RESULTS FOR ANNOUNCEMENT TO THE MARKET (Under ASX listing rule 4.

3A) Melbourne 22 August 2011 BlueScope Steel Limited (ASX Code: BSL) today reported its financial results for the twelve months ended 30 June 2011. Table 1: FY2011 Headlines Financial items Sales revenue from continuing operations Reported NPAT (NLAT) (1) Underlying NPAT (NLAT) Interim ordinary dividend Final ordinary dividend Earnings per share (2) (3) Gearing (net debt/net debt plus equity) FY2011 $9,112M ($1,054M) ($118M) 2 cps 0 cps (57.4)cps / (6.4)cps 19.5% FY2010 $8,598M $126M $113M 0 cps 5 cps 6.9cps / 6.2cps 11.4% Movements + $514M (+6%) - $1,180M (-936%) - $231M (-204%)

Notes: (1) underlying results in this report have been prepared based on the principles provided by the Financial Services Institute of Australasia and the Australian Institute of Company Directors (2) Shows reported / underlying. Please refer to Table 2(b) on page 5 for a detailed reconciliation. (3) Gearing pre 2H FY2011 net asset impairment write-down was 16.7% at 30 June 2011.

Core outcomes/issues for the year Sales revenue of $9,112M for FY2011, up $514M compared to FY2010, was primarily due to higher international and domestic selling prices and higher despatch volumes partly offset by a higher average AUD:USD exchange rate for FY2011 of 0.989 (vs. 0.883). Reported NLAT of $1,054M for FY2011, $1,180M lower than FY2010, mainly due to net impairment writedowns and spread contraction. In accordance with accounting standards the net impairment write-down comprised $797M at Coated & Industrial Products, $177M at BlueScope Distribution, $16M at Coated & Building Products North America partly offset by a $68M write-back of previous impairment write-downs in the Coated China business. Underlying NLAT of $118M for FY2011, $231M lower than FY2010 was largely due to spread contraction at Coated & Industrial Products Australia with higher selling prices being more than offset by higher raw material costs. Segment underlying earnings results: Lower Coated & Industrial Products Australia result driven by a decrease in spread as a result of continued growth in raw material costs, together with an adverse shift in domestic / export mix partly offset by higher volumes. Our Asian business continued to grow with sales volumes increasing by 16%, albeit at lower margins. The impact of this growth was more than offset by unfavourable foreign exchange movements. However, in local currency terms FY2011 was a record year. New Zealand and Pacific Steel Products produced another strong result, largely due to increased iron sands prices. Hot Rolled Products North America had a solid result due to improved spread, principally in 2H FY2011. Coated & Building Products North America had another tough year with volume growth being more than offset by lower margins, albeit their was a modest improvement in 2H FY2011 vs. 1H FY2011. Australia Distribution & Solutions result was driven by weaker margins. Consolidated inventory of A$2,029M at 30 June 2011 vs. A$1,829M at 30 June 2010 (A$1,962M at 31 December 2010). Liquidity A$1,137M at 30 June 2011 vs. A$1,620M at 30 June 2010 (A$1,332M at 31 December 2010). Business Restructuring The Company has announced a major restructure of Australian operations to reposition the Company for improved profit and growth. It has reinforced its commitment to steel production in Australia by better aligning Australian steelmaking production with domestic demand. The restructure includes shutting down the No. 6 Blast Furnace at Port Kembla and closing Western Port Hot Strip Mill. For the Coated and Industrial Products Australia (CIPA) reporting segment, if the restructure had been in place for the full year, the Earnings Before Interest and Tax (EBIT) improvement would have been around $225 million (management estimate on a pro forma FY2011 basis). One-off restructure costs in the range of $400-$500M (management estimate) are expected to be fully funded by release of working capital associated with the withdrawal from export markets. The company has the support of its lenders to undertake the restructure.

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Consolidated Results
Table 2a provides the FY2011 consolidated financial results and the comparable FY2010 period. Table 2b reconciles underlying operational earnings to reported earnings. Table 2a : Financial Headlines Twelve months ended 30-Jun-2011 (FY2011) and 30-Jun-2010 (FY2010) Variance Financial Measure Total revenue
(1)

FY2011 A$M A$M A$M A$M A$M A$M A$M A$M /s /s /s /s /s 9,153 (687) 254 (1,043) (101) (106) (1,054) (118) (57.4) (6.4) (57.4) 2 0 (218) % % % % % $/s (16.2)% (1.6)% (19.6)% (2.2)% 19.5% 1.97

FY2010 8,624 590 605 240 255 (113) 126 113 6.9 6.2 6.9 0 5 136 3.8% 4.0% 2.3% 2.0% 11.4% 2.53

$ 529 (1,277) (351) (1,283) (356) 7 (1,180) (231) (64.3) (12.6) (64.3) 0 0 (354)

% 6 (216) (58) (535) (140) 6 (936) (204) (930) (204) (932)

Earnings before interest tax, depreciation and (2) amortisation (EBITDA) Reported Underlying EBIT/(EBIT loss)
(2)

Reported Underlying

Borrowing costs NPAT/(NLAT) attributable to BlueScope Steel Shareholders Reported Underlying Earnings per share
(3)

Reported Underlying

Diluted earnings per share Reported Interim Dividend Full Year Dividend Net cash flow from operating and investing activities (pre-tax and interest) Return on invested capital
(5) (4)

(261)

Reported Underlying

Return on equity

Reported Underlying

Gearing (net debt / net debt plus equity) (6) Net tangible assets per share

(1) Excludes the companys 50% share of North Star BlueScope Steel revenue of $697M in FY2011 ($626M in FY2010). Includes revenue other than sales revenue of $41M in FY2011 ($26M in FY2010). (2) Includes 50% share of net profit from North Star BlueScope Steel of $74M in FY2011 ($62M in FY2010). (3) Earnings per share is based on the average number of shares on issue during the respective reporting periods, i.e. 1,836.5M in FY2011 vs. 1,823.3M in FY2010. (4) Return on invested capital is defined as earnings before interest and tax over average monthly capital employed. (5) Return on equity is defined as net profit after tax attributable to shareholders over average monthly shareholders equity. (6) FY2011 gearing was 8.1% higher than FY2010 mainly driven by additional borrowings to support operating and investing activities and the net asset impairment write-down during 2H FY2011. Gearing pre 2H FY2011 net asset impairment write-down was 16.7% at 30 June 2011. Variance Analysis (FY2011 vs. FY2010) Total revenue The $529M (6%) increase principally reflects: Higher international slab and hot rolled coil prices. Higher export sales volumes at Coated & Industrial Products Australia driven by the successful restart of the No. 5 Blast Furnace in the comparative period. Higher export sales volumes from New Zealand & Pacific Steel Products. Higher domestic sales volumes at Coated & Building Products Asia predominantly at Thailand and China. These were partly offset by: Higher average AUD:USD exchange rate for FY2011 of 0.989 compared to the previous corresponding period of 0.883. Lower domestic despatch volumes at Coated & Industrial Products Australia primarily within the Distribution and Pipe and Tube sectors.
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Lower domestic selling prices at Australia Distribution & Solutions. EBIT The $356M (140%) decrease in underlying EBIT principally reflects: Spread ($324M unfavourable) Prices ($620M favourable) Higher international slab and hot rolled coil prices. Higher Taharoa iron sand selling prices at New Zealand Steel. Higher domestic selling prices at Coated & Building Products North America. Partly offset by: Lower average domestic selling prices at Australia Distribution & Solutions. Raw material costs ($944M unfavourable) Principally higher USD coal and iron ore purchase prices partly offset by lower value of opening inventory carried forward into FY2011 compared to higher value of opening inventory carried forward into FY2010 at Coated & Industrial Products Australia. Higher steel feed costs at Coated & Building Products Asia and North America. Higher inventory net realisable value provisions for inventory on hand at June 2011 ($87M) compared to June 2010 ($13M). Higher cost of coal and scrap at New Zealand Steel. Partly offset by: Lower steel feed costs at Australia Distribution & Solutions. North Star BlueScope Steel ($12M favourable) Exchange rates ($12M unfavourable) Unfavourable foreign exchange movements in Coated & Building Products Asia and New Zealand and Pacific Steel Products. Partly offset by: Net favourable foreign exchange movement in the AUD:USD vs. FY2010 in respect of the unfavourable impact on export sales revenue more than offset by the favourable impact in respect of raw materials purchased in USD within Coated & Industrial Products Australia. Average exchange rate for FY2011 was 0.989 compared to 0.883 in FY2010. Sales volumes and product mix ($6M favourable) Higher despatch volumes at Coated & Building Products Asia, predominantly Thailand and China. Partly offset by: Unfavourable destination mix due to lower margin export despatches combined with higher export despatches at negative full cost margins at Coated & Industrial Products Australia. Costs ($22M unfavourable) comprising the following components: Cost improvement initiatives ($38M favourable) Lower repairs and maintenance, conversion, operational, overhead and discretionary costs delivered through cost reduction initiatives. Cost escalation ($109M unfavourable) Escalation of employment, utilities, consumables and other costs. One-off and discretionary costs ($82M favourable) Higher fixed conversion cost absorption driven by increased production volumes. . Other costs ($33M unfavourable) Higher freight costs primarily due to destination mix, higher export volumes and rate increases. Other items ($16M unfavourable) Mainly higher depreciation expense primarily in Coated & Industrial Products Australia and New Zealand Steel. Unusual or non-recurring items in reported EBIT include ($926M unfavourable) Net asset impairment write down during FY2011 ($922M) comprising a write down at Coated & Industrial Products Australia ($797M), Australia Distribution & Solutions ($177M) and Coated & Building Products North America ($16M) partly offset by reversal of previous impairment in Coated China ($68M). Refer table 2b for a full description. Profit on sale and leaseback of properties within Australia Distribution & Solutions during FY2010 ($13M). Insurance recovery within the Lysaght Taiwan business that was closed during 2007 and reduced provisioning in relation to the discontinued Packaging Products business during FY2010 ($7M) partly offset
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by profit on sale of Packaging Products assets and favourable foreign exchange translation gains during FY2011 ($2M). Higher restructure, closure and redundancy costs within Australia Distribution & Solutions in relation to Urban Water, Remote Building Solutions and Distribution branches ($7M) in FY2011 partly offset by plant rationalisation costs within Lysaght, Sheet and Coil Processing Services and BlueScope Water ($2M) during FY2010. Higher business development costs in Corporate ($3M).

Partly offset by: Staff redundancies and other internal restructuring costs at Coated & Industrial Products Australia ($24M) during FY2010 partly offset by staff redundancy and other internal restructuring costs ($7M) during FY2011. Staff redundancies and other internal restructuring costs at Coated & Building Products North America ($5M) during FY2010. Funding Financing costs for the twelve months ended 30 June 2011 were $106M ($113M in FY2010). The decrease in financing costs was largely the result of a decrease in commitment fees payable on undrawn funds to $19M ($29M in FY2010) and a decrease in the average interest rate to 7.3% (7.5% in FY2010) partly offset by a $114M increase in average borrowings to $1,091M. Tax The net tax benefit in FY2011 was $101M (in FY2010 $3M). The effective tax benefit for the twelve months ended 30 June 2011 was 8.9% (1.9% benefit in FY2010) including the asset impairments which were not tax effected. Excluding impairments the effective tax benefit was 44.2% and is more favourable than the Australian tax rate of 30% primarily due to the mix of earning/losses before tax by different tax regions, tax losses and timing difference utilised primarily in relation to operating profits generated in Coating Steel China and Steel Vietnam and tax provision adjustments as a result of finalising the Australian 2010 tax return. The tax benefit for FY2010 includes the recognition of unbooked deferred tax assets in New Zealand partly offset by an adverse tax expense charge following the New Zealand Governments decision to remove depreciation deductions on buildings. Excluding these two items the effective tax rate for FY2010 would be 15.6% and is lower than the Australian tax rate of 30% primarily due to the realisation of tax benefits in Australia and the mix of earning/losses before tax by different tax regions. Table 2b: Reconciliation of Underlying Operational Earnings to Reported Earnings FY2011 vs. FY2010; $ millions Underlying Operational Earnings have been adjusted for unusual or non-recurring events to reflect the underlying financial performance from ongoing operations. EBIT Factors Reported earnings Net (gains)/losses from businesses discontinued Reported earnings (from continuing operations) Unusual or non-recurring events: Restructure and redundancy costs (2) Profit on Sale and Leaseback of Properties Asset impairment (4) Business Development Costs (5) New Zealand tax adjustment (6) Underlying Operational Earnings
(3) (1)

NPAT FY2010 240 (7) 233 FY2011 (1,054) (1) (1,055) FY2010 126 (6) 120

EPS$(7) FY2011 (0.57) (0.00) (0.57) FY2010 0.07 (0.00) 0.07

FY2011 (1,043) (2) (1,045)

14 0 922 7 0 (101)

31 (13) 0 4 0 255

10 0 922 5 0 (118)

21 (9) 0 3 (22) 113

0.01 0 0.50 0 0 (0.06)

0.01 0 0 0.00 (0.01) 0.06

(1) FY2011 reflects profit on sale of Packaging Products assets and a foreign exchange translation gain within the Lysaght Taiwan business. FY2010 reflects reduced provisioning in relation to outstanding claims and an insurance recovery within the Lysaght Taiwan business that was closed during 2007 and reduced provisioning in relation to the closed Packaging Products business. (2) FY2011 reflects staff redundancies and other internal restructuring costs at Coated & Industrial Products Australia and Australia Distribution & Solutions and plant rationalisation costs at Australia Distribution & Solutions. FY2010 reflects staff redundancies and other internal restructuring costs at Coated & Industrial Products Australia and Coated & Building Products North America and plant rationalisation costs at Australia Distribution & Solutions within Lysaght, Sheet and Coil Processing Services and BlueScope Water. (3) FY2010 reflects profit on sale and leaseback of properties within Australia Distribution & Solutions.
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(4) Net asset impairment write down ($922M) comprising: Coated & Industrial Products Australia - Asset impairment write down of A$797M as a result of the ongoing macroeconomic challenges of a high AUD:USD, low spreads (selling price less raw material costs) and low domestic demand. Australia Distribution & Solutions Goodwill impairment write down $177M as a result of the ongoing macroeconomic challenges of a high AUD:USD improving the affordability of imports resulting in margin compression. Coated & Building Products North America Asset impairment write down of A$16M as a result of forecast lower margins at Steelscape. China Coated business Asset impairment write back of A$68M to the asset base. An $190M asset write down was recognised in the December 2007 accounts due to poor financial performance of the coated business (both lower sales volumes and weaker margins) and continued weaker outlook. A further $25M write-down was recognised in December 2008. A number of changes to the business operations in China which have, along with the continued strength of the Chinese economy, resulted in a material improvement in earnings over the last two years. (5) FY2011 and FY2010 reflects business development in Corporate. (6) Recognition of previously unbooked deferred tax assets in New Zealand Steel. (7) Earnings per share is based on the average number of shares on issue during the respective reporting periods, ie. 1,836.5M in FY2011 vs. 1,823.3M in FY2010. Equity, Financial Flexibility and Cash Flow Table 3 below provides a summary of consolidated equity and return measures at 30 June 2011 and 2010. Table 3: Consolidated Return Statistics FY2011 and FY2010; mixed measures Financial Measure Shares outstanding end of period (million) Average shares for the period (million) Return on equity based on reported NPAT attributable to shareholders Return on equity based on underlying operational NPAT earnings Return on invested capital based on reported EBIT Return on invested capital based on underlying EBIT FY2011 1,842.2 1,836.5 (19.6%) (2.2%) (16.2%) (1.6%) FY2010 1,823.3 1,823.3 2.3% 2.0% 3.8% 4.0% % 1 1 (960) (207) (531) (140)

Table 4 below provides a summary of key financial flexibility metrics based on underlying operational performance. Table 4: Consolidated Financial Flexibility Measures FY2011 and FY2010; mixed measures Variance Financial Measure Underlying Operational EBITDA Interest expense Borrowings Underlying Operational EBITDA / interest times Debt / Underlying Operational EBITDA
(2) (1)

FY2011 $M $M $M 254 106 1,240 2.4 times 4.9

FY2010 605 113 994 5.4 1.6

$M (351) (7) 246 (3) 3.3

% (58) (6) 25 (56) 206

(1) Calculated on a 12 month trailing basis for both underlying operational EBITDA and interest. (2) Calculated on a 12 month trailing basis for underlying operational EBITDA, using borrowings on hand at the respective balance dates.

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Table 5 below provides a summary of consolidated operating and investing cash flows. Table 5: Consolidated Cash Flow FY2011 and FY2010; $ millions Variance Factors Reported EBITDA
(1)

FY2011 (687)

FY2010 590

$M (1,277)

% (216)

Add back non cash items - Share of profits from associates and joint venture partnership not received as dividends - Impaired assets - Net (gain) loss on sale of assets - Expensing of share-based employee benefits Cash EBITDA Changes in working capital (2) Net cash from operating activities Net cash from investing activities Cash from operating and investing (pre-tax) Net interest paid Tax received / (paid)
(3)

62 925 1 7 308 (166) 142 (360) (218) (108) (12) (338)

8 0 (6) 4 596 (133) 463 (327) 136 (93) 7 50

54 925 7 3 (288) (33) (321) (33) (354) (15) (19) (388)

675 117 75 (48) (25) (69) (10) (260) (16) (271) (776)

Cash from operating and investing (post-tax) (as per statutory cash flow) (1) (2)

(3)

Refer EBIT Variance analysis for major changes in EBITDA. FY2011 changes in working capital primarily reflect higher inventories resulting from higher raw material costs and an increase in volumes on hand partly offset by lower receivables and higher creditors. FY2010 changes in working capital primarily reflects a increase in receivables and inventory mainly driven by higher selling prices and despatch volumes partly offset by higher creditors also driven by increased production and despatch volumes. The BlueScope Steel Australian tax consolidated group is estimated to have carry forward tax losses, as at 30 June 2011, in excess of $1.2B including those in relation to the write-down of non-current assets. There will be no Australian income tax payments until these are recovered.

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Business Unit Reviews Table 6a: Sales Revenue FY2011 and FY2010; 2H 2011; 1H FY2011 and 2H FY2010; $ millions Segment Coated & Industrial Products Australia Australia Distribution & Solutions Inter-segment
(1)

FY2011 5,193 1,675 (584) 6,284 672 1,487 0 1,312 0 1,312 0 (643) 9,112 0 0 9,112

FY2010 4,745 1,762 (628) 5,879 618 1,349 0 1,307 0 1,307 0 (556) 8,597 1 0 8,598

2H FY2011 2,691 808 (298) 3,201 342 747 0 637 0 637 0 (415) 4,512 0 0 4,512

1H FY2011 2,502 867 (286) 3,083 330 740 0 675 0 675 0 (228) 4,600 0 0 4,600

2H FY2010 2,614 866 (312) 3,168 340 720 0 614 0 614 0 (336) 4,506 1 0 4,507

Sub-total Australia New Zealand and Pacific Steel Products Coated and Building Products Asia Hot Rolled Products North America Coated and Building Products North America Inter-segment (1) Sub-total North America Corporate and Group Inter-segment
(1)

Continuing Businesses Discontinued Businesses Inter-segment Total BLUESCOPE STEEL

Table 6b: Reported EBIT FY2011 and FY2010; 2H 2011; 1H FY2011 and 2H FY2010; $ millions Segment Coated & Industrial Products Australia Australia Distribution & Solutions Inter-segment (1) Sub-total Australia New Zealand and Pacific Steel Products Coated and Building Products Asia Hot Rolled Products North America Coated and Building Products North America Inter-segment
(1)

FY2011 (1,063) (218) (2) (1,283) 82 176 72 (36) 0 36 (74) 18 (1,045)

(3)

FY2010 84 12 (2) 94 73 116 61 (21) 0 40 (71) (19) 233 7 0 240

2H FY2011 (966) (126) (3) (1,095) 33 62 64 (20) 0 44 (40) 1 (995) 0 0 (995)

1H FY2011 (97) (92) 1 (188) 49 114 8 (16) 0 (8) (34) 17 (50) 2 0 (48)

2H FY2010 176 5 6 187 52 66 47 (32) 0 15 (40) (17) 263 0 0 263

Sub-total North America Corporate and Group Inter-segment (1) Continuing Businesses Discontinued Businesses Inter-segment Total BLUESCOPE STEEL

2 0 (1,043)

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Table 6c: Underlying EBIT FY2011 and FY2010; 2H 2011; 1H FY2011 and 2H FY2010; $ millions Segment Coated & Industrial Products Australia Australia Distribution & Solutions Inter-segment
(1)

FY2011 (258) (34) (2) (294) 82 108 72 (20) 0 52 (67) 18 (101) 0 0 (101)

FY2010 108 2 (2) 108 73 116 61 (16) 0 45 (68) (19) 255 0 0 255

2H FY2011 (161) (19) (3) (183) 33 62 64 (4) 0 60 (33) 1 (60) 0 0 (60)

1H FY2011 (97) (15) 1 (111) 49 46 8 (16) 0 (8) (34) 17 (41) 0 0 (41)

2H FY2010 188 (1) 6 193 52 66 47 (27) 0 20 (37) (17) 277 0 0 277

Sub-total Australia New Zealand and Pacific Steel Products Coated and Building Products Asia Hot Rolled Products North America Coated and Building Products North America Inter-segment
(1)

Sub-total North America Corporate and Group Inter-segment

(1)

Continuing Businesses Discontinued Businesses Inter-segment Total BLUESCOPE STEEL

(1) Inter-segment revenue reflects the elimination of internal sales between reporting segments. Inter-segment EBIT reflects an entry to eliminate profit-in-stock associated with inter-segment sales. (2) Excludes the companys 50% share of North Star BlueScope Steels sales revenue of A$697M in FY2011 (A$626M in FY2010). (3) FY2011 reflects profit on sale of Packaging Products assets and a foreign exchange translation gain within the Lysaght Taiwan business. FY2010 reflects reduced provisioning in relation to outstanding claims and an insurance recovery within the Lysaght Taiwan business that was closed during 2007 and reduced provisioning in relation to the closed Packaging Products business. BLUESCOPE STEEL AUSTRALIA Coated & Industrial Products Australia This segment comprises: Port Kembla Steelworks, NSW, Australia (coke, iron, slab, plate and hot rolled coil production); Springhill Coated, Port Kembla, NSW, Australia (cold rolled coil, metal coated and painted steel production); Western Port facility, Hastings, VIC, Australia (hot rolled coil, cold rolled coil, metal coated and painted steel production); Western Sydney COLORBOND steel facility, NSW, Australia; Acacia Ridge COLORBOND steel facility, Queensland, Australia; and North America, European and Asian export trading offices. (i) Financial Performance

Table 7a: Financial Performance FY2011 and FY2010 Variance Financial Measure ($M, unless marked) Sales revenue
(1), (2) (2)

FY2011 5,193 (861) (1,063)

FY2010 4,745 282 84 108 224 3,464 2%

$ 448 (1,143) (1,147) (366) 26 (710)

% 9 (405) (1,365) (339) 12 (20)

Reported EBITDA

Reported EBIT/(EBIT loss) Underlying operational EBIT/(EBIT loss) Capital and investment expenditure Net operating assets (pre tax) Return on net assets (pre tax)
ASX FY2011 Earnings Report
(4) (5) (3)

(258) 250 2,754 (30%)

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Table 7b: Financial Performance 2H FY2011 vs. 2H FY2010 and 1H FY2011 Financial Measure ($M, unless marked) Sales revenue
(1), (2) (2)

2H FY2011 2,691 (864) (966) (161) 160 2,754 (55%)

2H FY2010 2,614 273 176 188 123 3,464 10%

Variance 77 (1,137) (1,142) (349) 37 (710)

1H FY2011 2,502 3 (97) (97) 90 3,582 (5%)

Reported EBITDA

Reported EBIT/(EBIT loss) Underlying operational EBIT/(EBIT loss) (3) Capital and investment expenditure Net operating assets (pre tax) Return on net assets (pre tax) (1) (2)
(4) (5)

(3)

(4)

(5)

FY2011 includes coke sales of 172kt (FY2010 175kt and 1H FY2011 87kt and 2H FY2011 85kt). Sales revenue and EBITDA includes $3,999M and $(770M) respectively in relation to the old Hot Rolled Products Australia segment (FY2010 $3,456M and $108M respectively and 2H FY2011 $1,985M and $(721M) respectively). These numbers represent sales revenue and EBITDA for the old Hot Rolled Products Australia segment and have not been adjusted for profit in stock eliminations that will now be occurring within the new Coated & Industrial Products Australia segment due to sales between the businesses in this segment. FY2011 EBIT has been adjusted for an asset impairment write down ($797M), staff redundancies and other internal restructuring costs ($7M). FY2010 EBIT has been adjusted for staff redundancies and other internal restructuring costs ($24M). Increase in net operating assets primarily reflects higher inventories resulting from higher raw material costs and an increase in volumes on hand and higher property, plant and equipment partly offset by higher creditors and lower receivables. Return on net assets is defined as reported EBIT (annualised in case of half year comparisons) / average monthly net operating assets. Variance Analysis (FY2011 vs. FY2010)

(ii)

The $448M increase in sales revenue is primarily due to higher international slab and hot rolled coil prices and higher volumes primarily driven by the successful restart of the No. 5 Blast Furnace in the comparative period and lower domestic despatches primarily within the Distribution and Pipe and Tube sectors. These were partly offset by an adverse foreign exchange impact due to the stronger AUD. The $366M decrease in underlying EBIT was largely due to: Reduced spread driven by: Higher coal, iron ore, scrap and alloy purchase prices Partly offset by Lower valued opening inventory carried forward from FY2010 compared to higher priced opening inventory carried forward into FY2010. Higher international slab and hot rolled coil prices Higher domestic commoditised prices driven by stronger global steel prices Unfavourable destination mix due to lower margin export despatches combined with higher overall export despatches. Higher inventory net realisable value provisions for inventory on hand at June 2011 ($77M) compared to June 2010 ($11M). Higher freight costs due to higher export destination mix. These were partly offset by: Higher fixed conversion cost absorption driven by increased production volumes. Net favourable foreign exchange movement in the AUD:USD (FY2011 average 0.989 vs. FY2010 0.883) in respect of the unfavourable impact on sales revenue more than offset by the favourable impact in respect of raw materials purchased in USD compared to FY2010 ($24M). Unusual and non-recurring items in reported EBIT included: Asset impairment write down of ($797M) as a result of ongoing macroeconomic challenges of a high AUD, high raw material costs and low prices during FY2011. Staff redundancies and other internal restructuring costs during FY2011 ($7M). (iii) Variance Analysis (2H FY2011 vs. 1H FY2011)

The $64M decrease in underlying EBIT was largely due to: Reduced spread Higher USD denominated coal and iron ore purchase prices.
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Lower value of opening inventory carried forward from FY2010 into 1H FY2011. Lower domestic prices driven by strengthening of the AUD in 2H FY2011 to combat increased import competition in the domestic market. Partly offset by: Higher international prices driven by improved hot rolled coil prices.

These were partly offset by: Net favourable foreign exchange movement in the AUD:USD (2H FY2011 average 1.0329 vs. 1H FY2011 0.945), Improved yields and conversion costs driven by cost improvement initiatives. Lower inventory net realisable value provisions for inventory on hand at June 2011 compared to December 2010. Unusual and non-recurring items in reported EBIT included: Asset impairment write down of ($797M) as a result of ongoing macroeconomic challenges of a high AUD, high raw material costs and low prices during 2H FY2011. Staff redundancies and other internal restructuring costs incurred in 2H FY2011 ($7M). (iv) Operations Report Port Kembla Steelworks Iron & Slab Ironmaking production of 5.05Mt in FY2011 (vs. 4.72Mt in FY2010) as both blast furnaces (BF) operated for the duration of FY2011. In FY2010, BF No. 6 was the only furnace running until 19 August 2009 when BF No. 5 recommenced operations. Ironmaking production of 2.5Mt in 2H FY2011 (vs. 2.56Mt in1H FY2011). Slab production was 5.173Mt in FY2011 (vs. 4.72Mt for FY2010) and 2.53Mt in 2H FY2011 vs. 2.654t in 1H FY2011. Hot Strip Mill (HSM) Hot rolled coil (HRC) production of 2.81Mt in FY2011 (vs. 2.71Mt in FY2010). HRC production of 1.31Mt in 2H FY2011 (vs. 1.50Mt in 1H FY2011). 13 day mill maintenance outage completed during March 2011. Plate Mill Plate production of 0.36Mt in FY2011 (vs. 0.32Mt in FY2010). Plate production of 0.20Mt in 2H FY2011 (vs. 0.17Mt in 1H FY2011). 31 day mill maintenance outage undertaken during December 2010. Coated Businesses Western Port Hot rolled coil production of 0.95Mt in FY2011 (vs.1.02Mt in FY2010) and 0.48Mt in 1H FY2011 vs. 0.47Mt in 1H FY2011. Metal coating line production of 0.76Mt in FY2011, (vs. 0.69kt in FY2010) and 0.38Mt in 1H FY2011 and 0.38MT in 2H FY2011) due to continuing steady building market demand. Paint line production of 0.27Mt in FY2011 (vs. 0.26Mt in FY2010) and 0.14Mtin 1H FY2011 and 0.13Mt in 2H FY2011). Springhill Coupled pickled cold mill production of 0.92Mt in FY2011 (vs. 0.92Mt in FY2010). Production of 0.49Mt in 2H FY2011 (vs. 0.43Mt in 1H FY2011). Metal coating line production of 0.76Mt in FY2011 (vs. 0.78Mt in FY2010). Production of 0.39Mt in 2H FY2011 (vs. 0.37Mt in 1H FY2011). No. 3 paint line production of 0.19Mt in FY2011 (vs. 0.18Mt in FY2010). Production of 0.11Mt in 2H FY2011 (vs. 0.09Mt in 1H FY2011).

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Western Sydney Centre (Paint Line) Paint line production of 0.09Mt in FY2011 (vs. 0.09Mt in FY2010). Production of 0.05Mt in 2H FY2011 (vs. 0.04Mt in 1H FY2011). Acacia Ridge Centre Paint line production of 0.08Mt in FY2011 (vs. 0.09Mt in FY2010). Production of 0.03Mt in 2H FY2011 (vs. 0.05Mt in 1H FY2011). The Queensland floods and cyclone activity have unfavourably impacted product demand and subsequently, facility loading. Markets Direct Sales to Domestic Building Sector (customers who participate in dwelling and non-dwelling segments) This market sector is referred to as the Australian Domestic Building Sector. Sales volumes to the Domestic Building Sector for FY2011 were in line with FY2010. Year on year, volumes were influenced by a small growth in residential activity offset by weaker year-onyear non-residential construction activity. This reflects the winding up of the governments BER stimulus program early in FY2011. Comparing the halves, total building volumes in 2H FY2011 were 6% lower than 1H FY2011. This was a result of lower building approvals in early Q3 FY2011 (dwelling approvals down 19% vs Q2, BIS Shrapnel) flowing through reduced activity in late Q3 and Q4 (residential activity down 5% in H2 vs H1, non-residential down 17%, BIS Shrapnel) and delayed construction in Queensland and Victoria due to storms and floods. BlueScope maintained market share for its painted products in FY2011. Pricing of the premier brand COLORBOND steel was increased in February 2011. Average pricing for metallic coated products declined in FY2011 compared to FY2010 largely due to increased competition from imports and the strength of the Australian dollar. Sales to Domestic Customers and Distributors who participate across all end market segments These market sectors are referred to as the Australian Domestic Industrial Sector. Sales volumes declined 16% in FY2011 (vs. FY2010). Inventory re-stocking in late 2H FY2010 saw the Distribution and Pipe & Tube sectors carrying high inventory into 1H FY2011. Distribution sector was impacted by de-stocking activity during 1H FY2011 and Q4 FY2011 largely due to customer uncertainty around the market outlook for both price and business activity. This can be seen by the reduced channel sales across all segments (including Dwelling and NonDwelling, which is also affected by structural Pipe & Tube). A reduction in underlying demand, primarily driven by: Impact of the high Australian dollar reducing the competitiveness of domestic fabricators and manufacturers; and A reduction in government stimulus driven activity and projects with the completion of major works such as the QSN3 gas pipeline and the Melbourne Desalination Project. Increased import competition into the Engineering, Manufacturing and Mining segments, largely driven by the strong Australian Dollar. Market share for FY2011 was consistent with FY2010. 1H FY2011 was impacted by increased supply of global steel and a strong AUD. This was mostly offset in 2H FY2011 by tightening supply of global steel and import displacement initiatives. Average pricing for Industrial Markets products increased in FY2011, reflecting higher global steel prices in Q1 but partly offset by the impact of the stronger Australian dollar through Q2 and Q3. Prices recovered in late Q3 2011 before declining again at the back end of Q4 2011. Sales to Export Markets Full year total sales volume despatched to export markets was 2.7 million tonnes (80% flat products / 20% coated products) on the back of a volatile year in export slab and HRC pricing. Volumes to affiliates improved by 3% (vs. FY2010). HRC prices softened during Q2 FY2011 vs Q1 FY2011 (approximately -2%) with continued uncertainty in world economic markets fuelling weaker demand resulting in buyers de-stocking to minimum operating levels. Weaker demand in the Australian domestic market resulted in higher volume of export tonnes despatched in Q2 FY2011 compared to Q1 FY2011.

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Following this retraction, global steel demand improved throughout Q3 FY2011 as companies re-stocked, particularly in the USA, with Hot Rolled Coil (HRC) prices then recovering strongly by 25% - 30% (region dependent). Leading into Q4 FY2011, globally traded HRC prices and steel price sentiment experienced a downturn on the back of over-supply concerns with producers deferring to export markets to shed volume. Australia Distribution & Solutions This segment comprises: BlueScope Distribution with 72 sites throughout Australia; BlueScope Lysaght, with 37 sites throughout Australia; Sheet and Coil Processing Services, with 6 sites across Australia Design Manufacture Construct (DMC, formerly known as Emerging Businesses), comprising Highline, Pioneer Water, Urban Water and BlueScope Buildings with 5 manufacturing and 5 retail sites across Australia and 1 manufacturing site and 1 retail site in the United States (i) Financial Performance

Table 8a: Financial Performance FY2011 and FY2010 Variance Financial Measure ($M, unless marked) Sales revenue Reported EBITDA/(EBITDA loss) Reported EBIT/(EBIT loss) Underlying operational EBIT/(EBIT loss) Capital and investment expenditure Net operating assets (pre tax) (2) Return on net assets (pre tax) (3) Table 8b: Financial Performance 2H FY2011 vs. 2H FY2010, and 1H FY2011 Financial Measure ($M, unless marked) Sales revenue Reported EBITDA Reported EBIT/(EBIT loss) Underlying operational EBIT/(EBIT loss) Capital and investment expenditure Net operating assets (pre tax) (2) Return on net assets (pre tax) (3)
(1) (1)

FY2011 1,675 (187) (218) (34) 28 689 (26%)

FY2010 1,762 43 12 2 10 881 1%

$ (87) (230) (230) (36) 18 (192)

% (5) (535) (1,917) (1,800) 180 (22)

2H FY2011 808 (110) (126) (19) 16 689 (7%)

2H FY2010 866 21 5 (1) 7 881 1%

Variance (58) (131) (131) (18) 9 (192)

1H FY2011 867 (77) (92) (15) 12 816 (21%)

(1) FY2011 EBIT has been adjusted for impairment write down of goodwill ($177M), plant closure & rationalisation costs ($5M) and restructuring & redundancy costs ($2M). FY2010 EBIT has been adjusted for profit on sale and leaseback of properties ($13M) and plant rationalisation costs within Lysaght, Sheet and Coil Processing Services and BlueScope Water ($2M). (2) Decrease in net operating assets primarily reflects goodwill impairment during FY2011. (3) Return on net assets is defined as reported EBIT (annualised in case of half year comparison) / average monthly net operating assets. (ii) Variance Analysis (FY2011 vs. FY2010)

The $87M decrease in sales revenue was mainly due to lower domestic selling prices primarily driven by the stronger AUD (average exchange rate for FY2011 was 0.989 compared to 0.883 in FY2010) and reduced domestic demand. The $36M reduction in underlying EBIT was largely due to: Reduced spread as lower domestic prices more than offset reduced steel feed costs. Reduced volumes, particularly in BlueScope Lysaght, driven by weak market conditions and demand.
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Higher inventory net realisable value provisions for inventory on hand at June 2011 compared to June 2010. Unusual and non-recurring items in reported EBIT include: Goodwill impairment write down during FY2011 ($177M) due to a revised medium term outlook that is influenced by ongoing macroeconomic challenges of a high AUD:USD improving affordability of imports resulting in margin compression. Profit on sale and leaseback of properties during FY2010 ($13M). Plant rationalisation costs booked during FY2011 ($5M). Plant rationalisation costs booked during FY2010 ($2M). Staff redundancies and other internal restructuring costs during FY2011 ($2M). (iii) Variance Analysis (2H FY2011 vs. 1H FY2011)

The $4M reduction in underlying EBIT was largely due to: Lower despatch volumes in BlueScope Lysaght mainly driven by seasonality impacts. Higher inventory net realisable value provisions for inventory on hand at June 2011 compared to December 2010. Unusual and non-recurring items in reported EBIT include: Goodwill impairment write down during 1H FY2011 ($77M) and 2H FY2011 ($100M). Plant rationalisation costs booked during 2H FY2011 ($5M). Staff redundancies and other internal restructuring costs during 2H FY2011 ($2M). (iv) Operations and Markets Report BlueScope Distribution Sales volumes are in line with FY2010. BlueScope manufactured products were up slightly whilst all other third party sourced products were consistent with FY2010. Although volumes have been flat, major market segments experienced continuing levels of contraction with the main drivers being soft underlying demand, the strong Australian dollar and increased import competition. Interest rate rises, weak demand and continued low availability of credit for private development saw construction activity stall in FY2011. Commercial construction was also slow reflecting the wind back of government stimulus and a lack of private investment in areas such as offices and retail premises. Growth in the Mining, Oil & Gas segment was positive; however steel related requirements for new construction continue to move offshore for fabrication, particularly in regard to WA projects. Despite announcement of price increases in the distribution market place, real rises have failed to gain traction with the high AUD improving affordability of imports and resulting in margin compression. FY2011 delivery in full on time performance of 93.1% highlights the significant focus on customer service. BlueScope Lysaght Sales volumes in FY2011 were down 5% on FY2010 driven primarily by lower sales in H2 FY2011. Extensive wet weather across all states during 2H FY2011, especially in Victoria, Queensland and NSW, together with cyclones in Queensland and Northern Territory, constrained volume growth with construction sites being water logged for extended periods. Consumer confidence in the residential segment was negatively impacted by increasing interest rates, leading to a decline in the number of new housing starts, particularly in Queensland. New commercial construction has slowed particularly in H2 FY2011 and all BER work has been completed. Lysaght operations ceased in December 2010 at the Chullora site in Sydney. Operations were moved successfully to a newly constructed facility adjacent to the current Lysaght site in Emu Plains. The consolidation of two locations to one in the Sydney region has had a positive impact on operating and transport costs. The full benefit will be captured in FY2012. Sheet and Coil Processing Services (S&CPS) Demand for processing (slit coil and sheared sheet) was down 1% compared to FY2010. H2 FY2011 was 2.9% down on 2H FY2010. Activity in the second half was significantly impacted by Cyclone Yasi and the widespread flooding across Eastern Australia.
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The consolidation of the two S&CPS NSW sites (Chullora and Padstow) to a single site at Chullora was completed during 2H FY2011. The combined NSW operation will lead to lower operating costs and improved efficiencies. BlueScope Design Manufacture Construct (formally known as Emerging Businesses) The Highline Commercial Buildings business continued to improve in 2H 2011, with a large number of project enquiries converting to orders. The Highline Residential and home improvement sector experienced a softer 2H 2011 on subdued consumer spending. Commercial water tank orders remain steady in WA and NSW; however the rural water sector nationally remained weak on extreme weather conditions and uncertainty in relation to cattle exports. BLUESCOPE STEEL NEW ZEALAND New Zealand and Pacific Steel Products This segment comprises: New Zealand Steel; and Lysaght Pacific Islands (i) Financial Performance

Table 9a: Financial Performance FY2011 and FY2010 Variance Financial Measure ($M, unless marked) Sales revenue Reported EBITDA Reported EBIT Underlying operational EBIT Capital and investment expenditure Net operating assets (pre tax) Return on net assets (pre tax)
(1)

FY2011 672 122 82 82 38 406 21%

FY2010 618 107 73 73 37 398 19%

$ 54 15 9 9 1 8

% 9 14 12 12 3 2

Table 9b: Financial Performance 2H FY2011 vs. 2H FY2010; and 1H FY2011; $ millions Financial Measure ($M, unless marked) Sales revenue Reported EBITDA Reported EBIT/(EBIT loss) Underlying operational EBIT/(EBIT loss) Capital and investment expenditure Net operating assets (pre tax) Return on net assets (pre tax)
(1)

2H FY2011 342 55 33 33 21 406 17%

2H FY2010 340 69 52 52 16 398 26%

Variance 2 (14) (19) (19) 5 8

1H FY2011 330 67 49 49 17 400 25%

(1) Return on net assets is defined as reported EBIT (annualised in case of half year comparisons) / average monthly net operating assets. (ii) Variance Analysis (FY2011 vs. FY2010)

The $54M increase in sales revenue is primarily due to higher export despatch volumes, higher international and domestic selling prices and higher Taharoa iron sand selling prices partly offset by an unfavourable movement in the USD relative to the NZD and in the AUD relative to the NZD. The $9M increase in underlying EBIT was largely due to: Higher Taharoa iron sand selling prices. Higher fixed conversion cost absorption driven by increased production volumes.
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Partly offset by: Unfavourable movement in the USD relative to the NZD and in the AUD relative to the NZD. Higher inventory net realisable value provisions for inventory on hand at June 2011 compared to June 2010 combined with an inventory net realisable value adjustment release during FY2010. (iii) Variance Analysis (2H FY2011 vs. 1H FY2011)

The $16M reduction in underlying EBIT was largely due to: Reduced spread driven by higher coal prices and the introduction of the NZ Emissions Trading Scheme partly offset by higher international hot rolled coil prices. Timing of iron sand sales volumes. Unfavourable foreign exchange impacts as the NZD appreciated against the USD and depreciated against the AUD. (iv) Operations and Markets Report An eight year steel production high of 615kt (vs. 577kt FY2010 and 310kt in 2H FY2011 vs. 305kt in 1H FY2011). FY2010 was impacted by the vessel fume hood replacement. A five year hot rolled production high of 613kt (vs. 552kt FY2010 and 313kt in 2H FY2011 vs. 300kt in 1H FY2011) was positively impacted by increased feed from the Primary Plant. Metal coating production of 217kt (vs. 221kt FY2010 and 110kt 2H FY2011 vs. 107kt in 1H FY2011). Paint line production of 54kt (vs. 52kt in FY2010 and 28kt in 2H FY2011 vs. 26kt in 1H FY2011). Cost control continued to be a major focus for all operational areas with business improvement initiatives across the site. Vanadium volumes were up 35% on FY2010 due to improved process control and increased steel production. Iron sands export sales volumes from Taharoa were 819kt, down 12% on 927kt in FY2010, due to shipping schedules. New Zealand Markets Domestic Domestic sales were 4% down on last year (FY2011 254kt vs. FY2010 265kt) reflecting the deterioration in residential and non-residential construction, and the impact of the Christchurch earthquakes. Consents for commercial building were down 4% on a year ago reflecting higher vacancy rates in this sector, residential consents were down 15% for the same period. Demand in the rural sector has remained steady reflecting higher incomes on the back of continuing agricultural commodity price increases. The impact of the rebuilding activity following the Christchurch earthquakes is anticipated to start in the second half of CY2012 with a moderate impact spread over a number of years. The manufacturing sector held up well and was underpinned by rural market requirements and exports to Australia. Export FY2011 volumes were the best in 5 years up 24% (FY2011 299kt vs. FY2010 241kt) primarily due to better operational performance and timing of shuts. 2H FY2011 was 186kt vs. 113kt in 1H FY2011. 2H FY2011 saw improving export prices offset by an appreciating NZD:USD. Iron sand prices strengthened in FY2011. BLUESCOPE STEEL ASIA Coated and Building Products Asia This segment comprises: Metal coating and paint line operations in Thailand, Indonesia, Malaysia, Vietnam and China; Butler Pre-Engineered Buildings (PEB) and Lysaght businesses across Asia (use product from the coating lines). Joint venture in India with Tata Steel Limited covering the development and construction of a metal coating line and paint line and existing Butler PEB and 3 Lysaght rollforming operations. (i) Financial Performance (Refer to Attachment 2(a) for a breakdown of half year financial data by country and Attachment 2(b) for a breakdown of the annual China data by principal business)

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Table 10a: Financial Performance FY2011 and FY2010 Variance Financial Measure ($M, unless marked) Sales revenue Reported EBITDA Reported EBIT Underlying operational EBIT Capital and investment expenditure Net operating assets (pre tax) (1) Return on net assets (pre tax)
(2)

FY2011 1,487 218 176 108 56 814 21%

FY2010 1,349 157 116 116 57 899 14%

$ 138 61 60 (8) (1) (85)

% 10 39 52 (7) (2) (9)

Table 10b: Financial Performance 2H FY2011 vs. 2H FY2010 and 1H FY2011; $ millions Financial Measure ($M, unless marked) Sales revenue Reported EBITDA Reported EBIT/(EBIT loss) Underlying operational EBIT/(EBIT loss) Capital and investment expenditure Net operating assets (pre tax) Return on net assets (pre tax)
(1) (2)

2H FY2011 747 84 62 62 29 814 15%

2H FY2010 720 86 66 66 19 899 16%

Variance 27 (2) (4) (4) 10 (85)

1H FY2011 740 134 114 46 27 867 27%

(1) Decrease in net operating assets primarily reflects a stronger AUD exchange rate resulting in a lower AUD equivalent net operating assets balance partly offset by the part reversal during 1H FY2011 of a previous asset impairment at Coated China and higher fixed assets following the completion of the second metal coating line in Indonesia. (2) Return on net assets is defined as reported EBIT (annualised in case of half year comparisons) / average monthly net operating assets. (ii) Variance Analysis (FY2011 vs. FY2010)

The $138M increase in sales revenue is primarily due to higher despatch volumes in China and Thailand partly offset by unfavourable exchange rate movements versus the AUD mainly in China, Indonesia and Vietnam. The $8M decrease in underlying EBIT is largely due to: Unfavourable foreign exchange movements totalling approximately $28M. Reduced spread with higher domestic and international selling prices more than offset by higher cost of steel feed. Higher conversion costs driven by the start up of the second metal coating line in Indonesia and higher labour costs. Partly offset by: Higher despatch volumes in China and Thailand. Unusual and non-recurring items in reported EBIT include: Part reversal of previous impairment write downs at Coated China ($68M) during FY2011. (iii) Variance Analysis (2H FY2011 vs. 1H FY2011)

The $16M increase in underlying EBIT is largely due to: Improved spread in China with higher steel prices exceeding steel feed cost increases. Higher despatch volumes and prices in Thailand partly offset by increased steel feed costs. Higher despatch volumes in Indonesia. Partly offset by: Unfavourable exchange rate movements versus the AUD mainly in Thailand.
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Lower despatch volumes in China. Unusual and non-recurring items in reported EBIT include: Part reversal of previous impairment write downs at Coated China ($68M) during 1H FY2011. (iv) China Markets China overview Chinas 12th 5-year plan (approved in March 2011) is focused on moving industry up the value chain and increasing domestic consumption versus reliance on exports. The government has set the new annual GDP growth target at 7% (vs. 7.5% in the previous 5-year plan). Most industry analysts expect annual GDP growth to exceed 8% over the 2011-2015 period (actual GDP growth was around 11% in previous 5-year plan period). Chinas non-residential construction market grew 12% in CY2010 and is projected to beat or meet pace with overall GDP growth as China continues development into its Western provinces. Coated BlueScope Steel Suzhou (BSS) produces and sells metallic-coated and pre-painted steel primarily for the China non-residential building and construction market. Approximately 50% of BSS sales volume is through its China downstream affiliates (Butler and Lysaght). Butler BlueScope Butler principally sells low-rise metal building systems into the industrial, commercial and community segments of the non-residential building market in China. Sales mix is approximately 60% to China domestic enterprises and 40% to multi-national corporations investing into the China market. Lysaght Lysaght supplies metal components to Chinas residential, commercial, non-residential and government (typically infrastructure) construction markets. Lysaght has focused on increasing sales across non-residential industrial and commercial end use markets (to approximately 70% of sales) as government stimulus investment into infrastructure has diminished. Operations and Market Report

Current Operations Coated BSS prime despatch volumes for FY2011 were up 17% (to 153kt) on rising demand for all products and strong focus on sales growth. FY2011 internal downstream affiliate despatches were up 12% and external despatches were up 23%. For FY2011, metal coating capacity utilization was 70% (vs. 61% FY2010) and paint line capacity utilization was 44% (similar to FY2010). Butler Buildings (PEB) FY2011 sales volume was 25% higher than FY2010 reflect expanding non-residential markets and improved sales management systems. The demand trend is positive for 1H FY2012 on increasing quote / order activity and strong order backlog. Lysaght FY2011 sales volume was 25% higher than FY2010 reflecting rising market conditions and improved product / market focus. Ending FY2011, order backlog was 22% higher than June 2010 mainly due to improving share across industrial and commercial markets. Capital Growth Project Status The Company has approved development of a new Butler PEB and Lysaght rollforming plant. Details: Located in Xian, Shaanxi province (geographic centre of China)
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Capital cost approximately A$60M Construction: expected to be operational by end CY2012 Thailand Markets Thailand rebounded strongly from the Global Financial Crisis in CY2010 with GDP growth of 7.4%, which is expected to moderate to 4.3% in CY2011 (source: EIU). Since the May 2010 political unrest, the political environment has stabilised and the gradual return of foreign investment to Thailand picked up pace from Q2 FY2011. The Thai elections held in early July delivered a majority win which gave hope for political stability and better economic prospects. Overall market demand was healthy with growing Foreign Direct Investment, Government and private fixed investments. The residential and agricultural segments in the North and North East of Thailand, while still slow in Q1 FY2011 affected by flooding at the start of CY2010, has since returned to normal conditions. Q3 FY2011 saw strong demand on forward buying due to rising global steel prices. Order intake has since moderated as global steel prices started to soften in April 2011. Import competition continues to be a challenge due to the strengthening of THB against USD making imports cheaper, Zincalume becoming increasingly commoditized and finalisation of Free Trade Agreements with China and other ASEAN countries. BST launched a more market-competitive pricing strategy and new lower-tier products that have helped to gain market share although affecting overall profitability. In addition, BST is aggressively protecting its interests in regards to dumped materials from China, Taiwan and Korea via the Thai Coated and Painted Steel Association putting its position directly to the Thai Government. The PEB market in Thailand, whilst improving, is seeing intense competition from local concrete and steel fabrication market. BLT continues to focus on delivering a higher quality Butler solution as part of the business improvement plans and has seen its PEB domestic despatch volume improve 60% to 14.7kt in FY2011. New building solution launched in 2H FY2011 has also received positive response from the market. Current Operations Metal coating line No. 1 and No. 2 are currently running 24 hours/7 days a week (shutting down only for maintenance). A technical issue (transformer failure) forced the closure of the cold rolled mill in May and June 2011 and led to BST turning to external toll roll companies for supply of production feed, thereby limiting impact on customers but having a detrimental impact on profitability in May and June 2011. The cold rolled mill has since re-commenced operations on 30 June and preventive measures have been put in place. BST has implemented improvement and cost reduction initiatives in its manufacturing and procurement processes, and is continually working to further improve its operational reliability and efficiency. Production volumes of Cold Roll Line in 2H FY2011 dropped 18kt as a result of the cold rolled mill breakdown as mentioned above. The incremental volumes in FY2011 vs. FY2010 reflect the recommissioning of metal coating line No. 2 production in January 2010 to support the increase in overall market demand. Production volumes (kt) Cold Roll Line Metallic Coating Lines Paint Line Vietnam Markets Vietnams GDP growth for CY2011 was projected by IMF in April 2011 to be 6.3% but since then, the global recovery has been weaker than expected and the macroeconomic environment unfavourable. The Vietnamese Dong has further devalued 12.3% against USD since a year ago. The Government has been tightening credit and monetary policy (Central Bank interest rates at 23% in 2H FY2011 vs. 18+% in 1H FY2011) to combat inflation and to stabilise the Dong, but in the process, slowed growth. These factors resulted in lower Foreign Direct Investment as well as lower local investment, leading to further cooling down in building and construction activities. Steel industry consolidations are also anticipated with some highly geared companies struggling to maintain healthy cash flow given payments of high interest on loans. For the downstream segment, some domestic competitors have reduced their prices to sustain volume in a softer building and construction market, specifically in the industrial and commercial segment. BSV continues to focus on growing domestically through channel development and expansion to the provincial residential segment that remains resilient in the prevailing environment. Downstream is introducing
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2H FY2011 97 120 34

1H FY2011 115 115 27

FY2011 212 235 61

FY2010 196 185 57

more efficient new generation steel profiles, new light weight and competitive buildings solutions to the increasingly price sensitive market in a softening market environment. Current Operations Total sales and production volumes were maintained at a level similar to last financial year despite overall softer market demand, but with improved domestic sales mix. Export volume was lower than last financial year as seeding volume to Indonesia was being phased out over 2H FY2011 with Indonesias 2nd coating line being commissioned in May 2011. Marketing strategy has been developed to place this seeding volume into both Intra-regional and new export markets. Production volumes (kt) Metallic Coating Lines Paint Line 2H FY2011 47 29 1H FY2011 52 29 FY2011 99 58 FY2010 100 48

The business has implemented cost reduction initiatives, improved business processes and energy efficiency review to sustain restructured cost base despite cost inflation e.g. 15% hike year-on-year in price of natural gas and electricity in January and March 2011 respectively. Seasonal cyclical shortage of electricity supply during the dry season has seen some alleviation with the commissioning of several new power plants, and more power plants are planned to come on stream as the electricity rate hikes make such investments more viable. Indonesia Markets The Indonesian building and construction market has grown 6% year-on-year in CY2010, and is expected to grow between 7-8% in CY2011 (source Castle Asia). This is driven by strong growth in the Indonesian economy on the back of government investment in infrastructure, Foreign Direct Investment and increasing consumer and business confidence, in an environment of low interest rates and easy access to financing. The Finance Ministry has approved approximately 1,800 public projects worth US$6.4bn for fast implementation, while BKPM, the investment board, expects foreign investment to rise 15% year-on-year to a record US$25.6bn in CY2011. Key areas of investment are Palm Oil plantations, mining and agriculture. Demand for steel was strong especially in Q3 FY2011 on forward buying due to rising global steel prices. Since April 2011, order intake has moderated with the softening of global steel prices. Notwithstanding, all BSI customers have imported coated steel during the last 18 months to supplement supply from BSI, due to BSIs capacity constraints and to take advantage of low imported steel prices. This has attracted two local producers to enter our markets in FY2011, noting the latest entrant, Sunrise Steel, has yet to begin commercial production. Imports from Korea, Taiwan, China and Vietnam have strengthened their position in Indonesia over the last 18 months through competitive pricing, consistent supply, IDR appreciation against USD, and introduction of Free Trade Agreement with China and other ASEAN countries. With the start up of its second metal coating line with in-line painting capability in May 2011, BSI is well positioned to win back market share from imports. Downstream business registered significant improvements over last financial year despite increased import and domestic competition. This is a result of strong PEB Lite volume, strong gross margin in all segments and continued focus on cost base. To build on the growth, BLI introduced new profiles and extended its geographic reach and scope e.g. it opened a new warehouse in Makassar Sulawesi. Current Operations The Cilegon metal coating line and the coil paint line were operating at less than full capacity throughout FY2011 (ie. at 93% of capacity) due to issues with electricity and gas supply, as well as supply of cold rolled full hard from local suppliers. BSI has since signed agreements to secure its supplies and during this period, market demand was satisfied by import seeding from other BlueScope operations. With the commissioning of the second metal coating line with in-line painting capability in May 2011, production capacity has more than doubled (273kt for MCL and 160kt for painted capacity (CPL 40kt, in-line painting 120kt) vs. existing annual capacity of 108kt for MCL and 40kt for CPL) to help address the market demand and increase market share. Production volumes (kt) Metallic Coating Lines Paint Line 2H FY2011 56 20 1H FY2011 42 17 FY2011 98 37 FY2010 115 43

Imported finished goods seeding from BlueScope Vietnam, BlueScope Malaysia and BlueScope Thailand continued and increased in FY2011 to supplement local production and satisfy domestic demand. With the second metal coating starting operations in May 2011, the seeding volumes have been gradually reduced and
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the seeding program ceased in July 2011, Import seed peaked to 42kt during FY2011 versus 24kt during FY2010. Capital Growth Project Status Construction for second metal coating line has been completed and operations started on 16 May 2011. The new line is capable to produce thin gauge products to support expansion strategy especially in the residential construction segment. It is expected this new line will be able to operate at full capacity by October 2011 (only subject to market demand). Malaysia Markets Malaysia GDP is expected to expand by 5-6% year-on-year in CY2011 (source: Malaysia Institute of Economic Research) driven mainly by Government investment under the 10th Malaysia plan. In October 2010, the Malaysian government announced the 2011 Budget, highlighting the emphasis on heath care, construction, infrastructure and oil & gas segments. Key plans include Greater KL MRT lines, a new landmark 100 storey tower and the acceleration of major regional development projects. Several PPP projects (Public-Private Partnerships) were also identified and scheduled for implementation. Total Foreign Direct Investment for CY2010 was US$7bn and forecasted to grow approximately 20% in CY2011 (source: Malaysia Industrial Development Authority), encouraging the government to adopt a proactive stance in liberating measures for the manufacturing sector. This positive growth is improving steel demand for Industrial & Commercial building industry from 1H CY2011. The second half of FY2011, especially in Q3, saw improved demand as construction activities moved into high season and customers forward-purchased in view of rising global steel prices. Order intake has since moderated with the softening of global steel prices in April 2011. Total export volume in FY2011 registered 48.7kt compared to 56.4kt in FY2010 with spreads on exports reduced, due to increased competition in destination markets. Imported steel from Korea, Taiwan, China and Vietnam continued to enter the Malaysian market, specifically in thin-gauge RW residential application and truss segment. This was further aggravated by strengthening of the MYR against USD, devaluation of Vietnamese Dong encouraging imports into Malaysia, and more China imports given the implementation of China-ASEAN Free Trade Agreement since January 2010. Notwithstanding, the current non-tariff barriers e.g. issuance of import permit and mandatory standards measure will slow down steel import. To stay ahead of competition and increase market share, BSM will continue to lead the local steel market with innovative products and services as well as continuing to invest on the corporate and product brands. Downstream businesses will enhance focus on solution based business while it continues to pull through volume into domestic residential segment and expand premium market segment. Current Operations Production volumes were slightly lower in FY2011 vs. FY2010 due to lower exports as mentioned above. Production volumes (kt) Metallic Coating Lines Paint Line 2H FY2011 72 37 1H FY2011 66 35 FY2011 138 72 FY2010 144 75

India (in joint venture with Tata Steel (50:50) for all operations) Current Operations / Markets Tata BlueScope Steel operates PEB and Building Products & Distribution (BPD) businesses. PEB business operates with two brands being Butler and Ecobuild and has been operating at full capacity. The BPD Business has a few brands and the significant volumes are sold through Lysaght and Durashine brands. During FY2011, BPD business grew 50% year-on-year (30kt to 45kt) with the Distribution segment (Durashine Brand) growing at 86% over previous year (26kt vs. 14kt). Durashine Brand which is mainly sold through Distributors has been well accepted in the market. Steel Buildings (PEBs) are gaining acceptance in the manufacturing and warehousing segments, with customers preferring to contract with a single supplier who takes responsibility for full design, supply and erection. India has seen above average inflation during FY2011 due to pressure from food prices and capital goods. Further to it, interest rates were on upwardly trend and impacted capital expenditure in infrastructure and industrial sector. Reserve Bank of India announced tightening measures to manage the inflation.

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Indian GDP forecast remains optimistic, even though it has seen a dip to 7.8 % (March 11 quarter). Centre for Monitoring for Indian Economy (CMIE) pegs GDP around 8.8 % for FY2012. The industrial sector, including construction, had grown at 8.5% as estimated in FY2011, and it is projected to grow by 9.4% during FY2012 (source: CMIE) Capital growth project status The planned start-up date of the coated steel project is currently expected to be 2H instead of 1H CY2011. This is due to the delay in equipment supply and commissioning teams not being fully mobilised by the overseas supplier. Project capital cost remains at A$270m (100% project). Completion status of the project as at 30 June 2011, was: Piling work complete Civil work Major activities completed. Finishing work pertaining to roads and drainage are in progress Primary & Secondary Building Completed other than finishing and small rectification job Equipment Installation

Color Coated Line- installation completed, Cold run is in progress. Metal Coated Line- 97% completed. Cold run initiated Pack Line- Completed Slitting and Recoiling Line- Testing of equipment in progress.

The coating and painting line in Jamshedpur was initially funded with INR 8,300 Million (approximately A$186m) project finance facility. This facility was re-financed through the issue of an INR 5,000 Million (approximately A$112M) Indian domestic bond during the year. The balance of the project funding requirement has been organized through a syndicated rupee term loan of INR 4,060 Million (approximately A$91M) from banks. BLUESCOPE STEEL NORTH AMERICA Hot Rolled Products North America BlueScope Steels 50% interest in North Star BlueScope Steel, USA (hot rolled coil production). BlueScope Steels 47.5% interest in Castrip LLC, USA (thin strip casting technology), in joint venture with Nucor and IHI Ltd. (i) Financial Performance

Table 11a: Financial Performance FY2011 and FY2010 Variance Financial Measure ($M, unless marked) Sales revenue Reported EBIT
(1) (2)

FY2011 0 72 72 72 2 82 55%

FY2010 0 61 61 61 1 172 34%

$ 0 11 11 11 1 (90)

% 0 18 18 18 100 (52)

Reported EBITDA
(2)

Underlying operational EBIT Capital and investment expenditure Net operating assets (pre tax) (3) Return on net assets (pre tax)
(4)

ASX FY2011 Earnings Report

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Table 11b: Financial Performance 2H FY2011 vs. 2H FY2010 and 1H FY2011 Financial Measure ($M, unless marked) Sales revenue
(1) (2) (2)

2H FY2011 0 64 64 64 1 82 110%

2H FY2010 0 47 47 47 0 172 52%

Variance 0 17 17 17 1 (90)

1H FY2011 0 8 8 8 1 123 11%

Reported EBITDA

Reported EBIT/(EBIT loss)

Underlying operational EBIT/(EBIT loss) Capital and investment expenditure Net operating assets (pre tax) Return on net assets (pre tax)
(3) (4)

(1) Excludes the companys 50% share of North Star BlueScope Steels sales revenue being A$697M in FY2011 (A$626M in FY2010 and A$316M in 1H FY2011 and A$381M in 2H FY2011). (2) Includes 50% share of net profit before tax from North Star BlueScope Steel of A$74M in FY2011 (A$62M in FY2010 and A$10M in 1H FY2011 and A$64M in 2H FY2011). (3) Decrease in net operating assets primarily reflects dividend payments and a stronger AUD:USD exchange rate resulting in a lower AUD equivalent net operating assets balance. (4) Return on net assets is defined as net profit before tax (annualised in case of half year comparison) / average monthly net operating assets (mainly includes equity investment in North Star BlueScope Steel). (ii) Variance Analysis (FY2011 vs. FY2010)

The $11M increase in underlying EBIT was largely due to: Increased spread driven by higher hot rolled coil prices partially offset by increased scrap costs. Partly offset by: Inventory net realisable value adjustment release during FY2010. (iii) Variance Analysis (2H FY2011 vs. 1H FY2011)

The $56M increase in underlying EBIT was largely due to: Increased spread driven by higher hot rolled coil prices partially offset by increased scrap costs. (iv) Operations and Markets Report North Star BlueScope Steel (BlueScope Steel has a 50% interest) High capacity utilisation rates have been maintained at North Star BlueScope Steel due to its reputation for on-time delivery, quality and ability to produce urgent customer orders promptly. Record performances in both despatches and production volume were achieved in FY2011. Despatches for FY2011 were up 5% on FY2010. Dividends paid to BSL in FY2011 totalled US$135M (US$56M in FY2010 and US$30M in 1H FY2011 and US$105M in 2H FY2011). Castrip LLC Castrip LLC is a joint venture that owns the Castrip technology, a revolutionary process for the direct casting of steel strip. It is owned 47.5% by BlueScope; 47.5% by Nucor and 5% by IHI. BlueScope has exclusive rights to use and license the technology in Australia, New Zealand, Thailand, Indonesia, Malaysia and the Philippines. (v) Markets North Star BlueScope Steel North Star sells approximately 80% of its production in the Mid-West, U.S.A, with its end customer segment mix being broadly 35% automotive, 25% construction, 10% agricultural and 30% manufacturing/industrial applications. Sales volumes were aided by continued improvement in the automotive sector. North Star continues to add new accounts with notable successes into the construction sector.
ASX FY2011 Earnings Report Page 23

Coated and Building Products North America This segment comprises: BlueScope Buildings North America Pre-Engineered Buildings business; Steelscapes pickling, cold rolling, metal coating and paint lines; Metl-Spans metal insulated panel business; and ASC Profiles West Coast steel components business.

(i)

Financial Performance and Operating Report

Table 12a: Financial Performance FY2011 and FY2010 Variance Financial Measure ($M, unless marked) Sales revenue Reported EBITDA Reported EBIT/(EBIT loss) Underlying operational EBIT/(EBIT loss) (1) Capital and investment expenditure Net operating assets (pre tax) Return on net assets (pre tax)
(2) (3)

FY2011 1,312 4 (36) (20) 20 690 (5%)

FY2010 1,307 24 (21) (16) 26 806 (3%)

$ 5 (20) (15) (4) (6) (116)

% 0 (83) (71) (25) (23) (13)

Table 12b: Financial Performance 2H FY2011 vs. 2H FY2010 and 1H FY2011

Financial Measure ($M, unless marked) Sales revenue Reported EBITDA Reported EBIT/(EBIT loss) Underlying operational EBIT/(EBIT loss) (1) Capital and investment expenditure Net operating assets (pre tax) Return on net assets (pre tax)
(2) (3)

2H FY2011 637 0 (20) (4) 12 690 (1%)

2H FY2010 614 (10) (32) (27) 13 806 (8%)

Variance 23 10 12 23 (1) (116)

1H FY2011 675 4 (16) (16) 8 692 (4%)

(1) FY2011 EBIT has been adjusted for an asset impairment write down ($16M). FY2010 EBIT has been adjusted for staff redundancies and other internal restructuring costs ($5M). (2) Decrease in net operating assets primarily reflects a stronger AUD:USD exchange rate resulting in a lower AUD equivalent net operating assets balance partly offset by lower defined benefit superannuation provisions and higher receivables. (3) Return on net assets is defined as reported EBIT (annualised in case of half year comparison) / average monthly net operating assets.

(ii)

Variance Analysis (FY2011 vs. FY2010)

The $5M increase in sales revenue is primarily resulting from improved volumes and prices in BlueScope Buildings and Steelscape partly offset by adverse foreign exchange impacts driven by a stronger AUD (FY2011 average 0.989 vs FY2010 0.883) Underlying EBIT was largely in line with FY2010 results. (iii) Variance Analysis (2H FY2011 vs.1H FY2011)

The $12M improvement in underlying EBIT was largely due to: Improved margins at Steelscape with higher selling prices more than offsetting the increased cost of steel feed and higher zinc and aluminium prices. Unusual and non-recurring items in reported EBIT include:
ASX FY2011 Earnings Report Page 24

Asset impairment write down of ($16M) during 2H FY2011 as a result of forecast reduced margins. Staff redundancies and other internal restructuring costs during 1H FY2010 ($5M). (iv) Operations and Markets Report BlueScope Buildings External despatches for FY2011 were up 8% on FY2010, and down 8% in 2H FY2011 vs. 1H FY2011. However, the increase in despatch tonnes over FY2010 is off a very deep cyclical low point. Net order intake in 2H FY2011 improved significantly over the same period in FY2010. The Vision engineering system rollout was completed at all ten manufacturing facilities. Vision is BlueScope Buildings newly developed integrated engineering design platform. Steelscape (metal coating & pre-painted steel) Total Steelscape despatches for FY2011 were up 6% compared to FY2010 and up 1% in 2H FY2011 vs. 1H FY2011. Metal coating capacity utilization in FY2011 remained high and similar to FY2010, resulting in continued manufacturing efficiencies. ASC Profiles (components) External despatches for FY2011 were up 5% on FY2010 and 2H FY2011 external despatches were up 18% on 2H FY2010. Key drivers included penetration into the solar structures market, increases in new customers, and launching new products. Strong demand experienced for light gauge pulins used as structures in the solar industry. Margin improvement in 2H FY2011 over 2H FY2010 due to product mix and plant efficiencies. Metl-Span (insulated metal panels) Metl-Span external despatches for FY2011 were up 20% on FY2010 and down 5% in 2H FY2011 vs. 1H FY2011. Improved performance in FY2011 is a result of increased demand for cold storage products. Increased competitive pressures continue to hold product prices low despite raw material cost increases. (v) Markets U.S. overview (Noting: Coated & Building Products North America is almost solely exposed to the US nonresidential construction market.) The U.S. non-residential construction market saw continued, but moderating declines in FY2011 vs. the same period last year. F.W. Dodge sq. ft. contract awards (CYTD) were down 8% when compared to the same period last year. Furthermore: The Architecture Billing Index (ABI) fell for the third straight month in June, to 46.3. This reading reflects a decrease in demand for design services. However, the new projects inquiry index was up sharply over May. The Industrial Capacity Utilization Rate (ICUR), a leading indicator of industry despatches was at 76.7 in June. The index remains 3.7 points below its historical average from 1972-2010. BlueScope Buildings BlueScope Buildings (BBNA) primarily sells low-rise metal building systems into the industrial, commercial and community segments of the non-residential building market in North America. BBNA, and the broader metal buildings industry, experienced an increase in despatches against a broad decline in the U.S. non-residential construction market during the period. Industry despatches (tonnage) in FY2011, as reported by the MBMA, increased 10% over same period last year. Market share gains have been realized in the traditional manufacturing/industrial areas of the country. Market indicators have shown there is increased interest in traditional design-build compared to pure bid projects. Design-build work puts control of project delivery under a single project owner as opposed to bid projects, which utilize open bidding for different project deliverables. There are also signs of increased interest in manufacturing and industrial related projects. BBNA maintained pricing discipline in the marketplace and experienced slightly softer demand from large corporate accounts when compared to FY2010.
ASX FY2011 Earnings Report Page 25

Steelscape Steelscape produces metallic-coated and pre-painted steel primarily for the U.S. non-residential building and construction market. Despite broader non-residential construction market weakness, Steelscapes volumes have recovered to more historical levels from active customer recruitment efforts and increasing share with existing customers. The increase in shipments compared to FY2010 is principally due to an increase in share with HVAC and studs customers as well as increased sales to sister companies, partially offset by lower shipments to the commercial construction segment (siding / roofing). ASC Profiles ASC Profiles supplies metal components to the West Coast U.S. residential, agricultural, commercial, non-residential and governmental construction markets. Expected economic growth in the Western U.S. did not materialize and commercial and non-commercial construction markets suffered a modest contraction over the prior year. However, growth was seen in the segment supplying metal structural components to the solar industry. Metl-Span Metl-Span sells composite insulated panels into the cold storage, commercial and industrial segments of non-residential construction across the U.S. FY2011 despatches to the cold storage segment increased compared to FY2010; however the commercial and industrial segments remain soft. The green building segment is expected to continue to grow in North America aided by changing building energy codes. OTHER INFORMATION Capital Management Dividend BlueScope Steel paid a fully franked dividend for the year ended 30 June 2010 of 5 cents per share in October 2010 and a fully franked interim dividend of 2 cents per share in April 2011 to its shareholders. In view of the financial performance of the Company in the second half of the year ended 30 June 2011 the Directors determined not to pay a final dividend for the year ended 30 June 2011. Debt facilities update On 20 December 2010 BlueScope executed an A$1,350M Syndicated Facility Agreement. The facility comprises two equal A$675M tranches with the three year tranche maturing in December 2013 and the five year tranche maturing in December 2015. The new facility replaced the previous A$1,275M Syndicated Loan Note Facility which was due to mature in July 2011 (A$200M) and July 2012 (A$1,075M). The new facility has extended the companys debt maturity profile and attracted more favourable pricing. Committed available undrawn capacity at 30 June 2011 under bank debt facilities (A$965M), plus cash (A$172M) was A$1,137M (A$1,620M at 30 June 2010 and A$1,332M at 31 December 2010). Current average cost of drawn debt is approximately 7.3%. In addition finance costs include commitment fees on undrawn facilities (at an average of 110 basis points under the extended Syndicated Facility), amortisation of facility establishment fees and the discount cost of long-term provisions. Net debt During the period, the companys net debt increased by $325M to $1068M, and this together with the material write down of non-current assets, resulted in a gearing ratio of 19.5% (net debt/(net debt plus equity)). During the year, debt was drawn principally to fund net capital and investment expenditure ($360M), net interest payments ($108M) and net dividend payments ($93M). Offsetting the impact of these cash outflows on net debt were the positive operating cash flows ($142M), and the benefit of foreign exchange translation on foreign currency debt ($172M).

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Safety, Environment & Health Safety There was a fatality in China with the tragic death of Mr Bao, one of our Operators, on 20th March 2011. The company remains committed to its aspirational goal of Zero Harm for all its people anywhere in the world. Some of the positive safety achievements in the period include: Asia BlueScope Steel Indonesia, Cilegon achieved 9 years LTI free. Lysaght Indonesia achieved 16 years LTI free. BlueScope Steel Thailand achieved 26 million hours LTI free. Lysaght Thailand achieved 1 million hours LTI free. Lysaght Singapore achieved 1 year MTI free. China Butler Guangzhou achieved 6 continuous months ZERO injuries. Lysaght China 1 million hours LTI free. Lysaght Shanghai achieved 5 years MTI free. Butler Tianjin achieved 3 years MTI free. Lysaght Guangzhou & Butler Guangzhou achieved 1 year MTI free. ANZSMB New Zealand, Hot Strip Mill Team achieved 15 years LTI Free. Port Kembla, Mills & Coating Business achieved 2 years LTI free. Engineering, Manufacturing & Environment - 2 years LTI free. Hot Strip Mill Port Kembla - 5 years LTI free. Western Sydney Service Centre achieved 2 years MTI free. Western Port - three new safety milestones - Longest injury free period, Lowest number of injuries in a month & Lowest injury number in a financial year. AD&S Distribution business achieved 1 year LTI free, the first time since acquisition in 2007. Sheet & Coil Processing Services achieved 2 years LTI free; Trade Coast Central, 2 years MTI free; Fairburn Rd, Sunshine surpassed best ever MTI free record of 698 days. North America ASC Profiles, 1 year LTI free (1st time ever entire business has achieved this); and ASC achieved 4 consecutive months of zero harm a new record. North Star achieved 1 million hours (16 months) LTI free. Metl Span, Virginia - 1 year MTI and LTI free. Buildings, Annville - 3 years LTI Free; and Arlington 1 year MTI free. BlueScope Buildings Evansville achieved 1 year LTI free. ACIM Queensland Logistics Terminal - 13 months MTI free. Noteworthy external recognition includes: China Buildings Guangzhou achieved the 2010 Outstanding Production Safety and Fire Protection Award from local government. North America Buildings Annville, PA site has been recognised by the Occupational Safety & Health Administrations Safety & Health Achievement Recognition Program (SHARP) for establishing and implementing an exemplary safety and health management system. Asia - BlueScope Steel Indonesia, won the Cilegon Mayor Zero Accident Award & Safety Committee Award 2010. Asia - Lysaght Indonesia received a Safety Award from the Governor East Java for achieving 606,633 hours without an accident. Asia - Cilegon Indonesia site was awarded the Cilegon Mayor Zero Accident Award & Safety Committee Award 2010. This is only an indication of the sustained commitment that BlueScope Steel has to the Health and Safety of its people, and the hard work they themselves have put into looking after themselves and their colleagues. The result of which is that many more employees and contractors are going home today unharmed, than ever before. Environmental Management Carbon Pricing New Zealand: New Zealand Steel was included in the New Zealand emissions trading scheme (ETS) from on 1 July 2010. New Zealand Steel receives emission unit permits (EUs) from the New Zealand Government based on the defined activity of manufacturing iron and Steel from iron sands. The New Zealand Government commissioned the 2011 ETS Review, the results of which were reported to the Minister on 30 June 2011. The Company continues to put its view to the Government and the review panel during this process that the ETS must not impose any additional costs that would adversely affect New Zealand Steels competitiveness.
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Australia: During July 2011 the Australian Federal Government announced the key features of its proposed Clean Energy Future Scheme (CEFS), which is intended to be introduced from 1 July 2012 with a starting price of $23 per tonne of carbon dioxide equivalent emissions. The Government also announced a sector-specific assistance package for Australian steelmakers, the Steel Transformation Plan (STP) which will effectively shield the Company from a carbon tax for four years. The proposed STP: Provides $300 million funding to minimise the impact of the carbon tax on Australian steelmakers for the first four years of the tax (BlueScope will receive approximately 60% of this funding); Provides an independent review mechanism to monitor the carbon tax position of our international competitors; and Signals the Governments intention to limit the potential pass-through of carbon emission costs from coal miners onto steelmakers. Environmental Compliance BlueScope Steels Australian manufacturing operations are subject to significant environmental regulation. Throughout its Australian operations, the Company notified relevant authorities of 30 incidents resulting in statutory non-compliances with environmental licensing requirements during the financial year. During the period there were no serious environmental incidents. In September 2010 BlueScope Steel received a fine of $1,500 from an incident in May 2010 pertaining to localised dust emissions caused by vehicle movement in the recycling area of Port Kembla Steelworks. The NSW regulator has also indicated that BlueScope Steel will receive a fine of $1500 for an incident in May 2011 which resulted in process water being discharged into a drain and then to Port Kembla Harbour, with exceedances of concentration limits for ammonia. BlueScope Steel reports on an annual basis to the National Pollutant Inventory and, under the National Greenhouse and Energy Reporting scheme, on its greenhouse gas emissions and energy consumption and production. BlueScope Steel also assesses and reports publicly upon its energy efficiency opportunities at the Commonwealth level and prepares and monitors progress on water and energy savings plans required under State legislation. Each year BlueScope Steel publishes a Community Safety and Environment Report which is available on our website. The report provides further details of the Companys environmental performance and initiatives. Senior Management Changes Pat Finan Executive General Manager, Global Building & Construction Markets Effective 1 November 2010, Pat Finan was appointed as Executive General Manager of the Companys new Global Building and Construction Markets business development group, and has joined the Companys Executive Leadership Team. Mr Finan will assist country Presidents to rapidly improve sales in the growing building and construction markets. His immediate focus will be to coordinate global sales, and to identify and pursue opportunities in new markets. Mr Finan joined BlueScope in 2004 and prior to assuming this new role was President BlueScope Buildings North America. Bob Moore President, BlueScope Steel China Effective 1 December 2010, Bob Moore joined the Companys Executive Leadership Team. Mr Moore is responsible for BlueScope Steels Coated business in China, as well as the BlueScope Buildings businesses of Butler, Lysaght, Residential and Panels . Mark Vassella Chief Executive, BlueScope ANZ Effective 1 July 2011, Mark Vassella was appointed as Chief Executive for BlueScope ANZ and continues to be a member of the Executive Leadership Team. Mr Vassella leads a business comprising all major operations in Australia and New Zealand and which was recently restructured to deliver an improved sales and marketing effort, and better integrated customer service. Previously, Mr Vassella headed BlueScopes North American businesses, and prior to that, he was Chief Executive of Australian Distribution and Solutions following BlueScopes acquisition of Smorgon Steel Distribution in 2007. Keith Mitchelhill President, BlueScope Steel North America Effective 1 July 2011, Keith Mitchelhill was appointed as President, BlueScope Steel North America, based in Kansas City, Missouri and continues to be a member of the Executive Leadership Team.
ASX FY2011 Earnings Report Page 28

Mr Mitchelhill is responsible for the Companys businesses in the North American markets including BlueScope Buildings North America, Steelscape, ASC Profiles, Metl-Span and the North Star BlueScope Steel joint venture. Prior to this role, Mr Mitchelhill was Chief Executive, BlueScope Australian Distribution and Solutions, and before joining the Company, he was an Executive General Manager at Boral. He joined BlueScope Steel in 2008. Noel Cornish previously Chief Executive Australian and New Zealand Steel Manufacturing Businesses has announced his retirement effective 31 July 2011 and will thereafter continue as a consultant to the Company. Paul OKeefe, previously Chief Executive Australian Coated and Industrial Markets, effective 1 July 2011 was appointed as Executive Leader Business Integration.

For further information: Media:Michael Reay, Manager Corporate Affairs Tel: +61 3 9666 4004 +61 (0) 437 862 472 Investor Relations: John Knowles, Vice President Investor Relations Tel: +61 3 9666 4150 +61 (0) 419 893 491 Don Watters, Manager Investor Relations & Special Projects Tel: +613 9666 4206 +61 (0) 409 806 691

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ATTACHMENT 1 PRODUCTION AND DESPATCH REPORT

000 Tonnes AUSTRALIA (1) Raw Steel Production External Despatches Coated & Industrial Products Australia - Domestic Slab (2) - HRC - Plate - Other - Export - Total - Slab (3) - HRC - Plate - Other - Total Sub-total
(4) (5)

FY2011 5,173

FY2010 4,724

Variance 9%

2H FY2010 2.537

1H FY2011 2,643

2H FY2011 2,530

0 570 191 854 1,615 854 734 134 458 2,180 3,795 750 15 765 2,365 2,195 4,560 615 254 299 552 1,060 72 1,132

21 740 183 925 1,870 672 555 53 297 1,576 3,446 755 11 766 2,624 1,587 4,212 577 265 241 506 889 89 978 950

(100%) (23%) 5% (8%) (14%) 27% 32% 153% 54% 38% 10% (1%) 36% (0%) (10%) 38% 8% 7% (4%) 24% 9% 19% (20%) 16% 5%

21 404 101 477 1,003 296 453 43 133 926 1,929 378 5 383 1,382 931 2,313 315 142 82 224 468 56 524 476

0 289 83 426 798 351 479 84 190 1,104 1,902 370 8 378 1,168 1,112 2,280 305 125 113 237 516 33 549 499

0 281 108 428 817 503 255 50 268 1,076 1,893 380 7 387 1,197 1,083 2,280 310 129 186 315 544 39 583 498

Australia Distribution & Solutions (6) - Domestic (6) - Export Sub-total Total Australian Despatches - Domestic - Export Total (7) NEW ZEALAND / PACIFIC Raw Steel Production External Despatches - Domestic - Export Total ASIA (Coated & Building Products) Raw Steel Production External Despatches - Domestic - Export Total
(9) (8)

NORTH AMERICA Raw Steel Production External Despatches North Star BlueScope Steel - Domestic - Export Coated & Building Products North America - Domestic - Export Total GROUP Raw Steel Production External Despatches - Domestic - Export Total 5,211 2,579 7,790 5,223 1,932 7,155 (0%) 34% 9% 2,713 1,074 3,787 2,574 1,266 3,840 2,637 1,313 3,950 6,785 6,251 9% 3,328 3,447 3,338 558 14 1,546 521 14 1,460 7% 4% 6% 251 6 727 282 8 774 276 6 772
(10) (10)

997

974 0

924 0

5% -

469 0

484 0

490 0

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Notes: Raw steel production at Port Kembla Steelworks (PKSW). 140kt of the 570kt of domestic despatches for FY2011 were from Western Port (2H FY2011 64kt, 1H FY2011 76kt, 2H FY2010 105kt and FY2010 185kt). (3) 5kt of the 734kt of export despatches for FY2011 were from Western Port (2H FY2011 5kt, 1H FY2011 0kt, 2H FY2010 0kt and FY2010 1kt). (4) Total FY2011 internal and external despatches from PKSW (slab, HRC and plate) were 4,915kt (2H FY2011 2,421kt, 1H FY2011 2,494kt, 2H FY2010 2,555kt and FY2010 4,636kt). (5) Total FY2011 internal and external despatches from Coated & Industrial Products Australia (CIPA) were 4,873kt (2H FY2011 2,467kt, 1H FY2011 2,406kt, 2H FY2010 2,510kt and FY2010 4,517kt), comprised of: external 3,795kt (2H FY2011 1,893kt, 1H FY2011 1,902kt, 2H FY2010 1,929kt and FY2010 3,446kt), and internal 1,078kt (2H FY2011 575kt, 1H FY2011 503kt, 2H FY2010 582kt and FY2010 1,071kt) CIPA internal despatches of 1,078kt comprised: 384kt of despatches to Steelscape Inc (2H FY2011 202kt, 1H FY2011 182kt, 2H FY2010 208kt and FY2010 356kt); 203kt to BlueScope Thailand (2H FY2011 112kt, 1H FY2011 91kt, 2H FY2010 95kt and FY2010 160kt); and 491kt of despatches to other BlueScope businesses including Distribution, Lysaght and BlueScope Malaysia and Vietnam (2H FY2011 261kt, 1H FY2011 230kt, 2H FY2010 278kt and FY2010 554kt). (6) FY2011 includes 320kt of domestic despatches and 9kt of export despatches via BlueScope Distribution which were not sourced internally, i.e. long products. Volumes for other periods of reference: 2H FY2011: 160kt of domestic despatches and 4kt of export despatches 1H FY2011: 160kt of domestic despatches and 5kt of export despatches 2H FY2010: 166kt of domestic despatches and 3kt of export despatches FY2010: 330kt of domestic despatches and 6kt of export despatches (7) Includes New Zealand Steel & Pacific Islands operations. (8) BlueScope Steel does not make steel in Asia. The Asian businesses source steel from a range of local suppliers as well as from BlueScope Steels Port Kembla or New Zealand operations. (9) Reflects despatches from the Asian country of production to external customers in other countries within Asia, the Pacific Islands, South Africa and Europe. (10) Reflects BlueScope Steels 50% share from North Star BlueScope Steel. (1) (2)

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ATTACHMENT 2(a) COATED AND BUILDING PRODUCTS ASIA COUNTRY DESPATCH AND FINANCIAL DETAILS FY2011 and FY2010; 2H FY2010, 1H FY2011 and 2H FY2011 Financial Measure External Despatches (kt) - Thailand - Indonesia - Malaysia - Vietnam - China - Other - Total Sales Revenue ($M) - Thailand - Indonesia - Malaysia - Vietnam - China - Other - Total Reported EBIT ($M) - Thailand - Indonesia - Malaysia - Vietnam - China - Other - Total Underlying EBIT ($M) - Thailand - Indonesia - Malaysia - Vietnam - China - Other - Total Net operating Assets (pre tax) ($M) - Thailand - Indonesia - Malaysia - Vietnam - China - Other - Total FY2011 FY2010 Variance 2H FY2010 1H FY2011 2H FY2011

258 156 160 77 399 82 1,132 340 236 245 139 591 (64) 1,487 20 22 30 9 107 (12) 176 20 22 30 9 39 (12) 108

199 142 165 83 326 62 977 276 238 240 139 503 (47) 1,349 27 29 28 11 .31 (10) 116 27 29 28 11 31 (10) 116

59 14 (5) (6) 73 20 155 64 (2) 5 0 88 (17) 138 (7) (7) 2 (2) 76 (2) 60 (7) (7) 2 (2) 8 (2) (8)

121 72 87 39 172 33 524 157 126 129 68 261 (21) 720 14 21 17 5 14 (5) 66 14 20 17 5 14 (4) 66

117 67 76 38 216 35 549 154 107 122 72 320 (35) 740 5 10 12 4 88 (5) 114 5 10 12 4 21 (6) 46

141 89 84 39 183 47 583 186 129 123 67 271 (29) 747 15 12 18 5 19 (7) 62 15 12 18 5 18 (6) 62

222 204 97 70 149 72 814

303 183 115 91 121 85 899

(81) 21 (18) (21) 28 (14) (85)

303 183 115 91 121 86 899

249 184 103 80 176 75 867

222 204 97 70 149 72 814

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ATTACHMENT 2(b) COATED AND BUILDING PRODUCTS ASIA COUNTRY DESPATCH AND FINANCIAL DETAILS CHINA

FY2011 and FY2010; 2H FY2010, 1H FY2011 and 2H FY2011 Financial Measure External despatches (kt) - China Coated - China Buildings - Total Sales revenue ($M) - China Coated - China Buildings (1) - Other / Eliminations - Total Reported EBIT ($M) - China Coated - China Buildings (1) - Other / Eliminations - Total Underlying EBIT ($M) - China Coated - China Buildings (1) - Other / Eliminations - Total Notes: (1) Includes BlueScope Lysaght businesses. 18 26 (5) 39 13 22 (4) 31 5 4 (1) 8 6 10 (2) 14 10 14 (3) 21 8 12 (2) 18 86 26 (5) 107 13 22 (4) 31 73 4 (1) 76 6 10 (2) 14 78 14 (4) 88 8 12 (1) 19 185 500 (94) 591 163 423 (83) 503 22 77 (11) 88 89 218 (46) 261 93 272 (45) 320 92 228 (49) 271
(1)

FY2011 91 309 (1) 399

FY2010 74 252 0 326

Variance 17 57 (1) 73

2H FY2010 39 135 (2) 172

1H FY2011 47 169 0 216

2H FY2011 43 140 0 183

- Other / Eliminations

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ATTACHMENT 2(c) DISCONTINUED BUSINESSES FY2011 and FY2010; 2H FY2010, 1H FY2011 and 2H FY2011 Financial Measure External despatches (kt) - Packaging Products - Lysaght Taiwan - Total Sales revenue ($M) - Packaging Products - Lysaght Taiwan - Total Reported EBIT ($M) - Packaging Products - Lysaght Taiwan - Total Net operating assets (pretax) ($M) - Packaging Products - Lysaght Taiwan - Total 1 1 2 3 4 7 (2) (4) (5) 0 0 0 1 0 2 0 0 0 0 0 0 0 1 1 0 (1) (1) 0 1 1 0 0 0 0 0 0 FY2011 0 0 0 FY2010 0 0 0 Variance 0 0 0 2H FY2010 0 0 0 1H FY2011 0 0 0 2H FY2011 0 0 0

(7) (4) (11)

(8) (5) (13)

1 1 2

(8) (5) (13)

(5) (5) (10)

(7) (4) (11)

ATTACHMENT 3 RECONCILIATION OF UNDERLYING EBIT TO UNDERLYING NPAT 2H FY2010 277 (57) 4 (52) (6) 166 1H FY2011 (41) (52) 5 46 (5) (47) 2H FY2011 (60) (54) 2 50 (9) (71)

$M Underlying EBIT Interest expense Interest revenue Tax on Underlying Earnings Outside equity interest Underlying NPAT

FY2011 (101) (106) 7 96 (14) (118)

FY2010 255 (113) 9 (25) (13) 113

Variance (356) 7 (2) 121 (1) (231)

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ASX Media Release

Release Time: Date: Immediate 22 August 2011

BlueScope Steel Limited ABN 16 000 011 058 Level 11, 120 Collins St Melbourne VIC 3000 AUSTRALIA Telephone +61 3 9666 4000 Facsimile +61 3 9666 4111 www.bluescopesteel.com

BLUESCOPE ANNOUNCES MAJOR RESTRUCTURE TO AUSTRALIAN OPERATIONS AND REINFORCES COMMITMENT TO STEEL PRODUCTION IN AUSTRALIA
BlueScope Steel Chairman, Mr Graham Kraehe, today announced the Board has approved a major restructure of Australian operations to reposition the Company for improved profit and growth. We are experiencing significant economic challenges and structural change in the global steel industry. The restructure, which includes shutting down the No.6 Blast Furnace at Port Kembla and closing the Western Port Hot Strip Mill, will better align Australian steelmaking production with Australian domestic demand and see BlueScope exit the Australian export business. The restructure announced today will produce a more viable and sustainable Australian steel business and allow us to focus clearly on domestic markets and international growth opportunities. It will also lower fixed costs at our major facilities at Port Kembla (NSW) and Western Port (Victoria). We are committed to making steel in Australia and can now prioritise our resources and efforts towards even better service for our domestic customers, Mr Kraehe said. BlueScope Managing Director and CEO, Mr Paul OMalley said: There is a compelling business case underpinning this decision. It will deliver a material improvement in future earnings and cashflow. It materially reduces export losses, reduces earnings volatility through the economic cycle and reduces long-term capital investment requirements at Port Kembla. For the Coated and Industrial Products Australia (CIPA) reporting segment, if the restructure had been in place for the full year, the Earnings Before Interest and Tax (EBIT) improvement would have been around $225 million (management estimate on a pro forma FY2011 basis). Its the right decision for the long-term viability of our business. The Company has the support of its lenders to undertake the restructure. We will now enter a consultation process with our employees and affected stakeholders, including customers, unions, contractors, suppliers, governments and local communities, said Mr OMalley.

Economic Conditions Drive Restructure

Mr OMalley said the Company is experiencing an unprecedented combination of economic challenges in the form of a record high Australian dollar, low steel prices and high raw material costs and these challenges are compounded by low domestic steel demand in the wake of the GFC. This is evidenced by the $487 million underlying EBIT loss experienced in FY2011 on our export sales. The economic conditions for export steelmaking from Australia appear unlikely to become favourable in the foreseeable future and our continued exposure to this market is clearly unsustainable. Our decision is a direct response to the economic factors affecting our business and is not related to the Federal Governments proposed carbon tax.

1 of 4

When fully implemented, the restructure plan will result in: Shut-down of No.6 Blast Furnace at Port Kembla, with production reduced to 2.6 mtpa. The shut down process will be completed in a manner that facilitates re-start of the furnace in the future should that be desirable. Closure of No. 4 cokemaking battery, No. 3 BOS steelmaking furnace and No. 1 slab caster. The PKSW hot strip and cold rolling mills, metal coating and paint lines will continue to operate. Closure of the Western Port Hot Strip Mill and mothballing of a metal coating line (MCL5).

Commitment to Australia and to Growth The restructure will better position us for profit and growth in Australia and allow us to grow our presence in building construction markets, in particular Pre-Engineered Buildings, where we are a world leader. We will also focus on growth opportunities, particularly in Asia.
The Company has a strong competitive advantage in coated steel with its world class ZINCALUME and COLORBOND steel products. In collaboration with Nippon Steel Corporation, we will develop the next generation of coated products for our customers. We expect these products to be launched initially in Australia and then rolled out across the Companys global footprint, said Mr OMalley.

Consultation Before Implementation Mr OMalley said: In managing the transition out of exports we will take a careful and considered approach. Regrettably, these changes will see a workforce reduction of around 1,000 people, with approximately 800 at Port Kembla and 200 at Western Port. There will be flow-on impacts for contractors and suppliers.
The actual size of the workforce reduction will be the subject of discussions with employees and unions and we will examine alternatives, including flexible work patterns, retraining, voluntary redundancies and job substitution. There will be programs and local job centres to assist employees to transition into the next phase of their careers either within or external to BlueScope, or to early retirement, Mr OMalley said.

The FY2011 Result Performance In Line with Previous Guidance

The Company reported a Net Loss After Tax (NLAT) of A$1,054 million for FY2011 (underlying NLAT of A$118 million, in line with previous guidance). The reported NLAT includes the previously announced one-off impairment cost of A$922 million, mainly relating to write-downs of the carrying value of two businesses; Coated and Industrial Products Australia and BlueScope Distribution. The Board has decided there will be no final ordinary dividend. This follows the 2 cent per share interim dividend (fully franked) announced in February 2011. Reflecting on the FY2011 Company performance, Mr OMalley said, The underlying result is in line with expectations and results from the tough economic challenges and structural changes our business faces.

Asia Following the successful transformation of our Coated and Building Products Asia division in FY2010, the segment delivered another excellent result, contributing $108 million in underlying EBIT, a record result in constant currency. Highlights included another impressive contribution from our businesses in China and Malaysia. New Zealand New Zealand and Pacific Products again provided a profitable contribution, with $82 million underlying EBIT in FY2011, and over recent years has been a consistent performer. This business continues to benefit strongly from the sale of iron sands from Taharoa.

2 of 4

North America Our North American businesses have delivered an overall positive contribution of $52 million in underlying EBIT in FY2011. This result was largely driven by an excellent second half performance by the North Star joint venture, leading to a $72 million underlying EBIT result for Hot Rolled Products North America, which more than offset the $20 million underlying EBIT loss for Coated and Building Products North America. More broadly, the US building business continues to remain subdued, given the state of the US economy. Australia The Australian businesses delivered a poor result in FY2011, with the Coated and Industrial Products Australia business, which includes sales to the loss-making export market, accounting for $258 million underlying EBIT loss and Australian Distribution and Solutions continuing to underperform with a $34 million underlying EBIT loss, Mr OMalley said.

Significant Initiatives

Mr OMalley said: BlueScope has undertaken several significant initiatives over the last 12 months that will help underpin the Companys future, these include:

1) Carbon Tax Steel Transformation Plan

The announcement of the Governments Steel Transformation Plan (STP) on 10 July 2011, effectively shields BlueScope from any material cost of the Carbon Tax for the first four years of the scheme.

2) BlueScope Australia & New Zealand (BANZ) Restructure

Following the announcement to restructure the Australian and New Zealand businesses on 10 March 2011 from three businesses into one consolidated business (BANZ), the design and implementation of the restructure is now well advanced and will deliver a more efficient and effective customer interface.

3) Further Fixed Cost Reductions

In FY2011, the Company has been able to achieve a further $38 million in fixed cost reductions, whilst successfully maintaining the cumulative savings of $696 million ($340 million in permanent savings and $356 million in temporary savings), based on FY2008 base levels. Cost reductions remain an ongoing focus for the business and we expect further improvements, once the BANZ restructure and the implementation of todays announcement are completed, said Mr OMalley.

BlueScopes Outlook
Turning to the first half Outlook, Mr OMalley said: Three key drivers will continue to have a material influence on 1HFY2012 financial performance: A$/US$; Steel spread (function of HRC and raw material prices); and Demand. Restructure costs will have a material impact on financial performance in this half. We expect continued good performance from Asia, New Zealand and our 50% interest in North Star. Currently we expect: A significant reported Net Loss After Tax (NLAT) including restructuring costs (excluding NRVs and/or impairments); and A small underlying NLAT (excluding restructure costs, NRVs and/or impairments). We will update the market at the AGM in November.

3 of 4

*** For further information about BlueScope Steel Limited: www.bluescopesteel.com Contacts: Media
Michael Reay Manager Corporate Affairs and Corporate Brand BlueScope Steel Limited Tel: +61 3 9666 4004 Mobile: +61 (0) 437 862 472 E-mail: Michael.Reay@bluescopesteel.com

Investor
John Knowles Vice President Investor Relations BlueScope Steel Limited Tel: +61 3 9666 4150 Mobile: +61 (0) 419 893 491 E-mail: John.Knowles@bluescopesteel.com Don Watters Manager Investor Relations and Special Projects BlueScope Steel Limited Tel: +61 3 9666 4206 Mobile: +61 (0) 409 806 691 E-mail: Don.Watters@bluescopesteel.com

4 of 4

BlueScope Steel Limited Directors Report

BlueScope Steel Limited ABN 16 000 011 058

Directors Report for the year ended 30 June 2011

Contents Page Corporate Directory Directors Report Directors Biographies Remuneration Report Corporate Governance Statement 2 3 7 11 38

Page 1 of 40

BlueScope Steel Limited Directors Report

CORPORATE DIRECTORY Directors G J Kraehe AO Chairman R J McNeilly Deputy Chairman P F OMalley Managing Director and Chief Executive Officer D J Grady AM H K McCann AM Y P Tan D B Grollo K A Dean P Bingham-Hall Secretary Executive Leadership Team M G Barron P F OMalley Managing Director and Chief Executive Officer M G Barron Chief Legal Officer and Company Secretary N H Cornish Chief Executive, Australian & New Zealand Steel Manufacturing Businesses I R Cummin Executive General Manager, People and Organisation Performance S Dayal Chief Executive, Asia S R Elias Chief Financial Officer P Finan Executive General Manager, Global Building and Construction Markets K Mitchelhill Chief Executive, Australian Distribution & Solutions R Moore President China P E OKeefe Chief Executive, Australian Coated & Industrial Markets M R Vassella President, North America Notice of Annual General Meeting The Annual General Meeting of BlueScope Steel Limited will be held at Wesley Conference Centre, 220 Pitt Street, Sydney, New South Wales at 2.00 pm on Thursday 17 November 2011 Level 11, 120 Collins Street, Melbourne, Victoria 3000 Telephone: +61 3 9666 4000 Fax: +61 3 9666 4111 Email: bluescopesteel@linkmarketservices.com.au Postal Address: PO Box 18207, Collins Street East, Melbourne, Victoria 8003 Link Market Services Limited Level 12, 680 George Street, Sydney, NSW 2000 Postal address: Locked Bag A14, Sydney South, NSW 1235 Telephone (within Australia): 1300 855 998 Telephone (outside Australia): +61 2 8280 7760 Fax: +61 2 9287 0303 Email: bluescopesteel@linkmarketservices.com.au Ernst & Young 8 Exhibition Street, Melbourne, Victoria 3000 BlueScope Steel Limited shares are quoted on the Australian Securities Exchange (ASX code: BSL) www.bluescopesteel.com

Registered Office

Share Registrar

Auditor Stock Exchange Website Address

Page 2 of 40

BlueScope Steel Limited Directors Report

DIRECTORS REPORT FOR THE YEAR ENDED 30 June 2011 The Directors of BlueScope Steel Limited (BlueScope Steel) present their report on the consolidated entity (BlueScope Steel Group or the Company) consisting of BlueScope Steel Limited and its controlled entities for the year ended 30 June 2011. PRINCIPAL ACTIVITIES During the year the principal continuing activities of the BlueScope Steel Group, based principally in Australia, New Zealand, North America, China and elsewhere in Asia, were: (a) Manufacture and distribution of flat steel products; (b) Manufacture and distribution of metallic coated and painted steel products; (c) Manufacture and distribution of steel building products; and (d) Design and manufacture of pre-engineered steel buildings and building solutions. SIGNIFICANT CHANGES IN STATE OF AFFAIRS The Company is progressing a number of growth initiatives mainly aimed at expanding the manufacture and distribution of metallic coated and painted steel products. The status of these projects is: Indonesia: a second metallic coating facility (capacity: 165,000 tonnes per annum) with in-line painting at Cilegon, was commissioned in May 2011; and India: the metallic coating and painting facilities project in India, which forms part of a 50/50 joint venture with Tata Steel, remains on track for completion during 2011.

MATTERS SUBSEQUENT TO THE YEAR ENDED 30 JUNE 2011 1. Major Restructure to Australian Operations The Company announced the Board has approved a major restructure of Australian operations to reposition the Company for improved profit and growth. The Company has been experiencing significant economic challenges and structural change in the global steel industry. The restructure, which includes shutting down the No.6 Blast Furnace at Port Kembla and closing the Western Port Hot Strip Mill, will better align Australian steelmaking production with Australian domestic demand and see BlueScope exit the Australian export business. The restructure will produce a more viable and sustainable Australian steel business and allow the Company to focus clearly on domestic markets and international growth opportunities. It will also lower fixed costs at major facilities at Port Kembla (NSW) and Western Port (Victoria). BlueScope is committed to making steel in Australia and can now prioritise its resources and efforts to better service domestic customers. There is a compelling business case underpinning this decision. It will deliver a material improvement in future earnings and cashflow. It materially reduces export losses, reduces earnings volatility through the economic cycle and reduces long-term capital investment requirements at Port Kembla. For the Coated and Industrial Products Australia (CIPA) reporting segment, if the restructure had been in place for the full year, the Earnings Before Interest and Tax (EBIT) improvement would have been around $225 million (management estimate on a pro forma FY2011 basis). Its the right decision for the long-term viability of the business. The Company has the support of its lenders to undertake the restructure. It will now enter a consultation process with employees and affected stakeholders, including customers, unions, contractors, suppliers, governments and local communities. Economic Conditions Drive Restructure The Company is experiencing an unprecedented combination of economic challenges in the form of a record high Australian dollar, low steel prices and high raw material costs and these challenges are compounded by low domestic steel demand in the wake of the GFC. This is evidenced by the $487 million underlying EBIT loss experienced in FY2011 on export sales. The economic conditions for export steelmaking from Australia appear unlikely to become favourable in the foreseeable future and continued exposure to this market is clearly unsustainable. The decision is a direct response to the economic factors affecting the business and is not related to the Federal Governments proposed carbon tax. When fully implemented, the restructure plan will result in: Shut-down of No.6 Blast Furnace at Port Kembla, with production reduced to 2.6 mtpa. The shut down process will be completed in a manner that facilitates re-start of the furnace in the future should that be desirable. Closure of No. 4 cokemaking battery, No. 3 BOS steelmaking furnace and No. 1 slab caster. The PKSW hot strip and cold rolling mills, metal coating and paint lines will continue to operate. Closure of the Western Port Hot Strip Mill and mothballing of a metal coating line (MCL5).

Page 3 of 40

BlueScope Steel Limited Directors Report

Commitment to Australia and to Growth The restructure will better position the Company for profit and growth in Australia and allow it to grow its presence in building construction markets, in particular Pre-Engineered Buildings, where BlueScope is a world leader. It will also focus on growth opportunities, particularly in Asia. The Company has a strong competitive advantage in coated steel with its world class ZINCALUME and COLORBOND steel products. In collaboration with Nippon Steel Corporation, it will develop the next generation of coated products for our customers. These products are expected to be launched initially in Australia and then rolled out across the Companys global footprint. Consultation Before Implementation In managing the transition out of exports BlueScope will take a careful and considered approach. Regrettably, these changes will see a workforce reduction of around 1,000 people, with approximately 800 at Port Kembla and 200 at Western Port. There will be flow-on impacts for contractors and suppliers. The actual size of the workforce reduction will be the subject of discussions with employees and unions to examine alternatives, including flexible work patterns, retraining, voluntary redundancies and job substitution. There will be programs and local job centres to assist employees to transition into the next phase of their careers either within or external to BlueScope, or to early retirement. 2. Australian Federal Governments proposed carbon tax During July 2011 the Australian Federal Government announced the key features of its proposed Clean Energy Future Scheme (CEFS), which is intended to be introduced from 1 July 2012 with a starting price of $23 per tonne of carbon dioxide equivalent emissions. The government also announced a sector-specific assistance package for Australian steelmakers, the Steel Transformation Plan (STP) which will effectively shield the Company from a carbon tax for four years. The proposed STP: 3. Provides $300 million funding to minimise the impact of the carbon tax on Australian steelmakers for the first four years of the tax (BlueScope Steel will receive approximately 60% of this funding); Provides an independent review mechanism to monitor the carbon tax position of our international competitors; and Signals the governments intention to limit the potential pass-through of carbon emission costs from coal miners onto steelmakers.

Potential impact of global share market performance on Retirement Benefit Obligations During August 2011 global share markets declined significantly. This decline would materially increase the Companys liability; refer note 33 of the Financial Report for details of the Companys Retirement Benefit Obligations as at 30 June 2011.

DIVIDENDS BlueScope Steel paid a fully franked dividend for the year ended 30 June 2010 of 5 cents per share in October 2010 and a fully franked interim dividend of 2 cents per share in April 2011 to its shareholders. In view of the financial performance of the Company in the second half of the year ended 30 June 2011 the Directors determined not to pay a final dividend for the year ended 30 June 2011. REVIEW AND RESULTS OF OPERATIONS The BlueScope Steel Group comprises six reportable operating segments: Coated & Industrial Products Australia, Australia Distribution & Solutions, New Zealand & Pacific Steel Products, Coated & Building Products Asia, Hot Rolled Products North America and Coated & Building Products North America.

Page 4 of 40

BlueScope Steel Limited Directors Report

REPORTED
REVENUES 2011 $M REVENUES 2010 $M

UNDERLYING EARNINGS 2011 $M EARNINGS 2010 $M

EARNINGS 2011 $M

EARNINGS 2010 $M

Sales revenue/EBIT Coated & Industrial Products Australia Australian Distribution & Solutions New Zealand & Pacific Steel Products Coated & Building Products Asia Hot Rolled Products North America Coated & Building Products North America Discontinued operations Segment revenue/EBIT Inter-segment eliminations Segment external revenue/EBIT Other revenue/(net expenses) Total revenue/EBIT Net borrowing costs Profit/(loss) from ordinary activities before income tax Income tax (expense)/benefit Profit/(loss) from ordinary activities after income tax expense Net (profit)/loss attributable to outside equity interest Net (profit)/loss attributable to equity holders of BlueScope Steel Earnings per share (cents) Underlying earnings The reported earnings includes the following unusual and non-recurring items: EBIT Factors Reported Earnings Net (gains)/losses from businesses discontinued Reported earnings (from continuing operations) Unusual or non-recurring events: Restructure and redundancy costs Profit on sale and leaseback of properties Asset impairment Business development costs New Zealand tax adjustment Underlying earnings 14.0 0.0 922.3 6.9 0.0 (101.3) 30.6 (12.6) 0.0 3.7 0.0 254.8 9.8 0.0 922.3 4.9 0.0 (118.4) 21.0 (8.8) 0.0 2.6 (21.5) 113.3 0.01 0.00 0.50 0.00 0.00 (0.06) 0.01 (0.01) 0.00 0.00 (0.01) 0.06 FY2011 (1,042.7) (1.8) (1,044.5) FY2010 240.1 (7.0) 233.1 NPAT FY2011 (1,054.2) (1.2) (1,055.4)
FY2010

5,193.0 1,675.4 672.1 1,486.8 0.0 1,312.2 0.0 10,339.5 (1,227.1) 9,112.4 40.7 9,153.1

4,744.5 1,761.6 618.1 1,348.6 0.0 1,306.8 0.7 9,780.3 (1,182.3) 8,598.0 25.8 8,623.8

(1,062.5) (217.9) 82.5 175.6 72.3 (35.6) 1.8 (983.8) 15.7 (968.1) (74.6) (1,042.7) (98.9) (1,141.6) 101.2 (1,040.4) (13.8) (1,054.2) (57.4)

84.3 11.9 72.9 115.6 60.7 (21.3) 7.0 331.1 (19.8) 311.3 (71.2) 240.1 (103.2) 136.9 2.6 139.5 (13.5) 126.0 6.9

(257.8) (34.2) 82.5 107.8 72.3 (20.0) (49.4) 15.7 (33.7) (67.6) (101.3) (98.6) (199.9) 95.3 (104.6) (13.8) (118.4) (6.4)

107.6 1.7 72.9 115.6 60.7 (16.4) 342.1 (19.8) 322.3 (67.5) 254.8 (103.2) 151.6 (24.8) 126.8 (13.5) 113.3 6.2

unallocated

EPS$ FY2011 (0.57) (0.00) (0.57) FY2010 0.07 (0.00) 0.07

126.0 (6.0) 120.0

Group Review The Company reported a Net Loss After Tax (NLAT) of $1,054.2 million for FY2011 (underlying NLAT of $118.4 million, in line with previous guidance). The reported NLAT includes the previously announced one-off impairment cost of $922.3 million, mainly relating to write-downs of the carrying value of two businesses; Coated and Industrial Products Australia and BlueScope Distribution.

Page 5 of 40

BlueScope Steel Limited Directors Report

The Board has decided there will be no final ordinary dividend. This follows the 2 cent per share interim dividend (fully franked) announced in February 2011. Asia Following the successful transformation of the Coated and Building Products Asia division in FY2010, the segment delivered another excellent result, contributing $107.8 million in underlying EBIT, a record result in constant currency. Highlights included another impressive contribution from our businesses in China and Malaysia. New Zealand New Zealand and Pacific Products again provided a profitable contribution, with $82.5 million underlying EBIT in FY2011, and over recent years has been a consistent performer. This business continues to benefit strongly from the sale of iron sands from Taharoa. North America The North American businesses have delivered an overall positive contribution of $52.3 million in underlying EBIT in FY2011. This result was largely driven by an excellent second half performance by the North Star joint venture, leading to a $72.3 million underlying EBIT result for Hot Rolled Products North America, which more than offset the $20.0 million underlying EBIT loss for Coated and Building Products North America. More broadly, the US building business continues to remain subdued, given the state of the US economy. Australia The Australian businesses delivered a poor result in FY2011, with the Coated and Industrial Products Australia business, which includes sales to the loss-making export market, accounting for $257.8 million underlying EBIT loss and Australian Distribution and Solutions continuing to underperform with a $34.2 million underlying EBIT loss. Significant Initiatives BlueScope has undertaken several significant initiatives over the last 12 months that will help underpin the Companys future, these include: 1) Carbon Tax Steel Transformation Plan

The announcement of the Governments Steel Transformation Plan (STP) on 10 July 2011, effectively shields BlueScope from any material cost of the Carbon Tax for the first four years of the scheme. 2) BlueScope Australia & New Zealand (BANZ) Restructure

Following the announcement to restructure the Australian and New Zealand businesses on 10 March 2011 from three businesses into one consolidated business (BANZ), the design and implementation of the restructure is now well advanced and will deliver a more efficient and effective customer interface. 3) Further Fixed Cost Reductions

In FY2011, the Company has been able to achieve a further $38 million in fixed cost reductions, whilst successfully maintaining the cumulative savings of $696 million ($340 million in permanent savings and $356 million in temporary savings), based on FY2008 base levels. Cost reductions remain an ongoing focus for the business and we expect further improvements, once the BANZ restructure and the implementation of todays announcement are completed. LIKELY DEVELOPMENTS AND EXPECTED RESULTS Three key drivers will continue to have a material influence on 1HFY2012 financial performance: A$/US$; Steel spread (function of HRC and raw material prices); and Demand. Restructure costs will have a material impact on financial performance in this half. The Company expects continued good performance from Asia, New Zealand and our 50% interest in North Star. Current expectations are: A significant reported Net Loss After Tax (NLAT) including restructuring costs (excluding NRVs and/or impairments); and A small underlying NLAT (excluding restructure costs, NRVs and/or impairments). The Company will update the market at the AGM in November. BOARD COMPOSITION The following were Directors for the full year ended 30 June 2011: Graham John Kraehe AO (Chairman), Ronald John McNeilly (Deputy Chairman), Diane Jennifer Grady AM, Daniel Bruno Grollo, Harry Kevin (Kevin) McCann AM, Kenneth Alfred Dean, Page 6 of 40

BlueScope Steel Limited Directors Report

Paul Francis OMalley (Managing Director and Chief Executive Officer) and Tan Yam Pin. Ms Penny Bingham-Hall was appointed as a Director on 29 March 2011. Particulars of the skills, experience, expertise and special responsibilities of the Directors are set out below. DIRECTORS BIOGRAPHIES Graham Kraehe AO, Chairman (Independent) Age 68, BEc Director since: May 2002 Extensive background in manufacturing and was Managing Director and Chief Executive Officer of Southcorp Limited from 1994 to February 2001. Chairman of Brambles Industries Limited since February 2008 and a Non-Executive Director since December 2000, Member of the Board of the Reserve Bank of Australia since February 2007, Djerriwarrh Investments Limited since July 2002, Member of the Board of Governors of CEDA and a Director of European Australian Business Council. Mr Kraehe was a Non-Executive Director of National Australia Bank Limited from August 1997 to September 2005 and Chairman from February 2004 to September 2005, and was a Non-Executive Director of News Corporation Limited from January 2001 until April 2004. He brings skills and experience in manufacturing management and in companies with substantial, geographically diverse, industrial operations. Mr Kraehes experience with a wide range of organisations is relevant for his role as Chairman of the Board. Ron McNeilly Deputy Chairman (Independent) Age 68, BCom, MBA, FCPA Director since: May 2002 Deputy Chairman of the Board with over 30 years experience in the steel industry. He joined BHP in 1962, and until December 2001 held various positions with the BHP Group (now BHP Billiton), including Executive Director and President BHP Minerals, Chief Operating Officer and Executive General Manager, and was Chief Executive Officer BHP Steel until 1997. The latter role developed his knowledge of many of the businesses comprising BlueScope Steel today. Chairman of Worley Parsons Limited and a Director since October 2002. Director of Alumina Ltd from December 2002 to March 2011, Vice President of the Australia Japan Business Cooperation Committee until November 2010. He also served as a Member of the Council on Australia Latin America Relations and as Chairman of Melbourne Business School. Diane Grady AM, Non-Executive Director (Independent) Age 63, BA (Hons), MA (Chinese Studies), MBA Director since: May 2002 Director of Macquarie Group Limited and Macquarie Bank Limited since May 2011 and Member of the Advisory Board of McKinsey & Co. Director of Woolworths Ltd from July 1996 until November 2010 and Goodman Group from September 2007 to October 2010. Has served on the boards of a number of other public and not-for-profit organisations including Lend Lease Corporation, Wattyl Limited, Greengrocer.com (Chair), Sydney Opera House Trust, Ascham School (current Chair), The Hunger Project Australia (current Chair) and as President of Chief Executive Women. Formerly a partner of McKinsey & Co. serving clients in a wide range of industries on strategic growth and change initiatives. Diane is an experienced director who brings valuable strategic and business expertise to the Board and to her role as Chair of the Remuneration and Organisation Committee. Kevin McCann AM, Non-Executive Director (Independent) Age 70, BA LLB (Hons), LLM, FAICD Director since: May 2002 Chairman of Origin Energy Limited since February 2000, Chairman of Macquarie Group Limited and Macquarie Bank Limited since March 2011 and a Director since August 2007 and December 1996 respectively. Member of the Corporate Governance Committee of the Australian Institute of Company Directors. Member of the Board and NSW President of the Australian Institute of Company Directors, Member of the Council of the National Library of Australia and the University of Sydney Senate, and a Director of the United States Studies Centre at the University of Sydney. Former Chairman of the Sydney Harbour Federation Trust, Chairman of ING Management Limited from September 2010 to June 2011 and Director of the Sydney Harbour Conservancy from January 2010 to September 2010. He also served as Chairman of Healthscope Ltd from May 1994 to October 2008 and as a Member of the Takeovers Panel and the Defence Procurement Advisory Board. He has served on the Boards of Pioneer International Limited, Ampol Limited and the State Rail Authority of New South Wales. Former Chairman of Partners of Allens Arthur Robinson, a national and international Australian law firm, and a partner of the firm from 1970 until June 2004. He brings extensive commercial experience as a director and former director of a number of major listed companies, experience in corporate governance and legal expertise to the Board.

Page 7 of 40

BlueScope Steel Limited Directors Report

Tan Yam Pin, Non-Executive Director (Independent) Age 70, BEc (Hons), MBA, CA Director since: May 2003 A chartered accountant by profession, formerly Managing Director of Fraser and Neave Group, one of South-East Asias leading public companies, and Chief Executive Officer of its subsidiary company, Asia Pacific Breweries Ltd. A member of the Public Service Commission of Singapore since 1990 and a Director of the Board of Keppel Land Limited (Singapore) since June 2003, Singapore Post Limited since February 2005, Great Eastern Holdings Limited since January 2005, Leighton Asia Limited since January 2009 and The Lee Kuan Yew Scholarship Fund since January 2010. Mr Tan previously served as Chairman of PowerSeraya Limited (Singapore) from January 2004 to June 2009, as a Director of Certis CISCO Security Pte. Ltd from July 2005 to January 2009, The East Asiatic Company Limited A/S (Denmark) from 2003 to 2006, International Enterprise Singapore from January 2004 to June 2008 and Singapore Food Industries Ltd from December 2005 to December 2009. Mr Tan resides in Singapore. He brings extensive knowledge of Asian markets, an area of strategic importance to BlueScope Steel. His financial and leadership skills complement the skills on the Board. Daniel Grollo, Non-Executive Director (Independent) Age 41 Director since: September 2006 Chief Executive Officer of Grocon Pty Ltd, Australias largest privately owned development and construction company. He was appointed a Director of CP1 Limited in June 2007 and is a Director of the Green Building Council of Australia. He has previously been a Director and National President of the Property Council of Australia. He brings extensive knowledge of the building and construction industry to the Board. Paul OMalley, Managing Director and Chief Executive Officer Age 47, BCom, M. App Finance, ACA Director since: August 2007 Appointed Managing Director and Chief Executive Officer of BlueScope Steel on 1 November 2007. Joined BlueScope Steel as its Chief Financial Officer in December 2005. Formerly the CEO of TXU Energy, a subsidiary of TXU Corp based in Dallas, Texas, and held other senior management roles within TXU including Senior Vice President and Principal Financial Officer and, based in Melbourne, Chief Financial Officer of TXU Australia. Before joining TXU, he worked in investment banking and consulting. Ken Dean, Non-Executive Director (Independent) Age 58, BCom (Hons), FCPA, FAICD Director since: April 2009 Mr Dean has been a Director of Santos Limited since February 2005 and has held past directorships with Alcoa of Australia Limited, Woodside Petroleum Limited and Shell Australia Limited. Mr Dean spent more than 30 years in a variety of senior management roles with Shell in Australia and the United Kingdom. His last position with Shell, which he held for five years, was as Chief Executive Officer of Shell Finance Services based in London. Upon his return to Australia in 2005, he was Chief Financial Officer of Alumina Limited, a position from which he resigned in 2009 to focus on non-executive directorship roles. He brings extensive international financial and commercial experience to the Board. Penny Bingham-Hall, Non-Executive Director (Independent) Age 51, BA (Ind.Des) FAICD, SA(Fin) Penny Bingham-Hall was appointed a Director of BlueScope Steel in March 2011. She has spent more than 20 years in a variety of roles with Leighton Holdings prior to retiring from that company at the end of 2009. Senior positions held by her with Leighton include Executive General Manager Strategy, responsible for Leighton Groups overall business strategy and Executive General Manager Corporate, responsible for business planning and corporate affairs. Ms Bingham-Hall is the inaugural Chairman of Advocacy Services Australia (the fiduciary company for the Tourism & Transport Forum and Infrastructure Partnerships Australia) and is a Director of Australia Post (since May 2011), The Global Foundation and SCEGGS Darlinghurst School. She is a former Director of the Australian Council for Infrastructure Development and former Member of the Vis Asia Council, Art Gallery of NSW. She brings extensive knowledge of the building and construction industry in both Australia and Asian markets.

Page 8 of 40

BlueScope Steel Limited Directors Report

COMPANY SECRETARIES Michael Barron Chief Legal Officer and Company Secretary, BEc, LLB, ACIS Responsible for the legal affairs of BlueScope Steel and for company secretarial matters. Joined the Company as Chief Legal Officer and Company Secretary in January 2002. Prior to that occupied position of Group General Counsel for Orica. Darren Mackenzie, BA, LLB (Hons) Corporate Counsel with BlueScope Steel. A lawyer with over 10 years experience in private practice and corporate roles. Clayton McCormack, BCom, LLB Corporate Counsel with BlueScope Steel. A lawyer with over 10 years experience in private practice and corporate roles. PARTICULARS OF DIRECTORS' INTERESTS IN SHARES AND OPTIONS OF BLUESCOPE STEEL LIMITED As at the date of this report the interests of the Directors in shares and options of BlueScope Steel are: Director Director - Current G J Kraehe R J McNeilly P F OMalley D J Grady H K McCann Y P Tan D B Grollo K A Dean P Bingham-Hall MEETINGS OF DIRECTORS The attendance of the current Directors at Board and Board Committee meetings from 1 July 2010 to 30 June 2011 is as follows: Board meetings Audit and Risk Committee A 4 4 4 4 B 4
1 4 2

Ordinary shares

Share rights

286,276 1,321,502 227,613 128,382 152,720 157,116 128,156 41,624 -

2,677,731 -

Remuneration and Organisation Committee A 6 6 6 6 B 6 4 6

4 2

Health, Safety and Environment Committee A 4 4 4 4 4 4 4 4 2 B 4 3

4

Nomination Committee

Other SubCommittees

Annual General Meeting A 1 1 1 1 1 1 1 1 B 1 1 1 1 1 1 1 1 -

A G J Kraehe R J McNeilly P F OMalley D J Grady H K McCann Y P Tan D B Grollo K A Dean P Bingham-Hall 11 11 11 11 11 11 11 11 4

B 10
3 4

A 4 4 4 4 4 4 4 2

B 4 3
4 2

A 1 2 2 -

B 1 2 2 -

10

3 4

11 11 11 11 11 11 4

4 4 4 4 4 4 2

4 4 4 -

6 6 -

4 4 4 4 4 2

All Directors have held office for the entire year ended 30 June 2011 with the exception of Ms Bingham-Hall who became a Director on 29 March 2011. A = number of meetings held during the period 1 July 2010 to 30 June 2011 during the time the Director was a member of the Board or the Committee, as the case may be. B = number of meetings attended by the Director from 1 July 2010 to 30 June 2011. 1 The Chairman of the Board is not a Committee member and attends as part of his duties as Chairman. 2 The Chief Executive Officer is not a Committee member and attends by invitation as required. 3 An unscheduled meeting was missed due to illness. 4 Mr McNeilly was granted a leave of absence from these meetings due to an illness in his family.

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BlueScope Steel Limited Directors Report

There were a number of unscheduled meetings held during the year. They are as follows: Board meetings: 3 Nomination Committee meetings: 1 The Non-Executive Directors have met once during the year ended 30 June 2011 (without the presence of management). NonExecutive Directors meetings are chaired by the Chairman of the Board.

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BlueScope Steel Limited Directors Report

REMUNERATION SUMMARY (UNAUDITED) BlueScopes approach to remuneration strategy is to support the delivery of long-term shareholder returns and to ensure executive rewards reflect achievements during the year. As a company undergoing structural change, it is important that the remuneration practices enable the Company to retain and motivate its executive talent in a different business environment. Key remuneration decisions during the year In the past year the Board has, with management support, remained focussed on ensuring remuneration practices reflect the current operating environment of the businesses, are consistent with good governance practices and take account of the potential risks to the Company. Key remuneration decisions taken by the Board include: Following a year in which there was an executive pay freeze, average increases in remuneration of less than 4% were paid to executives for the year ended 30 June 2011; Below target Short Term Incentive (STI) bonuses were assessed for the year ended 30 June 2011 for significant achievements in responding to the challenges facing the steel industry since the onset of the global financial crisis; Base fees for the Chairman and Directors were increased for the first time since 1 January 2006 by 5%; Determining there would be no vesting of the 2006 or 2007 Long Term Incentive Plan (LTIP) Awards; and Awarding a special share based retention plan to support the restructure of the business. Further details of these awards are contained in the Remuneration Report at page 16.

The table below shows the remuneration actually earned by or in the case of STI assessed for each member of the Executive Leadership Team (ELT) during FY2011 with comparatives for FY2010. The amounts required under accounting disclosures are disclosed at page 24. Specific comments in relation to amounts included in the table are: Moderate Base Pay increases were awarded to executives from 1 September 2010. These were the first increases in fixed pay since 1 September 2008 as executives had been subject to a pay freeze in FY 2009. STI assessments for FY 2011 are moderate and other than executives in the Asian business, are less than 50% of the maximum available opportunity. No executive has achieved stretch performance on non financials. Commentaries on the basis of STI assessments are included in the Remuneration Report at page 20. No LTI vesting for Key Management Personnel (KMP) under the LTI Plan during FY2011. The last vesting occurred in September 2008 (FY 2009) in respect of awards under the 2004 and 2005 LTI Plans. As a result of the reduced STI payments and the failure of LTI to vest, the total actual remuneration received by KMP executives during the past three years has been significantly lower than the remuneration available under their employment contracts. For example, the MD & CEO has only received 20% of his total variable pay (both STI and LTI at target opportunity) in year ended 30 June 2010 and 18% in year ended 30 June 2011 and the other KMP executives have on average received 26% of total variable pay.

BlueScope shareholding Policy We believe the shareholding policy clearly demonstrates the personal commitment of all Directors and executives to align their interests with those of all shareholders. All Non-Executive Directors (NED) are required to acquire over time a shareholding equal to one years total annual fees; The Managing Director and Chief Executive Offer and the Executive Leadership Team are required to accumulate and hold a shareholding equal to 100% of their annual base pay from participation in the Long Term Incentive Plan, net of tax obligations; and All other executives, a group of approximately 200 senior people, are required to accumulate and hold a minimum of 50% of their annual base pay in Company shares.

This policy results in this group having significant personal financial exposure to the value of BlueScope Steel shares. Stringent corporate governance standards The Remuneration and Organisation Committee (the Committee) is responsible for the Companys remuneration practices and policies on behalf of the Board. The Committee is comprised entirely of independent NED and adheres to stringent corporate governance standards. The Remuneration Report at page 13 provides a complete review of the Committees responsibilities.

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BlueScope Steel Limited Directors Report

KMP REMUNERATION - ADDITIONAL INFORMATION

Nam e

Year

SuperBase Pay annuation $ $

Total STI LTIP Fixed Pay Assessed Vested $ 1,940,750 1,915,200 878,438 857,850 869,364 827,403 653,560 628,425 649,517 634,296 649,517 634,296 779,427 735,300 776,309 718,200 852,173 819,397 8,049,055 7,770,367 472,598 655,500 9,177,153 7,770,367 $ 720,865 806,400 254,845 302,505 269,361 310,800 182,325 198,450 196,341 221,336 196,341 221,336 237,554 256,581 300,623 378,000 236,849 306,600 2,595,104 3,002,008 155,869 300,840 3,051,813 3,002,008 $

Shares Vested 3 $

Total $ 2,697,915 2,721,600 1,133,283 1,160,355 1,198,725 1,138,203 835,885 826,875 845,858 855,632 845,858 855,632 1,016,981 991,881 1,076,932 1,096,200 1,089,022 1,125,997 10,740,459 10,772,375 628,467 956,340 12,325,266 10,772,375

Executive Director P F O'Malley KMP executives - current N H Cornish 4 M R Vassella P E O'Keefe I R Cummin M G Barron S R Elias S Dayal KA Mitchelhill 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 Total 2011 - sam e KMP executives Total 2010 - sam e KMP executives P J Finan 5 R J Moore 5 Total 2011 - all KMP executives Total 2010 - all KMP executives
1

2011 1,702,346 2010 1,680,000 770,560 752,500 762,600 725,792 573,298 551,250 569,752 556,400 569,752 556,400 683,708 645,000 680,973 630,000 747,520 718,769 7,060,508 6,816,111 2011 2010 2011 2010 454,959 575,000 8,090,467 6,816,111

238,404 235,200 107,878 105,350 106,764 101,611 80,262 77,175 79,765 77,896 79,765 77,896 95,719 90,300 95,336 88,200 104,653 100,628 988,547 954,256 17,639 80,500 1,086,686 954,256

36,300 60,000 96,300 96,300 -

For Aust ralian executives, superannuation ent it lement of 14%of Annual Base Pay. KM P may have elect ed t o have received some of t his amount as a cash allowance. Superannuat ion Guarant ee obligat ions will have been met t o remit amount to a complying superannuat ion f und. For non-Australian Executives, pension cont ribut ions were made under local requirement s. Share Right s vest ed and exercised during the year ended 30 June 2011 are valued at market value on date of exercise. Shares vested during the year ended 30 June 2011 are valued at market value on date of release. M r Cornish is a member of the Def ined Benef it Division of the BlueScope St eel Superannuat ion Fund. Amount s disclosed are not ionally 14%of Base Pay. Base Pay for 2011 has been annualised at t he rat e upon appoint ment .

2 3 4 5

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BlueScope Steel Limited Directors Report

REMUNERATION REPORT (AUDITED) The Directors of the Company present the Remuneration Report prepared in accordance with section 300A of the Corporations Act 2001 for the Company and the consolidated entity for the year ended 30 June 2011. The information provided in this Remuneration Report has been audited as required by section 308(3C) of the Corporations Act 2001. This Remuneration Report forms part of the Directors Report. Structure of this report 1. Remuneration and Organisation Committee 2. Non-Executive Directors Remuneration 3. Remuneration Policy and Structure 4. Relationship between Company Performance and Remuneration 5. Specific Remuneration Details 1 REMUNERATION AND ORGANISATION COMMITTEE The Board oversees the BlueScope Steel Human Resources Strategy, both directly and through the Remuneration and Organisation Committee of the Board (the Committee). The Committee consisted entirely of independent non-executive directors. The members of the Committee during the year were: Ms Diane Grady - Independent Director and Chairman of the Committee Mr Graham Kraehe - Chairman of the Board and Committee Member Mr Ron McNeilly - Deputy Chairman and Committee Member Mr Tan Yam Pin - Independent Director and Committee Member The purpose of the Committee is to assist the Board in overseeing that the Company: Has a human resources strategy aligned to the overall business strategy, which supports Our Bond; Has coherent remuneration policies that are observed and that enable it to attract and retain executives and directors who will create value for shareholders; Fairly and responsibly rewards executives having regard to the performance of the Company, the creation of value for shareholders, the performance of the executives and the external remuneration environment; and Plans and implements the development and succession of executive management.

The Committee has responsibility for remuneration strategy, policies and practices applicable to Non-Executive Directors, the Managing Director and Chief Executive Officer, senior managers and employees generally. The Committee focuses on the following activities in its decision making on the Companys remuneration arrangements: Approving the terms of employment of the Executive Leadership Team, including determining the levels of remuneration; Ensuring a robust approach to performance management through approval of the STI objectives and awards and reviewing performance of members of the Executive Leadership Team; Considering all matters relating to the remuneration and performance of the Managing Director and Chief Executive Officer prior to Board approval; Approving awards of equity to employees; and Ensuring the Companys remuneration policies and practices operate in accordance with good corporate governance standards, including approval of the Remuneration Report and communications to shareholders on remuneration matters.

The Committee seeks input from the Managing Director and Chief Executive Officer and the Executive General Manager People and Organisation Performance, who attend Committee meetings except where matters relating to their own remuneration are considered. In addition, advice is obtained by the Committee from external specialist remuneration advisers in a number of areas including: Remuneration benchmarking; Short-term incentives; Long-term incentives; and Contract terms.

The Companys approach to remuneration recognises that BlueScope Steel operates in a cyclical and highly competitive global environment and that the delivery of long-term shareholder returns is directly impacted by the quality of its people.

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BlueScope Steel Limited Directors Report

2 NON-EXECUTIVE DIRECTORS REMUNERATION The Committee, on behalf of the Board, seeks the advice of expert external remuneration consultants to ensure that fees and payments reflect the duties of Board Members and are in line with the market. The Chairman and the Deputy Chairman of the Board do not participate in any discussions relating to the determination of their own fees. Non-Executive Directors do not receive share rights or other performance-based rewards. Non-Executive Directors are expected to acquire over time a shareholding in the Company at least equivalent in value to their annual remuneration. NonExecutive Directors have previously been required to salary sacrifice a minimum of 10% of their fees each year to acquire BlueScope Steel shares. Changes to the taxation of employee share plans introduced by the Federal Government effective 1 July 2009, made the operation of this plan impractical and the Board resolved to cease operation of this plan with effect from 1 July 2009. The schedule of fees and payments of Non-Executive Directors are reviewed each January. A 5% increase was applied effective 1 January 2011 to all fees. This was the first increase in base fees since 1 January 2006. There were no increases to committee fees in 2009 and 2010. The schedule of fees effective 1 January 2011, and which currently applies, is as follows: Role Fees effective 1 Jan 2011 $472,500 $273,000 $157,500 $36,750 $18,900 Organisation Organisation Environment $26,250 $13,650 $13,650 $21,000

Chairman1 Deputy Chairman1 Non-Executive Director Chairman of Audit and Risk Committee Member of Audit and Risk Committee Chairman of Committee Member of Committee Member of Committee Remuneration Remuneration Health, Safety and and and

Travel and Representation Allowance2

1 2

Additional fees are not payable to the Chairman and Deputy Chairman for membership of Committees. Allowance paid to Tan Yam Pin who is based in Singapore.

The maximum fee pool limit is currently $2,925,000 per annum (inclusive of superannuation) as approved by shareholders at the Annual General Meeting in 2008. Total fees paid to Directors for the year ended 30 June 2011 amounted to $1,851,347. Compulsory superannuation contributions per director capped at $15,775 per annum (commencing 1 July 2011) are paid on behalf of each Director. Compulsory superannuation contributions for the year ended 30 June 2011 were $15,199 per annum. Non-Executive Directors do not receive any other retirement benefits. 3 REMUNERATION POLICY AND STRUCTURE BlueScope Steels remuneration and reward practices aim to attract, motivate and retain employees of the highest calibre, as well as supporting Our Bond by rewarding performance through remuneration. The Companys salaried remuneration framework is designed to: Link employee remuneration with the creation of a sustainable business and value for shareholders; Recognise and reward individual performance and accountability for key job goals; Provide distinguishable remuneration differences between levels; and Maintain a competitive remuneration level relative to the markets in which the Company operates.

3.1 Key Principles

The framework is built on an appropriate mix of base pay and variable pay comprising short-term incentives and long-term equity incentives. The remuneration structure encourages a balanced approach to managing risk by: Requiring the Board to approve the performance targets and the measurement of performance for the STI; Imposing a cap of 150% of target on STI awards; Incorporating a significant component of remuneration for achievement of longer term targets through the long term incentive plan; and

Page 14 of 40

BlueScope Steel Limited Directors Report

Requiring executives to accumulate a prescribed shareholding in the Company from participation in the Long Term Incentive Plan.

The Remuneration and Organisation Committee reviews the Companys remuneration strategy annually. External factors impacting on financial performance such as the strong Australian dollar, high raw material costs and excess global steel industry capacity and competitive pressures for talent arising from Australias two-speed economy have given rise to the need for a fundamental review this coming year. The Board is currently considering a number of alternatives aimed at aligning remuneration strategies more effectively with the Companys business needs after the restructuring. The following describes the Companys remuneration strategy that was in place for the year ended 30 June 2011. 3.2 Fixed Remuneration Fixed remuneration is determined by reference to the scope and nature of each individuals role, performance, experience, work requirements and remuneration level for comparable roles in companies of similar complexity, size and geographical spread. Market data is obtained from external sources to establish appropriate guidelines for comparable roles. Remuneration reviews are usually conducted on an annual basis. There are no guaranteed remuneration increases for executives and all increases are based on individual contribution and performance and having regard to developments in the market. The Committee reviews proposed remuneration increases and approves increases in remuneration for ELT members. The Committee obtains market data from external advisers. No increases were awarded for the year ended 30 June 2010 and average increases of less than 4% were paid to executives and senior managers for the year ended 30 June 2011. 3.2.1 Superannuation BlueScope Steel operates superannuation funds in Australia, New Zealand and North America for its employees. In these locations there is a combination of defined benefit and defined contribution type plans. The defined benefit schemes are closed to new members. Contributions are also made to other international retirement benefit plans for employees outside of Australia, New Zealand and North America. 3.2.2 Other Benefits Additionally, executives are eligible to participate in an annual health assessment program designed to safeguard the Company against loss or long-term absence for health-related reasons. Employees engaged on international assignments are also provided with relocation benefits including housing, relocation costs and other living adjustments under the Companys international assignment policy. 3.3 Short Term Incentives (Variable Pay) All senior managers and many salaried employees participate in the Short Term Incentive Plan (STI). The STI is: An annual at risk cash bonus scheme, which is structured to deliver total remuneration in the upper quartile for the respective market group when stretch performance is attained; STI awards are not an entitlement but rather the reward for performance; The scheme is applied at the discretion of the Board, which has established policies to ensure that STI payments are aligned with the organisation and individual performance outcomes; Target STI levels are set having regard to appropriate levels in the market and range from 10% of base salary through to 80% at CEO level. These levels are reviewed annually. For outstanding results, participants may receive up to a further 50% of their target bonus amount; Goals for each participant are drawn from the following categories: o Financial Measures performance measures include Net Profit After Tax, Cash Flow, Return on Invested Capital, and Earnings Before Interest and Tax; Zero Harm safety and environment performance measures, including Lost Time Injury Frequency Rates, Medical Treatment Injury Frequency Rates and environmental measures; Business Excellence performance measures for the year ended 30 June 2011 included operational targets such as long-term structural reductions to the cost base of the Company, balance sheet and liquidity initiatives and improvements to the performance of business units; and Strategy implementation of specific longer-term strategic initiatives.

STI plans are developed using a balanced approach to financial measures and key performance indicator (KPI) metrics. At the senior executive level, approximately 60% of the target STI award is based on financial measures with approximately 40% based on KPI metrics. For other participants, approximately 50% of the STI award is based on financial measures and approximately 50% is based on KPI metrics. At Board discretion, the weighting between financial and KPI metrics can vary depending on business circumstances and the individuals role. Performance conditions, including threshold, target and stretch hurdles, are set for each plan and these conditions are assessed using quantified and verifiable measures or an assessment of value contribution. If the threshold level is not reached, no payment is made in respect of that goal. The Board retains the discretion to adjust any STI payments in exceptional circumstances, including determining that no award is paid, as was decided for the year ended 30 June 2009 and to pay below target STI awards as was decided in 2010 and 2011.

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BlueScope Steel Limited Directors Report

The Committee oversees the objective setting process and approves the targets and performance measures for all members of the Executive Leadership Team. The Board approves the targets and performance measures of the Managing Director and Chief Executive Officer. 3.4 Equity-Based Opportunities The Company encourages employee share ownership. This is achieved in the following ways: 3.4.1 for all employees, through the General Employee Share Plan; and for executives, through the Long Term Incentive Plan. General Employee Share Plan The Company operates a General Employee Share Plan. The allocation of shares to employees under such schemes and the form of the offer are determined by the Board on a year-by-year basis taking account of Company performance. The plan has been very effective in enabling employees to become shareholders with more than 97% of eligible employees participating in the last plan offered in 2008. In view of the impact of current business conditions on the financial performance of the Company, no shares were offered under the plans for the years ended 30 June 2010 and 2011. 3.4.2 Long Term Incentive Plan Awards of share rights are made to senior managers under the Long Term Incentive Plan (LTIP). The LTIP is designed to reward senior managers for long-term value creation. It is part of the Companys overall recognition and retention strategy having regard to the long-term incentives awarded to senior managers in the markets in which the Company operates. No LTI vesting occurred for KMP under the LTI Plan during FY2011. The last vesting occurred in September 2008 (FY 2009) in respect of awards under the 2004 and 2005 LTI Plans. The decision to make an award of share rights is made annually by the Board. Awards are based on a percentage of the relevant executives Base Pay and individual performance including living Our Bond. The number of share rights awarded to participants is calculated using the share price, averaged over three months to 31 August. Details of awards under the LTIP are set out below. In summary, the main features of the LTIP are as follows: Awards are generally made as a right to acquire an ordinary share for no consideration on vesting; Vesting requires sustained performance over at least three years with a hurdle based on Total Shareholder Return (TSR) relative to the TSR of the companies in the S&P/ASX 100 index at the award commencement date; The minimum ranking required for vesting is the 51st percentile against the peer group, at which point 52% of an award vests. Maximum vesting (100% of a participants share rights) occurs at the 75th percentile or above; In view of the cyclical nature of the markets in which the Company operates, there is up to four retests at six monthly intervals following the initial three-year performance period. This helps moderate the impact of shortterm share price volatility that may arise due to a market view of future Hot Rolled Coil prices, which is not reflective of actual Company performance. At each retest period, shares only vest if they have reached the hurdles for the total period from the date of the initial grant; Unvested share rights lapse on resignation or termination for cause or at the expiry of the relevant performance period, whichever comes first; and Change of Control conditions may result in early vesting provided the relevant performance hurdles are satisfied at that time.

3.4.3 Retention Share Plan The Board approves the use of retention plans in exceptional circumstances and on a targeted basis for specific purposes. These types of arrangements are not used in lieu of performance-related remuneration. During the year ended 30 June 2011 the Board approved an award of shares in a share based retention plan. Invitations to participate in this plan for executives were determined on the basis of rewarding, recognising and retaining key individuals, whose contributions are crucial to delivery of BlueScope Steels strategy for the next three years including restructuring the Australian business, changes to operating assets to drive improved earnings associated with a significant reduction in steel production, improving the performance of the North American business and expanding the Asian businesses. Offers of retention shares to ELT members are expected to be made in late August 2011 (with details to be included in the Remuneration Report for the year ending 30 June 2012). The shares will be issued pursuant to awards that are expected to be accepted during September 2011. Shares awarded under the Retention Share Plan will be subject to the following conditions: It will be a condition of acceptance of an award, that a recipient must agree to a variation of their employment contract which removes the ability of the company to make termination payments of more than 12 months fixed pay without shareholder consent other than as required by law;

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BlueScope Steel Limited Directors Report

Shares awarded will be forfeited in the event of cessation of employment for any reason in the restricted period other than where employment ceases due to death or disability; Shares cannot be sold, mortgaged, transferred, or otherwise encumbered at any time in the restriction period; The restriction period generally applies for a period of three years. The Board has discretion to allow vesting prior to the end of the restriction period; and In the event of a change in control during this time the shares will vest.

The Board is satisfied that similar plans operated in the past have been successful in achieving their reward and retention objectives.

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BlueScope Steel Limited Directors Report

SUMMARY TABLE OF LONG TERM INCENTIVE PLAN AWARDS September 2005 September 2006 September 2007 5 November 2007 (all executives excluding MD & CEO)
1 No vember 2007 4 (M D & CEO)

September 2008 1

September 20091

September 20101

18 November 2005 Grant Date

(The grant to the M D & CEO was subject to shareho lder appro val at the 2005 A GM )

18 November 2006

28 November 2008

30 November 2009

30 November 2010

(The grant to the M D & CEO was subject to shareho lder appro val at the 2006 A GM )

(The grant to the M D & CEO (The grant to the M D & CEO (The grant to the M D & CEO was subject to shareho lder was subject to shareho lder was subject to shareho lder appro val at the 2008 A GM ) appro val at the 2008 A GM ) appro val at the 2009 A GM )

Exercise Date Expiry Date Total Number of Share Rights Granted Total Number of Cash Rights Granted2 Number of Participants at Grant Date Number of Current Participants Exercise Price Fair Value Estimate at Grant Date Fair Value per Share Right at Grant Date

From 1 September 2008 From 1 September 2009 31 October 2010 1,938,100 228 0 Nil $7,086,856 31 October 2011 2,310,950 206 123 Nil $12,012,780

From 1 September 2010 From 1 September 2011 From 1 September 2012 From 1 September 2013 31 October 2012 1,934,845 217 152 Nil $11,468,263 $6.37 (5 Nov 2007) $6.42 (14 Nov 2007) 517,401 31 October 2013 2,248,246 255 234 Nil $2,765,343 31 October 2014 8,090,480 158,000 313 300 Nil $10,516,812 31 October 2015 10,536,550 166,000 285 279 Nil $9,723,180

$3.89 Share Rights Lapsed since Grant Date Cash Rights Lapsed since Grant Date Vesting Schedule TSR Hurdle - 75th-100th percentile TSR Hurdle - 51st-<75th percentile TSR Hurdle - < 51st percentile Vesting Outcome 1st Performance Period Vesting Outcome 2nd Performance Period Vesting Outcome 3rd Performance Period Vesting Outcome 4th Performance Period Vesting Outcome 5th Performance Period
1 2

$5.53 1,068,176 -

$1.64 310,095 -

$1.70 485,210 13,000

$1.20 210,000 18,000

421,780 -

100% 100% 100% 100% 100% 100% There is no vesting until the 51st percentile, at w hich point 52% vests increasing on a linear basis to 100% vesting at the 75th percentile. Any unvested Share Rights w ill be carried over for assessment at subsequent performance periods. All Share Rights w ill be carried over for assessment at subsequent performance periods. 100% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% -

These grants are w ithin the first performance period and are yet to be tested. For some countries, w here there are additional restrictions relating to aw ards of equity, a 'Cash Rights' aw ard is made w hich delivers a cash payment on vesting.

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BlueScope Steel Limited Directors Report

3.4.4 Share Ownership Guidelines Long-term equity incentives are tied to Company performance as experienced by shareholders. Employees who participate in the LTIP are prohibited from selling, assigning, charging or mortgaging their share rights. Share rights are personal to the employee. Employees are also prohibited from transferring any risk or benefit from the unvested share rights to any other party. So called cap and collar transactions cannot be made in respect of BlueScope Steel share rights. Employees are required to provide an annual confirmation that they are in compliance with this policy. 4 RELATIONSHIP BETWEEN COMPANY PERFORMANCE AND REMUNERATION The short-term and long-term incentive components of the remuneration strategy reward achievement against Company and individual performance measures over short-term and long-term timeframes. The graph below shows the Total Shareholder Return (TSR) performance of BlueScope Steel compared to the performance of the S&P/ASX 100 for the eight-year period to 30 June 2011. The TSR Index for BlueScope Steel as at 30 June 2011 was 74.9 compared to 212.4 for the S&P/ASX 100.

BlueScope Steel Limited Total Shareholder Return Index Compared to S&P/ASX100 15/7/02 to 30/6/11
Source: RBS 600

500

400

300

200

100

Jun-2002

Jun-2003

Jun-2004

Jun-2005

Jun-2006

Jun-2007

Jun-2008

Jun-2009

Jun-2010

Jun-2011

BLUESCOPE STEEL - TOT RETURN IND

S&P/ASX 100 - TSR Index (Rebased)

The use of a relative TSR measure as the Companys performance hurdle for the LTIP ensures that vesting of long-term incentives will only occur when the Company has delivered superior share price and dividend returns to shareholders over the performance period. For existing unvested LTIP grants to vest, the Companys relative TSR performance over the remainder of the relevant performance periods will need to recover its relative performance and by reversing the decline in share price and dividend performance, perform at least at the 51st percentile of those companies in the ASX 100 comparator group. An analysis of other Company performance and performance-related remuneration data relating to the nominated senior corporate executives in Section 3 over the same period are set out below.

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BlueScope Steel Limited Directors Report

BlueScope Steel Performance Analysis

30 June 2004 30 June 2005 30 June 2006 30 June 2007 30 June 2008 30 June 2009 30 June 2010 30 June 2011 Change from 30/6/04 to 30/6/11

Measure

Share Price Change in Share Price ($) Change in Share Price (%) Dividend per Share: Ordinary (cents) Special (cents) Earnings per Share (cents) REPORTED NPAT $ million % movement EBIT $ million % movement EBITDA $ million % movement UNDERLYING NPAT $ million % movement EBIT $ million % movement EBITDA $ million % movement

$6.74 $3.02 81.2 30 10 77.8 $584 $818 $1,105 $578 $822 $1,109 -

$8.23 $1.49 22.1 42 20 134 $982 68.2 $1,388 69.7 $1,696 53.5 $1,129 95.3 $1,559 89.7 $1,856 67.3

$7.95 -$0.28 -3.4 44 0 47.9 $338 -65.6 $556 -59.0 $850 -49.9 $555 -50.8 $840 -46.1 $1,127 -39.3

$10.34 $2.39 30.1 47 0 95.3 $686 103.0 $1,099 97.7 $1,423 67.4 $643 15.9 $1,057 25.8 $1,374 21.9

$11.34 $1.00 9.7 49 0 80.1 $596 -13.1 $1,063 -3.3 $1,420 -0.2 $816 26.9 $1,273 20.5 $1,630 18.7

$2.53 -$8.81 -77.7 5 0 -7.1 -$66 -111.1 $15 -98.6 $380 -73.2 $56 -93.1 $171 -86.6 $536 -67.1

$2.10 -$0.43 -17.0 5 0 6.9 $126 -290.9 $240 1,500.0 $590 55.3 $113 101.8 $255 49.1 $605 12.9

$1.21 -$0.89 -42.4 2 0 -57.4 -$1,054 -936.5 -$1,043 -534.2 -$687 -216.4 -$118 -204.4 -$101 -139.6 $254 -57.9 -$5.53 -82.0 N/A N/A N/A -$1,638 -280.5 -$1,860 -227.4 -$1,792 -162.2 -$696 -120.4 -$923 -112.3 -$854 -77.0

Note: From 1 July 2004 financial information is based on International financial reporting standards (IFRS).
1 Prior period earnings per share has been restated for the bonus element of the one for one share rights issue undertaken in May and June 2009 using a factor of 1.21.

4.1 Performance Related Remuneration Analysis In setting financial targets, the Board takes a number of factors into account, including market consensus on future earnings, forecast movements in steel prices, exchange rate and other external factors likely to impact financial performance. The Board aims to align executive remuneration to business outcomes and shareholder experience.

BSL Performance Related Remuneration Analysis for Executive Leadership Team

Measure Average % change in Short Term Incentive Payments 1 % change in underlying NPAT
1

Year ended Year ended Year ended Year ended 30 Year ended 30 June 2007 30 June 2008 30 June 2009 June 2010 30 June 2011 294% 15.9 36% 26.9 -100% -93.1 100% 101.8 -13% -204.4

Calculations are based on KMP executives w ho w ere employed for the current and prior financial years.

For 2011, all STI payments to ELT are below target and no amount is being paid for Group financial performance. Where bonuses are being paid for business unit financial performance, they are to be paid for results in Asia, New Zealand and Lysaght Australia and on a limited basis, for cash flow management. STIs for achievement of non financial objectives are being paid for reorganisation of the BlueScope Australian and New Zealand businesses, implementation of global PreEngineered Building marketing and engineering systems, improving the sourcing of raw materials, cost reduction, financial restructuring and improvements to the succession pipeline and talent capability.

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BlueScope Steel Limited Directors Report

5 SPECIFIC REMUNERATION DETAILS Details of the audited remuneration for the year ended 30 June 2011 for each Non-Executive Director of BlueScope Steel are set out in the following table. 5.1 Key Management Personnel Directors Remuneration

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BlueScope Steel Limited Directors Report

KMP Remuneration Non Executive Directors

Short-term employee benefits Post-employment Name Year Fees Non-monetary Sub-Total benefits 1 Total

$ Director - Current G J Kraehe R J McNeilly D J Grady H K McCann Y P Tan D B Grollo K A Dean P Bingham-Hall2 Total 2011 Total 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 2011 2010 460,385 450,000 266,000 260,000 192,339 188,000 185,177 181,000 200,523 196,000 185,177 181,000 202,569 195,450 38,838 1,731,007 1,651,450

$ 10,498 12,362 10,498 12,362

$ 470,883 462,362 266,000 260,000 192,339 188,000 185,177 181,000 200,523 196,000 185,177 181,000 202,569 195,450 38,838 1,741,505 1,663,812

$ 15,199 14,461 15,199 14,461 15,199 14,461 15,199 14,461 15,199 14,461 15,199 14,461 15,199 14,461 3,449 109,842 101,227

$ 486,082 476,823 281,199 274,461 207,538 202,461 200,376 195,461 215,722 210,461 200,376 195,461 217,768 209,911 42,287 1,851,347 1,765,039

1 2

Post-employment benefits relate to superannuation arrangements. Appointed to Non-Executive Director on 29 March 2011.

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BlueScope Steel Limited Directors Report

5.2 Key Management Personnel Executives (including Managing Director and Chief Executive Officers) remuneration The Key Management Personnel of BlueScope Steel Limited includes those members of the Executive Leadership Team who have the authority and responsibility for planning, directing and controlling the activities of the Company. These executives also represent the five most highly remunerated executives within the organisation. The following table shows the current composition of the Executive Leadership Team, who all held their positions during the year. Key Management Personnel - Executives Current KMP Position Dates Executive Leadership Team position held during year ended 30 June 2011 1 July 2010 30 June 2011 1 July 2010 30 June 2011

P F OMalley N H Cornish1

I R Cummin M R Vassella S R Elias M G Barron P E OKeefe K A Mitchelhill S Dayal R Moore P Finan

1

Managing Director and Chief Executive Officer Chief Executive, Australian & New Zealand Steel Manufacturing Businesses Executive General Manager, People and Organisation Performance President, North America Chief Financial Officer Chief Legal Officer and Company Secretary Chief Executive, Australian Coated & Industrial Markets Chief Executive, Australian Distribution & Solutions Chief Executive, Asia President, China Executive General Manager, Global Building & Construction Markets

1 July 2010 30 June 2011 1 July 2010 30 June 2011 1 July 2010 30 June 2011 1 July 2010 30 June 2011 1 July 2010 30 June 2011 1 July 2010 30 June 2011 1 July 2010 30 June 2011 1 December 2010 30 June 2011 1 November 2010 30 June 2011

Noel Cornish retired from the Company on 31 July 2011.

The audited information contained in the following tables represents the annual remuneration for the year ended 30 June 2011 for the Key Management Personnel - Executives. The aggregate remuneration of the Key Management Personnel - Executives of the Company is set out below:

Short-term employee benefits 1,2 Post-employment benefits Other long-term benefits Termination benefits Share-based payments 3 Total
1

2011 $ 12,009,504 432,438 231,934 578,810 2,452,180 15,704,866

2010 $ 10,898,772 412,329 72,432 2,253,122 13,636,655

This includes base salary, annual leave accruals, non-monetary benefits, superannuation received as cash allow ance and bonus payments (refer section 3.3 in regards to deferral of payment).
2

For some countries, w here there are more additional restrictions relating to aw ards of equity, a 'Cash Rights' aw ard is made w hich delivers a cash payment on vesting. This relates to aw ards of share rights that can only vest w hen performance hurdles are achieved

The remuneration of each member of the Key Management Personnel - Executives of the Company is set out in the following tables.

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BlueScope Steel Limited Directors Report

KMP REMUNERATION - Executives
Sho r t - t er m emp lo yee b enef it s M o vement i n annual l eave
1

Shar e- b ased p ayment s O t her l o ng - t er m emp l o yee b enef i t s

4

N ame

Y ear

Sal ar y and f ees p r o vi si o n $

B o nus $

N o nmo net ar y $

Po st emp lo yment Ot her

2

Sub - t o t al $

b enef i t s

T er mi nat io n b enef i t s $

Shar es and uni t s $

O p t i o ns and r i g ht s $

% of r emuner at io n t hat i s p er f o r mance T o t al $ r el at ed

9

Execut i ve D i r ect o r P F O'M alley 5 2011 2010 KM P execut i ves - cur r ent N H Cornish11 2011 2010 M R Vassella
6, 9

1,702,346 1,680,000

-11,903 -32,308

720,865 806,400

980 940

213,404 204,526

2,625,692 2,659,558

25,000 30,674

51,079 41,999

0 0

88,754 136,826

997,804 825,343

3,788,328 3,694,400

45.4 44.2

770,560 752,500 762,600 725,792 573,298 551,250 569,752 556,400 569,752 556,400 683,708 645,000 680,973 630,000 747,520 718,769 302,823 0 334,283 0 7,697,615 6,816,111

-16,284 26,049 -39,619 -22,470 19,587 -4,241 4,639 -23,540 13,599 -23,540 38,148 7,442 23,713 16,751 9,686 10,614 -5,706 0 16,317 0 52,176 -45,243

254,845 302,505 269,361 310,800 182,325 198,450 196,341 221,336 196,341 221,336 237,554 256,581 300,623 378,000 236,849 306,600 155,869 0 300,840 0 3,051,813 3,002,008

1,869 0 261,105 425,021 0 0 980 0 0 0 0 0 -90,007 68,378 50,452 71,570 198,902 0 161,543 0 585,824 565,909

0 0 81,190 78,694 55,291 46,191 53,659 8,066 29,765 37,620 70,771 62,551 45,550 42,367 54,653 79,972 0 0 17,792 0 622,076 559,987

1,010,990 1,081,054 1,334,637 1,517,837 830,502 791,650 825,371 762,262 809,457 791,816 1,030,181 971,574 960,852 1,135,496 1,099,160 1,187,525 651,888 0 830,775 0 12,009,504 10,898,772

109,526 123,410 25,000 22,917 25,000 30,984 26,106 69,830 50,000 40,276 25,000 27,749 50,000 45,833 50,000 20,656 17,639 0 29,167 0 432,438 412,329

34,386 -79,592 27,849 18,500 16,840 13,781 17,176 13,911 17,798 13,911 20,149 16,125 18,917 15,750 19,563 18,047 0 0 8,179 0 231,934 72,432

0 0 0 0 578,810 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 578,810 0

0 0 7,889 116,128 0 0 0 0 0 0 0 0 16,067 16,067 19,833 19,833 0 0 0 0 132,543 288,854

213,279 265,638 188,745 154,351 145,355 120,930 158,411 199,738 145,261 120,838 169,706 139,735 115,210 63,283 131,694 74,412 26,466 0 27,706 0 2,319,637 1,964,268

1,368,181 1,390,510 1,584,120 1,829,733 1,596,506 957,345 1,027,064 1,045,741 1,022,516 966,841 1,245,036 1,155,183 1,161,045 1,276,429 1,320,250 1,320,473 695,993 0 895,826 0 15,704,866 13,636,655

34.2 40.9 28.9 25.4 20.5 33.4 34.5 40.3 33.4 35.4 32.7 34.3 35.8 34.6 27.9 28.9 26.2 36.7 -

2011 2010

P E O'Keefe10

2011 2010

I R Cummin5

2011 2010

M G Barron

2011 2010

S R Elias

2011 2010

S Dayal

2011 2010

K A M it chelhill 5, 8

2011 2010

P J Finan

6, 7, 8

2011 2010

R J M oore6, 7

2011 2010

T o t al 2 0 11 T o t al 2 0 10

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BlueScope Steel Limited Directors Report

Negative movement in annual leave provision indicat es leave t aken during the year exceeded leave accrued during t he current year. The reduction in annual leave balances has been a key init iat ive t o reduce employment costs, wit h members of the ELT sett ing an example. Due t o changes in t he superannuat ion legislat ion result ing in maximum cont ribut ion levels, members of t he Def ined Contribut ion Division can elect to receive a proport ion of t heir superannuat ion as a cash allowance. Post -employment benef it s relat e t o superannuation arrangement s. There are no ot her post -employment benef it s. This shows movement in long service leave benef it s during t he year. Non-monet ary includes executive healt h check. Non-monet ary includes benef it s provided under the Company's int ernat ional assignment policy eg. accommodat ion, t ax equalisat ion, and medical coverage. KM P appoint ed t o ELT during year ended 30 June 2011. Amount s disclosed for year ended 30 June 2011 are f or part year only. Non-monet ary includes relocat ion expenses. The %of remuneration that is performance related recognises STI payout s at below t arget. LTI is based on accounting values rat her t han the amount s actually received.

2 3 4 5 6 7 8 9

As a result of t he restruct ure of the Company's business operat ions in Aust ralia, M r O'Keef e's role has been made redundant . He will be leaving the Company during t he year ending 30 June 2012, at which t ime he will be ent it led t o a terminat ion payment of 12 months base pay, under t he terms of his employment cont ract.
11

10

Noel Cornish ret ired f rom the Company on 31 July 2011. No payments ot her t han st at ut ory ent it lement s were paid.

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BlueScope Steel Limited Directors Report

5.3 Cash Bonuses For the year ended 30 June 2011, below-target STI payments will be made, resulting in outcomes for executives averaging less than 50% of the maximum STI that can be awarded. Eligibility to receive a bonus is subject to the terms and conditions of the plan, including a minimum of six months performance during the plan year and employment during the period is not terminated for resignation or performance-related reasons. Under the Companys Short Term Incentive Plan each executive can earn between 0% and 150% (maximum) of the STI target award. The table below shows the STI opportunity, actual percentage outcome achieved and percentage forfeited for the year ended 30 June 2011.

Name

Actual STI as a % % of maximum of maximum STI STI forfeited for Target of annual for year ended 30 year ended base pay June 2011 30 June 2011

% Executive director P F O'Malley KMP executives - current N H Cornish M R Vassella P E O'Keefe I R Cummin M G Barron S R Elias S Dayal K A Mitchelhill P J Finan1 R J Moore2
1 2

% 35 37 39 35 38 38 38 48 35 38 58

% 65 63 61 65 62 62 62 52 65 62 42

80 60 60 60 60 60 60 60 60 60 60

Appointed to ELT on 1 November 2010. Appointed to ELT on 1 December 2010.

5.4 Share Rights Holdings Share Rights granted, exercised and forfeited by the Key Management Personnel during the year ended 30 June 2011 were as follows:

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BlueScope Steel Limited Directors Report

VALUE OF SHARE RIGHTS HOLDINGS

Value of share rights exercised during the year $ Value of share rights at lapse date, that lapsed during the year $ Total value of share rights granted, exercised and lapsed during the year $

Nam e

Rem uneration consisting of share rights 1 %

Value of share rights granted during the year at grant date 2 $

Executive Director P F O'Malley KMP executives - current N H Cornish M R Vassella P E O'Keefe I R Cummin M G Barron S R Elias S Dayal K A Mitchelhill P J Finan3 R J Moore4 24 20 15 24 24 24 25 24 30 25 329,232 323,772 245,868 243,432 243,432 294,540 294,372 319,392 210,252 220,104 329,232 323,772 245,868 243,432 243,432 294,540 294,372 319,392 210,252 220,104 38 1,440,264 1,440,264

1 This figure is calculated on the value of share rights aw arded in the year ended 30 June 2011 as a percentage of the total value of all remuneration received in that same year.

External valuation advice from Pricew aterhouseCoopers Securities Limited has been used to determine the value of share rights aw arded in the year ended 30 June 2011. The valuation has been made using the Black-Scholes Option Pricing Model (BSM) that includes a Monte Carlo simulation analysis.
3 4

Apointed to ELT on 1 November 2010. Apointed to ELT on 1 December 2010.

The Share Rights awarded to executives under the September 2006 Award were tested after the third (31 August 2010) and fourth (28 February 2011) performance periods and no vesting occurred. The September 2007 Award were tested after the first (31 August 2010) and second (28 February 2011) performance periods and no vesting occurred. Both the September 2006 and 2007 Awards will be tested after the conclusion of the fifth and third performance period respectively on 31 August 2011. Details of the audited Share Rights holdings for year ended 30 June 2011 for the Key Management Personnel are set out in the following table. Refer to the Summary Table of Long Term Incentive Plan Awards (section 3.4.3) for details with respect to fair values, exercise price and key dates.

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BlueScope Steel Limited Directors Report

Share Rights holdings for the financial year ended 30 June 2011
Vested and not yet Granted in Exercised Lapsed in exercised Balance at year in year year Balance at in year Unvested 30 June ended 30 ended 30 ended 30 30 June ended 30 at 30 June 2010 June 2011 June 20111 June 2011 2011 June 2011 2011

2011

Total Share Rights vested in year ended 30 June 2011

Executive Director P F O'Malley KMP executives - current N H Cornish M R Vassella P E O'Keefe I R Cummin M G Barron S R Elias S Dayal K A Mitchelhill P J Finan
2

1,477,511 393,810 314,758 249,539 293,429 289,129 277,469 225,400 263,820 -

1,200,220 274,360 269,810 204,890 202,860 202,860 245,450 245,310 266,160 175,210 183,420

2,677,731 668,170 584,568 454,429 496,289 491,989 522,919 470,710 529,980 175,210 183,420

2,677,731 668,170 584,568 454,429 496,289 491,989 522,919 470,710 529,980 175,210 183,420

R J Moore3
1 2 3

The number of shares issued is equal to the number of rights exercised and no amount w as paid or remains unpaid for each share issued. Appointed to ELT on 1 November 2010. Appointed to ELT on 1 December 2010.

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BlueScope Steel Limited Directors Report

SHARE RIGHTS holdings for the financial year ended 30 June 2010

2010

Vested and not yet exercised Granted in Exercised Lapsed in Unvested year Balance at in year Balance at year in year ended 30 at 30 June 30 June ended 30 ended 30 ended 30 30 June June 2010 2010 2009 June 2010 June 20101 June 2010 2010

Total Share Rights vested in year ended 30 June 2010

Executive Director P F O'Malley KMP executives - current N H Cornish M R Vassella P E O'Keefe I R Cummin M G Barron S R Elias S Dayal K A Mitchelhill
1

547,511 178,810 103,328 92,039 134,459 130,159 93,179 45,400 55,250

930,000 215,000 211,430 157,500 158,970 158,970 184,290 180,000 208,570

1,477,511 393,810 314,758 249,539 293,429 289,129 277,469 225,400 263,820

1,477,511 393,810 314,758 249,539 293,429 289,129 277,469 225,400 263,820

The number of shares issued is equal to the number of rights exercised and no amount w as paid or remains unpaid for each share issued.

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BlueScope Steel Limited Directors Report

The table below sets out the details of each specific share right tranche and awards granted and vested during the year ended 30 June 2011 for each KMP - Executive.

2011 Executive Director P F O'Malley

Num ber of Share Rights aw arded

Date of grant

% vested in % forfeited in Share year ended year ended Rights yet 30 June 2011 30 June 2011 to vest

Financial year in w hich aw ards m ay vest

Value of Share Rights not vested 30 June 20111 $ Min $ Max

70,100 18-Nov-06 231,053 14-Nov-07 246,358 28-Nov-08 930,000 30-Nov-09 1,200,220 30-Nov-10

70,100 231,053 246,358 930,000 1,200,220 70,100 51,756 56,954 215,000 274,360 47,320 56,008 211,430 269,810 11,500 38,817 41,722 157,500 204,890 53,900 38,447 42,112 158,970 202,860

2011 2011 2012 2013 2014 2011 2011 2012 2013 2014 2011 2012 2013 2014 2011 2011 2012 2013 2014 2011 2011 2012 2013 2014

387,653 1,483,360 404,027 1,581,000 1,440,264 387,653 329,686 93,405 365,500 329,232 301,428 91,853 323,772 63,595 247,264 68,424 245,868 298,067 244,907 69,064 270,249 243,432

KMP executives - current N H Cornish 70,100 18-Nov-06 51,756 05-Nov-07 56,954 28-Nov-08 215,000 30-Nov-09 274,360 30-Nov-10 M R Vassella 47,320 05-Nov-07 56,008 28-Nov-08 211,430 30-Nov-09 269,810 30-Nov-10 P E O'Keefe
2

11,500 18-Nov-06 38,817 05-Nov-07 41,722 28-Nov-08 157,500 30-Nov-09 204,890 30-Nov-10

I R Cummin

53,900 18-Nov-06 38,447 05-Nov-07 42,112 28-Nov-08 158,970 30-Nov-09 202,860 30-Nov-10

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BlueScope Steel Limited Directors Report

M G Barron2

49,600 18-Nov-06 38,447 05-Nov-07 42,112 28-Nov-08 158,970 30-Nov-09 202,860 30-Nov-10

49,600 38,447 42,112 158,970 202,860 44,362 48,817 184,290 245,450 45,400 180,000 245,310 55,250 208,570 266,160 28,000 19,000 25,000 100,000 175,210 24,000 24,000 28,013 105,750 183,420

2011 2011 2012 2013 2014 2011 2012 2013 2014 2012 2013 2014 2012 2013 2014 2011 2011 2012 2013 2014 2011 2011 2012 2013 2014

274,288 244,907 69,064 270,249 243,432 282,586 80,060 313,293 294,540 74,456 306,000 294,372 90,610 354,569 319,392 154,840 121,030 41,000 170,000 210,252 132,720 152,880 45,941 179,775 220,104

S R Elias

44,362 05-Nov-07 48,817 28-Nov-08 184,290 30-Nov-09 245,450 30-Nov-10

S Dayal

45,400 28-Nov-08 180,000 30-Nov-09 245,310 30-Nov-10

K A Mitchelhill

55,250 28-Nov-08 208,570 30-Nov-09 266,160 30-Nov-10

P J Finan3

28,000 18-Nov-06 19,000 14-Nov-07 25,000 28-Nov-08 100,000 30-Nov-09 175,210 30-Nov-10

R J Moore3

24,000 18-Nov-06 24,000 14-Nov-07 28,013 28-Nov-08 105,750 30-Nov-09 183,420 30-Nov-10

External valuation advice from Pricew aterhouseCoopers Securities Limited has been used to determine the value of Share Rights held by KMP at 30 June 2011
2 3

Aw ard granted 2006 prior to appointment to ELT. Aw ard granted 2006, 2007, 2008 & 2009 prior to appointment to ELT.

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BlueScope Steel Limited Directors Report

5.5 Shares Awarded as Remuneration In the year ended 30 June 2008 a number of senior executives were awarded shares under the Special Share Retention Plan. Some of those shares vested in the year ended 30 June 2011.

Share Award Summary

Value of Shares not vested Financial 30 June 20111 year in w hich aw ards m ay vest $ Min $ Max

2011 Executive Director P F O'Malley

Num ber of Shares aw arded

Date of grant

% vested in % forfeited in year ended year ended Shares yet 30 June 2011 30 June 2011 to vest

15,000 06-Aug-07 17,000 06-Aug-07 18,000 06-Aug-07

100 100 -

17,000 18,000 20,000 25,000 -

2012 2013 2012 2012 -

180,880 191,520 48,200 59,500 -

KMP executives - current N H Cornish M R Vassella P E O'Keefe I R Cummin M G Barron S R Elias S Dayal2 K A Mitchelhill2 P J Finan3 R J Moore
4

25,000 03-Aug-07

20,000 10-Mar-09 25,000 27-Feb-09 -

1 2 3 4

Share price at grant date has been used to determine the value of Shares held by KMP at 30 June 2011. Granted on appointment to BlueScope Steel Limited. Appointed to ELTeam on 1 November 2010. Appointed to ELTeam on 1 December 2010.

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BlueScope Steel Limited Directors Report

5.6 Share Holdings in BlueScope Steel Limited The following table details the shares held by KMP Non Executive Directors and Executives, as well as any related-party interests in BlueScope Steel Limited as at 30 June 2011.

SHARE HOLDINGS1 IN BLUESCOPE STEEL LIMITED

Name Non-Executive Directors - current G J Kraehe R J McNeilly D J Grady H K McCann Y P Tan D B Grollo K A Dean P Bingham-Hall 2 Executive Director P F O'Malley KMP executives - current N H Cornish M R Vassella P E O'Keefe I R Cummin M G Barron S R Elias S Dayal K A Mitchelhill P J Finan3 R J Moore4
1 2 3 4

Ordinary shares held Ordinary shares held as at 30 June 2011 as at 30 June 2010

286,276 1,321,502 128,382 152,720 157,116 128,156 41,624 227,613 67,199 57,303 15,303 336,679 191,924 10,000 20,000 77,666 63,695 355,315

286,276 1,321,502 128,382 152,720 157,116 128,156 26,624 227,613 68,584 57,303 15,303 338,292 191,924 20,000 77,666 -

lncluding related party interests. Appointed to NED on 29 March 2011. Appointed to ELT on 1 November 2010. Appointed to ELT on 1 December 2010.

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BlueScope Steel Limited Directors Report

5.7 Managing Director and Chief Executive Officer Outline of Employment Contract Paul OMalley was appointed to the position of Managing Director and Chief Executive Officer effective from 1 November 2007. Mr OMalleys current annual base pay is $1,750,000. He received a 4% increase from 1 September 2010. Prior to this his base salary had not changed since 1 September 2008. Remuneration is reviewed annually in accordance with the Boards senior executive salary review policy. In addition, Mr OMalley is eligible to participate in the Short Term Incentive Plan and, subject to shareholder approval, Long Term Incentive Plan awards. In a year where financial performance was adversely affected by the economic downturn, the Managing Director and Chief Executive Officer received no payment for financial outcomes. His strong leadership during the year ended 30 June 2011 in delivering a pragmatic solution to the carbon tax for the Company, establishing Global Pre-Engineered Buildings (PEB) business, maintaining the cost reductions achieved in year ended 30 June 2010, achieving a strong contribution from the Asian business and driving the initiatives to restructure the Australian business has resulted in an STI bonus of $720,865 which is 35% of his maximum total bonus available. Upon appointment Mr OMalley was provided with 50,000 BlueScope Steel Limited shares (purchased on-market) to be held subject to certain restrictions. Some or all of these shares will be forfeited by Mr OMalley if his employment with BlueScope Steel is terminated within the restriction period specified, other than as a result of fundamental change in his employment terms. The employment of Mr OMalley may be terminated in the following circumstances: by notice: on six months notice by either party. If BlueScope Steel terminates Mr OMalleys employment by notice, it may provide payment in lieu of notice and must make an additional payment of 12 months annual base pay. with cause: immediate termination by BlueScope Steel if, among other things, Mr OMalley wilfully breaches his Service Contract, is convicted of various offences for which he can be imprisoned or is disqualified from managing a corporation, or engages in conduct which is likely to adversely impact the reputation of BlueScope Steel. In this circumstance, Mr OMalley will be entitled to his annual base pay up to the date of termination. illness or disablement: BlueScope Steel may terminate Mr OMalleys employment if he becomes incapacitated by physical or mental illness, accident or any other circumstances beyond his control for an accumulated period of six months in any 12-month period and, in this circumstance, will make payment of six months notice based on annual base pay. fundamental change: Mr OMalley may resign if a fundamental change in his employment terms occurs and within three months of the fundamental change Mr OMalley gives notice to BlueScope Steel. In this event, the Company will provide Mr OMalley with six months notice, or a payment in lieu of that notice, and a termination payment of 12 months annual base pay.

The rules governing the Companys Long Term Incentive Plan and Short Term Incentive Plan will apply to his LTIP and STI awards on termination of his employment. These rules which provide that STI and LTIP awards will be forfeited if Mr OMalleys employment is terminated for cause. Provision has also been made for early vesting (subject to satisfying performance testing requirements) of LTIP awards on a change of control. Mr OMalley is subject to a 12-month non-compete restriction after his employment ceases with BlueScope Steel. Mr OMalley cannot solicit or entice away from BlueScope Steel any supplier, customer or employee or participate in a business that competes with BlueScope Steel during the 12-month period. 5.8 Other Key Management Personnel - Executives Remuneration and other terms of employment for the disclosed Key Management Personnel are formalised in employment contracts that can be terminated with notice. Each of these agreements provide for an annual review of annual base pay, provision of performance-related cash bonuses, other benefits, including annual health assessment, and participation, when eligible, in the Long Term Incentive Plan. The contracts provide for notice of six months for resignation by the executive or termination by the Company. In the event of termination by the Company other than for cause, a termination payment of 12 months pay applies. Agreements are also in place for Key Management Personnel detailing the approach the Company will take with respect to payment of their termination payments and with respect to exercising its discretion on the vesting of share rights in the event of a Change of Control of the organisation.

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BlueScope Steel Limited Directors Report

ENVIRONMENTAL REGULATION BlueScope Steels Australian manufacturing operations are subject to significant environmental regulation. Throughout its Australian operations, the Company notified relevant authorities of 30 incidents resulting in statutory non-compliances with environmental licensing requirements during the financial year. During the period there were no serious environmental incidents. In September 2010 BlueScope Steel received a fine of $1,500 from an incident in May 2010 pertaining to localised dust emissions caused by vehicle movement in the recycling area of Port Kembla Steelworks. The NSW regulator has also indicated that BlueScope Steel will receive a fine of $1500 for an incident in May 2011 which resulted in process water being discharged into a drain and then to Port Kembla Harbour, with exceedances of concentration limits for ammonia. BlueScope Steel reports on an annual basis to the National Pollutant Inventory and, under the National Greenhouse and Energy Reporting scheme, on its greenhouse gas emissions and energy consumption and production. BlueScope Steel also assesses and reports publicly upon its energy efficiency opportunities at the Commonwealth level and prepares and monitors progress on water and energy savings plans required under state legislation. Each year BlueScope Steel publishes a Community Safety and Environment Report which is available on our website. The report provides further details of the Companys environmental performance and initiatives. INDEMNIFICATION AND INSURANCE OF OFFICERS BlueScope Steel has entered into directors' and officers' insurance policies and paid an insurance premium in respect of the insurance policies, to the extent permitted by the Corporations Act 2001. The insurance policies cover former Directors of BlueScope Steel along with the current Directors of BlueScope Steel (listed on page 2). Executive officers and employees of BlueScope Steel and its related bodies corporate are also covered. In accordance with Rule 21 of its Constitution, BlueScope Steel to the maximum extent permitted by law: must indemnify any current or former Director or Secretary; and may indemnify current or former executive officers,

of BlueScope Steel or any of its subsidiaries, against all liabilities (and certain legal costs) incurred in those capacities to a person, including a liability incurred as a result of appointment or nomination by BlueScope Steel or its subsidiaries as a trustee or as a director, officer or employee of another corporation. The current Directors of BlueScope Steel have each entered into an Access, Insurance and Indemnity Deed with BlueScope Steel. The Deed addresses the matters set out in Rule 21 of the Constitution and includes, among other things, provisions requiring BlueScope Steel to indemnify a Director to the extent to which they are not already indemnified as permitted under law, and to use its best endeavours to maintain an insurance policy covering a Director while they are in office and seven years after ceasing to be a Director. The Directors have not included details of the nature of the liabilities covered or the amount of the premium paid in respect of the directors' and officers' liability insurance contract, as (in accordance with normal commercial practice) such disclosure is prohibited under the terms of the contract. PROCEEDINGS ON BEHALF OF BLUESCOPE STEEL As at the date of this report, there are no leave applications or proceedings brought on behalf of BlueScope Steel under section 237 of the Corporations Act 2001. ROUNDING OF AMOUNTS BlueScope Steel is a company of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investments Commission, relating to the rounding off of amounts in the Directors' Report. Amounts in the Directors' Report have been rounded off in accordance with that Class Order to the nearest hundred thousand dollars, or in certain cases, the nearest thousand or the nearest dollar. AUDITOR Ernst & Young was appointed as auditor for BlueScope Steel at the 2002 Annual General Meeting. AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES The Auditors Independence Declaration for the year ended 30 June 2011 has been received from Ernst & Young. This is set out at page 37 of the Directors Report. Ernst & Young provided the following non-audit services during the year ended 30 June 2011: Audit related assurance services $742,111 acquisition related investigating accountants assurance.

Other services $236,482 taxation compliance services; and $160,004 other advisory services.

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BlueScope Steel Limited Directors Report

The Directors are satisfied that the provision of these non-audit services is compatible with the general standard of independence for auditors in accordance with the Corporations Act 2001. The nature, value and scope of each type of nonaudit service provided is considered by the Directors not to have compromised auditor independence. This report is made in accordance with a resolution of the Directors.

G J KRAEHE AO Chairman

P F OMALLEY Managing Director and Chief Executive Officer

Melbourne 20 August 2011

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Auditors Independence Declaration to the Directors of BlueScope Steel Limited

In relation to our audit of the financial report of BlueScope Steel Limited for the financial year ended 30 June 2011, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.

Ernst & Young

B R Meehan Partner 20 August 2011

Page 37 of 40 Liability limited by a scheme approved under Professional Standards Legislation

BlueScope Steel Limited Directors Report

CORPORATE GOVERNANCE STATEMENT Introduction As a global organisation with businesses operating in many countries, the BlueScope Steel Group must comply with a range of legal, regulatory and governance requirements. The Board places great importance on the proper governance of the Group. The Board operates in accordance with a set of corporate governance principles that take into account relevant best practice recommendations. These include the Corporate Governance Principles and Recommendations of the ASX Corporate Governance Council (2nd edition) (ASX Principles and Recommendations). The Company complies with each of the recommendations in the ASX Principles and Recommendations. A summary of BlueScope Steel's compliance with the recommendations follows, including details of specific disclosures required by a recommendation. Further information on the Company's corporate governance policies and practices can be found on the Companys website. Principle 1 Lay solid foundations for management and oversight The Board has adopted a Charter which sets out, among other things, its specific powers and responsibilities and the matters delegated to the Managing Director and Chief Executive Officer and those specifically reserved for the Board. A statement of the matters reserved for the Board and the areas of delegated authority to senior management is available on the Company's website. As part of the Board's oversight of senior management, all Company executives are subject to annual performance review and goal planning. This involves evaluation of the executives by their immediate superior. Each executive is assessed against a range of criteria, including achievement of financial, safety, business excellence and strategic goals, and adherence to the Companys values as expressed in Our Bond. All senior executives participated in a performance evaluation on this basis during the year ended 30 June 2011. Principle 2 Structure the Board to add value The Board is structured to bring to its deliberations a range of commercial, operational, financial, legal and international experience relevant to the Company's global operations. Pages 7 to 8 set out the qualifications, expertise and experience of each Director in office at the date of this Directors' Report, and their period of office. The Board considers all of its Non-Executive Directors to be independent. In making this assessment, the Board considers whether the Director is free of any business or other relationship that could, or could reasonably be perceived to, materially interfere with the exercise by the Director of an independent judgement in the interests of the Company as a whole. In determining whether a relationship between the Company and a Director is material and would compromise the Director's independence, the Board has regard to all the circumstances of the relationship including, where relevant: the proportion of the relevant class of expenses or revenues that the relationship represents to both the Company and the Director; and the value and strategic importance to the Company's business of the goods or services purchased or supplied by the Company.

Further details regarding the circumstances considered by the Board in making assessments of independence are contained on the Companys website under Directors Independence Policy The Board seeks to achieve a Board composition with a balance of diverse attributes relevant to the Companys operations and markets including skill sets, background, gender, geography, and industry experience. The Company is currently undergoing a process of Board renewal. The Nomination Committee has identified the keys skills and experience desirable on the Board as including financial / risk management, legal/governance, people management and operations management expertise; experience in the building and construction and steel or other heavy manufacturing industries; strategic and M&A/transactional experience; and experience with customers. The Board also strives for both gender and geographic diversity within these skill sets. Based on the assessment by the Nomination Committee of the particular skill profile for new appointees, a sub-committee is appointed to engage a search firm to assist in identifying appropriate candidates for consideration by the Board from a broad pool of possible candidates. Most recently, this process has resulted in the appointment of Ms Penny Bingham-Hall. The Board (and Board Committees and individual Directors) may obtain independent professional advice, at the Company's cost, in carrying out their responsibilities. Independent advice can be obtained without the involvement of the Company's management, where the Board or the Director considers it appropriate to do so. Procedures have been adopted by the Board setting out the practical steps by which independent advice may be obtained. All Non-Executive Directors are members of the Nomination Committee. Their attendance at meetings of the Committee are set out on page 9. The Board reviews its effectiveness and the performance of each Director regularly.

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BlueScope Steel Limited Directors Report

The Board completed an internal review of its effectiveness in August 2011 involving distribution of a questionnaire to Directors and senior management. Confidential responses were collated by the Companys auditors and discussed by the Board. The review concluded that the Board is functioning well with an appropriate mix of skills and experience and that an effective working relationship exists among Board members and between Board and management. In addition, each Committee reviews its performance and effectiveness periodically through a confidential questionnaire completed by members of the Committee and relevant management attendees. The results of these reviews are discussed by the Committee. Each Board Committee has conducted a review on this basis in the last 12 months. A formal review of the performance of individual Directors takes place periodically, involving completion of an evaluation questionnaire by other Board members, the results of which are collated and discussed by the Chairman with the director concerned (or the Deputy Chairman in the case of the review of the Chairman) and with the Board as a whole. In addition, the performance of the Chairman and other Directors are reviewed regularly through other informal mechanisms such as meeting critiques, discussions between Directors and the Chairman, and as part of Board and Committee evaluations. The Nomination Committee has reviewed the performance of Directors seeking election in 2011 and endorses their candidature. Principle 3 Promote ethical and responsible decision making BlueScope is committed to building a diverse workforce and considers that diversity (including gender diversity) will strengthen BlueScopes capability to meet its objectives. A range of programs and initiatives are in place to promote diversity including the establishment of a global Diversity Council, diversity action plans focused on recruitment, development and retention, flexible working arrangements, paid parental leave, womens networking groups, mentoring and leadership development programs and diversity awareness training. BlueScopes Diversity Policy is available on the Companys website. The Company has a set of values known as Our Bond and a Guide to Business Conduct, which provides an ethical and legal framework for all employees. The Guide defines how the BlueScope Steel Group relates to its customers, employees, shareholders and the community. Information relating to the Guide and Our Bond is available on the Company's website. In addition, the Board has established a Securities Trading Policy which governs dealing in the Company's shares and derivative securities. A copy of the policy has been lodged with ASX and is available on the Company's website. Principle 4 Safeguard integrity in financial reporting The Board has established an Audit and Risk Committee which assists the Board in the effective discharge of its responsibilities for financial reporting, internal controls, risk management, internal and external audit, and insurance (with the exception of directors' and officers' liability insurance). The Committee's Charter is set out in full on the Companys website. Separate discussions are held with the external and internal auditors without management present. The composition and structure of the Audit and Risk Committee complies with the requirements of the ASX Principles and Recommendations. The names of the members of the Audit and Risk Committee and their attendance at meetings of the Committee are set out on page 9 of this Directors' Report. The qualifications of the members are set out on pages 7 to 8. Principle 5 Make timely and balanced disclosure The Company is subject to continuous disclosure obligations under the ASX Listing Rules and Australian corporations legislation. Subject to limited exceptions, the Company must immediately notify the market, through ASX, of any information that a reasonable person would expect to have a material effect on the price or value of its securities. As part of its continuous disclosure responsibilities, the Company has established market disclosure protocols to promote compliance with these requirements and to clarify accountability at a senior executive level for that compliance. A summary of the Companys Continuous Disclosure Policy is included on the Company's website. Principle 6 Respect the rights of shareholders Respecting the rights of shareholders is of fundamental importance to the Company and a key element of this is how we communicate with our shareholders. In this regard, the Company recognises that shareholders must receive high-quality relevant information in a timely manner in order to be able to properly and effectively exercise their rights as shareholders. The Company's communications policy is summarised on the Company's website. Principle 7 Recognise and manage risk The Board has required management to design and implement a risk management and internal control system to manage the Company's material business risks and management has reported that those risks are being managed effectively. For the annual and half-year accounts released publicly, the Board has received assurance from the Managing Director and Chief Executive Officer and the Chief Financial Officer that, in their opinion: the financial records of the Group have been properly maintained; the financial statements and notes required by accounting standards for external reporting: (i) (ii) give a true and fair view of the financial position and performance of the Company and the consolidated BlueScope Steel Group; and comply with the accounting standards (and any further requirements in the Corporations Regulations) and applicable ASIC Class Orders; and

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BlueScope Steel Limited Directors Report

the above representations are based on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks.

Information relating to the Company's policies on risk oversight and management of material business risks is available on the Company's website. Principle 8 Remunerate fairly and responsibly The Remuneration Report (on pages 11 to 34) sets out details of the Company's policy and practices for remunerating Directors, key management personnel and senior executives. The names of the members of the Remuneration and Organisation Committee and their attendance at meetings of the Committee are set out on page 9. Information relating to: the role, rights, responsibilities and membership requirements for the Remuneration and Organisation Committee; and the Company's Securities Trading Policy, which prohibits entering into transactions in associated products that limit the economic risk of participating in unvested entitlements under any equity-based remuneration schemes,

is also available on the Company's website. Other than superannuation, there are no schemes for retirement benefits for Non-Executive Directors. All information referred to in this Corporate Governance Statement as being on the Companys website is included under the Responsibilities/Corporate Governance section of the website.

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BlueScope Steel Limited ABN 16 000 011 058 Annual Financial Report - 30 June 2011

Page Financial report Statement of comprehensive income Statement of financial position Statement of changes in equity Statement of cash flows Notes to the consolidated financial statements Directors' declaration Independent audit report to the members 2 3 4 5 6 94 95

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BlueScope Steel Limited Statement of comprehensive income For the year ended 30 June 2011 Consolidated 2011 2010 $M $M 9,153.1 0.8 222.9 (5,877.7) (1,517.3) (355.6) (925.9) (595.1) (939.0) (105.7) (276.9) 73.3 (1,143.1) 101.5 (1,041.6) 1.2 (1,040.4) 8,623.1 11.4 100.5 (4,963.2) (1,526.0) (349.8) (0.1) (544.5) (917.3) (112.1) (254.6) 62.9 130.3 3.5 133.8 5.7 139.5

Notes Revenue from continuing operations Other income Changes in inventories of finished goods and work in progress Raw materials and consumables used Employee benefits expense Depreciation and amortisation expense Impairment of non-current assets Freight on external despatches External services Finance costs Other expenses Share of net profits (losses) of associates and joint venture partnerships accounted for using the equity method Profit (loss) before income tax Income tax (expense) benefit Profit (loss) from continuing operations Profit from discontinued operations after income tax Net profit (loss) for the year Other comprehensive income Gain (loss) on cash flow hedges taken to equity (Gain) loss on cash flow hedges transferred to inventory Net gain (loss) on hedges of subsidiaries Exchange differences on translation of foreign operations Actuarial gain (loss) on defined benefit superannuation plans Income tax (expense) benefit on items of other comprehensive income Other comprehensive income for the year Total comprehensive income for the year Profit (loss) is attributable to: Owners of BlueScope Steel Limited Non-controlling interests Total comprehensive income is attributable to: Owners of BlueScope Steel Limited Non-controlling interests 6 7

8 8 8 45, 46 9

10

36(a) 36(a) 36(a) 36(b) 9

(0.6) 1.1 (13.0) (218.8) (4.9) 3.4 (232.8) (1,273.2) (1,054.2) 13.8 (1,040.4) (1,272.1) (1.1) (1,273.2) Cents

(0.5) (11.1) (17.5) (33.0) 14.7 (47.4) 92.1 126.0 13.5 139.5 77.7 14.4 92.1 Cents 6.6 6.6 Cents 6.9 6.9

Earnings per share for profit (loss) from continuing operations attributable to the ordinary equity holders of the Company Basic earnings per share Diluted earnings per share Earnings per share for profit (loss) attributable to the ordinary equity holders of the Company Basic earnings per share Diluted earnings per share

49 49

(57.5) (57.5) Cents (57.4) (57.4)

49 49

The above statement of comprehensive income should be read in conjunction with the accompanying notes.

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BlueScope Steel Limited Statement of financial position As at 30 June 2011 Consolidated 2011 2010 $M $M

Notes ASSETS Current assets Cash and cash equivalents Receivables Inventories Intangible assets Other Non-current assets classified as held for sale Total current assets Non-current assets Receivables Inventories Investments accounted for using the equity method Property, plant and equipment Deferred tax assets Intangible assets Other Total non-current assets Total assets LIABILITIES Current liabilities Payables Borrowings Current tax liabilities Provisions Deferred income Derivative financial instruments Total current liabilities Non-current liabilities Payables Borrowings Deferred tax liabilities Provisions Retirement benefit obligations Deferred income Total non-current liabilities Total liabilities Net assets EQUITY Contributed equity Reserves Retained profits Parent entity interest Non-controlling interest Total equity 35 36(a) 36(b) 29 30 31 32 33 34 17 18 19 20 21 22 23

11 12 13 14 16 20(a)

172.2 1,026.8 1,947.4 18.2 57.5 3,222.1 3,222.1 22.7 81.4 142.0 3,500.6 160.8 660.7 2.7 4,570.9 7,793.0

251.4 1,169.5 1,762.5 66.9 3,250.3 14.9 3,265.2 29.1 66.8 248.4 4,258.3 84.9 1,041.1 3.8 5,732.4 8,997.6

24 25 26 27 28 15

1,156.6 165.7 23.1 399.3 133.5 1,878.2 6.9 1,074.2 69.1 193.5 170.7 4.3 1,518.7 3,396.9 4,396.1 4,073.8 (324.8) 559.8 4,308.8 87.3 4,396.1

1,111.6 140.9 7.4 408.8 132.1 0.5 1,801.3 8.5 853.0 134.3 210.2 230.1 4.5 1,440.6 3,241.9 5,755.7 4,032.4 (118.4) 1,747.3 5,661.3 94.4 5,755.7

The above statement of financial position should be read in conjunction with the accompanying notes.

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BlueScope Steel Limited Statement of changes in equity For the year ended 30 June 2011 Contributed equity Reserves $M $M 4,032.4 (118.4) (212.6) (212.6) NonRetained controlling earnings interest $M $M 1,747.3 (1,054.2) (5.3) (1,059.5) 94.4 13.8 (14.9) (1.1)

Consolidated - 30 June 2011 Notes Balance at 1 July 2010 Profit (loss) for the period Other comprehensive income Total comprehensive income for the year Transactions with owners in their capacity as owners: Shares issued -Dividend Reinvestment Plan - transaction costs on share issues - General Employee Share Plan - exercise of share rights Share-based payment expense Dividends declared Tax credits recognised directly in equity Other

Total $M 5,755.7 (1,040.4) (232.8) (1,273.2)

35 35 35, 36(a) 35, 36(a) 36(a) 36(b) 35

41.3 (0.3) 0.3 0.1 41.4 4,073.8

(0.3) 6.6 (0.1) 6.2 (324.8)

(128.0) (128.0) 559.8

(6.0) (6.0) 87.3

41.3 (0.3) 6.6 (134.0) 0.1 (0.1) (86.4) 4,396.1

Balance at 30 June 2011

Consolidated - 30 June 2010 Notes Balance at 1 July 2009 Profit (loss) for the period Other comprehensive income Total comprehensive income for the year Transactions with owners in their capacity as owners: Shares issued - transaction costs on share issues - General Employee Share Plan - exercise of share rights Share-based payment expense Dividends declared Tax credits recognised directly in equity Transfer to undistributable profits reserve

Contributed equity Reserves $M $M 4,032.6 (104.8) (26.5) (26.5)

NonRetained controlling earnings interest $M $M 1,651.7 126.0 (21.8) 104.2 83.8 13.5 0.9 14.4

Total equity $M 5,663.3 139.5 (47.4) 92.1

35 35, 36(a) 35, 36(a) 36(a) 35

(0.9) 0.2 0.5 (0.2) 4,032.4

(0.4) 4.7 8.6 12.9 (118.4)

(8.6) (8.6) 1,747.3

(3.8) (3.8) 94.4

(0.9) (0.2) 4.7 (3.8) 0.5 0.3 5,755.7

Balance at 30 June 2010

The above statement of changes in equity should be read in conjunction with the accompanying notes.

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BlueScope Steel Limited Statement of cash flows For the year ended 30 June 2011 Consolidated 2011 2010 $M $M 9,616.9 (9,630.1) (13.2) 3.3 131.9 7.2 19.9 (115.3) (12.5) 47 21.3 8,873.4 (8,503.8) 369.6 6.5 64.4 9.5 21.8 (102.1) 7.2 376.9

Notes Cash flows from operating activities Receipts from customers Payments to suppliers and employees Associate dividends received Joint venture partnership distributions received Interest received Other revenue Finance costs paid Income taxes (paid) received Net cash (outflow) inflow from operating activities Cash flows from investing activities Payments for property, plant and equipment Payments for intangibles Payments for investment in joint venture partnership Payments for investment in business assets Proceeds from sale of property, plant and equipment Repayment of loans by related parties Net cash (outflow) inflow from investing activities Cash flows from financing activities Capital share raising costs Proceeds from borrowings Repayment of borrowings Dividends paid to Company's shareholders Dividends paid to minority interests in subsidiaries Net cash inflow (outflow) from financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at end of financial year 11

(380.2) (14.8) (1.7) (0.4) 31.9 5.7 (359.5)

(365.3) (8.0) (1.3) (0.4) 43.4 5.0 (326.6)

37(d)

(0.3) 9,347.5 (8,981.5) (86.7) (6.0) 273.0 (65.2) 249.3 (12.9) 171.2

(0.9) 2,157.1 (2,312.3) (3.7) (159.8) (109.5) 363.8 (5.0) 249.3

Financing arrangements 30 Non-cash investing and financing activities 48 The above statement of cash flows should be read in conjunction with the accompanying notes.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011

Contents of the notes to the consolidated financial statements

Page 7 23 24 31 32 36 36 37 38 40 41 41 43 43 44 44 45 45 45 46 48 49 51 51 52 52 53 54 54 55 58 58 59 63 63 65 67 68 71 72 73 75 77 79 82 83 84 84 85 86 90 92

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52

Summary of significant accounting policies Corporate information Financial risk management Critical accounting estimates and judgements Segment information Revenue Other income Expenses Income tax expense Discontinued operations Current assets - Cash and cash equivalents Current assets - Receivables Current assets - Inventories Current assets - Intangible assets Derivative financial instruments Current assets - Other Non-current assets - Receivables Non-current assets - Inventories Non-current assets - Investments accounted for using the equity method Non-current assets - Property, plant and equipment Non-current assets - Deferred tax assets Non-current assets - Intangible assets Non-current assets - Other Current liabilities - Payables Current liabilities - Borrowings Current liabilities - Current tax liabilities Current liabilities - Provisions Current liabilities - Deferred income Non-current liabilities - Payables Non-current liabilities - Borrowings Non-current liabilities - Deferred tax liabilities Non-current liabilities - Provisions Non-current liabilities - Retirement benefit obligations Non-current liabilities - Deferred income Contributed equity Reserves and retained profits Dividends Key management personnel disclosures Remuneration of auditors Contingencies Commitments Related party transactions Subsidiaries Deed of cross-guarantee Investments in associates Interests in joint ventures Reconciliation of profit after income tax to net cash inflow from operating activities Non-cash investing and financing activities Earnings per share Share-based payments Parent entity financial information Events occurring after the balance date

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

Summary of significant accounting policies

The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements include the consolidated entity consisting of BlueScope Steel Limited and its subsidiaries (the 'Group'). (a) Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. (i) Compliance with IFRS The consolidated financial statements of BlueScope Steel Limited comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). (ii) Early adoption of new accounting standards The Group has not elected to early adopt any of the standards set out under '(b) New accounting standards and interpretations' for the current reporting period. (iii) Historical cost convention These financial statements have been prepared under the historical cost convention, except for derivative financial instruments which have been measured at fair value. (iv) Critical accounting estimates The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Groups accounting policies. 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 4. (b) New accounting standards and interpretations Certain new accounting standards and interpretations have been published that are not mandatory for the 30 June 2011 reporting period. The Groups assessment of the impact of these new standards and interpretations is set out below. (i) AASB 9 Financial Instruments and AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) (effective from 1 January 2013) AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets. The standard is not applicable until 1 January 2013 but is available for early adoption. When adopted, the standard will impact accounting for available-for-sale financial assets, since AASB 9 only permits the recognition of fair value gains and losses in other comprehensive income if they relate to equity investments that are not held for trading. These changes are not expected to have an impact on the amount recognised in the Group's financial statements. There will be no impact on the Group's accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the Group does not have any such liabilities. (ii) Revised AASB 124 Related Party Disclosures (effective from 1 January 2011) In December 2009 the AASB issued a revised AASB 124 Related Party Disclosures. It is effective for accounting periods beginning on or after 1 January 2011 and must be applied retrospectively. The amendment clarifies and simplifies the definition of a related party. The Group will apply the amended standard from 1 July 2011. However, there will be no impact on any of the amounts recognised in the financial statements. (iii) AASB 2009-14 Amendments to Australian Interpretation - Prepayments of a Minimum Funding Requirement (effective from 1 January 2011) In December 2009, the AASB made an amendment to Interpretation 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction. The amendment removes an unintended consequence of the interpretation related to voluntary prepayments when there is a minimum funding requirement in regard to the entity's defined benefit scheme. It permits entities to recognise an asset for a prepayment of contributions made to cover minimum funding requirements. As the Group does not make any such prepayments, the amendment is not expected to have any impact on the Group's financial statements. The Group will apply the amendment from 1 July 2011.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

Summary of significant accounting policies (continued)

(iv) AASB 1053 Application of Tiers of Australian Accounting Standards and AASB 2010-2 Amendments to Australian Accounting Standards arising from Reduced Disclosure Requirements (effective from 1 July 2013) On 30 June 2010, the AASB officially introduced a revised differential reporting framework in Australia. Under this framework, a two-tier differential reporting regime applies to all entities that prepare general purpose financial statements. BlueScope Steel Limited is listed on the ASX and is not eligible to adopt the new Australian Accounting Standards Reduced Disclosure Requirements. The two standards will therefore have no impact on the financial statements of the Group. (v) AASB 2010-6 Amendments to Australian Accounting Standards - Disclosures on Transfers of Financial Assets (effective for annual reporting periods beginning on or after 1 July 2011) Amendments made to AASB 7 Financial Instruments: Disclosures November 2010 introduce additional disclosures in respect of risk exposures arising from transferred financial assets. As the Group currently factors financial assets, the amendments are expected to have an impact on the Group's disclosures. The Group will apply the amendment from 1 July 2011. (vi) AASB 2010-8 Amendments to Australian Accounting Standards - Deferred Tax: Recovery of Underlying Assets (effective from 1 January 2012) In December 2010, the AASB amended AASB 112 Income Taxes to provide a practical approach for measuring deferred tax liabilities and deferred tax assets when investment property is measured using the fair value model. The amendment introduces a rebuttable presumption that investment property which is measured at fair value is recovered entirely by sale. As the Group does not hold any investment properties, the amendment will have no impact on the Group's financial statements. The Group will apply the amendment from 1 July 2012. (vii) AASB 2010-4 Amendments to Australian Accounting Standards - Annual Improvement Project (effective from 1 January 2011) This amendment emphasises the interaction between quantitative and qualitative AASB 7 disclosures and the nature and extent of risks associated with financial instruments. It clarifies that an entity will present an analysis of other comprehensive income for each component of equity, either in the statement of changes of equity or in the notes to the financial statements. This is not expected to have any significant impact on the Group's disclosures. The Group will apply the amendment from 1 July 2011. (viii) AASB 2010-5 Amendments to the Australian Accounting Standards (effective from 1 January 2011) This standard makes numerous editorial amendments to a range of Australian Accounting Standards and Interpretations, including amendments to reflect changes made to the text of IFRS by the IASB. These amendments have no major impact on the requirements of the amended pronouncements. The Group will apply the amendments from 1 July 2011. (ix) IAS 19 Amendments to Australian Accounting Standards - Employee Benefits (effective from 1 January 2013) On 16 June 2011, the IASB issued an amended IAS 19 Employee Benefits which will, when adopted as an Australian Standard by the AASB, change how the Group will account for its defined benefit pension plans in relation to the expected returns on plan assets. Fund assets will be required to produce a credit to income based on government bond yields irrespective of actual composition of fund assets held. The difference between actual returns and the amount reported in the profit and loss will permanently bypass the profit and loss by being recorded as an actuarial variance. Actuarial gains and losses will continue to be recorded in other comprehensive income. These amendments are expected to have a significant impact on the Group's profit and loss, given government bond yields are currently lower than the actuarial estimation of the expected return on plan assets (refer note 33). In addition to the increase in the defined benefit pension plan expense, short and long-term benefits will now be distinguished based on the expected timing of settlement, rather than employee entitlement. The Group will now be required to discount to present value annual leave which is not expected to be settled within 12 months. The Group will apply this amendment from 1 July 2013. (x) IFRS 10 Consolidated Financial Statements (effective from 1 January 2013) IFRS 10 establishes a new control model that applies to all entities. It replaces parts of IAS 27 Consolidated and Separate Financial Statements dealing with the accounting for consolidated financial statements and SIC-12 Consolidation Special Purpose Entities. The new control model broadens the situations when an entity is considered to be controlled by another entity and includes new guidance for applying the model to specific situations, including when acting as a manager may give control, the impact of potential voting rights and when holding less than a majority voting rights may give control

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

Summary of significant accounting policies (continued)

(xi) IFRS 11 Joint Arrangements (effective from 1 January 2013) IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly- Controlled Entities Non-monetary Contributions by Venturers. IFRS 11 uses the principle of control in IFRS 10 to define joint control, and therefore the determination of whether joint control exists may change. In addition IFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, accounting for a joint arrangement is dependent on the nature of the rights and obligations arising from the arrangement. Joint operations that give the venturers a right to the underlying assets and obligations themselves is accounted for by recognising the share of those assets and obligations. Joint ventures that give the venturers a right to the net assets is accounted for using the equity method. (xii) IFRS 12 Disclosure of Interests in Other Entities (effective from 1 January 2013) IFRS 12 includes all disclosures relating to an entitys interests in subsidiaries, joint arrangements, associates and structures entities. New disclosures have been introduced about the judgements made by management to determine whether control exists, and to require summarised information about joint arrangements, associates and structured entities and subsidiaries with non-controlling interests. (xiii) IFRS 13 Fair value Measurement (effective from 1 January 2013) IFRS 13 establishes a single source of guidance under IFRS for determining the fair value of assets and liabilities. IFRS 13 does not change when an entity is required to use fair value, but rather, provides guidance on how to determine fair value under IFRS when fair value is required or permitted by IFRS. Application of this definition may result in different fair values being determined for the relevant assets. IFRS 13 also expands the disclosure requirements for all assets or liabilities carried at fair value. This includes information about the assumptions made and the qualitative impact of those assumptions on the fair value determined. The Group will apply IFRS 10, 11, 12 and 13 amended standards from 1 July 2013. These amendments are not expected to have any impact on the financial statements. (c) Parent entity financial information The financial information for the parent entity, BlueScope Steel Limited, disclosed in note 51 has been prepared on the same basis as the consolidated financial statements, except as set out below. (i) Investments in subsidiaries Investments in subsidiaries are accounted for at cost less accumulated impairment losses in the financial statements of BlueScope Steel Limited. (ii) Tax consolidation legislation BlueScope Steel Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation. The head entity, BlueScope Steel Limited, and the controlled entities in the tax consolidated group account for their own current and deferred tax amounts. These tax amounts are measured in a systematic manner that is consistent with the broad principles of AASB 112 Income Taxes ('Group allocation approach'). In addition to its own current and deferred tax amounts, BlueScope Steel Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group. Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the Group. Details about the tax funding agreement are disclosed in note 51. Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities. (d) Principles of consolidation (i) Subsidiaries The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of BlueScope Steel Limited ('Company' or 'parent entity') as at 30 June 2011 and the results of all subsidiaries for the year then ended. BlueScope Steel Limited and its subsidiaries together are referred to in this financial report as the Group or the consolidated entity.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

Summary of significant accounting policies (continued)

Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies, 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. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. The acquisition method of accounting is used to account for business combinations by the Group (refer to note 1(j)). Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Non-controlling interests in the results and equity of subsidiaries are shown separately in the statement of comprehensive income, statement of changes in equity and statement of financial position respectively. (ii) Associates Associates are all entities over which the Group has significant influence but not control or joint control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting, after initially being recognised at cost. The Groups investments in associates include goodwill (net of any accumulated impairment loss) identified on acquisition (refer to note 45). The Groups share of its associates post-acquisition profits or losses is recognised in profit or loss, and its share of postacquisition movements in reserves is recognised in other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividends receivable from associates in the consolidated financial statements reduce the carrying amount of the investment. When the Group's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Groups interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group. (iii) Joint venture entities The interests in joint venture partnerships are accounted for in the financial statements using the equity method and is carried at cost by the parent entity. Under the equity method, the share of the profits or losses of the partnerships are recognised in profit or loss, and the share of post-acquisition movements in reserves is recognised in other comprehensive income. Details relating to the partnership are set out in note 46. Profits or losses on transactions establishing joint venture partnerships and transactions with joint ventures are eliminated to the extent of the Groups ownership interest until such time as they are realised by the joint venture partnership on consumption or sale. 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. (iv) Changes in ownership interests The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of BlueScope Steel Limited. When the Group ceases to have control, joint control or significant influence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, jointly controlled entity or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

Summary of significant accounting policies (continued)

If the ownership interest in a jointly controlled entity or an associate is reduced but joint control or significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate. (e) Segment reporting Operating segments are reported in a manner which is materially consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Managing Director and Chief Executive Officer. (f) Foreign currency translation

(i) Functional and presentation currency Items included in the financial statements of each of the Groups entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in Australian dollars, which is BlueScope Steel Limiteds functional and presentation currency. (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit or loss, except when they are deferred in equity as qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation. Translation differences on available-for-sale financial assets are included in equity until such time as the available-for-sale asset is sold and the translated amount is reported in the profit and loss. (iii) Foreign operations The results and financial position of foreign operations (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position; income and expenses for each statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and all resulting exchange differences are recognised in other comprehensive income.

On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign operation is sold a proportionate share of such exchange differences is reclassified to profit or loss as part of the gain or loss on sale where applicable. Goodwill and fair value adjustments arising on the acquisition of foreign entities are treated as assets and liabilities of the foreign entities and translated at the closing rate. (g) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties. The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and the specific criteria described below have been met. Revenue is recognised for the major business activities as follows: (i) Sale of goods Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer. This is considered to have occurred when legal title of the product is transferred to the customer and the Group is no longer responsible for the product. The point at which title is transferred is dependent upon the specific terms and conditions of the contract under the sale.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

Summary of significant accounting policies (continued)

(ii) Rendering of services Contract revenue is recognised in accordance with the percentage of completion method unless the outcome of the contract cannot be reliably estimated. Where the outcome of the contract cannot be reliably estimated, contract costs are recognised as an expense as incurred, and where it is probable the costs will be recovered, revenue is recognised to the extent of costs incurred. (iii) Interest income Interest income is recognised using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. (iv) Dividends Dividends are recognised as revenue when the right to receive payment is established. This applies even if they are paid out of pre-acquisition profits. However, the investment may need to be tested for impairment as a consequence (refer note 1(k)). (h) Income tax and other taxes The income tax expense or revenue for the period is the tax payable on the current periods taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Group's subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. BlueScope Steel Limited and its wholly-owned Australian controlled entities have entered into a tax sharing and funding agreement in relation to their participation in the tax consolidation regime. As a consequence, these entities are taxed as a single entity and the deferred tax assets and liabilities of these entities are set off in the consolidated financial statements. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. Other taxes Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case, it is recognised as part of the cost of acquisition of the asset or as part of the expense.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

Summary of significant accounting policies (continued)

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority are presented as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. (i) Leases

Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the leases inception at the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in current and non-current interest bearing liabilities. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the assets useful life, or over the shorter of the asset's useful life and the lease term if there is no reasonable certainty that the Group will obtain ownership at the end of the lease term. Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the profit or loss on a straight-line basis over the period of the lease. (j) Business combinations

The acquisition method of accounting is used to account for all business combinations, excluding business combinations involving entities or businesses under common control which are transferred using the underlying carrying values of the entity being acquired, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net identifiable assets. The excess of the fair value of consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the Group's share of net identifiable assets of the subsidiary acquired is recorded as goodwill. If those amounts are less than the fair value of net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entitys incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss. Restructuring costs associated with a business combination are brought to account on the basis described in note 1(ab).

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

Summary of significant accounting policies (continued)

(k) Impairment of assets Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested 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 purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets, other than goodwill, that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. Refer to notes 20 and 22 for detail of impairment losses and reversals recognised in the current period. Refer to note 22 for impairment testing methodology and a detailed allocation of goodwill and intangible assets with indefinite useful lives to cash-generating units (CGUs). (l) Cash and cash equivalents

For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the statement of financial position. (m) Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are generally due for settlement within 30 to 90 days. Collectibility of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account (provision for impairment of trade receivables) is used when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the impairment allowance is the difference between the assets carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. The amount of the impairment loss is recognised in profit or loss within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in profit or loss. (n) Inventories Raw materials and stores, work in progress and finished goods are stated at the lower of cost and net realisable value. Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Cost includes the transfer from equity of any gains/losses on qualifying cash flow hedges relating to purchases of raw materials. Costs are assigned to inventory on the basis of weighted average costs. Costs of purchased inventory are determined after deducting rebates and discounts. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. (o) Non-current assets (or disposal groups) held for sale and discontinued operations Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell, except for assets such as deferred tax assets, assets arising from employee benefits and financial assets, which are specifically exempt from this requirement.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

Summary of significant accounting policies (continued)

An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset is recognised at the date of derecognition. Non-current assets classified as held for sale and the assets of a disposal group classified as held for sale are presented separately from the other assets in the statement of financial position. The liabilities of a disposal group classified as held for sale are presented separately from other liabilities in the statement of financial position. A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single coordinated plan to dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations are presented separately in the statement of comprehensive income. (p) Investments and other financial assets Classification The Group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and, in the case of assets classified as held to maturity, re-evaluates this designation at the end of each reporting period. (i) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are classified as held for trading unless they are designated as hedges. Assets in this category are classified as current assets. (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 included in current assets, except for those with maturities greater than 12 months after the reporting date which are classified as non-current assets. Loans and receivables are included in receivables in the statement of financial position (notes 12 and 17). (iii) Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Groups management has the positive intention and ability to hold to maturity. If the Group were to sell other than an insignificant amount of held-to-maturity financial assets, the whole category would be tainted and reclassified as available-for-sale. Assets in this category are classified as non-current assets except for those with maturities less than 12 months from the end of the reporting period, which are classified as current assets. (iv) Available-for-sale financial assets Available-for-sale financial assets, comprising principally equity securities, are non-derivatives that are either designated in this category or not classified in any of the other categories. Investments are designated as available-for-sale if they do not have fixed maturities and fixed or determinable payments and management intends to hold them for the medium to long term. Assets in this category are classified as non-current assets unless management intends to dispose of the investment within 12 months of the end of the reporting period, in which case they are classified as current assets. Financial assets-reclassification The Group may choose to reclassify a non-derivative trading financial asset out of the held-for-trading category if the financial asset is no longer held for the purpose of selling it in the near term. Financial assets other than loans and receivables are permitted to be reclassified out of the held-for-trading category only in rare circumstances arising from a single event that is unusual and highly unlikely to recur in the near term. In addition, the Group may choose to reclassify financial assets that would meet the definition of loans and receivables out of the held-for-trading or available-for-sale categories if the Group has the intention and ability to hold these financial assets for the foreseeable future or until maturity at the date of reclassification.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

Summary of significant accounting policies (continued)

Reclassifications are made at fair values as of the reclassification date. Fair value becomes the new cost or amortised cost as applicable, and no reversals of fair value gains or losses recorded before reclassification date are subsequently made. Effective interest rates for financial assets reclassified to loans and receivables and held-to-maturity categories are determined at the reclassification date. Further increases in estimates of cash flows adjust effective interest rates prospectively. Recognition and derecognition Regular purchases and sales of financial assets are recognised on trade-date - the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in profit or loss. 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 the risks and rewards of ownership. When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in other comprehensive income are reclassified to profit or loss as gains and losses from available-for-sale financial assets. Measurement At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in the profit or loss. Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method. Available-for-sale financial assets and financial assets at fair value through profit and loss are subsequently carried at fair value. Gains or losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss' category are presented in profit or loss within other income or other expenses in the period in which they arise. Dividend income from financial assets at fair value through profit and loss is recognised in profit or loss as part of revenue from continuing operations when the Group's right to receive payments is established. Details on how the fair value of financial instruments is determined are disclosed in note 3. Impairment The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of a security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss - is removed from equity and recognised in profit or loss. Impairment losses recognised in profit or loss on equity instruments classified as available-for-sale are not reversed through profit or loss. If there is evidence of impairment for any of the Group's financial assets carried at amortised cost, the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows discounted at the financial assets original effective interest rate. The carrying amount of the asset is reduced, with the amount of the loss recognised in profit or loss. (q) Derivatives and hedging activities Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates derivatives as either: hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedges); hedges of a particular risk associated with the cash flows of recognised assets and liabilities and highly probable forecast transactions (cash flow hedges), or hedges of a net investment in a foreign operation (net investment hedges).

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

Summary of significant accounting policies (continued)

The Group documents at the inception of the hedging transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items. The fair values of various derivative financial instruments used for hedging purposes are disclosed in note 15. Movements in the hedging reserve in shareholders' equity are shown in note 36. The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. Trading derivatives are classified as a current asset or liability. (i) Fair value hedges Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in profit or loss, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. (ii) Cash flow hedges The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income and accumulated in equity in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss within other income or other expenses. Amounts accumulated in the hedging reserve are reclassified to profit or loss in the periods when the hedged item affects profit or loss. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset (for example, inventory or fixed assets) the gains and losses previously deferred in the hedging reserve are reclassified from equity and included in the initial measurement of the cost of the asset. The deferred amounts are ultimately recognised in profit or loss as cost of goods sold in the case of inventory, or as depreciation in the case of fixed assets. When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in the hedging reserve at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in the hedging reserve is immediately reclassified to profit or loss. (iii) Net investment hedges Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in other comprehensive income and accumulated in equity in the foreign currency translation reserve. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss within other income or other expenses. Gains and losses accumulated in the foreign currency translation reserve are included in profit or loss when the foreign operation is partially disposed of or sold. (iv) Derivatives that do not qualify for hedge accounting

Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that do not qualify for hedge accounting are recognised immediately in profit or loss and are included in other income or other expenses. (r) Property, plant and equipment

Property, plant and equipment is stated at historical cost less accumulated depreciation and accumulated impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains or losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. Subsequent costs are included in the assets carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

Summary of significant accounting policies (continued)

Land is not depreciated. Depreciation on other assets is calculated on a straight-line basis to allocate their cost over their estimated useful lives or, in the case of leasehold improvements and certain leased plant and equipment, the shorter lease term. The useful lives of major categories of property, plant and equipment are as follows: Category Buildings Plant, machinery and equipment Useful life Up to 40 years Up to 40 years

The assets useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An assets carrying amount is written down immediately to its recoverable amount if the assets carrying amount is greater than its estimated recoverable amount (note 1(k)). Gains and losses on disposal are determined by comparing proceeds with the carrying amount. These are included in profit or loss on a net basis as either income (a gain) or an expense (a loss). (s) Intangible assets (i) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Groups share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates is included in investments in associates. Goodwill is not amortised. Instead, goodwill is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cashgenerating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose (note 22). (ii) Patents, trademarks and other rights Patents, trademarks and other rights are carried at cost less accumulated amortisation and impairment losses. Amortisation on patents, trademarks and other rights that have finite lives is calculated using the straight-line method to allocate the cost over their estimated useful lives. (iii) Research and development Research expenditure is recognised as an expense as incurred. Costs incurred on development projects are recognised as intangible assets when it is probable that the project will, after considering its commercial and technical feasibility, be completed and generate future economic benefits and its costs can be measured reliably. The expenditure capitalised comprises all directly attributable costs, including costs of materials, services, direct labour and an appropriate proportion of overheads. Other development expenditure that does not meet these criteria is recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use on a straight-line basis over the period of expected benefit. (iv) IT development software Costs incurred in developing products or systems and costs incurred in acquiring software and licences that will contribute to future period financial benefits through revenue generation and/or cost reduction are capitalised to software and systems. Costs capitalised include external direct costs of materials and service, direct payroll and payroll-related costs of employees' time spent on the project. Amortisation is calculated on a straight-line basis over periods generally ranging from 3 to 10 years. IT development costs include only those costs directly attributable to the development phase and are only recognised following completion of technical feasibility and where the Group has an intention and ability to use the asset. (v) Customer relationships

Customer relationships and items of similar substance are only recognised as an intangible asset if they are acquired as part of a business combination and meet the recognition criteria as set out in the business combinations accounting policy (refer to note 1(j)). When recognised, such items are carried at fair value at the date of acquisition less accumulated amortisation and impairment losses. Amortisation on customer relationships with finite lives is calculated using the straight-line method to allocate the asset carrying amount over its estimated useful life. -18-

BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

1
(t)

Summary of significant accounting policies (continued)

Trade and other payables

These amounts are carried at amortised cost and represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 to 62 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months from the reporting date. (u) Borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs and are consequently recognised in profit or loss over the term of the associated borrowing. Borrowings are removed from the statement of financial position when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period. (v) Borrowing costs Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed. The capitalisation rate used to determine the amount of borrowing costs to be capitalised is, where applicable, the interest rate applicable to associated borrowings or the weighted average interest rate applicable to the Group's borrowings outstanding during the period. (w) Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of management's best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense. Where the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in profit or loss net of any reimbursement. (x) Employee benefits (i) Short-term obligations Liabilities for wages and salaries, including non-monetary benefits, annual leave and other employee benefits expected to be settled within 12 months of the reporting period, are measured at the amounts expected to be paid when the liabilities are settled. These short-term obligations are recognised as provisions for employee benefits, except accrued wages and salaries, which is presented as an other payable due to the increased certainty around the timing of the attached cash outflows. Non-accumulating sick leave is recognised when the leave is taken and measured at the rates paid or payable.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

Summary of significant accounting policies (continued)

(ii) Other long-term employee benefit obligations The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. (iii) Retirement benefit obligations All employees of the Group are entitled to benefits from the Group's superannuation plans on retirement, disability or death. The Group has both defined benefit and defined contribution plans. The defined benefit plans provide defined lump sum benefits based on years of service and final average salary. The defined contribution plans receive fixed contributions from Group companies and the Groups legal or constructive obligation is limited to these contributions. A liability or asset in respect of defined benefit superannuation plans is recognised in the statement of financial position and is measured as the present value of the defined benefit obligation at the end of the reporting period less the fair value of the superannuation funds assets at that date and any unrecognised past service cost. The present value of the defined benefit obligation is based on expected future payments which arise from membership of the fund to the end of the reporting period, calculated half-yearly by independent actuaries using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in the period in which they occur, directly in other comprehensive income. Past service costs are recognised immediately in profit or loss, unless the changes to the superannuation plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past service costs are amortised on a straight-line basis over the vesting period. Future taxes that are funded by the entity and are part of the provision of the existing benefit obligation (e.g. taxes on investment income and employer contributions) are taken into account in measuring the net liability or asset. Contributions to the defined contribution fund are recognised as an expense as they become payable. (iv) Share-based payments The Group provides benefits in the form of share-based payment transactions to employees. Information relating to these schemes is set out in note 50 and the 30 June 2011 Remuneration Report. There are currently three plans in place providing share-based payment benefits: General Employee Share Plans ('GESP') GESP is a share award program which, at the determination of the Board, issue eligible employees with a grant of ordinary BlueScope Steel Shares (or a reward of equal value in countries where the issue of shares is not practicable). The decision to issue GESP is made annually. Long Term Incentive Plans ('LTIP') LTIP is a share rights program which, at the determination of the Board, provides eligible senior managers with the right to receive ordinary BlueScope Steel shares at a later date subject to the satisfaction of certain performance criteria. The decision to issue a LTIP share rights program is made annually. Special Share Grants and Rights Special share grants and rights are awarded by the Board from time to time to meet specific or exceptional demands.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

Summary of significant accounting policies (continued)

The fair values of share awards and share rights are recognised as an employee benefit expense with a corresponding increase to the share-based payments reserve within equity. The total amount to be expensed is determined by reference to the fair value of the share awards or share rights granted, which includes any market performance conditions but excludes the impact of non-market performance vesting conditions. Non-market vesting conditions are included in assumptions about the number of share awards or share rights that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are expected to be satisfied. At the end of each period, the entity revises its estimates of the number of share awards and share rights that are expected to vest based on non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in profit or loss, with a corresponding adjustment to equity, or the provision account as is the case for cash-settled share awards. The fair value of share rights at grant date is independently determined by an external valuer using Black-Scholes option pricing model which takes into account the exercise price, the term of the share right, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the share right. The cumulative expense recognised for share-based payment transactions at each reporting date until vesting date reflects the extent to which the expected vesting period has expired and the number of rights that are expected to ultimately vest. This number is based on the best available information at the reporting date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date. Upon the exercise of share rights and issue of equity-settled share awards, the balance of the share-based payments reserve relating to those rights and awards is transferred to share capital. The dilutive effect, if any, of outstanding rights is reflected as additional share dilution in the computation of diluted earnings per share. No expense is recognised for share awards and share rights that do not ultimately vest, except for share rights where vesting is only conditional upon a market condition. The Group's current LTIP program is a market condition share-based payment. (v) Short-term incentive plans (STI) The Group recognises a liability and an expense for STI plan payments made to employees. STI goals are based on both overall Company performance and the individual or team contribution to performance. The Group recognises a provision where past practice and current performance indicates that a probable constructive obligation exists. (vi) Employee benefit on-costs Employee benefit on-costs, including payroll tax, are recognised and included in employee benefit liabilities and costs when the employee benefits to which they relate are recognised as liabilities. (vii) Termination benefits Liabilities for termination benefits, not in connection with a business combination or the closure of an operation, are recognised when the group is demonstrably committed to either terminating the employment of current employees according to a formal plan without possibility of withdrawal, or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after the end of the reporting period are discounted to present value. Liabilities for termination benefits relating to an acquired entity or operation that arise as a consequence of business combinations are recognised as at the date of acquisition only if the liability has already been recognised in the statement of financial position of the acquiree. Redundancy costs associated with the closure of an operation are accounted for as restructuring costs. (y) Contributed equity

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration. If BlueScope Steel Limited reacquires its own equity instruments, e.g. as the result of a share buy-back, those instruments are deducted from equity and the associated shares are cancelled. No gain or loss is recognised in profit or loss and the consideration paid, including any directly attributable incremental costs (net of income taxes), is recognised directly in equity. -21-

BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

1
(z)

Summary of significant accounting policies (continued)

Dividends

Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period. A provision for dividends is not recognised as a liability unless the dividends are declared, determined or publicly recommended on or before the balance sheet date. (aa) Earnings per share (i) Basic earnings per share Basic earnings per share is calculated by dividing: the profit attributable to owners of the Company, excluding any costs of servicing equity other than ordinary shares by the weighted average number of ordinary shares outstanding during the financial year, adjusted for any bonus elements in ordinary shares issued during the year. (ii) Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account: the after-income-tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. (ab) Restructuring costs (i) Restructuring and the closure of an operation Liabilities arising directly from undertaking a restructuring program, defined as the closure of an operation, are recognised when a detailed plan of the restructuring activity has been developed and implementation of the restructuring program as planned has commenced, by either entering into contracts to undertake the restructuring activities or making a detailed announcement such that affected parties are in no doubt the restructuring program will proceed. (ii) Restructuring and the sale of an operation A restructuring liability associated with the sale of an operation is not recognised unless a purchaser has been identified and a binding sale agreement has been entered into. (iii) Restructuring and acquisitions through a business combination When acquiring another entity through a business combination, a restructuring liability is not recognised or included in the goodwill fair value calculation unless a liability has already been recognised by the acquiree, in accordance with note 1(ab)(i). Redundancy costs that are not part of a restructuring program which closes or sells an operation are classified as employee benefits (refer note 1(x)(vii)). (ac) Emissions trading schemes The Group is a participant in the New Zealand Governments uncapped emissions trading scheme (ETS) which was implemented with effect from 1 July 2010. There are currently no other countries in which the Group operates where an emissions trading scheme would require the Group to be a participant. The Australian Government has announced its intention to introduce a carbon pricing scheme commencing 1 July 2012 with a move to a cap and trade ETS at some future point (refer note 52). Other than in consideration of non-current asset carrying values (refer note 22), the proposed scheme has no accounting consequences in the current year. Under New Zealands ETS, emission unit permits (EUs) are received from the New Zealand Government based on the Allocative Baselines for the Defined Activity of Manufacture of Iron and Steel from Iron Sands. Permits are able to be sold or can be held to offset obligations accruing under the ETS.

-22-

BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

Summary of significant accounting policies (continued)

EUs received are accounted for at fair value at the date of grant with a corresponding entry to deferred income. Income is recognised based on the production outputs from the defined activity. EUs that are acquired are initially recognised at cost. EUs that are held for trading in the ordinary course of business are classified as inventory and subsequently held at the lower of cost and fair value less cost to sell. Non-held-for-trading EUs are classified as intangible assets and are carried at cost. Intangible EU assets are not amortised or subject to impairment as the economic benefits are realised from surrendering the rights to settle obligations arising from the ETS. The emissions liability is recognised as a provision for carbon and is measured with reference to the carrying amount of EUs held with any excess measured at the current market value of EUs. ETS costs passed through from suppliers are included as part of the underlying cost of the good or service rendered. The liability for this cost pass through is either included within trade creditors or recorded as an emissions liability within the carbon provision account when an agreement has been reached with the supplier to settle the ETS cost by transferring EUs. When EUs are delivered to the government or a third party, the EU asset along with the corresponding carbon provision is derecognised from the statement of financial position. (ad) Rounding of amounts The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the 'rounding off' of amounts in the financial statements. Amounts in the financial statements have been rounded off in accordance with that Class Order to the nearest hundred thousand dollars, or in certain cases, the nearest thousand or the nearest dollar.

Corporate information

The financial report of BlueScope Steel Limited for the year ended 30 June 2011 was authorised for issue in accordance with a resolution of the directors on 20 August 2011. BlueScope Steel Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The registered office of the Company is Level 11, 120 Collins Street, Melbourne, Victoria, Australia 3000. The nature of the operations and principal activities of the Group are described in note 5 and the directors' report.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

Financial risk management

The Group's principal financial instruments include receivables, payables, borrowings and derivatives. The accounting classification of each category of financial instruments as defined in note 1(p), and their carrying amounts are set out below. Financial liabilities at amortised cost

Loans and receivables

Derivative Instruments Designated Held for as hedges trading $M $M -

Total carrying amount

30 June 2011 Financial assets Receivables (current) Receivables (non-current) Financial liabilities Payables (current) Payables (non-current) Derivative financial instruments (current) Borrowings (current) Borrowings (non-current)

Notes 12 17 24 29 15 25 30

$M 1,026.8 22.7 1,049.5

$M (1,156.6) (6.9) (165.7) (1,074.2) (2,403.4)

$M 1,026.8 22.7 (1,156.6) (6.9) (165.7) (1,074.2) (1,353.9)

Loans and receivables

Derivative Instruments Designated Held for as hedges trading $M (0.5) (0.5) $M -

Financial liabilities at amortised cost

Total carrying amount

30 June 2010 Financial assets Receivables (current) Receivables (non-current) Financial liabilities Payables (current) Payables (non-current) Derivative financial instruments (current) Borrowings (current) Borrowings (non-current)

Notes 12 17 24 29 15 25 30

$M 1,169.5 29.1 1,198.6

$M (1,111.6) (8.5) (140.9) (853.0) (2,114.0)

$M 1,169.5 29.1 (1,111.6) (8.5) (0.5) (140.9) (853.0) (915.9)

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

Financial risk management (continued)

The Group's obligations expose it to market risk (including interest rate risk, currency risk and price risk), liquidity risk and credit risk. The nature of these risks and the policies the Group has for controlling them and any concentrations of exposure are discussed as follows: Financial risk management The Board of Directors has overall responsibility for the establishment and oversight of the financial risk management framework. The Board approves written policies for overall financial risk management, covering market, credit and liquidity risks. The objective of these policies is to support the delivery of the Group's financial targets while protecting future financial security. The Board also has established policies regarding the use of derivatives and does not permit their use for speculative purposes. The Group's Audit & Risk Committee reviews the adequacy of the financial risk management framework established by the Board. In doing so, the Committee considers the financial risks faced by the Group and changes in market conditions. The Committee also oversees how management monitors compliance with the Group's financial risk management policies and procedures. The Audit & Risk Committee reports regularly to the Board on its activities and: undertakes comprehensive reviews of the financial risk management controls and procedures; and monitors the levels of exposure to fluctuations in commodity prices, interest rates, foreign exchange rates and the market assessments in respect of these. (a) Market risk Market risk is the risk that the fair value of future cash flows of the Group's financial instruments will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk. (i) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial asset or financial liability will fluctuate due to changes in interest rates. Exposure to cash flow interest rate risk for the Group arises due to holding floating rate interest bearing liabilities and investments in cash and cash equivalents. Any changes in the current market rate will affect the cash flows payable and receivable on floating rate interest bearing liabilities and investments in cash and cash equivalents and hence impact the Group's profit (loss) after tax. Although a change in the current market interest rate may impact the fair value of the Group's fixed interest bearing liabilities and other receivables, it does not impact the Group's profit after tax or equity as these financial liabilities are carried at amortised cost and not at fair value through profit or loss. Sensitivity disclosure analysis The Group's exposure to its floating interest rate financial assets and financial liabilities is as follows: Consolidated 2011 2010 $M $M Financial assets Cash and cash equivalents Financial liabilities Borrowings - external Net exposure

172.2 512.2 340.0

251.4 101.9 149.5

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

Financial risk management (continued)

Taking into account past performance, future expectations, economic forecasts, and management's knowledge and experience of the financial markets, the Group believes the impacts on profit or loss and on equity in the following table are 'reasonably possible' over the next 12 months if interest rates had changed by +/- 50 basis points from the year-end rates with all other variables including foreign exchange rates held constant. Post-tax profit higher (lower) 2011 2010 $M $M Equity higher (lower) 2011 2010 $M $M

Judgement of reasonably possible movements:

+ 50 basis points - 50 basis points

(1.2) 1.2

0.6 (0.6)

(1.2) 1.2

0.6 (0.6)

The sensitivity analysis is based on the Group's composition of floating rate financial instruments held at reporting date. For purposes of the sensitivity analysis, the effect of interest rate changes on floating rate instruments held is calculated assuming no change in other assumptions. In reality, the composition of floating instruments will vary throughout the financial reporting period and interest rates will change continually. Changes in one factor may contribute to changes in another, which may magnify or counteract the above sensitivities. (ii) Currency risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a result of movements in international exchange rates. The Group is exposed to exchange rate transaction risk on foreign currency sales and purchases primarily with respect to the United States dollar (USD). The Group's most significant foreign currency exposure on financial instruments arises from USD receipts and payments on receivables, payables and interest bearing liabilities denominated in USD as held by Australian-based entities, some of which are used to hedge net investments in foreign operations. The Group is also exposed to exchange rate translation exposure on foreign currency financial assets and financial liabilities. In certain currencies the Group has a full or partial natural hedge between investments in net foreign assets and interest bearing liabilities. The Group's exposure to its external non-functional currency USD financial assets and financial liabilities that are not designated as net investment hedges are as follows: Consolidated 2011 2010 $M $M Financial assets Cash and cash equivalents Trade and other receivables 40.3 70.4 110.7 40.5 171.5 212.0

Financial liabilities Trade and other payables Borrowings Net exposure

97.1 578.1 675.2 (564.5)

73.2 747.1 820.3 (608.3)

This exposure for the Group does not reflect the natural hedge of USD assets against USD borrowings of AUD 621M (2010: AUD 735.3M). Although the Group is economically exposed to currency risk in relation to future purchases and sales this is not a recognised market risk under the Accounting Standards as the risk is embedded within normal purchases and sales and are therefore not financial instruments. -26-

BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

Financial risk management (continued)

Sensitivity disclosure analysis The table below summarises the impact of +/- 10% (2010: +/- 10%) movement of the AUD against the USD on the Group's post-tax profit for the year and on equity based on the Group's external net exposure. The analysis is based on the assumption that the AUD has moved by 10% with all other variables held constant. A sensitivity of 10% has been selected as this is considered reasonable given the current level of exchange rates and the volatility observed on a historical basis. Post-tax profit higher (lower) Judgement of reasonably possible movements: 2011 $M 36.3 (44.4) 2010 $M 38.7 (47.3) Equity higher (lower) 2011 $M 36.3 (44.4) 2010 $M 38.7 (47.3)

AUD/USD +10% (2010: +10%) AUD/USD -10% (2010: -10%) (iii) Other price risk

Other price risk is the risk that the fair value or future cash flows of the transacted financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The Group is exposed to other price risks arising from commodity prices. The Group takes a portfolio approach to price risk management. Hedging of price risks is undertaken infrequently due to the inherent limitations in being able to materially reduce volatility in earnings and cash flow. The primary limitation is that liquid derivative markets are not currently operating in the Group's most significant price risks, being international steel prices (particularly hot rolled coil and slab), coal and iron ore. The absence of derivative markets for these commodities means that any hedging program for other price risks will not have a material impact on reducing cash flow at risk. Commodity price risk The Group is exposed to price risk on steel that it produces, purchased steel feed and on the commodities that it utilises in its production processes, in particular iron ore, coal, scrap, zinc, aluminium and electricity. Although the Group is economically exposed to commodity price risk on its above mentioned inputs, this is not a recognised market risk under Accounting Standards as the risk is embedded within normal purchases and sales and are therefore not financial instruments. In June 2010, the Group entered into a cash flow hedge to manage exposure to fluctuations in electricity prices (New Zealand operations) in accordance with the Group's financial risk management policies. The hedge expired in March 2011 and no electricity hedge exists at balance date. The value of electricity hedges is influenced by the price of electricity and is considered a derivative financial instrument, exposing the Group to commodity price risk as defined under the accounting standards. The sensitivity of their fair value to an immediate increase/decrease in the commodity price of electricity is set out in the following table (with all other variables, in particular foreign exchange rates, held constant). The analysis is based on the volatility observed both on a historical basis and market expectations for future movement. Post-tax profit higher (lower) 2011 2010 $M $M N/A N/A 1.1 (2.1)

Judgement of reasonably possible movements:

Electricity price +50% Electricity price -50%

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

Financial risk management (continued)

(b) Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities. The Group expects to satisfy its ongoing capital expenditure requirements and meet its working capital needs through cash generated from operations, together with cash on hand and borrowings available under existing and new financing facilities. The total amount of financing facilities carried by the Group takes into account a liquidity buffer which is reviewed at least annually. Group Treasury monitors liquidity risk through the development of future rolling cash flow forecasts. The Group's exposure to liquidity risk is not significant based on available funding facilities and cash flow forecasts. Refer to note 30(c) for a summary of the Group's material financing facilities. Contractual maturity analysis The table below reflects all contractual repayments of principal and interest resulting from recognised financial liabilities at 30 June 2011 and 30 June 2010. The amounts disclosed represent undiscounted, contractual cash flows for the respective obligations in respect of upcoming fiscal years and therefore do not equate to the values shown in the statement of financial position. 30 June 2011 < 1 year $M Payables (current & non-current) Borrowings (current & non-current) Derivative financial instruments 30 June 2010 Payables (current & non-current) Borrowings (current & non-current) Derivative financial instruments (c) Credit risk Credit risk arises from financial assets of the Group, such as cash (including cash equivalents), receivables and derivative financial instruments. Credit risk arises from the possibility that counterparties to the Group's financial assets will fail to settle their obligations under the respective contracts at maturity, causing the Group to incur a financial loss. To manage this risk, the Group: has a policy for establishing credit approvals and limits, including the assessment of counterparty creditworthiness; may require collateral when appropriate; undertakes monitoring procedures such as periodic assessments of the financial viability of its counterparties, ageing analysis and reassessment of credit allowances provided; and manages exposures to individual entities it enters into derivative contracts with (a maximum exposure threshold is applied and transaction approval is required). The maximum exposure of the Group's credit risk is represented by the carrying amount of the financial assets it holds (without taking account of the value of any collateral obtained), reduced by the effects of any netting arrangements with financial institution counterparties. As at 30 June 2011 and 30 June 2010, the Group held minimal amounts of collateral as security relating to any of its financial assets. Irrespective of the above processes unexpected credit losses may occur. Exposure to unexpected losses increases when dealing with parties in similar industries or geographical regions whose ability to meet their contractual obligations are impaired by changes in economic, political or other conditions. The Group's primary customers, suppliers and financial institutions with whom it transacts are dispersed throughout the world. These risks are monitored at both the Group and operational level to ensure that all material credit risks are managed. 1,111.6 212.9 0.5 1,325.0 237.0 237.0 47.1 47.1 46.7 46.7 377.9 377.9 8.5 433.7 442.2 1,120.1 1,355.3 0.5 2,475.9 1,156.6 243.2 1,399.8 1-2 years $M 75.4 75.4 Contractually maturing in: 2-3 3-4 4-5 years years years $M $M $M 550.2 550.2 309.3 309.3 30.5 30.5

>5 years $M 6.9 397.1 404.0

Total $M 1,163.5 1,605.7 2,769.2

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

Financial risk management (continued)

(i) Concentrations of risk The Group's credit risks are categorised under the following concentrations of risk: counterparty type and geographical region. Counterparties The Group has a large number of customers, internationally dispersed. Sales to the Group's customers are made either on open terms or subject to independent payment guarantees with prime financial institutions. The Group obtains letters of credit from these institutions to guarantee the underlying payment from trade customers or undertake debtor insurance to cover selective receivables for both commercial and sovereign risks. The Group has significant transactions with major customers, being OneSteel Limited and Fletcher Building. These entities are major customers of the Group's Australian operations and credit risk with these businesses is managed on an active and ongoing basis, using both quantitative and qualitative evaluation (based on transactional and credit history). The Group's receivable counterparties consist of a number of prime financial institutions in the relevant markets. The Group has no significant transaction with any single counterparty or group of counterparties and generally does not require collateral in relation to the settlement of financial instruments. Geographical The Group trades in several major geographical regions and when appropriate export finance insurance and other risk mitigation facilities are utilised to ensure settlement. Regions in which the Group has a significant credit exposure are Australia, USA, China, South-East Asia and New Zealand. Terms of trade are continually monitored by the Group. As mentioned previously, selected receivables are covered for both commercial and sovereign risks by payment guarantee arrangements with various banks and specialist credit insurers. (ii) Renegotiations and amounts past due and not impaired The Group does not typically renegotiate the terms of trade receivables. However, should a renegotiation occur, the outstanding balance is included in the analysis based on the original payment terms. There were no significant renegotiated balances outstanding at 30 June 2011 (30 June 2010: Nil). Refer to note 12(e) for an ageing analysis of trade receivables past due and not impaired. Significant financial difficulties of the debtor, probability that the debtor will enter insolvency or financial reorganisation, and default or delinquency in payments are considered indicators of impairment. With respect to the trade receivables which are neither impaired nor past due, there are no indications as at reporting date that the debtors will not meet their obligations as they fall due. Refer to notes 12 and 17 for impairment losses recognised for the period. The Group's exposure to credit risk is large but due to the diversification of customers and geography the risk of loss is low. (d) Fair value The fair value of financial assets and financial liabilities is estimated for recognition and measurement or for disclosure purposes. AASB 7 Financial Instruments: Disclosures requires disclosure of fair value measurements by level of the following fair value measurement hierarchy: (i) Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities; (ii) Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (i.e. derived from prices); and (iii) Level 3 - inputs for the asset or liability that are not based on observable market data (i.e. unobservable inputs).

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

Financial risk management (continued)

The table below presents the Group's financial assets and financial liabilities measured and recognised at fair value at 30 June 2011 and 30 June 2010.

30 June 2011 Liabilities Derivatives used for hedging Total liabilities

Level 1 $M -

Level 2 $M -

Level 3 $M -

Total $M -

30 June 2010 Liabilities Derivatives used for hedging Total liabilities

0.5 0.5

0.5 0.5

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques. Dealer quotes for similar forward electricity contracts with comparable terms to maturity have been used to estimate fair value at the end of the reporting period. These instruments are included in Level 2. With the exception of the table below, the fair value of financial assets and financial liabilities (including those recognised and measured at amortised cost) are assumed to approximate their fair values due to their short-term nature and/or application of floating rate interest charges. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. The fair value of current interest bearing liabilities approximates the carrying amount, as the impact of discounting is not significant. At 30 June 2011 Carrying amount Fair value $M $M Non-traded financial assets Loans to related parties Non-traded financial liabilities Other loans Net asset (liability) At 30 June 2010 Carrying amount Fair value $M $M

5.0 640.0 (635.0)

5.1 758.8 (753.7)

10.7 853.9 (843.2)

11.4 1,002.9 (991.5)

None of the above financial assets or liabilities are readily traded on organised markets in standardised form. The fair value of loans receivable and interest bearing financial liabilities where no market exists is based upon discounting the expected future cash flows by the current market interest rates on liabilities with similar risk profiles that are available to the Group.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Group and that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom 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 discussed below. (i) Estimated impairment of cash-generating units (CGUs), including goodwill The Group tests at least annually whether goodwill, other intangible assets with indefinite useful lives and other assets have suffered any impairment or reversal of a previous impairment loss in accordance with the accounting policy stated in note 1(s). All cash-generating units (CGUs) were tested for impairment at the reporting date. The recoverable amounts of CGUs have been determined based on value-in-use (VIU) calculations under the assumptions contained in note 22(b). (ii) Income taxes The Group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Significant judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations during the ordinary course of business for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred tax provisions in the period in which such determination is made. In addition, deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable profits are available to utilise those temporary differences and losses, and the tax losses continue to be available having regard to the nature and timing of their origination and compliance with the relevant tax legislation associated with their recoupment. (iii) Workers compensation Calculations for the Group's self-insured workers compensation are determined by external actuaries. These calculations require assumptions in relation to the expectation of future events. Refer to notes 27 and 32 for amounts recognised for workers compensation. (iv) Product claims Provision for claims is based on modelled data combining sales volumes with past experiences of repair and replacement levels in conjunction with any specifically identified product faults. The provision requires the use of assumptions in relation to the level of future claims made. Refer to notes 27 and 32 for amounts recognised for product claims. (v) Share-based payment transactions The Group measures the cost of equity-settled transactions with employees by reference to the fair value of equity instruments at grant date. The fair value is determined by an external valuer using a Black-Scholes Option Pricing Model. These calculations require assumptions to be made as per note 1(x)(iv) and illustrated in note 50. (vi) Defined benefit plans Various actuarial assumptions underpin the determination of the Group's pension obligations. These assumptions and the related carrying amounts are discussed in note 33. (vii) Restructuring and redundancy provisions Provisions for restructuring and redundancy are based on the Group's best estimate of the outflow of resources required to settle commitments made by the Group to those likely to be affected. Where the outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income statement in the period in which such determination is made. Refer to notes 27 and 32 for amounts recognised for restructuring and redundancy provisions. (viii) Plant and machinery useful lives The estimation of the useful lives of plant and machinery has been based on historical experience and judgement with respect to technical obsolescence, physical deterioration and usage capacity of the asset in addition to any legal restrictions on usage. The condition of the asset is assessed at least once per year and considered against the remaining useful life. Adjustments to useful lives are made when considered necessary. (ix) Restoration and rehabilitation provisions Provisions have been made for the present value of anticipated costs for future restoration of leased premises and ironsand mine operations in New Zealand. Recognising restoration and rehabilitation provisions across the Group requires assumptions to be made as to the application of environmental legislation, site closure dates, available technologies and engineering cost estimates. These uncertainties may result in future actual expenditure differing from the amounts currently provided (refer notes 27 and 32). -31-

BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

Critical accounting estimates and judgements (continued)

(x) Legal claims Recognising legal provisions requires judgement as to whether a legal claim meets the definition of a liability (refer accounting policy note 1(w)). There is an inherent uncertainty where the validity of claims are to be determined by the courts or other processes which may result in future actual expenditure differing from the amounts currently provided (refer note 40).

Segment information

(a) Description of segments The Group has six reportable operating segments: Coated & Industrial Products Australia, Australia Distribution & Solutions, New Zealand & Pacific Steel Products, Coated & Building Products Asia, Hot Rolled Products North America, and Coated & Building Products North America. Coated & Industrial Products Australia Coated & Industrial Products Australia includes the Port Kembla Steelworks, a steel making operation with an annual production capacity of approximately 5.2 million tonnes of crude steel. The Port Kembla Steelworks is the leading supplier of flat steel in Australia, manufacturing slab, hot rolled coil and plate products. The segment also comprises two main metallic coating and painting facilities located in Springhill, New South Wales and Western Port, Victoria together with steel painting facilities in western Sydney and Acacia Ridge, Queensland. Steel from the Port Kembla Steelworks is processed by these facilities to produce a range of COLORBOND pre-painted steel and ZINCALUME zinc/aluminium branded products. Export offices are also incorporated within this segment to trade steel manufactured at these facilities on global markets. Australia Distribution & Solutions Australia Distribution & Solutions contains a network of service centres and distribution sites from which it forms a key supplier to the Australian building and construction industry, automotive sector, major white goods manufacturers and general manufacturers. The operating segment also holds the Lysaght steel solutions business, providing a range of LYSAGHT branded products to the building and construction sector and BlueScope's water business containing rainstorage tank solutions. New Zealand & Pacific Steel Products The New Zealand Steel operation at Glenbrook, New Zealand, produces a full range of flat steel products for both domestic and export markets. It has an annual production capacity of approximately 0.6 million tonnes. The segment also includes facilities in New Caledonia, Fiji and Vanuatu, which manufacture and distribute the LYSAGHT range of products. Coated & Building Products Asia Coated & Building Products Asia manufactures and distributes a range of metallic coated, painted steel products and preengineered steel building systems primarily to the building and construction industry and to some sections of the manufacturing industry across Asia. Hot Rolled Products North America Hot Rolled Products North America includes a 50% interest in the North Star BlueScope Steel joint venture, a steel mini mill in the United States and a 47.5% shareholding in Castrip LLC. Coated & Building Products North America Coated & Building Products North America includes the North American Buildings Group, which designs, manufactures and markets pre-engineered steel buildings and component systems; Steelscape, producer of metal coated and painted steel coils; Metl-Span, manufacturer of insulated steel panels for commercial, industrial and cold-storage buildings; and ASC Profiles, manufacturer of building components including architectural roof and wall systems and structural roof and decking. Geographical information The Group's geographical regions are determined based on the location of markets and customers. The Group operates in four main geographical regions being Australia, New Zealand, Asia and North America.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

Segment information (continued)

(b) Reportable segments The segment information provided to the Managing Director and Chief Executive Officer for operating segments for the year ended 30 June 2011 is as follows:
Coated & Industrial Products Australia $M 5,193.0 (1,084.2) 4,108.8 (1,062.5) 201.9 797.3 3,837.5 New Coated & Australia Zealand & Building Distribution Pacific Steel Products & Solutions Products Asia $M $M $M 1,675.4 (3.5) 1,671.9 (217.9) 31.1 179.1 1,000.2 672.1 (122.8) 549.3 82.5 39.3 2.9 623.0 1,486.8 (6.2) 1,480.6 175.6 42.3 (67.8) (4.1) 1,132.2 Hot Rolled Products North America $M 72.3 1.7 74.3 82.3 Coated & Building Products North Discontinued America Operations $M $M 1,312.2 (10.4) 1,301.8 (35.6) 39.3 15.6 0.2 940.7 1.8 (1.0) 0.2

30 June 2011

Total $M 10,339.5 (1,227.1) 9,112.4 (983.8) 353.9 924.9 73.3 7,616.1

Total segment sales revenue Intersegment revenue Revenue from external customers Segment EBIT Depreciation and amortisation Impairment (write-back) of non-current assets Share of profit (loss) from associates and joint venture partnerships Total segment assets Total assets includes: Investments in associates and joint venture partnerships Additions to non-current assets (other than financial assets and deferred tax) Total segment liabilities

253.0 1,083.3

2.9 36.1 311.2

8.0 85.1 217.5

49.2 60.4 318.1

81.0 -

0.9 19.8 251.2

10.8

142.0 454.4 2,192.1

30 June 2010

Coated & Industrial Products Australia $M 4,744.5 (1,072.5) 3,672.0 84.3 197.2 4,423.4

New Coated & Australia Zealand & Building Distribution Pacific Steel Products & Solutions Products Asia $M $M $M 1,761.6 (3.0) 1,758.6 11.9 30.7 (0.2) 0.1 1,241.9 618.1 (89.6) 528.5 72.9 34.1 (1.0) 3.0 607.4 1,348.6 (8.9) 1,339.7 115.6 41.4 (3.2) 1,220.2

Hot Rolled Products North America $M 60.7 1.3 62.5 172.3

Coated & Building Products North Discontinued America Operations $M $M 1,306.8 (8.3) 1,298.5 (21.3) 44.9 0.5 1,183.4 0.7 0.7 7.0 0.3

Total $M 9,780.3 (1,182.3) 8,598.0 331.1 348.3 0.1 62.9 8,848.9

Total segment sales revenue Intersegment revenue Revenue from external customers Segment EBIT Depreciation and amortisation Impairment (write-back) of non-current assets Share of profit (loss) from associates and joint venture partnerships Total segment assets Total assets includes: Investments in associates and joint venture partnerships Additions to non-current assets (other than financial assets and deferred tax) Total segment liabilities

228.2 959.0

3.0 23.2 360.4

6.7 37.3 209.2

64.6 48.0 321.0

171.0 -

3.1 25.0 377.3

13.2

248.4 361.7 2,240.1

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

Segment information (continued)

(c) Geographical information Segment revenues from sales to external customers 2011 2010 $M $M Australia New Zealand Asia North America Other 4,006.7 336.0 2,482.9 1,525.5 761.3 9,112.4 4,515.3 331.1 1,858.7 1,431.6 461.3 8,598.0

Non-current assets 2011 2010 $M $M 2,664.3 372.9 641.7 727.1 4.1 4,410.1 3,601.8 324.6 688.8 1,027.7 4.6 5,647.5

Segment revenues are allocated based on the country in which the customer is located. Segment non-current assets exclude deferred tax assets and are allocated based on where the assets are located. (d) Other segment information (i) Segment revenue Sales between segments are carried out at arm's length and are eliminated on consolidation. The revenue from external parties is measured in a manner consistent with that in the statement of comprehensive income. Segment revenue reconciles to total revenue from continuing operations as follows: Consolidated 2011 2010 $M $M Total segment revenue Intersegment eliminations Revenue attributable to discontinued operations Other revenue (note 6) Total revenue from continuing operations (ii) Segment EBIT 10,339.5 (1,227.1) 40.7 9,153.1 9,780.3 (1,182.3) (0.7) 25.8 8,623.1

Performance of the operating segments is based on EBIT. This measurement basis excludes the effects of interest and taxes. Interest income and expense are not allocated to segments, as this type of activity is driven by the central treasury function, which manages the cash position of the Group. A reconciliation of total segment EBIT to operating profit before income tax is provided as follows: Consolidated 2011 2010 $M $M Total segment EBIT Intersegment eliminations Interest income Finance costs EBIT (gain) loss attributable to discontinued operations Corporate operations Profit (loss) before income tax from continuing operations (983.8) 15.7 7.1 (105.7) (1.8) (74.6) (1,143.1) 331.1 (19.8) 9.4 (112.1) (7.0) (71.3) 130.3

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

Segment information (continued)

(iii) Segment assets Segment assets are measured in a manner consistent with that of the financial statements. These assets are allocated based on the operations of the segment and the physical location of the asset. Cash is not considered to be a segment asset as it is managed by the Group's centralised treasury function. As the segment information is focused on EBIT, deferred tax assets, which by their nature do not contribute towards EBIT, are not allocated to operating segments. Reportable segment assets are reconciled to total assets as follows: Consolidated 2011 2010 $M $M Segment assets Intersegment eliminations Unallocated: Deferred tax assets Cash Corporate operations Total assets as per the statement of financial position (iv) Segment liabilities 7,616.1 (186.0) 160.8 172.2 29.9 7,793.0 8,848.9 (220.4) 84.9 251.4 32.8 8,997.6

Segment liabilities are measured in a manner consistent with that of the financial statements. These liabilities are allocated based on the operations of the segment. Liabilities arising from borrowing and funding initiatives are not considered to be segment liabilities due to these being managed by the Group's centralised treasury function. As the segment information is focused on EBIT, tax liabilities, which by their nature do not impact EBIT, are not allocated to operating segments. Reportable segment liabilities are reconciled to total liabilities as follows: Consolidated 2011 2010 $M $M Segment liabilities Intersegment eliminations Unallocated: Current borrowings Non-current borrowings Current tax liabilities Deferred tax liabilities Accrued borrowing costs payable Corporate operations Total liabilities as per the statement of financial position 2,192.1 (173.7) 165.7 1,074.2 23.1 69.1 11.0 35.4 3,396.9 2,240.1 (192.5) 140.9 853.0 7.4 134.3 16.9 41.8 3,241.9

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

Revenue
Consolidated 2011 2010 $M $M

Revenue from operating activities Sales revenue Sale of goods Services Total sales revenue Other revenue Interest external Interest related parties Royalties external Rental external Carbon permit (government grant) Other Total other revenue Total revenue from ordinary activities From discontinued operations Sales revenue Total revenue from discontinuing operations 0.7 0.7 9,090.4 22.0 9,112.4 8,575.6 21.7 8,597.3

5.9 1.2 1.6 5.3 19.0 7.7 40.7 9,153.1

7.6 1.8 1.6 6.8 8.0 25.8 8,623.1

Other income
Consolidated 2011 2010 $M $M

Net gain on disposal of property, plant and equipment (2011 net loss - note 8) Insurance recoveries Litigation settlement

0.1 0.7 0.8

5.5 1.4 4.5 11.4

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

Expenses
Consolidated 2011 2010 $M $M

Profit before income tax includes the following specific expenses for continuing operations: Depreciation and amortisation Depreciation (note 20) Amortisation (note 22) Total depreciation and amortisation Impairment losses - financial assets Loans and receivables - trade receivables (note 12(d)) - reversal of impairment loss Total impairment of financial assets Impairment of non - current assets Coated & Industrial Products Australia PP&E (note 20) BlueScope Distribution goodwill (note 22) Coated & Industrial Products Australia goodwill (note 22) Steelscape goodwill (note 22) BlueScope Water leasehold improvements and not-in-use assets (note 20) BlueScope Water other intangible (note 22) Castrip joint venture 46 BlueScope Water rollformer Reversal of impairment loss (note 20(e), 22(d)) Total impairment of non-current assets Finance costs Interest and finance charges paid/payable for financial liabilities not at fair value through profit or loss Ancillary finance charges Provisions: unwinding of discount (note 32) Amount capitalised Finance costs expensed Net loss on disposal of property, plant and equipment (2010 net gain - note 7) Net foreign exchange losses Rental expense relating to operating leases Defined contribution superannuation expense Research and development expense Restructure provision expense (note 32) Employee redundancy provision expense Restoration and rehabilitation provision write-back (note 32) (a) Capitalised borrowing costs The capitalisation rate used to determine the amount of borrowing costs to be capitalised is 6.11%, being the weighted average interest rate applicable to the entity's outstanding borrowings during the year (2010: 5.86%). 325.0 30.6 355.6 317.5 32.3 349.8

4.7 (2.1) 2.6

9.3 (4.6) 4.7

728.7 177.2 68.6 15.6 1.8 0.1 1.7 (67.8) 925.9

1.3 0.1 (1.3) 0.1

80.3 25.2 7.2 112.7 (7.0) 105.7 1.1 35.0 101.1 83.1 28.3 1.7 9.2 (4.7)

74.4 39.1 7.4 120.9 (8.8) 112.1 1.6 102.2 87.5 28.8 (8.4) 19.4 -

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

Income tax expense

Consolidated 2011 2010 $M $M

(a) Income tax expense (benefit) Current tax Deferred tax Adjustments for current tax of prior periods 29.1 (126.2) (4.1) (101.2) (9.4) 2.7 4.1 (2.6)

Income tax expense (benefit) is attributable to: Profit (loss) from continuing operations Profit (loss) from discontinued operations Aggregate income tax expense Deferred income tax (benefit) expense included in income tax expense comprises: Decrease (increase) in deferred tax assets (note 21) (Decrease) increase in deferred tax liabilities (note 31) Investments in subsidiaries (note 36)

(101.5) 0.3 (101.2)

(3.5) 0.9 (2.6)

(65.5) (64.6) 3.9 (126.2)

(2.0) 1.4 3.3 2.7

(b) Numerical reconciliation of income tax expense to prima facie tax payable Profit (loss) from continuing operations before income tax expense Profit (loss) from discontinuing operations before income tax expense (note 10) Tax at the Australian tax rate of 30% (2010: 30%) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Depreciation and amortisation Manufacturing credits Research and development incentive Withholding tax Non-taxable (gains) losses Goodwill Impairment Share of net profits (losses) of associates Entertainment Share-based payments Sundry items (1,143.1) 1.5 (1,141.6) (342.5) 0.6 (1.4) (9.3) 2.5 (5.7) 78.4 0.4 1.3 2.0 5.5 (268.2) (12.4) (4.1) 220.4 (0.2) (32.2) (4.5) (101.2) 130.3 6.6 136.9 41.1 0.7 (0.6) (7.0) 7.1 (8.1) 0.1 1.2 1.8 3.8 40.1 (8.8) 4.1 11.6 2.5 (49.6) (2.5) (2.6)

Difference in overseas tax rates Adjustments for current tax of prior periods Temporary differences and tax losses not recognised Deferred tax restatement for New Zealand tax rate change Previously unrecognised tax losses and temporary differences now recognised Previously unrecognised tax losses now recouped to reduce current tax expense Income tax expense (benefit)

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

Income tax expense (continued)

Consolidated 2011 2010 $M $M

(c) Amounts recognised directly in equity Aggregate current and deferred tax arising in the reporting period and not recognised in profit or loss or other comprehensive income but directly debited (credited) to contributed equity Current tax - credit recognised directly in equity (note 35) Net deferred tax - credit recognised directly in equity (note 35)

0.1 0.1

0.2 0.3 0.5

(d) Tax expense (benefit) relating to items of other comprehensive income Cash flow hedges (note 36(a)) Actuarial (gain) loss on defined benefit superannuation plans (note 36(b)) Net (gain) loss on investments in subsidiaries (note 36(a)) Total income tax expense (benefit) on items of other comprehensive income (e) Tax losses Unused tax losses for which no deferred tax asset has been recognised Potential tax benefit 95.7 18.8 128.1 26.6 0.1 0.4 (3.9) (3.4) (0.2) (11.2) (3.3) (14.7)

The Group has tax losses arising in Vietnam of $19.6M (2010: $32.7M) and China of $57.5M (2010: $73.9M) which are able to be offset against taxable profits within five years of being incurred. Other unrecognised tax losses can be carried forward indefinitely but can only be utilised in the same tax group in which they are generated. Consolidated 2011 2010 $M $M (f) Unrecognised temporary differences 133.6 17.2 70.5 11.1 Temporary differences relating to investments in subsidiaries for which deferred tax liabilities have not been recognised Unrecognised deferred tax liabilities relating to the above temporary differences

Overseas subsidiaries have undistributed earnings, which, if paid out as dividends, would be subject to withholding tax. An assessable temporary difference exists, however no deferred tax liability has been recognised as the parent entity is able to control the timing of distributions from their subsidiaries and is not expected to distribute these profits in the foreseeable future. At 30 June 2011, the Group has $16.6M (2010: $35.6M) of deferred tax assets which have not been recognised as they arose from the initial recognition of a liability in a transaction that: was not a business combination; and at the time of the transaction, affected neither accounting profit nor taxable profit (tax loss).

Unrecognised deferred tax assets for the Group totalling $290.2M (2010: $99.9M) have not been recognised as they are not probable of realisation. This amount includes a unrecognised deferred tax asset of $218.6M on the $728.7M 30 June 2011 write-down of Coated & Industrial Products Australia property, plant and equipment (note 20 (e)). At 30 June 2011, the Group has $1.5M (2010: $3.2M) of deferred tax liabilities which have not been recognised as they arose from the initial recognition of an asset in a transaction that: was not a business combination; and at the time of the transaction, affected neither accounting profit nor taxable profit (tax loss).

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

10 Discontinued operations
(a) Description In June 2007, the Group closed its loss-making tinplate manufacturing operation, which was the major component of its Packaging Products cash-generating unit. Following a series of construction contract losses in the financial year 2006, the Group closed down and sold the assets of its Lysaght Taiwan business. The financial information for these operations identified as discontinued operations is set out below and is reported in this financial report as discontinued operations (refer to note 1(o)). (b) Financial performance of discontinued operations

The results of discontinued operations are presented below. Consolidated 2011 Packaging $M Lysaght Taiwan $M Total $M Packaging $M 2010 Lysaght Taiwan $M Total $M

Revenue Other income - insurance recovery Expenses other than finance costs Unutilised provisions written back Impairment reversal (i) Finance costs Profit (loss) before income tax Income tax (expense) benefit Profit (loss) after income tax from discontinued operations (i) Reversal of impairment loss

0.1 1.0 1.1 (0.3) 0.8

0.7 (0.3) 0.4 0.4

0.7 0.1 1.0 (0.3) 1.5 (0.3) 1.2

3.1 3.1 (0.9) 2.2

0.7 4.0 (0.7) (0.5) 3.5 3.5

0.7 4.0 (0.7) 3.1 (0.5) 6.6 (0.9) 5.7

Packaging Products recognised an impairment reversal for $1M against property, plant and equipment after selling previously impaired assets. (c) Cash flow information - discontinued operations

The net cash flows of discontinued operations held are as follows: Consolidated 2011 Lysaght Packaging Taiwan $M $M Total $M Packaging $M 2010 Lysaght Taiwan $M Total $M

Net cash inflow (outflow) from operating activities Net cash inflow (outflow) from investing activities Net cash inflow (outflow) from financing activities Net increase in cash generated by the operation

(1.7) 1.0 0.7 -

0.1 (0.1) -

(1.6) 1.0 0.6 -

(2.8) 4.0 (1.2) -

3.0 (3.0) -

0.2 4.0 (4.2) -

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

11 Current assets - Cash and cash equivalents

Consolidated 2011 2010 $M $M Cash at bank and on hand Deposits at call 172.1 0.1 172.2 251.2 0.2 251.4

(a) Reconciliation to cash at the end of the year The above figures are reconciled to cash at the end of the financial year as shown in the statement of cash flows as follows: Consolidated 2011 2010 $M $M Balances as above Bank overdrafts (note 25) Balances per statement of cash flows (b) Risk exposure The Groups exposure to interest rate and credit risk is discussed in note 3. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of cash and cash equivalents. 172.2 (1.0) 171.2 251.4 (2.1) 249.3

12 Current assets - Receivables

Consolidated 2011 2010 $M $M Trade receivables Provision for impairment of receivables (note 12(d)) 964.0 (21.0) 943.0 1.0 5.0 77.8 1,026.8 1,123.3 (30.4) 1,092.9 1.1 5.7 69.8 1,169.5

Loans to related parties - Associates (note 42(e)) Loans to related parties - Other (note 42(e)) Other receivables

(a) Trade receivables Trade receivables are non-interest bearing and are generally on 30 to 90 day terms. (b) Related party trade receivables and loans to related parties

For terms and conditions relating to related party trade receivables and loans to related parties refer to note 42. (c) Risk exposure

Information concerning fair values and credit risk of both current and non-current receivables is set out in note 3.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

12 Current assets - Receivables (continued)

(d) Provision for impairment of receivables Movements in the provision for impairment of trade receivables are as follows: Consolidated 2011 2010 $M $M Opening balance Additional provision recognised Amounts used during the period Unutilised provision written back Exchange fluctuations 30.4 4.7 (7.7) (2.1) (4.3) 21.0 34.8 9.3 (7.9) (4.6) (1.2) 30.4

The creation and release of the provision for impaired receivables has been included in 'other expenses' in profit or loss. Amounts charged to the allowance account are generally written off when there is no expectation of recovering additional cash. (e) Past due but not impaired The ageing analysis of trade receivables for amounts that were past due but not impaired for the Group is as follows: Consolidated 2011 2010 $M $M Within 30 days 31 to 60 days 61 to 90 days Over 90 days 141.7 27.2 7.5 13.6 190.0 172.8 26.7 8.8 13.0 221.3

With respect to the trade receivables that are neither impaired nor past due, there are no indications as at reporting date that the debtors will not meet their obligations as they fall due. Refer to notes 12(d) and 17(a) for impairment losses recognised during the period. The Group's exposure to credit risk is large but due to the diversification of customers and geography the risk of loss is considered minimal.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

13 Current assets - Inventories

Consolidated 2011 2010 $M $M Raw materials and stores - at cost - at net realisable value Work in progress - at cost - at net realisable value Finished goods - at cost - at net realisable value Spares and other - at cost

177.3 210.8 388.1 373.8 375.9 749.7 519.4 198.6 718.0 89.1 89.1

384.9 12.4 397.3 612.1 27.3 639.4 555.9 62.1 618.0 107.8 107.8

Emission unit permits - held for trading - at cost (a) Inventory expense

2.5 1,947.4

1,762.5

Current and non-current inventories recognised as an expense during the year ended 30 June 2011 amounted to $5,654.8M (2010: $4,862.7M) for the Group. Write-downs of inventories to net realisable value recognised as an expense at 30 June 2011 amounted to $87.0M (2010: $12.7M) for the Group. The expense has been included in raw materials and consumables used in the profit or loss. (b) Emission unit permits (EUs) The Group is a participant in the New Zealand Government's uncapped emissions trading scheme which was first implemented with effect from 1 July 2010. In accordance with the Group's accounting policy on accounting for emission trading schemes (note 1 (ac)) EUs held for trading in the ordinary course of business are classified as inventory and are held at the lower of cost and fair value less cost to sell.

14 Current assets - Intangible assets

Consolidated 2011 2010 $M $M Emission unit permits - not held for trading 18.2 18.2 -

In accordance with the Group's accounting policy on accounting for emission trading schemes (note 1(ac)) EUs that are not held for trading are recognised as current intangible assets and are carried at cost. Intangible EU assets are not amortised or subject to impairment as the economic benefits are realised from surrendering the rights to settle obligations arising from the ETS.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

15 Derivative financial instruments

Consolidated 2011 2010 $M $M Current liabilities Forward electricity contracts - cash flow hedges (a)(i)

0.5 0.5

(a) Instruments used by the Group (i) Forward electricity contracts - cash flow hedges The Group was party to derivative financial instruments in accordance with the Group's financial risk management policy (note 3) as a means of hedging exposure to electricity price fluctuations within New Zealand's steel making business. The derivative contract, representing a financial liability at fair value of $Nil (2010: $0.5M), was undertaken in June 2010 and matured in March 2011. The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised directly in equity. Upon maturity, the cumulative loss deferred in equity is adjusted against the initial amount recognised for electricity, which forms a component of inventory cost recognised in the statement of financial position (refer to note 36). There was no material hedge ineffectiveness in the current or prior year. (b) Risk exposures The Group generally does not enter into significant derivative hedging or other transactions involving market-sensitive instruments. Information about the Group's exposure to credit risk, foreign exchange and interest rate risk is provided in note 3. (c) Other hedging activities - hedge of net investments in foreign operations

The Group has net investments in New Zealand Steel Limited and North Star BlueScope Steel, whose functional currency is NZD and USD respectively. Movements in the AUD/NZD and AUD/USD exchange rates result in fluctuations in the AUD equivalent of these net investments. BlueScope Steel (Finance) Limited has borrowed NZD 1,098.1M (June 2010: NZD 973.0M) and USD 100.0M (June 2010: USD Nil) to hedge the net investments in New Zealand Steel Limited and North Star BlueScope Steel respectively. On translation of the net investments from NZD and USD to AUD, foreign exchange gains and losses are taken to the foreign currency translation reserve. Similarly, on translation of BlueScope Steel (Finance) Limited's NZD and USD borrowings to AUD, foreign exchange gains and losses are also taken to the foreign currency translation reserve to the extent that the hedge is effective. The North Star investment hedge was partially ineffective resulting in a $274K gain being recorded in the profit and loss. The effective hedge portion of these net investments are recorded in the foreign currency translation reserve net of tax (refer to note 36).

16 Current assets - Other

Consolidated 2011 2010 $M $M Deferred charges and prepayments 57.5 66.9

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

17 Non-current assets - Receivables

Consolidated 2011 2010 $M $M Loans to related parties - other Other receivables 22.7 22.7 5.0 24.1 29.1

Further information relating to loans to key management personnel and related parties is set out in notes 38 and 42. (a) Impaired receivables and receivables past due None of the non-current receivables are impaired or past due. (b) Fair values The current and non-current loan to the other related party accrues interest at a fixed interest rate. The fair value of this receivable using current interest rates is $5.1M (2010: $11.4M). Refer note 3(d). Non-current other receivables relate to third-party workers compensation recoveries which are actuarially determined at each reporting date. Given the revision of this actuarial calculation at each reporting date, including the selection of an appropriate discount rate, its carrying value is a reasonable approximation of fair value. (c) Risk exposure Information about the Group's exposure to credit risk, foreign exchange and interest rate risk is provided in note 3.

18 Non-current assets - Inventories

Consolidated 2011 2010 $M $M Spares and other - at cost

81.4

66.8

For detail of inventory expense and net realisable value write-downs recognised during the period refer to note 13.

19 Non-current assets - Investments accounted for using the equity method

Consolidated 2011 2010 $M $M Investments in associates (note 45) Interests in joint venture partnerships (note 46) 13.9 128.1 142.0 15.0 233.4 248.4

Investments in associates and interests in joint venture partnerships are accounted for in the consolidated financial statements using the equity method of accounting (refer to notes 1(d)(ii) and 1(d)(iii)).

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

20 Non-current assets - Property, plant and equipment

Land and buildings $M At 1 July 2009 Cost Accumulated depreciation and impairment Net book amount Year 30 June 2010 Opening net book amount Additions Depreciation charge Disposals Asset reclassifications Impairment (loss) write-back Exchange variations/other Closing net book amount At 30 June 2010 Cost Accumulated depreciation and impairment Net book amount 1,252.0 (539.9) 712.1 Plant, machinery and equipment $M 8,504.7 (4,955.2) 3,549.5

Total $M 9,756.7 (5,495.1) 4,261.6

712.1 38.4 (31.5) (4.3) 8.4 0.3 (11.8) 711.6

3,549.5 325.5 (286.0) (15.1) (9.4) 0.5 (18.3) 3,546.7

4,261.6 363.9 (317.5) (19.4) (1.0) 0.8 (30.1) 4,258.3

1,255.8 (544.2) 711.6

8,678.8 (5,132.1) 3,546.7 Plant, machinery and equipment $M 3,546.7 402.6 (294.7) (6.1) 1.1 (647.0) (133.4) 2,869.2

9,934.6 (5,676.3) 4,258.3

Land and buildings $M Year 30 June 2011 Opening net book amount Additions Depreciation charge Disposals Asset reclassifications Impairment (loss) write-back Exchange variations/other Closing net book amount At 30 June 2011 Cost Accumulated depreciation and impairment Net book amount (a) Assets held for resale 711.6 41.8 (30.3) (12.0) (1.6) (14.7) (63.4) 631.4

Total $M 4,258.3 444.4 (325.0) (18.1) (0.5) (661.7) (196.8) 3,500.6

1,187.0 (555.6) 631.4

8,752.4 (5,883.2) 2,869.2

9,939.4 (6,438.8) 3,500.6

During the year, the Group sold and leased back $14.9M of property held for sale residing within the Australia Distribution & Solutions segment at 30 June 2010.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

20 Non-current assets - Property, plant and equipment (continued)

(b) Assets in the course of construction The carrying amounts of the assets disclosed above include the following expenditure recognised in relation to property, plant and equipment which is in the course of construction: Consolidated 2011 2010 $M $M Land and buildings Plant, machinery and equipment Total assets in the course of construction (c) Leased assets Total property, plant and equipment includes the following amounts where the Group is a lessee under a finance lease: Consolidated 2011 2010 $M $M Leased assets Cost Accumulated depreciation Net book amount 2.0 314.1 316.1 0.8 378.1 378.9

108.9 (9.6) 99.3

52.3 (4.1) 48.2

During the period the Group entered into a finance lease for the use of plant and equipment situated at the New Zealand steelworks. An additional finance lease was established from a property sale and leaseback transaction entered into during the period. (d) Non-current assets pledged as security Refer to note 30(a) for information on non-current assets pledged as security by the Group. (e) Impairment losses and reversals The Group tests for impairment and measures recoverable amount based on value-in-use based on the discounted future cash flows derived from continued use of assets. Refer to note 22(b) for the testing methodology and details of assumptions, including discount rates used. Impairment losses are included in the line item 'impairment of non-current assets' in the profit or loss. (i) Coated and Industrial Products Australia (CIPA) At 30 June 2011, a total of $728.7M of property, plant and equipment impairments were recorded against CIPA assets due to economic factors including the strength of the AUD:USD, low spread (selling price less raw material cost) and low domestic demand. (ii) Impairment - BlueScope Water The BlueScope Water business, included in the Australia Distribution & Solutions segment, impaired $1.8M of property, plant and equipment due to restructuring of the business. (iii) Reversal - China coating line and Packaging Products The Coated & Building Products Asia segment has partially reversed impairments previously recognised for plant and equipment at the metallic coating and painting facility in Suzhou, China. Previously booked impairment losses have been reversed to the extent of $67.8M following the material improvement in financial performance and positive outlook of the business. The discontinued Packaging Products division recognised an impairment reversal for $1.0M against property, plant and equipment after securing a contract for the sale of the previously impaired equipment.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

20 Non-current assets - Property, plant and equipment (continued)

(iv) Prior period reversal of impairment loss Lysaght Pacific (Fiji) recognised an impairment reversal for $0.6M against property, plant and equipment following improved economic conditions in the region. This reversal resides within the New Zealand & Pacific Steel Products segment. Australia Distribution & Solutions' 'Trustek' business recognised an impairment reversal for $0.3M against property, plant and equipment following revised estimates from its closure in June 2009.

21 Non-current assets - Deferred tax assets

Consolidated 2011 2010 $M $M The balance comprises temporary differences attributable to: Doubtful debts provision Employee benefits provision Other provisions Depreciation Foreign exchange (gains) losses Investments Share capital raising costs Inventory Tax losses Electricity cash flow hedge Other Movements: Opening balance at 1 July Credited (charged) to profit or loss (note 9) Credited (charged) to other comprehensive income Foreign exchange differences Closing balance at 30 June 2.0 129.5 21.7 (310.1) (50.7) (7.3) 8.1 (12.9) 382.9 (2.4) 160.8 84.9 65.5 15.0 (4.6) 160.8 1.0 24.1 6.1 39.1 12.4 1.3 0.2 0.7 84.9 79.5 2.0 2.4 1.0 84.9

The Australian consolidated tax group has recognised a $84.5M deferred tax asset at 30 June 2011 (30 June 2010: $80.5M deferred tax liability). The Australian consolidated tax group has recorded taxable losses in relation to the current and preceding period. The utilisation of this amount depends upon future taxable amounts in excess of profits arising from the reversal of temporary differences. The Group believes this amount to be recoverable based on taxable income projections. A deferred tax asset of $218.6M has not been recognised on the $728.7M 30 June 2011 write-down of Coated & Industrial Products Australia property, plant and equipment (note 20 (e)) due to the existence of significant tax losses in the Australian tax consolidated Group.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

22 Non-current assets - Intangible assets

Patents, trademarks Other and other Computer Customer intangible rights software relationships assets $M $M $M $M

Goodwill $M Consolidated At 1 July 2009 Cost Accumulated amortisation and impairment Net book amount Year 30 June 2010 Opening net book amount Exchange differences Additions Impairment write-back Amortisation charge Reclassifications Closing net book amount At 30 June 2010 Cost Accumulated amortisation and impairment Net book amount 860.7 (10.8) 849.9

Total $M

30.8 (14.9) 15.9

230.3 (114.1) 116.2

127.0 (26.9) 100.1

8.4 (1.1) 7.3

1,257.2 (167.8) 1,089.4

849.9 (19.1) 830.8

15.9 (0.8) (0.9) 14.2

116.2 (1.5) 8.0 0.4 (22.3) 1.6 102.4

100.1 (4.3) (8.6) 87.2

7.3 (0.3) (0.5) 6.5

1,089.4 (26.0) 8.0 0.4 (32.3) 1.6 1,041.1

841.6 (10.8) 830.8

29.5 (15.3) 14.2

214.4 (112.0) 102.4

122.0 (34.8) 87.2

8.1 (1.6) 6.5

1,215.6 (174.5) 1,041.1

Goodwill $M Consolidated Year 30 June 2011 Opening net book amount Exchange differences Additions Impairment Amortisation charge Reclassifications Closing net book amount At 30 June 2011 Cost Accumulated amortisation and impairment Net book amount 830.8 (78.6) (261.4) 490.8

Patents, trademarks Other and other Computer Customer intangible rights software relationships assets $M $M $M $M

Total $M

14.2 (2.9) (0.8) 10.5

102.4 (6.4) 14.6 (21.6) 0.5 89.5

87.2 (14.6) (7.8) 64.8

6.5 (1.2) 0.3 (0.1) (0.4) 5.1

1,041.1 (103.7) 14.9 (261.5) (30.6) 0.5 660.7

751.9 (261.1) 490.8

24.0 (13.5) 10.5

210.7 (121.2) 89.5

101.2 (36.4) 64.8

6.7 (1.6) 5.1

1,094.5 (433.8) 660.7

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

22 Non-current assets - Intangible assets (continued)

(a) Allocation of goodwill and intangible assets with indefinite useful lives to cash-generating units Goodwill is allocated to the Groups cash-generating units (CGUs) for impairment testing purposes as follows: Cash-generating unit Coated & Industrial Products Australia BlueScope Distribution Lysaght Australia BlueScope Water Buildings North America Steelscape Metl-Span Buildings China Other Asia Total goodwill Business segment Coated & Industrial Products Australia Australia Distribution & Solutions Australia Distribution & Solutions Australia Distribution & Solutions Coated & Building Products North America Coated & Building Products North America Coated & Building Products North America Coated & Building Products Asia Coated & Building Products Asia 2011 $M 156.8 56.2 14.3 204.7 46.5 8.3 4.0 490.8 2010 $M 75.7 334.0 56.2 15.1 257.5 19.5 58.4 10.4 4.0 830.8

Intangible assets with indefinite useful lives (other than goodwill) of $2.7M and $2.0M (2010: $3.4M and $2.5M) have been allocated to the Buildings North America and Metl-Span CGUs respectively. These assets relate to trade names recognised as part of the IMSA Group business combination acquired in February 2008. (b) Key assumptions used for value-in-use calculations The recoverable amount of each CGU is determined on the basis of value-in-use (VIU). The following describes assumptions on which management has based its cash flow projections when determining VIU. Cash flows VIU calculations use cash flow projections based on financial projections approved by management covering a three-year period, being the basis of the Group's forecasting and planning processes. Cash flows beyond three years are extrapolated to provide a maximum of 30 years of cash flows with adjustments where necessary to reflect changes in longterm operating conditions. No terminal value is calculated. Foreign currency cash flows are discounted using the CGUs functional currency and then translated to the Group's presentation currency using the closing exchange rate. Raw material cost and selling price assumptions used for cash flow projections are based on global commodity prices, taking into account forecast and past actual pricing. Sales volume assumptions are based on management forecasts, taking into account actual historical sales volumes and external forecasts of underlying economic activity for the market sectors and geographies in which each CGU operates. Growth rate The growth rate used to extrapolate the cash flows beyond the three-year period is typically 2.5% (2010: 2.5%). The growth rate represents a steady indexation rate which does not exceed management's expectations of the long-term average growth rate for the business in which each CGU operates. Discount rate The base discount rate applied to the cash flow projections is 10.5% post-tax (2010: 10.5%). The discount rate is a posttax rate that reflects the current assessment of the time value of money, and the overall perceived risk profile of the Company. Given the differing characteristics, currencies and geographical locations of the Group's CGUs, where appropriate the discount rate is adjusted by a country risk premium (CRP) to reflect country-specific risks. Such adjustments do not reflect risks for which cash flow forecasts have already been adjusted. The CRP is derived from a combination of external sources including observed bond market spreads, market commentator surveys and analysis, and Standard & Poor's foreign currency ratings. This adjusted discount rate is then translated to a pre-tax rate for each CGU based on the specific tax rate applicable to where the CGU operates.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

22 Non-current assets - Intangible assets (continued)

Carbon pricing schemes The estimated impact of the New Zealand emissions trading scheme, which came into effect on 1 July 2010, has been included in determining cash flow projections. An estimate of the impact of the proposed Australian Carbon Tax and related Steel transformation Plan (STP), which is intended to come into effect on 1 July 2012 if approved by Federal Parliament, has been included in determining cash flow projections (refer note 52 for details of the proposed arrangements). In determining this estimate the Group has taken into account the assistance provided by the STP for the first four years, the potential for pass through of costs by suppliers and the ability of the Group to implement mitigation plans. (c) Impairment charges At 30 June 2011, a total of $184.4M of goodwill impairments were recognised. The goodwill impairments were recorded against Coated and Industrial Products ($68.6M) due to economic factors including the strength of the AUD:USD, low spread (selling price less raw material cost) and low domestic demand, BlueScope Distribution ($100.2M) due to the strength of the AUD:USD which improved the affordability of imports resulting in margin compression and Steelscape ($15.6M) due to a reduction in forecast margins. At 31 December 2010, the Australia Distribution & Solutions segment impaired $77.0M of goodwill in relation to its Distribution business acquired from Smorgon Steel in August 2007. The impairment was due to a revised medium term outlook influenced by reduced market demand and increased import competition driving margins lower. (d) Prior period impairment reversal Lysaght Pacific (Fiji) recognised an impairment reversal for $0.4M against computer software intangibles following improved economic conditions in the region. This reversal falls within the New Zealand & Pacific Steel Products segment. (e) Impact of possible changes in key assumptions During the year ended 30 June 2011, the Group wrote-down property, plant and equipment by $728.7M in its Coated and Industrial Products Australia CGU. These businesses are tested based on the assumptions outlined in note 22(b). A material change in certain forecast long-term assumptions, in particular AUD:USD exchange rate, spread (selling price less raw material cost), domestic sales volumes and carbon pricing, has the potential to give rise to a circumstance where the recoverable amount may be materially different to the carrying amount resulting in additional impairment or the writeback of previous impairments in a future period. The Group has two CGUs which comprise a significant proportion of the Group's goodwill. BlueScope Distribution (a business within the Australia Distribution & Solutions segment) and BlueScope Buildings North America (a business within the Coated & Buildings Products North America segment). These businesses are tested based on the assumptions outlined in note 22(b). A material adverse change in forecast sales volumes or margins (selling price less raw material cost) could have the potential to give rise to a circumstance where the recoverable amount may be materially lower than the carrying amount.

23 Non-current assets - Other

Consolidated 2011 2010 $M $M Deferred charges and prepayments 2.7 3.8

24 Current liabilities - Payables

Consolidated 2011 2010 $M $M Trade payables Other payables 1,055.0 101.6 1,156.6 990.5 121.1 1,111.6

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

24 Current liabilities - Payables (continued)

(a) Risk exposure Information about the Group's exposure to foreign exchange risk is provided in note 3.

25 Current liabilities - Borrowings

Consolidated 2011 2010 $M $M Secured Other loans Lease liabilities (note 41)

55.5 4.6 60.1

63.3 1.6 64.9

Unsecured Bank overdrafts (note 11) Bank loans Other loans Deferred borrowing costs

1.0 16.1 93.5 (5.0) 105.6 165.7

2.1 80.7 (6.8) 76.0 140.9

Total current interest bearing liabilities (a) Security and fair value disclosures

Information about the security relating to each of the secured liabilities and the fair value of each of the borrowings is provided in note 30. (b) Risk exposures Details of the Groups exposure to risks arising from current and non-current borrowings are set out in note 3.

26 Current liabilities - Current tax liabilities

Consolidated 2011 2010 $M $M

Income tax

23.1

7.4

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

27 Current liabilities - Provisions

Consolidated 2011 2010 $M $M

Employee benefits - annual leave Employee benefits - long service leave Employee benefits - redundancy (a) Employee benefits - other Restructure (b) Product claims (c) Workers compensation (d) Restoration and rehabilitation (e) Carbon emissions (f) Other

91.6 153.1 11.3 86.3 2.9 20.7 15.6 1.1 8.5 8.2 399.3

94.6 142.2 12.6 86.1 8.7 32.5 18.5 2.8 10.8 408.8

(a) Redundancy The employee redundancy provision reflects a range of internal reorganisations. Uncertainty exists around exact levels of redundancy payments caused by staff movements between the reporting date and key redundancy dates, in addition to the unknown potential for re-employment of a limited number of redundant personnel within other areas of the business which share similar skill prerequisites. All redundancies are expected to take effect within 12 months of the reporting date. (b) Restructure The restructure provision relates to the announced closures of Port Kembla's CRM paintline, Illawarra's Flat Products division, BlueScope Water Keysborough and Surrey Hills sites and the Packaging Products division. The majority of the provisions are expected to be utilised within the next two to three years. (c) Product claims A provision for product claims is recognised for all products at the reporting date and is measured based on modelled data combining sales volumes with past experiences of repair and replacement levels in conjunction with any specifically identified product faults. Due to the nature of this provision, uncertainty is inherent in the calculation of the extent and timing of predicted future claims costs. (d) Workers compensation In Australia and North America, BlueScope Steel Limited is a registered self-insurer for workers compensation. Provisions are recognised based on calculations performed by an external actuary. A contingent liability exists in relation to guarantees given to various state workers compensation authorities, due to self-insurance prerequisites (refer note 40). For the Group, an actuarially determined asset of $22.7M (2010: $24.1M) has been recognised for expected future reimbursements associated with workers compensation recoveries from third parties. This amount is included in noncurrent other receivables (refer to note 17) as there is no legal right of offset against the workers compensation provision. (e) Restoration and rehabilitation Restoration and rehabilitation provisions include environmental liabilities based upon the assessment of BlueScope Distribution sites following the acquisition of Smorgon Steel Limited's distribution business in August 2007. This provision has both $1.0M current (2010: $2.3M) and $2.3M non-current (2010: $4.1M) portions. Other restoration and rehabilitation non-current provisions of $4.3M (2010: $4.3M) exist for New Zealand Steel in relation to their operation of two iron-sand mines (refer to note 32). These provisions have been classified as non-current as the timing of payments to remedy these sites will not be made until the distant future upon cessation of their operations. The extent of these future costs remains uncertain due to possibilities of changed site conditions. Additionally, various businesses have recorded provisions of $0.1M current (2010: $0.5M) and $2.5M non-current (2010: $5.2M) in relation to leased sites that require rectification and restoration work at the end of their respective lease periods.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

27 Current liabilities - Provisions (continued)

(f) Carbon emissions The Group is a participant in the New Zealand Governments uncapped emissions trading Scheme (ETS) which was implemented with effect from 1 July 2010. The emissions liability is recognised as a provision for carbon and is measured with reference to the carrying amount of emission units (EUs) held with any excess measured at the current market value of EUs. ETS costs passed through from suppliers are included as part of the underlying cost of the good or service rendered. The liability for this cost pass-through is either included within trade creditors or recorded as an emissions liability within the carbon provision account when an agreement has been reached with the supplier to settle the ETS cost by transferring EUs. When EUs are delivered to the government or a third party, the EU asset along with the corresponding carbon provision is derecognised from the statement of financial position. (g) Movement in provisions The reconciliation of movement in provisions is set out in note 32. (h) Amounts not expected to be settled within the next 12 months The current provision for long service leave includes all unconditional entitlements where employees have completed the required period of service. The entire annual leave amount and current portion of long service leave are presented as current since the Group does not have an unconditional right to defer settlement. However, based on past experience, the Group does not expect all employees to take the full amount of accrued annual leave and long service leave or require payment within the next 12 months. The following amounts reflect leave currently classified as current that is not expected to be taken or paid within the next 12 months. Consolidated 2011 2010 $M $M Current annual and long service leave obligation expected to be settled after 12 months

178.5

140.3

28 Current liabilities - Deferred income

Consolidated 2011 2010 $M $M Deferred income The fair value of deferred income approximates carrying value. 133.5 132.1

29 Non-current liabilities - Payables

Consolidated 2011 2010 $M $M Other payables (a) Risk exposure 6.9 8.5

Information about the Group's exposure to foreign exchange risk is provided in note 3.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

30 Non-current liabilities - Borrowings

Consolidated 2011 2010 $M $M Secured Other loans Lease liabilities (note 41)

5.8 98.6 104.4

55.4 48.4 103.8

Unsecured Bank loans Other loans Deferred borrowing costs

490.3 491.0 (11.5) 969.8 1,074.2

12.8 742.6 (6.2) 749.2 853.0

Total non-current borrowings (a) Secured liabilities and assets pledged as security The total secured liabilities (current and non-current) are as follows:

Consolidated 2011 2010 $M $M

Other loans Lease liabilities Total secured liabilities

61.3 103.2 164.5

118.7 50.0 168.7

The Group has a borrowing arrangement secured by various Western Port and Port Kembla plant, machinery and equipment. Lease liabilities are effectively secured as the rights to the leased assets recognised in the financial statements revert to the lessor in the event of default. During the period the Group entered into a finance lease for the use of plant and equipment situated at the New Zealand steelworks. An additional finance lease was also established in Australia for a property sale and leaseback transaction entered into during the period. The carrying amounts of assets pledged as security for current and non-current borrowings are: Consolidated 2011 2010 $M $M Other loans Property, plant and equipment Lease liabilities Property, plant and equipment Total assets pledged as security

34.4 99.3 133.7

42.8 48.2 91.0

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

30 Non-current liabilities - Borrowings (continued)

(b) Set-off of assets and liabilities New Zealand Steel Limited deposits surplus funds with a financial institution. The institution makes advances up to an equivalent amount of the deposit to BlueScope Steel (Finance) Limited. These advances form part of the hedge instrument, outlined in note 15(c), utilised to hedge the net investment in New Zealand Steel Limited. The Group has established a legal right of set-off with the financial institution. The amount of the particular borrowings and offsetting cash deposits at the end of the period was $849.3M (2010: $792.0M).

(c) Financing arrangements As at the end of the period, the Group had the following material financing arrangements: Bank loan facilities Australian Bank loan facilities consist of the following facilities: $1,350M syndicated bank facility with a syndicate of banks. The facility is comprised of a $675M tranche maturing in December 2013 and a $675M tranche maturing in December 2015.

Non-Australian Bank loan facilities are arranged for several non-Australian businesses and are with a number of banks. Terms and conditions are agreed to on a periodic basis appropriate to the needs of the relevant businesses. Facilities for nonAustralian businesses include: Three long-term facilities totalling THB 2,500M (AUD 76M) are available for the BlueScope Steel (Thailand) Ltd cash requirements. Three short-term facilities totalling MYR 100M (AUD 30.9M) to support working capital and other short-term cash requirements for BlueScope Steel (Malaysia) Sdn Bhd.

Other facilities USD 625M of US Private Placement Loan Notes, USD 100M of which are due for repayment in July 2011; USD 200M due in 2014; USD 81M due in 2015; USD 204M due in 2018; and USD 40M due in 2020. In 2006, a sale and leaseback of various Western Port and Port Kembla plant and equipment was entered into raising approximately $270M net cash. The relevant assets have been leased back over a five-year period. This transaction has been accounted for as a borrowing, with final settlement in August 2011.

Bank overdrafts Bank overdraft facilities are arranged with a number of banks with the general terms and conditions agreed to on a periodic basis.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

30 Non-current liabilities - Borrowings (continued)

Unrestricted access was available at balance date to the following lines of credit: Consolidated 2011 2010 $M $M Credit standby arrangements Total facilities Bank overdrafts Bank loan facilities Bills of exchange 30.3 1,524.9 1,555.2 34.0 1,512.0 58.8 1,604.8

Used at balance date Bank overdrafts Bank loan facilities Bills of exchange

1.0 506.3 507.3

2.1 93.6 95.7

Unused at balance date Bank overdrafts Bank loan facilities Bills of exchange (d) Risk exposures

29.3 1,018.6 1,047.9

31.9 1,418.4 58.8 1,509.1

Information about the Group's exposure to interest rate and foreign currency changes is provided in note 3.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

31 Non-current liabilities - Deferred tax liabilities

Consolidated 2011 2010 $M $M The balance comprises temporary differences attributable to: Amounts recognised in profit or loss Doubtful debts provision Employee benefits Claims provision Other provisions Depreciation Foreign exchange gains (losses) Inventory Investments Intangible assets Tax losses Share capital raising costs Other (2.3) (27.1) (2.5) (5.6) 84.5 (0.1) 1.2 (0.2) 25.8 (3.8) (0.8) 69.1 (6.7) (151.4) (21.5) (9.3) 428.7 39.3 21.2 9.1 39.6 (206.7) (12.1) 4.1 134.3

Movements: Opening balance at 1 July Charged (credited) to profit or loss (note 9) Charged (credited) to contributed equity Charged (credited) to other comprehensive income Exchange fluctuation Closing balance at 30 June 134.3 (64.6) (0.1) 15.5 (16.0) 69.1 143.2 1.4 (0.3) (8.9) (1.1) 134.3

32 Non-current liabilities - Provisions

Consolidated 2011 2010 $M $M

Employee benefits - long service leave Employee benefits - other Restructure Product claims Workers compensation Restoration and rehabilitation Other For a description of each class of provision, refer to note 27.

21.7 0.9 4.9 47.9 107.7 9.1 1.3 193.5

19.1 2.8 3.0 57.7 112.1 13.6 1.9 210.2

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

32 Non-current liabilities - Provisions (continued)

Movements in provisions Movements in each class of provision during the financial year, other than employee benefits, are set out below.
Product claims $M Workers compensation $M Restoration and rehabilitation $M Carbon Emissions $M

Restructure $M Consolidated - 2011 Current and non-current Carrying amount at start of year Additional provision recognised Unutilised provisions written back Amounts used during the period Exchange fluctuations Transfers Unwinding and discount rate adjustment Carrying amount at end of year 11.7 1.7 (5.5) (0.1) 7.8

Other $M

Total $M

90.2 2.9 (3.4) (19.3) (4.3) 2.5 68.6

130.6 6.1 (15.6) (2.3) 4.5 123.3

16.4 (4.7) (1.5) (0.2) 0.2 10.2

15.7 (7.1) (0.1) 8.5

12.7 2.0 (1.0) (5.8) (0.9) 2.5 9.5

261.6 28.4 (9.1) (54.8) (7.9) 2.5 7.2 227.9

33 Non-current liabilities - Retirement benefit obligations

(a) Superannuation benefits All employees of the consolidated entity are entitled to benefits on resignation, retrenchment, retirement, death or disablement. Australian employees are entitled to benefits from a superannuation plan they select under the Australian Government's choice-of-fund legislation. The Australian Group has two default superannuation plans under choice of fund. New employees become members of one of those default plans if they do not actively choose an alternative plan. One of the default plans, the BlueScope Steel Superannuation Fund, has a defined benefit section and a defined contribution section. The defined benefit plan is closed to new participants. The other default plan, Australian Super, and any other superannuation plans chosen by Australian employees, are defined contribution plans under which the Australian Group's legal or constructive obligation is limited to making fixed contributions. New Zealand employees are members of either the New Zealand Steel Pension Fund, being a defined benefit plan, or the Retirement Savings Plan, a defined contribution master trust managed by Tower Employee Benefits Limited. In North America, employees previously belonging to the Butler Manufacturing Company are members of the Butler Manufacturing Base Retirement Plan, a defined benefit fund which has been closed to new participants since 31 December 2004. Employees hired on or after 1 January 2004 receive a retirement contribution from the Butler Employee Savings Trust (BEST) which is a defined contribution plan. Employees previously sponsored by the VP Salaried, VP Hourly and IMSA Steel defined benefit plans were merged into the Butler Base Retirement Plan effective 31 December 2008. The Group also makes superannuation contributions to defined contribution funds in respect of the entitys employees located in other countries. Defined benefit funds provide defined lump sum benefits based on years of service and final or average salary. The defined contribution plans receive fixed contributions from Group companies with the Group's legal obligation limited to these contributions. Actuarial assessments of the defined benefit funds are made at no more than three-yearly intervals, with summary assessments performed annually. The last formal actuarial investigations were made of the BlueScope Steel Superannuation Fund as at 30 June 2008, the New Zealand Steel Pension Fund as at 30 June 2009, and the Butler Base Retirement Plan as at 1 January 2011. Summary actuarial assessments were performed for all of these funds as at 30 June 2011, to provide information that is more up-to-date than that of the most recent formal actuarial investigation.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

33 Non-current liabilities - Retirement benefit obligations (continued)

The following sets out details in respect of the defined benefit section only. (b) Statement of financial position amounts The amounts recognised in the statement of financial position are determined as follows: Consolidated 2011 2010 $M $M Present value of the defined benefit obligation Fair value of defined benefit plan assets Net (liability) asset in the statement of financial position (c) Defined benefit funds to which BlueScope Steel employees belong 2011
BlueScope Steel Superannuation Fund New Zealand Pension Fund Coated & Building Products North America Total

(1,093.5) 922.8 (170.7)

(1,126.8) 896.7 (230.1)

Present value of the defined benefit obligation Fair value of defined benefit plan assets Net (liability) asset in the statement of financial position Defined benefit expense Employer contributions Principal actuarial assumptions Discount rate (gross of tax) Expected return on plan assets (net of tax) Future salary increases 2010

$M (484.3) 445.0 (39.3) 10.0 16.4 % 5.3 7.5 3.5

BlueScope Steel Superannuation Fund

$M (307.4) 234.2 (73.2) 8.8 14.3 % 5.1 6.3 4.0

New Zealand Pension Fund

$M (301.8) 243.6 (58.2) 1.4 28.0 % 5.5 7.5 4.0

Coated & Building Products North America

$M (1093.5) 922.8 (170.7) 20.2 58.7

Total

Present value of the defined benefit obligation Fair value of defined benefit plan assets Net (liability) asset in the statement of financial position Defined benefit expense Employer contributions Principal actuarial assumptions Discount rate (gross of tax) Expected return on plan assets (net of tax) Future salary increases

$M (464.3) 423.9 (40.4) 15.0 16.6 % 5.1 7.0 3.5

$M (288.4) 224.4 (64.0) 2.3 30.3 % 5.4 6.0 4.0

$M (374.1) 248.4 (125.7) 5.5 32.8 % 5.5 8.0 4.0

$M (1,126.8) 896.7 (230.1) 22.8 79.7

The net liability is not immediately payable. Any plan surplus will be realised through reduced future Company contributions. The expected rate of return on assets has been based on historical and future expectations of returns for each of the major categories of asset classes as well as the expected and actual allocation of plan assets to these major categories.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

33 Non-current liabilities - Retirement benefit obligations (continued)

(d) Categories of plan assets The major categories of plan assets are as follows: Consolidated 2011 2010 $M $M Cash Equity instruments Debt instruments Property Other assets 3.3 459.6 415.7 44.2 922.8 6.5 454.9 366.7 46.4 22.2 896.7

(e)

Reconciliations Consolidated 2011 2010 $M $M

Reconciliation of the present value of the defined benefit obligation, which is partly funded: Balance at the beginning of the year Current service cost Interest cost Actuarial losses (gains) Foreign currency exchange rate changes Benefits paid Allowance for contributions tax on net liability Loss (gains) on curtailments Other Balance at the end of the year

1,126.8 26.3 53.7 38.3 (91.4) (54.2) (4.0) (0.4) (1.6) 1,093.5

1,052.0 27.6 58.8 114.0 (12.7) (100.0) (11.1) (1.8) 1,126.8

Consolidated 2011 2010 $M $M Reconciliation of the fair value of plan assets: Balance at the beginning of the year Expected return on plan assets Actuarial gains (losses) Foreign currency exchange rate changes Contributions by the Group Tax on employer contributions Contributions by plan participants Benefits paid Other Balance at the end of the year

896.7 57.0 33.4 (65.6) 58.7 (6.5) 4.9 (54.2) (1.6) 922.8

791.4 57.9 81.0 (6.2) 79.7 (11.0) 5.6 (100.0) (1.7) 896.7

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

33 Non-current liabilities - Retirement benefit obligations (continued)

(f) Amounts recognised in profit or loss

The amounts recognised in profit or loss in respect of defined benefit plans are as follows: Consolidated 2011 2010 $M $M Current service cost Contributions by plan participants Interest cost Expected return on plan assets Allowance for contributions tax on net liability Losses (gains) on curtailments and settlements Total included in employee benefits expense Actual return on plan assets (g) Amounts recognised in other comprehensive income Consolidated 2011 2010 $M $M Actuarial (loss) gain recognised in other comprehensive income during the year Cumulative actuarial (losses) gains recognised in other comprehensive income (h) Employer contributions Employer contributions to the defined benefit section of the Group's plans are based on recommendations by the plans actuaries. Actuarial assessments are made no less frequently than once every three years. The objective of funding is to ensure that the benefit entitlements of members and other beneficiaries are fully funded by the time they become payable. Total employer contributions expected to be paid by Group companies for the year ending 30 June 2012 are $41.0M. Funding recommendations are made by the actuary based on their forecast of various matters, including future plan assets performance, interest rates and salary increases. A summary of the key economic assumptions for each of the Group's defined benefit plans is outlined in note 33(c). (i) Historical summary 2011 $M Present value of defined benefit plan obligation Fair value of defined benefit plan assets Net (liability) asset in the statement of financial position Experience adjustments arising on plan liabilities Experience adjustments arising on plan assets (1,093.5) 922.8 (170.7) (38.3) 33.4 2010 $M (1,126.8) 896.7 (230.1) (114.0) 81.0 2009 $M (1,052.0) 791.4 (260.6) 135.6 (239.2) 2008 $M (1,112.4) 908.0 (204.4) 13.7 (156.4) 2007 $M (1,087.8) 1,020.4 (67.4) (4.0) 55.1 (4.9) (276.5) (33.0) (271.6) 26.3 (4.9) 53.7 (57.0) 2.5 (0.4) 20.2 90.4 27.6 (5.6) 58.8 (57.9) (0.1) 22.8 140.1

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

34 Non-current liabilities - Deferred income

Consolidated 2011 2010 $M $M Deferred income 4.3 4.5

35 Contributed equity
Parent entity 2011 2010 Shares Shares 1,842,207,385 1,823,322,017 Parent entity 2011 2010 $M $M 4,073.8 4,032.4

Notes (a) Share capital Issued and fully paid ordinary shares (b) Movements in ordinary share capital: (c)

Date 1 July 2009 Various 11 March 2010

Details Opening balance Long Term Incentive Plan - 2005 Employee Share Plan - 2007 Less: Cost of capital issues Plus: Tax credit recognised directly in equity

Notes

Number of shares 1,823,297,662

Issue/ redemption price

$M 4,032.6

(e) (f)

8,889 15,466

$3.89 $9.42

0.2 (0.9) 0.5

30 June 2010 Various 20 October 2010 1 November 2010

Balance Long Term Incentive Plan - 2005 Dividend Reinvestment Plan -2010 final Employee Share Plan - 2008 Less: Cost of capital issues Plus: Tax credit recognised directly in equity (e) (d) (f)

1,823,322,017 17,000 18,839,253 29,115 $3.89 $2.19 $10.34

4,032.4 41.3 0.3 (0.3) 0.1 41.4

30 June 2011

Balance

1,842,207,385

4,073.8

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

35 Contributed equity (continued)

(c) Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Group in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. Ordinary shares have no par value and the Group does not have a limited amount of authorised capital. (d) Dividend Reinvestment Plan The Dividend Reinvestment Plan enables shareholders to receive some or all of their future dividends as ordinary BlueScope Steel Limited shares instead of cash. (e) Share rights Information relating to the Long Term Incentive Plan, including details of share rights issued, vested and lapsed during the financial year and share rights outstanding at the end of the financial year, is set out in note 50(a). (f) Employee share plans

Information relating to employee share plans, including details of shares issued under plans, is set out in note 50(b). (g) Capital risk management Management monitors its capital structure through various key financial ratios with emphasis on the gearing ratio (net debt/total capital). The Group's gearing ratio is managed in order to ensure an investment grade quality balance sheet through the steel price cycle, and to ensure access to finance at reasonable cost regardless of the point in the cycle. On occasions, the Group will take advantage of certain investment opportunities where an increased level of gearing will be tolerated, provided there is sufficient future cash flow strength and flexibility to be confident of credit strengthening rather than uncertainty and risk of credit weakening. In order to achieve the objectives above, management actively manages debt and equity. In terms of managing equity, all methods of returning funds to shareholders outside of dividend payments or raising funds are considered within the context of its balance sheet objectives. In managing debt, the Group seeks a diversified range of funding sources and maturity profiles. Sufficient flexibility is maintained within committed facilities in order to provide the business with the desired liquidity support for operations and to pursue its strategic objectives. The Group's gearing ratio is as follows: Consolidated 2011 2010 $M $M Total borrowings (notes 25 & 30) Less: Cash and cash equivalents (note 11) Net debt Total equity Total capital Gearing ratio 1,239.9 (172.2) 1,067.7 4,396.1 5,463.8 19.5 % 993.9 (251.4) 742.5 5,755.7 6,498.2 11.4 %

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

36 Reserves and retained profits

Consolidated 2011 2010 $M $M (a) Reserves Hedging reserve - cash flow hedges Share-based payments reserve Foreign currency translation reserve Non-distributable profits reserve 22.8 (361.0) 13.4 (324.8) (0.3) 16.6 (147.8) 13.1 (118.4)

Hedging reserve - cash flow hedges Opening balance Net gain (loss) Transfers to inventory Deferred tax Exchange fluctuation Closing balance Share-based payments reserve Opening balance Share-based payments expense Transfer to share capital Closing balance Foreign currency translation reserve Opening balance Net gain (loss) on hedges of subsidiaries Deferred tax on investments in subsidiaries (note 9) Currency translation differences arising during the year Closing balance Non-distributable profits reserve Opening balance Transfers from retained profits (b) Exchange fluctuations Closing balance

(0.3) (0.6) 1.0 (0.1) -

(0.5) 0.2 (0.3)

16.6 6.6 (0.4) 22.8

12.3 4.7 (0.4) 16.6

(147.8) (13.0) 3.9 (204.1) (361.0)

(121.6) (11.1) 3.3 (18.4) (147.8)

13.1 0.3 13.4

4.5 8.6 13.1

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

36 Reserves and retained profits (continued)

(b) Retained profits Movements in retained profits were as follows: Consolidated 2011 2010 $M $M Opening balance Profit (loss) for the year Dividends paid (note 37) Transfers to reserves (a) Actuarial gains (losses) on defined benefit plans recognised directly in retained profits (note 33) Deferred tax Closing balance (c) Nature and purpose of reserves (i) Hedging reserve - cash flow hedges This reserve is used to record gains or losses on hedging instruments that are determined to be an effective hedge and therefore qualify for hedge accounting, as described in note 1(q). The Group manages a cash flow hedging program in relation to electricity purchases. Gains or losses from hedging instruments are recognised within inventory in the statement of financial position when the hedged electricity cash flows are transacted. (ii) Share-based payments reserve The share-based payments reserve is used to recognise the fair value of unexercised share rights issued to employees that may or may not have meet vesting conditions. The share-based payments reserve is also used to recognise the fair value of benefits awarded under general employee share plans that have not vested at the reporting date. Once either share rights are exercised or shares are issued according to the conditions of general employee share plans the fair value of the related benefit is transferred into ordinary issued share capital. Refer to note 50(a) for details of share rights exercised during the period. (iii) Foreign currency translation reserve Exchange differences arising on translation of the foreign operations are taken to the foreign currency translation reserve, as described in note 1(f). It is also used to record the effect of hedging net investments in foreign operations. The reserve is recognised in profit and loss when a foreign controlled entity is disposed of. (iv) Non-distributable profit reserve In certain overseas operations local regulations require a set amount of retained profit to be set aside and not be distributed as a dividend. 1,747.3 (1,054.2) (128.0) (4.9) (0.4) 559.8 1,651.7 126.0 (8.6) (33.0) 11.2 1,747.3

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

37 Dividends
Parent entity 2011 2010 $M $M (a) Ordinary shares A final dividend of 5 cents per fully paid share was paid on 20 October 2010 in relation to the year ended 30 June 2010. In the comparative period, there was no final dividend declared in relation to the year ended 30 June 2009. Final fully franked based on tax paid @ 30% An interim dividend of 2 cents per fully paid share was paid on 4 April 2011 in relation to the year ended 30 June 2011. In the comparative period, there was no interim dividend declared for the year ended 30 June 2010. Fully franked based on tax paid @ 30% Total dividends provided for or paid (b) Dividends not recognised at year-end For the year ended 30 June 2011 the directors recommended that there will be no final dividend declared (June 2010: 5 cents). (c) Franked dividends Parent entity 2011 2010 $M $M Actual franking account balance as at the reporting date Franking credits that will arise from the payment (receipt) of income tax payable as at the reporting date Franking credits available for subsequent financial years based on a tax rate of 30% 52.6 124.7 91.2

91.2

36.8 128.0

52.6

(17.3) 107.4

The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for: (a) (b) (c) franking credits (debits) that will arise from the payment (receipt) of the amount of the provision for income tax franking debits that will arise from the payment of dividends recognised as a liability at the reporting date, and franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.

(d) Dividend cash flows The total cash paid to shareholders in respect of dividends during the period is $86.7M (2010: $Nil) as presented in the statement of cash flows. Dividend amounts of $41.3M were reinvested through the Company's dividend reinvestment plan for the 2010 final dividend (refer note 35(b)).

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

38 Key management personnel disclosures

(a) Directors The following persons were directors of BlueScope Steel Limited during the financial year: (i) Chairman - non-executive G J Kraehe, AO (ii) Executive director P F O'Malley, Managing Director (iii) Non-executive directors R J McNeilly D J Grady, AM H K McCann, AM Y P Tan D B Grollo K A Dean P Bingham-Hall (appointed on 29 March 2011) (b) Other key management personnel In addition to P F O'Malley, the following personnel formed part of the Executive Leadership Team and also had authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, during the entire financial year (except as noted): Name N H Cornish I R Cummin M R Vassella M G Barron P E O'Keefe S R Elias S Dayal K A Mitchelhill R J Moore P J Finan Position Chief Executive - Australian & New Zealand Steel Manufacturing Businesses Executive General Manager - People and Organisation Performance President - BlueScope North America Chief Legal Officer and Company Secretary Chief Executive - Australian Coated & Industrial Markets Chief Financial Officer Chief Executive - Asia Chief Executive - Australia Distribution & Solutions President - China (from 1 December 2010) Executive General Manager Global Building and Construction Markets (from 1 November 2010)

(c) Key management personnel compensation Consolidated 2011 2010 $'000 $'000

Short-term employee benefits Post-employment benefits Other long-term benefits Termination benefits Share-based payments

13,751.0 542.3 231.9 578.8 2,452.2 17,556.2

12,562.6 513.6 72.4 2,253.1 15,401.7

Detailed remuneration disclosures for directors and executives are provided in the 30 June 2011 Remuneration Report.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

38 Key management personnel disclosures (continued)

(d) Equity instrument disclosures relating to key management personnel (i) Share rights provided as remuneration and shares issued on vesting of such share rights. Details of share rights provided as remuneration and shares issued on the exercise of such share rights, together with terms and conditions of the share rights, can be found in the 30 June 2011 Remuneration Report. (ii) Share rights holdings The numbers of share rights over ordinary shares in the Company held during the financial year by each director of BlueScope Steel Limited and other key management personnel of the Group, including their personally related parties, are set out below. 2011 Balance Granted as at start of compenName the year sation Exercised Lapsed Directors of BlueScope Steel Limited P F O'Malley 1,477,511 1,200,220 Other key management personnel N H Cornish 393,810 274,360 M R Vassella 314,758 269,810 P E O'Keefe 249,539 204,890 I R Cummin 293,429 202,860 M G Barron 289,129 202,860 S R Elias 277,469 245,450 S Dayal 225,400 245,310 K A Mitchelhill 263,820 266,160 P J Finan1 175,210 (appointed 1 November 2010) R J Moore1 183,420 (appointed 1 December 2010) 2010 Other changes Balance at end of the Vested and year exercisable Unvested 2,677,731 668,170 584,568 454,429 496,289 491,989 522,919 470,710 529,980 175,210 183,420 2,677,731 668,170 584,568 454,429 496,289 491,989 522,919 470,710 529,980 175,210 183,420

Granted Balance as Balance at at start of compenOther end of the Vested and Name the year sation Exercised Lapsed changes year exercisable Directors of BlueScope Steel Limited P F O'Malley 547,511 930,000 1,477,511 Other key management personnel N H Cornish 178,810 215,000 393,810 M R Vassella 103,328 211,430 314,758 P E O'Keefe 92,039 157,500 249,539 I R Cummin 134,459 158,970 293,429 M G Barron 130,159 158,970 289,129 S R Elias 93,179 184,290 277,469 S Dayal 45,400 180,000 225,400 K A Mitchelhill 55,250 208,570 263,820 1Start balance relates to rights granted prior to their appointment to the Executive Leadership Team.

Unvested 1,477,511 393,810 314,758 249,539 293,429 289,129 277,469 225,400 263,820

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

38 Key management personnel disclosures (continued)

(iii) Share holdings The numbers of shares in the Company held during the financial year by each director of BlueScope Steel Limited and each of the other key management personnel of the Group, including their personally related parties, are set out below. 2011 Received during Balance at the the year on the Shares start of the exercise of granted as year options compensation Other changes during the year 15,000 -

Name Directors of BlueScope Steel Ltd G J Kraehe 286,276 R J McNeilly 1,321,502 D J Grady 128,382 H K McCann 152,720 Y P Tan 157,116 D B Grollo 128,156 P F O'Malley 227,613 K A Dean 26,624 P Bingham-Hall (appointed 29 March 2011) Other key management personnel Ordinary shares N H Cornish 68,584 I R Cummin 338,292 M R Vassella 57,303 M G Barron 191,924 S R Elias P E O'Keefe 15,303 S Dayal 20,000 K A Mitchelhill 77,666 P J Finan1 (appointed 1 November 2010) R J Moore1 (appointed 1 December 2010) 1Start balance is taken at the date of appointment to the Executive Leadership Team. 2010 Name Directors of BlueScope Steel Limited G J Kraehe R J McNeilly D J Grady H K McCann Y P Tan D B Grollo P F O'Malley K A Dean Other key management personnel Ordinary shares N H Cornish I R Cummin M R Vassella M G Barron P E O'Keefe S R Elias S Dayal K A Mitchelhill

Balance at the end of the year 286,276 1,321,502 128,382 152,720 157,116 128,156 227,613 41,624 -

(1,385) (1,613) 10,000 63,695 355,315 Other changes during the year 15,000

67,199 336,679 57,303 191,924 10,000 15,303 20,000 77,666 63,695 355,315

Received during Balance at the the year on the Shares start of the exercise of granted as year options compensation 286,276 1,321,502 128,382 152,720 157,116 128,156 227,613 11,624 -

Balance at the end of the year 286,276 1,321,502 128,382 152,720 157,116 128,156 227,613 26,624

68,584 338,292 57,303 191,924 15,303 20,000 77,666

68,584 338,292 57,303 191,924 15,303 20,000 77,666

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

38 Key management personnel disclosures (continued)

(e) Loans to key management personnel There have been no loans granted to directors and executives or their related entities. (f) Other transactions with key management personnel

Mr Daniel Grollo is a director of Grocon Pty Ltd, a privately owned company. Grocon occasionally purchases Lysaght building products from the BlueScope Steel Group on normal terms and conditions. Total amounts purchased from the BlueScope Steel Group by Grocon for the 12 months ended 30 June 2011 was $105,369 (2010: $978,880). In the normal course of business the Company occasionally enters into transactions with various entities that have directors in common with BlueScope Steel. Transactions with these entities are made on commercial arm's-length terms and conditions. The relevant directors do not participate in any decisions regarding these transactions.

39 Remuneration of auditors
During the year the following fees were paid or payable for services provided by the auditor of the company, and its related practices: Consolidated 2011 2010 $ $ (a) Audit services Audit and review of financial statements and other audit work under the Corporations Act 2001: Ernst & Young Australian firm Related practices of Ernst & Young Australian firm (including overseas Ernst & Young firms)

1,707,608 1,804,476 3,512,084

1,565,950 1,874,958 3,440,908

(b) Other services (i) Audit-related assurance services Ernst & Young Australian firm: Greenhouse gas emissions related assurance Acquisition-related investigating accountant assurance (ii) Other non-audit services Ernst & Young Australian firm Tax compliance services Other advisory services Related practices of Ernst & Young Australian firm (including overseas Ernst & Young firms) Tax compliance services

742,111 55,994 160,004 180,488 1,138,597

63,749 724,124 20,000 53,906 113,681 975,460

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

40 Contingencies
(a) Contingent liabilities The Company had contingent liabilities at 30 June 2011 in respect of: Outstanding legal matters Consolidated 2011 2010 $M $M Contingencies for various minor legal disputes 1.0 1.0 2.1 2.1

A range of outstanding legal matters exist that are contingent on court decisions, arbitration rulings and private negotiations to determine amounts required for settlement. It is not practical to provide disclosure requirements relating to each and every case. In addition to the above minor contingencies, the following material litigation cases are outstanding: Two suppliers have commenced legal proceedings seeking damages for alleged breaches of contract totalling approximately USD 137M (approximately AUD 128M). As the Group believes there has been no breach of contract in either case, no provision has been raised in the accounts.

Guarantees In Australia, BlueScope Steel Limited has provided $140.3M (2010: $138.8M) in guarantees to various state workers compensation authorities as a prerequisite for self-insurance. An amount, net of recoveries, of $92.8M (2010: $90.6M) has been recorded in the consolidated financial statements as recommended by independent actuarial advice. Bank guarantees have been provided to customers in respect of the performance of goods and services supplied. Bank guarantees outstanding at 30 June 2011 totalled $23.3M (2010: $25.2M). Associates and joint ventures For contingent liabilities relating to associates and joint ventures refer to notes 45 and 46 respectively. Taxation The BlueScope Steel Group operates in many countries across the world, each with separate taxation authorities, which results in significant complexity. At any point in time there are tax computations which have been submitted but not agreed by those tax authorities and matters which are under discussion between Group companies and the tax authorities. The Group provides for the amount of tax it expects to pay taking into account those discussions and professional advice it has received. While conclusion of such matters may result in amendments to the original computations, the Group does not believe that such adjustments will have a material adverse effect on its financial position, although such adjustments may be significant to any individual year's income statement. (b) Contingent assets No assets have been booked in relation to the recovery of any of the following claims due to the inherent uncertainty surrounding these amounts: The Group has lodged a claim for the cumulation of workers compensation in insurance recoveries on old 'predemerger' policies. The insurance company's position is unclear and therefore recoveries remain uncertain.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

41 Commitments
(a) Capital commitments Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows: Consolidated 2011 2010 $M $M Property, plant and equipment Payable: Within one year Later than one year but not later than five years Later than five years Joint ventures For commitments relating to joint ventures refer to note 46. (b) Lease commitments - Group as lessee (i) Non-cancellable operating leases The Group leases various property, plant and equipment under non-cancellable operating leases. The leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated. There are no restrictions placed upon the lessee by entering into these leases. Consolidated 2011 2010 $M $M Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Within one year Later than one year but not later than five years Later than five years 61.3 6.3 67.6 86.1 0.9 87.0

100.0 298.4 260.6 659.0

104.5 261.5 268.1 634.1

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

41 Commitments (continued)
(ii) Finance leases The Group leases various property, plant and equipment with a carrying amount of $99.3M (2010: $48.2M). In the period the Group established a NZD 61.9M, 12-year plant and equipment finance lease at New Zealand Steelworks. The Group has reserved the option to either purchase the asset at the end of the lease period or renegotiate new lease terms. Additionally, the Group entered into a property sale and finance leaseback transaction within Australia for $8.5M. The lease period is for 15 years with various options to renew up to a maximum period of 40 years. The Group reserves the right to purchase the property at the expiration date or to renegotiate a new lease term. The terms and conditions of other leases include varying terms, purchase options and escalation clauses. On renewal, the terms of these are renegotiated. There are no restrictions of use placed upon the lessee by entering into any of these leases. Consolidated 2011 2010 $M $M Commitments in relation to finance leases are payable as follows: Within one year Later than one year but not later than five years Later than five years Minimum lease payments Future finance charges Recognised as a liability Representing lease liabilities: Current (note 25) Non-current (note 30)

15.6 59.3 130.9 205.8 (102.6) 103.2

7.3 32.7 81.1 121.1 (71.1) 50.0

4.6 98.6 103.2

1.6 48.4 50.0

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

42 Related party transactions

(a) Parent entities The ultimate parent entity within the Group is BlueScope Steel Limited, which is incorporated in Australia. (b) Subsidiaries Interests in subsidiaries are set out in note 43. (c) Key management personnel Disclosures relating to key management personnel are set out in note 38. (d) Transactions with other related parties The following transactions occurred with related parties other than key management personnel or entities related to them: Consolidated 2011 2010 $M $M Sales of goods and services Sales of goods to associates Sales of goods to joint venture partnerships Interest revenue Associates Other related parties Interest expense Joint venture partnerships Superannuation contributions Contributions to superannuation funds on behalf of employees (e) Outstanding balances The following balances are outstanding at the reporting date in relation to transactions with related parties other than key management personnel: Consolidated 2011 2010 $M $M Current receivables (sales of goods and services) Joint venture partnerships Current receivables (loans) Associates Other related parties Non-current receivables (loans) Other related parties

10.6 16.5 0.1 1.1 141.8

9.2 26.7 0.1 1.7 0.1 166.6

5.6 1.0 5.0 -

11.1 1.1 5.7 5.0

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

42 Related party transactions (continued)

(f) Loans to/from related parties Consolidated 2011 2010 $M $M Loans from joint venture partnerships Proceeds Repayments Loans to other related parties Repayments

5.7

(7.6) 5.0

(g) Terms and conditions of transactions with related parties other than key management personnel or entities related to them Sales of finished goods and purchases of raw materials from related parties are made in arm's-length transactions both at normal market prices and on normal commercial terms. The terms and conditions of the tax funding agreement are set out in note 51. With the exception that there are no fixed terms for the repayment of loans between the parties, all other transactions were made on normal commercial terms and conditions and at market rates. Outstanding balances are unsecured and are repayable in cash. Other director transactions with group entities Transactions with related parties of directors of wholly-owned subsidiaries within the BlueScope Steel Group total $2.3M (June 2010: $2.2M). These transactions have been made on commercial arm's-length terms and conditions.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

43 Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1(d): Name of entity Amari Wolff Steel Pty Ltd (a) Australian Iron & Steel Pty Ltd BlueScope Building Solutions Pty Ltd (a) BlueScope Distribution Pty Ltd (a) BlueScope Steel Asia Holdings Pty Ltd BlueScope Steel (AIS) Pty Ltd BlueScope Steel Employee Share Plan Pty Ltd BlueScope Steel (Finance) Ltd BlueScope Steel Logistics Co Pty Ltd (a) BlueScope Steel Americas Holdings Pty Ltd (e) BlueScope Pty Ltd BlueScope Water Pty Ltd (a) Glenbrook Holdings Pty Ltd Highline Ltd (a) John Lysaght (Australia) Pty Ltd Laser Dynamics Australia Pty Ltd (a) Lysaght Building Solutions Pty Ltd (a) Lysaght Design and Construction Pty Ltd (a) Metalcorp Manufacturing Pty Ltd (a) Metalcorp Steel Pty Ltd (a) New Zealand Steel (Aust) Pty Ltd (a) Pioneer Water Tanks (Australia 94) Pty Ltd (a) Smorgon Steel Distribution Superannuation Fund Pty Ltd (g) The Roofing Centre (Tasmania) Pty Ltd (a) Butler do Brasil Limitada (g) BlueScope Lysaght (Brunei) Sdn Bhd BlueScope Lysaght (Guangzhou) Ltd (g) BlueScope Buildings (Guangzhou) Ltd BlueScope Lysaght (Shanghai) Ltd BlueScope Steel (Shanghai) Co Ltd BlueScope Steel International Trading (Shanghai) Co Ltd (g) BlueScope Steel Investment Management (Shanghai) Co Ltd BlueScope Lysaght (Langfang) Ltd BlueScope Lysaght (Chengdu) Ltd BlueScope Steel (Suzhou) Ltd Butler (Shanghai) Inc Butler (Tianjin) Inc Shanghai BlueScope Butler Construction Engineering Co. Ltd BlueScope Lysaght Fiji Ltd BlueScope Steel North Asia Ltd BlueScope Steel India (Private) Ltd PT BlueScope Steel Indonesia PT BlueScope Lysaght Indonesia PT BRC Lysaght Distribution BlueScope Steel Transport (Malaysia) Sdn Bhd BlueScope Steel Logistics (Malaysia) Sdn Bhd BlueScope Steel (Malaysia) Sdn Bhd BlueScope Lysaght (Malaysia) Sdn Bhd BlueScope Lysaght (Sabah) Sdn Bhd (b) BlueScope Steel Asia Sdn Bhd Global BMC (Mauritius) Holdings Ltd Butler Manufacturas S de R.L. de C.V. Butler de Mexico S. de R.L. de C.V. BlueScope Acier Nouvelle Caledonie SA (c) -77Country of incorporation Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Brazil Brunei China China China China China China China China China China China China Fiji Hong Kong India Indonesia Indonesia Indonesia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Mauritius Mexico Mexico New Caledonia Equity holding 2011 2010 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 60 100 100 100 100 100 100 100 100 100 100 100 100 64 100 100 100 100 80 100 100 60 60 49 100 100 100 100 65 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 60 100 100 100 100 100 100 100 100 100 100 100 100 64 100 100 100 100 80 100 100 60 60 49 100 100 100 100 65

BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

43 Subsidiaries (continued)
Name of entity Country of incorporation Equity holding

BlueScope Steel Finance NZ Ltd Tasman Steel Holdings Ltd New Zealand Steel Holdings Ltd New Zealand Steel Ltd Glenbrook Representatives Ltd New Zealand Steel Development Ltd Toward Industries Ltd Steltech Structural Ltd BlueScope Steel Trading NZ Ltd New Zealand Steel Mining Ltd Waikato North Head Mining Limited BlueScope Steel International Holdings SA BlueScope Steel Philippines Inc BlueScope Lysaght (Singapore) Pte Ltd BlueScope Steel Asia Pte Ltd Steelcap Insurance Pte Ltd BlueScope Steel Southern Africa (Pty) Ltd BlueScope Lysaght Taiwan Ltd BlueScope Steel (Thailand) Ltd Steel Holdings Co Ltd BlueScope Lysaght (Thailand) Ltd BlueScope Steel International Ltd ASC Profiles Inc B H Tank Works Inc BlueScope Steel Finance (USA) LLC (f) BlueScope Steel Holdings (USA) Partnership (f) BlueScope Steel North America Corporation BlueScope Steel Technology Inc BlueScope Steel Americas LLC BlueScope Steel Investments Inc VSMA Inc LB Real Properties Inc BIEC International Inc BMC Real Estate Inc Butler Holdings Inc BlueScope Construction Inc Metl-Span LLC Butler Pacific Inc Steelscape Inc Steelscape Washington LLC (f) BlueScope Buildings North America Inc BlueScope Lysaght (Vanuatu) Ltd (c)(d) BlueScope Buildings (Vietnam) Ltd BlueScope Steel Vietnam Ltd

New Zealand New Zealand New Zealand New Zealand New Zealand New Zealand New Zealand New Zealand New Zealand New Zealand New Zealand Panama Philippines Singapore Singapore Singapore South Africa Taiwan Thailand Thailand Thailand UK USA USA USA USA USA USA USA USA USA USA USA USA USA USA USA USA USA USA USA Vanuatu Vietnam Vietnam

100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 80 75 100 75 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 39 100 100

100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 80 75 100 75 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 39 100 100

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

43 Subsidiaries (continued)
All subsidiaries incorporated in Australia are members of the BlueScope Steel Ltd tax consolidated group. Refer to note 1(h). (a) These subsidiaries have been granted relief from the necessity to prepare financial reports in accordance with Class Order 98/1418 (as amended) issued by the Australian Securities and Investments Commission. For further information refer to note 44. The Group holds an ownership interest of 49% in BlueScope Steel Lysaght (Sabah) Sdn Bhd, which is classified as a controlled entity pursuant to AASB 127 Consolidated and Separate Financial Statements because the BlueScope Steel Group can exercise voting control. These controlled entities are audited by firms other than Ernst & Young and affiliates. The Group's ownership of the ordinary share capital in this entity represents a beneficial interest of 39% represented by its 65% ownership in BlueScope Acier Nouvelle Caledonie SA, which in turn has 60% ownership of the entity. BlueScope Steel Middle East Investments Pty Ltd changed its name to BlueScope Steel Americas Holdings Pty Ltd during the year. New entities established during the year. These entities are in the process of being liquidated and deregistered.

(b)

(c) (d)

(e) (f) (g)

44 Deed of cross-guarantee
BlueScope Steel Limited and certain Australian wholly-owned subsidiaries are parties to a deed of cross-guarantee under which each company guarantees the debts of the others. The companies in the deed are as follows: BlueScope Steel Limited New Zealand Steel (Aust) Pty Ltd Lysaght Building Solutions Pty Ltd BlueScope Steel Logistics Co Pty Ltd The Roofing Centre (Tasmania) Pty Ltd Glenbrook Holdings Pty Ltd Lysaght Design and Construction Pty Ltd Amari Wolff Steel Pty Ltd BlueScope Building Solutions Pty Ltd BlueScope Distribution Pty Ltd Metalcorp Steel Pty Ltd Metalcorp Manufacturing Pty Ltd Highline Ltd BlueScope Water Pty Ltd Pioneer Water Tanks (Australia 94) Pty Ltd Laser Dynamics Australia Pty Ltd By entering into the deed, with the exception of Glenbrook Holdings Pty Ltd, the wholly-owned subsidiaries have been relieved from the requirement to prepare a financial report and directors report under Class Order 98/1418 (as amended) issued by the Australian Securities and Investments Commission. Glenbrook Holdings Pty Ltd continues to form part of the deed of cross-guarantee and closed group, however is denied Class Order 98/1418 relief due to direct ownership being held from outside of the closed group.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

44 Deed of cross-guarantee (continued)

(a) Consolidated income statement and a summary of movements in consolidated retained profits The above companies represent a 'Closed Group' for the purposes of the Class Order, and as there are no other parties to the deed of cross-guarantee that are controlled by BlueScope Steel Limited, they also represent the 'Extended Closed Group'. Set out below is a consolidated statement of comprehensive income and a summary of movements in consolidated retained profits for the year ended 30 June 2011 of the Closed Group. 2011 $M Statement of comprehensive income Revenue Other income Changes in inventories of finished goods and work in progress Raw materials and consumables used Employee benefits expense Depreciation and amortisation expense Impairment of non-current assets Freight on external despatches External services Finance costs Other expenses Share of net profits of associates and joint venture partnership accounted for using the equity method Profit (loss) before income tax Income tax (expense) benefit Net profit (loss) for the period Other comprehensive income Actuarial gain (loss) on defined benefit superannuation plans Income tax on items of other comprehensive income Other comprehensive income for the year, net of tax Total comprehensive income for the period Summary of movements in consolidated retained profits Retained profits at the beginning of the financial year Net profit (loss) for the year Dividends provided or paid Actuarial gains (losses) on defined benefit plans recognised directly in retained profits Deferred tax on items taken directly to or transferred from equity Retained profits at the end of the financial year 170.4 (379.5) (128.0) (0.4) 0.1 (337.4) 225.4 (62.7) 11.0 (3.3) 170.4 4,227.8 59.9 (2,686.6) (569.3) (88.3) (591.0) (249.1) (301.8) (189.1) (61.6) (449.1) 69.6 (379.5) 3,945.2 13.5 45.4 (2,580.7) (555.1) (91.0) (25.9) (230.8) (247.3) (199.9) (163.5) 0.1 (90.0) 27.3 (62.7) 2010 $M

(0.4) 0.1 (0.3) (379.8)

11.0 (3.3) 7.7 (55.0)

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

44 Deed of cross-guarantee (continued)

(b) Statement of financial position Set out below is a consolidated statement of financial position as at 30 June 2011 of the Closed Group. 2011 $M Current assets Cash and cash equivalents Trade and other receivables Inventories Non-current assets classified as held for sale Other Total current assets Non-current assets Inventories Other financial assets Deferred tax assets Property, plant and equipment Intangible assets Other Total non-current assets Total assets Current liabilities Payables Borrowings Provisions Deferred income Total current liabilities Non-current liabilities Borrowings Provisions Retirement benefit obligations Deferred Income Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Retained profits Total equity 2010 $M

0.5 3,342.8 636.9 5.7 3,985.9

0.4 3,326.6 562.8 14.9 6.0 3,910.7

26.7 1,679.0 380.4 782.7 280.8 3,149.6 7,135.5

29.4 1,942.7 180.6 876.7 501.3 0.1 3,530.8 7,441.5

903.0 2,192.9 163.2 10.3 3,269.4

829.2 2,053.8 163.9 14.2 3,061.1

21.0 63.2 18.4 4.3 106.9 3,376.3 3,759.2

60.9 76.1 19.6 4.5 161.1 3,222.2 4,219.3

4,073.8 22.8 (337.4) 3,759.2

4,032.4 16.5 170.4 4,219.3

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

45 Investments in associates
Name of company Saudi Steel Building Manufacturing Company Saudi Building Systems Ltd BlueScope Lysaght (Sarawak) Sdn Bhd SteelServ Limited McDonalds Lime Limited BlueScope Bartlett Liners Pty Ltd Beacon Pathway Ltd Ownership interest 2011 2010 % % 30 30 30 30 49 49 50 50 28 28 50 50 20 20 Consolidated 2011 2010 $M $M (a) Movements in carrying amounts Carrying amount at the beginning of the financial year Share of profits after income tax Reclassification Dividends received/receivable Currency fluctuation Reserve movements Carrying amount at the end of the financial year (b) Contingent liabilities relating to associates There were no contingent liabilities relating to investments in associates. 15.0 3.3 (3.3) (1.2) 0.1 13.9 15.4 3.7 2.5 (6.5) (0.1) 15.0

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

46 Interests in joint ventures

(a) Joint venture partnerships The Group has a 50% interest in North Star BlueScope Steel LLC, a USA resident, the principal activity of which is to manufacture hot rolled steel products. The Group also has a 50% interest in Tata BlueScope Steel Ltd, an Indian resident, the principal activity of which is to manufacture steel products and pre-engineered steel building systems. The joint venture is also constructing a metal coating and painting facility. The interest in North Star BlueScope Steel and Tata BlueScope Steel is accounted for in the consolidated financial statements using the equity method of accounting (refer to note 19). Information relating to the joint venture partnerships is set out below. North Star BlueScope Tata BlueScope Steel Steel 2011 2010 2011 2010 $M $M $M $M Share of partnerships assets and liabilities Current assets Cash and cash equivalents Receivables Inventories Other Non-current assets Property, plant and equipment Intangible assets Other Total assets Current liabilities Payables Borrowings Provisions Non-current liabilities Payables Borrowings Total liabilities Net assets Share of partnership's revenue, expenses and results Revenues Expenses Profit (loss) before income tax Income tax (expense) benefit Profit (loss) after income tax Share of partnership's capital commitments (b) Contingent liabilities relating to joint ventures There were no contingent liabilities relating to investments in joint ventures. (c) Secured liabilities and assets pledged as security Consolidated 2011 $M 2010 $M

13.5 65.1 41.0 0.5 64.3 0.1 184.5

3.1 74.2 53.6 0.5 99.2 1.2 231.8

1.9 24.9 14.2 115.7 0.2 156.9

1.6 24.0 13.7 115.9 0.2 155.4

15.4 90.0 55.2 0.5 180.0 0.2 0.1 341.4

4.7 98.2 67.3 0.5 215.1 0.2 1.2 387.2

48.5 12.7 0.1 42.1 103.4 81.1

60.7 0.1 60.8 171.0

32.8 75.3 1.8 109.9 47.0

27.9 63.0 2.1 93.0 62.4

81.3 75.3 14.5 0.1 42.1 213.3 128.1

88.6 63.0 2.1 0.1 153.8 233.4

697.0 622.6 74.4 74.4 0.9

626.4 563.9 62.5 62.5 7.3

67.3 71.5 (4.2) (0.2) (4.4) 12.3

55.3 58.6 (3.3) (3.3) 24.9

764.3 694.1 70.2 (0.2) 70.0 13.2

681.7 622.5 59.2 59.2 32.2

The Tata BlueScope Steel borrowings are secured against property, plant and equipment.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

46 Interests in joint ventures (continued)

(d) Impairment losses Impairment losses of $1.7M (June 2010: $1.3M) were recognised in relation to the Group's investment in Castrip LLC (refer to note 8). The Group's 47.5% interest in Castrip resides within the Hot Rolled Products North America segment and has a carrying value of $Nil (June 2010: $Nil).

47 Reconciliation of profit after income tax to net cash inflow from operating activities
Consolidated 2011 2010 $M $M Profit (loss) for the year Depreciation and amortisation Impairment of non-current assets Reversal of impairment Actuarial gains (losses) on defined benefit superannuation recorded in other comprehensive income Tax on items recorded in other comprehensive income Tax on items recorded directly in equity Non-cash employee benefits expense - share-based payments Capitalised borrowing costs Net (gain) loss on sale of non-current assets Share of (profits) losses of associates and joint venture partnership Associate and joint venture partnership dividends received Change in operating assets and liabilities Decrease (increase) in trade debtors Decrease (increase) in other debtors Decrease (increase) in other operating assets Decrease (increase) in inventories Increase (decrease) in trade creditors Increase (decrease) in other creditors Increase (decrease) in borrowing costs payable Increase (decrease) in income taxes payable Increase (decrease) in deferred tax balances Increase (decrease) in other provisions and liabilities Other variations Net cash (outflow) inflow from operating activities (1,040.4) 355.6 993.7 (68.8) (4.9) 3.4 0.1 6.6 (7.0) 1.1 (73.3) 135.2 77.8 (11.3) (18.8) (306.6) 114.2 (7.5) (9.4) 12.6 (129.9) (20.1) 19.0 21.3 139.5 349.8 0.1 (33.0) 14.7 0.3 4.4 (8.8) (5.5) (62.9) 70.9 (196.5) (3.2) (12.4) (128.1) 220.8 2.6 11.8 1.7 (12.1) 24.6 (1.8) 376.9

48 Non-cash investing and financing activities

Consolidated 2011 2010 $M $M Acquisition of property, plant and equipment by means of finance leases (i) Dividend reinvestment plan (ii) 56.0 41.3 97.3 49.0 49.0

(i) New Zealand Steelworks entered into a finance lease agreement for NZD 61.9M ($47.5M) in relation to plant and machinery. In addition a property sale and finance leaseback transaction occurred within Australia for $8.5M. (ii) The Company had a formal Dividend Reinvestment Plan (DRP) in relation to the June 2010 final dividend, enabling participating shareholders to receive dividends as ordinary BlueScope Steel Limited shares instead of cash. A total of 18,839,253 shares were issued under the DRP connected to the June 2010 final dividend. There was no DRP attached to the December 2010 interim dividend. There were no dividends paid in the comparative period. Refer to note 35(b) for a reconciliation of movements in ordinary share capital. (iii) Details of share-based payments are shown in note 50. -84-

BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

49 Earnings per share

Consolidated 2011 2010 Cents Cents (a) Basic earnings (loss) per share From continuing operations attributable to the ordinary equity holders of the Company From discontinued operations Total basic earnings (loss) per share attributable to the ordinary equity holders of the Company (b) Diluted earnings (loss) per share From continuing operations attributable to the ordinary equity holders of the Company From discontinued operations Total diluted earnings (loss) per share attributable to the ordinary equity holders of the Company (c) Reconciliation of earnings used in calculating earnings (loss) per share Consolidated 2011 2010 $M $M Basic and diluted earnings per share Profit (loss) attributable to the ordinary equity holders of the Group used in calculating earnings per share: From continuing operations From discontinued operations (57.5) 0.1 (57.4) 6.6 0.3 6.9 (57.5) 0.1 (57.4) 6.6 0.3 6.9

(1,055.4) 1.2 (1,054.2)

120.3 5.7 126.0

(d) Weighted average number of shares used as the denominator Consolidated 2011 2010 Number Number Weighted average number of ordinary shares used in calculating basic earnings per share Adjustments for calculation of diluted earnings per share: Weighted average number of share rights Weighted average number of ordinary shares and potential ordinary shares used in calculating diluted earnings per share (e) Information concerning the calculation of earnings per share (i) Basic earnings per share Basic earnings per share is calculated by dividing net profit (loss) attributable to the ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the period. (ii) Diluted earnings per share Diluted earnings per share is calculated by dividing the net profit (loss) attributable to the ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued upon the conversion of all dilutive potential ordinary shares into ordinary shares. Share rights granted to eligible senior managers under the Long Term Incentive Plan are considered to be potential ordinary shares and have been included in the determination of diluted earnings per share to the extent that they are expected to vest based on current TSR (Total Shareholder Return) ranking as per the 30 June 2011 Remuneration Report. Details relating to the share rights are set out in note 50. There are 22,468,189 share rights relating to the 2006, 2007, 2008, 2009 and 2010 LTIPs that are not included in the calculation of diluted earnings per share because they are not dilutive for the year ended 30 June 2011. These share rights could potentially dilute basic earnings per share in the future. -851,836,463,357 7,015 1,836,470,372 1,823,309,479 36,926 1,823,346,405

BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

50 Share-based payments
The Group provides benefits in the form of share-based payment transactions to employees. There are currently three plans in place providing share-based payment benefits: (a) The Long Term Incentive Plan, (b) General Employee Share Plans; and (c) Special Share Grants and Rights. Information relating to these schemes is set out below. Further information is provided in the 30 June 2011 Remuneration Report. Refer to note 1(x)(iv) for the share-based payments accounting policy. (a) The Long Term Incentive Plan The Long Term Incentive Plan (LTIP) is a program determined annually by the Board, which awards share rights to eligible senior management of BlueScope Steel. LTIPs are designed to reward senior management for long-term value creation, and is part of the Company's overall recognition and retention strategy. The share rights give the right to receive an ordinary share in BlueScope Steel Limited at a later date subject to the satisfaction of certain performance criteria and continued employment with the Group. The share rights available for exercise are contingent on the Company's total shareholder return (TSR) percentile ranking relative to the TSR of companies in the S&P/ASX 100 index at the reward grant date. Share rights that fail to meet performance vesting conditions will lapse upon the LTIP's expiry date, or sooner upon employee resignation or termination. Plans have been granted to senior management as outlined below. Further details of each award is provided in the 30 June 2011 Remuneration Report. Movement of LTIP rights during the year Balance at Exercise start of the Expiry date price year Number 31 Oct 2010 31 Oct 2011 31 Oct 2012 31 Oct 2012 27 Oct 2013 31 Oct 2014 31 Oct 2015 Nil Nil Nil Nil Nil Nil Nil 25,000 1,261,381 1,396,004 231,053 2,025,318 8,170,131 13,108,887 Granted during the year Number 10,702,550 10,702,550 Granted during the year Number 8,248,480 8,248,480 Exercised Forfeited during the during the year year Number Number (17,000) (8,000) (80,607) (209,613) (87,167) (419,861) (228,000) (17,000) (1,033,248) Exercised Forfeited during the during the year year Number Number (8,889) (8,889) (11,514) (2,000) (578,931) (101,332) (151,313) (78,349) (923,439) Balance at Exercisable end of the at end of year the year Number Number 1,180,774 1,186,391 231,053 1,938,151 7,750,270 10,474,550 22,761,189 -

Grant date 2011 18 Nov 2005 18 Nov 2006 5 Nov 2007 14 Nov 2007 28 Nov 2008 30 Nov 2009(1) 30 Nov 2010(1) Total

Grant date 2010 31 Aug 2004 18 Nov 2005 18 Nov 2006 5 Nov 2007 14 Nov 2007 28 Nov 2008 30 Nov 2009 Total

Balance at Exercise start of the Expiry date price year Number 31 Oct 2009 31 Oct 2010 31 Oct 2011 31 Oct 2012 31 Oct 2012 31 Oct 2013 31 Oct 2014 Nil Nil Nil Nil Nil Nil Nil 11,514 35,889 1,840,312 1,497,336 231,053 2,176,631 5,792,735

Balance at Exercisable end of the at end of year the year Number Number 25,000 1,261,381 1,396,004 231,053 2,025,318 8,170,131 13,108,887 25,000 25,000

The average share price during the period for the year ended 30 June 2011 was $2.02 (June 2010: $2.80). The weighted average remaining contractual life of share rights outstanding at the end of the period was 3.4 years (June 2010: 3.5 years).
(1)

The November 2009 LTIP includes 158,000 cash rights, of which 13,000 have been forfeited while the November 2010 LTIP includes 166,000, of which 18,000 have been forfeited during the period. The cash rights have been issued to eligible employees in Asia who are entitled to receive cash bonuses three years from grant date, in place of shares. The fair value of the cash rights is calculated as the sum of the market value of shares and dividends that would have otherwise been received. -86-

BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

50 Share-based payments (continued)

Fair value of share rights granted The assessed fair value at grant date of share rights granted during the year ended 30 June 2011 is detailed below. The fair value at grant date is independently determined for each award using Black-Scholes Option Pricing Model that includes a Monte Carlo simulation analysis. Standard option pricing inputs include underlying share price, exercise price, expected dividends, expected risk-free interest rates and expected share price volatility. In addition, specific factors in relation to the likely achievement of performance hurdles and employment tenure have been taken into account. The fair value inputs for share rights granted during the years ended 30 June 2011 and 30 June 2010 included: Nov 2010 Plan details Exercise price ($) Grant date Latest expiry date Share rights granted Cash rights granted Fair value estimate at grant date ($) Vesting conditions (a) Fair value inputs Expected life of share rights (yrs) Expected dividend yield (%) Expected risk-free interest rate (%) Expected share price volatility (%) Grant date share price ($)
(a)

Nov 2009 Nil 30 Nov 2009 31 Oct 2014 8,090,480 158,000 1.70 TSR ranking

Nil 30 Nov 2010 31 Oct 2015 10,536,550 166,000 1.20 TSR ranking

Minimum vesting Minimum vesting period period 5.0 5.0 5.19 4.90 35.0 35.0 1.93 2.71

The number of rights that vest under each plan are contingent on BlueScope Steel's TSR percentile ranking. The TSR ranking requirements differ for each plan. For further details of vesting conditions refer to the 30 June 2011 Remuneration Report. The expected price volatility reflects the assumption that the historical volatility is indicative of future trends, which may not necessarily be the actual outcome. There have been no significant modifications to any LTIP arrangement since grant date. (b) General Employee Share Plans General Employee Share Plans (GESPs) are share award plans which, at the determination of the Board, issue eligible employees with a grant of ordinary BlueScope Steel shares (or a cash equivalent in countries where the issue of shares is not practicable). The objective of GESPs is to recognise and reward employees for their contribution to BlueScope Steel's financial results and workplace safety performance and provide them with the opportunity to benefit from dividends paid on the shares and growth in the market value of shares. Employees may elect not to participate in the plan. The allocation of GESPs is considered on a year-by-year basis. In view of impact of current business conditions on the financial performance of the Company, no shares were offered under the plan for the years ended 30 June 2010 and 2011. At 30 June 2011 the following share plan was outstanding: (i) September 2008 'General Employee Share Plan (GESP)' The September 2008 GESP granted the option of receiving two nil-priced ordinary shares for each one share purchased at market equivalent price, up to a maximum of $1,000 per employee (or a cash reward equal in value to 45 shares in countries where the grant of shares in not practicable). The Company also offered an alternative option to receive shares to the equivalent of $500 per employee for zero cash outlay. A total of 18,722 employees participated in the plan.

-87-

BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

50 Share-based payments (continued)

The form of GESPs depends on local regulations and tax laws. Due to this, GESPs comprise of three components as follows: Regular share grants The majority of the Group's eligible employees, including those in Australia are offered shares with a restriction on trading of three years or as elected by the employee, dependent on the tax deferral period. Once the shares are granted, employees can fully participate in all dividends paid. Fair value is measured as grant date for shares issued. For regular share grants to overseas employees, it is a condition that shares are forfeited and sold on market if employees leave before the expiration of the three-year restriction period. Cash plan Eligible employees in certain Asian and Pacific regions are entitled to receive cash bonuses three years from grant date, in place of shares, the fair value of which is calculated as the sum of the market value of shares and dividends that would have otherwise been received. Deferred share grants In some Asian countries shares vest three years from the grant date and cash rewards are received for dividends forgone during this period. Fair value is calculated as the market value of shares to be received as at grant date in addition to the dividends forgone during the three-year vesting period. Shares issued under GESPs rank equally with other fully paid ordinary shares on issue (refer to note 35 for number of shares issued and fair value of at grant date). (c) Other share grants and rights On 27 February 2009, 25,000 BlueScope Steel Limited shares were granted to Mr Keith Mitchelhill upon his appointment to the Executive Leadership Team and Chief Executive - Australia Distribution & Solutions. Share grants awarded vest in February 2012 and are entitled to participate in dividends and rank equally with other fully paid ordinary shares on issue. On 10 March 2009, 20,000 BlueScope Steel Limited shares were granted to Mr Sanjay Dayal upon his appointment to the Executive Leadership Team and Chief Executive - Asia. Share grants awarded vest in January 2012 and are entitled to participate in dividends and rank equally with other fully paid ordinary shares on issue. On 6 August 2007, 50,000 BlueScope Steel Limited shares were granted to Mr Paul O'Malley upon his appointment as an executive director. Share grants have been split between three tranches, each with specific vesting conditions requiring the fulfilment of an underlying service period. The service periods range from August 2010 to August 2012. Share granted are entitled to participate in dividends and rank equally with other fully paid ordinary shares on issue. On 3 August 2007, 25,000 BlueScope Steel Limited shares were granted to Mr Mark Vassella upon his appointment to the Executive Leadership Team and Chief Executive - Australia Distribution & Solutions. Share grants awarded vested in August 2010. During the year ended 30 June 2011 the Board approved an award of shares (3,795,000), share rights (858,000) and cash rights (403,500) in a share based retention plan. Invitations to participate in this plan were determined on the basis of rewarding, recognising and retaining key individuals (excluding ELT members), whose contributions are crucial to delivery of BlueScope Steels strategy for the next three years including restructuring the Australian business, changes to operating assets to drive improved earnings associated with a significant reduction in steel production, improving the performance of the North American business and expanding the Asian businesses. It is expected the shares will be issued during September 2011. Offers of retention shares to ELT members are expected to be made in late August. Shares awarded under the retention plan are subject to the following conditions: Shares awarded will be forfeited in the event of cessation of employment for any reason in the restricted period other than where employment ceases due to death or disability; Shares cannot be sold, mortgaged, transferred, or otherwise encumbered at any time in the restriction period; and The restriction period generally applies for a period of three years. In the event of a change in control during this time the shares will vest.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

50 Share-based payments (continued)

(d) The Employee Share Purchase Plan The Employee Share Purchase Plan (ESPP) provides facilities for Australian employees to purchase shares at market prices through salary sacrifice of STI bonus payments. The Company has had an ESPP in place since 2003. Under the plan, shares can be provided on a tax deferred basis and therefore sale or transfer is restricted. Shares provided under the plan are entitled to participate in dividends and rank equally with other fully paid ordinary shares on issue (refer to note 35(c)). No employee benefit expense is recognised in respect of the ESPP other than the administrative costs of the plan, which are met by the Company. (e) Expenses arising from share-based payment transactions Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expense were as follows: Consolidated 2011 2010 $'000 $'000 6.6 5.3 0.1 (0.2) 6.7 5.1

Employee share rights expense Employee share awards expense (write-back) Total expense arising from share-based payments

The carrying amount of the liability relating to share-based payment plans at 30 June 2011 is $0.2M (June 2010: $0.4M). This liability represents the deferred cash amounts payable under LTIPs and GESPs.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

51 Parent entity financial information

(a) Summary financial information The financial statements for the parent entity, BlueScope Steel Ltd, show the following aggregate amounts: Statement of financial position 2011 $M Current assets Cash and cash equivalents Trade and other receivables Inventories Other Total current assets Non-current assets Inventories Other financial assets Deferred tax assets Property, plant and equipment Intangible assets Other Total non-current assets Total assets Current liabilities Payables Borrowings Provisions Deferred income Total current liabilities Non-current liabilities Borrowings Provisions Retirement benefit obligations Other Total non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Retained profits Total equity 2010 $M

0.3 3,029.7 439.2 4.0 3,473.2

0.1 3,019.8 341.3 4.0 3,365.2

26.7 1,851.6 380.1 707.7 29.2 2,995.3 6,468.5

29.4 2,304.7 189.0 795.1 27.6 0.1 3,345.9 6,711.1

489.7 2,098.3 133.6 4.4 2,726.0

379.9 1,977.1 130.7 6.7 2,494.4

12.6 56.0 18.2 4.3 91.1 2,817.1 3,651.4

60.5 64.8 19.5 4.5 149.3 2,643.7 4,067.4

4,073.8 22.7 (445.1) 3,651.4

4,032.4 16.5 18.5 4,067.4

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

51 Parent entity financial information (continued)

Statement of comprehensive income 2011 $M Revenue Other income Changes in inventories of finished goods and work in progress Raw materials and consumables used Employee benefits expense Depreciation and amortisation expense Impairment of non-current assets Freight on external despatches External services Finance costs Other expenses Profit (loss) before income tax Income tax (expense) benefit Net profit (loss) for the period 3,183.0 81.3 (1,909.9) (425.7) (71.6) (561.4) (226.2) (232.3) (181.4) (37.8) (382.0) 46.7 (335.3) 2010 $M 2,854.5 12.2 46.6 (1,769.3) (414.8) (73.3) (25.2) (209.2) (179.2) (193.8) (96.6) (48.1) 14.8 (33.3)

Other comprehensive income Actuarial gain (loss) on defined benefit superannuation plans Income tax on items of other comprehensive income Other comprehensive income for the year, net of tax Total comprehensive income for the year Summary of movements in retained profits Retained earnings at the beginning of the financial year Net profit (loss) for the year Dividends paid Actuarial gains (losses) on defined benefit plans recognised directly in retained profits Deferred tax Retained earnings at the end of the financial year (b) Guarantees entered into by the parent entity

(0.4) 0.1 (0.3) (335.6)

11.0 (3.3) 7.7 (25.6)

18.5 (335.3) (128.0) (0.4) 0.1 (445.1)

44.1 (33.3) 11.0 (3.3) 18.5

In Australia, the parent entity has given $140.3M (June 2010: $138.8M) in guarantees to various state workers compensation authorities as a prerequisite for self-insurance and has entered into a deed of cross-guarantee with certain Australian wholly-owned subsidiaries (note 44). Additionally, the parent entity has provided financial guarantees in respect to subsidiaries amounting to: Parent entity 2011 2010 $M $M

Bank overdrafts and loans of subsidiaries (unsecured) Other loans (unsecured) Trade finance facilities

2,663.5 584.5 234.3 3,482.3

2,598.5 735.3 342.6 3,676.4

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

51 Parent entity financial information (continued)

(c) Capital commitments As at 30 June 2011, the parent entity had capital commitments of $8.7M (June 2010: $15.4M). These commitments are not recognised as liabilities as the relevant assets have not yet been received. (d) Tax consolidation legislation

BlueScope Steel Limited and its wholly-owned Australian controlled entities have entered into a tax sharing and funding agreement in relation to their participation in the tax consolidation regime. Under the terms of this agreement, the whollyowned entities reimburse BlueScope Steel Limited for any current tax payable assumed and are compensated by BlueScope Steel for any current tax receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to BlueScope Steel Limited under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the wholly-owned entities' financial statements. The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from BlueScope Steel Limited, which is issued as soon as practicable after the end of each financial year. BlueScope Steel Limited may require payment of interim funding amounts to assist with its obligations to pay tax instalments. The tax sharing agreement limits the joint and several liability of the wholly-owned entities in the case of a default by BlueScope Steel Limited. At balance date, the possibility of default is considered remote. The accounting policy in relation to tax consolidation is set out in note 1(c). The tax consolidated group has applied the group allocation approach in determining the appropriate amount of current taxes to allocate to members of the tax consolidated group. Intercompany receivables of $30.3M (2010: $66.8M) and intercompany payables of $190.1M (2010: $104.9M) of BlueScope Steel Limited have been recognised as a tax consolidated adjustment.

52 Events occurring after the balance date

(i) Major restructure to Australian Operations The Company has announced it will restructure its Australian operations to better align Australian steelmaking production with Australian domestic demand. This move will involve exiting export markets and lowering fixed costs at major facilities at Port Kembla (NSW) and Western Port (Victoria). The Company has the support of its lenders to undertake the restructure. The restructure will result in: Shut-down of No.6 Blast Furnace at Port Kembla, with production reduced to 2.6 mtpa. The shut down process will be completed, in a manner that facilitates re-start of the furnace in the future should that be desirable; Closure of No. 4 cokemaking battery, No. 3 BOS steelmaking furnace and No. 1 slab caster. The PKSW hot strip and cold rolling mills, metal coating and paint lines will all continue in operation; Closure of the Western Port Hot Strip Mill and mothball of a metal coating line (MCL5); and Regrettably a workforce reduction of approximately 1,000 people, with 800 at Port Kembla and 200 at Western Port. There will be flow-on impacts for contractors and suppliers.

The change will have the following financial effects: A write-down of approximately $460 million in redundant plant and equipment already covered by the impairment of CIPA non-current assets included in the financial statements for the year ended 30 June 2011; Restructuring costs totalling approximately $400 - $500 million including; employee redundancy, contract renegotiation, redundant equipment make-safe and environmental compliance; and Release of working capital totalling approximately $400 - $500 million associated with the withdrawal from export markets.

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BlueScope Steel Limited Notes to the consolidated financial statements 30 June 2011 (continued)

52 Events occurring after the balance date (continued)

(ii) Australian Federal Governments proposed Carbon Tax During July 2011 the Australian Federal Government announced the key features of its proposed Clean Energy Future Scheme (CEFS), which is intended to be introduced from 1 July 2012 with a starting price of $23 per tonne of carbon dioxide equivalent emissions. The government also announced a sector-specific assistance package for Australian steelmakers, the Steel Transformation Plan (STP), which will effectively shield the Company from a carbon tax for four years. The proposed STP: Provides $300 million funding to minimise the impact of the carbon tax on Australian steelmakers for the first four years of the tax (it is expected BlueScope will receive approximately 60% of this funding); Provides an independent review mechanism to monitor the carbon tax position of our international competitors; and Signals the governments intention to limit the potential pass-through of carbon emission costs from coal miners onto steelmakers.

Carbon tax assumptions used for non-current asset impairment testing purposes are provided in note 22. (iii) Potential impact of global share market performance on Retirement Benefit Obligations During August 2011 global share markets declined significantly. This decline would materially increase the Companys liability, refer note 33 for details of the Companys Retirement Benefit Obligations as at 30 June 2011.

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BlueScope Steel Limited Directors' declaration 30 June 2011

Directors' declaration In the directors opinion: (a) the financial statements and notes set out on pages 1 to 93 are in accordance with the Corporations Act 2001, including: (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and (ii) giving a true and fair view of the Companys and consolidated entity's financial position as at 30 June 2011 and of their performance for the financial year ended on that date; and there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed group identified in note 44 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross-guarantee described in note 44. The financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.

(b) (c) (d)

The directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the directors.

G J Kraehe, AO Chairman

P F O'Malley Managing Director & CEO

Melbourne 20 August 2011

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Independent auditor's report to the members of BlueScope Steel Limited

Report on the financial report
We have audited the accompanying financial report of BlueScope Steel Limited, which comprises the consolidated statement of financial position as at 30 June 2011, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors' declaration of the consolidated entity comprising the company and the entities it controlled at the year's end or from time to time during the financial year.

Directors' responsibility for the financial report

The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal controls as the directors determine are necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 1(a), the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards.

Auditor's responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity's preparation and fair presentation of the financial report 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 controls. 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 report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Independence
In conducting our audit we have complied with the independence requirements of the Corporations Act 2001. We have given to the directors of the company a written Auditors Independence Declaration, a copy of which is included in the directors report.

Opinion
In our opinion: a. the financial report of BlueScope Steel Limited is in accordance with the Corporations Act 2001, including: i ii b. giving a true and fair view of the consolidated entity's financial position as at 30 June 2011 and of its performance for the year ended on that date; and complying with Australian Accounting Standards and the Corporations Regulations 2001; and

the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.

Report on the remuneration report

We have audited the Remuneration Report included in the directors' report for the year ended 30 June 2011. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Opinion
In our opinion, the Remuneration Report of BlueScope Steel Limited for the year ended 30 June 2011, complies with section 300A of the Corporations Act 2001.

Ernst & Young

B R Meehan Partner Melbourne 20 August 2011

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Liability limited by a scheme approved under Professional Standards Legislation