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Focus Lumber Berhad (188710-V)

Mile 3, Jalan Masak, Kampung Ulu Patikang,Locked Bag 13 SM-88, 89009 Keningau,Sabah, Malaysia.Tel: 087-334761/4/6, 335457/8Fax: 087-335459Email: [email protected]

Annual Report

2012

Growth and Beyond Boundaries

Annual Report 2012

Focus Lumber Berhad (188710-V

)

02 CorporateProfile

03 CorporateInformation

04 CorporateMilestones

05 Director’sProfile

07 CorporateStructure

08 Chairman’sStatement

10 StatementonCorporateGovernance

20 GenderDiversityPolicy

22 SustainabilityPolicy

23 AuditCommitteeReport

26 StatementonRiskManagementandInternalControl

29 FinancialStatements

94 ListofProperties

95 AnalysisofShareholdings

98 NoticeofAnnualGeneralMeeting

Form of Proxy

CONTENTS

CORPORATEPROFILE

BACKGROUND

Inthe1980’s,agroupofTaiwanesebusinessmenledbyLinFongMing,LuChinTingandYangChiehChih,withtheinitiativesoftheMalaysiangovernmentindevelopingdownstreamtimberindustry,setupaplywoodmanufacturingcompanyinSabah,aMalaysianstaterichofnaturaltropicalforestresources.Thecompanywassubsequentlyconvertedtoapubliclimitedliabilitycompany,FocusLumberBerhad(“FLBHD”),on13November2009andlistedontheMainMarketofBursasecuritieson28April2011.TheprincipalactivitiesofFLBHDaremanufacturingandsaleofplywood,veneer,laminatedveneerlumberandinvestmentholding.Plywoodisthecoreproduct,generatingthebulkoftheGroup’srevenue.

Aspartof themanagementsuccessionplan, in recentyears, theGrouphasgroomedkeymanagementpersonnelwhohaveboughtinnewideastotheoperations.Theyarethechildrenofthefounders.

Overtheyearswiththevastexperienceandstrongtechnicalcapabilitiesandknowhow,theGrouphavebecome a major player in the plywood industry. The Group also emphases on environmentally friendlymanufacturinganditwasthefirstMalaysianplywoodmillcompanycertifiedasaCARBCertifiedManufactureron2October2008byProfessionalService Industries, Inc., aCARBauthorized thirdparty certifier. TheCARBstandardsregulateformaldehydeemissionsfromwoodproductssoldinCaliforniaorusedtomakefinishedgoodforsaleinCalifornia.Inaddition,itwasalsoawardedwiththeJASCertificationbytheMinistryofAgriculture,ForestryandFisheriesofJapan in2009asaprovenqualifiedplywoodmanufacturer.JASimposesstringentrequirementsonvariousaspectsofproductionprocess.TheJAScertificationsignifiesthe acknowledgement and endorsement of the high quality of the Group’s product which will enhancecustomers’confidence.

InJanuary2013,FLBHDwasaccreditedasacertifiedLaceyCompliantWoodProductsManufacturerbyBenchmarkInternational,LLC(BMH)undertheBMHLaceyComplianceVerification(LCV)Program,affirmingthelegalityofsourcedforestproductsusedinthemanufactureofFLBHDproducts.BMHisanindependentthirdpartyauditorswhoassistwoodproductsmanufacturersandimportersinprovingthattheirsourceofforestproductsarelegalasrequiredbytheLaceyAct,whichwaspassedbytheUSCongressin1900and2008,byaddingtheprotectionofplantsandplantproducts.ThiscertificationwillgiveourUScustomersahigherdegreeofconfidenceandhelpsprotectthemfromheavycivilandcriminalpenaltiesthatcanresultfromviolatingtheLaceyAct.

TheGroupiscommittedtoprotectingtheenvironment,caringforthecommunity’sneedsandprovidingasafeandhealthyworkingplaceinitspursuitofcommercialobjectivesforitsstakeholders.

FOCUS LUMBER BERHAD (188710-V)ANNUAL REPORT 2012


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CORPORATEINFORMATION

BOARD OF DIRECTORS

Aznam Bin MansorChairman / Independent Non-Executive Director

Lin Hao WenManaging Director

Lin Lieh MingExecutive Director

Yang SenExecutive Director

Wong Yoke NyenIndependent Non-Executive Director

Ng Tian MengIndependent Non-Executive Director

REGISTERED OFFICE AND FACTORYMile3,JalanMasak,KampungUluPatikangLockedBag13SM-88,89009Keningau,SabahTelNo:087-335457/335458/334761/334766FaxNo:087-335459Email:[email protected]

AUDITORSErnst&Young(AF:0039)Suite1-10-W1,10thFloorCPSTower,CentrePointSabahNo.1,JalanCentrePoint88000KotaKinabalu,Sabah

BRANCH OFFICELotNo.12A,JalanTelukLikasPOBoxNo.576,88856KotaKinabalu,SabahTelNo:088-393255/393257/393258FaxNo:088-393169Email:[email protected]

SHARE REGISTRARTricorInvestorServicesSdnBhdLevel17,TheGardensNorthTowerMidValleyCity,LingkaranSyedPutra59200KualaLumpurTelNo:03-22643883FaxNo:03-22821886

STOCK NAME / CODEFLBHD/5197

STOCK EXCHANGE LISITINGMainMarketofBursaMalaysiaSecuritiesBerhad

AUDIT COMMITTEEWongYokeNyen(Chairman)AznamBinMansor(Member)NgTianMeng(Member)

REMUNERATION COMMITTEENgTianMeng(Chairman)WongYokeNyen(Member)LinHaoWen(Member)

NOMINATION COMMITTEEAznamBinMansor(Chairman)WongYokeNyen(Member)NgTianMeng(Member)

COMPANY SECRETARIESWongWaiFoong(MAICSA7001358)WongPeirChyun(MAICSA7018710)

SENIOR INDEPENDENTNON- EXECUTIVE DIRECTORAznamBinMansorEmail:[email protected]

PRINCIPAL BANKERSAmIslamicBankBerhadArgoBank(Malaysia)BerhadCIMBBankBerhadOCBCBank(Malaysia)BerhadPublicBankBerhadRHBBankBerhad

WEBSITEwww.focuslumber.com.my





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CORPORATEMILESTONES

Year Description

1996 InstalledanewUrokoRotaryLathemachine,whichincreasesproductioncapacityandimprovesthequalityofourproduct.

2001 SuccessfullypenetratedintotheUSmarketandbecomethesolesupplierofplywoodtoIhloSales&ImportCo.,oneofour longtermcustomers fromtheUS.Ourplywoodwasmainlyused in theRV industryandhighvalueaddedfurnitureindustry.

2003 Forcontinuousqualityimprovement,weaddedaMeinanSBAL-4RotaryLathemachineintotheexistingproductionline.Theinstallationofthenewmachineryallowedustoreducemanpowerusedinproduction,increaseproductquality,andfacilitateproductionprocesses.

2005 Inordertocopewithincreasingdemand,weaddedupaSunwayfourdeckautomaticRollerDryer,whichenabledustoexpandourproductioncapacitytothenextlevel.

2006 SettingupofapowerplantunderUntungRiaSdn.Bhd.,asubsidiarywhollyownedbyus,whichreusesbulkwastetogeneratebiomassenergytosupplyelectricitytoourproductionplant,officeandhostel,whichhassignificantlyreducedourdependencyonfossilfuelforourproduction

2007 InstalledanewKikukawasandingmachinewithcomputer-aidedthicknessdetection.Thecomputerizedproductionprocessincreasedourqualitycontrolandproductionqualityfurther.

2008 AddedanotherupgradedMeinanRotaryLathemachineintoourproductionline.Theinstallationofthenewmachineryistocopewiththeincreasingmarketdemandforourplywoodandmeetourgoalforcontinuousqualityimprovement.

AcquiredtheBlueCubeformaldehydeemissionstestingmachinefromtheUSandestablishedourownsmallchamberroomforformaldehydeemissionstesting.Theinvestmentfurtherreflectsourcommitmenttowardsqualitycontrolandensuringwecontinuouslymeetourcustomer’sspecificationsandrequirements.

BecamethefirstMalaysianplywoodmillcertifiedasaCARBCertifiedManufacturerbyProfessionalServiceIndustries,inc.TheCARBstandardsregulate formaldehydeemissionsfromwoodproductssold inCaliforniaorusedtomakefinishedgoodsforsaleinCalifornia.

2009 Awarded the JAS certification by the Japan Plywood Inspection Corporation. JAS requires evaluation of theinternalstructureandmanagerialcompetencethatsupportstheprocessesthatoccuralongtheorganicchainandfurtherfocusesonverifyingthatsystemsare inplacefordecidingandensuringtheproductsmeettherelevantstandards(grading).

2010 StartedanewproductionlineforthemanufacturingandsaleofLVLaspartofourgrowthstrategy.

2011 SuccessfullylistedintheMainBoardofBursaMalaysiaSecuritiesBerhad.

2013 AccreditedasacertifiedLaceyCompliantWoodProductsManufacturerbyBenchmarkInternational,LLC(BMH)undertheBMHLaceyComplianceVerification (LCV)Programaffirmingthe legalityofsourcedforestproductsused inthemanufacturingofourproducts.

Sincethecommencementofourplant’soperationsinKeningauin1990,wehavebeenveryfocusedindoingwhatwe

excelat,i.e.plywoodmanufacturing.Ourmostsignificantachievementisthatwehavegrownfromstrengthtostrength

andbecomeamajorplywoodmanufacturerinMalaysia.Ourotherkeymilestonesareasfollows:-



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AznamBinMansor,ourChairmanandIndependentNon-ExecutiveDirector,wasappointedtoourBoardon24November2010.HeisamemberoftheAuditCommitteeandChairmanofNominationCommittee.

HeisanAdvocateandSolicitorbyprofessionhavingbeenadmittedasaBarristerofLawatLincoln’sInnin1984andwasadmittedandenrolledasanAdvocateandSolicitoroftheHighCourtofMalayain1986.UponhisadmissiontotheMalaysianBar,hecommencedhis legalpracticeandhehasbeenapartnerof hispresent legalpractice,LeeHishammudinAllen&Gledhillsince1993.Currently,heistheIndependentNon-ExecutiveChairmanandamemberoftheAudit,RemunerationandNominationCommitteeofMikroMSCBerhad,BenalecHoldingsBerhadandSentoriaGroupBerhad.Inaddition,heisaNon-ExecutiveDirectorofKnusfordBhd.

Aznam Bin MansorMalaysian,aged55Chairman/Independent Non-Executive Director

Lin Hao WenTaiwanese,aged35Managing Director

LinHaoWen,ourManagingDirector,wasappointedtoourBoardon 14 July 2009. He is also a member of the RemunerationCommittee.

He graduated from Yuan-Ze University, Taiwan with a BachelorDegree inComputerScience in2001andsubsequentlypursuedhis Master in Business Administration (Major in Supply ChainManagement)inEasternMichiganUniversity,USA.Hegraduatedin2006andstartedhiscareerwithourGroupin2007asAssistanttotheManagingDirectoroverseeingthebusinessoperationintheareaofproductionandmarketing.On1March2013,heisappointedastheManagingDirectoroftheCompanyandthereafter,heisalsoappointedasamemberoftheRemunerationCommittee.

DIRECTOR’SPROFILE

LinLiehMing,ourExecutiveDirector,wasappointedtoourBoardon14July2009.

Hehasmorethan20yearsofexperienceinthemarketingindustry.HejoinedourGroupastheHeadofPurchasingDepartmentin2003wherehewasinchargeofpurchasingandmanagingsuppliesforourGroup’soperations.PriortojoiningourGroup,hewasthemanageroftheAccountsandMarketingDepartmentinZhongHuaTelecom,aTaiwaneseGovernmentownedcorporation,for25years.

YangSen,ourExecutiveDirector,wasappointedtoourBoardon21July2011.

He holds a Bachelor Degree in International Trade from MingChuangUniversity,Taiwanin1994.PriortojoiningourGroup,hewasaMarketingManagerinaveneermanufacturingcompanyinCambodiafor5years.In2000,hejoinedourGroupastheSalesandMarketingManagerandwaspromotedtothepositionofHeadofSalesandMarketingDepartmentin2009.

Lin Lieh MingTaiwanese,aged55Executive Director

Yang SenTaiwanese,aged42Executive Director





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DIRECTOR’SPROFILE (Cont’d)

WongYokeNyen,our IndependentNon-ExecutiveDirector,wasappointed toourBoardon24November2010.He is theAuditCommitteeChairman,memberofNominationandRemunerationCommittees.

HeearnedhisBachelorDegreeinAccountancyfromCityofLondonPolytechnic,UnitedKingdom.HeisalsoagraduateoftheWhartonAdvanceManagementProgramfromtheWhartonBusinessSchooloftheUniversityofPennsylvania,USA.

In1981,hestartedhiscareerinBakerRooke,afirmofcharteredaccountants in London where he gained wide experience andexposureintheareasofauditing,accountancy,andmanagementconsultancy work. In 1983, he joined Aseambankers MalaysiaBerhad(nowknownasMaybankInvestmentBankBerhad).Heisaseasonedinvestmentbankerwithmorethan20yearsofdedicatedcorporatefinanceandinvestmentbankingexperience.HewastheExecutiveVicePresidentcumHeadofCorporateFinanceDivisioninAseambankersMalaysiaBerhad.

In 2004, he started WYNCORP Advisory Sdn Bhd, a privatecompany licensed to provide investment advisory services. Heis currently the Managing Director of WYNCORP Advisory SdnBhd. He is also an Independent Non-Executive Director of NewHoongFattHoldingsBerhad,XiDeLangHoldingsLimited,BenalecHoldingsBerhadandSentoriaGroupBerhad.

Ng Tian Meng, our Independent Non-Executive Director, wasappointedtoourBoardon24November2010.HeistheChairmanofRemunerationCommitteeandmemberofAuditandNominationCommittees.

Hehasapproximately29yearsofexperienceintheelectricalengineeringfield involving engineering consultancy, project management,operation,maintenance, testingandcommissioning.Hestartedhisengineering career and worked in Malayawata Steel Berhad as anElectricalEngineerbetweenMay1981andJuly1983.Subsequently,heworked in several companies involved in the steel, engineering,breweryandcameramanufacturingbusinesses.Currently,he istheManagingDirectorofJuruteraPerundingM&ENTM(S)SdnBhdandNTMEngineeringServicesSdnBhd.

Apartfromhisextensiveworkingexperience,heobtainedhisCouncilforNationalAcademicAwardBachelorofScienceDegree(Major inElectrical and Electronic Engineering) from Robert Gordon InstituteofTechnology,Scotland in1980.He isacorporatememberof theInstitutionofEngineersMalaysia, the InstituteofEngineersAustraliaandtheInstituteofElectricalEngineersUnitedKingdom.Inaddition,heisalsoaProfessionalEngineerregisteredwiththeBoardundertheInstitutionofEngineers,AustraliaandaCharteredEngineerregisteredwiththeEngineeringCouncil,UnitedKingdom.

Wong Yoke NyenMalaysian,aged54Independent Non-Executive Director

Ng Tian MengMalaysian,aged58Independent Non-Executive Director

Notes to Directors’ Profile:1. Lin Hao Wen and Lin Hao Yu, a major shareholder are brothers and they are sons of Lin Fong Ming, a major shareholder. 2. Yang Sen, Yang Hsi Hsien and Yang Wei Szu, both the major shareholders are sibling and they are sons of Yang Chien Chih, a major shareholder.3. Lin Lieh Ming is the nephew to Lu Chin Ting, a major shareholder.

Save as disclosed, none of the Directors have:i. any family relationship with any Director and/or major shareholder of the Company; andii. any conflict of interest with the Company; andiii. any conviction for offences within past 10 years other than traffic offences.



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CORPORATESTRUCTURE

UntungRiaisprincipallyinvolvedinthegeneration,transmission,distributionandsaleofelectricity.

UntungRiareusesbulkwastetogeneratebiomassenergytosupplyelectricitytoourGroup’soperations.

OurexistingcorporateGroupstrucureisasfollows:

FOCUS LUMBER BERHAD(188710-V)

100%

UNTUNG RIA SDN BHD(434316-V)





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Overview of the Industry

Fortheyear2012,theglobalplywoodmarketexperiencedamarginalrecoveryindemandasthereisacontinuousgrowthinthehousingdevelopmentinUSandtheemergingmarketsacross Asia, Latin America and Europe since the last fewyears.TheGrouprecordedan increasedsaleof itsplywoodto the US market by 27.9% in year 2012 as compared tothe previous year. We anticipate more sales will be rollingto the US plywood market in the year ahead. However, theGroupwillbecautiouslyoverlookingtheoverallperformanceas there will be more challenges and uncertainties such asthe inflated costing elements and the sluggish economiesfromtheprolongedEurozoneDebtCrisis,theUSDebtCeilingCrisisetc.

Financial Performance

For the year under review, the Group recorded revenue ofRM132.80million,an increaseof8.7%against thepreviousyearperformanceofRM122.15million.Theincreaseinsaleswascontributedbyabetterproductionyield in the financialyear 2012. Profit before taxation was RM 8.38 million, adeclineof45.3%tothepreviousyearofRM15.33millionwhilethenetprofitaftertaxationofRM11.60millionrepresentedadeclineof15.4%yearonyear.Thistranslatedtoearningspershareof11.2sen.Thedecline in theprofitswasmainlyduetotheincreaseoftherawmaterialcostandthefluctuationoftheUSDcurrency.

Equity attributable to owners of the Company grew fromRM110.47 million in the previous year to RM115.88 millionin2012whilereturnonequityfortheyearunderreviewwas10.2%.

Though the Group has been under significant pressure onthe increasing cost of production and the fluctuation ofthe USD currency during the financial year 2012, however,the Group has managed to achieve growth in its earningsmainlybenefitedbytheimprovingUShousingmarketandtheincreasingplywooddemand.

Corporate Social Responsibility

TheGroupacknowledgestheimportanceofCorporateSocialResponsibility (CSR)andhaspracticed itsCSR towards thefourapproaches,i.e.theworkplace,environment,communityand the stakeholders which are also in line with BursaMalaysia’s framework. Just to name a few, the Group hastakentheinitiativestowardsthefollowing:-

1.Promotingawork-lifebalanceamongitsemployeesthroughorganising recreational activities such as sports events,LabourDayFeast,etc;

2.Maintainingasafecleanandhealthyworkingenvironmentthroughstrengtheningsafetyawarenessandfacilitiessuchas fire prevention program and improved rescue facilitiesetc;

3.Conducting cleaning events and beautifying gardens andlandscapingwithinthecompoundofthepremises;

4.Investing in building human capital through learning andcapabilitydevelopment;

5.Reachingouttothesocietalneedsthroughdonationsandsponsorshipforcharitableeventsandfestiveseasons;

6.Recyclingofwoodwasteforbiomasspowergeneration;and

7.CarryingoutaLaceyComplianceVerification(LCV)Programin affirming the legality of sourced forest products usedin the manufacture of our products which will give highconfidencetoourcustomersundertherequirementoftheLaceyActfortheUSmarket.

DearShareholders,

OnbehalfoftheBoardofDirectors, IpresenttoyouFOCUS LUMBER BERHAD’sAnnualReportfortheyearended31December2012.

CHAIRMAN’SSTATEMENT



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CHAIRMAN’SSTATEMENT (Cont’d)

Prospects

Due to the implementation of the Minimum Wages Systemeffective from 1 January 2013, the Group’s operatingenvironment has becoming more challenging in order toremain profitable in the year ahead. However, the GroupexpectsthatthepricesofitsproductswillremaincompetitivesincetheUSemploymentmarkethasimprovedatthestartoftheyearandthegainsinhiringisontheheelsofareboundedhousing market, a pickup in consumer spending and morecorporate investment which will help bolster stability in USeconomy,ofwhichwill result inastrongerplywooddemandandbetterpricingintheplywoodmarket.

TheGroup,havingbeencertifiedbyawoodproductstestingand certifying company from US recently, will expand itsbusinessesfurtherintotheUSregionandwillpursueabiggershareinUSplywoodmarket.

Lookingforward,theGroupwillcontinuetoworkonimprovingoperational efficiency by enhancing the productivity of itsworkforceanditsequipmentfleet,andkeepingaclosewatchon costs and expenditures.With a healthy balance sheet,strong operating fundamentals and excellent leadership ofthe Board, our CEO/MD and management, I am confidentthattheGroupwillcontinuetodelivergrowthandsustainableshareholdersreturnsintheyearahead.

Appreciation

Firstofall,onbehalfoftheBoard,Iwishtoextendmyhighestappreciation and salutation to our former Directors, MessrsLu Chin Ting, Lin Fong Ming and Chen Chun Hsiung, whohave dedicated their most valuable time, hard work andcommitment during their services with the Group in strivingfortheGroup’slegendarysuccessintheindustry.

Meantime,ourmanagementteamandemployeesalsodeserveour appreciation for their strong dedication, hard work andcommitment thatwill enable theGroup to look forward toabrightfuture.

We would also like to express our appreciation to all ourvaluedcustomers,suppliers,businessassociates,bankersandregulatoryauthoritiesforthelong-standingsupport,confidenceand guidance to the Group. Above all, we thank you, ourshareholdersforyourcontinuoussupporttotheGroup.

Aznam Bin MansorChairman





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STATEMENT ON CORPORATE GOVERNANCE

TheBoardofDirectors(“TheBoard”)ofFocusLumberBerhadrecognizesthatgoodCorporateGovernanceisfundamentaltoprotectingshareholders’valueandthefinancialperformanceoftheGroup.

TheBoardiscommittedtoensurethatthehigheststandardsofCorporateGovernancearepracticedbytheCompanythroughouttheGroupandthattheGrouphasadopted,sofarasitispracticable,thePrinciplesandBestPracticessetoutintheMalaysianCodeonCorporateGovernance2012(“Code”).

ThefollowingstatementsetouttheGroup’scompliancewiththePrinciplesoftheCodeandhowtheBoardhascompliedwiththeBestPracticessetoutintheCode:-

(A) BOARD OF DIRECTORS

The Board and its Responsibilities

The Group is managed by an effective Board which leads and controls the Group in the discharge of its stewardshipresponsibilities.

TheBoardhas theoverall responsibility for the strategicdirection; formulationof objectivesand strategies; establishmentofpoliciesandprocedures;andexecutionandmonitoringofthebusinessactivitiesoftheGroup;riskmanagement;successionplanning;developingandimplementinginvestorsrelationsandreviewinginternalcontrols.

TheauthorityforimplementingtheBoard’spoliciesisdelegatedtotheManagingDirectorwithinthelimitsauthorizedbytheBoard.TheDirectorsbringtotheBoardawealthofbusinessandprofessionalexperiencerelevanttotheCompanyinthepursuitofitsbusinessobjectives.AbriefdescriptionofthebackgroundofeachDirectorispresentedintheDirectors’Profilesetoutinpages5to6ofthisAnnualReport.

TheGrouphasputinplaceaBoardCharterthatsetsout,amongothers,therolesoftheBoard,divisionofresponsibilitiesbetweentheChairmanandtheManagingDirector,structuresoftheBoardCommittees,proceduresfortheconductofmeetings,conflictofinterest,etc.MoreinformationontheBoardChartercanbefoundontheCompany’swebsiteatwww.focuslumber.com.my.

Board Composition and Balance

TheBoardasatthedateofthisstatementcomprisessix(6)members;-

(i) One(1)ManagingDirector (ii) Two(2)ExecutiveDirectors (iii) Three(3)IndependentNon-ExecutiveDirectors

TheBoardfulfilstherequirementtohaveatleastonethirdoftheBoardcomprisingofIndependentNon-ExecutiveDirectors.TheBoard is ledbyAznamBinMansorwho isan IndependentNon-ExecutiveChairman,andtheexecutivemanagementoftheGroup is ledbyLinHaoWenastheManagingDirectorof theGroup.Therolesandresponsibilitiesof theChairmanandtheManagingDirectorareclearlydefinedandseparatedsoastoensureabalanceofpowerandauthority.TheChairman isresponsiblefororderlyconductandworkingoftheBoard.TheManagingDirectorisresponsiblefortherunningofthebusiness,implementationofthepolicieslaiddownandmakingexecutiveandinvestmentdecisions.

TheIndependentNon-ExecutiveDirectorshavethenecessarycalibretoprovideindependentjudgementontheissuesofstrategy,performance,allocationof resourcesandstandardsofconducts.TheBoardhasalsoappointed theBoardChairmanas theSeniorIndependentNon-ExecutiveDirectortowhomconcernsofindividuals,internalandexternal,maybeconveyed.

Currently,thereisnowomenmemberontheBoard.Nevertheless,theBoardrecognisesthevalueofawomenmemberontheBoard.Assuch,towardsinachievingtheBoardDiversity,theBoardhasadoptedtheGenderDiversityPolicyandthispolicyisdisclosedonpages20to21ofthisannualreport.



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NoneoftheDirectorsoftheCompanyhadservednine(9)yearsattheBoard.

TheBoardissatisfiedthatthecurrentBoardcompositionisfairlybalancedtoensurethelong-terminterestoftheshareholders,employees,customersandotherstakeholders.

• Board Meetings and Supply of Information

TheBoardmeetsregularlyonaquarterlybasisandasandwhenrequired.Duringthefinancialyear,therewerefive(5)BoardMeetingsheldandtheattendancerecordisasfollows:-

Directorsareprovidedwiththenoticeofmeetingsandfullsetofboardpapersprior toeachBoardmeetingtoenablethem,tohavesufficienttimetodeliberateontheissuestoberaisedatthemeetingsandalsotoobtainfurtherexplanations,wherenecessary.Atthesemeetings,strategies,directionsandplanswerediscussedandappropriateactionswereadopted.

Duringthemeetings,theBoardshalldiscussanddeliberateonaformalagendaandscheduleofmattersarisingforapprovalandnotation.AlldeliberationsandconclusionoftheBoardareclearlyandaccuratelyrecordedbytheCompanySecretary.TheminutesarethenconfirmedbytheBoardandsignedascorrectrecordsofproceedingsbytheChairmanofthemeeting.

The Directors are also regularly updated and advisedonnew regulations, guidelinesor directives issuedbyBursaMalaysiaSecuritiesBerhad,SecuritiesCommissionandotherregulatoryauthorities.

All Board members have access to the advice and services of the appointed Company Secretary, namely Tricor CorporateServicesSdn.Bhd.toenablethemtodischargetheirdutieseffectively.TheappointmentoftheCompanySecretary isbasedonthecapabilityandproficiencydeterminedbytheBoard.Bothof thesecretariesappointedtoprovidetheirservicesto theCompanyarequalifiedandtheyaremembersoftheMalaysianInstituteofCharteredSecretariesandAdministrators(“MAICSA”).TheCompanySecretaryisresponsibleforensuringtheproceduresfortheBoardmeetingsarefollowedandthatapplicablerulesandregulationsarecompliedwith.DirectorsmayalsoobtainindependentprofessionaladvicewheneverdeemednecessaryattheCompany’sexpense.

• Board Committees

TheBoardgovernsthroughanumberofBoardCommittees,i.e.theAudit,NominationandRemunerationCommittees,towhichtherespectivedutiesandresponsibilitiesaredelegatedandgovernedbycleardefinedtermsofreference.TheChairmanofthevariouscommitteeswillreporttotheBoardtheoutcomeoftherespectivecommitteemeetingsandsuchreportsareincorporatedintheminutesoftheBoardmeeting.

Directors Total Number of Meetings attended by Directors

AznamBinMansor 5/5

WongYokeNyen 5/5

NgTianMeng 5/5

LinHaoWen 5/5

LinLiehMing 4/5

YangSen 5/5

LuChinTing (Retiredon26June2012) 2/3

LinFongMing (Resignedon24September2012) 4/4

ChenChunHsiung (Resignedon24September2012) 2/4

STATEMENT ON CORPORATE GOVERNANCE (Cont’d)





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(a) Audit Committee

TheAuditCommitteeconsistsofWongYokeNyen(ChairmanoftheCommittee),AznamBinMansorandNgTianMeng.ThemembershipoftheCommitteethatcomprisesofallnon-executivedirectors,withamajorityofthembeingindependentdirectorscomplieswithPara15.09(1)(b)oftheMainMarketListingRequirementofBursaMalaysiaSecuritiesBerhad.ThesummaryoftheactivitiesandtermsofreferenceoftheAuditCommitteearesetoutonpages23to25ofthisAnnualReport.

ThetermsofreferenceoftheAuditCommitteearealsosetoutintheCompany’swebsiteatwww.focuslumber.com.my.

(b) Nomination Committee

TheNominationCommittee(NC)wasestablishedtoassisttheBoardinidentifyingtherightcandidatewiththenecessaryskills, experience and competencies to be filled in the Board. The NCcomprises entirely Independent Non-ExecutiveDirectorsasfollows:-

• AznamBinMansor–Chairman• WongYokeNyen-Member• NgTianMeng-Member

WithMr.AznamBinMansorbeingtheChairmanoftheNC,theGrouphascompliedwithRecommendation2.1oftheCodewhichrecommendsthattheChairoftheNominationCommitteeshouldbetheSeniorIndependentDirectoridentifiedbytheBoard.

TheNCisempoweredbytheBoardthroughitstermofreferencetocarryoutthefollowingfunctions:-i) To recommend to theBoardofDirectors, candidates forall directorships tobe filledby theshareholdersor the

board;

ii) To consider, in making its recommendations, candidates for directorships proposed by the Managing Director/Chief Executive Officer and within the bounds of practicability, by any other senior executive or any director orshareholder;

iii) TorecommendtotheBoard,theDirectorstofilltheseatsonBoardCommittees;

iv) ToassessannuallytheeffectivenessoftheBoardasawhole,theCommitteesoftheBoardandthecontributionofeachexistingindividualDirectorandthereafter,recommenditsfindingstotheBoard;

v) ToensurethatallDirectorsundergoappropriateinductionprogramsandreceivecontinuoustraining;

vi) Toreviewannuallytherequiredmixofskillsandexperienceandotherqualities,includingcorecompetencieswhichNon-ExecutiveDirectorsshouldbringtotheBoardandthereafter,recommenditsfindingstotheBoard;

vii) ToapplytheprocessasdeterminedbytheBoardofDirectors,forassessingtheeffectivesoftheBoardasawhole,theCommitteesoftheBoard,andforassessingthecontributionofeachindividualDirector,includingIndependentNon-ExecutiveDirectors,aswellastheChiefExecutiveDirectorwhereallassessmentsandevaluationscarriedoutbytheCommitteeinthedischargeofallitsfunctionsshouldbeproperlydocumented.

TheNominationCommitteemeetsatleastonceayear.Duringthefinancialyearended31December2012,theNominationCommittee held two (2) meetings to review and evaluate Directors’ resignations and appointment and to carry outassessmenton the contributionandperformanceof each individualDirector and this includesanassessmenton theindependenceoftheIndependentDirectorsaswellasnotedthetrainingsattendedbyeachindividualDirector.TheBoardissatisfiedwiththecontributionandperformanceofeachindividualDirectoraswellastheIndependentDirectorscomplieswiththecriteriaofIndependencebasedontheMainMarketListingRequirementsofBursaMalaysiaSecuritiesBerhad.




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TheNominationCommitteealsodiscussedthesuccessionplanoftheGroup.

ThetermsofreferenceoftheNominationCommitteearesetoutintheCompany’swebsiteatwww.focuslumber.com.my.

(c) Remuneration Committee

TheRemunerationCommittee(RC)wasestablishedtoassisttheBoardindischargingitsdutiesandresponsibilities.ThecurrentcompositionoftheRCcompriseof

• NgTianMeng–Chairman• WongYokeNyen–Member• LinHaoWen–Member(Appointedon1March2013)• LinFongMing–Member(Resignedon24September2012)

TheRCisresponsibleforrecommendingtotheBoardtheremunerationoftheExecutiveDirectorsinallitsformsdrawingfromoutsideadviceasnecessaryandtheExecutiveDirectorsshallplaynopartindecisionsontheirownremuneration.

Determination of remuneration packages of Non-Executive Directors, including Non-Executive Chairman, shall bedeterminedbytheBoardofDirectorsasawholeandtheindividualsconcernedshouldabstainfromdiscussingtheirownremuneration.

TheGroupcomplieswithRecommendation2.3ofTheCodeasithasaRemunerationPolicy&ProceduretoprovideaframeworkforremunerationpaidtothemembersoftheBoard.

TheremunerationpolicyandprocedureprovidesaframeworkforremunerationpaidtothemembersoftheBoardandtheManagementTeamoftheCompany.TheremunerationpolicyrecognisestheneedfortheCompanytoattract,motivateandretainqualifiedmembersoftheBoard and the Management Team as well as to align the interests of the Board with the interests of the Company’sshareholders.

TheremunerationoftheBoardandtheManagementTeamshallbedesignedtosupportthestrategicgoalsoftheCompanyandtopromotevaluecreationforthebenefitoftheshareholdersoftheCompany.

Tothisendtheremunerationpolicyembodiesthefollowingprinciples:

• Providingfair,consistentandcompetitiverewardstoattractandretainhighcalibreexecutives.• MotivatingtheCompany’sdirectorsandexecutivestoachievesuperiorperformance.• AremunerationframeworkthatincorporatesbothshortandlongtermincentiveslinkedtoCompanyperformance

andtotalshareholderreturn.• Building a partnership between the Company and its directors and Management Team by encouraging share

ownershipintheCompanybydirectorsandManagementTeam.

Remuneration Procedure

TheBoardestablishestheRCanditoperatesunderaTermofReferenceapprovedbytheBoard.TheCommitteeoverseestheremunerationarrangementsfordirectorsandtheManagementTeamoftheCompanywithinthisPolicy.

TheRCassessestheappropriatenessofdirectorandManagementTeamremunerationonanannualbasisbyreferencetotheprinciplesofthisPolicy,overallemploymentmarketconditions,scopeofworkandtheCompany’sfinancialposition.

TheRCrecommendsremunerationforthedirectorsandManagementTeamtotheBoardforapproval.






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Remuneration of the Board

ThemembersoftheBoardshallberemuneratedwithfixedannualfeesapprovedbythegeneralmeetingandshallnotbecoveredbyincentiveprogramsorbeentitledtovariableremuneration.

AllmembersoftheBoardwhoarealsomembersofthecommitteesestablishedbytheBoardshallreceiveanadditionalfixedfeeasremunerationfortheircommitteework.Thesizeofthefixedcommitteefeedependsonthecompetencies,effortandscopeofworkrequiredbythemembersofeachcommittee.

TheBoard’sremunerationforthecurrentfinancialyearshallbeapprovedbythegeneralmeetingoftheCompany.

Thedirectorsare reimbursedexpensesandmaybesupported in their role throughCompanysponsoredprofessionaldevelopmentactivities,Companysuppliedtechnology,insuranceandindemnitycoverandotherbenefits.

Duringthefinancialyearended31December2012,one(1)meetingwasheld,whichwasattendedbyallmembersoftheRemunerationCommittee.TheRemunerationCommitteereviewedandrecommendedtotheBoardtheremunerationoftheDirectors.

Directors’ Remuneration

ThedetailsoftheDirectors’remunerationoftheCompanyforthefinancialyearended31stDecember2012aresetoutbelow:-


Executive Directors Non-Executive Directors Total RM RM RM

Salariesandotheremoluments 763,000 73,500 836,500Directors’fee - 180,000 180,000Definedcontributionplans 9,360 - 9,360

772,360 253,500 1,025,860

ThenumberofDirectorswhosetotalremunerationfallsintotherespectivebandsisasfollows:-

No. of DirectorsBand of Remuneration Executive Directors Non-Executive Directors

RM50,001toRM100,000 1 4RM100,001toRM150,000 - -RM150,001toRM200,000 3 -RM200,001toRM250,000 1 -RM250,001toRM300,000 - -



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Thedisclosureofdirectors’remuneration ismade inaccordancewithAppendix9C, item11of theBursaMalaysiaSecuritiesBerhadListingRequirements.ThismethodofdisclosurerepresentsadeviationfromtheBestPracticessetoutintheCode,whichsuggestsseparatedisclosureofeachdirector’sremuneration.TheBoardofDirectorsisoftheopinionthatseparatedisclosurewillimpingeuponthedirectors’rightofprivacy.

ThetermsofreferenceoftheRemunerationCommitteearesetoutintheCompany’swebsiteatwww.focuslumber.com.my.

• Appointment to the Board

TheBoardappointsitsmemberthroughaformalselectionprocesswhichisconsistentwiththeArticlesofAssociationoftheCompany.Thisprocesshasbeenreviewed,approvedandadoptedbytheBoardasawhole.NewappointeeswillbeconsideredandevaluatedbytheNCandthereafterrecommendedtotheBoard.TheCompanySecretarywillensurethatallappointmentsareproperlymadeandthatlegalandregulatoryobligationsaremet.

The NC also annual reviews the effectiveness of the Board as a whole, its committees and the contribution of eachindividualDirectoraswellastheManagingDirectoronanannuallybasis.TheNCwillensurethatallassessmentsandevaluationscarriedoutareproperlydocumentedandfiled.

• Re-election of DirectorsInaccordancewiththeArticlesofAssociationoftheCompany,one-third(1/3)oftheBoard,shallretirefromofficeandbeeligibleforre-electionateachAnnualGeneralMeeting.AlltheDirectors,includingtheManagingDirector,shallretirefromofficeonceatleastineverythree(3)yearsbutshallbeeligibleforre-election.

DirectorsappointedbytheBoardduringthefinancialyearshallbesubjecttoretirementandre-electionbyshareholdersinthenextAnnualGeneralMeetingheldfollowingtheirappointments.

Directorswhoareoforover theageofseventy (70)arerequiredtoretire fromofficeateveryAnnualGeneralMeetingandmayoffer themselves for re-appointment toholdofficeuntil theconclusionof thenextAnnualGeneralMeeting inaccordancewithSection129oftheCompaniesAct,1965.

• Directors’ Training

AllDirectorsoftheCompanyhadattendedandsuccessfullycompletedtheMandatoryAccreditationProgramme(“MAP”)asprescribedbyBursaMalaysiaSecuritiesBerhad.TheDirectorswillcontinuetoundergootherrelevanttrainingprogrammesandworkshopsasappropriate,tofurtherenhanceandupdatetheirskillsandknowledge.

TrainingprogrammesandworkshopsattendedbytheDirectorsduringthefinancialyearended31stDecember2012areasfollows:-





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Director Name of conferences, seminars Date and training programmes

AznamBinMansor •MalaysianCodeonCorporateGovernance2012 13June2012 •TransformingYourOrganizationsThroughtheYGeneration 18June2012

LinHaoWen •KeyAmendmentstoListingRequirements2011 18May2012 andCorporateDisclosureGuide2011 •BursaMalaysiaSustainabilityTrainingForDirectors 20November2012 &Practitioners

LinLiehMing •KeyAmendmentstoListingRequirements2011 18May2012 andCorporateDisclosureGuide2011 •BursaMalaysiaSustainabilityTrainingFor 20November2012 Directors&Practitioners

YangSen •KeyAmendmentstoListingRequirements2011 18May2012 andCorporateDisclosureGuide2011 •BursaMalaysiaSustainabilityTraining 20November2012 ForDirectors&Practitioners

WongYokeNyen LawGoverningDirectorsinaNutshell:Dutiesand 12June2012 LiabilitiesunderMalaysiaCompaniesAct1965

NgTianMeng •IntroductiontoCompetitionAct2010and 10April2012 ManagingHumanResourcesforCompanyDirectors, CompanySecretariesandSeniorManagement •KeyAmendmentstoListingRequirements2011 18May2012 andCorporateDisclosureGuide2011 •CorporateDirectorsTrainingProgrammeFundamental 22September2012 •BursaMalaysiaSustainabilityTrainingForDirectorsand 20November2012 Practitioners

Code of Conduct & Ethics, Whistleblowing Policy and Sustainability Policy

InlinewiththerecommendationsofTheCode,thecodeofconduct&ethics,whistleblowingpolicyandsustainabilitypolicyhavebeenestablishedandapprovedbytheBoardon11April2013.

Thecodeofconduct&ethicsandwhistleblowingpolicycanbeviewedattheCompany’swebsiteatwww.focuslumber.com.my.

TheCompany’ssustainabilitypolicycanbereferredonpage22ofthisannualreport.

TheCodeofConduct&EthicsdescribesthebehaviourexpectedofouremployeesandhowtheyrelatetoourBusinessPrinciplesandcorevalueswhilstthewhistleblowingpolicyisdesignedtocreateapositiveenvironmentinwhichemployeescanraisegenuineconcernswithoutfearofrecriminationandenablepromptcorrectiveactiontobetakenwhereappropriate.



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(B) SHAREHOLDERS

Dialogue between the Company and Investors

TheBoardrecognizestheimportanceofkeepingtheshareholdersandinvestorsinformedoftheGroup’sbusinessandcorporatedevelopments. Such information isdisseminatedvia theGroup’sannual reports,circulars toshareholders,quarterlyfinancialresultsandthevariousprescribedannouncementsmadetoBursaSecuritiesfromtimetotimeintheBursaSecurities’websiteatwww.bursamalaysia.com.

Inaddition,theGrouphasestablishedawebsiteatwww.focuslumber.com.mytoprovidepublicaccesstoGroupinformationandbusinessactivitiesincompliancewithPara9.21oftheMainMarketListingRequirementsofBursaMalaysiaSecuritiesBerhad.

TheCompanycomplieswithTheCodethroughtheestablishmentofInvestorsRelationsandShareholdersCommunicationPolicy.TheaimofthisPolicyistoproactivelycommunicatewiththeinvestorsandshareholderstoensurethatinvestors/shareholdersareinformedofbalancedandunderstandableinformationabouttheCompany(includingGroup’business,majordevelopmentsandfinancialperformance)inafactualandtimelymanner.

Inaddition, investorsandshareholdersarealsoable todirect theirqueries to theCompany through theCompany’[email protected]@tm.net.my.

Annual General Meeting (AGM)

TheAGMistheprincipalforumfordialogueandcommunicationwiththeshareholders.ShareholdersarenotifiedofthemeetingandprovidedwithacopyoftheCompany’sannualreporttwentyone(21)daysbeforethemeeting.AttheAGM,theshareholdershavedirectaccesstotheBoardandareencouragedtoparticipateintheopenquestionandanswersession.TheChairmanandDirectorsareinattendancetorespondtotheshareholders’queriesduringthemeeting.

Theexternalauditorsarealsopresenttoprovideprofessionalandindependentclarificationonissuesandconcernsraisedbytheshareholdersduringthemeeting.

TheBoardalsoencouragesshareholderstoparticipate,speakandvoteatgeneralmeetingsaswellastherighttodemandpollvotinginthegeneralmeetings.However,sofartheCompanyhadnotconductedanypollvotingastherewasnocontentiousissueraisedatthemeeting.

(C) ACCOUNTABILITY AND AUDIT

Financial Reporting

The Board aims to provide and present a balanced, clear and meaningful assessment of the Group’s financial position andprospects,primarilythroughtheannualfinancialstatements,quarterlyresultsannouncementstoBursaSecuritiesandtheannualreporttotheshareholders.TheAuditCommitteeassiststheBoardinscrutinizinginformationfordisclosuretoensureaccuracyandcompletenessandoverseetheGroup’sfinancialreportingprocessesandthequalityofitsfinancialreporting.

Risk Management and Internal Control

TheBoardacknowledgesitsresponsibilityformaintainingasoundriskmanagementframeworkandinternalcontrolsystem,whichprovidesreasonableassessmentofeffectiveandefficientoperations, internalfinancialcontrolsandcompliancewith lawsandregulationsaswellaswithinternalproceduresandguidelines.TheinternalcontrolsystemalsoaimsatidentifyingandmanaginganyrisksthattheCompanymayencounterinpursuitofitsbusinessobjectives.






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AStatementonRiskManagementandInternalControlwhichprovidesanoverviewofthestateofriskmanagementandinternalcontrolswithintheGroupisdisclosedonpages26to28ofthisAnnualReport.

Relationship with the Auditors

TheGroup’sindependentexternalauditorsfillanessentialrolebyenhancingthereliabilityoftheGroup’sfinancialstatementsandgivingassuranceofthereliabilitytousersofthesefinancialstatements.TheGrouphasalwaysmaintainedanindependent,formalandtransparentrelationshipwithitsexternalauditorsinseekingprofessionaladviceandensuringcompliancewiththeaccountingstandardsinMalaysia.ContinuouscommunicationsareheldwithexternalauditorsthroughoutthefinancialyearandtheexternalauditorsparticipateinAuditCommitteemeetingsatleasttwiceayear.Duringthefinancialyearended31December2012,theexternalauditorshavemettwicewiththeAuditCommitteewithoutthepresenceoftheManagement.

Inaddition,theexternalauditorshavealsodeclaredthattheyhavecompliedwiththeethicalrequirementsregardingindependencewithrespecttotheconductoftheauditoftheGroupandwerenotawareofanynon-auditservicesthathavecompromisedtheirindependenceasexternalauditorsoftheCompany.

(D) DIRECTORS’ RESPONSIBILITY STATEMENT IN RESPECT OF FINANCIAL STATEMENTS

TheDirectorsarerequiredbytheCompaniesAct,1965topreparethefinancialstatementsforeachfinancialyearsoastogiveatrueandfairviewofthestateofaffairsoftheGroupandtheCompanyasatendofthefinancialyearandofresultsandcashflowoftheGroupandtheCompanyforthefinancialyearthenended.

Inpreparingthefinancialstatements,theDirectorshavetakenthenecessarystepsandactionsasfollows:-

• Adoptedsuitableaccountingpoliciesandappliedthemconsistently;• Madejudgmentsandestimatesthatareprudentandreasonable;• CompliedwiththeapplicableapprovedFinancialReportingStandardsinMalaysiaandtheprovisionsoftheCompaniesAct,

1965;and• Preparedthefinancialstatementsonagoingconcernbasis.

TheDirectorshavetheresponsibilityinensuringthattheCompanykeepsaccountingrecordswhichdiscloseswithreasonableaccuracythefinancialpositionoftheGroupandtheCompanyandwhichenablethemtoensurethatthefinancialstatementscomplywiththeCompaniesAct,1965,BursaSecuritiesListingRequirementsandarepreparedinaccordancewiththeapplicableapprovedaccountingstandard.

TheDirectorshavetheoverallresponsibilitiesfortakingsuchstepsarereasonablyopentothemtosafeguardtheassetsoftheGroupandtopreventanddetectfraudandotherirregularities.

(E) COMPLIANCE STATEMENT

TheBoardconsidersthattheGrouphassubstantiallycompliedwiththeBestPracticesoftheCodethroughoutthefinancialyearended31stDecember2012.



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(F) ADDITIONAL COMPLIANCE INFORMATION

ThefollowingispresentedincompliancewiththeListingRequirementsofBursaSecurities:

1. Utilisation of Proceeds raised from Corporate Proposal

Asat31stDecember2012,theproceedsofRM7.32millionraisedbytheCompanyfromtheInitialPublicOffering(“IPO”)exercisehasbeenfullyutilizedfortheexpensesinconjunctionwiththelistingoftheCompanyontheMainMarketoftheBursaMalaysiaSecuritiesBerhadon28April2011andforworkingcapitaloftheGroup.

2. Non-audit Fees Payable to External Auditors

Theamountofnon-audit feespaidtotheexternalauditorsforthefinancialyearended31December2012amountedtoRM134,148.00forcorporatetaxcomplianceandadvisoryservicesrendered.

3. Sanctions and/ or Penalties

NosanctionsorpenaltieshavebeenimposedbyanyregulatorybodiesontheCompanyoritssubsidiary,theDirectorsormanagementoftheCompanyoritssubsidiary.

4. Material Contracts

Therewerenomaterialcontractssubsistingorentered intobytheCompanyand itssubsidiary involvinganyDirectorsorsubstantial shareholdersof theCompanyoranypersonsconnected toaDirectorormajorshareholderof theCompanyduringthefinancialyear.

5. Variation of Results

Therewerenovariationof10%ormorebetweentheauditedresultsforthefinancialyearended31December2012andtheunauditedresultspreviouslyannouncedbytheCompany.

Noprofitestimates,forecastorprojectionwasannouncedorpublishedbytheGroup.

6. Recurrent Related Party Transactions (RRPTs)

RRPTsenteredintotheCompanyandtheGrouparedisclosedunderNote25totheFinancialStatementsonpages81to82.

7. Share Buy-Back

TheCompanydidnotundertakeanysharebuybackexerciseduringthefinancialyear2012.

8. Options or Convertible Securities

Nooptionsorconvertiblesecuritieswereissuedduringthefinancialyear2012.

9. Depository Receipt Programme

TheCompanydidnotsponsoranyDepositoryReceiptProgrammeduringthefinancialyear2012.

10. Profit Guarantee

TherewerenoprofitguaranteegivenorreceivedbytheCompanyduringthefinancialyear.





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GENDER DIVERSITYPOLICY

TheBoard ispleasedtosetoutbelow itsapproachtoboardroomdiversityas recommendedbyTheMalaysianCodeonCorporateGovernance2012.

Policy

TheCompanyiscommittedtoactivelymanagingdiversityasameansofenhancingtheCompany’sperformancebyrecognisingandutilisingthecontributionofdiverseskillsandtalentfromitsdirectors,officersandemployees.

Diversityinvolvesrecognisingandvaluingtheuniquecontributionpeoplecanmakebecauseoftheirindividualbackgroundanddifferentskills,experiencesandperspectives, includingpersonswithco-existingdomesticresponsibilities.Diversitymayresultfromarangeoffactorsincludingage,gender,ethnicity,culturalbackgroundorotherpersonalfactors.TheCompanyvaluesthedifferencesbetweenitspeopleandthecontributionthesedifferencesmaketotheCompany.

1. Role of the Board

ItistheresponsibilityoftheBoardtofosteranenvironmentwhere:

(a) Individualdifferencesarerespected.(b) Theabilitytocontributeandaccessemploymentopportunitiesisbasedonperformance,skillandmerit.(c) Inappropriateattitudes,behavioursandstereotypesareconfrontedandeliminated.

2. Objectives

TheCompanyencouragesdiversityinemployment,andinthecompositionofitsBoard,asameansofensuringtheCompanyhasanappropriatemixofskillsandtalenttoconductitsbusinessandachievetheCompany’sgoals.

Specifically,theCompanywillprovideequalopportunitiesinrespecttoemploymentandemploymentconditions,including:

(a) Hiring:TheBoardwillensureappropriateselectioncriteriabasedondiverseskills,experienceandperspectives isusedwhenhiringnewstaff,includingBoardmembers.Jobspecifications,advertisements,applicationformsandcontractswillnotcontainanydirectorinferreddiscrimination.TheBoardisempoweredtoengageprofessionalconsultantstoassistinthehiringprocessbypresentingdiversecandidatestotheCompanyforconsideration.

(b) Training:AllinternalandexternaltrainingopportunitieswillbebasedonmeritandinlightofCompanyandindividualneeds.TheBoardwillconsiderseniormanagementtrainingandexecutivementoringprogramstodevelopskillsandexperiencetoprepareemployeesforseniormanagementandBoardpositions.

(c) Career Advancement: All decisions associated with career advancement, including promotions, transfers, and otherassignments,willmeettheCompany’sneedsandbedeterminedonskillandmerit.



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GENDER DIVERSITYPOLICY (Cont’d)

3. Achieving Diversity

TheCompanywillfocusontheparticipationofwomenonitsBoardandwithinseniormanagement.

However,theCompanywillnotrush into identifyingwomentobe includedin itsBoardandseniormanagementasthepersonselectedmustbeable tocontributepositively to theCompany.TheNominationCommitteehasbeen taskedby theBoard tocontinuouslylookforpeoplewithdiverseskillsandtalentthatcancontributetotheCompany.

4. Work environment

The Company will ensure that all officers, employees and contractors have access to a work environment that is free fromharassment.TheCompanywillnotpermitunwantedconductbasedonanofficer,employeeorcontractor’spersonalcircumstancesorcharacteristics.

TheBoardandseniormanagersarerequiredtoensurethattheworkenvironmentisharassmentfree,andtoensurethatcomplainantsorreportsofsexual,racialorotherharassmentaretreatedseriously,confidentially,andsympatheticallybytheCompany.

5. Reporting Responsibility

It istheresponsibilityofalldirectors,officersandemployeestocomplywiththeCompany’sGenderDiversityPolicyandreportviolationsorsuspectedviolationsinaccordancewiththisGenderDiversityPolicy.

AnybreachofcompliancewiththisGenderDiversityPolicyistobereporteddirectlytotheChairmanoftheBoardortheAuditCommitteeChairman.

ThecontactdetailsoftheChairmanoftheBoardandAuditCommitteeChairmanwhereconcernscanberaisedbytheemployeeareasfollow:

ChairmanoftheBoard AuditCommitteeChairman

Email:[email protected] Email:[email protected]

AnyonebreachingthisDiversityPolicymaybesubjecttodisciplinaryaction,includingtermination.

6. Summary Of Diversity Policy

TheBoardhasadoptedaDiversityPolicywhichdescribestheCompany’scommitmenttoensuringadiversemixofskillsandtalentexistsamongst itsdirectors,officersandemployees, toenhanceCompanyperformance.TheDiversityPolicyaddressesequalopportunities in thehiring, trainingandcareeradvancementofdirectors,officersandemployees.TheBoard is responsible formonitoringCompanyperformanceinmeetingtheDiversityPolicyrequirements.

AdoptedattheBoardofDirectorsmeetingon11April2013.





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SUSTAINABILITYPOLICY

TheGrouprecognizestheimportanceofsustainabilitydevelopmenttobusinessesandiscommittedtoensureattentionisgiventoenvironmental,socialandgovernanceaspectsasanintegralpartofitsbusinessoperations.TheGrouppracticesitsSustainabilityPolicyonthefollowingapproach:-

1. The WorkplaceTheGrouphastheresponsibilitytoprovideandmaintainasafeandhealthyworkingenvironmentforall itsemployees.Regularinspectionsandupgradeswerecarriedouttoensurecanteencleanliness,kitchenandseweragefacilitieswerewellmaintained.Foodhygienicstandardsareappliedtoensuresafetyandhealth intheworkplace.Recreationactivitiesareorganized,suchasfootballandbadminton tournamentsand festivecelebrations foremployeesandmanagementstaff toparticipateand interact.TheestablishmentofaSafetyandHealthCommittee for itsmanufacturing facilities is toensureasafeandconduciveworkingenvironmentforitsemployees.

2. The EnvironmentTheGroupiscommittedtoreduceenvironmentalimpactofitsoperationandfirmlybelievesinadoptingwastemanagementandrecyclingprogramssuchas thewoodwasteofwhichgenerated fromthemanufacturingprocessareusedasmaterial for thebiomasspowerplantforregenerationofelectricitysupplyforitsoperation.Wearealsocommittedtobeincompliancewiththerelevantlawsrelatingtosustainableforestry,emissionstandardsandplanteffluentmanagement.

3. The CommunityTheGrouphasbeencontributingtothecommunitybydonatingtotheneedyandcontributingtocharitableeventsorganizedbygovernmentalandprivateorganization.

4. The StakeholdersTheGroupwillcontinuewith its focus toenhanceandmaximize itsshareholders’value.TheGroupbelieves inenhancing therelationshipwithallstakeholdersincludingshareholders,regulatoryauthorities,businessassociates,bankersandsuppliers.



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AUDIT COMMITTEEREPORT

1. Constitution

TheAuditCommitteewasestablishedtoassist theBoardtoensurethat internalandexternalaudit functionsof theGroupareproperlyconducted,andthatrecommendationsarebeingappropriatelyimplemented.

Members

TheAuditCommitteecomprisesthefollowingmembers:-

Wong Yoke NyenChairman, Independent Non-Executive Director

Aznam Bin MansorMember,IndependentNon-ExecutiveDirector

Ng Tian MengMember,IndependentNon-ExecutiveDirector

2. Meetings Of The Committee

Duringthefinancialyearended31stDecember2012,five(5)AuditCommitteeMeetingswereheldandthedetailsofattendanceofthemeetingsareasfollows:-

Name Total Meetings attended by Directors Percentage Attendance

WongYokeNyen 5/5 100% AznamBinMansor 5/5 100% NgTianMeng 5/5 100%

Therepresentativesoftheexternalauditors,internalauditorsandotherofficersoftheGroupwerealsoinvitedtoattendandbriefthemembersonspecificissuesduringtheAuditCommitteeMeeting.

3. Summary Of Terms Of Reference Of The Audit Committee

3.1 Duties and Responsibilities of Audit committee

ThemaindutiesandresponsibilitiesoftheAuditCommitteeshallbe:-

(1) toconsidertheappointmentoftheexternalauditors,theauditfeeandanyquestionofresignationordismissal;

(2) todiscusswiththeexternalauditorbeforetheauditcommence,thenatureandscopeoftheaudit,andensureco-ordinationwheremorethanoneauditfirmisinvolved;

(3) toreviewthequarterlyandyear-endfinancialstatementsoftheboard,focusingparticularlyon:-

(a) anychangeinaccountingpoliciesandpractices;(b) significantadjustmentsarisingfromtheaudits;(c) thegoingconcernassumption;and(d) compliancewithaccountingstandardsandotherlegalrequirements.





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AUDIT COMMITTEEREPORT (Cont’d)

3. Summary Of Terms Of Reference Of The Audit Committee (continued)

3.1 Duties and Responsibilities of Audit committee (continued)

(4) todiscussproblemsandreservationsarisingfromtheinterimandfinalaudits,andanymattertheauditormaywishtodiscuss(intheabsenceofmanagementwherenecessary);

(5) toreviewtheexternalauditors’managementletterandmanagement’sresponses;

(6) toperformthefollowing,inrelationtotheinternalauditfunction:-

(a) reviewtheadequacyofthescope,functions,resourcesandcompetencyoftheinternalauditfunction,andthatithasthenecessaryauthoritytocarryoutitswork;

(b) reviewtheinternalauditprogrammeandresultsoftheinternalauditprocessand,wherenecessary,ensurethatappropriateactionsaretakenontherecommendationsoftheinternalauditfunction;

(c) reviewanyappraisalorassessmentoftheperformanceofmembersoftheinternalauditfunction;(d) approveanyappointmentorterminationofseniorstaffmembersoftheinternalauditfunction;and(e) take cognizance of resignations of internal audit staff members and provide the resigning staff member an

opportunitytosubmithisreasonsforresigning.

(7) toconsideranyrelated-partytransactionsthatmayarisewithinthecompanyorgroup;

(8) provideanopinionor viewon theeffectivenessof the related systemof riskmanagement and internal control inmanagingthesignificantrisks, includingexceptionreportingonsignificantriskmanagementandcontrol failuresorweaknesses,whichhaveamaterialimpactontheCompany’sfinancialposition;

(9) toconsiderthemajorfindingsofinternalinvestigationsandmanagement’sresponse;

(10) toreviewandmonitorthesuitabilityoftheExternalAuditor;

(11) tocarryoutanannualreviewoftheperformanceoftheExternalAuditor,includingassessmentofindependenceofExternalAuditorintheperformanceoftheirobligationsasExternalAuditors;and

(12) toconsiderothertopicsasdefinedbytheboard.

3.2 Rights of the Audit Committee

Inperformingofitsdutiesandresponsibilities,theAuditCommitteeshall:-

(1) havetheauthoritytoinvestigateanymatterwithinitstermsofreference;

(2) havetheresourceswhicharerequiredtoperformitsduties;

(3) havefullandunrestrictedaccesstoanyinformationpertainingtotheCompany;

(4) havedirectcommunicationchannelswiththeexternalauditorsandperson(s)carryingouttheinternalauditfunctionoractivity;

(5) beabletoobtain independentprofessionalorotheradviceattheexpenseoftheCompanyandtoinviteoutsiderswith relevantexperienceandexpertise toattend theAuditCommitteemeetings (if required)and tobrief theAuditCommittee;and

(6) beabletoconvenemeetingswiththeexternalauditors,theinternalauditorsorboth,excludingtheattendanceofotherdirectorsandemployeesoftheCompany,wheneverdeemednecessary.



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AUDIT COMMITTEEREPORT (Cont’d)

4. Summary Of Activities Of The Audit Committee

ThemainactivitiescarriedoutbytheAuditCommitteeduringthefinancialyearended31December2012wereasfollows:-

a. Reviewed the quarterly unaudited financial results of the Company and Group before recommending to the Board forconsiderationandapproval;

b. Reviewedtheexternalauditors’scopeofworkandauditplanforthefinancialyearended31December2012;

c. ReviewedwiththeInternalAuditor,theinternalauditplans,theinternalauditreports,theirevaluationoftheinternalcontrolsystemandthefollow-upontheauditfindings;

d. Reviewed relatedparty transactions entered intoby theGroupand theCompany to ensure that such transactionswereundertaken in line with the Group’s normal commercial terms and the internal control procedures with regards to suchtransactionaresufficient;

e. ReviewoftheauditedfinancialstatementsbeforerecommendingfortheBoardofDirectors’approval.

f. RecommendedtotheBoardonthememberstobeappointedforRiskManagementCommittee.

5. Internal Audit Functions

TheAuditCommitteeisawarethatanindependentandadequatelyresourcedinternalauditfunctionisessentialtoassistinensuringaneffectiveandadequateinternalcontrolsystemincompliancetotheMainMarketListingRequirementsofBursaMalaysiaSecuritiesBerhadunderParagraph9.25(1),PartAofAppendix9C(30).

TheGroup’sinternalauditfunctionisoutsourcedtoaprofessionalinternalauditserviceproviderandthisensuresthattheoutsourcedinternalauditor is independentas ithasno involvement intheoperationsoftheGroup.Theoutsourced internalauditorreportsdirectlytotheAuditCommittee.

TheAuditCommitteehasfullanddirectaccesstointernalauditors,reviewsthereportsonallauditsperformedandmonitorsitsperformance.TheAuditCommitteealsoinitsframeworkreviewstheadequacyofthescope,functions,competencyandresourcesoftheoutsourcedinternalauditfunctions.

TheoutsourcedinternalauditorcarriedoutinternalauditsonvariousoperationunitswithintheGroupbasedonarisk-basedauditplanapprovedbytheAuditCommittee.Basedontheseaudits,theoutsourced internalauditorsprovidedtheAuditCommitteewithperiodicreportshighlightingobservations,recommendationsandmanagementactionplanstoimprovethesystemofinternalcontrol.

Duringthefinancialperiod,asummaryofactivitiescarriedoutbytheoutsourcedinternalauditorinclude:-

• Developingtheinternalauditplanforyear2012• PerformedinternalauditreviewontheProduction,InventoryandHumanResourcefunctionoftheGroup.• Issued reports on the results of the internal audit review, identifying weaknesses with suggested recommendations for

improvementstoManagementforfurtheractiontoimprovethesystemofinternalcontrol.• Conducted followup reviews toensure that actionplansareproperly andappropriately implementedbyManagement in

accordancewiththeagreedtimeframe.• AttendedAuditCommittee’smeetingstotableanddiscusstheauditreports.

Duringtheyear,theAuditCommitteehasmetfour(4)timestocarryoutitsresponsibilityinreviewingtheinternalauditfunctionandtoassureitselfonthesoundnessofinternalcontrolsystem.Thecostsincurredfortheoutsourcedinternalauditfunctioninrespectofthefinancialyearended31December2012amountedtoRM35,500.





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STATEMENT ON RISK MANAGEMENTAND INTERNAL CONTOL

TheMalaysianCodeonCorporateGovernancepromulgates,inter-alia,theneedforlistedcompaniestomaintainasoundriskmanagementframeworkandinternalcontrolsystemtosafeguardshareholders’investmentandGroup’sassets.TheBoardofDirectors(“Board”)ofFocusLumberBerhad ispleased topresent theStatementonRiskManagementand InternalControl (the “Statement”)which is incompliancewithparagraph15.26(b)ofBursaMalaysiaSecuritiesBerhad’sMainMarketListingRequirementsandhastakenintoaccounttheguidelinesmentionedintheStatementonRiskmanagementandInternalControl(GuidelinesforDirectorsofListedIssuers).

Board’s Responsibility

TheBoardacknowledgesitsresponsibilityforensuringtheadequacyandeffectivenessoftheGroup’sRiskManagementandInternalControlSystem.This includes theestablishmentofanappropriatecontrolenvironmentand riskmanagement framework,processesandstructuresandcontinuallyreviewingtheadequacyandintegrityofthesaidsystemstosafeguardshareholders’investmentandtheGroup’sassets.

Whilstacknowledgingitsresponsibilities,theBoardisawareofthelimitationsthatareinherentinanysystemsofinternalcontrolandriskmanagementwheresuchsystemsbeingdesignedtomanage,ratherthaneliminate,therisksthatmayimpedetheachievementoftheGroup’sbusinessobjectives.Accordingly,itcanonlyprovideareasonable,butnotabsoluteassuranceagainstmaterialmisstatementorlosses,fraudorbreachesoflawsorregulations.

TheBoardisresponsibleforsettingthebusinessdirectionandforoverseeingtheconductoftheGroup’soperationsthroughvariousBoardCommittees.ThisrepresentsthemainplatformbywhichtheGroup’sperformance,risksandconductaremonitored.TheGroupmonitorstheeffectivenessoftheinternalcontrolsystembyacontinuousprocessofimprovingtheinternalcontrolsystemthroughperiodicinternalauditreviews.TheprocessisregularlyreviewedbytheAuditCommitteeandtheoutcomeofthereviewisreportedtotheBoard.

For the financial yearunder review, theBoardhas receivedassurance from theManagingDirector andFinancialController that theGroup’sriskmanagementandinternalcontrolsystemisoperatingadequatelyandeffectively,inallmaterialaspects,basedontheriskmanagementandinternalcontrolsystemoftheGroup.

TheBoardisoftheviewthattheGroup’sriskmanagementandinternalcontrolframeworkandsystemsisinplaceforthefinancialyearunderreviewanduptothedateofissuanceofthefinancialstatementsforidentifying,evaluatingandmanagingsignificantrisksfacedorpotentiallytobeencounteredbytheGroup.Risk Management Framework

TheBoardfirmlybelieves thataneffective riskmanagement iscritical to theGroup’scontinuedprofitabilityand theenhancementofshareholdervalue.Therefore,theBoardhassourcedforanexternalconsultanttoassistindevelopingaformalenterpriseriskmanagementframeworkthatallowsamorestructuredandfocusedapproachtoidentify,evaluate,monitorandreporttheprincipalrisksthataffecttheachievementoftheGroup’sbusinessobjectives.

TheEnterpriseRiskManagement(ERM)Frameworkwouldincludethefollowing:

• ConductriskawarenesssessiontocreateacultureofriskawarenessamongManagementandStaff• Establish the risk management structure to be adopted based on the organisation structure and operations of respective

departments• Establishriskparameters(impact&likelihood)andriskappetite• EstablishriskprofilebasedontheidentificationofrisksimpactingFLBanditscorrespondingcontrols• Developriskmanagementpolicy



��



Control Environment

InstrivingtooperateasoundsystemofriskmanagementandinternalcontrolthatdrivestheGrouptowardsachievingitsgoals,theBoardofDirectorshasputinplaceanorganisationstructurewithformallydefinedlinesofresponsibilityanddelegationofauthority.

The Board is responsible towards the overall effectiveness of the Group’s risk management and internal control systems throughestablishing,directingandsupervisingtheoperationofariskframeworkthatadequatelymanagesthevariousrisksfacedbytheGroupwhilst theAuditCommittee isoverall responsible forprovidingassuranceto theBoardofDirectors,asan independentparty,on theeffectivenessoftheinternalcontrolsystemsandriskmanagementintheGroup.

The daily running of business is entrusted to the Managing Director, Executive Director and the management team. This close-to-operationsmanagementstyleenablestimelyidentificationandreportingofsignificantmatters.

InordertoinculcateastandardofethicalbehaviourfordirectorsandemployeesoftheGroup,aCodeofConductandCodeofEthicshavebeenestablishedandcommunicatedtoalldirectorsandemployeesoftheGroup.

TheGroupalsomaintainsaWhistleblowingPolicytoallowemployeestoraiseconcernswithoutfearofreprisalsonpossibleimproprietiesinmattersoffinancial reporting,complianceandothermalpracticesattheearliestopportunity,and inanappropriateway.UndertheGroup’sWhistleblowingPolicy,theemployeeshouldimmediatelyreportanymalpracticethatexistsintheworkplacetohis/hermanager.However,iftheemployeefeelsreluctanttodoso,theemployeehasanoptiontoeitherreportittotheChairmanoftheBoardortheAuditCommitteeChairman.

TheGroup’sCodeofConduct,CodeofEthicsandWhistleblowingPolicyarepublishedintheCompanywebsiteatwww.focuslumber.com.my

Internal Control

TheGrouphasanestablishedinternalcontrolstructureandiscommittedtoevaluating,enhancingandmaintainingthestructuretoensureeffectivecontrolovertheGroup’sbusinessoperationsandtosafeguardtheGroup’sassets.

Thekeyelementsofthestructureinclude:

• Control Activities

TheGroup’spracticeisguidedbytheCodeofConductandCodeofEthics.MajordecisionsthatrequiretheapprovaloftheBoardareonlymadeafterdetailedappraisalandreview.ProposalsformajorcapitalexpenditureandnewinvestmentbytheGrouparereviewedandapprovedbytheBoardofDirectors.

Standardoperatingproceduresareestablishedtoensureoperationsundertakenbystaffareproperlyguidedforcompleteandaccuratereporting.

• Information and communication

TheAuditCommitteeholdsmeetingstodeliberateonthefindingsandrecommendationsforimprovementbytheinternalauditoronthestateoftheinternalcontrolsystemandreportstotheBoard.TheAuditCommitteealsoreviewsanddeliberatesonanymattersrelatingtointernalcontrolhighlightedbytheExternalAuditorsinthecourseoftheirstatutoryauditofthefinancialstatementsoftheGroup.

Quarterly performance reports provide Management and the Board of Directors with information on financial performance and keybusinessindicators.

• Monitoring

PeriodicreviewsofadequacyandintegrityofselectedareasofinternalcontrolsystemarecarriedoutbytheinternalauditfunctionandresultsofsuchreviewsarereportedtotheAuditCommittee.TheinternalauditfunctiontherebyprovidesindependentassuranceontheareasreviewedbytheinternalauditfunctiontotheBoardontheeffectivenessoftheGroup’sinternalcontrolsystem.

STATEMENT ON RISK MANAGEMENTAND INTERNAL CONTOL (Cont’d)





��

Conclusion

Forthefinancialyearunderreviewanduptothedateofissuanceofthefinancialstatements,theBoardissatisfiedwiththeadequacyandeffectivenessoftheGroup’sriskmanagementandinternalcontrolsystem.TherewerenomateriallossesthathavearisenfromanyinadequacyorfailureoftheGroup’ssystemofinternalcontrolwhichrequiredadditionaldisclosureinthefinancialstatements.

Theimprovementofthesystemofinternalcontrolsisanon-goingprocessandtheBoardmaintainson-goingcommitmenttostrengthentheGroup’scontrolenvironmentandprocesses.Review of the Statement by External Auditors

Asrequiredbyparagraph15.23oftheMainMarketListingRequirementsofBursaMalaysiaSecuritiesBerhad,theexternalauditorshavereviewedthisStatement.TheirreviewwasperformedinaccordancewithRecommendedPracticeGuide(RPG)5:GuidanceforAuditorsontheReviewofDirectors’StatementonInternalControl,issuedbytheMalaysianInstituteofAccountants.Basedontheirreview,theexternalauditorshavereportedtotheBoardthatnothinghascometotheirattentionthatcausesthemtobelievethatthisstatementisinconsistentwiththeirunderstandingoftheprocesstheBoardhasadoptedinthereviewoftheadequacyandintegrityofinternalcontroloftheGroup.RPG5doesnotrequiretheexternalauditorsto,andtheydidnot,considerwhetherthisstatementcoversallriskandcontrols,ortoformanopinionontheeffectivenessoftheGroup’sriskandcontrolprocedures.

ThisStatementismadeinaccordancewiththeresolutionoftheBoardofDirectorsdated11April2013.

STATEMENT ON RISK MANAGEMENTAND INTERNAL CONTOL (Cont’d)



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30 Directors’Report

34 StatementbyDirectors

34 StatutoryDeclaration

35 IndependentAuditors’Report

37 StatementsofComprehensiveIncome

38 StatementsofFinancialPosition

40 StatementsofChangesInEquity

42 StatementsofCashFlows

44 NotestotheFinancialStatements

93 SupplementaryInformation

FINANCIAL STATEMENTS





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DIRECTORS’REPORT

ThedirectorshavepleasureinpresentingtheirreporttogetherwiththeauditedfinancialstatementsoftheGroupandoftheCompanyforthefinancialyearended31December2012.

Principal activities

TheprincipalactivitiesoftheCompanyarethemanufacturingandsaleofplywood,veneer, laminatedveneer lumber,andinvestmentholding.

Theprincipalactivitiesofthesubsidiaryarethegeneration,transmission,distributionandsaleofelectricity.

Therehavebeennosignificantchangesinthenatureoftheprincipalactivitiesduringthefinancialyear.

Results

Group Company RM RM

Profitnetoftax 11,600,226 10,462,367

There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the financialstatements.

In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year were notsubstantiallyaffectedbyanyitem,transactionoreventofamaterialandunusualnature.

Dividends

TheamountsofdividendspaidbytheCompanysince31December2011wereasfollows:

RMInrespectofthefinancialyearended31December2011:

Interimtaxexempt(single-tier)dividendof12%,on103,200,000ordinaryshares,declaredon15December2011andpaidon16January2012 6,192,000Inrespectofthefinancialyearended31December2012:

Interimtaxexempt(single-tier)dividendof12%,on103,200,000ordinaryshares,declaredon19November2012andpaidon4February2013 6,192,000

12,384,000



�0



DIRECTORS’REPORT (Cont’d)

Directors

ThenamesofthedirectorsoftheCompanyinofficesincethedateofthelastreportandatthedateofthisreportare:

AznamBinMansorLinHaoWenLuChinTing (Retiredon26June2012)YangSenWongYokeNyenNgTianMengLinFongMing (Resignedon24September2012)ChenChunHsiung (Resignedon24September2012)LinLiehMing

Directors’ benefits

Neitherattheendofthefinancialyear,noratanytimeduringthatyear,didtheresubsistanyarrangementtowhichtheCompanywasaparty,wherebythedirectorsmightacquirebenefitsbymeansoftheacquisitionofsharesinordebenturesoftheCompanyoranyotherbodycorporate.

Sincetheendofthepreviousfinancialyear,nodirectorhasreceivedorbecomeentitledtoreceiveabenefit(otherthanbenefitsincludedintheaggregateamountofemolumentsreceivedordueandreceivablebythedirectorsorthefixedsalaryofafull-timeemployeeoftheCompanyasshowninNote10tothefinancialstatements)byreasonofacontractmadebytheCompanyorarelatedcorporationwithanydirectororwithafirmofwhichthedirectorisamember,orwithacompanyinwhichthedirectorhasasubstantialfinancialinterest,exceptasdisclosedinNote25tothefinancialstatements.

Directors’ interests

Accordingtotheregisterofdirectors’shareholdings,theinterestsofdirectorsinofficeattheendofthefinancialyearinsharesintheCompanyanditsrelatedcorporationduringthefinancialyearwereasfollows:

Number of ordinary shares of RM0.50 each 1.1.2012 Acquired Sold 31.12.2012

Direct interest: OrdinarysharesoftheCompany AznamBinMansor 9,087,000 - (9,087,000) - LinHaoWen 6,313,550 - - 6,313,550 LinLiehMing 5,050,840 - - 5,050,840 YangSen 3,156,776 - - 3,156,776





�1


Directors’ interests (continued)

Number of ordinary shares of RM0.50 each 1.1.2012 Acquired Sold 31.12.2012

Indirect interest: Ordinary shares of the Company

LinHaoWen 12,627,100 - - 12,627,100 @YangSen 9,470,328 - - 9,470,328 @

@ Interestbyvirtueofsharesheldbyclosefamilymembers.

ByvirtueofLinHaoWen’sandYangSen’sdeemedinterestsinthesharesoftheCompanyunderSection6AoftheCompaniesAct,1965,theyaredeemedtohaveinterestsinthesharesofthesubsidiaryoftheCompanytotheextentthatCompanyhasaninterest.

NoneoftheotherdirectorsinofficeattheendofthefinancialyearhadanyinterestinsharesintheCompanyoritsrelatedcorporationduringthefinancialyear.

Other statutory information

a) BeforethestatementsofcomprehensiveincomeandstatementsoffinancialpositionoftheGroupandoftheCompanyweremadeout,thedirectorstookreasonablesteps:

i) toascertainthatproperactionhadbeentakeninrelationtothewritingoffofbaddebtsandthemakingofprovisionfordoubtfuldebtsandsatisfiedthemselvesthattherewerenoknownbaddebtsandthatnoprovisionfordoubtfuldebtswasnecessary;and

ii) toensurethatanycurrentassetswhichwereunlikelytorealisetheirvaluesasshownintheaccountingrecordsintheordinarycourseofbusinesshadbeenwrittendowntoanamountwhichtheymightbeexpectedsotorealise.

b) Atthedateofthisreport,thedirectorsarenotawareofanycircumstanceswhichwouldrender:

i) itnecessarytowriteoffanybaddebtsortomakeanyprovisionfordoubtfuldebtsinrespectofthefinancialstatementsoftheGroupandoftheCompany;and

ii) thevaluesattributedtocurrentassetsinthefinancialstatementsoftheGroupandoftheCompanymisleading.



��




Other statutory information (continued)

c) Atthedateofthisreport,thedirectorsarenotawareofanycircumstanceswhichhavearisenwhichwouldrenderadherencetotheexistingmethodofvaluationofassetsorliabilitiesoftheGroupandoftheCompanymisleadingorinappropriate.

d) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financialstatementsoftheGroupandoftheCompanywhichwouldrenderanyamountstatedinthefinancialstatementsmisleading.

e) Atthedateofthisreport,theredoesnotexist:

i) anychargeontheassetsoftheGrouporoftheCompanywhichhasarisensincetheendofthefinancialyearwhichsecurestheliabilitiesofanyotherperson;or

ii) anycontingentliabilityoftheGrouporoftheCompanywhichhasarisensincetheendofthefinancialyear.

f) Intheopinionofthedirectors:

i) nocontingentorotherliabilityhasbecomeenforceableorislikelytobecomeenforceablewithintheperiodoftwelvemonthsaftertheendofthefinancialyearwhichwillormayaffecttheabilityoftheGrouporoftheCompanytomeettheirobligationswhentheyfalldue;and

ii) noitem,transactionoreventofamaterialandunusualnaturehasarisenintheintervalbetweentheendofthefinancialyearandthedateofthisreportwhichislikelytoaffectsubstantiallytheresultsoftheoperationsoftheGrouporoftheCompanyforthefinancialyearinwhichthisreportismade.

Independent auditors

Theauditors,Ernst&Young,haveexpressedtheirwillingnesstocontinueinoffice.

SignedonbehalfoftheBoardinaccordancewitharesolutionofthedirectorsdated11April2013.

Lin Hao Wen Lin Lieh Ming





��

STATEMENT BYDIRECTORS

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

We,LinHaoWenandLinLiehMing,beingtwoofthedirectorsofFocusLumberBerhad,doherebystatethat,intheopinionofthedirectors,theaccompanyingfinancialstatementssetoutonpages37to92giveatrueandfairviewofthefinancialpositionoftheGroupandoftheCompanyasat31December2012andoftheirfinancialperformanceandthecashflowsfortheyearthenendedinaccordancewithMalaysianFinancialReportingStandards,InternationalFinancialReportingStandardsandtherequirementsoftheCompaniesAct1965inMalaysia.

TheinformationsetoutinNote33tothefinancialstatementshavebeenpreparedinaccordancewiththeGuidanceonSpecialMatterNo.1,DeterminationofRealisedandUnrealisedProfitsorLosses intheContextofDisclosurePursuant toBursaMalaysiaSecuritiesBerhadListingRequirements,asissuedbytheMalaysianInstituteofAccountants.

SignedonbehalfoftheBoardinaccordancewitharesolutionofthedirectorsdated11April2013.

LinHaoWen LinLiehMing

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

I,LinHaoWen,beingtheDirectorprimarilyresponsibleforthefinancialmanagementofFocusLumberBerhad,dosolemnlyandsincerelydeclare that the accompanying financial statements set out on pages 37 to 92 are in my opinion correct, and I make this solemndeclarationconscientiouslybelievingthesametobetrueandbyvirtueoftheprovisionsoftheStatutoryDeclarationsAct,1960.

SubscribedandsolemnlydeclaredbytheabovenamedLinHaoWenatKotaKinabaluintheStateofSabahon11April2013 LinHaoWen

Beforeme,

STATUTORY DECLARATION



��



INDEPENDENT AUDITORS’REPORT

Report on the financial statements

WehaveauditedthefinancialstatementsofFocusLumberBerhad,whichcomprisethestatementsoffinancialpositionasat31December2012oftheGroupandoftheCompany,andthestatementsofcomprehensiveincome,statementsofchangesinequityandstatementsofcashflowsoftheGroupandoftheCompanyfortheyearthenended,andasummaryofsignificantaccountingpoliciesandotherexplanatoryinformation,assetoutonpages37to92.

Directors’ responsibility for the financial statements

ThedirectorsoftheCompanyareresponsibleforthepreparationoffinancialstatementssoastogiveatrueandfairviewinaccordancewithMalaysianFinancialReportingStandards,InternationalFinancialReportingStandardsandtherequirementsoftheCompaniesAct,1965 inMalaysia.Thedirectorsarealso responsible for such internal control as thedirectorsdetermine isnecessary toenable thepreparationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.

Auditors’ responsibility

Ourresponsibilityistoexpressanopiniononthesefinancialstatementsbasedonouraudit.WeconductedourauditinaccordancewithapprovedstandardsonauditinginMalaysia.Thosestandardsrequirethatwecomplywithethicalrequirementsandplanandperformtheaudittoobtainreasonableassuranceaboutwhetherthefinancialstatementsarefreefrommaterialmisstatement.

Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthefinancialstatements.Theproceduresselecteddependonourjudgment,includingtheassessmentofrisksofmaterialmisstatementofthefinancialstatements,whetherduetofraudorerror.Inmakingthoseriskassessments,weconsiderinternalcontrolrelevanttotheentity’spreparationoffinancialstatementsthatgiveatrueandfairviewinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheentity’sinternalcontrol.Anauditalsoincludesevaluatingtheappropriatenessoftheaccountingpoliciesusedandthereasonablenessofaccountingestimatesmadebythedirectors,aswellasevaluatingtheoverallpresentationofthefinancialstatements.

Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.

Opinion

Inouropinion, thefinancialstatementsgivea trueand fairviewof thefinancialpositionof theGroupandof theCompanyasat31December2012andof their financial performanceandcash flows for the year then ended in accordancewithMalaysianFinancialReportingStandards,InternationalFinancialReportingStandardsandtherequirementsoftheCompaniesAct,1965inMalaysia.

Report on other legal and regulatory requirements

InaccordancewiththerequirementsoftheCompaniesAct,1965inMalaysia,wealsoreportthefollowing:

a) Inouropinion,theaccountingandotherrecordsandtheregistersrequiredbytheActtobekeptbytheCompanyanditssubsidiaryhavebeenproperlykeptinaccordancewiththeprovisionsoftheAct.

b) WearesatisfiedthatthefinancialstatementsofthesubsidiarythathavebeenconsolidatedwiththefinancialstatementsoftheCompanyareinformandcontentappropriateandproperforthepurposesofthepreparationoftheconsolidatedfinancialstatementsandwehavereceivedsatisfactoryinformationandexplanationsrequiredbyusforthosepurposes.

c) Theauditors’ reporton the financial statementsof thesubsidiarywasnot subject toanyqualificationanddidnot includeanycommentrequiredtobemadeunderSection174(3)oftheAct.





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INDEPENDENT AUDITORS’REPORT (Cont’d)

Other reporting responsibilities

ThesupplementaryinformationsetoutinNote33onpage93isdisclosedtomeettherequirementofBursaMalaysiaSecuritiesBerhadandisnotpartofthefinancialstatements.ThedirectorsareresponsibleforthepreparationofthesupplementaryinformationinaccordancewithGuidanceonSpecialMatterNo.1,DeterminationofRealisedandUnrealisedProfitsorLossesintheContextofDisclosurePursuanttoBursaMalaysiaSecuritiesBerhadListingRequirements,asissuedbytheMalaysianInstituteofAccountants(“MIAGuidance”)andthedirectiveofBursaMalaysiaSecuritiesBerhad.Inouropinion,thesupplementaryinformationisprepared,inallmaterialrespects,inaccordancewiththeMIAGuidanceandthedirectiveofBursaMalaysiaSecuritiesBerhad.

Other matters

1. Asstated inNote2 to thefinancialstatements,FocusLumberBerhadadoptedMalaysianFinancialReportingStandardson1January2012withatransitiondateof1January2011.Thesestandardswereappliedretrospectivelybydirectorstothecomparativeinformationinthesefinancialstatements,includingthestatementsoffinancialpositionasat31December2011and1January2011,andthestatementsofcomprehensiveincome,statementsofchangesinequityandstatementsofcashflowsfortheyearended31December2011andrelateddisclosures.Wewerenotengagedtoreportonthecomparativeinformationanditisunaudited.OurresponsibilitiesaspartofourauditofthefinancialstatementsoftheGroupandoftheCompanyfortheyearended31December2012have, in thesecircumstances, includedobtainingsufficientappropriateauditevidence that theopeningbalancesasat1January2012donotcontainmisstatements thatmateriallyaffect the financialpositionasof31December2012andfinancialperformanceandcashflowsfortheyearthenended.

2. ThisreportismadesolelytothemembersoftheCompany,asabody,inaccordancewithSection174oftheCompaniesAct1965inMalaysiaandfornootherpurpose.Wedonotassumeresponsibilitytoanyotherpersonforthecontentofthisreport.

Ernst&Young YongVoonKarAF:0039 1769/04/14(J/PH)CharteredAccountants CharteredAccountant

KotaKinabalu,Malaysia11April2013



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STATEMENTS OFCOMPREHENSIVE INCOME

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2012

Note Group Company 2012 2011 2012 2011 RM RM RM RM

Revenue 4 132,803,282 122,150,080 132,703,533 122,048,407Costofsales (102,216,987) (88,105,263) (103,806,648) (88,620,892)

Gross profit 30,586,295 34,044,817 28,896,885 33,427,515 Other items of income Interestincome 5 386,620 150,672 386,620 150,672 Otherincome 6 365,271 2,919,906 425,271 2,978,395 Other items of expense Administrativeexpenses (5,475,295) (6,463,266) (5,369,178) (6,351,719) Sellinganddistributioncosts (17,245,995) (14,377,493) (17,245,995) (14,377,493) Financecosts 7 - (1,347) - (1,347) Otherexpenses (232,848) (944,012) (232,848) (944,012)

Profit before tax 8 8,384,048 15,329,277 6,860,755 14,882,011Incometaxexpense 11 3,216,178 (1,609,347) 3,601,612 (1,493,896)

Profit net of tax 11,600,226 13,719,930 10,462,367 13,388,115 Other comprehensive income - - - - Total comprehensive income for the year 11,600,226 13,719,930 10,462,367 13,388,115 Profit attributable to: OwnersoftheCompany 11,600,226 13,719,930 10,462,367 13,388,115 Earnings per ordinary share attributable to owners of the Company (sen per share): Basic 12 11.24 13.81 Diluted 12 11.24 13.81

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.





��

STATEMENTS OFFINANCIAL POSITION

AS

AT

31

DE

CE

MB

ER

201

2

N

ote

G

roup

C

om

pan

y

31

.12.

2012

31

.12.

2011

1.

1.20

11

31.1

2.20

12

31.1

2.20

11

1.1.

2011

RM

R

M

RM

R

M

RM

R

M

Ass

ets

No

n-cu

rren

t as

sets

Pro

pert

y,p

lant

and

equ

ipm

ent

13

38,8

30,1

87

43,7

16,5

88

46,9

87,4

50

23,0

92,4

45

26,4

79,0

10

28,1

55,2

68In

vest

men

tpro

pert

ies

14

2,87

1,11

01,

476,

551

1,51

7,72

02,

871,

110

1,47

6,55

11,

517,

720

Inve

stm

enti

na

subs

idia

ry

15

--

-5,

000,

000

5,00

0,00

015

,000

,000

Oth

erin

vest

men

ts

16

1,14

9,04

01,

149,

040

1,14

9,04

01,

149,

040

1,14

9,04

01,

149,

040

Def

erre

dta

xas

sets

17

2,

916,

968

3,30

2,40

23,

417,

853

--

-

45,7

67,3

05

49,6

44,5

81

53,0

72,0

63

32,1

12,5

95

34,1

04,6

01

45,8

22,0

28

C

urre

nt a

sset

s

Inve

ntor

ies

18

18,4

13,3

64

26,6

63,2

66

22,2

84,8

27

18,4

13,3

64

26,6

63,2

66

22,2

84,8

27O

ther

inve

stm

ents

16

-

2,60

0,00

0-

-2,

600,

000

-Tr

ade

and

othe

rre

ceiv

able

s19

8,

640,

543

8,88

5,04

56,

347,

490

8,54

2,89

68,

858,

748

6,30

4,82

6Ta

xre

fund

able

1,30

9,61

14,

444,

811

3,67

9,07

31,

309,

611

4,44

4,81

13,

679,

073

Cas

han

dba

nkb

alan

ces

20

57,5

36,4

91

33,8

18,9

85

28,8

10,4

77

57,3

16,0

96

33,7

45,2

01

28,7

16,3

22

85,9

00,0

09

76,4

12,1

07

61,1

21,8

67

85,5

81,9

67

76,3

12,0

26

60,9

85,0

48

Tota

l ass

ets

13

1,66

7,31

412

6,05

6,68

811

4,19

3,93

011

7,69

4,56

211

0,41

6,62

710

6,80

7,07

6



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STATEMENTS OFFINANCIAL POSITION (Cont’d)

AS

AT

31

DE

CE

MB

ER

201

2

N

ote

G

roup

C

om

pan

y

31

.12.

2012

31

.12.

2011

1.

1.20

11

31.1

2.20

12

31.1

2.20

11

1.1.

2011

RM

R

M

RM

R

M

RM

R

M

Eq

uity

and

liab

iliti

es

C

urre

nt li

abili

ties

Trad

ean

dot

her

paya

bles

22

7,

235,

907

6,45

6,65

99,

155,

980

10,6

82,8

94

7,09

8,47

817

,719

,191

Div

iden

dsp

ayab

le

6,

192,

000

6,19

2,00

0-

6,19

2,00

06,

192,

000

-

13,4

27,9

07

12,6

48,6

59

9,15

5,98

016

,874

,894

13

,290

,478

17

,719

,191

Net

cur

rent

ass

ets

72

,472

,102

63

,763

,448

51

,965

,887

68

,707

,073

63

,021

,548

43

,265

,857

No

n-cu

rren

t lia

bili

ty

D

efer

red

tax

liabi

litie

s17

2,

362,

222

2,93

9,07

02,

880,

341

2,36

2,22

22,

939,

070

2,88

0,34

1

Tota

l lia

bili

ties

15,7

90,1

29

15,5

87,7

29

12,0

36,3

21

19,2

37,1

16

16,2

29,5

48

20,5

99,5

32

Net

ass

ets

11

5,87

7,18

511

0,46

8,95

910

2,15

7,60

998

,457

,446

94

,187

,079

86

,207

,544

Eq

uity

att

rib

utab

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STATEMENTS OFCHANGES IN EQUITY (Cont’d)

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Group Company 2012 2011 2012 2011 RM RM RM RM

Operating activities Profitbeforetax 8,384,048 15,329,277 6,860,755 14,882,011

Adjustmentsfor: Depreciationof investmentproperties 54,790 41,169 54,790 41,169 Depreciationofproperty, plantandequipment 4,834,894 4,954,185 3,005,322 3,144,111 Gainondisposalofplant andmachinery (65,562) (504,377) (65,562) (504,377) Interestexpense - 1,347 - 1,347 Interestincome (386,620) (150,672) (386,620) (150,672) Plantandequipment scrapped 2 - 2 -

Totaladjustments 4,437,504 4,341,652 2,607,932 2,531,578

Operating cash flows before changes in working capital 12,821,552 19,670,929 9,468,687 17,413,589Changesinworkingcapital Decrease/(increase)in inventories 8,249,902 (4,378,439) 8,249,902 (4,378,439) Decrease/(increase)in receivables 244,502 (2,537,555) 315,852 (2,553,922) Increase/(decrease)in payables 779,248 (2,699,321) 3,584,416 (10,620,713)

Totalchangesinworkingcapital 9,273,652 (9,615,315) 12,150,170 (17,553,074) Cash flows from/(used in)operations 22,095,204 10,055,614 21,618,857 (139,485) Interestpaid - (1,347) - (1,347) Interestreceived 105,073 22,266 105,073 22,266 Incometaxpaid (1,108,600) (2,200,905) (1,108,600) (2,200,905) Incometaxrefunded 7,268,564 - 7,268,564 -

Net cash flows generated from/(usedin) operating activities 28,360,241 7,875,628 27,883,894 (2,319,471)

STATEMENTS OFCASH FLOWS



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Investing activities (Placement)/withdrawalin short-termdeposits (2,757,528) 2,526,822 (2,757,528) 2,526,822Interestreceived 281,547 128,406 281,547 128,406Withdrawal/(placement)of structuredinvestment 2,600,000 (2,600,000) 2,600,000 (2,600,000)Proceedsfromdisposalof plantandequipment 100,000 542,638 100,000 542,638Purchaseofproperty, plantandequipment (1,432,282) (1,721,584) (1,102,546) (1,506,114)Redemptionofredeemablenon-cumulativepreferencesharesinsubsidiary - - - 10,000,000

Net cash flows (used in)/generated from investing activities (1,208,263) (1,123,718) (878,527) 9,091,752

Financing activitiesDividendspaidon ordinaryshares (6,192,000) (6,200,000) (6,192,000) (6,200,000)Proceedsfrom issuanceofordinary shares - 7,320,000 - 7,320,000Shareissuance expenses - (336,580) - (336,580)

Net cash flows (used in)/generated from financing activities (6,192,000) 783,420 (6,192,000) 783,420

Net increase in cash and cash equivalents 20,959,978 7,535,330 20,813,367 7,555,701

Cash and cash equivalents at 1 January 33,751,375 26,216,045 33,677,591 26,121,890

Cash and cash equivalents at 31 December 54,711,353 33,751,375 54,490,958 33,677,591

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.

STATEMENTS OFCASH FLOWS (Cont’d)





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NOTES TO THEFINANCIAL STATEMENTS


1. Corporate information

TheCompanyisapubliclimitedliabilitycompany,incorporatedanddomiciledinMalaysia,andislistedontheMainMarketofBursaMalaysiaSecuritiesBerhad.TheregisteredofficeoftheCompanyislocatedatMile3,JalanMasak,KampungUluPatikang,LockedBag13SM-88,89009Keningau,Sabah.

TheprincipalactivitiesoftheCompanyarethemanufacturingandsaleofplywood,veneer,laminatedveneerlumber,andinvestmentholding.

Theprincipalactivitiesofthesubsidiaryaregeneration,transmission,distributionandsaleofelectricity.

Therehavebeennosignificantchangesinthenatureoftheprincipleactivitiesduringthefinancialyear.

2. Summary of significant accounting policies

2.1 Basis of preparation

The financial statements of the Group and Company have been prepared in accordance with Malaysian FinancialReportingStandards (“MFRS”), InternationalFinancialReportingStandardsandtherequirementsof theCompaniesAct,1965inMalaysia.

Fortheperiodsuptoandincludingthefinancialyearended31December2011,theGroupandtheCompanypreparedtheirfinancialstatementsinaccordancewithFinancialReportingStandards(“FRS”).

Thesefinancialstatements, for thefinancialyearended31December2012are theGroup’sfirstMFRSannualfinancialstatements.MFRS1FirsttimeAdoptionofMalaysianFinancialReportingStandards(“MFRS1”)hasbeenapplied.ThedateoftransitiontoMFRSis1January2011.

Thefinancialstatementshavebeenpreparedonthehistoricalcostbasisexceptasdisclosedintheaccountingpoliciesbelow.

ThefinancialstatementsarepresentedinRinggitMalaysia(RM).

2.2 First-time adoption of Malaysian Financial Reporting Standards (“MFRS”)

ThetransitionfromFRStoMFRShasnothadamaterialimpactonthestatementsofcomprehensiveincome,statementsoffinancialpositionandstatementsofcashflows.

2.3 Significant accounting policies and application of MFRS 1

TheauditedfinancialstatementsoftheGroupandtheCompanyfortheyearended31December2011werepreparedin

accordancewithFRS.Exceptforcertaindifferences,therequirementsunderFRSandMFRSaresimilar.



��



NOTES TO THEFINANCIAL STATEMENTS (Cont’d)


2. Summary of significant accounting policies (Continued)

2.3 Significant accounting policies and application of MFRS 1 (Continued)

Thesignificantaccountingpoliciesadopted inpreparingthesefinancialstatementsareconsistentwith thoseof theauditedfinancialstatementsfortheyearended31December2011.

2.4 Standards issued but not yet effective

ThestandardsandinterpretationsthatareissuedbutnotyeteffectiveuptothedateofissuanceoftheGroup’sandtheCompany’sfinancialstatementsaredisclosedbelow.TheGroupandtheCompanyintendtoadoptthesestandards,ifapplicable,whentheybecomeeffective.

Effective for annual periods beginning onDescription or after

MFRS101PresentationofItemsofOtherComprehensiveIncome 1July2012(AmendmentstoMFRS101)AmendmentstoMFRS101:PresentationofFinancialStatements 1January2013(AnnualImprovements2009-2011Cycle)MFRS3BusinessCombinations(IFRS3BusinessCombinations 1January2013issuedbyIASBinMarch2004)MFRS10ConsolidatedFinancialStatements 1January2013MFRS11JointArrangements 1January2013MFRS12DisclosureofinterestsinOtherEntities 1January2013MFRS13FairValueMeasurement 1January2013MFRS119EmployeeBenefits 1January2013MFRS127SeparateFinancialStatements 1January2013MFRS128InvestmentinAssociateandJointVentures 1January2013MFRS127ConsolidatedandSeparateFinancialStatements 1January2013(IAS27asrevisedbyIASBinDecember2003)AmendmenttoICInterpretation2Members’SharesinCo-operative 1January2013EntitiesandSimilarInstruments(AnnualImprovements2009-2011Cycle)ICInterpretation20StrippingCostsintheProductionPhaseofa 1January2013SurfaceMineAmendmentstoMFRS7:Disclosures–OffsettingFinancialAssets 1January2013andFinancialLiabilitiesAmendmentstoMFRS1:First-timeAdoptionofMalaysianFinancial 1January2013ReportingStandards–GovernmentLoans





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2. Summary of significant accounting policies (continued)

2.4 Standards issued but not yet effective (continued)

Effective for annual periods beginning onDescription or after

AmendmentstoMFRS1:First-timeAdoptionofMalaysianFinancial 1January2013ReportingStandards(AnnualImprovements2009-2011Cycle)AmendmentstoMFRS116:Property,PlantandEquipment(Annual 1January2013Improvements2009-2011Cycle)AmendmentstoMFRS132:FinancialInstruments:Presentation 1January2013(AnnualImprovements2009-2011Cycle)AmendmentstoMFRS134:InterimFinancialReporting(Annual 1January2013Improvements2009-2011Cycle)AmendmentstoMFRS10:ConsolidatedFinancialStatements: 1January2013TransitionGuidanceAmendmentstoMFRS11:JointArrangements:TransitionGuidance 1January2013AmendmentstoMFRS12:DisclosureofInterestsinOtherEntities: 1January2013TransitionGuidanceAmendmentstoMFRS132:OffsettingFinancialAssetsand 1January2014FinancialLiabilitiesAmendmentstoMFRS10,MFRS12andMFRS127: 1January2014InvestmentEntitiesMFRS9FinancialInstruments 1January2015

Thedirectorsexpectthattheadoptionoftheabovestandardsandinterpretationswillhavenomaterialimpactonthefinancialstatementsintheperiodofinitialapplicationexceptasdiscussedbelow:

MFRS12DisclosuresofInterestsinOtherEntities

MFRS12includesalldisclosurerequirementsforinterestsinsubsidiaries,jointarrangements,associatesandstructuredentities.Anumberofnewdisclosuresarerequired.ThisstandardaffectsdisclosuresonlyandhasnoimpactontheGroup’sfinancialpositionorperformance.

MFRS127SeparateFinancialStatements

Asaconsequenceof thenewMFRS10andMFRS12,MFRS127 is limited toaccounting for subsidiaries, jointlycontrolledentitiesandassociatesinseparatefinancialstatements.




��





2.4 Standards issued but not yet effective (continued) MFRS9FinancialInstruments:ClassificationandMeasurement

MFRS9reflectsthefirstphaseoftheworkonthereplacementofMFRS139FinancialInstruments:RecognitionandMeasurementandapplies toclassificationandmeasurementoffinancialassetsandfinancial liabilitiesasdefined inMFRS139FinancialInstruments:RecognitionandMeasurement.TheadoptionofthefirstphaseofMFRS9willhaveaneffectontheclassificationandmeasurementoftheGroup’sfinancialassets.TheGroupwillquantifytheeffectinconjunctionwiththeotherphases,whenthefinalstandardincludingallphasesisissued.

2.5 Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiary as atthe reportingdate. The financial statementsof the subsidiary used in thepreparationof the consolidated financialstatementsarepreparedforthesamereportingdateastheCompany.Consistentaccountingpoliciesareappliedtoliketransactionsandeventsinsimilarcircumstances.

Allintra-groupbalances,incomeandexpensesandunrealisedgainsandlossesresultingfromintra-grouptransactionsareeliminatedinfull.

Acquisitions of subsidiaries are accounted for by applying the acquisition method. Identifiable assets acquiredand liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.Acquisition-relatedcostsarerecognisedasexpensesintheperiodsinwhichthecostsareincurredandtheservicesarereceived.

Inbusinesscombinationsachievedinstages,previouslyheldequityinterestsintheacquireearere-measuredtofairvalueattheacquisitiondateandanycorrespondinggainorlossisrecognisedinprofitorloss.

TheGroupelectsforeachindividualbusinesscombination,whethernon-controllinginterestintheacquiree(ifany)isrecognisedontheacquisitiondateatfairvalue,oratthenon-controllinginterest’sproportionateshareoftheacquireenetidentifiableassets.

Anyexcessofthesumofthefairvalueoftheconsiderationtransferredinthebusinesscombination,theamountofnon-controllinginterestintheacquiree(ifany),andthefairvalueoftheGroup’spreviouslyheldequityinterestintheacquiree(ifany),overthenetfairvalueoftheacquiree’sidentifiableassetsandliabilitiesisrecordedasgoodwillinthestatementoffinancialposition.Ininstanceswherethelatteramountexceedstheformer,theexcessisrecognisedasgainonbargainpurchaseinprofitorlossontheacquisitiondate.

Subsidiariesareconsolidatedfromthedateofacquisition,beingthedateonwhichtheGroupobtainscontrol,andcontinuetobeconsolidateduntilthedatethatsuchcontrolceases.






��



2.6 Transactions with non-controlling interests

Non-controlling interest represents theequity insubsidiariesnotattributable,directlyor indirectly, toownersof theCompany,andispresentedseparatelyintheconsolidatedstatementofcomprehensiveincomeandwithinequityintheconsolidatedstatementoffinancialposition,separatelyfromequityattributabletoownersoftheCompany.

ChangesintheCompanyowners’ownershipinterestinasubsidiarythatdonotresultinalossofcontrolareaccountedforasequitytransactions.Insuchcircumstances,thecarryingamountsofthecontrollingandnon-controllinginterestsareadjustedtoreflectthechangesintheirrelativeinterestsinthesubsidiary.Anydifferencebetweentheamountbywhich thenon-controlling interest isadjustedand the fairvalueof theconsiderationpaidor received is recogniseddirectlyinequityandattributedtoownersoftheparent.

2.7 Foreign currency

a) Functional and presentation currency

The individual financial statements of each entity in the Group are measured using the currency of the primaryeconomicenvironmentinwhichtheentityoperates(“thefunctionalcurrency”).TheconsolidatedfinancialstatementsarepresentedinRinggitMalaysia(RM),whichisalsotheCompany’sfunctionalcurrency.

b) Foreign currency transactions

Transactions in foreign currencies are measured in the respective functional currencies of the Company and itssubsidiaryandarerecordedoninitialrecognitioninthefunctionalcurrenciesatexchangeratesapproximatingthoserulingat the transactiondates.Monetaryassetsand liabilitiesdenominated in foreigncurrenciesare translatedatthe rateofexchange rulingat the reportingdate.Non-monetary itemsdenominated in foreigncurrencies thataremeasuredathistoricalcostaretranslatedusingtheexchangeratesasatthedatesoftheinitialtransactions.Non-monetaryitemsdenominatedinforeigncurrenciesmeasuredatfairvaluearetranslatedusingtheexchangeratesatthedatewhenthefairvaluewasdetermined.

Exchangedifferencesarisingonthesettlementofmonetaryitemsorontranslatingmonetaryitemsatthereportingdatearerecognisedinprofitorloss.

Exchangedifferencesarisingonthetranslationofnon-monetaryitemscarriedatfairvalueareincludedinprofitorloss

fortheperiod.




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2.8 Property, plant and equipment

All itemsofproperty,plantandequipmentare initially recordedatcost.Thecostofan itemofproperty,plantandequipmentisrecognisedasanassetif,andonlyif,itisprobablethatfutureeconomicbenefitsassociatedwiththeitemwillflowtotheGroupandthecostoftheitemcanbemeasuredreliably.

Subsequenttorecognition,property,plantandequipmentaremeasuredatcostlessaccumulateddepreciationandaccumulatedimpairmentlosses.Whensignificantpartsofplantandequipmentarerequiredtobereplacedinintervals,theGrouprecognisessuchpartsasindividualassetswithspecificusefullivesanddepreciation,respectively.Likewise,whenamajorinspectionisperformed,itscostisrecognisedinthecarryingamountoftheplantandequipmentasareplacementiftherecognitioncriteriaaresatisfied.Allotherrepairandmaintenancecostsarerecognisedinprofitorlossasincurred.

Depreciationiscomputedonastraight-linebasisovertheestimatedusefullivesoftheassetsasfollows:

-Leaseholdland:Remainingleaseperiods-Factoryandofficebuildings:20years-Motorvehicles:4years-Heavyequipment:5years-Plantandmachinery:15years-Furniture,fittings,officeequipmentandrenovation:5years

The carrying values of property, plant and equipment are reviewed for impairment when events or changes incircumstancesindicatethatthecarryingvaluemaynotberecoverable.

The residual value, useful life and depreciation method are reviewed at each financial year-end, and adjustedprospectively,ifappropriate.

An itemofproperty,plantandequipment isderecognisedupondisposalorwhenno futureeconomicbenefitsareexpectedfromitsuseordisposal.Anygainorlossonderecognitionoftheassetisincludedintheprofitorlossintheyeartheassetisderecognised.

2.9 Investment properties

Investment properties are initially measured at cost, including transaction costs. Subsequent to initial recognition,investmentpropertiesaremeasuredatcostlessaccumulateddepreciationandaccumulatedimpairmentlosses.Thedepreciationpolicyforinvestmentpropertiesisinaccordancewiththatfordepreciableproperty,plantandequipmentasdescribedinNote2.8.






��



2.9 Investment properties (continued)

Apropertyinterestunderanoperatingleaseisclassifiedandaccountedforasaninvestmentpropertyonaproperty-by-propertybasiswhentheGroupholdsittoearnrentalsorforcapitalappreciationorboth.Anysuchpropertyinterestunderanoperatingleaseclassifiedasaninvestmentpropertyiscarriedatfairvalue.

Investmentpropertiesarederecognisedwheneithertheyhavebeendisposedofforwhentheinvestmentpropertyispermanentlywithdrawnfromuseandnofutureeconomicbenefitisexpectedfromitsdisposal.Anygainorlossontheretirementordisposalofaninvestmentpropertyisrecognisedinprofitorlossintheyearofretirementordisposal.

Transfers are made to or from investment property only when there is a change in use. For a transfer frominvestmentpropertytoowner-occupiedproperty,thedeemedcostforsubsequentaccountingisthefairvalueatthedateofchange inuse.Fora transfer fromowner-occupiedproperty to investmentproperty, theproperty isaccountedforinaccordancewiththeaccountingpolicyforproperty,plantandequipmentsetoutinNote2.8uptothedateofchangeinuse.

2.10 Impairment of non-financial assets

TheGroupassessesateachreportingdatewhetherthereisanindicationthatanassetmaybeimpaired.Ifanysuchindicationexists,orwhenanannual impairmentassessmentforanassetisrequired,theGroupmakesanestimateoftheasset’srecoverableamount.

Anasset’s recoverableamount is thehigherof anasset’s fair value lesscosts to sell and its value inuse.Forthe purpose of assessing impairment, assets are grouped at the lowest levels for which there are separatelyidentifiablecashflows(cash-generatingunits(“CGU”)).

In assessing value in use, the estimated future cash flows expected to be generated by the asset arediscountedto theirpresentvalueusingapre-taxdiscount rate that reflectscurrentmarketassessmentsofthetimevalueofmoneyandtherisksspecifictotheasset.Wherethecarryingamountofanassetexceedsits recoverableamount, theasset iswrittendownto its recoverableamount. Impairment lossesrecognisedinrespectofaCGUorgroupsofCGUsareallocatedtoreducethecarryingamountoftheassetsintheunitorgroupsofunitsonapro-ratabasis.

Impairmentlossesarerecognisedinprofitorloss.




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2.10 Impairment of non-financial assets (continued)

An assessment is made at each reporting date as to whether there is any indication that previously recognisedimpairmentlossesmaynolongerexistormayhavedecreased.Apreviouslyrecognisedimpairmentlossisreversedonly if therehasbeenachange in theestimatesused todetermine theasset’s recoverable amount since the lastimpairmentlosswasrecognised.Ifthatisthecase,thecarryingamountoftheassetisincreasedtoitsrecoverableamount.Thatincreasecannotexceedthecarryingamountthatwouldhavebeendetermined,netofdepreciation,hadnoimpairmentlossbeenrecognisedpreviously.Suchreversalisrecognisedinprofitorloss.

2.11 Subsidiary

AsubsidiaryisanentityoverwhichtheGrouphasthepowertogovernthefinancialandoperatingpoliciessoastoobtainbenefitsfromitsactivities.

In the Company’s separate financial statements, investment in subsidiary is accounted for at cost lessimpairmentlosses.

2.12 Financial assets

Financialassetsarerecognisedinthestatementoffinancialpositionwhen,andonlywhen,theGroupandtheCompanybecomesapartytothecontractualprovisionsofthefinancialinstrument.

When financialassetsare recognised initially, theyaremeasuredat fair value,plus, in thecaseof financialassetsnotatfairvaluethroughprofitorloss,directlyattributabletransactioncosts.

TheGroupandCompanydetermine theclassificationof their financialassetsat initial recognition,and thecategoriesincludefinancialassetsatfairvaluethroughprofitorloss,loansandreceivables,held-to-maturityinvestmentsandavailable-for-salefinancialassets.

a) Financial assets at fair value through profit or loss

Financialassetsareclassifiedasfinancialassetsatfairvaluethroughprofitorlossiftheyareheldfortradingoraredesignated as such upon initial recognition. Financial assets held for trading are derivatives (including separatedembeddedderivatives)orfinancialassetsacquiredprincipallyforthepurposeofsellinginthenearterm.






�1



2.12 Financial assets (continued)

a) Financial assets at fair value through profit or loss (continued)

Subsequenttoinitialrecognition,financialassetsatfairvaluethroughprofitor lossaremeasuredatfairvalue.Anygainsorlossesarisingfromchangesinfairvaluearerecognisedinprofitorloss.Netgainsornetlossesonfinancialassetsatfairvaluethroughprofitorlossdonotincludeexchangedifferences,interestanddividendincome.Exchangedifferences,interestanddividendincomeonfinancialassetsatfairvaluethroughprofitorlossarerecognisedseparatelyinprofitorlossaspartofotherlossesorotherincome.

Financialassetsatfairvaluethroughprofitorlosscouldbepresentedascurrentornon-current.Financialassetsthatareheldprimarilyfortradingpurposesarepresentedascurrentwhereasfinancialassetsthatarenotheldprimarilyfor

tradingpurposesarepresentedascurrentornon-currentbasedonthesettlementdate.

b) Loans and receivables

Financialassetswithfixedordeterminablepaymentsthatarenotquotedinanactivemarketareclassifiedasloansandreceivables.

Subsequenttoinitialrecognition, loansandreceivablesaremeasuredatamortisedcostusingtheeffectiveinterestmethod.Gainsandlossesarerecognisedinprofitorlosswhentheloansandreceivablesarederecognisedorimpaired,andthroughtheamortisationprocess.

Loansandreceivablesareclassifiedascurrentassets,exceptforthosehavingmaturitydateslaterthan12monthsafterthereportingdatewhichareclassifiedasnon-current.

c) Held-to-maturity investments

Financialassetswithfixedordeterminablepaymentsandfixedmaturityareclassifiedasheld-to-maturitywhentheGrouphasthepositiveintentionandabilitytoholdtheinvestmenttomaturity.

Subsequent to initial recognition,held-to-maturity investmentsaremeasuredatamortisedcostusing theeffectiveinterest method. Gains and losses are recognised in profit or loss when the held-to-maturity investments arederecognisedorimpaired,andthroughtheamortisationprocess.

Held-to-maturityinvestmentsareclassifiedasnon-currentassets,exceptforthosehavingmaturitywithin12monthsafterthereportingdatewhichareclassifiedascurrent.




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2.12 Financial assets (continued)

d) Available-for-sale financial assets

Available-for-salefinancialassetsarefinancialassetsthataredesignatedasavailableforsaleorarenotclassifiedinanyofthethreeprecedingcategories.

Afterinitialrecognition,available-for-salefinancialassetsaremeasuredatfairvalue.Anygainsorlossesfromchangesin fairvalueof thefinancialassetsare recognised inothercomprehensive income,except that impairment losses,foreignexchangegainsandlossesonmonetaryinstrumentsandinterestcalculatedusingtheeffectiveinterestmethodarerecognised inprofitor loss.Thecumulativegainor losspreviouslyrecognised inothercomprehensive incomeisreclassifiedfromequitytoprofitorlossasareclassificationadjustmentwhenthefinancialassetisderecognised.Interestincomecalculatedusingtheeffectiveinterestmethodisrecognisedinprofitorloss.Dividendsonanavailable-for-saleequityinstrumentarerecognisedinprofitorlosswhentheGroupandtheCompany’srighttoreceivepaymentisestablished.

Investments in equity instruments whose fair value cannot be reliably measured are measured at cost lessimpairmentloss.

Available-for-salefinancialassetsareclassifiedasnon-currentassetsunlesstheyareexpectedtoberealisedwithin12monthsafterthereportingdate.

Afinancialassetisderecognisedwhenthecontractualrighttoreceivecashflowsfromtheassethasexpired.Onderecognitionofafinancialassetinitsentirety,thedifferencebetweenthecarryingamountandthesumoftheconsiderationreceivedandanycumulativegainorlossthathadbeenrecognisedinothercomprehensiveincomeisrecognisedinprofitorloss.

Regularwaypurchasesorsalesarepurchasesorsalesoffinancialassetsthatrequiredeliveryofassetswithintheperiodgenerallyestablishedbyregulationorconvention in themarketplaceconcerned.All regularwaypurchasesandsalesoffinancialassetsarerecognisedorderecognisedonthetradedatei.e.,thedatethattheGroupandtheCompanycommittopurchaseorselltheasset.






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2.13 Impairment of financial assets

The Group and the Company assess at each reporting date whether there is any objective evidence that afinancialassetisimpaired.

Trade and other receivables and other financial assets carried at amortised cost

Todeterminewhetherthereisobjectiveevidencethatanimpairmentlossonfinancialassetshasbeenincurred,theGroupandtheCompanyconsiderfactorssuchastheprobabilityofinsolvencyorsignificantfinancialdifficultiesofthedebtoranddefaultorsignificantdelayinpayments.Forcertaincategoriesoffinancialassets,suchastradereceivables,assetsthatareassessednottobe impaired individuallyaresubsequentlyassessedfor impairmenton a collective basis based on similar risk characteristics. Objective evidence of impairment for a portfolio ofreceivablescould include theGroup’sand theCompany’spastexperienceofcollectingpayments,an increasein the number of delayed payments in the portfolio past the average credit period and observable changes innationalorlocaleconomicconditionsthatcorrelatewithdefaultonreceivables.

If anysuchevidenceexists, theamountof impairment loss ismeasuredas thedifferencebetween theasset’scarryingamountandthepresentvalueofestimatedfuturecashflowsdiscountedatthefinancialasset’soriginaleffectiveinterestrate.Theimpairmentlossisrecognisedinprofitorloss.

Thecarryingamountofthefinancialassetisreducedbytheimpairmentlossdirectlyforallfinancialassetswiththeexceptionoftradereceivables,wherethecarryingamountisreducedthroughtheuseofanallowanceaccount.Whenatradereceivablebecomesuncollectible,itiswrittenoffagainsttheallowanceaccount.

Ifinasubsequentperiod,theamountoftheimpairmentlossdecreasesandthedecreasecanberelatedobjectivelytoaneventoccurringaftertheimpairmentwasrecognised,thepreviouslyrecognisedimpairmentlossisreversedtotheextentthatthecarryingamountoftheassetdoesnotexceeditsamortisedcostatthereversaldate.Theamountofreversalisrecognisedinprofitorloss.

2.14 Cash and cash equivalents

Cashandcashequivalentscomprisecashatbankandonhand,demanddeposits,andshort-term,highlyliquidinvestmentsthatarereadilyconvertibletoknownamountofcashandwhicharesubjecttoaninsignificantriskofchangesinvalueandhaveashortmaturityofgenerallywithinthreemonthswhenacquired.ThesealsoincludebankoverdraftsthatformanintegralpartoftheGroup’scashmanagement.




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2.15 Inventories

Inventoriesarestatedatthelowerofcostandnetrealisablevalue.Costsincurredinbringingtheinventoriestotheirpresentlocationandconditionareaccountedforasfollows:

- Rawmaterials:purchasecostsonweightedaveragebasis.

- Finishedgoodsandworkinprogress:costsofrawmaterials,directlabour,otherdirectcostsandappropriateproportionsofmanufacturingoverheadsbasedonnormaloperatingcapacity.Thesecostsaredeterminedusingtheweightedaveragebasis.

Netrealisablevalueistheestimatedsellingpriceintheordinarycourseofbusinesslesstheestimatedcostsnecessarytomakethesale.

2.16 Provisions

ProvisionsarerecognisedwhentheGrouphasapresentobligation(legalandconstructive)asaresultofapastevent,itisprobablethatanoutflowofeconomicresourceswillberequiredtosettletheobligationandtheamountoftheobligationcanbemadeestimatedreliably.

Provisionsarereviewedateachreportingdateandadjustedtoreflectthecurrentbestestimate.Ifitisnolongerprobablethatanoutflowofeconomicresourceswillberequiredtosettletheobligation,theprovisionisreversed.If the effect of the time value of money is material, provisions are discounted using a current pretax rate thatreflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in theprovisionduetothepassageoftimeisrecognisedasfinancecost.

2.17 Financial liabilities

Financialliabilitiesareclassifiedaccordingtothesubstanceofthecontractualarrangementsenteredintoandthedefinitionsofafinancialliability.

Financial liabilities, are recognised in the statement of financial position when, and only when, the Group andthe Company become a party to the contractual provisions of the financial instrument. Financial liabilities are

classifiedaseitherfinancialliabilitiesatfairvaluethroughprofitorlossorotherfinancialliabilities.






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2.17 Financial liabilities (continued)

a) Financial liabilities at fair value through profit or loss

Financialliabilitiesatfairvaluethroughprofitorlossincludefinancialliabilitiesheldfortradingandfinancialliabilitiesdesignateduponinitialrecognitionasatfairvaluethroughprofitorloss.

FinancialliabilitiesheldfortradingincludederivativesenteredintobytheGroupandtheCompanythatdonotmeetthehedgeaccountingcriteria.Derivativeliabilitiesareinitiallymeasuredatfairvalueandsubsequentlystatedatfairvalue,withanyresultantgainsor lossesrecognisedinprofitor loss.Netgainsor lossesonderivatives includeexchangedifferences.

TheGroupandtheCompanyhavenotdesignatedanyfinancialliabilitiesasatfairvaluethroughprofitorloss.

b) Other financial liabilities

The Group’s and the Company’s other financial liabilities include trade payables, other payables and loans andborrowings.

Tradeandotherpayablesarerecognisedinitiallyatfairvalueplusdirectlyattributabletransactioncostsandsubsequentlymeasuredatamortisedcostusingtheeffectiveinterestmethod.

Loans and borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequentlymeasuredatamortisedcostusingtheeffectiveinterestmethod.BorrowingsareclassifiedascurrentliabilitiesunlesstheGroupandtheCompanyhaveanunconditionalrighttodefersettlementoftheliabilityforatleast12monthsafterthereportingdate.

Forotherfinancialliabilities,gainsandlossesarerecognisedinprofitorlosswhentheliabilitiesarederecognised,andthroughtheamortisationprocess.

Afinancialliabilityisderecognisedwhentheobligationundertheliabilityisextinguished.Whenanexistingfinancialliabilityisreplacedbyanotherfromthesamelenderonsubstantiallydifferentterms,orthetermsofanexistingliabilityaresubstantiallymodified,suchanexchangeormodificationistreatedasaderecognitionoftheoriginalliabilityandtherecognitionofanewliability,andthedifferenceintherespectivecarryingamountsisrecognisedinprofitorloss.




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2.18 Borrowing costs

Borrowingcostsarecapitalisedaspartofthecostofaqualifyingassetiftheyaredirectlyattributabletotheacquisition,constructionorproductionofthatasset.Capitalisationofborrowingcostscommenceswhentheactivitiestopreparetheassetforitsintendeduseorsaleareinprogressandtheexpendituresandborrowingcostsareincurred.Borrowingcostsarecapitaliseduntiltheassetsaresubstantiallycompletedfortheirintendeduseorsale.

Allotherborrowingcostsarerecognisedinprofitorlossintheperiodtheyareincurred.BorrowingcostsconsistofinterestandothercoststhattheGroupandtheCompanyincurredinconnectionwiththeborrowingoffunds.

2.19 Employee benefits

Defined contribution plans

TheGroupparticipatesinthenationalpensionschemesasdefinedbythelawsofthecountriesinwhichithasoperations.TheMalaysiancompaniesintheGroupmakecontributionstotheEmployeeProvidentFund(“EPF”)inMalaysia,adefinedcontributionpensionscheme.Contributionstodefinedcontributionpensionschemesarerecognisedasanexpenseintheperiodinwhichtherelatedserviceisperformed.

2.20 Leases

a) As lessee

Financeleases,whichtransfertotheGroupsubstantiallyalltherisksandrewardsincidentaltoownershipoftheleaseditem,arecapitalisedattheinceptionoftheleaseatthefairvalueoftheleasedassetor,iflower,atthepresentvalueoftheminimumleasepayments.Anyinitialdirectcostsarealsoaddedtotheamountcapitalised.Leasepaymentsareapportionedbetweenthefinancechargesandreductionoftheleaseliabilitysoastoachieveaconstantrateofinterestontheremainingbalanceoftheliability.Financechargesarechargedtoprofitorloss.Contingentrents,ifany,arechargedasexpensesintheperiodsinwhichtheyareincurred.

Leasedassetsaredepreciatedovertheestimatedusefullifeoftheasset.However,ifthereisnoreasonablecertaintythattheGroupwillobtainownershipbytheendoftheleaseterm,theassetisdepreciatedovertheshorteroftheestimatedusefullifeandtheleaseterm.

Operatingleasepaymentsarerecognisedasanexpenseinprofitorlossonastraight-linebasisovertheleaseterm.Theaggregatebenefitofincentivesprovidedbythelessorisrecognisedasareductionofrentalexpenseovertheleasetermonastraight-linebasis.






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2.20 Leases (continued)

b) As lessor

LeaseswheretheGroupretainssubstantiallyalltherisksandrewardsofownershipoftheassetareclassifiedasoperatingleases.Initialdirectcostsincurredinnegotiatinganoperatingleaseareaddedtothecarryingamountoftheleasedassetandrecognisedovertheleasetermonthesamebasesasrentalincome.TheaccountingpolicyforrentalincomeissetoutinNote2.21(c).

2.21 Revenue

RevenueisrecognisedtotheextentthatitisprobablethattheeconomicbenefitswillflowtotheGroupandtherevenuecanbereliablymeasured.Revenueismeasuredatthefairvalueofconsiderationreceivedorreceivable.

a) Sales of goods

Revenuerelatingtosalesofplywood,veneer,andlaminatedveneerlumberisrecognisednetofsalesdiscountsuponthetransferofsignificantrisksandrewardsofownershipofgoodstothecustomer.

b) Sale of electricity

Revenuerelatingtosaleofelectricityisrecogniseduponconsumptionbytheconsumers.

c) Rental income

Rentalincomeisaccountedforonastraight-linebasisovertheleaseterm.

d) Dividend income

DividendincomeisrecognisedwhentheGroup’srighttoreceivepaymentisestablished.

e) Interest income

Interestisrecognisedonanaccrualbasisusingtheeffectiveinterestmethod.




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2.22 Income taxes

a) Current tax

Currenttaxassetsandliabilitiesaremeasuredattheamountexpectedtoberecoveredfromorpaidtothetaxationauthorities. The tax rates and tax lawsused to compute theamount are those that are enactedor substantivelyenactedbythereportingdate.

Currenttaxesarerecognisedinprofitorlossexcepttotheextentthatthetaxrelatestoitemsrecognisedoutsideprofitorloss,eitherinothercomprehensiveincomeordirectlyinequity.

b) Deferred tax

Deferred tax isprovidedusing the liabilitymethodon temporarydifferencesat the reportingdatebetweenthe taxbasesofassetsandliabilitiesandtheircarryingamountsforfinancialreportingpurposes.

Deferredtaxliabilitiesarerecognisedforalltemporarydifferences,except:

- wherethedeferredtaxliabilityarisesfromtheinitialrecognitionofanassetorliabilityinatransactionthatisnotabusinesscombinationand,atthetimeofthetransaction,affectsneithertheaccountingprofitnortaxableprofitorloss;and

- inrespectoftaxabletemporarydifferencesassociatedwithinvestmentinsubsidiary,wherethetimingofthereversalofthetemporarydifferencescanbecontrolledanditisprobablethatthetemporarydifferenceswillnotreverseintheforeseeablefuture.

Deferredtaxassetsarerecognisedforalldeductibletemporarydifferences,carryforwardofunusedtaxcreditsandunusedtaxlosses,totheextentthatit isprobablethattaxableprofitwillbeavailableagainstwhichthedeductibletemporarydifferences,andthecarryforwardofunusedtaxcreditsandunusedtaxlossescanbeutilisedexcept:

- wherethedeferredtaxassetrelatingtothedeductibletemporarydifferencearisesfromtheinitialrecognitionofanassetorliabilityinatransactionthatisnotabusinesscombinationand,atthetimeofthetransaction,affectsneithertheaccountingprofitnortaxableprofitorloss;and

- inrespectofdeductible temporarydifferencesassociatedwith investment insubsidiary,deferredtaxassetsarerecognisedonlytotheextentthatitisprobablethatthetemporarydifferenceswillreverseintheforeseeablefuture

andtaxableprofitwillbeavailableagainstwhichtemporarydifferencescanbeutilised.






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2.22 Income taxes (continued)

b) Deferred tax (continued)

Thecarryingamountofdeferredtaxassetsisreviewedateachreportingdateandreducedtotheextentthatitisnolongerprobablethatsufficienttaxableprofitwillbeavailabletoallowallorpartofthedeferredtaxassettobeutilised.

Unrecogniseddeferredtaxassetsarereassessedateachreportingdateandarerecognisedtotheextentthatithasbecomeprobablethatfuturetaxableprofitwillallowthedeferredtaxassetstobeutilised.

Deferredtaxassetsandliabilitiesaremeasuredatthetaxratesthatareexpectedtoapplytotheyearwhentheassetisrealisedortheliabilityissettled,basedontaxratesandtaxlawsthathavebeenenactedorsubstantivelyenactedatthereportingdate.

Deferredtaxrelatingtoitemsrecognisedoutsideprofitorlossisrecognisedoutsideprofitorloss.Deferredtaxitemsarerecognisedincorrelationtotheunderlyingtransactioneitherinothercomprehensiveincomeordirectlyinequityanddeferredtaxarisingfromabusinesscombinationinadjustedagainstgoodwillonacquisition.

Deferredtaxassetsanddeferredtaxliabilitiesareoffset,ifalegallyenforceablerightexiststosetoffcurrenttaxassetsagainstcurrenttaxliabilitiesandthedeferredtaxesrelatetothesametaxableentityandthesametaxationauthority.

2.23 Segment reporting

Formanagementpurposes,theGroupisorganisedintooperatingsegmentsbasedontheirproductsandserviceswhichareindependentlymanagedbytherespectivesegmentmanagersresponsiblefortheperformanceoftherespectivesegmentsunder their charge. The segment managers report directly to the management of the Company who regularly reviewthesegmentresults inordertoallocateresourcestothesegmentsandtoassessthesegmentperformance.AdditionaldisclosuresoneachofthesesegmentsareshowninNote30,includingthefactorsusedtoidentifythereportablesegmentsandthemeasurementbasisofsegmentinformation.

2.24 Share capital and share issuance expenses

AnequityinstrumentisanycontractthatevidencesaresidualinterestintheassetsoftheGroupandtheCompanyafterdeductingallofitsliabilities.Ordinarysharesareequityinstruments.

Ordinary shares are recorded at the proceeds received, net of directly attributable incremental transaction costs.Ordinarysharesareclassifiedasequity.Dividendsonordinarysharesarerecognisedinequityintheperiodinwhichtheyaredeclared.




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2.25 Contingencies

Acontingent liabilityorasset isapossibleobligationorassetthatarisesfrompasteventsandwhoseexistencewillbeconfirmed only by the occurrence or non-occurrence of uncertain future event(s) not wholly within the control of theGroup.

ContingentliabilitiesandassetsarenotrecognisedinthestatementsoffinancialpositionoftheGroup.

3. Significant accounting judgements and estimates

ThepreparationoftheGroup’sfinancialstatementsrequiresmanagementtomakejudgements,estimatesandassumptionsthataffectthereportedamountsofrevenues,expenses,assetsandliabilities,andthedisclosureofcontingentliabilitiesatthereportingdate.However,uncertaintyabouttheseassumptionsandestimatescouldresultinoutcomesthatcouldrequireamaterialadjustmenttothecarryingamountoftheassetorliabilityaffectedinthefuture.

Key sources of estimation uncertainty

Thekeyassumptionsconcerning the futureandother key sourcesof estimationuncertaintyat the reportingdate thathaveasignificantriskofcausingamaterialadjustmenttothecarryingamountsofassetsandliabilitieswithinthenextfinancialyeararediscussedbelow.

a) Useful lives of plant and machinery

Thecostofplantandmachineryforthemanufactureofplywood,veneer, laminatedveneer lumber,andpowerutilityaredepreciatedonastraight-linebasisovertheassets’estimatedeconomicuseful lives.Managementestimatestheusefullivesoftheseplantandmachinerytobewithin15to20yearsfortimberindustry,and5to20yearsforpowerutilityindustry.Thesearethecommonlifeexpectanciesappliedinthetimberandpowerutilityindustries.Changesintheexpectedlevelofusagecouldimpacttheeconomicusefullivesandtheresidualvaluesoftheseassets,thereforefuturedepreciationchargescouldberevised.ThecarryingamountoftheGroup’splantandmachineryatthereportingdateisdisclosedinNote13.A5%differenceintheexpectedusefullivesoftheseassetsfrommanagement’sestimateswouldresultinapproximately2.1%(2011:1.8%)varianceintheGroup’sprofitfortheyear.






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3. Significant accounting judgements and estimates (continued)

b) Deferred tax assets

Deferredtaxassetsarerecognisedforunutilisedinvestmenttaxallowancesandunabsorbedcapitalallowancestotheextentthatitisprobablethattaxableprofitwillbeavailableagainstwhichtheinvestmenttaxallowancesandcapitalallowancescanbeutilised.Significantmanagementjudgementisrequiredtodeterminetheamountofdeferredtaxassetsthatcanberecognised,baseduponthelikelytimingandleveloffuturetaxableprofitstogetherwithfuturetaxplanningstrategies.ThetotalcarryingvalueofrecognisedunutilisedinvestmenttaxallowancesandunabsorbedcapitalallowancesoftheGroupwasRM29,680,948(31December2011:RM28,524,876,1January2011:RM29,125,336).

c) Impairment of loans and receivables

The Group assesses at each reporting date whether there is any objective evidence that a financial asset is impaired.Todeterminewhether there isobjectiveevidenceof impairment, theGroupconsiders factorssuchas theprobabilityofinsolvencyorsignificantfinancialdifficultiesofthedebtoranddefaultorsignificantdelayinpayments.

4. Revenue Group Company

2012 2011 2012 2011 RM RM RM RM

Saleofveneer 7,375,325 7,346,257 7,375,325 7,346,257Saleofplywood 123,864,674 112,142,683 123,864,674 112,142,683Saleoflaminatedveneerlumber 1,463,534 2,559,467 1,463,534 2,559,467Saleofelectricity 99,749 101,673 - -

132,803,282 122,150,080 132,703,533 122,048,407

5. Interest income


Interestincomefrom: Fixeddeposits 157,157 97,437 157,157 97,437Structuredinvestment 124,390 30,969 124,390 30,969Foreigncurrencyaccount 60,414 13,807 60,414 13,807Currentaccount 44,659 2,760 44,659 2,760Othersources - 5,699 - 5,699

386,620 150,672 386,620 150,672



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6. Other income

Group Company

2012 2011 2012 2011 RM RM RM RM

Gainondisposalofplantandmachinery 65,562 504,377 65,562 504,377Insuranceclaims 69,867 - 69,867 -Foreignexchangegain-realised 50,287 1,922,532 50,287 1,921,021Baddebtsrecovered 6,000 4,000 6,000 4,000Rentalincomefromland 18,000 21,000 78,000 81,000Rentalincomefrominvestmentproperties 112,000 102,000 112,000 102,000Sundryincome 43,555 365,997 43,555 365,997

365,271 2,919,906 425,271 2,978,395

7. Finance costs


Interestexpenseon: Bankoverdraft - 1,347 - 1,347

8. Profit before tax

Thefollowingamountshavebeenincludedinarrivingatprofitbeforetax:

Group Company 2012 2011 2012 2011

RM RM RM RM Employeebenefitsexpense 12,011,818 12,518,415 11,384,962 11,846,672Auditors’remuneration: -statutoryaudit 78,000 75,000 68,000 65,000-otherservices 140,148 103,090 134,148 97,090Depreciationofinvestmentproperties 54,790 41,169 54,790 41,169






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8. Profit before tax (continued)

Group Company

2012 2011 2012 2011 RM RM RM RM

Depreciationofproperty,plantandequipment 4,834,894 4,954,185 3,005,322 3,144,111Directoperatingexpensesarisingfrominvestmentproperties-rentalgeneratingproperties 79,200 47,540 79,200 47,540Non-executivedirectors’remuneration 253,500 304,500 253,500 304,500Plantandequipmentscrapped 2 - 2 -Foreignexchangelosses-unrealised 232,848 944,012 232,848 944,012Rentalofland 28,217 24,700 28,217 24,700Rentalofofficepremise 104,000 - 104,000 -Rentalofparkinglotsandofficeequipment 9,947 15,084 9,947 15,084

9. Employee benefits expense


Salaries,wages,bonuses,incentivesandallowances 11,705,953 12,218,199 11,091,030 11,559,934Definedcontributionplan 270,187 266,238 259,181 253,923Socialsecuritycontributions 35,678 33,978 34,751 32,815

12,011,818 12,518,415 11,384,962 11,846,672

Included in employee benefits expense of the Group and the Company are executive directors’ remuneration amounting toRM772,360(2011:RM888,120)asfurtherdisclosedinNote10.



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10. Directors’ remuneration

Group and Company

2012 2011 RM RM

Executivedirectors’remuneration:

Fees - -Definedcontributionplans 9,360 18,120Otheremoluments 763,000 870,000

Totalexecutivedirectors’remuneration 772,360 888,120 Non-executivedirectors’remuneration Fees 180,000 180,000Otheremoluments 73,500 124,500

Totalnon-executivedirectors’remuneration 253,500 304,500

Totaldirectors’remuneration 1,025,860 1,192,620

ThenumberofdirectorsoftheCompanywhosetotalremunerationduringthefinancialyearfellwithinthefollowingbandisanalysedbelow:

Number of Directors 2012 2011

Executivedirectors: RM50,001-RM100,000 1 2RM100,001-RM150,000 - -RM150,001-RM200,000 3 3RM200,001-RM250,000 1 -RM250,001-RM300,000 - 1 Non-executivedirectors: RM50,000-RM100,000 4 3RM100,001-RM150,000 - 1





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11. Income tax expense

Major components of income tax expense

Majorcomponentsofincometaxexpenseforthefinancialyearsended31December2012and2011are:

Group Company

2012 2011 2012 2011 RM RM RM RM

Statements of comprehensive income: Currentincometax: -Malaysianincometax 97,375 2,014,621 97,375 2,014,621-Overprovisioninrespectofpreviousyears (3,122,139) (579,454) (3,122,139) (579,454)

(3,024,764) 1,435,167 (3,024,764) 1,435,167

Deferredincometax:Originationandreversaloftemporarydifferences 143,681 176,220 (240,452) 61,604Overprovisioninrespectofpreviousyears (335,095) (2,040) (336,396) (2,875)

(191,414) 174,180 (576,848) 58,729

Incometaxexpenserecognisedinprofitorloss (3,216,178) 1,609,347 (3,601,612) 1,493,896



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11. Income tax expense (continued)

Reconciliation between tax expense and accounting profit

Group Company

2012 2011 2012 2011 RM RM RM RM

Accountingprofitbeforetax 8,384,048 15,329,277 6,860,755 14,882,011 TaxatMalaysianstatutorytaxrateof25%(2011:25%) 2,096,012 3,832,320 1,715,189 3,720,503Adjustments: Non-deductibleexpenses 161,393 575,496 158,083 572,697Effectofexpenseseligiblefordoubledeductiontaxincentives (2,016,349) (2,216,975) (2,016,349) (2,216,975)Overprovisionofcurrentincometaxinrespectofpreviousyear (3,122,139) (579,454) (3,122,139) (579,454)Overprovisionofdeferredincometaxinrespectofpreviousyears (335,095) (2,040) (336,396) (2,875)

Incometaxexpenserecognisedinprofitorloss (3,216,178) 1,609,347 (3,601,612) 1,493,896

DomesticincometaxiscalculatedattheMalaysianstatutorytaxrateof25%(2011:25%)oftheestimatedassessableprofitfortheyear.

12. Earnings per share

Basicearningspershareamountiscalculatedbydividingprofitfortheyear,netoftax,attributabletoownersoftheCompanybytheweightedaveragenumberofordinarysharesoutstandingduringthefinancialyear.

TheCompanyhasnodilutivepotentialordinaryshares.






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12. Earnings per share (continued)

Group 2012 2011

RM RM

ProfitnetoftaxattributabletoownersoftheCompanyusedinthecomputationofbasicearningspershare 11,600,226 13,719,930

Number of Number of shares sharesWeightedaveragenumberofordinarysharesforbasicearningspersharecomputation 103,200,000 99,322,740 Basicearningsperordinaryshare(sen) 11.24 13.81

13. Property, plant and equipment

Leasehold Factory and Motor vehicles Furniture, land office heavy fittings, buildings equipment equipment, Plant and and machinery renovation Total RM RM RM RM RM

Group

Cost: At 1 January 2011 700,080 11,629,291 116,963,530 1,371,178 130,664,079Additions - 3,600 1,700,058 17,926 1,721,584Disposals - - (2,352,918) - (2,352,918) At 31 December 2011 and 1 January 2012 700,080 11,632,891 116,310,670 1,389,104 130,032,745Additions - 107,595 997,896 326,791 1,432,282Transfer(Note14) - (1,639,950) - (370,086) (2,010,036)Disposals - - (40,519) - (40,519)Scrapped - - (121,500) - (121,500) At 31 December 2012 700,080 10,100,536 117,146,547 1,345,809 129,292,972




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13. Property, plant and equipment (continued) Leasehold Factory and Motor vehicles Furniture, land office heavy fittings, buildings equipment equipment, Plant and and machinery renovation Total RM RM RM RM RM

Group (continued)

Accumulated depreciation: At 1 January 2011 28,382 7,687,978 74,707,902 1,252,367 83,676,629Depreciationchargefortheyear 9,460 465,777 4,428,712 50,236 4,954,185Disposals - - (2,314,657) - (2,314,657)

At 31 December 2011and 1 January 2012 37,842 8,153,755 76,821,957 1,302,603 86,316,157Depreciationchargefortheyear 9,461 352,137 4,409,850 63,446 4,834,894Transfer(Note14) - (190,607) - (370,080) (560,687)Disposals - - (6,081) - (6,081)

Scrapped - - (121,498) - (121,498)

At31December2012 47,303 8,315,285 81,104,228 995,969 90,462,785 Net carrying amount:

At31December2011 662,238 3,479,136 39,488,713 86,501 43,716,588 At31December2012 652,777 1,785,251 36,042,319 349,840 38,830,187

Company

Cost: At 1 January 2011 700,080 11,629,291 89,449,274 1,347,346 103,125,991Additions - 3,600 1,486,308 16,206 1,506,114Disposals - - (2,352,918) - (2,352,918)

At 31 December 2011and 1 January 2012 700,080 11,632,891 88,582,664 1,363,552 102,279,187Additions - 107,595 673,720 321,231 1,102,546Transfer(Note14) - (1,639,950) - (370,086) (2,010,036)Disposals - - (40,519) - (40,519)Scrapped - - (121,500) - (121,500)

At 31 December 2012 700,080 10,100,536 89,094,365 1,314,697 101,209,678






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13. Property, plant and equipment (continued) Leasehold Factory and Motor vehicles Furniture, land office heavy fittings, buildings equipment equipment, Plant and and machinery renovation Total RM RM RM RM RM

Company (continued)

Accumulated depreciation:

At 1 January 2011 28,382 7,687,978 66,016,335 1,238,028 74,970,723Depreciationchargefortheyear 9,460 465,777 2,621,682 47,192 3,144,111Disposals - - (2,314,657) - (2,314,657)

At 31 December 2011and 1 January 2012 37,842 8,153,755 66,323,360 1,285,220 75,800,177Depreciationchargefortheyear 9,461 352,137 2,584,296 59,428 3,005,322Transfer(Note14) - (190,607) - (370,080) (560,687)Disposals - - (6,081) - (6,081)Scrapped - - (121,498) - (121,498)

At 31 December 2012 47,303 8,315,285 68,780,077 974,568 78,117,233 Net carrying amount: At31December2011 662,238 3,479,136 22,259,304 78,332 26,479,010 At31December2012 652,777 1,785,251 20,314,288 340,129 23,092,445

14. Investment properties Group and Company RM

Cost: At 1 January 2011 and 31 December 2011 1,641,312Transferfrompropertyplantandequipment 2,010,036

At 31 December 2012 3,651,348




�0




14. Investment properties (continued)

Group and Company RM

Accumulated depreciation: At 1 January 2011 123,592Chargefortheyear 41,169

At 31 December 2011 164,761Transferfrompropertyplantandequipment 560,687Chargefortheyear 54,790

At 31 December 2012 780,238Net carrying amount: At31December2011 1,476,551 At31December2012 2,871,110

Thestratatitletotheinvestmentpropertiesisbeingprocessedbytherelevantauthority.

TheDirectorsestimatethefairvaluesoftheinvestmentpropertiestobeapproximatelyRM4,263,008.

15. Investment in a subsidiary Company 31.12.2012 31.12.2011 1.1.2011 RM RM RM Cost Unquotedshares 5,000,000 5,000,000 15,000,000Detailsofthesubsidiary,whichisaprivatelimitedcompanyincorporatedanddomiciledinMalaysia,areasfollows:

Name of subsidiary Principal activities Proportion (%) of ownership interest 2012 2011

UntungRiaSdn.Bhd. Generation,transmission, distributionandsaleofelectricity 100% 100%






�1


16. Other investments

Group and Company 31.12.2012 31.12.2011 1.1.2011 RM RM RM

Current

Cost Held-to-maturityinvestment -Short-termstructuredinvestment - 2,600,000 - Non-current Cost InvestmentinGolfandCountryClubmembership 149,040 149,040 149,040Held-to-maturityinvestment -Structuredinvestment 1,000,000 1,000,000 1,000,000

1,149,040 1,149,040 1,149,040

Thestructuredinvestmentisprincipalprotectedifheldtomaturityanduponearlyterminationbythebankers.

Theshort-termstructuredinvestmentearnsafixedinterestrateof3.58%perannum.

Thenon-currentstructureinvestmentearnsfixedinterestsasfollows:

-Year1 : 3.08%perannum,plusbonusinterestof2%forthefirstquarteroftheyear.-Year2to5 : 0.34%perannum,plusenhancedinterest(3MKLIBOR)of2.70%per annumforthenumberofdaysthatthedaily3MKLIBORisfixedator belowapredefinedlevelthroughoutyear2to5.

Thestructuredinvestmentsarepledgedassecuritiesforoverdraftfacility.




��




17. Deferred tax

Deferredincometaxasatreportingdaterelatestothefollowing:

As at Recognised As at Recognised As at 1 January in profit or 31 December in profit 31 December 2011 loss 2011 loss 2012

RM RM RM RM RM

Group

Deferred tax liabilities: Property,plantandequipment (6,743,822) (24,065) (6,767,887) (97,604) (6,865,491) Deferred tax assets: Unabsorbedcapitalallowances 705,475 (150,115) 555,360 289,018 844,378Unutilisedinvestmenttaxallowances 6,575,859 - 6,575,859 - 6,575,859

7,281,334 (150,115) 7,131,219 289,018 7,420,237

537,512 (174,180) 363,332 191,414 554,746 Company Deferred tax liabilities: Property,plantandequipment (2,880,341) (58,729) (2,939,070) (178,759) (3,117,829) Deferred tax assets: Unabsorbedcapitalallowances - - - 755,607 755,607

(2,880,341) (58,729) (2,939,070) 576,848 (2,362,222)






��


17. Deferred tax (continued)

31.12.2012 31.12.2011 1.1.2011 RM RM RM

Group

Presented after appropriate offsetting as follows: Deferredtaxassets 2,916,968 3,302,402 3,417,853Deferredtaxliabilities (2,362,222) (2,939,070) (2,880,341)

554,746 363,332 537,512

Company Presented after appropriate offsetting as follows: Deferredtaxassets - - -Deferredtaxliabilities (2,362,222) (2,939,070) (2,880,341)

(2,362,222) (2,939,070) (2,880,341)

Unabsorbedcapitalallowances

At reporting date, the subsidiary has unabsorbed capital allowances that are available for offset against future taxable profits,subjecttonosubstantialchangeinshareholdingsofthesubsidiaryundertheIncomeTaxAct,1967andguidelinesissuedbythetaxauthority.

18. Inventories

Group and Company 31.12.2012 31.12.2011 1.1.2011 RM RM RM

Cost Rawmaterials 1,564,091 919,671 1,104,927Work-in-progress 5,079,051 6,160,326 5,090,324Finishedgoods 9,162,725 16,803,312 12,111,365Consumables 2,607,497 2,779,957 2,196,795Logsintransits - - 1,781,416

18,413,364 26,663,266 22,284,827




��




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��


20. Cash and bank balances (continued)

Shorttermdepositsaremadeforvaryingperiodsofbetween1monthand2monthsdependingontheimmediatecashrequirementoftheGroupandtheCompany.Shorttermandotherdepositsearninterestattherespectivedepositrates.Theweightedaverageeffectiveinterestrateasat31December2012fortheGroupandtheCompanywas2.78%(31December2011:3.02%,1January2011:2.88%)perannum.

21. Borrowings

BankoverdraftfacilityofRM3,500,000wasnotutilisedasattheendofthefinancialyear.Theoverdraftfacilityissecuredbythefollowing:i) certainfixeddepositandlong-termstructuredinvestmentsoftheCompany;ii) jointandseveralguaranteesbycertaindirectorsoftheCompany;andiii) negativepledgeonallassetsoftheCompany.




��




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��


23. Share capital and share premium Group and Company Number of ordinary shares of RM0.50 each Amount

2012 2011 2012 2011 RM RM

Issued and fully paid At1January 103,200,000 91,000,000 51,600,000 45,500,000

Issuedduringtheyear - 12,200,000 - 6,100,000

At31December 103,200,000 103,200,000 51,600,000 51,600,000

Authorised share capitalAt1Januaryand31December 300,000,000 300,000,000 150,000,000 150,000,000

Group and Company 2012 2011 RM RM

Share premium At1January 883,420 -Sharepremiumarisingfromissuanceofshares - 1,220,000Shareissuanceexpenses - (336,580)

At31December 883,420 883,420

TheholdersofordinarysharesareentitledtoreceivedividendsasandwhendeclaredbytheCompany.AllordinarysharescarryonevotepersharewithoutrestrictionsandrankedequallywithregardtotheCompany’sresidualassets.

24. Retained earnings

TheCompanyhas elected for the irrevocable option under FinanceAct 2007 todisregard the108balance.Hence, theCompanywillbeabletodistributedividendsoutofitsentireretainedearningsasat31December2012and2011underthesingletiersystem.




�0




25. Related party transactions

a) Sale and purchase of goods and services

Inadditiontotherelatedpartyinformationdisclosedelsewhereinthefinancialstatements,thefollowingsignificanttransactionsbetweentheGroupandrelatedpartiestookplaceattermsagreedbetweenthepartiesduringthefinancialyear:

Group Company

2012 2011 2012 2011 RM RM RM RM

Purchaseofelectricityfromsubsidiary - - 4,644,988 4,163,588

PurchaseofedgingtapesfromacompanyinwhichoneofthedirectorsoftheCompanyhasinterest 357,284 433,145 357,284 433,145 Rentalincomereceivedfromsubsidiary - - 60,000 60,000 Rentalofofficepaidtoadirector 104,000 - 104,000 -

Salestoadirector 2,700 - 2,700 -

CompanyinwhichoneofthedirectorsoftheCompanyhasinterest:

TheGrouppurchasededgingtapesfromSabarinaCorporationSdn.Bhd.,acompanyinwhichoneofthedirectorsoftheCompanyhasinterest.






�1


25. Related party transactions (continued)

b) Compensation of key management personnel

Theremunerationofdirectorsandothermembersofkeymanagementduringthefinancialyearwasasfollows:


Short-termemployeebenefits 1,384,500 1,505,200 1,306,500 1,428,200Definedcontributionplan 23,220 42,420 23,220 42,420

1,407,720 1,547,620 1,329,720 1,470,620

Includedinthetotalremunerationofkeymanagementpersonnelare:


Directors’remuneration 1,025,860 1,192,620 1,025,860 1,192,620

26. Capital commitments

Capitalcommitmentsasatthereportingdateareasfollows:


Approvedandcontractedfor: Acquisitionofmachinery 279,000 611,200 279,000 361,200 Approvedbutnotcontractedfor: Acquisitionofmachinery 186,091 - - -




��




27. Fair value of financial instruments

A. Fair value of financial instruments by classes that are not carried at fair value and whose carrying amounts are not reasonable approximation of fair value.

Group and Company 2012 2011 Note Carrying Fair Carrying Fair amount Value amount Value RM RM RM RM

Financialassets:

Otherinvestment(non-current) -Golf&CountryClubmembership 16 149,040 # 149,040 #

# Fairvalueinformationhasnotbeendisclosedforthisfinancialinstrumentcarriedatcostbecausefairvaluecannotbemeasuredreliably.

B. Determination of fair value

Financialinstrumentsthatarenotcarriedatfairvalueandwhosecarryingamountsarereasonableapproximationoffairvalue

Thefollowingareclassesoffinancialinstrumentsthatarenotcarriedatfairvalueandwhosecarryingamountsarereasonableapproximationoffairvalue:

Note

Tradeandotherreceivables(current) 19Tradeandotherpayables(current) 22Otherinvestments(non-current) -Structuredinvestment 16

Thecarryingamountsofthesefinancialassetsandliabilitiesarereasonableapproximationoffairvaluesduetotheirshort-termnature.

Thecarryingamountofotherinvestmentisreasonableapproximationsoffairvalueduetotheinsignificantimpactofdiscounting.






��


28. Financial risk management objectives and policies

TheGroupandtheCompanyareexposedtofinancialrisksarisingfromtheiroperationsandtheuseoffinancialinstruments.Thekeyfinancialrisksincludecreditrisk,liquidityrisk,interestrateriskandforeigncurrencyrisk.

TheBoardofDirectors reviewsandagreespoliciesandprocedures for themanagementof these risks.Theauditcommitteeprovidesindependentoversighttotheeffectivenessoftheriskmanagementprocess.

Itis,andhasbeenthroughoutthecurrentandpreviousfinancialyears,theGroup’spolicythatnoderivativesshallbeundertaken.TheGroupandtheCompanydonotapplyhedgeaccounting.

ThefollowingsectionsprovidedetailsregardingtheGroup’sandCompany’sexposuretotheabove-mentionedfinancialrisksandtheobjectives,policiesandprocessesforthemanagementoftheserisks.

a) Credit risk

The Group’s objective is to seek continual revenue growth while minimising losses incurred due to increased credit riskexposure.TheGrouptradesonlywithrecognisedandcreditworthythirdparties.ItistheGroup’spolicythatallcustomerswhowishtotradeoncredittermsaresubjecttocreditverificationprocedures.Inaddition,receivablebalancesaremonitoredonanongoingbasiswiththeresultthattheGroup’sexposuretobaddebtsisnotsignificant.

Exposuretocreditrisk

Atthereportingdate,theGroup’sandtheCompany’smaximumexposuretocreditriskisrepresentedbythecarryingamountofeachclassoffinancialassetsrecognisedinthestatementsoffinancialposition.

Creditriskconcentrationprofile

TheGroupdeterminesconcentrationsofcreditriskbymonitoringthecountryandindustrysectorprofileofitstradereceivablesonanongoingbasis.Thecreditriskconcentrationprofilesofthetradereceivablesatthereportingdateareasfollows:

Group 2012 2011 RM % of total RM % of total

By country: USA 5,031,757 77% 4,369,941 65%India 248,316 4% 526,196 8%Japan - - 71,916 1%Korea 549,570 8% 1,416,270 21%Taiwan 690,922 11% 259,073 4%Malaysia 17,647 <1% 66,220 1%

6,538,212 100% 6,709,616 100%




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28. Financial risk management objectives and policies (continued)

a) Credit risk (continued)

Creditriskconcentrationprofile(continued)

Company 2012 2011 RM % of total RM % of total

By country: USA 5,031,757 77% 4,369,941 65%India 248,316 4% 526,196 8%Japan - - 71,916 1%Korea 549,570 8% 1,416,270 21%Taiwan 690,922 11% 259,073 4%Malaysia - - 39,923 1%

6,520,565 100% 6,683,319 100%

Financialassetsthatareneitherpastduenorimpaired

InformationregardingtradereceivablesthatareneitherpastduenorimpairedisdisclosedinNote19.Depositswithbanksandotherfinancialinstitutionsthatareneitherpastduenorimpairedareplacedwithorenteredintowithreputablefinancialinstitutionswithhighcreditratingsandnohistoryofdefault.

b) Liquidity risk

LiquidityriskistheriskthattheGrouportheCompanywillencounterdifficultyinmeetingfinancialobligationsduetoshortageof funds.TheGroup’sand theCompany’sexposure to liquidity riskarisesprimarily frommismatchesof thematuritiesoffinancialassetsandliabilities.TheGroup’sandtheCompany’sobjectiveistomaintainabalancebetweencontinuityoffundingandflexibilitythroughtheuseofstand-bycreditfacilities.






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28. Financial risk management objectives and policies (continued)

c) Interest rate risk

InterestrateriskistheriskthatthefairvalueorfuturecashflowsoftheGroup’sandtheCompany’sfinancialinstrumentswillfluctuatebecauseofchangesinmarketinterestrates.

Theinvestmentsinfinancialassetsaremainlyshort-terminnatureandhavebeenmostlyplacedinfixeddeposits.

d) Foreign currency risk

Foreigncurrencyriskistheriskthatthefairvalueorfuturecashflowsofafinancial instrumentwillfluctuatebecauseofchangesinforeignexchangerates.

TheGrouphastransactionalcurrencyexposuresarisingfromsalesorpurchaseofplantandmachinerythataredenominateda currency other than in RM. The foreign currency in which these transactions are denominated is mainly US Dollars(“USD”).

Approximately91%(2011:89%)oftheGroup’ssalesaredenominatedinforeigncurrencieswhilstalmost76%(2011:75%)and0%(2011:2%)oftheGroup’sreceivablesandpayablesbalancesaredenominatedinforeigncurrencies.

TheGroupandtheCompanyalsoholdcashandcashequivalentsdenominatedinforeigncurrenciesforworkingcapitalpurposes.Atthereportingdate,suchforeigncurrencybalances(USD)amounttoRM44,876,948(2011:RM8,674,636).

Sensitivityanalysisforforeigncurrencyrisk

ThefollowingtabledemonstratesthesensitivityoftheGroup’sprofitnetoftaxtoareasonablypossiblechangeintheUSDexchangeratesagainsttherespectivefunctionalcurrenciesoftheGroupentities,withallothervariablesheldconstant.

Change in Increase in currency rate profit net of tax Group Company 2012 2012 RM RM

USD/RM +5% 1,927,407 1,927,407

A5%decreaseinthecurrencyrateshownabovewouldhaveresultedinanequivalent,butoppositeeffecttoprofitnetoftax,withallothervariablesheldconstant.




��




29. Capital management

TheprimaryobjectiveoftheGroup’scapitalmanagementistoensurethatitmaintainsastrongcreditratingandhealthycapitalratiosinordertosupportitsbusinessandmaximiseshareholdervalue.

TheGroupmanagesitscapitalstructureandmakesadjustmentstoit,inlightofchangesineconomicconditions.Tomaintainoradjustthecapitalstructure,theGroupmayadjustthedividendpaymenttoshareholders,returncapitaltoshareholdersorissuenewshares.Nochangesweremadeintheobjectives,policiesorprocessesduringtheyearsended31December2012and31December2011.

30. Segment information

For management purposes, the Group is organised into business units based on their products and services, and has tworeportableoperatingsegmentsasfollows:

i. Themanufacturingsegmentisbusinessofmanufacturingandsaleofplywood,veneerandlaminatedveneerlumber.ii. Theelectricitysegmentisthebusinessofgeneration,transmission,distributionandsaleofelectricity.

Managementmonitorstheoperatingresultsofitsbusinessunitsseparatelyforthepurposeofmakingdecisionsaboutresourceallocationandperformanceassessment.Segmentperformanceisevaluatedbasedonoperatingprofitorlosswhich,incertainrespects as explained in the table below, is measured differently from operating profit or loss in the consolidated financialstatements.

Transferpricesbetweenoperatingsegmentsareonanarm’slengthbasisinamannersimilartotransactionswiththirdparties.






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30. Segment information (continued)

Note Nature of adjustments and eliminations to arrive at amounts reported in the consolidated financial statements

A Inter-segmentrevenuesareeliminatedonconsolidation. B Additiontodepreciationandamortisationconsistof:

2012 2011 RM RM Depreciationofinvestmentproperties 54,790 41,169 C Additionstonon-currentassetsconsistof: 2012 2011 RM RM Property,plantandequipment 1,432,282 1,721,584

D Thefollowingitemsareaddedtosegmentassetstoarriveattotalassetsreportedintheconsolidatedstatementoffinancialposition:

2012 2011 RM RM Otherinvestments 1,149,040 3,749,040 Deferredtaxassets 2,916,968 3,302,402 Investmentproperties 2,871,110 1,476,551

6,937,118 8,527,993 E Thefollowingitemsareaddedtosegmentliabilitiestoarriveattotalliabilitiesreportedintheconsolidatedstatementof

financialposition:

2012 2011 RM RM Deferredtaxliabilities 2,362,222 2,939,070 Dividendspayable 6,192,000 6,192,000

8,554,222 9,131,070






�1


30. Segment information (continued)

GeographicalinformationRevenueinformationbasedonthegeographicallocationofcustomersisasfollows: 2012 2011 RM RM

Australia - 1,135,854Canada 217,222 -People’sRepublicofChina 936,802 967,849HongKong 780,759 -India 8,552,742 10,932,805Japan - 267,463Korea 14,898,496 7,725,510Malaysia 11,066,581 12,959,852RepublicoftheMarshallIslands 162,689 -Singapore 1,111,680 -Taiwan 19,057,062 29,060,145UnitedKingdom 547,863 -USA 75,471,386 59,100,602

132,803,282 122,150,080

31. Dividends

Group and Company 2012 2011 RM RM

Recognised during the financial year.

Dividendsonordinaryshares: -Interimtaxexempt(single-tier)dividendfor2010:6.8132senperordinaryshareofRM0.50each - 6,200,000-Interimtaxexempt(single-tier)dividendfor2011:6senperordinaryshareofRM0.50each - 6,192,000-Interimtaxexempt(single-tier)dividendfor2012:6senperordinaryshareofRM0.50each 6,192,000 -

6,192,000 12,392,000

32. Authorisation of financial statements for issue

Thefinancialstatementsfortheyearended31December2012wereauthorisedforissueinaccordancewitharesolutionofthedirectorson11April2013.




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33. Breakdown of retained earnings into realised and unrealised

ThebreakdownoftheretainedearningsoftheGroupandoftheCompanyasat31December2012intorealisedandunrealisedprofits is presented in accordance with the directive issued by Bursa Malaysia Securities Berhad dated 25 March 2010 andpreparedinaccordancewithGuidanceonSpecialMatterNo.1,DeterminationofRealisedandUnrealisedProfitsorLossesintheContextofDisclosurePursuanttoBursaMalaysiaSecuritiesBerhadListingRequirements,asissuedbytheMalaysianInstituteofAccountants.

Group Company 2012 2011 2012 2011

RM RM RM RM

TotalretainedearningsoftheCompanyanditssubsidiary -Realised 63,091,867 59,620,559 48,569,096 46,621,081-Unrealised 321,898 (1,615,020) (2,595,070) (4,917,422)

63,413,765 58,005,539 45,974,026 41,703,659Less:Consolidationadjustments (20,000) (20,000) - -

Retainedearningsasperfinancialstatements 63,393,765 57,985,539 45,974,026 41,703,659

SUPPLEMENTARYINFORMATION





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ANALYSIS OFSHAREHOLDINGS

Asat9April2013

Authorisedsharecapital : RM150,000,000.00Issuedandfullypaid-upcapital : RM51,600,000.00Classofshares : OrdinarysharesofRM0.50pershareVotingrightsofshareholders : Onevoteperordinaryshare

DISTRIBUTION OF SHAREHOLDINGS AS AT 9 APRIL 2013

Size of holdings No. of holders % No. of shares %

1–99 3 0.40 100 0.00 100–1,000 100 13.17 86,800 0.08 1,001–10,000 440 57.97 2,504,800 2.43 10,001–100,000 181 23.85 5,964,400 5.78 100,001–5,159,999(*) 29 3.82 49,453,668 47.92 5,160,000andabove(**) 6 0.79 45,190,232 43.79

Total 759 100.00 103,200,000 100.00

* Lessthan5%ofissuedshares** 5%andaboveofissuedshares

SUBSTANTIAL SHAREHOLDERS AS AT 9 APRIL 2013

Direct Indirect No. of shares % No. of shares % ChenChunHsiung 9,470,324 9.18 - -LuKuanCheng 9,203,000 8.92 - -LuChinTing 7,576,258 7.34 4,419,484(1) 4.28LinFongMing 6,313,550 6.12 12,627,100(1) 12.24LinHaoWen 6,313,550 6.12 12,627,100(2) 12.24LinHaoYu 6,313,550 6.12 12,627,100(2) 12.24LuWeiHsu 4,419,484 4.28 7,576,258(2) 7.34LuWeiSheng - - 11,995,742(2) 11.62YangChienChih 3,156,776 3.06 9,470,328(1) 9.18YangHsiHsien 3,156,776 3.06 9,470,328(2) 9.18YangSen 3,156,776 3.06 9,470,328(2) 9.18YangWeiSzu 3,156,776 3.06 9,470,328(2) 9.18

(1)Deemedinterestbyvirtueofsharesheldbychildren(2)Deemedinterestbyvirtueofsharesheldbyclosefamilymembers





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ANALYSIS OFSHAREHOLDINGS (Cont’d)

DIRECTORS’ SHAREHOLDINGS

Direct Indirect No. of shares % No. of shares %

LinHaoWen 6,313,550 6.12 12,627,100(1) 12.24LinLiehMing 5,050,840 4.89 - -YangSen 3,156,776 3.06 9,470,328(1) 9.18AznamBinMansor - - - -WongYokeNyen - - - -NgTianMeng - - - -

(1)Deemedinterestbyvirtueofsharesheldbyclosefamilymembers

LIST OF THIRTY LARGEST SHAREHOLDERS AS AT 9 APRIL 2013

No. Name of shareholders No. of shares held %

1 ChenChunHsiung 9,470,324 9.18 2 RHBCapitalNominees(Asing)SdnBhd PledgedSecuritiesAccountforLuKuanCheng 9,203,000 8.92 3 LuChinTing 7,576,258 7.34 4 LinFongMing 6,313,550 6.12 5 PublicNominees(Asing)SdnBhd PledgedSecuritiesAccountforLinHaoWen(E-KKU/KNG) 6,313,550 6.12 6 PublicNominees(Asing)SdnBhd PledgedSecuritiesAccountforLinHaoYu(E-KKU/KNG) 6,313,550 6.12 7 LuChun-Chien 5,050,840 4.89 8 PublicNominees(Asing)SdnBhd PledgedSecuritiesAccountforLinLiehMing(E-KKU/KNG) 5,050,840 4.89 9 LuWeiHsu 4,419,484 4.28 10 KuoChang-Fang 3,927,800 3.81 11 HuangChia-Hsing 3,766,900 3.65 12 PublicNominees(Asing)SdnBhd PledgedSecuritiesAccountforYangChienChih(E-KKU/KNG) 3,156,776 3.06



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ANALYSIS OFSHAREHOLDINGS (Cont’d)

LIST OF THIRTY LARGEST SHAREHOLDERS AS AT 9 APRIL 2013

No Name of shareholders No. of shares held %

13 PublicNominees(Asing)SdnBhd PledgedSecuritiesAccountforYangHsiHsien(E-KKU/KNG) 3,156,776 3.0614 YangSen 3,156,776 3.0615 YangWeiSzu 3,156,776 3.0616 ChenZong-Liang 3,003,000 2.9117 HsuehChenSheng 3,003,000 2.9118 YangWen-Chia 3,003,000 2.9119 LinSu-Hui 949,600 0.9220 KhooHockLeong 802,600 0.7821 ChangYung-Sheng 712,200 0.6922 MaybankNominees(Tempatan)SdnBhd PledgedSecuritiesAccountforTanSonHuat 602,600 0.5823 NgTinChoo 325,300 0.3124 OoiCheeMin 315,800 0.3125 CimsecNominees(Tempatan)SdnBhd PledgedSecuritiesAccountforSongSueiFeng(MQ0343) 315,500 0.3026 CheahOiChee 294,900 0.2827 OoiSingHwat 200,000 0.1928 JFApexNominees(Asing)SdnBhd PledgedSecuritiesAccountforChiangPing-Chung(Margin) 162,000 0.1629 PublicNominees(Tempatan)SdnBhd PledgedSecuritiesAccountforYoungKetYee(E-TWU) 155,000 0.1530 SuChinYung 133,000 0.13

94,010,700 91.09





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FOCUS LUMBER BERHAD(CompanyNo.188710-V)(IncorporatedinMalaysia)

NOTICE OF TWENTY-THIRD ANNUAL GENERAL MEETING

NOTICEISHEREBYGIVENTHATtheTwenty-ThirdAnnualGeneralMeetingofFOCUSLUMBERBERHADwillbeheldatZara’sBoutiqueHotel,HarbourCity,JalanPantaiBaru,Sembulan,88100KotaKinabaluonThursday,23May2013at10.00a.m.totransactthefollowingbusiness:-

A G E N D A

Ordinary Business

1. ToreceivetheAuditedFinancialStatementsforthefinancialyearended31December2012andtheReportsoftheDirectorsandAuditorsthereon. (Please refer to Explanatory Note 1)

2. ToapprovethepaymentofDirectors’feesinrespectofthefinancialyearended31December2012. (Resolution 1)

3. Tore-electthefollowingDirectorswhoretirepursuanttoArticle67oftheCompany’sArticlesofAssociation:-

(i)AznamBinMansor (Resolution 2)

(ii)WongYokeNyen (Resolution 3)

4. Tore-appointMessrsErnst&YoungasAuditorsoftheCompanyandtoauthorisetheDirectorstofix theirremuneration. (Resolution 4)Special Business

Toconsiderand,ifthoughtfit,topassthefollowingresolution,withorwithoutmodifications:-

5. OrdinaryResolutionAuthoritytoIssueSharesPursuanttoSection132DoftheCompaniesAct,1965.

“THATpursuanttoSection132DoftheCompaniesAct,1965,theDirectorsoftheCompanybeandareherebyempoweredtoissuesharesintheCompanyatanytimeanduponsuchtermsandconditionsandforsuchpurposesastheDirectorsmayintheirabsolutediscretiondeemfitprovidedthattheaggregatenumberofshares issuedpursuanttothisresolutiondoesnotexceed10%oftheissuedsharecapitaloftheCompanyforthetimebeingandthattheDirectorsbeandarealsoempoweredtoobtainapprovalforthelistingofandquotationfortheadditionalsharessoissuedonBursaMalaysiaSecuritiesBerhadandthatsuchauthorityshallcontinuetobeinforceuntiltheconclusionofthenextAnnualGeneralMeetingoftheCompanyunlessrevokedorvariedbytheCompanyatageneralmeeting.”

(Resolution 5)6. ToconsideranyotherbusinessofwhichduenoticeshallbegiveninaccordancewiththeCompaniesAct,1965.

BYORDEROFTHEBOARDWONGWAIFOONG(MAICSA7001358)WONGPEIRCHYUN(MAICSA7018710)Secretaries

KualaLumpur

Date:30April2013

NOTES:

1. Appointment of Proxy

(a) Amemberentitledtoattendandvoteatthemeetingisentitledtoappointproxy(ies)(orincaseofacorporation,adulyauthorised representative) toattendandvote inhis stead.Aproxyneednotbeamemberof theCompanyand theprovisionsofSection149(1)(b)oftheCompaniesAct,1965shallnotapplytotheCompany.

NOTICE OF ANNUAL GENERAL MEETING



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NOTES: (Con’d)

(b) Theinstrumentappointingaproxyshallbeinwriting(inthecommonorusualform)underthehandoftheappointororofhisattorneydulyauthorisedinwritingoriftheappointerisacorporation,eitherundersealorunderthehandofanofficerorattorneydulyauthorised.

(c) Amembershallbeentitled toappointnotmore thantwo (2)proxies toattendandvoteat thesamemeetingandthatwherethemembersappointtwo(2)proxies,suchappointmentshallbeinvalidunlesshespecifiestheproportionsofhisshareholdingstoberepresentedbyeachproxy.

(d) WhereamemberoftheCompany isanauthorisednomineeasdefined intheSecurities Industry (CentralDepositories)Act,1991(“SICDA”),itmayappointnotmorethantwo(2)proxiesinrespectofeachsecuritiesaccountitholdsinordinarysharesoftheCompanystandingtothecreditofthesaidsecuritiesaccount.

(e) Where amemberof theCompany is an exempt authorisednomineewhichholdsordinary shares in theCompany formultiplebeneficialowners inone (1)securitiesaccount (“omnibusaccount”), there isno limit to thenumberofproxieswhichtheexemptauthorisednomineemayappointinrespectofeachomnibusaccountitholds.

(f) Wheretheauthorisednomineeappointstwo(2)proxies,orwhereanexemptauthorisednomineeappointstwo(2)ormoreproxies,theproportionofshareholdingstoberepresentedbyeachproxymustbespecifiedintheinstrumentappointingproxies.

(g) The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed or anotarially certifiedcopyof that poweror authority shall bedepositedat theShareRegistrar of theCompanyat TricorInvestorServicesSdn.Bhd.(118401-V),Level17,TheGardensNorthTower,MidValleyCity,LingkaranSyedPutra,59200KualaLumpur,notlessthanforty-eight(48)hoursbeforethetimeforholdingthemeetingoranyadjournmentthereof.

(h) OnlythememberswhosenamesappearontheRecordofDepositorsasat13May2013shallbeentitletoattendandvoteatthismeetingorappointproxy(ies)toattendandvoteontheirbehalf.

2. Audited Financial Statements for the year ended 31 December 2012

TheAuditedFinancialStatementsinAgenda1ismeantfordiscussiononlyastheprovisionofSection169(1)oftheCompaniesAct,1965doesnotrequireaformalapprovaloftheshareholdersfortheAuditedFinancialStatements.Hence,thisAgendaisnotputforwardforvoting.

3. Ordinary Resolutions 2 and 3 - Re-election of Directors

TheBoardhadcarriedoutassessmentonthecontributionandperformanceaswellasthetheindependenceoftheIndependentDirectorsstandingforre-electionandsatisfiedthattheymeetthecriteriaofindependenceasprescribedintheMainMarketListingRequirementofBursaMalaysiaSecuritiesBerhad.

4. Explanatory Note on Special Business

Resolution No. 5 - Authority to Issue Shares

The proposed Resolution No. 5 is proposed for the purpose of granting a renewed general mandate (“General Mandate”) andempoweringtheDirectorstoissuesharesintheCompanyuptoanamountnotexceedingintotaltenpercentum(10%)oftheIssuedShareCapitaloftheCompanyforsuchpurposeastheDirectorsconsiderwouldbeintheinterestoftheCompany.

Theauthority,unlessrevokedorvariedbytheCompanyatageneralmeeting,willexpireatthenextAnnualGeneralMeeting.

TheGeneralMandateistoprovideflexibilitytotheCompanytoissuenewsecuritieswithouttheneedtoconveneseparategeneralmeetingtoobtainitsshareholders’approvalsoastoavoidincurringadditionalcostandtime.ThepurposeofthisGeneralMandateisforpossiblefundraisingexercisesincludingbutnotlimitedtofurtherplacementofsharesforpurposeoffundingcurrentand/orfutureinvestmentprojects,workingcapital,repaymentofbankborrowings,acquisitionsand/orforissuanceofsharesassettlementofpurchaseconsideration.

Asatthedateofthisnotice,theCompanydidnotissueanysharespursuanttothemandategrantedtotheDirectorsattheTwenty-Second Annual General Meeting because there were no investment(s), acquisition(s) or working capital that require fund raisingactivity.

NOTICE OF ANNUAL GENERAL MEETING (Cont’d)





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PROXY FORM

I/We

I.C/Passport/CompanyNo.

of

beingamember/membersofFOCUS LUMBER BERHAD herebyappoint

of

orfailingwhom, of

asmy/ourproxytovoteforme/usandonmy/ourbehalfattheTwenty-ThirdAnnualGeneralMeetingoftheCompany,tobeheldatZara’sBoutiqueHotel,HarbourCity,JalanPantaiBaru,Sembulan,88100KotaKinabalu,SabahonThursday,23May2013at10.00a.m.and,ateveryadjournmentthereoffor/against*theresolution(s)tobeproposedthereat.

Please indicate with an “x” in the spaces provided whether you wish your votes to be cast for or against the resolutions. In the absence of specific directions, your proxy will vote or abstain as he thinks fit.

Dated this __________ day of _________________ 2013

___________________________________Signature/CommonSealofShareholder(s)

*Strikeoutwhicheverisnotdesired.(Unlessotherwiseinstructed,theproxymayvoteashethinksfit).

Notes:

*Strikeoutwhicheverinnotdesired.(Unlessotherwiseinstructed,theproxymayvoteashethinksfit).

Notes:

(a) Amemberentitledtoattendandvoteatthemeetingisentitledtoappointproxy(ies)(orincaseofacorporation,adulyauthorisedrepresentative)toattendandvoteinhisstead.AproxyneednotbeamemberoftheCompanyandtheprovisionsofSection149(1)(b)oftheCompaniesAct,1965shallnotapplytotheCompany.

(b) Theinstrumentappointingaproxyshallbeinwriting(inthecommonorusualform)underthehandoftheappointororofhisattorneydulyauthorisedinwritingoriftheappointerisacorporation,eitherundersealorunderthehandofanofficerorattorneydulyauthorised.

(c) Amembershallbeentitledtoappointnotmorethantwo(2)proxiestoattendandvoteatthesamemeetingandthatwherethemembersappointtwo(2)proxies,suchappointmentshallbeinvalidunlesshespecifiestheproportionsofhisshareholdingstoberepresentedbyeachproxy.

(d) WhereamemberoftheCompanyisanauthorisednomineeasdefinedintheSecuritiesIndustry(CentralDepositories)Act,1991(“SICDA”),itmayappointnotmorethantwo(2)proxiesinrespectofeachsecuritiesaccountitholdsinordinarysharesoftheCompanystandingtothecreditofthesaidsecuritiesaccount.

(e) WhereamemberoftheCompanyisanexemptauthorisednomineewhichholdsordinarysharesintheCompanyformultiplebeneficialownersinone(1)securitiesaccount(“omnibusaccount”),thereisnolimittothenumberofproxieswhichtheexemptauthorisednomineemayappointinrespectofeachomnibusaccountitholds.

(f ) Wheretheauthorisednomineeappointstwo(2)proxies,orwhereanexemptauthorisednomineeappointstwo(2)ormoreproxies,theproportionofshareholdingstoberepresentedbyeachproxymustbespecifiedintheinstrumentappointingproxies.

(g) Theinstrumentappointingaproxyandthepowerofattorneyorotherauthority,ifany,underwhichitissignedoranotariallycertifiedcopyofthatpowerorauthorityshallbedepositedattheShareRegistraroftheCompanyatTricorInvestorServicesSdn.Bhd.(118401-V),Level17,TheGardensNorthTower,MidValleyCity,LingkaranSyedPutra,59200KualaLumpur,notlessthanforty-eight(48)hoursbeforethetimeforholdingthemeetingoranyadjournmentthereof.

(h) OnlythememberswhosenamesappearontheRecordofDepositorsasat13May2013shallbeentitletoattendandvoteatthismeetingorappointproxy(ies)toattendandvoteontheirbehalf.

Item AGENDA Resolution For Against

Ordinary Business

1 ReceivetheAuditedFinancialStatementsforthefinancialyearended31December2012togetherwiththeReportsoftheDirectorsandAuditorsthereon.

2 ApprovalonthepaymentofDirectors’feesforthefinancialyearended31December2012.

3(i) Re-electionofEncikAznamBinMansorasDirectoroftheCompanypursuanttoArticle67oftheCompany’sArticlesofAssociation.

3(ii) Re-electionofMr.WongYokeNyenasDirectoroftheCompanypursuanttoArticle67oftheCompany’sArticlesofAssociation.

4 Re-appointmentofMessrsErnst&YoungasAuditorsandauthorisedtheDirectorstofixtheirremunerations.

1

2

3

4

5

Special Business

5 AuthoritytotheDirectortoIssueSharespursuanttoSection132DoftheCompaniesAct,1965.

CDSaccountno. No.ofsharesheld

FOLD HERE

FOLD THIS FLAP FOR SEALING

The Share RegistrarTricor Investor Services Sdn Bhd (118401-V)

Level 17, The Gardens North TowerMid Valley City, Lingkaran Syed Putra

59200 Kuala Lumpur

AFFIX STAMP

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