NOTES TO THE FINANCIAL STATEMENTS

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1. PRINCIPAL ACTIVITIES AND GENERAL INFORMATION

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.

The total number of employees of the Group and of the Company at year end were 1,487 and 773 (1,692 and 878 in 2002) respectively.

The registered office and the principal place of business is located at 7, Jalan Tandang, 46050 Petaling Jaya, Selangor Darul Ehsan.

2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The financial statements of the Group and of the Company have been approved by the Board of Directors for issuance on 26th February, 2004.

The financial statements of the Group and of the Company have been prepared in accordance with the provisions of the Companies Act, 1965 and the applicable approved accounting standards of the Malaysian Accounting Standards Board (MASB).

3. SIGNIFICANT ACCOUNTING POLICIES

Accounting Basis
The financial statements of the Group and of the Company have been prepared under the historical cost convention modified to include the revaluation of certain property, plant and equipment. The directors have applied the transitional provisions of International Accounting Standard No. 16 (Revised), Property, Plant and Equipment by virtue of which a reporting enterprise which does not adopt a policy of revaluation is allowed to retain revalued amounts on the basis of their previous revaluation (subject to continuity in depreciation policy and the requirement to write an asset down to its recoverable amount.)

Basis of Consolidation
The consolidated financial statements incorporate the financial statements of the Company and all its subsidiary companies made up to the end of the financial year. Financial statements of subsidiary companies are consolidated using the acquisition method of accounting. On acquisition, the assets and liabilities of the relevant subsidiary companies are measured at their fair values at the date of acquisition.

The results of subsidiary companies acquired are included in the consolidated financial statements from the effective date of acquisition. All significant inter-company balances and transactions are eliminated on consolidation.

Goodwill arising on consolidation represents the excess of the purchase consideration over the share of fair values of the identifiable net assets of a subsidiary company at the date of acquisition.

Goodwill is recognised as an asset and amortised on a straight-line basis over a period of 20 years commencing in 2001.

Where an indication of impairment exists, the carrying amount of goodwill is assessed and written down immediately to its recoverable amount.

Revenue
Sales of goods are recognised upon delivery of products and when the risks and rewards of ownership have passed. Revenue of the Group and of the Company represents gross invoiced value of sales less discounts and returns. All significant intercompany sales are eliminated on consolidation. Group sales do not include the applicable share of associated companies' sales.

Rental and interest income earned by the Group and the Company are recognised on accruals basis and dividend income earned by the Company is recognised when the shareholder's right to receive payment is established.

Foreign Currency Conversion
Foreign currency transactions are converted into Ringgit Malaysia at exchange rates prevailing at the transaction dates or, where settlement has not yet been made at the end of the financial year, at the approximate exchange rates prevailing on that date. All foreign exchange gains or losses are taken up in the income statements.

For the purposes of consolidation, the financial statements of the foreign subsidiary and associated companies, have been translated into Ringgit Malaysia as follows:

Assets and liabilities             - at closing rate
Share capital and reserves   - at historical rate
Revenue and expenses        - at average rate for the financial year

The closing rate per unit of Ringgit Malaysia used in the translation of foreign subsidiary and associated companies' financial statements are as follows:

All translation gains or losses are taken up and reflected in the translation reserve account under shareholders' equity. Such translation gains or losses are recognised as income or expenses in the income statements, in the period in which those companies are disposed of.

Differences in exchange arising from the translation of the results of those companies at the average exchange rate, are taken to translation reserve account.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the Company and are translated at the exchange rate ruling at the date of the transaction.

Income Tax
In the previous financial year, the tax effects of transactions are recognised, using the "liability" method, in the year such transactions enter into the determination of net income, regardless of when they are recognised for tax purposes. Deferred tax liabilities are in respect of timing difference between depreciation and tax allowances of property, plant and equipment. However, where timing differences give rise to net deferred tax assets, the tax effects are generally recognised on actual realisation.

During the current financial year, the Company adopted MASB Standard No. 25, Income Taxes. Upon adoption of MASB 25, the tax effects of transactions are recognised using the "balance sheet" method and all taxable temporary differences are recognised. Where such temporary differences would give rise to net deferred tax assets, the tax effects are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. There is no significant effect on the financial statements of the Group and of the Company for the current and previous financial years arising from the adoption of MASB 25.

Property, Plant and Equipment and Depreciation
Property, plant and equipment are stated at cost or valuation less accumulated depreciation and any impairment loss.

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 income statements.

The carrying amounts of property, plant and equipment are reviewed at each balance sheet date to determine whether there is any indication of impairment. An impairment loss is recognised whenever the carrying amount of an item of property, plant and equipment exceeds its recoverable amount. The impairment loss is charged to the income statements unless it reverses a previous revaluation in which case it is treated as a revaluation decrease.

Freehold land and property, plant and equipment under construction are not depreciated. Land under long and short leases are amortised evenly over the term of the lease. Depreciation of all other property, plant and equipment is computed on the straight-line method based on the estimated useful lives of the various assets. The annual depreciation rates are as follows:

Property, Plant and Equipment Acquired Under Hire-Purchase Arrangements
Property, plant and equipment acquired under hire-purchase arrangements are capitalised in the financial statements and the corresponding obligations treated as liabilities. Finance charges are allocated to the income statements to give a constant periodic rate of interest on the remaining hire-purchase liabilities.

Investments
Investments in unquoted subsidiary companies, which are eliminated on consolidation, investment in unquoted associated companies and other investments are stated at cost in the Company's financial statements. Where there is an indication of impairment in the value of the assets, the carrying amount of the investment is assessed and written down immediately to its recoverable amount.

Associated Companies
An associated company is a non-subsidiary company in which the Company holds not less than 20% of the equity voting rights as long term investment and in which the Company is in a position to exercise significant influence in its management.

The Company's investments in associated companies are accounted for by the equity method of accounting based on management or audited financial statements made up to 31st December, 2003. Under this method of accounting, the Company's interests in the post acquisition profit and reserve of the associated companies are included in the consolidated results while dividends received from associated companies are reflected as a reduction of the investment in the consolidated balance sheet. The carrying values of these investments approximate the underlying equities in net assets of the associated companies.

Inventories
Inventories, other than bottles and cases, are valued at the lower of cost (determined principally on the first-in, first-out basis) and net realisable value. The cost of raw materials and other inventories comprises the original cost of purchase plus cost of bringing the inventories to present location. The cost of finished goods and work-in-process includes the cost of raw materials, direct labour and a proportion of the manufacturing overheads. 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.

Bottles and cases are stated at cost less amounts written off in respect of losses arising from obsolescence, breakages and non-return. The cost of bottles and cases is written off on a straight-line basis over a period of five years.

Receivables
Trade and other receivables are stated at nominal value as reduced by the appropriate allowance for estimated irrecoverable amounts. Allowance for doubtful receivables is made based on estimates of possible losses which may arise from non-collection of certain receivable accounts.

Provisions
Provisions are made when the Group and the Company have a present legal or constructive obligation as a result of past events, when it is probable that an outflow of resources will be recognised to settle the obligation, and when a reliable estimate of the amount can be made.

Provision for retirement benefits relates to retirement benefits given to employees and is a non-contributory unfunded retirement benefits scheme for employees who are eligible 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. The cost of retirement benefit is determined based on a triennial actuarial valuation using the Projected Unit Credit Method. This method sees each period of service as giving rise to an additional unit separately to build up the final obligation. Current service costs, past services cost and experience adjustments in respect of the plan are dealt with through the income statement systematically over the expected remaining lives of members.

Financial Assets
The Group's principal financial assets are short-term deposits, cash and bank balances, trade and other receivables and inter-companies receivables.

Trade and other receivables and inter-companies receivables 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, inter-companies payables and hire-purchase payables are stated at nominal value.

Cash Flow Statement
The Group and the Company adopt the indirect method in the preparation of the cash flow statement.

Cash equivalents are short-term, highly liquid investments with maturities of three months or less from the date of acquisition and are readily convertible to cash with insignificant risk of changes in value.

4. SEGMENTAL REPORTING

Geographical Segments

Geographical Segments

The segments share significant common distribution network and resources and the directors are of the opinion that it is not meaningful and practical to allocate operating assets and liabilities to the individual segment. Accordingly, segment assets and liabilities have not been disclosed as required under Malaysian Accounting Standard Board No. 22.

Information on the Group's operations by business segments has not been provided as the Group principally involved in manufacturing and distribution of beverage and food products.

5. DIRECTORS' REMUNERATION

The number of directors of the Company whose total remuneration during the financial year fall within the following bands is as follows: