Takaso Resources Berhad K Annual Report Contents

Transcription

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2 Takaso Resources Berhad K Annual Report 2011 Contents 2 Notice of Annual General Meeting 4 Statement Accompanying The Notice Of Fourteenth Annual General Meeting 5 Corporate Information 6 Corporate Structure 7 Five Year Financial Highlights 8 Board of Directors 11 Additional Compliance Information 14 Audit Committee Report 18 Statement On Corporate Governance 24 Statement Of Internal Control 26 Directors Responsibility Statement 27 Executive Chairman s Statement 30 Export Markets 31 Financial Statements 112 List of Properties 113 Analysis of Shareholdings 116 Analysis Of Warrant A (Takaso-WA) Holdings 118 Analysis Of Warrant B (Takaso-WB) Holdings Proxy Form

3 Notice of Annual General Meeting NOTICE IS HEREBY GIVEN THAT the Fourteenth Annual General Meeting of the Company will be held at the Registered Office of the Company at K55 Jalan Kesang, Kawasan Perindustrian Tanjung Agas, Ledang, Johor Darul Ta zim on Wednesday, 21 December 2011, at 2.30 p.m. for the following purposes:- 2 AGENDA As Ordinary Business:- 1. To receive the Audited Financial Statements of the Company and of the Group for the financial year ended together with the Directors and Auditors Reports thereon. (Please refer Explanatory Note 1) 2. To approve the payment of Directors fees of RM62,000 for the financial year ended. (Ordinary Resolution 1) 3. To approve the payment of Directors fees of not exceeding RM150,000 for the financial year ending 31 July (Ordinary Resolution 2) 4. To re-elect the following Directors who retire in accordance with Article 92 and Article 98 of the Company s Articles of Association and being eligible, offered themselves for re-election:- (i) Tee Tze Chern, JP (Article 92) (Ordinary Resolution 3) (ii) Wong Koon Wai (Article 98) (Ordinary Resolution 4) 5. To re-appoint Messrs. BDO as Auditors of the Company for the financial year ending 31 July 2012 and to authorise the Board of Directors to fix their remuneration. (Ordinary Resolution 5) AS SPECIAL BUSINESS:- To consider and if thought fit, to pass the following resolution with or without modifications as an Ordinary Resolution:- 6. Proposed Issuance of New Ordinary Shares of RM0.25 Each Pursuant to Section 132D of the Companies Act, 1965 THAT subject always to the Companies Act, 1965, the Articles of Association of the Company and the approvals of the relevant regulatory authorities, the Directors be and are hereby empowered pursuant to Section 132D of the Companies Act, 1965, to issue new ordinary shares of RM0.25 each in the Company from time to time and upon such terms and conditions to such persons and for such purposes as the Directors may deem fit PROVIDED THAT the aggregate number of new ordinary shares to be issued pursuant to this resolution does not exceed ten percent (10%) of the total issued share capital of the Company and that such authority shall unless revoked or varied by an ordinary resolution by the shareholders of the Company in general meeting, commence upon the passing of this resolution until the conclusion of the next annual general meeting of the Company AND THAT the Directors are further authorised to do all such things and upon such terms and conditions as the Directors may deem fit and expedient in the best interest of the Company to give effect to the issuance of new ordinary shares under this resolution including making such applications to Bursa Malaysia Securities Berhad for the listing of and quotation for the new ordinary shares to be issued pursuant to this resolution. (Ordinary Resolution 6) (Please refer Explanatory Note 2) 7. To transact any other ordinary business where due notice has been given in accordance with the Companies Act, By order of the Board, TAN BEE HWEE (MAICSA ) LAM SOOK CHING (MAICSA ) Secretaries Melaka 29 November 2011

4 Takaso Resources Berhad K Annual Report 2011 Notes: 1. A member of the Company who is entitled to attend and vote at the meeting is entitled to appoint more than two (2) proxies to attend and vote instead of him/ her. Where a member appoints two (2) or more proxies, the appointment shall be invalid unless he/she specifies the proportion of his/her shareholdings to be represented by each proxy. A proxy may but need not be a member of the Company and a member may appoint any person to be his/her proxy without limitation and the provisions of Section 149(1)(a),(b),(c) and (d) of the Companies Act, 1965 shall not apply to the Company. 2. Where a member is an authorised nominee, it may appoint more than one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account. 3. The instrument appointing a proxy shall be in writing by the appointor or an attorney duly authorised in writing or, if the appointor is a corporation, whether under its seal or by an officer or attorney duly authorised. 4. The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy of that power or authority shall be deposited at the Registered Office of the Company at K55 Jalan Kesang, Kawasan Perindustrian Tanjung Agas, Ledang, Johor Darul Ta zim not less than forty-eight (48) hours before the time for holding the meeting or at any adjournment thereof. 5. In respect of deposited securities, only members whose names appear in the Record of Depositors on 14 December 2011 ( General Meeting Record of Depositors ) shall be eligible to attend the meeting. Explanatory Notes on Ordinary and Special Business:- 1. Item 1 of the Agenda This Agenda item is meant for discussion only as the provision of Section 169(1) of the Companies Act, 1965 does not require a formal approval of the shareholders for the Audited Financial Statements. Hence, this Agenda item is not put forward for voting. 2. Item 6 of the Agenda Ordinary Resolution 6 proposed under item 6 of the Agenda is for the purpose of granting a renewal of a general mandate and if passed, will give the Directors authority to issue and allot new ordinary shares of up to an amount not exceeding ten percent (10%) of the issued share capital of the Company for such purposes as the Directors would consider to be in the best interest of the Company. This authority will commence from the date of this Annual General Meeting and, unless earlier revoked or varied by the shareholders of the Company at a subsequent general meeting, will expire at the next annual general meeting of the Company. The mandate will provide flexibility to the Company for the allotment of shares not exceeding ten percent (10%) of its existing paid-up share capital to raise funds for future investments, acquisitions and/or working capital requirements. As at the date of this Notice, no new shares have been issued pursuant to the mandate obtained at the last Annual General Meeting of the Company held on 27 December ANNUAL REPORT OF THE COMPANY: The 2011 Annual Report of the Company is in CD-ROM format. A printed copy of the Annual Report shall be provided to the shareholders within four (4) market days from the date of receipt of the verbal or written request. Shareholders who wish to receive the printed copy of the Annual Report and who require assistance with viewing the CD-ROM, kindly contact Ms. Lily Tee at Tel. No or fax the request form for a printed copy of Annual Report at Fax No or send the request form to K55 Jalan Kesang, Kawasan Perindustrian Tanjung Agas, Ledang, Johor Darul Ta zim. You may also your request to lily_tee@takaso.com for a printed copy of the Annual Report. 3

5 Statement Accompanying The Notice Of Fourteenth Annual General Meeting 1. Details of Directors Standing for Re-Election and Re-Appointment Details of the Directors who are retiring and standing for re-election at the Fourteenth Annual General Meeting of the Company are set out in the Directors profile appearing on pages 8 to 10 of this Annual Report. 2. Directors Standing for Re-election and Re-appointment a. Tee Tze Chern, JP (Article 92) b. Wong Koon Wai (Article 98) 3. Details of Attendance of Directors at Board Meetings A total of six (6) Board of Directors Meetings were held during the financial year ended, details of Directors attendance at Board meetings are set out in the Corporate Governance Statements appearing on page 11 of this Annual Report. 4. Date, Time and Place of the Annual General Meeting Date : Wednesday, 21 December 2011 Time : 2.30 p.m. Place : The Registered Office of the Company K55 Jalan Kesang Kawasan Perindustrian Tanjung Agas Ledang, Johor Darul Ta zim 4

6 Corporate Information Takaso Resources Berhad K Annual Report 2011 BOARD OF DIRECTORS Dato Tee How Cut, PIS, DPTJ Chairman (Resigned w.e.f ) Tee Tze Chern, JP Executive Chairman (Re-designated as Executive Chairman w.e.f ) Chin Boon Kim Executive Director (Appointed w.e.f ) Tunku Makhlad Bin Tunku Mohamed Jamil Independent Non-Executive Director Tan Ooi Jin Independent Non-Executive Director (Appointed w.e.f ) Alex Ng Khang Hui Independent Non-Executive Director (Resigned w.e.f ) To Peng Koon Independent Non-Executive Director (Resigned w.e.f ) Wong Koon Wai Independent Non-Executive Director (Appointed w.e.f ) AUDIT COMMITTEE Chairman Wong Koon Wai Member Tunku Makhlad Bin Tunku Mohamed Jamil Tan Ooi Jin NOMINATION COMMITTEE Chairman Tunku Makhlad Bin Tunku Mohamed Jamil Member Tan Ooi Jin Wong Koon Wai REMUNERATION COMMITTEE Chairman Tee Tze Chern, JP Member Tan Ooi Jin Wong Koon Wai REGISTERED OFFICE and PRINCIPAL PLACE OF BUSINESS K55 Jalan Kesang Kawasan Perindustrian Tanjung Agas Ledang, Johor Darul Ta zim Tel : Fax : takaso@takaso.com SHARE REGISTRAR Symphony Share Registrars Sdn Bhd Level 6 Symphony House Block D13 Pusat Dagangan Dana 1 Jalan PJU 1A/46, Petaling Jaya Selangor Darul Ehsan Tel : Fax : COMPANY SECRETARIES Teo Soon Mei (MAICSA ) (Resigned w.e.f ) Tan Bee Hwee (MAICSA ) (Appointed w.e.f ) Lam Sook Ching (MAICSA ) (Appointed w.e.f ) AUDITORS BDO (AF0206) Chartered Accountants Suite 18-04, Level 18 Menara MAA No. 15 Jalan Dato Abdullah Tahir Johor Bahru, Johor Darul Ta zim Tel : Fax : PRINCIPAL BANKERS HSBC Bank Malaysia Berhad Malayan Banking Berhad CIMB Bank Berhad STOCK EXCHANGE LISTING Main Market Consumer Products Bursa Malaysia Securities Berhad Stock Name and Stock Code : TAKASO (7071) : TAKASO-WA (7071WA) : TAKASO-WB (7071WB) (Listed on the Malaysian stock exchange since 1999) WEBSITE INVESTOR RELATIONS Mr. Tee Tze Chern, JP (Executive Chairman) Tel : Fax : francis_tee@takaso.com 5

7 Corporate Structure Takaso Rubber Products Sdn. Bhd. (Company No V) Manufacturing of rubber products and baby products and trading in baby accessories, apparels and milk powder. 100% 100% Takaso marketing Sdn. Bhd. (Company No A) Marketing of rubber products and baby products. JAPLO HEALTHCARE SDN. BHD. 100% (Company No H) Distributing and retailing of baby products. 100% Takaso TRADING Sdn. Bhd. (Formerly known as Romantic Family Planning Sdn. Bhd. ) (Company No M) Dormant. 100% Takaso International Sdn. Bhd. (Formerly known as Secret Universal Sdn. Bhd. ) (Company No X) Dormant. A pioneer manufacturer and exporter of condoms and babycare accessories such as baby feeding bottle, soothers and teats in Malaysia. 100% Takaso INDUSTRIES PTE. LTD. (Company Registration No W) Trading of industrial cable support system 6

8 Five Year Financial Highlights Takaso Resources Berhad K Annual Report 2011 Revenue (RM 000) Loss Before Tax (RM 000) Loss For The Financial Year (RM 000) Net Tangible Assets Per Share (RM) Net Loss Per Share RM (Sen) ,157 24,523 21,886 19,045 16, (4,116) (709) (2,583) (1,536) (2,163) (3,984) (931) (2,477) (1,536) (2,163) (9.67) (2.26) (6.01) (3.73) (5.25) Revenue RM ,157 24,523 21,886 19,045 16,844 Loss Before Tax RM 000 (4,166) (709) (2,583) (1,536) (2,163) Net Loss For The Financial Year RM 000 (3,984) (931) (2,477) (1,536) (2,163) Net Tangible Assets Per Share RM Net Loss Per Share RM(sen) (9.67) (2.26) (6.01) (3.73) (5.25) 7

9 Board of Directors Tee Tze Chern, JP Aged 46, Malaysian Executive Chairman, Chairman of Remuneration Committee Chin Boon Kim Aged 38, Malaysian Executive Director Mr. Tee Tze Chern, JP was appointed to the Board as the Managing Director on 22 December 1998 and was re-designated as Executive Chairman on 27 December 2010 following the resignation of Dato Tee How Cut as Chairman of the Board of Directors on 14 December Mr. Tee is also Chairman of the Remuneration Committee of the Company. Mr. Tee graduated from the Rubber Research Institute with a Diploma in He has been a member of the Association of Overseas Technical Scholarship Malaysia since 1990 and a member of the Malaysian Institute of Management since He has over 19 years of experience in the baby products and condom industry. He has previously been invited to sit in SIRIM s Technical Committee on Standard Specifications under the ISO division in mechanical contraceptive in Mr. Tee Tze Chern, JP sits on the board of several private limited companies. Trainings attended by Mr. Tee during the financial year ended are as follows:- - Sustainability Program for Corporate Malaysia. - Seminar Hari Harta Intelek Negara Marketing and Branding Conference Mr. Chin Boon Kim was appointed to the Board as the Executive Director on 23 September After completing his secondary education, he began his career with Eli Trading Co. in 1992 and his last posting before leaving the company was as the Operations Manager overseeing to Eli Trading s operations and logistics. During his tenure with Eli Trading, he contributed to the company s expansion and was in charge of its new branch office. Mr. Chin started his own company in 2001 specialising in total nationwide endto-end logistics solutions from transportation to manpower and warehousing and he brings with him a wealth of operational and management experience with a vast networking resources in its related industries. He does not hold any other directorships in public companies. Trainings attended by Mr. Chin during the financial year ended are as follows:- - Mandatory Accreditation Programme for Directors of Public Listed Companies conducted by Bursatra Sdn. Bhd. - Half-day Program on the Corporate Governance Guide: Towards Boardroom Excellence in Mandarin. 8

10 Takaso Resources Berhad K Annual Report 2011 Tunku Makhlad Bin Tunku Mohamed Jamil Aged 66, Malaysian Independent Non-Executive Director Member of Audit Committee and Chairman of Nomination Committee Tan Ooi Jin Aged 36, Malaysian Independent Non-Executive Director Member of Audit Committee, Nomination Committee and Remuneration Committee Tunku Makhlad Bin Tunku Mohamed Jamil was appointed to the Board as an Independent Non-Executive Director on 11 February He is a member of the Company s Audit Committee and Chairman of the Nomination Committee. Tunku Makhlad is a Graduate member of the Chartered Institute of Transport. He has a diploma in Automobile Engineering in Association with The Institute of Road Transport Engineers, London (U.K.) and a post-diploma in Transport Management from the Willesden College of Technology, London (U.K.). Tunku Makhlad was a Production Executive attached to the Associated Motor Industry Sdn. Bhd. of the Sime Darby Group from 1976 till 1981 before joining Malaysia Airlines Berhad ( MAS ) as Transport Administrator in He was promoted to the post of Transport Controller from 1994 until his resignation from MAS in His last employment was with Jimah Energy Venture Sdn. Bhd. as the Senior Executive overseeing to Public Relations and Protocol at the Jimah Power Plant in Port Dickson, Negeri Sembilan prior to his retirement in December He does not hold any other directorships in public companies. Training attended by Tunku Makhlad during the financial year ended 31 July 2011 is as follows:- - What Directors Should Know about the Investor Mindset Mr. Tan Ooi Jin was appointed to the Board as an Independent Non-Executive Director on 14 September He is a member of the Company s Audit Committee, Nomination Committee and Remuneration Committee. A former ASEAN scholar, he holds a LL.B. (Honours) from the University of Newcastleupon-Tyne, UK. He completed his certificate in legal practice in 2002 and was called to the Bar in November He has been a member of the Bar Council of Malaysia since Mr. Tan is currently a partner of Messrs. Feroz & Co., a legal entity that specialises in corporate, commercial, cross-border transactions and ICT matters. He started his legal career in a medium-sized firm with an international affiliation focusing on corporate and ICT matters. He left the firm as a partner. While there, Mr. Tan gained recognition and was listed in the independent publication Asia Pacific Legal 500 in three practice areas in w h i c h i n c l u d e d I T a n d telecommunications. He also advises the Technopreneurs Association of Malaysia and its members on legal issues. Mr. Tan has been involved in the listing of various companies in Malaysia, London and Hong Kong and is familiar with the rules and requirements of regulators. He currently sits on the Board of Tejari Technologies Berhad and The Media Shoppe Berhad as well as a private company involved in circuit manufacturing and whose ultimate holding company is listed on the NASDAQ, New York, America. Training attended by Mr. Tan during the financial year ended is as follows:- - Sustainability Program for Corporate Malaysia 9

11 Board of Directors (continued) Wong Koon Wai Aged 36, Malaysian Independent Non-Executive Director Chairman of Audit Committee, Member of Nomination Committee and Remuneration Committee Mr. Wong Koon Wai was appointed to the Board as an Independent Non-Executive Director on 29 June He is Chairman of the Company s Audit Committee and a member of both the Nomination Committee and Remuneration Committee of the Company. Mr. Wong Koon Wai graduated from the Royal Melbourne Institute of Technology (RMIT) University in Melbourne, Australia in 1999 with a Bachelor of Business (majoring in Accountancy). He is a member of the Malaysian Institute of Accountants (MIA) and CPA Australia. He began his career in audit and assurance in In 2003, he joined Crowe Horwath and was promoted to Senior Manager in During his eight (8) years service with Crowe Horwath, he was involved in the audit and assurance service for a wide range of industries. He was also involved in special audits, listing exercises, mergers and acquisitions as well as fund-raising exercises. He is currently the financial controller of a private company. He does not hold any other directorships in public companies. Following his appointment to the Board on 29 June 2011 till the end of the financial year, Mr. Wong did not attend any training but has registered himself for the Mandatory Accreditation Programme for Directors of Public Listed Companies conducted by Bursatra Sdn. Bhd. Notes:- Family Relationship Mr. Tee Tze Chern, JP and Ms. Lily Tee are siblings. Ms. Lily Tee sits on the Board of the following subsidiaries of the Company alongside Mr. Tee Tze Chern:- - Takaso Rubber Products Sdn. Bhd. - Takaso Marketing Sdn. Bhd. - Japlo Healthcare Sdn. Bhd. Save as disclosed above, none of the other Directors of the Company has any relationship with any directors or substantial shareholders of the Company. Conflict of Interest None of the Directors have any conflict of interest with the Company. Conviction of Offences A fine of RM100, was imposed by the Securities Commission ( SC ) on the following persons for failure to comply with all the relevant requirements relating to the mandatory offer pursuant to Practice Note of the Malaysian Code on Take-Overs and Mergers 1998 ( the Code ):- a) Dato Tee How Cut, PIS, DPTJ (the former Chairman of the Company); b) Mr. Tee Tze Chern, JP (the Executive Chairman of the Company); c) Datin Teo Beng Ha (a former Director of the Company); d) Madam Tee Bee Leng, PJK (a former Director of the Company); and e) Parties acting in concert with it. SC had on 22 December 2006 filed a civil suit against Up & Famous Sdn. Bhd. ( UFSB ), the former substantial shareholder of the Company, and parties acting in concert with it (hereinafter referred to as the Defendants ) in KL High Court Originating Motion on D , Suruhanjaya Sekuriti v Up & Famous Sdn Bhd & 6 others. The Kuala Lumpur High Court made the following Orders on 7 August 2009:- 10 (i) Within 21 days of being ordered to do so, each of the Defendants, whether by themselves or by their servants or agents, circulate the offer and compensation

12 Takaso Resources Berhad K Annual Report 2011 Additional Compliance Information documents in the form of Exhibit A15 attached to the Affidavit affirmed by Md Noor Bin Abd Rahim and filed in support of the Motion dated 21 December 2006 (subject to updating of current information) to all the shareholders of TRB; (ii) Within 21 days of the deadline imposed in the said offer and compensation document, the Defendants pay the respective portions to all the shareholders of TRB who are entitled to receive proceeds of the compensation scheme as listed in Exhibit A22 attached to the Affidavit affirmed by the said Md Noor Bin Abd Rahim; (iii) In the event any Defendant fails to comply with the Orders referred to in Paragraphs (i) and (ii) above within the specified period, SC be entitled to take execution proceedings under the Rules of the High Court, 1980, and/or seek leave of this Honourable Court to punish such Defendant for contempt of Court for failure to comply with orders of the Court. (iv) The costs of these proceedings shall be borne by the Defendants on the normal basis and such costs to be taxed. Pursuant to the Order of Kuala Lumpur High Court made on 7 August 2009, UFSB, on behalf of itself and the parties acting in concert with it, circulated the Offer and Compensation Document in accordance with Paragraph 1 of the court order made on 28 August 2009 to all the shareholders of the Company. UFSB had on 18 November 2009 and 19 November 2009 respectively to complete the acquisition of 4,500 TRB shares at the price of RM1.06 per share from the qualified shareholders of TRB pursuant to the Restricted Unconditional Mandatory offer by UFSB to qualified shareholders of TRB. Other than as disclosed, none of the other Directors of the Company have been convicted of any offences within the past ten (10) years other than traffic offences, if any. Sanctions and/or Penalties There were no sanctions and/or penalties imposed on the Group and its subsidiaries, Directors or management by any regulatory bodies other than those disclosed in the conviction of offences. Shareholding in the Company and Subsidiaries of the Company. The direct and indirect interest in securities in the Company and subsidiaries of the Company of those who are directors of the Company according to the Register of Directors shareholdings are set out on page 114 of this Annual Report. Board Meetings A total of six (6) Board Meetings were held during the financial year ended 31 July 2011 and the attendance of each Director is as follows:- Total no. of Meetings held during Director s Board Member tenure in office Meetings Attended Dato Tee How Cut, PIS, DPTJ 3 3 (Resigned w.e.f ) Tee Tze Chern JP 6 5 (Re-designated as Executive Chairman w.e.f ) Alex Ng Khang Hui 2 2 (Resigned w.e.f ) To Peng Koon 5 5 (Resigned w.e.f ) Tunku Makhlad Bin Tunku Mohamed Jamil 6 6 Chin Boon Kim 4 3 (Appointed w.e.f ) Tan Ooi Jin 5 5 (Appointed w.e.f ) Wong Koon Wai 1 1 (Appointed w.e.f ) 11

13 Additional Compliance Information (continued) Material Contracts There were no material contracts entered into by the Company and its subsidiaries involving Directors and major shareholders interests still subsisting at the end of the financial year. Options, Warrants or Convertible Securities No options were issued by the Company or exercised during the financial year ended. The Company had issued a total of 5,883,992 Existing Warrants at an exercise price of RM1.00 and as at its financial year end on, none of the Existing Warrants were exercised and 5,883,992 Existing Warrants were outstanding. Subsequent to the Company s financial year end, the number of Existing Warrants, also referred to as TAKASO-WA, was on 11 August 2011 adjusted to 6,529,131 at an exercise price of RM0.89 in consequent to the Rights Issue of Shares with Warrants Exercise, more information found under Utilisation of Proceeds. Recurrent Related Party Transaction of a Revenue Nature There were no material recurrent related party transaction of a revenue during the financial year other than those disclosed in Note 28 to the financial statements. Share Buy-Backs The Company does not have a share buy-back programme in place. Depository Receipt During the financial year, the Company did not sponsor any depository receipt programme. Profit Guarantee During the financial year, the Company did not provide any profit guarantee. Variation of Results There were no profit estimates, forecasts or projections or unaudited financial results released by the Company which differed by ten percent (10%) or more from the audited results for the financial year ended. Utilisation of Proceeds Rights Issue - 21 November 2003 A revision in the utilisation of proceeds arising from the rights issue of 5,884,000 new TRB Shares with 5,884,000 free detachable warrants at an issue price of RM1.00 per share has been duly passed and approved at the Extraordinary General Meeting held on 27 December The construction of two (2) units of logistics warehouses at Tangkak, Johor costing RM2.2 million has been revised to central region of Peninsular Malaysia. The Board of Directors of the Company has approved a further extension of the timeframe for utilisation of the abovesaid proceeds until the Company can identify a suitable warehouse located at central region of Peninsular Malaysia. As at the financial year end on, management has yet to identify a suitable warehouse that meets the Group s current operational needs. Rights Issue - 13 September 2011 The Company had embarked on a Rights Issue of Shares with Warrants which was completed on 13 September 2011 following the listing and quotation for 94,033,811 Rights Shares of RM0.25 each together with 56,420,285 Warrants (these new warrants are known as TAKASO-WB ) on the Main Market of Bursa Securities Berhad on 13 September 2011 ( Rights Issue of Shares with Warrants Exercise ). The said Rights Issue of Shares with Warrants Exercise was approved at the Company s Extraordinary General Meeting held on 28 April Total proceeds raised from the Rights Issue of Shares with Warrants Exercise was RM million and will be utilised as follows:- 12

14 Takaso Resources Berhad K Annual Report 2011 Manner of Utilisation RM ( 000) As Working Capital - Overseas expansion 6,500 - Operating expenses 11,312 - New business investment 9,500 27,312 Capital Expenditure 3,000 Repayment of borrowings 2,000 Expenses in relation to the Rights Issue of Shares with Warrants Exercise ,912 Non-Audit Fees The amount of non-audit fees paid to external auditors by the Group for the financial year ended was RM18,000. Corporate Social Responsibility ( CSR ) The Group is committed to operate its business in a socially responsible manner towards its employees, the wider environment, the community and the marketplace. The following are the Group s CSR activities conducted during the financial year ended 31 July 2011:- 1) CSR in the Community Every year in the month of March, this year being of no exception, the Group had organised an annual blood donation campaign in collaboration with the local Hospital Pakar Sultanah Fatimah, Muar, to boost the nation s blood bank. This yearly effort has been recognised by the Hospital and it is hoped the annual campaign can help to foster awareness of the spirit of love, care and giving to the community. The Group s continued efforts to reach out to the community include supporting and sponsoring the following programmes:- a) Being the main sponsor for the HIV/AIDS Awareness campaign held at Dataran Pahlawan, Melaka Megamall for the CSR Month. b) Sponsoring the I care, do you? Health Awareness Campaign organised by the First Aid Society of Universiti Tunku Abdul Rahman Perak Campus. c) Supply of food aid to children welfare homes. d) Supply of diapers to old folks public nursing homes. 2) CSR at the Workplace Safety is our priority at work. The on-going in-house safety training is conducted for all our employees. The Health and Safety Audit Committee performs on-going fire hazard internal audit at every six (6) monthly intervals in our factory. In addition, management constantly conducts various structural training and coaching sessions to improve and upgrade the level of our employees knowledge and competency at work. 3) CSR towards the Environment The Group s current pursuit is to ensure that all residual schedule wastes are properly stored and disposed of in accordance with the Akta Alam Sekeliling (1974) (Malaysia) to reduce environment contamination. The Group also promotes environmentally conscious work practices and our internal policy dictates strict compliance to the environment regulations. 4) CSR in the Marketplace The Group believes that in order to achieve sustainable business interests and to be able to respond to the increasing demands from our customers and stakeholders, we have to implement socially responsible business conduct that protects the interest of our customers, shareholders, suppliers, consumers and public at large. The Company is committed to conduct its business with integrity while in compliance with all applicable laws. We also seek our suppliers to conform to the highest standards of business practices in the marketplace to comply with the requirements of our vendors. Audit will be performed by the Group on our suppliers and the audit trail and data on material used by suppliers will be provided to the Group to ensure that products meet the safety and other standards and requirements. In addition, the Group has applied risk management standards on the products based on the requirements of EN ISO

15 Audit Committee Report The Audit Committee for the financial year ended comprised the following members:- 1. Members and Meeting attendance Membership of the Audit Committee and details of members attendance at the five (5) meetings during the financial year ended are as follows:- Audit Committee Member Composition Total no. of Meetings held Meetings Attended during Director s Tenure in Office To Peng Koon Chairman/Independent Non-Executive Director 4 4 (Resigned w.e.f ) Wong Koon Wai Chairman/Independent Non-Executive Director 1 1 (Appointed w.e.f ) Alex Ng Khang Hui Member/Independent Non-Executive Director 1 1 (Resigned w.e.f ) Tunku Makhlad Bin Tunku Mohamed Jamil Member/Independent Non-Executive Director 5 5 Tan Ooi Jin Member/Independent Non-Executive Director 3 3 (Appointed as Director on and as member w.e.f ) Mr. Wong Koon Wai is a member of the Malaysian Institute of Accountants (MIA) and CPA Australia. The composition of the Audit Committee during the financial year complied with the Terms of Reference of the Audit Committee which is, the committee shall comprise not less than three (3) members and a majority of whom shall be independent directors and at least one (1) member of the Audit Committee has the required financial background and experience. The Executive Chairman, Chief Financial Officer, General Manager and representatives of the external auditors are normally invited to attend Audit Committee meetings while the internal auditors attend twice a year, at a six (6) monthly interval. Other Board members may attend the meeting upon invitation by the Audit Committee. The Minutes of the Audit Committee meetings are extended to all members of the Board of Directors and significant issues are discussed at Board meetings held subsequent to the Audit Committee meetings. 2. Meetings The Audit Committee shall meet regularly, with due notice of issues to be discussed, and shall record its conclusions in discharging its duties and responsibilities. Meetings shall be held not less than four (4) times a year and additional meetings shall be called as the Chairman decides in order to fulfill its duties. 14

16 Takaso Resources Berhad K Annual Report 2011 The Company Secretary or any person appointed by the Audit Committee shall act as Secretary of the Audit Committee and shall be responsible, in conjunction with the Chairman, for drawing up the agenda and other supporting explanatory documentation for circulation to the Audit Committee members prior to each meeting. The Secretary will also be responsible for keeping the minutes of meetings of the Audit Committee and circulating them to the Audit Committee members and other members of the Board of Directors. The Chairman of the Audit Committee shall engage on a continuous basis with senior management such as the Chairman, the Executive Director, Chief Financial Officer, the General Manager and Head of Internal Audit and the external auditors in order to be kept informed of matters affecting the Group. The Chairman of the Audit Committee shall also convene a meeting of the Audit Committee to consider any matters that the external auditors or internal auditors believe should be brought to the attention of the Directors or shareholders. At least twice a year, the Audit Committee shall meet with the external auditors without the presence of any executive directors or employees of the Company. 3. Terms of Reference A summary of the key functions, roles and responsibilities as spelt out in the Terms of Reference of the Audit Committee is as follows:- Authority The Audit Committee is empowered and authorised by the Board of Directors at the cost of the Company:- (a) to investigate any matters within its terms of reference and shall have unrestricted access to both the internal and external auditors and to all employees of the Group; (b) to have the resources in order to perform its duties as set out in its terms of reference; (c) to have full and unrestricted access to any information pertaining to the Company and the Group; (d) to have direct communication channels with the external auditors and internal auditors; (e) to obtain external legal or other independent professional advice where necessary; (f) to invite outsiders with relevant experience to attend its meetings, whenever deemed necessary; and (g) to convene meetings with the external auditors, the internal auditors or both excluding the attendance of other directors and employees of the Company, whenever deemed necessary. Notwithstanding anything contrary hereinbefore stated, the Committee does not have executive powers and shall report to the Board of Directors on matters pertaining to the Company and the Group that it has considered and its recommendations thereon. Duties Duties of the Committee are as follow:- a) To consider and report the same to the Board of Directors of the Company the appointment, nomination, resignation and dismissal of external auditors and their respective audit fees; b) To discuss with the external auditors before the commencement of their audit, the nature and scope of the audit, competency and resources of the external auditors and to ensure co-ordination where more than one audit firm is involved. c) To discuss problems and reservations arising from the interim and final audits and any matters the auditors may wish to discuss (in the absence of management); d) To do the following in relation to the internal audit function and report the same to the Board of Directors of the Company:- 1) to review the adequacy of the scope, functions, competency and resources of the internal audit function and whether it has the necessary authority to carry out its work; 2) to review the internal audit processes and results of the internal audit plan processes or investigation undertaken and where necessary, ensure 15

17 Audit Committee Report (continued) 16 that appropriate actions are taken on the recommendations of the internal audit function; 3) to review any appraisal or assessment of the performance of members of the internal audit function and their respective audit fees; 4) to approve any appointment or termination of senior staff members of the internal audit function; and 5) to take cognisance of resignations of internal audit staff members and provide the resigning staff member an opportunity to submit his reasons for resigning. e) To review the effectiveness of the management information system; f) To review the quarterly results and annual financial statements of the Company and the Group with both the external auditors and management and report the same to the Board of Directors of the Company focusing particularly on:- 1) any change in or implementation of accounting policies and practices; 2) significant adjustment arising from the audit; 3) any unusual events; 4) the going concern assumption; and 5) compliance with accounting standards and other legal requirements. g) To review the following and report the same to the Board of Directors of the Company:- 1) with the external auditors, the audit plan; 2) with the external auditors, their evaluation of the system of internal controls; 3) with the external auditors, their audit report; and 4) the assistance given by the employees of the Company and the Group to the external auditors. h) To review and discuss any management letter sent by the external auditors to the Company and management s response to such letter; i) To consider the report, major findings and management s response thereto on any internal investigations carried out by the internal auditors; j) To review all areas of significant financial risk and the arrangements in place to contain those risks to acceptance levels; k) To consider and review any related party transactions and potential conflict of interest situations that may arise within the Company and the Group including any transaction, procedure or course of conduct that raises questions of management integrity; l) To review and report the same to the Board of Directors of the Company whether there is reason (supported by grounds) to believe that the Company s external auditors are not suitable for re-appointment; m) To review the allocation of options pursuant to the Share Issuance Scheme and make such statement to be included in the annual report of the Company in relation to a share issuance scheme for employees; and n) Any such other functions as may be agreed by the Committee and the Board. Responsibility Where the Committee is of the view that a matter reported by it to the Board of Directors of the Company has not been satisfactorily resolved resulting in a breach of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad or any serious offence involving fraud and dishonesty committed by the Company or the Group, the Committee has the responsibility to promptly report such matters to Bursa Malaysia Securities Berhad or any other relevant authorities. 4. Summary of Activities During the Year During the financial year ended, activities undertaken by the Audit Committee include:- (a) Review of the quarterly unaudited financial statements of the Group; (b) Review of inter-company transactions and/or any related party transactions or conflict of interest situations that arose within the Group or in the Company;

18 Takaso Resources Berhad K Annual Report 2011 (c) Review of the annual audited financial statements of the Group and the Company for the financial year ended 31 July 2010; (r) Review of the risk profile update and impact report from the external consultants; (d) Review of the Audit Planning Memorandum by the external auditors for audit of the financial year ending ; (e) Review of the external auditors report in relation to its audit and accounting issues; (s) (t) Review of the litigations and claims against the subsidiaries companies of the Company; Review of the forecast consolidated financial statements of the Company; and (f) Discussion with the external auditors without the presence of the Executive Directors and employees of the Company; (u) Review of the proposed corporate exercise of the Company in relation to the Rights Issue of Shares with Warrants. (g) Review of the action plan for internal audit of the Group, the audit findings and the follow-up internal audit reports from the internal auditor; (h) Review of the internal auditors effectiveness, competence and independence; (i) (j) Review of the terms of reference of the audit committee; Discussion and consideration of the utilisation of proceeds arising from the rights issue (2003) of 5,884,000 new TRB Shares with 5,884,000 free detachable warrants at an issue price of RM1.00 per share; (k) Review of the Group s latest business development and operations; (l) Review of the Statement of Directors Responsibility for the financial year ended 31 July 2010; (m) Review of the Statement on Internal Control for the financial year ended 31 July 2010; (n) Review of the Audit Committee Report for the financial year ended 31 July 2010; (o) Review of the Statement on Corporate Governance for the financial year ended 31 July (p) Review of the Statement on Corporate Social Responsibilities for the financial year ended 31 July 2010; 5. Review of Share Issuance Scheme ( SIS ) The SIS has expired on 26 February 2006 pursuant to Bye-Laws 17 of the SIS thus, no review was conducted by the Audit Committee during the year. 6. Internal Audit Function and Risk Management The Group has outsourced its internal audit function to a professional services firm which reports directly to the Audit Committee, assisting the Committee in discharging its duties and responsibilities. The Statement on Internal Control is furnished on pages 24 and 25 of this Annual Report and provides an overview of the state of internal controls within the Group. The scope of internal audit encompasses the examination and evaluation of the adequacy and effectiveness of the Company s governance, system of internal control structure and the quality of performance in carrying out assigned responsibilities to achieve the Company s stated goals and objectives. The internal auditors also performed ad hoc appraisals, inspection, investigations, examinations and reviews that may be requested by the Committee or senior management from time to time. (q) Review of the inter-companies balances for the financial year ended 31 July 2010; 17

19 Statement On Corporate Governance 18 The Board of Directors is pleased to report to the shareholders on the manner the Group has applied the principles and the extent of its compliance with the Best Practices of Corporate Governance as set out in Part I and Part II of the Malaysian Code on Corporate Governance (the Code ) pursuant to Paragraph of the Main Market Listing Requirements ( LR ) of Bursa Malaysia Securities Berhad. The Board considers that it has, to the best of its ability and knowledge, complied with the Best Practices on Corporate Governance as set out in Part 2 of the Malaysian Code on Corporate Governance. BOARD OF DIRECTORS i. Composition and Board Balance ii. The Board comprises five (5) Directors, three of whom are Independent Non- Executive Directors, a list of the entire Board is found on page 5 of this Annual Report while their respective profiles are on pages 8 to 10. The Independent Non-Executive Directors bring with them objective and independent judgement to facilitate a balanced leadership and decision-making process and also, provides for an effective check and balance to safeguard the interests of the minority shareholders and other stakeholders and to uphold high standards of conduct and integrity. The Board considers the current size and composition of its Directors with a diverse mix of experience, skills and expertise ranging from accounting, legal, logistics and general management to be optimum and provides the Board with not only essential commercial skills needed for sound management decisions but also, invaluable practical and operational experience to professionally manage the Group. Board Responsibility The Board is responsible for the overall corporate governance of the Group. The Board retains full and effective control of the management of the Company and its overall responsibilities include strategic formulations, planning, succession planning and execution of the Group s objectives as well as monitoring management s implementation of its decisions. It is the responsibility of the Board to conscientiously iii. weigh and balance the interests of its shareholders and stakeholders with its own objectives during decision making process. The Executive Chairman and together with the Executive Director of the Company, oversee to the running of the business and implementation of the policies and strategies adopted by the Board. The Independent Non-Executive Directors engage proactively with management and both the external and internal auditors to address matters concerning the management and oversight of the Group s business and operations. The Board has set up and delegated certain responsibilities to three (3) Board Committees that operate within clearly defined terms of reference. The Board Committees are the Audit Committee, the Remuneration Committee and the Nomination Committee. Supply of Information Board meetings for the ensuing financial year are scheduled in advance before the end of each financial year so as to enable the Directors to plan ahead and fit the coming year s Board meetings into their schedule. Board meetings are scheduled at quarterly intervals and additional meetings will be held if necessary. Board meetings are conducted in accordance with a structured formal agenda which includes, review of various aspects of the Group s operations, financial performance, business plan, strategic decisions, any major investments, findings from both the external and internal auditors and any other proposals or other significant matters that require the expeditious direction of the Board. The Board members assess the viability of business propositions and corporate proposals and the principal risks that may have significant impact on the Group s business or its financial position and the mitigating factors. During the year, the Board held a total of six (6) meetings and the attendance of each Director is set out in page 11 of this Annual Report. Board meetings are chaired by the Executive Chairman who has the responsibility of ensuring that each agenda item is adequately reviewed and thoroughly deliberated within a reasonable timeframe. A full set of the Board papers for each meeting including financial reports and notices are submitted to the Directors about a week prior to meetings to provide them with sufficient time to evaluate the matters to be discussed and to enable a more informed decision-making process. The Board is also aware of the decisions

20 Takaso Resources Berhad K Annual Report 2011 iv. and salient issues deliberated by board committees through the minutes of these committees. The Directors have a duty to declare immediately to the Board should they have any interest in transactions to be entered into directly or indirectly with the Company or the Group. The interested Directors would serve notice to the Board and thereupon, abstain from deliberations and decisions of the Board on the transaction concerned. In the event a corporate proposal is required to be approved by shareholders, the interested Directors would also abstain from voting in respect of their shareholdings relating to that corporate proposal and would further undertake to ensure that persons connected to them similarly abstain from voting on the resolutions. Senior Management as well as the internal and external auditors of the Company may be invited to attend Board meetings to provide the Board with their views and explanations on certain agenda being tabled to the Board and to furnish clarification on issues that may be raised by the Directors. The Directors have direct access to Senior Management and has complete and unimpeded access information relating to the Group in the discharge of their duties. The Directors also have the liberty to engage independent professional advice if necessary at the Company s expense. Every Board member has ready and unrestricted access to the advice and the services of the Company Secretary in ensuring the effective functioning of the Board. The Directors are also regularly updated and advised by the Company Secretary on new statutory and regulatory requirements issued by regulatory authorities, and the resultant implications to the Company and the Directors in relation to their duties and responsibilities. Appointments to the Board Nomination Committee The Nomination Committee of the Company comprises entirely of Independent Non-Executive Directors. The role of the Nomination Committee is to review and assess the proposed appointment of Directors and thereupon, recommends to the Board for approval. However, the Board makes all decisions on appointments after considering those recommendations. The Nomination Committee would also ensure that the Board has an appropriate balance of expertise and ability. Another objective of this Committee is to assess the effectiveness of the Board as a whole and the contribution of each individual director on an on-going basis. The Nomination Committee will review annually the required mix of skills, experience and other qualities including core competencies which Non-Executive Directors should bring to the Board, identify areas for improvement and review the succession plan for senior management in the Group. Other responsibilities of this Committee are defined in the Terms of Reference of the Nomination Committee. v. Directors Training vi. A familiarisation programme has been put in place for new Directors which include visits to the Group s business and meetings with senior management, where appropriate, to facilitate better understanding of the Group s business and operations. The Board acknowledged that the Directors of the Company, through their varied experience and qualifications, have provided the desired contribution and support to the functions of the Board for the year ended The Board has empowered the Directors of the Company to determine their own training requirements and will evaluate and determine the training needs of its Directors on an on-going basis to assist them in discharging their responsibilities. During the year, all board members save for the newest member to the Board, Mr. Wong Koon Wai, have attended seminars and briefings during the financial year as set out in their respective profiles on pages 8 to 10 of this Annual Report. Re-election In accordance with Company s Articles of Association, at least one-third (1/3) of the directors for the time being shall be subject to retirement by rotation at the Company s annual general meeting. All retiring directors shall be eligible for reelection. In any case, each director shall submit themselves for re-election at regular interval and at least once every three (3) years. Directors appointed by the Board during the financial period before an annual general meeting are subject to retirement and shall be eligible for re-election by 19

21 Statement On Corporate Governance (continued) the shareholders at the Company s next annual general meeting to be held following their appointments. Details of the retiring Directors are disclosed in the Statement Accompanying the Notice of Annual General Meeting on page 4 of this Annual Report. COMMITTEES OF THE BOARD The Board Committees of the Company are as follows:- a) The Audit Committee The Audit Committee s role is to review the adequacy and competency of the Groups internal control system including systems for compliance with applicable laws, regulations, rules, directives and guidelines. The Audit Committee assists and supports the Board s responsibility to oversee the Group s operations by providing a means for review of the Group s processes for producing financial data, its internal controls, and that it is independent of the Group s external and internal auditors. The Audit Committee will discuss with management and the external auditors the accounting principles and standards that were applied and their judgment of the items that may affect the financial statements. It is the policy of the Audit Committee to meet with the external auditors at least twice a year to discuss their audit plan, audit findings and the Company s financial statements. These meetings are held without the presence of the Executive Directors and staff of the Company. b) The Nomination Committee The Nomination Committee held a total of five (5) meetings during the financial year and details of members attendance at meetings are as follows:- Total no. of Meetings held during Director s Nomination Committee Member tenure in office Meetings Attended To Peng Koon (Chairman) 4 4 (Resigned w.e.f ) Tunku Makhlad Bin Tunku Mohamed Jamil (Chairman) 5 5 (Re-designated as Chairman of Nomination Committee w.e.f ) Alex Ng Khang Hui (Member) 2 2 (Resigned w.e.f ) Tan Ooi Jin (Member) 2 2 (Appointed as Director on a nd as member w.e.f ) Wong Koon Wai (Member) 0 0 (Appointed w.e.f ) The Terms of Reference of the Audit Committee are set out under the Audit Committee Report on pages 15 and 16 of this Annual Report. 20

22 Takaso Resources Berhad K Annual Report 2011 c) The Remuneration Committee The Remuneration Committee has a total of three (3) members comprising two (2) Independent Non-Executive Directors and the Executive Chairman who is also Chairman of the Remuneration Committee. The Remuneration Committee met once during the financial year and details of members attendance at meetings are as follows:- Total no. of Meetings held during Director s Remuneration Committee Member tenure in office Meetings Attended Tee Tze Chern, JP (Chairman) 1 1 To Peng Koon (Member) 1 1 (Resigned w.e.f ) Alex Ng Khang Hui (Member) 1 1 (Resigned w.e.f ) Tan Ooi Jin (Member) 0 0 (Appointed as Director on and as member w.e.f ) Wong Koon Wai (Member) (Appointed w.e.f ) 0 0 The Remuneration Committee of the Company has set up a remuneration policy framework and makes recommendations to the Board on the remuneration and other terms of employment for the Executive Directors. The terms of reference of the Remuneration Committee are clearly defined by the Board to its members. The component parts of remuneration of directors of the Company are structured so as to link rewards to corporate and individual performance in the case of executive directors. In the case of non-executive directors, the levels of remuneration are reflected by the experience and level of responsibilities. The Executive Directors will abstain from participating in the discussion with respect to their own remuneration. The determination of remuneration of Non- Executive Directors is a matter for the Board as a whole. The individual concerned will abstain from discussion and decision of his own remuneration. The remuneration of non-executive directors comprises fees while the remuneration package of executive directors comprised basic salary, fees and bonus. The Remuneration Committee meets at least once a year to conduct the annual review of the overall remuneration policy for Directors whereupon recommendations are submitted to the Board for approval. The Company adopted the peer evaluation or self-evaluation process to evaluate the performance of the Directors of the Company. Breakdown of the remuneration of the Directors of the Company for the financial year ended is as follows:- Executive Non-Executive Directors Directors Total (RM 000) (RM 000) (RM 000) Salaries & Other Emoluments Bonus Fees Meeting/Committee Allowance Total The number of Directors, include those Directors who resigned during the financial year, whose remuneration falls into the following bands are as follows:- Number of Directors Executive Non-Executive Range of Remuneration per annum Directors Directors Below 50, RM100,001 to RM150, RM150,001 to RM200,

23 Statement On Corporate Governance (continued) RELATIONSHIP WITH SHAREHOLDERS AND INVESTORS One of the key elements of good corporate governance is being transparent and accountable to all stakeholders. Underlying the transparency and accountability objectives is the provision of clear, relevant, timely, comprehensive and readily assessable information to all stakeholders. i) Shareholders Communication and Investor Relations The Group values its dialogues with investors. The investor relations activities of the Company form an important channel of communication with shareholders, investors and the investment community broadly. The shareholders and investors of the Company can obtain information of the Groups performance and major developments from its Annual Reports, which is disseminated to shareholders either in hard copy or in CD-ROM media, as well as from the Company s website ( for all announcements, press release, products information and to make enquiries. The Executive Chairman of the Company, Mr. Tee Tze Chern, JP, is responsible for the Company s investor relations functions. This reflects the commitment of the Group to maintain good investor relations and to provide views and information on the Group that is appropriate and substantive to investors. Report are sent out not less than twenty-one (21) days from the date of the meeting and explanatory notes or statement to facilitate better understanding and evaluation of issues involved, will accompany items under special business of the meeting. In between AGMs, if a transaction or decision arises that requires shareholders approval, the Board will convene an EGM and the appropriate notice of meeting would be issued together with a circular explaining the intended agenda and purpose of the meeting to facilitate understanding and evaluation. ACCOUNTABILITY AND AUDIT i) Financial Reporting The Board aims to present a balanced, clear and meaningful assessment of the Group s financial position and prospects in all their reports to shareholders, investors, and relevant Regulatory Authorities. The Board is assisted by the Audit Committee to oversee the Group s financial reporting processes and the quality of financial reporting. The Audit Committee also reviews the appropriateness of the Company s and the Group s accounting policies and the changes to these policies. ii) Annual General Meeting and Extraordinary General Meeting The main forum for dialogue with shareholders of the Company is the Company s Annual General Meeting (the AGM ) and the Extraordinary General Meeting ( EGM ). The AGM represents the primary platform for direct two-way interactions between shareholders, Directors and senior management of the Company. During AGMs, shareholders are encouraged to raise questions which the Directors and senior management are at hand to address. Notice of the AGM together with the Annual ii) The Responsibility Statement by the Directors on the annual audited financial statements of the Company and the Group is set out on page 26. Internal Control The Board acknowledges its overall responsibility to maintain a sound and reliable systems of internal control within the Group covering financial, operational and compliance aspects of the Group. The internal control systems of individual business units of the Group are managed by the management and operational team of the respective business units. The system of internal controls is designed to meet the Group s needs and to manage risks to which it is exposed. There is a continuous process of management s risk assessment, internal controls reviews and internal audit assessments on major subsidiaries within the Group. The purpose of 22

24 Takaso Resources Berhad K Annual Report 2011 this continuous process is to ensure that the Group s assets are safeguarded in the interest of preserving the investment of shareholders. The internal audit function is outsourced to external consultants. The outsourced internal auditors meet and report to the Audit Committee at least twice a year to present their reports and to discuss their findings on the adequacy and integrity of the internal control systems of the Group. The Board has through the Audit Committee reviewed the adequacy and integrity of the Group s system of internal controls and the Board s Statement of Internal Control are on pages 24 and 25 of this Annual Report. iii) Relationship with Auditors The Group s independent external auditors are essential for the shareholders in ensuring the reliability of the Group s financial statements and in providing assurance of that reliability to users of these financial statements. The Audit Committee will meet with the external auditors at least twice a year, or more if deemed necessary, to discuss their audit plan, audit findings and the financial statements of the Company without the presence of the Executive Directors and staff of the Company. In addition, the external auditors are invited to attend the annual general meetings of the Company and would be at hand to answer shareholders questions on the conduct of the audit and the preparation and content of the audit report. An appropriate relationship is maintained with the Group s auditors through the Audit Committee. The Audit Committee has been explicitly accorded the power to communicate directly with both the external and internal auditors. A full Audit Committee Report and its Terms of Reference detailing its role in relation to the auditors, is set out on pages 14 to 17 of this Annual Report. Terms of engagement of the services provided by the external auditors are reviewed by the Audit Committee and approved by the Board. In reviewing the terms of engagement for the services to be provided by the external auditors, the Audit Committee ensures that the independence and objectivity of the external auditors are not compromised. 23

25 Statement Of Internal Control The Board of Directors of the Takaso Group of Companies is committed to maintain a sound system of internal control within the Group and is pleased to provide the following statement, made in pursuance to paragraph 15.26(b) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, which outlines the nature and scope of internal control of the Group during the financial year ended 31 July Responsibility The Board acknowledges its overall responsibility for the Group s system of internal controls which includes the establishment of an appropriate control environment and framework as well as reviewing its adequacy and integrity. The system of internal control covers inter alia, risk management procedures, financial, operational and compliance controls. Because of the inherent limitation in any system of internal control, it could only provide reasonable and not absolute assurance against any material misstatement and loss as it is designed to manage rather than eliminate the risk of failure to achieve the policies and objectives of the Group. The Group has had in place an on-going process for identifying, monitoring and managing the significant risks affecting the achievement of its business objectives throughout the period. The Board regularly reviews this process and is of the view that the system of internal controls that has been instituted throughout the Group is sound and adequate to safeguard shareholders investment. Key Features of Internal Control System the Group s quarterly financial results are reviewed and approved by the Audit Committee and the Board; its major subsidiary, Takaso Rubber Products Sdn. Bhd., was certified with ISO Standards carrying the current version of ISO 9001:2008 and ISO 13485:2003 in its manufacturing processes. Internal quality audit was performed annually prior to the annual surveillance audit conducted by the external certification bodies; Management conducts an assessment of staff training needs annually to ensure that staff is armed with the necessary skills to perform their responsibilities diligently. A structured KPI performance appraisal has been instituted to appraise each employees capabilities and achievements. the existence of a formal reporting framework for staff to report on operational performances and the status of control activities periodically; and the outsourced internal audit function to assess the adequacy and integrity of the Group s system of internal controls periodically in accordance with the approved internal audit plan. Risk Management Framework The Enterprise Risk Management ( ERM ) framework contains a risk profile that is reflective of the latest operating environment within the Group. Principal risks identified therein are managed by the management team via routine management meeting and operation reviews with the development and implementation of relevant strategies. 24 The key elements of the Group s existing system of internal control measures are described below:- a clearly defined organisation structure with the lines of responsibility and delegated authority to the management and operating units; the Executive Directors, Senior Management and Head of Departments meet regularly to discuss key risks affecting the corporate, operational, financial and compliance aspects of the Group and the relevant actions taken to address, manage and mitigate any risks or potential risks which have been identified accordingly;

26 Takaso Resources Berhad K Annual Report 2011 Internal Audit Function The Group s internal audit function is outsourced to external consultants. The outsourced internal auditors assist the Board and the Audit Committee in providing an independent assessment on the adequacy and integrity of the Group s internal control system. The annual internal audit plan which reflects the risk profile of the Group s business and operation units, is tabled for the review and approval of the Audit Committee. The outsourced internal auditors report directly to the Audit Committee on its audit activities and the outcome of internal audit assessments including follow-up review on the implementation status of management s actions to address the internal audit findings highlighted. The effectiveness of the system of internal controls of the Company and the Group is reviewed by the Audit Committee during its quarterly meetings. The review covers the financial, operational and compliance controls. The Audit Committee assists the Board in its review of the effectiveness of the internal control and risk management processes of the Group. Minutes of the Audit Committee meetings are circulated to the Directors for notation and if necessary, action by the Board. The cost incurred in relation to the internal audit function during the financial year ended was RM36,000. Review of the Statement by External Auditors The external auditors have reviewed this Statement of Internal Control for inclusion in the Annual Report of the Group for the financial year ended in accordance with Recommended Practice Guidance 5 Guidance for Auditors on the Review of Directors Statement on Internal Control. They have reported to the Board that nothing has come to their attention that causes them to believe that the Statement is inconsistent with their understanding of the processes adopted by the Board in reviewing the adequacy and integrity of the system of internal controls. 25

27 Directors Responsibility Statement This Director s responsibility statement is issued, as required under paragraph 15.27(a) of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad, in respect of the preparation of the audited financial statements of the Group and of the Company for the financial year ended. The Directors are required by law to prepare financial statements for each financial year that give a true and fair view of the state of affairs of the Group and of the Company as at the end of the financial year and of the results and cashflow of the Group and of the Company for the year ended. In preparing the financial statements for the financial year ended, the Directors have:- adopted the applicable accounting standards issued by the Malaysian Accounting Standards Board and applied them consistently; made estimates and judgments which are reasonable and fair; ensured that applicable accounting standards have been followed; and prepared the financial statements on the going concern basis. The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy, at any time, the financial positions of the Group and of the Company thus ensuring that the financial statements comply with the Companies Act, Further thereto, the Directors are also responsible for taking reasonable steps to safeguard the assets of the Group to prevent and detect fraud and other irregularities. The Directors confirm that they have complied with these requirements and have a reasonable expectation that the Group has adequate resources to continue its operation for the future and to continue to adopt a going concern basis in preparing the financial statements. The Directors also confirmed that the annual audited financial statements of the Company are properly drawn up to give a true and fair view of the state of affairs of the Group for the financial year ended. 26

28 Executive Chairman s Statement Takaso Resources Berhad K Annual Report 2011 Dear Shareholders, On behalf of the Board of Directors of Takaso Resources Berhad, I am pleased to present herewith the Group s Annual Report for the financial year ended 31 July

29 Executive Chairman s Statement (continued) Financial Results Group revenue for the financial year ended was RM16.8 million, 11.6% lower than the revenue of RM19.0 million achieved the year before. The Group ended the financial year with a loss before tax of RM2.2 million compared to the previous year s loss of RM1.5 million. The drop in revenue was primarily because of lower exports due to reduced orders from the Middle East countries following the political crisis besieging the region and the customers in Europe in the wake of the financial crisis roiling the Eurozone. In addition, cost of production has risen considerably as material costs, especially latex, and packaging material, have been increasing incessantly. The shortage of labour has also led to a higher rate of overtime. All these combined factors resulted in a net loss for the year. Corporate Exercises During the year under review the Company had successfully undertaken the following key corporate exercises which had received the prior approval of the members at the Extraordinary General Meeting of the Company held on 28 April 2011:- (i) reduction of the par value of the existing ordinary shares of RM1.00 each in the Company to RM0.25 each which was sanctioned by the High Court on 13 July (ii) completed the listing and quotation for 94,033,811 Rights Shares together with 56,420,285 Warrants on the Main Market of Bursa Securities Berhad on 13 September Total proceeds raised from this special exercise was RM million, the manner in which the proceeds is to be utilised is spelt out under Utilisation of Proceeds on page 12. 6,529,131 Warrants. The exercise price of TAKASO-WA was also revised downwards from RM1.00 to RM0.89. Industry Outlook and Future Prospects of the Group Being export orientated with major distributors based in the Middle East and Europe, the Group foresees a challenging outlook so long as the respective political crisis and debt crisis of its customers remained unresolved. However, steps have already started to reduce dependency on these two major markets by venturing into Asian countries. As a start, the Group has in August 2011 executed a Memorandum of Understanding with Yakin Hakikat (Thailand) Ltd. Part. to secure an exclusive distribution in Thailand. Inflation is expected to continue trending upwards and the Group is monitoring the situation closely and will try to increase its selling prices to sustain margins while balancing this with ensuring its competitiveness is not compromised. On the local front, domestic demand is expected to remain due to the Government s push towards a high income nation. Notwithstanding this, demand for the Group s products is affected by rising energy costs and higher food prices which if, on the uptrend in the coming year, will see demand for the Group s products dampening. Management expects the coming year to be an even more challenging year in the light of natural disasters hitting the surrounding regions such as the floods in Thailand and earthquake and tsunami in Japan, political tensions in the Middle East and North Africa, the European debt crisis, worldwide food crisis and a slowing global economy. Going forward, management will emphasise on the following to bring the Group back to profitability:- As a consequence of the Rights Issue of Shares with Warrants, holders of the warrants issued in 2003 and maturing on 13 November 2013 (TAKASO-WA) were issued with an additional 645,139 bringing the total TAKASO-WA in circulation to 28

30 Takaso Resources Berhad K Annual Report 2011 upgrading and improving its plant and machinery in order to achieve optimal output and capacity. re-structuring, revamping and beefing up its sales and marketing team and identifying and appointing new members who have the ability and capacity to contribute in all aspects of th Group s Operations. identifying and venturing into more new markets especially in the Asian region. developing new marketing strategies and implementing incentive schemes for our distributers to strive harder for the sales of our products. sourcing for new business opportunities that fit into our business model which may contribute to the future growth of the Group. extend my heartfelt appreciation to the shareholders, all customers, business associates and all other stakeholders and the Government of Malaysia who have each supported and believed in us throughout the years and I look forward to your continued support and trust in the years ahead. Last but not least, my gratitude goes to our dedicated employees, whose steadfast commitment to deliver value and quality products and services which is the backbone and growth of the Group. Tee Tze Chern, JP Executive Chairman Corporate Social Responsibility The Group remains committed in operating its business in a socially responsible manner in respect to its employees, the wider environment, the community and the marketplace. The Group s CSR towards its employees is in the form of maintaining and providing the staff with a conducive working environment bearing in mind staff welfare and well being. This also includes providing them with the necessary training to equip their knowledge and to enable progression up the career path as well as to train them on health and safety issues. CSR activities towards the community at large during the year includes organising its annual blood donation drive in March 2011 in collaboration with Hospital Pakar Sulit Fatimah, Muar, reaching out to the community by supporting and sponsoring various health awareness campaigns and supplying of food to children welfare homes and old folk s public nursing homes. Appreciation I wish to take this opportunity to express my sincere appreciation and thanks to my fellow Board of Directors for their constant support and contribution. I also wish to 29