax.

3. to approve the payment of Directors’ fees.

4. to re-elect tan Chin teng (article 128).

5. to re-elect Chong Khim leong @ Chong Kim leong (article 128).

6. to re-elect Su, wei-Jin (article 133).

7. to re-elect wang, hwa-min @ martin wang (article 133).

8. to re-appoint messrs. Deloitte & touche as auditors of the Company and to authorise the Directors to fix their remuneration.

9. proposed renewal of Shareholders’ mandate for recurrent related party transactions of a revenue or trading nature.

10. proposed new Shareholders’ mandate for additional recurrent related party transactions of a revenue or trading nature.

11. proposed renewal of authority for the purchase by the Company of its own Shares.

12. proposed Change of name of Company.

Signed this ………………………….……… day of ………………………….……… 2008

………………………….…………………………… ………………………….…………………………… Signature Common SealNotes:-i. 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 Commissioner of Malaysia.

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

iii. 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 officer or attorney duly authorised.

iv. 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.

v. To be valid, the instrument appointing a proxy or proxies shall be deposited at the registered office 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.

to: the Company Secretary ornasteel Holdings Berhad 49-b Jalan melaka raya 8 taman melaka raya 75000 melaka malaysia

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