Statement on Corporate Governance

INTRODUCTION
The Company has complied with the Best Practices in Corporate Governance as set out in Part 2 of the Code and the ensuing paragraphs clarify how the Company has applied the principles as set out in Part 1 of the Code.

The Code
In March 2000, the Finance Committee on Corporate Governance issued the Malaysian Code on Corporate Governance (" the Code"). The code lays down the principles and best practices of corporate governance over the structures and processes companies may use in their operations towards achieving the optimal governance framework.

The Board of Yeo Hiap Seng (Malaysia) Berhad (" The Company") is committed to ensuring that the highest standards of corporate governance are practised throughout the Group as a fundamental part of discharging its responsibilities to protect and enhance shareholder value and the financial performance of the Company.

The Board of Directors
The Board has the overall responsibility for corporate governance, establishing goals, strategic direction and overseeing the investments of the Company.

The Board, led by a Non-Executive Chairman, is made up of seven members, comprising one Executive Non-Independent Directors, three Non-Executive Non-Independent and three Non-Executive Independent Directors. The Board's composition represents a mix of knowledge, skills and expertise relevant to the activities of the Group. A brief profile of each Director is presented on pages to 8 to 14.

The role of the Chairman and the Group Managing Director are distinct and separated with responsibilities clearly drawn out to ensure a balance of power and authority. Generally the Executive Directors are responsible for making and implementing operational and corporate decisions. Non-Executive Directors play key supporting roles, contributing their knowledge and experience towards the formulation of policies and in the decision-making process. 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.

The functions and Responsibilities of Members of the Board adopted at the Directors' Meeting of 27 November 2001 are as follows:

Function and Responsibilities of Members of the Board of Directors:

• To formulate group strategies.
• To approve group policies, procedures and systems.
• To delegate responsibilities and authority.
• To provide proactive support to subsidiaries.
• To ensure adequate systems for communicating objectives.
• To ensure the adequacy and integrity of the internal control systems.
• To decide and approve on entry into new business ventures.
• To decide and approve on any disposals of business ventures.
• To approve significant financial transactions/assets acquisition undertaken by the organization.
• To evaluate and approve major agreements or contracts.
• Hiring of senior staff in the organization.

The Board meets on a scheduled basis, at least four times a year. Additional meetings will be convened as and when required. The summary of attendance to each of the board meetings held during the financial year under review is as follows:

Directors' Record of Attendance:

Record of Attendance of Directors who resigned during the year

Supply of Information
All Directors are provided with reports and other relevant information on a timely manner, covering various aspects of the Group's operations and performance. The Board has unrestricted access to all staff for any information pertaining to the Group's affairs. In addition, the Board has access to the advice and services of the Company Secretary and may seek independent advice should the need arise.

Board Committees
The Board is assisted by an Audit Committee, whose role and function is as set out in the ensuing pages. Two other committees, namely the Nomination Committee and the Remuneration Committee have also been formed during the last financial year.

Audit Committee
The Audit Committee reviews issues of accounting policy 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 committee has full access to both the internal and external auditors who, in turn, have access at all times to the Chairman of the Committee.

The Composition and terms of reference of the Audit Committee may be found on pages 35 to 38.

The Nomination Committee:
The terms of reference of the Nomination Committee (NC) adopted by the Board are as follows:
Terms of Reference of the Nomination Committee:

• 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 and etc.
• To review the board required mix of skills and experience and other qualities that directors should bring to the board.

The Nomination Committee comprises the following members:

The Remuneration Committee

The Terms of Reference of the Remuneration Committee (RC) are:

1. Made up of a composition 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 minimizes the risk of any potential conflict of interest.
2. Chaired by an Independent Non-Executive Director.
3. RC's recommendations are made in consultation with the Chairman of the Board and submitted for endorsement by the entire Board.
4. 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.
5. 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.
6. No Director should be involved in deciding his own remuneration.
7. The RC covers all aspects of remuneration, including but not limited to Director's fees, salaries, allowances, bonuses, options and benefits in kind.

The Remuneration Committee comprises the following members:

Directors' Mandatory Accreditation Programme ("MAP")
All Directors of the board including directors appointed during the year have successfully completed the MAP programme organized by the Research Institute of Investment Analysts Malaysia (RIIAM), an affiliate of the Kuala Lumpur Stock Exchange. The Directors will continue to undergo other relevant training programmes to further enhance their knowledge in the latest statutory and regulatory developments to enable them to discharge their responsibilities more effectively.

Re-Election of the Directors
In accordance with the Company's Articles of Association all Directors who are appointed by the Board are subject to election by shareholders at the first Annual General Meeting subsequent to their appointment. The Articles also require that in every subsequent year, one-third of the remaining Directors or the number nearest one-third, shall submit themselves for re-election by rotation at each Annual General Meeting.

Directors over seventy years of age are required to submit themselves for re-appointment annually in accordance with Section 129(6) of the Companies Act, 1965.

DIRECTORS' REMUNERATION

The number of Directors whose total remuneration fall within the following bands:

RELATIONSHIP WITH SHAREHOLDERS
Relationship with Shareholders and Investors
The Group recognizes the importance of establishing a direct line of communication with shareholders and investors through timely dissemination of information on the Group's performance and major developments via appropriate channels of communication.

Dissemination of information includes the distribution of Annual Report and relevant circulars, issuance of press release inclusive of quarterly financial performance of the Group to KLSE and the public as well as press conferences.

To further enhance the transparency and communication with the shareholders and all concerned, the Company maintains a website at www.yeos.com.my which shareholders and the public are invited to access for information on the company. All announcements released to the Kuala Lumpur Stock Exchange are also available on the KLSE website at www.klse.com.my

Annual General Meeting (AGM)
The Chairman and the Board encourage shareholders to attend and participate in the AGM held annually. The shareholders are given the opportunity to seek clarification on any matters pertaining to the business and financial performance of the Company.

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 Audit Committee assists the Board to ensure accuracy and adequacy of all information for disclosure.

The Directors are also responsible for ensuring that all financial statements are prepared in accordance with the Companies Act, 1965 and the applicable approved accounting standards board in Malaysia (MASB).

A Directors' Responsibility Statement is set out on page 39.

Internal Control
The Board of Directors is responsible for the Company's overall system of internal control and risk management. The internal control system covers all 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 operating environment.

A statement on Internal Control is set out on pages 33 and 34 of the Annual Report.

Relationship with Auditors
The Board through the establishment of an Audit Committee maintains a formal and transparent arrangement with the Company's auditors.

ADDITIONAL COMPLIANCE INFORMATION

1. Material Contracts
   There were no material contracts entered into by the Company and its subsidiary companies which involve directors' and major shareholders' interests subsisting at the end of the financial year ended 31 December 2002 or entered into since the end of the previous financial year.
2. Share Buyback
   The Company does not have a share buyback programme in place.
3. Options, warrants or convertible securities
   There were no options, warrants or convertible securities exercised in respect of the financial year.
4. American Depository Receipt (ADR) or Global Depository Receipt (GDR) programme
   The Company does not have an ADR or GDR programme in place.
5. Imposition of sanctions/ penalties
   There were sanctions/penalties imposed on the Company or its subsidiaries, Directors or management by the relevant regulatory bodies.
6. Non-audit fee
   There were no non-audit fees paid to external auditors in the financial year.
7. Profit estimates, forecast or projection
   There were no profit estimates, forecast or projections or unaudited results released, which differ by 10 per cent or more from the audited results.
8. Profit Guarantees
   There were no profit guarantees given in respect of the Company.
9. Recurrent related party transactions statement
   The Company did not enter into any recurrent related party transactions of a revenue or trading nature during the financial year ended December 2002.
10. Revaluation policy on landed properties
    The Company did not have a revaluation policy on landed properties.