c o n t e n t s

NOTICE OF ANNUAL GENERAL MEETING 2

STATEMENT ACCOMPANYING NOTICE OF AGM 4

CORPORATE INFORMATION 5

BOARD OF DIRECTORS / MANAGEMENT TEAM 6

PROFILE OF BOARD OF DIRECTORS 7

CORPORATE STRUCTURE 9

STATEMENT ON CORPORATE GOVERNANCE 10

STATEMENT OF INTERNAL CONTROL 16

REPORT OF THE AUDIT COMMITTEE 18

STATEMENT OF DIRECTORS’ RESPONSIBILITIES 20

FINANCIAL HIGHLIGHTS 21

CHAIRMAN’S STATEMENT 22

VISION & MISSION STATEMENTS 27

DIRECTORS’ REPORT 28

STATEMENT BY DIRECTORS 32

STATUTORY DECLARATION 32

REPORT OF THE AUDITORS 33

BALANCE SHEETS 34

INCOME STATEMENTS 36

STATEMENTS OF CHANGES IN EQUITY 37

CASH FLOW STATEMENTS 38

NOTES TO THE FINANCIAL STATEMENTS 40

ANALYSIS OF SHAREHOLDINGS 62

LIST OF PROPERTIES 64

PROXY FORM ENCLOSED

ESTHETICS INTERNATIONAL GROUP BERHAD (408061-P)

(Formerly known as Esthetics International Berhad)(Incorporated in Malaysia)

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notice of annual general meeting

NOTICE IS HEREBY GIVEN THAT the Seventh Annual General Meeting of the Company will be held at theEast VIP Lounge, Kuala Lumpur Golf and Country Club, No. 10 Jalan 1/70D, Off Jalan Bukit Kiara, 60000Kuala Lumpur, on Monday, 26 July 2004 at 10.00 a.m. to transact the following business:-

AGENDA

As Ordinary Business

1. To receive and adopt the Audited Financial Statements for the year ended 31 January 2004 togetherwith the Directors’ and Auditors’ Reports thereon.

2. To declare a Final Dividend of 5% less 28% income tax in respect of the year ended 31 January2004.

3. To re-elect Ms Melissa M Chen as a Director who is retiring under Article 87 of the Company’sArticles of Association.

4. To re-elect the following Directors who are retiring under Article 94 of the Company’s Articles ofAssociation:-

• Mr Chieng Ing Huong• Mr Wong Chin Mun

5. To re-appoint Messrs KPMG as Auditors of the Company and to authorise the Directors to fix theirremuneration.

As Special Business

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

6. Authority under Section 132D of the Companies Act, 1965 for the Directors to issue shares

“THAT pursuant to Section 132D of the Companies Act, 1965, the Directors be and are herebyauthorised to issue shares in the Company at any time until the conclusion of the next Annual GeneralMeeting upon such terms and conditions and for such purposes as the Directors may, in their absolutediscretion, deem fit provided that the aggregate number of shares to be issued does not exceed 10per centum (10%) of the issued Share Capital of the Company for the time being, subject always tothe approval of all relevant regulatory bodies being obtained for such allotment and issue.”

7. Authority pursuant to Section 132E of the Companies Act, 1965

“THAT pursuant to Section 132E of the Companies Act, 1965, authority be and is hereby given for theCompany and each of its subsidiaries to enter into any arrangement or transaction with any Directorof the Company or any person connected with such Director to acquire from or dispose to suchDirector or person connected with such Director any non-cash assets of requisite value that is lessthan 5% of the total consolidated net tangible assets of the Company at the time of such acquisitionor disposal.

AND THAT such authority shall continue to be in force until:

(a) the conclusion of the next Annual General Meeting of the Company; or

Ordinary Resolution 1

Ordinary Resolution 2

Ordinary Resolution 3

Ordinary Resolution 4Ordinary Resolution 5

Ordinary Resolution 6

Ordinary Resolution 7

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[3]notice of annual general meeting (cont’d)

7. Authority pursuant to Section 132E of the Companies Act, 1965 (Cont’d)

(b) the expiration of the period within which the next Annual General Meeting of the Company isrequired to be held pursuant to Section 143(1) of the Companies Act, 1965 (but shall notextend to such extension as may be allowed pursuant to Section 143(2) of the Companies Act,1965); or

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

whichever is earlier.”

NOTICE OF DIVIDEND PAYMENT

NOTICE IS ALSO HEREBY GIVEN THAT, subject to the approval of the shareholders at the Seventh AnnualGeneral Meeting, a Final Dividend of 5% less 28% Income Tax in respect of the financial year ended 31January 2004 will be paid to shareholders on 18 August 2004. The entitlement date for the said dividendshall be 3 August 2004. .

A Depositor shall qualify for entitlement to the Dividend only in respect of:-

a) Shares transferred to the Depositor’s securities account before 4.00 p.m. on 3 August 2004 in respectof the transfers; and

b) Shares bought on Bursa Malaysia Securities Berhad on a cum entitlement basis according to theRules of Bursa Malaysia Securities Berhad.

BY ORDER OF THE BOARD

LEE WAI NGAN (LS 00184)CHAN TOYE YING (LS 00185) Kuala LumpurSecretaries 2 July 2004

Ordinary Resolution 8

NOTES:

1. A member of the Company entitled to attend and vote at the meeting is entitled to appoint a proxy or proxies to attend and vote in his stead. A proxy may but need not be a member of theCompany and the provision of Section 149(1)(b) of the Companies Act, 1965 shall not apply.

2. The instrument appointing a proxy shall be in writing under the hand of the appointor or of his attorney duly authorised in writing or, if the appointor is a corporation, either under itsCommon Seal or under the hand of the attorney.

3. The instrument appointing a proxy must be deposited at the Registered Office of the Company at Wisma Selangor Dredging, 6th Floor, South Block, 142-A, Jalan Ampang, 50450 KualaLumpur not less than 48 hours before the time set for holding the meeting or any adjournment thereof.

EXPLANATORY NOTES TO THE SPECIAL BUSINESS

4. Authority under Section 132D of the Companies Act, 1965 for the Directors to issue shares

Ordinary Resolution No. 7 if passed, will empower the Directors to allot and issue shares in the Company up to an amount not exceeding in total 10% of the issued Share Capital of theCompany for such purposes as the Directors consider would be in the interest of the Company. This authority, unless revoked or varied by the Company at a general meeting, will expireat the next Annual General Meeting.

5. Authority under Section 132E of the Companies Act, 1965

Section 132E of the Companies Act 1965 prohibits a Company or its subsidiaries from entering into any arrangement or transaction with its Directors or persons connected with suchDirectors in respect of the acquisition from or disposal to such Directors or connected persons of any non-cash assets of the requisite value without prior approval of the Company ingeneral meeting. According to the Companies Act, 1965, a non-cash asset is considered to be of the requisite value, if at the time of arrangement or transaction, its value is greater thanRM250,000 or ten percentum (10%) of the Company’s net assets whichever is the lesser, subject to a minimum of RM10,000.

The Resolution 8, if passed, will authorise the Company and each of its subsidiaries to enter into any arrangement or transaction with a Director of the Company or with a person connectedwith such a Director to acquire from or dispose to such a Director or person any non-cash assets of the requisite value that is less than five percentum (5%) of the total consolidated nettangible assets of the Company at the time of such acquisition or disposal.

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statement accompanying notice of annual general meeting

Pursuant to Paragraph 8.28(2) of the Bursa Malaysia Securities Berhad Listing Requirements

1. Directors who are standing for re-election at the Seventh Annual General Meeting of the Company are:-

Pursuant to Article 87 of the Company’s Articles of AssociationMs Melissa M Chen (Ordinary Resolution 3)

Pursuant to Article 94 of the Company’s Articles of AssociationMr Chieng Ing Huong (Ordinary Resolution 4)Mr Wong Chin Mun (Ordinary Resolution 5)

The details of the Directors standing for re-election are set out in their respective profiles on pages 7 and 8 of this Annual Report.

2. No Board Meeting was held during the financial year ended 31 January 2004 as the Company was listed with Bursa Malaysia on11 March 2004.

3. The Seventh Annual General Meeting of the Company will be convened and held at East VIP Lounge, Kuala Lumpur Golf and CountryClub, No. 10 Jalan 1/70D, Off Jalan Bukit Kiara, 60000 Kuala Lumpur on Monday, 26 July 2004 at 10.00 a.m.

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[5]corporate information

AUDIT COMMITTEE

Chieng Ing Huong - ChairmanWong Chin Mun - MemberMelissa M. Chen - Member

REMUNERATION COMMITTEE

Wong Chin Mun - ChairmanChieng Ing Huong - MemberLim Yee Soon - Member

NOMINATION COMMITTEE

Chieng Ing Huong - ChairmanWong Chin Mun - Member

AUDITORS

KPMGChartered AccountantsWisma KPMG, Jalan DungunDamansara Heights50490 Kuala LumpurTel: 03-2095 3388Fax: 03-2095 0971

REGISTERED OFFICE

Wisma Selangor Dredging6th Floor, South Block142-A, Jalan Ampang50450 Kuala LumpurTel: 03-2161 5466Fax: 03-2163 6968

SHARE REGISTRARS

Systems & Securities Sdn BhdWisma Selangor Dredging6th Floor, South Block142-A, Jalan Ampang50450 Kuala LumpurTel: 03-2161 5466Fax: 03-2163 6968

COMPANY SECRETARIES

Lee Wai Ngan (LS 00184)Chan Toye Ying (LS 00185)

BOARD OF DIRECTORSLIM YEE SOON (Executive Chairman)

MELISSA M. CHEN (Group Chief Executive Officer)

KAN KOK CHEE (Executive Director)

CHIENG ING HUONG (Independent Non-Executive Director)

WONG CHIN MUN (Independent Non-Executive Director)

www.estheticsgroup.com

STOCK EXCHANGE LISTING

Bursa Malaysia Securities BhdMain BoardDate of Listing: 11 March 2004Stock Code: 5081

PRINCIPAL PLACE OF BUSINESS

(Headquarters)Wisma Dermal EstheticaNos. 54-58, Jalan SS 22/25Damansara Jaya47400 Petaling JayaSelangor Darul EhsanTel: 03-7729 8333Fax: 03-7727 6032Website: www.estheticsgroup.com

PRINCIPAL BANKERS

Malayan Banking BerhadHSBC Bank Malaysia BerhadPublic Bank BerhadRHB Bank Berhad

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[6]

Standing from left to right:Yap Wai YinWey Hiok Liom, MichealPeter Teoh Bor TeikSitting from left to right:Soo Kim Yeu, PatrickThomas Koh Kheng SeongChen Yoke Chin, JeanNg Wai Hou, JamesGary Chin Wei MengTan Thiam Keat, Alex

group senior management

board of directors

Seated from left to right: Melissa M. Chen (Group CEO), Lim Yee Soon (Executive Chairman)Standing from left to right: Eddy Chieng Ing Huong, Josef Kan Kok Chee, Richard Wong Chin Mun

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[7]

Lim Yee Soon Melissa M. ChenExecutive Chairman Group CEO

profile of directors

Lim Yee Soon, aged 44, is the ExecutiveChairman of Esthetics Group. He graduatedfrom the National University of Singaporewith a Degree in Bachelor of Art, majoringin Architectural Studies in 1983. Upongraduation, he joined Archurban Architectsin Singapore in February 1984 as a TraineeArchitect and left in December 1984 tofurther pursue studies. In 1987, he obtainedhis Bachelor of Architecture Degree at theNational University of Singapore. Hisinvolvement with the Group started inFebruary 1989 when he became the ChiefExecutive Officer of DESB. Currently, heholds the position of Executive Chairmanin DESB. He has been the driving forcebehind the development, growth andexpansion of the Esthetics Group. He is alsoresponsible for the strategic direction of theEsthetics Group and plays an active role inthe overall management. He is a Directorof Amita Pearls Sdn Bhd, a companyinvolved in the trading of pearls andjewellery and Hartsville Sdn Bhd, which isan investment holding company.

Melissa M. Chen, aged 44, is the founderof the Esthetics Group and the Group ChiefExecutive Officer of Esthetics. To-date, shehas obtained numerous international beautyqualifications since 1984. Amongst others:

• Diploma in Beautician from theConfederation of International BeautyTherapy & Cosmetology (London)

• Diploma International CIDESCO (Zurich)(COMITÉ INTERNATIONAL D’ESTHETIQUEET DE COSMETOLOGIE)

• Post Graduate Diploma in European SkinCare Techniques (USA)

• Diploma in Clinical Aromatherapy (HK)• Post Graduate courses in Sunscreens

and Sun Care and Skin Care and BasicCosmetic Ingredients at the University ofCalifornia Los Angeles (UCLA) in USA

She began her career in April 1984 as theFounder and Sole Proprietor of Head to ToeBeauty Centre. Since then she has heldnumerous top management positions withinthe group culminated in her assuming theposition of Group CEO in 2001.

She is a member of the British Associationof Beauty Therapy and Cosmetology Ltdsince 1984.

Josef Kan Kok CheeExecutive Director

Kan Kok Chee, aged 45, is the ExecutiveDirector of DESB. He first ventured intobusiness by managing his family wholesalingand retailing business from 1978 to 1988.Subsequently in 1988, he joined DESB as anExecutive Director. His responsibilities coversales and operations of the company. He hasaided in the rapid growth of the distributionbusiness for DESB. By providing strategicsupport, the distribution business grewrapidly thus establishing DESB as a leadingplayer in the professional skincare industry.He has also assisted in the continuousgrowth and expansion for the Leonard Drakeand Belle Lina chain of skincare salons inthe country and was responsible for the set-up of these centres. Through his affiliationas a committee member of the MalaysianRetailers Chain Association (MRCA), he wasable to secure strategic retail locations forthe expansion of the Leonard Drake andDermalogica centres in Malaysia. He is alsoresponsible for the management of logisticsand warehousing of the Group. Operationally,he also oversees the Group’s inventoryplanning and coordination.

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[8] profile of directors (cont’d)

Richard Wong Chin MunIndependent Non-Executive Director

Wong Chin Mun, aged 59, is the IndependentNon-Executive Director of Esthetics Group.He is the Founder of TEC Asia Centre SdnBhd which has licence to the internationallyknown TEC process that helps ChiefExecutive Officers (“CEO”) proactivelymanage change and stay ahead of thecompetition through sharing ideas, expertiseand personal experience with othersuccessful CEOs. After five (5) years as ateacher, he obtained his business degrees inAustralia and worked with MultinationalCorporations (“MNC”) at home and abroadbefore joining Nylex (Malaysia) Berhad in1976. He was appointed its General Manager/Director in 1980 and Managing Director in1985. Under his leadership, Nylex won the1991 Quality Management Award from theMITI and became the first company inMalaysia to be awarded the ISO 9001certification in 1991. He was voted Boss-of-the-Year 1991/92 by Secretaries SocietyMalaysia. He left in 1994 as its ManagingDirector/Group Chief Executive to start TECAsia Centre. Headhunted in 1996 on a five(5) year contract, his leadership tenure at alarge glove manufacturing company saw itdoubled its annual sales for the 1997-2000period, increased its PAT fourfold andreceived many accolades. Besides havingserved as Deputy Chairman of the NylexBoard and Chairman of Audit Committee,

Eddy Chieng Ing HuongIndependent Non-Executive Director

Chieng Ing Huong, aged 46, is theIndependent Non-Executive Director ofEsthetics Group. He graduated with aBachelor of Commerce Degree inAccounting, Finance & InformationSystems from the University of New SouthWales, Australia in 1980. He is a CharteredAccountant and is a member of the Instituteof Chartered Accountants in Australia. Heis also a Chartered Accountant registeredwith the Malaysian Institute of Accountants.He was the Managing Director of Equity &Property Investment Corporation LimitedAustralia and a Director of Hillgrove GoldNL, Australia. He is the founder andcurrently a Director and substantialshareholder of Nationwide Express CourierServices Berhad, Senior Vice-President,Business Development of Hwang-DBSSecurities Berhad, Chairman of SelangorDredging Berhad and a Director of AncomBerhad, Nylex (Malaysia) Berhad and QLResources Berhad.

he has been a member of the National ExportCouncil under MITI and the Board of Trusteesof the Malaysian Rubber Export PromotionCouncil as well as a Council member of theFederation of Malaysian Manufacturers,where he was the Chairman of AuditCommittee. Currently, he sits on the Boardof Sunway Holdings Incorporated Bhd andis the Chairman of its Audit Committee,Remuneration Committee and NominationCommittee. He was a member of the Boardof Trustees of the Malaysian Rubber ExportPromotion Council from 2000-2002. He alsosits on the TEC International PartnersExecutive Council.

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[9]corporate structure

[100%] Belle Lina Franchise International Sdn Bhd (320728-T)

[100%] Head To Toe Skin Care Centre (KL) Sdn Bhd (318080-D) (Dormant)

[100%] Leonard Drake (M) Sdn Bhd (422149-D)

Skin CareCentres &

Services

[100%] Leonard Drake Fitness (M) Sdn Bhd (436251-M)

[100%] Esthetics Concept Sdn Bhd (305356-X)

[100%] Beuxstar Sdn Bhd (583486-D) (Dormant)

OtherServices

[100%] Clinelle (M) Sdn Bhd (587026-H)

[100%] EIG Pharma Asia Pacific Sdn Bhd (638699-H)

[49.9%] Dermal Concept Co. Ltd (468/2542)

[100%] Averine (Malaysia) Sdn Bhd (364717-K)

[100%] Dermal Esthetica Sdn Bhd (178535-D)

[94.99%] Esthetics International (HK) Ltd (718951)

Distribution& Trading

[99.9%] Leonard Drake (Thai) Co. Ltd (839/2543)

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[10] statement on corporate governance

The Board of Directors (“Board”) of Esthetics International Group Berhad (“EIGB” or “the Company”) is committed to the principles andbest practices of corporate governance in the Malaysian Code of Corporate Governance and ensure that standards of corporate governanceare being observed to realize the objective of increasing shareholders’ value.

THE BOARD AND BOARD STRUCTURES

An effective Board lead and control the Company. The Directors are from diverse professional and business backgrounds with a wide rangeof business and financial experience relevant to lead the Group’s business activities and as such are able to discharge their duties andresponsibilities on issues of strategy, performance, resources, standards of conduct, identifying principal risks and reviewing internalcontrol systems.

There were no Board Meetings held during the financial year ended 31 January 2004, for the Company was listed with the Bursa MalaysiaSecurities Berhad (Bursa Malaysia) on 11 March 2004.

The Board has delegated certain responsibilities to the Board Committees with clearly defined terms of reference to assist in dischargingtheir duties. The Board Committees include the Audit Committee, Nomination Committee and Remuneration Committee. The Chairman ofthe Committee will report and table to the Board their respective recommendations for consideration and adoption.

BOARD COMPOSITION

The current Board consists of five (5) members of which three (3) are Executive Directors and two (2) are Independent Non-ExecutiveDirectors. A brief profile of each Director is presented on pages 7 and 8 of this Annual Report.

The Executive Directors are generally responsible for making and implementing operational decisions while Independent Non-ExecutiveDirectors complement their expertise and experience towards the formulation of policy and decision-making process.

The Chairman of the Board is also the Executive Chairman of the Company. This reflects the relatively small size of the Board which at sometime has independent elements. The presence of Independent Non-Executive Directors provide an effective Board with a mix of industry-specific knowledge and broad business and commercial experience. The balance enables the Board to provide fair and independent views,advise and judgement to the Company and to bring informed and independent judgement to many aspects of the Company’s strategy andperformance so as to ensure that the highest standards of conducts and integrity are maintained by the Company, as well as to safeguardthe interest of other stakeholders.

More than one third of the Board comprises Independent Non-Executive Directors since the Company recognizes the contribution ofIndependent Non-Executive Directors as equal Board members to the development of the Company’s strategy, the importance of representingthe interests of public shareholders and providing a balanced and independent view of the Board. All Independent Non-Executive Directorsare independent of management and free from any relationship which could interfere with their independent judgement.

The Articles of Association of the Company provides that at least one-third of the Board is subject to retirement by rotation at each AnnualGeneral Meeting (AGM). Further, each of the Director of the Company shall retire at least once every three years. A retiring Director iseligible for re-election. This provides an opportunity for shareholders to renew their mandate. The election of each Director is voted onseparately.

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[11]

SUPPLY OF INFORMATION TO THE BOARD

All Directors have full and unrestricted access to timely information, necessary in the furtherance of their duties. Prior to each Boardmeeting, all Directors receive an agenda and a full set of Board papers for each agenda item to be discussed. Relevant Directors will provideexplanation of pertinent issues. All proceedings from the Board meetings are minuted.

The Board is constantly kept updated on the Company’s financial performance, activities and its operations. All Directors have access to theadvice and services of the Company Secretaries.

APPOINTMENT TO THE BOARD

The Nomination Committee comprises two (2) members who are the Independent Non-Executive Directors of the Company. The Chairmanof the Committee is Mr Chieng Ing Huong and the other member is Mr Wong Chin Mun. The Committee is empowered to bring to the Boardrecommendations as to the appointment of any new Executive or Non-Executive Director, provided that the Chairman of the NominationCommittee, in developing such recommendations, consults all Directors and reflects that consultation in any recommendation of theNomination Committee brought forward to the Board.

The Nomination Committee also ensures that the Board has an appropriate balance of expertise and ability. For this purpose, the Committeeassesses the effectiveness of the Board as a whole and performance of the Directors of the Company on an on-going basis. Terms ofreference of the Committee are clearly defined.

DIRECTORS’ REMUNERATION

The aggregate remuneration of Directors of the Company capitalised into appropriate components for the financial year are as follows:

Salaries &Other Benefits

RM’000 Emoluments* In Kind** Fees Total

Executive Directors 2,005 53 – 2,058

Non-Executive Directors – – – –

* Other emoluments include bonuses, commission and employer contribution to the Employees Provident Fund.** Benefits in-kind is in respect of motor vehicle provided.

statement on corporate governance (cont’d)

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[12]

DIRECTORS’ REMUNERATION (Cont’d)

The number of Directors whose remuneration fall into the following bands are as follows:-

Range of remuneration per annum No. of DirectorsExecutive Director Non-Executive Director

Below RM50,000 – –

RM50,000 to RM500,000 1 –

RM500,001 to RM1,000,000 2 –

Above RM1,000,000 – –

The Remuneration Committee is made up of three (3) members comprising an Executive Director and two (2) Independent Non-ExecutiveDirectors namely:-

• Mr Wong Chin Mun (Chairman)• Mr Chieng Ing Huong (Member)• Mr Lim Yee Soon (Member)

Mr Wong Chin Mun and Mr Chieng Ing Huong are Independent Non-Executive Directors.

The objective of the Committee is to assist the Board of Directors in their responsibilities in assessing the remuneration packages ofthe Directors. The Director concerned will not be present when matters affecting his own remuneration arrangement are considered.The determination of remuneration of Independent Non-Executive Directors is a matter for the Board as a whole. The IndependentNon-Executive Directors abstain from discussion of their own remuneration. Terms of reference of the Committee are clearly defined.

DIRECTORS’ TRAINING

All members of the Board have attended the Mandatory Accreditation Program of Bursa Malaysia (“MAP”). The Board will continue toupgrade themselves through attending continuing education program recommended by accredited institutions and authorities to furtherenhance their skills and knowledge.

RELATIONS WITH SHAREHOLDERS

The Company strictly adheres to the disclosure requirements of the Bursa Malaysia and recognizes the importance of timely and equaldissemination of information to shareholders and stakeholders.

In addition, the institutional shareholders, fund managers and substantial shareholders are able to enter into dialogue with the Company’srepresentatives.

The AGM is the principal forum for dialogue with shareholders. Shareholders are notified of the meeting and provided with a copy ofCompany’s Annual Report at least 21 days before the date of the meeting.

statement on corporate governance (cont’d)

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[13]

RELATIONS WITH SHAREHOLDERS (Cont’d)

The Board members are prepared to respond to all queries and undertake to provide sufficient clarification on issues and concerns raisedby the shareholders. The external auditors are also present to provide their professional and independent clarification on queries raised byshareholders. Status of all resolutions proposed at the AGM are announced to the Bursa Malaysia at the end of the meeting day. Proceedingsof the AGM are properly minuted.

The Company also maintains a website (www.estheticsgroup.com) through which shareholders and members of the public in general cangain access to information about the Group.

THE AUDIT COMMITTEE

The Audit Committee comprises one (1) Executive Director and two (2) Independent Non-Executive Directors namely:-

• Mr Chieng Ing Huong (Chairman)• Mr Wong Chin Mun• Ms Melissa M. Chen

Mr Wong Chin Mun and Mr Chieng Ing Huong are Independent Non-Executive Directors.

The composition and Terms of Reference of this Committee together with its report are set out on pages 18 and 19 of the Annual Report.

FINANCIAL REPORTING

The Board is responsible for presenting a balanced and understandable assessment of the Group’s operation and prospect whenever itreleases its quarterly report and annual financial statements to shareholders. The Audit Committee has assisted the Board in scrutinisinginformation for disclosure to ensure accuracy, adequacy and completeness.

A Statement of Directors’ Responsibility in respect of the Audited Financial Statements is presented on page 20 of the Annual Report.

INTERNAL CONTROL

The Board acknowledge its responsibility for the Group’s system of internal control and the need to review its effectiveness regularly. Indoing so, the Board has the right to seek information and clarification from the Management, seeks input from the Audit Committee,auditors and other experts at the expense of the Company.

In addition to that, the Board recognizes that risks cannot be eliminated completely, therefore, the system and process put in place wouldhave to be aimed at minimizing and managing the risks.

Audit Committee has been empowered to assist the Board in fulfilling the above roles via functions laid down in its terms of reference.

The Group’s Statement on Internal Control is set out on pages 16 and 17.

statement on corporate governance (cont’d)

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[14]

RELATIONSHIPS WITH THE AUDITORS

Through the Audit Committee, the Company has always maintained a close and transparent relationship with its auditors in seekingprofessional advice and ensuring compliance with the accounting standards in Malaysia.

From time to time, the auditors highlight to the Audit Committee and the Board in matters that require the Board’s attention.

STATEMENT OF COMPLIANCE WITH THE BEST PRACTICES OF THE MALAYSIAN CODE ON CORPORATE GOVERNANCE (“CODE”)

The Board has to the best of its ability and knowledge complied with the Best Practices Corporate Governance set out in Part II of the Codeexcept that under Part II AA VII, the Code recommends the Board to identify a senior independent non-executive director to whomconcerns may be conveyed. At present, the Board has yet to identify a senior independent non-executive director given that the Companywas listed on 11 March 2004. This shall be complied at a later date.

OTHER INFORMATION

Family Relationship With Directors And Substantial Shareholders

Ms Melissa M.Chen is the spouse of Mr Lim Yee Soon. Ms Melissa M. Chen and Ms Chen Yoke Chin are sisters. Mr Kan Kok Chee is thespouse of Ms Chen Yoke Chin and the brother in law of Ms Melissa M. Chen.

Utilisation Of Proceeds

During the financial year, there was no fund raising exercise.

However, the Company made a Public Issue of 23,340,000 new ordinary shares of RM0.50 each comprising:• 4,000,000 new ordinary shares of RM0.50 each available for application by the Malaysian Public• 8,000,000 new ordinary shares of RM0.50 each by way of placement to identified investors• 6,000,000 new ordinary shares of RM0.50 each available for application by eligible employees and business associates of Esthetics

International Group Berhad and its subsidiary companies• 5,340,000 new ordinary shares of RM0.50 each to bumiputera investors approved by the Ministry of International Trade and Industry.

Offer for sales of 6,660,000 ordinary shares of RM0.50 each to bumiputera investors approved by the Ministry of International Tradeand Industry at an issue/offer price of RM0.75 per ordinary share of RM0.50 each representing 19.45% of the enlarged issued andpaid-up share capital of the Company enroute to their listing on the Main Board of Bursa Malaysia on 11 March 2004.

The gross proceeds of RM17.505 million raised from the Public Issue were partially utilised for listing expenses, Information Technologysystems and launching of FMCG products in accordance with the usage indicated in the Prospectus dated 20 February 2004.

Share Buy Back

There were no share buy backs during the financial year.

Option, Warrants Or Convertible Securities

There were no options, warrants or convertible securities exercised during the year.

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

There were no ADR or GDR programme sponsored by the Company.

statement on corporate governance (cont’d)

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[15]

OTHER INFORMATION (Cont’d)

Sanctions And/Or Penalties

There were no sanctions and penalties imposed on the Company and its subsidiaries, Directors or Management by the relevant regulatoryauthorities.

Variation In Results

The Company did not make any profit estimate / forecast / projection / unaudited results announcement that differs by more than 10%margin.

Profit Guarantee

No profit guarantee was given to or by the Company during the financial year.

Material Contracts

There were no material contracts entered into by the Company and/or its subsidiary companies which involve Directors’ and substantialshareholders’ interests either still subsisting at the end of the financial year ended 31 January 2004 or entered into since the end of theprevious financial year.

Revaluation Policy On Landed Properties

No revaluation was carried out on the landed properties of the Group.

Non-audit Fees

There were no non-audit fees paid to external auditors for the financial year ended 31 January 2004.

Conviction Of Offences

None of the Directors have been convicted for any offence in the past ten (10) years other than traffic offences.

Directorship In Public Companies

None of the Directors hold any directorships in other public companies except as indicated below:-

Director Public Companies

Mr Chieng Ing Huong Nationwide Express Courier Services BerhadSelangor Dredging BerhadAncom BerhadNylex (Malaysia) BerhadQL Resources Berhad

Mr Wong Chin Mun Sunway Holdings Incorporated Berhad

statement on corporate governance (cont’d)

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[16] statement of internal control

BOARD’S RESPONSIBILITIES AND COMMITMENT

The Board of Directors acknowledges its overall responsibility for the Group’s system of internal control and for reviewing its adequacy andintegrity. The system of internal control is designed to safeguard shareholders’ investment and the Group’s assets and by its nature, canonly provide reasonable but not absolute assurance against material misstatement, loss and fraud as it is designed to manage rather thaneliminate the risk of failure to achieve business objectives.

The Board believe that the Group’s system of internal control, financial or otherwise should provide reasonable assurance regarding theachievement of the Group’s objective in:-

• Effectiveness and efficiency of operations• Reliability and transparency of financial information• Compliance with laws and regulations• Safeguarding of the Group’s assets

INTERNAL CONTROL AND RISK MANAGEMENT

In discharging its stewardship responsibilities, the Board recognises that risk management

• Is a logical and systematic method of identifying, analysing, assessing, treating and monitoring of the Group’s risk.• Is a continuous and an ongoing process.• Is an integral part of the Group’s management practices.• Enables the Group to not only minimise losses but also to maximise opportunities.

The Board’s primary objective and direction in managing the Group’s principal risks are to enhance the Group’s ability to achieve itsbusiness objectives. In order to measure the achievement of the business objectives, the Board monitors the Group’s performance andprofitability at its periodic Management and Board meetings.

The Group is structured such that the heads of each operating unit has clear reporting line and the management of the Group as a whole isassigned to the Executive Directors. The management of the Group’s individual operating units is assigned to divisional management whoare accountable for the conduct and performance of their business unit.

The Executive Directors and senior management during the current financial year, attended periodic monthly management and operationalmeetings, review financial and operations reports in order to monitor the performance of the Group. These meetings and reports coupledwith the ‘close to operation’ policy employed by the Executive Directors and top management present an ideal platform for timely identificationof the Group’s risks and systems to manage those risks on an informal basis.

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[17]

INTERNAL CONTROL ENVIRONMENT

The system of internal control in the Group has the following key elements:-

• Clear Group vision, mission and strategic direction• A Board which retains control over the Group and monitors senior management• Preparation of monthly financial and operating reports• Centralised procurement and payment function at Head Office• Periodic Management and Board Meetings to review business operations, performance and approve significant transactions• Clearly defined delegation of responsibilities to the Committees of the Board (which were established in April 2004)• Existing of an organisational structure for clear lines of reporting and accountability• Approved annual budget monitored regularly against actual with variance analysis and appropriate management action taken where

necessary• Segregation of duties, system access controls and physical safeguards

ASSURANCE

The Board has assigned to the Audit Committee, that was established in April 2004, with the duty of reviewing and monitoring theeffectiveness of the Group’s system of internal control. The Internal Audit function had not been set up since being listed on 11 March2004. It is in the Board’s plan to outsource the function.

The Board remains committed towards operating a system of internal control and therefore recognizes that the system must continuouslyevolve to support the type of business and size of operations of the Group. As such, the Board, in striving for continuous improvement willput in place appropriate action plans, when necessary, to further enhance the Group’s system of internal control.

statement of internal control (cont’d)

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[18] report of the audit committee

MEMBERS

Mr Chieng Ing Huong (Chairman) : Independent Non-Executive DirectorMr Wong Chin Mun : Independent Non-Executive DirectorMs Melissa M. Chen : Executive Director

TERMS OF REFERENCE

The terms of reference of the Audit Committee are set out below:

Composition

The Audit Committee shall be appointed by the Board from amongst their number and shall:

1. Consist no less than three (3) members2. Consist of majority of independent directors; and3. Have at least one (1) member who is a member of the Malaysian Institute of Accountants or who fulfils such other requirements as

prescribed in the Bursa Malaysia Listing Requirements.

The members of the Audit Committee shall elect a Chairman from among their numbers who is an independent director.

In the event of any vacancy in the Audit Committee resulting in the non compliance of the above stated conditions, the Company shall fillthe vacancy within three (3) months.

The terms of office and performance of the Audit Committee and its members should be reviewed by the Board no less than every three (3)years.

Authority

The Audit Committee shall:-

1. Have authority to investigate any matter within its terms of reference2. Have the resources which are required to perform its duties3. Have full and unrestricted access to any information pertaining to the Group4. Have direct communication channels with the external auditors and person(s) carrying out the internal audit function or activity5. Have the right to obtain independent professional or other advice at the Company’s expense6. Have the right to convene meetings with the external auditors, excluding the attendance of the executive members of the audit

committee, whenever deemed necessary, and7. Promptly report to the Bursa Malaysia matters which have not been satisfactorily resolved by the Board of Directors resulting in the

breach of the listing requirements.

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[19]report of the audit committee (cont’d)

TERMS OF REFERENCE (Cont’d)

Functions

The functions of the Audit Committee shall be to review:-

1. With the external auditors, the audit plan and scope2. With the external auditors, his evaluation of the accounting policies and system of internal control3. With the external auditors, his audit report and the assistance given by the Company’s officers to the auditors4. The scope, functions and resources of the internal audit functions and the system of internal controls within the Group5. The internal audit programme, processes, results of the internal audit programme, processes or investigation undertaken and whether

or not appropriate action is taken on the recommendations of the internal audit function6. The quarterly reports on consolidated results and annual financial statements prior to submission to the Board of Directors, focussing

particularly on changes in or implementation of major accounting policy changes, significant and unusual events and compliancewith accounting standards and other legal requirements

7. Any letter of resignation from the external auditors of the Group and consider the nomination of a person or person(s) as auditors(internal and external)

8. Suitability of the external auditors for re-appointment9. Any related party transactions and conflict of interest that may arise within the Company or Group10. To consider other topics as defined by the Board.

Meeting

The Audit Committee shall meet at least each quarter of a financial year and such additional meetings as the Chairman shall decide in orderto fulfill his duties. The Company Secretary or any person appointed by the Audit Committee shall act as a secretary of the Audit Committeeand shall be responsible, in conjunction with the Chairman, for drawing up the agenda and other explanatory documentation for circulationto the Committee members prior to each meeting. The Secretary shall be responsible for keeping the minutes of the meeting of the AuditCommittee, and circulating them to the Committee members and to other members of the Board of Directors. The Chairman shall convenea meeting of the Audit Committee to consider any matter the external auditor believes should be brought to the attention of the directors orshareholders. The Company must ensure that other directors and employees attend any particular Audit Committee meeting only at theAudit Committee’s invitation, specific to the relevant meeting.

A quorum shall consist of a majority of members present who must be independent directors.

MEETINGS

During the financial year ended 31st January 2004, there were no meetings held as the Company was listed in the Bursa Malaysia on March11, 2004 and the Audit Committee was not formed.

ACTIVITIES

There were no activities during the financial year as the Company was listed in the Bursa Malaysia on March 11, 2004.

INTERNAL AUDIT FUNCTION

The internal audit function had not been formed as the Company was listed in the Bursa Malaysia on March 11, 2004.

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[20]

The Directors are legally required to prepare financial statements for each financial year which give a true and fair view of the state of affairsof the Group and of the Company at the end of the financial year and of the results of the Group and the Company for the financial year thenended.

In preparing those financial statements, the directors of the Company have:-

• Adopted suitable accounting policies and then applied them consistently• Made judgements and estimates that are prudent and reasonable• Ensured applicable accounting standards have been followed, subject to any material departures disclosed and explained in the

financial statements, and• Prepared the financial statement on the going concern basis unless it is inappropriate to presume that the Group and the Company

will continue in business

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financialposition of the Group and of the Company and to enable them to ensure that the financial statements comply with the Companies Act, 1965and applicable approved accounting standards. The Directors are also responsible for the assets of the Group and of the Company andhence, for taking reasonable steps for the prevention and detection of fraud and other irregularities.

statement of directors’ responsibilities

In Respect of the Audited Financial Statements

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[21]financial highlights

(RM’000) 2000 2001 2002 2003 2004

Revenue 34,006 44,502 56,374 65,575 62,586

Profit before tax 8,169 12,328 15,102 17,295 16,037

Profit after tax 5,853 8,177 10,537 11,611 11,688

Shareholders funds 23,267 31,340 41,920 53,533 65,235

Net tangible assets 23,267 31,340 41,920 53,533 65,235

Number of shares* 700 700 700 700 96,660

Earning per share (RM) 8.36 11.68 15.05 0.12** 0.12

Net tangible assets per share (RM) 33.24 44.77 59.89 0.55** 0.67

* Based on ordinary shares of RM1.00 each except in year 2004 where shares were split to RM0.50 each.** Based on 96,660,000 weighted average number of shares (refer Note 25 of the Notes to the Financial Statements).

0 10 20 30 40 50 60 70 80

2004

2003

2002

2001

2000

0 5 10 15 20

2004

2003

2002

2001

2000

0 2 4 6 8 10 12

2004

2003

2002

2001

2000

0 10 20 30 40 50 60 70 80

2004

2003

2002

2001

2000

PROFIT AFTER TAX (RM MILLION) SHAREHOLDERS FUNDS (RM MILLION)

REVENUE (RM MILLION) PROFIT BEFORE TAX (RM MILLION)

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O

On behalf of the Board of Directors of Esthetics International Group Berhad,I am pleased to present the Annual Report and Audit Accounts of the

Group and the Company for the financial year ended 31 January 2004.This is the first Annual Report after the Official Listing of the Group on the

Main Board of Bursa Malaysia on 11 March 2004.

chairman’s statement

FINANCIAL PERFORMANCE

The global economy, which continued to remain uncertain with the impactof global events such as the Iraqi war, showed modest recovery. The

Malaysian economy was able to chalk up a growth of 5.2% in 2003driven by a combination of strong domestic demand and risingexports.

The operating environment for the Group in the financial yearunder review was demanding with the impact of the outbreak

of the Severe Acute Respiratory Syndrome (“SARS”)epidemic across the Asian region.

Despite the challenging times, I am pleased to reportthat the Group performed well, thanks to some effective

cost control measures implemented by themanagement of the company. The Group has reported a

slight improvement in the Group’s net profit after tax ofRM11.69 million against RM11.61 million in 2003 in spite ofthe Group achieving a slightly lower revenue of RM62.59million against RM65.58 million in 2003.

[22]

[23]

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chairman’s statement (cont’d) [23]

[24]

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[24] chairman’s statement (cont’d)

DIVIDEND

In recognition of the continued support and loyalty of ourshareholders, the Board is pleased to recommend a first and finaldividend of 2.5 sen per share less 28% tax for the financial yearended 31 January 2004.

The recommended dividend is subjected to shareholders’ approvalat the forthcoming Annual General Meeting which will be held on26 July 2004.

CORPORATE DEVELOPMENT

Year 2004 was a significant year in the history of the Group withthe successful listing of its 120,000,000 ordinary shares of RM0.50each on the Main Board of Bursa Malaysia on 11 March 2004.

Achieving the listing status is truly a moment of pride andgratification for everyone in Esthetics International Group. Thismilestone event and achievement will certainly inspire us to takethe Group to greater heights and enable the Group to meet its futurechallenges with confidence.

PROSPECTS

The global economic outlook in 2004 has improved considerablywith growth expected to be more broad based which is reinforcedby strong growth in the Asian region. This significant improvementin the external environment coupled with higher consumer, businessconfidence and strong underlying fundamentals in the Malaysianeconomy are anticipated to provide stable conditions for futuregrowth of the Group.

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[25]chairman’s statement (cont’d)

[26]

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[26] chairman’s statement (cont’d)

The Group will continue to focus on the Group’s vision to be thekey player in the wellness and skin care industry and to be theleading global corporation in all of the Group’s core businesses.

With the Malaysian economy expected to expand at the rate of 6.0%for this coming year and coupled with the anticipation of strongerconsumer spending, the Group’s business is expected to performfavourably. Barring unforeseen circumstances, I am confident thatthe Group will be able to record a satisfactory performance and willuse our best endeavour to achieve the profit forecast as disclosedin the prospectus.

APPRECIATION

On behalf of the Board of Directors, I would like to express mysincere thanks and appreciation to the management and employeesof the Group for their commitment, contribution and dedicatedservices. My thanks and appreciation are also extended to ouresteemed shareholders, customers, suppliers, business associates,bankers and regulatory authorities for their continuing support,assistance and confidence they have in us. Last but not least, Iwould like to extend my utmost appreciation to my fellow Boardmembers for their advise and guidance.

LIM YEE SOONExecutive Chairman

vision & mission statements

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OUR VISION

OUR MISSION

OUR VALUESAn obsession with satisfying our customer’s needs

A commitment to business excellence;• through innovation • values creation • speed

A family friendly and result oriented workenvironment;• deep mutual respect & teamwork• strong sense of personal accountability• fairness, integrity & care

We aspire:

To enhance total wellness and quality of life through the provision of superiorservices and products for health and beauty

To unleash our passion and creativity to anticipate and satisfy our customer’sneeds

To turn superior understanding of consumers, business partners and thecompetition into growth of revenue, share and brand equity

To achieve sustainable long term growth and profitability in order that we cancontinue to satisfy the needs of our customers, employees, shareholders, suppliersand community

“To be the leading company offering the best services andproducts to enhance the quality of life of people aroundthe world”