CONTENTS 118 List Of Landed Properties 120 Analysis Of Shareholdings 121 30 Largest Shareholders ......

2 Chairman’s Statement 6 Corporate Structure 8 Group Financial Highlights 10 Notice Of Annual General Meeting 14 Statement Accompanying 15 Corporate Information 16 Profile Of Directors 19 Corporate Governance Statement 28 Audit Committee Report 33 Statement On Internal Control 35 Financial Statements 118 List Of Landed Properties 120 Analysis Of Shareholdings 121 30 Largest Shareholders 123 Proxy Form

CONTENTS

1LII HEN INDUSTRIES BHD. (301361-U)

At the year end, the Group’s profit before tax and profit after tax stood at

RM 23.2 million and RM 17.6 million respectively, representing increases of 10.48% and 8.64% compared to RM 21 million and RM 16.2 million from the preceding year

2 LII HEN INDUSTRIES BHD. (301361-U)

CHAIRMAN’S STATEMENT


DEAR VALUED SHAREHOLDERS,

On behalf of the Board of Directors of Lii Hen Industries Berhad (LHIB), I am pleased to present the AnnualReport and Audited Financial Statements of the Company and the Group for the financial year ended 31 December 2010.

REVIEW OF PERFORMANCE

In the beginning of FY 2010, the global economy rebounded from its low with the road of recovery rather uncertain and full ofobstacles. The recovery remained fragile and uneven, uncertainties prevailed in the developed nations albeit concerns of a “double –dip” recession.

For the furniture industry, the challenging environment and the strengthening of the Ringgit against US Dollar continued tosignificantly affect the Group’s financial performance. However, the Group was able to report commendable financial results. Turnover increased to RM 261 million, a jump of 19.18% from RM 219 million in the preceding year. Bedroom set continued to be the main contributor, making up of 69% of the Group’s turnover. Such excellent performance is a testament to the Group’s sound corporate strategy and confidence of our customers.

At the year end, the Group’s profit before tax and profit after tax stood at RM23.2 million and RM 17.6 million respectively, representing increases of 10.48% and 8.64% compared to RM 21.0 million and RM16.2 million from the preceding year. The insurance claim of approximately RM3.8 million on fire incident which occurred in October 2009 and fully accrued in 2009 wasreceived during the year. For the first half of 2010, the Group achieved RM 18 million in profit before tax, mainly attributable to the overallincrease in orders for all factories and the strong US Dollar against the RM for that period under review. Although the sales momentumcontinued in the second half of the year with some delayed shipments, profit eroded due to continuing adverse movement in foreign currency, the US Dollar depreciated approximately 10% by year end.

The year ended with the earnings per share of 29.28 sen per share and strong financial position with Current Assets: Current Liabili-ties ratio at 2.65 and Debt: Equity ratio at 0.39. The bad debts writen off was RM 86,622 (2009: RM288,327).

FUTURE PROSPECTS

The most acute phase of the global economic crisis had deemed passed but the persisting low growth and high employment in the developed countries continued to dampen consumption. The European debt crisis; the political unrest in the middle-east and the volatility of the major currencies added more uncertainties into the global business trading activities.

With the challenging economic outlook, the Group is confident of remaining resilient and will continue to offer a comprehensive range of furniture at competitive price to our existing and potential customers. With the expected improvement sales volume, all factories are expected to continue achieving economic of scale. After last year’s fire incident, the finishing and spraying line of the Group’s main bedroom set subsidiary, Favourite Design Sdn Bhd , was upgraded, increasing its production capacity by 30%.

Besides increasing sales volume, the Group will continue to maintain stringent cost control in order to derive a better cost efficiencies and effectiveness.

Barring any unforeseen circumstances, we expect the Group’s prospect for the year ending 31 December 2011 to be satisfactory.

CHAIRMAN’S STATEMENT- continued


In line with the favourable results for FY 2010, the Board of Directors

is pleased to propose a final single tier dividend of 2.5%, amounting

to RM 1.5 million for financial year ended 31 December 2010.

CORPORATE DEVELOPMENT

-PPL PLANTATIONS SDN BHD (PPLSB)

PPLSB had engaged consultants to carry out the soil investigation for the bridge construction and to submit the Environmental Management Plan to the DOE for approval..

The Group will continue to progressively update shareholders on the development of the project.

BOARD CHANGES

There have been no changes to the Board members since the last Annual Report.

CHAIRMAN’S STATEMENT


CORPORATE SOCIAL RESPONSIBILITY (CRS)

In pursuit of its corporate objective, the Group acknowledges its responsibility as a good corporate citizen in contributing tosociety and country’s development.

During the year, the Group has contributed funds to the flood victims through Muar Furniture Association, donated funds tolocal schools, providing industrial training to local universities students and carry out other activities in relation to environmentpreservation.

The Group believes in continuing education and personal improvement, hence; provide internal and external training anddevelopment for its employees. During the year, a team building course was conducted for all employees at the Austin Hill Golf Resorts, Johor Bahru.

ADOPTION OF NEW AND REVISED FINANCIAL REPORTING STANDARDS

l am also pleased to inform that at the beginning of the year under review, the Company and the Group have adopted new andrevised Financial Reporting Standards which are mandatory. The adoption of these new and revised FRSs are disclosed in greater details in the note 3.1 to of the financial statements. The effects of adoption of the new and revised FRSs also disclosed in note 3.1.

DIVIDENDS

In line with the favourable results for FY 2010, the Board of Directors is pleased to propose a final single tier dividend of 2.5%, amounting to RM1.5 million for financial year ended 31 December 2010. The proposed final dividend is subject to shareholders’ approval at the forthcoming Annual General Meeting to be held on 28 June 2011.

For the year 2010, the total dividends paid and proposed were 10%, amounting to RM 6 million. This represents about 33.33% of the consolidated net profit for this financial year.

ACKNOWLEDGEMENT

On behalf of the Board of Directors, l wish to extend our sincere gratitude and appreciation to the management and valuedemployees for their continued commitment, support and dedication in carrying out their duties and responsibilities diligently.

We also wish to record our utmost appreciation to the shareholders, customers, business associates, suppliers, bankers and the relevant authorities for their continuous support and confidence with the Management and the Board.

CHUA LEE SENGExecutive Chairman

CHAIRMAN’S STATEMENT- continued

LII HEN INDUSTRIES BHD(LHIB)

Investment Holding

LII HEN FURNITURE SDN BHD (LHF)

Investment holding and manufacturingof wooden furniture

CORPORATE STRUCTURE

FAVOURITE DESIGN SDN BHD(FDSB)

Manufacturing of bedroom furniture

KEJORA JUARA SDN BHD (KJSB)

Letting of factory building

LII HEN PLANTATION SDN BHD(LHP)

Investment holding

100%

100%

100%

90%


LII HEN INDUSTRIES BHD (LHIB)

LII HEN FURNITURE SDN BHD (LHF)

FAVOURITE DESIGN SDN BHD (FDSB)

EF FURNITURE SDN BHD (EFF)

MAYTECK KILANG KAYU DAN PERABUT SDN BHD (MKK)

CT HAUP HENG SDN BHD (CTHH)

EF FURNITURE SDN BHD(EFF)

Manufacturing of office & residential furniture

CT HAUP HENG SDN BHD(CTHH)

Manufacturing of wooden furniture

MAYTECK KILANG KAYU DAN PERABUT (MKK)

Manufacturing of furniture component, processing & kiln-drying of rubber wood & timber

PPL PLANTATIONS SDN BHD(PPLSB)

Planting , cultivating, milling and dealing in agriculture and forest product

100%

100%

80%

100%


GROUP FINANCIAL HIGHLIGHTS

50,000

75,000

100,000

125,000

150,000

175,000

200,000

225,000

250,000

275,000

0

2,500

5,000

7,500

10,000

12,500

15,000

17,500

20,000

22,500

25,000

0

5

10

15

20

25

30

0

75

100

125

150

175

200

50

2006

RM Million

173,180

150,289

218,850

260,692

2,841

6,251

1,047

21,033

2007 2008 2009 2010

137,532

REVENUE

2006

RM Million

23,224

2007 2008 2009 2010

PROFIT BEFORE TAXATION

2006

SEN

9

2

27

29

2007 2008 2009 2010

1

Net EARNING PER SHARE

2006

SEN

150142

170

188

2007 2008 2009 2010

141

NET ASSETS PER SHARE


Financial Year 2006 2007 2008 2009 2010 RM’000 RM’000 RM’000 RM’000 RM’000

Revenue 137,532 150,289 173,180 218,850 260,692 Profit before taxation 2,841 1,047 6,251 21,033 23,224Profit after taxation 873 1,180 5,466 16,186 17,567 Property, plant and equipment 50,228 46,917 45,409 45,840 57,502Current assets 62,966 61,907 75,367 92,378 99,494Current liabilities 22,068 18,509 26,112 26,872 37,527Non current liabilities 6,304 5,093 4,826 8,835 6,474 Shareholders’ funds 84,822 85,221 89,783 102,324 112,810Dividends paid 648 900 900 5,100 7,200

*Net earnings per share (sen) 1 2 9 27 29*Net assets per share (sen) 141 142 150 170 188 * Based on the issued and paid-up share capital of 60,000,000 shares

GROUP FINANCIAL HIGHLIGHTS



NOTICE IS HEREBY GIVEN that the Seventeenth (17th) Annual General Meeting of Lii Hen Industries Bhd. will be held atClassic 1, Ballroom, Classic Hotel, 69, Jalan Ali, 84000 Muar, Johor Darul Takzim on Tuesday, 28 June, 2011 at 11.30 a.m. for the following purposes:

AS ORDINARY BUSINESS

1. To receive the audited financial statements for the financial year ended 31 December 2010 and the Reports of the Directors and Auditors thereon. (Resolution 1)

2. To sanction the payment of a final single tier dividend of 2.5% per share for the financial year ended 31 December 2010. (Resolution 2)

3. To re-elect Directors retiring by rotation under the Company’s Articles of Association (a) Chua Lee Seng (Article 83) (Resolution 3) (b) Tan Bee Eng (Article 83) (Resolution 4)

4. To re-appoint Messrs. John Lim & Associates as auditors of the Company and to authorise the Directors to fix their remuneration. (Resolution 5)

AS SPECIAL BUSINESS

To consider and, if thought fit, to pass the following resolutions as Ordinary and Special Resolutions:

5 Authority to Issue Shares – Ordinary Resolution “THAT pursuant to Section 132D of the Companies Act, 1965, and subject to the approvals of the relevant Governmental

and/or regulatory authorities, the Directors be and are hereby empowered to issue shares in the Company from time to time upon such terms and conditions and for such purposes and to such person or persons whomsoever as the Directors may, in their absolute discretion, deem fit, provided that the aggregate number of shares issued pursuant to this resolution in any one financial year does not exceed 10% of the issued share capital of the Company for the time being and that the

Directors be and are also empowered to obtain the approval from the Bursa Malaysia Securities Berhad for the listing of and quotation for the additional shares so issued and that such authority shall continue in force until the conclusion of the next

Annual General Meeting of the Company”. (Resolution 6)

6 Proposed Authority for the Purchase by the Company of its Own Shares – Ordinary Resolution

“THAT, subject to the provisions under Companies Act, 1965, the Articles of Association of the Company, the Main Market Listing Requirements (“Listing Requirements”) of Bursa Malaysia Securities Berhad (“Bursa Securities”) and the approval of such relevant government and/or regulatory authorities where necessary, the Company be and is hereby authorized to

purchase its own ordinary shares (“Shares”) on the Bursa Securities (“Proposed Share Buy-Back”) at any time, upon such terms and conditions as the Directors shall in their discretion deem fit and expedient in the best interest of the Company provided that :

(i) the aggregate number of Shares pursuant to this resolution shall not exceed ten percent (10%) of the prevailing issued and paid-up share capital of the Company at the time of purchase and the compliance with the public shareholding spread requirements as stipulated in Rule 8.02(1) of the Listing Requirements or such other requirements

as may be determined by Bursa Securities from time to time; and

NOTICE OF ANNUAL GENERAL MEETING


(ii) the maximum amount of funds to be utilised by the Company for the purpose of purchasing the Shares shall not exceed the Company’s latest audited retained profits and/or share premium account.

AND THAT upon the purchase by the Company of its own Shares, the Board be and is hereby authorized to:

(i) retain all or part of the Purchased Shares as Treasury Shares; and/or

(ii) distribute the Treasury Shares as share dividends to the Company’s shareholders for the time being; and/or

(iii) resell the Treasury Shares on Bursa Securities.

AND THAT the authority conferred by this resolution will be effective immediately from the passing of this ordinary resolution and will continue to be in force until:

(i) the conclusion of the next Annual General Meeting (“AGM”) at which time it shall lapse unless renewed by ordinary at the meeting, either unconditionally or subject to conditions; or

(ii) the expiration of the period within which the next AGM after that date is required by law to be held; or

(iii) revoked or varied by ordinary resolution passed by the shareholders of the Company in a general meeting;

whichever occurs first.

AND THAT authority be and is hereby given to the Board to take all such steps as necessary to implement, finalise and give full effect to and to implement the Proposed Share Buy-Back with full powers to assent to any conditions, modifications, revaluations, variations and/or amendments (if any) as may be required or imposed by the relevant authorities from time to time and to do all such acts and things as the Board may deem fit and expedient in the best interest of the Company.” (Resolution 7)

7. Proposed Amendment to Article 155 of the Company’s Articles of Association - Special Resolution

“THAT the amendment to the Article 155 of the Articles of Association of the Company as set out in Pant B of the Circular to Shareholders dated 3 June 2011 be and is hereby approved.” ( Resolution 8)

8. To consider any other business for which due notice shall have been given in accordance with the Companies Act, 1965.

NOTICE OF ANNUAL GENERAL MEETING- continued


NOTICE OF ENTITLEMENT DATE AND DIVIDEND PAYMENT

NOTICE IS HEREBY GIVEN that a final single tier dividend of 2.5% in respect of the financial year ended 31 December 2010, if apporoved by members at the Seventeenth (17th) Annual General Meeting on 28 June 2011, will be paid on 28 July 2011 to Depositors registered in the Records of Depositors at the close of business on 12 July 2011.

A Depositor shall qualify for entitlement only in respect of:

(a) Shares transferred into the Depositor’s Securities Account before 4.00 p.m. on 12 July 2011 in respect of ordinary transfer; and

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

By Order of the Board

Tan Wang Giap (MACS 00523)Company Secretary

Muar, Johor Darul Takzim3 June 2011



Notes: 1. A proxy may but need not be a member of the Company and the provisions of Section 149(1)(b) of the Companies Act, 1965

shall not apply to the Company.

2. Where a member appoints two or more proxies, the appointment shall be invalid unless the member specifies the proportions of his holding to be represented by each proxy.

3. The instrument appointing a proxy in the case of any individual shall be signed by the appointor or his attorney duly authorised in writing and in the case of a corporation under its common seal or under the hand of an officer or attorney duly

authorised.

4. To be valid the proxy form must be duly completed and deposited at the registered office of the Company, No. 67, 2nd Floor, Room B, Jalan Ali, 84000 Muar, Johor, not less than forty eight (48) hours before the time for holding the meeting.

Explanatory Notes on Special Business

5. Resolution 6

The proposed ordinary resolution, if passed, will empower the Directors of the Company to issue and allot shares in the Company from time to time and for such purpose as the Directors consider would be in the interest of the Company. This authority, unless revoked or varied by the Company in general meeting, will expire at the next Annual General Meeting of the Company. This is the renewal of the mandate obtained from the members on the last Annual General Meeting (“the

previous mandate”). The previous mandate was not utilized and accordingly no proceeds were raised. The renewed mandate will provide flexibility to the Company for any possible fund raising activities, including but not limited to placing of shares for purpose of funding future investment project(s), working capital and/or acquisitions.

6. Resolution 7

The proposed ordinary resolution, if passed, will empower the Directors of the Company to purchase not more than 10% of the issued and paid-up share capital of the Company for the time being, for such purposes as they consider would be in the best interest of the Company. Further information is set out in the Circular to shareholders dated 3 June 2011 which is dispatched together with the Company’s 2010 Annual Report.

7. Resolution 8

The Special Resolution under item 7 of the Agenda , is to seek shareholders’ approval to amend Article 155 of the Company’s Articles of Association to be in line with the recent amendment to the Main Market Listing Requirements in relation to the implementation of the eDividend.



STATEMENT ACCOMPANYING Notice Of The Seventeenth (17th) Annual General Meeting

(Pursuant to Paragraph 8.27(2) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad)

1. The Directors who are standing for re-election pursuant to the Company’s Articles of Association are as follows: Chua Lee Seng (Article 83) Tan Bee Eng (Article 83) 2. Details of the profile of the above directors are set out in the Directors’ Profile on page no. 16 of this Annual Report. 3. Details of the above directors’ interest in the securities of the Company are set out in the Directors’ Report on page 38 of

this Annual Report. 4. The above directors’ family relationship with other directors and/or substantial shareholder of the Company are disclosed in

the Directors’ Profile on page no. 16 of this Annual Report. 5. None of the above directors have any conflict of interest in the Company other than as disclosed on page 25 to 27 of this

Annual Report. 6. None of the above directors have been convicted for offences within the past ten (10) years other than traffic offences, if

any. 7. None of the above directors hold any directorship in any public listed company.


CORPORATE INFORMATION

DIRECTORS

CHUA LEE SENG Executive Chairman CHUA YONG HAUP Managing DirectorTOK HENG LEONG Executive DirectorTAN BEE ENG Executive DirectorMOHD QARI BIN AHMAD Independent Non-Executive DirectorTEY PING CHENG Independent Non-Executive DirectorONN YEE HAN Independent Non-Executive Director

AUDIT COMMITTEE

TEY PING CHENG Committee ChairmanONN YEE HANMOHD QARI BIN AHMAD

NOMINATION COMMITTEE

ONN YEE HAN Committee ChairmanTEY PING CHENG MOHD QARI BIN AHMAD

REMUNERATION COMMITTEE

MOHD QARI BIN AHMAD Committee ChairmanTEY PING CHENGONN YEE HAN

SECRETARY

TAN WANG GIAP MACS 00523

AUDITORS

John Lim & AssociatesChartered Accountants

PRINCIPAL BANKERS

OCBC Bank (Malaysia) BerhadHSBC Bank Malaysia BerhadMalayan Banking Berhad

SOLICITORS

K. H. Tan & Co.

REGISTRARS

Plantation Agencies Sdn BerhadStandard Chartered Bank ChambersLebuh Pantai10300 Penang Tel: 04-2625333 Fax: 04-2622018

REGISTERED OFFICE

67, 2nd FloorRoom B, Jalan Ali84000 Muar, Johor Darul TakzimTel: 06-9541818 Fax: 06-9525823

PRINCIPAL PLACE OF BUSINESS

Plo 43, Kawasan Perindustrian Bukit PasirJalan Raja, Mukim Sungai Raya84300 Bukit PasirMuar, Johor Darul TakzimTel: 06-9857202 Fax: 06-9857818Email: lhib @ liihenfurniture.com

STOCK EXCHANGE LISTING Main Market of the Bursa Malaysia Securities Berhad

WEBSITE

www.liihenfurniture.com


CHUA LEE SENGExecutive Chairman

Mr Chua Lee Seng, 61 , a Malaysian, was appointed to the Board of Lii Hen Industries Berhad (LHIB) on 24 May 1994 as its Chairman and Managing Director. On 26th August 2006, he was appointed as an Executive Chairman of the Group.

Mr Chua was the President of The Muar Furniture Association since 2003 and was resigned on 28th February 2009. . He began his working career as an apprentice after completing his Senior Middle Three Diploma in Chung Hwa High School, Muar in 1968. He set up Oasis Furniture, a partnership involved in furniture manufacturing in 1976. Thereafter, in 1979, he set up Seng Heng Furniture with three partners to manufacture sofas and dining furniture for the local market. He was the co-founder of Lii Hen Furniture Sdn Bhd and CT Haup Heng Sdn Bhd where presently he also serves as a director.

On 30 November 2007, Mr Chua resigned from the Audit Committee in order to comply with the 15.10 of the amended ListingRequirements of Bursa Malaysia Securities Bhd in relation to corporate governance.

He has a direct interest of 1,091,200 ordinary shares and an indirect interest of 25,855,170 ordinary shares in LHIB by virtue of his interest in Asset Muar Sdn Bhd, a substantial shareholder of LHIB, and the shares held by his daughter, Ms Chua Gek Tiow.

He is a brother in law of Mr Tok Heng Leong and uncle of Mr Chua Yong Haup.

CHUA YONG HAUPManaging Director

Mr Chua Yong Haup, aged 44, a Malaysian, was appointed to the Board of LHIB on 30 December 1999. On 26th August 2006, he was appointed as the Managing Director of the Group.

He began his working career as an apprentice in Seng Heng Furniture in 1981. Later he joined Hong Kong Teak, a company principally involving in furniture manufacturing as a supervisor in the Research and Development Division and established Hup Heng Furniture in 1989. He is also the co-founder and Director of CT Haup Heng Sdn Bhd since 12 September 1992. Mr Chua now leads the Group in the areas of strategic planning, business development and he also involves in the daily operation of the Group.

He is a nephew to Mr Chua Lee Seng and has no shareholding in LHIB.

TAN BEE ENGExecutive Director

Mr Tan Bee Eng, aged 53, a Malaysian, was appointed to the Board of LHIB on 30 December 1999. He commenced his career as an apprentice with a woodworking company in Singapore in 1971. Upon his return to Muar in 1976, he joined Wong Kam Chin Perabut Sdn Bhd as a production operator. He then entered into partnership under Hup Cheong Furniture in 1980 and subsequently set up Eng Furniture Industries in 1989. He was appointed as Director of EF Furniture Sdn Bhd on 21 November 1992.

He has a direct interest of 152,665 ordinary shares in LHIB and an indirect interest of 25,566,170 by virtue of his interest inAssets Muar Sdn Bhd, a substantial shareholder of LHIB, and the shares held by his son, Mr. Tan Uei Jye. He has no familyrelationship with any other Directors or major shareholders of the Company.

PROFILE OF DIRECTORS


PROFILE OF DIRECTORS- continued

TOK HENG LEONGExecutive Director

Mr Tok Heng Leong, aged 54, a Malaysian, was appointed to the Board of LHIB on 24 May 1994. He began his career in 1973 as an apprentice with a company involved in the manufacture of household furniture for government schools. In 1979, he set up Seng Heng Furniture with three partners to manufacture sofas and dining furniture for the local market. He is also the co-founder and Director of Lii Hen Furniture Sdn Bhd.

He is a brother in law to Mr Chua Lee Seng. He holds 150,043 ordinary shares in LHIB and has indirect interest of 25,386,170 by virtue of his interest in Assets Muar Sdn Bhd, a substantial shareholder of LHIB.

MOHD QARI BIN AHMADIndependent Non Executive Director

Encik Mohd Qari Bin Ahmad, aged 57, a Malaysian, was appointed to the Board of LHIB on 30 December 1999 and also serves as Director of Lii Hen Furniture Sdn Bhd since 30 August 1996. He obtained his MBA from the University of Aston in Birmingham, UK in 1983 and is a Fellow of Institute of Chartered Secretaries and Administrators (ICSA), UK. He joined Perwira Affin Merchant Bank Berhad (now known as Affin Merchant Bank) in 1983 as an executive in theCorporate Finance and Advisory Division and later promoted as General Manager of the Division. He left the merchant bank in August 1996 to set up his own corporate advisory and consultancy business.

He previously sat on the Boards of several public companies namely Amtek Holdings Berhad, Damansara Realty Berhad, The Store Corporation Berhad and Long Huat Group Berhad and several private companies namely Spark Manshop Holdings Sdn Bhd Group and Crocodile Sdn Bhd Group of companies. Encik Mohd Qari Ahmad was previously as Independent Director on the Board of BTM Resources Berhad.

He presently sits as a member to the investigating Tribunal and Disciplinary Committee Panel of the Advocates and SolicitorsDisciplinary Board of Bar Council, Malaysia. He was also a committee member of Corporate Law Reform-Task Force C of MAICSA.

On 26 November 2009, he was redesignated to independent Non Executive Director.

On 1 December 2009, he was appointed as a chairman of the Remuneration Committee and remained as a member of the Audit and Nomination Committees. He does not have any family relationship with any other Directors or major shareholders of the Company.

TEY PING CHENGIndependent Non-Executive Director

Mr Tey Ping Cheng, aged 42, a Malaysian, was appointed to the Board of LHIB on 2 July 2001.

He graduated with a Bachelor of Business degree in Accounting from the Curtin University of Technology, Perth, Australia. He is a partner of Tey Consultancy, a company engaged in secretarial and tax consultancy in Malacca since 1992. He is a member of Malaysia Institute of Accountants and Certified Practicing Accountant of Australia. He is also a council member of Malaysia Association of Company Secretaries and also sits on the Board of KSL Holdings Berhad.

He is a chairman of the Audit Committee and member of Nomination and Remuneration Committees. He does not have any family relationship with any other Directors or major shareholders of the Company.


ONN YEE HANIndependent Non Executive Director

Mr Onn Yee Han, aged 39 , a Malaysian , was appointed to the Board on 30th December 2005. He graduated from University of London ( External) with LLB Second Class Honours in 1996 and obtained the Certificate in Legal Practice (CLP) with Second Class Honours in 1998. He was admitted as an qualified advocate and solicitor of the High Court of Malaya in 2000.

He was a legal assistance in Messrs Rajah Lau & Associates, Messrs. Y.C Pang & Low, Messrs Jayasuria, and JP Chong &Associates. He is now practicing as a partner in Messrs Mei-Han, at Kampung Baru Sungai Buloh Branch. He is also a Chairman and Legal Advisor of The Small and Medium Industries and Commerce Association in Kampung Baru Sungai Buloh and Subang (SMIC) and the legal advisor to the Malaysia Furniture Enterpreneur Association (MFEA), the Kuala Lumpur & Selangor Furniture Enterpreneur Association (KLSFEA) and Woon Clansman Association Malaysia.

On 1 December 2009, he was appointed as a chairman of the Nomination Committee and remained as member of the Audit and Remuneration Committees. He does not have any family relationship with any other Directors or major shareholders of the Company.

CONFLICT OF INTEREST

None of the Directors has any conflict of interest with the Company.

CONVICTION OF OFFENCE

None of the Directors has been convicted of any offence within the past 10 years other than traffic offences.

PROFILE OF DIRECTORS- continued


CORPORATE GOVERNANCE STATEMENT

The Board of Directors (the “Board”) of Lii Hen Industries Berhad is committed of adopting the high standards of corporate governance within the Group as a fundamental part of discharging its responsibilities to protect and enhance shareholders’ value and financial performance of the Group. The Board is pleased to report on the application by the Company of the principles and the extent of its compliance with the best practices of the Malaysian Code of Corporate Governance(Revised 2007)(“Code”).

BOARD OF DIRECTORS

COMPOSITION AND BOARD BALANCE

The Board is responsible for the overall corporate governance of the Group, its strategic direction, establishing goals for management and monitoring the achievement of these goals. The Board has delegated specific responsibilities to three (3) subcommittees namely Audit, Nomination and Remuneration Committees, the details of which are set out below. These Committees have the authority to examine specific issues and report to the Board with their recommendation. The ultimateresponsibility for the final decision on all matters, however, lies with the Board.

As at the date of this statement, the Board currently has 7 members comprising the Executive Chairman, the ManagingDirector, two (2) Executive Directors, and three (3) Independent Non-Executive Directors.

The role of the Executive Chairman and the Managing Director are separated and clearly defined, so as to ensure there is a balance of power and authority. The Executive Chairman is responsible for ensuring the effective conduct of the Board, monitoring monthly result so as to meet its corporate goals and objectives. The Managing Director with the assistance of the Executive Directors, is responsible for the day to day management of the business as well as implementation of Board’s policies and decisions. TheIndependent Non-Executive Directors provide independent judgement to the decision making of the Board and provide anindependent check and balance for the Executive Directors. The Independent Non-Executive Directors also ensure all strategies proposed by Executive Directors are fully deliberated and agreed.

The Board members possess a wide range of business, financial and legal experience. The mix of skills and experience is vital in directing and supervising the Group’s overall business activities. A brief profile of each Director is presented on pages 16 to 18 of this annual report.

BOARD MEETINGS

The Board meets every quarter. Additional meetings are convened whenever necessary. Meetings were scheduled at the start of the year to enable Board members to plan their appointment schedule. During the financial year under review, the Board met five (5) times and the attendance record for each Director is as follows:

Name of Director No. of Meeting Attended Percentage of Attendance (%)

Chua Lee Seng 5/5 100%Chua Yong Haup 5/5 100%Tan Bee Eng 5/5 100%Tok Heng Leong 5/5 100%Mohd Qari Bin Ahmad 5/5 100%Tey Ping Cheng 5/5 100%Onn Yee Han 4/5 80%

All the directors have complied with the minimum 50% attendance requirement in respect of Board meetings as stipulated by the Main Market Listing Requirement of Bursa Malaysia Securities Berhad.


SUPPLY OF INFORMATION

The agenda for the Board Meetings, together with detailed reports and proposition papers to be tabled at the Board Meeting are circulated to all Directors in advance prior to the meeting. This will ensure all the Directors are supplied with all necessary information and sufficient time to consider the matters tabled in order to enable them to effectively discharge their duties and responsibilities.

Every Director has access to the advice and services of the Company Secretary and, if deemed necessary, seek advice from the independent professional advisors and internal / external auditors at the Company’s expense. Senior management officers and external advisers may be invited to attend Board Meetings when necessary, to furnish the Board with explanations and comments on the relevant agenda items tabled at the Board meetings or to provide clarification on issue(s) that may be raised by any Director.

All meetings of the Board are duly recorded in the Board Minutes. .Minutes of every Board Meeting are circulated to all directors for their perusal prior to confirmation of the minutes at the following Board Meeting.

APPOINTMENT AND RE-ELECTION OF DIRECTORS In accordance with the Company’s Articles of Association, all Directors who are appointed by the Board are subject to re-election by shareholders at the next Annual General Meeting immediately after their appointment.

The Articles of Association also provides that at least one-third (1/3) of the Board are subject to retirement by rotation and offer themselves for re-election at each Annual General Meeting. In practice, this means that every Director be subject to re-election by rotation at least once every three (3) years.

DIRECTORS’ TRAINING

All Directors have attended the Mandatory Accreditation Programme prescribed by Bursa Malaysia Securities Bhd (BursaSecurities).During the financial year, Directors attended the following training programmes and seminars to further boarden their skills, knowledge and perspectives to keep them abreast with new and relevant developments pertaining to changes in legislation, regulations and the market place:

(1) Real Property Gain Tax – Implications and Exemptions(2) National Tax Conference 2010(3) Minutes Writing Workshop(4) Percukaian Kebangsaan 2010(5) 2011 Budget Seminar – Highlights and Implications(6) Corporate Social Responsibility(7) Exploring the Nature of Mind

The Directors will continue to undergo other relevant training programmes and seminars to ensure that they remain well equipped with the relevant knowledge as well as emergent strategic directions and ideas to discharge their duties effectively.

CORPORATE GOVERNANCE STATEMENT- continued



BOARD COMMITTEES

The Board has delegated certain responsibilities to Board Committees which operate within defined terms of reference.

DIRECTORS’ REMUNERATION

REMUNERATION COMMITTEE

The Remuneration Committee comprises of the following members :

CHAIRMANEn. Mohd Qari Bin Ahmad Independent Non-Executive Director

MEMBERMr Onn Yee HanIndependent Non-Executive Director

Mr Tey Ping ChengIndependent Non-Executive Director

The Remuneration Committee comprises solely of independent non-executive Directors.

The Committee is responsible for the annual review and make recommendation to the Board of the remuneration packages to the Executive Directors based on their contributions to the Group’s overall performance and success, inter alia, the committee also review the Incentive Scheme to the Executive Directors and Top Management. The criteria for the Incentive Scheme include the level of profit achieved by each of the subsidiary company and also the Group from its business activities against target, together with an assessment of each individual’s performance during the period.

It is the ultimate responsibility of the entire Board to approve the remuneration of these Directors.

DETAILS OF THE DIRECTORS’ REMUNERATION

Details of the Directors’ remuneration payable to the Directors of the Company for the financial year ended 31 December 2010, by category and in successive bands of RM 50,000 are as follows :

Executive Directors Non-Executive Directors Total RM RM RM

Fees - - -Salary & emoluments 1,991,755 95,000 2,086,755Defined contribution retirement plan 270,403 - 270,403Benefits in kind 61,875 - 61,875


DETAILS OF THE DIRECTORS’ REMUNERATION

Range of Remuneration Number of Directors Executive Non-Executive

Below RM 50,000 3RM 450,001 – RM500,000 2 -RM 500,001 – RM550,000 1 -RM 650,001 – RM700,000 - -RM 800,001 – RM850,000 1 -

While the Board is aware that best practice under the Malaysian Code is to provide disclosure of individual remuneration, however the Board is of the view it is consider appropriate to disclose the remuneration of the directors in aggregate and bands.

There are no contracts of service between any directors and the Company or its subsidiary companies.

NOMINATION COMMITTEE

The Nomination Committee will bring to the Board recommendations on appointment of any new members or non-executive Directors. The Committee shall be responsible to ensure the appropriate Board balance and size; and that the Board has the required mix of responsibilities, skills and experience and other qualities to enable the Board to function efficiently.

The Committee consists solely of non-executive Directors, all of whom are independent. The members are as follows:

CHAIRMANMr Onn Yee Han Independent Non-Executive Director

MEMBERMR TEY PING CHENG Independent Non-Executive Director

EN. MOHD QARI BIN AHMADIndependent Non-Executive Director

The Nomination Committee has carried out an annual review of the effectiveness of the Board as a whole; the committees of the Board and the contribution of each individual director, including independent non-executive directors.

AUDIT COMMITTEE

The composition and terms of reference of this board committee are presented in Audit Committee Report.

In addition to the duties and responsibilities set out under its term of reference, Audit Committee also acts as a forum for discussion of internal control and the risk management assessment issues. The minutes of the Audit Committee Meetings are tabled to the Board for noting and for action by the Board where appropriate. The activities carried out by the Audit Committee during the year are set out under the Audit Committee Report on pages 31 and 32 of the Annual Report.




SHAREHOLDERS

DIALOGUE WITH INVESTORS

The Board recognize the importance of timely dissemination of material information to shareholders and other stakeholders to ensure that the shareholders and other stakeholders are well informed of major developments of the Company. The information is communicated to them through the following :

(i) the Annual Report ;(ii) the various disclosures and announcements made to Bursa Malaysia including the Quarterly Results, Semi Annual

Returns and Annual Results.(iii) Website of the Company at : www.liihenfurniture.com

Any queries or concerns relating to the Group may be conveyed to the following persons:

(i) En.Mohd Qari Bin Ahmad Senior Independent Non Executive Director

Tel : 06-9859222 Fax: 06-9858270

(ii) Mr Tan Wang Giap Company Secretary

Tel : 06-9541818 Fax: 06-9525823

ANNUAL GENERAL MEETINGS

The Company’s Annual General Meeting (AGM) serves as a principal forum for dialogue with shareholders. At the AGM, the Board presents the progress and performance of the Group and provides an opportunity for the shareholders to have a better understanding of the business.

ACCOUNTABILITY AND AUDIT

FINANCIAL REPORTING

The Board aims to present a balance and understandable assessment of the Group’s financial performance and prospects in the financial reports. The Group publishes full financial statements annually and condensed financial statements quarterly as required by the Main Market Listing Requirements of Bursa Malaysia.

The Board is also assisted by the Audit Committee to oversee the Group’s financial reporting processes and the quality of its financial reporting.


DIRECTORS’ RESPONSIBILITY STATEMENT

The Board is responsible for ensuring that the financial statements give a true and fair view of the state of affairs of the Group and of the Company as at the end of the financial year and of the results and cash flows for the financial year then ended. In preparing the financial statements, the Directors have selected and applied consistently suitable accounting policies and made reasonable and prudent judgments and estimates.

The Directors are responsible for ensuring that all applicable approved accounting standards in Malaysia have been followed and keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and the Company that enable them to ensure the financial statements comply with the Companies Act, 1965.

The Directors also have a general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

STATE OF INTERNAL CONTROLS

The Group has established internal controls, which cover all levels of personnel, and business processes that ensure the Group’s operations are effective and efficient, as well as the safeguarding of the Group’s assets and shareholders’ interest. The Statement on Internal Control which provides an overview on the state of internal controls within the Group is set out on pages 33 to 34 of the Annual Report.

RELATIONSHIP WITH THE AUDITORS

The Group works closely with the external auditors and maintains a transparent relationship with them in seeking professional advice and ensuring compliance with applicable accounting standards and statutory requirements.

The external auditors attend all Audit Committee Meetings when the Group’s quarterly and annual financial results are considered, as well as meeting to review and discuss the Group’s accounting policies and post audit findings.

From time to time, the external auditors bring to the attention of the Board and Audit Committee on matters that require their attention.

OTHER INFORMATION

UTILIZATION OF PROCEEDS

No proceeds were raised by the Company from any corporate exercise during the financial year.

SHARE BUYBACK

The Company has not been authorized by shareholders to purchase its own shares and has not purchased any of its own shares during the financial year. As such, there are no shares being retained as treasury shares by the Company.




OPTIONS, WARRANTS OR CONVERTIBLE SECURITIES

The Company has not granted any options including the existing ESOS scheme, to any parties to take up unissued shares in the Company. The Company has not issued any warrants or convertible securities. As such, there is no exercise of any options, warrants or convertible securities during the financial year.

AMERICAN DEPOSITORY RECEIPT OR GLOBAL DEPOSITORY RECEIPT PROGRAM

The Company did not sponsor any American Depository Receipt or Global Depository Receipt Program during the financial year.

SANCTIONS AND / OR PENALTIES IMPOSED

No major sanctions and / or penalties have been imposed on the Company and its subsidiaries, Directors or management by any regulatory bodies.

NON-AUDIT FEES

There was an amount of RM 26,540 being professional fees paid/payable to external auditors for the financial year ended 31 December 2010.

VARIATION IN RESULTS

There was no material variation between the audited results for the financial year of 2010 and the unaudited results previouslyannounced.

PROFIT GUARANTEE

No profit guarantee was given by the Company during the financial year.

REVALUATION POLICY

The Group has a policy of revaluing landed properties every five (5) years. The last valuation was undertaken in 2009.

Material Contracts

Save as disclosed below there were no material contracts subsisting or entered into by the Company and its subsidiaries involving any Directors or substantial shareholders of the Company or any persons connected to Directors or major shareholders of the Company during the financial year.


Related Parties Nature of the Value of Frequency/ Interested Directors, Recurrent transactions as Basis major shareholders and Related Party at 31 Dec 2010 connected persons Transactions (Please refer to following notes for details of relationship between Interested Directors, major shareholders and persons connected)

Chua Lee Seng1 LHF to pay rent for RM 32,989 Monthly/ Chua Lee SengTok Heng Leong2 renting building located at Agreement Tok Heng Leong Soo Tee Heng (f) 3 Lot 585, Grant 23284/ Mukim Soo Tee Heng (f)Tok Heng Hwa (f) 4 Sg. Raya, 84000 Muar for monthly rental of RM2,749 as hostel for LHF’s employees

Domain Partners Renting of warehouse located RM 417,372 Monthly/ Chua Lee SengSdn Bhd at GM356, Lot 1833, a total Agreement Tan Bee Eng built-up area of approximately Tok Heng Leong 99,375 sq.ft Mukim of Sg Raya, Muar with a monthly rental of RM34,781

Domain Partners Renting of warehouse located RM 67,620 Monthly/ Chua Lee SengSdn Bhd at GM 156, Lot 1907, Mukim Agreement Tan Bee Eng of Sungai Raya, District of Muar, Tok Heng Leong Johor, a total built up area of 64,400 sq ft with a monthly rental of RM22,540.

Domain Partners Renting of warehouse located RM164,514 Monthly/ Chua Lee Seng Sdn Bhd at Lot 905, GM9, Mukim of Agreement Tan Bee Eng Sungai Raya, District of Muar, Tok Heng Leong Johor, a total built up area of 91,395 sq ft with a montly rental of RM41,128

NCCT Resources Renting of warehouse located RM 73,920 Monthly/ Chua Lee SengSdn Bhd at HS(D) 646 Lot PTD 5547, Agreement Tan Bee Eng Mukim of Tangkak, District of Chua Yong Haup Ledang, Johor, a total built up area of approximately 70,400 sq ft with a monthly rental of RM 24,640



Notes :-

1. Mr. Chua Lee Seng is the Executive Chairman of LHIB. He is also a major shareholder of LHIB by virtue of his shareholding in Assets Muar Sdn Bhd (AMSB). Mr. Chua is also a Director of all subsidiaries in the Group.

2. Mr. Tok Heng Leong is the Executive Director of LHIB. He is also a major shareholder of LHIB by virtue of his shareholding in AMSB. Mr. Tok is brother-in-law to Mr. Chua Lee Seng. He is also a Director of all subsidiaries in the Group.

3. Madam Soo Tee Heng is a major shareholder of LHIB by virtue of her shareholding in AMSB. She is sister-in-law to Mr. Chua Lee Seng.

4. Madam Tok Heng Hwa is wife to Mr. Chua Lee Seng and sister to Mr. Tok Heng Leong.

This statement is issued in accordance with a Directors’ Resolution passed at a Board of Directors’ Meeting held on 23 April 2011.



The Audit Committee was formed on 30 January 2000. The Board has, on 26 April, 2008, resolved to adopt the Revised Term of Reference for the Committee to carry out its responsibilities and functions.

The Audit Committee currently comprises of three (3) members with all the audit committee members are independent andnon-executive directors. Mr Tey Ping Cheng is the Independent Non Executive Chairman of the audit committee and his professional accounting qualification meets the requirement of Charter 15.10 of the Main Market Listing Requirements of Bursa Malaysia.

Details of attendance of each member at the Audit Committee Meetings held during the year are as follows :

NUMBER OF COMMITTEE MEETING HELD ATTENDED

CHAIRMAN Mr Tey Ping Cheng 5 5 Independent Non-Executive Director

MEMBERSMr Onn Yee Han 5 4Independent Non-Executive Director

Encik Mohd Qari Bin Ahmad 5 5Independent Non Executive Director

TERMS OF REFERENCE

OBJECTIVES

The primary function of the Committee is to assist the Board in fulfilling their responsibilities in assessing the Group’s processes relating to its risks and control environment. The Committee also oversees financial reporting and evaluates the internal and external audit processes.

COMPOSITION

The Committee shall be appointed by the Board from amongst their numbers and shall consist of not less than three (3) members. .All the members of the Committee must be non-executive directors, with a majority of them being independent directors.

All members of the Committee shall be financially literate and at least one of the members of the Committee must fulfill the Paragraph 15.10 (1)© of the Listing Requirements of BMSB.

The Chairman of the Committee shall be an Independent Non-Executive Director. No alternate Director of the Board shall be appointed as a member of the Committee.

If a member of the 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 the new members as may be required to fill the vacancy.

AUDIT COMMITTEE REPORT


AUTHORITY

In carry out their duties and responsibilities, the Committee: -

a) is authorized by the Board to seek any information it requires from employees, who are required to cooperate with any request made by the Committee and shall have unlimited access to any information pertaining to the Group. All employees

are directed to cooperate with any request made by the Committee.

b) shall have direct communication channels with the internal and external auditors as well as with senior management of the Group and can obtain independent professional advice it considers necessary at the expense of the Company.

c) shall have the power to establish Sub-Audit Committee to carry out certain investigation on behalf of the Committee and at such manner as the Committee shall deem fit and necessary.

DUTIES AND RESPONSIBILITIES

The duties and responsibilities of the Committee are as follows :

INTERNAL AUDIT

• Reviewandreportontheadequacyandeffectivenessoftheinternalauditscopeandplan,functions,competencyand resources of the internal audit division and that it has necessary authority to carry out its work.

• ReviewtheresultsoftheGroup’sinternalauditproceduresandtheadequacyofactionstakenbytheManagementbased on the reports.

• Reviewtheadequacyandeffectivenessofinternalcontrol.

• Approve any appointment or termination of staff of the internal audit function. Provide the resigning staff member an opportunity to submit his reasons for resignation.

• Provide recommendation to the Board for certain tasks of the internal audit functions to be outsourced if no sufficient resources to carry out the function.

EXTERNAL AUDIT

• MakerecommendationstotheBoardontheappointmentofexternalauditors,theirremunerationanyquestionofresignation or dismissal.

• Reviewwiththeexternalauditors,theauditplan,thescopeoftheirauditsandreports.

• Reviewmajorauditfindingsandresponsewithmanagementandexternalauditorsincludingthestatusofpreviousaudit recommendations.

• ReviewtheassistancegivenbytheemployeesoftheGrouptotheauditorsandanydifficultiesencounteredinthecourse of the audit work.

AUDIT COMMITTEE REPORT- continued


FINANCIAL REPORTING

• ReviewthequarterlyandannualfinancialstatementsoftheGroupandtheCompanyforrecommendationtotheBoard for approval, focusing particularly on:

* any changes in or implementation of major accounting policies and practices.

* significant adjustments and unusual events arising from the audit.

* the going-concern assumption.

* compliance with accounting standards, Main Market Listing Requirements of Bursa Malaysia and other legal requirements.

RELATED PARTY TRANSACTIONS

• ReviewanyrelatedpartytransactionandconflictofinterestsituationthatmayarisewithintheGroupandtheCompany.

ALLOCATION OF ESOS

* Review the allocation of ESOS to ensure in compliance with the allocation criteria determined by the ESOS Committee and in accordance with the Bye-Laws of the ESOS.

BURSA REPORTING

* Report promptly to Bursa Malaysia if it is of the view that a matter reported by it to the Board not been satisfactorily resolved resulting in breach of the Listing Requirements.

OTHER FUNCTIONS

• ConsiderandexamineanyothermattersasagreedbytheBoardandtheCommittee.

MEETINGS

The Committee shall meet at least four times in a year, and such additional meetings as the Chairman shall decide in order to fulfill its duties. The agenda for the Committee meetings shall be circulated before each meeting to members of the Committee. Upon request of any of its members or the internal or external auditors, the Chairman of the Committee shall convene a meeting of the Committee.

The Chairman of the Committee should engage on a continuous basis with senior management and the external auditors in order to be kept informed of matters affecting the Company.

QUORUM

The quorum for the Committee meeting shall consist of two members of whom the majority of the members present shall beindependent director.



ATTENDANCE AND MEETINGS

The Company Secretary shall be the Secretary of the Committee and shall be responsible for the coordination of administrativedetails including sending out notice of meetings, preparing and keeping minutes of meetings. The minutes of the Committeemeetings are to be extended to the Board.

The head of finance, a representative of outsourced internal audit consultants and a representative of the external auditors shallnormally attend meetings. The Committee may invite any person to be in attendance to assist its deliberations. Other Boardmembers may attend meetings upon the invitation of the Committee. The Committee shall meet with the external auditors without executive board members present at least twice a year.

SUMMARY OF ACTIVITIES

The main activities carried out by the Committee during the year were as follows :

FINANCIAL RESULTS

• ReviewedthequarterlyunauditedfinancialresultsoftheGroupandtheCompanybeforerecommendingthemforBoard’s approval.

• Reviewed the annual report and the audited financial statements of the Group and the Company prior to submission to the Board for their consideration and approval. The review was to ensure that the audited financial statements were drawn up in accordance with the provision of the Companies Act, 1965 and the applicable approved accounting standards.

INTERNAL AUDIT

• Reviewedtheoutsourcedinternalauditors’programsandplanforthefinancialyearunderreview.

• Reviewed the internal audit reports, which highlighted the audit issues, recommendations and management’s response.

• Reviewtheriskregisterandreassesstheriskprofileofeachkeyriskareas.

• Reviewtheproposalfromtheoutsourcedinternalauditors.

EXTERNAL AUDIT

• Reviewedwiththeexternalauditorstheirauditplanandthescopeoftheirwork.

• Reviewedwiththeexternalauditorstheresultsoftheaudit,auditreportandmanagementlettertogetherwithmanagement’s responses to the findings of the external auditors.

• MakerecommendationstotheBoardontheappointmentoftheexternalauditors.



RELATED PARTY TRANSACTIONS

• Reviewedtherelatedpartytransactionsandanyconflictof interestthatmayarisewithintheGroupandthe Company.

EMPLOYEES’ SHARE OPTION SCHEME

• TheCompanyhasyettograntoptionsundertheEmployees’ShareOptionScheme(“ESOS”)governedbytheESOS By-Laws that was approved by the shareholders of the Company at the Extraordinary General Meeting held on 7 February 2002. The ESOS was expired on 29 May 2007 and was extended for a further period of five years on 26th February 2007.

OTHERS

• ReviewedmajorinvestmentundertakenbytheGroupduringthefinancialyear.

* Reviewed annual financial budget before recommendation for Board’s approval.

INTERNAL AUDIT FUNCTION

The internal audit function is outsourced to an independent firm which operates independently from the other operating units in assisting the Committee to discharge of its duties and responsibilities. The principal role of the service provider is to undertake independent, regular and systematic reviews of the systems of internal controls so as to provide reasonable assurance that such systems continue to operate satisfactorily and effectively.

Further details of the activities of the internal audit function are set out in the Statement on Internal Control on pages 33 and 34 of the annual report.



The Board recognizes the importance of maintaining a sound system of internal control and an effective risk management system as part of its ongoing efforts to practice good corporate governance. The Board is committed to practicing the highest standards of corporate governance and observing best practices, and will continue to improve on current practices.

RESPONSIBILITY

The Board is ultimately responsible for the Group’s system of internal controls and its effectiveness to safeguard shareholders’ investment and the Group’s assets. This is vital to ensure that they are consistent with the overall company’s objectives. However, such a system is designed to manage the Group’s risks within an acceptable risk profile, rather than eliminate the risk of failure to achieve the business objectives of the Group. Accordingly, it can only provide reasonable but not absolute assurance against material misstatement or loss. The Board has established the necessary processes, which accord with the guidance on internal controls provided in the Statement on Internal Control : Guidance for Directors of Public Listed Companies, and that these processes have been in place throughout the financial year under review and up to the date of issuance of the annual report and financial statements.

KEY ELEMENTS OF INTERNAL CONTROL

The key elements of the Group’s internal control system are described below :

• OrganizationalStructure

The Board has put in place an organizational structure with formally defined lines of responsibility and delegation of authority for the Board, committees of the Board and the executive management of the Group’s operating units.

• AuditCommittee

The Audit Committee meets quarterly to review the quarterly result, internal audit findings, discuss risk management plans and ensures weaknesses in controls highlighted are appropriately addressed by management. Senior management representatives also participate in these meetings.

• InternalAudit

The internal audit function provides the Board with much of the assurance it requires regarding the adequacy and effectiveness of the risk management, internal control and governance systems. Audits are independently carried out on the internal control in the key activities of the Group’s business in accordance to the risk-based approach. The findings of the audits and recommendations to improve the internal control are submitted to the Audit Committee for review and response as well as implementation of corrective actions.

• PoliciesandProcedures

Policies and procedures regulating financial and operating activities are documented in manuals. These manuals are subject to regular reviews and updates to reflect the changing business risks and to resolve operational deficiencies, if any.

STATEMENT ON INTERNAL CONTROL


• RiskManagement

Key performance indicators to monitor risks were formally and clearly identified for the respective business processes. The Risk Register is complied and reviewed on a regularly basis. Any emerging new risks will be identified and follow up with the implementation of the control action plans.

• BusinessPlanandBudgetingProcess

Detailed annual business plan and budgets are prepared by individual operating units containing business strategies, financial and operating targets, performance indicators and capital expenditure proposals, which are approved both at operating unit level and by the Board.

• FinancialReportingSystem

The Board entrusts the daily running of the operations to the Managing Director (MD), Executive Directors (EDS) and the management team. The Executive Chairman, MD and EDS held their regular meetings at least once a month to discuss and review significant changes in the business and the external environment which affect the risks faced by the Group.

At quarterly Board Meetings, the Directors discuss and deliberate the strategic issues facing the business and the principal risks affecting the Group. The MD and EDS will report to the Board of any significant matters arising and necessary action to mitigate such risks. Comprehensive information are provided by the respective business units covering financial performance and operation, including the monthly monitoring of results against budget, with major variances being followed up and management action taken, where necessary.

INTERNAL AUDIT FUNCTION

The Board outsourced its internal audit function to an independent professional firm and report directly to the Audit Committee. The internal audit plan is reviewed and approved by Audit Committee. During the year, the internal auditors have carried out the following reviews and assessments:

(a) On the Company & Group’s practice in applying FRS 139 Financial Instruments: Recognition and Measurement and FRS 7 Financial Instrument: Disclosures.

(b) On the internal control procedures of the inventories system of Favourite Design Sdn Bhd and Mayteck Kilang Kayu dan Perabut Sdn Bhd.

(c) On the new Enterprise Resource Planning system on Marketing Department on certain subsidiary companies.(d) On the Group’s property, plant and equipment.

The total fee paid to the services rendered for the year amounted to RM31,773.

CONCLUSION

A number of minor internal control weaknesses were identified during the year, all of which have been, or are being addressed. Save as mentioned, there were no material losses incurred during the current financial year as a result of weaknesses in internal control. The Management of the Group continues to take measures to strengthen the internal control environment.

This statement is issued in accordance with a Directors’ Resolution passed at a Board of Directors’ Meeting held on 23 April 2011.

STATEMENT ON INTERNAL CONTROL- continued

CONTENTS 118 List Of Landed Properties 120 Analysis Of Shareholdings 121 30 Largest Shareholders ......

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Transcript of CONTENTS 118 List Of Landed Properties 120 Analysis Of Shareholdings 121 30 Largest Shareholders ......