SER SOL BERHAD...SER SOL BERHAD (602062-X) ANNUAL REPORT 2018 Berhad (602062-X) ANNUAL REPORT LAPORAN TAHUNAN 2018 SERSOL BHD (602062-X) …

SERSOL BERHAD (602062-X)ANNUAL REPORT 2018

(602062-X)Berhad

A N N U A L R E P O R T

LAPORAN TAHUNAN2018

www.sersol.com.my

SERSOL BHD (602062-X)1-40-2, Menara Bangkok Bank, Berjaya Central Park,No 105, Jalan Ampang, 50450 Kuala Lumpur, Malaysia.T : +603 - 2181 3993 F : +603 - 2181 6688

BRANCHES ADDRESS:JOHOR BAHRU28, Jalan Canggih 1, Taman Perindustrian Cemerlang,81800 Ulu Tiram, Johor, Malaysia.T : +607 - 861 1112 / +607 - 861 1113F : +607 - 861 9261 / +607 - 863 3116

PETALING JAYA13-2, Block I, Jalan PJU 1/37,Dataran Prima, 47301 Petaling JayaT : +603 - 7880 1616 F : +603 - 7806 2020

THAILAND19/37, tambol Moo10, Klong Neung, Amphur Klong Luang,Pathumthani 12120 ThailandT : +66 - 2529 6240 F : +66 - 2520 4060

Yuk Tung • Royce Residences Magazine Ad • 420mm(w)x297mm(h) • CMYK

LIAN SOON EXPRESS SDN BHD (406135-H)

MY LOGISTICS SDN BHD (682561-X)

No. 3-01 & 5-01, Jalan Sri Perkasa 2/18, Taman Tampoi Utama, 81200 Johor Bahru, Johor, Malaysia

Tel: 07-241 4851, 07-241 4852 Fax: 07-241 6088

> Air & Sea Services> Warehousing Services> Cross Border Transport - Malaysia / Singapore> Custom Declaration> Inland Trucking> Haulage

One Stop Solutions

LIAN SOON EXPRESS SDN BHD (406135-H) I MY LOGISTICS SDN BHD (682561-X)

No. 3-01 & 5-01, Jalan Sri Perkasa 2/18, Taman Tampoi Utama, 81200 Johor Bahru, Johor, Malaysia

Tel: 07-241 4851, 07-241 4852 Fax: 07-241 6088

> Air & Sea Services> Warehousing Services> Cross Border Transport - Malaysia / Singapore> Custom Declaration> Inland Trucking> Haulage

One Stop Solutions

Design

Design

Design

Corporate Video

Corporate Video

Corporate Video

Corporate Video

Corporate VideoCorporate VideoWeb Solutions Web Solutions

Web Solutions

Web Solutions

Web Solutions

Web Solutions

PrintingPrinting

PrintingPrintingPrinting

Printing

Printing

Printing

DesignCorporate VideoWeb SolutionsPrinting

IT Solutions

IT SolutionsIT Solutions

IT SolutionsIT Solutions

IT Solutions

IT Solutions

NO. 16, JALAN IDA 1A, TAMAN PERINDUSTRIAN

DESA AMAN, 52200 KUALA LUMPUR.

Design

设计

Typesetting

排版

Printing

印刷

S D N. B H D.DYNAMIC

S D N. B H D.DYNAMIC

Ivan YongH/P: 016-3388 455 Tel: 03-6279 0682

[email protected]

FINISHGLOSS

Wood & MetalFinish• For Protection & Decoration of

Wood and Metal• For Both Exterior & Interior Use• Excellent Gloss Retention• Rust Resistant with Good

Durability• Fungal Resistant

ANTIFUNGUS & ALGAE

ANTIRUST

CORPORATE INFORMATION

GROUP CORPORATE STRUCTURE

MANAGEMENT DISCUSSION & ANALYSIS

SUSTAINABILITY REPORT

DIRECTORS’ PROFILE

KEY SENIOR MANAGEMENT PROFILES

CORPORATE GOVERNANCE OVERVIEW STATEMENT

CORPORATE GOVERNANCE STATEMENT

REPORT OF AUDIT AND RISK MANAGEMENT COMMITTEE

ADDITIONAL LISTING REQUIREMENTS COMPLIANCE INFORMATION

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

STATEMENT OF DIRECTORS’ RESPONSIBILITY

FINANCIAL STATEMENTS

LIST OF PROPERTIES

ANALYSIS OF SHAREHOLDINGS

ANALYSIS OF WARRANT HOLDINGS

NOTICE OF SIXTEENTH ANNUAL GENERAL MEETING

PROXY FORM

01

02

03

06

10

13

15

17

33

35

36

38

39

107

108

110

112

TA B L E O F C O N T E N T S

SERSOL BERHAD (602062-X)

ANNUAL REPORT 2018 1

CORPORATE INFORMATION

BOARD OF DIRECTORS

Toh Hong Chye Executive Chairman

Tan Fie Jen Executive Director / Acting Managing Director

Dato’ Yen Soon Ai Independent Non-Executive Director

Datuk Low Kim Leng Independent Non-Executive Director

Yeong Siew Lee Independent Non-Executive Director

AUDIT AND RISK MANAGEMENT COMMITTEE

Yeong Siew LeeChairman

Datuk Low Kim LengMember

Dato’ Yen Soon AiMember

NOMINATION COMMITTEE

Datuk Low Kim LengChairman

Yeong Siew LeeMember


REMUNERATION COMMITTEE

Datuk Low Kim LengChairman

Yeong Siew LeeMember


COMPANY SECRETARIES

Tai Yit Chan (MAICSA 7009143)

Tan Ai Ning(MAICSA 7015852)

REGISTERED OFFICE

Lot 6.05, Level 6KPMG Tower8 First AvenueBandar Utama47800 Petaling Jaya, SelangorTel : (603) 7720 1188Fax : (603) 7720 1111

SHARE REGISTRAR

Boardroom Share Registrars Sdn. Bhd. (Formerly known as Symphony Share Registrars Sdn. Bhd.)Level 6, Symphony HousePusat Dagangan Dana 1Jalan PJU 1A/4647301 Petaling Jaya, SelangorTel : (603) 7841 8088Fax : (603) 7841 8100

AUDITORS

UHY Suite 11.05, Level 11The Gardens South Tower Mid Valley CityLingkaran Syed Putra59200 Kuala LumpurTel : (603) 2279 3088Fax : (603) 2279 3099

SOLICITORS

Ringo Low and AssociatesD-03-03, Phileo Damansara 1Off Jalan Damansara46350 Petaling Jaya, SelangorTel : (603) 7957 8778Fax : (603) 7957 1771

PRINCIPAL BANKER

CIMB Islamic Bank BerhadLot C04-05 Concourse LevelPetronas Tower 3, Suria KLCCJalan Ampang50088 Kuala Lumpur

PRINCIPAL PLACE OF BUSINESS

1-40-2, Menara Bangkok BankBerjaya Central ParkNo. 105, Jalan Ampang50450 Kuala LumpurTel : (603) 2181 3993 Website : www.sersol.com.my

STOCK EXCHANGE LISTING

Ace Market of Bursa Malaysia Securities BerhadStock Name : SERSOLStock Code : 0055


ANNUAL REPORT 20182

CORPORATE STRUCTURE

Multi Square Sdn Bhd

100% 100%

100%

Sersol Marketing Sdn Bhd

Multi Square Coating

(Thailand) Co Ltd



MANAGEMENT DISCUSSION & ANALYSIS (MD&A)

1. Overview of the Group’s Business and Operations

Sersol Berhad is a public company listed on the ACE Market of Bursa Malaysia Securities Berhad since 2005 and is principally involved in the coatings business relating to buildings, furniture, electrical and electronic products. Within the Sersol Berhad Group there are three subsidiaries namely, Multi Square Sdn Bhd, Sersol Marketing Sdn Bhd and Multi Square Coating (Thailand) Co Ltd. (collectively referred to as “the Group”).

The Group business focus mainly in the coating of plastic and metal in the industry of electronic and electrical. However in recent years, the Group has ventured into the wood coatings and decorative coatings business segment. Notwithstanding the aforesaid, the robust technology changes in the coating industry resulted in difficulty to achieve an economy of scale in production.

In view of these changes, the Group objective is to provide niche coatings products in the industry by innovating and providing new solutions to customers which would increase the Group’s product life cycle and reduce our operating cost in order to remain competitive. The Group has undertaken a quality and deliverability product assurance strategy to cater to the needs and demands of its customers.

2. Financial Performance Review

Sersol Berhad recorded losses for FY2018. Summary of the Group’s result is as follows:-

Financial Results and Key 2014 2015 2016 2017 2018 Performance Indicators RM’000 RM’000 RM’000 RM’000 RM’000

Gross Revenue 16,926 21,293 20,429 18,066 18,016 (Loss)/Profit After Tax (4,447) (1,844) (1,231) 279 (767) Basic (Loss)/Earnings Per Share (Sen) (2.3) (0.88) (0.57) 0.13 (0.36) Total Asset 20,778 25,056 22,375 22,323 20,122

Total Equity 13,910 17,179 16,027 16,999 16,155

For the financial year ended 31 December 2018 (“FY2018”), Sersol Berhad has achieved a total revenue of RM 18.016 million, a slight decrease of the turnover as compared to total revenue of RM 18.066 million chieved the financial year ended 31 December 2017 (“FY2017”). Our Group recorded losses of RM 767,000 as compared to profit of RM 279,000 in FY 2017. The losses were mainly due to the provision for impairment loss on trade receivables of RM 363,000 and upkeep of factory of RM 165,000.

The demand of plastic and metal coatings and wood coatings in Malaysia remains stable and the main decrease of 13.3% of revenue was primarily attributed by the decrease of revenue generated from the decorative coatings segment in the property market. Nonetheless, the Group’s business in Thailand in relation to plastic and metal coatings posted a 10.6% growth, which mitigated the lower turnover of the Group.

Furthermore, the weakening of the Malaysian Ringgit and the increase of crude oil prices in FY 2018 resulted in the increase of raw materials prices, which in turn reduced the profit margin of the Group’s products. In order to mitigate the increasing raw material price, the Group would source for alternative raw materials to allow its products to remain competitive.

3. Capital Expenditure

Against the challenging market condition, the Group has implemented strict controls on capital management. In view of the aforementioned, there were no major capital expenditure commitments made for the FY2018.


ANNUAL REPORT 20184

MANAGEMENT DISCUSSION & ANALYSIS (MD&A) (Cont’d)

4. Sales Performance by Geographic Region and Business Segment

i. Geographic Region

Sersol Berhad has a business presence in both Malaysia and Thailand. Whilst the Malaysian subsidiaries contributed substantially to the Group’s revenue for FY2018 whilst the Thailand subsidiary contributed the balance.

ii. Business Segment

There are three main segments of the Group’s coating business, namely the plastic and metal coatings, wood coatings and decorative coatings segments. Whilst the plastic and metal coatings segment generate approximately 75% of the Group revenue for FY2018, wood coatings and decorative coatings segments contributed the balance.

5. Known Trend and Events

The main factors that have affected and are expected to continue to affect our Group’s operations and profits include, but are not limited to, the following:

a) Impact of Foreign Exchange and Commodity Products

The Group mainly imports raw materials from oversea which is subject to fluctuation of foreign exchange and crude oil prices. Hence, any fluctuation of the prices of raw material will impact the Group’s profit margin.

b) Competitive Market

The Group’s main competitors in the coating industry mainly derived from Multi-National Companies from Japan, Europe and USA, which have established brands and competitive price to provide their products and services to various customers. Hence, it is challenging for our Group to compete in the coating industry.

c) Industry Outlook

The industry outlook for the Group’s coating business continue to look challenging and competitive. Due to the aforesaid nature, the Group is seeking opportunities to diversify to other segment of the coating industry by using existing resources and facilities to build-up market share in the region.

6. Business Strategies & Initiatives

The Business strategy of the Group is enhancing the Group’s mission to provide innovative solution by selling the highest quality solution to achieve total customer satisfaction. Therefore, we will enhance our Research and Development (“R&D”) ability in products development, problems solving and troubleshooting, cost effective in selection of raw materials and formulate the coatings according to requested specification and application of customer in niche and consumer coatings market.

Sersol Berhad continues to serve its Multi-National Company customers, distributors and agencies with on time delivery upon ordering, attentive customer service on products testing and enquiries, and also aiming to be competitive in cost control.

The effect of global warming has also a small impact on our Group’s business direction as we shall seek to provide more environmental friendly coatings products. Therefore, as water based paint is expected to be the coating of the future, the Group will be placing more emphasis on its R&D with the view to be prepared for the change from the current solvent based paint to the water based ones.



7. Risk

Risk assessment exercises are conducted periodically for all business units assisted by external consultants to identify, evaluate and update known and anticipated risks of the Group. The risks, related controls, risk responses and strategies to mitigate them are presented to the Audit and Risk Management Committee (“ARMC”). The ARMC monitors the implementation and progress of risk responses, aided by a program of internal audits in order to safeguard the interest of the Group and its stakeholders.

The key anticipated and known risks that the Group are exposed to which may have a material effect on the Group’s operations, performance, financial condition and liquidity are regulatory compliance risks, data and ERP Integrity Risks and credit risk.

i. Regulatory Compliance Risks

The development, manufacturing and distribution of coating solutions are closely regulated in all markets where the Group operates. Regulatory compliance is critical in ensuring uninterrupted manufacturing and distribution operations. Compliance is not just restricted to abiding by the current standards, but also to be prepared for future standards when implemented. To manage regulatory compliance risks, the Group has established procedures and mechanisms to ensure full compliance and periodically invests in major infrastructure upgrades in anticipation of future regulatory demands.

ii. Data and ERP Integrity Risks

The Management is of view that the proprietary, personal and confidential data and stable operations of the Group’s ERP system is another major concern as the loss or corruption of such data and prolonged system failures may result in the loss of competitive edge and business opportunities. Internal controls are in place for the management and protection of data and the ERP system, which ensure that they are maintained, tested, secured and upgraded periodically.

iii. Credit Risks

The Management also realized that the credit risk of the business has increased from the past. We have undertaken mitigation plan to improve the credit control of our customers by doing background check regularly.

8. Future Prospect Sersol Berhad is expecting the market for paint and coatings industry in Malaysia to be challenging as the

newly formed government attracted less Multi-National Companies to Malaysia to invest as compared to Vietnam and neighboring countries such as Indonesia and Thailand. The situation is further compounded by the foreign labour supply policy issue in the manufacturing sector as the government has presently adopted a policy that is more favorable to the employment of local labour. Further, the delay in the implementation of various mega infrastructure projects have also contributed to the lower demand of decorative paints domestically.

Moving forward, Sersol Berhad will focus towards preparation of the review of the existing products performance with a view to increase cost effectiveness. We are also closely monitoring the opportunity which may arise from the US and China trade war whereby many Multi-National Companies will be shifting their manufacturing bases out of China to avoid losing their competitiveness.

9. Acknowledgement

Despite all best efforts have been taken in this challenging year, the Group recorded its losses in FY 2018 after last years of profit. In this respect, I wish to record my appreciation to the management and staff, employees of Sersol to achieve our Group turnaround with their team work, hard work and committed to deliver the result. We hope to continue to achieve better performance in FY2019 with our best endeavor.

Besides, we would like to thank our value customers, suppliers, shareholders, government and fellow board members to give their full support to the Group.

Bernard Tan Fie Jen Group Acting Managing Director

MANAGEMENT DISCUSSION & ANALYSIS (MD&A) (Cont’d)


ANNUAL REPORT 20186

SUSTAINABILITY STATEMENT

Introduction

Sustainability is a journey where an organization undertakes to achieve the goals set by the organization which are not limited to the focus on impact to the organization’s financial performance but also the economic, social and environmental impacts to the stakeholders. At Sersol Berhad and its subsidiaries (collectively referred to as “the Group”), we believe that the engagement with our stakeholders in a responsible manner in all our business aspects is one of the key components for us to achieve our business sustainability. We focused on managing the organization’s impact on the economy, environment and society whilst ensuring our continuous business growth.

Governance Framework

The Board acknowledges the importance of business sustainability to our organization. The Board plays an important role in determining the sustainability strategies and goals of the Group, and also overseeing our corporate sustainability performance while the senior management is responsible in the implementation of the Group’s sustainability policy and approach. The Group is committed towards providing sustainable solutions to our stakeholders and achieving our goals set for sustainable business operations.

Stakeholders Engagement

The Group recognizes the importance of actively engaging with our stakeholders as we believe it is a key factor for an organization to be successful. Multiple effective communication channels are provided to our stakeholders to ensure that our stakeholders understand the Group’s business including our financial performance, business values and prospects. Our stakeholders who have direct or indirect involvement with the Group are identified in the table below:

Stakeholders

Employees

Customers

Suppliers

Shareholders

ISO auditor

Frequency

Annually/Quarterly

Ongoing

Ongoing

Ongoing

Annually

Forms of Engagement

Meeting and discussionTrainingAnnual performance review

Site visitMeetingsComplaints or feedbacksAdvertisement

MeetingsComplaints or feedbacksWhistle blowing

Annual General Meeting or Extraordinary General MeetingAnnouncements to BursaCircularsCompany’s websiteAdvertisement of notice

Site visitMeetings

Engagement Focus/ Objectives

Career progressionEmployee development needs

Product’s quality assurance and deliverability

Sound payments practices

Shareholders’ engagement

Renewal of certification

In our website, we update the Group’s information on a regular basis to provide convenience to our stakeholders in obtaining information about the Group and also provide our contact information in our website to enhance communication with our stakeholders.



SUSTAINABILITY STATEMENT (Cont’d)

Key Sustainability Matters

Throughout the financial year under review, we have identified and focused on the key sustainability matters as outlined in the table below:

Pillars Key Sustainability Matters

Economic Products and services Customer engagement

Social Employment diversity Occupational health and safety Training and education Employee engagement

Environmental Environmental compliance Environmental impact

Economic

Product and Services

The Group is principally involved in the manufacturing and sale of coatings, thinners and industrial chemicals in Malaysia and Thailand. The Group also involved in the trading of architectural coatings, wood coatings and general industrials coatings.

We have established a strong presence in Malaysia since 1992 and a regional presence in Thailand with manufacturing facility. Today, through our offer of a wide range of products and services to our customers, we remain committed to continue in providing sustainable products and services as we keep abreast with the innovative formulations and manufacturing processes in the coatings industry. Our manufacturing of coatings and thinners are certified with ISO 9001:2015 Quality Management System. The certification of ISO 9001 is a testament of our high manufacturing standards and products compliance to customer requirement.

Customer Engagement

We have been in the industry for over 20 years, the Group has established a strong customer base including local manufacturers, agencies and distributors in Malaysia and Thailand. Our customer base has been built up through our continuous active engagement with our existing and potential customers in various forms i.e. organizing site visit or conducting meetings to understand our customers’ requirements and needs by our sales team.

Social

Employment Diversity

The Group is determined in promoting employment diversity across races, genders and age groups as we believe a diverse workforce expands the Group’s capabilities in terms of knowledge and skills as well as fosters mutual understanding and respects among employees. As part of the Group’s hiring practise, we do not discriminate against any races, genders or age groups.


ANNUAL REPORT 20188


Occupational Health and Safety

Our nature of business has to a certain extent, exposes our employees to various occupational health and safety risks. In view of this, the Group had developed and undertaken various health and safety measures in both our manufacturing facilities in Malaysia and Thailand to protect our employees from the potential occupational health and safety risks.

During the financial year under review, a total of 75% of our workers have undergone health and safety training organised by our in-house safety committee and external professionals – an improvement compared to a total of 74% recorded in the previous financial year. The health and safety trainings attended by our employees during the financial year under review include fire, spillage and first aid training.

We actively monitor our employees’ health and safety in our day-to-day operations. During the financial year under review, there are no work-related injuries, fatalities or accidents reported in the Group.

Training and Education

To ensure a constant delivery of quality products and services to our customers, we place strong emphasis to the training and development of our employees. We train and develop our employees through a range of learning and development programme. We offer our employees with on-the-job trainings, as well as internal and external trainings as identified and assigned to the relevant employees by our senior management team. The trainings attended by our employees during the financial year under review include all rounded leadership training, and sales and services tax training.

Employee Engagement

Our employees are essential to the Group in delivering success and business growth. We valued our employee’s services by compensating our employees appropriately during retrenchment. Apart from providing our employees with a set of standard and compulsory benefits including base salary, bonus, medical coverage, insurance benefits and contribution to the Employees Provident Fund, the Group also recognises long serving employees that have served the Group for more than 10 years to instil employees’ loyalty within the Group.

Environmental

Environmental Compliance

The Group is operating in compliance with the Environmental Quality Act, 1974. In every month, our safety committee will conduct an internal audit to analyse and verify the environmental compliant status of our manufacturing facilities. In cases where the environmental compliant status is found to be undesirable, the corrective actions or measures, where necessary, will be taken immediately by the relevant departments based on our audit findings.



Environmental Impact

As part of the Group’s ongoing efforts in preserving and conserving the environment, various measures were undertaken by the Group during the financial year under review to ensure our manufacturing operations have little environmental impact and are in accordance with industry benchmarks and procedures.

We have been invested in air suction cyclone system in our factory in Malaysia to minimize environmental impact caused by the wastes discharged from our manufacturing processes. We have also invested in a dust collector to reduce air pollution from powder and particle released during manufacturing process from our factory in Malaysia.

Generally, our wastes discharged from our manufacturing operations have reduced significantly during the financial year under review, as depicted in table below:

Waste Code Waste Discharged Waste Discharged Year-on Year (MT) (MT) Changes (%) FYE 2018 FYE 2017

SW307 (Waste Water and Sludge) 12.6 13.2 -4.6%SW417 (Waste or Reject Paint) 1.4 1.2 16.7%SW322 (Waste Thinner) 19.4 26.0 -25.4%SW409 (Waste Drums and Containers) 3.0 4.9 -39.4%

Total 36.4 45.3 -19.7%

Our waste discharged are collected by the licensed waste collectors where the licensed waste collectors will recycle the waste to further reduce the impact of our waste discharged on the environment and ecosystem.



ANNUAL REPORT 201810

DIRECTORS’ PROFILE

TOH HONG CHYE Age 43, Malaysian(Executive Chairman)

Mr Toh Hong Chye, was appointed to the Board on 1 March 2012 as Executive Director and was subsequently re-designated as Executive Chairman of the Company on 9 February 2018. He holds a Master Degree in Business Administration in Finance from the International Islamic University Malaysia. He is also a Chartered Accountant, a fellow member of the Association of Chartered Certified Accountants and a member of the Malaysian Institute of Accountants.

In 2002, he began his own career by setting up H.C. Toh & Co, a non-audit firm, which provides professional services such as company secretary, accounting and business advisory to companies from various industries. His experience covers audit and assurance engagements, corporate reporting and compliance, taxation and wide ranging overseas exposures. He was involved in the successful implementation of several corporate exercises which included merger and acquisition and corporate debt restructuring exercises undertaken by private and public listed companies.

Currently, he sits on the Board of AppAsia Berhad and Pegasus Heights Berhad, all of which are companies listed on Bursa Malaysia Securities Berhad and he also sits on the board of several other private limited companies.

He is the chairman of Option Committee of Sersol.

He does not have any family relationship with any Director and/or major shareholder of the Company, nor any conflict of interest in any business arrangement involving the Company. He has not been convicted of any offences within the past five (5) years, other than traffic offences, if any, and has not been imposed by any public sanctions or penalty by relevant regulatory bodies during the financial year.

He attended all five (5) meetings held in financial year ended 31 December 2018. He currently holds 2,951,549 ordinary shares in the Company as at 29 March 2019.

TAN FIE JENAge 53, Malaysian (Acting Managing Director)

Mr Tan Fie Jen was appointed to the Board on 1 September 2004 and re-designated as Acting Managing Director on 14 April 2014. He graduated from the Tunku Abdul Rahman College with a Diploma in Building in 1989. 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 as Sales Executive in 1992 and has been promoted as Assistant General Manager in 2001. He has 26 years of experience in the industrial coating industries. He was promoted to Chief Operating Officer in Multi Square Sdn Bhd in 2006 and he was a Marketing Director of the Group since 2008. Currently, he is the Acting Managing Director of Sersol.

He does not have any family relationship with any director and/or major shareholder of the Company, nor any conflict of interest in any business arrangement involving the Company. He has not been convicted of any offence within the past five (5) years other than traffic offence, if any, and has not been imposed by any public sanctions or penalty by relevant regulatory bodies during the financial year.

He attended all five (5) meetings held in the financial year ended 31 December 2018. He currently holds 5,300,048 ordinary shares in the Company as at 29 March 2019.



DATUK LOW KIM LENG Age 56, Malaysian(Independent Non-Executive Director)

Datuk Low Kim Leng was appointed as Independent Non-Executive Director of the Company on 30 April 2012. He graduated from Manchester Metropolitan University (UK) with the degree of Bachelor of Arts (Hons) (Law) in 1983 and as an Utter Barrister of the Honourable Society of Gray’s Inn, he was admitted to the English Bar in 1984. He was called to the Malaysian Bar and was admitted as an advocate and solicitor of the High Court of Malaya in 1985.

He practises law under the name and style of Messrs Ringo Low & Associates of which he is now a principal partner. He is a registered Trade Mark Agent and has also been appointed as a Notary Public to carry out notarial functions since 2004. He is also a legal advisor to various national organisations.

In recognition of his excellent services rendered as a lawyer and a corporate advisor, he was conferred the award of Darjah Pangkuan Seri Melaka (DPSM) by TYT Tun Datuk Seri Utama Dr Khalil Bin Yaakob, the Governor of Melaka on November 2018.

He is an Independent Non-Executive Director of AppAsia Berhad.

He does not have any family relationship with any Director and/or major shareholder of the Company, nor any conflict of interest in any business arrangement involving the Company. He has not been convicted for any offence within the past (5) years other than traffic offence, if any, and has not been imposed by any public sanctions or penalty by relevant regulatory bodies during the financial year.

He attended all five (5) meetings held in the financial year ended 31 December 2018. He does not hold any ordinary shares in the Company as at 29 March 2019.

YEONG SIEW LEEAge 41, Malaysian(Independent Non-Executive Director)

Madam Yeong Siew Lee was appointed as Independent Non-Executive Director of the Company on 11 August 2014. She Graduated from University of Wales College (UK) with the degree of Bachelor of Science (Honours) (Accounting and Finance) in 1999 and completed her Association of Chartered Certified Accountants (UK) in 2004.

She is a Chartered Accountant and also a member of the Malaysian Institute of Accountants (MIA). She began her career with GHL Systems Berhad (“GHL”), a company listed on the Main Market of Bursa Malaysia Securities Berhad, as an Assistant Accountant in 2003 and moved up the ranks and became Head/Assistant General manager of Finance in 2008 to supervise the company’s local and overseas accounting teams. She left GHL in August 2009 to venture into business in the consumer & architectural industry and was working as a finance adviser for SMR HR Group Sdn Bhd.

She is an Independent Non-Executive Director of TFP Solutions Berhad and Independent Non-Executive Director of Bright Packaging Industry Berhad.

She does not have any family relationship with any Director and/or major shareholder of the Company, nor any conflict of interest in any business arrangement involving the Company. She has not been convicted for any offence within the past (5) years other than traffic offence, if any, and has not been imposed by any public sanctions or penalty by relevant regulatory bodies during the financial year.

She attended all five (5) meetings held in the financial year ended 31 December 2018. She does not hold any ordinary shares in the Company as at 29 March 2019.

DIRECTORS’ PROFILE (Cont’d)



DATO’ YEN SOON AIAge 49, Malaysian(Independent Non-Executive Director)

Dato’ Yen Soon Ai was appointed as Independent Non-Executive Director of the Company on 3 January 2019. He attended Northwestern Business College, Chicago, Illinois, U.S.A. from 1989 to 1991. He has accumulated more than 23 years of working experience across various organization and corporations and his competency is particularly in the commercial sector specializing in marketing to corporate clients, business development and client relationship in diversified sectors.

He began his career as an Operations Manager in Malaysian Timber Trade Corporation Sdn Bhd (“MTTC”), a contracting company undertaking the extraction and harvesting of timber for forest concessionaires, concurrently involved in the production of rattan furniture. In 1996, he joined All Best Furniture (M) Sdn Bhd (“ABF”) as Executive Director in the Operations Division, a company with forest and timber concessions focused in logging and with its downstream activities being saw milling and the manufacture of molded parts for the furniture industries in Malaysia. ABF was also responsible for the harvesting of a forest totaling 10,000 acres in the state of Pahang. Subsequently he was promoted to the position of Chief Executive Officer in All Best Timber (M) Sdn Bhd (“ABT”), a subsidiary of ABF. In 2006, Dato’ Yen was seconded to Yoke Tank Installations Pte. Ltd, a company incorporated in the Republic of Singapore, with its group of companies incorporated throughout South East Asia and East Asia which are primarily involved in the development of edible oil storage and bulking plants with an ancillary business of trading in edible oil and fats.

He does not have any family relationship with any Director and/or major shareholder of the Company, nor any conflict of interest in any business arrangement involving the Company. He has not been convicted for any offence within the past (5) years other than traffic offence, if any, and has not been imposed by any public sanctions or penalty by relevant regulatory bodies during the financial year.

He does not hold any ordinary shares in the Company as at 29 March 2019.

DIRECTORS’ PROFILE (Cont’d)



LAU LEE CHENGGENERAL MANAGER

Lau Lee Cheng, Malaysian, female, age 41, was appointed as General Manager of Multi Square Sdn Bhd on 26 June 2008. She graduated with a Master’s degree in Science, majoring in Chemistry Industry from University of Technology Malaysia in year 2000.

She started her career with the Company as a Chemist and was promoted to Chemical Engineer in the year 2003. In 2005, she was promoted to Manager of R&D department. In year 2006 and 2008, she was appointed as Assistant General Manager and General Manager of Multi Square Sdn Bhd respectively.

She does not have any family relationship with any Director and/ or substantial shareholder of the Company, nor does she have any personal interest in any business arrangement involving the Company.

She has not been convicted of any offence within the past 5 years, other than traffic offences, if any and has not been imposed by any public sanctions or penalty by relevant regulatory bodies during the financial year.

She does not hold any directorships in any other public companies and listed issuers.

TIEW CHEE MINGCHIEF FINANCIAL OFFICER

Tiew Chee Ming, Malaysian, male, age 30, graduated from the Association of Chartered Certified Accountants (ACCA) in year 2014. He is a Chartered Accountant and a member of the Malaysian Institute of Accountants (MIA).

He joined the company in year 2014 as an in house internal auditor and collaborated with the outsourced internal auditor to reinforce the Group’s internal control function. In year 2016, he was promoted to Group Accountant. He was subsequently promoted to Chief Financial Officer in year 2018.

He does not have any family relationship with any Director and/ or substantial shareholder of the Company, nor does he have any personal interest in any business arrangement involving the Company.

He has not been convicted of any offence within the past 5 years, other than traffic offences, if any and has not been imposed by any public sanctions or penalty by relevant regulatory bodies during the financial year.

He is an Independent Non-Executive Director of AppAsia Berhad.

KEY SENIOR MANAGEMENT PROFILES



TAN CHIEW NGEEADMIN / HR MANAGER

Tan Chiew Ngee, Malaysian, female, age 54, was appointed as Admin/HR Manager of Multi Square Sdn Bhd in 2012. She graduated from Tunku Abdul Rahman College Kuala Lumpur with a Diploma in Building in 1989.

In 1990, she started her career as a Contract Officer in Syarikat Pembenaan Yeoh Tiong Lay Sdn Bhd for 2 years. Subsequently, she was appointed as a Quantity Surveyor in Retni DSR Sdn Bhd until year 1999.

In 1999, she joined our Group as a Purchasing Manager for 3 years. In 2012, she was transferred to Admin/HR Department and appointed as a Manager.

Save for being the spouse of the Acting Managing Director, Tan Fie Jen, she does not have any other family relationship with any other Director and / or substantial shareholder of the Company, nor does she have any personal interest in any business arrangement involving the Company.

She has not been convicted of any offence within the past 5 years, other than traffic offences, if any and has not been imposed by any public sanctions or penalty by relevant regulatory bodies during the financial year.

She does not hold any directorships in any other public companies and listed issuers.

TAN CHUAN THYEBUSINESS DEVELOPMENT MANAGER

Tan Chuan Thye, Malaysian, male, age 49, was appointed as Business Development Manager of Multi Square Sdn Bhd in 2008. He graduated from Singapore Polytechnic with a diploma in Marine Engineering in 1993. He started his career in 1993 as an engineer in Tru Marine for 6 months.

He joined our Group in 1994 as a Sales Coordinator and transfer to Thinner Production as a supervisor within the same year. In 2004, he was promoted to Production Manager and he gained a lot of working experiences here. In 2006, he had transferred to Sales and Marketing Department and with his technical knowledge about paint, he able to understand customer requirement well and fulfil them.

He does not have any family relationship with any Director and/ or substantial shareholder of the Company, nor does he have any personal interest in any business arrangement involving the Company.

He has not been convicted of any offence within the past 5 years, other than traffic offences, if any and has not been imposed by any public sanctions or penalty by relevant regulatory bodies during the financial year.

He does not hold any directorships in any other public companies and listed issuers.

KEY SENIOR MANAGEMENT PROFILES (Cont’d)



INTRODUCTION

The Board of Directors (“the Board”) of Sersol Berhad (“Sersol” or “the Company”) recognises the importance of corporate governance and is committed to ensuring that the principles and best practices in corporate governance as set out in the Malaysian Code on Corporate Governance (“the Code”) are observed and practised throughout the Company and its subsidiaries (collectively referred to as “the Group”) so that the affairs of the Group are conducted with integrity and professionalism with the objective of safeguarding shareholders’ investment and ultimately enhancing shareholders’ value.

This statement outlines the following principles and recommendations which the Group has comprehended and applied with the best practices outlined in the Code and the Board will continue to take measures to improve compliance with principles and recommended best practices in the ensuing years:-

• BoardLeadershipandEffectiveness• EffectiveAuditandRiskManagement• IntegrityinCorporateReportingandMeaningfulRelationshipwithStakeholders

This statement is prepared in compliance with Bursa Malaysia Securities Berhad’s (“Bursa Securities”), Ace Market Listing Requirements (“AMLR”) and it is meant to be read together with Corporate Governance Statement and Corporate Governance Report. The Corporate Governance Report provides details on how the Company has applied each practices as set out in the Code for the financial year ended 31 December 2018, a copy of which is available on the Company’s website: www.sersol.com.my as well as via an announcement on the website of Bursa Securities.

BOARD LEADERSHIP AND EFFECTIVENESS

The Board has considered and discussed a wide range of matters during the financial year ended 31 December 2018, including strategic decisions and reviewing of risk associated matters in the business. The Board is aware that decisions made for the business of the Group would affect a broad range of our stakeholders. While the Board seeks to ensure that the decisions were taken in a way that was fair and consistent with the Group’s values, the Board also recognised the importance of balancing these with the need to support the long-term future of the business.

During the year, the Board undertook a review and updated its Board Charter and policies to reflect the revised regulatory expectations. These authoritative documents serve to guide the governance and conduct of the Board and its committees.

Moving forward, the Board, being in line with the national target of having 30% women on the boards of the listed issuers, will maintain a register of potential directors which include high-calibre female candidates and appoint them when the need arises.

EFFECTIVE AUDIT AND RISK MANAGEMENT

The Audit and Risk Management Committee (“ARMC”) played a key role in ensuring integrity and transparency of corporate reporting. The ARMC’s role is to review and challenge Management to ensure that appropriate disclosures of accounting treatment and accounting policies are made. The ARMC has a duty to provide assurance to the Board that robust risk management, controls and assurance process are in place. The ARMC continues to monitor the potential risks of the Group and ensures that mitigating factors are in place to ensure health, safety and business continuity of the Group.

Risk Management is a critical component of good management practice and effective corporate governance. With the Risk Management Framework being in place, the Board’s decision-making was supported by sufficient information for the right discussions and considerations. The enhanced level of risk debate and greater involvement from the Management were also critical in ensuring that appropriate monitoring and mitigations were embedded to support the proposals under discussion.

CORPORATE GOVERNANCE OVERVIEW STATEMENT



EFFECTIVE AUDIT AND RISK MANAGEMENT (CONT’D)

The ARMC with the assistance of the Internal Audit had undertaken a thorough review of the following areas within the Group to ensure that appropriate controls and effective management process are in place:-

• SalesandMarketing• Purchasing• AccountingandFinance

The Board will continue to drive a proactive risk management culture and ensure that the Group’s employees have a good understanding and application of risk management principles towards cultivating a sustainable risk management culture. The Board will also continue to challenge the Group’s risk reporting mechanism and ensure that it is data-driven to capture and quantify exposures where applicable and necessary.

Further details pertaining to the activities undertaken by the ARMC can be obtained in the ARMC report set out on page 33 to page 34 of this Annual Report.

INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL RELATIONSHIP WITH STAKEHOLDERS

The Group recognises the importance of stakeholder engagement to the long-term sustainability of its businesses, means that as a Company, we must interact with, and acknowledge the potential impact of our operations upon a wide range of stakeholders in our duty as a responsible Company. For engagement to be constructive and meaningful, each matter considered by the Board therefore has to be in the context of relevant economic, social and environmental factors.

The Company has heightened its engagement efforts with stakeholders by engaging discussions with analysts, fund managers and shareholders, both locally and overseas, upon requests.

The Company has yet to adopt an integrated reporting framework. The Board acknowledged that integrated reporting goes beyond a mere combination of our financial statements and sustainability report into a single document. Nevertheless, there are coordinated efforts among cross-functional departments in preparing the various statements and reports in the Annual Report.

PRELUDE

Over the next few pages, we would look at the Board, its role, performance and oversight. We will provide details on the Board’s activities and discussions during the financial year, the actions arising from these and the progress made against them. We also provide an insight on director independence effectiveness and our Board evaluation, succession planning and induction and ongoing developments.

Good corporate governance of Sersol Berhad is an important element of our Board environment. To support how we run the business and how we serve our stakeholders, it needs to be relevant, authentic and meaningful. The Board has used the three (3) key principles of the Code to articulate the Board’s activities during the year:-

• BoardLeadershipandEffectiveness (page 17 to page 29) • EffectiveAuditandRiskManagement (page 29 to page 31)• IntegrityinCorporateReportingandMeaningfulRelationshipwithStakeholders. (page 31 to page 32 )

The required governance and regulatory assurance are provided throughout this statement reflecting their relevance to the business. The Company’s application with the key practices and any departure thereof of the Code is set out in the Company’s Corporate Governance Report, which is available in the Company’s website.

CORPORATE GOVERNANCE OVERVIEW STATEMENT (Cont’d)



A. BOARD LEADERSHIP AND EFFECTIVENESS

I. Board Responsibilities 1. Board of Directors

The Group acknowledge the pivotal role played by the Board in the stewardship of its directions and operations, and ultimately the enhancement of long-term shareholders’ value. To fulfil this role, the Board plays a critical role in setting the appropriate tone at the top and is charged with leading and managing the Group in an effective, good governance and ethical manner. The directors individually have a legal duty to act in the best interest of the Group and are also collectively aware of their responsibilities to the stakeholders for the manner in which the affairs of the Group are managed. The Board’s responsibilities, amongst others include the following:-

• Togetherwithseniormanagement,promotegoodcorporategovernanceculturewithintheGroup which reinforces ethical, prudent and professional behaviour.

• Review,challengeanddecideonmanagement’sproposalsforthecompany,andmonitorits implementation by management.

• Ensure that the strategic plan of the company supports long-term value creation andincludes strategies on economic, environmental and social considerations underpinning sustainability.

• Supervise and assessmanagement performance to determine whether the business isbeing properly managed.

• Ensurethereisasoundframeworkforinternalcontrolsandriskmanagement.• Understand the principal risk of the company’s business and decisions taken have

considered the risks involved.• Settheriskappetitewithinwhichtheboardexpectsmanagementtooperateandensure

that there is an appropriate risk management framework to identify, analyse, evaluate, manage and monitor significant financial and non-financial risks.

• Ensure that seniormanagement has thenecessary skills andexperience, and there aremeasures in place to provide for the orderly succession of board and senior management.

• Ensurethatthecompanyhasinplaceprocedurestoenableeffectivecommunicationwithstakeholders.

• Ensuretheintegrityofthecompany’sfinancialandnon-financialreporting.

To assist in the discharge of its responsibilities, the Board has established the following Board Committees to perform certain of its functions and to provide recommendations and advice:

(i) Nomination Committee (“NC”) (ii) Remuneration Committee (“RC”) (ii) Audit and Risk Management Committee (“ARMC”)

Each Board Committee operates within their approved terms of reference set by the Board which are periodically reviewed. The Board appoints the Chairman and members of each Board Committee.

The Chairman of the respective Board Committees will report to the Board on the outcome of any discussions and make recommendations thereon to the Board. The ultimate responsibility for the final decision on all matters, however, lies with the Board.

The Board may form other committees delegated with specific authorities to act on their behalf. These committees will operate under approved terms of reference or guidelines and are formed whenever required.

Board meeting agenda includes statutory matters, governance and management reports, which include strategic risks, strategic projects and operational items. The Board approves an annual performance contract setting the priorities director and performance targets for the Group within the parameters of the corporate plan.

The profile of each Director is presented on page 10 to page 12 of this Annual Report.

CORPORATE GOVERNANCE STATEMENT



A. BOARD LEADERSHIP AND EFFECTIVENESS (CONT’D)

I. Board Responsibilities (Cont’d) 2. Separation of position of the Chairman and Acting Managing Director

The Board has established clear roles and responsibilities in discharging its fiduciary and leadership functions. The roles of Chairman and Acting Managing Director of the Company are separately held and each has clearly accepted division of responsibilities and accountability to ensure a balance of power and authority. This segregation of roles also facilitates a healthy open, exchange of views between the Board and Management in their deliberation of the business, strategic aims and key activities of the Company.

The Chairman of the Board for the financial year ended 31 December 2018, Toh Hong Chye, an Executive Chairman, leads the Board with focus on governance and compliance and acts as a facilitator at Board meetings to ensure that relevant views and contributions from Directors are forthcoming on matters being deliberated and that no Board member dominates the discussion. The Chairman’s key responsibility, amongst others, includes the following:-

• Providing leadership for the board so that the board can perform its responsibilitieseffectively.

• Settingtheboardagendaandensuringthatboardmembersreceivecompleteandaccurateinformation in a timely manner.

• Leadingboardmeetingsanddiscussions.• Encouragingactiveparticipationandallowingdissentingviewstobefreelyexpressed.• Managingtheinterfacebetweenboardandmanagement.• Ensuringappropriatestepsaretakentoprovideeffectivecommunicationwithstakeholders

and that their views are communicated to the board as a whole.• LeadingtheBoardinestablishingandmonitoringgoodcorporategovernancepracticesin

the Group.

The Group Acting Managing Director, Tan Fie Jen, oversees the day-to-day operations to ensure the smooth and effective running of the Group. The Group Acting Managing Director also implements the policies, strategies, decisions adopted by the Board, monitors the operating financial results against plans and budgets and acts as a conduit between the Board and Management in ensuring the success of the Group’s governance and management functions.

During Board meetings, the Chairman maintains a collaborative atmosphere and ensures that all Directors contribute to the discussion. The Chairman, Acting Managing Director and Executive Directors arrange informal meetings and events from time to time to build constructive relationships between the Board members.

The Executive Directors take on primary responsibility to spearhead and manage the overall business activities of the various business division of the Group to ensure optimum utilization of corporate resources and expertise by all the business divisions and at the same time achieve the Group’s long term objectives. The Executive Directors are assisted by the heads of each division in implementing and running the Group’s day-to-day business.

3. Supply of and Access to Information

All Directors have full and unrestricted access to all information pertaining to the Group’s businesses and affairs in a timely manner to enable them to discharge their duties effectively.

Procedures have been established for timely dissemination of Board and Board Committee papers to all Directors and Board Committees in advance of the scheduled meetings. Notices of meetings are sent to Directors at least seven (7) days before the meetings. Management provides the Board with detailed meeting materials at least seven (7) days in advance of the Board or Board Committees’ meetings. Senior Management may be invited to join the meetings to brief the Board and Board Committees on the requisite information on matters being discussed, where necessary. Upon conclusion of the meeting, the minutes are circulated in a timely manner.

Technology is effectively used in the meetings of Board and Board Committees and in communication with the Board, where the Directors may receive agenda and meeting materials online and participate in meetings via audio or video conferencing.

CORPORATE GOVERNANCE STATEMENT (Cont’d)




I. Board Responsibilities (Cont’d) 4. Commitment of the Board

The Board would meet at least five (5) times a year, at quarterly intervals which are scheduled at the onset of the financial year to help facilitate the Directors in planning their meeting schedule for the year. Additional meetings are convened where necessary to deal with urgent and important matters that require attention of the Board. All Board meetings are furnished with proper agendas with due notice given and Board papers are prepared by the Management and circulated to all Directors prior to the meetings.

All pertinent issues discussed at the Board meetings are properly recorded by the Company Secretaries.

The Board met five (5) times during the financial year ended 31 December 2018. Details of attendance are as follows:

Number of

Directors meetings attended %

Toh Hong Chye 5/5 100%

Tan Fie Jen 5/5 100%

Datuk Low Kim Leng 5/5 100%

Yeong Siew Lee 5/5 100%

Dato’ Yen Soon Ai 1 N/A N/A

(Appointed with effect from 3 January 2019)

Dato’ Seow Thiam Fatt 2 4/4 100%

(Resigned with effect from 23 November 2018)

Ong Chooi Lee 3 3/3 100%

(Resigned with effect from 29 June 2018)

Note:-

1 Dato’ Yen Soon Ai did not attend any Board meetings during the financial year ended 31 December 2018 as he was appointed subsequent to the year end.

2 Dato’ Seow Thiam Fatt has attended all the Board meetings prior to his resignation.3 Ong Chooi Lee has attended all the Board meetings prior to his resignation.

The Board is satisfied with the level of time commitment given by the Directors towards fulfilling their roles and responsibilities which is evidenced by the satisfactory attendance record of the Directors at each Board meeting.

It is the Board’s policy for Directors to notify the Board before accepting any new directorship notwithstanding that the AMLR of Bursa Securities allow a Director to sit on the board of a maximum of five listed issuers. Such notification is expected to include an indication of time that will be spent on the new appointment. At present, all Directors of the Company have complied with the Listing Requirements where they do not sit on the board of more than five (5) listed issuers.





I. Board Responsibilities (Cont’d)

5. Continuous Development of the Board

The Board, via the Nominating Committee, continues to identify and attend appropriate briefings, seminars, conferences and courses to keep abreast of changes in legislations and regulations affecting the Group.

All Directors have completed the Mandatory Accreditation Programme. The Directors are mindful that they would continue to enhance their skills and knowledge to maximize their effectiveness as Directors during their tenure. Throughout their period in office, the Directors are continually updated on the Group’s business and the regulatory requirements.

During the financial year, the Board have attended collectively and individually seminar(s), conference(s) and/or training(s) to continuously upgrade their skills and to keep abreast with current developments. The lists of topics on trainings (which are not exhaustive) attended are as follows:-

• ValuationofIntangibleAssets• LatestDevelopmentsonMFRS15&MFRS16• AuditCommitteeConference2018• SalesandServiceTax2018• InternalAuditforBoardandAuditCommittee• AllRoundLeadership(CEOCLASS)• ApplyingMFRS9&MFRS132• Application,DisclosureandReportingExpectationforPrincipleA&B

The Company Secretaries also highlight the relevant guidelines on statutory and regulatory requirements from time to time to the Board. The external auditors on the other hand, briefed the Board on changes to the Malaysian Financial Reporting Standards that affect the Group’s financial statements during the year.

6. Board Committees

ARMC

The ARMC monitors internal control policies and procedures designed to safeguard the Group’s assets and to maintain the integrity of financial reporting. The ARMC maintains direct, unfettered access to the Company’s external auditor, internal auditor and management.

The ARMC Report is set out on page 33 to page 34 of this Annual Report.

A copy of the ARMC’s Terms of Reference can be found in the Company’s website at www.sersol.com.my.






6. Board Committees (Cont’d)

NC

The NC Committee oversees matters related to the nomination of new Directors, annually reviews the required mix of skills, experience and other requisite qualities of Directors as well as the annual assessment of the effectiveness of the Board as a whole, its Committees and the contribution of each individual Director as well as identify candidates to fill board vacancies, and nominating them for approval by the Board.

Following the resignation of Dato’ Seow Thiam Fatt on 23 November 2018, the NC comprises only two (2) members, all of whom are Independent Non-Executive Directors. The members of the NC for the financial year ended 31 December 2018 are as follows:

Director Designation

Datuk Low Kim Leng Chairman Yeong Siew Lee Member

During the financial year ended 31 December 2018, the NC held one (1) meeting. Below is a summary of the key activities undertaken by the NC in discharge of its duty:-

(a) Reviewed the composition of the Board and Board Committees with regards to the mix of skills, independence and diversity in accordance with its policy as stated in the Group’s Corporate Governance Statement to ensure compliance.

(b) Assessed and reviewed the independence and continuing independence of the Independent Directors.

(c) Assessed the effectiveness and performance of the Board, Directors and Board Committees for the financial year 2017. This is carried out through a self-assessment document that is completed by each Director and reviewed by the NC. Assessment criteria include the following:

• BoardComposition• Boardprocess• PerformanceofBoardCommittees• InformationprovidetotheBoard• RoleoftheBoardinstrategyandplanning• Riskmanagementframework• AccountabilityandstandardofconductofDirectors

(d) Reviewed and assessed on behalf of the Board the training record and needs of each Director, and proposed training courses to meet any shortfall or gaps in knowledge.

(e) Determined the Directors to stand for re-election and re-appointment at the 2018 Annual General Meeting on 1 June 2018.

(f) Reviewed the character, experience, integrity and competence of all the Directors, the Acting Managing Director and Chief Financial Officer and assessed their performance in 2017, paying attention to whether each of the Non-Executive Directors have made available sufficient time to discharge their responsibilities and duties.

(g) Reviewed the term of office and performance of the ARMC and each of its members to ascertain that the ARMC and its member have carried out their duties in accordance with the ARMC Terms of Reference.

(h) Recommended the re-designation of Key Senior Managements which forms part of the Succession Management Plan of the Group.

(i) Reviewed and recommended the draft NC Report to the Board for approval and inclusion in the Company’s Annual Report 2017.






6. Board Committees (Cont’d)

NC (Cont’d)

A copy of the NC’s Terms of Reference can be found in the Company’s website at www.sersol.com.my

The NC had recomposed on 3 January 2019, following the appointment of Dato’ Yen Soon Ai on the same date. The current composition of the NC is as follow:-

Director Designation Datuk Low Kim Leng Chairman Yeong Siew Lee Member Dato’ Yen Soon Ai Member

RC

The RC is responsible for recommending to the Board the remuneration principles and the framework for members of the Board and Senior Management.

The RC comprises only two (2) members which was resulted from the resignation of Dato’ Seow Thiam Fatt on 23 November 2018. The members of the RC for the financial year ended 31 December 2018 are as follows:

Director Designation Datuk Low Kim Leng Chairman Yeong Siew Lee Member

During the financial year ended 31 December 2018, the RC held two (2) meetings. Below is a summary of the key activities undertaken by the RC in discharge of its duty:-

(a) Reviewed, assessed and recommended the remuneration packages of the Group Acting

Managing Director, the Executive Directors and Senior Management.

(b) Reviewed the remuneration package of Non-Executive Directors and their Meeting Allowances.

The RC had recomposed on 3 January 2019, following the appointment of Dato’ Yen Soon Ai on the same date. The current composition of the RC is as follow:-

Director Designation Datuk Low Kim Leng Chairman Yeong Siew Lee Member Dato’ Yen Soon Ai Member

A copy of the RC’s Terms of Reference can be found in the Company’s website at www.sersol.com.my.






7. Board Charter

The Company has established a Board Charter to promote high standards of corporate governance and the Board Charter is designed to provide guidance and clarity for Directors and Management with regard to the role of the Board and its committees. The Board Charter clearly sets out the key values and principles of the Company and further sets out the duties and responsibilities of the Board, the Chairman, the Executive Directors, the Senior Independent Director and the Board Committees. The Board Charter also provides structure guidance and ethical standards for the Board in discharging their duties towards the Group as well as its operating practices. The Board Charter further entails the following issues and decisions reserved for the Board:-

• Conflict of interest issues relating to substantial shareholders or Directors includingapproving of related party transactions

• Materialacquisitionanddisposalofassetsnotintheordinarycourseofbusinessincludingsignificant capital expenditure

• Strategicinvestments,mergersandacquisitionsandcorporateexercises• AuthorityLevels• Treasurypolicies• RiskManagementpolicies• Keyhumanresourceissue

The Board Charter is reviewed annually by the Board to ensure it complies with legislations and best practices, and remains effective and relevant to the Board’s objectives.

A copy of the Board Charter can be found in the Company’s website at www.sersol.com.my.

8. Code of Conduct and Code of Ethics

The Company has established a Code of Conduct and Code of Ethics to promote a corporate culture which engenders ethical conduct that permeates throughout the Group. The Code of Conduct is based on principles in relation to trust, integrity, responsibility, excellence, loyalty, commitment, dedication, discipline, diligence and professionalism. Where else the Code of Ethics is based on the principles in relation to integrity, transparency, accountability and corporate social responsibility.

The Board is focused on creating corporate culture which engenders ethical conduct that permeates throughout the Company. The Group practices the relevant principles and values in the Group’s dealings with employees, customers, suppliers and business associates. The Directors, officers and employees of the Group are also required to observe, uphold and maintain high standards of integrity in carrying out their roles and responsibilities and to comply with the relevant laws and regulations as well as the Group’s policies. Ongoing training is provided to staff on the Code of Conduct, Ethics and general workplace behaviour to ensure they continuously uphold high standard of conduct when performing their duties.

The Board is provided guidance on disclosure of conflict of interest and other disclosure information/requirements to ensure that the Directors comply with the relevant regulations and practices. In order to address and manage possible conflicts of interest that may arise between Directors’ interests and those of the Group, the Company has put in place appropriate procedures including requiring such Directors to abstain from participating in deliberations during meetings and abstaining from voting on any matter in which they may also be interested or conflicted. The Directors of the Group are also required to disclose and confirm their directorships and shareholdings in the Group and any other entities where they have interests for the Company’s monitoring on a half yearly basis or as and when required.

Notices on the closed period for trading in the Company’s shares are sent to Directors and principal officers and the relevant employees on a quarterly basis specifying the timeframe during which they are prohibited from dealing in the Company’s shares, unless they comply with the procedures for dealings during closed period as stipulated in the AMLR.

A copy of the Code of Conduct and Code of Ethics can be found in the Company’s website at www.sersol.com.my.






9. Whistle Blowing Policy and Procedure

The Company has adopted a Whistleblowing Policy as the Board believes that a sound whistleblowing system will strengthen, support good management and at the same time, demonstrate accountability, good risk management and sound corporate governance practices. The policy is to encourage reporting of any major concerns over any wrongdoings within the Group.

The policy outlines the relevant procedures such as when, how and to whom a concern may be properly raised about the genuinely suspected or instances of wrongdoing at the Company and its subsidiaries. The identity of the whistleblower is kept confidential and protection is accorded to the whistleblower against any form of reprisal or retaliation. All such concerns shall be set forth in writing and forwarded in a sealed envelope to either the Chairman of the Board or the members of the ARMC.

Besides the above mentioned, the Company has also put in place the following policies:

• InsiderDealingPolicy• SustainabilityPolicy• DiversityPolicy• CorporateDisclosurePolicy• DirectorsandSeniorManagements’RemunerationPolicy• Directors’AssessmentPolicy• SuccessionPlanningPolicy• RelatedPartyTransactionPolicy

10. Company Secretary

The Board is assisted by qualified and competent Company Secretaries who play a vital role in advising the Board in relation to the Group’s constitution, policies, procedures and compliance with the relevant regulatory requirements, codes, guidance and legislations. Both of the Company Secretaries are Fellow members of the Malaysian Institute of Chartered Secretaries and Administrators (“MAICSA”). All the Directors have unrestricted access to the advice and services of the Company Secretaries for the purpose of the conduct of the Board’s affairs and the business.

The Company Secretaries constantly keep themselves abreast of the evolving capital market environment, regulatory changes and developments in corporate governance through attendance at relevant conferences and training programmes. They have also attended the relevant continuous professional development programmes as required by the Companies Commission of Malaysia or MAICSA for practising company secretaries. The Board is satisfied with the performance and support rendered by the Company Secretaries in discharging its functions.

In addition, the Company Secretaries are also accountable to the Board and are responsible for the following:

• AdvisingtheBoardonitsrolesandresponsibilities.• AdvisingtheBoardonmattersrelatedtocorporategovernanceandtheAMLR.• EnsuringthatBoardproceduresandapplicablerulesareobserved.• Maintaining recordsof theBoardandensuringeffectivemanagementof theCompany’s

statutory records.• Preparing comprehensive minutes to document Board proceedings and ensuring

conclusions are accurately recorded.• AssistingcommunicationsbetweentheBoardandManagement.• ProvidingfullaccessandservicestotheBoardandcarryingoutotherfunctionsdeemed

appropriate by the Board from time to time.• Preparingagendasandco-coordinatingthepreparationofBoardpapers.





II. Board Composition

1. Composition and Diversity

The Directors are of the opinion that the current Board size and composition is adequate for facilitating effective decision making given the cope and nature of the Group’s businesses and operations. The Board maintains an appropriate balance of expertise, skills and attributes among the Directors which is reflected in the diversity of backgrounds and competencies of the Directors. Such competencies include finance, accounting, legal, digital and other relevant industry knowledge, entrepreneurial and management experience and familiarity with regulatory requirements and risk management.

As at the date of this Statement, the Board consists of one (1) Executive Chairman, three (3) Independent Non-Executive Directors and one (1) Group Acting Managing Director, wherein at least half of the Board comprises Independent Directors. The composition of the Board ensures that the Independent Non-Executive Directors will be able to exercise independent judgment on the affairs of the Company.

The Board of Directors’ profile can be found on page 10 to page 12 of this Annual Report.

2. Independency of Independent Directors

The tenure of the Independent Directors has yet to exceed a cumulative term of nine (9) years. Nonetheless, if such Independent Directors exceeded a cumulative term of nine (9) years, the Board would justify and seek annual shareholders’ approval. In addition, if the Board continues to retain the Independent Directors after the twelfth (12th) year, the Board would seek annual shareholders’ approval to authorise these Independent Directors to continue in office as Independent Directors through a two-tier process.

The Independent Directors play a crucial role in corporate accountability and provide unbiased views and impartiality to the Board’s deliberations and decision-making process. In addition, the Independent Directors ensure that matters and issues brought to the Board are given due consideration, fully discussed and examined, taking into account the interest of all stakeholders. The Board, via the NC assesses each Director’s independence to ensure on-going compliance with this requirement annually. The NC is satisfied that the Independent Directors are independent of Management and free from any business or other relationships which could interfere with the exercise of independent judgement, objectivity and the ability to act in the best interest of the Company.

3. Appointment of Board and Senior Management

The Board of Directors comprise of a collective of individuals having an extensive complementary knowledge and competencies, as well as expertise to make an active, informed and positive contribution to the management of the Group in terms of the business’ strategic direction and development. The appointment of the Board and its Senior Management are based on objective criteria, merit and with due regard for diversity in skills, experience, age, cultural background and gender.

The NC will assess the suitability of the candidates before formally considering and recommending them for appointment to the Board or Senior Management. In proposing its recommendation, the NC will consider and evaluate the candidates’ required skills, knowledge, expertise, competence, experience, characteristics, professionalism. For appointment of Independent Directors, considerations will also be given on whether the candidates meet the requirements for independence as defined in AMLR of Bursa Securities and time commitment expected from them to attend to matters of the Company in general, including attending meetings of the Board, Board Committees and Annual General Meeting (“AGM”).





II. Board Composition (Cont’d)

4. Gender Diversity

While the Board of Directors acknowledges the need to promote gender diversity within its composition and endeavour to increase female participation in the Board and Senior Management, it has decided not to set any specific targets as the Board believes that it is more important to have the right mix and skills for such positions. Nonetheless, the Board has appointed Ms Yeong Siew Lee as an Independent Non- Executive Director, which contributes 16.67% of the Board composition, to contribute to the development of the Group.

The Company has adopted a diversity policy which outlines its approach to achieving and maintaining diversity (including gender diversity) on its Board and in Senior Management positions. This includes requirements for the Board to establish measurable objectives for achieving diversity on the Board and in management positions, and for the appropriate Board Committees to monitor the implementation of the policy, assess the effectiveness of the Board nomination process and the appointment process for management positions at achieving the objectives of the policy.

5. Identifying Suitable Candidates

Any proposed appointment of a new Member to the Board will be deliberated by the full Board based upon a formal report, prepared by the NC on the necessity for reviewing the qualifications and experience of the proposed director. The Nominating Committee would be guided by an internal policy on Criteria and Skill Sets for the Board Members in assessing the suitability of the potential candidates for appointment to the Board.

There was no new appointment of Directors for the financial year 2018. However, the Company had appointed Dato’ Yen Soon Ai (Independent Non-Executive Director) on 3 January 2019 via the recommendation by management. Despite the nomination process was based on the recommendation by the management, ultimately, the NC would be responsible for assessing the suitability of the above mentioned Directors for appointment and opined that the nominated Director is of suitable calibre and have the necessary knowledge, experience, diverse range of skills and competence to enable him to discharge his duties and responsibilities effectively.

6. Chairman of the NC

The NC is led by Datuk Low Kim Leng, the Senior Independent Non-Executive Director, who directs the NC for succession planning, appointment of Board members and Senior Management by conducting annual review of board effectiveness and skill assessments. This provides the NC with relevant information of the Group’s needs, allowing them to source for suitable candidates when the need arises.

7. Annual Evaluation

The NC is responsible in evaluating performance and effectiveness of the entire Board, the Board Committees and individual Director on a yearly basis. The evaluation process is led by the NC Chairman and supported by the Company Secretary via questionnaires. The NC reviews the outcome of the evaluation and recommends to the Board on areas for continuous improvement and also for them to form the basis of recommending relevant Directors for re-election at the AGM.

On 22 February 2019, the NC assessed the effectiveness of the Board, its Committees and the contribution of each Director by identifying the strengths and weaknesses of the Board.

The assessment criteria used in the assessment of Board and individual Directors include mix of skills, knowledge, Board diversity, size and experience of the Board, core competencies and contribution of each Director. The Board Committees were assessed based on their roles and responsibilities, scope and knowledge, frequency and length of meetings, supply of sufficient and timely information to the Board and also overall effectiveness and efficiency in discharging their function.





II. Board Composition (Cont’d)

7. Annual Evaluation (Cont’d)

The Board evaluation comprises Performance Evaluation of the Board and various Board Committees, Directors’ Peer Evaluation and Assessment of the independence of the Independent Directors. The assessment is based on four (4) main areas relating to Board Structure, Board Operations, Board and Chairman’s roles and responsibilities and Board Committees’ role and responsibilities.

For Directors’ Peer Evaluation, the assessment criteria includes abilities and competencies, calibre and personality, technical knowledge, objectivity and the level of participation at Board and Committee meetings including his/ her contribution to Board processes.

Any appointment of a new Director to the Board or Board Committee is recommended by the Nominating Committee for consideration and approval by the Board. In accordance with the Company’s Constitution, one-third (1/3) of the Directors for the time being shall retire from office at each AGM. A retiring director shall be eligible for re-election. The Constitution also provides that all directors shall retire at least once every three (3) years.

During the year, the Board conducted an internally facilitated Board assessment. The results and recommendations from the evaluation of the Board and Committees are reported to the Board for full consideration and action. The Board was comfortable with the outcome and that the skills and experience of the current Directors satisfy the requirements of the skills matrix and that the Chairman possesses the leadership to safeguard the stakeholders’ interest and ensure the development of the Group.

The NC also considered the results of the evaluation when considering the re-election of Directors and recommended to the Board for endorsement the Directors standing for re-election at forthcoming AGM of the Company. The Directors standing for retirement by rotation and subject to re-election at the forthcoming AGM are Tan Fie Jen and Dato’ Yen Soon Ai.

III. Remuneration

The objective of the Group’s remuneration policy is to provide fair and competitive remuneration to its Board and Senior Management in order for the Company to attract and retain Board and Senior Management of calibre to run the Group successfully. The responsibilities for developing the remuneration policy and determining the remuneration packages of Executive Directors and Senior Management lie with the RC. Nevertheless, it is ultimately the responsibility of the Board to approve the remuneration of Executive Directors and Senior Management.

Based on the remuneration framework, the remuneration packages for the Executive Directors and Senior Management comprise of a fixed component (i.e. salary, allowance and etc.) and a variable component (i.e. bonus, benefit-in kind and etc.) which is determined by the Group’s overall financial performance in each financial year which is designed to support our strategy and provides a balance between motivating and challenging our Senior Management to deliver our business priorities, as set out by the Group Acting Managing Director, and strong performance while also driving the long-term sustainable success of the Group.

The level of remuneration of Non-Executive Directors reflects their experience and level of responsibility undertaken by them. Non-Executive Directors will receive a fixed fee, with additional fees if they are members of Board Committees, with the Chairman of the ARMC or NC receiving a higher fee in respect of his service as Chairman of the respective Committees. The fees for Directors are determined by the Board with the approval from shareholders at the AGM and no Director is involved in deciding his/her own remuneration.





III. Remuneration (Cont’d)

During the financial year under review, the RC had reviewed the remuneration for the Group Acting Managing Director, Executive Directors and Senior Management which reflects their level of responsibilities as well as the performance of the Group, and considered their remuneration packages are comparable within the industry norm. The RC further discussed the annual salary review for the Group Acting Managing Director, Executive Directors and Senior Management in line with the budget salary increase for the rest of the organisation. However, the Group Acting Managing Director and Executive Directors have for the second year in succession, chosen not to accept any increase in their salaries. Salaries for the Group Acting Managing Director and Executive Directors will therefore remain at those levels set in 2017. When approving payments for annual bonus, the RC considered the overall performance of the business and of the Group Acting Managing Director, Executive Directors and Senior Management against this, as well as their individual targets. Bonus payments made to Group Acting Managing Director, Executive Directors and Senior Management reflected the large proportion of collective measures for the year, in support of focusing on teamwork and simplicity within the pay arrangements.

The details of the remuneration of the Board (on named basis) and top four (4) Key Senior Management (on bands of RM50,000) of the Company comprising remuneration received/receivable from the Company and the Group for the financial year 2018 are set out below:-

Company

Salaries* Benefits Fees & Bonus in kind RM RM RM Total

Executive Directors Toh Hong Chye - 37,500 8,258 45,758 Tan Fie Jen - - - - Ong Chooi Lee (Resigned on 29 June 2018) - - 2,736 2,736

Total - 37,500 10,994 48,494

Non-Executive Director Dato’ Seow Thiam Fatt 40,000 - 12,500 52,500 (Resigned on 23 November 2018) Yeong Siew Lee 23,000 - 8,000 31,000 Datuk Low Kim Leng 42,500 - 10,000 52,500

Total 105,500 - 30,500 136,000





III. Remuneration (Cont’d)

Group

Salaries* Benefit Fees & Bonus in kind RM RM RM Total

Executive Directors Toh Hong Chye - 454,602 15,744 470,346 Tan Fie Jen - 344,599 14,490 359,089 Ong Chooi Lee (Resigned on 29 June 2018) - 88,649 14,736 103,385

Total - 887,850 44,970 932,820

Non-Executive Director Dato’ Seow Thiam Fatt 40,000 - 12,500 52,500 (Resigned on 23 November 2018) Yeong Siew Lee 23,000 - 8,000 31,000 Datuk Low Kim Leng 42,500 - 10,000 52,500 Somjit Pumthongdee 11,986 - - 11,986

Total 117,486 - 30,500 147,986

* Salaries & Bonus including statutory payments.

Range of Remuneration Number of Key Senior Management

Below RM50,000 - RM 50,001- RM100,000 1 RM100,001- RM150,000 2 RM150,001- RM200,000 1

A copy of the Remuneration Policy can be found in the Group’s website

Documents

SER SOL BERHAD...SER SOL BERHAD (602062-X) ANNUAL REPORT 2018 Berhad (602062-X) ANNUAL REPORT LAPORAN TAHUNAN 2018 SERSOL BHD (602062-X) …