having practiced as a partner in the legal firms hisham, sobri & kadir and kadir, khoo &...

Ho Hup ConstruCtion Company BerHad (14034-W)

No.18, Jalan 17/155C, Bandar Bukit Jalil, 57000 Kuala LumpurTel No. : 03-8993 9168 Fax No. : 03-8993 9268

Ho Hup ConstruCtion Company BerHad (14034-W)

www.hohup.net

Annual Report 2008

Ho

Hu

p C

on

st

ru

Ct

ion

Co

mp

an

y B

er

Ha

d (14034-W

) A

NN

uA

L repo

rT 2008

02 Corporate Information

03 Corporate Structure

04 Board of Directors’ Profile

07 Corporate Governance Statement

14 Other Information required by the Listing Requirements of Bursa Malaysia Securities Berhad

15 Statement On Internal Control

17 Audit Committee Report

21 Directors’ Responsibility Statement

22 Chairman’s Statement

26 Analysis of Shareholdings

30 List of Properties

31 Financial Statements

115 Notice of Annual General Meeting

117 Statement Accompanying Notice of Annual General Meeting

• Form of Proxy

contents2008

35thAnnual GeneralMeeting

Place : Kelab Golf Seri Selangor, Persiaran Damansara Indah, Off Jalan Persiaran Damansara Tropicana, 47410 Petaling Jaya, Selangor Darul EhsanTime : 25 June 2009, Thursday, 9.30 am

2hO huP CONSTRuCTION COMPANy BERhAD (14034-W)

2008 Annual Report

corporAte information

COMPANY SECRETARIES

Ms. Wong Wei Fong (MAICSA 7006751)Mr. Ivan Oh Boon Wee (MIA 17911)

SHARE REGISTRAR

Tenaga Koperat Sdn BhdLevel 17, The Gardens North TowerMid Valley CityLingkaran Syed Putra59200 Kuala LumpurTel No. : 03-2264 3883Fax No. : 03-2282 1886

REGISTERED OFFICE

No.18, Jalan 17/155CBandar Bukit Jalil57000 Kuala LumpurTel No. : 03-8993 9168Fax No. : 03-8993 9268

BOARD OF DIRECTORS

yBhg. Tan Sri Datuk Seri Panglima Abdul Kadir Bin haji Sheikh Fadzir Chairman/Independent Non-Executive Director

yBhg. Datuk Lye Ek SeangDeputy Executive Chairman

Mr. Lim Ching ChoyManaging Director

Mr. Low Teik Kien Executive Director

Encik Faris Najhan Bin hashim Executive Director

Mr. Lai Moo Chan Independent Non-Executive Director

yBhg. Dato’ Liew Lee Leong Independent Non-Executive Director

Mr. Low Kim Leng Independent Non-Executive Director

Encik Long Md. Nor Amran Bin Long Ibrahim Independent Non-Executive Director

PRINCIPAL BANKERS

CIMB Bank Berhadunited Overseas Bank (Malaysia) BerhadMalayan Banking Berhad

AUDITORS

Ernst & youngChartered AccountantsLevel 23A, Menara MileniumJalan DamanlelaPusat Bandar Damansara50490 Kuala LumpurTel No. : 03-7495 8000Fax No. : 03-2095 5332

SOLICITORS

Skrine & Co.Jasbeer, Nur & LeeRingo Low & AssociatesMohamed Noor, Amran & yoonFong, yap & Gan

STOCK EXCHANGE LISTING

Bursa Malaysia Securities Berhad

STOCK CODE

5169

STOCK NAME

hOhuP

WEBSITE

www.hohup.net


2008 Annual Report

corporAte structure

100% ho hup Construction Company (India) Private Limited *

100% ho hup Construction Company Berhad (Madagascar Branch)

49.9% ho hup Construction (Madagascar) SARL ***

100% ho hup Corporation (Mauritius) Ltd ****

50% hupcon Antarabangsa Sdn Bhd

45% Shanghai San ho hup Pile Co. Ltd **

100% ho hup Corporation (South Africa) Pty Ltd #

100% ho hup Geotechnics Sdn Bhd

100% ho hup Jaya Sdn Bhd

* Incorporated in India** Incorporated in the People’s Republic of China*** Incorporated in Madagascar**** Incorporated in Mauritius

100% ho hup Equipment Rental Sdn Bhd

70% Bukit Jalil Development Sdn Bhd

48% ho hup Corporation (Thailand) Limited ##

49% Semenyih Brickmakers Sdn Bhd

100% Timeless Element Sdn Bhd

90% Tru-Mix Concrete Sdn Bhd

80% PT halford Citra ###

100% h2Energy Corporation Sdn Bhd (Formerly known as homeg Sdn Bhd)

100% Mekarani heights Sdn Bhd

100% Intermax Resources Sdn Bhd

# Incorporated in South Africa## Incorporated in Thailand### Incorporated in Indonesia

Ho Hup ConstruCtion Company BerHad


2008 Annual Report

boArd of directors’ profile YBHG. TAN SRI DATUK SERI PANGLIMA ABDUL KADIR BIN HAjI SHEIKH FADzIRChairman

yBhg. Tan Sri Datuk Seri Panglima Abdul Kadir bin haji Sheikh Fadzir, a Malaysian, aged 70, was appointed to the Board of ho hup Construction Company Berhad on 6 August 2008. On 16 January 2009, he was redesignated from Non-Independent Non-Executive Director to Independent Non-Executive Director of the Company.

yBhg. Tan Sri Kadir graduated from Lincoln’s Inn, London in 1970. he was Minister of Information prior to his resignation from the Cabinet on 14 February 2006. he is a lawyer by profession, having practiced as a partner in the legal firms hisham, Sobri & Kadir and Kadir, Khoo & Aminah from 1974 to 1982 and 1987 to 1990 respectively. yBhg. Tan Sri Kadir had been holding full-time

positions with the Federal Government since 1970 beginning as Political Secretary, Parliamentary Secretary, Deputy Minister and Cabinet Minister in various ministries almost continuously until his resignation as Minister of Information. yBhg. Tan Sri Kadir was Minister of Culture, Arts and Tourism for 5 years before his appointment as Minister of Information in 2004. During his tenure as Minister of Culture, Arts and Tourism, he was also the Chairman, Tourism Promotions Board of Malaysia.

Currently, yBhg. Tan Sri Kadir also sits on the Board of Karambunai Corporation Berhad and MNC Wireless Berhad.

yBhg. Tan Sri Kadir has no family relationship with any director and/or major shareholders of the Company, and has no conflict of interest with the Company. he has not been convicted of any offences for the past 10 years.

YBHG. DATUK LYE EK SEANGDeputy Executive Chairman

yBhg. Datuk Lye Ek Seang, a Malaysian, aged 44, was appointed to the Board of ho hup Construction Company Berhad on 6 August 2008. On 1 December 2008, he was redesignated from Non-Independent Non-Executive Director to Deputy Executive Chairman of the Company. he is the Chairman of the Executive Committee.

yBhg. Datuk Lye holds a Bachelor of Science (hons.) degree in Mathematics from the university of Malaya. he holds various directorships in media and television production companies and

is the founder of Systemvation Sdn Bhd & VL Film Productions Sdn Bhd. VL Film Productions Sdn Bhd and CCTV (China Central Television) has jointly produced 3 world class dramas and documentaries namely, “Tale of Twin Cities”, “SEA Providence” and a documentary on Malacca for the world market.

Currently, yBhg. Datuk Lye also sits on the Board of Magna Prima Berhad and Minetech Resources Berhad.

yBhg. Datuk Lye is the spouse of Datin Viannie Damit @ undikai, a major shareholder of the Company. he has no conflict of interest with the Company. he has not been convicted of any offences for the past 10 years.

MR LIM CHING CHOYExecutive Director/Managing Director

Mr Lim Ching Choy, a Malaysian, aged 48, was appointed to the Board of Directors of the Company on 1 June 2009 as a Managing Director. he is a member of the Executive Committee.

Mr Lim has had a diverse and broad involvement in various capacities in the corporate and financial sectors. he spent a total of 22 years in the banking and financial services industry where he acquired administrative, operational and management skills in new ventures, expansion and turnaround situations. he spent 12 years with the Arab-Malaysian Banking Group before joining Bolton Finance Berhad as Chief Executive Officer in 1996, a post which he held for 5 years until 2001. In that year, he was appointed Chief Executive Director of Alliance Finance Berhad (formerly known as Bolton Finance Berhad).

he was appointed as the Chief Executive Officer/ Executive Director of Mah Sing Group Berhad from July 2002 to October 2006. his presence in Mah Sing Group Berhad was significant in helping the group increase the number of projects as well as increasing the group’s turnover.

Mr Lim was subsequently appointed as the Chief Executive Officer of Magna Prima Berhad from November 2006 to May 2009. Within a one year period, Mr. Lim orchestrated a remarkable turnover at Magna Prima Berhad.

Mr Lim does not hold any other directorship in any other public listed companies.

Mr Lim has no family relationship with any director and/or major shareholders of the Company, and has no conflict of interest with the Company. he is not convicted of any offences for the past 10 years.


2008 Annual Report

DATO’ LIEW LEE LEONG @ RAYMOND LIEWIndependent Non-Executive Director

Dato’ Liew Lee Leong @ Raymond Liew, a Malaysian, aged 52, was appointed to the Board of the Company as an Independent Non-Executive Director on 1 December 2008. Dato’ Raymond Liew is the Chairman of the Audit Committee. he is also a member of both the Nomination Committee and Remuneration Committee.

he is a Chartered Accountant by profession, holds a Master degree in Business Administration from henley Management College, united Kingdom. he is a fellow member of both The Association of Chartered Certified Accountants (uK) and the Malaysian Institute of Certified Public Accountants.

Dato’ Raymond Liew is currently, the Managing Partner of Parker Randall Malaysia and the Deputy President of Parker Randall International (uK).

Dato’ Raymond Liew spent over 20 years in the united Kingdom where he has gained extensive work experience with professional

firms and multi-national companies in corporate advisory, insolvency, mergers and acquisitions and corporate tax planning exercises. he returned to Malaysia in 1997 and has since assisted in numerous corporate recoveries and related due diligence corporate exercises. With his extensive work knowledge, Dato’ Raymond Liew is a regular writer of technical articles and a regular speaker at various seminars and workshops. he is a Trustee of the Malaysian Accountancy Research & Education Foundation and is a Council Member of the Chartered Tax Institute of Malaysia (Formerly known as Malaysian Institute of Taxation) and a council member of the Malaysian Institute of Accountants between the years 2001 – 2008 and chairs various committees in both the institutes. he also represents the institutes in tax dialogues and discussions with the Inland Revenue Board and the Ministry of Finance on a regular basis. Currently, Dato’ Raymond Liew also sits on the Board of Seni Jaya Corporation Berhad.

Dato’ Raymond Liew has no family relationship with any director and/or major shareholders of the Company, and has no conflict of interest with the Company. he has not been convicted of any offences for the past 10 years.

MR LOW TEIK KIENExecutive Director

Mr Low Teik Kien, a Malaysian, aged 44, was first appointed to the Board of the Company on 1 June 1995 and has since served as an Executive Director. he is a member of the Executive Committee. he has over 22 years of experience in the construction and building industry. he is also a director of Tru-Mix Concrete Sdn Bhd and several other private companies.

As a key member of the Company’s Management Group, Mr Low is responsible for overseeing the maintenance of the Company’s comprehensive fleet of construction equipment and the provision of logistics support for the Group’s construction projects in Malaysia.

Mr Low does not hold any other directorship in any other public listed companies.

Mr Low does not have any family relationship with the Directors. he is the brother of Dato’ Low Tuck Choy, a major shareholder of the Company. he has no conflict of interest with the Company other than disclosed under Note 38 to the Financial Statements on pages 102 to 103 of the Annual Report. he has not been convicted of any offences for the past 10 years.

MR LAI MOO CHAN Independent Non-Executive Director

Mr Lai Moo Chan, a Malaysian, aged 64, joined the Company in 1964 and was appointed to the Board of Directors of the Company on 8 May 1980. On 21 February 2006, he was redesignated from a Non-Independent Non-Executive Director to an Independent Non-Executive Director of the Company. Mr Lai is a member of Nomination Committee and Remuneration Committee.

Mr Lai has more than 45 years of experience in the construction industry and was the Past President of Master Builders

Association Malaysia. he is also a member of the National Economic Consultative Council II.

Currently, Mr Lai is the Managing Director of Techjaya Builders Sdn Bhd and is also a director of several development companies.

Mr Lai has no family relationship with any director and/or major shareholders of the Company, and has no conflict of interest with the Company. he has not been convicted of any offences for the past 10 years.


2008 Annual Report

boArd of directors’ profile (cont’d)

ENCIK FARIS NAjHAN BIN HASHIM Executive Director

Encik Faris Najhan Bin hashim, a Malaysian, aged 42, was appointed to the Board of the Company on 23 September 2008 as an Executive Director. he is a member of the Executive Committee.

Encik Faris holds a Bachelor of Economics (Major in Accounting) degree from The university of Sydney, Australia. he has many years of hands-on experience in corporate management and project development, privatisation projects, IT, telecommunication,

education, public sector and technology development sectors. he served as the Executive Director and subsequently Managing Director of Mun Loong Berhad between 1995 and 1999. he has also previously served as Executive Director of ho hup Construction Company Berhad between May 2004 and March 2008. he does not hold any other directorship in any other public listed companies.

Encik Faris has no family relationship with any director and/or major shareholders of the Company, and has no conflict of interest with the Company. he has not been convicted of any offences for the past 10 years.

MR LOW KIM LENGIndependent Non-Executive Director

Mr Low Kim Leng, a Malaysian, aged 47, was appointed to the Board of the Company on 1 December 2008 as an Independent Non-Executive Director. he is the Chairman of the Remuneration Committee and a member of the Audit Committee and Nomination Committee.

Mr Low graduated from Manchester Metropolitan university (uK) with the degree of Bachelor of Arts (Law) in 1983. he had successfully completed the professional examination of the Council of Legal Education in London. As an utter barrister of the honorable Society of Gray’s Inn, he was admitted to the English Bar in 1984. In 1985, he was admitted as an advocate

and solicitor of the high Court of Malaya. he has been actively practicing law as an advocate and solicitor since then. he is also a registered Trade Mark Agent. he set up his own legal practice in the year 2000 and is now the principal partner of the law firm of Messrs. Ringo Low & Associates. he has also been appointed a Notary Public to carry out notarial functions. he is a legal advisor to various organisations. Currently, Mr Low also sits on the Board of Seni Jaya Corporation Berhad.

Mr Low has no family relationship with any director and/or major shareholders of the Company, and has no conflict of interest with the Company. he has not been convicted of any offences for the past 10 years.

ENCIK LONG MD. NOR AMRAN BIN LONG IBRAHIM Independent Non-Executive Director

Encik Long Md. Nor Amran Bin Long Ibrahim, a Malaysian aged 46, was appointed to the Board of the Company on 1 December 2008 as an Independent Non-Executive Director. he is the Chairman of the Nomination Committee and a member of the Audit Committee and Remuneration Committee.

Encik Long Md. Nor Amran holds a Bachelor of Laws (honours) - 2nd Class upper from Birmingham and attended Certificate In Legal Practice (honours) course at university of Malaya. he was then admitted as an Advocate & Solicitor, high Court of Malaya.

Encik Long Md. Nor Amran was attached to Petmal Oil (M) Sdn. Bhd, as head of Legal Advisor in Legal Department for about three (3) years and read in Chambers of Dato’ Sidek Bin Awang in Messrs. Sidek, Teoh, Wong & Dennis.

Encik Long Md. Nor Amran was then a Partner in Messrs. Rithauddin & Azlin from June 1995 to March 1997 and currently a Principal Partner with Messrs. Mohamed Noor, Amran & yoon. he is also a member of the Advocates & Solicitors Disciplinary Board. his area of specialisation includes Litigation, Conveyancing, Banking & Corporate Work. he does not hold any other directorship in any other public listed companies.

Encik Long Md. Nor Amran has no family relationship with any director and/or major shareholders of the Company and has no conflict of interest with the Company. he has not been convicted of any offences for the past 10 years.


2008 Annual Report

corporAte GovernAnce statement

Recognising the numerous problems faced by the Company after being placed under Practice Note 1/2001 (“PN1”) and Practice Note 17/2005 (“PN17”) of Bursa Malaysia Securities Berhad (“Bursa Securities”) Listing Requirements (“LR”), and realising the problems associated with the previous practice of the management, an Executive Committee (“Exco”) was formed on 13 August 2008.

Set out below is a description of how the Group has otherwise applied the principles and the extent of compliance with best practices, as set out in the Revised Code, throughout the 12 months ended 31 December 2008 and up to the date of this report.

A) DIRECTORS

1) Composition of the Board

At the date of this report, the Board consists of 9 members; with 5 Independent Non-Executive Directors and 4 Executive Directors. The Board complied with Paragraph 15.02 of Bursa Securities LR which requires at least two or one-third, whichever is higher, to be independent Directors.

The Company is led by a Board who has a wide range of business and financial experience relevant to the direction of the Group. Together they supervise and manage the Group’s businesses which are vital to the success of the Group and enhancement of long term shareholders’ value with their broad range of experience, skills and knowledge. A brief description of the background of each Director is presented on pages 4 to 6.

The Board recognises the importance of practising good Corporate Governance to protect and enhance shareholder value and continues to implement the recommendations of the Malaysian Code on Corporate Governance (Revised 2007) (“the Revised Code”), to ensure that the highest standards of corporate governance are practised throughout the Group as a fundamental part of discharging their responsibility.

During the 12 months ended 31 December 2008, the Board met 23 times. Details of the attendance of the Directors are as follows:

Directors Attendance

Encik Abdul Kadir Bin Mohd Kassim 10/10 (Chairman) (Resigned on 2 June 2008)

yBhg. Dato’ Low Tuck Choy 17/21 (Managing Director) (Not re-elected on 23 October 2008)

yBhg. Datuk Sulaiman Bin Daud 2/2 (Resigned on 19 February 2008)

yBhg. Dato’ Mohd Ghazali @ Fauzi Bin yacub 2/2 (Resigned on 19 February 2008)

Encik Faris Najhan Bin hashim 6/8 (Resigned on 28 March 2008) (Re-appointed on 23 September 2008)

Mr. Lai Moo Chan 21/23

Mr. Low Teik Kien 22/23

Encik Mustapha Bin Mohamed 15/20 (Retired on 23 October 2008)

Encik Zainal Abidin Bin Mohd yusof 17/18 (Retired on 23 October 2008)

Mr. Lee Chong hoe 15/18 (Retired on 23 October 2008)

yBhg. Tan Sri Datuk Seri Panglima Abdul 8/8 Kadir Bin haji Sheikh Fadzir (Chairman) (Appointed on 6 August 2008)

yBhg. Datuk Lye Ek Seang 8/8 (Appointed on 6 August 2008)

yBhg. Dato’ Liew Lee Leong 1/1 (Appointed on 1 December 2008)

Mr. Low Kim Leng 1/1 (Appointed on 1 December 2008)

Encik Long Md. Nor Amran Bin Long Ibrahim 1/1 (Appointed on 1 December 2008)

Mr. Lim Ching Choy N/A (Appointed on 1 June 2009)


2008 Annual Report

At the Board meetings, the Directors deliberate and resolve significant strategic, operational, financial, corporate and regulatory matters affecting the Group.

Prior to 13 August 2008, the Managing Director was responsible for the overall strategic direction of the Group and retains full and effective control of and responsibility for the Group’s activities. After 13 August 2008, the managing decision has been handled by the Exco, with consultation and approval from the Board of Directors.

The Terms of Reference of the Exco are as follows:-

1.0 Introduction

The Exco (“Committee”) shall be established by the Board as an operating committee which functions as a medium between the Board and management to ensure that business strategies, daily business and operational issues are carried out efficiently and effectively and that the requirements of good corporate governance practices are observed.

2.0 Members

2.1 Composition

The Committee members shall be appointed by the Board from amongst the Executive Directors and senior management personnel.

The Committee must be composed of no fewer than 3 members.

The Senior Independent Non-Executive Director or a representative of the Independent Non-Executive Directors shall attend the meeting to provide independent views, advice and judgment in the decision making process.

head of the respective division units, relevant management personnel and consultants may be invited to attend the Committee meetings.

2.2 The Chairman

The members of the Committee shall elect the Chairman from among their number.

3.0 Reporting

The Committee reports to the Board.

The Chairman of the Committee shall wherever possible at the Board’s meeting following the Committee’s meeting, report to the Board on the significant decisions, findings and recommendations of the Committee.

4.0 Approving Authority Limits

The Committee is authorised by the Board to approve transactions or activities which are beyond the individual discretionary powers of senior management personnel as per the approving authority limits stipulated in the relevant policy manuals of respective operating units.

5.0 Meetings

a. The Committee shall preferably meet on a monthly basis, but in any event, no less than once in every two (2) months, or whenever deemed necessary;

b. The quorum of the meetings shall be at least two (2) members or 50% of the total members, whichever is higher;

c. Resolutions, proposals and matters tabled for approvals at any meeting of the Committee shall be decided by a simple majority of the members present;

d. In the event of equality of votes, the Chairman of the Committee shall have a casting vote;

e. The Committee is also allowed to carry out the resolution by way of circulation;

corporAte GovernAnce statement (cont’d)


2008 Annual Report

f. The Committee may meet together for dispatch of business, adjourn, and otherwise regulate their meetings as they think fit by means of any communication technology by which all persons participating in the meeting are able to hear and be heard by all other participants without the need for a member to be in the physical presence in the meeting. The member participating in any such meeting shall be counted in the quorum for such meeting. All resolutions agreed by the members in such meeting shall be deemed to be as effective as a resolution passed at a meeting in person of the members duly convened and held;

g. The calling of meetings, notice of meetings, agenda and proceedings at meetings are regulated by Committee itself; and

h. The Company Secretary or his/her assistant shall be the Secretary of the Committee. The Secretary shall maintain all records of the deliberations and proceedings of Committee’s meetings and shall produce these records to the Board or the auditors on request.

6.0 Duties & Functions

The duties and functions of the Committee shall be as follows:

a. To exercise and execute the authority/transaction as granted/delegated by the Board;

b. To conduct positional assessment on the finance, business, projects of the Company in order to formulate a restructuring plan for the Group to be out of the PN17 categorisation;

c. To identify, formulate and prioritise strategic issues and chart strategic directions for action by management and staff;

d. To review and approve the business strategies, budget, relevant key procedures and/or guidelines;

e. To ensure that infrastructure, resources and systems are in place for the establishment of a conducive working environment;

f. To review management reports from operation and business units on key business performance, operating statistics and regular matters;

g. To report to the Board on matters that require their attention and approval;

h. To monitor and evaluate business conditions and developments in the property markets on an ongoing basis to ensure that the impact of changes are identified and managed accordingly; and

i. To identify, review and recommend any new business development to the Board.

7.0 Authority

The Committee shal l within its terms of reference:

a. have the resources required to perform its duties;

b. have full and unrestricted access to any information pertaining to the Company;

c. have direct communication channels with employees, senior management personnel and external parties;

d. have the authority to investigate any activity of the Company and its subsidiaries;

e. have the authority to form management / sub-committee(s) if deemed necessary and fit;

f. have the authority to delegate any of its responsibilities to any person or committee(s) that is deemed fit;

g. be able to obtain independent professional or other advice; and

h. be able to convene meetings with external parties, whenever deemed necessary.


2008 Annual Report

The present and past members of the Exco are as follows:

Chairman yBhg. Datuk Lye Ek Seang - Deputy Executive Chairman

Members Mr. Low Teik Kien - Executive Director

Encik Faris Najhan Bin hashim - Executive Director (Appointed on 23 September 2008)

Mr. Lim Ching Choy - Managing Director (Appointed on 1 June 2009)

yBhg. Dato’ Low Tuck Choy - Managing Director (Ceased on 23 October 2008)

Mr. Lee Chong hoe - Independent Director without voting power in the Exco

(Ceased on 23 October 2008)

Mr. Lai Moo Chan - Independent Director without voting power in the Exco

(Resigned on 19 December 2008)

2) Board Balance

There is a clear division of responsibility between the Board and the Exco to ensure that there is a balance of power and authority. The Board is to approve the major decisions of the Company whilst the Exco is primarily responsible for the overall day to day operations of the Group and implementation of the strategies and policies.

Balance in the Board is further enhanced by the presence of Independent Non-Executive Directors. The role of Independent Non-Executive Directors is particularly important in ensuring that the long term interest of shareholders, employees, customers, suppliers and the many communities in which the Group conducts business with are being looked after.

All shareholders are fairly represented on the Board. The investment of minority shareholders is fairly represented by the 5 Independent Non-Executive Directors who make up more than 1/3 of the Board.

3) Board Committees

The Board has put in place the following Committees to assist in carrying out its fiduciary duties. All of these Committees have written terms of reference clearly outlining their objectives, duties and powers.

Executive Committee

The role of the Executive Committee is described above under 1) Composition of the Board.

Audit Committee

The objective of the Audit Committee is to assist the Board to review the adequacy and integrity of the Company’s and Group’s internal control systems and management information systems. The composition, summary of activities and terms of reference of the Audit Committee can be found in the Audit Committee Report on pages 17 to 20.

Nomination Committee

The role of the Nomination Committee is described below under 5) Appointments to the Board.

Remuneration Committee

The role of the Remuneration Committee is described below under B) Directors’ Remuneration.

4) Board Meetings and Supply of Information

The Board meets at least four (4) times a year which is scheduled at quarterly intervals, with additional meetings convened when necessary.

Twenty Three (23) Board meetings were held during the financial year ended 31 December 2008. Details of attendance of the Directors are disclosed on page 7.

All Directors have access to draft quarterly Management Accounts of the Group. The new Board of directors is looking at ways to improve reporting procedure and to ensure that more timely information is supplied to Board members before Board meetings.



2008 Annual Report

Board papers are provided to all Directors on a regular basis to enable them to monitor the financial and operational performance of the Group. Senior Management staff may be invited to attend Board meetings to provide the Board with the necessary information and clarification on issues that are deliberated during the meetings.

All Directors also have access to the advice and services of the Company Secretary and they may seek independent professionals’ advice, if required.

5) Appointments to the Board

The Board had set up a Nomination Committee in year 2002. The objective of the Nomination Committee is to ensure that the appointed Directors bring to the Board, a mix of skills and expertise necessary to meet the requirements of corporate stewardship. The Nomination Committee will also assist the Board in reviewing, on an annual basis, the appropriate balance and size of Non-Executive Directors’ participation and in establishing procedures and processes towards an annual assessment of the effectiveness of the Board as a whole and contribution of each individual Director and Board Committee member.

The Nomination Committee, in its terms of reference, is tasked with the duty of making suitable recommendations to fill vacancies on the Board and its Committees. Nonetheless, the approval for appointment of new Board or Committee Members rests with the Board as a whole.

The Nomination Committee currently consists of the following Non-Executive Directors, all of whom are Independent Directors:

Chairman Encik Long Md. Nor Amran Bin Long Ibrahim (Appointed on 19 December 2008)

Encik Zainal Abidin Bin Mohd yusof (Ceased on 23 October 2008)

Members Mr. Lai Moo Chan (Ceased on 12 June 2008, Re-appointed on 19 December

2008)

Mr. Low Kim Leng (Appointed on 19 December 2008)

yBhg. Dato’ Liew Lee Leong (Appointed on 15 May 2009)

Encik Mustapha Bin Mohamed (Ceased on 23 October 2008)

Mr. Lee Chong hoe (Ceased on 23 October 2008)

The Board will implement a process to be carried out by the Nomination Committee annually, for assessing the effectiveness of the Board as a whole, the Committees of the Board and for assessing the contribution of each individual director in the current Financial year.

6) Re-election to the Board

In accordance with the Company’s Articles of Association (“AA”), all Directors who are appointed by the Board are subject to re-election by shareholders at the next Annual General Meeting held after their appointment. The AA also provide that at least one third of the Directors (including Managing Director) be subject to re-election by rotation at each Annual General Meeting, provided always that all Directors shall retire from office at least once in every three years but shall be eligible for re-election. The Directors who retire in each year are the Directors who have been longest in office since their last election.

7) Directors’ Training

All Directors of the Company have attended and successfully completed the Mandatory Accreditation Programme (“MAP”) prescribed by Bursa Securities for new directors of public listed companies.

The new directors attended the orientation programme to acquaint themselves with the Group’s businesses, its business plans, the management and operating environment.


2008 Annual Report

The Board acknowledges that continuous education is vital in keeping them abreast with corporate developments. The current Directors have constantly been updated with relevant reading materials and technical updates which will enhance their knowledge and equip them with the necessary skills to effectively discharge their duties as directors of the Company. During year 2008, the following Directors have attended the following courses:-

Director Name of Course Attendend

yBhg. Tan Sri Datuk Seri Annual Conference On Panglima Abdul Kadir Corporate & Regulatory Bin haji Sheikh Fadzir updates 2008 (Chairman) yBhg. Datuk Lye Ek Seang Risk Awareness Program

Dato’ Liew Lee Leong, Mr Low Kim Leng and Encik Long Md. Nor Amran Bin Long Ibrahim were appointed as new directors on 1 December 2008 and did not attend any training course in December 2008.

Mr Lai Moo Chan, Encik Faris Najhan Bin hashim and Mr Low Teik Kien did not attend any training during the financial year due to time constraints and a hectic work schedule.

The Nomination Committee, tasked with the duty of recommending suitable educational and training programmes, will put in place a training program for new Board Members in the current Financial year.

B) DIRECTORS’ REMUNERATION

1) Remuneration Committee

The objective of the Remuneration Committee is to set the policy framework and to make recommendations to the Board on all elements of the remuneration, terms of employment, reward structure, and fringe benefits for Executive Directors, the Managing Director and other selected top management positions with the aim to attract, retain, and motivate individuals of the highest calibre.

The remuneration of the Executive Directors is based on their performance. Fees payable to Non-Executive Directors are determined by way of benchmarking to comparable organisations. Non-Executive Directors are paid monthly allowances (w.e.f. 1 December 2008) and meeting allowances based on attendance.

The Remuneration Committee currently consists of the following Non-Executive Directors:

Chairman Mr. Low Kim Leng (Appointed on 19 December 2008)

Mr. Lee Chong hoe (Ceased on 23 October 2008) Members Encik Long Md. Nor Amran Bin Long Ibrahim (Appointed on 19 December 2008)

Mr. Lai Moo Chan (Appointed on 19 December 2008)

yBhg. Dato’ Liew Lee Leong (Appointed on 15 May 2009)

Encik Zainal Abidin Bin Mohd yusof (Ceased on 23 October 2008)

Encik Mustapha Bin Mohamed (Ceased on 23 October 2008)

The Remuneration Committee shall recommend to the Board the remuneration and entitlements of all directors (including the Non-Executive Chairman) and the Board will decide based on the recommendations of the Remuneration Committee. The approval for Directors’ remuneration rests with the Board as a whole with the Directors abstaining from voting and deliberating on decisions in respect of their own remuneration package.

The Board will implement a structured process to be carried out by the Remuneration Committee in developing a policy for selected top management remunerations as well as the remuneration packages of the individual Directors in the current Financial year.



2008 Annual Report

Individual Directors’ remuneration is not disclosed in the Annual Report. Directors’ remuneration aggregated and categorised into appropriate components, number of Directors whose remuneration falls into successive band of RM50,000.00, distinguishing between Executive and Non-Executive Directors, are shown on page 71.

C) SHAREHOLDERS

1) Shareholders and Investor Relations

The Board is committed to maintaining effective communications with the Company’s shareholders, stakeholders and the public generally. In accordance with Paragraph 9.02 of Bursa Securities LR, the Board discloses to the public all material information necessary for informed investment and takes reasonable steps to ensure that all shareholders enjoy equal access to such information.

Shareholders are also able to access the Company’s Annual Reports, Circulars to Shareholders, Prospectus’ and the Group’s corporate and financial information from Bursa Securities website.

2) The Annual General Meeting

Notice of the Annual General Meeting and related papers are sent out to shareholders at least 21 days before the date of the meeting.

At each Annual General Meeting, the Board presents the progress and performance of the business and encourages shareholders to participate in the question and answer session. Executive Directors and, where appropriate, the Chairman of the Audit Committee are available to respond to shareholders’ questions during the meeting.

Stakeholders and market analysts are invited to meet with Directors after each Annual General Meeting.

D) CORPORATE SOCIAL RESPONSIBILITY

The Company is aware of its Corporate Social Responsibility and endeavours to operate as a responsible and ethical corporate entity.

The Company also ensures its business practices comply with a general respect for its environment, community, customers, suppliers and its employees.

E) ACCOUNTABILITY AND AUDIT

1) Financial Reporting

In presenting the annual financial statements and quarterly announcements to shareholders, the Directors aim to present a balanced and understandable assessment of the Group’s position and prospects. The statement of Directors pursuant to Section 169 of the Companies Act 1965 is set out on page 37 whereas the Directors’ Responsibility Statement pursuant to Paragraph 15.27(a) of Bursa Securities LR is on page 21.

2) Internal Control

The Directors acknowledge their responsibility for the Group’s system of internal controls covering not only financial controls but also operational and compliance controls as well as risk management. The internal control system involves each business and key management from each business, including the Board, and designed to meet the Group’s particular needs and to manage the risks to which it is exposed. The system, by its nature, can only provide reasonable but not absolute assurance against misstatement or loss.

The Board has reviewed the adequacy and integrity of the Group’s system of internal controls which indicated various weaknesses. These weaknesses and steps to be taken to mitigate the weaknesses are highlighted in the Board’s Statement on Internal Control as set out on page 15.

3) Relationship with the auditors

The Company maintains a transparent relationship with the external auditors in seeking their professional advice towards ensuring compliance with the accounting standards.

The role of the Audit Committee in relation to the auditors is stated in the Audit Committee’s terms of reference on page 18.

This statement is made at the Board of Directors’ Meeting held on 27 May 2009.


2008 Annual Report

1. Sanctions and/or Penalties

During the financial year ended 31 December 2008, there were no sanctions nor any material penalties imposed on the Company or its subsidiaries, directors or management by the relevant regulatory bodies save and except for the following:-

The Company had on 2 April 2008 been publicly reprimanded by Bursa Securities for breach of Paragraph 2.19 of Bursa Securities LR.

Paragraph 2.19 of Bursa Securities LR states that Bursa Securities may, from time to time, issue any instruction or directive to or impose any condition on an applicant, a listed issuer, a management company, a trustee, its directors, officers, employees, advisers or any other person to whom these Requirements are directed and such person as aforesaid must comply with the said instruction, directive or condition and within such time as may be specified by Bursa Securities. Bursa Securities had previously, on 5 October 2007, directed the Company to ensure that the next four quarterly reports are to be reviewed by the external auditor before they are disseminated to the public. On 29 February 2008, the Company announced the 3rd quarterly report for the financial period ended 30 September 2007 (“Q3 2007”) after a delay of approximately 3 months. however, the Company announced the Q3 2007 without the review by the external auditor. The Company had therefore breached Paragraph 2.19 of Bursa Securities LR for failure to comply with Bursa Securities’ directive as abovementioned. The public reprimand was imposed pursuant to Paragraph 16.17 of Bursa Securities LR after taking into consideration all facts and circumstances of the matter and upon completion of due process.

2. Material Contracts

None of the Directors and substantial shareholders have any material contract with the Company and/or its subsidiaries save and except for the significant related-party transactions as disclosed in Note 38 of the financial statements on pages 102 to 103.

3. Non-audit Fees

During the financial year ended 31 December 2008, there were no non-audit fees incurred for services rendered to the Company and/or its subsidiaries by the external auditors, Messrs Ernst & young or a firm or company affiliated to Messrs Ernst & young.

4. Revaluation Policy on Landed Properties

The Company and its subsidiaries’ have not adopted a regular revaluation policy on landed properties.

5. Share Buy Backs

There were no share buy-backs during the financial year 2008.

6. Options, Warrants or Convertible Securities

There were no options, warrants or convertible securities exercised during the financial year 2008.

7. American Depository Receipt (“ADR”)/Global Depository Receipt (“GDR”)

The company did not sponsor any ADR or GDR program during the financial year 2008.

8. Variation in results

There were no variance of 10% or more between the results for the financial year 2008 and the unaudited results previously announced.

9. Profit Guarantee

There were no profit guarantees received by the Company during the financial year 2008.

10. Utilisation of proceeds

There were no proceeds raised by the Group from any corporate proposal.

other inforMAtion required bAsed on the listing requirementsOF BURSA MALAYSIA SECURITIES BERHAD


2008 Annual Report

stAteMent on internal controlINTRODUCTION

The Malaysian Code on Corporate Governance (Revised 2007) stipulates that the Board of Directors of listed companies should maintain a sound system of internal control to safeguard shareholders’ investment and Group’s assets. Set out below is the Statement on Internal Control (“Statement”) of ho hup Construction Company Berhad and its subsidiaries, made by the Board of Directors of ho hup Construction Company Berhad in compliance with the Bursa Malaysia Securities Berhad (“Bursa Securities”) Listing Requirements (“LR”) and the Statement on Internal Control: Guidance for Directors of Public Listed Companies.

RESPONSIBILITY

The Board of Directors acknowledges that it is collectively responsible for the Group’s system of internal control and for reviewing its adequacy and integrity. The Group’s system of internal control includes controls of an operational and compliance nature, as well as internal financial controls. The internal control system is designed to identify and manage significant risks in pursuit of the Group’s business objectives as well as to safeguard shareholders’ investments and the Group’s assets.

The system serves to provide reasonable but not absolute assurance against the risk of material loss. The concept of reasonable assurance recognises that the cost of control procedures shall not exceed the expected benefits

THE GROUP’S SYSTEM OF INTERNAL CONTROL

Operating Style and Monitoring Mechanisms

Prior to the formation of the Executive Committee (“EXCO”), the decision-making process in respect of the Group’s daily operations are entrusted to the Managing Director. With the EXCO’s formation in August 2008, the Group’s daily operations are entrusted to the EXCO and the Executive Directors. however, the operations of the Group have been subdued due to financial and manpower constraints. As a result, the Group’s priorities have been largely focused on stabilising daily operations and preparation of the Regularisation Plan.

Resulting from the above constraints and limitations placed on the management, the Group’s strategic, financial, organisational and compliance structures were subject to various risks as follows:-

a. lack of segregation of duties. Critical review, check and balance in many areas of operations are difficult due to the lack of segregation of duties due to the frequent resignation of staff at all levels.

b. absence of capable senior management staff to oversee the progress of the ongoing projects and the financial management of the Group. The lack of sufficient senior management staff meant that project progress meetings, evaluation and assessment are not held effectively and efficiently to monitor the Group’s operations. This could perhaps explain the numerous projects delays, project failures, abandoned projects, numerous litigation, outstanding amount owing by debtors had not been adequately monitored and pursued and amount owing to creditors not been properly monitored.

c. inadequate resources in the Accounting and Finance Department, resulting in a weak financial statements closing process and untimely financial reporting.

d. a number of key decisions were made by the former Managing Director without due consultation with the Board of Directors, and in some circumstances, the Board was expected to ratify those decisions. For example, there appears to be inadequate assessment and review of new projects undertaken prior to the engagement and during the execution phase of the projects. Problems seem to be repeating itself in many of the projects year after year;

e. the business plan appear to be fragmented and is not comprehensive to address the immediate overall problems faced by the Group;

f. due to the lack of financial resources, the Group did not extend the internal audit function to the overseas operation; and

g. the executive management has not addressed itself adequately to the issue of succession planning, and this had posed a serious problem with the resignation of senior management staff within a short time frame.


2008 Annual Report

EXCO OF THE BOARD

In order to strengthen the internal control environment, an EXCO was formed on 13 August 2008 to oversee all aspects of the Group’s operations and especially, to expedite the regularisation plans to exit from the Company’s PN17 status. Given the above risks, the EXCO has implemented immediate changes to the cheques signing operations, where verification and checking procedures are put in place to improve governance and internal control procedures. It is envisaged that with these new governance procedures, internal control and governance issues can be improved and addressed. There still remain many procedures and steps to be tightened up in order to improve issues of concern in respect of internal control.

The EXCO will address the issues of the lapses internal control, restructuring and management problems, recruit capable key management personnel, address the key business direction of the Group and the Board hopes to report better results in the near future. While the Board is cognisant of the issues facing the Group, in particular, the tight financial cash flows, limited financial and manpower resources, the Board and senior management will positively address and rectify these issues before the end of the current financial year.

OTHER KEY FEATURES OF THE GROUP’S INTERNAL

CONTROL SYSTEM

Going forward, the salient features of the Group’s system of internal control are as follows:

• AnEXCOandmanagementstructurewithdefinedlinesofroles and responsibilities;

• Regularbriefingof theprojects’progressby theheadofdepartment and subsidiaries to the Executive Committee; and

• Internal audit function to assess the integrity of theoperation.

ASSURANCE MECHANISMS

The Board will continuously review the adequacy and integrity of the Group’s system of internal control. The process that the Board has applied in reviewing the adequacy and the integrity of the system of internal control is summarised as follows:

The Audit Committee, on behalf of the Board, will identify the shortcomings of the internal control based on the review of quarterly results. As the Internal Audit Department is inadequately resourced, the Audit Committee will look into appropriate actions to resolve these shortcomings.

In addition, as part of the statutory audit of the financial statement, the external auditors perform tests over certain financial controls. Any weaknesses detected are highlighted to the Audit Committee through management letters or articulated at Audit Committee meetings.

The Audit Committee Report set out on pages 17 to 20 contains further information on the Committee’s activities as well as that of the internal auditors.

The Group’s system of internal control mainly applies to its operating units and does not cover associated companies, dormant companies and overseas operations.

It is the intention of the new Board members to ensure that the above accords with the guidance as outlined in Statement of Internal Control Guidance for Directors of Public Listed Companies.

BOARD’S COMMITMENT

The Board understands the challenges it faces in light of the Company’s status under PN1 & PN17 of Bursa Securities LR. The structure of controls and operations must continually evolve to ensure they remain adequate and appropriate to the Company’s and Group’s situation. The Board remains committed to maintaining a sound system of internal control and will, when necessary, put in place actions to continuously improve and enhance the Group’s system of internal control.

This statement is made at the Board of Directors’ Meeting held on 27 May 2009.

stAteMent on internal control (cont’d)


2008 Annual Report

Audit coMMittee report1. Constitution

The Audit Committee (“the Committee”) of the Company was established by the Board of Directors in 1993.

2. Composition

The present Audit Committee comprises of three (3) members of the Board, all of whom are Independent Non-Executive Directors.

3. Members

Members of the Board who are currently serving on the Audit Committee as at the date of the Annual Report are as follows:-

1. yBhg. Dato’ Liew Lee Leong (Chairman)2. Mr. Low Kim Leng; and3. Encik Long Md. Nor Amran Bin Long Ibrahim

4. Frequency of Meetings

For the financial year under review, the Committee met 16 times. The attendance by each Committee member at meetings during the financial year were as follows:

Attendance Date of Appointment/ No. of Meetings Attended/ Resignation held whilst in Office

yBhg. Dato’ Liew Lee Leong Appointed on 1 December 2008 2/2 (Independent Non Executive Director)

Mr. Low Kim Leng Appointed on 1 December 2008 2/2 (Independent Non Executive Director)

Encik Long Md. Nor Amran Bin Long Ibrahim Appointed on 1 December 2008 1/2 (Independent Non Executive Director)

Encik Faris Najhan Bin hashim Resigned on 25 January 2008 1/1 (Executive Director)

yBhg. Datuk Sulaiman Bin Daud Resigned on 19 February 2008 2/2 (Independent Non-Executive Director)

yBhg. Dato’ Mohd Ghazali @ Fauzi Bin yacub Resigned on 19 February 2008 2/2 (Independent Non-Executive Director)

En. Mustapha Bin Mohamed Ceased on 23 October 2008 10/13 (Independent Non-Executive Director)

En. Zainal Abidin Bin Mohd yusof Ceased on 23 October 2008 11/12 (Independent Non-Executive Director)

Mr. Lee Chong hoe Ceased on 23 October 2008 12/12 (Independent Non-Executive Director)


2008 Annual Report

5. Terms of Reference

1.0 Composition of the Audit Committee

The Audit Committee shall be appointed by the Board of Directors from amongst its members:

a. The Audit Committee must be composed of no fewer than three (3) members.

b. All Audit Committee members shall comprise of exclusively Non-Executive Directors and a majority must be Independent Directors.

c. All the Committee members must be financially literate, with at least one member of the Audit Committee:-

• mustbeamemberoftheMalaysianInstituteof Accountants; or

• ifheisnotamemberoftheMalaysianInstituteof Accountants, the member must have at least 3 years’ working experience and:-

(a) he must have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act, 1967; or

(b) he must be a member of one of the associations of the accountants specified in Part II of the 1st Schedule of the Accountants Act, 1967; or

• musthavefulfilledsuchotherrequirementsasprescribed or approved by Bursa Securities.

d. No alternate director shall be appointed as a

member of the Audit Committee.

The Board of Directors must review the term of office and performance of the Audit Committee and each of its members at least once every three (3) years to determine whether the Audit Committee has carried out its duties in accordance with its terms of reference.

If a member of the Audit Committee resigns, dies or for any reason ceases to be a member with the result that the number of members is reduced below three (3), the Board shall, within three (3) months of the event appoint such number of new members as may be required to fill the vacancy.

The quorum of the meeting shall consist of two (2) members, the majority of whom shall be independent Directors.

2.0 Chairman

The members of the Audit Committee shall then elect a Chairman from among themselves who shall be an Independent Director. The Chairman of the Committee should engage on a continuous basis with senior management, the head of internal audit and external auditors in order to be kept informed of matters affecting the Company.

3.0 Secretary of the Audit Committee (“Committee Secretary”)

The Company Secretary of ho hup Construction Company Berhad or his/her representative shall be the Committee Secretary.

4.0 Meetings and Minutes

The Committee shall meet at least four (4) times a year and such additional meetings as the Chairman shall decide in order to fulfill its duties.

The finance director, the head of internal audit and a representative of the external auditors should normally attend the Committee meetings. Other directors and employees may attend any particular audit committee meeting only at the Committee’s invitation, specific to the relevant meeting. however, the Committee should meet with the external auditors without the presence of the executive directors, at least twice a year.

5.0 Authority of the Audit Committee

The Committee is authorised by the Board to investigate and report any specific matters of the Company and its subsidiaries within its terms of reference or otherwise directed by the Board.

Audit coMMittee report (cont’d)


2008 Annual Report

It shall, in accordance with a procedure to be determined by the Board of Directors and at the expense of the Company:-

a. Explicit authority to investigate any matter within its terms of reference;

b. To have, or obtain the resources required to perform its duties;

c. Full and unrestricted access to any information, records, properties and personnel of the Company and of any other companies within the Group;

d. Direct communication channels with the external auditors and internal audit manager carrying out the internal audit function or activity;

e. To be able to obtain independent professional or other advice and to invite outsiders with relevant experience and expertise to attend the Committee’s meetings (if required) and to brief the Committee;

f. Be able to convene meetings with external auditors without the presence of the executive board members, at least once a year; and

g. Where the Committee is of the view that any matter reported by it to the Board of Directors has not been satisfactorily resolved resulting in a breach of Bursa Securities Listing Requirements the Committee must promptly report such matter to Bursa Securities.

6.0 Objectives of the Audit Committee

The objective of the Audit Committee is to assist the Board in discharging its responsibilities by reviewing the adequacy and integrity of the Company’s and of the Group’s internal control systems and management information systems, including systems for compliance with applicable laws, regulations, rules, directives and guidelines.

7.0 Functions of the Audit Committee

The following are the main duties and responsibilities of the Committee collectively:-

7.1 Recommend to the Board on the appointment and annual reappointment of the external auditors and their audit fee, after taking into consideration the independence and objectivity of the external auditors and the cost effectiveness of their audit.

7.2 Discuss with the external auditor before the audit commence, the nature and scope of the audit, the audit plan and ensure co-ordination where more than one audit firm is involved.

7.3 Review the quarterly interim results and annual financial statements of the Company and the Group, prior to approval by the Board focusing particularly on:-

- any change in accounting policies and practices;

- significant adjustment arising from the audit;

- the going concern assumption; and- compliance with accounting standards and

other legal requirements.

7.4 Discuss problems and reservations arising from the interim and final audits and any matter the auditor may wish to discuss in the absence of the management where necessary.

7.5 Review the external auditor’s management letter and management’s response.

7.6 Review the assistance and co-operation given by the Company and its Group’s officers to the external and internal auditors.

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


2008 Annual Report

7.8 Review the internal audit programme, processes and results of the internal audit programme, processes and the results of the internal audit process and where necessary ensure that appropriate actions taken on the recommendations of the internal audit function.

7.9 Review any appraisal or assessment of the performance of the members of internal audit function.

7.10 Approve any appointment, transfer or termination of senior staff members of the internal audit function.

7.11 To review any resignation of the internal audit staff member and to provide the resigning staff member an opportunity to submit reasons for resigning, where necessary.

7.12 Review any related party transactions and conflict of interest situation that may arise within the Group, including any transaction, procedure or course of conduct that raises questions of management integrity.

7.13 Consider other issues raise by the Board.

ACTIVITIES OF THE COMMITTEE

During the year under review, the activities undertaken by the Committee were primarily focused on the following key items due to the resignation of the Executive Director of Finance and the personnel of the Accounting & Finance Department of the Company and its subsidiary, Bukit Jalil Development Sdn. Bhd.:

• Reviewing the quarterly financial statements beforeannouncements to Bursa Malaysia Securities Berhad.

• Reviewingtheyear-endfinancialstatementsinrelationto the audit and accounting issues arising from the audit.

• Discussing and reviewing theexternal auditors’ scopeofwork, audit plan and procedures.

• DiscussingandreviewingthestateofinternalcontrolintheCompany.

INTERNAL AUDIT FUNCTION

The Internal Audit Department is established to conduct reviews of the operation, procedures and internal control of the Company and its subsidiaries and to report findings and recommendation to the management and Audit Committee.

In view of the financial and operational challenges faced by the Company during the year, the internal audit function has been minimal as the Board of Directors and the Audit Committee have focused on addressing these challenges.

Audit coMMittee report (cont’d)


2008 Annual Report

directors’ responsibility statement

The Directors are required to prepare financial statements for each financial year which give a true and fair view of the financial position of the Group and of the Company as at the end of the financial year and of the results and cash flow of that Group and of the Company for the financial year then ended.

The Directors consider that, in preparing these financial statements, the Group and the Company have used appropriate accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent. The Directors also consider that all applicable Approved Accounting Standards have been followed and confirmed that the financial statements have been prepared on a going concern basis.

The Directors are responsible for ensuring that the Group and the Company keep proper accounting records which enable them to ensure that the financial statements comply with the provisions of the Companies Act, 1965 and the applicable Approved Accounting Standards in Malaysia.

in relation to the Audited Financial Statements


2008 Annual Report

chairman’s stAteMent

FINANCIAL PERFORMANCE

For the financial year ended 31 December 2008, the Group recorded a net loss after tax of RM56.2 million (2007 : net loss after tax of RM46.2 million) on a marginally lower Group Revenue of RM91.2 million (2007 : RM100.1 million). Although there was a gain on disposal of residential land of RM20.6 million, the gain was offset by several provisions which ultimately resulted in a higher net loss after tax. These provisions included additional impairment losses of some RM10.9 million in respect of its overseas investments particularly, in China. A provision of about RM9 million was also

INTRODUCTION

On behalf of the Board of Directors of Ho Hup Construction Company Berhad, I present to you the Annual Report and the Financial Statements of the Group and of the Company for the financial year ended 31 December 2008.

made arising from the demand of bank guarantees from the Government of Madagascar and further provisions were made for doubtful debts (RM7.1 million), liquidated ascertained damages (RM4.6 million) in respect of the Group’s housing development activities, and foreign exchange translation losses (RM3.5 million) for the Madagascar road projects which have since been terminated. In tandem with the higher net loss, the Group’s shareholders’ equity declined to RM18.8 million from RM75.5 million in 2007.


2008 Annual Report

Prospects for the Group’s property development projects in Bukit Jalil will continue to improve due to strong demand for choice locations and attractive valuations of landed properties in the Klang Valley

“

”HO HUP’S PROPOSED REGULARISATION PLAN

Following the announcement on 31 July 2008 of ho hup’s status as an affected listed issuer pursuant to paragraph 2.1(d) of the Practice Note 17/2005 (“PN17”) of Bursa Malaysia Securities Berhad (“Bursa Securities”) Listing Requirements, ho hup was required to submit its Regularisation Plan to the relevant authorities within eight(8) months of the announcement, i.e. by 31 March 2009. In this respect, the Board had formed an Executive Committee on 13 August 2008 to develop and implement the proposed Regularisation Plan.

In addition to being a PN17 company as announced on 31 July 2008, the Company has recently triggered paragraph 2.1(a) of the Amended PN 17 following the release, on 15 May 2009, of the Company’s latest audited financial statements for the financial year ended 31 December 2008. Based on its latest audited financial statements, the consolidated shareholders’ equity stood at RM18.8 million, which is below 25% of the Company’s paid-up share capital of RM102 million. The shareholders’ equity of RM18.8 million, as at 31 December 2008, is well below the minimum issued and paid-up capital of RM60 million as required under paragraph 8.16A(1) of the Bursa Securities’ Listing Requirements.

The above issues are currently being addressed as the remedial measures being proposed would form the core of the Company’s Regularisation Plan.

On behalf of the Board, I am positively confident that the relevant details of the proposed Regularisation Plan will be announced before 31 July 2009 being the extended deadline, granted to the Company by Bursa Securities, to submit its Regularisation Plan for approval by the relevant authorities.

OPERATING ENVIRONMENT

In spite of the international financial turmoil and sharp deterioration in the global economic environment, the Malaysian economy registered a growth of 4.6% in 2008. The economy grew strongly in the first half of 2008. however, as the country began to feel the impact of the global downturn, there was a sharp decline in external demand and correction in commodity prices in the second half of 2008.

Despite the deteriorating economic scenario, the construction sector in 2008 recorded positive growth of 2.1% (Source: Bank Negara Malaysia Annual Report 2008). The sector was driven mainly by the civil engineering sub-sector, following the implementation of projects under the Ninth Malaysia Plan (9MP) and supported by expansion in the residential and non-residential sub-sectors.

In line with the sharp increases in global prices of construction materials, the rising costs of these building materials, particularly steel and cement, in the second half of the year, have made for a tougher operating environment in 2008. To mitigate the effects of rising global prices of construction materials, the Government, in August 2008, issued an update to the Variation of Price (VoP) clause to ensure that implementation of Government projects were completed as planned. The updated VoP included additional materials that come under the VoP scheme categorised under civil works, building works, mechanical and electrical works.

Competition in the construction industry will remain intense and challenging as an increasing number of contractors bid for newly launched infrastructure projects under the 9MP, in particular the development of growth corridors such as Iskandar Malaysia in Johore.


2008 Annual Report

OVERVIEW OF GROUP OPERATIONS

Construction

Total revenue in construction activities declined about 40% from RM58.9 million in 2007 to RM35.8 million in 2008 while the loss from operations increased to RM58.2 million from RM28.6 million recorded in 2007. The results reflected a declining project order book and lower operating margins amidst the rising costs of construction materials.

The current jobs on hand are limited to the Company’s ongoing RM127 million Trans Eastern Kedah Interland highway from Durian Burung to Kupang in Kedah and completion of phases 5-7A of Jalil Sutera’s 21/2 storey superlink and semi-detached houses in Bandar Bukit Jalil.

Property Development

The property development division registered a significant increase in revenue from RM0.45 million achieved in 2007 to RM23.1 million in 2008. The much improved performance resulted in significantly higher progress billings generated for the period.

Notwithstanding the uncertainty in the domestic economic scenario for 2009, the Group’s property development arm is nevertheless, intensifying its development activities particularly in the completion of 62 units of semi-detached and superlink terrace houses in Jalil Sutera Phases 5-7A. These phases are scheduled be completed between June 2009 to September 2009.

Ready-Mixed Concrete

Total revenue for the ready-mixed concrete division declined 23% to RM33.86 million in 2008 (2007: RM44.1million), in the face of intense competition. The division recorded an operational loss of RM1.5 million against an operational profit of RM0.4 million recorded for the previous year.

chAirMAn’s statement (cont’d)

The property development division registered a significant increase in revenue from RM0.45 million achieved in 2007 to RM23.1 million in 2008. The much improved performance resulted in significantly higher progress billings generated for the period

“

”


2008 Annual Report

BUSINESS OUTLOOK

With the global economic outlook expected to experience a more protracted and deeper economic downturn this year, the prospects for continued growth in the construction sector are extremely remote in 2009. Despite the negative outlook, the various stimulus measures put in place by the Government for the construction sector and the continued implementation of projects under the 9MP coupled with projects under the various economic corridors are expected to spearhead the growth momentum in the construction sector.

Prospects for the Group’s property development projects in Bukit Jalil will continue to improve due to strong demand for choice locations and attractive valuations of landed properties in the Klang Valley.

Based on the foregoing, your Board is cautiously optimistic of a better year ahead despite business conditions remaining challenging and competitive.

ACKNOWLEDGEMENT

On behalf of the Board, I would like to thank our shareholders, former directors, valued customers, government authorities and agencies, consultants, financiers, business associates, sub-contractors, suppliers and last but not least, the management and staff for their continuing support and confidence in the Group.

TAN SRI DATUK SERI PANGLIMA ABDUL KADIRBIN HAjI SHEIKH FADzIRChairman

Other Subsidiaries and Associates

During the financial year ended 31 December 2008, the Group and the Company made additional impairment losses of RM10.9 million and RM10.6 million respectively in respect of its net investments overseas as these investments continue to show losses in the face of intense competition.

CORPORATE DEVELOPMENT Since August 2008, there have been some significant changes to the Group’s management. As highlighted in the Directors’ profile of this Annual Report, a revamped Board and changes at senior management level have taken over effective management control of the Group. I take this opportunity to welcome new members of the Board and the management team. I sincerely believe these appointments to be key to the rebranding of the Group to emerge, once again, as a major player in construction. Their collective experience and expertise will steer the Group away from its troubled past.

In tandem with the changes made at the Board and senior management levels, the Group’s registered office and business premises have been relocated, since March 2009, to Bandar Bukit Jalil. This relocation was indeed relevant and necessary as the Group’s offices are sited in the hub of its housing development and construction activities.

In late 2008, 31 units of the superlink terrace houses developed by the Group’s 70%-owned subsidiary, Bukit Jalil Development Sdn Bhd, were completed under Phase 4 and handed over to the purchasers without undue delay. A handing-over of keys ceremony officiated by the former y.B.Minister of housing and Local Government was held on 10 January 2009. Currently, Bukit Jalil Development Sdn Bhd is making significant progress in the completion of the remaining 62 units of semi-detached and superlink terrace houses in Jalil Sutera, Bandar Bukit Jalil. These phases are scheduled be completed between June 2009 to September 2009.


2008 Annual Report

ANALYSIS OF SHAREHOLDINGS

Authorised Share Capital : RM200,000,000.00Issued and Fully Paid-up : RM102,000,408.00Class of Shares : Ordinary Shares of One Ringgit EachNo of Shareholders : 3,150Voting-Right : One Vote Per Ordinary Share

No of No. of OrdinarySize of Holding Shareholders % Shares %

1-99 116 3.68 2,504 0.00100-1,000 470 14.92 294,339 0.291,001-10,000 1,965 62.38 7,971,245 7.8210,001-100,000 522 16.57 17,006,024 16.67100,001-5,100,019* 75 2.38 25,856,941 25.355,100,020 and above** 2 0.07 50,869,355 49.87

Total 3,150 100.00 102,000,408 100.00

Notes:* Less than 5% of issued holdings** 5% and above of issued holdings

DIRECTORS’ INTEREST IN SHARES

Direct IndirectName of Directors Shareholdings % Shareholdings %

yBhg. Tan Sri Datuk Panglima Abdul Kadir Bin haji Sheikh Fadzir - - - -yBhg. Datuk Lye Ek Seang - - 28,506,326(1) 27.95Low Teik Kien 698,700 0.68 25,162,629(2) 24.67Faris Najhan Bin hashim - - - -Lai Moo Chan 1,017,522 1.00 - -yBhg. Dato’ Liew Lee Leong - - - -Low Kim Leng - - - -Long Md.Nor Amran Bin Long Ibrahim - - - -

Notes:(1) Deemed interest by virtue of his spouse, Datin Viannie Damit @ undikai’s substantial shareholdings in Extreme System Sdn Bhd.(2) Deemed interest by virtue of his shareholdings in Low Chee & Sons Sdn Bhd and Low Chee Estate.

AnAlysis of shareholdingsAs at 6 May 2009


2008 Annual Report

LIST OF THIRTY LARGEST SHAREHOLDERS

Name No. of Shares %

1. Extreme System Sdn Bhd 28,506,326 27.95

2. Low Chee & Sons Sdn Bhd 22,363,029 21.92

3. Cheah Suan Lee 2,070,000 2.03

4. Low Tuck Choy 2,050,000 2.01

5. Ambank (M) Berhad 971,014 0.95 Pledged Securities Account for Lai Moo Chan (SMART)

6. Chung Fui Chu 910,800 0.89

7. Mrs yung Emily yeuk – May Nee Poon 850,000 0.83

8. Wong Ching Weoh 800,000 0.78

9. Low Chee & Sons Sdn Bhd 749,600 0.74

10. Amsec Nominees (Tempatan) Sdn Bhd 700,000 0.69 Pledged Securities Account for Chin Chin Seong

11. A.A.Anthony Nominees (Tempatan) Sdn Bhd 698,700 0.69 CIMB Bank for Low Teik Kien (M78009)

12. Low Tuck Choy 688,500 0.68

13. Lim Shoh Cheng 683,700 0.67

14. Citigroup Nominees (Tempatan) Sdn Bhd 564,500 0.55 Pledged Securities Account for Low Tuck Choy (471941)

15. Lim Kew @ Lim Kon Foong 559,527 0.55

16. Esteem Evergreen Sdn Bhd 557,000 0.55

17. ho yoon Shin @ Michael ho 525,000 0.52

18. Kew hoi Lam @ hew hoi Lam 510,400 0.50

19. Edmond hoyt yung 500,000 0.49

20. Beh yek Leng 494,100 0.48

21. Eng Shi Lin @ Ng Cheu Ling 435,000 0.43

22. Ooi Chee hong 420,000 0.41

23. Ruslan Bin Ali Omar 400,000 0.39

24. Malathi A/P Thevendran 394,100 0.39

25. Apt Avenue Sdn Bhd 365,500 0.36


2008 Annual Report

LIST OF THIRTY LARGEST SHAREHOLDERS (cont’d)

Name No. of Shares %

26. Chow Chee Onn 359,900 0.35

27. Lee Chenk Guan 343,000 0.34

28. Mayban Securities Nominees (Tempatan) Sdn Bhd 294,300 0.29 Pledged Securities Account for Chia Siang Wu (REM 865-Margin)

29. Lim hock Ming 292,300 0.29

30. Low Lai yoong 282,600 0.28

SUBSTANTIAL SHAREHOLDERS BASED ON THE REGISTER OF SUBSTANTIAL SHAREHOLDERS

Direct Indirect No. of No. of Name Shares held % Shares held %

Extreme System Sdn Bhd 28,506,326 27.95 - -

yBhg. Datin Viannie Damit @ undikai - - 28,506,326 (1) 27.95

yBhg. Datuk Lye Ek Seang - - 28,506,326 (2) 27.95

yBhg. Dato’ Low Tuck Choy 1,319,000 1.29 25,162,629 (3) 24.67

Low Teik Kien 698,700 0.68 25,162,629 (3) 24.67

Low Chee & Sons Sdn Bhd 23,112,629 22.66 - -

Toh hong hooi - - 28,506,326 (4) 27.95

Lim Tow Fuh 28,506,326 (4) 27.95

Tan Mei Lian - - 28,506,326 (4) 27.95

Notes:(1) Deemed interest by virtue of her shareholdings in Extreme System Sdn Bhd.(2) Deemed interest by virtue of his spouse, Datin Viannie Damit @ undikai’s substantial shareholdings in Extreme System Sdn Bhd.(3) Deemed interest by virtue of his shareholdings in Low Chee & Sons Sdn Bhd and Low Chee Estate. (4) Deemed interest by virtue of his/her substantial shareholdings in Extreme System Sdn Bhd.

AnAlysis of shareholdings (cont’d)


2008 Annual Report

building on our strengths


2008 Annual Report

list of propertiesAs at 31 December 2008

Address/Location Age of Date of Tenure Size/Area Existing Description Net Book Building Acquisition Use Value RM’000

Lot 4150 30/1/1985 Freehold 5.5 acres Vacant Industrial land 1,712Mukim of CherasDistrict of ulu LangatSelangor Darul Ehsan

2B 1st Floor 32 years 1/7/1986 Freehold 900 Office Shophouse 66Medan Imbi sq.ft. PremiseKuala Lumpur

Lot A4-01 23 years 2/12/1985 Expires 2,412 Rented Flatted factory 2414th Floor, Kuala Lumpur year sq.ft.Industrial Park 20638KM Jalan Klang LamaKuala Lumpur

Lot 36099,36100 & 36101 12/9/1995 Freehold 153 Property Development 146,444Mukim of Petaling acres Development landWilayah Persekutuan

financialstAteMents

32 Directors’ Report

37 Statement by Directors

37 Statutory Declaration

38 Independent Auditors’ Report

43 Income Statements

44 Balance Sheets

46 Statements of Changes in Equity

47 Consolidated Cash Flow Statements

49 Cash Flow Statements

51 Notes to the Financial Statements


2008 Annual Report

The Directors present their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2008.

PRINCIPAL ACTIVITIES

The principal activities of the Company consist of foundation engineering, civil engineering, building contracting works and hire of plant and machinery.

The principal activities of the subsidiaries are disclosed in Note 20 to the financial statements.

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

Pursuant to the amendments to the Listing Requirements (“LR”) of Bursa Malaysia Securities Berhad (“Bursa Securities”) in relation to Practice Note No. 17/2005 (“Amended PN17”) the Company on 31 July 2008 announced (“First Announcement”) that the Company is deemed an Affected Listed issuer as defined in the Amended PN17 as the auditors have expressed a disclaimer opinion in the Company’s financial statements for the year ended 31 December 2007.

As an Affected Listed Issuer, the Company is required pursuant to paragraph 3.1(a)(ii) of the Amended PN17 to comply with the following obligations:

(a) to announce details of the Regularisation Plan as referred to in paragraph 8.14C(3) of the Listing Requirements which announcement must fulfill the requirements set out in paragraph 3.1A of the Amended PN 17/2005;

(b) to submit the Regularisation Plan to the Securities Commission, and other relevant authorities (“Approving Authority”), for approval within eight (8) months from the date of the First Announcement; and to implement the Regularisation Plan within the timeframe stipulated by the relevant Approving Authority;

(c) to announce the status of its plan to regularise its condition and the number of months to the end of the relevant timeframes referred thereto, as may be applicable on a monthly basis until further notice from Bursa Securities; and

(d) to announce its compliance or non-compliance with a particular obligation imposed pursuant to Amended PN17/2005 on an immediate basis.

In the event that the Company fails to comply with the obligation to regularise its condition, all of its listed securities shall be suspended from trading on the 5th market day after the Submission Timeframe or Implementation Timeframe, as the case may be, and de-listing procedures shall be taken against the Company by Bursa Securities.

On 13 March 2009, the Company applied for extension of time from Bursa Securities to submit the Company’s Regularisation Plan to the relevant authorities for approval. On 1 April 2009, the Company was granted an extension of time of 4 months until 31 July 2009.

directors’ report

33ho hup CoNStRuCtIoN CompANy BERhAD (14034-W)

2008 Annual Report

results

Group company rM’000 rM’000

Loss for the financial year 56,163 68,648 Attributable to:Equity holders of the Company 56,074 68,648minority interests 89 - 56,163 68,648

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

In the opinion of the Directors, the results of the operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature except as disclosed in the financial statements.

DiviDenD

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

the Directors do not recommend the payment of any dividend for the current financial year.

Directors

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

Low teik KienLai moo Chantan Sri Datuk Seri panglima Abdul Kadir Bin haji Sheikh Fadzir (Appointed on 6 August 2008)Datuk Lye Ek Seang (Appointed on 6 August 2008)Faris Najhan Bin hashim (Appointed on 23 September 2008)Dato’ Liew Lee Leong (Appointed on 1 December 2008)Low Kim Leng (Appointed on 1 December 2008)Long md Nor Amran Bin Long Ibrahim (Appointed on 1 December 2008)mustapha Bin mohamed (Retired on 23 october 2008)Zainal Abidin Bin mohd yusof (Retired on 23 october 2008)Lee Chong hoe (Retired on 23 october 2008)Dato’ Low tuck Choy (Ceased on 23 october 2008)


2008 Annual Report

directors’ report (cont’d)

Directors’ benefits

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

Since the end of the previous financial year, no Director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the Directors or the fixed salary of a full-time employee of the Company as shown in Note 11 to the financial statements) by reason of a contract made by the Company or a related corporation with any Director or with a firm of which the Director is a member or with a company in which the Director has a substantial financial interest, except as disclosed in Note 38 to the financial statements.

Directors’ interests

According to the register of Directors’ shareholdings, the interests of Directors in office at the end of the financial year in shares in the Company and its related corporations during the financial year were as follows:

<---------- number of ordinary shares of rM1 each ---------> at 1 January at 31 December 2008 acquired sold 2008

the companyDirect interestLow teik Kien 698,700 - - 698,700Lai moo Chan 1,474,522 - (457,000) 1,017,522

<---------- number of ordinary shares of rM1 each ---------> at 1 January at 31 December 2008 acquired sold 2008

the companyindirect interestLow teik Kien 25,162,629 - - 25,162,629Datuk Lye Ek Seang - 28,506,326 - 28,506,326

Low teik Kien’s indirect interests in shares in the company is held through Low Chee & Sons Sdn Bhd and Executors of Estate of Low Chee.

Datuk Lye Ek Seang’s indirect interests in shares in the company is held through his spouse, Datin Viannie Damit @ undikai’s substantial shareholdings in Extreme System Sdn. Bhd.

Datuk Lye Ek Seang and Low teik Kien by virtue of their interest in shares of the Company are also deemed interested in shares of all the Company’s subsidiaries to the extent the Company has an interest.

None of the other Directors in office at the end of the financial year had any interest in shares in the Company or its related corporations during the financial year.


2008 Annual Report

other statutory inforMation

(a) Before the income statements and balance sheets of the Group and of the Company were made out, the Directors took reasonable steps:

(i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts; and

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

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

(i) the amount written off for bad debts or the amount of the provision for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent; and

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

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

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

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

(i) any charge on the assets of the Group or of the Company which has arisen since the end of the financial year which secures the liabilities of any other person except as disclosed in the financial statements; or

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

(f) In the opinion of the Directors:

(i) except as disclosed in Note 37 and Note 41 to the financial statements, no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may affect the ability of the Group or of the Company to meet their obligations when they fall due; and

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


2008 Annual Report

siGnificant events DurinG the financial year

Significant events during the financial year are as disclosed in Note 39 to the financial statements.

siGnificant event subsequent to the balance sheet Date

Significant event subsequent to the balance sheet date is disclosed in Note 40 to the financial statements.

Signed on behalf of the Board in accordance with a resolution of the Directors dated 14 may 2009.

Datuk lye ek seanG low teik kien

directors’ report (cont’d)


2008 Annual Report

We, DAtuK LyE EK SEANG and LoW tEIK KIEN, being two of the Directors of ho hup CoNStRuCtIoN CompANy BERhAD, do hereby state that, in the opinion of the Directors, the accompanying financial statements set out on pages 43 to 114 are drawn up in accordance with the applicable Financial Reporting Standards in malaysia and the provisions of the Companies Act, 1965 so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2008 and of the results and the cash flows of the Group and of the Company for the year then ended.

Signed on behalf of the Board in accordance with a resolution of the Directors dated 14 may 2009.

Datuk lye ek seanG low teik kien

statement by directors

statutory declaration

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

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

I, IVAN oh BooN WEE, being the officer primarily responsible for the financial management of ho hup CoNStRuCtIoN CompANy BERhAD, do solemnly and sincerely declare that the accompanying financial statements set out on pages 43 to 114 are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declaredby the abovenamed IVAN oh BooN WEEat Kuala Lumpur in the Federal territoryon 14 may 2009 ivan oh boon wee

Before me,


2008 Annual Report

independent auditors’ reportto the members of ho hup Construction Company Berhad(Incorporated in malaysia)

report on the financial statements

We were engaged to audit the financial statements of ho hup Construction Company Berhad, which comprise the balance sheets as at 31 December 2008 of the Group and of the Company, and the income statements, statements of changes in equity and cash flow statements of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 14 to 102.

Directors’ responsibility for the financial statements

the directors of the Company are responsible for the preparation and fair presentation of these financial statements in accordance with Financial Reporting Standards and the Companies Act, 1965 in malaysia. this responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ responsibility

our responsibility is to express an opinion on the financial statements based on our audit. Because of the matters described below in the Basis for Disclaimer of opinion section, we were not able to obtain sufficient appropriate evidence to provide a basis for an audit opinion.

Basis for Disclaimer of Opinion

the auditors’ report for the previous financial year ended 31 December 2007 was disclaimed in respect of the following :-

1. the financial statements disclosed the material significant arbitration case between the Company and the Government of madagascar that was underway in the International Chamber of Commerce, International Court of Arbitration.

Should the outcome of this arbitration case be unfavourable to the Company, it may give rise to significant uncertainty on the ability of the Group and of the Company to continue as going concerns as the liquidity of the Group and of the Company would be adversely affected.

2. the Group and the Company reported a net loss of Rm46.16 million and Rm19.04 million respectively during the year ended 31 December 2007. As of that date, the Group’s current liabilities exceeded its current assets by Rm83.62 million.

In addition, the Group and the Company have defaulted in the repayment of bank borrowings totaling Rm48.79 million and Rm30.94 million respectively as at 31 December 2007.

these factors indicate the existence of material uncertainties which may cast significant doubt on the ability of the Group and the Company to continue as going concerns and therefore they may be unable to realise their assets and discharge their liabilities in the normal course of business. the financial statements of the Group and the Company do not include any adjustments and classifications relating to the recorded assets and liabilities that may be necessary if the Group and the Company are unable to continue as going concerns.


2008 Annual Report

Basis for Disclaimer of Opinion (cont’d)

the Directors were of the opinion that the Group would be able to achieve profitable results, generate positive cash flows and obtain the support of their bankers, creditors and shareholders. the Directors’ plan included the partial disposal of the land held for property development of its subsidiary, Bukit Jalil Development Sdn Bhd, to generate sufficient cash flows to enable the Group and the Company to repay a portion of their bank borrowings and to continue their property development activities so as to meet their liabilities as and when they fall due. We were unable to obtain sufficient appropriate audit evidence that the above plan was feasible and that the outcome would improve the situation.

3. the Secured Bank Guarantees amounting to uSD 13,273,849 (equivalent to Rm43,406,029) have been called upon by the Government of madagascar from the Guarantor Bank following the dismissal of the Company’s application for leave to the Federal Courts on 8 July 2008. on 25 July 2008, the Guarantor Bank paid Rm43,406,029 to the Government of madagascar. No provision has been made for the amounts of bank guarantees demanded by the Government of madagascar but the amounts have been disclosed as contingent liabilities in the financial statements. the non-recognition of the liability arising from the demand of bank guarantees by the Government of madagascar is not in accordance with Financial Reporting Standards in malaysia. We are unable to perform sufficient appropriate audit procedures to ascertain whether the corresponding debit represented a recoverable amount or an expense in the income statement.

4. Included in the trade receivables of the Group as at 31 December 2007, is an amount of Rm4.48 million (2006: Rm4.48 million), being the amounts due from Khoo Soon Lee Realty Sdn Bhd to ho hup Jaya Sdn Bhd (“hh Jaya”), a subsidiary of the Company. hh Jaya is taking legal action to recover the disputed amounts owing. We draw attention to the disclosed note which describes the uncertainty related to the outcome of the legal action.

5. As at the date of our previous report, management financial statements for the periods subsequent to the financial year end of the Company and certain subsidiaries have not been prepared. In the absence of the latest management financial statements as mentioned in the preceding paragraph, the subsequent events review procedures required by Approved Standard on Auditing AI 560 Subsequent Events to be performed by us were limited.

6. Included in the Group’s and the Company’s investment in associates are the carrying amounts of investment in Shanghai San ho hup pile Co Ltd of Rm10.25 million and Rm10.31 million respectively. the associate has been incurring losses for the previous three financial years which indicates that the asset may be impaired. the Directors have informed us of their intentions to dispose of this investment and are confident that the fair value less costs to sell would exceed the carrying amount of the investment. In the absence of appropriate documentary evidence, we are unable to ascertain whether the carrying amount of the investment has been measured in accordance with FRS 136 Impairment of Assets.

We discuss below the extent of the matters that gave rise to the disclaimer of opinion in respect of the financial statements for the year ended 31 December 2007 that remained unresolved, insofar as they impact both corresponding as well as current year figures provided in the current financial statements, and additional matters that relate to the current financial statements.

1. As disclosed in Note 41(g) to the financial statements, the arbitration case between the Company and the Government of madagascar, which was one of the matters included in our audit report on the financial statements for the year ended 31 December 2007, is presently still ongoing in the International Chamber of Commerce, International Court of Arbitration.


2008 Annual Report


1. Should the outcome of this arbitration case be unfavourable to the Company, additional provisions arising from claims made may be required and certain property, plant and equipment and receivables relating to the Company’s operations in madagascar may need to be impaired. We are unable to determine as to the nature and quantum of such claims and the extent of the impairment required, if any, for the corresponding and the current financial year.

2. the Group and the Company reported a net loss of Rm56.163 million and Rm68.648 million respectively during the year ended 31 December 2008. As of that date, the Group’s current liabilities exceeded its current assets by Rm132.519 million.

In addition, the Group and the Company has defaulted in the repayment of its bank borrowings as at 31 December 2008 and certain creditors have also filed winding up petitions against certain subsidiaries and the Company.

these factors indicate the existence of material uncertainties which may cast significant doubt on the ability of the Group and the Company to continue as going concerns and therefore they may be unable to realise their assets and discharge their liabilities in the normal course of business.

the financial statements of the Group and of the Company do not include any adjustments and classifications relating to the recorded assets and liabilities that may be necessary should the Group and the Company be unable to continue as going concerns.

At the date of this report, the Directors are of the opinion that the Group would be able to achieve profitable results, generate positive cash flows and obtain the support of their bankers, creditors and shareholders.

the Directors are currently formulating a plan that could include the partial disposal of the land held for property development of its subsidiary, Bukit Jalil Development Sdn Bhd to generate sufficient cash flows to enable the Group and the Company to repay a portion of their bank borrowings and to continue their property development activities so as to meet their liabilities as and when they fall due.

3. As at the date of this report and that of our report on the financial statements of the Group and of the Company for the year ended 31 December 2007, management financial statements for the periods subsequent to the respective financial year end of the Company and certain subsidiaries have not been prepared. In the absence of the latest management financial statements, the subsequent events review procedures required by Approved Standard on Auditing AI 560 Subsequent Events to be performed by us were limited. As such, we are also unable to satisfy ourselves as to the completeness of the recorded liabilities of the Group and of the Company as at 31 December 2008 and as at 31 December 2007.

4. As at the date of this report, replies relating to certain bank confirmation requests are outstanding. We are unable to perform such appropriate alternative audit procedures to satisfy ourselves as to the completeness of the recorded liabilities, contingent liabilities and disclosure matters of the Group and of the Company for the year ended 31 December 2008.

5. As disclosed in Note 20 to the financial statements, the audited financial statements for the year ended 31 December 2008 of the indicated subsidiaries and the foreign branch operations in madagascar were not available and accordingly management financial information of these entities were use for the preparation of the consolidated financial statements of the Group. We are unable to satisfy ourselves as to whether the financial information used for consolidation is appropriate.

independent auditors’ report (cont’d)


2008 Annual Report


6. Certain solicitors’ response to management request on the material litigation cases as disclosed in Note 41 to the financial statements have not been received. Accordingly, we are unable to satisfy ourselves as to the nature, quantum and extent of the cases disclosed and as to its completeness.

7. In our audit report on the financial statements for the year ended 31 December 2007, we reported that the Secured Bank Guarantees amounting to uSD 13,273,849 (equivalent to Rm43,406,029) have been paid by the Guarantor Bank to the Government of madagascar on 25 July 2008. We reported that this amount should have been recognised as a liability by the Group and the Company in their respective balance sheets as at 31 December 2007. During the year ended 31 December 2008, the Group and the Company recognised this liability with the corresponding Rm8,933,563 and Rm34,472,466 taken to the income statements and against the advances from Government of madagascar respectively. the above liability amount should have been recognised in the corresponding year. however, due to the lack of relevant available information, we are not able to fully satisfy ourselves as to whether the Rm8,933,563 taken to the income statements is appropriate.

8. In our audit report on the financial statements for the year ended 31 December 2007, we reported that the Group and the Company’s investment in an associated company, Shanghai San ho hup pile Co Ltd of Rm10.25 million and Rm10.31 million respectively may have been impaired. however, no provision for impairment was made for the year ended 31 December 2007. During the current financial year ended 31 December 2008, the Group and the Company provided for impairment of the entire carrying values. In our opinion, such impairment amounts should have been recognised in the corresponding year.

Disclaimer of Opinion

Because of the significance of the matters as discussed in the Basis for Disclaimer of opinion paragraph, we do not express an opinion on the financial statements.

Other Matters

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

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

(b) In our opinion, except for the matters discussed in the Basis for Disclaimer of opinion paragraph insofar as it affect the accounting and other records, the accounting and other records required by the Act to be kept by the Company and its subsidiary of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.

(c) We are unable to consider the financial statements and the auditors’ reports of all the subsidiaries of which we have not acted as auditors, being financial statements that have been included in the consolidated financial statements as the financial statements of these subsidiaries have not been audited as at the date of this report.

(d) Because of the significance of the matters discussed in the Basis for Disclaimer of opinion paragraph, we are unable to comment as to whether the financial statements of the subsidiaries that have been consolidated with the financial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have not received satisfactory information and explanations required by us for those purposes except for the financial statements of tru-mix Concrete Sdn Bhd and ho hup Jaya Sdn Bhd.


2008 Annual Report

Other Matters (cont’d)

(e) Except for Bukit Jalil Development Sdn Bhd, the auditors’ reports on the financial statements of the subsidiaries which have been audited were not subject to any qualification and did not include any comment required to be made under Section 174(3) of the Act.

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

ernst & younG kua choo kai AF: 0039 No. 2030/03/10(J) Chartered Accountants Chartered Accountant

Kuala Lumpur, malaysia14 may 2009

independent auditors’ report (cont’d)


2008 Annual Report

income statementsfor the year ended 31 December 2008

Group company 2008 2007 2008 2007

note rM’000 rM’000 rM’000 rM’000

Revenue 7 91,183 100,088 35,717 57,622 Cost of sales 8 (70,812) (87,225) (40,813) (54,830)

Gross profit/(loss) 20,371 12,863 (5,096) 2,792 other income 9 (a) 4,399 6,821 23,626 20,036 Administrative expenses 9 (b) (9,258) (8,459) (6,527) (5,347)operating expenses 9 (b) (65,267) (50,773) (76,308) (31,744)

loss from operations 9 (49,755) (39,548) (64,305) (14,263)Finance costs 13 (6,515) (5,875) (4,341) (4,498)Share of result of associates 21 351 (380) - -

loss before tax (55,919) (45,803) (68,646) (18,761)Income tax expense 14 (244) (359) (2) (275)

loss for the financial year (56,163) (46,162) (68,648) (19,036)

attributable to:equity holders of the company (56,074) (46,107) (68,648) (19,036)Minority interests (89) (55) - -

(56,163) (46,162) (68,648) (19,036)

loss per share attributable to equity holders of the company

Basic loss per share (sen) 15 (55.0) (45.2)

the accompanying notes form an integral part of the financial statements.


2008 Annual Report

Group company 2008 2007 2008 2007

note rM’000 rM’000 rM’000 rM’000

non-current assets

property, plant and equipment 16 30,397 35,980 28,993 34,264 Investment properties 17 1,712 1,712 1,712 1,712 prepaid land lease payments 18 227 234 227 234 Land held for property development 19(a) 120,264 120,264 - - Investment in subsidiaries 20 - - 15,747 40,502 Investment in associates 21 - 10,522 - 10,549 Investment in jointly controlled entities 22 - - - -

152,600 168,712 46,679 87,261

current assets

property development costs 19(b) 31,051 30,113 - - Inventories 23 806 885 - - trade receivables 24 81,566 102,988 57,946 64,984 other receivables 25 13,078 12,086 184,530 191,382 Cash and bank balances 27 10,582 14,827 9,282 12,420

137,083 160,899 251,758 268,786

Non-current asset classified as held for sale 28 - 1,919 - -

137,083 162,818 251,758 268,786

total assets 289,683 331,530 298,437 356,047

balance sheetsas at 31 December 2008


2008 Annual Report

Group company 2008 2007 2008 2007

note rM’000 rM’000 rM’000 rM’000

equity anD liabilities

equity attributable to equity holders of the company

Share capital 29 102,000 102,000 102,000 102,000 Reserves (83,231) (26,530) (15,071) 53,577

Shareholders’ equity 18,769 75,470 86,929 155,577 minority interests 1,270 1,859 - -

total equity 20,039 77,329 86,929 155,577

non-current liabilities

provision for liquidated ascertained damages 30 - 7,222 - - Long term borrowings 31 - 500 - 369 Deferred tax liabilities 33 42 38 - -

42 7,760 - 369

current liabilities

provision for liquidated ascertained damages 30 23,054 11,313 - - Short term borrowings 31 104,515 70,276 80,155 45,545 trade payables 34 83,924 123,822 71,173 100,845 other payables 35 51,184 32,988 55,184 48,215 tax payable 36 6,925 8,042 4,996 5,496

269,602 246,441 211,508 200,101

total liabilities 269,644 254,201 211,508 200,470

total equity anD liabilities 289,683 331,530 298,437 356,047



2008 Annual Report

statements of changes in equityfor the year ended 31 December 2008

<--------- attributable to equity holders of the company --------->

share capital

non-distributable foreign exchange

reserve

retained earnings/ (accumulated

losses) total

Minority interests

total

equity rM’000 rM’000 rM’000 rM’000 rM’000 rM’000

GrouP

at 1 January 2007 102,000 5,387 14,341 121,728 1,914 123,642

Loss for the year - - (46,107) (46,107) (55) (46,162)

Exchange difference on translation of net assets of foreign subsidiaries - (151) - (151) - (151)

at 31 December 2007 102,000 5,236 (31,766) 75,470 1,859 77,329

at 1 January 2008 102,000 5,236 (31,766) 75,470 1,859 77,329

Loss for the year - - (56,074) (56,074) (89) (56,163)

Dividends paid to minority shareholders - - - - (500) (500)

Exchange difference on translation of net assets of foreign subsidiaries - (627) - (627) - (627)

at 31 December 2008 102,000 4,609 (87,840) 18,769 1,270 20,039

share capital

Distributable retained profits/

(accumulated losses)

total equity

rM’000 rM’000 rM’000

coMPany

at 1 January 2007 102,000 72,613 174,613

Loss for the year - (19,036) (19,036)

at 31 December 2007 102,000 53,577 155,577

at 1 January 2008 102,000 53,577 155,577

Loss for the year - (68,648) (68,648)

at 31 December 2008 102,000 (15,071) 86,929



2008 Annual Report

consolidated cash flow statementfor the year ended 31 December 2008

2008 2007 rM’000 rM’000

cash flows froM oPeratinG activities

Loss before taxation (55,919) (45,803)

Adjustments for:

Bad debts written off 565 1,073

provision for doubtful debts 6,258 14,554

Write back of provision for doubtful debts

- trade receivables - (204)

- other receivables (181) -

provision for diminution in value of investment in associates 10,873 17

Depreciation of property, plant and equipment 5,463 6,245

Gain on disposal of property, plant and equipment (2,005) (2,382)

Gain on disposal of land held for property development (20,594) -

property, plant and equipment written off - 29

Amortisation of prepaid lease payments 7 7

Gain on disposal of quoted investment - (110)

unrealised foreign exchange loss 3,597 95

provision for liquidated ascertained damages 4,602 5,552

provision for foreseeable losses 2,931 2,500

Dividend income - (3)

Interest income (565) (588)

Interest expense 6,515 5,875

Share of results of associates (351) 380

operating loss before working capital changes (38,804) (12,763)

property development costs (3,869) (5,811)

Inventories 79 (726)

Receivables 10,191 (1,533)

payables (21,785) 27,600

Cash (used in)/generated from operations (54,188) 6,767

tax paid (1,357) (304)

Interest paid (6,515) (6,534)

Net cash used in operating activities (62,060) (71)


2008 Annual Report

2008 2007 rM’000 rM’000

cash flows froM investinG activities

purchase of property, plant and equipment (Note 16(b)) (331) (1,248)

proceeds from disposal of property, plant and equipment 2,449 2,748

proceeds from disposal of land held for property development 22,513 -

proceeds from disposal of quoted investment - 145

Dividend received - 2

Interest received 565 588

Net cash generated from investing activities 25,196 2,235

cash flows froM financinG activities

Repayment of hire purchase financing (1,778) (702)

Net drawdown/(repayment) on borrowings 46,107 (14,926)

Dividend paid to minority interests of a subsidiary (500) -

Net cash generated from/(used in) financing activities 43,829 (15,628)

net increase/(Decrease) in cash anD bank balances net of bank overDrafts 6,965 (13,464)

effects of exchanGe rate chanGes (620) 213

cash anD bank balances net of bank overDrafts at beGinninG of financial year (3,360) 9,891

cash anD bank balances net of bank overDrafts at enD of financial year 2,985 (3,360)

less: cash anD cash equivalents restricteD froM use by the coMPany (note 27) (8,584) (12,200)

cash anD cash equivalents at enD of financial year (note 27) (5,599) (15,560)

consolidated cash flow statement(cont’d)



2008 Annual Report

2008 2007 rM’000 rM’000

cash flows froM oPeratinG activities

Loss before taxation (68,646) (18,761)

Adjustments for:

Bad debts written off 565 729

provision for doubtful debts

- subsidiaries 3,220 1,089

- trade receivables 6,258 14,476


- subsidiaries (12,327) (13,714)

- other receivables (181) -

provision for diminution in value of investment in

- subsidiaries 24,755 -

- associates 10,549 17

Depreciation of property, plant and equipment 4,870 5,605

property, plant and equipment written off - 9

Gain on disposal of property, plant and equipment (2,756) (2,342)

Amortisation of prepaid land lease payments 7 7

unrealised foreign exchange loss 3,597 95

Dividend income (4,500) -

Interest income (3,216) (3,827)

Interest expense 4,341 4,498

operating loss before working capital changes (33,464) (12,119)

Receivables 15,765 (5,712)

payables (22,703) 21,983

Cash (used in)/generated from operations (40,402) 4,152

tax paid (502) (636)

Interest paid (4,341) (4,498)

Net cash used in operating activities (45,245) (982)

cash flow statementfor the year ended 31 December 2008


2008 Annual Report

cash flow statement(cont’d)

2008 2007 rM’000 rM’000

cash flows froM investinG activities

purchase of property, plant and equipment (3) (568)

proceeds from disposal of property, plant and equipment 3,160 2,629

Dividend income received 4,500 -

Interest received 209 534

Net cash generated from investing activities 7,866 2,595

cash flows froM financinG activities

Repayment of hire purchase financing (1,661) (509)

Net drawdown/(repayment) on borrowings 46,115 (14,169)

Net cash generated from/(used in) financing activities 44,454 (14,678)

net increase/(Decrease) in cash anD bank balances net of bank overDrafts 7,075 (13,065)

cash anD bank balances net of bank overDrafts at beGinninG of financial year (2,023) 11,042

cash anD bank balances net of bank overDrafts at enD of financial year 5,052 (2,023)

less: cash anD cash equivalents restricteD froM use by the coMPany (note 27) (8,251) (11,537)

cash anD cash equivalents at enD of financial year (note 27) (3,199) (13,560)



2008 Annual Report

notes to the financial statements31 December 2008

1. corPorate inforMation

the principal activities of the Company consist of foundation engineering, civil engineering, building contracting works and hire of plant and machinery. the principal activities of the subsidiaries are disclosed in Note 20. there have been no significant changes in the nature of the principal activities during the financial year.

the Company is a public limited liability company, incorporated and domiciled in malaysia, and is listed on the main Board of the Bursa malaysia Securities Berhad. the registered office of the Company is located at No.18, Jalan 17/155C, Bandar Bukit Jalil, 57000 Kuala Lumpur.

the financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the Directors on 14 may 2009.

pursuant to the amendments to the Listing Requirements (“LR”) of Bursa malaysia Securities Berhad (“Bursa Securities”) in relation to practice Note No. 17/2005 (“Amended pN17”) the Company on 31 July 2008 announced (“First Announcement”) that the Company is deemed an Affected Listed issuer as defined in the Amended pN17 as the auditors have expressed a disclaimer opinion on the Company’s financial statements for the year ended 31 December 2007.

As an Affected Listed Issuer, the Company is required pursuant to paragraph 3.1(a)(ii) of the Amended pN17 to comply with the following obligations:

(a) to announce details of the Regularisation plan as referred to in paragraph 8.14C(3) of the Listing Requirements which announcement must fulfill the requirements set out in paragraph 3.1A of the Amended pN 17/2005;

(b) to submit the Regularisation plan to the Securities Commission, and other relevant authorities (“Approving Authority”), for approval within eight (8) months from the date of the First Announcement; and to implement the Regularisation plan within the timeframe stipulated by the relevant Approving Authority;

(c) to announce the status of its plan to regularise its condition and the number of months to the end of the relevant timeframes referred thereto, as may be applicable on a monthly basis until further notice from Bursa Securities; and

(d) to announce its compliance or non-compliance with a particular obligation imposed pursuant to Amended pN17/2005 on an immediate basis.

In the event that the Company fails to comply with the obligation to regularise its condition, all of its listed securities shall be suspended from trading on the 5th market day after the Submission timeframe or Implementation timeframe, as the case may be, and de-listing procedures shall be taken against the Company by Bursa Securities.


2008 Annual Report

notes to the financial statements (cont’d)

2. basis of PreParation

the financial statements of the Group and of the Company have been prepared under the historical cost convention unless otherwise indicated. the financial statements are presented in Ringgit malaysia (“Rm”) and all values are rounded to the nearest thousand except when otherwise stated.

Note 41 disclosed details of material litigation relating to the Group and the Company. Should the outcome of the matters referred to in Note 41 be unfavourable to the Group and the Company, it may give rise to significant uncertainty on the ability of the Group and the Company to continue as going concerns as additional provision for doubtful debts and/or further provision for liabilities are required to be made in the financial statements of the Group and the Company.

the financial statements indicated that the Group and the Company incurred a net loss of Rm56.16 million and Rm68.65 million respectively during the year ended 31 December 2008 and, as of that date, the Group’s current liabilities exceeded its current assets by Rm132.52 million. the financial statements further disclosed that the Group and the Company have negative operating cash flows of Rm62.06 million and Rm45.25 million respectively for the year ended 31 December 2008. In addition, as disclosed in Note 30 and Note 31, the Company has defaulted on its repayment obligations relating to bank borrowings and hire purchase facilities. Further as disclosed in Note 35, the Group and the Company has not paid its schedular tax deductions (“StD”) and contributions to the Employee provident Fund (“EpF”) amounting to Rm218,000 and Rm1.74 million and income taxes of the Group and the Company of Rm6.6 million plus estimated tax penalties of Rm1.1 million respectively. these factors, along with the matters as set forth in the preceding paragraph, indicate the existence of material uncertainties which may cast significant doubt on the ability of the Group and the Company to continue as going concerns and therefore they may be unable to realise their assets and discharge their liabilities in the normal course of business.

At the date of this report, the Directors are of the opinion that the Group would be able to achieve profitable results, generate positive cash flows and obtain the support of their bankers, creditors and shareholders. the Directors’ plan includes the partial disposal of the land held for property development of its subsidiary, Bukit Jalil Development Sdn Bhd to generate sufficient cash flows to enable the Group and the Company to repay a portion of their bank borrowings and to continue their property development activities so as to meet their liabilities as and when they fall due. on 2 march 2009, the Company announced to Bursa Securities that Bulit Jalil Development Sdn Bhd has entered into two separate Conditional Sale and purchase Agreements to dispose of two (2) pieces of its freehold land for Rm29.24 million for cash.

the financial statements of the Group and the Company have been prepared on a going concern basis which assumes that the Group and the Company will continue in operational existence for the foreseeable future and have adequate funds to meet their obligations as and when they fall due. the validity of this assumption is dependent on the success of the management plan as discussed in the preceeding paragraphs.

the financial statements of the Group and the Company do not include any adjustments and classifications relating to the recorded assets and liabilities that may be necessary if the Group and the Company are unable to continue as going concerns.

(a) statement of compliance

the financial statements comply with Financial Reporting Standards and the Companies Act, 1965 in malaysia. on 1 January 2008, the Group and the Company adopted revised FRSs, amendment to FRS and interpretations as described in Note 3.


2008 Annual Report

2. basis of PreParation (cont’d)

(b) subsidiaries and basis of consolidation

(i) subsidiaries

Subsidiaries are entities over which the Group has the ability to control the financial and operating policies so as to obtain benefits from their activities. the existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group has such power over another entity.

In the Company’s separate financial statements, investments in subsidiaries are stated at cost less impairment losses. on disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in profit or loss.

(ii) basis of consolidation

the consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the balance sheet date. the financial statements of the subsidiaries are prepared for the same reporting date as the Company.

Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. In preparing the consolidated financial statements, intragroup balances, transactions and unrealised gains or losses are eliminated in full. uniform accounting policies are adopted in the consolidated financial statements for like transactions and events in similar circumstances.

Acquisitions of subsidiaries are accounted for using the purchase method. the purchase method of accounting involves allocating the cost of the acquisition to the fair value of the assets acquired and liabilities and contingent liabilities assumed at the date of acquisition. the cost of an acquisition is measured as the aggregate of the fair values, at the date of exchange, of the assets given, liabilities incurred or assumed, and equity instruments issued, plus any costs directly attributable to the acquisition.

Any excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities represents goodwill. Any excess of the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition is recognised immediately in profit or loss.

minority interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group. It is measured at the minorities’ share of the fair value of the subsidiaries’ identifiable assets and liabilities at the acquisition date and the minorities’ share of changes in the subsidiaries’ equity since then.


2008 Annual Report

2. basis of PreParation (cont’d)

(b) subsidiaries and basis of consolidation (cont’d)

(iii) associates

Associates are entities in which the Group exercises significant influence but not control. Significant influence is the power to participate in the financial and operating policy decisions of the investee but not in control or joint control over those policies.

Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting. under the equity method of accounting, the investment in associates is carried in the consolidated balance sheet at cost adjusted for post-acquisition changes in the Group’s share of net assets of the associates. the Group’s share of the net profit or loss of associates during the financial year is included in the consolidated income statement. Where there has been a change recognised directly in equity of the associates, the Group recognises its share of such changes.

unrealised gains on transactions between the Group and the associates are eliminated to the extent of the Group’s interests in the associates. unrealised losses are eliminated unless cost cannot be recovered.

After application of the equity method, the Group determines whether it is necessary to recognise any additional impairment loss with respect to the Group’s net investment in the associates. the associates are equity accounted for from the date the Group obtains significant influence until the date the Group ceases to have significant influence over the associate, or when it is classified as held for sale.

Goodwill relating to an associate is included in the carrying amount of the investment and is not amortised. Any excess of the Group’s share of the net fair value of the associate’s identifiable assets, liabilities and contingent liabilities over the cost of investment is excluded from the carrying amount of the investment and is instead included in the determination of the Group’s share of the associate’s profit or loss in the period in which the investment is acquired.

When the Group’s share of losses in an associate equals or exceeds its interest in associate, including any long-term interest that, in substance, form part of the Group’s net investment in the associate, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

the most recent available audited or management financial statements of the associate are used by the Group in applying the equity method. uniform accounting policies are adopted for like transactions and events in similar circumstances.

(iv) Jointly controlled entities

A jointly controlled entity is an entity in which the Group has joint control over its economic activity established under a contractual arrangement.

Interest in jointly controlled entity is accounted for in the consolidated financial statements using the equity method of accounting as described in Note 2(b)(iii).



2008 Annual Report

3. chanGes in accountinG Policies anD effects arisinG froM aDoPtion of new anD reviseD frss

on 1 January 2008, the Group and the Company adopted the following revised FRSs, amendment to FRS and Interpretations:

FRS 107 Cash Flow Statements

FRS 111 Construction Contracts

FRS 112 Income taxes

FRS 118 Revenue

FRS 120 Accounting for Government Grants and Disclosure of Government Assistance

FRS 134 Interim Financial Reporting

FRS 137 provisions, Contingent Liabilities and Contingent Assets

Amendment to FRS 121 the Effects of Changes in Foreign Exchange Rates – Net Investment in a Foreign operation

IC Interpretation 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities

IC Interpretation 2 members’ Shares in Co-operative Entities and Similar Instruments

IC Interpretation 5 Rights to Interests Arising from Decommissioning, Restoration and Environmental Rehabilitation Funds

IC Interpretation 6 Liabilities Arising from participating in a Specific market - Waste Electrical and Electronic Equipment

IC Interpretation 7 Applying the Restatement Approach under FRS 129 - Financial Reporting in hyperinflationary Economies

IC Interpretation 8 Scope of FRS 2

the revised FRSs, amendment to FRS and Interpretations above do not have any significant impact on the financial statements of the Group and of the Company.

4. siGnificant accountinG JuDGeMents anD estiMates

the Directors are required to make certain estimates, judgements and assumptions that they believe are reasonable based upon the information available. these estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the periods presented. on an ongoing basis, the Group evaluates its estimates using historical experience, consultation with experts and other methods considered reasonable in the particular circumstances. Actual results may differ significantly from the estimates, the effect of which is recognised in the period in which the facts that give rise to the revision become known.


2008 Annual Report


4. siGnificant accountinG JuDGeMents anD estiMates (cont’d)

the key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed as follows:

(a) trade and other receivables

the Group and the Company evaluate the collectibility of trade and other receivables and record provisions for doubtful debts based on historical collection pattern. these provisions are based, amongst other things, comparisons of the relative age of accounts and consideration of actual write-off history. the actual level of receivables collected may differ from the estimated levels of recovery, which could impact the operating results positively or negatively. As at 31 December 2008, the Group’s and the Company’s gross trade and other receivables were Rm134.83 million (2007: Rm149.18 million) and Rm319.33 million (2007: Rm336.25 million) respectively, and the provision for doubtful debts made in respect of trade and other receivables were Rm40.18 million (2007: Rm34.11 million) and Rm 76.85 million (2007: Rm79.88 million) respectively.

(b) classification between investment properties and property, plant and equipment

the Group and the Company have developed certain criteria based on FRS 140: Investment property in making judgement whether a property qualifies as an investment property. Investment property is a property held to earn rentals or for capital appreciation or both.

(c) Depreciation of plant and machinery

the cost of plant and machinery is depreciated on a straight-line basis over the assets’ useful lives. management estimates the useful lives of these plant and machinery to be between 10 and 20 years.

Changes in the expected level of usage could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised.

A 10% difference in the average useful lives of these assets from management’s estimates would result in approximately 1.5% variance in the Group’s loss for the year.

(d) Property development

the Group recognises property development revenue and expenses in the income statement using the stage of completion method. the stage of completion is determined by the proportion that property development costs incurred for work performed to date bear to the estimated property development costs.

Significant judgement is required in determining the stage of completion, the extent of property development costs incurred, the estimated total property development revenue and costs, as well as the recoverability of the development projects. In making the judgement, the Group evaluates based on past experience and by relying on the work of specialists. During the financial year, the Group made provision for foreseeable losses amounting to Rm2.9 million in respect of a property development project.


2008 Annual Report

4. siGnificant accountinG JuDGeMents anD estiMates (cont’d)

(e) Provision for liquidated ascertained damages

provision for liquidated ascertained damages is recognised for expected liquidated ascertained damages claims based on the terms of the applicable sale and purchase agreements and is provided up to the estimated completion date of development projects. A delay in the estimated completion date of development projects will result in further liquidated ascertained damages of approximately Rm372,000 per month.

(f) Material litigations

the Group and the Company determine whether a present obligation in relation to a material litigation exists at the balance sheet date by taking into account all available evidence, including, the opinion of the solicitors. the evidence considered includes any additional evidence provided by events after the balance sheet date. on the basis of such evidence, the Group and the Company evaluate if a provision needs to be recognised in the financial statements. Further details of the material litigations involving the Group and the Company are given in Note 41.

(g) impairment of assets

the Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

5. siGnificant accountinG Policies

(a) Property, plant and equipment and depreciation

property, plant and equipment are initially recorded at cost. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. the carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Subsequent to recognition, property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.

Freehold land has an unlimited useful life and therefore is not depreciated.

Depreciation of other property, plant and equipment is provided for on a straight-line basis to write off the cost of each asset to its residual value over the estimated useful life, at the following annual rates:

Buildings 2%motor vehicles 20%plant and machinery 5% - 10%others 10% - 20%


2008 Annual Report


5. siGnificant accountinG Policies (cont’d)

(a) Property, plant and equipment and depreciation (cont’d)

the residual values, useful lives and depreciation methods are reviewed at each financial year end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. the difference between the net disposal proceeds, if any and the net carrying amount is recognised in profit or loss.

(b) investment properties

Investment properties are properties which are held either to earn rental income or for capital appreciation or for both. Such properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at cost less accumulated depreciation and impairment losses.

Depreciation of buildings classified as investment properties is provided for on a straight-line basis to write off the cost of each asset to its residual value over the estimated useful life, at an annual rate of 2%.

the residual values, useful lives and methods of depreciation of investment properties are reviewed, and adjusted if appropriate, at each financial year end.

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

(c) investments in subsidiaries, associates and jointly controlled entities

the Company’s investments in subsidiaries, associates and jointly controlled entities are stated at cost less impairment losses.

on disposal of such investments, the difference between net disposal proceeds and their carrying amounts is recognised in the income statement.

(d) impairment of non-financial assets

the carrying amounts of assets, other than construction contract assets, property development costs, inventories, deferred tax assets and non-current assets held for sale, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated to determine the amount of impairment loss.


2008 Annual Report


(d) impairment of non-financial assets (cont’d)

For the purpose of impairment testing of these assets, recoverable amount is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. If this is the case, recoverable amount is determined for the cash-generating unit (CGu) to which the asset belongs to. Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s CGus, or groups of CGus, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units.

An asset’s recoverable amount is the higher of an asset’s or CGu’s fair value less costs to sell and its value in use. 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. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses recognised in respect of a CGu or groups of CGus are allocated first to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the carrying amount of the other assets in the unit or groups of units on a pro-rata basis.

An impairment loss is recognised in profit or loss in the period in which it arises. An impairment loss for an asset other than goodwill is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. the carrying amount of an asset other than goodwill is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss for an asset other than goodwill is recognised in profit or loss.

(e) lanD helD for ProPerty DeveloPMent anD ProPerty DeveloPMent costs

(i) land held for property development

Land held for property development consists of land where no development activities have been carried out or where development activities are not expected to be completed within the normal operating cycle. Such land is classified within non-current assets and is stated at cost less any accumulated impairment losses.

Land held for property development is reclassified as property development costs at the point when development activities have commenced and where it can be demonstrated that the development activities can be completed within the normal operating cycle.

(ii) Property development costs

property development costs comprise all costs that are directly attributable to development activities or that can be allocated on a reasonable basis to such activities.

When the financial outcome of a development activity can be reliably estimated, property development revenue and expenses are recognised in the income statement by using the stage of completion method. the stage of completion is determined by the proportion that property development costs incurred for work performed to date bear to the estimated total property development costs.


2008 Annual Report



(e) land held for property development and property development costs (cont’d)

(ii) Property development costs (cont’d)

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

Any expected loss on a development project is recognised as an expense immediately.

property development costs not recognised as an expense are recognised as an asset, which is measured at the lower of cost and net realisable value.

the excess of revenue recognised in the income statement over billings to purchasers is classified as accrued billings within trade receivables and the excess of billings to purchasers over revenue recognised in the income statement is classified as progress billings within trade payables.

(f) construction contracts

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

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

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

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

(g) inventories

Inventories which represent construction materials and unsold property are stated at the lower of cost (determined on the first-in, first-out basis) and net realisable value. the cost of unsold property comprises cost associated with the acquisition of land, direct costs and appropriate proportions of common costs.

Net realisable value represents the estimated selling price in the ordinary course of business less the estimated costs of completion and the costs necessary to make the sale.


2008 Annual Report


(h) financial instruments

Financial instruments are recognised in the balance sheet when the Group has become a party to the contractual provisions of the instrument.

Financial instruments are classified as liabilities or equity in accordance with the substance of the contractual arrangement. Interest, dividends and gains and losses relating to a financial instrument classified as a liability, are reported as expense or income. Distributions to holders of financial instruments classified as equity are recognised directly in equity. Financial instruments are offset when the Group has a legally enforceable right to offset and intends to settle either on a net basis or to realise the asset and settle the liability simultaneously.

(i) cash and cash equivalents

For the purposes of the cash flow statements, cash and cash equivalents include cash on hand and at banks and deposits at call which have an insignificant risk of changes in value, net of outstanding bank overdrafts.

(ii) other non-current investments

Non-current investments other than investments in subsidiaries, associates, jointly controlled entities and investment properties are stated at cost less impairment losses. on disposal of an investment, the difference between net disposal proceeds and its carrying amount is recognised in the income statement.

(iii) trade and other receivables

trade and other receivables are carried at anticipated realisable values. Bad debts are written off when identified. An estimate is made for doubtful debts based on a review of all outstanding amounts as at the balance sheet date.

(iv) trade and other payables

trade and other payables are stated at cost which is the fair value of the consideration to be paid in the future for goods and services received.

(v) interest-bearing loans and borrowings

All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.

(vi) equity instruments

ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared.

the transaction costs of an equity transaction are accounted for as a deduction from equity, net of tax. Equity transaction costs comprise only those incremental external costs directly attributable to the equity transaction which would otherwise have been avoided.


2008 Annual Report



(i) borrowing costs

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 added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

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.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

(j) leases

(i) classification

A lease is recognised as a finance lease if it transfers substantially to the Group all the risks and rewards incidental to ownership. Leases of land and buildings are classified as operating or finance leases in the same way as leases of other assets and the land and buildings elements of a lease of land and buildings are considered separately for the purposes of lease classification. All leases that do not transfer substantially all the risks and rewards are classified as operating leases.

(ii) finance leases - the Group as lessee

Assets acquired by way of hire purchase or finance leases are stated at an amount equal to the lower of their fair values and the present value of the minimum lease payments at the inception of the leases, less accumulated depreciation and impairment losses. the corresponding liability is included in the balance sheet as borrowings. In calculating the present value of the minimum lease payments, the discount factor used is the interest rate implicit in the lease, when it is practicable to determine; otherwise, the Company’s incremental borrowing rate is used. Any initial direct costs are also added to the carrying amount of such assets.

Lease payments are apportioned between the finance costs and the reduction of the outstanding liability. Finance costs, which represent the difference between the total leasing commitments and the fair value of the assets acquired, are recognised in the profit or loss over the term of the relevant lease so as to produce a constant periodic rate of charge on the remaining balance of the obligations for each accounting period.

the depreciation policy for leased assets is in accordance with that for depreciable property, plant and equipment as described in Note 5(a).

(iii) operating leases - the Group as lessee

operating lease payments are recognised as an expense on a straight-line basis over the term of the relevant lease. the aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.


2008 Annual Report


(j) leases (cont’d)

(iii) operating leases - the Group as lessee (cont’d)

In the case of a lease of land and buildings, the minimum lease payments or the up-front payments made are allocated, whenever necessary, between the land and the buildings elements in proportion to the relative fair values for leasehold interests in the land element and buildings element of the lease at the inception of the lease. the up-front payment represents prepaid lease payments and are amortised on a straight-line basis over the lease term, which is 50 years.

(k) income tax

Income tax on the profit or loss for the year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the year and is measured using the tax rates that have been enacted at the balance sheet date.

Deferred tax is provided for, using the liability method, on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts in the financial statements. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unutilised tax losses and unutilised tax credits to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unutilised tax losses and unutilised tax credits can be utilised. Deferred tax is not recognised if the temporary difference arises from goodwill or negative goodwill or from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit.

Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is recognised in the income statement, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also recognised directly in equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill or the amount of any excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the cost of the combination.

(l) Provisions for liabilities

provisions for liabilities are recognised when the Group has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount can be made. provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risk specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as finance cost.


2008 Annual Report



(m) employee benefits

(i) short-term benefits

Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees of the Group. Short-term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences. Short-term non-accumulating compensated absences such as sick leave are recognised when the absences occur.

(ii) Defined contribution plans

Defined contribution plans are post-employment benefit plans under which the Group pays fixed contribution into separate entities or funds and will have no legal or constructive obligation to pay further contributions if any of the funds do not hold sufficient assets to pay all employee benefits relating to employee services in the current and preceding financial years.

As required by law, companies in malaysia make contributions to the EpF. Such contributions are recognised as an expense in the income statement as incurred.

(n) foreign currencies

(i) functional and presentation currency

the individual financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). the consolidated financial statements are presented in Ringgit malaysia (Rm), which is also the Company’s functional currency.

(ii) foreign currency transactions

In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency (foreign currencies) are recorded in the functional currencies using the exchange rates prevailing at the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are translated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not translated.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are included in the profit or loss for the period except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign operation.

these are initially taken directly to the foreign currency translation reserve within equity until the disposal of the foreign operations, at which time they are recognised in profit or loss. Exchange differences arising on monetary items that form part of the Company’s net investment in foreign operation are recognised in profit or loss in the Company’s separate financial statements or the individual financial statements of the foreign operation, as appropriate.


2008 Annual Report


(n) foreign currencies (cont’d)

(ii) foreign currency transactions (cont’d)

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

the principal exchange rate used for every unit of foreign currency ruling at the balance sheet date is as follows:

2008 2007 rM rM

100 Indian Rupee 7.08 8.47 1 Chinese Renminbi 0.56 0.45 1 uSD 3.49 3.31 100 thai Baht 9.97 9.82 100 South African Rand 36.90 47.64 1000 madagascar Ariary 1.86 1.85 1000 Rupiah 0.32 0.35

(iii) foreign operations

the results and financial position of foreign operations that have a functional currency different from the presentation currency (Rm) of the consolidated financial statements are translated into Rm as follows:

(a) Assets and liabilities for each balance sheet presented are translated at the closing rate prevailing at the balance sheet date;

(b) Income and expenses for each income statement are translated at average exchange rates for the year, which approximates the exchange rates at the dates of the transactions; and

(c) All resulting exchange differences are taken to the foreign currency translation reserve within equity.

Goodwill and fair value adjustments arising on the acquisition of foreign operations on or after 1 January 2006 are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated at the closing rate at the balance sheet date.


2008 Annual Report



(o) revenue recognition

Revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the enterprise and the amount of the revenue can be measured reliably.

(i) construction contracts

Revenue from construction contracts is accounted for by the stage of completion method as described in Note 5(f).

(ii) sale of development properties

Revenue from sale of development properties is accounted for by the percentage of completion method as described in Note 5(e)(ii).

(iii) sale of goods

Revenue relating to sale of goods is recognised net of sales taxes and discounts upon the transfer of risks and rewards.

(iv) hire of plant and machinery

Revenue from hire of plant and machinery is recognised on an accrual basis.

(p) non-current assets held for sale

Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. this condition is regarded as met only when the sale is highly probable and the asset is available for immediate sale in its present condition subject only to terms that are usual and customary.

Immediately before classification as held for sale, the measurement of the non-current assets is brought up-to-date in accordance with applicable FRSs. then, on initial classification as held for sale, non-current assets are measured in accordance with FRS 5 that is at the lower of carrying amount and fair value less costs to sell. Any differences are included in profit or loss.


2008 Annual Report

6. future chanGes in accountinG Policies

At the date of authorisation of these financial statements, the following new FRSs and Interpretations were issued but not yet effective and have not been applied by the Group and the Company:

effective for financial periods beginning on frs and interpretations or after

FRS 4: Insurance Contracts 1 January 2010 FRS 7: Financial Instruments: Disclosures 1 January 2010 FRS 8: operating Segments 1 July 2009 FRS 139: Financial Instruments: Recognition and measurement 1 January 2010 IC Interpretation 9: Reassessment of Embedded Derivatives 1 January 2010 IC Interpretation 10: Interim Financial Reporting and Impairment 1 January 2010

the new FRS and Interpretations above are expected to have no significant impact on the financial statements of the Group and of the Company upon their initial application except for the changes in disclosures arising from the adoption of FRS 8.

the Group and the Company are exempted from disclosing the possible impact, if any, to the financial statements upon the initial application of FRS 7 and FRS 139.

7. revenue

Group company

2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

Construction contracts 34,242 55,585 35,714 57,604

Sale of development properties 23,081 448 - -

Sale of goods 33,860 44,045 - -

hire of plant and machinery - 10 3 18

91,183 100,088 35,717 57,622


2008 Annual Report


8. cost of sales

Group company

2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

Construction contract costs 40,378 52,552 40,813 54,830

property development costs (Note 19(b)) 5,418 1,177 - -

Cost of goods sold 25,016 33,496 - -

70,812 87,225 40,813 54,830

Included in the property development costs of the Group is provision for foreseeable losses Rm2.9 million (2007: Rm2.5 million).

9. loss froM oPerations

the following amounts have been included in arriving at loss from operations:

(a) other income

Included in other income of the Group and of the Company are the following:

Group company

2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

Interest income

- from subsidiaries - - (3,007) (3,293)

- deposits with financial institutions (242) (554) (207) (534)

- others (323) (34) (2) -

Dividend income - (3) (4,500) -


- subsidiaries - - (12,327) (13,714)

- trade receivables - (204) - -

- other receivables (181) - (181) -


2008 Annual Report

9. loss froM oPerations (cont’d)

(a) other income (cont’d)

Group company

2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

Gain on disposal of land held for property development (20,594) - - -

Gain on disposal of property, plant and equipment (2,005) (2,382) (2,756) (2,342)

Gain on disposal of quoted investment - (110) - -

Rental income (170) (213) - -

(b) administrative and operating expenses

Included in administrative and operating expenses of the Group and of the Company are the following:

Group company

2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

Staff costs (Note 10) 7,320 7,063 2,741 1,703

Non-executive Directors’ remuneration (Note 11) 46 206 46 206

Auditors’ remuneration (Note 12)

- statutory audits 256 272 195 198

- other services 30 19 - -

Bad debts written off 565 1,073 565 729

provision for doubtful debts

- subsidiaries - - 3,220 1,089

- trade receivables 6,258 14,554 6,258 14,476

Depreciation of property, plant and equipment (Note 16) 5,463 6,245 4,870 5,605

property, plant and equipment written off - 29 - 9

Direct operating expenses of investment properties

- non-revenue generating during the year 10 7 10 7


2008 Annual Report


9. loss froM oPerations (cont’d)

(b) administrative and operating expenses (cont’d)

Group company

2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

Amortisation of prepaid land lease payments (Note 18) 7 7 7 7

office and store rental 1,141 1,320 790 799

hire of plant and machineries - 92 - -

provision for diminution in value of investment in:

- subsidiaries (Note 20) - - 24,755 -

- associates (Note 21) 10,873 17 10,549 17

provision for liquidated ascertained damages (Note 30) 4,602 5,552 - -

Rental of equipment 121 28 - -

Realised foreign exchange loss 5 - - -

unrealised foreign exchange loss 3,597 95 3,597 95

10. staff costs

Group company

2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

Wages and salaries 7,728 7,531 4,798 4,144

Social security costs 143 87 80 54

pension cost - defined contribution plans 885 888 542 581

other staff related expenses 2,290 2,363 1,047 730

11,046 10,869 6,467 5,509

Less: Staff costs included in construction contract costs (Note 26) (3,726) (3,806) (3,726) (3,806)

7,320 7,063 2,741 1,703

Included in staff costs of the Group and of the Company are Executive Directors’ remuneration amounting to Rm835,000 (2007: Rm938,000) and Rm805,000 (2007: Rm908,000) respectively as further disclosed in Note 11.


2008 Annual Report

11. Directors’ reMuneration

Group company

2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

Directors of the company

Executive:

Salaries and other emoluments 805 908 805 908

Benefits-in-kind 17 37 17 37

Fees 30 30 - -

852 975 822 945

Non-executive:

Fees - 174 - 174

other emoluments 46 32 46 32

46 206 46 206

898 1,181 868 1,151

Analysis excluding benefits-in-kind:

total executive Directors’ remuneration excluding benefits-in-kind (Note 10) 835 938 805 908

total non-executive Directors’ remuneration excluding benefits-in-kind (Note 9(b)) - 174 - 174

total Directors’ remuneration excluding benefits-in-kind 835 1,112 805 1,082

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

number of Directors

2008 2007

Executive Directors:

Rm100,001 to Rm200,000 1 -

Rm200,001 to Rm250,000 - 1

Rm250,001 to Rm300,000 1 1

Rm400,001 to Rm450,000 1 -

Non-executive Directors:

Below Rm50,000 9 1

Rm50,001 to Rm100,000 - 3


2008 Annual Report


12. auDitors’ reMuneration

Group company

2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

auditors of the company

Statutory audit 214 243 195 198

tax 10 7 - -

224 250 195 198

other auditors

Statutory audit 42 29 - -

Fees for other services:

- tax 12 6 - -

- others 8 6 - -

62 41 - -

286 291 195 198

13. finance costs

Group company

2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

Interest expense on:

- Bankers’ acceptances 145 517 - 372

- Bank overdrafts 1,376 1,571 1,072 1,311

- Revolving credits 966 1,775 966 1,775

- hire purchase 196 132 186 118

- term loan 3,832 2,502 2,117 922

6,515 6,497 4,341 4,498

Less: Interest expense capitalised in property development costs (Note 19(b)) - (622) - -

6,515 5,875 4,341 4,498


2008 Annual Report

14. incoMe tax exPense

Group company

2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

Current income tax:

malaysian income tax 45 211 - 210

Foreign income tax 2 18 2 1

underprovision in prior years 193 7 - -

240 236 2 211

Real property gains tax:

underprovision in prior year - 64 - 64

- 64 - 64

Deferred tax (Note 33):

Relating to origination and reversal of temporary differences 65 68 - -

Relating to change in tax rate 7 - - -

overprovision in prior years (68) (9) - -

4 59 - -

244 359 2 275

Domestic income tax is calculated at the malaysian statutory tax rate of 26% (2007: 27%) of the estimated assessable profit for the year. the domestic statutory tax rate will be reduced to 25% from the current year’s tax rate of 26% with effect from the year of assessment 2009. the computation of deferred tax as at 31 December 2008 has reflected these changes. Certain subsidiaries of the Company being malaysian resident companies with paid-up capital of Rm2.5 million or less qualifies for the preferential tax rates under paragraph 2A schedule 1 of the Income tax Act, 1967 as follows:

on the first Rm500,000 of chargeable income : 20%In excess of Rm500,000 of chargeable income : malaysian corporate statutory tax rate


2008 Annual Report


14. incoMe tax exPense (cont’d)

A reconciliation of income tax expense applicable to loss before tax at the statutory income tax rate to income tax expense at the effective income tax rate of the Group and of the Company is as follows:

Group company

2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

Loss before taxation (55,919) (45,803) (68,646) (18,761)

taxation at malaysian statutory tax rate of 26% (2007: 27%) (14,539) (12,367) (17,848) (5,065)

Effect of different tax rate for small and medium scale companies of 20% for the first chargeable income of Rm500,000 - (1) - -

Effect of change in tax rate on opening deferred tax 3 - - -

Effects of different tax rate in other country (7) (25) - -

Income not subject to income tax (3,321) (30) (4,492) (3,703)

Expenses not deductible for tax purposes 11,707 2,814 14,206 2,220

Deferred tax assets not recognised during the year 11,734 10,493 8,136 6,759

utilisation of previously unrecognised deferred tax assets (5,458) (587) - -

underprovision of income tax in prior years 193 7 - -

overprovision of deferred tax in prior years (68) (9) - -

underprovision of real property gains tax - 64 - 64

tax expense for the year 244 359 2 275

tax savings during the financial year arising from:

utilisation of current year tax losses 5,498 - 33 -

15. basic loss Per share

the basic loss per share is calculated by dividing the net loss for the year attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares in issue during the financial year.

2008 2007

Net loss for the year attributable to ordinary equity holders of the Company (Rm’000) (56,074) (46,107)

Weighted average number of ordinary shares in issue (‘000) 102,000 102,000

Basic loss per share (sen) (55.0) (45.2)


2008 Annual Report

16. ProPerty, Plant anD equiPMent

freehold property rM’000

furniture, fittings

and office equipment

rM’000

Motor vehicles rM’000

Plant and machinery

rM’000

renovations rM’000

tools and technical

equipment rM’000

total rM’000

Group2008

cost

At 1 January 100 5,284 23,820 113,510 334 3,181 146,229 Additions (Note b) 225 66 3 37 - - 331 Disposals - (52) (1,418) (6,061) - - (7,531)Exchange difference - (19) - - - - (19)At 31 December 325 5,279 22,405 107,486 334 3,181 139,010

accumulated depreciation

At 1 January 36 4,586 20,959 81,951 322 2,395 110,249 Charge for the year 9 320 612 4,391 4 127 5,463 Disposals - (40) (1,124) (5,923) - - (7,087)Exchange differences - (12) - - - - (12)At 31 December 45 4,854 20,447 80,419 326 2,522 108,613

net carrying amount

At 31 December 280 425 1,958 27,067 8 659 30,397

Group2007

cost

At 1 January 100 5,255 24,582 120,502 364 3,150 153,953 Additions (Note b) - 215 865 601 - 31 1,712 Disposals - (7) (1,627) (7,152) - - (8,786)Written off - (183) - (441) (30) - (654)Exchange difference - 4 - - - - 4 At 31 December 100 5,284 23,820 113,510 334 3,181 146,229


At 1 January 34 4,376 21,624 84,412 341 2,262 113,049 Charge for the year 2 366 706 5,027 11 133 6,245 Disposals - (2) (1,371) (7,047) - - (8,420)Written off - (154) - (441) (30) - (625)Exchange differences - - - - - - - At 31 December 36 4,586 20,959 81,951 322 2,395 110,249

net carrying amount

At 31 December 64 698 2,861 31,559 12 786 35,980


2008 Annual Report


16. ProPerty, Plant anD equiPMent (cont’d.)

freehold property rM’000

furniture, fittings and

office equipment

rM’000

Motor vehicles rM’000

Plant and machinery

rM’000 renovations

rM’000

tools and technical

equipment rM’000

total rM’000

company2008

cost

At 1 January 100 3,519 12,031 104,984 133 2,990 123,757 Additions (Note b) - - 3 - - - 3 Disposals - - (1,326) (5,984) - - (7,310)At 31 December 100 3,519 10,708 99,000 133 2,990 116,450


At 1 January 36 3,083 9,949 74,080 132 2,213 89,493 Charge for the year 2 193 275 4,278 - 122 4,870 Disposals - - (1,045) (5,861) - - (6,906)At 31 December 38 3,276 9,179 72,497 132 2,335 87,457

net carrying amount

At 31 December 62 243 1,529 26,503 1 655 28,993

company2007

cost

At 1 January 100 3,546 12,566 111,596 133 2,959 130,900 Additions (Note b) - 4 657 340 - 31 1,032 Disposals - - (1,192) (6,952) - - (8,144)Written off - (31) - - - - (31)At 31 December 100 3,519 12,031 104,984 133 2,990 123,757


At 1 January 34 2,878 10,572 76,072 128 2,083 91,767 Charge for the year 2 227 386 4,856 4 130 5,605 Disposals - - (1,009) (6,848) - - (7,857)Written off - (22) - - - - (22)At 31 December 36 3,083 9,949 74,080 132 2,213 89,493

net carrying amount

At 31 December 64 436 2,082 30,904 1 777 34,264


2008 Annual Report

16. ProPerty, Plant anD exquiPMent (cont’d)

(a) Net book values of property, plant and equipment of the Group and of the Company held under hire purchase arrangement are as follows:

Group company 2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

motor vehicles 1,502 2,246 1,301 1,891

plant and machinery 1,357 2,098 1,357 2,098

2,859 4,344 2,658 3,989

(b) purchase of property, plant and equipment

Group company 2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

Aggregate cost of purchase 331 1,712 3 1,032

Less: purchases under hire purchase - (464) - (464)

Acquisitions using cash and cash equivalents 331 1,248 3 568

(c) plant and machinery with an aggregate net book value of Rm 2.80 million (2007: Rm2.20 million) are pledged as securities for borrowings (Note 31).

(d) plant and machinery with an aggregate net book value of Rm 22.28 million (2007: Rm24.98 million) have been seized by the Government of madagascar pursuant to the arbitration between the Company and the Government of madagascar as disclosed in Note 41(g).

17. investMent ProPerties

Group company 2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

cost

At 1 January/31 December 1,712 1,712 1,712 1,712

Investment properties with an aggregate carrying value of Rm1.71 million (2007: Rm1.71 million) are pledged as securities for borrowings (Note 31).


2008 Annual Report


17. investMent ProPerties (cont’d)

the fair value of investment property is as follows:

Group company 2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

Freehold land 7,146 9,646 7,146 9,646

the fair value of the investment property as at 31 December 2008 is based on Directors’ appraisal.

18. PrePaiD lanD lease PayMents

Group company 2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

long term leasehold property

At 1 January 234 241 234 241

Amortisation for the year (Note 9(b)) (7) (7) (7) (7)

At 31 December 227 234 227 234

19. lanD helD for ProPerty DeveloPMent anD ProPerty DeveloPMent costs

(a) land held for property development

Group

2008 2007

rM’000 rM’000

freehold land

cost

At 1 January 120,264 122,183

Reclassified as asset held for sale (Note 28) - (1,919)

At 31 December 120,264 120,264


2008 Annual Report

19. lanD helD for ProPerty DeveloPMent anD ProPerty DeveloPMent costs (cont’d)

(b) Property development costs

Group

2008 2007

rM’000 rM’000

cumulative property development costs:

At 1 January

Freehold land cost 21,990 24,789

Development costs 102,875 123,579

124,865 148,368

costs incurred during the year:

Development costs 3,869 3,251

provision for foreseeable losses (2,931) 2,500

Reversal of completed projects - (28,613)

transfer to inventories (Note 23) - (641)

125,803 124,865

cumulative costs recognised in income statement:

At 1 January (94,752) (122,188)

Recognised during the year (Note 8) - (1,177)

Reversal of completed projects - 28,613

At 31 December (94,752) (94,752)

property development costs at 31 December 31,051 30,113

Included in property development costs incurred during the previous financial year were interest costs amounting to Rm622,000. During the current financial year, interest costs have been expended as active development has been interrupted over an extended period.

the land held for property development and property development costs are pledged to financial institutions as security for certain borrowings granted to the Group and the Company as referred to in Note 31.


2008 Annual Report


20. investMent in subsiDiaries

company

2008 2007

rM’000 rM’000

unquoted shares, at cost 40,702 40,702

Less: Accumulated impairment losses (24,955) (200)

15,747 40,502

Details of the subsidiaries are as follow:

Proportion ofownership interest (%)

name of subsidiaries Principal activities 2008 2007

incorporated in Malaysia

h2Energy Corporation Sdn Bhd (formerly known as homeg Sdn Bhd) * (Note d)

Engineering, procurement, construction, and commissioning of pipeline system

100 100

tru-mix Concrete Sdn Bhd manufacturing and distribution of ready-mixed concrete

90 90

Bukit Jalil Development Sdn Bhd (Note a) property development 70 70

ho hup Jaya Sdn Bhd Inactive 100 100

ho hup Equipment Rental Sdn Bhd* Rental of equipment 100 100

mekarani heights Sdn Bhd* Dormant 100 100

Intermax Resources Sdn Bhd* Dormant 100 100

ho hup Geotechnic Sdn Bhd* Dormant 100 100

timeless Element Sdn Bhd* Dormant 100 100


2008 Annual Report

20. investMent in subsiDiaries (cont’d)

Details of the subsidiaries are as follow (cont’d):


name of subsidiaries Principal activities 2008 2007

incorporated in india

ho hup Construction Company (India) pte Ltd* (Note b)

Construction 100 100

incorporated in Mauritius

ho hup Construction (mauritius) Limited * Dormant 100 100

incorporated in south africa

ho hup Construction (South Africa) pty Ltd * Construction 100 100

incorporated in indonesia

pt halford Citra * management consulting in property and manufacturing business

80 80

* Audited by firms other than Ernst & young

(a) the auditors’ report on the financial statements of Bukit Jalil Development Sdn Bhd contains a disclaimer of opinion and comments as follows:

“Basis for Disclaimer of Opinion

1. As disclosed in Note 2 to the financial statements, the Company incurred a net loss of Rm13,629,661 during the year ended 31 December 2008 and, as of that date, the Company recorded shareholders’ deficit of Rm55,822,379 and its current liabilities exceeded its current assets by Rm11,379,044. In addition, as disclosed in Note 30 to the financial statements, the Company has not met its repayment obligations relating to its term loans. Furthermore, the Company’s holding company, ho hup Construction Company Berhad (“ho hup”) also created third party charges in favour of CImB Berhad, for its borrowings. ho hup has also not met its repayment obligations relating to its borrowings.

these factors indicate the existence of material uncertainties which may cast significant doubt on the ability of the Company to continue as a going concern and therefore it may be unable to realise its assets and discharge its liabilities in the normal course of business. the financial statements of the Company do not include any adjustments and classifications relating to the recorded assets and liabilities that may be necessary if the Company is unable to continue as a going concern.


2008 Annual Report


(a) At the date of this report, the Directors are of the opinion that the Company would be able to achieve profitable results, generate positive cash flows and obtain the support of its bankers, creditors and shareholders. the Directors’ are currently formulating a plan that includes the partial disposal of the land held for property development to generate sufficient cash flows to enable the Company to repay its bank borrowings and to continue its property development activities so as to meet its liabilities as and when they fall due. We were unable to obtain sufficient appropriate audit evidence that the above plan’s outcome will improve the situation.

We had disclaimed our opinion on this matter in our Audit Report of the Company for the year ended 31 December 2007 due to the material inherent uncertainty on its probable outcome.

2. As at the date of this report and that of our report on the financial statements of the the Company for the year ended 31 December 2007, management financial statements for the periods subsequent to the respective financial year end of the Company has not been prepared. In the absence of the latest management financial statements, the subsequent events review procedures required by Approved Standard on Auditing AI 560 Subsequent Events to be performed by us were limited. As such, we are also unable to satisfy ourselves as to the completeness of the recorded liabilities of the Company as at 31 December 2008 and as at 31 December 2007.

Disclaimer of Opinion

Because of the significance of the matters as discussed in the Basis for Disclaimer of opinion section, we do not express an opinion on the financial statements.”

(b) In the financial year ended 31 December 2007, the auditors’ report on the financial statements of ho hup Construction Company (India) pte Ltd include an emphasis of matter paragraph as follows:

“Without qualifying our opinion, we draw attention to point 1 of Schedule J of the Financial Statements, the company has incurred a net loss of Rs.9,925,326 (equivalent to Rm841,000) during the twelve month period ended 31st December 2007 (2006: Rs.5,793,742 (equivalent to Rm454,000)) and as of that date, the accumulated loss was Rs.29,025,419 (equivalent to Rm2.46 million (2006: Rs.18,898,963 (equivalent to Rm1.48 million)) and its current liabilities exceed current assets by Rs.27,711,813 (equivalent to Rm2.35 million) (2006: Rs.19,381,295 equivalent to Rm1.52 million)) and its net worth is fully eroded. the company is engaged in the business of construction and is eligible to receive a share of profit from the ho hup Simplex Joint Venture formed for executing a road project in India. As the Joint Venture recognizes income based on the completed contract method as per the provisions of Accounting Standard – 7 for “Accounting for Construction Contracts” issued by the Institute of Chartered Accountants of India, the company will receive its share of the profit only on completion of the project. the Financial Statements have been prepared based on the assumption that the company will continue as a going concern and realise its assets and discharge its liabilities in normal course of business.”



2008 Annual Report


(c) the amounts of the following subsidiaries have been consolidated into the balance sheet as at 31 December 2008 of the Group and the income statement, statement of changes in equity and cash flow statement of the Group for the year ended 31 December 2008 using the respective documents:

name of subsidiaries

h2Energy Corporation Sdn Bhd (formerly known as homeg Sdn Bhd)

Draft audited financial statements for the year ended 31 December 2008.

ho hup Equipment Rental Sdn Bhd Draft audited financial statements for the year ended 31 December 2008.

mekarani heights Sdn Bhd Draft audited financial statements for the year ended 31 December 2008.

Intermax Resources Sdn Bhd Draft audited financial statements for the year ended 31 December 2008.

ho hup Geotechnic Sdn Bhd Draft audited financial statements for the year ended 31 December 2008.

timeless Element Sdn Bhd Draft audited financial statements for the year ended 31 December 2008.

ho hup Construction Company (India) pte Ltd (Note b) unaudited management accounts for the year ended 31 December 2008.

ho hup Construction (mauritius) Limited unaudited management accounts for the year ended 31 December 2008.

ho hup Construction (South Africa) pty Ltd Audited financial statements for the year ended 31 December 2007.

pt halford Citra Audited financial statements for the year ended 31 December 2007.


2008 Annual Report


(d) (i) acquisition of additional 49% equity interest in a subsidiary and capitalisation of amount due from the subsidiary during the financial year ended 31 December 2007

on 7 August 2007, the Company acquired 245,000 ordinary shares of Rm1.00 each in homeg Sdn Bhd (“homeg”), a subsidiary company, representing 49% equity interest in homeg from 2 individual parties for a purchase consideration of Rm1.00. upon completion of the acquisition of 49% equity interest of homeg, homeg became a wholly-owned subsidiary of the Company. Subsequently on 16 August 2007, homeg increased its issued and paid-up capital to Rm20,000,000 via the capitalisation of Rm19,500,000 amount owing by homeg to the Company.

the acquisition of additional 49% equity interest in homeg did not have any financial effect on the financial statements of the Group as at the end of the previous financial year as the losses attributable to the minority in homeg exceeded the minority interest in homeg’s equity as at the date of acquisition. the excess was absorbed by the Company, the majority interest in homeg, resulting in an effective equity interest in homeg of 100%.

(ii) Disposal of 8,000,000 ordinary shares of rM1.00 each in a subsidiary

on 22 August 2007, the Company entered into a conditional Share Sale Agreement (“SSA”) with mohd Faizal bin Ahmad mahidin for the proposed disposal of 8,000,000 ordinary shares of Rm1.00 each in homeg, representing 40% equity interest in homeg for a cash consideration of Rm1,492,898 (“Consideration price”). the Consideration price, as per the SSA, will be paid within a four (4) year period commencing from 22 August 2007. the transaction had not been recognised in the previous financial year as a disposal as the risks and rewards had not been transferred to the new shareholder. on 30 may 2008, the SSA was mutually terminated and the shareholding was reverted to the Company.

21. investMents in associates

Group company

2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

unquoted shares, at cost 12,917 12,917 12,917 12,917

Share of post acquisition reserves 27 (324) - -

12,944 12,593 12,917 12,917

Less: Accumulated impairment losses (12,944) (2,071) (12,917) (2,368)

- 10,522 - 10,549

Represented by:

Share of net assets - 10,522



2008 Annual Report

21. investMents in associates (cont’d)

Details of the associates are as follows:


name of associates Principal activities 2008 2007

incorporated in Malaysia

Semenyih Brickmakers Sdn Bhd Dormant 49 49

hupcon Antarabangsa Sdn Bhd Dormant 50 50

incorporated in the People’s republic of china

Shanghai San ho hup pile Co Ltd manufacturing and trading of concrete spun piles

45 45

incorporated in thailand

ho hup Corporation (thailand) Limited Dormant 48 48

incorporated in Madagascar

ho hup Construction (madagascar) Sarl Dormant 49.9 49.9

(a) During the financial year ended 31 December 2008, the Group and the Company made additional impairment losses of Rm10,873,378 and Rm10,548,759 respectively in respect of its net investment in Shanghai San ho hup pile Co. Ltd and ho hup Corporation (thailand) Limited as these associates have made losses for the past financial years.


2008 Annual Report

21. investMents in associates (cont’d)

(b) the summarised financial information of the Group’s share in associates are as follows:

2008 2007

rM’000 rM’000

assets and liabilities

Non-current assets 6,431 6,365

Current assets 11,325 8,957

total assets 17,756 15,322

Current liabilities (10,379) (4,800)

Net assets 7,377 10,522

results

Revenue 14,702 15,062

Loss for the year (989) (380)

22. investMent in Jointly controlleD entities

Group company

2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

unquoted investment, at cost 250 250 250 250

Share of post-acquisition reserves (250) (250) - -

- - 250 250

Less: Accumulated impairment losses - - (250) (250)

- - - -



2008 Annual Report

23. inventories

Group company

2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

At cost:

Construction materials 165 244 - -

property held for sale (Note 19(b)) 641 641 - -

806 885 - -

property held for sale is pledged to financial institutions as security for certain borrowings granted to the Group and the Company as disclosed in Note 31.

22. investMent in Jointly controlleD entities (cont’d)

Details of the jointly controlled entities are as follows:


name of jointly controlled entities Principal activities 2008 2007

ho hup-Ballast Nedam Joint Venture Dormant 50 50

ho hup-Star-Zaks Joint Venture Dormant 50 50

ho hup-Simplex Joint Venture (Note a) Inactive 50 50

(a) A subsidiary of the Company, ho hup Construction Company (India) pte Ltd (“ho hup India”) is eligible to received a share of profit from the ho hup-Simplex Joint Venture formed for executing a road project in India. however, the Joint Venture will receive its share of the profit only on completion of the project. the auditors’ report on the financial statements of ho hup India in the previous financial year ended 31 December 2007 as disclosed in Note 20(b) includes an emphasis of matter paragraph, which draws attention to this matter.


2008 Annual Report

24. traDe receivables

Group company

2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

trade receivables 99,568 108,849 82,266 84,561

Accrued billings in respect of property development costs 6,688 14,086 - -

Retention sums on contracts (Note 26) 8,390 6,875 8,390 6,875

114,646 129,810 90,656 91,436

Less: Allowance for doubtful debts (33,080) (26,822) (32,710) (26,452)

81,566 102,988 57,946 64,984

Allowance for doubtful debts of Rm565,107 of the Group and the Company have been written off against the trade receivables during the current financial year.

trade receivables of the Group and the Company include an aggregate amount of Rm1.53 million (2007: Rm1.53 million) receivable from subsidiary of an associated investor in connection with progress billings on construction works.

the Group’s normal trade credit terms range from 14 to 90 days (2007: 14 to 90 days). other credit terms are assessed and approved on a case-by-case basis.

the Group and the Company credit exposures are concentrated mainly on 14 (2007: 18) and 11 (2007: 14) trade receivables respectively, which accounted for 53% (2007: 64%) and 51% (2007: 77%) respectively of the total trade receivables as at the year then ended.

(a) Included in the trade receivables of the Group and of the Company as at 31 December 2008 are the following amounts owing from two customers for contracts under disputes. the Company is taking legal action to recover the disputed amounts owing. the status of the legal action is disclosed in Note 41(e).

Group company

2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

Gross amount receivable 15,457 15,457 15,457 15,457

Less: provision for doubtful debts (15,457) (15,457) (15,457) (15,457)

Net amount receivable - - - -



2008 Annual Report

24. traDe receivables (cont’d)

(b) Included in the trade receivables of the Group and of the Company as at 31 December 2008, is an amount of Rm21.6 million (2007: Rm23.9 million), being the amounts due from the Government of madagascar in relation to construction contracts which were awarded to the Company by the Government of madagascar. these construction contracts were terminated during the financial year ended 31 December 2005.

the Company has initiated an arbitration claim at the International Court of Arbitration under the Rules of the International Chamber of Commerce (“ICC”), paris to recover damages it had sustained as a result of the unlawful contract termination. Details of the arbitration proceedings against the Government of madagascar are disclosed in Note 41(g).

the Directors of the Company after consultation with their legal advisers, are of the opinion that the risk that the Company will be ordered to make payments to the Government of madagascar is very weak and it seems likely that the Arbitration tribunal will agree at least partially with the Company’s position. No provision for doubtful debts has been made against the amount receivable from the Government of madagascar.

(c) Included in the trade receivables of the Group as at 31 December 2007, was an amount of Rm4.48 million, being the amounts due from Khoo Soon Lee Realty Sdn Bhd to ho hup Jaya Sdn Bhd (“hh Jaya”), a subsidiary of the Company.

hh Jaya had taken legal action to recover the disputed amounts owing. the status of the legal action is disclosed in Note 41(b).

25. other receivables

Group company

2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

Due from subsidiaries (Note a) - - 212,402 229,227

Deposits (Note b) 5,436 4,445 3,861 4,103

prepayments 328 498 - -

Sundry receivables 14,419 14,429 12,409 11,482

20,183 19,372 228,672 244,812

Less: provision for doubtful debts

- due from subsidiaries - - (37,037) (46,144)

- other receivables (7,105) (7,286) (7,105) (7,286)

(7,105) (7,286) (44,142) (53,430)

13,078 12,086 184,530 191,382


2008 Annual Report

25. other receivables (cont’d)

(a) Rm153.51 million (2007: Rm146.63 million) owing from a subsidiary is unsecured, repayable on demand, is subject to interest at 2.0% (2007 : 2.0%) per annum and is subordinated to the term loan facilities of that subsidiary.

Rm58.89 million (2007: Rm82.6 million) owing from certain subsidiaries are unsecured, non-interest bearing and repayable on demand.

(b) Included in the other receivables of the Group and of the Company as at 31 December 2008 is an amount of deposit of Rm1.5 million (2007:Rm1.5 million) paid in relation to the proposed acquisition of 51% of the total issued and paid-up share capital of urban Shift Sdn Bhd. provision for doubtful debts has been made in respect of the entire deposit.

26. Due froM custoMers on contracts

Group company 2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

Construction contract costs incurred to date 125,994 89,681 125,994 89,681

Attributable profits 11,244 16,341 11,244 16,341

137,238 106,022 137,238 106,022

Less: progress billings (137,238) (106,022) (137,238) (106,022)

Due from customer on contracts - - - -

Retention sums on contract, included within trade receivables (Note 24) 8,390 6,875 8,390 6,875

the costs incurred to date on construction contracts include the following costs incurred during the year:

Group company 2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

hire of plant and machinery 804 890 804 890

Staff costs (Note a) 3,726 3,806 3,726 3,806

Rental of premises 83 126 83 126

(a) Wages and salaries 2,881 2,513 2,881 2,513


pension cost - definedcontribution plans 326 429 326 429

other staff related expenses 468 798 468 798

Staff costs (Note 10) 3,726 3,806 3,726 3,806



2008 Annual Report

27. cash anD cash equivalents

Group company

2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

Cash on hand and at banks 2,355 3,347 1,055 1,340

Deposits with licensed banks 8,227 11,480 8,227 11,080

Cash and bank balances 10,582 14,827 9,282 12,420

Less: Bank overdrafts (Note 31) (7,597) (18,187) (4,230) (14,443)

2,985 (3,360) 5,052 (2,023)

Less: Cash at banks restricted from use (Note a) (124) (12) - -

Sinking fund accounts restricted from use (Note b) (209) (251) - -

Deposits with licensed banks pledged as security (Note c) (8,227) (11,480) (8,227) (11,080)

Sinking fund accounts pledged as security (Note d) (24) (457) (24) (457)

Cash and cash equivalents restricted from use (8,584) (12,200) (8,251) (11,537)

Cash and cash equivalents (5,599) (15,560) (3,199) (13,560)

(a) Included in cash at banks of the Group is an amount of Rm124,000 (2007: Rm12,000) held pursuant to Section 7A of the housing Developers (Control and Licensing) Act 1966 and are restricted from use in other operations.

(b) Included in cash at banks of the Group is an amount of Rm209,000 (2007: Rm251,000) placed in sinking funds for the purpose of expenditure incurred in repairs and maintenance of certain properties, as required by the Building and Common property (maintenance and management) Act, 2007.

(c) Deposits with licensed banks of the Group and the Company amounting to Rm8.23 million (2007: Rm11.48 million) and Rm8.23 million (Rm11.08 million) respectively are pledged to banks as security for credit facilities granted to the Group and Company as referred to in Note 31 and hence, are not available for general use.

(d) Sinking fund accounts of the Group and the Company amounting to Rm24,000 (2007: Rm457,000) are pledged to banks as security for credit facilities granted to the Group and Company as referred to in Note 31 and hence, are not available for general use.

(e) the weighted average interest rates during the financial year for the Group and the Company were 3.18% (2007: 3.17%) per annum and 3.18% (2007: 3.21%) per annum respectively.

(f) the average maturities of deposits with licensed banks as at 31 December 2008 were 65 days (2007: 75 days) and 65 days (2007: 77 days) respectively.


2008 Annual Report

28. non-current asset classifieD as helD for sale

During the previous financial year, ho hup Jaya Sdn Bhd, a wholly-owned subsidiary of the Company, entered into a Sale and purchase Agreement on 3 July 2007 with tenterajaya (m) Sdn Bhd to dispose three (3) pieces of freehold development land (“Land”) held under Geran mukim No.3 Lot No.584, Geran mukim No.4 Lot No. 585 and Geran mukim No.5 Lot No.599 all in the mukim of ulu Klang, District of Gombak, State of Selangor measuring approximately 5.62 acres, 4.47 acres and 4.62 acres respectively for a total cash consideration of Rm23.081 million only.

this transaction was completed in march 2008.

29. share caPital

number of ordinaryshares of rM1 each

amount

2008 2007 2008 2007‘000 ‘000 rM’000 rM’000

authorised:


issued and fully paid:


30. Provision for liquiDateD ascertaineD DaMaGes

Group company 2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

At 1 January 18,535 13,000 - -

Additional provision made during the year (Note 9(b)) 4,602 5,552 - -

payments made during the year (83) (17) - -

At 31 December 23,054 18,535 - -

payable:

Not later than 1 year 23,054 11,313 - -

Later than 1 year and not later than 2 years - 7,222 - -

23,054 18,535 - -

provision for liquidated damages is in respect of property development projects undertaken by a subsidiary of the Company. the provision is recognised for expected liquidated damages claims based on the terms of the applicable sale and purchase agreements.



2008 Annual Report

31. borrowinGs

Group company 2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

short term

secured:

Bank overdrafts 3,372 10,418 5 10,418

Revolving credits - 17,191 - 17,191

term loans 87,230 27,123 69,383 9,268

hire purchase payables (Note 32) 874 2,152 728 2,020

91,476 56,884 70,116 38,897

unsecured:

Bank overdrafts 4,225 7,769 4,225 4,025

Revolving credits 5,814 2,623 5,814 2,623

Bankers’ acceptances 3,000 3,000 - -

13,039 13,392 10,039 6,648

104,515 70,276 80,155 45,545

long term

secured:

hire purchase payables (Note 32)(Note 32) - 500 - 369

total borrowings

Bank overdrafts (Note 27) 7,597 18,187 4,230 14,443

Revolving credits 5,814 19,814 5,814 19,814

Bankers’ acceptances 3,000 3,000 - -

term loans 87,230 27,123 69,383 9,268

(Note 32) 874 2,652 728 2,389

104,515 70,776 80,155 45,914

Maturity of borrowings (excluding hire purchase payables):

Within one year 103,641 68,124 79,427 43,525


2008 Annual Report

31. borrowinGs (cont’d)

In the current and previous financial year, the Group and the Company did not meet repayment obligations relating to bank borrowings (excluding hire purchase payables) amounting to Rm100.64 million (2007: Rm46.93 million) and Rm79.43 million (Rm29.08 million) respectively. Accordingly, all instalments under these bank borrowings, which were originally scheduled for repayment after 31 December 2008 and 2007, are reclassified as current liabilities.

As disclosed in Note 41(k), the Company was served with a sealed Writ of Summons and Statement of Claims by Alliance Investment Bank Berhad (“AIBB”) for the sum of Rm3.82 million for a revolving credit facility and continuing interest on the principal outstanding of Rm3.19 million. this amount is included in bank borrowings of the Group and of the Company.

As disclosed in Note 41(l), the Company was served with a sealed Writ of Summons and Statement of Claims by RhB Bank Berhad (“RhB”) for the sum of Rm2.72 million for a revolving credit facility and continuing interest on the principal outstanding of Rm2.62 million. this amount is included in bank borrowings of the Group and of the Company.

the weighted average effective interest rates (excluding penalty interest rates) during the financial year for borrowings were as follows:

Group company 2008 2007 2008 2007

% % % %

Bank overdrafts 8.30 8.31 8.10 8.25

Revolving credits 8.41 8.17 8.41 8.17

Bankers’ acceptances 4.89 4.89 - 4.57

term loans 8.47 8.59 8.59 9.25

(a) the secured bank overdrafts of the Group and the Company are secured by:

(i) Deposits with licensed banks as disclosed in Note 27; and

(ii) Sinking fund accounts as disclosed in Note 27; and

(b) the secured revolving credits of the Group and of the Company are secured by:

(i) Deposits with licensed bank as disclosed in Note 27;

(ii) Sinking fund accounts as disclosed in Note 27; and

(iii) third party legal charge over the land held for development, development properties and property held for sale of a subsidiary as stated in Note 19 and Note 23;

- Lot 36100, Geran 42276; - Lot 36101, Geran 42277; - part of Lot 38472, Geran 55265; - Lot 38474, Geran 55267; and - Lot 38476, Geran 55268.



2008 Annual Report

31. borrowinGs (cont’d)

(c) the secured term loans of the Group are secured by:

(i) First legal charge over the land held for development, development properties and property held for sale of a subsidiary as stated in Note 19 and Note 23;

- Lot 36100, Geran 42276; - Lot 36101, Geran 42277; - part of Lot 38472, Geran 55265; - Lot 38474, Geran 55267; and - Lot 38476, Geran 55268.

(ii) First party first legal charge over land held under hS (D) 812 Lot No. pt 4150, mukim of Cheras, District of hulu Langat, Selangor Darul Ehsan as stated in Note 17;

(iii) A fixed charge by way of debenture on the encumbered machinery/equipment registered in the name of the Company which comprise of excavator, cranes, bulldozer, caterpillar compactors, vibratory roller, tractors and cargo truck, crawler, wheel loader and construction equipment of the like, acceptable to the Bank and having the market value of not less than Rm10 million (“machinery”) and the list of machinery shall be agreed by the parties as stated in Note 16(c);

(iv) Endorsement of ownership claim at Road transport Department on the registrable machinery/equipment via e-hakmilik registration;

(v) Letter of Set-off by the subsidiary in respect of fixed deposit amount of Rm7 million with interest thereon;

(vi) Second Legal Charge over seventy two (72) pieces of lands owned by Bukit Jalil Development Sdn Bhd, a wholly-owned subsidiary of the Company; and

(vii) Second Legal Charge over the land held under Lot 36101 Geran 42277 mukim petaling District of Kuala Lumpur.

(d) the term loan of the Company is secured by:

(i) First party first legal charge over land held under hS (D) 812 Lot No. pt 4150, mukim of Cheras, District of hulu Langat, Selangor Darul Ehsan as stated in Note 17;

(ii) A fixed charge by way of debenture on the encumbered machinery/equipment registered in the name of the Company which comprise of excavator, cranes, bulldozer, caterpillar compactors, vibratory roller, tractors and cargo truck, crawler, wheel loader and construction equipment of the like, acceptable to the Bank and having the market value of not less than Rm10 million (“machinery”) and the list of machinery shall be agreed by the parties as stated in Note 16(c);

(iii) Endorsement of ownership claim at Road transport Department on the registrable machinery/equipment via e-hakmilik registration;

(vi) Second Legal Charge over seventy two (72) pieces of lands owned by Bukit Jalil Development Sdn Bhd, a wholly-owned subsidiary of the Company; and

(vii) Second Legal Charge over the land held under Lot 36101 Geran 42277 mukim petaling District of Kuala Lumpur.


2008 Annual Report

32. hire Purchase Payables

Group company 2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

future minimum lease payments:

Not later than 1 year 924 2,295 775 2,153

Later than 1 year and not later than 2 years - 268 - 158

Later than 2 years and not later than 5 years - 279 - 255

924 2,842 775 2,566

Less: Future finance charges liabilities (50) (190) (47) (177)

874 2,652 728 2,389

analysis of present value of finance lease liabilities:

Not later than 1 year 874 2,152 728 2,020

Later than 1 year and not later than 2 years - 241 - 133

Later than 2 years and not later than 5 years - 259 - 236

874 2,652 728 2,389

analysed as:

Due within 12 months 874 2,152 728 2,020

Due after 12 months - 500 - 369

874 2,652 728 2,389

the hire purchase payables bear interest during the year of between 2.60% and 5.25% (2007: 2.60% and 5.25%) per annum.

the Company did not meet repayment obligations relating to hire purchase payables amounting to Rm67,761 (2007: Rm1.86 million) in the current and previous financial years. Accordingly, all hire purchase instalments under these hire purchase facilities, which were originally scheduled for repayment after 31 December 2008 and 2007, are reclassified as current liabilities.

33. DeferreD tax liabilities

Group company 2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

At 1 January 38 (21) - -

Recognised in income statement (Note 14) 4 59 - -

At 31 December 42 38 - -

presented after appropriate offsetting as follows:

Deferred tax assets (5,943) (5,665) (5,679) (5,362)

Deferred tax liabilities 5,985 5,703 5,679 5,362

42 38 - -



2008 Annual Report

33. DeferreD tax liabilities (cont’d)

the components and movements of deferred tax liabilities and assets during the financial year prior to offsetting are as follows:

Deferred tax liabilities of the Group:

accelerated capital

allowance receivables total rM’000 rM’000 rM’000

At 1 January 2008 5,572 131 5,703

Recognised in income statement 278 4 282

At 31 December 2008 5,850 135 5,985

At 1 January 2007 5,419 124 5,543

Recognised in income statement 153 7 160

At 31 December 2007 5,572 131 5,703

Deferred tax assets of the Group:

unused tax losses and

unabsorbed capital

allowance Payables total rM’000 rM’000 rM’000

At 1 January 2008 (5,465) (200) (5,665)

Recognised in income statement (314) 36 (278)

At 31 December 2008 (5,779) (164) (5,943)

At 1 January 2007 (5,424) (140) (5,564)

Recognised in income statement (41) (60) (101)

At 31 December 2007 (5,465) (200) (5,665)

Deferred tax liabilities of the company:

accelerated capital

allowance rM’000

At 1 January 2008 5,362

Recognised in income statement 317

At 31 December 2008 5,679

At 1 January 2007 5,139

Recognised in income statement 223

At 31 December 2007 5,362


2008 Annual Report

33. DeferreD tax liabilities (cont’d)

Deferred tax assets of the company:

unused tax losses and

unabsorbed capital

allowance rM’000

At 1 January 2008 (5,362)

Recognised in income statement (317)

At 31 December 2008 (5,679)

At 1 January 2007 (5,139)

Recognised in income statement (223)

At 31 December 2007 (5,362)

Deferred tax assets have not been recognised in respect of the following:

Group company

2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

unused tax losses 186,461 152,329 69,920 44,886

unabsorbed capital allowances 896 677 - -

other temporary differences 55,767 44,988 32,710 26,452

243,124 197,994 102,630 71,338

the unutilised tax losses and unabsorbed capital allowances of the Group amounting to Rm187.36 million (2007: Rm153.01 million) are available indefinitely for offsetting against future taxable profits of the respective entities within the Group, subject to no substantial change in shareholdings of those entities under the Income tax Act, 1967 and guidelines issued by the tax authority.

the unutilised tax losses of the Company are available for offsetting against future taxable profits subject to no substantial change in shareholdings under the Income tax Act, 1967 and guidelines issued by the tax authority.



2008 Annual Report

34. traDe Payables

Group company

2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

trade payables 69,225 77,557 57,512 58,213

trade accruals 2,177 4,683 1,139 1,121

Advances received on contracts (Note a) - 29,566 - 29,566

Retention sums on contracts 12,522 12,016 12,522 11,945

83,924 123,822 71,173 100,845

the normal trade credit terms granted to the Group range from 30 to 120 days (2007: 30 to 120 days). Any extension of credit terms are negotiated with the respective creditors on a case-by-case basis.

(a) the amount in the previous financial year represents advances received from the Government of madagascar in relation to construction contracts which have been terminated. It was subsequently settled on 25 July 2008, when CImB Bank Berhad (“CImB”) informed the Company that pursuant to a Court order dated 8 July 2008, and the Company’s failure to settle the amount claimed under the bank guarantee, CImB had honoured the claim by debiting the Company’s current account maintained with CImB the total amount of Rm43.41 million. the balance in the current account was subsequently converted into term loan. Details of the term loan are disclosed in Note 31(c).

(b) From the total trade payables, Rm9.71 million relating to the Group and the Company are under litigation.

35. other Payables

Group company

2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

Due to subsidiaries (Note a) - - 21,272 26,961

Due to an associated investor (Note a) 1,211 1,211 - -

Due to companies/ estates in which certain Directors have beneficial interests (Note b) 6,848 6,147 5,721 4,711

Accruals (Note c) 27,337 11,141 19,539 7,612

Sundry payables (Note d) 15,788 14,489 8,652 8,931

51,184 32,988 55,184 48,215


2008 Annual Report

35. other Payables (cont’d)

(a) the amounts due to subsidiaries and to an associated investor are unsecured, noninterest bearing and repayable on demand.

(b) the amounts due to companies/ estates in which certain Directors have beneficial interests are unsecured, non-interest bearing and repayable on demand.

(c) (i) Included in accruals of the Group is an amount of Rm2,542 (2007: Rm2,542) owing to Sri Rakyat management Sdn Bhd (“Sri Rakyat”). Bukit Jalil Development Sdn Bhd (“BJD”), a subsidiary of the Company, incorporated Sri Rakyat as a vehicle to undertake the obligations and responsibilities of BJD under the Strata title Act 1985 (Act 318) & Strata titles Rules 1988 (“the Act”), as the original proprietor. Sri Rakyat will provide management and maintenance services for the low cost apartments and will be transferred to the parcel proprietors of the low cost apartments upon completion of the transfer of strata title in respect of all parcels by BJD or upon the making of an order under subsection (2) of the Section 64A of the Act.

(ii) Included in accruals of the Group and the Company is provision for tax penalty amounting to Rm1.13 million (Rm1.10 million).

(iii) Included in accruals of the Group and the Company is interest on borrowings and penalty on interest amounting to Rm4.28 million (2007: Rm1.83 million) and Rm1.87 million (Rm1.14 million) respectively.

(d) Included in sundry payables of the Group is a refundable deposit of Rm 1.2 million (2007 : Rm1.2 million) pursuant to a development agreement entered into by a subsidiary of the Company.

(e) Included in accruals and sundry payables are amounts relating to the following:

Group company

2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

unpaid wages and salaries including holiday pay 1,058 1,100 1,008 1,055


pension cost - defined contribution plans 1,735 1,141 1,701 1,080

unpaid Schedular tax Deductions 218 12 217 -

36. tax Payable

Included in tax payable of the Group and the Company is an amount of Rm6.6 million (2007: Rm7.1 million) representing unpaid tax for years of assessment 2000 and 2005. provision for tax penalty has been made in respect of these amounts as disclosed in Note 35.



2008 Annual Report

37. continGent liabilities

Group company

2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

Guarantees given to financial institutions in respect of credit facilities granted to subsidiaries - unsecured - - 26,847 27,569

Guarantees issued by financial institutions in connection with performance bonds, security and tender deposits in favour of third parties for construction projects:

- Secured

(a) Fixed deposits (Note i) 7,047 10,457 7,047 10,022

(b) Land held for development, development properties and property held for sale and fixed deposits (Note ii) - 50,772 - 50,772

- unsecured 750 750 - -

7,797 61,979 7,047 60,794

(i) these guarantees are secured by fixed deposits of the Group and the Company respectively as disclosed in Note 27.

(ii) this represents guarantees given to CImB Bank Berhad (“CImB”) in connection with the construction contracts awarded by the Government of madagascar in the previous financial year, as disclosed in Note 41(g). on 25 July 2008, CImB had honoured the claim on the bank guarantees due to the Company’s failure to settle the amount claimed on the bank guarantees by debiting the Company’s current account maintained with CImB on the same day amounting to Rm43.41 million.


2008 Annual Report

38. siGnificant relateD Party transactions

(a) In addition to the transactions detailed elsewhere in the financial statements, the Group and the Company had the following transactions with related parties during the financial year:

Group company

2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

with subsidiary companies

purchases of materials from:

- tru-mix Concrete Sdn Bhd - - 1,379 192

progress billings for construction construction work performed for:

- Bukit Jalil Development Sdn Bhd - - 1,493 3,290

Interest income from:

- Bukit Jalil Development Sdn Bhd - - 3,007 3,074

- h2Energy Corporation SdnBhd (previously known as homeg Sdn Bhd)

- - - 219

Rental income from:

- Bukit Jalil Development Sdn Bhd - - 3 2

- tru-mix Concrete Sdn Bhd - - - 6

(b) transactions with other related parties

Group company

2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

with companies/estates/individual in which certain Directors are deemed to have beneficial interests/related to

office and store rental payable to:

- Low Chee & Sons Sdn Bhd* 330 678 330 678

- Estate of Low Chee** 427 88 402 54

- Concrete paver IndustriesSdn Bhd* - 16 - -

- tang Sau Kuan*** 72 96 - -



2008 Annual Report

38. siGnificant relateD Party transactions (cont’d.)

(b) transactions with other related parties (cont’d)

Group company

2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

with companies/estates/individual in which certain Directors are deemed to have beneficial interests/related to

Rental income from:

- tepat Concrete Industries Sdn Bhd**** - 60 - 60

* Certain Directors of the Company are also Directors of this company

** Estate of the late father of a Director of the Company

*** Late mother of a Director of the Company

**** A shareholder of a subsidiary is a Director of this company

(c) Compensation of key management personnel

the key management personnel of the Company are its Directors. the remuneration of Directors during the year are disclosed in Note 11.

39. siGnificant events DurinG the financial year

(a) on 22 August 2007, the Company entered into a conditional Share Sale Agreement (“SSA”) with mohd Faizal bin Ahmad mahidin for the proposed disposal of 8,000,000 ordinary shares of Rm1.00 each in homeg, representing 40% equity interest in homeg for a cash consideration of Rm1,492,898 (“Consideration price”). the Consideration price, as per the SSA, will be paid within a four (4) year period commencing from 22 August 2007.

on 30 may 2008, the SSA is mutually terminated and the shareholding reverted to the Company.


2008 Annual Report

39. siGnificant events DurinG the financial year (cont’d)

(b) on 31 July 2008, the Company is designated an affected listed issuer pursuant to paragraph 2.1(d) of the pN 17/2005 as the Company’s external auditors, have expressed a disclaimer opinion in the Company’s audited accounts for the year ended 31 December 2007.

As an Affected Listed Issuer, the Company is required pursuant to paragraph 3.1(a)(ii) of the Amended pN17 to comply with the following obligations:

(i) to announce details of the Regularisation plan as referred to in paragraph 8.14C(3) of the Listing Requirements which announcement must fulfill the requirements set out in paragraph 3.1A of the Amended pN 17/2005;

(ii) to submit the Regularisation plan to the Securities Commission, and other relevant authorities (“Approving Authority”), for approval within eight (8) months from the date of the First Announcement; and to implement the Regularisation plan within the timeframe stipulated by the relevant Approving Authority;

(iii) to announce the status of its plan to regularise its condition and the number of months to the end of the relevant timeframes referred thereto, as may be applicable on a monthly basis until further notice from Bursa Securities; and

(iv) to announce its compliance or non-compliance with a particular obligation imposed pursuant to Amended pN17/2005 on an immediate basis.

In the event that the Company fails to comply with the obligation to regularise its condition, all of its listed securities shall be suspended from trading on the 5th market day after the Submission timeframe or Implementation timeframe, as the case may be, and de-listing procedures shall be taken against the Company by Bursa Securities.

on 13 march 2009, the Company applied for extension of time from Bursa Securities to submit the Company’s Regularisation plan to the relevant authorities for approval. on 1 April 2009, the Company was granted an extension of time of 4 months until 31 July 2009.

(c) on 28 August 2008, the Board of Directors of the Company resolved to suspend its managing Director, Dato’ Low tuck Choy from his duties and responsibilities until further notice.

(d) on 22 December 2008, the Company announced to Bursa Securities that it had on 22 December 2008 disposed its entire shareholding comprising 100 ordinary shares of Rand 1.00 each in the share capital of ho hup Corporation (South Africa) pty Ltd (“hhCSA”) to mr theunis Crous, the managing Director of hhCSA for a total consideration of Rand 600,000 equivalent to approximately Rm225,000 and in consequence thereof, hhCSA had ceased as a subsidiary of the Company.

on 22 April 2009, the Company announced that the disposal of its investment in hhCSA is subject to the execution of the relevant documents on the proposed Disposal by 31 December 2008. the Company shall make the necessary announcement on the proposed Disposal upon execution of the relevant documents.



2008 Annual Report

40. siGnificant event subsequent to the balance sheet Date

(a) on 2 march 2009, Bukit Jalil Development Sdn Bhd, a 70% owned subsidiary of the Company, entered into the followings:-

(i) a conditional Sale and purchase Agreement with Santari Sdn Bhd for the disposal of a parcel of freehold land held under Geran 55267, Lot 38474, mukim of petaling, District of Kuala Lumpur, state of Wilayah persekutuan Kuala Lumpur (“property”) for a cash consideration of Rm9.83 million (“proposed property 1 Disposal”); and

(ii) a conditional Sale and purchase Agreement with permata Juang (m) Sdn Bhd, a wholly owned subsidiary of magna prima Berhad for the disposal of a parcel of freehold land held under Geran 55268, Lot 38476, mukim of petaling, District of Kuala Lumpur, state of Wilayah persekutuan Kuala Lumpur (“property 2”) for a cash consideration of Rm19.41 million (“proposed property 2 Disposal”).

the proposed Disposals are expected to be completed by second quarter of 2009.

the proposed property 2 Disposal is deemed as a related company transaction pursuant to paragraph 10.08 of the Listing Requirements of Bursa malaysia Securities Berhad by virtue of Datuk Lye Ek Seang’s directorship in magna prima Berhad.

41. Material litiGations

(a) yip chee seng & sons sdn bhd v ho hup construction company berhad kuala lumpur high court civil suit no. s1-22-161-2003

yip Chee Seng & Sons Sdn Bhd, a sub-contractor of the Company, has lodged a claim with the high Court, Kuala Lumpur on 17 February 2003. the claim is for earthworks done for the Light Rail transit System two for Kuala Lumpur. the quantum claimed is for an amount of Rm1,023,585 together with interest at 8% per annum from 26 July 2002 until realisation (“the Claim”). the Company denies that it is liable and has lodged a counter claim for an amount of Rm1,413,522 together with interest at 8% per annum from 18 April 2003 (date of filing of the counter claim) until realisation.

on 1 march 2004, the high Court made an Interim order (“order”) that an amount of Rm1,023,585 be placed in a separate fixed deposit account in a bank with yip Chee Seng & Sons Sdn Bhd and the Company being the joint signatories.

on 6 November 2008, both parties agreed to settle the dispute amicably, where both parties agreed to distribute equally the amount placed in the fixed deposit account and interest earned to date.

on 10 February 2009, the Company’s solicitors filed a “Notice perberhentian” of the suit.


2008 Annual Report

41. Material litiGations (cont’d)

(b) ho hup Jaya sdn bhd v khoo soon lee realty sdn bhd Johor bahru high court (Mt3) 22-790-2005

on 17 April 2003, ho hup Jaya Sdn Bhd (“hh Jaya”), a wholly-owned subsidiary of the Company, entered into a conditional sale and purchase agreement with Khoo Soon Lee Realty Sdn Bhd (“KSL”) for the disposal of two parcels of development land measuring 52.668 hectares and 39.504 hectares held under master titles h.S.(D) 257249 ptD No 71047 and h.S.(D)258295 ptD No 71065, respectively, both located in the mukim of pulai, District of Johor Bahru, for a cash consideration of Rm97 million (“purchase price”). Save for the sum of Rm4,476,919 held by the stakeholders (“Stakeholder monies”), the balance purchase price has been released to hh Jaya.

A dispute arose between hh Jaya and KSL as to who was entitled to the Stakeholder monies (“Dispute”). on 28 April 2004, the Dispute was referred to the Court by way of an interpleader summons to determine who was entitled to the Stakeholder monies.

on 23 october 2008, a sum of Rm2,500,620 was agreed between parties as settlement sum and this has been settled.

(c) europlus corporation sdn bhd v ho hup construction company berhad kuala lumpur high court civil suit no. s1-22-241-2004

Europlus Corporation Sdn Bhd (“Europlus”) lodged a claim in high Court, Kuala Lumpur, vide Civil Suit No. S1-22-241-2004 on 26 February 2004. the claim is for an alleged overpayment under a project known as “ proposed Bukit Beruntung alleged overpayment under a project at Ch. 7501.575 of rawang-tanjung malim Expressway, Bukit Beruntung Development, mukim Serendah, Daerah ulu Selangor, Selangor Darul Ehsan for a sum of Rm 4,387,463.

the Summons and Statement of Claim has been filed on 26 February 2004 and served on 1 April 2004. the Company subsequently filed an application for further and better particulars on 30 July 2004 and the matter was fixed for hearing on 19 August 2004 but was adjourned to 26 october 2004. the Company obtained order in terms of the said application on 26 october 2004 and Europlus has subsequently served the Company the particulars as requested on 25 November 2004. the Company then filed its defence on 10 December 2004. As of to date, Europlus has not taken any further action in pursuing its claim. No further proceeding is initiated yet.

the Directors are of the opinion that the Company has a fair chance of success.

(d) (i) kM quarry sdn bhd v ho hup construction company berhad Melaka high court civil suit no. 22-3-2005

Km Quarry Sdn Bhd (“Km Quarry”) lodged a claim in the high Court, melaka, vide Civil Suit No 22-3-2005 on 10 January 2005. the claim is for a sum of Rm3,233,474 for the supply and laying of pavement works under a project known as “Cadangan membina Jalanraya Durian tunggal-paya Rumput-Sungai udang, melaka”.

Km Quarry’s application for summary judgement was allowed on 22 July 2005. thereafter, the Company filed a notice of appeal and application for stay of execution. on 19 April 2006, the Company’s appeal was dismissed with costs and an appeal to the Court of Appeal was made on 20 April 2006. on 19 July 2007, the Company’s application for stay of execution was dismissed with costs.

Km Quarry had filed a Bill of Costs on 24 January 2008 and was awarded costs amounting to Rm11,604 plus Allocator Fees at Rm934. the Company then filed an application to review the Bill of Costs. on 15 october 2008, the Senior Assistant Registrar awarded costs in the amount of Rm10,453 and Allocator Fees at Rm846.



2008 Annual Report


(d) (ii) kM quarry sdn bhd v ho hup construction company berhad kuala lumpur high court, court summon no. s1-22-1076-2005

on the other hand, the Company also filed a cross claim against Km Quarry for an amount of Rm3,433,334 for incomplete joint measurement and Rm2,439,294 for overlapping claims. Km Quarry Sdn Bhd has since filed an application to strike out some paragraphs and prayers in the Company’s statement of claim. on 26 January 2007, the Court allowed Km Quarry’s application to strike out some paragraphs and prayers in the Company’s statement of claim. the Company has filed an appeal against the Court order and it was allowed with costs on 30 July 2008. the matter is not fixed for case management on 14 July 2009.

the solicitors are of the opinion that if the Company succeeds in convincing the Judge of through the pleadings and submissions, the chances of success are fairly good.

(e) (i) revolutionary technology holdings sdn bhd v ho hup construction company berhad kuala lumpur high court originating summons no. D-24-338-2004

on 19 october 2004, the Company issued a notice pursuant to Section 218 of the Companies Act, 1965 against Revolutionary technology holdings Sdn Bhd (“Rth”) for the sum of Rm7,169,810 in respect of the amounts due under construction project undertaken by the Company. Rth had on 10 November 2004 filed an injunction application restraining the Company from filing and advertising the winding-up and an ad interim injunction was granted against the Company on 12 April 2005. Costs was awarded against the Company. After the hearing for taxation, the taxed costs was fixed at Rm20,000. the Company’s appeal on reduced taxed costs was disallowed on 29 June 2007.

Rth has since extracted its Allocatur based on the costs awarded and served it on the Company’s solicitors requesting for payment. the Company’s solicitors have in reply taken out an application for stay of execution of the Allocatur as there are 2 suits pending in the same case, as disclosed in Note 41(e)(ii) and Note 41(e)(iii) below. the Court accordingly fixed the hearing of the Application for Stay on 22 April 2008 and directed both parties to submit their written submissions simultaneously. the Company has filed and served its Written Submissions on 21 April 2008. the hearing for Application for Stay could not proceed as the Judge was on leave and is now pending for a new hearing date.

(ii) arbitration at kuala lumpur regional centre for arbitration between ho hup construction company berhad and 1) revolutionary technology holdings sdn bhd; 2) seri siantan sdn bhd; and 3) syarikat Pembinaan al-Joffrie sdn bhd (“respondents”)

kuala lumpur high court originating summons no. r2-24-20-07

on 16 may 2006, by way of court order, a sole arbitrator was appointed. the Company is pursuing the matter by way of arbitration for the amount of Rm23,438,498 together with interest at 8% per annum from 29 November 2004 in respect of damages for unlawful termination for road construction works, balance value of work done at the termination and loss and expense as a consequence of extension of time being granted to the Company.

the Respondents’ Defence is that the Company’s action against the Respondents is wrongful as the Respondents are not the proper parties to this action. the Respondents have submitted a counter-claim for the amount of Rm12,355,662 together with interest at 8% per annum from 1 october 2004.


2008 Annual Report


(e) (iii) arbitration at kuala lumpur regional centre for arbitration between ho hup construction company berhad and 1) revolutionary technology holdings sdn bhd; 2) seri siantan sdn bhd; and 3) syarikat Pembinaan al-Joffrie sdn bhd (“respondents”)

kuala lumpur high court originating summons no. r2-24-20-07

the arbitral award was published on 14 September 2008 in favour of the Company for the sum of Rm11,536,661 together with interest and costs amounting to Rm207,750. the Respondents have filed an application to Court to set aside the award. the Company had filed its affidavit opposing the application to review the arbitrator’s decision on 13 march 2009.

the solicitors of the Company are of the opinion that the Company has a good chance of success in defeating the Appellant’s claim.

(f) arbitration between ho hup construction company (india) Pte ltd and andhra Pradesh housing board

on 9 march 2005, a subsidiary of the Company, ho hup Construction Company (India) pte Ltd (“ho hup India”) entered into a Joint Development Agreement with the Andhra pradesh housing Board (“AphB”) to develop a piece of land situated at Kancha Imarath, maheshwaran mandal, Ranga Reddy District, Andhra pradesh, India. ho hup India has been selected to implement the development of the said land into an intergrated township with an approximately development value of India Rupee (“Rs”) 3.6 billion (equivalent to Rm204.92 million) at Shamshabad near hyderabad. ho hup India shall pay AphB development fees of Rs101,175,000 (equivalent to Rm8.57 million) over a period of 5 years.

this joint development Agreement was subsequently terminated by AphB. the Company is disputing the termination on the ground that AphB had yet to comply with its obligations in respect of condition precedent under the agreement.

on 2 may 2005, ho hup India commenced an arbitration claim for damages amounting to Rs.2,544,512,230.00 (Rm200.5million) being the unlawful termination of the above mentioned contract.

the award in ho hup India’s favour has been published in may 2008 as follows:-

(i) AphB shall pay ho hup India the sum of Rs16,796,250 (equivalent to Rm1.42 million) together with simple interest at the rate of 12% per annum from 1 February 2006 to the date of payment;

(ii) AphB shall pay partial compensation of Rs6 lakhs (equivalent to Rm50,820) together with simple interest at the rate of 9% per annum from 6 January 2006 to the date of payment.

An appeal was submitted In the hyderabad high Court to set a side the award and date is pending. the purported termination does not have material adverse impact on the financial statement for the Group and of the Company.



2008 Annual Report


(g) arbitration between ho hup construction company berhad and the Government of Madagascar.

During the financial year ended 31 December 2004, the Company was awarded certain construction contracts by the Government of madagascar. these construction contracts were terminated in February 2006.

on 14 September 2006, the Company commenced an arbitration claim to recover damages it sustained as a result of the unlawful contract termination and of the seizure of its equipment and material with net carrying amounts of Rm22.28 million as at 31 December 2008 by the Government of madagascar following the termination. the claim has been referred to the International Court of Arbitration under the Rules of the International Chamber of Commerce (“ICC”), paris.

the Company has quantified such damages at uSD26.61 million (equivalent to Rm97.13 million). the Government of madagascar has submitted a counter-claim for uSD42.76 million (equivalent to Rm156.07 million). In August 2008, the Company amended its claim to add the sum of uSD 13,278,349.75 (Rm48.47 million) being reimbursement of monies disbursed by CImB Bank Berhad pursuant to Bank Guarantees claimed by the Government of madagascar. the legal adviser for the arbitration has advised us that the arbitral award can be expected by end of may 2009.

the solicitors representing the Company in this Arbitration are of the opinion that the risk that the Company will be ordered to make payments to the Government of madagascar is very weak and while it seems likely that the arbitration tribunal will agree partially with the Company’s position, it is impossible to estimate the amount of damages that it may decide to award to the Company.

the Company has not made any provision for the cost of the arbitration proceedings as the solicitors have stated that it is difficult to estimate the total costs of the proceedings. Further the final amount of the arbitrators’ fee will only be determined by the ICC at the end of the proceedings. however, the Company has paid an advance of uSD330,000 (equivalent to Rm1.09 million) to the ICC upon the commencement of the proceedings.

(h) ho hup construction company berhad v urban shift sdn bhd kuala lumpur high court no. D8-28-524-2007

on 10 July 2006, the Company served a notice pursuant to Section 218 of the Companies Act, 1965 against urban Shift Sdn Bhd (“urban Shift”) for claims for workdone in the amount of Rm7,440,016 under the project known as “Cadangan pembangunan Bercampur yang mengandungi 3 Blok pangsapuri Servis Dengan 5 tingkat podium Beli Belah dan Aras Basemen Letak Kereta termasuk Rumah Kelab Di Atas Lot 1282, 1283 Seksyen 67 Kuala Lumpur” which was then suspended in year 2005. urban Shift has appointed a solicitor to act on their behalf and they have replied to the Section 218 notice. the Company has filed a winding up petition against urban Shift which is yet to be served, advertised and gazetted. this petition has subsequently been withdrawn. A new winding-up petition has been filed on 26 July 2007 and has been extracted from the Court. the Company has been required by the Court to withdraw this action with liberty to file afresh.

the solicitors of the Company are of the opinion that if the Company succeeds in convincing the Judge of their view through the pleadings and submissions, the chances of success are fairly good.


2008 Annual Report


(i) hino Motors (M) sdn bhd v ho hup construction company berhad kuala lumpur high court suit no. s6-22-522-2007

hino motors (m) Sdn Bhd (“hino”) has claimed for the sum of Rm5,332,065 plus interest being the balance outstanding sum owing for goods sold and delivered.

this matter was fixed for hearing of hino’s Summary Judgement Application on 28 January 2008. Both parties had orally submitted on the said Application on 28 January 2008. hino’s Summary Judgement application was dismissed with cost. hino has filed a Notice of Appeal to Judge in Chambers and this was allowed with costs by the Court on 22 July 2008.

on 24 November 2008, the Company received a copy of the sealed judgement dated 22 July 2008 together with a letter of demand for the judgement sum. the Company is in the midst of negotiating a settlement with the plantiff.

(j) ang yoke lian construction sdn bhd v ho hup construction company berhad kuala lumpur high court suit no. s6-22-977-2007

Ang yoke Lian Construction Sdn Bhd (“AyL”) filed Summons and Statement of Claim against the Company and served on 30 october 2007. AyL’s claim is for the sum of Rm1,493,041 being the outstanding sum owed for services rendered under the Letter of Award dated 16 march 2004.

the Company has filed memorandum of Appearance on 5 November 2007 and Statement of Defence on 30 November 2007. AyL’s solicitors have served on the Company an application for summary judgement and the same was dismissed with costs on 21 october 2008. AyL subsequently filed an appeal to the Court of Appeal on 30 November 2008. No hearing date has been fixed yet.

the solicitors of the Company are of the opinion that if the the Court of Appeal agrees with the findings of the high Court that there are triable issues, the the Appeal would be dismissed and the case set for trial.

(k) alliance investment bank berhad v 1) ho hup construction company berhad and 2) tru-Mix concrete sdn bhd kuala lumpur high court suit no. D-22-442-2009

on 6 April 2009, the Company received a Writ of Summons from Alliance Investment Bank Berhad (“AIBB”) claiming the sum of Rm3,824,580.09 together with interest at the rate of 2.75% per annum above AIBB’s Cost of Funds on the principal outstanding of Rm3,191,249.17 and late payment interest of 1.07% per annum above the prescribed rate on the monthly basis from 1 February 2009 to date of full payment.

(l) rhb bank berhad v ho hup construction company berhad kuala lumpur high court suit no. D-22-290-2009

on 17 February 2009, the Company received a Writ of Summons from RhB Bank Berhad (“RhB”) claiming the sum of Rm2,722,301.90 together with interest at the rate of 3.50% per annum above the Base Lending Rate on the principal outstanding of Rm2,623,196.41 and late payment interest of 3.50% per annum above the prescribed rate on the monthly basis from 6 September 2008 to date of full payment.



2008 Annual Report


(m) lembaga kumpulan wang simpanan Pekerja v 1) ho hup construction company berhad; 2) lai Moo chan; 3) low teik kien; 4) Dato’ low tuck choy; 5) Datuk Mohd Ghazali @ fauzi bin yakub; 6) Datuk sulaiman bin Daud; 7) faris najhan bin hashim; 8) abdul kadir bin Md kassim and 9) wong yoke Ming

kuala lumpur high court suit no. s6-22-1086-2008

on 28 November 2008, the Company was served with a sealed Writ of Summons and Statement of Claim by Lembaga Kemajuan Wang Simpanan pekerja (“KWSp”) for the sum of Rm685,825. the Company has filed memorandum of Appearance on 30 December 2008.

(n) MJc Precast sdn bhd v ho hup construction company berhad kuala lumpur high court suit no. D8-22-145-2008 section 218 notice dated 8 January 2009

the Company was served with the Section 218 Notice dated 8 January 2009 as the plaintiff had been granted Summary Judgement with costs on 29 october 2008.

on 4 march 2009, a winding-up petition dated 18 February 2009 was served on the Company. this winding-up petition shall be heard on 21 may 2009.

the total amount claimed by mJC against the Company are as follows:

(i) outstanding and accrued debt in the sum of Rm398,470;(ii) outstanding and accrued interest in the sum of Rm154,063;(iii) Further interest of the sum of Rm398,470 at the rate of 1.5% per annum from 1 November 2007 to the date of full

settlement; and(iv) Cost of Rm350.

42. oPeratinG lease arranGeMents

the Group has entered into cancellable operating lease agreements for the use of buildings. these leases have an average life of between 2 and 3 years with renewal or purchase option included in the contracts. All contracts include fixed rentals for an average of 2 to 3 years. there are no restrictions placed upon the Group by entering into these leases.

the future aggregate minimum lease payments under cancellable operating leases contracted for as at balance sheet date but not recognised as liabilities are as follows:

Group company 2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000

Future minimum rental payments:

Not later than 1 year 393 665 322 665

Later than 1 year and not later than 5 years 203 602 101 602

596 1,267 423 1,267

the lease payments recognised in profit or loss during the financial year are disclosed in Note 9(b).


2008 Annual Report

43. financial instruMents

(a) financial risk management objectives and policies

the Group’s financial risk management policy seeks to ensure that the Group creates value for its shareholders whilst managing its interest rate, foreign exchange, liquidity and credit risks. the Group operates within clearly defined guidelines and policy that is not to engage in speculative transactions.

(b) interest rate risk

the Group finances its operations through operating cash flows and borrowings which are principally denominated in malaysian Ringgit.

the Group’s primary interest rate risk relates to interest-bearing debt, as the Group had no substantial long-term interest-bearing assets as at 31 December 2008. the investment in financial assets are mainly short term in nature and they are not held for speculative purposes but have been mostly placed in fixed deposits.

(c) foreign exchange risk

the Group is not exposed to foreign exchange risk derived from highly probable purchases and sales. the Group, however, is subject to foreign exchange rates fluctuation when translating the foreign entities’ financial statements as referred to in Note 5(n)(iii).

(d) liquidity risk

the Group manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure that all refinancing, repayment and funding needs are met. the Group strives to maintain sufficient levels of cash through disposal of non-core assets of the Group and to maintain sufficient banking facilities of a reasonable level.

the Group and the Company have not made payments on certain obligations relating to bank borrowings and hire purchase payables as disclosed in Note 31 and Note 32.

(e) credit risk

Credit risks, or the risk of counterparties defaulting, is controlled by the application of credit approvals, limits and monitoring procedures. Credit risks are minimised and monitored by associating with business partners with high creditworthiness. trade receivables are monitored on an ongoing basis via Group management reporting procedures.

the Group’s exposure to credit risk is disclosed in Note 24.



2008 Annual Report

43. financial instruMents (cont’d)

(f) fair values

the fair values of financial assets and financial liabilities of the Group and of the Company approximate their carrying values as at the balance sheet date.

It is not practicable to estimate the fair value of contingent liabilities as referred to in Note 37 due to the uncertainties of timing, costs and eventual outcome.

the following methods and assumptions are used to estimate the fair values of the following classes of financial instruments:

(i) cash and cash equivalents, trade and other receivables/payables and short term borrowings

the carrying amounts approximate fair values due to the relatively short term maturity of these financial instruments.

(ii) borrowings - term loans

the fair value of the term loans approximate the carrying amounts as the interest rates attached to these borrowings approximate the current interest rates for liabilities with similar risk profiles.

44. seGMent inforMation

the Group is organised into three major segments:

(i) Construction - foundation and civil engineering, building contracting works and engineering, procurement, construction and commissioning of pipeline system.

(ii) property development - the development of residential and commercial properties.

(iii) manufacturing - manufacturing and distribution of ready-mixed concrete.

other business segment represents hire of plant and machinery which is not of sufficient size to be reported separately.

the Directors are of the opinion that all inter-segment transactions have been entered into in the normal course of business and have been established on terms and conditions that are not materially different from those obtainable in transactions with unrelated parties.

No analysis of geographical segments is presented as the Group operates principally in malaysia and the Group’s foreign operations are considered to be insignificant.


2008 Annual Report

44. seGMent inforMation (cont’d)

Property construction development Manufacturing others eliminations consolidated 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007

rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000 rM’000

revenue and expenses

revenueExternal sales 34,242 55,585 23,081 448 33,860 44,045 - 10 - - 91,183 100,088 Inter-segment

sales 1,496 3,290 - - 1,379 192 - 8 (2,875) (3,490) - - total revenue 35,738 58,875 23,081 448 35,239 44,237 - 18 91,183 100,088

result Segment results Loss from

operations (58,242)

(28,525) 10,223 (11,232) (1,499) 430 (237) (221)

(49,755) (39,548) Finance costs (4,341) (4,498) (1,722) (965) (452) (412) - - (6,515) (5,875)Share of results of

associates 351 - - - - - - - 351 (380) taxation (6) (347) (45) - (193) (12) - - (244) (359)

Loss after taxation (56,163) (46,162)

minority interests 89 55

Net loss for the year (56,074) (46,107)

assets and liabilities

Segment assets 112,932 128,830 164,880 172,431 11,836 19,728 35 19 289,683 321,008 Investment in

equity method of associates - - - - - 10,246 - 276 - 10,522

Consolidated total assets 289,683

331,530

Segment liabilities 195,115 178,965 61,561 56,033 12,577 18,833 391 370 269,644 254,201

other information

Depreciation and amortisation 4,675 5,632 102 108 473 512 220 - 5,470 6,252

Capital expenditure 9 1,040 - - 322 672 - - 331 1,712 Non-cash

expenses other than

depreciation and amortisation 21,293

15,521 - 5,705 4,602 95 - -

25,895 21,321



2008 Annual Report

notice of annual general meeting

NotICE IS hEREBy GIVEN thAt the thirty-Fifth Annual General meeting of the Company will be held at Kelab Golf Seri Selangor, persiaran Damansara Indah, off Jalan persiaran Damansara tropicana, 47410 petaling Jaya, Selangor Darul Ehsan on thursday, 25 June 2009 at 9.30 a.m., to transact the following businesses:

agenda

1. to receive the Audited Financial Statements for the financial year ended 31 December 2008 and the Reports of Directors and Auditors thereon.

(Please refer to explanatory note (1))

2. to re-elect the following Directors who retire by rotation in accordance with Article 96 of the Company’s Articles of Association and being eligible, offer themselves for re-election:

(a) Dato’ Liew Lee Leong ordinary resolution 1

(b) mr. Low Kim Leng ordinary resolution 2

(c) Encik Long md. Nor Amran Bin Long Ibrahim ordinary resolution 3

(d) mr. Lim Ching Choy ordinary resolution 4

3. to re-elect mr. Low teik Kien who retires by rotation in accordance with Article 90 of the Company’s Articles of Association and being eligible, offer himself for re-election. ordinary resolution 5

4. to re-appoint yang Berbahagia tan Sri Datuk Seri panglima Abdul Kadir Bin haji Sheikh Fadzir who retires pursuant to Section 129(6) of the Companies Act, 1965 to hold office until the conclusion of the next Annual General meeting of the Company. ordinary resolution 6

5. to re-appoint messrs. Ernst & young as the Company’s Auditors for the ensuing year and to authorise the Board of Directors to fix their remuneration. ordinary resolution 7


2008 Annual Report

notice of annual general meeting(cont’d)

as special business

to consider and, if thought fit, to pass the following ordinary Resolutions:

6. authority to issues shares

“thAt subject always to the Companies Act, 1965, Articles of Association of the Company and approvals from Bursa malaysia Securities Berhad and any other governmental/regulatory bodies, where such approval is necessary, authority be and is hereby given to the Directors pursuant to Section 132D of the Companies Act, 1965 to issue not more than ten percent (10%) of the issued capital of the Company at any time upon any such terms and conditions and for such purposes as the Directors may in their absolute discretion deem fit or in pursuance of offers, agreements or options to be made or granted by the Directors while this approval is in force until the conclusion of the next Annual General meeting of the Company and that the Directors be and are hereby further authorised to make or grant offers, agreements or options which would or might require shares to be issued after the expiration of the approval hereof.” ordinary resolution 8

7. to transact any other business of which due notice shall have been given in accordance with the Companies Act, 1965.

by order of the board

wong wei fong (Maicsa 7006751)ivan oh boon wee (Mia 17911)Secretaries

Kuala LumpurDate: 3 June 2009

notes:

A member entitled to attend and vote at the meeting is entitled to appoint i. a proxy/ proxies to attend and vote in his stead. A proxy need not be a member of the Company.

however, in accordance with Section 149(1)(b) of the Companies Act, 1965, a member shall not be entitled to appoint a person who is not a member of the Company as his proxy unless that person is a qualified legal practitioner, an approved company auditor or a person approved by the Registrar of Companies in a particular case.

Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depositories) Act, 1991, it may appoint at least one proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

the Form of proxy must be deposited at the Registered office at No.18, ii. Jalan 17/155C, Bandar Bukit Jalil, 57000 Kuala Lumpur not less than forty-eight (48) hours before the time appointed for holding the meeting.

the instrument appointing a proxy in the case of an individual shall be signed iii. by the appointer or his attorney and in the case of a corporation must be executed under its common seal or under the hand of its duly authorised officer or attorney. the signature of any joint holder is sufficient.

explanatory notes on ordinary and special business:

item 1 of the agenda - audited financial statements for the financial 1. year ended 31 December 2008 and the reports of Directors and auditors thereon.

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

ordinary resolution 8 - authority to issue shares2.

the proposed resolution, if passed, will empower the Directors to issue shares in the Company up to an amount not exceeding in total 10% of the issued share capital of the Company for the time being for such purposes as the Directors consider would be in the interests of the Company. this would avoid any delay and costs in convening a general meeting to approve such an issue of shares.


2008 Annual Report

statement accompanying notice of annual general meeting

Details of Directors who are standing for re-election in Agenda 2 to Agenda 4 of the Notice of the thirty-Fifth Annual General meeting are set out in the Directors’ profile appearing on pages 4 to 6 of this Annual Report.

this page has been intentionally left blank

proxy form

I/We (name of shareholder as per NRIC, in capital letters) IC No./ID No./Company

No. (new) (old) of

(full address) being a member(s) of the abovenamed Company,

hereby appoint (name of proxy as per NRIC, in capital letters) IC No.

(new) (old) or failing him/her (name of proxy per NRIC, in capital letters)

IC No. (new) (old) failing him/her the Chairman of the meeting as my/

our proxy to vote for me/us on my/our behalf at the 35th Annual General meeting of the Company to be held at Kelab Golf Seri Selangor, persiaran

Damansara Indah, off Jalan persiaran Damansara tropicana, 47410 petaling Jaya, Selangor Darul Ehsan on thursday, 25 June 2009 at 9.30 a.m. and

at each and every adjournment thereof.

my/our proxy is to vote as indicated below:

item agenda

1. to receive the Audited Financial Statements for the financial year ended 31 December 2008 and the Reports of Directors and Auditors thereon.

resolution for aGainst

2. to re-elect Dato’ Liew Lee Leong as Director pursuant to Article 96 of the Company’s Articles of Association.

1

3. to re-elect mr. Low Kim Leng as Director pursuant to Article 96 of the Company’s Articles of Association.

2

4. to re-elect Encik Long md. Nor Amran Bin Long Ibrahim as Director pursuant to Article 96 of the Company’s Articles of Association.

3

5. to re-elect mr. Lim Ching Choy as Director pursuant to Article 96 of the Company’s Articles of Association.

4

6. to re-elect mr. Low teik Kien as Director pursuant to Article 90 of the Company’s Articles of Association.

5

7. to re-appoint yang Berbahagia tan Sri Datuk Seri panglima Abdul Kadir Bin haji Sheikh Fadzir as Director pursuant to Section 129(6) of the Companies Act, 1965.

6

8. to re-appoint messrs. Ernst & young as the Company’s Auditors for the ensuing year and to authorise the Board of Directors to fix their remuneration.

7

special business9. Authority to Issue Shares. 8

(please indicate with an “X” in the spaces provided how you wish your vote to be cast. If you do not do so, the proxy will vote or abstain from voting at his discretion.)

Signature/Common Seal

Date:

ho huP construction coMPany berhaD(14034-W) Incorporated in malaysia

No. of shares held

CDS account no. of authorised nominee

note:

i. A member entitled to attend and vote at the meeting is entitled to appoint a proxy/ proxies to attend and vote in his stead. A proxy need not be a member of the Company.

however, in accordance with Section 149(1)(b) of the Companies Act, 1965, a member shall not be entitled to appoint a person who is not a member of the Company as his proxy unless that person is a qualified legal practitioner, an approved company auditor or a person approved by the Registrar of Companies in a particular case.

Where a member of the Company is an authorised nominee as defined under the Securities Industry (Central Depositories) Act, 1991, it may appoint at least one proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account.

ii. the Form of proxy must be deposited at the Registered office at No. 18, Jalan 17/155C, Bandar Bukit Jalil, 57000 Kuala Lumpur not less than forty-eight (48) hours before the time appointed for holding the meeting.

iii. the instrument appointing a proxy in the case of an individual shall be signed by the appointer or his attorney and in the case of a corporation must be executed under its common seal or under the hand of its duly authorised officer or attorney. the signature of any joint holder is sufficient.

reGistereD office

ho huP construction coMPany berhaD(14034-W)Incorporated in malaysia

No. 18, Jalan 17/155C, Bandar Bukit Jalil, 57000 Kuala Lumpur.

Fold along this line

Fold along this line

StAmp

having practiced as a partner in the legal firms hisham, sobri & kadir and kadir, khoo &...

Documents