On behalf of the Board of Directors ("Board"), I hereby present the Annual Report and Audited Financial Statements of Lion Industries Corporation Berhad ("LICB" or "the Group") for the financial year ended 30 June 2009.

Financial Performance

After achieving an excellent performance in 2008, the Group entered the new financial year faced with greater challenges, as the global economy experienced its deepest and most severe downturn in decades in the wake of the sub-prime mortgage crisis in the United States of America. The unprecedented financial meltdown of major economies had brought the global economy into a severe recession. Industrial production, commodities prices and merchandise trade plummeted in the end of year 2008 and continued to fall rapidly in early 2009 across both advanced and emerging economies as inventories started to build up rapidly against a scenario of plunging demand. The Malaysian economy was not spared the effects of the global economic crisis and experienced a steep decline in both its exports and industrial production. The country’s Gross Domestic Product ("GDP") plunged to a negative growth of 6.2% and 3.9% in the first and second quarter of 2009 respectively. As the international economic environment was far worse than expected, the Malaysian Government revised downwards the estimated GDP for the whole of 2009 to a negative growth of between 4% to 5%. The sudden and dramatic global economic downturn had adversely affected the Group. The Group’s core steelmaking business was impacted the most with a steep fall in selling prices and demand. Various initiatives had been taken to enable the Group to meet the rising challenges amongst which was the reduction in production and inventories level. In line with the deterioration in steel prices, the Group had written down its inventories by RM472 million. Meanwhile, Lion Forest Industries Berhad ("LFIB"), our listed subsidiary, completed its take-over exercise of Silverstone Corporation Berhad ("SCB"), and recorded a gain of RM138 million arising from the negative goodwill on acquisition. The local tyre manufacturing business of SCB posted a set of commendable results and delivered a positive contribution to the Group’s earnings. Overall, the Group recorded a lower revenue of RM4.4 billion, registering a contraction of 36% from the preceding year and a net loss of RM243 million for the year under review.

Corporate Developments

On 28 November 2008, LFIB, a 73% owned listed subsidiary company, completed the acquisition of ordinary shares and redeemable cumulative convertible preference shares in SCB via a conditional take-over offer, following the issue and allotment of 19,931,861 new LFIB Shares to the accepting holders. Consequent thereupon, SCB became an 84.16% owned subsidiary of LFIB. On 11 September 2009, LFIB announced that the Federal Court had on the same date dismissed Sabah Forest Industries Sdn Bhd’s ("SFI") appeal with costs ("Judgement") and further ruled that the case be transferred to the High Court of Kota Kinabalu for assessment of damages payable by SFI. Following therefrom, SFI had instructed its solicitors to submit an application for review of the Judgement under Rule 137 of the Rules to the Federal Court 1995. Full details of the above are set out on pages 29 and 30 of this Annual Report.

Dividend

The Board of Directors is pleased to recommend a first and final dividend of 1.0% or 1.0 sen per share (2008: 1.0% or 1.0 sen per share), less 25% income tax (2008: 25%). Total net dividend payable, if approved at the Annual General Meeting, will amount to RM5.3 million (2008: RM5.3 million).

Corporate Social Responsibility

We recognise the importance of Corporate Social Responsibility (CSR) as an integral part of business and incorporating a CSR framework into our business plan to enhance stakeholder confidence, accountability and transparency. CSR is an important component of good business practice aimed at improving society and the environment.

Society

In carrying out its business activities, the Group is mindful of its responsibilities as a corporate citizen, in contributing to society while enhancing the bottom-line and shareholders’ value. The Group is focused on assisting the community through education and medical care via the two Foundations established by the Lion Group of Companies of which the Group is a member. The Lion-Parkson Foundation disburses funds for education and charitable needs; and every year, awards scholarships and interest-free education loans to undergraduates in the local universities. The Lion Group Medical Assistance Fund provides financial assistance to needy Malaysians who require medical treatment including surgery, purchase of equipment and medication. The Fund also sponsors community health programmes such as medical camps and the purchase of dialysis machines for Dialysis Centres providing subsidised treatment to the less fortunate. The Group also supports the community by contributing to fundraising and donation drives and responding to the plight of disaster victims locally and elsewhere.

Environment

In keeping abreast with technology and industry developments, the Group seeks to uphold environmental concerns through strict compliance of its operations with the environmental laws and regulations governing the industries in which it operates. In the face of increasing demand for energy and other natural resources, the Group is also identifying alternative sources of energy such as natural gas, and opting for new technologies that are environmentally friendly, for our business operations. The Group subscribes to the safety, health and environment regulations with a systematic approach reinforced by constant training and monitoring to ensure the safety and well-being of our employees.

Prospects

Recent macro-economic indicators around the world are showing signs of economic recovery as the effects of the implementation of massive stimulus packages by Governments of various countries begin to be felt. As such, the operating environment for the Group’s businesses in both the domestic and overseas markets is envisaged to improve and the Group is expected to record better results in the next financial year.

Acknowledgement

On behalf of the Board, I wish to express our deepest appreciation to all our valued shareholders, customers, financiers, business associates and the various governmental and regulatory authorities for their continued support and confidence in the Group throughout these challenging times. I would also like to convey my sincere appreciation and gratitude to my fellow Directors for their invaluable guidance, dedication and contributions. Last but not least, I sincerely thank the management and staff for their dedication and commitment to the Group.

TUN MUSA HITAM Chairman