Contentshsl.listedcompany.com/misc/ar2011.pdf · 93450 Kuching, Sarawak, Malaysia Tel: 6-082-332755 Fax: 6-082-484653 email: [email protected] Website: aUDitoRs kpMg REgistRaR Tricor

Contents

Performance Highlights 01

Financial Highlights 02

Corporate Information 04

From the Chairman 05

From the Managing Director 08

Corporate social Responsibility 11

Directors’ Profiles 12

HsL Happenings 14

statement on Corporate Governance 15

Audit Committee Report 19

statement on Internal Control 21

Financial statements 22

top 10 Properties 64

other Information 65

shareholding Analysis 66

notice of AGM 68

Proxy Form

Cover StoryThe sea green colour scheme of HSL’s annual report reflects the company’s core business of marine engineering.

Over its three decades in the industry, HSL Group has gone on to acquire increasingly sophisticated engineering capabilities for a full range of infrastructure and building works.

The photo montage shows a selection of HSL’s recent projects including affordable housing construction, road works, Kuching’s centralized sewerage treatment plant, tunnel boring for installation of the sewerage pipes, mass reclamations, hydraulic cutter suction dredging and property development projects.

1

Hock Seng Lee group

performance Highlights for 2011

revenue at a record high of rM581.5 million - up 19% from 2010

earnings at a record high of rM116.6 million - up 18% from 2010

earnings per share of 15.81 sen - up 18% from 2010

return on equity at 23%

Total cash dividend for 2011 of 18%, less tax

The case to invest:Why we’re building your future today• Consistently strong financial results

• Impressive earnings history with growth each of the last 10 years

• Superior margins (on PBT), averaging 20% over the last 5 years

• Healthy balance sheet with zero gearing and net cash position of RM180 million

• CAGR on net earnings for 3 years (2008-2011) 28%

• Strong track record of project delivery over 30 years

• Sizeable order book of some 33 projects worth RM1.7 billion with RM1.0 billion outstanding as at April 2012

• Beneficiary of accelerated infrastructure development in Sarawak, Malaysia’s largest state (10MP, SCORE)

• Niche market player specializing in marine engineering

• Ownership of a large portfolio of marine and land-based heavy equipment including dredgers, tugboats, barges, cranes, tunnel boring machines, etc.

• Largest construction firm in East Malaysia by market capitalization• Winner of Forbes Best Under A Billion Award as one of the top 200 Best Performing Companies in Asia-Pacific• Consistently awarded for Shareholder Value (KPMG awards, Property and Construction Sector)• The Edge-Billion Ringgit Club & Corporate Awards - ranked No.2 in construction sector for profitability, profit growth and best stock performance

2

We’re building your future today

Hock Seng Lee BerHad 045556-X

Financial HigHligHts

2011 2010 2009 2008 2007 RM’000 RM’000 RM’000 RM’000 RM’000 Revenue 581,515 488,276 375,021 309,069 248,168 Profit Profit Before Tax 116,598 98,419 75,569 56,458 53,173 Profit After Tax 87,268 73,439 56,323 41,839 38,940 Earnings Per share (sen) 15.81 13.40 10.25 7.56 6.99 a

ReturnonEquity(%) 23.1% 23.1% 21.1% 18.2% 19.0% Property,PlantandEquipment 112,647 96,175 71,132 49,335 35,988 OtherNon-currentAssets 94,014 87,344 66,720 72,153 71,566 NetCurrentAssets 218,725 175,791 164,676 127,684 115,403 425,386 359,310 302,528 249,172 222,957 Financed by ShareCapital 116,535 116,535 116,535 116,535 116,535 CapitalRedemptionReserves 2,165 2,165 2,165 2,165 2,165 TreasuryShares (31,672) (21,029) (20,706) (20,296) (17,107) RetainedEarnings 322,222 247,369 193,967 144,237 115,501 Non-controllingInterests 206 203 199 - - Non-currentLiabilities 15,930 14,067 10,368 6,531 5,863 425,386 359,310 302,528 249,172 222,957 NetAssetspershare RM0.75 RM0.62 RM0.53 RM0.44 RM0.39 a

aadjustedtoreflectthesubdivisionofshareson21January2008

Netassets Revenue Profitbeforetax Profitaftertax (RM’000) (RM’000) (RM’000) (RM’000)

2

201020082007 20112009

248,

168

309,

069

375,

021

488,

276

581,

515

201020082007 20112009

53,1

73 56,4

58

75,5

69

98,4

19

116,

598

201020082007 20112009

38,9

40 41,8

39

56,3

23

73,4

39

87,2

68

201020082007 20112009

217,

094 24

2,64

1

292,

160 34

5,24

3

409,

456

3

Assets2011Total: rM683,141,823

EquityandLiabilities2011

GrossCashDividend

Total: rM683,141,823

18

%

16

14

12

10

8

6

4

2

0

8% 8%

5%

2007 20102008 20112009

16%

11%12%

15%

18%

8%

3%

5%

2%

3%

6%

9%

3%

6% 6%

Interim

Final

Special

3

Trade and other payables, 36.6%

Deferred tax liabilities, 2.3%

non-controlling interests, 0.0%

reserves,42.8%

Share capital, 17.1%

current taxliabilities, 1.2%

Trade and other receivables, 32.5%

Inventories, 3.4%

property developmentcosts, 4.1% Land held for property

development, 13.7%

property, plant and equipment, 16.5%

Cash and bank balances, 26.9%

prepayments and other assets, 2.9%

4



coRPoRatE inFoRMation

HocK sEng lEE BERHaD is a marine engineering, civil engineering and construction company. It undertakes dredging, land reclamation and earthworks, road and bridge construction, tunneling and other infrastructure and building works.

Its wholly owned subsidiary HockSengLeeConstructionSendirianBerhad is involved in property development and building construction.

lEgal FoRM anD DoMicilEPublic Limited Liability Company, Incorporated and domiciled in Malaysia

BoaRD oF DiREctoRsDato’ Haji Idris Bin Buang (Chairman,Independent,Non-executiveDirector)Dato Yu chee Hoe (ManagingDirector) Datuk Yii Chi Hau (ExecutiveDirector)Yu chee Lieng (ExecutiveDirector)Lau kiing kang (ExecutiveDirector)Yii chee Sing (ExecutiveDirector)Lau kiing Yiing (Non-executiveDirector)Dato’ Mohd. Nadzir Bin Mahmud (Non-executiveDirector)Dr chou chii Ming (Independent,Non-executiveDirector)Tuan Hj Abang Kashim Bin Abang Morshidi (Independent,Non-executiveDirector)

coMPanY sEcREtaRiEsYu Chee Hung (MIA No. 3926)Augustine Law Sek Hian (MIA No. 10087)

REgistERED oFFicELot 1004 Jalan Kwong Lee Bank93450 Kuching, Sarawak, Malaysia

Tel: 6-082-332755Fax: 6-082-484653

email: [email protected]

Website: www.hsl.com.my

aUDitoRskpMg

REgistRaRTricor Investor Services Sdn Bhd (118401-V)Level 17, The Gardens North TowerMid Valley City, Lingkaran Syed Putra59200 kuala Lumpur

PRinciPal BanKERsAmBank Berhad HSBC Bank Malaysia Berhad Malayan Banking BerhadOCBC Bank (Malaysia) BerhadPublic Bank BerhadRHB Bank BerhadUnited Overseas Bank (Malaysia) Bhd

lEgal aDVisoRsAlvin Chong and PartnersTang & Partners

listingBursa Malaysia (Main Market, Construction Counter)Stock Code: 6238Stock Name: HSL

5

FRoM tHE cHaiRMan

On behalf of the Board of Directors of Hock Seng LEE BERHAD (HSL), it is my pleasure to present the Group’s Annual Report and the Audited Financial Statements, for the year ended 31 December 2011.

We have enjoyed another year of notable achievements and remarkable growth while building on our technical repertoire. As a leading infrastructure company with our expertise founded in marine engineering, we are riding a wave of rapid development across our home state of Sarawak and finding our capabilities in high demand.

Abounding in natural resources and gearing up to be Malaysia’s biggest energy producing state, Sarawak is making a concerted leap forward. The input of foreign investment, particularly in the setting up of metal-related industries in the SCORE (Sarawak Corridor of Renewable Energy), will create numerous spin-off

effects for the local construction industry. At the same time, there is a push to bring basic amenities such as access roads, mains power and treated piped water to more remote communities to ensure they are not left behind. HSL looks forward to contributing further to Sarawak’s planned development.

StrongfinancialresultsSustained growth has been the hallmark of HSL’s much lauded financial reports and 2011 was no exception. HSL Group’s net annual profit before tax for the financial year ended 31 December 2011 breached the RM100 million mark when it rose to RM116.60 million up 18 percent from 2010’s year-end figure of RM98.42 million. The substantial earnings growth was recorded on the back of annual revenue of RM581.52 million up 19 percent from 2010’s RM488.28 million in revenue.

Recent years have seen severe material price fluctuations and global economic uncertainties, yet with judicial stewardship and by keeping abreast of government procurement policies, HSL group has achieved a Compound Annual Growth Rate (CAGR) on pre-tax earnings of some 28 percent and Return on Equity (ROE) at more than 20 percent over the past three years. The Group also remains completely debt free with over RM180 million in cash reserves.

AttractivereturnsFor the year 2011, the Board has recommended a final ordinary dividend of 9 percent. In addition, to celebrate the outstanding performance of the group, it has proposed a special dividend of 3 percent. on top of the gross interim dividend of 6 percent per share paid in October 2011, the total dividend for 2011 will be 18 percent, up from 15 percent in 2010 and 12 percent in 2009. The final dividend shall be payable on 18 June 2012 pending approval at the Annual General Meeting on 23 May 2012. All dividends are franked with a tax credit of 25 percent.

Furthermore, the Board of HSL decided to distribute a portion of its Treasury Shares as Share Dividends as an additional reward to shareholders. The company has been carrying out a share buy-back exercise since March 2002 and had a similar share dividend exercise in December 2010.

On 12 April 2012, shareholders were again rewarded on the basis of one (1) treasury share for every fifty (50) ordinary shares of rM0.20 held. This is equivalent to 3.06 sen or 15 percent per share based on HSL’s share price of RM1.53 per share on the date of distribution. The Share Dividend exercise involved a distribution of 10,939,477 treasury shares.

Landmark buildings completed in 2011 included the Great Hall of Unimas and the Islamic Centre, Kota Samarahan.

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After the exercise, 24,717,781 treasury shares remain held by the company, giving the Board options to further reward stakeholders in the future.

Sharing the success of HSL with our investors is an important part of the strategic management of the group. HSL has a long history of ensuring attractive returns to shareholders while retaining necessary cash reserves for fleet renewal, fast-track project implementation and flexibility in payment options for clients. Dividend payout ratios have averaged 20 percent over the past five years.

AccoladesWe were greatly honoured in 2011, to receive a number of prestigious awards which reflected our growing standing in the investment community. In November, we were rated as one of the top 200 best performing small and mid-sized companies in the Asia-Pacific region when we received the Forbes Asia ‘Best Under a Billion’ Award at a ceremony held in Hong Kong. The field of some 15,000 companies is screened for sales and earnings growth and return on equity. Forbes looks for healthy balance sheets and for how well the recent economic volatility is being managed. There were only 14 recipients from Malaysia.

Earlier in the year under review we were a construction and property sector winner in the KPMG Shareholder Value Awards 2011 and ranked 35 on the list of top 100 value creating companies in Malaysia. We were also admitted to The Edge Billion Ringgit Club gaining a ranking of No.2 for the Highest Profit Growth Company, Most Profitable Company and Best Performance Stock under the construction sector.

All these accolades reflect the strength and consistency of our business performance and I applaud the management for these impressive triumphs.

CorporateGovernanceHSL is governed by a stable, well-established Board of ten directors who deliberate on the risk and reward balance and drive the Group forward. The Malaysian Code of Corporate governance provides the essential foundation for all our management processes. Hence, complete transparency in business decision making and the vigilant safeguarding of Group assets are considered fundamental to our business sustainability.

We have five executive directors and five non-executive directors, three of whom are independent directors. The separation of the role of the chairman and the Managing Director enhances the balance of power of the Board, while the depth and breadth

of experience represented on the Board makes for soundly reasoned decision making. With backgrounds in law, in technical fields, in finance and auditing, in administration, in community relations and in business development, the Directors also bring varied perspectives to ensure thorough deliberations. They are all individuals who seek to keep abreast of policy developments and industry trends and therefore expanding their knowledge is an ongoing process of attending seminars and undertaking private research.

The Audit Committee, Management Committee, Remuneration Committee and Nomination Committee are the active sub-committees which meet and thereafter advise the full Board in their specific areas to ensure Board responsibilities are fulfilled.

Our Annual Business Plan is reviewed by the Board quarterly and adjusted to respond to the industry climate, economic conditions and public policy directions. The Board considers our financial systems, internal controls and risk management and above all seeks to maintain our sound reputation as a sustainable and successful business.

Investorrelations/AGMOur Annual General Meeting is a platform for Board members to interact with our valued shareholders, respond to their queries and garner their feedback. Meanwhile, our Annual Report provides a comprehensive evaluation of the Group’s performance for the year under review as well as an appraisal of prospects for the future.

At the Annual General Meeting held on 25 May 2011, shareholders supported a renewal of the proposed share buy-back of up to ten percent of the issued and paid-up share capital. They also approved the proposed recurrent related party transactions of a revenue or trading nature.

Most major broking and research houses are now tracking our stock. Our respected profile as a sound investment choice has been enhanced by a slew of performance and shareholder value awards as well as invitations for higher profile investor briefings. We were the only East Malaysian company invited to present our merits at Bursa Malaysia’s prime international investor’s event: Invest Malaysia 2011 organised by Maybank in April. We also presented at Ambank’s Sarawak Day Conference in August. Aside from these larger forums, we conducted numerous smaller briefings in Kuala Lumpur and Kuching during the year. Several analyst and fund manager groups visited our tunnelling and sewerage plant construction sites to see this major ongoing project first hand.

Roadworks and affordable housing continue to feature in HSL’s order book including the Lubok Antu road at Sri Aman and the PPR project at Bintulu.

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Analysts have begun to show signs of cautious optimism for the overall construction industry with several upgrading the sector. HSL is positioning itself as a niche market player in the specialised marine and infrastructure fields and operating in the rapidly developing state of Sarawak.

AppreciationHSL Group has an illustrious track record and continues to build on this fine tradition. This is a result of the positive interaction of many people and the opportunities made available to HSL by visionary Federal and State leadership with a clear agenda to accelerate socio-economic development in Sarawak.

We must acknowledge our loyal suppliers, sub-contractors, professional consultants and associates, bankers and advisors who play such an integral role in the Group’s success. We are also very grateful for the guidance and service we receive from the various government departments, councils and agencies, all of which enable us to achieve smooth and timely project delivery.

We thank our loyal shareholders for their faith in HSL and we hope that we have shown our appreciation in the sound returns you have all enjoyed for 2011.

In addition, I wish to pay tribute to my fellow Board members. Their sharp minds and commitment to vigilant and assured stewardship of the Group, make it a pleasure to chair our meetings. The Board is ably supported by the dedicated and capable HSL management. Indeed, HSL’s sustained success must be credited to the excellent team work exhibited by HSL’s people.

ProspectsThe Malaysian economy is forecast to expand some 4-5 percent in 2012 with the construction sector seen as one of the key drivers. The government highlights the country’s strong economic fundamentals, pragmatic macroeconomic policies and the Economic Transformation Programme (ETP) as the domestic sources of growth. However, it will have to work towards shielding the country from the global fallout created by the Eurozone crisis.

HSL has proven its resilience in all economic scenarios. While the timing of project awards in Sarawak, particularly for SCORE, may impact the extent of our order book growth, HSL still anticipates considerable ongoing opportunities in 2012. There is much to be done in Sarawak to ensure all levels of society enjoy the nation’s industrialisation process. While the fast pace of urbanisation means the state’s main cities need improved roads, more affordable housing, flood mitigation works and centralised sewerage, the rural communities also need better road access to towns, treated piped water and mains electricity. It is evident that the need for these basic amenities cannot be ignored and hence their implementation is a question of prioritising and funding.

In keeping with this situation, HSL’s prospective projects are further centralised sewerage works, flood mitigation works, affordable housing and educational institutions and projects within SCORE. From the public sector these include essential roads and water treatment, while the foreign investors will require infrastructure and construction works to get their facilities operational.

Marine engineering remains HSL’s specialty. Its flagship hydraulic cutter suction dredger is currently undertaking remedial dredging

works near to Sibu town.

HSL maintains its reputation as an efficient, technically competent and cost-competitive contractor with specialist skills in marine-related engineering and challenging infrastructure works. HSL has both state (UPK) and national (PKK G7, CIDB) accreditation which is essential to perform most projects in Sarawak. We also boast an extensive portfolio of marine plant and land-based heavy equipment, a highly experienced technical team and sound financial backing. This combination of attributes continues to position HSL for a productive future.

Dato’ Haji Idris Bin Buangchairman

8



On behalf of the Board of Directors, it is my great pleasure to review our operations for 2011 and to offer some insights into the future opportunities we envisage as a participant in Sarawak’s exciting era of growth and development.

By any measure, HSL’s financial results track record has been consistently strong. To achieve pre-tax profit growth of over 18 percent during a year in which there was a slower than expected output of project awards and a plethora of global economic woes, is very commendable. Indeed, the year 2011 saw us maintain the upward momentum of our revenue and earnings flows as has been the story for over a decade. At the same time, our Earnings Before Interest and Tax (EBIT) margins have stayed within the range of 18-20 percent, as they have for the past five years.

In line with increases in profit, Earnings Per Share reached 15.81 sen as at 31 December 2011 up from 13.40 sen for 2010 and

10.25 sen for 2009. The awards we have received for shareholder value provide additional testimony of our status as an excellent investment prospect.

HSL’s order book is nudging the RM2 billion mark and our construction teams are busy across the state with RM1.0 billion outstanding. Ten new projects were procured during 2011, worth a total of RM313 million. Half of the new contracts were for road works and the balance for rural water supply, reclamation and other infrastructure projects.

We finished a considerable number of contracts in 2011, notably the RM180 million reclamation and infrastructure works for the ship building industrial estate at Tanjung Manis, the RM116 million extension to the industrial estate at Samarahan and a RM142 million technical training centre in Bintulu. The total value of projects completed during the year was at a record high of rM616 million; an increase from the rM318 million completed in 2010 and the rM200 million completed in 2009.

Building construction works for educational institutions, various road works and infrastructure works for the Demak Laut Industrial Park near Kuching were among the other jobs achieving completion in 2011.

In 2012, we will continue to enhance HSL’s winning formula of tight cost and quality controls while always building upon our extensive technical capabilities and maintaining margins above industry average.

We presently have over 33 ongoing projects spread across the State including land reclamation and infrastructure works contracts for industrial estates; roads and associated bridge works, building projects and our own property development projects.

Package 1 of Kuching’s Centralised Wastewater Management System remains our largest ongoing project ongoing project and is progressing well. At present, some 13km of sewer pipeline has been jacked into place using high-tech tunnel boring and we have commenced the onerous task of individual property connections (tertiary lines) which are done by open trenched pipe-laying. The sewerage treatment plant complex near to the Tun Salahuddin toll bridge has been constructed and test commissioning is underway.

Road projects predominate in our order book, comprising over a third of ongoing contracts. It is worth noting that road building in Sarawak is a challenging task. The populated coast is swampy and calls for extensive reclamation (sand fill) and geo-technical treatments while the interiors are rugged and mountainous and therefore present logistics and access challenges. Local knowledge and networks - particularly barges and tugboats for

Kuching’s Centralised Wastewater is HSL’s biggest ongoing project. Test commissioning for the sewerage treatment plant is underway including for the secondary clarifier and activated sludge reactor.

FRoM tHE Managing DiREctoR

9

river transport, access to reliable machinery and material supply and technical know-how are essential elements of successful road construction in Sarawak. PropertyDevelopmentThe highlight of 2011 for our property division was winning the award for best housing estate in Sarawak for our 642-unit SamariangAman development in Kuching’s north. The Sarawak Housing and Real Estate Developers’ Excellence Award (SHEDA) for “Outstanding Development: Landed Residential Development” acknowledged our efforts to achieve conducive community living for lower budget housing. HSL’s internal courtyard designs, varying styles and colour schemes and our provision of a four-acre recreation park and football pitch were the features of this top-selling estate.

Other ongoing residential projects in 2011 were HSL’s guarded and gated development called theLeaf near Kuching International Airport, VistaAman at Samarahan and LavenderHills at 13 ½ mile Kuching-Serian road. All are currently in the handover stage.

With a slight softening of the local property market, we postponed some new launchings and these are now scheduled over the next twelve months. Among the underway projects are Highfields2 at Batu Kawa, a boutique residential development near to Third Mile in kuching called Botanika, SamariangAman 2 which is the follow up to our award-winning first phase and another phase of Eden Fields at 13 ½ mile Kuching-Serian Road. Also in progress is the 200-acre site for LaPromenade, an integrated mixed development which includes a high-end guarded and gated community of some 1,000 homes, 200 shops lots, offices and a mall located along the Kuching-Samarahan expressway.

Hock Seng Lee Construction Sendirian Berhad (HSLC), our wholly-owned subsidiary and property development arm, has a number of innovative development proposals in the planning stages and is looking at an exciting future.

In March 2012, HSLC announced purchase of a 275-acre plot of land in Kuching’s northern township of Samariang for a total cash consideration of RM25.5 million. The land has been earmarked for an exciting mixed development called SamariangAman 3 and will include approximately 1,500 landed residential homes, 2,000 units of affordable housing and 40 units of commercial shophouses. The Gross Development Value is estimated at RM700 million. Works are expected to begin in 2013 and will stretch over 6-8 years, enabling HSLC’s ongoing presence in this area of Kuching where it has enjoyed strong sales.

CorporateSocialResponsibility(CSR)We are pleased to see a heightened sense of the role of commercial operations in society and of the ethical issues which arise in balancing the needs of all stakeholders with the need to be profitable and reward shareholders. HSL’s Corporate Social Responsibility (CSR) policy is pursued as an integral part of our business practices on the understanding that we have a duty of

care to ensure the welfare of the society in which we function and cannot be motivated solely by financial drivers.

A reputation for being a responsible corporate citizen, for fair practices, respect for health and safety standards, work-life balance considerations and opportunities to advance are all part of the equation in ensuring HSL’s attracts and maintains a dedicated workforce as well as enhancing shareholder value through its honourable reputation.

HSL also endeavours to inculcate in all its employees a caring attitude towards the community at large. HSL staff participate in a variety of charity activities including the Sarawak Heart Foundation’s Walk-a-Mile event, the Red Crescent jog-a-thon and other community events. We also hold a “Green Week” each year to get staff actively involved in the 3rs – reduce, reuse, recycle. Staff bring in household items, newspapers and old clothes for recycling. These are donated to a local charity.

Each Chinese New Year, the HSL Group has a voluntary donation program in which over a dozen Sarawak charities are selected to receive annual grants. Aside from this, HSL funds a wide variety of community, sporting and cultural events and supports educational initiatives, charitable fund raising, disaster relief initiatives and festival activities for the underprivileged.

We also reach out to local schools to offer career opportunities and work with various colleges and universities to support their industrial training programmes, host construction site visits and briefings and other projects which give students valuable exposure to the real-life working environment.

It is the objective of HSL Group to share the Group’s accomplishments with the wider community in which we operate and forge a group culture in which, the social, environmental and other consequences of our activities are as important as the bottom line.

EnvironmentandsustainabledevelopmentBecause of the nature of our business, the projects we undertake have an objective to enhance the standard of living of the rakyat and bring about socio-economic development. However, we applaud and support the government’s sustainability agenda which strives for progress without compromising environmental protection.

We greatly look forward to the commissioning of Kuching’s centralised sewerage system which will alleviate the serious pollution of the city’s waterways. As with flood mitigation works, such public infrastructure projects are critical for the future health of the city.

As a leading company, we seek to be a role model in responsible practices on site. This encompasses everything from safety equipment for workers, to recycling, to our tree rescue and re-planting programme to the proper disposal of used oil, recycling of batteries, dust control and so on.

Informationtechnology(IT)

Completed vocational institution in Bintulu. Deep shafts around Kuching enable the lowering of hi-tech tunnel boring machines for trenchless

sewerage pipe installation.

10



Our major project for 2012 will be the migration of our operating systems, software, web applications and existing file server to new higher performance and higher capacity servers. Although keeping pace with IT innovations can be a challenge, HSL has always emphasised the need to maximise efficiency through the latest electronic means.

Throughout 2011, system reviews were carried out and enhancements made where necessary. Paperless communication is still our objective and we strive to limit hard copies of documents and to rely on scanned electronic storage of the same wherever possible. Our website provides regularly updated information and announcements for investors as well as general information for the public and media. House buyers can research our property development projects, download brochures and even see construction progress photos on-line.

StaffingIn line with our growth, there has been a modest increase in our personnel. As at 31 December 2011, HSL Group had some 711 permanent staff of whom around a third are office-based and the rest are on site or at sea. We recorded 700 staff at the same point of 2010.

The stability of HSL’s senior and middle management is part of HSL’s recipe for success. The commitment and dedication of a core of highly competent senior staff is certainly a feature of our business. Our expectations of our staff are high and we challenge individuals to reach their potential, but we also endeavour to provide attractive career opportunities and just compensation. As well as the relevant technical training and seminars offered to staff during 2011, we also conducted in-house soft skills training for junior staff such as positive attitude and team work training.

HSL’s Annual Dinner for 2011 saw a total of 15 recipients for long service awards including 10, 20 and even 30 years long service.

LookingaheadOur existing order book will see HSL achieve further growth in 2012. However, we are confident that several of our current procurement initiatives will bear fruit. We are eyeing building construction projects such as an educational institution in Mukah and with our mastering of tunnel boring technology, we will propose involvement in the next packages of Kuching’s centralized sewerage project. Similarly, we will draw on our experience in flood mitigation to bid for such works in Sibu, Kuching and other towns. The need for greater connectivity across the state will also mean road works will continue to feature in our tendering bids.

Overall the Tenth Malaysia Plan (2011-2015) and the National Mission (2006-2015) seek to achieve balanced development within the nation. This means Sarawak, with its large land area and substantial needs can continue to expect federal funding accordingly. The high profile Economic Transform Programme (ETP) is adding urgency to projects that provide basic infrastructure to Sarawak’s rural communities. As such, HSL will align itself with prevailing public policy and pursue additional infrastructure contracts such as those for rural water treatment and supply. We secured two such contracts in 2011 and believe it to be an area of great potential. It also gives us the satisfaction of raising the quality of life of rural folks who often depend on untreated river water with its inherent health risks.

Meanwhile, there is a need to relieve the pressures of urbanization and industrialization on the state’s cities. In Sarawak, many urban development projects will require a land reclamation component and therefore whether it is a hospital to be built, a new road, better drainage or an industrial park, our marine engineering skills will be in demand.

No coverage of HSL’s future outlook would be complete without mention of the 70,000 sq km Sarawak Corridor for Renewable Energy (SCORE). Planned in three phases over 22 years (2008-2030), SCORE’s total infrastructure bill could be RM64 billion. At present a quarter of our existing contracts are Score-related and this ratio may increase depending on the timing of the roll-out of projects from RECODA, SCORE’s administrative body.

The coastal SCORE growth node towns of Mukah, Tanjung Manis and Samalaju are now the scene of substantial construction activity. The pioneering high-energy consuming industries are in various stages of building their facilities at Samalaju Industrial Park. These include the manganese smelting plants of Asia Minerals Ltd which signed its PPA in January 2012 and OM Materials (Sarawak) Sdn Bhd which signed its PPA in February 2012. It follows that as more energy tariff agreements are signed, more projects will proceed and more infrastructure and building works will be generated.

In summary, HSL’s optimistic outlook is founded on the three-pronged approach that is driving Sarawak’s development. Firstly, is the need to alleviate the consequences of rapid urbanisation on the state’s major cities – squatters, wastewater disposal, flooding, traffic snarls etc. Secondly, is the need to ensure remote communities have basic amenities (clean water and mains electricity) and access to markets so they are not left behind in the development drive. Thirdly, is the implementation of Score projects and the urgent need to provide promised infrastructure to the investors such as road linkages, treated water and port facilities. Taken together these thrusts point towards robust growth for the local construction industry. As well as having the local knowledge and sought after marine engineering capabilities, HSL also has the financial resources to ease public funding issues. Our cash reserves and financial standing enable us to offer deferred payment options, accept land as payment in kind or assemble financing packages to fast track projects and usurp competitors.

With a strong technical team, specialised in-house equipment, experienced management and abundant cash-reserves, HSL can expect to capitalise handsomely on the promising scenario of Sarawak’s advancement.

We’rebuildingyourfuturetoday.

Dato paul Yu chee Hoe Managing Director

TheLeaf boutique guarded and gated estate is sold out.

11

coPRoRatE social REsPonsiBilitY

Staff welfare – celebrating 10, 20 and 30 years long service.

community engagement – study visits, event sponsorships, donations

Walk-a-Mile event for World Heart Day

Environment – tree rescue programme, Green week charity and recycling campaign 11

12



DiREctoRs’ PRoFilEs

1. Dato’HajiIdrisbinBuang, aged 57, Malaysian, appointed 23 March 1996 Dato’ Haji Idris is the Group Chairman and an independent,

Non-executive Director. A practising advocate and solicitor, he holds a LLB (Hons), University of Buckingham, United Kingdom (1982) and was admitted as Barrister of the Lincoln’s Inn and as Advocate and Solicitor to the High Court of Sabah and Sarawak in 1983 and is the proprietor of Idris-Buang and Associates, a legal firm in Kuching. Dato’ Haji Idris was a Senator of the Dewan Negara appointed by the Sarawak State Legislative Assembly until November 2011. Dato’ Haji Idris brings to the Board extensive experience on Board procedures, corporate governance regulations and legal perspectives. He is also a director of several private limited companies.

Dato’ Haji Idris is the Chairman of the Audit Committee and the Remuneration Committee. He attended all four Board meetings held during 2011. He has no convictions for offences within the past 10 years.

2. DatoYuCheeHoe, aged 57, Malaysian, appointed 17 December 1978 Dato Yu has been the Managing Director since 1980 and is

the driving force of HSL. He leads the company in strategic planning and business development; has a respected profile in the industry and keen business acumen. He possesses an in-depth knowledge of the construction and engineering fields with extensive experience in civil and infrastructure works. He is also a director of several private limited companies.

Dato Yu is chairman of the Management committee and Member of the Remuneration Committee. He attended all four Board meetings held during 2011. He has no convictions for offences within the past 10 years.

3. DatukYiiChiHau, aged 62, Malaysian, appointed 10 January 1980 Datuk Yii is an Executive Director and a co-founder of

the company. He oversees the dredging operations and maintenance of the marine fleet. Qualified as an engine

driver, Datuk Yii has over thirty years experience in construction, heavy machinery mechanics and shipbuilding and maintenance. Datuk Yii is active in community works and is also a director of several private limited companies.

Datuk Yii is a Member of the Management Committee and attended all four Board meetings held during 2011. He has no convictions for offences within the past 10 years.

4. YuCheeLieng, age 59, Malaysian, appointed 10 January 1980

Mr Yu is an executive Director and co-founder of the company. He is involved in strategic planning, co-ordinates and monitors all site operations including machinery and labour deployment and quality control. Qualified as a coastal Shipping Master, he has vast experience in the construction industry from heavy machinery operation to heavy machinery mechanics and marine engineering. He is also a director of several private limited companies.

Mr Yu is a Member of the Management Committee and attended all four of the Board meetings held during 2011. He has no convictions for offences within the past 10 years.

5. LauKiingKang, aged 47, Malaysian, appointed 27 April 1998 Mr Lau is an Executive Director. He holds a Bachelor of

Engineering (Civil), University of New South Wales, Australia (1987) and is the Director of projects with responsibility for technical excellence. Mr Lau co-ordinates professional project staff, project management and execution. He has particular experience in road and infrastructure projects. Mr Lau has been the Chairman of the Sarawak Quarry Association since its inauguration in 2002. He is also a director of several private limited companies.

Mr Lau is a Member of the Management Committee and he attended all four of the Board meetings held during 2011. He has no convictions for offences within the past 10 years.

1 2 3 4 5

6 7 8 9 10

Hock Seng Lee BerHad Board of directorS 2011

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6. YiiCheeSing, aged 43, Malaysian, appointed 2 January 1993 Mr Yii is an Executive Director. He holds a Bachelor of

Building, University of New South Wales, Australia (1993) and is a member of the Australian Institute of Quantity Surveyors (1994). Mr Yii is involved in project procurement, project viability studies and property development projects of HSL Group as well as the electronic office environment. He is also a director of several private limited companies.

Mr Yii is a Member of the Management Committee and he attended all four of the Board meetings held during 2011. He has no convictions for offences within the past 10 years.

7. LauKiingYiing, aged 56, Malaysian, appointed 23 March 1996 Mr Lau is a Non-executive Director. He holds a Bachelor of

Commerce, University of Canterbury, New Zealand (1980), has been a Chartered Accountant of the Institute of Chartered Accountants of New Zealand since 1985 and a Chartered Accountant with the Malaysian Institute of Accountants since 1987. He is a fellow member of the Malaysian Institute of Taxation and is a partner in the accounting firm Crowe Horwath. Mr Lau is well-versed in corporate reporting, auditing, taxation and statutory matters. Hence he contributes this in-depth corporate accounting knowledge to the Board. Mr Lau is an independent non-executive director of TAS Offshore Berhad, a company listed on the Main Market of Bursa Malaysia. He is also a director of several private limited companies.

Mr Lau is a Member of the Audit Committee and Nomination Committee. He attended all four of the Board meetings held during 2011. He has no convictions for offences within the past 10 years.

8. Dato’Mohd.NadzirBinMahmud, aged 70, Malaysian, appointed 20 November 2000 Dato’ Mohd. Nadzir Bin Mahmud is a Non-executive

Director. A Barrister-at-Law from Inner Temple, London; he was called to the English Bar in 1973 and admitted and enrolled as an Advocate and Solicitor to the High Court Malaya in 1974. Dato’ Nadzir completed his post-graduate studies in Business Administration at Harvard University Graduate School of Business Administration USA (1981). He had previously served in various senior management positions as Executive Director in both local and international companies. As well as offering legal perspectives, Dato’ Nadzir is a highly experienced corporate director, familiar with corporate governance regulations, audit and risk management assessment and company secretarial matters.

Dato’ Mohd. Nadzir Bin Mahmud is a Member of the Remuneration Committee and attended two of the four Board meetings held during 2011. He has no convictions for offences within the past 10 years.

9. DrChouChiiMing, aged 73, Malaysian, appointed 29 November 2001 Dr chou is an independent, non-executive Director. He

holds a Doctor of Letters and a post Doctoral Degree from the Isles Internationae Universite Europa, Certified Doctor of Business Administration (CDBA) of the Oxford Association of Management United Kingdom, is an associate member of the Association of International Accountants, London. He began his public service career in the field of education in 1958, then with Kuching Port Authority from 1966, rising to the post of General Manager (1994-1999). Currently he is active in community works holding numerous prestigious

posts. He also brings to the Board his extensive background in management, administration, accounting and company image issues. As a community leader, he is in touch with local issues and keeps abreast of relevant government policies and procedures.

Dr chou is the chairman of the nomination committee and a Member of the Audit Committee. The Board has nominated him as the Senior Independent Non-executive Director to whom concerns may be conveyed. Dr Chou attended all four Board meetings during 2011. He has no convictions for offences within the past 10 years.

10.TuanHjAbangKashimBinAbangMorshidi, aged 63, Malaysian, appointed 3 January 2008 Tuan Hj Abang Kashim Bin Abang Morshidi is a professional

forester. He graduated from the University of Aberdeen with a Bachelor of Science in Forestry in 1972, and a Master of philosophy in natural resources Management from Edinburgh University in 1979. He has served the Government of Sarawak for 32 years in different capacities namely Deputy Director – Department of Forestry, General Manager – Sarawak Timber Industry Development corporation, permanent Secretary – Ministry of Tourism and the Chief Executive Officer – Sarawak Tourism Board. He has attended the Senior Fellows Management Course at John F. Kennedy School of Government, Harvard University in 1995. He is also a member of Malaysian Institute of Management and Institute of Rimbawan Malaysia. Tuan Hj Abang Kashim brings to the Board extensive understanding of public sector administration and management, as well as policies and procedures. His professional qualifications allow him to contribute on environmental issues and he is also well-versed on corporate governance regulations.

Tuan Hj Abang Kashim Bin Abang Morshidi is a Member of the Audit Committee and Nomination Committee and attended three of the four Board meetings held during 2011. He has no convictions for offences within the past 10 years.

Familyrelationship Dato Yu Chee Hoe, Datuk Yii Chi Hau, Mr Yu Chee Lieng and

Mr Yii Chee Sing are brothers. Mr Lau Kiing Yiing and Mr Lau Kiing Kang, who are brothers, are their brother-in-laws. Datuk Yii Chi Hau, Yu Chee Lieng, Dato Yu Chee Hoe and Yii Chee Sing are substantial shareholders of HSL by virtue of their substantial interest in Hock Seng Lee Enterprise Sdn Bhd.

Other than the above, none of the other directors have any family relationship with any of the directors and/or substantial shareholders of the Company.

Conflictofinterest Dato Yu Chee Hoe, Datuk Yii Chi Hau, Yu Chee Lieng, Lau

kiing kang, Yii chee Sing and Lau kiing Yiing, each have interests in certain private companies which are involved in property development and construction, but these are not in direct conflict with the business of HSL. Dato’ Haji Idris Bin Buang, Dato’ Mohd Nadzir Mahmud, Dr Chou Chii Ming and Tuan Hj Abang Kashim Bin Abang Morshidi have no conflict of interest with HSL.

except for recurrent related party transactions of a revenue nature which are necessary for day to day operations of the HSL Group and for which Dato Yu Chee Hoe, Datuk Yii Chi Hau, Yu chee Lieng, Lau kiing kang, Yii chee Sing and Lau kiing Yiing are deemed to have interests as disclosed on page 65 of the Annual Report, there are no other business arrangements with the Group in which the directors have interests.

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HaPPEnings

….numerous ministerial, analyst and study visits to our pioneering wastewater project

…. the receipt of many awards including the Forbes Award as one of Asia-Pacific’s top 200 best performing mid-sized companies.

…. the regular AGM, Board Meetings, in-house training and our annual dinner.

… several exhibitions ,property development road shows and a career fair

….project launchings and completions and key handing over events

2011sawmanyeventsatHSLincluding:

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15

statEMEnt on coRPoRatE goVERnancE

The Board of Directors (“the Board”) of Hock Seng Lee Berhad (‘HSL”) is firmly committed to good corporate governance and recognises that accountability and transparency at every level of the organisation is essential in safeguarding assets, enhancing shareholder value and maintaining strong financial performance.

The Board is pleased to provide this statement which outlines the manner in which HSL Group has applied the principals of the Malaysian Code on Corporate Governance (“the Code”).

BoaRD oF DiREctoRs

PrincipalResponsibilities: The Board assumes full responsibility for the success of the Group by taking stewardship responsibilities to lead the Group, focusing on strategic plan, overall management and business performance, management of principal risks and controls, the succession plan, investor relations and corporate communications.

• Strategic Plan: The Board establishes the vision for the Group and sets overall strategies and objectives. It reviews and approves the annual business plan which covers the scope of business activities; government initiatives and policies; industry overview and potential opportunities; risk management; business model and revenue generators; human resources plan; capital expenditure; finance plan; critical success factors; profit estimates and targets for the year. The Board evaluates business performance and target achievement quarterly.

• Overall Management: To facilitate effective management, certain functions have been delegated to various Board Committees

in accordance with their respective terms of reference, namely the Management Committee, the Audit Committee, the Remuneration Committee and the Nomination Committee. The minutes of the Board Committee meetings are presented to the Board for information and the chairman of the relevant Board Committees will report on the key issues deliberated and decided at each Board meeting. The key matters reserved specifically for the decision of the Board include the approval of the business plans and annual estimates and target, substantial transactions that are not of a revenue nature in the ordinary course of business, expenditure and contracts above a certain limit, major investment and financial decisions including key policies and procedures and chart of authority limit for transactions, all banking facilities and cheque signatories, quarterly reports and the annual financial statement. The chart of authority limit is reviewed when required.

The Managing Director, Dato Yu Chee Hoe is the chairman of the Management Committee which comprises all Executive Directors. The Management Committee is primarily responsible for developing the Group’s strategy and business plan including annual estimates for the approval of the Board; overseeing the implementation of the approved strategy and business plan; developing a risk management framework and undertaking an ongoing process for identifying, reviewing and managing the significant financial risks faced by the Group; and managing the operational activities and routine business matters and entering into transactions up to an approved limit.

Each quarter, Dato Yu Chee Hoe, as chairman of the Management Committee, provides the Audit Committee and the Board with the quarterly reports and financial statements as well as the financial performance evaluation for review and approval.

• Risks Management and Internal Control System: The Managing Director, with the support of the risk managers who are various department heads, reviews the risks and exposures and the internal controls that are in place to mitigate such risks, at least annually. In the current economic climate, conscientious monitoring of market indicators, the industry climate and financial management issues is vital. Further details on risks management are set out in the Statement of Internal Control on page 21 of this Annual Report.

• Succession Planning and Human Resources Management: The nomination committee comprises three non-executive Directors of whom two are independent. It is lead by Dr Chou Chii Ming. The Nomination Committee is responsible, among others, for recommending new director nominees to the Board and Board Committees and for assessing the performance of the directors on an on-going basis. The Nomination Committee reviews the required skills and core competencies of Non-executive Directors annually. Any new nominations received will be reviewed and put to the Board, which makes all decisions on such appointments.

The Remuneration Committee comprises three directors of whom two are Non-executive Directors. It is lead by Dato’ Haji Idris Bin Buang. The Remuneration Committee reviews the remuneration of the Directors and advises the Board accordingly. The determination of the remuneration packages of directors is approved by the full Board and individual Directors are required to abstain from deliberating and voting on their own remuneration. The fees for Non-executive Directors are recommended by the Board and approved by the shareholders of the Company at its AGM.

The Managing Director together with the Executive Directors ensures management of the highest standard in appointing, training, assessing and providing for succession. The Group maintains a strong organization structure with a dynamic senior management team. The Group values its employees and strives to foster a caring atmosphere that nurtures career development and balances high expectations for productivity with respect and understanding for each individual.

• Shareholder/Investor Relations and Corporate Communication: The Board places great importance in ensuring the highest standards of transparency and accountability in the disclosure of information to shareholders, potential investors and the public. The Board endeavours to provide shareholders and the public with a balanced assessment of the Group’s performance, position and prospects on a quarterly basis via the quarterly reports and press releases and to provide timely and adequate disclosure of information on matters of material impact to the public. The Board values the opportunity to provide an annual report to shareholders and to meet them annually.

The senior management of the Company frequently meets with investors, analysts and institutional shareholders to discuss the Group’s strategies, performance, general market conditions relevant to the business of the Group and new developments as well as explaining the Group’s business and financial objectives. The Group also participated in road shows and investor conferences during the year.

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The Board recognizes that the AGM provides an important opportunity to meet shareholders and it welcomes shareholders to ask questions and share a dialogue on the performance of the Group. In 2011, all Directors attended the AGM and the external auditors were invited to present their audit report.

The Group has a web-site where shareholders and the general public can access the latest corporate information of the Group including annual reports, quarterly reports and other corporate announcements made to Bursa Malaysia.

BoardBalance:The Board currently has ten members, five Executive Directors and five Non-executive Directors of whom three ie. one-third, are Independent Directors. The profile of each Director is presented on pages 12 to 13.

The Chairman, Dato’ Haji Idris Bin Buang who leads the Board, is responsible for the efficient functioning of the Board. The Managing Director, Dato Yu Chee Hoe, holds the executive responsibilities for the Group’s business and manages the Group in accordance with the strategies and policies approved by the Board. The separation of the role of the Chairman and the Managing Director ensures a balance of power and authority.

Dato Yu Chee Hoe, who has extensive experience in the construction industry and renowned business acumen, leads the Executive Directors in taking on the primary responsibility to manage the Group’s business and resources, making and implementing operational business decisions. The Executive Directors are experienced and hands-on and have intimate knowledge of the business of the Group.

The Non-executive Directors have taken on various roles in the Board Committees and contribute significantly, especially in the enhancement of the corporate governance and controls of the Group. They are individuals of high calibre, sound reputation and standing and bring independent judgment to the Board’s decision making. As well as being well qualified in their respective fields, they bring extensive corporate and professional work experience to the Board. Together with the hands-on, in-depth industry knowledge and vast experience of the executive directors, there is a valuable collaboration of expertise and experience, ie business, technical, legal and financial. This range of inputs and views enables the Board to deliberate on issues from varied perspectives and so helps to ensure carefully considered, prudent decision-making at the helm of the Group. There are three Independent Directors and then there are representatives of the significant shareholder, Hock Seng Lee Enterprise Sdn Bhd, while Dato’ Mohd. Nadzir Mahmud represents another substantial shareholder. The Board has identified Dr Chou Chii Ming as the Senior Independent Non-executive Director to whom any concerns relating to the Group may be conveyed.

The Nomination Committee reviews the performance of the directors annually and is of the view that the present board is effective and balanced with sufficient members and the right mix of skills and experience appropriate for informed and efficient decision making.

Meetings: The attendance details of the directors at Board and Board Committee meetings are as follows:

Board of Management Audit Remuneration Nomination Directors committee committee committee committee

No.ofmeetingsheld 4 6 4 1 1

Attendance at Board and Board Committee Meetings

ExecutiveDirectorsDato Yu Chee Hoe 4/4 6/6* n/a 1/1 n/aYu Chee Lieng 4/4 6/6 n/a n/a n/aDatuk Yii Chi Hau 4/4 5/6 n/a n/a n/aLau Kiing Kang 4/4 6/6 n/a n/a n/aYii Chee Sing 4/4 4/6 n/a n/a n/a

Non-executiveDirectorsDato’ Mohd. Nadzir Bin Mahmud 2/4 n/a n/a -/1 n/aLau Kiing Yiing 4/4 n/a 3/4 n/a 1/1

IndependentDirectorsDato’ Haji Idris Bin Buang 4/4* n/a 4/4* 1/1* n/aDr Chou Chii Ming 4/4 n/a 4/4 n/a 1/1*Tuan Hj Abg Kashim Bin Abg Morshidi 3/4 n/a 4/4 n/a 1/1

* chairman of the respective Board and Board committees

SupplyofInformation: The Directors have access to all information within the Group, whether in the capacity of a full Board, Board Committee or in their individual capacity, to enable them to discharge their duties. All directors are provided with timely notices with agenda and appropriate information prior to each meeting. This includes appropriate Board papers that identify and fairly address the affairs of the Group and the key issues of the respective meeting. Minutes on deliberations and conclusions on issues brought up are taken for all meetings of the Board and its committees and they are circulated to all directors.

The Board and its Board Committees have access to the senior management and to the Company Secretaries who attend all Board and Board Committee meetings. The company secretaries ensure that all Board procedures, applicable rules and regulations are complied with. When necessary, the Board obtains independent professional advice to discharge its duties effectively.

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TrainingandDevelopment: All Directors have completed the mandatory accreditation programme and they are encouraged to keep abreast of trends through general economic, regulatory, industry and technical development seminars.

During the year, the Directors have attended various training programmes to enhance their knowledge and expertise and they are briefed by the management on their respective areas and updates on new regulations, changes in laws and accounting standards. Conferences, seminars and training programmes attended by the Directors are as follows:

Directors Conferences/Seminars/Training Programmes attendedDato’ Haji Idris Bin Buang - Ernst & Young Economic Transformation Programme (‘ETP’) Forum – “Bringing Your Ideas to Fruition : Decoding the DNA of the “ETP”Dato Yu Chee Hoe - Listing Opportunity by Malayisian Companies in Singapore Stock MarketYu Chee Lieng - 2012 National Tax Budget ForumDatuk Yii Chi Hau - 2012 National Tax Budget ForumLau Kiing Kang - JKR tender evaluation and common mistakes in tendering process - New Frontiers and Innovations in Quarrying - Working Visit and Case Study: Hong Kong’s Integrated Approach to Modern Day Quarrying Delivering community needs and DreamsYii Chee Sing - Programme Suruhanjaya Syarikat Malaysia Annual Dialogue (Sarawak) 2011Lau Kiing Yiing - MIA course - “A to Z - Effects of Foreign Exchange” - CTIM and LHDN conference - “National Tax Conference 2011” - LHDN Seminar – “National Tax Seminar 2011”Dr Chou Chii Ming - Listing Opportunity by Malaysian Companies in Singapore Stock Market - 2012 National Tax Budget ForumDato’ Mohd. Nadzir Bin - Dato’ Nadzir had attended many conferences approved by Bursa Malaysia prior to 2011. Dato’ Mahmud Nadzir had not attended any structured training in 2011 but Dato’ has kept himself updated in new developments in financial and legal issues through reading and researchTuan Hj Abang Kashim - No seminars attended in 2011 but Tuan Haji has kept himself updated in new developments inBin Abang Morshidi corporate issues through reading and research

Re-electionandReappointmentofDirectors: A director (including the Managing Director) appointed by the Board must submit himself or herself for re-election at the next AGM following his or her appointment and at least every three years thereafter in accordance with the Company’s Articles of Association. At least one-third of the Directors are required to retire by rotation each year. Any director over seventy (70) years of age is required to submit himself for re-appointment annually in accordance with section 129 of the Company Act, 1965,

At the forthcoming AGM, three directors, namely Dato Yu Chee Hoe, Datuk Yii Chi Hau and Dato’ Haji Idris Bin Buang will retire by rotation and are seeking re-election. Dr Chou Chii Ming and Dato’ Mohd. Nadzir Bin Mahmud will retire pursuant to section 129 of the Companies Act 1965 and are seeking re-appointment to the Board.

DiREctoRs’ REMUnERation

TheLevelandMakeupofRemuneration:The remuneration package of each individual Executive Director is structured to reflect his or her experience, performance and scope of responsibilities. The bonuses for Executive Directors are linked to their performances, achievements on group financial targets and the net earnings growth of the Group. The Executive Directors are not paid any directors’ fees.

At the last AGM, the shareholders approved the payment of Directors’ fees of up to RM175,000.00 for the year 2011 and the fees were distributed to Non-executive Directors.

Disclosure: The details of remuneration of the Directors for the financial year ended 31 December 2011 are as follows:-

Fees Salaries Bonuses Others TotalRemuneration RM’000 RM’000 RM’000 RM’000 RM’000 executive Directors - 2,502 1,251 802 4,555 Non-executive Directors 175 - - - 175 Total 175 2,502 1,251 802 4,730

The number of Directors whose total annual remuneration falls within the following bands is as follows:-

executive Directors non-executive Directors Below RM50,000 - 4 rM50,001 to rM100,000 - 1 rM550,001 to rM600,000 2 - rM850,001 to rM900,000 1 - rM1,000,001 to rM1,050,000 1 - rM1,450,001 to rM1,500,000 1 -

The Board has considered the disclosure of the details of the remuneration of each Director and is of the view that the transparency and accountability aspects of corporate governance in relation to Directors’ remuneration are appropriately served by the above disclosure of analysis by applicable bands of RM50,000, a disclosure required under the Main Market Listing Requirements of Bursa Malaysia Securities Berhad.

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accoUntaBilitY anD aUDit

FinancialReporting: In presenting the annual audited financial statements and the quarterly reports to shareholders, the Board aims to present a balanced and understandable assessment of the Group’s financial position and prospects and ensures that the financial results are released to Bursa Malaysia Securities Berhad within the required timeframe.

StatementonDirectors’Responsibility forPreparing theAnnualAuditedFinancial Statement:The directors are responsible for ensuring that the financial statements give a true and fair view of the state of affairs of the Company and of the Group as at the end of the accounting period and of the results of their operations and of their cash flows for the year ending on that date.

The Directors are responsible for taking reasonable steps to ensure the maintenance of proper accounting and other records and internal controls, the application of appropriate accounting policies and the safeguarding of the assets of the group. The Directors are of the opinion that in preparing the financial statements for the year ended 31 December 2011, the Company has adopted appropriate accounting policies in accordance with the applicable financial reporting standard in Malaysia and the provision of the Companies Act 1965 and that these are applied consistently and are supported by reasonable and prudent judgments and estimates.

AuditCommittee:The Audit Committee assists the Board in the effective discharge of its responsibilities relating to financial reporting, corporate governance and corporate control. The composition of the Audit Committee meets the Main Market Listing Requirements whereby all members of the Audit Committee are Non-Executive Directors, the majority of whom are Independent Directors and one member is a qualified accountant. The report of the Audit Committee is set out on pages 19 to 20.

ExternalAuditors: The Audit Committee recommends to the Board the appointment of the external auditors and their remuneration. The Board has maintained a transparent, objective and professional relationship with the external auditors.

The Audit Committee reviews with the external auditors, their audit plan and the results of the audit including any recommendations arising. The report of the external auditors to members is set out on page 63.

This statement is made in accordance with a resolution of the Board of Directors on 28 February 2012.

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aUDit coMMittEE REPoRt

The Audit Committee carried out its duties and responsibilities in accordance with its terms of reference during the year with the main objective of assisting the Board of Directors in the effective discharge of its responsibilities relating to financial reporting, corporate governance and corporate control.

coMPosition The Audit Committee shall comprise no fewer than three Non-executive Directors, the majority of whom must be Independent Directors with at least one member who is a member of the Malaysian Institute of Accountants or a member who fulfils the requirements of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. All four members of the Audit Committee are Non-executive Directors, of whom three are Independent Non-executive Directors. Mr Lau Kiing Yiing is a member of the Malaysian Institute of Accountants. The chairman of the Audit Committee, Dato’ Haji Idris Bin Buang is an independent director elected by the members of the Audit Committee. The members of the Audit Committee and the chairman of the Audit Committee are re-appointed annually by the Board of Directors and the members of the Audit Committee respectively. The present members of the Audit Committee are:-

Chairman Dato’ Haji Idris Bin Buang Independent, Non-executive Director Member Mr Lau Kiing Yiing (MIA 3709) Non-executive Director Member Dr Chou Chii Ming Independent, Non-executive Director Member Tuan Hj Abang Kashim Bin Abang Morshidi Independent, Non-executive Director

aUtHoRitYThe Audit Committee shall, wherever necessary and reasonable for the performance of its duties and in accordance with a procedure to be determined by the Board of Directors:-i have authority to investigate any matter within its terms of reference;ii have the resources which are required to perform its duties;iii have full and unrestricted access to any information pertaining to the company and the group;iv have direct communication channels with both the internal and external auditors;v be able to obtain independent professional or other advice; andvi be able to convene meetings with the external auditors, internal auditors or both, excluding the attendance of other directors

and employees of the Company, whenever deemed necessary.

DUtiEs anD REsPonsiBilitiEsThe duties and responsibilities of the Audit Committee shall be:

Financial Reportingi To review the quarterly results and the annual audited financial statements, prior to the approval by the Board of Directors,

focusing particularly on:- • any changes in or implementation of major accounting policies and practices; • significant adjustments arising from the audit; • significant and unusual events; • the going concern assumption; and • compliance with accounting standards and other legal requirements.

Internal Control and Risk Managementii To review the adequacy and effectiveness of risk management and internal control systems of the Group;

Internal and External Auditiii To review the adequacy of the scope, functions, competency and resources of the internal audit function and ensure it has the

necessary authority to carry out its work;iv To review the effectiveness and quality of the control environment, the management information and the internal control systems

of the company and the group including the scope of the internal audit plan, processes and performance, the results of the internal audit, processes or investigations undertaken and whether or not appropriate action is taken on the recommendations of the internal audit;

v To review any appraisal or assessment of the performance of members of the internal audit function and the appointment or termination of senior staff member;

vi To review with the external auditor, their audit plan including the nature and scope of audit, their evaluation of the system of internal controls including their audit findings / external auditor’s management letters and actions taken by management to rectify any matter noted and the audit reports;

vii To ensure that the assistance and cooperation given by the employees of the Company and the Group to the internal and external auditors is at a level which enables them to complete their work economically, efficiently and effectively;

viii To recommend to the Board of Directors the appointment and remuneration of the external auditors and any questions of resignation or dismissal of the external auditors;

Related Party Transactionsix To review any related party transactions that may arise within the Company and the Group;

Other Functionsx To perform any other functions as may be agreed by the Board of Directors.

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MEEtings anD REPoRtingThe Audit Committee met four times during the year 2011. The attendance details of the members at these meetings are as follows:-

no. of meetings attended Chairman Dato’ Haji Idris Bin Buang 4/4 Member Mr Lau Kiing Yiing (MIA 3709) 3/4 Member Dr Chou Chii Ming 4/4 Member Tuan Hj Abang Kashim Bin Abang Morshidi 4/4

The internal audit reports together with the findings and recommendations were presented and discussed at all four of the meetings. Other directors and relevant members of senior management were invited to attend the Audit Committee meetings, where appropriate, to discuss the financial performance, the audit findings and other financial reporting issues. The Audit Committee also met with the external auditors twice in 2011 without the presence of any executive board members and management to discuss the state of affairs of the system of internal controls and control environment of the Group and to make enquiries in relation to management’s cooperation in the audit process and financial reporting.

The quorum for each meeting is two members and the majority of the members present must be Independent Directors and the Company Secretaries act as the secretaries of the Audit Committee. Minutes of all Audit Committee meetings were circulated to all members of the Board of Directors and the chairman of the Audit Committee reports on key issues deliberated and decided at each meeting to the Board of Directors.

tRainingDuring the year, the chairman and members of the Audit Committee have attended the following conferences and seminars:-

Members Conferences/Seminars attended Dato’ Haji Idris Bin Buang - Ernst & Young Economic Transformation Programme (‘ETP’) Forum – “Bringing Your Ideas to Fruition : Decoding the DNA of the ETP Lau Kiing Yiing - MIA course - “A to Z - Effects of Foreign Exchange” - CTIM and LHDN conference - “National Tax Conference 2011” - LHDN Seminar – “National Tax Seminar 2011” Dr Chou Chii Ming - Listing Opportunity by Malayisian Companies in Singapore Stock Market - 2012 National Tax Budget Forum Tuan Hj Abang Kashim - No seminars attended in 2011 but Tuan Haji has kept himself updated in new Bin Abang Morshidi developments in corporate issues through reading and research

sUMMaRY oF actiVitiEs During the year, the main activities undertaken by the Audit Committee were as follows:- i review the Quarterly Reports and year end Financial Statements to ensure compliance with generally accepted accounting

principles and Financial Reporting Standards, before recommending the same for Board’s approval;ii review the effectiveness of the internal audit process and the internal audit reports incorporating the risk assessment, internal

controls review and audit procedures, findings, internal audit recommendation and the response from the management;iii meeting with the external auditors to review the audit plan well as their audit findings and audit report and to discuss the state

of affairs of the system of internal controls and control environment of the group;iv review the recurrent related party transactions of a revenue or trading nature which are necessary for the day to day operations

of the Group on a quarterly basis to ensure that all transactions are covered under the shareholders’ mandate and are on normal commercial terms that are not more favourable to the related parties than those generally available to the public;

v review the Circular to Shareholders in relation to the Shareholders’ Mandate for recurring related party transactions before recommending it for Board of Directors’ approval; and

vi review the share buy-back activities of the Company and report the same to the Board of directors.

The Audit Committee has recommended the re-appointment of KPMG as the external auditors for the ensuing year.

intERnal aUDit FUnctionThe Audit Committee obtains adequate assurance that the system of internal controls and risk management practices are appropriate to the Group’s operation, through the review and audit conducted by the Internal Audit. The Internal Audit function of the Group is performed in house and the total cost incurred in relation to the Internal Audit function for year 2011 amounted to approximately rM120,000.

The Internal Audit adopts a risk base approach when establishing its audit plan and strategy. It provides the Audit Committee with independent and objective reports on the state of internal controls and risk management, the extent of compliance with policies and procedures and its recommendation thereof. During the year, the internal audit continued with the ongoing review on the system of internal control and risk management to constantly strengthen the state of internal control of the Group. The major assignments carried out during the year included the audit on treasury management, insurance management, sub-contractors management and the Group’s risk management. In undertaking each audit assignment, the internal auditor reviewed the risk management procedures with emphasis on major risk areas, performed relevant compliance and substantive audit procedures and reported his findings, recommendations and the response from the management to the Audit Committee. The internal auditor has, where necessary followed up on the implementation and satisfactory dispositions of all audit findings and recommendations on all previous audits.

21

statEMEnt on intERnal contRol

REsPonsiBilitYThe Board of Directors of Hock Seng Lee Berhad recognises the importance of sound internal controls and risk management practices to good corporate governance. The Board affirms its overall responsibility to maintain a sound system of internal controls and risk management including the review for adequacy and integrity of these systems so as to safeguard shareholders’ investment. In considering the system, the Board noted that such system of internal controls is designed to manage rather than eliminate the risk of failure to achieve business objectives. Accordingly, the internal control systems can only provide reasonable but not absolute assurance against material misstatement or loss.

RisK ManagEMEnt The Risk Management Framework of the Group, which is embedded in the Company’s management systems, provides a structured approach in identifying, assessing and managing the key risks faced by the Group. During the year, the Group has reviewed and updated the risk assessment on the Group’s operations. This involved reviewing and updating the key risk exposures of the Group and re-assessing the risks identified, the strength of internal controls and/or action plans that mitigate and manage the primary risks and the residual risks. This interactive process enables continual improvement in decision making, minimises losses and maximises opportunities. The risk assessment is subjected to periodic review and updates.

KEY PRocEssEs oF intERnal contRols The key processes of internal controls of the Group can be summarised as follows:-

Strategic Business Planning and Budgeting Process: The Board approves the Group’s Annual Business Plan which includes an assessment of the overall business environment affecting the Group’s operations, major risks and opportunities as well as financial estimates for the year, against which the Group’s performance is monitored on an ongoing basis.

Financial Reporting: The Audit Committee reviews and approves the Quarterly reports and annual financial statements before recommending to the Board for approval. Performance evaluation, including the comparison of actual results against estimates is presented to the Board. The Board approves the quarterly reports and the annual financial statements before announcement to Bursa Malaysia Securities Berhad.

AuthorisationProcedures: The Group has established an organisational structure with defined lines of accountability and delegated authority. All transactions are approved in accordance with delegated authorities in the Chart of Financial Authority Limit approved by the Board.

OperationalRisks: The risks inherent in the construction activities are mainly related to: market conditions; escalating/volatile material costs; tendering; execution of construction work and completion of projects within the contract period. The objective of the Group is to identify, evaluate, control and minimise the risks. The executive directors and senior professional staff apply their experience and knowledge to all aspects of contract tendering, proposals, contracting and project execution. Construction schedules, costs of projects and quality of works are controlled through monthly progress reports to the senior management. Selective and careful project procurement ensures that the relevant know-how including any specialized plant and machinery and suitably trained personnel are available within the Group for the procurement and the eventual performance of the projects. The Executive Directors visit the sites of on-going projects regularly. Where necessary, professional consultants may be engaged to advise on specialised fields. For property development, project feasibility studies are carried out before the Group embarks on any project.

Internal Review andAudit: The Group monitors compliance with its internal controls through internal checking and approval procedures and management review. The system of internal controls is continually reviewed and updated to reflect changing risks or changes in the operating environment. Apart from internal review on the Group’s policies and procedures, the internal auditor conducts periodic internal audits to monitor and ensure compliance with procedures and evaluates the effectiveness of the system of internal controls within the Group. The results of such reviews are reported to the Audit Committee on a quarterly basis, which provides reasonable independent assurance on the effectiveness of the Group’s system of internal controls. The Audit Committee considers the reports from the internal audit and management and presents their conclusions to the Board. There were no major internal control weaknesses that required disclosure in the Annual Report and corrective actions have been taken on control exceptions noted.

BoaRD’s conclUsionThe Board of Directors is of the view that the system of internal controls and risk management practices are effective to ensure that the level of risk to which the Group is exposed to has been managed appropriately. The Board will continue the on-going process of identifying, evaluating and managing the significant risks faced by the Group.

This statement is made in accordance with a resolution of the Board of Directors dated 28 February 2012.

22



Financial statEMEnts

Directors’report for the year ended 31 December 2011

The Directors have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the year ended 31 December 2011.

PrincipalactivitiesThe Company is principally engaged in marine engineering and civil engineering as well as a construction contractor whilst the principal activities of the subsidiaries are as stated in Note 4 to the financial statements. There has been no significant change in the nature of these activities during the financial year.

Results Group Company RM RMProfit for the year attributable to: - Owners of the Company 87,265,026 80,952,950 - non-controlling interests 3,554 - __________ __________ 87,268,580 80,952,950 ========= ========= Reservesandprovisions There were no material transfers to or from reserves and provisions during the year under review.

Dividends Since the end of the previous financial year, the Company paid:

(a) a final dividend of 6.00% per ordinary share of RM0.20 each less tax at 25% totalling RM4,971,764 (equivalent to 4.50% net per share) in respect of the year ended 31 December 2010 on 16 June 2011;

(b) a special dividend of 3.00% per ordinary share of RM0.20 each less tax at 25% totalling RM2,485,882 (equivalent to 2.25% net per share) in respect of the year ended 31 December 2010 on 16 June 2011; and

(c) an interim dividend of 6.00% per ordinary share of RM0.20 each less tax at 25% totalling RM4,954,512 (equivalent to 4.50% net per share) in respect of the year ended 31 December 2011 on 7 October 2011.

The Directors are proposing the following dividends in respect of the year ended 31 December 2011, to be paid once approved by shareholders at the forthcoming annual general meeting:

(a) a final dividend of 9.00% per ordinary share of RM0.20 each less tax at 25% totalling RM7,396,852 (equivalent to 6.75% net per share); and

(b) a special dividend of 3.00% per ordinary share of RM0.20 each less tax at 25% totalling RM2,465,617 (equivalent to 2.25% net per share).

DirectorsoftheCompanyDirectors who served since the date of the last report are:

Dato’ Haji Idris Bin Haji BuangDato Yu chee HoeDatuk Yii Chi HauYu chee LiengLau kiing kangYii chee SingLau kiing YiingDato’ Mohd Nadzir Bin MahmudDr. Chew Kheng Min @ Chou Chii MingTuan Haji Abang Kashim Bin Abang Morshidi

23 23 23 23

Directors’ interests in sharesThe interests of the Directors (including the interests of the spouses or children of the Directors who themselves are not Directors of the Company), in the shares of the Company and of its related corporations as recorded in the Register of Directors’ Shareholdings are as follows:

Number of ordinary shares of RM1.00 each At At 1.1.2011 Bought Sold 31.12.2011Interest in the holding company, Hock Seng Lee Enterprise Sendirian Berhad

Direct interest Datuk Yii Chi Hau 2,774,117 - - 2,774,117 Yu Chee Lieng 2,774,117 - - 2,774,117 Dato Yu Chee Hoe 2,774,117 - - 2,774,117 Yii Chee Sing 2,774,117 - - 2,774,117

Interest in Bright Trenchless Engineering Sdn. Bhd.

Deemed interest Datuk Yii Chi Hau 800,000 - - 800,000 Yu Chee Lieng 800,000 - - 800,000 Dato Yu Chee Hoe 800,000 - - 800,000 Yii Chee Sing 800,000 - - 800,000

Number of ordinary shares of RM0.20 each At At 1.1.2011 Bought Sold 31.12.2011Interest in the Company

Datuk Yii Chi Hau: Direct interest ^ 8,959,680 - - 8,959,680 Deemed interest 314,967,850 - - 314,967,850

Yu Chee Lieng: Direct interest 6,210,984 - - 6,210,984 Deemed interest 314,967,850 - - 314,967,850

Dato Yu Chee Hoe: Direct interest 4,624,272 - - 4,624,272 Deemed interest 314,967,850 - - 314,967,850

Yii Chee Sing: Direct interest * 3,475,140 - - 3,475,140 Deemed interest 314,967,850 - - 314,967,850

Lau Kiing Kang: Direct interest # 1,198,500 - - 1,198,500 Deemed interest 391,680 - - 391,680

Lau Kiing Yiing: Direct interest 281,520 - - 281,520 Deemed interest 408,000 - - 408,000

Dr. Chew Kheng Min @ Chou Chii Ming: Direct interest 122,400 - - 122,400

^ 8,959,680 shares held through RHB Capital Nominees (Tempatan) Sdn. Bhd.* 3,198,720 shares held through Kenanga Nominees (Tempatan) Sdn. Bhd.# 1,174,020 shares held through TA Nominees (Tempatan) Sdn. Bhd.

Save as disclosed, none of the other Directors holding office at 31 December 2011 had any interest in the shares of the Company and of its related corporations during the financial year.

24 24 24 24

Directors’ benefitsSince the end of the previous financial year, no Director of the Company has received nor become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by 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 the Director is a member, or with a company in which the Director has a substantial financial interest, other than certain Directors who have significant financial interests in certain companies which traded with the Group in the ordinary course of business (see also Note 26 to the financial statements).

There were no arrangements during and at the end of the financial year which had the object of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

Issue of shares and debenturesThere were neither changes in the authorised, issued and paid-up capitals of the Company, nor issuances of debentures by the Company, during the year.

Options granted over unissued shares No options were granted to any person to take up unissued shares of the Company during the year.

Other statutory informationBefore the statements of financial position and statements of comprehensive income of the Group and of the Company were made out, the Directors took reasonable steps to ascertain that:

i) there are no bad debts to be written off and no provision need be made for doubtful debts, and

ii) any current assets which were unlikely to be realised in the ordinary course of business have been written down to an amount which they might be expected so to realise.

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

i) that would render it necessary to write off any bad debts or provide for any doubtful debts, or

ii) that would render the value attributed to the current assets in the financial statements of the Group and of the Company misleading, or

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

iv) not otherwise dealt with in this report or the financial statements, that would render any amount stated in the financial statements of the Group and of the Company misleading.

At the date of this report, there does not exist: i) any charge on the assets of the Group or of the Company that has arisen since the end of the financial year and which secures

the liabilities of any other person, or

ii) any contingent liability in respect of the Group or of the Company that has arisen since the end of the financial year.

No contingent liability or other liability of any company in the Group has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due.

In the opinion of the Directors, the financial performance of the Group and of the Company for the financial year ended 31 December 2011 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has any such item, transaction or event occurred in the interval between the end of that financial year and the date of this report.

AuditorsThe auditors, Messrs KPMG, have indicated their willingness to accept re-appointment.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:

……………………………. …………………………….Dato Yu Chee Hoe Lau Kiing Kang

Kuching,

Date: 26 March 2012

25 25 25 25

Statements of financial position as at 31 December 2011

Group Company 2011 2010 2011 2010 Note RM RM RM RM Assets

Property, plant and equipment 3 112,647,432 96,174,997 103,535,382 95,977,602Investment in subsidiaries 4 - - 71,299,999 71,299,999Land held for property development 5 94,013,896 87,344,355 23,127,744 23,080,347 ------------------------ ------------------------ ------------------------ ------------------------Total non-current assets 206,661,328 183,519,352 197,963,125 190,357,948 ------------------------ ------------------------ ------------------------ ------------------------

Property development costs 6 27,844,646 27,013,290 - -Inventories 7 23,245,894 13,076,727 21,570,636 11,367,143Trade and other receivables 8 221,839,296 244,265,905 217,663,782 235,336,872Deposits and prepayments 9 19,830,066 24,442,402 19,444,698 14,987,136Cash and cash equivalents 10 183,720,593 89,702,417 162,875,694 72,345,282 ------------------------ ------------------------ ------------------------ ------------------------Total current assets 476,480,495 398,500,741 421,554,810 334,036,433 ------------------------ ------------------------ ------------------------ ------------------------

Total assets 683,141,823 582,020,093 619,517,935 524,394,381 ============ ============ ============ ============

EquityShare capital 11 116,535,200 116,535,200 116,535,200 116,535,200Capital redemption reserve 11 2,165,500 2,165,500 2,165,500 2,165,500Treasury shares 11 ( 31,671,844) ( 21,028,753) ( 31,671,844) ( 21,028,753)Retained earnings 11 322,221,332 247,368,464 263,445,406 194,904,614 ------------------------ ------------------------ ------------------------ ------------------------Total equity attributable to owners of the Company 409,250,188 345,040,411 350,474,262 292,576,561Non-controlling interests 2(a)(v) 206,147 202,593 - - ------------------------ ------------------------ ------------------------ ------------------------Total equity 409,456,335 345,243,004 350,474,262 292,576,561 ============ ============ ============ ============

Non-current liabilities

Deferred tax liabilities 12 15,930,100 14,067,000 15,985,000 14,132,000 ------------------------ ------------------------ ------------------------ ------------------------

Trade and other payables 13 249,712,324 217,297,373 245,431,173 212,821,320Current tax liabilities 8,043,064 5,412,716 7,627,500 4,864,500 ------------------------ ------------------------ ------------------------ ------------------------Total current liabilities 257,755,388 222,710,089 253,058,673 217,685,820 ------------------------ ------------------------ ------------------------ ------------------------

Total liabilities 273,685,488 236,777,089 269,043,673 231,817,820 ============ ============ ============ ============

Total equity and liabilities 683,141,823 582,020,093 619,517,935 524,394,381 ============ ============ ============ ============

The notes on pages 30 to 60 are an integral part of these financial statements.

26 26 26 26

Statements of comprehensive income for the year ended 31 December 2011

Group Company 2011 2010 2011 2010 Note RM RM RM RM Revenue 14 581,515,074 488,275,503 559,499,746 457,712,884

Cost of sales 14 (455,388,307) (379,448,915) (442,124,294) (359,301,798) ------------------------ ------------------------ ------------------------ ------------------------Gross profit 126,126,767 108,826,588 117,375,452 98,411,086

Other income 1,114,809 1,638,258 923,653 1,562,209Administrative expenses ( 14,548,110) ( 14,174,810) ( 13,491,432) ( 13,231,338) ------------------------ ------------------------ ------------------------ ------------------------Results from operating activities 112,693,466 96,290,036 104,807,673 86,741,957

Finance income 17 4,372,284 2,514,868 3,798,146 2,206,668Finance costs 17 ( 467,684) ( 385,786) ( 447,338) ( 345,273) ------------------------ ------------------------ ------------------------ ------------------------Profit before tax 15 116,598,066 98,419,118 108,158,481 88,603,352

Income tax expense 18 ( 29,329,486) ( 24,980,358) ( 27,205,531) ( 22,517,766) ------------------------ ------------------------ ------------------------ ------------------------Profit/Total comprehensive income for the year 87,268,580 73,438,760 80,952,950 66,085,586 ============ ============ ============ ============Profit/Total comprehensive income attributable to: - Owners of the Company 87,265,026 73,435,308 80,952,950 66,085,586 - Non-controlling interests 3,554 3,452 - - ------------------------ ------------------------ ------------------------ ------------------------Profit/Total comprehensive income for the year 87,268,580 73,438,760 80,952,950 66,085,586 ============ ============ ============ ============

Basic earnings per ordinary share (sen) 19 15.81 13.40 ============ ============


27 27 27 27

Statement of changes in equity for the year ended 31 December 2011

--------------------- Attributable to owners of the Company ------------------------ --- Non-distributable --- ------- Distributable ------- Capital Share redemption Treasury Retained Non-controlling Total capital reserve shares earnings Total interests equityGroup Note RM RM RM RM RM RM RM

At 1 January 2010- as previously stated 116,535,200 2,165,500 ( 20,705,974) 193,966,678 291,961,404 199,141 292,160,545- effect of adopting FRS 139 28 - - - ( 1,103,375) ( 1,103,375) - ( 1,103,375) ------------------------ ------------------------ ------------------------ ------------------------ ------------------------ ------------------------ ------------------------At 1 January 2010, restated 116,535,200 2,165,500 ( 20,705,974) 192,863,303 290,858,029 199,141 291,057,170

Profit / Total comprehensive income for the year - - - 73,435,308 73,435,308 3,452 73,438,760

Own shares acquired 11 - - ( 8,570,538) - ( 8,570,538) - ( 8,570,538)Distribution of treasury shares as share dividends 11 - - 8,247,759 ( 8,247,759) - - -Dividends to owners of the Company 20 - - - ( 10,682,388) ( 10,682,388) - ( 10,682,388)

Total distribution to owners - - ( 322,779) ( 18,930,147) ( 19,252,926) - ( 19,252,926) ------------------------ ------------------------ ------------------------ ------------------------ ------------------------ ------------------------ ------------------------At 31 December 2010/1 January 2011 116,535,200 2,165,500 ( 21,028,753) 247,368,464 345,040,411 202,593 345,243,004

Profit / Total comprehensive income for the year - - - 87,265,026 87,265,026 3,554 87,268,580

Own shares acquired 11 - - ( 10,643,091) - ( 10,643,091) - ( 10,643,091)Dividends to owners of the Company 20 - - - ( 12,412,158) ( 12,412,158) - ( 12,412,158)

Total distribution to owners - - ( 10,643,091) ( 12,412,158) ( 23,055,249) - ( 23,055,249) ------------------------ ------------------------ ------------------------ ------------------------ ------------------------ ------------------------ ------------------------At 31 December 2011 116,535,200 2,165,500 ( 31,671,844) 322,221,332 409,250,188 206,147 409,456,335 ============ ============ ============ ============ ============ ============ ============ (Note 11) (Note 11) (Note 11)

--------------------------------------- Attributable to owners of the Company -------------------------------- --- Non-distributable --- --------- Distributable --------- Capital Share redemption Treasury Retained Total capital reserve shares earnings equityCompany Note RM RM RM RM RM

At 1 January 2010 - as previously stated 116,535,200 2,165,500 ( 20,705,974) 148,803,214 246,797,940- effect of adopting FRS 139 28 - - - ( 1,054,039) ( 1,054,039) ----------------------- ------------------------ ------------------------ ------------------------ ------------------------At 1 January 2010, restated 116,535,200 2,165,500 ( 20,705,974) 147,749,175 245,743,901

Profit / Total comprehensive income for the year - - - 66,085,586 66,085,586

Own shares acquired 11 - - ( 8,570,538) - ( 8,570,538)Distribution of treasury shares as share dividends 11 - - 8,247,759 ( 8,247,759) -Dividends to owners of the Company 20 - - - ( 10,682,388) ( 10,682,388)

Total distribution to owners - - ( 322,779) ( 18,930,147) ( 19,252,926) ----------------------- ------------------------ ------------------------ ------------------------ ------------------------At 31 December 2010/1 January 2011 116,535,200 2,165,500 ( 21,028,753) 194,904,614 292,576,561

Profit / Total comprehensive income for the year - - - 80,952,950 80,952,950

Own shares acquired 11 - - ( 10,643,091) - ( 10,643,091)Dividends to owners of the Company 20 - - - ( 12,412,158) ( 12,412,158)

Total distribution to owners - - ( 10,643,091) ( 12,412,158) ( 23,055,249) ----------------------- ------------------------ ------------------------ ------------------------ ------------------------At 31 December 2011 116,535,200 2,165,500 ( 31,671,844) 263,445,406 350,474,262 ============ ============ ============ ============ ============ (Note 11) (Note 11) (Note 11) (Note 11)


28 28 28 28

Statements of cash flows for the year ended 31 December 2011

Group Company 2011 2010 2011 2010 Note RM RM RM RM Cash flows from operating activities

Profit before tax 116,598,066 98,419,118 108,158,481 88,603,352 Adjustments for: Depreciation of property,plant and equipment 3 8,257,547 7,647,514 8,205,413 7,599,586 Gain on disposal of property, plant and equipment 15 ( 387,665) ( 908,406) ( 384,798) ( 908,406) Property, plant and equipment written off 15 41,652 85,322 39,697 82,747 Finance income 17 ( 4,372,284) ( 2,514,868) ( 3,798,146) ( 2,206,668) Finance costs 17 467,684 385,786 447,338 345,273 Unrealised foreign exchange gain ( 505) ( 3,614) ( 505) ( 3,614) Derivative loss from foreign currency forward contract - 6,800 - 6,800 ------------------------ ------------------------ ------------------------ ------------------------ Operating profit before changes in working capital 120,604,495 103,117,652 112,667,480 93,519,070

Change in inventories ( 8,711,972) 3,924,701 ( 10,203,493) 3,126,983 Change in property development costs ( 2,320,310) 1,161,558 - - Change in trade and other receivables, deposits and prepayments 19,212,635 ( 81,022,035) 14,206,973 ( 79,980,682) Change in trade and other payables 32,171,591 46,996,099 32,355,079 46,913,224 ------------------------ ------------------------ ------------------------ ------------------------ Cash generated from operations 160,956,439 74,177,975 149,026,039 63,578,595

Income tax paid ( 24,836,038) ( 20,117,784) ( 22,589,531) ( 17,826,266) ------------------------ ------------------------ ------------------------ ------------------------ Net cash from operating activities 136,120,401 54,060,191 126,436,508 45,752,329 ------------------------ ------------------------ ------------------------ ------------------------ Cash flows from investing activities

Increase in investment in an existing subsidiary 27 - - - ( 8,500,000) Acquisition of property, plant and equipment [Note (i)] ( 17,360,163) ( 22,991,495) ( 17,186,592) ( 22,986,786) Proceeds from disposal of property, plant and equipment 1,608,441 1,712,050 1,576,441 1,712,050 Land held for property development ( 6,669,541) ( 1,714,827) ( 47,397) ( 16,174) Interest received 3,374,287 1,529,421 2,806,701 1,296,104 Discharge of a deposit pledged with a bank 450,000 - 450,000 - ------------------------ ------------------------ ------------------------ ------------------------ Net cash used in investing activities ( 18,596,976) ( 21,464,851) ( 12,400,847) ( 28,494,806) ------------------------ ------------------------ ------------------------ ------------------------

Cash flows from financing activities Dividends paid to owners of the Company 20 ( 12,412,158) ( 10,682,388) ( 12,412,158) ( 10,682,388) Repurchase of own shares 11 ( 10,643,091) ( 8,570,538) ( 10,643,091) ( 8,570,538) ------------------------ ------------------------ ------------------------ ------------------------ Net cash used in financing activities ( 23,055,249) ( 19,252,926) ( 23,055,249) ( 19,252,926) ------------------------ ------------------------ ------------------------ ------------------------

Net increase/(decrease) in cash and cash equivalents 94,468,176 13,342,414 90,980,412 ( 1,995,403) Cash and cash equivalents at 1 January 89,252,417 75,910,003 71,895,282 73,890,685 ------------------------ ------------------------ ------------------------ ------------------------ Cash and cash equivalents at 31 December [Note (ii)] 183,720,593 89,252,417 162,875,694 71,895,282 ============ ============ ============ ============

29 29 29 29

Statements of cash flows for the year ended 31 December 2011 (continued)

Notes

(i) Acquisition of property, plant and equipment

During the financial year, the Group and the Company acquired property, plant and equipment as follows:

Group Company 2011 2010 2011 2010 RM RM RM RM

Paid in cash 17,360,163 22,991,495 17,186,592 22,986,786 Payment in-kind received for a construction contract - 15,001,276 - 15,001,276 Deposit paid in prior year 8,824,306 - - - ------------------------ ------------------------ ------------------------ ------------------------ Total (see Note 3) 26,184,469 37,992,771 17,186,592 37,988,062 ============ ============ ============ ============

(ii) Cash and cash equivalents Cash and cash equivalents included in the statements of cash flows comprise the following amounts in statements of financial

position:


Deposits placed with licensed banks 172,534,287 85,065,551 154,576,698 68,755,551 Cash and bank balances 11,186,306 4,636,866 8,298,996 3,589,731

Total (see Note 10) 183,720,593 89,702,417 162,875,694 72,345,282 Less: Deposits pledged - ( 450,000) - ( 450,000) ------------------------ ------------------------ ------------------------ ------------------------ 183,720,593 89,252,417 162,875,694 71,895,282 ============ ============ ============ ============


30 30 30 30

Notes to the financial statements

Hock Seng Lee Berhad is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Main Market of Bursa Malaysia Securities Berhad. The address of its principal place of business and registered office is Lot 1004, Jalan Kwong Lee Bank, 93450 Kuching, Sarawak.

The consolidated financial statements of the Company as at and for the year ended 31 December 2011 comprise the Company and its subsidiaries (together referred to as the “Group” and individually referred to as “Group entities”).

The Company is principally engaged in marine engineering and civil engineering as well as a construction contractor whilst the principal activities of the subsidiaries are as stated in Note 4 to the financial statements.

The holding company during the financial year is Hock Seng Lee Enterprise Sendirian Berhad, a company incorporated in Malaysia.

These financial statements were authorised for issue by the Board of Directors on 28 February 2012.

1. Basis of preparation

(a) Statement of compliance The financial statements of the Group and of the Company have been prepared in accordance with Financial Reporting

Standards (FRSs), generally accepted accounting principles and the Companies Act, 1965 in Malaysia.

The Group and the Company have not applied the following accounting standards, amendments and interpretations that have been issued by the Malaysian Accounting Standards Board (MASB) but are only effective for annual periods beginning on or after the respective dates indicated herein:

FRS/Amendment/Interpretation Effective date

Amendments to IC Interpretation 14, Prepayments of a Minimum Funding Requirement 1 July 2011 IC Interpretation 19, Extinguishing Financial Liabilities with Equity Instruments 1 July 2011 FRS 124, Related Party Disclosures (revised) 1 January 2012 Amendments to FRS 1, First-time Adoption of Financial Reporting Standards – Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters 1 January 2012 Amendments to FRS 7, Financial Instruments: Disclosures - Transfers of Financial Assets 1 January 2012 Amendments to FRS 112, Income Taxes - Deferred Tax: Recovery of Underlying Assets 1 January 2012 Amendments to FRS 101, Presentation of Financial Statements - Presentation of Items of Other Comprehensive Income 1 July 2012 FRS 10, Consolidated Financial Statements 1 January 2013 FRS 11, Joint Arrangements 1 January 2013 FRS 12, Disclosure of Interests in Other Entities 1 January 2013 FRS 13, Fair Value Measurement 1 January 2013 FRS 119, Employee Benefits (2011) 1 January 2013 FRS 127, Separate Financial Statements (2011) 1 January 2013 FRS 128, Investments in Associates and Joint Ventures (2011) 1 January 2013 IC Interpretation 20, Stripping Costs in the Production Phase of a Surface Mine 1 January 2013 Amendments to FRS 7, Financial Instruments: Disclosures – Offering Financial Assets and Financial Liabilities 1 January 2013 Amendments to FRS 132, Financial Instruments: Presentation - Offsetting Financial Assets and Financial Liabilities 1 January 2014 FRS 9, Financial Instruments (2009) 1 January 2015 FRS 9, Financial Instruments (2010) 1 January 2015 Amendments to FRS 7, Financial Instruments: Disclosures – Mandatory Date of FRS 9 and Transition Disclosures 1 January 2015

The Group and Company plan to apply for the year beginning 1 January 2012 the standards, amendments and interpretations that are effective for annual periods beginning on or before 1 January 2012, except those assessed as being presently not applicable to them. The latter includes Amendments to IC Interpretation 14 and Amendments to FRS 1.

The initial application of a standard, an amendment or an interpretation, which is to be applied prospectively or which requires extended disclosures, is not expected to have any material financial impacts on the financial statements for the current and prior periods upon its first adoption.

IC Interpretation 19 provides guidance on accounting for debt-to-equity swap. Equity instruments issued to a creditor to extinguish all or a part of a financial liability would be “consideration paid” in accordance with paragraph 41 of FRS 139. The equity instruments would be measured initially at the fair value of those equity instruments unless that fair value cannot be reliably measured, in which case the equity instruments should be measured to reflect the fair value of the financial liability extinguished. Any difference between the carrying amount of the financial liability and the initial measurement of the equity instruments would be recognised as a gain or loss in profit or loss.

31 31 31 31

1. Basis of preparation (continued)

(a) Statement of compliance (continued) The revised FRS 124 simplifies the definition of related party, clarifies its intended meaning and eliminates inconsistencies

from the definition. The changes from current practice among others include a partial exemption from disclosures for government-related entities. It requires disclosure of related party transactions between government-related entities only if the transactions are individually or collectively significant.

Prior to the issuance of the revised FRS 124, no disclosure is required in the financial statements of state-controlled entities of transactions with other state-controlled entities. The partial exemption from disclosures for government-related activities as permitted in the revised FRS 124 is intended to put users on notice that such related party transactions have occurred and to give an indication of their extent.

MASB, in furtherance with its objective of converging the accounting framework for entities other than private entities in Malaysia with International Financial Reporting Standards, announced on 19 November 2011 the issuance of Malaysian Financial Reporting Standards (MFRSs). Entities other than private entities shall apply the MFRS framework for annual periods beginning on or after 1 January 2012, with the exception of entities subject to the application of MFRS 141, Agriculture and/or IC Interpretation 15, Agreements for the Construction of Real Estate.

An entity subject to the application of MFRS 141 and/or IC Interpretation 15, and the entity that consolidates or equity accounts or proportionately consolidates the first-mentioned entity, may continue to apply FRSs as their financial reporting framework for annual reporting periods beginning on or after 1 January 2012. These entities shall comply with the MFRS framework for annual periods beginning on or after 1 January 2013.

In view of the foregoing, the Group and the Company will be migrating to the MFRS framework from 1 January 2013 and will not be adopting the FRS standards, amendments and interpretations listed earlier that are effective for annual periods beginning on or after 1 July 2012.

(b) Basis of measurement The financial statements have been prepared on the historical cost basis, except as disclosed in Note 2.

(c) Functional and presentation currency These financial statements are presented in Ringgit Malaysia (RM), which is the Company’s functional currency.

(d) Use of estimates and judgements The preparation of the financial statements in conformity with FRSs requires management to make judgements, estimates

and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected thereby.

There are no significant areas of estimation uncertainty and critical judgements in applying accounting policies that have significant effect on the amounts recognised in the financial statements other than those disclosed in the following notes:

(i) Profitfromconstructioncontracts The Group/Company recognises contract revenue and contract costs in profit or loss using the stage of completion

method. The stage of completion is determined by reference to the proportion that contract costs incurred for contract work performed to-date bear to the estimated total contract costs.

Significant judgement is required in determining the stage of completion of construction activities, accrual of costs incurred for which claims/billings have yet to be received, estimated total contract revenue and contract costs as well as the recoverability of the carrying amount of the contract work-in-progress. The total contract revenue also includes an estimation of the variations that are recoverable from the contract customers.

The Group/Company relies when making the estimations and judgements on, inter alia, past experiences and the assessment of its experienced project managers and quantity surveyors.

(ii) Profitfrompropertydevelopment The Group recognises revenue and costs from property development in profit or loss based on the stage of completion

of properties sold, measured by reference to the proportion that property development costs incurred for work performed to-date bear to the estimated total property development costs.

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1. Basis of preparation (continued)

(d) Use of estimates and judgements (continued)

(ii) Profitfrompropertydevelopment(continued) Significant judgement is required in determining the stage of completion of the development activities, extent

of property development costs incurred, estimated total property development revenue and costs as well as the recoverability of the development projects. In making such estimations and judgements, the Group relies, as with the construction activities explained above on, inter alia, past experiences and the assessment of its experienced project managers and quantity surveyors.

2. Significant accounting policies

The following are the significant accounting policies of the Group, which have been consistently applied to the periods presented in these financial statements, unless otherwise disclosed.

(a) Basis of consolidation

(i) Subsidiaries Subsidiaries are entities, including unincorporated entities, controlled by the Group. Control exists when the Group

has the ability to exercise its power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account.

Investment in subsidiaries are measured in the Company’s statement of financial position at cost less any impairment losses, unless the investment is classified as held for sale. The cost of investments includes transaction costs.

The accounting policies of subsidiaries are changed when necessary to align them with the policies adopted by the Group.

(ii) Accounting for business combinations Business combinations are accounted for using the acquisition method from the acquisition date, which is the date on

which control is transferred to the Group.

The Group has changed its accounting policy with respect to accounting for business combinations.

From 1 January 2011, the Group has applied FRS 3, Business Combinations (revised) in accounting for business combinations. The change in accounting policy has been applied prospectively in accordance with the transitional provisions provided by the Standard and does not have an impact on earnings per share.

Acquisitions on or after 1 January 2011 For acquisitions on or after 1 January 2011, the Group measures goodwill at the acquisition date as:

• the fair value of the consideration transferred; plus • the recognised amount of any non-controlling interests in the acquiree; plus • if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less • the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.

Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss.

When share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree’s employees (acquiree’s awards) and relate to past services, then all or a portion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on the market-based value of the replacement awards compared with the market-based value of the acquiree’s awards and the extent to which the replacement awards relate to past and/or future service.

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2. Significant accounting policies (continued)

a) Basis of consolidation (continued)

(ii) Accounting for business combinations (continued)

Acquisitions between 1 January 2006 and 1 January 2011 For acquisitions between 1 January 2006 and 1 January 2011, goodwill represents the excess of the cost of the

acquisition over the Group’s interest in the recognised amount (generally fair value) of the identifiable assets, liabilities and contingent liabilities of the acquiree. When the excess was negative, a bargain purchase gain was recognised immediately in profit or loss.

Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurred in connection with business combinations were capitalised as part of the cost of the acquisition.

Acquisitions prior to 1 January 2006 For acquisitions prior to 1 January 2006, goodwill represents the excess of the cost of the acquisition over the Group’s

interest in the fair values of the net identifiable assets and liabilities.

(iii) Accounting for acquisitions of non-controlling interests The Group treats all changes in its ownership interest in a subsidiary that do not result in a loss of control as equity

transactions between the Group and its non-controlling interest holders. Any difference between the Group’s share of net assets before and after the change, and any consideration received or paid, is adjusted to or against Group reserves.

(iv) Loss of control The Group applied FRS 127, Consolidated and Separate Financial Statements (revised) since the beginning of the

reporting period in accordance with the transitional provisions provided by the Standard which do not have an impact on earnings per share. Upon the loss of control of a subsidiary, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained.

In the previous financial years, if the Group retained any interest in the previous subsidiary, such interest was measured at the carrying amount at the date that control was lost and this carrying amount would be regarded as cost on initial measurement of the investment.

(v) Non-controlling interests Non-controlling interests at the end of the reporting period, being the equity in a subsidiary not attributable directly or

indirectly to the equity holders of the Company, are presented in the consolidated statement of financial position and statement of changes in equity within equity, separately from equity attributable to the owners of the Company. Non-controlling interests in the results of the Group is presented in the consolidated statement of comprehensive income as an allocation of the profit or loss and the comprehensive income for the year between non-controlling interests and the owners of the Company.

Since the beginning of the reporting date, the Group has applied FRS 127, Consolidated and Separate Financial Statements (revised) where losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance. This change in accounting policy is applied prospectively in accordance with the transitional provisions of the standard and does not have an impact on earnings per share.

In the previous financial years, where losses applicable to the non-controlling interests exceeded their interests in the equity of a subsidiary, the excess, and any further losses applicable to the non-controlling interests, were charged against the Group’s interest except to the extent that the non-controlling interests had a binding obligation to, and was able to, make additional investment to cover the losses. If the subsidiary subsequently reported profits, the Group’s interest was allocated with all such profits until the non-controlling interests’ share of losses previously absorbed by the Group had been recovered.

(vi) Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions,

are eliminated in preparing the consolidated financial statements.

34 34 34 34


(b) Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates

at the transaction dates.

Monetary assets and liabilities denominated in foreign currencies at the reporting period are retranslated to the functional currency at the exchange rate at that date.

Non-monetary assets and liabilities denominated in foreign currencies are not retranslated at the end of the reporting date except for those measured at fair value which are retranslated to the functional currency at the exchange rate at the date that the fair value was determined.

Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments or a financial instrument designated as a hedge of currency risk, which are recognised in other comprehensive income.

(c) Financial instruments

(i) Initial recognition and measurement A financial asset or a financial liability is recognised in the statement of financial position when, and only when, the

Group or the Company becomes a party to the contractual provisions of the instrument.

A financial instrument is recognised initially at its 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 issue of the financial instrument.

An embedded derivative is recognised separately from the host contract and accounted for as a derivative if, and only if, it is not closely related to the economic characteristics and risks of the host contract and the host contract is not categorised at fair value through profit or loss. The host contract, in the event an embedded derivative is recognised separately, is accounted for in accordance with policy applicable to the nature of the host contract.

(ii) Financial instruments categories and subsequent measurement The Group and the Company categorise financial instruments as follows:

Financial assets

(a) Financialassetsatfairvaluethroughprofitorloss Fair value through profit or loss category comprises financial assets that are held for trading, including

derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument) or financial assets that are specifically designated into this category upon initial recognition.

Derivatives that are linked to and must be settled by delivery of unquoted equity instruments whose fair values cannot be reliably measured are measured at cost.

Other financial assets categorised as fair value through profit or loss are subsequently measured at their fair values with the gain or loss recognised in profit or loss.

(b) Held-to-maturity investments Held-to-maturity investments category comprises debt instruments that are quoted in an active market and the

Group or the Company has the positive intention and ability to hold them to maturity.

Financial assets categorised as held-to-maturity investments are subsequently measured at amortised cost using the effective interest method.

(c) Loans and receivables Loans and receivables category comprises debt instruments that are not quoted in an active market.

Financial assets categorised as loans and receivables are subsequently measured at amortised cost using the effective interest method.

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(c) Financial instruments (continued)

(ii) Financial instruments categories and subsequent measurement (continued)

Financial assets (continued)

(d) Available-for-salefinancialassets Available-for-sale category comprises investment in equity and debt securities instruments that are not held for

trading.

Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are measured at cost. Other financial assets categorised as available-for-sale are subsequently measured at their fair values with the gain or loss recognised in other comprehensive income, except for impairment losses, foreign exchange gains and losses arising from monetary items and gains and losses of hedged items attributable to hedge risks of fair value hedges which are recognised in profit or loss. On derecognition, the cumulative gain or loss recognised in other comprehensive income is reclassified from equity into profit or loss. Interest calculated for a debt instrument using the effective interest method is recognised in profit or loss.

All financial assets, except for those measured at fair value through profit or loss, are subject to review for impairment [see Note 2(k)(i)].

Financial liabilities

All financial liabilities are measured at fair value on initial recognition. They are subsequently measured at amortised cost, other than those categorised as fair value through profit or loss.

Fair value through profit or loss category comprises financial liabilities that are held for trading, including derivatives (except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument) or financial liabilities that are specifically designated into this category upon initial recognition.

Derivatives that are linked to and must be settled by delivery of unquoted equity instruments whose fair values cannot be reliably measured are measured at cost.

Other financial liabilities categorised as fair value through profit or loss are subsequently measured at their fair values with the gain or loss recognised in profit or loss.

(iii) Financial guarantee contracts A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder

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

Financial guarantee contracts are classified as deferred income and are amortised to profit or loss using a straight-line method over the contractual period or, when there is no specified contractual period, recognised in profit or loss upon discharge of the guarantee. When settlement of a financial guarantee contract becomes probable, an estimate of the obligation is made. If the carrying value of the financial guarantee contract is lower than the obligation, the carrying value is adjusted to the obligation amount and accounted for as a provision.

(iv) Regularwaypurchaseorsaleoffinancialassets A regular way purchase or sale of financial assets 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 convention in the marketplace concerned.

A regular way purchase or sale of financial assets is recognised and derecognised, as applicable, using trade date accounting. Trade date accounting refers to:

(a) the recognition of an asset to be received and the liability to pay for it on the trade date, and

(b) the derecognition of an asset that is sold, recognition of any gain or loss on disposal and the recognition of a receivable from the buyer for payment on the trade date.

36 36 36 36


(c) Financial instruments (continued)

(v) Derecognition A financial asset or a part thereof is derecognised when, and only when the contractual rights to the cash flows from

the financial asset expire or the financial asset is transferred to another party without retaining control or substantially all risks and rewards of the asset. On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss that had been recognised in equity is recognised in profit or loss.

A financial liability or a part thereof is derecognised when, and only when, the obligation specified in the contract is discharged or cancelled or expires. On derecognition of a financial liability, the difference between the carrying amount of the 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.

(d) Property, plant and equipment

(i) Recognition and measurement Items of property, plant and equipment are measured at cost less any accumulated depreciation and any accumulated

impairment losses.

Cost includes expenditures that are directly attributable to the acquisition of assets and any other costs directly attributable to bringing the assets to working condition for their intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. The cost of self-constructed assets includes the cost of materials and direct labour. For qualifying assets, borrowing costs are capitalised in accordance with the accounting policy on borrowing costs [see Note 2(p)]. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

The gain and loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and is recognised net within “other income” or “administrative expenses” respectively in profit or loss.

(ii) Subsequent costs The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item

if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised to profit or loss. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.

(iii) Depreciation Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for

cost, less its residual value.

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term.

Property, plant and equipment under construction are not depreciated until the assets are ready for their intended use.

37 37 37 37


(d) Property, plant and equipment (continued)

(iii) Depreciation (continued) The principal depreciation rates, residual values and secondary depreciation rates for the current and comparative

periods are as follows:

Secondary Principal depreciation

depreciation Residual rate on rate value residual value

Leasehold land 41, 60, 61 and 99 years Not set Not applicable Buildings 50 years Not set Not applicable Furniture and fittings 5 and 13 years Not set Not applicable

Motor vehicles 10 years Set 10 years Plant, machinery and equipment 5, 10 and 13 years Set 10 years Vessels and wharf 10, 15 and 20 years Set 10 and 15 years

Residual values of the assets are determined based on directors’ best estimates. The depreciable amount is determined after deducting the residual value. Depreciation methods, useful lives and residual values are reviewed, and adjusted as appropriate at the end of the reporting period.

(e) Leased assets - Operating lease Leases, where the Group or the Company does not assume substantially all the risks and rewards of ownership are classified

as operating leases and the leased assets, other than prepaid lease payments, are not recognised in the statement of financial position.

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Lease incentives received are recognised in profit or loss as an integral part of the total lease expense, over the term of the lease. Contingent rentals are charged to profit or loss in the reporting period in which they are incurred. Leasehold land which in substance is an operating lease is classified as prepaid lease payments.

(f) Land held for property development Land held for property development consists of land or such portions thereof on which no development activities have been

carried out or where development activities are not expected to be completed within the Group’s normal operating cycle of 2 to 3 years. Such land is classified as a non-current asset and is stated at cost less accumulated impairment losses, if any.

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 Group’s normal operating cycle of 2 to 3 years.

Cost associated with the acquisition of land includes the purchase price of the land, professional fees, stamp duties, commissions, conversion fees, other direct development expenditure and related overheads.

(g) Property development costs Property development costs comprise costs associated with the acquisition of land and all costs that are directly attributable

to development activities or that can be allocated on a reasonable basis to such activities.

Property development costs not recognised as an expense are recognised as an asset and are stated at the lower of cost and net realisable value.

The excess of revenue recognised in profit or loss over billings to purchasers is shown as accrued billings under trade and other receivables (Note 8) and the excess of billings to purchasers over revenue recognised in profit or loss is shown as progress billings under trade and other payables (Note 13).

(h) Inventories Inventories are measured at the lower of cost and net realisable value. Net realisable value is the estimated selling price in

the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.

(i) Developed properties held for sale Cost of developed properties consists of costs associated with the acquisition of land, direct costs and appropriate

proportions of common costs attributable to developing the properties to completion.

(ii) Consumables Cost of consumables is measured based on the first-in first-out basis and includes expenditure incurred in acquiring

the inventories and bringing them to their existing location and condition.

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(i) Construction work-in-progress Construction work-in-progress represents the gross unbilled amount expected to be collected from customers for contract

work performed to date. It is measured at cost plus profit recognised to date less progress billings and recognised losses. Cost includes all expenditures related directly to specific projects and an allocation of fixed and variable overheads incurred in the Group’s construction activities based on normal operating capacity.

Construction work-in-progress is presented as part of trade and other receivables as amount due from contract customers in the statement of financial position for all contracts in which costs incurred plus recognised profits exceed progress billings (Note 8). If progress billings exceed costs incurred plus recognised profits, then the difference is presented as part of trade and other payables as amount due to contract customers in the statement of financial position (Note 13).

(j) Cash and cash equivalents Cash and cash equivalents consist of cash in hand, balances and deposits with banks and highly liquid investments which

have an insignificant risk of changes in value with original maturities of three months or less. For the purpose of the statement of cash flows, cash and cash equivalents are presented net of bank overdrafts and pledged deposits.

(k) Impairment (i) Financial assets All financial assets (except for financial assets categorised as fair value through profit or loss and investment in

subsidiaries) are assessed at each reporting date whether there is any objective evidence of impairment as a result of one or more events having an impact on the estimated future cash flows of the assets. Losses expected as a result of future events, no matter how likely, are not recognised. For an equity instrument, a significant or prolonged decline in the fair value below its cost is an objective evidence of impairment.

An impairment loss in respect of loans and receivables and held-to-maturity investments is recognised in profit or loss and is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account.

An impairment loss in respect of available-for-sale financial assets is recognised in profit or loss and is measured as the difference between the asset’s acquisition cost (net of any principal repayment and amortisation) and the asset’s current fair value, less any impairment loss previously recognised. Where a decline in the fair value of an available-for-sale financial asset has been recognised in the other comprehensive income, the cumulative loss in other comprehensive income is reclassified from equity to profit or loss.

An impairment loss in respect of unquoted equity instrument that is carried at cost is recognised in profit or loss and is measured as the difference between the financial asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset.

Impairment losses recognised in profit or loss for an investment in an equity instrument is not reversed through profit or loss.

If, in a subsequent period, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed, to the extent that the asset’s carrying amount does not exceed what the carrying amount would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognised in profit or loss.

(ii) Other assets The carrying amounts of other assets (except for inventories [refer Note 2(h)] and amount due from contract customers

[refer to Note 2(i)]) are reviewed at the end of each reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets (known as cash-generating unit). The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to a cash-generating unit or a group of cash-generating units that are expected to benefit from the synergies of the combination.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows 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 or cash-generating unit.

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(k) Impairment (continued) (ii) Other assets (continued) An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit exceeds its

estimated recoverable amount.

Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit or the group of cash-generating units and then to reduce the carrying amount of the other assets in the cash-generating unit (or a group of cash-generating units) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at the end of each reporting period for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount since the last impairment loss was recognised. 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. Reversals of impairment losses are credited to profit or loss in the year in which the reversals are recognised.

(l) Equity instruments Instruments classified as equity are measured at cost on initial recognition and are not remeasured subsequently.

(i) Issue expenses Costs directly attributable to issue of instruments classified as equity are recognised as a deduction from equity.

(ii) Repurchase, disposal and reissue of share capital When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly

attributable costs, net of any tax effects is recognised as a deduction from equity. Repurchased shares that are not subsequently cancelled are classified as treasury shares in the statement of changes in equity.

Where treasury shares are distributed as share dividends, the cost of the treasury shares is applied in the reduction of the share premium account or distributable reserves, or both.

Where treasury shares are sold or reissued subsequently, the difference between the sales consideration net of directly attributable costs and the carrying amount of the treasury shares is recognised in equity, and the resulting surplus or deficit on the transaction is presented in share premium.

Where treasury shares are cancelled, their nominal amounts are eliminated and the difference between their cost and nominal amounts is taken to reserves in the statement of changes in equity as appropriate.

(m) Employee benefits

(i) Shorttermemployeebenefits Short-term employee benefit obligations in respect of salaries and annual bonuses are measured on an undiscounted

basis and are expensed as the related service is provided.

A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employees and the obligation can be estimated reliably.

(ii) State plans Contributions to statutory pension funds are charged to profit or loss in the year to which they relate. Once the

contributions have been paid, the Group has no further payment obligations.

(n) Contingent liabilities Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably,

the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

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(o) Revenue and other income (i) Construction contracts Contract revenue includes the initial amount agreed in the contract plus any variations in contract work, claims and

incentive payments to the extent that it is probable that they will result in revenue and can be measured reliably. As soon as the outcome of a construction contract can be estimated reliably, contract revenue and expenses are recognised in profit or loss in proportion to the stage of completion of the contract. Contract expenses are recognised as incurred unless they create an asset related to future contract activity.

The stage of completion is assessed by reference to the proportion that contract costs incurred for work performed to-date bear to the estimated total contract costs.

When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that are likely to be recoverable. An expected loss on a contract is recognised immediately in profit or loss.

(ii) Property development Revenue from property development activities is recognised based on the stage of completion of properties sold

measured by reference to the proportion that property development costs incurred for work performed to-date bear to the estimated total property development costs.

Where the financial outcome of a property development activity cannot be reliably estimated, property development revenue is recognised only to the extent of property development costs incurred that is probable to be recoverable, and property development costs on the development units sold are recognised as an expense in the period in which they are incurred.

Any expected loss on a development project, including costs to be incurred over the defects liability period, is recognised immediately in profit or loss.

(iii) Rental income Rental income is recognised in profit or loss as it accrues, based on rates agreed with tenants.

(iv) Interest income Interest income is recognised as it accrues using the effective interest method in profit or loss except for interest

income arising from temporary investment of borrowings taken specifically for the purpose of obtaining a qualifying asset which is accounted for in accordance with the accounting policy on borrowing costs.

(v) Dividend income Dividend income is recognised in profit or loss on the date that the Group’s or the Company’s right to receive payment

is established.

(p) Borrowing costs Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are

recognised in profit or loss using the effective interest method.

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets.

Capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or completed.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

(q) Income tax Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except

to the extent that it relates to a business combination or items recognised directly in equity or other comprehensive income. Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or

substantively enacted by the end of the reporting period, and any adjustment to tax payable in respect of previous years.

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(q) Income tax (continued) Deferred tax is recognised using the liability method, providing for temporary differences between the carrying amounts of

assets and liabilities in the statement of financial position and their tax bases.

Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill and the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which temporary difference can be utilised. Deferred tax assets are reviewed at the end of each reporting period and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

A tax incentive that is not a tax base of an asset is recognised as a reduction of tax expense in profit or loss as and when it is granted and claimed. Any unutilised portion of the tax incentive is recognised as a deferred tax asset to the extent that it is probable that future taxable profits will be available against which the unutilised tax incentive can be utilised.

(r) Earnings per ordinary share The Group presents basic earnings per share (EPS) data for its ordinary shares.

Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held.

(s) Operating segments An operating segment is a component of the Group that engages in business activities from which it may earn revenues

and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. An operating segment’s operating results are reviewed regularly by the chief operating decision maker, which in this case is the Managing Director of the Group, to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available.

42 42 42 42

Plant Long term Short term Furniture machinery Vessels Assets leasehold leasehold and Motor and and under land land Buildings fittings vehicles equipment wharf construction TotalGroup RM RM RM RM RM RM RM RM RM

CostAt 1 January 2010 - 1,280,021 3,609,402 1,455,614 16,591,338 73,467,058 63,809,995 - 160,213,428Additions 15,001,276 - - 165,179 3,715,860 15,809,148 1,301,308 2,000,000 37,992,771 Disposals - - - - ( 312,000) ( 173,000) ( 2,562,525) - ( 3,047,525)Write-offs - - - ( 52,590) ( 111,620) ( 1,532,156) ( 236,000) - ( 1,932,366)Reclassification to inventories - - - - - ( 4,413,079) - - ( 4,413,079) ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------At 31 December 2010/ 1 January 2011 15,001,276 1,280,021 3,609,402 1,568,203 19,883,578 83,157,971 62,312,778 2,000,000 188,813,229Additions 8,824,306 - - 102,739 3,709,576 8,619,608 4,928,240 - 26,184,469Disposals - - - - ( 2,337,978) ( 273,166) ( 140,000) - ( 2,751,144)Write-offs - - - ( 152,900) ( 126,636) ( 1,961,869) ( 9,120) - ( 2,250,525)Charge to profit or loss - - - - - - - ( 192,059) ( 192,059)Transfers - - - - - - 1,807,941 ( 1,807,941) - ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------At 31 December 2011 23,825,582 1,280,021 3,609,402 1,518,042 21,128,540 89,542,544 68,899,839 - 209,803,970 ============ ===================================================================================== ==========Depreciation At 1 January 2010 - 259,714 603,643 983,624 9,750,174 35,995,767 41,488,721 - 89,081,643Depreciation for the year 75,764 25,470 76,856 124,365 1,079,337 4,075,511 2,190,211 - 7,647,514Disposals - - - - ( 244,400) ( 173,000) ( 1,826,481) - ( 2,243,881)Write-offs - - - ( 52,590) ( 91,331) ( 1,467,123) ( 236,000) - ( 1,847,044) ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------At 31 December 2010 / 1 January 2011 75,764 285,184 680,499 1,055,399 10,493,780 38,431,155 41,616,451 - 92,638,232Depreciation for the year 151,528 25,469 76,856 102,928 1,273,450 4,786,076 1,841,240 - 8,257,547Disposals - - - - ( 1,465,446) ( 48,922) ( 16,000) - ( 1,530,368)Write-offs - - - ( 151,259) ( 122,136) ( 1,926,358) ( 9,120) - ( 2,208,873) ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------At 31 December 2011 227,292 310,653 757,355 1,007,068 10,179,648 41,241,951 43,432,571 - 97,156,538 ============ ===================================================================================== ==========Carrying amountsAt 1 January 2010 - 1,020,307 3,005,759 471,990 6,841,164 37,471,291 22,321,274 - 71,131,785 ============ ===================================================================================== ==========At 31 December 2010/ 1 January 2011 14,925,512 994,837 2,928,903 512,804 9,389,798 44,726,816 20,696,327 2,000,000 96,174,997 ============ ===================================================================================== ==========

At 31 December 2011 23,598,290 969,368 2,852,047 510,974 10,948,892 48,300,593 25,467,268 - 112,647,432 ============ ===================================================================================== ==========

3. Property, plant and equipment

43 43 43 43

Plant, Long term Short term Furniture machinery Vessels Assets leasehold leasehold and Motor and and under land land Buildings fittings vehicles equipment wharf construction TotalCompany RM RM RM RM RM RM RM RM RM

CostAt 1 January 2010 - 1,280,021 3,609,402 1,414,847 16,445,338 73,189,476 63,809,995 - 159,749,079Additions 15,001,276 - - 164,399 3,715,860 15,805,219 1,301,308 2,000,000 37,988,062Disposals - - - - ( 312,000) ( 173,000) ( 2,562,525) - ( 3,047,525)Write-offs - - - ( 52,590) ( 111,620) ( 1,522,980) ( 236,000) - ( 1,923,190)Reclassification to inventories - - - - - ( 4,413,079) - - ( 4,413,079) ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------At 31 December 2010/ 1 January 2011 15,001,276 1,280,021 3,609,402 1,526,656 19,737,578 82,885,636 62,312,778 2,000,000 188,353,347Additions - - - 99,628 3,553,556 8,605,168 4,928,240 - 17,186,592Disposals - - - - ( 2,337,978) ( 235,166) ( 140,000) - ( 2,713,144)Write-offs - - - ( 152,900) ( 126,636) ( 1,957,358) ( 9,120) - ( 2,246,014)Charged to profit or loss - - - - - - - ( 192,059) ( 192,059)Transfers - - - - - - 1,807,941 ( 1,807,941) - ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------At 31 December 2011 15,001,276 1,280,021 3,609,402 1,473,384 20,826,520 89,298,280 68,899,839 - 200,388,722 ============ ===================================================================================== ==========DepreciationAt 1 January 2010 - 259,714 603,643 964,471 9,649,906 35,894,028 41,488,721 - 88,860,483Depreciation for the year 75,764 25,470 76,856 121,887 1,067,045 4,042,353 2,190,211 - 7,599,586Disposals - - - - ( 244,400) ( 173,000) ( 1,826,481) - ( 2,243,881)Write-offs - - - ( 52,590) ( 91,331) ( 1,460,522) ( 236,000) - ( 1,840,443) ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------At 31 December 2010 / 1 January 2011 75,764 285,184 680,499 1,033,768 10,381,220 38,302,859 41,616,451 - 92,375,745Depreciation for the year 151,528 25,469 76,856 100,273 1,252,088 4,757,960 1,841,239 - 8,205,413Disposals - - - - ( 1,465,446) ( 40,055) ( 16,000) - ( 1,521,501)Write-offs - - - ( 151,259) ( 122,136) ( 1,923,802) ( 9,120) - ( 2,206,317) ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- --------------------At 31 December 2011 227,292 310,653 757,355 982,782 10,045,726 41,096,962 43,432,570 - 96,853,340 ============ ===================================================================================== ==========Carrying amountsAt 1 January 2010 - 1,020,307 3,005,759 450,376 6,795,432 37,295,448 22,321,274 - 70,888,596 ============ ===================================================================================== ==========At 31 December 2010/ 1 January 2011 14,925,512 994,837 2,928,903 492,888 9,356,358 44,582,777 20,696,327 2,000,000 95,977,602 ============ ===================================================================================== ==========

At 31 December 2011 14,773,984 969,368 2,852,047 490,602 10,780,794 48,201,318 25,467,269 - 103,535,382 ============ ===================================================================================== ==========

3. Property, plant and equipment (continued)

44 44 44 44

3. Property, plant and equipment (continued)

3.1 Allocation of depreciation

Depreciation for the year is allocated as follows:

Group Company 2011 2010 2011 2010 Note RM RM RM RM Charged to profit or loss 15 731,856 683,989 688,790 639,974 Capitalised in - contract costs 8 7,516,623 6,959,612 7,516,623 6,959,612 - property development costs 6 9,068 3,913 - - ------------------------ ------------------------ ------------------------ ------------------------

8,257,547 7,647,514 8,205,413 7,599,586 ============ ============ ============ ============

3.2 Buildings costing RM534,398 (2010: RM534,398) are built on land leased from third parties.

3.3 No amortisation was provided on a parcel of leasehold land of the Group costing RM8,824,306 acquired during the year as all the conditions precedent set out in the sale and purchase agreement were only fulfilled towards the 2011 year end.

3.4 The addition of leasehold land of RM15,001,276 during the year ended 31 December 2010 consisted of payment in-kind in the form of leasehold land for a construction contract.

4. Investment in subsidiaries Company 2011 2010 RM RM Unquoted shares, at cost 71,299,999 71,299,999 ============ ============ Details of the subsidiaries, all of which are incorporated in Malaysia, are as follows:

Effective Name of subsidiary Principal activities ownership interest 2011 2010

% %

Hock Seng Lee Construction Property development 100 100 Sendirian Berhad and building construction

HSL Hydro Sdn. Bhd. Presently dormant. .100 100 Its intended activity is shipyard operation

Bright Trenchless Presently dormant. 80 80 Engineering Sdn. Bhd. Its intended activities are civil engineering and construction 5. Land held for property development

Development Land costs Total RM RM RM Group At 1 January 2010 59,539,948 7,180,572 66,720,520 Additions 23,007,000 1,918,702 24,925,702 Transfer to property development costs (Note 6) ( 3,834,500) ( 467,367) ( 4,301,867) ------------------------ ------------------------ ------------------------ At 31 December 2010 /1 January 2011 78,712,448 8,631,907 87,344,355 Additions 19,416 6,650,125 6,669,541 ------------------------ ------------------------ ------------------------ At 31 December 2011 78,731,864 15,282,032 94,013,896 ============ ============ ============

Company Additions for 2010 and balances at 31 December 2010 /1 January 2011 23,007,000 73,347 23,080,347 Additions - 47,397 47,397 ------------------------ ------------------------ ------------------------ At 31 December 2011 23,007,000 120,744 23,127,744 ============ ============ ============

45 45 45 45

5. Land held for property development (continued)

5.1 Included in the land held for property development of the Group at 31 December 2011 is a cumulative amount of RM5,465,216 (2010: RM5,445,801) incurred on one (2010: one) parcel of land, the title to which is in the process of being transferred to the Group.

5.2 The addition of land held for property development of RM23,080,347 during the year ended 31 December 2010 consisted of land acquired as payment in-kind for a construction contract.

6. Property development costs - Group

Accumulated costs charged Development to profit Land costs or loss Total RM RM RM RM

At 1 January 2010 13,149,624 50,315,661 ( 37,839,246) 25,626,039 Transfer from land held for property development (Note 5) 3,834,500 467,367 - 4,301,867 Development costs incurred during the year 20,627 17,200,477 - 17,221,104 Costs charged to profit or loss - - (18,529,365) (18,529,365) Transfer of completed properties to inventories ( 2,583,153) (32,580,899) 33,557,697 ( 1,606,355) ------------------------ ------------------------ ------------------------ ------------------------ At 31 December 2010 / 1 January 2011 14,421,598 35,402,606 (22,810,914) 27,013,290 Development costs incurred during the year - 13,641,546 - 13,641,546 Costs charged to profit or loss - - (11,352,995) (11,352,995) Transfer of completed properties to inventories ( 571,544) ( 8,635,202) 7,749,551 ( 1,457,195) ------------------------ ------------------------ ------------------------ ------------------------ At 31 December 2011 13,850,054 40,408,950 (26,414,358) 27,844,646 ============ ============ ============ ============

Property development costs incurred during the financial year include: 2011 2010 RM RM

Depreciation of property, plant and equipment (Note 3) 9,068 3,913 Hire of equipment 98,760 195,660 Personnel expenses (including key management personnel) - Contributions to state plans 6,635 - - Wages, salaries and others 168,135 33,963 ============ ============7. Inventories

Group Company 2011 2010 2011 2010 RM RM RM RM At cost Consumables 21,647,271 11,462,136 21,570,636 11,367,143 Developed properties held for sale 1,598,623 1,614,591 - - ------------------------ ------------------------ ------------------------ ------------------------ 23,245,894 13,076,727 21,570,636 11,367,143 ============ ============ ============ ============8. Trade and other receivables

Group Company 2011 2010 2011 2010 Note RM RM RM RM Trade Trade receivables 2,179,569 9,418,334 1,829,837 1,830,707 Progress billings receivables 8.1 193,002,278 198,622,515 190,439,067 198,622,515 Amount due from contract customers 8.2 24,942,954 34,620,008 24,942,954 34,620,008 Accrued billings 1,230,111 1,319,097 - - ------------------------ ------------------------ ------------------------ ------------------------ 221,354,912 243,979,954 217,211,858 235,073,230 ------------------------ ------------------------ ------------------------ ------------------------

46 46 46 46

8. Trade and other receivables (continued) Group Company 2011 2010 2011 2010 Note RM RM RM RM

Non-trade Other receivables 484,384 285,951 451,924 263,642 ------------------------ ------------------------ ------------------------ ------------------------ Total 221,839,296 244,265,905 217,663,782 235,336,872 ============ ============ ============ ============

8.1 Progress billings receivables

Progress billings receivables of the Group/Company include retention sums of RM18,834,386 (2010: RM27,351,511) receivable from contract customers.

The retention sums are unsecured, interest-free and are expected to be collected as follows: Group/Company 2011 2010 RM RM Within 1 year 13,774,334 16,034,276 1-2 years 4,547,969 7,414,146 2-3 years 512,083 3,903,089 ------------------------ ------------------------ 18,834,386 27,351,511 ============ ============

8.2 Amount due from/to contract customers Group/Company 2011 2010 RM RM Aggregate costs incurred to-date 1,156,764,105 879,374,555 Attributable profits 311,700,241 243,827,702 ------------------------------ ---------------------------- 1,468,464,346 1,123,202,257 Progress billings ( 1,592,276,424) ( 1,244,258,817) ------------------------------ ---------------------------- ( 123,812,078) ( 121,056,560) Amount due to contract customers (Note 13) 148,755,032 155,676,568 ------------------------------ ---------------------------- Amount due from contract customers 24,942,954 34,620,008 =============== ============== Additions to aggregate costs incurred during the year include:

Depreciation of property, plant and equipment (Note 3) 7,516,623 6,959,612 Hire of equipment 11,104,444 8,121,662 Rental of premises 819,131 424,923 Personnel expenses (including key management personnel) - Contributions to state plans 791,470 743,149 - Wages, salaries and others 9,738,170 9,116,735

============ ============9. Deposits and prepayments


Deposits 19,577,653 23,560,230 19,192,285 14,104,964 Prepayments 252,413 882,172 252,413 882,172 ------------------------ ------------------------ ------------------------ ------------------------ 19,830,066 24,442,402 19,444,698 14,987,136 ============ ============ ============ ============

9.1 Included in the deposits subsisting at 31 December 2011 of the Group and of the Company is an amount of RM17,172,681 (2010: RM11,038,468) paid for the purchase of construction materials, which are progressively deducted against the physical goods supplied.

9.2 Included in the deposits of the Group subsisting at 31 December 2010 was an amount of RM9,041,661 paid for the acquisition of one parcel of leasehold land and RM1,390,903 paid for the acquisition of plant and machinery.

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10. Cash and cash equivalents

Group Company 2011 2010 2011 2010 RM RM RM RM Deposits placed with licensed banks 172,534,287 85,065,551 154,576,698 68,755,551 Cash and bank balances 11,186,306 4,636,866 8,298,996 3,589,731 ------------------------ ------------------------ ------------------------ ------------------------ 183,720,593 89,702,417 162,875,694 72,345,282 ============ ============ ============ ============

Included in the deposits placed with licensed banks subsisting at 31 December 2010 was an amount of RM450,000 pledged as security for a bank guarantee facility granted to the Company. The deposit has been fully discharged during the current financial year.

11. Capital and reserves

11.1 Share capital

---------------------- Group and Company ---------------------- Amount Number Amount Number RM of shares RM of shares 2011 2011 2010 2010 Authorised: Ordinary shares of RM0.20 each 300,000,000 1,500,000,000 300,000,000 1,500,000,000 ============ ============== ============ ============== Issued and fully paid: Ordinary shares of RM0.20 each 116,535,200 582,676,000 116,535,200 582,676,000 ============ ============== ============ ==============

11.2 Capital redemption reserve Capital redemption reserve arose from the cancellation of 2,165,500 treasury shares on 17 November 2003, whereupon

an amount equivalent to their nominal value was transferred to the reserve.

11.3 Treasury shares The shareholders of the Company, at an Extraordinary General Meeting held on 29 November 2001, approved the

Company’s plan to repurchase its own shares. The mandate was subsequently renewed on a yearly basis. The Directors of the Company are committed to enhance the value of the Company to its shareholders and believe that the repurchase plan can be applied in the best interest of the Company and its shareholders.

During the financial year, the Company repurchased 7,018,400 (2010: 5,444,600) of its own ordinary shares of RM0.20 each from the open market at an average price of RM1.52 (2010: RM1.57) per ordinary share. The shares repurchased are retained as treasury shares. The total consideration paid was RM10,643,091 (2010: RM8,570,538) including transaction cost of RM44,998 (2010: RM30,219). The repurchase transactions were financed by internally generated funds.

On 29 December 2010, a total of 10,881,042 treasury shares were distributed as share dividends to the Company’s shareholders in a ratable ratio of one (1) treasury share for every fifty (50) existing ordinary shares held. The cost of the treasury shares (including transaction costs) of RM8,247,759 had been applied against the retained earnings account for the year ended 31 December 2010.

The total number of treasury shares held by the Company at 31 December 2011 is 34,761,058 (2010: 27,742,658).

11.4 Retained earnings Subject to agreement with the Inland Revenue Board, the Company has sufficient Section 108 tax credit and tax exempt

income to distribute approximately RM139,726,000 and RM17,082,000 out of its retained earnings at 31 December 2011 as franked dividends and normal exempt dividends. The remaining retained earnings are distributable as single-tier exempt dividends under the single-tier company income tax system enacted via the Finance Act 2007.

The single-tier system, which is effective from 1 January 2008, allows for a transitional period of six years. Unless so migrated to the system, the Section 108 tax credit will be available to the Company until such time the credit is fully utilised or upon the expiry of the transitional period on 31 December 2013, whichever is earlier.

The tax exempt income will be available to the Company until it is fully distributed as dividends.

48 48 48 48

12. Deferred tax

Recognised deferred tax Deferred tax (assets)/liabilities are attributable to the following:

Assets Liabilities Net 2011 2010 2011 2010 2011 2010 Group RM RM RM RM RM RM

Property, plant and equipment - - 16,743,900 14,485,500 16,743,900 14,485,500 Financial instruments ( 926,300) ( 533,000) 199,500 201,500 ( 726,800) ( 331,500) Unrealised inter-company profit on consolidation ( 87,000) ( 88,000) - - ( 87,000) ( 88,000) Unrealised gain in foreign exchange - 1,000 - - - 1,000 ------------------------ ------------------------ ------------------------ ------------------------ ------------------------ ------------------------ Tax (assets)/liabilities ( 1,013,300) ( 620,000) 16,943,400 14,687,000 15,930,100 14,067,000 Set off 1,013,300 620,000 ( 1,013,300) ( 620,000) - - ------------------------ ------------------------ ------------------------ ------------------------ ------------------------ ------------------------ Net tax liabilities - - 15,930,100 14,067,000 15,930,100 14,067,000 ============ ============ ============ ============ ============ ============ (Assets)/Liabilities 2011 2010 Company RM RM

Property, plant and equipment 16,683,000 14,446,000 Financial instruments ( 698,000) ( 315,000) Unrealised gain in foreign exchange - 1,000 ------------------------ ------------------------ 15,985,000 14,132,000 ============ ============

Movements in deferred tax during the year are as follows:

Effect Recognised At Recognised At of adopting in profit 31.12.2010/ in profit At 1.1.2010 FRS 139 or loss 1.1.2011 or loss 31.12.2011 RM RM RM RM RM RM Group

Property, plant and equipment 10,458,500 - 4,027,000 14,485,500 2,258,400 16,743,900 Financial instruments - ( 368,500) 37,000 ( 331,500) ( 395,300) ( 726,800) Unrealised inter-company profit on consolidation ( 91,000) - 3,000 ( 88,000) 1,000 ( 87,000) Unrealised gain in foreign exchange - - 1,000 1,000 ( 1,000) - ------------------------ ------------------------ ------------------------ ------------------------ ------------------------ ------------------------ 10,367,500 ( 368,500) 4,068,000 14,067,000 1,863,100 15,930,100 ============ ============ ============ ============ ============ ============ (Note 18) (Note 18) Company

Property, plant and equipment 10,420,000 - 4,026,000 14,446,000 2,237,000 16,683,000 Financial instruments - ( 352,000) 37,000 ( 315,000) ( 383,000) ( 698,000) Unrealised gain in foreign exchange - - 1,000 1,000 ( 1,000) - ------------------------ ------------------------ ------------------------ ------------------------ ------------------------ ------------------------ 10,420,000 ( 352,000) 4,064,000 14,132,000 1,853,000 15,985,000 ============ ============ ============ ============ ============ ============ (Note 18) (Note 18)

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13. Trade and other payables

Group Company 2011 2010 2011 2010 RM RM RM RM Trade Trade payables 96,951,564 58,310,398 93,336,158 54,324,322 Amount due to contract customers (Note 8.2) 148,755,032 155,676,568 148,755,032 155,676,568 Progress billings 457,615 401,706 - - ------------------------ ------------------------ ------------------------ ------------------------ 246,164,211 214,388,672 242,091,190 210,000,890

Non-trade Accrued expenses 3,548,113 2,908,701 3,339,983 2,820,430 ------------------------ ------------------------ ------------------------ ------------------------ 249,712,324 217,297,373 245,431,173 212,821,320 ============ ============ ============ ============

Included in the amount due to contract customers of the Group/Company at 31 December 2011 are advances received of RM35,514,173 (2010: RM69,058,360).

14. Revenue and cost of sales


Revenue - contract revenue 559,499,746 457,712,884 559,499,746 457,712,884 - sale of development properties 22,015,328 30,562,619 - - ------------------------ ------------------------ ------------------------ ------------------------ 581,515,074 488,275,503 559,499,746 457,712,884 ============ ============ ============ ============ Cost of sales - contract costs 442,124,294 359,301,798 442,124,294 359,301,798 - property development costs 13,264,013 20,147,117 - - ------------------------ ------------------------ ------------------------ ------------------------ 455,388,307 379,448,915 442,124,294 359,301,798 ============ ============ ============ ============15. Profit before tax

Group Company 2011 2010 2011 2010 RM RM RM RM Profit before tax is arrived at after charging:

Auditors’ remuneration - statutory audit 80,000 78,000 58,000 58,000 - non audit fee - KPMG 12,000 12,000 12,000 12,000 - Local affiliate of KPMG 11,000 10,400 6,600 6,000 Depreciation of property, plant and equipment (Note 3) 731,856 683,989 688,790 639,974 Impairment loss on financial assets 27,000 116,000 27,000 116,000 Personnel expenses (including key management personnel): - Contributions to state plans 1,426,499 1,321,506 1,340,782 1,243,867 - Wages, salaries and others 16,606,734 15,522,694 15,830,530 14,697,345 Property, plant and equipment written off 41,652 85,322 39,697 82,747 Rental expenses on property leases 116,545 112,045 99,745 95,245 Derivative loss from foreign currency forward contract - 6,800 - 6,800 ============ ============ ============ ============

50 50 50 50

15. Profit before tax (continued)

Group Company 2011 2010 2011 2010 RM RM RM RM and after crediting:

Gain on disposal of property, plant and equipment 387,665 908,406 384,798 908,406 Hire of vessels, plant and machinery 4,606,802 6,605,137 4,606,802 6,605,137 Foreign exchange gain - realised 155,050 82,496 155,050 82,496 - unrealised 505 3,614 505 3,614 Rental income from property subleases 261,000 258,600 261,000 258,600 Reversal of impairment loss 50,000 - - - ============ ============ ============ ============

16. Key management personnel compensations

Compensations paid/payable to key management personnel comprise:

Group Company 2011 2010 2011 2010 RM RM RM RM Directors - Fees 175,000 175,000 175,000 175,000 - Remuneration 3,753,000 3,519,900 3,753,000 3,519,900 - Contributions to state plans 713,071 668,787 713,071 668,787 - Other short-term employee benefits* 88,964 62,548 88,964 62,548 ----------------------- ------------------------ ------------------------ ----------------------- 4,730,035 4,426,235 4,730,035 4,426,235 Other key management personnel - Short-term employee benefits 3,696,452 3,379,611 3,343,817 3,129,507 ----------------------- ------------------------ ------------------------ ----------------------- 8,426,487 7,805,846 8,073,852 7,555,742 ============ ============ ============ ============

* These include the estimated monetary value of benefits-in-kind enjoyed by the Directors.

Other key management personnel comprise persons, other than the Directors of Group entities, having authority and responsibility for planning, directing and controlling the activities of the entity either directly or indirectly.

17. Finance income and costs

Recognisedinprofitorloss Group Company 2011 2010 2011 2010 RM RM RM RM Finance income - interest income from interest-bearing deposits 3,450,352 1,501,538 2,876,214 1,251,338 - interest income from other financial assets 921,932 1,013,330 921,932 955,330 ------------------------ ------------------------ ------------------------ ----------------------- 4,372,284 2,514,868 3,798,146 2,206,668 ============ ============ ============ ============ Finance costs - interest expense from other financial liabilities 467,684 385,786 447,338 345,273 ============ ============ ============ ============

51 51 51 51

18. Income tax expense Recognisedinprofitorloss Group Company 2011 2010 2011 2010 RM RM RM RM Current tax expense Malaysian - current year 26,968,064 20,425,074 24,865,000 17,962,000 - prior year 498,322 487,284 487,531 491,766

27,466,386 20,912,358 25,352,531 18,453,766 Deferred tax expense (Note 12) - current year 2,412,400 4,573,000 2,390,000 4,569,000 - prior year ( 549,300) ( 505,000) ( 537,000) ( 505,000)

1,863,100 4,068,000 1,853,000 4,064,000 ------------------------ ------------------------ ------------------------ ------------------------ Total income tax expense 29,329,486 24,980,358 27,205,531 22,517,766 ============ ============ ============ ============ Reconciliation of effective tax expense Profit for the year 87,268,580 73,438,760 80,952,950 66,085,586 Total income tax expense 29,329,486 24,980,358 27,205,531 22,517,766 ------------------------ ------------------------ ------------------------ ------------------------ Profit excluding tax 116,598,066 98,419,118 108,158,481 88,603,352 ============ ============ ============ ============

Income tax calculated using Malaysian tax rate of 25% (2010: 25%) 29,150,000 24,605,000 27,040,000 22,151,000 Non-deductible expenses 230,464 393,074 215,000 380,000 ------------------------ ------------------------ ------------------------ ------------------------ 29,380,464 24,998,074 27,255,000 22,531,000 Over-provision in prior years ( 50,978) ( 17,716) ( 49,469) ( 13,234) ------------------------ ------------------------ ------------------------ ------------------------ 29,329,486 24,980,358 27,205,531 22,517,766 ============ ============ ============ ============19. Earnings per ordinary share

Basic earnings per ordinary share The calculation of basic earnings per ordinary share at 31 December 2011 was based on the profit attributable to ordinary

shareholders and the weighted average number of ordinary shares outstanding, as follows:

Group 2011 2010 RM RM

Profit attributable to ordinary shareholders 87,265,026 73,435,308 ============ ============ Weighted average number of ordinary shares 2011 2010 Issued ordinary shares at beginning of year 582,676,000 582,676,000 Less: cumulative effect of treasury shares bought back in previous years ( 27,742,658) ( 33,179,100) 554,933,342 549,496,900 Adjust for effect of shares purchased during the year: - March ( 1,161,000) - - April ( 644,500) - - June - ( 341,500) - July - ( 43,750) - August ( 596,500) ( 285,550) - September ( 389,500) ( 950,000) - October ( 131,500) - - November ( 1,500) - ------------------------ ------------------------ Weighted average number of ordinary shares at 31 December 552,008,842 547,876,100 ============ ============ Basic earnings per ordinary share (sen) 15.81 13.40 ============ ============ The treasury shares comprising 10,881,042 ordinary shares of RM0.20 each distributed as share dividends on 29 December

2010 did not materially affect the earnings per share for the year ended 31 December 2010.

52 52 52 52

20. Dividends

20.1 Dividends per ordinary share are as follows:

2011 2010

Dividends per ordinary share (sen) - gross 3.60 4.52 ============ ============

20.2 Dividends recognised by the Company comprise:

Sen Total per share amount Date of (net of tax) RM payment 2011 Final 2010 ordinary 0.90 4,971,764 16 June 2011 Special 2010 ordinary 0.45 2,485,882 16 June 2011 Interim 2011 ordinary 0.90 4,954,512 7 October 2011 ---------------------- 12,412,158 =========== 2010 Final 2009 ordinary 0.75 4,121,227 15 June 2010 Special 2009 ordinary 0.30 1,648,490 15 June 2010 Interim 2010 ordinary 0.90 4,912,671 8 October 2010

---------------------- 10,682,388 ===========

After the end of the reporting period, the Directors have proposed the following dividends which will be paid upon being approved by shareholders at the forthcoming annual general meeting and recognised in the subsequent financial statements:

(a) a final dividend of 9.00% per ordinary share of RM0.20 each less tax at 25% totalling RM7,396,852 (equivalent to 6.75% net per share); and

(b) a special dividend of 3.00% per ordinary share of RM0.20 each less tax at 25% totalling RM2,465,617 (equivalent to 2.25% net per share).

The gross dividends per ordinary share relates to the total dividends declared or proposed for the financial year.

21. Capital expenditure commitments

Group Company 2011 2010 2011 2010 RM RM RM RM Property, plant and equipment

Within one year - Contracted but not provided for - 3,055,000 - 3,055,000 - Authorised but not contracted for 26,347,000 800,000 800,000 800,000 ------------------------ ------------------------ ------------------------ ------------------------ 26,347,000 3,855,000 800,000 3,855,000 ============ ============ ============ ============22. Contingent liability - Company

Unsecured The Company provides financial guarantees totalling RM8,000,000 (2010: RM8,000,000) to banks for credit facilities extended

to a wholly owned subsidiary.

The fair value of such financial guarantees is not expected to be material as the utilisation of such facilities is minimal and the probability of the subsidiary defaulting on the credit lines is remote.

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23. Operating segments The Group has two reportable segments, as described below, which are the Group’s strategic business units. For each of the

strategic business units, the Group Managing Director, who is the group chief operating decision maker, reviews internal management reports at least on a quarterly basis. The following describes the operations in each of the Group’s reportable segments.

Construction : Marine and civil engineering works and construction

Property development : Development of residential and commercial properties

Performance is measured based on segment profit before tax as included in the internal management reports. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of the segments relative to other entities that operate within these industries.

The activities of the Group are carried out in Malaysia and as such, segmental reporting by geographical locations is not presented.

Segment result, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.

Other non- Property reportable Inter-segment Construction development segment elimination Total 2011 RM RM RM RM RM

Segment profit

Revenue from external customers 559,499,746 22,015,328 - - 581,515,074 ============ ============ ============ ============ ============ Segment profit before tax, interest and depreciation 113,008,756 7,941,922 ( 3,633) 3,968 120,951,013 Depreciation of property, plant and equipment ( 8,205,413) ( 52,134) - - ( 8,257,547) Interest expense (Note 17) ( 447,338) ( 20,346) - - ( 467,684) Interest income (Note 17) 3,827,410 533,179 11,695 - 4,372,284 ------------------------ ------------------------ ------------------------ ------------------------ ------------------------ Segment profit before tax 108,183,415 8,402,621 8,062 3,968 116,598,066 ============ ============ ============ ============ Income tax expense ( 29,329,486) ------------------------ Profit for the year 87,268,580 ============

Segment assets 526,124,678 147,870,002 9,497,026 ( 349,883) 683,141,823 ============ ============ ============ ============ ============

Included in the measurement of segment assets are:

Addition to non-current assets other than financial instruments and deferred tax assets: - capital expenditure 17,186,592 173,571 8,824,306 - 26,184,469 - land held for property development - 6,669,541 - - 6,669,541 ============ ============ ============ ============ ============

Segment liabilities 269,047,426 4,722,452 2,610 ( 87,000) 273,685,488 ============ ============ ============ ============ ============

54 54 54 54

23. Operating segments (continued)

Other non- Property reportable Inter-segment Construction development segment elimination Total 2010 RM RM RM RM RM

Segment profit

Revenue from external customers 457,712,884 30,562,619 - - 488,275,503 ============ ============ ============ ============ ============ Segment profit before tax, interest and depreciation 94,340,542 9,588,389 ( 1,558) 10,177 103,937,550 Depreciation of property, plant and equipment ( 7,599,586) ( 47,928) - - ( 7,647,514) Interest expense (Note 17) ( 345,273) ( 40,513) - - ( 385,786) Interest income (Note 17) 2,231,019 275,904 7,945 - 2,514,868 ------------------------ ------------------------ ------------------------ ----------------------- ------------------------ Segment profit before tax 88,626,702 9,775,852 6,387 10,177 98,419,118 ============ ============ ============ ============ Income tax expense ( 24,980,358) ------------------------ Profit for the year 73,438,760 ============

Segment assets 431,032,730 141,849,622 9,491,592 ( 353,851) 582,020,093 ============ ============ ============ ============ ============

Included in the measurement of segment assets are:

Addition to non-current assets other than financial instruments and deferred tax assets: - capital expenditure 37,988,062 4,709 - - 37,992,771 - land held for property development - 24,779,000 - 146,702 24,925,702 ============ ============ ============ ============ ============

Segment liabilities 231,823,550 5,039,053 2,486 ( 88,000) 236,777,089 ============ ============ ============ ============ ============

Majors customers The following are major customers with revenue equal to or more than 10 percent of the Group revenue: Revenue 2011 2010 Segment RM RM All common control entities of - State and Federal Governments 234,738,957 173,485,704 Construction - one (2010: one) state-controlled entity 68,386,408 62,913,003 Construction - two (2010: two) trade receivables 127,187,264 119,475,292 Construction ============ ============

24. Financial instruments

24.1Categoriesoffinancialinstruments The table below provides an analysis of financial instruments categorised as follows:

(i) Loans and receivables (L&R); and (ii) Other financial liabilities measured at amortised cost (OL).

55 55 55 55

24. Financial instruments (continued)

24.1Categoriesoffinancialinstruments(continued)

Carrying L&R/ amount (OL) 2011 RM RM

Group Financial assets/(liabilities) Trade and other receivables 221,839,296 221,839,296 Cash and cash equivalents 183,720,593 183,720,593 Trade and other payables (100,499,677) (100,499,677) ============ ============ Company

Financial assets/(liabilities) Trade and other receivables 217,663,782 217,663,782 Cash and cash equivalents 162,875,694 162,875,694 Trade and other payables ( 96,676,141) ( 96,676,141) ============ ============ 2010 Group

Financial assets/(liabilities) Trade and other receivables 244,265,905 244,265,905 Cash and cash equivalents 89,702,417 89,702,417 Trade and other payables ( 61,219,099) ( 61,219,099) ============ ============ Company

Financial assets/(liabilities) Trade and other receivables 235,336,872 235,336,872 Cash and cash equivalents 72,345,282 72,345,282

Trade and other payables ( 57,144,752) ( 57,144,752) ============ ============

24.2 Financial risk management The Group has established a risk management framework with which, and undertake ongoing exercise, to identify, assess

and manage key financial risks such as credit risk, liquidity risk and market risk.

(a) Credit risk Credit risk is the risk of a financial loss to the Group if a customer or counterparty to a financial instrument fails to

meet its contractual obligations. The Group’s and the Company’s exposures to credit risk arise principally from their receivables from customers. The Company also has exposure to credit risk that arises from the financial guarantees given to banks for credit facilities granted to a subsidiary.

Receivables Risk management objectives, policies and processes for managing the risk Most of the construction projects undertaken by the Group are government funded. Prior to tendering for construction

contracts, credit evaluation on potential customers is carried out.

The Group’s exposure to credit risk for property development is regarded as low as titles to properties are only transferred to purchasers upon full settlement.

Management regularly reviews the credit risks of customers and takes appropriate measures to enhance credit control procedures.

56 56 56 56


24.2 Financial risk management (continued)

(a) Credit risk (continued)

Receivables (continued)

Exposure to credit risk, credit quality and collateral As at the end of the reporting period, the maximum exposure to credit risk is represented by the carrying amount of

each financial asset in the statement of financial position.

Management has taken reasonable steps to ensure that receivables that are neither past due nor impaired are stated at their net realisable values. A significant portion of these receivables are regular customers of the Group. The Group monitors each receivable individually and uses ageing analysis as a tool to monitor the credit quality of the receivables.

As at the end of the reporting period, other than an amount of RM120,324,948 (2010: RM101,623,006) receivable from the Government and a state-controlled entity, there were no significant concentrations of credit risk.

The exposure to credit risk is mainly concentrated in Malaysia as the business activities of the Group are carried out locally.

Impairment losses The ageing of trade receivables as at the end of the reporting period was:

--------------------- Group ------------------- --------------- Company ----------------- 2011 2010 2011 2010 Age of debts RM RM RM RM Not past due 206,958,646 212,870,665 205,007,319 207,762,987 Past due 0-90 days 5,087,407 14,657,643 3,560,286 12,920,383 Past due 91-180 days 4,234,100 6,682,390 3,998,059 6,303,513 Past due more than 180 days 5,761,759 10,479,256 5,309,194 8,722,347 ------------------------ ------------------------ ------------------------ ------------------------ 222,041,912 244,689,954 217,874,858 235,709,230 Less: Allowance for impairment loss ( 687,000) ( 710,000) ( 663,000) ( 636,000) ------------------------ ------------------------ ------------------------ ------------------------ Total (see Note 8) 221,354,912 243,979,954 217,211,858 235,073,230 ============ ============ ============ ============

The movements in the allowance for impairment losses of trade receivables during the year were:

Group Company RM RM At 1 January 2010 652,000 520,000 Impairment loss provided 116,000 116,000 Impairment loss reversed ( 58,000) - ------------------------ ------------------------ At 31 December 2010/1 January 2011 710,000 636,000

Impairment loss provided 27,000 27,000 Impairment loss reversed ( 50,000) - ------------------------ ------------------------ At 31 December 2011 687,000 663,000 ============ ============

An allowance account in respect of trade receivables is used to record impairment losses. Unless the Group is satisfied that recovery is possible, the amount considered irrecoverable is written off against the receivables directly.

57 57 57 57



(a) Credit risk (continued) Financial guarantees Risk management objectives, policies and processes for managing the risk The Company provides unsecured financial guarantee to banks in respect of banking facilities granted to a subsidiary.

The Company monitors on an on-going basis the results of and repayments made by the subsidiary.

Exposure to credit risk, credit quality and collateral As at the end of the reporting period, the maximum exposure to credit risk amounts to RM1,389,600 (2010:

RM1,089,600) representing the banking facilities utilised by a subsidiary and there is no indication that the subsidiary would default on repayment. The financial guarantee has not been recognised as its fair value on initial recognition was not material.

(b) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s

exposure to liquidity risk arises principally from its various payables.

The Group monitors and maintains a level of banking facilities and cash and cash equivalents deemed adequate by management to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they fall due.

Maturity analysis The table below summarises the maturity profile of the Group’s financial liabilities (which are non-derivatives) as at

the end of the reporting period based on undiscounted contractual payments:

Carrying Contractual Under 1-2 2-5 amount cash flows 1 year years years 2011 RM RM RM RM RM

Trade and other payables - Group 100,499,677 101,266,954 92,664,844 7,490,656 1,111,454 - Company 96,676,141 97,406,353 89,212,812 7,183,296 1,010,245 ============ ============ ============ ============ ============

2010

Trade and other payables - Group 61,219,099 61,992,943 53,582,356 5,253,683 3,156,904 - Company 57,144,752 57,892,944 49,706,994 5,041,910 3,144,040 ============ ============ ============ ============ ============

(c) Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and other prices that

will affect the Group’s financial position or cash flows.

Currency risk The Group is exposed to foreign currency risk on purchases that are denominated in a currency other than Ringgit

Malaysia. The currencies giving rise to this risk are United States Dollar (USD), Euro, Japanese Yen (JPY) and Singapore Dollar (SGD). The amount of purchase in foreign currency is not significant to the Group.

The currency risk is managed on a case to case basis and forward exchange contracts are occasionally used to hedge

certain foreign currency risk.

58 58 58 58



(c) Market risk (continued)

Exposure to foreign currency risk The Group and the Company do not have any outstanding forward foreign exchange contract as at 31 December

2011.

The Group’s other exposure to foreign currency risk, based on the carrying amounts as at the end of the reporting period was:

2011 2010 RM RM Group and Company

Trade payables denominated in: - Euro 7,871 36,768 - SGD 110,507 2,560 - USD - 205,981 - Yen 147,362 - ------------------------ ------------------------ Exposure in the statement of financial position 265,740 245,309 ============ ============

Currency risk sensitivity analysis The exposure to currency risk is not material and hence, sensitivity analysis is not presented.

Interest rate risk The primary interest rate risk to which the Group is exposed to relate to the short term deposits which are fixed rate

instruments placed with approved financial institutions. The exposure to a risk of change in their fair value due to changes in interest rates would not be significant as the deposits are usually placed for less than three months.

Exposure to interest rate risk The overdraft facilities of the Group/Company bear interest ranging from 1.00% to 1.25% (2010: 1.00% to 1.25%) per

annum above the base lending rate of the lender banks and were not utilised as at the end of the reporting period.

Deposits placed with licensed banks (see Note 10) bear interest ranging from 2.10% to 3.32% (2010: 1.75% to 3.00%) per annum.

Interest rate risk sensitivity analysis Management does not expect fixed deposit rates to fluctuate materially in the coming year from the current level and

regards the Company’s exposure to interest rate risk as immaterial and hence does not present the sensitivity analysis.

24.3Fairvalueoffinancialinstruments The carrying amounts of cash and cash equivalents, trade and other receivables as well as trade and other payables

approximate their fair values due to the relatively short term nature of these financial instruments.

25. Capital management

The Group’s objectives when managing capital is to maintain strong capital base and safeguard the Group’s ability to continue as a going concern, so as to maintain the confidence of shareholders, creditors and markets in the Group and to sustain the future development of its business.

There were no changes in the Group’s approach to capital management during the year.

26. Related parties

Identity of related parties For the purposes of the financial statements, parties are considered to be related to the Group or the Company if the Group or the

Company has the ability, directly or indirectly, to control the parties or exercise significant influence over the parties in making financial and operating decisions, or vice versa, or where the Group or the Company and the parties are subject to common control or common significant influence. Related parties may be individuals or other entities.

59 59 59 59

26. Related parties (continued)

Identity of related parties (continued)

Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group either directly or indirectly. The key management personnel include all the Directors of the Group and certain members of senior management of the Group.

Significant related party transactions, other than key management personnel compensations (see Note 16) and those disclosed elsewhere in the financial statements, are as follows:

Transaction value 2011 2010 Group RM RM

Related parties * Income on hiring vessels, plant and machinery ( 2,681,476) ( 2,857,251) Purchase of motor vehicles and machinery 3,825,900 3,400,000 Purchase of consumables and raw materials 27,006,869 41,506,414 Piling and geotechnical works 12,261,134 - Repair and maintenance services 1,549,230 3,373,520 Hire of plant and machinery and vessels 5,511,301 4,242,172 Rental of premises 78,000 78,000 Freight and handling charges 2,395,137 2,147,399 ============ ============ Balances owing to related parties at year end 24,804,673 23,405,390 ============ ============

Company

Related parties (excluding subsidiaries) * Income on hiring vessels, plant and machinery ( 2,681,476) ( 2,857,251) Purchase of motor vehicles and machinery 3,825,900 3,400,000 Purchase of consumables and raw materials 24,981,364 40,508,243 Piling and geotechnical works 12,261,134 - Repair and maintenance services 1,538,131 3,352,199 Hire of plant and machinery and vessels 5,470,605 4,151,740 Rental of premises 66,000 66,000 Freight and handling charges 2,374,560 2,115,283 ============ ============

Balances owing to related parties at year end 24,174,240 22,818,926 ============ ============ * Consisting of companies controlled by/or connected to certain substantial shareholders and/or Directors of the Group and

the Company.

Related party transactions were effected based on negotiated terms and all amounts outstanding at the end of the reporting period are unsecured and expected to be settled in cash.

27. Acquisition of subsidiaries

During the previous financial year, the Company subscribed for 1,000,000 new ordinary shares of RM1.00 each in HSL Hydro Sdn. Bhd. (“HSL Hydro”) for a total cash consideration of RM1,000,000. On the same day, the Company subscribed for 75,000 new redeemable preference shares of RM1.00 each at an issue price of RM100.00 per share in the said subsidiary for a total consideration of RM7,500,000, satisfied in cash.

60 60 60 60

28. Significant changes in accounting policies

The effect of the initial adoption of FRS 139, Financial Instruments: Recognition and Measurement on 1 January 2010 by the Group and the Company is summarised as follows:

Group Company Retained earnings RM RM

At 1 January 2010, as previously stated 193,966,678 148,803,214 Adjustments arising from adoption of FRS 139 (net of tax): - Remeasurement of trade receivables ( 1,625,953) ( 1,526,953) - Remeasurement of trade payables 522,578 472,914

( 1,103,375) ( 1,054,039) ------------------------ ------------------------

At 1 January 2010, as restated 192,863,303 147,749,175 ============ ============

29. Subsequent event

On 28 February 2012, the Board of Directors approved the distribution in respect of the year ending 31 December 2012 of one (1) treasury share for every fifty (50) existing ordinary shares of RM0.20 each held by shareholders whose names appear on the Record of Depositors on 28 March 2012. The number of treasury shares to be distributed is approximately 10,948,317.

61 61 61 61

Supplementary financial information on the breakdown of realised and unrealised profit or losses

30. Disclosure of realised and unrealised profits or losses

The breakdown of the retained earnings of the Group and of the Company as at 31 December, into realised and unrealised profits or losses is as follows:

Group Company 2011 2010 2011 2010 RM RM RM RM Total retained earnings - Realised 338,593,957 261,883,094 279,429,901 209,039,800 - Unrealised ( 16,016,595) ( 14,158,186) ( 15,984,495) ( 14,135,186) Less: consolidation adjustments ( 356,030) ( 356,444) - - ------------------------ ------------------------ ------------------------ ----------------------- 322,221,332 247,368,464 263,445,406 194,904,614 ============ ============ ============ ============

The determination of realised and unrealised profits or losses is based on the Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants on 20 December 2010.

62 62 62 62

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

In the opinion of the Directors,

a) the financial statements set out on pages 25 to 60 are drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia, so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2011 and of their financial performance and cash flows for the year then ended, and

b) the information set out in Note 30 on page 61 to the financial statements has been compiled in accordance with the Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants, and presented based on the format prescribed by Bursa Malaysia Securities Berhad.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:

…………………………….Dato Yu Chee Hoe

…………………………….Lau Kiing Kang

Kuching,

Date: 26 March 2012

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

I, Augustine Law Sek Hian, the officer primarily responsible for the financial management of Hock Seng Lee Berhad, do solemnly and sincerely declare that the financial statements set out on pages 25 to 60 are, to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the abovenamed in Kuching in the State of Sarawak on 26 March 2012 .................................................. Augustine Law Sek HianBefore me:

63 63 63 63

Independent Auditors’ Report To The Members Of Hock Seng Lee Berhad

Report on the Financial Statements

We have audited the financial statements of Hock Seng Lee Berhad, which comprise the statements of financial position as at 31 December 2011 of the Group and of the Company, and statements of comprehensive income, changes in equity and cash flows of the Group and of the Company for the year then ended and notes, comprising a summary of significant accounting policies and other explanatory information, as set out on pages 25 to 60.

Directors’ Responsibility for the Financial StatementsThe Directors of the Company are responsible for the preparation of financial statements that give a true and fair view in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia, and 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’ ResponsibilityOur 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.

OpinionIn our opinion, the financial statements have been properly drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of 31 December 2011 and of their financial performance and cash flows for the year then ended.

Report on Other Legal and Regulatory Requirements

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

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

b) We are satisfied that the accounts 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) Our audit reports on the accounts of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act.

Other Reporting Responsibilities

Our audit was made for the purpose of forming an opinion on the financial statements taken as a whole. The information set out in Note 30 to the financial statements has been compiled by the Company as required by the Bursa Malaysia Securities Berhad Listing Requirements. We have extended our audit procedures to report on the process of compilation of such information. In our opinion, the information has been properly compiled, in all material respects, in accordance with the Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants and presented based on the format prescribed by 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.

KPMG Khaw Hock Hoe Firm Number: AF 0758 Approval Number: 2229/04/12(J)Chartered Accountants Chartered Accountant

Kuching,

Date: 26 March 2012

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TOP 10 PROPERTIES as at 31 December 2011

No Location Land area Tenure / Date Usage Book Value Year of (acres) lease expires (RM’000) acquisition

1 Lot 674 Block 14 200.3 Leasehold / Commercial/ 42,559 2006 Muara Tuang Land District Sarawak 05/06/2066 residential development

2 Lots 30, 44 & 83 Block 12 and Lots 56.8 Leasehold/ Industrial 23,128 2010 3612-3613, 3615, 4282 & 4922 and 08/08/2109 development Part of Lots 3614, 4276-4277 & 4283 Muara Tebas Land District Sarawak

3 Lots 3583-3584, 4279, 4281 & 4284 37.1 Leasehold/ Workshop & 14,774 2010 and Part of Lots 3614, 4276-4277 & 4283 08/08/2109 stockyard for Muara Tebas Land District Sarawak own use 4 Lots 4570-4763, 4767, 5280, 37.8 Leasehold/ Mixed 9,238 2006 5285-5287 & 5289 Block 225 20/08/2066 development Kuching North Land District Sarawak

5 Lot 1572 Block 12 47.3 Leasehold/ Shipyard & 8,824 2011 Buan Land District Sarawak 23/07/2068 workshop for own use 6 Lots 110 & 112 Block 223 8.9 Leasehold/ On-going 8,438 2000 Kuching North Land District Sarawak 31/12/2038 residential development

7 Lot 202 Phase III Block 83 9.9 Leasehold/ Residential 5,762 2000 Kuching Central Land District Sarawak 31/12/2048 Development 8 Lot 1966 Block 9 31.5 Leasehold/ Commercial 5,675 2005 Salak Land District Sarawak 08/04/2098 development

9 Lots 1129 and Part of Lots 1125, 1126, 190.2 Leasehold/ Mixed 5,465 2005 1131 & 1132 Block 37 25/05/2065 Development Kemena Land District Sarawak 10 Lot 7084 Block 9 41.9 Leasehold/ Residential 4,267 2005 Salak Land District Sarawak 08/04/2098 development

65 65 65 65

Material Contracts Involving Directors And Major ShareholdersThere were no material contracts of the Company and its subsidiaries involving directors and substantial shareholders during the financial year ended 31 December 2011 other than the recurrent related party transactions (“RPT”) as disclosed below.

Recurrent Related Party Transactions (RPT)The Shareholder mandate for the Group to enter into RPT of a revenue and trading nature was renewed at the last Annual General Meeting of Hock Seng Lee Berhad held on 25 May 2011. Details of the RPT conducted during the financial year ended 31 December 2011 pursuant to the Shareholder mandate are as follows:

Nature of Transactions Related Parties Value of RPT (RM’000) Income on hiring plant and machinery and vessels Hock Seng Lee Corporation Sdn Bhd and its subsidiaries (2,682) Purchase of motor vehicles and machinery Hock Seng Lee Timber Sdn Bhd and its subsidiaries 3,826 Purchase of consumables and raw materials Hock Seng Lee Corporation Sdn Bhd and its subsidiaries 27,007 Megapron Engineering Sdn Bhd Lau Kou Chiong & Sons Sdn Bhd Hock Seng Lee Realty Sdn Bhd Repair and maintenance services Hock Seng Lee Timber Sdn Bhd and its subsidiaries 1,549 Hire of plant and machinery and vessels Hock Seng Lee Timber Sdn Bhd and its subsidiaries 5,511 Hock Seng Lee Heavy Industries Sdn Bhd Hock Seng Lee Corporation Sdn Bhd and its subsidiaries Jentera Ceria Sdn Bhd Rental of premises Hock Seng Lee Realty Sdn Bhd 78 Hock Seng Lee Timber Sdn Bhd Hock Seng Lee Holdings Sdn Bhd and its subsidiaries Freight and handling charges Hock Seng Lee Timber Sdn Bhd and its subsidiaries 2,395 Megakina Shipping Sdn Bhd Jentera Ceria Sdn Bhd Piling and geotechnical services Borneo Geotechnical Engineering Sdn Bhd 12,261 Aggregate Gross Value 55,309

The Related Parties are companies controlled by or connected to certain substantial shareholders and/or Directors of the Company,namely:1. Datuk Yii Chi Hau, Yu Chee Lieng, Dato Yu Chee Hoe and Yii Chee Sing (Yu/Yii Brothers); and2. Lau Kiing Kang and Lau Kiing Yiing (brothers-in-law of the Yu/Yii Brothers).

Share Buy-BackThe Company has purchased 7,018,400 of its own shares from the open market during the financial year ended 31 December 2011 at an average price of RM1.516 per ordinary share. All the 7,018,400 shares purchased back by the Company are retained as treasury shares.

The monthly breakdown for the shares purchased back during the financial year ended 31 December 2011 is set out below:-

The total number of treasury shares held by the Company at 31 December 2011 was 34,761,058 (2010: 27,742,658).

On 12 April 2012, a total of 10,939,477 treasury shares were distributed as share dividends to the Company’s shareholders on the basis of one (1) treasury share for every fifty (50) existing ordinary shares held by shareholders whose name appear on the Record of Depositors on 28 March 2012.

Non-Audit FeesThe amount of non-audit fees paid by the Group to the external auditors for professional services rendered for the financial year ended 31 December 2011 was RM23,000.

OTHER INFORMATION

Purchase Price Total Purchase Month No. of shares purchased and Lowest Highest Average Consideration held as treasury shares (RM) (RM) (RM) (RM)

March 2011 1,548,200 1.720 1.830 1.784 2,762,249

April 2011 966,900 1.630 1.730 1.709 1,652,216

August 2011 1,789,500 1.330 1.530 1.459 2,611,405

September 201 1,558,000 1.220 1.490 1.352 2,106,884

October 2011 788,200 1.260 1.340 1.304 1,028,159

November 2011 16,600 1.260 1.300 1.287 21,356

December 2011 351,000 1.300 1.310 1.313 460,822

Total for 2011 7,018,400 1.220 1.830 1.516 10,643,091

66 66 66 66

SHAREHOLDING ANALYSIS as at 12 April 2012

Authorised share capital : RM300,000,000 divided into 1,500,000,000 ordinary shares of RM0.20 eachIssued and paid-up capital : RM116,535,200 comprising 582,676,000 ordinary shares of RM0.20 eachClass of shares : Ordinary Shares of RM0.20 eachVoting rights : One (1) vote per ordinary shareNo. of treasury shares held : 24,717,781 ordinary shares

ANALYSIS BY SIZE OF HOLDINGS Number of Percentage of Number of Percentage of Size of holdings shareholders/ shareholders/ shares held issued capital depositors depositors Less than 100 332 6.33 13,387 0.00 100 – 1,000 209 3.99 70,674 0.01 1,001 – 10,000 2,785 53.15 11,132,116 2.00 10,001 – 100,000 1, 777 33.91 39,747,672 7.12 100,001 – less than 5% of issued shares 134 2.56 104,432,949 18.72 5% and above of issued shares 3 0.06 402,561,421 72.15 TOTAL 5,240 100.00 557,958,219 100.00

SUBSTANTIAL SHAREHOLDERSas shown in the register of substantial shareholders Direct interests Indirect interests No. of shares % No. of shares % Hock Seng Lee Enterprise Sdn Bhd 321,267,207 57.58 - - Datuk Yii Chi Hau A 9,138,873 1.64 321,267,207* 57.58 Yu Chee Lieng 6,335,203 1.14 321,267,207* 57.58 Dato Yu Chee Hoe B 5,144,497 0.92 321,267,207* 57.58 Yii Chee Sing C 3,544,642 0.64 321,267,207* 57.58 AmanahRaya Trustees Berhad 41,616,000 7.46 - - - Skim Amanah Saham Bumiputera Employees Provident Fund Board D 55,162,630 9.89 - -

DIRECTORS’ INTERESTSas shown in the Register of Directors’ Interests Direct interests Indirect interests No. of shares % No. of shares % Dato Yu Chee Hoe B 5,144,497 0.92 321,267,207* 57.58 Datuk Yii Chi Hau A 9,138,873 1.64 321,267,207* 57.58 Yu Chee Lieng 6,335,203 1.14 321,267,207* 57.58 Lau Kiing Kang E 1,222,469 0.22 399,513# 0.07 Yii Chee Sing C 3,544,642 0.64 321,267,207* 57.58 Lau Kiing Yiing 287,150 0.05 416,160# 0.07 Dato’ Haji Idris Bin Buang - - - - Dato’ Mohd. Nadzir Bin Mahmud - - - - Dr Chou Chii Ming 124,848 0.02 - - Tuan Hj Abang Kashim Bin Abang Morshidi - - - -

A held through RHB Capital Nominees (Tempatan) Sdn BhdB held through himself and CIMSEC Nominees (Tempatan) Sdn BhdC held through himself and Kenanga Nominees (Tempatan) Sdn BhdD held through itself and Citigroup Nominees (Tempatan) Sdn BhdE held through himself and TA Nominees (Tempatan) Sdn Bhd* Deemed interested by virtue of his substantial shareholding in Hock Seng Lee Enterprise Sdn Bhd# Shares held by their respective spouses

67 67 67 67

TOP 30 SECURITIES ACCOUNT HOLDERS

No. of Holdings Name Shares Held %

1 HOCK SENG LEE ENTERPRISE SENDIRIAN BERHAD 321,267,207 57.58

2 AMANAHRAYA TRUSTEES BERHAD – SKIM AMANAH SAHAM BUMIPUTERA 41,616,000 7.46

3 CITIGROUP NOMINEES (TEMPATAN) SDN BHD – EMPLOYEES PROVIDENT 39,678,214 7.11 FUND BOARD

4 CITIGROUP NOMINEES (TEMPATAN) SDN BHD – EMPLOYEES PROVIDENT 13,823,346 2.48 FUND BOARD (NOMURA)

5 AMSEC NOMINEES (TEMPATAN) SDN BHD – NGU SOON HIENG 11,019,197 1.97

6 RHB CAPITAL NOMINEES (TEMPATAN) SDN BHD – PLEDGED SECURITIES 9,138,873 1.64 ACCOUNT FOR YII CHI HAU

7 MAYBAN NOMINEES (ASING) SDN BHD – NOMURA SINGAPORE LIMITED 8,662,370 1.55 FOR HIDEAKI TSUOKA

8 YU CHEE LIENG 6,335,203 1.14

9 YU CHEE HOE 4,716,757 0.85

10 KENANGA NOMINEES (TEMPATAN) SDN BHD – PLEDGED SECURITIES 3,262,694 0.59 ACCOUNT FOR YII CHEE SING

11 CITIGROUP NOMINEES (ASING) SDN BHD – CGML IPB FOR PEDDER STREET 2,621,298 0.47 ASIA ABSOLUTE RETURN MASTER FUND LIMITED

12 KUMPULAN WANG SIMPANAN GURU-GURU (KWSGACT431961) 2,258,994 0.41

13 EMPLOYEES PROVIDENT FUND BOARD 1,560,600 0.28

14 CITIGROUP NOMINEES (TEMPATAN) SDN BHD – KUMPULAN WANG 1,468,800 0.26 PERSARAAN (DIPERBADANKAN) (NOMURA)

15 AMANAHRAYA TRUSTEES BERHAD – PUBLIC ISLAMIC SECTOR SELECT FUND 1,365,941 0.24

16 MAYBAN NOMINEES (TEMPATAN) SDN BHD – MAYBAN TRUSTEES BERHAD 1,198,602 0.21 FOR MAAKL VALUE FUND

17 TA NOMINEES (TEMPATAN) SDN BHD – PLEDGED SECURITIES ACCOUNT 1,197,500 0.21 FOR LAU KIING KANG

18 HONG LEONG ASSURANCE BERHAD – AS BENEFICIAL OWNER 1,140,258 0.20 (UNITLINKED GF)

19 CITIGROUP NOMINEES (ASING) SDN BHD – CBNY FOR DFA EMERGING 1,051,116 0.19 MARKETS SMALL CAP SERIES

20 AM NOMINEES (TEMPATAN) SDN BHD – LEMBAGA TABUNG HAJI 965,052 0.17

21 ONG TOO @ ONG OH CHOO 951,966 0.17

22 CHAN LING LEE 944,114 0.17

23 HSBC NOMINEES (ASING) SDN BHD – HSBC BK PLC FOR WEST 918,000 0.16 YORKSHIRE PENSION FUND 24 CITIGROUP NOMINEES (TEMPATAN) SDN BHD – NOMURA ASSET MANAGEMENT 850,068 0.15 MSIA FOR SYARIKAT TAKAFUL MALAYSIA BERHAD (FAMILY TAKA FD)

25 KUMPULAN WANG SIMPANAN GURU-GURU (ACT431961) 836,196 0.15

26 CITIGROUP NOMINEES (TEMPATAN) SDN BHD – ALLIANZ LIFE INSURANCE 735,518 0.13 MALAYSIA BERHAD (MEF)

27 HONG LEONG ASSURANCE BERHAD – AS BENEFICIAL OWNER (UNITLINKED DP) 720,700 0.13

28 HSBC NOMINEES (ASING) SDN BHD – EXEMPT AN FOR JPMORGAN 713,898 0.13 CHASE BANK, NATIONAL ASSOCIATION (U.S.A.)

29 AMSEC NOMINEES (TEMPATAN) SDN BHD – AMTRUSTEE BERHAD FOR APEX 642,906 0.12 DANA AL-SOFI-I (UT-APEX-SOFI)

30 CITIGROUP NOMINEES (ASING) SDN BHD – CIPLC FOR MANULIFE GLOBAL 634,440 0.11 FUND-ASIAN SMALL CAP EQUITY FUND

TOTAL 482,295,828 86.43

68 68 68 68

NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT the Thirty-first Annual General Meeting (“AGM”) of Hock Seng Lee Berhad (“the Company”) will be held at Borneo Convention Centre Kuching, The Isthmus, Sejingkat, 93050 Kuching, Sarawak, Malaysia at 9.00 am on 23 May 2012 for the following business:

ORDINARY BUSINESS RESOLUTION1. To receive and adopt the Audited Financial Statements for the year ended 31 December 2011 together

with the Reports of the Directors and Auditors thereon.

2. To approve the payment of a final ordinary dividend of 9% per share less tax at 25% for the year ended 31 December 2011 as recommended by the Directors.

3. To approve the payment of a special dividend of 3% per share less tax at 25% for the year ended 31 December 2011 as recommended by the Directors.

4. To approve the payment of Directors’ fees of up to RM175,000 (2011:RM175,000) for the financial year ending 31 December 2012.

5. To re-elect as a Director, Dato Yu Chee Hoe, who retires by rotation pursuant to Article 115 of the Company’s Articles of Association.

6. To re-elect as a Director, Datuk Yii Chi Hau, who retires by rotation pursuant to Article 115 of the Company’s Articles of Association.

7. To re-elect as a Director, Dato’ Haji Idris Bin Buang, who retires by rotation pursuant to Article 115 of the Company’s Articles of Association.

8. To re-appointment as a Director, Dr Chou Chii Ming, who retires pursuant to Section 129(2) of the Companies Act 1965, to hold office until the next AGM.

9. To re-appointment as a Director, Dato’ Mohd. Nadzir Bin Mahmud, who retires pursuant to Section 129(2) of the Companies Act 1965, to hold office until the next AGM.

10. To re-appoint Messrs KPMG as auditors of the Company and to authorise the Board of Directors to fix their remuneration.

SPECIAL BUSINESSTo consider and, if thought fit, pass the following Ordinary Resolutions:

11. PROPOSED RENEWAL OF AUTHORITY FOR SHARE BUY-BACK “THAT, subject to the Companies Act, 1965, the Company’s Articles of Association and the requirements

of Bursa Malaysia Securities Berhad (“Bursa Malaysia”) and any other relevant authorities, the Company be and is hereby authorised to purchase such number of ordinary shares of RM0.20 each (“Shares”) in the Company (“Proposed Share Buy-Back”) as may be determined by the Directors of the Company (“Directors”) from time to time through Bursa Malaysia upon such terms and conditions as the Directors may deem fit, necessary and expedient in the interest of the Company provided that the total aggregate number of Shares purchased or to be purchased pursuant to this resolution shall not exceed ten percent (10%) of the total issued and paid-up share capital of the Company AND THAT an amount not exceeding the Company’s latest audited retained earnings of RM263,445,406 as at 31 December 2011, be allocated by the Company for the Proposed Share Buy-Back AND THAT authority be and is hereby given to the Directors to decide in their absolute discretion to either retain the Shares purchased by the Company as treasury shares to be either distributed as share dividends or resold on Bursa Malaysia or subsequently cancelled, or to cancel the Shares so purchased, or a combination of both AND THAT the Directors of the Company be and are hereby authorised to act and to take all such steps and to do all things as they may deem necessary or expedient to implement, finalise and to give full effect to the Proposed Share Buy-Back.

AND FURTHER THAT the authority hereby given shall commence immediately upon passing of this

ordinary resolution and shall continue in force until :- a) the conclusion of the next AGM of the Company at which time it shall lapse, unless by ordinary

resolution passed at that meeting, the authority is renewed, either unconditionally or subject to conditions;

b) the expiration of the period within which the next AGM is required by law to be held; c) revoked or varied by ordinary resolution passed by the shareholders in general meeting, whichever occurs first”

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1212. PROPOSED RENEWAL OF SHAREHOLDER MANDATE IN RELATION TO THE RELATED PARTY TRANSACTIONS INVOLVING RECURRENT TRANSACTIONS OF A REVENUE OR TRADING NATURE (“Proposed Shareholder Mandate”)

“THAT pursuant to Paragraph 10.09 of Chapter 10 of the Listing Requirements of Bursa Malaysia, the Directors of the Company be and are hereby empowered to enter into recurrent related party transactions of a revenue or trading nature of the activities as set out in Section 3.1.1 of the Circular to shareholders which are necessary for its day-to-day operations and are in the ordinary course of business and are on terms not more favourable to the related party than those generally available to the public at any time until:-

(a) the conclusion of the next AGM of the Company, at which time the shareholder mandate will lapse, unless by a resolution passed at the meeting, the authority is renewed;

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

(c) revoked or varied by resolution passed by the shareholders in general meeting, whichever is the earlier, upon such terms and conditions as the Directors of the Company, may in their

absolute discretion deem fit. AND THAT the Directors of the Company be and are hereby authorised to complete and to do all such

acts and things they may consider expedient or necessary to give effect to the Proposed Shareholder Mandate.”

13. To transact any other business for which due notice shall have been given in accordance with the Company’s Articles of Association and the Companies Act, 1965.

NOTICE OF DIVIDEND ENTITLEMENT DATE AND PAYMENTNOTICE IS ALSO HEREBY GIVEN THAT, subject to the approval of the shareholders at the Thirty-first AGM a final dividend of 9% per share less income tax at 25% and a special dividend of 3% per share less income tax at 25% in respect of the year ended 31 December 2011 will be paid on 18 June 2012 to Depositors whose name appear in the Record of Depositors on 7 June 2012.

A Depositor shall qualify for entitlement to the Dividend only in respect of:

a) Shares transferred into the Depositor’s Securities Account before 4.00 pm on 7 June 2012 in respect of transfers; and b) Shares bought on Bursa Malaysia Securities Berhad on a cum entitlement basis in accordance with the Rules of Bursa Malaysia

Securities Berhad.

By Order of the Board

Yu Chee Hung (MIA No. 3926)Augustine Law Sek Hian (MIA No. 10087)Company Secretaries

Kuching26 April 2012

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GENERAL MEETING RECORD OF DEPOSITORS1. For the purpose of determining a member who shall be entitled to attend this AGM, the Company shall request Bursa Malaysia

Depository Sdn Bhd to issue a General Meeting Record of Depositors as at 16 May 2012. Only a depositor whose name appears on the General Meeting Record of Depositors as at 16 May 2012 shall be entitled to attend this AGM or to appoint proxies to attend and/or vote on his/her behalf.

PROXY2. A member of the Company entitled to attend and vote at this meeting is entitled to appoint any person as his/her proxy to attend

and vote instead of the member at the meeting.

3. Where a member appoints two proxies, the appointment shall be invalid unless he/she specifies the proportions of his/her holdings to be represented by each proxy.

4. Where a member is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account (“omnibus account”), there is not limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds.

5. The instrument appointing a proxy in the case of an individual shall be signed by the appointer, or his/her attorney duly authorised in writing and in the case of a corporation the instrument appointing a proxy must be under Seal or under the hand of an attorney duly authorised in writing.

6. The instrument appointing a proxy must be completed, signed and deposited at the Registered Office of the Company at Lot 1004, Jalan Kwong Lee Bank, 93450 Kuching, Sarawak, Malaysia not less than forty-eight (48) hours before the time set for holding the meeting or any adjournment thereof.

ABSTENTION FROM VOTING7. The payment of Directors’ fees shall be distributed to the Non-executive Directors. All the Non-executive Directors of the

Company who are shareholders of the Company will abstain from voting on Resolution 4 concerning the payment of Directors’ Fees.

8. The Directors and major shareholders and persons connected to them as disclosed in 3.2 of the Circular to Shareholders will abstain from voting on Resolution 12 pertaining to the Proposed Renewal of Shareholder Mandate in relation to the related party transactions involving recurrent transactions of a revenue or trading nature.

RESOLUTION PURSUANT TO SECTION 129(6) OF THE COMPANIES ACT 19659. The re-appointment of Dr Chou Chii Ming and Dato’ Mohd Nadzir Bin Mahmud, who have attained the age of seventy (70) years

old respectively, to hold office until the conclusion of the next annual general meeting of the Company shall take effect if the proposed Resolution 8 & 9 have been passed respectively by a majority of not less than three-fourth (3/4) of such members as being entitled to vote in person or by proxy at the AGM.

EXPLANATORY NOTES ON SPECIAL BUSINESS10. Ordinary Resolution Pursuant To Proposed Renewal of Authority for Share Buy-Back The proposed Ordinary Resolution 11, if passed, will give the Directors of the Company authority to purchase the Company’s

Shares through Bursa Malaysia Securities Berhad up to ten percent (10%) of the issued and paid up share capital of the Company and the funds allocated shall not exceed the total retained earnings of the Company. This authority, unless revoked or varied at a general meeting, will expire at the conclusion of the next AGM of the Company. Further information on the Proposed Renewal of Authority for Share Buy-Back is set out in the Circular to Shareholders of the Company dated 26 April 2012 which is despatched together with the Company’s Annual Report 2011.

11. Ordinary Resolution Pursuant To Proposed Renewal of Shareholder Mandate For Ordinary Resolution 12, further information on the Proposed Renewal of Shareholder Mandate in relation to the related

party transactions involving recurrent transactions of a revenue or trading nature is set out in the Circular to Shareholders of the Company dated 26 April 2012 which is despatched together with the Company’s Annual Report 2011. This mandate, if approved, will expire at the conclusion of the next AGM of the Company unless revoked or varied at a general meeting.

FURTHER DETAILS OF DIRECTORS WHO ARE STANDING FOR RE-ELECTION/RE-APPOINTMENT12. Details of Directors who are standing for re-election/re-appointment are set out in the Profile of Directors on pages 12 to 13 of the

Annual Report 2011. Information relating to the respective Director’s interest in the securities of the Company and its subsidiaries is set out on page 23 of the Annual Report 2011.

HOCK SENG LEE BERHAD(Company No.: 045556-X)

F o r m o F P r o x y

I/We (full name as per NRIC/company name in block capitals)……………………………………………………………....................…...NRIC/Company No.……………………………………………………………………………………………………………………………...of (full address)………………………………………………………………………………………....………………………………..………being a member of HOCK SENG LEE BERHAD hereby appoint (full name as per NRIC in block capitals).....................................…………………………………………………………………………………………………....…….........NRIC................................................of (full address)……………………………………………………………………………………………………………………………………or failing him/her……………………………………………………………………………………….NRIC…………………………………..of (full address)…………………………………………………………………………………………………………………………………… as my/our proxy to vote for me/us and on my/our behalf at the Annual General Meeting of the Company to be held on 23 May 2012 or at any adjournment thereof.

(Please indicate with a “√” in the space above how you wish your vote to be cast. If no specific direction as to voting is indicated above, the proxy will vote or abstain from voting as he/she thinks fit.)

Dated this .............. day of ..........………………2012

Signature of shareholder

RESOLUTIONS FOR AGAINST

1. Adoption of the Audited Financial Statements for the year ended 31 December 2011 together with the Reports of the Directors and Auditors thereon

2. Declaration of a final dividend of 9% per share less tax at 25% for the year ended 31 December 2011

3. Declaration of a special dividend of 3% per share less tax at 25% for the year ended 31 December 2011

4. Approval of the payment of Directors’ fees of up to RM175,000 for the financial year ending 31 December 2012

5. Re-election of Dato Yu Chee Hoe as Director

6. Re-election of Datuk Yii Chi Hau as Director

7. Re-election of Dato’ Haji Idris Bin Buang as Director

8. Re-appointment of Dr Chou Chii Ming as Director

9. Re-appointment of Dato’ Mohd. Nadzir Bin Mahmud as Director10. Re-appointment of Messrs KPMG as auditors of the Company and to authorise the

Board of Directors to fix their remuneration11. Renewal of Authority for the Proposed Share Buy-Back

12. Renewal of Shareholder Mandate in relation to the related party transactions involving recurrent transactions of a revenue or trading nature

NOTES:i. A member of the Company entitled to attend and vote at this meeting is entitled to appoint any person as his/her proxy to attend

and vote instead of the member at the meeting. ii. Where a member appoints two proxies, the appointment shall be invalid unless he/she specifies the proportions of his/her

holdings to be represented by each proxy. iii. Where a member is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners

in one securities account (“omnibus account”), there is not limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds.

iv. The instrument appointing a proxy in the case of an individual shall be signed by the appointer, or his/her attorney duly authorised in writing and in the case of a corporation the instrument appointing a proxy must be under Seal or under the hand of an attorney duly authorised in writing.

v. The instrument appointing a proxy must be completed, signed and deposited at the Registered Office of the Company at Lot 1004, Jalan Kwong Lee Bank, 93450 Kuching, Sarawak, Malaysia not less than forty-eight (48) hours before the time set for holding the meeting or any adjournment thereof.

No. of shares held

The Company SecretaryHOCK SENG LEE BERHADLot 1004 Jalan Kwong Lee Bank93450 KuchingSarawakMalaysia

stamp


OUR VISIONto be a leading, integrated, professional construction company contributing positively to the development of

modern environments in the region.

OUR MISSIONto deliver high quality marine engineering, civil engineering, construction and property development

projects on time and on budget to our clients’ total satisfaction.

OUR STRATEGYto maintain a high performance organisation with dedicated, competent staff who work together to provide

dependable project delivery and superior business results.

Documents

Contentshsl.listedcompany.com/misc/ar2011.pdf · 93450 Kuching, Sarawak, Malaysia Tel: 6-082-332755 Fax: 6-082-484653 email: [email protected] Website: aUDitoRs kpMg REgistRaR Tricor