Statement on Corporate Governance

INTRODUCTION

The Board of Directors of Yeo Hiap Seng (Malaysia) Berhad (.the Company.) are committed to ensuring that the highest standards of corporate governance are practiced throughout the Group as a fundamental part of discharging its responsibilities to protect and enhance shareholder value and the financial performance of the Company. The ensuring paragraphs set out the manner in which the Group has applied the principles set out in theMalaysian Code of Corporate Governance (.the Code.) and the extent of its compliance with the best practice of the Code for the year ended 31 December 2004.

The Board of Directors

The Board has the overall responsibility for corporate governance, establishing goals, strategic direction and overseeing the investments of the Company. The Board currently has six members, comprising two Non-Independent Non-Executive Directors and four Independent Non-Executive Directors. The Board's composition represents a wealth of knowledge, skills and expertise which brings an independent judgement and considerable knowledge to the Board's discussion. A brief profile of each Director is presented on pages 5 to 7 of this Annual Report. There is a balance in the Board with the presence of four Independent Non-Executive Directors of caliber and collectively possess significant experience and expertise in objective and independent decision-making. Non-Executive Directors play key supporting roles, contributing their knowledge and experience towards the formulation of policies and in the decision-making process. Where a potential conflict of interest may arise, it is mandatory practice for the director concerned to declare his interest and abstain from the decision-making process. The Board meets on a scheduled basis, at least five times a year. Additional meetings will be convened as and when required. During the year, five (5) Board Meetings were held. The Attendance of Directors is as follows:-

Name of Directors	Number of Meetings Attended
Philip Ng Chee Tat	5/5
Tjong Yik Min	5/5
Brigadier General (R) Dato' Yahya bin Yusof	5/5
Dato' Mohamed Nizam bin Abdul Razak	5/5
Dato' N. Sadasivan a/l N.N. Pillay	1/1*
Razman Hafidz bin Abu Zarim	-**

* There was one (1) Board meeting held since his appointment on 13 August 2004.

** He was appointed after the financial year ended 31 December 2004, on 1 March 2005.

Record of Attendance of Directors who resigned/retired during the year is as follows:-

Name of Directors	Number of Meetings Attended
Winston Mah Yat Kong	4/4***
Tham Chong Kong	-****
Chan Wai Ming	3/3*****

*** There were four (4) Board meetings held before his resignation on 31 December 2004.

**** No meeting was held during the period between his appointment on 8 June 2004 and resignation on 13 August 2004.

*****There were three (3) Board meetings held before his retirement on 22 April 2004.

Supply of Information

All Directors are provided with reports and other relevant information on a timely manner, covering various aspects of the Group's operations and performance. They are also provided with an agenda and a set of board papers pertaining to agenda items prior to Board meetings for consideration and where appropriate, for decision. This is issued in sufficient time to enable the Directors to consider the matter to be deliberated and to obtain further explanation, where necessary, in order to be briefed properly before the Meeting. The Board has unrestricted access to all staff for any information pertaining to the Group's affairs. In addition, the Board has access to the advice and services of the Company Secretary and may seek professional advice from external consultants at the Company's expense should the need arise. At the Board meetings, the Management updates the Board on the business and market factors relevant to the Group.

Board Committees

The Board delegates certain responsibilities to the Board Committees. The Committees which were set up to assist the Board in certain area of decisions are:-

• Audit Committee • Nomination Committee • Remuneration Committee

Audit Committee

The Audit Committee reviews issues of accounting policy and presentation for external financial reporting, monitors the work of the internal audit function and ensures an objective and professional relationship is maintained with the external auditors. The Committee has full access to both the internal and external auditors who, in turn, have access at all times to the Chairman of the Committee. The composition and terms of reference to the Audit Committee may be found on pages 22 to 25.

The Nomination Committee

The terms of reference of the Nomination Committee (“NC”) adopted by the Board are as follows:

• To recommend appropriate candidates to the Board. • To determine annually whether or not a director is independent. • To decide whether or not a director is able and has been adequately carrying out his/her duties based on the following criteria:     - Attendance     - Preparedness     - Participation • To evaluate and propose objective performance criteria for the Board. erformance criteria that may be used include return on assets (ROA), return on equity (ROE), economic value added (EVA), return on sales, return on investment and etc. • To review the Board required mix of skills and experience and other qualities that Directors should bring to the Board. The Nomination Committee comprises the following members:

Member	Status
Brigadier General (R) Dato' Yahya bin Yusof (Chairman)	Non-Executive / Independent
Dato' Mohamed Nizam bin Abdul Razak	Non-Executive / Independent
Tjong Yik Min	Non-Executive / Non-Independent

The Remuneration Committee

The terms of reference of the Remuneration Committee (RC) are as follows:

• Made up of a composition of Non-Executive Directors, the majority of whom are independent of management and free from any business or other relationship, which may materially interfere with the exercise of their independent judgment. This ensures transparency in the development of the remuneration framework and minimises the risk of any potential conflict of interest. • Chaired by an Independent Non-Executive Director. • RC's recommendations are made in consultation with the Chairman of the Board and submitted for endorsement by the entire Board. • RC recommends to the Board a framework of remuneration for the Board and key executives and determines specific remuneration packages for each Executive Director and the CEO if the CEO is not an Executive Director. • The determination of remuneration packages of Non-Executive Directors is the matter of the Board and individuals concerned should abstain from discussion of their own remuneration. • No Director should be involved in deciding his own remuneration. • The RC covers all aspects of remuneration, including but not limited to Director's fees, salaries, allowances, bonuses, options and benefits-in-kind.

The Remuneration Committee comprises the following members:

Member	Status
Dato' Mohamed Nizam bin Abdul Razak (Chairman)	Non-Executive / Independent
Brigadier General (R) Dato' Yahya bin Yusof	Non-Executive / Independent
Tjong Yik Min	Non-Executive / Non-Independent

Directors' Training Programme

All Directors of the Board have successfully completed the Mandatory Accreditation Programme organised by the Research Institute of Investment Analysts Malaysia (RIIAM), now known as Bursa Malaysia Training Sdn Bhd, an affiliate of the Bursa Malaysia Securities Berhad. The Directors will continue to undergo other relevant training programmes to further enhance their knowledge in the latest statutory and regulatory developments to enable them to discharge their responsibilities more effectively and to keep abreast with development in the market place.

Re-Election of the Directors

In accordance with the Company's Articles of Association all Directors who are appointed by the Board are subject to election by shareholders at the first Annual General Meeting (.AGM.) subsequent to their appointment. The Articles also require that in every subsequent year, one-third of the remaining Directors or the number nearest to one-third, shall submit themselves for re-election by rotation at each Annual General Meeting. The names of Directors who are standing for re-election at the Thirty-First AGM of the Company to be held on 27 April 2005 are contained in the Statement Accompanying Notice of AGM.

Directors' Remuneration

The RC is responsible for reviewing and recommending the policy framework on the remuneration of Executive Director with the aim to attract, motivate and retain Directors of right caliber needed to run the Company successfully. The determination of the remuneration of the Non-Executive Directors is a matter for the Board as a whole.

For the year ended 31 December 2004, the aggregate remuneration of the Directors are as follows:-

	Directors' Fees (RM)	Salaries (RM)	Bonus (RM)	Benefits -In-Kind (RM)	Other Emoluments (RM)	Total (RM)
Executive	-	480,000	-	20,882	10,769	511,651
Non-Executive	43,500	-	-	-	266,667	310,167
	43,500	480,000	-	20,882	277,436	821,818

The number of Directors whose total remuneration fall within the following bands are as follows:

Number of Directors

Range of Remuneration	Executive	Non-Executive
RM50,000 and below	-	5
RM50,001 to RM100,000	-	2
RM100,001 to RM800,000	1	1
RM800,001 to RM850,000	-	-

RELATIONSHIP WITH SHAREHOLDERS

Relationship with Shareholders and Investors

The Group recognises the importance of establishing a direct line of communication with shareholders and investors through timely and thorough dissemination of information on the Group's performance and major developments via appropriate channels of communication. Dissemination of information includes the distribution of Annual Report and relevant circulars, issuance of press release inclusive of quarterly financial performance of the Group to Bursa Malaysia Securities Berhad (.Bursa Securities.) and the public as well as press conferences. To further enhance the transparency and communication with the shareholders and all concerned, the Company maintains a website at www.yeos.com which shareholders and the public are invited to access for information on the Company. All announcements released to the Bursa Securities are also available on Bursa Securities website at www.bursamalaysia.com.

Annual General Meeting (AGM)

The Chairman and the Board encourage shareholders to attend and participate in the AGM held annually. The AGM is the principal forum for dialogue and interaction with individual shareholders and investors where they may seek clarifications and comment on the Group's businesses and financial performance.

ACCOUNTABILITY AND AUDIT

Financial Reporting

In addition to providing the financial report on an annual basis, the Company also presents the Group's financial results on a quarterly basis via public announcements. The Audit Committee assists the Board in reviewing the information disclosed to ensure accuracy, adequacy and completeness of all annual and quarterly reports, audited or unaudited, and approved by Board before releasing to the Bursa Securities. The Directors are also responsible for ensuring that all financial statements are prepared in accordance with the Companies Act, 1965 and the applicable approved accounting standards in Malaysia. A statement by Directors of their responsibility in preparing the financial statements is set out on page 26 of this Annual Report .

Internal Control

The Board of Directors acknowledges its responsibilities for maintaining a sound system of internal control and forreviewing its adequacy and integrity. The internal control system covers all business processes and is designed to safeguard the Company's assets and shareholders' interest. The Board is satisfied with the design of the existing internal control system, which would continue to be improved, reviewed and updated in line with changes in the operating environment. The information of the Group's internal control is presented in the Statement of Internal Control set out on page 20 to 21 of this Annual Report.

Internal Audit Function

The Board outsourced its internal audit functions to a professional audit firm which assists the Audit Committee in monitoring and managing risks and internal control system of the Group. Among the responsibilities of the Internal Auditors are as follows: . To assist in reviewing the adequacy, integrity and effectiveness of the Group's internal control system for the Board to make an accurate Statement on Internal Control in the annual report; . To support the Audit Committee in evaluating the effectiveness of the existing internal control system, identify future requirements and recommend a prioritised action plan to further enhance the internal control system; and . To perform a risk assessment of the Group to identify the business processes within the Group that internal audit should focus on. The Internal Audit Plan and, accordingly, the work of the internal audit team is designed based on the analysis of the risks faced by the Group in meeting its business objectives and takes into consideration the concerns of management. The Internal Audit Plan is reviewed and approved by the Audit Committee. The Audit Committee provides necessary support to the internal auditors and management to ensure all major issues highlighted by the internal auditors are deliberated and satisfactorily resolved.

Relationship with External Auditors

Messrs. PricewaterhouseCoopers is the Company's external auditors. The Board through the establishment of an Audit Committee maintains a formal and transparent arrangement with the external auditors. The role of the Audit Committee in relation to the external auditors is described in the Audit Committee Report on page 23 to 24 of this Annual Report.

ADDITIONAL COMPLIANCE INFORMATION

Material Contracts

There were no material contracts entered into by the Company and its subsidiary companies which involve directors' and major shareholders' interests subsisting at the end of the financial year ended 31 December 2004 or entered into since the end of the previous financial year.

Non-Audit Fees

The non-audit fees paid/payable to the external auditors, PricewaterhouseCoopers for the financial year ended 31 December 2004 for tax and consultancy services totalling RM42,300.