sustainable growth sustainable growth We have come a long way since our roots as a small to medium size Malaysian enterprise. Through resilience and fortitude we have been growing from strength to strength, meeting challenges head-on and succeeding in branching further aloft. This year’s cover depicts our growth and strong foundations. The branches of the tree symbolise our subsidiaries whereas the leaves are our potential reaching out towards opportunities. Now, as a significant player in all our core business, we are sustaining our growth on a global business landscape. Table of Contents

4 Vision, Mission & Core Values 43 Statement on 76 Consolidated Statement of 6 Corporate Profile Corporate Governance Changes in Equity 7 Corporate Information 56 Additional Compliance 78 Company Statement of Information Changes in Equity 8 Worldwide Operations 58 Statement on Internal Control 79 Statements of Cash Flows 9 Financial Highlights 61 Statement of 82 Notes to the 12 Joint Chairman & Directors’ Responsibilities Financial Statements Group CEO’s Statement 62 Directors’ Report 176 Summary of Significant 18 Board of Directors 68 Statement by Directors Recurrent Related Party 20 Profile of the Board of Directors Transactions 68 Statutory Declaration 26 Corporate Social Responsibility 177 Summary of Landed Properties 69 Independent Auditors’ Report 30 Health, Safety and Environment 180 Analysis of Shareholdings, 71 Statements of 32 Audit Committee ICULS & Warrants Holdings Financial Position 37 Remuneration Committee 187 Notice of Eleventh 74 Statements of Annual General Meeting 40 Nomination Committee Comprehensive Income 192 Statement Accompanying Notice of Eleventh Annual General Meeting (“AGM”) Proxy Form 002 WAH SEONG CORPORATION BERHAD Annual Report 2010 ExpandING our Capabilities

WAH SEONG CORPORATION BERHAD 003 Annual Report 2010 Vision To develop and manage a world class and profitable, integrated energy infrastructure group.

CORE ValueS We are We hold ourselves and each passionate other to the highest standards of about what professionalism, accountability, we do. integrity and transparency.

We deliver our We are a caring commitments to and responsible customers. organisation.

004 WAH SEONG CORPORATION BERHAD Annual Report 2010 Mission We will provide reliable and competitive products, services and solutions to the markets that we serve, while continuously creating value for our customers, employees, shareholders and other stakeholders.

We work together We are to create an open, intolerant to friendly and safe waste. workplace. Performance, merit and equal opportunity are the cornerstone of our rewards philosophy.

Only sustainable profit and growth will perpetuate our business and enable all of the above.

WAH SEONG CORPORATION BERHAD 005 Annual Report 2010 CORPORATE PROFILE

A Rising Global Energy Service Provider Founded in 1994, Wah Seong Corporation Berhad has successfully harnessed its reservoir of knowledge and diversified oil and gas services to serve accelerating energy demands. The Group has since grown from being a mid-sized Malaysian enterprise to become a globally integrated energy infrastructure group.

Listed on the Main Market of Bursa Malaysia Securities Berhad, Wah Seong Corporation Berhad has - via its vast product and service offerings - sealed its footprint in more than 13 countries worldwide. The Group aspires to strengthen its foothold in these territories and expand even further across the world.

006 WAH SEONG CORPORATION BERHAD Annual Report 2010 CORPORATE INFORMATION

Directors Auditors Registered Office Robert Tan Chung Meng PricewaterhouseCoopers (AF 1146) Suite 2-1, 2nd Floor Non-Independent Chartered Accountants Menara Penang Garden Non-Executive Chairman Level 10, 1 Sentral, Jalan Travers 42A Jalan Sultan Ahmad Shah Kuala Lumpur Sentral 10050 Penang Chan Cheu Leong 50706 Kuala Lumpur Tel : 04-2294390 Managing Director/ Fax : 04-2265860 Group Chief Executive Officer Solicitors Email : [email protected] Shearn Delamore & Co. Giancarlo Maccagno Jeyaratnam & Chong Stock Exchange Listing Deputy Managing Director Main Market of Bursa Malaysia Principal Bankers Securities Berhad Halim Bin Haji Din OCBC Bank Group Independent Non-Executive Director RHB Bank Berhad Date of Listing Citibank Berhad 9 July 2002 Tan Sri Ab Rahman Bin Omar Independent Non-Executive Director Principal Advisers Category CIMB Investment Bank Berhad Industrial Products Tan Sri Dato’ Dr. Lin See Yan AmInvestment Bank Berhad Independent Non-Executive Director Stock Code No. Website 5142 Jen (B) Tan Sri Dato’ Seri Mohd www.wahseong.com Zahidi Bin Haji Zainuddin Stock Name Non-Independent Non-Executive Director Share Registrar WASEONG Agriteum Share Registration Pauline Tan Suat Ming Services Sdn. Bhd. Non-Independent 2nd Floor, Wisma Penang Garden Non-Executive Director 42 Jalan Sultan Ahmad Shah 10050 Penang Company Secretaries Tel : 04-2282321 Woo Ying Pun (MAICSA 7001280) Fax : 04-2272391 Lam Voon Kean (MIA 4793) Email : [email protected]

Committee AuDIT nomination Remuneration Committee Committee Committee

Chairman Halim Bin Haji Din Robert Halim Bin Haji Din Tan Chung Meng Member Tan Sri Ab Rahman Tan Sri Ab Rahman Tan Sri Ab Rahman Bin Omar Bin Omar Bin Omar Member Tan Sri Dato’ Halim Bin Haji Din Chan Cheu Leong Dr. Lin See Yan

WAH SEONG CORPORATION BERHAD 007 Annual Report 2010 WORLDWIDE OPERATIONS

PIPE COATING 1 WASCO COATINGS MALAYSIA Sdn. Bhd. (Formerly known as PPSC Industries Sdn. Bhd.) 2 WASCO COATINGS EUROPE B.V. 2 3 DEEPWATER CORROSION SERVICES, INC 4 KANSSEN (YADONG) PIPE COATING SERVICES LIMITED 5 WASCO CORROSION SERVICES Sdn. Bhd. 26 4 25 (Formerly known as Material Performance 11 Engineering Sdn. Bhd.) 23 6 WASCO LINDUNG Sdn. Bhd. 7 (Formerly known as MPE Lindung Sdn. Bhd.) 13 PIPE MANUFACTURING 7 PETRO-PIPE (SABAH) Sdn. Bhd. 9 1 5 6 8 PPI INDUSTRIES Sdn. Bhd. 12 8 15 16 17 ENGINEERING 18 19 20 22 10 14 9 WASCO ENGINEERING AUSTRALIA PTY LTD 24 (Formerly known as Gas Services International (Aust) Pty Limited) 10 GAS SERVICES INTERNATIONAL (S) PTE. LTD. 11 GAS SERVICES INTERNATIONAL LIMITED 12 MACKENZIE HYDROCARBONS (AUSTRALIA) PTY LTD 13 PT MEGARON SEMESTA 14 WASCO TECHNOLOGIES PTE. LTD.

3 21 RENEWABLE ENERGY 15 JUTASAMA Sdn. Bhd. 16 MACKENZIE INDUSTRIES Sdn. Bhd. 17 PMT INDUSTRIES Sdn. Bhd. 18 PMT DONG YUAN INDUSTRIES Sdn. Bhd. 19 PMT-PHOENIX INDUSTRIES Sdn. Bhd.

TRADING 20 SYN TAI HUNG TRADING Sdn. Bhd.

E&P SERVICES 21 ASHBURN INTERNATIONAL, INC 22 BOTCO Sdn. Bhd. 23 LTT OIL & GAS NIGERIA LIMITED 24 TOTAL OIL TECHNOLOGIES Sdn. Bhd. 25 WAH SEONG CHINA LIMITED 26 WSM OIL & GAS SERVICES LIMITED

008 WAH SEONG CORPORATION BERHAD Annual Report 2010 FINANCIAL HIGHLIGHTS

FIVE-YEARS GROUP FINANCIAL HIGHLIGHTS FINANCIAL YEAR ENDED 31 DECEMBER 2006 2007 2008 2009 2010 OPERATING RESULTS Revenue RM’000 1,624,348 1,950,112 2,343,194 1,950,308 1,523,356 EBITDA RM’000 129,945 184,696 219,841 340,351 167,347 EBIT RM’000 97,309 140,718 183,258 282,387 104,011 Profit Before Tax RM’000 71,604 115,121 152,913 245,782 86,156 Net Profit RM’000 50,189 97,231 133,049 206,239 64,952 Net Profit Attributable to Owners of the Company RM’000 37,414 86,039 115,596 121,322 55,981

KEY BALANCE SHEET DATA Total Assets RM’000 1,384,419 1,560,146 2,129,594 2,206,735 2,009,711 Paid-up Capital RM’000 197,780 214,618 328,500 343,370 361,971 Capital and Reserves Attributable to Owners of the Company RM’000 371,984 470,001 791,166 885,616 925,186

VALUATION Per share of RM0.50 each

Basic Earnings sen 5.98 13.58 15.68 15.98 7.35 Gross Dividend - Cash Dividend sen 5.00 6.00 6.00 5.50 4.50 - Share Dividend sen - - - 1.96* - Net Assets RM 0.94 1.09 1.20 1.29 1.28

PROFITABILITY RATIOS Return on Total Assets % 7 9 9 13 5 Return on Capital Employed % 12 17 14 18 7

GEARING RATIO Net Debt to Capital and Reserves Attributable to Owners of the Company Times 1.02 0.75 0.62 0.32 0.28

Note: * The share dividend distributed from the treasury shares of the Company was made on the basis of one (1) share for every one hundred and twenty (120) existing shares held at the entitlement date. Based on the Company’s share price of RM2.35 each on 31 December 2009, the value of the share dividend per share is equivalent to an approximate gross cash dividend of 1.96 sen.

WAH SEONG CORPORATION BERHAD 009 Annual Report 2010 Leveraging our global scale

010 WAH SEONG CORPORATION BERHAD Annual Report 2010 WAH SEONG CORPORATION BERHAD 011 Annual Report 2010 JOINT CHAIRMAN AND GROUP CEO’s STATEMENT

Dear Shareholders,

Despite the many challenges faced in 2010, Wah Seong Corporation Berhad still recorded modest results and with the encouraging first quarter results announced recently, we are confident that we will see a better performance in the upcoming financial year. On this note, we are pleased to present our annual review of the performance of the Company and its subsidiaries (“Group”) for the financial year ended 31 December 2010.

Overall Financial Review Although the tail-end of the economic and financial Wah Seong Corporation Berhad (“WSC”) recorded a turbulence of 2008/2009 continues to impact unfavorably net profit of RM55.98 million, a reduction of 53.9% from on the oil & gas industry in the early part of FY2010, our order book has picked up towards the end of FY2010 and that achieved in the previous year. The Group registered currently stands at RM1.2 billion. This mainly comprises a decrease of 50.8% in earnings before interest, tax, of RM456 million from Pipe Coating Division and depreciation and amortisation (EBITDA) to RM167.35 RM360 million from the Engineering Division. With the million from RM340.35 million achieved in 2009. However, improving outlook for the oil & gas industry, the Group our net gearing level continues to be at manageable level expects a steady increase in requests for tenders in the of 0.28 times as at 31 December 2010 compared with coming months, which will impact favorably on our order 0.32 times in the preceding year. Overall, our balance book and financial performance in FY2011. sheet continues to improve and strengthen due to sound Dividend and prudent financial management. The Board had declared and paid the following dividends in respect of the financial year ended 31 December 2010:- Segmentally, the Pipe Coating and Pipe Manufacturing Divisions contributed RM107.43 million and RM25.48 (a) On 25 August 2010, the Directors declared a first million respectively to the Group’s EBITDA and RM284.42 interim Malaysian tax exempt cash dividend of 2.0 sen million and RM250.30 million respectively to the Group’s per share amounting to RM14,477,925, and this was paid on 1 October 2010. revenue. Whilst the Engineering Division’s revenue contribution was RM212.89 million, the Trading Division (b) On 17 February 2011, the Directors declared a second achieved revenue of RM465.99 million and the Renewable interim Malaysian tax exempt cash dividend of 2.5 sen Energy Division generated revenue of RM183.65 million per share amounting to RM18,421,927, and this was during the year. paid on 1 April 2011.

012 WAH SEONG CORPORATION BERHAD Annual Report 2010 JOINT CHAIRMAN AND GROUP CEO’s STATEMENT

Sustainability Amidst Adversity Revenue from the Renewable Energy Division was Despite an adverse and challenging operating lower in FY2010 at RM183.65 million compared with environment, the Group managed to record a modest RM225.03 million achieved in FY2009, mainly due to the profit for the year under review, due to prudent and postponement of certain projects. Some of these projects stringent cost management. In FY2010, the core of the have since come back on stream and will contribute Group business activities centred on the commencement positively to the Renewable Energy Division’s results of work on the US$162.90 million Gorgon pipe coating in FY2011. With palm oil prices remaining strong and project (which is undertaken by a JV between Chevron, the increasing demand for vegetable oil in 2011, the Exxon Mobil and Shell in Australia) involving the coating Renewable Energy Division should expect an overall of approximately 850 km of line-pipes. The execution of positive improvement in operating result in FY2011. this contract will be of utmost priority this year. Todate, we have completed about 43% of the project, full completion We expect the global economy to continue its recovery in of which is targeted to be completed by the first quarter 2011. With firmer oil prices and return of financial liquidity of 2012. Currently our coating plants are operating at a to the oil & gas industry, we are likely to see a steady capacity utilisation rate of up to 70%. rise in capital expenditure in the oil & gas industry. The Group is currently focusing on potential projects in Asia as The Engineering Division experienced a setback last year well as Australia, where we have a solid track record, and as most of their orders were at the tail-end of completion. where many industry operators have been able to achieve New orders received were not sufficient to generate positive findings in their exploration programmes. We will significant revenue for FY2010. However, the significant continue to be actively involved in tendering projects and increase in order book towards the end of FY2010 is with increasing enquiries received throughout the year, we expected to have a positive impact and improve the are confident that the demand for our products and services performance of the division in FY2011. The largest project should continue to improve in the current financial year. In being carried out by the division at the moment is the this regard, the Group’s improved operating and financial Teekay Petrojarl contract, which involves the supply of results for the first quarter announced recently should various process modules and compressor modules for provide some optimism in the current year outlook. “FPSO Petrojarl Cidade de Itajai”. This project, estimated at US$46 million is expected to be completed by the end Future Growth of FY2011. Other ongoing projects such as rental for gas The Group has been constantly reviewing all possible compressor packages will continue to contribute positively strategic options to ensure focused and sustainable long towards the Engineering Division’s revenue. term growth while enhancing shareholders’ value.

The Trading Division performed well in FY2010, having Amongst all these possibilities, the Board is now achieved revenue of RM465.99 million, an increase of 18% actively evaluating the de-merger proposal of the oil from FY2009. This is mainly attributed to an increase in & gas businesses (Pipe Coating, Engineering and construction activities and higher raw material prices during E&P Services) currently held through its wholly-owned the year. This trend is expected to continue well into FY2011 subsidiary, Wasco Energy Ltd (WEL) with a view that it and beyond as the Government and private sectors roll out will eventually operate as a separate fast growing listed many new infrastructure projects in the country. oil & gas entity. Under this scenario, WSC will continue

WAH SEONG CORPORATION BERHAD 013 Annual Report 2010 JOINT CHAIRMAN AND GROUP CEO’s STATEMENT

to remain as a public listed company, principally engaged • WEL will continue to realign its business strategies in industrial services activities such as trading, renewable with the new Petronas Exploration and Production energy and pipe manufacturing. The de-merger will enable Policies which place greater emphasis on both entities to have a better focus on their respective development of oil & gas reserves in Malaysia and businesses and growth opportunities as well as improving countries where they currently operate in. Malaysia’s competencies and deployment of resources. It will also oilfields are maturing and the production of oil & gas enable the respective entities to have more focused talent is limited to deepwater exploration and the revival of management and people development programmes. marginal oilfields. What used to be easy oil extraction has now evolved into complex environments Irrespective of whatever strategic option chosen, it is requiring innovative and high technology solutions. pertinent to articulate some business strategies for both the We are now looking at operations taking place in Oil & Gas, and Industrial Services Groups going forward:- challenging circumstances involving extremely high pressure, high temperature and/or deepwater Oil & Gas GROUP subsea terrain. With our strong track record and • Greater focus on gas projects as gas production in our deepwater insulation coatings technology, we Malaysia is expected to increase by 60% over the are well positioned to take on these challenges. next decade whilst oil production will remain relatively Moreover, the outlook for Malaysia’s oil & gas flat. WEL will be looking actively for opportunities industry has become more promising with Petronas in gas projects in Malaysia and globally especially stepping up project awards based on enhanced in Australia where many major gas infrastructure oil recovery (EOR), small fields’ development and projects are expected to be implemented. Gas is pipeline replacement. Petronas is also looking at expected to play an increasingly significant role in the the intensification of their exploration activities as global energy equation, being the cleanest source of well as unlocking stranded resources via EOR. energy and the cheapest in terms of thermal efficiency. Rejuvenation projects such as the Tapis EOR, due The recent nuclear disaster in Japan will also prompt to kick off in 2013, will see operators committing many countries to review their nuclear energy policies capital expenditure spending estimated to be worth which may result in greater inclination towards the over US$1 billion. use of gas for energy generation over other less environmentally friendly sources. • WEL will seek to expand its pipe coating, corrosion protection and compression engineering services • For our long term growth and sustainability, we are into new growth areas, such as the Gulf of Mexico, looking to invest in pipeline infrastructure that will the Americas and Europe. Recently, the Group enable us to generate recurring income, particularly in entered into a joint venture agreement with Insituform the gas sector. This will enable the Group to diversify its Techology Inc of USA, which will not only provide us a earning base which is largely dependent on projects. platform to enter the deepwater pipe coating markets in the Gulf of Mexico, Central America, and the Caribbeans, but it will also allow the Group to venture further into the maintenance and rehabilitation of pipes in Asia and Australia.

014 WAH SEONG CORPORATION BERHAD Annual Report 2010 JOINT CHAIRMAN AND GROUP CEO’s STATEMENT

Industrial Services GROUP • WSC has been involved in the manufacturing of water WSC’s Industrial Services Group will undertake a major and structural pipes for the Malaysian and regional growth transformation strategy in the next five years in needs through its wholly owned subsidiary. With rapid order to enhance the shareholders’ value:- population growth (estimated global population of 9 billion by 2050) and increasing rate of urbanisation • The Renewable Energy Division which is currently and environmental degradation, water treatment focusing on the regional palm oil sector seeks and supply of clean water will become a sector that to transform itself from process equipment offers tremendous business potential. The Group is manufacturing and servicing to become a major evaluating opportunities to broaden its business into the water industry, which may eventually include player in design and manufacturing of mill and water treatment, engineering and technology as well biomass / biofuel plants on a turnkey basis. The as owning water assets to provide a more recurring division is looking at integration into the greater palm income base in the long term. oil sector, through investment in biomass and bio- energy power generation sector which offers great We will continue to focus on internal growth, and potential as alternative clean energy and recurring supplement our expansion via merger and acquisitions income for the Group. Further integration into oil along the strategic framework highlighted above for both palm plantation and other agriculture crops will be the Oil & Gas and Industrial Services Groups. actively pursued, given the extremely bright future in the palm oil and agro-food sector. Acknowledgement Finally, on behalf of the Board of Directors, we would like • Our Trading Division, which is currently involved in to express our utmost appreciation to the management the trading of building materials within the Malaysian and employees for working tirelessly and giving their full construction industry has regional expansion plans commitment to WSC Group throughout the year. that will give them stronger presence within the ASEAN region, higher margins in its products and We would also like to sincerely thank the Board of services and strategic expansion into complimentary Directors for their invaluable guidance and direction, and services in the logistic sector. Ultimately, it seeks to to all stakeholders, government authorities, bankers, develop itself into a major trading and logistics group clients, partners, suppliers and other business associates or distribution power house in the fast growing region for their dedicated support and cooperation. of ASEAN.

Robert Tan Chung Meng Chairman

Chan Cheu Leong Managing Director / Group Chief Executive Officer

WAH SEONG CORPORATION BERHAD 015 Annual Report 2010 016 WAH SEONG CORPORATION BERHAD Annual Report 2010 potential progress performance

WAH SEONG CORPORATION BERHAD 017 Annual Report 2010 BOARD OF DIRECTORS

1. ROBERT TAN CHUNG MENG Non-Independent Non-Executive Chairman

2. CHAN CHEU LEONG Managing Director/Group Chief Executive Officer

3. PAULINE TAN SUAT MING Non-Independent Non-Executive Director

4. GIANCARLO MACCAGNO Deputy Managing Director

5. JEN (B) TAN SRI DATO’ SERI MOHD ZAHIDI BIN HAJI ZAINUDDIN Non-Independent Non-Executive Director

6. TAN SRI AB RAHMAN BIN OMAR Independent Non-Executive Director

7. HALIM BIN HAJI DIN Independent Non-Executive Director

8. TAN SRI DATO’ DR. LIN SEE YAN Independent Non-Executive Director

018 WAH SEONG CORPORATION BERHAD Annual Report 2010 BOARD OF DIRECTORS

6 7 8 1 2 3 4 5

WAH SEONG CORPORATION BERHAD 019 Annual Report 2010 PROFILE OF THE BOARD OF DIRECTORS

ROBERT TAN CHUNG MENG CHAN CHEU LEONG Non-Independent Non-Executive Chairman Managing Director/Group Chief Executive Officer

Mr Robert Tan, a Malaysian aged 58, was appointed Mr Chan, a Malaysian aged 60, is the Managing Director Chairman of Wah Seong Corporation Berhad (“WSC”) on and Group Chief Executive Officer of WSC. He was 22 May 2002. appointed to the Board of WSC on 22 May 2002.

Mr Robert Tan has vast experience in the property and Mr Chan attained a Bachelor of Science (Hon) Degree hotel industry. After studying Business Administration in Engineering Production in 1974 from the University of in the United Kingdom, he was attached to a Chartered Birmingham under a Colombo Plan Award and began his Surveyor’s firm for one (1) year. He has also developed career by joining the Singapore Administrative Service. He a housing project in Central London before returning to left the Ministry of Finance, Singapore in 1976 to pursue Malaysia. He has been involved in various development his Master in Business Administration from the London projects carried out by IGB Corporation Berhad and Tan Business School. & Tan Developments Berhad, in particular the Mid Valley Project. Upon successful completion of the same, he joined ESSO Production Malaysia Incorporated as their Senior Financial Currently, Mr Robert Tan is the Group Managing Director of Analyst before joining Tractors Malaysia Berhad as their IGB Corporation Berhad and KrisAssets Holdings Berhad; Group Treasurer in 1981. Thereafter, he left to become and a Director of Tan & Tan Developments Berhad. He also the Group Executive Director for General Corporation sits on the Board of several private limited companies. Berhad from 1984 to 1990 before assuming the position of Managing Director of Tan & Tan Developments Berhad from 1990 to 1995. In 1994, he established Wah Seong Industrial Holdings Sdn. Bhd. and subsequently formed WSC, which was listed on the Main Market of Bursa Malaysia Securities Berhad on 9 July 2002. He has extensive experience in the property, manufacturing and financial fields. Mr Chan is a Trustee of Yayasan Wah Seong. He also sits on the Board of several other private limited companies.

020 WAH SEONG CORPORATION BERHAD Annual Report 2010 PROFILE OF THE BOARD OF DIRECTORS

TAN SRI AB RAHMAN BIN OMAR HALIM BIN HAJI DIN Independent Non-Executive Director Independent Non-Executive Director

Tan Sri Ab Rahman, a Malaysian aged 64, was appointed Encik Halim, a Malaysian aged 64, was appointed to the to the Board of WSC on 1 October 2003. Board of WSC on 22 May 2002.

Tan Sri Ab Rahman holds an Honours Degree in Economics Encik Halim is a Chartered Accountant who spent more from the University of Malaya. Tan Sri Ab Rahman served than 30 years working for multinational corporations and in the Administration & Diplomatic Service of the various international consulting firms. He accumulated eighteen Government Departments i.e. the Statistics Department, (18) years of experience working in the Oil and Gas the Ministry of Commerce & Industry and the Ministry of Industry - six (6) years of which as a Board member of Primary Industry from 1970 to 1973 before opting out of civil Caltex/Chevron, responsible for financial management service in 1978. He was seconded to Pineapple Cannery before engaging in the Consulting business. Prior to his Malaysia Sdn. Bhd. as the Finance & Administrative appointment as a Board member of Caltex Malaysia, Encik Manager in late 1973 and was subsequently promoted Halim served as Regional Financial Advisor for Caltex as General Manager before becoming a Director for the Petroleum Corporation Dallas, Texas overseeing investment period from 1980 to 1993. He was the Managing Director viability of the Corporation’s Asian subsidiaries. of Perusahaan Otomobil Kedua Sdn. Bhd. from May 1996 to 1 May 2004. Encik Halim also had extensive experience in corporate recovery when he worked for Ernst & Whinney, London, Concurrently, Tan Sri Ab Rahman was appointed as United Kingdom in mid 1980’s. He was appointed as Director of Edaran Otomobil Nasional Berhad (“EON”) from Managing Partner of the Consulting Division of Ernst & 1989 to 1996 and reappointed as Chairman and Director of Young Malaysia in 1995. He later became the Country EON from 2006 to 2008, Director of PROTON from 1991 to Advisor of Cap Gemini Ernst & Young Consulting when Cap 1996 and Director of DRB-Hicom Berhad from December Gemini of France merged with Ernst & Young Consulting. 2005 to July 2008. Currently, Tan Sri Ab Rahman is the In 2003, he with two (2) partners took over the consulting Chairman of Perusahaan Sadur Timah Malaysia (Perstima) business of Cap Gemini Ernst & Young Malaysia through Berhad. He is also a Director of several other private limited a management buyout and rebranded it as Innovation companies. Associates, currently known as The IA Group, where he is currently the Chairman of the Group.

Encik Halim is an independent member of the Board of Employees Provident Fund Board, KrisAssets Holdings Berhad, BNP Paribas Malaysia Berhad, Takaful Ikhlas Sdn. Bhd. and Felda Prodata Systems Sdn. Bhd. He is also a Director of several other private limited companies.

WAH SEONG CORPORATION BERHAD 021 Annual Report 2010 PROFILE OF THE BOARD OF DIRECTORS

GIANCARLO MACCAGNO PAULINE TAN SUAT MING Deputy Managing Director Non-Independent Non-Executive Director

Mr Maccagno, an Italian aged 47, was first appointed as an Ms Pauline Tan, a Malaysian aged 65, was appointed to Executive Director of WSC on 1 June 2004 and subsequently the Board of WSC on 22 May 2002. promoted to be the Deputy Managing Director on 1 January 2007. Mr Maccagno is also the Chief Executive Officer of Ms Pauline Tan is a holder of Bachelor of Science (Honours) the Wasco Energy Group of Companies. He is responsible in Biochemistry from University of Sussex, England and is for the overall business and management operations of the a Fellow member of The Malaysian Institute of Chartered WSC Group. Secretaries and Administrators. She started her career as a chemist with Malayan Sugar Manufacturing Company Bhd Mr Maccagno attained his Bachelor in Business from 1969 to 1972. She then joined Tan Kim Yeow Sendirian Administration from Tecnico Commerciale Maddalena Berhad as an Executive Director in 1976 and subsequently Adria (RO) Italy in 1982, after which he worked with joined Wah Seong (Malaya) Trading Co. Sdn. Bhd. in 1983 Socotherm S.R.L, Italy from 1984 to 1987 as a Trainee in and was made an Executive Director in 1994. Currently, Production and Project Management. He was appointed as she is a Director of IGB Corporation Berhad and Goldis Project Manager for Socotherm S.R.L in Nigeria from 1987 Berhad, a Trustee of Yayasan Wah Seong and also sits on to 1990 and was briefly seconded to Petro-Pipe Industries the Board of several other private limited companies. (M) Sdn. Bhd. (“PPI”) in 1990 to assist in the setting up of PPI’s coating plant in Kuantan, Malaysia. After serving as Country Manager for Socotherm S.R.L in Taiwan from 1991 to 1992, he returned to Malaysia in 1993 to be the General Manager of Wasco Coatings Malaysia Sdn. Bhd. (formerly known as PPSC Industries Sdn. Bhd.) in Kuantan, Malaysia. He has vast experience in the global pipe coating business and the oil and gas business in general.

022 WAH SEONG CORPORATION BERHAD Annual Report 2010 PROFILE OF THE BOARD OF DIRECTORS

TAN SRI DATO’ DR. LIN SEE YAN JEN (B) TAN SRI DATO’ SERI MOHD Independent Non-Executive Director ZAHIDI BIN HAJI ZAINUDDIN Non-Independent Non-Executive Director

Tan Sri Dato’ Dr. Lin, a Malaysian aged 71, was appointed Jen (B) Tan Sri Dato’ Seri Mohd Zahidi, a Malaysian aged 63, to the Board of WSC on 20 July 2004. was appointed to the Board of WSC on 29 November 2005.

Tan Sri Dato’ Dr. Lin, a British Chartered Scientist, is a Jen (B) Tan Sri Dato’ Seri Mohd Zahidi served the Malaysian Armed Forces for thirty nine (39) years and has held many Harvard educated economist. Qualified as Malaysia’s first key appointments in the field as well as at the ministerial Chartered Statistician, he graduated from the University level. He was the Chief of the Malaysian Defence Forces of Malaya in Singapore and Harvard University (where he with the rank of General from 1 January 1999 until his received three (3) degrees, including a PhD in economics). retirement on 30 April 2005. Prior to this appointment, he He is also Professor of Economics (Adjunct), Universiti was the Malaysian Chief of Army for a period of one (1) Utara Malaysia, Professor of International Finance and year from 1 January 1998. Business (Adjunct), Universiti Malaysia Sabah and an Eisenhower Fellow. Jen (B) Tan Sri Dato’ Seri Mohd Zahidi is a graduate of the Senior Executive Program in National and International Security Prior to 1998, he was Chairman/President and CEO of Harvard University USA, Command and General Staff College Pacific Bank and for fourteen (14) years previously, Deputy Philippines, Joint Services Staff College Australia and National Defence College Pakistan. He also holds a Master of Science Governor of Bank Negara Malaysia, having been a central Degree (Defence and Strategic Studies) from the Quaid-i-Azam banker for thirty four (34) years. Tan Sri Dato’ Dr. Lin University, Islamabad, Pakistan. continues to serve the public interest, including Member, Prime Minister’s Economic Council Working Group, as well He is currently the Chairman of Affin Holdings Berhad, as a member of a number of key National Committees on a subsidiary of the Armed Forces Trust Fund (“Lembaga Higher Education; Economic Advisor, Associated Chinese Tabung Angkatan Tentera”) since 17 October 2005. His Chambers of Commerce and Industry of Malaysia; current directorships in other public companies include Governor, Asian Institute of Management, Manila; Trustee, Cahya Mata Sarawak Berhad, Genting Malaysia Berhad, Monash University Sunway Campus; and Chairman Bintulu Port Holdings Berhad, Bandar Raya Developments Emeritus, Harvard Graduate School Alumni Council Berhad and Genting Plantations Berhad. He was elected at Harvard University in Cambridge (USA) as well as and made a Member of Dewan Negara Perak by DYMM Paduka Seri Sultan Perak on 25 November 2006. He is a President, Harvard Club of Malaysia. Director of Yayasan Sultan Azlan Shah. He is also made a member of the Malaysian-Indonesian Eminent Persons Tan Sri Dato’ Dr. Lin advises and sits on the Boards of Group elected by the Prime Minister since July 2008. He a number of publicly listed and private businesses in is an Independent Non-Executive Director for DRB-Hicom Malaysia, Singapore and Indonesia, including Chairman, Defence Technologies Sdn. Bhd. (Deftech), a subsidiary Cabot (Malaysia) Sdn. Bhd.; and is a Director of Ancom company of DRB-HICOM Berhad Group Companies. Berhad, Genting Berhad, Fraser & Neave Holdings Bhd., Jobstreet Corporation Berhad, KrisAssets Holdings Berhad Notes: and Top Glove Corporation Bhd. Family relationship with Director and/or major shareholders Mr Robert Tan Chung Meng and Ms Pauline Tan Suat Ming are siblings. Mr Robert Tan and Ms Pauline Tan are deemed major shareholders of WSC and their interests in the securities of WSC are set out in the Analysis of Shareholdings of this Annual Report. Saved as disclosed herein, none of the Directors have any family relationship with any Directors and/or major shareholders of WSC.

Conflict of interest None of the Directors have any conflict of interest with WSC.

Convicted of offences None of the Directors have been convicted for any offences within the past ten (10) years other than traffic offences.

WAH SEONG CORPORATION BERHAD 023 Annual Report 2010 Defining The Future

024 WAH SEONG CORPORATION BERHAD Annual Report 2010 WAH SEONG CORPORATION BERHAD 025 Annual Report 2010 CORPORATE SOCIAL RESPONSIBILITY

At Wasco Energy, Corporate Social Responsibility (“CSR”) is about our commitment to contribute to sustainable social and economic development while improving the livelihood of our community and society at large. Our CSR initiatives reflect our corporate values, one of which, “We are a caring and responsible organisation”. Here are some of the CSR initiatives that took place in 2010.

026 WAH SEONG CORPORATION BERHAD Annual Report 2010 CORPORATE SOCIAL RESPONSIBILITY

Yayasan Wah Seong Scholarship Awards This is the third consecutive year Yayasan Wah Seong (“YWS”) has offered scholarships to financially needy students with excellent academic results. For the academic year 2010/2011, which commenced in July 2010, eight (8) promising students were selected and offered the YWS scholarship. Selection is based on outstanding academic results as well as financial capabilities. All selected candidates had scored 3As and above (maximum 4As) in their STPM/Matriculation exams. In total, 44 scholarships have been given out in the past three (3) years.

FEEDING THE HOMELESS Recognising Kenchara Soup Kitchen’s (“KSK”) contribution towards society, Wasco’s Pipe Coating Division donated RM18,400 towards KSK’s cause. Some of our colleagues and their families participated in the volunteer programme for the whole month of October. They helped to pack and distribute food to the homeless around Kuala Lumpur. It was indeed a humbling experience.

WAH SEONG CORPORATION BERHAD 027 Annual Report 2010 CORPORATE SOCIAL RESPONSIBILITY

“Buka Puasa” with Rumah Teratak Shifa Wasco Energy Group of Companies organized a “Majlis Berbuka Puasa” at The Impiana Hotel KLCC in August 2010 in conjuction with the month of Ramadhan. The Group played host to 18 kids from Rumah Teratak Shifa, an orphanage for girls located in Setapak, Kuala Lumpur.

SHELTERING THE NEEDY In September 2010, Wasco’s Trading Division organised a visit to Stepping Stones Living Centre located in Taman Seputeh, Kuala Lumpur to assist in the running of the home, besides cash donations, employees donated essential food items such as rice, cooking oil, milk and cookies.

SOCIETY In December 2010, Wasco’s Pipe Coating Division brought Christmas cheer to the kids at Assunta Children Society (“ACS”). Wasco sponsored the items needed for the children’s 2011 schooling materials which included shoes, bags and other miscellaneous school supplies. Sponsorship was also given to ACS’s boys from Montfort Boys Town.

028 WAH SEONG CORPORATION BERHAD Annual Report 2010 CORPORATE SOCIAL RESPONSIBILITY

ANNUAL BLOOD DRIVE The Group organised an annual blood donation campaign at the National Blood Centre in Kuala Lumpur.

BEACH CLEANUP Wasco’s Pipe Coating Division and Chevron organised a beach cleanup in Kuantan, Pahang, Malaysia in June 2010 as part of their CSR initiative. This event saw a turnout of over 200 people consisting of Wasco employees as well as the general public.

WAH SEONG CORPORATION BERHAD 029 Annual Report 2010 health, safety and environment

Wah Seong Corporation Berhad is fully committed to ensure no harm to people and no damage to the environment. To this end, we have a zero tolerance policy towards injurious accidents and believe that we can achieve, and sustain, an accident-free working environment.

In line with our vision on becoming a global player in the While these improvements are encouraging, we will energy infrastructure sector, we exceeded our Health, continue in 2011 to target zero LTIR and TRIR. This will Safety and Environment (“HSE”) goals, reaching a total over be achieved through the implementation of programmes 9.7 million manhours recorded for the last five (5) years aimed at continuously strengthening our safety culture without fatality, recorded 1.07 Lost Time Injury Rate whilst simultaneously improving our HSE management (“LTIR”) in 2010 and achieved a 29% reduction in the Total systems and operational procedures. Recordable Incident Rate (“TRIR”) compared to 2009.

030 WAH SEONG CORPORATION BERHAD Annual Report 2010 health, safety and environment

We believe that the development of a strong safety culture purpose of OET implementation is to study on several is essential for the long term success of our business. Our HSE elements for further improvement. Risk assessment commitment to the provision of a safe working environment is reviewed internally together with Chevron. for all our employees will lead to efficiency improvements, lower costs and higher productivity. In June 2009, we had We will continue to develop, implement and maintain implemented an Incident Injury Free (“IIF”) programme to management systems in which work processes are clearly promote and embrace safety as a personal value. We have defined, risks are identified and mitigated, safe working seen improvement in HSE statistics and changes to our procedures are developed and all employees understand employee’s behavior towards safety. their HSE responsibilities. In 2010, Wasco Coatings Malaysia Sdn. Bhd. (formerly known as PPSC Industries Apart from IIF, Wasco in collaboration with Chevron has Sdn. Bhd.) has been re-certified with ISO 9001, ISO 14001 implemented an Operational Excellence Team (“OET”) and OHSAS 18001. programme in our main operating facility in Kuantan. The

WAH SEONG CORPORATION BERHAD 031 Annual Report 2010 AUDIT COMMITTEE

1. MEMBERS AND MEETINGS Members and details of attendance of Directors at the Audit Committee Meetings of the Company for the financial year ended 31 December 2010 are as follows:

Name of Directors Directorship Date of No. of Meetings Appointment attended

Halim Bin Haji Din (Chairman) Independent Non- 22 May 2002 4/4 Executive Director

Tan Sri Ab Rahman Bin Omar (Member) Independent Non- 1 October 2003 4/4 Executive Director

Tan Sri Dato’ Dr. Lin See Yan (Member) Independent Non- 20 July 2004 4/4 Executive Director

2. ROLE OF THE AUDIT COMMITTEE The primary function of the Audit Committee is to assist the Board of Directors (“the Board”) in fulfilling the following oversight objectives on the Group’s activities:

• assess the Group’s processes relating to its risks and control environment; • oversee financial reporting; and • evaluate the internal and external audit processes.

3. TERMS OF REFERENCE i. Composition The Board shall elect and appoint Committee members from amongst their numbers, comprising no fewer than three (3) Directors, all of whom must be non-executive Directors, with a majority of them being independent non-executive Directors of the Company.

The Board shall at all times ensure that the Audit Committee should be financially literate and at least one (1) member of the Committee shall be:-

• a member of the Malaysian Institute of Accountants (“MIA”); or

• if he or she is not a member of MIA, he or she must have at least three (3) years of working experience and: - he or she must have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act, 1967; or - he or she must be a member of the associations of accountants specified in Part II of the Accountants Act, 1967; and

• fulfils such other requirements as may be prescribed or approved by Bursa Malaysia Securities Berhad from time to time.

032 WAH SEONG CORPORATION BERHAD Annual Report 2010 AUDIT COMMITTEE

If a member of the Committee resigns, dies or for any reason ceases to be a member with the result that the number of members is reduced to below three (3), the Board shall within three (3) months of the event appoint such number of new members as may be required to fill the vacancy.

The Chairman of the Committee shall be an independent non-executive Director. No alternate Director of the Board shall be appointed as a member of the Committee.

The Board shall review the terms of each of its members at least once (1) every three (3) years. ii. Quorum and Committee’s procedures Meetings shall be conducted at least four (4) times annually, or more frequently as circumstances dictate.

In order to form a quorum for the meeting, the majority of the members present must be independent non-executive Directors. In the absence of the Chairman, the members present shall elect a Chairman for the meeting from amongst the members present.

The Company Secretary shall be appointed Secretary of the Committee (“the Secretary”). The Secretary, in conjunction with the Chairman, shall draw up an agenda, which shall be circulated together with the relevant support papers, at least one (1) week prior to each meeting to the members of the Committee. The minutes shall be circulated to members of the Board.

The Committee may, as and when deemed necessary, invite other Board members and senior management members to attend the meetings.

The Chairman shall submit an annual report to the Board summarising the Committee’s activities during the year and the related significant results and findings.

The Committee shall meet at least twice a year with the Head, Internal Audit and external auditors in separate sessions to discuss any matters without the presence of Management.

The Committee shall regulate the manner of proceedings of its meetings, having regard to normal conventions on such matter. iii. Authority The Committee is authorised to investigate any activity within its terms of reference and shall have unrestricted access to both the internal and external auditors and to all employees of the Group.

The Committee shall have full and unlimited access to any information pertaining to the Group.

The Committee shall have direct communication channels with the internal and external auditors and with senior management of the Group and shall 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.

WAH SEONG CORPORATION BERHAD 033 Annual Report 2010 AUDIT COMMITTEE

The Committee shall have the resources that it requires to perform its duties. The Committee can obtain, at the expense of the Company, outside legal or other independent professional advice that it considers necessary.

Where the 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 Main Market Listing Requirements of the Bursa Malaysia Securities Berhad (“Bursa Securities Listing Requirements”), the Committee shall promptly report such matter to the Bursa Malaysia Securities Berhad.

iv Responsibilities and duties In fulfilling its primary objectives, the Committee shall undertake the following responsibilities and duties:

• Review the appointment and performance of external auditors, the audit fee and any question of resignation or dismissal before making recommendations to the Board.

• Review with the external auditor, the audit scope and plan, including any subsequent changes to the audit scope and plan.

• Review the quarterly results and the year end financial statements, prior to the approval by the Board focusing particularly on: - changes in or implementation of major accounting policy changes; - significant or unusual events; and - compliance with accounting standards and other legal requirements;

• Review the Internal Audit Charter and the adequacy of the internal audit scope and plan, as well as the functions, competency and resources of the Group Internal Audit Department and whether it has the necessary authority to carry out its work.

• Review the internal and external audit reports to ensure that appropriate and prompt remedial action is taken by management on major deficiencies in controls or procedures that are identified.

• Review major audit findings and the management’s response during the year with management, internal and external auditors, including the status of previous audit recommendations.

• Review the assistance given by the Group’s officers to both the internal and external auditors, andany difficulties encountered in the course of the audit work, including any restrictions on the scope of activities or access to required information.

• Review the independence and objectivity of the external auditors and their services, including non-audit services and the professional fees, so as to ensure a proper balance between objectivity and value for money.

• Approve all decisions regarding the appointment or removal of the Head, Group Internal Audit.

• Review the adequacy and integrity of internal control systems, including risk management, management information system and the internal auditors’ and/or external auditors’ evaluation of the said systems.

034 WAH SEONG CORPORATION BERHAD Annual Report 2010 AUDIT COMMITTEE

• Direct and where appropriate supervise any special projects or investigation considered necessary, and review investigation reports on any major defalcations, frauds and thefts.

• Review procedures in place to ensure that the Group is in compliance with the Companies Act, 1965, Bursa Securities Listing Requirements and other legislative and reporting requirements.

• Review any related party transaction and conflict of interest situation that may arise within the Company or the Group, including any transaction, procedure or course of conduct that raises question on management integrity.

• Prepare reports, if the circumstances arise or at least once (1) a year, to the Board summarising the work performed in fulfilling the Committee’s primary responsibilities.

• Review the allocation of options pursuant to WSC Group’s Employees Share Option Scheme (if any).

• Any other activities, as authorised by the Board.

4. SUMMARY OF ACTIVITIES During the financial period under review, the Audit Committee conducted its activities in line with the termsof reference, as follows:

• Reviewed quarterly and annual reports of the Group and the Company before submission to the Board for consideration and approval.

• Reviewed the annual audit plan and the scope for the year prepared by internal and external auditors.

• Reviewed the fee for external auditors.

• Discussed with the external auditors their report on the financial statements and management letters relating to the audit.

• Met the external auditors without any executive present except the Secretary.

• Reviewed the recurrent related party transactions of a revenue or trading nature and provision of financial assistance of the Group for inclusion in the Circular to the Shareholders in relation to the Proposed Renewal of the existing and new Shareholders’ mandate for recurrent related party transactions pursuant to Bursa Securities Listing Requirements for the Board’s approval.

• Reviewed all related party transactions and recurrent related party transactions to ensure that they are within the mandate obtained;

• Reviewed key risks deliberated at the Risk Committee Meeting;

• Reviewed major findings in the reports prepared by Group Internal Audit together with the recommendation made by the Internal Auditors and management response to the findings.

WAH SEONG CORPORATION BERHAD 035 Annual Report 2010 AUDIT COMMITTEE

5. STATEMENT BY AUDIT COMMITTEE ON WSC GROUP ESOS Appendix 9C Part A Item No. 26 of Bursa Securities Listing Requirements requires a statement by the Audit Committee in relation to the allocation of options pursuant to a share scheme for employees as required under paragraph 8.17.

There was no new ESOS scheme in place during the financial year.

6. INTERNAL AUDIT FUNCTION The Audit Committee is assisted by the Group Internal Audit Department in reviewing the adequacy of operational controls so as to provide reasonable assurance that such system continues to operate satisfactorily and effectively in the Group and to add value and improve the Group’s operations by providing independent and objective assurance.

The Group Internal Audit Department is independent from the activities or operations of other operating units of the WSC Group. Its principal responsibility is to conduct periodic reviews on the Group’s key operations and to ensure adequacy in operational controls, consistency in application of policies and procedures and compliance with statutory requirements.

The internal audit function focused on:

a. reviewing the adequacy and effectiveness of key controls.

b. compliance to established policies and procedures as well as relevant statutory requirements.

c. recommending improvements to existing procedures and policies in order to improve efficiency and effectiveness within the Group and the Company.

d. performing special reviews requested by management and/or the Audit Committee.

After each audit, the findings and recommendations for improvement were communicated to the respective management for their response and corrective actions, if necessary. Quarterly, the internal audit reports with the management responses were submitted to the Audit Committee for their review and consideration.

036 WAH SEONG CORPORATION BERHAD Annual Report 2010 REMUNERATION COMMITTEE

1. MEMBERS AND MEEETINGS Members and details of attendance of Directors at the Remuneration Committee Meetings of the Company for the financial year ended 31 December 2010 are as follows:

Name of Directors Directorship Date of No. of Meetings Appointment Attended Halim Bin Haji Din (Chairman) Independent Non- 22 May 2002 1/1 Executive Director

Tan Sri Ab Rahman Bin Omar (Member) Independent Non- 1 October 2003 1/1 Executive Director

Chan Cheu Leong (Member) Managing Director/ 22 May 2002 1/1 Group Chief Executive Officer

2. ROLE OF THE REMUNERATION COMMITTEE (“RC”) In compliance with The Malaysian Code on Corporate Governance (Revised 2007) (Part 1-B and Part 2-AA XXIV) (“the Malaysian Code”), the RC shall set the policy framework and recommend to the Board, the remuneration of the Executive Directors in all its forms, drawing from outside advice as necessary with the objective of ensuring:

a. that the Company’s Executive Directors are fairly rewarded for their individual contributions to the Company’s overall performance; and

b. that the levels of remuneration are sufficient to attract and retain the Directors needed to run the Company successfully.

The determination of remuneration packages of Non-Executive Directors, including Non-Executive Chairman should be a matter for the Board as a whole.

The individuals concerned should abstain from discussion of their own remuneration.

3. TERMS OF REFERENCE i. Composition The RC shall be headed by a non-executive Chairman and its members shall comprise wholly or mainly of non-executive Directors.

ii. Quorum of Meetings A minimum of two (2) RC Members present in person shall constitute the quorum.

iii. RC Members The RC Members are as disclosed above.

Any other person(s) may be invited by the RC and/or the RC Chairman from time to time.

WAH SEONG CORPORATION BERHAD 037 Annual Report 2010 REMUNERATION COMMITTEE

iv. Majority Decision All decisions of the RC shall be decided on the votes of the simple majority of those Members present. However, no Executive Director shall participate in the discussion of his own remuneration.

Any decision or recommendation made at the RC shall be subject to the review and ultimate approval of the Company’s Board of Directors.

v. Casting Vote In the event there be an equality of votes, then the Chairman of the meeting shall have a casting vote.

vi. Frequency of Meetings The Committee shall meet at least annually or at such other frequency as the Chairman may determine.

vii. Notice of Meetings Minimum seven (7) days or such shorter notice as the RC may deem fit depending on the nature and prevailing circumstances at hand.

viii. Secretary The Company’s Company Secretary(s) shall be the Secretary(s) for the RC. In the event any of the Company Secretary(s) is unable to attend, an assistant or deputy Secretary(s) may be appointed for that specific meeting.

ix. Minutes of Meetings The Secretary (which expression shall include the assistant or deputy Secretary appointed under item (viii)) shall table the minutes of each RC Meeting and shall circulate the same for each Member’s record. The Chairman’s confirmation of the Minutes shall be taken as a correct record of the proceedings thereat.

The Chairman shall report on each meeting to the Board.

x. Functions of the RC Without prejudice to the generality of the foregoing, the RC shall:

a. Review, recommend and advise on all forms of Directors’ remuneration e.g. • Basic Salary • Profit-sharing schemes (if any) • Share options • Any other benefits;

b. Establish a formal and transparent procedure for developing a policy on executive remuneration and for fixing the remuneration packages of individual Directors;

c. To structure the component parts of the Executive Directors’ remuneration so as to link rewards to corporate and individual performance; whereas, in the case of Non-Executive Directors, the level of remuneration should reflect the experience and level of responsibilities undertaken by the particular Non-Executive Director concerned;

038 WAH SEONG CORPORATION BERHAD Annual Report 2010 REMUNERATION COMMITTEE

d. Conduct continued assessment of individual Executive Directors to ensure that remuneration is directly related to performance over time;

In this regard, the review of Non-Executive Directors’ fees may take place at a different time of the year from the review of Executive Directors’ salaries;

e. To monitor and assess the suitability of such proposed performance related formula (e.g. whether the formula is based on individual performance, company profit performance, earnings per share, etc.) and to see that awards under the Company’s share option schemes are consistent with the Company’s overall performance and provide an additional incentive to management;

f. To provide an objective and independent assessment of the benefits granted to Executive Directors;

g. To ensure that there are adequate pension arrangements for the Executive Directors;

h. To consider what other details of Executive Directors’ remuneration to be reported in addition to the existing legal requirements, and how these details should be presented in the Annual Report;

i. Introduce any regulation which would enable the smooth administration and effective discharge of the Committee’s duties and responsibilities;

j. To furnish a report to the Board of any findings of the Committee;

k. Engage or appoint such other competent and professional advisers/consultants as may be deemed fit to assist the RC in the smooth discharge of its duties herein;

l. To establish a remuneration framework for key officers of the Group in order to attract and retain key personnel of requisite quality that increases productivity and profitability in the long run;

m. To review and determine the appropriate remuneration package for key officers of the Group as follows: - Head Office – Group Chief Executive Officer, Deputy Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Group Company Secretary;

n. To review the salary increment or adjustment in the event of promotion or re-designation of key officers of the Group, where necessary;

o. To review the annual increment and bonus payment for key officers of the Group basing on the performance of the Group and performance of the individuals, where necessary;

p. To establish schemes, options and remuneration and compensation plans for the key officers of the Group, where appropriate; and

q. Generally, to decide and implement such other matters as may be delegated by the Company’s Board of Directors from time to time. xi. Variation The above Terms of Reference may be determined and/or varied by the Company’s Board of Directors at anytime and from time to time.

WAH SEONG CORPORATION BERHAD 039 Annual Report 2010 NOMINATION COMMITTEE

1. MEMBERS AND MEETINGS Members and details of attendance of Directors at the Nomination Committee Meetings of the Company for the financial year ended 31 December 2010 are as follows:

Name of Directors Directorship Date of No. of Meetings Appointment Attended Robert Tan Chung Meng (Chairman) non-Independent Non- 22 May 2002 2/2 Executive Chairman

Tan Sri Ab Rahman Bin Omar (Member) Independent Non- 1 October 2003 2/2 Executive Director

Halim Bin Haji Din (Member) Independent Non- 22 May 2002 2/2 Executive Director

2. ROLE OF THE NOMINATION COMMITTEE (“NC”) In compliance with The Malaysian Code on Corporate Governance (Revised 2007) (Part 1-A and Part 2-AA VIII) (“the Malaysian Code”), the NC shall set the policy framework and:-

a. Recommend to the Board, candidates for all directorships to be filled by the shareholders or the Board after considering the candidates’ - - skills, knowledge, expertise and experience; - professionalism; - integrity; and - in the case of candidates for the position of independent non-executive directors, to evaluate the candidates’ ability to discharge such responsibilities/functions as expected from independent non-executive directors;

b. Consider, in making its recommendations, candidates for directorships proposed by the Chief Executive Officer and within the bounds of practicability, by any other senior executive or any director or shareholder;

c. Recommend to the Board, directors to fill the seats on Board Committees.

The actual decision as to who shall be nominated shall be the responsibility of the full Board after considering the NC’s recommendations.

The individuals concerned should abstain from discussion of their own nomination.

3. TERMS OF REFERENCE i. Composition The NC shall be headed by a non-executive Chairman and its members shall comprise exclusively of non executive directors, a majority of whom are independent.

ii. Quorum of Meetings A minimum of two (2) NC Members present in person shall constitute the quorum.

040 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOMINATION COMMITTEE

iii. NC Members The NC Members are as disclosed above.

Any other person(s) may be invited by the NC and/or the NC Chairman from time to time. iv. Majority Decision All decisions of the NC shall be decided on the votes of the simple majority of those Members present. Any decision or recommendation made at the NC shall be subject to the review and ultimate approval of the Company’s Board of Directors. v. Casting Vote In the event there be an equality of votes, then the Chairman of the meeting shall have a casting vote. vi. Frequency of Meetings The Committee shall meet at least annually or at such other frequency as the Chairman may determine. vii. Notice of Meetings Minimum seven (7) days or such shorter notice as the NC may deem fit depending on the nature and prevailing circumstances at hand. viii. Secretary The Company’s Company Secretary(s) shall be the Secretary(s) for the NC. In the event any of the Company Secretary(s) is unable to attend, an assistant or deputy Secretary(s) may be appointed for that specific meeting. ix. Minutes of Meetings The Secretary (which expression shall include the assistant or deputy Secretary appointed under item (viii)) shall table the minutes of each NC Meeting and shall circulate the same for each Member’s record. The Chairman’s confirmation of the Minutes shall be taken as a correct record of the proceedings thereat.

The Chairman shall report on each meeting to the Board. x. Functions of the NC Without prejudice to the generality of the foregoing, the NC shall:

a. Determine the core competencies and skills required of Board members to best serve the business and operations of the Group as a whole and the optimum size of the Board to reflect the desired skills and competencies;

b. Review the size of Non-Executive participation, Board balance and determine if additional Board members are required and also to ensure that at least 1/3 of the Board is independent;

c. Recommend to the Board on the appropriate number of Directors to compose the Board which should fairly reflect the investments of the minority shareholders in the Company, and whether the current Board representation satisfies this requirement;

d. Recommend to the Board, candidates for directorships to be filled by the shareholders or the Board;

WAH SEONG CORPORATION BERHAD 041 Annual Report 2010 NOMINATION COMMITTEE

e. Consider in making its recommendations, candidates for directorships proposed by the Chief Executive Officer and, within the bounds of practicability, by any other senior executive or any Director or shareholder;

f. Recommend to the Board, Directors to fill the seats on Board Committees;

g. Undertake an annual review of the required mix of skills and experience and other qualities of Directors, including core competencies which Non-Executive Directors should bring to the Board and to disclose this forthwith in every Annual Report;

h. Assist the Board to introduce a criteria and to formulate and implement a procedure to be carried out by the NC annually for assessing the effectiveness of the Board as a whole, the Board Committees and for assessing the contributions of each individual Director;

i. Introduce any regulation which would enable the smooth administration and effective discharge of the Committee’s duties and responsibilities;

j. To furnish a report to the Board of any findings of the Committee;

k. To recommend to the Board for continuation or discontinuation in service of Directors as an Executive Director or Non-Executive Director;

l. To recommend Directors who are retiring by rotation to be put forward for re-election;

m. To recommend to the Board the employment of the services of such advisers as it deems necessary to fulfill the Board’s responsibilities;

n. To review the appointment and termination of key officers of the Group as follows:

- Head Office – Group Chief Executive Officer. Deputy Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Group Company Secretary;

o. To review succession plans for key officers of the Group;

p. To review the appointment and resignation of Directors on the Board of subsidiaries, where necessary;

q. To review the composition, quality, capacity, competencies and effectiveness of the Board of the subsidiaries, where necessary; and

r. Generally, to decide and implement such other matters as may be delegated by the Company’s Board of Directors from time to time.

xi. Variation The above Terms of Reference may be determined and/or varied by the Company’s Board of Directors at any time and from time to time.

042 WAH SEONG CORPORATION BERHAD Annual Report 2010 STATEMENT ON CORPORATE GOVERNANCE

The Board of Directors of the Company recognises the importance of upholding good corporate governance in the discharge of its duties and responsibilities to protect its shareholders’ interest and to reflect the status of the Group in the eyes of the public investors.

Principles of Corporate Governance

A. DIRECTORS I. Board of Directors The Company is headed by the Board of Directors (“the Board”) who leads and controls the Company.

II. Board Balance The Board is led by a Non-Executive Chairman and altogether, comprises eight (8) members, which includes two (2) Executive Directors, three (3) Non-Independent Non-Executive Directors (including the Non-Executive Chairman) and three (3) Independent Non-Executive Directors.

Composition of the Board members reveals their varied background as outlined on pages 20 to 23 of this Annual Report. The Board members are experienced and equipped with the relevant skills, knowledge and expertise required for the proper running of the Company’s affairs.

Generally, the Executive Directors along with the Management Team are responsible for making and implementing operational decisions. Non-Executive Directors play a key supporting role, contributing their skills, expertise and knowledge towards the formulation of the Group’s strategic and corporate objectives, policies and decisions.

III. Supply of Information The Board is briefed on a timely manner on all major financial, operational and corporate matters.

All Directors are provided with written reports and supporting documents and they have full access to all staff for any information pertaining to the Group’s affairs.

The Board either collectively or individually is authorised to seek such independent professional advice as may be considered necessary in furtherance of their duties at the expense of the Company.

Directors also have access to the advice and services of its qualified Company Secretaries in the course of discharging their duties and responsibilities and in fulfilling their obligation to statutory requirements, the Bursa Securities Listing Requirements or other rules and regulations, either as a full Board or in their individual capacity.

IV. Appointments to the Board The Nomination Committee is responsible for assessing and making recommendations on any new appointments to the Board and its various Committees.

In making these recommendations, due consideration is given to the required mix of skills, expertise, knowledge, experience, professionalism and integrity that the proposed Directors shall bring to complement the Board.

WAH SEONG CORPORATION BERHAD 043 Annual Report 2010 STATEMENT ON CORPORATE GOVERNANCE

V. Re-election and Re-appointment of Directors The Company’s Articles of Association provide that all the Directors shall retire at least once in every three (3) years and are eligible for re-election at each Annual General Meeting in compliance with the Bursa Securities Listing Requirements.

Pursuant to Section 129 of the Companies Act, 1965, a Director who has attained the age of seventy (70) years is required to submit himself/herself for re-appointment as Director annually at the Annual General Meeting of the Company.

B. DIRECTORS’ REMUNERATION I. Level and Make-Up of Remuneration The remuneration of the Board Members is broadly categorised into those paid to Executive Directors and Non-Executive Directors.

The Executive Directors are remunerated in cash and in kind by way of salary, performance bonus and other benefits and entitlements; taking into consideration their experience, responsibilities, length of service, their individual performance and contribution as well as the overall performance of the Group and the Company.

Non-Executive Directors are paid fees based on their experience and level of responsibilities.

II. Procedure The Remuneration Committee is responsible to make any recommendation to the Board on the remuneration package and benefits extended to the Executive Directors; whereas, Non-Executive Directors’ remuneration is a matter to be decided by the Board as a whole.

The individual concerned must abstain from deliberations and voting on decisions in respect of his individual remuneration.

III. Disclosure For purposes of security, instead of presenting the remuneration details of each Director individually, the Board is of the opinion that such information will not add significantly to the understanding and evaluation of the Company’s standards of corporate governance and that the same can be disclosed as follows:

044 WAH SEONG CORPORATION BERHAD Annual Report 2010 STATEMENT ON CORPORATE GOVERNANCE

The details of the remuneration for the Directors of the Company during the financial year ended 31 December 2010 are as follows: Executive Non-Executive Directors Directors Total (RM’000) (RM’000) (RM’000)

Salaries and Other Emoluments 2,825 43 2,868 Bonus 2,483 - 2,483 Directors’ Fees 60 255 315

Benefits-in-kind - Leave Passage 125 - 125 - Others * 225 - 225

Total 5,718 298 6,016

* Others under benefits-in-kind include motor vehicles, club subscription and etc.

The number of Directors whose total remuneration falls within the following bands: No. of No. of Executive Non-Executive Directors Directors Total

Less than RM50,000 - 3 3 RM50,001 to RM100,000 - 3 3 RM2,600,000 to RM2,700,000 1 - 1 RM3,000,000 to RM3,100,000 1 - 1

Total 2 6 8

C. SHAREHOLDERS AND INVESTORS I. Dialogue between Company and Investors The Board values feedback and dialogues with its Investors. The Company will hold open discussions with Investors upon written request. Analyst Briefings are periodically held to introduce and update the Investors on the Company’s/the Group’s undertakings and financial performance from time to time.

In this respect, the Board and the Company shall ensure that any information sought is disseminated in strict adherence to the disclosure requirements under Bursa Securities Listing Requirements.

All Investors are encouraged at all times to log on and visit the Company’s website at www.wahseong.com to be informed of the latest happenings and detailed information of the Group.

WAH SEONG CORPORATION BERHAD 045 Annual Report 2010 STATEMENT ON CORPORATE GOVERNANCE

II. Annual General Meeting The Annual General Meeting is one of the platforms for the Company’s shareholders to meet and exchange views with the Board.

An open Question and Answer Session will be held whereby any shareholder may seek further details and clarification regarding any proposed resolutions as well as matters relating to the Group’s businesses and affairs.

The Chairman and the other members of the Board together with the Company’s external auditors will be in attendance to provide explanations to all shareholders’ queries.

D. ACCOUNTABILITY AND AUDIT FUNCTION I. Financial Reporting Fair assessments are always given by the Directors of the Group’s financial performance and prospects in respect of all quarterly results, annual financial statements and announcements issued by the Company.

The Board is assisted by the Audit Committee to scrutinise information for disclosure to ensure its timeliness, accuracy and adequacy.

Page 61 of this Annual Report sets out the Statement by the Board in compliance with paragraph 15.26(a) of Bursa Securities Listing Requirements.

II. Internal Control The Board has overall responsibility for maintaining a sound system of internal control, which encompasses risk management, financial, organisational, operational and compliance controls necessary for the Group to achieve its objectives within an acceptable risk profile.

These controls can only provide reasonable but not absolute assurance against material misstatement, errors of judgment, loss or fraud.

The Group’s Statement on Internal Control is as set out on pages 58 to 60 of this Annual Report.

The creation of an Internal Audit Department since the Group first commenced operations followed by the formation of the Risk Management Committee in 2009 are testimony of the dedication and commitment that the Board and the Company have in identifying and mitigating such potentially harmful risks from occurring.

III. Relationship with External Auditors The Board has established a formal and transparent relationship with all the External Auditors appointed by the Company and its subsidiaries within its fold.

The External Auditors are invited to attend the Audit Committee Meeting where the Group’s annual financial results are considered, as well as at meetings to review and discuss the Group’s audit findings, internal controls and accounting policies, whenever the need arises.

The amount of non-audit fees paid and payable to the External Auditors and its affiliated companies for the financial year ended 31 December 2010 was RM800,000.

046 WAH SEONG CORPORATION BERHAD Annual Report 2010 STATEMENT ON CORPORATE GOVERNANCE

STATEMENT ON THE EXTENT OF COMPLIANCE WITH THE BEST PRACTICES IN CORPORATE GOVERNANCE

AA. BOARD OF DIRECTORS I. Principal Responsibilities of the Board The Board is responsible towards the strategic planning, overseeing the resources and operational conduct, identifying and implementing appropriate systems to manage principal risks, reviewing the adequacy and integrity of its internal control and management information systems, ensuring a management succession plan as well as having a dedicated investor relation and shareholders’ communication policy in place.

Where appropriate, the Board has delegated certain responsibilities to the various Board Committees with clearly defined terms of reference to assist the Board in discharging its responsibilities.

II. Non-Executive Chairman The Board is led by Mr. Robert Tan Chung Meng as the Non-Executive Chairman and Mr. Chan Cheu Leong as the Managing Director and Group Chief Executive Officer.

There is a separation of the Chairman’s role to ensure a division of responsibilities and a balance of control, power and authority.

III. Board Balance The Board is led by a Non-Executive Chairman and altogether, comprises eight (8) members, which includes two (2) Executive Directors, three (3) Non-Independent Non-Executive Directors (including the Non-Executive Chairman) and three (3) Independent Non-Executive Directors.

Composition of the Board members reveals their varied background as outlined on pages 20 to 23 of this Annual Report. The Board members are equipped with the relevant skills, knowledge and expertise towards the proper running of the Company’s affairs.

Generally, the Executive Directors along with the Management Team are responsible for making and implementing operational decisions. Non-Executive Directors play a key supporting role, contributing their skills, expertise and knowledge towards the formulation of the Group’s strategic and corporate objectives, policies and decisions.

IV. Directors Representing Minority Shareholders The Board may consider the appointment of additional Directors who fairly reflects the level of investment by minority shareholders in the Company.

V. Largest Shareholder Other Than the Majority Shareholder The Board may exercise judgment in determining the appropriate number of Directors, which fairly reflects the level of investment by the other shareholders in the Company.

VI. One Third Independent Directors The Board currently comprises one third Independent Directors.

WAH SEONG CORPORATION BERHAD 047 Annual Report 2010 STATEMENT ON CORPORATE GOVERNANCE

VII. Senior Independent Non-Executive Director There is no combination or overlapping of roles between the current Chairman (who is a Non-Executive Director) and the Managing Director/Group Chief Executive Officer of the Company since these two (2) positions are held by separate individuals.

As such, the Board is of the view that there is no necessity to appoint a Senior Independent Non-Executive Director of the Board to whom concerns may be conveyed.

VIII. Appointments to the Board A Nomination Committee comprising majority Independent Directors has been set up. Its details are set out on pages 40 to 42 of this Annual Report.

IX. Review of Quality Mix of Board Members The Nomination Committee will meet at least once every year to review the optimum mix of the Board members after considering the skills, experience and other qualities including core competencies which Non-Executive Directors will bring to the Board.

X. Annual Assessment of the Board’s Performance The Nomination Committee will meet at least once every year to assess the effectiveness of the Board and Committees as a whole as well as the contribution of each individual Director.

XI. Services of Company Secretary The Board has full access to the services of the Company Secretaries.

Currently, the Group’s in-house Company Secretary is assisted by the external Company Secretary in preparing and effecting all proper documentation and meeting all statutory obligations and compliances.

XII. Size of Board The Board will, from time to time, examine its size to determine the optimum mix of skills and its effectiveness.

XIII. Directors’ Training All the current Directors of the Company have attended and completed the Mandatory Accreditation Program (“MAP”) as well as the Continuing Education Program (“CEP”), having accumulated the requisite minimum CEP Points within the period 2004 - 2005 as formerly required under the previous Bursa Malaysia Securities Berhad’s Practice Note 15 which has since been repealed.

The Directors do and will undergo such similar or continuing training and education programs from time to time to equip and keep themselves abreast of the latest developments in order to discharge their duties and responsibilities more effectively.

Subject to Bursa Malaysia Securities Berhad’s Practice Note 5 and in compliance with paragraph 15.08 of Bursa Securities Listing Requirements, the Board shall on a continuous basis, evaluate and determine the training needs of its Directors, which subject matter of training shall be one that aids the Director in the discharge of his/her duties as a Director.

048 WAH SEONG CORPORATION BERHAD Annual Report 2010 STATEMENT ON CORPORATE GOVERNANCE

A brief description of the type of training/courses attended by the Directors for the financial year under review are as set out below.

DETAILS OF DIRECTORS’ TRAINING

Directors Date of Course/ Type of Training/Courses Attended Name of Organiser Robert Tan Chung Meng 11 November 2010/ 2011 Budget and Accounting Standards update KrisAssets Holdings Berhad and by Messrs PricewaterhouseCoopers IGB Corporation Berhad

Pauline Tan Suat Ming 11 November 2010/ 2011 Budget and Accounting Standards update KrisAssets Holdings Berhad and by Messrs PricewaterhouseCoopers IGB Corporation Berhad

Tan Sri Ab Rahman Bin Omar 6 May 2010/ The roles of GLICs and GLCs in the New Economic Malaysian Directors Academy Model (“NEM”) (“MINDA”)

Jen (B) Tan Sri Dato’ Seri Mohd 13 - 14 January 2010/ MICG Annual Directors Duties & Governance Zahidi Bin Haji Zainuddin Malaysian Institute of Corporate Conference Governance (“MICG”) – Towards Boardroom Excellence and Corporate Governance Best Practices

1 July 2010/ Knowledge of Islamic Banking by Affin Islamic Bank Affin Holdings Berhad

6 - 7 July 2010/ 2nd Annual Corporate Governance Summit 2010 Asian World Summit with MICG – “Truth, Lies and Corporate Governance” and the Federation of Public Listed Companies (“FPLC”) / Affin Holdings Berhad

8 July 2010/ GST (Good Services Tax) & Accounting Standards Affin Holdings Berhad briefing by Messrs PricewaterhouseCoopers

19 November 2010/ Training on FRS by Messrs PricewaterhouseCoopers Genting Malaysia Berhad

28 - 29 November 2010/ Senior Manager’s Conference – “Stepping Up to Genting Malaysia Berhad Stepping Out” by Mr Simon Treselyan

WAH SEONG CORPORATION BERHAD 049 Annual Report 2010 STATEMENT ON CORPORATE GOVERNANCE

Directors Date of Course/ Type of Training/Courses Attended Name of Organiser Tan Sri Dato’ Dr. Lin See Yan 12 January 2010/ Understanding the Regulatory Environment Singapore Exchange Limited (“SGX”) and Singapore Institute of Directors, Singapore

18 March 2010/ Research symposium on “Harvard and China” Harvard Center Shanghai

19 March 2010/ Harvard Asia & Oceania Club Leaders Harvard Alumni Association, Shanghai

14 - 15 June 2010/ Achieving Breakthrough Service Charles River Centre

24 June 2010/ Directors’ Continuing Education Programme Guinness Anchor Bhd and Fraser & Neave Holdings Bhd

28 - 29 June 2010/ Word of Mouth Marketing Charles River Centre

1 - 2 July 2010/ Improving Business Acumen and Decision Making Charles River Centre

6 – 7 July 2010/ National Tax Conference 2010 Malaysian Tax Academy Inland Revenue Board of Malaysia and Chartered Tax Institute of Malaysia

4 August 2010/ Directors’ Continuing Education Programme 2010 Fraser & Neave Holdings Bhd.

15 November 2010/ Directors’ Training Singapore Institute of Directors, - Getting it right, the challenges and opportunity Singapore ahead

Chan Cheu Leong 25 January 2010/ Financial Outlook 2010 Credit Suisse

3 February 2010/ DBS Investment Outlook 2010 DBS Bank Limited

20 March 2010/ Asia Trader and Investor Convention 2010 NextView Pte. Ltd.

050 WAH SEONG CORPORATION BERHAD Annual Report 2010 STATEMENT ON CORPORATE GOVERNANCE

Directors Date of Course/ Type of Training/Courses Attended Name of Organiser Chan Cheu Leong 30 - 31 March 2010/ Invest Malaysia 2010 (Continued) Bursa Malaysia Securities Berhad

9 - 10 July 2010/ OCBC Economic and Business Forum OCBC Bank (Malaysia) Berhad

15 July 2010/ Credit Suisse Market Outlook Lunch Seminar Credit Suisse

11 November 2010/ Luncheon Talk by Professor Mervyn E. King Malaysian Alliance of Corporate – “Governance, Strategy and Sustainability are Directors (“MACD”) Inseparable for the Successful Implementation of the Economic Transformation Programme (“ETP”)

23 November 2010/ Talk by Professor Rajesh Chandy Malaysian External Trade – “The New Faces of Entrepreneur” Development Corporation (“Matrade”)

Halim Bin Haji Din 29 - 31 March 2010/ High Performance in Social Security by Innovation Sekretariat International Social Change Management and Risk Management Security Association (“ISSA”)

5 - 6 April 2010/ Financial Institution Directors’ Education (“FIDE”) Bank Negara Malaysia Programme Module 1

3 - 4 May 2010/ FIDE Programme Module 2 Bank Negara Malaysia

18 - 20 May 2010/ World Islamic Economic Forum World Islamic Economic Forum Foundation

14 - 15 June 2010/ FIDE Programme Module 3 Bank Negara Malaysia

29 - 30 June 2010/ 6th Asia Pacific Audit & Governance Summit 2010 Columbus Circle Governance Sdn. Bhd.

5 - 6 July 2010/ FIDE Programme Module 4 Bank Negara Malaysia

3 November 2010/ Financial Industry Conference (“FIC”) Bank Negara Malaysia

WAH SEONG CORPORATION BERHAD 051 Annual Report 2010 STATEMENT ON CORPORATE GOVERNANCE

Directors Date of Course/ Type of Training/Courses Attended Name of Organiser Halim Bin Haji Din 8 - 11 November 2010/ World Congress of Accountants 2010 (“WCOA”) (Continued) International Federation of Accountants (“IFAC”) and Malaysian Institute of Accountants (“MIA”)

11 November 2010/ 2011 Budget and Accounting Standards update KrisAssets Holdings Berhad and by Messrs PricewaterhouseCoopers IGB Corporation Berhad

Giancarlo Maccagno 30 - 31 March 2010/ Invest Malaysia 2010 Bursa Malaysia Securities Berhad

3 - 6 May 2010/ Offshore Technology Conference 2010 Offshore Technology Conference

27 Sept - 1 Oct 2010/ IPLOCA Convention International Pipeline & Offshore Contractors Association (“IPLOCA”)

XIV. Board Meetings The Board meets on a scheduled basis of at least four (4) times a year. Additional Board meetings can be convened as and when necessary.

During the financial year ended 31 December 2010, the Board met on four (4) occasions. The meeting attendance of each individual Director is set out on page 192 of this Annual Report (see Statement Accompanying Notice of Eleventh Annual General Meeting).

XV. Formal Schedule of Matters There are formal schedule of matters specifically reserved for the Board to decide to ensure that the direction and control of the Company firmly rests in its hands, for example strategic financial and investment decisions.

XVI. Position Descriptions and Corporate Objectives The Board together with the Managing Director/Group Chief Executive Officer and the respective management team(s), where applicable, develop the Group’s corporate objectives, policies and positions descriptions and setting out the limits of empowerment of its respective management/committees’ authority, duties and responsibilities.

XVII. Quality of Information The Board stresses on having timely reports and has full access to quality information which is not just historical or bottom line and financial oriented but information that goes beyond assessing the quantitative performance of the Group and other performance factors e.g. customer satisfaction, product and service quality, market share, market reaction, environmental protection, etc.

052 WAH SEONG CORPORATION BERHAD Annual Report 2010 STATEMENT ON CORPORATE GOVERNANCE

XVIII. Information Organising The Non-Executive Chairman of the Board, as assisted by the Managing Director/Group Chief Executive Officer and the Company Secretaries, undertake primary responsibility for organising information necessary for the Board to deal with the agenda at Board Meetings and for circulating this information to the Directors on a timely basis.

XIX. Access to Information The Directors have access to all information within the Company whether as a full Board or in their individual capacity, in furtherance of their duties.

XX. Access to Advice The Directors, whether as a full Board or in their individual capacities, in furtherance of their duties may take such independent professional advice at the expense of the Company, if any, on a case to case basis and depending on the complexities involved.

XXI. Company Secretary The Directors have access to the advice and services of both its in-house and external Company Secretaries.

XXII. Appointment of Company Secretary Both the in-house and externally appointed Company Secretaries meet the requirements for the discharge of their duties and termination of his/her services is a matter for the Board as a whole.

XXIII. Use of Board Committees The authority of such Committees appointed by the Board is governed by their respective Terms of Reference. An extension of such authority may be expressly given for a specific purpose and the Board may delegate such Committees to act on its behalf.

XXIV. Remuneration Committee The Board has set up a Remuneration Committee consisting mainly of Independent Non-Executive Directors to recommend to the Board the remuneration of Executive Directors in all its forms, drawing from outside advice as necessary. The Executive Directors play no part in decisions on their own remuneration.

Members of the Remuneration Committee appear on page 37 of this Annual Report.

Determination of remuneration packages of Non-Executive Directors, including the Non-Executive Chairman is a matter of the Board as a whole. The individuals concerned will abstain from discussion of their own remuneration.

BB. ACCOUNTABILITY AND AUDIT I. The Audit Committee’s composition complies with the Bursa Malaysia Securities Berhad Main Market Listing Requirements The Terms of Reference of the Audit Committee, which deals clearly with its authority and duties, is as detailed and set out on pages 32 to 36 of this Annual Report.

The Audit Committee is chaired by an Independent Non-Executive Director.

II. Duties of the Audit Committee Please refer to pages 34 and 35 of this Annual Report.

WAH SEONG CORPORATION BERHAD 053 Annual Report 2010 STATEMENT ON CORPORATE GOVERNANCE

III. Audit Committee Meetings The Head, Group Compliance, Risk Management, Tax and Strategic Finance and the Head, Group Internal Audit attend such Audit Committee Meetings and the representative of the External Auditors are encouraged to attend whenever possible. Other Directors may be invited to attend such Audit Committee Meetings when necessary. The Audit Committee will meet the External Auditors at least twice a year without the presence of any executive Board member.

IV. Authority of the Audit Committee The Audit Committee has explicit authority to investigate any matter within its terms of reference and shall have the resources which it needs to do so as well as full access to all information it needs. The Audit Committee can obtain, at the expense of the Company, outside legal or other independent professional advice that it considers necessary.

V. Frequency of Audit Committee Meetings The Audit Committee meets regularly at least four (4) times annually, with due notice of issues to be discussed and its conclusions are duly recorded and minuted by the Company Secretary in attendance towards discharging of its duties and responsibilities. Additional meetings may be held at the request of the Board, the Committee, the Management, the External or Internal Auditors.

Nonetheless, the Chairman and the Audit Committee members have free and direct access to consult, communicate and enquire with any Senior Management of the Company as well as the External Auditors at any time.

VI. Disclosure of the Audit Committee’s Activities The Board will disclose in an informative way, details of the Audit Committee’s activities, the number of Audit Committee meetings held annually and the details of attendance of each individual Director in respect of such meetings.

VII. Internal Audit Function and Activities The Board has established an internal audit function for the Group to review the adequacy of operational controls so as to provide reasonable assurance that such system continues to operate satisfactorily and effectively in the Group and to add value and improve the Group’s operations by providing independent and objective assurance.

The internal audit function of the Group is currently performed in-house.

A summary of the Internal Audit activities during the financial year is as follows:

a) prepared its annual audit plan for consideration by the Audit Committee;

b) performed operational audits on business units of the Group to ascertain the adequacy and integrity of their system of internal controls and made recommendations for improvement where weaknesses were found;

c) conducted follow-up review to determine the adequacy, effectiveness and timeliness of action taken by the Management on audit recommendations and provided updates on their status to the Audit Committee; and

d) reviewed related party transactions.

054 WAH SEONG CORPORATION BERHAD Annual Report 2010 STATEMENT ON CORPORATE GOVERNANCE

VIII. Independence of the Internal Audit Function

The Head, Group Internal Audit reports directly to the Audit Committee. The Internal Audit function of the Group is independent of the activities they audit and the audit reviews are performed with impartiality, proficiency and due professional care.

The Board and/or the Audit Committee determines the general direction or remits of the Internal Audit function, which encompass its main role, that is to evaluate risk and monitor the effectiveness of the Group’s system of internal controls, consistent with the standards developed by the internal audit profession.

The Internal Audit function is competently and adequately resourced and independently positioned to assist the Board and the Audit Committee in obtaining the assurance they require regarding the effectiveness of the Group’s system of internal controls.

IX Principles and Rules of Business and Conduct and Whistle-Blowing Policy

The Board is committed to achieving and maintaining high standards with regards to behavior at work. The Principles and Rules of Business Conduct of the Group sets out the guiding principles in which the employees and Directors shall not depart from in conducting the day to day duties and operations.

In conjunction with the above, the Company has also disseminated its Whistle Blowing Policy and Procedures by which an employee or stakeholder can report or disclose in good faith, through the established channel, genuine concerns about unethical behaviour, malpractice, illegal act or failure to comply with regulatory requirements.

The Principles and Rules of Business Conduct and procedures of the Whistle Blowing Policy, in raising such genuine concerns to the established channels are set out in the Company’s website at www.wahseong.com.

CC. SHAREHOLDERS I. Effective Communications Policy Besides the various announcements and disclosures including information on the quarterly and annual results to Bursa Malaysia Securities Berhad, the Board maintains an effective communications policy that enables the Board (in particular the Executive Board Members) to communicate effectively with its shareholders, stakeholders and the public generally.

As part of the Group’s commitment towards having an effective investor relations and shareholders’ communication policy, the following have been established:

a) an interactive and dedicated website for the Group which can be accessed by the public at large at www.wahseong.com.

b) the Company’s Investor Relations and Communications Department attends to the Group’s communication needs and whenever required, the services of an external public relations firm will be engaged to promote the Group’s image and to create greater public awareness of the Group’s products and services aside from fostering and maintaining closer relations with the press and other members of the media.

c) Internally, the Corporate Secretarial Department headed by the Group’s in-house Company Secretary maintains most of the official correspondences with the various authorities.

d) the Annual General Meeting provides an additional forum for shareholders’ interaction and feedback with the Company.

e) Media and Analyst Briefings are held by the Company to explain any major corporate exercises and/or to discuss the financial performance of the Group from time to time.

DD. CORPORATE SOCIAL RESPONSIBILITY Please refer to pages 26 to 29 of this Annual Report.

WAH SEONG CORPORATION BERHAD 055 Annual Report 2010 ADDITIONAL COMPLIANCE INFORMATION

1. OPTIONS, CONVERTIBLE SECURITIES EXERCISED OR ESOS Warrants No warrants were exercised during the financial year. The warrants 2008/2013 carry the rights to subscribe for new shares in WSC at an exercise price of RM3.17 per share and expires on 25 March 2013. (Please refer to Analysis of Shareholdings, ICULS and Warrants holdings of the Annual Report for more details).

ICULS On 9 July 2002, the Company issued RM89,499,999.00 nominal value of 3% Irredeemable Convertible Unsecured Loan Stocks 2002/2012 at RM 1.00 per ICULS. During the financial year, there were 14,881,000 ICULS converted to 37,202,500 WSC Shares. From 1 January 2011 until 29 April 2011, there were 5,201,000 ICULS converted to 13,002,500 WSC Shares and the balance of ICULS remaining is 15,177,390 (Please refer to Analysis of Shareholdings, ICULS and Warrants holdings of the Annual Report for more details).

ESOS No ESOS scheme exists during the financial year under review.

2. DEPOSITORY RECEIPT PROGRAMME The Company has not sponsored any depository receipt programme for the financial year ended 31 December 2010.

3. VARIATION IN RESULTS There is no significant variance in WSC’s audited financial results for the financial year ended 31 December 2010 from the unaudited results as previously announced. The Company has not released or announced any estimated profit, financial forecast and projection in the financial year ended 31 December 2010.

4. PROFIT GUARANTEE During the financial year, WSC did not provide any profit guarantee nor is there any profit guarantee given to WSC.

5. RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE AND PROVISION OF FINANCIAL ASSISTANCE The details of significant recurrent related party transactions conducted during the financial year ended 31 December 2010 pursuant to the shareholders’ mandate are disclosed in the Summary of Significant Recurrent Related Party Transactions as set out on page 176 of this Annual Report.

6. 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 subsidiaries, involving Directors’ and major shareholders’ interests during the financial year ended 31 December 2010.

056 WAH SEONG CORPORATION BERHAD Annual Report 2010 ADDITIONAL COMPLIANCE INFORMATION

7. SHARE BUY-BACK The Company has purchased 415,000 of its own shares during the financial year ended 31 December 2010. Details are as follows: Treasury Shares Total Lowest Highest Consideration Month of No. of Price paid Price paid Average Paid (including Buy-back Shares Par Value for each for each Price per transaction in 2010 Bought-Back per share share share share costs) (RM) (RM) (RM) (RM) (RM) January 350,000 0.50 2.31 2.39 2.38 832,221.18 February 40,000 0.50 2.31 2.33 2.34 93,478.64 March ------April ------May ------June 5,000 0.50 2.07 2.11 2.12 10,603.32 July ------August ------September ------October ------November ------December 20,000 0.50 2.02 2.02 2.03 40,695.51 Total 415,000 976,998.65

The funding of the share buy-back transactions is from internally generated funds. The purchased shares are being held as treasury shares in accordance with Section 67A of the Companies Act, 1965.

A total of 5,857,451 special tax-exempt share dividend distributed from the treasury shares of Wah Seong Corporation Berhad (“WSC”) was made on 13 April 2010 on the basis of one (1) WSC share for every one hundred and twenty (120) existing WSC ordinary shares of RM0.50 each held at the entitlement date.

There was no resale or cancellation of treasury shares during the financial year.

9. IMPOSITION OF SANCTIONS AND/OR PENALTIES There were no significant sanctions and/or penalties imposed on WSC Group and its subsidiaries, Directors or Management by the relevant regulatory bodies during the financial year.

10. NON-AUDIT FEES The amount of non-audit fees paid and payable to the External Auditors by WSC Group for the financial year is RM800,000.

11. STATEMENT ON REVALUATION POLICY The Group does not have any revaluation policy on landed properties.

WAH SEONG CORPORATION BERHAD 057 Annual Report 2010 STATEMENT ON INTERNAL CONTROL

Board Responsibility The Board of Directors acknowledges its responsibility for the system of internal control and for reviewing its adequacy and integrity. This system of internal control is designed to safeguard shareholders’ investment and the Group’s assets, which by its nature can only be managed within an acceptable risk profile rather than eliminate the risk of failure to achieve business objectives. Accordingly, it can only provide reasonable and not absolute assurance against material misstatement of financial information, financial loss or fraud.

The Board has established an ongoing process for identifying, evaluating and managing significant risks faced by the Group. There is regular review in place to ensure the effectiveness, adequacy and integrity of internal controls in safeguarding the Group’s assets. The Board is of the view that the system of internal controls in place for the year under review and up to the date of issuance of the annual report and financial statements is sound and sufficient to safeguard the shareholders’ investment, the interests of customers, regulators, employees and the Group’s assets.

Risk Management The Board subscribes to the guidelines spelt out in the Bursa Malaysia Securities Berhad’s Statement on Internal Control: Guidance for Directors of Public Listed Companies. During the financial year under review, the Risk Management Committee has activated the Risk Management Department at the Corporate Office to implement the risk management processes as enshrined in the approved Risk Management Framework based on the following key principles:-

• Effective risk management enhances good corporate governance and is integral to the achievement of the Group’s business objectives.

• Every level of employee within the Group is accountable for the management of risks within their areas of responsibility.

• Risk Management should be embedded into the day-to-day business processes and is explicitly applied in decision-making and strategic planning.

• The risk management processes applied should aim to take advantage of opportunities, manage uncertainties and minimise threats.

• Provide assurance on the reliability of reporting and compliance with laws and regulations.

The primary roles of the Risk Management department is to instill a risk management culture throughout the Group, to conduct and facilitate the risk assessment programmes at the business units as well as coordinating the documentation and reporting of risk maps to the Risk Management Committee.

The findings from the risk assessment programmes conducted are deliberated at the business units prior to presentation to the Risk Management Committee at regular intervals. On a quarterly basis, the summary of the key risks presented at the Risk Management Committee are compiled for tabling to the Audit Committee for their review and comments.

058 WAH SEONG CORPORATION BERHAD Annual Report 2010 STATEMENT ON INTERNAL CONTROL

Internal Audit The Group has an internal audit department which reports to the Audit Committee of the Company. Its role is to provide the Board with regular assurance on the continuity, integrity and effectiveness of the internal control system through monitoring and reviewing of the internal control processes across the Group.

For each financial year, the internal audit department prepares an annual audit plan, which is presented and approved by the Audit Committee. The scope of work in the audit plan encompasses review of operations and procedures of operating units within the Group.

The Internal Audit Department has conducted various audit assignments to evaluate the adequacy and effectiveness of the internal control systems and made recommendations for improvements to the system of internal controls. Besides assessing the efficiency of the Group’s business operations, the Internal Audit Department also reviews the Group’s compliance with statutory legislations including Bursa Securities Listing Requirements. The Audit Committee reviews the internal audit reports on a regular basis and keeps the Board informed of key audit findings.

Other Key Elements of Internal Control System As part of the internal control system, the Board has clearly defined delegation of responsibilities to the respective committees of the Board and to the Management of each operating units, including the establishment of authorisation limits for effective management of the Group’s businesses.

Terms of reference of Committees in operation during the financial year to oversee the operational and strategic needs of the Group are:-

Group Finance Committee The primary functions of the Group Finance Committee amongst others include:- a) ensuring effective financial management and optimisation of Group’s financial resources; b) reviewing the capital structure of the Group’s businesses and effectiveness of the working capital management; c) reviewing the group tax structure and scope of general insurance coverage; d) engage or meet selection of solicitors, financial advisers or consultants and other competent professionals as maybe required in respect of any corporate exercise undertaken by the Group; e) disseminating new and changes to the relevant statutory legislations and compliance requirements as may be imposed by law or by governing body or authority in respect of the Group’s businesses to the operating units; f) deciding and implementing such other matters as may be delegated by the Board of Directors from time to time; g) deliberate the financial viability, proposed recommendations and appraisal of potential mergers & acquisitions or divestment proposals; h) oversee the comprehensiveness of the due diligence process; and i) appraise the Group’s corporate strategies.

WAH SEONG CORPORATION BERHAD 059 Annual Report 2010 STATEMENT ON INTERNAL CONTROL

Business Units Executive Committee The primary functions of the Executive Committee amongst others include:-

a) to conduct periodic meetings to examine all matters within the committee members’ scope of responsibility including the deliberation of business units’ operating performance against annual budget and key performance indicators; and

b) to determine and assess whether the business units’ resources are utilised in an efficient manner for conduct of its businesses.

Board and Management Meetings are regularly held by the respective operating units to inter alia, ensure that all decisions and policies formulated by the Group are acted upon in timely manner and adhered to respectively.

Periodic site visits to operating units are undertaken by the members of the Executive Committee and/or the members of the Board whenever deemed appropriate.

The Group’s system of internal control applies principally to Wah Seong Corporation Berhad and its subsidiaries. Associated companies and joint ventures have been excluded because the Group does not have management control and majority board representation.

Review of the Statement by External Auditors As required by paragraph 15.23 of the Bursa Securities Listing Requirements, the external auditors have reviewed this Statement on Internal Control. As set out in their terms of engagement, the review was performed in accordance with Recommended Practice Guide (“RPG”) 5 issued by the Malaysian Institute of Accountants. Based on their review, the external auditors have reported to the Board that nothing has come to their attention that causes them to believe that this Statement is inconsistent with their understanding of the process the Board has adopted in the review of the adequacy and integrity of internal control of the Group.

060 WAH SEONG CORPORATION BERHAD Annual Report 2010 STATEMENT OF DIRECTORS’ RESPONSIBILITIES

The Directors are required by law to prepare financial statements for each financial year which gives a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2010 and of the results and cash flows of the Group and of the Company for the financial year then ended.

The Directors consider that, in preparing the financial statements for the financial year ended 31 December 2010, the Group has adopted appropriate accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent and ensure that the financial statements comply with the provisions of the Companies Act, 1965 and Financial Reporting Standards in Malaysia.

WAH SEONG CORPORATION BERHAD 061 Annual Report 2010 DIRECTORS’ REPORT

The Directors have the pleasure in submitting their report and the audited financial statements of the Group and of the Company for the financial year ended 31 December 2010.

PRINCIPAL ACTIVITIES The principal activities of the Company are investment holding and the provision of management services to subsidiaries.

The principal activities of the Group consist of Specialised Pipe Coating and Corrosion Protection Services; EPC, Fabrication and Rental of Gas Compressors and Process Equipment; E&P Products and Services; Infrastructure and Building Materials; and Agro-based Engineering.

There have been no significant changes in the nature of these activities during the financial year.

FINANCIAL RESULTS Group Company RM’000 RM’000 Net profit for the financial year attributable to: - Owners of the Company 55,981 49,481 - Non-controlling interests 8,971 - Net profit for the financial year 64,952 49,481

DIVIDENDS The dividends paid or declared since the end of the previous financial year were as follows:

In respect of financial year ended 31 December 2009:

2nd interim dividend paid/credited into the entitled shareholders securities accounts on 13 April 2010:

(i) tax-exempt cash dividend of 3.0 sen per share amounting to RM21,100,240; and

(ii) 5,857,451 treasury shares distributed to the shareholders of Wah Seong Corporation Berhad (“WSC”) on the basis of one (1) treasury share for every one hundred and twenty (120) existing WSC ordinary shares of RM0.50 each held at the entitlement date on 25 March 2010 as special tax-exempt share dividend.

In respect of financial year ended 31 December 2010:

(a) On 25 August 2010, the Directors declared a first interim tax exempt cash dividend of 2.0 sen per share amounting to RM14,477,925, paid on 1 October 2010.

(b) On 17 February 2011, the Directors declared a second interim tax exempt cash dividend of 2.5 sen per share amounting to RM18,421,927, paid on 1 April 2011.

The Directors do not recommend the payment of any final dividend in respect of the financial year ended 31 December 2010.

062 WAH SEONG CORPORATION BERHAD Annual Report 2010 DIRECTORS’ REPORT

RESERVES AND PROVISIONS All material transfers to or from reserves and provisions during the financial year are shown in the financial statements.

ISSUE OF SHARES AND DEBENTURES During the financial year, the issued and paid-up share capital of the Company was increased from RM343,369,660.50 to RM361,970,910.50 by way of issuance of 37,202,500 new ordinary shares of RM0.50 each resulting from the conversion of 14,881,000 3% Irredeemable Convertible Unsecured Loan Stocks 2002/2012 (“ICULS”) at the rate of RM1.00 nominal amount of ICULS for two and a half fully paid ordinary shares of RM0.50 each in the Company, details of which are disclosed in Note 27 to the financial statements.

The new ordinary shares issued during the financial year rank pari passu in all respects with the existing ordinary shares of the Company except that the shares issued on conversion of ICULS (“New Shares”) were not entitled to any dividend, rights, allotment and/or other distribution that were declared, made or paid prior to the date of allotment of the New Shares.

The Company did not issue any debentures during the financial year.

TREASURY SHARES During the financial year, the Company purchased 415,000 of its issued share capital from the open market on Bursa Malaysia Securities Berhad for RM976,999. The average price paid for the shares purchased during the financial year was approximately RM2.35 per share.

On 13 April 2010, a total of 5,857,451 treasury shares were distributed to the shareholders on the basis of one (1) treasury share for every one hundred and twenty (120) existing Wah Seong Corporation Berhad ordinary shares of RM0.50 each held at the entitlement date on 25 March 2010 as special tax exempt share dividend.

As at 31 December 2010, the number of treasury shares held by the Company was 65,549 shares.

Details of the treasury shares are set out in Note 25 to the financial statements.

DIRECTORS The Directors in office since the date of the last report are:

Robert Tan Chung Meng Chan Cheu Leong Giancarlo Maccagno Halim Bin Haji Din Pauline Tan Suat Ming Tan Sri Dato’ Dr. Lin See Yan Tan Sri Ab Rahman Bin Omar Jen (B) Tan Sri Dato’ Seri Mohd Zahidi Bin Haji Zainuddin

WAH SEONG CORPORATION BERHAD 063 Annual Report 2010 DIRECTORS’ REPORT

DIRECTORS’ INTERESTS IN SHARES, ICULS AND WARRANTS According to the Register of Directors’ Shareholdings required to be kept under Section 134 of the Companies Act, 1965, none of the Directors who held office at the end of the financial year held any shares or had any interests in ICULS and/or Warrants in the Company and its related corporations during the financial year except as follows:

Number of ordinary shares of RM0.50 each Share^^ As at ICULS dividends As at 1.1.2010 Bought conversion received 31.12.2010 The Company Robert Tan Chung Meng - direct interest 10,646,203 - - 88,718 10,734,921 - deemed interest## 219,098,175 - 37,200,000 2,013,316 258,311,491

Chan Cheu Leong - direct interest 17,895,466 75,000 - 149,128 18,119,594 - deemed interest** 40,929,326 50,000 - 341,074 41,320,400

Giancarlo Maccagno - direct interest 15,277,530 - - 127,312 15,404,842

Pauline Tan Suat Ming - direct interest 2,069,880 - - 17,248 2,087,128 - deemed interest# 219,860,958 - 37,200,000 2,019,671 259,080,629

Jen (B) Tan Sri Dato’ Seri Mohd Zahidi Bin Haji Zainuddin - direct interest 30,000 - - 250 30,250

Number of ordinary shares of Baht 100 each As at As at 1.1.2010 Acquired Disposed 31.12.2010 Subsidiary PPSC (Thailand) Limited Chan Cheu Leong - direct interest^ 1 - - 1 Giancarlo Maccagno - direct interest^ 1 - - 1

Number of ICULS of RM1.00 each As at As at 1.1.2010 Acquired Converted 31.12.2010 The Company Robert Tan Chung Meng - deemed interest@ 35,228,789 - (14,880,000) 20,348,789

Pauline Tan Suat Ming - deemed interest@ 35,228,789 - (14,880,000) 20,348,789

064 WAH SEONG CORPORATION BERHAD Annual Report 2010 DIRECTORS’ REPORT

DIRECTORS’ INTERESTS IN SHARES, ICULS AND WARRANTS (CONTINUED)

Number of Warrants with an exercise price of RM3.17 per ordinary share As at As at 1.1.2010 Acquired Disposed 31.12.2010 The Company Robert Tan Chung Meng - direct interest 1,878,743 - - 1,878,743 - deemed interest## 54,207,824 - - 54,207,824

Chan Cheu Leong - direct interest 3,185,450 - - 3,185,450 - deemed interest* 7,638,174 - - 7,638,174

Giancarlo Maccagno - direct interest 1,180,000 - - 1,180,000

Pauline Tan Suat Ming - direct interest 365,273 - - 365,273 - deemed interest# 54,523,376 - - 54,523,376

Tan Sri Ab Rahman Bin Omar - direct interest 62,501 - - 62,501

By virtue of their interests of more than 15% in the shares of the Company, Robert Tan Chung Meng and Pauline Tan Suat Ming are deemed to be interested in the shares of all the subsidiaries to the extent that the Company has an interest.

## Deemed interest held through Wah Seong (Malaya) Trading Co. Sdn. Bhd. (“WST”), Wah Seong Enterprises Sdn. Bhd. (“WSE”) and Tan Kim Yeow Sendirian Berhad (“TKYSB”) pursuant to Section 6A of the Companies Act, 1965 (“Act”). * Deemed interest held through Midvest Asia Sdn. Bhd. (“MASB”) pursuant to Section 6A of the Act. ** Deemed interest held through MASB pursuant to Section 6A of the Act and include interests of his spouse and children. # Deemed interest held through WST, WSE and TKYSB pursuant to Section 6A of the Act and include interests of her spouse and children. ^ Held in trust for Wasco Coatings HK Limited (formerly known as PPSC (HK) Limited). @ Deemed interest held through WST pursuant to Section 6A of the Act. ^^ Arising from the distribution by Wah Seong Corporation Berhad (‘WSC’) of a special tax-exempt share dividend on the basis of one (1) WSC treasury share for every one hundred and twenty (120) WSC ordinary shares of RM0.50 each held in WSC.

WAH SEONG CORPORATION BERHAD 065 Annual Report 2010 DIRECTORS’ REPORT

DIRECTORS’ BENEFITS Since the end of the previous financial year, no Director has received or become entitled to receive a benefit (other than the benefits shown in Notes 39 and 47 to the financial statements) by reason of a contract made by the Company or by a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest.

Neither during nor at the end of the financial year was the Company or any of its subsidiaries a party to any arrangements whose object was to enable the Directors to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

OTHER STATUTORY INFORMATION (a) Before the statements of comprehensive income and statements of financial position of the Group and of the Company were made out, the Directors took reasonable steps:

(i) 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 satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts; and

(ii) to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course of business their values as shown in the accounting records of the Group and of the Company had been written down to an amount which they might be expected so to realise.

(b) At the date of this report, the Directors are not aware of any circumstances:

(i) which would render the amounts written off for bad debts or the amount of the allowance for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; or

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

(iii) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.

(c) At the date of this report, there does not exist:

(i) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; or

(ii) any contingent liability of the Group and of the Company which has arisen since the end of the financial year.

(d) no contingent or other liability of any company in the Group 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 affect the ability of the Company and its subsidiaries to meet their obligations as and when they fall due.

066 WAH SEONG CORPORATION BERHAD Annual Report 2010 DIRECTORS’ REPORT

OTHER STATUTORY INFORMATION (CONTINUED) (e) At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements of the Group and of the Company which would render any amount stated in the respective financial statements misleading.

(f) In the opinion of the Directors:

(i) the results of the operations of the Group and of the Company for the financial year were not substantially affected by any item, transaction or event of a material and unusual nature; and

(ii) there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Group and of the Company for the financial year in which this report is made.

AUDITORS The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office.

Signed on behalf of the Board of Directors in accordance with their resolution dated 14 April 2011.

CHAN CHEU LEONG HALIM BIN HAJI DIN DIRECTOR DIRECTOR

Kuala Lumpur

WAH SEONG CORPORATION BERHAD 067 Annual Report 2010 STATEMENT BY DIRECTORS PURSUANT TO SECTION 169(15) OF THE COMPANIES ACT, 1965

We, Chan Cheu Leong and Halim Bin Haji Din, two of the Directors of Wah Seong Corporation Berhad, state that, in the opinion of the Directors, the financial statements set out on pages 71 to 175 are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2010 and of the results and cash flows of the Group and of the Company for the financial year ended on that date in accordance with the provisions of the Companies Act, 1965 and Financial Reporting Standards in Malaysia.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors dated 14 April 2011.

CHAN CHEU LEONG HALIM BIN HAJI DIN DIRECTOR DIRECTOR

Kuala Lumpur

STATUTORY DECLARATION PURSUANT TO SECTION 169(16) OF THE COMPANIES ACT, 1965

I, Ramanathan A/L P.R. Singaram, the officer primarily responsible for the financial management of Wah Seong Corporation Berhad, do solemnly and sincerely declare that, the financial statements set out on pages 71 to 175 are, to the best of my knowledge and belief, 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.

RAMANATHAN A/L P.R.SINGARAM

Subscribed and solemnly declared by the abovenamed at Kuala Lumpur in the Federal Territory on 14 April 2011.

Before me:

COMMISSIONER FOR OATHS

068 WAH SEONG CORPORATION BERHAD Annual Report 2010 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF WAH SEONG CORPORATION BERHAD (INCORPORATED IN MALAYSIA) (COMPANY NO. : 495846-A)

REPORT ON THE FINANCIAL STATEMENTS We have audited the financial statements of Wah Seong Corporation Berhad on pages 71 to 175 which comprise the statements of financial position as at 31 December 2010 of the Group and of the Company, and the statementsof comprehensive income, changes in equity and cash flows of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on Notes 1 to 54.

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

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

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

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

Opinion In our opinion, the financial statements have been properly drawn up in accordance with Financial Reporting Standards in Malaysia and the Companies Act, 1965 so as to give a true and fair view of the financial position of the Group and of the Company as of 31 December 2010 and of their financial performance and cash flows for the year then ended.

WAH SEONG CORPORATION BERHAD 069 Annual Report 2010 INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF WAH SEONG CORPORATION BERHAD (INCORPORATED IN MALAYSIA) (COMPANY NO. : 495846-A)

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:

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

(b) We have considered the financial statements and the auditors’ reports of all the subsidiaries of which we have not acted as auditors, which are indicated in Note 7 to the financial statements.

(c) We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company’s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes.

(d) The audit reports on the financial statements of the subsidiaries did not contain any qualification or anyadverse comment made under Section 174(3) of the Act.

OTHER REPORTING RESPONSIBILITIES The supplementary information set out in Note 55 on page 175 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The Directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.

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

PRICEWATERHOUSECOOPERS SHIRLEY GOH (No. AF: 1146) (No. 1778/08/12 (J)) Chartered Accountants Chartered Accountant

Kuala Lumpur 14 April 2011

070 WAH SEONG CORPORATION BERHAD Annual Report 2010 STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER 2010

Group Company Note 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000

NON-CURRENT ASSETS

Property, plant and equipment 4 541,463 612,036 335 260 Prepaid lease payments 5 79,719 80,847 - - Investment properties 6 6,172 2,823 - - Investment in subsidiaries 7 - - 558,422 399,804 Investment in associates 8 17,091 22,403 - - Investment in jointly controlled entities 9 27,625 36,366 - - Available-for-sale financial assets/other investments 10 1,137 1,096 - - Derivative financial asset 11 10 - - - Goodwill 12 110,469 126,284 - - Other intangible assets 13 549 4,187 - - Deferred tax assets 14 9,581 7,458 690 690 793,816 893,500 559,447 400,754

CURRENT ASSETS

Inventories 15 243,115 290,414 - - Amounts due from customers on contracts 16 46,000 160,164 - - Trade and other receivables 17 481,078 356,508 103 20 Amounts owing by subsidiaries 18 - - 42,003 181,878 Amounts owing by associates 19 4,079 3,606 - - Amounts owing by jointly controlled entities 20 7,044 6,183 - - Tax recoverable 12,217 24,466 7,959 16,280 Derivative financial assets 11 2,187 - 1,205 - Time deposits 21 175,531 249,497 86,445 148,895 Cash and bank balances 22 189,891 222,397 33,268 7,013 1,161,142 1,313,235 170,983 354,086 Assets of disposal groups held for sale 35 54,753 - - - TOTAL ASSETS 2,009,711 2,206,735 730,430 754,840

WAH SEONG CORPORATION BERHAD 071 Annual Report 2010 STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER 2010

Group Company Note 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000

EQUITY AND LIABILITIES

CAPITAL AND RESERVES ATTRIBUTABLE TO OWNERS OF THE COMPANY

Share capital 23 361,971 343,370 361,971 343,370 Share premium 24 165,348 169,068 165,348 169,068 Treasury shares 25 (138) (11,624) (138) (11,624) Warrants reserve 28 25,786 25,786 25,786 25,786 Exchange translation reserve 26 (9,930) (4,340) - - Capital reserve 26 85 85 - - Equity component of Irredeemable Convertible Unsecured Loan Stocks (“ICULS”) 27 11,701 - 11,701 - Hedging reserve 26 (439) - - - Available-for-sale reserve 26 41 - - - Retained profits 29 370,761 363,271 150,794 149,354 925,186 885,616 715,462 675,954 Non-controlling interests 115,052 148,956 - - TOTAL EQUITY 1,040,238 1,034,572 715,462 675,954

NON-CURRENT AND DEFERRED LIABILITIES

Irredeemable Convertible Unsecured Loan Stocks (“ICULS”) 27 8,678 35,259 8,678 35,259 Term loans 30 428,365 435,873 - - Hire purchase liabilities 31 31 53 - - Deferred tax liabilities 14 18,831 26,405 - - Other liabilities 2,415 2,740 - - 458,320 500,330 8,678 35,259

072 WAH SEONG CORPORATION BERHAD Annual Report 2010 STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER 2010

Group Company Note 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000

CURRENT LIABILITIES

Amounts due to customers on contracts 16 32,992 36,014 - - Trade and other payables 32 246,238 310,781 5,613 5,163 Provision for warranties 33 18,604 22,585 - - Amounts owing to subsidiaries 18 - - 677 38,464 Amount owing to an associate 19 68 - - - Amount owing to a jointly controlled entity 20 279 - - - Derivative financial liability 11 414 - - - Hire purchase liabilities 31 24 56 - - Term loans 30 75,635 187,203 - - Other bank borrowings 34 116,042 92,997 - - Dividend payable 1,343 3,419 - - Current tax liabilities 9,183 18,778 - - 500,822 671,833 6,290 43,627 Liabilities of disposal groups held for sale 35 10,331 - - - TOTAL LIABILITIES 969,473 1,172,163 14,968 78,886 TOTAL EQUITY AND LIABILITIES 2,009,711 2,206,735 730,430 754,840

WAH SEONG CORPORATION BERHAD 073 Annual Report 2010 STATEMENTS OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

Group Company Note 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000

Gross revenue 36 1,523,356 1,950,308 102,620 75,048 Cost of sales 37 (1,246,925) (1,498,191) - - Gross profit 276,431 452,117 102,620 75,048

Other operating income 46,556 77,063 8,309 1,854 Selling and distribution expenses (39,006) (34,714) - - Administrative and general expenses (170,194) (213,517) (54,430) (23,012) Other gains/(losses) - net 38 2,164 - 1,205 - Profit from operations 39 115,951 280,949 57,704 53,890

Finance costs 40 (24,091) (36,605) (793) (9,421) Share of results of associates (3,193) (325) - - Share of results of jointly controlled entities (2,511) 1,763 - - Profit before tax 86,156 245,782 56,911 44,469

Tax expense 41 (21,204) (39,543) (7,430) (1,721) Net profit for the financial year 64,952 206,239 49,481 42,748

Other comprehensive income

Available-for-sale financial assets 26 - Fair value losses (21) - - - Cash flow hedge 26 - Fair value gains 1,172 - - - - Tax charge on fair value gain (199) - - - - Reclassification (25) - - - Foreign currency translation differences for foreign operations (7,799) (2,872) - - Other comprehensive income for the financial year, net of tax (6,872) (2,872) - - Total comprehensive income for the financial year 58,080 203,367 49,481 42,748

074 WAH SEONG CORPORATION BERHAD Annual Report 2010 STATEMENTS OF COMPREHENSIVE INCOME FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

Group Company Note 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000

Net profit for the financial year attributable to: Owners of the Company 55,981 121,322 49,481 42,748 Non-controlling interests 8,971 84,917 - - Net profit for the financial year 64,952 206,239 49,481 42,748

Total comprehensive income for the financial year attributable to: Owners of the Company 51,318 118,692 49,481 42,748 Non-controlling interests 6,762 84,675 - - Total comprehensive income for the financial year 58,080 203,367 49,481 42,748

Earnings per share attributable to owners of the Company: - basic (sen) 42(a) 7.35 15.98

- fully diluted (sen) 42(b) 7.35 15.98

WAH SEONG CORPORATION BERHAD 075 Annual Report 2010 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010 - - (977) Total 6,337 4,944 (1,775) (6,872) 20,245 64,952 58,080 (35,578) (12,318) (42,536) (33,292) (28,348) (70,884) RM’000 1,034,572 1,053,042 1,040,238

------Non- 8,971 6,762 4,944 (2,209) (12,318) (12,318) (33,292) (28,348) (40,666) RM’000 115,052 148,956 148,956 controlling

------(977) 6,337 (1,775) (4,663) 20,245 55,981 51,318 (35,578) (30,218) (30,218) RM’000 885,616 904,086 925,186

------(450) 55,981 55,981 (35,578) (12,463) (48,041) (48,041) RM’000 363,271 362,821 370,761 Retained

------62 62 41 (21) (21) RM’000 for-sale Available-

------948 948 (439) (1,387) (1,387) RM’000 Hedging

------(977) (138) 11,486 11,486 12,463 (11,624) (11,624) RM’000 Treasury

------85 85 85 Capital RM’000

------(4,340) (4,340) (5,590) (5,590) (9,930) RM’000 Exchange translation

------Attributable to owners of the Company 25,786 25,786 25,786 RM’000 Warrants

------Share (3,720) (3,720) (3,720) RM’000 169,068 169,068 165,348

------(8,544) (8,544) (8,544) 11,701 Equity 20,245 20,245 RM’000 component

------3,720 Share 14,881 18,601 18,601 RM’000 343,370 343,370 361,971

25 43 Note capital of ICULS premium reserve reserve reserve shares reserve reserve profits Total interests equity 23/27 23/24 25/43 2.2(a) 2.2(a) Amendments to FRS 132 for the financial year for the financial year transaction costs) conversion of ICULS of the Company owners of the Company non-controlling interests distributions to owners non-controlling interests existing subsidiaries from from subsidiaries existing non-controlling interests interest in subsidiaries that do not result in a loss of control ther comprehensive income income comprehensive ther otal comprehensive income otal contributions by and and by contributions otal otal changes in ownership ownership in changes otal

At 1 January 2010 - as previously reported - effect of adopting - effect - effects of adopting FRS 139 - effects -as restated Net profit for the financial year O Issuance of shares: - conversion of ICULS T with owners: Transactions Shares buy back (including - bonus shares arising from Dividends paid to owners owners to paid Dividends Share dividends distributed to Dividends paid/payable to to paid/payable Dividends T to shares of Issue Acquisition of shares in in shares of Acquisition T Total transactions with owners Total At 31 December 2010

076 WAH SEONG CORPORATION BERHAD Annual Report 2010 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010 - 27 213 Total 2,615 (1,486) (2,872) (6,032) 11,896 (34,652) (95,130) (92,275) (30,274) RM’000 953,754 203,367 206,239 (122,549) 1,034,572

- - - - 27 213 (242) Non- 2,615 (6,032) (6,032) 84,675 84,917 (98,307) 148,956 (95,130) (92,275) RM’000 162,588 controlling ------(1,486) (2,630) 11,896 (34,652) (24,242) (24,242) 885,616 RM’000 118,692 791,166 121,322 ------(34,652) (34,652) (34,652) 363,271 RM’000 276,601 121,322 121,322 Retained ------(1,486) (1,486) (1,486) (11,624) (10,138) RM’000 Treasury ------85 85 Capital RM’000 ------(4,340) (1,710) (2,630) (2,630) RM’000 Exchange translation ------25,786 25,786 RM’000 Attributable to owners of the Company Warrants ------Share (2,974) (2,974) (2,974) 169,068 RM’000 172,042

------2,974 Share 11,896 14,870 14,870 343,370 RM’000 328,500

25 43 Note capital premium reserve reserve reserve shares profits Total interests equity 45(vi) 23/27 23/24 44(b)(iv)

- conversion of ICULS - bonus shares arising from conversion of ICULS from non-controlling interests that do not result in a loss of control otal changes in ownership interest in subsidiaries subsidiaries in interest ownership in changes otal

At 1 January 2009 Net profit for the financial year Issue of shares: Total comprehensive income for the financial year Total with owners: Transactions Shares buy back (including transaction costs) Other comprehensive income for the financial year Dividends paid to owners of the Company Dividends paid/payable to non-controlling interests contributions by and distributions to owners Total Acquisition of shares in an existing subsidiary T transactions with owners Total Dilution of equity interest in a subsidiary Issue of shares to non-controlling interests Acquisition of a new subsidiary At 31 December 2009

WAH SEONG CORPORATION BERHAD 077 Annual Report 2010 COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010 - - - (977) Total 6,337 (1,486) 11,896 20,245 49,481 42,748 (35,578) (30,218) (24,242) (34,652) RM’000 675,954 696,199 715,462 657,448 675,954 ------49,481 42,748 (12,463) (35,578) (48,041) (34,652) (34,652) RM’000 149,354 149,354 150,794 141,258 149,354 Retained Distributable ------(977) (138) (1,486) (1,486) 11,486 12,463 (11,624) (11,624) (11,624) (10,138) RM’000 Treasury ------25,786 25,786 25,786 25,786 25,786 RM’000 Warrants ------Share (3,720) (3,720) (2,974) (2,974) RM’000 169,068 169,068 165,348 172,042 169,068 Non-distributable ------(8,544) (8,544) 11,701 20,245 20,245 Equity RM’000 of ICULS premium reserve shares profits equity component

------3,720 2,974 Share 11,896 14,881 18,601 14,870 RM’000 343,370 343,370 361,971 328,500 343,370

43 43 25 25 27 43 Note capital 23/24 23/27 23/24 2.2(a) financial year Company financial year otal comprehensive income for the the for income comprehensive otal otal comprehensive income for the the for income comprehensive otal

At 1 January 2010 - as previously reported - effect of adopting Amendments to FRS 132 of adopting - effect - as restated T - bonus shares arising from conversion of ICULS Share dividends distributed to owners of the Issue of shares: - conversion of ICULS Dividends paid to owners of the Company Transactions with owners: Transactions Shares buy back (including transaction costs) Total contributions by and distributions to owners Total At 31 December 2010 At 1 January 2009 T At 31 December 2009 Transactions with owners: Transactions Shares buy back (including transaction costs) Issue of shares: - conversion of ICULS - bonus shares arising from conversion of ICULS Dividends paid to owners of the Company Total contributions by and distributions to owners Total

078 WAH SEONG CORPORATION BERHAD Annual Report 2010 STATEMENTS OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

Group Company Note 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 CASH FLOWS FROM OPERATING ACTIVITIES

Profit before tax 86,156 245,782 56,911 44,469

Adjustments for: Amortisation of other intangible assets 972 957 - - Amortisation of prepaid lease payments 1,128 1,146 - - Bad debts written off 391 480 - - Depreciation of property, plant and equipment 55,366 57,031 86 131 Depreciation of investment properties 166 170 - - Gain on disposal of property, plant and equipment (435) (2,925) - (2) loss on disposal of property, plant and equipment - 232 - - Impairment loss on property, plant and equipment 3,537 2,761 - - Impairment loss on other intangible assets 873 - - - Property, plant and equipment written off 485 752 - 4 (Reversal of impairment loss)/impairment loss on investment in: - a jointly-controlled entity (2,495) 3,392 - - - an associate 1,499 964 - - Impairment loss on investment in subsidiaries - - 37,000 9,804 Gain on disposal of subsidiaries - (604) - - Gain on dilution of interest in a subsidiary - (17) - - Gain on disposal of other investments - (14,456) - - Share of loss/(profit) of jointly controlled entities 2,511 (1,763) - - Share of loss of associates 3,193 325 - - Provision for obsolete inventories 2,559 516 - - Write back of provision for inventories - (169) - - Waiver of amount owing to a subsidiary - - (7,560) - negative goodwill on acquisition of additional interest in existing subsidiaries (22,526) (13,334) - - Gain on disposal of investment properties - (14) - - Inventories written off 854 1,817 - - net (reversal of allowance)/allowance for impairment on receivables (2,110) 28,928 - 249 Net (reversal of provision)/provision for warranties 3,385 238 - - Net unrealised loss/(gain) on foreign exchange 1,056 (9,957) 915 (1,851) Dividend income - - (95,169) (68,658) Interest income from loans and receivables (6,236) (5,040) (5,945) (4,884) Interest expense 24,091 36,605 793 9,421 Amortisation of Islamic Notes issuance cost - 98 - 98 Fair value gains on derivative financial instruments 38 (2,164) - (1,205) - 152,256 333,915 (14,174) (11,219)

WAH SEONG CORPORATION BERHAD 079 Annual Report 2010 STATEMENTS OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

Group Company Note 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 Changes in working capital: Inventories 34,265 6,078 - - Receivables (43,349) 190,234 713 1,639 Payables (60,711) (102,399) 450 (3,670)

Cash generated from/(used in) operations 82,461 427,828 (13,011) (13,250)

Interest received 6,236 5,040 5,945 4,884 Interest paid (24,091) (36,605) (793) (9,421) Tax (paid)/received - net (25,543) (37,953) 11,041 - Net cash generated from/(used in) operating activities 39,063 358,310 3,182 (17,787)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment (25,687) (110,509) (161) (68) Additional prepaid lease payment - (1,177) - - Acquisition of new subsidiaries - (2,860) - - Payment for subscription of interest in a jointly-controlled entity (2,801) - - - Acquisition of additional shares in subsidiaries (10,767) (58,176) - - Proceeds from disposal of property, plant and equipment 836 9,773 - 71 Net cash outflow from partial disposal of a subsidiary 45(v) - (741) - - Proceeds from redemption of RPS shares in an associate - 1,000 - - Proceeds from disposal of investment properties - 989 - - Proceeds from disposal of available-for-sale financial assets - 27,493 - - Dividends received from: - subsidiaries - - 82,029 53,518 - jointly controlled entities 948 1,169 - - - associates 339 - - - Net (advances to)/repayment from subsidiaries - - (83,895) 201,666 Balance consideration paid to vendor of subsidiary upon achievement of profit guarantee 12 - (350) - - Redemption of shares in a subsidiary - - - 100 Subscription of shares in a subsidiary - - - (10) Net cash (used in)/generated from investing activities (37,132) (133,389) (2,027) 255,277

080 WAH SEONG CORPORATION BERHAD Annual Report 2010 STATEMENTS OF CASH FLOWS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

Group Company Note 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 CASH FLOWS FROM FINANCING ACTIVITIES

Purchase of treasury shares 25 (977) (1,486) (977) (1,486) Proceeds from issue of shares to non-controlling interests 200 2,845 - - Drawdown from other bank borrowings 278,072 557,843 - 159,254 Repayments of other bank borrowings (254,078) (747,954) - (159,254) Drawdown from term loans 115,239 440,754 - - Repayments of term loans (179,706) (53,909) - - Payment of Islamic Notes - (100,000) - (100,000) Payment of hire purchase instalments (48) (109) - - Dividends paid to owners of the Company 43 (35,578) (34,652) (35,578) (34,652) Dividends paid to non-controlling interests (14,394) (2,613) - - Deposits pledged as security for term loans (1,295) - - - Net cash (used in)/generated from financing activities (92,565) 60,719 (36,555) (136,138)

NET CHANGES IN CASH AND CASH EQUIVALENTS (90,634) 285,640 (35,400) 101,352

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE FINANCIAL YEAR 471,894 186,665 155,908 54,431

EFFECTS OF EXCHANGE RATE CHANGES (12,907) (411) (795) 125

CASH AND CASH EQUIVALENTS WITHIN ASSETS OF DISPOSAL GROUPS HELD FOR SALE 35 (4,226) - - -

CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL YEAR 364,127 471,894 119,713 155,908

Represented by:

TIME DEPOSITS 21 175,531 249,497 86,445 148,895 CASH AND BANK BALANCES 22 189,891 222,397 33,268 7,013 LESS: RESTRICTED CASH (1,295) - - -

CASH AND CASH EQUIVALENTS 364,127 471,894 119,713 155,908

WAH SEONG CORPORATION BERHAD 081 Annual Report 2010 NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

1 GENERAL INFORMATION The Company is a public limited liability company, incorporated and domiciled in Malaysia, and listed on the Main Market of Bursa Malaysia Securities Berhad. The address of its registered office and principal place of business are as follows:

Registered office: Suite 2-1, 2nd Floor Menara Penang Garden 42A, Jalan Sultan Ahmad Shah 10050 Penang

Principal place of business: Suite 19.01, Level 19 The Gardens North Tower Mid Valley City Lingkaran Syed Putra 59200 Kuala Lumpur

The principal activities of the Company are investment holding and the provision of management services to subsidiaries.

The principal activities of the Group consist of Specialised Pipe Coating and Corrosion Protection Services; EPC, Fabrication and Rental of Gas Compressors and Process Equipment; E&P Products and Services; Infrastructure and Building Materials; and Agro Based Engineering.

The financial statements are presented in Ringgit Malaysia (“RM”), which is also the Company’s functional currency. Unless otherwise indicated, the amounts in these financial statements have been rounded to the nearest thousand.

These financial statements were authorised for issue by the Directors on 14April 2011.

2 SIGNIFICANT ACCOUNTING POLICIES Unless otherwise stated, the following accounting policies have been applied consistently in dealing with items that are considered material in relation to the financial statements.

2.1 Basis of preparation The financial statements of the Group and of the Company have been prepared in accordance with the provisions of the Companies Act, 1965 and Financial Reporting Standards in Malaysia.

The financial statements have been prepared under the historical cost convention unless otherwise indicated in this summary of significant accounting policies.

The preparation of financial statements in conformity with Financial Reporting Standards in Malaysia requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. It also requires Directors to exercise their judgement in the process of applying the Company’s accounting policies. Although these estimates and judgement are based on the Directors’ best knowledge of current events and actions, actual results may differ from those estimates.

The areas involving a higher degree of judgement or complexity or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3 to the financial statements.

082 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.2 Changes in accounting policies and disclosures

The significant accounting policies adopted are consistent with those of the previous financial year except for the following changes in accounting policies due to changes in Financial Reporting Standards in Malaysia:

(a) Standards, amendments to published standards and interpretations that are applicable to the Group and the Company and are effective

the new accounting standards, amendments to published standards and IC interpretations that are effective for the Group’s and the Company’s financial year beginning on or after 1 January 2010 are as follows:

• Amendments to FRS 1 “First-time Adoption of Financial Reporting Standards” and FRS 127 “Consolidated and Separate Financial Statements: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate” • FRS 7 “Financial Instruments: Disclosures” and related amendments • FRS 8 “Operating Segments” • FRS 101 “Presentation of Financial Statements” (Revised 2009) • FRS 123 “Borrowing Costs” • Amendments to FRS 132 “Financial instruments: Presentation” • FRS 139 “Financial Instruments: Recognition and Measurement” and related amendments • IC Interpretation 9 “Reassessment of Embedded Derivatives” and related amendments • IC Interpretation 10 “Interim Financial Reporting and Impairment” • Improvements to FRSs (2009)

the adoption of the above standards, amendments to published standards and interpretations did not result in any significant changes in the accounting policies and presentation of the financial results of the Group and the Company, except for the effects of the application of FRS 7, FRS 8, FRS 101 (Revised 2009), FRS 139 and Amendments to FRS 132 as described below:

• FRS 7 “Financial Instruments: Disclosures”. Prior to 1 January 2010, information about financial instruments was disclosed in accordance with the requirements of FRS 132 “Financial Instruments: Disclosure and Presentation”. FRS 7 introduces new disclosures relating to financial instruments and does not have any impact on the classification and valuation of the Group’s and the Company’s financial instruments. FRS 7 does not require comparative disclosures when the standard is first applied.

• FRS 8 “Operating Segments” replaces FRS 1142004 Segment Reporting. The new standard requires a ‘management approach’, under which segment information is presented in a manner consistent with the internal reporting provided to the chief operating decision-maker. The Group’s Chief Executive Officer and the Deputy Managing Director have been identified as the chief operating decision maker as they are responsible for allocating resources and assessing performance of the Group’s operating segments.

WAH SEONG CORPORATION BERHAD 083 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.2 Changes in accounting policies and disclosures (continued) (a) Standards, amendments to published standards and interpretations that are applicable to the Group and the Company and are effective (continued)

The change in reportable segments did not result in a reallocation of goodwill as the newly identified operating segments conform to the previously identified cash generating units (“CGU”), as summarised below:

Operating segments Cash generating units Pipe coating division CGU A – Specialised Pipe Coating and Corrosion Protection Services Engineering division CGU B – EPC, Fabrication and Rental of Gas Compressors and Process equipment E&P services division CGU C – E&P Products and Services

The Group has adopted FRS 8 retrospectively and as such, prior year comparatives have been represented to conform with the revised presentation. These revised disclosures, including the related revised comparative information, are shown in Note 50 to the financial statements.

• FRS 101 “Presentation of financial statements” (Revised 2009) requires all owner changes in equity to be presented in the statement of changes in equity, separately from non-owners changes in equity. All non-owner changes in equity are required to be shown in a performance statement, but entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income).

the Group and the Company have presented both the income statement and statement of comprehensive income as a single performance statement. Comparative information has been represented so that it is in conformity with the revised standard. This revised presentation does not have any impact on the financial position and results of the Group and Company.

The revised FRS 101 also requires the Group to make new disclosures to enable users of the financial statements to evaluate the Group’s objectives, policies and processes for managing capital which have been presented in Note 54.

• FRS 139 “Financial Instruments: Recognition and Measurement” establishes principles for the recognition and measurement of the Group’s and the Company’s financial instruments. Financial instruments are recorded initially at fair value. Subsequent measurement of the financial instruments at the reporting date is dependent on the designation/classification of the financial instruments. The Group and the Company determines the classification at initial recognition and for the purpose of the first adoption of the standard, as at transitional date on 1 January 2010.

Financial assets Financial assets are classified as loans and receivables, available-for-sale (“AFS”) financial assets, financial assets at fair value through profit or loss or as derivatives designated as an effective hedge, as appropriate.

The Group’s financial assets comprise loans and receivables which includes cash and bank balances and time deposits, AFS financial assets and derivative financial assets.

084 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.2 Changes in accounting policies and disclosures (continued) (a) Standards, amendments to published standards and interpretations that are applicable to the Group and the Company and are effective (continued) Financial assets (continued) (i) loans and receivables Prior to 1 January 2010, receivables were initially recognised at their costs and subsequently stated at cost less allowance for doubtful debts. Under FRS 139, loans and receivables are initially measured at fair value plus transaction costs and subsequently carried at amortised cost using the effective interest method. Gains and losses arising from the derecognition of the loans and receivables, amortisation and impairment losses are recognised in the profit or loss.

(ii) AFS financial assets Prior to 1 January 2010, AFS financial assets such as investments were accounted for at cost less impairment. Under FRS 139, AFS financial assets are measured initially at fair value plus transaction costs and subsequently carried at fair value except for investment in equity instruments categorised under available for sale investment that do not have a quoted market price in an active market and whose fair value cannot be reliably measured. These are measured at cost. Changes in the fair values together with the related currency translation differences of AFS financial assets are recognised in AFS reserve, within other comprehensive income. When AFS financial assets are sold or impaired, the accumulated fair value adjustments recognised within other comprehensive income are included in profit or loss.

(iii) Financial assets and liabilities at fair value through profit or loss Fair value through profit or loss financial assets and liabilities comprise derivatives (except for derivatives that are designated as effective hedging instruments). Prior to 1 January 2010, derivatives are off balance sheet items and gains or losses were recognised in the financial statements on settlement date. Under FRS 139, financial assets and liabilities at fair value through profit or loss are measured initially and subsequently at fair value. Changes in fair values including the effects of currency translation, interest and dividends, are recognised in the profit or loss when the changes arise.

Financial liabilities Financial liabilities are classified as loans and borrowings, financial liabilities at fair value through profit or loss, or as derivatives designated as effective hedging instruments, as appropriate. The Group’s financial liabilities comprise loans and borrowings, payables and derivative financial liabilities.

(i) loans and borrowings Under FRS 139, loans and borrowings are initially recognised at fair value plus directly attributable transaction costs. Loans and other borrowings are subsequently measured at amortised cost using the effective interest method. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the loans and borrowings using the effective interest method. Prior to 1 January 2010, loans and borrowings were subsequently measured at amortised cost using the straight line method.

WAH SEONG CORPORATION BERHAD 085 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.2 Changes in accounting policies and disclosures (continued) (a) Standards, amendments to published standards and interpretations that are applicable to the Group and the Company and are effective (continued) Financial liabilities (continued) (ii) payables Prior to 1 January 2010, payables are measured initially and subsequently at cost. Under FRS 139, payables are initially recognised at fair value, which is usually the original invoiced amount and subsequently carried at amortised cost using the effective interest method.

Financial guarantee contracts The Group has changed its accounting policy for financial guarantee contracts upon adoption of FRS 139 “Financial instruments: Recognition and Measurement” on 1 January 2010. Previously, financial guarantee contracts were not recognised in the financial statements. The accounting policies governing the recognition and measurement of financial guarantee contracts are disclosed in Note 2.23. This change in accounting policy did not have any impact on the financial position and the results of the Group and Company.

Derivative financial instruments Prior to 1 January 2010, derivative financial instruments were not recognised in the financial statements. With the adoption of FRS 139, derivative financial instruments are initially recognised at fair value on the date the derivative contracts are entered into and are subsequently remeasured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as an effective hedge, and if so, the nature of the item being hedged. The Group designates certain derivatives as hedges of a particular risk associated with a recognised liability or a highly probable forecast transaction (cash flow hedge).

The accounting policies governing the recognition, measurement and classification of derivative financial instruments are disclosed in Note 2.21.

086 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010 - - - (62) (62) RM’000 - - - 1,387 1,387 RM’000 - 26 424 RM’000 (363,271) (362,821) - - 290 (26,115) RM’000 (26,405) Deferred - - (497) RM’000 356,011 356,508 Trade and Trade - - (302) (1,703) (2,005) RM’000 Derivatives - - - 375 375 RM’000 Derivatives - - - 62 62 AFS assets asset liability receivables liabilities profits reserve reserve RM’000 financial financial financial other tax Retained Hedging AFS securities classified as AFS financial assets previously not recognised, net of tax hedge previously not recognised, net of tax as previously reported - fair valuation of equity - recognition of derivatives - recognition of cash flow

Standards, amendments to published standards and interpretations that are applicable (continued) effective to the Group and the Company and are Impact on opening balances In accordance with the transitional provisions of FRS 139, the as recognised been changes have changes the Instead, restated. arising been not have 2009 December 31 from at as comparatives the and the prospectively adoption of FRS 139 have been applied an adjustment of balances as at 1 January 2010, shown below: Consolidated statement of financial position At 1 January 2010, Effects of adopting FRS 139: Effects

At 1 January 2010, as restated Changes in accounting policies and disclosures (continued) (a) SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) SIGNIFICANT 2.2 2

WAH SEONG CORPORATION BERHAD 087 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.2 Changes in accounting policies and disclosures (continued) (a) Standards, amendments to published standards and interpretations that are applicable to the Group and the Company and are effective (continued) The impact of the adoption of FRS 139 to the financial position and results of the Group and the Company for the financial year ended 31 December 2010 is set out below: As at 31 December 2010 RM’000 Statement of financial position Group Derivative financial instruments - Non-current assets 10 - Current assets 2,187 - Current liabilities (414)

Available-for-sale financial assets 1,137

Hedging reserve 439

Available-for-sale reserve (41)

Company Derivative financial instruments - Current assets 1,205

2010 RM’000 Statement of comprehensive income for the financial year ended 31 December 2010 Group Other gains/(losses) – net 2,164

Available-for-sale financial assets - Fair value losses (21)

Cash flow hedge - Fair value gains 1,172 - Tax charge on fair value gain (199)

Company Other gains/(losses) – net 1,205

088 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.2 Changes in accounting policies and disclosures (continued) (a) Standards, amendments to published standards and interpretations that are applicable to the Group and the Company and are effective (continued) • Amendments to FRS 132 “Financial Instruments: Presentation” require an entity that has availed itself

of the transitional provision in FRS 1322004 “Financial Instruments: Disclosures and Presentation” not to apply the component part classification for compound financial instruments issued before 1 January 2003 to classify the compound financial instrument into its liability and equity elements when the entity first applies FRS 139 “Financial Instruments: Recognition and Measurement”. Therefore, the reclassification of ICULS into its liability and equity components is recognised as an adjustment to opening balances as at 1 January 2010, as shown below:

Statement of financial position Group and Company Liability Equity component component of ICULS of ICULS RM’000 RM’000 At 1 January 2010, as previously reported (35,259) - Effect of adopting Amendments to FRS 132 20,245 (20,245) At 1 January 2010, as restated (15,014) (20,245)

(b) Standards, amendments to published standards and interpretations to existing standards that are not yet effective and have not been early adopted • FRS 3 “Business Combinations” (revised) (effective from 1 July 2010) continues to apply the acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through profit or loss. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. All acquisition-related costs should be expensed off. The Group will apply this standard from financial period beginning on 1 January 2011.

• Amendments to FRS 3 “Business Combinations” (effective from 1 January 2011). This amendment clarifies that the choice of measuring non-controlling interests at fair value or at the proportionate share of the acquiree’s net assets applies only to instruments that represent present ownership interests and entitle their holders to a proportionate share of the net assets in the event of liquidation. All other components of non-controlling interest are measured at fair value unless another measurement basis is required by FRS. The amendment further clarifies that the amendments to FRS 7, FRS 132 and FRS 139 that eliminate the exemption for contingent consideration, do not apply to contingent consideration that arose from business combinations whose acquisition dates precede the application of FRS 3 (2010). Those contingent consideration arrangements are to be accounted for in accordance with the guidance in FRS 3 (2005).

WAH SEONG CORPORATION BERHAD 089 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.2 Changes in accounting policies and disclosures (continued) (b) Standards, amendments to published standards and interpretations to existing standards that are not yet effective and have not been early adopted (continued) • Amendments to FRS 7 “Improving Disclosures about Financial Instruments” (effective from 1 January 2011). This amendment requires enhanced disclosures about fair value measurements and liquidity risk, which includes disclosures of fair value measurements by level of a fair value measurement hierarchy and a separate liquidity risk analysis for derivative and non-derivative financial liabilities. The Group and Company will apply this standard from financial period beginning on 1 January 2011.

• Amendments to FRS 101 “Presentation of financial statements” (effective from 1 January 2011). This amendment clarifies that an entity shall present an analysis of other comprehensive incomefor each component of equity, either in the statement of changes in equity or in the notes to the financial statements.

• FRS 127 “Consolidated and Separate Financial Statements” (revised) (effective from 1 July 2010). This revised standard requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. When this standard is effective, all earnings and losses of the subsidiary are attributed to the parent and the non-controlling interests, even if the attribution of losses to the non-controlling interests results in a debit balance in the shareholders’ equity. Profit or loss attribution to non-controlling interests for prior years is not restated. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain or loss is recognised in profit or loss. The Group will apply this standard from financial period beginning on 1 January 2011.

• Amendments to FRS 132 “Financial Instruments: Presentation” (classification of rights issues) (effective from 1 March 2010). This amendment allows rights issues to be classified as equity if they are issued for a fixed amount of cash. This is regardless of the currency in which the exercise price is denominated and provided that they are offered on a pro rata basis to all owners of the same class of equity. The Group and Company will apply this standard from financial period beginning on 1 January 2011.

There will not be any material impact on the financial position and results of the Group and the Company on the adoption of the above standards and amendments to published standards.

090 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.3 Subsidiaries Subsidiaries are those corporations, partnerships or other entities (including special purpose entities) over which the Group has power to exercise control over the financial and operating policies so as to obtain benefits from their activities, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

In the Company’s separate financial statements, investments in subsidiaries are stated at cost less accumulated impairment losses. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. See accounting policy 2.22 on impairment of non-financial assets.

Subsidiaries are consolidated using the acquisition method of accounting. Under the acquisition method of accounting, subsidiaries are fully consolidated from the date on which control is transferred to the Group and are de-consolidated from the date that control ceases. The cost of an acquisition is measured as the fair value of the assets given, equity interests issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. The cost of acquisition includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the date of acquisition. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired at the date of acquisition is reflected as goodwill in the statement of financial position – see accounting policy 2.11(a) on goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the profit or loss.

Where more than one exchange transaction is involved, any adjustment to the fair values of the subsidiary’s identifiable assets, liabilities and contingent liabilities relating to previously held interests of the Group is accounted for as a revaluation and recognised in other comprehensive income.

Non-controlling interests represent that portion of the profit or loss, other comprehensive income and net assets of a subsidiary attributable to equity interests that are not owned, directly or indirectly through subsidiaries, by the Company. It is measured at the non-controlling’s share of the fair value of the subsidiaries’ identifiable assets and liabilities at the date of acquisition and the non-controlling’s share of changes in the subsidiaries’ equity since that date.

All inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of impairment of the asset transferred. Where necessary, adjustments are made to the financial statements of subsidiaries to ensure consistency of accounting policies with those of the Group.

The gain or loss on disposal of a subsidiary, which is the difference between net disposal proceeds and the Group’s share of its net assets as of the date of disposal, including the cumulative amount of any exchange differences that relate to the subsidiary, is recognised in the consolidated profit or loss.

WAH SEONG CORPORATION BERHAD 091 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.4 Transactions with non-controlling interests The Group applies a policy of treating transactions with non-controlling interests as transactions with parties external to the Group. Disposals to non-controlling interests resulting in gains and losses for the Group are recorded in the profit or loss. Purchases from non-controlling interests result in goodwill, being the difference between any consideration paid and the relevant share of the carrying value of net assets of the subsidiary acquired.

2.5 Associates An associate is an entity in which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but not control or joint control over those policies.

In the Company’s separate financial statements, investments in associates are stated at cost less accumulated impairment losses. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. See accounting policy 2.22 on impairment of non-financial assets.

On disposal, the difference between the net disposal proceeds and the net carrying amount of the associate disposed is taken to the profit or loss.

Investment in associates is accounted for in the consolidated financial statements using the equity method of accounting. Under the equity method, the investment in associates are initially recognised at cost and adjusted thereafter for post-acquisition changes in the Group’s share of net assets of the associates.

The Group’s share of the associate’s profit or loss and other comprehensive income are recognised inthe consolidated profit or loss and other comprehensive income respectively.

An investment in an associate is accounted for using the equity method from the date on which the Group obtains significant influence until the date the Group ceases to have significant influence over the associate.

Goodwill relating to an associate is included in the carrying value of the investment and is not tested for impairment separately.

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of impairment of the asset transferred. Where necessary, adjustments are made to the financial statements of associates to ensure consistency of accounting policies with those of the Group.

Equity accounting is discontinued when the carrying amount of the investment in an associate diminishes by virtue of losses to zero, unless the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

For incremental interest in an associate, the date of acquisition is the purchase date at each stage and goodwill is calculated at each purchase date based on the fair value of assets and liabilities identified. There is no “step up to fair value” of net assets of the previously acquired stake and the share of profits and equity movements for the previously acquired stake is recorded directly through equity.

092 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.6 Jointly controlled entities Jointly controlled entities are those corporations, partnerships or other entities over which there is contractually agreed sharing of control by the Group with one or more parties where the strategic financial and operating decisions relating to the entities require unanimous consent of the parties sharing control.

The Group has interests in joint ventures which are jointly controlled entities. A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control.

Investments in jointly controlled entitles are accounted for in the consolidated financial statements using the equity method of accounting. Equity accounting involves recognising the Group’s share of the post-acquisition profit or loss and other comprehensive income within consolidated profit or loss and other comprehensive income respectively. The cumulative post-acquisition movements are adjusted against the cost of investment and include goodwill on acquisition (net of accumulated impairment loss).

The Group recognises the portions of gains or losses on the sale of assets by the Group to the joint venture that is attributable to other venturers. The Group does not recognise its share of profits or losses from the joint venture that result from the purchase of assets by the Group from the joint venture until it resells the assets to an independent party. However, a loss on the transaction is recognised immediately if the loss provides evidence of a reduction in the net realisable value of current assets or an impairment loss.

Where necessary, adjustments have been made to the financial statements of jointly controlled entities to ensure consistency of accounting policies with those of the Group.

In the Company’s separate financial statements, investments in jointly controlled entities are stated at cost less accumulated impairment losses. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. See accounting policy 2.22 on impairment of non-financial assets.

On disposal, the difference between the net disposal proceeds and the carrying amount of the jointly controlled entity disposed is included in consolidated profit or loss.

2.7 Property, plant and equipment (a) Measurement basis property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any.

the cost of property, plant and equipment includes expenditure that is directly attributable to the acquisition of the assets. Dismantlement, removal or restoration costs are included as part of the cost of property, plant and equipment if the obligation for dismantlement, removal or restoration is incurred as a consequence of acquiring or using the asset.

Subsequent costs are included in the asset’s carrying amount when it is probable that future economic benefits associated with the asset will flow to the Group and the Company and the cost of the asset can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance cost are charged to the profit or loss during the financial year in which they are incurred.

WAH SEONG CORPORATION BERHAD 093 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.7 Property, plant and equipment (continued) (a) Measurement basis (continued) At each balance sheet date, the Group and the Company assesses whether there is any indication of impairment. Where an indication of impairment exists, the carrying value of the asset is assessed and written down immediately to its recoverable amount. See accounting policy 2.22 on impairment of non-financial assets.

Property, plant and equipment are derecognised upon disposal or when no future economic benefits are expected from their use. Gains and losses on disposals are determined by comparing proceeds with carrying amounts and are included in the profit or loss.

(b) Depreciation Freehold land is not depreciated as it has an infinite life. Depreciation on capital work-in-progress commences when the assets are ready for their intended use.

Depreciation is calculated to write off the depreciable amount of other property, plant and equipment on a straight line basis over their estimated useful lives. The depreciable amount is determined after deducting residual value from cost. The estimated useful lives of the property, plant and equipment are as follows:

Buildings 10 – 50 years Plant, machinery, tools and equipment 2 – 25 years Electrical installations, office equipment and furniture and fittings 5 – 10 years Computer and equipment 3 – 10 years Renovation and store extension 2 – 50 years Motor vehicles 3 – 5 years

The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at the end of each financial year.

2.8 Leases Accounting as lessee (a) Finance lease Leases of property, plant and equipment where the Group assumes substantially all the benefits and risks of ownership are classified as finance leases.

Finance leases are capitalised at the lower of the fair value of the leased assets or the estimated present value of the underlying lease payments at the date of inception. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the lease principal outstanding. The corresponding rental obligations, net of finance charges, are included in borrowings. The interest element of the finance charge is charged to the profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Property, plant and equipment acquired under finance lease contracts is depreciated over the useful life of the asset. If there is no reasonable certainty that the ownership will be transferred to the Group, the asset is depreciated over the shorter of the lease term and its useful life.

094 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.8 Leases (continued) Accounting as lessee (continued) (b) operating leases Leases of assets where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the profit or loss over the lease period.

Accounting as lessor (a) operating leases The Group leases investment properties under operating leases to non-related parties.

Leases of investment properties where the Group retains substantially all risks and rewards incidental to ownership are classified as operating leases. Rental income from operating leases is recognised in profit or loss in a straight-line basis over the lease term.

2.9 Prepaid lease payments Leasehold land that normally has a definite economic life and title is not expected to pass to the lessee by the end of the lease term is treated as operating lease. Prepaid lease payments are carried at cost or surrogate carrying amount and are amortised on a straight line basis over the lease terms in accordance with the pattern of benefits provided.

Leasehold land is amortised over the remaining period of the respective leases ranging from 39 to 98 years.

2.10 Investment properties Investment properties are properties held to earn rental income or for capital appreciation or both rather than for use in the production or supply of goods and services or for administrative purposes, or sale in the ordinary course of business.

(a) Measurement basis Investment properties are stated at cost less accumulated depreciation and accumulated impairment losses, if any.

The cost of investment properties includes expenditure that is directly attributable to the acquisition of the asset.

Subsequent costs are included in the asset’s carrying amount when it is probable that future economic benefits associated with the asset will flow to the Group and the cost of the asset can be measured reliably. All other repairs and maintenance cost are charged to the profit or loss during the financial year in which they are incurred.

At each reporting date, the Group assesses whether there is any indication of impairment. Where an indication of impairment exists, the carrying value of the investment property is assessed and written down immediately to its recoverable amount. See accounting policy 2.22 on impairment of non-financial assets.

WAH SEONG CORPORATION BERHAD 095 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.10 Investment properties (continued) a) Measurement basis (continued) Investment properties are derecognised upon disposal or when they are permanently withdrawn from use and no future economic benefits are expected from their disposal. On disposal, the difference between the net disposal proceeds and the carrying amount is recognised in profit or loss.

Transfers are made to or from investment property only when there is a change in use. Transfers from investment property to owner-occupied property are made at the carrying amount as at the date of change in use. For a transfer from owner-occupied property to investment property, the property is accounted for in accordance with the accounting policy for property, plant and equipment as set out in Note 2.7 up to the date of change in use.

(b) Depreciation Freehold land is not depreciated. Freehold buildings are depreciated over their estimated useful lives of 50 years.

Depreciation is calculated to write off the depreciable amount of other investment properties on a straight- line basis over their estimated useful lives. Depreciation amount is determined after deducting the residual value from the cost of the investment properties.

The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at the end of each financial period.

2.11 Intangible assets Intangible assets acquired separately are measured initially at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial acquisition, intangible assets are measured at cost less any accumulated amortisation and accumulated impairment losses.

Intangible assets with finite useful lives are amortised over the estimated useful lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. See accounting policy 2.22 on impairment of non-financial assets. The amortisation period and the amortisation method are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in profit or loss.

Intangible assets with indefinite useful lives or not yet available for use are tested for impairment annually, or more frequently if the events and circumstances indicate that the carrying value may be impaired either individually or at the cash-generating unit level. See accounting policy 2.22 on impairment of non-financial assets. Such intangible assets are not amortised. The useful life of an intangible asset with an indefinite useful life is reviewed annually to determine whether the useful life assessment continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised.

096 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.11 Intangible assets (continued) (a) Goodwill Goodwill represents the excess of the cost of acquisition of subsidiaries, jointly controlled entities and associates over the fair value of the Group’s share of the identifiable net assets at the date of acquisition.

Goodwill on acquisition of subsidiaries is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill on acquisition of subsidiaries is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the synergies of the business combination in which the goodwill arose.

Goodwill on acquisitions of jointly controlled entities and associates is included in investments in jointly controlled entities and associates respectively. Such goodwill is tested for impairment as part of the overall balance.

(b) technical know-how Expenditure on acquired technical know-how is amortised on a straight line basis over their estimated useful life not exceeding 10 years.

(c) Intellectual property Expenditure on acquired intellectual property is capitalised and amortised using the straight line method over their estimated useful life, not exceeding a period of 20 years.

2.12 Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined on the first in, first out basis. In the case of finished goods and work-in-progress, cost comprises materials, direct labour, other direct charges and an appropriate proportion of factory overheads.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and selling expenses.

2.13 Provision for warranties The Group recognises the estimated liability to repair or replace products when the underlying products or services are sold. The provision is calculated based on historical warranty data and specific circumstances related to products or services sold, after considering the various possible outcomes against their associated probabilities.

2.14 Share capital (a) Issue of shares Ordinary shares are recorded at nominal value and proceeds received in excess of the nominal value of shares issued, if any, are accounted for as share premium. Both ordinary shares and share premium are classified as equity. Costs incurred that are directly attributable to the issuance of the shares are accounted for as a deduction from share premium, if any, otherwise it is charged to profit or loss. Other shares are classified as equity and/or liability according to the economic substance of the particular instruments.

WAH SEONG CORPORATION BERHAD 097 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.14 Share capital (continued) (b) Dividend to shareholders Dividend to shareholders is recognised as a liability in the period in which they are declared.

(c) treasury shares When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, is recognised as a deduction from equity. Repurchased shares that are not subsequently cancelled are classified as treasury shares and are presented as a deduction from equity attributable to owners of the Company. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of treasury shares. When treasury shares are reissued by resale, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to owners of the Company.

2.15 Compound financial instruments A compound financial instrument is a non-derivative financial instrument that contains both a liability and an equity component.

Compound financial instruments issued by the Company comprise Irredeemable Convertible Unsecured Loan Stocks (“ICULS”) that can be converted to share capital at the option of the holder, and the number of shares to be issued does not vary with changes in their fair value.

The liability component of a compound financial instrument is recognised initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognised initially at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using the effective interest method. The equity component of a compound instrument is not re- measured subsequent to initial recognition except on conversion or expiry.

The liability component of a compound financial instrument is classified as current liability, unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the end of the financial period.

2.16 Warrants reserve Proceeds from the issuance of warrants, net of issue costs, are credited to warrants reserve which is non- distributable. Warrants reserve is transferred to the share premium account upon the exercise of warrants and the warrants reserve in relation to the unexercised warrants at the expiry of the warrants will be transferred to retained earnings.

2.17 Foreign currencies (a) Functional and presentation currencies The financial statements of each entity within the Group are measured using the respective currency of the primary economic environment in which the entity operates (‘the functional currency’). The financial statements are presented in Ringgit Malaysia (“RM”), which is the Group’s presentation currency.

098 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.17 Foreign currencies (continued) (b) transactions and balances Transactions in foreign currencies are translated into the functional currency at the rate of exchange ruling at the dates of the transactions.

Monetary items denominated in foreign currencies at the balance sheet date are translated at the foreign exchange rates ruling at that date.

Non-monetary items which are measured in terms of historical costs denominated in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction.

Foreign exchange gains and losses arising on the settlement of monetary items and the translation of monetary assets and liabilities denominated in foreign currencies are recognised in the profit or loss, except when deferred in other comprehensive income as qualifying cash flow hedges.

When a gain or loss on a non-monetary item is recognised in the profit or loss, any corresponding exchange gain or loss is recognised in profit or loss. When a gain or loss on a non-monetary item is recognised directly in other comprehensive income, any corresponding exchange gain or loss is recognised directly in other comprehensive income.

(c) translation of foreign operations On consolidation, all assets and liabilities of foreign operations that have a functional currency other than Ringgit Malaysia, including goodwill and fair value adjustments arising on acquisition, are translated at the exchange rates ruling at the balance sheet date, except for goodwill and fair value adjustments arising from business combinations before 1 January 2006 which are reported using the exchange rates at the dates of the acquisitions.

Income and expense items are translated at average exchange rates.

All exchange differences arising from the translation of the financial statements of foreign operations are taken to other comprehensive income. Upon disposal of a foreign operation, the exchange translation differences relating to those foreign operations that were recorded within other comprehensive income are recognised in the profit or loss as part of the gain or loss on disposal.

2.18 Financial assets (a) Classification The Group and the Company classify its financial assets in the following categories: at fair value through profit or loss, loans and receivables and available-for-sale. The classification depends on the natureof the asset and the purpose for which the assets were acquired. The classification of financial assets are determined at initial recognition.

WAH SEONG CORPORATION BERHAD 099 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.18 Financial assets (continued) (a) Classification (continued) (i) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are either financial assets held for trading or those designated at fair value through profit or loss at inception. A financial asset is classified as held for trading if it is acquired principally for the purpose of selling in the short term. Financial assets designated at fair value through profit or loss at inception are those that are managed and their performances are evaluated on a fair value basis, in accordance with a documented Group investment strategy. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if they are either held for trading or are expected to be realised within 12 months after the reporting date. Otherwise, they are classified as non-current.

(ii) loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are presented as current assets, except for those maturing later than 12 months after the reporting date which are presented as non-current assets.

(iii) Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are presented within non-current assets unless management intends to dispose of the assets within 12 months after the reporting date.

(b) Recognition and de-recognition Regular purchases and sales of financial assets are recognised on the trade-date. Trade-date refers to the date on which the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. On disposal of a financial asset, the difference between the carrying amount and the sale proceeds is recognised in profit or loss. Any amount in the fair value reserve relating to that asset is transferred to profit or loss.

(c) Initial measurement Financial assets are initially recognised at fair value plus transaction costs except for financial assets at fair value through profit or loss, which are recognised at fair value. Transaction costs for financial assets at fair value through profit or loss are recognised immediately as expenses within profit or loss.

(d) Subsequent measurement (i) Financial assets at fair value through profit or loss Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in fair value are recognised in profit or loss within ‘other gains/(losses) - net’. Exchange differences, interest and dividend income on financial assets at fair value through profit or loss are recognised separately in profit or loss.

100 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.18 Financial assets (continued) (d) Subsequent measurement (continued) (ii) loans and receivables Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are amortised or impaired.

(iii) Available-for-sale financial assets After initial recognition, available-for-sale financial assets are measured at fair value. Any gains or losses from changes in fair value of available-for-sale financial asset are recognised in other comprehensive income. When financial assets classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised within other comprehensive income are included in profit or loss.

Interest on available-for-sale financial assets calculated using the effective interest method is recognised in profit or loss as other income. Dividends on available-for-sale financial assets are recognised in profit or loss when the Group’s right to receive payment is established.

Investment in equity instruments whose fair value cannot be reliably measured are measured at cost less impairment loss.

(e) Impairment of financial assets The Group assesses at each reporting date whether there is objective evidence that a financial asset or group of financial assets is impaired and recognises an allowance for impairment when such evidence exists.

(i) Financial assets carried at amortised cost To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group and the Company consider factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis based on similar risk characteristics. Objective evidence of impairment for a portfolio of receivables could include the Group’s and the Company’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in economic conditions that correlate with default on receivables.

If any such evidence exists, the amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable becomes uncollectible, it is written off against the allowance account.

WAH SEONG CORPORATION BERHAD 101 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.18 Financial assets (continued) (e) Impairment of financial assets (continued) (i) Financial assets carried at amortised cost (continued) If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss.

(ii) unquoted equity investments carried at cost If there is objective evidence (such as significant adverse changes in the business environment where the issuer operates, probability of insolvency or significant financial difficulties of the issuer) that an impairment loss on financial assets carried at cost has incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed in subsequent periods.

(iii) Available-for-sale financial assets - equity investments Significant or prolonged decline in fair value below cost, significant financial difficulties of the issuer or obligor, and the disappearance of an active trading market are considerations to determine whether there is objective evidence that investment securities classified as available-for-sale financial assets are impaired.

If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from equity to profit or loss.

Impairment losses on available-for-sale equity investments are not reversed in profit or loss in the subsequent periods. Instead, any increase in fair value subsequent to impairment loss is recognised in other comprehensive income.

2.19 Financial liabilities (a) Classification Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability.

(i) Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities held for trading include derivatives entered into by the Group and the Company that do not meet the hedge accounting criteria. Liabilities in this category are classified within current liabilities if they are either held for trading or are expected to be settled within 12 months after the reporting date. Otherwise, they are classified as non-current.

102 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.19 Financial liabilities (continued) (a) Classification (continued) (ii) Other financial liabilities The Group and the Company’s other financial liabilities include trade payables, other payables, intercompany payables and borrowings. Borrowings are classified as current liabilities unless the Group and the Company has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

(b) Recognition and de-recognition A financial liability is recognised when, and only when, the Group or the Company becomes a party to the contractual provisions of the financial instrument.

A financial liability is derecognised when the obligation under the liability is extinguished. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.

(c) Initial and subsequent measurement Derivative financial liabilities are initially measured at fair value and subsequently stated at fair value, with any resulting gains or losses recognised in profit or loss. Net gains or losses on the derivatives include exchange differences.

Trade and other payables are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method.

Loans and borrowing are recognised initially at fair value, net of transaction costs incurred, and subsequently measured at amortised cost using the effective interest method.

For other financial liabilities, gains and losses are recognised in profit or loss when the liabilities are de- recognised, and through the amortisation process.

2.20 Offsetting financial instruments Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously.

2.21 Derivative financial instruments and hedging activities A derivative financial instrument is initially recognised at its fair value on the date the contract is entered into and is subsequently carried at its fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as hedges of a particular risk associated with a recognised asset or liability or a highly probable forecast transaction (cash flow hedge).

WAH SEONG CORPORATION BERHAD 103 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.21 Derivative financial instruments and hedging activities (continued) the Group documents at the inception of the transaction the relationship between the hedging instruments and hedged items, as well as its risk management objectives and strategies for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives designated as hedging instruments are highly effective in offsetting changes in fair value or cash flows of the hedged items.

the carrying amount of a derivative designated as a hedge is presented as a non-current asset or liability if the remaining maturity of the hedged item is more than 12 months and as a current asset or liability if the remaining maturity of the hedged item is less than 12 months. The fair value of a trading derivative is presented as a current asset or liability.

Cash flow hedges The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedge is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss within ‘other gains/(losses) - net’.

Amounts recognised in other comprehensive income are reclassified to profit or loss when the hedged transaction affects profit or loss, such as when the hedged interest income or interest expense is recognised or when a forecast sale occurs. Where the hedged item is a non-financial asset or a non-financial liability, the amounts recognised previously in other comprehensive income are removed and included in the initial carrying amount of the non-financial asset or liability.

If the forecast transaction or firm commitment is no longer expected to occur, the cumulative gain or loss previously recognised in other comprehensive income is reclassified to profit or loss. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, any cumulative gain or loss previously recognised in other comprehensive income remain in equity until the forecast transaction or firm commitment is ultimately recognised in profit or loss.

The Group uses interest rate swap as hedge of the exposure to variability in cash flows attributable to a variable rate term loan.

Fair value changes on derivatives that are not designated or do not qualify for hedge accounting are recognised in profit or loss when the changes arise.

2.22 Impairment of non-financial assets Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which they are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

104 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.23 Financial guarantee contracts A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due.

The Company has issued corporate guarantees to banks for borrowings of certain subsidiaries. These guarantees are financial guarantees as they require the Company to reimburse the banks if the subsidiaries fail to make principal or interest payments when due in accordance with the terms of their borrowings.

Financial guarantee contracts are recognised initially as a liability at fair value, net of transaction costs. Subsequent to initial recognition, financial guarantee contracts are amortised to profit or loss over the period of the subsidiaries’ borrowings. If a particular subsidiary fails to make payment relating to financial guarantee when it is due and the Company, as the issuer, is required to reimburse the holder for the associated loss, the liability is measured at the higher of the best estimate of the expenditure required to settle the present obligation at the reporting date and the amount initially recognised less cumulative amortisation.

2.24 Borrowing costs Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditure and borrowing costs are incurred. Capitalisation of borrowing costs is suspended or ceased when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or completed.

All other borrowing costs are recognised in profit or loss using the effective interest method in the period they are incurred. Borrowing costs consist of interest and other costs that the Group and the Company incurred in connection with the borrowing of funds.

2.25 Revenue recognition Revenue is recognised when it is probable that economic benefits will flow to the Group and the Company and when they can be measured reliably. Revenue is measured at the fair value of consideration received or receivable.

(a) Construction contracts A construction contract is a contract specifically negotiated for the construction of an asset or a combination of assets that are closely interrelated or interdependent in terms of their design, technology and functions or their ultimate purpose or use.

When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs are recognised as revenue and expenses respectively by reference to the stage of completion of the contract activity at the reporting date. The stage of completion of a construction contract is determined based on the proportion that the contract costs incurred for work performed to date bear to the estimated total costs for the contract. Costs incurred during the financial year in connection with future activity on a contract are excluded from costs incurred to date when determining the stage of completion of a contract. Such costs are shown as amounts due from/(to) customers on construction contracts in the statement of financial position unless it is not probable that such contract costs are recoverable from the customers, in which case such costs are recognised as an expense immediately.

When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that are likely to be recoverable.

WAH SEONG CORPORATION BERHAD 105 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.25 Revenue recognition (continued) (a) Construction contracts (continued) When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

Contract revenue comprises the initial amount of revenue agreed in the contract and variations in the contract work and claims that can be measured reliably. A variation or a claim is only included in contract revenue when it is probable that the customer will approve the variation or negotiations have reached an advanced stage such that it is probable that the customer will accept the claim.

At the reporting date, the cumulative costs incurred plus recognised profit (less recognised loss) on each contract is compared against the progress billings. Where the cumulative costs incurred plus the recognised profits (less recognised losses) exceed progress billings, the balance is presented as ‘amount due from customers on contracts’ within current assets. Where progress billings exceed the cumulative costs incurred plus recognised profits (less recognised losses), the balance is presented as ‘amount due to customers on contracts’ within current liabilities.

Progress billings not yet paid by customers and retentions by customers are included within “trade and other receivables”. Advances received are included within “trade and other payables”.

(b) Sale of goods Revenue from sale of goods is measured at the fair value of the consideration receivable and is recognised in the profit or loss when the significant risks and rewards of ownership have been transferred to the buyer.

(c) Service income Service income is recognised on an accrual basis when services have been rendered.

(d) Dividend income Dividend income is recognised when the right to receive payment is established.

(e) Rental income Rental income is recognised on a time proportion basis over the lease term.

(f) Interest income Interest income is recognised on a time proportion basis, taking into account the principal outstanding and the effective interest rate applicable.

(g) Management fee Management fee is recognised on an accrual basis when service is rendered.

(h) Hire of machinery and equipment Income from hire of machinery and equipment is recognised on a time proportion basis over the term of hire.

(i) Commission income Commission income is recognised on an accrual basis when service is rendered.

106 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.26 Income taxes (a) Current tax Current tax expense is determined according to the tax laws of each jurisdiction in which the Group operates and includes all taxes based upon the taxable profits after taking into consideration available tax incentives.

Current taxes are recognised in profit or loss except to the extent that the tax relates to items recognised outside profit or loss, either in other comprehensive income or directly in equity.

(b) Deferred tax Deferred tax is recognised in full, using the liability method, on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which the deductible temporary differences or unused tax losses can be utilised.

Deferred tax is not recognised if the temporary difference arises from goodwill or from the initial recognition of an asset or liability in a transaction which is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable profit.

Deferred tax is recognised on temporary differences arising on investments in subsidiaries, associates and jointly controlled entities, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

The Group and Company has changed its accounting policy to recognise deferred tax assets on any unutilised portion of tax incentives to the extent that it is probable that future taxable profits will be available against which the unutilised tax incentives can be utilised. Previously, tax incentives were recognised as and when realised. This change in accounting policy did not have any impact on the financial position and the results of the Group and Company.

Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date.

Deferred tax is recognised in the profit or loss, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also charged or credited directly to equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill.

Deferred tax assets and liabilities are offset when the enterprise has a legally enforceable right to offset and intends to settle either on a net basis or to realise the asset and settle the liability simultaneously.

WAH SEONG CORPORATION BERHAD 107 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 2.27 Employee benefits (a) Short term benefits Salaries, wages, bonuses and social security contributions are recognised as an expense in the financial year in which the services are rendered by employees. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlements to future compensated absences, and short term non-accumulating compensated absences such as sick leave are recognised when the absences occur. Non-monetary benefits such as medical care, housing and other staff related expenses are charged to the profit or loss as and when incurred.

(b) Post-employment benefits The Group has post-employment benefit schemes in accordance with local conditions and practices in the countries in which it operates. These post-employment benefit schemes are defined contribution plans.

A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity (a fund) and will have no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee services in the current and prior periods.

As required by law, the Company and its subsidiaries in Malaysia make contributions to the Employees Provident Fund (“EPF”) which is a defined contribution plan, whereas companies in other countries make their respective local contributions, if required by law.

Such contributions are recognised as an expense in the profit or loss in the financial year to which they relate.

2.28 Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The Group Chief Executive Officer and the Deputy Managing Director have been identified as the chief operating decision-maker as they are responsible for allocating resources and assessing performance of the Group’s operating segments.

2.29 Cash and cash equivalents Cash and cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value. For the purpose of the statements of cash flows, cash and cash equivalents are presented net of bank overdrafts and exclude fixed deposits pledged to secure banking facilities.

2.30 Disposal groups held for sale Disposal groups are classified as assets/liabilities held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell.

2.31 Contingent liabilities The Group does not recognise a contingent liability but discloses its existence in the financial statements. A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in the extremely rare case where there is a liability that cannot be recognised because it cannot be measured reliably.

108 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates and judgements are continually evaluated by the Directors and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the current circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below.

(a) Impairment of goodwill The Group tests goodwill for impairment annually in accordance with the accounting policy in 2.11(a) and whenever events or changes in circumstances indicate that the goodwill may be impaired. For the purposes of assessing impairment, goodwill is allocated to cash-generating units that are expected to benefit from the synergies of the business combination in which the goodwill arose. Judgement is required in the estimation of the present value of future cash flows generated by the cash-generating units or groups of cash-generating units, which involves uncertainties and are significantly affected by assumptions used and judgement made regarding estimates of future cash flows and discount rates. Changes in assumptions could significantly affect the results of the Group’s test for impairment of goodwill. Further details of the carrying value, the key assumptions applied in the impairment assessment of goodwill and sensitivity analysis to changes in assumptions are given in Note 12.

(b) Construction contracts The Group recognises contract revenue based on the stage of completion method. The stage of completion is measured by reference to the contract costs incurred-to-date to the estimated total contract costs for the contract. When it is probable that the estimated total contract costs will exceed the total contract revenue, the expected loss is recognised as an expense immediately.

Judgement is required in the estimation of stage of completion, the extent of the contract costs incurred, as well as the recoverability of the construction contracts. The Group evaluates the estimates made using past experience.

(c) Income taxes The Group is subject to income taxes in numerous jurisdictions. Judgement is required in determining the capital allowances and deductibility of certain expenses during the estimation of the provision for income taxes. There are certain transactions and calculations for which the ultimate tax determination may be uncertain. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred income tax provisions in the period in which such determination is made.

(d) Deferred tax assets Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. This involves judgment regarding the future financial performance of the particular entity in which the deferred tax asset has been recognised.

WAH SEONG CORPORATION BERHAD 109 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010 - - (680) Total 3,537 (2,719) (2,220) (4,195) (1,735) (2,318) 25,687 55,366 (26,311) (37,741) (17,037) (14,059) RM’000 938,925 891,426 326,889 349,963 541,463 ------(47) (97) (61) (215) (993) (4,521) 11,397 11,563 23,682 30,199 12,617 18,636 Capital RM’000 work-in- progress - - - - - (224) (102) 6,302 7,669 (1,957) (2,022) (2,291) (1,697) (1,735) (1,762) 72,473 72,281 47,223 49,596 22,685 RM’000 Electrical computer and motor equipment, renovation, installations, vehicles store extension, office equipment,

furniture, fittings,

- - - (29) (24) (697) (583) 6,136 4,358 4,530 Plant, 40,338 (11,553) (19,965) (32,573) (16,060) RM’000 634,222 591,452 229,234 245,882 345,570 tools and equipment machinery,

------114 163 160 (139) (274) 1,540 8,237 (1,491) 23,735 22,382 12,719 14,145 RM’000 leasehold buildings Short term

- - - - - (19) (14) (680) (501) (765) 1,617 5,070 (3,464) (4,195) (2,154) 22,662 25,772 RM’000 137,079 128,864 103,092 leasehold Long term buildings

------(78) 121 749 (487) (100) 2,434 3,005 (1,120) 47,734 46,248 43,243 RM’000 land and Freehold buildings

6 6 35 35 Note

groups held for sale impairment) for the year groups held for sale ransfer to assets of disposal disposal of assets to ransfer ransfer to assets of disposal

PROPERTY, PLANT AND EQUIPMENT PLANT PROPERTY,

Group 2010 Cost At 1 January Additions Disposals Write-offs Reclassifications Transfer to investment properties Transfer T Effect of exchange rate changes Effect At 31 December and impairment loss At 1 January Accumulated depreciation Reclassifications Depreciation charge for the year of charge/(reversal Impairment Write-offs Disposals to investment properties Transfer T of exchange rate changes Effect At 31 December Net book value at 31 December 4

110 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010 - - 24 150 843 (786) Total 4,007 2,761 (2,351) (4,741) (2,394) (1,599) (2,909) 57,031 (24,071) (16,991) RM’000 110,569 857,756 938,925 288,515 326,889 612,036 ------105 950 1,896 11,562 11,065 66,095 53,949 23,682 12,617 Capital (98,258) RM’000 work-in- progress - - - (42) (34) (46) 662 (576) (149) (625) (534) 2,643 4,507 8,914 (3,215) (1,542) (2,395) 70,847 72,473 47,223 25,250 41,281 RM’000 Electrical computer and motor equipment, renovation, installations, vehicles store extension, office equipment,

furniture, fittings,

- - 181 326 (668) (147) 1,811 1,364 Plant, (6,223) (1,775) (2,922) (1,065) 92,289 27,142 39,799 (18,233) (14,158) RM’000 540,326 634,222 205,409 229,234 404,988 tools and equipment machinery,

------70 (21) (62) (997) (229) (280) 3,626 8,258 4,824 11,016 21,265 23,735 12,719 RM’000 leasehold buildings Short term

------24 (90) (14) 150 (366) (184) 2,910 11,916 19,832 22,662 RM’000 114,417 125,563 137,079 leasehold Long term buildings

------53 (76) 584 (376) 7,115 9,429 2,173 2,434 (2,394) 33,660 47,734 45,300 RM’000 land and Freehold buildings

6 6 Note 45(v) 45(v) 44(b)(i) 44(b)(i)

properties properties ransfer from investment ransfer from investment

PROPERTY, PLANT AND EQUIPMENT (CONTINUED) PLANT PROPERTY,

Group 2009 Cost At 1 January of exchange rate changes Effect Write-offs Reclassifications T At 31 December Acquisition of a subsidiary Additions Disposals Disposal of a subsidiary Effect of exchange rate changes Effect and impairment loss At 1 January Accumulated depreciation Depreciation charge for the year Impairment charge for the year Acquisition of a subsidiary Write-offs Reclassifications T At 31 December Disposal of a subsidiary Disposals Net book value at 31 December 4

WAH SEONG CORPORATION BERHAD 111 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

4 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Renovations, office Computer equipment, and furniture and Motor equipment fittings vehicles Total RM’000 RM’000 RM’000 RM’000

Company 2010 Cost At 1 January 470 453 207 1,130 Additions 23 138 - 161 Disposal (7) - (4) (11) At 31 December 486 591 203 1,280

Accumulated depreciation At 1 January 438 225 207 870 Charge for the year 26 60 - 86 Disposal (7) - (4) (11) At 31 December 457 285 203 945 Net book value at 31 December 29 306 - 335

2009 Cost At 1 January 453 408 322 1,183 Additions 17 51 - 68 Disposal - - (115) (115) Write-offs - (6) - (6) At 31 December 470 453 207 1,130

Accumulated depreciation At 1 January 397 155 235 787 Charge for the year 41 72 18 131 Disposal - - (46) (46) Write-offs - (2) - (2) At 31 December 438 225 207 870 Net book value at 31 December 32 228 - 260

112 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

4 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Assets pledged to financial institutions Net book value of property, plant and equipment of the Group which have been pledged to financial institutions to secure loan facilities (Note 30) which have been granted to the Group are as follows: Group 2010 2009 RM’000 RM’000 Long term leasehold buildings 58,473 59,091 Plant, machinery, tools and equipment 59,203 66,074 117,676 125,165

Assets under hire purchase Included in the property, plant and equipment of the Group are motor vehicles with a total net book value of RM77,115 (2009: RM408,239) which are held under hire purchase arrangements as at the reporting date.

Ownership Included in property, plant and equipment of the Group as at year end is freehold land of RM567,658 (2009: RM630,973) for which the title have yet to be issued by the relevant authorities.

Impairment of property, plant and equipment During the financial year, the Group has recognised an impairment loss of approximately RM4,530,000 (2009: RM2,761,000) in respect of plant and equipment as the recoverable amounts are lower than the carrying amounts. The impairment loss was recognised within “Administrative and general expenses” line item of the statement of comprehensive income. The impairment loss is mainly due to a plant and equipment of a specialised nature for which there are currently no specific projects available for its use. The recoverable amount of the specialised plant and equipment is determined based on value in use.

5 PREPAID LEASE PAYMENTS Unexpired Unexpired period less period more than than 50 years 50 years Total RM’000 RM’000 RM’000 Group 2010 Cost At 1 January/31 December 18,282 68,809 87,091

Accumulated amortisation At 1 January 3,244 3,000 6,244 Amortisation for the year 411 717 1,128 At 31 December 3,655 3,717 7,372 Net book value at 31 December 14,627 65,092 79,719

WAH SEONG CORPORATION BERHAD 113 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

5 PREPAID LEASE PAYMENTS (CONTINUED) Unexpired Unexpired period less period more than than 50 years 50 years Total RM’000 RM’000 RM’000 Group 2009 Cost At 1 January 17,741 68,173 85,914 Additions 541 636 1,177 At 31 December 18,282 68,809 87,091

Accumulated amortisation At 1 January 2,825 2,273 5,098 Amortisation for the year 419 727 1,146 At 31 December 3,244 3,000 6,244 Net book value at 31 December 15,038 65,809 80,847

Ownership The title deeds to certain leasehold land of the Group stated at a total net book value of RM64,003,920 (2009: RM64,696,625) have yet to be issued by the relevant authorities.

Assets pledged to financial institutions Prepaid lease payments with a total carrying value of RM33,773,987 (2009: RM34,135,239) have been pledged to financial institution to secure a loan facility (Note 30) granted to a subsidiary of the Group.

6 INVESTMENT PROPERTIES Group Note 2010 2009 RM’000 RM’000 At 1 January 4,218 6,288 Disposals - (1,920) Transfer from/(to) property, plant and equipment 4 4,195 (150) At 31 December 8,413 4,218

Accumulated depreciation At 1 January 1,205 1,266 Charge for the year 166 170 Disposals - (207) Transfer from/(to) property, plant and equipment 4 680 (24) At 31 December 2,051 1,205

114 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

6 INVESTMENT PROPERTIES (CONTINUED) Group Note 2010 2009 RM’000 RM’000 Accumulated impairment losses At 1 January 190 494 Disposal - (304) At 31 December 190 190 Net book value at 31 December 6,172 2,823 Fair value at 31 December 17,031 6,887

The fair value of the properties were estimated based on either valuation by independent professionally qualified valuers or estimates based on current prices in an active market.

On 19 November 2009, certain properties were valued by Colliers, Jordan and Lee & Jaafar, an independent firm of professional valuer, registered with the Board of Valuers, Appraisers & Estate Agents Malaysia using the comparison method of valuation. The Directors consider these valuations as being representative of the fair value of the investment properties at the reporting date.

7 INVESTMENT IN SUBSIDIARIES Company 2010 2009 RM’000 RM’000 Unquoted shares, at cost 487,790 487,790 Accumulated impairment losses (124,986) (87,986) 362,804 399,804 Advances to subsidiaries treated as quasi-investment 195,618 - 558,422 399,804

Impairment of investment in a subsidiary During the financial year, the Company has recognised an impairment loss of RM37,000,000 in respect of investment in a subsidiary as the recoverable amount is lower than the carrying amount. The subsidiary is an investment holding company which declared a dividend of RM29,673,000 that is in excess of its total comprehensive income. Consistent with the revised FRS 127 “Consolidated and Separate Financial Statements” which is effective from 1 January 2010, dividends paid out of pre-acquisition profits were recognised within profit or loss. The resulting impairment loss was recognised within “Administrative and general expenses” line item of the statement of comprehensive income. The recoverable amounts are determined based on fair value less costs to sell. The fair value less costs to sell is determined based on the net recoverable value of the subsidiary company’s assets.

WAH SEONG CORPORATION BERHAD 115 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

7 INVESTMENT IN SUBSIDIARIES (CONTINUED) Details of the subsidiaries are as follows: Group’s effective interest 2010 2009 Country of % % incorporation Principal activities Wasco Energy Ltd 100 100 Bermuda Investment holding

WSC Capital (Labuan) Limited 100 100 Federal Territory Investment holding of Labuan, Malaysia

Wasco Management Services 100 100 Malaysia Provision of management support Sdn. Bhd. services

# Wasco Capital Pte. Limited 100 100 Singapore Investment holding

# Wasco (Australia) Pty Ltd 100 100 Australia Dormant

# Wasco Coatings Limited 100 100 Hong Kong, SAR Investment holding

# Wasco Coatings Singapore 100 100 Singapore Investment holding Pte. Ltd.

* Wasco Coatings Denmark ApS 100 100 Denmark Dormant

Wasco Coatings Europe B.V. 100 100 Netherlands Dormant

* Wasco Coatings UK Ltd 100 100 england and Wales Dormant

Wasco Coatings International 100 100 British Virgin Islands Dormant limited

ppSC Industrial Holdings 100 100 Malaysia Investment holding Sdn. Bhd.

Wasco Coatings Malaysia 78 78 Malaysia Provision of pipe coating services Sdn. Bhd. (formerly known as PPSC Industries Sdn. Bhd.)

Wasco Coatings Insulation 78 78 Malaysia Coating of pipes for the oil and gas Sdn. Bhd. (formerly known as PPSC industry Insulation System Sdn. Bhd.)

# Wasco Coatings HK Limited 100 100 Hong Kong, SAR General trading and marketing of (formerly known as PPSC coated pipes for oil and gas industry (HK) Limited)

116 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

7 INVESTMENT IN SUBSIDIARIES (CONTINUED) Group’s effective interest 2010 2009 Country of % % incorporation Principal activities ppSC (Thailand) Limited 100 100 thailand Dormant

PPSC (Malaysia) Sdn. Bhd. 100 100 Malaysia Investment holding

Wasco Resources Sdn. Bhd. 100 100 Malaysia Property holding (formerly known as PPSC Resources Sdn. Bhd.)

PPSC Property Sdn. Bhd. 100 100 Malaysia Property holding

Wasco Coatings Labuan Limited 100 100 Federal Territory Investment holding (formerly known as PPSC Capital of Labuan, Malaysia (Labuan) Limited)

Kanssen (Yadong) Pipe Coating 100^ 81 British Virgin Islands Investment holding and provision of Services Limited pipe coating services

Kanssen (Yadong) International 100^ 81 British Virgin Islands Provision of pipe coating services pipe Coating Services Limited

Yadong Anti-Corrosion (Int) 100^ 81 British Virgin Islands Investment holding Company Limited

Jingzhou Kanssen Yadong 100^ 81 people’s Republic of provision of pipe coating services offshore Pipe Coating China engineering Company Limited

Shashi Kanssen (Yadong) Coating 100^ 81 people’s Republic of provision of pipe coating services Services Company Limited China

Kanssen (Yadong) Coating Services 100^ 81 people’s Republic of provision of pipe coating services (Jingzhou) Company Limited China

* ppSC China Limited 100^ 81 Hong Kong, SAR Investment holding

# Deepwater Corrosion Services, 51 51 United States of Provision of corrosion control Inc. America products and services to the offshore oil and gas industry

WAH SEONG CORPORATION BERHAD 117 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

7 INVESTMENT IN SUBSIDIARIES (CONTINUED) Group’s effective interest 2010 2009 Country of % % incorporation Principal activities # Inter Resources, Inc. 51 51 United States of Dormant America

# Deepwater EU Ltd 51 51 England and Manufacturing and selling corrosion Wales control products and services

Asiana Emas Sdn. Bhd. 100 100 Malaysia Investment holding

Petro-Pipe (Sabah) Sdn. Bhd. 60+ 40 Malaysia Manufacturing and sales of spiral welded pipes for the oil and gas industry

Wasco Corrosion Services 74Ω 72 Malaysia Manufacturing, supply and Sdn. Bhd. (formerly known as installation of sacrificial anodes, Material Performance Engineering provision of cathodic protection Sdn. Bhd.) services and equipment, corrosion protection services, special paint coating services and provision of technical training services

Wasco Lindung Sdn. Bhd. 63Ω 61 Malaysia Manufacturing, supply and (formerly known as installation of sacrificial anodes, MPE Lindung Sdn. Bhd.) provision of cathodic protection services and equipment, corrosion protection services and special paint coating services

* PT MPE Deepwater 59Ω 58 Indonesia Manufacture of sacrificial aluminium and zinc anodes, cathodic protection retrofit systems, pipe support systems and the provision of such related products and services

* petro-Pipe Engineering Services 100 100 Malaysia Provision of technical services Sdn. Bhd.

# Jutasama International Limited 100 100 Hong Kong, SAR trading and marketing of machineries, equipment and other related products for the oil and gas industry

118 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

7 INVESTMENT IN SUBSIDIARIES (CONTINUED) Group’s effective interest 2010 2009 Country of % % incorporation Principal activities Wasco Engineering Group Limited 100 100 British Virgin Islands Investment holding

Wasco Engineering & Technology 65 65 British Virgin Islands Investment holding and provision of Inc engineering works and services

# Gas Services International 100 100 British Virgin Islands Leasing compressors and designing, limited engineering and fabrication of oil and gas processing and compression systems and equipment

* PT. Gas Services Indonesia 100 100 Indonesia Consulting services, rental, repair and maintenance of natural gas industry equipment

# Gas Services International (S) 100 100 Singapore Design, engineering and fabrication Pte. Ltd. of oil and gas processing and compression systems and equipment

Gas Services International (M) 70 70 Malaysia Leasing of plant and equipment, Sdn. Bhd. parts sales and provision of operation and maintenance and other related services to the oil and gas industry

# Wasco Engineering Australia 100 100 Australia Servicing of gas compression plant pty Ltd (formerly known as and machinery and sales of general Gas Services International (Aust) spare parts pty Limited)

* Mackenzie Hydrocarbons 100 100 Australia Provision of engineering (Australia) Pty Ltd consultancy and fabrication services

Excel Tradition Limited 100 100 British Virgin Islands Dormant

# Wasco Technologies Pte. Ltd. 70 70 Singapore Engineering and fabrication of oil and gas system and equipment

# PT. Megaron Semesta 67 67 Indonesia Provision of engineering, design, fabrication and construction services for oil and gas industry

WAH SEONG CORPORATION BERHAD 119 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

7 INVESTMENT IN SUBSIDIARIES (CONTINUED) Group’s effective interest 2010 2009 Country of % % incorporation Principal activities # Wasco Singapore Pte. Ltd. 100 100 Singapore Leasing of plant and equipment, parts sales and provision of operation and maintenance and other related services to the oil and gas industry

Jutasama Sdn. Bhd. 100 100 Malaysia Contracting of industrial engineering projects

Jutasama Jaya Sdn. Bhd. 60 60 Malaysia Dormant

Mackenzie Industries Sdn. Bhd. 60 60 Malaysia Undertaking of steam boilers and energy system projects

Peakvest Sdn. Bhd. 100 100 Malaysia Dormant

* Delco Papua New Guinea Ltd 100 100 papua New Guinea Dormant

# WSM Oil & Gas Services Limited 80 80 Hong Kong, SAR Investment holding and provision of management consultancy services including all kinds of products and services related to the infrastructure, oil and gas, water, power and energy related industries

# Wasco E&P Services Limited 100 100 Hong Kong, SAR Investment holding

Total Oil Technologies Sdn. Bhd. 100 100 Malaysia Investment holding and provision of management services

Botco Sdn. Bhd. 65 65 Malaysia Agent and representative for the supply of equipment and the provision of related technical services to the oil drilling and production industry

# WSN Investments Limited 100 100 Hong Kong, SAR Investment holding

120 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

7 INVESTMENT IN SUBSIDIARIES (CONTINUED) Group’s effective interest 2010 2009 Country of % % incorporation Principal activities * ltt Oil & Gas Nigeria Limited 100 100 nigeria Provision of engineering consultancy, product and related services to the oil and gas industry

* Driltools International FZCO 60µ 60 United Arab Emirates Marketing and provision of oilfield and water well supplies and services related to the oil and gas industry

* Driltools Equipment Trading 60µ 60 United Arab Emirates Trading of agricultural and L.L.C. workshop equipment, accessories and spare parts

* Drilbits International 60µ 60 India Manufacturing and trading of oilfield private Limited tools and equipment

# Wah Seong China Limited 80 80 Hong Kong, SAR Investment holding, marketing and provision of services related to the oil and gas industry

* Ashburn International, Inc. 80 80 United States of International consulting and trading America business

* Ashburn International Trade 52 52 People’s Republic of International trade, processing (Tianjin) Co. Ltd. China and assembling, storage of bonded goods and development of high technological products and consultancy services

* Ashburn Offshore Oil & Gas 52 52 People’s Republic of Design and manufacturing of equipment & Engineering China products to the oil and gas industry Company Ltd

Wasco China International Limited 80 80 British Virgin Islands Dormant

* Petro-Pipe Industries (M) Sdn. Bhd. 100 100 Malaysia Manufacturing and sales of welded steel pipes and related products

* PPI Industries Sdn. Bhd. 100 100 Malaysia Manufacturing and sales of welded steel pipes and related products

* Syn Tai Hung Corporation Sdn. Bhd. 100 100 Malaysia Investment holding

WAH SEONG CORPORATION BERHAD 121 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

7 INVESTMENT IN SUBSIDIARIES (CONTINUED) Group’s effective interest 2010 2009 Country of % % incorporation Principal activities * Syn Tai Hung Trading Sdn. Bhd. 100 100 Malaysia Trading and distribution of building materials

* STH Sri Bulatan Sdn. Bhd. 100 100 Malaysia Trading and distribution of building materials

* Stellar Marketing Sdn. Bhd. 100 100 Malaysia Dormant

* PMT Industries Sdn. Bhd. 100 100 Malaysia Manufacturing and supplying of spare parts, equipment and provision of maintenance services for palm oil and other agricultural industries

* Palmillvest Sdn. Bhd. 100 100 Malaysia Dormant

* pMT Industries (HK) Limited 100 100 Hong Kong, SAR Supply of equipment for power, palm oil and other agricultural industries

Palmilltech (M) Sdn. Bhd. -© 100 Malaysia Dormant

* pt PMT Industri 100& 80 Indonesia Supply of spare parts, equipment, provision of maintenance services and engineering consultation for palm oil and other agricultural industries

* PMT-Phoenix Industries Sdn. Bhd. 83 83 Malaysia Manufacturing and supply of industrial fans and component parts and provision of other related services

* PMT-Dong Yuan Industries 70 70 Malaysia Manufacturing and trading of Sdn. Bhd. machinery related to palm oil industries

* PMT Industries (Labuan) Ltd 100 100 Federal Territory of Supply of equipment for power, labuan, Malaysia palm oil and other agricultural industries

* E-Green Technology Sdn. Bhd. 92 92 Malaysia Dormant

122 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

7 INVESTMENT IN SUBSIDIARIES (CONTINUED) Group’s effective interest 2010 2009 Country of % % incorporation Principal activities * Wah Seong Industrial Holdings Sdn. Bhd. 100 100 Malaysia Investment and property holding

* Sunrise Green Sdn. Bhd. 100 100 Malaysia Property holding

* Wah Seong Ventures Sdn. Bhd. 100 100 Malaysia Investment holding

* petro-Pipe Industrial Corporation 100 100 Malaysia Investment holding Sdn. Bhd.

# Wah Seong International Pte 100 100 Hong Kong, SAR Investment holding limited

# WSIPL (Australia) Pty Ltd 100 100 Australia Dormant

* Audited by a firm other than member firm of PricewaterhouseCoopers International Limited and PricewaterhouseCoopers Malaysia. # Audited by a member firm of PricewaterhouseCoopers International Limited which is a separate and independent legal entity from PricewaterhouseCoopers Malaysia. ^ Wasco Coatings HK Limited (formerly known as PPSC (HK) Limited) had on 23 December 2010 obtained and completed the transfer of the remaining 525,546 shares of USD1.00 each representing 18.75% equity interest in Kanssen (Yadong) Pipe Coating Services Limited (“Kanssen”) from Good & Good Limited (In Liquidation). + Asiana Emas Sdn. Bhd. had on 6 August 2010 completed the acquisition of 6,000,000 ordinary shares of RM1.00 each, representing 20% equity interest in the issued and paid-up share capital of Petro-Pipe (Sabah) Sdn. Bhd. from Detik Gaya Sdn. Bhd. & PMT Industries Sdn. Bhd. and PMT Industries (Labuan) Ltd completed the acquisition of 15% and 5% equity interest respectively in the issued and paid-up share capital of PT PMT Industri. µ on 28 December 2010, the Company announced the proposed disposal of shares by Wah Seong International Pte Limited and Wasco E&P Services Limited in Drilbits International Private Limited and Driltools International FZCO respectively. The aforementioned disposal of shares are expected to be completed simultaneously in the first half of 2011. Ω Total Oil Technologies Sdn. Bhd. had on 8 June 2010 completed the acquisition of 139,000 ordinary shares of RM1.00 each, representing 2.54% equity interest in the issued and paid-up share capital of Wasco Corrosion Services Sdn. Bhd. (formerly known as Material Performance Engineering Sdn. Bhd.). © Palmiilltech (M) Sdn. Bhd. struck off from the Register of Companies Commission of Malaysia on 3 September 2010.

WAH SEONG CORPORATION BERHAD 123 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

8 INVESTMENT IN ASSOCIATES Group 2010 2009 RM’000 RM’000 Unquoted shares at cost 15,651 15,651 Share of post-acquisition results and reserves 3,903 7,716 19,554 23,367 Less: Impairment losses (2,463) (964) 17,091 22,403 Share of net assets of associates 17,091 22,403

Impairment of investment in an associate During the financial year, the Group recognised an impairment loss of approximately RM1,499,000 (2009: RM964,000) in respect of investment in an associate as the recoverable amounts are lower than the carrying amounts. The impairment loss was recognised within “Administrative and general expenses” line item of the statement of comprehensive income. The recoverable amounts are determined based on fair value less costs to sell.

The Group’s share of revenue, losses, assets and liabilities of associates are as follows: Group 2010 2009 RM’000 RM’000 Revenue 21,388 16,315 Loss for the financial year (3,193) (325)

Non-current assets 10,318 13,755 Current assets 13,752 11,155 Current liabilities (9,524) (6,998) Non-current liabilities (104) (161) Net assets 14,442 17,751 Goodwill 5,112 5,616 Less: Accumulated impairment loss (2,463) (964) 17,091 22,403

Details of the associates are as follows: Group’s effective interest Country of 2010 2009 Incorporation % % Principal activities TOT Inspection Sdn. Bhd. Malaysia 45 45 Provision of non-destructive testing, general inspection and site supervision services

Turn Key Pipeline Services BV Netherlands 40 40 Provision of engineering design, construction, installation services and supply of equipment for pipe coating plant and facilities for the oil and gas industry

124 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

8 INVESTMENT IN ASSOCIATES (CONTINUED) Group’s effective interest Country of 2010 2009 Incorporation % % Principal activities Syarikat Beka Sdn. Bhd. Malaysia 48 48 Sales of hardware products

Wah Seong Boustead Myanmar 50 50 Property development, trading and Company Limited provision of auxiliary services

Spirolite (M) Sendirian Berhad Malaysia 49 49 Manufacturing and trading of spiral pipes, straight pipes, tubes, tanks and containers

Advanced Piping Systems Malaysia 49 49 Manufacturing and trading of Sdn. Bhd. straight pipes and fittings

Spirolite Marketing Sdn. Bhd. Malaysia 49 49 Trading of spiral pipes, straight pipes, tubes, tanks and containers

Hicom Petro-Pipes Sdn. Bhd. Malaysia 49 49 Dormant

9 INVESTMENT IN JOINTLY CONTROLLED ENTITIES Group 2010 2009 RM’000 RM’000

Unquoted shares at cost 19,188 19,130 Share of post-acquisition results and reserves 8,437 20,628 27,625 39,758 Less: Impairment losses - (3,392) 27,625 36,366 Share of net assets of jointly controlled entities 27,625 36,366

WAH SEONG CORPORATION BERHAD 125 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

9 INVESTMENT IN JOINTLY CONTROLLED ENTITIES (CONTINUED) The Group’s share of revenue, (loss)/profit, assets and liabilities of jointly controlled entities are as follows: Group 2010 2009 RM’000 RM’000 Revenue 26,024 29,573 (Loss)/profit for the financial year (2,511) 1,763

Non-current assets 10,688 16,042 Current assets 38,848 63,172 Current liabilities (21,926) (36,508) Non-current liabilities (929) (3,998) Net assets 26,681 38,708 Goodwill 944 1,050 Less: Accumulated impairment loss - (3,392) 27,625 36,366

During the financial year, the Group reversed an impairment loss that was previously recognised, amounting to approximately RM2,495,000 as the recoverable amount was higher than the carrying amount. This reversal was recognised within “Administrative and general expenses” line item of the statement of comprehensive income. The recoverable amount is determined based on the fair value less costs to sell.

The details of the jointly controlled entities are as follows: Group’s effective interest Country of 2010 2009 Incorporation % % Principal activities Nacap Drilling (China) Co. Hong Kong, SAR 40 40 Dormant Limited

Ashburn (Huanghua) Hardware people’s Republic 33 33 Dormant Products Co. Ltd of China

Socotherm Shashi Pipe Coating People’s Republic 50 50 Provision of pipe coating services Co. Ltd of China and overseas investment holding

PetroChina Socotherm people’s Republic 38 38 Provision of pipe coating services Jingzhou Coating Technology of China Co. Ltd

Socotherm PPSC Ningbo People’s Republic 50 50 Marketing and provision of pipe (Daxie) Pipe Coating Limited of China coating services to the oil and gas industry

Sichuan Chuanshi Kanssen People’s Republic 51 41 Provision of pipe coating services (Yadong) Coating Services of China Company Limited

Shaanxi Yadong Anti-Corrosion People’s Republic 55 45 Provision of pipe coating services Company Limited of China

Pesanan Dinamik Sdn. Bhd. Malaysia 51 51 Dormant

126 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

9 INVESTMENT IN JOINTLY CONTROLLED ENTITIES (CONTINUED) Group’s effective interest Country of 2010 2009 Incorporation % % Principal activities Arabian Yadong Coating Saudi Arabia 50^ 41 Marketing and provision of pipe Co. Ltd. coating services

WD International Limited Hong Kong, SAR 50 50 Dormant

Wasco Engineering & People’s Republic 36 36 Construction, building, repairing, Technology (Nantong) Co., Ltd. of China installation of all types of offshore equipment and modules, platform and process modules, large modules, provision of engineering services including design, research and development, technical consultancy services, import and export material relating to the business

^ Yadong-Anti Corrosion (Int) Co. Ltd on 26 January 2011, entered into a sales and purchase agreement with Arabian Pipe Co to dispose its entire 50% shareholdings (equivalent to 60,000 shares of Saudi Riyals 50.00 each).

10 AVAILABLE-FOR-SALE FINANCIAL ASSETS/ OTHER INVESTMENTS Group Unquoted Quoted ICULS shares in shares in quoted in Malaysia Malaysia Malaysia Total RM’000 RM’000 RM’000 RM’000 2010 At cost 1,050 - - 1,050 At fair value - 40 47 87 1,050 40 47 1,137

Market value of quoted investments - 40 47 87

2009 At cost 1,050 135 806 1,991 Less: impairment loss - (121) (774) (895) 1,050 14 32 1,096

Representing items: At cost/amortised cost 1,050 14 32 1,096

Market value of quoted investments - 35 73 108

The comparative figures as at 31 December 2009 have not been presented based on the new categorisation of financial assets resulting from the adoption of FRS 139 by virtue of the exemption given in paragraph 44AA of FRS 7.

WAH SEONG CORPORATION BERHAD 127 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

11 DERIVATIVE FINANCIAL INSTRUMENTS Contract/ Notional amount Assets Liabilities RM’000 RM’000 Group 2010 Current Non-hedging derivatives Financial assets at fair value through profit or loss - held for trading - Forward currency contracts USD44,310,000 2,187 -

Derivative designated as hedging instrument Cash flow hedge-interest rate swap USD7,100,000 - (414) 2,187 (414)

Non-current Non-hedging derivative Financial asset at fair value through profit or loss - held for trading - Interest rate cap USD14,680,000 10 -

Company 2010 Current Non-hedging derivatives Financial assets at fair value through profit or loss - held for trading - Forward currency contracts USD28,000,000 1,205 -

The comparative figures as at 31 December 2009 have not been presented by virtue of the exemption given in FRS 7 paragraph 44AA.

Non-hedging derivatives the Group uses forward currency contracts and interest rate cap derivatives to manage transaction exposures and limit its exposure to adverse fluctuation in interest rates respectively. These contracts are not designated as cash flow or fair value hedges.

128 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

11 DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED) Interest rate cap In the previous financial year, the Group has entered into interest rate cap to limit its exposure from adverse fluctuations in interest rates of an underlying debt instrument of a subsidiary. The Group will receive interest at the end of each contractual period if the USD London Interbank Offered Rate (“LIBOR”) exceeds the agreed strike rate of 2.35% per annum. The contract will mature on 31 October 2012 and the floating interest rate will be repriced quarterly.

Forward currency contracts the Group and Company enter into foreign currency forward contracts to protect the Group and Company from movements in exchange rates by establishing the rate at which a foreign currency asset or liability will be settled. Forward currency contracts are used to hedge certain trade receivables and payables denominated in US Dollar for which firm commitments existed at the reporting date, extending to November 2011.

Derivative designated as hedging instrument Cash-flow hedge - interest rate swap The interest rate swap is used to hedge cash flow interest rate risk arising from a floating rate secured term loan amounting to USD7,100,000 (equivalent to RM21,904,210).The Group receives a floating rate of interest equal to the 3 months USD Singapore Interbank Offered Rate per annum and pays a fixed all-in interest rate of 5.5% per annum on the notional amount (inclusive of credit spread of 1.65% per annum).

The management considers the interest rate swap as an effective hedging instrument as the floating rate bank loan and interest rate swap have identical critical terms.

The cash flows associated with the interest rate swap are expected to occur within the next 12 months.

Gains or losses arising from fair value changes of its financial liabilities During the financial year, the Group recognised a net gain of approximately RM1,591,000 arising from fair value changes of its derivative liability. The method and assumptions applied in determining the fair value of derivatives are disclosed in Note 53.

During the financial year, a gain of approximately RM973,000 was recognised in the other comprehensive income and approximately RM25,000 was reclassified from equity to profit or loss as finance cost.

Gains or losses recognised in the hedging reserve within equity on the effective portion of the interest rate swap as at 31 December 2010 will be continuously reclassed to finance costs within profit or loss until the repayment of the term loan.

Comparative disclosures have not been presented for 31 December 2009 by virtue of the exemption given in paragraph 44AA of FRS 7.

WAH SEONG CORPORATION BERHAD 129 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

12 GOODWILL Group 2010 2009 RM’000 RM’000

Cost At 1 January 190,480 189,821 Acquisition of new subsidiaries (Note 44) - 9,468 Balance consideration paid to vendor of a subsidiary upon achievement of profit guarantee - 350 Disposal of a subsidiary (Note 45(v)) - (6,413) Transfer to assets of disposal groups held for sale (Note 35) (6,629) - Effect of exchange rate changes (9,186) (2,746) At 31 December 174,665 190,480 Accumulated impairment loss At 1 January/31 December 64,196 64,196 Net book value at 31 December 110,469 126,284

Impairment testing of goodwill Goodwill arising from business combination has been allocated to the Group’s cash generating units (‘CGU’) identified according to business segments. The carrying amounts of goodwill allocated to the CGUs are as follows: Group 2010 2009 RM’000 RM’000

Cash-generating units Specialised Pipe Coating and Corrosion Protection Services (CGU A) 57,252 60,920 EPC, Fabrication and Rental of Gas Compressors and Process Equipment (CGU B) 52,769 57,425 E&P Products and Services (CGU C) 448 7,939 110,469 126,284

The recoverable amount of the CGU is determined based on value-in-use calculations. These calculations use pre–tax cash flow projections based on financial budgets approved by management covering a period of 5years (2009: 5 years).

130 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

12 GOODWILL (CONTINUED) Value in use was determined by discounting the future cash flows generated from the cash-generating units and was based on the following key assumptions: 2010 2009 Pre-tax Pre-tax Growth discount Growth discount rate rate rate rate CGU A 2.9% 13% 1% - 4% 10% CGU B 8.4% 14% 14% 11.5% CGU C 7.5% 15% 11% 12%

The following describes each key assumptions on which management has based its cash flow projections to undertake impairment testing for goodwill:

(i) overall assumption There will be no material changes in the principal activities of the Group.

(ii) Growth rate The growth rate used to extrapolate the cash flows is based on the respective business plans.

(iii) Discount rate The discount rates used reflect the weighted average cost of capital of the Group with a premium representing the business risks of the respective CGUs.

The key assumptions mentioned above are based on past performance.

Sensitivity analysis The above key estimates have been analysed for any significant movements should there be an adverse change to the assumptions made. Based on past experiences, the growth rates and discount rates may vary by 2 percentage points. The Group has assessed that any adverse shifts to the growth rates and discount rates by this margin will not result in any impairment on the goodwill allocated to the respective CGUs. In respect to CGU B, the recoverable amount of CGU B will equal the carrying amount of goodwill allocated to CGU B if the growth rate were to reduce to 4% or if the pre-tax discount rate were to increase to 24%.

13 OTHER INTANGIBLE ASSETS Technical Intellectual Group know-how property Total RM’000 RM’000 RM’000 2010 Cost At 1 January 3,726 3,520 7,246 Transfer to assets of disposal groups held for sale (Note 35) (3,461) - (3,461) Effect of exchange rate changes (265) (291) (556) At 31 December - 3,229 3,229

WAH SEONG CORPORATION BERHAD 131 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

13 OTHER INTANGIBLE ASSETS (CONTINUED) Technical Intellectual know-how property Total RM’000 RM’000 RM’000 2010 (Continued) Less: Accumulated amortisation At 1 January 1,677 1,382 3,059 Amortisation for the financial year 359 613 972 Transfer to assets of disposal groups held for sale (Note 35) (1,902) - (1,902) Effect of exchange rate changes (134) (149) (283) At 31 December - 1,846 1,846

Less: Accumulated impairment At 1 January - - - Impairment for the financial year - 873 873 Effect of exchange rate changes - (39) (39) At 31 December - 834 834 Net book value at 31 December - 549 549

2009 Cost At 1 January 3,811 2,751 6,562 Acquisition of a new subsidiary (Note 44(b)(i)) - 380 380 Effect of exchange rate changes (85) 389 304 At 31 December 3,726 3,520 7,246

Less: Accumulated amortisation At 1 January 1,328 687 2,015 Amortisation for the financial year 371 586 957 Effect of exchange rate changes (22) 109 87 At 31 December 1,677 1,382 3,059 Net book value at 31 December 2,049 2,138 4,187

Technical knowhow and intellectual property have unamortised useful life of nil (2009: 5.5 years) and 2 years (2009: 2.75 years to 3 years) respectively.

The amortisation of technical know-how and intellectual property are included in “Administrative and general expenses” line item within profit or loss.

132 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

14 DEFERRED TAX 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 the deferred taxes relate to the same tax authority. The following amounts, determined after appropriate offsetting, are shown in the statements of financial position: Group Company 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 Deferred tax assets 9,581 7,458 690 690 Deferred tax liabilities (18,831) (26,405) - - (9,250) (18,947) 690 690 At 1 January - as previously reported (18,947) (11,695) 690 690 - effects of adopting FRS 139 (Note 2.2(a)) 290 - - - - as restated (18,657) (11,695) 690 690

(Charged)/credited to profit or loss (Note 41): - Unused tax losses 1,373 108 - - - Property, plant and equipment 3,385 (8,748) - - - Provisions and accruals 1,464 1,056 - - - Incentives 2,534 - - - - Others (299) (304) - -

8,457 (7,888) - - Charged to other comprehensive income: - Hedging reserve (Note 26) (199) - - -

Transfer to liabilities of disposal groups held for sale (Note 35) 565 - - - Currency translation differences 584 636 - - At 31 December (9,250) (18,947) 690 690

Subject to income tax Deferred tax assets (before offsetting) - Unused tax losses 4,045 2,672 - - - Property, plant and equipment 268 79 - - - Provisions and accruals 8,255 6,791 745 745 - Incentives 2,534 - - - - Others 1,647 1,962 - - 16,749 11,504 745 745 Offsetting (7,168) (4,046) (55) (55) Deferred tax assets (after offsetting) 9,581 7,458 690 690

WAH SEONG CORPORATION BERHAD 133 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

14 DEFERRED TAX (CONTINUED) Group Company 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 Deferred tax liabilities (before offsetting) - Property, plant and equipment (22,348) (25,859) (55) (55) - Surplus arising from fair value adjustment to freehold and leasehold properties (3,420) (4,254) - - - Others (231) (338) - - (25,999) (30,451) (55) (55) Offsetting 7,168 4,046 55 55 Deferred tax liabilities (after offsetting) (18,831) (26,405) - -

At 31 December 2010, the Group did not recognise deferred tax assets arising from the following temporary differences of certain subsidiaries as it is not probable that future taxable profit will be available against which the deferred tax assets can be utilised. Group 2010 2009 RM’000 RM’000 Deductible temporary differences on - Unused tax losses 79,843 63,850 - Unabsorbed capital allowances 4,561 517 84,404 64,367

Deferred tax assets not recognised 23,904 18,333

15 INVENTORIES Group 2010 2009 RM’000 RM’000 At cost:

Raw materials 155,760 187,104 Work-in-progress 20,596 40,700 Manufactured goods and trading goods 40,931 50,552 Consumables 12,990 11,457 Goods in transit 7,717 601 237,994 290,414 At net realisable value:

Manufactured goods and trading goods 5,121 - 243,115 290,414

134 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

16 AMOUNTS DUE FROM/(TO) CUSTOMERS ON CONTRACTS Group 2010 2009 RM’000 RM’000 Aggregate costs incurred to date 800,460 966,842 Attributable profits recognised to date less recognised losses 165,545 239,295 966,005 1,206,137 Less: Progress billings on contracts (952,997) (1,081,987) 13,008 124,150

Represented by:

Amounts due from customers on contracts 46,000 160,164 Amounts due to customers on contracts (32,992) (36,014) 13,008 124,150

Retention sums on contracts (included within trade receivables) 3,495 6,165

17 TRADE AND OTHER RECEIVABLES Group Company 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 Gross trade receivables 464,791 358,702 - - Less: Allowance for impairment (37,556) (60,162) - - 427,235 298,540 - - Other receivables, deposits and prepayments 54,148 59,830 103 973 Less: Allowance for impairment (305) (1,862) - (953) 53,843 57,968 103 20 Total net receivables 481,078 356,508 103 20

Trade receivables are non-interest bearing and are generally on 30 to 90 days (2009: 30 to 90 days) terms. They are recognised at their original invoice amounts which represent their fair values on initial recognition.

WAH SEONG CORPORATION BERHAD 135 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

17 TRADE AND OTHER RECEIVABLES (CONTINUED) Credit risk concentration profile The Group determines concentration of credit risk by monitoring the business segment of its trade receivables on an ongoing basis. The credit risk concentration profile of the Group’s trade receivables at the reporting date is as follows: Group 2010 2009 RM’000 RM’000 Pipe coating division 143,914 34,575 Pipe manufacturing division 51,069 37,088 Engineering division 57,735 76,841 Renewable energy division 54,348 48,817 Trading division 108,696 78,793 E&P services division 11,205 22,158 Others 268 268 Total 427,235 298,540

Concentration of credit risk exists within the pipe coating, pipe manufacturing and engineering divisions which primarily trade with oil majors. However, the Group considers the risk of default by these oil majors to be negligible.

Ageing analysis of trade receivables The ageing analysis of the Group’s trade receivables is as follows:

2010 Gross Group Net trade receivables impairment receivables RM’000 RM’000 RM’000 Not past due 231,852 - 231,852 1 to 30 days overdue 125,471 - 125,471 31 to 60 days overdue 26,740 - 26,740 61 to 90 days overdue 10,299 - 10,299 91 to 180 days overdue 22,574 (3,379) 19,195 181 to 365 days overdue 17,212 (11,840) 5,372 More than 365 days overdue 30,643 (22,337) 8,306 Total 464,791 (37,556) 427,235

Receivables that are neither past due nor impaired Trade receivables that are neither past due nor impaired are creditworthy debtors with good payment records with the Group. The Group’s trade receivables arise from customers with more than 5 years of experience with the Group.

None of the Group’s trade receivables that are neither past due nor impaired have been renegotiated during the financial year.

136 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

17 TRADE AND OTHER RECEIVABLES (CONTINUED) The movements in the allowance for impairment losses of trade receivables during the financial year are as follows: Group 2010 2009 RM’000 RM’000 At 1 January 60,162 31,748 Impairment loss recognised 7,581 32,691 Impairment loss reversed (7,721) (4,415) Impairment loss written off (19,583) (735) Transfer to assets of disposal groups held for sale (126) - Exchange differences (2,757) 873 At 31 December 37,556 60,162

The movements in the allowance for impairment losses of other receivables during the financial year are as follows: Group Company 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 At 1 January 1,862 1,220 953 704 Impairment loss recognised - 826 - 249 Impairment loss reversed (537) (174) - - Impairment loss written off (953) - (953) - Exchange differences (67) (10) - - 305 1,862 - 953

Trade receivables that are individually determined to be impaired at the reporting date relate to debtors that are in significant financial difficulties and have defaulted on payments. These receivables are not secured by any collateral.

The currency exposure profile of trade receivables are as follows: Group 2010 2009 RM’000 RM’000 Gross trade receivables

- Ringgit Malaysia 207,939 185,169 - US Dollar 229,794 135,819 - Singapore Dollar 6,666 8,011 - China Renminbi 9,543 12,787 - Euro Dollar 1,411 2,910 - Japanese Yen 6,057 5,173 - Australian Dollar 1,326 3,476 - British Pound 1,606 - - Indian Rupee - 2,926 - Nigerian Naira - 1,740 - United Arab Emirates Dirham - 471 - Indonesian Rupiah 402 138 - Syrian Pound 29 82 - Thai Baht 18 - 464,791 358,702

WAH SEONG CORPORATION BERHAD 137 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

17 TRADE AND OTHER RECEIVABLES (CONTINUED) The currency exposure profile of the other receivables, deposits and prepayments are as follows: Group Company 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 Other receivables, deposits and prepayments

- Ringgit Malaysia 18,910 24,305 103 973 - US Dollar 25,274 15,073 - - - Singapore Dollar 875 635 - - - China Renminbi 3,767 5,280 - - - Euro Dollar 12 1,897 - - - Australian Dollar 169 3,588 - - - United Arab Emirates Dirham - 3,434 - - - Nigerian Naira - 2,439 - - - Indonesian Rupiah 1,733 1,972 - - - Japanese Yen 1,660 1,118 - - - Hong Kong Dollar 1,591 56 - - - Syrian Pound - 33 - - - British Pound 157 - - - 54,148 59,830 103 973

18 AMOUNTS OWING BY/(TO) SUBSIDIARIES (a) The amounts owing by subsidiaries are analysed as follows: Company 2010 2009 RM’000 RM’000 Interest bearing loans (unsecured) 24,779 44,251 Interest free advances (unsecured) 17,224 137,627 42,003 181,878

The effective interest rate of interest bearing loans as at 31 December 2010 ranges between 2.84% and 3.61% (2009: 1.73% and 7.05%) per annum. The loans and advances are recoverable on demand.

The currency exposure profile of the amounts owing by subsidiaries are as follows: Company 2010 2009 RM’000 RM’000 - Ringgit Malaysia 27,367 151,737 - US Dollar 14,636 30,141 42,003 181,878

(b) The amounts owing to subsidiaries are analysed as follows:

Interest bearing loans (unsecured) - 2,194 Interest-free advances (unsecured) 677 36,270 677 38,464

138 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

18 AMOUNTS OWING BY/(TO) SUBSIDIARIES (CONTINUED) (b) The amounts owing to subsidiaries are analysed as follows: (Continued) The effective interest rate of interest bearing loans as at 31 December 2009 ranged between 1.50% and 1.65% per annum. The loans and advances are payable on demand.

The currency exposure profile of the amounts owing to subsidiaries is as follows: Company 2010 2009 RM’000 RM’000 - Ringgit Malaysia 615 38,412 - US Dollar 62 52 677 38,464

19 AMOUNTS OWING BY/(TO) ASSOCIATES (a) Amounts owing by associates are analysed as follows: Group 2010 2009 RM’000 RM’000 Trade accounts 1,603 564 Advances 2,476 3,042 4,079 3,606

The currency exposure profile of the amounts owing by associates are as follows:

- Ringgit Malaysia 2,458 2,560 - US Dollar 255 551 - Euro Dollar 1,366 495 4,079 3,606

The trade accounts are unsecured, interest free and recoverable within the normal credit period. The advances are unsecured, interest free and recoverable on demand.

(b) Amounts owing to an associate is analysed as follows: Group 2010 2009 RM’000 RM’000 Advances 68 -

The advances are denominated in EURO Dollar, unsecured, interest free and payable on demand.

WAH SEONG CORPORATION BERHAD 139 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

20 AMOUNTS OWING BY/(TO) JOINTLY CONTROLLED ENTITIES (a) Amounts owing by jointly controlled entities are analysed as follows: Group 2010 2009 RM’000 RM’000 Trade accounts - 1,235 Advances 9,681 9,388 Less: Allowance for impairment (2,637) (4,440) 7,044 6,183

The movements in the allowance for impairment losses of amount owing by jointly controlled entity during the financial year are as follows: Group 2010 2009 RM’000 RM’000 At 1 January 4,440 4,568 Impairment loss reversed (1,433) - Exchange differences (370) (128) 2,637 4,440

The currency exposure profile of the amounts owing by jointly controlled entities are as follows: Group 2010 2009 RM’000 RM’000 - Ringgit Malaysia 125 139 - US Dollar 4,929 1,739 - China Renminbi 1,990 2,373 - Hong Kong Dollar - 1,932 7,044 6,183

Advances made to jointly controlled entities are unsecured, interest free and recoverable on demand except for an amount of RM1,778,418 (2009: RM1,911,400) which was subject to interest at an effective rate of 5.1% (2009: 5.1%) per annum.

(b) Amount owing to a jointly controlled entity are denominated in China Renminbi and represents an advance which is unsecured, interest free and payable on demand.

21 TIME DEPOSITS Group Company 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 Time deposits placed with: - licensed banks in Malaysia 137,980 200,152 86,445 148,895 - licensed overseas banks 37,551 49,345 - - 175,531 249,497 86,445 148,895

140 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

21 TIME DEPOSITS (CONTINUED) Group Company 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 The currency exposure profile of the time deposits is as follows: - Ringgit Malaysia 131,810 196,722 80,275 145,466 - US Dollar 7,404 24,875 6,170 3,429 - China Renminbi 36,317 19,765 - - - Indian Rupee - 4,604 - - - United Arab Emirates Dirham - 3,531 - - 175,531 249,497 86,445 148,895

The effective interest rates of time deposits of the Group and Company are as follows: Group Company 2010 2009 2010 2009 % % % % Time deposits 1.55 - 5.00 0.12 - 6.75 2.93 1.76

The time deposits have maturity periods between 1 to 8 months (2009: 1 to 12 months).

22 CASH AND BANK BALANCES The currency exposure profile of cash and bank balances is as follows: Group Company 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 - Ringgit Malaysia 95,965 116,552 24,412 2,121 - US Dollar 51,662 53,678 1,855 3,991 - Singapore Dollar 9,857 8,421 6,230 295 - China Renminbi 12,211 14,122 - - - Euro Dollar 10,920 11,804 529 396 - British Pound 61 9,832 14 14 - Japanese Yen 7,859 4,640 1 1 - Australian Dollar 541 1,103 227 195 - United Arab Emirates Dirham - 855 - - - Hong Kong Dollar 54 378 - - - Syrian Pound 472 318 - - - Indian Rupee - 279 - - - Indonesian Rupiah 251 254 - - - Bangladeshi Taka 1 148 - - - Danish Kron 11 13 - - - Papua New Guinea Kina 26 - - - 189,891 222,397 33,268 7,013

Cash and bank balances are deposits held at call with banks and earn no interest.

WAH SEONG CORPORATION BERHAD 141 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

23 SHARE CAPITAL Group and Company 2010 2009 Number Nominal Number Nominal of shares value of shares value ‘000 RM’000 ‘000 RM’000 Authorised Ordinary shares of RM0.50 each at beginning and end of the financial year 2,000,000 1,000,000 2,000,000 1,000,000

Issued and fully paid Ordinary shares of RM0.50 each At 1 January 686,739 343,370 657,000 328,500 Issue of shares - conversion of ICULS 29,762 14,881 23,792 11,896 - bonus shares arising from conversion of ICULS 7,440 3,720 5,947 2,974 At 31 December 723,941 361,971 686,739 343,370

The holders of ordinary shares (except treasury shares) are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share and rank equally with regard to the Company’s residual assets.

24 SHARE PREMIUM Group and Company 2010 2009 RM’000 RM’000 At 1 January 169,068 172,042 Arising from shares issued upon conversion of ICULS (3,720) (2,974) At 31 December 165,348 169,068

25 TREASURY SHARES Group and Company 2010 2009 Number Number of shares Amount of shares Amount RM RM At 1 January 5,508,000 11,623,614 4,793,900 10,138,087 Shares buy back 415,000 976,999 714,100 1,485,527 Less: Share dividends distributed (5,857,451) (12,463,038) - - At 31 December 65,549 137,575 5,508,000 11,623,614

The shareholders of the Company had approved an ordinary resolution at the Tenth Annual General Meeting held on 11 June 2010 for the Company to purchase its own shares up to a maximum of 10% of the issued and paid-up capital of the Company. The Directors of the Company are committed to enhancing the value of the Company and believe that the purchase plan is being implemented in the best interest of the Company and its shareholders.

142 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

25 TREASURY SHARES (CONTINUED) During the financial year, the Company purchased 415,000 (2009: 714,100) of its issued share capital from the open market on Bursa Malaysia for RM976,999 (2009: RM1,485,527). The prices paid for the shares purchased ranged from RM2.02 to RM2.39 (2009: RM0.995 to RM2.42) per share. The purchase transactions were financed by internally generated funds. Pursuant to the provisions of Section 67A of the Companies Act, 1965 (the “Act”), the Company may either retain the purchased shares as treasury shares or cancel the purchased shares or a combination of both. The purchased shares held as treasury shares may either be distributed as share dividends, resold on Bursa Malaysia in accordance with the relevant rules of Bursa Malaysia, subsequently cancelled or any combination of the three.

As treasury shares, the rights attached as to voting, dividends and participation in other distribution and otherwise are suspended and the treasury shares shall not be taken into account in calculating the number or percentage of shares or of a class of shares for any purposes including substantial shareholdings, takeovers, notices, the requisitioning of meetings, the quorum for a meeting and the result of a vote on a resolution at a meeting.

On 13 April 2010, a total of 5,857,451 treasury shares were distributed to the shareholders on the basis of one (1) treasury share for every one hundred and twenty (120) existing Wah Seong Corporation Berhad ordinary shares of RM0.50 each held at the entitlement date of 25 March 2010 as special tax exempt share dividend.

26 OTHER RESERVES Exchange Available- Capital translation Hedging for-sale reserve reserve reserve reserve RM’000 RM’000 RM’000 RM’000 Group 2010 At 1 January - as previously reported 85 (4,340) - - - effect of adopting FRS 139 - - (1,387) 62 - as restated 85 (4,340) (1,387) 62

Fair value gains/(losses) - - 1,172 (21) Tax charge on fair value gains - - (199) - Reclassification to profit or loss (within finance costs) - - (25) - Exchange translation differences for foreign operations - (5,590) - - At 31 December 85 (9,930) (439) 41

2009 At 1 January 85 (1,710) - - Exchange translation differences for foreign operations - (2,630) - - At 31 December 85 (4,340) - -

The hedging reserve comprise the effective portion of the cumulative fair value changes, net of tax, of cash flow hedging instruments related to hedged transactions that have yet to occur.

Available-for-sale reserve represents the cumulative fair value changes, net of tax, of available-for-sale financial assets until they are disposed or impaired.

WAH SEONG CORPORATION BERHAD 143 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

27 IRREDEEMABLE CONVERTIBLE UNSECURED LOAN STOCKS (“ICULS”) Group and Company 2010 2009 Equity Liability Liability RM’000 RM’000 RM’000 At 1 January - as previously reported - 35,259 47,155 - effect of adopting Amendments to FRS 132 20,245 (20,245) - - as restated 20,245 15,014 47,155

Converted during the financial year (8,544) (6,336) (11,896) At 31 December 11,701 8,678 35,259

The ICULS represent the unconverted portion of the original RM89,499,999 nominal value of ICULS issued and allotted in 2002 at 100% of the nominal value.

The ICULS are in registered form and constituted by a Trust Deed dated 9 January 2001 and a Supplementary Deed dated 16 May 2002, collectively referred to as “the Trust Deeds”. The ICULS have a tenure of ten years from the date of issue and will not be redeemable in cash. Unless previously converted, all outstanding ICULS will be mandatorily converted by the Company into new ordinary shares at the conversion price applicable on the maturity date. The ICULS are convertible into fully paid ordinary shares of RM0.50 each at any time during the tenure of the ICULS from 21 May 2002 to the maturity date on 20 May 2012, at the rate of RM1.00 nominal amount of ICULS for two fully paid ordinary shares of RM0.50 each in the Company in accordance to the Trust Deeds.

Pursuant to the increase in the share capital in the rights issue together with the free detachable warrants (Note 28), the exercise entails an ICULS adjustment whereby the issuance of new WSC shares is revised upon full conversion of the outstanding ICULS into WSC shares at the rate of RM1.00 nominal amount of ICULS for two and a half fully paid ordinary share of RM0.50 each in the Company.

Upon conversion of the ICULS into new ordinary shares, such shares would rank pari passu in all material respects with the existing ordinary shares of the Company in issue at the date of allotment of the new ordinary shares except that the newly converted ordinary shares shall not be entitled to any rights, allotments of dividends, and/or other distribution if the dividend entitlement date is on or before the relevant conversion date.

The interest on the ICULS at the rate of 3% per annum on the nominal value of the ICULS is payable semi-annually in arrears on 30 June and 31 December in each year commencing 21 May 2002.

The ICULS contain a covenant that the group borrowing should not exceed ten times the shareholders’ fund as disclosed in the latest consolidated statement of financial position.

In prior years, the Company had availed itself the transitional provision provided under the previous FRS 1322004 Financial Instruments: Disclosure and Presentation. By virtue of that transitional provision, the ICULS issued by the Company before 1 January 2003 were not reclassified into their liability and equity components.

144 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

27 IRREDEEMABLE CONVERTIBLE UNSECURED LOAN STOCKS (“ICULS”) (CONTINUED) The Amendment to FRS 132 has removed this transitional provision. As at 1 January 2010, the Group and the Company has reclassified the ICULS into its liability and equity components. The liability component is remeasured at its amortised cost. The equity component of ICULS represents the residual amount of ICULS after deducting the fair value of the liability component and is reclassified as an adjustment to opening balances as at 1 January 2010. The effect on opening retained earnings is not material.

28 WARRANTS RESERVE Group and Company 2010 2009 RM’000 RM’000 At beginning/end of financial year 25,786 25,786

The Warrants 2008/2013 are constituted by a Deed Poll dated 18 February 2008.

On 26 March 2008, the Company allotted the rights issue of 90,641,547 new ordinary shares at an issue price of RM2.23 per share (“Rights Shares”), together with 135,962,320 warrants to the holders of the ordinary shares and ICULS on the basis of:

a) two Rights Shares and three free detachable warrants for every twelve existing ordinary shares held; and

b) two Rights Shares and three free detachable warrants for every six existing ICULS held.

Each warrant entitles the registered holder to subscribe for one new ordinary share in the Company at any time on or after 28 March 2008 up to the date of expiry on 25 March 2013, at an exercise price of RM3.17 per share or such adjusted price in accordance with the provisions in the Deed Poll. The Warrants 2008/2013, is listed on the Main Market of Bursa Malaysia Securities Berhad with effect from 28 March 2008.

No warrant was exercised during the financial year ended 31 December 2010.

As at the balance sheet date, 135,962,320 (2009: 135,962,320) Warrants 2008/2013 remain unexercised.

29 RETAINED PROFITS Prior to year of assessment 2008, Malaysian companies adopted the full imputation system. In accordance with the Finance Act 2007 which was gazetted on 28 December 2007, companies shall not be entitled to deduct tax on dividends paid, credited or distributed to its shareholders, and each dividend will be exempted from tax in the hands of the shareholders (“single tier system”). However, there is a transitional period of six years, expiring on 31 December 2013, to allow companies to pay franked dividends to their shareholders under limited circumstances. Companies also have an irrevocable option to disregard the Section 108 balance and opt to pay dividends under the single tier system. The change in the tax legislation also provides for the Section 108 balance to be locked-in as at 31 December 2007 in accordance with Section 39 of the Finance Act 2007.

The Company has sufficient tax credits under Section 108 of the Income Tax Act, 1967 and tax exempt income to frank the payment of net dividends up to approximately RM72,663,000 (2009: RM76,668,000).

WAH SEONG CORPORATION BERHAD 145 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

30 TERM LOANS Group 2010 2009 RM’000 RM’000 Current: Secured - 102,237 Unsecured 75,635 84,966 75,635 187,203 Non-current: Secured 2,932 2,723 Unsecured 425,433 433,150 428,365 435,873 504,000 623,076

The remaining maturities of the term loans as at 31 December 2010 are as follows: Group 2010 2009 RM’000 RM’000 Within 1 year 75,635 187,203 More than 1 year and less than 2 years 54,550 82,565 More than 2 years and less than 5 years 373,815 353,308 504,000 623,076

Group 2010 2009 RM’000 RM’000

The currency exposure profile of term loans is as follows:

Ringgit Malaysia 33,191 147,811 US Dollar 470,809 475,265 504,000 623,076

The secured loans above are secured over certain property, plant and equipment and prepaid lease payments of the Group as indicated in Note 4 and Note 5 to this financial statements.

146 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

30 TERM LOANS (CONTINUED) The net exposure of term loans to interest rate cash flow risk and the periods in which they mature or reprice (whichever is earlier) are as follows: Effective Floating interest Total interest rate as at carrying Fixed interest rate rate Currency 31.12.2010 amount <1 year 1-2 years 2-3 years 3-4 years <1 year % p.a. RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group At 31 December 2010

Secured USD 6.50-6.75 2,932 - 552 307 2,073 -

Unsecured RM 3.99-4.20 33,191 - - - - 33,191 USD 2.69-6.30 467,877 13,637 14,438 7,195 - 432,607 504,000 13,637 14,990 7,502 2,073 465,798

Effective Floating interest Total interest rate as at carrying Fixed interest rate rate Currency 31.12.2009 amount <1 year 1-2 years 2-3 years 3-4 years 4-5 years <1 year % p.a. RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group At 31 December 2009

Secured RM 3.85 102,237 - - - - - 102,237 USD 7.28 2,723 - 122 130 140 2,331 -

Unsecured RM 3.80-4.11 45,574 - - - - - 45,574 USD 2.80-6.30 472,542 14,265 15,157 16,049 8,023 - 419,048 623,076 14,265 15,279 16,179 8,163 2,331 566,859

WAH SEONG CORPORATION BERHAD 147 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

31 HIRE PURCHASE LIABILITIES Group 2010 2009 RM’000 RM’000 Future minimum hire purchase payments: - Payable within 1 year 29 68 - More than 1 year and less than 5 years 32 60 61 128 Less: Future finance charges (6) (19) Present value of hire purchase liabilities 55 109

Analysis of present value of hire purchase liabilities: - Payable within 1 year 24 56 - More than 1 year and less than 5 years 31 53 55 109

The currency exposure profile of hire purchase liabilities is as follows:

Ringgit Malaysia 40 50 Indonesian Rupiah 15 59 55 109

At 31 December 2010, the effective interest rates of the hire purchase liabilities are between 5.39% to 13.6% (2009: 4.99% and 13.62%) per annum.

32 TRADE AND OTHER PAYABLES Group Company 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000

Current - Trade payables 98,643 114,972 - - - Other payables and accruals 147,595 195,809 5,613 5,163 246,238 310,781 5,613 5,163

Trade payables Credit terms of trade payables range from 30 to 90 days (2009: 30 to 90 days).

Other payables Credit terms of other payables range from 30 to 90 days (2009: 30 to 90 days).

148 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

32 TRADE AND OTHER PAYABLES (CONTINUED) Currency exposure profile of trade payables The currency exposure profile of trade payables is as follows: Group Company 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 Trade payables - Ringgit Malaysia 58,843 67,537 - - - US Dollar 25,283 20,167 - - - Singapore Dollar 7,179 13,936 - - - China Renminbi 1,746 1,119 - - - Euro Dollar 355 1,422 - - - United Arab Emirates Dirham 1,435 3,151 - - - Indian Rupee - 2,922 - - - Japanese Yen 1,921 1,755 - - - British Pound 395 1,457 - - - Australian Dollar 554 1,101 - - - Indonesian Rupiah 856 327 - - - Nigerian Naira 31 37 - - - Omani Rials 30 32 - - - Syrian Pound 15 9 - - 98,643 114,972 - -

Currency profile of other payables and accruals The currency profile of other payables and accruals is as follows: Group Company 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 Other payables and accruals - Ringgit Malaysia 58,445 64,618 5,613 5,150 - US Dollar 61,111 67,709 - - - Singapore Dollar 4,655 4,566 - - - China Renminbi 5,197 3,868 - - - Euro Dollar 761 22,987 - - - Japanese Yen 12,846 11,981 - - - Australian Dollar 2,763 8,365 - 13 - Indian Rupee - 6,700 - - - Nigerian Naira 3 2,377 - - - Hong Kong Dollar 591 1,181 - - - Indonesian Rupiah 957 921 - - - United Arab Emirates Dirham - 471 - - - British Pound 266 - - - - Taiwan Dollar - 15 - - - Syrian Pound - 26 - - - Omani Rials - 24 - - 147,595 195,809 5,613 5,163

WAH SEONG CORPORATION BERHAD 149 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

33 PROVISION FOR WARRANTIES Group 2010 2009 RM’000 RM’000 At 1 January 22,585 23,470 Additions 6,099 7,502 Utilisation (5,818) (766) Unused provision reversed during the financial year (2,714) (7,264) Effect of exchange rate changes (1,548) (357) At 31 December 18,604 22,585 Included under current liabilities 18,604 22,585

The Group recognises the estimated liability to repair or replace products when the underlying products or services are sold. It is expected that most of these costs will be incurred over the warranty period which extends up to 4 years. Provision for warranties is calculated based on historical warranty data and specific circumstances related to products or services sold, after considering the various possible outcomes against their associated probabilities.

34 OTHER BANK BORROWINGS Group 2010 2009 RM’000 RM’000 Secured: Revolving credits 7,431 579

Unsecured: Revolving credits 53,204 - Bankers’ acceptances 55,407 92,418 116,042 92,997

The currency exposure profile of other bank borrowings is as follows: Group 2010 2009 RM’000 RM’000 Ringgit Malaysia 60,258 92,418 US Dollar 47,607 579 Euro Dollar 8,177 - 116,042 92,997

The effective interest rates of other bank borrowings of the Group as at 31 December 2010 are as follows: Group 2010 2009 % % Revolving credits 1.28 - 4.86 4.75 Bankers’ acceptances 1.20 - 3.71 2.49 - 4.50

The revolving credits of a subsidiary are secured by property, plant and equipment and prepaid lease payment as disclosed in Note 4 and Note 5.

150 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

35 DISPOSAL GROUPS HELD FOR SALE a) Proposed disposal of the shares and assets held in a joint venture company, Arabian-Yadong Coating Co. Ltd (“AYC”) On 26 January 2011 and 31 January 2011, the Company announced the proposed disposal by its wholly-owned indirect subsidiary, namely Yadong-Anti Corrosion (Int) Co. Ltd. (“YAC”) of the shares and assets held in a joint venture company, AYC pursuant to two (2) separate Sale and Purchase Agreements dated 26 January 2011:

(a) to dispose YAC’s 60,000 shares (50% equity interest) in AYC to Arabian Pipes Co., (“APC”), for a total consideration of USD2,552,000 (equivalent to RM7,788,704 based on the exchange rate of USD1.000 to RM3.052); and

(b) to dispose the machinery and equipment for the external coating of steel pipes, including auxiliary equipment, industrial utilities, attachments, tooling, spare parts and, as available, all designs and drawings, plans, manufacturing data, technical publications and other documents related thereto to APC, for a total consideration of USD900,000 (equivalent to RM2,746,800 based on the exchange rate of USD1.000 to RM3.052).

The aforementioned disposals of shares and assets are expected to be completed simultaneously, subject to the satisfaction of the conditions precedent, in any event not later than three (3) months from the date of the Sale and Purchase Agreements. Upon completion, AYC will cease to be the Company’s indirect jointly control entity.

b) Disposals of shares by the wholly owned direct and indirect subsidiaries of the Company in Drilbits International Private Limited (“Drilbits”) and Driltools International FZCO (“Driltools”) respectively On 28 December 2010, the Company announced the proposed disposals of shares by the following subsidiaries of the Company pursuant to two (2) separate Sale and Purchase Agreements dated 27 December 2010 :-

(a) Wah Seong International Pte Limited (“WSIPL”), the Company’s wholly-owned direct subsidiary, to dispose WSIPL’s 2,182,800 shares (60% equity interest) in Drilbits to Omni Oil Technology Holdings Limited (a Jebel Ali Offshore Free Zone Company), for a total consideration of USD2,700,000 (equivalent to RM8,356,500 based on the exchange rate of USD1.000 to RM3.095); and

(b) Wasco E&P Services Limited (“Wasco E&P Services”), the Company’s wholly-owned indirect subsidiary, to dispose Wasco E&P Services’ 24 shares (60% equity interest) in Driltools to Omni Oil Technology Holdings Ltd. (a company incorporated in British Virgin Islands), for a total consideration of USD4,800,000 (equivalent to RM14,856,000 based on the exchange rate of USD1.000 to RM3.095).

The aforementioned disposals of shares are expected to be completed simultaneously in the first half of 2011, subject to the satisfaction of the conditions precedent. Upon completion, Drilbits and Driltools will cease to be the Company’s indirect subsidiaries.

WAH SEONG CORPORATION BERHAD 151 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

35 DISPOSAL GROUPS HELD FOR SALE (CONTINUED) c) The major classes of assets and liabilities classified as held for sale as at 31 December 2010 in relation to the above-mentioned proposed disposals are summarised below: Group RM’000

Assets: Property, plant and equipment 9,274 Goodwill 6,629 Intangible assets-Technical know-how 1,559 Investment in a jointly controlled entity 7,876 Inventories 9,621 Trade and other receivables 15,568 Time deposits 1,057 Cash and bank balances 3,169 Assets of disposal groups held for sale 54,753

Liabilities: Trade and other payables 8,014 Current tax liabilities 1,464 Deferred tax liabilities 565 Other liabilities 288 Liabilities of disposal groups held for sale 10,331

36 GROSS REVENUE Group Company 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 Contract revenue 261,425 618,374 - - Sales of goods and services 1,185,230 1,251,246 - - Engineering services 6,338 10,270 - - Rental income 68,440 67,267 - - Dividend income - - 95,169 68,658 Commission income 1,923 3,151 - - Interest income - - 5,945 4,884 Management fees - - 1,506 1,506 1,523,356 1,950,308 102,620 75,048

152 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

37 COST OF SALES Group 2010 2009 RM’000 RM’000 Contract costs 234,196 355,822 Cost of goods sold and services 955,949 1,090,168 Cost of engineering services 5,613 9,392 Direct operating costs relating to rental income 51,167 42,809 1,246,925 1,498,191

38 OTHER GAINS/(LOSSES) - NET 2010 Group Company RM’000 RM’000 Fair value gains/(losses) - Financial assets at fair value through profit or loss - Forward currency contracts 2,507 1,205 - Interest rate cap (343) - 2,164 1,205

39 PROFIT FROM OPERATIONS Group Company 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 Profit from operations is stated after charging:

Impairment loss on financial assets - trade receivables 7,581 32,691 - - - other receivables - 826 - 249 Provision for obsolete inventories 2,559 516 - - Staff costs (Note 47) 177,659 161,627 7,427 5,965 Directors’ fees 315 315 315 315 Amortisation of other intangible assets 972 957 - - Amortisation of prepaid lease payments 1,128 1,146 - - Auditors’ remuneration - statutory audit - current year 2,235 2,560 100 100 - under provision in prior year 178 143 - - - fees for non-audit services* 800 915 92 17 Bad debts written off 391 480 - - Depreciation of property, plant and equipment 55,366 57,031 86 131 Depreciation of investment properties 166 170 - - Impairment of other intangible assets 873 - - -

WAH SEONG CORPORATION BERHAD 153 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

39 PROFIT FROM OPERATIONS (CONTINUED) Group Company 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 Profit from operations is stated after charging (continued):

Impairment of property, plant and equipment 3,537 2,761 - - Impairment loss on investment in a subsidiary - - 37,000 9,804 Inventories written off 854 1,817 - - Loss on disposal of property, plant and equipment - 232 - - Loss on foreign exchange: - realised 7,688 19,888 6,137 4,401 - unrealised 6,118 2,972 1,043 - Operating lease rental 17,869 16,113 - - Property, plant and equipment written off 485 752 - 4 Provision for warranties 6,099 7,502 - - Rental of equipment 11,721 7,798 - - Rental of premises 8,828 9,598 - 183 Impairment of investment in: - a jointly-controlled entity - 3,392 - - - an associate 1,499 964 - -

and crediting:

Negative goodwill on acquisition of additional interest in existing subsidiaries 22,526 13,334 - - Reversal of allowance for impairment of trade and other receivables 8,258 4,589 - - Reversal of allowance for impairment of amount owing from jointly controlled entity 1,433 - - - Reversal of impairment of investment in a jointly controlled entity 2,495 - - - Bad debts recovered - 2,522 - - Write back of provision for inventories - 169 - - Gain on disposal of property, plant and equipment 435 2,925 - 2 Gross dividend income from available-for-sale financial assets - equity instruments quoted in Malaysia - 6 - - Gross dividend income from subsidiaries - - 95,169 68,658 Gain on foreign exchange - realised 5,074 11,519 605 - - unrealised 5,062 12,929 128 1,851 Interest income from: - loans and receivables 6,236 5,040 5,945 4,884 Provision for warranties written back 2,714 7,264 - -

154 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

39 PROFIT FROM OPERATIONS (CONTINUED) Group Company 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 and crediting (continued):

Rental income 1,967 2,011 - - Gain on disposal of subsidiary (Note 44) - 604 - - Gain on dilution of interest in a subsidiary (Note 45(vi)) - 17 - - Gain on disposal of other investments - 14,456 - - Gain on disposal of investment properties - 14 - - Insurance claim - 3 - - Waiver of amount owing to a subsidiary - - 7,560 -

* Included in fees for non-audit services is fees payable to PricewaterhouseCoopers Malaysia and its local affiliates for the Group and Company of RM396,000 (2009: RM385,000) and RM91,500 (2009: RM16,600) respectively.

40 FINANCE COSTS Group Company 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 Interest expense on: - ICULS 699 1,123 699 1,123 - Islamic notes - 7,622 - 7,622 - bank borrowings and term loan 22,693 26,762 71 261 - hire purchase liabilities 7 4 - - - others 692 1,094 23 415 24,091 36,605 793 9,421

41 TAX EXPENSE Group Company 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 Current tax: - Malaysian income tax 30,589 22,183 7,430 1,721 - Foreign tax (928) 9,472 - - 29,661 31,655 7,430 1,721

Deferred taxation (Note 14) (8,457) 7,888 - - 21,204 39,543 7,430 1,721

WAH SEONG CORPORATION BERHAD 155 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

41 TAX EXPENSE (CONTINUED) Group Company 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 Statement of comprehensive income: Current tax: - Current year 33,376 40,735 7,563 1,721 - Benefits from previously unrecognised temporary - - differences (84) (8,570) - - Over accrual in prior years (3,631) (510) (133) - 29,661 31,655 7,430 1,721

Deferred taxation (Note 14) - Origination and reversal of temporary differences (8,149) 8,352 - - - Change in tax rate - (464) - - - Benefits from previously unrecognised temporary differences (308) - - - Tax expense recognised in profit or loss 21,204 39,543 7,430 1,721

Deferred taxation (Note 14) - Origination and reversal of temporary differences 199 - - - Total expense recognised in other comprehensive income 199 - - -

The numerical reconciliation between the tax expense and the product of accounting profit multiplied by the statutory tax rate is as follows: Group Company 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 Profit before tax 86,156 245,782 56,911 44,469

Calculated at the Malaysian tax rate of 25% (2009: 25%) 21,539 61,446 14,228 11,117 Expenses not deductible for tax purposes 21,472 22,463 11,004 4,093 Income not subject to tax (19,345) (20,513) (15,672) (11,446) Utilisation of previously unrecognised tax losses and unabsorbed capital allowances (392) (4,307) - - Current year deferred tax assets not recognised 2,033 - - - Reversal of previously recognised deferred tax assets 3,704 - - - Utilisation of tax incentives (5,593) (21,814) (1,997) (2,043) Effect of different tax rates in other countries 79 3,823 - - Over provision in prior years (3,631) (510) (133) - Share of associates and jointly controlled entities tax 783 (136) - - Others 555 (909) - - Tax expense recognised in profit or loss 21,204 39,543 7,430 1,721

156 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

42 EARNINGS PER SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY (a) Basic The basic earnings per share for the financial year has been calculated by dividing the Group’s profit attributable to owners of the Company for the financial year of RM55,981,000 (2009: RM121,322,000) by the weighted average number of ordinary shares in issue, after adjusting for movements in treasury shares during the financial year, and the potential ordinary shares that would be issued upon conversion of all outstanding Irredeemable Convertible Unsecured Loan Stocks (“ICULS”) during the financial year.

Weighted average number of shares Group 2010 2009 ‘000 ‘000 Issued ordinary shares at 1 January 686,739 657,000 Effect of shares issued from conversion of ICULS 24,063 19,027 Effect of shares buy back and share dividend (41) (4,972) Adjustment for number of shares assuming conversion of remaining ICULS 50,946 88,148 Weighted average number of ordinary shares in issue 761,707 759,203

Basic earnings per ordinary share (sen) 7.35 15.98

(b) Fully diluted The warrants are anti-dilutive and hence the calculation of diluted earnings per share for the financial year ended 31 December 2010 and 31 December 2009 does not assume the exercise of Warrants.

43 DIVIDENDS Group and Company 2010 2009 RM’000 RM’000 In respect of the financial year ended 31 December 2010: 1st interim tax exempt cash dividend of 2.0 sen per share paid on 1 October 2010 14,478 -

In respect of the financial year ended 31 December 2009: 1st interim tax exempt dividend of 2.5 sen per share paid on 15 October 2009 - 17,044

2nd interim dividend paid/credited into the entitled shareholders securities accounts on 13 April 2010 comprising: (i) tax exempt cash dividend of 3.0 sen per share; and 21,100 - (ii) special tax exempt share dividend on the basis of one treasury share per every one hundred and twenty WSC ordinary share held at the entitlement date on 25 March 2010 12,463 -

WAH SEONG CORPORATION BERHAD 157 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

43 DIVIDENDS (CONTINUED) Group and Company 2010 2009 RM’000 RM’000 In respect of the financial year ended 31 December 2008:

2nd interim dividend of 3.0 sen per share comprising: (i) gross dividend of 1.5 sen per share less 25% income tax paid on 28 April 2009 ; and - 7,546 (ii) tax exempt dividend of 1.5 sen per share paid on 28 April 2009 - 10,062 48,041 34,652

On 17 February 2011, the Directors declared a second interim tax exempt cash dividend of 2.5 sen per share amounting to RM18,421,927 in respect of the financial year ended 31 December 2010.The amount was paid on 1 April 2011.

44 SIGNIFICANT ACQUISITIONS (a) Acquisition of additional interest in subsidiaries during the financial year (i) On 6 August 2010, Asiana Emas Sdn. Bhd. (“AE”), an indirect wholly owned subsidiary of the Company, entered into a Share Sale Agreement (“SSA”) with Detik Gaya Sdn. Bhd. (“DG”), a non-controlling interest, to acquire from DG, 6,000,000 ordinary shares of RM1.00 each in the issued and paid-up share capital of Petro- Pipe (Sabah) Sdn. Bhd. (“PPS”), representing 20% of the total issued and paid-up share capital of PPS for a total cash consideration of RM10.5 million.

prior to the share acquisitions, PPS was already an indirect subsidiary of the Company by virtue of AE having Board and management control over PPS. As a result of this acquisition, AE’s shareholdings in PPS increased from 40% to 60%. On the date of acquisition, the carrying value of the additional interest acquired was RM15,865,867. The difference between the consideration and the carrying value of the interest acquired of RM5,365,867 is reflected in the profit or loss as negative goodwill on acquisition of additional interest in existing subsidiaries.

(ii) on 23 December 2010, Wasco Coatings HK Limited (“WCHK”) (formerly known as PPSC (HK) Limited), an indirect wholly-owned subsidiary of the Company, has transferred the remaining 525,546 shares not held by WCHK, which is equivalent to 18.75% equity interest in Kanssen (Yadong) Pipe Coating Services Limited (“Kanssen”) from Good & Good Limited (In Liquidation) (“G&G”), in lieu of G&G’s payment of the sum of USD5.8 million (equivalent to RM17,893,600 based on the exchange rate of USD1.0000 to RM3.0851) under a court order judgement awarded by the High Court of Justice, British Virgin Islands pursuant to the Sale and Purchase Agreement dated 12 April 2005 entered into between amongst others, WCHK and G&G. The non-controlling interest’s share of net assets amounting to RM16,754,690 is reflected in the profit or loss as negative goodwill on acquisition of additional interest in existing subsidiaries.

With the completion of the aforesaid transfer of shares, Kanssen became a wholly-owned subsidiary of WCHK and hence, an indirectly wholly-owned subsidiary of the Company.

158 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

44 SIGNIFICANT ACQUISITIONS (CONTINUED) (b) Acquisition of subsidiaries in the preceding financial year (i) On 20 April 2009, Wasco Technologies Pte Ltd, a subsidiary of the Company had completed the acquisition of 95% equity stake in PT. Megaron Semesta subsequent to approval being obtained from the Badan Koordinasi Penanaman Modal of Indonesia.

Details of the net assets acquired are as follows: Fair value RM’000 Property, plant and equipment 3,164 Other intangible assets 380 Amounts due from customers on contracts 1,070 Trade and other receivables 6,513 Cash and bank balances 27 Trade and other payables (13,144) Amounts due to customers on contracts (4,555) Net liabilities (6,545) Less: Fair value of total net assets held by non-controlling interests - Identifiable net liabilities acquired (6,545) Goodwill on acquisition 9,461 Purchase consideration 2,916

The carrying value of the assets and liabilities acquired approximated their fair value.

Goodwill on acquisition was attributed to the acquired customer base and presence which cannot be separately recognised as an intangible asset.

The acquisition had no significant effect on revenue and financial results of the Group in the preceding financial year.

Details of the cashflow arising from the acquisition were as follows: At the date of acquisition RM’000 Total purchase consideration 2,916 Less: Cash and cash equivalents of subsidiary acquired (27) Net cash outflow to the Group on acquisition 2,889

(ii) On 19 March 2009, Wasco E&P Services Limited, a subsidiary of the Company had subscribed for 80 ordinary shares of USD1.00 each representing a 80% equity stake in Wasco China International Limited (“WCIL”), a company incorporated in British Virgin Islands, for a total cash consideration of USD80.00 (equivalent to RM292.20 based on the exchange rate of USD1.00 to RM3.6525) only.

WAH SEONG CORPORATION BERHAD 159 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

44 SIGNIFICANT ACQUISITIONS (CONTINUED) (b) Acquisition of subsidiaries in the preceding financial year (Continued) (iii) On 20 August 2009, Wasco Engineering Group Limited, a subsidiary of the Company had subscribed for 70,000 ordinary shares of RM1.00 each representing a 70% equity stake in Gas Services International (M) Sdn. Bhd. (“GSIM”), for a total cash consideration of RM70,000 only. GSIM was incorporated as Miza Engineering Sdn. Bhd. on 16 June 2006 as a private company limited by shares in Malaysia and assumed its present name on 29 January 2007. At the date of acquisition, the authorised share capital of GSIM was RM100,000 comprising 100,000 ordinary shares of RM1.00 each with an issued and paid-up capital of RM100,000.

(iv) On 28 October 2009, Wasco Coatings Limited, a subsidiary of the Company had completed the acquisition of 12,291,142 ordinary shares of RM1.00 each representing 32.52% equity interest in the issued and paid- up share capital of PPSC Industrial Holdings Sdn. Bhd. (“PPSCIH”) from Socotherm S.p.A. for a total purchase consideration of Euro Fifteen Million and Five Hundred Thousand only (€15,500,000) (equivalent to RM81,358,595 based on the exchange rate of €1.00 to RM5.2489). Purchase consideration consisted of: RM’000 - Cash paid (€11,000,000 million) 57,739 - Deferred settlement (€4,500,000 million) 23,620 - Cost directly attributable to acquisition paid 437 Total purchase consideration 81,796

As a result of the additional acquisition, PPSCIH became a wholly owned indirect subsidiary of the Company. The acquisition had been accounted for as transaction with non-controlling interests. The difference between the consideration paid and the relevant share of the carrying value of net assets of PPSCIH amounting to RM13,334,000 was credited to profit or loss.

(v) On 17 November 2009, the Company had incorporated Wasco Capital Pte. Limited as a wholly owned subsidiary in Singapore with an initial issued and paid-up capital of USD1.00 comprising one (1) ordinary share of USD1.00 (equivalent to RM3.3660 based on the exchange rate of USD1.00 to RM3.3660) only.

(vi) On 20 November 2009, Wasco Engineering & Technology Inc (“WETI”), a subsidiary of the Company had incorporated a new joint venture company, Wasco Engineering & Technology (Nantong) Co., Ltd. in the People’s Republic of China (“PRC”) with a partner, Nan Tong United Technology Co. Ltd (“NTUT”) with a shareholding structure of 55% WETI and 45% NTUT.

The above acquisitions or newly incorporated companies had no significant effect on the financial results of the Group in the preceding financial year and the financial position of the Group as at 31 December 2009.

160 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

45 DISPOSAL OF SUBSIDIARIES There was no disposal of subsidiaries during the financial year ended 31 December 2010 other than the proposed disposals as disclosed in Note 35.

The following are disposals/striking off of subsidiaries effected in the preceding financial year:

(i) On 3 March 2009, the members’ voluntary liquidation of Thistle Welding Services Pty Ltd was completed. The members’ voluntary liquidation had no significant impact on the results and financial position of the Group in the preceding financial year.

(ii) On 28 July 2009, the striking off of Camark International Limited, China Mine Investments Limited, Equity Empire Investments Limited, Good Glory Investments Limited, Silver Fortune Investments Ltd. and Wise Forward Investments Limited was completed. The striking off of these subsidiaries had no significant impact on the results and financial position of the Group in the preceding financial year.

(iii) On 28 September 2009, the striking off of Sichuan Kanssen (Yadong) Coating Services Co. Ltd was completed. The striking off of this subsidiary had no significant impact on the results and financial position of the Group in the preceding financial year.

(iv) On 9 November 2009, the striking off of Ao Jie International Ltd, Asian Dragon Services Limited, Blue Water Overseas Corporation Inc., Good Advance International Limited and Kanswin Limited were completed. The striking off of these subsidiaries had no significant impact on the results and financial position of the Group in the preceding financial year.

(v) On 2 December 2009, Wasco Coatings Singapore Pte Ltd (“WASCOS”), a subsidiary of the Company completed the disposal of 4,041 ordinary shares of Euro1.00 each representing 11% of the issued and paid-up capital of Turn Key Pipeline Services B.V. (“TKPS”) to WKB Holding Goor B.V. (“WKB”) for a total consideration of Euro4,041.00 (equivalent to RM20,469.69 based on the exchange rate of Euro1.00 to RM5.0655).

As a result, TKPS ceased to be a 51% indirect subsidiary of the Company and became a 40% indirect associated company of the Company.

The effect of the disposal of TKPS up to the date of disposal on the results of the Group is shown below: RM’000 Revenue 28,946 Loss after taxation 1,172

WAH SEONG CORPORATION BERHAD 161 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

45 DISPOSAL OF SUBSIDIARIES (CONTINUED) Disposal of subsidiaries in the preceding financial year Details of the disposal and the net cash flow on disposal are as follows: At the date of disposal RM’000 Property, plant and equipment 1,608 Inventories 13,914 Trade and other receivables 7,336 Tax recoverable 21 Cash and bank balances 761 Amounts due to customers on contracts (10,228) Trade and other payables (16,690) Identifiable net liabilities disposed (3,278) Goodwill 6,413 Less: Non-controlling interests - Less: Reclassification of the subsidiary company as an associated company (3,719) Total net liabilities disposed (584) Gain on disposal 604 Net disposal proceeds 20 Less: Cash and bank balances of the subsidiary company disposed (761) Net cash outflow on disposal (741)

(vi) On 11 December 2009, Wasco Engineering & Technology Inc (“WETI”), a subsidiary of the Company had increased its issued and paid-up capital from USD200,000.00 to USD300,000.00 via the issuance and allotment of 100,000 ordinary shares of USD1.00 each to the following parties for a total consideration of USD100,000.00 (“the Issuance”):

- Key Orient Holdings Limited – 12,500 ordinary shares - Wasco Engineering Group Limited (“WEGL”) – 35,000 ordinary shares - Ang Ban Teck – 52,500 ordinary shares

With the issuance, WEGL’s equity stake in WETI was effectively diluted from 80% to 65%. The dilution of equity interest in WETI resulted in a net gain of RM17,000 to the Group for the preceding financial year.

46 SIGNIFICANT RELATED PARTY DISCLOSURES For the purposes of these financial statements, parties are considered to be related to the Group if the Group or the Company has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group or the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities.

Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group either directly or indirectly.

162 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

46 SIGNIFICANT RELATED PARTY DISCLOSURES (CONTINUED) In addition to related party disclosures mentioned elsewhere in the financial statements, set out below are other significant related party transactions. The transactions described below were carried out on agreed terms. Group 2010 2009 RM’000 RM’000 Significant transactions with companies in which a Director of the Company, Robert Tan Chung Meng, has interest

Rental of premises paid/payable 500 39

Company 2010 2009 RM’000 RM’000 Significant transactions with subsidiaries Dividend income: - Wah Seong Industrial Holdings Sdn. Bhd. 29,673 16,732 - Wasco Energy Ltd 33,720 43,924 - Jutasama Sdn. Bhd. 10,200 4,000 - Petro-Pipe Industrial Corporation Sdn. Bhd. 21,574 4,001

Interest income: - Total Oil Technologies Sdn. Bhd. 469 524 - PPI Industries Sdn. Bhd. 524 593 - Asiana Emas Sdn. Bhd. 2,523 2,282

Management fees: - Wasco Management Services Sdn. Bhd. 978 978

Finance cost: - Jutasama Sdn. Bhd. - 524

Net advances to / (repayment from) subsidiaries: - Asiana Emas Sdn. Bhd. 59,060 (13,050) - Jutasama International Limited - (29,235) - Petro-Pipe Industrial Corporation Sdn. Bhd. - (10,000) - Petro-Pipe Industries (M) Sdn. Bhd. - (9,550) - PPI Industries Sdn. Bhd. 3,418 (19,948) - Wasco Coatings Malaysia Sdn. Bhd. (formerly known as PPSC Industries Sdn. Bhd.) - (26,127) - Syn Tai Hung Trading Sdn. Bhd. 8,000 (1,000) - Total Oil Technologies Sdn. Bhd. - (3,850) - Wasco Energy Ltd (26,107) (129,198) - WSN Investments Limited (10,642) - - Wasco Management Services Sdn. Bhd. 2,508 78

Net (advances from) / repayment to subsidiaries: - Jutasama Sdn. Bhd. - 12,000 - Wasco Lindung Sdn. Bhd. (formerly known as MPE Lindung Sdn. Bhd.) 2,346 (2,194) - Petro-Pipe Industries (M) Sdn. Bhd. - 1,163 - PPSC Industrial Holdings Sdn. Bhd. - 4,620 - Wasco Coatings Malaysia Sdn. Bhd. (formerly known as PPSC Industries Sdn. Bhd.) - 20,000 - Wah Seong International Pte Limited 4,358 (2,113) - Wah Seong Industrial Holdings Sdn. Bhd. (31,090) 15,650

WAH SEONG CORPORATION BERHAD 163 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

46 SIGNIFICANT RELATED PARTY DISCLOSURES (CONTINUED) Significant outstanding balances with related parties at year end are as follows: Company 2010 2009 RM’000 RM’000 Amounts due from/(to) subsidiaries Botco Sdn. Bhd. 3,732 4,395 Petro-Pipe Industrial Corporation Sdn. Bhd. - 85,514 Total Oil Technologies Sdn. Bhd. - 10,774 Wasco Management Services Sdn. Bhd. 11,700 9,530 Asiana Emas Sdn. Bhd. - 30,515 Wasco Energy Ltd 14,628 28,624 WSN Investments Limited - 10,642 Wasco Lindung Sdn. Bhd. (formerly known as MPE Lindung Sdn. Bhd.) 13 (2,210) Wah Seong Industrial Holdings Sdn. Bhd. (615) (31,660) Wah Seong International Pte Limited (19) (4,159) PPI Industries Sdn. Bhd. 3,625 25 Syn Tai Hung Trading Sdn. Bhd. 8,125 61

Compensation of key management personnel are as follows: Group Company 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 Key management personnel: - short-term employee benefits (including monetary value of benefits-in-kind) 9,673 8,226 2,854 1,995 - post-employment benefits 468 386 322 234

47 STAFF COSTS Group Company 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 Salaries, wages and bonus 169,063 154,316 7,002 5,619 Defined contribution plan 8,596 7,311 425 346 177,659 161,627 7,427 5,965

Included within staff costs are remuneration of Executive Directors of the Group and the Company, as follows: Group Company 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 Salaries, wages and bonus 5,039 4,203 2,247 1,619 Defined contribution plan 269 187 269 187 5,308 4,390 2,516 1,806

The estimated monetary value of benefits-in-kind received and receivable by Directors of the Group and Company are RM350,000 (2009: RM118,000) and RM122,000 (2009: RM24,000) respectively.

164 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

48 COMMITMENTS (a) Capital commitments Capital expenditure as at the reporting date is as follows: Group Company 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 Commitment to acquire property, plant and equipment not provided for in the financial statements:

Approved and contracted 55 3,352 - -

Approved but not contracted 46,609 4,099 - -

(b) operating lease commitments - The Group as lessee In addition to the prepaid lease payments disclosed in Note 5, the Group has entered into commercial leases mainly on certain motor vehicles and buildings. These leases have an average tenure between 1 to 3 years with no renewal option or contingent rent provision included in the contracts.

Future minimum rental payable under non-cancellable operating leases (excluding prepaid lease payments) at the reporting date are as follows: Group 2010 2009 RM’000 RM’000 Payable not later than one year 4,056 2,146 Payable later than one year but not later than five years 4,831 2,443

(c) operating lease commitments - The Group as lessor The Group leases out equipment to non-related parties under non-cancellable operating leases. The lessees are required to pay absolute fixed lease payments during the lease period.

Total future minimum lease receivables under non-cancellable operating leases contracted for at the balance sheet date but not recognised as receivables, are as follows: Group 2010 2009 RM’000 RM’000 Not later than one year 16,123 5,716 Later than one year but not later than five years 14,158 -

WAH SEONG CORPORATION BERHAD 165 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

49 CONTINGENT LIABILITIES Group Company 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000

Unsecured corporate guarantees given to secure banking facilities granted to subsidiaries - - - 434,678 Claim by a customer (Note A) - 24,721 - - Other financial guarantee - 198 - -

Note A: On 8 December 2008, Gas Services International Limited (“GSI”), a subsidiary of the Company was served with a Particulars of Claim by Weatherford UK Limited (“Weatherford”). The claim was for an alleged breach of contract by GSI for the provision of 28 booster compressor (“Boosters”) to Weatherford originally aggregating to approximately Euro7.166 million. The claim was revised to approximately Euro5.03 million. The alleged breaches include failure to deliver the Boosters on time for testing and commissioning, non-compliance with relevant standards, specification and fitness for purpose and failure to meet obligations relating to commissioning and on site support. On 23 January 2009, GSI filed a Defence and Counterclaim amounting to originally approximately USD5.58 million denying all the allegations of breach of contract and losses claimed by Weatherford and for Weatherford’s failure to make settlement towards outstanding payments and for additional costs incurred arising from changes, variations and/or additional works and requirements. GSI’s counterclaim was revised to USD5.09million. On 1 April 2010, GSI and Weatherford executed a settlement agreement and, Weatherford has subsequently paid GSI the sum of USD2.0 million in full satisfaction of all the claims referred to above in July 2010.

50 SEGMENTAL ANALYSIS For management purposes, the Group is organised into business units based on their products and services, and has seven reportable operating segments as follows:

(a) Pipe coating division: Purchasing, manufacturing and distributing pipe coating solutions for the oil, gas and water industries.

(b) Pipe manufacturing division: Manufacturing large diameter spiral steel pipes.

166 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

50 SEGMENTAL ANALYSIS (CONTINUED) (c) Engineering division: Building and operating facilities for both offshore and onshore field developments. Its services include the conceptual, through detailed process engineering designs, fabrication, installation, operation and maintenance services. It also provides highly specialised equipment and services to the power generation, water treatment, oleochemical and petrochemical industries.

(d) Renewable energy division: Supplier and manufacturer of specialised equipment for biomass power plants; such as industrial fans, boilers and turbines that run primarily on biomass fuels.

(e) Trading division: Trading and distribution of building materials for the construction industry, from basic building materials (e.g. cement, reinforcement bars) to architectural products (e.g. tiles, sanitary wares, paints/coatings) and specialised products (roof trusses, chemical additives).

(f) E&P services: Support and consultancy services to the exploration industry as well as supplying quality products and equipment to sectors including brine filtration, inspection services and drilling support services.

(g) Others: Investment holding and property holding neither of which constitutes a separately reportable segment.

Management monitors the operating results of its divisions separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on revenue and profitability measures as shown in the table below.

Transactions between segments were entered into in the normal course of business and were established on agreed terms. The effects of such inter-segmental transactions are eliminated on consolidation.

WAH SEONG CORPORATION BERHAD 167 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010 Total 86,156 55,981 (55,790) 245,782 121,322 RM’000 (137,248) 1,579,146 1,523,356 2,087,556 1,950,308

- 922 (922) 5,125 (8,462) (5,639) 13,587 Others (17,367) (15,683) (16,471) RM’000

584 (773) E&P 4,598 1,514 5,341 (1,355) 127,457 126,102 167,610 166,837 RM’000 services

9,617 9,144 (5,226) (3,728) 12,313 12,231 471,218 465,992 399,198 395,470 RM’000 Trading (917) (2,589) 31,561 24,898 41,428 29,615 184,569 183,652 227,619 225,030 RM’000 energy Renewable

- - (4,881) (19,477) (17,989) (14,463) 212,885 212,885 319,918 319,918 RM’000 Engineering - - Pipe 1,068 4,422 79,176 34,288 250,303 250,303 496,683 496,683 RM’000 manufacturing Pipe 73,460 49,202 67,793 (47,370) 331,792 284,422 462,941 341,245 128,958 RM’000 coating (121,696) to the owners of Company to the owners of Company SEGMENTAL ANALYSIS (CONTINUED) ANALYSIS SEGMENTAL

Year ended 31 December 2010 Year Revenue Less: Inter segment revenue External revenue Results: Profit/(loss) before tax Net profit/(loss) attributable attributable profit/(loss) Net Year ended 31 December 2009 Year Revenue Less: Inter segment revenue External revenue Results: Profit/(loss) before tax Net profit/(loss)attributable profit/(loss)attributable Net 50

168 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

50 SEGMENTAL ANALYSIS (CONTINUED) Geographical information Revenue and non-current assets information is based on the geographical location of customers and assets respectively as follows: Revenue Non-current assets* 2010 2009 2010 2009 RM’000 RM’000 RM’000 RM’000 Attributed to the country of domicile: Malaysia 746,960 1,069,993 447,517 475,840

Attributed to foreign countries: South East Asia excluding Malaysia 318,244 335,724 230,119 264,137 Australia 117,030 18,890 25,475 25,131 China 60,982 97,068 65,675 85,996 Middle East 79,343 137,588 1,442 9,886 Others 200,797 291,045 12,860 23,956 1,523,356 1,950,308 783,088 884,946

* Non-current assets other than financial instruments and deferred tax assets.

51 FINANCIAL INSTRUMENTS BY CATEGORY Group Company RM’000 RM’000 As at 31 December 2010 Financial assets Financial assets measured at fair value through profit or loss - Derivatives financial assets 2,197 1,205

Available-for-sale financial assets 1,137 -

Loans and receivables: - Trade and other receivables excluding prepayment 468,959 103 - Amounts owing by subsidiaries - 42,003 - Amounts owing by associates 4,079 - - Amounts owing by jointly controlled entities 7,044 - - Time deposits 176,588 86,445 - Cash and bank balances 193,060 33,268 849,730 161,819 Total 853,064 163,024

WAH SEONG CORPORATION BERHAD 169 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

51 FINANCIAL INSTRUMENTS BY CATEGORY (CONTINUED) Financial liabilities Group Company RM’000 RM’000 As at 31 December 2010 Derivatives designated as an effective cash flow hedge - Derivative financial liability 414 - 414 -

Other financial liabilities at amortised cost: - Trade and other payables 254,252 5,613 - Amounts owing to subsidiaries - 677 - Amounts owing to an associate 68 - - Amount owing to a jointly controlled entity 279 - - Hire purchase liabilities 55 - - Term loans 504,000 - - Other bank borrowings 116,042 - - Dividend payable 1,343 - - Other liabilities 2,415 - - Irredeemable Convertible Unsecured Loan Stocks (“ICULS”) 8,678 8,678 887,132 14,968 Total 887,546 14,968

The above balances include the carrying amount of financial assets and liabilities included within disposal groups held for sale.

52 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Group’s overall financial risk management objectives and policies are to ensure that the Group creates value and maximises returns for its shareholders. Financial risk management is carried out through risk review, internal control systems, benchmarking the industry’s best practices and adherence to the Group’s financial risk management policies.

The main risks arising from the financial instruments of the Group are credit risk, market risk, and liquidity risk. Management monitors the Group’s financial position closely with the objective to minimise potential adverse effects on the financial performance of the Group.

The following sections provides details regarding the Group’s and Company’s exposure to the above-mentioned financial risks and the objectives, policies and processes for the management of these risks.

Credit risk Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in financial loss to the Group and the Company.

At the reporting date, the Group’s and the Company’s maximum exposure to credit risk is represented by the carrying amounts of each class of financial assets recognised in the statements of financial position, including derivative financial instruments with positive fair values.

170 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

52 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) (a) Receivables The Group’s exposure to credit risk is monitored on an ongoing basis. The Group has credit policies in place to manage the credit risk exposure. The risk is managed through the application of the Group’s credit management procedures which include the application of credit evaluations/approvals and follow up procedures.

The Group does not require collateral in respect of receivables and considers the risk of material loss from non- performance on the part of counter–parties to be negligible.

(b) Inter company balances The Company provides unsecured loans and advances to subsidiaries. The Company monitors the results of its subsidiaries regularly.

As at 31 December 2010, the maximum exposure to credit risk is represented by their carrying amounts in the statement of financial position.

Management has taken reasonable steps to ensure that intercompany receivables are stated at the realisable values. As at 31 December 2010, there was no indication that the loans and advances extended to the subsidiaries are not recoverable.

(c) Derivative financial instruments Transactions involving derivative financial instruments are with approved financial institutions and reputable banks.

As at the end of the reporting period, the maximum exposure to credit risk arising from receivables is represented by the carrying amounts in the statement of financial position.

In view of the counterparties being reputable licensed financial institutions, management does not expect any of the counterparties to fail to meet their obligations.

(d) Financial guarantees The Company provides unsecured financial guarantees to banks in respect of banking facilities granted to certain subsidiaries. The Company monitors on an ongoing basis the results of the subsidiaries and repayment made by the subsidiaries.

The maximum exposure to credit risk amounts to RM375,148,000 (2009: RM434,678,000) representing the outstanding banking facilities of the subsidiaries as at end of reporting period.

As at the end of the reporting period, there was no indication that any subsidiary would default on repayment.

Financial guarantees have not been recognised since the fair value on initial recognition was not material as the probability of the subsidiaries defaulting on its banking facilities is remote.

WAH SEONG CORPORATION BERHAD 171 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

52 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) (e) time deposits and bank balances Time deposits and bank balances are placed with approved financial institutions and reputable banks. The likelihood of non-performance by these financial institutions is remote based on their high credit ratings.

Market risk Market risk refers to the risk that changes in market prices, such as foreign exchange rates, interest rates and prices will affect the Group’s financial position and cash flows.

(a) Foreign currency risk Foreign currency risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The Group has transactional currency exposures arising from sales and purchases that are denominated in a currency other than the functional currencies of the Group entities. The foreign currencies in which these transactions are denominated are mainly US Dollar.

The Group maintains a natural hedge, whenever possible, by maintaining receivables and payables in matching foreign currencies. Foreign exchange exposures in transactional currencies other than the functional currencies of the operating entities are kept to an acceptable level.

The Group also uses forward currency contracts to minimise exposure on currency fluctuations for which receipts or payments are anticipated more than one month after the Group has entered into a firm commitment for a sale or purchase. The forward currency contracts entered are in the same currency as the hedged item. It is the Group’s policy to negotiate the terms of the forward currency contracts to match the terms of the hedged item to maximise its effectiveness.

The Group’s currency exposure is disclosed in the respective notes for all items of financial assets and liabilities.

The Group is mainly exposed to fluctuation in the US Dollar exchange rate against the respective functional currencies of the Group entities. The Group considers a 5% strengthening or weakening of the US Dollar as a possible change. A 5% strengthening or weakening of the US Dollar would result in the pre-tax profit being approximately RM4,530,000 and RM1,130,000 higher/lower for the Group and Company respectively. The Group considers that the foreign currency risk attributable to currencies other than the US Dollar to be insignificant.

(b) Interest rate risks Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the fair value of a financial instrument will fluctuate due to changes in market interest rates.

172 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

52 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) (b) Interest rate risks (Continued) The Group’s exposure to interest rate risks relates primarily to the Group’s time deposits and interest bearing borrowings.

Surplus funds are placed with licensed financial institutions to earn interest income based on prevailing market rates. The Group manages its interest rate risks by placing such funds on short tenures of 12 months or less.

The Group generally borrows principally on a floating rate basis and ensures that interest rates obtained are competitive. The Group has entered into an interest rate swap contract and an interest cap (Note 11) to limit the Group’s exposure to adverse interest rate fluctuations.

The interest rate profile of the Group’s and the Company’s significant interest-bearing financial instrument have been presented in Notes 21, 27, 30, 31 and 34.

Fair value sensitivity for fixed rate instruments The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and the Group does not designate derivatives as hedging instruments under a fair value hedge accounting model. Therefore, a change in interest rates at the end of the reporting period would not affect profit or loss.

Cash flow sensitivity analysis for variable rate instruments At the reporting date, if interest rates had been 50 basis points lower/higher, with all other variables held constant, the Group’s pre-tax profit would have been approximately RM2.9 million higher/lower, arising mainly as a result of lower/higher interest expense on floating rate borrowings, and higher/lower negative fair value of interest rate swap. The assumed movement in basis points for interest rate sensitivity analysis is based on the currently observable market environment.

Liquidity risk Liquidity risk is the risk that the Group or the Company will not be able to meet its financial obligations as they fall due. The Group’s exposure to liquidity risk arises principally from its payables and borrowings. The Group maintains a level of cash and cash equivalents and bank facilities deemed adequate by the management to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they fall due.

All financial liabilities of the Group and Company that will be due and payable within the next 12 months are classified within current liabilities. The maturity profile of non-current financial liabilities is presented below: More than More than Total 1 year and 2 years and contractual Total Within 1 less than less than undiscounted carrying year 2 years 5 years cash flows amount RM’000 RM’000 RM’000 RM’000 RM’000 Term loans 90,598 67,083 388,343 546,024 504,000 Hire purchase liabilities 29 11 21 61 55 90,627 67,094 388,364 546,085 504,055

WAH SEONG CORPORATION BERHAD 173 Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

53 FAIR VALUES OF FINANCIAL INSTRUMENTS The carrying amounts of financial assets and liabilities classified within current assets and current liabilities respectively approximate their fair values due to the relatively short term nature of these financial instruments.

Fair value of quoted equity instruments and debts securities are determined by reference to their respective published market bid price as at 31 December 2010.

The fair values of forward exchange contracts are estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate.

The fair values of interest rate swaps and interest rate cap are based on quotes from financial institutions.

Fair values of non-derivative financial liabilities are calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the end of the reporting period. In respect of the liability component of ICULS, the market rate of interest is determined by reference to similar liabilities that do not have a conversion option.

The carrying amount of the non-current portion of hire purchase liabilities is a reasonable approximation of its fair value due to the insignificant impact of discounting.

The fair values of other financial assets and liabilities, together with the carrying amounts shown in the statement of financial position, are as follows: Group Company Carrying Fair Carrying Fair value value value value RM’000 RM’000 RM’000 RM’000

2010 Non current liabilities Term loans 428,365 429,869 - - ICULS 8,678 8,673 8,678 8,673

2009 Non current liabilities Term loans 435,873 444,525 - - ICULS 35,259 207,149 35,259 207,149

174 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTES to the financial statements FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

54 CAPITAL MANAGEMENT The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value. The Group considers capital and reserves attributable to owners of the Company as capital. The Group manages its capital in order to ensure that the net gearing ratio of the Group does not exceed 1.0 times, which is well within the requirements of the Group’s banking facilities.

Under the requirements of Bursa Malaysia Practice Note No. 17/2005, the Company is required to maintain a consolidated shareholders’ equity equal to or not less than the 25% of the issued and paid-up capital (excluding treasury shares) and such shareholders’ equity is not less RM40 million. The Company has complied with this requirement.

The Group and the Company are in compliance with all externally imposed capital requirements.

55 SUPPLEMENTARY INFORMATION DISCLOSED PURSUANT TO BURSA MALAYSIA SECURITIES BERHAD LISTING REQUIREMENTS The following analysis of realised and unrealised retained profits is prepared pursuant to Paragraphs 2.06 and 2.23 of Bursa Malaysia Securities Berhad Listing Requirements and in accordance with the Guidance on Special Matter No. 1 - Determination of Realised and Unrealised Profits or Losses as issued by the Malaysian Institute of Accountants. This disclosure is based on the format prescribed by Bursa Malaysia Securities Berhad.

The retained earnings as at 31 December 2010 are analysed as follows: Group Company RM’000 RM‘000

Total retained profits (excluding retained profits from associates and jointly controlled entities) - Realised gains 366,896 149,813 - Unrealised (losses)/gains (23,847) 981

Total share of retained profits from associates - Realised gains 2,875 -

Total share of retained profits from jointly controlled entities - Realised gains 18,155 - - Unrealised losses (61) - At 31 December 364,018 150,794 Less: Consolidation adjustments 6,743 - 370,761 150,794

WAH SEONG CORPORATION BERHAD 175 Annual Report 2010 SUMMARY OF SIGNIFICANT RECURRENT RELATED PARTY TRANSACTIONS

Actual value transacted for the Interested Related Recipient of Provider of Products/ financial year ended Nature of Transaction Party Products/Services Services 31 December 2010 (RM’000) DongShi Quan WETN WSCL *11,500 Sale of oil and gas (“Don Qian”) related products/ services Don Qian is a common director of Wasco Engineering & Technology (Nantong) Co. Ltd. (“WETN”) and Wah Seong China Limited (“WSCL”). He is a major shareholder in WSCL by virtue of him holding 20% shares. He is also a major shareholder of WETI, the immediate holding company of WETN by virtue of him holding 17.5% indirect interest in WETI. * on 10 December 2010, an announcement was made to Bursa Malaysia Securities Berhad when the actual value exceeded the mandated value as disclosed in the Circular to the Shareholders dated 17 May 2010 due to the higher level of procurement activity in tandem with the increase in orders secured by WETN.

Actual value transacted for the Interested Related Lender Borrower financial year ended Nature of Transaction Party 31 December 2010 (RM’000) Ruben Ang Ban Teck WTPL PT. Megaron 12,515 Advances with interest (“Ang”) bearing for purpose of working capital requirement Karim Tanado Ang is a common director of Wasco Technologies Pte Ltd (“WTPL”) and PT. Megaron Semesta (“Karim”) (“PT. Megaron”). He is a major shareholder in WTPL, the immediate holding company of PT. Megaron, by virtue of him holding 20% shares. Ang, who was a director of WTPL and PT. Megaron for the preceding six (6) months, resigned as a director of WTPL and PT. Megaron on 18 March 2011. Karim is a director of PT. Megaron and shareholder by virtue of him holding 5% and 10% shares in PT. Megaron and WTPL (the immediate holding company of PT. Megaron), respectively.

176 WAH SEONG CORPORATION BERHAD Annual Report 2010 SUMMARY OF landed properties as at 31 DECEMBER 2010

Title/Location Description Approximate Approximate Tenure Audited NBV /Existing Age of the land/built-up area @ 31/12/2010 Use building RM Sub Lot 2, Kawasan Perindustrian Industrial 8 - 19 years 55,565.3 sq m Leasehold 99 years 31,901,520 Miel, Gebeng, KM25 building (leasehold title not Jalan Kuantan-Kemaman issued yet) PO Box 140, 25720 Kuantan Pahang

Lot. A/D and one sub-unit of Industrial N/A 44.73 acres Leasehold 99 years 11,315,422 Lot C Kawasan MIEL (leasehold title not Tanjong Gelang issued yet) Kuantan, Pahang

Lot. B, Kawasan MIEL Tanjong Gelang Industrial N/A 22.26 acres Leasehold 99 years 5,641,574 Kuantan, Pahang (leasehold title not issued yet)

Lot C, Kawasan MIEL Industrial N/A 20 acres Leasehold 99 years 4,252,147 Tanjong Gelang (leasehold title not Kuantan, Pahang issued yet)

Pasdec Land Lot A Industrial N/A 40.01 acres Leasehold 99 years 9,020,788 Tanjong Gelang (leasehold title not Kuantan, Pahang issued yet)

No 59, The Boulevard Commercial 8 years 32,574 sq ft Leasehold 6,869,408 Mid Valley City 99 years expiring Lingkaran Syed Putra on 14/12/2100 59200, Kuala Lumpur

No. 5 Pandan Road Office buildings 21 years 13,722.7 sq m Leasehold 10,137,429 Singapore 609299 28 yrs 1 month expiring on 30/12/2037

Geran No 32544, 32546 and 32547 Industrial land 6 years 12 acres Freehold 26,677,337 Lot No 1930, 1944, 1945 with office and Daerah & Mukim of Klang factory building Negeri Selangor

Geran No 32545, Lot 1943 Industrial land N/A 4 acres Freehold 5,578,552 Daerah & Mukim of Klang Negeri Selangor

One unit of two storey shop/office Shop/office 11 years 1,650 sq ft Leasehold 243,293 Lot No. 6454 Lot CP 855 99 years expiring Mukim of Sungai Raja on 8/11/2098 Daerah Kinta, Perak Bandar Cyber Ipoh

WAH SEONG CORPORATION BERHAD 177 Annual Report 2010 SUMMARY OF landed properties as at 31 DECEMBER 2010

Title/Location Description Approximate Approximate Tenure Audited NBV /Existing Age of the land/built-up area @ 31/12/2010 Use building RM Province : Nusa Tenggara Agriculture land N/A 13,900 sq m Freehold 567,381 District : Lombok Barat Sub-District : Tanjung Village : Sokong Country : Indonesia

Lot 11-08, Yin Feng Tower Commercial 6 years 334.45 sq m Leasehold 1,398,396 No 707, Zhangyang Road, Pudong office lot 40 years expiring 200120 Shanghai on 6/1/2045 People Republic of China

KKIP Timor, Industrial Zone 13 Industrial land 3 years 21.625 acres Leasehold 68,048,355 General Industrial Zone with factory and 99 years expiring Kota Kinabalu Industrial Park office building on 1/12/2099 Mile 15 Jalan Telipok, Telipok Kota Kinabalu, Sabah

KKIP Timor, Industrial Zone 10 Industrial land N/A 30 acres Leasehold 21,586,853 General Industrial Zone for storage 99 years expiring Kota Kinabalu Industrial Park on 1/12/2099 Mile 15 Jalan Telipok, Telipok Kota Kinabalu, Sabah

10851 Train Court Industrial land 16 years 63,884 sq ft Freehold 2,799,358 Harris County with office and Texas 77041 warehouse building

Lot 1929, Jalan Bukit Kemuning Industrial land 5 years 18,363 sq m/ Freehold 7,656,159 Seksyen 32, 40460 Shah Alam with 2 1/2 storey 198,320 sq ft Selangor Darul Ehsan office and single storey factory

Parcel No. G1-02-10 Residential 17 years 94.25 sq m Freehold 1 Strata Grant No. 39419/M5/3/310 (1 apartment Mukim Damansara, District of Petaling unit) (Unit No. G1-02-10, Goodyear Court 6 Jalan Kewajipan, Subang Perdana 47600 Subang Jaya, Selangor)

HS(D) Nos 40386, 40387 and 39789 Industrial land 10 - 27 years 97,500 sq m Leasehold 23,309,494 PT No 18,19 and 1554 respectively with office and Lot P.T Nos 18 & 19 Mukim 1, Seberang Perai Tengah factory building Expiring on 31/1/2039 Pulau Pinang Lot P.T Nos 1554 Expiring on 5/6/2046

C-08-13, Pangsapuri Vista Lavender Residential 6 years 852 sq ft Leasehold expiring 83,220 Persiaran Kinrara Seksyen 3 (apartment) on 15/11/2098 47100 Puchong Selangor

178 WAH SEONG CORPORATION BERHAD Annual Report 2010 SUMMARY OF landed properties as at 31 DECEMBER 2010

Title/Location Description Approximate Approximate Tenure Audited NBV /Existing Age of the land/built-up area @ 31/12/2010 Use building RM Parcel G-53, Megamall Penang Commercial 12 years 3,210 sq ft Freehold 720,195

Parcel B3-3-7G-3A Residential 11 years 1,113 sq ft Freehold 29,412 PD Marina International Resort Phase 3 (Bay View Villas) Port Dickson, Negeri Sembilan

PT3745 Agricultural land N/A 1.229 hectares Leasehold 528,571 3745, Mukim of Kapar (pending approval (3.037 acres) 99 years District of Klang for conversion Selangor to industrial land)

PN 4460, Lot No. 487 Seksyen 90 Commercial 24 years 466 sq m Leasehold 473,414 Bandar Kuala Lumpur (double storey 99 years expiring No. 2 Jalan 1/75 link house) on 14/10/2076 Off Jalan Kampong Pandan Kuala Lumpur

PN 4462, Lot No. 489 Seksyen 90 Residential 24 years 298 sq m Leasehold 486,096 Bandar Kuala Lumpur (double storey 99 years expiring No. 6 Jalan 1/75 link house) on 14/10/2076 Off Jalan Kampong Pandan Kuala Lumpur

PN 4463, Lot No. 490 Seksyen 90 Residential 24 years 372sq m Leasehold 607,722 Bandar Kuala Lumpur (double storey 99 years expiring No. 6 Jalan 1/75 link house) on 14/10/2076 Off Jalan Kampong Pandan Kuala Lumpur

Parcel Lot No L-33 Commercial 9 years 517 sq m Leasehold 115,712 H.S. (D) 23128 No PT 464 (shoplot) 99 years expiring Plaza Melaka Raya on 19/01/2045 District of Melaka Tengah

PT4426/4427, Taman Semarak Residential 15 years 260 sq m Freehold 52,567 District of Seremban (single terrace Negeri Sembilan house)

Parcel No. 5 Storey No 5 Residential 4 years 1,535 sq ft Freehold 323,638 Building 77 of Sri Emas Condominium (1 condominium Geran No 5336, Lot No. 613 unit) Jalan Galloway, Seksyen 56 Mukim Kuala Lumpur District of Wilyah Persekutuan

Plot No : 66; MIDC Area, Satpur Leasehold land 26-38 years 39,000 sq m Leasehold 5,201,134 Nashik 422007, Maharashtra, India and building 95 years (Asset of a disposal group held for sale) from 1/5/1971

WAH SEONG CORPORATION BERHAD 179 Annual Report 2010 ANALYSIS OF SHAREHOLDINGS, ICULS & WARRANTS HOLDINGS

1. Ordinary Shares Share Capital as at 29 April 2011 Authorised Capital : RM1,000,000,000.00 Issued and Fully Paid-up Capital : RM368,472,160.50 Nominal/Par value per share : RM0.50 Class of Equity Securities : Ordinary Shares Voting Rights : On a show of hands - one vote per shareholder on a poll - one vote per ordinary share held Total Shareholders : 9,311

Distribution of Shareholders as at 29 April 2011 Size of No. of No. of Shareholdings Shareholders % Shares %

Less than 100 1,069 11.4810 37,547 0.0051 100 – 1,000 2,375 25.5075 901,217 0.1223 1,001 – 10,000 4,574 49.1247 17,025,846 2.3103 10,001 – 100,000 1,038 11.1481 27,879,316 3.7831 100,001 to less than 5% of issued share capital 252 2.7065 401,207,254 54.4420 5% and above of issued share capital 3 0.0322 289,893,141 39.3372 Total 9,311 100.0000 736,944,321 100.0000

List of Substantial Shareholders as at 29 April 2011 No. of Ordinary Shares of RM0.50 each Name of Substantial Shareholders Direct Interest %(a) Deemed Interest %(a)

1. Wah Seong (Malaya) Trading Co. Sdn. Bhd. 231,282,043 31.3867 2,534,315(b) 0.3439 2. Midvest Asia Sdn. Bhd. 39,669,152 5.3834 - - 3. Tan Kim Yeow Sendirian Berhad 37,495,133 5.0884 233,816,358(c) 31.7306 4. Pauline Tan Suat Ming 2,087,128 0.2832 271,311,491(d) 36.8190 5. Tan Chin Nam Sdn. Bhd. - - 233,816,358(c) 31.7306 6. Tony Tan @ Choon Keat - - 271,311,491(d) 36.8190 7. Robert Tan Chung Meng 10,734,921 1.4568 271,311,491(d) 36.8190 8. Chan Cheu Leong 18,119,594 2.4590 39,669,152(e) 5.3834 9. Employees Provident Fund Board 48,772,116 6.6187 - - 10. Kumpulan Wang Persaraan (Diperbadankan) 46,467,879 6.3060 - -

180 WAH SEONG CORPORATION BERHAD Annual Report 2010 ANALYSIS OF SHAREHOLDINGS, ICULS & WARRANTS HOLDINGS

Directors’ Shareholdings as at 29 April 2011 No. of Ordinary Shares of RM0.50 each Name of Directors Direct Interest %(a) Deemed Interest %(a)

1. Robert Tan Chung Meng 10,734,921 1.4568 271,311,491(d) 36.8190 2. Chan Cheu Leong 18,119,594 2.4590 39,820,400(f) 5.4039 3. Tan Sri Ab Rahman Bin Omar - - - - 4. Pauline Tan Suat Ming 2,087,128 0.2832 272,080,629(g) 36.9234 5. Halim Bin Haji Din - - - - 6. Giancarlo Maccagno 15,404,842 2.0906 - - 7. Tan Sri Dato’ Dr. Lin See Yan - - - - 8. Jen (B) Tan Sri Dato’ Seri Mohd Zahidi 30,250 0.0041 - - Bin Haji Zainuddin

Notes: (a) Based on 736,878,772 (Issued and paid-up share capital of 736,944,321 less Treasury Shares of 65,549).

(b) Deemed interest held through Wah Seong Enterprises Sdn. Bhd. (“WSE”) pursuant to Section 6A of the Companies Act, 1965 (“the Act”).

(c) Deemed interest held through WSE and Wah Seong (Malaya) Trading Co. Sdn. Bhd. (“WST”) pursuant to Section 6A of the Act.

(d) Deemed interest held through WSE, WST and Tan Kim Yeow Sendirian Berhad (“TKYSB”) pursuant to Section 6A of the Act.

(e) Deemed interest held through Midvest Asia Sdn. Bhd. (“MASB”) pursuant to Section 6A of the Act.

(f) Deemed interest held through MASB pursuant to Section 6A of the Act and include interests of his spouse and children.

(g) Deemed interest held through WSE, WST and TKYSB pursuant to Section 6A of the Act and include interests of her spouse and children.

Note : By virtue of their interests of more than 15% in the shares of the Company, Robert Tan Chung Meng and Pauline Tan Suat Ming are also deemed to be interested in the shares of all its subsidiaries to the extent the Company has an interest.

WAH SEONG CORPORATION BERHAD 181 Annual Report 2010 ANALYSIS OF SHAREHOLDINGS, ICULS & WARRANTS HOLDINGS

Thirty (30) Largest Shareholders as at 29 April 2011

Name No. of Shares %(a) 1. Wah Seong (Malaya) Trading Co. Sdn. Bhd. 203,757,503 27.6514 2. Kumpulan Wang Persaraan (Diperbadankan) 44,777,179 6.0766 3. Tan Kim Yeow Sendirian Berhad 37,495,133 5.0884 4. Lembaga Tabung Angkatan Tentera 35,240,909 4.7825 5. Citigroup Nominees (Tempatan) Sdn. Bhd. 35,004,246 4.7503 Employees Provident Fund Board 6. Midvest Asia Sdn. Bhd. 30,920,979 4.1962 7. CIMSEC Nominees (Tempatan) Sdn. Bhd. 23,661,214 3.2110 Wah Seong (Malaya) Trading Company Sdn. Bhd. (ESOS Pool Account) 8. HSBC Nominees (Asing) Sdn. Bhd. 19,898,007 2.7003 exempt AN for Credit Suisse (SG BR-TST-ASING) 9. AmanahRaya Trustees Berhad 19,474,870 2.6429 Skim Amanah Saham Bumiputera 10. Karya Insaf (M) Sdn. Bhd. 15,713,194 2.1324 11. HSBC Nominees (Asing) Sdn. Bhd. 15,404,842 2.0906 Giancarlo Maccagno 12. Chan Cheu Leong 15,187,511 2.0611 13. ValueCap Sdn. Bhd. 11,307,279 1.5345 14. Robert Tan Chung Meng 10,734,921 1.4568 15. HSBC Nominees (Asing) Sdn. Bhd. 10,618,152 1.4410 Exempt AN for HSBC Private Bank (Suisse) S.A. (SPORE TST AC CL) 16. HSBC Nominees (Asing) Sdn. Bhd. 8,490,900 1.1523 Exempt AN for HSBC Private Bank (Suisse) S.A. (Hong Kong AC CL) 17. Citigroup Nominees (Tempatan) Sdn. Bhd. 7,813,221 1.0603 Employees Provident Fund Board (KIB) 18. UOBM Nominees (Tempatan) Sdn. Bhd. 5,591,666 0.7588 Pledged Securities Account for Midvest Asia Sdn. Bhd. (KD) 19. Wah Seong (Malaya) Trading Co. Sdn. Bhd. 3,863,326 0.5243 20. Citigroup Nominees (Tempatan) Sdn. Bhd. 3,725,000 0.5055 Employees Provident Fund Board (AM INV) 21. Lee La Kim 3,537,302 0.4800 22. DB (Malaysia) Nominee (Tempatan) Sendirian Berhad 3,444,300 0.4674 MIDF Amanah Asset Management Berhad for Lembaga Tabung Haji (JG283) 23. RHB Capital Nominees (Tempatan) Sdn. Bhd. 3,156,507 0.4284 Pledged Securities Account for Midvest Asia Sdn. Bhd. (1031031) 24. Citigroup Nominees (Tempatan) Sdn. Bhd. 3,033,333 0.4116 Employees Provident Fund Board (Nomura) 25. HSBC Nominees (Asing) Sdn. Bhd. 3,000,000 0.4071 exempt AN for JPMorgan Chase Bank, National Association (NORGES BK NLEND) 26. Hong Leong Assurance Berhad 2,850,000 0.3868 As Beneficial Owner (UNITLINKED GF) 27. HSBC Nominees (Asing) Sdn. Bhd. 2,739,105 0.3717 Exempt AN for The Bank of New York Mellon (MELLON ACCT) 28. Goldhill Gardens Sdn. Bhd. 2,670,000 0.3623 29. Wah Seong Enterprises Sdn. Bhd. 2,534,315 0.3439 30. DB (Malaysia) Nominee (Tempatan) Sendirian Berhad 2,464,300 0.3344 MIDF Amanah Asset Management Berhad for Yayasan Sarawak (JG281) Total 588,109,214 79.8108

Note: (a) Based on 736,878,772 (Issued and paid-up share capital of 736,944,321 less Treasury Shares of 65,549).

182 WAH SEONG CORPORATION BERHAD Annual Report 2010 ANALYSIS OF SHAREHOLDINGS, ICULS & WARRANTS HOLDINGS

2. Irredeemable Convertible Unsecured Loan Stock (“ICULS”) ICULS as at 29 April 2011 Original ICULS issued : RM89,499,999.00 Balance ICULS remaining : RM15,177,390.00 Nominal/Par value per ICULS : RM1.00 Class of ICULS : ICULS 2002/2012 Coupon Rate : 3% per annum payable semi-annually in arrears Voting Rights : None Total ICULS holders : 23

Distribution of ICULS holders as at 29 April 2011 Size of No. of No. of ICULS Holdings ICULS holders % ICULS %

Less than 100 3 13.0435 101 0.0007 100 - 1,000 16 69.5652 14,500 0.0955 1,001 - 10,000 3 13.0435 14,000 0.0922 10,001 - 100,000 - 0.0000 - 0.0000 100,001 to less than 5% of issued ICULS - 0.0000 - 0.0000 5% and above of issued ICULS 1 4.3478 15,148,789 99.8116 Total 23 100.0000 15,177,390 100.0000

Directors’ ICULS holdings as at 29 April 2011 No. of ICULS of RM1.00 each Name of Directors Direct Interest % Deemed Interest %

1. Robert Tan Chung Meng - - 15,148,789(a) 99.8116 2. Chan Cheu Leong - - - - 3. Tan Sri Ab Rahman Bin Omar - - - - 4. Pauline Tan Suat Ming - - 15,148,789(a) 99.8116 5. Halim Bin Haji Din - - - - 6. Giancarlo Maccagno - - - - 7. Tan Sri Dato’ Dr. Lin See Yan - - - - 8. Jen (B) Tan Sri Dato’ Seri Mohd Zahidi - - - - Bin Haji Zainuddin

Note: (a) Deemed interest held through Wah Seong (Malaya) Trading Co. Sdn. Bhd. pursuant to Section 6A of the Companies Act, 1965.

WAH SEONG CORPORATION BERHAD 183 Annual Report 2010 ANALYSIS OF SHAREHOLDINGS, ICULS & WARRANTS HOLDINGS

Twenty-Three (23) Largest ICULS holders as at 29 April 2011

Name No. of ICULS %

1. Wah Seong (Malaya) Trading Co. Sdn. Bhd. 15,148,789 99.8116 2. Lim Boon Yet @ Lim Bon Lai 8,000 0.0527 3. Kok May Leng 4,000 0.0264 4. Wong Kai Chean 2,000 0.0132 5. Tan Peng Sin 1,000 0.0066 6. Hiew Fook Ein 1,000 0.0066 7. Khuzairi Bin Abdul Karim 1,000 0.0066 8. Chuah Bah Hock 1,000 0.0066 9. Lee Lam Ching 1,000 0.0066 10. Lee Son Kwai 1,000 0.0066 11. Liew Lee Ling 1,000 0.0066 12. Chua Pooi San 1,000 0.0066 13. Lim Choon Peng 1,000 0.0066 14. Helmiah Binti Hasan 1,000 0.0066 15. Munir Kasman Bin Abdul Hamid 1,000 0.0066 16. Ng Chei How 1,000 0.0066 17. Ong Chew Kuan 1,000 0.0066 18. Ong Chew Wee 1,000 0.0066 19. Loh Sai Eng 400 0.0026 20. Chan Wong Loong 100 0.0007 21. Chua Kim Hock 83 0.0004 22. Wong Gek Keong 11 # 23. Rosdin Bin Roslan 7 #

Total 15,177,390 100.0000

Note: # Negligible.

184 WAH SEONG CORPORATION BERHAD Annual Report 2010 ANALYSIS OF SHAREHOLDINGS, ICULS & WARRANTS HOLDINGS

3. Warrants Warrants as at 29 April 2011 Original Warrants issued : 135,962,320 Exercise price per Warrant : RM3.17 Exercise period : 5 years (Expiring 25 March 2013) Voting Rights : None Total Warrants holders : 2,137

Distribution of Warrants holders as at 29 April 2011 Size of No. of No. of Warrants Holdings Warrants holders % Warrants %

Less than 100 179 8.3762 7,359 0.0054 100 - 1,000 366 17.1268 197,075 0.1450 1,001 - 10,000 857 40.1030 3,786,556 2.7850 10,001 - 100,000 624 29.1998 22,813,898 16.7796 100,001 to less than 5% of issued Warrants 108 5.0538 49,013,646 36.0494 5% and above of issued Warrants 3 0.1404 60,143,786 44.2356 Total 2,137 100.0000 135,962,320 100.0000

Directors’ Warrants holdings as at 29 April 2011 No. of Warrants Name of Directors Direct Interest % Deemed Interest %

1. Robert Tan Chung Meng 1,878,743 1.3818 54,207,824(a) 39.8697 2. Chan Cheu Leong 3,185,450 2.3429 7,638,174(b) 5.6179 3. Tan Sri Ab Rahman Bin Omar 62,501 0.0460 - - 4. Pauline Tan Suat Ming 365,273 0.2687 54,523,376(c) 40.1018 5. Halim Bin Haji Din - - - - 6. Giancarlo Maccagno 1,180,000 0.8679 - - 7. Tan Sri Dato’ Dr. Lin See Yan - - - - 8. Jen (B) Tan Sri Dato’ Seri Mohd Zahidi - - - - Bin Haji Zainuddin

Notes: (a) Deemed interest held through Wah Seong (Malaya) Trading Co. Sdn. Bhd. (“WST”), Wah Seong Enterprises Sdn. Bhd. (“WSE”) and Tan Kim Yeow Sendirian Berhad (“TKYSB”) pursuant to Section 6A of the Companies Act, 1965 (“the Act”). (b) Deemed interest held through Midvest Asia Sdn. Bhd. pursuant to Section 6A of the Act. (c) Deemed interest held through WST, WSE and TKYSB pursuant to Section 6A of the Act and include interests of her spouse and children.

WAH SEONG CORPORATION BERHAD 185 Annual Report 2010 ANALYSIS OF SHAREHOLDINGS, ICULS & WARRANTS HOLDINGS

Thirty (30) Largest Warrants holders as at 29 April 2011

Name No. of Warrants % 1. Wah Seong (Malaya) Trading Co. Sdn. Bhd. 42,385,052 31.1741 2. HSBC Nominees (Asing) Sdn. Bhd. 9,996,904 7.3527 Exempt AN for HSBC Private Bank (Suisse) S.A. (Hong Kong AC CL) 3. Midvest Asia Sdn. Bhd. 7,085,700 5.2115 4. Tan Kim Yeow Sendirian Berhad 6,562,104 4.8264 5. Cimsec Nominees (Tempatan) Sdn. Bhd. 4,141,001 3.0457 Wah Seong (Malaya) Trading Company Sdn. Bhd. (ESOS Pool Account) 6. HSBC Nominees (Asing) Sdn. Bhd. 3,336,450 2.4540 exempt AN for Hsbc Private Bank (Suisse) S.A. (SPORE TST AC CL) 7. Chan Cheu Leong 3,035,450 2.2326 8. Karya Insaf (M) Sdn. Bhd. 2,750,000 2.0226 9. Robert Tan Chung Meng 1,878,743 1.3818 10. RHB Capital Nominees (Tempatan) Sdn. Bhd. 1,327,400 0.9763 pledged Securities Account for Susy Ding (CEB) 11. HSBC Nominees (Asing) Sdn. Bhd. 1,180,000 0.8679 Giancarlo Maccagno 12. Kay Yew Kiang 1,000,000 0.7355 13. Teh Say Seong 877,400 0.6453 14. HSBC Nominees (Asing) Sdn. Bhd. 793,150 0.5834 exempt AN for Credit Suisse (SG BR-TST-ASING) 15. Mayban Securities Nominees (Tempatan) Sdn. Bhd. 754,700 0.5551 exempt AN for UOB Kay Hian Pte Ltd (A/C Clients) 16. Rhb Capital Nominees (Tempatan) Sdn. Bhd. 724,000 0.5325 pledged Securities Account for Nor Azizy Binti Abdul Aziz (CEB) 17. Wah Seong (Malaya) Trading Co. Sdn. Bhd. 676,130 0.4973 18. Lau Lay Seng 650,000 0.4781 19. Sukhwinder Singh A/L Harbans Singh 593,500 0.4365 20. Rhb Capital Nominees (Tempatan) Sdn. Bhd. 552,474 0.4063 Pledged Securities Account for Midvest Asia Sdn. Bhd. (1031031) 21. Lim Wing Huat 523,300 0.3849 22. ECML Nominees (Tempatan) Sdn. Bhd 500,000 0.3677 Pledged Securities Account for Yap Tiam Chi 23. CIMSEC Nominees (Tempatan) Sdn. Bhd. 500,000 0.3677 CIMB Bank for Chung Mui Nyok (MY0532) 24. AIBB Nominees (Tempatan) Sdn. Bhd. 500,000 0.3677 Pledged Securities Account for Yu Kuan Chon 25. Mayban Nominees (Tempatan) Sdn. Bhd. 470,000 0.3457 pledged Securities Account for Lim Peng Heng 26. RHB Capital Nominees (Tempatan) Sdn. Bhd. 451,000 0.3317 pledged Securities Account for Sher Khan Bin Khan Mohamad (CEB) 27. Wah Seong Enterprises Sdn. Bhd. 443,537 0.3262 28. Rhb Nominees (Tempatan) Sdn. Bhd. 415,000 0.3052 pledged Securities Account for Chu Chee Keong (CST) 29. Tay Kooi Wah 369,000 0.2714 30. Goldhill Gardens Sdn. Bhd. 345,000 0.2537 Total 94,816,995 69.7375

186 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTICE OF ELEVENTH ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT the Eleventh Annual General Meeting of WAH SEONG CORPORATION BERHAD (“the Company”) will be held at Perdana IV, Level 3, Cititel Hotel, 66 Jalan Penang, 10000 Penang, Malaysia on Friday, 17 June 2011 at 9.00 a.m. for the following purposes:

AGENDA As Ordinary Business

1. To receive and adopt the Audited Financial Statements of the Company and the Group for the financial year ended 31 December 2010 and the Reports of the Directors and Auditors thereon. Ordinary Resolution 1

2. To approve the Directors’ Fees of RM315,000 for the financial year ended 31 December 2010. Ordinary Resolution 2

3. To re-elect the following Directors who retire pursuant to Article 110 of the Company’s Articles of Association: (i) Jen (B) Tan Sri Dato’ Seri Mohd Zahidi Bin Haji Zainuddin Ordinary Resolution 3 (ii) Robert Tan Chung Meng Ordinary Resolution 4 (iii) Halim Bin Haji Din Ordinary Resolution 5

4. To re-appoint Tan Sri Dato’ Dr. Lin See Yan who retires pursuant to Section 129(2) of the Companies Act, 1965 as Director of the Company and to hold office until the next Annual General Meeting of the Company pursuant to Section 129(6) of the Companies Act, 1965. Ordinary Resolution 6

5. To re-appoint Messrs PricewaterhouseCoopers as Auditors of the Company for the ensuing year and to authorise the Directors to fix their remuneration. Ordinary Resolution 7

As Special Business To consider, and if thought fit, to pass the following resolutions, with or without modifications thereto:

6. Ordinary Resolution Authority to Issue Shares Pursuant to Section 132D of the Companies Act, 1965 Ordinary Resolution 8 “THAT, subject always to the Companies Act, 1965 (“the Act”), the Articles of Association of the Company and approvals from the relevant governmental and/or regulatory bodies where such approvals shall be necessary, authority be and is hereby given to the Directors of the Company pursuant to Section 132D of the Act, to issue and allot shares from the unissued share capital of the Company from time to time upon such terms and conditions and for such purposes as may be determined by the Directors of the Company to be in the interest of the Company provided always that the aggregate number of shares to be issued pursuant to this resolution does not exceed ten per centum (10%) of the issued share capital of the Company for the time being AND THAT the Directors of the Company be also empowered to obtain the approval for the listing of and quotation for the additional shares so issued on the Bursa Malaysia Securities Berhad AND THAT such authority shall continue in force until the conclusion of the next Annual General Meeting (“AGM”) of the Company or the expiration of the period within which the next AGM is required by law to be held, whichever is the earlier; but any approval may be previously revoked or varied by the Company in general meeting.”

WAH SEONG CORPORATION BERHAD 187 Annual Report 2010 NOTICE OF ELEVENTH ANNUAL GENERAL MEETING

7. Ordinary Resolution Proposed Renewal of Authority to Buy-Back its Own Shares by the Company Ordinary Resolution 9 “THAT, subject to the provisions of the Companies Act, 1965 (“the Act”), the Memorandum and Articles of Association of the Company, the Main Market Listing Requirements (“MMLR”) of Bursa Malaysia Securities Berhad (“Bursa Securities”) and any other applicable laws, rules, orders, requirements, regulations and guidelines for the time being in force, the Directors of the Company be hereby unconditionally and generally authorised to make purchase(s) of ordinary shares of RM0.50 each in the Company’s issued and paid-up share capital through the Bursa Securities at any time and upon such terms and conditions and for such purposes as the Directors of the Company may, in their discretion deem fit, subject to the following:

i) the maximum number of ordinary shares which may be purchased and/or held by the Company shall be ten per centum (10%) of the issued and paid-up ordinary share capital of the Company for the time being (“WSC Shares”);

ii) the maximum fund to be allocated by the Company for the purpose of purchasing the WSC Shares shall not exceed the aggregate of the retained profits and share premium account of RM150.8 million and RM165.3 million respectively of the Company as at 31 December 2010;

iii) the authority conferred by this resolution will be effective immediately upon the passing of this resolution and will continue in force until:

a) the conclusion of the next Annual General Meeting (“AGM”) of the Company, at which time the authority shall lapse, unless by ordinary resolution passed at the meeting, the authority is renewed, either unconditionally or subject to conditions; b) the expiration of the period within which the next AGM after that date it is required by law to be held; or c) revoked or varied by an ordinary resolution of the shareholders of the Company at a general meeting;

whichever is earlier but not so as to prejudice the completion of the purchase(s) made by the Company before the aforesaid expiry date and, in any event, in accordance with the provisions of the MMLR of Bursa Securities or any other relevant authorities;

iv) upon completion of the purchase(s) of the WSC Shares by the Company, the Directors of the Company be hereby authorised to deal with the WSC Shares in the following manner:

a) to cancel the WSC Shares so purchased; or b) to retain the WSC Shares so purchased as treasury shares for distribution as dividend to the shareholders and/or resell on the market of Bursa Securities and/or for cancellation subsequently; or c) to retain part of the WSC Shares so purchased as treasury shares and cancel the remainder; or d) in such other manner as the Bursa Securities and such other relevant authorities may allow from time to time.

AND THAT the Directors of the Company be and are hereby authorised to take all such steps that are necessary or expedient and/or appropriate to implement, finalise and to give full effect to the purchase(s) of WSC Shares with full power to assent to any conditions, variations, and/or amendments that may be imposed by the relevant authorities.”

188 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTICE OF ELEVENTH ANNUAL GENERAL MEETING

8. Ordinary Resolution Proposed Renewal of Shareholders’ Mandate for Existing Recurrent Related Party Transactions and Provision of Financial Assistance Ordinary Resolution 10 “THAT, subject to the provisions of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, approval be and is hereby given to the Company and/or its subsidiaries (“WSC Group”) to enter into recurrent related party transactions of a revenue or trading nature and the provision of financial assistance as specified in Section 2.5 of Part B of the Circular to Shareholders dated 25 May 2011 which transactions are necessary for the day-to-day operations in the ordinary course of business of WSC Group on terms 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 and the shareholders’ mandate is subject to annual renewal and disclosure is made in the Annual Report of the aggregate value of transactions conducted pursuant to the shareholders’ mandate during the financial year and that such approval shall continue to be in force until:

i) the conclusion of the next Annual General Meeting (“AGM”) of the Company, at which time the proposed shareholders’ mandate will lapse, unless renewed by a resolution passed at the meeting;

ii) the expiration of the period within which the next AGM of the Company after the date it 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 resolution passed by the shareholders of the Company in a general meeting;

whichever is earlier.

AND THAT the Directors of the Company be and are hereby authorised to complete and to 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 transactions contemplated and/or authorised by this resolution.”

9. Ordinary Resolution Proposed New Shareholders’ Mandate for Additional Recurrent Related Party Transactions and Provision of Financial Assistance Ordinary Resolution 11 “THAT, subject to the provisions of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, approval be and is hereby given to the Company and/or its subsidiaries (“WSC Group”) to enter into new/additional recurrent related party transactions of a revenue or trading nature and the provision of financial assistance as specified in Section 2.5 of Part B of the Circular to Shareholders dated 25 May 2011 which transactions are necessary for the day-to-day operations in the ordinary course of business of WSC Group on terms 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 and the shareholders’ mandate is subject to annual renewal and disclosure shall be made in the Annual Report of the aggregate value of transactions conducted pursuant to the shareholders’ mandate during the financial year and that such approval shall continue to be in force until:

i) the conclusion of the next Annual General Meeting (“AGM”) of the Company, at which time the proposed new shareholders’ mandate will lapse, unless renewed by a resolution passed at the meeting;

ii) the expiration of the period within which the next AGM of the Company after the date it 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 resolution passed by the shareholders of the Company in a general meeting;

whichever is earlier.

WAH SEONG CORPORATION BERHAD 189 Annual Report 2010 NOTICE OF ELEVENTH ANNUAL GENERAL MEETING

AND THAT the Directors of the Company be and are hereby authorised to complete and to 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 transactions contemplated and/or authorised by this resolution.”

10. To transact any other business that may be transacted at an Annual General Meeting of which due notice shall have been given in accordance with the Companies Act, 1965 and the Company’s Articles of Association.

BY ORDER OF THE BOARD

WOO YING PUN (MAICSA 7001280) LAM VOON KEAN (MIA 4793) Company Secretaries Penang Dated: 25 May 2011

Notes: 1. A proxy may but need not be a Member of the Company and the provision of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company. If a Member appoints two (2) proxies, the appointments shall be invalid unless he specifies the proportions of his shareholdings to be represented by each proxy.

2. Where a Member of the Company is an authorised nominee as defined under the Securities Industry (Central Depositories) Act, 1991, it may appoint at least one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

3. If the appointor is a corporation, the proxy form must be executed under the common seal or under the hand of its officer or attorney duly authorised in writing.

4. In order for the proxy form to be valid, it must be deposited at the Company’s Registered Office at Suite 2-1, 2nd Floor, Menara Penang Garden, 42A Jalan Sultan Ahmad Shah, 10050 Penang, Malaysia, not less than forty-eight (48) hours before the time appointed for holding the meeting or at any adjournment thereof.

190 WAH SEONG CORPORATION BERHAD Annual Report 2010 NOTICE OF ELEVENTH ANNUAL GENERAL MEETING

Explanatory Notes on Special Business 1. Authority to Issue Shares Pursuant to Section 132D of the Companies Act, 1965 The Ordinary Resolution 8, if passed, will give authority to the Directors of the Company to issue and allot shares from the unissued share capital of the Company for such purposes as the Directors of the Company in their absolute discretion consider to be in the interest of the Company without having to convene a general meeting. This authority shall continue to be in force until the conclusion of the next Annual General Meeting (“AGM”) or the expiration of the period within which the next AGM is required by law to be held, whichever is the earlier; but any approval may be previously revoked or varied by the Company in general meeting.

The Company has not issued any new shares pursuant to Section 132D of the Companies Act, 1965 under the general mandate which was approved at the Tenth AGM of the Company held on 11 June 2010 and which will lapse at the conclusion of the Eleventh AGM to be held on 17 June 2011. A renewal of this authority is being sought at the Eleventh AGM.

The authority to Issue Shares Pursuant to Section 132D of the Companies Act, 1965 will provide flexibility and expediency to the Company for any possible fund raising involving the issuance or placement of shares to facilitate business expansion or strategic merger and acquisition opportunities involving equity deals or part equity or to fund future investment project(s) or for working capital requirements, which the Directors of the Company consider to be in the best interest of the Company.

As such, any additional cost to be incurred or delay arising from the need to convene a general meeting to approve such issuance of shares could be eliminated.

2. Proposed Renewal of Share Buy-Back Authority The Ordinary Resolution 9, if passed, will allow the Directors of the Company to exercise the power of the Company to purchase not more than ten per centum (10%) of the issued and paid-up share capital of the Company for the time being. This authority will expire at the conclusion of the next Annual General Meeting unless earlier revoked or varied by ordinary resolution passed by shareholders at a general meeting.

Please refer to Part A of the Circular to Shareholders dated 25 May 2011, which is enclosed and despatched together with the Annual Report 2010, for information pertaining to Ordinary Resolution 9.

3. Proposed Renewal of Shareholders’ Mandate for Existing Recurrent Related Party Transactions and Provision of Financial Assistance Proposed New Shareholders’ Mandate for Additional Recurrent Related Party Transactions and Provision of Financial Assistance

The Ordinary Resolutions 10 and 11, if passed, will allow the Company and/or its subsidiaries to enter into recurrent related party transactions of a revenue or trading nature with the related parties and the provision of financial assistance in the ordinary course of business which are necessary for the day-to-day operations based on 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.

Please refer to Part B of the Circular to Shareholders dated 25 May 2011, which is enclosed and despatched together with the Annual Report 2010, for information pertaining to Ordinary Resolutions 10 and 11.

WAH SEONG CORPORATION BERHAD 191 Annual Report 2010 STATEMENT ACCOMPANYING NOTICE OF ELEVENTH ANNUAL GENERAL MEETING (“AGM”)

1. Re-election and Re-appointment of Directors The following are the Directors standing for re-election/re-appointment at the Eleventh AGM of the Company:

Re-election of Directors who retire pursuant to Article 110 of the Company’s Articles of Association

(i) Jen (B) Tan Sri Dato’ Seri Mohd Zahidi Bin Haji Zainuddin (ii) Robert Tan Chung Meng (iii) Halim Bin Haji Din

Re-appointment of Director who retires pursuant to Section 129(6) of the Companies Act, 1965

(i) Tan Sri Dato’ Dr. Lin See Yan

Further details of the Directors standing for re-election and re-appointment are set out in the Profile of the Board of Directors on pages 20 to 23 of this Annual Report.

Information in relation to the Directors’ interests in the Company is stated in the Analysis of Shareholdings, ICULS and Warrants Holdings on pages 180 to 186 of this Annual Report.

2. Details of Attendance of Directors at the Board of Directors’ Meetings Name of Directors Date of No. of Board Appointment Meetings Attended Robert Tan Chung Meng 22 May 2002 4/4 Chan Cheu Leong 22 May 2002 4/4 Halim Bin Haji Din 22 May 2002 4/4 Pauline Tan Suat Ming 22 May 2002 4/4 Tan Sri Ab Rahman Bin Omar 1 October 2003 4/4 Giancarlo Maccagno 1 June 2004 4/4 Tan Sri Dato’ Dr. Lin See Yan 20 July 2004 4/4 Jen (B) Tan Sri Dato’ Seri Mohd Zahidi Bin Haji Zainuddin 29 November 2005 3/4

3. Place, Day, Date and Time of the Eleventh AGM

Place : Perdana IV, Level 3, Cititel Hotel, 66 Jalan Penang 10000 Penang, Malaysia

Day, Date and Time : Friday, 17 June 2011 at 9.00 a.m.

192 WAH SEONG CORPORATION BERHAD Annual Report 2010 WAH SEONG CORPORATION BERHAD Number of Ordinary Shares held (COMPANY NO. : 495846-A) (INCORPORATED IN MALAYSIA)

PROXY FORM

I/We (Full Name in block letters) NRIC or Company No. CDS Account No. of (Full address) being a *member/members of WAH SEONG CORPORATION BERHAD hereby appoint

NRIC No. (Full Name in block letters) of (Full address) or failing *him/her, NRIC No. (Full Name in block letters) of (Full Address) or failing *him/her, the Chairman of the Meeting as *my/our proxy to vote for *me/us on *my/our behalf, at the Eleventh Annual General Meeting of the Company to be held at Perdana IV, Level 3, Cititel Hotel, 66 Jalan Penang, 10000 Penang, Malaysia on Friday, 17 June 2011 at 9.00 a.m. and at any adjournment thereof in the manner indicated below.

NO. RESOLUTIONS FOR AGAINST 1. To receive and adopt the Audited Financial Statements of the Company and the Group for the financial year ended 31 December 2010 and the Reports of the Directors and Auditors thereon. 2. To approve the Directors’ Fees of RM315,000 for the financial year ended 31 December 2010. 3. To re-elect Jen (B) Tan Sri Dato’ Seri Mohd Zahidi Bin Haji Zainuddin who retires pursuant to Article 110 of the Company’s Articles of Association. 4. To re-elect Robert Tan Chung Meng who retires pursuant to Article 110 of the Company’s Articles of Association. 5. To re-elect Halim Bin Haji Din who retires pursuant to Article 110 of the Company’s Articles of Association. 6. To re-appoint Tan Sri Dato’ Dr. Lin See Yan who retires pursuant to Section 129(6) of the Companies Act, 1965. 7. To re-appoint Messrs PricewaterhouseCoopers as Auditors of the Company for the ensuing year and to authorise the Directors to fix their remuneration. 8. To authorise the Directors to issue and allot ordinary shares pursuant to Section 132D of the Companies Act, 1965. 9. Proposed Renewal of Authority to Buy-Back its Own Shares by the Company. 10. Proposed Renewal of Shareholders’ Mandate for Existing Recurrent Related Party Transactions and Provision of Financial Assistance. 11. Proposed New Shareholders’ Mandate for Additional Recurrent Related Party Transactions and Provision of Financial Assistance.

(Please indicate with an “x” in the space provided above as to how you wish to cast your vote. If no specific direction as to voting is given, the proxy will vote or abstain from voting at his/her discretion.) * Strike out whichever not applicable

Signature of Member Company Seal to be affixed here if Member is a Corporation

Signed this: day of 2011

Notes: 1. A proxy may but need not be a Member of the Company and the provision of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company. If a Member appoints two (2) proxies, the appointments shall be invalid unless he specifies the proportions of his shareholdings to be represented by each proxy. 2. Where a Member of the Company is an authorised nominee as defined under the Securities Industry (Central Depositories) Act, 1991, it may appoint at least one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account. 3. If the appointor is a corporation, the proxy form must be executed under the common seal or under the hand of its officer or attorney duly authorised in writing. 4. In order for the proxy form to be valid, it must be deposited at the Company’s Registered Office at Suite 2-1, 2nd Floor, Menara Penang Garden, 42A Jalan Sultan Ahmad Shah, 10050 Penang, Malaysia, not less than forty-eight (48) hours before the time appointed for holding the meeting or at any adjournment thereof. Fold this flap for sealing

Then fold here

AFFIX STAMP

THE COMPANY SECRETARIES WAH SEONG CORPORATION BERHAD (COMPANY NO. : 495846-A) Registered Office: Suite 2-1, 2nd Floor, Menara Penang Garden 42A Jalan Sultan Ahmad Shah 10050 Penang

1st fold here Wah seong corporation berhad (495846-A)

Suite 19.01, Level 19 The Gardens North Tower Mid Valley City Lingkaran Syed Putra 59200 Kuala Lumpur Malaysia

Tel : (603) 2685 6800 Fax : (603) 2685 6999 Website : www.wahseong.com