CONTENTS. 4 Corporate Information. 5 Corporate Calendar. 6 Chairman Statement 9 主席文告. 11 Directors Profile. 13 Corporate Governance Statement

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2 CONTENTS 4 Corporate Information 5 Corporate Calendar 6 Chairman Statement 9 主席文告 11 Directors Profile 13 Corporate Governance Statement 15 Report Of Audit Committee 18 Additional Listing Requirements Compliance Information 19 Statement On Internal Controls 20 Statement Of Directors Responsibility 21 Financial Statements 68 List Of Properties 69 Analysis Of Shareholding 71 Notice Of Fifth Annual General Meeting 72 Statement Accompanying Notice Of Fifth Annual General Meeting Enclosed Proxy Form

3 Multi Square Malaysia China Thailand Indonesia

4 Multi Square Our coating products being use as comestic decorative on home audio, car audio, DVD, LCD, TV, handphone coating, handphone keypads, office equipments, games products & computer casing. G-Earthmate Our special product G-Earthmate products are apply on building.

5 Corporate Information BOARD OF DIRECTORS Tan Fie Ping Chairman and Managing Director Tan Fie Jen Executive Director Tan Bee Ngoh Executive Director Tan Lay Beng Independent Non-Executive Director Azahar bin Baharudin Independent Non-Executive Director Winston Paul Wong Chi Huang Independent Non-Executive Director COMPANY SECRETARIES Rokiah Binti Abdul Latiff (LS ) Ow Pee Juan (f) (MAICSA ) Noriah Binti MD Yusof (LS ) REGISTERED OFFICE Level 31, Menara Landmark Mail Box 172, 12 Jalan Ngee Heng Johor Bahru Tel : Fax : SHARE REGISTRAR Symphony Share Registrars Sdn Bhd Level 26, Menara Multi Purpose, Capital Square, 8 Jalan Munshi Abdullah Kuala Lumpur Tel : Fax : AUDITOR Horwath (AF 1018) Level 30, Menara Landmark Mail Box 171, 12 Jalan Ngee Heng Johor Bahru Tel : Fax : SPONSOR OSK Investment Bank Berhad 20th Floor Plaza OSK, Jalan Ampang Kuala Lumpur Tel : Fax : PRINCIPAL BANKER EON Bank Berhad 37 & 39 Jalan Johar 1, Taman Desa Cemerlang Ulu Tiram Johor Tel : STOCK EXCHANGE LISTING MESDAQ MARKET OF BURSA MALAYSIA SECURITIES BERHAD

6 Corporate Calender 5 DATE EVENTS 6 March 2007 The Company announced that on 16 February 2007 Bank Negara Malaysia has approved the investment of HKD920,000 in its 50%+1 owned subsidiary, Asset Capital Holdings Limited (ACHL) by subscribing for new ordinary shares of HKD1.00 each in ACHL (ACHL Shares) at par. In this regard, the Company has on 6 March 2007, 18 April 2007 and 31 May 2007 remitted HKD920,000 to ACHL pursuant to the proposed ACHL Shares subscription. The Investment was completed on 19 June Its proposed ACHL Shares Subscription has been completed with the allotment of total 1,840,000 ordinary shares of HKD1.00 each in ACHL to the Company and Ever Bright Printing Machine Factory Limited, the other shareholder of ACHL. 20 August 2007 The Company announced its proposed disposal of a piece of land held under Geran Lot (formerly known as HS (D) PTD 89771), Mukim of Plentong, District of Johor Bahru, State of Johor and a factory erected thereon ( the property ) by Multi Square Sdn Bhd ( the Vendor ), a wholly-owned subsidiary of SerSol, had on 20 August 2007, executed a Sale and Purchase Agreement ( SPA ) with VIP Plastic Machinery Sdn Bhd ( the Purchaser ) for the total cash consideration of 590,000.

7 6 Chairman Statement Dear shareholders, on behalf of the Board of Directors, it is my pleasure to report on the Financial Statements of SerSol Technologies Berhad ( SerSol ) and its subsidiaries ( SerSol Group ) for the financial year ended 31 December PERFOANCE REVIEW After listing on the MESDAQ Market for 3 years, we have invested in various countries in Asia including Indonesia, China, Thailand and Singpapore with limited funds available. We have also taken great effort to familiarize ourselves with the markets in those countries and the results have shown positive development at the end of the last quarter for the financial year ended During the FYE 2007, SerSol Group had gone through different stages of development in the said countries. For the 1st and 2nd quarter of FYE 2007, SerSol Group were still facing losses due to the unforeseen factors in those countries as stated below. For the financial year ended 31st Dec, 2007, SerSol Group s overall revenue was registered at 31.2 million, which was an increase of approximately 9.7% compared to FYE Although our Group s performance was not as encouraging during the early part of FYE 2007, we had managed to cut the losses to approximately 326,000 at the end of FYE 2007 compare to approximately 1.5 million losses in FYE The management team has implemented a focused and performance based business strategy across over our Group during the 3rd quarter of FYE 2007 and as a result of the strategy, the positive results begun to contribute in the last quarter of FYE The strategies that were carried out after the end of the 2nd quarter of FYE 2007 are as follows: (i) our subsidiary MSSB stopped producing low demand products. (ii) reduce labour and operating costs; (iii) focus on developing more high value products; (iv) restructure the management team and promoting potential managerial personnel; and (v) sharing of resources across our subsidiaries in these said countries. MALAYSIA MULTI SQUARE SDN. BHD. (MSSB) In FYE 2007, the biggest customer of MSSB; which had contributed an average revenue of at least 5 million yearly to MSSB, closed down its operations in Johor which had a direct impact on the revenue and profit of MSSB. Thereafter, the MSSB management diverted its marketing efforts into high quality, high value and huge volume for mobile phone, car audio and LCD/Plasma TV markets. This type of plastic coating is a niche market and it is controlled by a few well known international players. Further there are barriers to enter such market as there are stringent tests imposed by the MNC customers. In addition, for this type of coating, the suppliers to the MNCs must be reviewed according to their capabilities in terms of financial, technology, technical, management skill, accreditation and the company s reputation as well. With our capable and intelligent R&D staff, good marketing people, experienced production workers and tight quality control implemented by us, we finally started supplying these high value plastic coating at the last quarter of FYE During the same period in mid of year 2007, the management had foreseen that the prospects for wood coating will decline and the risk of impact to financial credits getting higher in this sector. Hence, the management decided to stop producing wood coating, and reducing the man power from 91 to 60 staff to reduce operating expenses. DECO COATINGS SDN. BHD. (DCSB) After a year, our subsidiary DCSB, ventured into a water-based architectural multi-color granite-look coatings technology. Currently we are still trying to break our products into Malaysia construction market. This coating technology is considered advance in the building industry but the company is still at an introduction stage to capture the attention of architects and developers. DCSB have participated in all related exhibitions to introduce this coating across the country. DCSB have received many enquiries who want to know about the durability and application process of this coating. However, there were no big projects but DCSB manage to secure a number of small projects for testing our product in the market. DCSB will continue his efforts to seek more business during year 2008.

8 Chairman Statement (cont d) 7 THAILAND MULTI SQUARE COATING THAILAND CO. LTD. (MSCT) MCST is a subsidiary of the Group when we ventured into Thailand in November 2006 in which its holds 75% stake and it has started operation in January The company MSCT faced shareholders conflict after 6 months of joint venture. Then we decided to take over the balance stake and now holding 100% stake in MCST. However, after taking over the operations, it was not smooth because our management teams took time to familiarize with the culture, language, market and laws of Thailand. Our management team in MCST had finally resolved operating issues in MCST and all local government regulation issues. Together with our marketing efforts we have started to promote our products and it is now recognized by local MNC s contractors. CHINA ASSET CAPITAL HOLDINGS LTD. (ACHL) AND ZHUHAI MS COATING LTD. (ZMCL) In the FYE 2007 our China subsidiary produced positive results and it turned losses into profit. The high value products were the key contributions of ZMCL s profits. ZMCL is not only supplying in China s local market but also exporting to the Vietnam market. However, the operations in China is facing a competitive environment and we are required to strictly comply with China s safety regulations on hazardous manufacturing rules. The stringent safety regulations have an impact to those small size coating manufacturers. In addition, all coating and hazardous manufacturers must renew their manufacturing license in every two years. The new ruling in August 2007 for abolishment of export tax rebate had reduced the profit of the company. The appreciation of China Renminbi cause the cost of materials for export and losses in foreign exchange in receiving US dollar. In order to counter this issue, ZMCL had authorised another subsidiary to do the manufacturing and export to their customers in Vietnam. INDONESIA PT MULTI SQUARE (PTMS) The revenue FYE 2007 showed slight improvement in revenue compared to FYE PTMS had break even for the FYE As PTMS incurred high import duty and value added tax (VAT) on products imported from our MSSB in Malaysia, the management team is considering the possibility to manufacture the products in Indonesia for FYE SINGAPORE MULTI SQUARE (S) PTE. LTD. (MSPL) Our presence in Singapore is predominantly for strategic reason. PROSPECTS As reflected in the last quarter result of FYE 2007, SerSol expects a better prospect for FYE We have number of approved projects that will be commencing in mid of year 2008 and it would be a main source of revenue to the Group. Nevertheless, the slow down in US market may have impact on business in the region. However, the management team is ready to tune our business strategy accordingly. The appreciation of the China Renminbi, new labour laws in China, new income tax law and new environmental control policy had caused lesser foreign direct investments into China. In light of this, it would be a challenging business environment for SerSol Group in FYE The accreditation as Green Partner by Sony and Canon would help the Group to get more new projects in the coming years across the region. With our new business strategy, vision and mission, our SerSol Group will continue to focus our strategies to increase new products range, quality and productivity to perform better results for FYE 2008.

9 8 Chairman Statement (cont d) DIVIDENDS No dividend was recommended for the financial year ended 31 December APPRECIATIONS I would like to take this opportunity to express my sincere appreciation and thanks to my fellow directors for their advice and contribution. To the management and staff, I would like to thank you for your patience, understanding and loyalty towards our Group. On behalf of the Board of Directors and Management, I would like to express my gratitude to all shareholders, customers, business associates, vendors, bankers and regulatory authorities for their continuous support and trust in our SerSol Group and the Board. Tan Fie Ping Chairman

10 主席文告 9 致亲爱的股东们 : 你们好! 本人非常荣幸代表董事局向各位的股东们陈述盛资科技集团与属下子公司 ( 以下简称 盛资集团或本集团 ) 截止至 2007 年 12 月 31 日的常年报告及通过审核的财政报告 : 盛资集团经过三年的上市于自动报价市场后, 集团运用限定资金投资泰国 中国 印尼与新加坡市场, 将盛资集团推向一个新的里程碑 且尽最大努力尝试开发新项目, 并于 2007 年第四季取得良好业绩给予回馈 回顾 2007 年整个财政年度里, 盛资集团面临了许多挑战 在第一与第二季度的财政报告因不可预测的因素而面临亏损, 我们为此努力做出一些销售策略和技术调整, 在 2007 年的财政报告中盛资集团的总营业额约达至马币 3 千 1 百零 2 万 比较于 2006 年的营业额, 其增长率为 9.7% 虽然本集团上半年的表现未能达到预期的效果, 但与 2006 年相比之下, 集团的亏损从大约马币 150 万减至 2007 年的大约马币 32 万 6 百 管理层于 2007 年第 3 季度实专注实施商业策略方针, 其策略成功创造佳绩于第 4 季度. 策略方针实施于第 3 季度包括以下方面 : 1) 本集团属下的子公司 MSSB 停止生产低需求的产品 2) 降低营运费用与人力成本 3) 集中研究高科技产品 4) 改组管理团队, 积极栽培和提升有潜质人员 5) 完善规划属下子公司的人力和物力资源 马来西亚 MULTI SQUARE SDN. BHD. (MSSB) 在 2007 年里, 致使马来西亚的营业额遭受主要的客户结束于柔佛州区域的营运 ( 此客户每年的营业交易额高达马币 5 百万 ) 的严重打击下, 因此子公司管理层转于注意力销售高价位 高品质及高销量产品市场 例如 : 手机 汽车音响和高清电视的涂料市场 此类工业涂料市场被视旷大的市场并且都被国际知名品牌所垄断 因此要越入这类工业涂料市场, 其客户对于供应商的资金 科技设施, 技术 管理技能和信誉等各方面都有严峻的要求 基于本集团拥有智力强大的研发人员, 销售人员, 熟练的生产人员和严峻的品质管理的配合下, 子公司终于在 2007 年第四季度开拓了新的商机 于年中时期, 在管理层预测之下, 木材涂料市场的需求与其资金风险, 因此决定停产此涂料和削减人员从 91 名至 60 名, 以减低公司营运费用和人力成本 DECO COATINGS SDN. BHD. (DCSB) 子公司管理层引进了花刚岩水性多彩涂料, 该涂料属于新型的产品, 因此业务们正努力开拓建筑行业的涂料市场, 积极参与各国各地的展销会, 以吸引房产开发商和建筑师的注意 到目前为止, 虽然 DCSB 未接获大型工程, 但通过展销会已成功获取市场上的青睐, 并已获取一定额的小工程订单 展望 2008 年,DCSB 将在建筑行业占有一席之地, 开拓更大的涂料市场 泰国 MULTI SQUARE COATING THAILAND CO. LTD (MSCT) 泰国公司在开业六个月后, 由于股东之间的问题, 集团决定收购剩余的百分之二十五的股权, 因此, 现在本集团拥有百分之百的控股权 收购之后, 管理层积极迅速了解泰国的文化 语言 市场及法律 在大家的努力之下, 公司已能正常运作和解决法律的议题 以此同时, 销售人员也积极推广本集团的产品, 此产品已被当地的跨国公司所接受

11 10 主席文告 ( 续 ) 中国 ASSET CAPITAL HOLDINGS LTD. (ACHL) AND ZHUHAI MS COATING LTD. (ZMCL) 位于中国的子公司在 2007 年里全力以付, 成功将亏损转为盈利 此子公司不只专注于中国的市场也同时积极开发中国客户在越南的市场 在中国的安全生产与危险化学品的法规规定下, 所有涂料公司必需严利遵守法规, 以便在两年后顺利取得更新其准许证 这对中小型涂料制造商造成严重的打击 在 2007 年的 8 月, 中国政府已撤消化学品的出口退税的优惠政策, 无形中降低了子公司的营利 由于中国人民币的增值与美金的贬值, 其造成兑币亏损于产品出口 印尼 PT MULTI SQUARE (PTMS) 于 2007 年 PTMS 处于收支平衡的阶段, 部份因素是基于子公司需支付高进口税和增值税 在 2008 年重新考量各项优势和技术转移的可能性 新加坡 MULTI SQUARE (S) PTE. LTD. (MSPL) 本集团涉足于新加坡市场是基于策略性的原因 展望 从 2007 年第四季财政报告的回响, 本集团对于 2008 年的长成表示乐观 于 2008 年年初, 集团已获得不少客户对产品的肯定, 这将增进集团的销售 虽然现今美国经济的低糜, 不明朗的美国市场因素有可能间接影响本区域的市场, 但是管理层将积极调整商业策略, 将所有可能不利因素减至最低 由于中国人民币的增值, 劳工法令, 税务法令的更新和环境保护限定, 这将会造成减少投资者的加入 以上因素将是集团的一大挑战 股息 获得 SONY 和 CANON 授权的 GREEN PARTNER, 这将协助集团产品的肯定于未来的发展 通过集团的营运策略, 梦想, 使命, 本集团将会积极专注于增加产品的类别, 品质和生产以达到更加的前景 在 2007 年财政总结报告里显示无股息 致谢 本人谨此感谢董事局成员过去一年来对本集团的支持与信任 对于各董事局成员提出的宝贵意见深感谢意 由衷地感谢各位尊贵的股东 政府机关 商业同仁 客户及有关当局一直以来给予盛资集团及属下子公司的支持与合作 同时也对管理层和全体员工一直以来尽忠职守和竭诚服务 对本集团的支持信赖与体谅表示赞赏与感激 Tan Fie Ping 主席

12 Directors Profile 11 TAN FIE PING Age 46, Malaysian (Chairman and Managing Director) Mr Tan Fie Ping, began his career as a production supervisor in Daihwa (M) Sdn Bhd in He was appointed to the Board of SerSol Technologies Berhad on 1 September He is currently the Chairman and Managing Director of the Company. He graduated with a Bachelor of Business Studies degree in 1985 from the University of Winnipeg, Canada. While serving in Daihwa, he was holding several key positions in the company during different period of time. These positions include Head of Department for the 2nd Process Department, Head of Secondary Sales and Marketing Department and Head of the Purchasing Department. He left Daihwa and joined Lea Tat (M) Sdn Bhd as Manager in 1991 before leaving the Company in 1992 to set up his own business. He is the pioneer of the Group and has vast working experience in the Electrical and Electronics and industrial coatings industries. TAN FIE JEN Aged 43, Malaysian (Executive Director) Mr Tan Fie Jen, was appointed to the Board on 1 September He is currently the Executive Director of the Company. He graduated from the Tunku Abdul Rahman College with a Diploma in Building in He began his career as Sales Executive in various companies such as Hunter Products (M) Sdn Bhd, Supermax Enterprise and Lea Tat (M) Sdn Bhd. He joined the Group of the Company as Sales Executive in 1992 and has been promoted as Assistant General Manager in He is currently the Chief Operating Officer of Multi Square Sdn Bhd. He has fifteen (15) years of experience in the industrial coating industries. TAN BEE NGOH Aged 46, Malaysian (Executive Director) Ms Tan Bee Ngoh was appointed as an executive Director on 1 September She graduated with a Bachelor of Economics degree from the University of Winnipeg, Canada in She has started her career as a Purchaser in Claytan Industries Sdn Bhd for three years before she joined Fairwood Furniture (M) Sdn Bhd as a Personnel Officer. She then joined the Group in 1992 as a Director and the Administrator of the Company. TAN LAY BENG Aged, 54, Malaysian (Independent Non-Executive Director) Ms Tan Lay Beng was appointed as Independent Non-Executive Director of the Company on 1 September She obtained her certificate as a Certified & Chartered Accountants (ACCA) from the Association of Certified and Chartered Accountants United Kingdom in 1984 and was subsequently accredited with Fellow Certified and Chartered Accountant (FCCA). She is currently a Chartered Accountant of the Malaysian Institute of Accountants, Certified Financial Planner of the Financial Planning Association of Malaysia and a Fellow Member of the Malaysian Institute of Taxation. She has started her career in the accounting and auditing field in After eight (8) years, she choose to specialize in taxation work whereby she became the Tax manager of a medium size firm and then continued her career in taxation work with Price Waterhouse in She left the firm to set-up her own consultancy firm.

13 12 Directors Profile (cont d) AZAHAR BIN BAHARUDIN Aged 52, Malaysian (Independent Non-Executive Director) En Azahar was appointed as Independent Non-Executive Director of the Company on 1 September He graduated from MARA Institute of Technology in He began his career in 1977 in United Asian Bank and was subsequently promoted to an Officer in He left United Asian Bank in 1991 and joined Affin Bank Berhad as an Executive Officer. In 1992 he was promoted to Head of Credit and became a Deputy Branch Manager of Johor Bahru branch in In 1994 he has been promoted as Branch Manager and worked in various branch of the Bank in Johor. He served with the Bank until He is currently a financial consultant with the Royal Mint Exchange. Overall he has twenty- eight (28) years of experience in the banking industry. Winston Paul Wong Chi-Huang Aged 38, Malaysian (Independent Non-Executive Director) Mr Winston Paul Wong Chi-Huang was appointed as Independent Non-Executive Director on 31 December He graduated from the University of Keele, UK in 1993 with a Bachelor of Arts Degree Second Class Upper (Hons) in Law and Management. In 1997 he obtained his Masters of Laws degree from the National University of Singapore. He was called to English Bar in 1994 and admitted to practice to the Malaysian Bar in In 2008 he was admitted to practice in Singapore. He started his career as a lawyer in the firm of Messrs Abdul Raman Saad & Associates in 1995 and was with the firm until February While he was at Messrs Abdul Raman Saad & Associates, he was a Partner and Head of Department of the Corporate Finance and Capital Markets Department. In March 2006, Mr. Winston Wong joined Messrs Adi Radlan & Co as a Partner and he was also the Head of the Corporate and Commercial Department of Messrs Adi Radlan & Co until March In April 2007, he and Ms Pamela Wong set up a new law firm under the name of Winston Wong Law Chambers. In June 2007, he was appointed as a Foreign Legal Consultant with WongPartnership LLP, Singapore, one of Singapore s leading law firms. Winston s main area of practice is equity and debt capital markets including Islamic Debt Capital Market, mergers and acquisitions, corporate banking and finance, securities and advisory and corporate and commercial affairs. Mr. Winston Wong is also very active in presenting papers at law conferences and one of his notable papers is his presentation at the International Pacific Bar Association Conference in Japan in 2001 on Security issues relating to Corporate Banking from a Malaysian Perspective. He has also co-authored and written a chapter in the book Due Diligence Law and Practice by Christopher Davis on The Importance of Due Diligence in Malaysia from the perspective of Securities Regulation In Malaysia. He is currently a member of the International Pacific Bar Association, Malaysia China Business Council and Malaysian Chinese Association.

14 Corporate Governance Statement 13 A. DIRECTORS The Board The Board of Directors comprises six (6) Members, of whom three (3) are of Executive capacity and three (3) are Independent Non-Executive Directors. The Independent Directors fulfill their role by exercising independent judgment and objective participation in the proceeding and decision making process of the Board. Board Meeting Four (4) times Board meetings were held within the financial year ended 31 December Directors attendance to the meeting can be found in the Statement Accompanying the Notice of the Fifth Annual General Meeting on page 72. The Chairman of the Board The Chairman of the Board, Mr Tan Fie Ping is the pioneer of the Group and has vast working experience in the coating industry. He is also the Managing Director of the Company. Directors Training All the Directors have attended various training as a continuous effort to enhance management skills. Stated below is the list of courses attended during financial year ended 31 December 2007: Name of Directors Name of courses Date: Tan Fie Ping Lean Manufacturing Breakthrough Techniques 9 & 10 February 2007 Tan Bee Ngoh Lean Manufacturing Breakthrough Techniques 9 & 10 February 2007 International Transfer Pricing 12 December 2007 Tan Fie Jen Lean Manufacturing Breakthrough Techniques 9 & 10 February 2007 The Black Belt Sales Ninja System For 24 & 25 May 2007 Manufacturers M.A.D Marketing Made Easy Workshop 5 & 6 October 2007 Tan Lay Beng MIT Workshop PR on Property Development, 7 July 2007 Construction Contracts, Tax Audit & Investigation Managing Change MIA Public & Advance PR by IRB 17 & 18 July 2007 MIA Regional Conference & Budget August & 11 September 2007 Azahar Bin Baharudin Tax Incentives for Malaysian Companies 25 July 2007 Remuneration Committee The Committee was set up on 22 November Its responsibilities include assessing the size of the Board, relevant mixed skills and experience and other qualifications of Non-Executive Directors and effectiveness of the Board as a whole. The members of the Remuneration Committee are as follows:- Tan Fie Ping Tan Lay Beng Azahar bin Baharudin

15 14 Corporate Governance Statement (cont d) Re-election of Directors In accordance with the Company s Articles of Association, one-third of the Directors for the time being shall retire from office at each Annual General Meeting ( AGM ). A retiring director shall be eligible for reelection. Directors who are appointed by the Board during the financial year are subject to re-election by the shareholders at the next AGM held following their appointments. Details of Directors seeking re-election at the Fifth Annual General Meeting are disclosed in the Statement Accompanying the Notice of AGM on page 72 in this Annual Report. B. DIRECTORS REMUNERATION 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 are as follows:- Salaries & other Emoluments () Fees () Total () Executive Directors 621, ,206 Non-Executive Directors 36,000 36,000 12,100 12,100 Number of Directors Range of remuneration per annum Executive Non-Executive Below 50, , , , , , , , , , , , , ,001 to 400,000 1 C. ACCOUNTABILITY AND AUDIT It is the Board s responsibility and commitment to provide a balanced and understandable assessment of the Group s operation and prospects in all the quarterly reports and annual financial statements to shareholders, investors and Regulatory Authorities. The Board is assisted by the Audit Committee to review information for disclosure, the quality of the financial reporting and to ensure accuracy and completeness. The statement of Directors Responsibility in respect of the Audited Financial Statements of SerSol Technologies Berhad is set out on page 20 of this annual report. D. OTHERS Audit Committee The composition and terms of reference of Audit Committee together with its report are presented on pages 15 to 17 of this annual report. Non-Audit Fees During the financial year under review, there were no non-audit fees paid to the external auditors of the Group.

16 Report Of Audit Committee COMPOSITION The present Audit Committee comprises of 3 members of the Board. The Company has complied to the Bursa Securities Listing Requirements that came into effect on 1 June 2001, which require a majority of Audit Committee members to be independent Directors. In addition, the Audit Committee has one Director who is also member of the Malaysian Institute of Accountants ( MIA ) and the Chairman of the Audit Committee is an Independent Director. 1.1 Members Members of the Audit Committee are as follows: Ms Tan Lay Beng En Azahar bin Baharudin Mr Tan Fie Jen Mr Winston Paul Wong Chi Huang Independent Non-Executive Director (Appointed with effect from 01/09/2004) Independent Non-Executive Director (Appointed with effect from 01/09/2004) Executive Director (Appointed with effect from 01/09/2004, resigned with effect from 31/12/2007) Independent Non-Executive Director (Appointed with effect from 31/12/2007) 1.2 Chairman of Audit Committee The Chairman of the Audit Committee is Ms Tan Lay Beng, an Independent Non-Executive Director. 1.3 Constitution The Audit Committee of SerSol Techonologies Berhad ( SerSol ) was established by the Board of Directors ( the Board ) in The terms of Reference of Audit Committee are set out in this page of this Annual Report. 2. TES OF REFERENCE 2.1 Composition of the Audit Committee The Audit Committee shall be appointed by the Board of Directors from amongst its members, which fulfills the following requirements:- a. The Audit Committee must comprise at least 3 members. b. A majority of the Audit Committee must be Independent Directors. c. No Alternate Director shall be appointed as a member of the Audit Committee. The Members of Audit Committee shall then elect a Chairman from among themselves who shall be an Independent Director. All members of Audit Committee, including the Chairman, will hold office only so long they serve as Directors of SerSol Technologies Berhad. The Board of Directors must review the term of office and performance of the Audit Committee and each of its members at least once every 3 years to determine whether the Audit Committee has carried out its duties in accordance with its terms of reference. 2.2 Secretaries of the Audit Committee The Company Secretaries of SerSol Technologies Berhad shall be the Secretaries of the Audit Committee.

17 16 Report Of Audit Committee (cont d) 2.3 Objective of the Audit Committee The objective of the Audit Committee is to assist the Board to discharge its responsibilities by reviewing the adequacy and integrity of the Company and the Group s internal control systems and management information systems, including system for compliance with applicable laws, regulations, rules, directives and guidelines. Audit Committee is also to reinforce the independence of the external auditors and thereby helps assure that they will have rein in the audit process and to provide, by way of regular meetings, a line of communication between the Board and the external auditors. 3. Duties and Responsibilities of Audit Committee The following are the main duties and responsibilities of the Audit Committee: a. To recommend to the Board on the appointment and annual reappointment of the external auditors and their audit fee, after taking into consideration the independence and objectivity of the external auditors and cost effectiveness. b. Discuss with the external auditors before the audit commences the nature and scope of the audit, the audit plan and ensure co-ordination where more than one audit firm is involved. c. To review the quarterly interim results, half year and annual financial statements of the Company and the Group prior to the approval by the Board whilst ensuring that they are prepared in a timely and accurate manner complying with all accounting and regulatory requirements and are promptly published. d. Discuss problems arising from the interim and final audits and any matter the auditor may wish to discuss in the absence of the management where necessary. e. Review the external auditor s management letter and management s response. f. Evaluate the standards of internal controls and financial reporting of the SerSol Group of Companies. g. Consider the major findings of internal investigations and management s response. h. Review any related party transactions and conflict of interest situation that may arise within SerSol Group, including any transaction, procedure or source of conduct that raises questions of management integrity. i. Consider other issues as defined by the Board. 4. Power of the Audit Committee a. Have explicit authority to investigate any matter within its terms of reference. b. Have the resources required to perform its duties. c. Have full and unrestricted access to any information, records, properties and personnel of SerSol and any of other companies within the Group. d. Have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity (if any) e. Be able to obtain independent professional or other advice and to invite outsiders with relevant experience and expertise to attend the Audit Committee s meeting (if required) and to brief the Audit Committee; f. Be able to convene meetings with external auditors without the presence of the executive board members, whenever deemed necessary. 5. Frequency of Meetings The Audit Committee shall hold a minimum of at least four (4) meetings in a financial year. The number of Committee meetings held during a financial year and the details of attendance of each individual member in respect of meetings held shall be disclosed annually.

18 Report Of Audit Committee (cont d) 17 The meeting shall be chaired by the Chairman of Audit Committee or in the absence of the Chairman, another committee member who is an Independent Director nominated by the committee members. The quorum of the meeting is the majority of whom shall be Independent Directors. The Chairman also has the discretion to call for additional meetings at any time. The Committee Secretaries shall attend each Audit Committee Meeting and record the proceedings of the meeting. Meetings Five (5) Audit Committee meeting were held within the financial year ended 31 December 2007 during the tenure of the present Audit Committee. Details of the attendance of the members at the Audit Committee meeting are as follows: Name of Audit Committee Member No. of Meeting attended Ms Tan Lay Beng 5/5 En Azahar bin Baharudin 5/5 Mr Tan Fie Jen 5/5 The Managing Director of the Company and the representatives from the External Auditors have attended the Audit Committee meetings conducted during the financial year under review. Activities During the financial year, the Audit Committee has conducted its activities in accordance with its existing Terms of Reference, which include quarterly meetings to review the quarterly results, discussions on the Internal Audit reports to assess the effectiveness of the system of internal controls in the areas audited. The Audit Committee also discussed the annual audited financial statements with the external auditors as well as their findings and recommendations.

19 18 Additional Listing Requirements Compliance Information The information set out in the Annual Report is made up to a date not earlier than 6 weeks from the date of Annual General Meeting of the Company. To comply with the Listing Requirements of Bursa Securities, the following additional information is provided: RECURRENT RELATED PARTIES TRANSACTIONS Significant related parties transactions are as follows: Name of related parties Nature of transactions Tan Fie Ping and Tan Fie Jen Rental of premises 18,000 4,000 In the opinion of the directors, the above transaction has been entered into in the ordinary course of business and has been established under terms that were mutually agreed between the parties. The tenancy agreement was expired during the year. The relationship between the Group and the related parties are as follows: Name of related parties Tan Fie Ping Tan Fie Jen Relationship with the Group Director Director SHARE BUYBACKS There were no share buy backs during the financial year ended 31 December OPTIONS, WARRANTS OR CONVERTIBLE SECURITIES EXERCISED The Company has not issued any options, warrants or convertible securities in respect of the financial year ended 31 December AMERICAN DEPOSITORY RECEIPT ( ADR ) OR GLOBAL DEPOSITORY RECEIPT ( GDR ) The Company has not sponsored any ADR or GDR programme for the financial year ended 31 December SANCTIONS AND/OR PENALTIES The Company and its subsidiaries, Directors and management have not been imposed with any sanctions and/or penalties by any regulatory bodies. PROFIT GUARANTEE No profit guarantee was given by the Company in respect of the financial year ended 31 December MATERIAL CONTRACTS There were no material contracts by the Company and its subsidiaries involving Directors and major shareholders interest. REVALUATION OF LANDED PROPERTIES The Company does not have a revaluation policy on landed properties. CONTRACT RELATED TO LOAN BY THE COMPANY There were no contracts relating to loan by the Company.

20 Statement Of Internal Controls 19 INTRODUCTION The Malaysian Code on Corporate Governance requires that the Board set up a sound system of internal control to safeguard the Company s shareholders investments and the Group s assets. This statement of internal control has been prepared pursuant to paragraph (b) of the Listing Requirements of Bursa Malaysia Securities Berhad for MESDAQ Market. BOARD RESPONSIBILITIES The Board acknowledges that it is their responsibility to ensure the establishment of adequate and effective internal control within the Group. Notwithstanding, the Board is aware that the internal control established can only provide reasonable but not absolute assurance against material misstatement or loss, as it is designed to manage rather than eliminate the risk of failure to achieve business objectives. The Board monitors the financial performance of the Group and provides feedback to the Executive Directors to ensure the objectives of the Company is met. RISK MANAGEMENT FRAMEWORK The Board is aware that an effective risk management system should be integral to the operations of the Group. In this regard, STB developed the Group s initial Key Risk Profile ( KRP ) on 10 March 2008 with facilitation from a professional service provider. The KRP was updated during the year and presented to the Board in May Nevertheless, the Board acknowledges the benefits of updating the KRP on a more frequent basis. In the forthcoming years, the Board shall also be implementing changes to the Group s risk management framework to ensure that the risk management activities are conducted in a more formalized and systematic manner. INTERNAL AUDIT The Board acknowledges the importance of the internal audit function and had established an in-house internal audit department to carry audits and strengthen the Group s overall system of internal control. OTHER ELEMENTS OF INTERNAL CONTROL The other key elements of the Group s existing internal control systems are as follows: Clearly defined and structured reporting lines Clearly documented internal policies and procedures set out in a series of Standard Operating Procedures ( SOP ) manuals implemented through an International Organisation for Standardization ( ISO ) accreditation programme. ISO audits are conducted by both internal and external parties annually. Close involvement of the Executive Directors in day to day management of the Group. CONCLUSION There were no significant losses incurred during the financial year ended 31 December 2007 as a result of weaknesses in the system of internal control and uncertainties that could result in material loss to the Group that may adversely affect the Group. The Board, together with management, will continue to take measures to strengthen the internal control environment of the Group The Board of Directors SerSol Technologies Berhad

21 20 Statement Of Directors Responsibility In respect of the Audited Financial Statements Directors are legally required to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Group and of the Company at the end of the financial year and of the results of the Group and of the Company for the financial year then ended. In preparing those financial statements, the Directors of the Company have: adopted suitable accounting policies and then applied them consistently; made judgments and estimates that are prudent and reasonable; ensured applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and prepared the financial statement on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business. The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Group and of the Company and to enable them to ensure that the financial statements comply with the Companies Act and applicable approved accounting standards. The Directors are also responsible for the assets of the Group and of the Company and, hence, for taking reasonable steps for the prevention and detection of fraud and other irregularities.

22 FINANCIAL STATEMENTS 22 Directors Report 26 Statement By Directors 26 Statutory Declaration 27 Report Of The Auditors 28 Balance Sheets 30 Income Statements 31 Statements Of Changes In Equity 33 Cash Flow Statements 35 Notes To The Financial Statements

23 22 Directors Report The directors hereby submit their report and the audited financial statements of the Group and of the Company for the financial year ended 31 December PRINCIPAL ACTIVITIES The Company is principally an investment holding company and a provider of management services. The principal activities of the subsidiaries are set out in Note 7 to the financial statements. There have been no significant changes in the nature of these activities during the financial year. RESULTS THE GROUP THE COMPANY Profit after taxation for the financial year 388,756 (201,752) Minority interest (714,902) Loss attributable to equity holders of the Company (326,146) (201,752) DIVIDENDS No dividend was paid since the end of the previous financial year and the directors do not recommend the payment of any dividend for the current financial year. RESERVES AND PROVISIONS All material transfers to or from reserves or provisions during the financial year are disclosed in the financial statements. ISSUES OF SHARES AND DEBENTURES During the financial year, (a) (b) there were no changes in the authorised and issued and paid-up capital of the company; and there were no issues of debentures by the company. OPTIONS GRANTED OVER UNISSUED SHARES During the financial year, no options were granted by the Company to any person to take up any unissued shares in the Company. BAD AND DOUBTFUL DEBTS Before the financial statements of the Group and of the Company were made out, the directors took reasonable steps to ascertain that action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts, and satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts. At the date of this report, the directors are not aware of any circumstances that would further require the writing off of bad debts, or the additional allowance for doubtful debts in the financial statements of the Group and of the Company.

24 Directors Report (cont d) 23 CURRENT ASSETS Before the financial statements of the Group and of the Company were made out, the directors took reasonable steps to ascertain that any current assets other than debts, which were unlikely to be realised in the ordinary course of business, including their values as shown in the accounting records of the Group and of the Company, have been written down to an amount which they might be expected so to realise. At the date of this report, the directors are not aware of any circumstances which would render the values attributed to the current assets in the financial statements misleading. VALUATION METHODS At the date of this report, the directors are not aware of any circumstances which have arisen which render adherence to the existing methods of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate. CONTINGENT AND OTHER LIABILITIES The contingent liability of the Company is disclosed in Note 40 to the financial statements. At the date of this report, there does not exist:- (a) (b) any charge on the assets of the Group and of the Company that has arisen since the end of the financial year which secures the liabilities of any other person; or any contingent liability of the Group and of the Company which has arisen since the end of the financial year. No contingent or other liability of the Group and of the Company has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations when they fall due. CHANGE OF CIRCUMSTANCES At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading. ITEMS OF AN UNUSUAL NATURE The results of the operations of the Group and of the Company during the financial year were not, in the opinion of the directors, substantially affected by any item, transaction or event of a material and unusual nature. There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors, to affect substantially the results of the operations of the Group and of the Company for the financial year. HOLDING COMPANY The holding company is SerSol Holdings Sdn. Bhd., a private limited company incorporated in Malaysia, which the directors also regard as the ultimate holding company.

25 24 Directors Report (cont d) DIRECTORS The directors who served since the date of the last report are as follows:- AZAHAR BIN BAHARUDIN TAN BEE NGOH TAN FIE PING TAN FIE JEN TAN LAY BENG WINSTON PAUL WONG CHI HUANG (Appointed on ) Pursuant to Article 101 of the Articles of Association of the Company, Tan Fie Jen retires by rotation at the forthcoming annual general meeting and, being eligible, offers himself for re-election. Pursuant to Article 106 of the Articles of Association of the Company, Winston Paul Wong Chi Huang retires at the forthcoming annual general meeting and, being eligible, offers himself for re-election. DIRECTORS INTERESTS According to the register of directors shareholdings, the interests of directors holding office at the end of the financial year in shares in the Company and its related corporations during the financial year are as follows:- NUMBER OF ORDINARY SHARES OF 0.10 EACH AT AT THE COMPANY BOUGHT SOLD Direct Interests TAN BEE NGOH 1,385,489 1,385,489 TAN FIE JEN 372, ,824 TAN FIE PING 547, ,448 Indirect Interests TAN FIE JEN 49,928, ,000 50,268,949 TAN FIE PING 49,928, ,000 50,268,949 NUMBER OF ORDINARY SHARES OF 1.00 EACH HOLDING COMPANY AT AT SerSol HOLDINGS SDN. BHD BOUGHT SOLD Direct Interests TAN FIE JEN TAN FIE PING 1,195 1,195 By virtue of their interests in the holding company, Tan Fie Jen and Tan Fie Ping are deemed to have interest in shares in the subsidiaries to the extent of the Company s interest in accordance with Section 6A of Companies Act, None of the other directors holding office at the end of financial year had any interest in shares in the Company or its related corporations during the financial year.

26 Directors Report (cont d) 25 DIRECTORS BENEFITS Since the end of the previous financial year, no director has received or become entitled to receive any benefit (other than a benefit included in the aggregate amount of emoluments received or due and receivable by directors as shown in the financial statements, or the fixed salary of a full-time employee of the Company) by reason of a contract made by the Company or a related corporation with the director or with a firm of which the director is a member, or with a company in which the director has a substantial financial interest except for any benefits which may be deemed to arise from transactions entered into in the ordinary course of business with certain directors as disclosed in Note 39 to the financial statements. Neither during nor at the end of the financial year was the Company a party to any arrangements whose object is to enable the directors to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate. SIGNED IN ACCORDANCE WITH A RESOLUTION OF THE DIRECTORS DATED 24 APRIL 2008 Tan Fie Ping Tan Bee Ngoh

27 26 Statement By Directors We, Tan Fie Ping and Tan Bee Ngoh, being two of the directors of SerSol Technologies Berhad, state that, in the opinion of the directors, the financial statements set out on pages 28 to 67 are drawn up in accordance with applicable approved Financial Reporting Standards in Malaysia and the provisions of the Companies Act, 1965 so as to give a true and fair view of the state of affairs of the Group and of the Company at 31 December 2007 and of their results and cash flows for the financial year ended on that date. SIGNED IN ACCORDANCE WITH A RESOLUTION OF THE DIRECTORS DATED 24 APRIL 2008 Tan Fie Ping Tan Bee Ngoh Statutory Declaration I, Tan Fie Ping, I/C No.: , being the director primarily responsible for the financial management of SerSol Technologies Berhad, do solemnly and sincerely declare that the financial statements set out on pages 28 to 67 are, to the best of my knowledge and belief, correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declaration Act, Subscribed and solemnly declared by Tan Fie Ping, I/C No.: , at Johor Bahru in the state of Johor on this 24 April 2008 Before me RUSLY B. MOHD. YUNUS P.I.S. (No. J112) Commissioner For Oaths Tan Fie Ping

28 Report Of The Auditors To The Members Of SerSol Technologies Berhad (Company No : X) 27 We have audited the financial statements set out on pages 28 to 67. The preparation of the financial statements is the responsibility of the Company s directors. It is our responsibility to form an independent opinion, based on our audit, on the financial statements and to report our opinion to you, as a body, in accordance with Section 174 of the Companies Act, 1965 and for no other purpose. We do not assume responsibility to any other person for the content of this report. We conducted our audit in accordance with approved standards on auditing in Malaysia. These standards require that we plan and perform the audit to obtain reasonable assurance that the financial statements are free of material misstatement. Our audit included examining, on a test basis, evidence relevant to the amounts and disclosures in the financial statements. Our audit also included an assessment of the accounting principles used and significant estimates made by the directors as well as evaluating the overall adequacy of the presentation of information in the financial statements. We believe our audit provides a reasonable basis for our opinion. In our opinion, (a) the financial statements are properly drawn up in accordance with the provisions of the Companies Act, 1965 and applicable approved Financial Reporting Standards in Malaysia so as to give a true and fair view of:- (i) (ii) the state of affairs of the Group and of the Company at 31 December 2007 and their results and cash flows for the financial year ended on that date; and the matters required under Section 169 of the Companies Act, 1965 to be dealt with in the financial statements of the Group and of the Company; and (b) the accounting and other records and the registers required by the Companies Act, 1965 to be kept by the Company and the subsidiaries have been properly kept in accordance with the provisions of the said Act. We have considered the financial statements and auditors reports of the subsidiaries of which we have not acted as auditors, as indicated in Note 7 to the financial statements. We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Company s financial statements are in form and content appropriate and proper for the purpose of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes. The audit reports on the financial statements of the subsidiaries were not subject to any qualification and did not include any comments made under Subsection (3) of Section 174 of the Companies Act, Horwath Firm No.: AF 1018 Chartered Accountants Wong Tak Mun Approval No: 1793/09/08 (J) Partner Johor Bahru 24 April 2008

29 28 Balance Sheets At 31 December 2007 THE COMPANY NOTE ASSETS NON-CURRENT ASSETS Investments in subsidiaries 7 8,994,145 8,583,605 Investment in an associate 8 149, , , ,000 Property, plant and equipment 9 9,564,170 10,584,590 87, ,409 Goodwill on consolidation , ,392 Other intangible assets 11 1,311,732 1,184,853 Deferred tax assets 22 2,762 11,297,123 12,094,387 9,231,550 8,844,014 CURRENT ASSETS Inventories 12 4,294,358 3,792,775 Trade receivables 13 10,718,179 8,224,985 Other receivables, deposits and prepayments 14 1,055,902 1,031,504 1,000 1,000 Tax recoverable 847, ,349 32,432 33,545 Amount owing by subsidiaries 15 3,334,872 3,910,881 Marketable securities , ,936 Fixed deposits with licensed banks 17 73,371 1,321,880 Cash and bank balances 1,630, ,451 9,762 29,745 18,726,356 16,286,880 3,378,066 3,975,171 TOTAL ASSETS 30,023,479 28,381,267 12,609,616 12,819,185 The annexed notes form an integral part of these financial statements.