9. INTERNAL CONTROL

STA recognizes the importance of its internal control system, risk
management, and the monitoring of the business operation, which is a
continuous process; and the role and shared responsibilities of all STA
staff members ranking from the Executive Committee to each employee. STA
has set up a sufficient and adequate internal control system to provide
a reasonable assurance that all functions within the Group are operated
consistently and are able to meet the goals laid down by Executive
Committee. STA has established an Internal Audit Department which is an
independent unit and reports directly to the Audit Committee. The
Internal Audit Department performs an internal control assessment
pursuant to the annual plan by considering related risk factors as
approved by the Audit Committee as well as supporting the creation of a
risk management system and providing various recommendations to ensure
that all operations of the Company meet the objectives as planned. The
Internal Audit Department has followed the Standard for the Professional
Practice of Internal Auditing as a guideline for its work, which focuses
on independent, just, and international standard operations with high
quality auditing work. Therefore, an adequate training program specially
designed for each individual internal audit personnel is provided
continuously. In addition, according to an independent auditor who
certified the Company’s financial statements for the year 2011, there
was no weakness in the internal control system which will materially
affect the financial statements of the Company.

The following is a summary of the internal control system and internal
audit of the Company:

Audit Committee: The Audit Committee responsibility is to consider the
sufficiency of the Company’s internal control system by continuously
reviewing the performance of the Internal Audit Department and the
independent auditor. The Audit Committee emphasizes the sufficiency and
adequacy of the internal control system and ensures that all operations
have complied with the laws, rules, regulations and other relevant
policies. If the Audit Committee has any recommendations or has found
any significant error, the Audit Committee will report these matters to
the Board of Directors of STA for further improvement.

Internal Audit Department: The Internal Audit Department monitors the
operation of various units within the Group in accordance with the
annual plan and as assigned by the Executive Committee or the Audit
Committee by using the principle of risk management to make an
assessment on the businesses or the working processes, and also gives
advices and makes recommendations regarding the improvement of internal
control to the management of each unit and also provides operation
guidelines to improve effectiveness and efficiency.

Management Activity Control System: The Board of Directors sets the
operating goals of the Company by determining the clear mission,
detailed operating plan of each department, and Key Performance
Indicators (KPIs) in financial outcome, operating output, and customer
satisfaction. Such control is continuously closely monitored.

Risk Assessment: Changing environments may cause business at risk and
negative impacts, therefore continuous risk assessment and monitoring
are required. Each department shall assess its risk and prepare the
solution plan. In addition, there is a management meeting every month to
evaluate the current situation and select strategy to cope with the
possible risks.

Control: The Company clearly determines measures and implementation
plans by issuing orders, rules, approval authority, and working
procedures for the management and all employees.

Information and Communication: The Company has various communication
networks, via both the Internet and its Intranet. The Internet is a
communications channel between the Company and stakeholders such as
shareholders, investors, and other external parties. For internal
communication within the Group, the Intranet is the key method for
correspondence. This ensures efficiency and accuracy of information, and
that information is delivered in time to all related parties.

Monitoring and Evaluation Systems: The management continuously monitors
economic situations to strategically plan business operation under
current and future circumstances that may impact organisation’s goal.
Key Performance Indicator (KPI) report will be conducted in order to
closely and timely monitor and evaluate operating performance of
organisation.

Risk Reporting: Daily reports setting out the aggregate amount and cost
of raw materials purchased are generated by the managers of each of the
Company's rubber processing facilities. In addition, the Company's sales
and marketing department also generates a daily sales and inventory
report. The senior management team utilises these reports to determine
the net position of the Company's sales and cost of goods sold, and
hence, the exposure to the various risks.

Reviews: The managers of the Company's rubber processing facilities meet
with the procurement and sales and marketing teams on a monthly basis,
to prepare the budget (including the targeted monthly production
capacities for each of the Company's rubber processing facilities as
well as the sales targets for the month). These targets are set after
taking into account several factors such as the estimated effective
production capacity at each of the rubber processing facilities, the
supply of raw materials that the Company is able to acquire, the demand
of Natural Rubber Products, the price of natural rubber in the
commodities markets and other general economic conditions. Such budgets
are then reviewed by the senior management team before they are
implemented. Through these monthly budget meetings and the setting of
targets, the Company has established procedures which it believes to
achieve maximum return on investments within the appropriate risk
parameters that are set by the senior management team from time to time.

Following the meeting of the STA Board of Directors no. 1/2013, on 28
February 2013, which was attended by three members of the Audit
Committee, the STA Board of Directors, having received information from
the management and relevant staff members, assessed the internal control
system and concluded that by assessing the internal control system of
the Company in five areas, which are organization and the environment,
risk management, control of the operation of the management, information
and communication, and monitoring system using the assessment model of
the Office of the SEC, was of the opinion that STA has a sufficient
internal control system and has applied a precise audit standard.
Neither the opinion of the independent directors nor the Audit Committee
differs from the opinion of the STA Board of Directors with regard to
internal control. However, the Audit Committee has emphasized the strict
implementation of Good Corporate Practice of the Company in order to
comply with the regulations of the Capital Markets Supervisory Board,
the SET, SGX-ST, and the Office of the SEC to ensure that the operation
of the Company is conducted in the most transparent and effective manner
possible.

In addition, the meeting of the Audit Committee of STA no. 1/2013, on 27
February 2013, made an assessment of the internal control system of the
Company and was of the opinion that the internal control of the Company
was adequate and appropriate.

Regarding the monitoring and supervision of the subsidiaries of STA, the
Directors of STA will serve as directors of the subsidiaries and
associates and may from time to time nominate the Company’s
representatives to serve as directors of the subsidiaries. The Internal
Audit Department of the Company is assigned to audit the sufficiency of
the internal control of the subsidiaries and reports its findings to the
Audit Committee in order for the Company to be able to effectively
control and monitor the internal control operation of the subsidiaries.