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Annual Report2012

Harvest Court Industries Berhad

(Company No. 36998-T)

VisionTo be recognised as a Reputable Contractor and

premier integrated Door Manufacturer in Malaysia .

MissionThrough a culture of Teamwork and Innovation, we shall strive to provide customers with quality

products in a timely manner, generating wealth to our employees and shareholders.

Corporate Information

Board of Directors

Directors’ Profiles

Chairman’s Statement

Corporate Social Responsibility

Corporate Governance Statement

Audit Committee’s Report

Statement on Risk Management and Internal Control

Other Disclosure Requirements Pursuant to the Listing Requirements of Bursa Securities

Analysis of Shareholdings

Director’s Report

Statements by Directors’

Statutory Declaration

Auditors’ Report

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

Group’s Landed Properties

Notice of Annual General Meeting

Statement Accompanying Notice of Annual General Meeting

Proxy Form

Contents

01

02

04

12

14

15

24

29

32

35

42

48

49

50

53

56

57

61

63

134

135

136

140

Annual Report 2012 1



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 DirectorsDatuk Tan Choon Hwa (JMK, JP)Zainuri Bin ZainalChua Eng Chin Woo Mun Chee

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

REMUNERATION COMMITTEEDato’ Mohamed Amir Abas Bin Zainal Azim (Chairman)Datuk Raymond Chan Boon Siew Woo Mun Chee

NOMINATION COMMITTEEWoo Mun Chee (Chairman)Zainuri Bin ZainalChua Eng Chin ESOS COMMITTEE Datuk Raymond Chan Boon Siew (Chairman) Ng Wai Han Chua Eng Chin Low Son Heng Freiya Chong Fui Fui

COMPANY SECRETARIESTan Tong Lang (MAICSA 7045482)Chong Voon Wah (MAICSA 7055003)

REGISTERED OFFICESuite 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 REGISTRARMEGA 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 United Overseas Bank (Malaysia) Berhad

AUDITORSUHY (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 LISTINGMain Market of Bursa Malaysia Securities Berhad Stock Name : HARVEST Stock Code : 9342

WEBSITE http://www.harvestcourt.com

EMAIL [email protected] (Marketing) [email protected] (Management)

Harvest Court Industries Berhad (Company No .36998-T)2

Board of DirectorsSitting 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

Datuk Tan Choon Hwa - (JMK, JP)Independent Non-Executive Director

Zainuri Bin ZainalIndependent Non-Executive Director

Chua Eng ChinIndependent Non-Executive Director

Woo Mun CheeIndependent Non-Executive Director

Board of Directors

Annual Report 2012 3Board of Directors (cont’d)


Dato’ Mohamed Amir Abas Bin Zainal Azim, a Malaysian, aged 63, 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.

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



Annual Report 2012 5Directors’ Profiles (cont’d)

Datuk Raymond Chan Boon Siew, a Malaysian, aged 41, 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 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

Harvest Court Industries Berhad (Company No .36998-T)6 Directors’ Profiles (cont’d)

Ng Wai Han Executive Director

Mr. Ng Wai Han, a Malaysian, aged 42, 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.


Chua Eng Chin Independent Non-Executive Director

Mr. Chua Eng Chin, a Malaysian, aged 54, 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. and an Independent Non-Executive Director in Tiger Synergy Berhad.

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.

Harvest Court Industries Berhad (Company No .36998-T)8 Directors’ Profiles (cont’d)

Zainuri Bin Zainal Independent Non-Executive Director

En. Zainuri Bin Zainal, a Malaysian, aged 40, had obtained a private pilot License with Instructor Rating (Aviation 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.


Datuk Tan Choon Hwa (JMK, JP) – Independent Non-Executive Director

Datuk Tan Choon Hwa (JMK, JP), a Malaysian, aged 56, was appointed as an Independent Non-Executive Director on 4 September 2012.

He is a businessman with twenty (20) years of experiences in various industries such as timber, mining, international trading and, housing and land development. He is the Executive Chairman of TCH International Resources Group Sdn Bhd and TCH Vision Trading Corporation Sdn Bhd, executive director of Naim Indah Corporation Berhad, non-executive director of VTI Vintage Berhad and Aturmaju Resources Berhad and non-independent non-executive director of China Stationery Limited. He also holds directorships in Fonpoint Foncare Enterprise Sdn Bhd, Pasaraya Besar Bilal Sdn Bhd, Intergold Entity (M) Sdn Bhd, Intergold Nexus (M) Sdn Bhd, Linapro Sdn Bhd, Tok Aman Bali Beach Resort Sdn Bhd, Corak Anggerik Sdn Bhd, Bakat Mentari Sdn Bhd and Sri Uda Sdn Bhd. He holds other chairmanship in several associations, e.g. Persatuan Teo Chew Association.

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


Woo Mun Chee Independent Non-Executive Director

Woo Mun Chee, a Malaysian, aged 60, was appointed as an Independent Non-Executive Director on 4 September 2012. Mr. Woo is presently the Chairman of the 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 have not been convicted for any offences within the past 10 years other than traffic offence, if any.

Directors’ Profiles (cont’d)

THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK




On behalf of the Board of Directors, it is my pleasure to present to you the annual report of Harvest Court Industries Berhad (“HCIB”) for the financial year ended 31 December 2012.

The year 2012 has proven to be another challenging year for the Group. Although the brunt of the global financial crisis has passed, the Group remains affected by its aftermath. The year 2012 was a significant year for us as it marked the 20th anniversary of our group. From its humble beginnings two decades ago, HCIB has grown to become a household brand and is now a leading solid doors manufacturer in the region. Throughout the years, together, we have upheld the spirit of strengthening the company’s operations and performance, and

we are delighted to see the resilient and commendable growth in our construction division as we grow and diversify our business. We improved our manufacturing portfolio fundamentals and continued to pursue a prudent and diversification on projects and construction, which saw HCIB emerge stronger and well-positioned as one of Malaysia’s leading construction company.

The Group is optimistic about the growth potential in both India and Middle East markets. The potential to grow in these two markets is undeniable, as these economies have remained resilient despite the external turbulent economic conditions.

Taking cue from the successful diversification and transformation

programmes, HCIB have since last year embarked on their own transformation programmes, which aim to strengthen the Company’s fundamentals and operational platform to prepare for rapid growth in the years to come. In line with the Group’s direction, the timber and construction divisions have achieved RM24.3 million gross revenue for the year ending 31 December 2012 (2011: RM11.6 million). This represents 110% increase in Group turnover from year 2011. The Group has also managed to achieve profit after tax of RM140,405 after two consecutive years of losses.

We are happy that our strategy to accelerate the growth of our new ventures continues to show positive trend while prudent cost control measures have helped the Group

Annual Report 2012 13Chairman’s Statement (cont’d)

to improve its operational results without compromising on the quality of our service to customers.

Moving forward, the Group will continue to build on its strengths, and focus on its business goals and strategies to enhance shareholders’ value. On the same note, the Group will also explore various opportunities to grow and expand its businesses.

Acknowledgement

As part of our proactive self-renewal and governance process, there were several changes to our board in 2012.

I would like to thank Mr Ng Swee Kiat and Mr Sukhinderjit Singh Muker, both of whom have stepped down as Managing Director and Independent non-executive Director

of the Board, for their dedication and invaluable contributions since the inception of HCIB.

On behalf of the Board of Directors, I would like to announce the re-composition of the Board and Board Committees. Firstly, Datuk Raymond Chan Boon Siew has been re-designated as Managing Director (“MD”) cum Chief Executive Officer of the group. Mr. Steven Ng Wai Han has also been appointed as Executive Director of the group. We are also pleased to welcome to the Board two new members, Datuk Tan Choon Hwa (JMK, JP) and Mr. Woo Mun Chee as Independent Non-Executive Directors. I am confident that their wealth of experience in their respective fields will further strengthen HCIB Management’s bench strength.

I would also like to thank our management and staffs for their hard work, dedication, and commitments to the Group. Our shareholders, customers, bankers, suppliers, and partners play an extremely vital role in our business and I would like to thank them for their continuous support. Harvest Court Industries Berhad looks forward to bringing the company to the next level of growth and development with our dynamic management and staff and the strong support from our stakeholders.

Dato’ Mohamed Amir Abas Bin Zainal Azim

Independent Non-Executive Chairman


Corporate Social Resposibility (CSR)

Corporate Social Resposibility (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.




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 2012 (“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 2012 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 Seven (7) members, comprising a Managing Director & Chief Executive Officer, one (1) Executive Director and five (5) 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 4 to 10 of the Annual Report 2012.

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.

Harvest Court Industries Berhad (Company No .36998-T)16 Corporate Governance Statement (cont’d)

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.

Annual Report 2012 17Corporate Governance Statement (cont’d)

3. 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 as well as to independent professional advice, including the internal and external auditors. The Company Secretary attends to most of the Board meetings.

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

4. Board Meetings

There were Eight (8) Board of Directors’ Meetings held during the financial year ended 31 December 2012. 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 8/8(b) Datuk Raymond Chan Boon Siew 7/8(c) Zainuri Bin Zainal 6/8(d) Chua Eng Chin 8/8(e) Ng Wai Han (Appointed on 04.09.2012) 1/1(f) Datuk Tan Choon Hwa (JMK, JP) (Appointed on 04.09.2012) 1/1(g) Woo Mun Chee (Appointed on 04.09.2012) 1/1(h) Ng Swee Kiat (Resigned on 01.10.2012) 6/7(i) Sukhinderjit Singh Muker (Resigned on 05.09.2012) 3/7

5. 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 several relevant courses/seminars during the financial year as detailed below:

Name of Director Date Courses attended

Dato’ Mohamed Amir Abas Bin Zainal Azim

22 October 2012 Effective Audit Committees – The Malaysian Code on Corporate Governance 2012

Datuk Raymond Chan Boon Siew

16-17 May 2012 Mandatory Accreditation Programme for Directors of public listed company

Chua Eng Chin 21 April 2012 Risk of Liquidity Driven Growth in 201222 April 2012 Should Asean and GCC Countries Head for Currency

Union

Zainuri Bin Zainal NA NA (Please refer to note below)

Ng Wai Han 5-6 December 2012 Mandatory Accreditation Programme for Directors of public listed company

Datuk Tan Choon Hwa (JMK, JP)

29 August 2012 Strategic Risk Management

Woo Mun Chee NA NA (Please refer to note below)

En. Zanuri Bin Zainal and Mr. Woo Mun Chee did not attend any training during the year 2012.

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

6. 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

MembersZainuri Bin Zainal - Independent Non-Executive DirectorChua Eng Chin - Independent Non-Executive Director

7. 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.

8. 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/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 2012 is as follow:

Executive Directors

(RM)

Non-Executive Directors

(RM)Salary 96,000 60,000*Other Emoluments 4,950 12,600Directors’ fee - -Total 100,950 72,600

*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-Executive50,000 and below 1 5 50,001 – 100,000 1 -100,000 – 150,000 - -

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 satisfies 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 Chairman

MembersWoon Mun Chee - Independent Non-Executive DirectorDatuk Raymond Chan Boon Siew - Managing Director & Chief Executive Officer

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 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 2012, 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.

Corporate Governance Statement (cont’d)


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 ChinLow Son Heng Freiya Chong Fui Fui

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

Corporate Governance Statement (cont’d)

Harvest Court Industries Berhad (Company No .36998-T)24 Audit Committee Report

1. COMPOSITION

Chairman

Chua Eng Chin - Independent Non-Executive Director

MembersDato’ Mohamed Amir Abas Bin Zainal Azim - Independent Non-Executive ChairmanZainuri Bin Zainal - 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.

Audit Committee Report

Annual Report 2012 25Audit Committee Report (cont’d)

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.

Harvest Court Industries Berhad (Company No .36998-T)26 Audit Committee Report (cont’d)

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.

Annual Report 2012 27Audit Committee Report (cont’d)

3. ATTENDANCE OF MEETINGS

During the year ended 31 December 2012, the audit committee held six (6) meetings. Details of the attendance of committee members are as follow:

Attendance

Chua Eng Chin 6/6Zainuri Bin Zainal 5/6Dato’ Mohamed Amir Abas Bin Zainal Azim 6/6Sukhinderjit Singh Muker (Resigned on 05.09.2012) 1/5

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 2012 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 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 2012, were in accordance with the criteria of allocation of share options set out in the ESOS By-Laws.

Harvest Court Industries Berhad (Company No .36998-T)28 Audit Committee Report (cont’d)

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

01.01.2012

Amount of Options

Granted

Amount of Options Exercised

At31.12.2012

i) Dato’ Mohamed Amir Abas Bin Zainal Azim

200,000 - 200,000 -

ii) Chua Eng Chin 230,000 - 230,000 -iii) Sukhinderjit Singh Muker

(Resigned on 05.09.2012)200,900 - 200,000 900

iv) Zainuri Bin Zainal 200,000 - 200,000 -

Total :- 830,900 - 830,000 900

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 2012 is RM62,074.

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.

Annual Report 2012 29Statement on Risk Management and Internal Control

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 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 on Risk Management and Internal Control

Harvest Court Industries Berhad (Company No .36998-T)30 Statement on Risk Management and Internal Control (cont’d)

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.

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

Annual Report 2012 31Statement on Risk Management and Internal Control (cont’d)

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 2012 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 29 May 2013.

Harvest Court Industries Berhad (Company No .36998-T)32 Other Disclosure Requirements Pursuant to the Listing Requirements of Bursa Securities

1. UTILISATION OF PROCEEDS FROM CORPORATE EXERCISE

On 19 July 2012, the Company had completed its Private Placement exercise of 16,700,000 new ordinary shares which had been listed and quoted on Main Market of Bursa Malaysia Securities Berhad on even date.

Status of utilization of proceeds up to 31 December 2012 is as follows :-

Purpose

Proposed utilisation

RM’000

Actual utilisation

RM’000

Working capital requirements for the HCIB Group - Construction Division (1) 3,166 3,108- Timber Division (2) 3,166 2,744

To defray expenses relating to the Proposed Private Placement (3)

400 400

Total 6,732 6,252

Notes :

1) The working capital for the construction division shall be utilised to undertake construction projects 2) The working capital for the timber division shall be utilised for the purchase of raw materials factory repair and

maintenance and repayment to creditors. In the event that the working capital requirements for the Timber Division is lower than intended, the excess amount shall be utilised for the Construction Division

3) The estimated expenses of approximately RM400,000 consist of professional fees and fees payable to the relevant authorities. Any variation in the actual amount of the expenses for the Proposed Private Placement will be adjusted proportionately for working capital purposes

Other Disclosure Requirements Pursuantto the Listing Requirements of Bursa Securities

Annual Report 2012 33Other Disclosure Requirements Pursuant to the Listing Requirements of Bursa Securities (cont’d)

2. SHARE BUY-BACKS

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

3. OPTIONS, WARRANTS OR CONVERTIBLE SECURITIES

The Company had on 23 March 2010 implemented the ESOS for a period of five (5) years expiring on 22 March 2015. The ESOS is governed by the By-Laws which were approved by its shareholders on 3 March 2010.

During the financial year ended 31 December 2012, the Company had not offered any share options to the eligible Directors and employees of the Group and 1,056,000 share options were exercised from the previous options granted in year 2011 at an exercise price of RM0.25 each pursuant to the provision of By-Laws of the ESOS.

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

There were RM85,976 non-audit fees paid to the external auditors by the Company and its subsidiary companies for the financial year ended 31 December 2012. The non-audit fees is for the corporate exercise pertaining to the Proposed Diversification and Proposed Related Party Transaction which had been approved by the shareholders during the Extraordinary General Meeting held on 27 June 2012.

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 28 February 2013.

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.

Harvest Court Industries Berhad (Company No .36998-T)34 Other Disclosure Requirements Pursuant to the Listing Requirements of Bursa Securities (cont’d)

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 25 June 2013.

RRPT of a trading or revenue nature of the Group for the financial year ended 31 December 2012 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 (Sabah) Sdn Bhd (“Sagajuta”)

Harvest Lumber Sdn Bhd (“HLSB”)

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

26,546 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

72,165 Datuk Raymond Chan Boon Siew is a Director of SCCSB. He is also a Managing Director & Chief Executive Officer and substantial shareholder of HCIB.

(i) Notes on Nature of Transaction:

(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 15 May 2013

AUTHORIZED SHARE CAPITAL : RM200,000,000.00ISSUED AND FULLY PAID-UP CAPITAL : RM 49,768,368.25CLASS OF SHARES : ORDINARY SHARES OF RM0.25 EACHVOTING RIGHTS : ONE VOTE PER ORDINARY SHARENUMBER OF SHAREHOLDERS : 4,944

DISTRIBUTION OF SHAREHOLDINGS AS AT 15 MAY 2013

SIZE OF SHAREHOLDINGS NO. OF SHAREHOLDERS

NO. OF ORDINARY

SHARES%

LESS THAN 100 39 991 0.00100 TO 1,000 665 623,067 0.311,001 TO 10,000 2,165 13,054,756 6.5610,001 TO 100,000 1,781 63,941,643 32.12100,001 TO LESS THAN 5% OF ISSUED SHARES 293 97,198,507 48.835% AND ABOVE OF ISSUED SHARES 1 24,254,509 12.18TOTAL 4,944 199,073,473 100.00

DIRECTORS’ SHAREHOLDINGS AS AT 15 MAY 2013

DIRECT INDIRECT

NO. NAMES NO. OF SHARES % NO. OF

SHARES %

1. DATO’ MOHAMED AMIR ABAS BIN ZAINAL AZIM 150,500 0.08 - -2. DATUK RAYMOND CHAN BOON SIEW 29,740,809 14.94 - -3. NG WAI HAN 300,000 0.154. ZAINURI BIN ZAINAL 301,600 0.15 - -5. CHUA ENG CHIN 230,000 0.12 - -6. DATUK TAN CHOON HWA (JMK, JP) - - - -7. WOO MUN CHEE 18,000 0.01 - -

LIST OF SUBSTANTIAL SHAREHOLDERS (5% AND ABOVE) AS AT 15 MAY 2013DIRECT INDIRECT


SHARES %

1. DATUK RAYMOND CHAN BOON SIEW 29,740,809 14.94 - -

Analysis of Shareholdings


LIST OF TOP 30 SHAREHOLDERS / DEPOSITORS AS AT 15 MAY 2013

Name No. of Shares Held Percentage

1. TA NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR DATUK RAYMOND CHAN BOON SIEW 24,254,509 12.18

2. AFFIN NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR YANG PEING NAN (YAN0139C) 5,628,300 2.83

3. ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD PLEDGE SECURITIES ACCOUNT FOR DATUK RAYMOND CHAN BOON SIEW (8081977) 4,500,000 2.26

4. UOB KAY HIAN NOMINEES (ASING) SDN BHD EXEMPT AN FOR UOB KAY HIAN PTE LTD ( A/C CLIENTS ) 1,926,800 0.97

5. PUBLIC NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR TEE KIM HEW (E-KLG/BTG) 1,665,800 0.84

6. LIM CHEEN MEI 1,550,000 0.787. LIEW CHUN KEONG 1,452,000 0.73

8. HLB NOMINEES (ASING) SDN BHD PLEDGED SECURITIES ACCOUNT FOR CHANG, TZUNG-YAUR @ EDDY CHANG 1,400,000 0.70

9. MAYBANK NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR SABARUDIN BIN BABA 1,400,000 0.70

10. LAI KIM LAN 1,320,005 0.66

11. MAYBANK NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR HOO YEEK FOO 1,092,600 0.55

12. RHB NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR PETRINA CHONG FUI FUI 1,078,000 0.54

13. WONG WEI SHAN 1,046,826 0.5314. ANG HONG SWEE 1,017,000 0.5115. KHOO KIM KWANG @ KHOO KIM KUANG 1,000,000 0.5016. LEE TIEN KWAI 1,000,000 0.5017. YAP FOO KAN 985,900 0.50 18. YII LEH KIEW 969,400 0.49 19. TAY KOO HUI 912,000 0.4620. CHAN YOO FONG 900,000 0.45

21. MAYBANK SECURITIES NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR YAP CHEE WEI 895,000 0.45

22.MAYBANK SECURITIES NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR RAJA ZAINAL ABIDIN BIN RAJA HUSSIN (REM 672)

830,000 0.42

23. SONG HAN LEONG 798,000 0.40

24. RHB NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR RAYMOND CHAN BOON SIEW 786,300 0.39

25. WONG KON WAH 700,000 0.35

26. CIMSEC NOMINEES (ASING) SDN BHD CIMB BANK FOR CHANG, TZUNG-YAUR @ EDDY CHANG (MP0178) 684,400 0.34

27. PUBLIC NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR LOH WOK SENG @ LOH WAK SENG (E-JCL) 669,000 0.34

28. AFFIN NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR NG SOON TEAM (NGS0826C) 612,000 0.31

29. LIM KAH CHING 600,000 0.3030. NORAINI BINTI DARUS 600,000 0.30

TOTAL 62,273,840 31.28

Analysis of Shareholdings (cont’d)


ANALYSIS OF WARRANTS HOLDINGS AS AT 15 MAY 2013

ISSUED SIZE : 70,760,472 10 YEARS DETACHABLE WARRANTS ISSUED PURSUANT TO THE RIGHTS ISSUE WITH WARRANTS, LAND ACQUISITION AND DEBT SETTLEMENT SCHEME

NUMBER OF WARRANTS HOLDERS : 1,840

DISTRIBUTION OF WARRANTS HOLDINGS AS AT 15 MAY 2013

SIZE OF SHAREHOLDINGSNO. OF

WARRANTS HOLDERS

NO. OF WARRANTS %

LESS THAN 100 40 1,416 0.00100 TO 1,000 54 41,060 0.061,001 TO 10,000 710 4,609,456 6.1510,001 TO 100,000 917 34,352,340 48.55100,001 TO LESS THAN 5% OF ISSUED SHARES 119 31,756,200 44.885% AND ABOVE OF ISSUED SHARES - - -TOTAL 1,840 70,760,472 100.00

DIRECTORS’ INTEREST IN WARRANTS AS AT 15 MAY 2013

DIRECT INDIRECT


SHARES %

1. DATO’ MOHAMED AMIR ABAS BIN ZAINAL AZIM - - - -2. DATUK RAYMOND CHAN BOON SIEW 515,000 0.73 - -3. NG WAI HAN - - - -4. ZAINURI BIN ZAINAL - - - -5. CHUA ENG CHIN - - - -6. DATUK TAN CHOON HWA (JMK, JP) - - - -7. WOO MUN CHEE - - - -



LIST OF TOP 30 WARRANTS HOLDERS/DEPOSITORS AS AT 15 MAY 2013

Name No. of Warrants Held Percentage

1. KUASATEK (M) SDN BHD 1,500,000 2.12

2. ZULKIFLI BIN OSMAN 1,416,300 2.00

3. LIM GEOK ENG MARY 1,048,000 1.48

4. JASON NGA KOR SING 842,200 1.19

5. NG HOOI LENG 820,000 1.16

6. HLB NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR SHANMUGHANATHAN A/L VELLANTHURAI 600,000 0.85

7. ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR FOON CHEE MENG (8073458) 558,300 0.79

8. WANGSA KITA SDN BHD 540,000 0.76

9. YAP KOW CHAI 511,800 0.72

10. ANUAL BIN HASSAN 500,000 0.71

11. HLIB NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR SUCCESS SECRETS SDN BHD (MG0179-192) 500,000 0.71

12. MOHD NOOR BIN ABD KADIR 500,000 0.71

13. RHB CAPITAL NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR MOHD AMIRI BIN AB RAHMAN 500,000 0.71

14. TAN YOKE WAI 500,000 0.71

15. KHOR HUN BOON 480,000 0.68

16. YII KIE CHEW 467,900 0.66

17. LIM CHONG YAW 430,400 0.61

18. CHAN YIAP FATT 424,000 0.60

19. LIM YAT KWAN 410,000 0.58

20. PUBLIC NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR KUA AH PENG (E-SPI) 402,600 0.57

21. GOH HUA NAM 400,000 0.57

22. TAN PHILIP 400,000 0.57

23. PM NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR LING SIEW LUAN (B) 395,600 0.56

24. YEO ECK LIONG 390,000 0.55

25. AIBB NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR LIM GEOK ENG MARY 380,000 0.54

26. ECML NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR KENG ENG HAI (10K34873M) 380,000 0.54

27. LIEW CHUN KEONG 380,000 0.54

28. ALLIANCEGROUP NOMINEES (TEMPATAN) SDN BHD PLEDGED SECURITIES ACCOUNT FOR RAYMOND CHAN BOON SIEW (8081977) 350,000 0.49

29. YEO PER 327,000 0.46

30. PER CHAI KENG 325,000 0.46

TOTAL 16,679,100 23.57


AUDITED FINANCIAL STATEMENTS 2012


Directors’ Report

Directors’ Report

The Directors have pleasure in submitting their report together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2012.

Principal Activities

The principal activity of the Company is investment holding.

The principal activities of the subsidiary companies are disclosed in Note 6 to the financial statements.

There have been no significant changes in the nature of these activities during the financial year except as disclosed in Note 6 to the financial statements.

Financial Results

Group CompanyRM RM

Net profit/(loss) for the financial year 140,405 (2,852,431)

Attributable to: Owners of the parent 166,902 Non-controlling interests (26,497)

140,405 In the opinion of the Directors, the results of the operations of the Group and of the Company for the financial year have not been substantially affected by any item, transaction or event of a material and unusual nature.

There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely to affect substantially the results of the operations of the Group and of the Company for the current financial year.

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.

Annual Report 2012 43Directors’ Report (cont’d)

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.

Issue of Shares and Debentures

During the financial year, the Company increased its:

(a) authorised share capital by the creation of 400,000,000 ordinary shares from 400,000,000 ordinary shares of RM0.25 each to 800,000,000 ordinary shares of RM0.25 each;

(b) issued and paid-up share capital by the issuance of 1,056,000 new ordinary shares of RM0.25 each pursuant to the exercise of options granted under the Company’s Employee Share Option Scheme (“ESOS”) at the exercise price of RM0.25 each; and

(c) issued and paid-up share capital by the issuance of 16,700,000 new ordinary shares of RM0.25 each through private placement at issue price of RM0.403 each.

The total issued capital of the Company as at the financial year end stands at 199,073,473 ordinary shares of RM0.25 each and the paid-up share capital is RM49,768,368.

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

The warrants 2009/2019 was constituted under the Deed Poll dated 23 October 2009.

As at 31 December 2012, the total numbers of warrants that remain unexercised were 70,760,472.

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.

Harvest Court Industries Berhad (Company No .36998-T)44 Directors’ Report (cont’d)

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 30 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 266,000 ordinary shares of RM0.25 each.

The movement of options over unissued shares of the Company granted under ESOS during the financial year are disclosed in Note 30 to the financial statements. No ESOS was granted during the financial year.

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 Han Appointed on 4 September 2012Datuk Tan Choon Hwa (JMK, JP) Appointed on 4 September 2012Woo Mun Chee Appointed on 4 September 2012Ng Swee Kiat Resigned on 1 October 2012Sukhinderjit Singh Muker Resigned on 5 September 2012


Directors’ Interests

Details of holdings and deemed interests in the share capital, options and warrants over the shares of the Company or its related corporations by the Directors in office at the end of the financial year, according to the register required to be kept under Section 134 of the Companies Act, 1965, were as follows:

No. of ordinary shares of RM0.25 each

At 1.1.2012 Acquired Disposed

At 31.12.2012

Harvest Court Industries BerhadDirect interest:

Datuk Raymond Chan Boon Siew 28,954,509 1,386,300 - 29,740,809Zainuri bin Zainal 201,600 200,000 100,000 301,600Chua Eng Chin - 230,000 - 230,000Dato’ Mohamed Amir Abas bin Zainal Azim 500 200,000 50,000 200,500Woo Mun Chee 18,000 - - 18,000Ng Wai Han - 300,000 - 300,000

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

At1.1.2012 Granted Exercised

At31.12.2012

Harvest Court Industries BerhadDirect interest:

Zainuri bin Zainal 200,000 - 200,000 -Chua Eng Chin 230,000 - 230,000 -Dato’ Mohamed Amir Abas bin Zainal Azim 200,000 - 200,000 -

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 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, other than those disclosed in Note 35 the financial statements.

Harvest Court Industries Berhad (Company No .36998-T)46 Directors’ Report (cont’d)

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.

Other Statutory Information

(a) Before the statements of comprehensive income and statements of financial position of the Group and of 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 allowance for doubtful debts and satisfied themselves that there were no known bad debts and that no allowance for doubtful debts were necessary; and

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

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

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

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

(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) No contingent or other liabilities have become enforceable, or are likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may affect the ability of the Group and of the Company to meet their obligations as and when they fall due.

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

(i) any charge on the assets of the Group and of 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 of the Company which has arisen since the end of the financial year.

Significant Events

The significant events are disclosed in Note 33 to the financial statements.


Auditors

The auditors, UHY, have expressed their willingness to accept reappointment.

Signed on behalf of the Board in accordance with a resolution of the Directors dated 25 April 2013.

DATUK RAYMOND CHAN BOON SIEW CHUA ENG CHIN

Harvest Court Industries Berhad (Company No .36998-T)48 Statement by Director’s

Statement by Director’sPursuant to Section 169 (16) of the Companies Act, 1965

We, DATUK RAYMOND CHAN BOON SIEW and CHUA ENG CHIN, being two of the Directors of HARVEST COURT INDUSTRIES BERHAD, do hereby state that, in the opinion of the Directors, the financial statements set out on pages 53 to 133 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 2012 and of their financial performance and cash flows for the financial year then ended.

The supplementary information set out on Page 134 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 25 April 2013.

DATUK RAYMOND CHAN BOON SIEW CHUA ENG CHIN

Annual Report 2012 49Statutory Declaration

Statutory DeclarationPursuant 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 the financial statements set out on pages 53 to 133 are to the best of my knowledge and belief, 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 above-named MAZLAN BIN MOHAMAD at KUALA LUMPUR in the Federal Territory this 25 April 2013

))))

MAZLAN BIN MOHAMAD

Before me,

COMMISSIONER FOR OATHSARSHAD ABDULLAH

W 550

NO. 102 & 104 1st FLOOR BANGUNAN PERSATUAN YAP SELANGOR

JALAN TUN HS LEE50000 KUALA LUMPUR

Harvest Court Industries Berhad (Company No .36998-T)50 Auditors’ Report

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 2012 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 53 to 133.

Directors’ Responsibility for the Financial Statements

The Directors of the Company are responsible for the preparation of financial statements that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the Companies Act, 1965 in Malaysia, and for such internal control as the Directors determine are 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.

Auditors’ Report

Annual Report 2012 51Auditors’ Report (cont’d)

Opinion

In our opinion, the financial statements have been properly 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 2012 and of their financial performance and cash flows for the financial year then ended.

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 134 is solely 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.

Harvest Court Industries Berhad (Company No .36998-T)52 Auditors’ Report (cont’d)

Other Matters

1. As stated in Notes 2(a) and 38 to the financial statements, Harvest Court Industries Berhad adopted Malaysian Financial Reporting Standards on 1 January 2012 with a transition date of 1 January 2011. These standards were applied retrospectively by Directors to the comparative information in these financial statements, including the statements of financial position as at 31 December 2011 and 1 January 2011, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the financial year ended 31 December 2011 and related disclosures. We were not engaged to report on the restated comparative information and it is unaudited. Our responsibilities as part of our audit of the financial statements of the Group and of the Company for the financial year ended 31 December 2012 have, in these circumstances, included obtaining sufficient appropriate audit evidence that the opening balances as at 1 January 2012 do not contain misstatements that materially affect the financial position as of 31 December 2012 and financial performance and cash flows for the financial year then ended.

2. This report is made solely to the members of the Company, as a body, in accordance with Section 174 of 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

LO KUAN CHEApproved Number: 3016/11/14 (J)Chartered Accountant

KUALA LUMPUR

25April 2013

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Statements of Comprehensive Income for the financial year ended 31 December 2012

Statements of Comprehensive Income

Group Company2012 2011 2012 2011

Note RM RM RM RM

Revenue 24 24,341,007 11,614,251 - -

Cost of sales 25 (20,230,214) (9,828,877) - -

Gross profit 4,110,793 1,785,374 - -

Other income 459,417 377,809 595,807 729,190

Administration expenses (4,077,264) (3,437,227) (3,507,606) (852,464)

Distribution costs (423,839) (473,549) - -

Finance costs 26 (5,052) (5,389) - -

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

Profit/(Loss) before taxation 27 59,350 (1,752,982) (2,911,799) (123,274)

Taxation 28 81,055 63,723 59,368 59,368

Net profit/(loss) for the finan-cial year, representing total comprehensive income for the financial year 140,405 (1,689,259) (2,852,431) (63,906)

Net profit/(loss) for the financial year attributable to:

Owners of the parent 166,902 (1,684,169)Non-controlling interests (26,497) (5,090)

140,405 (1,689,259)

Earnings/(Loss) per share at-tributable to owners of the parent (sen):

Basic 29(a) 0.09 (0.97)Fully diluted 29(b) 0.08 (0.97)

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

Ann

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57

Stat

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)


Statements of Cash Flow for the financial year ended 31 December 2012

Statements of Cash Flow

Group Company2012 2011 2012 2011RM RM RM RM

Cash Flows From Operating ActivitiesProfit/(Loss) before taxation 59,350 (1,752,982) (2,911,799) (123,274)

Adjustments for: Bad debts written off - 185,957 - -Depreciation of property, plant and equipment 1,416,721 1,412,843 493,828 493,828Gain on disposal of property, plant and equipment (140,857) (118,123) - -Impairment on amounts owing bysubsidiary companies - - 1,123,513 - Interest expenses 5,052 5,389 - - Interest income (14,138) (3,321) (14,138) (1,180)Loss on disposal of investment in subsidiary company - - - 553,722Loss on remeasurement of investment in subsidiary company to associated company - - 86,929 -Prepayments written off - 365,000 - -Reversal of impairment loss on investment in a subsidiary company - - - (1,287,201)Reversal of impairment on trade and other receivables - (117,228) - -Share of loss of associated company 4,705 - - -Share option granted under ESOS - 67,000 - 8,300Unrealised gain on foreign exchange (3,916) (19,945) - -Waiver of debts on payables - (70,561) - -Operating profit/(loss) before working capital changes 1,326,916 (45,971) (1,221,667) (355,805)

Increase/(Decrease) in working capitalInventories 889,965 (2,484,271) - -Trade and other receivables (10,629,948) 779,287 (402,851) (745,056)Trade and other payables (3,175,431) 939,776 (4,677,727) (510,351)Amounts owing by subsidiary companies - - (5,009,254) 353,375Amounts owing to subsidiary companies - - (1,153,656) (755,978)Amount owing by contract customer (478,326) - - -Amount owing to associated company 870,353 - 877,344 -Amounts owing to Directors 4,809,972 20,144 4,809,972 20,144

(7,713,415) (745,064) (5,556,172) (1,637,866)Cash used in operations (6,386,499) (791,035) (6,777,839) (1,993,671)

Harvest Court Industries Berhad (Company No .36998-T)62 Statements of Cash Flow (cont’d)

The acompany notes from an integral part of the financial statements.

Group Company

2012 2011 2012 2011

Note RM RM RM RM

Interest received 14,138 3,321 14,138 1,180

Interest paid (5,052) (5,389) -

Tax paid (173,732) (187,401) - (93,700)

(164,646) (189,469) 14,138 (92,520)

Net cash used in operating activities (6,551,145) (980,504) (6,763,701) (2,086,191)

Cash Flows From Investing ActivitiesReclassification of investment in subsidiary company to associated company (9,534) - - -Purchase of property, plant and equipment 5(a) (313,086) (2,639,877) - -Proceeds from disposal of property, plant and equipment 146,899 262,865 - -

Net cash used in investing activities (175,720) (2,377,012) - -

Cash Flows From Financing Activities

Proceeds from issuance of shares 6,994,100 2,348,775 6,994,100 2,348,775Repayment of hire purchase Payables (19,712) (37,279) - -

Repayment of bank borrowing (109,500) (50,000) - -Net cash generated from financing activities 6,864,888 2,261,496 6,994,100 2,348,775

Net increase/(decrease) in cash and cash equivalents 138,023 (1,096,020) 230,399 262,584

Cash and cash equivalents at beginning of the financial year 453,149 1,549,169 270,986 8,402Cash and cash equivalents at end of the financial year 591,172 453,149 501,385 270,986

Cash and cash equivalents at end of financial year comprises:

Cash and bank balances 91,980 185,372 2,193 3,209Short term deposits with a licensed bank 499,192 267,777 499,192 267,777

591,172 453,149 501,385 270,986

Statements of Cash Flow for the financial year ended 31 December 2012 (cont’d)

Annual Report 2012 63Notes to The Financial Statements (cont’d)

Notes to The Financial Statements

1. Corporate Information

The principal activity of the Company is investment holding.

The principal activities of the subsidiary companies are disclosed in Note 6. There have been no significant changes in the nature of these activities during the year except for a subsidiary company which included construction and interior design fit up works as its principal activity.

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 compliance with Malaysian Financial Reporting Standards (“MFRS”), International Financial Reporting Standards (“IFRS”) and the Companies Act, 1965 in Malaysia.

In the previous years, the financial statements of the Group and of the Company were prepared in accordance with Financial Reporting Standards (“FRS”). These are the Group’s and the Company’s first financial statements prepared in accordance with MFRSs and MFRS 1, First-time Adoption of Malaysian Financial Reporting Standards has been applied.

Harvest Court Industries Berhad (Company No .36998-T)64 Notes to The Financial Statements (cont’d)

2. Basis of Preparation (Cont’d)

(a) Statement of Compliance (Cont’d)

The Group and the Company have not applied the following MFRSs, Issues Committee (“IC”) Interpretation and Amendments to MFRSs that have been issued by the Malaysian Accounting Standards Board but are not yet effective for the Group and the Company:

Effective date for finan-cial periods beginning

on or afterAmendments to MFRS 101

Presentation of Items of Other Comprehensive Income

1 July 2012

Amendments to MFRS 1 Government Loans 1 January 2013Amendments to MFRS 10, MFRS 11 and MFRS 12

Consolidated Financial Statements, Joint Arrangement and Disclosure of Interests in Other Entities: Transition Guidance

1 January 2013

MFRS 10 Consolidated Financial Statements 1 January 2013MFRS 11 Joint Arrangements 1 January 2013MFRS 12 Disclosure of Interests in Other

Entities1 January 2013

MFRS 13 Fair Value Measurement 1 January 2013MFRS 119 Employee Benefits 1 January 2013MFRS 127 Separate Financial Statements 1 January 2013MFRS 128 Investments in Associates and Joint

Ventures1 January 2013

IC Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine

1 January 2013

Amendments to MFRS 7 Disclosures - Offsetting Financial Assets and Financial Liabilities

1 January 2013

Improvements to MFRSs (2012) 1 January 2013Amendments to MFRS 132

Offsetting Financial Assets and Financial Liabilities

1 January 2014

MFRS 9 (IFRS 9 as issued by IASB in November 2009)

Financial Instruments 1 January 2015

MFRS 9 (IFRS 9 as issued by IASB in October 2010)

Financial Instruments 1 January 2015

The Group and the Company intend to adopt the above MFRSs, IC Interpretations and Amendments to MFRSs when they become effective.




The initial application of the standards which will be applied prospectively or which requires extended disclosures, is not expected to have any financial impacts to the current and prior period’s financial statements upon the first adoption.

The possible financial impacts of initial application of MFRSs, which will be applied retrospectively is as follows:

MFRS 9 Financial Instruments

MFRS 9 (IFRS 9 (2009)) replaces the guidance in MFRS 139 Financial Instruments: Recognition and Measurement on classification and measurement of financial asset. MFRS 9 requires financial asset to be measured at fair value or amortised cost. The classification depends on the entity’s business model for managing its financial instruments and the contractual cash flow characteristics of the instrument.

MFRS 9 (IFRS 9 (2010)) includes the requirements for the classification and measurement of financial liabilities and for derecognition. Measurement for financial liability designated as at fair value through profit or loss, requires the amount of change in the fair value of the financial liability, that is attributable to the change of credit risk of that liability, is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss.

Under MFRS 139, the entire amount of the change in fair value of the financial liability designated as fair value through profit or loss was presented in profit or loss.

The adoption of MFRS 9 will result in a change in accounting policy. The Group and the Company are currently examining the financial impact of adopting MFRS 9.

MFRS 10 Consolidated Financial Statements

MFRS 10 replaces all the guidance on control and consolidation in MFRS 127 Consolidated and Separate Financial Statements and IC Interpretation 112 Consolidation – Special Purpose Entities.

MFRS 10 changes the definition of control. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. It establishes control as the basis for determining which entities are consolidated in the consolidated financial statements and sets out the accounting requirements for the preparation of consolidated financial statements.

The adoption of MFRS 10 may lead to consolidation of entities that were previously not included in the Group. The Group is currently examining the financial impact of application of MFRS 10.




The possible financial impacts of initial application of MFRSs, which will be applied retrospectively is as follows: (Cont’d)

MFRS 13 Fair Value Measurement

MFRS 13 defines fair value and sets out a framework for measuring fair value, and the disclosure requirements about fair value. This standard is intended to address the inconsistencies in the requirements for measuring fair value across different accounting standards. The definition of fair value under this standard emphasises the principle that fair value is a market-based measurement, not an entity specific measurement.

The adoption of MFRS 13 will result in a change in accounting policy. The Group and the Company are currently examining the financial impact of adopting MFRS 13.

MFRS 119 Employee Benefits (2011)

This revised MFRS 119 will supersede the existing MFRS 119 when effective. This new standard makes significant changes to the recognition and measurement of defined benefit pension expense and termination benefits, and to the disclosures for all employee benefits. Actuarial gains and losses will no longer be deferred using the corridor approach. Past service costs, whether unvested or already vested, are recognised immediately in the profit or loss as incurred and the annual defined benefit costs in the profit or loss will include net interest expense/income on the defined benefit asset/liability.

The adoption of MFRS 119 (2011) will result in a change in accounting policy. The Group and the Company are currently examining the financial impact of adopting MFRS 119 (2011).

MFRS 127 Separate Financial Statements (2011)

Upon the adoption of MFRS 10, the accounting requirements relating to the preparation of consolidated financial statements are no longer covered under MFRS 127. This revised MFRS 127 only cover the requirements relating to the accounting for investments in subsidiary companies, associated companies and joint ventures in the separate financial statements of the entity. In such cases, the entity should account for such investments either at cost, or in accordance with MFRS 9.

The adoption of MFRS 127 (2011) will result in a change in accounting policy. The Group is currently examining the financial impact of adopting MFRS 127 (2011).




The possible financial impacts of initial application of MFRSs, which will be applied retrospectively is as follows: (Cont’d)

MFRS 128 Investments in Associates and Joint Ventures (2011)

This revised MFRS 128 incorporates the requirements for accounting for joint ventures, as well as associates, to be equity accounted following the issue of MFRS 11. However, the revised MFRS 128 exempts the investor from applying equity accounting in certain circumstances, i.e. where the investment in the associated company or joint venture is held indirectly via venture capital organisations or mutual funds and similar entities. In such cases, the entity shall measure the investment at fair value through profit or loss, in accordance with MFRS 9.

The adoption of MFRS 128 (2011) will result in a change in accounting policy. The Group is currently examining the financial impact of adopting MFRS 128 (2011).

(b) Functional and presentation currency

These financial statements are presented in Ringgit Malaysia (RM), which is the Group’s and the Company’s functional currency.

3. Significant Accounting Estimates and Judgements

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) Depreciation 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 4(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 at 31 December 2012 are disclosed in Note 5.


3. 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 2012 is disclosed in Note 6.

(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 30.

(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 Estimates and Judgements (Cont’d)

(vii) Inventories written down

Inventories are measured at the lower of cost and net realisable value. The Group estimates the net realisable value of inventories based on an assessment of expected sales prices. Demand levels and pricing competition could change from time to time. If such factors result in an adverse effect on the Group’s products, the Group might be required to reduce the value of its inventories.

4. 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 associated company through equity accounting, which are made up to the end of the financial year.

In the Company’s separate financial statements, investments in subsidiary companies and investment in associated company are stated at cost less impairment losses. On disposal of these investments, the difference between the net disposal proceeds and the carrying amount is recognised in the profit and loss.

(i) Subsidiary companies

Subsidiary companies are those companies in which the Group has long term equity interest and has the power, directly or indirectly, to govern the financial and operating policies so as to obtain benefits from its activities, generally accompanying a shareholding of more than one half of the voting rights.

The acquisition method of accounting is used to account for the purchase of subsidiary companies. The consideration transferred for acquisition of a subsidiary is measured as the fair value of the assets given, equity instruments issued and or liabilities incurred or assumed at the date of exchange, as well as any contingent consideration given. Acquisition related costs are expensed off in the profit or loss as incurred. Identifiable assets acquired and liabilities as well as contingent liabilities assumed in a business combination are measured initially at their fair values on the date of acquisition.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired (ie. a bargain purchase), the gain is recognised in profit or loss.

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.


4. Significant Accounting Policies (Cont’d)

(a) Basis of consolidation (Cont’d)

(i) Subsidiary companies (Cont’d)

Intra-group balances, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

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 together with the remaining fair value of the investment is recognised as a gain or loss on disposal in the consolidated statements of comprehensive income.

Non-controlling interest is the equity in a subsidiary company not attributable, directly or indirectly, to the Group. On an acquisition-by-acquisition basis, the Group measures any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets. At the end of reporting period, non-controlling interest consists of amount calculated on the date of combinations and its share of changes in the subsidiary’s equity since the date of combination.

All earnings and losses of the subsidiary company is attributed to the parent and the non-controlling interest, even if the attribution of losses to the non-controlling interest results in deficits in the shareholders’ equity. Profit or loss attribution to non-controlling interests for prior years is not restated.

(ii) Associate companies

Associate companies are entities in which the Group has significant influence, but no control, over their financial and operating policies. Investments in associate companies are accounted for using the equity method of accounting. Investments in associate companies include goodwill identified on acquisition, net of any accumulated impairment loss.

Equity accounting involves recording investments in associate companies initially at cost, and recognising the Group’s share of its associate companies’ 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.



(a) Basis of consolidation (Cont’d)

(ii) Associate companies (Cont’d)

When the Group’s interest in an associate company 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 company are eliminated to the extent of the interest in the associate.

(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 4(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.



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

(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.

(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 18to 38 years

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

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.



(c) Financial assets (Cont’d)

(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.


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.

(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 36(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 initial 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.



(f) Impairment of non-financial assets (Cont’d)

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) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

When the borrowings are made specifically for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalisation is the actual borrowing costs incurred on that borrowing during the period less any investment income on the temporary investment of funds drawdown from that borrowing.

When the borrowings are made generally, and used for the purpose of obtaining a qualifying asset, the borrowing costs eligible for capitalisation are determined by applying a capitalisation rate which is the weighted average of the borrowing costs applicable to the borrowings that are outstanding during the financial year.

All other borrowing costs are recognised as an expense in the statement of comprehensive income in the period in which they are incurred.



(i) 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.

(j) 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.

(k) 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.



(l) 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. Exchange differences arising from such non-monetary items are also recognised directly in equity.

(m) Revenue recognition

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

(i) Goods sold and services rendered

Revenue 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 a time proportion basis that takes into account the effective yield on the asset.

(iii) Construction revenue

Revenue from construction contracts is accounted in accordance to the accounting policies as described in Note 4(r).



(n) 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. Such contributions are recognised as an expense in the profit and loss in the period to which they relate.

(iii) ESOS

The Company’s ESOS, an equity-settled, share-based compensation plan, allows the Company and its subsidiary companies’ 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.



(o) Contingent liabilities

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

(p) 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 is not recognised if the temporary difference arises from goodwill or negative goodwill or from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit.

Deferred tax 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.

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.



(q) 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 revenues 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.

(r) 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.

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

Leasehold land

Office furniture,

fittings and equipment Total

RM RM RM2012CompanyAt costAt 1 January 2012/ 31 December 2012 10,258,373 27,629 10,286,002

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

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

2011CompanyAt costAt 1 January 2011/ 31 December 2011 10,258,373 27,629 10,286,002

Accumulated depreciationAt 1 January 2011 - 26,449 10,286,002Charge for the financial year 493,533 295 493,828At 31 December 2011 493,533 26,744 520,277

Carrying amountAt 31 December 2011 9,764,840 885 9,765,725

Carrying amountAt 1 January 2011 10,258,373 1,180 10,259,553


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

(a) The aggregate additional cost for the property, plant and equipment of the Group during the financial year under hire purchase financing, cash payment, transferred from inventories and consideration by way of disposal of investment in a subsidiary company are as follows:

Group31.12.2012 31.12.2011

RM RM

Aggregate costs 313,086 4,976,738Less: Transferred from inventories - (1,590,583)Less: Consideration by way of disposal of investment in a subsidiary company - (646,278)Less: Hire purchase financing - (100,000)Cash payment 313,086 2,639,877

(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.


6. Investments in Subsidiary Companies

(a) Investments in subsidiary companies

Company

31.12.2012 31.12.2011 1.1.2011

RM RM RM

Unquoted shares, in Malaysia

At cost 60,665,991 60,724,691 61,865,991

Less: Accumulated impairment (46,833,792) (46,833,792) (48,120,993)

Less: Reclassified to investment in associated company (910,095) - -

12,922,104 13,890,899 13,744,998

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

Name of company Effective interest Principal activities

31.12.2012 31.12.2011 1.1.2011

% % %

Direct holding:

Harvest Court (M) Sdn. Bhd.

100.0 100.0 100.0 Sawmilling and marketing of sawn timber (Temporary ceased operation)

Harvest Court Marketing Sdn. Bhd. (“HCMkt”)

* - 60.0 100.0 Marketing of timber doors and other related products

Harvest Lumber Sdn. Bhd.

100.0 100.0 100.0 Manufacturing and marketing of timber doors and other related products

Harvest Court Corporation Sdn. Bhd.

100.0 100.0 100.0 Manufacturing and marketing of timber doors and other related products (Temporary ceased operation)

Harvest Exporter Sdn. Bhd. #

100.0 100.0 100.0 Construction and interior design fit up

Quantum Pro Sdn. Bhd. 100.0 100.0 100.0 Timber kiln drying


6. Investments in Subsidiary Companies (Cont’d)

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

Name of company Effective interest Principal activities31.12.2012 31.12.2011 1.1.2011

% % %Direct holding:

Harvest Court Properties Sdn. Bhd. (“HCP”)

100.0 100.0 100.0 Property development

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

ceased operation)

Harvest Court Management Sdn. Bhd.

100.0 100.0 100.0 Investment holding

Harvest Court Constructions Sdn. Bhd.

(“formerly known as Harvest CourtDevelopment Sdn. Bhd.”)

100.0 100.0 100.0 Construction

Harvest Nation Sdn. Bhd. 100.0 100.0 100.0 Dormant (Ceased opera-tion)

Timbeck (M) Sdn. Bhd. 100.0 100.0 100.0 Dormant

* During the year, the Company loses 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 year, the subsidiary, Harvest Exporter Sdn. Bhd. has recommenced operation by engaged in construction and interior design fit up.

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

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7.

Inve

stm

ent i

n A

ssoc

iate

d C

ompa

ny

(a)

Inve

stm

ent i

n as

soci

ated

com

pany

Gro

upC

ompa

ny31

.12.

2012

31.1

2.20

111.

1.20

1131

.12.

2012

31.1

2.20

111.

1.20

11RM

RMRM

RMRM

RM

Unq

uote

d sh

ares

, in

Mal

aysia

Tra

nsfe

rred

from

inve

stm

ents

in s

ubsid

iary

com

pani

es, a

t cos

t (

Not

e 6)

910,

095

--

910,

095

--

Sha

re o

f pos

t acq

uisit

ion

rese

rve

(4,7

05)

--

--

-90

5,39

0-

-91

0,09

5-

-Le

ss: L

oss o

n re

mea

sure

men

t o

f inv

estm

ent i

n su

bsid

iary

com

pany

to a

ssoc

iate

d co

mpa

ny(8

6,92

9)-

-(8

6,92

9)-

-81

8,46

1-

-82

3,16

6-

-

(b)

The

asso

ciat

ed co

mpa

ny a

nd th

e sh

areh

oldi

ngs t

here

in a

re a

s fol

low

s:

Nam

e of

com

pany

Effec

tive

inte

rest

Prin

cipa

l act

iviti

es31

.12.

2012

31.1

2.20

111.

1.20

11%

%%

Dir

ect h

oldi

ng:

HC

Mkt

60-

-M

arke

ting

of ti

mbe

r doo

rs a

nd o

ther

rela

ted

prod

ucts

The

asso

ciat

ed co

mpa

ny o

f the

Com

pany

is in

corp

orat

ed in

Mal

aysia

.


7. Investment in Associated Company (Cont’d)

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

Group

31.12.2012RM

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

8. Inventories

Group31.12.2012 31.12.2011 1.1.2011

RM RM RM

At cost: Raw materials 1,244,149 2,067,686 4,283,394 Work-in-progress 4,286,901 4,099,680 931,463 Finished goods 331,756 501,809 530,430

5,862,806 6,669,175 5,745,287

At net realisable value: Work-in-progress 1,729,650 1,813,246 1,843,446 Finished goods 270,301 270,301 270,301

1,999,951 2,083,547 2,113,7477,862,757 8,752,722 7,859,034

9. Trade Receivables

Group

31.12.2012 31.12.2011 1.1.2011

RM RM RM

Trade receivables 9,757,187 943,086 2,728,658

Less: Accumulated impairment - (437,886) (547,043)

9,757,187 505,200 2,181,615

The Group’s normal trade credit terms range from 30 to 120 days (31.12.2011 and 1.1.2011: 30 to 120 days). Other credit terms are assessed and approved on a case to case basis.


9. Trade Receivables (Cont’d)

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

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

Group2012 2011RM RM

At 1 January 437,886 547,043Reversal of impairment - (109,157)Reclassification of investment in subsidiary company to associated

company (437,886) -At 31 December - 437,886

Analysis of the trade receivables ageing is as follows:

Group31.12.2012 31.12.2011 1.1.2011

RM RM RM

Neither past due nor impaired 5,326,954 461,534 628,710

Past due less than 30 days but not impaired 134,488 20,420 1,378,954Past due for more than 30 days but not impaired 4,295,745 23,246 173,951

4,430,233 43,666 1,552,9059,757,187 505,200 2,181,615

Impaired - 437,886 547,0439,757,187 943,086 2,728,658

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 RM6,182,260 (31.12.2011 and 1.1.2011: Nil) owing by company where a director of the Company has substantial financial interest; and

(b) is an amount of RM890,356 (31.12.2011 and 1.1.2011: Nil) being retention sum relating to construction work in progress.

Notes to The Financial Statements (cont’d)

Ann

ual R

epo

rt 2

012

91N

otes

to Th

e Fi

nanc

ial S

tate

men

ts (c

ont’d

)

10.

Oth

er R

ecei

vabl

es

Gro

upC

ompa

ny

31.1

2.20

1231

.12.

2011

1.1.

2011

31.1

2.20

1231

.12.

2011

1.1.

2011

RMRM

RMRM

RMRM

Oth

er re

ceiv

able

s45

0,60

854

027

,071

450,

607

-19

,000

Dep

osits

1,06

0,02

11,

040,

928

155,

600

914,

421

895,

328

110,

000

Prep

aym

ents

112,

388

141,

736

525,

260

221

67,0

7088

,342

1,62

3,01

71,

183,

204

707,

931

1,36

5,24

996

2,39

821

7,34

2

Less

: Acc

umul

ated

impa

irmen

t-

-(8

,071

)-

--

1,62

3,01

71,

183,

204

699,

860

1,36

5,24

996

2,39

821

7,34

2

Mov

emen

ts in

impa

irmen

t (in

divi

dual

ly a

sses

sed)

dur

ing

the

finan

cial

yea

r are

as f

ollo

ws:

Gro

up

2012

2011

RMRM

At 1

Janu

ary

-8,

071

Reve

rsal

of i

mpa

irmen

t-

(8,0

71)

At 3

1 D

ecem

ber

--

The

Gro

up a

nd th

e C

ompa

ny h

ave

not r

ecog

nise

d an

y im

pairm

ent l

oss

on c

erta

in r

ecei

vabl

es th

at a

re p

ast d

ue a

t the

end

of fi

nanc

ial y

ear,

as th

ere

has

not b

een

signi

fican

t cha

nge

in cr

edit

qual

ity a

nd th

ese

amou

nts a

re st

ill co

nsid

ered

rece

ivab

le.

Incl

uded

in o

ther

rece

ivab

les o

f the

Gro

up a

nd o

f the

Com

pany

are

am

ount

s ow

ing

by c

ompa

ny w

here

a d

irect

or o

f the

Com

pany

has

subs

tant

ial fi

nanc

ial i

nter

est o

f RM

228,

138

(31.

12.2

011

and

1.1.

2011

: Nil)

.

Incl

uded

in d

epos

its o

f the

Gro

up a

nd o

f the

Com

pany

are

am

ount

s pa

id fo

r ju

dgem

ent s

um a

nd it

s re

late

d in

tere

st a

mou

ntin

g to

RM

428,

827

and

RM37

5,59

4 (3

1.12

.201

1 an

d 1.

1.20

11: R

M42

8,82

7 an

d RM

356,

502)

resp

ectiv

ely

arisi

ng fr

om th

e Hig

h C

ourt

judg

men

t aga

inst

the C

ompa

ny (p

lain

tiff) i

n fa

vour

of t

he d

efen

dant

as

disc

lose

d in

Not

e 34

(b).


11. Amount Owing by Contract Customers

Group31.12.2012 31.12.2011 1.1.2011

RM RM RM

Construction costs incurred to date 8,332,486 - -Attributable profits 1,049,404 - -

9,381,890 - -Less: Progress billings (8,903,564) - -

478,326 - -

12. Amounts Owing by/to Subsidiary Companies / Amount Owing to Associated Company

Amounts Owing by Subsidiary Companies

Company31.12.2012 31.12.2011 1.1.2011

RM RM RM

Amounts owing by subsidiary companies 22,992,161 17,924,207 17,618,750Less: Accumulated impairment (1,123,513) - -

21,868,648 17,924,207 17,618,750

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

Company

2012 2011RM RM

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

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

Amounts Owing to Subsidiary Companies / Associated Company

These represent unsecured, interest free advances and repayable on demand.

13. Tax Assets

This is in respect of tax paid in advance to Inland Revenue Board.


14. Short Term Deposits with a Licensed Bank

The short term deposits of the Group and of the Company earn interest at rates ranging from 1.70% to 2.05% (31.12.2011: 2.00% and 1.1.2011: Nil) per annum.

15. Share Capital

Group/Company Group/Company

2012 2011 2012 2011Number of

sharesNumber of

shares RM RM

Ordinary shares of RM0.25 each:

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

Issued and fully paidAt 1 January 181,317,473 171,922,373 45,329,368 42,980,593Issuance of shares pursuant to

ESOS 1,056,000 9,395,100 264,000 2,348,775Issuance of shares pursuant to

private placement 16,700,000 - 4,175,000 -At 31 December 199,073,473 181,317,473 49,768,368 45,329,368

During the financial year, the Company increased its:

(a) authorised share capital by the creation of 400,000,000 (31.12.2011: Nil) ordinary shares from 400,000,000 ordinary shares of RM0.25 each to 800,000,000 (31.12.2011: 400,000,000) ordinary shares of RM0.25 each;

(b) issued and paid-up share capital by the issuance of 1,056,000 (31.12.2011: 9,395,100) new ordinary shares of RM0.25 each amounting to RM264,000 (31.12.2011: RM2,348,775) pursuant to the exercise of options granted under the Company’s Employee Share Option Scheme (“ESOS”) at the exercise price of RM0.25 each; and

(c) issued and paid-up share capital by the issuance of 16,700,000 (31.12.2011: Nil) new ordinary shares of RM0.25 each amounting to RM4,175,000 (31.12.2011: Nil) through private placement at issue price of RM0.403 each.


15. Share Capital (Cont’d)

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.

Free Detachable Warrants

The main features of the warrants were as follows:

a. Each Warrant carries 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.

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. The Warrants shall expire at 5.00 p.m. on 19.11.2019. 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 as at 31 December 2012 was 70,760,472 (31.12.2011: 70,760,472).

16. Share Premium

Group/Company

2012 2011RM RM

At 1 January - -Issuance of shares pursuant to private placement 2,555,100 -At 31 December 2,555,100 -


17. ESOS Reserve

Group/Company

2012 2011

RM RM

At 1 January 8,550 -

Share option granted under ESOS - 67,000

Transfer to accumulated losses for ESOS exercised (8,500) (58,450)

At 31 December 50 8,550

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.

18. Hire Purchase Payables

Group

31.12.2012 31.12.2011 1.1.2011

RM RM RM

(a) Minimum hire purchase payments

Within one year 20,977 22,884 20,538

Within two to five years 66,752 89,609 21,018

87,729 112,493 41,556

Less: Future finance charges (8,876) (13,928) (5,712)

Present value of hire purchase liabilities 78,853 98,565 35,844

(b) Present value of hire purchase liabilities

Within one year 17,058 17,832 17,786

Within two to five years 61,795 80,733 18,058

78,853 98,565 35,844

Analysed as:

Repayable within twelve months 17,058 17,832 17,786

Repayable after twelve months 61,795 80,733 18,058

78,853 98,565 35,844

The hire purchase liabilities interest is charged at rates ranging from 2.88% (31.12.2011: 2.88% and 1.1.2011: 3.30% to 3.90%) per annum.


19. Deferred Tax Liabilities


At 1 January 2,254,400 2,335,455 1,174,761 1,234,129Recognised in statements of comprehensive income (Note 28) (81,055) (81,055) (59,368) (59,368)At 31 December 2,173,345 2,254,400 1,115,393 1,174,761

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.

Ann

ual R

epo

rt 2

012

97N

otes

to Th

e Fi

nanc

ial S

tate

men

ts (c

ont’d

)

19.

Def

erre

d Ta

x Li

abili

ties (

Con

t’d)

The

estim

ated

tim

ing

diffe

renc

es o

f whi

ch n

o de

ferr

ed ta

x as

sets

hav

e be

en re

cogn

ised

in th

e fin

anci

al st

atem

ents

are

as f

ollo

ws:

Gro

up

Com

pany

31.1

2.20

1231

.12.

2011

1.1.

2011

31.1

2.20

1231

.12.

2011

1.1.

2011

RMRM

RMRM

RMRM

Unu

tilise

d ca

pita

l allo

wan

ces

3,93

1,00

03,

715,

800

3,21

3,00

067

,300

67,3

0067

,300

Unu

tilise

d ta

x lo

sses

19,9

04,4

0023

,151

,400

22,0

97,6

0067

0,00

043

9,80

043

9,80

0

Unu

tilise

d re

inve

stm

ent

allo

wan

ce1,

444,

700

1,44

5,20

01,

467,

200

234,

700

234,

700

234,

700

25,2

80,1

0028

,312

,400

26,7

77,8

0097

2,00

074

1,80

074

1,80

0

20.

Trad

e Pa

yabl

es

The

Gro

up’s

norm

al tr

ade

cred

it te

rms r

ange

from

30

to 1

20 d

ays (

31.1

2.20

11 a

nd 1

.1.2

011:

30

to 1

20 d

ays)

. Oth

er c

redi

t ter

ms a

re a

sses

sed

and

appr

oved

on

a ca

se to

cas

e ba

sis.

Har

vest

Co

urt I

ndus

trie

s B

erha

d (C

om

pan

y N

o .3

6998

-T)

98N

otes

to Th

e Fi

nanc

ial S

tate

men

ts (c

ont’d

)

21.

Oth

er P

ayab

les

Gro

up

Com

pany

31.1

2.20

1231

.12.

2011

1.1.

2011

31.1

2.20

1231

.12.

2011

1.1.

2011

RMRM

RMRM

RMRM

Oth

er p

ayab

les

685,

321

5,52

9,69

65,

725,

346

196,

354

4,86

5,41

55,

316,

646

Acc

rual

s91

5,81

51,

206,

298

1,26

4,98

848

7,91

249

6,57

855

5,69

81,

601,

136

6,73

5,99

46,

990,

334

684,

266

5,36

1,99

35,

872,

344

Incl

uded

in o

ther

pay

able

s of t

he G

roup

and

of th

e Com

pany

are a

mou

nts o

f RM

16,4

33 an

d RM

16,4

43 (3

1.12

.201

1 an

d 1.

1.20

11: N

il) re

spec

tivel

y, ow

ing t

o co

mpa

nies

w

here

a d

irect

or o

f the

Com

pany

has

subs

tant

ial fi

nanc

ial i

nter

est.

Incl

uded

in a

ccru

als o

f the

Gro

up is

an

amou

nt o

f RM

54,2

61 (3

1.12

.201

1 an

d 1.

1.20

11: R

M54

,261

) bei

ng in

tere

st a

ccru

ed o

n th

e ou

tsta

ndin

g te

rm lo

an a

s disc

lose

d in

Not

e 23

.

22.

Am

ount

s Ow

ing

to D

irec

tors

This

repr

esen

ts u

nsec

ured

, int

eres

t fre

e ad

vanc

es a

nd re

paya

ble

on d

eman

d.


23. Bank Borrowing

Group

31.12.2012 31.12.2011 1.1.2011RM RM

Unsecured Term loan 95,993 205,493 255,493

Analysed as:Repayable within twelve months Term loan 95,993 205,493 255,493

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

The term loan bears a fixed interest rate at 8.00% (31.12.2011 and 1.1.2011: 8.00%) per annum.

A subsidiary company had defaulted on the repayment of the term loan which was due for payment. Todate the lender bank has not taken any action against the subsidiary company as a result of the default and agreed to grant the subsidiary company with twenty four (24) monthly instalments payment of RM10,500 per instalment in order for the subsidiary company to fully settle the loan.

24. Revenue

Group

2012 2011

RM RM

Construction revenue 9,381,890 -

Interior design fit up works 3,300,000 -

Sales of timber products 11,659,117 11,614,251

24,341,007 11,614,251


25. Cost of Sales

Group

2012 2011RM RM

Construction costs 8,332,486 -Interior design fit up works 1,450,000 -Cost of sales on timber products 10,447,728 9,828,877

20,230,214 9,828,877

26. Finance Costs

Group

2012 2011

RM RM

Interest expenses on:

Hire purchase payables 5,052 5,389


27. Profit/(Loss) Before Taxation

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


Auditors’ remuneration - Statutory 45,775 40,000 16,000 16,000 - Non statutory 89,752 12,000 85,976 12,000Bad debts written off - 185,957 - -Directors’ remuneration - Salaries and other emoluments 173,550 220,700 17,550 11,700 - Share option granted under ESOS - 16,800 - 8,300Depreciation of property, plant and equipment 1,416,721 1,412,843 493,828 493,828Deposits written off - 365,000 - -Expenses on corporate exercise 819,333 5,469 819,333 5,469Gain on disposal of property, plant and equipment (140,857) (118,123) - -Gain on foreign exchange - realised (49,255) (32,202) - - - unrealised (3,916) (19,945) - -Impairment on amounts owing by subsidiary companies - - 1,123,513 -Interest income (14,138) (3,321) (14,138) (1,180)Loss on disposal of investment in a subsidiary company - - - 553,722Loss on remeasurement of investment in associated company - - 86,929 -Reversal of impairment loss on investment in a subsidiary company - - - (1,287,201)Reversal of impairment on trade and other receivables - (117,228) - -Share option granted under ESOS - 67,000 - 8,300Waiver of debts on payables - (70,561) - -


28. Taxation


Current income tax:Under provision in prior year - 17,332 - -

Deferred tax (Note 19):Relating to origination and re-

versal of temporary differences (81,055) (81,055) (59,368) (59,368)(81,055) (81,055) (59,368) (59,368)

Tax income for the financial year (81,055) (63,723) (59,368) (59,368)

Income tax is calculated at the statutory tax rate of 25% (2011: 25%) of the estimated taxable profit for the financial year.

Prior to the year of assessment 2008, Malaysian companies adopt the full imputation system. In accordance with the Finance Act, 2007 which was gazetted on 28 December 2007, companies shall not be entitled to deduct tax on dividend paid, credited or distributed to its shareholders, and such dividends will be exempted from tax in the hands of the shareholders (“single tier system”). However, there is a transitional period of six years, expiring on 31 December 2013, to allow companies to pay franked dividends to their shareholders under limited circumstances. Companies also have an irrevocable option to disregard the Section 108 balance and opt to pay dividends under the single tier system. The change in the tax legislation also provides for the Section 108 balance to the locked-in as at 31 December 2007 in accordance with Section 39 of the Finance Act 2007.

The Company has tax credit under Section 108 of the Income Tax Act, 1967 and tax exempt income account to pay franked dividend of approximately RM4,175,500 (2011: RM4,175,500) out of its retained earnings without incurring additional tax liability as no election has been made to disregard the Section 108 as at to date by the Company.


28. Taxation (Cont’d)

A reconciliation of tax income applicable to profit/(loss) 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:

Group Company

2012 2011 2012 2011RM RM RM RM

Profit/(Loss) before taxation 59,350 (1,752,982) (2,911,799) (123,274)

Tax at Malaysian statutory tax rate of 25% (2011: 25%) 14,838 (438,245) (727,950) (30,818)

Expenses not deductible for tax purposes 387,682 67,000 645,082 154,820Income not subject to tax - (13,037) - (183,370)Deferred tax assets not recognised 170,425 415,550 23,500 -Under provision of taxation in prior year - 17,332 - -Utilisation of deferred tax assets

not recognised in prior year (654,000) (112,323) - -Tax income for the financial year (81,055) (63,723) (59,368) (59,368)

As disclosed in Note 19, the Group and the Company have unutilised tax credits carry forward, available to set-off against future taxable profits.


29. Earnings/(Loss) Per Share

(a) Basic earnings/(loss) per share

The earnings/(loss) per share has been calculated based on the consolidated profit/(loss) 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:

Group

2012 2011

Net profit/(loss) for the financial year attributable to the owners of the parent (RM) 166,902 (1,684,169)

Weighted number of ordinary shares in issue 181,135,966 172,877,878

Basic earnings/(loss) per share (sen) 0.09 (0.97)

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

The fully diluted earnings/(loss) per share has been calculated based on the consolidated profit/(loss) 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:

Group

2012 2011

Net profit/(loss) for the financial year attributable to the owners of the parent (RM) 166,902 (1,684,169)

Weighted average number of ordinary shares in issue 181,135,966 172,877,878Adjusted for:

Assumed exercise of ESOS and Warrant 38,288,027 148,242219,423,993 173,026,120

Fully diluted earnings/(loss) per share (sen) 0.08 (0.97)


30. 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 on 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, allotments and or other distributions, the entitlement date of which is prior to the date of allotment of the new ordinary shares.

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

Share Options Exercise prices Exercise Period

RM

2010 Grant 0.25 23.03.2010 - 22.03.20152011 Grant 0.25 05.07.2011 - 22.03.2015


30. ESOS (Cont’d)

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

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

Movement during the financial year

Outstanding at

1 January Granted Exercised

Outstanding at

31 December

Excercisable at 31

Descember

20122010 Grant 640,900 - 206,000 434,900 434,9002011 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

20112010 Grant 4,191,000 - 3,550,100 640,900 640,9002011 Grant - 6,700,000 5,845,000 855,000 855,000

4,191,000 6,700,000 9,395,100 1,495,900 1,495,900

WAEP 0.25 0.25 0.25 0.25 0.25


30. ESOS (Cont’d)

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

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

Movement during the financial year

Outstanding at

1 January Granted ExercisedOutstanding at 31 December

Exercisable at

31 December

2012

2010 Grant 900 - - 900 9002011 Grant 830,000 - 830,000 - -

830,900 - 830,000 900 900

WAEP 0.25 0.25 0.25 0.25 0.25

2011

2010 Grant 1,591,400 - 1,590,500 900 9002011 Grant - 1,680,000 850,000 830,000 830,000

1,591,400 1,680,000 2,440,500 830,900 830,900

WAEP 0.25 0.25 0.25 0.25 0.25

The fair value of the share options granted in the previous financial year 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 dates 05.07.2011 23.03.2010

Fair value of share options (RM) 0.01 0.00

Weighted average share price (RM) 0.0057 0.0034

Weighted average exercise price (RM) 0.25 0.25

Expected volatility 20 20

Expected option life (years) 4 5

Risk free interest rate, p.a. 3.910 2.946

Expected dividend yield (%) 0 0

* No share option was granted under ESOS in 2012.


30. ESOS (Cont’d)

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.

31. Employee Benefits Expenses

Group Company

2012 2011 2012 2011RM RM RM RM

Salaries, wages and others 3,220,457 2,838,947 452,344 158,818Contribution to defined con-

tribution plan 154,318 82,513 56,323 -Share option granted under ESOS - 50,200 - -Employee benefits expenses (excluding Directors) 3,374,775 2,971,660 508,667 158,818


32. 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 a 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 development

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

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

Performance is measured based on segment profit before tax, interest and depreciation, as included in the internal management reports that are reviewed by the Group’s Chief Executive Officer, who is the Group’s chief operating decision maker. Segment 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

vest

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The

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ncia

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tem

ents

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32.

Segm

enta

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Res

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ore

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tion

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32.

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ortin

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s11

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--

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00)

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--

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Res

ults

Segm

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321

Inte

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)

Add

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s to

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curr

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32. 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.

Group Revenue

2012 2011RM RM

Malaysia 21,041,007 11,614,251Hong Kong 3,300,000 -

24,341,007 11,614,251

33. Significant Events

During the financial year, the following significant events took place for the Company and its subsidiary companies:

(a) Harvest Court Industries Berhad (“the Company”)

The Company proposes the Right Issue with Warrants. However, todate, the due diligence exercise in relation to the relevant applications is still on-going.

(b) Harvest Court Properties Sdn. Bhd. (“HCP”)

HCP had on 19 July 2011 entered into a Joint Venture Agreement with a landowner for the purpose of developing a parcel of freehold agriculture land into a housing estate or such other development as may be approved by the relevant authorities.

Todate, HCP is still in the progress of obtaining the approval from the relevant authorities.


34. Contingent Liabilities

(a) Guarantees

Company

2012 2011RM RM

Unsecured corporate guarantees given tolicensed bank for banking facility granted to a subsidiary company 95,993 205,493

(b) Material Litigation

On 10 February 2001, a legal suit was filed by Kilang Papan Galas Setia (Kelantan) Sdn Bhd against the Company for alleged sum of RM428,827 in respect of the disputed raw material sold and delivered to the Company.

On 8 July 2011, the Company announced that the Shah Alam High Court had entered Judgment against the Company in favour of Kilang Papan Galas Setia (Kelantan) Sdn Bhd for the sum of RM428,827 together with interest thereon at the rate of 8% per annum from 22 November 2000 to 8 July 2011 and at 4% per annum thereafter to the date of payment.

The Company had lodged an appeal against the above judgement to the Court of Appeal and have further obtained a conditional stay of execution of the judgement. In the opinion of the Directors, the Company has a good prospect of succeeding the appeal.


35. 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, associated 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:


Transactions with subsidiary companiesManpower support charges - - 350,147 -Transactions with companies where a director of the Company has substantial financial interest Construction progress billings 8,903,564 - - -Admin charges on construction project 231,522 - 231,522 -Sales of doors 26,546 - - -Advertisement, design and printing expenses 106,746 - 106,746 -


35. Related Party Disclosures (Cont’d)

(c) The remuneration of key management personnel is same with the Directors’ remuneration as disclosed in Note 28. The Group and the Company have no other members of key management personnel apart from the Board of Directors.

36. 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 4 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:


Other financial liabilities at

amortised cost TotalRM RM RM

Group31.12.2012Financial Assets

Trade and other receivables 11,380,204 - 11,380,204Amount owing by contract customer 478,326 - 478,326Short term deposits with a licensed bank 499,192 - 499,192Cash and bank balances 91,980 - 91,980Total financial assets 12,449,702 - 12,449,702

Financial LiabilitiesTrade and other payables - 5,284,257 5,284,257Amount owing to associated company - 870,353 870,353Amounts owing to Directors - 4,845,029 4,845,029Hire purchase payables - 78,853 78,853Bank borrowing - 95,993 95,993Total financial liabilities - 11,174,485 11,174,485


36. Financial Instruments (Cont’d)

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




Group31.12.2011Financial AssetsTrade and other receivables 1,688,404 - 1,688,404Short term deposits with a licensed bank 267,777 - 267,777Cash and bank balances 185,372 - 185,372Total financial assets 2,141,553 - 2,141,553

Financial LiabilitiesTrade and other payables - 8,519,177 8,519,177Amount owing to a Director - 35,057 35,057Hire purchase payables - 98,565 98,565Bank borrowing - 205,493 205,493Total financial liabilities - 8,858,292 8,858,292

1.1.2011Financial AssetsTrade and other receivables 2,881,475 - 2,881,475Cash and bank balances 1,549,169 - 1,549,169Total financial assets 4,430,644 - 4,430,644

Financial LiabilitiesTrade and other payables - 7,649,962 7,649,962Amount owing to a Director - 14,913 14,913Hire purchase payables - 35,844 35,844Bank borrowing - 255,493 255,493Total financial liabilities - 7,956,212 7,956,212







Company31.12.2012Financial AssetsOther receivables 1,365,249 - 1,365,249Amounts owing by subsidiary companies 21,868,648 - 21,868,648Fixed deposits with a licensed bank 499,192 - 499,192Cash and bank balances 2,193 - 2,193Total financial assets 23,735,282 - 23,735,282

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

31.12.2011Financial AssetsOther receivables 962,398 - 962,398Amounts owing by subsidiary companies 17,924,207 - 17,924,207Short term deposits with a licensed bank 267,777 - 267,777Cash and bank balances 3,209 - 3,209Total financial assets 19,157,591 - 19,157,591

Financial LiabilitiesOther payables - 5,361,993 5,361,993Amounts owing to subsidiary companies - 9,328,355 9,328,355Amount owing to a Director - 35,057 35,057Total financial liabilities - 14,725,405 14,725,405




Loans and re-ceivables

Other financial liabilities at am-

ortised cost TotalRM RM RM

Company1.1.2011Financial AssetsOther receivables 217,342 - 217,342Amounts owing by subsidiary companies 17,618,750 - 17,618,750Cash and bank balances 8,402 - 8,402Total financial assets 17,844,494 - 17,844,494

Financial LiabilitiesOther payables - 5,872,344 5,872,344Amounts owing to subsidiary companies - 10,084,333 10,084,333Amount owing to a Director - 14,913 14,913Total financial liabilities - 15,971,590 15,971,590

(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 risk and market risk. The Group and the Company operate within clearly defined guidelines that are approved by the Board and the Group’s and the Company’s policy is 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.



(c) Credit risk (Cont’d)

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. The Group has significant concentration of credit risk with its exposure to two customers representing 91% (2011: Nil) of total trade receivables.

(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.

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(d) Liquidity risk (Cont’d)

On demand or within 1 year Carrying amount

RM RM

Company

31.12.2012Other payables 684,266 684,266Amounts owing to subsidiary companies 8,174,699 8,174,699Amount owing to associated company 877,344 877,344Amount owing to Directors 4,845,029 4,845,029

14,581,338 14,581,338

31.12.2011Other payables 5,361,993 5,361,993Amounts owing to subsidiary companies 9,328,355 9,328,355Amount owing to a Director 35,057 35,057

14,725,405 14,725,405

1.1.2011Other payables 5,872,344 5,872,344Amounts owing to subsidiary companies 10,084,333 10,084,333Amount owing to a Director 14,913 14,913

15,971,590 15,971,590

(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 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.



(e) Market risks (Cont’d)

(i) Foreign currency exchange risk

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

Trade recceivables

Cash and bank balances Total

RM RM RMGroup31.12.2012USD 159,467 67,434 226,901

384,859 1,163 386,02231.12.2011USD

403,657 712,3071.1.2011USD 1,115,964

(ii) Foreign currency risk sensitivity

A 10% strengthening of Ringgit Malaysia against the following foreign currencies at the end of the reporting period would increase/(decrease) the profit before tax by the amounts shown below. This analysis assumes that all other variables remain unchanged.

Group

2012 2011RM RM

USD

Profit before taxation (22,690) (38,602) A 10% weakening of Ringgit Malaysia against the above foreign currencies at the end of the reporting period would have had the equal but opposite effect on the above currencies 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.



(e) Market risks (Cont’d)

(iii) Interest rate risk (Cont’d)

The Group and the Company constantly monitor its interest rate risk and do not utilise interest 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:

Group/Company31.12.2012 31.12.2011 1.1.2011

RM RM RM

Financial AssetShort term deposits with a licensed bank 499,192 267,777 -

The Group and the Company are exposed to interest rate risk arising from the short term deposits. However, the short term deposits interest rate 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.

Ann

ual R

epo

rt 2

012

125

Not

es to

The

Fina

ncia

l Sta

tem

ents

(con

t’d)

36.

Fina

ncia

l Ins

trum

ents

(Con

t’d)

(f)

Fair

valu

es o

f fina

ncia

l ass

ets a

nd fi

nanc

ial l

iabi

litie

s (C

ont’d

)

(ii)

Fair

valu

e of fi

nanc

ial i

nstr

umen

ts b

y ca

tego

ries t

hat a

re n

ot ca

rrie

d at

fair

valu

e and

who

se ca

rryi

ng am

ount

s are

not

reas

onab

le ap

prox

imat

ion

of fa

ir va

lue:

31.1

2.20

1231

.12.

2011

1

.1.2

011

Car

ryin

g am

ount

Fair

valu

eC

arry

ing

amou

ntFa

irva

lue

Car

ryin

g am

ount

Fair

valu

eRM

RMRM

RMRM

RM

Fina

ncia

l lia

bilit

ies

Gro

upH

ire p

urch

ase

paya

bles

(non

-cur

rent

)61

,795

63,9

2780

,733

73,6

1018

,058

17,4

03

Com

pany

Con

tinge

nt li

abili

ties

95,9

93@

205,

493

@25

5,49

3@

@

It is

not p

ract

icab

le to

est

imat

e th

e fa

ir va

lue

of co

ntin

gent

liab

ilitie

s rel

iabl

y du

e to

the

unce

rtai

ntie

s of t

imin

g, co

st a

nd e

vent

ual o

utco

me.

37.

Cap

ital r

isk

man

agem

ent o

bjec

tives

and

pol

icie

s

The

Gro

up a

nd th

e C

ompa

ny’s

man

agem

ent m

anag

e its

cap

ital t

o en

sure

that

the

Gro

up a

nd th

e C

ompa

ny a

re a

ble

to c

ontin

ue a

s a g

oing

con

cern

and

mai

ntai

n an

op

timal

capi

tal s

truc

ture

so a

s to

max

imise

shar

ehol

der v

alue

. The m

anag

emen

t rev

iew

s the

capi

tal s

truc

ture

by

cons

ider

ing

the c

ost o

f cap

ital a

nd th

e risk

s ass

ocia

ted

with

the

capi

tal.

In o

rder

to m

aint

ain

or a

djus

t the

cap

ital s

truc

ture

, the

Gro

up a

nd th

e C

ompa

ny m

ay is

sue

new

shar

es o

r sel

l ass

ets t

o re

duce

deb

t.

The

capi

tal o

f the

Gro

up a

nd th

e C

ompa

ny co

nsist

s of i

ssue

d ca

pita

l, ca

sh a

nd c

ash

equi

vale

nts,

bank

bor

row

ing

and

hire

pur

chas

e fin

anci

ng.

Har

vest

Co

urt I

ndus

trie

s B

erha

d (C

om

pan

y N

o .3

6998

-T)

126

Not

es to

The

Fina

ncia

l Sta

tem

ents

(con

t’d)

37.

Cap

ital r

isk

man

agem

ent o

bjec

tives

and

pol

icie

s (C

ont’d

)

The

gear

ing

ratio

s are

as f

ollo

ws:

Gro

up

Com

pany

31.1

2.20

1231

.12.

2011

1.1.

2011

31.1

2.20

1231

.12.

2011

1.1.

2011

RMRM

RMRM

RMRM

Tota

l bor

row

ings

174,

846

304,

058

291,

337

--

-Le

ss: C

ash

and

cash

equ

ival

ents

(591

,172

)(4

53,1

49)

(1,5

49,1

69)

(501

,385

)(2

70,9

86)

(8,4

02)

Net

deb

ts(4

16,3

26)

(149

,091

)(1

,257

,832

)(5

01,3

85)

(270

,986

)(8

,402

)

Tota

l equ

ity38

,814

,062

32,2

94,2

4830

,921

,454

31,0

55,7

1826

,914

,049

24,0

04,5

51

Gea

ring

ratio

# #

# *

* *

# Th

e G

roup

has

no

gear

ing

as th

e G

roup

’s ca

sh a

nd c

ash

equi

vale

nts a

re su

ffici

ent t

o re

pay

the

entir

e bo

rrow

ing

oblig

atio

n at

any

poi

nt in

tim

e.*

The

Com

pany

has

no

gear

ing

as th

e C

ompa

ny d

oes n

ot ra

ise a

ny b

orro

win

g as

at th

e fin

anci

al y

ear e

nd.

Ther

e w

ere

no ch

ange

s in

the

Gro

up’s

and

the

Com

pany

’s ap

proa

ches

to c

apita

l man

agem

ent d

urin

g th

e fin

anci

al y

ear.

Ann

ual R

epo

rt 2

012

127

Not

es to

The

Fina

ncia

l Sta

tem

ents

(con

t’d)

38.

Expl

anat

ion

of tr

ansi

tion

to M

FRSs

In

pre

parin

g th

e op

enin

g co

nsol

idat

ed st

atem

ent o

f fina

ncia

l pos

ition

at 1

Janu

ary

2012

, the

Gro

up a

nd th

e C

ompa

ny h

ave

adju

sted

the

amou

nts r

epor

ted

prev

ious

ly

in

the

finan

cial

stat

emen

ts p

repa

red

in a

ccor

danc

e w

ith p

revi

ous F

RSs.

An

expl

anat

ion

of h

ow th

e pr

evio

us F

RSs t

rans

ition

to M

FRSs

hav

e aff

ecte

d th

e G

roup

’s an

d th

e

C

ompa

ny’s

finan

cial

pos

ition

, fina

ncia

l per

form

ance

and

cas

h flo

ws i

s set

out

as f

ollo

ws:

Re

conc

iliat

ion

of F

inan

cial

Pos

ition

Gro

upG

roup

FRSs

Effec

t of t

rans

ition

to

MFR

SM

FRSs

FRSs

Effec

t of t

rans

ition

to

MFR

SM

FRSs

31.1

2.20

111.

1.20

11RM

RMRM

RMRM

RMN

on-C

urre

nt A

sset

Prop

erty

, pla

nt a

nd e

quip

men

t33

,181

,770

(311

,429

)32

,870

,341

20,1

77,3

659,

273,

823

29,4

51,1

88

Cur

rent

Ass

ets

Inve

ntor

ies

8,75

2,72

2-

8,75

2,72

27,

859,

034

-7,

859,

034

Trad

e re

ceiv

able

s50

5,20

0-

505,

200

2,18

1,61

5-

2,18

1,61

5O

ther

rece

ivab

les

1,18

3,20

4-

1,18

3,20

469

9,89

0-

699,

890

Tax

asse

ts33

2-

332

332

-33

2Sh

ort t

erm

dep

osits

with

a lic

ense

d ba

nk26

7,77

7-

267,

777

--

-C

ash

and

bank

bal

ance

s 18

5,37

2-

185,

372

1,54

9,16

9-

1,54

9,16

910

,894

,607

-10

,894

,607

12,2

90,0

10-

12,2

90,0

10To

tal a

sset

s44

,076

,377

(311

,429

)43

,764

,948

32,4

67,3

759,

273,

823

41,7

41,1

98

Har

vest

Co

urt I

ndus

trie

s B

erha

d (C

om

pan

y N

o .3

6998

-T)

128

Not

es to

The

Fina

ncia

l Sta

tem

ents

(con

t’d)

38.

Expl

anat

ion

of tr

ansi

tion

to M

FRSs

(Con

t’d)

Re

conc

iliat

ion

of F

inan

cial

Pos

ition

(Con

t’d)

Gro

upG

roup

FRSs

Effec

t of t

rans

ition

to

MFR

SM

FRSs

FRSs

Effec

t of t

rans

ition

to

MFR

SM

FRSs

31.1

2.20

111.

1.20

11

RMRM

RMRM

RMRM

Equi

tySh

are

capi

tal

45,3

29,3

68-

45,3

29,3

6842

,980

,593

-42

,980

,593

Reva

luat

ion

rese

rve

6,95

9,65

2(6

,959

,652

)-

--

-

ESO

S re

serv

e8,

550

-8,

550

--

-

Acc

umul

ated

loss

es(2

0,41

5,56

6)6,

730,

708

(13,

684,

858)

(19,

014,

507)

6,95

5,36

8(1

2,05

9,13

9)

Equi

ty a

ttri

buta

ble

to o

wne

rs o

f the

par

ent

31,8

82,0

04(2

28,9

44)

31,6

53,0

6023

,966

,086

6,95

5,36

830

,921

,454

Non

-con

trol

ling

inte

rest

s64

1,18

8-

641,

188

--

-To

tal E

quity

32,5

23,1

92(2

28,9

44)

32,2

49,2

4823

,966

,086

6,95

5,36

830

,921

,454

Non

-Cur

rent

Lia

bilit

ies

Hire

pur

chas

e pa

yabl

es80

,733

-80

,733

18,0

58-

18,0

58D

efer

red

tax

liabi

litie

s2,

336,

885

(82,

485)

2,25

4,40

017

,000

2,31

8,45

52,

335,

455

2,41

7,61

8(8

2,48

5)2,

335,

133

35,0

582,

318,

455

2,35

3,51

3

Ann

ual R

epo

rt 2

012

129

Not

es to

The

Fina

ncia

l Sta

tem

ents

(con

t’d)

38.

Expl

anat

ion

of tr

ansi

tion

to M

FRSs

(Con

t’d)

Re

conc

iliat

ion

of F

inan

cial

Pos

ition

(Con

t’d)

Gro

upG

roup

FRSs

Effec

t of t

rans

ition

to

MFR

SM

FRSs

FRSs

Effec

t of t

rans

ition

to

MFR

SM

FRSs

31.1

2.20

111.

1.20

11

RMRM

RMRM

RMRM

Fina

ncia

l Lia

bilit

ies

Trad

e pa

yabl

es1,

783,

183

-1,

783,

183

659,

628

-65

9,62

8

Oth

er p

ayab

les

6,73

5,99

4-

6,73

5,99

46,

990,

334

- 6

,990

,334

Am

ount

ow

ing

to a

Dire

ctor

35,0

57-

35,0

5714

,913

-14

,913

Hire

pur

chas

e pa

yabl

es17

,832

-17

,832

17,7

86-

17,7

86

Bank

bor

row

ing

205,

493

-20

5,49

325

5,49

3-

255,

493

Tax

paya

ble

358,

008

-35

8,00

852

8,07

7-

528,

077

9,13

5,56

7-

9, 1

35,5

678,

466,

231

-8,

466,

231

Tota

l Lia

bilit

ies

11,5

53,1

85(8

2,48

5)11

,470

,700

8,50

1,28

92,

318,

455

10,8

19,7

44

Tota

l Equ

ity a

nd L

iabi

litie

s44

,076

,377

(311

,429

)43

,764

,948

32,4

67,3

759,

273,

823

41,7

41,1

98

Har

vest

Co

urt I

ndus

trie

s B

erha

d (C

om

pan

y N

o .3

6998

-T)

130

Not

es to

The

Fina

ncia

l Sta

tem

ents

(con

t’d)

38.

Expl

anat

ion

of tr

ansi

tion

to M

FRSs

(Con

t’d)

Re

conc

iliat

ion

of F

inan

cial

Pos

ition

(Con

t’d)

Com

pany

Com

pany

FRSs

Effec

t of t

rans

ition

to

MFR

SM

FRSs

FRSs

Effec

t of t

rans

ition

to

MFR

SM

FRSs

31.1

2.20

111.

1.20

11

RMRM

RMRM

RMRM

Non

-Cur

rent

Ass

ets

Prop

erty

, pla

nt a

nd e

quip

men

t9,

961,

362

(195

,637

)9,

765,

725

5,32

3,03

64,

936,

517

10,2

59,5

53

Inve

stm

ents

in su

bsid

iary

com

pani

es13

,890

,899

-13

,890

,899

13,7

44,9

98-

13,7

44,9

98

23,8

52,2

61(1

95,6

37)

23,6

56,6

2419

,068

,034

4,93

6,51

724

,004

,551

Cur

rent

Ass

ets

Oth

er re

ceiv

able

s96

2,39

8-

962,

398

217,

342

-21

7,34

2

Am

ount

s ow

ing

by su

bsid

iary

com

pani

es17

,924

,207

-17

,924

,207

17,6

18,7

50-

17,6

18,7

50

Shor

t ter

m d

epos

its w

ith a

lice

nsed

ban

k26

7,77

7-

267,

777

--

-

Cas

h an

d ba

nk b

alan

ces

3,20

9-

3,20

98,

402

-8,

402

19,1

57,5

91-

19,1

57,5

9117

,844

,494

-17

,844

,494

Tota

l Ass

ets

43,0

09,8

52(1

95,6

37)

42,8

14,2

153

6,91

2,52

84,

936,

517

41,8

49,0

45

Ann

ual R

epo

rt 2

012

131

Not

es to

The

Fina

ncia

l Sta

tem

ents

(con

t’d)

38.

Expl

anat

ion

of tr

ansi

tion

to M

FRSs

(Con

t’d)

Re

conc

iliat

ion

of F

inan

cial

Pos

ition

(Con

t’d)

Com

pany

Com

pany

FRSs

Effec

t of t

rans

ition

to

MFR

SM

FRSs

FRSs

Effec

t of t

rans

ition

to

MFR

SM

FRSs

31.1

2.20

111.

1.20

11

RMRM

RMRM

RMRM

Equi

ty

Shar

e ca

pita

l45

,329

,368

-45

,329

,368

42,9

80,5

93-

42,9

80,5

93

Reva

luat

ion

rese

rve

3,67

1,01

1(3

,671

,011

)-

--

-

ESO

S re

serv

e8,

550

-8,

550

--

-

Acc

umul

ated

loss

es(2

1,94

8,15

3)3,

524,

284

(18,

423,

869)

(22,

120,

801)

3,70

2,38

8(1

8,41

8,41

3)

Tota

l Equ

ity27

,060

,776

(146

,727

)26

,914

,049

20,8

59,7

923,

702,

388

24,5

62,1

80

Non

-Cur

rent

Lia

bilit

y

Def

erre

d ta

x lia

bilit

ies

1,22

3,67

1(4

8,91

0)1,

174,

761

-1,

234,

129

1,23

4,12

9

Non

-Cur

rent

Lia

bilit

y

Oth

er p

ayab

les

5,36

1,99

3-

5,36

1,99

35,

872,

344

-5,

872,

344

Am

ount

s ow

ing

to su

bsid

iary

com

pani

es9,

328,

255

-9,

328,

255

10,0

84,3

33-

10,0

84,3

33

Am

ount

s ow

ing

to a

Diri

ctor

35,0

57-

35,0

5714

,913

-14

,913

Tax

paya

ble

--

-81

,146

-81

,146

14,7

25,4

05-

14,7

25,4

0516

,052

,736

-16

,052

,736

Tota

l Lia

bilit

ies

15,9

49,0

76(4

8,91

0)15

,900

,166

16,0

52,7

361,

234,

129

17,2

86,8

65

Tota

l Equ

ity a

nd L

iabi

litie

s43

,009

,852

(195

,637

)42

,814

,215

36,9

12,5

284,

936,

517

41,8

49,0

45

Har

vest

Co

urt I

ndus

trie

s B

erha

d (C

om

pan

y N

o .3

6998

-T)

132

Not

es to

The

Fina

ncia

l Sta

tem

ents

(con

t’d)

38.

Expl

anat

ion

of tr

ansi

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39. Date of Authorisation for Issue The financial statements of the Group and of the Company for the financial year ended 31 December 2012 were authorised for issue in accordance with a resolution of the Board of Directors on 25 April 2013.


Harvest Court Industries Berhad (Company No .36998-T)134 Supplementary Information on the Disclosure of Realised and Unrealised Profits or Losses

Group Company

31.12.2012 31.12.2011 31.12.2012 31.12.2011RM RM RM RM

Accumulated losses- Realised (45,436,334) (45,529,710) (21,267,800) (18,423,869)- Unrealised (2,169,429) (2,251,455) - -

(47,605,763) (47,781,165) (21,267,800) (18,423,869)Less: Consolidation adjustments 34,096,307 34,096,307 - -

(13,509,456) (13,684,858) (21,267,800) (18,423,869)

The disclosure of realised and unrealised profits or losses is solely compiled in accordance on the Malaysian Institute of Accountants Guidance of Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad (“Bursa Malaysia”) Listing Requirements issued on 20 December 2010.

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

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

Annual Report 2012 135Group’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 1-27 15,589,825 2009 Factory and Office

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

- KD Plant and warehouse

Leasehold 5,970 1-23 12,425,376 2009 KD Chambers

Group’s Landed Properties

Harvest Court Industries Berhad (Company No .36998-T)136 Notice of Annual General Meeting

Notice of Annual General Meeting

NOTICE IS HEREBY GIVEN that the Thirty Fifth Annual General Meeting of the Company will be held at Lot 450 Jalan Papan, Pandamaran Industrial Area, 42000 Port Klang, Selangor Darul Ehsan on Tuesday, 25 June 2013 at 2.30 p.m. to transact the following businesses:-

1. To receive the audited financial statements for the year ended 31 December 2012 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) Ng Wai Han (Article 103)ii) Datuk Tan Choon Hwa (JMK, JP) (Article 103)iii) Woo Mun Chee (Article 103)iv) Dato’ Mohamed Amir Abas bin Zainal Azim (Article 97)

Ordinary Resolution 1Ordinary Resolution 2Ordinary Resolution 3Ordinary Resolution 4

3. To approve the payment of Directors’ fees of up to RM300,000.00 to the Non-Executive Directors of the Company for the financial year ending 31 December 2013.

Ordinary Resolution 5

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 Ordinary Resolution 7

“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”).”

Annual Report 2012 137Notice of Annual General Meeting (cont’d)

6. Proposed New Shareholders’ Mandate and Renewal of 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 3 June 2013 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 and/

or its subsidiaries 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 lower;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.”

Harvest Court Industries Berhad (Company No .36998-T)138 Notice of Annual General Meeting (cont’d)

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 3 June 2013 NotesA. 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 Fifth AGM, the Company shall be requesting Bursa Malaysia Depository Sdn Bhd to issue a General Meeting Record of Depositors as at 18 June 2013. Only members whose name appears on the Record of Depositors as at 18 June 2013 shall be entitled to attend the said meeting or appoint proxies to attend and/or vote on his/her behalf.

Annual Report 2012 139Notice of Annual General Meeting (cont’d)

EXPLANATORY NOTES ON SPECIAL BUSINESS

Ordinary Resolution 7: Authority To Directors To Allot And Issue Shares

The Ordinary Resolution 7 is a renewal of the mandate given to the Company by the shareholders at the previous Annual General Meeting held on 27 June 2012, 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.

During the financial year ended 31 December 2012, 1,056,000 new ordinary share of RM0.25 each in the Company were issued via exercising of 1,056,000 option shares under the ESOS by the eligible Directors and employees (“ESOS”) and 16,700,000 new ordinary share of RM0.25 each in the Company were issued by way of private placement at an issue price of RM0.403 per share (“Private Placement”) pursuant to the mandate granted to the Company at the Thirty Fourth Annual General Meeting held on 27 June 2012. The proceeds amounting to RM6,994,100.00 arising from the ESOS and Private Placement is mainly for working capital and capital expenditure requirements of the Group.

Ordinary Resolution 8: Proposed New Shareholders’ Mandate and Renewal of Existing Shareholders’ Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature

The Ordinary Resolution 8, 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.


Statement AccompanyingNotice of Annual General Meeting

The Directors who are standing for re-election at the Thirty Fifth Annual General Meeting of the Company are:-

(i) Ng Wai Han Article 103 (Ordinary Resolution 1) (ii) Datuk Tan Choon Hwa (JMK, JP) Article 103 (Ordinary Resolution 2) (iii) Woo Mun Chee Article 103 (Ordinary Resolution 3) (iv) Dato’ Mohamed Amir Abas bin Zainal Azim Article 97 (Ordinary Resolution 4)

The profile of the above Directors are set out on pages 4 and 10 of the Annual Report 2012. 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 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 2012.

The Thirty Fifth Annual General Meeting of the Company will be held at Lot 450 Jalan Papan, Pandamaran Industrial Area, 42000 Port Klang, Selangor Darul Ehsan on Tuesday, 25 June 2013 at 2.30 p.m.

Statement Accompanying Notice of Annual General Meeting

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 Fifth Annual General Meeting of the Company to be held at Lot 450, Jalan Papan, Pandamaran Industrial Area, 42000 Port Klang, Selangor Darul Ehsan on Tuesday, 25 June 2013 at 2.30 p.m. and at any adjournment thereof in the manner as indicate below:-

RESOLUTIONS FOR AGAINSTOrdinary Resolution 1 - To re-elect Ng Wai Han as Director Ordinary Resolution 2 - To re-elect Datuk Tan Choon Hwa (JMK, JP) as Director Ordinary Resolution 3 - To re-elect Woo Mun Chee as DirectorOrdinary Resolution 4 - To re-elect Dato’ Mohamed Amir Abas bin Zainal Azim as Director

Ordinary Resolution 5 - To approve the payment of Directors’ fees for the financial year ending 31 December 2013

Ordinary Resolution 6 - To re-appoint Messrs UHY as Auditors of the Company

Ordinary Resolution 7 - To approve the authority to issue shares pursuant to Section 132D of the Companies Act

Ordinary Resolution 8 To approve the Proposed Shareholders’ Mandate.

(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 ______________________, 2013.

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

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 : ……………….%

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

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 Fifth AGM, the Company shall be requesting Bursa Malaysia Depository Sdn Bhd to issue a General Meeting Record of Depositors as at 18 June 2013. Only members whose name appears on the Record of Depositors as at 18 June 2013 shall be entitled to attend the said meeting or appoint proxies to attend and/or vote on his/her behalf.

NUMBER OF SHARES HELD CDS Account No :Harvest Court Industries Berhad

FOLD THIS FLAP FOR SEALING

THEN FOLD HERE

1ST FOLD HERE

The Company SecretaryHARVEST COURT INDUSTRIES BERHAD (36998-T) Suit 10.03. Level 10The Gardens South TowerMidVally City, Lingkaran Syed Putra,59200 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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