2003Tel : 03-2692 4022 Fax : 03-2691 5229 PRINCIPAL BANKERS Malayan Banking Berhad (3813 K) No.2, Lorong Rahim Kajai 14 Taman Tun Dr. Ismail 60000 Kuala Lumpur Tel : 03-7729 3671 Cathay

BOARD OF DIRECTORS Datuk Dr. Anis Bin Ahmad (Chairman)

Dr. Lee Fang Hsin (President/Group Managing Director)

Mr. Lee Tien Te (Non-Independent Non-Executive Director)

Dr. Lee Fang Yu (Non-Independent Non-Executive Director)

Dato' Koay Soon Eng (Independent Non-Executive Director)

Mr. Tu Shu Yao (Independent Non-Executive Director)

COMPANY SECRETARIES Ms. Lim Seck Wah (MAICSA 0799845)

Mr. M. Chandrasegaran A/L S. Murugasu (MAICSA 0781031)

REGISTERED OFFICE AND

PRINCIPAL PLACE OF BUSINESS 16th Floor, Plaza IBM,

No. 1, Jalan Tun Mohd Fuad,

Taman Tun Dr. Ismail, 60000 Kuala Lumpur.

Tel : 03-7727 6390

Fax : 03-7727 6701

Email : [email protected]

Website : www.ysp.com.my

REGISTRAR Mega Corporate Services Sdn Bhd (187984-H)

Level 11-2, Faber Imperial Court,

Jalan Sultan Ismail, 50250 Kuala Lumpur.

Tel : 03-2692 4271

Fax : 03-2732 5388

AUDITORS Shamsir Jasani Grant Thornton (AF 737)

(Member of Grant Thornton International)

Chartered Accountants,

Level 11-1, Faber Imperial Court,

Jalan Sultan Ismail, 50250 Kuala Lumpur.

Tel : 03-2692 4022

Fax : 03-2691 5229

PRINCIPAL BANKERS Malayan Banking Berhad (3813 K)

No.2, Lorong Rahim Kajai 14

Taman Tun Dr. Ismail

60000 Kuala Lumpur

Tel : 03-7729 3671

Cathay United Bank (970064C)

Licensed Offshore Bank

Level 3(C), Main Office Tower

Financial Park Labuan Complex

STOCK EXCHANGE LISTING Second Board of Bursa Malaysia

Bursa Malaysia refers to Bursa Malaysia Securities Berhad

(Formerly known as Malaysia Securities Exchange Berhad)

CORPORATE INFORMATION

1

NOTICE IS HEREBY GIVEN that the Third Annual General Meeting of the Company will be held at Cempaka Room, Mezzanine

Floor, Equatorial Hotel Kuala Lumpur, Jalan Sultan Ismail, 50250 Kuala Lumpur on Thursday, 24th June 2004 at 10:00a.m. for

the following purposes :-

AGENDA

AS ORDINARY BUSINESS

NOTICE OF ANNUAL GENERAL MEETING

2

1. To receive and adopt the Audited Financial Statements of the Company for the financial year

ended 31st December 2003 and the Reports of the Directors and the Auditors thereon.

2. To approve the payment of a final tax exempt dividend of 6 sen per ordinary share for the

financial year ended 31st December 2003.

3. To consider and if thought fit, to pass the following resolution in accordance with Section

129(6) of the Companies Act, 1965 :-

"THAT Mr. Lee Tien-Te, after having attained the age of seventy years, and retiring in

accordance with Section 129 of the Companies Act, 1965 be and is hereby re-appointed as

Director of the Company to hold office until the next Annual General Meeting."

4. To re-elect the following Directors retiring in accordance with the Company's Articles of

Association :-

i) Datuk Dr. Anis Bin Ahmad - Article 85

ii) Dr. Lee Fang Yu - Article 92

iii) Dr. Lee Fang Hsin - Article 92

iv) Mr. Tu Shu Yao - Article 92

5. To re-appoint Messrs Shamsir Jasani Grant Thornton as Auditors and to authorise the Board

of Directors to fix their remuneration.

AS SPECIAL BUSINESS

To consider and, if thought fit, to pass the following Ordinary Resolutions :-

6. AUTHORITY TO ISSUE SHARES PURSUANT TO SECTION 132D OF THE COMPANIES

ACT, 1965

"THAT pursuant to Section 132D of the Companies Act, 1965, and subject to the approvals

from the relevant governmental/regulatory authorities, the Directors be and are hereby

empowered to issue shares in the capital of the Company from time to time and upon such

terms and conditions and for such purposes as the Directors may deem fit provided that the

aggregate number of shares issued pursuant to this resolution does not exceed 10% of the

issued capital of the Company for the time being and that such authority shall continue in

force until the conclusion of the next annual general meeting of the Company."

7. PROPOSED SHAREHOLDERS' RATIFICATION AND MANDATE FOR RECURRENT

RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE WITH

YUNG ZIP CHEMICAL IND. CO. LTD. ("YZC")

"THAT approval be hereby given to the Company and/or its subsidiaries ("Group") to enter

into the recurrent related party transactions of a revenue or trading nature ("Recurrent

Transactions") with YZC as set out in Section 2.3(ii)(a) of the Circular to Shareholders dated

2nd June 2004 ("Circular") which are necessary for the Group's day-to-day operations

provided that such transactions are in the ordinary course of business and are on terms not more

favourable to the related party than those generally available to the public and not

detrimental to minority shareholders and such approval shall continue to be in force until :-

(RESOLUTION 1)

(RESOLUTION 2)

(RESOLUTION 3)

(RESOLUTION 4)

(RESOLUTION 5)

(RESOLUTION 6)

(RESOLUTION 7)

(RESOLUTION 8)

(RESOLUTION 9)


(CONT’D)

3

(a) the conclusion of the next Annual General Meeting ("AGM") of the Company

following this AGM, at which time it will lapse, unless by a resolution passed at such

AGM, such authority is renewed;

(b) the expiration of the period within which the next AGM of the Company is required

to be held pursuant to Section 143(1) of the Act (but shall not extend to such

extension as may be allowed pursuant to Section 143(2) of the Act); or

(c) revoked or varied by resolution passed by the shareholders in a general meeting;

whichever is earlier.

AND THAT, all the past Recurrent Transactions entered into by the Group from the

date of listing on 12th January 2004 up to the date of this resolution be hereby

approved and ratified.

AND THAT, the Directors of the Company be and hereby authorized to complete

and to do all such acts and things (including executing all such documents as may

be required) as they may consider expedient or necessary to give effect to the

Proposed Shareholders' Mandate."



RE-GO PACKAGING MATERIALS SDN BHD ("RGP")



Transactions") with RGP as set out in Section 2.3(ii)(b) of the Circular to Shareholders dated









to be held pursuant to Section 143(1) of the Act (but shall not extend to such extension

as may be allowed pursuant to Section 143(2) of the Act); or










(RESOLUTION 10)

(RESOLUTION 11)


(CONT’D)

4



YUNG SHIN PHARMACEUTICALS INDUSTRIES CO. LTD. ("YSP(TW)")



Transactions") with YSP(TW) as set out in Section 2.3(ii)(c),(d)&(e) of the Circular to

Shareholders dated 2nd June 2004 ("Circular") which are necessary for the Group's

day-to-day operations provided that such transactions are in the ordinary course of business and

are on terms not more favourable to the related party than those generally available to the

public and not detrimental to minority shareholders and such approval shall continue to be

in force until :-



AGM, such authority is renewed ;



extension as may be allowed pursuant to Section 143(2) of the Act) ; or

(c) revoked or varied by resolution passed by the shareholders in a general meeting ;


AND THAT, all the past Recurrent Transactions entered into by the Group from the date of

listing on 12th January 2004 up to the date of this resolution be hereby approved and

ratified.

AND THAT, the Directors of the Company be and hereby authorized to complete and to do

all such acts and things (including executing all such documents as may be required) as they

may consider expedient or necessary to give effect to the Proposed Shareholders'

Mandate."



ANGEL ASSOCIATES, INC. ("AA")



Transactions") with AA as set out in Section 2.3(ii)(f) of the Circular to Shareholders dated
















(RESOLUTION 12)


(CONT’D)

5







SHANGHAI YUNG ZIP PHARM. TRADING CO., LTD ("SYZ")



Transactions") with SYZ as set out in Sections 2.3(ii)(g) of the Circular to Shareholders dated















ratified.




Mandate."


RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE WITH TIEN

TE (M) SDN. BHD. ("TTSB")



Transactions") with TTSB as set out in Section 2.3(ii)(h) of the Circular to Shareholders

dated 2nd June 2004 ("Circular") which are necessary for the Group's day-to-day operations










(c) revoked or varied by resolution passed by the shareholders in a general meeting ;


(RESOLUTION 13)

(RESOLUTION 14)


(CONT’D)

6



ratified.




Mandate."

13. To transact any other business which may properly be transacted at an Annual General

Meeting for which due notice shall have been given.

By Order of the Board

LIM SECK WAH (MAICSA 0799845)

M. CHANDRASEGARAN A/L S. MURUGASU (MAICSA 0781031)

Company Secretaries

Dated this 2nd day of June 2004

Kuala Lumpur

(RESOLUTION 15)

NOTICE OF DIVIDEND ENTITLEMENT AND PAYMENT

NOTICE IS ALSO HEREBY GIVEN that a final tax exempt dividend of 6 sen per ordinary share for the financial year

ended 31st December 2003, if approved by members, will be paid on 8th September 2004 to depositors registered in

the Record of Depositors at the close of business on 20th August 2004.

A depositor shall qualify for the entitlement only in respect of :-

a) Shares transferred into the Depositor's Securities Account before 4:00p.m. on 20th August 2004 in respect of

ordinary transfer ;

b) Shares deposited into the Depositor's Securities Account before 12:30p.m. on 18th August 2004 (in respect of

shares which are exempted from mandatory deposit) ;

c) Shares bought on Bursa Malaysia on a cum entitlement basis according to the Rules of Bursa Malaysia.

Notes:

1. A member entitled to attend and vote at the meeting is entitled to appoint a proxy/proxies to attend and vote in his/her stead.

A proxy needs not be a member of the Company.

2. Where a member is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991, it may

appoint at least one (1) proxy in respect of each securities account it holds with ordinary shares of the company standing to

the credit of the said securities account.

3. Where a member appoints more than one (1) proxy to attend at the same meeting, the appointment shall be invalid unless

he/she specifies the proportions of his/her holdings to be represented by each proxy.

4. If the appointer is a corporation, this form must be executed under its Common Seal or under the hand of its attorney duly

authorized.

5. The Form of Proxy must be deposited at the Company's Share Registrar Office at Level 11-2, Faber Imperial Court, Jalan

Sultan Ismail, 50250 Kuala Lumpur not less than 48 hours before the time appointed for holding the meeting or any

adjournment thereof.

6. Explanatory notes on Special Business

6.1 The proposed Resolution 9 is primarily to give flexibility to the Board of Directors to issue and allot shares at any

time in their absolute discretion and for such purposes as they consider would be in the interest of the Company

without convening a general meeting. This authority, unless revoked or varied at a general meeting, will expire at

the next annual general meeting of the Company.

6.2 The Proposed Resolutions 10-15, if passed will mandate the Company to enter into the categories of recurrent

transactions of a revenue or trading nature and with those related parties specified in Section 2.3 of the Circular

to Shareholders dated 2nd June 2004 .

1. DIRECTORS STANDING FOR RE-ELECTION

a) Mr Lee Tien-Te - Section 129 of the Companies Act, 1965

b) Datuk Dr. Anis Bin Ahmad - Article 85

c) Dr. Lee Fang Yu - Article 92

d) Dr. Lee Fang Hsin - Article 92

e) Mr. Tu Shu Yu - Article 92

The particulars of all the above directors have been disclosed in the Directors' Profile in this Annual Report.

2. DETAILS OF ATTENDANCE OF DIRECTORS AT BOARD MEETINGS

No Board Meeting was held during the financial year for the Company was listed with Bursa Malaysia on 12th January

2004.

3. PLACE, DATE AND TIME OF THE GENERAL MEETING

The Third Annual General Meeting of the Company will be held as follows:-

Place : Cempaka Room, Mezzanine Floor

Equatorial Hotel Kuala Lumpur

Jalan Sultan Ismail

50250 Kuala Lumpur

Date : 24th June 2004

Time : 10:00a.m.

STATEMENT ACCOMPANYING NOTICE OF

ANNUAL GENERAL MEETING

7

Dear Shareholders

On behalf of the Board of Directors, I am pleased to present the Annual Report of Y.S.P.SAH for the

financial year ended 31 December 2003.

Corporate Development

As you are all aware, Y.S.P.SAH was incorporated in Malaysia on 10 July 2001 as a private limited

company under the name of Y.S.P. South East Asia Holding Sdn. Bhd. The Company was subsequently

converted into a public limited company and assumed its present name on 16 May 2002. Y.S.P.SAH is

principally an investment holding company for six subsidiaries. Y.S.P. Industries (M) Sdn Bhd

incorporated on 22 January 1990, is the earliest subsidiary Group to be incorporated in Malaysia. The relentless and

unwavering efforts of the Group in expanding the business locally and overseas over the years has resulted in Y.S.P.SAH being

successfully listed with Bursa Malaysia on 12 January 2004. The investing public can now participate in the growth and success

of the group.

Financial Performance

For the financial year under review, the Group managed a turnover of RM70.37 million resulting in a Profit after Tax figure of

RM8.3 million. In view of this, the Directors are pleased to recommend the payment of the first and final tax exempt dividend of

6% per ordinary share for the shareholders' approval at the forthcoming Annual General Meeting.

Business Review

The Group’s activities in 2003 remained focus on its core business of manufacturing quality pharmaceuticals and for the

Malaysian public. This is evidenced through the increased turnover of the Group as compared to previous years. In 2003 also

saw the Group initiating an expansion programme to include the manufacturing of eye drops and injectables in its Bangi plant.

Once complete, Y.S.P.SAH will join an elite group of local manufacturers capable of producing eye drops and injectables.

However, the future of the local pharmaceutical industry in Malaysia would nevertheless be constrained by the small population

base of 23 million people. In order to overcome this problem, the Group has been expanding into other countries especially in

the ASEAN region. In 2003, the main markets for exports are Singapore, Philippines and Vietnam. The group has also

established offices in Myanmar and Cambodia. The Group has also registered a number of its products with the authorities in

Thailand and is planning to do the same for Indonesia in the coming year. Therefore income from export activities is expected to

increase in the foreseeable future.

Special Thanks

I would like to thank our shareholders and customers for their faith and continuous trust in us, the authorities, financiers and the

investment community for their continuous support and assistance and members of the Board of Directors for contributing their

skills and wise counsel for the Group.

The Management and employees of the Group deserve special mention for their hard work and dedication throughout the year.

Datuk Dr Anis Bin Ahmad

Chairman

CHAIRMAN'S STATEMENT

8

Facing a new era, Y.S.P.SAH is concentrating all the effort and know-how in serving life and human health.

The perseverance, commitment and dedication of the management team and staff of the Group since its inception enables the

Company to achieve a successful listing on the Second Board of the Bursa Malaysia on 12 Jan 2004. The listing of Y.S.P.SAH

underscores the Group's capabilities and reputation whilst demonstrating the confidence of its business associates,

customers, suppliers, financial institutions and investors in its core competencies.

PROSPECTS

The Malaysian economy is expected to strengthen further in 2004, building on the strong growth momentum in the second half

of 2003 and brighter prospects for global growth in 2004 and boots from the Malaysian Budget 2004 in healthcare, ICT

infrastructure and education sectors.

With the growing population in Malaysia and the government initiatives under the Eighth Malaysian Plan to transform itself into

a developed nation with a knowledge-based society, the demand for education and healthcare will increase over time. These

shall provide further expansion opportunity to Y.S.P.SAH, particularly in healthcare sectors. Barring unforeseen circumstances,

the Board is optimistic toward maintaining the forecast growth for the coming year.

The group has constantly focused on its core competency in the provision of manufacture and supply quality pharmaceutical

products to Southeast Asia region countries. The Group strives to continuously improve its performance and believe that

QUALITY is and will always remain as the key operating philosophy.

APPRECIATION

On behalf of the Board of Directors, I would like to extend my sincere thanks and appreciation to the strong support of our shareholders

and customers. My appreciation also goes to our dedicated and committed staff, business associates and support and

confidence of our financiers and suppliers. I also wish to extend my sincere gratitude and appreciation to the Securities

Commission, Bursa Malaysia Berhad, Ministry of International Trade and Industry and Foreign Investment Committee for approving

Y.S.P.SAH’s listing exercise. I would also like to thank all our advisors for their guidance and hard work which lead to the

successful listing of Y.S.P.SAH on the Second Board of the Bursa Malaysia Berhad.

Last but not least, I would like to express my heartfelt gratitude to my fellow Board members, the entire management team and

employees of the Y.S.P.SAH for another year of commitment and devotion for the betterment and growth of Y.S.P.SAH. Together,

we shall move forward to face the business challenges of the coming years.

Dr Lee Fang Hsin

Group Managing Director

GROUP MANAGING DIRECTOR'S MESSAGE

9

2003 GROUP FINANCIAL HIGHLIGHTS

For the year ended 31 December 2003

10

Group

RM'000

Turnover 70,370

Profit Before Tax 11,151

Profit After Taxation 8,300

Profit After Pre-acquisition and Minority Interests 2,174

Earnings Per Share (sen)* 18.6

Net Tangible Assets Per Share (sen) 138

• The earnings per share has been calculated based on Group profit after taxation, pre-acquisition profit and minority

interest of RM2,174, 261 and the weighted average number of shares issued during the financial year of 11,688,250.

Datuk Dr. Anis Bin Ahmad

Aged 58, was appointed to the Board of Directors of Y.S.P.SAH as the Independent Non-Executive Director on 16th September 2002

and subsequently as the Chairman on 17th November 2003. Datuk Dr. Anis graduated with a Bachelor of Pharmacy from the University

of Singapore, a Master of Science in Pharmaceutical Technology from the University of London and a Ph.D. in Pharmacology from the

University of Bath, United Kingdom. In 1968, Datuk Dr. Anis started his career as a Pharmaceutical Officer/Pharmacist with the MoH for

6 years. He continued his career as a Lecturer and Head of the Department of Pharmacology in University Kebangsaan Malaysia from

1975 to 1979. By his extensive experience in pharmacy, he serviced as the Deputy Director of NPCB from 1983 to 1987, and was

promoted to Director of NPCB in 1988 and served in that capacity until 1990. He was also the Secretary of the DCA from 1985 to 1990.

In 1991, he held the position of Deputy Director of Health (Pharmacy) for the Department of Health, Johor before he was promoted to

Director of Pharmacy of MoH in 1996 where he was attached for 5 years until 2001. Datuk Dr. Anis was awarded the Pingat Jasa Negara

that carries the title "Datuk" by Seri Paduka Baginda Yang Dipertuan Agong in 2001.

Datuk Dr. Anis is presently the Chairman of the Remuneration Committee and a member of Nomination Committee of Y.S.P.SAH.

He has no family relationship with other directors or major shareholders of Y.S.P.SAH.

Dr. Lee Fang Hsin

Aged 43, a Taiwanese and a permanent resident in Malaysia, was appointed to the Board of Directors of Y.S.P.SAH as President/Group

Managing Director on 17th November 2003. Dr. Lee currently sits on the boards of several private limited companies in Malaysia

including subsidiary companies of Y.S.P.SAH in Malaysia. He possesses a graduate diploma in Finance and Taxation from Tamsui Oxford

College, a Masters in Business Administration and PhD from Pacific Western University, USA.

Dr. Lee started his career in 1985 with Yung Shin Pharmaceutical Industries Co. Ltd. ["YSP(TW)"], as a Marketing Executive. In the same

year, he was transferred to Japan to conduct marketing surveys for YSP(TW) until 1987. In 1985, Dr. Lee was also appointed as the

Representatives in charge of YSP(TW)'s branch in Malaysia, which eventually resulted in the establishment in Kumpulan Y.S.P.

(Malaysia) Sdn Bhd .

Dr. Lee has been honoured with the following titles and awards:

• "Darjah Seri Melaka" by the Governor of Malacca in 1998

• the Asia-Pacific Distinguish General Manager Award in the Second Annual Professional Manager Award for Enterprise in

Taiwan, R.O.C. in 1998

• The Model from Overseas Chinese Young Entrepreneur in Taiwan, R.O.C. in 1998

• the Global Overseas Professional Manager Award in Taiwan, R.O.C. in 2000

• the Third National Award of Overseas Taiwanese Enterprises in 2001

Dr. Lee is currently the National President of Taipei Investors' Association in Malaysia.

Dr. Lee is presently a member of Audit Committee and Remuneration Committee of Y.S.P.SAH and he is a son to Mr. Lee Tien-Te and

a sibling to Dr. Lee Fang-Yu.

Lee Tien-Te

Aged 81, a Taiwanese was appointed to the Board of Directors of Y.S.P.SAH as a Non-Independent Non-Executive Director on 17th

November 2003. He is the Founder, Chairman and a major shareholder of YSP(TW) and has more than 50 years experience in the

pharmaceutical field. He graduated from Japan Osaka Business School in Japan as a Business Specialist. He began his career with the

Taichia Town Administrator council in Tachia, Taiwan, R.O.C. in health management. In 1952, he set up Yung Shin Pharmacy in Taiwan,

R.O.C. as a distributor of pharmaceuticals. In 1965, he established YSP(TW) to manufacture and distribute pharmaceuticals, which

subsequently expanded to investing in oversea markets. YSP(TW) was listed on the Main Board of the Taiwan Stock exchange in 1993.

His vision, foresight and wealth of expertise in the pharmaceutical industry has propelled YSP(TW) to great heights over the years. Mr.

Lee actively supports various charitable causes and is also the Chairman of the Yung Shin Social Welfare Foundation.

Mr. Lee is presently a member of the Nomination Committee of Y.S.P.SAH and he is the father to Dr. Lee Fang Hsin and Dr. Lee

Fang-Yu.

DIRECTORS' PROFILE

11

Dr. Lee Fang-Yu

Aged 51, a Taiwanese was appointed to the Board of Directors of Y.S.P.SAH as a Non-Independent Non-Executive Director on 17th

November 2003. He is currently the President and a substantial shareholder of YSP(TW). He graduated with a Bachelor of Science in

Pharmacy from China Medical College, Taiwan R.O.C. in 1980. Dr. Lee subsequently obtained a Master of Science and a Ph.D from the

China Medical College in 1990 and 1997 respectively. He is also the Chairman of Yung Zip Chemical Ind. Co. Ltd. Taiwan, R.O.C. and

is a member of the Industry Pharmacy Committee, The Pharmaceutical Society of the Taiwan, R.O.C. He is a Clinical Professor in the

School of Pharmacy, National Defence Centre and Assistant Professor in China Medical College.

Dr. Lee began his career as an Assistant Technician in 1972 at YSP(TW)'s R&D Section, responsible for drug analysis

approaches. In 1974, he was transferred to the Production Division where he was responsible for the approaches to the

analysis of drugs and bulk materials. Promoted in the same year, Dr. Lee was the Administrator of YSP(TW)'s R&D Section responsible

for the analysis of drugs, bulk materials and formulation. In 1977, he was promoted as Manager for YSP(TW)'s Production Division where

he dealt with production management, Dr Lee was promoted to manager of the R&D Division in 1978, as Vice President of the R&D

Division and the Production Division in 1979 and 1982 respectively. In 1987, Dr. Lee was appointed Executive Vice President of

YSP(TW), followed by the position of President in 1991.

He led YSP(TW) to 2 Excellence in Biotechnological Development Awards and established YSP(TW) as the largest supplier of

pharmaceutical products in Taiwan R.O.C. in 1996. As President, he also finished the design and construction of YSP(TW)'s GMP plants

in the USA and China to complete the YSP(TW) global production system in 2000.

Dr. Lee is a member of the Polymeric Biomaterials Science Association, Taiwan R.O.C. and has contributed substantially to the

pharmaceuticial industry. One of his many accomplishments includes the production of YC-1, a chemical which functions as an impor-

tant and unique tool for cardiovascular pharmacological studies.

Dr. Lee currently sits on the board of several private limited companies in Taiwan, R.O.C. and the subsidiary companies of

Y.S.P.SAH in Malaysia.

Dr. Lee is presently the Chairman of Nomination Committee of Y.S.P.SAH and he is a son to Mr. Lee Tien-Te and a sibling to Dr. Lee Fang Hsin.

Dato' Koay Soon Eng

Aged 56, was appointed to the Board of Directors of Y.S.P.SAH as an Independent Non-Executive Director and Chairman of the Audit

Committee of Y.S.P.SAH on 16th September 2002 and 17th November 2003 respectively. He holds a Bachelor of Commerce from the

University of Queensland and is an Accountant by profession, being a Chartered Accountant of the Malaysian Institute of Accountants.

Dato' Koay is also the Fellow of the Institute of Chartered Accountants in Australia and a Certified Practising Accountant of the Society of

Certified Practising Accountants, Australia.

Being in public practice for 30 years since 1973 as an Accountant, Auditor, Tax Agent and Business Consultant, Dato' Koay is currently

the Executive Chairman of the Moores Rowland Group, a Malaysian firm of an international practice of accountants and consultants.

Dato' Koay is presently the Chairman of the Audit Committee of Y.S.P.SAH and he has no family relationship with other directors or major

shareholders of Y.S.P.SAH.

Tu Shu Yao

Aged 53, was appointed to the Board of Directors of Y.S.P.SAH as an Independent Non-Executive Director and a member of the Audit

Committee of Y.S.P.SAH on 17th November 2003. Graduated with a Diploma in Mining & Metallurgical engineering from the University

of National Taipei Technology in 1971, he embarked on his career in the metal and gas industry in Nigeria, Africa where he served in

various capacities. He was involved in similar metal and gas industry in Taiwan from 1986 to 1989.

Mr. Tu is presently the Chairman and Managing Director of Region group of companies ("RGC") in Malaysia, a position which he holds

since 1989. In RGC, Mr. Tu is involved in, overseeing the business operations, devising strategic plans and business direction as well

as responsible for the overall performance of the group, He was the President of the Chinese Taipei School (Kuala Lumpur) from 1999

to 2001 and also the President of the Taipei Investors' Association in Malaysia-Central District Standing Committee from 1999 to 2003

where he is actively involved in providing business advices and guidance to other associations and social organizations.

Mr. Tu is presently a member of Audit Committee, Remuneration Committee and Nomination Committee of Y.S.P.SAH and he has no

family relationship with other directors or major shareholders of Y.S.P.SAH.

All the above Directors have not been convicted of any criminal offences (other than ordinary traffic offences, if any). The

Directors do not have any conflict of interest with the Company.

DIRECTORS' PROFILE (CONT’D)

12

The Board of Directors fully acknowledges the importance of good corporate governance and is taking steps to evaluate the

status of the corporate governance adopted by the Group as tabulated below and its compliance with the code of best practices

as set out in Part 1 and 2 of the Malaysian Code on Corporate Governance pursuant to Paragraph 15.26 of the Listing

Requirements of Bursa Malaysia.

1. BOARD OF DIRECTORS

1.1 Composition of the Board of Directors

The Board presently has six (6) members and is headed by the President/Group Managing Director, Dr. Lee

Fang Hsin. The profile of each Director is presented separately in the Annual Report.

1.2 Board Balance

The Board has six (6) members comprising the following:-

• One (1) Chairman

• One (1) President/Group Managing Director

• Two (2) Non-Independent Non-Executive Directors

• Two (2) Independent Non-Executive Directors

The Company is in compliance with Paragraph 15.02 of the Listing Requirements whereby one-third of its

Board members are independent directors.

All Board members participate fully in decisions on the key issues involving the Group. The President/Group

Managing Director has primary responsibilities for managing the Group's day to day operations and together with

the Non-Executive Directors to ensure that the strategies proposed by the management are fully discussed and

examined, and taking into account the long term interests of the various stakeholders including shareholders,

employees, clients, suppliers and the various communities in which the Group conducts its business.

The Board is assured of a balanced and independent view at all Board deliberations largely due to the

presence of its Non-Executive Directors who are independent from Management. The Independent Directors

are also free from any business or other relationships that could materially interfere with the exercise of their

independent judgment.The Board is constituted of individuals who are committed to business integrity and

professionalism in all its activities.

As part of its commitment, the Board supports the highest standards of corporate governance and the

development of the best practices for the Group.

In addition to the role of guidance by the Independent Non-Executive Directors, each Director brings

independent judgment to bear on issues of strategy, performance, resources and standard of conduct.

1.3 Duties and Responsibilities

The Board retains full and effective control of the Company and the Group. This includes responsibility for

determining the Group's overall strategic direction as well as development and control of the Group.

1.4 Meetings

There was no Board Meeting held during the financial year ended 31 December 2003 for the Company was

listed with Bursa Malaysia on 12th January 2004.

1.5 Appointments to the Board

The appointment of any additional Director is made as and when it is deemed necessary by the existing Board

with due consideration given to the mix of expertise and experience required for an effective Board.

In compliance with the Listing Requirements of Bursa Malaysia, the Board's Nomination Committee

comprises two (2) Independent Non-Executive Directors.

CORPORATE GOVERNANCE STATEMENT

13

1.5 Appointments to the Board (CONT’D)

The Nomination Committee is empowered by the Board and its terms of reference to consider and evaluate

the appointment of new Directors and Directors to board Committees of the Company. The Nomination

Committee will then recommend the candidates to the Board for the appoinment. The Nomination Committee

also keeps under review the Board structure, size and composition and the mix of skills and core competencies

required for the Board to discharge its duties effectively. In addition, the Nomination Committee will deliberate

on Board succession plan as and when approprite.

The Nomination Committee will also assess the effectiveness of the Board as a whole, the Committees of the

Board and the condition of each individual Director on at least an annual basis.The members of the Nomination

Committee are as follows:-

a) Dr. Lee Fang Yu (Chairman)

b) Datuk Dr. Anis Bin Ahmad

c) Mr. Lee Tien-Te

d) Mr. Tu Shu Yao

1.6 Retirement and Re-election

Pursuant to the Company's Articles of Association, one-third (1/3) of the Directors, including the Managing

Director, shall retire from office, at least once in three (3) years. Retiring directors may offer themselves for

re-election. Directors who are appointed by the Board during the financial year are subject to re-election by

shareholders at the next Annual General Meeting held following their appointment. Directors over seventy (70)

years of age are subject for re-appointment annually in accordance with Section 129(6) of the Companies Act,

1965.

1.7 Supply of Information

The agenda and Board papers for each item as well as minutes of previous meetings are circulated prior to

the Board meetings to give Directors sufficient time to deliberate on the issues to be raised at the Board

meetings. In arriving at any decision on recommendations by the Management, thorough deliberation and

discussion by the Board is a pre-requisite. All proceedings of the Board Meetings are minuted and signed by

the Chairman of the meeting in accordance with the provision of Section 156 of the Companies Act, 1965.

The Board is kept updated on the Company's and Group's activities and its operations on a regular basis. The

directors also have access to reports on the Group's activities, both financial and operational.

All directors have access to the advice and services of the Company Secretary who is responsible for

ensuring that board procedures are followed and the Board may also take independent advice, at the

Company's expenses, in the furtherance of their duties if so required. The Board also has unlimited access to

all information with regard to the activities of the Company.

1.8 Relationship of the Board to Management

• Quality of Information

Information plays a key role in the Board's decision-making and in setting up the policies and

strategies of the Company. The Board has unrestricted access to timely and accurate information,

which is not only confined to qualitative and quantitative information, but also to other information

deemed suitable such as customer satisfaction, products and services quality, market share and

market reaction and macro economic performance.

• Access to Information

Prior to the board meetings, all Directors receive an agenda and Board papers containing information

relevant to the business of the meeting including information on major financial, operational and

corporate matters relating to the activities and performance of the Group. This is issued in sufficient

time to enable Directors to obtain further explanation, where necessary, in order to be properly

informed before the meeting.


(CONT’D)

14

1.8 Relationship of the Board to Management (CONT’D)

• Use of Board Committees

As appropriate, the Board has delegated certain responsibilities to Board Committees which operate

within clearly defined terms of reference. The Committees are as follows:-

a) Audit Committee

b) Remuneration Committee

c) Nomination Committee

1.9 The Relationship between the Board and the Shareholders

The principal forum for dialogue with shareholders is the AGM, during which shareholders are encouraged to

participate and pose questions to the Board regarding operational and financial information. The AGM also

allows shareholders an opportunity to interact directly with the Board and seek first-hand information on the

above matters. Extraordinary General Meetings are held as and when shareholders' approvals are required

on specific matters and shareholders are notified of such meetings requirements.

2. DIRECTORS' REMUNERATION

2.1 The Level and Make-Up of Remuneration

The remuneration of the Directors of the Company for the financial year ended 31 December 2003 is set out

below:-

(i) Aggregate remuneration of Directors for the financial year ended 31st December 2003 is as follows:-

Salaries & Other

Emoluments

(RM)

Executive Directors 78,072

Non-Executive Directors 17,485

95,557

(ii) Number of Directors whose remuneration falls in bands of RM50,000 is tabulated below:-

Remuneration Band Executive Directors Non-Executive Directors Total

Below RM50,000 - 1 1

RM50,001 - RM100,000 1 - 1

2.2 Procedure

In compliance with the Listing Requirements of Bursa Malaysia, the Board has established a Remuneration Committee

comprising two (2) Independent Non-Executive Directors and the Group Managing Director. The Committee's

primary responsibility is to recommend to the Board, the remuneration of Directors. However, the final

decision on remuneration for Directors is a matter for the Board as a whole and individual directors are required

to abstain from discussion of their own remuneration.

The members of the Remuneration Committee are as follows:-

a) Datuk Dr. Anis Bin Ahmad (Chairman)

b) Mr. Tu Shu Yao

c) Dr. Lee Fang Hsin


(CONT’D)

15

3. SHAREHOLDERS

3.1 Dialogue between the Company and Investors

The Group values dialogue with investors as a means of effective communication that enables the Board to

convey information about the Group's performance, corporate strategy and other matters affecting shareholders'

interests.

The AGM is the principal forum for dialogue with individual shareholders. It is a crucial mechanism in share

shareholder communication for the Company. At the Company's AGM, shareholders have direct access to the

Board and are given the opportunity to ask questions during the open questions and answers session prior to

moving for approval of the Company's Audited Financial Statements and Directors' Report for the financial year

and other businesses (if applicable). The shareholders are encouraged to ask questions both on the resolutions

being proposed and about the Group's operations in general.

The Board is also committed to ensure that shareholders are well informed of major developments of the

Company and the Group and the information is also communicated to them through the following channels:-

a) Annual Report;

b) various disclosures and announcements made to Bursa Malaysia including the quarterly results and

annual results; and

c) the Company's website www.ysp.com.my through which shareholders and the public in general can

gain access to the latest corporate and product information of the Group.

3.2 Annual General Meeting ("AGM")

Notice of AGM and annual reports are sent out to shareholders at least 21 days before the date of the meeting.

At the AGM, the Board also provides opportunities for shareholders to raise questions pertaining to the

business activities of the Group. Directors and senior management staff are available to provide responses to

shareholders' questions during these meetings.

For the re-election of Directors, the Board will ensure that full information is disclosed through the notice of

meeting regarding Directors who are retiring and who are willing to serve if re-elected.

Each item of special business included in the notice of meeting will be accompanied by an explanatory

statement for the proposed resolution to facilitate full understanding and evaluation of issues involved.

4. ACCOUNTABILITY AND AUDIT

4.1 Financial Reporting

The Board is aware of its responsibilities to shareholders and the requirement to present a balanced and

comprehensive assessment of the Group's financial position, by means of the annual and quarterly reports and

other published information. In this regard, the Board is primarily responsible for the preparation of a financial

statement to present a fair and balanced report of the financial state of affairs of the Group.

Before releasing to Bursa Malaysia, the quarterly financial results are reviewed by the Audit Committee and

approved by the Board of Directors. The details of the Company's and the Group's financial positions are

included in the Financial Statements section of the Annual Report.

4.2 Internal Control

The Board acknowledges its responsibility for maintaining a sound system of internal control in the Company

and the Group. These controls can only provide reasonable but not assurance against material misstatement,

loss or fraud. Information on the Group's absolute internal control is disclosed in the Statement of Internal

Control section in the Annual Report.


(CONT’D)

16

4. ACCOUNTABILITY AND AUDIT (CONT’D)

4.3 Relationship with Auditors

The Company's external auditors, Shamsir Jasani Grant Thornton report to members of the Company on their

findings which are included as part of the Company's financial reports with respect to each year's audit on the

statutory financial statements. In doing so, the Company has established a transparent arrangement with the

auditors to meet their professional requirements. From time to time, the auditors highlight to the Audit

Committee and Board of Directors on matters that require the Board's attention.

5. DIRECTOR'S RESPONSIBILITY STATEMENT IN RESPECT OF FINANCIAL STATEMENTS

The Board of Directors are required under Paragraph 15.27(a) of the Bursa Malaysia Listing Requirements to issue a

statement explaining their responsibility in the preparation of the annual financial statements.

The Directors are required by the Companies Act, 1965 to prepare financial statements for each financial year which

give a true and fair view of the state of affairs of the Company and of the Group as at the end of the financial year and

of the profit and loss of the Company and of the Group for the financial year.

In preparing the financial statements, the Directors are required to:-

a) use appropriate accounting policies and consistently apply them;

b) make judgments and estimates that are reasonable and prudent; and

c) ensure all applicable approved accounting standards have been followed.

The Directors are responsible for keeping proper accounting records which disclose, with reasonable accuracy at any

time, the financial position of the Company and of the Group, to enable them to ensure that the accounts comply

with the Companies Act, 1965.

The Directors are satisfied that in preparing the financial statements of the Group for the financial year ended 31

December 2003, the Group has used the appropriate accounting policies and applied them consistently and prudently.

The Directors are of the opinion that all relevant approved accounting standards have been followed and confirm that

the financial statements have been prepared on a going concern basis.


(CONT’D)

17

Utilization of Proceeds

No proceeds were raised by the Company from any corporate proposal during the financial year.

Share Buybacks

During the financial year, there were no share buybacks by the Company.

Option, Warrants and Convertible Securities

The Company has not issued any options, warrants or convertible securities during the financial year.

American Depository Receipt ("ADR") / Global Depository Receipt ("GDR")

During the financial year, the Company did not sponsor any ADR or GDR programme.

Sanctions and/or Penalties

There were no sanctions and/or penalties imposed on the Company and its subsidiaries, Directors or management staff by the

relevant regulatory bodies during the financial year.

Non-Audit Fee

There was no non-audit fees paid to the external auditors by the Group for the financial year ended 31 December 2003, except

for RM7,125 paid for services taxation fees of the Group.

Profit Estimate, Forecast or Projection

The Company did not undertake any profit estimates, forecast or projection for the financial year. Thus, there is no variance

between the results for the financial year and no unaudited results was released previously by the Company.

Profit Guarantee

There was no profit guarantee given by the Company during the financial year.

Revaluation of Landed Properties

The Group does not have a revaluation policy currently for its landed properties.

Material Contracts

Save for the following, there are materials contract (not being contracts entered into in the ordinary course of business) which

have been entered into by the Company and its subsidiaries during the financial year:-

a) Contract dated 7th August 2003 entered between Yung Shin Pharma (S) Pte Ltd ["YSP(S)"] and Ubi Development Pte.

Ltd, Singapore ("Ubi"), wherein YSP(S) agreed to purchase from Ubi the terraced factory located at No. 10, Ubi

Crescent, #06-57, Singapore 408564, measuring approximately 209 square meters for a cash consideration of

SGD346,700.

b) Contract dated 7th August 2003 entered between YSP(S) and Ubi Development Pte. Ltd, Singapore ("Ubi"), wherein

YSP(S) agreed to purchase from Ubi the terraced factory located at No. 10, Ubi Crescent, #06-58, Singapore 408564,

measuring approximately 216 square metres for a cash consideration of SGD358,300.

c) Sale and Purchase Agreement dated 13th August 2003 entered between Y.S.P. Industries (M) Sdn Bhd ("YSPI") and

Perbadanan Kemajuan Negeri Selangor ("PKNS"), wherein YSPI agreed to purchase from PKNS the land known as

Tapak No. 6, Jalan 9/7, Taman IKS, Seksyen 9, 43650 Bandar Baru Bangi, Selangor Darul Ehsan measuring

approximately 2,723.5 square metres for a cash consideration of RM749,106.00

d) Sale and Purchase Agreement dated 13th August 2003 entered between YSPI and PKNS, wherein YSPI agreed to

purchase from PKNS the land known as Tapak No. 1, Jalan 9/8, Taman IKS, Seksyen 9, 43650 Bandar Baru Bangi,

Selangor Darul Ehsan measuring approximately 2,784.7 square metres for a cash consideration of RM915,780.00

OTHER INFORMATION REQUIRED PURSUANT

TO PART A OF THE BURSA MALAYSIA

LISTING REQUIREMENTS

18

Material Contracts (CONT’D)

e) Sale and Purchase Agreement dated 13th August 2003 entered between YSPI and PKNS, wherein YSPI agreed to



f) Sale and Purchase Agreement dated 13th August 2003 entered between YSPI and PKNS, wherein YSPI agreed to


Selangor Darul Ehsan measuring approximately 2,983.8 square meters for a cash consideration of RM981,198.00

g) Sale and Purchase Agreement dated 19th August 2003 entered into between YSPI and PKNS, wherein YSPI agreed

to purchase from PKNS the land known as Tapak No. 3, Jalan 9/8, Taman IKS, Seksyen 9, 43650 Bandar Baru Bangi,


h) Sale and Purchase Agreement dated 30th September 2003 entered into between the Company and the shareholders

of Yung Shin South East Asia Sdn Bhd ("YSSEA") for the acquisition of the entire issued and paid-up share capital of

YSSEA comprising 31,000,002 ordinary shares of RM1.00 each for a total purchase consideration or RM49,424,604

satisfied by the issuance of 44,125,416 new ordinary shares of RM1.00 each in Y.S.P.SAH ("Shares") at an issue price

of RM1.12 per Share.

i) Placement and Underwriting Agreement dated 18th November 2003 between the Company and RHB Sakura Merchant

Bankers Berhad to:

(i) act as the Placement Agent for the 2,500,000 Issue Shares reserved for identified placees for a placement

fee of 0.5% of the IPO price of RM1.43 per Share; and

(ii) underwrite:

• the entire 3,000,000 Issue Shares reserved for the Malaysian public for an underwriting commission

of 2% of the IPO price of RM1.43 per Share; and

• such number of up to 2,750,000 Issue Shares reserved for the eligible employees of the Y.S.P.SAH

Group which are not subscribed for by the eligible employees of the Y.S.P.SAH Group and therefore

made available to the Malaysian public ("Unsubscribed Shares"), for an underwriting commission of

2% of the total value of Unsubscribed Shares (based on the IPO price of RM1.43 per Share).

OTHER INFORMATION REQUIRED PURSUANT

TO PART A OF THE BURSA MALAYSIA

LISTING REQUIREMENTS (CONT’D)

19

The Board of Directors is committed to maintain a sound system of internal control in the Group and is pleased to provide the

following Statement of Internal Control which outlines the nature and scope of internal control of the Group during the year

pursuant to paragraph 15.27(b) of the Bursa Malaysia Listing Requirements.

1. INTERNAL CONTROL

The Board through its Audit Committee is ultimately responsible for the Group's system of internal control and for

reviewing its effectiveness. While acknowledging their responsibilities for the system of internal control, the Directors

are aware that such a system is designed to reduce as far as possible rather than eliminate the risk of failure to achieve

business objectives and can provide only a reasonable and not an absolute assurance against risk. The system of

internal controls covers financial, organizational, operational and compliance controls and risk management to

safeguard shareholders' investment and the group's assets.

The Group has in place on-going processes in identifying, evaluating and managing significant risks faced by the Group

for the year and up to the date of approval of the annual report and financial statements.

2. INTERNAL AUDIT FUNCTIONS

The Group is in the process of setting up and formalise an Internal Audit Division. Senior management staff are

currently appointed to assist the Audit Committee in the discharge of its duties and responsibilities. The Board and the

Audit Committee is of the view that although the current arrangement may not be the best practice advocated, it provides

sufficient assurance in obtaining regular review and/or appraisal of the effectiveness of the system of internal controls

within the Group.

STATEMENT OF INTERNAL CONTROL

20

The primary objective of the Audit Committee is to assist the Board in the effective discharge of its fiduciary responsibilities for

corporate governance, financial reporting to shareholders, the public and the internal control.

The Audit Committee will adopt practices aimed at maintaining appropriate standards of responsibility, integrity and accountability

to all the Company's shareholders.

MEMBERSHIP

The Audit Committee is appointed by the Board and comprises the following members:-

1. Dato' Koay Soon Eng (Chairman) - Independent Non-Executive Director

2. Tu Shu Yao - Independent Non-Executive Director

3. Dr. Lee Fang Hsin - President/Group Managing Director

TERMS OF REFERENCE

COMPOSITION

The composition of the Audit Committee is at least three (3) members of whom the majority, including the Chairman, must be

independent directors.

At least one (1) member of the Committee must:-

a) be a member of Malaysian Institute of Accountants ("MIA:); or

b) have at least 3 years' working experience and:-

i) must have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act, 1967; or

ii) must be a member of one of the associations of accountants specified in Part II of the 1st Schedule of the

Accountants Act, 1967.

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

In the event that the Audit Committee is reduced to less than (3) members, the vacancy shall be filled within 3 months.

AUTHORITY

The Audit Committee is authorised by the Board to investigate any activity of the Company and its subsidiaries within its terms

of reference determined by the Board of Directors and all employees shall be directed to co-operate as and when required by

the Audit Committee.

The Audit Committee shall have direct communication channels with the external auditors and person(s) carrying out the

internal audit function or activity (if any).

The Audit Committee is authorised at the cost of the Company to take such independent professional advice as it considers

necessary.

MEETINGS

The Committee shall meet at least four (4) times a year and such additional meetings as the Chairman shall decide in order to

fulfill its duties. In addition, the Chairman may call a meeting of the Audit Committee if a request is made by any committee

member, any Executive Director, or the external auditors.

In order to form a quorum, the majority of members present must be independent directors. The Company Secretary shall act

as Secretary of the Audit Committee or in her/his absence, another person authorized by the Chairman of the Audit Committee.

The Committee was formed pursuant to a resolution passed by the Board of Directors on 17th November 2003 and there was

no Audit Committee meeting held in year 2003 for the Company was listed with Bursa Malaysia on 12th January 2004.

AUDIT COMMITTEE

21

SUMMARY OF ACTIVITIES OF THE AUDIT COMMITTEE

No substantial activities were carried out by the Audit Committee for the financial year ended 31st December 2003 for the

Committee was only formed on 17th November 2003. However, in line with the term and reference of the Audit Committee, the

duties and responsibilities of the Committee shall include:-

1) To consider the appointment of the external auditors, the audit fees, and any questions of resignation and dismissal.

2) To discuss with the external auditors the nature and scope of audit before the audit commences.

3) To review and report the following to the Board of Directors:-

i) The quarterly results and year end financial statements, focusing particularly on:-

a) changes in or implementation of major accounting policy;

b) significant and unusual events;

c) compliances with accounting standards, listing and other relevant legal and regulatory requirements.

ii) The audit report and audit plan with the external auditors and their evaluation of the system of internal controls;

iii) Any related party transactions and conflict of interest situation that may arise within the Company or Group

including any transaction, procedure or course of conduct that raises questions of management integrity.

4) Other functions as may be agreed to by the Audit Committee and the Board of Directors.

INTERNAL AUDIT FUNCTIONS

The Group did not have an Independent Internal Audit Division in the financial year 2003. Senior management staffs were

allocated the task to assist the Audit Committee in discharging its duties and responsibilities. The Board and the Audit Committee

feel that although the current arrangement is not the best practice advocated, it provides sufficient assurance in obtaining

regular review and/or appraisal of the effectiveness of the system of internal controls within the Group.

AUDIT COMMITTEE (CONT’D)

22

The Directors have pleasure in submitting their report together with the audited financial statements of the Group and of the

Company for the financial year ended 31 December 2003.

PRINCIPAL ACTIVITIES

The principal activity of the Company consists of investment holding.

The principal activities of the subsidiary companies are as disclosed in Note 13 to the Financial Statements.

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

financial year.

FINANCIAL RESULTS

Group Company

RM RM

Net profit/(loss) for the year 2,174,261 (6,005)

Accumulated loss at beginning of year (3,904) (3,904)

Unappropriated profit/(Accumulated loss) at end of year 2,170,357 (9,909)

DIVIDENDS

There were no dividends paid or declared by the company since the end of the previous financial year.

RESERVES AND PROVISIONS

There were no material transfers to or from reserves or provisions during the financial year.

ISSUE OF SHARES AND DEBENTURES

During the financial year, the following shares were issued:-

Date of Purpose of Class of Number of shares Term of

issue issue share at RM1.00 per share issue

30.09.2003 Acquisition of subsidiary company Ordinary 44,125,416 Otherwise than cash

30.09.2003 Settlement of inter-company debts Ordinary 2,623,584 Otherwise than cash

There were no debentures issued during the financial year.

INFORMATION ON THE FINANCIAL STATEMENTS

Before the financial statements of the Group and of the Company were made out, the Directors took reasonable steps:-

(a) to ascertain that action had been taken in relation to the writing off of bad debts and the making of allowance for

doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate allowance had

been made for doubtful debts; and

(b) to ensure that any current assets which were unlikely to be realised in the ordinary course of business including their

value as shown in the accounting records of the Group and of the Company have been written down to an amount which

they might be expected so to realise.

DIRECTORS' REPORT

24

INFORMATION ON THE FINANCIAL STATEMENTS (CONT’D)

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

(a) which would render the amounts written off for bad debts or the amount of the allowance for doubtful debts in the

financial statements of the Group and of the Company inadequate to any substantial extent; or

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

misleading; or

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

of the Company misleading or inappropriate.

No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months

after the end of the financial year which, in the opinion of the Directors, will or may affect the ability of the Group and of the

Company to meet its obligations as and when they fall due.

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

(a) any charge on the assets of the Group and of the Company which has arisen since the end of the financial year which

secures the liability of any other person; or

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

OTHER STATUTORY INFORMATION

The Directors state that:-

At the date of this report, they are not aware of any circumstances not otherwise dealt with in this report or the financial

statements which would render any amount stated in the financial statements misleading.

In the opinion of the Directors:-

(a) the results of the Group's and of the Company's operations during the financial year were not substantially affected by

any item, transaction or event of a material and unusual nature; and

(b) 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 likely to affect substantially the results of the operations of the

Group and of the Company for the current financial year in which this report is made.

DIRECTORS

The Directors in office since the date of the last report are :-

Datuk Dr. Anis Bin Ahmad (Chairman)

Lee Fang Hsin (appointed on 17 November 2003)

Lee Tien Te (appointed on 17 November 2003)

Lee Fang Yu (appointed on 17 November 2003)

Dato' Koay Soon Eng

Tu Shu Yao (appointed on 17 November 2003)

DIRECTORS' REPORT (CONT’D)

25

The shareholdings in the Company and its related corporations of those who were Directors at the end of the financial year are

as follows :-

Company Ordinary shares of RM1 each

Direct shareholding At 1.1.2003 Bought Sold At 31.12.2003

Datuk Dr. Anis bin Ahmad 300 - - 300

Lee Fang Hsin - 2,503,237 - 2,503,237

Lee Tien Te - 854,095 - 854,095

Lee Fang Yu - 813,500 - 813,500

Tu Shu Yao 700 - 700 -

Ultimate holding company

- Yung Shin Pharmaceutical

Industries Co. Ltd. (Taiwan)

Ordinary shares of NTD 10 each

Direct shareholding

Lee Fang Hsin 10,172,907 - - 10,172,907

Lee Tien Te 15,245,541 - - 15,245,541

Lee Fang Yu 6,459,438 - 117,000 6,342,438

Subsidiary company

- Yung Shin (Philippines) Inc

Ordinary shares of PESO 10 each

Direct shareholding

Lee Fang Hsin 1 - - 1

Lee Tien Te 1 - - 1

By virtue of the Mr. Lee Fang Hsin, Mr. Lee Tien Te and Mr. Lee Fang Yu interest in shares of the ultimate holding company, they

are deemed to have interest in the Company and its related companies under Section 6A of the Companies Act, 1965 to the

extent the ultimate holding company has an interest.

No other Directors in office at the end of the financial year held any interest in shares of the Company and its related corpora-

tions during the financial year.

DIRECTORS' BENEFITS

During and at the end of the financial year, no arrangements subsisted to which the Company is a party, with the object or objects

of enabling the Directors of the Company to acquire benefits by means of the acquisition of shares in the Company or any other

body corporate.

Since the end of the previous financial year, no Director has received or become entitled to receive any benefit (except as

disclosed in the Notes 22 and 25 to the Financial Statements) by reason of a contract made by the Company or a related

corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a

substantial financial interest.

ULTIMATE HOLDING COMPANY AND HOLDING COMPANY

The Directors regard Yung Shin Pharmaceutical Industries Co. Ltd., a company incorporated in Taiwan, Republic of China as the

ultimate holding company and YSP SEA Investment Co. Ltd., a company incorporated in British Virgin Island, United Kingdom,

as the holding company.


26

AUDITORS

Messrs Shamsir Jasani Grant Thornton have expressed their willingness to continue in office.

On behalf of the Board

.................................................………… )

DATUK DR. ANIS BIN AHMAD )

)

)

)

) DIRECTORS

)

)

)

.................................................………… )

LEE FANG HSIN )

Kuala Lumpur

10 February 2004


27

STATEMENT BY DIRECTORS

In the opinion of the Directors, the financial statements set out on pages 30 to 52 are drawn up in accordance with the

applicable approved accounting standards in Malaysia so as to give a true and fair view of the state of affairs of the Group and

of the Company as at 31 December 2003 and of the results and cash flows of the Group and of the Company for the financial

year then ended.

On behalf of the Board

........................................................... ...............................................................

DATUK DR. ANIS BIN AHMAD LEE FANG HSIN

Kuala Lumpur

10 February 2004

STATUTORY DECLARATION

I, Lee Fang Hsin being the Director responsible for the financial management of Y. S. P. Southeast Asia Holding Berhad, do

solemnly and sincerely declare that to the best of my knowledge and belief, the financial statements set out on pages 30 to 52

are correct and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of

the Statutory Declarations Act, 1960.

Subscribed and solemnly declared by )

the abovenamed at Kuala Lumpur in )

the Federal Territory this day of )

10 February 2004 ) .........................................................

LEE FANG HSIN

Before me :

Commissioner for Oaths

STATEMENT BY DIRECTORS &

STATUTORY DECLARATION

28

REPORT OF THE AUDITORS

TO THE MEMBERS OF Y.S.P. SOUTHEAST ASIA HOLDING BERHAD AND ITS SUBSIDIARY COMPANIES

(Incorporated in Malaysia)

We have audited the financial statements of the Group and of the Company set out on pages 30 to 52. These financial

statements are the responsibility of the Company's Directors. Our responsibility is to express an opinion on the financial

statements based on our audit.

We conducted our audit in accordance with approved standards on auditing in Malaysia. These standards require that we plan

and perform the audit to obtain all the information and explanations, which we consider necessary to provide us with sufficient

evidence to give reasonable assurance that the financial statements are free of material misstatement. An audit includes

examining, on a test basis, evidence relevant to the amounts and disclosures in the financial statements. An audit includes an

assessment of the accounting principles used and significant estimates made by the Directors as well as evaluating the overall

adequacy of the presentation of information in the financial statements. We believe that our audit provides a reasonable basis

for our opinion.

In our opinion:

a) the financial statements which have been prepared under the historical cost convention, as modified by the revaluation

of certain assets, are properly drawn up in accordance with the provisions of the Companies Act, 1965 and applicable

approved accounting standards in Malaysia so as to give a true and fair view of:

(i) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements of

the Group and of the Company; and

(ii) the state of affairs of the Group and of the Company as at 31 December 2003, results of the operations and

cash flows of the Group and of the Company for the financial year ended on that date; and

b) the accounting and other records and the registers required by the Companies Act, 1965 to be kept by the Company

and by the subsidiary companies of which we have acted as auditors have been properly kept in accordance with the

provisions of the said Act.

We have considered the financial statements and auditors' reports thereon of the subsidiary companies of which we have not

acted as auditors, as indicated in Note 13 to the Financial Statements.

We are satisfied that the financial statements of the subsidiary companies that have been consolidated with the Company's

financial statements are in form and content appropriate and proper for the purposes of the preparation of the consolidated

financial statements and we have received satisfactory information and explanations required by us for those purposes.

The auditors' reports on the financial statements of the subsidiary companies were not subject to any qualification and did not

include any comment made under Subsection (3) of Section 174 of the Act.

SHAMSIR JASANI GRANT THORNTON

(NO: AF-737)

CHARTERED ACCOUNTANTS

DATO' N.K. JASANI

CHARTERED ACCOUNTANT

(NO: 708/03/04(J/PH) )

PARTNER

Kuala Lumpur

10 February 2004

REPORT OF THE AUDITORS

29

Group Company

Note 2003 2003 2002

RM RM RM

SHARE CAPITAL 6 46,750,000 46,750,000 1,000

SHARE PREMIUM 5,614,264 5,614,264 -

EXCHANGE FLUCTUATION RESERVE 7 43,149 - -

RESERVE ON CONSOLIDATION 8 9,927,455 - -

UNAPPROPRIATED PROFIT/(ACCUMULATED LOSS) 2,170,357 (9,909) (3,904)

Total shareholders' equity 64,505,225 52,354,355 (2,904)

MINORITY INTERESTS 5 - -

DEFERRED AND LONG TERM LIABILITIES

Deferred taxation 9 1,918,000 - -

Term loan 10 1,121,430 - -

Finance creditor 11 48,737 - -

67,593,397 52,354,355 (2,904)

REPRESENTED BY :-

PROPERTY, PLANT AND EQUIPMENT 12 28,118,695 - -

INVESTMENT IN SUBSIDIARY COMPANIES 13 - 49,424,604 -

INTANGIBLE ASSET 1,242 - -

CURRENT ASSETS

Inventories 14 20,072,866 - -

Trade receivables 15 23,749,221 - -

Other receivables 16 5,787,112 2,860 -

Amount due from related companies 17 49,794 - -

Amount due from subsidiary company 13 - 2,688,660 -

Fixed deposits with licensed banks 2,066,440 - -

Cash and bank balances 4,120,807 250,921 2,980

Total current assets 55,846,240 2,942,441 2,980

LESS: CURRENT LIABILITIES

Trade payables 2,593,472 - -

Other payables 18 5,897,835 12,690 5,884

Amount due to ultimate holding company 17 3,433,029 - -

Amount due to related companies 17 295,154 - -

Bank overdraft 19 612,856 - -

Term loan 10 3,091,288 - -

Tax payable 449,146 - -

Total current liabilities 16,372,780 12,690 5,884

NET CURRENT ASSETS/(LIABILITIES) 39,473,460 2,929,751 (2,904)

67,593,397 52,354,355 (2,904)

The accompanying notes form an integral part of the financial statements.

BALANCE SHEETS AS AT 31 DECEMBER 2003

30

Group Company

Note 2003 2003 2002

RM RM RM

Revenue 20

- new acquisition 21 70,369,446 - -

70,369,446 - -

Cost of goods sold (34,736,762) - -

Gross profit 35,632,684 - -

Other operating income 670,700 974 -

Distribution cost (17,988,841) - -

Administrative expenses (6,088,593) - -

Other operating expenses (759,146) (6,979) (2,696)

Profit/(Loss) from operations 11,466,804 (6,005) (2,696)

Finance cost (315,845) - -

Profit/(Loss) before taxation 22 11,150,959 (6,005) (2,696)

Taxation 23 (2,850,792) - -

Profit/(Loss) after taxation 8,300,167 (6,005) (2,696)

Pre-acquisition profit (6,125,905) - -

Minority interest (1) - -

Net profit/(loss) for the year 2,174,261 (6,005) (2,696)

Earning per share

- Basic 24 18.60 sen - -

The accompanying notes form an integral part of the financial statements.

INCOME STATEMENTS FOR THE FINANCIAL

YEAR ENDED 31 DECEMBER 2003

31

(Accumulated

Exchange Reserve loss)/

Share Share fluctuation on Unappropriated

capital premium reserve consolidation profit Total

Group RM RM RM RM RM RM

Balance at

1 January 2003 1,000 - - - (3,904) (2,904)

Issue of share

capital 46,749,000 5,614,264 - - - 52,363,264

Currency translation

difference - - 43,149 - - 43,149

Acquisition of

subsidiary companies - - - 9,927,455 - 9,927,455

Net profit for the year - - - - 2,174,261 2,174,261

Balance at 31

December 2003 46,750,000 5,614,264 43,149 9,927,455 2,170,357 64,505,225

Company

Balance at 1

January 2002 1,000 - - - (1,208) (208)

Net loss for the year - - - - (2,696) (2,696)

Balance at 31

December 2002 1,000 - - - (3,904) (2,904)

Issue of share

capital 46,749,000 5,614,264 - - - 52,363,264

Net loss for the year - - - - (6,005) (6,005)

Balance at 31

December 2003 46,750,000 5,614,264 - - (9,909) 52,354,355

The accompanying notes form an intergral part of the financial statements

STATEMENTS OF CHANGES IN EQUITY FOR

THE FINANCIAL YEAR ENDED

31 DECEMBER 2003

32

Group Company

Note 2003 2003 2002

RM RM RM

CASH FLOWS FROM OPERATING ACTIVITIES

Profit/(loss) before taxation 11,150,959 (6,005) (2,696)

Adjustments for :-

Amortisation of intangible assets 69 - -

Bad debts written off 405,449 - -

Depreciation 429,895 - -

Gain on foreign exchange (12,727) - -

Interest expenses 23,456 - -

Interest income (26,449) - -

Inventories written off 97,672 - -

Allowance for doubtful debts no longer required (52,265) - -

Allowance for doubtful debts 99,012 - -

Pre-acquisition profit (6,125,905) - -

Operating profit/(loss) before working capital

changes 5,989,166 (6,005) (2,696)

Changes in working capital:-

Subsidiary company - (2,688,660) -

Receivables (3,142,028) (2,860) -

Inventories 4,393 - 2,676

Payables (2,048,858) 6,806 -

Ultimate holding company 2,570,445 - -

Related companies 309,860 - -

Cash generated from/(used in) operations 3,682,978 (2,690,719) (20)

Interest paid (23,456) - -

Tax paid (2,365,401) - -

Interest received 26,449 - -

Net cash from/(used in) operating activities 1,320,570 (2,690,719) (20)

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of subsidiary companies, net of cash acquired A 9,188,819 - -

Purchase of property, plant and equipment (4,904,375) - -

Additional investment in subsidiary company - (49,424,604) -

Net cash from/(used in) investing activities 4,284,444 (49,424,604) -

CASH FLOWS FROM FINANCING ACTIVITIES

Proceed from issuance of shares - 52,363,264 -

Repayment of hire purchase creditors (443,403) - -

Repayment of term loans (755,133) - -

Drawdown of term loans 1,157,851 - -

Net cash (used in)/from financing activities (40,685) 52,363,264 -

CASH AND CASH EQUIVALENTS

Effect on foreign exchange rate changes 7,082 - -

Net increase/(decrease) 5,564,329 247,941 (20)

Brought forward 2,980 2,980 3,000

Carried forward B 5,574,391 250,921 2,980


CASH FLOW STATEMENTS FOR THE

FINANCIAL YEAR ENDED 31 DECEMBER 2003

33

NOTES TO THE CASH FLOW STATEMENT

A. ACQUISITION OF SUBSIDIARY COMPANIES

The fair value of assets acquired and liabilities assumed of the subsidiary companies acquired during the financial year were as

follows:-

Group

2003

RM

Property, plant and equipment 23,634,790

Intangible asset 1,324

Inventories 19,316,313

Receivables 27,675,172

Related companies 63,992

Tax recoverable 210,710

Payables (9,156,164)

Ultimate holding company (873,670)

Holding company (2,938,660)

Tax payable (174,161)

Bank borrowings (5,678,401)

Deferred taxation (1,918,000)

Minority interest (5)

Cash and cash equivalents 9,188,819

Share of net assets acquired 59,352,059

Reserve on consolidation (9,927,455)

49,424,604

Total purchase consideration through issuance of shares (49,424,604)

Company's cash flow on acquisition -

Cash and cash equivalents acquired 9,188,819

Group's cash flow on acquisition, net of cash and cash equivalents acquired 9,188,819

B. CASH AND CASH EQUIVALENTS

Group Company

2003 2003 2002

RM RM RM

Bank overdraft (612,856) - -

Fixed deposits with licensed banks 2,066,440 - -

Cash and bank balances 4,120,807 250,921 2,980

5,574,391 250,921 2,980


CASH FLOW STATEMENTS FOR THE

FINANCIAL YEAR ENDED 31 DECEMBER 2003

(CONT’D)

34

1. BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS

The financial statements of the Group and of the Company have been prepared in accordance with the provisions of

the Companies Act, 1965 and applicable approved accounting standards in Malaysia.

2. RESTRUCTURING EXERCISE

On 26 September 2003, the Company ("Y.S.P.SAH") has obtained approval from the relevant authorities on the

Proposed Restructuring and Listing on the Second Board of Bursa Malaysia Securities Berhad ("BMSB").The

restructuring scheme includes the following :-

(a) Offer for sale of 16,499,700 ordinary shares of RM1.00 each in Y.S.P.SAH ("Shares") representing 30% of the

enlarged issued and paid up share capital of 55,000,000 Shares, to Bumiputra investors approved by Ministry

of International Trade and Industry ("MITI") at an offer price of RM1.43 per Share ("Offer for Sale");

(b) Public issue of 2,750,000 new Shares, representing 5% of the enlarged issued and paid-up share capital of

55,000,000 Shares, to the eligible employees of the Y.S.P.SAH Group at an issue price of RM1.43 per Share;

(c) Private placement of 2,500,000 new Shares, representing approximately 4.5% of the enlarged issued and

paid-up share capital of 55,000,000 Shares, to investors identified by the placement agent at an issue price of

RM1.43 per Share ("Private Placement") ;

(d) Pub

Documents

2003Tel : 03-2692 4022 Fax : 03-2691 5229 PRINCIPAL BANKERS Malayan Banking Berhad (3813 K) No.2, Lorong Rahim Kajai 14 Taman Tun Dr. Ismail 60000 Kuala Lumpur Tel : 03-7729 3671 Cathay