the year under review

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4 Laporan Tahunan 2005 Annual Report " the year under review INDUSTRY OUTLOOK Despite the country 9s robust economic growth, the level of competition experienced in the local consumer electrical and electronics industry have not withered the least, for the year under review and will further intensify in the foreseeable future. The competition is very much driven by price, promotions, customers 9 benefits and the speed at which the new offerings reach the market. The focus of product offerings amongst the key retail players, have also shifted from the basic specifications products to the latest technology appliances, include flat screen, plasma and LCD TVs, home theatre systems and digital imaging products.

All these attributes have continued to dramatize the level of competition in the retail environment for all players in the industry. FINANCIAL PERFORMANCE For the financial year ended 30 September 2005, the Group 9s revenue decreased by 13% due to unfavorable performance of all divisions arising from increased competitive trading environment. As a result, the pre-tax loss for the Group increased to RM5.9 million against RM2.7 million in the previous year.

CORPORATE RECOGNITIONS For three years consecutively, the Group 9s major retail outlets emerged as one of the proud recipients of ... more. less.

the Fair Price Shop Awards 2005/2006 from the Ministry of Domestic Trade and Consumer Affairs. In reaffirming the Group 9s commitment to customer service excellence, the Group 9s major outlets have also been successfully accredited with the 2005/ 2006 Retail Service & Courtesy Standards of Excellence Accreditation Programme organized by the Malaysia Retailers Association, supported by the National Productivity Corporation, endorsed by the Ministry of Domestic Trade and Consumers Affairs. REVIEW OF OPERATIONS Strengthening its continuous quest to set new industry standards, HSL 9s third generation lifestyle megastore operating under the concept of Pioneering Digitech Lifestyle saw the Group 9s second City of Digitech Lifestyle, a 32,000sqft retail area size launched in The Curve Shopping Centre, Mutiara Damansara. HSL @ The Curve has the primary objective to enhance HSL 9s brand positioning in the mid to rising income households in the Klang Valley. The Group 9s first generation lifestyle megastore is reputably HSL Subang Parade introduced in 1988. Whilst the second generation lifestyle megastore is none other than HSL Mid Valley Megamall opened in 2000. All 3 generations lifestyle megastores earmarked the Group 9s innovations in determining the industry 9s evolving requirements on the present lifestyle megastores 9 total look. Each generation 9s megastores only grew slicker and more sophisticated as they cater to the discerning market expectations. From left Datuk Abdul Ghani Bin Abdullah & Lee Ah Lan @ Lee Keok Hooi Commitment to Shareholders The Group is committed to address the challenges in the year ahead so as to improve performance and ultimately to safeguard shareholders 9 interest. Commitment to Customers The Group will continue to uphold its hallmark quality of comprehensive services and interesting merchandise mix to fulfill its current customers 9 expectations and to entice new markets. Commitment of Staff The Group will continue to boost staff morale and staff personal developments in its efforts to maintain a committed, knowledgeable and dedicated team to provide hallmark quality of customer service. AR 2005.pmd2/21/2006, 2:46 PM 4 5 Hock Sin Leong Group Berhad the year under review " The Group continues to create exciting marketing initiatives and innovative campaigns. Of particular note, is that there were more than 25 road shows held nationwide, throughout major shopping malls, convention centers, public association halls and outlets 9 shop front. This has greatly helped to reinforce market awareness towards HSL retailing the varying innovative digital-based products. To continue to attract positive market response, a host of new payment conveniences have been introduced in addition to expanding the present number of credit card centers offering Interest Free Installment Payment Plan to its customers. To name a few, the Group now accepts customers shopping with Maybank TreatsPoints, facilitates ATM-like cash withdrawal and cash back incentives at all its nationwide outlets. In its efforts to establish greater sales volume in the high-end products, such as plasma and LCD TVs, numerous benefits have been bundled to influence customers buying pattern to such product line. HSL Digitech WorldCard, a customer loyalty reward programme continued to play a major role in driving sales during the financial year under review. For the year under review, encouraging increase in membership was recorded, whilst members 9 purchases had also begun to contribute favorably to the Group 9s total turnover. In addition to print advertisement communication, regular mailouts to this database were carried out to keep members abreast of the major outlet launches and the exclusive members 9 promotions. The Group dedicated its 75 th Anniversary retail campaign to raise funds for those disadvantaged in our community, which saw the Group contributing DATUK ABDUL GHANI BIN ABDULLAH Chairman & Senior Independent Non-Executive Director 26 January 2006 LEE AH LAN @ LEE KEOK HOOI Group Managing Director RM3 for every cGood Heart! Good RM75 Voucher d spent by its customers to the children from Shelter Home. The charity vouchers were mailed out to major credit cardmembers database and were constantly highlighted in all its above-the-lines activities. PROSPECT AND OUTLOOK In line with the Group 9s mission to bring better living to Malaysian homes, the Group will continue to maintain innovative merchandise mix in all its retail outlets. The Group will continue to expand its Pioneering Digitech Lifestyle retail concept to strategic markets. The various outlets 9 upgrading efforts will also be implemented at other current outlet locations to ensure an optimal shopping ambience is sustained. Continuous innovations will be expected of the Group in its efforts to overcome intensified competitions in 2006, that include stringent cost control as well to establish improved margins. In terms of the financial performance, the Group expects to improve its results for the new financial year with positive efforts and capitalizing on its long- term branding in the retail industry. ACKNOWLEDGEMENTS On behalf of the Board, we would like to express our sincere appreciation to the Management and all the staff for their continued commitment and loyalty. We also thank all our valued shareholders, business partners and bankers for your trust and support on the Group. Last but not least, the Board expresses its heartfelt gratitude to all our customers who continue to patronize our retail outlets. AR 2005.pmd2/21/2006, 2:46 PM 5 6 Laporan Tahunan 2005 Annual Report " events for the year 2005 Mar 3 Jul 2005 In March 2005, HSL launched its 75 th Anniversary Campaign to support Shelter Home For Children at all retail outlets nationwide. The event concluded with the mock-up cheque presentation at the Curve Shopping Centre, Mutiara Damansara. 28 Mar 3 3 Apr 2005 Digital Fair Extravaganza was organized at East Entrance Atrium, Mid Valley Megamall promoting digital cameras/ LCD/ plasma TVs. 25 3 29 May 2005 Showcasing the increasing sought after digital products, HSL line-up a roadshow at Cheras Leisure Mall. 13 Jul 2005 HSL 9s second City of Digitech Lifestyle, occupying over 32,000 sqft, is presently the Group 9s largest retail outlet was officially launched to an overwhelming crowd at The Curve, Mutiara Damansara. 20 Aug 2005 HSL Seberang Prai newly reallocated outlet. 27 Aug 2005 HSL penetrated into the Sitiawan local market with its new local outlet. 7 3 11 Sept 2005 Promoting digital based products at one of the highest traffic malls in Kuala Lumpur, Mid Valley Megamall. 12 Sept 3 2 Oct 2005 An exclusive HSL & Electrolux Fair held in conjunction with Mid Valley Megamall Home Fair 2005. 21 3 25 Sept 2005 Another solo brand exclusive Fair, Toshiba at Subang Parade. 22 3 25 Sept 2005 A large scale showcase of major brands at Centre Court, The Curve. 22 Sept 2005 HSL Sri Petaling was re-branded Leeco Electric to reach out to low-mid segment market. 5 3 9 Oct 2005 HSL Electrical Fair concentrating on audio visuals and home appliances at NorthCourt, Mid Valley Megamall. March 3 July 2005 28 March 3 3 April 2005 25 3 29 May 2005 13 July 2005 20 August 2005 27 August 2005 7 3 11 September 2005 12 September 3 2 October 2005 AR 2005.pmd2/21/2006, 2:46 PM 6 7 Hock Sin Leong Group Berhad events for the year 2005 " 13 3 16 Oct 2005 HSL in collaboration with Sharp featuring the brand 9s latest releases at North Court, Mid Valley Megamall. Panasonic and HSL focused on Panasonic latest plasma TVs series at Fashion Court, The Curve. 19 3 20 Oct 2005 Hand-in-hand with Maybank Bukit Bintang Branch at its Home Loan Fiesta. 20 Oct 2005 Leeco Electric, a tradename re-launched at Pandamaran, Klang. 21 3 30 Oct 2005 Showcased a combination of digital and health equipment products at Plaza Pelangi, Johor Bahru. 27 Oct 3 2 Nov 2005 Major home appliances brands Fair targeted at the Ramadan market at Subang Parade. 9 3 13 Nov 2005 Featuring leading digital camera brand names at BB Plaza, within Kuala Lumpur Golden Triangle. 21 Nov 2005 For 3 years consecutively, HSL emerges as one of the proud recipients of the Fair Price Shop Awards 2005/2006 from the Ministry of Domestic Trade and Consumer Affairs. 23 3 27 Nov 2005 Together with LG Electronics, HSL participated at the Homdec Fair at Mid Valley Exhibition Centre. 24 3 27 Nov 2005 Electrolux, Otto and Braun join up at HSL integrated brands display at Fashion Court, The Curve. 24 Nov 3 4 Dec 2005 8The Biggest Warehouse Sale of The Year 9 housed under 11 units of canopies, a massive stock clearing exercise was a huge hit to the neighboring residents as well as those from afar. 1 3 31 Dec 2005 Enticing impulse purchase for smaller appliances at The Curve Christmas show. 1 3 4 Dec 2005 Participating in Maybank Treats Points Hot Spot held at City Square Johor Bahru. 8 3 25 Dec 2005 Showcasing Panasonic and Toshiba products at Endah Parade to capture Christmas sales. 13 3 16 October 2005 19 3 20 October 2005 20 October 2005 21 November 2005 24 3 27 September 2005 24 November 3 4 December 2005 1 3 4 December 2005 1 3 31 December 2005 22 September 2005 23 3 27 November 2005 AR 2005.pmd2/21/2006, 2:46 PM 7

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