HY cover2 · 2019-03-04 · notice Hing Yiap Knitting Industries Berhad (22414-V) 02 of annual general meeting NOTICE NOTICE IS HEREBY GIVEN THAT the Twenty-Eighth Annual General

02 Notice of Annual General Meeting

04 Statement Accompanying Notice of Annual General Meeting

05 Corporate Information

06 Group Financial Information

06 Financial Calendar and Share Price Movement

07 Profile of Directors

10 Statement of Corporate Governance

19 Statement on Internal Control

21 Audit Committee Report

26 Chairman’s Statement

29 Other Corporate Information

31 Financial Statements

79 Properties

81 Shareholdings Statistics

Proxy Form

contentsannual report 2003

CONTENTS

notice

Hing Yiap Knitting

Industries

Berhad(22414-V)

02

of annual general meetingNOTICE

NOTICE IS HEREBY GIVEN THAT the Twenty-Eighth Annual GeneralMeeting of the Members will be held at Function Room 1, Kuala LumpurGolf & Country Club, No. 10, Jalan 1/70D, Off Jalan Bukit Kiara, 60000Kuala Lumpur on Tuesday, 23 December 2003 at 10.00 a.m. for thefollowing purposes:

Resolution 1

Resolution 2

Resolution 3

Resolution 4

Resolution 5

Resolution 6

Resolution 7

To receive and consider the Audited Financial Statements for the financial year ended 30June 2003 together with the Reports of the Directors and Auditors thereon.

To declare a first and final dividend of 3.5 sen per share less income tax of 28% for thefinancial year ended 30 June 2003.

To approve Directors’ Fees of RM216,000 for the financial year ended 30 June 2003.

To re-elect Ms. Chi Oi Meng who retires as a Director of the Company pursuant to Article102 of the Company’s Articles of Association.

To re-elect Mr. Chi Kin Meng who retires as a Director of the Company pursuant to Article102 of the Company’s Articles of Association.

To appoint Messrs. Ernst & Young as the Auditors of the Company in place of the retiringauditors, Messrs. Sekhar & Tan to hold office until the conclusion of the next AnnualGeneral Meeting at a remuneration to be determined by the Directors.

Special Business:

To consider and if thought fit,to pass the following ordinary resolution:

AUTHORITY TO ISSUE SHARES PURSUANT TO SECTION 132D OF THECOMPANIES ACT, 1965

“THAT subject always to the approvals of the relevant authorities, the Directors of theCompany be and are hereby empowered pursuant to Section 132D of the Companies Act,1965 to issue shares in the Company at any time and upon such terms and conditions andfor such purposes as the Directors of the Company may in their absolute discretion deemfit, provided that the aggregate number of shares issued pursuant to this resolution doesnot exceed 10% of the issued capital of the Company as at the date of this Annual GeneralMeeting and that the Directors of the Company be and are hereby empowered to obtainthe approval for the listing of and quotation for the additional shares so issued on the KualaLumpur Stock Exchange and that such authority shall continue to be in force until theconclusion of the next Annual General Meeting of the Company.”

Hing Yiap Knitting Industries

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NOTICE OF ANNUAL GENERAL MEETING(continued)

To transact any other business for which due notice shall have been given.

By Order of the Board

Lim Boon Siang Chen Keow Ching Company Secretaries

Kuala Lumpur1 December 2003

NOTICE OF DIVIDEND ENTITLEMENT

NOTICE IS HEREBY GIVEN that the first and final dividend of 3.5 sen per share lessincome tax of 28%, in respect of the financial year ended 30 June 2003, if so approved bythe shareholders at the Twenty-Eighth Annual General Meeting, will be paid on 19 March2004 to shareholders appearing in the Register of Members or Record of Depositors as atthe close of business on 20 February 2004.

Further notice is given that a Depositor shall qualify for entitlement only in respect of:

1. Shares deposited into the depositor’s securities account before 12.30 pm on 18February 2004 (in respect of shares which are exempted from mandatory deposit);

2. Shares transferred into the depositor’s securities account before 4.00 pm on 20February 2004 in respect of ordinary transfers; and

3. Shares bought on the Kuala Lumpur Stock Exchange on a cum entitlement basisaccording to the Rules of the Kuala Lumpur Stock Exchange.

Notes1. A member entitled to attend and vote at the Meeting is not entitled to appoint more than one (1) proxy to attend and vote in

his stead. A proxy may but need not be a member of the Company. If a proxy is granted to a non-member of the Company, heneed not be any of the person described in Section 149(1)(b) of the Companies Act,1965.

Where a member is an authorised nominee as defined under the Securities Industry (Central Depositories) Act,1991, it mayappoint only one proxy in respect of each securities account it holds with ordinary shares of the Company standing to thecredit of the said securities account.

2. If the appointor is a corporation,the form of proxy should be executed under its common seal or under the hand of an officeror attorney duly authorised in that behalf.

3. The instrument appointing a proxy must reach the Registered Office of the Company at Lots 59-60, Lorong Kuang Bulan,Taman Kepong, 52100 Kuala Lumpur not less than forty-eight (48) hours before the time set for the Meeting or any adjournmentthereof.

4. Explanatory note on Special Business

Authority to issue shares pursuant to Section 132D of the Companies Act, 1965

The proposed Ordinary Resolution No. 7,if passed, will give the Directors of the Company, from the date of this Annual GeneralMeeting, authority to issue and allot ordinary shares from the unissued share capital of the Company for such purposes as theDirectors of the Company may consider to be in the interest of the Company. This authority will,unless revoked or varied bythe Company in general meeting, expire at the next Annual General Meeting of the Company.

agm

Hing Yiap Knitting

Industries

Berhad(22414-V)

04

STATEMENTACCOMPANYING

1. Directors who are standing for re-election at the Twenty-Eighth Annual GeneralMeeting of the Company:

Pursuant to Article 102 of the Company’s Articles of Association

• Ms. Chi Oi Meng• Mr. Chi Kin Meng

Further details of Directors who are standing for re-election are set out in the Profile ofDirectors appearing on pages 7 to 9 of the Annual Report.

2. The place, date and time of the Twenty-Eighth Annual General Meeting is set out inthe notice of Annual General Meeting.

notice of annual general meeting(Pursuant to Paragraph 8.28(2) of the Listing Requirements of Kuala LumpurStock Exchange)


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corporateinformation

CORPORATEBOARD OF DIRECTORSDato’ Azizi Yom Ahmad

Chairman

Chi Oi Meng Executive Deputy Chairman

Khoo Henn KuanChief Executive Officer

Chi Kin MengExecutive Director

Dato’ Paduka Dr. Khairuddin bin Mohamed YusofIndependent Non-Executive Director

Ng Teng SengIndependent Non-Executive Director

AUDIT COMMITTEEDato’ Paduka Dr. Khairuddin bin Mohamed Yusof

Chairman,Independent Non-Executive Director

Ng Teng SengIndependent Non-Executive Director

Chi Oi MengNon-Independent Executive Director

SECRETARIESLim Boon Siang

Chen Keow Ching

REGISTERED OFFICELots 59-60,Lorong Kuang Bulan

Taman Kepong52100 Kuala Lumpur

Tel :03-6276 6633Fax :03-6276 7780

Email :[email protected]

BUSINESS OFFICE Lots 58-60,Lorong Kuang BulanTaman Kepong52100 Kuala LumpurTel :03-6276 6633Fax :03-6276 7780Email :[email protected] : www.hingyiap.com

REGISTRARLawco Corporate Services Sdn BhdSuite 6.01,Level 6, Wisma Technip241,Jalan Tun Razak50400 Kuala LumpurTel :03-2730 1811Fax :03-2148 7868

AUDITORSSekhar & TanSuite 8.01,Level 8, Wisma Technip241,Jalan Tun Razak50400 Kuala Lumpur

SOLICITORSAzhar & GohSkrine

BANKERSMalayan Banking BerhadAmBank BerhadUnited Overseas Bank (Malaysia) BerhadHong Leong Bank Berhad

STOCK EXCHANGEKuala Lumpur Stock ExchangeSecond Board (21 February 1997)

STOCK CODE AND STOCK NAME7722 (International Securities IdentificationNumber (ISIN):MYL7722OO001); Hingyap

financial&

information

Hing Yiap Knitting

Industries

Berhad(22414-V)

06

financial informationGROUP

calendar FINANCIAL share

RM’000 2003 2002 2001 2000 1999 1998

Revenue 115,341 103,280 99,561 96,588 79,748 72,437

Profit Before Taxation 8,156 8,368 6,560 8,875 3,964 3,977

Net Profit 5,168 5,786 4,504 6,473 4,535 2,485

Paid-up Share Capital 41,787 41,787 31,257 20,795 20,363 19,995

Shareholders’ Funds 65,387 61,272 54,794 50,821 44,860 40,341

SEN PER SHARE 2003 2002 2001 2000 1999 1998

Earnings per Share, adjusted 12.37 14.09 11.26 16.43 11.79 6.47

Dividends per Share - Gross 3.50 3.50 3.50 5.00 3.00 1.00

RM 2003 2002 2001 2000 1999 1998

Net Tangible Assets per Share 1.49 1.38 1.64 2.27 2.02 1.82

The Company was listed on the Second Board of the Kuala Lumpur Stock Exchange on 21 February 1997.

QUARTERLY RESULTS ANNOUNCEMENT

- First quarter ended 30.9.2002 28.11.2002- Second quarter ended 31.12.2002 24.2.2003- Third quarter ended 31.3.2003 28.5.2003- Fourth quarter ended 30.6.2003 28.8.2003

SHARE PRICES ON THE KUALA LUMPUR STOCK EXCHANGE

10 months Calendar Year31.10.2003 2002 2001 2000 1999 1998

Highest - RM 1.25 1.38 1.14 0.86 1.74 4.17

Lowest - RM 0.74 0.70 0.70 0.73 0.73 0.35

Closing - RM 1.06 0.90 1.08 0.78 1.10 1.44

Where applicable, the share prices have been adjusted for bonus issues that were allotted in 2001 and 2002

PRICE MOVEMENT

DATO’ AZIZI YOM AHMAD

Dato’ Azizi Yom A h m a d, aged 54,Malaysian, is the Non-Executive Chairmanof the Board of Directors. He was appointedto the Board on 18 August 1994. Heobtained his Bachelor of Economics degreefrom Monash University,Australia and is an associatemember of the Institute ofChartered Accountants inAustralia. Dato’ Azizi has had a successfulc a r e e r, where he started off with BankNationale de Paris in Australia beforereturning to Malaysia and served in variousorganisations such as the Head of theAccounting Department of MalayanBanking Berhad in 1983, Manager of theAccounting Department of Bank NegaraMalaysia in 1984, and Secretary of theCapital Issues Committee in 1985, aposition he held until 1991. Thereafter, hebecame the Managing Director of RHBSakura Merchant Bankers Berhad (thenknown as DCB Sakura Merchant BankersBerhad). In 1993, he ventured into privatebusiness and he now sits on the board ofSeacera Tiles Berhad, where he is also theExecutive Vice-Chairman and severalprivate companies.

Dato’ Azizi does not have any familyrelationship with any Director and/or majorshareholder nor have any conflict of interestwith Hing Yiap Knitting Industries Berhad.He has had no conviction for any offenceswithin the past ten (10) years. Dato’ Aziziattended four (4) out of the five (5) Boardmeetings held during the financial year. Hisshareholding in the Company is disclosedin page 36 of the Directors’ Report.


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07profile of

DIRECTORS

CHI OI MENG

Chi Oi Meng, aged 46, Malaysian, was appointed to the Boardon 18 March 1988 and is the Executive Deputy Chairman of theCompany. She graduated with a Bachelor of Commerce degreefrom the University of Melbourne, Australia and is a member ofthe Australian Society of Certified Practising Accountants. Shejoined the Company in 1984 as the accountant cum personalassistant to the then managing director. Ms Chi rose throughthe ranks in the Company and was the Managing Director priorto assuming her present post.

Ms Chi is also a member of the Audit Committee andEmployees’ Share Option Scheme (“ESOS”) Committee. She hashad no conviction for any offences in the past. She attended allfive (5) Board meetings held during the financial year. She is nota director of other public companies.

Ms Chi is the spouse of Mr Khoo Henn Kuan and sister to Mr Chi Kin Meng, and is also a substantial shareholder of theCompany. Her shareholdings in the Company and subsidiarycompanies are disclosed in page 36 of the Directors’ Report.Save for certain recurrent related party transactions of arevenue nature disclosed in Note 28 to the financial statements,Ms Chi does not have any conflict of interest with the Company.

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PROFILE OF DIRECTORS (continued)

KHOO HENN KUAN

Khoo Henn Kuan, aged 48, Malaysian, is the Chief ExecutiveOfficer and an Executive Director of the Company. Hegraduated with a Bachelor of Architecture degree from theUniversity of Melbourne in 1981. He also holds a Master degreein Town and Country Planning from University of Sydney and isa member of the Malaysian Institute of Management and theMalaysian Institute of Architects.

M r. Khoo started his career as anA r c h i t e c t - Town Planner in 1983 inAustralia. Upon his return to Malaysia in1 9 8 4 , he continued his career as anArchitect-Town Planner in a professionalarchitecture and town planning firm inKuala Lumpur before joining theCompany as General Manager in 1988.He was appointed to the Board on 20February 1989 and to his present positionas Chief Executive Officer in 1995.

Mr Khoo is a member of the ESOSCommittee. He has had no conviction forany offences in the past. He attendedfour (4) out of the five (5) Board meetingsheld during the financial year. He is not adirector of other public companies.

Mr Khoo is the spouse of Ms Chi Oi Mengand brother-in-law to Mr Chi Kin Meng,and is also a substantial shareholder ofthe Company. His shareholdings in theCompany and subsidiary companies aredisclosed in page 36 of the Directors’Report. Save for certain recurrent relatedparty transactions of a revenue naturedisclosed in Note 28 to the financialstatements, Mr Khoo does not have anyconflict of interest with the Company.

CHI KIN MENG

Chi Kin Meng, aged 35, Malaysian, is theExecutive Director of Hing Yiap KnittingIndustries Berhad and was appointed to the Board on 22 March 2000. He holds a Bachelor Degree in BusinessA d m i n i s t r a t i o n , Michigan University,United States of America. Upon graduationin 1992, he joined a company in the UnitedStates of America as a management traineeprior to joining the Company in 1993,initially as a Plant Manager, and then risingthrough the ranks to General Managerbefore assuming the current post.

Mr Chi has had no conviction for anyoffences in the past. He attended four (4)out of the five (5) Board meetings heldduring the financial year. He is not adirector of other public companies.

Mr Chi is the brother of Ms Chi Oi Mengand brother-in-law to Mr Khoo Henn Kuan,and is also a substantial shareholder of theC o m p a n y. His shareholdings in theCompany and subsidiary companies aredisclosed in page 36 of the Directors’Report. Save for certain recurrent relatedparty transactions of a revenue naturedisclosed in Note 28 to the financials t a t e m e n t s , Mr Chi does not have anyconflict of interest with the Company.


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PROFILE OF DIRECTORS (continued)

DATO’ PADUKA DR. KHAIRUDDIN BIN MOHAMED YUSOF

Dato’ Paduka Dr. Khairuddin bin Mohamed Yusof, aged 64, Malaysian, is an IndependentNon-Executive Director and was appointed to the Board on 5 October 1989. He graduatedwith a MBBS degree from Sydney University, Australia in 1964 and became a Member ofthe Royal College of Obstetrics and Gynaecology (Sydney) in 1972. He was made a Fellowof the Royal College of Obstetrics and Gynaecology (United Kingdom) and a Fellow of theInstitute and College of Surgeons (United Kingdom) in 1984. He was a senior consultant inclinical obstetrics and gynaecology at Universiti Hospital (now known as Universiti MalayaMedical Centre),while at the same time holding the post of professor of Social Obstetricsand Gynaecology in Universiti Malaya. He was awarded a lifetime achievement award bythe Asia-Pacific Academic Consortium for Public Health. For a time he was an honoraryprofessor at the School of Public Health,University of Hawaii.

Dato’ Paduka Dr. Khairuddin hashad a distinguished career inmedicine and tertiary education,having served Universiti Malayain various capacity, starting as alecturer and then progressing through the ranks to Dean,Faculty of Medicine in 1986. He was also the Deputy Vice-Chancellor (Finance and Development) from 1986 to 1989 andon several occasions served the university in his capacity asthe Acting Vice-Chancellor.

He is very active in community service, having served atvarious times as a consultant in his field of expertise to theMalaysian Government and international organisations suchas the World Bank, UNICEF, Rand Corporation, Asia-PacificAcademic Consortium for Public Health and the World HealthOrganisation. He was actively involved as a consultant toSIRIM on artificial intelligence, and is currently a consultant toPerak College of Medicine and a Director of TelemedicineS e r v i c e s , WorldCare Health (Malaysia) Sdn Bhd. He haspublished textbooks and academic papers during his career. Asports and dance enthusiast, Dato’ Paduka Dr. Khairuddinactively participates in dancing, mountaineering, marathon,running, triathlon and the iron-man challenge.

He is the Chairman of the Audit Committee of the Company.He is not a director of other public companies.

Dato’ Paduka Dr. Khairuddin does not have any familyrelationship with any Director and/or major shareholder norhave any conflict of interest with Hing Yiap Knitting IndustriesBerhad and does not hold any shares in the Company andsubsidiary companies. He has had no conviction for anyoffences within the past ten (10) years. Dato’ Paduka Dr.Khairuddin attended four (4) out of the five (5) Board meetingsheld during the financial year.

directorsNG TENG SENG

Ng Teng Seng, aged 48, Malaysian, is anIndependent Non-Executive Director of theCompany since 1 July 2001. He graduatedwith a Bachelor of Arts (Economics) Degreefrom Wilfrid Laurier University, O n t a r i o ,Canada. He has extensive sales andmarketing experience in consumerproducts in the Asian region,having servedin various capacities with MalayanB r e w e r i e s , F&N Group Products, R . J.Reynolds Tobacco, Liggett (US) Inc. andSriwani Holdings Berhad.

Mr Ng is a member of the Audit Committeeof the Company. He is not a director ofother public companies.

Mr Ng does not have any familyrelationship with any Director and/or majorshareholder nor have any conflict of interestwith Hing Yiap Knitting Industries Berhadand does not hold any shares in theCompany and subsidiary companies. Hehas had no conviction for any offenceswithin the past ten (10) years. Mr Ngattended all five (5) Board meetings heldduring the financial year.

corporategovernance

Hing Yiap Knitting

Industries

Berhad(22414-V)

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CORPORATE GOVERNANCE

The Board of Directors of Hing Yiap Knitting Industries Berhad (“Hing Yiap”or the “Company”) is pleased to reporton the manner in which the Principles set-out in Part 1 of the Malaysian Code on Corporate Governance (the “Code”) are applied and the extent of compliance with the Best Practices in Corporate Governance set-out inPart 2 of the said Code, pursuant to paragraph 15.26 of the Kuala Lumpur Stock Exchange (“KLSE”) ListingRequirements (the “Listing Rules”).

The Board recognizes the importance of adopting a good corporate governance culture in the organisation. TheBoard takes cognizant of the fact that appropriate standards of corporate governance should be practisedthroughout the Company, based on the Company’s culture and business,as a fundamental part of discharging itsresponsibilities towards the protection and enhancement of shareholder value and financial performance of theCompany.

The Company’s operations are neither complex nor sophisticated to warrant a complete formalisation of policiesor a comprehensive form of reporting. There is an implicit understanding of duties and responsibilities. The Boardrecognises that cost competitiveness and effective management remain a key consideration in the Company’soperating environment and has to be balanced with the Principles and Best Practices of the Code. The BestPractices promulgated may not be practical to be implemented in its recommended form.

Following the implementation of the KLSE Listing Requirements, the Board appointed an independent externalconsultant to review the state of Hing Yiap’s corporate governance vis-à-vis the Code. The Board had adopted thediagnostic review report and certain practical recommendations were implemented. The Board shall considerimplementing the other recommendations made in the diagnostic report in the medium term.

The Principles of the Code applicable to the Company are as follows:

Part A:DirectorsPart B:Directors’ RemunerationPart C:ShareholdersPart D:Accountability and Audit

The manner in which the Company has applied the foregoing Principles is described in the following paragraphs.

PART A: DIRECTORS

The Board

The Board of Directors of Hing Yiap provides the leadership and control for the Company. The Board meets atregular intervals and is responsible for the proper management of the Company. All Board members bring anindependent judgement to bear on the issues of strategy, performance and resources,including appointments andstandards of conduct.

statement of


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STATEMENT OF CORPORATE GOVERNANCE (continued)

The Board meets at least four (4) times a year and additional Board meetings are convened where necessary.Sufficient notices are given to the Board prior to each meeting. During the financial year, the Board has convenedfive (5) meetings,as follows:

Meeting No. Date Time

3/2002 Wednesday, 28 August 2002 11.00 a.m.4/2002 Wednesday, 16 October 2002 11.30 a.m.5/2002 Thursday, 28 November 2002 11.30 a.m.1/2003 Monday, 24 February 2003 2.45 p.m.2/2003 Wednesday, 28 May 2003 11.50 a.m.

The Board meetings were all held at the registered office at Lots 59-60,Lorong Kuang Bulan, Taman Kepong, 52100Kuala Lumpur.

The Company Secretary records minutes of meetings and conclusions by the Board in the discharge of their dutiesand responsibilities.

All the Directors have attended at least 50% of the total Board meetings held. Their attendances are as follows:

Director No. of Meetings attended

Y.Bhg. Dato’ Azizi Yom Ahmad 4/5Chi Oi Meng 5/5Khoo Henn Kuan 4/5Y.Bhg. Dato’ Paduka Dr. Khairuddin bin Mohamed Yusof 4/5Chi Kin Meng 4/5Ng Teng Seng 5/5

Best Practices in Corporate Governance as set-out in Part 2 of the Code provides that the Board explicitly assumessix (6) specific responsibilities,which facilitate the discharge of the Board’s stewardship responsibilities. The stateof the Company’s compliance with these specific responsibilities and alternative practices adopted are as follows:

1. Reviewing and adopting strategic plan for the Company

A business and marketing plan is developed by management to chart the direction of the Company’s businessat the start of every financial year. Management would brief the Board on the business direction and actionplans that will be undertaken. The Company recognises that the fashion industry and retailing environment isdynamic and constantly evolving. Management has to be constantly aware of such challenges and adaptaccordingly, even if such modification and change involves a complete different set of action plans. The Boardis informed at the Board meetings of the state of the Company’s business environment and revised actionplans that may have been taken.

2. Overseeing the conduct of the Company’s business to evaluate whether the business is beingproperly managed

The Executive Directors are involved in the day-to-day operations of the Company, having the relevantknowledge and experience of the business and industry. They are supported by executives who have therelevant experience in finance, human resource, p r o d u c t i o n , s o u r c i n g, m e r c h a n d i s i n g, marketing andoperations. The Non-Executive Directors,who have diverse experience, bring a broader view and input to theCompany’s activities.

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3. Identifying principal risks and ensure the implementation of appropriate systems to managethese risks

Currently the Company has not formalized a system of risk identification and management. Risk assurancesare performed by the internal audit function on business processes. The Executive Directors, based on theirintimate knowledge and experience of the business, and the executives that formed the management teamare implicitly expected to have a degree of knowledge of the principal risks and to ensure the implementationof a proper system to manage such risk.

4. Succession planning, including appointing, training, fixing the compensation of and whereappropriate, replacing senior management

The Board has not adopted a formalized succession plan for management. It is implied that the dailyoperations of the Company can be rested among the Executive Directors,and supported by executives of themanagement in the various discipline. The Executive Directors determine the appointment, training andcompensation for all employees. Should a successor be required and no suitable candidate can be foundinternally, the Company may find candidates from external sources.

5. Developing and implementing an investor relations programme or shareholder communicationspolicy for the Company

The Board has not formalized an investor relations programme or shareholder communications policy.Investors and shareholders are informed of the Company’s business by way of the quarterly announcement offinancial results, and other requisite announcements of corporate developments, and communication withshareholders in the Annual General Meeting. The Company is not adverse to communication with investorsand shareholders and has entertained requests for documents and information from such investors andshareholders.

6. Reviewing the adequacy and the integrity of the Company’s internal control systems andmanagement information systems, including systems for compliance with applicable laws,regulations, rules, directives and guidelines.

Management is tasked with ensuring that a proper system of internal control is in place. This task issupplemented by the internal audit function. During the financial year, an external consultant,with specializedskills in system improvement, organization and methods, was appointed to review and to recommendimprovements to certain critical processes of the Company’s business. The key recommendations of theconsultant have been implemented.

Board Balance

The Articles of Association of Hing Yiap provides that the number of Directors shall not be less than two (2) or morethan twenty (20). The current Board comprises six (6) Directors,of which three (3) are Executive Directors and two(2) or one-third are Independent Non-Executive Directors. The Board is chaired by a Non-Executive Director. TheExecutive Directors,who are jointly deemed to be a significant shareholder, are family members and are involvedin the daily management of the Company. The Non-Executive Directors are independent of management and haveno relationships that could materially interfere with the exercise of their independent judgement. Together, theDirectors have wide ranging experience in business,corporate and financial experience.

The Board is free to discuss all matters regarding the affairs of the Company, without any restrictions or limitationsbeing imposed on any Director. Where matters discussed involve the interest of the Executive Directors,they shallstate their interest and shall refrain from discussions and decision-making, and in such conflict of situation thedecision of the Non-Executive Directors shall prevail.


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No individual or a company of individuals dominates the Board’s decision making.

The roles of the Chairman of the Board and the Chief Executive Officer are not combined.

Dato’ Paduka Dr. Khairuddin bin Mohamed Yusof, an Independent Non-Executive Director, also assumes the roleas Senior Independent Non-Executive Director.

Based on the nature of the Company’s business and the size of its operations, the present Board representationfairly reflects the interest of significant shareholder and minority shareholders.

The Board may consider developing a policy to assess the size of the Board to determine the impact of the numberupon its effectiveness.

Supply of Information

Directors are given appropriate information in advance of each Board meeting. These information include, and notlimited, to the following:

• Draft quarterly financial report prior to public release.• Draft announcements of any corporate proposals prior to public release.• A report on current trading and business issues.• Draft minutes of meeting of the previous Board meeting.• Minutes of meeting of the Audit Committee.• Summary of Directors’ resolutions of the Company that were made since the last Board meeting.• Proposals for any corporate exercise, including acquisitions and disposals.• Summary of related party transactions.• Changes in Directors and substantial shareholders’ shareholding in Hing Yiap.• Reports of the external and internal auditors.• Replies to queries from the authorities.

The Company Secretary and management normally assist the Chairman in organising the information necessaryfor the Board to deal with the agenda and providing the information to the Directors on a timely basis.

In the furtherance of their duties,the Directors have access to all information within the Company, to seek advisefrom independent professional advisors at the Company’s expense and access to the advice and services of theCompany Secretary.

The Audit Committee reports to the Board during the Board meeting. The terms of reference, authority andactivities of the Audit Committee, which are approved by the Board, are detailed in pages 21 to 25.

The Board may consider implementing the following matters in the future:

• Develop a formal schedule of matters specifically reserved to it for decision to ensure that the direction andcontrol of the Company is firmly in its hands.

• Develop position descriptions for the Board and the Chief Executive Officer, involving definition of the limitsto management’s responsibilities.

• Develop corporate objectives which the Chief Executive Officer is responsible for meeting.

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Appointments to the Board

Hing Yiap does not have a nomination committee for the appointment of new Director, due to the relative smallsize of the Company’s business and present Board composition. The full Board shall deliberate and decide on theappointment of new Director if nominees are proposed. During the financial year there were no nominees proposedfor the Board’s consideration.

The Board is entitled to the services of the Company Secretary who ensures that all appointments are properlymade, that all necessary information is obtained from Directors,both for the internal records and for the purposesof meeting statutory obligations, as well as obligations arising from the Listing Rules or other regulatoryrequirements.

The Joint Company Secretaries are appointed by the Board and are persons who are capable of carrying out theduties in which the post entails,providing effective support to the Chairman and Deputy Chairman to ensure theeffective functioning of the Board. Removal of Company Secretary is a matter for the Board as a whole to decide.

All the Directors have attended the “Mandatory Accreditation Programme” organized by Research Institute ofInvestment Analysts, an affiliate company of the KLSE. Pursuant to Practice Note No. 15/2003 – “ContinuingEducation Programme”issued by the KLSE,the Directors shall endeavour to comply with the new requirement ofthe KLSE.

The Board shall consider implementing the following matters in the future:

• Develop a formal annual review of the mix of skills and experience and other qualities, including corecompetencies which Non-Executive Directors should bring to the Board.

• Develop a policy to assess the effectiveness of the Board as a whole, the committees of the Board and thecontribution of each individual Director.

• Develop a continuing education programme for Directors in the furtherance of their duties.

Re-election

In accordance with the Articles of Association, all Directors who are appointed by the Board shall hold office onlyuntil the next annual general meeting and shall be eligible for re-appointment by the shareholders.

In addition, the Articles of Association also provides that at every annual general meeting, one-third of theDirectors,including the Managing Director, shall retire from office provided always that all Directors shall retire atleast once in every three (3) years. A retiring Director shall be eligible for re-election.

PART B: DIRECTORS’ REMUNERATION

The Level and Make-up of Remuneration

The Board has adopted the Principle as recommended by the Code. The Board ensures that the level ofremuneration is sufficient to attract and retain Directors needed to run the Company successfully. The componentpart of remuneration have been structured to link rewards to corporate and individual performance for ExecutiveDirectors whilst Non-Executive Directors’ remuneration reflect the experience and level of responsibilitiesundertaken by individual Non-Executive Directors.


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Procedure

The Board has not appointed a remuneration committee as it is of the opinion that the Board as a whole coulddetermine the remuneration of Directors,with outside advice where necessary. The practices adopted by the Boardare as follows:

• When considering the remuneration of the Executive Directors, decisions are made by the Non-ExecutiveDirectors. The Executive Directors refrain from any form of deliberation and play no part in the decision-making process of their own remuneration.

• The remuneration of the Non-Executive Directors is a matter for the Board as a whole to decide. The individualDirector concerned abstains from discussion of his own remuneration.

• All Directors’ remuneration are subject to the approval of the shareholders in the Annual General Meeting.

Disclosure

Directors’ Remuneration and remuneration policy are as follows:

Directors’ Remuneration during the financial year

a. Aggregate Remuneration

Executive Non-Executive Directors Directors Total

RM RM RM

Fees 108,000 108,000 216,000Salaries and other emoluments 787,376 - 787,376Bonus 109,600 - 109,600Benefits-in-kind 103,421 - 103,421

Total 1,108,397 108,000 1,216,397

b. Remuneration Band

NumberAmount Executive Directors Non-Executive Directors

Below RM 50,000 - 3RM 150,001 to RM 200,000 1 -RM 350,001 to RM 400,000 1 -RM 400,001 to RM 450,000 1 -

The Company does not disclose details of the remuneration of each Director as the Board is of the view that suchdisclosure may jeopardize the personal security and safety of the Directors.

Remuneration Policy

The Board’s policy is to ensure that the remuneration practices of the Company are competitive, thereby enablingthe Company to attract and retain Directors needed to run the Company successfully and the linking of rewards tocorporate and individual performance.

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The remuneration policy of Hing Yiap is also governed by Article 86 of the Articles of Association. The salientfeatures of Article 86 are as follows:

• Directors’ fees for Non-Executive Directors shall be paid by a fixed sum and not by a commission on orpercentage of profits or turnover;

• Salaries for Executive Directors shall not include a commission on or percentage of turnover;• Fees payable to Directors shall not be increased except pursuant to a resolution passed at a general meeting,

where notice of the proposed increase has been given in the notice convening the meeting;• Any fee paid to an alternate director shall be agreed between himself and the Director nominating him and

shall be paid out of the remuneration of the latter;• No payment shall be made to any Director as compensation for loss of office or as consideration for his

retirement from office unless particulars with respect of the proposed payment (including the amount thereof)have been disclosed to the members and the proposal has been approved in a general meeting.

It is Hing Yiap’s practice to pay the Directors’ fees in one lump sum immediately upon the conclusion of the AnnualGeneral Meeting where the requisite approval has been obtained from the shareholders. If a Director vacates officeprior to the convening of the Annual General Meeting, the Directors’ fees due to him up to the date of vacation shallbe immediately paid to him.

The remuneration package of the Executive Directors is set-out in their service contracts with the Company, whichwere reviewed and approved by the Non-Executive Directors in the Board meeting held on 15 October 2001. Theservice contracts, which take effect on 15 October 2001 for duration of three (3) years, contain the followingelements:

• Basic salary is reviewed annually and any increment is discretionary and subject to satisfactory performanceand contribution to the Company.

• Annual bonus is discretionary and reviewed annually subject to the performance of the Company.• Contribution to the Employees Provident Fund is based on the statutory rate.• Benefits-in-kind, includes a company car and leave passage.• Compensation for loss of office, which is calculated based on three (3) months of the last drawn salary for each

year of service as a Director with Hing Yiap.

The Board as a whole determines the remuneration of the Non-Executive Directors, who do not take part in thediscussions on their own remuneration.

PART C: SHAREHOLDERS

Dialogue between Companies and Investors

The Board has not formalized an investor relations programme or shareholder communications policy. TheCompany is not adverse to communication with investors and shareholders and has entertained requests fordocuments and information from such investors and shareholders.

The Board views the Annual General Meeting as an ideal opportunity to communicate with investors. Whilst theCompany endeavours to provide as much information as possible to its shareholders,it is also wary of the legal andregulatory framework governing the release of material and price-sensitive information.


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Investors and shareholders are informed of the Company’s business development by way of the quarterlyannouncement of financial results and annual reports, and other requisite announcements of corporatedevelopments. These information may be assessed from the website of the KLSE at www.klse.com.my. In addition,interviews conducted from time to time by local journalists with the management of the Company are reported inthe local newspapers.

The Annual General Meeting

The Annual Report, which contains the Notice of Annual General Meeting, is sent to the shareholders at leasttwenty-one (21) days prior to the date of the meeting. The Notice of Annual General Meeting, which sets-out thebusiness to be transacted at the Annual General Meeting, is also published in a major local newspaper. In the caseof election or re-election of Directors, the Statement Accompanying the Notice of Annual General Meeting willhave a brief description of the Directors concerned. Item of special business included in the Notice of AnnualGeneral Meeting will be accompanied by an explanation of the proposed resolution.

At each meeting, shareholders are able to participate in the question and answer session in respect of the matterslisted in the Notice of Annual General Meeting. There is no time limitation for shareholders to raise questions andto solicit reply from the Board.

A press conference is held at the end of each Annual General Meeting where the Chairman,Chief Executive Officerand other executives of the management will field questions from the media in respect of the resolutions passedand other matters pertaining to the Company’s business.

The last Annual General Meeting was held at Matahari 1,Level 5,Cititel Mid Valley, Mid Valley City, Lingkaran SyedPutra,59200 Kuala Lumpur on Monday, 23 December 2002.

PART D: ACCOUNTABILITY AND AUDIT

Financial Reporting

The Company operates, and attaches importance to clear principles and procedures designed to achieveaccountability and control appropriate to its business. In presenting the annual financial statements and quarterlyfinancial reports, the Directors aim to present a balanced and understandable assessment of the Company’sposition and prospects.

Statement of Directors’ Responsibility for preparing the Annual Audited Financial Statements

The Directors are required by the Companies Act,1965 (“the Act”) to prepare financial statements for each financialyear which give a true and fair view of the state of affairs of the Company and the Group at the end of the financialyear and of their results and cashflows for the financial year ended on that date. The Act and the ListingRequirements of KLSE require the financial statements to be prepared in accordance with the applicable approvedaccounting standards in Malaysia and the provisions of the Act.

The Directors have considered that, in the preparation of the financial statements for the financial year ended 30June 2003,the Group has used appropriate accounting policies, which are consistently applied and supported byreasonable and prudent judgements and estimates.

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The Directors are responsible for ensuring that proper accounting records are kept which disclose with reasonableaccuracy the financial position of the Company and the Group, which enable them to ensure that the financialstatements comply with the Act. The Directors have general responsibility for taking such steps as are reasonablyopen to them to safeguard the assets of the Group,and to prevent and detect fraud and other irregularities.

Internal Control

The Board maintains a reasonable sound system of internal control to safeguard shareholders’ investments and theCompany’s assets. The Company’s Statement on Internal Control is detailed in pages 19 to 20.

Relationship with the Auditors

The Audit Committee and the Board have established formal and transparent arrangements to maintain anappropriate relationship with the auditors as stated in the Audit Committee Report in pages 21 to 25.

This Statement of Corporate Governance is made in accordance with a resolution of the Board dated 31 October2003.

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statement on

Internal Control

The Board of Directors (“the Board”) of Hing Yiap Knitting Industries Berhad (“HYKI”or “the Group”) acknowledgesits overall responsibility for the Group’s system of internal control and the need to review its adequacy and integrityregularly. In this connection, the Board is pleased to provide the following Statement on Internal Control whichoutlines the scope of internal control of HYKI during the financial year pursuant to paragraph 15.27 (b) of the KualaLumpur Stock Exchange Listing Requirements.

The Board recognises that risks cannot be eliminated completely, and as such, the system of internal control ofHYKI is designed to manage rather than eliminate the risk of failure to achieve business objectives and thus canonly provide reasonable but not absolute assurance against material misstatement or loss.

The Board also ensures that the external auditors review the Statement on Internal Control and report the resultsthereof to the Board annually.

The following elements of a sound system of internal control are present in HYKI:

• Strategic Business Direction

The Group’s business objectives, vision, mission and corporate values are communicated throughout theorganisation through its Business Plan, management meetings and interaction between the ExecutiveDirectors with management and employees. The Board has reviewed and adopted the Business Plan.

• Risk Management

The Board is fully aware of the principal risks faced by HYKI and has put in place the appropriate controls tomanage these risks through the involvement of the Executive Directors in the day-to-day operations of theGroup. The performance of HYKI is monitored through strategic, management and operational level meetings.Significant matters identified during these meetings are highlighted to the Board on a timely basis.

• Audit and Credit Committees

The Audit Committee is tasked with responsibilities on accounting and reporting practices, internal andexternal auditors, and the adequacy of administrative, operating and accounting controls. In addition, HYKIhas in place a Credit Committee to assist the management to review its collection and debtors’ performance.This Credit Committee has been tasked with the responsibilities to monitor credit collection and implementcredit control policies to manage credit risks. Significant developments and matters under their purview willbe highlighted to the Board.

The Board reviews the minutes of meetings of the Audit Committee. The terms of reference of the AuditCommittee is set-out in the Audit Committee Report on pages 21 to 25 of the Annual Report.

• Internal Audit Function

HYKI outsourced its internal audit function to a reputable international professional services firm,whose remitis to the Audit Committee. In connection with the internal audit of HYKI, the Audit Committee has approvedan internal audit plan, which was co-developed by the outsourced internal audit function and the AuditCommittee. Applying a risk-based approach, periodic internal audit visits have been carried out to monitorcompliance with the Group’s procedures and to provide assurance on the effectiveness of the Group’s systemof internal control.

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STATEMENT ON INTERNAL CONTROL (continued)

• Policies and Procedures

The manufacturing function of HYKI has been awarded with MS ISO 9001:2000 Quality Management SystemsCertification. ISO procedures manuals have laid out the policies and procedures to govern various aspects ofbusiness operations incorporating necessary controls to mitigate risks. The policies and procedures areperiodically reviewed to ensure they continue to be relevant as business evolves.

During the final quarter of the financial year, management appointed an external ISO consultant to reviewexisting procedures and controls, recommend improvement pursuant to this review and to assist in theimplementation of certain key critical processes of the subsidiary companies. The consultant, working intandem with a working committee appointed specifically for this purpose, has prepared a Standard OperatingProcedures (“SOP”) manual for the key critical processes. The implementation of the SOP is currently inprogress and the working committee will jointly review the effectiveness of the new measures during thesecond quarter of the financial year ending 30 June 2004.

• Organisation Structure and Corporate Culture

The current organisational structure enables a clear reporting line from lower management level up to theBoard. Job functions and areas of responsibilities of certain employees are outlined in job descriptions andauthority chart. HYKI also practices an “open-door” policy that allows matters to be identified and resolvedtimely and efficiently.

During the financial year, a high-level assessment of the Group’s system of internal control was undertaken by theinternal audit function to assess the Group’s readiness to make the Statement on Internal Control, based on the“Statement on Internal Control: Guidance for Directors of Public Listed Companies” issued by the Kuala LumpurStock Exchange’s Task Force on Internal Control. This assessment has identified the following key features ofHYKI’s system of internal control, including those highlighted above:

• Strategic Business Plan that define HYKI’s business objectives and future directions.• The Board is aware of the principal risks affecting the Group and has implemented relevant controls to manage

these risks.• Clear organisation structure with defined reporting lines.• ISO policies and procedures which define the expected standard of operations.• Internal quality audits to ensure that ISO policies and procedures are being complied with.• Meetings involving Executive Directors,senior management and heads of department are regularly held with

significant matters escalated to the Board.• Adoption of “hands-on”and “open-door”management policy by the Executive Directors and management.• Employees are given “on-the-job”training and sent for appropriate training when necessary.• Independent assurance on the system of internal control from periodic internal audit visits.

Following this assessment, the Board together with management has developed and begin to take measures tofurther enhance the Group’s system of internal control.

At this juncture, the Board is of the view that the system of internal control that has been instituted throughout theGroup is sound and sufficient to safeguard shareholders’ investment and the Group’s assets. Notwithstanding this,on-going reviews are continuously carried out to ensure the effectiveness of the system. The Board is committedtowards operating a sound system of internal control and effective risk management throughout the Group. TheBoard is also cognisant of the fact that the system of internal control and risk management practices mustcontinuously evolve to support the type of business and size of operations. As such,the Board will,when necessary,put in place appropriate action plans to rectify any potential weaknesses or further enhance the system of internalcontrol.

This Statement on Internal Control is made in accordance with a resolution of the Board dated 31 October 2003.


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21MEMBERS OF THE AUDIT COMMITTEE

Dato’ Paduka Dr. Khairuddin bin Mohamed Yusof Chairman,Independent Non-Executive Director

Ng Teng Seng Independent Non-Executive Director

Chi Oi Meng Non-Independent Executive Director, member of the Australian Society of Certified Practising Accountants

ROLE OF THE AUDIT COMMITTEE

1. Assisting the Board of Directors in the discharge of their statutory duties and responsibilities in the followingareas:

• Preparation of quarterly financial reports and annual financial statements that give a true and fair view ofthe Group’s affairs and results.

• Manage the Group’s affairs in compliance with laws and regulations and proper standards of conduct.• Establishment and maintenance of internal controls for areas of risks to provide reasonable and reliable

financial information.• Review of the quality and performance of the internal and external audit function.

2. Provide, by way of regular meetings,a line of communication between the Board and the internal and externalauditors.

3. Enhance the perception held by other interested parties (shareholders, regulators, creditors, etc) of thecredibility and objectivity of the financial reports.

TERMS OF REFERENCE

1. Membership

The Committee shall be appointed by the Board from amongst the Directors of the Company and shall consistof not less than three (3) members with a majority of independent non-executive directors. An independentnon-executive member shall not have any family relationship with an executive director of the Company or ofany related company or any relationship, which in the opinion of the Board, would interfere with his/herindependent judgement.

At least one (1) member of the Committee must be a member of the Malaysian Institute of Accountants,or ifhe/she is not a member of the Malaysian Institute of Accountants, he/she must have at least three (3) years’working experience and must be a member of one of the associations of accountants specified in Part II of the1st Schedule of the Accountants Act,1967.

No alternate director can be appointed as a member of the Committee.

auditcommitteecommittee reportAUDIT

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AUDIT COMMITTEE REPORT(continued)

The Chairman of the Committee shall be elected by the members of the Committee and shall be anindependent non-executive member of the Committee.

Members of the Committee may relinquish their membership in the Committee with prior written notice tothe Secretary. In the event of any vacancy in the Committee, the vacancy should be filled within a period ofthree (3) months.

2. Attendance at Meetings

The majority of members present in order to form a quorum necessary for the transaction of business of theAudit Committee shall be the independent non-executive directors,and in any case shall not be less than two(2) independent non-executive directors.

The number of Audit Committee meetings held during the financial year and the attendance of each auditcommittee member are as follows:

Audit Committee Member No. of Meetings attended

Dato’ Paduka Dr. Khairuddin bin Mohamed Yusof 4/4Ng Teng Seng 4/4Chi Oi Meng 4/4

The Audit Committee meetings were held on the following dates and time:

Meeting No. Date Time

3/2002 Wednesday, 28 August 2002 9.30 a.m.4/2002 Wednesday, 16 October 2002 9.30 a.m.5/2002 Thursday, 28 November 2002 10.00 a.m.1/2003 Wednesday, 28 May 2003 9.55 a.m.

The Committee meetings were all held at Lots 59-60, Lorong Kuang Bulan, Taman Kepong, 52100 KualaLumpur.

The heads of finance and internal audit and a representative of the external auditors shall attend meetings,only at the invitation of the Committee.

The Company Secretary shall be the secretary of the Committee.

3. Notices of Meetings and Minutes of Proceedings

The Secretary shall circulate the notice of meeting to the members of the Committee prior to the meeting andshall be responsible for the recording, safekeeping and production of the minutes of proceedings of theCommittee.

The Secretary shall produce for inspection such minutes of proceedings of meetings of the Committee uponreceiving instructions from the Committee or the Board of Directors of the Company.

The Secretary shall circulate the minutes of the Committee to all members of the Board.

The Chairman of the Committee shall report on each meeting to the Board.


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4. Frequency of Meetings

The Committee shall meet at least twice during each financial year and hold such additional meetings as theChairman shall deem necessary in order to fulfill its duties.

5. Proceedings of Meetings

In the absence of the Chairman, the Committee shall appoint one (1) of the independent non-executivemembers to chair that meeting.

Questions arising at any meeting shall be decided by a majority of votes of the members present. Save thatwhere two (2) members form a quorum or that which only two (2) members are competent to vote on thequestion in issue, the vote of the independent non-executive director shall be the decision of the Committee.

6. Authority

The Committee is authorised by the Board to investigate any matter within its terms of reference, empoweredwith the authority to seek the necessary resources that it requires to perform its duties. It is authorised to seekand to have full,free and unrestricted access to the Group’s records,properties,personnel and other resources,and to seek any information it requires from any employee of the Group or from any other sources pertainingto the affairs of the Company and Group. All employees are directed to cooperate with any request made bythe Committee.

The Committee is authorised by the Board to obtain outside legal or other independent professional adviceand to secure the attendance of outsiders with relevant experience and expertise if it considers this necessary.Other Directors, who are not members of the Committee may attend the Committee’s meeting only at theinvitation of the Committee and specific to the relevant meeting.

It is also authorised to have direct communication channels with the external auditors and internal auditors ofthe Company and Group. Whenever the Committee deemed necessary, it is authorised to convene meetingswith the external auditors without the attendance of the executive members of the Committee.

The Committee has no executive powers to implement its recommendations on behalf of the Board but toreport its recommendations back to the Board for its consideration and implementation.

Where the Committee is of the view that a matter reported by it to the Board of Directors has not beensatisfactorily resolved resulting in a breach of the Listing Requirements of Kuala Lumpur Stock Exchange, theCommittee has the responsibility of promptly reporting such matter to the Kuala Lumpur Stock Exchange.

7. Duties and functions

The duties and functions of the Committee shall be:

a. To perform the following and to report the same to the Board of Directors:

i. Review the adequacy and integrity of the internal control system, including system for compliancewith applicable laws,regulations,rules,directives and guidelines.

ii. To discuss with the external auditors on their audit plan before the commencement of the annualaudit and ensure coordination where more than one audit firm is involved.

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iii. To discuss with the external auditors on their evaluation of the system of internal control and to keepunder review the effectiveness of internal control systems, and in particular, review the externalauditors’ management letter and management’s responses as well as to monitor the implementationof the recommendations of the external auditors.

iv. To act as an intermediary between management or other employees,and the external auditors.

v. To discuss with the external auditors, the problems and reservations arising from the annual audits,including the state of assistance given by employees of the Company and Group to the externalauditors, and any matter that the external auditors wish to discuss (in the absence of management,where necessary).

vi. To discuss with the external auditors on their audit report.

vii. To review with the internal auditors,the adequacy of the scope, function and resources of the internalaudit function and the necessary authority for the internal auditors to carry out their work.

viii. To review the internal audit programme and processes,consider major findings of internal audit work,processes or investigations undertaken and to consider management’s responses and appropriateactions taken as well as to monitor the implementation of the recommendations of the internalauditors.

ix. To review any appraisal or assessment of the performance of members of the internal audit function,including an evaluation of the independence of the internal audit function.

x. To review the level of coordination between the internal and external auditors.

xi. To review the quarterly financial reports and annual financial statements before submission to theBoard. The review shall focus, inter alia, the changes in or implementation of major accountingpolicies, significant adjustments arising from the annual audit, significant and unusual events,litigation that could affect results materially, the going concern assumption and compliance withaccounting standards and other legal requirements.

xii. To review related party transactions and conflict of interest situation that may arise within the Group,including any transaction,procedure or course of conduct that may question management integrity,and any other major transactions outside the ordinary course of business of the Group.

xiii. To review any letter of resignation from the external auditors and to consider whether there is reason(supported by grounds) to believe that the Group’s external auditors is not suitable for re-appointment.

b. To recommend to the Board, the nomination and appointment of the external auditors,the audit fee, andany other terms of engagement.

c. To consider any other related matters,as defined by the Board from time to time.

d. To ensure compliance with the requirements of the Securities Commission, Companies Commission ofMalaysia and Kuala Lumpur Stock Exchange as well as the requirements of any other regulatoryauthorities.


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REVIEW OF THE COMPOSITION OF THE AUDIT COMMITTEE

The term of office and performance of the Audit Committee and each of its members shall be reviewed by the Boardof Directors at least once in every three (3) years to determine whether the Committee and its members havecarried out their duties in accordance with their terms of reference.

ACTIVITIES OF THE AUDIT COMMITTEE DURING THE FINANCIAL YEAR

In line with the terms of reference of the Committee, the Committee carried out the following activities during thefinancial year ended 30 June 2003 in the discharge of its duties and functions:

a. Review the audit fees of the external auditors in respect of the audit for the financial year ended 30 June 2002.

b. Review of the audit plan prepared by the external auditors in respect of their audit for the financial year ended30 June 2003.

c. Review of the quarterly results of the Group for the financial quarters ended 30 September 2002,31 March 2003and 30 June 2003 prior to submission to the Board of Directors for consideration and approval.

d. Quarterly review of the disclosure on related party transactions entered into by the Company and the Group.

e. Review of the audit reports prepared by the internal auditors and the consideration of the major findings bythe auditors and the management’s responses thereto.

INTERNAL AUDIT FUNCTION

The internal audit function of the Group and Company is outsourced to a reputable international accounting firm,with the primary objective of obtaining an independent and objective evaluation of the Group’s and Company’ssystem of internal control,at a reasonable cost. The appointment took effect from the financial year ended 30 June2001.

The internal auditors carried out the following activities:

a. Review the efficiency and effectiveness of the internal control system of certain key processes of the Group,with the objective of identifying and addressing business risks and controls of the key processes, testing ofcontrols to assess control effectiveness and that these controls are operating as intended, assessing theadequacy, appropriateness of procedures within processes identified and review adherence to establishedauthority limit.

b. Recommending improvements to the internal control system of the key processes that were identified for auditand reporting the findings to the Audit Committee, after obtaining response from management.

c. Identifying and developing the internal audit programme for the internal audit cycle for the financial yearending 30 June 2004. The internal audit programme was tabled to the Audit Committee for its consideration.

This report is made in accordance with a resolution of the Board dated 31 October 2003.

CHAIRMAN’S

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REVIEW OF PERFORMANCE

During the financial year, the Malaysianeconomy faced challenges anduncertainties arising from the slowdown inthe global economy, especially the UnitedStates, negative impact from the Iraq warand effect from the deadly Severe AcuteRespiratory Syndrome (“SARS”) virus. Allthese negative events have an impact onconsumer confidence and consequently,the spending behaviour. The MalaysianGovernment has made significant effort,through the 2003 Budget and stimulusp a c k a g e, to protect the economy andencourage domestic spending. Yo u rCompany is not spared from the effect ofthese events.

In spite of the events mentioned in thepreceding paragraph,I am pleased to reportthat Hing Yiap’s business continue to beresilient, having achieved profit before taxof RM 8.156 million for the financial year onthe back of revenue of RM 115.341 million.The pre-tax profit is only marginally lowerthan the pre-tax profit of RM 8.368 millionachieved in the financial year ended 30June 2002. Revenue increased byapproximately 11.68% from the precedingyear revenue of RM 103.280 million.

The improvement in revenue is attributableto the better performance of the Company’sproducts and maiden contribution from our“Bumcity” specialty retail stores. As at theend of the financial year, Hing Yiap hasopened two “Bumcity” stores, in GentingHighlands and Central Market in Ku a l aLumpur. The response from our partnersand customers has been very encouraging,and we expect to open at least six“Bumcity”stores by the end of the financialyear ending 30 June 2004.

In my report last year, I mentioned thatHing Yiap disposed its entire interest in aloss making subsidiary company, B.U.M.Marketing (Singapore) Pte Ltd, in May 2002.Pursuant to the terms of the Share SaleAgreement, Hing Yiap has waived debtsamounting to RM 1.93 million upon fullsettlement of the cash consideration andthis amount has been recognised in theincome statement for the current financialyear. The Company has also recognised theimpairment in the value of the industrialproperties in Pulau Indah and the charge ofRM 0.9 million has also been recognised inthe current financial year. With therecognition of these exceptional items,profit before tax of RM 8.156 million wasmarginally lower than that achieved in thepreceding financial year.

Dear Shareholders,On behalf of the Board of Directors of Hing Yiap Knitting Industries Berhad(“Hing Yiap” or “Company”), I am pleased to present the Twenty-Eighth AnnualReport of the Company for the financial year ended 30 June 2003.

statement

statement


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27Hing Yiap management will continue to approach business in a cautious manner, with emphasis on cost control,cashflow management and inventoriesmanagement. This management style hasserved your Company well and I amconfident that Hing Yiap will continue tolook for business opportunities andenhance its financial position.

Under the difficult and challengingc i r c u m s t a n c e s , the Board would like torecord its satisfaction on the performanceachieved for the financial year.

CORPORATE DEVELOPMENT

The following transactions wereundertaken and completed subsequent tothe financial year and up to the date of thisreport:

1. The issued and fully paid share capital of a wholly-owned subsidiarycompany, B.U.M. Marketing (Malaysia)Sdn Bhd, was increased by RM 250,000to RM 500,000.

2. Hing Yiap acquired the entire interestin B. U.M. Holdings (M) Sdn Bhd from Ms Chi Oi Meng and Mr KhooHenn Ku a n , who are Directors andsubstantial shareholders of Hing Yiap,for a cash consideration of RM 20,024.The said company remains dormant.

3. The acquisition of one unit of freehold industrial property for a cashconsideration of RM 2.5 million. Thesaid property is used by Hing Yiap forwarehousing purposes.

I wish to report that the new EmployeesShare Option Scheme had not beenimplemented within the timeframe

approved by the Securities Commission.The lacklustre performance of the stockmarket, in general, and Hing Yiap’s shareprice, in particular, during the said perioddid not provide an ideal opportunity for theemployees to benefit from this scheme.

SPORTS SPONSORSHIP

Hing Yiap continues to play an active role inthe development of sports in the country,through the brand “Antioni”, by being theofficial sports attire-wear sponsor of theOlympic Council of Malaysia and theMalaysian Tenpin Bowling Congress. TheMalaysian team for the recently concludedWorld Cup Tenpin bowling tournament inKuala Lumpur was attired by “Antioni”.The Malaysian contingent to the nextedition of the SEA Games, to be held inVietnam,will also be attired by “Antioni”.

SMALL AND MEDIUM INDUSTRIES(“SMI”) RECOGNITION AWARDSERIES 2003

I am proud to report that your Company hasbeen awarded the “SMI-Canon AchieversAward 2003” on 3 October 2003. This is aproud moment for your Company, beingrecognised by the SMI Association ofMalaysia for its achievement and serve as ashining example of entrepreneurship,perseverance and hard work. In thiscategory, which is by invitation only, twelveawards were given to companies listed onthe Second Board of the Kuala LumpurStock Exchange which continued to dowell in their performance after listing andmanaged the business admirablythroughout the Asian financial crisis.Syabas, to the entire management team ofHing Yiap for this success.

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CHAIRMAN’S STATEMENT (continued)

OUTLOOK FOR 2004

The Malaysian Government hasemphasised in the recent 2004 Budget that impetus is given to acceleratingdomestic private sector with the small andmedium industries being the engine ofdomestic growth. The economy isprojected to accelerate next year and grow between 5.5% and 6%, driven byhigher exports and stronger domesticdemand, primarily from the private sector.

Hing Yiap will continue to seekimprovement in management andoperations and will source for attractiveproducts to suit the ever changingconsumer demands. An improvingeconomy will pose a different set ofchallenges to your Company. I believe thatthe management is well suited to face thecompetition and challenges ahead.

The “ B u m c i t y ” specialty chain storeslocated in strategic shopping complexesand selling various types of merchandisesupplied by third party suppliers onconcessionaire basis as well as our ownbrands of products, will provide a newsource of revenue and earnings to HingYiap. As at the date of this report, newstores in Mahkota Parade (in Malacca),Sunway Pyramid (in Klang Valley) and IpohParade (in Ipoh) have opened for businesswhilst the outlet in Gurney Plaza (inPenang) shall commence operations beforethe end of the financial year. The “Bumcity”concept will provide an opportunity to HingYiap to broaden its revenue and earningsstream. Hing Yiap management willcontinue to monitor the progress andperformance of the new business and shallcontinue to work closely with our businesspartners to ensure every success.

The Board is reasonably optimistic that thegood performance of the Company willcontinue into the financial year ending 30June 2004.

DIVIDEND

The Board recommends a first and finaldividend of 3.5 sen per share, l e s sMalaysian income tax, for the approval ofthe shareholders in the forthcoming AnnualGeneral Meeting.

APPRECIATION

On behalf of the Board, I would like to offermy utmost gratitude to the employees of Hing Yiap for their dedication incontributing to the success of theCompany.

F i n a l l y, I would also like to thank our shareholders, c u s t o m e r s , r e l e v a n ta u t h o r i t i e s , business associates andfinancial institutions for their continuingsupport and confidence in Hing Yiap.

Dato’ Azizi Yom AhmadChairman

Kuala Lumpur14 November 2003


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informationother corporate

information

1. Status of utilisation of proceeds raised from any corporate proposal

The Company did not undertake any fund raising corporate exercise during the financial year.

2. Share buybacks for the financial year

The Company is not authorised by the shareholders to undertake a share buyback programme and accordinglyis not involved in any purchase of own shares during the financial year.

3. Amount of options, warrants or convertible securities exercised during the financial year

The amount of options under the Employees’ Share Option Scheme (“ESOS”), which were exercised intoordinary shares in Hing Yiap Knitting Industries Berhad during the financial year, is disclosed in Note 20 to thefinancial statements and the Directors’ Report.

The Company does not have any outstanding warrants or convertible securities.

4. American Depository Receipt (“ADR”) and Global Depository Receipt (“GDR”)

Hing Yiap Knitting Industries Berhad has not sponsored nor issued any securities under the ADR or GDRprogramme.

5. Particulars of sanctions and/or penalties imposed on Hing Yiap Knitting Industries Berhad andsubsidiary companies, Directors or management by the relevant regulatory bodies

To the best of the knowledge and belief of the Directors, Hing Yiap Knitting Industries Berhad and itssubsidiary companies, Directors and management have not been sanctioned nor penalised by any relevantauthorities.

6. Non-audit fees paid to external auditors for the financial year

Details of non-audit fees paid to the external auditors during the financial year are as follows:

RM

Professional fees paid for the provision of tax services 26,000

Professional fees paid for the review of Directors’ Statement on Internal Control 3,000

Verification of sales data in compliance with the terms of a certain tenancy agreement 1,000

Verification of the amount claimed as Deduction for the Promotion of Export 500

30,500

(Pursuant to Paragraph 9.25 and Appendix 9C of the Listing Requirementsof Kuala Lumpur Stock Exchange)

Hing Yiap Knitting

Industries

Berhad(22414-V)

30

OTHER CORPORATE INFORMATION (continued)

7. Deviation of actual results from profit forecast, estimate or projection or unaudited resultspreviously made or released by Hing Yiap Knitting Industries Berhad

The Company did not issue any profit forecast, estimate or projection in conjunction with any corporateproposal. In addition,the deviation of actual audited results from the unaudited results announced to the KualaLumpur Stock Exchange in respect of the financial year ended 30 June 2003 did not deviate by 10% or more.

8. Deviation of profit achieved in the financial year as compared to the profit guarantee

Hing Yiap Knitting Industries Berhad has not undertaken any corporate proposal or activity which involves aprofit guarantee.

9. Material contracts entered into by Hing Yiap Knitting Industries Berhad and subsidiarycompanies with Directors and/or major shareholders

Save for the recurrent related party transactions of a revenue or trading nature, as disclosed in Note 28 to thefinancial statements, neither the Company nor its subsidiary companies has entered into any arrangement oragreement,loan or otherwise, with any Director and/or shareholder.

10. Contracts relating to loan with Directors and/or major shareholders

There were no contracts relating to a loan by the Company and its subsidiary companies involving Directorsand/or major shareholders.

11. Revaluation policy on landed properties in respect of the financial year

Properties that are recognised as investment properties are revalued in accordance with the policy mentionedin Note 2(d) to the financial statements. A firm of independent professional appraisers performed the latestvaluation on 27 April 2001 and 11 June 2001 and any differences between the revalued amounts and thecorresponding book values were adjusted in the financial statements for the financial year ended 30 June 2001,in accordance with the said policy.

Properties that are recognised as property, plant and equipment are stated at cost, adjusted for depreciationon buildings,amortisation of leases and any impairment losses. One of the properties was revalued at RM 3.9million on 7 October 1995 by a firm of independent professional appraisers,for the purpose of reflecting the fairvalue of the property concerned as an integral part of the listing and quotation for the entire issued and paid-up share capital of the Company on the Second Board of the Kuala Lumpur Stock Exchange. The valuation ofthe said property has not been updated nor has the Company commissioned any revaluation for otherproperties that are recognised as property, plant and equipment since their acquisition dates because theCompany adopted the transitional provisions issued by the Malaysian Accounting Standards Board (“MASB”)on adoption of MASB 15,“Property, Plant and Equipment” whereby the value of the properties are allowed tobe stated at its existing carrying amount,less depreciation and impairment losses.

This report is made in accordance with a resolution of the Board dated 31 October 2003.

32 Directors’ Report

39 Statement by Directors

39 Statutory Declaration

40 Report of the Auditors to the Members

41 Balance Sheets

42 Statements of Changes in Equity

44 Income Statements

45 Cash Flow Statements

48 Notes to Financial Statements

statementsstatements

FINANCIAL

Hing Yiap Knitting

Industries

Berhad(22414-V)

32

DIRECTORS’ REPORT

The Directors have pleasure in submitting their report and the audited financial statements of the Group and of theCompany for the financial year ended 30 June 2003.

PRINCIPAL ACTIVITIES

The principal activities of the Company are those of property and investment holding, textile knitting and themanufacture of garments whilst its subsidiary companies are principally engaged in the wholesaling, retailing anddistribution of ready-made sports and casual wear, women intimate apparel and related accessories.

During the financial year, a subsidiary company, Bumcity Sdn. Bhd. commenced operations as an operator ofspeciality stores known as “BUMCITY”.

Other than the above, there have been no significant changes in the nature of the Group’s and the Company’sactivities during the financial year.

RESULTS

Group Company

Profit after taxation RM5,168,102 RM3,586,998

DIVIDENDS

Dividends paid, declared or proposed by the Company since the end of the previous financial year were:

RM

(i) in respect of the financial year ended 30 June 2002:

as proposed in the Directors’ Report for that financial year,a first and final dividend of 3.5% less tax,paid on 19 March 2003 1,053,037

(ii) in respect of the financial year ended 30 June 2003:

a proposed first and final dividend of 3.5% less tax 1,053,037

RESERVES AND PROVISIONS

All material transfers to or from reserves or provisions during the financial year have been disclosed in thestatements of changes in equity.

BAD AND DOUBTFUL DEBTS

Before the financial statements of the Group and of the Company were made out, the Directors took reasonablesteps to ascertain that action had been taken in relation to the writing off of bad debts and the making of allowancefor doubtful debts, and are satisfied that all known bad debts had been written off and adequate allowance hadbeen made for doubtful debts.

At the date of this report,the Directors are not aware of any circumstances which would render the amount writtenoff for bad debts or the amount of the allowance for doubtful debts,in the Group and the Company, inadequate toany substantial extent.


Berhad(22414-V)

33

DIRECTORS’REPORT(continued)

CURRENT ASSETS

Before the financial statements of the Group and of the Company were made out, the Directors took reasonablesteps to ensure that any current assets, other than debts,which were unlikely to realise in the ordinary course ofbusiness their values as shown in the accounting records of the Company and its subsidiary companies, werewritten down to an amount that they might be expected to realise.

At the date of this report, the Directors are not aware of any circumstances which would render the valuesattributed to the current assets in the financial statements of the Group and of the Company misleading.

VALUATION METHODS

At the date of this report, the Directors are not aware of any circumstances which have arisen which renderadherence to the existing methods of valuation of assets or liabilities of the Group and the Company misleading orinappropriate.

CONTINGENT AND OTHER LIABILITIES

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

(i) any charge on the assets of the Company or its subsidiary companies which has arisen since the end of thefinancial year which secures the liabilities of any other person; or

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

No contingent liability or other liability of the Group or the Company has become enforceable, or is likely to becomeenforceable within the period of twelve months after the end of the financial year which, in the opinion of theDirectors,will or may substantially affect the ability of the Group or of the Company to meet their obligations asand when they fall due.

CHANGE OF CIRCUMSTANCES

At the date of this report,the Directors are not aware of any circumstances,not otherwise dealt with in this reportor the financial statements of the Group and of the Company which would render any amount stated in thefinancial statements of the Group and of the Company misleading.

ITEMS OF AN UNUSUAL NATURE

In the opinion of the Directors:

(i) the results of the operations of the Group and of the Company for the financial year have not been substantiallyaffected by any item, transaction or event of a material and unusual nature other than the debt waiver andimpairment losses of property, plant and equipment disclosed in the income statements.

(ii) there has not arisen in the interval between the end of the financial year and the date of this report any item,transaction or event of a material and unusual nature which is likely to affect substantially the results of theoperations of the Group and of the Company for the financial year in which this report is made.

Hing Yiap Knitting

Industries

Berhad(22414-V)

EMPLOYEES’ SHARE OPTION SCHEME

The Company’s Employees’ Share Option Scheme [“Scheme”] which was approved by the Registrar of Companieson 29 January 1999 and was in force for a period of four (4) years, expired on 28 January 2003.

The main features of the Scheme were as follows:

(i) the total number of new ordinary shares to be offered under the Scheme shall be subject to a maximum of 10%of the issued and paid-up share capital of the Company at any time during the existence of the Scheme.

(ii) eligible employees comprise confirmed full time employees,including Executive Directors,of the Company orits eligible subsidiary companies,subject to the meeting of the following conditions:

(a) employees must be Malaysians and must have served for at least one continuous year with the Group;

(b) have attained the age of eighteen (18) years on or before the date of offer of the option to subscribe forordinary shares; and

(c) are not participants of any employee share option scheme implemented by any company in the Group.

The entitlement of an Executive Director under the Scheme must be approved by the shareholders of theCompany in a general meeting.

(iii) the price payable upon the exercise of an option offered shall be the average of the mean market quotation ofthe ordinary shares as shown in the Daily Official List issued by the Kuala Lumpur Stock Exchange for the five(5) market days immediately preceding the offer date, subject to the proviso that the option price per ordinaryshare shall in no event be less than its par value or the last transacted market price of the ordinary shares atthe time the option is offered.

(iv) an option may be exercised in full or in part by notice of writing to the Company on any working day duringthe option period.

(v) the new ordinary shares to be allotted upon any exercise of the option will,upon allotment,rank pari passu inall respects with the then existing issued and paid-up share capital of the Company, but will not entitle theholders thereof to receive any dividends, rights, bonus issue and any other distribution declared to theCompany’s shareholders which entitlement date thereof precedes the relevant exercise date of the option andwill be subject to all the provisions of the Articles of Association of the Company.

The total number of options granted pursuant to the Scheme to subscribe for new ordinary shares of RM1 each inthe Company up to the expiry date of 28 January 2003 was as follows:

No. of options over ordinaryshares of RM1 each

Options granted on 30 March 1999 1,998,000Adjustment for bonus issue during the financial year ended 30 June 2001 504,000Options granted on 3 April 2001 589,000Adjustment for bonus issue during the financial year ended 30 June 2002 164,000

3,255,000

34



Berhad(22414-V)

35


EMPLOYEES’ SHARE OPTION SCHEME (continued)

Of the above total,Executive Directors had been granted options to subscribe for 305,000 ordinary shares of RM1each.

As a consequence of the bonus issue during the previous financial year, the option prices for the options grantedon 30 March 1999 and 3 April 2001 were adjusted from RM1.03 per share and RM1.06 per share respectively toRM1.00 per share.

The movements in the options to take up the unissued ordinary shares of RM1 each of the Company during thefinancial year are as follows:

No. of options over ordinary shares of RM1 eachOption price At At

Options granted on RM 1.7.2002 Granted Exercised Lapsed 30.6.2003

30 March 1999 1.00 442,000 - - 442,000 -3 April 2001 1.00 293,000 - - 293,000 -

The Company has been granted exemption by the Registrar of the Companies Commission of Malaysia fromhaving to disclose the list of option holders with options of less than 40,000 to take up the unissued ordinary sharesof RM1 each of the Company.

The employees granted options to take up 40,000 and above of the unissued ordinary shares of RM1 each of theCompany during the financial year are as follows:

No. of options over ordinary shares of RM1 each Option price At AtRM 1.7.2002 Granted Exercised Lapsed 30.6.2003

Chi Kin Meng 1.00 109,000 - - 109,000 -Leow Peng Chang 1.00 46,000 - - 46,000 -

The above employees to whom the options have been granted have no right to participate by virtue of the optionsin any share issue of any other company.

DIRECTORS

The Directors who served since the date of the last report are:

Y.Bhg. Dato’ Azizi Yom Ahmad (Chairman - Non Independent Non Executive Director)Chi Oi Meng (Deputy Chairman - Non Independent Executive Director)Khoo Henn Kuan (Chief Executive Officer - Non Independent Executive Director)Chi Kin Meng (Executive Director - Non Independent Executive Director)Y.Bhg. Dato’ Paduka Dr. Khairuddin

bin Mohamed Yusof (Independent Non Executive Director)Ng Teng Seng (Independent Non Executive Director)

In accordance with Article 102 of the Company’s Articles of Association,Ms. Chi Oi Meng and Mr. Chi Kin Mengretire at the forthcoming Annual General Meeting and, being eligible, offer themselves for re-election.

The Directors holding office at the end of the financial year and their interests in shares and options over shares inthe Company as recorded in the register of directors’ shareholdings were as follows:

No. of ordinary shares of RM1 eachShareholdings registered At At

in the name of Directors 1.7.2002 Bought Sold 30.6.2003

Y.Bhg. Dato’ Azizi Yom Ahmad 2,039,520 - - 2,039,520Chi Oi Meng 1,829,760 - - 1,829,760Khoo Henn Kuan 1,109,760 - - 1,109,760

Shareholdings in which Directorsare deemed to have an interest

Chi Oi Meng 13,883,520 - - 13,883,520Khoo Henn Kuan 14,025,600 - - 14,025,600Chi Kin Meng 13,883,520 - - 13,883,520

No. of options over ordinary shares of RM1 eachOption

Options granted price At Atto a Director RM 1.7.2002 Granted Exercised Lapsed 30.6.2003

Chi Kin Meng 1.00 109,000 - - 109,000 -

Ms. Chi Oi Meng, Mr. Khoo Henn Kuan and Mr. Chi Kin Meng, by virtue of their interests of more than 15% of theshare capital of the Company, are deemed to have an interest in the share capitals of the Company’s subsidiarycompanies to the extent the Company has an interest during the financial year.

Ms. Chi Oi Meng, Mr. Khoo Henn Kuan and Mr. Chi Kin Meng are immediate family members. They are thereforedeemed to have an interest in each other’s shareholding in the Company and options over the Company’s ordinaryshares during the financial year.

Other than the above, none of the directors holding office at the end of the financial year had any interest in theshares in the Company and its subsidiary companies during the financial year.

Hing Yiap Knitting

Industries

Berhad(22414-V)

36



Berhad(22414-V)

37

DIRECTORS’ REPORT(continued)

DIRECTORS’ BENEFITS

During the financial year, the Company and its subsidiary companies,in the ordinary course of business,transactedwith a Director and related parties in which certain Directors have substantial financial interests, the details ofwhich are disclosed in note 28 to the financial statements.

Subsequent to the balance sheet date, the Company acquired the entire equity shares in a company from certainDirectors,details of which are described under “SIGNIFICANT EVENTS”in this report.

Other than the above, since the end of the previous financial year, no Director has received or become entitled toreceive any benefit (other than those disclosed in the financial statements) by reason of a contract made by theCompany or a subsidiary company with the Director, or with a firm of which the Director is a member, or with acompany in which the Director has a substantial financial interest.

Neither during nor at the end of the financial year, was the Company a party to any arrangements whose object isto enable the Directors to acquire benefits by means of the acquisition of shares in or debentures of the Companyor any other body corporate except for options over the Company’s ordinary shares granted by the Company to aDirector, pursuant to the Scheme described in this report.

PRINCIPAL PLACE OF BUSINESS

The principal place of business of the Company is located at Lots 59 – 60, Lorong Kuang Bulan, Taman Kepong,52100 Kuala Lumpur.

SIGNIFICANT EVENTS

During the financial year:

(i) the Company subscribed for an additional 249,998 new ordinary shares of RM1 each in Bumcity Sdn. Bhd. atpar for cash; and

(ii) the new Employees’ Share Option Scheme [“New Scheme”] of the Company for the eligible employees(including Executive Directors) of the Group was approved by the shareholders of the Company and theSecurities Commission on 23 December 2002 and 22 January 2003 respectively. However, the New Scheme haslapsed on 21 July 2003,being the deadline for implementation.

Subsequent to the balance sheet date, the Company:

(i) subscribed for an additional 250,000 new ordinary shares of RM1 each in B.U.M. Marketing (Malaysia) Sdn.Bhd. at par for cash;

(ii) entered into a sale and purchase agreement to acquire a piece of freehold land and building for a cashconsideration of RM2,500,000; and

(iii) acquired the entire equity shares in B.U.M. Holdings (M) Sdn. Bhd.,a company incorporated in Malaysia,fromcertain Directors for a cash consideration of RM20,024.

AUDITORS

The auditors, Sekhar & Tan, have indicated that they do not wish to seek re-appointment at the forthcomingAnnual General Meeting.

Signed in accordance with a resolution of the Directors,

.......................................................................... ..........................................................................Chi Oi Meng Khoo Henn Kuan

Kuala LumpurDated:20 October 2003

Hing Yiap Knitting

Industries

Berhad(22414-V)

38



Berhad(22414-V)

39

STATEMENT BY DIRECTORS

We, Chi Oi Meng and Khoo Henn Kuan , being two of the Directors of HING YIAP KNITTING INDUSTRIESBERHAD do hereby state that in the opinion of the Directors,the accompanying financial statements give a trueand fair view of the state of affairs of the Group and the Company at 30 June 2003 and of their results and cashflows for the financial year ended on that date and are properly drawn up in accordance with applicable approvedaccounting standards in Malaysia.

Signed in accordance with a resolution of the Directors,

..........................................................................Chi Oi Meng

..........................................................................Khoo Henn Kuan

Kuala LumpurDated:20 October 2003

I, Chi Oi Meng , the Director primarily responsible for the financial management of HING YIAP KNITTINGINDUSTRIES BERHAD do solemnly and sincerely declare that the accompanying financial statements are in myopinion correct,and I make this solemn declaration conscientiously believing the same to be true and by virtue ofthe provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by the abovenamed )Chi Oi Meng at Kuala Lumpur in Wilayah Persekutuan )on 20 October 2003 ) ……………................................................

Chi Oi Meng

Before me,Tee Kian @ Tee Sing PPNNo. W193

Commissioner for OathsKuala Lumpur

STATUTORY DECLARATION

Hing Yiap Knitting

Industries

Berhad(22414-V)

We have audited the financial statements set out on pages 41 to 78. The financial statements are the responsibilityof the Company’s directors. Our responsibility is to express an opinion on these financial statements based on ouraudit.

We conducted our audit in accordance with approved auditing standards in Malaysia. Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by the directors,as well as evaluating the overall financial statements presentation. Webelieve that our audit provides a reasonable basis for our opinion.

In our opinion:

(a) the financial statements have been prepared in accordance with the provisions of the Companies Act, 1965and applicable approved accounting standards in Malaysia and give a true and fair view of:

(i) the state of affairs of the Group and the Company as at 30 June 2003 and of their results and cash flowsfor the year ended on that date; and

(ii) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financialstatements; and

(b) the accounting and other records and the registers required by the Companies Act, 1965 to be kept by theCompany and its subsidiary companies have been properly kept in accordance with the provisions of the saidAct.

We are satisfied that the financial statements of the subsidiary companies that have been consolidated with theCompany’s financial statements are in form and content appropriate and proper for the purposes of the preparationof the consolidated financial statements and we have received satisfactory information and explanations requiredby us for those purposes.

Our audit reports on the financial statements of the subsidiary companies did not contain any qualification or anyadverse comment made under subsection (3) of Section 174 of the Act.

.......................................................................... ..........................................................................Sekhar & Tan Chong Hai HeongNo. AF 0926 No. 704/06/05 (J/PH)Chartered Accountants Partner of the Firm

Dated:20 October 2003

40

REPORT OF THE AUDITORS TO THE MEMBERS


Berhad(22414-V)

41

BALANCE SHEETS at 30 june 2003

Group Company2003 2002 2003 2002

Note RM RM RM RM

NON CURRENT ASSETSProperty, plant and equipment 3 21,160,988 21,502,346 15,529,654 16,913,841Investment properties 4 3,310,000 3,310,000 3,310,000 3,310,000Intangible assets 5 3,267,200 3,489,400 - -Subsidiary companies 6 - - 5,590,998 5,341,000Deferred tax assets 7 842,000 649,000 - -

28,580,188 28,950,746 24,430,652 25,564,841

CURRENT ASSETSInventories 8 53,105,535 46,898,763 8,166,931 8,010,068Trade receivables 9 18,902,843 15,860,669 1,477,332 1,983,540Other receivables and prepayments 10 4,262,234 6,128,201 397,269 935,440Due from subsidiary companies 11 - - 37,214,375 36,238,486Short term investment 12 166,027 166,027 135,000 135,000Bank and cash balances 1,687,213 1,195,407 1,599,118 871,391

78,123,852 70,249,067 48,990,025 48,173,925

LESS: CURRENT LIABILITIESTrade payables 13 8,069,265 9,796,345 6,725,395 8,275,255Other payables 14 5,916,667 5,220,541 916,621 1,404,040Hire purchase payables 15 1,501,455 966,349 136,021 251,060Due to subsidiary companies 16 - - 112,853 1,267,343Short term borrowings 17 21,162,767 16,776,205 6,571,414 5,360,918Taxation 203,704 52,823 140,089 52,823

36,853,858 32,812,263 14,602,393 16,611,439

NET CURRENT ASSETS 41,269,994 37,436,804 34,387,632 31,562,486

LESS: NON CURRENT LIABILITIESHire purchase payables 15 1,170,638 938,400 78,796 147,629Term loans 18 2,726,866 3,489,037 2,726,866 3,489,037Deferred taxation 19 565,500 688,000 1,304,000 1,316,000

4,463,004 5,115,437 4,109,662 4,952,666

65,387,178 61,272,113 54,708,622 52,174,661

CAPITAL AND RESERVESShare capital 20 41,787,199 41,787,199 41,787,199 41,787,199Reserves 23,599,979 19,484,914 12,921,423 10,387,462

Shareholders’ funds 65,387,178 61,272,113 54,708,622 52,174,661

The notes on pages 48 to 78 form an integral part of these financial statements. Auditors’ report on page 40.

Hing Yiap Knitting

Industries

Berhad(22414-V)

ExchangeShare Share Revaluation fluctuation Retained

capital premium surplus reserve profits TotalNote RM RM RM RM RM RM

Group

At 30 June 2001 as previously reported 31,257,000 1,436,605 1,700,572 (203,843) 20,400,441 54,590,775Prior year adjustment 21 - - (600,000) - 803,000 203,000

At 30 June 2001 as restated 31,257,000 1,436,605 1,100,572 (203,843) 21,203,441 54,793,775

Share issue expenses - (130,260) - - - (130,260)Currency translation differences - - - 27,803 - 27,803Net losses not recognised in

income statement - (130,260) - 27,803 - (102,457)

Profit after taxation - - - - 5,786,183 5,786,183Bonus issue 20 9,139,199 - - - (9,139,199) -Exercise of options rights 20 1,391,000 50,100 - - - 1,441,100Dividend 22 - - - - (822,528) (822,528)Exchange fluctuation reserve realised

on disposal of subsidiary company - - - 176,040 - 176,040

At 30 June 2002 41,787,199 1,356,445 1,100,572 - 17,027,897 61,272,113

At 30 June 2002 as previously reported 41,787,199 1,356,445 1,700,572 - 15,735,897 60,580,113Prior year adjustment 21 - - (600,000) - 1,292,000 692,000

At 30 June 2002 as restated 41,787,199 1,356,445 1,100,572 - 17,027,897 61,272,113Profit after taxation - - - - 5,168,102 5,168,102Dividend 22 - - - - (1,053,037) (1,053,037)

At 30 June 2003 41,787,199 1,356,445 1,100,572 - 21,142,962 65,387,178

[Note A]


42

STATEMENTS OF CHANGES IN EQUITYfinancial year ended 30 june 2003


Berhad(22414-V)

43

STATEMENTS OF CHANGES IN EQUITY financial year ended 30 june 2003(continued)


Share Share Revaluation Retainedcapital premium surplus profits Total

Note RM RM RM RM RM

Company

At 30 June 2001 as previously reported 31,257,000 1,436,605 1,700,572 13,899,863 48,294,040Prior year adjustment 21 - - (600,000) - (600,000)

At 30 June 2001 as restated 31,257,000 1,436,605 1,100,572 13,899,863 47,694,040Share issue expenses – Loss not recognised

in income statement - (130,260) - - (130,260)Profit after taxation - - - 3,992,309 3,992,309Bonus issue 20 9,139,199 - - (9,139,199) -Exercise of options rights 20 1,391,000 50,100 - - 1,441,100Dividend 22 - - - (822,528) (822,528)

At 30 June 2002 41,787,199 1,356,445 1,100,572 7,930,445 52,174,661

At 30 June 2002 as previously reported 41,787,199 1,356,445 1,700,572 7,930,445 52,774,661Prior year adjustment 21 - - (600,000) - (600,000)

At 30 June 2002 as restated 41,787,199 1,356,445 1,100,572 7,930,445 52,174,661Profit after taxation - - - 3,586,998 3,586,998Dividend 22 - - - (1,053,037) (1,053,037)

At 30 June 2003 41,787,199 1,356,445 1,100,572 10,464,406 54,708,622

[Note A]

NOTE TO THE STATEMENTS OF CHANGES IN EQUITY

A. The share premium,revaluation surplus and exchange fluctuation reserve are not distributable by way of cash dividends.

Hing Yiap Knitting

Industries

Berhad(22414-V)

Group Company2003 2002 2003 2002

Note RM RM RM RM

Revenue 23 115,341,365 103,279,873 75,576,914 65,384,445Other operating income 650,467 345,776 909,715 807,631Changes in inventories of finished

goods and work-in-progress 6,840,726 7,067,417 34,960 (1,090,796)Raw materials and consumables used (10,120,230) (10,728,683) (9,241,013) (10,728,683)Staff costs (23,819,143) (21,153,938) (5,108,990) (4,629,856)Depreciation and amortisation expenses (2,724,900) (2,699,371) (839,081) (825,568)Allowance for doubtful debts (45,400) - (45,400) (348,868)Allowance for doubtful debts written back 504,903 - 54,258 -Bad debts recovered - 20,910 - -Debt waiver (1,930,411) - - -Impairment losses of property,

plant and equipment (900,411) - (900,411) -Inventories write-downs (763,343) (381,847) - -Profit on disposal of a subsidiary company 24 - 1,416,055 - 399,000Operating expenses (73,206,716) (67,127,928) (54,454,079) (42,950,014)

Profit from operations [Note A] 9,826,907 10,038,264 5,986,873 6,017,291Finance costs (1,671,391) (1,670,280) (678,350) (554,175)

Profit before taxation 25 8,155,516 8,367,984 5,308,523 5,463,116Taxation 26 (2,987,414) (2,581,801) (1,721,525) (1,470,807)

Profit after taxation 5,168,102 5,786,183 3,586,998 3,992,309

Basic earnings per share 27 12.37 sen 14.09 sen

Number of employees(including Executive Directors)at the balance sheet date 1,376 1,342 266 226

NOTE TO THE INCOME STATEMENTS

A. This is made up of:

Group Company2003 2002 2003 2002RM RM RM RM

Continuing operations 9,826,907 10,211,063 5,986,873 6,017,291Discontinued operations - (172,799) - -

9,826,907 10,038,264 5,986,873 6,017,291


44

INCOME STATEMENTS financial year ended 30 june 2003


Berhad(22414-V)

45

CASH FLOW STATEMENTS financial year ended 30 june 2003


CASH FLOWS FROM OPERATING ACTIVITIESProfit before taxation 8,155,516 8,367,984 5,308,523 5,463,116Adjustments for:

Interest expenses 1,563,149 1,548,880 705,928 703,502Interest income (30,676) (34,221) (105,131) (245,711)Dividend income - - (1,525,000) (1,495,000)Depreciation 2,502,700 2,477,171 839,081 825,568Amortisation of intangible assets 222,200 222,200 - -Impairment losses of property,

plant and equipment 900,411 - 900,411 -Loss on disposal of property,

plant and equipment 19,130 - 18,498 -Profit on disposal of property,

plant and equipment (165,553) (23,195) (58,495) (10,017)Profit on disposal of a

subsidiary company [Note A] - (1,416,055) - (399,000)Property, plant and equipment written off 133,043 91,153 66,517 89,753Allowance for doubtful debts 45,400 - 45,400 348,868Allowance for doubtful debts written back (504,903) - (54,258) -Debt waiver 1,930,411 - - -Inventories write-downs 763,343 381,847 - -Unrealised gain on foreign exchange (1,556) (1,594) - -

Operating profit before working capital changes 15,532,615 11,614,170 6,141,474 5,281,079(Increase)/decrease in inventories (6,970,115) (6,912,027) (156,863) 1,224,513(Increase)/decrease in receivables (4,148,435) (1,277,533) 41,396 (9,374,147)(Decrease)/increase in payables (956,264) 3,629,835 (3,193,635) 951,601

Cash generated from/(absorbed by) operations 3,457,801 7,054,445 2,832,372 (1,916,954)Tax paid (1,635,952) (2,606,687) (1,180,806) (583,335)

Net cash from/(used in) operating activities 1,821,849 4,447,758 1,651,566 (2,500,289)

CASH FLOWS FROM INVESTING ACTIVITIESPurchase of property, plant and equipment [Note B] (1,034,109) (587,152) (362,225) (93,338)Sub-license fee paid (75,000) (150,000) - -Purchase of additional equity

shares in a subsidiary company - - (249,998) (249,998)Interest received 30,676 34,221 105,131 245,711Dividends received - - 1,098,000 1,160,400Proceeds from disposal of property, plant and equipment 245,413 46,195 62,000 17,000Disposal of a subsidiary company net of cash

and cash equivalents disposed [Note A] - 386,927 - 100,000

Net cash (used in)/from investing activities (833,020) (269,809) 652,908 1,179,775

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Industries

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CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issues of shares - 1,441,100 - 1,441,100Share issue expenses paid - (130,260) - (130,260)Interest paid (1,577,910) (1,528,418) (708,429) (700,156)Dividends paid (1,051,171) (816,964) (1,051,171) (816,964)Proceeds from bankers’ acceptances 74,862,000 69,714,000 27,775,000 21,791,000Repayment of bankers’ acceptances (71,573,000) (71,841,000) (26,609,000) (21,665,000)Repayment of hire purchase obligations (1,492,333) (838,710) (265,472) (266,425)Repayment of term loans (717,675) (700,596) (717,675) (700,596)

Net cash used in financing activities (1,550,089) (4,700,848) (1,576,747) (1,047,301)

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (561,260) (522,899) 727,727 (2,367,815)

CASH AND CASH EQUIVALENTSAT BEGINNING OF FINANCIAL YEAR (407,880) 115,019 871,391 3,239,206

CASH AND CASH EQUIVALENTSAT END OF FINANCIAL YEAR (969,140) (407,880) 1,599,118 871,391

CASH AND CASH EQUIVALENTSARE REPRESENTED BY :Bank and cash balances 1,687,213 1,195,407 1,599,118 871,391Bank overdrafts (2,656,353) (1,603,287) - -

(969,140) (407,880) 1,599,118 871,391

46

CASH FLOW STATEMENTS financial year ended 30 june 2003(continued)


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CASH FLOW STATEMENTS financial year ended 30 june 2003(continued)

NOTES TO THE CASH FLOW STATEMENTS

A. DISPOSAL OF A SUBSIDIARY COMPANY NET OF CASH AND CASH EQUIVALENTS

The fair value of assets and liabilities of a subsidiary company disposed of during the previous financial yearwas as follows:

Group CompanyRM RM

Property, plant and equipment 262,921 -Subsidiary company - 1,000Inventories 554,120 -Receivables 454,225 -Payables (2,176,434) -Cash and cash equivalents (286,927) -Exchange fluctuation reserve realised 176,040 -

Net (liabilities)/asset disposed (1,016,055) 1,000Disposal consideration (400,000) (400,000)

Profit on disposal (1,416,055) (399,000)

Disposal consideration 400,000 400,000Deferred as other receivables (300,000) (300,000)

Cash proceeds from disposal 100,000 100,000Cash and cash equivalents disposed 286,927 -

Net cash inflow on disposal 386,927 100,000

There were no disposals by the Group and the Company in the current financial year.

B. PURCHASE OF PROPERTY, PLANT AND EQUIPMENT

During the financial year, the Group and the Company respectively purchased property, plant and equipmentwith an aggregate cost of RM3,293,786 (2002: RM1,984,452) and RM443,825 (2002: RM276,101) of whichRM2,259,677 (2002:RM1,397,300) and RM81,600 (2002:RM182,763) were financed by means of hire purchase.Cash payments of RM1,034,109 (2002:RM587,152) and RM362,225 (2002:RM93,338) were made by the Groupand the Company respectively during the financial year in respect of these property, plant and equipmentpurchased.


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NOTES TO FINANCIAL STATEMENTS financial year ended 30 june 2003

1. CORPORATE INFORMATION

The principal activities of the Company are those of property and investment holding, textile knitting and themanufacture of garments whilst those of its subsidiary companies are disclosed in note 6.

During the financial year, a subsidiary company, Bumcity Sdn. Bhd. commenced operations as an operator ofspeciality stores known as “BUMCITY”.

Other than the above, there have been no significant changes in the nature of the Group’s and the Company’sactivities during the financial year.

The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed onthe Second Board of Kuala Lumpur Stock Exchange.

The financial statements of the Group and the Company were authorised for issue in accordance with aresolution of the Directors on 20 October 2003.

2. SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Accounting

The financial statements of the Group and the Company have been prepared under the historical costconvention unless otherwise disclosed in the accounting policies below, and comply with the provisionsof the Companies Act,1965 and applicable approved accounting standards in Malaysia.

(b) Basis of Consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiarycompanies,made up to the end of the financial year, using the acquisition method of accounting.

Subsidiary companies are those companies in which the Group has power to exercise control over thefinancial and operating policies so as to obtain benefits therefrom. Subsidiary companies acquired ordisposed are included in the consolidated financial statements from the date of acquisition or to the dateof disposal.

Intragroup transactions, balances and unrealised gains are eliminated on consolidation and theconsolidated financial statements reflect external transactions only. Unrealised losses are also eliminatedon consolidation unless cost cannot be recovered.

The difference between the cost of acquisition over the fair value of the Group’s share of the net assets ofan acquired subsidiary company at the date of acquisition is included in the consolidated balance sheetas goodwill or reserve arising on consolidation. Goodwill on consolidation is reviewed at each balancesheet date and will be written down for impairment where it is considered necessary.

Minority interest is measured at the minorities’ share of the post acquisition fair values of the identifiableassets and liabilities of the acquiree.

The gain or loss on disposal of a subsidiary company is the difference between net disposal proceeds andthe Group’s share of its net assets together with any unamortised balance of goodwill on consolidationand exchange differences which were not previously recognised in the consolidated income statement.


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NOTES TO FINANCIAL STATEMENTS financial year ended 30 june 2003(continued)

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

(c) Property, Plant and Equipment and Depreciation

P r o p e r t y, plant and equipment are stated at cost or valuation less accumulated depreciation and i m p a i r m e n tl o s s e s .

Freehold land is not depreciated as it has an infinite life.

Land on long term leases is amortised in equal annual instalments over the remaining term of the respectiveleases of 97 years.

Buildings are depreciated at the rate of 2% per annum on a straight-line basis.

On other assets,depreciation is calculated on the following bases and annual rates:

Purchased on or subsequent Purchased prior toto 1 July 1993 - straight 1 July 1993 - reducing

line basis balance basis

Display counters,furnitureand fixtures 5% to 25% 5% to 20%

Electrical fittings 10% 10%Plant and machinery 10% 10%Store equipment 10% and 20% 10%Computer and office equipment 10% to 25% 10%Motor vehicles 20% and 25% 20%

Depreciation on assets under construction commences when the assets are ready for their intended use.

On disposal of a property, plant and equipment,the difference between the net disposal proceeds and thecarrying value is charged or credited to the income statement; any amount in revaluation surplus relatingto that asset is transferred to retained profits.

(d) Investment Properties

Investment properties consist of investments in land and buildings that are not substantially occupied foruse by, or in the operations of, the Group and the Company. These properties are treated as long terminvestments and are stated at cost or valuation less impairment losses except for leasehold investmentproperties with an unexpired lease term of less than 20 years at the balance sheet date. Such investmentproperties on short term leases are stated at cost or valuation less impairment losses and subject toamortisation in view of their short and finite lives. Other investment properties are not subject toamortisation.

Investment properties stated at valuation are appraised by independent professional valuers at least oncein every five years on a fair market value basis. Additions subsequent to the date of the last valuation arestated at cost. Surpluses arising on revaluation where considered by the Directors to be permanent innature, are included in the balance sheet as “Revaluation Surplus”. Any decrease in the carrying value ofinvestment properties below their costs or valuation is charged to the income statement and/or therevaluation surplus in the balance sheet. The charging of any decrease in the carrying value to therevaluation surplus in the balance sheet is only applicable if there was an originating surplus and thesurplus concerned has not been reversed or utilised.

On disposal of an investment property, the difference between the net disposal proceeds and the carryingvalue is charged or credited to the income statement; any amount in revaluation surplus relating to thatinvestment property is transferred to retained profits.

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(e) Intangible Assets

The costs of acquiring the rights, interests and benefits to the operations, brands and patents pertainingto the “ANTIONI”and “BONTTON”trademarks, are capitalised as intangible assets and amortised to theconsolidated income statement on a straight-line basis over the anticipated period of profitableexploitation, as determined by the Directors, of twenty five years commencing from the date ofacquisition.

The sub-license fee paid to acquire the rights to manufacture, market and distribute the “VANITY FAIR”brand of women intimate apparel and related accessories in Malaysia,is also capitalised as an intangibleasset and amortised to the consolidated income statement on a straight-line basis over the term of thesub-license agreement of ten years.

The amortisation period and method are reviewed annually at each balance sheet date.

(f) Investments

Investments in subsidiary companies and other unquoted equity shares (including those classified asshort term investments) are stated at cost less allowance for any permanent diminution in value. Suchallowance is made when there is a decline other than temporary in the value of the investments and isrecognised as an expense in the period in which the decline occurred.

In the consolidated balance sheet, the short term investment is stated at cost plus share of postacquisition profits.

On disposal of an investment,the difference between the net disposal proceeds and the carrying value ischarged or credited to the income statement.

(g) Inventories

Inventories are stated at the lower of cost and net realisable value. In general,cost is determined on a first-in first-out basis and includes all costs in bringing the inventories to their present location and condition.In the case of manufactured products, cost includes all direct expenditure and production overheadsbased on the normal level of activity.

Net realisable value is the price at which the inventories can be realised in the normal course of businessafter allowing for the costs of realisation and, where appropriate, the cost of conversion from their existingstate to a finished condition.

(h) Receivables

Receivables are carried at anticipated realisable value. Bad debts are written off in the period in whichthey are identified. An estimate is made for doubtful debts based on a review of all outstanding amountsat the balance sheet date.

(i) Cash and Cash Equivalents

For purposes of the cash flow statements,cash and cash equivalents include cash on hand and in banksand deposits at call, net of outstanding bank overdrafts.



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(j) Impairment of Assets

At each balance sheet date, the Group reviews the carrying amount of its assets, other than inventories,deferred tax assets and financial assets (other than investments in subsidiary companies) to determinewhether there is any indication that those assets have suffered an impairment loss. If any such indicationexists, impairment is measured by comparing the carrying values of the assets with their recoverableamounts. Recoverable amount is the higher of net selling price and value in use, which is measured byreference to discounted future cash flows. Recoverable amounts are estimated for individual assets or, ifit is not possible, for the cash-generating unit to which the asset belongs.

An impairment loss is charged to the income statement immediately, unless the asset is carried atrevalued amount. Any impairment loss of a revalued asset is treated as a revaluation decrease to theextent of any available previously recognised revaluation surplus for the same asset.

Reversal of impairment losses recognised in previous financial years is recorded when there is anindication that the impairment losses recognised for the asset no longer exist or have decreased. Thereversal is recognised to the extent of the carrying amount of the asset concerned that would have beendetermined (net of amortisation and depreciation) had no impairment loss been recognised. The reversalis recognised in the income statement immediately, unless the asset is carried at revalued amount. Areversal of an impairment loss on revalued asset is credited directly to revaluation surplus. However, tothe extent that an impairment loss on the same revalued asset was previously recognised as an expensein the income statement, a reversal of that impairment loss is recognised as income in the incomestatement.

(k) Financial Liabilities

Payables are stated at cost which is the fair value of the consideration to be paid in the future for goods,services and deposits received.

Borrowings are initially recognised based on the proceeds received, net of transaction costs incurred. Insubsequent periods, borrowings are stated at amortised cost using the effective yield method; anydifference between proceeds (net of transaction costs) and the redemption value is recognised in theincome statement over the period of the borrowings.

(l) Hire Purchase

Property, plant and equipment acquired under hire purchase are capitalised in the financial statementsand are depreciated in accordance with the depreciation policy set out in note 2(c). The correspondingoutstanding obligations due under hire purchase after deducting finance expenses are included asliabilities in the financial statements. Finance expenses are charged to the income statement over theperiods of the respective agreements.

(m) Provision for Liabilities

Provision for liabilities are recognised when the Group has a present legal or constructive obligation as aresult of a past event and it is probable that an outflow of resources embodying economic benefits will berequired to settle the obligation and a reliable estimate of the amount can be made. Provisions arereviewed at each balance sheet date and adjusted to reflect the current best estimate.

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(n) Taxation

The tax expense in the income statement comprises current and deferred tax. Current tax is the amountof income taxes payable in respect of the taxable profit for the financial year and is measured using thetax rates that have been enacted or substantially enacted by the balance sheet date.

Deferred tax liabilities and assets are provided for, using the liability method, at the current tax rate inrespect of all temporary differences between the carrying amount of an asset or liability in the balancesheet and its tax base including unabsorbed tax losses and capital allowances.

A deferred tax asset is recognised only to the extent that it is probable that taxable profit will be availableagainst which the deductible temporary differences can be utilised. The carrying amount of a deferred taxasset is reviewed at each balance sheet date. If it is no longer probable that sufficient taxable profit willbe available to allow the benefit of part or all of that deferred tax asset to be utilised, the carrying amountof the deferred tax asset will be reduced accordingly. When it becomes probable that sufficient taxableprofit will be available, such reduction will be reversed to the extent of the taxable profit.

In prior financial years,deferred taxation was calculated by the liability method, and provided for on timingdifferences arising from the different treatments in accounting and taxation of certain items except whereit could be demonstrated with reasonable probability that the deferral will continue for the foreseeablefuture. In accounting for timing differences, deferred tax debits were not accounted for unless there wasa reasonable expectation of their realisation.

This change in accounting policy, which is to comply with MASB 25 “Income Taxes”,has been accountedfor retrospectively and the effects of this change are disclosed in note 21 to the financial statements.

(o) Equity Instruments

Ordinary shares and non redeemable preference shares with discretionary dividends are both classified asequity. Other shares are classified as equity and/or liability according to the economic substance of theparticular instrument.

External costs directly attributable to the issue of new shares are shown as a deduction, net of tax, inequity from the proceeds.

Dividends on ordinary shares are recognised in equity in the period in which they are declared.

(p) Foreign Curr ency Conversion and Translation

Transactions in foreign currencies are converted into Ringgit Malaysia at the rates of exchange ruling atthe transaction dates.

Monetary assets and liabilities in foreign currencies at the balance sheet date have been translated intoRinggit Malaysia at the rates of exchange ruling at that date.

Gains or losses on exchange are included in the income statement.

Income and expense items of foreign subsidiary companies are translated into Ringgit Malaysia ataverage rates of exchange for the financial year and assets and liabilities, both monetary and non-monetary, at the rates of exchange ruling at the balance sheet date. Exchange differences arising from thetranslation of income and expense items at average rates and assets and liabilities at the rates prevailingat the balance sheet date, and the restatement at rates prevailing at the balance sheet date of the openingnet investment in foreign subsidiary companies are taken to “Exchange Fluctuation Reserve”.



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(p) Foreign Currency Conversion and Translation (continued)

The exchange rates used during the financial year are as follows:

Ringgit Malaysia per unit of foreign currencyAverage rates Closing rates

2003 2002 2003 2002RM RM RM RM

Singapore Dollar 2.16 2.12 - 2.12United States Dollar 3.80 3.80 3.80 3.80

(q) Financial Instruments

The particular recognition method adopted for financial instruments recognised on the balance sheet isdisclosed in the individual accounting policy associated with each item.

Financial instruments are recognised in the balance sheet when the Company has become a party to thecontractual provisions of the instrument.

Financial instruments are classified as liabilities or equity in accordance with the substance of thecontractual arrangement. Interest,dividends,gains and losses relating to a financial instrument classifiedas a liability are reported in the income statement as expense or income. Distributions to holders of afinancial instrument classified as equity are charged directly to equity. Financial instruments are offsetwhen the Company has a legally enforceable right to offset and intends to settle either on a net basis orto realise the asset and settle the liability simultaneously.

(r) Revenue Recognition

Revenue is recognised on the following bases:

Sales of goods - upon the delivery of goods and customers acceptance, if any, and in thecase of consignment sales, when the goods are sold by the consignee to a third party

Dividend income - when the right to receive payment is established

Interest income - on a time proportion basis that takes into account the effective yield on the assetunless collectability is in doubt

Royalty income - on an accrual basis in accordance with the substance of the relevant agreement

(s) Operating Leases

Leases of assets under which all risks and benefits of ownership are retained by the lessor are classifiedas operating leases. Payments made under operating leases are charged to the income statement on astraight-line basis over the period of the lease.

When an operating lease is terminated before the lease period has expired, any payment required to bemade to the lessor by way of penalty is recognised as an expense in the period in which the terminationtakes place.

(t) Borrowing Costs

Borrowing costs incurred on the purchase of qualifying assets are capitalised until the assets concernedare ready for their intended use.

Other borrowing costs are recognised as an expense in the period in which they are incurred.

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3. PROPERTY, PLANT AND EQUIPMENT (continued)

The freehold land and building of the Group and the Company stated at valuation of RM3,900,000 (2002:RM3,900,000) were revalued on 7 October 1995 on a fair market value basis by a firm of independentprofessional appraisers.

It is the Group’s and Company’s policy to state its property, plant and equipment at cost less accumulateddepreciation and impairment losses. The above revaluation was carried out primarily for the purpose ofreflecting the fair value of the asset concerned as an integral part of the listing of and quotation for the entireissued and fully paid share capital of the Company on the Second Board of the Kuala Lumpur Stock Exchangein 1997. The accounting treatment of this revaluation which has not been updated since 7 October 1995 is inaccordance with the transitional provisions of MASB 15 “Property, Plant and Equipment”.

The carrying value of this revalued asset at the balance sheet date, had the asset been accounted for by theGroup and the Company in accordance with the benchmark treatment as set out in MASB 15 would be:

2003 2002RM RM

Freehold land 30,153 30,153Building 322,352 334,460

352,505 364,613

At the balance sheet date:

(i) the net book value of property, plant and equipment on hire purchase in respect of which instalments areoutstanding is as follows:


Display counters,furniture and fixtures 1,936,129 1,246,747 - -Electrical fittings 32,748 36,854 - -Plant and machinery 230,998 263,412 230,998 263,412Store equipment 74,367 83,567 - -Computer and office equipment 734,621 163,704 21,357 27,692Motor vehicles 730,934 812,888 304,480 419,412

3,739,797 2,607,172 556,835 710,516



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3. PROPERTY, PLANT AND EQUIPMENT (continued)

(ii) the cost of property, plant and equipment which are fully depreciated but are still in use is as follows:


Display counters,furniture and fixtures - 3,918,521 - -Computer and office equipment 585,746 269,366 2,100 2,100Motor vehicles 731,339 1,144,518 459,690 634,240

1,317,085 5,332,405 461,790 636,340

(iii) the cost of the Group’s and the Company’s property, plant and equipment which have been charged tosecure the term loans referred to in note 18 is as follows:

2003 2002RM RM

Freehold land and buildings 5,271,193 5,271,193Land and buildings on long term leases 4,531,946 4,531,946

9,803,139 9,803,139

(iv) the title deeds and strata titles to the land and buildings on long term leases of the Group and theCompany have not been issued by the relevant authorities or transferred by the developer to the Company.

Subsequent to the balance sheet date, the Company entered into a sale and purchase agreement toacquire a piece of freehold land and building for a cash consideration of RM2,500,000.

The above acquisition has no material financial effects.

4. INVESTMENT PROPERTIES

Group and Company2003 2002RM RM

At valuation:Freehold land and building 1,200,000 1,200,000Land and buildings on long term leases 2,110,000 2,110,000

3,310,000 3,310,000

The investment properties were revalued on a fair market value basis by a firm of independent professionalappraisers in the financial year ended 30 June 2001.


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5. INTANGIBLE ASSETS

Sub-Trademarks license fee Total

RM RM RM

Group

Cost:At 1 July 2002/ At 30 June 2003 4,805,000 300,000 5,105,000

Accumulated amortisation and impairment losses:At 1 July 2002 1,585,600 30,000 1,615,600Charge for the financial year 192,200 30,000 222,200

At 30 June 2003 1,777,800 60,000 1,837,800

Net book value:At 30 June 2003 3,027,200 240,000 3,267,200

Net book value:At 30 June 2002 3,219,400 270,000 3,489,400

Amortisation charge for the financial year ended 30 June 2002 192,200 30,000 222,200

6. SUBSIDIARY COMPANIES

This represents unquoted equity shares in the following subsidiary companies,all of which were incorporatedin Malaysia,and are stated at cost:

Effective interest2003 2002

Name of company Principal activities % %

Antioni Sdn. Bhd. Retailing and distribution of the “ANTIONI” 100 100brand of ready-made sports and casual wear and related accessories

B.U.M. Marketing Retailing and distribution of the “B.U.M. 100 100(Malaysia) Sdn. Bhd. EQUIPMENT” brand of ready-made

casual wear and related accessories

Bontton Sdn. Bhd. Retailing and distribution of the “BONTTON” 100 100brand of ready-made casual wear andrelated accessories

Bumcity Sdn. Bhd. Operator of speciality stores known as 100 100“BUMCITY”



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6. SUBSIDIARY COMPANIES (continued)

Effective interest2003 2002

Name of company Principal activities % %

Diesel Marketing Sdn. Bhd. Retailing and distribution of the “DIESEL” 100 100brand of ready-made casual wear and related accessories

Hing Yiap Trading Sdn. Bhd. Wholesaling of ready-made garments and 100 100fabrics

VFUSA Marketing Sdn. Bhd. Marketing and distribution of the “VANITY 100 100FAIR” brand of women intimate appareland related accessories

All the subsidiary companies are audited by Sekhar & Tan.

During the financial year, the Company subscribed for an additional 249,998 new ordinary shares of RM1 eachin Bumcity Sdn. Bhd. at par for cash.

Subsequent to the balance sheet date, the Company:

(i) subscribed for an additional 250,000 new ordinary shares of RM1 each in B.U.M. Marketing (Malaysia)Sdn. Bhd. at par for cash.

(ii) acquired the entire equity shares in B.U.M. Holdings (M) Sdn. Bhd., a dormant company incorporatedin Malaysia for a cash consideration of RM20,024.

The above subscription and acquisition of shares have no material financial effects.

7. DEFERRED TAX ASSETS

2003 2002RM RM

Group

At 1 July 2002/2001:As previously reported - -Prior year adjustment (note 21) 649,000 433,000

As restated 649,000 433,000Transfer to income statement (note 26) 193,000 216,000

At 30 June 842,000 649,000


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7. DEFERRED TAX ASSETS (continued)

2003 2002RM RM

Group

The deferred tax assets recognised in the financialstatements are in respect of the following:Temporary differences on the excess of depreciation

over the corresponding capital allowances 68,000 87,000Provision for royalties that are deducted for tax purposes only when paid 733,000 530,000Temporary differences on unrealised profits on inventories 41,000 32,000

842,000 649,000

The deferred tax assets of a subsidiary company notrecognised in the financial statements are as follows:Temporary differences on the excess of capital allowances

over the corresponding depreciation (3,600) (7,600)Provision for royalties that are deducted for tax purposes only when paid 12,600 2,600Unabsorbed capital allowances and tax losses available

for set off against future taxable profits (note 26) 258,500 154,500

267,500 149,500

8. INVENTORIES


Raw materials and consumables 1,853,164 1,731,261 1,853,164 1,731,261Work-in-progress 4,950,087 5,598,514 4,950,087 5,598,514Finished goods 46,302,284 39,568,988 1,363,680 680,293

53,105,535 46,898,763 8,166,931 8,010,068

Included in the above carrying values arefinished goods which are stated at their respective net realisable amounts 2,493,769 2,512,532 75,630 31,795

9. TRADE RECEIVABLES


Trade receivables 19,877,290 19,381,337 2,332,454 3,124,375Allowance for doubtful debts (974,447) (3,520,668) (855,122) (1,140,835)

18,902,843 15,860,669 1,477,332 1,983,540

The normal credit terms ranged from 14 to 120 days for the Group and 30 to 120 days for the Company.



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10. OTHER RECEIVABLES AND PREPAYMENTS


Other receivables and prepayments* 4,262,234 6,128,201 397,269 2,411,751Allowance for doubtful debts - - - (1,476,311)

4,262,234 6,128,201 397,269 935,440

* Included in this item is tax recoverable 634,748 2,150,829 - -

11. DUE FROM SUBSIDIARY COMPANIES

2003 2002RM RM

Cash advances 1,755,482 2,065,972Trade transactions 35,458,893 34,172,514

37,214,375 36,238,486

The above cash advances are unsecured and have no fixed terms of repayment. These advances bore interestat rates which varied in accordance with the Company’s prevailing applicable borrowing rates during thefinancial year.

The normal trade credit terms ranged from 30 to 120 days.

12. SHORT TERM INVESTMENT


Unquoted equity shares,at cost 135,000 135,000 135,000 135,000Group’s share of post-acquisition profits 31,027 31,027 - -

166,027 166,027 135,000 135,000

The above represents the Group’s and the Company’s effective equity interest of 45% (2002: 45%) in DieselTrading Sdn. Bhd. (In Liquidation), a company incorporated in Malaysia, which is currently under members’voluntary liquidation. As the Group and the Company had ceased to have a significant influence in thisinvestee company, which was formerly treated as an associated company, this investment is now accountedfor as a short term investment.

13. TRADE PAYABLES

The normal credit terms ranged from 14 to 150 days for the Group and 30 to 150 days for the Company.


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14. OTHER PAYABLES


Included in this item are:Sundry payable owing to the investee

company referred to in note 12 321,929 321,929 - -Dividends payable 15,271 13,405 15,271 13,405

15. HIRE PURCHASE PAYABLES


Future minimum payments 2,672,093 1,904,749 214,817 398,689Portion due within twelve

months (included in current liabilities) (1,501,455) (966,349) (136,021) (251,060)

Portion due after twelve months 1,170,638 938,400 78,796 147,629

Analysis of hire purchase commitments:Due within one year 1,678,252 1,109,823 147,824 277,372Due between one and five years 1,226,886 999,727 82,124 156,525

2,905,138 2,109,550 229,948 433,897Finance expenses (233,045) (204,801) (15,131) (35,208)

2,672,093 1,904,749 214,817 398,689

The hire purchase payables of the Group and the Company bore interest at flat rates ranging from 3.90% to6.25% per annum during the financial year.

The fair value of the above hire purchase payables of the Group and the Company is RM2,773,106 andRM220,863 respectively.

16. DUE TO SUBSIDIARY COMPANIES

This represents unsecured and interest-free cash advances with no fixed terms of repayment.



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17. SHORT TERM BORROWINGS


Unsecured:Bank overdrafts 2,656,353 1,603,287 - -Bankers’ acceptances 17,745,000 14,456,000 5,810,000 4,644,000

20,401,353 16,059,287 5,810,000 4,644,000

Secured:Term loans - repayment due

within twelve months (note 18) 761,414 716,918 761,414 716,918

21,162,767 16,776,205 6,571,414 5,360,918

The interest rates for bank overdrafts and annual discount rates for bankers’ acceptances at the balance sheetdate are as follows:

Group Company2003 2002 2003 2002

% % % %

Bank overdrafts 7.50 and 8.00 7.90 and 8.40 7.50 7.90

Bankers’ acceptances 4.00 to 5.25 4.00 to 5.20 4.00 to 4.75 4.00 to 4.75

18. TERM LOANS

Group and Company

2003 2002RM RM

Term loans 3,488,280 4,205,955Repayment due within twelve months

(included in short term borrowings - note 17) (761,414) (716,918)

Repayment due after twelve months 2,726,866 3,489,037

The above term loans are repayable over periods not exceeding 10 years (2002: 10 years) and are secured byway of fixed and legal charges and deeds of assignment cum loan agreements over certain land and buildingson long term leases and certain freehold land and buildings referred to in note 3.

The interest rates for the term loans at the balance sheet date ranged from 7.50% to 7.75% (2002: 7.90% to8.15%) per annum.


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19. DEFERRED TAXATION


At 1 July 2002/2001:As previously reported 731,000 803,000 716,000 732,000Prior year adjustment (note 21) (43,000) 230,000 600,000 600,000

As restated 688,000 1,033,000 1,316,000 1,332,000Transfer to income statement (note 26) (122,500) (345,000) (12,000) (16,000)

At 30 June 565,500 688,000 1,304,000 1,316,000

The deferred taxation recognised in the financialstatements is in respect of the following:Temporary differences on

the excess of capital allowances over the corresponding depreciation 720,500 713,000 688,000 698,000

Temporary differences on the excess of lease rental over depreciation 16,000 18,000 16,000 18,000

Temporary differences onunrealised profits on inventories (771,000) (643,000) - -

Revaluation surplus 600,000 600,000 600,000 600,000

565,500 688,000 1,304,000 1,316,000

20. SHARE CAPITAL

2003 2002RM RM

Ordinary shares of RM1 each:Authorised 100,000,000 100,000,000

Issued and fully paid:At 1 July 2002/2001 41,787,199 31,257,000Bonus issue by the capitalisation of retained profits on

the basis of 7 new shares for every 25 existing shares held - 9,139,199Issued pursuant to Employees’ Share Option Scheme

[“Scheme”] at RM1.00,RM1.03 and RM1.06 per share - 1,391,000

At 30 June 41,787,199 41,787,199

The above new shares rank pari passu in all respects with the existing shares of the Company.



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20. SHARE CAPITAL (continued)

The Scheme which was approved by the Registrar of Companies on 29 January 1999 and was in force for aperiod of four (4) years,expired from 28 January 2003.

The main features of the Scheme were as follows:

(i) the total number of new ordinary shares to be offered under the Scheme shall be subject to a maximumof 10% of the issued and paid-up share capital of the Company at any time during the existence of the Scheme.

( i i ) eligible employees comprise confirmed full time employees, including Executive Directors, of the Companyor its eligible subsidiary companies, subject to the meeting of the following conditions:

( a ) employees must be Malaysians and must have served for at least one continuous year with the Group;

(b) have attained the age of eighteen (18) years on or before the date of offer of the option to subscribefor ordinary shares; and

(c) are not participants of any employee share option scheme implemented by any company in the Group.

The entitlement of an Executive Director under the Scheme must be approved by the shareholders of theCompany in a general meeting.

(iii) the price payable upon the exercise of an option offered shall be the average of the mean market quotationof the ordinary shares as shown in the Daily Official List issued by the Kuala Lumpur Stock Exchange forthe five (5) market days immediately preceding the offer date, subject to the proviso that the option priceper ordinary share shall in no event be less than its par value or the last transacted market price of theordinary shares at the time the option is offered.

(iv) an option may be exercised in full or in part by notice of writing to the Company on any working dayduring the option period.

(v) the new ordinary shares to be allotted upon any exercise of the option will,upon allotment,rank pari passuin all respects with the then existing issued and paid-up share capital of the Company, but will not entitlethe holders thereof to receive any dividends,rights,bonus issue and any other distribution declared to theCompany’s shareholders which entitlement date thereof precedes the relevant exercise date of the optionand will be subject to all the provisions of the Articles of Association of the Company.

The total number of options granted pursuant to the Scheme to subscribe for new ordinary shares of RM1 eachin the Company up to the expiry date of 28 January 2003 was as follows:

No. of options over ordinaryshares of RM1 each

Options granted on 30 March 1999 1,998,000Adjustment for bonus issue during the financial year ended 30 June 2001 504,000Options granted on 3 April 2001 589,000Adjustment for bonus issue during the financial year ended 30 June 2002 164,000

3,255,000


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20. SHARE CAPITAL (continued)

As a consequence of the bonus issue during the previous financial year, the option prices for the optionsgranted on 30 March 1999 and 3 April 2001 were adjusted from RM1.03 per share and RM1.06 per sharerespectively to RM1.00 per share.

The movements in the options to take up the unissued ordinary shares of RM1 each of the Company duringthe financial year are as follows:

No. of options over ordinary shares of RM1 eachOption price At At

Options granted on RM 1.7.2002 Granted Exercised Lapsed 30.6.2003

30 March 1999 1.00 442,000 - - 442,000 -3 April 2001 1.00 293,000 - - 293,000 -

During the financial year, the new Employees’ Share Option Scheme [“New Scheme”] of the Company for theeligible employees (including Executive Directors) of the Group was approved by the shareholders of theCompany and the Securities Commission on 23 December 2002 and 22 January 2003 respectively. However,the New Scheme has lapsed on 21 July 2003, being the deadline for implementation.

21. PRIOR YEAR ADJUSTMENT

Group and Company

In previous financial years,deferred tax assets were not accounted for in the financial statements unless therewas a reasonable expectation of their realisation. In addition, deferred taxation was not provided on therevaluation surplus arising from the revaluation of landed properties as it was not the intention of the Directorsto dispose the properties concerned in the foreseeable future.

This accounting policy was changed during the financial year to one which recognises a deferred tax asset tothe extent that it is probable that taxable profit will be available against which the deductible temporarydifferences can be utilised and also which recognises all temporary differences between the carrying amountof an asset or liability in the balance sheet and its tax base.

The above change in accounting policy is to comply with MASB 25 “Income Taxes”and has been dealt withretrospectively.

This change in accounting policy has no material effect on the current financial year’s results of the Group andthe Company.



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21. PRIOR YEAR ADJUSTMENT (continued)

The other effects of the change on the Group’s and Company’s financial statements are as follows:

Aspreviously Effects Asreported of change restated

RM RM RM

Group

At 30 June 2001Deferred tax assets - 433,000 433,000Deferred taxation 803,000 230,000 1,033,000Revaluation surplus 1,700,572 (600,000) 1,100,572Retained profits 20,400,441 803,000 21,203,441

Financial year ended 30 June 2002Tax expense 3,070,801 (489,000) 2,581,801

At 30 June 2002Deferred tax assets - 649,000 649,000Deferred taxation 731,000 (43,000) 688,000Revaluation surplus 1,700,572 (600,000) 1,100,572Retained profits 15,735,897 1,292,000 17,027,897

Company

At 30 June 2001Deferred taxation 732,000 600,000 1,332,000Revaluation surplus 1,700,572 (600,000) 1,100,572

At 30 June 2002Deferred taxation 716,000 600,000 1,316,000Revaluation surplus 1,700,572 (600,000) 1,100,572

22. DIVIDEND

This represents a first and final dividend of 3.5 sen (2002:3.5 sen) per ordinary share less tax paid.

A first and final dividend in respect of the current financial year of 3.5% less tax amounting to RM1,053,037will be proposed for the approval of the Company’s shareholders at the forthcoming Annual General Meetingof the Company. These financial statements do not reflect this first and final dividend which will be accountedfor in shareholders’ equity as an appropriation of retained profits in the financial year ending 30 June 2004when approved by the Company’s shareholders.


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23. REVENUE


Continuing operations:Sales of goods less returns and discounts 114,571,753 98,894,486 74,051,914 63,889,445Royalty income 769,612 689,050 - -Dividends from unquoted equity

shares in subsidiary companies - - 1,525,000 1,495,000

115,341,365 99,583,536 75,576,914 65,384,445

Discontinued operations:Sales of goods less returns and discounts - 3,696,337 - -

115,341,365 103,279,873 75,576,914 65,384,445

24. PROFIT ON DISPOSAL OF A SUBSIDIARY COMPANY

The effect of the disposal of a subsidiary company, B.U.M. Marketing (Singapore) Pte. Ltd.,on 10 May 2002,onthe results of the Group for the previous financial period to the date of disposal was as follows:

Financialperiod from1.7.2001 to10.5.2002

RM

Revenue 3,696,337Changes in inventories of finished goods and work-in-progress (60,515)Staff costs (724,535)Depreciation (88,000)Bad debts recovered 20,910Profit on disposal of a subsidiary company 1,416,055Operating expenses (2,996,086)

Profit from operations 1,264,166Finance costs (35,423)

Profit before taxation 1,228,743Taxation -

Profit after taxation 1,228,743



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25. PROFIT BEFORE TAXATION


This has been arrived at:

after charging:Amortisation of intangible assets 222,200 222,200 - -Auditors’ remuneration:

Auditors of the Company 81,000 76,800 29,000 29,000Other auditors of a subsidiary company - 7,412 - -

Depreciation 2,502,700 2,477,171 839,081 825,568Directors’ remuneration* 1,112,976 1,032,940 467,552 448,848Interest expenses:

Bank overdrafts 194,640 204,420 53,877 37,712Bankers’ acceptances 762,394 766,093 281,325 232,190Hire purchase 263,375 187,381 29,623 44,614Overdue accounts 1,637 - - -Term loans 311,698 372,900 311,698 372,900Trust receipts 29,405 18,086 29,405 16,086

Loss on disposal of property, plant and equipment 19,130 - 18,498 -Property, plant and equipment written off 133,043 91,153 66,517 89,753Realised loss on foreign exchange 280 10,514 271 -Rental expenses:

Equipment 4,995 67,672 4,995 -Land and buildings 2,988,993 2,789,761 81,900 88,200

Royalty expenses 1,081,448 999,370 - -

and crediting:Gain on foreign exchange:

Realised 8,594 137 - 137Unrealised 1,556 1,594 - -

Interest received from:Cash advances granted to

subsidiary companies - - 74,455 211,490Others 30,540 33,000 30,540 33,000Short term deposits 136 1,221 136 1,221

Profit on disposal of property, plant and equipment 165,553 23,195 58,495 10,017Rental income from:

Subsidiary companies:Land and buildings and store equipment - - 510,000 510,000

Third parties:Land and buildings 370,977 249,400 284,075 249,400


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25. PROFIT BEFORE TAXATION (continued)


* This is made up of:

Fees:Non Executive Directors (1) 108,000 108,000 108,000 108,000Executive Directors (2) 108,000 108,000 108,000 108,000

216,000 216,000 216,000 216,000

Salaries and otherbenefits (3) - Executive Directors (2) 896,976 816,940 251,552 232,848

1,112,976 1,032,940 467,552 448,848

(1) The Non Executive Directors in 2003 and 2002 were Y.Bhg. Dato’ Azizi Yom Ahmad, Y.Bhg. Dato’ PadukaDr. Khairuddin bin Mohamed Yusof and Mr. Ng Teng Seng.

(2 ) The Executive Directors in 2003 and 2002 were Ms. Chi Oi Meng, M r. Khoo Henn Kuan and Mr. Chi Kin Meng.

(3 ) Group Company2003 2002 2003 2002RM RM RM RM

The estimated monetary value of other benefits not included in the above received by the Executive Directors 103,421 71,015 79,471 47,065

26. TAXATION


Taxation on the profit of the financial year:Malaysian income tax 3,654,000 3,367,400 1,855,000 1,622,000Transfer from deferred tax assets (note 7) (193,000) (216,000) - -Transfer from deferred taxation (note 19) (122,500) (345,000) (12,000) (16,000)

3,338,500 2,806,400 1,843,000 1,606,000

Over provision of Malaysian income taxin respect of prior financial years (351,086) (224,599) (121,475) (135,193)

2,987,414 2,581,801 1,721,525 1,470,807



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26 TAXATION (continued)

Malaysian income tax is calculated as follows:

(i) at the statutory rate of 28% (2002: 28%) on the chargeable income of the estimated taxable profit for thefinancial year of the Company; and

(ii) at the statutory rate of 20% on the first RM100,000 and 28% on the chargeable income above RM100,000(2002:28%) of the estimated taxable profit for the financial year of the subsidiary companies.

The numerical reconciliation between the tax expense in the income statements and the income tax expenseapplicable to profit before taxation at the statutory income tax rates of the Group and the Company is asfollows:


Profit before taxation 8,155,516 8,367,984 5,308,523 5,463,116

Tax at the applicable statutory rates:20% on first RM100,000 90,742 - - -28% (2002:28%) on the

balance of chargeable income 2,697,022 2,343,036 1,486,386 1,529,672Tax effect of income not subject to tax (30,107) (396,495) - (195,720)Tax effect of expenses not

deductible for tax purposes 494,509 723,334 356,614 272,048Tax effect of tax loss not recognised 86,334 136,525 - -Over provision of taxation

in respect of prior financial years (351,086) (224,599) (121,475) (135,193)

Tax expense 2,987,414 2,581,801 1,721,525 1,470,807

At the balance sheet date, a subsidiary company has unabsorbed capital allowances and tax losses amountingto approximately RM923,000 (2002: RM551,000), which can, subject to approval by the tax authorities, becarried forward and utilised to offset against its future taxable profits. These unabsorbed capital allowancesand tax losses have not been recognised as deferred tax assets disclosed in note 7.

The Company has:

(i) tax exempt income for the payment of tax exempt dividends of approximately RM4,350,000 (2002:RM4,350,000); and

(ii) sufficient tax credit under Section 108 of the Income Tax Act,1967,to frank the payment of dividends outof the balance of its retained profits.


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27. EARNINGS PER SHARE

(a) Basic Earnings Per Shar e

The basic earnings per share of the Group is calculated by dividing the Group’s profit after taxation by theweighted average number of ordinary shares of the Company in issue during the financial year.

2003 2002RM RM

Profit after taxation (RM) 5,168,102 5,786,183Weighted average number of ordinary shares in issue 41,787,199 41,080,199Basic earnings per share (sen) 12.37 14.09

(b) Diluted Earnings Per Shar e

Diluted earnings per share is not presented as, upon expiry of the Employees’ Share Option Schemeduring the financial year, there were no dilutive potential ordinary shares.

The comparative earnings per share information has been restated to take into account the effect on theprofit after taxation as a result of the prior year adjustment disclosed in note 21.

28. SIGNIFICANT RELATED PARTY AND OTHER INTRAGROUP TRANSACTIONS

(a) During the financial year, the Group and the Company transacted with certain related parties, thetransactions of which were carried out in the ordinary course of business, at arm’s length, on normalcommercial terms which were not more favourable to the related parties than those generally available tothird parties which have commercial relationship with the Group and the Company. In addition,the traderelated transactions were based on market pricing and/or standard pricing formulae used in the industry.The more significant of such transactions were as follows:

Group CompanyNature of Name of 2003 2002 2003 2002transactions related party RM RM RM RM

Purchase of a motor vehicle Chi Kin Meng - 200,000 - 200,000

Rental of a house Chi Oi Meng 7,200 7,200 7,200 7,200

Rental of apartments Jenapine Sdn. Bhd. (1) 21,600 21,600 16,200 16,200

Rental of apartments Chi Kuei Yungand an industrial & Sons Realtybuilding Sdn. Bhd. (2) 175,200 152,400 21,600 21,600

(1) A company in which Ms. Chi Oi Meng and Mr. Khoo Henn Kuan have substantial financial interests.

(2) A company in which Ms. Chi Oi Meng, Mr. Khoo Henn Kuan and Mr. Chi Kin Meng have substantialfinancial interests.



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28. SIGNIFICANT RELATED PARTY AND OTHER INTRAGROUP TRANSACTIONS (continued)

(b) During the financial year, the Company also sold ready-made garments amounting to RM67,464,080 (2002:RM54,625,565) to its subsidiary companies.

(c) The options over ordinary shares of the Company granted to a Director during the financial year are asfollows:

No. of options over ordinary shares of RM1 eachOption Granted during the Unexercised options atprice financial year financial year endRM 2003 2002 2003 2002

Chi Kin Meng 1.00 - 23,000 - 109,000

The above options were granted on the same terms and conditions as those granted to other employeesof the Group,the details of which are summarised in note 20.

The unexercised options lapsed during the financial year with the expiry of the Scheme on 28 January2003.

(d) Subsequent to the balance sheet date, the Company acquired the entire equity shares in B.U.M. Holdings(M) Sdn. Bhd.,a company incorporated in Malaysia from Ms. Chi Oi Meng and Mr. Khoo Henn Kuan for acash consideration of RM20,024.

29. COMMITMENTS

Group

At the balance sheet date, the Group has the following commitments in respect of its future minimum leasepayments under non cancellable leases of premises:

2003 2002RM RM

Expiring within one financial year 2,869,976 1,709,870Expiring between two and five financial years 3,134,087 1,756,057

6,004,063 3,465,927


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30. CONTINGENT LIABILITIES (UNSECURED)

Group

(i) During the previous financial year, a subsidiary company, Bontton Sdn. Bhd. (proprietor of the “DIESEL”trademark in relation to articles of clothing in Malaysia) together with another subsidiary company, DieselMarketing Sdn. Bhd. (the authorised licensee of Bontton Sdn. Bhd. for the said “DIESEL” trademark)commenced a suit against APCOTT PP (M) Sdn. Bhd. [“APCOTT”],for an injunction to stop APCOTT fromusing the “DIESEL” name in relation to bags and other fashion goods in Malaysia and to claim for generaldamages.

Subsequent to the above, DIESEL S.p.A., a corporation incorporated in Italy, successfully applied to bejoint as a party to the above suit as second defendant.

On 15 November 2002,an interim injunction was entered against APCOTT restraining APCOTT, until thedisposal of the main suit,from carrying on the business of manufacturing, distributing, selling or otherwisedealing by way of trade in certain fashion goods using the trademark “DIESEL”.

On 11 April 2003 and 31 July 2003, APCOTT and DIESEL S.p.A. filed their defence and counter-claimsrespectively.

As at the date of the Directors’ Report, the above subsidiary companies have yet to file their reply anddefence to counter-claim after which this matter will be set down for trial.

(ii) During the financial year, Bontton Sdn. Bhd. and Diesel Marketing Sdn. Bhd. filed three suits against F.O.S.Clothing Co. Sdn. Bhd., Orifocus Sdn. Bhd. and Popular Gateway Sdn. Bhd. [“the defendants”] based oninfringement of Bontton Sdn. Bhd.’s “DIESEL” trademarks and claiming an injunction, damages anddelivery up of the infringing goods. These subsidiary companies also filed applications for an interiminjunction against each of the defendants to restrain infringement of their “DIESEL” trademarks pendingdisposal of the main suit.

On 5 March 2003,the defendants each filed their defence and counter-claims.

On 18 March 2003, the subsidiary companies obtained an interim injunction against each of thedefendants restraining each of them from carrying on the business of importing, manufacturing,distributing, selling or otherwise dealing with the clothing or other fashion goods bearing the trademark“DIESEL” or any other mark comprising the word “DIESEL” pending the final disposal of the main suit.

The above subsidiary companies later successfully applied for the three suits to be consolidated toproceed as one suit and this matter has been fixed for pre-trial case management on 17 November 2003.

Despite the above counter-claims by the respective defendants, the Group has not made any allowance forpossible losses arising therefrom as the maximum exposure of liabilities on the Group, if any, will depend onthe outcome of the respective suits.

Company

At the balance sheet date, the Company has contingent liabilities amounting to RM30,996,992 (2002:RM29,578,268) in respect of corporate guarantees granted to third parties for banking and financing facilitiesof its subsidiary companies.



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32. FINANCIAL INSTRUMENTS

(a) Financial Risk Management Objectives and Policies

The Group’s and the Company’s financial risk management policy seeks to ensure that adequate financialresources are available for the development of the Group’s and the Company’s businesses whilstmanaging their interest rate, credit and foreign exchange risks. The Group and the Company operatewithin clearly defined guidelines that are approved by the Directors and the Group’s and the Company’spolicy is to not engage in speculative transactions.

(b) Interest Rate Risk

The Group’s and the Company’s income and operating cash flows are substantially independent ofchanges in market interest rates. Interest rate exposure arises from the Group’s and the Company’sborrowings and deposits,and is managed through the use of fixed and floating rate debts.

(c) Credit Risk

Credit risk arises when sales are made on deferred credit terms. The Group and the Company seek toinvest cash assets safely and profitably. They also seek to control credit risk by setting counterparty limitsand ensuring that sales are made to customers with an appropriate credit history. The Group and theCompany consider the risk of material loss in the event of non-performance by a financial counterparty tobe unlikely.

The Group and the Company do not have any significant exposure to any individual customer orcounterparty nor do they have any major concentration of credit risk related to any financial instruments.

(d) Foreign Exchange Risk

The Group and the Company are exposed to foreign currency risk as a result of their normal operatingactivities, where the currency denomination differs from the local currency, Ringgit Malaysia (RM). TheGroup’s and the Company’s policy is to keep the foreign exchange exposure to an acceptable level.

(e) Fair Values

All financial assets and liabilities are stated at or close to their fair values unless otherwise disclosed inthe notes to the financial statements.

33. COMPARATIVES

The presentation and classification of items in the current financial year’s financial statements have beenconsistent with that of the previous financial year except for the following:

(a) certain comparatives have been reclassified or adjusted to comply with the current financial year’spresentation;

(b) comparative information is not disclosed upon first application of MASB 24 “Financial Instruments:Disclosure and Presentation”; and

(c) restatement of comparatives as disclosed in notes 21 and 27.



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PROPERTIES as at 30 june 2003

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PROPERTIES as at 30 june 2003(continued)


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DIRECTORS’ INTERESTS IN SHARES IN THE COMPANY AS AT 31 OCTOBER 2003

Shareholdings% of Issued in which % of Issued

Directors’ and Paid-up Directors are and Paid-upDirect Share deemed to Share

No. Name of Directors Shareholdings Capital have Interests Capital

1 YBhg Dato’ Azizi Yom Ahmad 2,039,520 (1) 4.88 - -2 Chi Oi Meng 1,829,760 4.38 14,993,280 (2) 35.873 Khoo Henn Kuan 1,109,760 2.65 15,817,360 (3) 37.894 Chi Kin Meng - - 16,823,040 (4) 40.255 YBhg Dato’ Paduka Dr. Khairuddin

bin Mohamed Yusof - - - -6 Ng Teng Seng - - - -

Ms Chi Oi Meng, Mr Khoo Henn Kuan and Mr Chi Kin Meng, by virtue of their interests of more than 15% of theshare capital of the Company, are deemed to have an interest in the entire share capitals of the Company’ssubsidiary corporations during the financial year.

Notes:

(1) Direct interest in shares pledged with Southern Nominees (Tempatan) Sdn. Bhd.

(2) Deemed interest by virtue of direct and indirect interests in Chi Kuei Yung & Sons Realty Sdn. Bhd. and in thevoting shares of spouse, Khoo Henn Kuan.

(3) Deemed interest by virtue of direct and indirect interests in Chi Kuei Yung & Sons Realty Sdn. Bhd. and in thevoting shares of spouse, Chi Oi Meng and connected persons,Khoo Henn Loi and Khoo Henn Kiew.

(4) Deemed interest by virtue of direct and indirect interests in Chi Kuei Yung & Sons Realty Sdn. Bhd. and in thevoting shares of connected persons,Chi Oi Meng and Khoo Henn Kuan.

SHAREHOLDINGS STATISTICS

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30 LARGEST SHAREHOLDERS AS AT 31 OCTOBER 2003

% of Issued andNo. of Ordinary Paid-up

Name of Shareholders Shares of RM1 each Share Capital

1. Chi Kuei Yung & Sons Realty Sdn Bhd 13,883,520 33.22

2. Southern Nominees (Tempatan) Sdn Bhd 2,039,520 4.88Qualifier Name:Pledged Securities Account for

Dato’ Azizi Bin Yom Ahmad

3. Choi Choong Hin 1,756,900 4.20

4. Khoo Henn Kuan 1,109,760 2.66

5. Chi Oi Meng 960,000 2.30

6. Chi Oi Meng 869,760 2.08

7. Tan Eng Lan 695,040 1.66

8. Khoo Kar Toi 659,200 1.58

9. Perabut Kupang Sdn Bhd 590,000 1.41

10. Fong Chan Moi 532,000 1.27

11. Nellie Wong 510,720 1.22

12. Kong Choon Thai 387,840 0.93

13. Kong Choon Thai 364,800 0.87

14. Hong Leong Finance Berhad 350,000 0.84Qualifier Name:Pledged Securities Account for Chan Wai Pun

15. RHB Nominees (Tempatan) Sdn Bhd 289,920 0.69Qualifier Name: Yuen Siew Van

16. Lim Keat Wah 262,000 0.63

17. Suriakant a/l Babu Vallabh Patel 218,000 0.52

18. Lembaga Tabung Haji 192,000 0.46

19. Tay Teck Ho 173,000 0.41

20. Choi Yu Loong 168,960 0.40

21. Mayban Nominees (Tempatan) Sdn Bhd 166,400 0.40Qualifier Name:Pledged Securities Account for Joo Moi Hoon

22. Lim Keat Pheng 160,000 0.38

23. Lim Guan Lai @ Lim Hock Lye 150,000 0.36

24. HDM Nominees (Tempatan) Sdn Bhd 145,000 0.35Qualifier Name:Pledged Securities Account for Lim Yen Nee

25. Lim Pay Kaon 137,000 0.33

26. TA Nominees (Tempatan) Sdn Bhd 126,720 0.30Qualifier Name:Pledged Securities Account for

Francis Chia Mong Tet

27. Alliancegroup Nominees (Tempatan) Sdn Bhd 122,960 0.29Qualifier Name:Pledged Securities Account for Tan Sew Ching

28. Teh Kim Seng 110,080 0.26

29. Gan Tee Kian 99,840 0.24

30. Foo You Chin @ Woo You Chin 96,000 0.23

SHAREHOLDINGS STATISTICS(continued)


Berhad(22414-V)

83

SHARE DISTRIBUTION AS AT 31 OCTOBER 2003

% of IssuedNo. Of % Of No. Of and Paid-up

Size of Shareholdings Shareholders Shareholders Shares Held Share Capital

1 – 99 53 2.25 2,372 0.01100 – 1,000 192 8.16 157,948 0.381,001 – 10,000 1,755 74.62 6,375,119 15.2610,001 – 100,000 324 13.78 8,120,660 19.43100,001 to less than

5% of issued shares 27 1.15 13,247,580 31.705% and above of issued shares 1 0.04 13,883,520 33.22

Total 2,352 100.00 41,787,199 100.00

Authorised Share Capital : RM100,000,000

Issued and Fully Paid-up Share Capital : RM41,787,199.00

Class of Shares : Ordinary shares of RM1.00 per share

No. of Ordinary Shareholders : 2,352

VOTING RIGHT OF SHAREHOLDERS

On a show of hands every member personally present or by attorney or proxy shall have one vote and in the caseof a poll shall have one vote for every share held by him. No person,other than a member duly registered and whoshall have paid everything for the time being due from him and payable to the Company in respect of his sharesshall be entitled to vote on any question either personally or by proxy or as proxy for another member.


Hing Yiap Knitting

Industries

Berhad(22414-V)

84

SUBSTANTIAL SHAREHOLDERS AS AT 31 OCTOBER 2003

Shareholdingsin which

Shareholdings Substantialin Substantial % of Issued Shareholders % of Issued

Name of Shareholders’ and Paid-up are deemed to and Paid-up No. Substantial Shareholders Name Share Capital have Interests Share Capital

1 Chi Kuei Yung & Sons Realty Sdn. Bhd. 13,883,520 33.22 - -

2 Chi Oi Meng 1,829,760 4.38 14,993,280 (1) 35.873 Khoo Henn Kuan 1,109,760 2.65 15,817,360 (2) 37.894 Chi Kin Meng - - 16,823,040 (3) 40.255 Sze Tho Pooi Lin - - 16,823,040 (3) 40.25

Notes:

(1) Deemed interest by virtue of direct and indirect interests in Chi Kuei Yung & Sons Realty Sdn. Bhd. and in thevoting shares of spouse, Khoo Henn Kuan.

(2) Deemed interest by virtue of direct and indirect interests in Chi Kuei Yung & Sons Realty Sdn. Bhd. and in thevoting shares of spouse, Chi Oi Meng and connected persons,Khoo Henn Loi and Khoo Henn Kiew.

(3) Deemed interest by virtue of direct and indirect interests in Chi Kuei Yung & Sons Realty Sdn. Bhd. and in thevoting shares of connected persons, Chi Oi Meng and Khoo Henn Kuan.


Chi Kuei Yung & Sons Realty Sdn. Bhd.[Company No. 28760-W]

915-916, Jalan Kuang Cermin Satu, Taman Kepong52100 Kuala Lumpur

6 October 2003

The Board of DirectorsHing Yiap Knitting Industries BerhadLots 59-60, Lorong Kuang Bulan,Taman Kepong,52100 Kuala Lumpur

Dear Sirs,

CHANGE OF AUDITORS

Pursuant to Section 172(11) of the Companies Act, 1965, we, being a shareholder of theCompany, hereby give notice of our intention to nominate Messrs Ernst & Young forappointment as auditors of the Company and to propose the following as an ordinaryresolution to be tabled at the forthcoming Annual General Meeting of the Company, toreplace the retiring auditors, Messrs Sekhar & Tan.

“ To appoint Messrs Ernst & Young as the Auditors of the Company in place of theretiring auditors, Messrs Sekhar & Tan to hold office until the conclusion of the nextAnnual General Meeting at a remuneration to be determined by the directors.”

Yours faithfullyFor and on behalf ofChi Kuei Yung & Sons Realty Sdn. Bhd.

Chi Oi MengDirector

[g:ckc:hingyiap/chgaud]

FORM OF PROXY (Please refer to the notes below before completing this form)

Number of shares held

I/We ..........................................................................................................................................................................................(FULL NAME IN BLOCK LETTERS)

of ..............................................................................................................................................................................................(FULL ADDRESS)

being a member of HING YIAP KNITTING INDUSTRIES BERHAD hereby appoints ............................................

...................................................................................................................................................................................................(FULL NAME IN BLOCK LETTERS)

of ..............................................................................................................................................................................................(FULL ADDRESS)

as my/our proxy to attend and vote for me/us on my/our behalf at the Twenty-Eighth Annual General Meeting ofthe Company to be held at Function Room 1, Kuala Lumpur Golf & Country Club, No. 10, Jalan 1/70D, Off JalanBukit Kiara,60000 Kuala Lumpur on Tuesday, 23 December 2003 at 10.00 a.m. or any adjournment thereof.

RESOLUTIONS 1 2 3 4 5 6 7

For

Against

(Please indicate with an “X” in the appropriate boxes above how you wish your vote to be cast. If you do not doso,your proxy shall vote as he thinks fit,or at his/their discretion.)

Dated this ………. day of …………………. 2003 ……………………………………………………...Signature of Shareholder

Notes1. A member entitled to attend and vote at the Meeting is not entitled to appoint more than one (1) proxy to attend and vote in his

stead. A proxy may but need not be a member of the Company. If a proxy is granted to a non-member of the Company, he need notbe any of the person described in Section 149(1)(b) of the Companies Act,1965.

2. Where a member is an authorised nominee as defined under the Securities Industry (Central Depositories) Act,1991,it may appointonly one proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the saidsecurities account.

3. If the appointor is a corporation,the form of proxy should be executed under its common seal or under the hand of an officer orattorney duly authorised in that behalf.

4. The instrument appointing a proxy must reach the registered office of the Company at Lots 59-60, Lorong Kuang Bulan, TamanKepong, 52100 Kuala Lumpur not less than forty-eight (48) hours before the time set for the meeting or any adjournment thereof.

PROXY FORM

HING YIAP KNITTING INDUSTRIES BERHAD(22414-V) (Incorporated in Malaysia)

HING YIAP KNITTING INDUSTRIES BERHAD (22414-V)

Lots 59-60,Lorong Kuang Bulan

Taman Kepong

52100 Kuala Lumpur

Stamp/Setem

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Documents

HY cover2 · 2019-03-04 · notice Hing Yiap Knitting Industries Berhad (22414-V) 02 of annual general meeting NOTICE NOTICE IS HEREBY GIVEN THAT the Twenty-Eighth Annual General