Directors' Report

The directors of YEO HIAP SENG (MALAYSIA) BERHAD have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the financial year ended 31st December, 2003.

PRINCIPAL ACTIVITIES
The Company is principally involved in the production, marketing and sale of beverage and food products.

The subsidiary companies are principally involved in the production, marketing and distribution of beverage and food products.

There have been no significant changes in the nature of the activities of the Company and its subsidiary companies during the financial year.

RESULTS OF OPERATIONS
The results of operations of the Group and of the Company for the current financial year are as follows:

In the opinion of the directors, the results of operations of the Group and of the Company during the financial year have not been substantially affected by any item, transaction or event of a material and unusual nature.

DIVIDENDS
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.

During the financial year, an interim dividend and special dividend of 2% and 3% less tax, amounting to RM1,844,576 and RM2,766,862 respectively were paid in respect of the current financial year.

The directors proposed a final dividend of 9%, less tax, amounting to RM8,300,591 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 2003 is payable in respect of all ordinary shares in issue as of the date of the financial statements.

RESERVES AND PROVISIONS
There were no material transfers to or from reserves or provisions during the financial year other than those disclosed in the financial statements.

ISSUE OF SHARES AND DEBENTURES
The Company has not issued any new shares or debentures during the financial year.

SHARE OPTIONS
No options were granted by the Company to any parties during the financial year to take up unissued shares of the Company.

No shares were issued during the financial year by virtue of the exercise of any option to take up unissued shares of the Company.As of the end of the financial year, there were no unissued shares of the Company under options

OTHER FINANCIAL INFORMATION
Before the income statements and the balance sheets of the Group and of the Company were made out, the directors tookreasonable steps:

(a)to ascertain that proper action had been taken in relation to the writing off of bad receivables and the making of allowance fordoubtful receivables, and had satisfied themselves that all known bad receivables had been written off and that adequateallowance had been made for doubtful receivables; and

(b)to ensure that any current assets which were unlikely to realise their book values in the ordinary course of business had beenwritten down to their estimated realisable values.

At the date of this report, the directors are not aware of any circumstances:

(a)which would render the amount written off for bad receivables or the amount of allowance for doubtful receivables in thefinancial statements of the Group and of the Company inadequate to any substantial extent;

(b)which would render the values attributed to current assets in the financial statements of the Group and of the Companymisleading; or

(c)which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of theCompany misleading or inappropriate; or

(d)not otherwise dealt with in this report or financial statements which would render any amount stated in the financial statementsof the Group and of the Company misleading.

At the date of this report, there does not exist:

(a)any charge on the assets of the Group and of the Company which has arisen since the end of the financial year whichsecures the liability of any other person; or

(b)any contingent liability of the Group and of the Company which has arisen since the end of the financial year.

No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months afterthe end of the financial year which, in the opinion of the directors, will or may substantially affect the ability of the Group and of theCompany to meet their obligations as and when they fall due.

In the opinion of the directors, no item, transaction or event of a material and unusual nature has arisen in the interval between theend of the financial year and the date of this report which is likely to affect substantially the results of operations of the Group andof the Company for the succeeding financial year

DIRECTORS
The following directors served on the Board of the Company since the date of the last report:

Philip Ng Chee Tat
Tjong Yik Min
Brigadier Gen (R) Dato' Yahya bin Yusof
Chan Wai Ming
Mohamed Nizam bin Abdul Razak
Winston Mah Yat Kong (appointed on 14.1.2004)
Raja Dato' Hj. Redzwa bin Raja Tun Uda (deceased on 28.1.2004)
Tan Teow Choon (resigned on 14.10.2003)

In accordance with Article 75 of the Company's Articles of Association, Brigadier Gen (R) Dato' Yahya bin Yusof retires by rotation and being eligible, offers himself for re-election.

In accordance with Article 75 of the Company's Articles of Association, Mr. Chan Wai Ming retires by rotation and does not seek for re-election.

Mr. Winston Mah Yat Kong, who was appointed to the Board since the last Annual General Meeting, retires under Article 80 of the Company's Articles of Association and, being eligible, offers himself for re-election.

DIRECTORS' INTERESTS
None of the directors in office at the end of the financial year held shares or have any beneficial interest in the shares of the Company or its related companies during the financial year. Under the Company's Articles of Association, the directors are not required to hold any shares in the Company.

DIRECTORS' BENEFITS
Since the end of the previous financial year, none of the directors of the Company has received or become entitled to receive any benefit (other than the benefit included in the aggregate of emoluments received or due and receivable by directors as disclosed in the financial statements or the fixed salary of a full time employee of the Company) 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.

During and at the end of the financial year, no arrangement subsisted to which the Company was a party whereby directors of the Company might acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

HOLDING COMPANIES
The Company is a subsidiary company of YHS (Singapore) Pte. Ltd., a company incorporated in Singapore. The directors regard Yeo Hiap Seng Limited, a company incorporated in Singapore, as the ultimate holding company.

AUDIT COMMITTEE
In compliance with the listing requirement set up by Malaysia Securities Exchange Berhad (MSEB), the audit committee was established on 24th March, 1994 comprising the following directors:

Brigadier Gen (R) Dato' Yahya bin Yusof (Chairman)
Chan Wai Ming
Mohamed Nizam bin Abdul Razak
Raja Dato' Hj. Redzwa bin Raja Tun Uda (Former Chairman) (deceased on 28.1.2004)
Tan Teow Choon (resigned on 14.10.2003)

The functions of the audit committee as stipulated in the MSEB listing requirements include discussion and review with management, internal auditors and the auditors of the Company, the scope and results of the internal and statutory audits, financial and operating results, internal controls, accounting policies and other significant matters, including the annual financial statements which accompany this report.

AUDITORS
The auditors, Messrs. Deloitte KassimChan, have indicated that they will not be seeking reappointment as auditors at the forthcoming Annual General Meeting of the Company.

Signed on behalf of the Board
in accordance with a resolution of the Directors,

_________________________________________
BRIGADIER GEN (R) DATO' YAHYA BIN YUSOF

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WINSTON MAH YAT KONG

Petaling Jaya
26th February, 2004