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Harvest Court Industries Berhad

(Company No. 36998-T)

ANNUAL REPORT 2013

VisionTo be recognised as the premier integrated Contractors and Timber Service Provider

in Malaysia and to successfully diversify our current scope of bussiness.

MissionThrough a culture of Teamwork and Innovation, we shall strive to

provide customers with quality services in a timely manner,

generating wealth to our employees and shareholders.

Harvest Court Industries Berhad (36998-T)IV

Annual Report 2013 1

CONTENTSCorporate Information

Directors’ Profiles

Chairman’s Statement

Corporate Social Responsibility

Corporate Governance Statement

Audit Committee’s Report

Statement on Risk Management and Internal Controls

Other Disclosure Requirements Pursuant to the Listing Requirements of Bursa Securities

Analysis of Shareholdings

Group’s Landed Properties

Directors’ Report

Statement by Directors

Statutory Declaration

Report of the Auditors

Statements of Financial Position

Statements of Comprehensive Income

Statements of Changes in Equity

Statements of Cash Flow

Notes to the Financial Statements

Supplementary Information on The Disclosure of Realised and Unrealised Profits or Losses

Notice of Annual General Meeting

Statement Accompanying Notice of Annual General Meeting

Proxy Form

02

03

12

14

15

23

27

30

34

40

42

48

49

50

54

56

57

61

63

119

120

124

Harvest Court Industries Berhad (36998-T)2

BOARD OF DIRECTORS

Independent Non-Executive Chairman Dato’ Mohamed Amir Abas Bin Zainal Azim

Managing Director & Chief Executive Officer Datuk Raymond Chan Boon Siew

Executive Director Ng Wai Han

Independent Non-Executive DirectorsZainuri Bin ZainalChua Eng Chin Woo Mun Chee

AUDIT COMMITTEE

Chua Eng Chin (Chairman)Dato’ Mohamed Amir Abas Bin Zainal AzimZainuri Bin Zainal

REMUNERATION COMMITTEE

Dato’ Mohamed Amir Abas Bin Zainal Azim (Chair-man)Datuk Raymond Chan Boon SiewWoo Mun Chee

NOMINATION COMMITTEE

Woo Mun Chee (Chairman)Chua Eng ChinZainuri Bin Zainal

ESOS COMMITTEE

Datuk Raymond Chan Boon Siew (Chairman) Ng Wai Han Chua Eng ChinLow Son Heng Freiya Chong Fui Fui

COMPANY SECRETARIES

Tan Tong Lang (MAICSA 7045482)Chong Voon Wah (MAICSA 7055003)

REGISTERED OFFICE

Suite 10.03, Level 10The Gardens South TowerMid Valley City, Lingkaran Syed Putra59200 Kuala Lumpur Tel No.: (603) 2279 3080 Fax No.: (603) 2279 3090

SHARE REGISTRAR

Mega Corporate Services Sdn Bhd Level 15-2, Sheraton Imperial CourtJalan Sultan Ismail, 50250 Kuala LumpurTel No.: (603) 2692 4271 Fax No.: (603) 2732 5388

PRINCIPAL BANKERS

Malayan Banking BerhadCIMB Bank Berhad Public Bank Berhad

AUDITORS

Messrs. UHY (AF1411)Suite 11.05, Level 11The Gardens South TowerMid Valley City, Lingkaran Syed Putra59200 Kuala Lumpur

SOLICITORS

Lovelace & Hasting Law Practice of Rafique

STOCK EXCHANGE LISTING

Main Market of Bursa Malaysia Securities Berhad Stock Name : HARVEST Stock Code : 9342

WEBSITE

http://www.harvestcourt.com

EMAIL ADDRESS

[email protected]

CORPORATEINFORMATION


BOARD OFDIRECTORS


Sitting infront from left

Datuk Raymond Chan Boon Siew Managing Director & Chief Executive Officer

Dato’ Mohamed Amir Abas Bin Zainal Azim Independent Non-Executive Chairman Ng Wai Han Executive Director

Standing from left

Zainuri Bin ZainalIndependent Non-Executive Director

Chua Eng ChinIndependent Non-Executive Director

Woo Mun CheeIndependent Non-Executive Director

BOARD OFDIRECTORS


BOARD OF DIRECTOR’S


Dato’ Mohamed Amir Abas Bin Zainal Azim Independent Non-Executive Chairman

DIRECTORS’ PROFILES

Dato’ Mohamed Amir Abas Bin Zainal Azim, a Malaysian, aged 64, is a graduate of the Royal Military College, Malaysia. He is a corporate Member of the British Institute of Management (MBIM) and also a Fellow of the Institute of Directors (F. Inst. D.). Dato’ Amir began work as an accountant with ESSO Malaysia Berhad. Following which, he gained further business and corporate experiences in senior management positions in corporations such as Perbadanan Nasional Berhad, Ayer Hitam Tin Dredging (M) Berhad, Olympia Industries Berhad, and Proton Edar Sdn Bhd. Currently he runs his own business and is a Director of a few private companies.

Dato’ Amir was appointed to the Board of Harvest Court Industries Berhad (“HCIB”) on 1 July 2009. Subsequently on 22 July 2010, he was redesignated as Independent Non-Executive Chairman. Presently he is the Chairman of Remuneration Committee and a member of the Audit Committee of HCIB.

Dato’ Amir does not hold directorships in any other public companies.

Dato’ Amir has no relation with any director and/or major shareholder of the Company, no conflict of interest with the Company and has not committed any offences within the past ten (10) years other than traffic offences, if any.


Datuk Raymond Chan Boon Siew Managing Director & Chief Executive Officer

Datuk Raymond Chan Boon Siew, a Malaysian, aged 42, was appointed to the Board of HCIB on 28 October 2011 as Non-Independent Non-Executive Director. Subsequently on 17 January 2012, he was re-designated as Executive Director and once again as Managing Director & Chief Executive Officer on 1 July 2012. Presently he is the Chairman of the ESOS Committee and a member of Remuneration Committee of HCIB.

Datuk Raymond Chan Boon Siew has been awarded the “Outstanding Young Person of 2007” by the Junior Chamber International of Kota Kinabalu. He subsequently won “The Outstanding Young Malaysia Award, 2008” in the same category of Business, Economic and Entrepreneurial Accomplishment. He holds a Bachelor of Business Administration (Honours) Degree from the Western Michigan University, United States of America and is the Managing Director and CEO of Sagajuta Group of Companies and the Managing Director of 1Green Enviro Sdn. Bhd. He is also the Chief Executive Officer and Non-Independent Director of Naim Indah Corporation Berhad (NICORP).

Datuk Raymond Chan Boon Siew has more than one and a half decade of extensive property development experience and a successful track record of developments such as the award winning 1Borneo in Kota Kinabalu, Sabah, Mutiara Idaman, Mutiara Heights, Desa Acacia and Ujana Kingfisher Park in Penang and, Warisan Square in both Kota Kinabalu and Penang as well as upcoming developments such as 1Sulaman in Kota Kinabalu, currently at its second phase of development, 1Likas in Kota Kinabalu and, 1 Gateway in Klang.

Datuk Raymond Chan has no relation with any director and/or major shareholder of the Company, no conflict of interest with the Company other than those disclosed in the page 32-33 of this annual report and has not committed any offences within the past ten (10) years other than traffic offences, if any.

DIRECTOR’S PROFILE


Ng Wai Han Executive Director

Mr. Ng Wai Han, a Malaysian, aged 43, was appointed to the Board of HCIB as Executive Director on 4 September 2012. Mr. Ng obtained American Degree Studies, P.J. Community College, Petaling Jaya and Bachelor of Science (Honors) Business Administration, The University of Montana, Montana, U.S.A. Presently he is a member of the ESOS Committee of HCIB.

Mr. Ng carried with him vast marketing and management experiences from various established multinational corporations. He was the general manager for UPS SCS (M) Sdn Bhd, a member of UPS Group, a market leader in world logistic industry, managing the Asia Pacific Southern Region and CEO for Renesola (Malaysia) Sdn Bhd, a world leading wafer manufacturer and largest scrap silicon material recycler. He has successfully developed the above two business units in terms of operation results and setting up new business units. He later joined Health Solutions (Malaysia) Sdn Bhd as Head of Business Development in managing the international markets.

Mr. Ng has no relation with any director and/or major shareholder of the Company, no conflict of interest with the Company and has not committed any offences within the past ten (10) years other than traffic offences, if any.

DIRCTOR’S PROFILE


Zainuri Bin Zainal Independent Non-Executive Director

DIRCTOR’S PROFILE

En. Zainuri Bin Zainal, a Malaysian, aged 41, had obtained a private pilot License with Instructor Rating (Aviatio n Career Academy, Lakeland Florida). En. Zainuri is presently a member of Audit Committee and Nomination Committee of HCIB.

En. Zainuri was appointed to the Board of HCIB as an Independent Non-Executive Director on 27 December 2006. He was a Majlis Perbandaran Klang Councilor from 2006 to 2008.

En. Zainuri does not hold directorships in any other public companies.

En. Zainuri has no relation with any director and/or major shareholder of the Company, no conflict of interest with the Company and has not committed any offences within the past ten (10) years other than traffic offences, if any.


Chua Eng Chin Independent Non-Executive Director

DIRCTOR’S PROFILE

Mr. Chua Eng Chin, a Malaysian, aged 55, was appointed as an Independent Non-Executive Director of HCIB on 23 April 2008. He is a Fellow of The Association of Chartered Certified Accountants (ACCA) and also a member of Malaysian Institute of Accountants (MIA). Mr. Chua is presently the Chairman of the Audit Committee and a member of Nomination Committee and ESOS Committee of HCIB.

After qualified as Chartered Accountant in 1984, he started his career in an accounting firm where he specializes in auditing and consultancy works. He had served in the internal audit department of Public Companies such as the Lion Group and the Berjaya Group. He also served as Senior Accountant in Berjaya Textiles Berhad and Senior Manager in Malpac Holdings Berhad.

Mr. Chua is currently a Commissioned Dealer Representative with PM Securities Sdn. Bhd. He is also sits on the board of directors of Tiger Synergy Berhad and Naim Indah Corporation Berhad as Independent Non-Executive Director.

Mr. Chua has no relation with any director and/or major shareholder of the Company, no conflict of interest with the Company and has not committed any offences within the past ten (10) years other than traffic offences, if any.


Woo Mun Chee Independent Non-Executive Director

DIRCTOR’S PROFILE

Woo Mun Chee, a Malaysian, aged 61, was appointed as an Independent Non-Executive Director on 4 September 2012. Mr. Woo is presently the Chairman of Nomination Committee and a member of Remuneration Committee of HCIB.

Mr. Woo has years of experience in the banking and financial industry. He has attached to a financial institution in Malaysia for more than twenty (20) years. Throughout the banking career, have resumed various job functions, from branch to head office operations, initially as an assistant accountant and promoted to assistant manager and subsequently to full managerial position. At the time of resignation, he was holding the position as senior manager. In the capacity as a branch manager, the job involved the day to day operation and administration of the branch. He also headed various departments at the head office, namely credit and marketing, branches operations and loans supervision. Besides the banking experience, he was also having the experience in internal auditing in an established automobile manufacturing company as well as external auditing for two (2) and three (3) years respectively.

He has no relationship with any other Directors or Major Shareholder of the Company, no conflict of interest with the Company and has not been convicted for any offences within the past 10 years other than traffic offence, if any.


On behalf of the Directors, it is my pleasure to present to you the annual report of Harvest Court Industries Berhad (“HCIB”) for the financial year ended December 2013.

The year 2013 has proven to be another challenging year for the Group. We will continue in 2013/14 to address long-standing business issues in manufacturing, and other field of industries in order to secure future prosperity as well as ensuring that our financial and human resources are developed and deployed where they are able most effectively to generate future growth and returns.

Business IssuesThe Board of HCIB understood clearly the importance of ‘doing the right thing’ to create long-term value. It has been a year of addressing long standing business issues in manufacturing, bedding in management and governance change, and weighing the transformation of our

core business, from manufacturing to construction and development. We are laying the foundations for sustainable future growth, as we clearly understand that in manufacturing, primary inputs such as minimum wages imposed for foreign workers by the government, increase in electricity and plant maintenance continue their upward spiral which resulted in negative cost pressure on all our bottom lines. These increased has continued to increase at an unexpected rate of another 30% since January 2013. In such, HCIB is certain that we need to embark on the transformation programmes, which aim to strengthen the company’s fundamentals and operational platform to prepare for rapid growth and challenge in the years to come. One of the greatest challenges for a business is to face itself honestly. It is also the mark of a quality business that it can do so, since the capacity to name issues is the essential first step towards

addressing them. We have made an enormous brave decisions to shut down the door manufacturing division, to call an end of what we have ventured for decade, and to focus on construction and developments, which ultimately reflects a long, hard look at where the business needs to devote its energy and resources to create sustainable value, growth and profitability of the companyin near future.

Decisions of such kind had painful short-term consequences. The early signs are that we are unable to meet the projected bottom-line, which resulted in unsustainable, unprofitable year, notwithstanding the accounting write-downs we have had to take this year as a consequence.

Our long term strategy to accelerate the continuous growth of our transformation will place HCIB in a platform and laying a strong foundation so as to enhance our shareholders value.

CHAIRMAN’S STATEMENT


Bedding in management and governance changeThe year of 2013 has also seen a generational transition in management. This is not a surprise when there has been a relatively unchanged management team in place for a substantial time and we are fortunate in HCIB to have a substantial depth of talent to draw on over the years. We now have a smaller operations team, where talented, and widely experienced, younger executives are getting to grips with new responsibilities with skill and enthusiasm, which has been developed and trained under our operation heads for the past 2 years to handle day to day operational tasks and responsibilities. I would like to thank our operation teams for their dedications and invaluable contributions, since the inception of HCIB. As immediate operational business issues are addressed, our attention can turn increasingly to the strategic

judgements that will determine HCIB’s prosperity and value for shareholders over the next decade.

Financial resultsFor the financial year ended 31 December 2013, we have a lower turnover of RM16.96 million as compared to RM24.34 million in year 2012. The lower turnover is mainly due to the lower contributions from both manufacturing and construction divisions facing tough business environment mentioned above. As a result, the Group has incurred a loss after tax of RM3.72 million as compared to profit after tax of RM0.14 million in the preceding year.

OutlookWe believe challenging market conditions will persist in 2014, including instability in world currency fluctuation, cost of manpower & overhead continue to be on an upward spiral, and also new government

implementation such as GST. The revenue impact from loss of India trade on solid doors will continue to affect our performance.

I would like to extend my thanks, on behalf of the Board, to everyone in HCIB who in an exceptional year has, as always, striven to anticipate and meet the needs of our customers while all the time retaining a sense of perspective, sometimes a sense of humour and always a sense of respect for others. They are a great group of people and we are lucky to have them.

We remain committed to delivering value for shareholders and growing profits while making investments.

Dato’ Mohamed Amir Abas Bin Zainal Azim

Independent Non-Executive Chairman

CHAIRMAN’S STATEMENT


CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Company and its subsidiaries are always mindful of its CSR towards employees, community and stakeholders. A strong governance policy is necessary to ensure that CSR are fulfilled at our own premises, only then we can contribute positively to the community. We continue to place high emphasis on health and safety issues at our work sites. Necessary tools and protective gears are provided to our employees to ensure that they are adequately protected. We also enforce stringent compliance requirements so that health and safety issues are not compromise.

We also work very closely with environment enforcement agency with periodic consultation arrangements and visits so that our manufacturing activities are always in line with environmental standards and legislation.

We continuously encourage employees to recycle and/or reduce wastage on the consumption of raw materials so that waste disposals are kept to the minimum. We also incorporate changes to our manufacturing process to allow the usage of environmental friendly materials.

At the marketplace, the Company and its subsidiaries maintain high integrity of corporate governance practices as well as enhancing the shareholders’ value.


CORPORATEGOVERNANCE

STATEMENT COMPANY’S CORPORATE GOVERNANCE INITIATIVE

The Board is committed to ensure that a high standard of corporate governance is practised throughout the Company and its subsidiaries (“the Group”) in discharging its responsibilities with integrity, transparency and professionalism, to protect and enhance shareholders’ value and the financial position of the Group.

The Board recognises the importance of good corporate governance and fully supports the principles and best practices promulgated in the Malaysian Code on Corporate Governance (“the Code”) to enhance business prosperity and maximize shareholders’ value. The Board will continuously evaluate the Group’s corporate governance practices and procedures, and where appropriate will adopt and implement the best practices as enshrined in the Code to the best interest of the shareholders of the Company.

Below is a statement and description in general on how the Group has applied the principles and complied with the best practice provisions as laid out in the Code throughout the financial year ended 31 December 2013 pursuant to Paragraph 15.25 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Listing Requirements”).

A. DIRECTORS

1. Board Balance

The Board assumes responsibility for effective stewardship and control of the Group and its members have established terms of reference to assist in the discharge of their responsibilities.

The Board consists of Six (6) members, comprising a Managing Director & Chief Executive Officer, one (1) Executive Director and four (4) Independent Non-Executive Directors. The Company is in compliance with Paragraph 15.02 of the Listing Requirements whereby more than one third (1/3) of its Board members are independent directors. The profile of each Director is presented separately in page 3 to11 of the Annual Report 2013.

The current composition of the Board provides an effective Board with a mix of industry specific knowledge, broad based business and commercial experience together with independent judgement on matters of strategy, operations, resources and business conduct.

The Board did not appoint a Senior Independent Non-Executive Director to whom concerns may be conveyed as the Chairman of the Board encourages the active participation of each and every Board member in the decision making process.


2. Board Responsibilities

The Board retains full and effective control of the Group and has developed corporate objectives and position descriptions including the limits to management’s responsibilities, which the Management are aware and are responsible for meeting.

The Board has a formal schedule of matters reserved to itself for decision, which includes the overall Group strategy and direction, investment policy, major capital expenditures, consideration of significant financial matters and review of the financial and operating performance of the Group.

The Board understands the principal risks of all aspects of the business that the Group is engaged in recognising that business decisions require the incurrence of risk. To achieve a proper balance between risks incurred and potential returns to shareholders, the Board ensures that there are in place systems that effectively monitor and manage these risks with a view to the long term viability of the Group.

The Board had delegated to the Managing Director & Chief Executive Officer and his management team the day to day management of the Group.

The Company has a clear distinction and separation of roles between the Chairman and the Managing Director & Chief Executive Officer, with clear division of responsibilities. The Chairman is primarily responsible in leading and guiding the Board, and also serves as the communication point between the Board and the Managing Director & Chief Executive Officer whilst the Managing Director & Chief Executive Officer and his management team is responsible for implementing the plans chartered out and the day to day management of the Group, with clear authority delegated by the Board.

The Independent Non-Executive Directors of the Company play a key role in providing unbiased and independent views, advice and contributing their knowledge and experience toward the formulation of policies and in the decision making process. The Board structure ensures that no individual or group of individuals dominates the Board’s decision-making process. Although all the Directors have equal responsibility for the Company and the Group’s operations, the role of the Independent Directors are particularly important in ensuring that the strategies proposed by the Executive Directors are deliberated on and have taken into account the interest, not only of the Company, but also that of the shareholders, employees, customers, suppliers and the community.

In discharging its fiduciary duties, the Board has delegated specific tasks to four (4) Board Committees namely the Audit Committee, Nomination Committee, Remuneration Committee and ESOS Committee. All the Board Committees have its own terms of reference and has the authority to act on behalf of the Board within the authority as lay out in the terms of reference and to report to the Board with the necessary recommendation.

3. Board Charter As part of governance process, the Board has formalised and adopted the Board Charter. This Board Charter sets out the composition and balance, roles and responsibilities, operation and processes of the Board and is to ensure that all Board members acting on behalf of the Company are aware of their duties and responsibilities as Board members. A copy of the Board Charter is available at the Company’s website.

CORPORATE GOVERNANCE STATEMENT


4. Supply of information

Prior to the Board meetings, the Board papers comprising of due notice of issues to be discussed and supporting information and documentations were provided to the Board sufficiently in advance. The deliberations of the Board in terms of the issues discussed during the meetings and the Board’s conclusions in discharging its duties and responsibilities are recorded in the minutes of meetings.

The Board has access to all information within the Company as a full Board to enable them to discharge their duties and responsibilities and is supplied in a timely basis with information and reports on financial, regulatory and audit matters by way of Board papers for informed decision making and meaningful discharge of its duties.

To fulfill the responsibilities as set out above, all Directors have direct access to the advice and services of the Company Secretary who is responsible for ensuring the Board’s meeting procedures are adhered to and that applicable rules and regularations are complied with. The Board recognises that the Company Secretary is suitably qualified and capable of carrying out the duties required. The Board is satisfied with the service and support rendered by the Company Secretary in discharge of their functions.When necessary, Directors may whether as a full Board or in their individual capacity, seek independent professional advice at the Company’s expense to enable the directors to discharge their duties with adequate knowledge on the matters being deliberated.

Where applicable, the Board will establish a formal schedule of matters to clearly detail out matters that require the Board’s deliberation and approvals.

5. Board Meetings

There were Four (4) Board of Directors’ Meetings held during the financial year ended 31 December 2013. Details of the attendance of the Directors at the Board of Directors’ Meetings are as follow:

Name of Director Attendance(a) Dato’ Mohamed Amir Abas Bin Zainal Azim 4/4(b) Datuk Raymond Chan Boon Siew 4/4(c) Zainuri Bin Zainal 3/4(d) Chua Eng Chin 4/4(e) Ng Wai Han 3/4(g) Woo Mun Chee 3/4(f) Datuk Tan Choon Hwa (JMK, JP) (Resigned on 04.04.2014) 1/4

The Board is satisfied with the level of time commitment given by the Directors of the Company towards fulfilling their duties and responsibilities. This is evidenced by the attendance record of the Directors as set out herein above.

6. Directors’ Training

All Directors appointed to the Board have undergone the Mandatory Accreditation Program (“MAP”) prescribed by Bursa Malaysia Securities Berhad (“Bursa Securities”). The Directors are encouraged to attend continuous education programmes/seminars/conferences and shall as such receive further training from time to time to keep themselves abreast of the latest development in statutory laws, regulations and best practices, where appropriate, in line with the changing business environment and enhance their business acumen and professionalism in discharging their duties to the Group.



The following Board members have attended the relevant courses/seminars during the financial year as detailed below:

Name of Director Date Courses attended

Dato’ Mohamed Amir Abas Bin Zainal Azim 18 April 2013

Board oversight responsibilities for merger and acquisition-Passion beyond numbers

26 November 2013Board leadership& value systems- The tone at the top

Datuk Raymond Chan Boon Siew NA NA

Chua Eng Chin 11 May 2013 Anti Money Laundering and Anti Terrorism Financing – A Practitioners Guide

12 May 2013 The Mind of Investor – A Behavioural Finance Perspective

Zainuri Bin Zainal NA NANg Wai Han NA NADatuk Tan Choon Hwa (JMK, JP) (Resigned on 04.04.2014)

23 August 2013 Financial Management

Woo Mun Chee 6 March - 7 March 2013

Mandatory Accredition Programe (MAP) for Directors of Public Listed Companies

Datuk Raymond Chan Boon Siew, Encik Zanuri Bin Zainal and Mr Ng Wai Han did not attend any training during the year 2013 due to their busy schedule. They are aware of the duties and responsibilities and will continue to undergo other relevant training programmes to keep abreast with the new regulatory developments and requirements in compliance with the Listing Requirements on continuing education.

In addition to the above, Directors would be updated on recent developments in the areas of statutory and regulatory requirements from the briefing by the Auditors, Company Secretary and the Internal Auditors during the Committee and Board Meetings.

7. Nomination Committee

As recommended by the Code, the Nomination Committee was established on 5 December 2001, comprising exclusively of Non-Executive Directors, with the responsibilities of assessing the balance composition of Board members, nominate the proposed Board member by looking into his skills and expertise for contribution to the Company on an ongoing basis. The appointment of new Directors is the responsibility of the full Board after considering the recommendations of the Nomination Committee. The Nomination Committee is aware of their duties and responsibilities. As a whole, the Company maintains a very lean number of Board members.

The Nomination Committee does an annual review of the composition of the Board and makes recommendations to the Board accordingly, with a view to meeting current and future requirements of the Group. The Committee is satisfied with the current size of the Board, and with the mix of qualifications, skills & experience among the Board members. Among other evaluation criteria is the commitment displayed, the depth of contribution, ability to communicate and undertake assignments on behalf of the Board.



The present members of the Nomination Committee are:

Chairman

Woo Mun Chee - Independent Non-Executive Director

Members

Zainuri Bin Zainal - Independent Non-Executive Director

Chua Eng Chin - Independent Non-Executive Director

8. Re-election

The procedure on re-election of directors by rotation is set out in Articles No. 97 and 103 of the Company’s Articles of Association (“the Articles”). Pursuant to the Articles, all Directors who are appointed by the Board during the year are subject to re-election by shareholders at the first meeting after their appointment. The Articles also provide at least one third (1/3) of the remaining Directors are subject to re-election by rotation at each Annual General Meeting and retiring directors can offer themselves for re-election. All Directors shall retire from office at least once in every three (3) years, but shall be eligible for re-election. Directors over seventy (70) years of age are subject for re-appointment annually in accordance with Section 129(6) of the Companies Act, 1965.

9. Reinforce Independence

The Non-Executive Directors are not employees of the Group and do not participate in the day to day management of the Group. The Non-Executive Directors, including the Chairman, are independent directors and are able to express their views without any constraint. This strengthens the Board which benefits from the independent views expressed before any decisions are taken. The Nomination Committee has reviewed the performance of the independent directors and is satisfied they have been able to discharge their responsibilities in an independent manner.

None of the current independent board members had served the company for more than nine (9) years as per the recommendations of the Code. Should the tenure of an independent director exceed nine (9) years, shareholders approval will be sought at a General Meeting or if the services of the director concerned are still required, the director concerned will be re-designated as a non-independent director.

There is clear separation of powers between the Chairman, who is an independent director and the Managing Director and Chief Executive Officer, and this further enhances the independence of the Board. Should any director have an interest in any matter under deliberation, he is required to disclose his interest and abstain from participating discussions on the matter.



B. DIRECTORS’ REMUNERATION

1. Procedures

The Directors’ fee including Non-Executive Directors if any, have to be endorsed by the Board and approved for by the shareholders of the Company at the Annual General Meeting. The compensations for Non-Executive Directors are linked to their experience and level of responsibility taken.

2. Disclosure

The aggregate remuneration of Directors for the financial year ended 31 December 2013 is as follow:

Executive Directors(RM)

Non-Executive Directors(RM)

Salary 120,000 60,000

*Other Emoluments 3,600 10,800

Directors’ fee - 72,000

Total 123,600 142,800

*Other emoluments include the meeting allowance for the Directors’ attendance in Board and Audit Committee Meetings.

The number of Directors whose remuneration fall into the following bands is as follows:-

Range of Remuneration (RM) Executive Non-Executive

50,000 and below 1 2

50,001 – 100,000 - 1

100,000 – 150,000 1 -

Details of the individual Director’s remuneration are not disclosed in this report as the Board is of the view that the above remuneration disclosures by band and analysis between Executive and Non-Executive Directors satisfy the accountability and transparency aspects of the Code.

3. Remuneration Committee

In line with the best practices of the Code, the Board has set up a Remuneration Committee which would comprise a majority of Independent Non-Executive Directors in order to assist the Board for determining the Director’s remuneration.

The Remuneration Committee meets when required and is entrusted, among others, with examining the remuneration packages and other benefits of the Executive Director. The contribution, responsibilities and performance of each Executive Director is taken into account when determining their respective remuneration packages.



However, the ultimate responsibility to approve the remuneration of these Directors remains with the Board as a whole. The Executive Director is not involved in any decisions with regard to their own remuneration.

The present members of the Remuneration Committee are as follow:

Chairman Dato’ Mohamed Amir Abas Bin Zainal Azim - Independent Non-Executive Director

Members

Datuk Raymond Chan Boon Siew - Managing Director & Chief Executive Officer

Woo Mun Chee - Independent Non-Executive Director

C. COMMUNICATION BETWEEN THE COMPANY AND ITS SHAREHOLDERS AND INVESTORS

The Group values regular communication with its shareholders and investors.

The Company reaches out to its shareholders through the issuance of Annual Reports and updates on the Company are provided through the quarterly reports and various announcements made throughout the year. Shareholders and investors can also obtain general information of the Company through its website at http://www.harvestcourt.com.

Currently, the General Meetings are the principal forum for dialogues with the shareholders and investors. At each General Meeting, the Board presents the progress and performance of the Group and/or Corporate Proposals of the Company and shareholders are encouraged to participate in the question and answer sessions. Informal discussions between the Directors, senior management staff and the shareholders and investors are always active before and after the General Meetings.

D. ACCOUNTABILITY AND AUDIT

1. Financial Reporting

In presenting the annual financial statements and quarterly announcements to shareholders, the aim of the directors is to present a balanced and comprehensible assessment of the Group’s position and prospects. The Audit Committee assists the Board to ensure accuracy and adequacy of all annual and quarterly financial reports, audited and unaudited for disclosure. The statement by the Board pursuant to Paragraph 15.26(a) of the Listing Requirements on its responsibilities in preparing the financial statements is set out in Section E below.

2. Internal Controls

The Board acknowledges its overall responsibility for maintaining a system of risk management and internal controls, which provides reasonable assessment of effective and efficient operations, internal controls and compliance with laws and regulations. The system provides reasonable but not absolute assurance against material misstatements, losses, fraud and irregularities.





3. Relationship with Auditors

The External Auditors, Messrs. UHY have to report to the Company of their findings which are included as part of the Company’s financial reports with respect to each year’s audit on statutory financial statements. In doing so, the Company has established a transparent arrangement with the auditors to meet their professional requirements. From time to time, the auditors will highlight to the Audit Committee and the Board of Directors on matters that require the Audit Committee’s and Board’s attention and action.

E. STATEMENT OF DIRECTORS’ RESPONSIBILITY IN RESPECT OF THE AUDITED FINANCIAL STATEMENTS

The Directors are required by the Companies Act, 1965 to prepare financial statements for each financial year which have been made out in accordance with the applicable approved accounting standards so as to give a true and fair view of the state of affairs of the Group and Company at the end of the financial year and of the results and cash flows of the Group and Company for the financial year.

The Directors are satisfied that in preparing the financial statements of the Group for the financial year ended 31 December 2013, the Group has used the appropriate accounting policies and applied them consistently and supported by reasonable and prudent judgments and estimates. The Directors also consider that all applicable approved accounting standards have been complied with and further confirm that the financial statements have been prepared on a going concern basis.

The Directors are responsible for ensuring that the Company keeps proper accounting records with reasonable accuracy of the financial position of the Company. The Directors are to ensure that the financial statements comply with mandatory provisions of the Companies Act, 1965, the Malaysia Approved Accounting Standards and the Listing Requirements. The Directors are also responsible for taking such reasonable steps to safeguard the assets of the Group and to minimise fraud and other irregularities.

F. COMPLIANCE STATEMENT

The Group has complied with and shall remain committed to attaining the highest possible standards through the continuous adoption of the principles and best practices of the Code and all other applicable laws.

EMPLOYEES’ SHARE OPTION SCHEME (“ESOS”) COMMITTEE

The ESOS Committee was established on 8 March 2010. Its main responsibility is to oversee the administration as well as to ensure proper implementation of the ESOS according to the By-Laws of the ESOS.The present members of the ESOS Committee are as follow:

Chairman Datuk Raymond Chan Boon Siew

MembersNg Wai Han Chua Eng Chin Low Son Heng Freiya Chong Fui Fui

The ESOS Committee meets whenever necessary. During the year, the ESOS Committee had two (2) meetings with full attendance by all the members.



AUDIT COMMITTEE’S REPORT

1. COMPOSITION

Chairman Chua Eng Chin - Independent Non-Executive Director

MembersZainuri Bin Zainal - Independent Non-Executive DirectorDato’ Mohamed Amir Abas Bin Zainal Azim - Independent Non-Executive Director

2. TERMS OF REFERENCE

2.1 Members

The Board from among its members shall appoint the Audit Committee that fulfils the following requirements:

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

b) All the Audit Committee members must be non-executive directors, with a majority of them being independent directors.

c) All members of the Audit Committee should be able to read, analyse and interpret financial statements. At least one (1) of them:

(i) must be a member of the Malaysian Institute of Accountants; or

(ii) if he is not a member of the Malaysian Institute of Accountants, he must have at least three (3) years’ working experience and:(aa) he must have passed the examinations specified in Part I of the 1st Schedule of the

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

1st Schedule of the Accountant Act, 1967; or

(iii) fulfils such other requirements as prescribed or approved by the Exchange pursuant to Para.7 of the Practice Note 13 as “Requisite Qualifications” as follows:

(aa) a degree/masters/doctorate in accounting or finance and at least three (3) years’ post qualification experience in accounting or finance;

(bb) at least seven (7) years’ experience being a chief financial officer of a company or having the function of being primarily responsible for the management of the financial affairs of a company;

d) The members of the Audit Committee shall elect a Chairman among their number who shall be an independent director.

e) No alternate director is appointed as a member of Audit Committee.


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

g) The term of office and performance of Audit Committee and each of its members shall be reviewed by the Board at least once every three (3) years.

2.2 Meetings

Meetings shall be held as and when the Audit Committee deems necessary.

A minimum of two (2) members present shall form a quorum, both of whom present shall be independent Non-Executive Directors. In the event that the Chairman is unable to attend a meeting, a member of the Audit Committee shall be nominated as Chairman of the meeting. The nominated Chairman shall be an Independent Director.

The Committee may invite other directors and employees to the meeting to brief the Audit Committee on issues that are incorporated into agenda. At least twice a year, the Committee shall meet with the external auditors without the executive board members present. The Company Secretary shall be the Secretary to the Audit Committee meetings.

2.3 Authority

The Committee shall, in accordance with a procedure to be determined by the Board and at the cost of the Company:

a) have authority to investigate any matter within its terms of reference;

b) have adequate resources and unrestricted access to any information from both internal and external auditors and all employees of the Group in performing its duties;

c) have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity (if any);

d) be able to obtain external legal or other independent professional advice and to invite outsiders with relevant experience to attend, if necessary; and

e) be able to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other directors and employees of the Company, whenever deemed necessary.

2.4 Duties and Responsibilities

The duties and responsibilities of the Audit Committee shall be:

a) To review and recommend the appointment of external auditors, the audit fee and any questions of resignation or dismissal including the nomination of person or persons as external auditors;

b) To review with the external auditors, the audit plan and audit report;

c) To review with the external auditor, his evaluation of the system of internal controls;



d) To review the assistance given by the employees of the Company to the external auditor;

e) To review the adequacy of the scope, functions, competency and resources of the internal audit functions and that it has the necessary authority to carry out its work;

f) To review the internal audit programme, processes, the results of the internal audit programmed, processes or investigation undertaken and whether or not appropriate action is taken on the recommendations of the internal audit function;

g) To review the quarterly results and year end financial statements, prior to the approval by the board of directors, focusing particularly on:

(i) changes in or implementation of major accounting policy changes;(ii) significant and unusual events; and(iii) compliance with accounting standards and other legal requirements;

h) To review any related party transaction and conflict of interest situation that may arise within the listed company or group including any transaction, procedure or course of conduct that raises questions of management integrity; and

i) To review whether there is reason (supported by grounds) to believe that the listed company’s external auditor is not suitable for re-appointment.

j) To verify the allocation of options pursuant to a share scheme for employees at the end of each financial year.

3. ATTENDANCE OF MEETINGS

During the year ended 31 December 2013, the audit committee held four (4) meetings. Details of the attendance of committee members are as follow:

AttendanceChua Eng Chin 4/4Zainuri Bin Zainal 3/4Dato’ Mohamed Amir Abas Bin Zainal Azim 4/4

The external auditor shall meet the Audit Committee if there are contentious issues to be discussed. The Company Secretary attended all the Audit Committee meetings held.

4. SUMMARY ACTIVITIES OF THE AUDIT COMMITTEE DURING THE YEAR

The activities of the Audit Committee during the financial year ended 31 December 2013 include the following:

- review the quarterly results and year end financial statements- review the adequacy of the audit scope and plan of the external auditors- review reports of the internal and external auditors- review related party transactions- review the ESOS offered and exercised- review the Statement of Risk Management and Internal Control- review 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 accounting standards approved by the Malaysian Accounting Standard Board (“MASB”).



5. STATEMENT ON EMPLOYEES’ SHARE OPTIONS SCHEME (“ESOS”)

The Audit Committee has verified and was satisfied that the allocation of ESOS Options to the eligible Directors and employees of the HCIB Group during the financial year ended 31 December 2013, were in accordance with the criteria of allocation of share options set out in the ESOS By-Laws.

A breakdown of the options offered to and exercised by Non-Executive Directors pursuant to the ESOS in respect of the financial year under review are as follow:

No. of option over ordinary shares of RM0.25 each (ESOS)

Non-Executive DirectorsAt

01.01.2013

Amount of Options Granted

Amount of Options Exercised

At31.12.2013

i) Dato’ Mohamed Amir Abas Bin Zainal Azim - 400,000 - 400,000

ii) Zainuri Bin Zainal - 300,000 - 300,000Total :- - 700,000 - 700,000

6. INTERNAL AUDIT FUNCTIONS

The Company has established its in-house Internal Audit Division with effect from 4 June 2008. It reports directly to the Audit Committee to ensure that the internal audit functions are carried out effectively and professionally.

The role of the internal audit functions is to undertake regular and systematic reviews of the system of internal controls so as to provide reasonable assurance that such systems continue to operate satisfactorily and effectively.

The internal audits cover the review of the adequacy of risk management, operational controls, compliance with established procedures, guidelines and statutory requirements.

The costs incurred for the Internal Audit Function for the financial year 2013 is RM72,786.

During the financial year, the following activities were carried out by the internal audit department in discharge of its responsibilities:

i) Review the system of internal controls of the various business operating units;ii) Recommend improvements to the existing systems of internal controls;iii) Follow up on implementation and disposition of audit findings and recommendation;iv) Ascertain the extent to which the Company’s and the Group’s assets are accounted for and safeguarded

from losses of all kinds;v) Carry out various special assignments requested by the management and or the Audit Committee;vi) Identify opportunities to improve the operations of and processes in the Company and the Group;vii) Identification of risks and implementation of recommendations to mitigate the risks; andviii) Implementation of quarterly report with emphasis of Key Performance Index across the group; as

indicative yardstick of measures in daily operation.



Introduction

This Statement on Risk Management and Internal Control is made in accordance with the Code and paragraph 15.26(b) of the Listing Requirements, which require Malaysian public listed companies to make a statement in their annual report about their state of internal control, as a Group.

In view of this, the Board of Directors of Harvest Court Industries Berhad is pleased to provide the following statement on the state of the internal control of the Group as a whole for the financial year ended 31 December 2012, which has been prepared in accordance with the Statement on Risk Management and Internal Control : Guidelines for Directors of Listed Issuers issued by Bursa Malaysia Securities Berhad.

Board Responsibility

The Board is committed to ensuring the existence of an appropriate risk management framework and sound, efficient and effective system of internal control that cover the financial reporting, compliance and operations of the Group to safeguard shareholders’ investment and the Group’s assets. However, it should be noted that such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss.

The Group’s risk management and internal control framework is an ongoing process, and has been in place for identifying, evaluating and managing significant risks faced or potentially to be encountered by the Group. The process is regularly reviewed by the Board.

The implementation of the risk management and internal control system within the Group inclusive of design, operation, identification, assessment, mitigation and control of risks, are operated with the assistance of the management throughout the period. The Board has received assurance from the Managing Director & Chief Executive Officer that the Group’s risk management and internal control system is operating adequately and effectively in all material aspects, based on the risk management and internal control system of the Group.

The Board is of the view that the Group’s risk management and internal control framework and systems is in place for identifying, evaluating and managing significant risks faced or potentially to be encountered by the Group. The key features of the internal control systems which are operated with the assistance of the management are described under the following headings:-

Risk Management Framework

The Group has an embedded process for the identification, evaluation, reporting, treatment, monitoring and reviewing of the major strategic, business and operation risks within the Group, covering both wholly and partially owned subsidiaries. Both the Audit Committee and Board of Directors review the effectiveness of the risk management function and deliberate on the risk management and internal control frameworks, functions, processes and reports on a regular basis.

For the period under review, the Audit Committee is assisted by the internal control division and the operation staff from various divisions to effectively embed risk management and control into the corporate culture, processes and structures within the Group. The framework is continually monitored to ensure it is responsive to the changes in the business environment and clearly communicated to all levels.

STATEMENT ONRISK MANAGEMENT AND INTERNAL CONTROL


Internal Control Structure

The Group has an established internal control structure and is committed to evaluating, enhancing and maintaining the structure to ensure effective control over the Group’s business operations and to safeguard the value and security of the Group’s assets. There is a clearly defined operating structure with lines of responsibilities and delegated authority in place to assist the Board to maintain a proper control environment. The key elements of the Group’s internal control system include :-

(a) A clear and defined organisation structure that is aligned to the business and operational requirements of the core businesses of the Group which limits the respective levels of authority, accountability and responsibility of their job functions and specifications;

(b) Documentation of standard operating procedures and ensuring that internal policies, processes and procedures are drawn-up, reviewed and revised as and when required and necessary;

(c) Regular operational and financial reporting to the senior management and/or the Board, highlighting their progress and variances from budgets. The Audit Committee and the Board review quarterly operational as well as financial results and reports;

(d) Regular group management meetings are held as and when necessary to raise issues, discuss, review and monitor the business development and resolve operational and management issues and review financial performances against the business plans, the targets and the budgets, if any, for each operating unit and regular visits by the senior personnel or management team to each operating unit as and when necessary;

(e) Board and Audit Committee Meetings are scheduled regularly, that is at least four (4) times in a year and the respective meeting papers are distributed on a timely basis to enable members to have access to all relevant information for reviews and queries to be raised;

(f) Audit Committee prepares the Audit Committee Report and also reviews the quarterly financial results and yearly Audited Financial Statements prior to the approval of the Board;

(g) Management ensures that safety working regulations within the Group are being considered, implemented and adhered to accordingly;

(h) As and when necessary, staff training and development programs may be provided to equip staff with the appropriate knowledge and skills to enable staff to carry out their job functions productively and effectively; and

(i) Adequate insurance of major assets to ensure that assets of the Group are sufficiently covered against mishap that may results material losses to the Group.

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL


Conclusion

The business processes and internal controls of the Group are continually monitored, to ensure statutory compliance and maintain data integrity. The effectiveness of the internal control system is reviewed regularly.

For the financial year under review, there were no significant internal control deficiencies or material weaknesses resulting in material losses or contingencies requiring disclosure in the Annual Report. The Board is of the view that the existing system of the internal control is adequate to achieve the Group’s objectives. Nevertheless, the Board recognises that the system of internal control must continuously improve in line with the Group’s business environment. Therefore, the Board would put in place adequate plans, where necessary, to continuously improve the Group’s system of internal control.

Pursuant to Paragraph 15.23 of the Listing Requirements, the External Auditors have reviewed this Statement on Risk Management and Internal Control for inclusion in the Annual Report of the Company for the financial year ended 31 December 2013 and reported to the Board that nothing has come to their attention that causes them to believe that this statement is inconsistent with their understanding of the process adopted by the Board in reviewing the adequacy and integrity of the system of internal controls.

This statement is made in accordance with the resolution of the Board of Directors dated 22 May 2014.

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL


OTHER DISCLOSURE REQUIREMENTS PURSUANT TO THE LISTING REQUIREMENTS OF BURSA SECURITIES

1. UTILISATION OF PROCEEDS FROM CORPORATE EXERCISE

On 30 August 2013, the Company had completed its Right Issue with Warrants exercise by issuance of 66,356,050 new ordinary shares together with 33,178,025 free detachable warrants which had been listed and quoted on Main Market of Bursa Malaysia Securities Berhad on even date.

Status of utilization of proceeds from Right Issue with Warrants exercise up to 31 December 2013 is as follows :-

Purpose

Proposed utilisation

RM

Actual utilisation

RMDeviation

RMBank Borrowing 64,493 84,000 (19,507)

Working capital requirements for the HCIB Group :-i) Construction 11,007,164 6,965,948 4,041,216ii) Timber 4,717,356 3,382,597 1,334,759

Estimated expenses for Right Issue with Warrants 800,000 300,064 499,936

Total 16,589,013 10,732,609 5,856,404

Notes :

1) The estimated expenses of approximately RM800,000 consist of professional fees and fees payable to the relevant authorities. Any variation in the actual amount of the expenses for the Proposed Right Issue with Warrants will be adjusted proportionately for working capital purposes

2. SHARE BUY-BACKS

There were no share buy-back arrangements during the financial year.

3. OPTIONS, WARRANTS OR CONVERTIBLE SECURITIES

During the financial year ended 31 December 2013, total of 12,000,000 ESOS share options were offered to the eligible Directors and employees of the Group and there was no exercise of options during the financial year.

On 30 August 2013, 33,178,025 new warrants issued by the Company pursuant to Right Issue with Warrants exercise were listed and quoted on Main Market of Bursa Malaysia Securities Berhad.

4. DEPOSITORY RECEIPT PROGRAMMES

The Company did not sponsor any depository receipt programmes during the financial year.


5. IMPOSITION OF SANCTIONS/PENALTIES

During the financial year, there were no sanctions and/or penalties imposed on the Company and its subsidiaries, directors or management by the regulatory bodies.

6. NON-AUDIT FEES

No non-audit fees paid to the external auditors by the Company and its subsidiary companies during the financial year ended 31 December 2013.

7. VARIANCE IN RESULTS, PROFIT ESTIMATE, FORECAST OR PROJECTION

There were no significant variances between the results for the financial year and the unaudited results previously announced on 27 February 2014.

8. PROFIT GUARANTEE

The Company did not give any form of profit guarantee to any parties during the financial year.

9. MATERIAL CONTRACTS AND CONTRACTS RELATING TO LOAN

There were no contracts relating to loan and material contracts of the Company and its subsidiaries involving the Directors and substantial shareholders since the end of the previous financial year.



10. RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE AND TRADING NATURE

The Company is seeking approval from Shareholders for the Proposed Shareholders’ Mandate pursuant to Chapter 10.09 of the Listing Requirements and Practice Note 12 of the Listing Requirements at the forthcoming Annual General Meeting to be held on 20 June 2014.

RRPT of a trading or revenue nature of the Group for the financial year ended 31 December 2013 are as follows:

Related Party HCIB Group- Transacting Party

Nature of Transaction with HCIB Group

Value ofTransaction

(RM)

Nature of relationship between HCIB Group and the Related Party

Sagajuta Group HCIB Group Provision and/or receipt of construction work to and/or from Sagajuta Group

Provision and/or receipt of project management and development, property development to and/or from Sagajuta Group

Supply of timber and timber products, construction and building materials to Sagajuta Group

457,331 Datuk Raymond Chan Boon Siew is a Managing Director and substantial shareholder of Sagajuta with a shareholding of 8.71%. He is also a Managing Director & Chief Executive Officer and substantial shareholder of HCIB.

Naim Indah Group

HCIB Group Provision and/or receipt of construction work to and/or from Naim Indah Group

Provision and/or receipt of project management and development, property development to and/or from Naim Indah Group

Supply and/or purchase of timber and timber products, construction and building materials to and/or from Naim Indah Group

Nil Datuk Raymond Chan Boon Siew is a Chief Executive Office and Non-Independent Director and substantial shareholder of Naim Indah with a shareholding of 8.73%. He is also a Managing Director & Chief Executive Officer and substantial shareholder of HCIB.



Related Party HCIB Group- Transacting Party

Nature of Transaction with HCIB Group

Value ofTransaction

(RM)

Nature of relationship between HCIB Group and the Related Party

1Green Enviro HCIB Group Provision of construction work to 1Green Enviro

Provision of project management and development to 1Green Enviro

Supply of timber and timber products, construction and building materials to 1Green Enviro

Nil Datuk Raymond Chan Boon Siew is a Director of 1Green Enviro. He is also a Managing Director & Chief Executive Officer and substantial shareholder of HCIB.

Sagajuta (Sabah) Sdn Bhd (“Sagajuta”)

Harvest Lumber Sdn Bhd (“HLSB”)

Supply of door leavesto 1 Sulaman Project (a) and 1 Likas project (b) in Kota Kinabalu, Sabah 1

748,563 Datuk Raymond Chan Boon Siew is a Managing Director and substantial shareholder of Sagajuta with a shareholding of 8.71%. He is also a Managing Director & Chief Executive Officer and substantial shareholder of HCIB.

Sagajuta Creatives & Communications Sdn Bhd (“SCCSB”)

Harvest Court Industries Berhad (“HCIB”)

Provision of advertisement, marketing and event management services 2

46,390 Datuk Raymond Chan Boon Siew is a Director of SCCSB. He is also a Managing Director & Chief Executive Officer and substantial shareholder of HCIB.

Notes on Nature of Transaction:

* The estimated values are calculated based on the historical data and best estimates by the management. Accordingly, the actual value of the transaction may vary form the estimated value disclosed above and subject to changes.

(a)

1 Sulaman Project is a proposed construction and completion of a 28-storey medium cost apartment (950 units), 2-storey shop office (8 units), 1-level common facilities podium and 5-level car parking floors called Gold Tower on Parcel 3 at Lot CL No. 015080145 and 015026392 Jalan Sulaman, District of Kota Kinabalu, Kuala Menggatal, Sabah.

(b) 1 Likas Project is a proposed mixed development on Lot TL 017546879 at Teluk Likas, Kota Kinabalu, Sabah.

1 Supply of door leaves to Sagajuta by HLSB based on prevailing market price.

2 Provision of advertisement, marketing and events management services by SCCSB to HCIB based on prevailing market price.



ANALYSIS OF SHAREHOLDINGS AS AT 7 MAY 2014

AUTHORIZED SHARE CAPITAL : RM200,000,000.00ISSUED AND FULLY PAID-UP CAPITAL : RM66,357,380.75CLASS OF SHARES : ORDINARY SHARES OF RM0.25 EACHVOTING RIGHTS : ONE VOTE PER ORDINARY SHARENUMBER OF SHAREHOLDERS : 4,715

DISTRIBUTION OF SHAREHOLDINGS AS AT 7 MAY 2014

SIZE OF SHAREHOLDINGS NO. OF SHAREHOLDERS

NO. OF ORDINARY

SHARES%

LESS THAN 100 58 1,944 0.00100 TO 1,000 615 566,440 0.211,001 TO 10,000 1,722 9,893,336 3.7310,001 TO 100,000 1,940 68,020,039 25.63100,001 TO LESS THAN 5% OF ISSUED SHARES 380 186,947,764 70.435% AND ABOVE OF ISSUED SHARES - - -TOTAL 4,715 265,429,523 100.00

DIRECTORS’ SHAREHOLDINGS AS AT 7 MAY 2014

DIRECT INDIRECT

NO. NAMES NO. OF SHARES % NO. OF

SHARES %

1. DATO’ MOHAMED AMIR ABAS BIN ZAINAL AZIM 10,500 0.004 - -2. DATUK RAYMOND CHAN BOON SIEW 18,719,675 7.05 - -3. NG WAI HAN - - - -4. ZAINURI BIN ZAINAL 301,600 0.11 - -

5. CHUA ENG CHIN 226,600 0.09 - -

6. WOO MUN CHEE 24,000 0.01 - -

LIST OF SUBSTANTIAL SHAREHOLDERS (5% AND ABOVE) AS AT 7 MAY 2014

DIRECT INDIRECT


SHARES %

1. DATUK RAYMOND CHAN BOON SIEW 18,719,675 7.05 - -2. ZENITH CITY INVESTMENTS LIMITED 20,339,500 7.66 - -3. DATUK CHAI WOON CHET - - 20,339,500 (a) 7.66

(a) Deemed interested through substantial shareholding in Zenith City Investments Limited


LIST OF TOP 30 SHAREHOLDERS/DEPOSITORS AS AT 7 MAY 2014

Name No. of Shares Held Percentage

1. KENANGA NOMINEES (ASING) SDN BHD EXEMPT AN FOR AG STOCKBROKING LTD 12,867,600 4.85

2. TA NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR RAYMOND CHAN BOON SIEW 12,428,009 4.68

3. RHB NOMINEES (ASING) SDN BHD PLEDGED SECURITIES ACCOUNT FOR WENCASTLE HOLDINGS LIMITED 11,800,000 4.45

4. UOBM NOMINEES (ASING) SDN BHD EXEMPT AN FOR AVESTRA ASSET MANAGEMENT LTD 8,064,400 3.04

5.M & A NOMINEE (ASING) SDN BHD SANSTON FINANCIAL GROUP LIMITED FOR AVESTRA ASSET MANAGEMENT LIMITED

6,300,000 2.37

6. KONG KOK KEONG 6,180,000 2.33

7. CARTABAN NOMINEES (ASING) SDN BHD EXEMPT AN FOR KGI ASIA LTD 5,647,500 2.13

8. PUBLIC NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR TEE KIM HEW (E-KLG/BTG) 5,326,000 2.01

9. AFFIN NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR YANG PEING NAN (YAN0139C) 4,628,300 1.74

10.ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR RAYMOND CHAN BOON SIEW (8081977)

3,602,900 1.36

11. LIEW CHUN KEONG 2,884,100 1.09

12.ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR RAYMOND CHAN BOON SIEW (8083561)

2,660,000 1.00

13. LIM CHEEN MEI 2,066,666 0.7814. WONG KON WAH 1,900,000 0.7215. TEOH HIN HENG 1,759,000 0.66

16. MAYBANK NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR HOO YEEK FOO 1,456,800 0.55

17. LIM LEONG HENG 1,226,666 0.46

18.CARTABAN NOMINEES (ASING) SDN BHD STANDARD CHARTERED BANK SINGAPORE FOR AVESTRA ASSET MANAGEMENT LTD ACCELERATOR FUND (MY011777700027)

1,155,400 0.44

19. QUEK SOON TIANG 1,150,000 0.43

20.PUBLIC NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR S VIJIAN A/L SUBRAMANIAM (E-SJA/SAM)

1,132,000 0.43

21. PUBLIC NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR ENG CHEW ONG (E-KLG/BTG) 1,119,300 0.42

22. KHOR HUN BOON 1,100,000 0.41

23. WANGSA KINTA SDN. BHD. 1,046,826 0.39

24. ANG HONG SWEE 1,017,000 0.38

25. CIMSEC NOMINEES (TEMPATAN) SDN BHD CIMB BANK FOR LEE WENG KHANG (MY1237) 1,000,000 0.38

26. MAH SOON HUAT 1,000,000 0.3827. LIM KWE HUA 1,000,000 0.38

28. CIMSEC NOMINEES (TEMPATAN) SDN BHD CIMB BANK FOR QUEK YONG WAH (MY1537) 1,000,000 0.38

29. CHOONG GUAN CHENG 971,000 0.3730. LIM TECK SOON 870,000 0.33

TOTAL 104,359,467 39.32



ANALYSIS OF WARRANTS A HOLDINGS AS AT 7 MAY 2014

ISSUED SIZE :

80,666,898 10 YEARS DETACHABLE WARRANTS A ISSUED PURSUANT TO THE RIGHTS ISSUE WITH WARRANTS, LAND ACQUISITION, DEBT SETTLEMENT SCHEME AND ADDITIONAL WARRANTS ISSUED PURSUANT TO A RIGHTS ISSUE EXERCISE

NUMBER OF WARRANTS HOLDERS : 1,748

DISTRIBUTION OF WARRANTS A HOLDINGS AS AT 7 MAY 2014

SIZE OF WARRANTS HOLDINGSNO. OF

WARRANTS HOLDERS

NO. OF WARRANTS %

LESS THAN 100 99 4,024 0.00100 TO 1,000 40 19,820 0.021,001 TO 10,000 431 1,989,698 2.4710,001 TO 100,000 1,010 34,237,268 42.44100,001 TO LESS THAN 5% OF ISSUED SHARES 168 44,416,088 55.065% AND ABOVE OF ISSUED SHARES - - -TOTAL 1,748 80,666,898 100.00

DIRECTORS’ INTEREST IN WARRANTS A AS AT 7 MAY 2014

DIRECT INDIRECT


SHARES %

1. DATO’ MOHAMED AMIR ABAS BIN ZAINAL AZIM - - - -2. DATUK RAYMOND CHAN BOON SIEW 100 0.0001 - -3. NG WAI HAN - - - -4. ZAINURI BIN ZAINAL - - - -5. CHUA ENG CHIN - - - -6. WOO MUN CHEE - - - -



LIST OF TOP 30 WARRANTS A HOLDERS/DEPOSITORS AS AT 7 MAY 2014

Name

No. of Warrants A

Held Percentage

1.M & A NOMINEE (ASING) SDN BHD SANSTON FINANCIAL GROUP LIMITED FOR AVESTRA ASSET MANAGEMENT LIMITED

2,430,100 3.01

2. ZULKIFLI BIN OSMAN 1,614,582 2.003. ANUAL BIN HASSAN 1,398,000 1.734. NG HOOI LENG 934,800 1.16

5. RHB CAPITAL NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR MOHD AMIRI BIN AB RAHMAN 798,000 0.99

6. TA NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR OH KOK BENG 752,400 0.93

7.MAYBANK SECURITIES NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR ZAMLIS BIN ZAINAL (REM 868-MARGIN)

721,000 0.89

8. PUBLIC NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR KUA AH PENG (E-SPI) 720,800 0.89

9. TA NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR OH KOK KEONG 684,000 0.85

10.HLB NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR SHANMUGHANATHAN A/L VELLANTHURAI

684,000 0.85

11. ROSZALI BIN MOHAMED 642,000 0.80

12. CIMSEC NOMINEES (TEMPATAN) SDN BHD CIMB BANK FOR LEN BOOK LEARN (M66002) 621,600 0.77

13. WANGSA KINTA SDN. BHD. 615,600 0.7614. KUASATEK (M) SDN BHD 600,400 0.74

15.HLIB NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR SUCCESS SECRETS SDN. BHD. (MG0179-192)

570,000 0.71

16. CHEE CHOONG SOON 524,040 0.6517. MOHD NOOR BIN ABD KADIR 500,000 0.6218. JASON NGA KOR SING 490,200 0.6119. MOHAMAD BIN HJ DAUD 471,200 0.5820. LIM YAT KWAN 467,400 0.5821. LIM KAH CHING 456,000 0.57

22.KENANGA NOMINEES (TEMPATAN) SDN BHDPLEDGED SECURITIES ACCOUNT FOR KENG ENG HAI (10K34873M)

456,000 0.57

23. TAN PHILIP 456,000 0.5724. PER CHAI KENG 433,450 0.5425. ZAINAL ARIFFIN BIN OSMAN 426,300 0.5326. ANG SOH MUI 424,900 0.5327. ABDUL RAHMAN BIN ABU BAKAR 410,400 0.5128. NGU SIEW HO 380,000 0.4729. KOY AH SON @ KOAY KAH SOON 350,000 0.4330. LIM CHONG YAW 342,456 0.42

TOTAL 20,375,628 25.26



ANALYSIS OF WARRANTS B HOLDINGS AS AT 7 MAY 2014

ISSUED SIZE : 33,178,025 10 YEARS FREE DETACHABLE WARRANTS ISSUED PURSUANT TO A RIGHTS ISSUE EXERCISE

NUMBER OF WARRANTS HOLDERS : 1,446

DISTRIBUTION OF WARRANTS B HOLDINGS AS AT 7 MAY 2014

SIZE OF WARRANTS HOLDINGSNO. OF

WARRANTS HOLDERS

NO. OF WARRANTS %

LESS THAN 100 59 2,608 0.01100 TO 1,000 289 171,784 0.521,001 TO 10,000 729 2,916,027 8.7910,001 TO 100,000 301 11,063,423 33.35100,001 TO LESS THAN 5% OF ISSUED SHARES 68 19,024,183 57.345% AND ABOVE OF ISSUED SHARES - - -TOTAL 1,446 33,178,025 100.00

DIRECTORS’ INTEREST IN WARRANTS B AS AT 7 MAY 2014

DIRECT INDIRECT


SHARES %

1. DATO’ MOHAMED AMIR ABAS BIN ZAINAL AZIM - - - -2. DATUK RAYMOND CHAN BOON SIEW - - - -3. NG WAI HAN - - - -4. ZAINURI BIN ZAINAL - - - -5. CHUA ENG CHIN - - - -6. WOO MUN CHEE 3,000 0.009 - -



LIST OF TOP 30 WARRANTS B HOLDERS/DEPOSITORS AS AT 7 MAY 2014

Name No. of

Warrants B Held Percentage1. YAP KOW CHAI 896,000 2.70

2. MERCSEC NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR HO LIH MENG 820,000 2.47

3. GO HANG THONG 800,000 2.41

4.ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR LEN BOOK LEARN (8109660)

783,300 2.36

5. CIMSEC NOMINEES (TEMPATAN) SDN BHD CIMB BANK FOR LEN BOOK LEARN (M66002) 769,800 2.32

6. CHEN MEI FONG MARY 635,000 1.917. LIM LAY PENG 620,000 1.878. PHUA BOON PING 614,400 1.859. TAN BOON HAR 530,000 1.6010. TEH TEK SOON 500,000 1.5111. KHOR HUN BOON 500,000 1.5112. AZHAR BIN MAMAT 437,400 1.3213. WONG YORK NGOH 383,400 1.1614. KEW OI LAN 361,500 1.0915. ANG SOH MUI 346,900 1.0516. LIM TECK SOON 335,000 1.01

17. RHB CAPITAL NOMINEES (ASING) SDN BHD PLEDGED SECURITIES ACCOUNT FOR CHEN MEI FONG MARY 334,900 1.01

18. SIM KEW 328,900 0.9919. HEONG YEW CHOY 300,000 0.9020. TAN CHIN HUAT 300,000 0.9021. AW SOOK FUN 300,000 0.90

22. AIBB NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR GOH KIM CHOON 294,300 0.89

23. WONG YIN LING 285,050 0.8624. LIM CHEEN MEI 258,333 0.7825. CHOA SEONG YEE 252,500 0.7626. TAN SO CHANG 240,000 0.7227. LAI KIM LAN 203,334 0.6128. CHAN YEW FEE 200,000 0.6029. TAN TECK HENG 200,000 0.60

30. RHB NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR MEAH ONG SING 200,000 0.60

TOTAL 13,030,017 39.27



GROUP’S LANDED PROPERTIES

Location Description Tenure Area sq. m. Approximate Age (Years)

Net Book Value

Date of Acquisition Existing use

1. Lot 450, 451 & 452, Jalan Papan Pandamaran Industrial Area 42000 Port Klang Selangor Darul Ehsan

- Main Office- 4 factory buildings- 6 storage yards- 1 packing area- Boiler houses & workshop

Leasehold 32,375 1-28 15,004,015 2009 Factory and Office

2. Lot 10568, Jalan Papan Pandamaran Industrial Area 42000 Port Klang

- KD Plant and warehouse

Leasehold 5,970 1-24 12,213,628 2009 KD Chambers


AUDITED FINANCIAL STATEMENT 2013

AUDITED FINANCIAL STATEMENTS

2013


The Directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2013.

Principal Activities

The principal activity of the Company is investment holding.

The principal activities of the subsidiary companies are disclosed in Note 5 to the financial statements.

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

Financial Results

Group Company

RM RM

Net loss for the financial year (3,718,673) (486,244)

Attributable to:Owners of the parent

(3,718,673)

Dividend

No dividend has been paid or declared by the Company since the end of the previous financial year. The Board of Directors does not recommend any dividend in respect of the financial year under review. Reserves and Provisions

There were no material transfers to or from reserves or provisions during the financial year under review other than those disclosed in the financial statements.

DIRECTORS’ REPORT


Issue of Shares and Debentures

During the financial year, the Company increased its issued and paid-up share capital by the issuance of 66,356,050 new ordinary shares of RM0.25 each through renounceable right issue at issue price of RM0.25 each on the basis of two (2) right shares and one (1) free right warrant for every six (6) existing shares held on 30 July 2013.

The new ordinary shares issued during the financial year ranked pari passu in all respects with the existing ordinary shares of the Company.

There were no issues of debentures during the financial year under review.

Warrants

During the financial year, the Company issued 33,178,025 Warrants B (2013/2023), pursuant to the above right issue and no warrants were exercised during the year.

The salient features of the Company’s Warrants A and Warrants B are disclosed in Note 13 of the financial statements.

Options Granted Over Unissued Shares

No options were granted to any person to take up unissued shares of the Company during the financial year under review, except for the ESOS.

Employee Share Option Scheme (“ESOS”)

The Company’s ESOS was approved by shareholders at the Extraordinary General Meeting on 3 March 2010 and became effective on 23 March 2010 for a period of 5 years, and will lapse on 22 March 2015.

The salient features and other terms of the ESOS are disclosed in Note 28 to the financial statements.

The Company has been granted exemption pursuant to Section 169(11) of the Companies Act, 1965 by the Companies Commission of Malaysia from having to disclose the names of option holders, other than Directors, who have been granted options to subscribe for less than 559,000 units. The names and number of options granted and accepted in excess of 559,000 is disclosed in Note 28 to the financial statements.

The movement of options granted under ESOS during the financial year are disclosed in Note 28 to the financial statements.

DIRCTOR’S REPORT


Employee Share Option Scheme (“ESOS”) (Cont’d)

Details of the options granted to Directors are disclosed in the section on Directors’ Interests of this report.

Directors

The Directors of the Company who served since the date of the last report are as follows:

Datuk Raymond Chan Boon SiewChua Eng ChinZainuri bin ZainalDato’ Mohamed Amir Abas bin Zainal AzimNg Wai HanWoo Mun CheeDatuk Tan Choon Hwa (JMK, JP) (resigned on 4 April 2014)

Directors’ Interests

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

At At1.1.2013 Acquired Disposed 31.12.2013

Harvest Court Industries BerhadDirect interest: Datuk Raymond Chan Boon Siew 29,740,809 11,976,766 22,997,900 18,719,675 Zainuri Bin Zainal 301,600 - - 301,600 Chua Eng Chin 230,000 96,600 - 326,600 Dato' Mohammed Amir Abas Bin Zainal Azim 150,500 - 140,000 10,500 Woo Mun Chee 18,000 6,000 - 24,000 Ng Wai Han 300,000 208,077 508,077 -

At At1.1.2013 Granted Exercised 31.12.2013

Harvest Court Industries BerhadDirect interest: Zainuri Bin Zainal - 300,000 - 300,000 Dato' Mohammed Amir Abas Bin Zainal Azim - 400,000 - 400,000

No. of ordinary shares of RM0.25 each

No. of option over ordinary shares of RM0.25 each

DIRCTOR’S REPORT


Directors’ Interests (Cont’d)


Harvest Court Industries Berhad Datuk Raymond Chan Boon Siew 515,000 - 514,900 100


Harvest Court Industries Berhad Datuk Raymond Chan Boon Siew - 5,988,383 (5,988,383) - Chua Eng Chin - 48,300 (48,300) - Woo Mun Chee - 3,000 - 3,000 Ng Wai Han - 104,039 (104,039) -

No. of Warrants A

No. of Warrants B

By virtue of the interest in the share capital of the Company, Datuk Raymond Chan Boon Siew is also deemed interested in the shares of its related corporations to the extent that the Company has an interest under Section 6A of the Companies Act, 1965.

None of the other Directors holding office at the end of the financial year had any interest in the ordinary shares and options of the Company or its related corporations during the financial year under review.

Directors’ Benefits

Since the end of the previous financial year, no Director of the Company has received or become entitled to receive any benefit (other than a benefit included in the aggregate amount of remunerations received by Directors as shown in Note 25 the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest.

Neither during nor at the end of the financial year, was the Company or its subsidiary companies a party to any arrangement the object of which is to enable the Directors to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate other than those arising from the share options granted under the Company’s ESOS.

DIRCTOR’S REPORT


Other Statutory Information

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

(i) to ascertain that action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that there were no known bad debts to be written off and that no provision for doubtful debts were necessary; and

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

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

(i) it necessary to write off any bad debts or to make any provision for doubtful debts in the financial statements of the Group and of the Company; or

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

Company misleading; or

(iii) any amount stated in the financial statements of the Group and of the Company misleading; and

(iv) adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.

(c) At the date of this report, there does not exist:

(i) any charge on the assets of the Group and the Company which has arisen since the end of the financial year which secures the liabilities of any other person; and

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

(d) No contingent liability or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may affect the ability of the Group and of the Company to meet their obligations as and when they fall due.

DIRCTOR’S REPORT


Auditors

The auditors, UHY, have expressed their willingness to continue in office.

Signed on behalf of the Board in accordance with a resolution of the Directors dated 22 April 2014.

DATUK RAYMOND CHAN BOON SIEW CHUA ENG CHIN

DIRCTOR’S REPORT


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

We, the undersigned, being two of the Directors of the Company, do hereby state that, in the opinion of the Directors, the financial statements set out on pages 54 to 118 are drawn up in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of 31 December 2013 and of their financial performance and cash flows for the financial year then ended.

The supplementary information set out in page 119 to the financial statements have been compiled in accordance with Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants and the directive of Bursa Malaysia Securities Berhad.

Signed on behalf of the Board in accordance with a resolution of the Directors dated 22 April 2014.

DATUK RAYMOND CHAN BOON SIEW CHUA ENG CHIN

STATEMENT BY DIRECTORS


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

I, MAZLAN BIN MOHAMAD, being the Officer primarily responsible for the financial management of HARVEST COURT INDUSTRIES BERHAD, do solemnly and sincerely declare that to the best of my knowledge and belief, the financial statements set out on pages 54 to 118 are correct and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the abovenamed MAZLAN BIN MO-HAMAD at KUALA LUMPUR in the Federal Territory on 22 April 2014

))))

MAZLAN BIN MOHAMAD

Before me,

STATUTORY DECLARATION


INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OFHARVEST COURT INDUSTRIES BERHAD(Company No.: 36998 - T)(Incorporated in Malaysia)

Report on the Financial Statements

We have audited the financial statements of Harvest Court Industries Berhad, which comprise the statements of financial position as at 31 December 2013 of the Group and of the Company, and the statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 54 to 118.

Directors’ Responsibility for the Financial Statements

The Directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

REPORT OFTHE AUDITORS


INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OFHARVEST COURT INDUSTRIES BERHAD (CONT’D)(Company No.: 36998 - T)(Incorporated in Malaysia)

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the Group and of the Company as of 31 December 2013 and of their financial performance and cash flows for the financial year then ended in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia.

Report on Other Legal and Regulatory Requirements

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

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

(b) We are satisfied that the accounts of the subsidiary companies that have been consolidated with the Company’s financial statements are in form and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes.

(c) Our audit reports on the accounts of the subsidiary companies did not contain any qualification or any adverse comment made under Section 174(3) of the Act.

Other Reporting Responsibilities

The supplementary information set out on page 119 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The Directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.

REPORT OF THE AUDITOR


INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OFHARVEST COURT INDUSTRIES BERHAD (CONT’D)(Company No.: 36998 - T)(Incorporated in Malaysia)

Other Matter

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

UHYFirm Number: AF 1411Chartered Accountants

YEOH AIK CHUANApproved Number: 2239/07/14( J)Chartered Accountant

KUALA LUMPUR22 April 2014

REPORT OF THE AUDITOR


STATEMENTS OF FINANCIAL POSITIONAS AT 31 DECEMBER 2013

2013 2012 2013 2012Note RM RM RM RM

Non-Current AssetsProperty, plant and equipment 4 30,494,949 31,214,916 8,779,393 9,271,897 Investment in subsidiary companies 5 - - 14,391,548 12,922,104 Investment in associate company 6 - 818,461 - 823,166

30,494,949 32,033,377 23,170,941 23,017,167

Current AssetsInventories 7 6,979,085 7,862,757 - - Trade receivables 8 12,555,284 9,757,187 - - Other receivables 9 977,356 1,623,017 801,008 1,365,249 Amounts owing by contract customers 10 - 478,326 - -

Amounts owing by subsidiary companies 11 - - 27,267,427 21,868,648

Tax recoverable - 332 575,000 - Short-term deposits with licensed banks 12 6,659,329 499,192 6,659,329 499,192

Cash and bank balances 419,060 91,980 221,435 2,193 27,590,114 20,312,791 35,524,199 23,735,282

Total Assets 58,085,063 52,346,168 58,695,140 46,752,449

Group Company


2013 2012 2013 2012Note RM RM RM RM

EquityShare capital 13 66,357,381 49,768,368 66,357,381 49,768,368 Share premium 14 - 2,555,100 - 2,555,100 Other reserves 15 2,768,750 50 2,768,750 50 Accumulated losses (17,228,129) (13,509,456) (21,754,044) (21,267,800) Total equity 51,898,002 38,814,062 47,372,087 31,055,718

Non-Current LiabilitiesHire purchase payables 16 248,697 61,795 - - Deferred tax liabilities 17 2,092,292 2,173,347 1,056,025 1,115,393

2,340,989 2,235,142 1,056,025 1,115,393

Current LiabilitiesTrade payables 18 1,038,945 3,683,121 - - Other payables 19 1,584,000 1,601,136 1,166,006 684,266 Amounts owing to contract customers 10 1,077,060 - - - Amounts owing to subsidiary companies 11 - - 9,101,022 8,174,699 Amount owing to associated company 11 - 870,352 - 877,344 Amounts owing to Directors 20 - 4,845,029 - 4,845,029 Hire purchase payables 16 63,067 17,058 - - Bank borrowing 21 - 95,992 - - Tax payable 83,000 184,276 - -

3,846,072 11,296,964 10,267,028 14,581,338 Total Liabilities 6,187,061 13,532,106 11,323,053 15,696,731 Total Equity and Liabilities 58,085,063 52,346,168 58,695,140 46,752,449

Group Company

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

STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER 2013 (CONT’D)


2013 2012 2013 2012Note RM RM RM RM

Revenue 22 16,961,601 24,341,007 2,400,000 -

Cost of sales 23 (15,901,315) (20,230,214) - -

Gross profit 1,060,286 4,110,793 2,400,000 -

Other income 613,682 459,417 953,980 595,807

Administrative expenses (5,231,037) (4,077,264) (3,836,592) (3,507,606)

Distributions costs (126,659) (423,839) - -

Finance costs 24 (10,175) (5,052) - -

Share of results of associate 27,175 (4,705) - -

(Loss)/Profit before taxation 25 (3,666,728) 59,350 (482,612) (2,911,799)

Taxation 26 (51,945) 81,055 (3,632) 59,368

Net (loss)/profit for the financial year, representing total comprehensive income for the financial year (3,718,673) 140,405 (486,244) (2,852,431)

Net (loss)/profit for the financial year attributable to: Owners of the parent (3,718,673) 166,902 Non-controlling interest - (26,497)

(3,718,673) 140,405

(Loss)/Earning per share attributable to owners of the parent (sen):Basic 27(a) (1.68) 0.09 Fully diluted 27(b) (1.62) 0.08

CompanyGroup


STATEMENTS OF COMPREHENSIVE INCOMEFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013

Ann

ual R

epo

rt 2

013

57

Non

-Sh

are

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RM

RM

RM

RM

RM

RM

At 1

Janu

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45,3

29,3

68

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8,

550

(1

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4,85

8)

31,6

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60

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188

32

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Net

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264,

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4,43

9,00

0

2,55

5,10

0

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8,

500

6,99

4,10

0

(6

14,6

91)

6,37

9,40

9

At 3

1 D

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012

49,7

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38

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Not

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MR

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49,7

68,3

68

2,55

5,10

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50

-

-

(1

3,50

9,45

6)

38,8

14,0

62

Net

loss

for t

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tota

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8,

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349

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66,3

57,3

81

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21

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STATEMENTS

OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013

2013 2012 2013 2012RM RM RM RM

Cash Flows From Operating Activities(Loss)/Profit before taxation (3,666,728) 59,350 (482,612) (2,911,799)

Adjustments for: Depreciation of property, plant and equipment 1,371,049 1,416,721 493,899 493,828 Gain on disposal of property, plant and equipment - (140,857) - - Impairment on amounts owing by subsidiary companies - - - 1,123,513 Interest expenses 10,175 5,052 - - Interest income (91,979) (14,138) (91,979) (14,138) Loss on remeasurement of investment in subsidiary company to associate company - - - 86,929 Goodwill written off 16,607 - - - Share of (profit)/loss of associate company (27,175) 4,705 - - Share options granted under ESOS 213,600 - 213,600 - Unrealised gain on foreign exchange (886) (3,916) - - Operating (loss)/profit before working capital changes (2,175,337) 1,326,917 132,908 (1,221,667)

Changes in working capital: Inventories 883,672 889,965 - - Trade and other receivables (2,151,550) (10,629,948) 564,241 (402,851) Trade and other payables (2,680,052) (3,175,431) 481,740 (4,677,727) Amounts owing by subsidiary companies - - (5,398,779) (5,009,254) Amounts owing to subsidiary companies - - 926,323 (1,153,656) Amounts owing by/to contract customers 1,555,386 (478,326) - - Amount owing to associate company (22,729) 870,353 (877,344) 877,344 Amounts owing to Directors (4,845,029) 4,809,972 (4,845,029) 4,809,972

(7,260,302) (7,713,415) (9,148,848) (5,556,172) Cash used in operations (9,435,639) (6,386,499) (9,015,940) (6,777,839)

Interest received 91,979 14,138 91,979 14,138 Interest paid (10,175) (5,052) - - Tax paid (233,942) (173,732) (638,000) -

(152,138) (164,646) (546,021) 14,138 Net cash used in operating activities (9,587,777) (6,551,145) (9,561,961) (6,763,701)

Group Company


2013 2012 2013 2012Note RM RM RM RM

Cash Flows From Investing Activities Reclassification of investment in subsidiary company to associate company - (9,534) - - Net cash inflow arising from acquisition of subsidiary company 144 - - -

Additional investment insubsidiary company - - (646,278) -

Purchase of property, plant and equipment 4(a) (377,082) (313,086) (1,395) - Proceeds from disposal of property, plant and equipment - 146,899 - - Net cash used in investing activities (376,938) (175,721) (647,673) -

Cash Flows From Financing Activities Proceeds from issuance of shares 16,589,013 6,994,100 16,589,013 6,994,100 Repayment of hire purchase payable (41,089) (19,712) - - Repayment of bank borrowing (95,992) (109,500) - - Net cash generated from financing activities 16,451,932 6,864,888 16,589,013 6,994,100

Net increase in cash and cash equivalents 6,487,217 138,023 6,379,379 230,399 Cash and cash equivalents at beginning of the financial year 591,172 453,149 501,385 270,986 Cash and cash equivalents at end of the financial year 7,078,389 591,172 6,880,764 501,385

Cash and cash equivalents at end of financial year comprises: Cash and bank balances 419,060 91,980 221,435 2,193 Short term deposits with a licensed bank 6,659,329 499,192 6,659,329 499,192

7,078,389 591,172 6,880,764 501,385

Group Company


STATEMENTS OF CASH FLOW FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013 (CONT’D)


1. Corporate Information

The principal activity of the Company is investment holding.

The principal activities of the subsidiary companies are disclosed in Note 5. There have been no significant changes in the nature of these activities during the financial year.

The Company is a public limited liability company, incorporated in Malaysia under the Companies Act, 1965 and domiciled in Malaysia, and is listed on Main Market of Bursa Malaysia Securities Berhad.

The registered office of the Company is located at Suite 10.03, Level 10, The Gardens South Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur and the principal place of business of the Company is located at Lot 450, Jalan Papan, Pandamaran Industrial Area, 42000 Port Klang, Selangor Darul Ehsan.

2. Basis of Preparation

(a) Statement of Compliance

The financial statements of the Group and of the Company have been prepared on the historical cost convention except as disclosed in the notes to the financial statements and in accordance with Malaysian Financial Reporting Standards (“MFRSs”), International Financial Reporting Standards (“IFRSs”) and the Companies Act, 1965 in Malaysia.

The accounting policies adopted are consistent with those of the previous financial year except in the current financial year, the Group and the Company have adopted all applicable and new amended MFRSs and IC Interpretations that are effective for annual periods beginning on 1 January 2013. The adoption of these standards and interpretations did not have any effect on the financial performance or position of the Group and the Company.

(b) Standards issued but not yet effective

The Group and the Company have not adopted the new and amended MFRSs and IC Interpretations that have been issued but not yet effective. The Directors expect the adoption of these standards and interpretations will have no material impact on the financial statements in the period of initial application.

NOTE TO THE FINANCIAL

STATEMENTS


2. Basis of Preparation (Cont’d)

(c) Functional and presentation currency

The financial statements are presented in Ringgit Malaysia (“RM”) which is the Group’s and Company’s functional currency and all values has been rounded to the nearest RM except when otherwise stated.

(d) Significant Accounting Estimates and Judgements

The summary of accounting policies as described in Note 3 are essential to understand the Company’s results of operations, financial position, cash flows and other disclosures. Certain of these accounting policies require critical accounting estimates that involve complex and subjective judgements and the use of assumptions, some of which may be for matters that are inherently uncertain and susceptible to change. Directors exercise their judgement in the process of applying the Company’s accounting policies.

Estimates, assumptions concerning the future and judgements are made in the preparation of the financial statements. They affect the application of the Group’s and the Company’s accounting policies, reported amounts of assets, liabilities, income and expenses, and disclosures made. They are assessed on an on-going basis and are based on historical experience and other relevant factors, including expectations of future events that are believed to be reasonable under the circumstances.

The key assumptions concerning the future and other key sources of estimation or uncertainty at the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are set out below:

(i) Useful lives of property, plant and equipment

The costs of property, plant and equipment of the Group and of the Company are depreciated on a straight-line basis over the useful lives of the assets. Management estimates the useful lives of the property, plant and equipment as disclosed in Note 3(b)(iii). These are common life expectancies applied in the industry. Changes in the expected level of usage could impact the useful lives and the residual values of these assets, therefore future depreciation charges could be revised. The carrying amounts of the Group’s and of the Company’s property, plant and equipment as at 31 December 2013 are disclosed in Note 4.

NOTES TO THE FINANCIAL STATEMENTS



(d) Significant Accounting Estimates and Judgements (Cont’d)

(ii) Impairment of investments in subsidiary companies

The carrying values of investments in subsidiary companies are reviewed for impairment. In the determination of the value in use of the investments, the Company is required to estimate the expected cash flows to be generated by the subsidiary companies and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The carrying amount of the Company’s investments in subsidiary companies as at 31 December 2013 is disclosed in Note 5.

(iii) Impairment of financial assets

The Group and the Company assess at each reporting date whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the Group and the Company consider factors such as the probability of significant financial difficulties of the debtor and default or significant delay in payments.

Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics.

(iv) Income taxes

There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. Significant judgement is involved especially in determining tax base allowances and deductibility of certain expenses in determining the Group-wide and the Company-wide provision for income taxes. The Group and the Company recognise liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

(v) Employees’ Share Option Scheme (“ESOS”)

The fair value of share options granted during the financial year was estimated by the management using the Black-Scholes-Merton model, taking into accounts the terms and conditions upon which the options were granted. The fair value of share options was measured at Grant Date. The principal assumption used in the fair value estimation is disclosed in Note 28.




(d) Significant Accounting Estimates and Judgements (Cont’d)

(vi) Construction contracts

The Group recognises construction contracts based on stage of completion method. Revenue recognised from construction contracts reflects management’s best estimate about each contract’s outcome and stage of completion. The Group assesses the profitability of on-going construction contracts and the order backlog at least monthly, using project management procedures. For more complex contracts in particular, costs to complete and contract profitability are subject to significant estimation uncertainty.

3. Significant Accounting Policies

(a) Basis of consolidation

The consolidated financial statements include the financial statements of the Company and all its subsidiary companies and its associate companies through equity accounting, which have been prepared in accordance with the Group’s accounting policies, and are all drawn up to the same reporting period.

(i) Subsidiary companies

Subsidiary companies are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

In the Company’s separate financial statements, investment in subsidiary companies is stated at cost less any impairment losses, unless the investment is held for sale or distribution. The cost of investments includes transaction costs.

Upon the disposal of investment in a subsidiary company, the difference between the net disposal proceeds and its carrying amount is included in profit or loss.

(ii) Consolidation

The acquisition method of accounting is used to account for business combination. The consideration transferred for acquisition of a subsidiary company is the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the date of exchange, as well as any contingent consideration given.



3. Significant Accounting Policies (Cont’d)

(a) Basis of consolidation (Cont’d)

(ii) Consolidation (Cont’d)

Acquisition related costs are expensed off in the profit or loss as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values on the date of acquisition

The consolidated financial statements include the financial statements of the Company and all its subsidiary companies made up to the end of the financial year. Subsidiary companies are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

In a business combination achieved in stages, the previously held equity interest in the acquiree is re-measured at its acquisition date fair value and the resulting gain or loss is recognised in profit or loss.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with MFRS 139 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.

Changes in the Company owners’ ownership interest in a subsidiary company that do not result in a loss of control are accounted for as equity transactions. Any difference between the Group’s share of net assets before and after the change, and any consideration received or paid is recognised directly in equity.

If the Group loses control of a subsidiary company, the assets and liabilities of the subsidiary company, including any goodwill, and non-controlling interests are derecognised at their carrying value on the date that control is lost. Any remaining investment in the entity is recognised at fair value. The difference between the fair value of consideration received and the amounts derecognised and the remaining fair value of the investment is recognised as a gain or loss on disposal in profit or loss. Any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities.





(ii) Consolidation (Cont’d)

Inter-company transactions, balances and unrealised gains or losses on transactions between Group companies are eliminated, unless the transaction provides evidence of an impairment of the asset transferred. Where necessary, the accounting policies of subsidiaries have been changed to ensure consistency with the policies adopted by the Group.

(iii) Associates

Associates are entities in which the Group has significant influence, but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Significant influence is the power to participate in the financial and operating policy decisions of the associates but not the power to exercise control over those policies.

Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment in associates is initially at cost, and recognising the Group’s share of its associates’ post-acquisition results and its share of post-acquisition net results and other changes to comprehensive income against the carrying amount of the investments. When the Group’s share of losses in an associate company equals or exceeds its interest in the associate company, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate company.

When the Group ceases to have significant influence over an associate company, it is accounted for as a disposal of the entire interest in that associate, with a resulting gain or loss being recognised in profit or loss. Any retaining investment is measured at fair value at that date and the fair value is regarded as its fair value on initial recognition as a financial asset. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retaining investment and proceeds from disposal is recognised in profit or loss.

When the Group’s interest in an associate reduces but does not result in a loss of significant influence, any retained interest is not re-measured. Any gain or loss arising from the decrease in interest is recognised in profit or loss. Any gains or losses previously recognised in other comprehensive income are also reclassified proportionately to the profit or loss.

Unrealised gains and losses resulting from transactions between the Group and the associate are eliminated to the extent of the interest in the associate company, unless the transaction provides evidence of an impairment of the asset transferred.





(iii) Associates (Cont’d)

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

(b) Property, plant and equipment

Property, plant and equipment are stated at cost or valuation less accumulated depreciation and accumulated impairment losses. The policy of recognition and measurement of impairment losses is in accordance with Note 3(f).

(i) Recognition and measurement

Cost includes expenditures that are directly attributable to the acquisition of the assets and any other costs directly attributable to bringing the asset to working condition for its intended use, cost of replacing component parts of the assets, and the present value of the expected cost for the decommissioning of the assets after their use. The cost of self-constructed assets also includes the cost of materials and direct labour. For qualifying assets, borrowing costs are capitalised in accordance with the accounting policy on borrowing costs. All other repair and maintenance costs are recognised in profit or loss as incurred.

The cost of property, plant and equipment recognised as a result of a business combination is based on fair value at acquisition date. The fair value of property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The fair value of other items of plant and equipment is based on the quoted market prices for similar items. When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

(ii) Subsequent costs

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




(b) Property, plant and equipment (Cont’d)

(iii) Depreciation

Depreciation is recognised in the profit and loss on a straight-line basis over the estimated useful lives of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives.

The estimated useful lives for the current and comparative periods are as follows:

Leasehold land Remaining lease periods of 17 to 37 years

Leasehold buildings 50 yearsPlant and machinery 3 - 20 yearsMotor vehicles 5 - 10 yearsOffice furniture, fittings and equipment 10 - 20 yearsElectrical installation 20 years

The depreciable amount is determined after deducting the residual value.

Depreciation methods, useful lives and residual values are reassessed at each financial year end.

(iv) Derecognition

Upon disposal of an asset, the difference between the net disposal proceeds and the carrying amount of the assets is charged or credited to the profit and loss. On disposal of a revalued asset, the attributable revaluation surplus remaining in the revaluation reserve is transferred to retained earnings.

(c) Financial assets

Financial assets are recognised on the statements of financial position when, and only when the Group and the Company become a party to the contractual provisions of the financial instrument.

(i) Classification

The Group and the Company classify their financial assets as loans and receivables. The classification depends on the purpose for which the assets were acquired. Management determines the classification of its financial assets at initial recognition.




(c) Financial assets (Cont’d)

(i) Classification (Cont’d)

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are presented as current assets, except for those maturing later than 12 months after the reporting date which are presented as non-current assets.

(ii) Recognition and initial measurement

Financial assets are initially recognised at fair value plus transaction costs.

(iii) Subsequent measurement

Loans and receivables are subsequently carried at amortised cost using the effective interest method.

(iv) Impairment

The Group and the Company assess at each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired and recognises an allowance for impairment when such evidence exists.

Loans and receivables

Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy, and default or significant delay in payments are objective evidence that these financial assets are impaired. The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The asset’s carrying amount is reduced and the amount of the loss is recognised in profit or loss.

If in a subsequent period, the amount of impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in profit or loss.

When the asset becomes uncollectible, it is written off against the related accumulated impairment losses account. Subsequent recoveries of amounts previously written off are recognised against the same line item in the profit and loss.




(c) Financial assets (Cont’d)

(v) Derecognition

Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group and the Company have transferred substantially all risks and rewards of ownership. On derecognition of a financial asset, the difference between the carrying amount and the sum of consideration received and any cumulative gains or loss that had been recognised in equity is recognised in the profit or loss.

(d) Determination of fair value

All financial instruments are recognised initially at fair value. At initial recognition, the fair value of a financial instrument is the transaction price, i.e. the fair value of the consideration given or received. Subsequent to initial recognition, the fair value of financial instruments measured at fair value is measured in accordance with the valuation methodologies as set out in Note 33(f).

Investments in unquoted equity instruments whose fair value cannot be reliably measured are measured at cost, and assessed for impairment at each reporting date.

(e) Financial liabilities

Financial liabilities are recognised on the statements of financial position when, and only when the Group and the Company become a party to the contractual provisions of the financial instrument. The Group and the Company classify their financial liabilities as other financial liabilities. Management determines the classification of its financial liabilities at initial recognition.

All financial liabilities are initially recognised at fair value plus transaction cost and subsequently carried at amortised cost using the effective interest method.

Other financial liabilities are non-derivatives financial liabilities. The Group’s and the Company’s other financial liabilities comprise trade and other payables and borrowings. Financial liabilities are classified as current liabilities; except for maturities more than 12 months after the reporting date, in which case they are classified as non-current liabilities.

A financial liability or a part of it is derecognised when, and only when, the obligation specified in the contract is discharged or cancelled or expires. On derecognition of a financial liability, the difference between the carrying amount of the financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.




(f) Impairment of non-financial assets

The carrying amounts of assets are reviewed at each reporting date to determine whether there is any indication of impairment.

If any such indication exists then the asset’s recoverable amount is estimated.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount unless the asset is carried at a revalued amount, in which case the impairment loss is recognised directly against any revaluation surplus for the asset to the extent that the impairment loss does not exceed the amount in the revaluation surplus for that same asset. A cash-generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets and groups.

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

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

An impairment loss for an asset is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. The carrying amount of an asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss for an asset is recognised in profit and loss, unless the asset is carried at revalued amount, in which case, such reversal is treated as a revaluation increase.




(g) Inventories

Inventories of raw materials, work-in-progress and finished goods are valued at the lower of cost and net realisable value after adequate allowance has been made for all deteriorated, damaged, obsolete or slow-moving inventories.

Cost is determined using the first in, first out method. The cost of raw materials comprises the original cost of purchase plus the cost of bringing the stocks to its present location and condition.

The cost of work-in-progress and finished goods consist of raw materials, direct labour, other direct costs and appropriate proportion of production overheads.

Net realisable value is the estimate of the selling price in the ordinary course of business, less the costs of completion and selling expenses.

(h) Leases and hire purchase

A lease is recognised as a finance lease if it transfers substantially to the Group and the Company all the risks and rewards incident to ownership. All other leases are treated as operating leases.

Assets acquired by way of hire purchase or finance leases are stated at an amount equal to the lower of their fair values and the present value of the minimum lease payments at the inception of the leases, less accumulated depreciation and impairment losses. The corresponding liability is included in the statements of financial position as liabilities. In calculating the present value of the minimum lease payments, the discount factor used is the interest rate implicit in the lease, when it is practical to determine; otherwise, the Group’s or the Company’s incremental borrowing rate is used.

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

The depreciation policy for leased assets is consistent with that for depreciable property, plant and equipment which are owned.

Lease rental under operating lease is charged to the profit and loss on a straight line basis over the term of the relevant lease.




(i) Share capital

Ordinary shares are recorded at the nominal value and proceeds in excess of the nominal value of shares issued, if any, are accounted for as share premium. Both ordinary shares and share premium are classified as equity. Cost directly attributable to the issuance of the shares is accounted for as a deduction from share premium, otherwise, it is charged to the profit and loss.

Dividends on ordinary shares, when declared or proposed by the Directors of the Company are disclosed in the notes to the financial statements. Upon approval and when paid, such dividends will be accounted for in the shareholders’ equity as an appropriation of retained earnings in the financial year in which the dividends are paid.

(j) Cash and cash equivalents

Cash and cash equivalent consist of cash in hand, bank balances and deposits with banks which have an insignificant risk of changes in value. For the purpose of the statements of cash flows, cash and cash equivalent are presented net of bank overdrafts and pledged deposits.

(k) Foreign currencies transactions

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

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are included in the profit or loss for the period.

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




(l) Income recognition

Income is recognised when it is probable that the economic benefits will flow to the Group and the Company and when the income can be measured reliably, on the following bases:

(i) Goods sold and services renderedRevenue from sales of goods and services is recognised when significant risk and rewards have been transferred to the buyer, if any, or on performance of services, net of sales taxes and discounts.

(ii) Interest income Interest income is recognised on accruals basis using the effective interest method.

(iii) Dividend income Dividend income is recognised when the Group’s right to receive payment is established.

(iv) Construction revenueRevenue from construction contracts is accounted in accordance to the accounting policies as described in Note 3(p).

(m) Employee benefits

(i) Short term employee benefits

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

The expected cost of accumulating compensated absences is measured as additional amount expected to be paid as a result of the unused entitlement that has accumulated at the reporting date.

(ii) Defined contribution plans

As required by law, companies in Malaysia make contributions to the state pension scheme, the Employees Provident Fund (“EPF”). Such contributions are recognised as an expense in the profit and loss in the period to which they relate.




(m) Employee benefits (Cont’d)

(iii) ESOS

The Company’s ESOS is an equity-settled, share-based compensation plan. It allows the Group’s employees to acquire ordinary shares of the Company. The total fair value of share options granted to employees is recognised as an employee cost with a corresponding increase in the share option reserve within equity over the vesting period and taking into account the probability that the options will vest. The fair value of share options is measured at grant date, taking into account, if any, the market vesting conditions upon which the options were granted but excluding the impact of any non-market vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable on vesting date.

At each reporting period, the Group revises its estimated number of options that are expected to become exercisable on vesting date. It recognised the impact of the revision of original estimates, if any, in the profit and loss, and a corresponding adjustment to equity over the remaining vesting period. The equity amount is recognised in the share option reserve until the option exercised, or expires, upon which it will transferred directly to retained earnings. The proceeds received, net of any directly attributable transaction costs, are credited to equity when the options are exercised.

(n) Income taxes

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

Deferred tax is recognised on the liability method for all temporary differences between the carrying amount of an asset or liability in the statements of financial position and its tax base at the reporting date. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised.

Deferred tax asset and liability is measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on the tax rates that have been enacted or substantively enacted by reporting period. The carrying amount of a deferred tax asset is reviewed at each reporting period and is reduced to the extent that it becomes probable that sufficient future taxable profit will be available.




(n) Income taxes (Cont’d)

Deferred tax is recognised in the profit and loss, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also charged or credited directly to equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill or negative goodwill.

(o) Operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenue and expenses that relate to transactions with any of the Group’s other components. An operating segment’s operating results are reviewed regularly by the chief operating decision maker, which in this case is the Group’s Executive Board, to make decisions about resources to be allocated to the segment and to assess its performance and for which discrete financial information is available.

(p) Construction contracts

Construction contracts are contract specifically negotiated for the construction of an asset or a combination of assets that are closely interrelated or interdependent in terms of their design, technology and function or their ultimate purpose or use.

When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs are recognised over the period of contract as revenue and expenses respectively by reference to the stage of completion of the contract activity at the end of the reporting period. The stage of completion method is determined by the proportion that contract costs incurred for work performed to date bear to the estimated total contract cost.

When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that is probable will be recoverable and contract costs are recognised as expenses in the period in which they are incurred. Irrespective of whether the outcome of a construction contract can be estimated reliably, when it is probable that contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

Contract revenue comprises the initial amount of revenue agreed in the contract and variations in contract work, claims and incentive payments to the extent that it is probable that they will result in revenue and they are capable of being reliably measured.

The aggregate of the costs incurred and the profit or loss recognised on each contract is compared against the progress billings up to the year end. Where costs incurred and recognised profits (less recognised losses) exceed progress billings, the balance is presented as amounts due from contract customers. Where progress billings exceed costs incurred plus recognised profits (less recognised losses), the balance is presented as amounts due to contract customers.


Ann

ual R

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4.

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RM

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2012

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4. Property, Plant and Equipment (Cont’d)

Officefurniture,

Leasehold fittings andland equipment TotalRM RM RM

2013CompanyAt costAt 1 January 2013 10,258,373 27,629 10,286,002 Additions - 1,395 1,395 At 31 December 2013 10,258,373 29,024 10,287,397

Accumulated depreciationAt 1 January 2013 987,066 27,039 1,014,105 Charge for the financial year 493,533 366 493,899 At 31 December 2013 1,480,599 27,405 1,508,004

Carrying amountAt 31 December 2013 8,777,774 1,619 8,779,393

2012CompanyAt costAt 1 January/31 December 2012 10,258,373 27,629 10,286,002

Accumulated depreciationAt 1 January 2012 493,533 26,744 520,277 Charge for the financial year 493,533 295 493,828 At 31 December 2012 987,066 27,039 1,014,105

Carrying amountAt 31 December 2012 9,271,307 590 9,271,897



4. Property, Plant and Equipment (Cont’d)

(a) The aggregate additional cost for the property, plant and equipment of the Group and of the Company during the financial year under hire purchase financing and cash payment are as follows:

2013 2012 2013 2012RM RM RM RM

Aggregate costs 651,082 313,086 1,395 - Less: Hire purchase financing (274,000) - - - Cash payment 377,082 313,086 1,395 -

Group Company

(b) The motor vehicles of the Group were acquired under hire purchase.

(c) The leasehold land and leasehold building of the Group and of the Company have remaining lease period of less than 50 years.

5. Investments in Subsidiary Companies

(a) Investments in subsidiary companies

Cost Impairment NetRM RM RM

Company2013Unquoted shares, in Malaysia At 1 January 2013 58,865,991 45,943,887 12,922,104 Add: Reclassified from investment in associate company (Note 6) 2,446,278 976,834 1,469,444 At 31 December 2013 61,312,269 46,920,721 14,391,548

2012Unquoted shares, in Malaysia At 1 January 2012 60,665,991 46,833,792 13,832,199 Additions - 86,929 (86,929) Less: Reclassification to investment in associated company (Note 6) (1,800,000) (976,834) (823,166) At 31 December 2012 58,865,991 45,943,887 12,922,104



5. Investments in Subsidiary Companies (Cont’d)

(b) The subsidiary companies and the shareholdings therein are as follows:

Name of company Principal activities

2013 2012% %

Direct holding:

Harvest Court Trading 100.00 100.00 Sawmiling and marketing of Sdn. Bhd. (formerly known sawn timber (Temporary as Harvest Court (M) ceased operation) Sdn. Bhd.)

Harvest Court Marketing 100.00 *- Marketing of timber doors and Sdn. Bhd. ("HCMkt") other related products

Harvest Lumber 100.00 100.00 Manufacturing and marketing of Sdn. Bhd. timber doors and other related

products

Harvest Court 100.00 100.00 Manufacturing and marketing of Corporation timber doors and other related Sdn. Bhd. products (Temporary ceased

operation)

Harvest Exporter 100.00 100.00 Construction and interior design Sdn. Bhd. fit up

Quantum Pro 100.00 100.00 Timber kiln drying Sdn. Bhd.

Harvest Court 100.00 100.00 Property development Properties Sdn. Bhd. ("HCP")

Harvest Rimba 98.8 98.8 Property development and jetty Sdn. Bhd. operation (Temporary ceased

operation)

Harvest Court 100.00 100.00 Investment holding Management Sdn. Bhd.

Effective equity interest



5. Investments in Subsidiary Companies (Cont’d)

(b) The subsidiary companies and the shareholdings therein are as follows: (Cont’d)

Name of companyPrincipal activities

2013 2012% %

Direct holding:

Harvest Court 100.00 100.00 Construction Constructions Sdn. Bhd.

Harvest Nation 100.00 100.00 Dormant (Ceased operation) Sdn. Bhd.

Timbeck (M) 100.00 100.00 Dormant Sdn. Bhd.

Effective equity interest

* In the previous financial year, the Company lost the power to govern the financial and operating activities of HCMkt so as to obtain the benefits from its activities due to the change of management through a contractual agreement.

During the financial year, HCMkt become wholly owned subsidiary of the Group upon purchase of the remaining 40% equity interest.

The net cash inflow arising from the acquisition of remaining 40% equity interest of HCMkt during the financial year is RM144.

All the subsidiary companies of the Company are incorporated in Malaysia.



6. Investment in Associate Company

(a) Investment in associate company

Unquoted shares, in Malaysia At cost 2,446,278 1,800,000 2,446,278 1,800,000 Less: Impairment (976,834) (976,834) (976,834) (976,834)

1,469,444 823,166 1,469,444 823,166 Reclassified to investments in subsidiaries (Note 5) (1,469,444) - (1,469,444) - Accumulated share of post acquisition results 22,470 (4,705) - -

Elimination on consolidation (22,470) - - - - 818,461 - 823,166

- - - -

(b) The associate company and the shareholdings therein are as follows:

The associate company of the Company was incorporated in Malaysia.

On 1 October 2013, the Company purchased the remaining 40% equity interest of HCMkt and make it a wholly-owned subsidiary of the Company.


Group Company2013 2012 2013 2012RM RM RM RM

Group Company2013 2012 2013 2012RM RM RM RM

Name of company Effective equity interest Principal activities

2013 2012% %

Direct holdingHCMkt* - 60 Marketing of timber

doors and others related products


6. Investment in Associate Company (Cont’d)

(c) The summarised financial information of the associate company, not adjusted for the proportion of ownership interest held by the Group, is as follows:

2013 2012RM RM

Total assets - 1,468,935 Total liabilities - 38,920 Revenue - 378,601 Net loss for the financial year - (7,842)

Group

7. Inventories

8. Trade Receivables

The Group’s normal trade credit terms range from 30 to 90 days. Other credit terms are assessed and approved on a case to case basis.

Trade receivables are recognised at their original invoice amounts which represent their fair value on initial recognition.


Group2013 2012RM RM

At costRaw material 1,264,137 1,244,149Work-in-progress 3,596,221 4,286,901Finish goods 360,766 331,756

5,221,124 5,862,806At net realisable value:Work-in-progress 1,487,660 1,729,650Finish goods 270,301 270301

1,757,961 1,999,9516,979,085 7,862,757


8. Trade Receivables (Cont’d)

Analysis of the trade receivables ageing as at the end of the financial year is as follows:

2013 2012RM RM

Neither past due nor impaired 1,769,124 5,326,954

Past due less than 30 days but not impaired 1,360,386 134,488 Past due for more than 30 days but not impaired 9,425,774 4,295,745

10,786,160 4,430,233 12,555,284 9,757,187

Group

The Group has not recognised any impairment loss on receivables that are past due at the end of financial year, as there has not been significant change in credit quality and these amounts are still considered receivable.

Included in trade receivables of the Group:

(a) is an amount of RM10,924,956 (2012: RM6,182,260) owing by company where a Director of the Company has substantial financial interest; and

(b) is an amount of RM1,902,265 (2012: RM890,356) being retention sum relating to construction work in progress.

9. Other Receivables

2013 2012 2013 2012RM RM RM RM

Other receivables 759,343 450,607 691,008 450,607 Deposits 158,300 1,060,021 110,000 914,421 Prepayments 59,713 112,389 - 221

977,356 1,623,017 801,008 1,365,249

Group Company

Included in other receivables of the Group and of the Company are amounts owing by company where a Director of the Company has substantial financial interest amounting to RM690,144 (2012: RM228,318).



9. Other Receivables (Cont’d)

Included in deposits of the Group and of the Company in the previous financial year were amounts paid for judgement sum and its related interest amounted to RM428,827 and RM375,594 respectively arising from the High Court judgement against the Company (plaintiff) in favour of the defendant.

10. Amounts Owing by/(to) Contract Customers

2013 2012RM RM

Construction costs incurred to date 15,938,294 8,332,486 Attributable profits 2,007,290 1,049,404

17,945,584 9,381,890 Less: Progress billings (19,022,644) (8,903,564)

(1,077,060) 478,326

Group

11. Amounts Owing by/to Subsidiary Companies / Amount Owing to Associate Company

Amounts Owing by Subsidiary Companies

2013 2012RM RM

Amounts owing by subsidiary companies 28,390,940 22,992,161 Less: Accumulated impairment loss (1,123,513) (1,123,513)

27,267,427 21,868,648

Company

Movements in impairment (individually assessed) during the financial year are as follows:

2013 2012RM RM

At 1 January 1,123,513 - Impairment made during the year - 1,123,513 At 31 December 1,123,513 1,123,513

Company



11. Amounts Owing by/to Subsidiary Companies / Amount Owing to Associate Company (Cont’d)

The amounts owing by subsidiary companies are unsecured, interest free and repayable on demand.

Amounts Owing to Subsidiary Companies / Associate Company

The amounts owing to subsidiary companies are unsecured, interest free and repayable on demand.

In the previous financial year, the amount owing to associate company was unsecured, interest free and was repayable on demand.

12. Short Term Deposits with Licensed Banks

The short term deposits with licensed banks of the Group and of the Company earn interests at rates ranging from 2.50% to 3.08% (2012: 1.70% to 2.05%) per annum.

13. Share Capital

2013 2012 2013 2012No. of shares No. of shares RM RM

Ordinary shares of RM0.25 each:

Authorised At 1 January 800,000,000 400,000,000 200,000,000 100,000,000 Created during the year - 400,000,000 - 100,000,000 At 31 December 800,000,000 800,000,000 200,000,000 200,000,000

Group/Company Group/Company



13. Share Capital (Cont’d)

2013 2012 2013 2012No. of shares No. of shares RM RM

Ordinary shares of RM0.25 each:

Issued and fully paid At 1 January 199,073,473 181,317,473 49,768,368 45,329,368 Issuance of shares pursuant to right issues 66,356,050 - 16,589,013 - Issuance of shares pursuant to ESOS - 1,056,000 - 264,000 Issuance of shares pursuant to private placement - 16,700,000 - 4,175,000 At 31 December 265,429,523 199,073,473 66,357,381 49,768,368

Group/Company Group/Company

During the financial year, the Company increased its issued and paid-up share capital by the issuance of 66,356,050 new ordinary shares of RM0.25 each through renounceable right issue at issue price of RM0.25 each on the basis of two (2) right shares and one (1) free right warrant for every six (6) existing shares held on 30 July 2013.

The new ordinary shares issued ranked pari passu in all respects with the existing ordinary shares of the Company.

The holders of ordinary shares are entitled to receive dividend as and when declared by the Company. All ordinary shares carry one vote per share without restrictions and rank equally with regard to the Company’s residual assets.

WarrantsThe Company has two types of warrants: Warrants A (2009/2019) and Warrants B (2013/2023).

The main features of the Warrants were as follows:

a. Each Warrant carried the entitlement to subscribe for one (1) Company’s share at the Exercise Price at any time during the Exercise Period, subject to adjustments in accordance with the provisions of the Deed Poll.

b. Subject to the adjustments in accordance with the Deed Poll, the exercise price of the Warrants has been fixed at RM0.25 each, being the par value of the Company’s shares price.



13. Share Capital (Cont’d)

The main features of the Warrants were as follows (Cont’d):

c. The Warrants can be exercised at any time during the period commencing from and including the date of issue of the Warrants and up to and including the Expiry Date.

d. Warrants A shall expire at 5.00 p.m. on 19.11.2019 and Warrants B on 25.8.2023. Any warrants which have not been exercised will lapse and cease thereafter to be valid for any purpose.

During the financial year, no Warrants were exercised. The outstanding number of Warrants A and B as at 31 December 2013 was 70,760,472 and 33,178,025 (2012: 70,760,472 and Nil) respectively.

14. Share Premium

2013 2012RM RM

At 1 January 2,555,100 - Issuance of shares pursuant to private placement - 2,555,100 Write off pursuant to issuance of Warrants B (2,555,100) - At 31 December - 2,555,100

Group/Company

15. Other Reserves

2013 2012RM RM

ESOS reserve 213,650 50 Warrants reserve 5,225,539 - Discount on equity (2,670,439) -

2,768,750 50

Group/Company

The ESOS reserve represents the estimated cumulative value of services received from employees which arose from the equity-settled share option granted to the employees. The reserve is reduced by the transfer to accumulated losses upon exercise or expiry of the share options.



15. Other Reserves (Cont’d)

Movements of the ESOS reserve during the financial year are as follows:

2013 2012RM RM

At 1 January 50 8,550 Share option granted under ESOS 213,600 - Transfer to accumulated losses for ESOS exercised - (8,500) At 31 December 213,650 50

The warrants reserve is in respect of the fair value for free Warrants B issued pursuant to the Right Issue and the discount on equity is a reserve account that is created to preserve the par value of the ordinary shares.

16. Hire Purchase Payables

2013 2012RM RM

(a) Minimum hire purchase payments Within one year 76,632 20,977 Within two to five years 273,191 66,752

349,823 87,729 Less: Future finance charges (38,059) (8,876) Present value of hire purchase liabilities 311,764 78,853

(b) Present value of hire purchase liabilities Within one year 63,067 17,058 Within two to five years 248,697 61,795

311,764 78,853

Analysed as: Repayable within twelve months 63,067 17,058 Repayable after twelve months 248,697 61,795

311,764 78,853

Group

The hire purchase interest is charged at rates ranging from 2.39% to 2.88% (2012: 2.88%) per annum.



17. Deferred Tax Liabilities

2013 2012 2013 2012RM RM RM RM

At 1 January 2,173,347 2,254,402 1,115,393 1,174,761 Recognised in statements of comprehensive income (Note 26) (81,055) (81,055) (59,368) (59,368) At 31 December 2,092,292 2,173,347 1,056,025 1,115,393

Group Company

The estimated deferred tax liabilities were recognised as a result of the differences between the carrying amounts of property, plant and equipment and their tax bases.

The estimated timing differences of which no deferred tax assets have been recognised in the financial statements are as follows:

2013 2012 2013 2012RM RM RM RM

Unabsorbed capital allowance 4,482,000 4,304,600 - 67,100 Unutilised tax losses 20,733,300 20,760,200 - 439,800

25,215,300 25,064,800 - 506,900

Group Company

18. Trade Payables

The Group’s normal trade credit terms range from 30 to 120 days. Other credit terms are assessed and approved on a case to case basis.

19. Other Payables

2013 2012 2013 2012RM RM RM RM

Other payables 342,519 685,321 205,705 196,354 Accruals 1,241,481 915,815 960,301 487,912

1,584,000 1,601,136 1,166,006 684,266

Group Company



19. Other Payables (Cont’d)

Included in other payables of the Group and of the Company are amounts of RM58,578 and RM58,578 (2012: RM16,433 and RM16,433) respectively, owing to a company where a Director of the Company has substantial financial interest.

Included in accruals of the Group is an amount of RM30,754 (2012: RM54,261) being interest accrued on the outstanding term loan as disclosed in Note 21.

20. Amounts Owing to Directors

In the previous financial year, the amount was unsecured, interest free and repayable on demand.

21. Bank Borrowing

The term loan of the Group was denominated in RM and was obtained from a licensed bank. The term loan was supported by corporate guarantee by the Company.

The term loan bore a fixed interest rate at 8% per annum and was fully settled on 12 December 2013.

22. Revenue

2013 2012 2013 2012RM RM

Construction revenue 8,563,694 9,381,890 - -Interior design fit up works - 3,300,000 - -Sales of timber products 8,397,907 11,659,117 - -Dividend received - - 2,400,000 -

16,961,601 24,341,007 2,400,000 -

Group Company


Group2013 2012RM RM

UnsecuredTerm loan - 95,992

Analysed as :Repayble within twelve months

Term loan - 95,992


23. Cost of Sales

2013 2012RM RM

Construction costs 7,605,808 8,332,486 Interior design fit up works - 1,450,000 Sales of timber products 8,295,507 10,447,728

15,901,315 20,230,214

Group

24. Finance Costs

2013 2012RM RM

Interest expenses on: Hire purchase payables 10,175 5,052

Group

25. (Loss)/Profit Before Taxation

(Loss)/Profit before taxation is derived at after charging/ (crediting):

2013 2012 2013 2012RM RM RM RM

Auditors' remuneration- Statutory

- current year 49,100 45,775 21,000 16,000 - under provision in

prior year 7,200 - 5,000 - - Non statutory - 89,752 - 85,976

- Over provision in prior year (3,000) - (3,000) -

Directors' remuneration- Fee 300,000 - 300,000 - - Salaries and other emoluments 199,400 173,550 139,400 17,550 - Share option granted under ESOS 12,460 - 12,460 - Depreciation of property, plant and equipment 1,371,049 1,416,721 493,899 493,828 Expenses on corporate exercise 282,756 819,333 282,756 819,333

Group Company



25. (Loss)/Profit Before Taxation (Cont’d)

(Loss)/Profit before taxation is derived at after charging/(crediting)(Cont’d):

2013 2012 2013 2012RM RM RM RM

Group Company

Gain on disposal of property, plant and equipment - (140,857) - - Gain on foreign exchange- realised (47,506) (49,255) - - - unrealised (886) (3,916) - - Impairment on amounts owing by subsidiary companies - - - 1,123,513 Interest income (91,979) (14,138) (91,979) (14,138) Loss on remeasurement of investment in associate company - - - 86,929 Share option granted under ESOS 201,140 - 178,251 -

26. Taxation

2013 2012 2013 2012RM RM RM RM

Current income tax 95,000 - 25,000 - Under provision in prior year 38,000 - 38,000 -

133,000 - 63,000 - Deferred tax (Note 17): Relating to origination and reversal of temporary differences (81,055) (81,055) (59,368) (59,368)Income tax expense/ (credit) for the financial year 51,945 (81,055) 3,632 (59,368)

Group Company



26. Taxation (Cont’d)

A reconciliation of tax income applicable to (loss)/ profit before taxation at the statutory income tax rate to tax income at the effective income tax rate of the Group and of the Company are as follows:

2013 2012 2013 2012RM RM RM RM

(Loss)/profit before taxation (3,666,728) 59,350 (482,612) (2,911,799)

Tax at Malaysia statutory tax rate of 25% (916,700) 14,838 (120,700) (727,950) Expenses not deductible for tax purposes 892,945 387,682 213,032 645,082 Deferred tax assets not recognised 266,400 170,425 - 23,500 Under provision of taxation in prior year 38,000 - 38,000 - Utilisation of deferred tax assets not recognised in prior year (228,700) (654,000) (126,700) - Income tax expense/ (credit) for the financial year 51,945 (81,055) 3,632 (59,368)

Group Company

The Group and the Company have unutilised tax losses and unabsorbed capital allowances as disclosed in Note 17 available for carry forward to set off against future taxable profits.



27. (Loss)/Earnings Per Share

(a) Basic (loss)/earnings per share

The (loss)/earnings per share has been calculated based on the consolidated (loss)/ profit after taxation for the financial year attributable to owners of the parent for the Group and the adjusted weighted average number of ordinary shares in issue during the financial year as follows:

2013 2012

Net (loss)/profit for the financial year attributable to the owners of the parent (3,718,673) 166,902

Weighted number of ordinary shares in issue 221,616,351 181,135,966

Basic (loss)/earnings per share (sen) (1.68) 0.09

Group

(b) Fully diluted (loss)/earnings per share

The fully diluted (loss)/earnings per share has been calculated based on the consolidated (loss)/profit after taxation for the financial year attributable to owners of the parent for the Group and the adjusted weighted average number of ordinary shares in issue during the financial year as follows:

2013 2012

Net (loss)/profit for the financial year attributable to the owners of the parent (3,718,673) 166,902

Weighted number of ordinary shares in issue 221,616,351 181,135,966 Adjusted for: Assumed exercise of ESOS and Warrants 8,469,387 38,288,027

230,085,738 219,423,993

Fully diluted (loss)/earnings per share (sen) (1.62) 0.08

Group



28. ESOS

The Company’s ESOS was approved by shareholders at the EGM on 3 March 2010 and became effective on 23 March 2010 for a period of 5 years which will lapse on 22 March 2015.

The salient features of the ESOS are as follows:

(a) the ESOS Committee appointed by the Board of Directors to administer the ESOS, may from time to time grant options to eligible employees of the Group to subscribe for new ordinary shares of RM0.25 each in the Company;

(b) the eligibility of a Director or employee of the Group to participate in the ESOS shall be at the discretion of the ESOS Committee, who shall take into consideration factors such as year of service and performance track record;

(c) the total number of shares to be issued under ESOS shall not exceed in aggregate 15% of the issued share capital of the Company at any point of time during the tenure of the ESOS and out of which not more than 50% of the shares shall be allocated, in aggregate, to Directors and senior management. In addition, not more than 10% of the shares available under the ESOS shall be allocated to any individual Director or employee who, either singly or collectively through his/her associates, holds 20% or more in the issued and paid-up capital of the Company;

(d) the option price for each share shall be weighted average of the market price as quoted in the Daily Official List issued by Bursa Malaysia Securities Berhad for the five (5) market days immediately preceding the date of which the option is granted less, if the ESOS Committee shall so determine at their discretion from time to time, a discount of not more than 10% or the par value of the shares of the Company of RM0.25;

(e) the number of outstanding options to subscribe for shares or the option price or both may be adjusted following any issue of additional shares by way of right issues, bonus issues or other capitalisation issue carried out by the Company while an option remain unexercised; and

(f) the new shares allotted upon any exercise of the option shall rank pari passu in all respects with the existing ordinary shares of the Company except that the new shares so issued will not rank for any rights, dividends, allotment and or other distributions, the entitlement date of which is prior to the date of allotment of the new ordinary shares.



28. ESOS (Cont’d)

Details of share options outstanding at end of the financial year are as follows:

Share Options

2010 Grant 0.25 23.03.2010 - 22.03.20152011 Grant 0.25 05.07.2011 - 22.03.20152013 Grant 0.25 10.12.2013 - 22.03.2015

Exercise Price Exercise PeriodRM RM

Movements in the number of share options outstanding and their related weighted average exercise prices (“WAEP”) are as follows:

Outstanding Adjustment Outstanding Exercisableat due to at at

1 January Granted Right Issue Exercised 31 December 31 December

20132010 Grant 434,900 - 51,900 - 486,800 486,800 2011 Grant 5,000 - - - 5,000 5,000 2013 Grant - 12,000,000 - - 12,000,000 12,000,000

439,900 12,000,000 51,900 - 12,491,800 12,491,800

WAEP 0.25 0.25 0.25 0.25 0.25 0.25

20122010 Grant 640,900 - - 206,000 434,900 434,900 2011 Grant 855,000 - - 850,000 5,000 5,000

1,495,900 - - 1,056,000 439,900 439,900

WAEP 0.25 0.25 0.25 0.25 0.25 0.25

Movement during the financial yearNo. of option over ordinary shares of RM0.25 each



28. ESOS (Cont’d)

Directors of the Group and of the Company have been granted the following number of options under the ESOS:

Outstanding Adjustment Outstanding Exercisableat due to at at

1 January Granted Right Issue Exercised 31 December 31 December

20132010 Grant 900 - (900) - - - 2011 Grant - - - - - - 2013 Grant - 700,000 - - 700,000 700,000

900 700,000 (900) - 700,000 700,000

WAEP 0.25 0.25 0.25 0.25 0.25 0.25

20122010 Grant 900 - - - 900 900 2011 Grant 830,000 - - 830,000 - -

830,900 - - 830,000 900 900

WAEP 0.25 0.25 0.25 0.25 0.25 0.25

Movement during the financial yearNo. of option over ordinary shares of RM0.25 each

The names and the number of options granted and accepted in excess of 559,000 units during the financial year are as follows:

NameNumber of

ESOS grantedChan Kok Leong 940,000 Chong Fui Fui 915,000 Chong Kim Seong 561,800 Foo Thyang Lee 670,000 Haw Su Peng 670,000 Ir Lok Wung Yip 1,101,000 Low Son Heng 1,125,100 Ng Tian Kang 600,000 Pang Chee Keong @ Anthony Pang 559,000 Sum Wei Ming 1,100,000



28. ESOS (Cont’d)

The fair value of the share options granted was estimated by the management using Black-Scholes-Merton model, taking into account the terms and conditions upon which options were granted. The fair value of share options were measured at Grant Date and the assumptions are as follows:

Grant date 10.12.2013

Fair value of share options (RM) 0.0178Weighted average share price (RM) 0.235Weighted average exercise price (RM) 0.25Expected volatility 20Expected option life (years) 2Risk free interest rate, per annum 3.26Expected dividend yield (%) 0

The expected life of the share options is based on historical data and is not necessarily indicative of exercise patterns that may occur in the future. The expected volatility is based on the historical volatility, adjusted for unusual or extraordinary volatility arising from certain economic or business occurrences which is not reflective of its long term average level. While the expected volatility is assumed to be indicative of future trends, it may not necessarily be the actual outcome. No other features of the option grant were incorporated into the measurement of the fair value.

29. Employee Benefits Expenses

2013 2012 2013 2012RM RM RM RM

Salaries, wages and others 4,534,587 3,220,457 1,878,793 452,344 Contribution to defined contribution plan 329,289 154,318 251,905 56,323 Share option granted under ESOS 201,140 - 178,251 - Employee benefits expenses (excluding Directors) 5,065,016 3,374,775 2,308,949 508,667

Group Company



30. Segmental Reporting

The Group has three reportable segments, as described below, which are the Group’s strategic business units. For each of the strategic business unit, the Group’s Chief Executive Officer reviews internal management reports on at least quarterly basis.

The following summary describes the main business segments and respective business activity of each segment of the Group’s reportable segments:

Business segment Business activities

Timber product manufacturing Kiln drying, sawmilling, manufacturing of timber doors and related products

Construction and property Contractors in construction and interior development design fit up works and related maintenance services, development of residential and commercial properties

Investment holding and Investments in shares and securities and the others provision of marketing and management service

Performance is measured based on segment (loss)/profit before taxation, interest and depreciation, as included in the internal management reports that are reviewed by the Group’s Chief Executive Office, who is the Group’s chief operating decision maker. Segment (loss)/profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.

Segment assets

The total of segment asset is measured based on all assets of a segment, as included in the internal management reports that are reviewed by the Group’s Chief Executive Officer.

Segment total asset is used to measure the return of assets of each segment.

Segment liabilities

Segment liabilities information is neither included in the internal management reports nor provided regularly to the Chief Executive Officer. Hence no disclosure is made on segment liability.


Har

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30. Segmental Reporting (Cont’d)

Geographical Segment

The construction and property development segments are managed on worldwide basis but the operational office is in Malaysia.

In presenting information on geographical segments, segment revenue is based on geographical segment of the customers. No segment assets are to be presented as all the segment asset is located in Malaysia.

2013 2012RM RM

Malaysia 16,961,601 21,041,007 Hong Kong - 3,300,000

16,961,601 24,341,007

Group Revenue

31. Contingent Liabilities

(a) Guarantees

2013 2012RM RM

Unsecured corporate guarantees given to licensed bank for banking facility granted to a subsidiary company - 95,992

Company

(b) Material Litigation

On 18 February 2014, a legal suit was filed by Kilang Papan Galas Selia (Kelantan) Sdn Bhd against the Company. The Plaintiff ’s claimed for timbers which previously delivered and rejected by the Company. The Company is requested to return all the timbers in good and acceptable condition to the Plaintiff within 14 days from the date of the Writ of Summons.



32. Related Party Disclosures

(a) Identifying related parties

For the purposes of these financial statements, parties are considered to be related to the Group if the Group or the Company have the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group or the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities.

Related parties also include key management personnel defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group either directly or indirectly. The key management personnel include all the Directors of the Group and of the Company.

The Group has related party relationships with companies where a Director of the Company has substantial financial interest, subsidiary companies, associate company and key management personnel.

(b) Related party transactions

Related party transactions have been entered into in the normal course of business under normal trade terms. The related party transactions of the Group and of the Company are as follows:

2013 2012 2013 2012RM RM RM RM

Transactions with subsidiary companies

Manpower support charges - - 404,670 350,147 Dividend income - - 2,400,000 -

Group Company



32. Related Party Disclosures (Cont’d)

(b) Related party transactions (Cont’d)

2013 2012 2013 2012RM RM RM RM

Transactions with companies where a Director of the Company has substantial financial interest

Construction progress billings 10,119,080 8,903,564 - - Admin charges on construction project 457,331 231,522 457,331 231,522 Sales of doors 748,563 26,546 - - Advertisement, design and printing expenses 46,390 106,746 46,390 106,476

Group Company

(c) The remuneration of key management personnel is same with the Directors’ remuneration as disclosed in Note 25. The Group and the Company have no other members of key management personnel apart from the Board of Directors.

33. Financial Instruments

(a) Classification of financial instruments

Financial assets and financial liabilities are measured on an ongoing basis either at fair value or at amortised cost. The principal accounting policies in Note 3 describe how the classes of financial instruments are measured, and how income and expense, including fair value gains and losses, are recognised. The following table analyses the financial assets and liabilities in the statements of financial position by the class of financial instruments to which they are assigned, and therefore by the measurement basis:



33. Financial Instruments (Cont’d)

(a) Classification of financial instruments (Cont’d)

Other financialLoans and liabilities atreceivables amortised cost Total

RM RM RMGroup2013Financial AssetsTrade and other receivables 13,532,640 - 13,532,640 Short term deposits with licensed banks 6,659,329 - 6,659,329 Cash and bank balances 419,060 - 419,060 Total financial assets 20,611,029 - 20,611,029

Financial LiabilitiesTrade and other payables - 2,622,945 2,622,945 Amounts owing to contract customers - 1,077,060 1,077,060 Hire purchase payables - 311,764 311,764 Total financial liabilities - 4,011,769 4,011,769

Group2012Financial AssetsTrade and other receivables 11,380,204 - 11,380,204 Amounts owing by contract customers 478,326 - 478,326 Short term deposits with licensed banks 499,192 - 499,192 Cash and bank balances 91,980 - 91,980 Total financial assets 12,449,702 - 12,449,702







RM RM RMGroup (Cont'd)2012 (Cont'd)Financial LiabilitiesTrade and other payables - 5,284,257 5,284,257 Amount owing to associated company - 870,352 870,352 Amounts owing to Directors - 4,845,029 4,845,029 Hire purchase payables - 78,853 78,853 Bank borrowing - 95,992 95,992 Total financial liabilities - 11,174,483 11,174,483

Company2013Financial AssetsOther receivables 801,008 - 801,008 Amounts owing by subsidiary companies 27,267,427 - 27,267,427 Short term deposits with licensed banks 6,659,329 - 6,659,329 Cash and bank balances 221,435 - 221,435 Total financial assets 34,949,199 - 34,949,199

Financial LiabilitiesOther payables - 1,166,006 1,166,006 Amounts owing to subsidiary companies - 9,101,022 9,101,022 Total financial liabilities - 10,267,028 10,267,028





RM RM RMCompany (Cont'd)2012Financial AssetsOther receivables 1,365,249 - 1,365,249 Amounts owing by subsidiary companies 21,868,648 - 21,868,648 Short term deposits with licensed banks 499,192 - 499,192 Cash and bank balances 2,193 - 2,193 Total financial assets 23,735,282 - 23,735,282

Financial LiabilitiesOther payables - 684,266 684,266 Amounts owing to subsidiary companies - 8,174,699 8,174,699 Amount owing to associate company - 877,344 877,344 Amounts owing to Directors - 4,845,029 4,845,029 Total financial liabilities - 14,581,338 14,581,338

(b) Financial risk management objectives and policies

The Group’s and the Company’s financial risk management policy is to ensure that adequate financial resources are available for the development of the Group’s and the Company’s operations whilst managing its financial risks, including foreign currency exchange risk, interest rate risk, credit risk, liquidity and cash flow risks. The Group and the Company operate within clearly defined guidelines that are approved by the Board and the Group’s and the Company’s policies are not to engage in speculative transactions.




(c) Credit risk

Short term deposits with licensed banks, cash and bank balances are placed with a credit worthy financial institution.

Credit risk arises mainly from the inability of its customers to make payments when due. The Group and the Company have adopted a policy of only dealing with creditworthy counterparties. Receivables are monitored on an ongoing basis via the Group’s and the Company’s management reporting procedures and action will be taken for long outstanding debts. The Company only provided loans and advances to subsidiary companies and the results of the subsidiary companies are monitored regularly.

The carrying amounts of the financial assets recorded on the statements of financial position at the end of the reporting period represent the Group’s and the Company’s maximum exposure to credit risk in relation to financial assets.

(d) Liquidity risk

The Group’s and the Company’s funding requirements and liquidity risks are managed with the objective of meeting business obligations on a timely basis. The Group and the Company monitor their cash flows and ensures that sufficient funding is in place to meet the obligations as and when they fall due.

The following table analyses the remaining contractual maturity for non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group and the Company can be required to pay.


Ann

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Fina

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76,6

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1,76

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776,

637

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196,

559

4,04

9,82

8

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870,

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4,84

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22,8

84

22,8

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41,9

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NOT

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(d) Liquidity risk (Cont’d)

On demand Carryingor within 1 year Amount

RM RM

Company2013Other payables 1,166,006 1,166,006 Amounts owing to subsidiary companies 9,101,022 9,101,022

10,267,028 10,267,028

2012Other payables 684,266 684,266 Amounts owing to subsidiary companies 8,174,699 8,174,699 Amount owing to associate company 877,344 877,344 Amounts owing to Directors 4,845,029 4,845,029

14,581,338 14,581,338

(e) Market risks

(i) Foreign currency exchange risk

The Group incurs foreign currency risk on transactions that are denominated in foreign currencies. The currencies giving rise to this risk is primarily the United Stated Dollar (USD). The Group has not entered into any derivative instruments for hedging or trading purposes as the net exposure to foreign currency risk is not significant.

The carrying amounts of the Group’s foreign currency denominated financial assets at the end of the reporting period are as follows:

Trade Cash and bankreceivables balances Total

RM RM RMGroup2013USD 14,873 166 15,039

2012USD 159,467 67,434 226,901




(e) Market risks (Cont’d)

(ii) Foreign currency risk sensitivity

A 10% strengthening of Ringgit Malaysia against USD at the end of the reporting period would increase/ (decrease) loss before taxation by the amounts shown below. This analysis assumes that all other variables remained unchanged.

2013 2012RM RM

USDLoss before taxation 1,504 22,690

Group

A 10% weakening of Ringgit Malaysia against USD at the end of the reporting period would have had the equal but opposite effect on the USD to the amounts shown above, on the basis that all other variables remain unchanged.

(iii) Interest rate risk

The Group and the Company obtain financing through other financial liabilities. The Group’s and the Company’s policy are to obtain the financing with the most favourable interest rates in the market.

The Group and the Company constantly monitor their interest risk and do not utilise swap contracts or other derivative instruments for trading or speculative purposes. At the end of the reporting period, there were no such arrangements, interest rate swap contracts or other derivative instruments outstanding.

The carrying amounts of the Group’s and of the Company’s financial instruments that are exposed to interest rate risk are as follows:

2013 2012RM RM

Financial AssetShort term deposits with licensed banks 6,659,329 499,192

Group/Company




(e) Market risks (Cont’d)

(iii) Interest rate risk (Cont’d)

Interest rate sensitivity analysis

The Group and the Company are exposed to interest rate risk arising from the short term deposits with licensed banks. However, the short term deposit with licensed banks interest rate risk is insignificant and any fluctuations in the rate would have no material impact on the results of the Group and of the Company.

(f) Fair values of financial assets and financial liabilities

(i) The fair values of financial instruments refer to the amounts at which the instruments could be exchanged or settled between knowledgeable and willing parties in an arm’s length transaction. Fair values have been arrived at based on prices quoted in an active, liquid market or estimated using certain valuation techniques such as discounted future cash flows based upon certain assumptions. Amount derived from such methods and valuation technique are inherently subjective and therefore do not necessarily reflect the amounts that would be received or paid in the event of immediate settlement of the instruments concerned.

On the basis of amount estimated from the methods and techniques as mentioned in the preceding paragraph, the carrying amount of the various financial assets and financial liabilities reflected on the statements of financial position approximate their fair values.

The carrying amounts are considered to approximate the fair values as they are within the normal credit terms or they have short-term maturity period and insignificant discounting impact.




(f) Fair values of financial assets and financial liabilities (Cont’d)

(ii) Fair value of financial instruments by categories that are not carried at fair value and whose carrying amounts are not reasonable approximation of fair value:

Carrying Fair Carrying Fairamount value amount value

RM RM RM RM

GroupFinancial liability

Hire purchase payables (non-current) 248,697 250,242 61,795 63,927

Contingent liabilities - - 95,992 - @

2013 2012

@ It is not practicable to estimate the fair value of contingent liabilities reliably due to the uncertainties of timing, cost and eventual outcome.

34. Capital Management

The Group’s and the Company’s management manage its capital to ensure that the Group and the Company are able to continue as a going concern and maintain an optimal capital structure so as to maximise shareholder value. The management reviews the capital structure by considering the cost of capital and the risks associated with the capital.

The capital of the Group consists of issued capital, cash and cash equivalents, bank borrowing and hire purchase financing.



34. Capital Management (Cont’d)

The gearing ratios are as follows:

2013 2012 2013 2012RM RM RM RM

Total borrowings 311,764 174,845 - - Less: Cash and cash equivalents (7,078,389) (591,172) (6,880,764) (501,385) Net debts (6,766,625) (416,327) (6,880,764) (501,385)

Total equity 51,898,002 38,814,062 47,372,087 31,055,718

Gearing ratio # # # #

Group Company

# The Group and the Company have no gearing as the Group’s and the Company’s cash and cash equivalents are sufficient to repay the entire borrowing obligation at financial year end.

There were no changes in the Group’s and the Company’s approaches to capital management during the financial year.

The Group and the Company are not subject to any externally imposed capital requirements.

35. Date of Authorisation for Issue

The financial statements of the Group and of the Company for the financial year ended 31 December 2013 were authorised for issue in accordance with a resolution of the Board of Directors on 22 April 2014.



The following analysis of realised and unrealised accumulated losses of the Group and of the Company at 31 December 2013 is presented in accordance with the directive issued by Bursa Malaysia Securities Berhad (“Bursa Securities”) dated 25 March 2010 and prepared in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants.

The accumulated losses of the Group and of the Company as at 31 December 2013 is analysed as follows:

2013 2012 2013 2012RM RM RM RM

Accumulated losses- Realised (52,184,576) (45,436,334) (21,754,044) (21,267,800) - Unrealised (2,091,406) (2,169,429) -

(54,275,982) (47,605,763) (21,754,044) (21,267,800) Less: Consolidation

adjustments 37,047,853 34,096,307 - - (17,228,129) (13,509,456) (21,754,044) (21,267,800)

Group Company

The disclosure of realised and unrealised losses above is solely for complying with the disclosure requirements stipulated in the directive of Bursa Securities and should not be applied for any other purposes.

SUPPLEMENTARYINFORMATION ON THE DISCLOSURE

OF REALISED AND UNREALISED PROFITS OR LOSSES


NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the Thirty Sixth (36th) Annual General Meeting of the Company will be held at Lot 450 Jalan Papan, Pandamaran Industrial Area, 42000 Port Klang, Selangor Darul Ehsan on Friday, 20 June 2014 at 2.30 p.m. to transact the following businesses:-

1. To receive the audited financial statements for the year ended 31 December 2013 together with the Directors’ and Auditors’ Reports thereon. Please refer to Note A.

2. To re-elect the following Directors retiring pursuant to the Company’s Articles of Association:-i) Chua Eng Chin (Article 97)ii) Datuk Raymond Chan Boon Siew (Article 97)

Ordinary Resolution 1Ordinary Resolution 2

3. To approve the payment of Directors’ fees of up to RM300,000 to the Directors of the Company for the financial year ending 31 December 2014.

Ordinary Resolution 3

4. To re-appoint Messrs. UHY as Auditors of the Company and to authorise the Directors to fix their remuneration.


SPECIAL BUSINESSES :-To consider and, if thought fit, to pass the following Resolution:-

5. Authority To Directors To Allot And Issue Shares

“THAT subject to the Companies Act, 1965, and the approval of the relevant government and/or regulatory authorities, the Directors be and are hereby empowered pursuant to Section 132D of the Companies Act, 1965, to issue shares of 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 deem fit provided that the aggregate number of shares issued pursuant to this resolution shall not exceed 10% of the issued capital of the Company for the time being, subject always to the approval of all the relevant regulatory bodies having been obtained for such allotment and issue, and such authority shall continue to be in force until the conclusion of the next annual general meeting of the Company; and FURTHER THAT the Directors be and are hereby empowered to obtain the approval for the listing and quotation for the additional shares so issued on the Bursa Malaysia Securities Berhad (“Bursa Securities”).”


6. Proposed Renewal of the Existing Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature (“Proposed Shareholders’ Mandate”)



“THAT, subject to compliance with all applicable laws, regulations and guidelines, approval be and is hereby given to the Company and/or its subsidiaries to enter into Recurrent Related Party Transactions of a revenue or trading nature with related parties as set out in Section 2.3 of the Circular to Shareholders dated 29 May 2014 for the purposes of Paragraph 10.09, Chapter 10 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Listing Requirements”), subject to the following:-

(i) the transactions are necessary for the day to day operations of the Company’s subsidiary in the ordinary course of business, at arm’s length, on normal commercial terms and are on terms not more favourable to the related party than those generally available to the public and not detrimental to minority shareholders of the Company;

(ii) the mandate is subject to annual renewal. In this respect, any authority conferred by a mandate shall only continue to be in force until:-

(a) the conclusion of the next Annual General Meeting (“AGM”) of the Company, at which time it will lapse, unless by a resolution passed at the meeting, the authority is renewed;

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

(c) revoked or varied by resolution passed by the shareholders in a general meeting,

whichever is the earlier.

(iii) disclosure is made in the annual report of the Company of the breakdown of the aggregate value of the Recurrent Related Party Transactions conducted pursuant to the mandate during the current financial year, and in the annual reports for the subsequent financial years during which a shareholder’s mandate is in force, where:-

(a) the consideration, value of the assets, capital outlay or costs of the aggregated transactions is equal to or exceeds RM1.0 million; or

(b) any one of the percentage ratios of such aggregated transactions is equal to or exceeds 1%,

whichever is the higher;

and amongst other, based on the following information:-

(a) the type of the Recurrent Related Party Transactions made; and(b) the names of the related parties involved in each type of the

Recurrent Related Party Transactions made and their relationships with HCIB Group.

AND THAT the Directors of the Company be and are hereby authorised to complete and do all such acts and things to give effect to the transactions contemplated and/or authorised by this Ordinary Resolution.”

7. To transact any other business of the Company for which due notice shall have been given.



By order of the Board,

Tan Tong Lang (MAICSA 7045482)Chong Voon Wah (MAICSA 7055003)Company Secretaries

Kuala Lumpur 29 May 2014

Notes

A. This Agenda item is meant for discussion only as Section 169(1) of the Companies Act, 1965 and the Company’s Articles of Association provide that the audited financial statements are to be laid in the general meeting. Hence, it is not put forward for voting.

1. A member entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend and vote in his/her stead. A proxy may but need not be a member of the Company. The provision of Section 149(1)(b) of the Act shall not apply to the Company.

2. Where a member appoints more than one proxy to attend the same meeting, the appointment shall be invalid unless he/she specifies the proportion of his/her holdings to be represented by each proxy.

3. Where a member of the Company is an exempt authorised nominee defined under the Central Depositories Act which is exempted from compliance with the provision of subsection 25A(1) of the Central Depositories Act which holds ordinary shares in the Company for multiple beneficial owners in one Securities Account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds.

4. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorized in writing or, if the appointer is a corporation, either under its Common Seal or signed by attorney so authorized.

5. The Form of Proxy must be deposited at the Registered Office of the Company at Suite 10.03, Level 10, The Gardens South Tower Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur not less than 48 hours before the time set for holding the meeting or any adjournment thereof.

6. For the purpose of determining a member who shall be entitled to attend the Thirty Sixth AGM, the Company shall be requesting Bursa Malaysia Depository Sdn Bhd to issue a General Meeting Record of Depositors as at 13 June 2014. Only members whose name appears on the Record of Depositors as at 13 June 2014 shall be entitled to attend the said meeting or appoint proxies to attend and/or vote on his/her behalf.



EXPLANATORY NOTES ON SPECIAL BUSINESS

Ordinary Resolution 5: Authority To Directors To Allot And Issue Shares

The Ordinary Resolution 5 is a renewal of the mandate given to the Company by the shareholders at the previous Annual General Meeting held on 25 June 2013, if duly passed, will give the Directors of the Company the flexibility to issue and allot new shares in the Company up to an amount not exceeding in total 10% of the issued share capital of the Company for the time being for such purposes as the Directors consider would be in the interest of the Company. This authority, unless revoked or varied at a general meeting will expire at the conclusion of the next Annual General Meeting of the Company.

In order to avoid any delay and costs involved in convening a general meeting to approve such issue of shares, it is thus considered appropriate that the Directors be empowered to issue shares in the Company, up to any amount not exceeding in total 10% of the issued share capital of the Company for the time being, for such purposes. The renewed authority for allotment of shares will provide flexibility to the Company for the allotment of shares for the purpose of funding future investment, working capital and/ or acquisitions.

As at the date of this Notice, no new shares in the Company were issued pursuant to the mandate granted to the Directors at the Thirty Fifth (35th) Annual General Meeting held on 25 June 2013 and which will lapse at the conclusion of the Thirty Sixth (36th) Annual General Meeting.

Ordinary Resolution 6: Proposed Renewal of the Existing Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature

The Ordinary Resolution 6, if passed, will enable the Company and/or its subsidiaries to enter into recurrent related party transactions of a revenue or trading nature which are necessary for the day-to-day operations of the Company and/or its subsidiaries, subject to the transactions being carried out in the ordinary course of business of the Company and/or its subsidiaries and on normal commercial terms which are generally available to the public and not detrimental to the minority shareholders of the Company. This authority, unless revoked or varied by the Company at a general meeting, will expire at the next annual general meeting of the Company.

The Directors who are standing for re-election at the Thirty Sixth (36th) Annual General Meeting of the Company are:-

(i) Chua Eng Chin Article 97 (Ordinary Resolution 1) (ii) Datuk Raymond Chan Boon Siew Article 97 (Ordinary Resolution 2)

The profile of the above Directors are set out on pages 7 and 10 of the Annual Report 2013. The details of the interest of the above Directors in the securities of the Company or its related corporations are disclosed in the Directors report on page 44 to page 45 of the aforesaid Annual Report.

The details of the Directors’ attendance for Board Meetings are disclosed in the Corporate Governance Statement on page 17 of the Annual Report 2013.

The Thirty Sixth (36th) Annual General Meeting of the Company will be held at Lot 450 Jalan Papan, Pandamaran Industrial Area, 42000 Port Klang, Selangor Darul Ehsan on Friday, 20 June 2014 at 2.30 p.m.



STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING

The Directors who are standing for re-election at the Thirty Sixth (36th) Annual General Meeting of the Company are:-

(i) Chua Eng Chin Article 97 (Ordinary Resolution 1) (ii) Datuk Raymond Chan Boon Siew Article 97 (Ordinary Resolution 2)

The profile of the above Directors are set out on pages 7 and 10 of the Annual Report 2013. The details of the interest of the above Directors in the securities of the Company or its related corporations are disclosed in the Directors report on page 44 to page 45 of the aforesaid Annual Report.

The details of the Directors’ attendance for Board Meetings are disclosed in the Corporate Governance Statement on page 17 of the Annual Report 2013.

The Thirty Sixth (36th) Annual General Meeting of the Company will be held at Lot 450 Jalan Papan, Pandamaran Industrial Area, 42000 Port Klang, Selangor Darul Ehsan on Friday, 20 June 2014 at 2.30 p.m.

(Company No: 36998 T)(Incorporated in Malaysia)

FORM OF PROXY(Before completing this form please refer to the notes below)

I / We (Full Name in Block Letters)____________________________________________________________________

NRIC No. / Passport No. / Company No. _______________________________________________________________

of ______________________________________________________________________________________________

being a member / members of HARVEST COURT INDUSTRIES BERHAD (36998-T), hereby appoint

__________________________________________NRIC No. / Passport _____________________________________

of ______________________________________________________________________________________________

and/or ___________________________________________________________________________________________

of ______________________________________________________________________________________________

NRIC No. / Passport No. ____________________________________________________________________________

or failing him/her, the Chairman of the Meeting as *my/our proxy to attend and vote for *me/us and on my/our behalf at the Thirty Sixth (36th) Annual General Meeting of the Company to be held at Lot 450, Jalan Papan, Pandamaran Industrial Area, 42000 Port Klang, Selangor Darul Ehsan on Friday, 20 June 2014 at 2.30 p.m. and at any adjournment thereof in the manner as indicate below:-

RESOLUTIONS FOR AGAINSTOrdinary Resolution 1 - To re-elect Chua Eng Chin as Director Ordinary Resolution 2 - To re-elect Datuk Raymond Chan Boon Siew as Director

Ordinary Resolution 3 - To approve the payment of Directors’ fees for the financial year ending 31 December 2014

Ordinary Resolution 4 - To re-appoint Messrs UHY as Auditors of the Company

Ordinary Resolution 5 - To approve the authority to issue shares pursuant to Section 132D of the Companies Act

Ordinary Resolution 6 - To approve the Proposed Shareholders’ Mandate

The proportions of my/our holdings to be represented by my/our proxies are as follows:-

First ProxyNo. of Shares: ……………………………

Percentage : …………………………..….%

Second ProxyNo. of Shares: …………………….………

Percentage : …………………………….%

(Please indicate with ‘X’ how you wish to cast your vote. In the absence of specific directions, the proxy may vote or abstain from voting on the resolutions as he/she may think fit.)

Signed this ___________ day of ______________________, 2014.

Signature : ____________________________________________________(If shareholder is a corporation, this form should be executed under seal)

NOTES:

1. A member entitled to attend and vote at the Meeting is entitled to appoint a proxy to attend and vote in his/her stead. A proxy may but need not be a member of the Company. The provision of Section 149(1)(b) of the Act shall not apply to the Company.

2. Where a member appoints more than one proxy to attend the same meeting, the appointment shall be invalid unless he/she specifies the proportion of his/her holdings to be represented by each proxy.

3. Where a member of the Company is an exempt authorised nominee defined under the Central Depositories Act which is exempted from compliance with the provision of subsection 25A(1) of the Central Depositories Act which holds ordinary shares in the Company for multiple beneficial owners in one Securities Account (“omnibus account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds.

4. The instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly authorized in writing or, if the appointer is a corporation, either under its Common Seal or signed by attorney so authorized.

5. The Form of Proxy must be deposited at the Registered Office of the Company at Suite 10.03, Level 10, The Gardens South Tower Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur not less than 48 hours before the time set for holding the meeting or any adjournment thereof.

6. For the purpose of determining a member who shall be entitled to attend the Thirty Sixth AGM, the Company shall be requesting Bursa Malaysia Depository Sdn Bhd to issue a General Meeting Record of Depositors as at 13 June 2014. Only members whose name appears on the Record of Depositors as at 13 June 2014 shall be entitled to attend the said meeting or appoint proxies to attend and/or vote on his/her behalf.

Harvest Court Industries Berhad

NUMBER OF SHARES HELD CDS ACCOUNT NO.

FOLD THIS FLAP FOR SEALING

THEN FOLD HERE

1ST FOLD HERE

The Company SecretaryHARVEST COURT INDUSTRIES BERHAD (36998-T) Suite 10.03, Level 10, The Gardens South Tower Mid Valley City, Lingkaran Syed Putra59200 Kuala Lumpur

AFFIXSTAMP

www.harvestcourt.com Lot 450, Jalan PapanPandamaran Industrial Area42000 Port Klang, Selangor Darul EhsanTel No.: (603) 3165 2218Fax No.: (603) 3168 1336

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