NOTES TO THE FINANCIAL STATEMENTS

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25. SHARE CAPITAL

26. RESERVES

Share premium

Share premium arose from the following:

Capital reserve
During the financial year, an amount of BD60 equivalent to RM606 of a subsidiary company, Yeo Hiap Seng (Middle East) Co. Ltd. E. C. has been transferred to the capital reserve. The capital reserve arose from the provisions of the Bahrain Commercial Companies Law 1975 (Amended), which represents an amount equivalent to 10% of the company's net profit before appropriation to be transferred to a non-distributable reserve account until such time as a minimum of 25% of the issued share capital is set aside.

Foreign exchange reserve
Exchange differences arising on translation of foreign controlled entities are taken to the foreign exchange reserve.

Unappropriated profit
Distributable reserves are those available for distribution by way of cash dividends. Based on estimated tax credits available and prevailing tax rates applicable to dividends, the unappropriated profit of the Company is available for distribution by way of cash dividends without additional tax liability being incurred.

As of 31st December, 2002, the Group and the Company have unutilised reinvestment allowances and investment tax credits amounting to about RM31,210,000 (RM36,872,000 in 2001) and RM22,304,000 (RM27,967,000 in 2001) respectively, under the Investment Incentive Act, 1968 (revised 1978) and Promotion of Investment Act, 1986. These reinvestment allowances and investment tax credits, if confirmed by the Inland Revenue Board, will enable the Company and its subsidiary companies to distribute tax exempt dividends up to the same amount. As of 31st December, 2002, the Group and the Company have reinvestment allowances and investment tax credits approved by the tax authorities amounting to about RM22,473,000 and RM19,640,000 (RM27,292,000 and RM24,459,000 in 2001) respectively.

27. DIVIDENDS
Dividends consist of the following:

A final dividend of 6.5%, tax exempt, amounting to RM8,326,210 proposed in the previous financial year and dealt with in the previous directors' report was paid by the Company during the current financial year.

An interim dividend of 2%, less tax, amounting to RM1,844,576 was paid in respect of the current financial year.

The directors proposed a final dividend of 6.5%, tax exempt, amounting to RM8,326,210 in respect of the current financial year. This dividend is subject to approval by the shareholders at the forthcoming Annual General Meeting of the Company and has not been included as liability in the financial statements.

The proposed final dividend for 2002 is payable in respect of all ordinary shares in issue as at the date of the financial statements.

28. CONTINGENT LIABILITIES
(a) A legal action for damages of approximately RM6.7 million and interest thereon for an allegad breach of a lease agreement of the land where the Chenderiang mineral water plant was situated, was brought by the lessor against the Company in 2003. The Company is disputing the claim and based on advice received from its legal advisors, the directors are of the opinion that this claim is unsustainable. Accordingly, no provisions for loss has been made in the financial statements. The outcome of the case is not presently known.

(b) In 2002, the subsidiary companies have credit and loan facilities amounting to RM200,000 obtained from local financial institutions, which are guaranteed by the Company. Accordingly, the Company is contingently liable to the extent of the amount of the credit and loan facilities utilised by its subsidiary companies. None of the credit and loan facilities is secured against the assets of the Company or of the Group.

29. COMMITMENTS
As of the end of the financial year, the Group and the Company have commitments in respect of the following:

30. CASH AND CASH EQUIVALENTS
Cash and cash equivalents included in the cash flow statements comprise the following balance sheet items:

31. FINANCIAL INSTRUMENTS
Financial Risk Management Objectives and Policies
The operations of the Group is subject to a variety of financial risks, including market risk, credit risk, liquidity risk and cash flow risk. The Group has formulated a financial risk management framework whose principal objective is to minimise the Group's exposure to risk and/or costs associated with the financing, investing and operating activities of the Group.

Various risk management policies are made and approved by the Board for observation in the day-to-day operations for the controlling and management of the risks associated with financial instruments.

Market Risk
The Group has in place policies to manage the Group's exposure to fluctuation in the prices of the key raw materials and commodities used in the operations. The Group enters into fixed price contracts to establish determinable prices for raw materials and commodities used.

Credit Risk
The Group has no major concentration of credit risk and manage these risks by monitoring credit ratings and limiting the aggregate financial exposure to any individual counterparty.

The Group extends credit to its customers based upon careful evaluation of the customer's financial condition and credit history.

Liquidity Risk
The Group practices prudent liquidity risk management to minimise the mismatch of financial assets and liabilities and to maintain sufficient credit facilities for contingent funding requirement of working capital.

Cash flow risk
The Group reviews its cash flow position regularly to manage its exposure to fluctuations in future cash flows associated with its monetary financial instruments.

Financial Assets
The Group's and the Company's principal financial assets are short term deposits, cash and bank balances, trade and other receivables, amount owing by related companies and equity investment.

Trade and other receivables and amount owing by related companies are stated at their nominal value as reduced by appropriate allowance for estimated irrecoverable amounts.

Financial Liabilities
Significant financial liabilities include trade and other payables, amount owing to related companies and hire-purchase payables are stated at nominal value.

Fair Values
The carrying amount and the estimated fair value of the Group's and the Company's investment in quoted shares as of 31st December, 2002 is RM9,181.

Cash and cash equivalents, trade and other receivables, inter-company indebtedness and trade and other payables
The carrying amount approximate fair value because of the short maturity of these financial assets and liabilities.