SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
        SECURITIES EXCHANGE ACT OF 1934
        For the fiscal year ended May 31, 2001 or
[  ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
        SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
        For the transition period from to
Commission file number 0-2288
**HOSOI GARDEN MORTUARY, INC.**
STATE OF HAWAII
IRS Employer Identification No. 99-0088064
30 North Kukui Street
Honolulu, Hawaii 96817
Issuer's telephone number:  808-538-3877
Securities registered pursuant to Section 12(b) of the Exchange Act:

         None
Securities registered pursuant to Section 12(g) of the Exchange Act:
         Common Stock  Par Value $.20 per share
Check whether the issuer (1) filed all reports required to be filed by the Exchange Act during the past12 months (or for such shorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.     Yes       X          No 
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Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B (is not)contained in this form, and no disclosure will be contained to the best of registrant's knowledge, indefinitive proxy or information statements incorporated by reference in Part III of  this Form 10-KSBor any amendment to this Form 10-KSB.  (   )
State issuer's revenue for its most recent fiscal year.       $2,602,328
State the aggregate market value of the voting stock held by non-affiliates computed by reference to theprice at which the stock was sold, or the average bid and asked prices of such stock, as of a specifieddate within the past 60 days. (See definition of affiliate in Rule 12b-2 of the Exchange Act):$6,597,024
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of issuer's classes of common stock, as of the latestpracticable date:     1,649,256
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe them and identify the part ofthe 10-KSB (e.g. Part I, Part II, etc.) into which the document is incorporated:  (1) any annual report tosecurity holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule424(b) or (c) of the Securities Act of 1933 ("Securities Act").  The listed documents should be clearlydescribed for identification purposes (e.g. annual report to the security holders for fiscal year endedMay 31, 1992).
Transitional Small Business Disclosure Format (Check one):  Yes    X     No 
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PART I
ITEM 1.	Description of Business
Hosoi Garden Mortuary, Inc. (the "Company") was incorporated in 1957 under the laws of the State ofHawaii as the successor to a business founded in 1900.  Professional funeral services are the principalservices rendered by the Company.  The Company is engaged in the funeral and mortuary business,including the sale of pre-need funeral services contracts.  During the fiscal years ended May 31, 2001and 2000, funeral services accounted for 83.0% and 78.9%, respectively, of revenues.  The Companyowns  50% of Garden Life Plan, Ltd. ("Garden Life") which sells pre-need funeral service contracts forwhich the Company acts as the sole servicing mortuary.
The Company operates a mortuary business in Honolulu, Hawaii.  The Company offers funeral servicesto all persons in Hawaii.  Although the Company, historically, has served principally persons ofJapanese ancestry who follow a particular and special order of worship in accordance with theirreligious beliefs, the Company continues to develop markets involving other ethnic groups and religiousbeliefs.  In addition to handling funeral services for residents of Honolulu, the Company conductsservices for residents of other counties in Hawaii and prepares remains for shipment to or receivesthem from other counties in Hawaii, other states in the United States and foreign countries.Competition in the funeral business in Hawaii is based upon (1) the location of a mortuary and (2) theprincipal ethnic group that a mortuary serves.  There are 20 mortuaries in the State of Hawaii.  Theirlocations are as follows:**Location**
**Number of Mortuaries**Island of Hawaii
Island of Maui
Island of Oahu
Island of Kauai
Island of Molokai
3
3
11
2
1
Because of the separation of the Hawaiian islands by ocean, a mortuary is generally confined to thefuneral  demands of a particular island.  A very small percentage of business constitutes servicerequiring the use of funeral parlors on an island other than where death has occurred.
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Comparative Statistical Information**Calendar**
**Year End****No. of Deaths**
**in State of HI****No. of Deaths
**in Oahu****Services**
**Performed by**
**the Company****Percent of Services**
**by Company as to**
**No. of Deaths in
**Oahu**1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
20007,056
6,486
7,173
7,570
7,531
7,795
8,148
8,016
8,297
8,369
8,5125,253
4,930
5,317
5,689
5,588
5,834
5,557
5,856
6,058
6,136
6,129	   980
   980
1,011
1,114
1,091
1,043
1,151
1,050
1,063
1,100
1,103	18.66%
19.88%
19.01%
19.58%
19.52%
17.88%
20.71%
17.93%
17.54%
17.93%
18.00%
In most cases, a substantial portion of the business of a mortuary is from an ethnic group it principallyserves.  Historically, a substantial portion of the Company's total services were for families of Japaneseancestry.
The larger mortuaries on the Island of Oahu and the ethnic groups which they are believed to serveprimarily are as follows:**Name****Ethnic Groups Served**Williams Mortuary
Hosoi Garden Mortuary
Borthwick Mortuary
Hawaiian Memorial Park
Mililani Memorial Park & Mortuary
Leeward Funeral Home
Valley of the Temples Mortuary
(also operating Kukui, Nuuanu
and Diamond Head Memorial Parks)Caucasian
Japanese
Caucasian and Chinese
Mixed and Japanese
Mixed (Filipino and Japanese)
Mixed
Japanese, Chinese and Caucasian

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On July 7, 1998, the Company entered into an agreement with Woolsey Funeral & Cemetery Services,Inc. to form Woolsey-Hosoi Mortuary Services, LLC, a limited liability company under the laws of theState of Hawaii.  It is expected that the LLC will conduct funeral services to persons other than thoseof Japanese ancestry.  Funeral services arranged by the LLC will generally be conducted at churchesand other locations other than on the Company's premises.
Thirty-two (32) persons were employed by the Company for the fiscal year ended May 31, 2001.Seventeen (17) persons were employed full-time and fifteen (15) persons were employed part-time.
ITEM 2.	Description of Property
The Company operates its business at 30 North Kukui Street, Honolulu, Hawaii, 96817, on thenorthwest corner of Nuuanu Avenue and Kukui Street in Honolulu, Hawaii.  The business site consistsof 92,773 square feet, of which the Company owns a 78/104th interest.  The Herman S. Hosoi Trustowns a 13.65/104th interest and the Hosoi-Tamori-Shimonishi Trust owns the remaining 12.35/104thinterest.  The trustees and beneficiaries of both trusts include directors, officers and shareholders ofthe Company.
The portion owned by the Company is owned in fee simple.  The Company leases the portion owned bythe Herman S. Hosoi Trust and Hosoi-Tamori-Shimonishi Trust ("Trusts") under a fifteen-year leasethat expires on October 31, 2014.  The lease provides for an annual base rent of $112,200 for the periodfrom November 1, 1999 to October 31, 2004, and annual base rent of $132,000 for the period fromNovember 1, 2004 to October 31, 2009.  Additionally, the lease provides for the payment of percentagerent on the Company's annual gross revenues.  The Company is also responsible for the payment of realproperty taxes on the portion of the land owned by the Trusts.  Total rental expense was $134,601 and$216,776 in fiscal years 2001 and 2000, respectively.
The main mortuary building, which was built in 1961, contains a chapel area, which is capable of beingused for one service with a seating capacity of 600 or for two chapels with a seating capacity of 300each.  There is an altar and family room at each end of the building.  The office is located on the westend of the main mortuary building.  The embalming rooms are on the second floor.
In addition, there is a combined garage, kitchen and dining room annex.  Parking facilities for 147 carshave access to Nuuanu Avenue, Kukui Street and Maunakea Street, and are one-half block away fromVineyard Boulevard, which is one of the
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main thoroughfares in Honolulu.  The areas not used for buildings or parking stalls have beenappropriately landscaped to qualify for partial real property tax exemption.
No substantial addition or changes in the real property or improvements of the Company were madeduring the fiscal year ended May 31, 2001.
ITEM 3.	Legal Proceedings
		None.
ITEM 4.	Submission of Matters to Vote of Security Holders
On January 21, 2001, the annual meeting of the shareholders was held.  According to the Company'sstock transfer agent Continental Stock Transfer & Trust Co., the total shares issued, outstanding andentitled to vote were 1,662,731.  The total shares present in person and proxy were 1,037,881 (62.42%).
The election of three directors and the election of an auditor were submitted to a vote of theshareholders.  Of the total shares present in person and proxy, the following vote of the shareholderswas taken:
Election of Class A Directors (3 year term)**Name****For****Against****Abstain**Clifford Hosoi
Ricky Manayan
Rene Mansho1,032,696 (62.11%)
1,030,556 (61.98%)
1,024,306 (61.60%)
   5,185
   7,325
 13,575
The foregoing persons were elected at the annual meeting to serve a three-year term until the 2004annual meeting or until their successors shall be elected.
Election of Auditor (One Year Term)**Name****For****Against****Abstain**Endo & Company, CPA
(Jack Y. Endo)1,035,756 (62.29%)1,400725
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PART II
ITEM 5.	Market for Common Stock and Related Shareholder Matters
The common shares of the Company are neither traded nor listed on an exchange and has noestablished public trading market.  During the fiscal year ended May 31, 2001, the Company redeemed23,205 shares as follows:**No. of Shares****Redemption Price**23,205$4.00
There were 1,557 record holders of common stock as of May 31, 2001.
A cash dividend has been declared and paid once a year since 1969.  The dividend for the year endedMay 31, 2000, which was declared on October 19, 2000, was $.045 per share, and was paid toshareholders in January 2001.
ITEM 6.	Management's Discussion and Analysis of Financial Condition and Results of Operations
The following table sets forth items from Hosoi Garden Mortuary, Inc.'s statements of income aspercentages of net revenues:**Years Ended May 31,**
**2001**
**2000**Total revenues
100.0%
100.0%Cost of revenues
68.7%
71.2%Gross profit
31.3%
28.8%Selling, general and administrative expenses     
30.6%
27.7%Operating income.7%
1.1%Other income (expenses)9.0%
6.9%Income before income taxes9.7%
8.0%Provision for income taxes
3.2%
2.3%Income before equity in earnings
of Garden Life Plan, Ltd. (GLP)
6.5%
5.7%Equity in earnings of GLP, net-
-Net income
6.5%
5.7%
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Results of Operations
Total Revenues
The Company's revenues decreased by $123,283 in 2001 over 2000.  The decrease of 4.5% is principallyattributable to an overall decrease in the total number of services performed from 1,109 in 2000 to1,067 in 2001, which is a decrease of 3.8%.  In addition the number of pre-need funeral services whichgenerate a lower average price, decreased from 451 in 2001 to 459 in 2000, which is a decrease of 1.8%
Pre-need funeral services accounted for 43.0% of total revenues in 2001 and 40.1% in 2000.  TheCompany expects that the total number of pre-need funeral services will account for between 45% to50% of total services within the next five years.  The Company expects to mitigate the reduction inrevenues from this expected increase in pre-need funeral services by a combination of marketingadditional merchandise sales to its pre-need customers and marketing its at-need services to ethnicgroups which currently comprise a minor part of its at-need services revenues.  In addition, theCompany expects to construct its own crematory to reduce the cost of its cremation services which iscurrently provided by an outside crematory.
The continued affiliation with Woolsey Funeral & Cemetery Services, Inc., described in ITEM 1.*Description of Business*, is a revenue source from a segment of the community which was notpreviously served by the Company. This affiliation with Woolsey is expected to provide an additionalrevenue source from an ethnic group (Polynesian) which currently contributes only a minor part of theCompany's revenues.
The Company's operating expenses increased in 2001 over 2000 as a result of increases in professionalservices and advertising expenses, which were partially offset by decreases in lease rent and realproperty tax expenses.  The Company's operating expenses is expected to increase as a result of theCompany's continued plans for the upgrade of its facilities and personnel as follows:
	1.	Upgrade and train professional staff to meet the current market demands and changingthe nature of customer preferences.  The current trend indicates that families are havingsmaller services with lower priced merchandise.
	2.	Upgrade the facilities to provide the capacity to provide multi-cultural services and toservice the expected increase in pre-need funeral services.
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	3.	Establishment of a pre-need authority or purchase the 50% share of the Company'spartner in Garden Life Plan, Ltd.
	4.	Construction of an on-site crematory.
Operating results for fiscal 2002 will be adversely affected if revenues do not increase in relation to theincrease in operating expenses.  The expected increase in the number of pre-need funeral services willlimit the growth of revenues if the Company's facilities and  personnel are not upgraded to enable it toincrease the capacity of its facilities.  The upgrade of the Company's facilities and personnel is expectedto mitigate the effects of the increase in pre-need funeral services.
Gross Profit
Gross profit increased from $783,954 in 2000 to $814,003 as a result of an increase in the profit marginfrom 28.8% in 2000 to 31.3% in 2001.  The 2.5% increase in the gross profit margin is attributable to adecrease in lease rent and real property tax expenses.
Selling, General, and Administrative Expenses
Selling, general, and administrative (SG&A) expenses increased from $755,008 in 2000 to $795,220 in2001.  As a percent of revenues SG&A expenses were 27.7% and 30.6% in 2000 and 2001, respectively.The increase is primarily attributable to increases in professional services and advertising expenses.
It is expected that professional services and advertising expenses will increase in the short term as theCompany attempts to market its services to customers from ethnic groups not currently served andseeks legal and accounting services relating to issues concerning expansion of its facilities andestablishment of  its own pre-need authority or the purchase of the 50% share of Garden Life Plan, Ltd.which is currently owned by Hawaii Memorial Park Cemetery.
Equity in Earnings of Garden Life Plan, Ltd.
The financial audit of Garden Life Plan, Ltd. (GLP) for its year ended May 31, 2001 was not completedby the filing deadline for Hosoi Garden Mortuary, Inc.'s Form 10-KSB.  In addition, the auditor's reporton the Company's financial statements for its year ended May 31, 1999 was recalled by the Company'sauditor because of the
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resignation of GLP's auditor before the completion of the audit of GLP's financial statements for itsyear ended May 31, 1999.  The resignation of GLP's auditor
resulted principally because of a disagreement over the accounting for the recognition of revenues onthe financial statements of GLP.
A successor auditor has been retained by GLP for the audit of its financial statements for the yearsended May 31, 1999, 2000 and 2001.  The issues regarding the revenue recognition policies have beenresolved and the auditor's report on GLP's financial statements for its years ended May 31, 1999 and2000 is expected to be issued soon.  It is expected that the new revenue recognition policies of GLP willresult in a substantial charge to its retained earnings and will adversely affect continuing income.  As aresult, the carrying value of GLP on the Company's financial statements will also be reduced.
It is expected that the audit of GLP's financial statements  for the year ended May 31, 2001 will becompleted soon after the issuance of its financial statements for its years ended May 31, 1999 and2000.  The Company's Form 10-KSB for 1999, 2000 and 2001 will be amended after issuance of GLP'saudited financial statements.
Income Taxes
The Company's effective income tax rate was 32.6% in 2001 and 29.0% in 2000.
Liquidity and Capital Resources
Total working capital was $1,930,453 at May 31, 2001 and $1,954,141 at May 31, 2000.  Workingcapital ratio was 4.9:1 at May 31, 2001 and 5.5:1 at May 31, 2000.  The decrease in the working capitaland working capital ratio was a result of increases in accounts payable and accrued liabilities relativeto the increase in total current assets.
*Securities available-for-sale* increased to $928,668 in 2001 from $891,482 in 2000 as a result of anincrease in the market value of the Company's investments.
*Securities Held-to-Maturity* increased to $888,846 in 2001 from $876,950 in 2000 as a result of thereinvestment of earnings.
At the end of 2001, the Company did not have any long-term debt.  The Company expects that cashflows from operations, its cash reserves and earnings on its investments will be adequate to meet theCompany's cash requirements in the foreseeable future.
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Dividends paid were $74,826 in 2001 and $101,024 in 2000, which represents dividends of $.045 and$.06 per share in 2001 and 2000, respectively.  The decrease
of $26,198 in the total dividends in 2001 over 2000 is a result of the decrease in the shares outstandingas a result of the repurchase of shares by the Company and the reduction in the per share dividendpaid.
Cash outflows for the acquisition of the Company's shares were $95,640 in 2001 and $64,834 in 2000.The Company expects that future acquisitions will be in the range of $75,000 to $100,000 per year.
Year 2000
The following summarizes the Company's Year 2000 disclosure statement pursuant to the Year 2000Readiness and Disclosure Act.
State of Readiness
The Company did not have a formal Year 2000 readiness program, however, the Company's Treasurerwas assigned the task of the assessment of the Company's exposure to the Y2K problem, theimplementation of any required remediation and the testing and validation of its remediation efforts.
The Company's Year 2000 project focused on two areas: (1) information technology (IT) systems, suchas application software and PC's; and (2) suppliers.
The Company identified application software and PC's which needed to be replaced and have upgradedits PC systems and have replaced application software which were not Year 2000 compliant.
As expected the Company remediation, validation and testing efforts were completed by the end of1999.

Risk/Contingency Plans
Prior to the Year 2000 date change, the Company believed that the most likely worst-case scenarioswould have involved the interruption of crucial suppliers as a result of infrastructure failures or thirdparty vendor failures.  To date, no such interruptions or failures have occurred.  The Companycurrently believes that the likelihood of the occurrence of such events due to the Year 2000 date changeis low.
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Cost
Total cost of the Year 2000 readiness program were not material to the Company's financial conditionor results of operations.  Cost associated with the Company's efforts around Year 2000 issues wereexpensed as incurred, unless they related to the purchase of hardware and software, in which case theywere capitalized.

ITEM 7.  Financial Statements
The attached independent auditor's report on the balance sheets as of May 31, 2001 and 2000 and thestatements of income, cash flows and changes in shareholders' equity for the two fiscal years thenended, expressed a qualified opinion because the Company's auditors are unable to complete theiraudits because the audit of the financial statements of  Garden Life Plan, Ltd., the Company'ssignificant subsidiary, have not been completed because of the issues discussed under the captionEquity in earnings of Garden Life Plan, Ltd. in ITEM 6 - Management's Discussion and Analysis ofFinancial Condition and Results of Operations.
ITEM 8.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
See discussion under the caption Equity in Earnings of Garden Life Plan, Ltd. in ITEM 6 -Management's Discussion and Analysis of Financial Condition and Results of Operations.
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PART III
ITEM 9.	Directors, Executive Officers, Promoters and Control Persons:  Compliance with Section 16(a)of the Exchange Act
The Company has a total of nine (9) directors constituting the entire Board of Directors, divided intothree (3) classes of three (3) directors each.  The Company's Articles of Association provide for eachclass of directors to be elected for three-year terms on a staggered basis.
Directors hold office for the duration of their terms and thereafter until their successors are elected.The executive officers serve at the pleasure of the Board of Directors.  See the table on pages 15 and 16for certain information about the directors and executive officers of the Company.
The names, ages, positions and offices, terms of office, and business experience of the directors andexecutive officers of the Company are set forth below.
Directors Whose Terms Expired in 2001 and Who Were Elected to Terms Expiring in 2004
Clifford Hosoi has been a director of the Company since 1989.  He was a vice president from 1989 untilhis appointment as president and chief executive officer of the Company as of  January 1, 1994.  He hasbeen a licensed embalmer since 1979.  He has been a Funeral Director for the Company since 1985.  Heserves as a director of Garden Life Plan, Ltd.  He is the son of Sadako Hosoi, director, and the brotherof Julie S. Shimonishi, director, and Anne T. Tamori, director and vice-president of the Company.
Rene Mansho is an elected member of the City Council of the City and County of Honolulu and hasserved on the City Council since 1988.  She has been a director of the Company since 1993.   Shepresently serves as chairperson of the Board of Directors and was elected to that position in 1994.  Shehas been a school teacher, Vice-Principal and Administrator with the Department of Education of theState of Hawaii between 1971 through 1988.  Other organizations with which she is involved includethe Hawaii State Association of Counties, the Mililani Hongwanji, Mililani YMCA, Honolulu JapaneseChamber of Commerce, Goodwill Industries, Great Aloha Run, Salvation Army, Wahiawa Lions,Muscular Dystrophy Association of Hawaii.
Ricky C. Manayan is currently a Manager - Prepaid Card Programs with GTE Hawaiian Tel.  He hasbeen a director of the Company since 1995.  His other
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business affiliations include Rick Manayan & Associates.  He is President of East-West Real EstateCo., Inc., Ricky Manayan Associates and Transpacific Empire, Inc.
Directors Whose Terms Expire in 2003
Julie S. Shimonishi is a school teacher and has been employed by the Department of Education, Stateof Hawaii, since 1970.  She has been a director since 1979.  At the January 23, 2000 annual meetingshe was elected to a new three-year term which will expire in 2003.  She is the daughter of SadakoHosoi, director, and the sister of Clifford Hosoi, director and president of the Company, and Anne T.Tamori, director and vice-president of the Company.
Robert Kuwahara is a Certified Public Accountant and has his own CPA practice.  He has been adirector of the Company since 1995.  At the January 23, 2000 annual meeting he was elected to a newthree-year term which will expire in 2003.  He is actively involved in human services organizationssuch as the YMCA.
Glenn Suetsugu is a Real Estate Appraiser and also engages in real property sales and management.He has been a director of the Company since 1999.  At the January 23, 2000 annual meeting he waselected to a new three-year term which will expire in 2003.  He provides volunteer work for the BoyScouts of America.
Directors Whose Terms Expire in 2002
Sadako Hosoi is the widow of Herman S. Hosoi, founder of the Company.  She has
been a director of the Company since 1957 and is the Chairperson of the Board Emeritus.  In the past,she has served as chairperson of the Company and treasurer.  She serves as a director of Garden LifePlan, Ltd. She is the mother of Julie S. Shimonishi, director, Clifford Hosoi, director and president ofthe Company, and Anne T. Tamori, director and vice president of the Company.
Berton T. Kato is an attorney licensed in the State of Hawaii and has his own law practice.
Anne T. Tamori has been employed by the Company since 1978.  She has been a vice president anddirector of the Company since 1994.  She has served as an associate secretary of the Company.  She isthe daughter of Sadako Hosoi, director, and the sister of Clifford Hosoi, director and president of theCompany, and Julie S. Shimonishi, director.
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Other Executive Officers are as Follows:
David Fujishige has been employed by the Company since 1989.  He has been a funeral director since1991.  He has been a vice president of the Company since 1994.  Prior to joining the Company, he was afood production supervisor at Rehabilitation Hospital of the Pacific.
Keith Numazu has been employed by the Company since 1992.  He has been treasurer of the Companysince 1994.  He has been an assistant bookkeeper and programmer since 1992.  Prior to joining theCompany, he was a systems operator/analyst for Consolidated Amusement, Inc. and a senior systemsanalyst/programmer for Holmes and Narver, Inc. and Raytheon Services Nevada.
Elaine Nakamura has been employed by the Company since 1963.  She is the secretary of theCompany.
Directors and Executive Officers of the Company**Name****Age****Office****Director**
**Since****Family Relationship****Yrs.**
**Employed**Sadako Hosoi84Director /ChairpersonEmeritus1957Mother of Julie S.Shimonishi, Director,Clifford Hosoi, Director andPresident, and Anne Tamori,Director and Vice PresidentRene Mansho52Director /
Chairperson
of the Board1993None	
0Clifford Hosoi52Director /President1991	Son of Sadako Hosoi, Brotherof Julie S. Shimonishi andAnne Tamori
21Julie S.Shimonishi55Director1979Daughter of Sadako Hosoi,Sister of Clifford Hosoi andAnne T. TamoriPart-timesince 1996Ricky C.Manayan42Director1995None	
0

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**Since****Family Relationship****Yrs.**
**Employed**Berton T. Kato53Director1996None
0RobertKuwahara54Director1995None
0GlennSuetsugu52Director1999None
0Anne T.Tamori54Director / VicePresident1994Daughter of Sadako Hosoi,Sister of Clifford Hosoi andJulie S. Shimonishi
23ElaineNakamura63Secretary1972None
37DavidFujishige53Vice President1994None
12Keith Numazu39Treasurer1994None
8
(1)	None of the directors of the Company is a director of an investment companyor another company registered under the Securities Exchange Act of 1934.All officers serve at the pleasure of the Board of Directors.
Certain Reports
The Company has been informed that none of its directors, officers or holders of tenpercent or more of its securities were required to file Forms 3 or 4 during the fiscalyear ended May 31, 2001, and that during this same time period none of the holdersof five percent or more of the Company's securities were required to file a report onSchedule 13D.
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ITEM 10.	Executive Compensation
The following sets forth the information, on an accrual basis, with respect to thecompensation of the chief executive officer of the Company for the three fiscal yearsended May 31, 2001.
Summary Compensation - Annual Compensation**Name and Position****Year ended May 31****Salary****All Other Compensation**Clifford Hosoi
President / ChiefExecutive Officer
1999
2000
2001$52,961
$64,788 (2)
$71,477$8,098 (1)
$8,987 (3)
$8,303 (4)
	(1)	Amount shown includes $2,355 contributed to the Company's MoneyPurchase Pension Plan, $3,668 contributed to the Company's ProfitSharing Plan and $2,075 fees paid as a director.
	(2)	Amount shown includes retroactive pay of $7,292.
	(3)	Amount shown includes $3,239 contributed to the Company's MoneyPurchase Pension Plan, $4,248 contributed to the Company's ProfitSharing Plan and $1,500 fees paid as a director.
	(4)	Amount shown includes $3,209.29 contributed to the Company'sMoney Purchase Pension Plan, $3,944.05 contributed to the Company'sProfit Sharing Plan and $1,150 fees paid as a director.
The total annual salary and bonus for any other executive officer does not exceed$100,000.
The standard fees paid to directors are $100 for each Board of Directors meetingattended and $25 for each committee meeting attended.
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Compensation Pursuant to Plans
(a)	Profit-Sharing Plan.  The Company has established a profit-sharing plan forthe Company's employees.  Every employee, who has completed one year of servicewith the Company, becomes eligible to participate in the profit-sharing plan.  Anemployee who has completed 1,000 hours of service commencing from the date ofemployment or an anniversary date is considered to have one year of service.
The Company's contribution to the profit-sharing plan is discretionary and may beup to 15% of the participant's eligible compensation.  The Company's totalcontributions shall not exceed the amount allowable by income tax regulations.  Theamounts charged against income for the profit-sharing plan in 2001 and 2000 were$40,000 in each year.  The Company's allocation of contributions among eligiblemembers is based on their respective compensation and is allocated proportionately.
The investment decision for the profit-sharing plan is formulated by a registeredinvestment advisor through Pacific Century Trust.
(b)	Money Purchase Pension Plan.  The Company has established a moneypurchase pension plan, which became effective as of June 1, 1990, for theCompany's employees.  Every employee, who has completed one year of service withthe Company, becomes eligible to participate in the money purchase plan.  Anemployee who has completed 1,000 hours of service commencing from the date ofemployment or an anniversary date is considered to have one year of service.

The Company is required to contribute 5% of each participant's eligiblecompensation to the money purchase plan.  The Company's total contributionscannot exceed the amount allowable by income tax regulations.  The amountscharged against income for the money purchase pension plan in 2001 and 2000 were$32,548 and $33,845 respectively.
The investment decision for the money purchase plan is formulated by a registeredinvestment advisor through Smith Barney, Inc.
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ITEM 11.	Security Ownership of Certain Beneficial Owners & Management
A.  Principal Shareholders
The Herman S. Hosoi Trust, whose trustees are Sadako Hosoi and Julie S.Shimonishi, and the Hosoi Family Limited Partnership, whose general partner isthe Hosoi Family Voting Trust, by its trustee Julie S. Shimonishi, are the onlypersons who own of record or are known to the Company to own beneficially morethan five percent of the common shares of the Company as of May 31, 2001.Certain information about the holders is set forth below.**Title of Class****Name and Address**
**of Beneficial Owner****Nature of Beneficial**
**Ownership****No. of**
**Shares****Percent**
**of Class**CommonJulie S. Shimonishi
30 N. Kukui Street
Honolulu, HI 96817Co-trustee of the HermanS. Hosoi Trust
158,250
9.60%CommonJulie S. Shimonishi
30 N. Kukui Street
Honolulu, HI 96817General Partner of theHosoi Family LimitedPartnership, as Trustee ofthe Hosoi Family VotingTrust
160,250
9.72%CommonJulie S. Shimonishi
30 N. Kukui Street
Honolulu, HI 96817Custodian for ChadShimonishi and LaneShimonishi underHUGMA
8,000
0.49%CommonJulie S. Shimonishi
30 N. Kukui Street
Honolulu, HI 96817Direct
52,534
3.19%CommonJulie S. Shimonishi
30 N. Kukui Street
Honolulu, HI 96817Total
379,034
22.98%
-19-**Title of Class****Name and Address**
**of Beneficial Owner****Nature of Beneficial**
**Ownership****No. of**
**Shares****Percent**
**of Class**CommonSadako Hosoi
30 N. Kukui Street
Honolulu, HI 96817Co-trustee of the HermanS. Hosoi Trust
158,250
9.60%CommonSadako Hosoi
30 N. Kukui Street
Honolulu, HI 96817Settlor of the HosoiFamily Voting Trust andlimited partner of theHosoi Family LimitedPartnership
160,250
9.72%CommonSadako Hosoi
30 N. Kukui Street
Honolulu, HI 96817Total
318,500
19.31%CommonHerman S. HosoiTrust Sadako Hosoiand Julie S.Shimonishi,Trustees          30 N.Kukui StreetHonolulu, HI 96817Direct
158,250
9.60%CommonHosoi FamilyLimitedPartnership (1)          30 N. KukuiStreetHonolulu, HI 96817Direct
160,250
9.72%
(1)	The Sadako Hosoi Trust, by its trustees Sadako Hosoi and Julie S.Shimonishi, transferred 160,250 shares of the Company to the Hosoi FamilyLimited Partnership, whose general partner is the Hosoi Family VotingTrust, by its trustee Julie S. Shimonishi, and whose limited partner isSadako Hosoi.  Julie S. Shimonishi, as trustee, exercises voting andinvestment powers over those shares pursuant to the Hosoi Family VotingTrust Agreement dated December 30, 1994, between Sadako Hosoi, assettlor, and Julie S. Shimonishi, as trustee.
-20-
B.	Directors and Executive Officers
Certain information with respect to the holdings of Common Stock of the directorsand executive officers of the Company as of May 31, 2001 is set forth below.**Title of**
**Class****Name of Beneficial**
**Owner**(1)**Amount and Nature of**
**Beneficial Ownership****Percent**
**of Class**CommonJulie S. Shimonishi
379,034 (2)22.98%CommonSadako Hosoi
318,500 (3)19.31%CommonClifford Hosoi
52,532 (4)3.19%CommonAnne T. Tamori
56,534 (5)3.43%CommonAll directors andofficers as a group(12 persons) (6)
488,10029.60%
(1)	The address of each person is 30 N. Kukui Street, Honolulu, Hawaii 96817.
(2)	Includes:52,534 shares (3.19%)as to which Ms. Shimonishiexercises sole voting andinvestment powers;8,000 shares (0.49%)as to which Ms. Shimonishiexercises sole voting andinvestment powers as Custodianfor Chad Shimonishi and LaneShimonishi under HUGMA;158,250 shares (9.60%)as to which Ms. Shimonishi andSadako Hosoi share voting andinvestment powers as trustees ofthe Herman S. Hosoi Trust; and160,250 shares (9.72%)as to which Ms. Shimonishi, astrustee of the Hosoi Family VotingTrust, has voting and investmentpowers over the shares owned bythe Hosoi Family LimitedPartnership.
-21-
(3)	Voting and investment powers over 158,250 shares of the Company areshared by Sadako Hosoi and Julie S. Shimonishi, as Trustees of the HermanS.  Hosoi Trust, which owns 158,250 shares of the Company.  Voting andinvestment power over 160,250 shares of the Company are exercised by JulieS. Shimonishi, as trustee under the Hosoi Family Voting Trust.  See thepreceding table for more information about the Hosoi Family LimitedPartnership and the Hosoi Family Voting Trust.
(4)	Voting and investment powers exercised solely.
(5)	Includes:52,534 shares (3.19%)as to which Ms. Tamori exercisessole voting and investment powers;4,000 shares (0.24%)as to which Ms. Tamori exercisessole voting and investment powersfor Ryan Tamori under HUGMA;
(6)	Rene Mansho, Ricky C. Manayan, Berton T. Kato, Robert Kuwahara andGlenn Suetsugu, who are currently serving as directors, and ElaineNakamura, David Fujishige and Keith Numazu, who are currently serving asofficers, do not own any shares of the Company.
ITEM 12.	Certain Relationships and Related Transactions
The Company leases a portion of the land on which the mortuary is situated fromthe Herman S. Hosoi Trust and the Hosoi-Tamori-Shimonishi Trust (Trusts), whichown a 13% and 12% interest in the land.  The terms of the lease agreement betweenthe Company and the Trust are described in ITEM 2- Description of Property.
-22-
PART IV
ITEM 13.	Exhibits and Reports on Form 8-K

A.	Exhibits.
Except as noted, the following exhibits were previously filed on August 31, 1981, asexhibits to Form 10-K for the fiscal year ended May 31, 1981, for the Company andare incorporated herein by reference:(2)**Plan of Purchase, Sale,Reorganization, Arrangement,Liquidation and Succession**(3)**Articles of Association andByLaws**(a)  Articles of Association,Affidavit of Officers andSupplemental affidavit ofincorporation filed May 31, 1957(1) Amendments(i)   January 18, 1962
(ii) January 16, 1963
(iii) February 3, 1972
(iv) February 2, 1977
(v)  March 31, 1978
(vi) July 23, 1993 (fn1)(b)  By Laws dated May 31, 1957(1) Amendments(i)   January 30, 1972
(ii)  March 31, 1978(4)**Instruments Defining the Rightsof Security Holders, IncludingIndentures**(a) Equity securities:  Articles ofAssociation and  Affidavit ofOfficers, Certificate ofAmendment filed January 16,1963, in the Hawaii Departmentof Regulatory Agencies(b) Debt securities:
Not applicable.

-23-(9)**Voting Trust Agreement**Hosoi Family Voting TrustAgreement dated December 30,1994, between Sadako Hosoi, assettlor, and Julie S. Shimonishi,as trustee,    covering 160,250shares owned by the HosoiFamily Limited Partnership.(fn5)(10)Material Contracts(i)  Lease between the Company,as lessee, and Sadako Hosoi andJulie Sakaye Shimonishi, astrustees of the Herman S. Trust,and Clifford Isamu Sadao Hosoi,Anne Ume  Toyo Tamori andJulie Sakaye Shimonishi, astrustees under theHosoi-Tamori-Shimonishi Trust,as lessor, dated as of July 10,1990.  (fn2)(ii)  Deed conveying the interestof the late Herman Hosoi to theTrustees of the Herman S. HosoiTrust, dated February 27, 1978.(iii)  Profit-sharing Plan. (fn3)(iv) Annuities. (fn3)(v) Amendment to profit-sharingplan.  (fn4)
(fn1)	Filed August 30, 1993, as an exhibit to the Annual Report on Form 10-KSBfor the year ended May 31, 1993.
(fn2)	Filed August 28, 1990, as an exhibit to the Annual Report on Form 10-K forthe year ended May 31, 1990.
(fn3)	Filed August 30, 1984, as Exhibit 19 to the Annual Report on Form 10-K forthe year ended May 31, 1984.
(fn4) 	Filed August 30, 1985, as Exhibit 19 to the Annual Report on Form 10-K forthe year ended May 31, 1985.
(fn5)	Filed August 30, 1995, as an exhibit to this Annual Report on Form 10-KSBfor the year ended May 31, 1995.
(11)**Statements Re Computation of Per Share Earnings**
Not applicable.
-24-(13)**Annual Report to Security Holders, Form 10-K, or QuarterlyReport to Security Holders, Form 10-Q**
Not applicable.(16)**Letter on Change in Certifying Accountants**
Not applicable.(18)**Letter Re Change in Accounting Principles**
Not applicable.(21)**Subsidiaries of the Registrant**
Garden Life Plan, Ltd., a Hawaii corporation, is 50 percent ownedby the Company.(22)**Published Report Regarding Matters Submitted to Vote ofSecurity Holders**
Not Applicable.(23)**Consents of Experts and Counsel**
Not applicable.(24)**Power of Attorney**
Not applicable.(28)**Information from Reports to State Insurance RegulatoryAuthorities**
Not applicable.(99)**Additional Exhibits**
Not applicable.
B.	Reports on Form 8-K
The Company filed the following report on Form 8-K in the last quarter of the yearended May 31, 2001:
-25-
	Form 8-K (Current Report) dated March 13, 2001, was filed with the U.S.Securities and Exchange Commission on March 29, 2001, and reported thefollowing:(i) the issuer's Form 10-KSB (Annual Report) for the fiscal year endedMay 31, 1999 was amended to note that the audit report of thefinancial statements of the Company's subsidiary, Garden LifePlan, Ltd. (GLP), should not have been included in the initial filingof the Annual Report because the report of GLP's auditors wasissued in draft form; (ii)the Company's auditor has reissued its report on the Registrant'sfinancial statements as of and for the year ended May 31, 1999; (iii)the Registrant's equity in earnings of GLP for the fiscal year endedMay 31, 1999 is not reflected in the table on page 7 of the AmendedAnnual Report which sets forth the Company's statements ofincome and comprehensive income as percentages of total revenues; (iv)the report on GLP's financial statements as of and for the yearended May 31, 1999 has not been completed because of adisagreement with GLP's former auditors over recognition ofrevenue of the initial 30% of each funeral plan sold and theconsolidation of the financial statements of GLP and Garden LifePlan Trust (GLFPT); (v)GLP has retained new auditors for the audit of its financialstatements for the year ended May 31, 1999 and it is expected thatthe successor auditor will be able to resolve the issues with respectto the accounting for the recognition of revenues and theconsolidation of the financial statements of GLP and GLFPT;(vi)although it is not known what, if any, adjustments to GLP'srevenues, previously recorded, will be proposed by GLP's newauditors, deferral of the initial 30% of each funeral plan sold couldresult in a substantial charge to the Company's retained earnings;and (vii)after completion of the audit of GLP's financial statements, theCompany's financial statements for 1999 will be restated andanother amended Form 10-KSB will be filed. 
-26-
Signatures
Pursuant to the requirements of Section 13 or 15(d)of the Securities Exchange Actof 1934, the registrant has duly caused this annual report to be signed on its behalfby the undersigned, thereunto duly authorized.
Dated:  Honolulu, Hawaii, September 13, 2001.
HOSOI GARDEN MORTUARY, INC.
By CLIFFORD HOSOI, President
-27-
Pursuant to the requirements of the Securities Exchange Act of 1934, this Form10-KSB for the year ended May 31, 2001, has been signed below by the followingpersons on behalf of the registrant and in the capacity and on the date indicated.
Dated:  September 13, 2001
RENE MANSHO, Director and Chairperson of the Board of Directors
CLIFFORD HOSOI, Director, President and Chief Executive Officer
SADAKO HOSOI, Director
BERTON T. KATO, Director
ROBERT KUWAHARA, Director
RICKY C. MANAYAN, Director
JULIE S. SHIMONISHI, Director
ANNE T. TAMORI, Director
GLENN SUETSUGU, Director
-28-
**REPORT OF CERTIFIED PUBLIC ACCOUNTANT
To the Board of Directors and Stockholders
**Hosoi Garden Mortuary, Inc.**
We have audited the accompanying balance sheets of
**HOSOI GARDEN MORTUARY, INC.**
as of May 31, 2001 and 2000, and the related statements of income and comprehensive income,stockholders' equity and cash flows for the years then ended.  These financial statements are theresponsibility of the Company's management.  Our responsibility is to express an opinion on thesefinancial statements based on our audits.
Except as discussed in the following paragraph, we conducted our audits in accordance with generallyaccepted auditing standards.  Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free of material misstatement.  Anaudit includes examining, on a test basis, evidence supporting the amounts and disclosures in thefinancial statements.  An audit also includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financial statement presentation.We believe that our audits provide a reasonable basis for our opinion.
We were unable to obtain audited financial statements supporting the Company's investment in GardenLife Plan, Ltd. (GLP) stated at $2,090,156 at May 31, 2001 and 2000, or its equity in earnings of GLPfor its years ended May 31, 2001 and 2000; nor were we able to satisfy ourselves about the carryingvalue of the investment or the equity in its earnings by other auditing procedures.
Since the Company's investment in GLP and the equity in its earnings materially affect thedetermination of financial position, results of operations and cash flows, the scope of our work wasnot sufficient to enable us to express, and we do not express, an opinion on the financial statementsreferred to in the first paragraph.
ENDO & COMPANY
Honolulu, Hawaii
August 20, 2001
 F-1

**HOSOI GARDEN MORTUARY, INC.**
BALANCE SHEETS
_ _ _ _ _ _ _ _ _ _ _ _
May 31, 2001 and 2000
**2001**2000
**A S S E T S**CURRENT ASSETSCash and cash equivalents (Note 1 and 4)
$    980,416
$    828,818Available-for-sale securities, at market (Notes 1 and 5)
928,668
891,482Accounts receivable, less allowance of $61,051 and $67,110
269,000
300,506Income tax receivable
        - 
50,956Inventories (Note 1)
160,775
223,674Prepaid expense and others
52,026
58,353Deferred income taxes (Note 6)
        34,865
        34,782TOTAL CURRENT ASSETS
   2,425,750
   2,388,571INVESTMENTSGarden Life Plan, Ltd, (Notes 1 and 2)
2,090,156
2,090,156Woolsey-Hosoi Mortuary Services, LLC (Note 3)
41,177
25,718Cemetery plots
1,350
1,350Held-to-maturity securities, at cost (Notes 1 and 5)
888,846
876,950
3,021,529
2,994,174PROPERTY AND EQUIPMENT, at cost, less accumulateddepreciation (Notes 1 and 7)
1,420,366
1,467,067OTHER ASSETS
132,508
112,987**TOTAL ASSETS****$7,000,153**$6,962,799
**L I A B I L I T I E S**CURRENT LIABILITIESAccounts payable (Note 8)
$     329,952
 $   285,651Accrued liabilities (Note 9)
159,790
148,779Income taxes payable (Note 1)
5,555
             -      TOTAL CURRENT LIABILITIES
495,297
434,430DEFERRED INCOME TAXES (Note 6)
152,489
161,166
**S T O C K H O L D E R S '   E Q U I T Y**CAPITAL CONTRIBUTED (Note 11)Common stock, par value $.20 per share; authorized 3,626,000shares, issued 2,187,140 shares
437,428
437,428Less 327,274 and 304,069 reacquired shares
(65,675)
(61,034)TOTAL CAPITAL CONTRIBUTED
371,753
376,394RETAINED EARNINGS
6,005,162
6,001,185ACCUMULATED OTHER COMPREHENSIVE INCOME, net ofapplicable deferred income taxes (Note 1 and 5)
56,734
70,906TREASURY STOCK, 223,785 shares, at cost (Note 11)
(81,282)
(81,282)TOTAL STOCKHOLDERS' EQUITY
6,352,367
6,367,203**TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY****$ 7,000,153**$ 6,962,799
	The accompanying Notes to Financial Statements are an integral part of these statements.
F - 2
**HOSOI GARDEN MORTUARY, INC.
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 2001 and 2000

**2001**2000RevenuesFuneral services
$ 2,159,005
$ 2,149,351Sale of urns and other items
443,323
576,260Total revenues
2,602,328
2,725,611Cost of revenues
1,788,325
1,941,657Gross profit
814,003
783,954Selling, general and administrative expensesSalaries and wages
274,493
276,930Professional services
263,780
222,567Profit-sharing and pension fund contributions (Note 12)
72,548
73,845Advertising
58,833
41,160Taxes and licenses
29,816
29,672Others
95,750
110,834Total selling, general and administrative expenses
795,220
755,008Operating income
18,783
28,946Other income and (expenses)Interest, dividends, and others (Note 14)
256,512
204,930Interest and others
(23,178)
(15,869)Total other income and (expenses)
233,334
189,061Income before income taxes and equity in earnings ofGarden Life Plan, Ltd.
252,117
218,007Income taxes (Note 10)
82,315
63,253Income before equity in earnings of Garden Life Plan, Ltd.
169,802
154,754Equity in earnings of Garden Life Plan, Ltd., net of deferred taxes(Notes 2 and 6)
       -
       -Net income
169,802
154,754Other comprehensive income, net of taxesNet unrealized losses on available-for-sale securities
(14,172)
(13,522)**Comprehensive income****$    155,630**$     141,232**Average number of shares common stock outstanding****1,647,114**1,659,286**Earnings per common share (Note 1)**
**$            .09****$            .09****Dividends per common stock**
**$          .045****$            .06**
The accompanying Notes to Financial Statements are an integral part of these statements.
F - 3
**HOSOI GARDEN MORTUARY, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 
Years Ended May 31, 2001 and 2000

******Accumulated**********Other******Capital**Retained**Comprehensive**Treasury****Contributed**Earnings**Income**Stock**TotalBalance, May 31, 1999$   379,445
$ 6,009,238
$84,428
$(81,282)
$6,391,829Net income
--
154,754
--
--
154,754Reacquired common stock(3,051)
(61,783)
--
--
(64,834)Cash dividend paid $.06 pershare
--
(101,024)
--
--
(101,024)Increase in net unrealizedgains (loss) on available-for-sale securities, net of taxes
--
--
(13,522)
--
(13,522)**Balance, May 31, 2000****376,394****6,001,185**70,906**(81,282)**6,367,203Net income
--
169,802
--
--
169,802Reacquired common stock(4,641)
(90,999)
--
--
(95,640)Cash dividend paid $.045per share
--
(74,826)
--
--
(74,826)Increase in net unrealizedgains (loss) on available-for-sale securities, net of taxes
--
--
(14,172)
--
(14,172)**Balance, May 31, 2001****$    371,753****$6,005,162**$            56,734**$(81,282)**$6,352,367
	The accompanying Notes to Financial Statements are an integral part of these statements.
F - 4
**HOSOI GARDEN MORTUARY, INC.
STATEMENTS OF CASH FLOWS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 
Years Ended May 31, 2001 and 2000
**2001**
**2000**CASH FLOWS FROM OPERATING ACTIVITIES:Net income
$    169,802
 $    154,754Adjustments to reconcile net income to net cash and cashequivalents provided by operating activities:Depreciation
59,282
65,929Realized Gain on sale of investments securities, net
(40,928)
(13,386)Loss on disposal of equipment
--
1,250(Decrease)increase in allowance for doubtful accounts
(6,059)
4,400Partnership income
(36,459)
(20,873)Cash value of life insurance policies
(13,899)
(2,669)Deferred income taxes
(83)
(828)(Increase) decrease in certain assetsAccounts receivable
37,565
16,547Income tax receivable
50,956
(42,882)Inventories
62,899
(79,700)Prepaid expenses and others
6,327
512(Decrease) increase in certain liabilitiesAccounts payable
44,301
25,680Accrued liabilities
11,011
17,063Income taxes payable
5,555
--NET CASH PROVIDED BY OPERATINGACTIVITIES
350,270
125,797CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property and equipment
(12,581)
(28,154)Proceeds from sale of investment securities
1,915,648
929,787Purchase of investment securities
(1,946,651)
(969,983)Distributions from Woolsey-Hosoi Mortuary Services, LLC
21,000
17,500Increase in cash value of life insurance policies
(5,622)
(8,433)NET CASH USED IN INVESTING ACTIVITIES
(28,206)
(59,283)CASH FLOWS FROM FINANCING ACTIVITIES:Reacquired common stock
(95,640)
(64,834)Cash dividends paid
(74,826)
(101,024)NET CASH USED IN FINANCING ACTIVITIES
(170,466)
(165,858)NET INCREASE (DECREASE)
151,598
(99,344)CASH AND CASH EQUIVALENT, beginning of year
828,818
928,162********CASH AND CASH EQUIVALENT, end of year**$   980,416**$   828,818
	The accompanying Notes to Financial Statements are an integral part of these statements.
F - 5

**HOSOI GARDEN MORTUARY, INC.**
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 2001 and 2000
(1) Summary of significant accounting policies
**Line of business** - The Company is engaged in one line of business that consists principally ofproviding mortuary services in the State of Hawaii on the island of Oahu.
	The significant accounting policies followed by the Company are summarized below.
**Fair value of financial instruments** - The carrying amount of cash and cash equivalents approximatesfair value due to the short-term maturities of these instruments.  The fair value of current and non-current marketable securities were estimated based on quotes obtained from brokers for those orsimilar instruments.  The fair value for long-term investments was estimated based on quotedmarket price at year end.
**Cash and cash equivalents** - For the purpose of the statements of cash flows, cash equivalents includecertificates of deposit, money market accounts and highly liquid debt instruments with maturitiesof three months or less at the date of acquisition.
**Investment securities** - Management determines the appropriate classification of securities at thetime of purchase.  These investments are classified in three categories and accounted for as follows:
**Debt securities**that the company intends to hold to maturity are classified as *securities held-to-maturity* and reported at cost.
**Debt and equity securities** that are purchased and held for the purpose of selling in the near termare classified as *trading securities* and reported at fair value, with unrealized gains and lossesincluded in income.
**Debt and equity securities**not classified as *securities held-to-maturity* or *trading securities* areclassified as *securities available-for-sale* and reported at fair value, with unrealized gains and lossesincluded in other comprehensive income.  *Securities available-for-sale* will be used as part of theCompany's asset management strategy and may be sold in response to changes in market values orthe need for capital.
F - 6

**HOSOI GARDEN MORTUARY, INC.**
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 2001 and 2000
(1) Summary of significant accounting policies (continued)
**Investment in Garden Life Plan, Ltd.** - The Company accounts for its investment in Garden Life Plan,Ltd. (a 50% owned Company) by the equity method of accounting.
**Inventories** - Inventories of caskets and urns are stated at the lower of cost or market.  Cost isdetermined substantially by the first-in, first-out method and market is based on replacement costor realizable value.
**Property and equipment** - Land, buildings and equipment are carried at cost. Depreciation iscomputed using the declining-balance and straight-line methods. Maintenance and repairs arecharged to income as incurred.  Major renewals and betterments are capitalized.  Upon sale or otherdisposition of assets, the cost and related accumulated depreciation are removed from the accounts,the proceeds applied thereto, and any resulting gain or loss is reflected in income.
**Compensated absences** - Full-time  employees of the Company are entitled to paid vacations and  sickdays.  Unused vacation and sick leave are reflected in accrued liabilities.
**Earnings per common share** - Earnings per common share has been computed by dividing net incomeby the weighted average number of common shares outstanding.
**Revenue and cost recognition** - Revenues from at-need funeral services and pre-need funeral planservices are recognized upon completion of the final funeral ceremony.  Revenues from at-needfuneral services include professional service revenues which are included in Funeral services andsales of caskets, urns and other items are included in Sale of urns and other items.  Revenues frompre-need services, which accounted for approximately 32.2% and 36.7% of funeral service revenuesin 2001 and 2000, respectively, are accounted for in Funeral services since these plans are soldinclusive of the merchandise selected.
F - 7

**HOSOI GARDEN MORTUARY, INC.**
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Years Ended May 31, 2001 and 2000
(1) Summary of significant accounting policies (continued)
	Cost of sales and services includes all direct cost, including merchandise, labor and other related costand indirect cost such as insurance, depreciation, supplies and indirect labor costs related to theperformance and completion of at-need and pre-need funeral services.
**Advertising** - The Company follows the policy of charging the costs of advertising to operations asincurred.
**Income taxes** - Income tax expense is based on reported earnings before income taxes.  Deferredincome taxes reflect the effects of temporary differences between assets and liabilities recognized forfinancial reporting purposes and such amounts recognized for tax purposes.  In accordance withStatement of Financial Accounting Standards (SFAS) 109, *Accounting for Income Taxes*, deferredincome taxes are measured by applying currently enacted tax laws.
**Comprehensive income** - In the year ended May 31, 1999, the Company adopted Statement ofFinancial Accounting Standards No. 130, *Reporting Comprehensive Income*, which requires thatunrealized gains and losses on available-for-sale securities be included in other comprehensiveincome.
**Use of estimates** - The preparation of financial statements in conformity with generally acceptedaccounting principles requires management to make estimates and assumptions that affect thereported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at thedate of the financial statements and the reported amounts of revenues and expenses during thereporting periods.  Actual results could differ from those estimates.
F - 8
**HOSOI GARDEN MORTUARY, INC.**
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 
Years Ended May 31, 2001 and 2000
(2) Garden Life Plan, Ltd.
	Investment in Garden Life Plan, Ltd. (GLP) represents the Company's 50% share in the underlyingequity in the net assets, accounted for under the equity method of accounting for investments incommon stock, of Garden Life Plan, Ltd., a Hawaii corporation engaged in the sales of pre-needfuneral plans which are serviced solely by the Company.
	All payments received from the sale of pre-need funeral plans up to an amount equal to 30% of thetotal price plus any sales tax or other charges are retained by GLP as its compensation.  The balanceis deposited with Pacific Century Trust Company, Limited to be held in trust.
	The audit of the financial statements of GLP for the years ended May 31, 2000 and 1999 is in process.GLP 's financial statements for its year ended May 31, 2001 will be audited after the completion ofthe 2000 and 1999 audits.
	It is expected that GLP's financial statements will include a charge for the overreporting of itsrevenues in prior years and that the charge could result in a substantial charge to the Company'sretained earnings.
(3) Related party transactions
	On July 7, 1998, the Company in partnership with Woolsey Funeral & Cemetery Services, Inc.formed Woolsey-Hosoi Mortuary Services, LLC (Woolsey-Hosoi), a limited liability company, toprovide funeral services to market sectors not previously serviced by the Company.  The Company'sinitial capital contribution in Woolsey-Hosoi was $15,000. The Company received distributions of$21,000 and $17,500 for 2001 and 2000 respectively.
F - 9
**HOSOI GARDEN MORTUARY, INC.
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 
Years Ended May 31, 2001 and 2000
(3) Related party transactions (continued)
	The Company provides Woolsey-Hosoi with embalming services, assistance with funeralarrangements, use of its facilities and related charges.  Revenues from services provided to Woolsey-Hosoi is reflected in net sales and services which amounted to $29,365 and $25,751 for the yearsended May 31, 2001 and 2000, respectively.  Included in accounts receivable is $6,728 and $4,619 ofreceivables from Woolsey-Hosoi for 2001 and 2000, respectively.
(4) Cash and cash equivalents
	Cash and cash equivalents consist of the following:

**2001**
**2000**Cash on hand
$     64,561
   $       5,654Checking accounts
201,211
189,906Savings accounts
531,577
512,531Short-term investments
183,067
120,727Total cash and cash equivalents
**$   980,416**
**$   828,818**
F - 10
**HOSOI GARDEN MORTUARY, INC.**
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 
Years Ended May 31, 2001 and 2000
(5) Investment securities
	As of May 31, 2001 and 2000, the Company held investments in the following types of securities:
******Gross****Gross****Amortized****Unrealized**Unrealized**Fair
**Cost**Gain**Loss**Market**May 31, 2001**Available-for-saleEquity securities
$     127,202
$        8,379
$        2,843
$     132,737Mutual funds
709,999
85,942
11
795,931
837,201
94,321
2,854
928,668Held-to-maturityU.S. Treasury bills
888,846
349
569
888,626**Totals****$  1,726,047**$     94,670**$        3,423**$  1,817,294
******Gross****Gross****Amortized****Unrealized**Unrealized**Fair
**Cost**Gain**Loss**Market**May 31, 2000**Available-for-saleEquity securities
$     111,241
$        17,502
$        12,035
$     116,708Mutual funds
665,925
121,803
12,954
774,774
777,166
139,305
24,989
891,482Held-to-maturityU.S. Treasury bills
818,351
21,447
1,262
838,536Government notes
58,599
--
3,378
55,221
876,950
21,447
4,640
893,757**Totals****$ 1,654,116,**$    160,752**$      29,629**$ 1,785,239
F - 11
**HOSOI GARDEN MORTUARY, INC.**
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 
Years Ended May 31, 2001 and 2000
(5)	Investment securities (continued)
	The maturities of all debt securities held at May 31, 2001 were as follows:
**Available-for-Sale**Held-to-Maturity

**Amortized**Market**Amortized**Market
**Cost****Value**Cost**ValueWithin one year
$      --        $      --        
$   828,081
$  828,336After one year through five years
      --              --        
40,234
39,820After five years
      --              --        
20,531
20,470
**$      --        **$      --        **$ 888,846**$  888,626
	The Company sold *securities available-for-sale* for $206,794 and $76,929 in 2001 and 2000,respectively.  Reflected in earnings are gross realized gains of $56,172 and $23,082 and grossrealized losses of $15,244 and $9,696 for 2001 and 2000, respectively.  The cost of the securitiessold was based on cost of all the shares of each such security held at the time of sale.
	The unrealized holding gains on investment securities *available-for-sale* during the years endedMay 31, 2001 and 2000, and reported as a separate component of Stockholders' Equity, are asfollows:
**2001**
**2000**Unrealized holding gains, net of losses
$   91,467
$   114,316Deferred income tax on the net unrealized holding gains
(34,733)
(43,410)
**$   56,734****$   70,906
F - 12
**HOSOI GARDEN MORTUARY, INC.**
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 
Years Ended May 31, 2001 and 2000
(6)	Deferred income taxes
	Deferred income taxes are recognized for differences between the basis of assets and liabilitiesfor financial statement and income tax purposes.  The deferred assets and liabilities representthe future tax consequences of those differences, which will be either taxable or deductible whenthe assets and liabilities are recovered or settled.
	The deferred tax liability results from the recognition of unrealized gains or losses on securitiesfor financial statements and the recognition of gains or losses when securities are sold for incometax purposes, and the equity method of accounting for the investment in subsidiary as explainedunder *Garden Life Plan, Ltd.* above.  Under the equity method the Company's share of earningsof the subsidiary is reported for tax purposes only when distributions of earnings are received asdividends.
	The deferred tax asset results from the use of the reserve method in accounting for uncollectibleaccounts receivable in the financial statements and the use of the direct write off method forincome tax purpose, and the accrual of vacation and sick leave when earned for the financialstatements and the recognition for income tax purposes when paid.
(7)	Property and equipment
	Property and equipment consist of:

**2001**
**2000**Land
$    517,040
$   517,040Buildings
1,262,530
1,262,530Land improvements
94,710
94,710Equipment and vehicles
379,674
371,980Total cost
2,253,954
2,246,260Accumulated depreciation
833,588
    779,193**Net property and equipment****$ 1,420,366**$ 1,467,067
F - 13
**HOSOI GARDEN MORTUARY, INC.**
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 
Years Ended May 31, 2001 and 2000
(7)	Property and equipment (continued)
	Aggregate depreciation charged to operations is as follows:

**2001**
**2000**Cost of revenues
$    50,772
$    59,365Selling, general and administrative expenses
8,510
6,564
**$    59,282****$    65,929
(8)	Funeral service deposits

	Included in accounts payable is $33,731 of deposits made by ten individuals that the Companyhad collected from since 1969 for future services or purchase of merchandise.  The payable of$33,731, including interest of $26,294 accrued to May 31, 2001, approximates fair value.
	In an agreement with the Professional and Vocational Licensing Division of the State of Hawaii,Department of Commerce and Consumer Affairs (DCCA), the Company consented to a plan toeither convert these funeral service deposits to a Garden Life Plan, Ltd.'s (GLP) pre-need funeralplan identical to the services and/or merchandise that the depositor originally contracted for orrefund the deposit plus accrued interest.  The agreement with the DCCA provides that theCompany will provide the funds for any difference between the cost of a comparable GLP pre-need plan and the amount deposited with the Company.
	As of May 31, 2001,  twenty-eight plans have been converted to GLP pre-need plans or refundedto the original depositor.  The difference between the cost of plans converted and the amount ofthe available deposit is reflected as a charge to operations. Ten plans remain to be converted.No provision has been made for the cost of conversion of the remaining ten plans because of theuncertainty of whether the holders of the deposits will elect to convert to a GLP pre-need planor elect to receive a refund.
F - 14
**HOSOI GARDEN MORTUARY, INC.**
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 
Years Ended May 31, 2001 and 2000
(9)	Accrued liabilities
	Accrued liabilities consist of the following:

**2001**
**2000**Accrued bonus
$   25,000
$  21,250Accrued wages payable
9,347
14,642Payroll and general excise taxes
22,070
14,555Profit-sharing and money-purchase plancontributions
72,548
73,845Vacation and sick leave
30,825
24,487**Total accrued liabilities****$ 159,790**$ 148,779
(10)	Income taxes
	The provisions for income taxes (benefits) consist of the following:

**2001**
**2000**Current:Federal
$ 71,295
$ 55,294State
11,103
8,787
82,398
64,081Deferred:Federal
(70)
(697)State
(13)
(131)
(83)
(828)**Total****$ 82,315**$ 63,253
F - 15
**HOSOI GARDEN MORTUARY, INC.**
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 
Years Ended May 31, 2001 and 2000
(10)	Income taxes (continued)
	The provision for income taxes differs from the amount computed by applying the federalstatutory income tax rate to income before income taxes as follows:

**2001**
**2000**Federal income tax statutory rate
34.0%
34.0%State income tax, net of tax benefit
3.0    
2.5    Life insurance premiums, net of increasein cash value
(1.9)  
(0.9)   Others, net
(2.5)  
(6.6)   **Effective tax rate****32.6%**29.0%
(11)	Reacquired shares
*Capital Contributed* has been reduced for shares reacquired after June 30, 1987.  Purchases of23,205 and 15,255 reacquired shares in 2001 and 2000, respectively, exceeded the balance ofadditional paid-in capital and a charge of $90,999 and $61,783 for 2001 and 2000, respectively,were made to *Retained Earnings* for the cost of reacquired shares in excess of their par value.

	The 223,785 shares reflected as *Treasury Stock* as of May 31, 1999 reflects the shares acquiredbefore July 1, 1987.
(12)	Retirement plans
	The Company provides benefits to substantially all full-time employees with a definedcontribution profit-sharing plan and a money-purchase pension plan.  Both plans are non-contributory plans.
F - 16
**HOSOI GARDEN MORTUARY, INC.**
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 
Years Ended May 31, 2001 and 2000
(12)	Retirement plans (continued)
	The money-purchase pension plan was adopted on June 1, 1990 and provides benefits toemployees after one year of service and upon completion of 1,000 hours of service each year.  Therequired contribution under this plan is five-percent of compensation of qualified employees.
	Contribution to the defined contribution profit-sharing plan is discretionary up to a maximumof fifteen-percent of compensation of eligible employees after one year of service and uponcompletion of 1,000 hours of service each year.
	Amounts charged against income for the retirement plans are as follows:

**2001**
**2000**Profit sharing
$   40,000
$   40,000Money-purchase pension plan
32,548
33,845
**$  72,548****$   73,845
(13)	Lease
	The Company leases a portion of  the land on which the mortuary is situated from the HermanS. Hosoi Trust and the Hosoi-Tamori-Shimonishi Trust (Trusts) which respectively owns a 13%and 12% interest in the land.  As a group, members of the Hosoi family own approximately29.42% of the outstanding shares of the Company.
	On October 31, 1999, the Company entered into a fifteen-year lease which expires on May 31,2014.  For the first five years of the agreement, the Company will pay the higher of $116,875 peryear or percentage rent of 25% times 15% of gross annual revenues, as defined.  For the secondfive year period, the Company will pay the higher of $137,499 per year or the percentage rent.For the third five year period, an appraisal of the property will be required to establish the baserent but in no event will the base rent  exceed  the greater of $208,332  per year or the percentagerent.
F - 17
**HOSOI GARDEN MORTUARY, INC.**
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 
Years Ended May 31, 2001 and 2000
(13)	Lease (continued)
	In addition, the Company is responsible for the payment of real property taxes on the propertyowned by the Trust.  Total rental expense was $134,601 and $216,776 in 2001 and 2000,respectively.
	The future minimum lease payments under the lease at May 31, 2001 are as follows:
**Amount**May 31, 2002
$116,8752003
116,8752004
116,8752005
137,4992006
137,499Thereafter
412,497
**$1,038,120**
(14)	Other income
	Other income consists of the following:

**2001**
**2000**Interest
$   134,702
$    98,540Capital gains and dividends
 19,197
21,580Net gain from sale of securities 
40,928
13,386Loss on disposal of property and equipment           -
(1,250)Parking
23,620
31,311Others
1,606
20,490Partnership income
36,459
20,873**Total other income****$ 256,512**$  204,930
F - 18
**HOSOI GARDEN MORTUARY, INC.**
NOTES TO FINANCIAL STATEMENTS
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 
Years Ended May 31, 2001 and 2000
(15)	Cash flow supplementary disclosure

	Cash payments for interest and income taxes were as follows:

**2001**
**2000**Interest
$    --      
$       268Income taxes paid, net of refunds**$  75,353**$   116,511
(16)	Concentrations of credit risk of financial instruments
	The Company's cash, cash equivalents, short and long term investments are deposited with fivelocal financial institutions.  For the years ended May 31, 2001 and 2000, the Company haddeposits in a financial institution in excess of the deposit insurance of $545,393 and $533,152,respectively.
	The Company performs funeral services for deaths occurring principally on the island of Oahulocated in the State of Hawaii.  In the normal course of business the Company extends unsecuredcredit to its customers.  The Company maintains reserves for potential credit losses; historically,such losses have been within management's expectations.
F-19**************************************************************************************************************************************************************************************************************