Nature of transaction. Lease of lands by LTH to THP for the cultivation of oil palm. Provision of management services

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1 12. RELATED PARTY TRANSACTIONS AND CONFLICT OF INTERESTS 12.1 Related Party Transactions (i) Save as disclosed below, there are no existing or potential related party transactions between our Group and our Directors and our key management, substantial shareholder and/or persons connected to them: Transacting parties Nature of relationship Nature of transaction Actual value Estimated value for the FY 31 from 1 January December 2006 to December 2006 RM 000 RM 000 THP and LTH THP and LSB THP and THLSS THP and LBB THP and LJK LTH is the holding company of THP. Ismee bin Ismail and Datuk Dr Abdul Samad bin Haji Alias sit on the Board of LTH while Datuk Azizan bin Abd Rahman sits on LTH s Investment Panel. THLSS, a wholly owned subsidiary of LTH, owns 70% of LSB. Dato Che Rashidi bin Che Omar sits on the Board of THLSS and LSB while Tan Sri Datuk Dr Yusof bin Basiran sits on the Board of THLSS. LTH is the holding company of both THP and THLSS. Tan Sri Datuk Dr Yusof bin Basiran and Dato Che Rashidi bin Che Omar sit on the Board of THLSS. THLSS, a wholly owned subsidiary of LTH, owns 100% of LBB. Tan Sri Datuk Dr Yusof bin Basiran and Dato Che Rashidi bin Che Omar sit on the Board of THLSS. THLSS, a wholly owned subsidiary of LTH, owns 82.53% of LJK. Dato Che Rashidi bin Che Omar sits on the Board of THLSS and LJK while Tan Sri Datuk Dr Yusof bin Basiran sits on the Board of THLSS. Lease of lands by LTH to THP for the cultivation of oil palm 2,000 2, , THP and THUJ THLSS, a wholly owned subsidiary of LTH, owns 70% of THUJ. Tan Sri Datuk Dr Yusof bin Basiran and Dato Che Rashidi bin Che Omar sit on the Board of THLSS while Hassan Fikri bin Mohamad sits on the Board of THUJ

2 Transacting parties Nature of relationship Nature of transaction Actual value for the FY 31 December 2005 Estimated value from 1 January 2006 to 31 December 2006 RM 000 RM 000 THP and THBG THLSS, a wholly owned subsidiary of LTH, owns 100% of THBG. Dato Che Rashidi bin Che Omar sits on the Board of THLSS and THBG while Tan Sri Datuk Dr Yusof bin Basiran sits on Board of THLSS THP and CCM LTH is the holding company of THP and owns 49% of CCM. Dato Che Rashidi bin Che Omar and Zainal Azwar bin Zainal Aminuddin sit on the Board of CCM. Purchase of fertilisers 8,312 11,000 THP and SSSB THLSS, a wholly owned subsidiary of LTH, owns 51% of SSSB. Dato Che Rashidi bin Che Omar sits on the Board of SSSB and THLSS while Tan Sri Datuk Dr Yusof bin Basiran sits on the Board of THLSS 646 1,758 THP and PTMGI THP and CB Industrial Product Sdn Bhd ( CBIPSB ) THI, a wholly owned subsidiary of LTH, owns 90% of PTMGI. Dato Che Rashidi bin Che Omar, Md Yusof bin Hussin and Zainal Azwar bin Zainal Aminuddin sit on the Board of PTMGI. CBIPSB is a wholly owned subsidiary of CB Industrial Product Holding. Tan Sri Datuk Dr Yusof bin Basiran, Chairman of THP also sits on the Board of CB Industrial Product Holding. Contractor for the construction of palm oil mill 9,408 10,698 -* 780 Note: * Tan Sri Datuk Dr Yusof bin Basiran was only appointed to the Board of CB Industrial Product Holding on 20 January Our Group, in the ordinary course of business, enters into transactions that are of revenue or trading in nature with related parties ( Recurrent Transactions ), which are necessary for the day-to-day operations of our Company. Our Directors confirm that such Recurrent Transactions are carried out and will be carried out at mutually agreed terms and conditions between our Company and our related parties. The estimated transaction values are based on the information available and the management s estimates for the financial year ending 31 December Due to the nature of the transactions, the actual value of the Recurrent Transactions may vary from the estimated value disclosed above. 121

3 Nevertheless, disclosure will be made in the annual report of our Company of the aggregate value of transactions conducted, names of the related parties involved and their relationship with our Company during the financial year and in the annual reports for the subsequent financial years. (ii) (iii) Save as disclosed in Section 17.9 on material contracts, there are no unusual transactions involving goods, services, tangible or intangible assets to which our Company or our subsidiaries was a party in respect of the past one (1) financial year and the beginning of the financial year ending 31 December 2006 up to the date of this Prospectus. As at 15 March 2006, being the latest practicable date prior to the printing of this Prospectus, there are no outstanding loans made/received by our Company and/or our subsidiaries for the benefit of our related parties. Deleted: 28 Febr Deleted: uary 12.2 Conflict of Interests (i) Save as disclosed below, none of our Directors or substantial shareholders of our Company has any interest, direct or indirect, in any business carrying on a similar trade as our Company or its subsidiaries LTH s subsidiaries which carry on a similar trade as our Company as at 28 February 2006 Company Principal activities Major markets Major products < Shareholding > < Direct > < Indirect > held held THLSS Investment holding while its subsidiaries are involved in cultivation of oil palm, processing of FFB, marketing of FFB, CPO and PK and teak plantations. Sabah and Sarawak FFB, CPO and PK 45,000, THEH Investment holding while its subsidiary is involved in the cultivation of oil palm and selling of FFB Peninsular Malaysia FFB 13,263, THI THA Investment holding while its subsidiaries are involved in the cultivation of oil palm, processing of FFB and marketing of CPO and PK Investment holding while its subsidiary is involved in the cultivation of oil palm and selling of FFB Indonesia CPO and PK 126,200, Philippines FFB 9,181,

4 Justifications and steps taken to resolve conflict: (a) (b) (c) Save for THEH, which has a subsidiary located in Terengganu, the geographical locations of all these plantations are outside of Peninsular Malaysia. Generally, the sale of products are geographically confined to the locality of the plantations (i.e. local mills and refineries) as it is not economical to sell to other buyers outside its locality due to transport cost. Therefore, LTH s other plantation companies, which are not located in Peninsular Malaysia, are not in direct competition with our Company; THB, a 70% subsidiary company of THEH with its plantation located in Mukim Besul, Dungun, Terengganu, was incorporated in 26 October 2004 and has yet to commence operations. Upon commencement of its operations, the plantations will require a gestation period of three (3) to five (5) years before any positive contribution can be derived. In view of this and the substantial cost involved in the initial years of the oil palm plantation which will not be beneficial to THP Group, our substantial shareholder has decided not to include this company in the Scheme; and LTH currently is in preliminary stages of negotiation to dispose of its entire equity interest in THJP, the subsidiary of THA involved in the same nature of business of our Group, to interested investors. Upon completion of this disposal, THA will be wound down LTH s shareholdings in other companies which carry on a similar trade as our Company as at 28 February 2006 < Direct > <----Indirect----> Shares held % Principal activities Asiatic Development Chin Teck Plantations Golden Hope Plantations 13,528, Plantation and investment holding. Its subsidiaries provide palm oil mill, plantations, property development and golf course operation. 564, Cultivate oil palm, processing and sale of CPO and PK and investment holding company. 6,617, Investment holding, provision of plantation and cultivate oil palm. Guthrie Ropel 3,930, Cultivate oil palm. IJM Plantations IOI Corporation 720, Cultivate oil palm, milling and investment holding. 2,857, Investment holding and the cultivate oil palm and rubber and processing of oil palm and rubber. 123

5 < Direct > <----Indirect----> Shares held % Principal activities Johore Tenggara Oil Palm Kuala Lumpur Kepong Kulim (Malaysia) Lam Soon (M) PPB Oil Palms 8,000, Investment holding and provision of to its subsidiary. Its subsidiaries market commodity products, cultivate oil palm, process palm oil and kernel, animal husbandry, agriculture contractors and investment holding. 104, The company carries on the business of producing and processing palm products and natural rubber on its plantations. Its subsidiaries are involved in the plantation business, manufacturing, retailing, property development and investment holding. 2,068, Investment holding, property investment and cultivate oil palm. 21,000, Investment holding company. Its subsidiaries refine and process oil palm, manufacture, market, sale, trade and distribution of refined palm oil products, cooking oil, soap and detergent, fats, margarine and other consumer products, cultivate oil palm, process and sale CPO and PK, manufacture soap chips, provide management services and property holding. 8,243, Investment holding and provision of agricultural and technical advisory services to its subsidiary. Its subsidiaries cultivate oil palm, mill, refine and market palm oil and related products. 124

6 < Direct > <----Indirect----> Shares held % Principal activities Sindora Bhd 391, Cultivation of oil palm and rubber, processing and marketing of such products and marketing their related products and investment holdings. Its subsidiaries are involved in timber logging, manufacturing and processing of sawn timber, manufacturing and sale of doors, manufacturing and trading of wood products, property development, manufacturing of laminated timber scantling, manufacturing and trading of furniture, fund management, bulk mailing and printing services, contract packing of tea and tea trading, producing carbonated drinks and provision of parking operation and related consultancy services. Southern Acids (M) Tradewinds (M) TSH Resources United Plantations Yee Lee Corporation 17,864, Investment holding company and markets oleochemical products for commercial use. Its subsidiaries provide administrative services, operate private hospitals, cultivate oil palm, warehouses and property development. 8,223, and investment holding. Its subsidiaries refine sugar, cultivation of oil palm and producing CPO and property development. 28,646, Investment holding company. Its subsidiaries process and distribute cocoa beans and cocoa products, cultivate oil palm and palm oil mills, manufacture and supply wood and timber products and operate a power plant. 2,118, Cultivate oil palm and coconut and the processing and sale of these products. 8,455, Investment holdings, market and distribute edible oil, mill and sell CPO, manufactures cooking oil, margarine and shortening, cultivate oil palm, manufacture and sell corrugated paper cartons, manufacture plastic household goods and process tea. 125

7 < Direct > <----Indirect----> Shares held % Principal activities YNH Property Bhd 17,613, Investment holdings, property development and investment, contractor, cultivate oil palm and sell palm oil products. Justification and step taken to resolve conflict: LTH is an investment holding company and has shareholding interests in other public listed companies whose principal activities are similar in nature to that of THP. LTH s interests in these companies are only investment holding in nature and LTH does not have any direct influence in the operations and management of these companies Directors and senior management s directorships and/or shareholdings in other companies which are in the same principal business of our Company as at 28 February 2006 < Direct > <-----Indirect------> Shares held % Designation Principal activities Directors Tan Sri Datuk Dr Yusof bin Basiran Dato Che Rashidi bin Che Omar THLSS Chairman Investment holding while its subsidiaries are involved in cultivation of oil palm, processing of FFB, marketing of FFB, CPO and PK and teak plantations. THLSS Director Investment holding while its subsidiaries are involved in cultivation of oil palm, processing of FFB, marketing of FFB, CPO and PK and teak plantations. PTMGI Direktur Utama Cultivation of oil palm, processing of FFB and marketing of CPO and PK. THI Director Investment holding while its subsidiary is involved in the cultivation of oil palm, processing of FFB and marketing of CPO and PK. TH Muis Agro Sdn Bhd Director Cultivation of oil palm and THB Chairman Cultivation of oil palm and LSB Director Cultivation of oil palm and THA Chairman Investment holding while its subsidiary is involved in the cultivation of oil palm and SSSB Director Cultivation of oil palm, processing of FFB and marketing of FFB, CPO and PK. 126

8 < Direct > <-----Indirect------> Shares held % Designation Principal activities Dato Wan Zakaria bin Abd Rahman Md Yusof bin Hussin Senior Managers Hassan Fikri bin Mohamad Zainal Azwar bin Zainal Aminuddin TDM Director Plantation, medical and poultry. THB Director Cultivation of oil palm and Glenealy Plantations (Malaya) Director Investment holding and provision of management services. Its subsidiaries are in the cultivation of oil palm, processing and marketing of CPO, PK and FFB, forest plantation and quarry. PTMGI Director Cultivation of oil palm, processing of FFB and marketing of CPO and PK. THEH Director Investment holding while its subsidiary is involved in the cultivation of oil palm and THB Director Cultivation of oil palm and PTMGI Director Cultivation of oil palm, processing of FFB and marketing of CPO and PK. Justifications and steps taken to resolve conflict: (a) Tan Sri Datuk Dr Yusof bin Basiran s capacity as a Director of THLSS will not give rise to a conflict of interest due to his capacity as an independent, non-executive Director in this company. Furthermore, the plantations of THLSS and its subsidiaries are located outside of Peninsular Malaysia and hence it does not compete directly with THP Group. The Board is of the opinion that his vast knowledge and experience of the corporate environment is a valuable addition to the Group and would only enhance the Board s capabilities in executing its duties. He has also given his undertaking that he will abstain from any deliberation pertaining to to be rendered by THP to THLSS and its subsidiaries as well as any other matters which may give rise to situations where he would have conflicting roles due to the provision of management services by THP. 127

9 (b) Dato Che Rashidi bin Che Omar s capacity as the Director of THLSS, PTMGI, THI, THA, TH Muis Agro Sdn Bhd, SSSB and LSB will not give rise to a conflict of interest as these companies plantations are located outside of Peninsular Malaysia and do not compete directly with THP. THB, which is located in Terengganu and which Dato Che Abdullah is a director, has not commenced operations and will not be competing with THP. He has given his undertaking that he will abstain from any deliberation pertaining to to be rendered by THP to all these companies as well as any other matters which may give rise to situations where he would have conflicting roles due to the provision of management services by THP. He also gave his undertaking that he shall abstain from any deliberation at any meeting of Board of Directors of THP and CCM in relation to the supply of fertiliser by CCM to THP as well as any other matters which may give rise to issues of conflict pertaining to the supply of fertiliser by CCM to THP. (c) (d) Dato Wan Zakaria bin Abd Rahman s capacity as a Director of TDM will not give rise to a conflict of interest due to his capacity as an independent, non-executive Director in TDM. THB, which is located in Terengganu and which Dato Wan Zakaria bin Abdul Rahman is a director, has not commenced operations and will not be competing with THP. Md Yusof bin Hussin s capacity as Director of Glenealy Plantations (Malaya) and PTMGI will not give rise to a conflict of interest due to his capacity as an independent, non-executive Director in these companies. Furthermore, the plantations of PTMGI are located outside of Peninsular Malaysia hence they do not compete directly with THP Group. The Board is of the opinion that his vast knowledge and experience of the corporate environment is a valuable addition to the Group and would only enhance the Board s capabilities in executing its duties. He has also given his undertaking that he will abstain from any deliberation pertaining to to be rendered by THP to PTMGI as well as any other matters which may give rise to situations where he would have conflicting roles due to the provision of by THP. (e) Hassan Fikri bin Mohamad s capacity as the Director of THEH and THB whose subsidiary THB is involved in the cultivation of oil palm and selling of FFB will not give rise to a conflict of interest as the plantation of THB, which is located in Terengganu has not commenced operations and will not be competing with THP. He has also given his undertaking that he will abstain from any deliberation pertaining to to be rendered by THP to THEH and THB as well as any other matters which may give rise to situations where he would have conflicting roles due to the provision of by THP. 128

10 (f) Zainal Azwar bin Zainal Aminuddin s capacity as a Director of PTMGI will not give rise to a conflict of interest as the plantations of PTMGI are located outside Malaysia hence it does not compete directly with THP Group. He has also given his undertaking that he will abstain from any deliberation pertaining to to be rendered by THP to PTMGI as well as any other matters which may give rise to situations where he would have conflicting roles due to the provision of by THP. (ii) Save as disclosed below, none of our Directors or substantial shareholder of our Company has any interest, direct or indirect, in the promotion of any material assets acquired or proposed to be acquired, or disposed or proposed to be disposed, or leased or proposed to be leased by our Company within the two (2) years preceding the date of this Prospectus. Transacting parties THEH Nature of relationship THEH is a wholly owned subsidiary of LTH, which is our holding company Nature of transaction Acquisition of 12,750,000 ordinary shares of RM1.00 each in LBU by us from THEH via share sale agreement dated 27 May 2004 pursuant to a rationalisation exercise carried out within LTH Group Value of transaction RM 16,985,378 THLSS THLSS is a wholly owned subsidiary of LTH, which is our holding company Acquisition of 11,560,100 ordinary shares of RM1.00 each in LBB by THLSS from us via share sale agreement dated 27 May 2004 and supplemental share sale agreement dated 21 June 2004 pursuant to a rationalisation exercise carried out within LTH Group 12,499,510 LTH Our substantial shareholder Acquisition of 500,002 ordinary shares of RM1.00 each in THA by LTH from us via a share sale agreement dated 27 April 2005 pursuant to a rationalisation exercise carried out within LTH Group 1 LTH Our substantial shareholder Acquisition of 1,287,350 ordinary shares of RM1.00 each in TH Computers Sdn Bhd by LTH from us via a share sale agreement dated 27 April 2005 pursuant to a rationalisation exercise carried out within LTH Group 1 LTH Our substantial shareholder Acquisition of 200,004 ordinary shares of RM1.00 each in THI by LTH from us via a share sale agreement dated 27 April 2005 pursuant to a rationalisation exercise carried out within LTH Group 200,

11 12.3 Management Agent Services We are the management agent for our substantial shareholder s (LTH) oil palm operations in Malaysia and Indonesia as well as teak plantations in East Malaysia. We ventured into the provision of these to enable us to diversify our revenue base. Our Directors are keen to grow this area of our business with the aim that it will be one of our core activities. Through these services, we have successfully developed and managed large scale plantation on peat soil that is known for its challenges. With the experience acquired, we have the capabilities to cultivate future plantations on peat soil in Malaysia. The type of services rendered and the basis for which these services are charged for these management agreements are illustrated in the table below. Services Rendered Basis of charge 1. Agency Fee Fixed rate per planted area 2. Selling Commission Percentage on gross proceed of all product of this estate 3. Buying Commission Percentage on purchase 4. Group Engineer s Fee Percentage on cost of capital project 5. Mill Management Fee Fixed rate per tonne FFB on throughput charge 6. Planting Adviser s Fee Fixed rate per hectare per visit and expenses for the visits or a pre-determined fixed amount (whichever is greater) 7. Agronomic Advisory Fee Fixed rate per planted hectare per annum 8. Audit/HR/Secretarial/Corporate/ Account/Advisory Fee Fixed rate per planted hectare per annum Deleted: Charged Deleted: Charged 12.4 Declaration by Advisers CIMB s sister company, Bumiputra-Commerce Bank has extended a back to back bank guarantee facility of RM3 million to THP which is secured over a fixed deposit of the same amount. As at 28 February 2006, RM914,650 has been utilised. As THP will not receive any proceeds from the IPO which may then be utilised to repay the banking facilities provided by Bumiputra-Commerce Bank, CIMB is of the view that there are no circumstances which would give rise to a conflict of interest situation in its capacity as the adviser for the IPO. Messrs. KPMG Desa Megat & Co. has confirmed that there is no existing or potential conflict of interest in its capacity as the Auditors and Reporting Accountants in relation to the IPO. Messrs. Zaid Ibrahim & Co. has been appointed as the legal counsel for THP Group in relation to the IPO. Dato Dr Nik Norzrul Thani bin Nik Hassan Thani who is a partner of Messrs. Zaid Ibrahim & Co. currently sits on the Board of Directors of LTH. Dato Dr Nik Norzrul Thani bin Nik Hassan Thani s capacity as a member of the Board of Directors of LTH does not give rise to a conflict of interest as he is not involved in the due diligence process nor is he the engagement partner for the IPO. C H Williams Talhar & Wong Sdn Bhd has confirmed that there is no existing or potential conflict of interest in its capacity as the valuers in relation to the IPO. 130

97 Directors Report 103 Statements of Financial Position 105 Statements of Profit or Loss and other Comprehensive Income 106 Consolidated Statement

CONSOLIDATED FINANCIAL STATEMENTS 97 Directors Report 103 Statements of Financial Position 105 Statements of Profit or Loss and other Comprehensive Income 106 Consolidated Statement of Changes in Equity