CONTENTS. Page. Corporate Information 2. Notice Of Annual General Meeting 3-4. Statement Accompanying Notice Of Annual General Meeting 5

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1 CONTENTS Corporate Information 2 Notice Of Annual General Meeting 3-4 Statement Accompanying Notice Of Annual General Meeting 5 Directors Profile 6-8 Executive Chairman s Statement 9 Corporate Governance Statement Audit Commitee Report Disclosure Requirements Pursuant To The Listing Requirements 16 Of The Kuala Lumpur Stock Exchange Directors Report Statement By Directors 21 Statutory Declaration 21 Auditors Report 22 Consolidated Balance Sheet 23 Consolidated Income Statement 24 Consolidated Statement Of Changes In Equity 25 Consolidated Cash Flow Statement 26 Balance Sheet 27 Income Statement 28 Statement Of Changes In Equity 28 Cash Flow Statement 29 Notes To The Financial Statements Analysis Of Shareholdings s Properties 53 Proxy Form Page Annual Report

2 CORPORATE INFOATION BOARD OF DIRECTORS COMPANY SECRETARIES Executive Chairman Aaron Kwan Kien Fai (MIA 13376) Ng Chuan Ng Teck Huat Hu Siew Poh (MAICSA ) Managing Director Ng Swee Kiat REGISTERED OFFICE 111, Pusat Perniagaan NBC, Executive Directors Jalan Meru, Klang, Ng Swee Keong Selangor Darul Ehsan Ng Ai Cheng Tel No : (603) Fax No: (603) /2 Non-Independent Non-Executive Director Sukhinderjit Singh Muker Independent Non-Executive Directors COMPANY NUMBER Yet Kiong Siang T Ahmad Kamaruzaman Bin Mohamed Baria AUDIT COMMITTEE Chairman Ahmad Kamaruzaman Bin Mohamed Baria Members Yet Kiong Siang Ng Swee Kiat AUDITORS K.C. CHIA & NOOR REMUNERATION COMMITTEE Fax No: (603) Chairman Sukhinderjit Singh Muker PRINCIPAL BANKERS Members Ahmad Kamaruzaman Bim Mohamed Baria Ng Swee Kiat SHARE REGISTRAR MALAYSIAN SHARE REGISTRATION SERVICES SDN BHD 7 th Floor, Exchange Square, Bukit Kewangan, Kuala Lumpur. Tel No : (603) Affin Bank Berhad United Overseas Bank (Malaysia) Bhd. Public Bank Berhad NOMINATION COMMITTEE STOCK EXCHANGE LISTING Chairman Second Board of the Kuala Lumpur Ahmad Kamaruzaman Bin Mohamed Baria Stock Exchange Members KLSE STOCK CODE Yet Kiong Siang 9342 Sukhinderjit Singh Muker 2

3 NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the Twenty-Fourth Annual General Meeting of the will be held at the Crystal 2 (1st Floor), Crystal Crown Hotel Harbour View, 217, Persiaran Raja Muda Musa, Port Klang on Friday, 21st June 2002 at 9.30 a.m. to transact the following business : - 1 To receive and adopt the Statement of Accounts for the year ended 31st December 2001 together with the Reports of Directors and Auditors thereon. Resolution 1 2 To re-elect the following Director retiring pursuant to Section 129(1) & (6) of the Companies Act, 1965 Mr Ng Chuan Ng Teck Huat Resolution 2 3 To re-elect the following Director retiring pursuant to Paragraph 7.28 of the Kuala Lumpur Stock Exchange Listing Requirements. Mr Ng Swee Kiat Resolution 3 4 To re-elect the following Directors retiring pursuant to Article 97 of the s Articles of Association : - (i) Mdm Ng Ai Cheng Resolution 4 (ii) Mr Sukhinderjit Singh Muker Resolution 5 5 To re-elect the following Director retiring pursuant to Article 103 of the s Articles of Association : - En Ahmad Kamaruzaman Bin Mohamed Baria Resolution 6 6 To approve the payment of Directors fees for the year ended 31st December Resolution 7 7 To re-appoint Messrs K. C. Chia & Noor as Auditors of the and to authorise the Directors to fix their remuneration. Resolution 8 SPECIAL BUSINESS 8. To consider and, if thought fit, to pass the following Ordinary Resolutions : - ORDINARY RESOLUTION I AUTHORITY TO ISSUE SHARES BY THE COMPANY PURSUANT TO SECTION 132D OF THE COMPANIES ACT, 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 from time to time upon such terms and conditions and for such purpose 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 for the time being and such authority shall continue to be in force until the conclusion of the next annual general meeting of the. Resolution 9 ORDINARY RESOLUTION II AUTHORITY TO ALLOT SHARES PURSUANT TO THE EMPLOYEES SHARE OPTION SCHEME 8.2 THAT pursuant to the s Employees Share Option Scheme (the Scheme ) as approved at the Extraordinary General Meeting of the held on 23rd June 2000, the Directors of the be and are hereby authorised in accordance with Section 132D of the Companies Act, 1965, to allot and issue shares of the from time to time in accordance with the Scheme. Resolution Annual Report

4 SPECIAL BUSINESS (CONT D) ORDINARY RESOLUTION III PROPOSED RENEWAL OF SHAREHOLDERS MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE 8.3 THAT approval be and is hereby given to the and its subsidiaries to enter into and give effect to specified recurrent transactions of a revenue or trading nature as set out in Section 2.1 of the s Circular to Shareholders dated 30th May 2002 with specified classes of Related Parties which are necessary for the s day to day operations in the ordinary course of business on terms not more favourable to the Related Parties than those generally available to the public and not detrimental to minority shareholders of the and such approval shall continue to be in force until : - (a) The conclusion of the first AGM of the following the AGM at which the Proposed Renewal of Shareholders Mandate was passed, at which time the Proposed Renewal of Shareholders Mandate will lapse, unless by a resolution passed at the AGM, the authority is renewed; (b) The expiration of the period within which the next AGM is required to be held pursuant to Section 143(1) of the Companies Act, 1965 ( Act )(but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Act); or (c) Revoked or varied by resolution passed by the shareholders in general meeting; whichever is the earlier. Resolution 11 9 To transact any other business of the for which due notice has been given. By Order Of The Board AARON KWAN KIEN FAI HU SIEW POH SECRETARIES Klang 30 th May 2002 Notes 1. A member entitled to attend and vote at the Meeting is entitled to appoint a proxy or proxies to attend and vote in his stead. A member shall not be entitled to appoint a person who is not a member as his proxy unless that person is a qualified legal practitioner or an approved company auditor or a person approved by the Registrar of Companies in a particular case. Where a member appoints two or more proxies, the appointment shall be invalid unless he specifies the proportion of his holdings to be represented by each proxy. 2. The instrument appointing a proxy in the case of an individual shall be signed by the appointer or his attorney, and in the case of a corporation, executed either under its common seal or under the hand of an officer or attorney duly authorised in writing. 3. The proxy form must be deposited at the s Registered Office at 111, Pusat Perniagaan NBC, Jalan Meru, Klang, Selangor Darul Ehsan not less than 48 hours before the time set for holding the Meeting or any adjournment thereof. 4. Explanatory Notes To Special Business 4.1 Resolution Pursuant to Section 132D of the Companies Act, 1965 The Ordinary Resolution proposed under item 8.1, if passed, will empower the Directors to issue and allot shares up to and not exceeding in total ten per centum (10%) of the issued share capital of the for the time being for such purposes as they may deem fit from the date of this Annual General Meeting till the next Annual General Meeting of the and also to avoid any delay and costs incurred in convening a general meeting.this authority, unless revoked or varied by the at a general meeting, will expire at the next Annual General Meeting of the. 4.2 Resolution Pursuant to the Employees Share Option Scheme The Ordinary Resolution proposed under item 8.2, if passed, will empower the Directors of the to issue and allot shares to those employees who have exercised their options under the Employees Share Option Scheme. 4.3 Resolution Pursuant to the Proposed Renewal of Shareholders Mandate For Recurrent Related Party Transactions Of A Revenue Or Trading Nature The Ordinary Resolution proposed under item 8.3, if passed, will empower the to conduct recurrent transactions of a revenue or trading nature which are necessary for the s and its subsidiaries day-to-day operations and transacted in the ordinary course of business with the Related Parties. Please refer to Section 2.1 of the Circular to Shareholders dated 30 th May 2002 for more information. 4

5 STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING (Pursuant to Paragraph 8.28(2) of the Listing Requirements of Kuala Lumpur Stock Exchange) 1. Directors who are standing for re-election at the 24th Annual General Meeting of Harvest Court Industries Berhad. Mr Ng Chuan Ng Teck Huat (Resolution 2) Mr Ng Swee Kiat (Resolution 3) Mdm Ng Ai Cheng (Resolution 4) Mr Sukhinderjit Singh Muker (Resolution 5) En Ahmad Kamaruzaman Bin Mohamed Baria (Resolution 6) 2. Details of Attendance of Directors At Board Meetings There were eight (8) Board meetings held during the financial year ended 31 December Details of attendance of the Directors are set out in the Directors Profile appearing on pages 6 to 8 of the Annual Report. 3. Place, Date and Time of Board Meetings All Board meetings during the financial year ended 31 December 2001 were held at Conference Room, 111, Pusat Perniagaan NBC, Jalan Meru, Klang, Selangor Darul Ehsan. The date and time of the Board meetings held were as follows : - Date of Meetings Time 19/02/ p.m. 09/04/ p.m. 28/05/ a.m. 20/08/ a.m. 07/09/ p.m. 26/10/ p.m. 26/11/ a.m. 05/12/ p.m. 4. Further Details of Directors Who Are Standing For Re-election Details of Directors who are standing for re-election are set out on pages 6 to 8 of the Annual Report Annual Report

6 DIRECTORS PROFILE Ng Chuan Ng Teck Huat - Executive Chairman/Non independent Aged 73, Mr Ng, a Malaysian has more than 40 years of experience in the timber trade. He had been a timber logger, sawmiller, jetty operator and a seasoned timber downstream products manufacturer. As Executive Chairman and Advisor to the Mr Ng has been a great source of inspiration and invaluable experience to the management team. Mr Ng was appointed to the Board of HARVEST COURT INDUSTRIES BERHAD ( HCIB ) on 28 June Mr Ng does not hold directorships in any other public companies. Mr Ng attended all eight Board meetings of HCIB held during the financial year ended 31December Mr Ng has an indirect interest by virtue of his and his wife s interest in Harvest Court Holdings (M) Sdn Bhd, a substantial shareholder of HCIB. He is father to Mr Ng Swee Kiat, Mr Ng Swee Keong and Mdm Ng Ai Cheng. He has no conflict of interest with HCIB and has no convictions for offences within the past ten years. Ng Swee Kiat - Managing Director/Non Independent Aged 47, Mr Ng, a Malaysian, obtained a Bachelor Civil Engineering from Monash University, Australia in Mr Ng has been involved in the timber trade since his graduation day for a total of more than 20 years. Mr Ng plans and charts the expansion programme of the, transforming it from a mere sawn timber exporter to a diversified and fully integrated timber manufacturer. Mr Ng was appointed to the Board of HCIB on 04 July 1980 and appointed as Managing Director of the since 1997 and presently is a member of the Audit Committee and Remuneration Committee of HCIB. Mr Ng does not hold directorships in any other public companies. Mr Ng attended seven of the eight Board meetings of HCIB held during the financial year ended 31 December Mr Ng holds 495,000 shares in HCIB and he also has an indirect interest by virtue of his interest in Harvest Court Holdings (M) Sdn Bhd, a substantial shareholder of HCIB. He is a son to Mr Ng Chuan Ng Teck Huat. He is also a sibling to Mr Ng Swee Keong and Mdm Ng Ai Cheng. He has no conflict of interest with HCIB and has no convictions for offences within the past ten years. Ng Swee Keong - Executive Director/Non Independent Aged 44, Mr Ng, a Malaysian, obtained a Bachelor of Science (Electrical and Electronics Engineering) from the University of Birmingham, United Kingdom in Mr Ng has been in timber trade for more than 15 years. Beside overseeing the s manufacturing activities, he is the prime mover behind the aggressive marketing strategies pursued by the. He travels overseas extensively to foster close relationship with buyers, to learn of changes in their countries and to attend seminars and exhibitions on latest technology in timber processing. Mr Ng was appointed as an Executive Director of HCIB on 25 March Mr Ng does not hold directorships in any other public companies. Mr Ng attended seven of the eight Board meetings of HCIB held during the financial year ended 31 December Mr Ng holds 495,000 shares in HCIB and he also has an indirect interest by virtue of his interest in Harvest Court Holdings (M) Sdn Bhd, a substantial shareholder of HCIB. He is a son to Mr Ng Chuan Ng Teck Huat. He is also a sibling to Mr Ng Swee Kiat and Mdm Ng Ai Cheng. He has no conflict of interest with HCIB and has no convictions for offences within the past ten years. 6

7 Ng Ai Cheng - Executive Director/Non Independent Aged 49, Mdm Ng, a Malaysian, obtained a Bachelor of Computer Science from University of Wellington, New Zealand in Mdm Ng has established her own business dealing in computers and software products for the past 12 years. She was appointed to the Board of HCIB on 18 December 1993 and currently she is helping the to establish a strong presence in the local domestic doors and timber joinery markets. Mdm Ng does not hold directorships in any other public companies. Mdm Ng attended seven of the eight Board meetings of HCIB held during the financial year ended 31 December Mdm Ng holds 1,000 shares in HCIB. She is a daughter to Mr Ng Chuan Ng Teck Huat and is the eldest sister to Mr Ng Swee Kiat and Mr Ng Swee Keong. She has no conflict of interest with HCIB and has no convictions for offences within the past ten years. Yet Kiong Siang - Non Executive Director/Independent Aged 44, a Malaysian, Mr Yet is a Fellow of the Chartered Association of Certified Accountants, a member of the Malaysian Institute of Accountants and an associate member of the Institute of Internal Auditors Malaysia. He is an auditor by profession. He joined Khoo Teng Keat & Co. as an Audit Trainee in 1983 and progressed rapidly within the firm. Mr Yet is currently the proprietor of Khoo Teng Keat & Co. He has about 20 years of experience in the field of auditing, taxation, management consultancy and corporate advisory services. Mr Yet was appointed to the Board of HCIB as an Independent non-executive director in He is presently a member of the Audit Committee and the Nomination Committee of HCIB. Mr Yet does not hold directorships in any other public companies. Mr Yet attended all eight of the Board meetings of HCIB held during the financial year ended 31 December Mr Yet does not hold any shares in HCIB and its subsidiaries. Mr Yet has no family relationship with other directors or major shareholders of HCIB. He has no conflict of interest with HCIB and has no convictions for offences within the past ten years. Sukhinderjit Singh Muker - Non Executive Director/Non Independent Aged 55, Mr Muker, a Malaysian, was appointed to the Board of HCIB in Mr Muker obtained the Bachelor of Laws (Hons) degree from the University of London, England in 1972 and was conterred the degree of an Utter Barrister by the Honourable Society of Grays Inn in He has been in active practice with the firm of M/S Lovelace & Hastings since being called to the Malaysian Bar in Mr Muker is presently the Chairman of the Remuneration Committee and a member of the Nomination Committee of HCIB. Mr Muker is a director of Southern Acids (M) Berhad and Pahangco Corporation Berhad Mr Muker attended all eight of the Board meetings of HCIB held during the financial year ended 31 December Mr Muker holds 10,000 shares in HCIB. Mr Muker has no family relationship with other directors or major shareholders of HCIB. He has no conflict of interest with HCIB and has no convictions for offences within the past ten years Annual Report

8 DIRECTORS PROFILE (CONT D) Ahmad Kamaruzaman Bin Mohamed Baria - Non Executive/Independent Aged 53, Encik Kamaruzaman, a Malaysian, was re-appointed to the Board in He holds a Bachelor of Science in Forestry from the University of Michigan. He also has a Master of Business Administration degree from the University of Strathclyde, Scotland. Upon graduation he worked for two years as Sawmill Manager for Amanah Saham Pahang Berhad and later promoted to the post of Forest Manager. Encik Kamaruzaman also has five years of experience in the export of timber. Before he was re-appointed to the Board, he was a member of Parliament and Parliament Secretary during 1997 to Encik Kamaruzaman is presently the Chairman of the Audit Committee and Nomination Committee of HCIB. He is also a member of the Remuneration Committee of HCIB. Encik Kamaruzaman does not hold directorships in any other public companies. Encik Kamaruzaman attended only one of eight Board meetings of HCIB held during the financial year ended 31December 2001 as he was appointed near the end of the financial year. Encik Kamaruzaman holds 186,800 shares in HCIB. He has no family relationship with other directors or major shareholders of HCIB. He has no conflict of interest with HCIB and has no convictions for offences within the past ten years. 8

9 EXECUTIVE CHAIAN S STATEMENT On behalf of the Board of Directors, I am pleased to present to you Harvest Court Industries Berhad s Annual Report and the Financial Statements of the and the for the financial year ended 31st December Financial Performance For the financial year under review the recorded a revenue of 33.3 million and a profit before taxation of 1.05 million as compared to a revenue of 35.6 million and profit before taxation of million in the previous financial year. The s less favourable performance was attributed to a general slow down and intensive competitive positions of the overseas and regional markets. Corporate Development The has yet to submit the restructuring proposals which inter alia, involve the acquisition of landed properties and companies with viable businesses and Rights and Warrants Issues as announced on 28 November These acquisitions if completed successfully, will enable the and the to further expand its downstream activities in the timber industry and achieve substantial savings in rental of land and buildings in the future which will augur well for the in the long-run. Operation Overview Till now, the wood-based operations remains the major contributor of turnover and profit before taxation for the. In this respect, the is fortunate to be able to capture the export market which continues to expand in the future. Currently the is operating almost at its maximum capacity to meet with the expanding overseas demand. In addition, the also strives in every effort to expand its overseas market by adopting aggressive marketing strategies which have been fruitful and encouraging resulting in more new customers from countries such as China, Middle East and Far East. The has also adopted modern ways of doing business in response to the rapid advancement in information technology. One strategy applied in order to be kept abreast of these changes is by the continuous training of staff and investment in new information technology systems to improve productivity, operating efficiency and cost effectiveness. Prospects Despite the impending slowdown of the global economy and domestic demand showing sign of weakening, the is confident of its future prospects and expects to be more focused in its business approach by actively striving to improve upon its production efficiency and productivity. Standards and procedures are constantly reviewed to improve the objective of producing high quality products at competitive costs. Barring any unforeseen circumstances, the expects to achieve a better results for this current year. Appreciation On behalf of the Board of Directors, I wish to express my appreciation to all the management and staff for their dedication and support in driving our forward. I would also like to thank all the Directors for their wise counsel and support during the past year. Lastly, I would like to extend my warmest gratitude to our shareholders, valued customers, members, bankers, business associates, suppliers and government authorities for their confidence and continuous support to the. IN GOD WE TRUST Ng Chuan Ng Teck Huat Executive Chairman 25 th April Annual Report

10 CORPORATE GOVERNANCE STATEMENT COMPANY S CORPORATE GOVERNANCE INITIATIVE The is committed to good corporate governance in accordance with the Revamped Listing Requirements. The provides detailed information to shareholders on various issues on financial performance and the s business. A. DIRECTORS The Board The Board assumes responsibility for effective stewardship and control of the and has established terms of reference to assist in the discharge of this responsibility. The Board comprises seven (7) directors, three (3) of whom are non-executive. The profiles of the members of the Board are provided in the Annual Report. The Board met eight (8) times during the financial year ended 31 December Supply of Information To fulfill the responsibilities set out above, all Directors have access to the advice and services of the Secretaries as well as to independent professional advice, including the external auditors. Re-election In accordance with Article 103 of the s Articles of Association, all Directors who are appointed by the Board are subject to election by shareholders at the next general meeting immediately after their appointment and KLSE Listing Requirements provides that each Director, including the Managing and/or Executive Directors, must retire from office at least once in three years and can offer himself for re-election. The details of the retiring Directors are set out in the Annual Report. B. DIRECTORS REMUNERATION Procedure The fees of Directors, including non-executive directors, are endorsed by the Board for approval by the shareholders of the at the Annual General Meeting. Disclosure The aggregate remuneration of Directors for the financial year ended 31 December 2001 are as follows: Fees Salaries & Other Total Emoluments () () () Executive Directors 3, , ,250 Non-Executive Directors 4,250-4,250 The number of Directors whose remuneration fall into the following bands are as follows:- Range of Remuneration () Executive Non-Executive 50,000 and below , , , , , , Establishment of Committee On 05 December 2001, a nomination committee and a remuneration committee were established. Nomination Committee Since the date of its establishment, the nomination committee has not convened any meeting 10

11 Nomination Committee (Cont d) The composition and category of directors in the nomination committee are as follows : - Category No of directors Percentage Non-Executive Non-Independent Directors % Non-Executive Independent Director % Executive Director % Total % The Nomination Committee s roles include to forward recommendation of candidates to the Board for directorships and seats of Board committees to be filled, assess the effectiveness of the Board and the various committees of the Board as a whole, and contribution of all members of the Board, and review the appropriate Board balance and size of the non-executive participation. The Board, through the Nomination Committee, reviews annually its required mix of skills, experience and competencies that non-executive directors should contribute to the Board. Remuneration Committee The composition and category of directors in the remuneration committee are as follows : - Category No of directors Percentage Non-Executive Non-Independent Director % Non-Executive Independent Director % Executive Director % Total % The committee had one meeting during the financial year, which was attended by all of the members of the committee. C. ACCOUNTABILITY AND AUDIT 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 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 (a) of the KLSE Listing Requirements on its responsibilities in preparing the financial statements is set out on page 12 of the Annual Report. 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 and fraud. Relationship with Auditors The external auditors, Messrs K.C. Chia & Noor has continued to report to members of the of their findings which are included as part of the s financial reports with respect to each year s audit on statutory financial statements. In doing so, the has established a transparent arrangement with the auditors to meet their professional requirements. From time to time, the auditors highlight to the Audit Committee and the Board of Directors on matters that require the Board s attention. D. COMMUNICATION BETWEEN THE COMPANY AND SHAREHOLDERS AND INVESTORS The values regular communication with shareholders and investors. The reaches out to its shareholders through the issuance of Annual Reports, Explanatory Circulars and updates on the is provided through the quarterly reports and various announcements made throughout the year. Shareholders and Investors could also general information of the through the website Annual Report

12 D. COMMUNICATION BETWEEN THE COMPANY AND SHAREHOLDERS AND INVESTORS (CONT D) Currently, the General Meetings are the principal forum for dialogues with the shareholders and investors. At each General Meetings, the Board presents the progress and performance of the and/or Corporate Proposals of the and shareholders are encouraged to participate in the question and answer session. Informal discussion between the Directors, senior management staff and the shareholders and investors are always active before and after the General Meetings. 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 accounting standards and give a true and fair view of the state of affairs of the and at the end of the financial year and of the results and cash flows of the and for the financial year. The Directors are satisfied that in preparing the financial statements of the for the financial year ended 31 December 2001, the has used the appropriate accounting policies and applied them consistently and supported by reasonable and prudent judgements and estimates. The Directors also consider that all applicable accounting standards have been followed and confirm that the financial statements have been prepared on the going concern basis. The Directors are responsible for ensuring that the keeps accounting records which disclose with reasonable accuracy at any time the financial position of the and which enable them to ensure that the financial statements comply with the Companies Act, The Directors are also responsible for taking such steps that are reasonably open to safeguard the assets of the group and to minimise fraud and other irregularities. 12

13 AUDIT COMMITTEE REPORT 1. COMPOSITION Encik Ahmad Kamaruzaman Bin Mohamed Baria - Chairman, Independent Non-Executive Director Mr Yet Kiong Siang - Independent Non-Executive Director Mr Ng Swee Kiat - Non-independent Executive Director 2. TES OF REFERENCE 2.1 Membership The Board shall appoint the Committee comprising of at least three (3) directors, a majority of whom shall be independent non-executive directors of the Board. At least one member of the audit committee must be : - A member of the Malaysian Institute of Accountants; or If he is not a member of the Malaysian Institute of Accountants, he must have at least 3 years working experience and; either (i) he must have passed the examination specified in Part I of the 1st Schedule of the Accountants Act, 1967; or (ii) he must be a member of one of the associations of accountants specified in Part II of the 1st Schedule of the Accountants Act The Chairman of the Audit Committee should be an Independent director and be elected amongst the members of the Committee. 2.2 Duties To review the following and report to the Board : - (a) with the external auditors, the audit plan ; (b) with the external auditors, their evaluation of the system of internal controls ; (c) with the external auditors, their audit report ; (d) the assistance given by the employees of the to the external auditors ; (e) the adequacy of the scope, functions and resources of the internal audit functions and that it has the necessary authority to carry out its works ; (f) the internal audit programme, processes, the results of the internal audit programme, processes or investigation undertaken and whether or not appropriate action is taken on the recommendation of the internal audit function ; (g) the quarterly results and year end financial statement prior to the approval by the Board, focussing particularly on : - changes in or implementation of major accounting policy changes significant and unusual events the going concern assumption ; and compliance with accounting standards and other legal requirements (h) any related party transaction and conflict of interest situation that may arise within the or group including any transaction, procedure or course of conduct that raises questions of management integrity To consider the appointment of the external auditor, the audit fee and any questions of resignation or dismissal and whether there is reasonable (supported ground) to believe that the s external auditors are not suitable for re-appointment ; To discuss with the external auditor before the audit commences, the nature and scope of the audit, and ensure co-ordination where more than one audit firm is involved ; To discuss problems and reservations arising from the interim and final audits, and any matter the auditor may wish to discuss ; To review the external auditor s management letter and management s response ; Annual Report

14 2.2.6 To do the following where an internal audit functions exists : - a. Review the adequacy of the scope, functions and resources of the internal audit function, and that it has the necessary authority to carry out its work ; b. Review the internal audit programme and results of the internal audit process and where necessary ensure that appropriate action is taken in the recommendations of the internal audit function ; c. Review any appraisal or assessment of the performance of members of the internal audit function ; d. Approve any appointment or termination of senior staff members and provide the resigning staff members an opportunity to submit his reasons for resigning To consider the major findings of internal investigations and management s response To consider other topics as defined by the Board. 2.3 Rights and Authority of the Audit Committee The must ensure that whenever necessary and reasonable for the performance of its duties, the Audit Committee shall, in accordance with the procedures to be determined by the Board and at the cost of the : - have authority to investigate any matter within its terms of reference ; have the resource which are required to perform its duties ; have full and unrestricted access to any information pertaining to the ; have direct communication channels with the external auditors and person(s) carrying out internal audit function or activity (if any); be able to obtain independent professional or other advice; and be able to convene meetings with the external auditors, excluding the attendance of the executive member of the Committee whenever deemed necessary. 3. MEETINGS 3.1 The Committee shall convene at least four (4) regular meetings a year and such additional meetings as the Chairman shall determine. The Chairman shall convene a meeting of the Committee, if so requested by any member of the Committee, the Management of the, the internal auditors or the external auditors. 3.2 The external auditors shall have the rights to appear and be heard at any meetings of the Committee and appear before the Committee upon requested by the Committee. 3.3 The Head of Internal Audit and a representative of the external auditors shall attend all meetings of the Committee. Other members of the Board may attend meetings of the Committee upon its invitation. 3.4 The quorum for any meeting of the Committee shall be three (3) members present in person, the majority of whom present shall be independent directors. 4. ATTENDANCE OF MEETINGS During the year ended 31 December 2001, the audit committee held seven (7) meetings. The details of attendance of the Audit Committee members are as follows : - Audit Committee Members Attendance En Ahmad Kamaruzaman Bin Mohamed Baria (appointed Chariman on 05/12/01) 1/7 Mr Sukhinderjit Singh Muker (relinguished Chairmanship on 05/12/01) 7/7 Mr Yet Kiong Siang 7/7 Mr Ng Swee Kiat 6/7 14

15 5. SUMMARY ACTIVITIES OF THE AUDIT COMMITTEE DURING THE YEAR The activities of the Audit Committee during the financial year ended 31st December 2001 include the following : - review the quarterly results and year end financial statement review the adequacy of the audit scope and plan of the external auditors review reports of the external auditors review related party transactions 6. INTERNAL AUDIT FUNCTION The internal audit function is still in the process of being streamlined to assist the Audit Committee in discharging their responsibilities, to review the overall effectiveness of internal control including the adequacy in risk management, internal operational controls, compliance with laws and regulations and management efficiency Annual Report

16 DISCLOSURE REQUIREMENTS PURSUANT TO THE LISTING REQUIREMENTS OF THE KUALA LUMPUR STOCK EXCHANGE REMUNERATION OF DIRECTORS The details of remuneration of directors are stated in Page 10 of the Annual Report. UTILISATION OF PROCEEDS No proceeds were raised by the from any corporate exercise during the financial year. SHARE BUY-BACKS There were no share buy-backs during the financial year. OPTIONS, WARRANTS OR CONVERTIBLE SECURITIES No options, warrants or convertible securities were issued or exercised during the financial year. AMERICAN DEPOSITORY RECEIPT (ADR)/GLOBAL DEPOSITORY RECEIPT (GDR) PROGRAMMES The did not sponsor any ADR or GDR programmes during the financial year. IMPOSITION OF SANCTIONS/PENALTIES There was no public imposition of sanctions or penalties imposed on the and its subsidiaries, directors or management by the regulatory bodies during the financial year except penalties imposed on the subsidiaries by Inland Revenue Board of 71, NON-AUDIT FEES There was no payment made to external auditors during the financial year in relation to non-audit fees. PROFIT ESTIMATE, FORECAST OR PROJECTION The did not release any profit estimate, forecast or projection for the financial year. There is no variance between the results for the financial year and unaudited results previously released by the except for the provision of tax which is immaterial. PROFIT GUARANTEE The did not give any profit guarantee to any parties during the financial year. MATERIAL CONTRACTS AND CONTRACTS RELATING TO LOAN There are no contract relating to material contracts of the and subsidiary companies involving Directors and substantial shareholders. There are no contracts relating to loan entered into by the and its subsidiaries which involve the Directors and major shareholders interests entered into since the previous financial year ended 31 December RECURRENT RELATED PARTY TRANSACTIONS OF REVENUE NATURE Recurrent related party transactions of revenue nature during the year was 733, The details of related party transactions are stated in Note 29 to the Accounts. REVALUATION POLICY ON LANDED PROPERTIES The does not adopt a policy on regular revaluation of its landed properties. 16

17 DIRECTORS REPORT The directors hereby submit their report together with the audited financial statements of the and the for the financial year ended 31 December PRINCIPAL ACTIVITIES The principal activity of the is investment holding. It is also involved in provision of marketing and management services to its subsidiaries. The principal activities of the subsidiaries are described in Note 4 to the financial statements. There have been no significant changes in the nature of these activities during the financial year. RESULTS Profit after taxation 922, ,570 Minority interests - share of loss in subsidiary 15,276 - Net profit attributable to shareholders 938, ,570 DIVIDENDS No dividend has been paid or declared by the since the end of the previous financial year. The directors do not recommend the payment of any dividend for the current financial year. RESERVES AND PROVISIONS There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the statements of changes in equity. BAD AND DOUBTFUL DEBTS Before the income statements and balance sheets were made out, the directors took reasonable steps to ascertain that action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that all known bad debts had been written off and that no provision for doubtful debts is required. At the date of this report, the directors are not aware of any circumstances which would render the amount written off as bad debts or provided for as doubtful debts in the financial statements of the and the inadequate to any substantial extent. CURRENT ASSETS Before the income statements and balance sheets were made out, the directors took reasonable steps to ensure that any current assets which were unlikely to be realised in the ordinary course of business including their values as shown in the accounting records of the and the have been written down to an amount which they might be expected so to realise. At the date of this report, the directors are not aware of any circumstances which would render the values attributed to the current assets in the financial statements of the and the misleading. VALUATION METHODS At the date of this report, the directors are not aware of any circumstances which have arisen which render adherence to the existing methods of valuation of assets or liabilities of the and the misleading or inappropriate. CONTINGENT AND OTHER LIABILITIES At the date of this report, there does not exist: (a) any charge on the assets of the or the which has arisen since the end of the financial year which secures the liabilities of any other persons; or (b) any contingent liability of the or the which has arisen since the end of the financial year. Except for as disclosed in Note 28 to the financial statements, no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the directors, will or may substantially affect the ability of the or the to meet their obligations when they fall due Annual Report

18 CHANGE OF CIRCUMSTANCES At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements of the or the which would render any amount stated in the financial statements misleading. ITEMS OF AN UNUSUAL NATURE The results of the operations of the and the during the financial year were not, in the opinion of the directors, 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, in the opinion of the directors, to affect substantially the results of the operations of the or the for the financial year in which this report is made. SIGNIFICANT EVENTS The significant events during the year are as disclosed in Note 30 to the financial statements. CORPORATE EXERCISE On 15 March 2000, the obtained the approval from the Securities Commission for the following Corporate Exercise: (a) a Private Placement of 1,980,000 new ordinary shares of 1 each at a price to be determined on a later date; (b) (c) allocation for the Employees Share Option Scheme ( ESOS ) for the Directors and eligible Employees involving an issue of up to a maximum of 10% of the issued and paid-up share capital of the for a duration of five(5) years; and listing and quotation of the new ordinary shares to be issued pursuant to the Private Placement and ESOS on the Kuala Lumpur Stock Exchange. The proceeds from the Private Placement and ESOS will be utilised to partially repay the s existing bank borrowings and for working capital purposes. The Private Placement was not exercised and lapsed on 15 December EMPLOYEES SHARE OPTION SCHEME ( ESOS ) The Harvest Court Industries Berhad Employees Share Option Scheme ( ESOS ) is governed by the by-laws which was approved by the shareholders at the Extraordinary General Meeting held on 23 June 2000 and became effective on 15 July The main features of the ESOS are as follows: (a) Eligible persons are employees of the (including executive directors) who have been confirmed in the employment of the and have served for at least one year before the date of the offer. The eligibility for participation in the ESOS shall be at the discretion of the Option Committee appointed by the Board of Directors. (b) (c) (d) The total number of shares to be offered shall not exceed in aggregate 10% of the issued share capital of the at any point of time during the duration of the ESOS, which shall be in force for a period of five years from 15 July The option price for each share shall be the average of the mean market quotation of the shares as shown in the daily official list issued by the Kuala Lumpur Stock Exchange for the five trading days preceding the date of offer. No offer shall be made for less than 1,000 shares nor more than 350,000 shares to any eligible employee. 18

19 EMPLOYEES SHARE OPTION SCHEME ( ESOS ) (CONT D) (e) An option granted under ESOS shall be capable of being exercised by the grantee by notice in writing to the before the expiry of five (5) years from the date of the offer or such shorter period as may be specified in such offer. (f) The number of shares under option or the option price or both so far as the option remain unexercised may be adjusted following any variation in the issued share capital of the by way of a capitalisation or rights issue or a reduction, subdivision or consolidation of the s shares made by the. (g) The shares under option shall remain unissued until the option is exercised and shall on allotment rank pari passu in all respects with the existing shares of the at the time of allotment save that they will not entitle the holders thereof to receive any rights and bonus issues announced or to any dividend or other distribution declared to the shareholders of the as at a date which precedes the date of the exercise of the option. As at 31 December 2001, the movement in the share options, all of which will expire on 14 July 2005 is as follows: Outstanding Year of Option Price As As At 31 December Options Granted Per Share Granted Exercised ,000 20, , , , ,000 At the date of this report, the cumulative share options outstanding were not exercised. SHARE CAPITAL The did not issue any share during the financial year. DIRECTORS The directors who served since the date of the last report are: Ng Chuan Ng Teck Huat Ng Swee Kiat Ng Ai Cheng (f) Ng Swee Keong Yet Kiong Siang Sukhinderjit Singh Muker Ahmad Kamaruzaman Bin Mohamed Baria - appointed on In accordance with Section 129(2) of the Companies Act, 1965, Ng Chuan Ng Teck Huat retires and being eligible, offers himself for re-election. In accordance with the s Articles of Association, Ng Swee Kiat, Ng Ai Cheng, Sukhinderjit Singh Muker and Ahmad Kamaruzaman Bin Mohamed Baria retire at the forthcoming Annual General Meeting and, being eligible, offers themselves for re-election. DIRECTORS BENEFITS During and at the end of the financial year, no arrangement subsisted to which the is a party with the object of enabling directors of the to acquire benefits by means of the acquisition of shares in or debentures of the or any other body corporate, other than the share option to be granted pursuant to the ESOS. Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by the directors and related party transactions as disclosed in Notes 20, 21 and 29 respectively to the financial statements or the fixed salary of a full-time employee of the ) by reason of a contract made by the or a related corporation with the director or with a firm of which he is a member, or with a company in which he has a substantial financial interest Annual Report

20 DIRECTORS INTEREST According to the register of directors shareholdings, the interests of directors in office at the end of the financial year in shares in the and its related corporations during the financial year were as follows: Number of Ordinary Shares of 1 Each At 1 January At 31 December 2001/ Bought Sold 2001 date of appointment NG CHUAN NG TECK HUAT - direct indirect 8,164, ,164,200 NG SWEE KIAT - direct 495, ,000 - indirect 8,164, ,164,200 NG AI CHENG 1, ,000 NG SWEE KEONG - direct 495, ,000 - indirect 8,164, ,164,200 YET KIONG SIANG SUKHINDERJIT SINGH MUKER 10, ,000 AHMAD KAMARUZAMAN BIN MOHAMED BARIA 186, ,800 Cumulative Number of Options Outstanding Over Ordinary Shares At 1 January 31 December 2001 Granted Exercised 2001 NG CHUAN NG TECK HUAT 30,000 30,000-60,000 NG SWEE KIAT 26,000 26,000-52,000 NG AI CHENG 26,000 26,000-52,000 NG SWEE KEONG 26,000 26,000-52,000 By virtue of Section 6(A) of the Companies Act 1965, Ng Chuan Ng Teck Huat, Ng Swee Kiat, Ng Ai Cheng and Ng Swee Keong are deemed interested in the shares of all subsidiaries to the extent that the has an interest. AUDITORS K. C. Chia & Noor retire and have indicated their willingness to accept re-appointment. Signed on behalf of the Board in accordance with a resolution of the directors NG SWEE KIAT 22 nd April 2002 NG AI CHENG Kuala Lumpur 20

21 STATEMENT BY DIRECTORS We, NG SWEE KIAT and NG AI CHENG, being two of the directors of HARVEST COURT INDUSTRIES BERHAD, do hereby state that, in the opinion of the directors, the accompanying balance sheets of the and the as at 31 December 2001 and the statements of income, changes in equity and cash flows of the and the for the year then ended, together with the notes thereto, give a true and fair view of the state of affairs of the and the as at 31 December 2001 and of their results and their cash flows for the year then ended and have been properly drawn up in accordance with the provisions of Companies Act 1965 and applicable approved accounting standards in Malaysia. Signed on behalf of the Board in accordance with a resolution of the directors NG SWEE KIAT 22 nd April 2002 NG AI CHENG Kuala Lumpur STATUTORY DECLARATION I, NG SWEE KIAT, the director primarily responsible for the financial management of HARVEST COURT INDUSTRIES BERHAD, do solemnly and sincerely declare that the accompanying balance sheets of the and the as at 31 December 2001 and the statements of income, changes in equity and cash flows of the and the for the year then ended, together with the notes thereto, 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 Subscribed and solemnly declared by the ) abovenamed NG SWEE KIAT (NRIC NO. ) ) at Kuala Lumpur in ) Wilayah Persekutuan on 22 nd April 2002 ) NG SWEE KIAT Before me, D.SELVARAJ (W320) Commissioner for Oaths Annual Report

22 AUDITORS REPORT To the Shareholders of HARVEST COURT INDUSTRIES BERHAD We have audited the financial statements of HARVEST COURT INDUSTRIES BERHAD as at 31 December These financial statements are the responsibility of the s directors. 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 plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion: (a) the financial statements have been prepared in accordance with the provisions of the Companies Act 1965 and applicable approved accounting standards in Malaysia and give a true and fair view of: (i) (ii) the state of affairs of the and the as at 31 December 2001 and of their results and their cash flows for the year then ended; and the matter required by Section 169 of the Companies Act 1965 to be dealt with in the financial statements; and (b) the accounting and other records and the registers required by the Act to be kept by the and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act. We have considered the financial statements and the auditors report of a subsidiary of which we have not acted as auditors, as indicated in Note 4 to the financial statements, being financial statements that have been included in the consolidated financial statements. We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statements of the are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes. The auditors reports on the financial statements of the subsidiaries were not subject to any qualification in respect of subsidiaries incorporated in Malaysia, and did not include any comment made under subsection (3) of Section 174 of the Act. K. C. CHIA & NOOR (AF: 0922) CHIA KWONG CHOW Chartered Accountants 1127/1/04(J) Partner of the Firm Kuala Lumpur 22 nd April