How To Understand The Board Of Directors Of Tsh Group

Transcription

1 ANNUAL REPORT 2013

2 TABLE OF CONTENTS 2 Notice of Annual General Meeting 5 Statement Accompanying Notice of Annual General Meeting 6 Chairman s Statement 10 Our People and Faces 12 Corporate Structure 13 Corporate Information 14 Profile of Board of Directors 19 Statement on Corporate Governance 34 Statement on Corporate Responsibility 38 Statement on Risk Management and Internal Control 39 Audit Committee Report 45 Statement of Directors Responsibilities in respect of the Audited Financial Statements 46 Five-Year Financial Highlights 48 Directors Report 52 Statement by Directors 53 Independent Auditors Report 55 Statements of Comprehensive Income 57 Statements of Financial Position 59 Statements of Changes in Equity 62 Statements of Cash Flows 65 Financial Statements 164 Analysis of Shareholdings 167 List of Top 10 Properties owned by TSH Group Proxy Form

3 2 TSH RESOURCES BERHAD (49548-D) notice of annual general meeting NOTICE IS HEREBY GIVEN THAT the Thirty-Fourth Annual General Meeting ( AGM ) of the Company will be held at Ballroom 2, LG Level, Eastin Hotel, 13, Section 16/11, Jalan Damansara, Petaling Jaya, Selangor Darul Ehsan on 3 June 2014 at 9.30 am to transact the following businesses:- 1. To receive the Audited Financial Statements for the financial year ended 31 December 2013 together with the Reports of the Directors and Auditors thereon. 2. To declare a first and final single tier dividend of 3.5 sen per ordinary share for the financial year ended 31 December To approve payment of Directors fees of RM144,000 for the financial year ended 31 December To re-elect Datuk Suboh bin Md Yassin, who is retiring by rotation in accordance with Article 95 of the Company s Articles of Association, and who being eligible, offer himself for re-election. 5. To re-elect YB Datuk Nur Jazlan bin Mohamed, who is retiring in accordance with Article 86 of the Company s Articles of Association and who being eligible, offer himself for re-election. 6. To re-appoint Datuk Jaswant Singh Kler, who is retiring pursuant to Section 129(6) of the Companies Act, 1965 and to hold office until the conclusion of the next AGM. 7. To re-appoint Messrs Ernst & Young as the Company s Auditors and to authorise Directors to fix their remuneration. Resolution 1 Resolution 2 Resolution 3 Resolution 4 Resolution 5 Resolution 6 Resolution 7 As Special Business: To consider and, if thought fit, pass the following resolutions:- 8. ORDINARY RESOLUTION 1 PROPOSED AUTHORITY TO ISSUE SHARES PURSUANT TO SECTION 132D OF THE COMPANIES ACT, 1965 Resolution 8 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 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 AGM of the Company.

4 ANNUAL REPORT notice of annual general meeting 9. ORDINARY RESOLUTION 2 PROPOSED RENEWAL OF THE AUTHORITY FOR SHARE BUY-BACK Resolution 9 THAT, subject to the Companies Act, 1965, the Bursa Malaysia Securities Berhad ( Bursa Securities ) Main Market Listing Requirements, 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 Securities 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 the maximum amount of fund to be allocated by the Company for the purpose of purchasing its own shares shall not exceed the total retained profits of RM126,746,000 and share premium of RM138,471,000 based on the latest audited as at 31 December THAT such authority shall commence immediately upon passing of this ordinary resolution until the conclusion of the next AGM of TSH unless earlier revoked or varied by ordinary resolution passed by the shareholders of TSH in a general meeting or upon the expiration of the period within which the next AGM 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 Securities or subsequently cancelled, or to cancel the shares so purchased, or a combination of both. 10. ORDINARY RESOLUTION 3 PROPOSED RENEWAL OF THE EXISTING SHAREHOLDERS MANDATE AND PROPOSED NEW SHAREHOLDERS MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE Resolution 10 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 12 May 2014; 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 12 May 2014; (collectively known as the Mandate )

5 4 TSH RESOURCES BERHAD (49548-D) notice of annual general meeting THAT such Mandate shall commence upon passing of this ordinary resolution and continue in force until:- (a) the conclusion of the next 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. 11. ORDINARY RESOLUTION 4 RETENTION OF INDEPENDENT DIRECTOR Resolution 11 THAT subject to the passing of Resolution 6, approval be and is hereby given to Datuk Jaswant Singh Kler, who has served as an Independent Non-Executive Director of the Company for a cumulative term of more than nine (9) years, to continue to act as Independent Non-Executive Director of the Company. 12. 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 3.5 sen per ordinary share for the financial year ended 31 December 2013, if approved by the shareholders at the forthcoming Annual General Meeting will be paid on 23 June 2014 to depositors registered in the Record of Depositors at the close of business on 4 June A depositor shall qualify for entitlement only in respect of:- a) Shares transferred into the depositor s securities account before 4.00 pm on 4 June 2014 in respect of transfers; and b) Shares bought on the Bursa Securities on a cum entitlement basis according to the Rules of the Bursa Securities. By Order of the Board LIM FOOK HIN (MICPA 909) CHOW YEEN LEE (MAICSA ) Company Secretaries Kuala Lumpur 12 May 2014

6 ANNUAL REPORT notice of annual general meeting Notes: 1. Only depositors whose names appear in the Record of Depositors as at 27 May 2014 be regarded as members and entitled to attend, speak and vote at the meeting. 2. 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. 3. 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, Kuala Lumpur, not less than 48 hours before the time appointed for holding this meeting or adjourned meeting. 4. 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. 5. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account ( omnibus account ), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. Explanatory Notes on Special Business 6. Resolution 8 is a renewal of the general mandate empowering the Directors of the Company, pursuant to Section 132D of the Companies Act, 1965, to issue and allot new shares in the Company from time to time provided that the aggregate number of shares issued pursuant to the general mandate does not exceed 10% of the issued share capital of the Company for the time being. This authority, unless revoked or varied by the Company at a general meeting, will expire at the next AGM. As at the date of this notice, 62,580,000 ordinary shares of RM0.50 each were issued via private placement pursuant to Section 132D of the Companies Act, 1965 under the general mandate which was approved at the last AGM held on 21 May 2013 and which will lapse at the conclusion of the Thirty-Fourth AGM to be held on 3 June The proceeds raised totaling of RM141,639,400 have been utilized in the following manner:- Utilisation of Proceeds RM million 1) Working Capital ) Downpayment for the Sabah Plantation Estates ) Future investment ) Expenses for private placement exercise The renewal of the general mandate will provide flexibility to the Company for any possible fund raising activities without the need to convene separate general meeting to specifically approve such issuance of shares and thereby reducing administrative time and costs associated with the convening of such meeting. However, at this juncture, there is no decision to issue new shares. If there should be a decision to issue new shares after the general mandate is obtained, the Company will make an announcement in respect of the purpose and utilization of proceeds arising from such issue. 7. For Resolution 9 and 10, further information on the Proposed Renewal of the Authority for Share Buy-Back, Proposed Renewal of the Existing Shareholders Mandate and Proposed New Shareholders Mandate for recurrent related party transactions of a revenue or trading nature are set out in the Circular to Shareholders of the Company dated 12 May 2014 which is sent out together with the Company s 2013 Annual Report. 8. For Resolution 11, the Nomination Committee has assessed the independence of Datuk Jaswant Singh Kler, who has served as an Independent Non-Executive Director of the Company for a cumulative term of more than nine (9) years, and recommended him to continue to act as Independent Non-Executive Director of the Company based on the following justifications:- (i) (ii) He fulfilled the criteria under the definition of an Independent Director as stated in the Bursa Securities Main Market Listing Requirements, and demonstrates complete independence in character and judgement both in his designated role and as Board member and thus, he would continue to bring independent view of the Company s affairs to the Board. His in-depth knowledge of the Group s businesses and his extensive experience and expertise continue to provide invaluable contribution to the Board. 9. Dato Leong Leong Khee Seong who retires in accordance with Section 129(6) of the Companies Act, 1965 has expressed his intention not to seek re-appointment as Director of the Company. Hence, he will retain office until the close of the AGM. STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING Details of persons who are standing for election as Directors No individual is seeking election as a Director at the Thirty-Fourth Annual General Meeting of the Company.

7 6 TSH RESOURCES BERHAD (49548-D) CHAIRMAN S STATEMENT Dear valued shareholders, On behalf of the Board, it gives me great pleasure to present the Annual Report and Audited Financial Statements for TSH Resources Berhad and its Group of Companies for the financial year ended 31 December 2013.

8 ANNUAL REPORT CHAIRMAN S STATEMENT PERFORMANCE REVIEW 2013 was a challenging year for the oil palm industry. The contraction of CPO prices started in the second half on 2012 continued well into the third quarter of 2013 before staging a recovery in the last quarter. This had resulted in a drop of 14% in average CPO price in 2013 compared to Other challenges included the imposition of minimum wages by the authorities which added further stress to cost management. On the other hand, a moderate global economic recovery has helped to generate some modest growth in demand. This coupled with the Malaysia s new CPO export duties structure and higher usage of palm biodiesel had contributed in a significant drop in inventory from 2.50 million mt in 2012 to 1.98 million mt at the end of TSH Group has taken the above challenges in its stride and in year 2013, achieved a significantly higher pretax profit of RM164.5 million against RM100.0 million in Group revenue for the year was RM1,018 million against 2012 of RM985 million. Contributions came from the Palm & Bio-Integration segment driven by higher FFB yield and contributions from TSH-Wilmar Sdn. Bhd., our joint venture refinery and kernel crushing business. Included in the results is also a gain on disposal of investment securities-pontian United Plantations Berhad, partially offset by primarily unrealised forex losses arising from the strengthening of USD against Asian currencies. FFB production grew significantly by 28% from 425,000 mt in 2012 to 543,000 mt in Despite the lower average CPO price of RM2,251 per mt in 2013 compared to RM2,640 per mt in 2012, profit margin improved due to lower unit cost of production and operational efficiencies. Estates in Indonesia continue to show significantly improved performance as more planting come into harvest and higher maturity age resulting in higher crop and oil yields. Performance for our Wood Product segment has shown a modest improvement in This came about following rationalisation of Ekowood operation in Europe and the market shifts to domestic and Asia region which started in 2012 has begun to yield positive results. However, contributions from the Wood Product segment do not have any significant effects on the results of the Group. DELIVERING SHAREHOLDERS VALUE Subject to the approval of the shareholders at the forthcoming 34 th Annual General Meeting of the Company, your Board of Directors had on 25 February 2014 proposed a first and final single tier dividend of 3.5 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. The Board of Directors will strive to improve the Company s dividend payout by providing more cash value return to shareholders. STRATEGIC EXPANSION OF LANDBANK On 18 October 2013, the Company completed the acquisition of the entire equity interest of Casa Logistic Sdn Bhd, an investment holding company which holds a 90% equity interest in a Indonesian incorporated company, PT Perkebunan Sentawar Membangun. This acquisition will add another 5,084 hectares to our plantation landbank in Kalimantan Timur, Indonesia. On 6 December 2013, the Company announced the Proposed Acquisition of 60% equity interest in the share capital of Sg Kalabakan Estate Sdn. Bhd. This Proposed Acquisition will add another 26,794 hectares to our plantation landbank in Sabah. The Proposed Acquisition is expected to complete by 2nd quarter of SIGNIFICANT CORPORATE DEVELOPMENT In 2013, as part of a fund raising exercise, the Company issued 62,580,000 new ordinary shares of RM0.50 each through private placements. These shares were subsequently listed on the Main Market of Bursa Malaysia Securities Berhad. On 9 September 2013, the Company via its indirect wholly owned subsidiary, Bisa Jaya Sdn Bhd completed the disposal of the entire equity interest of 16.17% in Pontian United Plantations Berhad to Felda Global Ventures Holdings Berhad for a total cash consideration of RM195.8 million pursuant to a Voluntary Conditional Take-Over Offer. AWARD RECEIVED On 2 September 2013, the Group bagged the prestigious Best Performing Stock (Plantation) award from The Edge Billion Ringgit Club Awards The award is testament to the hard work and the continuous commitment to growth from our employees in the Group. COMMITTED TO SUSTAINABILITY DEVELOPMENTS The Group is committed to sustainability initiatives, which have been an integral part of our way of doing business. The Board of Directors strongly believes that contributing positively towards social and environmental causes will help to create business sustainability and enhance value for all its stakeholders. The Group has over the years been involved in numerous programs through the products and services we offer, producing in an environmentally responsible manner. More importantly, our social responsibility program improves the livelihood for those in need in the community we operate in. In 2012, the Group has taken a step further by setting up a dedicated department headed by a senior manager, to focus solely on management of the sustainability issues concerning our Group s oil palm activities in particular attention to the principles

9 8 TSH RESOURCES BERHAD (49548-D) CHAIRMAN S STATEMENT and criteria of the mandatory requirements under the Indonesian Sustainable Palm Oil ( ISPO ) and the Roundtable on Sustainable Palm Oil ( RSPO ). In 2013, in continuing with the sustainability development, the Group registered as a member of RSPO and its membership is currently under process. We have also obtained full ISPO certification for one of our significant entity in Indonesia and the rest of our other entities certification are in progress. Our other specific initiatives include the following: Environment Renewable Energy generation to supply green energy - electricity and steam to Sabah Electricity Sdn Bhd and our own palm oil mills. Removal of solid palm oil waste as feedstock for the Biomass/ Biogas plants and Eko Pulp and Paper plant. Accredited producer by the Forest Stewardship Council for usage of sustainable wood materials. Approved CDM projects that qualify for carbon credits under the Kyoto Protocol. Land development in a responsible manner to comply with the Environmental conditions and avoid biodiversity impairment. Sustainable forestry projects including enrichment planting and silviculture treatment under the Forest Management Unit Programme in Sabah. Community/Workplace Drive and implement the Plasma Development Programme. Develop human capital through the establishment of Training Academy. Provide housing, school and other amenities for workers and its families. Provide philanthropic support to various causes with particular emphasis on education. Commit to maintaining high safety and health standards through the establishment of the Health and Safety Committee and safety training. Improve infrastructure for communities living in the surrounding plantations. Building a sustainable pool of talent for the oil palm sector through the signing of Memorandum of Understanding with University Malaysia Sabah. PROSPECTS AND OUTLOOK The Group is mindful of the challenging operating conditions of the oil palm sector and to move ahead requires the Group to be well positioned to leverage on new opportunities. In spite of the volatile conditions, the Group is committed to growth premised on: Total planted area in the Group including Associate is about 49,900 hectares comprises of 16,900 hectares located in Sabah and 33,000 hectares located in Indonesia. The young oil palm age profile with about 80% of planted area comprising of immature and young mature fields. The Group s total land bank of 81,000 hectares of unplanted area. The Group s commitment to its oil palm planting programme to plant approximately 4,000 to 5,000 hectares annually. The Group has planted about 4,200 hectares in 2013 inclusive of those under the Plasma Development Programme. This and the young age profile will provide sustainable growth for many years to come.

10 ANNUAL REPORT CHAIRMAN S STATEMENT Continuing the extensive use of superior planting material - TSH s WAKUBA oil palm ramets in Sabah and Indonesia with the objective of producing higher FFB and oil yields. The use of these high yielding materials will further propel our yield per hectare to a significantly higher level than the industry average in coming years. FFB production is expected to increase significantly in 2014 and the following years with more oil palm areas in Indonesia coming into maturity and peak yield age. Our unit production cost will continue to undergo a downtrend as the FFB yield increases. Cost optimisation through improvement in efficiency and efficacy as well as oil yield improvement will also continue to reduce the unit cost of production. Good agronomic practices and standards, being our operational strength as well, are maintained throughout our estates in Sabah and Indonesia and this augers well going forward. Forecast by major industry players points to a more optimistic view of the plantation sector. Better CPO outlook for 2014 is expected, premised on better domestic biodiesel consumption in Indonesia and Malaysia, which would help keep inventories at a comfortable level. Other factors contributing to a higher support level for the CPO prices will depend on the level of discount to soy oil price, expected adverse weather conditions and continuing demands from major importer countries like China and India. IN APPRECIATION I would like to express my gratitude to our employees, for their unflinching dedication and contribution to the Group s performance. To all our shareholders, customers, business associates, strategic partners, financers and suppliers on behalf of the Board, I thank you, for your unwavering support and confidence in the Group. And to my colleagues on the Board, we have faced many challenging cyclical changes together, which we have managed to overcome through the Board s valuable insights and strategic guidance. I would like to express my deepest appreciation for the continuous support and steadfast commitment to the Group. Datuk (Dr.) Kelvin Tan Aik Pen Chairman In view of the good prospects and the mitigation measures taken for operating challenges faced, your management is optimistic that the Group will continue to maintain a strong financial performance and is well positioned to take on new opportunities in 2014.

11 10 TSH RESOURCES BERHAD (49548-D) OUR PEOPLE & FACES

12 ANNUAL REPORT OUR PEOPLE & FACES

13 12 TSH RESOURCES BERHAD (49548-D) CORPORATE STRUCTURE Palm Bio-Integration TSH Plantation Sdn. Bhd. ( H) TSH Plantation Management Sdn. Bhd. (46602-V) TSH Palm Products Sdn. Bhd. ( H) TSH-Wilmar Sdn. Bhd. ( U) Eko Pulp & Paper Sdn. Bhd. ( K) TSH Bio-Energy Sdn. Bhd. ( H) TSH Bio-Gas Sdn. Bhd. ( M) TSH Biotech Sdn. Bhd. ( V) Innoprise Plantations Berhad ( M) PT. Andalas Agro Industri (Incorporated in Indonesia) PT. Andalas Wahana Berjaya (Incorporated in Indonesia) PT. Sarana Prima Multi Niaga (Incorporated in Indonesia) PT. Teguh Swakarsa Sejahtera (Incorporated in Indonesia) PT. Laras Internusa (Incorporated in Indonesia) PT. Farinda Bersaudara (Incorporated in Indonesia) PT. Mitra Jaya Cemerlang (Incorporated in Indonesia) PT. Bulungan Citra Agro Persada (Incorporated in Indonesia) PT. Munte Waniq Jaya Perkasa (Incorporated in Indonesia) PT. Andalas Wahana Sukses (Incorporated in Indonesia) PT. Perkebunan Sentawar Membangun (Incorporated in Indonesia) Wood Products Ekowood International Berhad ( D) Ekowood S.A (Incorporated in Luxembourg) Ekowood Iberica S.L (Incorporated in Spain) Ekowood (USA) Inc. (Incorporated in the State of California, USA) TSH Forestry (Sabah) Sdn. Bhd. ( U)

14 ANNUAL REPORT CORPORATE INFORMATION Board of Directors Datuk (Dr.) Kelvin Tan Aik Pen Chairman, Non-Independent Non-Executive Director Dato Tan Aik Sim Group Managing Director Datuk Suboh bin Md Yassin Independent Non-Executive Director Dato Leong Leong Khee Seong Independent Non-Executive Director YB Datuk Nur Jazlan bin Mohamed Independent Non-Executive Director Datuk Jaswant Singh Kler Independent Non-Executive Director Tan Aik Kiong Group Executive Director Lim Fook Hin Executive Director Chew Siew Yeng Executive Director Tan Aik Yong Alternate Director to Datuk (Dr.) Kelvin Tan Aik Pen Audit Committee Datuk Jaswant Singh Kler Chairman/Independent Non-Executive Director Datuk Suboh bin Md Yassin Member/Independent Non-Executive Director YB Datuk Nur Jazlan bin Mohamed Member/Independent Non-Executive Director (Member of the Malaysian Institute of Accountants) Nomination Committee Datuk Suboh bin Md Yassin Chairman/Independent Non-Executive Director Datuk Jaswant Singh Kler Member/Independent Non-Executive Director Remuneration Committee Datuk Jaswant Singh Kler Chairman/Independent Non-Executive Director Datuk Suboh bin Md Yassin Member/Independent Non-Executive Director Lim Fook Hin Member/Executive Director Company Secretaries Lim Fook Hin (MICPA 909) Chow Yeen Lee (MAICSA ) Registered Address Level 10, Menara TSH No. 8 Jalan Semantan Damansara Heights Kuala Lumpur Tel : Fax : [email protected] Website : Auditors Ernst & Young MPT 4604, Lot rd Floor, Block B Bandaran Baru, Jalan Baru Tawau, Sabah Tel : Fax : Principal Bankers AmBank (M) Berhad Cooperatieve Centrale Raiffeisen - Boerenleenbank B.A. (Rabobank Nederland) HSBC Bank Malaysia Berhad Kuwait Finance House Malayan Banking Berhad OCBC Bank (Malaysia) Berhad Share Registrar Symphony Share Registrars Sdn. Bhd. Level 6, Symphony House Block D13, Pusat Dagangan Dana 1 Jalan PJU 1A/ Petaling Jaya Selangor Darul Ehsan Tel : Fax : /8152 Stock Exchange Listing Main Market of Bursa Malaysia Securities Berhad

15 14 TSH RESOURCES BERHAD (49548-D) PROFILE OF BOARD OF DIRECTORS Datuk (Dr.) Kelvin Tan Aik Pen, DPMP, PGDK, aged 56, a Malaysian, is the Chairman, Non-Independent Non-Executive Director of the Company. He has been a Director of TSH since his appointment to the Board on 17 January He is currently the Chairman of Ekowood International Berhad and the Managing Director of Innoprise Plantations Berhad. These companies are listed on the Main Market of Bursa Malaysia Securities Berhad. He also sits on the board of a number of private companies. Datuk (Dr.) Kelvin Tan Aik Pen Chairman, Non-Independent Non-Executive Director Datuk (Dr.) Kelvin Tan has more than twenty five (25) years experience in resource based industry, which includes extensive working knowledge in international trade practices. He was the Chairman of the Malaysian Cocoa Board for 8 consecutive years from 1997 to 2004 and trustee of the Borneo Conservation Trust Sabah from 2010 to He serves as Honorary Director of Sabah Chinese High School. As recognition for the many contributions to environmental conservation and forestry, Datuk (Dr.) Kelvin Tan was conferred an Honorary Doctorate in Philosophy (Agroforestry) by Universiti Malaysia Sabah on 3 September He is the brother of Tan Aik Kiong, Dato Tan Aik Sim and Tan Aik Yong. Other than the deemed interest as disclosed in the Circular to Shareholders on recurrent related party transactions, he has no other conflict of interest with the Company and has no conviction for offences within the past ten (10) years. Dato Tan Aik Sim, DIMP, aged 50, a Malaysian, was appointed as Group Managing Director on 1 January 2009 after serving as Chief Executive Officer since 1 September He was appointed to the Board of Directors of the Company on 27 February He is also the Group Managing Director of Ekowood International Berhad ( Ekowood ) and sits on the board of various subsidiary companies of TSH. He obtained Bachelor Degrees in both Economics and Engineering from Monash University, Australia in He started his career in the Cocoa industry in 1989 with significant involvement in the setting-up of its manufacturing facilities and its subsequent operation of a number of companies within the cocoa sector. He also played a leading role in the listing of TSH in 1994 and Ekowood in Dato Tan Aik Sim Group Managing Director He was appointed to Ekowood to spearhead the establishment of the integrated timber complex from a green field site. Through his active involvement since then, Ekowood has grown rapidly to now an award-winning internationally recognised brand within the engineered hardwood flooring industry. His initial involvement in TSH includes overseeing the forest management unit in Sabah before progressing into the biomass energy sector. In the recent years, he has been actively involved in palm oil plantation segment and its related downstream activities. He has played a pivotal role in the rapid growth of TSH s palm segment especially in Indonesia. He is also instrumental in developing and putting in place the necessary business platform for the next development phases of the palm segment in Indonesia and Sabah. He is the brother of Datuk (Dr.) Kelvin Tan Aik Pen, Tan Aik Kiong and Tan Aik Yong. Other than the deemed interest as disclosed in the Circular to Shareholders on recurrent related party transactions, he has no other conflict of interest with the Company and has no conviction for offences within the past ten (10) years.

16 ANNUAL REPORT PROFILE OF BOARD OF DIRECTORS Datuk Suboh bin Md Yassin, aged 63, a Malaysian, was appointed to the Board of Directors of TSH as an Independent Non-Executive Director on 1 March He also serves as the Chairman of the Nomination Committee and member of the Audit Committee and Remuneration Committee. He holds a Bachelor of Arts (Hons) from University of Malaya, a Master Degree in Business Administration (MBA) from the European University in Geneva and obtained an Advanced Management from Harvard University. He holds directorship in various subsidiary companies within the Group. Datuk Suboh bin Md Yassin Independent Non-Executive Director Having served the Government of Malaysia for thirty four (34) years, Datuk Suboh retired on 11 January He had served in senior positions while in the civil service, amongst others as Assistant Director in the Prime Minister s Department from 1974 to 1977, Assistant Director of the Ministry of International Trade and Industry from 1978 to 1980, First Secretary (Economic Affairs) Permanent Mission of Malaysia to the United Nations and other International Organisation from 1981 to 1983, Principal Assistant Director of the Ministry of International Trade and Industry from 1984 to 1985, Counsellor (Economic Affairs) Embassy of Malaysia, Washington D.C., United States of America from 1986 to 1992, Deputy Permanent Representative, Permanent Mission of Malaysia to the World Trade Organisation from 1992 to 1999, Advisor to the Islamic Development Bank, Jeddah from 1999 to August 2001, Deputy Secretary General 2 of the Ministry of Primary Industries from 1 September 2001 to 31 March 2004, Deputy Secretary General 1 of the Ministry of Natural Resources and Environment from 1 April 2004 to 11 February 2006 and Secretary General of the Ministry of Natural Resources and Environment from 12 February 2006 to 11 January He has no conviction for any offence within the past ten (10) years and has no family relationship with any Director or major shareholder of the Company nor any conflict of interest with the Company. Dato Leong Leong Khee Seong, aged 75, a Malaysian, was appointed as an Independent Non-Executive Director of the Company on 1 December He was Deputy Minister of Primary Industries from 1974 to 1978 and subsequently promoted as the Minister from 1978 to He was a member of Parliament from 1974 to Prior to his political career, he was a substantial shareholder of his family s private limited companies involved in general trading. Between 1986 and 1990, he was the Chairman of the General Agreement on Tariffs and Trade s Negotiating Committee on Tropical Products (1986 to 1990) and Chairman of the Group of 14 on Asean Economic Cooperation and Integration (1986 to 1987). He was an Independent Non-Executive Director of Sin Chew Media Corporation Berhad and the Executive Chairman of Nanyang Press Holdings Berhad. He graduated from the University of New South Wales, Australia with a Degree in Chemical Engineering in He is currently the First Chancellor of Help University. Dato Leong Leong Khee Seong Independent Non-Executive Director He is currently an Independent Non-Executive Director of Industrial & Commercial Bank of China (M) Bhd. He does not have any family relationship with any other Director and/or other major shareholder of the Company. He has no conflict of interest with the Company and has no conviction for offences within the past ten (10) years. Dato Leong who retires in accordance with Section 129(6) of the Companies Act, 1965 has expressed his intention not to seek re-appointment as Director of the Company. Hence, he will retain office until the close of the Annual General Meeting.

17 16 TSH RESOURCES BERHAD (49548-D) PROFILE OF BOARD OF DIRECTORS YB Datuk Nur Jazlan bin Mohamed, aged 48, a Malaysian, was re-appointed as an Independent Non-Executive Director of TSH on 22 May He also serves as a member of the Audit Committee. He is a Fellow member of the Association of Chartered Certified Accountants (ACCA), UK. He was a Council Member of the Malaysian Institute of Accountants from 2001 to August In addition to his professional credentials, YB Datuk Nur Jazlan is also active in politics. He is the Chief of UMNO Pulai, Johor and also Chairman of Barisan Nasional for the division since He was an EXCO Member of UMNO Youth from 1996 until He is a third term Member of Parliament for Pulai and was re-elected as a Member of Parliament in the recent general election held on 5 May He is also the Chairman of Public Accounts Committee (PAC). YB Datuk Nur Jazlan bin Mohamed Independent Non-Executive Director YB Datuk Nur Jazlan also has wide corporate experience since YB Datuk Nur Jazlan is a Director of Ekowood International Berhad and Asia Bioenergy Technologies Berhad, all of which are listed on the Main Market of Bursa Securities. He is a director of United Malayan Land Bhd and also sits on the board of several other private limited companies. He does not have any family relationship with any other Director and/or other major shareholder of the Company. He has no conflict of interest with the Company and has no conviction for offences within the past ten (10) years. Datuk Jaswant Singh Kler, PGDK, ASDK, aged 73, a Malaysian, was appointed as an Independent Non-Executive Director on 1 February He also serves as the Chairman of the Remuneration Committee and Audit Committee apart from being a member of the Nomination Committee. He is an Associate member of the Incorporated Society of Planters and continues to play an active role as a senior member of the planting fraternity in Malaysia and sits on the Board of Innoprise Plantations Berhad. He holds directorship in various subsidiary companies of TSH Group. Notably, he was the Chairman of the East Malaysia Planters Association for sixteen (16) years from 1985 to He was an Independent Non-Executive Director of Kwantas Corporation Berhad and an Executive Director of Bena Plantation Sdn. Bhd. when he left in 2006 and 1984 respectively. He now manages his own plantation consultancy business under Agri Cek Sdn. Bhd.. Datuk Jaswant Singh Kler Independent Non-Executive Director He participates actively as a committee member of the Malaysian International Chamber of Commerce & Industry of Sabah branch and as a committee member for Human Resources and also on the Home Affairs of MICCI standing committee. He is a member of the Institute for Development Studies (Sabah) and also a life member of Agricultural Institute of Malaysia. He does not have any family relationship with any other director and/or other major shareholder of the Company. Other than the deemed interest as disclosed under Notes to the Financial Statements of this Annual Report, he has no other conflict of interest with the Company and has no conviction for offences within the past ten (10) years.

18 ANNUAL REPORT PROFILE OF BOARD OF DIRECTORS Tan Aik Kiong, aged 54, a Malaysian, is the Group Executive Director of TSH. He was appointed to the Board of Directors of TSH on 25 November He also sits on the board of various subsidiary companies of TSH and also holds directorship in other private limited companies. He obtained a Master degree in Civil Engineering, majoring in Construction Management, from the University of Oklahoma, United States of America in Prior to joining the Company in 1987, he worked with Prudential Bache Ltd., an established brokerage and commission house in 1986 and subsequently with Ameroid Services Pte. Ltd., an independent warehousing company in Singapore. He is the brother of Datuk (Dr.) Kelvin Tan Aik Pen, Dato Tan Aik Sim and Tan Aik Yong. Other than the interest and deemed interest as disclosed in the Circular to Shareholders on recurrent related party transactions, he has no other conflict of interest with the Company and has no conviction for offences within the past ten (10) years. Tan Aik Kiong Group Executive Director Lim Fook Hin, aged 64, a Malaysian, was appointed as an Executive Director of TSH on 9 May He also serves as a member of the Remuneration Committee. He is currently the Executive Director of Ekowood International Berhad and Innoprise Plantations Berhad. He also sits on the board of some subsidiary companies within the TSH Group and also holds directorship in other private limited companies. He is a member of the Malaysian Institute of Certified Public Accountants. After qualifying as a member of the ICAEW, he joined Coopers & Lybrand as an audit senior in 1976 and was transferred to Coopers management consultancy services in He joined the Commonwealth Development Corporation in 1978 and was seconded to Sarawak Oil Palm Sdn. Bhd. as the Company Secretary. Lim Fook Hin Executive Director He joined BAL Plantation Sdn. Bhd. in 1981 as the Financial Controller until His main responsibility included financial management, merger and acquisition and commodity marketing. He was the Chief Executive of United Palm Oil Industries PLC ( UPOIC ), a company listed on the Stock Exchange of Thailand before joining TSH in He does not have any family relationship with any other Director and/or other major shareholder of the Company. Other than the interest and deemed interest as disclosed in the Circular to Shareholders on recurrent related party transactions, he has no other conflict of interest with the Company and has no conviction for offences within the past ten (10) years.

19 18 TSH RESOURCES BERHAD (49548-D) PROFILE OF BOARD OF DIRECTORS Chew Siew Yeng, aged 56, a Malaysian, is the Chief Financial Officer of TSH. He was appointed to the Board of Directors of TSH on 1 January He also sits on the Board of various subsidiary companies of TSH. He is a member of the Malaysian Institute of Certified Public Accountant and Malaysian Institute of Accountants. He started his career with an international accounting firm, PricewaterhouseCoopers from 1979 until 1994 and during this period, he has wide clientele and work exposure in Audit and Business Advisory, Business Centre and Management Consultancy departments covering all sectors of industries in private and listed companies notably in banking and finance, manufacturing and trading. Chew Siew Yeng Executive Director He joined a listed company, AMDB Bhd in 1995 as the Group Financial Controller until 2007 with his last position as Senior General Manager-Corporate Services/Finance and Chief Risk Officer before joining TSH. During this period, his main responsibilities included serving on the EXCO/Board of subsidiary companies within the AMDB Group and financial management involving the supervision of the Group Finance functions, merger and acquisition, risk management, treasury and tax function. He does not have any family relationship with any other Director and/or other major shareholder of the Company. He has no conflict of interest with the Company and has no conviction for offences within the past ten (10) years. Tan Aik Yong, aged 45, a Malaysian, was appointed as an Alternate Director on 4 July He is a non-practising barrister with a degree in Bachelor of Laws (LLB) from Queen Mary College, University of London. He qualified as a Chartered Financial Analyst (CFA) in His career started with a law firm in Kuala Lumpur and had spent about 10 years in investment banking activities in the region. He was a senior manager in United Overseas Bank Group prior to joining TSH Group to handle investment planning, corporate and financing matters in He also sits on the board of Ekowood International Berhad as an Alternate Director and various subsidiary companies within the Group and holds directorship in other private limited companies. Tan Aik Yong Alternate Director to Datuk (Dr.) Kelvin Tan Aik Pen He is the brother of Datuk (Dr.) Kelvin Tan Aik Pen, Dato Tan Aik Sim and Tan Aik Kiong. Other than the interest and deemed interest as disclosed in the Circular to Shareholders on recurrent related party transactions, he has no other conflict of interest with the Company and has no conviction for offences within the past ten (10) years.

20 ANNUAL REPORT STATEMENT ON CORPORATE GOVERNANCE The Board of Directors of TSH ( Board ) recognises that exercise of good corporate governance in conducting the business and affairs of the Company with integrity, transparency and professionalism are key components for the Company s continued progress and success. These will not only safeguard and enhance shareholders investment and value but will at the same time ensure that the interests of other stakeholders are protected. The Board is therefore committed to high standards of corporate governance and business practices. Accordingly, the Board has adopted TSH Corporate Governance Guidelines to assist the Board in the exercise of its responsibilities. These guidelines, along with the term of references of the Board and Board Committees provide the framework for corporate governance at TSH. This Corporate Governance Statement provides information about TSH s corporate governance practices for 2013, including the manner in which the Company has applied the Principles and the extent of compliance with the Recommendations as set out in the Malaysian Code of Corporate Governance 2012 ( Code ). PRINCIPLE 1 : ESTABLISH CLEAR ROLES AND RESPONSIBILITIES Roles and Principal Duties Presently, the Board comprises nine (9) members and one (1) alternate director of which four (4) are Independent Non-Executive Directors, one (1) Non-Executive Director who is also the Chairman and four (4) Executive Directors, including Group Managing Director. During the year under review, YB Datuk Nur Jazlan bin Mohamed resigned from the Board and Audit Committee on 16 April 2013 to facilitate his candidacy for the general election. He was subsequently re-appointed as Independent Non-Executive Director and member of the Audit Committee on 22 May The Board is of the view that the current Board size is appropriate for the complexity and scale of operations of the Company. The composition of the Board continues to provide the Group with a wealth of knowledge and experience to draw from a comprehensive mix of skills which includes financial, technical and business expertise that is important for the continued successful direction of the Group. Collectively, Datuk (Dr.) Kelvin Tan Aik Pen and his family constitute significant shareholders of the Company but with less than majority. The Board is satisfied that current Board composition fairly reflects the investment of minority shareholders of the Company. Of the total nine (9) Board members, four (4) are Independent Directors and two (2) Executive Directors who are not related to the significant shareholder. The positions of Chairman and Group Managing Director are individually held by two (2) persons to ensure a balance of power and authority. There is a clear distinction between the roles and responsibilities of the Board, Chairman and Group Managing Director which are set out in the TSH Corporate Governance Guidelines. The balance of responsibilities between the Board and Group Managing Director will be reviewed on a regular basis so as to ensure that the division of functions remains appropriate to the needs of the Company. The role of Chairman include, amongst others, overseeing the orderly conduct and effectiveness of the Board by ensuring a cohesive working relationship between members of the Board whilst the Group Managing Director has overall responsibility for the day-to-day management of the business and is responsible for the Group strategies, organizational effectiveness, implementation of Board policies and decisions. Generally, the Executive Directors are responsible for making and implementing operational and corporate decisions as well as developing, coordinating and implementing business and corporate strategies. Non-Executive Directors play key supporting roles, contributing knowledge and experience towards the formulation of policies and in the decision-making process. They could provide the relevant checks and balances, focusing on shareholders and other stakeholders interests and ensuring that high standards of corporate governance are applied. Where a potential conflict of interest may arise, it is mandatory practice for the Director concerned to declare his interest and abstain from the decision-making process.

21 20 TSH RESOURCES BERHAD (49548-D) STATEMENT ON CORPORATE GOVERNANCE The Board takes full responsibility for the overall performance of the Company and the Group. The main responsibilities of the Board comprise the following:- Setting the objectives, goals and strategic plan for the Company with a view to maximizing shareholder value and promoting sustainability; Adopting and monitoring progress of the Company s strategy, budgets, plans and policies; Overseeing the conduct of the Company s business to evaluate whether the business is being properly managed; To consider and approve reserved matters covering corporate policies, material investment and acquisition/disposal of assets; Identifying principal risks and ensure implementation of appropriate systems to manage these risks; Succession planning, including appointing, training, fixing the compensation of and where appropriate, replacing senior management; Developing and implementing an investor relations programme or shareholder communications policy for the Company; Reviewing the adequacy and the integrity of the Company s internal control systems and management information systems, including systems for compliance with applicable laws, regulations, rules, directives and guidelines; and Reviewing the term of office and performance of the Audit Committee and each of its members at least once in every three (3) years to determine whether the Audit Committee members have carried out their duties in accordance with their terms of reference. The Board has adopted a Board Charter which serves as a source of reference and primary induction literature, providing insights to prospective Board members and senior management. The Board Charter will be periodically reviewed and updated in accordance with the needs of the Company and any new regulations that may have an impact on the discharge of the Board s responsibilities. The details of the Board Charter are available for reference in the Company s website at Code of Conduct and Ethics The Company has adopted a code of conduct and ethics which applies to Directors, officers and employees of the Group and is available on the Company s website. The Board of Directors of TSH continues to adhere to the Code of Ethics for Company Directors issued by the Companies Commission of Malaysia ( Code of Ethics ). The Board is ultimately responsible for the implementation of this Code of Ethics. The Board has delegated to the Nomination Committee the responsibility to administer this Code of Ethics. Directors who learn of or suspect that a violation of the Code of Ethics has occurred or is likely to occur must immediately report the violation to the Chairman of the Nomination Committee, or to any other member of the Nomination Committee, except in the case of issues regarding the Company s, financial reporting, accounting, auditing matters or internal accounting controls of which it should be reported to the Chairman of the Audit Committee. If a Director is unsure whether a violation should be reported to the Nomination or the Audit Committee, he or she is encouraged to report to both Committees. Directors who report violations or suspected violations in good faith will not be subject to retaliation of any kind. Reported violations will be treated confidentially to the extent possible. Alleged violations of the Code of Ethics shall be investigated by the Nomination Committee and may result in discipline and other action at the discretion of the Board upon recommendation of the Nomination Committee, including, where appropriate, removal from the Board. The Board is ultimately responsible for the investigation and resolution of all issues that may arise under this Code of Ethics.

22 ANNUAL REPORT STATEMENT ON CORPORATE GOVERNANCE The Board in its effort to enhance corporate governance has put in place a process to ensure compliance. A whistle blowing channel has been established by the Company to enable its employees and stakeholders to report genuine concerns about malpractices, unethical behavior or misconduct without fear of reprisal. Any concerns raised will be investigated and outcome of such investigation will be reported to the Board. Appropriate action will be taken to resolve the issue. Corporate Responsibility and Sustainability The Board places great importance on corporate responsibility and business sustainability. The Company s activities on environment, social and governance for the year under review are disclosed in the ensuing pages of this Annual Report. Supply and Access to Information The Directors have access to all information within the Company, whether as a full board or in their individual capacity, to the extent that the information required is pertinent to the discharge of their duties as Directors. All Directors are provided with an agenda and a set of Board papers containing information relevant to the business of the meeting, including information on financial, operational and corporate matters prior to Board meetings. The Board papers are issued in sufficient time to enable the Directors to obtain further explanations, where necessary, in order to be properly briefed before the meetings. In addition, there are matters reserved specifically for the Board s decision, including the approval of corporate proposals, plans and annual budgets, acquisitions and disposals of undertakings and properties of a substantial value, major investments and financial decisions and changes to the management and control structure within the Group, including key policies and procedures and delegated authority limits. The Board has also put into place a procedure for Directors, whether as a full Board or in their individual capacity, to take independent professional advice at the Company s expense, if necessary. Company Secretaries All Directors have access to the advice and services of the Company Secretaries in carrying out their duties. The Board is regularly updated by the Company Secretaries on new changes to the statutory and regulatory requirements and the resultant implications to the Company and the Board in discharging their duties and responsibilities. PRINCIPLE 2 : STRENGTHEN COMPOSITION Nomination Committee The Board has established a Nomination Committee on 26 June 2001 and currently comprises entirely Independent Non- Executive Directors as follows: Datuk Suboh bin Md Yassin (Chairman) Datuk Jaswant Singh Kler The Nomination Committee is responsible for reviewing the Board s succession plans, training for Directors and assessing the effectiveness of the Board and Board Committees.

23 22 TSH RESOURCES BERHAD (49548-D) STATEMENT ON CORPORATE GOVERNANCE The Nomination Committee is also responsible for proposing and assessing new nominee(s) to the Board and Board Committee membership and thereupon submitting their recommendation to the Board for decision. In making its recommendations, the Nomination Committee will not be guided solely by gender but rather the candidates skills, knowledge, expertise and experience, professionalism, integrity and in the case of candidates for the position of Independent Non-Executive Directors, the Nomination Committee will also evaluate the candidates ability to discharge such responsibilities/functions as expected from Independent Non-Executive Directors. As part of the appointment process, the potential candidate must disclose his existing directorships as well as any other commitments so as to determine whether he has adequate time to perform his duties. The Company Secretaries shall ensure that all appointments are properly made and all necessary information is obtained, both for the Company s own records and for the purposes of meeting statutory obligations, as well as obligations arising from the regulatory requirements. As boardroom diversity is concerned, the Board does not have a specific policy on setting targets for women candidates as the Board believes that it is of utmost importance that the Company has an effective composition of the Board to discharge their duties effectively in the best interest of the Company and shareholders. The performance of those Directors who are subject to re-appointment and re-election at the next Annual General Meeting ( AGM ) are assessed by the Nomination Committee whereupon recommendations are submitted to the Board for decision on the tabling of the proposed re-appointment and re-election of the Directors concerned for shareholders approval. In accordance with the Company s Articles of Association, all Directors shall retire from office once at least in each three (3) years, but shall be eligible for re-election. Directors over seventy (70) years of age are required to submit themselves for re-appointment annually in accordance with Section 129(6) of the Companies Act, The Directors who are due for retirement and re-appointment in accordance with Section 129(6) of the Companies Act, 1965 at the forthcoming Thirty-Fourth AGM of the Company are Dato Leong Leong Khee Seong and Datuk Jaswant Singh Kler. However, Dato Leong Leong Khee Seong has expressed his intention not to seek re-appointment as Director of the Company. Hence, he will retain office until the close of the AGM. The Directors who are due for retirement and re-election pursuant to Article 95 and Article 86 of the Company s Articles of Association are Datuk Suboh bin Md Yassin and YB Datuk Nur Jazlan bin Mohamed respectively. The Board has adopted a formal process to be carried out by the Nomination Committee for reviewing its own effectiveness and that of its individual Directors and Board Committees and assessing the independence of its Independent Directors. Each member of the Nomination Committee receives the Board performance evaluation questionnaires and separate Committee performance evaluation forms. The assessment of the Nomination Committee s performance shall be carried out by individual members of the Nomination Committee. All Board members are required to assess their own performance by completing the Director s performance evaluation form. The Company Secretaries shall compile the results for submission to the Nomination Committee for review and assessment. The Chairman of the Nomination Committee shall then report the findings and/or recommendations to the Board. All assessments and evaluations carried out by the Nomination Committee in the discharge of all its functions are properly documented and kept confidential. Activities of the Nomination Committee during the year During the year, the Nomination Committee recommended to the Board for approval of the re-appointment of YB Datuk Nur Jazlan bin Mohamed as Independent Non-Executive Director and member of the Audit Committee. The Nomination Committee reviewed the required mix of skills and experience and other qualities, including core competencies which Non-Executive Directors should bring to the Board and was of the view that all Non-Executive Directors have extensive experience in managing substantial business entities covering the core business of the Group as well as knowledge and experience in finance and investment decision analysis with independent judgement.

24 ANNUAL REPORT STATEMENT ON CORPORATE GOVERNANCE The Nomination Committee also evaluated the effectiveness of the Board as a whole, the various Committees and assessing the contribution of each individual Director. Good and effective communications were established among Board members and Board Committee members on official and unofficial basis and major policies and corporate proposals are vigorously debated and scrutinised before putting to a vote. All members of the Board and the Committees have been diligent and exercised due reasonable care in discharging their duties and responsibilities. As at the date of this report, the Nomination Committee had reviewed and made recommendations to the Board for the reelection and re-appointment of those retiring Directors at the forthcoming AGM for shareholders approval. Remuneration Committee The Board has established a Remuneration Committee on 26 June 2001, comprising two (2) Independent Non-Executive Directors and one (1) Executive Director as follows: Datuk Jaswant Singh Kler (Chairman) Datuk Suboh bin Md Yassin Lim Fook Hin The Remuneration Committee s primary responsibility is to recommend to the Board the remuneration of the Executive Directors and senior management staff at director level in all its forms, drawing from outside advice as necessary. The Remuneration Committee assists the Board in developing a policy on remuneration of Directors to attract and retain Directors and ensure that rewards and remuneration packages are commensurate with each of their expected responsibilities and contribution to growth and profitability of the Company. The remuneration of the Executive Directors is structured on the basis of linking rewards to corporate and individual performance. The Executive Directors play no part in deciding their own remuneration and the Directors concerned shall abstain from all discussion pertaining to their remuneration. The level of remuneration for Non-Executive Directors reflects the experience and level of responsibilities. The Board as a whole determines the remuneration package of Non-Executive Directors. The annual Directors fees payable to Non-Executive Directors are subject to shareholders approval at the AGM based on the recommendation of the Board. Additional allowances are paid to certain Non-Executive Directors in accordance with the number of meetings attended during the financial year. Details of the remuneration of the Directors of the Company for the financial year under review are as follows:- 1. Aggregate remuneration of the Directors categorised into appropriate components:- Total per annum for the financial year ended 31 December 2013 Remuneration Packages Executive Directors Non-Executive Directors RM RM Directors Fees - 186,000 Salaries 3,012,000 - Bonuses 1,404,957 - Allowance 8,500 82,500 Other emoluments - 675,000 Benefits-in-kind 174, ,697 EPF 509,888 54,000 TOTAL 5,109,628 1,106,197

25 24 TSH RESOURCES BERHAD (49548-D) STATEMENT ON CORPORATE GOVERNANCE 2. The number of Directors whose total remuneration fall within the following bands:- Number of Directors Range of Remuneration (RM) Executive Non-Executive Below 50, , , , , , , , , , , ,550,001-1,600, ,500,001-2,550, PRINCIPLE 3 : REINFORCE INDEPENDENCE In line with the Code, the Board has incorporated additional responsibility into the Nomination Committee s terms of reference, namely to undertake annual assessment of independence of the Independent Directors. All Independent Directors are required to assess their level of independence annually by completing the form of annual assessment of independence of independent directors for submission to the Nomination Committee for review and assessment. The Chairman of the Nomination Committee shall then report the findings and/or recommendations to the Board. For the financial year ended 31 December 2013, each of the four (4) Independent Non-Executive Directors had provided an annual confirmation of his independence to the Board based on its policy on criteria of assessing independence in line with the definition of independence directors prescribed by the Bursa Malaysia Securities Berhad ( Bursa Securities ) Main Market Listing Requirements ( MMLR ). The Nomination Committee and the Board had assessed the four (4) Independent Non- Executive Directors of the Company, namely Dato Leong Leong Khee Seong, Datuk Suboh bin Md Yassin, Datuk Jaswant Singh Kler and YB Datuk Nur Jazlan bin Mohamed and are satisfied with the level of independence demonstrated by all the Independent Directors and their ability to act in the best interest of the Company. Considering the recommendation of the Code on the tenure of an independent director should not exceed a cumulative term of nine (9) years, the Board holds the view that the ability of an independent director to exercise independent judgement is not affected by the length of his service as an independent director. The suitability and ability of independent director to carry out his roles and responsibilities effectively are very much a function of his caliber, experience and personal qualities. Restriction on tenure may cause loss of experience and expertise that are important contributors to the efficient working of the Board. The Board is fully satisfied that Datuk Jaswant Singh Kler, who has served as an Independent Non-Executive Director for more than nine (9) years, is still independent and continues to bring valuable business expertise, knowledge and professionalism to the Board for its efficient and effective functioning. The Board is of the opinion that Datuk Jaswant Singh Kler continues to bring independent views of the Company s affairs to the Board notwithstanding his length of service. The Board believes that his in-depth knowledge of the Group s businesses and his extensive experience and expertise continue to provide invaluable contribution to the Board. At the preceding AGM held on 21 May 2013, the shareholders had approved the retention of Datuk Jaswant Singh Kler as an Independent Non-Executive Director. The Company intends to seek shareholders approval at the forthcoming AGM to retain Datuk Jaswant Singh Kler as an Independent Non-Executive Director for the ensuing year. Recommendation 3.5 of the Code states that the Board must comprise a majority of independent directors where the Chairman is not an independent director. Currently, the Chairman of the Company is a Non-Independent Non-Executive Director. Even though the number of Independent Directors of the Company do not meet the Code recommendation, the Board formed the view that it is still able to exercise objective judgment on business and corporate affairs, independent from management because of active participation and engagement of the Independent Directors during the Board and Board Committee meetings.

26 ANNUAL REPORT STATEMENT ON CORPORATE GOVERNANCE PRINCIPLE 4 : FOSTER COMMITMENT In line with the Code, the Board has adopted a policy whereby all its Board members are required to notify the Chairman of the Board before accepting any new directorship and to indicate the time expected to be spent on the new appointment. A schedule of Board and Board Committee meetings set for a whole financial year is prepared in advance and tabled to the Board for approval before the commencement of a new financial year to enable the Directors to plan ahead and allocate time in their respective schedules. The Board meets regularly at least four (4) times a year with due notice of issues to be discussed and records its deliberations and conclusions in discharging its duties and responsibilities. Additional meetings will be convened as and when required. In the intervals between Board meetings, for exceptional matters requiring urgent Board decision, Board approvals are sought via circular resolutions, which are supported with sufficient information required to make an informed decision. During the financial year, the Board met four (4) times, whereat it deliberated and considered various matters including the Group s financial results, major investment and strategic decisions, business plan and direction of the Group. Details of attendance of each Board member are as follows: Name 26/02/13 20/05/13 20/08/13 19/11/13 Total Datuk (Dr.) Kelvin Tan Aik Pen P P P P 4/4 Dato Tan Aik Sim P P P P 4/4 Datuk Suboh bin Md Yassin P P P P 4/4 Dato Leong Leong Khee Seong - P P P 3/4 Datuk Jaswant Singh Kler P P P P 4/4 YB Datuk Nur Jazlan bin Mohamed * P N/A P P 3/3 Tan Aik Kiong - P - P 2/4 Lim Fook Hin P P P P 4/4 Chew Siew Yeng P P P P 4/4 Tan Aik Yong (Alternate to Datuk (Dr.) Kelvin Tan Aik Pen) P P P P 4/4 * resigned on 16 April 2013 and re-appointed on 22 May 2013 Directors Training All Directors receive full and appropriate briefing on first appointment, with subsequent updating as necessary. They were also provided with a Directors manual containing amongst others, the background information on TSH Group, TSH Corporate Governance Guidelines and other relevant policies for their reference. All members of the Board have attended the Mandatory Accreditation Programme training as required by the MMLR. The Board, through the Nomination Committee had undertaken an assessment of the training needs of each Director for the financial year under review and concluded that all Board members have vast experience and extensive knowledge in managing the core business of the Group. Nonetheless, the Directors are encouraged to attend various training programmes to ensure they keep abreast on various issues facing the changing business environment within which the Group operates to effectively discharge their duties as Directors.

27 26 TSH RESOURCES BERHAD (49548-D) STATEMENT ON CORPORATE GOVERNANCE For the year under review, all Directors had attended various seminars, conferences, talk, forums and workshops ( training ) to keep abreast of changes in the industry. Details of training attended by the Directors during the year, collectively or individually are as follows: Title of training Type of training No. of hours/ days spent Myanmar Finance Leaders Summit Summit/Conference 2 days 59 th Parliamentary Conference Conference 8 days CNBC Summit 2013 Summit 1 day The Global Forum of the Global Parliamentarians on Habitats (GPH) Forum 9 days 10 th Natsem Confronting Management Challenges in the Oil Palm Industry Seminar 3 days The New Landscape for Global Political Risk Management Seminar 1 day 2013 Palm Oil Industry Leadership Forum Sharing Solutions, Shaping Vision Forum 1 day and Creating Opportunities Jabatan Perhutanan Sabah - International Conference on Heart of Borneo Conference 2 days Natural Capital : Unleasing Their Potential for Sustainable Growth in Sabah Institute for Development Studies (Sabah) - Greening of Sabah: Renewable Seminar 1 day Energy Options in the Near Future Tax briefing on 2014 Malaysian Budget Briefing 1 day DBS Vickers Pulse of Asia 2013 Conference 2 days Anti Money Laundering and Counter Financing of Terrorism Conference 2013 Conference 1 day PRINCIPLE 5 : UPHOLD INTEGRITY IN FINANCIAL REPORTING The Company s are prepared in accordance with the provisions of the Companies Act, 1965 and applicable financial reporting standards in Malaysia. The Board is responsible to ensure that the give a true and fair view and balanced and understandable assessment of the state of affairs of the Company and of the Group. The Statement of Directors Responsibilities in respect of the preparation of the annual audited is set out in the ensuing pages of this Annual Report. The Audit Committee assists the Board to review the adequacy and integrity of the Group s financial administration and reporting, internal control and risk management systems. The Audit Committee currently comprises three (3) members, all of whom are Independent Non-Executive Directors. On 16 April 2013, YB Datuk Nur Jazlan bin Mohamed resigned from the Audit Committee and the vacancy was soon filled with his re-appointment to the Audit Committee on 22 May The terms of reference of the Audit Committee together with its report are set out in the ensuing pages of this Annual Report. The Audit Committee is authorised by the Board to investigate any matter within its terms of reference and to have the resources in order to perform its duties and responsibilities as set out in its terms of reference. External Auditors The Board through the Audit Committee maintains a formal and transparent relationship with the Company s external auditors. The external auditors are invited to attend the Audit Committee meetings and AGMs and are available to answer shareholders questions on the conduct of the statutory audit and the preparation and content of their audit report. The Board has adopted a policy in relation to the provision of non-audit services by the Company s external auditors. The Audit Committee is responsible to review all the non-audit services provided by the external auditors and the aggregate amount of fees

28 ANNUAL REPORT STATEMENT ON CORPORATE GOVERNANCE paid to them. The Audit Committee is satisfied that the provision of these non-audit services was not in conflict with the role of the external auditors or their independence. Details of the amounts paid to the external auditors for non-audit services performed during the year are set out in the Additional Compliance Information of this Annual Report. The external auditors had provided a written confirmation of their independence to the Audit Committee that they are and have been independent throughout the conduct of the audit engagement in accordance with the terms of all relevant professional and regulatory requirements. The Audit Committee had reviewed the suitability and independence of external auditors and recommended their re-appointment for the financial year ending 31 December PRINCIPLE 6 : RECOGNISE AND MANAGE RISKS Risk Management and Internal Control The Board is responsible for maintaining a sound system of internal control to safeguard shareholders investment and the Company s assets. The Company has effected several systems of internal control covering financial controls, operational and compliance controls and risk management. Some of the systems have been in place over the years and will continue to be reviewed, added on or updated in line with the changes in the operating environment. The Board seeks regular assurance on the continuity and effectiveness of the internal control system through independent appraisals by the internal and external auditors. Information on the Group s internal control and risk management are presented in the Statement on Risk Management and Internal Control. Internal Audit Function The Company has established an internal audit function which reports directly to the Audit Committee. The internal audit department communicates regularly with the members of the Audit Committee and the Head of Internal Audit is invited to attend meetings of the Audit Committee. Internal audit activities, all of which are risk-based, are performed by a team of appropriate, qualified and experienced employees. Further information on internal audit function is set out in the Audit Committee Report. PRINCIPLE 7 : ENSURE TIMELY AND HIGH QUALITY DISCLOSURE The Company s Corporate Disclosure Policy is designed to ensure the timely release of material price-sensitive information to the market. This policy establishes procedures to ensure that Directors and employees are aware of the Company s disclosure obligations and procedures, and have accountability for the Company s compliance with those obligations. The Board has established a dedicated section for corporate governance on the Company s website where information on the Board Charter, shareholders rights, code of ethics and conducts and whistle blowing may be accessed. PRINCIPLE 8 : STRENGTHEN RELATIONSHIP BETWEEN COMPANY AND SHAREHOLDERS TSH recognises the importance of establishing a direct line of communication with shareholders and investors through timely dissemination of information on the Group s performance and major development via appropriate channels of communication. Dissemination of information includes distribution of Annual Report and relevant circulars, issuance of press releases, quarterly financial performance of the Company and TSH Group to Bursa Securities, Securities Commission and the public as well as by press conference. The Board has appointed Datuk Jaswant Singh Kler as Senior Independent Non-Executive Director to whom concerns may be conveyed. At all times, shareholders may contact the Company Secretaries for information on the Company.

29 28 TSH RESOURCES BERHAD (49548-D) STATEMENT ON CORPORATE GOVERNANCE In addition, the Company maintains a website at for shareholders and the public to access information on amongst others, the Company s background, business activities and products, annual reports, corporate responsibility, shareholders rights, updates on its various news and events and financial performance. The Chairman and the Board encourage shareholders to attend and participate in the AGM and any general meetings of the shareholders. Notice of meeting and a copy of the Company s annual report are sent out to shareholders at least twenty one (21) days before the AGM. The shareholders are given the opportunity to seek clarification on any matters pertaining to the business and financial performance of the Company. Members of the Board as well as the external auditors and representatives from the share registrars of the Company are present to answer questions raised at the meeting. Resolutions tabled and passed at the meeting are released to Bursa Securities on the same day to enable the public to know the outcome. A press conference is usually held immediately after the AGM or general meeting where questions on the Group s activities and performance from the press are answered by the Board. Board members are also available before and after these meetings for informal discussions. The Board takes note of the Recommendation 8.2 of the Code on the adoption of electronic means for poll voting to facilitate greater shareholder participation. However, the Board is of the view that with the current level of shareholders attendance at AGM, voting by way of a show of hands continues to be efficient. Nonetheless, the Company has always made the necessary preparation for poll voting for all resolutions tabled at the AGM and the Chairman will inform shareholders of their right to demand a poll vote at the commencement of the AGM or general meeting. ADDITIONAL COMPLIANCE INFORMATION 1. Utilisation of Proceeds During the financial year, the Company undertook three (3) tranches of Private Placement totaling 62,580,000 ordinary shares of RM0.50 each and a total of RM141,639,400 were raised. The proceeds were utilized by TSH as follows: Utilisation of Proceeds RM million 1) Working Capital ) Downpayment for the Sabah Plantation Estates ) Future investment ) Expenses for private placement exercise Share Buy-Back During the financial year, a total of 3,000 ordinary shares were purchased and retained as treasury shares. Details of the shares purchased are as follows: Monthly breakdown No. of shares purchased & retained Purchase price per share (RM) Average cost per share as treasury shares Lowest Highest (RM) Total cost (RM) March , , May , , November , , As at 31 December 2013, the total number of shares held as treasury shares was 6,885,900. None of the treasury shares were resold or cancelled during the financial year.

30 ANNUAL REPORT STATEMENT ON CORPORATE GOVERNANCE 3. Options, Warrants or Convertible Securities The Company does not have any options, warrants or convertible securities in issue. 4. American Depository Receipt ( ADR ) or Global Depository Receipt ( GDR ) Programme The Company did not sponsor any ADR or GDR programme during the financial year. 5. Imposition of Sanctions and/or Penalties There were no sanctions and/or penalties imposed on the Company, its subsidiaries, Directors and management by the relevant regulatory bodies which have material impact on the operations or financial position of the Group during the financial year ended 31 December Non-Audit Fees Non-audit fees amounting to RM227,000 (Group) and RM77,000 (Company) were incurred for services rendered by external auditors for the financial year ended 31 December Variation in Results There were no material variations between the audited results for the financial year ended 31 December 2013 and the unaudited results previously announced by the Company. 8. Profit Guarantee The Company did not give any profit guarantee during the financial year. 9. Material Contracts During the financial year under review, save as disclosed in the sections under Recurrent Related Party Transactions set out in the ensuing pages of this Annual Report, there were no material contracts entered into by the Company and/or its subsidiaries involving Directors and major shareholders interests which were still subsisting at the end of the financial year or if not then subsisting, entered into since the end of the previous financial year.

31 30 TSH RESOURCES BERHAD (49548-D) STATEMENT ON CORPORATE GOVERNANCE 10. Recurrent Related Party Transactions of a revenue or trading nature At the last AGM of the Company held on 21 May 2013, the Company had obtained a mandate from its shareholders ( Shareholders Mandate ) to allow the Company and/or its subsidiaries to enter into Recurrent Related Party Transactions of a Revenue or Trading Nature ( Recurrent Transactions ). In accordance with Paragraph 10.09(2)(b) of the MMLR, details of the Recurrent Transactions conducted during the financial year ended 31 December 2013 pursuant to the said Shareholders Mandate are as follows: Aggregate value of Nature of transactions made Name of Related Recurrent during the financial Companies parties Class of related party Transactions year (RM) TSH Plantation Sdn. Bhd. ( TSHP ) and TSH Plantation Management Sdn. Bhd. ( TSHPM ) (Seller) TSH-Wilmar Sdn. Bhd. ( TSH-W ) (Buyer) TSH-W is a jointly-owned company in which TSH Resources Berhad ( TSH ) holds 50% equity interest. Datuk (Dr.) Kelvin Tan Aik Pen is a Director and substantial shareholder of TSH. He also holds directorship in TSH-W and TSHPM. Tan Aik Kiong and Lim Fook Hin are Directors and shareholders of TSH and both of them also hold directorships in TSHP, TSHPM and TSH-W. Tan Aik Yong is an Alternate Director and shareholder of TSH. He also holds directorship in TSHP. Dato Tan Aik Sim is a Director and shareholder of TSH and person connected to Datuk (Dr.) Kelvin Tan Aik Pen, Tan Aik Kiong and Tan Aik Yong. Tan Soon Hong, Ong Yah Ho, Tan Ah Seng, Tan Aik Choon, Tan Ek Huat, Tan Aik Hwa and Chin Chui Fong are shareholders of TSH and persons connected to Datuk (Dr.) Kelvin Tan Aik Pen, Tan Aik Kiong and Tan Aik Yong. Tan Soon Hong, Tan Aik Choon, Tan Ek Huat and Tan Aik Hwa are also directors of certain TSH subsidiaries. Cheong Sau Kum is a shareholder of TSH and person connected to Lim Fook Hin. Sale of crude palm oil 468,015,038 TSHP and TSHPM (Seller) TSH-W (Buyer) Same as disclosed above Sale of palm kernel 63,016,699 TSHP and TSHPM (Buyer) TSH-W (Seller) Same as disclosed above Purchase of crude palm oil 53,547,376

32 ANNUAL REPORT STATEMENT ON CORPORATE GOVERNANCE Aggregate value of Nature of transactions made Name of Related Recurrent during the financial Companies parties Class of related party Transactions year (RM) TSHP (Provider) TSH-W (Recipient) Same as disclosed above Provision of transportation for the delivery of palm kernel expeller and empty fruit bunches liquor 154,136 TSHP and TSHPM (Seller) TSH-Wilmar (BF) Sdn. Bhd. ( TSH- W(BF) ) (Buyer) TSH-W (BF) is a jointly-owned company in which TSH holds 50% equity interest. Datuk (Dr.) Kelvin Tan Aik Pen is a Director and substantial shareholder of TSH. He also holds directorship in TSH-W(BF) and TSHPM. Tan Aik Kiong and Lim Fook Hin are Directors and shareholders of TSH and both of them also hold directorships in TSHP, TSHPM and TSH-W (BF). Tan Aik Yong is an Alternate Director and shareholder of TSH. He also holds directorship in TSHP. Dato Tan Aik Sim is a Director and shareholder of TSH and person connected to Datuk (Dr.) Kelvin Tan Aik Pen, Tan Aik Kiong and Tan Aik Yong. Tan Soon Hong, Ong Yah Ho, Tan Ah Seng, Tan Aik Choon, Tan Ek Huat, Tan Aik Hwa and Chin Chui Fong are shareholders of TSH and persons connected to Datuk (Dr.) Kelvin Tan Aik Pen, Tan Aik Kiong and Tan Aik Yong. Tan Soon Hong, Tan Aik Choon, Tan Ek Huat and Tan Aik Hwa are also directors of certain TSH subsidiaries. Cheong Sau Kum is a shareholder of TSH and person connected to Lim Fook Hin. Sale of palm oil wastes, namely empty fruit bunches, fibre, shell & etc 1,206,102

33 32 TSH RESOURCES BERHAD (49548-D) STATEMENT ON CORPORATE GOVERNANCE Aggregate value of Nature of transactions made Name of Related Recurrent during the financial Companies parties Class of related party Transactions year (RM) TSHP and TSHPM (Buyer) Velocity Gain Sdn. Bhd. ( VGSB ) (Seller) Tan Aik Kiong and Lim Fook Hin are Directors of TSH, TSHP, TSHPM and VGSB. They also hold direct and/or indirect shareholdings in TSH and VGSB. Tan Aik Yong is an Alternate Director of TSH and holds directorship in TSHP and VGSB. He also holds direct shareholding in TSH and indirect shareholding in VGSB. Ho Chui Mee Theresa is a Director and shareholder of VGSB and person connected to Tan Aik Yong. Chin Chui Fong is a Director of VGSB, shareholder of TSH and person connected to Tan Aik Kiong. Lim Bek Yee is a shareholder of VGSB and Cheong Sau Kum is a shareholder of VGSB and TSH and she also holds directorship in VGSB. Both of them are persons connected to Lim Fook Hin. Purchase of oil palm fresh fruit bunches 1,067,018 TSH Biotech Sdn. Bhd. ( TSH Biotech ) (Seller) Serijaya Industri Sdn. Bhd. ( Serijaya ) (Buyer) Serijaya is a wholly-owned subsidiary of Innoprise Plantations Berhad ( Innoprise ). TSH is a substantial shareholder of Innoprise. Datuk (Dr.) Kelvin Tan Aik Pen is a substantial shareholder and Director of TSH and he also holds directorships in Innoprise and Serijaya. Tan Aik Kiong is a Director of TSH and TSH Biotech and shareholder of TSH. Lim Fook Hin is a Director of TSH, TSH Biotech, Serijaya and Innoprise and he is also a shareholder of TSH. Tan Aik Yong is an Alternate Director and shareholder of TSH. He also holds directorship in TSH Biotech. Dato Tan Aik Sim is a Director and shareholder of TSH and person connected to Datuk (Dr.) Kelvin Tan Aik Pen, Tan Aik Kiong and Tan Aik Yong. Tan Soon Hong, Ong Yah Ho, Tan Ah Seng, Tan Aik Choon, Tan Ek Huat, Tan Aik Hwa and Chin Chui Fong are shareholders of TSH and persons connected to Datuk (Dr.) Kelvin Tan Aik Pen, Tan Aik Kiong and Tan Aik Yong. Tan Soon Hong, Tan Aik Choon, Tan Ek Huat and Tan Aik Hwa are also directors of certain TSH subsidiaries. Cheong Sau Kum is a shareholder of TSH and person connected to Lim Fook Hin. Rosely bin Kusip is a director of TSH Biotech and alternate director of Serijaya and Innoprise. Sale of tissue culture oil palm (ramets) Nil

34 ANNUAL REPORT STATEMENT ON CORPORATE GOVERNANCE Aggregate value of Nature of transactions made Name of Related Recurrent during the financial Companies parties Class of related party Transactions year (RM) TSHPM (Buyer) Serijaya (Seller) Same as disclosed above Purchase of fresh fruit bunches 23,869,852 TSHPM (Seller) Serijaya (Buyer) Same as disclosed above Sale of organic fertilizer 72,468 TSHP (Seller) Serijaya (Buyer) Same as disclosed above Sale of organic fertilizer Nil This statement has been reviewed and approved by the Board of Directors at a meeting held on 25 February 2014.

35 34 TSH RESOURCES BERHAD (49548-D) STATEMENT ON CORPORATE RESPONSIBILITY TSH continues to be committed to Corporate Responsibility ( CR ) through various CR initiatives, which has been an integral part of our way of doing business. The Board of Directors strongly believes that social and environment performance will help to create business sustainability and enhance value for all its stakeholders. Community The Group steps forward and serves the community in which it operates and strives to make positive contribution to the community particularly in helping the underprivileged and the less fortunate. The Board of Directors strongly believes that in playing their role as a socially responsible corporate citizen, the Group creates business sustainability and enhances value for all its stakeholders. TSH continues to take care for the community by giving philanthropic support to various causes with particular emphasis on education as well as other social contribution throughout the year, contributing RM246,500 in the community. The following are some of the contributions: 1. TSH generously contributed the sum of RM5,000 to Saan Yak Nak Meditation Centre as a token of appreciation for their activities and meaningful service that contributed to society. 2. TSH generously donated the sum of RM10,000 for the conservation of Sumatran rhinoceros in Danum Valley, Sabah. As part of the conservation efforts, Borneo Rhino Alliance is to utilise the proceeds to construct a rhino breeding facility. 3. In September 2013, TSH generously sponsored the amount of RM50,000 for the distribution of 62,500 copies of The Star NiE to schools for the year TSH generously contributed RM30,000 in June 2013 to SJK (C) Chong Min for the purchase of computers. 5. TSH contributed RM1,500 in June 2013 to St. John Ambulans Malaysia. 6. TSH contributed RM2,000 in June 2013 to Institute Tengku Ampuan Afzan Pahang (INTAZ Foundation) in aid of children with special needs. 7. TSH donated RM3,000 to Sekolah Menengah San Min (SUWA) in May 2013 as part of its continued commitment to education. 8. TSH generously contributed RM50,000 in April 2013 to SJK (C) Sin Min Sungai Tiang, Selekoh, Perak to build the school s hall. 9. TSH generously contributed RM10,000 in March 2013 to SJK (C) San Min No. 1, Teluk Intan, Perak for the purpose to ensure a total of 10 classrooms will be equipped with multimedia equipments. 10. TSH generously contributed RM3,000 in March 2013 to St. Mary s Cathedral, Sandakan for the Pertandingan Golf Amal Kaamatan The proceeds will be donated to Taman Cahaya (The Sabah Blind Society), Rancangan Sungai Manila, Batu 12 Sandakan.

36 ANNUAL REPORT STATEMENT ON CORPORATE RESPONSIBILITY 11. TSH generously contributed RM15,000 in March 2013 to Emmanuel Methodist Church (EMC) for EMC s Building Fundraising Dinner activity for their proposed building expansion plans. 12. TSH contributed RM2,000 in February 2013 to Baitul Ehsan AlKhairi for the construction and renovation of Baitul Ehsan s house. 13. TSH generously contributed RM50,000 to SJK(C) Yeong Seng for the renovation of the school s general amenities namely, the school canteen and the restrooms. 14. In support of Pusat Kebajikan Good shepherd s mission, TSH donated a sum of RM10, TSH contributed RM5,000 in January 2013 to Majlis Perbandaran Tawau in conjunction with the Tawau Cultural Festival Environment The Group is committed to safeguarding the environment as part of our way of doing business. (a) Waste Management The Group continues to ensure that economic and social development is always balanced and in harmony with the environment. It is our obligation to keep the earth as natural and as clean as possible, as a legacy for the future. Taking cognizance of the environmental impact of the palm oil industry, TSH continues to take various initiatives to mitigate its impact. Our palm bio-integration approach taps the huge commercial potential of bio waste of the palm oil industry through a fully integrated bio-integration complex complete with biomass and biogas power plants which are: Sources of sustainable energy supply where Bio Energy resources are renewable in nature. Environmentally friendly i.e converting agro industrial wastes into energy as part of the waste management process reduces emission of greenhouse gases, which is a key source of global warming and climate change. Eko Paper project i.e converting solid waste of the palm oil industry into value-added pulp and paper. (b) Environment Commitment Apart from creating value for our Company and shareholders, we are directly contributing towards our environment, the health of our nation and its citizens. Energy from biomass power and biogas power are green energy. The use of green energy contributes to environmental protection for the present and future generations by reducing our carbon footprint. Our other environmental commitments include the following:- Removal of solid palm oil waste as feedstock for the Biomass/Biogas plants and Eko Pulp & Paper plant.

37 36 TSH RESOURCES BERHAD (49548-D) STATEMENT ON CORPORATE RESPONSIBILITY Accredited producer by the Forest Stewardship Council for usage of sustainable wood materials. Approved CDM projects that qualify for carbon credits under the Kyoto Protocol. Land development in a responsible manner to comply with the Environmental conditions and avoid biodiversity impairment. Sustainable forestry projects including enrichment planting and silviculture treatment under the Forest Management Unit Programme in Sabah. Sustainability The Group has taken a step further with the setting up a dedicated department headed by a senior manager, to focus solely on management of the sustainability issues concerning our Group s oil palm activities in particular attention to the principles and criteria of the mandatory requirements under the Indonesian Sustainable Palm Oil ( ISPO ) and the Roundtable on Sustainable Palm Oil ( RSPO ). In 2013, in continuing with the sustainability development, the Group registered as a member of RSPO and its membership is currently under process. We have also obtained full ISPO certification for one of our significant entity in Indonesia and the rest of our other entities certification are in progress. Workplace (a) Human Resources Development As a family, TSH Group values and cares for its employees who have been instrumental in helping the Group achieve profitable success year on year. With a mission to provide a systematic management and people development, its manpower force is the determinant factor in the rapid growth of the Group in its expansion plan. We strive to provide our employees with structured and systematic procedures of work to reflect transparency and accountability in order to motivate and educate all levels of employees. We also steadfastly make every effort to build a learning culture within our realm to equip all employees regardless of ranks with essential knowledge and requisite skills. We believe that skilled workforce will be effective in dispensing their responsibilities with confidence and flair. We endeavour to meet Company s objectives by arming our employees with a structured and clear career path. Our Plantation Training Centre in Indonesia is fully equipped with a modern facility to train our plantation employees in a controlled learning environment with realistic challenges similar to real life situations and crisis to ensure effectiveness in carrying out their duties productively. Management training programs such as One Approach with emphasis on execution are given to managers to endow them with up to date and the best business management tools which no other training providers could provide in order to support and enhance their performance. Our intentions are to shape our managers into fit and adaptive managers ready to take on more responsibilities as well as internal and external challenges faced by oil palm plantation industry. TSH Group and its leaders fully endorse the idea of personal and professional employee development through continuous education and on job training. Our comprehensive and detailed Group Human Resource Manual and its revisions, if any, guides and informs employees on benefits, rules and regulations as well as Company policies sanctioned by the Management. We believe in our people to deliver to the best of their abilities therefore our employees are our best and most valuable assets. In meeting our Group s business objectives and operational plans, we shall continually engage with our people closely, nurture them in order to retain and grow with them.

38 ANNUAL REPORT STATEMENT ON CORPORATE RESPONSIBILITY (b) Occupational Safety and Health TSH is committed to maintain high safety and health standards at the workplace. To achieve this objective, each operation unit has established a Health and Safety Committee which is entrusted with the functions on cultivating safe working practices and behavior at work place. A series of in-house training programs on safety and health have been conducted with the assistance of external experts and committee members. Marketplace We continue to be committed to provide high quality products and services to our customers through our valuable human capital and other resources. TSH also aims for continuous improvement towards building long term relationships with all its stakeholders. TSH s website provides easy access to the latest information on the Group s financials and operations as well as the direction of the Group. The website also allows the link for stakeholders to provide feedback or enquiries in order for the Group to satisfy all its stakeholders needs as well as to improve on its products and services. This statement has been reviewed and approved by the Board of Directors at a meeting held on 25 February 2014.

39 38 TSH RESOURCES BERHAD (49548-D) STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL The Board of Directors of TSH ( Board ) is pleased to provide the following Statement on Risk Management and Internal Control pursuant to Paragraph 15.26(b) of the Bursa Malaysia Securities Berhad Main Market Listing Requirements ( MMLR ). The External Auditors have reviewed this Statement as required under Paragraph of the MMLR and have reported to the Board that it appropriately reflects the processes that the Board has adopted in reviewing the adequacy and integrity of the system of internal control. Set out below is the Board s Statement on Risk Management and Internal Control which outlines the nature and state of internal control of the Group during the year under review, and up to the date of this Annual Report. Board Responsibility The Board affirms its overall responsibility for the establishment of the Group s system of internal control as well as periodically reviewing its adequacy and integrity to safeguard shareholders investments, customers interests and Group assets. However, such a system can only reduce but not eliminate the possibility of poor judgment in decision making, human error, occurrences of unforeseeable events and circumvention of controls by employees. Accordingly, such a system can be expected to provide only reasonable but not absolute assurance against material misstatement, operational failures and fraudulent activities. The concept of reasonable assurance also recognizes that the cost of control procedures should not exceed the expected benefits. Key Processes The Board confirms that there is a process for identifying, evaluating and managing significant risks faced by the Group, and the same has been in place for the financial year under review and up to the date of this Annual Report and. The process is periodically reviewed by the Board through the Audit Committee and is guided by the publication Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers issued by the Taskforce on Internal Control. The key processes that the Directors have established with regards to the review are as follows:- The Group s management operates a risk management process that identifies key risks of each operating unit and puts in place controls to mitigate the risks and continually monitor the adequacy and integrity of the control framework. Standard operating procedures that cover key aspects of the Group s various processes. These procedures are subjected to review to cater for process changes and changing risks. Occupational Safety and Health ( OSHA ) Committees meets at regular intervals to ensure a safe working environment. Corporate policy on zero tolerance pertaining to fraud and criminal breach of trust. Regular Board and management meetings to assess performance of key management staff. A comprehensive budgeting and forecasting system. Each operating unit submits a budget annually for approval by the Board. The actual results are reported, analyzed and monitored against the budget. Comprehensive management and financial information is provided to the Board. The Group s internal audit department reports directly to the Audit Committee after conducting reviews on the systems of internal control and the effectiveness of processes that are in place to identify, manage and report risks. The internal audit function adopts a risk-based approach and prepares its audit plan based on the risk profiles of the key business units of the Group after taking into consideration input of Management and the Audit Committee. This statement has been reviewed and approved by the Board of Directors at a meeting held on 25 February 2014.

40 ANNUAL REPORT AUDIT COMMITTEE REPORT Datuk Jaswant Singh Kler Chairman, Independent Non-Executive Director Datuk Suboh bin Md Yassin Member, Independent Non-Executive Director YB Datuk Nur Jazlan bin Mohamed Member, Independent Non-Executive Director (Member of the Malaysian Institute of Accountants) Terms of Reference of the Audit Committee Constitution The Board of Directors resolved on 26 April 1994 to establish a Committee of the Board to be known as the Audit Committee. Membership The Committee shall be appointed by the Board. The majority of the Committee must be Independent Directors of the Company and must be composed of at least three (3) members. All members of the Committee should be Non-Executive Directors. The Chairman of the Committee shall be appointed by the Board whom must be an Independent Director. The Chairman (or in his or her absence, a member designated by the Chairman) shall preside at each meeting of the Committee. No alternate director is allowed to be appointed as a member of the Audit Committee. All members of the Audit Committee should be financially literate and at least one (1) member of the Audit Committee:- (i) must be a member of the Malaysian Institute of Accountants; or (ii) if he is not a member of the Malaysian Institute of Accountants, he must have at least three (3) years working experience and:- (a) he must have passed the examinations specified in Part I of the 1 st Schedule of the Accountants Act 1967; or (b) he must be a member of one of the associations of accountants specified in Part II of the 1 st Schedule of the Accountants Act 1967; or (iii) fulfills such other requirements as prescribed or approved by Bursa Malaysia Securities Berhad ( Bursa Securities ). Authority The Audit Committee shall, in accordance with a procedure to be determined by the Board of Directors and at the cost of the Company:- (a) have explicit authority to investigate any matter within its terms of reference; (b) have the resources which are required to perform its duties;

41 40 TSH RESOURCES BERHAD (49548-D) AUDIT COMMITTEE REPORT (c) have full and unrestricted access to any information pertaining to the Company; (d) have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity (if any); (e) be able to obtain independent professional or other advice and to invite outsiders with relevant experience to attend, if necessary; and (f) be able to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of the other Directors and employees of the Company, whenever deemed necessary. The Chairman of the Audit Committee shall engage on a continuous basis with senior management and the external auditors in order to be kept informed of matters affecting the Company and its Group. Duties The Audit Committee shall discharge the following duties and report the same to the Board of Directors of the Company:- to review with the external auditors, their audit plan; to review with the external auditors, their evaluation of the system of internal controls; to review with the external auditors, their audit report; to discuss with the external auditors before the audit commences, the nature and scope of the audit and ensure co-ordination where more than one audit firm is involved; to review the assistance given by the employees of the Company to the external auditors; to review the adequacy of the scope, functions, competency and resources of the internal audit functions and that it has the necessary authority to carry out its work; to review the internal audit programme, processes, the results of the internal audit programme, processes or investigation undertaken and whether or not appropriate action is taken on the recommendations of the internal audit function; to review any appraisal or assessment of the performance of members of the internal audit function; to review any appointment or termination of senior staff members of the internal audit function; to take cognizance of resignation of internal audit staff members and provide the resigning staff member an opportunity to submit his reasons for resigning; to review any major findings of internal investigations and management s response; to review the quarterly results and year end, prior to the approval by the Board of Directors, focusing particularly on:- (i) any changes in or implementation of major accounting policy and practices; (ii) major judgemental areas;

42 ANNUAL REPORT AUDIT COMMITTEE REPORT (iii) significant adjustments resulting from the audit; (iv) the going concern assumption; (v) significant and unusual events; and (vi) compliance with accounting standards and other legal requirements. to discuss problems and reservations arising from the interim and final audits and any matter the auditor may wish to discuss (in the absence of management, where necessary); to review the external auditor s management letter and management s response; to review any related party transaction and conflict of interest situation that may arise within the Company or Group including any transaction, procedure or course of conduct that raises questions of management integrity; to consider the audit fee of the external auditors; to consider the appointment of the external auditors and any letter of resignation from the external auditors of the Company and to deal with any questions of resignation or dismissal; to review whether there is reason (supported by grounds) to believe that the Company s external auditor is not suitable for re-appointment; to recommend the nomination of a person or persons as external auditors; to promptly report to Bursa Securities if a matter reported by the Audit Committee to the Board of Directors of the Company has not been satisfactorily resolved resulting in a breach of the Bursa Securities Main Market Listing Requirements; to ensure comply with applicable financial reporting standards; to review and assess the suitability and independence of external auditors; to review the adequacy of the Audit Committee s policies and procedures for the provision of non-audit services by the Group s auditors; to obtain a written confirmation from the external auditors on an annual basis or at any time as the Audit Committee may request, confirming that they are, and have been, independent throughout the conduct of the audit engagement in accordance with the terms of all relevant professional and regulatory requirements; and to consider other topics, as defined by the Board. Notice of Meeting The Audit Committee should meet regularly, with due notice of issues to be discussed and should record its conclusions in discharging its duties and responsibilities. At least seven (7) days notice in writing is required for convening the meeting which shall be held at any place as may be determined by the Audit Committee.

43 42 TSH RESOURCES BERHAD (49548-D) AUDIT COMMITTEE REPORT Votes of Members Questions arising at the Committee meeting shall be decided by a simple majority of votes. Where two (2) members of the Audit Committee form a quorum, the Chairman of a meeting at which only such a quorum is present, or at which only two (2) members are competent to vote in the question at issue, shall not have a casting vote. Attendance at Meetings The Finance Director, the Head of Internal Audit and a representative of the external auditors should normally attend meetings. Other Board members and employees may attend meetings upon the invitation of the Audit Committee, specific to the relevant meeting. However, the Committee should meet with the external auditors without executive Board members present at least twice a year. A quorum shall be two (2) members and the majority of members present must be Independent Directors. The Company Secretaries shall be the Secretaries of the Committee, responsible for drawing up the agenda with the concurrence of the Chairman and circulating it, supported by explanatory documentation to the Committee members prior to each meeting. Frequency of Meetings Meetings shall be held not less than four (4) times a year. The external auditors may request a meeting if they consider that one is necessary. In the intervals between Audit Committee meetings, for exceptional matters requiring urgent Audit Committee decision, approvals are sought via circular resolutions signed by all members, which are supported with sufficient information required to make an informed decision. During the financial year ended 31 December 2013, five (5) Audit Committee meetings were held. Details of attendance of each Committee member are as follows:- Name 26/02/13 12/04/13 20/05/13 20/08/13 19/11/13 Total Datuk Jaswant Singh Kler P P P P P 5/5 Datuk Suboh bin Md Yassin P P P P P 5/5 YB Datuk Nur Jazlan bin Mohamed * P - N/A P P 3/4 * resigned on 16 April 2013 and re-appointed on 22 May 2013 Reporting Procedures The Company Secretaries shall be responsible for keeping the minutes of meeting of the Committee, circulating the minutes of meetings of the Committee to all members of the Board and follow up on any outstanding matters. Activities of the Audit Committee during the year The external auditors were present at two (2) Audit Committee meetings held during the financial year where matters relating to the audit of the statutory accounts were discussed. The Audit Committee also met with the external auditors on one (1) occasion in 2013 without the presence of the Executive Directors, management or internal auditors to discuss the audit findings and any other observations they may have during the audit process. The Chairman of the Audit Committee reports to the Board on matters deliberated at the Audit Committee meetings.

44 ANNUAL REPORT AUDIT COMMITTEE REPORT The followings activities were carried out by the Audit Committee during the financial year 31 December 2013: (1) Financial Reporting reviewed the draft quarterly and year-end results of the Company and the Group prior to submission to the Board for consideration and approval; and reviewed the annual audited of the Company and the Group prior to submission to the Board for approval. (2) Internal Audit reviewed the annual audit plan proposed by the Head of Internal Audit to ensure that adequacy of the scope and coverage of work; reviewed the internal audit reports for the Company and the Group prepared by the internal auditors and considered the major findings by the auditors and management s response thereto; followed up corrective actions taken by management on audit issues raised by the Head of Internal Audit; and reviewed the performance appraisal of the members of the Internal Audit. (3) External Audit reviewed with the external auditors, their audit plan and scope of work prior to commencement of audit; reviewed with the external auditors, the audit findings and audit fees for the financial year ended 31 December 2013; reviewed with the external auditors, their evaluation of Statement on Risk Management and Internal Control; and reviewed with the external auditors, their audit report and management s response. (4) Recurrent Related Party Transactions reviewed the recurrent related party transactions entered into by the Company and/or its subsidiaries and thereafter report to the Board; reviewed the reporting system and procedures to ascertain that the established guidelines and procedures have been complied with; and reviewed with the Head of Internal Audit to ensure that all transactions are conducted on an arm s length commercial term and rate. (5) Other activities reviewed final dividend payment proposed by management; and reviewed and approved the Audit Committee report.

45 44 TSH RESOURCES BERHAD (49548-D) AUDIT COMMITTEE REPORT (6) Training During the year, all members of the Audit Committee attended the following seminars, conference, forum and summit either individually or collectively: Myanmar Finance Leaders Summit 59 th Parliamentary Conference CNBC Summit 2013 The Global Forum of the Global Parliamentarians on Habitat 10 th Natsem Confronting Management Challenges in the Oil Palm Industry 2013 Palm Oil Industry Leadership Forum Sharing Solution, Shaping Vision and Creating Opportunities The New Landscape for Global Political Risk Management International Conference on Heart of Borneo Natural Capital: Unleasing Their Potential for Sustainable Growth in Sabah Greening of Sabah - Renewable Energy Options in the Near Future Internal Audit Function The Company established an Internal Audit Department in July 2001 which reports directly to the Audit Committee on a quarterly basis. The Internal Audit Department assists the Committee in the discharge of its duties and responsibilities. Its key role is to provide independent and objective assurance designed to add value and assist the Group in accomplishing its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, internal control and governance processes. Every quarter, the Internal Audit Department submits a report on their audit findings and recommendations to the Committee for its review and deliberation. The Head of Internal Audit attends these meetings to present the internal audit findings and makes appropriate recommendations on areas of concern within the Company and the Group. The total cost incurred in managing the Internal Audit Department in 2013 was RM745,512.

46 ANNUAL REPORT STATEMENT OF DIRECTORS RESPONSIBILITIES IN RESPECT OF THE AUDITED FINANCIAL STATEMENTS The Board of Directors is required under Paragraph 15.26(a) of the Bursa Malaysia Securities Berhad Main Market Listing Requirements ( MMLR ) to issue a statement on its responsibility in the preparation of the annual audited. The Directors are required by the Companies Act, 1965 ( the Act ) to prepare for the financial year which give a true and fair view of the financial positions of the Group and of the Company as at 31 December 2013 and of their financial performance and cash flows for the year then ended. In preparing the, the Directors have: applied the appropriate and relevant accounting policies on a consistent basis; made judgements and estimates that are reasonable and prudent; and prepared the annual audited in accordance with applicable Financial Reporting Standard in Malaysia, the provision of the Act and the MMLR. The Directors are responsible for ensuring that the Company and its subsidiaries keep accounting records which disclose with reasonable accuracy at any time the financial position of each company and which enable them to ensure that the financial statements comply with the provisions of the Act. The Directors are also responsible for taking reasonable steps to safeguard the assets of the Group and the Company to prevent and detect fraud and other irregularities.

47 46 TSH RESOURCES BERHAD (49548-D) FIVE-YEAR FINANCIAL HIGHLIGHTS Shareholders Funds (RM million) Total Assets (RM million) , , , , , , Revenue (RM million) Profit Before Tax (RM million) , , INCOME STATEMENT All figure in RM 000 Revenue 980, ,427 1,134, ,755 1,017,840 Profit before taxation 85, , ,919 99, ,485 Profit after taxation 80,034 90, ,529 84, ,563 Net profit attributable to equity holders 72,314 84, ,456 77, ,963 STATEMENT OF FINANCIAL POSITION All figure in RM 000 Share Capital 206, , , , ,914 Shareholders Equity 728, , , ,679 1,061,725 Total Assets 1,725,094 1,866,403 1,984,173 2,245,612 2,368,438 FINANCIAL INDICATORS Earnings per share (sen) * - Basic Diluted Net assets attributable to equity shareholders per share (RM) * * Calculated taking into account the bonus issue of 408,621,363 new ordinary shares

48 2013 DIRECTORS REPORT & AUDITED FINANCIAL STATEMENTS

49 48 TSH RESOURCES BERHAD (49548-D) DIRECTORS REPORT The directors have pleasure in presenting their report together with the audited of the Group and of the Company for the financial year ended 31 December Principal activities The principal activities of the Company are investment holding, oil palm cultivation and forest plantation. The principal activities of the subsidiaries are stated in Note 20 to the and are primarily oil palm cultivation and processing. There have been no significant changes in the nature of the principal activities during the financial year. Results Group RM 000 Company RM 000 Profit net of tax 156,563 6,569 Profit attributable to: Owners of the Company 150,963 6,569 Non-controlling interests 5, ,563 6,569 There were no material transfers to or from reserves or provisions during the financial year other than as disclosed in the financial statements. In the opinion of the directors, the results of the operations of the Group and of the Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature other than as disclosed in Note 45(a) to the. Dividend The amount of dividend paid by the Company since 31 December 2012 was as follows: In respect of the financial year ended 31 December 2012 as reported in the directors report of that year: RM 000 First and final single tier dividend of 2.5 sen, on 834,363,633 ordinary shares, declared on 28 June 2013 and paid on 23 July ,859 At the forthcoming Annual General Meeting, a first and final single tier dividend in respect of the financial year ended 31 December 2013, of 3.5 sen per ordinary share on 896,942,633 ordinary shares, amounting to a dividend payable of RM31,392,992 will be proposed for shareholders approval. The for the current financial year do not reflect this proposed dividend. Such dividend, if approved by the shareholders, will be accounted for in equity as an appropriation of retained earnings in the financial year ending 31 December 2014.

50 ANNUAL REPORT DIRECTORS REPORT (cont d) Directors The names of the directors of the Company in office since the date of the last report and at the date of this report are: Datuk (Dr.) Kelvin Tan Aik Pen Dato Tan Aik Sim Datuk Suboh bin Md Yassin Dato Leong Leong Khee Seong YB Datuk Nur Jazlan bin Mohamed (Resigned on 16 April 2013 and re-appointed on 22 May 2013) Datuk Jaswant Singh Kler Tan Aik Kiong Lim Fook Hin Chew Siew Yeng Tan Aik Yong (Alternate to Datuk (Dr.) Kelvin Tan Aik Pen) Directors benefits Neither at the end of the financial year, nor at any time during that year, did there subsist any arrangement to which the Company was a party, whereby the directors might acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate. Since the end of the previous financial year, no director has received or become entitled to receive a benefit (other than benefits included in the aggregate amount of emoluments received or due and receivable by the directors or the fixed salary of a full-time employee of the Company as shown in Note 12 to the ) by reason of a contract made by the Company or a related corporation with any director or with a firm of which he is a member, or with a company in which he has a substantial financial interest, except as disclosed in Note 40 to the. Directors interests According to the register of directors shareholdings, the interests of directors in office at the end of the financial year in shares in the Company and its related corporations during the financial year were as follows: Number of ordinary shares of RM0.50 each Acquired Sold The Company Direct interest: Datuk (Dr.) Kelvin Tan Aik Pen 99,962,726 4,538, ,501,426 Dato Tan Aik Sim 35,403, ,403,984 Tan Aik Kiong 36,738, ,738,126 Lim Fook Hin 1,068, ,068,000 Tan Aik Yong (Alternate to Datuk (Dr.) Kelvin Tan Aik Pen) 35,769, ,769,808 Indirect interest: Tan Aik Kiong 18, ,000 Lim Fook Hin 3,000, ,000,000

51 50 TSH RESOURCES BERHAD (49548-D) DIRECTORS REPORT (cont d) Directors interests (cont d) Number of ordinary shares of RM0.50 each Acquired Sold Subsidiary Ekowood International Berhad Direct interest: Datuk (Dr.) Kelvin Tan Aik Pen 6,274, ,274,939 Dato Tan Aik Sim 838, ,506 Datuk Jaswant Singh Kler 30, ,000 Tan Aik Kiong 910, ,592 Tan Aik Yong (Alternate to Datuk (Dr.) Kelvin Tan Aik Pen) 840, ,506 Indirect interest: Tan Aik Kiong None of the other directors in office at the end of the financial year had any interest in shares in the Company or its related corporations during the financial year. Issue of shares During the financial year, the Company increased its issued and paid-up ordinary share capital from RM420,624,267 to RM451,914,267 by way of the issuance of 62,580,000 new ordinary shares of RM0.50 each through a private placement at average issue prices between RM2.24 to RM2.28 per ordinary share for cash, for additional working capital purposes. The new ordinary shares issued during the financial year rank pari passu in all respects with the existing ordinary shares of the Company. Treasury shares During the financial year, the Company purchased 3,000 of its issued ordinary shares from the open market at a prices between RM2.22 to RM2.84 per ordinary share. The total consideration paid for the repurchase including transaction costs was RM7,521. The shares repurchased are being held as treasury shares in accordance with Section 67A of the Companies Act, As at 31 December 2013, the Company held as treasury shares a total of 6,885,900 of its 903,828,533 issued ordinary shares. Such treasury shares are held at a carrying amount of RM12,258,848 and further relevant details are disclosed in Note 35 to the. Other statutory information (a) Before the statements of comprehensive income and statements of financial position of the Group and of the Company were made out, the directors took reasonable steps: (i) (ii) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate provision had been made for doubtful debts; and to ensure that any current assets which were unlikely to realise their value as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise.

52 ANNUAL REPORT DIRECTORS REPORT (cont d) Other statutory information (cont d) (b) At the date of this report, the directors are not aware of any circumstances which would render: (i) (ii) the amount written off for bad debts or the amount of the provision for doubtful debts in the of the Group and of the Company inadequate to any substantial extent; and the values attributed to the current assets in the of the Group and of the Company misleading. (c) (d) (e) At the date of this report, the directors are not aware of any circumstances which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate. At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial statements of the Group and of the Company which would render any amount stated in the misleading. At the date of this report, there does not exist: (i) (ii) any charge on the assets of the Group or of the Company which has arisen since the end of the financial year which secures the liabilities of any other person; or any contingent liability of the Group or of the Company which has arisen since the end of the financial year. (f) In the opinion of the directors: (i) (ii) no contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which will or may affect the ability of the Group or of the Company to meet their obligations when they fall due; and no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of the operations of the Group or of the Company for the financial year in which this report is made. Significant events Details of significant events are disclosed in Note 45 to the. Auditors The auditors, Ernst & Young, have expressed their willingness to continue in office. Signed on behalf of the Board in accordance with a resolution of the directors dated 10 April 2014 Dato Tan Aik Sim Lim Fook Hin

53 52 TSH RESOURCES BERHAD (49548-D) Statement by directors Pursuant to Section 169(15) of the Companies Act, 1965 We, Dato Tan Aik Sim and Lim Fook Hin, being two of the directors of TSH Resources Berhad, do hereby state that, in the opinion of the directors, the accompanying set out on pages 55 to 162 are drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2013 and of their financial performance and cash flows for the year then ended. The information set out in Note 47 to the have been prepared in accordance with the Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants. Signed on behalf of the Board in accordance with a resolution of the directors dated 10 April Dato Tan Aik Sim Lim Fook Hin Statutory declaration Pursuant to Section 169(16) of the Companies Act, 1965 I, Chew Siew Yeng, being the director primarily responsible for the financial management of TSH Resources Berhad, do solemnly and sincerely declare that the accompanying set out on pages 55 to 163 are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, Subscribed and solemnly declared by the abovenamed Chew Siew Yeng at Kuala Lumpur in the Federal Territory on 10 April 2014 Chew Siew Yeng Before me,

54 ANNUAL REPORT Independent auditors report to the members of TSH Resources Berhad (Incorporated in Malaysia) Report on the We have audited the of TSH Resources Berhad, which comprise the statements of financial position as at 31 December 2013 of the Group and of the Company, and the statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 55 to 162. Directors responsibility for the The directors of the Company are responsible for the preparation of that give a true and fair view in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia, and for such internal control as the directors determine are necessary to enable the preparation of that are free from material misstatement, whether due to fraud or error. Auditors responsibility Our responsibility is to express an opinion on these based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity s preparation of that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the have been properly drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2013 and of their financial performance and cash flows for the year then ended. Report on other legal and regulatory requirements In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following: (a) (b) (c) (d) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act. We have considered the and the auditors reports of all the subsidiaries of which we have not acted as auditors, which are indicated in Note 20 to the, being that have been included in the consolidated. We are satisfied that the of the subsidiaries that have been consolidated with the of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated and we have received satisfactory information and explanations required by us for those purposes. The auditors reports on the of the subsidiaries were not subject to any qualification and did not include any comment required to be made under Section 174(3) of the Act.

55 54 TSH RESOURCES BERHAD (49548-D) Independent auditors report to the members of TSH Resources Berhad (Incorporated in Malaysia) (cont d) Other reporting responsibilities The supplementary information set out in Note 47 on page 163 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad. The directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants ( MIA Guidance ) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad. Other matters This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. Ernst & Young AF: 0039 Chartered Accountants Chong Ket Vui, Dusun 2944/01/15 (J) Chartered Accountant Tawau, Malaysia 10 April 2014

56 ANNUAL REPORT STATEMENTS OF COMPREHENSIVE INCOME For the financial year ended 31 December 2013 Group Company Note RM 000 RM 000 RM 000 RM 000 Revenue 4 1,017, , , ,064 Cost of sales 5 (714,825) (733,211) (9,563) (18,315) Gross profit 303, , ,760 95,749 Other items of income Interest income 6 1,308 1,951 54,854 37,814 Dividend income Other income 8 94,946 28,482 6,838 20,568 Other items of expense Marketing and distribution (44,025) (48,095) - - Administrative expenses (113,600) (106,974) (37,878) (45,586) Finance costs 9 (17,808) (19,367) (32,653) (26,997) Other expenses (84,368) (27,702) (91,745) (56,443) Share of profit of associates 709 1, Share of profit of jointly controlled entities 23,381 18, Profit before tax ,485 99,998 2,103 25,105 Income tax expense 13 (7,922) (15,577) 4, Profit net of tax 156,563 84,421 6,569 25,461 Other comprehensive (loss)/income: Items that may reclassified subsequently to profit or loss Foreign currency translation (101,723) (48,163) - - Item that will not be reclassified subsequently to profit or loss Remeasurements of net defined benefit liabilities 1, Income tax effect (402) Total comprehensive income for the year 56,045 36,258 6,569 25,461

57 56 TSH RESOURCES BERHAD (49548-D) STATEMENTS OF COMPREHENSIVE INCOME Group Company Note RM 000 RM 000 RM 000 RM 000 Profit attributable to: Owners of the Company 150,963 77,027 6,569 25,461 Non-controlling interests 5,600 7, ,563 84,421 6,569 25,461 Total comprehensive income attributable to: Owners of the Company 55,934 27,983 6,569 25,461 Non-controlling interests 111 8, ,045 36,258 6,569 25,461 Earnings per share attributable to owners of the Company (sen per share): Basic Diluted The accompanying accounting policies and explanatory notes form an integral part of the.

58 ANNUAL REPORT Statements of financial position As at 31 December 2013 Group Company Note RM 000 RM 000 RM 000 RM 000 Assets Non-current assets Property, plant and equipment , ,500 96,445 95,342 Biological assets , , , ,453 Land use rights , , Intangible assets 19 49,957 50, Investments in subsidiaries , ,837 Investment in associate 21 59,520 58,702 53,274 53,274 Investment in joint ventures 22 80,737 72,356 20,750 20,750 Deferred tax assets 23 19,810 8, Other receivables 24 46,597 38, , ,963 Investment securities 25 5,114 90, ,852,870 1,798,603 1,339,716 1,012,719 Current assets Inventories , ,623 9,243 8,730 Trade and other receivables , , , ,169 Other current assets 27 3,877 12, Tax recoverable 6,784 13,525 2,271 1,640 Investment securities Derivative assets Cash and bank balances and deposits ,258 53,465 97,538 16, , , , ,462 Total assets 2,368,438 2,245,612 1,765,633 1,437,181 Equity and liabilities Current liabilities Loans and borrowings , , , ,249 Trade and other payables , , , ,034 Deferred capital grants 34 4,915 4,915 4,915 4,915 Derivative liabilities 29 1, Current tax payable 4, , , , ,609 Net current (liabilities)/assets (39,103) (146,765) (108,401) 82,853

59 58 TSH RESOURCES BERHAD (49548-D) Statements of financial position As at 31 December 2013 (cont d) Group Company Note RM 000 RM 000 RM 000 RM 000 Non-current liabilities Retirement benefits 33 6,039 6, Deferred capital grants 34 54,790 59,305 6,900 11,815 Loans and borrowings , , , ,254 Other payables , ,000 Deferred tax liabilities 23 73,263 73,240-3, , , , ,574 Total liabilities 1,207,058 1,256,251 1,059, ,183 Net assets 1,161, , , ,998 Equity attributable to owners of the Company Share capital , , , ,624 Share premium ,735 29, ,471 28,341 Treasury shares 35 (12,259) (12,251) (12,259) (12,251) Other reserves 36 (142,325) (46,200) 1,248 1,248 Retained earnings , , , ,036 1,061, , , ,998 Non-controlling interests 100, , Total equity 1,161, , , ,998 Total equity and liabilities 2,368,438 2,245,612 1,765,633 1,437,181 The accompanying accounting policies and explanatory notes form an integral part of the.

60 ANNUAL REPORT Statements of changes in equity For the financial year ended 31 December 2013 Attributable to owners of the Company Non-distributable Distributable Non-distributable Equity Asset attributable revaluation Foreign Employee to owners of Other and currency share Non- Equity, the Company, Share Share Treasury Retained reserves, capital translation option controlling Note total total capital premium shares earnings total reserve reserve reserve interests RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM Group Opening balance at 1 January , , ,624 29,605 (12,251) 492,901 (46,200) 9,412 (55,860) ,682 Profit for the year 156, , , ,600 Other comprehensive income Foreign currency translation (101,723) (96,234) (96,234) - (96,234) - (5,489) Remeasurements of net defined benefit liabilities 1,205 1, , Other comprehensive income for the year, net of tax (100,518) (95,029) ,205 (96,234) - (96,234) - (5,489) Total comprehensive income for the year 56,045 55, ,168 (96,234) - (96,234) Contributions by and distributions to owners Ordinary shares issued for cash , ,420 31, , Grant of equity-settled share options to employees by an associate Purchase of treasury shares (8) (8) - - (8) Dividend on ordinary shares 15 (20,859) (20,859) (20,859) Dividend paid to non-controlling interests (5,668) (5,668) Total contributions by and distributions to owners 114, ,662 31, ,130 (8) (20,859) (5,668) Changes in ownership interest in subsidiaries Acquisition of subsidiaries Total transactions with owners in their capacity as owners 115, ,662 31, ,130 (8) (20,859) (4,688) Closing balance at 31 December ,161,380 1,061, , ,735 (12,259) 624,210 (142,325) 9,425 (152,094) ,105

61 60 TSH RESOURCES BERHAD (49548-D) Statements of changes in equity Attributable to owners of the Company Non-distributable Distributable Non-distributable Equity Asset attributable revaluation Foreign Employee to owners of Other and currency share Non- Equity, the Company, Share Share Treasury Retained reserves, capital translation option controlling Note total total capital premium shares earnings total reserve reserve reserve interests RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM Group Opening balance at 1 January , , ,062 - (12,249) 442,453 6,150 9,342 (6,816) 3,624 98,967 Profit for the year 84,421 77, , ,394 Other comprehensive income for the year, net off tax Foreign currency translation (48,163) (49,044) - (49,044) Total comprehensive income for the year 36,258 27, ,027 (49,044) - (49,044) - 8,275 Contributions by and distributions to owners Ordinary shares issued pursuant to: - ESOS 35 2,753 2,753 1,101 1, Purchase of investment securities 35 34,150 34,150 7,461 26, Grant of equity-settled share options to employees by an associate Share premium transfer from reserve , (1,264) - - (1,264) - ESOS lapsed ,172 (2,172) - - (2,172) - Redemption of preference shares (70) Purchase of treasury shares (2) (2) - - (2) Dividend on ordinary shares 15 (28,681) (28,681) (28,681) Dividend paid to non-controlling interests (2,560) (2,560) Total contributions by and distributions to owners 5,720 8,280 8,562 29,605 (2) (26,579) (3,306) 70 - (3,376) (2,560) Total transactions with owners in their capacity as owners 41,978 36,263 8,562 29,605 (2) 50,448 (52,350) 70 (49,044) (3,376) 5,715 Closing balance at 31 December , , ,624 29,605 (12,251) 492,901 (46,200) 9,412 (55,860) ,682

62 ANNUAL REPORT Statements of changes in equity 2013 Non-distributable Distributable Non-distributable Other Asset Share Equity, Share Share Treasury Retained reserves, revaluation option Note total capital premium shares earnings total reserve reserve RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Company Opening balance at 1 January , ,624 28,341 (12,251) 141,036 1,248 1,248 - Profit for the year, representing total comprehensive income for the year 6, , Contributions by and distribution to owners Ordinary shares issued for cash ,420 31, , Purchase of treasury shares 35 (8) - - (8) Dividend on ordinary shares 15 (20,859) (20,859) Total contributions by and distributions to owners 120,553 31, ,130 (8) (20,859) Total transactions with owners in their capacity as owners 127,122 31, ,130 (8) (14,290) Closing balance at 31 December , , ,471 (12,259) 126,746 1,248 1, Company Opening balance at 1 January , ,062 - (12,249) 140,868 4,636 1,248 3,388 Profit for the year, representing total comprehensive income for the year 25, , Contributions by and distribution to owners Ordinary shares issued pursuant to ESOS 35 2,753 1,101 1, Purchase of treasury shares 35 (2) - - (2) Issuance of shares 35 34,150 7,461 26, Dividend on ordinary shares 15 (28,681) (28,681) Expiry of ESOS ,388 (3,388) - (3,388) Total contributions by and distributions to owners 8,220 8,562 28,341 (2) (25,293) (3,388) - (3,388) Total transactions with owners in their capacity as owners 33,681 8,562 28,341 (2) 168 (3,388) - (3,388) Closing balance at 31 December , ,624 28,341 (12,251) 141,036 1,248 1,248 - The accompanying accounting policies and explanatory notes form an integral part of the.

63 62 TSH RESOURCES BERHAD (49548-D) Statements of CASH FLOWS For the financial year ended 31 December 2013 Operating activities Group Company Note RM 000 RM 000 RM 000 RM 000 Profit before tax 164,485 99,998 2,103 25,105 Adjustments for: Dividend income 7 (927) - (927) - Amortisation of deferred capital grants 8 (4,915) (4,915) (4,915) (4,915) Interest income 6 (1,308) (1,951) (54,854) (37,814) (Gain)/loss on disposal of property, plant and equipment 8, 10 (54) (469) 18 (161) Net unrealised foreign exchange loss 10 62,476 12,315 83,283 52,968 Interest expense 9 17,808 19,367 32,653 26,997 Fair value loss on forward currency contracts 10 1, Fair value gain on commodity future contracts 8 (411) (2,355) (411) (503) Unrealised gain on commodity future contracts 8 - (1,044) - - Amortisation of land use rights 10 5,427 3, Depreciation of property, plant and equipment 10 36,789 34,295 4,409 5,103 Property, plant and equipment written off Impairment loss of property, plant and equipment 10 1, Bad debts written off Loss on struck off investment in subsidiaries Gain on disposal of investment securities 8 (85,310) Inventories written down 10 3,675 1, Impairment loss on trade and other receivables 10 1,772 1, Fair value loss on sundry and plasma receivables 10 8, Reversal of impairment loss on trade receivables 8 (147) (107) - - Reversal of impairment on investment securities 8 (2) (11) (2) (11) Share of profit of associates (709) (1,201) - - Share of profit of jointly controlled entities (23,381) (18,958) - - Total adjustments 21,609 41,415 59,544 41,671 Operating cash flows before changes in working capital 186, ,413 61,647 66,776

64 ANNUAL REPORT Statements of CASH FLOWS Group Company Note RM 000 RM 000 RM 000 RM 000 Changes in working capital Decrease/(increase) in inventories 13,617 (40,864) (542) (3,236) Increase in receivables (74,394) (43,585) (247,870) (349,418) (Decrease)/increase in payables (10,431) (55) 155,204 70,183 (Decrease)/increase in retirement benefits obligations (850) 3, Total changes in working capital (72,058) (80,837) (93,208) (282,471) Cash flows from/(used in) operations 114,036 60,576 (31,561) (215,695) Interest paid (37,211) (32,869) (32,653) (26,997) Income tax paid (23,857) (37,668) (631) - Income tax refunded 9,071 9,609-7,196 Net cash flows from/(used in) operating activities 62,039 (352) (64,845) (235,496) Investing activities Acquisition of subsidiaries 20(b) (14,868) Additional investment in subsidiaries - - (46,135) - Net proceeds from disposal of other investment 172, Purchase of investments securities (89,044) (67,884) (89,044) - Withdrawal of pledged deposits Purchase of land use rights (12,234) (1,848) - - Purchase of property, plant and equipment (91,089) (82,715) (7,839) (5,370) Oil palm planting expenditure (108,019) (103,801) - - Forest planting expenditure (20,594) (18,333) (12,400) (13,556) Grant received Proceeds from disposal of property, plant and equipment 2,820 1,463 1, Interest received 1,308 1,951 54,854 37,814 Dividend received from: - joint venture 15,000 15, unit trusts Net cash flows (used in)/from investing activities (142,351) (255,945) (98,628) 19,356

65 64 TSH RESOURCES BERHAD (49548-D) Statements of CASH FLOWS Financing activities Group Company Note RM 000 RM 000 RM 000 RM 000 Proceeds from issuance of ordinary shares 141,420 36, ,420 36,902 Net (repayment)/proceeds from issuance of Sukuk Ijarah Commercial Papers (25,000) 25, Net proceeds from issuance of Sukuk Ijarah Medium Term Notes - 30, Net (repayment)/drawdown of revolving credits (23,742) 49,945 5,993 42,938 Net (repayment)/drawdown of bankers acceptances (17,879) 39,266 (6,000) 13,000 Net drawdown/(repayment) of export credit refinancing 1,634 (3,450) - - Net drawdown of term loans 15,132 94,669 35, ,114 Purchase of treasury shares (8) (2) (8) (2) Dividend paid 15 (20,859) (28,681) (20,859) (28,681) Dividend paid to non-controlling interest (5,668) (2,560) - - Net cash flows from financing activities 65, , , ,271 Net decrease in cash and cash equivalents (15,282) (15,208) (7,159) (13,869) Effects on exchange rate changes 16,590 (307) - - Effects of exchange rate changes on cash and cash equivalents 1, Cash and cash equivalents at beginning of year 47,704 62,887 15,653 29,522 Cash and cash equivalents at end of year 30 50,574 47,704 8,494 15,653 The accompanying accounting policies and explanatory notes form an integral part of the.

66 ANNUAL REPORT For the financial year ended 31 December Corporate information TSH Resources Berhad ( the Company ) is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the Main Market of Bursa Malaysia Securities Berhad. The registered office of the Company is located at Level 10, Menara TSH, No. 8 Jalan Semantan, Damansara Heights, Kuala Lumpur. The principal place of business of the Company is located at Bangunan TSH, TB 9, KM 7, Apas Road, Tawau, Sabah. The principal activities of the Company are investment holding, oil palm cultivation and forest plantation. The principal activities of the subsidiaries are stated in Note 20 to the and are primarily oil palm cultivation and processing. There have been no significant changes in the nature of the principal activities during the financial year. 2. Summary of significant accounting policies 2.1 Basis of preparation The of the Group and of the Company have been prepared in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia. At the beginning of the current financial year, the Group and the Company adopted new and revised FRS which are mandatory for financial periods beginning on or after 1 January 2013 as described fully in Note 2.2. The have been prepared on the historical cost basis except as disclosed in the accounting policies below. The are presented in Ringgit Malaysia (RM) and all values are rounded to the nearest thousand (RM 000) except when otherwise indicated. 2.2 Changes in accounting policies The accounting policies adopted are consistent with those of the previous financial year except as follows: On 1 January 2013, the Group and the Company adopted the following new and amended FRSs and IC Interpretations mandatory for annual financial periods beginning on or after 1 January Description Effective for annual periods beginning on or after Amendments to FRS 101: Presentation of Items of Other Comprehensive Income 1 July 2012 FRS 3: Business Combinations (IFRS 3 Business Combinations issued by IASB in March 2004) 1 January 2013 FRS 127: Consolidated and Separate Financial Statements (IAS 27 revised by IASB in December 2003) 1 January 2013 FRS 10: Consolidated Financial Statements 1 January 2013 FRS 11: Joint Arrangements 1 January 2013 FRS 12: Disclosure of Interests in Other Entities 1 January 2013 FRS 13: Fair Value Measurement 1 January 2013 FRS 119: Employee Benefits (IAS 19 as amended by IASB in June 2011) 1 January 2013 FRS 127: Separate Financial Statements (IAS 27 as amended by IASB in May 2011) 1 January 2013 FRS 128: Investment in Associates and Joint Ventures (IAS 28 as amended by IASB in May 2011) 1 January 2013 IC Interpretation 20: Stripping Costs in the Production Phase of a Surface Mine 1 January 2013

67 66 TSH RESOURCES BERHAD (49548-D) 2. Summary of significant accounting policies (cont d) 2.2 Changes in accounting policies (cont d) Description Effective for annual periods beginning on or after Amendments to FRS 7: Disclosures - Offsetting Financial Assets and Financial Liabilities 1 January 2013 Annual Improvements Cycle 1 January 2013 Amendments to FRS 1: Government Loans 1 January 2013 Amendments to FRS 10, FRS 11 and FRS 12: Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities - Transition Guidance 1 January 2013 Adoption of the above standards and interpretations did not have any effect on the financial performance or position of the Group and the Company except for those discussed below: FRS 12: Disclosures of Interests in Other Entities FRS 12 includes all disclosure requirements for interests in subsidiaries, joint arrangements, associates and structured entities. A number of new disclosures are required. This standard affects disclosures only and has no impact on the Group s financial position or performance. FRS 13: Fair Value Measurement FRS 13 establishes a single source of guidance under FRS for all fair value measurements. FRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under FRS. FRS 13 defines fair value as an exit price. As a result of the guidance in FRS 13, the Group re-assessed its policies for measuring fair values, in particular, its valuation inputs such as non-performance risk for fair value measurement of liabilities. FRS 13 also requires additional disclosures. Application of FRS 13 has not materiality impacted the fair value measurement of the Group. Additional disclosures where required, are provided in the individual notes relating to the assets and liabilities whose fair values were determined. Amendments to FRS Presentation of Items of Other Comprehensive Income The amendments to MFRS 101 introduce a grouping of items presented in other comprehensive income. Items that will be reclassified ( recycled ) to profit or loss at a future point in time (eg. net loss or gain on available-for-sale financial assets) have to be presented separately from items that will not be reclassified (eg. revaluation of land and buildings). The amendments affect presentation only and have no impact on the Group s financial position or performance. Revised FRS 119: Employee Benefits The Revised FRS 119 requires all actuarial gains and losses to be recognised in other comprehensive income and unvested past service costs previously recognised over the average vesting period to be recognised immediately in profit or loss when incurred. Prior to adoption of the Revised FRS 119, the Group recognised actuarial gains and losses as income or expense when the net cumulative unrecognised gains and losses for each individual plan at the end of the previous period exceeded 10% of the higher of the defined benefit obligation and the fair value of the plan assets and recognised unvested past service costs as an expense on a straight-line basis over the average vesting period until the benefits become vested. Upon adoption of the revised FRS 118, the Group changed its accounting policy to recognise all actuarial gains and losses in other comprehensive income and all past service costs in profit or loss in the period they occur.

68 ANNUAL REPORT Summary of significant accounting policies (cont d) 2.2 Changes in accounting policies (cont d) The Revised FRS 119 replaced the interest cost and expected return on plan assets with the concept of net interest on defined benefit liability or asset which is calculated by multiplying the net balance sheet defined benefit liability or asset by the discount rate used to measure the employee benefit obligation, each as at the beginning of the annual period. The changes in accounting policies have been applied prospectively as the prior year financial impact is not material to the Group. The effects relating to the adoption of FRS 119 of RM346,500 has been recognised under other comprehensive income during the financial year. FRS 127: Separate Financial Statements As a consequence of the new FRS 10 and FRS 12, FRS 127 is limited to accounting for subsidiaries, jointly controlled entities and associates in separate. FRS 128: Investments in Associates and Joint Ventures As a consequence of the new FRS 11 and FRS 12, FRS 128 is renamed as FRS 128 Investments in Associates and Joint Ventures. This new standard describes the application of the equity method to investments in joint ventures in addition to associates. 2.3 Standards and interpretations issued but not yet effective The standards and interpretations that are issued but not yet effective up to the date of issuance of the Group s and the Company s are disclosed below. The Group and the Company intend to adopt these standards, if applicable, when they become effective. Description Effective for annual periods beginning on or after Amendments to FRS 132: Offsetting Financial Assets and Financial Liabilities 1 January 2014 Amendments to FRS 10, FRS 12 and FRS 127: Investment Entities 1 January 2014 Amendments to FRS 136: Recoverable Amount Disclosures for Non-financial Assets 1 January 2014 Amendments to FRS 139: Novation of Derivation and Continuation of Hedge Accounting 1 January 2014 IC Interpretation 21: Levies 1 January 2014 Amendments to FRS 119: Defined Benefit Plans: Employee Contributions 1 July 2014 Annual Improvements to FRSs Cycle 1 July 2014 Annual Improvements to FRSs Cycle 1 July 2014 FRS 9 Financial Instruments (IFRS 9 issued by IASB in November 2009) To be announced FRS 9 Financial Instruments (IFRS 9 issued by IASB in October 2010) To be announced FRS 9 Financial Instruments: Hedge Accounting and amendments to FRS 9, FRS 7 and FRS 139 To be announced

69 68 TSH RESOURCES BERHAD (49548-D) 2. Summary of significant accounting policies (cont d) 2.3 Standards and interpretations issued but not yet effective (cont d) The Directors expect that the adoption of the above standards and interpretations will have no material impact on the in the period of initial application, except as discussed below: FRS 9: Financial Instruments FRS 9 reflects the first phase of work on the replacement of FRS 139 and applies to classification and measurement of financial assets and financial liabilities as defined in FRS 139. The standard was initially effective for annual periods beginning on or after 1 January 2013, but Amendments to FRS 9: Mandatory Effective Date of FRS 9 and Transition Disclosures, issued in March 2012, moved the mandatory effective date to 1 January Subsequently, on 14 February 2014, it was announced that the new effective date will be decided when the project is closer to completion. The adoption of the first phase of FRS 9 will have an effect on the classification and measurement of the Group s financial assets, but will not have an impact on classification and measurements of the Group s financial liabilities. The Group will quantify the effect in conjunction with the other phases, when the final standard including all phases is issued. Amendments to FRS 139: Novation of Derivatives and Continuation of Hedge Accounting These amendments provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria. The Group has not novated its derivatives during the current period. However, these amendments would be considered for future novation. Malaysian Financial Reporting Standards (MFRS Framework) On 19 November 2011, the Malaysian Accounting Standards Board (MASB) issued a new MASB approved accounting framework, the Malaysian Financial Reporting Standards (MFRS Framework). The MFRS Framework is to be applied by all Entities Other Than Private Entities for annual periods beginning on or after 1 January 2012, with the exception of entities that are within the scope of MFRS 141: Agriculture (MFRS 141) and IC Interpretation 15 Agreements for Construction of Real Estate (IC 15), including the parent, significant investor and venturer (herein called Transitioning Entities ). Transitioning Entities will be allowed to defer the adoption of the new MFRS for additional three years. Consequently, the adoption of the MFRS Framework by the Transitioning Entities will be mandatory for annual periods beginning on or after 1 January The Group falls within the scope of Transitioning Entities and accordingly will be required to prepare financial statement using MFRS Framework for the financial year beginning 1 January In presenting its first MFRS, the Group will be required to restate the comparative to amounts reflecting the application of MFRS Framework. The majority of the adjustments required on transition will be made, retrospectively, against opening retained earnings. At the date of these, the Group has not completed its quantification of the financial effects of the differences between Financial Reporting Standards and accounting standards under the MFRS Framework due to the ongoing assessment by the project team. Accordingly, the financial performance and financial position as disclosed in these for the year ended 31 December 2013 could be different if prepared under the MFRS Framework. The Group expects to be in a position to fully comply with the requirements of the MFRS Framework for the financial year ending 31 December 2015.

70 ANNUAL REPORT Summary of significant accounting policies (cont d) 2.4 Basis of consolidation The consolidated comprise the of the Company and its subsidiaries as at the reporting date. The of the subsidiaries used in the preparation of the consolidated are prepared for the same reporting date as the Company. Consistent accounting policies are applied for like transactions and events in similar circumstances. The Company controls an investee if and only if the Company has all the following: (i) (ii) (iii) Power over the investee (i.e existing rights that give it the current ability to direct the relevant activities of the investee); Exposure, or rights, to variable returns from its investment with the investee; and The ability to use its power over the investee to affect its returns. When the Company has less than a majority of the voting rights of an investee, the Company considers the following in assessing whether or not the Company s voting rights in an investee are sufficient to give it power over the investee: (i) (ii) (iii) (iv) The size of the Company s holding of voting rights relative to the size and dispersion of holdings of the other vote holders; Potential voting rights held by the Company, other vote holders or other parties; Rights arising from other contractual arrangements; and Any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders meetings. Subsidiaries are consolidated when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full. Losses within a subsidiary are attributed to the non-controlling interests even if that results in a deficit balance. Changes in the Group s ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group s interests and the noncontrolling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. The resulting difference is recognised directly in equity and attributed to owners of the Company. When the Group loses control of a subsidiary, a gain or loss calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets and liabilities of the subsidiary and any non-controlling interest, is recognised in profit or loss. The subsidiary s cumulative gain or loss which has been recognised in other comprehensive income and accumulated in equity are reclassified to profit or loss or where applicable, transferred directly to retained earnings. The fair value of any investment retained in the former subsidiary at the date control is lost is regarded as the cost on initial recognition of the investment.

71 70 TSH RESOURCES BERHAD (49548-D) 2. Summary of significant accounting policies (cont d) 2.4 Basis of consolidation (cont d) Business combinations Acquisitions of subsidiaries are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interests in the acquiree. The Group elects on a transaction-by-transaction basis whether to measure the non-controlling interests in the acquiree either at fair value or at the proportionate share of the acquiree s identifiable net assets. Transaction costs incurred are expensed and included in administrative expenses. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes in the fair value of the contingent consideration which is deemed to be an asset or liability, will be recognised in accordance with FRS 139 either in profit or loss or as a change to other comprehensive income. If the contingent consideration is classified as equity, it will not be remeasured. Subsequent settlement is accounted for within equity. In instances where the contingent consideration does not fall within the scope of FRS 139, it is measured in accordance with the appropriate FRS. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. If the business combination is achieved in stages, the acquisition date fair value of the acquirer s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss. Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss. The accounting policy for goodwill is set out in Note Subsidiaries A subsidiary is an entity over which the Group has all the following: (i) (ii) (iii) Power over the investee (i.e existing rights that give it the current ability to direct the relevant activities of the investee); Exposure, or rights, to variable returns from its investment with the investee; and The ability to use its power over the investee to affect its returns. In the Company s separate, investments in subsidiaries are accounted for at cost less impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in profit or loss. 2.6 Investments in associates and joint ventures An associate is an entity in which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

72 ANNUAL REPORT Summary of significant accounting policies (cont d) 2.6 Investments in associates and joint ventures (cont d) On acquisition of an investment in associate or joint venture, any excess of the cost of investment over the Group s share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill and included in the carrying amount of the investment. Any excess of the Group s share of the net fair value of the identifiable assets and liabilities of the investee over the cost of investment is excluded from the carrying amount of the investment and is instead included as income in the determination of the Group s share of the associate s or joint venture s profit or loss for the period in which the investment is acquired. An associate or a joint venture is equity accounted for from the date on which the investee becomes an associate or a joint venture. Under the equity method, on initial recognition the investment in an associate or a joint venture is recognised at cost, and the carrying amount is increased or decreased to recognise the Group s share of the profit or loss and other comprehensive income of the associate or joint venture after the date of acquisition. When the Group s share of losses in an associate or a joint venture equal or exceeds its interest in the associate or joint venture, the Group does not recognise further losses, unless it has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. Profits and losses resulting from upstream and downstream transactions between the Group and its associate or joint venture are recognised in the Group s only to the extent of unrelated investors interests in the associate or joint venture. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. The of the associates and joint ventures are prepared as of the same reporting date as the Company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group. After application of the equity method, the Group applies FRS 139 Financial Instruments: Recognition and Measurement to determine whether it is necessary to recognise any additional impairment loss with respect to its net investment in the associate or joint venture. When necessary, the entire carrying amount of the investment is tested for impairment in accordance with FRS 136 Impairment of Assets as a single asset, by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss is recognised in profit or loss. Reversal of an impairment loss is recognised to the extent that the recoverable amount of the investment subsequently increases. In the Company s separate, investments in associates and joint ventures are accounted for at cost less impairment losses. On disposal of such investments, the difference between net disposal proceeds and their carrying amounts is included in profit or loss. 2.7 Transactions with non-controlling interests Non-controlling interest represents the equity in subsidiaries not attributable, directly or indirectly, to owners of the Company, and is presented separately in the consolidated statement of comprehensive income and within equity in the consolidated statement of financial position, separately from equity attributable to owners of the Company. Changes in the Company owners ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. In such circumstances, the carrying amounts of the controlling and noncontrolling interests are adjusted to reflect the changes in their relative interests in the subsidiary. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the parent.

73 72 TSH RESOURCES BERHAD (49548-D) 2. Summary of significant accounting policies (cont d) 2.8 Foreign currency (a) Functional and presentation currency The individual of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates ( the functional currency ). The consolidated are presented in Ringgit Malaysia (RM), which is also the Company s functional currency. (b) Foreign currency transactions Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the reporting date. Non-monetary items denominated in foreign currencies that are measured at historical cost are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items denominated in foreign currencies measured at fair value are translated using the exchange rates at the date when the fair value was determined. Exchange differences arising on the settlement of monetary items or on translating monetary items at the reporting date are recognised in profit or loss except for exchange differences arising on monetary items that form part of the Group s net investment in foreign operations, which are recognised initially in other comprehensive income and accumulated under foreign currency translation reserve in equity. The foreign currency translation reserve is reclassified from equity to profit or loss of the Group on disposal of the foreign operation. Exchange differences arising on the translation of non-monetary items carried at fair value are included in profit or loss for the period except for the differences arising on the translation of non-monetary items in respect of which gains and losses are recognised directly in equity. Exchange differences arising from such non-monetary items are also recognised directly in equity. (c) Foreign operations The assets and liabilities of foreign operations are translated into RM at the rate of exchange ruling at the reporting date and income and expenses are translated at exchange rates at the dates of the transactions. The exchange differences arising on the translation are taken directly to other comprehensive income. On disposal of a foreign operation, the cumulative amount recognised in other comprehensive income and accumulated in equity under foreign currency translation reserve relating to that particular foreign operation is recognised in the profit or loss. Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated at the closing rate at the reporting date. 2.9 Property, plant and equipment All items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.

74 ANNUAL REPORT Summary of significant accounting policies (cont d) 2.9 Property, plant and equipment, and depreciation (cont d) Subsequent to recognition, plant and equipment and furniture and fixtures are measured at cost less accumulated depreciation and accumulated impairment losses. When significant parts of property, plant and equipment are required to be replaced in intervals, the Group recognises such parts as individual assets with specific useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred. Leasehold land and buildings of the Group and of the Company have not been revalued since they were first revalued in The directors have not adopted a policy of regular revaluations of such assets and no later valuation has been recorded. As permitted under the transitional provision of IAS 16 (Revised): Property, Plant and Equipment, these assets continue to be stated at their 1993 valuation less accumulated depreciation. Leasehold land are depreciated over their remaining leases which range from 62 years to 93 years. Depreciation of other property, plant and equipment is provided for on a straight-line basis to write off the cost of each asset to its residual value over the estimated useful life, at the following annual rates: Buildings 2% Motor vehicles 10% to 20% Plant, machinery and equipment 7% to 20% Furniture, fittings and renovation 5% to 10% Assets under construction are stated at cost and not depreciated as the assets are not yet available for use. Assets under construction comprises contractor s payments, finance costs and directly attributable costs incurred in preparing these assets for their intended use. Depreciation on assets under construction commences when the assets are ready for their intended use. The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. The residual value, useful life and depreciation method are reviewed at each financial year end, and adjusted prospectively, if appropriate. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on derecognition of the asset is included in the profit or loss in the year the asset is derecognised Biological assets (a) Oil palm planting expenditure New planting expenditure incurred on land clearing and upkeep of palms to maturity is stated at cost and capitalised under biological assets. A portion of the indirect overheads which include general charges and interest expense incurred on immature plantation is similarly capitalised under biological assets until such time when the plantation attains maturity. No amortisation is considered necessary on oil palm planting expenditure as its value is maintained through replanting programme. Replanting expenditure is recognised in the income statement in the year in which the expenditure is incurred.

75 74 TSH RESOURCES BERHAD (49548-D) 2. Summary of significant accounting policies (cont d) 2.10 Biological assets (cont d) (b) Forest planting expenditure 2.11 Intangible assets Goodwill All direct and related expenses incurred on the development of the Company s Sustainable Forest Management Project under a Sustainable Forest Management Licence Agreement with the State Government of Sabah is stated at cost and capitalised as biological assets. The expenditure will be amortised upon commencement of log extraction on the basis of the volume of logs extracted during the financial year as a proportion of the estimated volume available. Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less accumulated impairment losses. For the purpose of impairment testing, goodwill acquired is allocated, from the acquisition date, to each of the Group s cash-generating units that are expected to benefit from the synergies of the combination. The cash-generating unit to which goodwill has been allocated is tested for impairment annually and whenever there is an indication that the cash-generating unit may be impaired, by comparing the carrying amount of the cash-generating unit, including the allocated goodwill, with the recoverable amount of the cash-generating unit. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised in the profit or loss. Impairment losses recognised for goodwill are not reversed in subsequent periods. Where goodwill forms part of a cash-generating unit and part of the operation within that cash-generating unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed off in this circumstance is measured based on the relative fair values of the operations disposed off and the portion of the cash-generating unit retained. Goodwill and fair value adjustments arising on the acquisition of foreign operation on or after 1 January 2006 are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated in accordance with the accounting policy set out in Note 2.8. Goodwill and fair value adjustments which arose on acquisitions of foreign operation before 1 January 2006 are deemed to be assets and liabilities of the Company and are recorded in RM at the rates prevailing at the date of acquisition Land use rights Land use rights are initially measured at cost. Following initial recognition, land use rights are measured at cost less accumulated amortisation and accumulated impairment losses. The land use rights are amortised over their lease terms.

76 ANNUAL REPORT Summary of significant accounting policies (cont d) 2.13 Impairment of non-financial assets The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when an annual impairment assessment for an asset is required, the Group makes an estimate of the asset s recoverable amount. An asset s recoverable amount is the higher of an asset s fair value less costs to sell and its value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units ( CGU )). In assessing value in use, the estimated future cash flows expected to be generated by the asset are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is written down to its recoverable amount. Impairment losses recognised in respect of a CGU or groups of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to those units or groups of units and then, to reduce the carrying amount of the other assets in the unit or groups of units on a pro-rata basis. Impairment losses are recognised in profit or loss except for assets that are previously revalued where the revaluation was taken to other comprehensive income. In this case the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation. An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increase cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised previously. Such reversal is recognised in profit or loss unless the asset is measured at revalued amount, in which case the reversal is treated as a revaluation increase. Impairment loss on goodwill is not reversed in a subsequent period Plasma receivables Plasma receivables represent the accumulated costs to develop plasma plantations which are currently being financed by banks and self-financed by certain subsidiaries. Upon obtaining financing from the bank, the said advances will be offset against the corresponding funds received from rural cooperatives unit (Koperasi Unit Desa or the KUD ). For certain plasma plantations, the loans obtained from the bank are under the related subsidiaries (acting as nucleus companies) credit facility. When the development of plasma plantation is substantially completed and ready to be transferred or handed-over to plasma farmers, the corresponding investment credit from the bank is also transferred to the plasma farmers. Gain or loss resulting from the difference between the carrying value of the plasma receivables and the corresponding investment credit is payable or recoverable from the plasma farmers Current versus non-current classification The Group presents assets and liabilities in statement of financial position based on current/non-current classification. An asset as current when it is: - Expected to be realised or intended to be sold or consumed in normal operating cycle - Held primarily for the purpose of trading - Expected to be realised within twelve months after the reporting period, or - Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period

77 76 TSH RESOURCES BERHAD (49548-D) 2. Summary of significant accounting policies (cont d) 2.15 Current versus non-current classification (cont d) All other assets are classified as non-current. A liability is current when: - It is expected to be settled in normal operating cycle - It is held primarily for the purpose of trading - It is due to be settled within twelve months after the reporting period, or - There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period The Group classifies all other liabilities as non-current. Deferred tax assets and liabilities are classified as non-current assets and liabilities Financial instruments initial recognition and subsequent measurement A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. (a) Financial assets Initial recognition and measurement Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial assets are recognized initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group commits to purchase or sell the asset. Subsequent measurement For purposes of subsequent measurement financial assets are classified in four categories: - Financial assets at fair value through profit or loss - Loans and receivables - Held-to-maturity investments - Available-for-sale financial investments Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments as defined by FRS 139. The Group has not designated any financial assets at fair value through profit or loss. Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value presented as finance costs (negative net changes in fair value) or finance income (positive net changes in fair value) in the statement of profit or loss.

78 ANNUAL REPORT Summary of significant accounting policies (cont d) 2.16 Financial instruments initial recognition and subsequent measurement (cont d) (a) Financial assets (cont d) Financial assets at fair value through profit or loss (cont d) Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not held for trading or designated at fair value through profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognised in profit or loss. Re-assessment only occurs if there is either a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required or a reclassification of a financial asset out of the fair value through profit or loss. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the statement of profit or loss. The losses arising from impairment are recognised in the statement of profit or loss in finance costs for loans and in cost of sales or other operating expenses for receivables. This category generally applies to trade and other receivables. For more information on receivables, refer to Note 24. Held-to-maturity investments Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held to maturity when the Group has the positive intention and ability to hold them to maturity. After initial measurement, held to maturity investments are measured at amortised cost using the EIR, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance income in the statement of profit or loss. The losses arising from impairment are recognised in the statement of profit or loss as finance costs. The Group did not have any held-to-maturity investments during the years ended 31 December 2013 and Available-for-sale (AFS) financial investments AFS financial investments include equity investments and debt securities. Equity investments classified as AFS are those that are neither classified as held for trading nor designated at fair value through profit or loss. Debt securities in this category are those that are intended to be held for an indefinite period of time and that may be sold in response to needs for liquidity or in response to changes in the market conditions. After initial measurement, AFS financial investments are subsequently measured at fair value with unrealised gains or losses recognised in other comprehensive income and credited in the AFS reserve until the investment is derecognised, at which time the cumulative gain or loss is recognised in other operating income, or the investment is determined to be impaired, when the cumulative loss is reclassified from the AFS reserve to the statement of profit or loss in finance costs. Interest earned whilst holding AFS financial investments is reported as interest income using the EIR method.

79 78 TSH RESOURCES BERHAD (49548-D) 2. Summary of significant accounting policies (cont d) 2.16 Financial instruments initial recognition and subsequent measurement (cont d) (a) Financial assets (cont d) Available-for-sale (AFS) financial investments (cont d) The Group evaluates whether the ability and intention to sell its AFS financial assets in the near term is still appropriate. When, in rare circumstances, the Group is unable to trade these financial assets due to inactive markets, the Group may elect to reclassify these financial assets if the management has the ability and intention to hold the assets for foreseeable future or until maturity. For a financial asset reclassified from the AFS category, the fair value carrying amount at the date of reclassification becomes its new amortised cost and any previous gain or loss on the asset that has been recognised in equity is amortised to profit or loss over the remaining life of the investment using the EIR. Any difference between the new amortised cost and the maturity amount is also amortised over the remaining life of the asset using the EIR. If the asset is subsequently determined to be impaired, then the amount recorded in equity is reclassified to the statement of profit or loss. Derecognition A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the group s consolidated statement of financial position) when: - The rights to receive cash flows from the asset have expired, or - The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass-through arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset When the Group has transferred its rights to receive cash flows from an asset or has entered into a passthrough arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of the Group s continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay. (b) Impairment of financial assets The Group assesses, at each reporting date, whether there is objective evidence that a financial asset or a group of financial assets is impaired. An impairment exists if one or more events that has occurred since the initial recognition of the asset (an incurred loss event ), has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and observable data indicating that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

80 ANNUAL REPORT Summary of significant accounting policies (cont d) 2.16 Financial instruments initial recognition and subsequent measurement (cont d) (b) Impairment of financial assets (cont d) Financial assets carried at amortised cost For financial assets carried at amortised cost, the Group first assesses whether impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment. The amount of any impairment loss identified is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account and the loss is recognised in statement of profit or loss. Interest income (recorded as finance income in the statement of profit or loss) continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a write-off is later recovered, the recovery is credited to finance costs in the statement of profit or loss. Available-for-sale (AFS) financial investments For AFS financial investments, the Group assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired. In the case of equity investments classified as AFS, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. Significant is evaluated against the original cost of the investment and prolonged against the period in which the fair value has been below its original cost. When there is evidence of impairment, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the statement of profit or loss is removed from other comprehensive income and recognised in the statement of profit or loss. Impairment losses on equity investments are not reversed through profit or loss; increases in their fair value after impairment are recognised in other comprehensive income. In the case of debt instruments classified as AFS, the impairment is assessed based on the same criteria as financial assets carried at amortised cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortised cost and the current fair value, less any impairment loss on that investment previously recognised in the statement of profit or loss.

81 80 TSH RESOURCES BERHAD (49548-D) 2. Summary of significant accounting policies (cont d) 2.16 Financial instruments initial recognition and subsequent measurement (cont d) (b) Impairment of financial assets (cont d) Available-for-sale (AFS) financial investments (cont d) Future interest income continues to be accrued based on the reduced carrying amount of the asset, using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income. If, in a subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the statement of profit or loss, the impairment loss is reversed through the statement of profit or loss. (c) Financial liabilities Initial recognition and measurement Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Group s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, financial guarantee contracts and derivative financial instruments. Subsequent measurement The measurement of financial liabilities depends on their classification, as described below: Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by FRS 139. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognised in the statement of profit or loss. Financial liabilities designated upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the criteria in FRS 139 are satisfied. The Group has not designated any financial liability as at fair value through profit or loss.

82 ANNUAL REPORT Summary of significant accounting policies (cont d) 2.16 Financial instruments initial recognition and subsequent measurement (cont d) (c) Financial liabilities (cont d) Loans and borrowings After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss. This category generally applies to interest-bearing loans and borrowings. For more information refer Note 31. Financial guarantee contracts Financial guarantee contracts issued by the Group are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the best estimate of the expenditure required to settle the present obligation at the reporting date and the amount recognised less cumulative amortisation. As at reporting date, no values are placed on corporate guarantees provided by the Company to secure bank loans and other banking facilities granted to its subsidiaries where such loans and banking facilities are fully collateralised by fixed and floating charges over the property, plant and equipment and other assets of the subsidiaries and where the directors regard the value of the credit enhancement provided by the corporate guarantees as minimal. Derecognition A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss. (d) Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.

83 82 TSH RESOURCES BERHAD (49548-D) 2. Summary of significant accounting policies (cont d) 2.17 Cash and cash equivalents Cash and cash equivalents comprise cash at bank and on hand, demand deposits, and short-term, highly liquid investments that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value. These also include bank overdrafts that form an integral part of the Group s cash management Construction contracts The Group provides flooring installation works on contract basis for timber flooring supplied to customers. Where the outcome of a construction contract can be reliably estimated, contract revenue and contract costs are recognised as revenue and expenses respectively by using the stage of completion method. The stage of completion is measured by reference to the proportion of contract costs incurred for work performed to date to the estimated total contract costs. Where the outcome of a construction contract cannot be reliably estimated, contract revenue is recognised to the extent of contract costs incurred that it is probable will be recoverable. Contract costs are recognised as expenses in the period in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. Contract revenue comprises the initial amount of revenue agreed in the contract and variations in contract work, claims and incentive payments to the extent that it is probable that they will result in revenue and they are capable of being reliably measured. When the total of costs incurred on construction contracts plus, recognised profits (less recognised losses) exceeds progress billings, the balance is classified as amount due from customers on contracts. When progress billings exceed costs incurred plus, recognised profits (less recognised losses), the balance is classified as amount due to customers on contracts Inventories Inventories are stated at lower of cost and net realisable value. Cocoa and oil palm are valued on the first-in first-out method whereas wood products are valued on the weighted average method. The cost of raw materials comprises costs of purchase. The costs of finished goods and workin-progress comprise costs of raw materials, direct labour, other direct costs and appropriate proportions of manufacturing overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be estimated reliably.

84 ANNUAL REPORT Summary of significant accounting policies (cont d) 2.20 Provisions (cont d) Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed. If the effect of the time value of money is material, provisions are discounted using a current pre tax rate that reflects, where appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost Grants Grants are recognised initially at their fair value in the balance sheet as deferred income where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. Grants that compensate the Group for expenses incurred are recognised as income over the periods necessary to match the grant on a systematic basis to the costs that it is intended to compensate. Grants that compensate the Group for the cost of an asset are recognised as income on a systematic basis over the useful life of the asset Borrowing costs Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale. All other borrowing costs are recognised in profit or loss in the period they are incurred. Borrowing costs consist of interest and other costs that the Group and the Company incurred in connection with the borrowing of funds Employee benefits (a) Short term benefits Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences. Short term non-accumulating compensated absences such as sick leave are recognised when the absences occur. (b) Defined contribution plans Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into separate entities or funds and will have no legal or constructive obligation to pay further contributions if any of the funds do not hold sufficient assets to pay all employee benefits relating to employee services in the current and preceding financial years. Such contributions are recognised as an expense in the income statement as incurred. As required by law, companies in Malaysia make such contributions to the Employees Provident Fund. Some of the Group s foreign subsidiaries also make contributions to their respective countries statutory pension schemes.

85 84 TSH RESOURCES BERHAD (49548-D) 2. Summary of significant accounting policies (cont d) 2.23 Employee benefits (cont d) (c) Defined benefit plans 2.24 Leases The Group provides additional provisions for employee service entitlements in order to meet the minimum benefits required to be paid to qualified employees, as required under the Indonesian Labour Law No. 13/2003 (the Labour Law ). The said additional provisions, which are unfunded, are estimated using actuarial calculations. The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method. Defined benefit costs comprise the following: - Service cost - Net interest on the net defined benefit liability or asset - Remeasurements of net defined benefit liability or asset Re-measurements, comprising of actuarial gains and losses are recognised immediately in the statement of financial position with a corresponding debit or credit to retained earnings through other comprehensive income in the period in which they occur. Re-measurement are not reclassified to profit or loss in subsequent periods. Past service costs are recognised in profit or loss on the earlier of: - The date of the plan amendment or curtailment, and - The date that the Group recognises restructuring-related costs Net interest is calculated by applying the discount rate to the net defined benefit liability or assets. The Group recognises the following changes in the net defined benefit obligation under cost of sales, administration expenses and selling and distribution expenses in statements of comprehensive income (by function): - Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-rounding settlements - Net interest expense or income The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date: whether fulfillment of the arrangement is dependent on the usage of a specific asset or assets of the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement. (a) As lessee Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or loss. Contingent rents, if any, are charged as expenses in the periods in which they are incurred. Leased assets are depreciated over the estimated useful life of the asset. However, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life and the lease term.

86 ANNUAL REPORT Summary of significant accounting policies (cont d) 2.24 Leases (a) As lessee (cont d) Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis. (b) As lessor Leases where the Group retains substantially all the risks and rewards of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as rental income Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: (a) Sale of goods and electricity Revenue from sale of goods and electricity are recognised net of sales taxes and upon the transfer of significant risks and rewards of ownership to the buyer. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods. (b) Construction contracts Revenue from construction contracts is accounted for by the stage of completion method as described in Note (c) Interest income Interest income is recognised on an accrual basis using the effective interest method. (d) Management fees Management fees are recognised when services are rendered. (e) Dividend income Dividend income is recognised when the Group s right to receive payment is established. (f) Rental income Rental income is recognised on an accrual basis over the period of tenancy.

87 86 TSH RESOURCES BERHAD (49548-D) 2. Summary of significant accounting policies (cont d) 2.26 Income taxes (a) Current tax Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date. Current taxes are recognised in profit or loss except to the extent that the tax relates to items recognised outside profit or loss, either in other comprehensive income or directly in equity. (b) Deferred tax Deferred tax is provided using the liability method on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all temporary differences, except: - where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and - in respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except: - where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and - in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the reporting date.

88 ANNUAL REPORT Summary of significant accounting policies (cont d) 2.26 Income taxes (cont d) (b) Deferred tax (cont d) Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. (c) Value-added tax ( VAT ) Revenues, expenses and assets are recognised net of the amount of VAT except: - Where the VAT incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the VAT is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable, and - Receivables and payables that are stated with the amount of VAT included. The net amount of VAT recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the consolidated balance sheet Segment reporting For management purposes, the Group is organised into operating segments based on their products and services which are independently managed by the respective segment managers responsible for the performance of the respective segments under their charge. The segment managers report directly to the management of the Company who regularly review the segment results in order to allocate resources to the segments and to assess the segment performance. Additional disclosures on each of these segments are shown in Note 44, including the factors used to identify the reportable segments and the measurement basis of segment information Share capital and share issuance expenses An equity instrument is any contract that evidences a residual interest in the assets of the Group and the Company after deducting all of its liabilities. Ordinary shares are equity instruments. Ordinary shares are recorded at the proceeds received, net of directly attributable incremental transaction costs. Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared Treasury shares When shares of the Company, that have not been cancelled, recognised as equity are reacquired, the amount of consideration paid is recognised directly in equity. Reacquired shares are classified as treasury shares and presented as a deduction from total equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of treasury shares. When treasury shares are reissued by resale, the difference between the sales consideration and the carrying amount is recognised in equity.

89 88 TSH RESOURCES BERHAD (49548-D) 2. Summary of significant accounting policies (cont d) 2.30 Contingencies A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future events not wholly within the control of the Group. Contingent liabilities and assets are not recognised in the statements of financial position of the Group. 3. Significant accounting judgements and estimates The preparation of the Group s requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future. 3.1 Judgements made in applying accounting policies The following are the judgements made by management in the process of applying the Group s accounting policies that have the most significant effect on the amounts recognised in the : (a) Classification between investment properties and property, plant and equipment The Group has developed certain criteria based on FRS 140 in making judgement whether a property qualifies as an investment property. Investment property is a property held to earn rentals or for capital appreciation or both. Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purposes. If these portions could be sold separately (or leased out separately under a finance lease), the Group would account for the portions separately. If the portions could not be sold separately, the property is an investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes. Judgement is made on an individual property basis to determine whether ancillary services are so significant that a property does not qualify as investment property. During the financial year, the Group has sub-let an insignificant portion of vacant office space but has decided not to treat this portion as an investment property because of its insignificant portion in proportion to the whole building. Accordingly, this portion is still classified as property, plant and equipment. (b) Plasma receivables The Group evaluates the excess of accumulated development costs over the banks and Group s funding on the amount agreed by the plasma farmers. In such cases, the Group uses judgement, based on available facts and circumstances, to record allowance for uncollectible plasma receivables. These provisions are re-evaluated and adjusted as additional information received. The net carrying amount of the Group s plasma receivables as at 31 December 2013 and 2012 is RM23,941,000 and RM15,380,000 respectively. Further details are disclosed in Note 38(a).

90 ANNUAL REPORT Significant accounting judgements and estimates (cont d) 3.1 Judgements made in applying accounting policies (cont d) (c) Deposit for acquisition of land use right The Group evaluates the sufficiency of allowance for advances to purchase land use right based on its assessment over the plot of land rights that the related titles of ownership which are in the process of being transferred to the Group. The net carrying amount of the Group s advance for purchase of land as of 31 December 2013 amounting to RM21,718,000. (2012: RM18,219,000). 3.2 Key sources of estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. (a) Useful lives of plant and equipment The cost of plant and machinery is depreciated on a straight-line basis over the assets remaining useful lives. Management estimates the useful lives of these assets to be between 5 to 14 years. These are common life expectancies applied in the palm oil and woods industries. Changes in the expected level of usage and technological development could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised. (b) Impairment of goodwill The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value-in-use of the cash-generating units ( CGU ) to which goodwill is allocated. Estimating a valuein-use amount requires management to make an estimate of the expected future cash flows from the CGU and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The carrying amounts of goodwill as at 31 December 2013 was RM51,742,000 (2012: RM50,235,000). Further details are disclosed in Note 19. (c) Impairment of property, plant and equipment and biological assets The Group assesses whether there are any indication of impairment for all non-financial assets at each reporting date. Other non-financial assets are tested for impairment when there are indications that the carrying amounts may not be recoverable. During the current financial year, the Group has recognised impairment loss in respect of a subsidiary s property, plant and equipment. The Group carried out the impairment test based on a variety of estimation including the value-in-use of the CGU to which the property, plant and equipment and biological assets are allocated. Estimating the value-in-use requires the Group to make an estimate of the expected future cash flows from the CGU and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The carrying amounts of property, plant and equipment and biological assets of the Group were RM732,444,000 (2012: RM713,500,000) and RM719,051,000 (2012: RM644,721,000) respectively. Further details of the impairment loss recognised for the property, plant and equipment are disclosed in Note 16 respectively.

91 90 TSH RESOURCES BERHAD (49548-D) 3. Significant accounting judgements and estimates (cont d) 3.2 Key sources of estimation uncertainty (cont d) (d) Impairment of investments in subsidiaries During the current financial year, the fair values of investments in non-current quoted shares, which were included within the investments in subsidiaries were lower than the carrying amounts as highlighted in Note 20. The Group had carried out impairment test as stated in Note 3.2(b) above and concludes that no impairment is considered necessary as the value-in-use is higher than the carrying amounts in which those asset belongs to. As at 31 December 2013, the carrying amount of investments in subsidiaries of the Company was RM401,925,000 (2012: RM355,837,000). (e) Deferred tax assets Deferred tax assets are recognised for all unutilised tax losses and unabsorbed capital and agriculture allowances to the extent that it is probable that taxable profit will be available against which the losses, capital and agriculture allowances can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies. The total carrying value of recognised tax losses, capital and agriculture allowances of the Group and of the Company were RM193,888,000 (2012: RM150,300,000) and RM111,008,000 (2012: RM95,117,000) respectively and the unrecognised tax losses and capital allowances of the Group was RM98,458,000 (2012: RM97,235,000). (f) Defined benefit plan The cost of defined benefit pension plans and other post employment medical benefits as well as the present value of the pension obligation is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rates of return of assets, future salary increases, mortality rates and future pension increases. All assumptions are reviewed at each reporting date. The net employee liability as at 31 December 2013 is RM6,039,000 (2012: RM6,889,000). Further details are given in Note 33. The mortality rate is based on publicly available mortality tables for the specific country. Future salary increases and pension increases are based on expected future inflation rates for the specific country. Further details about the assumptions used are given in Note Revenue Group Company RM 000 RM 000 RM 000 RM 000 Sale of oil palm products 865, ,561 10,881 12,226 Sale of cocoa beans and cocoa products 65,007 34, Sale of ramet 14,026 16,534 5,952 14,326 Construction contract revenue 12,510 6, Supply of electricity 20,149 14, Sale of timber and latex 1,921 1,772 1,921 1,771 Sale of wood products 36,703 35, Dividend income from: - subsidiaries and joint venture ,496 77,114 - held for trading investment, equity instruments (unquoted in Malaysia) 2,237 1, Management fees from subsidiaries ,073 8,485 1,017, , , ,064

92 ANNUAL REPORT Cost of sales Group Company RM 000 RM 000 RM 000 RM 000 Cost of inventories sold 700, ,288 9,563 18,315 Construction contract costs 11,064 6, Cost of services rendered 3,581 6, , ,211 9,563 18, Interest income Group Company RM 000 RM 000 RM 000 RM 000 Interest income from: Short-term deposits 920 1, Loans and receivables ,682 37,733 1,308 1,951 54,854 37, Dividend income Group Company RM 000 RM 000 RM 000 RM 000 Dividend income from short term investments (unquoted in Malaysia)

93 92 TSH RESOURCES BERHAD (49548-D) 8. Other income Group Company RM 000 RM 000 RM 000 RM 000 Gain on disposal of investment securities (Note 45) 85, Gain on disposal of property, plant and equipment Realised net gain on foreign exchange Amortisation of deferred capital grants (Note 34) 4,915 4,915 4,915 4,915 Forest planting maintenance income Reversal of impairment on investment securities Bad debts recovered - 1, Rental income 1,002 1, ,320 Realised gain on commodity future contracts - 13,275-12,603 Unrealised gain on commodity future contracts - 1, Realised gain on forward currency contracts Realisation of hedging differences Reversal of impairment loss on trade receivables Fair value gain on commodity future contracts 411 2, Miscellaneous 1,851 1, ,946 28,482 6,838 20, Finance costs Group Company RM 000 RM 000 RM 000 RM 000 Interest expense on: Bankers acceptances 6,728 6, Bank overdrafts Discount bills Amount due to subsidiaries ,077 18,444 Revolving credits 6,317 4,592 4,847 2,910 Term loans 8,639 6,451 8,140 5,341 Sukuk Ijarah Medium Term Notes 11,125 10, Sukuk Ijarah Commercial Papers 1,448 1, Sukuk Musyarakah Medium Term Notes 2,250 2, Others 601 1, ,211 32,869 32,653 26,997 Less: Interest expense capitalised in biological assets (Note 17(ii)) (19,403) (13,502) - - Total finance costs 17,808 19,367 32,653 26,997

94 ANNUAL REPORT Profit before tax The following items have been included in arriving at profit before tax: Group Company RM 000 RM 000 RM 000 RM 000 Auditors remuneration: - Statutory audits: - Current year Underprovision in prior years Other services: - Current year Underprovision in prior years Employee benefits expense (Note 11) 72,316 65,565 18,453 17,433 Non-executive directors remuneration (Note 12) Amortisation of land use rights (Note 18) 5,427 3, Bad debts written off Depreciation of property, plant and equipment (Note 16) 36,789 34,295 4,409 5,103 Fair value loss on forward currency contracts 1, Inventories written down 3,675 1, Impairment loss of property, plant and equipment (Note 16) 1, Net loss on foreign exchange: - Realised 2,148 1, Unrealised 62,476 12,315 83,283 52,968 Property, plant and equipment written off Impairment loss on trade receivables 1,772 1, Rental of land and premises 1,246 1, Fair value loss on sundry and plasma receivables 8, Loss on disposal of investment in subsidiaries Realised loss on commodity future contracts Loss on disposal of property, plant and equipment

95 94 TSH RESOURCES BERHAD (49548-D) 11. Employee benefits expense Group Company RM 000 RM 000 RM 000 RM 000 Wages and salaries 86,339 65,723 20,558 18,144 Contributions to defined contribution plan 3,615 2,899 1,477 1,549 Social security contributions 2,512 2, Increase in liability for defined benefit plan (Note 33) 2,555 4, ,021 75,034 22,147 19,799 Less: Amount capitalised in oil palm planting expenditure (17,736) (7,103) - - Less: Amount capitalised in forest planting expenditure (4,969) (2,366) (3,694) (2,366) 72,316 65,565 18,453 17,433 Included in employee benefits expense of the Group and of the Company are executive directors remuneration amounting to RM4,936,000 (2012: RM4,342,000) and RM3,261,000 (2012: RM2,668,000) respectively as further disclosed in Note Directors remuneration The details of remuneration receivable by directors of the Company during the year are as follows: Group Company RM 000 RM 000 RM 000 RM 000 Executive: Salaries and other emoluments 3,021 2,568 2,014 1,561 Fees Bonus 1,405 1, Defined contribution plan Total executive directors remuneration (excluding benefits-in-kind) (Note 11) 4,936 4,342 3,261 2,668 Estimated money value of benefits-in-kind Total executive directors remuneration (including benefits-in-kind) 5,110 4,496 3,347 2,737 Non-Executive: Fees Other emoluments Total non-executive directors remuneration (excluding benefits-in-kind) (Note 10) Estimated money value of benefits-in-kind Total non-executive directors remuneration (including benefits-in-kind) 1,106 1, Total directors remuneration 6,216 5,573 3,829 3,220

96 ANNUAL REPORT Directors remuneration (cont d) The number of directors of the Company whose total remuneration during the financial year fell within the following bands is analysed below: Number of Directors Executive Directors: RM350,001 RM400, RM600,001 RM650, RM1,550,001 RM1,600, RM2,500,001 RM2,550, Non-Executive Directors: Below RM50, RM50,001 RM100, RM100,001 RM150, RM800,001 RM850, RM850,001 RM900, Income tax expense Major components of income tax expense The major components of income tax expense for the years ended 31 December 2013 and 2012 are: Statement of comprehensive income: Group Company RM 000 RM 000 RM 000 RM 000 Current income tax: - Malaysian income tax 12,139 8, Foreign tax 14,272 13, ,411 21, (Over)/underprovision in prior years: - Malaysian income tax (807) Foreign tax - (1) - - (807) ,604 22, Deferred income tax (Note 23): - Origination and reversal of temporary differences (15,395) (5,991) (4,506) (356) - Overprovision in prior years (807) (753) Effect of reduction in tax rate (1,480) (17,682) (6,744) (4,466) (356) Income tax expense recognised in profit and loss 7,922 15,577 (4,466) (356)

97 96 TSH RESOURCES BERHAD (49548-D) 13. Income tax expense (cont d) Reconciliation between tax expense and accounting profit The reconciliation between tax expense and the product of accounting profit multiplied by the applicable corporate tax rate for the years ended 31 December 2013 and 2012 are as follows: Group Company RM 000 RM 000 RM 000 RM 000 Profit before tax 164,485 99,998 2,103 25,105 Tax at Malaysian statutory tax rate of 25% (2012: 25%) 41,121 25, ,276 Different tax rates in other countries Effect of reduction in tax rate (1,480) Adjustments: Non-deductible expenses 15,697 8,069 15,812 20,793 Income not subject to taxation (38,306) (5,401) (20,252) (27,114) Effect of exemption of pioneer profits # (5,377) (6,668) - - Share of profit of associates (178) (300) - - Share of profit of jointly controlled entities (5,845) (4,740) - - Effect of utilisation of previously unrecognised tax losses and unabsorbed allowances (389) (274) - - Effect of utilisation of capital allowances and tax losses brought forward (594) (311) (592) (311) Deferred tax assets not recognised 5,054 4, Effect of double deduction incentives (182) (175) - - Effect of investment cost in subsidiaries eligible for tax deductions - (3,725) - - Overprovision of deferred tax in prior years (807) (753) - - (Over)/underprovision of tax expense in prior years (807) Income tax expense recognised in profit and loss 7,922 15,577 (4,466) (356) Domestic income tax is calculated at the Malaysian statutory tax rate of 25% (2012: 25%) of the estimated assessable profit for the year. The statutory tax rate will be reduced from the current year s rate of 25% to 24% with effective from the year of assessment The computation of deferred tax as 31 December 2013 has reflected these changes. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions. The above reconciliation is prepared by aggregating separate reconciliations for each national jurisdictions. # A subsidiary, TSH Bio-Energy Sdn. Bhd. has been granted Pioneer Status under Section 127 of the Income Tax Act, 1967, with 100% tax exemption on the subsidiary s statutory income from the operation of biomass plant for a period of 10 years, commencing from 17 February A subsidiary, TSH Biotech Sdn. Bhd. has been granted BioNexus Status and 100% exemption on the subsidiary s statutory income for a period of 10 years under the Income Tax Act (Exemption)(No.17) Order [P.U.(A) 371/2007] commencing from 27 August 2007 to undertake qualifying activities, namely research, development and supply of high quality oil palm ramets through tissue culture process.

98 ANNUAL REPORT Income tax expense (cont d) Group Company RM 000 RM 000 RM 000 RM 000 Tax savings during the financial year arising from utilisation of current year: Additional investment cost in subsidiary eligible for tax deduction - 3, Earnings per share (a) Basic Basic earnings per share amounts are calculated by dividing profit for the year, net of tax, attributable to owners of the Company by the weighted average number of ordinary shares outstanding during the financial year. Diluted earnings per share amounts are calculated by dividing profit for the year, net of tax, attributable to owners of the Company by the weighted average number of ordinary shares outstanding during the financial year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. The following reflect the profit and share data used in the computation of basic and diluted earnings per share for the years ended 31 December: Group RM 000 RM 000 Profit net of tax attributable to owners of the Company used in the computation of basic or diluted earnings per share 150,963 77,027 Number Number of shares of shares Weighted average number of ordinary shares for diluted earnings per shares computation* 855, ,265 * The weighted average number of shares for the year 2013 and 2012 takes into account of the following: (i) (ii) the weighted average effect of changes in treasury shares transactions during the year issuance of new ordinary shares as disclosed in Note 35(a) (b) Diluted The Group has no potential ordinary shares in issue as at statements of financial position date and therefore, diluted earnings per share is same as basic earnings per share.

99 98 TSH RESOURCES BERHAD (49548-D) 15. Dividends Recognised during the year: Dividends Dividends in respect of year recognised in year RM 000 RM 000 RM 000 RM 000 RM 000 First and final single tier dividend of 2.5 sen on 834,365,633 ordinary shares, declared on 28 June 2013 and paid on 23 July ,859-20,859 - First and final single tier dividend of 3.5 sen on 819,444,726 ordinary shares, declared on 23 May 2012 and paid on 23 July ,681-28,681 Proposed for approval at AGM (not recognised as at 31 December): First and final single tier dividend of 3.5 sen, on 896,942,633 ordinary shares 31, ,393 20,859 28,681 20,859 28,681 At the forthcoming Annual General Meeting, a first and final single tier dividend in respect of the financial year ended 31 December 2013, of 3.5 sen per ordinary share on 896,942,633 ordinary shares, amounting to a dividend payable of RM31,392,992 will be proposed for shareholders approval. The for the current financial year do not reflect this proposed dividend. Such dividend, if approved by the shareholders, will be accounted for in equity as an appropriation of retained earnings in the financial year ending 31 December 2014.

100 ANNUAL REPORT Property, plant and equipment Plant, Furniture, Land machinery fittings Assets and Motor and and under Group buildings* vehicles equipment renovation construction Total RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Cost or valuation: At 1 January ,470 52, ,394 24, , ,871 Additions 16,234 6,369 11,616 2,785 45,711 82,715 Disposals (393) (1,459) (1,958) (211) - (4,021) Write-offs (1) (116) (188) (49) (27) (381) Reclassifications 7, ,616 (366) (9,837) - Exchange differences (5,719) (1,910) (5,275) (449) (2,925) (16,278) At 31 December ,730 56, ,205 26, , ,906 Representing: At cost 338,775 56, ,205 26, , ,951 At valuation 3, ,955 At 31 December ,730 56, ,205 26, , ,906 At 31 December 2012 and 1 January ,730 56, ,205 26, , ,906 Additions 21,552 13,768 11,298 2,506 41,965 91,089 Disposals (1,529) (2,887) (6,262) (54) - (10,732) Write-offs (120) (187) (836) (63) - (1,206) Acquisition of subsidiaries (Note 20(b)) Reclassifications 18,503-26, (45,751) - Exchange differences (13,494) (4,115) (11,240) (914) (4,217) (33,980) At 31 December ,852 62, ,134 28, ,126 1,031,410 Representing: At cost 364,644 62, ,134 28, ,126 1,028,202 At valuation 3, ,208 At 31 December ,852 62, ,134 28, ,126 1,031,410

101 100 TSH RESOURCES BERHAD (49548-D) 16. Property, plant and equipment (cont d) Plant, Furniture, Land machinery fittings Assets and Motor and and under Group buildings* vehicles equipment renovation construction Total RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Accumulated depreciation and impairment loss: At 1 January ,444 31, ,508 11, ,901 Depreciation charge for the year: 8,655 6,631 20,808 2,591-38,685 Recognised in income statement (Note 10) 7,761 5,226 19,045 2,263-34,295 Capitalised in biological assets (Note 17) 894 1,405 1, ,390 Disposals (112) (1,377) (1,428) (110) - (3,027) Write-offs - (116) (153) (42) - (311) Reclassifications (664) (25) - - Exchange differences (720) (1,054) (1,811) (257) - (3,842) At 31 December 2012 and 1 January ,603 35, ,613 13, ,406 Depreciation charge for the year: 10,371 7,410 22,679 2,756-43,216 Recognised in income statement (Note 10) 8,356 4,996 21,187 2,250-36,789 Capitalised in biological assets (Note 17) 2,015 2,414 1, ,427 Disposals (9) (2,093) (5,834) (30) - (7,966) Write-offs (120) (145) (714) (46) - (1,025) Impairment loss recognised in income statement (Note 10) - - 1, ,059 Acquisition of subsidiaries (Note 20(b)) Exchange differences (2,022) (2,268) (4,172) (443) - (8,905) At 31 December ,995 38, ,631 15, ,966 Net carrying amount: At cost 286,029 20, ,592 13, , ,402 At valuation 3, ,098 At 31 December ,127 20, ,592 13, , ,500 At cost 303,040 24, ,503 12, , ,627 At valuation 2, ,817 At 31 December ,857 24, ,503 12, , ,444

102 ANNUAL REPORT Property, plant and equipment (cont d) * Land and buildings of the Group comprise: Long term leasehold Plantation land infrastructure Buildings Total RM 000 RM 000 RM 000 RM 000 Cost or valuation: At 1 January ,491 28, , ,470 Additions - 5,405 10,829 16,234 Disposals - - (393) (393) Write-offs - (1) - (1) Reclassifications (1,072) 1,128 7,083 7,139 Exchange differences - (1,608) (4,111) (5,719) At 31 December ,419 33, , ,730 Representing: At cost 81,846 33, , ,775 At valuation 1,573-2,382 3,955 At 31 December ,419 33, , ,730 At 31 December 2012 and 1 January ,419 33, , ,730 Additions 1,126 10,910 9,516 21,552 Disposals (921) (63) (545) (1,529) Write-offs - - (120) (120) Acquisition of subsidiaries (Note 20(b)) Reclassifications ,277 18,503 Exchange differences - (4,161) (9,333) (13,494) At 31 December ,624 40, , ,852 Representing: At cost 82,051 40, , ,644 At valuation 1,573-1,635 3,208 At 31 December ,624 40, , ,852

103 102 TSH RESOURCES BERHAD (49548-D) 16. Property, plant and equipment (cont d) * Land and buildings of the Group comprise (cont d): Accumulated depreciation: Long term leasehold Plantation land infrastructure Buildings Total RM 000 RM 000 RM 000 RM 000 At 1 January ,830 2,775 30,839 46,444 Depreciation charge for the year: 983 1,393 6,279 8,655 Recognised in income statement 979 1,094 5,688 7,761 Capitalised in biological assets Disposals - - (112) (112) Reclassifications - (700) 36 (664) Exchange differences - (214) (506) (720) At 31 December 2012 and 1 January ,813 3,254 36,536 53,603 Depreciation charge for the year: 993 2,341 7,037 10,371 Recognised in income statement 989 1,708 5,659 8,356 Capitalised in biological assets ,378 2,015 Disposals - - (9) (9) Write-offs - - (120) (120) Acquisition of subsidiaries (Note 20(b)) Exchange differences - (587) (1,435) (2,022) At 31 December ,806 5,045 42,144 61,995 Net carrying amount: At cost 68,063 30, , ,029 At valuation 1,543-1,555 3,098 At 31 December ,606 30, , ,127 At cost 67,276 35, , ,040 At valuation 1,542-1,275 2,817 At 31 December ,818 35, , ,857

104 ANNUAL REPORT Property, plant and equipment (cont d) Company Plant, Furniture, Land machinery fittings Assets and Motor and and under buildings* vehicles equipment renovation construction Total RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Cost or valuation: At 1 January ,249 15,628 9,644 9,367 4, ,273 Additions 297 1, ,817 5,370 Disposals (244) (717) (22) (163) - (1,146) Write-offs - - (22) (1) - (23) Reclassifications 4,093-1,244 - (5,337) - At 31 December ,395 16,228 11,382 9,604 1, ,474 Representing: At cost 81,587 16,228 11,382 9,604 1, ,666 At valuation 1, ,808 At 31 December ,395 16,228 11,382 9,604 1, ,474 At 31 December 2012 and at 1 January ,395 16,228 11,382 9,604 1, ,474 Additions 660 2, ,931 7,839 Disposals (608) (1,368) (13) (18) - (2,007) Write-offs - (1) (25) - - (26) Reclassifications 2, (2,510) - At 31 December ,957 17,764 11,483 9,790 3, ,280 Representing: At cost 84,149 17,764 11,483 9,790 3, ,472 At valuation 1, ,808 At 31 December ,957 17,764 11,483 9,790 3, ,280

105 104 TSH RESOURCES BERHAD (49548-D) 16. Property, plant and equipment (cont d) Company Plant, Furniture, Land machinery fittings Assets and Motor and and under buildings* vehicles equipment renovation construction Total RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Accumulated depreciation: At 1 January ,772 9,018 3,780 3,099-21,669 Depreciation charge for the year: 1,352 1,927 2, ,318 Recognised in income statement (Note 10) 1,077 1,271 2, ,103 Capitalised in biological assets (Note 17) ,215 Disposals (55) (681) (15) (88) - (839) Write-offs - - (15) (1) - (16) At 31 December 2012 and 1 January ,069 10,264 5,997 3,802-27,132 Depreciation charge for the year: 1,445 1,997 1, ,703 Recognised in income statement (Note 10) 1,119 1,343 1, ,409 Capitalised in biological assets (Note 17) ,294 Disposals (8) (966) (2) (4) - (980) Write-offs - (1) (19) - - (20) At 31 December ,506 11,294 7,411 4,624-31,835 Net carrying amount: At cost 74,643 5,964 5,385 5,802 1,865 93,659 At valuation 1, ,683 At 31 December ,326 5,964 5,385 5,802 1,865 95,342 At cost 75,774 6,470 4,072 5,166 3,286 94,768 At valuation 1, ,677 At 31 December ,451 6,470 4,072 5,166 3,286 96,445

106 ANNUAL REPORT Property, plant and equipment (cont d) * Land and buildings of the Company comprise: Long term leasehold Plantation land infrastructure Buildings Total RM 000 RM 000 RM 000 RM 000 Cost or valuation: At 1 January ,476 12,787 45,986 79,249 Additions Disposals - - (244) (244) Reclassifications (1,072) 253 4,912 4,093 At 31 December ,404 13,161 50,830 83,395 Representing: At cost 17,831 13,161 50,595 81,587 At valuation 1, ,808 At 31 December ,404 13,161 50,830 83,395 At 31 December 2012 and 1 January ,404 13,161 50,830 83,395 Additions Disposals - (63) (545) (608) Reclassifications ,477 2,510 At 31 December ,404 13,262 53,291 85,957 Representing: At cost 17,832 13,262 53,055 84,149 At valuation 1, ,808 At 31 December ,404 13,262 53,291 85,957

107 106 TSH RESOURCES BERHAD (49548-D) 16. Property, plant and equipment (cont d) * Land and buildings of the Company comprise (cont d): Accumulated depreciation: Long term leasehold Plantation land infrastructure Buildings Total RM 000 RM 000 RM 000 RM 000 At 1 January ,421 5,772 Depreciation charge for the year: ,011 1,352 Recognised in income statement ,077 Capitalised in biological assets Disposals - - (55) (55) At 31 December 2012 and 1 January ,377 7,069 Depreciation charge for the year: ,104 1,445 Recognised in income statement ,119 Capitalised in biological assets Disposals - - (8) (8) At 31 December , ,473 8,506 Net carrying amount: At cost 16,895 12,435 45,313 74,643 At valuation 1, ,683 At 31 December ,438 12,435 45,453 76,326 At cost 16,709 12,382 46,683 75,774 At valuation 1, ,677 At 31 December ,251 12,382 46,818 77,451

108 ANNUAL REPORT Property, plant and equipment (cont d) (a) Leasehold land and buildings were revalued by the directors based on independent professional valuations carried out by C.H. Williams, Talhar & Wong (Sabah) Sdn. Bhd. in 1993 based on open market value on an existing use basis. The Group applied the transitional provisions in IAS 16 (Revised): Property, Plant and Equipment by virtue of which a reporting enterprise which does not adopt a policy of revaluation is allowed to retain carrying amounts on the basis of their previous revaluations. If the leasehold land and buildings were measured using the cost model, the carrying amounts would be as follows: Long term leasehold land Buildings Total Group RM 000 RM 000 RM 000 At 31 December 2013 Cost 50 2,362 2,412 Accumulated depreciation - (1,310) (1,310) Net carrying amount 50 1,052 1,102 At 31 December 2012 Cost 50 2,362 2,412 Accumulated depreciation - (1,268) (1,268) Net carrying amount 50 1,094 1,144 Company At 31 December 2013 Cost Accumulated depreciation - (16) (16) Net carrying amount At 31 December 2012 Cost Accumulated depreciation - (12) (12) Net carrying amount (b) (c) Buildings of certain subsidiaries with an aggregate carrying amount of RM43,011,000 (2012: RM33,904,000) are mortgaged to secure the Group s bank borrowings (Note 31). TSH Sukuk Ijarah Sdn. Bhd., a wholly-owned subsidiary of the Company, holds the beneficial title, interests and rights on the leasehold land and buildings of certain subsidiaries (Trust Assets) with an aggregate carrying amount of RM256,007,000 (2012: RM246,121,000) on behalf of the Sukuk Ijarah Holders (Note 31).

109 108 TSH RESOURCES BERHAD (49548-D) 17. Biological assets Forest Oil palm planting planting expenditure expenditure Total RM 000 RM 000 RM 000 Group Cost: At 1 January , , ,869 Additions during the year 19, , ,649 Exchange differences - (41,797) (41,797) At 31 December 2012 and 1 January , , ,721 Additions during the year 21, , ,443 Acquisition of subsidiaries (Note 20(b)) - 6,483 6,483 Exchange differences - (86,596) (86,596) At 31 December , , ,051 Company Cost: At 1 January ,691 32, ,682 Additions during the year 14,771-14,771 At 31 December 2012 and 1 January ,462 32, ,453 Additions during the year 13,694-13,694 At 31 December ,156 32, ,147 The nature and purpose of each category of planting expenditure are as follows: (i) Forest planting expenditure The forest plantation development expenditure is in respect of a long term concession for 123,000 hectares of timber land under Forest Management Unit at Ulu Tungud, Sabah. Depreciation of property, plant and equipment capitalised during the financial year under forest plantation expenditure of the Group amounted to RM1,399,000 (2012: RM1,241,000) and of the Company amounted to RM1,294,000 (2012: RM1,215,000), as disclosed in Note 16. (ii) Oil palm planting expenditure The oil palm planting expenditure includes all expenses incurred in connection with the development of the Group s oil palm plantations. Oil palm plantations of certain subsidiaries with an aggregate carrying amount of RM463,704,000 (2012: RM463,704,000) are mortgaged to secure Group s bank borrowings (Note 31). TSH Sukuk Ijarah Sdn. Bhd., a wholly-owned subsidiary of the Company, holds the beneficial title, interests and rights on the oil palm plantations of certain subsidiaries (Trust Assets) with an aggregate carrying amount of RM29,476,000 (2012: RM29,476,000) on behalf of the Sukuk Ijarah Holders (Note 31).

110 ANNUAL REPORT Biological assets (cont d) (ii) Oil palm planting expenditure (cont d) Included in oil palm planting expenditure incurred during the financial year are: Group Company RM 000 RM 000 RM 000 RM 000 Depreciation of property, plant and equipment (Note 16) 5,028 3, Amortisation of land use rights (Note 18) 545 1, Interest expense (Note 9) 19,403 13, Land use rights Cost: Group Company RM 000 RM 000 RM 000 RM 000 At 1 January 147, , Additions 12,234 1, Acquisition of subsidiaries (Note 20(b)) 13, Exchange differences (4,068) (6,335) - - At 31 December 170, , Accumulated amortisation: At 1 January 25,798 21, Amortised for the year: 5,972 5, Recognised in income statement (Note 10) 5,427 3, Capitalised in biological assets (Note 17) 545 1, Exchange differences (1,367) (1,392) - - At 31 December 30,403 25, Net carrying amount 139, , Amount to be amortised: Not later than one year 5,972 5, Later than one year but not later than five years 24,431 20, Leasehold land of certain subsidiaries with an aggregate carrying amount of RM77,461,000 (2012: RM77,237,000) are mortgaged to secure the Group s bank borrowings (Note 31).

111 110 TSH RESOURCES BERHAD (49548-D) 19. Intangible assets Goodwill Group RM 000 Cost: At 1 January ,235 At 31 December 2012 and 1 January ,235 Acquisition of subsidiaries (Note 20(b)) 3,593 Reversal of goodwill arising from disposal of investment securities in a subsidiary (2,086) Exchange differences (1,785) At 31 December ,957 Impairment tests for goodwill Goodwill arising from business combinations and entrance fee for sub-licence has been allocated to three individual cash-generating units ( CGU ) for impairment testing as follows: - Palm products segment - Wood products segment - Multiple units without significant goodwill The carrying amounts of goodwill allocated to each CGU are as follows: RM 000 RM 000 Segments: Palm products 40,711 40,989 Wood products 9,058 9,058 Multiple units without significant goodwill ,957 50,235 Based on indicative market value information of property, plant and equipment of Ekowood International Berhad, the fair value less cost to sell which represents the recoverable amounts exceed the carrying amount of the wood products segment. The Directors are therefore of the opinion that there is no indication of impairment in relation to the goodwill on consolidation. Except for goodwill allocated to wood products, the recoverable amounts of the CGUs have been determined based on value in use calculations using cash flow projections from financial budgets approved by management covering a five-year period. The pre-tax discount rate applied to the cash flow projections and the forecasted growth rates used to extrapolate cash flows beyond the five-year period are as follows: Palm products segment % % Growth rates Pre-tax discount rates

112 ANNUAL REPORT Intangible assets (cont d) Impairment tests for goodwill (cont d) The calculations of value in use for the CGUs are most sensitive to the following assumptions: Budgeted gross margins Gross margins are based on average values achieved in the three years preceding the start of the budget period. These are increased over the budget period for anticipated efficiency improvements. Growth rates The forecasted growth rates are based on published industry research and do not exceed the long-term average growth rate for the industries relevant to the CGUs. Pre-tax discount rates Discount rates reflect the current market assessment of the risks specific to each CGU. This is the benchmark used by management to assess operating performance and to evaluate future investment proposals. In determining appropriate discount rates for each CGU, regard has been given to the yield on a ten-year government bond at the beginning of the budgeted year. Market share assumptions These assumptions are important because, as well as using industry data for growth rates (as noted above), management assesses how the CGU s position, relative to its competitors, might change over the budget period. Management expects the Group s share of the market to be stable over the budget period. Sensitivity to changes in assumptions With regard to the assessment of value-in-use of the palm products unit, the management recognises that any significant changes in the market selling prices for its oil palm may have a significant impact on the sales and supplies assumptions. 20. Investments in subsidiaries Company RM 000 RM 000 Unquoted shares, at cost: In Malaysia 101,748 86,868 Outside Malaysia 30,269 30, , ,185 Quoted shares in Malaysia, at cost 65,640 65, , ,825 ESOS granted to employees of subsidiaries 2,446 2,446 Convertible redeemable preference shares in Malaysia 184, ,566 Non-convertible redeemable preference shares in Malaysia 17,000 17, , ,837 Market value of quoted shares # 29,464 22,665 # The investment in quoted shares has not been impaired due to the fact that the indicative market value information of property, plant and equipment of Ekowood International Berhad, the fair value less cost to sell which represents the recoverable amounts exceed the carrying amount.

113 112 TSH RESOURCES BERHAD (49548-D) 20. Investments in subsidiaries (cont d) Country of Name of subsidiaries incorporation Principal activities % of ownership Interest held by the Group % of ownership held by noncontrolling interest % % % % Held by the Company: TSH Plantation Sdn. Bhd. i Malaysia Operation of palm oil mills and investment holding CocoaHouse Industries Malaysia Dormant Sdn. Bhd. i CocoaHouse Sdn. Bhd. i Malaysia Manufacture and sale of cocoa products and investment holding Ekowood International Malaysia Manufacture and sale Berhad i of downstream wood products TSH Bio-Gas Sdn. Bhd. i Malaysia Operation of biogas power plant TSH Forestry (Sabah) Sdn. Bhd. i Malaysia Dormant LKSK Sdn. Bhd. i Malaysia Oil palm plantations TSH Sabahan Oil Mill Sdn. Bhd. i Malaysia Dormant Tan Soon Hong Holdings Malaysia Oil palm plantations Sdn. Bhd. i and investment holding Ekowood Energy Sdn. Bhd. i Malaysia Dormant TSH Bio-Energy Sdn. Bhd. i Malaysia Operation of a power plant TSH Timber Industries Malaysia Dormant Sdn. Bhd. i POME Energy Sdn. Bhd. i Malaysia Dormant

114 ANNUAL REPORT Investments in subsidiaries (cont d) Country of Name of subsidiaries incorporation Principal activities % of ownership Interest held by the Group % of ownership held by noncontrolling interest % % % % Held by the Company (cont d): TSH BioDiesel Sdn. Bhd. i Malaysia Dormant Landquest Sdn. Bhd. i Malaysia Oil palm plantations Andalas Agro Industri Seychelles Investment holding Limited iv PT Aramico Komoditi iv/v Indonesia Dormant TSH Logistics Sdn. Bhd. i Malaysia Investment holding Eko Paper International Malaysia Dormant Sdn. Bhd. i Polar Vertix Sdn. Bhd. i Malaysia Operation of a power plant (under project development) Abaca Enterprise Pte. Ltd. iv/viii Singapore Dormant Jatoba International Pte. Ltd. iv Singapore Investment holding TSH Sukuk Ijarah Sdn. Bhd. i Malaysia Undertaking of Islamic Securities transactions Elaeis Oversea Pte. Ltd. iv Singapore Investment holding Martinique Cove Pte. Ltd. iv Singapore Investment holding TSH Palmco (Singapore) Singapore Dormant Pte. Ltd. iv/viii BioWorld Enterprise Sdn. Bhd. i Malaysia Investment holding GlobeFlex Advisory Sdn. Bhd. i Malaysia Investment holding TSH Sukuk Musyarakah Malaysia Undertaking of Islamic Sdn. Bhd. i Securities transactions

115 114 TSH RESOURCES BERHAD (49548-D) 20. Investments in subsidiaries (cont d) Country of Name of subsidiaries incorporation Principal activities % of ownership Interest held by the Group % of ownership held by noncontrolling interest % % % % Held by the Company (cont d): Halaman Semesta Sdn. Bhd. i Malaysia Investment holding Bagan Agresif Sdn. Bhd. i Malaysia Investment holding Casa Logistic Sdn. Bhd. i Malaysia Investment holding Held through Ekowood International Berhad TSH Products Sdn. Bhd. i Malaysia Temporarily ceased operations Ekowood Iberica, S.L. iii Spain Trading of wood products Ekowood Malaysia Malaysia Supply and installation Sdn. Bhd. i of timber flooring EkoLoc System Sdn. Bhd. i Malaysia Supply and installation of timber strips panel flooring and sub-licensing of strip lock system Ekowood (USA) Inc. iii United States Trading of wood of America products Ekowood S.A. iii Luxembourg Trading of wood products Alden S.A.S.U iv/vi France Dormant Held through CocoaHouse Industries Sdn. Bhd. Eko Paper Sdn. Bhd. i/viii Malaysia Dormant ##

116 ANNUAL REPORT Investments in subsidiaries (cont d) Country of Name of subsidiaries incorporation Principal activities % of ownership Interest held by the Group % of ownership held by noncontrolling interest % % % % Held through TSH Plantation Sdn. Bhd. TSH Plantation Management Malaysia Oil palm plantations Sdn. Bhd. i and operation of a palm oil mill TSH Biotech Sdn. Bhd. i Malaysia Undertake oil palm ramets and other tissue culture projects TSH Forest Plantation Sdn. Bhd. i Malaysia Forest plantation Held through CocoaHouse Sdn. Bhd. PT Sinar Bersatu iv Indonesia Marketing and distribution of cocoa beans Cammal Cocoa Limited iii/viii Cameroon Dormant Afromal Cocoa Limited iii/vii Ghana Dormant Held through Tan Soon Hong Holdings Sdn. Bhd. TSH Palm Products Sdn. Bhd. i Malaysia Oil palm plantations and investment holding Held through TSH Palm Products Sdn. Bhd. Eko Pulp & Paper Sdn. Bhd. i Malaysia Operation of a pulp plant (under project development) Held through Andalas Agro Industri Limited PT Andalas Agro Indonesia Operation of a palm Industri ii oil mill PT Andalas Wahana Berjaya iv Indonesia Oil palm plantations

117 116 TSH RESOURCES BERHAD (49548-D) 20. Investments in subsidiaries (cont d) Country of Name of subsidiaries incorporation Principal activities % of ownership Interest held by the Group % of ownership held by noncontrolling interest % % % % Held through Jatoba International Pte. Ltd. PT Sarana Prima Multi Niaga ii Indonesia Oil palm plantations and operation of a palm oil mill PT Teguh Swakarsa Indonesia Oil palm plantations Sejahtera iv Held through PT Andalas Agro Industri PT Laras Internusa iv Indonesia Oil palm plantations Held through Elaeis Oversea Pte. Ltd. PT Farinda Bersaudara iv Indonesia Oil palm plantations and operation of a palm oil mill Held through Martinique Cove Pte. Ltd. PT Mitra Jaya Cemerlang iv Indonesia Oil palm plantations Held through BioWorld Enterprise Sdn. Bhd. Bisa Jaya Sdn. Bhd. i Malaysia Investment holding Held through GlobeFlex Advisory Sdn. Bhd. PT Karya Unggulan Cemerlang iv Indonesia Provision of management services Held through TSH Logistics Sdn. Bhd. PT Bulungan Citra Indonesia Oil palm plantations Agro Persada iv

118 ANNUAL REPORT Investments in subsidiaries (cont d) Country of Name of subsidiaries incorporation Principal activities % of ownership Interest held by the Group % of ownership held by noncontrolling interest % % % % Held through Halaman Semesta Sdn. Bhd. PT Munte Waniq Indonesia Oil palm plantations Jaya Perkasa iv Held through Bagan Agresif Sdn. Bhd. PT Andalas Wahana Indonesia Oil palm plantations Sukses iv Held through Casa Logistic Sdn. Bhd. PT Perkebunan Sentawar Indonesia Oil palm plantations Membagun iv i Audited by Ernst & Young, Malaysia. ii Audited by Purwantono Sunermande Surja, Indonesia (member firm of Ernst Young Global). iii Audited by Ernst & Young for the purpose of consolidation in the of the Group. iv Audited by firms other than Ernst & Young. v PT Aramico Komoditi was placed under members voluntary winding-up on 26 October vi Alden S.A.S.U was placed under members voluntary winding-up on 16 December vii Afromal Cocoa Limited was placed under members voluntary winding-up on 13 December viii Struck off from the register/wound up.

119 118 TSH RESOURCES BERHAD (49548-D) 20. Investments in subsidiaries (cont d) (a) Material partly-owned subsidiary Summarised financial information of Ekowood International Berhad which have non-controlling interests that are material to the Group is set out below. The summarised financial information presented below is the amount before inter-company elimination. The non-controlling interests in respect of other subsidiaries is not material to the Group. (i) Summarised statements of financial position Ekowood International Berhad RM 000 RM 000 Non-current assets 45,651 49,029 Current assets 100,068 97,777 Total assets 145, ,806 Current liabilities 24,925 23,820 Non-current liabilities 4,096 4,255 Total liabilities 29,021 28,075 Net assets 116, ,731 Equity attributable to owners of the Company 118, ,093 Non-controlling interests (2,156) (1,362) 116, ,731

120 ANNUAL REPORT Investments in subsidiaries (cont d) (a) Material partly-owned subsidiary (cont d) (ii) Summarised statements of comprehensive income Ekowood International Berhad RM 000 RM 000 Revenue 49,712 41,891 Loss for the year (3,504) (7,014) Loss attributable to owners of the parent (3,353) (6,487) Loss attributable to the non-controlling interests (151) (527) Other comprehensive income/(loss) attributable to owners of the parent 2,115 (394) Other comprehensive loss attributable to the non-controlling interests (644) (65) Other comprehensive income/(loss) for the year 1,471 (329) Total comprehensive loss for the year (2,033) (7,343) Total comprehensive loss attributable to owners of the parent (1,238) (6,881) Total comprehensive (loss) attributable to the non-controlling interests (795) (462) (2,033) (7,343) (iii) Summarised cash flows Ekowood International Berhad RM 000 RM 000 Net cash flows (used in)/from operating activities (4,190) 85 Net cash flows used in investing activities (241) (101) Net cash flows from/(used in) financing activities 4,260 (1,262) Net decrease in cash and cash equivalents (171) (1,278) Effect of exchange rate changes 1,469 (331) Cash and cash equivalents at beginning of the year (485) 1,123 Cash and cash equivalents at end of the year 813 (486)

121 120 TSH RESOURCES BERHAD (49548-D) 20. Investments in subsidiaries (cont d) (b) Acquisition of subsidiaries Acquisitions in 2013 The acquisitions during the financial year are as follow:- (i) On 22 February 2013, the Company entered into a Share Sale Agreement to acquire 2 ordinary shares of RM1 each, representing the entire issued and paid up share capital in Bagan Agresif Sdn Bhd ( Bagan ) for a total purchase consideration of USD2,170,000 (approximately RM6,750,000 based on an exchange rate of USD1.00 for RM3.11) from Maple Consolidated Limited. Bagan is a private limited company, incorporated in Malaysia on 20 February 2012 with an issued and paid-up capital of RM2 comprising 2 ordinary shares of RM1 each. Bagan is the beneficial owner of 90% of the entire share capital of PT Andalas Wahana Sukses. On 13 March 2013 all conditions precedent pertaining to the acquisition of Bagan had been fulfilled by both parties and the acquisition of Bagan is deemed completed. Bagan and PT Andalas Wahana Sukses are now subsidiaries of the Group. (ii) On 20 June 2013, the Company entered into a Share Sale Agreement to acquire 2 ordinary shares of RM1 each, representing the entire issued and paid-up share capital in Casa Logistic Sdn Bhd ( Casa Logistic ) for a total purchase consideration of RM12,500,000 from Mega Everest Limited ( Mega Everest ). Casa Logistic is a private limited company, incorporated in Malaysia on 22 February 2013 with an issued and paid-up capital of RM2 comprising 2 ordinary shares of RM1 each. Casa Logistic is the beneficial owner of 90% of the entire share capital of PT Perkebunan Sentawar Membangun. On 18 October 2013 all conditions precedent pertaining to the acquisition of 2 ordinary shares of RM1 each, representing the 100% equity interest in Casa Logistic had been complied with by both parties. In this relation, the acquisition of Casa Logistic is deemed completed. Casa Logistic and PT Perkebunan Sentawar Membangun are now subsidiaries of the Group. The fair value of the identifiable assets and liabilities arising from the acquisition are as follows: Fair value RM 000 Carrying amount RM 000 Property, plant and equipment (Note 16) Biological assets (Note 17) 6,483 6,483 Land use rights (Note 18) 13,903 - Trade and other receivables 9,945 9,945 Cash and bank balances ,495 16,592 Trade and other payables 15,009 15,009 Deferred tax liabilities (Note 23) 3, ,572 15,096 Net identifiable assets 11,923 1,496

122 ANNUAL REPORT Investments in subsidiaries (cont d) (b) Acquisition of subsidiaries (cont d) Acquisitions in 2013 (cont d) The effect of the acquisitions on cash flows is as follows: RM 000 Total cost of the business combination 19,250 Less: Assumption of liabilities (4,370) Consideration settled in cash 14,880 Less: Cash and cash equivalents of subsidiaries acquired (12) Net cash outflow on acquisitions 14,868 Goodwill arising on acquisition RM 000 Fair value of net identifiable assets 11,923 Less: Non-controlling interest (636) Group s interest in fair value of net identifiable assets 11,287 Goodwill on acquisition (Note 19) 3,593 Cost of acquisition 14,880 Impact of acquisition in statement of comprehensive income The acquired subsidiaries have attributed the following results to the Group: RM 000 Revenue - Loss for the year (808) If the acquisition had occurred on 1 January 2013, the loss for the year attributable to the Group would had been RM948,000. Acquisitions in 2012 There is no acquisition of subsidiary during the financial year ended 31 December 2012.

123 122 TSH RESOURCES BERHAD (49548-D) 21. Investment in associate Group Company RM 000 RM 000 RM 000 RM 000 Quoted shares in Malaysia, at cost 53,274 53,274 53,274 53,274 Share of post-acquisition reserves 6,246 5, ,520 58,702 53,274 53,274 Fair value of investment in an associate for which there is published price quotation 60,935 65,138 60,935 65,138 Country of Effective Name of associate incorporation Principal activities interest % % Innoprise Plantations Berhad * Malaysia Log extraction contractor and operation of oil palm plantations * Audited by Ernst & Young, Malaysia The of the above associate is coterminous with those of the Group. The summarised financial information of the associate, not adjusted for the proportion of ownership interest held by the Group, is as follows: (i) Summaried statements of financial position RM 000 RM 000 Assets and liabilities Current assets 20,225 16,403 Non-current assets 275, ,805 Total assets 295, ,208 Current liabilities 27,536 14,454 Non-current liabilities 48,150 12,021 Total liabilities 75,686 26,475 Net assets 219, ,733

124 ANNUAL REPORT Investment in associate (cont d) (ii) Summaried statements of comprehensive income RM 000 RM 000 Results Revenue 32,541 25,498 Profit for the year 3,182 5,392 Other comprehensive income - - Total comprehensive income 3,182 5,392 (iii) Reconciliation of the summarised financial information presented above to the carrying amount of the Group s interest in associate RM 000 RM 000 Net asset at 1 January 214, ,069 Profit for the year 3,182 5,392 Transaction with owners 1, Net asset at 31 December 219, ,733 Interest in associate (%) 22.16% 22.28% Goodwill 10,860 10,860 Carrying value of Group s interest in associate 59,520 58,702 The details of goodwill included within the Group s carrying amount of investment in associate amounted to RM10,860,000 (2012: RM10,860,000). 22. Interest in joint ventures Group Company RM 000 RM 000 RM 000 RM 000 Unquoted shares, at cost 20,750 20,750 20,750 20,750 Share of post-acquisition reserves 59,987 51, ,737 72,356 20,750 20,750 The Group has 50% of the voting rights of its joint arrangements. Under the contractual arrangements, unanimous consent is required from all parties to the agreements for all relevant activities. The Group s interest in joint ventures is accounted for using the equity method in the consolidated. The joint arrangements are structured via separate entities and provide the Group with the rights to the net assets of the entities under the arrangements. Therefore these entities are classified as joint ventures of the Group.

125 124 TSH RESOURCES BERHAD (49548-D) 22. Interest in joint ventures (cont d) (a) Details of the jointly controlled entities are as follows: Name of jointly Country of Effective controlled entities incorporation Principal activities interest % % TSH-Wilmar Sdn. Bhd. * Malaysia Operation of palm oil refinery mill and kernel crushing plant TSH-Wilmar (BF) Sdn. Bhd. * Malaysia Operation of a power plant * Audited by Ernst & Young, Malaysia These joint ventures have the same reporting period as the Group. No quoted market prices are available for the shares of both companies as these companies are private companies. (b) Summarised financial information of TSH-Wilmar Sdn. Bhd. and TSH-Wilmar (BF) Sdn. Bhd. is set out below. The summarised information represents the amounts in the MFRS of the joint ventures and not the Group s share of those amounts. (i) Summarised statements of financial position TSH-Wilmar Sdn. Bhd. TSH-Wilmar (BF) Sdn. Bhd RM 000 RM 000 RM 000 RM 000 Non-current assets 69,245 77,904 28,121 33,889 Cash and cash equivalents 90,982 8, Other current assets 130, ,072 15,271 8,342 Total current assets 221, ,333 15,429 8,490 Total assets 291, ,237 43,550 42,379 Current liabilities (excluding trade and other payables and provisions) 102, , Trade and other payables and provisions 59,688 74,954 1,157 1,211 Total current liabilities 162, ,544 1,157 1,211 Non-current liabilities (excluding trade and other payables and provisions) 7,778 9, Total liabilities 170, ,337 1,950 2,005 Net assets 120, ,900 41,600 40,374

126 ANNUAL REPORT Interest in joint ventures (cont d) (b) Summarised financial information of TSH-Wilmar Sdn. Bhd. and TSH-Wilmar (BF) Sdn. Bhd. is set out below. The summarised information represents the amounts in the MFRS of the joint ventures and not the Group s share of those amounts. (cont d) (ii) Summarised statements of comprehensive income TSH-Wilmar Sdn. Bhd. TSH-Wilmar (BF) Sdn. Bhd RM 000 RM 000 RM 000 RM 000 Revenue 1,749,573 2,508,340 27,603 27,987 Depreciation and amortisation 9,354 9,341 5,955 5,965 Interest income 858 1, Interest expense (3,292) (6,941) - (66) Profit before tax from continuing operations 50,279 35,847 8,725 10,708 Income tax expense (12,009) (8,985) 1 (117) Profit after tax 38,270 26,862 8,726 10,591 (c) Reconciliation of the summarised financial information presented above to the carrying amount of the Group s interest in joint ventures TSH-Wilmar Sdn. Bhd. TSH-Wilmar (BF) Sdn. Bhd RM 000 RM 000 RM 000 RM 000 Net assets at 1 January 104, ,038 40,374 29,783 Profit for the year 38,270 26,862 8,726 10,591 Dividend (22,500) (30,000) (7,500) - Net assets at 31 December 120, ,900 41,600 40,374 Interest in joint ventures (%) 50% 50% 50% 50% Goodwill Unrealised profit on stock (398) (281) - - Carrying value of Group s interest in joint ventures 59,937 52,169 20,800 20,187

127 126 TSH RESOURCES BERHAD (49548-D) 23. Deferred tax Deferred income tax as 31 December related to the following: Group Recognised At 1 Recognised At 31 Recognised in other Acquisition At 31 January in profit Exchange December in profit comprehensive of Exchange December 2012 or loss differences 2012 or loss income subsidiaries differences 2013 (Note 13) (Note 13) (Note 20 (b)) RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Deferred tax liabilities: Property, plant and equipment 45,528 (951) 43 44,620 (2,689) ,296 Biological assets 25,834 1, , ,289 Land use right 29,765 (297) (1,678) 27,790 1,473-3,475 (665) 32,073 Others (4,547) 4,106 - (441) ,580 4,587 (1,617) 99,550 (102) - 3,475 (228) 102,695 Deferred tax assets: Payables 5,395 (3,388) - 2,007 (2,025) Others (1,648) 2, ,027 (2,326) (1,154) Tax losses and unabsorbed capital allowances (28,109) (10,611) 1,145 (37,575) (13,229) ,244 (48,472) (24,362) (11,331) 1,152 (34,541) (17,580) ,389 (49,242) 72,218 (6,744) (465) 65,009 (17,682) 402 3,563 2,161 53,453

128 ANNUAL REPORT Deferred tax (cont d) Company Deferred tax liabilities: At 1 Recognised in At 31 Recognised in At 31 January profit or loss December profit or loss December 2012 (Note 13) 2012 (Note 13) 2013 RM 000 RM 000 RM 000 RM 000 RM 000 Property, plant and equipment 6,691 1,487 8,178 (636) 7,542 Biological assets 17,441 1,665 19, ,249 Deferred tax assets: 24,132 3,152 27,284 (493) 26,791 Tax losses and unabsorbed allowance (20,271) (3,508) (23,779) (3,973) (27,752) Presented after appropriate offsetting as follows: 3,861 (356) 3,505 (4,466) (961) Group Company RM 000 RM 000 RM 000 RM 000 Deferred tax assets (19,810) (8,231) (961) - Deferred tax liabilities 73,263 73,240-3,505 Deferred tax assets have not been recognised in respect of the following items: 53,453 65,009 (961) 3,505 Group RM 000 RM 000 Unused tax losses 83,931 82,114 Unabsorbed capital allowances 14,527 15,121 Other deductible temporary differences 1,149 6,290 Unrecognised tax losses 99, ,525 Unutilised tax losses of certain foreign subsidiaries amounting to RM10,150,000 (2012: RM9,243,000) and RM63,666,000 (2012: RM28,745,000) are available for carry forward in the jurisdiction in which the foreign subsidiaries operates for a period of 20 years and 5 years respectively from the year in which those tax losses arose. The unused tax losses and unabsorbed capital allowances are available for offsetting against future taxable profits of the respective subsidiaries subject to no substantial changes in shareholdings of the subsidiaries under the Income Tax Act, 1967 and guidelines issued by the tax authority. Unrecognised temporary differences relating to investments in subsidiaries At the reporting date, no deferred tax liability (2012: NiI) has been recognised for taxes that would be payable on the undistributable earnings of certain of the Group s foreign subsidiaries as the Group has determined that the undistributed earnings of its subsidiaries will not be distributed in the foreseeable future.

129 128 TSH RESOURCES BERHAD (49548-D) 24. Trade and other receivables Current Group Company RM 000 RM 000 RM 000 RM 000 Trade receivables Third parties 36,838 24, Joint ventures 16,439 15, Deposits for supplies Retention sums on contracts (Note 28) 1, ,553 40, Less: Allowance for impairment Third parties (7,499) (5,618) - - Trade receivables, net 47,054 34, Other receivables Amounts due from related parties: Subsidiaries , ,962 Associate company 1, Joint ventures , , ,993 Other deposits 22,172 8,719 19,903 3,625 Sundry receivables 80,024 89,832 8,192 13,398 Workers advances 4,553 10, , , , ,212 Less: Allowance for impairment (1,270) (1,270) (1,270) (1,270) Non-current 107, , , , , , , ,169 Other receivables Amounts due from subsidiaries , ,963 Deposits paid for acquisition of land 21,718 18, Sundry receivables 8,086 7, Plasma receivables (Note 38(a)) 29,260 15, ,064 40, , ,963 Less: Fair value loss on sundry and plasma receivables (12,467) (2,439) ,597 38, , ,963 Total trade and other receivables (current and non-current) 200, , , ,132 Add: Cash and bank balances (Note 30) 54,214 53,465 8,494 16,652 Total loans and receivables 255, , , ,784

130 ANNUAL REPORT Trade and other receivables (cont d) (a) Trade receivables Trade receivables are non-interest bearing and are generally on 30 to 90 days (2012: 30 to 90 days) terms. They are recognised at their original invoice amounts which represent their fair values on initial recognition. Ageing analysis of trade receivables The ageing analysis of the Group s trade receivables is as follows: Group RM 000 RM 000 Neither past due nor impaired 28,363 20,416 1 to 30 days past due not impaired 3, to 60 days past due not impaired 5,664 2, to 90 days past due not impaired 2,844 3, to 120 days past due not impaired 1,421 3,657 More than 121 days past due not impaired 1,813 2,747 15,387 11,847 Impaired 10,803 8,326 54,553 40,589 Receivables that are neither past due nor impaired Trade and other receivables that are neither past due nor impaired are creditworthy debtors with good payment records with the Group. None of the Group s trade receivables that are neither past due nor impaired have been renegotiated during the financial year. Receivables that are past due but not impaired The Group has trade receivables amounting to RM15,387,000 (2012: RM11,847,000) that are past due at the reporting date but not impaired. Receivables that are impaired The Group s trade receivables that are impaired at the reporting date and the movement of the allowance accounts used to record the impairment are as follows: Group Individually impaired RM 000 RM 000 Trade receivables - nominal amounts 10,803 8,326 Less: Allowance for impairment (7,499) (5,618) 3,304 2,708

131 130 TSH RESOURCES BERHAD (49548-D) 24. Trade and other receivables (cont d) (a) Trade receivables (cont d) Receivables that are impaired (cont d) Movement in allowance accounts: Group RM 000 RM 000 At 1 January 5,618 5,174 Charge for the year (Note 10) 1,772 1,013 Reversal of impairment loss (Note 8) (147) (107) Written off - (427) Exchange differences 256 (35) At 31 December 7,499 5,618 Trade receivables that are individually determined to be impaired at the reporting date relate to debtors that are in significant financial difficulties and have defaulted on payments. These receivables are not secured by any collateral or credit enhancements. (b) Amounts due from related parties (i) Subsidiaries Except for the amounts due from certain subsidiaries totalling RM884,467,000 (2012: RM672,203,000) that bear interest at rates ranging from 3.50% to 7.50% (2012: 3.50% to 7.50%) per annum, the amounts due from other related parties are non-interest bearing and are repayable on demand. All these amounts are unsecured and are to be settled in cash. (ii) Associate company Included in an amount due from associate company of the Group is deposit for fresh fruit bunches (FFB) supplies amounted to RM1,693,000 (2012: Nil). This amount which bears interest at 1.5% above Based Lending Rate per annum is unsecured, repayable on demand and is to be settled by offsetting against the proceeds of FFB delivered. (c) Other receivables Included in sundry receivables of the Group are advance payments to suppliers and contractors totalling RM3,433,000 (2012: RM11,424,000), advance payment for value-added-tax amounting RM11,743,000 (2012: RM9,747,000). Movement in fair value loss on sundry and plasma receivables: Group RM 000 RM 000 At 1 January 2,439 2,439 Acquisition of subsidiaries 1,775 - Charge for the year (Note 10) 8,253 - At 31 December 12,467 2,439

132 ANNUAL REPORT Investment securities Current Group Market value Market value Carrying of quoted Carrying of quoted amount investments amount investments RM 000 RM 000 RM 000 RM 000 Held for trading investments - Equity instruments (quoted in Malaysia) Non-current Available-for-sale financial assets - Equity instruments (unquoted), at cost 5,114-90,434 - Total investment securities 5, , Current Company Market value Market value Carrying of quoted Carrying of quoted amount investments amount investments RM 000 RM 000 RM 000 RM 000 Held for trading investments - Equity instruments (quoted in Malaysia) Non-current Available-for-sale financial assets - Equity instruments (unquoted), at cost Total investment securities In the previous financial year, investment securities of the Group with carrying amount of RM67,884,000 had been pledged as security for bank borrowing as disclosed in Note 31 to the.

133 132 TSH RESOURCES BERHAD (49548-D) 26. Inventories Cost Group Company RM 000 RM 000 RM 000 RM 000 Raw materials 19,991 16, Work-in-progress 21,594 22, Finished goods 102, ,783 8,101 6,878 Stores and supplies 58,826 56,083 1,142 1, , ,348 9,243 8,730 Net realisable value Work-in-progress 1,429 1, Finished goods 3,104 19, ,533 21, , ,623 9,243 8,730 During the year, the amount of inventories recognised as an expense in cost of sales of the Group and of the Company were RM700,180,000 (2012: RM720,288,000) and RM9,563,000 (2012: RM18,315,000) respectively. The amount of inventories written down in the Group and in the Company during the year were RM3,675,000 (2012: RM1,064,000) and RM29,000 (2012: Nil) respectively. 27. Other current assets Group Company RM 000 RM 000 RM 000 RM 000 Due from customers on contracts (Note 28) Prepayments 3,165 11, ,877 12,

134 ANNUAL REPORT Due from customers on contracts Group Company RM 000 RM 000 RM 000 RM 000 Construction contract costs incurred to date 68,980 59, Attributable profits 7,792 5, ,772 65, Less: Progress billings (76,060) (65,242) - - Due from customers on contracts (Note 27) Advances received on contracts, included within other payables (Note 32) Retention sums on contract, included within trade receivables (Note 24) 1, Contract costs recognised as expense during the year 8,607 5, Derivatives Group Contract/ Contract/ notional notional amount Assets Liabilities amount Assets Liabilities RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Non-hedging derivatives: Current Forward currency contracts 17,924 - (1,316) 36,782 - (179) Commodity futures contracts 6,724 - (25) 30, (411) - (1,341) 643 (590) Company Non-hedging derivatives: Current Commodity futures contracts (411)

135 134 TSH RESOURCES BERHAD (49548-D) 29. Derivatives (cont d) The Group uses forward currency contracts and commodity futures contract to manage some of the transaction exposure. These contracts are not designated as cash flow or fair value hedges and are entered into for periods consistent with currency transaction exposure and fair value changes exposure. Such derivatives do not qualify for hedge accounting. Forward currency contracts are used to hedge the Group s sales denominated in USD, GBP and Euro. The commodity futures contracts are used to hedge prices fluctuation of CPO and cocoa commodity. During the financial year, the Group also entered into sale forward contract with customers in Sabah at local currencies. These contracts require physical delivery. During the financial year, the Group recognised a net loss of RM726,000 (2012: net loss of RM120,000) arising from fair value changes of derivative assets and derivative liabilities. The fair value changes are attributable to changes in foreign exchange spot and forward rate. The method and assumptions applied in determining the fair values of derivatives are disclosed in Note Cash and cash equivalents Group Company RM 000 RM 000 RM 000 RM 000 Cash at banks and on hand 35,244 39,683 5,420 10,978 Short-term deposits with licensed banks 18,970 13,782 3,074 5,674 Short-term investments 89,044-89,044 - Cash and bank balances and deposits 143,258 53,465 97,538 16,652 Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group and the Company, and earn interests at the respective short-term deposit rates. The interest rate for the Group and the Company are disclosed in Note 42(c). Deposits with licensed banks of the Group amounting to RM1,937,000 (2012: RM2,263,000) are pledged as securities for bank guarantees facilities granted. Short-term investments represent unit trust fund that invests in money market instrument, deposits and cash. The unit trust fund aims to provide investors with capital preservation, liquidity and reasonable return. For the purpose of the consolidated statement of cash flow, cash and cash equivalents comprise the following at the reporting date: Group Company RM 000 RM 000 RM 000 RM 000 Cash and bank balances 143,258 53,465 97,538 16,652 Less: Bank overdrafts (Note 31) (1,703) (3,498) - (999) Deposits pledged with licensed banks (1,937) (2,263) - - Short-term investments (89,044) - (89,044) - Cash and cash equivalents 50,574 47,704 8,494 15,653

136 ANNUAL REPORT Loans and borrowings Group Company RM 000 RM 000 RM 000 RM 000 Short term borrowings Secured: Sukuk Ijarah Commercial Papers 20,000 45, Sukuk Ijarah Medium Term Notes 35,000 35, Term loans 34,262 27,277 34, , ,277 34, Unsecured: Bank overdrafts 1,703 3, Bankers acceptances 171, ,727 10,000 16,000 Export credit refinancing 8,420 6, Revolving credits 111, , ,903 94,745 Term loans 23,338 10, , , , , , , , ,249 Long term borrowings Secured: Sukuk Ijarah Medium Term Notes 220, , Sukuk Musyarakah Medium Term Notes 50,000 50, Term loans 248, , , , , , , ,254 Unsecured: Term loans - 4, , , , ,254 Total borrowings Bank overdrafts 1,703 3, Bankers acceptances 171, ,727 10,000 16,000 Export credit refinancing 8,420 6, Revolving credits 111, , ,903 94,745 Sukuk Ijarah Commercial Papers 20,000 45, Sukuk Musyarakah Medium Term Notes 50,000 50, Sukuk Ijarah Medium Term Notes 255, , Term loans 305, , , , , , , ,503

137 136 TSH RESOURCES BERHAD (49548-D) 31. Loans and borrowings (cont d) The remaining maturities of the loans and borrowings as at 31 December 2013 are as follows: Group Company RM 000 RM 000 RM 000 RM 000 On demand or within one year 406, , , ,249 More than 1 year and less than 2 years 92,012 93,821 62,012 37,032 More than 2 years and less than 5 years 401, , , ,901 5 years or more 25, ,321-40, , , , ,503 The Sukuk Ijarah Commercial Papers, Sukuk Musyarakah Medium Term Notes and Sukuk Ijarah Medium Term Notes comprise tranches as follows: Coupon Tranche no. rates Tenure RM 000 RM,000 Sukuk Ijarah Commercial Papers Tranche % % ½ - 1 year - 45,000 Tranche % % ½ year 20,000-20,000 45,000 Sukuk Musyarakah Medium Term Notes Tranche % 6 years 50,000 50,000 Sukuk Ijarah Medium Term Notes Tranche 18, 20/12, 13, 18, % % 1 year 35,000 70,000 Tranche % 2 years 30,000 30,000 Tranche 14, 15, 21, 22/14, % % 3 years 115,000 80,000 Tranche % 4 years 50,000 50,000 Tranche % 6 years 25,000 25, , , , ,000

138 ANNUAL REPORT Loans and borrowings (cont d) (a) The borrowings of the Group and of the Company are secured by the following: (i) A letter of negative pledge over the assets of the Company with certain bankers; and (ii) Certain landed properties of the Group (Note 16, 17 and 18) (b) Sukuk Ijarah Commercial Papers and Medium Term Notes There was no security for the Sukuk Ijarah Commercial Papers and Medium Term Notes but the Company declares that it holds the beneficial title, interests and rights in certain leasehold land and buildings (Note 16), biological assets (Note 17) and land use rights (Note 18) of certain subsidiaries. The Sukuk Ijarah Commercial Papers and Medium Term Notes Programme will expire in 7 years and 15 years respectively from the date of the first issuance. The profit rate for Commercial Papers is Zero as it will be issued at a discount and the profit rate for Medium Term Notes shall be determined at the point of issuance. The unutilised portion of the Sukuk Ijarah Commercial Papers and Medium Term Notes Programme as at 31 December 2013 amounted to RM125,000,000 (2012: RM100,000,000). (c) Sukuk Musyarakah Medium Term Notes The Kafalah Facility Agreement undertaken by a subsidiary, TSH Sukuk Musyarakah Sdn. Bhd. is guaranteed by Danajamin National Berhad ( Danajamin ). The Islamic financial guarantee facility granted by Danajamin is in accordance with the Shariah principle of Kafalah to guarantee the subsidiary s payment obligations under the Purchase Undertaking. The Islamic Medium Term Notes will expire in 7 years from the date of the first issuance in April The profit rate shall be determined at the point of issuance. There was no unutilised portion of the Islamic Medium Term Notes as at 31 December 2013 and 2012.

139 138 TSH RESOURCES BERHAD (49548-D) 32. Trade and other payables Current Group Company RM 000 RM 000 RM 000 RM 000 Trade payables Third parties 44,475 46, ,308 Other payables Amounts due to subsidiaries , ,145 Accruals 26,202 26,575 3,924 10,799 Advances received on contracts (Note 28) Amounts due to contractors and suppliers 4,800 7, Other deposits 2,986 3,136 2,986 3,136 Sundry payables 59,011 51,566 11,156 12,646 93,479 88, , , , , , ,034 Non-current Other payables Amounts due to subsidiaries , ,000 Total trade and other payables 137, , , ,034 Add: Loans and borrowings (Note 31) 924, , , ,503 Total financial liabilities carried at amortised cost 1,062,323 1,111,002 1,047, ,537 (a) Trade payables Trade payables are non-interest bearing and the normal trade credit terms granted to the Group range from 30 to 60 days (2012: 30 to 60 days). (b) Amounts due to subsidiaries Except for the amounts due to certain subsidiaries totalling RM98,698,000 (2012: RM108,508,000) that bear interest at 2.75% to 3.50% (2012: 2.75% to 3.50%) per annum, the amounts due to other related parties are noninterest bearing and are repayable on demand. All these amounts are unsecured and are to be settled in cash. (c) Sundry payables Included in sundry payables of the Group and the Company is an amount of RM9,139,000 (2012: RM10,623,000) due to vendors, being the purchase consideration on acquisition of subsidiaries in prior years.

140 ANNUAL REPORT Trade and other payables (cont d) (d) Financial guarantees The fair value of financial guarantees provided by the Company to the banks to secure banking credit facilities granted to subsidiaries as disclosed in Note 39 with nominal amount of RM190,725,000 (2012: RM264,625,000) are negligible as the probability of the financial guarantees being called upon is remote due to the following factors: (i) (ii) Most of the outstanding loans and borrowings are adequately secured by properties, plant and equipment of the subsidiaries which their market values upon realisation are higher than the outstanding loans and borrowing amounts; For short term loans and borrowings which are not secured by properties, plant and equipment of the subsidiaries, the respective subsidiaries will be able to meet their short term loans and borrowings obligations as and when they are due as they are in net current assets positions. 33. Retirement benefits Group RM 000 RM 000 At 1 January 6,889 3,222 Acquisition of subsidiaries 31 - Charge for the year recognised in income statement (Note 11) 2,555 4,200 Interest cost Current service cost 2,130 3,923 Actuarial loss recognised 9 - Recognised in other comprehensive income: Actuarial gains arising from changes in assumption in respect of: - prior years (462) - - current year (1,341) - (1,803) - Actual benefit payment (567) (97) Exchange differences (1,066) (436) At 31 December 6,039 6,889 The amounts recognised on the statements of financial position are determined as follows: Present value of obligations 6,039 7,351 Unrecognised actuarial gain - (462) Net liabilities 6,039 6,889

141 140 TSH RESOURCES BERHAD (49548-D) 33. Retirement benefits (cont d) Principal actuarial assumptions used at the balance sheet date in respect of the Group s defined benefit plans are as follows: (%) (%) Discount rate Expected return of salary increase The sensitivity analysis below has been determined based on reasonably possible changes of each significant assumption on the defined benefit obligation as at the end of the reporting period, assuming if all other assumptions were held constant: 31 December 2013 Impact on defined benefits obligation Increase/(decrease) RM 000 Discount rate + 1% 1,668-1% (2,178) Future salary + 1% 2,178-1% (1,665) Mortality + 10% 1,899-10% (1,894) Disable or illness + 5% 1,903-5% (1,895)

142 ANNUAL REPORT Deferred capital grants Group Company RM 000 RM 000 RM 000 RM 000 Cost: At 1 January 93,490 93,490 46,000 46,000 Received during the financial year At 31 December 93,890 93,490 46,000 46,000 Accumulated amortisation: At 1 January 29,270 24,355 29,270 24,355 Amortisation (Note 8) 4,915 4,915 4,915 4,915 At 31 December 34,185 29,270 34,185 29,270 Net carrying amount: Current 4,915 4,915 4,915 4,915 Non-current 54,790 59,305 6,900 11,815 59,705 64,220 11,815 16,730 Deferred capital grants relate to investment grants received by the Group as follows: (a) (b) An investment grant of RM46,000,000 from a private sector which represents non-refundable advances received in respect of carbon credit to be generated by a tree plantation development project. During the financial year, the Company has proportionately recognised these advances in the income statement based on mutually agreed carbon sequestration which have been absorbed by the tree plantation under development. At reporting date, a subsidiary received cumulative investment grant of RM47,890,000 (2012: RM47,490,000) from Forest Research Institute Malaysia out of the total investment grant of RM50,000,000 which is conditional upon the construction of a plant to technically co-operate and financially fund the joint Research and Development Project in researching and developing the process of converting oil palm biomass waste, in particular empty fruit bunches, to pulp and its co-products using the Caustic Soda Technology. The plant is currently under construction and the grant will be recognised in the income statement over the estimated useful life of the plant upon completion.

143 142 TSH RESOURCES BERHAD (49548-D) 35. Share capital, share premium and treasury shares Number of ordinary Amount shares of RM0.50 each Share Share Total capital capital share (Issued (Issued capital and fully Treasury and fully Share and share Treasury paid) share paid) premium premium shares RM 000 RM 000 RM 000 RM 000 At 1 January ,124 (6,882) 412, ,062 (12,249) Ordinary shares issued pursuant to: - ESOS 2,202-1,101 1,652 2, Purchase of investment securities 14,922-7,461 26,689 34,150 - Transferred from share option reserve ,264 1,264 - Purchase of treasury shares - (1) (2) At 31 December ,248 (6,883) 420,624 29, ,229 (12,251) At 1 January ,248 (6,883) 420,624 29, ,229 (12,251) Ordinary shares issued for cash 62,580-31, , ,420 - Purchase of treasury shares - (3) (8) At 31 December ,828 (6,886) 451, , ,649 (12,259) Authorised share capital Number of ordinary shares of RM0.50 each Amount RM 000 RM 000 At 1 January 1,000,000 1,000, , ,000 Created during the year 1,000, ,000 - At 31 December 2,000,000 1,000,000 1,000, ,000 The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All ordinary shares rank equally with regard to the Company s residual assets.

144 ANNUAL REPORT Share capital, share premium and treasury shares (cont d) (a) Ordinary shares issued for cash During the financial year, the Company issued 62,580,000 new ordinary shares of RM0.50 each through a private placement at average issue prices between RM2.24 to RM2.28 per ordinary share for cash, for additional working capital purposes. The share premium of RM110,349,400 arising from the issuance of ordinary shares and the issue cost of RM218,679 have been included in the share premium account. The new ordinary shares rank pari passu in all respects with the existing ordinary shares of the Company. In the previous financial year, the Company issued: (i) (ii) 2,202,000 new ordinary shares of RM0.50 each for cash pursuant to the Company s Employee Share Options Scheme at average exercise prices between RM0.50 to RM1.32 per ordinary share. The share premium of RM1,652,000 arising from the issuance of ordinary shares has been included in the share premium account. 14,921,907 new ordinary shares of RM0.50 each at an issue price of RM2.14 per ordinary share as partial discharge of purchase consideration for the acquisition of investment in Pontian United Plantations Berhad as disclosed in Note 45(a). The share premium of RM26,689,000 arising from the issuance of ordinary shares was arrived at after netting off the share issuance cost of RM2,142,000 have been included in the share premium account. The new ordinary shares ranked pari passu in all respects with the existing ordinary shares of the Company. (b) Treasury shares This amount relates to the acquisition cost of treasury shares net of proceeds received on their subsequent sale or issuance. The shareholders of the Company, by a ordinary resolution passed in a annual general meeting held on 23 May 2013, renewed their approval for the Company s plan to repurchase its own ordinary shares. The directors of the Company are committed to enhancing the value of the Company for its shareholders and believe that the repurchase plan can be applied in the best interests of the Company and its shareholders. During the financial year, the Company purchased 3,000 of its issued ordinary shares from the open market at prices between RM2.22 to RM2.84 per share. The total consideration paid for the repurchase was RM7,521 comprise consideration paid amounting to RM7,390 and transaction cost of RM131. The repurchase transactions were financed by internally generated funds. The shares purchased are being held as treasury shares in accordance with Section 67A of the Companies Act, Of the total 903,828,533 (2012: 841,248,533) issued and fully paid ordinary shares as at 31 December 2013, 6,885,900 (2012: 6,882,900) are held as treasury shares by the Company. As at 31 December 2013, the number of outstanding ordinary shares in issue after set off is therefore 896,942,633 (2012: 834,365,633) ordinary shares of RM0.50 each.

145 144 TSH RESOURCES BERHAD (49548-D) 36. Other reserves Group Foreign Asset currency Share revaluation Capital translation option reserve reserve reserve reserve Total RM 000 RM 000 RM 000 RM 000 RM 000 At 1 January ,390 7,952 (6,816) 3,624 6,150 Foreign currency translation - - (49,044) - (49,044) Share options granted under ESOS by an associate company Transferred to share premium (1,264) (1,264) ESOS lapsed (2,172) (2,172) Redemption of preference shares At 31 December 2012 and 1 January ,390 8,022 (55,860) 248 (46,200) Foreign currency translation - - (96,234) - (96,234) Share options granted under ESOS by an associate company At 31 December ,390 8,035 (152,094) 344 (142,325) Company At 1 January , ,388 4,636 Expiry of ESOS (3,388) (3,388) At 31 December 2012 and 31 December , ,248 The nature and purpose of each category of reserve are as follows: (a) Asset revaluation reserve The asset revaluation reserve is used to record increases in the fair value of leasehold land and buildings and decreases to the extent that such decrease relates to an increase on the same asset previously recognised in equity. (b) Capital reserves This reserve comprises all the amounts capitalised arising from the redemption of non-cumulative redeemable preference shares in the subsidiaries.

146 ANNUAL REPORT Other reserves (cont d) (c) Foreign currency translation reserve The foreign currency translation reserve is used to record exchange differences arising from the translation of the of foreign operations whose functional currencies are different from that of the Group s presentation currency. It is also used to record the exchange differences arising from monetary items which form part of the Group s net investment in foreign operations, where the monetary item is denominated in either the functional currency of the reporting entity or the foreign operation. (d) Share option reserve The share option reserve represents the equity-settled share options granted to employees. This reserve is made up of the cumulative value of services received from employees recorded on grant of share options and is reduced by the expiry of share options. 37. Retained earnings The Company may distribute dividends out of its entire retained earnings as at 31 December 2013 and 31 December 2012 under the single tier system. 38. Commitments and contingencies (a) Plasma receivables The Indonesian government requires oil palm plantation companies to develop new plantations together with the local small landholders. This form of assistance to local small landholders is generally known as the Plasma Scheme. Once developed, the plasma plantations are transferred to the small landholders who then operate the plasma plantations under the supervision of the developer. In line with this requirement, certain subsidiary companies of the Group have commitments to develop plantations under the Plasma Scheme. The funding for the development of the plantations under the Plasma Scheme is provided by the designated banks and/or by the subsidiary companies. This includes the subsidiary companies providing corporate guarantees for the loans advanced by the banks. When the plasma plantations start to mature, the plasma farmers are obliged to sell all their harvests to the subsidiary companies and a portion of the resulting proceeds will be used to repay the loans from the banks or the subsidiary companies. In situations where the sales proceeds are insufficient to meet the repayment obligations to the banks, the subsidiary companies also provide temporary funding to the plasma farmers to develop the plasma plantations and to repay the instalment and interest payments to the banks. The plasma farmers will repay the temporary funding to the subsidiary companies once the plantations have positive cash flows. The loans advanced by the banks under the Plasma Scheme are secured by the sales proceeds of FFB of the respective plasma plantations and corporate guarantees from certain subsidiary companies for a maximum IDR92,587,554,827 equivalent to RM24,906,000 (2012: RM29,350,000) as at 31 December 2013.

147 146 TSH RESOURCES BERHAD (49548-D) 38. Commitments and contingencies (cont d) (a) Plasma receivables (cont d) The accumulated development costs net of funds received are presented as Plasma receivables in the consolidated balance sheet and in the Plantations segment. An analysis of the movement in the Plasma receivables is as follows: Group RM 000 RM 000 Balance at 1 January 15,380 5,187 Additional net investment 13,880 10,193 Total plasma receivable (Note 24) 29,260 15,380 Less: Fair value loss (5,319) - Balance at 31 December 23,941 15,380 (b) Capital commitments Capital expenditure as at the reporting date is as follows: Capital expenditure: Group Company RM 000 RM 000 RM 000 RM 000 Property, plant and equipment: Approved and contracted for 21,037 21,189 1,533 1,318 Approved but not contracted for 11,505 28, ,542 49,644 1,533 1, Contingent liabilities Unsecured: Group Company RM 000 RM 000 RM 000 RM 000 Guarantee given to PT Bank CIMB Niaga, Tbk, to secure the loan for Pembangunan Kebun Kelapa Sawit Plasma under a Plasma Scheme 14,886 16,907 14,886 16,907

148 ANNUAL REPORT Related party disclosures (a) In addition to the transactions detailed elsewhere in the, the Group and the Company had the following transactions with related parties during the financial year: Note RM 000 RM 000 Group Jointly controlled entities: Sale of crude palm oil (i) (468,015) (517,363) Sale of palm kernel (i) (63,017) (69,961) Sale of burning materials (i) (1,206) (1,227) Transportation fees received (i) (154) (152) Purchase of crude palm oil (ii) 53,547 62,717 (Sale)/purchase of oil palm seedlings (to)/from an associate company (i) - 71 Purchase of fresh fruit bunches from a subsidiary company of an associate (i) 23, Sales commission paid to a minority shareholder of a subsidiary (iv) - 29 Rental of premises paid to spouse of a director (iv) Purchase of fresh fruit bunches from a company in which certain directors of the Company and their family members have equity interest (iv) 1,067 1,298 Purchase of fresh fruit bunches from spouse of a director (iv) 944 1,067 Company Transactions with subsidiaries: Sale of dried cocoa beans (i) - (142) Sale of fresh fruit bunches (i) (10,881) (12,226) Sale of ramets (i) (5,952) (14,326) Interest income (iii) (54,682) (37,733) Interest on advances paid (iii) 19,077 18,444 Management fees received (12,073) (8,485) Dividends received (65,496) (62,114) Proceeds from disposal of motor vehicle (604) (50) Purchase of decanter cake Unsecured corporate guarantee given 190, ,625 Maintenance of flooring Rebate on management fees 1,800 - Transactions with an associate company: Rental income (i) (91) (89)

149 148 TSH RESOURCES BERHAD (49548-D) 40. Related party disclosures (cont d) (a) In addition to the transactions detailed elsewhere in the, the Group and the Company had the following transactions with related parties during the financial year (cont d): Note RM 000 RM 000 Company (cont d) Transactions with joint ventures: Rental income (iii) (24) (24) Dividends received (15,000) (15,000) (i) (ii) (iii) (iv) The sale of products and rendering of services to subsidiaries, subsidiary company of an associate, and a subsidiary company of an associate were made according to the published prices and conditions offered to the major customers of the Group and the Company. The purchase of products from subsidiaries and jointly controlled entity were made according to the published prices and conditions offered by these related parties to their major customers. The interest income and expense arose from the amounts due from/to related parties. Further details are disclosed in Note 24 and Note 32. The directors consider that the rental, management fee and commission paid, purchase of oil palm FFB and contract fees received from a director and/or spouse of director were made according to the published prices and conditions similar to those offered to the major customers of the supplier, except that interest was not charged on overdue balances. Information regarding outstanding balances arising from related party transactions as at 31 December 2013 are disclosed in Note 24 and Note 32. (b) Compensation of key management personnel The remuneration of directors who are also the members of key management during the year was as follows: Group Company RM 000 RM 000 RM 000 RM 000 Short-term employee benefits 6,361 5,744 4,193 3,615 Post-employment benefits: Defined contribution plan ,006 6,353 4,620 4,000

150 ANNUAL REPORT Fair value of financial instruments (a) Financial assets carried at amortised cost Plasma receivables and non-current receivables are carried at amortised cost using the effective interest method and the discount rates used are the current market incremental lending rate for similar types of lending. (b) Fair value of financial instruments that are carried at fair value The following table shows an analysis of financial instruments carried at fair value by level of fair value hierarchy: 2013 Group Quoted price in active markets for Significant other identical instruments observable inputs (Level 1) (Level 2) Total RM 000 RM 000 RM 000 Financial assets Financial assets held for trading 89,102-89,102 Derivatives - Forward currency contracts Commodity future contracts ,102-89,102 Financial liabilities Derivatives - Forward currency contracts - 1,316 1,316 - Commodity future contracts ,341 1, Financial assets Financial assets held for trading Derivatives - Forward currency contracts Commodity future contracts Financial liabilities Derivatives - Forward currency contracts Commodity future contracts

151 150 TSH RESOURCES BERHAD (49548-D) 41. Fair value of financial instruments (cont d) (b) Fair value of financial instruments that are carried at fair value (cont d) Fair value hierarchy The Group classifies fair value measurement using a fair value hierarchy that reflect the significance of the inputs used in making the measurements. The fair value hierarchy have the following levels: - Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities - Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices), and - Level 3 - Inputs for the asset or liability that are not based on observable market data (unobservable inputs) The Group does not have any financial assets or financial liabilities measured at level 3 hierarchy. Methods and assumptions used to determine fair values The methods and assumptions used by management to determine fair values of financial instruments other than those whose carrying amounts reasonably approximate their fair values as mentioned in Note 41(c), are as follows: Financial assets and liabilities Methods and assumptions Quoted equity and non-equity instruments Other than the quoted equity instruments disclosed below, fair value is determined directly by reference to their published market bid price at the balance sheet date. Forward currency contracts Fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. Commodity future contracts Where available, quoted market prices are used as a measure of fair values for the outstanding contracts. Where the quoted market prices are not available, the fair values are based on management s best estimate and are arrived at by reference to the market prices of another contract that is substantially similar.

152 ANNUAL REPORT Fair value of financial instruments (cont d) (c) Fair value of financial instruments by classes that are not carried at fair value Group Company Note Carrying Fair Carrying Fair amount value amount value RM 000 RM 000 RM 000 RM 000 At 31 December 2013 Financial assets: - Unquoted equity instruments, at cost 25 5,114 * 100 * At 31 December 2012 Financial assets: - Unquoted equity instruments, at cost 25 90,434 * 100 * * Investment in equity instruments carried at cost (Note 25) Fair value information has not been disclosed, for the Group s investments in equity instruments that are carried at cost because fair value cannot be measured reliably. (d) Determination of fair value Financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value The followings are classes of financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value: Other receivables (non-current) 24 Trade and other receivables (current) 24 Other payables (non-current) 32 Trade and other payables (current) 32 Loans and borrowings (current) 31 Loans and borrowings (non-current) 31 The carrying amounts of these financial assets and liabilities are reasonable approximation of fair values, either due to their short-term nature of that they are floating rate instruments that are re-priced to market interest rates on or near the reporting date. The carrying amounts of the current portion of loans and borrowings are reasonable approximation of fair value due to the insignificant impact of discounting. The fair values of current loans and borrowings are estimated by discounting expected future cash flows at market incremental lending rate for similar types of lending, borrowing or leasing arrangements at the reporting date. Note

153 152 TSH RESOURCES BERHAD (49548-D) 41. Fair value of financial instruments (cont d) (d) Determination of fair value (cont d) Quoted equity instruments Fair value is determined directly by reference to their published market bid price at the reporting date. Derivatives Forward currency contracts and commodity futures contracts are valued using a valuation technique with market observable inputs. The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates and interest rate curves. Financial guarantees Fair value is determined based on probability weighted discounted cash flow method. The probability has been estimated and assigned for the following key assumptions: - The likelihood of the guaranteed party defaulting within the guaranteed period; - The exposure on the portion that is not expected to be recovered due to the guaranteed party s default; - The estimated loss exposure if the party guaranteed were to default. 42. Financial risk management objectives and policies The Group and the Company is exposed to financial risks arising from their operations and the use of financial instruments. The key financial risks include credit risk, liquidity risk, interest rate risk, foreign currency risk and market price risk. The Board of Directors reviews and agrees policies and procedures for the management of these risks, which are executed by the Chief Financial Officer, Head of Treasury and Head of Finance. The audit committee provides independent oversight to the effectiveness of the risk management process. It is, and has been throughout the current and previous financial year, the Group s policy that no derivatives shall be undertaken except for the use as hedging instruments where appropriate and cost-efficient. The Group and the Company do not apply hedge accounting. The following sections provide details regarding the Group s and Company s exposure to the above-mentioned financial risks and the objectives, policies and processes for the management of these risks. (a) Credit risk Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Group s and the Company s exposure to credit risk arises primarily from trade and other receivables. For other financial assets (including cash and bank balances), the Group and the Company minimise credit risk by dealing exclusively with high credit rating counterparties.

154 ANNUAL REPORT Financial risk management objectives and policies (cont d) (a) Credit risk (cont d) Trade receivables The Group s objective is to seek continual revenue growth while minimising losses incurred due to increased credit risk exposure. The Group trades only with recognised and creditworthy third parties. It is the Group s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group s exposure to bad debts is not significant. Plasma receivables As disclosed in Note 2.14 and 38(a), plasma receivables represent costs incurred for plasma plantation development which include costs for plasma plantations funded by the banks and temporarily self funded by the subsidiaries awaiting banks funding. Plasma receivables also include advances to plasma farmers for topping up loan instalments to the banks, advances for fertilisers and other agriculture supplies. These advances shall be reimbursed by the plasma farmers and the collateral in form of titles of ownership of the plasma plantations will be handed over to the plasma farmers once the plasma receivables have been fully repaid. The Group through partnership scheme also provides technical assistance to the plasma farmers to maintain the productivity of plasma plantations as part of the Group s strategy to strengthen relationship with plasma farmers which is expected to improve the repayments of plasma receivables. Exposure to credit risk At the reporting date, the Group s and the Company s maximum exposure to credit risk is represented by: - The carrying amount of each class of financial assets recognised in the statements of financial position. - A nominal amount of RM190,725,000 (2012: RM264,625,000) relating to corporate guarantee provided by the Company to bankers on subsidiaries bank loans. Information regarding credit enhancements for trade and other receivables is disclosed in Note 24(a). Credit risk concentration profile The Group determines concentrations of credit risk by monitoring the industry sector profile of its trade receivables on an ongoing basis. The credit risk concentration profile of the Group s trade receivables at the reporting date are as follows: By industry sectors: Group RM 000 % of total RM 000 % of total Palm products 27,134 58% 19,193 55% Wood products 15,656 33% 10,433 30% Others 4,264 9% 5,345 15% 47, % 34, %

155 154 TSH RESOURCES BERHAD (49548-D) 42. Financial risk management objectives and policies (cont d) (a) Credit risk (cont d) Financial assets that are neither past due nor impaired Information regarding trade and other receivables that are neither past due nor impaired is disclosed in Note 24. Deposits with banks and other financial institutions, and short-term investment that are neither past due nor impaired are placed with or entered into with reputable financial institutions or companies with high credit ratings and no history of default. Financial assets that are either past due or impaired Information regarding financial assets that are either past due or impaired is disclosed in Note 24. (b) Liquidity risk Liquidity risk is the risk that the Group or the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Group s and the Company s exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Group s and the Company s objective is to maintain a balance between continuity of funding and flexibility through the use of stand-by credit facilities. At the reporting date, approximately 44% (2012: 46%) of the Group s loans and borrowings will mature in less than one year based on the carrying amount reflected in the financial statement. Analysis of financial instruments by remaining contractual maturities The table below summarises the maturity profile of the Group s and the Company s liabilities at the reporting date based on contractual undiscounted amounts On demand One to Over or within five five 1 year years years Total RM 000 RM 000 RM 000 RM 000 Group Financial assets: Trade and other receivables 154,260 46, ,857 Cash and bank balances 54, ,214 Total undiscounted financial assets 208,474 46, ,071 Financial liabilities: Trade and other payables 137, ,954 Loans and borrowings 406, ,295 25, ,369 Total undiscounted financial liabilities 544, ,295 25,000 1,062,323 Total net undiscounted financial liabilities (335,554) (446,698) (25,000) (807,252)

156 ANNUAL REPORT Financial risk management objectives and policies (cont d) (b) Liquidity risk (cont d) Analysis of financial instruments by remaining contractual maturities (cont d) 2013 On demand One to Over or within five five 1 year years years Total RM 000 RM 000 RM 000 RM 000 Company Financial assets: Trade and other receivable 316, , ,758 Cash and bank balances 8, ,494 Total undiscounted financial assets 325, , ,252 Financial liabilities: Trade and other payables 379, , ,238 Loans and borrowings 150, , ,460 Total undiscounted financial liabilities 529, ,295-1,047,698 Total net undiscounted financial liabilities (204,265) 80,819 - (123,446) (c) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of the Group s and the Company s financial instruments will fluctuate because of changes in market interest rates. The Group s and the Company s exposure to interest rate risk arises primarily from their loans and borrowings. The Group s policy is to manage interest cost using a mix of fixed and floating rate debts. Sensitivity analysis for interest rate risk At the reporting date, if interest rates had been 25 basis points lower/higher, with all other variables held constant, the Group s profit net of tax would have been RM829,000 (2012: RM1,078,000) higher/lower, arising mainly as a result of lower/higher interest expense on loans and borrowings. The assumed movement in basis points for interest rate sensitivity analysis is base on the currently observable market environment.

157 156 TSH RESOURCES BERHAD (49548-D) 42. Financial risk management objectives and policies (cont d) (c) Interest rate risk (cont d) The following tables set out the carrying amounts, the range of interest rates as at the balance sheet date and the remaining maturities of the Group s and the Company s financial instruments that are exposed to interest rate risk: Within More than Note 1 year years years years years 5 years Total % RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 At 31 December 2013 Group Floating rate Deposits with licensed banks , ,970 Bank overdrafts (1,703) (1,703) Bankers acceptances (171,848) (171,848) Export credit refinancing (8,420) (8,420) Revolving credits (111,503) (111,503) Sukuk Ijarah Commercial Papers (20,000) (20,000) Sukuk Ijarah Medium Term Notes (35,000) (35,000) (30,000) (80,000) (50,000) (25,000) (255,000) Sukuk Musyarakah Medium Term Notes (50,000) - (50,000) Term loans (57,600) (62,012) (81,033) (60,066) (45,184) - (305,895) Company Floating rate Deposits with licensed banks , ,074 Bank overdrafts Bankers acceptances (10,000) (10,000) Revolving credits (105,903) (105,903) Term loans (34,262) (62,012) (81,033) (60,066) (45,184) - (282,557)

158 ANNUAL REPORT Financial risk management objectives and policies (cont d) (c) Interest rate risk (cont d) Within More than Note 1 year years years years years 5 years Total % RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 At 31 December 2012 Group Floating rate Deposits with licensed banks , ,782 Bank overdrafts (3,498) (3,498) Bankers acceptances (189,727) (189,727) Export credit refinancing (6,786) (6,786) Revolving credits (135,245) (135,245) Sukuk Ijarah Commercial Papers (45,000) (45,000) Sukuk Ijarah Medium Term Notes (35,000) (35,000) (30,000) (80,000) (50,000) (25,000) (255,000) Sukuk Musyarakah Medium Term Notes (50,000) (50,000) Term loans (37,720) (58,821) (54,105) (60,293) (39,503) (40,321) (290,763) Company Floating rate Deposits with licensed banks , ,674 Bank overdrafts (999) (999) Bankers acceptances (16,000) (16,000) Revolving credits (94,745) (94,745) Term loans (505) (37,032) (54,105) (60,293) (39,503) (40,321) (231,759) (d) Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group has transactional currency exposures arising from sales or purchases that are denominated in a currency other than the respective functional currencies of Group entities, United States Dollars (USD), Australian Dollars (AUD), Sterling Pound (GBP), Singapore Dollars (SGD), Euro Dollars (EURO) and Indonesia Rupiah (IDR). The foreign currencies in which these transactions are denominated are mainly US Dollars ( USD ). Approximately 90% (2012: 94%) of the Group s sales and 90% (2012: 95%) of cost of sales are denominated in the respective functional currencies of the Group entities. The Group s trade receivable and trade payable balances at the reporting date have similar exposures. The Group and the Company also hold cash and cash equivalents denominated in foreign currencies for working capital purposes. At the reporting date, such foreign currency balances (mainly in USD, SGD and IDR) amount to RM22,725,000 (2012: RM19,354,000) and RM1,582,000 (2012: RM1,269,000) for the Group and the Company respectively.

159 158 TSH RESOURCES BERHAD (49548-D) 42. Financial risk management objectives and policies (cont d) (d) Foreign currency risk (cont d) The Group requires all of its operating entities to use forward currency contracts to eliminate the currency exposures on any individual transactions for which payment is anticipated more than one month after the Group has entered into a firm commitment for a sale or purchase. The forward currency contracts must be in the same currency as the hedged item. It is the Group s policy not to enter into forward contracts until a firm commitment is in place. It is the Group s policy to negotiate the terms of the hedge derivatives to match the terms of the hedged item to maximise hedge effectiveness. At 31 December 2013, the Group hedged 24% (2012: 20%) of its foreign currency denominated sales, for which firm commitments existed at the reporting date, extending to March 2014 (2012: March 2013). Sensitivity analysis for foreign currency risk The following table demonstrates the sensitivity of the Group s and Company s profit net of tax to a reasonably possible change in the USD, GBP and IDR exchange rates against the respective functional currency of the Group entities, with all other variables held constant. Profit net tax Group Company RM 000 RM 000 RM 000 RM 000 RM/USD - strengthened 5% weakened 5% (328) (112) (5) - RM/GBP - strengthened 5% 565 1, weakened 5% (565) (1,864) - - USD/IDR - strengthened 5% (9,596) (10,010) weakened 5% 9,596 10, RM/IDR - strengthened 5% - - (22,623) (18,659) - weakened 5% ,623 18,659 (e) Market price risk Market price risk is the risk that the fair value of future cash flows of the Group s financial instruments will fluctuate because of changes in market prices (other than interest or exchange rates). The Group is exposed to equity price risk arising from its investment in quoted equity instruments. The quoted equity instruments in Malaysia are listed on the Bursa Malaysia, this instrument is classified as held for trading. Sensitivity analysis for equity price risk At the reporting date, if the FTSE Bursa Malaysia KLCI had been 5% higher/lower, with all other variables held constant, the impact to the Group s other reserve in equity would be minimal.

160 ANNUAL REPORT Capital management The primary objective of the Group s capital management is to ensure that it maintains a good credit rating and healthy capital ratios in order to support a balanced growth objective in its business and to maximise shareholder value. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions and the free cash flow position. To achieve this objective, the Group may adjust the group internal plans in its expansion of plantation land areas and plantation programme. No changes were made in the objectives, policies or processes during the years ended 31 December 2013 and 31 December The Group monitors capital using a debts/equity ratio, which is loans and borrowings less cash and bank balances divided by shareholder s fund. The Group intends to manage its debt/equity ratio at below 1.0 level over the near to medium term to support its existing credit metrics despite its existing financial covenant under the current banking facilities indicating at 1.5 level. 44. Segment information For management purposes, the Group is organised into business units based on their products and services, and has three reportable operating segments as follows: (i) (ii) (iii) Palm and bio-integration the operation of oil palm plantations, manufacture and sale of crude palm oil and palm kernel, and generation and supply of electricity from a biomass plant; Wood product manufacturing and trading, and reforestation manufacture and sale of downstream wood products, and operation of a forest management unit; and Others manufacture, sale and trading of cocoa products. Except as indicated above, no operating segments has been aggregated to form the above reportable operating segments. Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which, in certain respects as explained in the table below, is measured differently from operating profit or loss in the consolidated. Group financing (including finance costs) and income taxes are managed on a group basis and are not allocated to operating segments. Transfer prices between operating segments are on an arm s length basis in a manner similar to transactions with third parties.

161 160 TSH RESOURCES BERHAD (49548-D) 44. Segment information (cont d) Wood product manufacturing Palm and and trading, Adjustments and Per consolidated bio-integration and reforestation Others eliminations Notes RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 RM 000 Revenue: External customers 901, ,357 51,134 43,662 65,007 34, ,017, ,755 Inter-segment 12,073 8, (12,073) (8,485) (a) - - Total revenue 913, ,842 51,134 43,662 65,007 34,736 (12,073) (8,485) 1,017, ,755 Results: Interest income 75,052 58, (73,760) (56,177) 1,308 1,951 Dividend income Depreciation and amortisation 36,642 32,764 5,072 4, ,216 37,980 Share of profit of associates 709 1, ,201 Share of profit of jointly controlled entities 23,381 18, ,381 18,958 Other material non-cash expenses 72,692 12,236 2,555 2, (b) 76,176 14,392 Segment profit 189, ,100 1,479 (1,747) 6,435 (1,686) (32,826) (20,699) (c) 164,485 99,998 Assets: Additions to non-current assets 230, ,657 27,457 24, (545) (1,623) (d) 257, ,212 Segment assets 1,784,123 1,774, , ,797 36,491 50, , ,383 (e) 2,368,438 2,245,612 Segment liabilities 168, ,608 19,156 23,655 5,749 2,631 1,013,675 1,079,357 (f) 1,207,058 1,256,251 Notes: Nature of adjustments and eliminations to arrive at amounts reported in the consolidated. (a) (b) Inter-segment revenues are eliminated on consolidation. Other material non-cash expenses consist of the following items as presented in the respective notes to the : RM 000 RM 000 Impairment of trade receivables 1,772 1,013 Inventories written down 3,675 1,064 Unrealised foreign exchange loss 62,476 12,315 Fair value loss on sundry and plasma receivables 8,253-76,176 14,392

162 ANNUAL REPORT Segment information (cont d) (c) The following items are added to/(deducted from) segment profit to arrive at Profit before tax presented in the statements of comprehensive income: RM 000 RM 000 Share of profit of associate 709 1,201 Share of profit of jointly controlled entities 23,381 18,958 Finance costs (17,808) (19,367) Unallocated corporate expenses (39,108) (21,461) (32,826) (20,669) (d) Additions to non-current assets consist of: RM 000 RM 000 Property, plant and equipment 91,089 82,715 Biological asset 154, ,649 Land use rights 12,234 1, , ,212 (e) The following items are added to segment assets to arrive at total assets reported in the statements of financial position: RM 000 RM 000 Tax recoverable 6,784 13,525 Deferred tax assets 19,810 8,231 Unallocated amounts 181,923 84, , ,383 (f) The following items are added to segment liabilities to arrive at total liabilities reported in the statements of financial position: RM 000 RM 000 Deferred tax liabilities 73,263 73,240 Borrowings 924, ,019 Unallocated amounts 16,043 30,098 1,013,675 1,079,357

163 162 TSH RESOURCES BERHAD (49548-D) 44. Segment information (cont d) Geographical information Revenues and segment assets information based on the geographical location of customers and assets respectively are as follows: Revenues Segment assets RM 000 RM 000 RM 000 RM 000 Malaysia 590, ,476 1,311,736 1,277,542 Europe 27,164 21,962 30,285 13,634 Indonesia 277, ,206 1,020, ,149 United States of America 45,020 10,116 4,440 4,104 Others 78,029 29,995 1,137 1,183 1,017, ,755 2,368,438 2,245, Significant event (a) On 18 July 2013, the Company, via its indirect wholly-owned subsidiary, Bisa Jaya Sdn Bhd ( BJSB ) had given an irrevocable undertaking to Felda Global Ventures Holding Berhad ( FGV ) pursuant to a voluntary conditional take-over offer ( Conditional Take-Over Offer ) by FGV to acquire all the voting shares of RM1.00 each in Pontian United Plantations Berhad ( Pontian ) ( Pontian Shares ) for a cash consideration of RM per Pontian Share which shall be reduced by the quantum of dividend declared after the offer date but prior to closing date of the offer. On 9 September 2013, all conditions precedent pertaining to the disposal as set out in the Conditional Take-Over Offer had been complied with by both parties and the disposal is deemed completed. The disposal of the entire BJSB s equity stake in Pontian representing approximately 16.17% to FGV for a total cash consideration of RM195,813,660, resulted in a gain of RM85.3 million to the Group. (b) On 6 December 2013, the Company entered into a Share Sale Agreement ( SSA ) to acquire 300,000 ordinary shares of RM1.00 each, representing 60% of the issued and paid-up share capital in Sg Kalabakan Estate Sdn. Bhd. ( SKE ) for a purchase consideration of RM150,000,000 and assumption of liabilities of not more than RM30,000,000 from Ratus Awansari Sdn. Bhd. ( RASB ). SKE is a private limited company, incorporated in Malaysia on 15 January 2007 with an issued and paid-up share capital RM500,000 comprising 500,000 ordinary shares of RM1.00 each. The principal activity of SKE is to undertake oil palm development in the locality of Kalabakan, Sabah. Todate, SKE has planted a total of 2,979 hectares with 23,815 hectares of the total land area of 26,794 hectares available for future planting. As at to-date, the SSA is still pending for final completion as certain condition precedents pertaining to the acquisition of SKE has not been fulfilled yet. 46. Authorisation of for issue The for the year ended 31 December 2013 were authorised for issue in accordance with a resolution of the directors on 10 April 2014.

164 ANNUAL REPORT Supplementary information breakdown of retained earnings into realised and unrealised The breakdown of the retained earnings of the Group and of the Company as at 31 December 2013 into realised and unrealised profits is presented in accordance with the directive issued by Bursa Malaysia Securities Berhad dated 25 March 2010 and prepared in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants. Group Company RM 000 RM 000 RM 000 RM 000 Total retained earnings or accumulated losses of the Company and its subsidiaries - Realised 720, , , ,920 - Unrealised (215,192) (118,760) (134,802) (3,986) 504, , , ,934 Total share of retained earnings or accumulated losses from associate - Realised 9,714 7, Unrealised (3,433) (1,653) - - Total share of retained earnings or accumulated losses from jointly controlled entities - Realised 64,092 57, Unrealised (3,707) (5,919) , , , ,934 Less: Consolidation adjustments 52,667 (6,954) - - Retained earnings as per 624, , , ,934

165 164 TSH RESOURCES BERHAD (49548-D) analysis of shareholdings As at 31 March 2014 Authorised Capital : RM1,000,000,000 divided into 2,000,000,000 ordinary shares of RM0.50 each Issued and Fully Paid-Up Capital : RM448,471, divided into 896,942,633 ordinary shares of RM0.50 each (net of treasury shares) Class of Shares : Ordinary shares of RM0.50 each fully paid-up Voting Rights : One vote per RM0.50 share 1. ANALYSIS BY SIZE OF SHAREHOLDINGS No. of Size of Shareholdings Shareholders % shares held % ,571 Negligible 100-1, , ,001-10,000 3, ,775, , ,000 1, ,548, ,001-44,847,130 * ,116, ,847,131 and above ** Total 5, ,942, * Less than 5% of issued holdings ** 5% and above of issued holdings 2. DIRECTORS SHAREHOLDINGS No. of shares held Name Direct % Indirect * % Datuk (Dr.) Kelvin Tan Aik Pen 106,946, Dato Tan Aik Sim 35,403, Datuk Suboh bin Md Yassin Dato Leong Leong Khee Seong YB Datuk Nur Jazlan bin Mohamed Datuk Jaswant Singh Kler Tan Aik Kiong 36,738, ,000 Negligible Lim Fook Hin 1,068, ,000, Chew Siew Yeng , Tan Aik Yong (Alternate Director to 35,769, Datuk (Dr.) Kelvin Tan Aik Pen) * Deemed interested by virtue of Section 134(12)(c) of the Companies (Amendments) Act 2007.

166 ANNUAL REPORT analysis of shareholdings As at 31 March 2014 (cont d) 3. SUBSTANTIAL SHAREHOLDERS Name No. of shares held % 1. Datuk (Dr.) Kelvin Tan Aik Pen 106,946, Tunas Lestari Sdn. Bhd. 57,000, Embun Yakin Sdn. Bhd. 50,468, THIRTY (30) LARGEST SHAREHOLDERS Name No. of shares held % 1. Tan Aik Kiong 36,636, HSBC Nominees (Tempatan) Sdn. Bhd. 35,403, Tan Aik Sim 3. Maybank Nominees (Asing) Sdn. Bhd. 31,498, Eccles Equity Asia Ltd 4. UOB Kay Hian Nominees (Asing) Sdn. Bhd. 29,766, Exempt an for UOB Kay Hian Pte Ltd 5. Maybank Securities Nominees (Tempatan) Sdn. Bhd. 29,538, Pledged Securities Account for Embun Yakin Sdn. Bhd. 6. Citigroup Nominees (Tempatan) Sdn. Bhd. 27,374, Employees Provident Fund Board 7. Maybank Nominees (Asing) Sdn. Bhd. 25,590, Walton Private Investment Limited 8. HSBC Nominees (Tempatan) Sdn. Bhd. 24,105, YB Tan Ek Huat 9. HSBC Nominees (Tempatan) Sdn. Bhd. 23,955, Tan Ah Seng 10. Tan Aik Hwa 23,955, Tan Aik Yong 22,138, RHB Capital Nominees (Tempatan) Sdn. Bhd. 20,723, Pledged Securities Account for Tan Aik Pen 13. Maybank Nominees (Asing) Sdn. Bhd. 18,744, L & P Bakri Inc.

167 166 TSH RESOURCES BERHAD (49548-D) analysis of shareholdings As at 31 March 2014 (cont d) 4. THIRTY (30) LARGEST SHAREHOLDERS (cont d) Name No. of shares held % 14. Alliancegroup Nominees (Tempatan) Sdn. Bhd. 18,319, Pledged Securities Account for Tan Aik Pen 15. Maybank Securities Nominees (Tempatan) Sdn. Bhd. 17,907, Pledged Securities Account for Kemudi Seraya Sdn. Bhd. 16. UOBM Nominees (Tempatan) Sdn. Bhd. 17,000, Pledged Securities Account for Tunas Lestari Sdn. Bhd. 17. Tan Aik Pen 16,218, Tan Soon Hong 15,227, Alunan Moden Sdn. Bhd. 15,000, HSBC Nominees (Tempatan) Sdn. Bhd. 13,721, Tan Aik Choon 21. Tan Aik Choon 13,626, Amsec Nominees (Tempatan) Sdn. Bhd. 12,694, Pledged Securities Account Ambank (M) Berhad for Tan Aik Pen 23. Alliancegroup Nominees (Tempatan) Sdn. Bhd. 12,000, Pledged Securities Account for Tunas Lestari Sdn. Bhd. 24. HSBC Nominees (Tempatan) Sdn. Bhd. 12,000, Pledged Securities Account for Tan Aik Pen 25. UOBM Nominees (Tempatan) Sdn. Bhd. 12,000, Pledged Securities Account for Tunas Lestari Sdn. Bhd. 26. Ong Yah Ho 11,111, Malaysia Nominees (Tempatan) Sendirian Berhad 11,000, Pledged Securities Account for Tunas Lestari Sdn. Bhd. 28. Amanahraya Trustees Berhad 10,805, Public Smallcap Fund 29. UOBM Nominees (Tempatan) Sdn. Bhd. 10,000, Pledged Securities Account for Embun Yakin Sdn. Bhd. 30. Cartaban Nominees (Tempatan) Sdn. Bhd. 9,724, Exempt an for Eastspring Investments Berhad

168 ANNUAL REPORT LIST OF TOP 10 PROPERTIES Owned by TSH Group as at 31 December 2013 Net book Date of Approximate value Acquisition/ age of as at (Date building of last Location Description Area Existing use Tenure (years) RM revaluation) Desa Penawai, Bekokong Makmur, Plantation 12,093 ha Plantation 35 years lease Not applicable 180,362, Kecamatan Bongan, Kabupaten Kutai land land expiring on Barat, Provinsi Kalimantan Timur & Desa Resak, Jambuk, Muara Gusik, for land under Penawai, Tanjung Sari, Jambuk Desa Penawai, Makmur, Muara Siram, Siram Jaya Bekokong dan Resak Kampung, Kecamatan Makmur & 35 Bongan, Kabupaten Kutai Barat, years lease Provinsi Kalimantan Timur expiring on (PT Farinda Bersaudara) for land under Desa Resak, Jambuk, Muara Gusik, Penawai, Tanjung Sari, Jambuk Makmur, Muara Siram, Siram Jaya dan Resak Kampung Pelantaran, Pundu & Bajarau Plantation 7,114 ha Plantation 35 years lease Not applicable 106,887, Kecamatan Cempaga Hulu & Parenggean land land expiring on Kabupaten Kotawaringin Timur Propinsi Kalimantan Tengah (PT Sarana Prima Multi Niaga) Kecamatan Tanjung Palas Timur Plantation 13,215 ha Plantation 35 years lease Not applicable 80,613, Kabupaten Bulungan land land expiring on Provinsi Kalimantan Timur (PT Bulungan Citra Agro Persada) Desa Langgam Katiagan & Nagari Kinali Plantation 7,309 ha Plantation 35 years lease Not applicable 71,167, Kecamatan Kinali land land expiring on Kabupaten Pasaman Barat Propinsi Sumatera Barat for land (PT Laras Internusa) under Desa Langgam & 35 years lease expiring on for land under Nagari Kinali

169 168 TSH RESOURCES BERHAD (49548-D) LIST OF TOP 10 PROPERTIES Owned by TSH Group as at 31 December 2013 (cont d) Net book Date of Approximate value Acquisition/ age of as at (Date building of last Location Description Area Existing use Tenure (years) RM revaluation) Muara Siram, Kecamatan Bongan Plantation 10,282 ha Plantation 35 years lease Not applicable 70,234, Kabupaten Kutai Barat land land expiring on Propinsi Kalimantan Timur (PT Teguh Swakarsa Sejahtera) Nagari Tebing Tinggi Plantation 4,307 ha Plantation Pending Not applicable 63,102, Kecamatan Pulau Punjung land land Nagari Sitiung, Kecamatan Sitiung, Nagari Sialang Gaung, Kecamatan Kota Baru Kabupaten Dharmasraya Propinsi Sumatera Barat (PT Andalas Wahana Berjaya) Title No. CL Plantation 4,942 acres Oil palm 98 years 14 61,647,608 ( ) District of Kinabatangan land plantation leasehold Tenegang Koyah Locality & mill expiring on Off KM 46.5, Jalan Lahad Datu Sandakan, Sabah Title No. CL , District of Plantation 2,489 acres Oil palm Leasehold Not applicable 45,852,818 ( ) Kinabatangan, State of Sabah land plantation land from to Title Nos. CL , CL Plantation acres Oil palm 98 years lease 15 35,031,536 ( ) Kunak District of Tawau, Sabah land plantation, from mill & power plant to Kecamatan Katingan Tengah Desa Samba Plantation 15,000 ha Plantation Pending Not applicable 30,020, Bakumpai, Desa Telok, Desa Petak Puti land land Desa Tewang Panjang, Desa Tumbang Lahang dan Kecamatan Pulau Malan Desa Tura, Desa Tumbang Tanjung Kabupaten Katingan Provinsi Kalimantan Tengah (PT Mitra Jaya Cemerlang)

170 PROXY FORM (Incorporated in Malaysia) I/We (FULL NAME IN BLOCK LETTERS) of (ADDRESS) being a member/members of TSH RESOURCES BERHAD hereby appoint (FULL NAME) of (ADDRESS) or failing him/her (FULL NAME) of (ADDRESS) as my/our proxy to vote for me/us on my/our behalf at the Thirty-Fourth Annual General Meeting of the Company to be held at Ballroom 2, LG Level, Eastin Hotel, 13, Section 16/11, Jalan Damansara, Petaling Jaya, Selangor Darul Ehsan on 3 June 2014 at 9.30 am and any adjournment thereof and to vote as indicated below:- Resolution 1 Resolution 2 Resolution 3 Resolution 4 Resolution 5 Resolution 6 Resolution 7 Resolution 8 Resolution 9 Resolution 10 Resolution 11 To receive the Audited Financial Statements for the financial year ended together with the Reports of the Directors and Auditors thereon. To declare a first and final single tier dividend of 3.5 sen per ordinary share. To approve payment of Directors fees of RM144,000 for the financial year ended To re-elect Datuk Suboh bin Md Yassin, who is retiring by rotation in accordance with Article 95 of the Company s Articles of Association. To re-elect YB Datuk Nur Jazlan bin Mohamed, who is retiring in accordance with Article 86 of the Company s Articles of Association. To re-appoint Datuk Jaswant Singh Kler, who is retiring pursuant to Section 129(6) of the Companies Act, 1965 and to hold office until the conclusion of the next Annual General Meeting. To re-appoint Messrs Ernst & Young as the Company s Auditors and to authorise Directors to fix their remuneration. Proposed Authority to issue shares pursuant to Section 132D of the Companies Act, Proposed Renewal of the Authority for Share Buy-Back. Proposed Renewal of the Existing Shareholders Mandate and Proposed New Shareholders Mandate for recurrent related party transactions of a revenue or trading nature. Retention of Datuk Jaswant Singh Kler as Independent Director. *FOR *AGAINST * Please indicate with an X in the space provided for each resolution. Unless voting instructions are indicated in the space above, the proxy will vote as he/she thinks fit. Signed this day of 2014 No. of shares held Signature/Common Seal of Appointor

171 Notes: 1. Only depositors whose names appear in the Record of Depositors as at 27 May 2014 be regarded as members and entitled to attend, speak and vote at the meeting. 2. 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. 3. 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, Kuala Lumpur, not less than 48 hours before the time appointed for holding this meeting or adjourned meeting. 4. 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. 5. Where a member of the Company is an exempt authorised nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account ( omnibus account ), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each omnibus account it holds. Explanatory Notes on Special Business 6. Resolution 8 is a renewal of the general mandate empowering the Directors of the Company, pursuant to Section 132D of the Companies Act, 1965, to issue and allot new shares in the Company from time to time provided that the aggregate number of shares issued pursuant to the general mandate does not exceed 10% of the issued share capital of the Company for the time being. This authority, unless revoked or varied by the Company at a general meeting, will expire at the next AGM. As at the date of this notice, 62,580,000 ordinary shares of RM0.50 each were issued via private placement pursuant to Section 132D of the Companies Act, 1965 under the general mandate which was approved at the last AGM held on 21 May 2013 and which will lapse at the conclusion of the Thirty-Fourth AGM to be held on 3 June The proceeds raised totaling of RM141,639,400 have been utilized in the following manner:- Utilisation of Proceeds RM million 1) Working Capital ) Downpayment for the Sabah Plantation Estates ) Future investment ) Expenses for private placement exercise st fold here AFFIX STAMP HERE The Company Secretary TSH RESOURCES BERHAD (49548-D) Level 10, Menara TSH No. 8 Jalan Semantan Damansara Heights Kuala Lumpur, Malaysia 2nd fold here The renewal of the general mandate will provide flexibility to the Company for any possible fund raising activities without the need to convene separate general meeting to specifically approve such issuance of shares and thereby reducing administrative time and costs associated with the convening of such meeting. However, at this juncture, there is no decision to issue new shares. If there should be a decision to issue new shares after the general mandate is obtained, the Company will make an announcement in respect of the purpose and utilization of proceeds arising from such issue. 7. For Resolution 9 and 10, further information on the Proposed Renewal of the Authority for Share Buy-Back, Proposed Renewal of the Existing Shareholders Mandate and Proposed New Shareholders Mandate for recurrent related party transactions of a revenue or trading nature are set out in the Circular to Shareholders of the Company dated 12 May 2014 which is sent out together with the Company s 2013 Annual Report. 8. For Resolution 11, the Nomination Committee has assessed the independence of Datuk Jaswant Singh Kler, who has served as an Independent Non-Executive Director of the Company for a cumulative term of more than nine (9) years, and recommended him to continue to act as Independent Non-Executive Director of the Company based on the following justifications:- (i) (ii) He fulfilled the criteria under the definition of an Independent Director as stated in the Bursa Securities Main Market Listing Requirements, and demonstrates complete independence in character and judgement both in his designated role and as Board member and thus, he would continue to bring independent view of the Company s affairs to the Board. His in-depth knowledge of the Group s businesses and his extensive experience and expertise continue to provide invaluable contribution to the Board. 9. Dato Leong Leong Khee Seong who retires in accordance with Section 129(6) of the Companies Act, 1965 has expressed his intention not to seek re-appointment as Director of the Company. Hence, he will retain office until the close of the AGM.

172 Level 10, Menara TSH, No. 8 Jalan Semantan, Damansara Heights, Kuala Lumpur, Malaysia Tel: +(6) Fax: +(6) [email protected]