NOTES TO THE FINANCIAL STATEMENTS

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18. HOLDING COMPANIES AND RELATED PARTY TRANSACTIONS
The Company is a subsidiary company of YHS (Singapore) Pte. Ltd. (YHSPL), a company incorporated in Singapore. The directors regard Yeo Hiap Seng Limited (YHSL), a company also incorporated in Singapore as the ultimate holding company.

Amount owing by/to holding companies mainly arose from purchases, sales and other trade transactions.

Amount owing by/to subsidiary companies mainly represents sales and other trade transactions, advances and payments on behalf with the subsidiary companies.

Amount owing by other related companies mainly represents purchases and sales with YHS Trading (USA), Inc. and YHS Hong Kong (2000) Pte. Ltd., subsidiary companies of YHSL.

The amount owing is interest free and has no fixed repayment schedule.

The financial statements of the Group and of the Company reflect the following related party transactions:

The Directors of the Group and of the Company are of the opinion that the above transactions have been entered in the
normal course of business and have been established under the terms that are no less favourable than those arranged with
independent third parties.

19. CASH AND BANK BALANCES

20. TRADE PAYABLES, OTHER PAYABLES AND ACCRUED EXPENSES
Trade and other payables comprise amounts outstanding for trade purchases and ongoing costs. The average credit period
granted to the Group and the Company for trade purchases is 60 days (60 days in 2001).

Other payables and accrued expenses consist of the following:

21. PROVISION FOR RELOCATION OF MANUFACTURING FACILITIES

The provision for relocation of manufacturing facilities represents the cost for relocating certain plant facilities and related staff cost involved in a detailed rationalisation plan to relocate and reduce the number of its current manufacturing plants in order to decrease logistics costs and increase production efficiency. During the financial year, the rationalisation plan has been abandoned and accordingly, the full provision has been reversed to the income statement.

22. PROVISION FOR RETIREMENT BENEFITS

The Group and the Company have a non-contributory unfunded retirement benefits scheme for those employees who are eligible under a collective bargaining agreement and a contributory funded retirement benefits scheme (known as Yeo Hiap Seng (M) Bhd Retirement Benefit Fund) for those management staff not covered by collective bargaining agreement but who fulfil certain conditions. As of 31st December, 2002, the provision for retirement benefits consists of the following:

(a) Retirement benefits for employees under a collective bargaining agreement, which are estimated and provided for in the financial statements taking into consideration the length of service and basic salary earnings of the eligible employees; and

(b) Retirement benefits for management staff, which are actuarially determined and the charge to operations includes current service costs plus amortisation of past service costs over a period of 5 years. Based on the actuary's valuation report in December 2000, past service costs not yet recognised in the financial statements as of 31st December, 2002, amounted to about RM879,000 (RM1,319,000 in 2001).

The Company has proposed to dissolve the scheme for management staff, as at 1st May, 2003, crystallising the liability of the Group and the Company. The accrued benefits for each staff shall be paid into the respective individual Employment Provident Fund Account.

23. HIRE-PURCHASE PAYABLES
The Group's obligations under hire-purchase are as follows:

The average term of hire purchase is about 3 to 5 years. For the financial year ended 31st December, 2002, the effective
borrowing rate was about 4.8% to 5.5% (4.8% to 5.5% in 2001) per annum. Interest rates are fixed at the inception of the
hire-purchase arrangements.

24. DEFERRED TAX LIABILITIES

As of 31st December, 2002, the deferred tax liability of the Group arose mainly from timing differences between book depreciation and tax capital allowances of the property, plant and equipment.

As of 31st December, 2002, the amount of estimated net deferred tax assets of the Group and of the Company calculated at applicable tax rate which is not recognised in the financial statements, are as follows: