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., 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/to other related companies mainly represents purchases and sales with YHS Trading (USA), Inc., Yeo Hiap Seng (Guangzhou) Ltd. 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 terms that are no more favourable than those arranged with independent third parties.

19. CASH AND BANK BALANCES

The short-term deposits bear interest at rates ranging from 2.2% to 4.0% (2.2% to 3.2% in 2002) per annum and have an average maturity of 60 days (30 days in 2002).

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 2002).

Other payables and accrued expenses consist of the following:

21. 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 ("YHSB Retirement Benefit Fund") for those management staff not covered by collective bargaining agreement but who fulfil certain conditions. On 1st May, 2003, the said YHSB Retirement Fund was dissolved and the accrued benefit for each staff was paid into respective individual Employee Provident Fund Account.

The provision for retirement benefits as of 31st December, 2003 consists of retirement benefits for employees under a collection bargaining agreement.

22. 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, 2003, the effective borrowing rate was about 4.8% to 5.5% (4.8% to 5.5% in 2002) per annum. Interest rates are fixed at the inception of the hire-purchase arrangements.

23. DEFERRED TAX LIABILITIES

As mentioned in Note 3, the effects of temporary differences, which would give rise to net deferred assets, are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. As of 31st December, 2003, 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 is as follows:

The unabsorbed capital allowances and carryforward tax losses are subject to agreement by the tax authorities.

24. SHARE CAPITAL