annual report’o7 2. to declare a first and final single tier dividend of 6.5 sen per ordinary...

annual report’o7

contents

Notice of Annual General Meeting 02

Statement Accompanying Notice of Twenty-Eighth Annual General Meeting 05

Chairman’s Statement 06 Corporate Events 10 Our People and Faces 12

Corporate Structure 14 Corporate Information 16 Profile of Board of Directors 18

Five-Year Financial Highlights 28 Statement of Corporate Governance 29

Statement of Corporate Social Responsibility 40

Statement on Internal Control 41 Audit Committee Report 43

Statement of Directors’ Responsibilities in respect of the Audited Financial Statements 48

Directors’ Report 50 Statement by Directors 57 Statutory Declaration 57

Report of the Auditors 58 Income Statements 59 Balance Sheets 60

Consolidated Statement of Changes in Equity 62

Company Statement of Changes in Equity 64 Cash Flow Statements 65

Notes to Financial Statements 67 Analysis of Shareholdings 148

List of Properties 151 Proxy Form

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1. To receive and adopt Directors’ Report and Audited Financial Statements for the year ended 31 December 2007.

2. To declare a first and final single tier dividend of 6.5 sen per ordinary share for the year ended 31 December 2007.

3. To approve payment of Directors’ fees of RM136,668 for the year ended 31 December 2007.

4. To re-elect Datuk Jaswant Singh Kler retiring in accordance with Article 95 of the Company’s Articles of Association.

5. To re-elect Mr Tan Aik Kiong retiring in accordance with Article 95 of the Company’s Articles of Association.

6. To re-elect YB. Datuk Nur Jazlan bin Mohamed retiring in accordance with Article 86 of the Company’s Articles of Association.

7. To pass the following resolutions pursuant to Section 129(6) of the Companies Act, 1965:-

That pursuant to Section 129(6) of the Companies Act, 1965, the following persons be and are hereby re-appointed as Directors of the Company to hold office until the next Annual General Meeting:a) Mr Tan Soon Hong b) Mr William Tully

8. To re-appoint Messrs Ernst & Young as the Company’s Auditors and to authorise Directors to fix their remuneration.

As Special Business : To consider and, if thought fit, pass the following resolutions:-

9. ORDINARY RESOLUTION 1 PROPOSED AUTHORITY TO ISSUE SHARES PURSUANT TO SECTION 132D OF THE COMPANIES ACT, 1965

“THAT, subject always to the approvals of the relevant regulatory authorities, the Directors be and are hereby empowered by the shareholders, pursuant to Section 132D of the Companies Act, 1965 to issue new ordinary shares in the Company from time to time at such price, upon such terms and conditions, provided that the aggregate number of the new ordinary shares to be issued pursuant to this resolution does not exceed 10% of the issued capital of the Company for the time being AND THAT the Directors be and are empowered to obtain the approval from the Bursa Malaysia Securities Berhad (“Bursa Malaysia”) for listing and quotation for the additional new ordinary shares to be issued and THAT such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company.”

10. ORDINARY RESOLUTION 2 PROPOSED AUTHORITY TO ALLOT AND ISSUE SHARES PURSUANT TO THE EMPLOYEES’

SHARE OPTION SCHEME (ESOS)

“THAT pursuant to Section 132D of the Companies Act, 1965, approval be and is hereby given for the Directors to issue shares in the Company in accordance with the terms and conditions of the

notice of annual general meeting

Resolution 1

Resolution 2

Resolution 3

Resolution 4

Resolution 5

Resolution 6

Resolution 7Resolution 8

Resolution 9

Resolution 10

Resolution 11

NOTICE IS HEREBY GIVEN THAT the Twenty-Eighth Annual General Meeting of the Company will be held at Ballroom 2, LG Level, Eastin Hotel, 13, Section 16/11, Jalan Damansara, 46350 Petaling Jaya, Selangor on 22 May 2008 at 9.30 am to transact the following businesses:-

TSH Resources Berhad(49548-D)

(Incorporated in Malaysia)Annual Report �007

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Employees’ Share Option Scheme approved by the shareholders at the Extraordinary General Meeting held on 26 June 2001, provided that the total nominal value of shares to be issued pursuant to this resolution when aggregated with the nominal value of any shares or convertible securities issued during the preceding 12 months, shall not exceed ten per cent (10%) of the total issued and paid-up ordinary share capital of the Company at the time of issue and THAT such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company.”

11. ORDINARY RESOLUTION 3 PROPOSED RENEWAL OF THE AUTHORITY FOR SHARE BUY-BACK

“THAT, subject to the Companies Act, 1965, the Listing Requirements of the Bursa Malaysia, the Company’s Articles of Association and the approvals of other relevant authorities, the Company be and is hereby authorised to purchase and hold such number of ordinary shares of RM0.50 each in the Company (“Proposed Share Buy-Back”) as may be determined by the Directors of the Company from time to time through the Bursa Malaysia upon such terms and conditions as the Directors may deem fit in the interest of the Company provided that the aggregate number of shares purchased and/or held pursuant to this resolution does not exceed ten percent (10%) of the issued and paid-up share capital of the Company and that an amount not exceeding TSH’s total audited retained profits of RM45.289 million and share premium of RM92.529 million as at 31 December 2007 and retained profits of RM41.643 million and share premium of RM92.662 million as at 31 March 2008, would be allocated by TSH for the Proposed Share Buy-Back.

THAT such authority shall commence immediately upon passing of this ordinary resolution until the conclusion of the next Annual General Meeting of TSH unless earlier revoked or varied by ordinary resolution of shareholders of TSH in a general meeting or upon the expiration of the period within which the next Annual General Meeting is required by law to be held, whichever occurs first.

THAT the Directors be and are hereby authorised to take all steps necessary to implement, finalise and to give full effect to the Proposed Share Buy-Back and further THAT authority be and is hereby given to the Directors to decide in their discretion to either retain the shares so purchased as treasury shares, to be either distributed as share dividends or re-sold on the Bursa Malaysia or subsequently cancelled, or to cancel the shares so purchased, or a combination of both.”

12. ORDINARY RESOLUTION 4 PROPOSED RENEWAL OF THE EXISTING SHAREHOLDERS’ MANDATE AND PROPOSED

NEW SHAREHOLDERS’ MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE

“THAT approval be and is hereby given for the Renewal of the Existing Shareholders’ Mandate for the Company and/or its subsidiary companies to enter into recurrent related party transactions of a revenue or trading nature with related parties which are necessary for the day to day operations and on normal commercial terms not more favourable to the related parties than those generally available to the public and are not to the detriment of the minority shareholders as set out in Section 2.2 of the Circular to Shareholders dated 30 April 2008; and

THAT a New Shareholders’ Mandate be and is hereby granted for the Company and/or its subsidiary companies to enter into additional recurrent related party transactions of a revenue or trading nature with related parties which are necessary for the day to day operations and on normal commercial terms not more favourable to the related parties than those generally available to the public and are not to the detriment of the minority shareholders as set out in Section 2.2 of the Circular to Shareholders dated 30 April 2008;

(the “Mandate”)

Resolution 12

Resolution 13

notice of annual general meeting (cont’d.)

4

THAT such Mandate shall commence upon passing of this ordinary resolution and continue in force until:-

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

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

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

whichever is the earlier.

THAT the Directors be and are hereby empowered to do all such acts and things (including executing all such documents as may be required) as they may be considered expedient or necessary to give full effect to the Mandate with full powers to assent to any conditions, modifications, revaluations, variations and/or amendments (if any) as may be imposed by the relevant authorities.”

13. To transact any other business of which due notice shall have been given.

NOTICE OF DIVIDEND ENTITLEMENT AND PAYMENT

NOTICE IS ALSO HEREBY GIVEN THAT the first and final single tier dividend of 6.5 sen per ordinary share for the year ended 31 December 2007, if approved by the shareholders at the forthcoming Annual General Meeting will be paid on 22 July 2008 to Depositors registered in the Record of Depositors at the close of business on 30 June 2008.

A depositor shall qualify for entitlement only in respect of:-

a) Shares transferred into the depositor’s securities account before 4.00 pm on 30 June 2008 in respect of transfers; andb) Shares bought on the Bursa Malaysia on a cum entitlement basis according to the Rules of the Bursa Malaysia.

By Order of the Board

LIM FOOK HINCHOW YEEN LEECompany SecretariesKuala Lumpur30 April 2008

Notes:1. A member of the Company entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote in his stead. A proxy may but need not be a member of the

Company.2. The instrument appointing a proxy shall be in writing under the hand of the depositor or his attorney duly authorised in writing or if such appointor is a corporation, under its

common seal and shall be deposited at the Registered Office of the Company at Level 10, Menara TSH, No. 8 Jalan Semantan, Damansara Heights, 50490 Kuala Lumpur, not less than 48 hours before the time appointed for holding this meeting or adjourned meeting.

3. Where a member appoints two (2) or more proxies to attend the same meeting, the member shall specify the proportion of his shareholdings to be represented by each proxy. If the Proxy Form is returned without any indication as to how the proxy shall vote, the proxy will vote or abstain as he thinks fit and if no names are inserted in the space for the name of proxy, the Chairman of the meeting will act as proxy.

Explanatory Notes on Special Business 4. Resolution 10, if passed, will give the Directors of the Company, from the date of the above General Meeting, authority to issue and allot ordinary shares from the unissued share

capital of the Company up to an aggregate amount not exceeding 10% of the issued share capital of the Company for the time being. This authority unless revoked or varied at a General Meeting, will expire at the next Annual General Meeting.

5. Resolution 11, is to empower the Directors of the Company to issue shares pursuant to the Employees’ Share Option Scheme.6. For Resolution 12 & 13 further information on the Proposed Renewal of the Authority for Share Buy-Back and Proposed Renewal of the Existing Shareholders’ Mandate and

Proposed New Shareholders’ Mandate for recurrent related party transactions are set out in the Circular to Shareholders of the Company dated 30 April 2008 which is sent out together with the Company’s 2007 Annual Report.

notice of annual general meeting (cont’d.)



5

statement accompanying notice of twenty-eighth annual general meeting

Details of the Directors seeking re-election or re-

appointment are set out in their respective profiles

which appear in the Board of Directors’ profiles on

pages 18 to 27 of this Annual Report. Details of

their interest in securities of the Company and its

subsidiaries are set out in the Directors’ Report which

appear on pages 51 to 53 of this Annual Report.

5

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Dear valued shareholders,

On behalf of the Board, I am pleased

to present the Annual Report and

audited financial statements for the

Company and its subsidiaries for the

financial year ended �1 December �007.

Performance ReviewThe Group recorded a 38% increase in revenue to RM861.5 million for the

financial year ended 31 December 2007 as compared to RM624.7 million in the

preceding financial year primarily due to sharp rise in crude palm oil (“CPO”)

price. Structural changes in the global oils and fats market, viz a viz biofuel, and

the convergence of several factors including high petroleum prices, exceptionally

low wheat stock and surging demand for edible oils from China and India have

considerably reduced global oils and fats stock. This coupled with expectation that

soya bean plantings will have to fight for acreage with wheat due to escalating

wheat prices, has driven CPO price to historical height.

Profit before tax surged to RM120.3 million compared to RM77.9 million

registered in the preceding financial year. The improved result was underpinned

principally by favourable movements in CPO price and a full year contribution from

chairman’s

statement



7

chairman’s statement (cont’d.)

TSH-Wilmar Sdn. Bhd., our 50:50 joint-venture refinery and kernel crushing business with

Wilmar International Ltd and higher contributions from the Group’s oil palm plantations

and mill in Indonesia. Other contributing factor includes improved financial results achieved

by other business segments.

DIVIDEND

Subject to the approval of shareholders at the forthcoming 28th Annual General Meeting

of the Company, your Board of Directors had on 15 February 2008 proposed a first and

final single tier dividend of 6.5 sen per ordinary share to be paid out of the Company’s

profit.

The proposed dividend payout is consistent with the Company’s long term dividend

payout policy of 20% to 30% of profit. Your Board of Directors will strive to improve the

Company’s dividend yield by providing more cash value return to shareholders.

CORPORATE & BUSINESS DEVELOPMENT

During the financial year ended 31 December 2007, the Group completed the acquisition

of its 90%-owned Indonesian subsidiary, PT Sarana Prima Multi Niaga as part of its on-

going brown field growth strategy in oil palm segment. On the other hand, the Group’s

green field growth In Indonesia is propelled by 10,282 Ha of land bank of its 70%-owned

subsidiary, PT Teguh Swakarsa Sejahtera. Coupled with another of the Group’s subsidiary,

PT Laras Internusa, the oil palm sector will be the key source of growth for the coming

years.

As part of our supply chain management initiative in the African continent, we had on

3 January 2008 incorporated a new wholly-owned subsidiary, Afromal Cocoa Limited in

Ghana. An internal reorganization involving TSH Plantation Sdn. Bhd. and CocoaHouse

Industries Sdn. Bhd. was also completed during the financial year to promote greater

efficiency within the Group.

On the biotechnology sector, TSH Biotech Sdn. Bhd., a wholly-owned

subsidiary of the Group was bestowed bionexus status by Malaysian

Biotechnology Corporation Sdn. Bhd. on 27 August 2007. This will

allow the Group to enjoy various promotional tax and investment

incentives accorded by the Government

A new 95%-owned subsidiary, Polar Vertix Sdn. Bhd. was acquired

during the financial year.

7

8


8

REVIEW OF OPERATIONS

1. Palm&Bio-IntegrationBusiness

Palm bio-integration posted a significantly increased revenue of RM575.7 million for the financial year ended 31

December 2007 against RM358.3 million recorded in the preceding financial year driven mainly by the surge in CPO

price resulting in a strengthened performance. Other factors such as improvement in yield and positive contribution

from our Indonesian subsidiaries also supplemented to the favourable performance.

Construction of a new palm oil mill in Kalimantan Tengah, Indonesia is presently in the pipeline to accommodate the

milling requirement of fresh fruit bunches production of PT Sarana Prima Multi Niaga as well as other third party estates

in the vicinity.

In the meantime, efficiency and electricity output from our 14MW biomass co-generation power plant in Kunak, Sabah

continued to improve and is envisaged to achieve its optimal capacity in 2008.

2. WoodProductsBusiness

Revenue of the wood product segment marginally increased from RM160.6 million registered in the preceding financial

year to RM164.3 million for the financial year ended 31 December 2007.

Financial performance of this segment remained relatively stable despite challenges posed by adverse sentiment arising

from concerns over sub-prime mortgage crisis in United States and intense competition stemming from new entrants

especially low-cost producing countries.

3. Cocoa&VegetableFatBusiness

Increased throughput resulting from supply chain management and further improvement in

production efficiency had led to higher revenue of RM125.3 million compared to RM102.1

million for the preceding financial year. Improvement in cocoa butter ratio in 2007 also contributed

to higher profit from the cocoa segment.



9


PROSPECTS

More oil palm areas in Indonesia will come into maturity and compounded by management’s effort to implement improved

agronomic and agricultural husbandry standards in the newly acquired estates in Indonesia now beginning to bear fruits, your

Board expect FFB production to increase significantly in 2008 and the following years.

With CPO price achieving historical height in early 2008 and on the back of a general expectation that prices should hold at

level above RM3,000 per MT in 2008/9, the palm oil segment is expected to churn out robust profit growth over the next few

years.

As capacity utilization at the joint venture refinery improves, profit contribution is likely to show a reasonable improvement

given current benign market conditions.

ACKNOWLEDGMENT

On behalf of the Board, I would like to thank all Board members for their relentless efforts rendered during their stewardship

in 2007.

I also take this opportunity to record my sincere gratitude and appreciation to all our valued shareholders, customers, business

associates, strategic partners, financiers and suppliers for their continuous support, confidence and trust in our Group.

I also wish to extend special thanks to the Government authorities and agencies for their much appreciated guidance, assistance

and co-operation.

TAN SOON HONG

Chairman

9

10

corporate events

TSH Resources Berhad

contributed RM50,000

to Institute Science and

Management ( ISM ) Tawau,

Sabah towards their

education development

fund.

TSH Resources Berhad

contributed RM20,000

to the “New Sabah Times

Goes to School” project.

TSH Resources Berhad donated

RM50,000 in aid of 5 charity

organisations.

TSH Resources Berhad contributed

RM350,000 to Sabah Tshung Tsin

Secondary School New Campus

(Phase 1A) Building Fund.

11

Madam Lim Luk Yong, Senior Finance and Administration

Manager of TSH Resources Berhad receiving a token of

appreciation from Persatuan Alumni SRJK Yuk Chin Tawau

for contribution of RM5,000 towards the school’s new

basketball court.

TSH Resources Berhad contributed 100pcs of t-shirts to

Hokkien Association Tawau for the Chinese New Year Lion

Dance Presentation.

Ekowood was the official dance floor partner for the 1st KL International Dance Festival

held from 4 -10 June 2007 at the Berjaya Times Square KL.

This event also featured a World-class Dance Championship for Dance Sport attracting

participants from South Africa, Belarus, Slovenia, Russia, Germany, Syria, Chinese

Taipei, Indonesia, Vietnam, Macau, Japan, Singapore, Hong Kong and Malaysia.

corporate events (cont’d.)

1�

our people

1�

and faces…

1�1�

14

corporate structure

Palm Bio-Integration

TSH Plantation Sdn. Bhd. (150482-H)

Eko Paper Sdn. Bhd. (691347-D)

TSH Plantation Management Sdn. Bhd. (46602-V)

LKSK Sdn. Bhd. (10018-U)

TSH Sabahan Oil Mill Sdn. Bhd. (420656-U)

Tan Soon Hong Holdings Sdn. Bhd. (264109-H)

TSH Palm Products Sdn. Bhd. (395007-H)

Eko Pulp & Paper Sdn. Bhd. (590644-K)

Andalas Agro Industri Limited (Redomiciled to Seychelles)

PT Andalas Wahana Berjaya (Incorporated in Indonesia)

PT Andalas Agro Industri (Incorporated in Indonesia)

PT Laras Internusa (Incorporated in Indonesia)

PT Teguh Swakarsa Sejahtera (Incorporated in Indonesia)

TSH Biotech Sdn. Bhd. (631048-V)

Polar Vertix Sdn. Bhd. (786175-X)

Landquest Sdn. Bhd. (73724-P)

TSH Logistics Sdn. Bhd. (646747-D)

Eko Paper International Sdn. Bhd. (673481-A)

TSH Bio-Energy Sdn. Bhd. (272534-H)

Ekowood Energy Sdn. Bhd. (398304-U)

TSH Bio-Gas Sdn. Bhd. (420342-M)

POME Energy Sdn. Bhd. (330862-V)

TSH BioDiesel Sdn. Bhd. (632896-A)

Jatoba International Pte. Ltd. (Incorporated in Singapore)

PT Sarana Prima Multi Niaga (Incorporated in Indonesia)

Abaca Enterprise Pte. Ltd. (Incorporated in Singapore)

TSH-Wilmar Sdn. Bhd. (268555-U)

TSH-Wilmar (BF) Sdn. Bhd. (632894-V)

Tingkayu Palm Resources Sdn. Bhd. (643065-W)

TSH Resources Berhad (49548-D)



15

corporate structure (cont’d.)

Wood Products Cocoa Manufacturing

Ekowood International Berhad (301735-D)

TSH Products Sdn. Bhd. (450556-T)

Ekowood S.A (Incorporated in Luxembourg)

Ekowood (USA) Inc. (Incorporated in California)

Ekowood Iberica S.L (Incorporated in Spain)

Alden S.A.S.U. (Incorporated in France)

Ekowood Malaysia Sdn. Bhd. (336672-X)

EkoLoc System Sdn. Bhd. (396543-P)

TSH Timber Industries Sdn. Bhd. (337921-X)

TSH Forestry (Sabah) Sdn. Bhd. (337356-U)

CocoaHouse Industries Sdn. Bhd. (174767-X)

TSH Industries Sdn. Bhd. (220221-A)

PT Sinar Bersatu (Incorporated in Indonesia)

PT Aramico Komoditi (Incorporated in Indonesia)

Afromal Cocoa Limited (Incorporated in Accra, Ghana)

TSH Plantation Sdn. Bhd. (150482-H)

Eko Paper Sdn. Bhd. (691347-D)

TSH Plantation Management Sdn. Bhd. (46602-V)

LKSK Sdn. Bhd. (10018-U)

TSH Sabahan Oil Mill Sdn. Bhd. (420656-U)

Tan Soon Hong Holdings Sdn. Bhd. (264109-H)

TSH Palm Products Sdn. Bhd. (395007-H)

Eko Pulp & Paper Sdn. Bhd. (590644-K)

Andalas Agro Industri Limited (Redomiciled to Seychelles)

PT Andalas Wahana Berjaya (Incorporated in Indonesia)

PT Andalas Agro Industri (Incorporated in Indonesia)

PT Laras Internusa (Incorporated in Indonesia)

PT Teguh Swakarsa Sejahtera (Incorporated in Indonesia)

TSH Biotech Sdn. Bhd. (631048-V)

Polar Vertix Sdn. Bhd. (786175-X)

corporate information

BOARD OF DIRECTORS

Tan Soon Hong

Executive Chairman

Datuk (Dr.) Kelvin Tan Aik Pen

Managing Director

Tan Aik Sim

Chief Executive Officer

YB. Datuk Nur Jazlan bin Mohamed

Independent Non-Executive Director

Dato’ Leong Sonny @ Leong Khee Seong


Datuk Jaswant Singh Kler


William Tully

OBE, ASDK, ADK


Tan Aik Kiong

Executive Director

Lim Fook Hin

Executive Director

Tan Aik Yong

Alternate Director to Datuk (Dr.) Kelvin Tan Aik Pen

AUDIT COMMITTEE

William Tully

OBE, ASDK, ADK

Chairman/Independent Non-Executive Director


Member/Independent Non-Executive Director

YB. Datuk Nur Jazlan bin Mohamed


(Member of the Malaysian Institute of Accountants)

NOMINATION COMMITTEE

William Tully

OBE, ASDK, ADK




REMUNERATION COMMITTEE



William Tully

OBE, ASDK, ADK


Lim Fook Hin

Member/Executive Director

1�

EMPLOYEES’ SHARE OPTION SCHEME (ESOS)

COMMITTEE

Datuk (Dr.) Kelvin Tan Aik Pen

Chairman/Managing Director



Tan Aik Sim

Member/Chief Executive Officer

Lim Fook Hin

Member/Executive Director

COMPANY SECRETARIES

Lim Fook Hin (MICPA 909)

Chow Yeen Lee (MAICSA 7047480)

REGISTERED ADDRESS

Level 10, Menara TSH

No. 8, Jalan Semantan

Damansara Heights

50490 Kuala Lumpur

Tel : 03-2084 0888

Fax : 03-2084 0828

E-mail : [email protected]

Website : www.tsh.com.my

AUDITORS

Ernst & Young

MPT 4604, 3rd Floor

Lot 17 – 28, Block B

Bandaran Baru, Jalan Baru

91000 Tawau, Sabah

Tel : 089-774233

Fax : 089-762950

PRINCIPAL BANKERS

Malayan Banking Berhad

Hong Leong Bank Berhad

CIMB Bank Berhad

HSBC Bank Malaysia Berhad

RHB Bank Berhad

OCBC Bank (Malaysia) Berhad

SHARE REGISTRAR

Symphony Share Registrars Sdn. Bhd.

Level 26, Menara Multi-Purpose

Capital Square

No. 8 Jalan Munshi Abdullah

50100 Kuala Lumpur

Tel : 03-2721 2222

Fax : 03-2721 2530/31

STOCK EXCHANGE LISTING

Main Board of Bursa Malaysia Securities Berhad

corporate information (cont’d.)



1717

annual report’o7 2. to declare a first and final single tier dividend of 6.5 sen per ordinary...

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