Yeo Hiap Seng (Malaysia) Berhad (3405-X) annual report Yeo Hiap Seng (Malaysia) Berhad (3405-X)

Transcription

1 Yeo Hiap Seng (Malaysia) Berhad (3405-X) annual report Yeo Hiap Seng (Malaysia) Berhad (3405-X)

2 CONTENTS 01 Corporate Information 02 Financial Highlights of the Group 03 Five-Year Summary 04 Directors Profile 10 Chairman s Statement 12 Penyata Pengerusi 14 Corporate Responsibility Statement 17 Statement on Corporate Governance 25 Statement on Internal Control 27 Audit Committee Report 30 Directors Responsibilities Statement 31 Group Property Particulars 33 Financial Statements 116 Analysis of Shareholdings 118 Notice of Annual General Meeting 122 Statement Accompanying Notice of Annual General Meeting 127 Administrative Detail for 38th Annual General Meeting Form of Proxy

3 Corporate Information BOARD OF DIRECTORS Koh Boon Hwee (Chairman) Tjong Yik Min (Chief Executive Officer) Dato Mohamed Nizam bin Abdul Razak Dato N. Sadasivan a/l N.N. Pillay Razman Hafidz bin Abu Zarim Chandra Das s/o Rajagopal Sitaram Ow Tin Nyap Yap Ng Seng (Deputy Chief Executive Officer) Pearl Foong Lye Fong AUDIT COMMITTEE Dato Mohamed Nizam bin Abdul Razak (Chairman) Dato N. Sadasivan a/l N.N. Pillay Razman Hafidz bin Abu Zarim Pearl Foong Lye Fong REMUNERATION COMMITTEE Dato N. Sadasivan a/l N.N. Pillay (Chairman) Dato Mohamed Nizam bin Abdul Razak Chandra Das s/o Rajagopal Sitaram NOMINATION COMMITTEE Razman Hafidz bin Abu Zarim (Chairman) Dato N. Sadasivan a/l N.N. Pillay Tjong Yik Min INVESTMENT COMMITTEE Dato Mohamed Nizam bin Abdul Razak (Chairman) Dato N. Sadasivan a/l N.N. Pillay Razman Hafidz bin Abu Zarim Tjong Yik Min COMPANY SECRETARY Sau Ean Nee AUDITORS PricewaterhouseCoopers BANKERS Citibank Berhad Standard Chartered Bank Malaysia Berhad Malayan Banking Berhad SOLICITORS Raja, Darryl & Loh REGISTRARS Tricor Investor Services Sdn Bhd Level 17, The Gardens North Tower, Mid Valley City, Lingkaran Syed Putra, Kuala Lumpur Tel : (603) Fax : (603) REGISTERED OFFICE 7, Jalan Tandang, Petaling Jaya, Selangor Darul Ehsan Tel : (603) Fax : (603) (603) publicrelations@yeos.com Website: Customer Care Hotline: STOCK EXCHANGE LISTING Main Market of Bursa Malaysia Securities Berhad Annual Report 01

4 Financial Highlights of the Group RESULTS OF OPERATION Revenue 533, ,234 Profit Before Taxation 32,487 7,660 Profit Attributable to Equity Holders of the Company 24,983 3,817 FINANCIAL POSITION Net Current Assets 146, ,069 Net Tangible Assets 255, ,806 Total Tangible Assets 379, ,950 Paid Up Capital 153, ,548 Shareholders Equity 263, ,605 DIVIDENDS Interim 3,436 5,726 Final 10,307* 10,307 Cover (Times) PER SHARE Net Tangible Assets (in RM) Earnings Before Tax (in sen) Earnings After Tax (in sen) Dividend - Interim (net - in sen) Final (net - in sen) 6.75* 6.75 * Proposed final dividend 02 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

5 Five-Year Summary Group Revenue () Profit/(Loss) Attributable to Equity Holders of the Company () , (13,601) , , , (11,079) , , , , , , ,000-10, ,000 20,000 Net Tangible Assets () Total Dividend () , , , , , , , , , ,743* 0 100, , , ,000 10,000 15,000 20, Group Revenue 476, , , , ,381 Profit/(Loss) Attributable to Equity Holders of the Company (13,601) 2,229 (11,079) 3,817 24,983 Net Tangible Assets 273, , , , ,105 Total Dividend 17,807 14,507 10,308 16,033 13,743* * Includes proposed final dividend (net) Annual Report 03

6 Directors Profile Koh Boon Hwee Chairman Non-Independent / Non-Executive Age: 61 years Koh Boon Hwee is a Singaporean and he was appointed to the Board on 20 January 2009 and as Chairman of the Company on 22 April. He received his Bachelor s Degree (First Class Honours) in Mechanical Engineering from the Imperial College of Science and Technology, University of London, and his MBA (Distinction) from the Harvard Business School. He started his career in 1977 at Hewlett Packard and became its Managing Director in Singapore, a post he held from 1985 to From 1991 to 2000, he was Executive Chairman of the Wuthelam Group. Mr Koh is currently the Chairman of Yeo Hiap Seng Limited, Chairman of Sunningdale Tech Ltd, Chairman of AAC Technologies Holdings Inc, and a board member of Agilent Technologies, Inc. in the United States. Mr Koh contributes actively to nonprofit organisations, and is the current Chairman of the Board of Trustees of Nanyang Technological University, Singapore and a director of the Hewlett Foundation in the United States. He was formerly the Chairman of the Singapore Telecom Group (SingTel) and its predecessor organisations from 1986 to 2001, Chairman of Singapore Airlines Limited from July 2001 to December 2005 and Chairman of DBS Group and DBS Bank from January 2006 to April. He served on the Board of Temasek Holdings Pte Ltd from November 1996 to September, and was a member of the Executive Committee from January 1997 to September. Mr Koh attended all 5 Board meetings held in the year. He has no family relationship with any other director/major shareholder of the Company and has no conflict of interest with the Company. He has not been convicted for offences within the past 10 years. 04 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

7 Directors Profile (continued) Tjong Yik Min Chief Executive Officer Non-Independent / Executive Age: 59 years Tjong Yik Min is a Singaporean and he was appointed to the Board as a Director on 22 July He was appointed as the Chief Executive Officer on 1 June. He holds a Bachelor of Engineering (Hons) (Class 1) (Industrial Engineering) degree from the University of Newcastle, Australia, a Bachelor of Commerce (Economics) degree from the University of Newcastle, Australia and a Master of Science (Industrial Engineering) degree from the University of Singapore. Mr Tjong has been an Executive Director of Far East Organization and a Director of Yeo Hiap Seng Limited ( YHS Limited ), Singapore and also its President and Chief Operating Officer since 22 July He was appointed the Group Chief Executive Officer of YHS Limited on 26 April. Prior to joining YHS Limited, he was the Executive Director and Group President of Singapore Press Holdings Limited. Mr Tjong has also served in various capacities in the Singapore Civil Service. He presently sits on the boards of Orchard Parade Holdings Limited and Genting Singapore PLC. Mr Tjong is a member of the Nomination and Investment Committees. Mr Tjong attended all 5 Board meetings held in the year. He has no family relationship with any other director/major shareholder of the Company and has no conflict of interest with the Company. He has not been convicted for offences within the past 10 years. Dato Mohamed Nizam bin Abdul Razak Director Independent / Non-Executive Age: 53 years Dato Mohamed Nizam bin Abdul Razak is a Malaysian and he was appointed to the Board on 5 November He graduated with a Bachelor of Arts (Oxon) degree in Politics, Philosophy and Economics from the Oxford University, United Kingdom. Dato Nizam was attached to Bumiputra Merchant Bankers Berhad from 1981 to 1984 and to PB Securities Sdn Bhd from 1984 to He presently sits on the board of Mamee-Double Decker (M) Berhad, Delloyd Ventures Berhad, Synergy Track Berhad and Deutsche Bank (M) Berhad. He also serves on the board of several private limited companies engaged in a wide range of activities and is actively involved in several charitable foundations. Dato Nizam is the Chairman of the Audit and Investment Committees and a member of the Remuneration Committee. Dato Nizam attended all 5 Board meetings held in the year. He has no family relationship with any other director/major shareholder of the Company and has no conflict of interest with the Company. He has not been convicted for offences within the past 10 years. Annual Report 05

8 Directors Profile (continued) Dato N. Sadasivan a/l N.N. Pillay Director Independent / Non-Executive Age: 72 years Dato N. Sadasivan is a Malaysian and he was appointed to the Board on 13 August Dato N. Sadasivan graduated with a Bachelor of Arts (Hons) in Economics from the University of Malaya in He began his career as an Economist with the Economic Development Board, Singapore in 1963 and was subsequently promoted to the position of Chief of the Industrial Facilities Division in In 1968, he joined the Malaysian Industrial Development Authority (MIDA) and served as the Deputy Director General from 1976 to From 1984 until his retirement in 1995, he was the Director-General of MIDA. He presently sits on the board of several private and public listed companies namely Petronas Gas Berhad, APM Automotive Holdings Berhad and Leader Universal Holdings Berhad. He is also a director of Bank Negara Malaysia. Dato N. Sadasivan is the Chairman of the Remuneration Committee and a member of the Audit, Nomination and Investment Committees. Dato N. Sadasivan attended all 5 Board meetings held in the year. He has no family relationship with any other director/major shareholder of the Company and has no conflict of interest with the Company. He has not been convicted for offences within the past 10 years. Razman Hafidz bin Abu Zarim Director Independent / Non-Executive Age: 56 years Razman Hafidz bin Abu Zarim is a Malaysian and he was appointed to the Board on 1 March Encik Razman graduated with a Joint-Honours degree in Economics and Accounting, BSc (Econ), from University College, Cardiff, University of Wales. He is a Fellow of the Institute of Chartered Accountants in England and Wales and a member of the Malaysian Institute of Accountants. He started his career with Touche Ross & Co., Chartered Accountants, London, England and later joined Hacker Young, Chartered Accountants, London, England, where he was admitted as an Audit Partner. In 1989, he returned to Malaysia as an Audit Partner of Price Waterhouse ( PW ) and later Partner-in- Charge of PW s Management Consulting Practice and became an Executive Committee member. In , he established Norush Sdn Bhd, an investment holding and business advisory firm, where he remains as Chairman. He sits on the Boards of Panasonic Manufacturing Malaysia Berhad, ebworx Berhad, Linde Malaysia Holdings Berhad and Sumitomo Mitsui Banking Corporation Malaysia Berhad. He also holds directorships in several other private limited companies. Encik Razman is the Chairman of the Nomination Committee and a member of the Audit and Investment Committees. Encik Razman attended all 5 Board meetings held in the year. He has no family relationship with any other director/major shareholder of the Company and has no conflict of interest with the Company. He has not been convicted for offences within the past 10 years. Yeo Hiap Seng (Malaysia) Berhad (3405-X)

9 Directors Profile (continued) Chandra Das s/o Rajagopal Sitaram Director Independent / Non-Executive Age: 72 years Chandra Das s/o Rajagopal Sitaram is a Singaporean who received his Bachelor of Arts degree (with honours) in Economics from the University of Singapore in 1965 and he was appointed to the Board on 26 April. Mr Das has over 37 years of experience primarily in companies involved in the trading and manufacturing industries. He served as the Singapore Trade Representative to the USSR from 1970 to 1971, Chairman of the Trade Development Board from 1983 to 1986 and Chairman of NTUC Fairprice Cooperative Ltd from 1993 to He also served as a Member of Parliament in Singapore from 1980 to Mr Das is currently the Managing Director of NUR Investment & Trading Pte Ltd, Singapore s Non- Resident Ambassador to Turkey and also serves as Pro-Chancellor of Nanyang Technological University (NTU). He has been conferred numerous awards, such as the President s Medal by the Singapore Australian Business Council in 2000 and the Distinguished Service (Star) Award by National Trades Union Congress in He also holds directorships in various private and public listed companies in Singapore. Mr Das does not hold any other directorship in public companies in Malaysia. Mr Das attended 3 out of 3 Board meetings held since his appointment. He has no family relationship with any other director/major shareholder of the Company and has no conflict of interest with the Company. He has not been convicted for offences within the past 10 years. Ow Tin Nyap Director Non-Independent / Non-Executive Age: 58 years Ow Tin Nyap is a Malaysian and he was appointed to the Board as Managing Director and Chief Executive Officer on 1 June He was re-designated as a Non-Executive Director on 1 March. Mr Ow holds the Malaysian Certificate of Education. In an illustrious and sterling career spanning 40 years, Mr Ow brings with him strategic broadbased experience and many years of international exposure in the areas of business re-engineering, mergers and acquisitions, sales and marketing, logistics and manufacturing. Mr Ow s extensive knowledge and experience stems from starting at rank and file positions to various senior management appointments in fast-moving consumer goods (FMCG) market. Mr Ow is currently a Non-Executive Director of Yeo Hiap Seng Limited, Singapore. Mr Ow retired from his appointment as Executive Director at the end of February 2012, after a span of more than 6 years with Far East Organization during which he provided strategic leadership and business development counsel to various business portfolios, driving the growth of Kitchen Language, leading as Chairman of the Establishment Committee and the Far East Academy, and playing an active role in the Branding and Food & Beverage Executive Committees. With effect from March 2012, Mr Ow will continue to be the Deputy Chairman for Far East Academy, and also a member of the Branding and Food & Beverage Executive Committees. Prior to this, Mr Ow has spent 8 years with the Danone Group; working to grow Danone s ASEAN portfolio and strategic market leadership. Mr Ow spent his last 5 years in Indonesia as President Director of Danone Group of Companies and as Chairman of Danone Group of Companies in the ASEAN Region for Water/Beverages, Dairy and Biscuits from He was also a member of the Asia Pacific Matrix and he sat on the International Committee of Danone Group in Paris. Mr Ow has also previously held positions as President of Sara Lee Corporation (SEA), overseeing the market of Malaysia, Singapore and Indo China and General Manager of Boustead Trading (M) Sdn Bhd. Mr Ow attended all 5 Board meetings held in the year. He has no family relationship with any other director/ major shareholders of the Company and has no conflict of interest with the Company. He has not been convicted for offences within the past 10 years. Annual Report 07

10 Directors Profile (continued) Yap Ng Seng Deputy Chief Executive Officer Non-Independent / Executive Age: 55 years Yap Ng Seng is a Singaporean and he was appointed as an Executive Director and Deputy Chief Executive Officer on 2 August. He graduated with a Bachelor of Engineering (Mechanical & Production Engineering) and a Master of Science (Industrial Engineering) from National University of Singapore. In 1994, he obtained a Master of Business Administration (Accountancy) from Nanyang Technological University, Singapore. He started his career as a Project Engineer in Singapore Automotive Engineering Pte Ltd from 1982 to He then joined Singapore Aerospace Manufacturing Pte Ltd as a Materials Manager from 1984 to Before joining the Company, he was attached to Crown Asia Pacific Holdings Ltd since 1989 and his last position held was Vice President South East Asia, responsible for 5 plants in South East Asia. Mr Yap attended all 5 Board meetings held in the year. He has no family relationship with any other director/major shareholder of the Company and has no conflict of interest with the Company. He has not been convicted for offences within the past 10 years. Pearl Foong Lye Fong Director Non-Independent / Non-Executive Age: 46 years Pearl Foong Lye Fong is a Singaporean and she was appointed to the Board on 26 July She graduated from National University of Singapore in 1989 with a Bachelor of Accountancy Degree. Ms Pearl Foong worked in Price Waterhouse as Assistant Manager of Audit and Business Services from 1993 to From 1995 to February 1999, she was promoted to Manager of Assurance/ Business Advisory Services. In February 2000, she left PricewaterhouseCoopers as Senior Manager of Assurance/Business Advisory Services. She was appointed as Group Financial Controller of Tuan Sing Holdings Limited and SP Corporation Ltd, Singapore from March 2000 to October Subsequently, she worked with Gul Technologies Singapore Ltd as Vice President of Finance and Accounting from November 2002 to 14 June Ms Pearl Foong is a member of the Audit Committee. Ms Pearl Foong attended all 5 Board meetings held in the year. She has no family relationship with any other director/major shareholder of the Company and has no conflict of interest with the Company. She has not been convicted for offences within the past 10 years. 08 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

11 Annual Report 09

12 Chairman s Statement On behalf of the Board of Directors of Yeo Hiap Seng (Malaysia) Berhad (Yeo s), I am pleased to present to you the Annual Report and Audited Financial Statements of the Company and its Group of Companies for the financial year ended 31 December. Financial Performance The financial year ended 31 December ( FY ) has been another good year for Yeo s, marked by improving financial results and improvement in operations efficiency. The Group s operating revenue increased by 13% to RM533 million for FY compared to RM471 million in the previous year. The Group also achieved profit from operations of RM30.8 million for this year, an increase of RM11.2 million or a 57% growth against RM19.6 million in year. The increase in profit was largely attributable to increased sales and improvement in operations efficiency. The Group recorded profit after tax of RM25 million against RM3.8 million achieved last year despite volatility in currencies and escalating prices of raw materials in the wake of uncertainty in global markets. The Group s financial position remains healthy with a net cash and short-term cash investment of RM47.1 million, with no borrowings. Operations Review During the year, we have significantly raised our operating performance and strengthened key functions. We remain focused on delivering sustainable growth for our core products and also evaluating various initiatives and opportunities to attract new consumers through the introduction of new products. In line with the Government s call for a healthier lifestyle, we launched Yeo s Chrysanthemum Tea Light with 40% Less Sugar, a healthier choice for those who like beverages that contain less sugar. And for those who want to hydrate their bodies quickly, we introduced Yeo s Sparkling H-Two-O, an isotonic drink which replenishes the essential minerals and fluids in the body. In the financial year, the Group invested a considerable amount in advertising and promotion activities to enhance its brand leading position in Asian stilled drinks category. Our market position remains strong with 38% market share in Asian stilled drinks category. Dividend On 12 October, the Company had declared and paid out an interim dividend of 3 sen (5 sen in ) gross per ordinary share of RM1.00 each less Malaysian income tax of 25%. The Board is recommending for shareholders approval, a Final Dividend of 9 sen (9 sen in ) gross per ordinary share of RM1.00 each less Malaysian income tax of 25%, bringing the total dividend for the financial year to 12 sen gross per ordinary share of RM1.00 each. 10 Beverage sales improved by 13% year on year and sale of food products also grew by 15%. The plant rationalisation exercise embarked since has been progressing well. We have successfully transferred the production of sauces to Johor Bahru plant after closure of the Kuching plant in. The consolidation of Petaling Jaya and Shah Alam plants is on schedule and we have invested RM25 million in capital expenditure on plant upgrading in. We expect to realise significant annual savings when the exercise is completed in Yeo Hiap Seng (Malaysia) Berhad (3405-X)

13 Chairman s Statement During the year, we have successfully re-launched our products in Indonesia following the issuance of new ML numbers by the Indonesian authority. The sales in Indonesia have been encouraging and we see huge potential in growing our brands and distribution network. Corporate Responsibility Yeo s recognises the importance of corporate responsibility as an integral part of the business to create sustainable value for all our stakeholders, including our consumers, shareholders and employees. Yeo s initiated a school recycling contest, a platform for schools to educate and raise awareness about the importance of recycling amongst the younger generation and at the same time, emphasize the importance of healthy living through better understanding of food nutrition. Inspired by the enthusiasm of the 60 primary schools for the Yeo s Program Susu Soya Sekolah campaign held in year, the Company continued its campaign to reach out to an additional 100 primary schools in the Klang Valley by giving educational talks on the importance of a balanced diet and distributed Yeo s soy milk to the students from April to July. Future Strategy and Prospects The better performance in gives us confidence as we move into 2012 and the Board is optimistic in spite of the challenges facing the global economy. We will stay focused on our core products and markets in the new financial year while we build our skills and capacity for the future. We are positive of the future prospects and within 3 years, we plan to invest RM190 million in new plant and technologies and upgrading our facilities to prepare for future growth. Acknowledgement and Appreciation On behalf of the Board, I would like to express my sincere appreciation and gratitude to the management and staff for their conscientious effort, commitment and dedication to delivering results. My appreciation also goes to our valued customers, business associates, partners, and shareholders, for their continuing support of Yeo s. To my fellow Board members, I thank you for your contribution and guidance throughout the year. Stay Healthy and Lead a Joyful Life! Koh Boon Hwee Chairman In this Annual Report, we have included a more detailed write-up of our corporate responsibility initiatives to inform all our stakeholders of the Company s engagement in the community and in preserving the environment. Annual Report 11

14 Penyata Pengerusi Bagi pihak Lembaga Pengarah Yeo Hiap Seng (Malaysia) Berhad (Yeo s), saya ingin mengemukakan Laporan Tahunan dan Penyata Kewangan yang telah diauditkan bagi Syarikat dan Kumpulan bagi tahun kewangan berakhir 31 Disember. Prestasi Kewangan Tahun kewangan berakhir 31 Disember ( TK ) merupakan satu tahun yang memberangsangkan bagi Yeo s, nyata dengan peningkatan keputusan kewangan dan kecekapan dalam operasi. Perolehan operasi Kumpulan meningkat sebanyak 13% kepada RM533 juta bagi TK berbanding dengan RM471 juta pada tahun sebelumnya. Kumpulan juga mencatatkan keuntungan daripada operasi sebanyak RM30.8 juta bagi tahun ini, iaitu peningkatan sebanyak RM11.2 juta, 57% lebih tinggi berbanding dengan RM19.6 juta pada tahun. Peningkatan dalam keuntungan sebahagian besar didorong oleh peningkatan jualan dan kecekapan dalam operasi. Kumpulan telah mencatatkan keuntungan selepas cukai sebanyak RM25 juta berbanding dengan RM3.8 juta yang dicapai pada tahun sebelumnya walaupun kadar pertukaran mata wang asing tidak stabil dan kos bahan mentah meningkat berikutan pasaran global yang tidak menentu. Kedudukan kewangan Kumpulan kekal sihat dengan lebihan tunai dan pelaburan jangka pendek sebanyak RM47.1 juta, tanpa sebarang pinjaman. Dividen Pada 12 Oktober, pihak Syarikat telah mengumum dan membayar dividen interim sebanyak 3 sen (5 sen pada tahun ) tidak termasuk 25% Cukai Pendapatan Malaysia bagi setiap saham biasa yang bernilai RM1.00. Pihak Lembaga Pengarah mengesyorkan dividen akhir sebanyak 9 sen (9 sen pada tahun ) tidak termasuk 25% Cukai Pendapatan Malaysia bagi setiap saham biasa yang bernilai RM1.00 untuk kelulusan para pemegang saham. Jumlah dividen bagi TK adalah sebanyak 12 sen bagi setiap saham biasa yang bernilai RM1.00. Ulasan Operasi Sepanjang tahun, kami telah meningkatkan prestasi di bahagian operasi dan terus mengukuhkan fungsi-fungsi utama kami. Kami kekal fokus untuk mengembang perusahaan untuk produk dan jenama teras kami dan juga melaksanakan pelbagai inisiatif untuk menarik perhatian pengguna-pengguna baru melalui pelancaran produk-produk baru. Sejajar dengan seruan kerajaan ke arah gaya hidup sihat, kami telah memperkenalkan Teh Krisantimum Light Yeo s dengan 40 peratus kurang gula, salah satu pilihan yang lebih sihat bagi mereka yang gemar minuman yang mengandungi kandungan gula yang lebih rendah. Dan bagi mereka yang mahu menghidrat tubuh mereka dengan cepat, kami juga memperkenalkan Yeo s Sparkling H-TWO-O, minuman isotonik yang boleh mengisikan semula mineral-mineral utama dan kandungan air dalam badan. Dalam tahun, Kumpulan telah membelanjakan sejumlah wang dalam pengiklanan dan aktiviti promosi untuk mengukuhkan kedudukan jenamanya terutama bagi kategori minuman Asian. Kedudukan jenama kami kekal kukuh dengan 38% bahagian pasaran bagi kategori minuman Asian. Jualan produk minuman dan makanan masing-masing meningkat sebanyak 13% dan 15%. Projek rasionalisasi kilang telah dilaksanakan dengan lancar sejak tahun. Dalam tahun, kami telah berjaya mengalihkan pengeluaran sos dari kilang pemprosesan Kuching ke Johor Bahru. Selain itu, penggabungan kilang pemprosesan Petaling Jaya dan Shah Alam sedang berjalan dengan lancar dan kami 12 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

15 Penyata Pengerusi juga membelanjakan sebanyak RM25 juta dalam pembelanjaan modal untuk meningkatkan taraf kilangkilang pemprosesan. Pelaksanaan projek ini dijangka akan merealisasikan penjimatan tahunan yang nyata apabila ia selesai pada tahun 2013 nanti. Pada tahun ini, kami telah berjaya melancar semula produk-produk kami di Indonesia selepas memperolehi nombor-nombor ML yang baru dari pihak berkuasa Indonesia. Jualan di Indonesia amat menggalakkan dan kami dapat melihat potensi yang besar dalam meningkatkan jenama kami dan juga rangkaian pengedarannya. Tanggungjawab Korporat Yeo s mengiktiraf tanggungjawab korporat merupakan sebahagian penting dalam urusniaganya bagi mewujudkan nilai mampan bagi semua pemegang berkepentingan, termasuk pengguna-pengguna, pemegang saham dan juga warga pekerja. Yeo s telah melancarkan satu pertandingan kitar semula, satu platform bagi sekolah-sekolah untuk mendidik dan memupuk kesedaran di kalangan generasi muda mengenai kepentingan kitar semula dan pada masa yang sama, menegaskan lagi kepentingan hidup sihat melalui pemahaman yang mendalam tentang nutrisi makanan. Didorong oleh kesungguhan 60 buah sekolah rendah dalam Kempen Program Susu Soya Sekolah Yeo s yang diadakan pada tahun, kami telah melanjutkan kempen ini dengan penambahan 100 buah sekolah rendah di sekitar daerah Lembah Klang dengan menyampaikan ceramah pendidikan tentang pengamalan pemakanan yang seimbang dan seterusnya mengedarkan pek minuman Susu Soya Yeo s kepada semua murid yang terlibat dari bulan April ke Julai. Dalam Laporan Tahunan ini, kami juga memaparkan inisiatif-inisiatif tanggungjawab korporat yang dilaksanakan oleh Syarikat sepanjang tahun ini dalam aktiviti masyarakat dan pemeliharaan persekitaran dengan lebih terperinci. Strategi dan Prospek Masa Hadapan Peningkatan prestasi tahun ini menyakinkan kami untuk mengorak langkah ke arah tahun 2012 dan Lembaga Pengarah tetap optimistik meskipun menghadapi cabaran ekonomi global. Kami akan kekal menumpukan dan memasarkan produk teras kami dalam tahun kewangan baru ini di samping membina kemahiran dan keupayaan untuk masa depan. Kami amat positif terhadap prospek masa depan dan dalam jangka masa 3 tahun, kami merancang untuk melabur RM190 juta bagi pembinaan kilang dan teknologi-teknologi yang baru dan meningkatkan taraf kemudahan bagi menyediakan kami untuk pertumbuhan pada masa akan datang. Penghargaan dan Pengakuan Bagi pihak Lembaga, izinkan saya merakamkan setinggi-tinggi penghargaan ikhlas dan ucapan terima kasih kepada pihak pengurusan dan kakitangan atas usaha gigih, komitmen dan dedikasi dalam mencapai prestasi yang baik. Penghargaan saya juga ditujukan kepada para pelanggan kami, rakan-rakan perniagaan, rakan kongsi, dan pemegang-pemegang saham atas sokongan berterusan mereka terhadap Yeo s. Bagi rakan-rakan Pengarah seperjuangan saya, saya ingin mengucapkan jutaan terima kasih atas sokongan teguh dan bimbingan anda semua sepanjang tahun ini. Kekal Sihat Sentiasa dan Hidup Riang Dan Ceria Bersama Yeo s! Koh Boon Hwee Pengerusi Annual Report 13

16 Corporate Responsibility Statement Yeo Hiap Seng (Malaysia) Berhad ( Yeo s or the Company ), as a socially responsible company, has integrated its corporate responsibility into a sustainable business model that goes beyond shareholders interests, for the betterment of society. It reflects our commitments to our customers, employees, investors, suppliers and the community. COMMUNITIES Yeo s Program Susu Soya Sekolah 2 In, the Company initiated a corporate responsibility campaign, Yeo s Program Susu Soya Sekolah which received positive feedbacks from the public on its educational and nourishing values to the young. In continuing this initiative, the Company embarked on Yeo s Program Susu Soya Sekolah 2 to cover another 100 schools and reach out to another 50,000 students with an aim to instill the importance of a balanced diet and in educating the students on preserving the environment through recycling. 1Malaysia Creative Sculpture Recycling Competition In support of the 1Malaysia philosophy, Yeo s embarked on its green and remarkable 1Malaysia recycled sculpture competition among all participating schools of Yeo s Program Susu Soya Sekolah using Yeo s recyclable materials. The ultimate objective of this competition is to encourage creativity and nurture recycling mindset amongst the young. In recognition of the effort shown in this recycling competition, Yeo s awarded the winning schools each with school development fund to support the development and extra-educational activities at school level. Yeo s Scholarship Programme Backed by the spirit of enthusiasm and perseverance, students from 51 primary schools in the Klang Valley and Putrajaya took part in the Yeo s Program Tajaan Biasiswa Sekolah. The students battled for the scholarship through collection of Yeo s logo from empty beverage packs. Through this programme, Yeo s achieved its primary objective in setting a platform for students to exercise creativity and problem solving skills. This programme also aimed to promote the spirit of esprit de corps amongst students and teachers to work towards achieving the school category scholarship for school development fund. 14 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

17 Corporate Responsibility Statement (continued) My New Village Carnival For the 3rd consecutive year, Yeo s joined hands with Nanyang Siang Pau in My New Village Carnival to reach out to smaller communities and villages. Besides organising interactive activities with villagers, the Company contributed part of its sales generated from the carnival to the schools in those villages in support of their infrastructural and facilities building fund. This year, we also embarked on Embellish Your Village with Yeo s in which the participating villages collected, cleaned, and recycled Yeo s recyclable materials to embellish a selected spot in the villages and Yeo s also shared knowledge of creative recycling through fun and interactive games. Factory Educational Visits Yeo s continues its initiative to welcome local and overseas colleges and universities to enhance students knowledge on food and beverage manufacturing processes. WORKPLACE Dynamic Dance Competition In line with Lead a Joyful Life campaign, Yeo s in collaboration with China Press, organised a national dynamic dance competition with the main objective to encourage communities to live and lead a healthier and joyful lifestyle. Yeo s recognises that employees are the drivers of business performance. The Company s human resources policies aim to enhance the performance of staff through staff recognition schemes, offering equal opportunities, training and development, and creating sound employees relations. Every year, in recognition of the loyal, dedicated and committed employees, the Company honoured and rewarded the long service employees at its Annual Dinner and Dance. Support of World Vision Malaysia Movement Yeo s continued to support 30-Hour Famine program through its sponsorship of soy milk to individual camps to raise fund for World Vision Malaysia s movement in aid of those who are suffering from poverty and hunger, giving them the opportunity for improved health, better quality life, and most importantly, hope. Annual Report 15

18 Corporate Responsibility Statement (continued) Continue to Build Human Capital Yeo s continues to aggressively provide a supportive working culture through training and development programmes. During the year, employees participated in various in-house and external training programmes from technical-related skills to soft management skills. To nurture the future workforce of our industry, we continue to open our doors to interns for short-term attachment to complete their degree requirements. Committed to Hazard Free Zone Yeo s is committed to providing a safe, healthy, secure and conducive workplace for all its employees, visitors and business stakeholders. Our commitments to the effective implementation of Occupational Safety and Health Policy has achieved a hazard-free work zone. Various communications activities and campaigns were organised to ensure the employees awareness to safety precautions. system. This effort has further been enhanced with the introduction and implementation of the Distributor Management System (DMS). MARKETPLACE Yeo s continues its efforts to rigorously adhere to responsible business practices when engaging with its stakeholders particularly its consumers, suppliers and investors so as to provide clearer understanding of Yeo s performance and enhance their experience with us. Commitment to Maintain the Highest Halal Standard Compliance Strict halal compliance is a vital component in the continued success and an integral part of the Company s DNA. Our ingredients, employees, and systems constantly meet the most rigorous of halal standards and our halal compliance is something we are honoured to offer to our consumers. ENVIRONMENT Reusable Resources Yeo s is committed and passionate about environmental conservation. Yeo s is the first food and beverage company to introduce its Asian Drinks products in Tetra Pak packaging which is environmental friendly and recyclable. Moving Towards Paper-less Several programmes were introduced to upgrade IT infrastructure to encourage paper-less environment through electronic communications and e-filing 16 Interaction with Investor We engage in constant dialogue with our investors and shareholders through Annual General Meeting (AGMs) and meetings. Our AGMs are the primary platform for direct two ways interaction between the Board of the Company and shareholders. We keep investors updated on the Company s performance and key business activities including quarterly financial announcements which are made available through our website. Yeo Hiap Seng (Malaysia) Berhad (3405-X)

19 Statement on Corporate Governance The Board of Directors is fully committed to the principles of corporate governance and best practices as embodied in the Malaysian Code on Corporate Governance ( the Code ). The Board takes every step to ensure that the highest standards of corporate governance are practised throughout the Group in order to protect and enhance shareholders value and the financial performance of the Group. The Board is pleased to provide the following which outlines the corporate governance practices that were in place throughout the financial year. THE BOARD OF DIRECTORS Composition and Board Balance The Board currently has nine members, comprising two Executive Directors and seven Non-Executive Directors. Of the seven Non-Executive Directors, four are independent, satisfying the requirement of the Code for Independent Non-Executive Directors to make up at least one-third of the Board membership. The role of the Chairman is separate from that of the Chief Executive Officer. The Chairman is responsible for leadership of the Board and monitoring its effectiveness. He facilitates both the contribution of the Non- Executive Directors and constructive relations between the Executive and Non-Executive Directors. The Chief Executive Officer is responsible for managing the Group s business, including the formulation and implementation of major strategies and initiatives adopted by the Board. The Directors are from diverse professional background with a wide range of expertise, bringing with them an independent judgment and considerable knowledge to the Board. They advise management on strategy development and ensure that the Board maintains high standards of financial and other reporting compliance as well as providing adequate checks and balances for safeguarding the interests of shareholders and the Group as a whole. Where a potential conflict of interest may arise, it is mandatory practice for the Director concerned to declare his interest and abstain from the decision-making process. A brief profile of each Director is set out on pages 4 to 8 of this Annual Report. Board Attendance The Board meets at least once every quarter on a scheduled basis and additional meetings will be convened as and when required. Board meetings for the following financial year are scheduled before the end of the current financial year to allow the Directors to plan their appointments ahead and as such to facilitate full attendance at the Board meetings. During the year, five (5) Board Meetings were held and the Directors attended the following number of meetings: Name of Directors Attendance Koh Boon Hwee 5/5 Tjong Yik Min 5/5 Dato Mohamed Nizam bin Abdul Razak 5/5 Dato N. Sadasivan a/l N.N. Pillay 5/5 Razman Hafidz bin Abu Zarim 5/5 Chandra Das s/o Rajagopal Sitaram (Appointed on 26 April ) 3/3 Ow Tin Nyap 5/5 Yap Ng Seng 5/5 Pearl Foong Lye Fong 5/5 Annual Report 17

20 Statement on Corporate Governance (continued) Supply of Information The Directors have full and unrestricted access to all information pertaining to the Group s business and affairs to enable them to discharge their duties. All Directors are provided with reports and other relevant information on a timely manner, covering various aspects of the Group s operations and performance. They are also provided with an agenda and a set of board papers pertaining to agenda items prior to Board meetings for consideration and where appropriate, for decision. In addition, the Board has access to the advice and services of the Company Secretary and senior management. The Company Secretary attends all Board meetings and ensures that accurate records of the proceedings of the Board meetings and decisions made are properly recorded. Senior management officers may be invited to attend Board meetings when necessary to provide the Board with clarifications and comments on the relevant agendas tabled at the Board meetings. The Board may seek independent professional advice from external consultants at the Company s expense, if required, in furtherance of their duties. Board Committees The Board currently has four Committees, the majority members of which comprise Independent Non- Executive Directors. The Board delegated certain responsibilities to these four Board committees which operate within clearly defined terms of reference as set out below. The Board Committees evaluate matters and report to the Board their findings and recommendations thereon. The responsibility for the final decision on all matters discussed and recommended by the Board Committees, however, lies with the Board. a) Audit Committee 18 Yeo The Audit Committee ( AC ) reviews issues of accounting policies and presentation for external financial reporting, monitors the work of the internal audit function and ensures an objective and professional relationship is maintained with the external auditors. The AC has full access to both the internal and external auditors who, in turn, have access at all times to the Chairman of the AC. The composition and terms of reference of the AC may be found on pages 27 to 30. b) Nomination Committee The Nomination Committee ( NC ) recommends the appointment of Directors to the Board. The terms of reference of the NC adopted by the Board are as follows: To recommend appropriate candidates to the Board. To determine annually whether or not a Director is independent. To decide whether or not a Director is able and has been adequately carrying out his/her duties based on the following criteria: - Attendance - Preparedness - Participation To evaluate and propose objective performance criteria for the Board. Performance criteria that may be used include return on assets (ROA), return on equity (ROE), economic value added (EVA), return on sales, return on investment, etc. To review the Board s required mix of skills and experience and other qualities that the Directors should bring to the Board. The members of the NC as at the date of this statement are as follows: Razman Hafidz bin Abu Zarim (Chairman) - Non-Executive / Independent Dato N. Sadasivan a/l N.N. Pillay - Non-Executive / Independent Tjong Yik Min - Executive / Non-Independent Hiap Seng (Malaysia) Berhad (3405-X)

21 Statement on Corporate Governance (continued) c) Remuneration Committee The Remuneration Committee ( RC ) reviews and recommends remuneration framework for Executive Directors. The terms of reference of the RC are as follows: Made up of Non-Executive Directors, the majority of whom are independent of management and free from any business or other relationship, which may materially interfere with the exercise of their independent judgment. This ensures transparency in the development of the remuneration framework and minimises the risk of any potential conflict of interest. Chaired by an Independent Non-Executive Director. RC s recommendations are made in consultation with the Chairman of the Board and submitted for endorsement by the entire Board. RC recommends to the Board a framework of remuneration for the Board and key executives and determines specific remuneration packages for each Executive Director and the CEO if the CEO is not an Executive Director. The determination of remuneration packages of Non-Executive Directors is the matter of the Board and individuals concerned should abstain from discussion of their own remuneration. No Director should be involved in deciding his own remuneration. The RC covers all aspects of remuneration, including but not limited to Director s fees, salaries, allowances, bonuses, options and benefits-in-kind. The RC comprises the following members: Dato N. Sadasivan a/l N.N. Pillay (Chairman) - Non-Executive / Independent Dato Mohamed Nizam bin Abdul Razak - Non-Executive / Independent Chandra Das s/o Rajagpoal Sitaram - Non-Executive / Independent d) Investment Committee The term of reference of the Investment Committee ( IC ) is to manage the Company s portfolio of securities, reviewing and evaluating proposals for joint ventures, mergers and acquisitions. The IC comprises the following members: Dato Mohamed Nizam bin Abdul Razak (Chairman) - Non-Executive / Independent Dato N. Sadasivan a/l N.N. Pillay - Non-Executive / Independent Razman Hafidz bin Abu Zarim - Non-Executive / Independent Tjong Yik Min - Executive / Non-Independent Appointments and Re-Election Procedures relating to the appointment and re-election of Directors are set out in the Company s Articles of Association. All newly appointed Directors will be subject to retirement and re-election by shareholders at the first Annual General Meeting ( AGM ) subsequent to their appointment. In addition, one-third (or the number nearest to one-third) of the remaining Directors, including the Chief Executive Officer, shall retire from office and be eligible for re-election at each subsequent AGM, provided always, all Directors, including the Chief Executive Officer, shall retire from office once at least in every three years but shall be eligible for re-election. The NC recommends candidate for directorship to be filled by the shareholders or the Board. In making its recommendations, the NC will focus on the skills and personal qualities of the candidate as well as business experience the candidate possess to enhance the Board s decision making and management of the business and affairs of the Company. Annual Report 19

22 Statement on Corporate Governance (continued) Appointments and Re-Election (continued) The NC carries out an annual assessment and evaluation on the effectiveness of the Board as a whole and the contribution of each of the individual Directors, including Independent Non-Executive Directors, as well as the Chief Executive Officer. All assessments carried out by the NC are documented. Pursuant to Section 129(2) of the Companies Act, 1965, all Directors who are over seventy years of age are required to submit for re-appointment annually. The NC also recommends the re-appointment and re-election of Directors who are seeking for re-appointment and re-election at the AGM. The Directors who are standing for re-appointment and re-election at the Thirty- Eighth AGM of the Company to be held on 25 April 2012 are contained in the Notice of AGM. Directors Training Programme Given the fact that Directors roles are increasingly demanding in an organisation, the Board of Directors continues to equip and update themselves with the relevant programmes, technologies and current developments in the industry as well as with the new regulatory and statutory requirements. All members of the Board have also attended the Mandatory Accreditation Training Programme (MAP) prescribed by Bursa Malaysia Securities Berhad, including Mr Chandra Das s/o Rajagopal Sitaram who was appointed to the Board on 26 April. Except those Directors who were not able to attend any training during the year due to tight work schedule, the following Directors had attended the following conferences, forums, seminars and training programmes during the financial year. Name of Directors Dato N. Sadasivan a/l N.N. Pillay Razman Hafidz bin Abu Zarim Training Programme Corporate Governance and Boardroom Issues in Challenging Times on 18 February Sustainability Programme for Corporate Malaysia on Trading Services and Industrial Products on 23 March Government Financial Assistance for SMEs on 6 December New Corporate Governance Blueprint & Regulatory Updates on 14 December Ow Tin Nyap Far East Organization Leadership Talk Series on 18 February Far East Organization Leadership Talk Series on 25 March Far East Organization Leadership Talk Series on 29 June FEO Management Workshop : Do Good Business held in Shanghai on October Far East Organization Leadership Talk Series on 22 November Pearl Foong Lye Fong Doing Deals in Vietnam on 19 January New Challenges and Priorities for CFOs on 12 October Global Transfer Pricing Conference Sustainable Transfer Pricing in an Era of Growth and Business Transformation on October 20 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

23 Statement on Corporate Governance (continued) Directors Remuneration The RC is responsible for reviewing and recommending the policy framework on the remuneration of the Executive Directors with the aim to attract, motivate and retain Directors of the right caliber needed to run the Company successfully. The determination of the remuneration of the Non-Executive Directors is a matter for the Board as a whole. Directors do not participate in decisions regarding their own remuneration package. Directors fees are subject to shareholders approval at the AGM. The Independent Non-Executive Directors are paid attendance allowances for Board and Audit Committee meetings that they attended as well as allowances for serving as a Board Committee member. For the year ended 31 December, the aggregate remuneration of the Directors are as follows: Directors Fees (RM) Salaries (RM) Bonuses (RM) Other Emoluments (RM) Total (RM) Executive - 963, , ,308 1,564,777 Non-Executive 128, , , , , , ,975 1,900,416 The number of Directors whose total remuneration fall within the following bands are as follows: Number of Directors Range of Remuneration Executive Non-Executive Nil - 3 RM1 to RM50,000-1 RM50,001 to RM100,000-2 RM100,001 to RM150,000-1 RM600,001 to RM650, RM900,001 to RM950, RELATIONSHIP WITH SHAREHOLDERS Investors Relations and Shareholders Communication The Group recognises the importance of establishing a direct line of communication with shareholders and investors through timely and thorough dissemination of information on the Group s performance and major developments via appropriate channels of communication. Dissemination of information includes the distribution of the Annual Report and relevant circulars, issuance of press releases inclusive of quarterly financial performance of the Group to Bursa Malaysia Securities Berhad ( Bursa Securities ) and the public as well as press conferences. Annual Report 21

24 Statement on Corporate Governance (continued) Investors Relations and Shareholders Communication (continued) In order to maintain a high level of transparency and to promote wider dissemination of corporate and financial disclosures, all information that is made to the public, is available on the Company s website, www. yeos.com.my. Alternatively, shareholders and the public may access to our Customer Care toll free line at for more information on the Company. All announcements released to the Bursa Securities are available on Bursa Securities website at Annual General Meeting The Chairman and the Board encourage shareholders to attend and participate in the AGM held annually. The AGM is the principal forum for dialogue and interaction with individual shareholders and investors where they may seek clarifications and comments on the Group s businesses and financial performance from the Board as well as the senior management. ACCOUNTABILITY AND AUDIT Financial Reporting In addition to providing the financial report on an annual basis, the Company also presents the Group s financial results on a quarterly basis via public announcements. The Directors ensure the integrity of financial information and the effectiveness of the financial controls, internal control and risk management systems. The AC assists the Board in reviewing the information disclosed to ensure accuracy, adequacy and completeness of all annual and quarterly reports, audited or unaudited, and approved by the Board before releasing to Bursa Securities. The Directors are also responsible for ensuring that all financial statements are prepared in accordance with the provisions of the Companies Act, 1965 and Malaysian Accounting Standards Board ( MASB ), the Approved Accounting Standards in Malaysia for entities other than private entities. A statement by Directors of their responsibility in preparing the financial statements is set out on page 30 of this Annual Report. Internal Control The Board recognises the importance of a sound system of internal control and acknowledges its ultimate responsibility in maintaining the same, which includes the establishment of an appropriate control environment and framework as well as reviewing its adequacy and integrity. The internal control system covers all levels of personnel and business processes and is designed to safeguard the Company s assets and shareholders interest. The Board is satisfied with the design of the existing internal control system, which would continue to be improved, reviewed and updated in line with changes in the operating environment. Information of the Group s internal control is presented in the Statement on Internal Control set out on pages 25 to 26 of this Annual Report. 22 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

25 Statement on Corporate Governance (continued) Internal Audit Function During the year under review, the internal audit team performed regular review of the effectiveness of the risk management, internal control, and governance processes within the Group. Their responsibilities are as follows: Evaluate the relevance, reliability and integrity of financial and management information; Review systems and operations to assess the extent to which company objectives are achieved and the adequacy of control activities leading to such achievement; Appraise utilisation of resources with regard to economy, efficiency and effectiveness; Assess the means of safeguarding assets and verify their existence; Ascertain the extent of compliance with established policies, procedures, plans, laws and regulations. Internal auditors also perform ad hoc appraisals, inspections, investigations, examinations, reviews requested by the AC or senior management, as appropriate. The internal audit team reports directly to the AC of their findings, the AC in turn will review their findings with management on quarterly basis. The internal audit team will subsequently follow-up to determine the extent of their recommendations that have been implemented. As such, the internal audit function provides assurance to the Board on the Group s system of internal control. Relationship with External Auditors Messrs. PricewaterhouseCoopers is the Company s external auditors. The Board, through the establishment of the AC, maintains a formal and transparent arrangement with the external auditors. The roles of the AC in relation to the external auditors is described in the Audit Committee Report on pages 27 to 30 of this Annual Report. ADDITIONAL COMPLIANCE INFORMATION Share Buy-Back The Company had at its Thirty-Seventh AGM held on 26 April obtained the approval of the shareholders in relation to the Share Buy-Back authority, whereby the Directors are authorised to purchase and/or hold at any point of time up to ten per cent (10%) of the issued and paid-up share capital of the Company for the time being quoted on Bursa Securities. For the financial year ended 31 December, the Company purchased a total of 2,000 shares, all of which are retained as treasury shares. None of the shares purchased has been sold or cancelled. Details of the shares bought back are set out below: Date No. of Ordinary Shares Minimum price paid (RM) Maximum price paid (RM) Average price paid * (RM) Consideration * (RM) , , , , * Inclusive of transaction costs As at the date of this statement, the total number of shares purchased by the Company is 845,900 shares and these shares are presently held as treasury shares. Annual Report 23

26 Statement on Corporate Governance (continued) Recurrent Related Party Transactions The Company had also at the Thirty-Seventh AGM obtained the shareholders mandate to enter into recurrent related party transactions of a revenue nature, which are necessary for the day-to-day operations on the terms not more favorable to the related party than those available to the public and not to the detriment of the minority shareholders. Breakdown of the aggregate value and type of recurrent related party transactions conducted pursuant to the shareholders mandate for the financial year ended 31 December is set out below: Related Parties Nature of Transactions Interested Directors/ Major Shareholders/ Person Connected Aggregate Value (RM) YHS (Singapore) Pte. Ltd. ( YHSPL ), a major shareholder of the Company with direct interest of % as at 15 March 2012 Purchase of finished goods by Yeo Hiap Seng Trading Sdn Bhd ( YHST ), a wholly-owned subsidiary of Yeo Hiap Seng (Malaysia) Berhad ( YHSM ) (i) (ii) (iii) (iv) Yeo Hiap Seng Limited ( YHSL ), the penultimate holding company of the Company through its 100% shareholding in YHSPL Koh Boon Hwee, a common director of YHSL and YHSM Tjong Yik Min, a common director of YHSL, YHSPL and YHSM Ow Tin Nyap, a common director of YHSL and YHSM 3,226, (v) Yap Ng Seng, a common director of YHSL, YHSPL and YHSM (vi) Pearl Foong Lye Fong, Group Financial Controller of YHSL and common director of YHSM and YHST Material Contracts During the financial year, there were no material contracts entered into by the Company and its subsidiary companies which involve Directors and major shareholders interests. Non-Audit Fees The details of the non-audit fees paid/payable to the external auditors, PricewaterhouseCoopers for the financial year ended 31 December are set out below: Review of Interim Financial Information for Quarter 2 of and other services 40, RM This Statement on Corporate Governance is made in accordance with the resolution of the Board of Directors dated 15 March Yeo Hiap Seng (Malaysia) Berhad (3405-X)

27 Statement on Internal Control The Board of Directors recognises the importance of a sound system of internal control which consists inter alia, risk management, financial organisational, operational and compliance control to meet the Group s business objectives, safeguard shareholders investments, the interest of customers, regulators, employees and the Group s assets. The Group s system of internal control involves all management and personnel from each business unit. The Board affirms its overall responsibility for the Group s system of internal control in determining key strategies and policies for significant risks and control issues, while management of the Group is responsible for the effective implementation of the Board s policies by designing, operating, monitoring and managing risks and control processes. For the financial year ended 31 December, management of the Group continued to assist the Board in the implementation of the Board s policies and procedures in maintaining a sound system of internal control and risk management. The Audit Committee ( AC ) and internal auditors continued to provide independent, objective assurance and consulting services designed to add value and improve the Group s operations. The internal auditors help the Group accomplish its objectives by bringing a systematic, disciplined approach in evaluating and improving the effectiveness of risk management, controls and governance processes. The Board of Directors is pleased to provide the following statement on the state of internal control of the Group in accordance with Statement on Internal Control : Guidance for Directors of Public Listed Companies for the financial year ended 31 December. Internal Control The Board recognises the importance of a sound system of internal control and acknowledges its ultimate responsibilities in maintaining the same, which includes the establishment of an appropriate control environment and risk management framework as well as reviewing, monitoring and ensuring its adequacy and integrity. The Group has a system of internal control designed to address the following areas, in order to achieve its strategic goals and business objectives, whilst safeguarding its assets and shareholders interests: (i) Governance (ii) Regulations Compliance (iii) Efficient and Effective Operations (iv) Assets Protection and Safeguarding (v) Timely and Accurate Reporting The nature of risks means that events may occur which would give rise to unanticipated or unavoidable losses and because of the limitations that are inherent in any system of internal control, the Board recognises that such system of internal control are designed to manage and control, rather than eliminate the risk of failure to achieve its business objectives. Accordingly, it should be noted that the system of internal control could therefore only provide reasonable and not absolute assurance against the risk of material errors, misstatement, fraud or losses. The Group s system of internal control comprises the following key elements: Board Committees Clear definitions of functions and responsibilities of the various committees of the Board of Directors. Control Procedures Well established policies, procedures and practices are in place to ensure clear accountability and control procedures for all business units. These policies and procedures are available and accessible by all employees. Annual Report 25

28 Statement on Internal Control (continued) Organisational Structure and Accountability Levels 26 Yeo The Group has a well-defined organisational structure with clear lines of accountability. The delegation of authority is properly documented and sets out the decisions that need to be taken and the appropriate authority levels of management, including matters that require Board approval. Information System The Group maintains a comprehensive information system which enables transactions to be captured, compiled and reported in an organised manner. The SAP IT system provides management with exception reports to identify risk areas for appropriate remedial action. Reporting and Review There is a strategic planning, annual budgeting and target setting process formulated by management team, which comprises the Chief Executive Officer, the Deputy Chief Executive Officer, the Chief Operating Officer and senior management officers (known as the Matrix ). Actual sales performance compared to budget is reported to the Matrix on a daily basis and the Matrix carries out regular meetings to review financial results and forecasts for all business units within the Group, including actual performance against operating plans and annual budgets. The Matrix also reviews and monitors operational, financial performance and considers business developments as well as formulating action plans to address any areas of concern. In addition, quarterly business reviews and financial results are prepared and tabled at the Board meetings for review. Internal Audit and Audit Committee The internal auditors perform regular examination and evaluation of the adequacy and effectiveness of the Company s governance, system of internal control structure and the quality of management s performance in carrying out assigned responsibilities to achieve the Company s goals and objectives. The internal auditors reports directly to the AC of their findings, the AC in turn will review their findings with management on quarterly basis. The internal auditors will subsequently follow-up to determine the extent to which their recommendations have been implemented. As such, the internal auditors provide assurance to the Board on the effectiveness of the Group s system of internal control. The AC reports to the Board of Directors on the activities of the internal auditors, significant findings and the necessary recommendations in relation to the adequacy and effectiveness of the system of internal control and accounting control procedures of the Group. Risk Management The Group s operations involve the management of a wide range of risks. A Risk Management Committee comprising key management team has been set up and is responsible for identifying business risks and in ensuring the implementation of appropriate systems to manage these risks. The Risk Management Committee which is led by the Deputy Chief Executive Officer meets regularly to discuss, review and monitor strategic and operational matters and reports their findings and action plans to the Board on quarterly basis. Conclusion The Board is of the view that there is a continuous process in evaluating and managing significant risks faced by the Group. Because of the changing circumstances and conditions, the effectiveness of an internal control system may vary over time. The Board and management will continually evaluate and take measures to strengthen the internal control environment. This Statement on Internal Control is made in accordance with the resolution of the Board of Directors dated 15 March Hiap Seng (Malaysia) Berhad (3405-X)

29 Audit Committee Report Composition and Meetings The Audit Committee comprises the following four (4) members, three (3) of whom, including the Chairman, are Independent Non-Executive Directors. During the year, five (5) Audit Committee meetings were held and the members attended all the meetings. Name Status of Directorship Attendance Dato Mohamed Nizam bin Abdul Razak (Chairman) Independent Non-Executive Director 5/5 Dato N. Sadasivan a/l N.N. Pillay Independent Non-Executive Director 5/5 Razman Hafidz bin Abu Zarim Independent Non-Executive Director 5/5 Pearl Foong Lye Fong Non-Independent Non-Executive 5/5 Director The following terms of reference were reviewed and approved by the Board of Directors on 15 March Terms of Reference: 1. Terms of Membership An independent Audit Committee exists to implement and support the functions of the Board. The Audit Committee is appointed by the Board of Directors from among the Directors of the Company and consists of at least three members, all of whom must be non-executive directors. The majority of the members must be independent directors and at least one member of the committee; a. must be a member of the Malaysian Institute of Accountants (MIA); or b. has at least three years working experience and i. has passed the examinations specified in Part I of the First Schedule of the Accountants Act 1967; or ii. is a member of one of the associations of accountants specified in Part II of the First Schedule of the Accountants Act 1967; or c. fulfills such other requirements as prescribed or approved by Bursa Malaysia Securities Berhad. No Alternate Director has been appointed as a member of the Audit Committee. The Chairman of the Audit Committee is elected among the members and is an Independent Non-Executive Director. If a member of the Audit Committee resigns, dies or for any reason ceases to be a member with the result that the number of members is reduced to below three, the Board of Directors shall, within three months of that event, appoint such number of new members as may be required to make up the minimum number of three members. The terms of office and performance of the Audit Committee shall be reviewed by the Board of Directors at least once in every three years to determine whether the Audit Committee and members have carried out their duties in accordance with their terms of reference. 2. Objectives The primary objectives of the Audit Committee are: a. To assist the Board in discharging its responsibilities relating to the Group s and the Company s management of principal risks, internal controls, financial reporting and compliance of statutory and legal requirements. b. To maintain through regularly scheduled meetings, a line of communication between the Board of Directors, senior management, internal auditors and external auditors. Annual Report 27

30 Audit Committee Report (continued) 3. Duties and Responsibilities 28 Yeo The duties and responsibilities of the Audit Committee shall be: With the External Auditors: a. To review their audit plans; b. To review their evaluation of the system of internal control; c. To review their audit reports; d. To consider the nomination of a person or persons as auditors; e. To review any letter of resignation from the external auditors of the Company; and f. To review the assistance given by the employees of the Company to the external auditors. With the Internal Auditors: a. To review the adequacy of the scope, functions, competency and resources of the internal audit functions and that it has the necessary authority to carry out its work; and b. To review the internal audit programme, processes, the results of the internal audit programme, processes or investigations undertaken and whether or not appropriate actions are taken on the recommendations of the internal audit function. On Financial Reporting: To review the quarterly results and year-end financial statements, prior to the approval by the Board of Directors, focusing particularly on: i. Changes in or implementation of major accounting policies and practices; ii. Significant and unusual events; iii. Significant adjustments arising from the audit; iv. The going concern assumption; and v. Compliance with accounting standards and other legal requirements. On Related Party Transactions: Any related party transactions that may arise within the Company or the Group. Other matters: To review such other functions as may be agreed by the Audit Committee and the Board of Directors. 4. Authority The Audit Committee shall: a. Have authority to investigate any matter within its terms of reference; b. Have the resources which are required to perform its duties; c. Have full and unrestricted access to any information pertaining to the Company and the Group; Hiap Seng (Malaysia) Berhad (3405-X)

31 Audit Committee Report (continued) 4. Authority (continued) d. Have direct communication channels with the external auditors, internal auditors and person(s) carrying out the internal function or activity; e. Be able to obtain external professional advice; and f. Be able to convene meetings with the external auditors, internal auditors or both. 5. Activities of the Audit Committee In line with the terms of reference, the Audit Committee during the year ended 31 December : a. reviewed the audit plans of the Company and the Group for the year which were prepared by both the external and internal auditors; b. reviewed the audit reports for the Company and the Group prepared by the external and internal auditors, the major findings by the auditors and the management s responses thereto; c. reviewed the quarterly and annual reports of the Company and the Group and thereafter submitting them to the Board for consideration and approval; d. reviewed the findings of investigations conducted during the year and the management s responses thereto; e. reviewed the related party transactions; and f. considered and recommended to the Board for approval of the audit fees payable to the external and internal auditors. 6. Internal Audit Function and its Activities The internal audit function was performed by a professional firm, Deloitte Enterprise Risk Services Sdn Bhd and the internal auditors reports directly to the Audit Committee, assisting the Audit Committee in discharge its duties and responsibility. The costs incurred for the internal audit function in respect of the financial year ended 31 December was RM198, The internal audit provides independent, objective assurance and consulting services designed to add value and improve the Company s operations. Internal audit helps the Company accomplish its objectives by bringing a systematic, disciplined approach to evaluating and improving the effectiveness of risk management, controls and governance processes. The scope of internal audit encompasses the examination and evaluation of the adequacy and effectiveness of the Company governance, system of internal control structure, and the quality of performance in carrying out assigned responsibilities to achieve the Company s stated goals and objectives. It includes: Evaluate the relevance, reliability and integrity of financial and management information; Review systems and operations to assess the extent to which company objectives are achieved and the adequacy of control activities leading to such achievement; Appraise utilisation of resources with regard to economy, efficiency and effectiveness; Assess the means of safeguarding assets and verify their existence; Ascertain the extent of compliance with established policies, procedures, plans, laws and regulations. Annual Report 29

32 Audit Committee Report (continued) 6. Internal Audit Function and its Activities (continued) Internal auditors also perform ad hoc appraisals, inspections, investigations, examinations, reviews requested by the Audit Committee or senior management, as appropriate. 7. Meetings and Minutes a. Audit Committee meetings are held not fewer than four times a year. Internal auditors and external auditors may attend the meetings upon the invitation of the Audit Committee. b. At least twice a year, the Audit Committee shall meet the external auditors without the presence of any executive directors and management of the Company. There is a continuous engagement, both formal and informal, between the Chairman of the Audit Committee and the General Manager of Finance of the Company, as well as the external auditors, in order for the Audit Committee to be kept informed of matters affecting the Company. c. To form a quorum, a majority of members present must be independent directors. d. Minutes of each meeting shall be kept and distributed to each member of the Audit Committee. e. The Chairman of the Audit Committee shall report on each meeting to the Board. f. The Secretary to the Audit Committee shall be the Company Secretary. g. Detailed audit reports by the internal auditors and the respective management responses are circulated to the members of the Audit Committee before each meeting at which the said reports are tabled. Directors Responsibilities Statement The Directors are required by the Companies Act, 1965 ( the Act ) 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 and cash flows of the Group and the Company for the financial year then ended. The Directors affirm that in preparing the financial statements for the financial year ended 31 December set out on pages 41 to 115, the Group used certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported financial year in accordance with the provision of Companies Act, 1965 and MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities. Although these estimates and judgment are based on the Directors best knowledge of currents events and actions, actual results may differ as the Directors exercised their judgment in the process of applying the Group s accounting policies. 30 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

33 Group Property Particulars Listed below are the particulars of the properties referred to in Notes 14, 15, 19 and 21 to the Financial Statements. Location of Property Brief Description Corporate Office and Factories 1. 7, Jalan Tandang, Petaling Jaya, Selangor 2. Lots 191 & 121, Shah Alam Industrial Estate, Shah Alam 3. Lot 66134, District of Kinta, Perak 4. Lot , District of Kinta, Perak 5. Lot 65644, District of Kinta, Perak 6. Lot , District of Kinta, Perak 7. H.S. (M) 2458 (formerly known as Lot ), Mukim of Plentong, Johor 8. Lot 2050 (formerly known as Lots ) Sec.66, Kuching, Sarawak Trading Warehouses Corporate Office, Factory and Trading Warehouse Factory and Trading Warehouse Factory and Trading Warehouse Factory and Trading Warehouse Factory and Trading Warehouse Factory and Trading Warehouse Factory and Trading Warehouse Factory and Trading Warehouse Approximate Land Area (sq. ft.) Tenure 125, years lease expiring in year , years lease expiring in year 2074 and 2073 respectively 264, years lease expiring in year , years lease expiring in year , years lease expiring in year , years lease expiring in year ,769 Interest in perpetuity subject to payment of annual rent 144, years lease expiring in year 2027 Date of Acquisition Approximate Age of Building (years)* Net Book Value as at () , & , , , Lots 24, MIEL Industrial Estate Prai Trading Warehouse 85, years lease expiring in year & Lot PT , Mukim Panchor, Daerah Kemumin Kota Bharu, Kelantan Trading Warehouse 52, years lease expiring in year Lot 147A, Kawasan Perindustrian Semambu, Kuantan, Pahang Trading Warehouse 209, years lease expiring in year * The approximate age of building denotes the age of the oldest building. Annual Report 31

34 Group Property Particulars (continued) Location of Property 12. Lots K-70 & 71, Temerluh Industrial Park (Phase One) Mentakab 13. Lot 1347, Sec.66, Kuching, Sarawak 14. Lot 1348, Sec.66, Kuching, Sarawak 15. Lot 30, Block 19, Seduan Land District, Sibu, Sarawak 16. Lot 4183 (formerly known ) Block 5, Lambir Land District, Miri, Sarawak 17. Lot 71, Sedco Industrial Estate, Kota Kinabalu, Sabah Vacant Land Brief Description Trading Warehouse Trading Warehouse Trading Warehouse Trading Warehouse Trading Warehouse Trading Warehouse Approximate Land Area (sq. ft.) Tenure Date of Acquisition Approximate Age of Building (years)* Net Book Value as at () 43,560 Freehold Land , years lease expiring in year , years lease expiring in year , years lease expiring in year , years lease expiring in year , years lease expiring in year } 2, , Mukim of Ulu Kinta and Sungei Raja, Perak Farming Lands 11,288, lots freehold, 3 lots with 60 years lease expiring in year Lot 6843 (PT 2987), Mukim Bidor, Daerah Batang Padang, Perak Industrial Land 2,178, years lease expiring in year } 6, PT 2988, Mukim Bidor, Daerah Batang Padang, Perak Industrial Land 2,093, years lease expiring in year District of Kluang, Mukim Sungai Benut Johor Industrial Land 4,523,096 Interest in perpetuity , Lot 1632, Kemena Land District, Bintulu, Sarawak Industrial Land 60, years lease expiring in year ,751 * The approximate age of building denotes the age of the oldest building. 32 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

35 FINANCIAL STATEMENTS 34 Directors Report 38 Statement by Directors 38 Statutory Declaration 39 Independent Auditors Report 41 Statements of Comprehensive Income 43 Statements of Financial Position 45 Consolidated Statement of Changes in Equity 47 Statement of Changes in Equity 49 Statements of Cash Flows 51 Notes to the Financial Statements Annual Report 33

36 Directors Report The Directors have pleasure in submitting their annual report together with the audited financial statements of the Group and the Company for the financial year ended 31 December. PRINCIPAL ACTIVITIES The Company is principally involved in the production, marketing and sale of beverage and food products. The principal activities of the subsidiaries are shown in Note 16 to the financial statements. There have been no significant changes in the nature of these activities of the Group and the Company during the financial year. FINANCIAL RESULTS Group Company Profit for the financial year 24,988 25,154 Attributable to: Equity holders of the Company 24,983 25,154 Non-controlling interest 5-24,988 25,154 DIVIDENDS The dividends on ordinary shares paid or declared by the Company since 31 December were as follows: In respect of the financial year ended 31 December as shown in the Directors report of that financial year: Final gross dividend of 9 sen per share, less income tax of 25%, paid on 8 July 10,307 In respect of the financial year ended 31 December : Interim gross dividend of 3 sen per share, less income tax of 25%, paid on 12 October 3,436 13,743 The Directors now recommend the payment of a final gross dividend of 9 sen per share on 152,702,000 ordinary shares (less treasury shares), less income tax of 25%, in respect of the financial year ended 31 December, amounting to RM10,307,000 which is subject to the approval of shareholders at the forthcoming Annual General Meeting of the Company. The book closure and the payment dates for the dividend entitlement will be determined at a later date. RESERVES AND PROVISIONS All material transfers to or from reserves and provisions during the financial year are shown in the financial statements. TREASURY SHARES During the financial year, the Company repurchased 2,000 of its issued share capital from the open market on the Bursa Malaysia Securities Berhad for RM1.78 per share amounting to RM3,555. As at 31 December, none of the repurchased shares have been sold or cancelled. Details of the treasury shares are as set out in Note 32(a) to the financial statements. 34 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

37 Directors Report (continued) DIRECTORS The Directors who have held office during the period since the date of the last report are as follows: Koh Boon Hwee Tjong Yik Min Dato Mohamed Nizam bin Abdul Razak Dato N. Sadasivan a/l N.N. Pillay Razman Hafidz bin Abu Zarim Chandra Das s/o Rajagopal Sitaram (Appointed on 26 April ) Ow Tin Nyap Yap Ng Seng Pearl Foong Lye Fong In accordance with Article 75 of the Company s Articles of Association, Koh Boon Hwee and Pearl Foong Lye Fong will retire at the forthcoming Annual General Meeting and being eligible, offer themselves for reelection. In accordance with Section 129(6) of the Companies Act, 1965, Dato N. Sadasivan a/l N.N. Pillay and Chandra Das s/o Rajagopal Sitaram, being over the age of seventy, will retire at the forthcoming Annual General Meeting and being eligible, offer themselves for re-appointment to hold office until the conclusion of the next Annual General Meeting. DIRECTORS BENEFITS During and at the end of the financial year, no arrangements subsisted to which the Company is a party, being arrangements with the object or objects of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate. Since the end of the previous financial year, no Director has received or become entitled to receive a benefit (other than Directors remuneration as disclosed in Note 8 to the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which he is a member, or with a company in which he has a substantial financial interest except as disclosed in Note 31 to the financial statements. DIRECTORS INTERESTS IN SHARES According to the register of Directors shareholdings, particulars of interests of Directors who held office at the end of the financial year in shares in the Company are as follows: Annual Report Number of ordinary shares of RM1.00 each in the Company At 1.1. Bought Sold At Direct interest Ow Tin Nyap 18, ,000 Deemed interest Ow Tin Nyap 24, ,000 Other than as disclosed above, according to the register of Directors shareholdings, the Directors in office at the end of the financial year did not hold any interest in shares in the Company or shares of its related companies during the financial year. 35

38 Directors Report (continued) STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS Before the statements of comprehensive income and financial position were made out, the Directors took reasonable steps: (a) (b) to ascertain that proper 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; and to ensure that any current assets, other than debts, which were unlikely to realise in the ordinary course of business their values as shown in the accounting records of the Group and the Company had 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: (a) (b) (c) which would render the amounts written off for bad debts or the amount of the allowance for doubtful debts in the financial statements of the Group and the Company inadequate to any substantial extent; or which would render the values attributed to current assets in the financial statements of the Group and the Company misleading; or which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and the Company misleading or inappropriate. No contingent or other liability 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 affect the ability of the Group or the Company to meet their obligations when they fall due. At the date of this report, there does not exist: (a) (b) any charge on the assets of the Group or the Company which has arisen since the end of the financial year which secures the liability of any other person; or any contingent liability of the Group or the Company which has arisen since the end of the financial year except as disclosed in Note 35 to the financial statements. 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 which would render any amount stated in the financial statements misleading. In the opinion of the Directors: (a) the results of the Group s and the Company s operations during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature, except as disclosed in the statements of comprehensive income and Note 34 to the financial statements; and (b) 36 Yeo 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 to affect substantially the results of the operations of the Group and the Company for the financial year in which this report is made, except as disclosed in Note 34 to the financial statements. Hiap Seng (Malaysia) Berhad (3405-X)

39 Directors Report (continued) HOLDING COMPANIES The Directors regard YHS (Singapore) Pte. Ltd. and Yeo Hiap Seng Limited, both companies incorporated in Singapore, as the immediate holding company and the penultimate holding company respectively. The Directors regard Far East Organisation Pte. Ltd., a company incorporated in Singapore, as the ultimate holding company. AUDITORS The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office. Signed on behalf of the Board of Directors in accordance with a resolution dated 7 March TJONG YIK MIN DIRECTOR DATO MOHAMED NIZAM BIN ABDUL RAZAK DIRECTOR Annual Report 37

40 Statement by Directors pursuant to Section 169(15) of the Companies Act, 1965 We, Tjong Yik Min and Dato Mohamed Nizam bin Abdul Razak, two of the Directors of Yeo Hiap Seng (Malaysia) Berhad, state that, in the opinion of the Directors, the financial statements set out on pages 41 to 115 are drawn up so as to give a true and fair view of the state of affairs of the Group and the Company as at 31 December and of the results and cash flows of the Group and the Company for the financial year ended on that date in accordance with the provisions of the Companies Act, 1965 and the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities. The information set out in Note 40 to the financial statements have been prepared in accordance with the Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants. Signed on behalf of the Board of Directors in accordance with their resolution dated 7 March TJONG YIK MIN DIRECTOR DATO MOHAMED NIZAM BIN ABDUL RAZAK DIRECTOR Statutory Declaration pursuant to Section 169(16) of the Companies Act, 1965 I, Ong Chay Seng, the officer primarily responsible for the financial management of Yeo Hiap Seng (Malaysia) Berhad, do solemnly and sincerely declare that the financial statements set out on pages 41 to 115 are, in my opinion, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, ONG CHAY SENG Subscribed and solemnly declared by the abovenamed Ong Chay Seng, Petaling Jaya 7 March 2012 Before me: A.RATHNASAMY AMN COMMISSIONER FOR OATHS 38 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

41 Independent Auditors Report to the members of Yeo Hiap Seng (Malaysia) Berhad (Incorporated in Malaysia) (Company No X) REPORT ON THE FINANCIAL STATEMENTS We have audited the financial statements of Yeo Hiap Seng (Malaysia) Berhad on pages 41 to 114 which comprise the statements of financial position as at 31 December of the Group and of the Company, and the statements of comprehensive income, changes in equity and cash flows of the Group and of the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on Notes 1 to 39. Directors Responsibility for the Financial Statements The Directors of the Company are responsible for the preparation of financial statements that give a true and fair view in accordance with the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities and the provisions of the Companies Act, 1965 and for such internal control as the Directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements have been properly drawn up in accordance with the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities and the provisions of the Companies Act, 1965 so as to give a true and fair view of the financial position of the Group and of the Company as of 31 December and of their financial performance and cash flows for the financial year then ended. Annual Report 39

42 Independent Auditors Report (continued) to the members of Yeo Hiap Seng (Malaysia) Berhad (Incorporated in Malaysia) (Company No X) REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following: (a) (b) (c) (d) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries have been properly kept in accordance with the provisions of the Act. We have considered the financial statements and the auditors reports of all subsidiaries which we have not acted as auditors, which are indicated in Note 16 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 purposes of the preparation of the financial statements of the Group and we have received satisfactory information and explanations required by us for those purposes. Our audit reports on the financial statements of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act. OTHER REPORTING RESPONSIBILITIES The supplementary information set out in Note 40 on page 115 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The Directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants ( MIA Guidance ) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad. OTHER MATTERS This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report. PRICEWATERHOUSECOOPERS (No. AF: 1146) Chartered Accountants ERIC OOI LIP AUN (No. 1517/06/12 (J)) Chartered Accountant Kuala Lumpur 7 March Yeo Hiap Seng (Malaysia) Berhad (3405-X)

43 Statements of Comprehensive Income for the financial year ended 31 December Note Group Company Revenue 6, 7 533, , , ,826 Changes in inventories of finished goods and work-in-progress 16,414 (8,428) (3,287) (9,959) Raw materials and consumables used (326,444) (272,721) (263,413) (204,345) Staff costs 9 (61,907) (57,938) (33,158) (29,493) Depreciation of: - property, plant and equipment 14 (8,766) (10,018) (7,071) (7,721) - investment properties 15 (377) (433) (243) (298) Amortisation of: - prepaid lease rental 19 (191) (194) (44) (47) - intangible asset 18 (1,906) (1,905) (1,906) (1,905) Rental on premises, machinery, equipment and motor vehicles (7,218) (5,948) (2,507) (3,065) Supplies and utilities (12,942) (10,948) (11,356) (9,349) Repairs and maintenance (11,803) (9,030) (8,513) (7,067) Selling and promotional expenses (74,591) (57,883) (2,808) (2,915) Royalty, technical and management fees (7,592) (6,161) (7,592) (6,161) Net of foreign exchange gain/(loss) 104 (1,271) 2, Legal and professional fees (1,487) (1,992) (1,082) (929) Travelling expenses (1,527) (1,539) (662) (796) Telecommunication expenses (1,127) (1,142) (587) (666) Management fees from subsidiaries - - 6,307 6,722 Rental income Other operating income 3,306 1,250 2, Other operating expenses (5,229) (6,052) (2,907) (2,058) Impairment loss of: 30,758 19,571 31,158 9,593 - property, plant and equipment 14 (1,820) (11,000) (1,820) (10,259) - available-for-sale financial assets 24 (2,704) (97) - (97) Income from other investments and finance income 10 2,711 1,509 2,703 1,449 Severance payment and other non-operating expenses (577) (2,323) - (65) Gain from liquidation of a subsidiary 16 4, Profit before tax 6, 9 32,487 7,660 32, Tax (expense)/credit 11 (7,499) (3,842) (7,430) 411 Profit for the financial year 24,988 3,818 25,154 1,032 Annual Report 41

44 Statements of Comprehensive Income (continued) for the financial year ended 31 December Note Group Company Other comprehensive income/(loss): Fair value gain on available-for-sale financial assets 24 3,570 4,186 4,767 3,866 Currency translation differences (267) 1, Reclassification adjustment included in the profit or loss arising from liquidation of a subsidiary (4,146) Other comprehensive (loss)/ income for the financial year, net of tax (843) 6,113 4,767 3,866 Total comprehensive income for the financial year 24,145 9,931 29,921 4,898 Profit for the financial year attributable to: - Equity holders of the Company 24,983 3,817 25,154 1,032 - Non-controlling interest Profit for the financial year 24,988 3,818 25,154 1,032 Total comprehensive income attributable to: - Equity holders of the Company 24,140 9,930 29,921 4,898 - Non-controlling interest Total comprehensive income for the financial year 24,145 9,931 29,921 4,898 Basic earnings per share (sen) Gross dividends per ordinary share (sen) Yeo Hiap Seng (Malaysia) Berhad (3405-X)

45 Statements of Financial Position as at 31 December Group Company Note NON-CURRENT ASSETS Property, plant and equipment 14 72,450 58,310 61,761 48,826 Investment properties 15 17,530 10,366 7,180 1,876 Investments in subsidiaries ,466 93,037 Intangible asset 18 8,893 10,799 8,893 10,799 Prepaid lease rental 19 4,703 5,126 1,547 1,823 Deferred tax assets 20 1,498 1, Amount due from a subsidiary ,430 - Available-for-sale financial assets 24 20,295 19,429 17,192 12,425 CURRENT ASSETS 125, , , ,786 Inventories 22 99,360 73,316 41,102 35,606 Trade and other receivables ,352 88,766 36,028 16,805 Amount due from immediate holding company 26-9,243-8,630 Amounts due from subsidiaries , ,722 Amounts due from fellow subsidiaries ,917-1,917 Derivative financial assets Tax recoverable 2, Financial assets at fair value through profit or loss 27 32,064 48,521 32,064 48,521 Bank and cash balances 28 15,010 16,501 8,876 12, , , , ,845 Non-current assets held-for-sale LESS: CURRENT LIABILITIES 262, , , ,845 Trade and other payables 29 92,191 80,790 44,323 37,264 Amount due to penultimate holding company 26 2,139 1,535 2,139 - Amounts due to subsidiaries , ,926 Amount due to immediate holding company 26 18,412-16,236 - Amount due to fellow subsidiaries 26 2,133-2,089 - Tax payable 1,755 1,864 1,737 1,043 Annual Report 116,630 84,189 95, ,233 43

46 Statements of Financial Position (continued) as at 31 December Note Group Company NET CURRENT ASSETS 146, ,069 98,489 43,612 LESS: NON-CURRENT LIABILITIES Provision for retirement benefits 30 5,477 5,313 3,252 3,151 Deferred tax liabilities 20 1,998 1,416 1, ,475 6,729 4,410 4,024 NET ASSETS 264, , , ,374 CAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY Share capital , , , ,548 Treasury shares 32(a) (1,857) (1,853) (1,857) (1,853) 151, , , ,695 Reserves , ,910 72,857 56, , , , ,374 NON-CONTROLLING INTEREST TOTAL EQUITY 264, , , , Yeo Hiap Seng (Malaysia) Berhad (3405-X)

47 Consolidated Statement of Changes in Equity for the financial year ended 31 December Attributable to equity holders of the Company Note Issued and paidup share capital Share premium Capital reserve Foreign exchange reserves Fair value reserve Retained earnings Treasury shares Sub-total Non Controlling interest Total equity Group As at 1 January 153,548 34, ,192 6,956 56,316 (1,853) 253, ,831 Comprehensive income Profit for the financial year ,983-24, ,988 Other comprehensive income Fair value gain on available-for-sale financial assets , ,570-3,570 Currency translation differences (267) (267) - (267) Reclassification adjustment included in the profit or loss arising from liquidation of a subsidiary (4,146) (4,146) - (4,146) Total comprehensive income for the financial year (4,413) 3,570 24,983-24, ,145 Transactions with owners Dividends for the financial year ended: - 31 December (Final) (10,307) - (10,307) - (10,307) - 31 December (Interim) (3,436) - (3,436) - (3,436) Purchase of treasury shares 32(a) (4) (4) - (4) Total transactions with owners (13,743) (4) (13,747) - (13,747) As at 31 December 153,548 34,445 1 (221) 10,526 67,556 (1,857) 263, ,229 Annual Report 45

48 Consolidated Statement of Changes in Equity (continued) for the financial year ended 31 December Attributable to equity holders of the Company Note Issued and paidup share capital Share premium Capital reserve Foreign exchange reserves Fair value reserve Retained earnings Treasury shares Sub-total Noncontrolling interest Total equity Group As at 1 January 153,548 34, ,265 2,770 65,097 (1,850) 256, ,501 Comprehensive income Profit for the financial year ,817-3, ,818 Other comprehensive income Fair value gain on available-for-sale financial assets , ,186-4,186 Currency translation differences , ,927-1,927 Total comprehensive income for the financial year ,927 4,186 3,817-9, ,931 Transactions with owners Dividends for the financial year ended: - 31 December 2009 (Final) (6,872) - (6,872) - (6,872) - 31 December (Interim) (5,726) - (5,726) - (5,726) Purchase of treasury shares 32(a) (3) (3) - (3) Total transactions with owners (12,598) (3) (12,601) - (12,601) As at 31 December 153,548 34, ,192 6,956 56,316 (1,853) 253, , Yeo Hiap Seng (Malaysia) Berhad (3405-X)

49 Statement of Changes in Equity for the financial year ended 31 December Note Issued and paid-up share capital Non-distributable Share premium Fair value reserve Distributable Retained earnings Treasury shares Total Company As at 1 January 153,548 34,445 3,866 18,368 (1,853) 208,374 Comprehensive income Profit for the financial year ,154-25,154 Other comprehensive income Fair value gain on available-for-sale financial assets - - 4, ,767 Total comprehensive income for the financial year - - 4,767 25,154-29,921 Transactions with owners Dividends for the financial year ended: - 31 December (Final) (10,307) - (10,307) - 31 December (Interim) (3,436) - (3,436) Purchase of treasury shares 32(a) (4) (4) Total transactions with owners (13,743) (4) (13,747) As at 31 December 153,548 34,445 8,633 29,779 (1,857) 224,548 Annual Report 47

50 Statement of Changes in Equity (continued) for the financial year ended 31 December Note Issued and paid-up share capital Non-distributable Share premium Fair value reserve Distributable Retained earnings Treasury shares Total Company As at 1 January 153,548 34,445-29,934 (1,850) 216,077 Comprehensive income Profit for the financial year ,032-1,032 Other comprehensive income Fair value gain on available-for-sale financial assets - - 3, ,866 Total comprehensive income for the financial year - - 3,866 1,032-4,898 Transactions with owners Dividends for the financial year ended: - 31 December 2009 (Final) (6,872) - (6,872) - 31 December (Interim) (5,726) - (5,726) Purchase of treasury shares 32(a) (3) (3) Total transactions with owners (12,598) (3) (12,601) As at 31 December 153,548 34,445 3,866 18,368 (1,853) 208, Yeo Hiap Seng (Malaysia) Berhad (3405-X)

51 Statements of Cash Flows for the financial year ended 31 December Annual Report Group Company CASH FLOWS FROM OPERATING ACTIVITIES Profit for the financial year 24,988 3,818 25,154 1,032 Adjustments for non-cash items: Property, plant and equipment: - depreciation 8,766 10,018 7,071 7,721 - written off gain on disposal (1,246) (152) (1,179) (151) - impairment losses 1,820 11,000 1,820 10,259 Amortisation of: - prepaid lease rental intangible asset 1,906 1,905 1,906 1,905 Depreciation of investment properties Fair value gains on: - derivative financial instruments - (17) - (17) - financial assets at fair value through profit or loss (2,543) (521) (2,543) (521) Inventories: - written off 888 3, ,770 - allowance for inventories obsolescence 1,480 4,534 1,397 1,534 - write back of inventories obsolescence (1,880) (1,082) (1,104) - Allowance for doubtful debts (trade) 197 2, Write back of doubtful debts: - trade (429) (652) non-trade - (116) - (116) Bad debts (recovered)/written off (67) Provision for retirement benefits Write back of overprovision of retirement benefits - (596) - (223) Interest income (73) (826) (160) (911) Net unrealised (gain)/loss on foreign exchange (25) 13 (2,645) (1,351) Impairment loss on available-for-sale financial assets 2, Dividends income from available-for-sale financial assets (95) (145) - - Taxation 7,499 3,842 7,430 (411) Gain from liquidation of a subsidiary (4,119) - (543) - Arising from the incident in the warehouse: - write off of inventories 16, write off of racking system 1, other related incidental costs compensation from insurance companies (17,800) ,071 38,507 37,861 22,436 49

52 Statements of Cash Flows (continued) for the financial year ended 31 December Changes in working capital: 50 Yeo Note Group Company Inventories (26,490) (4,158) (6,391) 1,535 Trade and other receivables (22,554) 29,481 (19,242) (13,013) Penultimate holding company ,116 (1,254) Immediate holding company 27,506 4,688 24,719 4,801 Subsidiaries - - (25,941) 55,115 Fellow subsidiaries 4,066 (1,278) 4,066 (1,278) Trade and other payables 10,172 (27,719) 7,027 (17,443) Cash flows generated from operations 34,353 39,812 24,215 50,899 Tax paid (8,250) (3,469) (6,451) (2,383) Tax refund 3 1, Retirement benefits paid (552) (979) (265) (396) Net cash flows generated from operating activities 25,554 36,541 17,499 48,120 CASH FLOWS FROM INVESTING ACTIVITIES Property, plant and equipment: - proceeds from disposal 1, , additions (34,128) (2,115) (28,184) (1,324) Financial assets at fair value through profit or loss: - proceeds from disposals 94,000-94, additions (75,000) (48,000) (75,000) (48,000) Interest received Dividends received from available-for-sale financial assets Net cash flows used in investing activities (13,659) (48,954) (7,806) (48,219) CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid to equity holders of the Company (13,743) (12,598) (13,743) (12,598) Purchase of treasury shares (4) (3) (4) (3) Net cash flows used in financing activities (13,747) (12,601) (13,747) (12,601) NET MOVEMENT IN CASH AND CASH EQUIVALENTS (1,852) (25,014) (4,054) (12,700) Currency translation differences 361 (378) 303 (242) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE FINANCIAL YEAR 16,501 41,893 12,627 25,569 CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL YEAR 28 15,010 16,501 8,876 12,627 Hiap Seng (Malaysia) Berhad (3405-X)

53 Notes to the Financial Statements 31 December 1 GENERAL INFORMATION The principal activities of the Company are in the production, marketing and sale of beverage and food products. The principal activities of the subsidiaries are shown in Note 16 to the financial statements. There have been no significant changes in the nature of these activities of the Group and the Company during the financial year. The Company is a public limited liability company, incorporated and domiciled in Malaysia. The Directors regard the immediate, penultimate and ultimate holding companies of the Company are YHS (Singapore) Pte. Ltd., Yeo Hiap Seng Limited and Far East Organisation Pte. Ltd., respectively. All the companies are incorporated in Singapore. The address of the registered office and principal place of business of the Company is as follows: No. 7, Jalan Tandang Petaling Jaya Selangor Darul Ehsan. The financial statements have been approved for issue in accordance with a resolution of the Board of Directors on 7 March BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS The financial statements of the Group and the Company have been prepared in accordance with the provisions of the Companies Act, 1965 and the Malaysian Accounting Standards Board ( MASB ) Approved Accounting Standards in Malaysia for Entities Other than Private Entities. The financial statements have been prepared under the historical cost convention except as disclosed in this summary of significant accounting policies. The preparation of financial statements in conformity with the provisions of the Companies Act, 1965 and the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities requires the use of certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported financial year. It also requires the Directors to exercise their judgement in the process of applying the Group s accounting policies. Although these estimates and judgement are based on the Directors best knowledge of current events and actions, actual results may differ. The areas involving higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 5 to the financial statements. Annual Report 51

54 Notes to the Financial Statements (continued) 31 December 2 BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONTINUED) (a) Standards, amendments and improvements to published standards and interpretations that are effective and applicable to the Group and the Company The new accounting standards, amendments and improvements to published standards and interpretations that are effective and applicable for the Group and the Company financial year beginning on or after 1 January are as follows: Revised FRS 3 Business Combination Revised FRS 127 Consolidated and Separate Financial Statements Amendments to FRS 5 Non-Current Assets Held-For-Sale And Discontinued Operations Amendments to FRS 1 First-time Adoption of Financial Reporting Standards Amendments to IC Interpretation 9 Reassessment of Embedded Derivatives IC Interpretation 4 Determining Whether An Arrangement Contains a Lease Improvements to FRS issued in : - FRS 3 Business Combinations - FRS 101 Presentation of Financial Statements - FRS 128 Investment in Associates - FRS 132 Financial Instruments: Presentation - FRS 139 Financial Instruments: Recognition and Measurement - IC Interpretation 9 Reassessment of Embedded Derivatives The adoption of the new accounting standards, amendments and improvements to publish standards and interpretation is not material to the financial statements of the Group and the Company. (b) Standards early adopted by the Group and the Company in financial year ended 31 December Amendment to FRS 7 Financial Instruments: Disclosures - Improving Disclosures About Financial Instruments (c) Standards, amendments to published standards and interpretations to existing standards that are applicable to the Group and the Company but not yet effective In the next financial year, the Group and the Company will be adopting the new IFRS-compliant framework, Malaysian Financial Reporting Standards ( MFRS ). In adopting the new framework, the Group will be applying MFRS 1 First-time Adoption of MFRS. The Group and the Company will apply the new standards, amendments to standards and interpretations in the respective financial year set out below: (i) Financial year beginning on/after 1 January 2012 Applicable to the Group and the Company Amendments to IC Interpretation 14 MFRS The Limit on a Defined Benefit Assets, Minimum Funding Requirements and Their Interaction MFRS 139 Financial Instruments: Recognition and Measurement The revised MFRS 124 Related Party Disclosures 52 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

55 Notes to the Financial Statements (continued) 31 December 2 BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS (CONTINUED) (c) Standards, amendments to published standards and interpretations to existing standards that are applicable to the Group and the Company but not yet effective (continued) The Group and the Company will apply the new standards, amendments to standards and interpretations in the respective financial year set out below: (continued) (i) Financial year beginning on/after 1 January 2012 (continued) Applicable to the Group and the Company (continued) Amendment to MFRS 1 First Time Adoption on Fixed Dates and Hyperinflation Amendment to MFRS 112 Income Taxes Amendment to MFRS 7 Financial Instruments: Disclosures on Transfers of Financial Assets The initial application of the amendments to interpretation will not have a material impact to the financial statements of the Group and the Company. Not applicable to the Group and the Company MFRS 141 Agriculture IC Interpretation 15 Agreements For Construction of Real Estates IC Interpretation 19 Extinguishing Financial Liabilities with Equity Instruments (ii) Financial year beginning on/after 1 January 2013 Applicable to the Group and the Company MFRS 9 Financial Instruments - Classification and Measurement of Financial Assets and Financial Liabilities MFRS 10 Consolidated Financial Statements MFRS 12 Disclosures of Interests in Other Entities MFRS 13 Fair Value Measurement The revised MFRS 127 Separate Financial Statements The revised MFRS 128 Investments in Associates and Joint Ventures Amendments to MFRS 101 Presentation of Items of Other Comprehensive Income Amendment to MFRS 119 Employee Benefits The initial application of the standards and amendments to standards will not have a material impact to the financial statements of the Group and the Company. Not applicable to the Group and the Company MFRS 11 Joint Arrangements IC Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine Annual Report 53

56 Notes to the Financial Statements (continued) 31 December 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Unless otherwise stated, the following accounting policies have been applied consistently in dealing with items that are considered material in relation to the financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated. (a) Economic entities in the Group (i) Subsidiaries Subsidiaries are all those entities (including special purpose entities) over which the Group has power to govern the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are consolidated using the acquisition method of accounting. Under the acquisition method of accounting, subsidiaries are fully consolidated from the date on which control is transferred to the Group and are de-consolidated from the date that control ceases. The consideration transferred for acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. In a business combination achieved in stages, the previously held equity interest in the acquiree is re-measured at its acquisition date fair value and the resulting gain or loss is recognised in the profit or loss. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the Group s share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the gain is recognised in the profit or loss. Non-controlling interest is the equity in a subsidiary not attributable, directly or indirectly, to a parent. On an acquisition-by-acquisition basis, the Group measures any non-controlling interest in the acquiree either at fair value or at the non-controlling interest s proportionate share of the acquiree s identifiable net assets. At the end of reporting date, non-controlling interest consists of amount calculated on the date of combinations and its share of changes in the subsidiary s equity since the date of combination. All earnings and losses of the subsidiary are attributed to the parent and the non-controlling interest, even if the attribution of losses to the non-controlling interest results in a debit balance in the shareholders equity. The profit or loss attribution to non-controlling interests for prior years is not restated. 54 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

57 Notes to the Financial Statements (continued) 31 December 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (a) Economic entities in the Group (continued) (i) Subsidiaries (continued) Change in accounting policy The Group has changed its accounting policy on business combinations and accounting for noncontrolling interest when it adopted the revised FRS 3 Business Combinations and FRS 127 Consolidated and Separate Financial Statements. Previously, contingent consideration in a business combination was recognised when it is probable that payment will be made. Acquisition-related costs were included as part of the cost of business combination. Any non-controlling interest in the acquiree was measured at the non-controlling interest s proportionate share of the acquiree s identifiable net assets. Any adjustment to the fair values of the subsidiary s identifiable assets, liabilities and contingent liabilities relating to previously held interests of the Group was accounted for as a revaluation. The Group has applied the new policies prospectively to transactions occurring on or after 1 January. As a consequence, no adjustments were necessary to any of the amounts previously recognised in the financial statements. Previously, the Group had stopped attributing losses to the non-controlling interest because the losses exceeded the carrying amount of the non controlling interest. The Group has applied this policy prospectively. On the date of adoption of the new policy, the non-controlling interest reflects its previous carrying amount (that is, zero). Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. This may indicate an impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. The gain or loss on disposal of a subsidiary is the difference between net disposal proceeds and the Group s share of its net assets as of the date of disposal including the cumulative amount of any exchange differences that relate to the subsidiary is recognised in the profit or loss attributable to the parent. (ii) Transactions with non-controlling interests The Group applies a policy of treating transactions with non-controlling interests as transactions with equity owners of the Group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share of the carrying value of net assets of the subsidiary acquired is deducted from equity. For disposals to non-controlling interests, differences between any proceeds received and the relevant share of non-controlling interests are also recognised in equity. Annual Report 55

58 Notes to the Financial Statements (continued) 31 December 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (a) Economic entities in the Group (continued) (iii) Associates Associates are those corporations, partnerships or other entities in which the Group exercises significant influence, but which it does not control, generally accompanying a shareholding of between 20% and 50% of voting rights. Significant influence is power to participate in financial and operating policy decisions of associates but not power to exercise control over those policies. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. The Group s investment in associates includes goodwill identified on acquisition, net of any accumulated impairment loss. The Group s share of its associates post-acquisition profits or losses is recognised in the profit or loss, and its share of post-acquisition movements in reserves is recognised in other comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. If the Group s share of losses of an associate equals or exceeds its interest in the associate, the Group discontinues recognising its share of further losses. The interest in an associate is the carrying amount of the investment in the associate under the equity method together with any long-term interests that, in substance, form part of the Group s net investment in the associate. After the Group s interest is reduced to nil, additional losses are provided for, and a liability is recognised, only to the extent that the investor has incurred legal or constructive obligations or made payments on behalf of the associate. If the associate subsequently reports profits, the Group resumes recognising its share of those profits only after its share of the profits equals the share of losses not recognised. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group s interest in the associates; unrealised losses are also eliminated unless the transaction provides evidence on impairment of the asset transferred. Where necessary, in applying the equity method, adjustments are made to the financial statements of associates to ensure consistency of accounting policies with those of the Group. Dilution gains and losses in associates are recognised in the profit or loss. (iv) Changes in ownership interests When the Group ceases to have control, joint control or significant influence, any retained interest in the entity is re-measured to its fair value with the change in carrying amount recognised in the profit or loss. This fair value is its fair value on initial recognition as a financial asset in accordance with FRS 139. Any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. 56 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

59 Notes to the Financial Statements (continued) 31 December 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (a) Economic entities in the Group (continued) (iv) Changes in ownership interests (continued) Changes in accounting policy The Group has changed its accounting policy prospectively for transactions occurring on or after 1 January with non-controlling interests and transactions involving the loss of control, joint control or significant influence when it adopted the revised FRS 127 Consolidated and Separate Financial Statements. The revisions to FRS 127 contained consequential amendments to FRS 128 Investments in Associates. Previously when the Group ceased to have control, joint control or significant influence over an entity, the carrying amount of the investment at the date control, joint control or significant influence ceased became its cost on initial measurement as a financial asset in accordance with FRS 139. (b) Revenue recognition Revenue for the Group comprises the fair value of the consideration received or receivable for the sale of goods and rendering of services in the ordinary course of the Group s activities. Revenue is shown net of goods and services tax and discounts, and after eliminating sales within the Group. The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that the future economic benefits will flow to the entity and specific criteria have been met as described below. The amount of the revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. (i) Sale of goods Revenue from sale of goods is recognised when the Group has delivered the products to the customer with customers acceptance of the products and collectability of the related receivables is reasonably assured. (ii) Contract manufacturing fees Contract manufacturing fees is recognised upon services rendered and when significant risks and rewards have been transferred to the customer. (iii) Interest income Interest income is recognised on a time proportion basis, taking into account the principal outstanding and the effective rate over the period to maturity, when it is determined that such income will accrue to the Group. Annual Report 57

60 Notes to the Financial Statements (continued) 31 December 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (b) Revenue recognition (continued) (iv) Dividend income Dividend income is recognised when the Group s right to receive payment is established. (v) Rental income Rental income is recognised when the right to receive payment is established and on an accrual basis. (c) Foreign currencies (i) Functional and presentation currency Items included in the financial statements of each of the Group s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency ). The financial statements are presented in Ringgit Malaysia, which is the Company s functional and presentation currency. (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit or loss. For translation differences arising from financial assets at fair value through profit or loss and available-for-sale financial assets, refer to accounting policy Note 3(t) on financial assets. (iii) Group companies The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: - assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position; - income and expenses for each statement of comprehensive income or separate income statement presented are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and - all resulting exchange differences are recognised as a separate component of other comprehensive income. 58 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

61 Notes to the Financial Statements (continued) 31 December 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (c) Foreign currencies (continued) Annual Report (iii) Group companies (continued) On consolidation, exchange differences arising from the translation of the net investment in foreign operations are in other comprehensive income. When a foreign operation is partially disposed of or sold, a proportionate share of such exchange is reclassified to the profit or loss as part of the gain or loss on disposal. (d) Current and deferred income tax The tax expense for the financial year comprises current and deferred tax. Tax is recognised in the profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case the tax is also recognised in other comprehensive income or directly in equity, respectively. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting year in the countries where the Group s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. This liability is measured using the single best estimate of the most likely outcome. Deferred tax is recognised, using the liability method, on temporary differences arising between the amounts attributed to assets and liabilities for tax purposes and their carrying amounts in the financial statements. However, deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable the profit or loss. Deferred tax is determined using tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses or unused tax credits can be utilised. Deferred tax is recognised on temporary differences arising on investments in subsidiaries, associates and joint ventures except where the timing of the reversal of the temporary difference can be controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred and income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. 59

62 Notes to the Financial Statements (continued) 31 December 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (e) Property, plant and equipment Property, plant and equipment are stated at historical cost/valuation less accumulated depreciation and impairment losses. The cost of an item of property, plant and equipment initially recognised includes its purchase price and any cost that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Subsequent costs are included in the asset s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are recognised as expense in the profit or loss during the financial year in which they are incurred. The Directors have applied the transitional provisions of International Accounting Standard No. 16 (Revised) Property, Plant and Equipment as adopted by the Malaysia Accounting Standard Board which allow the land and building to be stated at their valuation less accumulated depreciation and do not require the asset to be revalued on a periodic basis. Accordingly, these valuations have not been updated. Freehold land is not depreciated as it has an infinite life. Leasehold land classified as finance lease (refer to accounting policy Note 3(g) on finance leases) is amortised in equal instalments over the period of the respective leases that range from years. Other property, plant and equipment are depreciated on the straight-line method to allocate the cost, to their residual values over their estimated useful lives summarised as follows: Buildings and improvements Machinery and equipment Furniture, fixtures and fittings, and office equipment Vehicles Useful lives years 4 15 years 5 10 years 5 years Depreciation on assets under construction commences when the assets are ready for their intended use. Residual values and useful lives of assets are reviewed and adjusted if appropriate, at each reporting date. The Group carries out an assessment on residual values and useful lives of assets on an annual basis and there was no adjustment arising from the assessment performed in the financial year. Gain or loss arising from the disposal of an asset is determined as the difference between the estimated net disposal proceeds and the carrying amount of the asset, and is recognised in the profit or loss. At each reporting date, the Group assesses whether there is any indication of impairment. If such indications exist, an analysis is performed to assess whether the carrying amount of the asset is fully recoverable. A write down is made if the carrying amount exceeds the recoverable amount. Refer accounting policy Note 3(j) on impairment of non-financial assets. 60 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

63 Notes to the Financial Statements (continued) 31 December 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (f) Investment properties Investment properties, comprising principally land and office buildings, are held for long term rental yields or for capital appreciation or both, and are not occupied by the Group. Investment property is measured initially at its cost, including related transaction costs and borrowing costs if the investment property meets the definition of qualifying asset. After initial recognition, investment property is stated at cost less any accumulated depreciation and impairment losses. Investment property is depreciated on the straight line basis to allocate the cost to their residual values over their estimated useful lives of 10 to 50 years. Freehold land is not depreciated. Buildings are depreciated on the straight-line basis to write off the cost of the buildings to their residual values over their estimated useful lives at annual depreciation rates that range from 2.00% to 10.00%. Subsequent expenditure is capitalised to the asset s carrying amount only when it is probable that future economic benefits associated with the expenditure will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed when incurred. When part of an investment property is replaced, the carrying amount of the replaced part is derecognised. If an item of owner-occupied property becomes an investment property because its use has changed, the carrying amount of the property does not change. Investment property is derecognised either when it has been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Gains and losses on disposals are determined by comparing net disposal proceeds with the carrying amount and are included in the profit or loss. (g) Leases A lease is an agreement whereby the lessor conveys to the lessee in return for a payment or series of payments, the right to use an asset for an agreed period of time. Accounting by lessee (i) Finance leases Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments. Annual Report 61

64 Notes to the Financial Statements (continued) 31 December 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (g) Leases (continued) Accounting by lessee (continued) (i) Finance leases (continued) Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate of interest on the remaining balance of the liability. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset and the lease term. Initial direct costs incurred by the Group in negotiating and arranging finance leases are added to the carrying amount of the leased assets and recognised as an expense in the profit or loss over the lease term on the same basis as the lease expense. (ii) Operating leases Leases of assets where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the profit or loss on the straight line basis over the lease period. Initial direct costs incurred by the Group in negotiating and arranging operating leases are recognised in the profit or loss when incurred. (h) Investments in subsidiaries and associates In the Company s separate financial statements, investments in subsidiaries and associates are carried at cost less accumulated impairment losses. On disposal of investments in subsidiaries and associates, the difference between disposal proceeds and the carrying amounts of the investments are recognised in the profit or loss. (i) Intangible asset Intangible asset represents the rights acquired to manufacture products and is shown at cost. The rights acquired have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight line method to allocate the cost of rights over their estimated useful lives of 15 years. At each reporting date, the Group assesses whether there is any indication of impairment. If such indications exist, an analysis is performed to assess whether the carrying amount of the asset is fully recoverable. A write down is made if the carrying amount exceeds the recoverable amount. Refer accounting policy Note 3(j) on impairment of non-financial assets. 62 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

65 Notes to the Financial Statements (continued) 31 December 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (j) Impairment of non-financial assets Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to sell and valuein-use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date. The impairment loss is charged to the profit or loss. An impairment loss is reversed only to the extent of previously recognised impairment losses for the same asset. The reversal is recognised in the profit or loss. (k) Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average cost method. The cost of raw materials and other inventories comprises the original cost of purchase plus cost of bringing the inventories to their present location. The cost of finished goods and work-in-progress includes the cost of raw materials, direct labour and related manufacturing overheads. It excludes borrowing costs. Net realisable value represents the estimated selling price in the ordinary course of business, less selling and distribution costs and all other estimated costs to completion. (l) Non-current assets classified as assets held-for-sale Non-current assets are classified as assets held-for-sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell. (m) Receivables Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost. Trade and other receivables are classified as loans and receivables. Refer to accounting policy Note 3(t) on financial assets for further details. Annual Report 63

66 Notes to the Financial Statements (continued) 31 December 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (n) Cash and cash equivalents The Group and the Company adopt the indirect method in the preparation of the statements of cash flows. For the purpose of the statements of cash flows, cash and cash equivalents comprise cash on hand, deposits held at call with banks, other short term, highly liquid investments with original maturities of three months or less. (o) Share capital (i) Classification Ordinary shares are classified as equity. Distribution to holders of a financial instrument classified as an equity instrument is charged directly to equity. (ii) Dividends to shareholders of the Company Distributions to holders of an equity instrument are debited directly to equity, net of any related income tax benefit and the corresponding liability is recognised in the financial year in which the dividends are approved. A dividend declared after the reporting date, but before the financial statements are authorised for issue, is not recognised as a liability at the reporting date. (iii) Purchase of own shares Where the Company or its subsidiaries purchases the Company s equity share capital (treasury shares), the consideration paid, including any directly attributable incremental external costs, net of tax, is included in equity attributable to the controlling equity holders as treasury shares until they are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction costs and the related tax effects, is included in equity attributable to the controlling equity holders. (p) Employee benefits (i) Short term employee benefits The Group recognises a liability and an expense for bonuses, based on a formula that takes into consideration the profit attributable to the Company s shareholders after certain adjustments. The Group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation. Wages, salaries, paid annual leave and sick leave, bonuses, and non-monetary benefits are accrued in the financial year in which the associated services are rendered by employees of the Group. 64 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

67 Notes to the Financial Statements (continued) 31 December 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (p) Employee benefits (continued) (ii) Post-employment benefits Defined benefit plan Post-employment benefits relate to retirement benefits given to employees and are a noncontributory unfunded retirement benefits scheme for employees who are eligible under a collective bargaining agreement. The defined benefit liability recognised in the statement of financial position is the present value of the defined benefit obligation at the end of the reporting date, less the fair value of plan assets, together with adjustments for actuarial gains/losses and unrecognised past service cost. The Group determines the present value of the defined benefit obligation and the fair value of any plan assets with sufficient regularity such that the amounts recognised in the financial statements do not differ materially from the amounts that would be determined at the end of the reporting date. The defined benefit obligation, calculated using the projected unit credit method, is determined by independent actuaries, by discounting the estimated future cash outflows using market yields at the end of the reporting date on government bonds/high quality corporate bonds which have currency and terms to maturity approximating the terms of the related liability. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are not recognised unless the cumulative unrecognised gain or loss at the end of the previous reporting date exceeds the greater of 10 per cent of the scheme assets or liabilities ( the corridor approach ). In these circumstances, the excess is recognised in the profit or loss over the employees expected average remaining working lives. Past service costs are recognised immediately in the profit or loss, unless the changes to the plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past service costs are amortised on a straight line basis over the vesting period. Defined contribution plans A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity (a fund) and will have no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees benefits relating to employee service in the current and prior periods. The defined contribution plan of the Group relates to the contribution to the Employee Provident Fund, the national defined contribution plan. The Group s contributions to defined contribution plans are charged to the profit or loss in the financial year to which they relate. Once the contributions have been paid, the Group has no further payment obligations. Annual Report 65

68 Notes to the Financial Statements (continued) 31 December 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (p) Employee benefits (continued) (ii) Post-employment benefits (continued) Termination benefits Termination benefits are payable whenever an employee s employment is terminated before the normal retirement date or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either terminate the employment of current employees according to a detailed formal plan without possibility of withdrawal or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after end of the reporting date are discounted to present value. (q) Financial instruments (i) Description A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise. A financial asset is any asset that is cash, a contractual right to receive cash or another financial asset from another enterprise, a contractual right to exchange financial instruments with another enterprise under conditions that are potentially favourable, or an equity instrument of another enterprise. A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another enterprise, or to exchange financial instruments with another enterprise under conditions that are potentially unfavourable. (ii) Financial instruments recognised on the statement of financial position The particular recognition method adopted for financial instruments recognised on the statement of financial position is disclosed in the individual policy statement associated with each item. (iii) Fair value estimation for disclosure purposes The fair value of financial liabilities with maturity of more than one year is estimated by discounting the future contractual cash flows at the current market interest rate available to the Company for similar financial instruments. The fair values of financial assets (less any estimated credit adjustments) and financial liabilities with a maturity of less than one year are assumed to approximate their fair values. 66 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

69 Notes to the Financial Statements (continued) 31 December 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (r) Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors that makes strategic decisions. (s) Contingent liabilities and contingent assets The Group does not recognise contingent assets and liabilities (to delete if not applicable: other than those arising from business combinations), but discloses its existence in the financial statements. A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in the extremely rare case where there is a liability that cannot be recognised because it cannot be measured reliably. However, contingent liabilities do not include financial guarantee contracts. A contingent asset is a possible asset that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group. The Group does not recognise contingent assets but discloses its existence where inflows of economic benefits are probable, but not virtually certain. (t) Financial assets (i) Classification The Group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, loans and receivables, and available-for-sale financial assets. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification at initial recognition. Financial assets at fair value through profit or loss ( FVTPL ) Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if it is acquired or incurred principally for the purpose of selling or repurchasing it in the near term. Annual Report 67

70 Notes to the Financial Statements (continued) 31 December 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (t) Financial assets (continued) (i) Classification (continued) Financial assets at fair value through profit or loss ( FVTPL ) (continued) Financial assets at fair value through profit or loss are designated at initial recognition when one of the designation criteria is met: Designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise Its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy The item is a hybrid contract that contains one or more embedded derivatives Assets in this category are classified as current assets. Loans and receivables ( LAR ) Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the financial year. These are classified as non-current assets. The Group s loans and receivables comprise trade and other receivables and cash and bank balances in the statements of financial position (Notes 23 and 28). Available-for-sale financial assets ( AFS ) Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months from the reporting date. (ii) Recognition and initial measurement Regular purchases and sales of financial assets are recognised on the trade-date, the date on which the Group commits to purchase or sell the asset. Financial assets are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the profit or loss. (iii) Subsequent measurement gains and losses Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method. 68 Yeo Changes in the fair values of financial assets at fair value through profit or loss, including the effects of currency translation, interest and dividend income are recognised in the profit or loss in the financial year in which the changes arise. Hiap Seng (Malaysia) Berhad (3405-X)

71 Notes to the Financial Statements (continued) 31 December 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (t) Financial assets (continued) (iii) Subsequent measurement gains and losses (continued) Changes in the fair value of available-for-sale financial assets are recognised in other comprehensive income, except for impairment losses (refer to accounting policy Note 3(t)(iv) on subsequent measurement) and foreign exchange gains and losses on monetary assets. The exchange differences on monetary assets are recognised in the profit or loss, whereas exchange differences on non-monetary assets are recognised in other comprehensive income as part of fair value change. Interest and dividend income on available-for-sale financial assets and financial assets at fair value through profit or loss are recognised separately in the profit or loss. Dividend income on available-for-sale equity instruments are recognised in the profit or loss when the Group s right to receive payments is established. (iv) Subsequent measurement - Impairment of financial assets Assets carried at amortised cost The Group assesses at the reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a loss event ) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The criteria that the Group uses to determine that there is an objective evidence of impairment loss include: Significant financial difficulty of the issuer or obligor; A breach of contract, such as a default or delinquency in interest or principal payments; The Group, for economic or legal reasons relating to the borrower s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider; It becomes probable that the borrower will enter bankruptcy or other financial reorganisation; Disappearance of an active market for that financial asset because of financial difficulties; or Observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including: (i) adverse changes in the payment status of borrowers in the portfolio; and (ii) national or local economic conditions that correlate with defaults on the assets in the portfolio. Annual Report 69

72 Notes to the Financial Statements (continued) 31 December 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (t) Financial assets (continued) (iv) Subsequent measurement - Impairment of financial assets (continued) Assets carried at amortised cost (continued) The amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset s original effective interest rate. The asset s carrying amount of the asset is reduced and the amount of the loss is recognised in the profit or loss. If loans and receivables has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument s fair value using an observable market price. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor s credit rating), the reversal of the previously recognised impairment loss is recognised in the profit or loss. When an asset is uncollectible, it is written off against the related allowance account. Such assets are written off after all the necessary procedures have been completed and the amount of the loss has been determined. Assets classified as available-for-sale The Group assesses at the end of the reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity securities classified as available-for-sale, in addition to the criteria for assets carried at amortised cost above, a significant or prolonged decline in the fair value of the security below its cost is also considered as an indicator that the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss that had been recognised directly in equity is removed from equity and recognised in the profit or loss. The amount of cumulative loss that is reclassified to the profit or loss is the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the profit or loss. Impairment losses recognised in the profit or loss on equity instruments classified as available-for-sale are not reversed through the profit or loss. (v) De-recognition Financial assets are de-recognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. When available-for-sale financial assets are sold, the accumulated fair value adjustments recognised in other comprehensive income are reclassified to the profit or loss. 70 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

73 Notes to the Financial Statements (continued) 31 December 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (u) Financial liabilities Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability. Financial liabilities, within the scope of FRS 139, are recognised in the statement of financial position when, and only when, the Group become a party to the contractual provisions of the financial instrument. Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities. The Group does not have any financial liabilities that are classified as fair value through profit or loss. The Group s other financial liabilities include trade and other payables. Trade and other payables are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method. For other financial liabilities, gains and losses are recognised in the profit or loss when the liabilities are derecognised, and through the amortisation process. A financial liability is derecognised when the obligation under the liability is extinguished. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the profit or loss. (v) Offsetting financial instruments Financial assets and liabilities are offset and the net amount presented in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. (w) Trade payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). Otherwise, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Refer to accounting policy Note 3(u) on financial liabilities. (x) Derivative financial instruments Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in fair value of financial instruments are recognised in the profit or loss. Annual Report 71

74 Notes to the Financial Statements (continued) 31 December 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (y) Financial guarantee contracts Financial guarantee contracts are contracts that require the Group or the Company to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due, in accordance with the terms of a debt instrument. Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability is initially measured at fair value and subsequently at the higher of the amount determined in accordance with FRS 137 Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognised less cumulative amortisation, where appropriate. The fair value of financial guarantees is determined as the present value of the difference in net cash flows between the contractual payments under the debt instrument and the payments that would be required without the guarantee, or the estimated amount that would be payable to a third party for assuming the obligations. Where financial guarantees in relation to loans or payables of subsidiaries are provided by the Company for no compensation, the fair values are accounted for as contributions and recognised as part of the cost of investment in subsidiaries. (z) Provisions Provisions are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and a reliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed (for example, under an insurance contract), the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as finance cost expense. 72 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

75 Notes to the Financial Statements (continued) 31 December 4 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The operations of the Group are subject to a variety of financial risks. The Group has formulated risk management policies whose principal objective is to minimise the Group s exposure to risk and/or costs associated with financing, investing and operating activities of the Group. Various risk management policies are made and approved by the Board for application in day-to-day operations for controlling and managing risks associated with financial instruments. (i) Foreign currency exchange risk The Group has a natural hedge to the extent that payments for foreign currency payables are matched against receivables, or whenever possible, by intercompany arrangements and settlements. The Group enters into currency forwards in the normal course of business to manage its exposure against foreign currency fluctuations on transactions denominated in foreign currencies. In general, the Group s policy is to enter into currency forwards for anticipated purchases in foreign currencies. Refer to Note 25 to the financial statements for further details. The Group does not apply hedge accounting. The Group s exposure to foreign currencies in respect of its financial assets and financial liabilities for functional currency in RM are as follows: USD SGD Others Total At 31 December Financial assets Cash and cash equivalents 6 2,419-2,425 Trade and other receivables 750 4,918 1,216 6,884 Related company receivables ,337 1,260 9,353 Less: Financial liabilities Trade and other payables 1,590 2, ,318 Related company payables - 20,551 2,133 22,684 1,590 23,134 2,278 27,002 Net financial liabilities (834) (15,797) (1,018) (17,649) Net currency exposure (834) (15,797) (1,018) (17,649) Annual Report 73

76 Notes to the Financial Statements (continued) 31 December 4 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) (i) Foreign currency exchange risk (continued) The Group s exposure to foreign currencies in respect of its financial assets and financial liabilities for functional currency in RM are as follows: (continued) USD SGD Others Total At 31 December Financial assets Cash and cash equivalents 11 9,536-9,547 Trade and other receivables 439-1,691 2,130 Related company receivables - 9,243 1,917 11, ,779 3,608 22,837 Less: Financial liabilities Trade and other payables 2,166 3, ,247 Amounts due to holding company - 1,535-1,535 2,166 5, ,782 Net financial (liabilities)/assets (1,716) 13,458 3,313 15,055 Less: Currency forwards - (3,903) - (3,903) Net currency exposure (1,716) 9,555 3,313 11,152 The Indonesian subsidiary ( subsidiary ) has a functional currency of Indonesia Rupiah ( IDR ) and exchange differences arising from the translation to RM is recognised in other comprehensive income as foreign exchange reserve. A 1% increases/ (decreases) of IDR will result in an increase/ (decrease) of RM108,000 (: RM110,000) in the Group s foreign exchange reserve account. The subsidiary is not exposed to the foreign exchange risk as transactions in the subsidiary are mainly denominated in IDR, except for bank balances amounting to USD48 (: USD51) and this amount is not material to the Group s financial statements. 74 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

77 Notes to the Financial Statements (continued) 31 December 4 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) (i) Foreign currency exchange risk (continued) The Company s exposure to foreign currencies in respect of its financial assets and financial liabilities for functional currency in RM, are as follows: USD SGD Others Total At 31 December Financial assets Cash and cash equivalents 6 2,419-2,425 Trade and other receivables , , ,124 Less: Financial liabilities Trade and other payables 1,481 2, ,937 Related company payables - 18,375 2,089 20,464 1,481 20,720 2,200 24,401 Net financial liabilities (695) (18,276) (1,306) (20,277) Net currency exposure (695) (18,276) (1,306) (20,277) At 31 December Financial assets Cash and cash equivalents 10 7,986-7,996 Trade and other receivables ,461 1,878 Related company receivables - 8,619 1,917 10, ,637 3,378 20,410 Less: Financial liabilities Trade and other payables 1,107 3, ,152 1,107 3, ,152 Net financial (liabilities)/assets (712) 12,851 3,119 15,258 Less: Currency forwards - (3,903) - (3,903) Net currency exposure (712) 8,948 3,119 11,355 Annual Report 75

78 Notes to the Financial Statements (continued) 31 December 4 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) (i) Foreign currency exchange risk (continued) The following table demonstrates the sensitivity of the Group s and the Company s profit after tax to 1% ( : 1%) strengthening of USD and SGD, respectively against the RM, with all other variables, in particular interest rates, being held constant. Increase/(decrease) Group USD against RM (6) (13) SGD against RM (118) 72 Company USD against RM (5) (5) SGD against RM (137) 67 A 1% weakening of the above currencies against the RM would have the equal but opposite effect to the amount shown above, on the basis that all other variables remain constant. (ii) Cash flow interest rate risk Interest rate risk arises mainly from the Group s short-term deposits. The Group s short-term deposits are placed with the financial institutions at prevailing interest rates and are not significant to the financial statements. (iii) Price risk The Group is exposed to equity securities price risk as those investments held by the Group which are classified on the consolidated statement of financial position as available-for-sale financial assets and financial assets at fair value through profit or loss. The Group s investments in equity of other entities are publicly traded in the following equity indices: Singapore Exchange Limited ( SGX ), Hong Kong Exchange and Clearing Limited ( HKEX ) and Nasdaq Stock Market ( NASDAQ ). The Group s financial assets at fair value through profit or loss comprise the unit trust investments that are publicly traded and the respective unit trust fund prices are available on a daily basis. 76 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

79 Notes to the Financial Statements (continued) 31 December 4 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) (iii) Price risk (continued) The table below summarises the impact of increases/decreases of the indices on the Group s equity or the profit or loss. The analysis is based on the assumption that the indexes had increased/ decreased by 1% with all other variables held constant and all the Group s equity instruments moved according to the historical correlation with the index: (a) Available-for-sale financial assets: Impact on fair value reserve Index SGX - 36 HKEX NASDAQ (b) Financial assets at fair value through profit or loss: (iv) Credit risk Impact on profit after tax Respective funds unit price The Group adopts the policy of dealing only with customers of appropriate credit history, and obtaining sufficient security where appropriate to mitigate credit risk. For other financial assets, the Group adopts the policy of dealing with financial institutions and other counterparties with high credit ratings. At the reporting date, there is no significant concentration of credit risk except for: (a) The advance payments to trade suppliers amounting to RM24.9 million (: RM11.0 million) at the Group and the Company levels; and (b) Insurance recoverable amounting to RM17.8 million (: RM nil) at the Group level. Concentration of credit risk on trade receivables is low as the credit exposure to an individual customer is limited to the credit limit approved by the credit controller and certain receivables are secured by collateral from customers. Customers payment profile and credit exposure are continuously monitored by the credit controller and reported to the management and Board of Directors. Annual Report 77

80 Notes to the Financial Statements (continued) 31 December 4 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) (iv) Credit risk (continued) Exposure to credit risk At the reporting date, the Group s and the Company s maximum exposure to credit risk is represented by: (a) The carrying amount of that class of financial instruments presented on the statements of financial position. The Group s major classes of financial assets are bank deposits, trade and other receivables and related party balances. (b) A nominal amount of RM106,000 (: RM106,000) relating to a corporate guarantee is extended by the Company to a subsidiary on a credit facility by a bank. The Company does not anticipate any outflow of economic benefits arising from the guarantee. Details of the financial assets are as follows: Group Company Not past due 88,871 58,694 53,170 38,307 Past due but not impaired 37,792 45,210 77, ,157 Impaired 1,760 1, Financial assets that are neither past due nor impaired 128, , , ,464 Bank deposits that are neither past due nor impaired are mainly deposits with banks which have high credit ratings as determined by international credit rating agencies. Trade and other receivables, and amounts due from subsidiaries and fellow subsidiaries that are neither past due nor impaired are substantially companies with good collection track records with the Group and the Company. None of the Group s and the Company s receivables that are neither past due nor impaired had been negotiated during the financial year, except for an amount due from a subsidiary in the Company which was not expected for repayment within the next twelve months from the reporting date (Note 26). Accordingly, this amount is reclassified to non-current asset during the financial year. No impairment is required as the subsidiary has the ability to repay the amount outstanding to the Company. Financial assets that are past due but not impaired There are no other financial assets in the Group and the Company that are past due but not impaired except for certain trade receivables and amounts due from subsidiaries of the Group and the Company as set out below. The Group and the Company have not impaired these amounts as these amounts are expected to be recovered within 12 months from the reporting date. 78 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

81 Notes to the Financial Statements (continued) 31 December 4 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) (iv) Credit risk (continued) Financial assets that are past due but not impaired (continued) Group Company Trade receivables 37,792 45, Amounts due from subsidiaries , ,632 Financial assets that are impaired 37,792 45,210 77, ,157 The carrying amount of trade receivables individually determined to be impaired and the movements in the related allowance for impairment are as follows: Gross amount Group Allowance for impairment Gross amount Company Allowance for impairment At 31 December Trade receivables 1,760 1, At 31 December Trade receivables 1,988 1, Details of the allowance for impairment of trade receivables are as follow: Group Company At 1 January 1,988 1, Allowance made 197 2, Overprovision in prior years (429) (652) - - Write off against provisions - (1,138) - (235) Currency translation differences 4 (41) - - At 31 December (Note 23) 1,760 1, Annual Report 79

82 Notes to the Financial Statements (continued) 31 December 4 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) (iv) Credit risk (continued) Financial assets that are impaired (continued) The impaired trade receivables are mainly in respect of customers who are facing legal action for recovery of debts and/or experiencing cash flow constraints in their operations. Trade receivables that are past due but not impaired are principally less than 90 days past due. No impairment has been made on these amounts as the Group is closely monitoring these receivables and these customers have no prior history of bad or doubtful debts. The Company had impaired the receivables owing from an associate amounting to RM0.8 million (Note 17) in prior years as the associate did not have the ability to repay the amount outstanding and the entity has remained dormant during the financial year. (v) Liquidity risk The Group practises prudent liquidity risk management to minimise the mismatch of financial assets and liabilities. The Group s cash flows are reviewed regularly to ensure that the Group is able to meet its working capital requirements and commitments when they fall due. The Group s total undrawn banking facilities is RM30 million (: RM30 million) at the reporting date. Included in the banking facilities is an amount denominated in US Dollar amounting to RM16 million (: RM10 million). All the financial liabilities of the Group and the Company at the end of the reporting date based on undiscounted contractual payments are as set out below: Group Due within one year Financial liabilities Trade and other payables 92,191 80,790 Amount due to penultimate holding company 2,139 1,535 Amount due to immediate holding company 18,412 - Amounts due to fellow subsidiaries 2, ,875 82,325 Company Financial liabilities Trade and other payables 44,323 37,264 Amount due to penultimate holding company 2,139 - Amounts due to subsidiaries 28, ,926 Amount due to immediate holding company 16,236 - Amounts due to fellow subsidiaries 2,089-93, , Yeo Hiap Seng (Malaysia) Berhad (3405-X)

83 Notes to the Financial Statements (continued) 31 December 4 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) (vi) Fair value The carrying amounts of the following financial assets and liabilities approximate their fair values due to the relatively short term maturity of these financial instruments: deposits, cash and bank balances, receivables and payables (including non-trade amounts due (to)/from group companies). Fair value estimation The disclosure of fair value measurements by level of the following fair value measurement hierarchy: Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1); Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2); Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3). The following table presents the Group s and the Company s assets and liabilities that are measured at fair value at 31 December : Group Level 1 Level 2 Level 3 Total Assets Available-for-sale financial assets 20, ,295 Financial assets at fair value through profit or loss 32, ,064 Company Assets Available-for-sale financial assets 17, ,192 Financial assets at fair value through profit or loss 32, ,064 Annual Report 81

84 Notes to the Financial Statements (continued) 31 December 4 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) (vi) Fair value (continued) The following table presents the Group s and the Company s assets and liabilities that are measured at fair value at 31 December : Group Level 1 Level 2 Level 3 Total Assets Available-for-sale financial assets 19, ,429 Financial assets at fair value through profit or loss 48, ,521 Derivative financial assets Company Assets Available-for-sale financial assets 12, ,425 Financial assets at fair value through profit or loss 48, ,521 Derivative financial assets The fair value of financial instruments traded in active markets is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in Level 1. The Group does not hold any financial assets or liabilities where the respective fair values are assessed at Level 2 and Level 3 except as set out below: the fair value on an available-for-sale financial asset which the bid price was adjusted as there is a disappearance of an active market for the equity shares and the current market price is not reflective of their fair value at the reporting date. Accordingly, the amount was written down to nil in the profit or loss during the financial year (Note 24). the derivative financial assets arising from the Group s foreign exchange forward contracts which were in a favourable position at 31 December and were included in Level 2. (vii) Capital risk The Group s objectives when managing capital are to safeguard the Group s ability to continue as a going concern and to maintain an optimal capital structure so as to maximise shareholder value. In order to maintain or achieve an optimal capital structure, the Group may adjust the amount of dividend payment, return capital to shareholders and issue new shares or buy back issued shares. 82 Yeo The Group considers that the capital of the Group relates only to the share capital and this remained unchanged from the prior year. Hiap Seng (Malaysia) Berhad (3405-X)

85 Notes to the Financial Statements (continued) 31 December 5 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates and judgements are continually evaluated by the Directors and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. To enhance the information content of the estimates, certain key variables that are anticipated to have material impact to the Group s results and financial position are tested for sensitivity to changes in the underlying parameters. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below. (i) Deferred tax assets Deferred tax asset is recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised, except as disclosed in Note 20 to the financial statements. This involves judgement regarding the future financial performance of the particular entity in which the deferred tax asset has been recognised. (ii) Impairment of assets Intangible assets with finite useful lives and property, plant and equipment are amortised or depreciated over their estimated useful lives. The estimated useful lives are based on estimates of the period during which the assets will generate revenue. Intangible assets with finite useful lives and property, plant and equipment are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may no longer be recoverable. In compliance with FRS 136 Impairment of Assets, impairment losses are measured by comparing the carrying amounts to the discounted cash flows expected to be generated by the respective assets. Where it is not possible to estimate the impairment loss for an individual asset, the loss is assessed on the basis of the discounted cash flows for the cash-generating unit to which the asset belongs. Value-in-use ( VIU ) calculations for the purpose of impairment assessment, where assumptions and estimates have been used, are based on future events which Directors expect to take place and actions which management expects to take. VIU is the net present value of the projected future cash flows derived from the asset discounted at an appropriate discount rate. The projected future cash flows are prepared based on management s knowledge of the current operating environment and expectations for the future covering a 5 years period. The projected future cash flows are prepared by management and approved by the Directors. While information may be available to support the assumptions on which the VIU calculations have been prepared, such information is generally future oriented and therefore uncertain and subject to changes. Accordingly, actual results may differ from the budgets. Management has made critical estimates and judgements for the following impairment assessments: Annual Report (a) Intangible asset (Note 18) (b) Property, plant and equipment (Note 14) (c) Investment in a subsidiary (Note 16) 83

86 Notes to the Financial Statements (continued) 31 December 6 SEGMENT INFORMATION The Group is principally involved in one business segment which is the production, marketing and distribution of beverage and food products. Management has determined the operating segments based on the reports received by the Board of Directors that are used to make strategic decisions. The reportable operating segments, which derive their revenues primarily from geographical areas, are as follows: Malaysia Singapore and others Indonesia Total Revenue 409,362 95,339 28, ,381 Profit from operations 28,064 2, ,758 Segment assets 345,057 20,294 19, ,686 Segment liabilities (90,245) - (30,107) (120,352) Capital expenditure 34, ,128 Revenue 383,813 79,109 8, ,234 Profit/(loss) from operations 22, (4,140) 19,571 Segment assets 310,769 19,925 11, ,311 Segment liabilities (82,292) - (5,346) (87,638) Capital expenditure 2, ,115 A reconciliation of profit from operations to profit before tax is provided as follows: Profit from operations 30,758 19,571 Impairment loss of: - property, plant and equipment (1,820) (11,000) - available-for-sale financial assets (2,704) (97) Income from other investments and finance income 2,711 1,509 Severance payment and other non-operating expenses (577) (2,323) Gain from liquidation of a subsidiary 4,119 - Profit before tax 32,487 7,660 In determining the geographical segments of the Group, sales are based on the region in which the respective customers are located. Segment assets (which exclude deferred tax assets and tax recoverable) and capital expenditure are determined based on where the assets are located. Segment liabilities (excluding deferred tax liabilities and tax payable) are determined based on where the liabilities arise. Information about major customers One major customer contributes revenue amounting to RM88 million (: RM75 million), representing 17% (: 16%) of total revenue of the Group. 84 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

87 Notes to the Financial Statements (continued) 31 December 7 REVENUE Group Company Sale of goods 532, , , ,826 Contract manufacturing fees 1, DIRECTORS REMUNERATION 533, , , ,826 Executive Directors: Group Company - Salaries and bonuses 1, Contributions to Employees Provident Fund Other allowances Non-executive Directors: 1,565 1, Fees Other emoluments ,901 1,538 1,259 1,271 The estimated monetary value of benefits provided to an Executive Director during the financial year is nil (: RM10,000). The Directors of the Company who have held office during the financial year were as follows: Koh Boon Hwee Tjong Yik Min Dato Mohamed Nizam bin Abdul Razak Dato N. Sadasivan a/l N.N. Pillay Razman Hafidz bin Abu Zarim Chandra Das s/o Rajagopal Sitaram (Appointed on 26 April ) Ow Tin Nyap Yap Ng Seng Pearl Foong Lye Fong Annual Report 85

88 Notes to the Financial Statements (continued) 31 December 8 DIRECTORS REMUNERATION (CONTINUED) The number of Directors of the Company whose total remuneration during the financial year fall within the following bands are as follows: Number of Directors Executive Directors: RM250,001 RM300,000-1 RM400,001 RM450,000-2 RM600,001 RM650, RM900,001 RM950, Non-Executive Directors: Nil 3 3 RM1 RM50, RM50,001 RM100, RM100,001 RM150, PROFIT BEFORE TAX The following amounts have been charged/(credited) in arriving at profit before tax: Auditors remuneration: - PricewaterhouseCoopers Malaysia Group Company - statutory audit others Member firm of PricewaterhouseCoopers International Limited - statutory audit Directors remuneration (Note 8) 1,901 1,538 1,259 1,271 Depreciation of: - property, plant and equipment 8,766 10,018 7,071 7,721 - investment properties Amortisation of: - prepaid lease rental intangible asset 1,906 1,905 1,906 1,905 Impairment loss of: - property, plant and equipment 1,820 11,000 1,820 10,259 - available-for-sale financial assets 2, Property, plant and equipment write off Yeo Hiap Seng (Malaysia) Berhad (3405-X)

89 Notes to the Financial Statements (continued) 31 December 9 PROFIT BEFORE TAX (CONTINUED) The following amounts have been charged/(credited) in arriving at profit before tax (continued): Inventories: Annual Report Group Company - write off 888 3, ,770 - allowance for obsolescence 1,480 4,534 1,397 1,534 - write back of obsolescence (1,880) (1,082) (1,104) - Arising from the incident in the warehouse (Note 23, 34): - write off of inventories 16, write off of racking system (Note 14) 1, other related incidental costs compensation from insurance companies (17,800) Receivables: - allowance for doubtful debts (trade) 197 2, write back of allowance for doubtful debts - trade (429) (652) non-trade - (116) - (116) Bad debts (recovered)/write offs (67) Rental of machinery, equipment and motor vehicles 3,341 3,635 1,376 1,714 Rental of premises 3,877 2,313 1,131 1,351 Quit rent and assessment Insurance Severance payments Loss on foreign exchange: - realised 143 1, ,285 - unrealised Gain on foreign exchange: - realised (222) (279) (84) - - unrealised (363) (397) (2,645) (2,008) Gain on disposal of: - property, plant and equipment (1,246) (152) (1,179) (151) Management fee receivable from subsidiaries (Note 31) - - (6,307) (6,722) Rental income of premises from: - external parties (660) (690) (528) (537) - a subsidiary (Note 31) - - (435) (435) Staff costs include salaries, bonuses, contributions to Employees Provident Fund, retirement benefits, Directors salaries and bonuses (Note 8), and all other payroll costs. The staff costs exclude severance payments amounting to RM577,000 (: RM884,000) and RM nil (: RM65,000) for the Group and the Company respectively. 87

90 Notes to the Financial Statements (continued) 31 December 9 PROFIT BEFORE TAX (CONTINUED) Details of the staff costs are as follows: 88 Yeo Group Company Wages, salaries and bonuses 53,806 50,634 28,779 25,457 Provision for retirement benefits (Note 30) Contributions to Employees Provident Fund 5,027 5,034 2,391 2,421 Other employee benefits 2,362 2,120 1,622 1,455 61,907 57,938 33,158 29, INCOME FROM OTHER INVESTMENTS AND FINANCE INCOME Group Company Interest income: - short-term deposits amount due from a subsidiary Dividends from available-for-sale financial assets Fair value gain on: - derivative financial instruments financial assets at fair value through profit or loss 2, , ,711 1,509 2,703 1, TAX EXPENSE/(CREDIT) Group Company Current tax: - Malaysian tax 7,272 2,775 7,145 3,191 - Foreign tax (318) 1, Deferred tax (Note 20) 545 (188) 285 (3,602) Tax expense/(credit) 7,499 3,842 7,430 (411) Current tax Current financial year 7,272 3,294 7,145 3,191 (Over)/under accrual in prior years (318) ,954 4,030 7,145 3,191 Deferred tax Origination and reversal of temporary differences 575 (105) 249 (3,496) (Over)/under accrual in prior years (30) (83) 36 (106) 545 (188) 285 (3,602) 7,499 3,842 7,430 (411) Hiap Seng (Malaysia) Berhad (3405-X)

91 Notes to the Financial Statements (continued) 31 December 11 TAX EXPENSE/(CREDIT) (CONTINUED) Tax expense/(credit) for the financial year can be reconciled to the profit before tax as follows: Group Company Profit before tax 32,487 7,660 32, % Group % % Company Malaysian tax rate Tax effects of: % - expenses not deductible for tax purposes income not subject to tax (4) (3) (4) (6) - capital allowances not recognised tax losses not recognised utilisation of unused tax losses (1) (1) utilisation of reinvestment allowances - (15) - (182) (Over)/under accrual in prior years (1) 9 - (16) Average effective tax rate (66) 12 EARNINGS PER SHARE Basic earnings per share of the Group is calculated by dividing the profit attributable to ordinary equity holders of the Company for the financial year by the weighted average number of ordinary shares in issue during the financial year, excluding ordinary shares purchased by the Company and held as treasury shares (Note 32(a)). Group Basic Profit attributable to ordinary equity holders of the Company 24,983 3,817 Weighted average number of ordinary shares in issue ( 000) 152, ,705 Basic earnings per share (sen) Annual Report 89

92 Notes to the Financial Statements (continued) 31 December 13 DIVIDENDS Dividends paid or declared in respect of ordinary shares and recognised as distributions to owners for the financial year are as follows: Group and Company Gross per share Sen Amount of dividend net ot tax Gross per share Sen Amount of dividend net of tax In respect of financial year 31 December : - Interim dividend paid , In respect of financial year 31 December : - Interim dividend paid ,726 - Final dividend paid , In respect of financial year 31 December 2009: - Final dividend paid , , ,598 At the forthcoming Annual General Meeting, a final gross dividend in respect of the financial year ended 31 December of 9 sen per share, less income tax of 25%, amounting to RM10,307,000 will be proposed for shareholders approval. The financial statements do not reflect this final dividend which will be accounted for in the financial year ending 31 December 2012 when approved by the shareholders. 90 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

93 Notes to the Financial Statements (continued) 31 December 14 PROPERTY, PLANT AND EQUIPMENT Group Net book value Freehold land Leasehold land Buildings and improvements Machinery and equipment Furniture, fixtures and fittings, and office equipment Vehicles Construction -in-progress Total At 1 January 1,433 8,228 10,895 32,979 2, ,171 58,310 Additions ,206 6, ,270 34,128 Disposals (53) (1) (1) - (55) Write offs (5) (1,044) - (6) (1,055) Reclassification to investment properties (Note 15) - (6,300) (1,994) (8,294) Reclassification of construction-inprogress, now completed (199) - Depreciation charge - (179) (1,678) (5,690) (1,129) (90) - (8,766) Impairment charge - - (1,154) (666) (1,820) Currency translation difference At 31 December 1,433 1,749 8,351 32,852 6, ,242 72,450 At 31 December Cost - 2,683 60, ,418 29,961 3,111 21, ,513 Valuation 1,433-6, ,275 Accumulated depreciation - (934) (53,901) (123,001) (23,315) (2,934) - (204,085) Accumulated impairment losses - - (4,688) (9,565) (14,253) Net book value 1,433 1,749 8,351 32,852 6, ,242 72,450 Annual Report 91

94 Notes to the Financial Statements (continued) 31 December 14 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Group Net book value Freehold land Leasehold land Buildings and improvements Machinery and equipment Furniture, fixtures and fittings, and office equipment Vehicles Construction -in-progress Total At 1 January 1,433 8,406 15,773 46,553 2, ,080 77,385 Additions ,115 Disposals (27) - (11) - (38) Write offs - - (3) (69) (5) - (51) (128) Depreciation charge - (178) (1,887) (6,583) (1,230) (140) - (10,018) Impairment charge - - (3,266) (7,734) (11,000) Currency translation difference (6) - - (6) At 31 December 1,433 8,228 10,895 32,979 2, ,171 58,310 At 31 December Cost - 8,585 59, ,920 25,178 3,113 2, ,776 Valuation 1,433-6, ,275 Accumulated depreciation - (357) (52,222) (120,998) (22,776) (2,911) - (199,264) Accumulated impairment losses - - (3,534) (8,943) (12,477) Net book value 1,433 8,228 10,895 32,979 2, ,171 58, Yeo Hiap Seng (Malaysia) Berhad (3405-X)

95 Notes to the Financial Statements (continued) 31 December 14 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Company Net book value Freehold land Leasehold land Buildings and improvements Machinery and equipment Furniture, fixtures and fittings, and office equipment Vehicles Construction -in-progress Total At 1 January 1,433 7,732 8,264 29,899 1, ,826 Additions ,063 3, ,264 28,184 Disposals (53) (53) Write offs (2) - - (2) Reclassification to investment properties (Note 15) - (6,300) (6,300) Reclassification of constructionin-progress, now completed (81) - Transfer to a subsidiary (3) - - (3) Depreciation charge - (170) (1,380) (4,871) (615) (35) - (7,071) Impairment charge - - (1,154) (666) (1,820) At 31 December 1,433 1,262 5,873 27,453 4, ,242 61,761 At 31 December Cost - 1,324 44, ,040 20,778 1,110 21, ,698 Valuation 1,433-6, ,275 Accumulated depreciation - (62) (41,042) (102,162) (16,310) (1,080) - (160,656) Accumulated impairment losses - - (4,131) (9,425) (13,556) Net book value 1,433 1,262 5,873 27,453 4, ,242 61,761 Annual Report 93

96 Notes to the Financial Statements (continued) 31 December 14 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Company Net book value Freehold land Leasehold land Buildings and improvements Machinery and equipment Furniture, fixtures and fittings, and office equipment Vehicles Construction -in-progress Total At 1 January 1,433 7,902 12,178 41,982 1, ,630 Additions ,324 Disposals (29) (17) (11) - (57) Write offs (37) (3) - (51) (91) Depreciation charge - (170) (1,483) (5,107) (874) (87) - (7,721) Impairment charge - - (2,709) (7,550) (10,259) At 31 December 1,433 7,732 8,264 29,899 1, ,826 At 31 December Cost - 8,072 44, ,243 17,250 1, ,789 Valuation 1,433-6, ,275 Accumulated depreciation - (340) (39,662) (99,585) (15,870) (1,045) - (156,502) Accumulated impairment losses - - (2,977) (8,759) (11,736) Net book value 1,433 7,732 8,264 29,899 1, , Yeo Hiap Seng (Malaysia) Berhad (3405-X)

97 Notes to the Financial Statements (continued) 31 December 14 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Valuation of property, plant and equipment The Directors have applied the transitional provisions of International Accounting Standard No. 16 (Revised) Property, Plant and Equipment as adopted by the Malaysia Accounting Standard Board which allows the land and building to be stated at their valuation less depreciation and does not require the asset to be revalued on a periodic basis. Accordingly, these valuations have not been updated. Land and building were last revalued on 3 December 1980 by Wong Choon Kee, member of Institute of Surveyors, Malaysia, a director with C.H. Williams, Talhar & Wong Sdn. Bhd.. Net book value of the revalued freehold land, had the asset been carried at cost is as follows: Annual Report Group and Company Carrying value Freehold land The revalued building which is attached to the freehold land has been fully depreciated in prior years. Included in property, plant and equipment of the Group and the Company are machinery and equipment which have been fully depreciated but are still in use, with cost amounting to approximately RM108,782,000 and RM79,058,000 (: RM101,355,000 and RM72,462,000) respectively. Impairment assessment of property, plant and equipment In the prior year, the Group and the Company had carried out a plant rationalisation exercise for the closure of certain plants which would take place within the next two years. The recoverable amount of the property, plant and equipment is determined by the value-in-use ( VIU ) calculation. The VIU calculation derived by the Directors had incorporated the following key assumptions in the prior year: Gross margin was consistent based on historical trend, Sales volumes for production plant was anticipated to be running at capacity based on historical trend and expected forecast sales before the closure of the respective plants, Distribution and logistics costs are in line with the growth/decline based on production units, Pre-tax weighted average cost of capital of 9.72%. Based on the above key assumptions, the recoverable amount for these plants at the Group and the Company level were lower than the carrying value by RM11 million, resulting in an impairment charge recorded in the prior year. The sensitivity of the recoverable amount based on changes to the discount rate and gross margin in the prior year was as follows: If the discount rate increases by 1%, the plant and machinery will be impaired by further RM0.1 million. If the gross margin decreases by 1%, the plant and machinery will be impaired by further RM1.0 million. 95

98 Notes to the Financial Statements (continued) 31 December 14 PROPERTY, PLANT AND EQUIPMENT (CONTINUED) During the financial year, the Group has recognised the following: (i) The Group decided to discontinue using one of its equipment within the next 12 months as part of its plant rationalisation exercise and therefore recorded an impairment loss of RM0.7 million based on the recoverable amount of the equipment at the reporting date, and (ii) The Group demolished a building in order to expand the factory space during the financial year and recorded an impairment loss of RM1.1 million, and (iii) The Group wrote off the racking system amounting to RM1.0 million (Note 9) as a result of the incident in the Bukit Jelutong warehouse as disclosed in Note 34 to the financial statements. 15 INVESTMENT PROPERTIES Group Company Net book value At beginning of the financial year 10,366 10,799 1,876 2,174 Add: Reclassification from property, plant and equipment (Note 14) 8,294-6,300 - Less: Reclassification to non-current assets held-for-sale (Note 21) (753) - (753) - Less: Depreciation charge (377) (433) (243) (298) At end of the financial year 17,530 10,366 7,180 1,876 Cost 27,051 20,603 13,296 8,838 Less: Accumulated depreciation (9,521) (10,237) (6,116) (6,962) Net book value 17,530 10,366 7,180 1,876 The fair value of the properties was estimated at RM43,560,000 (: RM33,365,000) for the Group and RM13,030,000 (: RM4,950,000) for the Company based on valuations by an independent professionally qualified valuer. Valuations were based on current prices in an active market for all properties. Direct operating expenses arising from investment properties of the Group and the Company are RM226,000 (: RM107,000) and RM190,000 (: RM71,000) respectively. 96 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

99 Notes to the Financial Statements (continued) 31 December 16 INVESTMENTS IN SUBSIDIARIES Company Unquoted shares, at cost 24,070 95,641 Less: Accumulated impairment losses (2,604) (2,604) 21,466 93,037 The subsidiaries, which are all incorporated in Malaysia (except where indicated), are as follows: Subsidiaries Principal activities % Effective equity interest Yeo Hiap Seng Trading Sdn. Bhd. Distribution of food and beverages Bestcan Food Technological Industry Sendirian Berhad (1) (2) PT YHS Indonesia (Incorporated in Indonesia) % Production of instant noodles Distribution of food and beverages YHS Manufacturing Berhad Procurement company Yeo Hiap Seng (Perak) Investment holding Sendirian Berhad Yeo Hiap Seng (Sarawak) Dormant Sdn. Bhd. (4) Esin Canning Industry Dormant Sendirian Berhad Yeo Hiap Seng (Middle East) Dormant Co. Ltd. E.C. (1) (Incorporated in Bahrain) Wahtai Realty Sdn. Bhd. Dormant YHS Beverage (International) Dormant (1) (2) (3) Pte. Ltd. (Incorporated in Singapore) (1) (5) PT Botani Beverage Indonesia (Incorporated in Indonesia) Dormant (1) Not audited by PricewaterhouseCoopers, Malaysia. (2) The financial statements of these companies are audited by a member firm of PricewaterhouseCoopers International Limited which is a separate and independent legal entity from PricewaterhouseCoopers, Malaysia. (3) Liquidated during the financial year. (4) Closure of operations in November. (5) The Company was incorporated on 16 June and remained dormant during the financial year. Annual Report 97

100 Notes to the Financial Statements (continued) 31 December 16 INVESTMENTS IN SUBSIDIARIES (CONTINUED) Liquidation of a subsidiary The Group has dissolved its wholly-owned dormant subsidiary company, YHS Beverage (International) Pte. Ltd. ( YHSBI ), on 30 August pursuant to the Singapore s Companies Act, Cap. 50. Accordingly, the Group and the Company have recognised a gain on liquidation amounting to RM4.1 million and RM0.5 million, respectively during the financial year. Impairment assessment in a subsidiary The Company has carried out an impairment assessment on its wholly-owned subsidiary, PT YHS Indonesia at the reporting date. The recoverable amount is determined via the value-in-use ( VIU ) calculation. The VIU calculation derived by the Directors, has incorporated the following key assumptions which have been consistently applied, unless otherwise indicated: Gross margin is consistent based on historical trend, Distribution and logistics costs are in line with the growth/decline based on sales, Pre-tax cost of equity of 9.14% (: 9.72%) per annum, and Perpetuity annuity cash flows with no growth from year 2017 (: no growth from year 2016) onwards. Based on the above key assumptions, the recoverable amount is higher than the carrying value of the investment in subsidiary, thus no impairment loss (: nil) has been recorded during the financial year. The sensitivity of the recoverable amount based on changes to the discount rate and gross margin is as follows: If the discount rate increases by 1%, the investment in subsidiary will not be impaired (: RM0.1 million). If the gross margin decreases by 1%, the investment in subsidiary will not be impaired (: RM1.9 million). 98 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

101 Notes to the Financial Statements (continued) 31 December 17 INVESTMENT IN AN ASSOCIATE/AMOUNT DUE FROM AN ASSOCIATE The Group has an unquoted investment in an associate, W.Y.Company Limited, a company incorporated in Thailand amounting to RM1,224,000 (: RM1,224,000), which represents a 49% (: 49%) equity interest in the associate. The associate has ceased operation in the prior years and remained dormant during the financial year. The cost of investment and amount due from the associate were impaired in full in the prior years. 18 INTANGIBLE ASSET Group Company Net book value At 1 January 12,704 12,704 Amortisation charge (1,905) (1,905) At 1 January 10,799 10,799 Amortisation charge (1,906) (1,906) At 31 December 8,893 8,893 At 31 December Cost 26,167 23,638 Accumulated amortisation (16,937) (13,561) Accumulated impairment losses (337) (1,184) Net book value 8,893 8,893 At 31 December Cost 26,167 23,638 Accumulated amortisation (15,031) (11,655) Accumulated impairment losses (337) (1,184) Net book value 10,799 10,799 Intangible asset represents the rights acquired to manufacture products for YHS (Singapore) Pte. Ltd.. The remaining amortisation period of the intangible asset at the end of financial year is 4.67 years (: 5.67 years). The recoverable amount of the intangible asset is based on the value-in-use of a cash-generating unit which produces finished goods for sale to the immediate holding company, YHS (Singapore) Pte. Ltd.. There is no impairment indicator in relation to this intangible asset in the current financial year. Annual Report 99

102 Notes to the Financial Statements (continued) 31 December 18 INTANGIBLE ASSET (CONTINUED) Impairment assessment of intangible asset In the prior year, the cash-generating unit was tested for impairment due to certain impairment indicators relating to the performance of the cash-generating unit. The key assumptions involved in the value-in-use calculation in the prior year were as follows: A period of 6 years based on the remaining useful life of the intangible asset, Revenue and operating profits were based on the average of past 5 years financial results, A growth rate of 4% per annum based on projected forecast for the financial year to the immediate holding company, and Pre-tax discount rate applied was 9% based on weighted average cost of capital of companies in similar industry. Based on the above key assumptions, the recoverable amount for the intangible asset was higher than the carrying value of the intangible asset as at 31 December. Thus, no impairment was recognised in the prior year. The sensitivity of the recoverable amount based on changes to the discount rate and growth rate in the prior year was as follows: - If the discount rate increases by 1%, the intangible asset will be impaired by RM0.6 million. - If the growth rate decreases by 1%, the intangible asset will be impaired by RM0.3 million. 19 PREPAID LEASE RENTAL Group Company At beginning of the financial year 5,126 5,320 1,823 1,870 Less: Reclassification to non-current assets held-for-sale (Note 21) (232) - (232) - Less: Amortisation (191) (194) (44) (47) At end of the financial year 4,703 5,126 1,547 1, Yeo Hiap Seng (Malaysia) Berhad (3405-X)

103 Notes to the Financial Statements (continued) 31 December 20 DEFERRED TAX Deferred tax assets and liabilities are offset when there is a legally enforceable right to set-off current tax assets against current tax liabilities and when the deferred taxes relate to the same tax authority. The following amounts, determined after appropriate offsetting, are shown in the statements of financial position: Group Company Deferred tax (liabilities)/assets Deferred tax assets 1,498 1, Deferred tax liabilities (1,998) (1,416) (1,158) (873) (500) 45 (1,158) (873) At beginning of the financial year 45 (138) (873) (4,475) (Charged)/credited to the profit or loss (Note 11): - property, plant and equipment (559) 2, ,409 - provision for retirement benefits 56 (132) 25 (59) - inventories (223) tax losses (145) (3,203) others (227) 908 (226) 904 (545) 188 (285) 3,602 Currency translation - (5) - - At end of the financial year (500) 45 (1,158) (873) Subject to income tax Deferred tax assets (before offsetting) - property, plant and equipment provision for retirement benefits 1,334 1, inventories 1,707 1, tax losses others ,062 3, ,345 Offsetting deferred tax liabilities (1,564) (1,682) (983) (1,345) Deferred tax assets (after offsetting) 1,498 1, Deferred tax liabilities (before offsetting) - property, plant and equipment (3,499) (3,098) (2,079) (2,218) - others (63) - (62) - (3,562) (3,098) (2,141) (2,218) Offsetting against deferred tax assets 1,564 1, ,345 Deferred tax liabilities (after offsetting) (1,998) (1,416) (1,158) (873) Annual Report 101

104 Notes to the Financial Statements (continued) 31 December 20 DEFERRED TAX (CONTINUED) The amounts of deductible temporary differences and unused tax losses (all of which have no expiry date) for which no deferred tax assets have been recognised in the statements of financial position on the basis that it is not probable that future taxable profits will be available against which the deductible temporary differences or unused tax losses can be utilised, are as follows: Group Property, plant and equipment 2,375 2,375 Tax losses and provisions 13,555 13, NON-CURRENT ASSETS HELD-FOR-SALE Group and Company At beginning of the financial year - - Add: Reclassification from investment properties (Note 15) Add: Reclassification from prepaid lease rental (Note 19) At end of the financial year During the financial year, the Group has entered into sale and purchase agreements to dispose of the land and buildings with external parties and the disposals of these assets are anticipated to complete within twelve months from the reporting date. 22 INVENTORIES Group Company Finished goods and trading merchandise 74,196 56,740 17,186 20,030 Raw materials 8,153 5,918 7,388 5,512 Packing materials 14,241 8,299 13,973 7,899 Work-in-progress 2,146 1,667 1,945 1,492 Spare parts and merchandise ,360 73,316 41,102 35, Yeo Hiap Seng (Malaysia) Berhad (3405-X)

105 Notes to the Financial Statements (continued) 31 December 23 TRADE AND OTHER RECEIVABLES Group Company Trade receivables 55,134 67, ,598 Less: Allowance for doubtful debts (1,760) (1,988) ,374 65, ,598 Other receivables 31,943 9,551 8,502 2,819 Deposits 1,392 1, Prepayments 26,643 12,523 26,302 12, ,352 88,766 36,028 16,805 Included in the Group s other receivables is an insurance recoverable of RM17.8 million, comprising RM17.3 million on the compensation for damaged finished goods and the racking system and RM0.5 million on the compensation for other related incidental costs, due to the collapse of the racking system at Bukit Jelutong warehouse. Further details are disclosed in Note 34 to the financial statements. Included in the prepayments of the Group and the Company are advance payments made to trade suppliers amounting to RM24.9 million (: RM11.0 million). The creation and write-back of the allowance for doubtful debts have been included in other expenses in the statements of comprehensive income (Note 9). Amounts charged to the allowance account are generally written off, when there is no expectation of recovering additional cash. 24 AVAILABLE-FOR-SALE FINANCIAL ASSETS Group Company At beginning of the financial year 19,429 15,340 12,425 8,656 Net gain transfer to equity 3,570 4,186 4,767 3,866 Impairment losses (2,704) (97) - (97) At end of the financial year 20,295 19,429 17,192 12,425 Annual Report 103

106 Notes to the Financial Statements (continued) 31 December 24 AVAILABLE-FOR-SALE FINANCIAL ASSETS (CONTINUED) Available-for-sale financial assets include the following: Listed securities: Group Company Equity securities HK 3,103 3, Equity securities NASDAQ 17,192 12,425 17,192 12,425 Equity securities SGX - 3, DERIVATIVES FINANCIAL INSTRUMENTS 20,295 19,429 17,192 12,425 Group Company Forward foreign exchange contracts The notional principal amounts of the outstanding forward foreign exchange contracts as at 31 December are nil (: SGD1,300,000). 26 AMOUNTS DUE FROM/(TO) HOLDING COMPANIES, A SUBSIDIARY, SUBSIDIARIES AND FELLOW SUBSIDIARIES Amounts due from/(to) holding companies, subsidiaries and fellow subsidiaries mainly comprise trade transactions. Amounts due from/(to) holding companies, subsidiaries and fellow subsidiaries are interest free except for an amount due from a subsidiary of RM0.2 million as at 31 December which was interest bearing at 7% per annum. The credit terms for trade transactions range from 90 to 180 days (: 90 to 180 days). There are no fixed terms of repayment for non-trade transactions. Amounts due to immediate and penultimate holding companies are denominated in Singapore Dollar. Included in the amount due to immediate holding company and amounts due to fellow subsidiaries are advance payments amounting to RM26.5 million (: Nil) and RM0.6 million (: Nil) respectively. These advances are entitled to prompt payment discount of 3% (: Nil) per annum. Amount due from a subsidiary which is classified as non-current asset as at 31 December is unsecured and interest-free except for an advance of RM0.2 million which bears an interest rate of 7% per annum. This amount is not expected to be repaid within the next twelve months from the reporting date. 104 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

107 Notes to the Financial Statements (continued) 31 December 27 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS Group Company At beginning of the financial year 48,521-48,521 - Additions 75,000 48,000 75,000 48,000 Disposals (94,000) - (94,000) - Changes in fair value through profit or loss 2, , At end of the financial year 32,064 48,521 32,064 48,521 Financial assets at fair value through profit or loss are presented within investing activities in the statements of cash flows. The fair value of the respective financial asset is based on the current bid prices in an active market. 28 CASH AND CASH EQUIVALENTS Group Company Bank and cash balances 15,010 16,501 8,876 12,627 Bank balances are deposits held at call with banks and earn interest of 1.25% to 1.55% (: 1.25% to 1.55%) per annum. 29 TRADE AND OTHER PAYABLES Group Company Trade payables 30,276 21,379 26,590 17,918 Other payables 9,675 12,030 1,633 5,221 Accrued expenses 52,240 47,381 16,100 14,125 92,191 80,790 44,323 37,264 Included in the accrued expenses of the Group are transportation, sales and marketing expenses amounting to RM37.2 million (: RM31.1 million). Annual Report 105

108 Notes to the Financial Statements (continued) 31 December 30 PROVISION FOR RETIREMENT BENEFITS The movements during the financial year in the amounts recognised in the statements of financial position in respect of the Group s and the Company s lump sum retirement benefit plan are as follows: Group Company At beginning of the financial year 5,313 6,146 3,151 3,387 Provision Write back of overprovision - (596) - (223) Less: Contributions paid to retired employees (552) (979) (265) (396) Currency translation differences 4 (4) - - At end of the financial year 5,477 5,313 3,252 3,151 The details of the provision for retirement benefits may be analysed as follows: Group Company Statements of financial position: Present value of unfunded obligations 5,477 5,313 3,252 3,151 Charged to the profit or loss: Current service cost Interest cost The details of the principal actuarial assumptions used in respect of the Group s and the Company s defined plan are as follows: Group and Company - discount rate 5.9% 5.9% - expected rate of salary increase 6.0% 6.0% The Group and the Company have a non-contributory unfunded retirement benefit scheme for those employees who are eligible under a collective bargaining agreement. The retirement benefit plans of the Group and the Company are not funded. There are no plan assets or actual returns on plan assets. The latest actuarial valuation of the plan was carried out at 31 December and the Directors are of the view that any changes in the principal actuarial assumptions applied in the valuation report at the reporting date are insignificant and therefore, the actuarial valuation will not differ materially from its carrying value. The present value of unfunded obligations for the Group for 2009, 2008 and 2007 are RM6,146,000, RM6,032,000 and RM5,690,000 respectively. The present value of unfunded obligations for the Company for 2009, 2008 and 2007 are RM3,387,000, RM3,482,000 and RM3,330,000 respectively. 106 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

109 Notes to the Financial Statements (continued) 31 December 31 SIGNIFICANT RELATED PARTY TRANSACTIONS The shareholders of the Company, by an ordinary resolution passed at the Annual General Meeting held on 26 April, approved the Company s recurrent related party transactions of a revenue or trading based on negotiated terms in the normal course of business as agreed between the respective parties. Key management personnel are those persons having authority and responsibility for planning, decision making and controlling activities of the Company activities directly or indirectly and thus considered related parties of the Company. The key management personnel of the Company include all the Directors and senior management of the Company. The financial statements of the Group and the Company reflect the following significant transactions with related parties during the financial year are as follows: Annual Report Group Company Significant related party transactions: (a) Management fee receivable from subsidiaries (non-trade): - Bestcan Food Technological Industry Sendirian Berhad Yeo Hiap Seng Trading Sdn. Bhd ,355 5,450 - PT YHS Indonesia Yeo Hiap Seng (Sarawak) Sdn. Bhd ,307 6,722 (b) Royalty, technical and management fee payable to penultimate holding company (non-trade) 7,592 6,161 7,592 6,161 (c) Information technology services fee payable to immediate holding company (non-trade) (d) Sales of goods to (trade): - Immediate holding company 88,484 75,150 85,563 73,470 - Subsidiaries: - Yeo Hiap Seng Trading Sdn. Bhd , ,591 - PT YHS Indonesia ,670 5,997 - Fellow subsidiaries: - YHS Hong Kong (2000) Pte. Ltd. 6,712 3,872 6,712 3,872 - YHS (Shanghai) Co. Ltd YHS Guangzhou Food & Beverage Ltd (e) Purchase of goods from immediate holding company (trade) 3, (f) Rental income of premises receivable from a subsidiary (non-trade): - Yeo Hiap Seng Trading Sdn. Bhd (g) Key management personnel compensation (non-trade): - Wages, salaries and bonuses 2,420 2,344 1,522 1,481 - Other employee benefits

110 Notes to the Financial Statements (continued) 31 December 31 SIGNIFICANT RELATED PARTY TRANSACTIONS (CONTINUED) Significant outstanding balances at the reporting date: (a) (b) Group Company Management fee receivable from subsidiaries (non-trade): - Bestcan Food Technological Industry Sendirian Berhad Yeo Hiap Seng Trading Sdn. Bhd ,355 5,450 - PT YHS Indonesia Yeo Hiap Seng (Sarawak) Sdn. Bhd ,307 6,722 Royalty, technical and management fee payable to penultimate holding company (non-trade) 1,625 1,209 1,625 1, SHARE CAPITAL Share capital No. of shares 000 Group and Company Amount No. of shares 000 Amount Authorised: Ordinary shares of RM1.00 each At beginning/the end of financial year 300, , , ,000 Issued and paid-up: Ordinary shares of RM1.00 each At beginning/end of financial year 153, , , ,548 Less: Treasury shares At beginning of the financial year 844 1, ,850 Shares repurchased during the financial year At end of the financial year 846 1, ,853 Total, net of treasury shares at end of financial year 152, , , , Yeo Hiap Seng (Malaysia) Berhad (3405-X)

111 Notes to the Financial Statements (continued) 31 December 32 SHARE CAPITAL (CONTINUED) (a) Treasury shares The shareholders of the Company, by an ordinary resolution passed at the Annual General Meeting held on 26 April, approved the Company s proposal to repurchase its own share capital. The Directors of the Company are committed to enhancing the value of the Company to its shareholders and believe that the proposed share buy-back can be applied in the best interests of the Company and its shareholders. During the financial year, the Company repurchased 2,000 (: 2,000) of its issued share capital from the open market on the Bursa Malaysia Securities Berhad for RM1.78 (: RM1.56) per share amounting to RM3,555 (: RM3,125). As at 31 December, none of the repurchased shares have been sold or cancelled. The purchased transactions were financed by internally generated funds. The shares purchased are being held as treasury shares as allowed under Section 67A of the Companies Act, As treasury shares, the rights attached as to voting, dividends and participation in other distributions are suspended. 33 RESERVES Group Company Retained earnings 67,556 56,316 29,779 18,368 Share premium 34,445 34,445 34,445 34,445 Capital reserve Foreign exchange reserves (221) 4, Fair value reserve 10,526 6,956 8,633 3,866 (a) Capital reserve 112, ,910 72,857 56,679 Capital reserve comprises an amount of Bahrain Dollar 60 (approximately RM606) in a whollyowned subsidiary, Yeo Hiap Seng (Middle East) Co. Ltd. E.C. ( YHSME ), which was transferred to the capital reserve account in The capital reserve arose pursuant to the provisions of the Bahrain Commercial Companies Law, 1975 (Amended), which requires an amount equivalent to 10% of YHSME s net profit before appropriation to be transferred to a non-distributable reserve account and as a minimum of 25% of the issued share capital to be set aside. (b) Foreign exchange reserves Exchange differences arising on translation of the Group s net investment in foreign operations are taken to the foreign exchange reserves. (c) Fair value reserve Fair value changes arising from the fluctuation of the available-for-sale financial assets prices in the stock market at the end of the reporting date are recorded in the fair value reserve. Annual Report 109

112 Notes to the Financial Statements (continued) 31 December 34 SIGNIFICANT EVENT DURING THE FINANCIAL YEAR AND SUBSEQUENT EVENT AFTER THE REPORTING DATE On 15 December, the racking system at the Group s main warehouse in Bukit Jelutong, Shah Alam collapsed and destroyed all the finished goods in the warehouse. As a result of the incident, the Group, in December, submitted insurance claims and received confirmation from the insurance companies in March 2012 to settle the claims at RM17.8 million in relation to the damaged finished goods and racking system, and other related incidental costs. Accordingly, the Group recorded an insurance recoverable as at 31 December. Further claims in relation to consequential losses and third party claims are being quantified but have not been submitted. Accordingly, the financial statements do not reflect these claims which will be accounted for in the financial year in which they are settled. 35 CONTINGENT LIABILITIES - UNSECURED (a) Litigation with F.Y. Sdn. Bhd. In the prior year, a legal action for an alleged breach of an agreement with regard to contract packing arrangement was brought by F.Y. Sdn. Bhd. ( the Plaintiff ), a company incorporated in Malaysia, against the Company. There was no specified sum in the original statement of claim filed which seeks, inter alia that the Company pays general damages. Details are as follows: The matter came up for trial before the High Court on 25 January and 26 January consecutively and the Plaintiff was then claiming for damages of approximately RM6,225,000 with interest and costs thereon. 110 Yeo The High Court had, on 10 March granted judgement against the Company in favour of the Plaintiff. However, the Court did not make any award on the quantum of damages as there was no evidence adduced by the Plaintiff to substantiate its claim for damages alleged to be suffered. Consequently, the Court ordered that damages be assessed before the High Court Registrar in a separate hearing. Based on the external legal advice that the Company has a strong case to appeal, the Company had, on 28 June, filed an appeal against the decision of the High Court. The case is now fixed for hearing at the Court of Appeal on 27 March On 6 December, the Registrar of High Court has granted the Plaintiff an extension of time up to 2 April 2012 to file the relevant documents in respect of assessment of damages. (b) Litigation with PT Kharisma Inti Persada In prior years, the Central Jakarta District Court has dismissed a suit filed by PT Kharisma Inti Persada ( the Plaintiff ) against the Company and its wholly-owned subsidiary, PT YHS Indonesia, claiming for IDR 219,900,000,000 (approximately RM77,000,000), for alleged breaches of an alleged distribution agreement and an alleged distributorship appointment. Details are as follows: The Plaintiff filed an appeal in the Jakarta High Court and the Company had, on 1 February, received a formal notification from the Central Jakarta District Court informing that the Jakarta High Court has decided in favour of the Company and PT YHS Indonesia in respect of the Plaintiff s appeal. On 23 March, the Company received a formal notification from the Central Jakarta District Court that the Plaintiff has filed an appeal against the Jakarta High Court s decision and the Company had, on 5 April, filed a counter memorandum to the Court. The case is still pending the decision by the Indonesia Supreme Court. Hiap Seng (Malaysia) Berhad (3405-X)

113 Notes to the Financial Statements (continued) 31 December 36 CAPITAL COMMITMENTS The Group and the Company have commitments in respect of the following at the end of the reporting date: Property, plant and equipment: Group Company - Approved and contracted for 47,797 7,980 47,447 1,400 - Approved but not contracted for 116,269 16, ,269 16, NON-CANCELLABLE OPERATING LEASE COMMITMENTS Group Company Rental of forklifts: Not later than 1 year 587 1, ,170 Later than 1 year and not later than 5 years ,188 1, , FINANCIAL INSTRUMENTS BY CATEGORY Group Loans and receivables Financial assets at fair value through profit or loss Availablefor-sale financial assets Derivative financial assets Total 31 December Assets per statements of financial position: Available-for-sale financial assets ,295-20,295 Trade and other receivables (excluding prepayments) 111, ,609 Financial assets at fair value through profit or loss - 32, ,064 Cash and cash equivalents 15, ,010 Amounts due from fellow subsidiaries ,663 32,064 20, ,022 Annual Report 111

114 Notes to the Financial Statements (continued) 31 December 38 FINANCIAL INSTRUMENTS BY CATEGORY (CONTINUED) Group Loans and receivables Financial assets at fair value through profit or loss Availablefor-sale financial assets Derivative financial assets Total 31 December Assets per statements of financial position: Available-for-sale financial assets ,429-19,429 Derivative financial assets Trade and other receivables (excluding prepayments) 76, ,243 Financial assets at fair value through profit or loss - 48, ,521 Cash and cash equivalents 16, ,501 Amount due from immediate holding company 9, ,243 Amounts due from fellow subsidiaries 1, , ,904 48,521 19, ,871 Group Liabilities per statements of financial position: Trade and other payables 92,191 80,790 Amount due to penultimate holding company 2,139 1,535 Amount due to immediate holding company 18,412 - Amounts due to fellow subsidiaries 2,133 - Other financial liabilities at amortised cost 114,875 82, Yeo Hiap Seng (Malaysia) Berhad (3405-X)

115 Notes to the Financial Statements (continued) 31 December 38 FINANCIAL INSTRUMENTS BY CATEGORY (CONTINUED) Company Loans and receivables Financial assets at fair value through profit or loss Availablefor-sale financial assets Derivative financial assets Total 31 December Assets per statements of financial position: Available-for-sale financial assets ,192-17,192 Trade and other receivables (excluding prepayments) 34, ,626 Financial assets at fair value through profit or loss - 32, ,064 Cash and cash equivalents 8, ,876 Amounts due from subsidiaries 74, ,627 Amount due from a subsidiary (non-current) 12, ,430 Company 130,559 32,064 17, , December Assets per statements of financial position: Available-for-sale financial assets ,425-12,425 Derivative financial assets Trade and other receivables (excluding prepayments) 4, ,568 Financial assets at fair value through profit or loss - 48, ,521 Cash and cash equivalents 12, ,627 Amounts due from subsidiaries 534, ,722 Amount due to immediate holding company 8, ,630 Amounts due to fellow subsidiaries 1, , ,464 48,521 12, ,427 Annual Report 113

116 Notes to the Financial Statements (continued) 31 December 38 FINANCIAL INSTRUMENTS BY CATEGORY (CONTINUED) Company Liabilities per statements of financial position: Trade and other payables 44,323 37,264 Amount due to penultimate holding company 2,139 - Amounts due to subsidiaries 28, ,926 Amount due to immediate holding company 16,236 - Amounts due to fellow subsidiaries 2,089 - Other financial liabilities at amortised cost 93, , RETAINED EARNINGS Under the single-tier tax system which came into effect from the year of assessment 2007, companies are not required to have tax credits under Section 108 of the Income Tax Act,1967 for dividend payment purposes. Dividends paid under this system are tax exempt in the hands of shareholders. Companies with Section 108 credits as at 31 December may continue to pay franked dividends until the Section 108 credits are exhausted or 31 December 2013, whichever is earlier unless they opt to disregard the Section 108 credits to pay single-tier dividends under the special transitional provisions of the Finance Act As at 31 December, subject to the agreement with the Inland Revenue Board, the Company has sufficient tax credit under Section 108 of the Income Tax Act, 1967 to frank the payment of dividend out of all its retained earnings. 114 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

117 Notes to the Financial Statements (continued) 31 December 40 SUPPLEMENTARY INFORMATION DISCLOSED PURSUANT TO BURSA MALAYSIA SECURITIES BERHAD LISTING REQUIREMENTS The following analysis of realised and unrealised retained profits/(accumulated losses) at the legal entity level is prepared in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants whilst the disclosure at the group level is based on the prescribed format by the Bursa Malaysia Securities Berhad. Group Company Total retained earnings of Yeo Hiap Seng (Malaysia) Berhad and its subsidiaries: - realised 66,032 52,211 27,315 20,919 - unrealised 3,358 (605) 2,464 (2,551) 69,390 51,606 29,779 18,368 Consolidation adjustments (1,834) 4, Total retained earnings per consolidated accounts 67,556 56,316 29,779 18,368 Annual Report 115

118 Analysis of Shareholdings As at 15 March 2012 No. of Shareholders : 4,442 Class of Shares : Ordinary share of RM1.00 each Voting Rights : 1 vote per ordinary share DISTRIBUTION OF SHAREHOLDINGS No. of Holders Holdings Total Holdings % , , , ,031 1,001-10,000 9,659, , ,000 14,160, ,001-7,635,067 35,223, ,635,068 and above 93,373, , ,701,369 # # Total holdings is based on the issued and paid-up share capital less 845,900 Treasury Shares as at 15 March SUBSTANTIAL SHAREHOLDER (AS PER REGISTER OF SUBSTANTIAL SHAREHOLDERS) No. Name No. of Shares Held % of Shareholdings 1. YHS (Singapore) Pte. Ltd. 93,373, Yeo Hiap Seng Limited 93,373,249* Far East Organisation Pte. Ltd. 93,373,249* * Deemed interest through YHS (Singapore) Pte. Ltd. STATEMENT OF DIRECTORS INTEREST None of the Directors of the Company has direct interest or deemed interest in the Company or its related corporation as at 15 March Yeo Hiap Seng (Malaysia) Berhad (3405-X)

119 Analysis of Shareholdings (continued) As at 15 March 2012 LIST OF 30 LARGEST SHAREHOLDERS No. Name 1. YHS (Singapore) Pte. Ltd. 93,373, Lembaga Tabung Haji 4,639, Citigroup Nominees (Asing) Sdn Bhd CBHK for Platinum Broking Company Limited - Client A/C 3,538, Citigroup Nominees (Asing) Sdn Bhd UBS AG for APS Asia Pacific Master Hedge Fund 2,497, Universal Trustee (Malaysia) Berhad CIMB Islamic Small Cap Fund 2,255, Amanahraya Trustees Berhad Amanah Saham Malaysia 1,885, Mayban Nominees (Tempatan) Sdn Bhd Mayban Trustees Berhad for CIMB-Principal Small Cap Fund (240218) 1,172, HSBC Nominees (Tempatan) Sdn Bhd HSBS (M) Trustees Bhd for MAAKL AL-Fauzan (5170) 1,053, Amanahraya Trustees Berhad Public Islamic Treasures Growth Fund 946, Shoptra Jaya (M) Sdn Bhd 804, Tan Jin Tuan 666, Public Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Ong Joo Theam (BWK/HLG) 661, HSBC Nominees (Tempatan) Sdn Bhd HSBC (M) Trustee Bhd for OSK-UOB Growth and Income Focus Trust (4892) 652, Amanahraya Trustees Berhad Public Islamic Opportunities Fund 649, AMSEC Nominees (Asing) Sdn Bhd AMFRASER Securities Pte. Ltd. for Lee Kim Chong (125703) 600, Citigroup Nominees (Asing) Sdn Bhd Exempt AN for OCBC Securities Private Limited (Client A/C-NR) 571, Affin Nominees (Asing) Sdn Bhd UOB Kay Hian Pte. Ltd. for Goi Seng Hui 505, Alliancegroup Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Ong Joo Theam ( ) 484, CIMSEC Nominees (Asing) Sdn Bhd Exempt AN for CIMB Securities (Singapore) Pte. Ltd. (Retail Clients) 478, HSBC Nominees (Tempatan) Sdn Bhd HSBC (M) Trustee Bhd for OSK-UOB Small Cap Opportunity Unit Trust (3548) 461, Amanahraya Trustees Berhad Public Islamic Select Treasures Fund 444, UOBM Nominees (Tempatan) Sdn Bhd UOB-OSK Asset Management Sdn Bhd for Uni Aggressive Fund 410, Ong Joo Theam 380, HSBC Nominees (Asing) Sdn Bhd BNY Brussels for VFM Emerging Markets Trust 346, Citigroup Nominees (Tempatan) Sdn Bhd Exempt AN for American International Assurance Berhad 342, Citigroup Nominees (Asing) Sdn Bhd CBNY for Dimensional Emerging Markets Value Fund 335, Zulkifli Bin Hussain 324, JF Apex Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Teo Siew Lai (Margin) 300, Public Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Lim Hock Fatt (E-SS2) 300, Citigroup Nominees (Asing) Sdn Bhd Exempt AN for Merrill Lynch Pierce Fenner & Smith Incorporated (Foreign) 282, ,360, Annual Report No. of Shares Held % of Shareholdings

120 Notice of Annual General Meeting NOTICE IS HEREBY GIVEN THAT the Thirty-Eighth Annual General Meeting of Yeo Hiap Seng (Malaysia) Berhad ( YHSM ) will be held at Victorian Ballroom, Level 1, Holiday Villa Subang, 9, Jalan SS12/1, Subang Jaya, Selangor Darul Ehsan on Wednesday, the 25th day of April, 2012 at 2.00 p.m. to transact the following businesses:- AGENDA As Ordinary Business 1. To receive the Audited Financial Statements for the financial year ended 31 December together with the Reports of the Directors and Auditors thereon. 2. To sanction the declaration of a Final Dividend of 9 sen per share less 25% Malaysian Income Tax in respect of the financial year ended 31 December. 3. To re-elect the following Directors who retire pursuant to Article 75 of the Company s Articles of Association: (i) Mr Koh Boon Hwee (ii) Ms Pearl Foong Lye Fong 4. To re-appoint the following Directors who retire pursuant to Section 129(6) of the Companies Act, 1965 and to hold office until the conclusion of the next Annual General Meeting: (i) Dato N. Sadasivan a/l N.N. Pillay (ii) Mr Chandra Das s/o Rajagopal Sitaram 5. To approve the payment of Directors Fees of RM128, for the financial year ended 31 December. 6. To re-appoint Messrs. PricewaterhouseCoopers as Auditors of the Company and to authorise the Directors to fix their remuneration. Resolution 1 Resolution 2 Resolution 3 Resolution 4 Resolution 5 Resolution 6 Resolution 7 Resolution 8 As Special Business To consider and, if thought fit, to pass the following Ordinary/Special Resolutions: 7. Ordinary Resolution Resolution 9 Authority to issue shares pursuant to Section 132D of the Companies Act, 1965 THAT pursuant to Section 132D of the Companies Act, 1965, the Directors be and are hereby authorised to issue shares in the Company at any time until the conclusion of the next Annual General Meeting and upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fit provided that the aggregate number of shares to be issued does not exceed ten per cent (10%) of the issued and paid-up ordinary share capital of the Company for the time being, subject always to the approvals of the relevant regulatory authorities. 118 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

121 Notice of Annual General Meeting (continued) 8. Ordinary Resolution Resolution 10 Proposed Share Buy-Back THAT subject to the Companies Act, 1965, provisions of the Company s Memorandum and Articles of Association and the Main Market Listing Requirements of Bursa Malaysia Securities Berhad and any other relevant authorities, and other relevant approvals, the Directors of the Company be and are hereby authorised to purchase its own shares through Bursa Malaysia Securities Berhad subject to the following: (a) (b) (c) The maximum number of ordinary shares of RM1.00 each in the Company ( YHSM Shares ) which may be purchased by the Company shall not exceed ten per cent (10%) of the issued and paid-up ordinary share capital of the Company at any point in time; The maximum fund to be allocated by the Company for the purpose of purchasing its shares shall not exceed the retained profits and share premium accounts of the Company. As at the latest financial year ended 31 December, the audited retained profits and share premium accounts of the Company stood at RM29,779,046 and RM34,445,915 respectively; The authority conferred by this resolution will be effective upon passing of this resolution and will continue in force until: (i) (ii) (iii) the conclusion of the next Annual General Meeting, at which time the said authority will lapse, unless by an ordinary resolution passed at that meeting, the authority is renewed, either unconditionally or subject to conditions; or the expiration of the period within which the next Annual General Meeting of the Company after that date is required to be held pursuant to Section 143(1) of the Companies Act, 1965 (but shall not extend to such extensions as may be allowed pursuant to Section 143(2) of the Companies Act, 1965); or revoked or varied by an ordinary resolution passed by the shareholders in a general meeting; whichever occurs first; (d) Upon completion of the purchase(s) of the shares by the Company, the shares shall be dealt with in the following manner: (i) (ii) (iii) cancel the YHSM Shares so purchased; and/or retain the YHSM Shares so purchased in treasury, to be distributed as dividend to the shareholders and/or to be resold on the market of the Bursa Malaysia Securities Berhad and/or to be subsequently cancelled; and/or retain part of the YHSM Shares so purchased as treasury shares and cancel the remainder. Annual Report 119

122 Notice of Annual General Meeting (continued) AND THAT the Directors of the Company be and are hereby authorised to take all such steps as are necessary and entering into all other agreements, arrangements and guarantees with any party or parties to implement, finalise and give full effect to the aforesaid purchase with full powers to assent to any conditions, modifications, revaluations, variations and/or amendments (if any) as may be imposed by the relevant authorities/parties from time to time to implement or to effect the purchase of its own shares. 9. Ordinary Resolution Resolution 11 Proposed Shareholders Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature THAT the Company and/or its subsidiaries be and is/are hereby authorised to enter into recurrent related party transactions from time to time with related parties who may be a Director, a major shareholder of the Company and/or its subsidiaries or a person connected with such a Director or a major shareholder, as specified in Section 1.3 of Part B of the Circular to Shareholders dated 3 April 2012 subject to the following: (a) (b) the transactions are of a revenue or trading in nature which are necessary for the day-to-day operations of the Company and/or its subsidiaries and are transacted on terms consistent or comparable with market or normal trade practices and/or based on normal commercial terms not more favourable to the related parties than those generally available to the public and/or will not to the detriment of the minority shareholders; and disclosure is made in the annual report of the aggregate value of transactions conducted pursuant to the shareholders mandate together with a breakdown of the aggregate value of the transactions during the financial year based on the type of transactions, names of the related parties and their relationship. THAT the Mandate given by the shareholders of the Company shall only continue to be in force until the conclusion of the next Annual General Meeting of the Company or the expiry of the period within which the next Annual General Meeting is required to be held pursuant to Section 143(1) of the Companies Act, 1965 (but shall not extend to such extension as may be allowed pursuant to Section 143(2) of the Companies Act, 1965); unless revoked or varied by ordinary resolution of the shareholders of the Company in general meeting. AND THAT the Directors of the Company be and is hereby authorised to complete and do such acts and things as they may consider expedient or necessary to give full effect to the shareholders mandate. 120 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

123 Notice of Annual General Meeting (continued) 10. Special Resolution Resolution 12 Proposed Amendments to the Articles of Association of the Company THAT the amendments to the Articles of Association of the Company in the manner detailed in Appendix I attached hereto be and are hereby approved. 11. To transact any other ordinary business of the Company for which due notice shall have been given. NOTICE OF DIVIDEND ENTITLEMENT AND PAYMENT NOTICE IS HEREBY ALSO GIVEN THAT a Final Dividend of 9 sen per share less 25% Malaysian Income Tax in respect of financial year ended 31 December, if approved by the shareholders at the forthcoming Annual General Meeting will be paid on 9 July The entitlement date for the dividend payment is 22 June A Depositor shall qualify for entitlement only in respect of:- a) Shares transferred into the Depositor s Securities Account before 4.00 p.m. on 22 June 2012 in respect of ordinary transfers; and b) Shares bought on the Bursa Malaysia Securities Berhad on a cum entitlement basis according to the Rules of Bursa Malaysia Securities Berhad. By Order of the Board, Sau Ean Nee Company Secretary Petaling Jaya 3 April 2012 Notes: 1. Only depositors whose names appear in the Record of Depositors as at 17 April 2012 be regarded as members and entitled to attend, speak and vote at the general meeting. 2. A member of the Company entitled to attend, speak and vote at the abovementioned meeting is entitled to appoint one proxy to attend, speak and vote in his stead. Such proxy need not be a member of the Company. 3. The instrument of appointing a proxy, in the case of an individual, shall be signed by the appointor or by his attorney duly authorised in writing, and in the case of a corporation, shall be either given under the hand of an officer or attorney of the corporation duly authorised. 4. The instrument appointing the proxy must be deposited at the registered office of the Company at No. 7, Jalan Tandang, Petaling Jaya, Selangor Darul Ehsan, Malaysia, not less than forty-eight (48) hours before the time set for holding the meeting or at any adjournment thereof. 5. Please refer to page 127 for further administrative detail for 38th Annual General Meeting. Annual Report 121

124 Notice of Annual General Meeting (continued) Explanatory Notes on Special Business Resolution 9 pertaining to Authority to Issue Shares Pursuant to Section 132D of the Companies Act, 1965 The proposed Ordinary Resolution 9 is a renewal of the General Mandate for the Directors to issue shares pursuant to Section 132D of the Companies Act, The proposed Ordinary Resolution 9, if passed, will authorise the Directors of the Company, from the date of the above Annual General Meeting, to issue shares up to ten per cent (10%) of the issued and paid-up capital of the Company for the time being for such purposes as the Directors consider would be in the best interest of the Company. This authority, unless revoked or varied by the Company in general meeting, will expire at the conclusion of the next Annual General Meeting of the Company. As at the date of this Notice, no new shares in the Company were issued pursuant to the authority granted to the Directors at the Thirty-Seventh Annual General Meeting held on 26 April and which will lapse at the conclusion of the Thirty-Eighth Annual General Meeting to be held on 25 April The authority will provide flexibility to the Company for any possible fund raising activities, including but not limited to further placing of shares, for purpose of funding future investment project(s), working capital and/ or acquisitions. Resolution 10 pertaining to the Proposed Share Buy-Back The proposed Ordinary Resolution 10, if passed, will empower the Directors of the Company to purchase the Company s shares up to ten per cent (10%) of the issued and paid-up share capital of the Company by utilising the funds allocated which shall not exceed the total retained earnings and share premium account of the Company. Further information on the Proposed Share Buy-Back is set out in the Circular to Shareholders dated 3 April 2012, which is despatched together with the Company s Annual Report. Resolution 11 pertaining to the Proposed Shareholders Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature The proposed Ordinary Resolution 11, if passed, will allow YHSM Group to enter into Recurrent Related Party Transactions pursuant to paragraph of the Main Market Listing Requirements of Burse Malaysia Securities Berhad. Further information on the Proposed Shareholders Mandate for Recurrent Related Party Transactions is set out in the Circular to Shareholders dated 3 April 2012, which is despatched together with the Company s Annual Report. Resolution 12 pertaining to the Proposed Amendments to the Articles of Association of the Company The proposed Amendments to the Articles of Association of the Company are made to comply with the provisions of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad. Further information on the Proposed Amendments to the Articles of Association of the Company is set out in the Circular to Shareholders dated 3 April 2012, which is despatched together with the Company s Annual Report. STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING No individual is seeking for election as Director of the Company at the forthcoming Thirty-Eighth Annual General Meeting. Further details of Directors who are seeking for re-election/re-appointment are set out in the Directors Profile on pages 4 to Yeo Hiap Seng (Malaysia) Berhad (3405-X)

125 Appendix I Proposed Amendments to the Articles of Association of the Company Details of the Proposed Amendments to the Articles of Association of the Company are as follows: i. Article 2 a) THAT the definition for Approved Market Place which appears under existing Article 2 which reads as follows: Approved Market Place A stock exchange which is specified to be an approved market place pursuant to an exemption order made under Section 62A of the Central Depositories Act. be and is hereby deleted in its entirety. b) THAT the following additional definition be and is hereby inserted under Article 2 after the definition of Deposited Security : Exempt Authorised Nominee An authorised nominee defined under Central Depositories Act which is exempted from compliance with the provisions of subsection 25A(1) of the Central Depositories Act. ii. Article 37A THAT the existing Article 37A which reads as follows: (1) Where: - (a) any securities of the Company is listed on an Approved Market Place; and (b) the Company is exempted from compliance with section 14 of the Securities Industry (Central Depositories) Act 1991 or section 29 of the Securities Industry (Central Depositories) (Amendment) Act 1998, as the case may be, under the Rules of the Depository in respect of such securities, the Company shall, upon request of a securities holder, permit a transmission of securities held by such securities holder from the register of holders maintained by the registrar of the Company in the jurisdiction of the Approved Market Place (hereinafter referred to as the Foreign Register ), to the register of holders maintained by the registrar of the Company in Malaysia (hereinafter referred to as the Malaysian Register ) provided that there shall be no change in the ownership of such securities. Annual Report 123

126 Appendix I (continued) (2) For the avoidance of doubt, where the Company fulfils the requirements of subparagraphs (1)(a) and (b) above, the Company shall not allow any transmission of securities from the Malaysian Register into the Foreign Register. be and is hereby amended as follows: by replacing the phrase an Approved Market Place in subparagraph (1)(a) with the phrase another Stock Exchange. by replacing the phrase Approved Market Place (hereinafter referred to as the Foreign Register ), to the register of holders maintained by the registrar of the Company in Malaysia (hereinafter referred to as the Malaysian Register ) in subparagraph (1)(b) with the phrase other Stock Exchange, to the register of holders maintained by the registrar of the Company in Malaysia and vice versa. by deleting subparagraph (2) in its entirety; and that the amended Article 37A shall read as follows: Where: - (a) any securities of the Company is listed on another Stock Exchange; and (b) the Company is exempted from compliance with section 14 of the Securities Industry (Central Depositories) Act 1991 or section 29 of the Securities Industry (Central Depositories) (Amendment) Act 1998, as the case may be, under the Rules of the Depository in respect of such securities, the Company shall, upon request of a securities holder, permit a transmission of securities held by such securities holder from the register of holders maintained by the registrar of the Company in the jurisdiction of the other Stock Exchange, to the register of holders maintained by the registrar of the Company in Malaysia and vice versa provided that there shall be no change in the ownership of such securities. iii. Article 62 THAT the existing Article 62 which reads as follows: Votes may be given either personally or by proxy or in the case of a Company by a representative duly authorised as aforesaid. A proxy shall be entitled to vote on a show of hands on any question at any general meeting. be and is hereby amended by inserting A proxy appointed to attend and vote at a meeting of a company shall have the same rights as the member to speak at the meeting. at the end of Article 62 and that the amended Article 62 shall read as follows: Votes may be given either personally or by proxy or in the case of a Company by a representative duly authorised as aforesaid. A proxy shall be entitled to vote on a show of hands on any question at any general meeting. A proxy appointed to attend and vote at a meeting of a company shall have the same rights as the member to speak at the meeting. 124 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

127 Appendix I (continued) iv. Article 63 THAT the existing Article 63 which reads as follows: The instrument appointing a proxy shall be in writing under the hand of the appointor or his Attorney duly authorised in writing or if such appointor is a corporation under its Common Seal or the hand of its Attorney. A proxy need not be a member of the Company and the provisions of Section 149(1)(b) of the Act shall not apply to the Company. be and is hereby amended by inserting There shall be no restriction as to the qualification of the proxy. before the sentence A proxy need not be a member of the Company and the provisions of Section 149(1) (b) of the Act shall not apply to the Company and that the amended Article 63 shall read as follows: The instrument appointing a proxy shall be in writing under the hand of the appointor or his Attorney duly authorised in writing or if such appointor is a corporation under its Common Seal or the hand of its Attorney. There shall be no restriction as to the qualification of the proxy. A proxy need not be a member of the Company and the provisions of Section 149(1)(b) of the Act shall not apply to the Company. v. Article 63B THAT the following new Article 63B be and is hereby inserted after the existing Article 63A: Where a member of the Company is an Exempt Authorised Nominee which holds ordinary shares in the Company for multiple beneficial owners in one securities account known as an omnibus account, there is no limit to the number of proxies which the Exempt Authorised Nominee may appoint in respect of each omnibus account its holds. vi. Article 70(b) THAT the existing Article 70(b) which reads as follows: Remuneration payable to non-executive Directors shall be by a fixed sum, and not by a commission on or percentage of profits or turnover and as shall from time to time be determined by Ordinary Resolution of the Company and shall (unless such resolution otherwise provide) be divisible among the Directors as they may agree, or, failing agreement, equally, except that any Director who shall hold office for part only of the period in respect of which such remuneration is payable shall be entitled only to rank in such division for a proportion of remuneration related to the period during which he has held office. Salaries payable to executive Directors may not include a commission on or percentage of turnover. Remuneration payable to Directors shall not be increased except pursuant to a resolution passed at a general meeting, where notice of the proposed increase has been given in the notice convening the meeting. Annual Report 125

128 Appendix I (continued) be and is hereby amended by inserting the word Non-Executive before the word Directors in the last sentence of the article and that the amended Article 70(b) shall read as follows: Remuneration payable to non-executive Directors shall be by a fixed sum, and not by a commission on or percentage of profits or turnover and as shall from time to time be determined by Ordinary Resolution of the Company and shall (unless such resolution otherwise provide) be divisible among the Directors as they may agree, or, failing agreement, equally, except that any Director who shall hold office for part only of the period in respect of which such remuneration is payable shall be entitled only to rank in such division for a proportion of remuneration related to the period during which he has held office. Salaries payable to executive Directors may not include a commission on or percentage of turnover. Remuneration payable to Non-Executive Directors shall not be increased except pursuant to a resolution passed at a general meeting, where notice of the proposed increase has been given in the notice convening the meeting. vii. Article 114 THAT the existing Article 114 which reads as follows: A reserve fund shall be set aside by the Directors as hereinafter provided to meet liabilities or contingencies, or for repairing, improving, or maintaining any of the property of the Company for such other purposes as the Directors shall think conducive to the interests of the Company. The Directors may divide the reserve fund into such special funds as they think fit. be and is hereby deleted in its entirety. 126 Yeo Hiap Seng (Malaysia) Berhad (3405-X)

129 Administrative Detail for 38th Annual General Meeting Date of 38th AGM : Wednesday, 25 April 2012 Time : 2.00 p.m. Venue : Victorian Ballroom, Level 1, Holiday Villa Subang, 9, Jalan SS12/1, Subang Jaya, Selangor Darul Ehsan 1. Registration Registration will start at 1.00 p.m. at the entrance of Victorian Ballroom and end at a time as directed by the Chairman of the meeting. A coupon for collection of door gift will be given upon registration. 2. Proxy A member of the Company entitled to attend, speak and vote at general meeting is entitled to appoint one (1) proxy to attend and vote in his stead. Such proxy need not be a member of the Company and the provisions of Section 149(1) of the Companies Act, 1965 shall not apply to the Company. If you are unable to attend and vote in person at the meeting and wish to appoint a proxy to attend and vote in your stead, you are requested to complete, sign and return the Form of Proxy in accordance with the instructions contained therein as soon as possible and in any event so as to arrive at the Company s Registered Office at 7, Jalan Tandang, Petaling Jaya, Selangor Darul Ehsan not less than 48 hours before the time for the AGM. If you have submitted your Form of Proxy prior to the meeting and subsequently decided to attend the meeting yourself, please proceed to the Help Desk to revoke the appointment of your proxy. 3. Door gift Upon registration, door gift will be given to individual shareholders and proxies who are present at the meeting. Each shareholder or proxy will be entitled for ONE door gift regardless of number of proxies held by him/her. Please present your coupon for collection of your entitled door gift from the redemption counter upon registration. You may collect your door gift after the meeting and the redemption counter will be closed sharp at 5.00 p.m. 4. Parking Parking at the hotel will be complimentary. Please get your parking ticket verified at the registration table with a signage Complimentary Parking, located at the entrance of Victorian Ballroom. 5. Food and Beverage Food and beverage will be served at the foyer of the Victorian Ballroom - Coffee and tea will be served before the meeting; and - Refreshment will be served after the conclusion of the meeting 6. General Meeting Record of Depositors For the purpose of determining a member who shall be entitled to attend the meeting, the Company shall be requesting Bursa Malaysia Depository Sdn Bhd, in accordance with Article 47 of the Company s Articles of Association and Section 34(1) of the Securities Industry (Central Depositories) Act, 1991 to issue a General Meeting Record of Depositors as at 17 April Only depositors whose names appear in the Record of Depositors as at 17 April 2012 shall be entitled to attend, speak and vote at the said meeting or appoint proxy to attend, speak and vote on his/her behalf. 7. Help Desk Please proceed to the Help Desk for any clarification or enquiry. The Help Desk will also handle revocation of proxy s appointment. 8. Chairman may at his discretion make any changes to the above arrangements in the event of occurrence of unforeseen circumstances. Annual Report 127

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131 Form of Proxy Yeo Hiap Seng (Malaysia) Berhad (3405-X) (Incorporated in Malaysia) I/We (Insert Full Name in Block Capital) NRIC/Company No. of (Full Address) being a member of Yeo Hiap Seng (Malaysia) Berhad hereby appoint (Insert Full Name in Block Capital) NRIC/Company No. of (Full Address) or failing him/her, the Chairman of the Meeting as my/our proxy to vote for me/us on my/our behalf at the 38th Annual General Meeting of the Company to be held at Victorian Ballroom, Level 1, Holiday Villa Subang, 9, Jalan SS12/1, Subang Jaya, Selangor Darul Ehsan on Wednesday, 25th April 2012 at 2.00 p.m. and at any adjournment thereof. My/Our proxy is to vote as indicated below:- NO. RESOLUTIONS FOR AGAINST 1. Receipt of Reports and Audited Financial Statements 2. Declaration of Final Dividend 3. Re-election of Mr Koh Boon Hwee 4. Re-election of Ms Pearl Foong Lye Fong 5. Re-appointment of Dato N. Sadasivan a/l N.N. Pillay 6. Re-appointment of Mr Chandra Das s/o Rajagopal Sitaram 7. Approval of the payment of Directors Fees 8. Re-appointment of Messrs PricewaterhouseCoopers as Company Auditors 9. Authority to Issue Shares Pursuant to Section 132D of the Companies Act, Proposed Share Buy-Back 11. Proposed Shareholders Mandate for Recurrent Related Party Transactions of a Revenue or Trading Nature 12. Proposed Amendments to the Articles of Association of the Company Dated this day of, No. of ordinary shares held: CDS Account No. Contact No. Signature of shareholder Notes: 1. Only depositors whose names appear in the Record of Depositors as at 17 April 2012 be regarded as members and entitled to attend, speak and vote at the general meeting. 2. A member of the Company entitled to attend, speak and vote at the abovementioned meeting is entitled to appoint one proxy to attend, speak and vote in his stead. Such proxy need not be a member of the Company. 3. The instrument of appointing a proxy, in the case of an individual, shall be signed by the appointor or by his attorney duly authorised in writing, and in the case of a corporation, shall be either given under the hand of an officer or attorney of the corporation duly authorised. 4. The instrument appointing the proxy must be deposited at the registered office of the Company at No. 7, Jalan Tandang, Petaling Jaya, Selangor Darul Ehsan, Malaysia, not less than forty-eight (48) hours before the time set for holding the meeting or at any adjournment thereof. 5. Please refer to page 127 for further administrative detail for 38th Annual General Meeting.

132 The Company Secretary Yeo Hiap Seng (Malaysia) Berhad (3405-X) No. 7, Jalan Tandang Petaling Jaya Selangor Darul Ehsan Affix Stamp

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