Audit Committee Report - malaysiastock.biz fileAudit Committee Report 1. Chong Peng Khang - Chairman...

Audit Committee Report

1.

Chong Peng Khang - Chairman / Independent Non-Executive DirectorYap Koon Roy - Member / Independent Non-Executive DirectorPeter Yong Kuen Fook - Member / Independent Non-Executive Director

2. Composition and Terms of Reference

Membership

The Audit Committee consists of three (3) members as follows:

17 ANNUAL REPORT 2010Hock Heng Stone Industries Bhd. (840040-H)

2.1 Composition of members

The Board shall appoint the Audit Committee members from amongst themselves, comprising no fewer than three (3) Non-Executive Directors. The majority of the Audit Committee members shall be Independent Directors.

In this respect, the Board adopts the definition of "Independent Director" as defined under the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ("Bursa Securities").

All members of the Audit Committee shall be financially literate and at least one (1) member of the Audit Committee must be:

(a) a member of the Malaysian Institute of Accountant ("MIA"); or

(b) if he is not a member of MIA, he must have at least three (3) years of working experience and :

(i) he must have passed the examinations specified in Part I of the First Schedule of the AccounantsAct 1967; or

(ii) he must be a member of one of the associations of the accountants specific in Part II of the First Schedule of the Accountants Act 1967; or

(c) fulfils such other requirements as prescribed or approved by Bursa Securities.

No alternate director of the Board shall be appointed as a member of the Audit Committee.

The terms of office and performance of the Audit Committee and each of its members shall be reviewed by the Board at least once every three (3) years to determine whether such Audit Committee and members have carried out their duties in accordance with their terms of reference.

Retirement and resignation

If a member of the Audit Committee resigns, dies, or for any reason ceases to be a member resulting in non-complianceto the composition criteria as stated in paragraph 2.1 above, the Board shall within three (3) months of the event appoint such number of the new members as may be required to fill the vacancy.

2.2 Chairman

The members of the Audit Committee shall elect a Chairman from amongst their number who shall be anIndependent Director.

In the absence of the Chairman of the Audit Committee, the other members of the Audit Committee shall amongst themselves elect a Chairman who must be Independent Director to chair the meeting.

2.3 Secretary

The Company Secretary shall be the Secretary of the Audit Committee and as a reporting procedure, the Minutes shall be circulated to all members of the Board.

2.4 Meetings

The Audit Committee shall meet regularly, with due notice of issues to be discussed, and shall record its conclusionsin discharging its duties and responsibilities. In addition, the Chairman may call for additional meetings at any time at the Chairman's discretion.

Upon the request of the external auditor, the Chairman of the Audit Committee shall convene a meeting of the Audit Committee to consider any matter the external auditor believes should be brought to the attention of the directors or shareholders.

Audit Committee Report(continued)

2. Composition and Terms of Refrence (continued)


2.4 Meetings (continued)Notice of Audit Committee meetings shall be given to all the Audit Committee members unless the Audit Committeewaives such requirement.

The Chairman of the Audit Committee shall engage on a continuous basis with senior management, such as the Chairman, the Chief Executive Officer, the Finance Director, the head of internal audit and external auditors in order to be kept informed of matters affecting the Company.

The Finance Director, the head of internal audit and a representative of the external auditors should normally attend meetings. Other Board members and employees may attend meetings upon the invitation of the Audit Committee. The Audit Committee shall be able to convene meetings with the external auditors, the internal auditors or both, without executive Board members or employees present whenever deemed necessary and at least twice a year with the external auditors.

Questions arising at any meeting of the Audit Committee shall be decided by a majority of votes of the members present, and in the case of equality of votes, the Chairman of the Audit Committee shall have a second or casting vote.

2.5 Minutes

Minutes of each meeting shall be kept at the Registered Office and distributed to each member of the AuditCommittee and also to the other members of the Board. The Audit Committee Chairman shall report on each meeting to the Board.

The minutes of the Audit Committee meeting shall be signed by the Chairman of the meeting at which the proceedings were held or by the Chairman of the next succeeding meeting.

2.6 Quorum

The quorum for the Audit Committee meeting shall be the majority of members present whom must be Independent Directors.

2.7 Objectives

The principal objectives of the Audit Committee are to assist the Board in discharging its statutory duties andresponsibilities relating to accounting and reporting practices of the holding company and each of its subsidiary companies. In addition, the Audit Committee shall:

(a) evaluate the quality of the audits performed by the internal and external auditors;(b) provide assurance that the financial information presented by management is relevant, reliable and timely;(c) oversee compliance with laws and regulations and observance of a proper code of conduct; and (d) determine the quality, adequacy and effectiveness of the Group's control environment.

2.8 Authority

The Audit Committee shall, in accordance with a procedure to be determined by the Board and at the expense of the Company,

(c)

(a)

(b)

(d)

obtain independent professional or other advice and to invite outsiders with relevant experience to attend, if necessary.

have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity (if any).

where the Audit Committee is of the view that the matter reported by it to the Board has not been satisfactorily resolved resulting in a breach of the Listing Requirements, the Audit Committee shall promptly report such matter to Bursa Securities.

(e)

have explicit authority to investigate any matter within its terms of reference, the resources to do so, and fullaccess to information. All employees shall be directed to co-operate as requested by members of the AuditCommittee.

have full and unlimited/unrestricted access to all information and documents/resources which are required toperform its duties as well as to the internal and external auditors and senior management of the Company andGroup.

19 ANNUAL REPORT 2010Hock Heng Stone Industries Bhd. (840040-H) 19 ANNANNUALUA REREPORPORT T 2T 20100100110Hococock Hk Hk engg StStonee In Indusdustritriesess Bhdd. . (8(88840040-0-0-0-H)H)


Composition and Terms of Refrence (continued)

2.8 Authority (continued)

2.

(f) convene meetings with the external auditors, without the presence of executive members of the Audit Committee, whenever deemed necessary.

2.9 Duties and Responsibilities

The duties and responsibilities of the Audit Committee are as follows:

(e)

(f)

(g)

----

any changes in accounting policies and practices;significant adjustments arising from the audit;the going concern assumption; andcompliance with accounting standards and other legal requirements.

(d)

(a)

(b)

(c)

To consider the appointment of the external auditor, the audit fee and any question of resignation or dismissal;

To discuss with the external auditor before the audit commences, the nature and scope of the audit, and ensure co-ordination where more than one audit firm involved;

To review with the external auditor his evaluation of the system of internal controls and his audit report;

To review the quarterly and year-end financial statements of the Board, focusing particularly on:

To discuss problems and reservations arising from the interim and final audits, and any matter the auditormay wish to discuss (in the absence of management, where necessary);

To review the external auditor's management letter and management's response;

To do the following, in relation to the internal audit function:

-

-

-

-

-

review the adequacy of the scope, functions, competency and resources of the internal audit function,and that it has the necessary authority to carry out its work;

review the internal audit programme and results of the internal audit process and, where necessary, ensure that appropriate actions are taken on the recommendations of the internal audit function;

review any appraisal or assessment of the performance of members of the internal audit function;

approve any appoinment or termination of senior staff members of the internal audit function; and

take cognizance of resignations of internal audit staff members and provide the resigning staff member an opportunity to submit his reasons for resigning.

( l )

(m)

( i )

( j )

(k)

(n)

To consider any related party transactions and conflict of interest situation that may arise within the Company or Group including any transaction, procedure or course of conduct that raises questions of management integrity;

To report its findings on the financial and management performance, and other material matters to the Board;

To consider the major findings of internal investigations and management's response;

To verify the allocation of employee's share option scheme ("ESOS") in compliance with the criteria as stipulated in the by-laws of ESOS of the Company, if any;

To determine the limit of the internal audit function;

To consider other topics as defined by the Board;

To advise the Board and make recommendation in respect of risk management as to the following matters:

(h)

-

-

-

-

To monitor risk management processes are integrated into all core business processes and that the culture of the organization reflects the risk consciousness of the Board;

Review the Risk Register and ensure that all risks are well managed;

Review the enterprise risk scorecard and determine the risks to be escalated to the Board once a year;and

Provide a consolidated risk and assurance report to the Board to support the statement relating to internal control in the Company's Annual Report.

20 ANNUAL REPORT 2010Hock Heng Stone Industries Bhd. (840040-H) 20 ANNANNUALUAL RE REPORPORRTT 2T 220100100010HocHocHock Hk engeng S Stonene In Indusdustritriies ee Bhdhdhd. (840044040-40-H)

2. Composition and Terms of Refrence (continued)


2.9 Duties and Responsibilities (continued)

(o) To consider and examine such other matters as the Audit Committee considers appropriate.

3. Summary of Activities of the Audit Committee

The Audit Committee has discharged its duties as set out in its terms of reference. The main activities undertaken by the Audit Committee are as follows:

(b)

(c)

(a)

(d)

(e)

Reviewed the four (4) quarters unaudited financial results announcement and the annual audited financial statementsof the Company at the Audit Committee meeting before recommending them for the Board's approval;

Reviewed and approved the internal and external auditors' scope of work and audit plan for the year. Prior to the audit commencement, representatives from the internal and external auditors presented their audit strategy and plan;

Reviewed the findings of the internal and external auditors and reported to the Board;

Reviewed the related party transactions that are required to be transacted at an arm's length basis and are not detrimental to the interest of minority shareholders; and

Reviewed and deliberated the emerging financial reporting issue pursuant to the new accounting standards and additional statutory disclosure requirements.

Name of Directors Meeting AttendedChong Peng KhangYap Koon RoyPeter Yong Kuen Fook

4/44/44/4

4. Meeting

The Audit Committee convened four (4) meetings during the financial year. The details of attendance of the Audit Committee members are as follows:

The other Directors, Company Secretary, representative from the internal and external auditors and senior managementwere present by invitation in the meetings.

5. Internal Audit Function

The Group has engaged Crowe Horwath Consulting (South) Sdn. Bhd. to perform the internal audit function of the Group in order to assist the Audit Committee in discharging its duties in regards to the adequacy and integrity of the system of internal control. The internal auditor reports directly to the Audit Committee. Its role include the following:

-

-

-

Perform review of operational compliance with the established internal control procedures and the risk profiles of the major business units of the Group;

Conduct investigations on areas and issues specified by the Audit Committee; and

Review the risk management process.

Internal audit plan for the Group is presented to the Audit Committee for approval. Any findings and weaknesses noted during the audit fieldwork are forwarded to the management for its attention and further action. The internal audit reports which incorporated the audit findings, audit recommendations and management responses were issued to the Audit Committee and tabled in the Audit Committee meetings. The internal auditors also follow up with the management in the implementation of the agreed audit recommendations.

The total costs incurred for the internal audit function of the Group for the financial year was RM26,462.


The Directors consider that in preparing the financial statements:

Directors’ Responsibility Statement

The Directors are responsible for ensuring that the Company maintains proper accounting records that disclose with reasonble accuracy the financial position of the Group and the Company, and which enable them to ensure that the financial statements comply with the Companies Act, 1965.

The Directors are also responsible for taking necessary steps to safeguard the assets of the Group, and to prevent and detectfraud and other irregularities.

In relation to the financial statements

The Directors are required under the Companies Act, 1965 to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Group and of the Company and of the results and cash flows of the Group and of the Company for the financial year then ended.

----

the Group and the Company have used appropriate accounting policies and applied them consistently;made judgements and estimates that are reasonable and prudent; all applicable approved accounting standards in Malaysia have been followed; andconfirm that the financial statements have been prepared on a going concern basis.

Financial Statements for the financial year ended 31 December 2010


Directors' Report

Statement by Directors

Statutory Declaration

Independent Auditors’ Report

Statements of Comprehensive Income

Statements of Financial Position

Statements of Changes in Equity

Statements of Cash Flows

Notes to the Financial Statements

Supplementary Information

23

26

26

27

29

30

31

33

35

71


The directors have pleasure in presenting their report together with the audited financial statements of the Group and of theCompany for the financial year ended 31 December 2010.

Principal activities

The principal activity of the Company is investment holding. The principal activities of the subsidiaries are described in Note 16to the financial statements.

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

ResultsGroup

RMCompany

RM

Profit net of tax 2,400,329 1,335,418

Profit attributable to:Owners of the parent 2,409,512 1,335,418Minority interests (9,183) -

2,400,329 1,335,418

There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the financial statements.

In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year were notsubstantially affected by any item, transaction or event of a material and unusual nature.

Dividend

No dividend has been paid or declared by the Company since the end of the previous financial year.

At the forthcoming Annual General Meeting, a final single tier dividend of 1 sen per share on 80,000,000 ordinary shares, amounting to RM800,000 in respect of the financial year ended 31 December 2010 will be proposed for shareholders' approval. The financial statements for the current financial year do not reflect this proposed dividend. Such dividend, if approved by the shareholders, will be accounted for in equity as an appropriation of retained earnings in the financial year ending 31 December 2011.

Directors

The names of the directors of the Company in office since the date of the last report and at the date of this report are :

Low Kim HockLow Kim JooLow Kim ChungLow Yong SengChong Peng KhangYap Koon RoyPeter Yong Kuen Fook

(Appointed on 12 April 2010)

Directors’ Report

Directors' benefits

Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party, whereby the directors might acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.


1.1.2010 Acquired Sold 31.12.2010Direct interestLow Kim HockLow Kim JooLow Kim ChungLow Yong SengChong Peng KhangYap Koon RoyPeter Yong Kuen Fook

1,000500500

----

4,319,0002,591,5002,303,500

40,00050,00030,00030,000

4,320,0002,592,0002,304,000

40,000-

30,00030,000

----

(50,000)--

Number of ordinary shares of RM0.50 each

1.1.2010 Acquired Sold 31.12.2010Number of ordinary shares of RM0.50 each

Directors' benefits (continued)

Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than benefitsincluded in the aggregate amount of emoluments received or due and receivable by the directors or the fixed salary of a full-timeemployee of the Company as shown in Note 9 to the financial statements) by reason of a contract made by the Company or a related corporation with any director or with a firm of which he is a member, or with a company in which he has a substantial financial interest, except as disclosed in Note 28 to the financial statements.

Directors' interests

According to the register of directors' shareholdings, the interests of directors in office at the end of the financial year in shares in the Company during the financial year were as follows:

Deemed interested by virtue of the direct interest of his son, Low Yong Seng and his direct interest in Jasa Maju Jaya Sdn. Bhd. pursuant to Section 6A of the Companies Act, 1965.

Deemed interested by virtue of their direct interest in Jasa Maju Jaya Sdn. Bhd. pursuant to Section 6A of the Companies Act, 1965.

^

*

Issue of shares

During the financial year, the Company increased its issued and paid-up ordinary share capital from RM1,000 to RM40,000,000by way of the issuance of 79,998,000 ordinary shares of RM0.50 each as part of flotation exercise on the Main Market of BursaMalaysia Securities Berhad. The increase in the issued and paid-up ordinary share capital was done by way of:

Number of sharesClass Terms and purpose of issue

Ordinary shares of RM0.50 eachOrdinary shares of RM0.50 each

64,656,00015,342,000

Acquisitions of subsidiariesPublic issue at RM0.55 each **

** The proceeds from public issue have been utilised for repayment of construction of a secondary processing plant, operatingof quarry, payment of listing expenses and for working capital.

The new ordinary shares issued during the financial year ranked pari passu in all respects with the existing ordinary shares of the Company.

Indirect interest Low Kim HockLow Kim JooLow Kim Chung

---

36,040,00036,000,00036,000,000

---

^ 36,040,000* 36,000,000* 36,000,000

Directors’ Report(continued)

Other statutory information

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


(i)

Other statutory information (continued)

Significant events

In addition to significant events disclosed elsewhere in this report, other significant events are disclosed in Note 31 to thefinancial statements.

Subsequent event

Details of subsequent event is disclosed in Note 16(c) to the financial statements.

Auditors

The auditors, Ernst & Young, have expressed their willingness to continue in office.

Signed on behalf of the Board in accordance with a resolution of the directors dated 25 April 2011.

Low Kim Hock Low Kim JooMelaka, Malaysia

(d)

to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision fordoubtful debts and satisfied themselves that there were no known bad debts and that adequate provision had beenmade for doubtful debts; and

to ensure that any current assets which were unlikely to realise their values as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise.

it necessary to write off any bad debts or the amount of the provision for doubtful debts inadequate to any substantial extent; and

the values attributed to the current assets in the financial statements of the Group and of the Company misleading.

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

any contingent liability of the Group or of the Company which has arisen since the end of the financial year.

(ii)

(b) At the date of this report, the directors are not aware of any circumstances which would render:

(i)

(ii)

(c) At the date of this report, the directors are not aware of any circumstances which have arisen which would renderadherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.

At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial statements of the Group and of the Company which would render any amount stated in the financial statementsmisleading.

As at the date of this report, there does not exist:(e)

(i)

(ii)

no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may affect the ability of the Group or of the Company to meet its obligations when they fall due; and

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

(i)

(ii)

(f) In the opinion of the directors:

Directors’ Report(continued)


Statement by DirectorsPursuant to Section 169 (15) of the Companies Act, 1965

We, Low Kim Hock and Low Kim Joo, being two of the directors of Hock Heng Stone Industries Bhd., do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 29 to 70 are drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2010 and of their financial performance and cash flows for the year then ended.

The information set out in Note 39 the financial statements have been prepared in accordance with the Guidance on SpecialMatter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to BursaMalaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants.

Signed on behalf of the Board in accordance with a resolution of the directors dated 25 April 2011.

Low Kim Hock Low Kim Joo

Melaka, Malaysia

Statement by Directors/Statutory Declaration

Statutory DeclarationPursuant to Section 169 (16) of the Companies Act, 1965

I, Low Kim Hock, being the director primarily responsible for the financial management of Hock Heng Stone Industries Bhd., do solemnly and sincerely declare that the accompanying financial statements set out on pages 29 to 70 are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the abovenamed Low Kim Hock at Melaka in the State of Melakaon 25 April 2011

Low Kim Hock

Before me,

LOH SEO KIM P.J.K.Commissioner for Oaths


Auditors’ responsibility

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

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

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

Opinion

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

Report on other legal and regulatory requirements

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

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

We have considered the financial statements and the auditors’ report of the subsidiary of which we have not acted as auditors, which is indicated in Note 16 to the financial statements, being financial statements that have been included in the consolidated financial statements.

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

The auditors’ reports on the financial statements of the subsidiaries were not subject to any qualification and did not include any comment required to be made under Section 174(3) of the Act.

(b)

(c)

(d)

Report on the financial statements

We have audited the financial statements of Hock Heng Stone Industries Bhd., which comprise the statements of financial position as at 31 December 2010 of the Group and of the Company, and the statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 29 to 70.

Directors’ responsibility for the financial statements

The directors of the Company are responsible for the preparation and fair presentation of these financial statements in accodancewith Financial Reporting Standards and the Companies Act 1965 in Malaysia. This responsibility includes: designing, implemeningand maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from materialmisstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Independent Auditors’ Reportto the members of Hock Heng Stone Industries Bhd.

(Incorporated in Malaysia)


Other matters

The supplementary information set out in Note 39 page 71 is disclosed to meet the requirement of Bursa Malaysia SecuritiesBerhad. The directors are responsible for the preparation of the supplementary information in accordance with Guidance onSpecial Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant toBursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants ("MIA Guidance")and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all materialrespects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.

The comparative financial information for the Group's statement of financial position, statement of comprehensive income, the statement of changes in equity and the statement of cash flows and the related notes are not audited.

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

Ernst & Young Lee Ah TooAF: 0039 2187/09/11(J)Chartered Accountants Chartered Accountant

Melaka, MalaysiaDate: 25 April 2011

Independent Auditors’ Reportto the members of Hock Heng Stone Industries Bhd.

(continued)


Statements of Comprehesive IncomeFor the financial year ended 31 December 2010

2010RM

Note 2010RM

2009RM

Company

RevenueCost of salesGross profitOther incomeOther items of expensesSelling and distribution expensesAdministrative and general expensesFinance costsProfit/(loss) before taxIncome tax expenseProfit/(loss) net of tax, representing total comprehensive income for the year

Total comprehensive income attributable to:Owners of the parentMinority interests

4 43,022,546(32,434,611)

1,700,000-

--

10,587,935201,708

1,700,00031,7955

(525,608)(5,826,346)(1,058,046)

-

(263,877)-

-(6,095)

-67 3,379,643

(979,314)1,467,918

(132,500) (6,095)

-10

2,400,329 1,335,418 (6,095)

2,409,512(9,183)

2,400,329

Earning per share attributable to owners of the parent (sen per share):Basic 11 3.35

--

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.

2009RM

34,059,468(21,651,419)

12,408,049255,254

(524,478)(4,324,967)

(974,584)

6,839,274(1,661,889)

5,177,385

5,165,31212,073

5,177,385

7.99

Group



2010

RMNote 2010

RM2009

RM2009

RM

Company

Equity and liabilitiesCurrent liabilitiesIncome tax payableLoans and borrowingsTrade and other payablesOther current liabilityDividend payable

131,54314,515,1829,192,915

105,359-

222324

--

56,603--

--

5,913--

23,944,999 56,603 5,913 Net current assets/(liabilities) 28,839,432 7,392,367 (5,095)

Current assetsInventoriesTrade and other receivablesOther current assetsIncome tax receivableCash and bank balances

171819

21

21,897,55719,652,5455,397,618

204,1255,632,586

-5,046,901

-17,500

2,384,569

----

818 52,784,431 7,448,970 818 Total assets 83,368,910 40,526,970 818

AssetsNon-current assetsProperty, plant and equipmentInvestment propertiesLand use rightsDevelopment expenditureInvestment in subsidiaries

1213141516

25,641,0031,962,1582,602,318

379,000-

----

33,078,000

-----

30,584,479 33,078,000 -

Non-current liabilitiesDeferred tax liabilitiesLoans and borrowings

2522

- -Total liabilities 56,603 5,913

Net assets/(liabilities) 40,470,367 (5,095)

--

--

Equity attributable to owners of the parentShare capitalRetained earnings/(accumulated losses)

2627

40,000,000470,367

1,000(6,095)

40,470,367-

(5,095)-Minority interests

40,470,367 (5,095)

40,526,970 818

Statements of Financial PositionAs at 31 December 2010

Total equity and liabilities

Total equity

22,482,3372,000,8522,661,439

379,000-

27,523,628

18,733,30614,779,7573,763,751

209,6941,703,830 39,190,338

66,713,966

507,535 12,586,036

5,178,32634,017

450,000

18,755,914

20,434,424

1,412,3989,028,597

1,536,5846,505,181

10,440,995 8,041,765 34,385,994

26,797,679

48,982,916

39,916,287

1,000 39,852,629

39,853,62962,658

39,916,287

66,713,966

40,000,0008,929,441

48,929,44153,475

48,982,916

83,368,910

Group

3`1 ANNUAL REPORT 2010Hock Heng Stone Industries Bhd. (840040-H)

Statements of Changes in EquityFor the financial year ended 31 December 2010

Equityattributable

to ownersof the parent,

totalRM

Non-distributable

Sharepremium

RM

DistributableRetainedearnings

RM

Equity,totalRM

Sharecapital

RM

Minorityinterests

RMNote

Group

Opening balance at 1 January 2010 39,916,287

(145,744)39,853,629

(145,744) 1,000

- 39,852,629

(145,744) -

- 62,658

-Effect of adopting FRS139 2.2

39,770,543 39,707,885 1,000 -

-

39,706,885 62,658

Total comprehensive income 2,400,329 2,409,512 - 2,409,512 (9,183)

Transactions with owners

Issue of shares:- Acquisition of subsidiaries- Public issueShare issue expenses

-8,438,100

(1,626,056)

-8,438,100

(1,626,056)

32,328,0007,671,000

-

-767,100

(767,100)

(32,328,000)-

(858,956)

---

6,812,044 6,812,044 39,999,000 - (33,186,956) -

Closing balance at 31 December 2010 48,982,916 48,929,441 40,000,000 -

-

-

8,929,441 53,475

Attributable to equity holders of the parent

Total transactions with owners

Opening balance at 1 January 2009

Total comprehensive income

29,290,742

5,177,385

29,240,157

5,165,312

2

-

-

-

---

29,240,155

5,165,312

50,585

12,073

Issue of sharesMerger reserve set offDividend *

998

5,897,162(450,000)

9985,897,162(450,000)

998

--

---

-5,897,162(450,000)

Total transactions with owners 5,448,160 5,448,160 998 5,447,162 -

Closing balance at 31 December 2009 39,916,287 39,853,629 1,000 39,852,629 62,658

* This interim tax exempt dividend was paid prior to the acquisition by a subsidiary of the Company.

Transactions with owners


Equity,totalRM

Company

Opening balance at 1 January 2010 (5,095) 1,000 - (6,095)

Total comprehensive income 1,335,418 - - 1,335,418

Transactions with ownersIssue of shares:- Acquisition of subsidiaries 32,328,000

8,438,100(1,626,056)

32,328,0007,671,000

-

-767,100

(767,100)

--

(858,956)- Public issue Share issue expenses

Total transactions with owners 39,140,044 39,999,000 - (858,956)

Closing balance at 31 December 2010 40,470,367 40,000,000 - 470,367

At date of incorporation (28 November 2008) 2

2 - -

Total comprehensive loss (6,095) - - (6,095)

Transactions with ownersIssue of shares 998 998 - -

Closing balance at 31 December 2009 (5,095) 1,000 - (6,095)

Distributable(Accumulated

losses)/Retainedearnings

RM

Sharecapital

RM

Non-distributable

Sharepremium

RM

Statements of Changes in EquityFor the financial year ended 31 December 2010

(continued)


33 ANNUAL REPORT 2010Hock Heng Stone Industries Bhd.

Statements of Cash FlowsFor the financial year ended 31 December 2010

2010RM

2010RM

2009RM

2009RM

Operating activitiesProfit/(loss) before tax 3,379,643 1,467,918 (6,095)

Adjustments for:Depreciation of property, plant and equipmentDepreciation of investment propertiesAmortisation of land use rightsImpairment loss on trade receivablesDividend incomeNet gain on disposal of of property, plant and equipmentNet gain on disposal of investmentProperty, plant and equipment written offUnrealised gain on foreign exchangeInterest expenseInterest income

1,999,84138,69459,12141,745

-(26,614)

-1,979

(77,945)1,058,046

(42,004)

----

(1,700,000)-----

(31,795)

-----------

3,052,863 (1,731,795) -Operating cash flows before changes in working capital 6,432,506 (263,877) (6,095)Changes in working capital

Increase in inventories(Increase)/decrease in trade and other receivablesIncrease in other current assets(Increase)/decrease in trade and other payablesIncrease in other current liabilities

(3,164,251)(5,060,277)(1,633,867)4,092,534

71,342

---

50,690-

---

5,913-

Total changes in working capital (5,694,519) 50,690 5,913 Cash flows from/(used in) operations 737,987

(1,058,046)(1,473,923)

(213,187)--

(182)--

Interest paid Income taxes paid

Net cash flows (used in)/from operating activities (1,793,982)

(213,187) (182)

Investing activitiesPurchase of property, plant and equipmentAddition of land use rightsProceeds from disposal of property, plant and equipmentProceeds from disposal of investmentInterest receivedDividend receivedAdditional investment in subsidiaries

(4,663,750)-

43,620-

42,004--

----

31,7951,550,000(750,000)

Net cash flows (used in)/from investing activities (4,578,126)

(2,040,148)(11,995)213,270160,00225,530

--

(1,653,341) 831,795 -

Company

Total adjustments

-------

6,839,274

1,997,76138,69459,020

--

(1,472)(160,002)

1,308-

974,584(25,530)

9,723,637

(4,765,078)3,414,548

(1,834,396)(1,181,342)

19,740

(4,346,528)

5,377,109(974,584)

(1,887,572)

2,514,953

2,884,363

Group

34 ANNUAL REPORT 2010Hock Heng Stone Industries Bhd.

2010RM

2010RM

2009RM

2009RM

Financing activitiesDividend paid to shareholders prior to acquisition of subsidiariesShare issue expensesProceeds from issuance of sharesAdvances to subsidiariesProceeds from loans and borrowingsRepayment of loans and borrowingsRepayment of obligation under finance leases

(450,000)(1,626,056)8,438,100

-6,638,540

(2,182,750)(361,641)

-(1,626,056)8,438,100

(5,046,901)---

--

1,000----

Net cash flows from/(used in) financing activities 10,456,193 1,765,143 1,000

Net increase/(decrease) in cash and cash equivalents 4,084,085 2,383,751 818-Cash and cash equivalents at beginning of the year (1,076,479) 818

Cash and cash equivalents at end of the year (Note 21) 3,007,606 2,384,569 818

Company

Statements of Cash FlowsFor the financial year ended 31 December 2010

(continued)

(192,405)----

(677,703)(250,662)

(1,120,770)

(259,158)(817,321)

(1,076,479)


Group


Notes to the Financial StatementsFor the year ended 31 December 2010

1.

2. Summary of significant accounting policies

2.1 Basis of preparation

2.2 Changes in accounting policies

Corporate information

The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the Main Market of Bursa Malaysia Securities Berhad. The principal place of business of the Company is located at Lot 197, Jalan Sungai Putat, Batu Berendam, 75350 Melaka. The registered office of the Company is located at Lot 1A, 6th Floor, Menara Pertam, Jalan BBP 2, Taman Batu Berendam Putra, Batu Berendam, 75350 Melaka.

The principal activities of the Company are investment holding. The principal activities of the subsidiaries are described in Note 16 to the financial statements. There have been no significant changes in the nature of the principal activities during the financial year.

The financial statements of the Group and of the Company have been prepared in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia. At the begining of the current financial year, the Group and the Company adopted new and revised FRS which are mandatory for financial periods beginning on or after 1 January 2010 as described fully in Note 2.2.

The financial statements of the Group and of the Company have also been prepared on a historical basis and are presented in Ringgit Malaysia (RM).

FRS 4 : Insurance Contracts and TR i-3: Presentation of Financial Statements of Islamic Financial Institutions will also be effective for annual periods beginning on or after 1 January 2010. These FRS are, however, not applicable to the Group or the Company.

The accounting policies adopted are consistent with those of the previous financial year except as follows:

On 1 January 2010, the Group and the Company adopted the following new and amended FRS and IC Interprettionsmandatory for annual financial periods beginning on or after 1 January 2010.

● FRS 7: Financial Instruments : Disclosures● FRS 8: Operating Segments● FRS 101: Presentation of Financial Statements (Revised)● FRS 123: Borrowing Costs● FRS 139: Financial Instruments : Recognition and Measurement ● Amendments to FRS 1: First-time Adoption of Financial Reporting Standards and FRS 127: Consolidated and Separate Financial Statements: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate● Amendments to FRS 2: Share-based Payments- Vesting Conditions and Cancellations● Amendments to FRS 132: Financial Instruments: Presentation● Amendments to FRS 139: Financial Instruments: Recognition and Measurement, FRS 7: Financial Instruments: Disclosures and IC Intrepretation 9: Reassessment of Embedded Derivatives Improvements to FRS issued in 2009● IC Interpretation 9: Reassessment of Embedded Derivatives● IC Interpretation 10: Interim Financial Reporting and Impairment● IC Interpretation 11: FRS 2 - Group and Treasury Share Transactions● IC Interpretation 13: Customer Loyalty Programmes● IC Interpretation 14: FRS 119 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

●


2. Summary of significant accounting policies (continued)

2.2 Changes in accounting policies (continued)

FRS 7: Financial Instruments: Disclosures

Prior to 1 January 2010, information about financial instruments was disclosed in accordance with the requirements of FRS 132: Financial Instruments: Disclosure and Presentation. FRS 7 introduces new disclosures to improve the information about financial instruments. It requires the disclosure of qualitative and quantitative information about exposure to risks arising from financial instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk, including sensitivity analysis to market risk.

The Group and the Company have applied FRS 7 prospectively in accordance with the transitional provisions. Hence, the new disclosures have not been applied to the comparatives. The new disclosures are included throughout the Group’s and the Company’s financial statements for the year ended 31 December 2010.

FRS 8, which replaces FRS 114 Segment Reporting, specifies how an entity should report information about its operating segments, based on information about the components of the entity that is available to the chief operating decision maker for the purposes of allocating resources to the segments and assessing their performance. The Standard also requires the disclosure of information about the products and services provided by the segments, the geographical areas in which the Group operates, and revenue from the Group’s major customers. The Group has adopted FRS 8 retrospectively (Note 35).

FRS 139 establishes principles for recognising and measuring financial assets, financial liabilities and some contracts to buy and sell non-financial items. The Group and the Company have adopted FRS 139 prospectively on 1 January 2010 in accordance with the transitional provisions. The effects arising from the adoption of this Standard has been accounted for by adjusting the opening balance of retained earnings as at 1 January 2010. Comparatives are not restated. The details of the changes in accounting policies and the effects arising from the adoption of FRS 139 are discussed below:

The revised FRS 101 introduces changes in the presentation and disclosures of financial statements. The revised Standard separates owner and non-owner changes in equity. The statement of changes in equity includes only details of transactions with owners, with all non-owner changes in equity presented as a single line. The Standard also introduces the statement of comprehensive income, with all items of income and expense recognised in profit or loss, together with all other items of recognised income and expense recognised directly in equity, either in one single statement, or in two linked statements. The Group and the Company have elected to present this statement as one single statement.

In addition, a statement of financial position is required at the beginning of the earliest comparative period following a change in accounting policy, the correction of an error or the classification of items in the financial statements.

The revised FRS 101 also requires the Group to make new disclosures to enable users of the financial statements to evaluate the Group’s objectives, policies and processes for managing capital (Note 34).

The revised FRS 101 was adopted retrospectively by the Group and the Company.

FRS 8 Operating Segments

FRS 101: Presentation of Financial Statements (Revised)

FRS 139: Financial Instruments: Recognition and Measurement


(continued)

• Impairment of trade receivables

Prior to 1 January 2010, provision for doubtful debts was recognised when it was considered uncollectible. Upon the adoption of FRS 139, an impairment loss is recognised when there is objective evidence that an impairment loss has been incurred. The amount of the loss is measured as the difference between the receivable’s carrying amount and the present value of the estimated future cash flows discounted at the receivable’s originaleffective interest rate. As at 1 January 2010, the Group has remeasured the allowance for impairment losses as at that date in accordance with FRS 139 and the difference is recognised as adjustments to theopening balance of retained earnings as at 1 January 2010.

Adoption of the above standards and interpretations did not have any effect on the financial performance or position of the Group and the Company except for those discussed below:



2.2 Changes in accounting policies (continued)

DecreaseAs at

1 January2010RM

Statements of financial positionGroupTrade and other receivablesRetained earnings

145,744145,744

2.3 Standards issued but not yet effective

The Group has not adopted the following standards and interpretations that have been issued but not yet effective:

Effective for annual periodsbeginning on or afterDescription

FRS 1: First-time Adoption of Financial Reporting StandardsFRS 3: Business Combinations (Revised)Amendments to FRS 2: Share-based PaymentAmendments to FRS 5: Non-current Assets Held for Sale and Discontinued OperationsAmendments to FRS 127: Consolidated and Separate Financial StatementsAmendments to FRS 138: Intangible AssetsAmendments to IC Interpretation 9: Reassessment of Embedded Derivatives IC Interpretation 12: Service Concession Arrangements IC Interpretation 16: Hedges of a Net Investment in a Foreign OperationIC Interpretation 17: Distributions of Non-cash Assets to Owners Amendments to FRS 132: Classification of Rights IssuesAmendments to FRS 1: Limited Exemption from Comparative FRS 7 Disclosures for First-time AdoptersAmendments to FRS 1: Additional Exemptions for First-time Adopters Amendments to FRS 2: Group Cash-settled Share-based Payment TransactionsAmendments to FRS 7: Improving Disclosures about Financial InstrumentsImprovements to FRSs (2010)

1 July 20101 July 20101 July 20101 July 20101 July 20101 July 20101 July 20101 July 20101 July 20101 July 2010

1 March 20101 January 20111 January 20111 January 20111 January 20111 January 2011


(continued)

IC Interpretation 4: Determining Whether an Arrangement contains a LeaseIC Interpretation 18: Transfer of Assets from Customers IC Interpretation 19: Extinguishing Financial Liabilities with Equity InstrumentsAmendments to IC Interpretation 14: Prepayments of a Minimum Funding RequirementTR i - 4: Shariah Compliant Sale ContractsFRS 124: Related Party Disclosures (Revised)IC Interpretation 15: Agreements for the Construction of Real Estate

1 January 20111 January 2011

1 July 20111 July 2011

1 January 20111 January 20121 January 2012

The directors expect that the adoption of the standards and interpretations above will have no material impact on the financial statements in the period of initial application.

2.4 Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the reporting date. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Company. Consistent accounting policies are applied to like transactions and events in similar circumstances.

All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-grouptransactions are eliminated in full.

The following are effects arising from the the above changes in accounting policies:

FRS 139: Financial Instruments: Recognition and Measurement (continued)



2.4 Basis of consolidation (continued)

All the subsidiaries are consolidated using the merger method of accounting.

Acquisition of subsidiaries that meets the conditions of a merger are accounted for using the merger method. Under the merger method of accounting, the results of subsidiaries are presented as if the merger had been effected throughout the current and previous years. In the consolidated financial statements, the cost of the merger is cancelled with the nominal values of the shares received. Any resulting debit difference is adjusted against the consolidated capital and revenue reserves.

Subsidiaries accounted for using the purchase method are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

Acquisitions of subsidiaries that do not meet the conditions of a merger are accounted for using the purchase method. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Adjustments to those fair values relating to previously held interests are treated as a revaluation and recognised in other comprehensive income. The cost of a business combination is measured as the aggregate of the fair values, at the date of exchange, of the assets given, liabilities incurred or assumed, and equity instruments issued, plus any costs directly attributable to the business combination.Any excess of the cost of business combination over the Group’s share in the net fair value of the acquired subsidiary’s identifiable assets, liabilities and contingent liabilities is recorded as goodwill on the statement of financialposition. Any excess of the Group’s share in the net fair value of the acquired subsidiary’s identifiable assets, liabilitiesand contingent liabilities over the cost of business combination is recognised as income in profit or loss on the date of acquisition. When the Group acquires a business, embedded derivatives separated from the host contract by the acquiree are reassessed on acquisition unless the business combination results in a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required under the contract.


(continued)

2.5 Transactions with minority interests

Minority interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group and are presented separately in profit or loss of the Group and within equity in the consolidated statements of financial position, separately from parent shareholders’ equity. Transactions with minority interests are accounted for using the entity concept method, whereby, transactions with minority interests are accounted for as transactions with owners. On acquisition of minority interests, the difference between the consideration and book value of the share of the net assets acquired is recognised directly in equity. Gain or loss on disposal to minority interests is recognised directly in equity.

The individual financial statements of each entity in the Group 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 Ringgit Malaysia (RM), which is also the Company’s functional currency.

2.6 Foreign currency

(a) Functional and presentation currency

Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange ratesapproximating those ruling at the transaction dates.

Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the reporting date. Non-monetary items denominated in foreign currencies that are measured at historical cost are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items denominated in foreign currencies measured at fair value are translated using the exchange rates at the date when the fair value was determined.

Exchange differences arising on the settlement of monetary items or on translating monetary items at the reporting date are recognised in profit or loss except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign operations, which are recognised initially in other compre-hensive income and accumulated under foreign currency translation reserve in equity. The foreign currency translation reserve is reclassified from equity to profit or loss of the Group on disposal of the foreign operation.

(b) Foreign currency transactions



Exchange differences arising on the translation of non-monetary items carried at fair value are included in profit or loss for the period except for the differences arising on the translation of non-monetary items in respect of which gains and losses are recognised directly in equity. Exchange differences arising from such non-monetary items are also recognised directly in equity.

All items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, 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.

Subsequent to recognition, property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. When significant parts of property, plant and equipment are required to be replaced in intervals, the Group recognises such parts as individual assets with specific useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred.

Freehold land has an unlimited useful life and therefore is not depreciated. Depreciation of other property, plant and equipment is computed on a straight-line basis over the estimated useful lives of the assets as follows:

2.6 Foreign currency (continued)

(b) Foreign currency transactions

2.7 Property, plant and equipment

- Leasehold land : 90 years- Buildings and extensions : 20 to 50 years- Plant, machinery and factory equipment : 10 to 15 years- Motor vehicles : 7 years- Other assets : 5 to 10 years

Building-in-progress is not depreciated as it is not yet available for use.

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

The residual value, useful life and depreciation method are reviewed at each financial year-end, and adjusted prospectively, if appropriate.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on derecognition of the asset is included in the profit or loss in the year the asset is derecognised.


(continued)

Investment properties are properties which are held either to earn rental income or for capital appreciation or both. Such properties are initially measured at cost, including transaction costs. Subsequent to recognition, investment properties are stated at cost less accumulated depreciation and any accumulated impairment losses. The invest-ment properties are depreciated in accordance with that for property, plant and equipment as described in Note 2.7.

Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property is recognised in profit or loss in the year of retirement or disposal.

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

2.8 Investment properties



Land use rights are initially measured at cost. Following initial recognition, land use rights are measured at cost less accumulated amortisation and accumulated impairment losses. The land use rights are amortised over their lease terms.

Development expenditure are capitalised in the year which they are incurred and are carried at cost. The cost of development expenditure will be carried forward as an asset in the statements of financial position where it is expected that the expenditure will be recovered through the successful development and exploration of an area of interest.

Should the project be abandoned, the expenditure will be written off in the year in which the decision is made.

Upon such time when a decision is made to proceed with development, accumulated expenditure will be amortised over the life of the associated reserves once extraction operations have commenced.

2.9 Land use rights

2.10 Development expenditure


(continued)

2.11 Impairment of non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when an annual impairment assessment for an asset is required, the Group makes an estimate of the asset’s recoverable amount.

An asset’s recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units (“CGU”)).

In assessing value in use, the estimated future cash flows expected to be generated by the asset are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is written down to its recoverable amount. Impairment losses recognised in respect of a CGU or groups of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the carrying amount of the other assets in the unit or groups of units on a pro-rata basis.

Impairment losses are recognised in profit or loss in the period in which it arises.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increase cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised previously.

A subsidiary is an entity over which the Group has the power to govern the financial and operating policies so asto obtain benefits from its activities.

In the Company's separate financial statements, investments in subsidiaries are accounted for at cost lessimpairment losses.

2.12 Subsidiaries

Financial assets are recognised in the statements of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument.

When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs.

2.13 Financial assets


Financial assets are classified as financial assets at fair value through profit or loss if they are held for trading or are designated as such upon initial recognition. Financial assets held for trading are derivatives (including separated embedded derivatives) or financial assets acquired principally for the purpose of selling in the near term.

Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in fair value are recognised in profit or loss. Net gains or net losses on financial assets at fair value through profit or loss do not include exchange differences, interest and dividend income. Exchange differences, interest and dividend income on financial assets at fair value through profit or loss are recognised separately in profit or loss as part of other losses or other income.

Financial assets at fair value through profit or loss could be presented as current or non-current. Financial assets that is held primarily for trading purposes are presented as current whereas financial assets that is not held primarily for trading purposes are presented as current or non-current based on the settlement date.

2.13 Financial assets (continued)

(a) Financial assets at fair value through profit or loss



(continued)

Financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables.

Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables arederecognised or impaired, and through the amortisation process.

Loans and receivables are classified as current assets, except for those having maturity dates later than 12 months after the reporting date which are classified as non-current.

Financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group has the positive intention and ability to hold the investment to maturity.

Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the held-to-maturityinvestments are derecognised or impaired, and through the amortisation process.

Held-to-maturity investments are classified as non-current assets, except for those having maturity within 12 months after the reporting date which are classified as current.

(b) Loans and receivables

(c) Held-to-maturity investments

The Group and the Company determine the classification of their financial assets at initial recognition, and the categories include financial assets at fair value through profit or loss, loans and receivables, held-to-maturity invest-ments and available-for-sale financial assets.


Available-for-sale financial assets are financial assets that are designated as available for sale or are notclassified in any of the three preceding categories.

After initial recognition, available-for-sale financial assets are measured at fair value. Any gains or losses from changes in fair value of the financial assets are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in profit or loss. The cumulative gain or loss previouslyrecognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial asset is derecognised. Interest income calculated using the effective interest method is recognised in profit or loss. Dividends on an available-for-sale equity instrument are recognised in profit or loss when the Group and the Company's right to receive payment is established.

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

Available-for-sale financial assets are classified as non-current assets unless they are expected to be realised within 12 months after the reporting date.


2.13 Financial assets (continued)

(d) Available-for-sale financial assets


(continued)

2.14 Impairment of financial assets

The Group and the Company assess at each reporting date whether there is any objective evidence that a financial asset is impaired.

To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group and the Company consider factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis based on similar risk characteristics.

Objective evidence of impairment for a portfolio of receivables could include the Group’s and the Company's past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or local economic conditions that correlate with default on receivables.

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

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

If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss.

(a) Trade and other receivables and other financial assets carried at amortised cost

A financial asset is derecognised when the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss.

Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned. All regular way purchases and sales of financial assets are recognised or derecognised on the trade date i.e., the date that the Group and the Company commit to purchase or sell the asset.


2.14 Impairment of financial assets (continued)

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

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

Impairment losses on available-for-sale equity investments are not reversed in profit or loss in the subsequent periods. Increase in fair value, if any, subsequent to impairment loss is recognised in other comprehensive income. For available-for-sale debt investments, impairment losses are subsequently reversed in profit or loss if an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss in profit or loss.

Cash and cash equivalents comprise cash at bank, cash on hand and deposits that are subject to an insignificant risk of changes in value. These also include bank overdrafts that form an integral part of the Group’s cashmanagement.

(b) Available-for-sale financial assets

2.15 Cash and cash equivalents



(continued)

Where the outcome of a construction contract can be reliably estimated, contract revenue and contract costs are recognised as revenue and expenses respectively by using the stage of completion method. The stage of completionis measured by reference to the proportion of contract costs incurred for work performed to date to the estimated total contract costs.

Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that are likely to be recoverable. Contract costs are recognised as expense in the period in which they are incurred.

When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

Contract revenue comprises the initial amount of revenue agreed in the contract and variations in contract work, claims and incentive payments to the extent that it is probable that they will result in revenue and they are capable of being reliably measured.

When the total of costs incurred on construction contracts plus recognised profits (less recognised losses) exceeds progress billings, the balance is classified as amount due from customers on contracts. When progress billings exceed costs incurred plus, recognised profits (less recognised losses), the balance is classified as amount due to customers on contracts.

2.16 Construction contracts

2.17 Inventories

Inventories are stated at the lower of cost and net realisable value. Costs incurred in bringing the inventories to their present location and condition are accounted for as follows:

- Raw materials: purchase costs on a first in, first out basis.- Finished goods and work-in-progress: costs of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business less estimated costs ofcompletion and the estimated costs necessary to make the sale.



Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be estimated reliably.

Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

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

Financial liabilities, within the scope of FRS 139, are recognised in the statement of financial position when, andonly when, the Group and the Company become a party to the contractual provisions of the financial instrument.Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities.

2.18 Provisions

2.19 Financial liabilities

(a) Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.

Financial liabilities held for trading include derivatives entered into by the Group and the Company that do not meet the hedge accounting criteria. Derivative liabilities are initially measured at fair value and subsequently stated at fair value, with any resultant gains or losses recognised in profit or loss. Net gains or losses onderivatives include exchange differences.

The Group and the Company have not designated any financial liabilities as at fair value through profit or loss.

The Group’s and the Company's other financial liabilities include trade payables, other payables and loans and borrowings.

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

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

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

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

(b) Other financial liabilities


(continued)



Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to theacquisition, construction or production of that asset. Capitalisation of borrowing costs commences when theactivities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale.

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

The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. The Malaysian companies in the Group make contributions to the Employee Provident Fund in Malaysia, a defined contribution pension scheme. Contributions to defined contribution pension schemes are recognised as an expense in the period in which the related service is performed.

2.20 Borrowing costs

2.21 Employee benefits

Defined contribution plans

2.22 Leases

(a) As lessee

Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or loss. Contingent rents, if any, are charged as expenses in the periods in which they are incurred.

Leased assets are depreciated over the estimated useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life and the lease term.

Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.

Leases where the Group retains substantially all the risks and rewards of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as rental income. The accounting policy for rental income is set out in Note 2.23(e).

(b) As lessor

Revenue from sale of goods is recognised upon the transfer of significant risk and rewards of ownership of the goods to the customer. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of consideration received or receivable.

2.23 Revenue

(a) Sale of goods


(continued)



Revenue from construction contracts is accounted for by the stage of completion method as described in Note 2.16.

Interest income is recognised using the effective interest method.

Dividend income is recognised when the Group’s right to receive payment is established.

Rental income is accounted for on a straight-line basis over the lease terms. The aggregate costs of incentives provided to lessees are recognised as a reduction of rental income over the lease term on a straight-line basis.

2.23 Revenue (continued)

(b) Construction contracts

(c) Interest income

(d) Dividend income

(e) Rental income


(continued)

2.24 Income taxes

(a) Current tax

Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.

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

Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all temporary differences, except:

Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except:

where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

where the deferred tax asset relating to the deductible temporary difference arises from the initial recogni-tion of an asset or liability in a transaction that is not a business combination and, at the time of the transac-tion, affects neither the accounting profit nor taxable profit or loss; and

in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

(b) Deferred tax

-

-

-

-



2.24 Income taxes (continued)

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwill onacquisition.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.


(continued)

(c) Sales tax

Revenues, expenses and assets are recognised net of the amount of sales tax except:

The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receiv-ables or payables in the statements of financial position.

An equity instrument is any contract that evidences a residual interest in the assets of the Group and the Company after deducting all of its liabilities. Ordinary shares are equity instruments.

Ordinary shares are recorded at the proceeds received, net of directly attributable incremental transaction costs. Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared.

Where the sales tax incurred in a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

Receivables and payables that are stated with the amount of sales tax included.

-

-

2.25 Share capital and share issuance expenses

The preparation of the Group’s financial statements requires management to make judgements, estimates andassumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future.

3. Significant accounting judgements and estimates

(b) Deferred tax (continued)

2.26 Contingencies

A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future event(s) not wholly within the control ofthe Group.

Contingent liabilities and assets are not recognised in the statements of financial position of the Group.


The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date 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.

The cost of plant and machinery for the manufacture of dimension stones is depreciated on a straight-line basis over the assets’ useful lives. Management estimates the useful lives of these plant and machinery to be 10 to 15 years. These are common life expectancies applied in the industry. Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised.

The Group assesses at each reporting date whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.

Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. The carrying amount of the Group’s loans and receivables at the reporting date is disclosed in Note 18. If the present value of estimated future cash flows varies by 5% from management’s estimates, the Group’s allowance forimpairment will increase/decrease by RM29,000.

3. Significant accounting judgements and estimates (continued)

3.2 Key sources of estimation uncertainty

(a) Useful lives of plant and machinery

(b) Impairment of loans and receivables


(continued)

4. Revenue

2010RM

2010RM

2009RM

2009RM

Sales of goodsConstruction revenueDividend income from subsidiaries

21,259,31421,763,232

-

--

1,700,000

---

43,022,546 1,700,000 -

Company

5. Other income

--

-----

2010RM

2010RM

2009RM

2009RM

Net gain on disposal of property, plant and equipmentNet gain on disposal of investmentGain on foreign exchange - realised- unrealisedInterest incomeRental incomeSundry income

26,614 -

-77,945 42,004 49,950 5,195

--

--

31,795---201,708

31,795

-

Company

29,816,0434,243,425

-

34,059,468

1,472 160,002

12,466

- 25,530 30,000 25,784

255,254

Group

Group

The management did not make any critical judgment in the process of applying the Group's accounting policies that have a significant effect on the amounts recognised in the financial statements.

3.1 Judgements made in applying accounting policies


6. Finance costs

2010RM

Interest expense on:- Bank loans, bankers' acceptances and bank overdrafts- Obligations under finance leases

Less: Interest expense capitalised in building-in-progress

Total finance costs

990,172 67,874

7. Profit/(loss) before tax

The following items have been included in arriving at profit/(loss) before tax:

2010RM

2009RM

2009RM

Company

Auditors’ remuneration:- statutory audits - current year - over provision in prior year- other servicesEmployee benefits expense (Note 8)Non-executive directors' remuneration (Note 9)Amortisation of land use rights (Note 14)Depreciation of property, plant and equipment (Note 12)Depreciation of investment properties (Note 13)Direct operating expenses arising from investment properties:- Rental generating properties- Non-rental generating propertiesProperty, plant and equipment written offImpairment loss on trade receivables (Note 18)Operating lease:- Minimum lease payments on motor vehicles and office equipment- Minimum lease payments on land and buildings

1,000-------

----

--

15,000

-1,000

-80,000

---

----

--

2010RM

67,000-

60,3004,712,788

80,00059,121

1,999,84138,694

6,2528,1381,979

41,745

157,573114,680


(continued)

1,058,046-

1,058,046

8. Employee benefits expense

2010RM

Executive directors (Note 9)Executive directors of the CompanyExecutive directors of subsidiaries

932,067287,841

1,219,908

Other staffWages, salaries and bonusContributions to defined contribution planSocial security contributionOther benefits

3,088,453251,74331,231

121,453

3,492,8804,712,788

2009RM

942,980 46,352

989,332 (14,748)

974,584

52,000(2,000)15,300

4,353,207-

59,0201,997,761

38,694

5,7647,2171,308

-

18,130125,870

2009RM

771,614255,265

1,026,879

2,980,519209,74027,376

108,693

3,326,3284,353,207

Group

Group

Group


9. Directors' remuneration

2010RM

2010RM

2009RM

2009RMDirectors of the Company

Executive:- Salaries and other emoluments- Fees- Contributions to defined contribution plan- Social security contribution- Estimate money value of benefits-in-kind

-----

-----

- -

Non-Executive:- Fees- Allowances

72,0008,000

--

80,000 -

Directors of subsidiariesExecutive:- Salaries and other emoluments- Fees- Contributions to defined contribution plan- Social security contribution

- - Total excluding benefits-in-kindEstimate money value of benefits-in-kind

80,000-

--

80,000 -

Company

----

----


(continued)

Analysis of directors' remuneration:Executive directors, excluding benefits-in-kind (Note 8)Non-Executive directors (Note 7)Total excluding benefits-in-kind

--

-80,000 80,000 -

RM1 - RM50,000RM50,001 – RM100,000RM100,001 – RM150,000RM150,001 – RM200,000RM200,001 – RM250,000RM250,001 – RM300,000RM300,001 – RM350,000

The number of directors of the Company whose total remuneration during the financial year fell within the following bandsis analysed below:

568,163299,60061,8242,480

11,085

943,152

72,0008,000

80,000

154,820113,00018,2881,733

287,8411,299,908

11,0851,310,993

1,219,90880,000

1,299,908

480,474239,60049,6801,860

-

771,614

--

-

153,20083,00017,6961,369

255,2651,026,879

-1,026,879

1,026,879-

1,026,879

Non- Non-Executive Executive Executive Executive

- 3 - -- - - -- - - -2 - 1 -- - - -1 - 2 -1 - - -

Number of directorsNumber of directors2010 2009

Group


10. Income tax expense

Major components of income tax expense

2010RM

2009RM

2009RMStatement of comprehensive income:

Current income tax:- Based on results for the year - Overprovision in respect of previous years

132,500-

--

Deferred tax (Note 25): - Origination and reversal of temporary differences- Under/(over)provision in respect of previous years

--

--

-

132,500

CompanyThe major components of income tax expense for the years ended 31 December 2010 and 2009 are:

2010RM

1,103,500-

(159,186)35,000

(124,186) 979,314

--


(continued)

Reconciliation between tax expense and accounting profit

2010RM

2009RM

2009RM

Accounting profit/(loss) before tax 1,467,918 (6,095)

Company

The reconciliation between tax expense and the product of accounting profit multiplied by the applicable corporate tax ratefor the years ended 31 December 2010 and 2009 are as follows:

Tax at Malaysian statutory tax rate of 25% (2009: 25%)Adjustments: Non-deductible expenses Expenses entitled for double deduction for tax purposes Income subject to tax rate at 20% Income not subject to taxation Effect of deferred tax assets recognised on unutilised capital allowances and tax losses Overprovision of income tax in previous years Under/(over)provision of deferred tax in previous years

366,980

41,933--

(276,413)

---

(1,524)

1,524---

---

132,500 -

2010RM

3,379,643

844,911

193,154(2,980)

(68,770)(22,001)

--

35,000979,314

11. Earnings per share

(a) Basic

Profit net of tax attributable to owners of the parent (RM)

Weighted average number of ordinary shares in issue (units)

Basic earnings per share (sen)

Basic earnings per share are calculated by dividing the profit for the year, net of tax, attributable to owners of theparent by the weighted average number of ordinary shares in issued during the financial year.

1,756,000(12,298)

(65,237)(16,576)(81,813)

1,661,889

132,5001,103,500 -1,743,702

6,839,274

1,709,819

96,001(2,975)

(63,935)(40,126)

(8,021)(12,298)(16,576)

1,661,889

2010 2009

2,409,512 5,165,312

71,875,605

3.35 7.99

Group

64,658,000*

Group

Group

Income tax expense recognised in profit or loss

For the purposes of calculating the weighted average number of ordinary of shares in issue in which merger of subsidiaries occurred, the number of shares in issue from the beginning of the financial year to include the shares issued for the acquisition of subsidiaries as disclosed in Note 31(a)(i) and before the shares issued for the public issue.

*


12. Property, plant and equipment

Plant,machinery

and factoryequipment

RM

* Land andbuildings

RM

Motorvehicles

RM

** Otherassets

RMTotal

RMGroup

At 1 January 2009 Additions Disposals Written off Reclassification

12,115,2401,695,664(202,050)

--

16,128,905573,680

(7,284)-

10,800

2,984,169216,224

---

2,238,646273,354

(4,415)(1,570)

(10,800)

33,466,9602,758,922(213,749)

(1,570)-

At 1 December 2009

and 1 January 2010

13,608,8543,647,223

---

16,706,101308,487

(6,964)-

3,450

3,200,3931,000,103(105,968)

--

2,495,215221,679

(980)(2,199)(3,450)

36,010,5635,177,492(113,912)

(2,199)-

AdditionsDisposalsWritten offReclassification

At 31 December 2010 17,256,077 17,011,074 4,094,528 2,710,265


(continued)

41,071,944

Accumulated depreciation

At 1 January 2009 1,449,668259,893

---

7,172,7231,200,833

(546)-

1,288

1,621,726

334,659---

1,288,561

202,376(1,405)

(262)(1,288)

11,532,678 1,997,761

(1,951)(262)

-

Charge for the year (Note 7)DisposalsWritten offReclassification

At 31 December 2009 and 1 January 2010 1,709,561

284,491---

8,374,2981,156,457

(1,340)-

144

1,956,385400,714(95,468)

--

1,487,982158,179

(98)(220)(144)

13,528,2261,999,841

(96,906)(220)

-

Charge for the year (Note 7)DisposalsWritten offReclassification

At 31 December 2010 1,994,052 9,529,559 2,261,631 1,645,699 15,430,941

Net carrying amountAt 31 December 2009 11,899,293 8,331,803 1,244,008 1,007,233 22,482,337

At 31 December 2010 15,262,025 7,481,515 1,832,897 1,064,566 25,641,003

** Other assets comprise office equipment, furniture and fittings, electrical installation, computers and cabin.

11. Earnings per share (continued)

(b) Diluted

There is no diluted earnings per share as the Company does not have any dilutive potential ordinary shares as atthe year end.

Cost


12. Property, plant and equipment (continued)

* Land and buildings

Factorybuildings

andextensions

RM

Building-in-

progressRM

FreeholdlandRM

LeaseholdlandRM

Hostelbuildings

RMTotal

RM

2,124,567-

(202,050)586,000

8,061,66714,650

-1,467,846

183,200--

1,745,8061,681,014

-(2,053,846)

12,115,2401,695,664(202,050)

-

2,508,517-

9,544,163563,400

183,200-

1,372,9742,021,223

13,608,8543,647,223

-1,062,600

2,508,517 1,062,600 10,107,563 183,200 3,394,197 17,256,077

1,444,027256,229

5,6413,664

1,449,668259,893

1,700,256270,201

9,3053,664

1,709,561284,491

-10,626 10,626 1,970,457 12,969 - 1,994,052

2,508,517 - 7,843,907 173,895 1,372,974 11,899,293

Group

Cost

At 1 January 2009AdditionsDisposalsReclassification

At 31 December 2009 and 1 January 2010Additions

At 31 December 2010

Accumulated depreciation

At 1 January 2009Charge for the year

At 31 December 2009 and 1 January 2010Charge for the year

At 31 December 2010

Net carrying amount

At 31 December 2009

At 31 December 2010 2,508,517 1,051,974 8,137,106 170,231 3,394,197 15,262,025


(continued)

--

--

----

--

--

-

--



(continued)

12. Property, plant and equipment (continued)

Capitalisation of borrowing costs

Assets held under finance leases

2010RM

2009RM

Finance leases (acquired machinery and motor vehicles)Cash outflow

513,7424,663,750

718,7742,040,148

5,177,492 2,758,922

Plant and machineryMotor vehicles

830,1211,169,311

627,392882,072

1,999,432 1,509,464

Assets pledged as security

Freehold landFactory buildingsHostel buildingPlant and machinery

2,508,5177,840,104

141,5312,185,519

2,508,5177,843,907

144,4953,849,904

12,675,671 14,346,823

Interest expense capitalised in previous financial year under building-in-progress amounted to RM14,748.

The carrying amount of property, plant and equipment under finance leases at the reporting date were as follows:

During the financial year, the Group acquired property, plant and equipment by mean of:

Leased assets are pledged as security for the related finance lease liabilities (Note 29(c)).

In addition to assets held under finance leases, the carrying amount of property, plant and equipment of the Groupmortgaged to secure the Group's bank loans (Note 22) are as follows:

Group

2010RM

2009RM

Group

2010RM

2009RM

Group



(continued)

13. Investment properties

2010RM

2009RM

CostAt 1 January/31 December 2,394,633 2,394,633

Accumulated depreciationAt 1 January 393,781

38,694355,08738,694Charge for the year (Note 7)

At 31 December 432,475 393,781

Net carrying amount 1,962,158 2,000,852

Fair value of investment properties

Properties pledged as securities

14. Land use rights

CostAt 1 January 2,944,440

-2,932,445

11,995Addition 31 December 2,944,440 2,944,440

Accumulated amortisationAt 1 January 283,001

59,121 223,981

59,020Charge for the year (Note 7) At 31 December 342,122 283,001

Net carrying amount 2,602,318 2,661,439

Amount to be amortised:- Not later than 1 year- Later than 1 year but not later than 5 years- Later than 5 years

59,121267,516

2,275,681

59,020267,112

2,335,307

Group

2010RM

2009RM

Group

Certain investment properties of the Group amounting to RM1,630,581 (2009: RM1,661,424) are mortgaged to securebank loans (Note 22).

15. Development expenditure

The land use rights are in respect of leasehold land which have been mortgaged to secure bank loans (Note 22).

This represents amount of development expenditure incurred and are stated at cost.

Fair value is arrived at by reference to market evidence of transaction prices similar properties and is performed byregistered independent valuers having an appropriate recognised professional qualification and recent experience in thelocation and category of the properties being valued. The fair value of the investment properties as at 31 December 2010is approximately RM2,293,800 (2009: RM2,140,000).



(continued)

Details of the subsidiaries are as follows :

Name of subsidiaries

Country ofincorporation Principal activities

2010 2009

Hock Heng Granite Sdn. Bhd. ("HHG")

Malaysia 100

-

Hock Heng Marketing (KL) Sdn. Bhd. ("HHMKL")

Malaysia 100

-

Hock Heng Marketing (Southern Region) Sdn. Bhd. ("HHMSR")

Malaysia 100 -

PMK Construction & Design Sdn. Bhd. ("PMK")

Malaysia 100 -

Hock Heng Stone (East Coast) Sdn. Bhd. ("HHSEC")*

Malaysia 80 -

* Audited by a firm other than Ernst & Young.

Proportion ofownership interest (%)

Manufacturing and selling of dimension stones and related products

Processing and distribution of dimension stones and renovation works for homes and offices

Processing and trading of dimension stones

Processing and trading of dimension stones

Processing and trading of dimension stones and related services

(a) Acquisition of subsidiaries

On 4 February 2010, the Company acquired 100% equity interest in HHG, HHMKL, HHMSR, PMK and 80% equity interest in HHSEC for a total purchase consideration of RM32,328,000 by an issue of 64,656,000 new ordinary shares of RM0.50 each in the Company at par.

The details of the assets and liabilities of the subsidiaries accounted for under the merger method of accounting at the date of merger are as follows:

RM

Non-current assetsCurrent assetsNon-current liabilitesCurrent liabilites

27,474,60849,234,695(8,104,465)

(28,515,105)

40,089,733

(b) During the financial year, the Company had invested additional of RM750,000 in HHMKL.With the additionalinvestment, the total issued and paid-up share capital of HHMKL is RM950,004 comprising 950,004 ordinary sharesof RM1 each.

Subsequent to the financial year, the Company had invested additional of RM1,000,000 in HHMKL. With theadditional investment, the total issued and paid-up share capital of HHMKL is RM1,950,004 comprising 1,950,004ordinary shares of RM1 each.

(c)

Net assets acquired

16. Investment in subsidiaries

2010 2009RM RM

Unquoted shares, at cost 33,078,000 -

Company

17. Inventories

Cost:Raw materialsWork-in-progressFinished goods

18. Trade and other receivables

2010RM

2009RM

2009RM

Trade receivablesThird partiesRetention sums on costruction contract (Note 20)Amount due from a company in which certain directors have interests

--

- -

-Less: Allowance for impairment - Third partiesTrade receivables, net

-

Other receivablesAmount due from a subsidiarySundry receivablesRefundable deposits

5,046,901--

---

5,046,901 - 5,046,901 -

Total trade and other receivablesAdd: Cash and bank balances (Note 21)Total loans and receivables

5,046,9012,384,569

-818

7,431,470 818

(a) Trade receivables

Ageing analysis of trade receivables

The ageing analysis of the Group's trade receivables is as follows:

Neither past due nor impaired

Impaired

Company2010

RM

17,179,8072,036,515

170,218 19,386,540

(307,640) 19,078,900

-292,383281,262 573,645

19,652,545

19,652,5455,632,586

25,285,131

--

----

Trade receivables are non-interest bearing and are generally on 30 to 90 (2009: 30 to 90) day terms. They are recogn-ised at their original invoice amounts which represent their fair values on initial recognition.


(continued)

1 to 30 days past due not impaired31 to 60 days past due not impaired61 to 90 days past due not impaired90 to 120 days past due not impairedMore than 121 days past due not impaired

2010RM

2009RM

11,905,9608,476,0271,515,570

8,448,5748,798,9211,485,811

21,897,557 18,733,306

Group

13,137,4871,563,012

-14,700,499

(397,497)14,303,002

-

-261,114215,641

476,75514,779,757

14,779,7571,703,830

16,483,587

2010RM

2009RM

12,302,998 6,167,030 523,741152,082411,023339,827

1,896,946

1,397,408409,224459,411516,409

1,518,426

3,323,619 4,300,878 3,759,923 4,232,591

19,386,540 14,700,499

Group


Group

18. Trade and other receivables (continued)

(a) Trade receivables (continued)

Receivables that are neither past due nor impaired

Receivables that are past due but not impaired

Receivables that are impaired

Trade receivables - nominal amountsLess: Allowance for impairment

Movement in allowance accounts:

At 1 JanuaryEffect of FRS 139Charge for the year (Note 7)Written offAt 31 December

Trade and other receivables that are neither past due nor impaired are creditworthy debtors with good payment records with the Group.

None of the Group's trade receivables that are neither past due nor impaired have been renegotiated during thefinancial year.

The Group has trade receivables amounting to RM3,323,619 (2009: RM4,300,878) that are past due at the reporting date but not impaired. These receivables are active accounts which the management considers to be recoverable.

The Group's trade receivables that are individually impaired at the reporting date and the movement of the allowance accounts used to record the impairment are as follows:

Trade receivables that are individually determined to be impaired at the reporting date relate to debtors that are in significant financial difficulties and/or have defaulted on payments. These receivables are not secured by anycollateral or credit enhancement.

(b) Related party balances


(continued)

19. Other current assets

Prepaid operating expensesDeposit for purchase of property, plant and equipmentDeposits paid to raw material suppliersAmount due from customers for contract (Note 20)

Amount due from a subsidiary is unsecured, non-interest bearing and are repayable upon demand except for an amount of RM3,921,233 which bore interest rate of 1% per annum.

2010RM

2009RM

3,759,923(307,640)

4,232,591(397,497)

3,452,283 3,835,094

Group

2010RM

2009RM

Group

2010RM

2009RM

Group

397,497145,74441,745

(277,346)

397,497---

307,640 397,497

345,693163,500575,489

4,312,936

723,049113,000429,926

2,497,776

5,397,618 3,763,751



20. Gross amount due from/(to) customers for contract work-in-progress

Construction contract costs incurred to dateAttributable profits

Less: Progress billings

Presented as:Gross amount due from customers for contract work (Note 19)Gross amount due to customers for contract work (Note 24)

Retention sums on construction contract included in trade receivables (Note 18)

21. Cash and bank balances

Cash at banks and on handShort term deposits with licensed banksCash and bank balancesLess: Bank overdrafts (Note 22)

Cash and cash equivalents

22. Loans and borrowings

CurrentSecured:Obligations under finance leases (Note 29(c))Bank overdrafts (Note 21)Bankers' acceptancesTrust receiptsBank loans:- RM loan at BLR - 0.75% p.a.- RM loan at BLR - 0.80% p.a.- RM loan at BLR - 1.50% p.a.- RM loan at BFR - 1.80% p.a.- RM loan at BLR + 0.30% p.a.- RM loan at BLR + 1.25% p.a.- RM loan at BLR + 1.50% p.a.- 2.49% p.a. fixed rate RM bank loan- 4.57% p.a. fixed rate RM bank loan- 5.00% p.a. fixed rate RM bank loan

Cash and banks earns interest at floating rates based on daily bank deposit rates. Short term deposits are made for varying periods of between one month to twelve months depending on the immediate cash requirements of the Group, and earn interests at the respective short-term deposit rates. The weighted average effective interest rates as at 31 December 2010 for the Group was 2.75% (2009: 2.69%) per annum.

All the short term deposits with licensed banks of the Group are pledged as securities for borrowings (Note 22).


(continued)

2010RM

2009RM

21,265,6612,408,513

6,201,8831,663,110

23,674,174(19,466,597)

7,864,993(5,401,234)

4,207,577 2,463,759

4,312,936(105,359)

2,497,776(34,017)

4,207,577 2,463,759

2,036,515 1,563,012

Group

2009RM

2010RM

2009RM

2010RM

4,116,5381,516,048

516,9751,186,855

2,384,569-

818-

5,632,586(2,624,980)

1,703,830(2,780,309)

2,384,569-

818-

3,007,606 (1,076,479) 2,384,569 818

Group Company

2009RM

2010RMMaturity

2011On demand

20112010

2011201120112011201120112010201120102011

431,2312,624,980

10,924,000-

71,0849,3735,517

156,28869,64819,580

-190,817

-12,664

321,2802,780,3098,715,000

70,460

50,8618,0214,548

-95,91625,04494,491

176,09598,500

145,511

14,515,182

12,586,036

Group


22. Loans and borrowings (continued)

Non-currentSecured:Obligations under finance leases (Note 29(c))Bank loans: - RM loan at BLR - 0.75% p.a. - RM loan at BLR - 0.80% p.a. - RM loan at BLR - 1.50% p.a. - RM loan at BFR - 1.80% p.a. - RM loan at BLR + 0.30% p.a. - RM loan at BLR + 1.25% p.a. - RM loan at BLR + 1.50% p.a. - 2.49% p.a. fixed rate RM bank loan - 4.57% p.a. fixed rate RM bank loan - 5.00% p.a. fixed rate RM bank loan

Total loans and borrowings

On demand or within 1 yearMore than 1 year and less than 2 yearsMore than 2 year and less than 5 years5 years or more

Obligations under finance leases

Bank overdrafts

Bankers' acceptance

The remaining maturities of the loans and borrowings as at 31 December 2010 are as follows:

Bank overdrafts are denominated in RM, bear interest range from BLR + 0.80% p.a. to BLR + 1.75% p.a. (2009: BLR + 0.80%. p.a. to BLR + 1.75% p.a.).

These obligations are secured by a charge over the leased assets (Note 12). The average discount rate implicit in the leases is 3.29% (2009: 3.47%) p.a..

The loans are secured by first legal charge over certain assets of the Group as disclosed in Note 12, Note 13, Note 14 and Note 21 respectively.

These are used to finance purchases of the Group denominated in RM and are short term in nature. The weighted average effective interest rate is 4.35% (2009: 3.89%) p.a..

RM bank loans


(continued)

2012 - 2015

2012 - 20252012 - 20252012 - 20232012 - 20302012 - 20272012 - 2016

20102012 - 2015

20102010

814,271

1,351,410252,09683,655

4,285,4651,350,169

115,809-

775,722--

772,121

1,429,474262,30589,413

-1,401,982

134,8101,003,684

970,230423,66617,496

9,028,597 6,505,18123,543,779

19,091,217

2009RM

2010RMMaturity

Group

2010RM

2009RM

14,515,182807,848

2,127,4936,093,256

12,586,036821,868

1,795,1423,888,171

23,543,779 19,091,217

Group


24. Other current liability

Gross amount due to customers for contract (Note 20)

25. Deferred tax liabilities

At 1 JanuaryRecognised in profit or loss (Note 10)

At 31 December

Unutilisedtax losses and

unabsorbedcapital

allowancesRM

Property, plant and

equipmentRM

OthersRM

TotalRM

The components and movements of deferred tax liabilities/(assets) during the financial year are as follows:


(continued)

23. Trade and other payables

2010RM

2009RM

2010RM

2009RM

Trade payablesThird parties 6,928,489 3,032,831 - - Other payablesSundry payablesAccrued operating expenses

1,679,617584,809

1,703,062442,433

22,40334,200 4,913

1,000

2,264,426 2,145,495 56,603 5,913 9,192,915 5,178,326 56,603 5,913

Total trade and other payablesAdd: Loans and borrowings (Note 22)

9,192,91523,543,779

5,178,32619,091,217 56,603

- 5,913

-

Total financial liabilities carried at amortised cost 32,736,694 24,269,543 56,603 5,913

(a) Trade payables

(b) Other payables

Company

These amounts are non-interest bearing. Trade payables are normally settled on 30 to 90 (2009: 30 to 90) day terms.

Group

These amounts are non-interest bearing. Other payables are normally settled on an average of six months(2009: six months).

2010RM

2009RM

105,359 34,017

Group

2010RM

2009RM

Group

1,536,584(124,186)

1,618,397(81,813)

1,412,398 1,536,584

At 1 January 2009Recognised in profit or loss

(10,178)(22,187)

-

(72,925)1,628,575

13,299 1,618,397

(81,813)

At 31 December 2009 and 1 January 2010Recognised in profit or lossAt 31 December 2010

(32,365)(6,948)

(72,925)(126,676)

1,641,8749,438

1,536,584(124,186)

(39,313) (199,601) 1,651,312 1,412,398


26. Share capital

Number of ordinary sharesof RM0.50 each Amount

2010 2009 2010RM

2009RM

Authorised At 1 January/date of incorporationCreated during the year

200,000,000-

200,000199,800,000

100,000,000-

100,00099,900,000

200,000,000 200,000,000 100,000,000 100,000,000

Issued and fully paid At 1 January/date of incorporationCreated during the year: New issue Acquisitions of subsidiaries Public issue

2,000

-64,656,00015,342,000

1,000

-32,328,0007,671,000

2

998--

3

1,997--

80,000,000 2,000 40,000,000 1,000

Group and Company

27. Retained earnings

28. Related party transactions

(a) Sale of goods

Companies in which certain directors have interests:(i) EMP Design Sdn. Bhd. (Formerly known as Eternal Memorial Park Sdn. Bhd.) (ii) LBS Realty Sdn. Bhd.

Subsidiaries:(i) Hock Heng Granite Sdn. Bhd. (ii) Hock Heng Marketing (KL) Sdn. Bhd.

The new ordinary shares issued during the financial year ranked pari passu in all respects with the existing ordinary shares of the Company.

The holder of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restrictions and rank equally with regard to the Company residual assets.

Prior to the year of assessment 2008, Malaysian companies adopted the full imputation system. In accordance with the Finance Act 2007 which was gazetted on 28 December 2007, companies shall not be entitled to deduct tax on dividends paid, credited or distributed to its shareholders, and such dividends will be exempted from tax in the hands of theshareholders ("single tier system"). However, there is a transitional period of six years, expiring on 31 December 2013, to allow companies to pay franked dividends to their shareholders under limited circumstances. Companies also have anirrevocable option to disregard the 108 balance and opt to pay dividends under the single tier system. The change in the tax legislation also provides for the 108 balance to be locked-in as at 31 December 2007 in accordance with Section 39 of the Finance Act 2007.

As at 31 December 2010, the 108 balance of the Company is Nil. The Company may distribute dividends out of its entire retained earnings as at 31 December 2010 and 2009 under the single tier system.

In addition to the related party information disclosed elsewhere in the financial statements, the following significanttransactions between the Company and related parties took place at terms agreed between the parties during the financial year:


(continued)

At 31 December

At 31 December


28. Related party transactions (continued)

(a) Sale of goods (continued)

Transactions with companies in which certain directors have interests

Sale of dimension stones toRental paid to

2010RM

2009RM

2010RM

2009RM

Transactions with subsidiaries

Dividend income received fromInterest charge toFund transferred toPayment on behalf by

1,700,00025,668

5,897,7031,972,667

----

(b) Compensation of key management personnel

29. Commitments

(a) Capital commitments

Capital expenditure as at the reporting date is as follows:

Approved and contracted for - Property, plant and equipment

Approved but not contracted for - Property, plant and equipment

Company

The remuneration of key management personnel comprising solely remuneration of the executive directors as disclosed in Note 9.


(continued)

(b) Operating lease commitments - as lessee

Not later than 1 yearLater than 1 year but not later than 5 years

In addition to the land use rights disclosed in Note 14, the Group has entered into non-cancellable operating lease agreements for the use of land and buildings. These leases have an average tenure of between two and five years. There are no restrictions placed upon the Group by entering into these leases.

Minimum lease payments, including amortisation of land use rights recognised in profit or loss for the financial year ended 31 December 2010 amounted to RM331,374 (2009: RM203,000).

Future minimum rentals payables under non-cancellable operating leases (excluding land use rights) at the reporting date are as follows:

1,610,32284,000

136,810 94,000

Group

2010RM

2009RM

Group

2010RM

2009RM

Group

819,757 3,791,723

544,000 1,423,0001,363,757 5,214,723

88,200165,025

81,205-

253,225 81,205


The Company has finance leases for certain items of motor vehicles and plant and machinery (Note 12). These leases do not have terms of renewal, but have purchase options at nominal values at the end of the lease term.

Future minimum lease payments under finance leases together with the present value of the net minimum lease payments are as follows:

29. Commitments (continued)

(c) Finance lease commitments

Minimum lease payments:Not later than 1 yearLater than 1 year but not later than 2 yearsLater than 2 years but not later than 5 yearsTotal minimum lease paymentsLess: Amounts representing finance charges

Present value of minimum lease payments

Present value of payments:Not later than 1 yearLater than 1 year but not later than 2 yearsLater than 2 years but not later than 5 yearsPresent value of minimum lease paymentsLess: Amount due within 12 months (Note 22)Amount due after 12 months (Note 22)


(continued)

496,212335,813555,053

381,746351,268499,293

1,387,078(141,576)

1,232,307(138,906)

1,245,502 1,093,401

431,231293,852520,419

321,280251,286520,835

1,245,502(431,231)

1,093,401(321,280)

814,271 772,121

2010RM

2009RM

Group

2010RM

2009RM

Group30. Contingent liabilities

Unsecured :Corporate guarantees given to financial institutions in respect of banking facilities granted to a company in which certain directors have interest - 932,287

31. Significant events

(a)

(i)

As part of flotation exercise of the Company on the Main Market of Bursa Malaysia Securities Berhad, the Companycompleted the followings transactions:

On 4 February 2010, the Company acquired Hock Heng Granite Sdn. Bhd. ("HHG"), Hock Heng Marketing (KL) Sdn. Bhd. ("HHMKL"), Hock Heng Marketing (Southern Region) Sdn. Bhd. ("HHMSR"), PMK Construction & Design Sdn. Bhd. ("PMK") and Hock Heng Stone (East Coast) Sdn. Bhd. ("HHSEC") which were satisfied by an issue of 64,656,000 new ordinary shares of RM0.50 each in the Company at par as follows:



(continued)

32. Fair value of financial instruments

Note

Trade and other receivables Loans and borrowings Trade and other payables

182223

Financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value

The following are classes of financial instruments that are not carried at fair value and whose carrying amounts arereasonable approximation of fair value:

The carrying amounts of these financial assets and liabilities are reasonable approximation of fair values, either due to their short-term nature or that they are floating rate instruments that are re-priced to market interest rates on or near the reporting date.

The carrying amounts of the current portion of loans and borrowings are reasonable approximations of fair values due to the insignificant impact of discounting.

The fair values of current loans and borrowings are estimated by discounting expected future cash flows at marketincremental lending rate for similar types of lending, borrowing or leasing arrangements at the reporting date.

33. Financial risk management objectives and policies

The Group and the Company are exposed to financial risks arising from their operations and the use of financial instru-ments. The key financial risks include credit risk, liquidity risk, interest rate risk and foreign currency risk.

The following sections provide details regarding the Group and the Company's exposure to the above-mentioned financial risks and the objectives, policies and processes for the management of these risks.

(a) Credit risk

Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Group and the Company’s exposure to credit risk arises primarily from trade and other receivables. For other financial assets (including cash and bank balances), the Group and the Company minimise credit risk by dealing exclusively with high credit rating counterparties.

The Group’s objective is to seek continual revenue growth while minimising losses incurred due to increased credit risk exposure. The Group trades only with recognised and creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant.

31. Significant events (continued)

Number ofshares

acquired@ RM1 each

Satified bynew shares

in theCompany

Equityinterest

(%)

Purchaseconsideration

RMCompany

- HHG- HHMKL- HHMSR- PMK- HHSEC

4,300,000200,004

1,000,000150,000240,003

10010010010080

25,417,0002,562,0002,895,0001,252,000

202,000

50,834,0005,124,0005,790,0002,504,000

404,000

32,328,000

64,656,000

(ii)

(b)

Public issue of 15,342,000 new ordinary shares of RM0.50 each at an issue price of RM0.55 each.

On 26 March 2010, the Company's shares were listed on Main Market of Bursa Malaysia Securities Berhad.


(a) Credit risk (continued)

Financial assets that are neither past due nor impaired

Information regarding trade and other receivables that are neither past due nor impaired is disclosed in Note 18.

(b) Liquidity risk

Liquidity risk is the risk that the Group and the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Group's and the Company’s exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Group's and the Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of stand-by credit facilities.

The Group manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure that refinancing, repayment and funding needs are met. As part of its overall liquidity management, the Group maintains sufficient levels of cash or cash convertible investments to meet its working capital requirements. In addition, the Group strives to maintain available banking facilities at a reasonable level to its overall debt position. As far as possible, the Group raises committed funding from financial institutions and balances its portfolio with some short term funding so as to achieve overall cost effectiveness.

The Group's and the Company's objective is to maintain a balance between continuity of funding and flexibility through the use of stand-by credit facilities and collection from customers.


(continued)

Analysis of financial instruments by remaining contractual maturities

On demandor withinone year

RM

One tofive years

RM

Over fiveyears

RMTotal

RMAs at 31 December 2010

Group

Trade and other payablesLoans and borrowings

Total undiscounted financial liabilities

9,192,91514,983,076 9,192,915

27,483,745

-

4,391,664-

8,109,005 24,175,991 4,391,664 8,109,005 36,676,660

Company

Trade and other payables

Total undiscounted financial liabilities 56,603 - - 56,603 56,603 - - 56,603

33. Financial risk management objectives and policies (continued)

Exposure to credit risk

At the reporting date, the Group's maximum exposure to credit risk is represented by the carrying amount of each class of financial assets recognised in the statements of financial position, with positive fair values.

Information regarding credit risk management for trade and other receivables is disclosed in Note 18.

Credit risk concentration profile

At the reporting date, approximately:

15% of the Group's gross trade receivables were due from 1 customer. To manage this risk, the Group works closely with this debtor to provide customer satisfaction through provision of high quality products and services at a competitive cost.

all of the Company receivables was balance with subsidiary. The directors believe that this will not createsignificant problems for the Company in view of the fact that the directors have direct participation and influential power in the management of these counterparties.

-

-

Financial assets that are either past due or impaired

Information regarding trade and other receivables that are either past due or impaired is disclosed in Note 18.


33. Financial risk management objectives and policies (continued)

(c) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of the Group's financial instruments will fluctuate because of changes in market interest rates.

The Group's interest rate risk arises primarily from interest-bearing borrowings. The Group manages its interest rate exposure by maintaining a prudent mix of fixed and floating rate borrowings and actively review its debt portfolio taking into account the investment holding period and nature of its assets.

These information on maturity dates and effective interest rates of financial assets and liabilities are disclosed in their respective notes.

Based on the utilisation of floating rate loans and borrowings throughout the reporting period, if interest rates had been 10 basis point lower (or higher), with all other variables held constant, the Group's profit before tax would have been RM18,834 higher (or lower), arising mainly as a result of lower (or higher) interest expense that would have been incurred. The assumed movement in basis points for interest rate sensitivity analysis is based on the currently observable market environment.

Sensitivity analysis for interest rate risk

(d) Foreign currency risk

Sensitivity analysis for foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The Group is exposed to transactional currency risk primarily through purchases that are denominated in foreign currencies. The currency giving rise to this risk is primarily the United States Dollars ("USD").

Approximately 12% of the Group's trade payables are denominated in USD.

The following table illustrates the hypothetical sensitivity of the Group's profit before tax to a reasonably possible change in the USD exchange rates at the reporting date against RM, assuming all other variables remain unchanged.

Increase/(decrease)

in profitbefore tax

RMAs at 31 December 2010

Group

USD strengthened by 5% USD weakened by 5%

(40,000)40,000

34. Capital management

The primary objective of the Group's capital management is to ensure that it maintains a healthy capital ratios in order to support its business and maximise shareholder value.

The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. Tomaintain or adjust the capital structure, the Group may adjust the dividend payments to shareholders. No changes were made in the objectives, policies or processes during the years ended 31 December 2010.

The Group monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Group includes within net debt, loans and borrowings, trade and other payables, less cash and bank balances. Capital includes equity attributable to the owners of the parent.


(continued)


34. Capital management (continued)

Loans and borrowingsTrade and other payables Less: - Cash and bank balances Net debt

Equity attributable to owners of the parentTotal capital

Capital and net debt

Gearing ratio

35. Segment information

For management purposes, the Group is organised into business units based on their products and services, and has three reportable operating segments as follows:

(i) Sales of goods - manufacture and sales of dimension stones and related products and is completed within 6 months.(ii) Construction - supply and installation of dimension stones and related products for projects secured and is completed over a period of more than 6 months.(iii) Others - investment holding.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which, in certain respects as explained in the table below, is measured differently from operating profit or loss in the consoli-dated financial statements. Group financing (including finance costs) and income taxes are managed on a group basis and are not allocated to operating segments.

Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.


(continued)

Perconsolidated

financial statements

RM

Sales ofgoods

RMConstruction

RMOthers

RMEliminations

RM Notes

2010

Revenue:

External customers 21,259,314

33,918,167 21,763,232

-43,022,546

-

Inter-segment-

1,700,000 -

(35,618,167) A Total revenue 55,177,481 21,763,232 1,700,000 (35,618,167) 43,022,546

2010RM

2009RMNote

222321

23,543,7799,192,915

(5,632,586)

19,091,2175,178,326

(1,703,830)

27,104,108 22,565,713

48,929,441 39,853,62948,929,441 39,853,629

76,033,549 62,419,342

36% 36%

Group


35. Segment information (continued)

Results:

Interest income 33,377 2,500 6,127 42,004 Finance costs 1,044,050 13,996 1,058,046

Depreciation and amortisation 1,998,808 98,848 2,097,656 Other non-cash expense 41,745 -

-

-

-

- -

-

- 41,745 Segment profit 3,073,700 1,044,728 1,467,918 (2,206,703) B 3,379,643

Assets:

Additions to non- current asstes 4,138,259 1,039,233 - - 5,177,492 Segment assets 66,172,931 14,793,910 2,402,069 - 83,368,910

Segment liabilities 34,224,032 105,359 56,603 - 34,385,994


(continued)

Perconsolidated

financial statements

RM

Sales ofgoods

RMConstruction

RMOthers

RMEliminations

RM Notes

2009Revenue:

External customers 29,816,043 4,243,425 - - 34,059,468 Inter-segment 24,960,088 - - (24,960,088) A -Total revenue 54,776,131 4,243,425 - (24,960,088) 34,059,468

Results:

Interest income 21,749 3,781 - - 25,530 Finance costs 963,226 11,358 - - 974,584 Depreciation and amortisation 1,996,627 98,848 - - 2,095,475

Segment profit 6,772,190 364,877 (6,095) (291,698) B 6,839,274

Assets:

Additions to non currentasstes 2,719,103 51,814 - - 2,770,917 Segment assets 58,387,925 8,325,223 818 - 66,713,966

Segment liabilities 26,757,749 34,017 5,913 - 26,797,679



(continued)

36. Comparative figures

37. Dividend

38. Authorisation of financial statements for issue

At the forthcoming Annual General Meeting, a final single tier dividend of 1 sen per share on 80,000,000 ordinary shares, amounting to RM800,000 in respect of the financial year ended 31 December 2010 will be proposed for shareholders' approval. The financial statements for the current financial year do not reflect this proposed dividend. Such dividend, if approved by the shareholders, will be accounted for in equity as an appropriation of retained earnings in the financial year ending 31 December 2011.

The financial statements for the year ended 31 December 2010 were authorised for issue in accordance with a resolution of the directors on 25 April 2011.

In accordance with the principles of merger accounting, the statements of financial position, statements of comprehensive income, statements of changes in equity, statements of cash flows and the related notes to the financial statements of the Group are presented as if the subsidiaries have been owned throughout the current and preceding financial years.Accordingly, comparative have been presented for the Group and these have not been audited.

35. Segment information (continued)

A :

B :

Inter-segment revenues are eliminated on consolidation.

Profit from inter-segment sales are deducted from segment profit to arrive at profit before tax presented in theconsolidated statement of comprehensive income.

Geographical information

Information about a major customer

Revenue from one major customer amount to RM10,720,000 (2009: RM4,805,000), arising from sales by theconstruction segment (2009: Sales of goods segment).

Geographical information is not prepared as the operations of the Group are predominantly carried out in Malaysia.


39. Supplementary information – Breakdown of realised and unrealised retained earnings

Group2010

RM

Company2010

RM

Total retained earnings of the Company and its subsidiaries:- Realised- Unrealised

10,834,339(1,534,054) 470,367

-

9,300,285(370,844)

470,367-

Less: Consolidation adjustments

Retained earnings of the Group/Company 8,929,441 470,367

The breakdown of the retained profits of the Group and of the Company as at 31 December 2010 into realised andunrealised earnings is presented in accordance with the directive issued by Bursa Malaysia Securities Berhad dated 25 March 2010 and prepared in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants.

Supplementary Information


List of Properties

The landed properties owned by the Group as at 31 December 2010 are set out below:

Description ofProperty/

Existing use

Approximateage of Building/

Tenure

Land Area/Built-up Area

(square meters)Date of

AcquisitionNo. Address Location/Title

1. 19/03/1988 15 years/Leasehold for 88years expiring on5 September 2054

11,087/ 2,490

19/03/1988 15 years/Leasehold for 88 years expiring on 5 September 2054

7,845/ 6,895

03/02/2000 4 years/Freehold

12,811/ 4,706

2. 03/02/2000 Not applicable/Freehold

27,187

3. 11/02/1995 16 years/Leasehold for 99 years expiring on 7 July 2093

143/ 33150, 50A & 50B, Jalan Melaka Raya 20, Taman Melaka Raya, 75000 Melaka

PN 15830 (previously known as HSD 25783) Lot 350 (previously known as PT 632)

Three-storey terrace shophouse/ tenanted to third parties

Mukim Kawasan Bandar XL, District of Melaka Tengah, State of Melaka

GM 1031 (previously known as HSM 1350 PT 13140 and originally held under GM 71)

Double storey warehouse/ warehouse for storing goods

Lot 13189, Mukim Batu Berendam, District of Melaka Tengah, State of Melaka

Lot 197, Jalan Sungai Putat, Batu Berendam, 75350 Melaka

GM 650 (previously known as GM 70) Lot 9533, Mukim Batu Berendam, District of Melaka Tengah, State of Melaka

Vacant land/ stockyard

Lot 197, JalanSungai Putat, Batu Berendam, 75350Melaka

PM 707(previously known as HSM 805and originally heldunder PM 152 Lot 197)

Double storey officeblock with a single storey factory/ head office cum mainmanufacturing plant

Lot 6756, Mukim BatuBerendam, District ofMelaka Tengah, Stateof Melaka

PM 708 (previously known as HSM 806 and originally held under PM 152)

Single storey warehouse/ warehouse for storing goods

Lot 6757, Mukim Batu Berendam, District of Melaka Tengah, State of Melaka

Audited NetCarryingamounts

as at31 December

2010RM

7,253,250

732,960

271,797


List of Properties(continued)

4. 27/12/1995 Quarry land Not applicable/Freehold

20,234

27/12/1995 Quarry land Not applicable/Freehold

20,259

27/12/1995 Quarry land Not applicable/Freehold

20,259

5. 29/07/2006 Vacant land Not applicable/Freehold

891

6. 15/09/2000 10 years/Freehold

156/ 312


93

8. 09/12/2003 8,090/ 4,248Leasehold for 60years expiring on9 April 2057

B 56 (B 5F), Blk 'B' Palais Le Renaissance Condominium, Jalan Berlian 8, Bukit Kaya, 70200 Seremban, Negeri Sembilan

Master title no. Geran 77439 (previously heldunder HSD 89511)

Condominium/ vacant

Lot 1468, Pekan BukitKepayang, District ofSeremban, State ofNegeri Sembilan

HSD 109736, PT No. 13, Pekan Subang, Daerah Petaling, Selangor

HSD 109736, PT No.13, Pekan Subang,District of Petaling,Selangor

Building underconstruction

Lot 45, Rainforest Sanctury Genting, Sempah Bentong, Pahang

GM 3983 (previouslyknown as HSM 5263)

Lot 19730, MukimBentong, District ofBentong, State of Pahang

No. 64 & 64A, Taman Dato RajaMd Hanifah, Jalan Rasah, 70300 Seremban, Negeri Sembilan

Geran 110212(previously known asHSD 114809)

Double-storey terrace shophouse/ tenanted to a third party

Lot 20435, BandarSeremban, District ofSeremban, State ofNegeri Sembilan

Lot 7670, Mukim of Tangkak, Daerah Muar, Johor

Geran 218662 (previously known asGeran 22743)

Lot 7670, Mukim Tangkak, District of Ledang, State of Johor


Geran 218666 (previously known asGeran 22744)

Lot 7671, MukimTangkak, District ofLedang, State of Johor


Geran 218661 (previously known as Geran 22742)

Lot 7669, Mukim Tangkak, District of Ledang, State of Johor

182,450

459,949

196,040

187,537

5,560,273


Existing use


Tenure





as at31 December

2010RM



9. 13/08/2003 12 years/Leasehold for 99years expiring on22 July 2072

107

10. 29/04/2005 5 years/Leasehold for 98years expiring on23 August 2102

94


464/ 164


48


105


79Unit No. 128D/ 33-2B, Block D, Seremban 2, 70300 Seremban, Negeri Sembilan

Geran 75319/ M1-D/3/ 182

Lot 21776, Mukim Rasah, District of Seremban, State of Negeri Sembilan

Office lot/ vacant

Unit No. 08, Block H, 2nd Floor, Tanming Jaya, Balakong, 43300 Selangor

Geran 34042/ M3/ 3/ 152

Lot 19704, MukimKajang, District of Hulu Langat, State of Selangor

Flat/ staff quarters

Unit SB-08-02, 8th Floor, KenanganView Apartment, Taman Bukit Kenangan, 43000Kajang, Selangor

Master title No. Geran No. 53455, Lot 40808 (previously known as Grant No. 24326, Lot 2988)

Medium cost apartment/ staff quarters

Bandar Kajang District of Ulu Langat, State of Selangor

Block A-10-05, No.451, PangsapuriMandy Villa, JalanSegambut,Segambut Tengah,51200 Kuala Lumpur

PN 33292 M1-A/ 11/143

Lot 58736, MukimBatu, District ofWilayah PersekutuanKuala Lumpur, State ofWilayah PersekutuanKuala Lumpur

Apartment/ vacant

No. 33, Jalan P9G 1/5, Presint 9, Putrajaya, 62250 Wilayah Persekutuan Putrajaya

HSD 198, PT 317, Pekan Presint 9, Bandar Putrajaya, District of Putrajaya, State of WilayahPersekutuan Putrajaya

Double-storey terrace house/ tenanted to a third party

19-2, Jalan 2/1A, Taman KepongIndah, 52100 Kuala Lumpur

Master title no. PN29645 (previously heldunder HSD 75359)

Office lot within athree-storey shop office/ vacant

Lot 49691, MukimBatu, District ofWilayah Persekutuan Kuala Lumpur, State of Wilayah Persekutuan Kuala Lumpur

121,800

150,329

364,929

46,200

97,272

66,305


Existing use


Tenure





as at31 December

2010RM




3,013/ 944

16. 19/04/2004 7 years/Leasehold for 66years expiring on 20 November 2050

972/ 502

17. 31/7/2010 8 years/Leasehold for 99 years expiring on 23 October 2101

1,407/ 339


208/ 146No. 27, Jalan SS9, Taman Seri Selendang, Batu Berendam, 75350 Melaka

Double-storey terrace house/ vacant

Geran 30848(previously known asHSD 36672)

Lot 9223(previouslyknown as PT 6619), Mukim Batu Berendam, District of MelakaTengah, State of Melaka.

No. 10, Jalan Industri Semambu 9/3, Cocopalm Industrial Park, 25300 Kuantan, Pahang

PN 10110 (previously known as HSD 18738)

Lot 50611, Mukim Kuala Kuantan, District of Kuantan, State of Pahang

Double storey office block with single storey factory/ Sales office cum shawroom and secondary processing plant with warehouse

Lot No. SD-06 Green Ville 2, Kelab Golf Sultan Abdul Aziz Shah, 40150 Shah Alam, Selangor

HS (D) 225057, PT2201 Seksyen 13,Bandar Shah Alam Daerah Petaling NegeriSelangor

Semi-detachedhouse/ vacant

No. 20, JalanPlentong 8, Sri Plentong, Industrial Park, 81750 Masai, Johor

Geran 250614 (previously known as HSD 212302)

Double storey office block with single storey factory/ Sales office cum shawroom and secondary processing plant with warehouse

Lot 182721(previouslyknown as PTD111402), MukimPlentong, District of Johor Bahru, State of Johor

2,083,660

561,245

1,348,974

141,531


Existing use


Tenure





as at31 December

2010RM


Analysis of ShareholdingsAs at 13 April 2011

Authorised share capital : RM100,000,000Issued and fully paid up capital : RM40,000,000Class of shares : Ordinary shares of RM0.50 eachVoting rights : One (1) vote per ordinary share

1. Distribution of Shareholdings

No. of No. ofSize of shareholdings holders % shares %Less than 100 shares100 to 1,000 shares1,001 to 10,000 shares10,001 to 100,000 shares100,001 to less than 5% of issued shares5% and above of issued shares

Total 662 100.00 80,000,000 100.00

2. List of Substantial Shareholders

No. of No. ofSubstantial Shareholders shares % shares %

Jasa Maju Jaya Sdn. Bhd. 36,000,000 45.00 - -Low Kim Hock 4,320,000 5.40 36,040,000 ** 45.05

**

Direct interest Indirect interest

The substantial shareholders of Hock Heng Stone Industries Bhd. ("Hock Heng") based on the Register of Substantial Shareholders of the Company and their respective shareholdings are as follows:

Deemed interested by virtue of his substantial shareholdings in Jasa Maju Jaya Sdn. Bhd. and the direct interest of his son, Low Yong Seng's shareholding in Hock Heng pursuant to Section 6A of the Companies Act, 1965.

3. List of Directors' Shareholdings

No. of No. ofDirectors shares % shares %

Low Kim Hock 4,320,000 5.40 36,040,000 ** 45.05

Low Kim Joo 2,592,000 3.24 36,000,000 * 45.00Low Kim Chung 2,304,000 2.88 36,000,000 * 45.00Low Yong Seng 40,000 0.05 - -Chong Peng Khang -

-

- -

Yap Koon Roy 30,000

0.04

- -Peter Yong Kuen Fook 30,000

0.04

- -

**

*

Direct interest Indirect interest

The Directors' shareholdings of Hock Heng based on the Register of Directors' Shareholdings of the Company are as follows:

Deemed interested by virtue of his substantial shareholdings in Jasa Maju Jaya Sdn. Bhd. and the direct interest of his son, Low Yong Seng's shareholding in Hock Heng pursuant to Section 6A of the Companies Act, 1965.

Deemed interested by virtue of their substantial shareholdings in Jasa Maju Jaya Sdn. Bhd. pursuant to Section 6A of the Companies Act, 1965.


Analysis of Shareholdings(continued)

As at 13 April 2011

4. Thirty (30) Largest Shareholders

No. Shareholders No. of shares %

1. Jasa Maju Jaya Sdn. Bhd. 36,000,000 45.00 2. Low Kim Hock 4,320,000 5.40 3. Low Kim Joo 2,592,000 3.24 4. Low Kim Chung 2,304,000 2.88 5. Low Kim Ong 2,304,000 2.88 6. Ab Rauf Bin Yusoh 2,000,000 2.50 7. Low Jin Guat 1,570,700 1.96 8. Low Jin Hoon 1,536,000 1.92 9. Low Kim Chye 1,071,000 1.34 10. Low Kim Siew 1,016,000 1.27 11. Jiang Guotian 920,000 1.15 12. Tai Teck Keem 910,000 1.14 13. Teo Yong Swee 800,000 1.00 14. Low Jin Kuan 790,300 0.99 15. Low Kim Choon 770,000 0.96 16. Liow Hock Siew 690,000 0.86 17. Wang Chengyu 660,000 0.83 18. Mohamad Salleh Yong Bin Abdullah 660,000 0.83 19. Expertise International A&I (M) Sdn. Bhd. 597,200 0.75 20. Bee Ping Chon @ Mah Peng Choon 591,000 0.74 21. Tan Kiew Moy 543,000 0.68 22. Lim Chian Thye 460,000 0.57 23. Lau Tee Ping 460,000 0.57 24. Low Han Wah 460,000 0.5725. Lim Sek Cheon 460,000 0.5726. Tan See Teck 460,000 0.5727. Chan Kin Loong 460,000 0.5728. Lai Meng Chee 460,000 0.5729. Xin Jinping 460,000 0.5730. Yang Weiyuan 460,000 0.57


Notice of Annual General Meeting

AGENDA

NOTICE IS HEREBY GIVEN THAT the Second Annual General Meeting (AGM) of the Company will be held at the Ballroom of Ornaresort Berhad, Batu 16, Jalan Gapam, Ladang Gapam, Bemban, 77200 Jasin, Melaka on Friday, 10 June 2011 at 10.30 a.m. for the following purposes:-

7. As Special Business

To consider and, if thought fit, to pass the following resolution as Ordinary Resolution:-

Ordinary Resolution- Proposed Shareholders’ Mandate For Recurrent Related Party Transactions Of A Revenue Or Trading Nature

THAT subject to the Companies Act, 1965, the Memorandum and Articles of Association of the Company and the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, approval be and is hereby given to the Company and its subsidiaries to enter into any of the category of recurrent transactions of a revenue or trading nature as set out in Section 2.3 of the Company’s Circular to Shareholders dated 19 May 2011 with the related parties mentioned therein which are necessary for Hock Heng Stone Industries Bhd. Group’s day-to-day operations subject further to the following:

(a) the transactions are in the ordinary course of business and are on normal commercial terms which are not more favourable to the related parties than those available to the public and on terms not to the detriment of the minority shareholders; and

(b) disclosure is made in the annual report of the breakdown of the aggregate value of transactions conducted pursuant to the Shareholders’ Mandate during the financial year based on the following information:

(i) the types of recurrent related party transactions made; and (ii) the names of the related parties involved in each type of the recurrent related party transactions made and their relationship with the Company.

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

(a) the conclusion of the next AGM of the Company following the forthcoming AGM at which such Proposed Shareholders’ Mandate was passed, at which time it will lapse, unless by a resolution passed at an AGM whereby the authority is renewed;

(b) the expiration of the period within which the next AGM of the Company subsequent to the date it is required to be held pursuant to the provisions of the Act; or

Resolution 11. To receive the Audited Financial Statements for the financial year ended 31 December 2010 together with the Reports of the Directors and the Auditors thereon.

2. To approve the declaration of the Final Single Tier Dividend of 1 sen per share for the financial year ended 31 December 2010.

3. To approve the payment of Directors’ Fees for the financial year ended 31 December 2010.

4. To re-elect the following Directors who retire pursuant to Article 96 of the Company’s Articles of Association and being eligible, have offered themselves for re-election:-

5. To re-elect Mr. Low Yong Seng, the Director who retires pursuant to Article 103 of the Company’s Articles of Association and being eligible, has offered himself for re-election.

6. To re-appoint Ernst & Young as Auditors of the Company until the conclusion of the next AGM and to authorise the Directors to fix their remuneration.

Resolution 2

Resolution 3

Resolution 4Resolution 5

• Mr. Low Kim Hock • Mr. Low Kim Chung

Resolution 6

Resolution 7

Resolution 8

NOTICE OF DIVIDEND ENTITLEMENT

NOTICE IS ALSO HEREBY GIVEN that the Final Single Tier Dividend of 1 sen per share in respect of financial year ended 31 December 2010 will be payable on 15 July 2011 to depositors who are registered in the Record of Depositors at the close of business on 1 July 2011, if approved by shareholders at the forthcoming Second AGM on Friday,10 June 2011.

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

(a) Shares transferred into the Depositor’s Securities Account before 4.00 p.m. on 1 July 2011 in respect of ordinary transfers; and

(b) Shares bought on Bursa Malaysia Securities Berhad on a cum entitlement basis accordingly to the Rules of the Bursa Malaysia Securities Berhad.

Explanatory Notes To Special Business:-

The Resolution 8, if passed would enable the Company and its subsidiary companies to enter into any of the recurrent related party transactions of a revenue or trading nature which are necessary for the Group’s day-to-day operations, subject to the transactions being in the ordinary course of business and on normal commercial terms which are not more favourable to the related parties than those generally available to the public and are not to the detriment of the minority shareholders of the Company.

Notes:

Notice of Annual General Meeting(continued)

By Order of the Board

Chua Siew Chuan (MAICSA 0777689)Sean Ne Teo (LS 0008058)Company Secretaries

Melaka19 May 2011

1. Proposed Shareholders’ Mandate for Recurrent Related Party Transactions of A Revenue or Trading Nature

1. In respect of deposited security, only members whose names appear in the Record of Depositors on 6 June 2011 (“General Meeting Record of Depositors”) shall be eligible to attend the Meeting.

2. A member of the Company entitled to attend and vote at the meeting is entitled to appoint at least one proxy to attend and vote in his stead. A proxy may but need not be a member of the Company and the provisions of section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.

3. Where a member appoints more than one proxy, the appointments shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy.

4. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or if the appointor is a corporation, either under its seal or under the hand of an officer or attorney duly authorised.

5. The instrument appointing a proxy and the power of attorney or other authority, if any, must be deposited at the Registered Office of the Company at Lot 1A, 6th Floor, Menara Pertam, Jalan BBP 2, Taman Batu Berendam Putra, Batu Berendam, 75350 Melaka not less than forty-eight (48) hours before the time fixed for holding the meeting or at any adjournment thereof.

8. To transact any other ordinary business of which due notice has been given in accordance with the Companies Act,1965.

whichever is earlier;

AND the Directors and/or any of them be and are hereby authorised to complete and do all such acts and things (including executing such documents as may be required) to give effect to the transactions contemplated and/or authorised by this resolution.

(c) revoked or varied by resolution passed by the shareholders in an AGM or Extraordinary General Meeting,


This page has been left blank intentionally

CDS ACCOUNT NUMBER

NUMBER OF SHARES HELD

No. Resolution

No. Resolution

1.

HOCK HENG STONE INDUSTRIES BHD.(Company No. 840040-H)

(Incorporated in Malaysia)

FORM OF PROXY

NRIC No./Company No.

being a member/members of HOCK HENG STONE INDUSTRIES BHD., do hereby appoint

of

* I / We

of (full address)

of

or failing him,

or failing him, the CHAIRMAN OF THE MEETING, as *my/our proxy to attend and vote for *me/us and on *my/our behalf at the Second Annual General Meeting of the Company to be held at Ballroom of Ornaresort Berhad, Batu 16, Jalan Gapam, Ladang Gapam, Bemban, 77200 Jasin, Melaka on Friday, 10 June 2011 at 10.30 a.m. and at any adjournment thereof.

For Against

2.

3.

4.

5.

6.

7.

8.

To approve the declaration of the Final Single Tier Dividend of 1 sen per share for the financialyear ended 31 December 2010.

To approve the payment of Directors’ Fees for the financial year ended 31 December 2010.

To re-elect Mr. Low Kim Hock who retires pursuant to Article 96 of the Company’s Articles of Association.

To re-elect Mr. Low Kim Chung who retires pursuant to Article 96 of the Company’s Articles of Association.

To re-elect Mr. Low Yong Seng who retires pursuant to Article 103 of the Company’s Articles of Association.

To re-appoint Ernst & Young as Auditors of the Company until the conclusion of the next AGM and toauthorise the Directors to fix their remuneration.

Special BusinessOrdinary Resolution- Proposed Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature

* Strike out whichever not applicable.

Please indicate with an “X” in the space provided above how you wish your votes to be casted. If no specific direction as tovoting is given, the Proxy will vote or abstain from voting at his/her discretion.

As witness my/our hand(s) this _________ day of _______________ 2011.

Signature of Member/Common Seal

Notes 1) In respect of deposited security, only members whose names appear in the Record of Depositors on 6 June 2011 (“General Meeting Record of Depositors”) shall be eligible to attend the Meeting.

2) A member of the Company entitled to attend and vote at the meeting is entitled to appoint at least one proxy to attend and vote in his stead. A proxy may but need not be a member of the Company and the provisions of section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.

3) Where a member appoints more than one proxy, the appointments shall be invalid unless he specifies the proportions of his holdings to be represented by each proxy.

4) The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or if the appointor is a corporation, either under its seal or under the hand of an officer or attorney duly authorised.

5) The instrument appointing a proxy and the power of attorney or other authority, if any, must be deposited at the Registered Office of the Company at Lot 1A, 6th Floor, Menara Pertam, Jalan BBP 2, Taman Batu Berendam Putra, Batu Berendam, 75350 Melaka not less than forty-eight (48) hours before the time fixed for holding the meeting or at any adjournment thereof.

To receive the Audited Financial Statements for the financial year ended 31 December 2010 together with the Reports of theDirectors and the Auditors thereon.

FOLD HERE

FOLD THIS FLAP FOR SEALING

THE COMPANY SECRETARY

HOCK HENG STONE INDUSTRIES BHD.

(Company No. 840040-H) (Incorporated in Malaysia)

Lot 1A, 6th Floor, Menara Pertam Jalan BBP 2, Taman Batu Berendam PutraBatu Berendam, 75350 Melaka, Malaysia

FOLD HERE

Stamp

Lot 13, Jalan TUDM,Seksyen U6,Kg. Baru Subang,40150 Shah Alam,Selangor Darul Ehsan.Tel : 03. 7843 9933Fax : 03. 7845 6753

Hock Heng Marketing (KL) Sdn. Bhd.(In progress of renovation)

10, Jalan Industrial Semambu 9/3,Cocopalm Industrial Park,25300 Kuantan,Pahang Darul Makmur.Tel : 09. 560 2212 / 2213Fax : 09. 560 2218

Hock Heng Stone (East Coast)Sdn. Bhd.

Lot 197, Jalan Sungai Putat,Batu Berendam,75350 Melaka.Tel : 06. 317 2028Fax : 06. 317 9324Email : [email protected] : www.hockheng.com.my

Hock Heng Stone Industries Bhd.

Lot 197, Jalan Sungai Putat,Batu Berendam,75350 Melaka.Tel : 06. 317 2028Fax : 06. 317 4264

Hock Heng Granite Sdn. Bhd.

20, PTD 111402,Jalan Plentong 8,Sri Plentong Industrial Park,81750 Masai,Johor Darul Takzim.Tel : 07. 386 8028 / 9028Fax : 07. 386 3028

Hock Heng Marketing(Southern Region) Sdn. Bhd.

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