NOTICE OF ANNUAL GENERAL MEETING

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2 CONTENTS Notice of Annual General Meeting Statement Accompanying the Notice of Annual General Meeting Corporate Information Corporate Structure 5 Years Financial Highlights Board of Directors Audit Committee Report Statement on Corporate Governance Statement on Internal Control Directors Responsibility Statement Chairman s Statement Managing Director s Statement Export Markets Financial Statements List of Properties Analysis of Shareholdings/Warrant Holdings Proxy Form

3 TAKASO RESOURCES BERHAD K NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN THAT the Eleventh Annual General Meeting of the Company will be held at the Registered Office of the Company at K55, Jalan Kesang, Kawasan Perindustrian Tanjung Agas, Muar, Johor on Monday, 22 December 2008 at 2.00 p.m. for the following purposes:- AGENDA AS ORDINARY BUSINESS:- 1. To receive the Audited Financial Statements for the financial year ended 31 July 2008 together with the Directors and Auditors Reports thereon. Resolution 1 2. To approve the payment of Directors fee for the financial year ended 31 July Resolution 2 3. To re-elect Dato Tee How Cut, PIS, DPTJ, the retiring Director who retires pursuant to Section 129 of the Companies Act, 1965, be and is hereby re-appointed as a Director of the Company to hold office until the next Annual General Meeting. Resolution 3 4. To re-elect Mr. To Peng Koon, the Director who retires by rotation and being eligible, offer himself for re-election in accordance with the Article 92 of the Company s Articles of Association. Resolution 4 5. To re-appoint Messrs. BDO Binder as Auditors of the Company for the financial year ending 31 July 2009 and to authorize the Directors to fix their remuneration. Resolution 5 AS SPECIAL BUSINESS:- To consider and if thought fit, to pass with or without modifications, the following resolutions:- 6. Authority To Issue Share 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 government/regulatory authorities, the Directors be and are hereby authorized, pursuant to Section 132D of the Companies Act, 1965, to allot and issue shares in the Company at any time until the conclusion of the next Annual General Meeting of the Company and upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fit provided that the aggregate number of shares to be issued pursuant to this resolution does not exceed 10% of the issued capital of the Company for the time being and that the Directors are also empowered to obtain the approval from Bursa Malaysia Securities Berhad for the listing of and quotation for the additional shares to be issued. 7. Proposed Adoption of the New Articles of Association Of The Company ( Proposed Adoption ) That the Articles of Association as set out in Appendix I despatched together with the Company s 2008 Annual Report be and is hereby adopted as the new Articles of Association of the Company in substitution for and to supersede the existing Articles of Association of the Company. 8. To transact any other ordinary business where due notice has been given in accordance with the Companies Act, By Order Of The Board TEO SOON MEI (MAICSA ) Company Secretary Resolution 6 Special Resolution Melaka Dated: 28 November

4 ANNUAL REPORT 2008 NOTICE OF ANNUAL GENERAL MEETING Explanatory Notes On Special Business 1. The Ordinary Resolution 6, if passed, will empower the Directors to issue shares up to 10% of the issued capital of the Company for the time being as the Directors may consider such action to be in the interest of the Company. This authority, unless revoked or varied by the Company in a general meeting, will expire at the conclusion of the next Annual General Meeting of the Company, or during the expiration of period within which the next Annual General Meeting is required by law to be held, whichever is earlier. 2. The proposed Special Resolution, if passed, will bring the Articles of Association of the Company to be in line with the recent amendments of the Listing Requirements of Bursa Malaysia Securities Berhad as well as for better clarity and enhancement. 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, Muar, Johor not less than 48 hours before the time for holding the meeting or at any adjournment thereof. 5. The right of Foreigners to vote in respect of deposited securities is subject to Sections 41(1)(e) and 41(2) of the Securities Industry (Central Depositories) Act, 1991; the Securities Industry (Central Depositories) (Foreign Ownership) Regulations 1996 and the Articles of Association of the Company. 6. In respect of deposited securities, only Member whose names appear in the Record of Depositors on 12 December 2008 ( General Meeting Record of Depositors ) shall be eligible to attend the Meeting. NOTES:- Detailed of the proposed new Articles of Association of the Company is set out in Appendix I despatched together with the Company s 2008 Annual Report. 1. A member of the Company who is entitled to attend and vote at the meeting is entitled to appoint more than two proxies to attend and vote instead of him. Where a member appoints two or more proxies, he shall specify the proportion of his 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 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 authorized nominee as defined under the Securities Industry (Central Depository) Act, 1991, 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 authorized in writing or, if the appointor is a corporation, whether under its seal or by an officer or attorney duly authorized. 3

5 TAKASO RESOURCES BERHAD K STATEMENT ACCOMPANYING THE NOTICE OF ANNUAL GENERAL MEETING Details of the particulars of all the retiring Directors namely, Dato Tee How Cut, PIS, DPTJ, and Mr. To Peng Koon are set out in page 8 of the Annual Report of the Company for the financial year ended 31 July DIRECTORS STANDING FOR RE-ELECTION Directors who are retiring and standing for re-election at the Eleventh Annual General Meeting of the Company to be held at the Registered Office of the Company at K55, Jalan Kesang, Kawasan Perindustrian Tanjung Agas, Muar, Johor on Monday, 22 December 2008 at 2.00 p.m. are as follows:- 1. Dato Tee How Cut, PIS DPTJ, the Director who is retiring pursuant to Section 129 of the Companies Act, 1965, 2. Mr. To Peng Koon, the Director who is retiring and standing for re-election in accordance to Article 92 of the Company s Articles of Association. A total of Five (5) Board of Directors Meetings were held during the financial year ended 31 July 2008 and all of the Board of Directors meetings were held at the Registered Office of the Company at K55, Jalan Kesang, Kawasan Perindustrian Tanjung Agas, Muar, Johor. Details of attendance at board meetings held during the financial year ended 31 July 2008 for the above-mentioned retiring directors are set out on page 9. 4

6 ANNUAL REPORT 2008 CORPORATE INFORMATION BOARD OF DIRECTORS Dato Tee How Cut, PIS, DPTJ Chairman Tee Tze Chern, JP Managing Director Tee Bee Leng, PJK Non Independent Non Executive Director (Resigned w.e.f ) Tunku T. Kechil Independent Non Executive Director To Peng Koon Independent Non Executive Director AUDIT COMMITTEE Members Responsibility/Directorship Tunku T. Kechil To Peng Koon Tee Tze Chern, JP Chairman/Independent Non Executive Director Member/Independent Non Executive Director Member/Managing Director REGISTERED OFFICE K55, Jalan Kesang Kawasan Perindustrian Tanjung Agas Muar, Johor Darul Ta zim Tel : Fax : //takaso@takaso.com REGISTRAR Symphony Share Registrars Sdn Bhd Level 26 Menara Multi-Purpose Capital Square No. 8, Jalan Munshi Abdullah Kuala Lumpur Tel : Fax : SECRETARY Teo Soon Mei (MAICSA ) AUDITOR BDO Binder (AF0206) Chartered Accountants PRINCIPAL PLACE OF BUSINESS K55, Jalan Kesang, Kawasan Perindustrian Tanjung Agas Muar, Johor Darul Ta zim Tel : Fax : //takaso@takaso.com PRINCIPAL BANKERS HSBC Bank Malaysia Berhad Malayan Banking Berhad CIMB Berhad (Formerly known as Bumiputra- Commerce Bank (M) Berhad) STOCK EXCHANGE LISTING Bursa Malaysia Securities Berhad - Second Board REMUNERATION COMMITTEE Members Responsibility/Directorship Tee Tze Chern, JP Tunku T. Kechil To Peng Koon Chairman/ManagingDirector Member/Independent Non Executive Director Member/Independent Non Executive Director NOMINATION COMMITTEE Members Responsibility/Directorship Tunku T. Kechil To Peng Koon Chairman/Independent Non Executive Director Member/Independent Non Executive Director 5

7 TAKASO RESOURCES BERHAD K CORPORATE STRUCTURE TAKASO RUBBER PRODUCTS SDN BHD (Company No V) 100% TAKASO MARKETING SDN BHD (Company No A) 100% JAPLO HEALTHCARE SDN BHD (Company No H) 100% LSR TECHONOLOGY SDN BHD (Company No X) 100% TAKASO MARKETING (S) PTE LTD (In Creditors Voluntary Liquidation (Company No: G) 100% TAKASO ( K) RESOURCES BERHAD ROMANTIC FAMILY PLANNING SDN BHD (Company No M) 100% 6

8 ANNUAL REPORT YEARS FINANCIAL HIGHLIGHTS ,034 30,117 29,420 28,157 24, (4,172) (1,038) (17,342) (4,116) (709) (3,380) (801) (16,883) (3,984) (931) (9.24) (1.94) (40.99) (9.67) (2.26) Revenue (RM'000) Loss Before Tax (RM'000) Net Loss for the financial year (RM'000) Net Tangible Assets Per Share (RM) Net Loss Ordinary Per Share (SEN) Revenue (RM 000) 27,034 30,117 29,420 28,157 24,523 Loss Before Tax (RM 000) (4,172) (1,038) (17,342) (4,116) (709) Net Loss for the Financial Year (RM 000) (3,380) (801) (16,883) (3,984) (931) Net Tangible Assets Per Share (RM) Net Loss Per Ordinary Share (sen) - basic (9.24) (1.94) (40.99) (9.67) (2.26) * Figures have been restated to reflect the prior year adjustment in respect of the accrual for certain holding costs 7

9 TAKASO RESOURCES BERHAD K BOARD OF DIRECTORS DATO TEE HOW CUT, PIS, DPTJ (Chairman) Dato Tee How Cut, PIS, DPTJ (aged 71, Malaysian) was appointed to the Board as Chairman on 22 December He started his career as traders upon completing his secondary education in Malaysia. Dato Tee How Cut was the founder of Takaso Resources Berhad Group of Companies and has over 40 years experience in the manufacturing and trading rubber products. Apart from his involvement in the rubber industries, he is also involved in the manufacturing of toiletries via his equity interest in Chinparis Industries Sdn Bhd. He presently also sits on the Board of several private limited companies in Malaysia. MR TEE TZE CHERN, JP (Managing Director) Mr Tee Tze Chern, JP (aged 44, Malaysian) was appointed to the Board of Directors as the Managing Director on 22 December 1998 and is overall in charge of managing the Group. He also the Chairman for both the Remuneration and ESOS Committees as well as the member of the Audit Committee. He holds a Diploma in Rubber Research Institute in 1992 and is also 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 industries. He has been previously invited to sit in SIRIM s technical committee on standard specifications under the ISO division in mechanical contraceptive in Mr Tee Tze Chern, JP is also sits on the board of several private limited companies. MADAM TEE BEE LENG, PJK (Non Independent Non Executive Director) Madam Tee Bee Leng, PJK (aged 48, Malaysian) began her career with Takaso Resources Berhad Group of Companies in 1987 and held a senior management position prior to her appointment to the Board on 22 December 1998 as Marketing Director. She obtained her degree from University Malaya in 1982 and is also a member of the Association Overseas Technical Scholarship, Malaysia since Following her resignation as the director of Takaso Rubber Products Sdn Bhd, the wholly-owned subsidiary of the Company, she has been re-designated as Non Independent Non Executive Director of the Company with effect from 29 December Madam Tee Bee Leng has on 17 September 2008 resigned as the Director of the Company. She currently sits on the board of several private limited companies in Malaysia. TUNKU MOHSINUDDIN@ T. KECHIL (Independent Non Executive Director) Tunku T. Kechil (aged 64, Malaysian) was appointed to the Board as an Independent Non Executive Director on 26 February He was formerly a deputy General Manager of Malaysia Piston Sdn Bhd and Police Inspector from the Police Headquarter Bukit Aman, Kuala Lumpur. He is the Chairman of the Audit and the Nomination Committees. He is also the member of the Remuneration Committees. Tunku holds a Diploma in Business Studies from the Mara Institute of Technology in 1969 and a Diploma in Public Relation in the Institute of Public Relations Malaysia in He was previously the Police Inspector upon completing the Lower/man Management from the Police College of Kuala Kubu Baru in He is presently the dealer and remisier of Hwang-DBS Securities Sdn Bhd in Seremban. Prior to joining Hwang-DBS Securities Sdn Bhd in Seremban, he was the Business Development Manager of Petro Marine Holding Sdn Bhd and the dealer and remisier with Arab Malaysian Securities Sdn Bhd and Hong Leong Securities Sdn Bhd respectively. MR TO PENG KOON (Independent Non Executive Director) To Peng Koon (aged 36, Malaysian) a Chartered Accountant by profession, Mr. To Peng Koon was appointed to the Board as an Independent Non Executive Director on 29 March He is the member of the Audit, the Nomination and the Remuneration Committees. Mr To Peng Koon graduated from University of Melbourne, Australia in 1995 with Bachelor of Commerce. Apart from his qualification as a Chartered Accountant of Malaysia, he is also Certified Practicing Accountant of CPA Australia and Licensed Tax Adviser. He presently also sits on the Board of several private limited companies in Malaysia. 8

10 ANNUAL REPORT 2008 BOARD OF DIRECTORS Family Relationship Tee Tze Chern JP, Tee Bee Leng, PJK and Lily Tee are children of Dato Tee How Cut and Datin Teo Beng Ha. Ms. Lim Kwee Hua is the wife of Tee Tze Chern, JP and the daughter-in-law of Dato Tee How Cut, PIS, DPTJ and Datin Teo Beng Ha. They are the substantial shareholders of the Company and Up & Famous Sdn Bhd, the substantial shareholder 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, is imposed by 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 Director of the Company; b) Mr. Tee Tze Chern, JP, the Director of the Company; c) Datin Teo Beng Ha, the former Director of the Company; d) Madam Tee Bee Leng, PJK, the former Director of the Company; and e) The parties acting in concert with it Up & Famous Sdn Bhd, the substantial shareholder of the Company and the parties acting in concert with it must undertake the compensation scheme as specified under the SC s letter dated 5 November 2003 to all remaining shareholders of Takaso Resources Berhad on 17 January 2002, which was the date, they and the parties acting in concert with it in triggered the obligation to extend a mandatory offer under Part II of the Code pursuant to Practice Note 2.3(2). Securities Commission had, vide its letter dated 7 April 2006, made a decision to impose a moratorium on all the ordinary shares of RM1.00 each in Takaso Resources Berhad ( TRB shares ) held by Up & Famous Sdn Bhd ( UFSB ) and the parties acting in concert with it as registered owner and/or beneficial owner ( Moratorium Shares ) with immediate effect ( Moratorium ). Under the conditions of Moratorium imposed, UFSB and the parties acting in concert with it are not allowed to sell, transfer or assign the Moratorium Shares until the following is implemented:- (i) (ii) restricted unconditional mandatory offer by UFSB to acquire the TRB Shares not owned by UFSB and the parties acting in concert with it as at 17 January 2002; and compensation by UFSB to the shareholders of TRB as at 17 January 2002 who subsequently sold their TRB Shares at a price lower than RM1.60 per TRB Share (cum bonus issue and rights issue) or RM1.06 per TRB Share (ex bonus issue and rights issue). Other than as disclosed, none of the directors of the Company has been convicted of any offence within the past 10 years. 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 were directors of the Company according to the Register of Directors shareholdings are set out in pages 33 to 34 of the Annual report. Board Meetings There are five (5) Board of Directors Meetings held during the financial year ended 31 July 2008 and the attendance of each Director were as follows:- Board Member Meeting attended Dato Tee How Cut 5 Tee Tze Chern, JP 5 Tee Bee Leng, PJK 4 (Resigned wef ) Tunku Mohsinuddin T. Kechil To Peng Koon 5 9

11 TAKASO RESOURCES BERHAD K BOARD OF DIRECTORS Material Contracts There were no material contract entered into by the Company and its subsidiaries involving Directors and major shareholders interest still subsisting at the end of the financial year. Warrants No warrants were exercised during the financial year. Board of Directos The Board currently has four (4) members comprising two (2) Executive Directors (Including Chairman), and two (2) Independent Non-Executive Directors. The Board has satisfy the requirement of 1/3 of the directors must be independent. Revaluation Policy on Landed Properties The Company has adopted a regular revaluation policy on landed properties. Land and buildings are revalued at least once in every five years. Utilisation of Proceeds 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 amounting 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 the suitable warehouse located at central region of Peninsular Malaysia. The location identified by the management previously was not suitable due to the changed in the distribution operation and the location was not suitable for the current operational arrangement. The management will continue to source for the suitable warehouse in order to meet the current and future operational needs. 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 the financial statements. Share Buy Back The group did not enter into any share buy-back transactions during the financial year. American Depository Receipt (ADR) or Global Depository Receipt (GDR) During the financial year, the Group did not sponsor any ADR or GDR programmes. Profit Guarantee During the year, the Company did not provide any profit guarantees. 10

12 ANNUAL REPORT 2008 AUDIT COMMITTEE REPORT The Audit Committee for the financial year 2008 comprises the following members:- Members Responsibility/Directorship Tunku T. Kechil - Chairman/Independent Non Executive Director Tee Tze Chern, JP - Member/Managing Director To Peng Koon - Member/Independent Non Executive Director Secretary Teo Soon Mei (MAICSA ) Audit Committee - Terms of Reference The terms of reference of the Audit Committee has been revised as follows:- MEMBERSHIP The Committee shall be appointed by the Board of Directors from amongst their number and shall consist of not less than three (3) members, a majority of whom shall be Independent Directors. All members of the Audit Committee shall be Non- Executive Directors. No Alternate Director is appointed as a member of the Committee and at least one (1) member of the Committee:- (a) (b) (c) (d) shall be a member of the Malaysian Institute of Accountants; or if he is not a member of the Malaysian Institute of Accountants, he must have at least three (3) years working experience and:- (i) (ii) he must have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act 1967; or he must be a member of one of the associations of accountants specified in Part II of the 1st Schedule of the Accountants Act shall be a degree/masters/doctorate in accounting or finance and at least 3 years post qualification experience in accounting or finance; or shall be at least 7 years experience being a chief financial officer of a corporation or having the function of being primarily responsible for the management of the financial affairs of a corporation; or (e) (f) shall be persons who are members of professional accountancy organisations which have been admitted as full members of the International Federation of Accountants and who at least 3 years post qualification experience in accounting or finance; or fulfils such other requirements as prescribed or approved by Bursa Malaysia Securities Berhad The members of the Audit Committee shall elect a Chairman from among their number who shall be an Independent Director. In the event of any vacancy in Committee resulting in the non-compliance of the above stated conditions, the Company shall fill the vacancy within 3 months. MEETING AND MINUTES 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 such additional meeting as the Chairman shall decide in order to fulfill its duties. The Company Secretary or any person appointed by the audit Committee shall act as the 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 Committee members prior to each meeting. The Secretary will also be responsible for keeping the minutes of the meetings of the Audit Committee, and circulating them to Committee members and to 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 chief executive officer, the finance director, the head of internal audit and the external auditors in order to be kept informed of matters affecting the Company. The Chairman of the Audit Committee shall also convene a meeting of the Audit Committee to consider any matters that the external auditors and/or Internal Auditor believes should be brought to the attention of the directors or shareholders. The Finance Director, Financial Controller, the Internal Auditors and a representative of the external auditors shall normally be invited to attend the meetings. Other members of the Board and employees of the Company may attend any particular Audit Committee meeting only at the Audit Committee s invitation, specific to the relevant meeting. At least twice a year, the Committee shall meet the external auditors without any executive directors present. 11

13 TAKASO RESOURCES BERHAD K AUDIT COMMITTEE REPORT QUORUM A quorum shall consist of a majority of members present who must be independent directors. AUTHORITY The Audit Committee is empowered and authorised by the Board of Directors at the cost of the Company:- (a) (b) 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; to have the resources in order to perform its duties as set out in its terms of reference; DUTIES The duties of the Audit Committee are as follow:- (a) (b) (c) (d) To consider the appointment, nomination, resignation and dismissal of external auditors and their respective audit fees; To discuss with the external auditor before the audit commences, the nature and scope of the audit, and ensure co-ordination where more than one audit firm is involved. To discuss problems and reservations arising from the interim and final audits and any matter the auditor may wish to discuss (in the absence of management where necessary); To do the following, in relation to the internal audit function:- (c) (d) (e) (f) (g) to have full and unrestricted access to any information pertaining to the Company and the Group; to have direct communication channels with the external auditors and internal auditors (if any); to obtain external legal or other independent professional advice where necessary; and to invite outsiders with relevant experience to attend its meetings, whenever deemed necessary. be able to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other directors and employees of the Group, 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 considered and its recommendations thereon, pertaining to the Company and the Group. (e) 1) review the adequacy of the scope, functions, competency and resources of the internal audit function, and whether its has the necessary authority to carry out its work; 2) review the internal audit programme and results of the internal audit process and, where necessary, ensure that appropriate action are taken on the recommendations of the internal audit function; 3) review any appraisal or assessment of the performance of members of the internal audit function and their respective audit fees; 4) approve any appointment or termination of senior staff members of th internal audit function; and 5) take cognisance of resignations of internal audit staff members and provide the resigning staff member an opportunity to submit his reasons for resigning. To review the effectiveness of the management information system 12

14 ANNUAL REPORT 2008 AUDIT COMMITTEE REPORT DUTIES (cont d) (f) To review the quarterly and annual financial statements of the Company and the Group with both the external auditors and management, focusing particularly on:- (g) 1) any change in accounting policies and practices; 2) significant adjustment arising from the audit; 3) the going concern assumption; and 4) compliance with accounting standards and other legal requirements. To review the external auditors report; REVIEW OF THE COMPOSITION OF THE COMMITTEE The term of office and performance of the Committee and each of the members shall be reviewed by the Board of Directors at least once every three (3) years to determine whether the Committee and its members have carried out their duties in accordance with their terms of reference. Audit Committee Meeting Held and Attendance List Audit Committee Member Total no. of meeting held during director s tenure in office Meeting attended (h) (i) (j) (k) To review and discuss any management letter sent by the external auditors to the Company and the management s response to such letter; To review assistance given by the employees of the Company and the Group to the external and internal auditors To consider the report, major findings and management s response thereto on any internal investigations carried out by the internal auditors; To review all areas if significant financial risk and the arrangements in place to contain those risks to acceptance levels; Tee Tze Chern, JP 5 5 Tunku T. Kechil 5 5 To Peng Koon 5 5 The General Manager and a representative of the external and internal auditors normally attend the meeting. Other Board members may attend the meeting upon invitation by the Audit Committee. The Minutes of the Audit Committee meetings had been extended to all members of the Board of Directors and relevant issues were discussed at the Board meetings. (l) (m) (n) To consider and review all related-party transactions entered into by the Group and the Company and potential conflict of interest situations; To review the allocation of options pursuant to the Employees Share Options Scheme and make such statement to be included in the annual report of the Company in relation to a share scheme for employees; 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 Listing Requirements of the Bursa Malaysia Securities Berhad, the Committee has the responsibility to promptly report such matters to the Bursa Malaysia Securities Berhad or any other relevant authorities. During the financial year, the activities undertaken by the Audit Committee include:- (a) Review of quarterly unaudited financial statements of the Group prior making the recommendations to the Board of Directors for approval; (b) Review of inter-company transaction and/or any related party transaction or conflict of interest situations that arose within the Group or in the Company; (c) Discussion on the Company s Corporate Governance process and the application of the key principles and best practices of Corporate Governance and the compliance with the Bursa Malaysia Securities Listing Requirements; 13

15 TAKASO RESOURCES BERHAD K AUDIT COMMITTEE REPORT (d) Discussion and review of the semi-annual returns pursuant to Paragraph 8.02 of Chapter 8 of the Bursa Malaysia Securities Berhad Listing Requirements; (e) Review of the annual audited financial statements of the Group and the Company for the financial year ended 31 July 2007 and made the recommendations to the Board of Directors for approval; (f) (g) Discussion and review on the external auditors report in relation to audit, and accounting issues; Discussion and review of the external auditors their Audit Planning Memorandum for the financial year ended 31 July 2008; (h) Discussion and review of the action plans of the internal audit and risk management framework of the Group; (i) (j) (k) (l) Discussion and consider the appointment of Internal auditors for the financial year ended 31 July 2008; Discussion and consider the composition of the audit committee; Discussion and consider of the utilization 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; Discussion and consider of the Creditors Voluntarily winding-up of Takaso Marketing (S) Pte Ltd, the wholly-owned subsidiary of the Company; (m) Discussion the amendments to the Listing Requirements of the Bursa Malaysia Securities Berhad; and (n) Discussion of the revised terms of reference of the Audit Committee of the Company REVIEW OF EMPLOYEES SHARE OPTION SCHEME The ESOS has been expired on 26 February 2006 pursuant to Bye-Laws 17 of the ESOS. Thus, no review was conducted by the Audit Committee of the Company during the year. RELATIONSHIPS WITH EXTERNAL AUDITORS The Audit Committee terms of reference formalizes the relationship with the External Auditors. Through the Audit Committee, the Company has maintained a formal and transparent relationship with its auditors in seeking professional advice and ensuring compliance with the Malaysia Accounting Standard Board (MASB) standards of accounting policies and methods when the Group s financial statement are prepared. From time to time, the auditors highlighted to the Audit Committee and the Board in matters that require the Board s attention. On 25 March 2008, the Audit Committee met the external auditors of the Company without the present of any Executive Directors of the Company to discuss the financial performance and operation as well as the financial alarm of the Group. NON-AUDIT FEES The amounts of non-audit fees paid to BDO Binder for the financial year ended 31 July 2008 were as follows: Services Review of Statement on Internal Control Tax Consultancy (Affiliated Companies) Total RM5, RM9, RM14, INTERNAL CONTROL AND RISK MANAGEMENT The Audit Committee is aware of the fact that an independent and adequately resourced internal audit function is essential to assist in obtaining the assurance it requires regarding the effectiveness of the system of internal control. The internal audit function is outsourced to external consultants. The outsourced internal Auditors will meet with the Audit Committee after the audit cycle at least two times a year to present their reports and to discuss their findings and the adequacy of the internal control system of the Group. Details of the activities of the Internal Auditors are set out in the Statement On Internal Control. 14

16 ANNUAL REPORT 2008 STATEMENT ON CORPORATE GOVERNANCE The Board of Directors is pleased to report to the shareholders on the manner Group has applied the principles and the extent of compliance with the Best Practice of good corporate governance as set out in Part I and Part II respectively of the Malaysian Code on Corporate Governance ( Code ) pursuant to Paragraph of the Listing Requirements of the Bursa Malaysia Securities Berhad ( LR ). A) BOARD OF DIRECTORS I) Composition and Board Balance The Board comprises as of this date four (4) Directors, two of whom are non-executives. The two Non-Executive Directors are independent. Ms. Tee Beng Leng has on 17 September 2008 resigned as the Director of the Company. One-third of the Board comprise Independent Non-Executive Directors, thereby bringing objective and independent judgement to facilitate a balanced leadership in the Group as well as to safeguard the interest of the minority shareholders and other stakeholders. This is to ensure that the highest standard of conduct and integrity are maintained. The Board of Directors comprises Executive Directors with wide range of experiences in the rubber and baby products while the Non-Executive Directors are professionals with diverse knowledge and skills in the areas of accounting and general management provide effective contribution and support to the functions of the Board. The two (2) Executive Directors represent the interest of Up & Famous Sdn Bhd ( UFSB ), the largest shareholder of the Company and the shareholders of UFSB, who collectively holds approximately 50% of the votes for the election of the directors of the Company. The investment of remaining shareholders is fairly reflected by two (2) Independent Non-Executive Directors of the Company. However, the Board and Nomination Committee of the Company will assess and review the Board representation on an annual basis as the shareholding duly held by Up & Famous Sdn Bhd, the largest shareholder of the Company may change upon completion the compensation scheme as specified under the Securities Commission s letter dated 5 November 2003 to all remaining shareholders of Takaso Resources Berhad on 17 January 2002, which was the date Up & Famous Sdn Bhd and the parties acting in concert with it in triggered the obligation to extend a mandatory offer under Part II of the Code pursuant to Practice Note 2.3(2). The biographical details of the Board are set out on page 8 of the Annual Report. II) 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 for strategic formulations, planning, succession planning and execution of the Company objectives. The Board has delegated the authorities to the Audit Committee, as stated in the revised terms of reference of the Audit Committee to review the adequacy and the competency of the Group s internal control system including systems for compliance with applicable laws, regulations, rules, directives and guidelines. It is the responsibility of the Board, in all decisions to conscientiously weigh the interests of the shareholders and to consider the effects of the decisions on the interests of all the shareholders. The role of the Chairman and Managing Director are separated. Dato Tee How Cut is the Chairman of the Company, leads the Board whereas Mr. Tee Tze Chern, JP is the Managing Director oversee the running of the business and implement the policies and strategies adopted by the Board. The Chairman is primary responsible for matters pertaining to the Board and overall conduct and performance of the Company. The roles of the Chairman and Managing Director are separated and each role consists of a clear and accepted division of responsibilities. This will ensure a balance of authority and power. Tunku T. Kechil, as a senior Independent Non-Executive Director is facilitating communications of any stakeholders concerns where the Chairman or the Managing Director would not deal it. The Board has also delegated certain responsibilities to other Board Committees that operate with clearly defined terms of reference. The Board Committees include the Audit Committee, the Remuneration Committee and the Nomination Committee. The Chairman of the Company and/or the Chairman of each Board Committees of the Company will draw up the agenda and other supporting explanatory documentation for circulation to the Board members and/or Board Committees members prior to each meeting. 15

17 TAKASO RESOURCES BERHAD K STATEMENT ON CORPORATE GOVERNANCE A) BOARD OF DIRECTORS (Cont d) III) 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 fix the year s Board meetings into their own schedule. The Board has four (4) quarterly scheduled Board meeting to review the quarterly financial results and discuss on the performance and the latest developments of the Group. In addition to quarterly Board meetings, special Board meetings are convened on an ad-hoc basis to review and approve the Company s annual audited financial statements; and to deliberate corporate proposals and other matters that require the Board s urgent decision. All Board members, with their extensive knowledge and experience in various fields exercise an independent judgment on issues of strategy, performance, resources and standard of conduct. The Board held four regular meetings and one special Board meeting and the attendance of each Director are set out in page 9 of the Annual Report. All Board members are provided with relevant information of the Company and the Group to enable them to carry out their duties effectively as Directors. A full set of the Board papers for each agenda including financial reports and notices are promptly communicated prior to the Board Meetings to allow for sufficient understanding of the proceedings. The Board also notes the decisions and salient issues deliberated by Board Committees through minutes of these committees. Senior Management staff as well as auditors and internal 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 Executive Directors and/or other relevant Board members and/or senior management of the Group will provide comprehensive explanation of pertinent issues and recommendations. The issues would then be deliberated and discussed thoroughly by the Board prior to decision-making. Proceedings of Board meetings are recorded and signed by the Chairman. The Directors whether as a full board or in their individual capacity have access to all information of the Company on a timely basis in an appropriate form necessary to enable them to discharge their duties and responsibilities. The Directors have the right when necessary to take on independent professional advice at the Company s expense while carrying out their duties. The Directors are updated by the Company Secretary on new statutory as well as regulatory requirements relating to the duties and responsibilities of Directors and listing requirements of the Bursa Malaysia Securities Berhad. All members of the Board have ready and direct access to the advice and services of the Company Secretary, and to obtain independent professional advice,when necessary, in ensuring the effective functioning of the Board. IV) Appointment to the Board Nomination Committee The proposed appointment of new member of the Board is recommended by the Nomination Committee to the Board before the application on the proposed appointment is tabled to the Board of Directors of the Company for approval. The Nomination Committee comprises mainly of independent Non-Executive Directors and its composition is as follows:- 1. Tunku T. Kechil - Chairman (Independent Non-Executive Director), 2. Mr To Peng Koon - Member (Independent Non-Executive Director). The Nomination Committee also ensures that the Board has an appropriate balance of expertise and ability. The Board acknowledged that the size of the Group is relatively small and the composition of the Board in the past was optimum, well balanced, and caters effectively to the scope of the Group s operation. Hence, the Board did not appoint additional Independent Non-Executive Director to become the member of the Nomination Committee of the Company. 16

18 ANNUAL REPORT 2008 STATEMENT ON CORPORATE GOVERNANCE A) BOARD OF DIRECTORS (Cont d) IV) Appointment to the Board (Cont d) The Nomination Committee will recommend the appointments of new Directors to the Board, 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 this succession plan for senior management in the Group. The Board is entitled to the services of the Company Secretary who would ensure that all appointments are properly made upon obtaining all necessary information from the Directors. The Nomination Committee has met once during the financial year where all members were present. The Nomination Committee met to:- (i) (ii) oversee and review the overall composition of the Board in terms of appropriate size, required mix of skills, experience and core competencies, professionalism and adequacy of balance between Executive Directors and Independent Non-Executive Directors; and annually assesses the effectiveness of the current Board as a whole, the effectiveness of the Committees of the Board, and the contributions of each individual director. The Nomination Committee upon its recent annual review carried out, is satisfied that the size of the Board of the Company is optimum and that there is appropriate mix of knowledge, aptitude and core competencies in the composition of the Board. The Nomination Committee is satisfied that all the members of the Board for the year under review are suitably qualified to hold their positions as Directors of the Company in view of their respective academic and professional qualifications, experience and qualities. However, the Board and Nomination Committee of the Company noted the recent amendment to the Code and LR on the composition of the Audit Committee requirements. A recommendation was made by the Nomination Committee to the Board to appoint additional Independent Non-Director to become the member of the Audit Committee of the Company to replace Mr. Tee Tze Chern, JP one of the member of the Audit Committee to comply with the recent amendment to the Code and LR that will make the composition of the Audit Committee to comprise exclusively of Non-Executive Directors. The Board of the Company is taking the necessary steps to comply with the aforesaid requirements before 31 January Meetings of the Nomination Committee are held as and when required, and at least once a year. The members of the Nomination committee registered full attendance at one meeting held by the Nomination Committee in year Directors Training All directors have attended the Mandatory Accreditation Programme ( MAP ) pursuant to requirements of the Bursa Malaysia Securities Berhad ( Bursa Securities ). The Board acknowledged that the directors of the Company, through their varied experience and qualifications have provided 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 as they consider necessary or deem fit expedient to enhance their knowledge in new rules and regulations as well as understanding of the Group s business and operations and to keep abreast with current developments in the market place. The Board will evaluate and determine the training needs of its Directors on an ongoing basis to assist them in discharging their responsibilities. During the year, all the Board members except Mr Tee Tze Chern, JP and Tunku T. Kechil have attended seminars and briefings to keep abreast with current developments. The following are training programmes and seminars attended by members of the Board in the year 2008 (other than CEP requirements):- a) Statement on CSR - What do you really do? b) 8th Seminar on Taxation; c) Tax Planning on current tax issues; and d) Seminar Percukaian Hasil

19 TAKASO RESOURCES BERHAD K STATEMENT ON CORPORATE GOVERNANCE A) BOARD OF DIRECTORS (Cont d) Directors Training (cont d) Mr Tee Tze Chern, JP and Tunku T. Kechil, both directors have not attended any training programme during the year. Mr. Tee Tze Chern, JP had devoted his time and effort in managing the overseas exhibitions of the Group. Mr. Tee Tze Chern, JP and Tunku T. Kechil were of the opinion that they have adequate exposures to the new rules and regulations to keep abreast with the latest market developments. V) Re-election In accordance with Company s Articles of Association, all Directors who are appointed by the Board hold office until the next annual meeting and shall then be eligible for re-election. The Articles also provide that at least one-third of the remaining Directors be subject to retirement by rotation during the Company s annual general meeting and these retiring Directors be eligible for re-election. In any case, each Director shall submit themselves for re-election at regular interval and at least every three years. Dato Tee How Cut, the Executive Chairman of the Company shall retire pursuant to Section 129 of the Companies Act, 1965 at the forthcoming Annual General Meeting. This is in compliance with Part 1, A(V) of the Code. The details of the retiring Directors are set out in the Statement Accompanying the Notice of Annual General Meeting. B) DIRECTORS REMUNERATION I) The Level and Make-up of Remuneration The objective of the Group is to ensure that the Group attracts and retains Directors of the calibre needed to run the Group successfully. The Executive Directors are to be appropriately rewarded giving due regard to the corporate and individual performance. The level of remuneration of Non-Executive Directors reflects their experience and level of responsibility undertaken by them. II) Procedure The Company adopted the peer evaluation or self-evaluation process to evaluate the performance of the Directors of the Company. The Remuneration Committee met once during the financial year where all members were present. During the meeting, the results of the selfevaluation performance conducted by the Nomination Committee of the Company was presented to the Remuneration Committee Company. The Remuneration Committee reviews annually the performance of all Executive Directors and recommends to the Board specific adjustments in remuneration that includes the reward payments which commensurate with their contributions during the financial year. The Remuneration Committee strives to reward the Directors based on accountability, fairness, and competitiveness, as prescribed by the Code. Thus, there is a formal and transparent procedure for rewarding and fixing the remuneration packages of Directors. The Executive Directors does not received Directors fees except the Chairman of the Company. Directors will abstain from discussion and voting on decisions in respect of their own remuneration. The aggregate annual Directors fees are to be approved by shareholders at the Annual General Meeting based on recommendations of the Board. In compliance with the Code, the Boards has established the Remuneration Committee consists mainly non-executive Directors. The Remuneration Committee comprised of two Independent Non Executive Directors and an Executive Director. The Remuneration Committee is authorised by the Board to establish a formal and transparent procedure for developing a policy on Executive Directors remuneration and for fixing the remuneration packages of individual Directors. The Chairman of the Remuneration Committee may request for a meeting as and when deemed necessary. The remuneration of Directors shall be the ultimate responsibility of the full Board after considering the recommendations of the Remuneration Committee. The Remueration Committee is generally responsible to:- 18

20 ANNUAL REPORT 2008 STATEMENT ON CORPORATE GOVERNANCE B) DIRECTORS REMUNERATION (Cont d) II) Procedure (Cont d) The determination of remuneration packages of non-executive directors is a matter for the Board as a whole. The individual concerned has abstained from discussion of his or her own remuneration. (i) establish and recommend to the Board the policy framework in determining the terms of employment and elements of remuneration of Executive Directors and to review changes to the policy from time to time, so as to ensure that the Company attracts and retains the Directors needed to run the Group successfully; III) Disclosure The directors fees are subject to the approval of shareholders at the Company s Annual General Meeting (AGM). The aggregate remuneration of Directors of the Company during the financial year is as follows: (ii) (iii) (iv) ensure that a strong link is maintained between the level of remuneration and individual performance against agreed targets, the performance-related elements of remuneration forming a significant proportion of the total remuneration package of Executive Directors; review and recommend on an annual basis the remuneration of Executive Directors in all its forms; and consider other matters as referred to the Committee by the Board. The clearly defined terms of reference of the Remuneration Committee has been prepared to include the above key duties and responsibilities. The remuneration packages of the Executive Directors for the financial year ended 31 July 2008 were determined by the Board after taking into consideration the recommendationfrom the Remuneration Committee. The members of the Remuneration Committee are: 1) Tee Tze Chern, JP - Chairman (Executive Director), 2) Tunku T. Kechil - Member (Independent Non-Executive Director), 3) Mr To Peng Koon - Member (Independent Non-Executive Director) Executive Non-Executive Director Directors Total (RM 000) (RM 000) (RM 000) Salaries & Other Emoluments Bonus Fees Meeting Allowance Total The number of Directors whose remuneration fall into the following bands are as follows: Number of Director Range of Executive Non-Executive Remuneration per annum Director Director Below 50, RM 50,001 to RM100, RM100,001 to RM150, RM150,001 to RM200,

21 TAKASO RESOURCES BERHAD K STATEMENT ON CORPORATE GOVERNANCE C) SHAREHOLDERS 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) Dialogue between Companies and Investors The Group values its dialogues with investors. The Annual Report of the Company is the channel of communication with shareholders and investors. The shareholders and investors of the Company are kept informed of the Groups s performance and major developments of the Group through the Annual Reports and announcements via Bursa Malaysia Securities Berhad s website ( Apart from this, financial results and other corporate information materials in the Annual Reports and other corporate information materials are disclosed in the Annual Reports and circulars to shareholders which is available to shareholders and investors to enable them to have an overview of the Groups business activities and performance. Price-sensitive information about the Group is, however, not disclosed in these exchanges until after the prescribed announcement to the Bursa Malaysia Securities Berhad. The Company has also established a website ( to which shareholders can access to products information and sending in enquiries. II) The Annual General Meeting The main forum for dialogue with shareholders of the Company is the Company s general meeting. At the Annual General Meeting, the Board also provides opportunities for shareholders to raise questions pertaining to the business activities of the Group. Adequate notice of the Annual General Meeting of not less than 21 days are communicated to those concerned. All Directors are available to provide responses to shareholders questions during the meeting. An explanatory statement for the proposed resolution to facilitate full understanding and evaluation of issues involved will accompany each item of special business included in the notice of the meeting. Extraordinary General Meeting The Board will convene an Extraordinary General Meeting if a situation arises for reasons that require shareholders to meet in between Annual General Meetings. An appropriate notice of a meeting would be communicated depending on the purposes of the meeting. A circular would accompany the notice to shareholders providing explanation of the intended agenda to facilitate understanding and evaluation. Apart from the Annual General Meetings and Extraordinary General Meetings, there is no formal program or schedule of meetings with investors, shareholders, stakeholders and the public generally. However, the Directors and/or management have the option of calling for meetings with investors/analysts if it deems necessary. Thus far, the Directors are of the opinion that this arrangement has been satisfactory to all parties. D) Accountability and Audit I) Financial Reporting In presenting the annual financial statements and quarterly announcement to shareholders, the Board aims to present a balanced and understandable assessment of the Group s position and prospects. The Audit Committee assists the Board in scrutinizing information for disclosure to ensure accuracy and adequacy and to oversee the Company and the Group s financial reporting processes and the quality of financial reporting. The Board is responsible for ensuring that financial statements are properly drawn up in accordance with the provisions of the Companies Act, 1965 and applicable approved accounting standards in Malaysia. In preparing the financial statements, the Board is required to select appropriate accounting policies, consistently applied and supported by reasonable and prudent judgments and estimates. The Board is required to prepare the financial statements on a going concern basis unless it is inappropriate to do so. 20

22 ANNUAL REPORT 2008 STATEMENT ON CORPORATE GOVERNANCE D) Accountability and Audit (Cont d) I) Financial Reporting (Cont d) The Board is responsible for ensuring that the Group keeps proper accounting records which disclose with accuracy at any time the financial position of the Group. The Board is also responsible for taking such steps as are reasonable to safeguard the assets of the Group for prevention and detection of fraud and other irregularities. BEST PRACTICES ON CORPORATE GOVERNANCE The Company is committed to achieving high standards of corporate governance throughout the Group and to the highest level of integrity and ethical standards in all its business dealings. The Board strives to ensure as far as practicable, the adoption and compliance with the Best Practices in corporate governance as set out in the Part 2 of the Code throughout the financial year ended 31 July The Responsibility Statement by the Directors on the annual audited financial statements of the Group and of the Company is set out on page 23. II) Internal Control The Board acknowledges its responsibility to maintain a sound system of internal control to safeguard shareholders investment and the Group s asset. The Company has effected several systems of internal control covering financial controls, operational and compliance controls and risk management. Some of the systems have been in place over the years and will continue to be reviewed, added on or updated in line with the changes in the operating environment. The internal audit function is outsourced to external consultants. The outsourced internal Auditors will meet with the Audit Committee after the audit cycle at least two times a year to present their reports and to discuss their findings and the adequacy of the internal control system of the Group. The details of the internal control system are stated on the statement of internal control on page 22 III) Relationship with the Auditors The role of the audit Committee in relation to external auditors may be found in the Audit Committee Report set out on pages 11 to 14. The Company has established a good working relationship with its external auditors in seeking professional advice and ensuring compliance with the appropriate accounting standards. 21

23 TAKASO RESOURCES BERHAD K STATEMENT ON INTERNAL CONTROL This statement is made pursuant to paragraph 15.27(b) of the Bursa Malaysia Listing Requirements that requires the Board of Directors of public listed companies to include in its annual report a statement about the state of internal control of the listed issuer as a group. The Board of Directors ( The Board ) is committed to maintain a sound system of internal control within the Group and is pleased to provide the following statement, which outlines the nature and scope of internal control of the Group during the financial year. 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 control that has been instituted throughout the Group is sound and adequate to safeguard the shareholders investment. Key Features of Internal Control System 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 Board continuously assesses key business risks; and with the assistance of the outsourced Internal Auditors and the external consultants for Risk Management Framework, the Board assesses the effectiveness of the control environment and highlights significant risks impacting the Group; the Directors, Senior Management and Head of Departments met regularly to discuss operational, corporate, financial and key management issues; the financial results are reviewed quarterly by the Audit Committee and the Board; Takaso Rubber Products Sdn Bhd, a key subsidiary of the Group, was certified with ISO Standards (ISO 9001 and ISO 13485) on its manufacturing processes. Internal quality audit was performed annually prior to the annual surveillance audit conducted by the external certification bodies; The Directors ensured that training needs analysis is assessed annually to ensure that all staff possess the necessary skills to perform their responsibilities 22 diligently. A structured performance appraisal is established by using a point system for staff performance evaluation. a formal reporting framework was established for staff to report operational performances and the status of control activities periodically; and the internal audit function to assess the adequacy and integrity of the Group s system of internal controls and to check compliance with procedures is in place. Risk Management Framework The Board acknowledges that the Company s business activities involve some degree of risk. Senior Management and Head of Departments are delegated with the responsibility to manage identified risks within defined parameters and standards. During the financial year under review, risk management awareness and training courses were conducted for Senior and Head of Departments as well as the Line Management to communicate potential and current risks faced by the various operating processes. Risk assessment workshops were conducted to identify, assess and priortise risks faced by the Group and to assist Senior and Head of Departments in identifying procedures and actions required to manage or control these risks. The risk management activity is an ongoing process and shall be regularly reviewed by the Board to ensure accordance with the Statement on Internal Control: Guidance for Directors of Public Listed Companies. Internal Audit Function The Company s internal audit function is outsourced to external consultants. The outsourced Internal Auditors assist the Board and the Audit Committee in providing independent assessment of the adequacy, efficiency and effectiveness of the Group s internal control system. The outsourced Internal Auditors report directly to the Audit Committee and internal audit plans are table to the Audit Committee for review and approval to ensure adequate coverage. The outsourced Internal Auditors table the results of their review on the business processes of different operating units to the Audit Committee at their scheduled meetings. The corrective actions to address control weaknesses are also followed up by them to ensure that these actions have been satisfactorily implemented. During the financial year under review, the identified weaknesses in internal control have been appropriately addressed. Review of the Statement by External Auditors The external auditors have reviewed this Statement on Internal Control for inclusion in the annual report of the Group for the year ended 31 July It is 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 process adopted by the Board in reviewing the adequacy and integrity of the system of internal controls.

24 ANNUAL REPORT 2008 DIRECTORS RESPONSIBILITY STATEMENT Directors responsibility statement in respect of the preparation of the audited financial statements of the Group and of the Company for the financial year ended 31 July 2008(as required under paragraph 15.27(a) of the Listing Requirement of Bursa Malaysia Securities Berhad). 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. In preparing the financial statements for the financial year ended 31 July 2008, 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 prudent; ensured that applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and prepared the financial statements on the going concern basis. The Directors are responsible for keeping proper accounting records, which disclose with reasonable accurate at any time the financial positions of the Group and of the Company, thus, enabling to ensure 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 this 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 31 July

25 TAKASO RESOURCES BERHAD K CHAIRMAN S STATEMENT Dear Shareholders, For this financial year under review, the Group faces challenging and competitive business environment with the higher raw material and packaging costs and the weakening of US currency against world currencies. The 2009 Budget duly announced on 29 August 2009 under the theme of A Caring Government reflects the Government s focus on enhancing the well being of all Malaysians. The 2009 Budget proposals are aimed at further strengthening Malaysia s economic resilience to mitigate the adverse impact of an external environment that is increasingly challenging and it should ease the financial burden of the low and medium-income households and small and medium entrepreneurs who are facing with the rising costs of living and production. The financial performance of Takaso Group for the past five years had greatly affected by the high operating cost coupled with the recognizing of the impairment losses of assets and the provision for doubtful debts as well as the written-off of bad debts. 24

26 ANNUAL REPORT 2008 CHAIRMAN S STATEMENT On behalf of the Board of Director of Takaso Resources Berhad, it is my pleasure to present to you the Annual Report of the Group and the Company for financial year ended 31 JULY Financial Results For the financial year under review, the revenue of the Group has dropped by 13% to RM24.52 million as compare to RM28.16 million in year The loss before tax has reduced by 83% to RM709,136 for the current financial year The Group recorded a net loss for the financial year as RM931,261 with the tax expenses of RM222,125. This translated into loss per ordinary share of 2.26 sen as compare to 9.96 sen in year The drop in the Group s revenue for the financial year under review was mainly due to the combination of the consolidated the customers portfolio and the reduction of the network distribution of Takaso Marketing Sdn Bhd, the wholly-owned subsidiary of the Company. Takaso Marketing Sdn. Bhd., the wholly-owned subisidiary of the Company has appointed a new local distributor to service their retailers portfolio other than their selected key customers. This strategic would have a direct influence on the Group s revenue but the actions will assist the Group to reduce the credit risk exposure and improvement on distribution to the key customers and our distributors in long term. The loss of the Group was further aggravated by unrealised foreign exchange loss of RM87, due to the continuous weakening of US currency against world currencies. Industry Trend The industry trend of baby products and contraceptive condoms are very much depend on the corporate branding. A good quality and reliability of the products have become the realities for the Group to promote and maintain the corporate branding. The Company has put its effort in promoting the brands of JAPLO, ROMANTIC and PLAYSAFE for the past 10 years and a substantial amount of budget was allocated to Trademark registration to secure the brand ownership over the targeted markets. The number of trademark duly registered or pending for registration during the financial year under review were as follows:- a) JAPLO trademark registration in 117 countries; b) ROMANTIC trademark registration in 115 countries; and c) PLAYSAFE trademark registration in 55 countries. The intellectual property registration of the Group has extended to the protection on design copyrights in the selected countries such as United Kingdom, Taiwan, China and Cambodia To improve on the product quality in order to comply with the latest international standards or specification, the Group shall continue to attract talent, nurtue, train and develop a strong quality assurance team to ensure on-going research efforts to be carried out to improve quality, the efficiency of production and safety of our products. Achievement Our contraceptive condom under ROMANTIC LOVE RUBBER QUICK & EASY PACK duly introduced in line with the current financial year theme, Commit to products innovation and creating new business model has been awarded by Malaysia Design Council under Malaysia Good Design Mark. Corporate Social Responsibility The Group is pleased to adopt the Bursa Securities CSR Framework, which is found to be in line with the Group s nature of business and inclinations for its CSR activities which focus on four main areas namely; environment, community, workplace and marketplace. Corporate Social responsibility for us goes beyond the donation of money and resources to worthy cause. It is about operating in such way that is responsible to our members and our staff, that is responsible to the environment and community in which we live and work.. 25

27 TAKASO RESOURCES BERHAD K CHAIRMAN S STATEMENT Corporate Social Responsibility (cont d) 1) CSR in the Community The employees of the Group has participated the annual blood donation campaign organised by Hospital Pakar Sultanah Fatimah Muar in March We exist as part of the local community which we operate in, providing employment and training to members of the local community. In addition to such activities which are essentially a part of our normal operations, we seek to engage with the public by providing support towards worthy causes. The Company has provided co-operation with Ministry of Health and Kolej Kejururawatan Muar, Hospital Pakar Sultanah Fatimah for factory visit and practical training programmes to understand the quality management system and production of medical devices. The Group has initialed the Gotong Royong campaign within and outside the factory premises of the Company since five years ago. The Company has invited the Company s neighboring food stalls to participate this campaign for the financial year under review. The respond from other participants were encouraging. The Group believes that through education and promotion this campaign will improve the awareness of the employees and public to keep their workplace clean and neat and also to ensure that the stakeholders and public interests, safety and health are duly protected. In addition, we have made donations to local schools for various fund raising activities. 2) CSR in workplace Safety is our priority at work. We strive to improve our workplace to ensure that all our employees and stakeholders safety and health are duly protected at work. The members of Health and Safety Audit Committee duly selected by the Company from among our employees will send for a three days practical training at Balai Bomba, Muar. They shall responsible for providing in-house safety training to all our employees from time to time and also performing a health and safety inspection every 6 months in our factory. 3) CSR in environment The Group promotes environmentally conscious work practices and our internal policy demands strict compliance to the Environmental Regulations such as Akta Alam Sekililing (1974) (Malaysia). Periodic assessment is also carried out by the Group to assess its environmental impact on the environment. The Group strives to reduce the environmental impact of its operation through investment in technologies that enhance energy efficiency and promotes recycling wherever possible. 4) CSR in marketplace The Group is committed to conducting its business with integrity while in compliance with all applicable laws. We seek also to conform to the highest standards of business practices in the marketplace to comply with requirements by our vendors who demand for compliance in areas of healthy and safety of the products, hazardous, labour force, workplace environment and environment standards. Further, the Group has applied risk management standards on the products based on the requirements of EN ISO We have an active policy to ensure continuous compliance with our commitment to our customers and the marketplace. Prospect Despite many global uncertainties such as high food and crude oil prices, economic recession in USA, unabatedly challenging global creidt crunch and continous weakening of US currency against world currencies would moderate global growth and consumption, the Group shall continue to pursue latest technical development, new products innovation, continuation of efficient manufacturing practices and improvement on distribution as well as the marketing efficiency to further improve our competitiveness and business presence in the domestic and international markets. 26

28 ANNUAL REPORT 2008 CHAIRMAN S STATEMENT Prospect (cont d) Since high energy and commodities prices have become the realities for all business operation worldwide and they could potentially sustain for next few years. To improve on our performance, the Group shall leverage on our cutting edge equipment to innovate with new economical quality products and to develop a new business model to meet the customers needs by introducing the personalized soothers which will create a procurement platform for the existing and potential customers vis a vis improve better corporate branding and achieve ultimate total cost saving and better profit to our Group. To sustain long term share value creation within increasing challenging globalised environment, besides building the capacity and new technology, the Group also focuses on other important organisation building blocks such as human capital development, upgrading information technology and total quality performance to achieve total operational excellence within the manufacturing facilities. The Group had in place a SAP computer system. Upon migration to this new system, this initiative shall improve the group capability to achieve transparent costing, fast and accurate information for the employees to improve the business efficiency among the organisation. To reduce the possible effect of the improving strength of the Ringgit and to improve margins, the Group shall continue to strengthen the internal processes, work closely with all the subcontractors to improve the cost structure to stay lean and mean. With all the positive measures taken to enhance the competitiveness and margins, barring any unforeseen circumstances, the Board of Directors of the Company hopes to improve corporate performance of the Group for the financial year Appreciation I would like to put on record my heartfelt appreciation to all our customers, business associates, bankers, and shareholders, Fund Managers, the Securities Commission, Bursa Malaysia Securities Berhad and Government of Malaysia who have supported and believed in us over the years. We look forward to your continuing support and trust for the years ahead. I would also like to take this opportunity to express my sincere appreciation and thanks to the Board of Directors for their constant support and contribution. Last but not least, my gratitude goes to our dedicated employees, whose continuous commitment to deliver value and quality products and services remains the key to the development and growth of the Group. Dato Tee How Cut, PIS, DPTJ CHAIRMAN Dated: 28 November 2008 Directorate Ms. Tee Bee Leng, resigned from the Board as the Non-Independent Non-Executive Director of the Company on 17 September On behalf of the Board, I wish to extend our sincere thanks for her invaluable contribution during her tenure on the Board. 27

29 TAKASO RESOURCES BERHAD K MANAGING DIRECTOR S STATEMENT MANAGING DIRECTOR S STATEMENT 2008 was indeed a challenging year for Takaso Resources Berhad Group ("the Group or Takaso Group").Despite many uncertainties such as high crude oil and food prices, the Group was able to brave through the challenges and the past 5 years records to register an operational profit before financial cost for financial year under review. This interpreted that the business model of the Group introduced to our overseas distributors have been worked effectively for the financial year under review. One of the measures taking by the Group is continuously outsource new business partners, and the Group will gradually moving away from traditional business model to outsource our business operation to cut down the cost of operation and achieve ultimate total cost saving. A new business model will be developed by the Group to meet the customers needs by introducing the personalized soothers which will create a procurement platform for the existing and potential customers vis a vis improve better corporate branding and achieve ultimate total cost saving and better profit to our worldwide distributors. The Group will consistent to appoint distributors in different areas to broaden our sales distribution channel and each of the appointed distributor will be given a flexibility to roll on our marketing, distribution and promotion plans as well as to create their internet platform at their own languages to market our products globally. The following are the available website in some countries created by our appointed distributors:- a) in Hungary; b) in Spain; and c) in Turkey. 28

30 ANNUAL REPORT 2008 MANAGING DIRECTOR S STATEMENT Operational Processes. The Group has a strong quality assurance team to ensure on-going research efforts to improve on the Group s product quality in order to comply with the latest international standards or specification as well as to improve efficiency and safety of products. The Group has also promoted environmentally conscious work practices and our internal policy demands strict compliance to the Environment Regulations. Our products have gained recognition with internationally recognised standards such as SGS Yardsly, BSI and JAKIM on HALAL logo, CCLP (China Certification) and other regulatory bodies etc. During the financial year under review, our contraceptive condom under "ROMANTIC LOVE RUBBER QUICK & EASY PACK" have gained recognition by Malaysia Design Council and it has been awarded "Malaysia Good Design Mark". Our baby product namely JAPLO GROWING UP FORMULA has been tested "Melamine" free and it was safe for consumption. The Company has step up efforts to procure certification on our baby products free from "Melamine" and to comply with the international standards to ensure our baby products were safe for consumption. Appreciation I would like to extend my sincere gratitude to our Chairman Dato Tee How Cut, PIS, DPTJ, and the Board of Directors of Takaso Resources Berhad for the trust and belief in my ability to assume the executive leadership for all these years. Finally I would like to acknowledge the support of all our stakeholders including relevant regulatory authorities, our shareholders, business partners, customers and our staff for the assistance, guideline and contribution to the Group. Mr Francis Tee Tze Chern, JP Managing Director Date : 28 November 2008 Group Outlook The financial crisis that emanted from the US has widespread impact on global economies and financial markets. This has given rise to greater volatility and slower economic growth in the rest of the world. The Malaysian economy is expected to soften in the last quarter of 2008 and in The operating environment for the manufacturers in Malaysia will thus be more challenging. Notwithstanding, the Group will remain focused on its strategy of building sustainable business growth, whist exercising prudent risk management and will continue to pursue the latest technical development, new products innovation, continuation of efficient manufacturing practices and improvement on distribution as well as the marketing efficiency to further improve our competitiveness and business presence in the domestic and international markets. 29