Hock Heng AR205 Cover - malaysiastock.biz Letter to Shareholders 08 ... Maybank Islamic Berhad (787435-M) Stock Exchange Listing Main Market of Bursa Malaysia Securities Berhad Stock

A N N U A LR E P O R T

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HOCK HENG STONE INDUSTRIES BHD(840040-H)

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


ABOUT HOCK HENG Hock Heng Stone Industries Bhd. (“Hock Heng”) is one of the major manufacturers of dimension stones in Malaysia. Hock Heng is a public listed company on the Main Market of Bursa Malaysia Securities Berhad.

Hock Heng’s business activities include sourcing, processing and distributing a wide range of dimension stones including: granite, marble, sandstone and slate. Hock Heng’s products are mainly used for a wide array of applications in the commercial and residential properties, such as façade walls, flooring, staircases, monuments, furniture, pillars, garden sets and landscaping.

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

Tel : 06. 317 2028Fax : 06. 317 4264

Hock Heng Granite Sdn. Bhd.

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

Tel : 06. 317 2028Fax : 06. 317 9324

Email : [email protected] : www.hockheng.com.my

Hock Heng Stone Industries Bhd.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.

20, PTD 111402,Jalan Plentong 8,

Sri Plentong Industrial Park,81750 Masai,

Johor Darul Takzim.Tel : 07. 386 8028 / 9028

Fax : 07. 386 3028

Hock Heng Marketing(Southern Region) Sdn. Bhd.

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.

Contacts

Hock Heng caters to retail and commercial customers through its manufacturing plant in Melaka as well as sales cum secondary processing plants located in Subang, Selangor, Kuantan, Pahang and Johor Bahru, Johor. Besides, Hock Heng also has sales offices in Seremban, Negeri Sembilan and Batu Pahat, Johor.

Other than dimension stones business, Hock Heng also venture into property development business to diversify its earning base and to enhance Hock Heng’s overall long term growth prospects.

CONTENTSCorporate Information 02

Corporate Structure 03

Financial Highlights 04

Profile of Directors 05

Letter to Shareholders 08

Corporate Governance Statement 13

Statement on Risk Management and Internal Control 22

Audit Committee Report 24

Directors’ Responsibility Statement 27

Financial Statements for the financial year ended 31 December 2015 28

List of Properties 87

Analysis of Shareholdings 92

Notice of Annual General Meeting 94

Form of Proxy

2 Hock Heng Stone Industries Bhd. (840040-H) Annual Report 2015

CORPORATE INFORMATION

Board of Directors

Peter Yong Kuen Fook(Independent Non-Executive Chairman) Low Kim Hock(Managing Director)

Low Kim Joo(Executive Director)

Low Kim Ong(Executive Director)

Low Yong Seng(Executive Director)

Chong Peng Khang(Independent Non-Executive Director) Yap Koon Roy(Independent Non-Executive Director)

Audit Committee

Chong Peng Khang (Chairman)Yap Koon RoyPeter Yong Kuen Fook Nomination Committee Peter Yong Kuen Fook (Chairman)Chong Peng Khang Yap Koon Roy

Remuneration Committee Yap Koon Roy (Chairman)Chong Peng Khang Low Kim Hock

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

Registered Office No. 60-1, Jalan Lagenda 5 Taman 1 Lagenda 75400 Melaka, Malaysia Tel: 06-288 0210 Fax: 06-288 0570

Head Office Lot 197, Jalan Sungai PutatBatu Berendam75350 Melaka, MalaysiaTel: 06-317 2028Fax: 06-317 9324E-mail: [email protected]: www.hockheng.com.my

Registrar

Symphony Share Registrars Sdn. Bhd. (378993-D)Level 6, Symphony HousePusat Dagangan Dana 1Jalan PJU 1A/4647301 Petaling JayaSelangor Darul EhsanTel: 03-7841 8000Fax: 03-7841 8151 / 8152 Auditors BDO (AF: 0206) Suite 18-04, Level 18, Menara ZurichNo. 15, Jalan Dato’ Abdullah Tahir80300 Johor BahruJohor Darul Ta’zimTel: 07-331 9815Fax: 07-331 9817

Principal Bankers Public Bank Berhad (6463-H)CIMB Bank Berhad (13491-P)Maybank Islamic Berhad (787435-M) Stock Exchange Listing Main Market of Bursa Malaysia Securities BerhadStock Code: 5165 Stock Name: HOKHENG

3Hock Heng Stone Industries Bhd. (840040-H) Annual Report 2015

Hock Heng Granite Sdn. Bhd.(168782-D)100%

Hock Heng Marketing (KL) Sdn. Bhd.(610659-T)100%

Hock Heng Marketing (Southern Region) Sdn. Bhd.(308130-X)100%

PMK Construction & Design Sdn. Bhd.(538315-X)100%

Hock Heng Stone (East Coast) Sdn. Bhd.(701947-T)

100%

Hock Heng Realty Sdn. Bhd.(972711-V)

100%

Dunia Batu Alam Sdn. Bhd.(487236-X)

60%

CORPORATE STRUCTURE


Financialyearended31December 2011 2012 2013 2014 2015 RM’000 RM’000 RM’000 RM’000 RM’000Revenue 40,302 34,718 39,719 39,954 37,933Earningsbeforeinterest,tax,depreciation andamortisation 6,463 4,565 5,539 5,048 5,794Profitbeforetax 3,120 1,040 1,551 1,667 1,848Profitattributabletoownersoftheparent 2,226 729 1,169 866 968Shareholders’equity 50,355 50,284 51,453 52,320 53,259Earningspershare(sen)^ 2.78 0.91 1.46 1.08 1.21Netassets(“NA”)pershare(RM)^ 0.63 0.63 0.64 0.65 0.67

^ForFYE2011to2015 ComputedbasedontheprofitattributabletoownersoftheparentandNAfortherespectivefinancialyearsdividedbytheweightedaveragenumberofsharesin

issueduringthefinancialyearof80,000,000shares.

0 10000 20000 30000 40000 50000 60000

SHAREHOLDERS’ EQUITYRM’000

NET ASSETS PER SHARE(RM)

PROFIT BEFORE TAXRM’000

REVENUERM’000

0 10000 20000 30000 40000 50000

2011

2012

2013

2014

2015

2011

2012

2013

2014

2015

2011

2012

2013

2014

2015

2011

2012

2013

2014

2015

0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8

0 500 1000 1500 2000 2500 3000 3500

40,302

34,718

39,719

39,954

37,933

50,355

50,284

51,453

52,320

53,259

0.63

0.63

0.64

0.65

0.67

3,120

1,040

1,551

1.667

1,848

FINANCIAL HIGHLIGHTS


Mr. Peter Yong Kuen Fook, a Malaysian aged 58, was appointed to the Board of Hock Heng as an Independent Non-Executive Director on 21 October 2009 and subsequently re-designate as Independent Non-Executive Chairman on 1 March 2013. He holds Bachelor’s Degree in Electrical Engineering from City University, England in 1982. He has more than 25 years of experience in project management, having started his career as a project engineer in Pathfinder M&E Sdn. Bhd. in 1983 and thereafter held the position as engineer in various companies mainly in the construction sector.

Mr. Peter Yong does not have any directorship in other public company.

He is a shareholder of the Company and does not have any family relationship with any other Director and/or major shareholder of the Company.

He does not have any conflict of interest with the Company and has not been convicted of any offences within the past 10 years other than traffic offences.

He is the Chairman of the Nomination Committee and a member of the Audit Committee of the Company.

Mr. Low Kim Hock, a Malaysian aged 59, was appointed to the Board of Hock Heng as Executive Chairman and Managing Director on 28 November 2008 and subsequently re-designate as Managing Director on 1 March 2013. In 1988, Mr. Low founded Hock Heng Granite Sdn. Bhd. (“HHG”), a wholly owned subsidiary of the Company, which paved way for his involvement in the manufacturing of dimension stones and related products. His extensive experience in the dimension stones industry is as a result of over 35 years of hands-on working experience in the industry. Mr. Low has been instrumental to the success, growth and development of the Group. His involvement in the industry started when he began working in his small family-owned business at the age of 18, which specialised in the manufacturing, polishing and engraving of dimension stones.

Through his years of exposure in the dimension stones industry and his extensive travels to foreign countries in search of dimension stones which he believes will have good market potential, he has gained vast experience, knowledge and skills in the selection of quality marble and granite blocks and the efficient processing of dimension stones which are considered crucial for the success of the Group. His responsibilities include developing the overall business strategies and direction, managing the day-to-day operations and business development of the Group.

Mr. Low is a substantial shareholder of the Company by virtue of his direct interest and indirect interest via his shareholding and directorship in Jasa Maju Jaya Sdn. Bhd., a major shareholder of Hock Heng (“JMJ”).

He is the father of Low Yong Seng and brother of Low Kim Joo, Low Kim Ong and Low Kim Chung. Low Kim Chung is a substantial shareholder of the Company by virtue of his direct interest and

indirect interest via his shareholding and directorship in JMJ.


He is a member of the Remuneration Committee of the Company. He also sits on the Board of several private limited companies.

Low Kim HockManaging Director

Peter Yong Kuen FookIndependent Non-Executive Chairman

PROFILE OF DIRECTORS


Mr. Low Kim Joo, a Malaysian aged 52, was appointed to the Board of Hock Heng as an Executive Director on 28 November 2008. He has more than 27 years of experience in the dimension stones industry when he began his career in HHG in 1988 as an Executive Director and was responsible for the sales and marketing operations of HHG. He was also appointed as the Executive and Marketing Director in both Hock Heng Marketing (Southern Region) Sdn. Bhd. (“HHMSR”) and Hock Heng Stone (East Coast) Sdn. Bhd. (“HHSEC”), the subsidiary companies of Hock Heng, in 2000 and 2005 respectively. He was instrumental in expanding the Group’s non-project based business in the Southern Region and East Coast of Peninsular Malaysia. He is in-charge of the management and operations of HHMSR and HHSEC which focus on non-project based clientele.

Mr. Low is a substantial shareholder of the Company by virtue of his direct interest and indirect interest via his shareholding and directorship in JMJ.

He is the uncle of Low Yong Seng and the brother of Low Kim Hock, Low Kim Ong and Low Kim Chung.


He sits on the Board of several private limited companies.

Mr. Low Kim Ong, a Malaysian aged 55, was appointed to the Board of Hock Heng as an Executive Director on 11 July 2013. He has more than 24 years of experience in the dimension stones industry, especially in the manufacturing, engraving and sandblasting of monuments. In 1988, he joined as an Executive Director in HHG and was appointed as General Manager in PMK Construction & Design Sdn Bhd (“PMK”), a wholly owned subsidiary of Hock Heng after establishment of PMK in 2001, which focuses on Hock Heng Group’s monuments and other dimension stones related product market. In 2004, he was appointed as Director of PMK. He is currently the General Manager of PMK.

Mr. Low is a substantial shareholder of the Company by virtue of his direct interest and indirect interest via his shareholding and directorship in JMJ.

He is the uncle of Low Yong Seng and the brother of Low Kim Hock, Low Kim Joo and Low Kim Chung.


He sits on the Board of several private limited companies.

Low Kim JooExecutive Director

Low Kim OngExecutive Director

PROFILE OF DIRECTORS (CONT’D)


Mr. Low Yong Seng, a Malaysian aged 35, was appointed to the Board of Hock Heng as an Executive Director on 12 April 2010. He holds Bachelor of Accounting degree from University of Herfordshine, United Kingdom in 2002. He begins his career with the Group after graduate as an Account Executive in HHG. He has been promoted to Accounts and Finance Manager in 2005. He is responsible for the accounts, finance and investor relationships of the Group.

Mr. Low is a shareholder of the Company.

He is the son of Low Kim Hock and nephew of Low Kim Joo, Low Kim Ong and Low Kim Chung.


Mr. Chong Peng Khang, a Malaysian aged 36, was appointed to the Board of Hock Heng as an Independent Non-Executive Director on 21 October 2009. He holds Bachelor of Accounting degree from Multimedia University, Malaysia in 2002. He began his career as an auditor with Deloittee KassimChan in 2002 and subsequently joined Ernst & Young in 2003. He has been involved in auditing and business advisory services to companies from various industries. He is a Chartered Accountant by profession as well as a Fellow of the Association of Chartered Certified Accountants, United Kingdom (“ACCA”) and a member of the Malaysian Institute of Accountants (“MIA”). He is currently a Financial Controller in a public listed company in Malaysia.

He is also a Director of Fibon Berhad and TPC Plus Berhad.

Mr. Chong does not have any shares in the Company and does not have any family relationship with any other Director and/or major shareholder of the Company.


He is the Chairman of the Audit Committee and members of the Remuneration Committee and Nomination Committee of the Company.

Mr. Yap Koon Roy, a Malaysian aged 53, was appointed to the Board of Hock Heng as an Independent Non-Executive Director on 21 October 2009. He holds Bachelor of Laws degree from University of Malaya in 1986. He was called to the Malaysian Bar in March 1987 and has been in active legal practice since then. He began his practice in Messrs Nordin & Phua, Advocates & Solicitors and subsequently started his own practice, Messrs Yap Koon Roy & Associates in 1997. He has approximately 27 years of experience in the legal services industry and serves as a Committee Member of the Strata Title Board of the Melaka State Government.

Mr. Yap does not have any directorship in other public company.

He is a shareholder of the Company and does not have any family relationship with any other Director and/or major shareholder of the Company.


He is the Chairman of the Remuneration Committee and members of the Audit Committee and Nomination Committee of the Company. He also sits on the Board of a private limited company.

Low Yong SengExecutive Director

Chong Peng KhangIndependent Non-Executive Director

Yap Koon RoyIndependent Non-Executive Director

PROFILE OF DIRECTORS (CONT’D)


FINANCIALHIGHLIGHTSDuring the financial year ended 31 December 2015, theGroup registered marginally lower revenue of RM37.93million as compared to the preceding year’s revenue ofRM39.95million.Thedecreaseinrevenuewasmainlyduetosofteningdimensionstoneretailmarketoff-setbystrengtheningconstructionsegment.

However, the Group registers a stronger profit before taxof RM1.85 million for the financial year under review incomparison with the preceding year’s profit before tax ofRM1.67millionmainlydue to theGroup’s continuingeffortin undertaking certain efficiency maximisation and costoptimisationmeasures.

The Group continues to maintain a set of healthy financialposition with shareholders’ equity of RM53.26 million andnet assets ofRM0.67per ordinary share as at 31December2015.

PROPERTYDEVELOPMENT By leveraging current wealth and growth, we strategicallyventure into development business for commercial andresidentialpropertydevelopmentprojectswhilstcontinuingtostrengthenandbuildup thedimension stonesbusinesses forfuturegrowthandprofitability.

Weforeseeoneoftheresidentialpropertydevelopmentprojectwill commence and contribute to the Group’s revenue andprofitinyear2016.ThisisexpectedtoboostuptheGroup’srevenueandprofitaswellastoimprovethenetassetpershareoftheGroup.

LETTER TO SHAREHOLDERS

Dear Valued Shareholders,

On behalf of the Board of Directors (“the Board”), we are pleased to present our Annual Report together with the Audited Financial Statements of Hock Heng Stone Industries Bhd. (“Hock Heng” or “the Company”) for the financial year ended 31 December 2015 to you.


LETTER TO SHAREHOLDERS (CONT’D)

The property development business will provide another source of revenue and income to the Group, it also reduces its sole dependency on the existing core business of dimension stone products.

INDUSTRY TRENDS AND DEVELOPMENT Global economic activity continued to expand at a moderate pace in year 2015. The advanced economies registered modest improvements, but with the pace of growth remaining constrained by crisis-related legacies, including high indebtedness and labour market weaknesses. In Asia, economic activity continued to be supported by domestic demand.

The Malaysian economy expanded by 5.0% in 2015 (2014: 6.0%)*, driven mainly by private sector demand. On the supply side, growth was underpinned by the major economic sectors.

Despite the challenging economic environment, the private sector continued to be the key driver of growth. The private sector grew by 6.1% in year 2015 (2014: 7.9%)*, supported by stable wage growth, labour market conditions and driven by capital spending in the manufacturing and services sectors.

The construction sector maintained strong growth by 8.2% in year 2015 (2014: 11.6%)* among the economic sectors, supported mainly by the civil engineering and residential sub-sectors. Activity in the civil engineering sub-sector was underpinned by petrochemical and transport-related projects while construction in the mass-market and high-end housing segments supported growth in the residential sub-sector. This has driven Hock Heng to improve in revenue especially in construction segment during the financial year 2015.

FUTURE PROSPECTS The Malaysian economy in year 2016 is expected to grow moderately at between 4% to 5%^, driven by domestic demand with private expenditure as the main anchor while the government expects public expenditure to increase moderately.

Looking forward into year 2016, the weakening Ringgit Malaysia and the increase of minimum wage will continue to pose challenges to Malaysian business in coping with the higher operating costs.

With the favourable outlook of construction sector in year 2016, the Group will continue to focus on maximising efficiency and undertake strategies to ensure the long-term strength of the businesses and operations.

Barring any unforeseen circumstances, the Board is confident that the Group will continue to be resilient and remain profitable in the financial year ending 31 December 2016.

DIVIDEND As the Group is strengthening its businesses for its long-term sustainability, the Board, after careful consideration, has not recommended any dividend payment for the financial year ended 31 December 2015.


APPRECIATIONOn behalf of the Board, we wish to express our sincereappreciation toallvaluedand loyalshareholders,customers,vendors,businessassociates,bankersandregulatoryauthoritiesforyourcontinuingsupportandconfidencetotheGroup.

We would also like to express our sincere appreciation tothe management and staff throughout the Group, for theircommitment and dedication in carrying out their duties andresponsibilitiesdiligently.

Finally,wewishtothankourfellowDirectorsfortheircounsel,contributionandsupportthroughouttheyear.WeareconfidentthatwiththeirwisdomandexperiencewillbenefitandbringtheGrouptowardsexcellence.

Thankyou. PETERYONGKUENFOOK IndependentNon-ExecutiveChairman

LOWKIMHOCKManagingDirector

Source:*BankNegaraMalaysiaQuarterlyBulletin(4thQuarter2015)^EconomicReport2015/2016,MinistryofFinance,Malaysia

LETTER TO SHAREHOLDERS (CONT’D)


Corporate GovernanCe Statement

The Board of Hock Heng recognises the need to maintain high standards of corporate governance to enhance shareholders’ value with corporate accountability and transparency. Thus, the Board is commited to ensure that its corporate governance practices are in line with the principles and recommendations of the Malaysian Code on Corporate Governance 2012 (“MCCG 2012”). The Board is pleased to provide the following statement, which outlines the main corporate governance practices that were in place throughout the financial year unless otherwise stated. PRINCIPLE 1: ESTABLISH CLEAR ROLES AND RESPONSIBILITIES Clear Function of the Board and Management In carrying out its functions effectively, the Board is supported by Audit Committee, Remuneration Committee and Nomination Committee of all which operate within defined terms and reference. The respective functions of each committee are clearly set out to ensure accountability of all parties. The Board Committees are entrusted with specific responsibilities to oversee the Group’s affairs, with authority to act on behalf of the Board in accordance with their respective functions. Although specific powers are delegated to the Board Committees, the Board continues to keep itself abreast of the actions and decisions taken by each Board Committee, including key issues via reports by the Chairman of each of the Board Committees, as well as the tabling of minutes of all Board Committee meetings, to the Board at Board meetings. Duties and Responsibilities of the Board The Board plays a pivotal role in the stewardship of the Group’s direction and operations, including enhancing long-term shareholders’ value. In order to fulfill this role, the Board is responsible for the overall corporate governance of the Group to ensure its sustainability. Amongst the key responsibilities of the Board are as described below:

- Review and approve the corporate policies, strategies and financial plans of the Group, and addressing the sustainability of the Group’s businesses;

- Overseeing the conduct of the Group’s business including monitor of financial performance and approval of the financial reports;

- Identifying principal business risks faced by the Group and ensuring the implementation of appropriate internal controls and mitigating action to address such risks;

- Ensure that appropriate processes are in place in respect of succession planning for appointments to the Board and to senior management positions; and

- Reviewing the adequacy and integrity of the Group’s internal control system and the management of information system. The Board also monitors the performance of the Managing Director and the Management. The roles of Managing Director and Chairman are distinct and clearly defined by the Board, so as to ensure balance of power and authority. The Managing Director oversees the day-to-day operations of the Group, organisational effectiveness and implementation of Board policies, strategies and decisions while the Chairman leads the Board Meeting to ensure the Board’s effectiveness and that it has properly carried out its duties and responsibilities. Code of Conduct The Code of Conduct (“the Code”) is applied to all employees, customers and vendors. It establishes ethical standard to ensure that working environment and condition are safe and healthy, workers are treated with respect and dignity, and business operation are conducted ethically. The fundamental in adopting the Code is to ensure that all business activities are in full compliance with the laws, rules and regulations. If a law of the country conflicts with a rule or policy set out in this code, affected personnel should comply with the law. Besides, the Code encourages affected personnel to go beyond legal compliance and adopt international recognized standard in order to advance business ethics and control. The Group is open to receive input from stakeholders in the continue development and implementation of the Code of Conduct adopt the best practice where possible.


Corporate GovernanCe Statement (Cont’D)

PRINCIPLE 1: ESTABLISH CLEAR ROLES AND RESPONSIBILITIES (continued) Strategies Promote Sustainability The Board promotes highest standards of integrity, transparency and accountability in the Group’s business and operations to ensure business sustainability. For employees, the Board will strive to recruit and retain the most competence people, offer them competitive terms and conditions of service, and maximize their personal progression through training and development. Hock Heng Group is committed to provide to all employees a safe, secure, healthy and conducive workplace culture and environment, where the values and mutual and reciprocal respect, trust and confidence and upheld and activities promoted. For government, the Board undertakes to comply with all applicable laws and regulations laid down and to participate in project promulgated by government for industry and social development. The Board pledges that the Group will be a responsible corporate citizen wherever it operates and will take into consideration the needs and aspiration of local communities. Access to information and advice The Directors, whether as a group or individually, are entitled to seek advice from independent professional at the Company’s expense on specific issues to enable them to discharge their duties in relation to matters being deliberated. All Directors received notice of meetings with pre-set agendas together with board papers before the meetings and within sufficient time to enable the Directors to obtain further explanations, where applicable, in order for them to be well informed before the day of holding the meetings. Any proposals and recommendations by the management will be discussed by the Board before a decision is made. Minutes are prepared on all Board proceedings and will be signed by the Chairman of the meeting. The Directors are notified of any corporate announcement released to Bursa Malaysia Securities Berhad and the impending restriction on dealing with the securities of the Company prior to the announcement of the quarterly financial results. Company Secretaries The Company Secretaries are responsible for ensuring the Board procedures are followed, that the applicable rules and regulations for the conduct of the affairs of the Board are complied with and for all matters associated with the maintenance of the Board or otherwise required for its efficient operation. The Company Secretaries advise the Board on issues relating to corporate governance, compliance with laws, rules, procedures and regulatory requirements. The Company Secretaries attend and ensure that all Board meetings are properly convened, and that accurate and proper records of the proceedings and resolutions passed are taken and maintained in the statutory register of the Company. The Board ensures that the Company Secretaries appointed have the relevant experiences and skills. Board Charter The Board has established and adopted a Board Charter, which sets out the Board’s composition, roles, responsibilities and processes of the Board and ensure all Board members acting on behalf of the Group are aware of their duties and responsibilities as Board members. The Board Charter had been formalised and will be reviewed and updated periodically in accordance with the needs of the Group and any regulations to ensure that it remains current and relevant. The Board Charter is available on Hock Heng’s corporate website at http://www.hockheng.com.my



PRINCIPLE 2: STRENGTHEN COMPOSITION Nomination Committee The Nomination Committee was established to assist the Board in their responsibilities in nominating new nominees to the Board. The Nomination Committee comprises three (3) Independent Non-Executive Directors. The members of the Nomination Committee are: Peter Yong Kuen Fook - ChairmanChong Peng Khang - MemberYap Koon Roy - Member The term of office of the Nomination Committee shall be for a period of three (3) years and may be re-nominated and appointed by the Board from time to time. Terms of reference of the Committee are being clearly defined. The Nomination Committee met once during the financial year under review. The duties and responsibilities of the Nomination Committee are as follows:- (a) to recommend to the Board of Directors, candidates for all directorships to be filled by the Shareholders or the Board of

Directors. In making its recommendations, the Nomination Committee would consider the candidates’ :- - skills, knowledge, expertise and experience; - professionalism; - integrity; and

- in the case of the candidates for the position of Independent Non-Executive Directors, the Nomination Committee would evaluate the candidates’ ability to discharge such responsibilities/functions as expected from independent non-executive Directors;

(b) to consider, in making its recommendations, candidates for directorships proposed by the Chief Executive Officer and,

within the bounds of practicability, by any other senior executive or any Director or Shareholder; (c) to recommend to the Board of Directors the nominees to fill the seats on Board Committees; (d) to assess the effectiveness of the Board of Directors as a whole and each individual Director/committee of the Board, including

Independent Non-Executive Directors, as well as the Chief Executive Officer annually. All assessments and evaluations carried out by the Nomination Committee in the discharge of all its functions to be properly documented;

(e) to act in line with the directions of the Board; and (f) to consider and examine such other matters as the Nomination Committee considers appropriate. Board, Committees and Individual Director Assessment Nomination Committee conducts assessment annually reviews its required mix of skills, experience as well as core competencies which the Directors should bring to the Board. Directors have always been assessed annually and feedback to the Board on the effectiveness of the Board as a whole, Director’s self evaluation, contribution of each individual Director, independency of Independent Non-Executive Director and assess the Board’s mix and skillset. The Nomination Committee is entrusted to carry out annual Board effectiveness evaluation and to authorise the evaluation process to ensure it meets the objectivity, review the results of the evaluation and finally to communicate the results for improvement and enhancement. The evaluations were facilitated by the Company Secretaries making references to the guides available and the good corporate governance compliance.



PRINCIPLE 2: STRENGTHEN COMPOSITION (continued) Re-election and Re-appointment of Directors In accordance to the Company’s Articles of Associate, any Director appointed during the year shall hold office until next AGM and shall be eligible for re-election. Subject to the Company’s Articles of Associate, one-third (1/3) of the Directors for the time being, or the number is not three (3) or a multiple of three (3), then the number nearest to one-third (1/3) shall retire from office at each AGM once at least in each three (3) years. The retiring Directors shall be eligible for re-election. The retiring Directors standing for re-election at the forthcoming AGM are Mr. Peter Yong Kuen Fook and Mr. Yap Koon Roy. Remuneration Committee The Remuneration Committee was established to assist the Board in their responsibilities in assessing the remuneration packages of the Executive Directors. The Remuneration Committee comprised two (2) Independent Non-Executive Directors and one (1) Executive Director as follows: Yap Koon Roy - ChairmanLow Kim Hock - MemberChong Peng Khang - Member The term of office of the Remuneration Committee shall be for a period of three (3) years and may be re-nominated and appointed by the Board from time to time. Terms of reference of the Committee are being clearly defined. The Remuneration Committee met once during the financial year under review. The Remuneration Committee is responsible for reviewing annually and recommending to the Board, the remuneration policy and packages of the Executive Directors. In making its recommendation, the Remuneration Committee adheres to the principle of remunerating based on the Group’s performance as well as individual performance. The Remuneration Committee does not possess the authority to make decisions on behalf of the Board. Its role is merely that of making recommendations for the Board’s approval. The policy practiced on Directors’ remuneration by the Remuneration Committee is to provide the remuneration packages that must be sufficient to attract, retain and motivate Directors of the quality required to manage the business of the Group and to align the interest of the Directors which those of the shareholders. Directors’ Remuneration In consideration of the recommendation from Remuneration Committee, the Board is responsible to determine the level of remuneration of the Directors of the Group in such a manner to promote and support long term vision and strategies of the Group. Such remuneration structure shall attract and retain key personnel of requisite quality for long term value creation as well as motivating and incentivising directors and senior executives to perform their best for the Group. Non-Executive Directors will be paid based on fixed fees commensurate with their responsibilities in the Board and Board Committees and their attendance at the meetings, subject to approval from shareholders. The determination of the remuneration package of Non-Executive Directors should be a matter for the full Board, with individual director concerned should abstain from discussion of their own remuneration. Remuneration package of Non-Executive Directors shall not include an element of commission or percentage of turnover or profits. The details of the Directors’ remuneration during the current financial year are as follows: 1) Aggregate remuneration of Directors categorised into appropriate components as follows:

Salaries and other Benefits- emoluments Allowances Fees in-kind Total RM’000 RM’000 RM’000 RM’000 RM’000 Executive Directors 663 - 520 39 1,222 Non-Executive Directors - 6 79 - 85



PRINCIPLE 2: STRENGTHEN COMPOSITION (continued) Directors’ Remuneration (continued) 2) Directors’ remuneration are broadly categorised into the following bands: Number of Directors Range of remuneration Executive Non-Executive Below RM50,000 - 3 RM50,001 to RM100,000 - - RM100,001 to RM150,000 - - RM150,001 to RM200,000 1 - RM200,001 to RM250,000 1 - RM250,001 to RM300,000 - - RM300,001 to RM350,000 - - RM350,001 to RM400,000 1 - RM400,001 to RM450,000 1 - PRINCIPLE 3: REINFORCE INDEPENDENCE Annual Assessement of Directors’ Independent In determining the independence of Independent Directors, the Board will consider all relevant information, facts and circumstances in respect of such Independent Directors. When assessing independence, the Board should focus beyond the Independent Director’s background, economic and family relationships and consider whether the Independent Director can continue to bring independent and objective judgment to the Board deliberations. In the annual review by the Nomination Committee of the Directors’ independence, each Independent Non-Executive Directors had submitted annual declaration regarding their independence. All the Independent Non-Executive Directors are independent from the substantial shareholders of the Company, not being substantial shareholders themselves nor directly connected with any substantial shareholders. Tenure of an Independent Director The Board, noted the recommendations of the MCCG 2012 on the tenure of an Independent Director should not exceed a cumulative term of nine (9) years. Amongst the Board members, the tenure of all three (3) Independent Non-Executive Directors have not exceeded cumulative term of nine (9) years. Chairman and Managing Director The positions of Chairman of the Board and the Managing Director (“MD”) are held by different individuals, each with clearly defined scope of duties and responsibilities. The segregation between the duties and responsibilities of Chairman and MD ensures an appropriate balance of roles, responsibilities and accountability at Board level. Board Balance and Composition The Board currently comprises seven (7) members of which four (4) are Executive Directors including Managing Director and three (3) are Independent Non-Executive Directors including Chairman. With the Board’s composition, Hock Heng fully complies with the Main Market Lising Requirements of Bursa Malaysia Securities Berhad (“Listing Requirements”) with regard to the constitution of the Board of Directors and the required ratio of Independent Directors. The profile of Directors are presented on pages 5 to 7 of this Annual Report. The Board consists of qualified individuals of different range of skills, experiences and backgrounds and the size of the Board is such that it facilitates the making of informed and critical decisions for the Group. The Executive Directors have direct responsibilities on the day-to-day business operations and frequently attend management meetings wherein operational details and other issues were discussed and considered. The presence of Independent Non-Executive Directors provide guidance, independent views, advice and judgement in ensuring that the strategies proposed are discussed and examined. This provides a balance in the Board to safeguard the interest of minority shareholders and to ensure that high standards of conduct and integrity are maintained by the Group.



PRINCIPLE 4: FOSTER COMMITMENT Time Commitment The Board is satisfied with the time commitment given by the respective Directors in fulfilling their roles and responsibilities. The Board meets quarterly to review its quarterly performances and discuss new strategies. Additional meetings will be called when necessary. During the financial year ended 31 December 2015, five (5) Board meetings have been held and the attendance of each of the Directors are as follows: Name of Directors Meetings Attended Peter Yong Kuen Fook 5/5 (100%)Low Kim Hock 5/5 (100%)Low Kim Joo 5/5 (100%)Low Kim Ong 5/5 (100%)Low Yong Seng 5/5 (100%)Chong Peng Khang 5/5 (100%)Yap Koon Roy 5/5 (100%) Most of the meetings were held in the Company’s Conference Room at Lot 197, Jalan Sungai Putat, Batu Berendam, 75350 Melaka, Malaysia. In the intervals between Board meetings, any matters requiring urgent Board’s decisions or approvals will be sought via circular resolutions which are supported with the relevant information and explanations required for an informed decision to be made. The Board’s decisions made at the Board meetings shall be by a majority as prescribed by the Article of Association of the Company. Directors’ Training All the Directors had attended the Mandatory Accreditation Programme. The Board recognises the importance of continuous education of its members in order for its members to discharge their responsibilities and duties effectively and to maintain their awareness of current industry development as well as new law and regulatory requirements. The Board shall, through Nomination Committee, continuously assess and determine the training needs of its individual members and ensure that the members of the Board received relevant updates and training to update individual directors’ knowledge and enhance their skills to effectively discharge their duties and responsibilities and to participate actively in the Board deliberations. The Directors are briefed by the Company Secretary on the letters and circulars issued by the Bursa Malaysia Berhad at every Board meetings and was constantly updated any changes in the regulatory requirements which may affect the governance practices of the Group. Trainings/courses attended by the Directors during the financial year ended 31 December 2015 are as follows:

Directors Training/Course Title Date

Peter Yong Kuen Fook BDO Tax Forum Series: Adapting to Change. Building Towards 3.11.2015 Sustainable Growth by BDO Tax Services Sdn. Bhd.

Low Kim Hock BDO Tax Forum Series: Adapting to Change. Building Towards 3.11.2015 Sustainable Growth by BDO Tax Services Sdn. Bhd.

Low Kim Joo National Tax Seminar 2015: 2016 Budget Proposals by Inland 5.11.2015 Revenue Board of Malaysia

Low Kim Ong GST Latest Updates & Developments by ITS Management Sdn. Bhd. 3.10.2015



PRINCIPLE 4: FOSTER COMMITMENT (continued)

Directors’ Training (continued)

Directors Training/Course Title Date

Low Yong Seng Briefing on Hands-on GST for Real Estate and Construction 12.2.2015 Sectors by Royal Malaysian Customs Department GST Post Implementation Issues by Malaysian Institute of 29.7.2015 Certified Public Accountant BDO Tax Forum Series: Adapting to Change. Building Towards 3.11.2015 Sustainable Growth by BDO Tax Services Sdn. Bhd.

Chong Peng Khang New Public Rulings for 2014 & 2015 by Malaysian Institute of Accountants 13.4.2015 Risk Management & Internal Control: Workshop for Audit 8.9.2015 Committee Members by Bursa Malaysia Bhd. BDO Tax Forum Series: Adapting to Change. Building Towards 3.11.2015 Sustainable Growth by BDO Tax Services Sdn. Bhd.

Yap Koon Roy Philosophy and Fundamentals of Shariah for Islamic Finance 24.1.2015 Ethics in Islamic Finance 25.1.2015 Application of Shariah in Islamic Finance 14.2.2015 - 15.2.2015 Shariah Framework and Governance 28.2.2015 Islamic Finance Regulatory Framework 1.3.2015 Contemporary Islamic Finance Architecture 21.3.2015 All by Islamic Banking and Finance Institute of Malaysia

PRINCIPLE 5: UPHOLD INTEGRITY IN FINANCIAL REPORTING Audit Committee The Audit Committee was established to assist the Board in overseeing the Group’s activities within its defined terms of reference. The report of the Audit Committee for the current financial year is set out on pages 24 to 26 in this Annual Report. The Board has full access to both internal and external auditors and receives reports on all audits performed via Audit Committee. Compliance with Applicable Financial Reporting Standards The Board is responsible for ensuring the proper maintenance of the accounting records of the Company. The Company’s financial reporting in the form of quarterly and annual financial statements present a balanced and understandable assessment of the Company’s position and prospects. In discharging the Board’s responsibility to ensure quality financial reporting to its shareholders, investors and regulatory authorities, the Audit Committee assists the Board in scrutinising information for disclosure to ensure compliance with accounting standard, accuracy, adequacy and completeness. The Directors’ Responsibility Statement pursuant to the Listing Requirements is set out on page 27 in this Annual Report. Assessment of Suitability and Independence of External Auditors The Audit Committee maintains a transparent and professional relationship with the external auditors of the Company. The Audit Committee had undertaken assessment of the suitability and independence of the external auditors, namely Messrs. BDO. Having satisfied of the performance of BDO during the assessment, the Audit Committee recommended the re-appointment of BDO to the Board, upon which the shareholders’ approval will be sought at the coming Annual General Meeting. Audit Committee had also assessed the external auditors by reviewing the level of non-audit services rendered to the Company during the financial year. The Audit Committee was satisfied with the technical competency and audit independence of the external auditors.



PRINCIPLE 6: RECOGNISE AND MANAGE RISKS Risk Management and Internal Control Enterprise Risk Management Framework was established by the Group to identify, assess and manage the Group’s key business risks in a structured manner. The Group continues to maintain and review its internal control system to ensure the safeguard of its assets and shareholders’ investments. Information on the Group’s internal control is presented in the Statement on Risk Management and Internal Control. Internal Audit Function The Board has established an internal audit function within the Group. The Group’s internal audit function was outsourced to an independent professional firm who report directly to the Audit Committee. The internal auditors carries out the responsibility to provide an independent, objective assurance and consultation to add value and improve Group’s operation and internal control besides assisting the Company to accomplish its effectiveness of risk management, control and governance processes. The details of the internal control system is set out on pages 22 to 23 in the Statement on Risk Management and Internal Control of this Annual Report. PRINCIPLE 7: ENSURE TIMELY AND HIGH QUALITY DISCLOSURE Corporate Disclosure Policy The Company has in place a policy stipulates the basic principles and procedures of corporate disclosure in order to communicate and disseminate material information impartially to stakeholders on timely, accurate, clear and complete manner, in accordance with the Listing Requirements and other applicable laws and regulations. The policy forms a part of the Company internal rules and regulations and applies to all Directors, officers and employees of the Group and at the same time clearly expresses its commitment on transparent, quality and timely disclosure of Material Information to all stakeholders. Leverage on Information Technology for Effective Dissemination of Information An effective communication channel between the Board and the stakeholders is essential to provide a clear and complete image of the Group’s performance and development in a timely and continuing disclosure manner. The Company has uses the following channels to communicate with all the stakeholders: (a) Company Website The Company maintains their corporate website at http://www.hockheng.com.my which provides all relevant information

on Hock Heng Group and is accessible by the public. This website enhances the Investor Relations function by including all announcements made to Bursa Malaysia Securities Berhad (“Bursa Securities”), annual reports as well as the corporate and governance structure of Hock Heng. Investors queries pertaining to financial performance or developments may be directed to the Group Accountant of Hock Heng, Mr. Lee Siang Ling (Tel: +606-317 2028, Fax: +606-317 9324).

(b) Annual Report Annual Report is an important channel of communication information disclosures on the Group’s business, financials and

additional information such as operations performance, outlooks and others. The Board’s places important on the content of the Annual Report to ensure the accuracy of the information because the Annual Report is an important source of information for shareholders, investors and the general public.

Hock Heng’s Annual Reports are available online at the Company’s website.



PRINCIPLE 7: ENSURE TIMELY AND HIGH QUALITY DISCLOSURE (continued)

Leverage on Information Technology for Effective Dissemination of Information (continued)

(c) Announcements to Bursa Securities All announcements are made via “Bursa Link”. The examples of announcements are financial results, listing of circulars,

corporate changes and etc. The Board is entrusted to review, approve and ensures the announcements are complied with regulatory authorities’ disclosure requirements.

PRINCIPLE 8: STRENGTHEN RELATIONSHIP BETWEEN COMPANY AND SHAREHOLDERS Encourage Shareholder Participation at General Meetings Notice of General Meetings to shareholders will be despatched at least twenty one (21) days before the said meetings. The Notice of General Meetings provides information to shareholders with regard to details of the agendas to be presented at the General Meetings, shareholders’ entitlement to attend the General Meetings and shareholders’ rights and procedures relating to the appointment of proxies. A full explanatory statement of the effects of the proposed resolutions will accompany each item of special business as mentioned in the Notice of meeting. Encourage Poll Voting The Board is encouraged to put substantive resolutions to vote by poll and make announcement of the results showing the number of votes cast for and against for each resolutions. At the 6th AGM of the Company, no substantive resolutions were put forth shareholders’ approval except resolutions for re-election of retiring Directors, payment of Directors’ fees, appointment of external auditors and proposed renewal of existing shareholders mandate. As such, the resolutions put forth shareholders’ approval at the 6th AGM were voted by a show of hands. Effective Communication and Proactive Engagement with Shareholders The Company recognises the importance of communication and timely dissemination of information concerning the Group’s business activities to shareholders and the investing public. Announcements on various disclosures, timely release of quarterly financial results, annual reports and any corporate announcements made has provided the shareholders and investing public with an overview of the Group’s performance and operations. The Company also values dialogue with shareholders as a means of effective communication that enables the Board to convey information about the Group’s performance, corporate strategy and other matters affecting shareholders’ interests. The AGM is the principle forum for dialogue with shareholders. The Board provides opportunities for shareholders to raise questions at the AGM pertaining to issue in the Annual Report, Audited Financial Statements, corporate developments of the Group and other matters that affect shareholders’ interests. The Directors and the external auditors are available to respond to questions from the shareholders during this meeting. WORKFORCE DIVERSITY The Board is committed in recognising and utilising the contribution of diverse skills and talent from its directors, officers and employees as a mean of enhancing the Group’s performance. Diversity may result from a wide range of factors which include age, gender, ethnicity or cultural background. The Board is actively managing its workforce diversity to ensure equal employment opportunity regardless of genders. It fosters the environment where the ability to contribute and access employment opportunities is based on performance, skills and merits. These will include equal opportunity in respect to employment and employment conditions such as hiring, training for professional development and promotion for career advancement. As at the reporting date, the Board has not set a gender diversity target, however, it is moving towards a more gender equality of employees. It will focus on getting the participation of women and those of different ethnicity on its Board and within senior management and the person selected must be able to contribute positively to the Group. Also, female representation will be considered when vacancies arise and suitable candidates are identified, underpinned by the overriding primary aim of selecting the best candidate to support the achievement of the Group’s strategic objectives.



CORPORATE SOCIAL RESPONSIBILITY Apart from maintaining healthy financial performance, the Group also ensure the positive impact it have on the community in which it serves. Accordingly, the Group recognises its role and responsibility as a caring corporate citizen within the community. In the previous years, the Group has operated and provided assistance and contributions in the form of cash of kind to deserving organisations, schools and temples. To strengthen the Group’s capacity, it continues to deploy an internal talent review platform to identify top talent. The Group acknowledged that its work place or human capital focus is the most important driver for its business growth. The Group believes in rewarding management will create a more effective and successful organisation. Its employees are rewarded with a mix of short-term and long-term incentives that directly correlate to their performance. Non monetary rewards such as performance recognition, work-life integration as well as professional development are also awarded. The Group placed great importance on the welfare of all employees and maintaining awareness on safety and environmental aspects by promoting safe work practices to all employees. In addition, the Group also places commitment in the healthcare, training and development for its employees, such as job training is conducted for new recruit employees, specific process training and skills enhancement training are provided for the existing employees to ensure that they are well equipped with the necessary skills on their job. OTHER COMPLIANCE INFORMATION 1. Utilisation of Proceeds The Company did not raise funds through any corporate proposal during the financial year. 2. Share Buy-back During the financial year, there were no share buy-back by the Company. 3. Options, Warrants or Convertible Securities There were no issuance of options, warrants or convertible securities during the financial year. 4. Depository Receipt Programme During the financial year, the Company did not sponsor any depository receipt programme. 5. Imposition of Sanctions and/or Penalties There were no sanctions or penalties imposed on the Company and its subsidiary companies, Directors or management by

the relevant regulatory bodies during the financial year. 6. Non-Audit Fees The amount of non-audit fees charged for services rendered to the Group and to the Company by the external auditors and

its affiliated firms for the financial year amounted to RM32,400 and RM8,500 respectively. 7. Variations in Results There were no significant variance between the audited results of the financial year ended 31 December 2015 and the

unaudited results previously announced. The Company did not issue any profit estimate, forecast or projection for the financial year.

8. Profit Guarantee During the financial year, there were no profit guarantees given by the Company.



OTHER COMPLIANCE INFORMATION (continued)

9. Material Contracts Other than the recurrent related party transactions as disclosed, there were no material contracts entered by the Company

and/or its subsidiary companies which involve Directors’ and major shareholders’ interests for the financial year ended 31 December 2015.

10. Recurrent Related Party Transactions (“RRPT”) The RRPT entered into by the Group during the financial year ended 31 December 2015 were as follows: Aggregate value of Name of transactions Related Parties Nature of RRPT Relationship RM’000 EMP Design Sdn. Bhd. Sales of dimension stone Note # below 1,643 (“EMP”) products from PMK Construction & Design Sdn. Bhd. to EMP LBS Realty Sdn. Bhd. Rental of premises paid from Note # below 84 (“LBS”) Hock Heng Granite Sdn. Bhd. to LBS

Total 1,727

Note # - LowKimHock,LowKimJooandLowKimOng,theDirectorsandsubstantialshareholdersoftheCompanyarealsoDirectorsand

substantialshareholdersofLBS.LBSowns70%equityinterestinEMP.LBSistheholdingcompanyofEMP.

- LowKimChung,asubstantialshareholderoftheCompanyisalsoaDirectorandsubstantialshareholderofLBS.

The Company is seeking its shareholders’ approval on RRPT of a revenue or trading nature to be entered by the Company’s

subsidiary companies with related parties in the ordinary course of business in the forthcoming AGM. Details of the transactions are furnished in the Circular to Shareholders, which is distributed together with the Annual Report.


Statement on riSk manaGement anD internal Control

Introduction Pursuant to Paragraph 15.26(b) and Practice Note 9 of Main Market Listing Requirements in relation to requirement to prepare statement about the state of internal control of the listed issuer as a group, and as guided by the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers (“the Guidelines”), the Board of Directors (“the Board”) is pleased to present the statement on the state of the system of internal control of the Group for the financial year ended 31 December 2015. Board Responsibilities The Board acknowledges its responsibility for maintaining a sound and effective risk management and internal control system in the Group’s pursuit to achieve its strategic objectives, to promote operational effectiveness and efficiency, to strive for the reliability of internal and external reporting, to comply with applicable laws and regulations and to safeguard shareholders’ investment and the Group’s assets. There is an on-going process by the Board to ensure the adequacy and integrity of such system through monitoring reviews performed on such system. However, in view of the inherent limitations in any system, such system is designed to manage, rather than eliminate risk of failure. The system can therefore only provide reasonable and not absolute assurance against material misstatements of financial information and records or against financial frauds or losses. Risk Management Framework The Board recognises that risk management is an integral part of the Group’s business operations. Enterprise Risk Management Framework established by the Group provides basic structure and mechanism to identify, assess and manage the Group’s key risks in a formal and structured manner. These key risks identified were prioritised in terms of the likelihood of their occurrence and potential impact to the Group’s operation should such key risks materializes in order to identify feasible risk responses to manage these risks in line with the risk appetite of the Group in order to achieve its strategic vision, taking into consideration existing internal control process to mitigate and control these risks. The Group has in place an on-going process to identify, evaluate, manage and monitor key risks faced by the Group during the financial year under review and up to the date of approval for inclusion in the Annual Report. These processes are embedded as part of the Group’s operating and business management processes and form the functional responsibility of all Executive Directors and Senior Management. Executive Directors and Senior Management manage key business risks faced by the Group through constant communication among themselves and changes in the key business risks faced by the Group or emergence of new key business risks are highlighted to the Board, if any. This process is reviewed by the Board during the meeting of the Board for the financial year under review. Internal Audit Function The Group’s internal audit function was outsourced to an independent professional firm who report directly to the Audit Committee. The outsource internal auditors perform reviews of the internal control procedures established for the business units in accordance to internal audit plan approved by Audit Committee to assess the adequacy and integrity of the internal control systems. The internal audit adopts a risk-based approach in developing its internal audit plan which prioritise internal audit visit in accordance with the key risk profile of the Group. This internal audit plan is reviewed and approved by the Audit Committee before its execution. The internal audit reports which included the findings, recommendations and management responses were presented to the Audit Committee members for their review and tabled in the Audit Committee meetings. The internal auditors will follow up with the management to determine the extent of management action plans arising from the management response that have been implemented in the subsequent internal audit visit. Internal Control System The Board put in place within the Group with an adequate and conducive control environment for it to accomplish its business objectives. The Group’s internal control system encompasses the Board and its Board Committees with specific terms of reference, Senior Management that is accountable for its decisions and also monitoring and review procedures that are embedded in the Group’s processes. The Board reviews these control processes regularly to ensure that an efficient and effective system of internal control is maintained within the Group.


Statement on riSk manaGement anD internal Control (Cont’D)

Internal Control System (continued) The key elements of the Group’s internal control systems include: - The tone from the top on integrity and ethical value are enshrined in formal Code of Conduct established and approved and

published on the corporate website. This formal code forms the foundation of integrity and ethical value for the Group and applied to all employees, customers and suppliers of the Group. Such Code of Conduct established to ensure that working environment and condition are safe and healthy, workers are treated with respect and dignity, and business operation are conducted ethically.

Integrity and ethical value expected from the employees are also incorporated in the Employee Handbook whereby the

ethical behaviours expected of them to carry out their duties and responsibilities assigned are formalised. - The Group has a well-defined organisational structure that is aligned to its business and operation requirements. Clearly

defined lines of accountability, delegation of responsibility and level of authorisation for all key aspects of the business have been laid down and communicated throughout the Group.

- Authority charts are established within the Group to provide a functional framework of authority for key operating processes. - The Group’s performance is monitored through management and operational meeting attended by Executive Directors and

Senior Management. Executive Directors adopt a hand-on approach and assisted by Senior Management in managing the Group’s business operations.

- A comprehensive “Employee Manual” is developed to promote on-going and harmonious working relationship among

the employees and set out the rules and regulations to be adhered by employees in performing their duties. The manual is reviewed regularly to include the changes which will enhance the working efficiency and effectiveness.

- Internal audits are conducted periodically by the outsourced internal auditors to review the adequacy and effectiveness of

control activities and monitor compliance with internal controls procedures based on internal audit plan approved by Audit Committee, whilst the annual statutory audit of the financial statements are conducted by external auditors and the external auditors report their findings to the Audit Committee through management letters or discussed at Audit Committee meetings.

- Internal quality audit are conducted by assessors of the ISO certification body as specified by ISO 9001: 2008 - Quality

Management System on the business operation to ensure that internal procedures and standard operating procedures had been properly implemented and documented.

Assurance Provided by the Managing Director The Managing Director, being highest ranking executive in the Company and being the person primarily responsible for the management of the financial affairs of the Company have provided assurance to the Board in writing stating that the Group’s risk management and internal control systems have operated adequately and effectively, in all material aspects, to meet the Group’s objectives during the financial year under review. The Board is of the view that the risk management and internal control systems are satisfactory and have not resulted in any material losses, contingencies or uncertainties that would require disclosure in the Group’s annual report. The Board continues to take pertinent measures to sustain and, where required, to improve the Group’s risk management and internal control systems in meeting the Group’s strategic objectives. Review of the Statement by External Auditors The external auditors have reviewed this Statement on Risk Management and Internal Control for inclusion in the Annual Report for the financial year ended 31 December 2015. The review was conducted in accordance with the Recommended Practice Guide 5 (Revised): Guidance for Auditors on Engagements to Report on the Statement on Risk Management and Internal Control included in the Annual Report (RPG 5) issued by the Malaysian Institute of Accountants. RPG 5 does not require the external auditors to form an opinion on the effectiveness of the Group’s risk and control procedures. Conclusion The Board is dedicated towards maintaining a sound and effective risk management and internal control system and believes that an effective risk management and internal control system duly complied able to provide reasonable assurance towards the achievement of the Group’s strategic vision. The Group continues to take measures to strengthen its risk management capability and the internal control environment. This statement is made in accordance with a resolution of the Board of Directors.


auDit Committee report

MEMBERSHIP Composition of the Audit Committee and details of attendance at the Audit Committee meetings during the financial year ended 31 December 2015, where a total of five (5) meetings were held, are as follows: Directors Directorship Meeting Attended

Chong Peng Khang (Chairman / Independent Non-Executive Director) 5/5 (100%) Yap Koon Roy (Member / Independent Non-Executive Director) 5/5 (100%) Peter Yong Kuen Fook (Member / Independent Non-Executive Chairman) 5/5 (100%) TERMS OF REFERENCE Composition of members The Board shall appoint the Audit Committee 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 Listing Requirements. Mr. Chong meets the requirements of paragraph 15.09(c)(i) where he is a Chartered Accountant and a member of the Malaysian Institute of Accountant. 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. Meetings The Audit Committee shall meet regularly, with due notice of issues to be discussed, and shall record its conclusions in 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 auditors, the Chairman of the Audit Committee shall convene a meeting of the Audit Committee to consider any matter the external auditors believe should be brought to the attention of the directors or shareholders. Notice of Audit Committee meetings shall be given to all the Audit Committee members unless the Audit Committee waives such requirement. The Chairman of the Audit Committee shall engage on a continuous basis with Senior Management, such as the Managing Director, the Executive Directors, the internal auditors and the external auditors in order to be kept informed of matters affecting the Company. The Managing Director, the representatives of the internal and the external auditors should normally attend Audit Committee 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 with the external auditors. Duties and Responsibilities The duties and responsibilities of the Audit Committee are as follows: (a) To consider the appointment of the external auditors, the audit fee and any question of resignation or dismissal; (b) To discuss with the external auditors before the audit commences, the nature and scope of the audit, and ensure co-

ordination where more than one audit firm is involved; (c) To review with the external auditors their evaluation of the system of internal controls and the audit report;


auDit Committee report (Cont’D)

TERMS OF REFERENCE (continued)

Duties and Responsibilities (continued) (d) To review the quarterly and year-end financial statements of the Board, focusing particularly on: - any change in accounting policies and practices; - significant adjustments arising from the audit; - the going concern assumption; and - compliance with accounting standards and other legal requirements. (e) To discuss problems and reservations arising from the interim and final audits, and any matter the auditors may wish to

discuss (in the absence of management, where necessary); (f) To review the external auditors’ management letter and management’s response; (g) 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 and consider the

appointment of the internal auditors, the audit fee and any question of resignation or dismissal; (h) 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; (i) To report its findings on the financial and management performance, and other material matters to the Board; (j) To consider the major findings of internal investigations and management’s response; (k) To consider other topics as defined by the Board; (l) To advise the Board and make recommendation in respect of risk management as to the following matters:

- 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.

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


auDit Committee report (Cont’D)

ACTIVITIES OF THE AUDIT COMMITTEE The activities of the Audit Committee as stipulated in Duties and Responsibilities were undertaken by the Audit Committee during the financial year ended 31 December 2015. The Audit Committee had also undertaken the following activities during the financial year: (a) Reviewed quarterly unaudited financial results and the annual audited financial statements of the Company before

recommending them for the Board’s approval; (b) 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; (c) Reviewed the findings of the internal and external auditors and reported to the Board; (d) 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 (e) Reviewed and deliberated the emerging financial reporting issue pursuant to the new accounting standards and additional

statutory disclosure requirements. ACTIVITIES OF THE INTERNAL AUDIT FUNCTION The Group has engaged an independent professional firm 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 plans of 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 to the Audit Committee meetings. The internal auditors also follow up with the management in the implementation of the agreed audit recommendations. None of the internal control weeknesses have resulted in any material losses, contingencies or uncertainties that would require disclosure in the Annual Report. The total costs incurred for the internal audit function of the Group for the financial year was RM24,000.


DireCtorS’ reSponSibility Statement in relation to the Financial Statements

The Directors are required under the provisions of the Companies Act, 1965 to prepare financial statements as at the end of each financial year in accordance with applicable approved accounting standards and which gives a true and fair view of the state of affairs of the Group and the Company and their results and cash flows for each financial year. The Directors are of the view that the Group and the Company have adopted suitable accounting policies and applied them appropriately and consistently; made judgements and estimates that are reasonable and prudent; as well as ensured that all applicable accounting standards have been followed; and confirm that the financial statements have been prepared on a going concern basis. The Directors are responsible for ensuring that the Group and the Company maintains proper accounting records that disclose with reasonable accuracy the financial position of the Group and of 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 the Company, and to prevent and detect fraud as well as other irregularities.

FinanCial StatementS

Directors’ Report 29

Statement by Directors 32

Statutory Declaration 32

Independent Auditors’ Report 33

Statements of Profit or Loss and Other 35Comprehensive Income

Statements of Financial Position 36

Statements of Changes in Equity 37

Statements of Cash Flows 38

Notes to the Financial Statements 40

Supplementary Information 86


DireCtorS’ report

The Directors have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the financial year ended 31 December 2015. Principal activities The principal activity of the Company is investment holding. The principal activities of the subsidiaries are set out in Note 20 to the financial statements. There have been no significant changes in the nature of these activities for the Group and Company during the financial year. Results

Group Company RM RM Profit/(Loss) net of tax 946,407 (88,329) Profit/(Loss) attributable to: Owners of the parent 968,173 (88,329)Non-controlling interests (21,766) -

946,407 (88,329)

Dividend No dividend has been paid, declared or proposed by the Company since the end of the previous financial year. The Directors do not recommend the payment of any final dividend in respect of the current financial year. Reserves and provisions There were no material transfers to or from reserves or provisions during the financial year. Issue of shares and debentures There were no issues of new shares or debentures during the financial year. Options granted over unissued shares No options were granted to any person to take up unissued shares of the Company during the financial year.

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 Hock Low Kim Joo Low Kim Ong Low Yong Seng Chong Peng Khang Yap Koon Roy Peter Yong Kuen Fook


DireCtorS’ report (Cont’D)

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. Since the end of the previous financial year, none of the Directors have received or become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by the Directors as shown in the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which he is a member, or with a company in which the Director has a substantial financial interest except for any benefits which may be deemed to have been derived by virtue of those transactions as disclosed in Note 31 to the financial statements.

Directors’ interests The Directors holding office at the end of the financial year and their beneficial interests in the ordinary shares of the Company and of its related corporations during the financial year ended 31 December 2015 as recorded in the Register of Directors’ Shareholdings kept by the Company under Section 134 of the Companies Act, 1965 in Malaysia were as follows: Number of ordinary shares of RM0.50 each 1.1.2015 Acquired Sold 31.12.2015

Direct interest Low Kim Hock 4,320,000 - - 4,320,000 Low Kim Joo 2,592,000 - - 2,592,000 Low Kim Ong 2,304,000 - - 2,304,000 Low Yong Seng 40,000 - - 40,000 Yap Koon Roy 30,000 - - 30,000 Peter Yong Kuen Fook 30,000 - - 30,000 Indirect interestLow Kim Hock 36,040,000 360,000 - ^36,400,000Low Kim Joo 36,000,000 360,000 - * 36,360,000Low Kim Ong 36,000,000 360,000 - * 36,360,000

^ Deemedinterestedbyvirtueofthedirectinterestofhisson,LowYongSengandhisdirectinterestinJasaMajuJayaSdn.Bhd.pursuanttoSection6AoftheCompaniesAct,1965.

* DeemedinterestedbyvirtueoftheirdirectinterestinJasaMajuJayaSdn.Bhd.pursuanttoSection6AoftheCompaniesAct,

1965. Low Kim Hock, Low Kim Joo and Low Kim Ong by virtue of their interests in shares in the Company are also deemed interested in shares of all the subsidiaries to the extent the Company has an interest. The other Directors in office at the end of the financial year had no interest in shares in the Company or its related corporations during the financial year. Other statutory information (I) As at the end of the financial year

(a) Before the statements of profit or loss and other comprehensive income and statements of financial position of the Group and of the Company were made out, the Directors took reasonable steps:

(i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of

provision for doubtful debts and have satisfied themselves that there are no known bad debts and that adequate provision had been made for doubtful debts; and

(ii) to ensure that any current assets other than debts, which were unlikely to realise their book values in the ordinary course of business had been written down to their estimated realisable values.


DireCtorS’ report (Cont’D)

Other statutory information (continued)

(I) As at the end of the financial year (continued)

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

(II) From the end of the financial year to the date of this report (c) The Directors are not aware of any circumstances:

(i) which would necessitate the writing off of bad debts or render the amount of the provision for doubtful debts inadequate to any material extent in the financial statements of the Group and of the Company;

(ii) which would render the value attributed to current assets in the financial statements of the Group and of the

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

the Group and of the Company misleading or inappropriate. (d) In the opinion of the Directors:

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

(ii) no contingent or other liability has become enforceable, or is likely to become enforceable, within the period

of twelve (12) months after the end of the financial year which would or may affect the ability of the Group and of the Company to meet its obligations as and when they fall due.

(III) As at the date of this report

(e) There are no charges on the assets of the Group and of the Company which have arisen since the end of the financial year to secure the liabilities of any other person.

(f) There are no contingent liabilities of the Group and of the Company which have arisen since the end of the financial

year.

(g) The Directors are not aware of any circumstances not otherwise dealt with in the report or financial statements which would render any amount stated in the financial statements of the Group and of the Company misleading.

Auditors The auditors, Messrs. BDO, have expressed their willingness to continue in office. Signed on behalf of the Board in accordance with a resolution of the Directors dated 18 April 2016.

Low Kim Hock Low Kim Joo


Statement by DireCtorS pursuant to Section 169 (15) of the Companies act, 1965

Statutory DeClarationpursuant to Section 169 (16) 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 financial statements set out on pages 35 to 85 are drawn up in accordance with Financial Reporting Standards and the provisions of 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 2015 and of the financial performance and cash flows of the Group and of the Company for the year then ended. The information set out in Note 38 to the financial statements on page 86 have been prepared in accordance with the 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 and the directive of Bursa Malaysia Security Berhad. Signed on behalf of the Board in accordance with a resolution of the Directors dated 18 April 2016. Low Kim Hock Low Kim Joo

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 35 to 86 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 on 18 April 2016 Low Kim Hock

Before me, ZALINA BINTI ZAINUDDIN Commissioner for Oaths


inDepenDent auDitorS’ reportto the members of Hock Heng Stone industries bhd. (incorporated in malaysia)

Report on the Financial Statements We have audited the financial statements of Hock Heng Stone Industries Bhd., which comprise statements of financial position as at 31 December 2015 of the Group and of the Company, and statements of profit or loss and other comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 35 to 85. The financial statements of the Group and of the Company as at 31 December 2014 were audited by another firm of chartered accountants, whose report dated 20 April 2015, expressed an unqualified opinion on those statements. Directors’ Responsibility for the Financial Statements The Directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view in accordance with Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about 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 judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the financial position of the Group and of the Company as of 31 December 2015 and of their financial performance and cash flows for the financial year then ended in accordance with Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. 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 have been properly kept in accordance with the provisions of the Act. (b) We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company’s financial

statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes.

(c) The audit reports on the financial statements of the subsidiaries did not contain any qualification or any adverse comment

made under Section 174(3) of the Act.


inDepenDent auDitorS’ report (Cont’D)to the members of Hock Heng Stone industries bhd. (incorporated in malaysia)

Other Reporting Responsibilities The information set out in Note 38 on page 86 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The Directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad. Other Matters This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. BDO Se Kuo ShenAF : 0206 2949/05/16 (J)Chartered Accountants Chartered Accountant Johor Bahru 18 April 2016


StatementS oF proFit or loSS anD otHer CompreHenSive inComeFor the financial year ended 31 December 2015

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

Group Company Note 2015 2014 2015 2014 RM RM RM RM Revenue 6 37,933,480 39,953,715 - -Cost of sales (27,217,928) (30,066,191) - -

Gross profit 10,715,552 9,887,524 - -Other income 7 836,496 328,852 277,907 234,482Selling and distribution expenses (721,590) (762,153) - -Administrative and general expenses (7,078,082) (6,400,689) (229,383) (211,378)Finance costs 8 (1,904,341) (1,386,841) (136,737) (103,911)

Profit/(Loss) before tax 9 1,848,035 1,666,693 (88,213) (80,807)Tax expense 12 (901,628) (836,240) (116) (500)

Profit/(Loss) net of tax, representing total comprehensive income for the year 946,407 830,453 (88,329) (81,307)

Total comprehensive income attributable to: Owners of the parent 968,173 866,491 Non-controlling interests (21,766) (36,038)

946,407 830,453

Earnings per share attributable to owners of the parent (sen per share): Basic and diluted 13 1.21 1.08


StatementS oF FinanCial poSitionas at 31 December 2015

Group Company Note 2015 2014 2015 2014 RM RM RM RM Assets Non-current assets Property, plant and equipment 14 22,962,188 24,431,004 - - Investment properties 15 5,227,931 1,388,672 - - Land use rights 16 2,306,711 4,072,331 - - Land held for property development 17 4,062,683 4,062,683 - - Development expenditure 19 379,000 379,000 - - Deferred tax assets 28 190,940 207,911 - - Investment in subsidiaries 20 - - 37,179,200 37,119,199

35,129,453 34,541,601 37,179,200 37,119,199

Current assets Property developments costs 18 25,330,659 23,905,114 - - Inventories 21 33,378,578 31,519,196 - - Trade and other receivables 22 11,284,829 12,685,108 7,336,688 6,497,620 Other current assets 23 6,407,759 5,124,999 - - Current tax assets 324,155 106,544 3,303 2,353 Cash and bank balances 25 1,918,462 2,336,263 30,658 53,611

78,644,442 75,677,224 7,370,649 6,553,584

Total assets 113,773,895 110,218,825 44,549,849 43,672,783

Equity and liabilitiesCurrent liabilities Trade and other payables 27 9,664,316 10,431,081 4,496,119 3,530,724 Borrowings 26 19,781,556 15,306,891 - - Current tax liabilities 34,965 352,977 - -

29,480,837 26,090,949 4,496,119 3,530,724

Net current assets 49,163,605 49,586,275 2,874,530 3,022,860

Non-current liabilities Deferred tax liabilities 28 668,352 404,849 - - Borrowings 26 30,241,709 31,226,436 - -

30,910,061 31,631,285 - -

Total liabilities 60,390,898 57,722,234 4,496,119 3,530,724

Net assets 53,382,997 52,496,591 40,053,730 40,142,059

Equity attributable to owners of the parent Share capital 29 40,000,000 40,000,000 40,000,000 40,000,000 Retained earnings 13,258,974 12,319,746 53,730 142,059

53,258,974 52,319,746 40,053,730 40,142,059 Non-controlling interests 124,023 176,845 - -

Total equity 53,382,997 52,496,591 40,053,730 40,142,059

Total equity and liabilities 113,773,895 110,218,825 44,549,849 43,672,783



StatementS oF CHanGeS in equityFor the financial year ended 31 December 2015

Attributable to equity holders of the parent Equity attributable to owners Distributable Non- Equity, of the parent, Share retained controlling Note total total capital earnings interests RM RM RM RM RM Group Opening balance at 1 January 2015 52,496,591 52,319,746 40,000,000 12,319,746 176,845 Total comprehensive income 946,407 968,173 - 968,173 (21,766) Transaction with owners - Acquisition of non-controlling interests 35 (60,001) (28,945) - (28,945) (31,056) Closing balance at 31 December 2015 53,382,997 53,258,974 40,000,000 13,258,974 124,023 Opening balance at 1 January 2014 51,666,138 51,453,255 40,000,000 11,453,255 212,883 Total comprehensive income 830,453 866,491 - 866,491 (36,038) Closing balance at 31 December 2014 52,496,591 52,319,746 40,000,000 12,319,746 176,845

Distributable Equity, Share retained total capital earnings RM RM RM Company Opening balance at 1 January 2015 40,142,059 40,000,000 142,059 Total comprehensive loss (88,329) - (88,329) Closing balance at 31 December 2015 40,053,730 40,000,000 53,730 Opening balance at 1 January 2014 40,223,366 40,000,000 223,366 Total comprehensive loss (81,307) - (81,307) Closing balance at 31 December 2014 40,142,059 40,000,000 142,059



StatementS oF CaSH FlowSFor the financial year ended 31 December 2015

Group Company Note 2015 2014 2015 2014 RM RM RM RM

Operating activities Profit/(Loss) before tax 1,848,035 1,666,693 (88,213) (80,807) Adjustments for: Depreciation on: - property, plant and equipment 14 1,877,497 1,885,546 - - - investment properties 15 104,760 26,290 - - Amortisation of land use rights 16 59,122 82,183 - - Impairment loss on trade receivables 22 240,600 246,754 - - Reversal of impairment loss on trade receivables 22 (213,273) (97,917) - - Gain on disposal of property, plant and equipment (25,394) (29,302) - - Inventories written (back)/down 21 (267,266) 423,499 - - Property, plant and equipment written off 14 - 7,066 - - Unrealised loss on foreign exchange - 18,931 - - Interest expense 1,904,341 1,386,841 136,737 103,911 Interest income (22,957) (45,260) (277,674) (234,482)

Total adjustments 3,657,430 3,904,631 (140,937) (130,571)

Operating cash flows before changes in working capital 5,505,465 5,571,324 (229,150) (211,378)Changes in working capital Property development costs (276,104) 3,135,100 - - Inventories (1,592,116) (4,096,801) - - Trade and other receivables 1,372,952 5,923,822 - - Other current assets (1,282,760) 1,537,503 - - Trade and other payables (766,765) (5,086,305) (1,600) (23,951)

Total changes in working capital (2,544,793) 1,413,319 (1,600) (23,951)

Cash flows from/(used in) operations 2,960,672 6,984,643 (230,750) (235,329)Tax refunded 5,100 - - 18,801 Tax paid (1,161,877) (1,084,544) (1,066) -

Net cash flows from/(used in) operating activities 1,803,895 5,900,099 (231,816) (216,528)


StatementS oF CaSH FlowS (Cont’D)For the financial year ended 31 December 2015

Group Company Note 2015 2014 2015 2014 RM RM RM RM Investing activities Purchase of: - property, plant and equipment 14 (2,335,936) (3,570,882) - - - land held for property development - (3,686,601) - - - land use rights 16 - (1,729,559) - - Proceeds from disposal of property, plant and equipment 60,500 30,780 - - Interest received 22,957 45,260 277,674 234,482 Repayments from subsidiaries - - 127,927 118,356 Acquisition of non-controlling interests 35 (60,001) - (60,001) -

Net cash flows (used in)/from investing activities (2,312,480) (8,911,002) 345,600 352,838

Financing activities Deposits (pledged to)/uplifted from licensed banks (21,563) 498,776 - - Interest paid (3,253,054) (2,995,601) (136,737) (103,911)Drawdown of borrowings 2,151,598 9,350,885 - - Repayments of borrowings (1,813,254) (3,627,068) - -

Net cash flows (used in)/from financing activities (2,936,273) 3,226,992 (136,737) (103,911)

Net (decrease)/increase in cash and cash equivalents (3,444,858) 216,089 (22,953) 32,399 Cash and cash equivalents at beginning of the year (793,454) (1,009,543) 53,611 21,212

Cash and cash equivalents at end of the year 25 (4,238,312) (793,454) 30,658 53,611



noteS to tHe FinanCial StatementSFor the financial year ended 31 December 2015

1. 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 registered office of the Company is located at No 60-1, Jalan Legenda 5, Taman 1 Lagenda, 75400 Melaka. The principal place of business of the Company is located at Lot 197, Jalan Sungai Putat, Batu Berendam, 75350 Melaka. The consolidated financial statements for the financial year ended 31 December 2015 comprise the Company and its

subsidiaries. These financial statements are presented in Ringgit Malaysia (‘RM’), which is also the functional currency of the Company.

2. Principal activities The principal activity of the Company is investment holding. The principal activities of the subsidiaries are set out in Note

20 to the financial statements. There have been no significant changes in the nature of these activities for the Group and Company during the financial year.

3. Basis of preparation The financial statements of the Group and of the Company have been prepared in accordance with Financial Reporting

Standards (‘FRSs’) and the provisions of the Companies Act, 1965 in Malaysia. However, Note 38 to the financial statements set out on page 86 has been 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 (‘MIA Guidance’) and the directive of Bursa Malaysia Securities Berhad.

4. Summary of significant accounting policies 4.1 Basis of accounting

The financial statements of the Group and of the Company have been prepared under the historical cost convention except as otherwise stated in the financial statements.

The preparation of financial statements in conformity with FRSs requires the Directors to make estimates and

assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and disclosure of contingent assets and contingent liabilities. In addition, the Directors are also required to exercise their judgement in the process of applying the accounting policies. The areas involving such judgements, estimates and assumptions are disclosed in Note 5 to the financial statements. Although these estimates and assumptions are based on the Directors’ best knowledge of events and actions, actual results could differ from those estimates.

4.2 Changes in accounting policies

The Group and Company adopted the following Standards of the FRS Framework that were issued by the Malaysian Accounting Standards Board (‘MASB’) during the financial year.

FRSs and IC Interpretations (including the Consequential Amendments) • Amendments to FRS 119 DefinedBenefitPlans:EmployeeContributions • Amendments to FRSs AnnualImprovements2010-2012Cycle • Amendments to FRSs AnnualImprovements2011-2013Cycle

There is no impact upon adoption of these amendments to FRSs and IC Interpretations during the current financial

year.


noteS to tHe FinanCial StatementS (Cont’D)For the financial year ended 31 December 2015

4. Summary of significant accounting policies (continued) 4.3 Standards issued but not yet effective

The following are Standards of the FRS Framework that have been issued by the Malaysian Accounting Standards Board (‘MASB’) but have not been early adopted by the Group and Company.

FRSs and IC Interpretations (Including The Consequential Amendments) Effective date FRS 9 FinancialInstruments(IFRSasissuedbyIASBinJuly2014) 1 January 2018 Amendments to FRS 11 AccountingforAcquisitionsofInterestsinJointOperations 1 January 2016 Amendments to FRS 10, FRS 12 and FRS 128 InvestmentEntities:Applyingthe 1 January 2016 ConsolidationException Amendments to FRS 101 DisclosureInitiative 1 January 2016 Amendments to FRS 116 and FRS 138 ClarificationofAcceptableMethodsof 1 January 2016 DepreciationandAmortisation Amendments to FRS 127 EquityMethodinSeparateFinancialStatements 1 January 2016 FRS 14 RegulatoryDeferralAccounts 1 January 2016 Amendments to FRSs AnnualImprovementsto2012-2014Cycle 1 January 2016 Amendments to FRS 10 and FRS 128 SaleorContributionofAssetsbetweenan Deferred InvestoranditsAssociateorJointVenture

The Group is in the process of assessing the impact of implementing these Amendments since the effects would only be observable for the future financial years.

4.4 Malaysian Financial Reporting Standards (MFRS)

MASB has issued a new MASB approved accounting framework, the Malaysian Financial Reporting Standards (“MFRSs”), that are to be applied by all entities other than private entities; with the exception of entities that are within the scope of MFRS 141 (Agriculture) and IC Interpretation 15 (Agreements for Construction of Real Estate), including its parent, significant investor and venturer (herein called “transitioning entities”).

As announced by MASB on 28 October 2015, the transitioning entities are allowed to defer the adoption of MFRSs to

annual periods beginning on or after 1 January 2018. Accordingly, as a transitioning entity as defined above, the Group has chosen to defer the adoption of MFRSs and will

only prepare its first set of MFRS financial statements for the financial year ending 31 December 2018. The Group is currently assessing the possible financial impacts that may arise from the adoption of MFRSs and the process is still ongoing.

4.5 Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and all its subsidiaries. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:

(a) Power over the investee; (b) Exposure, or rights, to variable returns from its involvement with the investee; and (c) The ability to use its power over the investee to affect its returns. If the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts

and circumstances in assessing whether it has power over an investee, including:

(a) The contractual arrangement with the other vote holders of the investee; (b) Rights arising from other contractual agreements; and (c) The voting rights of the Group and potential voting rights.



4. Summary of significant accounting policies (continued) 4.5 Basis of consolidation (continued)

Intragroup balances, transactions, income and expenses are eliminated on consolidation. Unrealised gains arising from transactions are eliminated.

The financial statements of the subsidiaries are prepared for the same reporting period as that of the Company,

using consistent accounting policies. Where necessary, accounting policies of subsidiaries are changed to ensure consistency with the policies adopted by the other entities in the Group.

Non-controlling interests represent the equity in subsidiaries that are not attributable, directly or indirectly, to owners

of the parent, and is presented separately in the consolidated statement of profit or loss and other comprehensive income and within equity in the consolidated statement of financial position, separately from equity attributable to owners of the Company. Profit or loss and each component of profit or loss and other comprehensive income are attributed to the owners of the parent and to the non-controlling interests. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance.

The Group re-assess whether or not it controls an investee if facts and circumstances indicate that there are changes

to one or more of the three elements of control. Subsidiaries are consolidated from the date on which control is transferred to the Group up to the effective date on which control ceases, as appropriate. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the financial year are included in the statement of profit or loss and other comprehensive income from the date of the Group gains control until the date the Group ceases to control the subsidiary.

Changes in the Company owners’ ownership interest in a subsidiary that do not result in a loss of control are accounted

for as equity transactions. In such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of consideration paid or received is recognised directly in equity and attributed to owners of the parent.

If the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between:

(a) the aggregate of the fair value of the consideration received and the fair value of any retained interest; and (b) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-

controlling interests. Amounts previously recognised in other comprehensive income in relation to the subsidiary are accounted for (i.e.

reclassified to profit or loss or transferred directly to retained earnings) in the same manner as would be required if the relevant assets or liabilities were disposed of. The fair value of any investments retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under FRS 139 FinancialInstruments:RecognitionandMeasurement or, where applicable, the cost on initial recognition of an investment in associate or joint venture.

4.6 Functional and presentation currency

Item included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entities operate (‘the functional currency’). The consolidated financial statements are presented in Ringgit Malaysia (‘RM’), which is the Company’s functional and presentation currency.

4.7 Business combinations

Business combinations are accounted for by applying the acquisition method of accounting. Identifiable assets acquired, liabilities and contingent liabilities assumed in a business combination are measured at

their fair value at the acquisition date, except that:



4. Summary of significant accounting policies (continued) 4.7 Business combinations (continued)

(a) deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with FRS 112 IncomeTaxes and FRS 119 EmployeeBenefits respectively;

(b) liabilities or equity instruments related to share-based payment transactions of the acquiree or the replacement

by the Group of an acquiree’s share-based payment transactions are measured in accordance with FRS 2 Share-basedPayment at the acquisition date; and

(c) assets (or disposal groups) that are classified as held for sale in accordance with FRS 5 Non-currentAssetsHeld

forSaleandDiscontinuedOperations are measured in accordance with that Standard.

Acquisition-related costs are recognised as expenses in the periods in which the costs are incurred and the serviced are received.

Any contingent consideration payable is recognised at fair value at the acquisition date. Measurement period

adjustments to contingent consideration are dealt with as follows:

(a) If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity.

(b) Subsequent changes to contingent consideration classified as an asset or liability that is a financial instrument

within the scope of FRS 139 are recognised either in profit or loss or in other comprehensive income in accordance with FRS 139. All other subsequent changes are recognised in profit or loss.

In a business combination achieved in stages, previously held equity interests in the acquiree are re-measured to fair

value at the acquisition date and any corresponding gain or loss is recognised in profit or loss. The Group elects for each individual business combination, whether non-controlling interest in the acquiree (if any) is

recognised on the acquisition date at fair value, or at the non-controlling interest’s proportionate share of the acquiree net identifiable assets.

Any excess of the sum of the fair value of the consideration transferred in the business combination, the amount of

non-controlling interest in the acquiree (if any), and the fair value of the Group’s previously held equity interest in the acquiree (if any), over the net fair value of the acquiree’s identifiable assets and liabilities is recorded as goodwill in the statement of financial position. In instances where the latter amount exceeds the former, the excess is recognised as a gain on bargain purchase in profit or loss on the acquisition date.

4.8 Property, plant and equipment and depreciation

All items of property, plant and equipment are initially measured at cost less any accumulated depreciation. Cost includes expenditures that are directly attributable to the acquisition of the asset.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only

when the cost is incurred and it is probable that the future economic benefits associated with the asset would flow to the Group and the cost of the asset can be measured reliably. The carrying amount of parts that are replaced is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in the profit and loss as incurred. Cost also comprises the initial estimate of dismantling and removing the asset and restoring the site on which it is located for which the Group is obligated to incur when the asset is acquired, if applicable.

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the

asset and which has different useful life, is depreciated separately. After initial recognition, property, plant and equipment are stated at cost less any accumulated depreciation and any

accumulated impairment losses.



4. Summary of significant accounting policies (continued) 4.8 Property, plant and equipment and depreciation (continued)

Depreciation is calculated to write off the cost or valuation of the assets to their estimated residual values on a straight line basis over their estimated useful lives. The principal annual depreciation periods and rates are as follows:

- Leasehold land: 96 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 Freehold land has unlimited useful life and is not depreciated. Building-in-progress represents installation and

renovation-in-progress and are stated at cost. Building-in-progress is not depreciated until such time when the asset is available for use.

At the end of each reporting period, the carrying amount of an item of property, plant and equipment is assessed for

impairment when events or changes in circumstances indicate that its carrying amount may not be recoverable. A write down is made if the carrying amount exceeds the recoverable amount.

The residual values, useful life and depreciation method are reviewed at the end of each reporting period to ensure

that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment. If expectations differ from previous estimates, the changes are accounted for as a change in an accounting estimate.

The carrying amount of an item of property, plant and equipment is derecognised on disposal or when no future

economic benefits are expected from its use or disposal. The difference between the net disposal proceeds, if any, and the carrying amounts is included in profit or loss and the revaluation surplus related to those assets, if any, is transferred directly to retained earnings.

4.9 Investment properties

Investment properties are properties which are held to earn rental yields or for capital appreciation or for both and are not occupied by the Group. Investment properties also include properties that are being constructed or developed for future use as investment properties. Investment properties are initially measured at cost, including transaction costs, less any accumulated depreciation and any accumulated impairment losses.

Subsequent costs are included in the carrying amount of the investment properties or recognised as a separate asset,

as appropriate, only when the cost is incurred and it is probable that the future economic benefits associated with the asset would flow to the Group and the cost of the asset could be measured reliably. The carrying amount of parts that are replaced is derecognised. The costs of the day-to-day servicing of investment properties are recognised in profit or loss as incurred. Cost also comprises the initial estimate of dismantling and removing the asset and restoring the site on which it is located for which the Group is obligated to incur when the investment properties are acquired, if applicable.

After initial recognition, investment properties are stated at cost less any accumulated depreciation and any

accumulated impairment losses. Depreciation is calculated to write off the cost or valuation of the investment properties to their residual values on

a straight line basis over their estimated useful lives. The principal annual depreciation periods for the investments properties ranges between forty-seven (47) and fifty (50) years.

At the end of each reporting period, the carrying amount of an item of the investment properties are assessed for

impairment when events or changes in circumstances indicate that its carrying amount may not be recoverable. A write down is made if the carrying amount exceeds the recoverable amount.



4. Summary of significant accounting policies (continued) 4.9 Investment properties (continued)

The residual values, useful lives and depreciation method are reviewed at the end of each reporting period to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the investment properties. If expectations differ from previous estimates, the changes are accounted for as a change in an accounting estimate.

Investment properties are derecognised when either they have been disposed of or when they are permanently

withdrawn from use and no future economic benefit is expected from their disposal. The gains or losses arising from the retirement or disposal of investment property is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the asset and is recognised in profit or loss in the period of the retirement or disposal.

4.10 Land use rights

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 of 67 years.

4.11 Development expenditure

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. 4.12 Impairment of non-financial assets

The carrying amounts of assets, except for financial assets (excluding investment in subsidiaries), inventories, assets arising from construction contracts, property development costs and deferred tax assets are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.

The recoverable amount of an asset is estimated for an individual asset. Where it is not possible to estimate the

recoverable amount of the individual asset, the impairment test is carried out on the cash generating unit (‘CGU’) to which the asset belongs.

The recoverable amount of an asset or CGU is the higher of its fair value less cost to sell and its value in use. In estimating the value in use, the estimated future cash inflows and outflows to be derived from continuing use of

the asset and from its ultimate disposal 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 for which the future cash flow estimates have not been adjusted. An impairment loss is recognised in the profit or loss when the carrying amount of the asset or the CGU, exceeds the recoverable amount of the asset or the CGU.

An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount

that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.



4. Summary of significant accounting policies (continued) 4.13 Investment in subsidiaries

A subsidiary is an entity in which the Group and the Company are exposed, or have rights, to variable returns from its involvement with the subsidiary and have the ability to affect those returns through its power over the subsidiary.

An investment in subsidiary, which is eliminated on consolidation, is stated in the separate financial statements of the

Company at cost (or in accordance with FRS 139). Put options written over non-controlling interests on the acquisition of subsidiary shall be included as part of the cost of investment in the separate financial statements of the Company. Subsequent changes in the fair value of the written put options over non-controlling interests shall be recognised in profit or loss. Investments accounted for at cost shall be accounted for in accordance with FRS 5 Non-currentAssetsHeldforSaleandDiscontinuedOperations when they are classified as held for sale (or included in a disposal group that is classified as held for sale) in accordance with FRS 5.

When control of a subsidiary is lost as a result of a transaction, event or other circumstance, the Group would

derecognise all assets, liabilities and non-controlling interests at their carrying amount and to recognise the fair value of the consideration received. Any retained interest in the former subsidiary is recognised at its fair value at the date control is lost. The resulting difference is recognised as a gain or loss in profit or loss.

4.14 Financial instruments

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

A financial asset is any asset that is cash, an equity instrument of another enterprise, a contractual right to receive

cash on another financial asset from another enterprise, or a contractual right to exchange financial assets or financial liabilities with another enterprise under conditions that are potentially favourable to the Group.

A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another

enterprise, or a contractual obligation to exchange financial assets or financial liabilities with another enterprise under conditions that are potentially unfavourable to the Group.

Financial instruments are recognised on the statement of financial position when the Group has become a party to the

contractual provisions of the instrument. At initial recognition, a financial instrument is recognised at fair value plus, in the case of a financial instrument not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issuance of the financial instrument.

An embedded derivative is separated from the host contract and accounted for as a derivative if, and only if the

economic characteristics and risks of the embedded derivative is not closely related to the economic characteristics and risks of the host contract, a separate instrument with the same terms as the embedded derivative meets the definition of a derivative, and the hybrid instrument is not measured at fair value through profit or loss.

(a) Financial assets A financial asset is classified into the following four (4) categories after initial recognition for the purpose of

subsequent measurement:

(i) Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss comprise financial assets that are held for trading

(i.e. financial assets acquired principally for the purpose of resale in the near term), derivatives (both, freestanding and embedded) and financial assets that were specifically designated into this classification upon initial recognition.

Subsequent to initial recognition, financial assets classified as at fair value through profit or loss are

measured at fair value. Any gains or losses arising from changes in the fair value of financial assets classified as at fair value through profit or loss are recognised in profit or loss. Net gains or losses on financial assets classified as at fair value through profit or loss exclude foreign exchange gains and losses, interest and dividend income. Such income is recognised separately in profit or loss as components of other income or administrative and general expenses.

However, derivatives that is linked to and must be settled by delivery of unquoted equity instruments that

do not have a quoted market price in an active market are recognised at cost.



4. Summary of significant accounting policies (continued) 4.14 Financial instruments (continued)

(a) Financial assets (continued)

A financial asset is classified into the following four (4) categories after initial recognition for the purpose of subsequent measurement (continued):

(ii) Held-to-maturity investments Financial assets classified as held-to-maturity comprise non-derivative financial assets with fixed or

determinable payments and fixed maturity that the Group has the positive intention and ability to hold to maturity.

Subsequent to initial recognition, financial assets classified as held-to-maturity are measured at amortised

cost using the effective interest method. Gains or losses on financial assets classified as held-to-maturity are recognised in profit or loss when the financial assets are derecognised or impaired, and through the amortisation process.

(iii) Loans and receivables Financial assets classified as loans and receivables comprise non-derivative financial assets with fixed or

determinable payments that are not quoted in an active market. Subsequent to initial recognition, financial assets classified as loans and receivables are measured at

amortised cost using the effective interest method. Gains or losses on financial assets classified as loans and receivables are recognised in profit or loss when the financial assets are derecognised or impaired, and through the amortisation process.

(iv) Available-for-sale financial assets Financial assets classified as available-for-sale comprise non-derivative financial assets that are designated

as available for sale or are not classified as loans and receivables, held-to-maturity investments or financial assets at fair value through profit or loss.

Subsequent to initial recognition, financial assets classified as available-for-sale are measured at fair value.

Any gains or losses arising from changes in the fair value of financial assets classified as available-for-sale are recognised directly in other comprehensive income, except for impairment losses and foreign exchange gains and losses, until the financial asset is derecognised, at which time the cumulative gains or losses previously recognised in other comprehensive income are recognised in profit or loss. However, interest calculated using the effective interest method is recognised in profit or loss whilst dividends on available-for-sale equity instruments are recognised in profit or loss when the Group’s right to receive payment is established.

Cash and cash equivalents consist of cash on hand, balances and deposits with banks which have an insignificant

risk of changes in fair value with original maturities of three (3) months or less, and are used by the Group and the Company in the management of their short term commitments. For the purpose of the statement of cash flows, cash and cash equivalents are presented net of bank overdrafts and pledged deposits.

A financial asset is derecognised when the contractual right to receive cash flows from the financial asset has

expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised directly in other comprehensive income shall be recognised in profit or loss.

A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery

of the asset within the time frame established generally by regulation or marketplace convention.

A regular way purchase or sale of financial assets shall be recognised and derecognised, as applicable, using trade date accounting.




(b) Financial liabilities Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual

arrangement. A financial liability is classified into the following two (2) categories after initial recognition for the purpose of subsequent measurement:

(i) Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss comprise financial liabilities that are held for trading,

derivatives (both, freestanding and embedded) and financial liabilities that were specifically designated into this classification upon initial recognition.

Subsequent to initial recognition, financial liabilities classified as at fair value through profit or loss are

measured at fair value. Any gains or losses arising from changes in the fair value of financial liabilities classified as at fair value through profit or loss are recognised in profit or loss. Net gains or losses on financial liabilities classified as at fair value through profit or loss exclude foreign exchange gains and losses, interest and dividend income. Such income is recognised separately in profit or loss as components of other income or administrative and general expenses.

(ii) Other financial liabilities Financial liabilities classified as other financial liabilities comprise non-derivative financial liabilities that

are neither held for trading nor initially designated as at fair value through profit or loss. Subsequent to initial recognition, other financial liabilities are measured at amortised cost using the

effective interest method. Gains or losses on other financial liabilities are recognised in profit or loss when the financial liabilities are derecognised and through the amortisation process.

A financial liability is derecognised when, and only when, it is extinguished, i.e. when the obligation specified

in the contract is discharged or cancelled or expired. An exchange between an existing borrower and lender of debt instruments with substantially different terms are accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, a substantial modification of the terms of an existing financial liability is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability.

Any difference between the carrying amount of a financial liability extinguished or transferred to another party

and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the

holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of a debt instrument.

The Group designates corporate guarantees given to banks for credit facilities granted to subsidiaries as

insurance contracts as defined in FRS 4 InsuranceContracts. The Group recognises these insurance contracts as recognised insurance liabilities when there is a present obligation, legal or constructive, as a result of a past event, when it is probable that an outflow of resources embodying economic benefits would be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

At the end of each reporting period, the Group assesses whether its recognised insurance liabilities are adequate,

using current estimates of future cash flows under its insurance contracts. If this assessment shows that the carrying amount of the insurance liabilities is inadequate, the entire deficiency shall be recognised in profit or loss.

Recognised insurance liabilities are only removed from the statements of financial position when, and only

when, it is extinguished via a discharge, cancellation or expiration.




(c) Equity An equity instrument is any contract that evidences a residual interest in the assets of the Group and Company

after deducting all of its liabilities. Ordinary shares are classified as equity instruments. Ordinary shares are recorded at the nominal value and proceeds in excess of the nominal value of shares issued,

if any, are accounted for as share premium. Both ordinary shares and share premium are classified as equity. Transaction costs of an equity transaction are accounted for as a deduction from equity, net of any related income tax benefit. Otherwise, they are charged to profit or loss.

Interim dividends to shareholders are recognised in equity in the period in which they are declared. Final

dividends are recognised upon the approval of shareholders in a general meeting. The Group measures a liability to distribute non-cash assets as a dividend to the owners of the Company at the

fair value of the assets to be distributed. The carrying amount of the dividend is remeasured at each reporting date and at the settlement date, with any changes recognised directly in equity as adjustments to the amount of the distribution. On settlement of the transaction, the Group recognises the difference, if any, between the carrying amount of the assets distributed and the carrying amount of the liability in profit or loss.

4.15 Impairment of financial assets

The Group assesses whether there is any objective evidence that a financial asset is impaired at the end of each reporting period.

Loans and receivables The Group collectively considers factors such as the probability of bankruptcy or significant financial difficulties of

the receivable and default or significant delay in payments to determine whether there is objective evidence that an impairment loss on loans and receivables has occurred. Other objective evidence of impairment include historical collection rates determined on an individual basis and observable changes in national or local economic conditions that are directly correlated with the historical default rates of receivables.

If any such objective evidence exists, the amount of impairment loss is measured as the difference between the

financial 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 loans and receivables is reduced through the use of an allowance account. If in a subsequent period, the amount of the impairment loss decreases and it objectively relates 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 impairment reversed is recognised in profit or loss.

4.16 Construction contracts

Contract costs comprise costs related directly to the specific contract and those that are attributable to the contract activity in general and can be allocated to the contract and such other costs that are specifically chargeable to the customer under the terms of the contract.

When the total costs incurred on construction contracts plus recognised profits (less recognised losses), exceeds

progress billings, the balance is classified as amount due from customers for contract work. When progress billings exceed costs incurred plus recognised profits (less recognised losses), the balance is classified as amount due to customers for contract work.



4. Summary of significant accounting policies (continued) 4.17 Property development activities

(a) Land held for property development Land held for property development is stated at cost less impairment losses, if any. Such land is classified as

non-current asset when no significant development work has been carried out or where development activities are not expected to be completed within the normal operating cycle.

Cost associated with the acquisition of land includes the purchase price of the land, professional fees, stamp

duties, commissions, conversion fees and other relevant levies. Land held for property development is reclassified as property development costs at the point when development

activities have commenced and where it can be demonstrated that the development activities can be completed within the normal operating cycle.

(b) Property development costs Property development costs comprise all cost that are directly attributable to the development activities or that

can be allocated on a reasonable basis to such activities. They comprised the cost of land under development, construction costs and other related development costs common to the whole project including professional fees, stamp duties, commissions, conversion fees and other relevant levies as well as borrowing costs.

Property development costs not recognised as an expense are recognised as an asset measured at the lower of

cost and net realisable value. When revenue recognised in profit or loss exceeds progress billings to purchasers, the balance is classified as

accrued billings under current assets. When progress billings exceed revenue recognised in profit or loss, the balance is classified as progress billings under current liabilities.

4.18 Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out formula. The cost comprises all costs of purchase, cost of conversion plus

other costs incurred in bringing the inventories to their present location and condition. The cost of work-in-progress and finished goods includes the cost of raw materials, direct labour, other direct cost and a proportion of production overheads based on normal operating capacity of the production facilities.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs necessary

to make the sale. 4.19 Provisions

Provisions are recognised when there is a present obligation, legal or constructive, as a result of a past event, when it is probable that an outflow of resources embodying economic benefits would be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

If the effect of the time value of money is material, the amount of a provision would be discounted to its present

value at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.

Provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. If it is no

longer probable that an outflow of resources embodying economic benefits would be required to settle the obligation, the provision will be reversed.

Provisions are not recognised for future operating losses. If the Group has a contract that is onerous, the present obligation under the contract shall be recognised and measured as a provision.



4. Summary of significant accounting policies (continued) 4.20 Contingent liabilities and contingent assets

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

A contingent asset is a possible asset that arises from past events whose existence would be confirmed by the

occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group. The Group does not recognise contingent assets but discloses its existence where inflows of economic benefits are probable, but not virtually certain.

In the acquisition of subsidiaries by the Group under business combinations, contingent liabilities assumed are

measured initially at their fair value at the acquisition date, irrespective of the extent of any non-controlling interest. 4.21 Borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualified asset is capitalised as part of the cost of the asset until when substantially all the activities necessary to prepare the asset for its intended use or sale are complete, after which such expense is charged to profit or loss. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. Capitalisation of borrowing cost is suspended during extended periods in which active development is interrupted.

The amount of borrowing costs eligible for capitalisation is the actual borrowing costs incurred on the borrowing

during the period less any investment income on the temporary investment of the borrowing. All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

4.22 Employee benefits

(a) Short term employee benefits Wages, salaries, social security contributions, paid annual leave, paid sick leave, bonuses and non-monetary

benefits are recognised as expenses in the financial year when employees have rendered their services to the Group.

Short term accumulating compensated absences such as paid annual leave are recognised as an expense when

employees render services that increase their entitlement to future compensated absences. Short term non-accumulating compensated absences such as sick leave are recognised when the absences occur and they lapse if the current period’s entitlement is not used in full and do not entitle employees to a cash payment for unused entitlement on leaving the Group.

Bonuses are recognised as an expense when there is a present, legal or constructive obligation to make such

payments, as a result of past events and when a reliable estimate can be made of the amount of the obligation. (b) Defined contribution plan The Company and its subsidiaries incorporated in Malaysia make contributions to a statutory provident fund.

The contributions are recognised as a liability after deducting any contributions already paid and as an expense in the period in which the employees render their services.



4. Summary of significant accounting policies (continued) 4.23 Leases

(a) Finance leases and hire purchase Assets acquired under finance leases and hire purchase which transfer substantially all the risks and rewards of

ownership to the Group are recognised initially at amounts equal to the fair value of the leased assets or, if lower, the present value of the minimum lease payments, each determined at the inception of the lease.

The discount rate used in calculating the present value of the minimum lease payments is the interest rate

implicit in the leases, if this is practicable to determine; if not, the Group’s incremental borrowing rate is used. Any initial direct costs incurred by the Group are added to the amount recognised as an asset. The assets are capitalised as property, plant and equipment and the corresponding obligations are treated as liabilities. The property, plant and equipment capitalised are depreciated on the same basis as owned assets.

The minimum lease payments are apportioned between the finance charges and the reduction of the outstanding

liability. The finance charges are recognised in profit or loss over the period of the lease term so as to give a constant periodic rate of interest on the remaining lease and hire purchase liabilities.

(b) Operating leases A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental

to ownership. Lease payments under operating leases are recognised as an expense on a straight-line basis over the lease

term. (c) Leases of land and buildings For leases of land and buildings, the land and buildings elements are considered separately for the purpose of

lease classification and these leases are classified as operating or finance leases in the same way as leases of other assets.

The minimum lease payments including any lump-sum upfront payments made to acquire the interest in the

land and building are allocated between the land and the buildings elements in proportion to the relative fair value of the leasehold interests in the land element and the buildings element of the leave at the inception of the lease.

For a lease of land and buildings in which the amount that would initially be recognised for the land element

is immaterial, the land and buildings are treated as a single unit for the purpose of lease classification and is accordingly classified as a finance or operating lease. In such a case, the economic life of the buildings is regarded as the economic life of the entire leased asset.

4.24 Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable net of discounts and rebates. Revenue is recognised to the extent that it is probable that the economic benefits associated with the transaction would

flow to the Group, and the amount of revenue and the cost incurred or to be incurred in respect of the transaction can be reliably measured and specific recognition criteria have been met for each of the Group’s activities as follows:

(a) Sale of goods Revenue from sale of goods is recognised when significant risk and rewards of ownership of the goods has been

transferred to the customer and where the Group retains neither continuing managerial involvement over the goods, which coincides with delivery of goods and acceptance by customers.



4. Summary of significant accounting policies (continued)

4.24 Revenue recognition (continued)

(b) Construction contracts Profit from contract works are recognised on a percentage of completion method. Percentage of completion is

measured by reference to the proportion of contract costs incurred for work performed to date to the estimated total contract costs.

When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised

as an expense immediately. When the outcome of a contract cannot be estimated reliably, revenue is recognised only to the extent of

contract costs incurred that is probable will be recoverable and contract cost are recognised as an expense in the period in which they are incurred.

(c) Sale of development properties Revenue from one-off sale of completed development property is measured at the fair value of the consideration

receivable and is recognised in profit or loss when the significant risks and rewards of ownership have been transferred to the buyer.

(d) Interest income Interest income is recognised as it accrues, using the effective interest method. (e) Rental income Rental income is accounted for on a straight line basis over the lease term of an ongoing lease. The aggregate

cost of incentives provided to the lessee is recognised as reduction of rental income over the lease term on a straight line basis.

4.25 Income taxes

Income taxes include all taxes on taxable profit. Taxes in the statements of profit or loss and other comprehensive income comprise current tax and deferred tax.

(a) Current tax Current tax expenses are determined according to the tax laws of each jurisdiction in which the Group operates

and include all taxes based upon the taxable profits and real property gains taxes payable on disposal of properties, if any.

(b) Deferred tax Deferred tax is recognised in full using the liability method on temporary differences arising between the carrying

amount of an asset or liability in the statement of financial position and its tax base. Deferred tax is recognised for all temporary differences, unless the deferred tax arises from goodwill or the

initial recognition of an asset or liability in a transaction which is not a business combination and at the time of transaction affects neither accounting profit nor taxable profit.

A deferred tax asset is recognised only to the extent that it is probable that taxable profits would be available

against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. The carrying amount of a deferred tax asset is reviewed at the end of each reporting period. If it is no longer probable that sufficient taxable profits would be available to allow the benefit of part or all of that deferred tax asset to be utilised, the carrying amount of the deferred tax asset would be reduced accordingly. When it becomes probable that sufficient taxable profits would be available, such reductions would be reversed to the extent of the taxable profits.




4.25 Income taxes (continued)

(b) Deferred tax (continued)

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred income taxes relate to either:

(i) the same taxable entity; or (ii) different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or

to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered

Deferred tax would be recognised as income or expense and included in profit or loss for the period unless the

tax relates to items that are credited or charged, in the same or different period, directly to equity, in which case the deferred tax will be charged or credited directly to equity.

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 by the Government in the annual budgets which have the substantive effect of actual enactment by the end of each reporting period.

4.26 Operating segments

For management purposes, the Group is organised into operating segments based on their products and services which are independently managed by the respective segment managers responsible for the performance of the respective segments under their charge. The segment managers report directly to the management of the Company who regularly review the segment results in order to allocate resources to the segments and to assess the segment performance. Additional disclosures on each of these segments are shown in Note 36, including the factors used to identify the reportable segments and the measurement basis of segment information.

4.27 Earnings per share

(a) Basic Basic earnings per ordinary share for the financial year is calculated by dividing the profit for the financial year

attributable to equity holders of the parent by the weighted average number of ordinary shares outstanding during the financial year.

(b) Diluted Diluted earnings per ordinary share for the financial year is calculated by dividing the profit for the financial

year attributable to equity holders of the parent by the weighted average number of ordinary shares outstanding during the financial year adjusted for the effects of dilutive potential ordinary shares.

4.28 Fair value measurements

The fair value of an asset or a liability, (except for lease transactions) is determined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement assumes that the transaction to sell the asset or transfer the liability takes place either in the principal market or in the absence of a principal market, in the most advantageous market.

The Group measures the fair value of an asset or a liability by taking into account the characteristics of the asset or

liability if market participants would take these characteristics into account when pricing the asset or liability. The Group has considered the following characteristics when determining fair value:

(a) The condition and location of the asset; and (b) Restrictions, if any, on the sale or use of the asset.




4.28 Fair value measurements (continued) The fair value measurement for a non-financial asset takes into account the ability of the market participant to generate

economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The fair value of a financial or non-financial liability or an entity’s own equity instrument assumes that:

(a) A liability would remain outstanding and the market participant transferee would be required to fulfil the

obligation. The liability would not be settled with the counterparty or otherwise extinguished on the measurement date; and

(b) An entity’s own equity instrument would remain outstanding and the market participant transferee would take

on the rights and responsibilities associated with the instrument. The instrument would not be cancelled or otherwise extinguished on the measurement date.

5. Significant accounting estimates and judgements 5.1 Changes in estimates

Estimates are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The Directors are of the opinion that there are no changes in estimates at the end of the reporting period.

5.2 Critical judgements made in applying accounting policies

The following are the judgements made by Directors in the process of applying the Group’s accounting policies that have the most significant effect on the amounts recognised in the financial statements.

(a) Classification of leasehold land The classification of leasehold land as a finance lease or an operating lease requires the use of judgement in

determining the extent to which risks and rewards incidental to its ownership lie. Despite the fact there will be no transfer of ownership by end of the lease term and that the lease term does not constitute the major part of the indefinite economic life of the land, management considered that the present value of minimum lease payments approximated to the fair value of the land at the inception of the lease. Accordingly, management judged that the Group has acquired substantially all the risks and rewards incidental to the ownership of the land through a finance lease.

(b) Classification of current and non-current borrowings Term loan agreements entered into by the Group include repayment on demand clauses at the discretion

of financial institutions. The Group believes that in the absence of a default being committed by the Group, these financial institutions are not entitled to exercise its right to demand for repayment. Accordingly, the carrying amount of the term loans have been classified between current and non-current liabilities based on their repayment period.

(c) Operating lease commitments - the Group as lessor The Group has entered into commercial property leases on its investment property portfolio. The Group has

determined that it retains all the significant risks and rewards of ownership of these properties which are leased out as operating leases.



5. Significant accounting estimates and judgements (continued)

5.2 Critical judgements made in applying accounting policies (continued) (d) Contingent liabilities The determination of treatment of contingent liabilities and assets is based on Director’s view of the expected

outcome of the contingencies for matters in the ordinary course of the business. (e) Contingent liabilities on corporate guarantees The Directors are of the view that the chances of the financial institutions to call upon the corporate guarantees

are remote.

5.3 Key sources of estimation uncertainty

The following are key assumptions concerning the future and other key sources of estimation uncertainty at the end of each reporting period that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

(a) Depreciation of property, plant and equipment The cost of property, plant and equipment is depreciated on a straight line basis over the assets’ useful lives.

Management estimates the useful lives of these property, plant and equipment in accordance with accounting policy stated in notes to the financial statements on property, plant and equipment and depreciation. These are common life expectancies applied in this industry. Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, and therefore future depreciation charges could be revised.

(b) Write down for obsolete or slow moving inventories The Group writes down its obsolete or slow moving inventories based on assessment of their estimated net

selling price. Inventories are written down when events or changes in circumstances indicate that the carrying amounts may not be recoverable. The management specifically analyses sales trend and current economic trends when making a judgement to evaluate the adequacy of the write down for obsolete or slow moving inventories. Where expectations differ from the original estimates, the differences will impact the carrying amount of inventories.

(c) Impairment of receivables The Group makes impairment of receivables based on an assessment of the recoverability of receivables.

Impairment is applied to receivables where events or changes in circumstances indicate that the carrying amounts may not be recoverable. The management specifically analyses historical bad debt, customer concentration, customer creditworthiness, current economic trends and changes in customer payment terms when making a judgement to evaluate the adequacy of impairment of receivables. Where expectations differ from the original estimates, the differences will impact the carrying amount of receivables.

(d) Investment in subsidiaries and impairment of amounts due from subsidiaries Management reviews the investments in subsidiaries for impairment when there is an indication of impairment

and assess the impairment of amounts due from subsidiaries when the receivables are long outstanding. The recoverable amounts of the investments in subsidiaries and amounts due from subsidiaries are assessed by reference to the fair value of the underlying assets.



5. Significant accounting judgements and estimates (continued) 5.3 Key sources of estimation uncertainty (continued)

(e) Fair value of borrowings The fair value of borrowings are estimated by discounting future contractual cash flows at the current market

interest rates available to the Group for similar financial instruments. It is assumed that the effective interest rates approximate the current market interest rates available to the Group based on its size and its business risk.

(f) Deferred tax assets Deferred tax assets are recognised for all unused tax losses and unabsorbed capital allowances to the extent

that it is probable that taxable profits will be available against which the losses and capital allowances can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies.

(g) Recognition of revenue from construction contract The Group recognises construction contract revenue and expenses in the statements of profit or loss and other

comprehensive income using the stage of completion method. The stage of completion is determined by reference to the proportion of contract costs incurred for work performed to date to the estimated total contract costs.

Significant judgement is required in determining the stage of completion, the extent of the costs incurred and

the estimated total revenue and costs, as well as recoverability of the construction projects. In making the judgement, the Group evaluates based on past experience and external economic factors.

(h) Income taxes Judgement is required in determining the capital allowances and deductibility of certain expenses when

estimating the provision for income taxes. There were transactions and calculations for which the ultimate tax determination of whether additional tax will be due is uncertain during the ordinary course of business. The Group and the Company recognise tax liabilities based on estimates of additional taxes that will be due. Where the final tax outcome is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax in the period in which the outcome is known.

6. Revenue

Group 2015 2014 RM RM Sales of goods 29,412,354 29,437,872 Construction revenue 8,521,126 6,655,843 Sales of development properties - 3,860,000 37,933,480 39,953,715



7. Other income

Group Company 2015 2014 2015 2014 RM RM RM RM

Gain on disposal of property, plant and equipment 25,394 29,302 - - Realised gain on foreign exchange 32,563 13,246 - - Reversal of impairment loss on trade receivables 213,273 97,917 - - Interest income from: - financial institution 22,957 45,260 599 527 - subsidiaries - - 277,075 233,955 Rental income 370,655 47,700 - - Sundry income 171,654 95,427 233 -

836,496 328,852 277,907 234,482

8. Finance costs


Interest expense on: - term loans, bankers’ acceptances, trust receipts and bank overdrafts 3,213,276 2,948,326 - - - obligations under finance leases 39,778 47,275 - - - amount due to a subsidiary - - 136,737 103,911

3,253,054 2,995,601 136,737 103,911 Less: Interest expense capitalised in building-in-progress (Note 14) (199,272) (203,738) - - Interest expense capitalised in property development costs (Note 18) (1,149,441) (1,405,022) - -

Total finance costs 1,904,341 1,386,841 136,737 103,911

9. Profit/(Loss) before tax The following items have been included in arriving at profit/(loss) before tax: Group Company 2015 2014 2015 2014 RM RM RM RM

Auditors’ remuneration: - statutory audit - current year 100,000 77,500 20,000 17,000 - underprovision in prior year 10,750 - 2,500 - - other services 32,400 24,100 8,500 5,600 Employee benefits expense (Note 10) 5,573,794 4,890,573 28,400 27,200 Amortisation of land use rights 59,122 82,183 - - Depreciation on: - property, plant and equipment 1,877,497 1,885,546 - - - investment properties 104,760 26,290 - - Impairment loss on trade receivables 240,600 246,754 - - Unrealised loss on foreign exchange - 18,931 - -



9. Profit/(Loss) before tax (continued) The following items have been included in arriving at profit/(loss) before tax (continued): Group Company 2015 2014 2015 2014 RM RM RM RM

Rental expenses: - motor vehicles and office equipment 4,740 8,925 - - - land and buildings 154,000 116,300 - - Property, plant and equipment written off - 7,066 - -

10. Employee benefits expense Group Company 2015 2014 2015 2014 RM RM RM RM

Executive Directors (Note 11) Executive Directors of the Company 1,183,527 1,066,907 28,400 27,200 Executive Directors of subsidiaries 142,151 340,402 - -

1,325,678 1,407,309 28,400 27,200

Other staff Wages, salaries and bonus 3,773,594 3,074,147 - - Contributions to defined contribution plan 296,802 263,701 - - Social security contribution 30,276 26,992 - - Other benefits 147,444 118,424 - -

4,248,116 3,483,264 - -

5,573,794 4,890,573 28,400 27,200

11. Directors’ remuneration Group Company 2015 2014 2015 2014 RM RM RM RM

Directors of the Company Executive: - Salaries and other emoluments 571,819 539,451 2,000 2,400 - Fees 520,400 457,800 26,400 24,800 - Contributions to defined contribution plan 88,828 67,176 - - - Social security contribution 2,480 2,480 - - - Estimated money value of benefits-in-kind 38,980 41,550 - -

1,222,507 1,108,457 28,400 27,200

Non-Executive: - Fees 79,200 74,400 79,200 74,400 - Allowances 6,000 7,200 6,000 7,200

85,200 81,600 85,200 81,600



11. Directors’ remuneration (continued)


Directors of subsidiaries Executive: - Salaries and other emoluments 80,955 189,400 - - - Fees 50,000 126,000 - - - Contributions to defined contribution plan 10,266 23,400 - - - Social security contribution 930 1,602 - - - Estimated money value of benefits-in-kind 8,800 8,303 - -

150,951 348,705 - -

Total excluding benefits-in-kind 1,410,878 1,488,909 113,600 108,800 Estimated money value of benefits-in-kind 47,780 49,853 - -

1,458,658 1,538,762 113,600 108,800

Analysis of Directors’ remuneration: Executive Directors, excluding benefits-in-kind (Note 10) 1,325,678 1,407,309 28,400 27,200 Non-Executive Directors 85,200 81,600 85,200 81,600

Total excluding benefits-in-kind 1,410,878 1,488,909 113,600 108,800

The number of Directors of the Company whose total remuneration during the financial year fell within the following bands is analysed below:

2015 2014 Number of directors Number of directors Non- Non- Executive Executive Executive Executive RM1 – RM50,000 - 3 - 3 RM50,001 – RM100,000 - - - - RM100,001 – RM150,000 - - - - RM150,001 – RM200,000 1 - 2 - RM200,001 – RM250,000 1 - - - RM250,001 – RM300,000 - - - - RM300,001 – RM350,000 - - 1 - RM350,001 – RM400,000 1 - - - RM400,001 – RM450,000 1 - 1 -



12. Tax expense Group Company 2015 2014 2015 2014 RM RM RM RM

Statement of comprehensive income: Income tax: - current financial year 607,000 1,031,500 - 500 - underprovision in prior years 14,154 76,089 116 -

621,154 1,107,589 116 500

Deferred tax (Note 28): - origination and reversal of temporary differences 275,203 (313,149) - - - underprovision in prior years 5,271 41,800 - -

280,474 (271,349) - -

901,628 836,240 116 500

The numerical reconciliation between tax expense and the product of accounting profit/(loss) multiplied by the applicable corporate tax rate for the years ended 31 December 2015 and 2014 are as follows:

Group Company 2015 2014 2015 2014 RM RM RM RM Accounting profit/(loss) before tax 1,848,035 1,666,693 (88,213) (80,807)

Tax at Malaysian statutory tax rate of 25% (2014: 25%) 462,009 416,673 (22,053) (20,202) Adjustments: Non-deductible expenses 331,803 298,143 21,793 20,834 Income not subject to tax (816) (3,047) (150) (132) Deferred tax asset not recognised 89,207 6,582 410 - Underprovision in prior years - income tax 14,154 76,089 116 - - deferred tax 5,271 41,800 - -

Tax expense recognised in profit or loss 901,628 836,240 116 500



13. Earnings per share (a) Basic

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

Group 2015 2014 Profit net of tax attributable to owners of the parent (RM) 968,173 866,491 Weighted average number of ordinary shares in issue (units) 80,000,000 80,000,000 Basic earnings per ordinary share (sen) 1.21 1.08

(b) Diluted

There are no diluted earnings per share as the Company does not have any dilutive potential ordinary shares at the end of the reporting period.

14. Property, plant and equipment

Plant, machinery * Land and and factory Motor ** Other buildings equipment vehicles assets Total Group RM RM RM RM RM Cost

At 1 January 2014 21,351,931 17,396,498 4,709,913 3,133,009 46,591,351 Additions 4,463,742 96,800 414,394 91,304 5,066,240 Disposals - - (79,000) (2,029) (81,029) Written off - (3,300) - (116,411) (119,711) Transfer to land held for property development (1,387,702) - - - (1,387,702) Transfer to property development costs (3,131,624) - - - (3,131,624) At 31 December 2014 and 1 January 2015 21,296,347 17,489,998 5,045,307 3,105,873 46,937,525 Additions 1,585,885 569,122 412,162 114,139 2,681,308 Disposals - (6,750) (528,260) - (535,010) Transfer to investment properties (2,266,776) - - - (2,266,776) At 31 December 2015 20,615,456 18,052,370 4,929,209 3,220,012 46,817,047



14. Property, plant and equipment (continued)

Plant, machinery * Land and and factory Motor ** Other buildings equipment vehicles assets Total Group RM RM RM RM RM

Accumulated depreciation

At 1 January 2014 2,811,471 12,735,533 3,002,901 2,263,266 20,813,171 Charge for the year 293,125 973,682 445,511 173,228 1,885,546 Disposals - - (79,000) (551) (79,551) Written off - (3,300) - (109,345) (112,645) At 31 December 2014 and 1 January 2015 3,104,596 13,705,915 3,369,412 2,326,598 22,506,521 Charge for the year 307,100 921,633 479,424 169,340 1,877,497 Disposals - (1,744) (498,160) - (499,904) Transfer to investment properties (29,255) - - - (29,255) At 31 December 2015 3,382,441 14,625,804 3,350,676 2,495,938 23,854,859 Net carrying amount At 31 December 2014 18,191,751 3,784,083 1,675,895 779,275 24,431,004 At 31 December 2015 17,233,015 3,426,566 1,578,533 724,074 22,962,188 ** Other assets comprise office equipment, furniture and fittings, electrical installation, computers and cabin. Factory buildings Building- Freehold Leasehold and Hostel inland land extensions buildings progress Total Group RM RM RM RM RM RM Cost At 1 January 2014 2,734,665 1,033,416 9,821,163 35,000 7,727,687 21,351,931 Additions 1,011,620 - 3,246,630 - 205,492 4,463,742 Transfer to land held for property development (1,387,702) - - - - (1,387,702) Transfer to property development cost - (1,033,416) 428,184 - (2,526,392) (3,131,624) At 31 December 2014 and 1 January 2015 2,358,583 - 13,495,977 35,000 5,406,787 21,296,347 Additions 543,390 - 774,094 - 268,401 1,585,885 Disposals - - - - - - Reclassification - - 5,675,188 - (5,675,188) - Transfer to investment properties - - (2,266,776) - - (2,266,776) At 31 December 2015 2,901,973 - 17,678,483 35,000 - 20,615,456



14. Property, plant and equipment (continued)

Factory buildings Building- Freehold Leasehold and Hostel inland land extensions buildings progress Total Group RM RM RM RM RM RM

Accumulated depreciation At 1 January 2014 - 19,734 2,783,337 8,400 - 2,811,471 Charge for the year - (19,734) 312,159 700 - 293,125 At 31 December 2014 and 1 January 2015 - - 3,095,496 9,100 - 3,104,596 Charge for the year - - 306,400 700 - 307,100 Transfer to investment properties - - (29,255) - - (29,255) At 31 December 2015 - - 3,372,641 9,800 - 3,382,441 Net carrying amount At 31 December 2014 2,358,583 - 10,400,481 25,900 5,406,787 18,191,751 At 31 December 2015 2,901,973 - 14,305,842 25,200 - 17,233,015 During the financial year, the Group acquired property, plant and equipment by mean of: Group 2015 2014 RM RM Finance leases 146,100 280,000 Interest expense capitalised (Note 8) 199,272 203,738 Transfer to land held for property development - 1,011,620 Cash outflow 2,335,936 3,570,882 2,681,308 5,066,240

Assets held under finance leases The carrying amount of motor vehicles under finance leases at the reporting date was RM1,098,883 (2014: RM1,381,183). Leased assets are pledged as security for the related finance lease liabilities (Note 32(c)).



14. Property, plant and equipment (continued) Assets pledged as securities In addition to assets held under finance leases, the carrying amount of property, plant and equipment of the Group mortgaged

to secure the Group’s borrowings (Note 26) are as follows: Group 2015 2014 RM RM Freehold land 2,747,273 2,203,883 Factory buildings 14,441,628 9,977,294 Building-in-progress - 5,406,787 17,188,901 17,587,964

15. Investment properties

Group 2015 2014 RM RM

Cost At 1 January 1,774,431 1,774,431 Transfer from land use rights 1,729,559 - Transfer from property, plant and equipment 2,266,776 - At 31 December 5,770,766 1,774,431 Accumulated depreciation At 1 January 385,759 359,469 Charge for the year 104,760 26,290 Transfer from land use rights 23,061 - Transfer from property, plant and equipment 29,255 - At 31 December 542,835 385,759 Net carrying amount 5,227,931 1,388,672

Direct operating expenses arising from investment properties generating rental income during the financial year are as follows:

Group 2015 2014 RM RM Quit rent and assessment 17,763 2,581 Repair and maintenance 13,254 5,011



15. Investment properties (continued)

Fair value of investment properties Fair value was determined by the valuer as at the end of reporting period based on comparison method that makes reference

to recent market value of a similar property in the vicinity on a price per square feet basis and by reference to market evidence of transaction prices for similar properties. The Directors are of the opinion that the fair value of the investment properties as at the end of the reporting period approximates RM6,110,000 (2014: RM2,475,000).

Properties pledged as securities Certain investment properties of the Group amounting to RM4,516,366 (2014: RM1,130,305) are mortgaged to secure

borrowings (Note 26). 16. Land use rights


Cost At 1 January 4,673,999 2,944,440 Addition - 1,729,559 Transfer to investment properties (1,729,559) - At 31 December 2,944,440 4,673,999 Accumulated amortisation At 1 January 601,668 519,485 Charge for the year 59,122 82,183 Transfer to investment properties (23,061) - At 31 December 637,729 601,668 Net carrying amount 2,306,711 4,072,331 Amount to be amortised: - Not later than 1 year 59,122 82,183 - Later than 1 year but not later than 5 years 236,489 359,772 - Later than 5 years 2,011,100 3,630,376

The land use rights are in respect of leasehold land which have been mortgaged to secure borrowings (Note 26). 17. Land held for property development


Cost At January 4,062,683 - Addition - 2,674,981 Transfer from property, plant and equipment - 1,387,702 At 31 December 4,062,683 4,062,683

The land held for property development have been pledged as security for borrowings (Note 26).



18. Property development costs


Cumulative property development costs at 1 January: Freehold land 21,716,259 21,710,843 Development costs 2,188,855 792,725 23,905,114 22,503,568 Costs incurred during the year: Freehold land 55,876 5,416 Development costs 1,369,669 1,636,376 Transfer from property, plant and equipment - 3,131,624 At 31 December 25,330,659 27,276,984 Cumulative costs recognised in profit or loss: Recognised during the year - (3,371,870) - (3,371,870) Property developments costs at 31 December 25,330,659 23,905,114

Included in property development costs incurred during the financial year are: Group 2015 2014 RM RM Interest expense capitalised (Note 8) 1,149,441 1,405,022

The freehold land under development with carrying value of RM21,772,135 (2014: RM21,716,259) has been pledged as security for borrowings (Note 26).

19. Development expenditure This represents amount of quarry development expenditure incurred and is stated at cost. 20. Investment in subsidiaries

Company 2015 2014 RM RM Unquoted shares, at cost 37,179,200 37,119,199



20. Investment in subsidiaries (continued)

Details of the subsidiaries are as follows : Name of Country of Proportion of subsidiaries incorporation Principal activities ownership interest (%) 2015 2014 Hock Heng Granite Malaysia Manufacturing and selling of dimension stones 100 100 Sdn. Bhd. and related products and rental of properties Hock Heng Marketing Malaysia Processing and distribution of dimension stones, 100 100 (KL) Sdn. Bhd. construction and renovation works for homes and offices Hock Heng Marketing Malaysia Processing and trading of dimension stones 100 100 (Southern Region) Sdn. Bhd. PMK Construction & Malaysia Processing and trading of dimension stones 100 100 Design Sdn. Bhd. Hock Heng Stone Malaysia Processing and trading of dimension stones 100 80 (East Coast) and related services Sdn. Bhd. (“HHSEC”) Hock Heng Realty Malaysia Property development 100 100 Sdn. Bhd. Dunia Batu Alam Malaysia Property development 60 60 Sdn. Bhd. (“DBA”) (a) The non-controlling interests (“NCI”) at the end of the reporting period comprise the following: Ownership and voting interest Group of NCI (%) 2015 2014 RM RM

Carrying amount of NCI HHSEC -/20 - 36,348 DBA 40 124,023 140,497 124,023 176,845 Loss allocated to NCI HHSEC (5,292) (13,431) DBA (16,474) (22,607) (21,766) (36,038)



20. Investment in subsidiaries (continued)

(b) The summarised financial information (before intra-group elimination) for each subsidiary that has NCI that are material to the Group as follows:

HHSEC 2014 RM As at 31 December Non-current assets 50,357 Current assets 756,757 Current liabilities (625,375) Net assets 181,739 Financial year ended 31 December Revenue 1,374,457 Loss net of tax, representing total comprehensive loss for the year (67,154) Net cash flows used in operating activities (10,425) Net cash flows used in investing activities (8,950) Net cash flows used in financing activities (3,350)

Net decrease in cash and cash equivalents (22,725) Dividends paid to NCI - DBA 2015 2014 RM RM As at 31 December Non-current assets 172,000 158,700 Current assets 24,384,194 23,169,677 Non-current liabilities (12,740,031) (13,464,189) Current liabilities (11,492,875) (9,478,115) Net assets 323,288 386,073 Financial year ended 31 December Revenue - - Loss net of tax, representing total comprehensive loss for the year (41,188) (56,517) Net cash flows from operating activities 624,100 398,300 Net cash flows used in financing activities (672,992) (491,236) Net decrease in cash and cash equivalents (48,892) (92,936) Dividends paid to NCI - -



21. Inventories


At cost: Raw materials 10,223,554 8,427,792 Work-in-progress 19,800,704 18,221,025 Finished goods 1,239,625 1,959,631 31,263,883 28,608,448 At net realisable value: Work-in-progress 1,834,824 2,512,709 Finished goods 279,871 398,039 2,114,695 2,910,748 33,378,578 31,519,196 Recognised in profit or loss: Inventories recognised as cost of sales 20,128,396 19,361,102 Inventories written (back)/down (267,266) 423,499 22. Trade and other receivables

Group Company 2015 2014 2015 2014 RM RM RM RM Trade receivables Third parties 9,277,521 10,734,965 - - Retention sums on construction contract (Note 24) 1,205,834 1,588,780 - - Amount due from a related party 877,347 1,416,672 - -

11,360,702 13,740,417 - - Less: Impairment losses - Third parties (499,929) (1,453,679) - -

Trade receivables, net 10,860,773 12,286,738 - -

Other receivables Amounts due from subsidiaries - - 7,336,688 6,497,620 Sundry receivables 189,216 70,918 - - Deposits for utilities 234,840 327,452 - -

424,056 398,370 7,336,688 6,497,620

11,284,829 12,685,108 7,336,688 6,497,620



22. Trade and other receivables (continued)

Movements in the impairment losses:

Group 2015 2014 RM RM At 1 January 1,453,679 1,304,842 Charge for the year 240,600 246,754 Reversal of impairment loss (213,273) (97,917) Written off (981,077) - At 31 December 499,929 1,453,679

(a) Trade receivables are non-interest bearing and are generally on 30 to 90 (2014: 30 to 90) days terms. Other credit terms are assessed and approved on a case-by-case basis. They are recognised at their original invoice amounts which represent their fair values on initial recognition.

(b) Amounts due from subsidiaries at the reporting date are unsecured, repayable upon demand and interest bearing of

4% (2014: 4%) per annum. (c) The retention sums for contract works are unsecured, interest-free and are expected to be collected within one (1)

year. 23. Other current assets

Group 2015 2014 RM RM Prepaid operating expenses 96,437 180,107 Deposit for purchase of property, plant and equipment 620,705 281,744 Deposits paid to raw material suppliers 1,840,479 239,690 Amount due from customers on contracts (Note 24) 3,850,138 4,423,458 6,407,759 5,124,999

24. Gross amount due from customers on contracts

Group 2015 2014 RM RM Construction contract costs incurred to date 2,912,110 8,413,873 Attributable profits 1,450,177 4,390,763 4,362,287 12,804,636 Less: Progress billings (512,149) (8,381,178) 3,850,138 4,423,458 Presented as: Gross amount due from customers for contract work (Note 23) 3,850,138 4,423,458 Retention sums on construction contract included in trade receivables (Note 22) 1,205,834 1,588,780



25. Cash and bank balances

Group Company 2015 2014 2015 2014 RM RM RM RM Cash and bank balances 1,350,936 1,790,300 30,658 53,611 Deposits with licensed banks 567,526 545,963 - -

1,918,462 2,336,263 30,658 53,611 Less: Bank overdrafts (Note 26) (5,589,248) (2,583,754) - - Less: Deposits pledged to licensed banks (567,526) (545,963) - -

Cash and cash equivalents (4,238,312) (793,454) 30,658 53,611

Cash and bank balances earn interest at floating rates based on daily bank deposit rates. Short term deposits are made for varying periods of between 1 to 12 months (2014: 1 to 12 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 the reporting date for the Group was 3.29% (2014: 3.22%) per annum.

The deposits with licensed banks of the Group are pledged as securities for borrowings (Note 26). 26. Borrowings


Current Secured: Obligations under finance leases (Note 32(c)) 265,043 308,554 Bank overdrafts (Note 25) 5,589,248 2,583,754 Bankers’ acceptances 5,345,615 5,199,936 Trust receipts 6,852,368 5,635,949 Term loans 1,729,282 1,578,698 19,781,556 15,306,891 Non-current Secured: Obligations under finance leases (Note 32(c)) 383,027 522,340 Term loans 29,858,682 30,704,096 30,241,709 31,226,436 50,023,265 46,533,327



26. Borrowings (continued)

The remaining maturities of the borrowings as at 31 December 2015 and 31 December 2014 are as follows: Group 2015 2014 RM RM

On demand or within 1 year 19,781,556 15,306,891 More than 1 year and less than 2 years 2,072,318 1,933,977 More than 2 years and less than 5 years 6,436,143 6,015,444 5 years or more 21,733,248 23,277,015 50,023,265 46,533,327

Obligations under finance leases These obligations are secured by a charge over the leased assets (Note 14). The average discount rate in the leases is 2.85%

(2014: 2.70%) per annum. Bank overdrafts Bank overdrafts are denominated in RM. The weighted average effective interest rate is 7.12% (2014: 6.67%). Bankers’ acceptance and trust receipts These are used to finance purchases of the Group denominated in RM and are short term in nature. The weighted average

effective interest rate of bankers’ acceptance and trust receipts are 4.53% (2014: 4.27%) per annum and 7.91% (2014: 7.86%) per annum respectively.

Term loans The loans are secured by first legal charge over certain assets of the Group as disclosed in Note 14, Note 15, Note 16, Note

17, Note 18 and Note 25 to the financial statements respectively. The weighted average effective interest rate is 6.61% (2014: 6.49%) per annum.

27. Trade and other payables


Trade payables Third parties 3,516,733 4,002,981 - -

Other payables Accruals 539,771 614,356 25,200 21,400 Amounts due to subsidiaries - - 4,456,891 3,489,896 Other payables 5,607,812 5,813,744 14,028 19,428

6,147,583 6,428,100 4,496,119 3,530,724

9,664,316 10,431,081 4,496,119 3,530,724

(a) Trade payables are non-interest bearing and the normal trade credit terms granted to the Group range from 30 to 90 (2014: 30 to 90) days.

(b) Amounts due to subsidiaries at the reporting date are unsecured, non-interest bearing and are repayable on demand

except for an amount of RM2,935,391 (2014: RM3,158,880) which bears interest rate of 4% (2014: 4%) per annum.



28. Deferred tax (assets)/liabilities (a) The deferred tax assets and liabilities are made up of the following: Group 2015 2014 RM RM At 1 January 196,938 468,287 Recognised in profit or loss (Note 12) 280,474 (271,349) At 31 December 477,412 196,938 Reflected in the statement of financial position as follows: Deferred tax assets, net (190,940) (207,911) Deferred tax liabilities, net 668,352 404,849 477,412 196,938 (b) The components and movements of deferred tax liabilities and assets during the financial year are as follows: Unutilised tax losses and unabsorbed Property, capital plant and allowances Others equipment Total RM RM RM RM At 1 January 2014 (223,513) (599,633) 1,291,433 468,287 Recognised in profit or loss 28,229 (77,412) (222,166) (271,349)

At 31 December 2014 (195,284) (677,045) 1,069,267 196,938 Recognised in profit or loss (110,557) 277,338 113,693 280,474

At 31 December 2015 (305,841) (399,707) 1,182,960 477,412

(c) The amounts of temporary differences for which no deferred tax asset have been recognised in the statements of financial position are as follows:

Group Company 2015 2014 2015 2014 RM RM RM RM Unused tax losses 168,492 26,328 1,641 - Unabsorbed capital allowance 35,692 2,296 - - Other temporary differences 181,268 - - -

385,452 28,624 1,641 -

Deferred tax assets of certain subsidiaries have not been recognised in respect of these items as it is not probable that

taxable profits of the subsidiaries will be available against which the deductible temporary differences can be utilised. The deductible temporary differences do not expire under the current tax legislation.



29. Share capital

Group and Company Number of ordinary shares of RM0.50 each Amount 2015 2014 2015 2014 RM RM Authorised 200,000,000 200,000,000 100,000,000 100,000,000

Issued and fully paid 80,000,000 80,000,000 40,000,000 40,000,000

The owners of the Company are entitled to receive dividends as and when declared by the Company and is entitled to one (1) vote per ordinary share at meetings of the Company. All ordinary shares rank pari passu with regard to the Company’s residual assets.

30. Contingent liabilities A nominal amount of RM46,060,000 (2014: RM41,699,000) relating to corporate guarantees provided by the Company to

banks for its subsidiaries’ borrowings. The Directors are of the view that the fair value of such corporate guarantees given by the Company is negligible as the

chances of the financial institutions to call upon the corporate guarantee are remote. 31. Related party disclosures (a) Sale and purchase of goods and services

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

Companies in which certain Directors have interests: (i) EMP Design Sdn. Bhd. (ii) LBS Realty Sdn. Bhd. Subsidiaries: (i) Hock Heng Granite Sdn. Bhd. (ii) Hock Heng Marketing (KL) Sdn. Bhd. (iii) Hock Heng Marketing (Southern Region) Sdn. Bhd. (iv) Hock Heng Stone (East Coast) Sdn. Bhd. (v) PMK Construction & Design Sdn. Bhd. (vi) Hock Heng Realty Sdn. Bhd. (vii) Dunia Batu Alam Sdn. Bhd.


Transactions with companies in which certain Directors have interests Sale of dimension stones to 1,643,305 3,848,117 Rental paid to 84,000 84,000



31. Related party disclosures (continued) Company 2015 2014 RM RM

Transactions with subsidiaries Interest charged to 277,075 233,955 Interest charged by 136,737 103,911

(b) Compensation of key management personnel

The remuneration of key management personnel comprising solely remuneration of the Executive Directors are disclosed in Note 11 to the financial statements.

32. Commitments (a) Capital commitments

Capital expenditure as at the reporting date is as follows: Group 2015 2014 RM RM

Approved and contracted for - Property, plant and equipment - 364,380 Approved but not contracted for - Property, plant and equipment 1,291,896 661,896 1,291,896 1,026,276

(b) Operating lease commitments - as lessee

In addition to the land use rights disclosed in Note 16 to the financial statements, 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 2015 amounted to RM217,862 (2014: RM207,408). Future minimum rentals payables under non-cancellable operating leases (excluding land use rights) at the reporting

date are as follows: Group 2015 2014 RM RM Not later than 1 year 77,000 84,000 Later than 1 year but not later than 5 years - 77,000 77,000 161,000



32. Commitments (continued)

(c) Finance lease commitments

The Group has finance leases for certain motor vehicles (Note 14). 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: Group 2015 2014 RM RM Minimum lease payments: Not later than 1 year 290,001 341,339 Later than 1 year but not later than 2 years 245,192 249,777 Later than 2 years but not later than 5 years 156,114 311,865 Total minimum lease payments 691,307 902,981 Less: Amounts representing finance charges (43,237) (72,087) Present value of minimum lease payments 648,070 830,894 Present value of payments: Not later than 1 year 265,043 308,554 Later than 1 year but not later than 2 years 232,371 230,030 Later than 2 years but not later than 5 years 150,656 292,310 Present value of minimum lease payments 648,070 830,894 Less: Amount due within 12 months (Note 26) (265,043) (308,554) Amount due after 12 months (Note 26) 383,027 522,340

33. Financial instruments (a) 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 shareholders value.

The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To

maintain 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 2015 and 31 December 2014.

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, less cash and bank balances. Capital includes equity attributable to the owners of the parent.



33. Financial instruments (continued)

(a) Capital management (continued)

Group 2015 2014 Note RM RM

Borrowings 26 50,023,265 46,533,327 Less: - Cash and bank balances 25 (1,918,462) (2,336,263)

Netdebt 48,104,803 44,197,064 Equity attributable to owners of the parent 53,258,974 52,319,746

Capital and net debt 101,363,777 96,516,810 Gearing ratio 47% 46%

(b) Financial instruments


Financial assets Loan and receivables Trade and other receivables 14,900,127 16,781,114 7,336,688 6,497,620 Cash and bank balances 1,918,462 2,336,263 30,658 53,611

16,818,589 19,117,377 7,367,346 6,551,231

Financial liabilities Other financial liabilities Borrowings 50,023,265 46,533,327 - - Trade and other payables 9,664,316 10,431,081 4,496,119 3,530,724

59,687,581 56,964,408 4,496,119 3,530,724 (c) Determination of fair value

The fair value of financial assets and financial liabilities are determined as follows:

(i) Financial instruments that are not carried at fair value and whose carrying amounts are a reasonable approximation of fair value are as follow:

Note Trade and other receivables 22 Borrowings 26 Trade and other payables 27

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 borrowings are reasonable approximations of fair values due to

the insignificant impact of discounting.



33. Financial instruments (continued)

(c) Determination of fair value (continued)

(ii) Obligations under finance leases The fair value of finance lease creditors is estimated by discounting expected future cash flows at market

incremental lending rate for similar types of instruments available to the Group at the end of the reporting period.

(d) Fair value hierarchy

As at the end of the reporting period, the Group and the Company have no financial instruments that are measured subsequent to initial recognition at fair value and hence fair value hierarchy is not presented.

The fair value of financial instruments that are not carried at fair value and whose carrying amounts do not approximate

its fair value are as follows: Group Carrying amount Fair value RM RM 2015

Financial liabilities Obligations under finance leases 648,070 633,000

2014 Financial liabilities Obligations under finance leases 830,894 809,000 34. 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 instruments.

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’s 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.



34. Financial risk management objectives and policies (continued) (a) Credit risk (continued)

Exposure to credit risk As at the end of the reporting period, 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.

Credit risk concentration profile At the and of each reporting date, the Company do not have significant concentration of credit risk other than the

amounts due from subsidiaries of RM7,336,688 (2014: RM6,497,620). Ageing analysis of trade receivables The ageing analysis of the Group’s trade receivables is as follows:

Gross Individual Carrying amount impairment amount RM RM RM As at 31 December 2015: Not past due 5,935,124 - 5,935,124 Past due: - less than 3 months 1,247,023 - 1,247,023 - 3 to 6 months 746,555 - 746,555 - more than 6 months 3,432,000 (499,929) 2,932,071

11,360,702 (499,929) 10,860,773

As at 31 December 2014: Not past due 8,658,943 - 8,658,943 Past due: - less than 3 months 901,807 - 901,807 - 3 to 6 months 330,791 - 330,791 - more than 6 months 3,848,876 (1,453,679) 2,395,197

13,740,417 (1,453,679) 12,286,738

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

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

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

financial year.

Trade receivables that are past due but not impaired The Group believes that no impairment allowance is necessary in respect of these trade receivables. These receivables

are active accounts which the management considers to be recoverable.



34. Financial risk management objectives and policies (continued) (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.

Analysis of financial instruments by remaining contractual maturities On demand or within One to Over five one year five years years Total RM RM RM RM

As at 31 December 2015: Group Trade and other payables 9,664,316 - - 9,664,316 Borrowings 21,839,820 15,451,657 28,836,648 66,128,125 Total undiscounted financial liabilities 31,504,136 15,451,657 28,836,648 75,792,441 Company Trade and other payables/Total undiscounted financial liabilities 4,496,119 - - 4,496,119

As at 31 December 2014: Group Trade and other payables 10,431,081 - - 10,431,081 Loans and borrowings 17,425,358 15,219,162 31,639,521 64,284,041 Total undiscounted financial liabilities 27,856,439 15,219,162 31,639,521 74,715,122 Company Trade and other payables/Total undiscounted financial liabilities 3,530,724 - - 3,530,724



34. 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. Sensitivity analysis for interest rate risk 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 after tax would have been RM39,000 (2014: RM34,000) 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.

(d) 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 4% (2014: 5%) of the Group’s trade payables are denominated in USD.

Foreign currency exposure


Trade payables USD 151,602 195,696

Sensitivity analysis for foreign currency risk

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

Increase/(decrease) in profit after tax 2015 2014 RM RM Group USD strengthened by 5% (2014: 5%) (5,600) (7,300) USD weakened by 5% (2014: 5%) 5,600 7,300



35. Acquisition of a subsidiary On 29 June 2015, the Company had further acquired 20% of equity interest in HHSEC, representing 60,001 ordinary

shares of RM1.00 each in HHSEC for a consideration of RM60,001, the difference of RM28,945 between the purchase consideration and share of net assets was recognised in the retained earnings as transaction with owners.

36. Segment information For management purposes, the Group is organised into business units based on their products and services, and has four

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) Development properties - development properties. (iv) 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 consolidated financial statements. Group financing (including finance cost) 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. Per consolidated Sales of Development financial goods Construction properties Others Eliminations Notes statements RM RM RM RM RM RM

2015 Revenue: External customers 29,412,354 8,521,126 - - - 37,933,480 Inter-segment 20,068,947 - - - (20,068,947) A -

Total revenue 49,481,301 8,521,126 - - (20,068,947) 37,933,480 Results: Depreciation and amortisation 1,888,663 152,716 - - - 2,041,379 Other non-cash (income)/ expenses (505,933) 240,600 - - - (265,333) Segment profit/(loss) 1,715,982 293,812 (346,556) (88,213) 273,010 B 1,848,035 Assets: Additions to non-current assets 2,406,316 274,992 - - - 2,681,308 Segment assets 76,035,336 8,120,565 29,524,032 93,962 - C 113,773,895 Segment liabilities 37,713,292 - 22,638,378 39,228 - D 60,390,898



36. Segment information (continued)

Per consolidated Sales of Development financial goods Construction properties Others Eliminations Notes statements RM RM RM RM RM RM

2014 Revenue: External customers 29,437,872 6,655,843 3,860,000 - - 39,953,715 Inter-segment 22,197,003 - - - (22,197,003) A -

Total revenue 51,634,875 6,655,843 3,860,000 - (22,197,003) 39,953,715 Results: Depreciation and amortisation 1,863,205 130,814 - - - 1,994,019 Other non-cash expenses 572,336 - - - - 572,336 Segment profit/(loss) 1,839,912 162,245 (226,922) (80,807) (27,735) B 1,666,693 Assets: Additions to non-current assets 5,666,308 117,871 3,686,601 - - 9,470,780 Segment assets 72,554,669 9,612,049 27,996,143 55,964 - C 110,218,825 Segment liabilities 33,645,835 - 24,035,571 40,828 - D 57,722,234

A : Inter-segment revenues are eliminated on consolidation.

B : The following items are added to/(deducted from) segment profit to arrive at profit before tax presented in the consolidated statement of comprehensive income:

2015 2014 RM RM Interest income 22,957 45,260 Finance costs (1,904,341) (1,386,841) (1,881,384) (1,341,581)

C : The following items are added to segment assets to arrive at total assets reported in the consolidated statement of financial position:

2015 2014 RM RM Current tax assets 324,155 106,544 Deferred tax assets 190,940 207,911 515,095 314,455



36. Segment information (continued)

D : The following items are added to segment liabilities to arrive at total liabilities reported in the consolidated statement

of financial position: 2015 2014 RM RM Current tax liabilities 34,965 352,977 Deferred tax liabilities 668,352 404,849 703,317 757,826

Geographical information Geographical information is not prepared as the operations of the Group are predominantly carried out in Malaysia. Information about major customer The Group has no sales to significant customer equal to or more than 10% of the Group’s revenue. 37. Authorisation of financial statements for issue The financial statements for the year ended 31 December 2015 were authorised for issue in accordance with a resolution

of the Directors on 18 April 2016.


Supplementary inFormation

38. Supplementary information on realised and unrealised profits or losses The breakdown of the retained earnings of the Group and of the Company into realised and unrealised earnings is presented

in accordance with the directive issued by Bursa Malaysia Securities Berhad 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.


Total retained earnings of the Company and its subsidiaries: - Realised 13,860,010 12,931,837 53,730 142,059 - Unrealised (477,412) (215,869) - -

13,382,598 12,715,968 53,730 142,059 Less: Consolidation adjustments (123,624) (396,222) - -

Retained earnings of the Group/Company 13,258,974 12,319,746 53,730 142,059


Audited Net Carrying amounts Approximate as at Description of Approximate Land Area/ 31 December Date of Property/ age of Building/ Built-up Area 2015No. Address Location/Title Acquisition Existing use Tenure (square meters) RM

1. Lot 197, Jalan PM 707 (previously 19/03/1988 Double storey 20 years/ 11,087/ 2,490 Sungai Putat, Batu knownasHSM805 office block with Leasehold for 88 Berendam, 75350 andoriginallyheld a single storey years expiring on Melaka underPM152Lot197) factory/ head 5 September 2054 office cum main Lot 6756, Mukim Batu manufacturing Berendam, District of plant Melaka Tengah, State of Melaka

PM 708 (previously 19/03/1988 Single storey 20 years/ 7,845/ 6,895 knownasHSM806 warehouse/ Leasehold for 88 andoriginallyheld warehouse for years expiring on underPM152) storing goods 5 September 2054 5,773,993 Lot 6757, Mukim Batu Berendam, District of Melaka Tengah, State of Melaka

GM 1031 (previously 03/02/2000 Double storey 9 years/ 12,811/ 4,706 knownasHSM1350 warehouse/ Freehold PT13140and warehouse for originallyheldunder storing goods GM71) Lot 13189, Mukim Batu Berendam, District of Melaka Tengah, State of Melaka

2. Lot 28 & 29, Jalan HSM 332 PT 3670, 25/02/2014 Leasehold land 36 years/ 8,035/ 4,352 3,865,548 Usaha 6, Kawasan Pajakan Mukim No with office and Leasehold for 99 Perindustrian Ayer 264 Lot 4327 and factory building years expiring on Keroh, 75450 Pajakan Mukim No 263 31 July 2090 and Melaka Lot 4328, Mukim Bukit 30 May 2072 Katil, District of Melaka respectively Tengah, State of Melaka

3. PTD 8436, Mukim H.S. (M): 1157 14/12/2011 Vacant land Not applicable 12,141 154,700 of Tangkak, PTD 8436, Mukim Freehold Daerah Muar, Tangkak, District of Johor Ledang, State of Johor

liSt oF propertieSthe landed properties owned by the Group as at 31 December 2015 are set out below:



4. Lot 7669, Mukim Geran 218661 27/12/1995 Vacant land Not applicable/ 20,234 of Tangkak, (previouslyknown Freehold Daerah Muar, asGeran22742) Johor Lot 7669, Mukim Tangkak, District of Ledang, State of Johor

Lot 7670, Mukim Geran 218662 27/12/1995 Vacant land Not applicable/ 20,259 of Tangkak, (previouslyknown Freehold Daerah Muar, asGeran22743) Johor 182,450 Lot 7670, Mukim Tangkak, District of Ledang, State of Johor

Lot 7671, Mukim Geran 218666 27/12/1995 Vacant land Not applicable/ 20,259 of Tangkak, (previouslyknown Freehold Daerah Muar, asGeran22744) Johor Lot 7671, Mukim Tangkak, District of Ledang, State of Johor

5. Lot 45, Rainforest GM 3983 (previously 29/07/2006 Vacant land Not applicable/ 891 459,949 Sanctury Genting, knownasHSM5263) Freehold Sempah Bentong, Pahang Lot 19730, Mukim Bentong, District of Bentong, State of Pahang

6. No. 64 & 64A, Geran 110212 15/09/2000 Double-storey 15 years/ 156/ 312 171,535 Taman Dato Raja (previouslyknown terrace Freehold Md Hanifah, Jalan asHSD114809) shophouse/ Rasah, 70300 tenanted to a Seremban, Negeri Lot 20435, Bandar third party Sembilan Seremban, District of Seremban, State of Negeri Sembilan

7. B 56 (B 5F), Blk ‘B’ Master title no. Geran 18/04/1998 Condominium/ 17 years/ 93 162,268 Palais Le 77439 (previouslyheld vacant Freehold Renaissance underHSD89511) Condominium, Jalan Berlian 8, Lot 1468, Pekan Bukit Bukit Kaya, 70200 Kepayang, District of Seremban, Negeri Seremban, State of Sembilan Negeri Sembilan

8. HSD 109736, PT HSD 109736, PT No. 09/12/2003 Three storey 1 year/ 8,090/ 4,248 7,603,038 No. 13, Pekan 13, Pekan Subang, office block with Leasehold for 60 Subang, Daerah District of Petaling, single storey years expiring on Petaling, Selangor Selangor factory/ sales office 9 April 2057 cum showroom and secondary processing plant with warehouse

liSt oF propertieS (Cont’D)the landed properties owned by the Group as at 31 December 2015 are set out below:



9. 19-2, Jalan 2/1A, Master title no. PN 13/08/2003 Office lot within 17 years/ 107 107,300 Taman Kepong 29645 (previously a three-storey Leasehold for 99 Indah, 52100 heldunderHSD75359) shop office/ years expiring on Kuala Lumpur vacant 22 July 2072 Lot 49691, Mukim Batu, District of Wilayah Persekutuan Kuala Lumpur, State of Wilayah Persekutuan Kuala Lumpur

10. No. 33, Jalan P9G HSD 198, PT 317, 21/05/1999 Double-storey 15 years/ 464/ 164 317,015 1/5, Presint 9, Pekan Presint 9, terrace house/ Freehold Putrajaya, 62250 Bandar Putrajaya, tenanted to a Wilayah District of Putrajaya, third party Persekutuan State of Wilayah Putrajaya Persekutuan Putrajaya

11. Unit SB-08-02, 8th Master title No. Geran 13/08/2003 Medium cost 14 years/ 105 85,692 Floor, Kenangan No. 53455, Lot 40808 apartment/ staff Freehold View Apartment, (previouslyknownas quarters Taman Bukit GrantNo.24326,Lot Kenangan, 43000 2988) Kajang, Selangor Bandar Kajang District of Ulu Langat, State of Selangor

12. Unit No. 128D/ Geran 75319/ M1-D/ 3/ 24/02/2004 Office lot/ vacant 17 years/ 79 58,624 33-2B, Block D, 182 Freehold Seremban 2, 70300 Seremban, Lot 21776, Mukim Negeri Sembilan Rasah, District of Seremban, State of Negeri Sembilan

13. No. 20, Jalan Geran 250614 02/08/2007 Double storey 8 years/ 3,013/ 944 1,928,691 Plentong 8, (previouslyknownas office block with Freehold Sri Plentong, HSD212302) single storey Industrial Park, factory/ Sales 81750 Masai, Lot 182721 office cum Johor (previouslyknownas showroom and PTD111402), Mukim secondary Plentong, District of processing plant Johor Bahru, State with warehouse of Johor

14. No. 10, Jalan PN 10110 (previously 19/04/2004 Double storey 12 years/ 972/ 502 512,137 Industri Semambu knownasHSD18738) office block with Leasehold for 66 9/3, Cocopalm single storey years expiring on Industrial Park, Lot 50611, Mukim factory/ Sales 20 November 25300 Kuantan, Kuala Kuantan, office cum 2050 Pahang District of Kuantan, showroom and State of Pahang secondary processing plant with warehouse




15. Lot 2364, Mukim GM 595, Lot 2364, 22/11/2011 Vacant land Not applicable/ 1,310 821,494 Bukit Baru, District Mukim Bukit Baru, Freehold of Melaka Tengah, District of Melaka State of Melaka Tengah, State of Melaka.

16. Unit 11-08 and 11- Master title GRN 05/04/2013 Office lot/ vacant 3 years/ 104 414,625 09, Avenus Crest, 299299, Lot 81129, Freehold Mukim Damansara, Mukim Damansara, Daerah Petaling, District of Petaling, State of Selangor. State of Selangor.

17. Lot 9195, Mukim GRN 54223, 23/08/2012 Development Not applicable/ 164,095 21,027,539 Durian Tunggal, Lot 9195, Mukim land Freehold Daerah Alor Gajah, Durian Tunggal, State of Melaka District of Alor Gajah, State of Melaka

18. Lot 8106, Mukim GRN 37660, Lot 8106, 30/04/2014 Development Not applicable/ 4,021 1,330,200 Tanjong Minyak, Mukim Tanjong land Freehold District of Melaka Minyak, District of Tengah, State of Melaka Tengah, Melaka State of Melaka

19. Lot 8107 and Lot GRN 37659, Lot 8107 30/04/2014 Development Not applicable/ 3,988 1,344,781 8108, Mukim and GRN 1980, Lot land Freehold Tanjong Minyak, 8108, Mukim Tanjong District of Melaka Minyak, District of Tengah, State of Melaka Tengah, Melaka State of Melaka

20. Lot 288, Mukim GRN 13851, Lot 288, 08/01/2014 Development Not applicable/ 2,401 1,011,620 Bandar Bukit Baru Mukim Bandar Bukit land Freehold Seksyen IV, District Baru Seksyen IV, of Melaka Tengah, District of Melaka State of Melaka Tengah, State of Melaka

21. Lot 9533, Mukim GM 650, Lot 9533, 03/02/2000 Development Not applicable/ 27,187 1,120,678 Batu Berendam, Mukim Batu Berendam, land Freehold District of Melaka District of Melaka Tengah, State of Tengah, State of Melaka Melaka

22. No. 12, 12A and GRN 116836, 29/09/2014 Office lot within 21 years/ 143 955,358 12B, Jalan Maju, Lot 25654, Mukim a three-storey Freehold Taman Maju, Simpang Kanan, shop office/ 83000, Batu Pahat, District of Batu Pahat, Vacant Johor State of Johor




23. Lot 7672, Mukim Geran 218717 22/06/2015 Vacant land Not applicable/ 20,259 424,369 of Tangkak, Daerah Lot 7672, Mukim Freehold Muar, Johor Tangkak, District of Ledang, State of Johor

24. No 6, Jalan TTC Master title HS(D) 10/04/2015 One and half 1 year/ 967 403,288 13A, Taman 71489, PT 8655, storey shop Leasehold for 82 Teknologi Mukim Mukim Cheng, Daerah office/ vacant years expiring on Cheng, 75250 Melaka Tengah, State 3 October 2096 Melaka of Melaka

25. Unit A25-01, Type Master title GRN 25/09/2015 Condominium/ 1 year/ 15,530 365,583 A1, Alam Sanjung, 299298, Lot 81128, vacant Freehold Mukim Damansara, Mukim Damansara, District of Petaling, District of Petaling, State of Selangor State of Selangor



analySiS oF SHareHolDinGSas at 31 march 2016

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

1. Distribution of Shareholdings No. of No. of Size of shareholdings holders % shares % Less than 100 shares 3 0.60 100 - 100 to 1,000 shares 55 11.02 37,400 0.05 1,001 to 10,000 shares 212 42.48 1,374,900 1.72 10,001 to 100,000 shares 175 35.07 6,587,300 8.23 100,001 to less than 5% of issued shares 52 10.43 31,320,300 39.15 5% and above of issued shares 2 0.40 40,680,000 50.85

Total 499 100.00 80,000,000 100.00

2. List of Substantial Shareholders 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: Direct interest Indirect interest No. of No. of Substantial Shareholders shares % shares % Jasa Maju Jaya Sdn. Bhd. 36,360,000 45.45 - - Low Kim Hock 4,320,000 5.40 36,400,000 ** 45.50

** DeemedinterestbyvirtueofhissubstantialshareholdingsinJasaMajuJayaSdn.Bhd.andthedirectinterestofhisson,LowYong

Seng’sshareholdinginHockHengpursuanttoSection6AoftheCompaniesAct,1965.

3. List of Directors’ Shareholdings The Directors’ shareholdings of Hock Heng based on the Register of Directors’ Shareholdings of the Company are as

follows: Direct interest Indirect interest No. of No. of Directors shares % shares % Low Kim Hock 4,320,000 5.40 36,400,000 ** 45.50 Low Kim Joo 2,592,000 3.24 36,360,000 * 45.45 Low Kim Ong 2,304,000 2.88 36,360,000 * 45.45 Low Yong Seng 40,000 0.05 - - Chong Peng Khang - - - - Yap Koon Roy 30,000 0.04 - - Peter Yong Kuen Fook 30,000 0.04 - -

** DeemedinterestbyvirtueofhissubstantialshareholdingsinJasaMajuJayaSdn.Bhd.andthedirectinterestofhisson,LowYongSeng’sshareholdinginHockHengpursuanttoSection6AoftheCompaniesAct,1965.

* DeemedinterestbyvirtueoftheirsubstantialshareholdingsinJasaMajuJayaSdn.Bhd.pursuanttoSection6AoftheCompanies

Act,1965.


analySiS oF SHareHolDinGS (Cont’D)as at 31 march 2016

4. Thirty (30) Largest Shareholders No. Shareholders No. of shares % 1. Jasa Maju Jaya Sdn. Bhd. 36,360,000 45.45 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. Chen Ronghui 1,093,500 1.37 10. Low Kim Chye 1,021,000 1.28 11. Wang Chengyu 1,018,800 1.27 12. Jiang Guotian 920,000 1.15 13. Bee Ping Chon @ Mah Peng Choon 800,800 1.00 14. Teo Yong Swee 800,000 1.00 15. Low Kim Choon 763,200 0.95 16. Lim Chee Lim 715,800 0.89 17. Liow Hock Siew 690,000 0.86 18. Low Jin Kuan 534,700 0.67 19. Wong Swee Khim 460,500 0.58 20. Chan Kin Loong 460,000 0.57 21. Lai Meng Chee 460,000 0.57 22. Lau Tee Ping 460,000 0.57 23. Lim Chian Thye 460,000 0.57 24. Lim Sek Cheon 460,000 0.57 25. Low Han Wah 460,000 0.57 26. Tan See Teck 460,000 0.57 27. Yang Weiyuan 460,000 0.57 28. Maybank Nominees (Tempatan) Sdn. Bhd. (Ooi Bee Ling) 450,000 0.56 29. Yip Ying Mui 440,400 0.55 30. Bong Kok Lee 429,900 0.54


notiCe oF annual General meetinG

1. To receive the Audited Financial Statements for the financial year ended 31 December 2015 together with the Reports of the Directors and the Auditors thereon.

2. To approve the payment of Directors’ fees for the financial year ended 31 December 2015.

3. To re-elect the following Directors who are retiring pursuant to Article 96 of the Company’s

Articles of Association and being eligible, have offered themselves for re-election:-

• Peter Yong Kuen Fook • Yap Koon Roy

4. To re-appoint Messrs. BDO as Auditors of the Company until the conclusion of the next AGM and to authorise the Directors to fix their remuneration.

5. AS SPECIAL BUSINESS To consider and, if thought fit, to pass the following resolutions with or without modifications:- Special Resolution I - Proposed Amendments to the Articles of Association

That the following proposed amendments to the Articles of Association of the Company be hereby approved:-

NOTICE IS HEREBY GIVEN THAT the Seventh 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 Monday, 30 May 2016 at 10.30 a.m. for the following purposes:-

AGENDA

(Please refer to Explanatory Note i)

(Resolution 1)

(Resolution 2)(Resolution 3)

(Resolution 4)

(Resolution 5)

Article ExistingProvisionNo.

146 Profitandlossaccountandbalancesheet The Directors shall cause to be prepared

and laid before the Company in general meeting such profit and loss accounts, balance sheet and reports as are required under the Act PROVIDED always that the interval between the close of a financial year of the Company and the issue of the annual audited accounts, the directors’ and auditors’ reports to the Exchange shall not exceed four (4) Months or such period as may be prescribed by the Listing Requirements.

147 ReportinCD-ROMorDVDROMformat

Subject to the compliance with the Listing Requirements and any other relevant laws and regulations, if any, the Company may issue its annual report in compact disc read-only memory (‘CD-ROM’) or digital video disc read-only memory (‘DVD-ROM’) format or in a format that may be developed in future for the playback of images.

AmendedProvision

ProfitandlossaccountandbalancesheetThe Directors shall cause to be prepared and laid before the Company in general meeting such profit and loss accounts, balance sheet and reports as are required under the Act. PROVIDED always that the interval between the close of a financial year of the Company and the issue of the annual audited accounts, the directors’ and auditors’ reports to the Exchange shall not exceed four (4) Months or such period as may be prescribed by the Listing Requirements.

ReportinCD-ROM or DVD ROM electronicformat

Subject to the compliance with the Listing Requirements and any other relevant laws and regulations, if any, the Company may issue its annual report in electronic format and if a member requires a printed form of the annual report, the Company shall send such document to the member within four (4) Market Days from the date of receipt of the member’s verbal or written request. compact disc read-only memory (‘CD-ROM’) or digital video disc read-only memory (‘DVD-ROM’) format or in a format that may be developed in future for the playback of images.


notiCe oF annual General meetinG (Cont’D)

And that the Board of Directors of the Company be and is hereby authorised to do all such acts, deeds and things as are necessary and/or expedient in order to give full effect to the Proposed Amendment with full powers to assent to any conditions, modifications and/or amendments as may be required by any relevant authorises.

Ordinary Resolution I - Authority to Issue Shares pursuant to Section 132D of the Companies Act, 1965

That subject to Section 132D of the Companies Act, 1965 and the approvals of the relevant governmental/regulatory authorities, the Directors be and are hereby empowered to issue and allot shares in the Company, at any time to such person(s) and upon such terms and conditions and for such purposes as the Directors may in their absolute discretion, deem fit, provided that the aggregate number of shares to be issued does not exceed ten per centum (10%) of the total issued and paid-up share capital of the Company for the time being and the Directors be and are also empowered to obtain the approval for the listing of and quotation for the additional shares so issued on Bursa Malaysia Securities Berhad.

And that such authority shall commence immediately upon the passing of this resolution and continue to be in force until the conclusion of the next Annual General Meeting of the Company.

Ordinary Resolution II

- Proposed Renewal of Existing Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature

That pursuant to paragraph 10.09 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, the Company and/or its subsidiary companies (the Group) be and are hereby authorized to enter into and give effect to recurrent related party transactions of a revenue or trading nature as set out in Section 2.3(a) of the Circular to Shareholders dated 29 April 2016, which are necessary for the Group’s day-to-day operations in the ordinary course of business, on terms not more favorable than those generally available to the public and not detrimental to the minority shareholders of the Company.

That such approval shall continue to be in force until:

(i) the conclusion of the next Annual General Meeting (AGM) of the Company, at which time it will lapse, unless authority is renewed by a resolution passed at the next AGM;

(ii) the expiration of the period within which the next AGM is required to be held pursuant to Section 143(1) of the Companies Act, 1965 (the Act) (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or

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

whichever is the earlier.

And that the Directors of the Company be authorised to act for and on behalf of the Company, to take all such steps and execute all necessary documents as they may consider expedient or deem fit in the best interest of the Company to give effect to the transactions contemplated and/or authorised by this resolution.

6. To transact any other ordinary business of which due notice has been given in accordance with

the Companies Act 1965.

By Order of the Board

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

Melaka29 April 2016

(Resolution 6)

(Resolution 7)


notiCe oF annual General meetinG (Cont’D)

Explanatory Notes to Special Business:-

(i) This Agenda item is meant for discussion only as the provision of Section 169(1) of the Companies Act, 1965 (the Act) does not require a formal approval for the Audited Financial Statements from the shareholders. Hence, this Agenda item is not put forward for voting.

(ii) Proposed Amendments to the Articles of Association of the Company (“Proposed Amendment”) The Proposed Amendment is to streamline the Company’s Articles of Association to be aligned with the recent amendments

made to Bursa Securities Main Market Listing Requirements, as well as to enhance administrative efficiency.

(iii) Authority to Issue Shares pursuant to Section 132D of the Act The Company wishes to seek a new mandate on the authority to issue shares pursuant to Section 132D of the Act at the

Seventh AGM of the Company (hereinafter referred to as the “General Mandate”).

The Company had been granted a general mandate by its shareholders at the Sixth AGM of the Company held on 29 May 2015 (hereinafter referred to as the “Previous Mandate”). The Previous Mandate granted by the shareholders had not been utilised and hence no proceed was raised therefrom.

The purpose to seek the General Mandate is to enable the Directors of the Company to issue and allot shares at any time to such persons in their absolute discretion without convening a general mandate as it would be both time-consuming and costly to organise a general meeting. This authority unless revoked or varied by the Company in a general meeting, will expire at the next AGM.

The proceeds raised from the General Mandate will provide flexibility for any possible fund raising activities, including but not limited to further placing of shares for purpose of funding future investment project(s), working capital and/or acquisition(s).

(iv) Proposed Renewal of the Existing Shareholders’ Mandate The proposed adoption of the Ordinary Resolution II is to renew the shareholders’ mandate granted by the shareholders of

the Company at the Sixth AGM held on 29 May 2015. This proposal will enable the Group to enter into 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 favorable to the related parties than those generally available to the public and are not to the detriment of the minority shareholders of the Company.

Further information on the proposed Ordinary Resolution II is set out in the Circular to Shareholders dated 29 April 2016.

Notes:

a. In respect of deposited security, only members whose names appear in the Record of Depositors on 23 May 2016 (“General Meeting Record of Depositors”) shall be eligible to attend, speak and vote at the Meeting.

b. A member entitled to attend and vote at the Meeting is entitled to appoint more than one proxy to attend and vote in his stead. A proxy may but does not need to be a member of the Company and the provisions of Section 149 (1)(b) of the Companies Act, 1965 need not be complied with. Where a member appoints more than one proxy, the appointments shall be invalid unless he specifies the proportions of his shareholdings to be represented by each proxy. A proxy appointed to attend and vote at the Meeting shall have the same rights as the member to speak at the Meeting. Notwithstanding this, a member entitled to attend and vote at the Meeting is entitled to appoint any person as his proxy to attend and vote instead of the member at the Meeting. There shall be no restriction as to the qualifications of the proxy.

c. In the case of a corporate member, the instrument appointing a proxy must be either under its common seal or under the hand of its officer or attorney duly authorised.

d. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds.

e. The instrument appointing a proxy must be deposited at the Registered Office of the Company at No. 60-1, Jalan Lagenda 5, Taman 1 Lagenda, 75400 Melaka not less than 48 hours before the time for holding the Meeting or at any adjournment thereof.

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

PROXY FORM

CDS ACCOUNT NUMBER

NUMBER OF SHARES HELD

*I / We NRIC No./Company No

of (full address)

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

of

or failing him, of

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 Seventh Annual General Meeting of the Company to be held at the Ballroom of Ornaresort Berhad, Batu 16, Jalan Gapam, Ladang Gapam, 77200 Bemban, Melaka on Monday, 30 May 2016 at 10.30 a.m. and at any adjournment thereof.

*Strikeoutwhichevernotapplicable.

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

As witness my/our hand(s) this day of 2016.

Signature of Member/Common Seal

Notes:

a. Inrespectofdepositedsecurity,onlymemberswhosenamesappearintheRecordofDepositorson23May2016(“GeneralMeetingRecordofDepositors”)shallbeeligibletoattend,speakandvoteattheMeeting.

b. AmemberentitledtoattendandvoteattheMeetingisentitledtoappointmorethanoneproxytoattendandvoteinhisstead.AproxymaybutdoesnotneedtobeamemberoftheCompanyandtheprovisionsofSection149(1)(b)oftheCompaniesAct,1965neednotbecompliedwith.Whereamemberappointsmorethanoneproxy,theappointmentsshallbeinvalidunlesshespecifiestheproportionsofhisshareholdingstoberepresentedbyeachproxy.AproxyappointedtoattendandvoteattheMeetingshallhavethesamerightsasthemembertospeakattheMeeting.Notwithstandingthis,amemberentitledtoattendandvoteattheMeetingisentitledtoappointanypersonashisproxytoattendandvoteinsteadofthememberattheMeeting.Thereshallbenorestrictionastothequalificationsoftheproxy.

c. Inthecaseofacorporatemember,theinstrumentappointingaproxymustbeeitherunderitscommonsealorunderthehandofitsofficerorattorneydulyauthorised.

d. WhereamemberoftheCompanyisanexemptauthorisednomineewhichholdsordinarysharesintheCompanyformultiplebeneficialownersinonesecuritiesaccount(“omnibusaccount”),thereisnolimittothenumberofproxieswhichtheexemptauthorisednomineemayappointinrespectofeachomnibusaccountitholds.

e. TheinstrumentappointingaproxymustbedepositedattheRegisteredOfficeoftheCompanyatNo.60-1,JalanLagenda5,Taman1Lagenda,75400Melakanotlessthan48hoursbeforethetimeforholdingtheMeetingoratanyadjournmentthereof.

No. Resolution 1. To receive the Audited Financial Statements for the financial year ended 31 December 2015 together with the Reports of

the Directors and the Auditors thereon.

No. Resolutions For Against 2. To approve the payment of Directors’ fees for the financial year ended 31 December 2015. 3. To re-elect Peter Yong Kuen Fook who retires pursuant to Article 96 of the Company’s Articles

of Association. 4. To re-elect Yap Koon Roy who retires pursuant to Article 96 of the Company’s Articles of

Association. 5. To re-appoint Messrs. BDO as Auditors of the Company until the conclusion of the next AGM. 6. Special Resolution: Proposed Amendments to the Articles of Association 7. Ordinary Resolution: Authority to Issue Shares pursuant to Section 132D of the Companies

Act, 1965 8. Ordinary Resolution: Proposed Renewal of Existing Shareholders’ Mandate for Recurrent

Related Party Transactions of a Revenue of Trading Nature

%

STAMP

FOLD HERE

FOLD THIS FLAP FOR SEALING

FOLD HERE

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

(IncorporatedinMalaysia)

No. 60-1, Jalan Lagenda 5Taman 1 Lagenda

75400 Melaka, Malaysia

THE COMPANY SECRETARY

ABOUT HOCK HENG Hock Heng Stone Industries Bhd. (“Hock Heng”) is one of the major manufacturers of dimension stones in Malaysia. Hock Heng is a public listed company on the Main Market of Bursa Malaysia Securities Berhad.

Hock Heng’s business activities include sourcing, processing and distributing a wide range of dimension stones including: granite, marble, sandstone and slate. Hock Heng’s products are mainly used for a wide array of applications in the commercial and residential properties, such as façade walls, flooring, staircases, monuments, furniture, pillars, garden sets and landscaping.

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

Tel : 06. 317 2028Fax : 06. 317 4264

Hock Heng Granite Sdn. Bhd.

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

Tel : 06. 317 2028Fax : 06. 317 9324

Email : [email protected] : www.hockheng.com.my

Hock Heng Stone Industries Bhd.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.

20, PTD 111402,Jalan Plentong 8,

Sri Plentong Industrial Park,81750 Masai,

Johor Darul Takzim.Tel : 07. 386 8028 / 9028

Fax : 07. 386 3028

Hock Heng Marketing(Southern Region) Sdn. Bhd.

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.

Contacts

Hock Heng caters to retail and commercial customers through its manufacturing plant in Melaka as well as sales cum secondary processing plants located in Subang, Selangor, Kuantan, Pahang and Johor Bahru, Johor. Besides, Hock Heng also has sales offices in Seremban, Negeri Sembilan and Batu Pahat, Johor.

Other than dimension stones business, Hock Heng also venture into property development business to diversify its earning base and to enhance Hock Heng’s overall long term growth prospects.

A N N U A LR E P O R T

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


Documents

Hock Heng AR205 Cover - malaysiastock.biz Letter to Shareholders 08 ... Maybank Islamic Berhad (787435-M) Stock Exchange Listing Main Market of Bursa Malaysia Securities Berhad Stock