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BOARD OF DIRECTORS Dr Lee Keng Thon, Non-Executive Group Chairman Col (Ret) Rodney How Seen Shing, Independent

Non-Executive Director Mr Ng Kok Lip, Independent Non-Executive Director Prof. Pang Eng Fong, Independent Non-Executive Director Mr Lee Khin Tien, Non-Executive Director Mr Lee Kin Hong, Non-Executive Director AUDIT COMMITTEE Col (Ret) Rodney How Seen Shing (Chairman) Mr Ng Kok Lip Prof. Pang Eng Fong Mr Lee Khin Tien REMUNERATION COMMITTEE Prof. Pang Eng Fong (Chairman) Col (Ret) Rodney How Seen Shing Mr Ng Kok Lip Mr Lee Khin Tien

C O M PA N Y P R O F I L E

NOMINATING COMMITTEE Mr Ng Kok Lip (Chairman) Col (Ret) Rodney How Seen Shing Prof. Pang Eng Fong Mr Lee Khin Tien COMPANY SECRETARY Sharon Yeoh (Ms) Wong Siew Choo (Mrs) SHARE REGISTRAR B.A.C.S. Private Limited 63 Cantonment Road Singapore 089758 Tel : (65) 6593 4848 Fax : (65) 6593 4847 Email : main@bacs.com.sg REGISTERED OFFICE 36 Newton Road Singapore 307964 Tel : (65) 6426 0168 Fax : (65) 6256 2710 Email : royal@hotelroyal.com.sg AUDITORS Deloitte & Touche LLP Certied Public Accountants Singapore 6 Shenton Way #32-00 DBS Building Tower Two Singapore 068809 Tel : (65) 6224 8288 Fax : (65) 6538 6166 Audit Partner-in-Charge Kee Cheng Kong, Michael Appointed on 11 August 2007 PRINCIPAL BANKERS Oversea-Chinese Banking Corporation Limited United Overseas Bank Limited DBS Bank Limited Bank of New Zealand Limited Credit Suisse Company Reg. No: 196800298G

Contents
Chairmans Message Board of Directors Senior Management Report on Corporate Governance Risk Factors and Risk Management Report of the Directors Statement of Directors Independent Auditors Report Statements of Financial Position Consolidated Profit and Loss Statement Consolidated Statement of Comprehensive Income Statements of Changes in Equity Consolidated Statement of Cash Flows Notes to Financial Statements Schedule of the Groups Major Properties Statistics of Shareholdings Five Year Group Financial Statistics Notice of Annual General Meeting Proxy Form 2 4 6 7 18 20 23 24 25 27 28 29 30 32 77 78 81 82

Annual Report 2011

Chairmans Message
Dear Shareholders, On behalf of your Board of Directors, I am pleased to present the Groups annual report for the financial year ended 31 December 2011. Operations and Financial Review 2011 had been an eventful year, with natural disasters such as earthquake and tsunami in Japan and massive floods in Thailand in the third quarter. This has resulted in disruption of supply chains across industries and led to a slow-down in the regional economy. Furthermore, the euro zone debt crisis in Europe and slow economic recovery in United States all added to the economic uncertainty, and had a dampening effect on tourist arrivals to Singapore. The Groups profit before income tax for 2011 decreased by 17.4% or S$1.996 million from S$11.467 million in 2010 to S$9.471 million in 2011 mainly due to the expenses relating to the acquisition of White Orchid Hotel in Bangkok of S$0.450 million and impairment loss on the investment property in New Zealand of S$2.460 million. However, the Groups profit after income tax increased in 2011 as compared with 2010 mainly due to additional deferred tax liability of S$5.075 million being recognised by Grand Complex Properties Limited in New Zealand in 2010, which was absent in 2011. The increase in deferred tax expense arose from a change in the tax regulations in New Zealand which disallowed the Groups New Zealand subsidiary from claiming tax deduction for the remaining depreciation for the estimated useful life of the building effective from year of assessment 2012. Outlook for 2012 The Group expects a slower year in 2012 due to the economic uncertainties in Europe. We continue to closely monitor our room occupancy and room rates for the Groups hotel segment, so that we are able to react swiftly to any changes in the operating environment. The current uncertain economic outlook may have an adverse affect on New Zealands commercial leasing market and that of the Groups investment property, Grand Complex, in Wellington. Meanwhile, the subsidiary is actively marketing its vacant premises so as to maximise rental income. The current economic uncertainties in Europe will also have an impact on the Groups managed fund portfolio. In addition to the above, the Groups profitability will continue to be influenced by the performance of the NZD, USD and RM against the SGD, the changes in the market value of our investment trading portfolio and the investment income from our total investment portfolio. Other Developments With the completion of the Royal Residences (formerly known as Star Mansions) at 1A Surrey Road, Singapore, which will be held as a long-term investment, the Group looks forward to marketing the units for recurring rental income.

Chairmans Message
The Group will embark on the renovations plans to increase room count and also to upgrade the existing rooms and food and beverages facilities for Hotel Royal Kuala Lumpur (previously known as The Hotel Coronade Kuala Lumpur) during the second quarter of 2012. Planning approval from the relevant authorities was received towards the end of 2011. The Group is looking into the upgrading of the recently acquired White Orchid Hotel in Bangkok. Our architect is presently studying the hotel layout and working on the design for the proposed upgrading works. Net Tangible Asset Per Share Based on directors estimate, the total market value of the Groups hotel and investment properties as at 31 December 2011 was about S$566.7 million as compared to their total net book value of S$406.3 million. The unrecorded revaluation surplus (net of tax effect) amounted to S$133.6 million. Had this revaluation surplus (net of tax effect) been included in the net asset value, the net asset (after revaluation) would have increased from S$3.98 to S$5.57 per share as at 31 December 2011. Proposed Dividend The Board of Directors recommends a one-tier tax exempt first and final dividend of five cents per share amounting to S$4.2 million. A Word of Appreciation I wish to express my utmost appreciation to our valued shareholders for your continuous support. I also thank our loyal customers and business partners for their staunch support and assistance. In addition, I wish to thank the management and staff for their dedicated services during the year and look forward to their consistent excellent service to our guests. Last but not least, I would like to thank my fellow directors for their invaluable guidance and contribution.

Dr Lee Keng Thon Chairman 19 March 2012

Board of Directors
Dr Lee Keng Thon Dr Lee Keng Thon, aged 68, was appointed to the Board of Directors on 8 September 1971. He was last re-elected as a director on 24 April 2010 and was appointed the Chairman of the Company on 29 April 2006. Dr Lee is a director of Aik Siew Tong Limited, Melodies Limited and SingaporeJohore Express (Private) Limited with businesses in real estate, bus transportation and plantation. He is a medical graduate from University of Sydney with a private medical practice.

Col (Ret) How Seen Shing Col (Ret) Rodney How, aged 69, was appointed to the Board on 26 February 1986 and is currently the Chairman of the Audit Committee and a member of the Nominating and the Remuneration Committees. He was last re-elected as a director on 30 April 2011. He previously served in the Singapore Armed Forces as Commander of Central Manpower Base (CMPB), Director of Employment Dept, Commanding Officer of Fourth Infantry Battalion, and Assistant Chief of the GENERAL STAFF (INTELLIGENCE). Col (Ret) Rodney How was also previously a Board Member of the International Ship Suppliers Association and President of the Singapore Association of Ship Suppliers. He graduated from Sydney University with a Bachelor of Arts (Public Administration).

Ng Kok Lip Ng Kok Lip, aged 70, was appointed to the Board of Directors on 1 January 2003 and is the Chairman of the Nominating Committee and a member of the Audit and Remuneration Committees. He was last re-elected as a director on 25 April 2009. He is the Managing Director of Beng Kim Holdings Pte Ltd. He graduated from the University of California, Berkeley with a M.A. and from the University of Singapore with a Bachelor of Science (Hons). Before joining the Group, Mr. Ng was with the University of Singapore as a lecturer and was the Managing Director of National Kap Ltd from 1970-1999.

Board of Directors
Pang Eng Fong Pang Eng Fong, aged 68, was appointed to the board of directors on 5 December 2011. He is a professor (practice) in the Lee Kong Chian School of Business, Singapore Management University. He graduated in economics from the University of Singapore and holds a Ph.D from the University of Illinois. He has served as head of Singapores diplomatic missions in Seoul, Brussels and London.

Lee Khin Tien Lee Khin Tien, aged 60, was appointed to the Board of Directors on 31 December 1996 as a non-executive director. He is a member of the Audit, Nominating and Remuneration Committees. He was last re-elected as a director on 24 April 2010. Lee Khin Tien is a director of Aik Siew Tong Limited, Melodies Limited and Singapore-Johore Express (Private) Limited with businesses ranging from real estate, bus transportation and plantation. He has more than 20 years of experience in real estate and plantation business. He graduated from Nanyang University with a Bachelor of Science (Biology).

Lee Kin Hong Lee Kin Hong, aged 58, was appointed to the Board of Directors on 21 June 2002 as a non-executive director. He was last re-elected as a director on 30 April 2011. He is currently the Managing Director of Singapore-Johore Express (Private) Limited and has more than 20 years of experience in managing commercial, industrial and residential projects. He graduated from the National University of Singapore with a Bachelor of Science (Building) and Master of Science (Project Management). He is also a member of the Singapore Institute of Building.

Senior Management
Lee Chin Chuan Adviser Lee Chin Chuan, aged 80, was appointed to the Board of Directors on 10 July 1968 and had held the position of Managing Director, Chairman and Executive Chairman of the Group until his retirement as a director on 29 April 2006. He was appointed as the Group Adviser on 29 April 2006. Lee Chin Chuan PBM is also the founder of the Company and sits on the board of many companies including Aik Siew Tong Limited, Melodies Limited, Man Won Co. Ltd. (Hong Kong) and Singapore-Johore Express (Private) Limited with businesses ranging from real estate, plantation and bus transportation. He has been in the real estate business since 1954 and has been appointed as the Hon. Patron of Real Estate Developers Association of Singapore. He is also currently the Hon. Council Member of Singapore Chinese Chamber of Commerce and Industry and Hon. Chairman of Singapore Lee Clan Association and Singapore Hin Ann Huay Kuan. Lee Chou Hock Chief Executive Officer Lee Chou Hock joined Hotel Royal Ltd in 1985 is presently the Chief Executive Officer of the Company. He is responsible for the management of the day to day operations of the Company and its investments in the subsidiaries. Prior to joining Hotel Royal, he was with a public accounting firm in Singapore. He holds a Bachelor of Accountancy from the University of Singapore and a Master of Business Administration (Hospitality & Tourism Management) from Nanyang Technological University. George Lee Chou Hor General Manager of Groups Key Subsidiaries George Lee Chou Hor joined the Group in 1993 and is the General Manager/Director of the Groups key subsidiaries, namely Royal Properties Investment Pte Ltd, Royal Capital Pte Ltd, Castle Mall Properties Pte Ltd and Grand Complex Properties Ltd (New Zealand). His primary responsibilities are real estate and capital market investments evaluation and acquisition, and asset planning and management for the Group. His prior working experiences included the Singapore Airlines Group and the Housing and Development Board. He holds a Bachelor of Business Administration (Hons) and Master of Business Administration from Schulich School of Business (York University, Toronto, Canada), a Master of Science (Real Estate) from the National University of Singapore and a Master of Professional Accounting from the Singapore Management University. Tay Kok Liang Group Financial Controller Tay Kok Liang is responsible for the Groups accounting and taxation functions. She joined the Group in 1975. She holds a Bachelor of Accountancy from the University of Singapore and is a member of the Institute of Certified Public Accountants of Singapore. Wong Siew Choo Group Revenue Controller Wong Siew Choo is responsible for the treasury functions and credit control of the Group. She joined the Group in 1973. Prior to joining the Group, she had accumulated experiences in accounting and purchasing. Lee Chu Bing General Manager Lee Chu Bing joined the Group in 2004 in the Sales & Marketing Department and also assisted in the leasing of the Groups investment properties. He was appointed the General Manager of Hotel Royal @ Queens (Singapore) Pte Ltd in April 2007. He holds a Bachelor of Arts from the National University of Singapore.

Report on Corporate Governance


Preamble The Board of Directors of Hotel Royal Limited (the Company) is pleased to confirm that it has adhered to the following corporate principles and guidelines tailored to the specific needs of the Company set out in the Code of Corporate Governance 2005 (the Code). These principles and guidelines reflect the Boards commitment in having effective self-regulatory corporate practices to safeguard the interests of its shareholders and maximising long-term shareholders value. The Board believes that these guidelines should be an evolving set of corporate governance principles, subject to the specific needs of the Company and subject to modification as circumstances may warrant. 1. 1.1 BOARD MATTERS The Boards Conduct of its Affairs

Principle 1: Every company should be headed by an effective Board to lead and control the company. The Board is collectively responsible for the success of the company. The Board works with Management to achieve this and the Management remains accountable to the Board. The primary responsibilities of the Board of Directors encompass the following:

To provide strategic direction and decision-making pertaining to the Groups activities that are of significant nature and approve periodic plans as well as major investments and divestments; To oversee the business and affairs of the Company, and working with management, establish strategic directions and financial goals to be implemented by management as well as monitoring the performance of management; To oversee the evaluation of the adequacy of internal controls, risks management, financial reporting and compliance, and satisfy itself as to the sufficiency of such processes; and To be responsible for the overall corporate governance of the Group.

The Company requires the approval from the Board for material new investments or increase in investments in businesses of subsidiaries, projects or fixed assets and any divestments or sales by any company in the Group. Other aspects which require the approval of the Board include all material commitments to term loans and lines of credit from banks and financial institutions by the Company. Each Board member exercises equal responsibility in overseeing the business and affairs of the Company. The Board meets quarterly and as and when deems necessary. To cater to urgent substantial matters, however, the Board may convene on an ad-hoc basis. The Board of Directors held four meetings in total for the financial year ended 31 December 2011.

Report on Corporate Governance


The directors attendance at those meetings are as follows: During 2011, the Board held four meetings: Director Dr Lee Keng Thon Col (Ret) Rodney How Seen Shing Ng Kok Lip Lee KhinTien Lee Kin Hong Goh Kok Yeow * During 2011, the Audit Committee held four meetings: (a) Col (Ret) Rodney How Seen Shing Ng Kok Lip Lee Khin Tien Goh Kok Yeow * During 2011, the Nominating Committee held two meetings: (a) Col (Ret) Rodney How Seen Shing Ng Kok Lip Lee Khin Tien Goh Kok Yeow * 2 2 2 1 (b) 2 2 2 1 Percentage (%) 100% 100% 100% 100% 4 4 4 1 (b) 4 4 4 1 Percentage (%) 100% 100% 100% 100% (a) 4 4 4 4 4 1 (b) 4 4 4 4 4 1 Percentage (%) 100% 100% 100% 100% 100% 100%

During 2011, the Remuneration Committee held one meeting: (a) Ng Kok Lip Col (Ret) Rodney How Seen Shing Lee Khin Tien Goh Kok Yeow * * Resigned on 30 April 2011 Notes: (a) Number of meetings held while a director (b) Number of meetings attended
8

(b) 1 1 1 0

Percentage (%) 100% 100% 100% NA

1 1 1 0

Report on Corporate Governance


Directors are informed of and encouraged to attend relevant courses conducted by the Singapore Institute of Directors, Singapore Exchange Limited and relevant business and financial consultants. During the year, the Company secretary conducted detailed briefing on new disclosure listing requirement at Board meetings. 1.2 Board Composition and Guidance

Principle 2: There should be a strong and independent element on the Board, which is able to exercise objective judgement on corporate affairs independently, in particular, from Management. No individual or small group of individuals should be allowed to dominate the Boards decision making. The Board believes that it should generally have at least 5 members and not more than 9 directors. This range permits a good mix of experiences without hindering effective deliberation. At present, the Board comprises 6 directors of whom 3 are considered independent by the Nominating Committee in accordance with the definition of independence in the Code. The Board collectively possesses the core competencies, appropriate mix of expertise and experience for effective functioning and decision. The composition of the Board is as follows:-

Director Dr Lee Keng Thon Col (Ret) Rodney How Seen Shing Ng Kok Lip Professor Pang Eng Fong Lee Khin Tien Lee Kin Hong Goh KokYeow * * Resigned on 30 April 2011

Board Membership Non-Executive Group Chairman

Committee Membership Audit Nominating Remuneration

Independent Non-Executive Director Chairman Independent Non-Executive Director Member Independent Non-Executive Director Member Non-Executive Director Non-Executive Director Independent Non-Executive Director Member Member

Member Chairman Member Member

Member Member Chairman Member

Chairman

Member

Other than directorships in the Company, none of the directors hold directorships in other listed company for both current and preceding 3 years. 1.3 Chairman and Chief Executive Officer

Principle 3: There should be a clear division of responsibilities at the top of the company the working of the Board and the executive responsibility of the companys business which will ensure a balance of power and authority, such that no one individual represents a considerable concentration of power. The Non-Executive Chairman and the Chief Executive Officer (CEO) are separate appointments. The CEO, Lee Chou Hock, is the nephew of the Non-Executive Chairman, Dr Lee Keng Thon.

Report on Corporate Governance


The Non-Executive Chairmans roles in relation to Board matters are as follows: (a) (b) (c) (d) 1.4 To schedule meetings that enable the Board to perform its duties responsibly while not interfering with the flow of the Companys operations; To prepare meeting agenda in consultation with the CEO; To exercise control over quality, quantity and timeliness of the flow of information between Management and the Board; and To assist in ensuring compliance with Companys guidelines on corporate governance. Board Membership

Principle 4: There should be a formal and transparent process for the appointment of new directors to the Board. The Nominating Committee The Nominating Committee consists of four directors; namely, Ng Kok Lip (Chairman of the Nominating Committee), Col (Ret) Rodney How Seen Shing, Professor Pang Eng Fong and Lee Khin Tien. The terms of reference of the Nominating Committee include the following: (a) (b) (c) (d) (e) (f) (g) To recommend appointment and re-appointment of directors; To review the proficiency or expertise required by the Board annually and the size of the Board; To review the independence of each director and ensure that the Board consists of at least one-third of independent directors; To assess the capabilities of the director in the execution of his work if he has multiple board representation; To establish measures for evaluating the performance of the Board; To conduct annual assessment on the effectiveness of the Board; and To report to the Board.

Directors will submit themselves for re-election at regular intervals of at least once every three years. Pursuant to Article 117 of the Companys Articles of Association, one-third of the directors retires from office at the Companys Annual General Meeting. In addition, Article 102 of the Companys Articles of Association provides that a newly appointed director must submit himself for re-election at the Annual General Meeting following the appointment. In identifying suitable candidates and in recommending new Board members to ensure continuity of Board talent, some of the criteria used for selection of Board member are diversity of competencies, track record of good decision-making, integrity, independent mindedness, ability to commit time and effort to the Board, experience in high-performing companies and financial literacy. The Nominating Committee may seek advice from external search consultants where necessary. The Nominating Committee has reviewed the independence of Col (Ret) Rodney How Seen Shing, Ng Kok Lip and Professor Pang Eng Fong and is satisfied that there are no relationships which would deem any of them not to be independent. In reviewing their independence, the Nominating Committee has considered the relationships identified by the Code and additionally the independent directors are also independent of substantial shareholders of the Company.
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Details of the year of initial appointment and last re-election of the directors are appended below: Name Dr Lee Keng Thon Col (Ret) Rodney How Seen Shing Ng Kok Lip Professor Pang Eng Fong Lee KhinTien Lee Kin Hong Age 68 69 70 69 60 58 Position Non-Executive Chairman Director Director Director Director Director Date of Initial Appointment 08.09.1971 26.02.1986 01.01.2003 05.12.2011 31.12.1996 21.06.2002 24.04.2010 30.04.2011 Date of Last re-election 24.04.2010 30.04.2011 25.04.2009

The Nominating Committee held two meetings during the financial year ended 31 December 2011. 1.5 Board Performance

Principle 5: There should be a formal assessment of the effectiveness of the Board as a whole and the contribution by each director to the effectiveness of the Board. We believe that the Boards performance is ultimately reflected in the performance of the Group. The Board ensures compliance with applicable laws and Board members act in good faith, with due diligence and care in the best interests of the Company and its shareholders. In addition to these fiduciary duties, the Board is charged with two key responsibilities: setting strategic directions and ensuring that the Company is ably led. The measure of a Boards performance is also tested through its ability to lend support to management especially in times of crisis and to steer the Group in the right direction. The financial indicators set out in the Code as guides for the evaluation of directors are, in our opinion, more of a measure of managements performance and hence are less applicable to directors. In any case, such financial indicators provide a snapshot of a companys performance, and do not fully measure the sustainable long-term wealth and value creation of the Company. The Board through the delegation of its authority to the Nominating Committee, has used its best efforts to ensure that directors appointed to our Board possess the background, experience and knowledge in technology, business, finance and management skills critical to the Companys business and that each director with his special contributions brings to the Board an independent and objective perspective to enable balanced and well-considered decisions to be made. The Board has implemented a process for assessing the effectiveness of the Board as a whole and for assessing the contribution by directors to the effectiveness of the Board. During the financial year, all directors were requested to complete a questionnaire to assess the overall effectiveness of the Board. The results of the questionnaire are first reviewed by the Nominating Committee, tabled as an agenda for Boards discussion to determining areas for improvement and enhancement. Renewal or replacement of Board members when it occurs, do not necessarily reflect their contributions to date, but may be driven by the need to position and shape the Board in line with the medium term needs of the Company and its business. 1.6 Access to Information

Principle 6: In order to fulfil their responsibilities, board members should be provided with complete, adequate and timely information prior to board meetings and on an on-going basis.
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Report on Corporate Governance


The Company recognises the importance of continual dissemination of relevant information which are explicit, accurate, timely and vital to the Board in carrying its duties. As such, the Board expects management to report the Companys progress and drawbacks in meeting its strategic business objectives or financial targets and other information relevant to the strategic issues encountered by the Company in a timely and accurate manner. In exercising their duties, the directors have unrestricted access to the Companys management and independent auditors. Directors have separate and independent access to the Company Secretary. The Company Secretary is responsible for ensuring that board procedures are followed and that applicable rules and regulations are complied with. All new directors are oriented by senior management with the Companys operations, its significant financial, accounting and risk management issues, its principal officers and its independent auditors. All directors are also encouraged to attend, at Companys expense, directors continuing education programs offered by various organisations. Professional advices are sought by the Board when necessary to enable the Board or its independent directors to carry out their roles effectively. Individual directors may obtain professional advice to assist them in the execution of their tasks subject to the approval from the Chairman, at the Companys expense. 2. 2.1 REMuNERATION MATTERS Procedures for Developing Remuneration Policies

Principle 7: There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration. The Remuneration Committee comprises four directors; namely Professor Pang Eng Fong, (Chairman of the Remuneration Committee), Col (Ret) Rodney How Seen Shing, Ng Kok Lip and Lee Khin Tien. Where necessary, the Committee can engage professional help from external consultants in areas of executive compensation. The Remuneration Committee held one meeting during the financial year ended 31 December 2011 and executed the following in consultation with the Chairman: (a) (b) (c) Made recommendations to the Board a framework of remuneration for the Board members as well as key executives; Determined specific remuneration packages for each non-executive director and the Chief Executive Officer; and Reviewed the terms, conditions and remuneration of the senior executives of the Company.

The Remuneration Committees objective is to motivate and retain proficient executives and ensure that the Company is able to attract competent staff in the market to maximise shareholders value. The review covers all areas of remuneration, including but not limited to directors salaries, fees, bonuses, allowances and benefits-in-kind. No director is involved in deciding his own remuneration. 2.2 Level and Mix of Remuneration

Principle 8: The level of remuneration should be appropriate to attract, retain and motivate the directors needed to run the company successfully but companies should avoid paying more than is necessary for this purpose. A significant proportion of executive directors remuneration should be structured so as to link rewards to corporate and individual performance.
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Report on Corporate Governance


The Remuneration Committee has recommended a framework of remuneration for the Board members and key management executives. The details are as follows: Board members The directors fees paid to the directors are based on the number of meetings attended during the year, subject to a minimum sum. The Chairman of the Board and the sub-committees will receive an additional Chairmans allowance of 100% of the directors fees of the main Board and 50% of the directors fees of the sub-committees respectively. The directors fees are recommended by the Board for approval at the Companys Annual General Meeting. Senior Executives Senior executive remuneration consists of three parts: 1. Base or fixed remuneration This element reflects the scope of the job and the level of skill and experience of the individuals. 2. Variable for performance related income/bonuses This is paid depending on the annual performance of the Company and its subsidiaries. It usually takes the form of an end of the year ex-gratia payment. 3. Directors fees in subsidiaries Some of the executives are directors of the subsidiaries and receive directors fees. 2.3 Disclosure on Remuneration

Principle 9: Each company should provide clear disclosure of its remuneration policy, level and mix of remuneration, and the procedure for setting remuneration, in the companys annual report. It should provide disclosure in relation to its remuneration policies to enable investors to understand the link between remuneration paid to directors and key executives, and performance. The breakdown of remuneration of the directors of the Company for the financial year ended 31 December 2011 is as follows: Annual Remuneration Report Remuneration of directors for the year ended 31 December 2011 Variable for performance related income/bonuses Directors Fees (including subsidiaries)

Remuneration Band & Name of Director Below S$60,000 Dr Lee Keng Thon Col (Ret) Rodney How Seen Shing Ng Kok Lip Lee Khin Tien Lee Kin Hong Goh Kok Yeow * * resigned on 30 April 2011

Base/Fixed salary

100% 100% 100% 100% 100% 100%

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Report on Corporate Governance


Details of remuneration paid to key executives of the Group (who are not directors of the Company) for the financial year ended 31 December 2011 are set out below: Remuneration Band & Name of Executive S$300,000 to below S$350,000 Lee Chou Hock George Lee Chou Hor Below S$200,000 Lee Chin Chuan Tay Kok Liang Wong Siew Choo Lee Chu Bing 87% 94% 100% 83% 13% 6% 17% 80% 79% 16% 17% 4% 4% Base/Fixed salary Variable for performance related income/bonuses Directors Fees (including subsidiaries)

Lee Chou Hock (Chief Executive Officer) and George Lee Chou Hor (General Manager, Subsidiaries) are the nephews of the Non-Executive Chairman, Dr Lee Keng Thon and Non-Executive Directors, Lee Khin Tien and Lee Kin Hong. Their annual remuneration exceeded S$300,000 during the year. Lee Chu Bing is the son of Dr Lee Keng Thon. Tay Kok Liang is the niece and Wong Siew Choo is the sister of Dr Lee Keng Thon respectively. Lee Chin Chuan, Lee Khin Tien and Lee Kin Hong are brothers of the Non-Executive Chairman, Dr Lee Keng Thon. 3. 3.1 ACCOuNTABILITY AND AuDIT Accountability

Principle 10: The Board should present a balanced and understandable assessment of the companys performance, position and prospects. The Board believes that it should conduct itself in ways that deliver maximum sustainable value to its shareholders. Prompt fulfillment of statutory requirements is one of the ways to maintain shareholders confidence and trust in the Boards capability and integrity. Management is responsible to the Board and the Board itself is accountable to the shareholders. The Management will provide the Board with detailed management accounts which present a balanced and understandable assessment of the Groups performance, position and prospects on a quarterly basis. The Management also presents to the Board quarterly, and full year financial results of the Group and the Audit Committee reports to the Board on the results for review and approval. The Board approved the results after review and authorised the release of the quarterly and full year financial results of the Group to the SGX-ST and the public via SGXNET. Annual general meetings are held every year to obtain shareholders approval to routine business, as well as the election of directors. In addition to its statutory responsibilities, the Board also ensures that the principal risks of the Companys business are identified and appropriately managed.
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3.2 Audit Committee

Principle 11: The Board should establish an Audit Committee with written terms of reference which clearly set out its authority and duties. Members of the Audit Committee comprise four directors; namely Col (Ret) Rodney How Seen Shing (Chairman of the Audit Committee), Ng Kok Lip, Professor Pang Eng Fong and Lee Khin Tien. The Audit Committee held four meetings during the financial year ended 31 December 2011 and performed the following functions: (a) Reviewed with management and the external auditors on audit plans and the areas to be audited on pertaining to external audit, financial and operating results, internal controls, accounting policies as well as other significant matters; Reviewed the assistance rendered to the external auditors by the Companys officers; Reviewed the annual financial statements, inclusive of quarterly announcements to shareholders and SGX-ST prior to submission to the Board of Directors for approval; Performed annual review of the independence and objectivity of the external auditors; Recommended the appointment or re-appointment of external and internal auditors and remuneration of the external and internal auditors; Reviewed the scope and extent of non-audit services performed by external auditors; Held meetings annually with both external and internal auditors without the presence of management; Reviewed the adequacy of the Companys internal controls; Reviewed the efficiency and effectiveness of internal audit function; and Reviewed interested person transactions, if any.

(b) (c) (d) (e) (f) (g) (h) (i) (j)

The Audit Committee has full access to and co-operation of the management and has been given the resources required for it to discharge its function properly. It also has full discretion to invite any director and executive officer to attend its meetings. The external auditors have unrestricted access to the Audit Committee. The Companys internal audit function has been outsourced to Philip Liew & Co. Both the external and internal auditors report directly to the Audit Committee their findings and recommendations. The Audit Committee, having reviewed the scope and value of non-audit services provided to the Company and Group by the external auditors, are satisfied that the nature and extent of such services will not prejudice the independence and objectivity of the external auditors. The Audit Committee is satisfied that the appointment of external auditors is in compliance with the requirements of Rule 712 and 715 of the SGX-ST Listing Manual. Accordingly, the Audit Committee has recommended to the directors the nomination of Deloitte & Touche LLP for re-appointment as external auditors of the Company at the forthcoming annual general meeting. Rule 716 of the Listing Manual of the SGX-ST is not applicable as the same auditing firm is appointed for Hotel Royal Limited and its subsidiaries. The Audit Committee has established the whistle-blowing policy in which serious matters relating to financial reporting, illegal or unethical conduct can be reported directly to the Chairman of the Audit Committee for appropriate actions. A whistle-blowing policy which has been endorsed by the Audit committee has been put in place. Under the policy, employees of the Group can in confidence, raise concerns about improper conduct for investigation. For the year ended 31 December 2011, the Company paid S$38,000 for non-audit services provided by the external auditors.
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3.3 Internal Control

Principle 12: The Board should ensure that the Management maintains a sound system of internal controls to safeguard the shareholders investments and the companys assets. The Board is satisfied that the Group has in place internal controls and systems designed to provide reasonable assurance in safeguarding assets and that proper accounting records are maintained, and in ensuring financial information used with the business and for publication is reliable. The external and internal auditors conducted annual review to assess the risk profile including the review on the adequacy of the internal controls, addressing financial, operational and compliance risks. Such review also assess whether there was reasonable assurance regarding the effectiveness and efficiency of operations, reliability of management and financial reporting, and compliance with internal policies. Any material non-compliance or lapses in internal controls together with corrective measures are reported to Audit Committee. The timely and proper implementation of all required corrective, preventive or improvement measures are closely monitored. In addition, the Audit Committee, together with the Board, reviewed the effectiveness of the Groups system of internal control put in place to address key financial, operational and compliance risks affecting the operations. Based on the reports submitted by the external and internal auditors and the various management controls put in place, the Board with the concurrence of the Audit Committee is satisfied that the internal control systems provide reasonable assurance that assets are safeguarded and that proper accounting records are maintained and financial statements are reliable. The Board acknowledges that it is responsible for the overall internal control framework. It recognises that a reliable internal control system is designed to provide reasonable assurance, but is not an absolute guarantee, against material misstatement or loss. 3.4 Internal Audit

Principle 13: The company should establish an internal audit function that is independent of the activities it audits. The Company has engaged a public accounting company, Philip Liew & Co., to perform the internal audit function. The internal auditors adopt the Standards for the Professional Practice of Internal Auditing set by the Institute of Internal Auditors. The internal auditors report directly to the Audit Committee, with full and direct access to the members of the Audit Committee at all times. Their duties encompass reviewing the Groups material internal controls consisting of financial, operational and compliance controls as well as risk management. The internal audit comprises all areas of operations. 4. 4.1 COMMuNICATION WITH SHAREHOLDERS Communication with shareholders

Principle 14: Companies should engage in regular, effective and fair communication with shareholders. In line with the continuous disclosure obligations of the Company pursuant to the Singapore Exchange Listing Rules and the Singapore Companies Act, it is the Boards policy to ensure that all shareholders are informed regularly and on a timely basis of every significant development that impact on the Group. Pertinent information is communicated to shareholders on a regular and timely basis through the following means:

The Companys annual reports;

16

Report on Corporate Governance


Notices of and explanatory memoranda for annual general meetings and extraordinary general meetings; Announcements of quarterly and full-year financial statements containing a summary of the financial information and affairs of the Group for the period. These are disclosed on SGXNET; Other announcements, where appropriate; Press releases regarding major developments of the Group; and Disclosures to the Singapore Exchange Securities Trading Limited. Greater Shareholder Participation

4.2

Principle 15: Companies should encourage greater shareholder participation at annual general meetings, and allow shareholders the opportunity to communicate their views on various matters affecting the company. Shareholders are encouraged to be present at annual general meeting in person so that face-to-face communication can best be achieved. The annual general meeting is the principal forum for dialogue with shareholders. Thus, with greater shareholders participation, it will ensure that they will be kept up to date as to the Groups long-term strategies and goals. In addition, the Chairmen of the Board Committees as well as the external auditors are also present in the meeting to assist in addressing any appropriate queries from the shareholders. The Board will ensure that there should be separate resolutions at general meetings on each substantially separate issue and adhere to the Codes principle with regards to the bundling of resolutions. In the event that bundled resolutions cannot be avoided whereby such resolutions are interdependent and linked so as to form one significant proposal, the Board will provide reasons and material implications. ADDITIONAL INFORMATION 5. DEALING IN SECuRITIES

The Group has adopted an internal code which prohibits the directors and key executives of the Group from dealing in the Companys share during the period of two weeks and one month immediately preceding the announcement of the Companys quarterly and full-year results respectively or if they are in possession of unpublished price-sentitive information of the Group. In addition, directors and key executives are expected to observe insider trading laws at all times even when dealing in securities within the permitted trading period. They are also discouraged from dealing in the Companys shares on short-term considerations. 6. MATERIAL CONTRACTS

There are no material contracts (including loans) of the Company or its subsidiaries involving the interests of the Chief Executive Officer or any director or controlling shareholder subsisted at the end of the financial year or have been entered into since the end of the previous financial year. 7. INTERESTED PERSON TRANSACTIONS

The Company has established procedures to ensure that all transactions with interested persons are reported in a timely manner to the Audit Committee and that transactions are conducted on an arms length basis and are not prejudicial to the interests of the shareholders. The Companys disclosure in accordance with Rule 907 of the Listing Manual of the SGX-ST in respect of the interested person transaction for the financial year ended 31 December 2011 is set out on page 53 of this Annual Report.

17

Risk Factors and Risk Management


Financial risks The Groups activities expose it to a variety of financial risks, including the effects of changes in debt and equity market prices, foreign currency exchange rates and interest rates. The Group may use derivative financial instruments such as interest rate swap to hedge certain exposures. The Group does not hold or issue derivative financial instruments for speculative purposes. 1. Credit risk The Groups credit risk is primarily attributable to its cash and bank balances, trade and other receivables and investments. Cash and fixed deposits are placed with creditworthy financial institutions. The trade and other receivables presented in the statement of financial position are net of allowances for doubtful receivables, estimated by management based on prior experience and the current economic condition. Investments are also subject to credit risk, which have been factored in the determination of their fair values. The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers. The carrying amounts of financial assets recorded in the financial statements, grossed up for any allowances for losses, represents the Groups maximum exposure to credit risk. 2. Interest rate risk The Group is exposed to interest rate risk through the impact of rate changes on interest rate bearing liabilities and assets. Those exposures are managed as far as possible by using natural hedges that arise from offsetting interest rate sensitive assets and liabilities. Further information related to interest rate and maturities of bank loans is disclosed in Notes 16 and 20 to the financial statements. 3. Foreign currency risk The Group has investments in funds under management of certain banks and cash deposits which are exposed to foreign exchange risk arising from the exchange rate movements of the United States dollar, the Euro, the Australian dollar, the Great Britain pound, the Malaysian ringgit, the Hong Kong dollar and the Thai baht vis--vis the Singapore dollar. In addition, the Group is exposed to currency translation risk as it has significant subsidiaries operating in Malaysia, New Zealand and Thailand. For the year ended 31 December 2011, approximately 12% (2010 : 13%) is denominated in Malaysian ringgit, approximately 11% (2010 : 12%) of the Groups net assets is denominated in New Zealand dollar and approximately 2% (2010 : nil) of the Groups net assets is denominated in Thai baht. 4. Price risk The Group is exposed to price risks arising from its investments classified as held-for-trading and available-for-sale. These investments include equity shares, and instruments whose fair values are subject to volatility in equity prices, commodity prices or real estate prices. Further details of these investments can be found in Notes 7 and 8 to the financial statements. 5. Liquidity risk Liquidity risk reflects the risk that the Group will have insufficient resources to meet its financial liabilities as they fall due.

18

Risk Factors and Risk Management


As at 31 December 2011, total current liabilities exceeded total current assets by $15.2 million (2010 : $5.3 million) for the Company. This is mainly due to some of the Companys bank loans being arranged on short-term revolving basis, as the interest rates are more favourable. Management assesses the availability of credit facilities and compliance with loan covenants on an on-going basis and no matters have been drawn to its attention that the roll-over of the short-term financing may not be forthcoming or that covenants have been breached. The Group and the Company have unutilised credit facilities totalling $139.4 million (2010 : $138.9 million) and $102.4 million (2010 : $105.1 million) respectively. 6. Capital risk The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of debt, which includes the bank borrowings disclosed in Notes 16, 18 and 20, and equity comprising share capital disclosed in Note 22, reserves and retained earnings. The Group reviews the capital structure on an annual basis. As a part of this review, the Group considers the cost of capital and the risks associated with each class of capital. The Group seeks to balance its overall capital structure through the payment of dividends, new share issues and share buy-backs as well as the obtaining of new debts, refinancing or redemption of existing debts. The Groups overall strategy remains unchanged from 2010. The bank loans require the Group to comply with certain financial covenants with respect of the market values of asset collaterals, and there has been no non-compliance with these externally imposed capital requirements during the year. General business risks The Groups businesses are subject to general business risks. They are as follows: a. b. c. d. War and terrorism, and its adverse effect on business; The spread of contagious diseases and their adverse effect on tourist arrivals; Global recession and its effect on the performance of the local economy; and Changes in government regulations that burden the Groups operating costs or restrict business.

It is recognised that such risks can never be eliminated totally and that the cost controls in minimising these risks may outweigh their potential benefits. Accordingly the Group continues to focus on risk management and incident management. Where appropriate, this is supported by risk transfer mechanism such as insurance.

19

Report of the Directors


The directors present their report together with the audited consolidated financial statements of the Group and statement of financial position and statement of changes in equity of the Company for the financial year ended 31 December 2011. 1 DIRECTORS The directors of the Company in office at the date of this report are: Dr Lee Keng Thon Col (Ret) Rodney How Seen Shing Ng Kok Lip Professor Pang Eng Fong (Appointed on 5 December 2011) Lee Khin Tien Lee Kin Hong 2 ARRANGEMENTS TO ENABLE DIRECTORS TO ACQuIRE BENEFITS BY MEANS OF THE ACQuISITION OF SHARES AND DEBENTuRES Neither at the end of the financial year nor at any time during the financial year did there subsist any arrangement whose object is to enable the directors of the Company to acquire benefits by means of the acquisition of shares or debentures in the Company or any other body corporate. 3 DIRECTORS INTERESTS IN SHARES AND DEBENTuRES The directors of the Company holding office at the end of the financial year had no interests in the share capital and debentures of the Company and related corporations as recorded in the register of directors shareholdings kept by the Company under Section 164 of the Singapore Companies Act except as follows: Shareholdings in which directors are deemed to have an interest At beginning of year At end of year

Name of directors and companies in which interests are held

Shareholdings registered in name of directors At beginning of year At end of year

The Company Dr Lee Keng Thon Lee Khin Tien Lee Kin Hong

Ordinary shares 499,800 235,200 77,280 499,800 235,200 77,280

Ordinary shares 336,000 336,000

The directors interests as disclosed above remained unchanged at 21 January 2012.

20

Report of the Directors


4 DIRECTORS RECEIPT AND ENTITLEMENT TO CONTRACTUAL BENEFITS Since the beginning of the financial year, no director has received or become entitled to receive a benefit which is required to be disclosed under Section 201(8) of the Singapore Companies Act, by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member, or with a Company in which he has a substantial financial interest except for salaries, bonuses and other benefits as disclosed in the financial statements. Certain directors received remuneration from related corporations in their capacity as directors and/or executives of those related corporations and as disclosed in the financial statements. There were certain transactions (as shown in the financial statements) with a corporation in which certain directors have interest. 5 SHARE OPTIONS (a) Options to take up unissued shares During the financial year, no option to take up unissued shares of the Company or any corporation in the Group was granted. Options exercised During the financial year, there were no shares of the Company or any corporation in the Group issued by virtue of the exercise of an option to take up unissued shares. Unissued shares under option At the end of the financial year, there were no unissued shares of the Company or any corporation in the Group under option.

(b)

(c)

AUDIT COMMITTEE Members of the Audit Committee comprise four directors, namely Col (Ret) Rodney How Seen Shing (Chairman of the Audit Committee), Ng Kok Lip, Professor Pang Eng Fong and Lee Khin Tien. The Audit Committee held four meetings during the financial year ended 31 December 2011 and performed the following functions: (a) Reviewed with management and the external auditors on audit plans and the areas to be audited on pertaining to external audit, financial and operating results, internal controls, accounting policies as well as other significant matters; Reviewed the assistance rendered to the external auditors by the Groups officers; Reviewed the annual financial statements, inclusive of quarterly announcements to shareholders and SGX-ST prior to submission to the Board of Directors for approval; Performed annual review of the independence and objectivity of the external auditors; Recommended the appointment or re-appointment of external and internal auditors and remuneration of the external and internal auditors;

(b) (c)

(d) (e)

21

Report of the Directors


(f) (g) Reviewed the scope and extent of non-audit services performed by external auditors; Held meetings annually with both external and internal auditors without the presence of management; Reviewed the adequacy of the Groups internal controls; Reviewed the efficiency and effectiveness of internal audit function; and Reviewed interested person transactions, if any.

(h) (i) (j)

The Audit Committee has full access to and co-operation of management and has been given the resources required for it to discharge its function properly. It also has full discretion to invite any director and executive officer to attend its meetings. The external and internal auditors have unrestricted access to the Audit Committee. The Companys internal audit function has been outsourced to Philip Liew & Co. Both the external auditors and the internal auditors report directly to the Audit Committee their findings and recommendations. The Audit Committee, having reviewed the scope and value of non-audit services provided to the Company and Group by the external auditors, are satisfied that the nature and extent of such services will not prejudice the independence and objectivity of the external auditors. The Audit Committee has recommended to the directors the nomination of Deloitte & Touche LLP for re-appointment as external auditors of the Group at the forthcoming annual general meeting of the Company. 7 AuDITORS The auditors, Deloitte & Touche LLP, have expressed their willingness to accept re-appointment.

ON BEHALF OF THE DIRECTORS

Dr Lee Keng Thon

Lee Khin Tien

19 March 2012

22

STATEMENT OF DIRECTORS
In the opinion of the directors, the consolidated financial statements of the Group and the statement of financial position and statement of changes in equity of the Company set out on pages 25 to 76 are drawn up 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 2011, and of the results, changes in equity, and cash flows of the Group and changes in equity of the Company for the financial year then ended and at the date of this statement there are reasonable grounds to believe that the Company will be able to pay its debts when they fall due.

ON BEHALF OF THE DIRECTORS

Dr Lee Keng Thon

Lee Khin Tien

19 March 2012

23

INDEPENDENT AUDITORS REPORT


Report on the Financial Statements

To The Members of Hotel Royal Limited

We have audited the consolidated financial statements of Hotel Royal Limited (the Company) and its subsidiaries (the Group) which comprise the statement of financial position of the Group and of the Company as at 31 December 2011, and the profit and loss statement, statement of comprehensive income, statement of changes in equity and statement of cash flows of the Group and the statement of changes in equity of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 25 to 76. Managements Responsibility for the Financial Statements Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of the Singapore Companies Act (the Act) and Singapore Financial Reporting Standards and for devising and maintaining a system of internal accounting controls sufficient to provide reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements of the Group and the statement of financial position and statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards 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 2011 and of the results, changes in equity and cash flows of the Group and the changes in equity of the Company for the year ended on that date. Report on Other Legal and Regulatory Requirements In our opinion, the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.

Deloitte & Touche LLP Public Accountants and Certified Public Accountants Singapore 19 March 2012
24

31 December 2011

STATEMENTS OF FINANCIAL POSITION


The Group 2011 2010 $000 $000 The Company 2011 2010 $000 $000

Note ASSETS Current assets Cash and cash equivalents Held-for-trading investments Available-for-sale investments Trade receivables Other receivables, deposits and prepaid expenses Inventories Total current assets 10 6 7 8 9

19,436 5,157 3,190 4,624

25,841 4,956 2,771 4,307

4,376 491 450 1,424

9,997 397 374 1,444

1,488 351 34,246

1,112 272 39,259

60 61 6,862

80 72 12,364

Non-current assets Subsidiaries Available-for-sale investments Other asset Goodwill Property, plant and equipment Investment properties Total non-current assets Total assets 11 8 12 13 14 15 3,687 1,328 123 325,987 90,436 421,561 455,807 4,397 279,144 84,377 367,918 407,177 84,182 1,424 143,050 23,291 251,947 258,809 78,727 1,778 121,901 17,522 219,928 232,292

LIABILITIES AND EQuITY Current liabilities Bank loans Trade payables Other payables Current portion of finance lease Income tax payable Total current liabilities 17 18 16 20,540 3,596 4,139 8 2,120 30,403 11,081 3,333 2,208 7 1,716 18,345 12,250 2,537 5,865 1,386 22,038 9,350 2,277 5,069 1,000 17,696

25

STATEMENTS OF FINANCIAL POSITION


The Group 2011 2010 $000 $000

31 December 2011 The Company 2011 2010 $000 $000

Note Non-current liabilities Retirement benefit obligations Long-term bank loans Finance lease Deferred income tax Total non-current liabilities 19 20 18 21

719 75,129 24 15,114 90,986

548 67,279 32 13,595 81,454

442 442

442 442

Capital and reserves Share capital Asset revaluation reserve Fair value reserve Translation reserve Retained earnings Total equity 22 100,438 158,977 1,671 (1,406) 74,738 334,418 100,438 132,077 3,025 (1,210) 73,048 307,378 100,438 115,908 284 19,699 236,329 100,438 96,008 658 17,050 214,154

Total liabilities and equity

455,807

407,177

258,809

232,292

See accompanying notes to financial statements.


26

Year ended 31 December 2011

CONSOLIDATED PROFIT AND LOSS STATEMENT


The Group 2011 2010 $000 $000

Note

Revenue Cost of sales Gross profit Distribution costs Administrative expenses Other income - Bargain purchase gain arising from acquisition of business - Miscellaneous income Other expenses - Expenses relating to acquisition of business - Miscellaneous expenses Finance costs Profit before income tax Income tax expense Profit for the year attributable to owners of the Company

23

48,807 (23,182) 25,625 (529) (9,729)

39,951 (18,847) 21,104 (311) (8,118)

30 24

247

4,109 790

(450) (3,164) 25 26 27 (2,529) 9,471 (3,581)

(2,190) (2,389) (1,528) 11,467 (6,419)

5,890

5,048

Basic earnings per share (cents) Diluted earnings per share (cents)

28 28

7.01 cents 7.01 cents

6.72 cents 6.72 cents

See accompanying notes to financial statements.


27

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Year ended 31 December 2011 The Group 2011 2010 $000 $000

Note

Profit for the year Other comprehensive income: Revaluation increase of freehold land - hotels Available-for-sale investments: Fair value (loss) gain recognised in fair value reserve Transfer from fair value reserve to profit or loss arising from impairment of investments Transfer from fair value reserve to profit or loss upon disposal of available-for-sale investments Exchange differences on translation of foreign operations Income tax relating to components of other comprehensive income 14

5,890

5,048

26,900

18,900

(1,278)

742

81

19

(157) (196) -

(322) (1,269) -

Other comprehensive income for the year, net of tax

25,350

18,070

Total comprehensive income for the year attributable to owners of the Company 31,240 23,118

See accompanying notes to financial statements.


28

Year ended 31 December 2011

STATEMENTS OF CHANGES IN EQUITY


Asset Share revaluation capital reserve $000 $000

Fair value Translation Retained reserve reserve earnings $000 $000 $000

Total $000

The Group Balance at 1 January 2010 Total comprehensive income for the year Rights issue (Note 22) Final dividends (Note 34) Balance at 31 December 2010 Total comprehensive income for the year Final dividends (Note 34) Balance at 31 December 2011 64,569 35,869 100,438 100,438 113,177 18,900 132,077 26,900 158,977 2,586 439 3,025 (1,354) 1,671 59 (1,269) (1,210) (196) (1,406) 71,000 5,048 (3,000) 73,048 5,890 (4,200) 74,738 251,391 23,118 35,869 (3,000) 307,378 31,240 (4,200) 334,418

Asset Share revaluation capital reserve $000 $000 The Company Balance at 1 January 2010 Total comprehensive income for the year Rights issue (Note 22) Final dividends (Note 34) Balance at 31 December 2010 Total comprehensive income for the year Final dividends (Note 34) Balance at 31 December 2011 64,569 35,869 100,438 100,438 88,108 7,900 96,008 19,900 115,908

Fair value reserve $000

Retained earnings $000

Total $000

483 175 658 (374) 284

13,207 6,843 (3,000) 17,050 6,849 (4,200) 19,699

166,367 14,918 35,869 (3,000) 214,154 26,375 (4,200) 236,329

See accompanying notes to financial statements.


29

CONSOLIDATED STATEMENT OF CASH FLOWS

Year ended 31 December 2011

Note Operating activities Profit before income tax Adjustments for: Depreciation expense Impairment loss on available-for-sale investments Dividend income Interest income Allowance for doubtful debts Write-back of allowance for doubtful debts Bad debts written off Bargain purchase gain arising from acquisition of business Interest expense Gain on disposal of available-for-sale investments Gain on disposal of property, plant and equipment Impairment loss on an investment property Fair value loss (gain) on held-for-trading investments Operating cash flows before movements in working capital Available-for-sale investments (current assets) Held-for-trading investments Trade and other receivables Inventories Trade and other payables Cash generated from operations Interest paid Interest received Dividend received Income tax paid - net of refund Net cash from operating activities 30

The Group 2011 2010 $000 $000 9,471 4,169 81 (240) (132) 271 (56) 33 2,529 (157) (12) 2,460 241 18,658 (1,280) (442) (2,275) (79) 2,190 16,772 (2,529) 132 240 (1,705) 12,910 11,467 3,452 19 (180) (97) 363 (24) (4,109) 1,528 (322) (41) 1,116 (276) 12,896 33 434 (935) (76) 721 13,073 (1,528) 97 180 (1,211) 10,611

30

Year ended 31 December 2011

CONSOLIDATED STATEMENT OF CASH FLOWS


The Group 2011 2010 $000 $000

Note

Investing activities Purchase of available-for-sale investments (non-current assets) Proceeds from disposal of property, plant and equipment Proceeds from disposal of available-for-sale investments Additions to property, plant and equipment A Arising from acquisition of business 30 Additions to investment properties Net cash used in investing activities Financing activities Proceeds from bank loans Net proceeds from rights issue Repayment of bank loans Repayment of finance lease Dividends paid Net cash from financing activities Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of year Effect of currency exchange adjustment Cash and cash equivalents at end of year Note A

(83) 30 376 (3,260) (21,320) (9,077) (33,334)

(44) 45 907 (1,112) (39,395) (11,469) (51,068)

77,630 (59,637) (7) (4,200) 13,786 (6,638) 25,841 233 19,436

46,738 35,869 (27,540) (1) (3,000) 52,066 11,609 13,241 991 25,841

In 2010, the Group acquired equipment with aggregate cost of $115,900 of which $40,000 was acquired under finance lease agreement.

See accompanying notes to financial statements.


31

NOTES TO FINANCIAL STATEMENTS


1 GENERAL

31 December 2011

The Company (Registration No. 196800298G) is incorporated in Singapore with its registered office and its principal place of business at 36 Newton Road, Singapore 307964. The financial statements are expressed in Singapore dollars, which is the functional currency of the Company. The principal activity of the Company is that of a hotelier and investment holding. The principal activities of the subsidiaries are disclosed in Note 11. On 2 December 1968, the Company was listed on the Main Board of Singapore Exchange Securities Trading Limited (SGX-ST). The financial statements of the Group and the statement of financial position and statement of changes in equity of the Company for the year ended 31 December 2011 were authorised for issue by the board of directors on 19 March 2012 2 SuMMARY OF SIGNIFICANT ACCOuNTING POLICIES BASIS OF ACCOUNTING - The financial statements have been prepared in accordance with the historical cost convention, except as disclosed in the accounting policies below and are drawn up in accordance with the provisions of the Singapore Companies Act and Singapore Financial Reporting Standards (FRS). ADOPTION OF NEW AND REVISED STANDARDS - In the current financial year, the Group has adopted all the new and revised FRSs and Interpretations of FRS (INT FRS) that are relevant to its operations and effective for annual periods beginning on or after 1 January 2011. The adoption of these new/revised FRSs and INT FRSs does not result in changes to the Groups accounting policies and has no material effect on the amounts reported for the current or prior years. At the date of authorisation of these financial statements, the following FRSs, INT FRSs and amendments to FRS that are relevant to the Group and the Company were issued but not effective: Amendments to FRS 1 - Presentation of Financial Statements - Amendments relating to Presentation of Items of Other Comprehensive Income Amendments to FRS 12 - Income Taxes - Deferred Taxes: Recovery of Underlying Assets Amendments to FRS 19 - Employee Benefits FRS 27 (Revised) - Separate Financial Statements Amendments to FRS 107 - Financial Instruments: Disclosures - Transfers of Financial Assets FRS 110 - Consolidated Financial Statements FRS 112 - Disclosure of Interests in Other Entities FRS 113 - Fair Value Measurement Consequential amendments were also made to various standards as a result of these new/revised standards. The management anticipates that the adoption of the above FRSs and amendments to FRS that were issued but only effective in future periods will not have no material impact on the financial statements of the Group and the Company in the period of their initial adoption, except for the following: FRS 110 Consolidated Financial Statements and FRS 27 Separate Financial Statements FRS 110 replaces the control assessment criteria and consolidation requirements currently in FRS 27 and INT FRS 12 Consolidation - Special Purpose Entities. FRS 110 defines the principle of control and establishes control as the basis for determining which entities are consolidated in the consolidated financial statements. It also provides more extensive application guidance on
32

31 December 2011

NOTES TO FINANCIAL STATEMENTS

assessing control based on voting rights or other contractual rights. Under FRS 110, control assessment will be based on whether an investor has (i) power over the investee; (ii) exposure, or rights, to variable returns from its involvement with the investee; and (iii) the ability to use its power over the investee to affect the amount of the returns. FRS 27 remains as a standard applicable only to separate financial statements. FRS 110 will take effect from financial years beginning on or after 1 January 2013, with full retrospective application. When the Group adopts FRS 110, entities it currently consolidates may not qualify for consolidation, and entities it currently does not consolidate may qualify for consolidation. The Group is currently evaluating the effects of FRS 110 on its investments in the period of initial adoption. FRS 112 Disclosure of Interests in Other Entities FRS 112 requires an entity to provide more extensive disclosures regarding the nature of and risks associated with its interest in subsidiaries, associates, joint arrangements and unconsolidated structured entities. FRS 112 will take effect from financial years beginning on or after 1 January 2013, and the Group is currently evaluating the extent of additional disclosures needed. FRS 113 Fair Value Measurement FRS 113 is a single new Standard that applies to both financial and non-financial items. It replaces the guidance on fair value measurement and related disclosures in other Standards, with the exceptions of measurement dealt with under FRS 102 Share-based Payment, FRS 17 Leases, net realisable value in FRS 2 Inventories and value-in-use in FRS 36 Impairment of Assets. FRS 113 provides a common fair value definition and hierarchy applicable to the fair value measurement of assets, liabilities, and an entitys own equity instruments within its scope, but does not change the requirements in other Standards regarding which items should be measured or disclosed at fair value. FRS 113 will be effective prospectively from annual periods beginning on or after 1 January 2013. Comparative information is not required for periods before initial application. The Group is currently evaluating the effects of FRS 113 in the period of initial adoption. BASIS OF CONSOLIDATION - The consolidated financial statements incorporate the financial statements of the Company and entities (including special purpose entities) controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation. Non-controlling interests in subsidiaries are identified separately from the Groups equity therein. The interest of non-controlling shareholders that are present ownership interests and entitle their holders to a proportionate share of the entitys net assets in the event of liquidation may be initially measured (at date of original business combination) either at fair value or at the non-controlling interests proportionate share of the fair value of the acquirees identifiable net assets. The choice of measurement basis is made on an
33

NOTES TO FINANCIAL STATEMENTS

31 December 2011

acquisition-by-acquisition basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another FRS. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests share of subsequent changes in equity. Total comprehensive income is attributed to non-controlling interests even if this results in the non-controlling interests having a deficit balance. Changes in the Groups interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the Groups interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company. When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. Amounts previously recognised in other comprehensive income in relation to the subsidiary are accounted for (i.e. reclassified to profit or loss or transferred directly to retained earnings) in the same manner as would be required if the relevant assets or liabilities were disposed of. The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under FRS 39 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or jointly controlled entity. In the Companys financial statements, investments in subsidiaries are carried at cost less any impairment in net recoverable value that has been recognised in the profit or loss. BUSINESS COMBINATIONS - Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate of the acquisition date fair values of assets given, liabilities incurred by the Group to the former owners of the acquiree, and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred. Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments (see below). The subsequent accounting for changes in the fair value of the contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with FRS 39 Financial Instruments : Recognition and Measurement, or FRS 37 Provision, Contingent Liabilities and Contingent Asset, as appropriate, with the corresponding gain or loss recognised in profit or loss. Where a business combination is achieved in stages, the Groups previously held interests in the acquired entity are remeasured to fair value at the acquisition date (i.e. the date the Group attains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss, where such treatment would be appropriate if that interest were disposed of. The acquirees identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under FRS 103 Business Combinations are recognised at their fair value at the acquisition date, except that:

34

31 December 2011

NOTES TO FINANCIAL STATEMENTS

deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognised and measured in accordance with FRS 12 Income Taxes and FRS 19 Employee Benefits respectively; liabilities or equity instruments related to share-based payment transactions of the acquiree or the replacement of an acquirees share-based payment awards transactions with share-based payment awards transactions of the acquirer in accordance with the method in FRS 102 Share-based Payment at the acquisition date; and assets (or disposal groups) that are classified as held for sale in accordance with FRS 105 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see below), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date. The measurement period is the period from the date of acquisition to the date the Group obtains complete information about facts and circumstances that existed as of the acquisition date - and is subject to a maximum of one year from acquisition date. The accounting policy for initial measurement of non-controlling interests is described above. The policy described above is applied to all business combinations that take place on or after 1 January 2010. FINANCIAL INSTRUMENTS - Financial assets and financial liabilities are recognised on the Groups statement of financial position when the Group becomes a party to the contractual provisions of the instrument. Effective interest method The effective interest method is a method of calculating the amortised cost of a financial instrument and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial instrument, or where appropriate, a shorter period. Income and expense are recognised on an effective interest rate basis for debt instruments other than those financial instruments at fair value through profit or loss. Financial assets Investments are recognised and de-recognised on a trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, net of transaction costs except for those financial assets classified as at fair value through profit or loss which are initially measured at fair value. Financial assets are classified into the following specified categories: financial assets at fair value through profit or loss, available-for-sale financial assets and loans and receivables. The classification depends on the nature and purpose of financial assets and is determined at the time of initial recognition. Financial assets at fair value through profit or loss (FVTPL) Financial assets are classified as at FVTPL where the financial asset is either held-for-trading or it is designated as at FVTPL.
35

NOTES TO FINANCIAL STATEMENTS


A financial asset is classified as held-for-trading if: it has been acquired principally for the purpose of selling in the near future; or

31 December 2011

it is a part of an identified portfolio of financial instruments that the Company manages together and has a recent actual pattern of short-term profit-taking; or it is a derivative that is not designated and effective as a hedging instrument.

A financial asset other than a financial asset held-for-trading may be designated as at FVTPL upon initial recognition if: such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Companys documented risk management or investment strategy, and information about the grouping is provided internally on that basis; or it forms part of a contract containing one or more embedded derivatives, and FRS 39 permits the entire combined contract (asset or liability) to be designated as at FVTPL.

Financial assets at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset. Fair value is determined in the manner described in Note 4. Available-for-sale financial assets Certain shares and debt securities held by the Group are classified as being available-for-sale and are stated at fair value. Fair value is determined in the manner described in Note 4. Gains and losses arising from changes in fair value are recognised in other comprehensive income with the exception of impairment losses, interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets which are recognised directly in profit or loss. Where the investment is disposed of or is determined to be impaired, the gain or loss previously recognised in other comprehensive income and accumulated in the fair value reserve is reclassified in profit or loss for the period. Dividends on available-for-sale equity instruments are recognised in profit or loss when the Groups right to receive payments is established. The fair value of available-for-sale monetary assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at reporting date. The change in fair value attributable to translation differences that result from a change in amortised cost of the asset is recognised in profit or loss, and other changes are recognised in other comprehensive income. Loans and receivables Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest rate method, except for short-term receivables when the recognition of interest would be immaterial. Impairment of financial assets Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at the end of each reporting period. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated
36

31 December 2011

NOTES TO FINANCIAL STATEMENTS

future cash flows of the investment have been impacted. For financial assets carried at amortised cost, the amount of the impairment is the difference between the assets carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. With the exception of available-for-sale equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. In respect of available-for-sale equity instruments, any subsequent increase in fair value after an impairment loss, is recognised directly in other comprehensive income. Derecognition of financial assets The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the assets and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits, bank overdrafts, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Financial liabilities and equity instruments Classification as debt or equity Financial liabilities and equity instruments issued by the Group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs. Financial liabilities Trade and other payables are initially measured at fair value, net of transaction costs, and are subsequently measured at amortised cost, using the effective interest method, with interest expense recognised on an effective yield basis.

37

NOTES TO FINANCIAL STATEMENTS

31 December 2011

Interest-bearing bank loans and overdrafts are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the Groups accounting policy for borrowing costs (see below). Financial guarantee contract liabilities are measured initially at their fair values and subsequently at the higher of the amount recognised as a provision and the amount initially recognised less cumulative amortisation in accordance with the revenue recognition policies described below. Derecognition of financial liabilities The Group derecognises financial liabilities when, and only when, the Groups obligations are discharged, cancelled or they expire. Derivative financial instruments Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship. Embedded derivatives Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at fair value with changes in fair value recognised in profit or loss. INVENTORIES - Inventories comprising mainly consumables are stated at the lower of cost (weighted average method) and net realisable value. Cost includes all costs of purchase and other costs incurred in bringing the inventories to their present location and condition. Net realisable value represents the estimated selling price less all estimated costs to be incurred in marketing, selling and distribution. PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses except for freehold land-hotels which are stated at revalued amounts. Revaluations of freehold land-hotels are performed with sufficient regularity such that the carrying amounts do not differ materially from that which would be determined using fair values at the end of the reporting period. For the freehold land-hotels which has been revalued, the revaluation increase arising on the revaluation of freehold land-hotel is recognised in other comprehensive income and accumulated in the asset revaluation reserve, except to the extent that it reverses a revaluation decrease for the same asset previously recognised in profit or loss, in which case the increase is credited to profit or loss to the extent of the decrease previously charged. A decrease in carrying amount arising on the revaluation of freehold land-hotel is charged to profit or loss to the extent that it exceeds the balance, if any, held in the asset revaluation reserve relating to a previous revaluation of that asset. On subsequent sale or retirement of a revalued freehold land, the attributable revaluation surplus remaining in the asset revaluation reserve is transferred directly to retained earnings. Depreciation is charged so as to write off the cost of assets, other than freehold land, over their estimated useful lives, using the straight-line method except for linen, china, glassware, silver and uniforms where the original expenditure has been written down to approximately one-half of the original cost and all subsequent purchases have been written off as replacements.
38

31 December 2011 The estimated useful lives are as follows:

NOTES TO FINANCIAL STATEMENTS

Number of years Freehold buildings - hotels Building improvement - hotels Plant and equipment 80 20 to 25 3 to 10

Depreciation is not provided on freehold land-hotels and freehold land for redevelopment. The estimated useful lives and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis. The gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. Fully depreciated assets still in use are retained in the financial statements. INVESTMENT PROPERTIES - Investment properties are held on a long-term basis for investment potential and income. Investment properties are stated at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is charged so as to write off the cost, other than freehold land, over their estimated useful lives, using the straight-line method. The estimated useful lives are as follows: Number of years Freehold buildings Leasehold buildings * 50 to 80 80*

Leasehold buildings acquired are depreciated over the shorter of remaining useful life or the terms of the relevant lease.

Investment properties in the course of construction are carried at cost, less any recognised impairment loss. Cost includes professional fees and for qualifying assets, borrowing costs capitalised in accordance with the Groups accounting policy. Depreciation of these assets commences when the assets are ready for their intended use. The estimated useful lives and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis. The gain or loss arising on disposal or retirement of an item of investment property is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. GOODWILL - Goodwill arising in business combination is recognised as an asset at the date that control is acquired (the acquisition date). Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirers previously held equity interest (if any) in the entity over net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed. If, after reassessment, the Groups interest in the fair value of the acquirees identifiable net assets exceeds the sum of consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of the acquirers previously held equity interest in the acquiree (if any), the excess is recognised immediately in profit or loss as bargain purchase gain.
39

NOTES TO FINANCIAL STATEMENTS

31 December 2011

Goodwill is not amortised but is reviewed for impairment at least annually. For the purpose of impairment testing, goodwill is allocated to each of the Groups cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. On disposal of a subsidiary or the relevant cash generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. IMPAIRMENT OF NON FINANCIAL ASSETS EXCLUDING GOODWILL - At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. PROVISIONS - Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. LEASES - Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. The Group as lessor Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. The aggregate cost of incentives provided to lessees is recognised as a reduction of rental income over the
40

31 December 2011

NOTES TO FINANCIAL STATEMENTS

lease term on a straight-line basis. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised in profit or loss on a straight-line basis over the lease term. The Group as lessee Assets held under finance leases are recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statement of financial position as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the Groups general policy on borrowing costs (see below). Contingent rentals are recognised as expenses in the periods in which they are incurred. BORROWING COSTS - Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, namely assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of these assets until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. REVENUE RECOGNITION - Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts and sales related taxes. Hotel room revenue is recognised based on room occupancy while other hotel related revenue is recognised when the goods are delivered or the services are rendered to the customers. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that assets net carrying amount. Dividend income from investments is recognised when the shareholders rights to receive payment have been established. Income from providing financial guarantee is recognised in profit or loss over the guarantee period on a straight line basis. EMPLOYEE LEAVE ENTITLEMENT - Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the end of the reporting period. RETIREMENT BENEFIT COSTS - Payments to defined contribution retirement benefit plans are charged as an expense in profit or loss as they fall due. Payments made to state-managed retirement benefit schemes, such as the Singapore Central Provident Fund and Malaysia Employee Provident Fund are dealt with as payments to defined contribution plans where the Groups obligations under the plans are equivalent to those arising in a defined contribution retirement benefit plan. The subsidiaries operate unfunded, defined benefit Retirement Benefit Schemes (the Schemes) for their eligible employees. The obligations under the Schemes, calculated using the Projected Unit Credit Method, are determined based on actuarial computations by independent actuaries, through which the amount of benefit that employees have earned in return for their service in the current and prior years are estimated. That benefits are discounted in order to determine their present value.

41

NOTES TO FINANCIAL STATEMENTS

31 December 2011

Actuarial gains and losses are recognised as income or expense in profit or loss over the expected average remaining working lives of the participating employees when the cumulative unrecognised actuarial gains or losses for the Schemes exceed 10% of the present value of the defined benefit obligation. Past service costs are recognised in profit or loss immediately to the extent that the benefits are already vested, and otherwise are amortised on a straight-line basis over the average period until the amended benefits become vested. The amount recognised in the statement of financial position represents the present value of the defined benefit obligations adjusted for unrecognised actuarial gains and losses and unrecognised past service costs. Any asset resulting from this calculation is limited to the net total of any unrecognised actuarial losses and past service costs, and the present value of any economic benefits in the form of refunds or reductions in future contributions to the plans. INCOME TAX - Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the profit and loss statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are not taxable or tax deductible. The Groups liability for current tax is calculated using tax rates (and tax laws) that have been enacted or substantively enacted in countries where the Company and subsidiaries operate by the end of the reporting period. Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised based on the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items credited or debited outside profit or loss (either in other comprehensive income or directly in equity), in which case the tax is also recognised outside profit or loss (either in other comprehensive income or directly in equity), or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is taken into account in calculating goodwill or determining the excess of the acquirers interest in the net fair value of the acquirees identifiable assets, liabilities and contingent liabilities over cost. FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION - The individual financial statements of each Group entity are measured and presented in the currency of the primary economic environment in which the entity operates (its functional currency). The consolidated financial statements of the Group and the statement of financial position and statement of changes in equity of the Company are presented in Singapore dollars, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements.
42

31 December 2011

NOTES TO FINANCIAL STATEMENTS

In preparing the financial statements of the individual entities, transactions in currencies other than the entitys functional currency are recorded at the rates of exchange prevailing on the date of the transaction. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the end of the reporting period. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items, and on retranslation of monetary items are included in profit or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised in other comprehensive income. For such non-monetary items, any exchange component of that gain or loss is also recognised in other comprehensive income. For the purpose of presenting consolidated financial statements, the assets and liabilities of the Groups foreign operations (including comparatives) are expressed in Singapore dollars using exchange rates prevailing on the end of the reporting period. Income and expense items (including comparatives) are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in a separate component of equity under the header of translation reserve. On the disposal of a foreign operation (i.e. a disposal of the Groups entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, loss of joint control over a jointly controlled entity that includes a foreign operation, or loss of significant influence over an associate that includes a foreign operation), all of the accumulated exchange differences in respect of that operation attributable to the Group are reclassified to profit or loss. Any exchange differences that have previously been attributed to non-controlling interests are derecognised, but they are not reclassified to profit or loss. In the case of a partial disposal (i.e. no loss of control) of a subsidiary that includes a foreign operation, the proportionate share of accumulated exchange differences are re-attributed to non-controlling interests and are not recognised in profit or loss. For all other partial disposals (i.e. of associates or jointly controlled entities that do not result in the Group losing significant influence or joint control), the proportionate share of the accumulated exchange differences is reclassified to profit or loss. On consolidation, exchange differences arising from the translation of the net investment in foreign entities (including monetary items that, in substance, form part of the net investment in foreign entities), and of borrowings and other currency instruments designated as hedges of such investments, are recognised in other comprehensive income and accumulated in translation reserve. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate. 3 CRITICAL ACCOuNTING JuDGEMENTS AND KEY SOuRCES OF ESTIMATION uNCERTAINTY In the application of the Groups accounting policies, which are described in Note 2 above, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.
43

NOTES TO FINANCIAL STATEMENTS


Critical judgements in applying accounting policies

31 December 2011

Impairment of investments in subsidiaries in the Companys statement of financial position The carrying amounts of investments in subsidiaries, including advances to subsidiaries and deemed investments are disclosed in Note 11. Management has evaluated whether there is any indication of impairment by considering both internal and external sources of information, and are satisfied that there were no such impairment indicators. Income tax on gain arising from the disposal of investment property In February 2007, a subsidiary disposed of an investment property for $58 million and made a gain on disposal of $31 million. Management is of the view that this gain is capital in nature and therefore no provision for income tax on this gain has been provided in the financial statements. Impairment indicators of available-for-sale investments (Note 8) The Group and Company have available-for-sale investments amounting to $6.1 million (2010 : $6.4 million) and $1.1 million (2010 : $1.4 million) respectively which are measured at fair values. Management exercises its judgement in determining if the magnitude of decline in fair value is an indication of objective evidence of impairment for each investment. An impairment loss of $0.08 million (2010 : $0.02 million) for the Group and $0.01 million (2010 : $0.01 million) for the Company was determined and was transferred from fair value reserve to profit or loss. Certain available-for-sale investment in unquoted shares with carrying amounts of $0.8 million (2010 : $0.8 million) are carried at cost. Based on latest financial information of the investees, management has evaluated that there were no impairment indicators relating to these investments. Effect of exchange differences on advances deemed as extension of net investment in foreign operations The Company has intercompany advances of $43.3 million (2010 : $40.8 million) which are deemed as extension of net investment in foreign operations, as management does not expect that the repayment of these advances will be made in the foreseeable future. As such, exchange loss of $0.3 million (2010 : $0.5 million gain) that are recognised in separate financial statements of the Group entities are taken to other comprehensive income and accumulated in the foreign currency translation reserve in the consolidated financial statements. Key sources of estimation uncertainty The key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below. Allowance for doubtful debts (Note 9) Management considered the recoverability of the Groups trade receivables and have made estimates for unrecoverable amounts based on objective evidence of debtors financial status. Allowances made are as disclosed in Note 9. Fair values of net assets arising from acquisition of business (Note 30) During the financial year, the Group acquired the White Orchid Hotel in Bangkok, which was accounted for using the acquisition method. As at 31 December 2011, the Group has applied the acquisition method using the fair values of the net assets of the acquiree as described in Note 30.

44

31 December 2011 Retirement benefit obligations (Note 19)

NOTES TO FINANCIAL STATEMENTS

The subsidiaries, Faber Kompleks Sdn. Bhd. and Ace Hotel Co., Ltd., operate unfunded defined benefit Retirement Benefit Schemes that require actuarial estimates to determine the present value of the benefit obligations. The basis of estimates is described in Note 19. Fair values of held-for-trading and available-for-sale investments (Notes 7 and 8) The basis of determining the fair values of held-for-trading investments and available-for-sale investments are described in Note 4(c)(vi). Certain of these investments amounting to $4.2 million (2010 : $4.5 million) for the Group and $0.5 million (2010 : $0.4 million) for the Company are not traded in active markets, and therefore their fair values are obtained from other sources which involve estimates. Management is satisfied as to the reasonableness and objectivity of these estimates. Contingent liability (Note 32) In 2009, Faber Kompleks Sdn. Bhd., a subsidiary acquired in 2008, was served with a notice of civil suit by a former hotel operator for alleged wrongful termination of its services. Based on consultation with legal adviser in Malaysia, management is of the view that the claims are without merit and the subsidiary will defend the suit vigorously. As such, management has not made any provision for this legal claim as at 31 December 2011. Unutilised tax losses and capital allowances carryforward (Note 21) The subsidiary, Faber Kompleks Sdn. Bhd., has unutilised tax losses and capital allowances of approximately $29.4 million (2010 : $30.2 million) which may be available for offset against future taxable profits of the subsidiary, subject to the approval by tax authorities. Management is of the view that the timing and amount of tax benefits that can be recovered are uncertain, and therefore no deferred tax asset has been recognised as at 31 December 2011. Impairment indicators of investment properties (Note 15) and property, plant and equipment (Note 14) Management engages independent professional valuers to assess the market values of investment properties and hotel buildings which are measured using cost model, and based on the market values, an impairment loss of investments properties of $2.5 million (2010 : $1.1 million) for the Group was determined. Useful lives of investment properties and property, plant and equipment Management exercises their judgement in estimating the useful lives of the depreciable assets which takes into consideration the physical conditions of the assets and their legal useful lives. Depreciation is provided to write off the cost of investment properties (Note 15) and property, plant and equipment (Note 14) over their estimated useful lives, using the straight-line method. Freehold land-hotels at revalued amounts (Note 14) Management engages independent professional valuers to assess the market values of freehold land-hotels on a regular basis to ensure that their revalued carrying amounts are not materially different from their fair values as at end of the reporting period. The market values as at 31 December 2011 were assessed by independent professional valuers, taking into account open market values of similar properties in Singapore, Malaysia and Thailand on existing use basis, and considering current occupancy rates, room rates and rental rates of hotel premises prevailing at and around end of the reporting period.

45

NOTES TO FINANCIAL STATEMENTS


4

31 December 2011

FINANCIAL INSTRuMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (a) Categories of financial instruments The following table sets out the financial instruments as at the end of the reporting period: The Group 2011 2010 $000 $000 Financial assets Fair value through profit or loss (FVTPL): Held-for-trading investments Loans and receivables (including cash and cash equivalents) Available-for-sale investments Financial liabilities Amortised cost Financial guarantee (b) The Company 2011 2010 $000 $000

5,157 24,995 6,877 103,436 -

4,956 30,742 7,168 83,940 -

491 49,101 1,874 15,188 5,464

397 52,226 2,152 11,652 5,044

Financial risk management policies and objectives The Groups overall financial risk management programme seeks to minimise potential adverse effects of financial performance of the Group. The Groups activities expose it to a variety of financial risks, including the effects of changes in foreign currency exchange rates, interest rates and equity prices. The Group does not hold or issue derivative financial instrument for speculative purposes. The Group invested in a variety of financial instruments such as bonds, fixed income funds, equity shares, structured notes with embedded derivatives and managed funds as disclosed in Notes 7 and 8. These investments are subject to a variety of financial risks, including credit risk of counterparties, liquidity risk, interest rate risk, foreign currency risk, and other market risks related to prices of equity, commodities or real estates. The Group engaged professional investment managers from banks to manage the risks and returns from these investments. Investment risk is managed primarily by diversification in asset classes, currency denomination and geographical region. All investment accounts opened with professional investment managers from banks are approved by the board of directors. For certain investment accounts (managed funds), the professional investment managers from the banks are given the discretionary powers to make investment decisions on behalf of management based on specified guidelines. The risks and performance of such managed funds are measured and evaluated by the fair values of the underlying investments on an overall portfolio basis. It will not be practical to provide an analysis of the various types of financial risks for certain types of investments (such as managed funds) given the dynamic management of the portfolio or the variety of the underlying instruments involved. The maximum exposure on the investments is limited to the carrying amounts recognised in the financial statements.

46

31 December 2011

NOTES TO FINANCIAL STATEMENTS

There has been no change to the Groups exposure to financial risks or the manner in which it manages and measures the risks. Financial risk exposures, to the extent practicable, are described below. (c) Exposure to financial risks i) Credit risk management The Groups credit risk is primarily attributable to its cash and cash equivalents, trade and other receivables and investments. Cash and fixed deposits are placed with creditworthy financial institutions. The trade and other receivables presented in the statement of financial position are net of allowances for doubtful receivables, estimated by management based on prior experience and the current economic condition. Investments are also subject to credit risk, which have been factored in the determination of their fair values. The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers. The carrying amounts of financial assets recorded in the financial statements, grossed up for any allowances for losses represents the Groups maximum exposure to credit risk. ii) Interest rate risk management Summary quantitative data of the Groups interest-bearing financial instruments can be found in Section (v) below. The Group is exposed to interest rate risk through the impact of rate changes on interest bearing liabilities and assets. Further information related to interest rate and maturities of bank loans is disclosed in Notes 16 and 20. Interest rate sensitivity The sensitivity analyses below have been determined based on the exposure to interest rates for interest-bearing financial assets and financial liabilities at the end of the reporting period. A 50 basis point increase or decrease is used when reporting interest rate risk sensitivity internally to the board of directors. If interest rates had been 50 basis points higher or lower and all other variables were held constant: the Groups profit for the year ended 31 December 2011 would decrease/increase by approximately $0.5 million (2010 : decrease/increase by $0.4 million). This is mainly attributable to the Groups exposure to interest rate risk on its variable rate borrowings and its investments in quoted bonds and fixed income funds measured at fair value through profit or loss. the Companys profit for the year ended 31 December 2011 would decrease/increase by approximately $0.1 million (2010 : decrease/increase by $0.1 million). This is mainly attributable to the Companys exposure to interest rate risk on its variable rate borrowings.

The above analysis may not be fully reflective of the Groups exposure to interest rate risk as the extent of interest rate sensitivity of the Groups investments may vary given the dynamic management of the portfolio and the variety of the instruments involved.

47

NOTES TO FINANCIAL STATEMENTS


iii) Foreign currency risk management

31 December 2011

The Groups foreign currency exposures arose mainly from the exchange rate movements of the United States dollar, the Euro, the Australian dollar, the Great Britain pound, the Malaysian ringgit, the Hong Kong dollar and the Thai baht vis-a-vis the functional currencies of the Group entities. At the reporting date, the carrying amounts of financial assets and liabilities denominated in currencies other than the respective Group entities functional currencies are as follows:
The Group Assets 2011 2010 $000 $000 United States dollar 3,571 Euro 522 Australian dollar 327 Great Britain pound 791 Malaysian ringgit 600 Hong Kong dollar 241 Japanese yen 3 Thai baht 654 4,338 480 176 618 229 Liabilities 2011 2010 $000 $000 2011 $000 654 654 Assets The Company 2010 $000 563 Liabilities 2011 2010 $000 $000 -

Foreign currency sensitivity The following table details the sensitivity to a 5% increase and decrease in the relevant foreign currencies against the functional currency of each Group entity. 5% is the sensitivity rate used when reporting foreign currency risk internally to the board of directors. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 5% change in foreign currency rates. If the relevant foreign currency strengthens by 5% against the functional currency of each Group entity: Profit or loss will increase by approximately: The Group 2011 2010 $000 $000 Impact arising from United States dollar Euro Australian dollar Great Britain pound Hong Kong dollar Japanese yen Thai baht 110 16 16 32 12 1 33 220 181 12 9 202 15 33 48 9 9 The Company 2011 2010 $000 $000

48

31 December 2011

NOTES TO FINANCIAL STATEMENTS


Other comprehensive income will increase by approximately: The Group 2011 2010 $000 $000 Impact arising from United States dollar Hong Kong dollar Great Britain pound Euro Malaysian ringgit 69 8 10 30 117 36 11 12 31 90 18 18 19 19 The Company 2011 2010 $000 $000

If the relevant foreign currency weakens by 5% against the functional currency of each Group entity, there will be an equal and opposite effect on profit or loss and other comprehensive income. In addition, the Group is exposed to currency translation risk as it has significant subsidiaries operating in Malaysia, New Zealand and Thailand. For the year ended 31 December 2011, approximately 12% (2010 : 13%) is denominated in Malaysian ringgit, approximately 11% (2010 : 12%) of the Groups net assets is denominated in New Zealand dollar and approximately 2% (2010 : nil) of the Groups net assets is denominated in Thai Baht. iv) Price risk management The Group is exposed to price risks arising from its investments classified as held-for-trading and available-for-sale. These investments include equity shares, and instruments whose fair values are subject to volatility in equity prices, commodity prices or real estate prices. 10% is the sensitivity rate used when reporting price risk internally to the board of directors. Further details of these investments can be found in Notes 7 and 8. Price sensitivity The sensitivity analyses below have been determined based on the exposure to price risks of investments at the reporting date. In respect of the Groups investments, if prices had been 10% higher/lower while all other variables were held constant: the Groups profit for the year ended 31 December 2011 would increase/decrease by approximately $0.4 million (2010 : $0.4 million); and the Groups other comprehensive income would increase/decrease by approximately $0.6 million (2010 : $0.6 million).

In respect of the Companys investments, if prices had been 10% higher/lower while all other variables were held constant: the Companys profit for the year ended 31 December 2011 would increase/decrease by approximately $0.05 million (2010 : increase/decrease by $0.04 million). the Companys other comprehensive income for the year ended 31 December 2011 would increase/decrease by approximately $0.1 million (2010 : increase/decrease by $0.1 million).
49

NOTES TO FINANCIAL STATEMENTS


v) Liquidity risk management

31 December 2011

Liquidity risk reflects the risk that the Group will have insufficient resources to meet its financial liabilities as they fall due. As at 31 December 2011, total current liabilities exceeded total current assets by $15.2 million (2010 : $5.3 million) for the Company. This is mainly due to some of the Companys bank loans being arranged on short-term revolving basis, as the interest rates are more favourable. Management assesses the availability of credit facilities and compliance with loans covenants on an on-going basis and no matters have been drawn to its attention that the roll-over of the short-term financing may not be forthcoming or that covenants have been breached. The Group and the Company have unutilised credit facilities totalling $139.4 million (2010 : $138.9 million) and $102.4 million (2010 : $105.1 million) respectively. Liquidity and interest risk analyses Financial liabilities The following table details the remaining contractual maturity for non-derivative financial liabilities. The table below has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group and Company can be required to pay. The table includes both interest and principal cash flows. The adjustment column represents the possible future cash flows attributable to the instrument included in the maturity analysis which is not included in the carrying amounts of the financial liabilities on the statements of financial position.
Weighted average effective interest rate 2011 2010 % p.a. % p.a. The Group Non-interest bearing Variable interest rate instruments The Company Non-interest bearing Variable interest rate instruments NA: not applicable. NA 1.70 NA 1.71 8,402 12,458 7,346 9,510 (208) (160) 8,402 12,250 7,346 9,350 NA 3.79 NA 4.37 7,735 21,327 5,541 11,573 26,922 17,576 51,080 52,676 (3,628) (3,426) 7,735 95,701 5,541 78,399 On demand or within 1 year 2011 2010 $000 $000

Within 2 to 5 years 2011 2010 $000 $000

After 5 years 2011 2010 $000 $000

Adjustment 2011 2010 $000 $000

Total 2011 $000 2010 $000

The Company has given corporate guarantees to banks for credit facilities granted to certain subsidiaries of the Group, as disclosed in Note 32. The earliest period that the guarantee could be called is within 1 year (2010 : 1 year) from the end of the reporting period. Management considers that it is more likely than not that no amount will be payable under these intra-group financial guarantee arrangements.

50

31 December 2011 Financial assets

NOTES TO FINANCIAL STATEMENTS

The following table details the expected maturity for non-derivative financial assets. The table below has been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets except where the Group and the Company anticipates that the cash flow will occur in a different period. The adjustment column represents the possible future cash flows attributable to the instrument included in the maturity analysis which are not included in the carrying amounts of the financial assets on the statements of financial position.
Weighted average effective interest rate 2011 2010 % p.a. % p.a. The Group Non-interest bearing Fixed interest rate instruments Variable interest rate instruments The Company Non-interest bearing Fixed interest rate instruments NA 1.28 NA 1.47 5,490 1,315 3,260 9,106 1,424 43,807 1,778 41,362 (570) (731) 6,914 44,552 5,038 49,737 NA 0.77 NA 0.37 24,784 7,341 1,273 22,228 15,470 827 3,687 4,398 (56) (57) 28,471 7,285 1,273 26,626 15,413 827

On demand or within 1 year 2011 2010 $000 $000

Within 2 to 5 years 2011 2010 $000 $000

Adjustment 2011 2010 $000 $000

Total 2011 $000 2010 $000

vi)

Fair value of financial assets and financial liabilities The fair values of financial assets and financial liabilities are determined as follows: Cash and fixed deposits The carrying amounts of cash and fixed deposits approximate their fair values due to their short-term maturities. H eld-for-trading and available-for-sale investments Held-for-trading and available-for-sale investments that are measured at fair values amounted to $5.2 million (2010 : $5.0 million) and $6.1 million (2010 : $6.4 million) respectively for the Group and $0.5 million (2010 : $0.4 million) and $1.1 million (2010 : $1.4 million) respectively for the Company. The information on the basis of fair values are classified into the following 3 categories: Level 1 2011 2010 $000 $000 The Group Held-for-trading investments - Quoted bonds - Quoted fixed income funds - Structured notes with embedded derivatives - Managed funds and alternative investments Available-for sale investments - Equity-linked funds - Quoted equity shares 1,273 162 5,568 827 171 5,812 2,067 108 528 2,287 64 575 528 1,019 495 1,112 51

Level 2 2011 2010 $000 $000

Level 3 2011 2010 $000 $000

NOTES TO FINANCIAL STATEMENTS


Level 1 2011 2010 $000 $000 The Company Held-for-trading investments - Structured notes with embedded derivatives - Managed funds and alternative investments Available-for sale investments - Quoted equity shares Level 2 2011 2010 $000 $000

31 December 2011 Level 3 2011 2010 $000 $000

1,093

1,371

206 -

210 -

285 -

187 -

Level 1 : Fair values are determined using quoted prices in active markets for identical instruments (without modification and repackaging). These include quoted bonds, shares and fixed income funds. Level 2 : Fair values are estimated using inputs other than quoted prices included in Level 1 that are observable, either directly or indirectly. These include managed funds measured at redemption net asset values provided by fund managers, and certain structured products with prices available from dealers. Level 3 : Fair values are derived using inputs that are not based on observable market data. These include structured products and instruments measured based on fair values provided by the banks investment managers. Reconciliation of movements in Level 3 financial assets: Fair value through profit or loss: The Group 2011 2010 $000 $000 Opening balance 1,607 Fair value gains (losses) (15) Exchange difference 5 Purchases 931 Disposals (981) Closing balance 1,547 2,029 (144) (31) 659 (906) 1,607 The Company 2011 2010 $000 $000 187 61 4 33 285 114 71 (15) 53 (36) 187

There were no significant transfers between Level 1 and Level 2 of the fair value hierarchy in 2011 and 2010. Trade receivables, other receivables, trade payables and other payables The carrying amounts of these balances approximate their fair values because of the immediate or short-term maturity of those financial instruments. Finance lease and bank loans The fair values of finance lease and bank loans are disclosed in Notes 16, 18 and 20.

52

31 December 2011 (d)

NOTES TO FINANCIAL STATEMENTS

Capital risk management policies and objectives The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of debt, which includes the bank borrowings disclosed in Notes 16, 18 and 20, and equity comprising share capital disclosed in Note 22, reserves and retained earnings. The Group reviews the capital structure on an annual basis. As a part of this review, the Group considers the cost of capital and the risks associated with each class of capital. The Group seeks to balance its overall capital structure through the payment of dividends, new share issues and share buy-backs as well as the obtaining of new debts, refinancing or redemption of existing debts. The Groups overall strategy remains unchanged from 2010. The bank loans require the Group to comply with certain financial covenants with respect of the market values of asset collaterals, and there has been no non-compliance with these externally imposed capital requirements during the year.

RELATED PARTY TRANSACTIONS Compensation of directors and key management personnel The remuneration of directors and other members of key management personnel during the year was as follows: The Group 2011 2010 $000 $000 Short-term benefits Post-employment benefits 828 19 847 749 20 769

The remuneration of directors and key management personnel is determined by the remuneration committee having regard to the performance of individuals and market trends. Other related party transactions with a director and certain key management personnel: The Group 2011 2010 $000 $000 Fees paid to directors in respect of professional services Rental paid to key management personnel for staffing housing Commission paid to a related party in respect of services rendered Money-changing transactions Sales of food and beverage Advertising expenses 52 25 26 20 11 41 43 25 2 -

During the prior year, the Company entered into an agreement with a related party (a company with common directors and in which certain directors have interest, significant influence over the entity and are the members of the key management personnel of the entity) to jointly redevelop the freehold land at 1A Surrey Road into a residential investment property as disclosed in Note 15.
53

NOTES TO FINANCIAL STATEMENTS


6 CASH AND BANK BALANCES The Group 2011 2010 $000 $000 Cash on hand Cash at bank Fixed deposits Total 123 12,028 7,285 19,436 126 10,302 15,413 25,841

31 December 2011

The Company 2011 2010 $000 $000 69 3,009 1,298 4,376 79 944 8,974 9,997

Fixed deposits bear interest ranging from 0.03% to 4.02% (2010 : 0.02% to 3.25%) per annum and for a tenure ranging from 7 to 92 days (2010 : 8 to 92 days) for the Group and 0.19% to 0.25% (2010 : 0.13% to 0.22%) per annum and for a tenure of 91 to 92 days (2010 : 8 to 92 days) for the Company. The Group and Companys cash and cash equivalents that are not denominated in the functional currencies of the respective entities are as follows: The Group The Company 2011 2010 2011 2010 $000 $000 $000 $000 Australian dollar Euro Great Britain pound Hong Kong dollar Japanese Yen Thai Baht United States dollar 7 HELD-FOR-TRADING INVESTMENTS The Group 2011 2010 $000 $000 Quoted bonds Quoted fixed income funds Structured notes with embedded derivatives Managed funds and alternative investments 1,273 162 2,595 1,127 5,157 827 171 2,782 1,176 4,956 The Company 2011 2010 $000 $000 206 285 491 210 187 397 327 640 241 3 654 794 1 176 5 2,141 654 4 1

Investments in quoted bonds, quoted fixed income funds, structured notes with embedded derivatives, and managed funds offer the Group and the Company the opportunity for return through fair value gains. The Group and Companys held-for-trading investments that are not denominated in the functional currencies of the respective entities are as follows: The Group 2011 2010 $000 $000 Euro United States dollar 328 1,402 239 1,469 The Company 2011 2010 $000 $000 285 188

54

31 December 2011 8 AVAILABLE-FOR-SALE INVESTMENTS

NOTES TO FINANCIAL STATEMENTS

The Group 2011 2010 $000 $000 Current assets Equity-linked funds Quoted equity shares Non-current assets Quoted equity shares Unquoted equity share - at cost Total 2,906 781 3,687 6,877 3,616 781 4,397 7,168 528 2,662 3,190 575 2,196 2,771

The Company 2011 2010 $000 $000 450 450 643 781 1,424 1,874 374 374 997 781 1,778 2,152

Available-for-sale investments are held for strategic rather than trading purpose. The Group does not actively trade available-for-sale investments. The available-for-sale investments presented as current assets are those held in investment accounts managed on behalf of the Group by professional fund managers and subject to re-allocation of portfolio investments. The available-for-sale investments presented as non-current assets are those held and managed directly by the Group and the Company and held for long term investments. Unquoted equity share is carried at cost as fair value cannot be reliably measured. Management has evaluated whether there is any indicator of impairment for unquoted equity share carried at cost, by considering both internal and external sources of information, and are satisfied that there is no such indicator. Quoted equity shares offer the Group and the Company opportunity for return through dividend income and fair value gains. They have no fixed maturity or coupon rate. The Group and Companys available-for-sale investments that are not denominated in the functional currencies of the respective entities are as follows: The Group The Company 2011 2010 2011 2010 $000 $000 $000 $000 Euro Great Britain pound Hong Kong dollar Malaysian ringgit United States dollar 9 TRADE RECEIVABLES The Group 2011 2010 $000 $000 Trade receivables Related parties (1) Less: Allowance for doubtful debts 5,311 38 5,349 (725) 4,624 4,792 29 4,821 (514) 4,307 The Company 2011 2010 $000 $000 1,688 2 1,690 (266) 1,424 1,710 1,710 (266) 1,444 194 151 600 1,375 240 224 618 728 365 374

(1)

Companies with common directors and in which certain directors have interest, significant influence over the entities and are the members of the key management personnel of the entities.
55

NOTES TO FINANCIAL STATEMENTS

31 December 2011

The average credit period granted to customers is 30 days (2010 : 30 days). No interest is charged on the trade receivables. Before accepting any new customer, the Group assesses the potential customers credit quality and defines credit limits by customer. The review of customer credit limits is conducted annually. Except for two regular customers with total balance of $0.6 million (2010 : $0.6 million) which made up 14% (2010 : 14%) of the Groups trade receivables, there is no other customer who represents more than 5% of the total balance of trade receivables of the Group. The allowance for estimated irrecoverable amount has been determined based on on-going evaluation of recoverability and aging analysis of individual receivables by reference to their past default experience. The Group does not hold any collateral over these balances. The age of receivables past due but not impaired amounting to $0.5 million (2010 : $1.7 million) ranges from 31 to 60 days (2010 : 31 to 60 days). In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. Management believes that there is no further allowance required. Movement in the allowance for doubtful debts: The Group 2011 2010 $000 $000 Balance at beginning of the year Increase in allowance Bad debts written off Write-back of allowance Exchange adjustment Balance at end of the year 10 514 271 (7) (56) 3 725 181 363 (4) (24) (2) 514 The Company 2011 2010 $000 $000 266 266 22 244 266

OTHER RECEIVABLES, DEPOSITS AND PREPAID EXPENSES The Group 2011 2010 $000 $000 Outside parties Income tax recoverable Refundable deposits Prepaid expenses 199 99 736 454 1,488 193 105 401 413 1,112 The Company 2011 2010 $000 $000 44 3 13 60 21 1 58 80

11

SuBSIDIARIES The Company 2011 2010 $000 $000 Unquoted equity shares - at cost Advances to subsidiaries Deemed investment in subsidiaries arising from fair value of corporate guarantee 34,154 43,254 6,774 84,182 32,154 40,763 5,810 78,727

56

31 December 2011

NOTES TO FINANCIAL STATEMENTS

The details of the Companys subsidiaries at are as follows: Country of incorporation (or registration) and operation Proportion of ownership interest and voting power held 2011 2010 % % 100 100 100 100

Name of subsidiary

Principal activity

Royal Properties Investment Pte Ltd Royal Capital Pte Ltd

Singapore Singapore

Property investment Investment holding and provision of management services Investment holding

Castle Mall Properties Pte Ltd (wholly owned subsidiary of Royal Properties Investment Pte Ltd) Grand Complex Properties Ltd (wholly owned subsidiary of Royal Properties Investment Pte Ltd) (1) Hotel Royal @ Queens (Singapore) Pte Ltd (wholly owned subsidiary of Royal Properties Investment Pte Ltd) Hotel Royal (Thailand) Private Limited (formerly known as Hotel Royal Investment Pte. Ltd.) Prestige Properties Sdn. Bhd. (1) Faber Kompleks Sdn. Bhd. (1) (wholly owned subsidiary of Prestige Properties Sdn. Bhd.) Premium Lodge Sdn. Bhd. (1) (2) (wholly owned subsidiary of Prestige Properties Sdn. Bhd.) Ace Hotel Co., Ltd (3) (wholly owned subsidiary of Hotel Royal (Thailand) Private Ltd)

Singapore

100

100

New Zealand

100

100

Property investment

Singapore

100

100

Hotelier

Singapore

100

100

Investment holding

Malaysia Malaysia

100 100

100 100

Investment holding Hotelier and property investment

Malaysia

100

100

Hotelier

Thailand

100

Hotelier

57

NOTES TO FINANCIAL STATEMENTS

31 December 2011

All the subsidiaries are audited by Deloitte & Touche LLP, Singapore except for the subsidiaries that are indicated as follows:
(1) (2)

Audited by overseas practices of Deloitte Touche Tohmatsu Limited. In 2010, the Companys direct shareholdings in the wholly-owned subsidiary, Premium Lodge Sdn. Bhd., was transferred to Prestige Properties Sdn. Bhd., another wholly-owned subsidiary of the Group. Reviewed by Deloitte & Touche LLP, Singapore for the purpose of the consolidated financial statements of the Group. Acquired on 6 October 2011. Although the company does not own more than 50% of the equity shares of Ace Hotel (Thailand) Co., Ltd., it controls 100% of the voting power of those shares and is responsible for all its liabilities, assets and retained earnings. As a result, Ace Hotel (Thailand) Co., Ltd. is controlled by the company and 100% consolidated in the financial statements.

(3)

In November 2010, the Company registered a branch in Kuala Lumpur, Malaysia. The branch has remained dormant as at end of the year. The amounts owing by subsidiaries are unsecured, not expected to be repaid within the next 12 months and bear interest at 1.31% (2010 : 1.6%) per annum which approximate market interest rate. Hence, the carrying amounts approximate their respective fair values. 12 OTHER ASSET The Company 2011 2010 $000 $000 Lease incentives Less: Current portion included in trade receivables Non-current portion 1,865 (537) 1,328 533 (533) -

Lease incentives refer to non-cash incentives provided by the Group to the tenants for entering into operating leases for its subsidiarys property. The incentives are recognised as a reduction of rental income over the lease term on a straight-line basis. 13 GOODWILL The Company 2011 2010 $000 $000 Arising from acquisition of business (Note 30) 123 -

Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating unit (CGU) that is expected to benefit from that business combination. The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired. The recoverable amounts of the CGU are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rate, growth rates and expected changes to room rates and direct costs during the period. Management estimates discount rates using pre-tax rates that reflect current market assessments of the time value of money and risks specific to the CGU. The growth rates are based on industry growth forecasts. Changes in room rates and direct costs are based on past practices and expectations of future changes in market.
58

31 December 2011

NOTES TO FINANCIAL STATEMENTS

The Group prepares cash flow forecasts derived from the most recent financial budgets approved by management for the next five years and extrapolates cash flows for the following years based on long term growth rate of 3%. The rate used to discount the forecast cash flows is 13% per annum. 14 PROPERTY, PLANT AND EQuIPMENT
Freehold land - hotels $000 The Group Cost or valuation: As at 1 January 2010 Additions Acquisition of a business (Note 30) Disposal Revaluation gain Exchange adjustment As at 31 December 2010 Additions Acquisition of a business (Note 30) Disposal Revaluation gain Exchange adjustment As at 31 December 2011 Comprising: 31 December 2011 At valuation At cost Total 31 December 2010 At valuation At cost Total Accumulated depreciation: As at 1 January 2010 Charge for the year Disposal As at 31 December 2010 Charge for the year Disposal Exchange adjustment As at 31 December 2011 Carrying amount: As at 31 December 2011 As at 31 December 2010 229,325 229,325 187,516 187,516 229,325 187,516 97,989 97,989 92,766 92,766 9,401 816 10,217 1,223 (15) 11,425 86,564 82,549 4,174 4,174 4,190 4,190 3,290 114 3,404 28 (4) 3,428 746 786 21,776 21,776 18,786 18,786 9,082 1,808 (182) 10,708 1,999 (66) (7) 12,634 9,142 8,078 428 428 429 429 217 3 (6) 214 4 218 210 215 229,325 124,367 353,692 187,516 116,171 303,687 21,990 2,741 (188) 24,543 3,254 (66) (26) 27,705 325,987 279,144 159,511 9,172 18,900 (67) 187,516 111 15,170 26,900 (372) 229,325 58,165 34,914 (313) 92,766 45 6,150 (972) 97,989 4,176 14 4,190 (16) 4,174 17,583 1,133 244 (186) 12 18,786 3,104 (84) (30) 21,776 416 19 (6) 429 (1) 428 239,851 1,152 44,330 (192) 18,900 (354) 303,687 3,260 21,320 (84) 26,900 (1,391) 353,692 Freehold building - hotels $000 Building improvement - hotels $000 Linen, china, glassware, Plant and silver and equipment uniform $000 $000

Total $000

59

NOTES TO FINANCIAL STATEMENTS

31 December 2011
Linen, china, glassware, Plant and silver and equipment uniform $000 $000

Freehold land - hotels $000 The Company Cost or valuation: As at 1 January 2010 Additions Disposal Revaluation increase As at 31 December 2010 Additions Disposal Revaluation increase As at 31 December 2011 Comprising: 31 December 2011 At valuation At cost Total 31 December 2010 At valuation At cost Total Accumulated depreciation: As at 1 January 2010 Charge for the year Disposal As at 31 December 2010 Charge for the year Disposal As at 31 December 2011 Carrying amount: As at 31 December 2011 As at 31 December 2010 137,800 137,800 117,900 117,900 137,800 117,900 110,000 7,900 117,900 19,900 137,800

Freehold building - hotels $000

Building improvement - hotels $000

Total $000

7,985 7,985 7,985

3,344 3,344 3,344

9,884 103 (16) 9,971 1,984 (59) 11,896

398 398 398

131,611 103 (16) 7,900 139,598 1,984 (59) 19,900 161,423

7,985 7,985 7,985 7,985 6,875 28 6,903 28 6,931 1,054 1,082

3,344 3,344 3,344 3,344 3,192 28 3,220 28 3,248 96 124

11,896 11,896 9,971 9,971 6,663 706 (12) 7,357 679 (59) 7,977 3,919 2,614

398 398 398 398 217 217 217 181 181

137,800 23,623 161,423 117,900 21,698 139,598 16,947 762 (12) 17,697 735 (59) 18,373 143,050 121,901

The Group engages independent professional valuers to assess the fair values of the freehold land and buildings - hotels on a regular basis. The fair values are estimated by reference to open market values of similar properties on existing use basis, and also considering the current occupancy rates, room rates and rental rates for hotel premises prevailing at or around the end of the reporting period. The fair values as at the end of each reporting period of the Groups freehold land and buildings - hotels are as follows: 2011 $000 The Company - Hotel Royal at Newton Road (1): Freehold land Freehold building Subsidiary - Hotel Royal @ Queens (1): Freehold land Freehold building Subsidiary - Hotel Royal Penang (2): Freehold land Freehold building 137,800 69,000 63,000 92,200 7,567 20,450 2010 $000 117,900 65,000 56,000 70,900 6,672 17,097

60

31 December 2011

NOTES TO FINANCIAL STATEMENTS


2011 $000 2010 $000 10,425 36,759 -

Subsidiary Hotel Royal Kuala Lumpur (3): Freehold land Freehold building Subsidiary White Orchid Hotel (4): Freehold land Freehold building
(1)

10,225 36,053 15,170 8,200

Desktop valuation performed by an independent professional valuer in Singapore as of 31 December 2011 and 2010. Full valuation performed by an independent professional valuer in Malaysia as of 31 December 2011 and 2010. Desktop valuation (2010: Full valuation) performed by an independent professional valuer in Malaysia as of 31 December 2011 and 2010. Full valuation performed by an independent professional valuer in Thailand as of 21 June 2011, followed by desktop valuation of the same amount as of year end.

(2)

(3)

(4)

Revaluation increase/decrease is recognised only for freehold land-hotels in accordance with the Groups accounting policies. Revaluation increase/decrease is not recognised for freehold building-hotels. As at 31 December 2011, had the freehold land-hotels been carried at historical cost less accumulated impairment losses, its carrying amount would have been approximately $48 million (2010 : $33.3 million) for the Group and $1 million (2010 : $1 million) for the Company. Property, plant and equipment of the Group and the Company are pledged as securities for the Groups and the Companys bank loans as disclosed in Notes 16 and 20. The carrying amount of the Groups plant and equipment includes an amount of $84,993 (2010 : $108,173) in respect of assets held under finance lease. 15 INVESTMENT PROPERTIES Freehold land $000 The Group Cost: As at 1 January 2010 Additions Exchange adjustment As at 31 December 2010 Additions Exchange adjustment Transferred from construction in-progress As at 31 December 2011 18,565 (2,183) 16,382 377 93 15,080 31,932 49,646 9,027 934 59,607 2,863 311 8,279 71,060 1,456 1,456 1,456 15,080 2,442 17,522 5,837 (23,359) 84,747 11,469 (1,249) 94,967 9,077 404 104,448 Freehold buildings $000 Leasehold buildings $000 Construction in-progress Total $000 $000

61

NOTES TO FINANCIAL STATEMENTS


Freehold land $000 Accumulated depreciation: As at 1 January 2010 Charge for the year Exchange adjustment As at 31 December 2010 Charge for the year Exchange adjustment As at 31 December 2011 Impairment: As at 1 January 2010 Charge for the year 31 December 2010 Charged for the year As at 31 December 2011 Carrying amount: As at 31 December 2011 As at 31 December 2010 31,932 16,382 Freehold buildings $000 8,216 693 (160) 8,749 897 47 9,693 284 1,116 1,400 2,460 3,860 57,507 49,458 Freehold land $000 The Company Cost: As at 1 January 2010 Additions As at 31 December 2010 Additions Transferred from construction in-progress As at 31 December 2011 Accumulated depreciation: As at 1 January 2010 and 31 December 2010 Charge for the year As at 31 December 2011 Carrying amount: As at 31 December 2011 As at 31 December 2010 15,080 15,080 8,279 8,279 15,080 2,442 17,522 5,837 (23,359) Leasehold buildings $000 423 18 441 18 459 997 1,015 Freehold buildings $000

31 December 2011 Construction in-progress Total $000 $000 17,522 8,639 711 (160) 9,190 915 47 10,152 284 1,116 1,400 2,460 3,860 90,436 84,377

Construction in-progress Total $000 $000

15,080 2,442 17,522 5,837 23,359

15,080 -

68 68 8,211 -

17,522

68 68 23,291 17,522

62

31 December 2011

NOTES TO FINANCIAL STATEMENTS

Fair values of investment properties (for information only): 2011 $000 Freehold land and buildings in New Zealand (1) Freehold land and buildings in Malaysia (2) Freehold buildings in Singapore (3) Leasehold buildings in Singapore (3) Freehold land and building in Singapore (4)(5) Freehold land under redevelopment in Singapore (4)(5) 51,304 15,951 5,260 7,000 27,563 107,078 2010 $000 51,735 14,178 4,030 5,350 19,338 94,631

(1) (2) (3) (4) (5)

Full valuation by an independent professional valuer in New Zealand. Full valuation by an independent professional valuer in Malaysia. Desktop valuation. Full valuation (2010: Desktop valuation) by an independent professional valuer in Singapore. Included under construction-in-progress in 2010.

Fair values of investment properties are generally assessed with reference to their open market values of similar properties on existing use basis, and taking into account current rental rates and market conditions prevailing at the end of the reporting period. Fair value increases/decreases are not recognised for investment properties. In prior year, the Company entered into an agreement with a related party (a company with common directors and in which certain directors have interest, significant influence over the entity and are the members of the key management personnel of the entity) to jointly redevelop the freehold land at 1A Surrey Road into a residential investment property. Currently, the Company and the related party own 87.5% and 12.5% respectively of the titles to the freehold land. The costs of approximately $10 million for the redevelopment shall be shared by the Company and the related party in proportion to their respective percentage share of the freehold land. On or before the completion of the redevelopment, the Company and the related party shall enter into a Partition Agreement under which the redeveloped property shall be partitioned such that the related party will own a particular unit and the Company shall own the remaining units. The Company shall then pay, by way of equality of partition, a sum to be computed based on the total redevelopment costs or total market value, attributable to its increased percentage of titles held in the redeveloped property, whichever is higher. The Companys interest in the freehold land for redevelopment was valued by an independent professional valuer in Singapore at approximately $27.6 million (2010 : $19.3 million), with reference to its open market value as a redevelopment site for residential property. Revaluation increase/decrease is not recognised for the freehold land for redevelopment. Certain investment properties of the Group are pledged as securities for the Groups bank loans as disclosed in Notes 16 and 20. The Group recognised an impairment loss of $2.5 million (2010 : $1.1 million) on investment property based on directors estimation of the market value of that investment property as at 31 December 2011. The property rental income for the Group from the Groups investment properties which are leased out under operating leases, amounted to $5.3 million (2010 : $4.4 million). Direct operating expenses (including repairs and maintenance) of the Group arising from the rental-generating investment properties and non-rental generating investment properties amounted to $3.1 million (2010 : $1.8 million) and $1.4 million (2010 : $1.3 million) respectively.

63

NOTES TO FINANCIAL STATEMENTS


16 BANK LOANS The Group 2011 2010 $000 $000 Short-term bank loans (secured) Long-term bank loans (secured) - current portion (Note 20) 12,250 8,290 20,540 9,350 1,731 11,081

31 December 2011

The Company 2011 2010 $000 $000 12,250 12,250 9,350 9,350

Short-term bank loan, drawn down under the Companys specific advance facility with a bank, with carrying amount of $5.5 million as at 31 December 2011 (2010 : $2.6 million), bears interest rate at 1.70% (2010 : 1.71%) per annum over the prevailing swap offer rate of the bank. The specific advance facility is secured by a mortgage on the Companys freehold land for redevelopment which has been reclassified as an investment property (2010 : investment property construction-in-progress) (Note 15) with carrying amount of $23.3 million (2010 : $17.5 million). Another short-term bank loan, drawn down from the Companys 5-year revolving credit facility with a bank, with carrying amount of $6.75 million as at 31 December 2011 (2010 : $6.75 million), bears interest at 1.70% (2010 : 1.71%) per annum which represents 1.25% (2010 : 1.25%) plus Singapore Swap Offer Rate. This 5-year revolving credit facility is secured by a mortgage on the Companys freehold hotel land and building with a carrying amount of $138.9 million (2010 : $119.0 million). The carrying amounts of short-term bank loans approximate their fair values due to the relatively short-term maturity of these borrowings. 17 OTHER PAYABLES The Group 2011 2010 $000 $000 Outside parties Financial guarantee contract liabilities 18 FINANCE LEASE Minimum lease payments 2011 2010 $000 $000 Amount payable under finance lease: Within one year In the second to fifth year inclusive Less: Future finance charges Present value of lease obligations Less: Amount due for settlement within 12 months (shown under current liabilities) Amount due for settlement after 12 months 8 26 34 (2) 32 8 35 43 (4) 39 8 24 32 N/A 32 (8) 24 7 32 39 N/A 39 (7) 32 Present value of mimimum lease payments 2011 2010 $000 $000 4,139 4,139 2,208 2,208 The Company 2011 2010 $000 $000 401 5,464 5,865 25 5,044 5,069

64

31 December 2011

NOTES TO FINANCIAL STATEMENTS

The lease term is 5 years. For the year ended 31 December 2011, the average effective borrowing rate was 3.72% (2010 : 3.72%) per annum. Interest rates are fixed at the contract date, and thus expose the company to fair value interest risk. All leases are on a fixed repayment basis and no arrangements have been entered into contingent rental payments. All lease obligations are denominated in Singapore dollars. The fair value of the Groups lease obligations approximate their carrying amount. The Groups obligations under finance leases are secured by the lessors title to the leased asset. 19 RETIREMENT BENEFIT OBLIGATIONS The subsidiaries operate unfunded, defined benefit Retirement Benefit Schemes (the Schemes) for their eligible employees in Malaysia and Thailand. Under the Schemes, eligible employees are entitled to retirement benefits based on 75% to 83% of their last drawn salary multiplied with the years of service on attainment of the normal retirement age of 55 or an early retirement age of 45. Defined benefit obligations as at 31 December 2011 for subsidiaries in Malaysia and Thailand have been valued by projecting forward the most recent actuarial valuations in March 2011 and January 2012 respectively which were performed by qualified independent actuaries using the projected unit credit method. (i) Statement of financial position The amounts recognised on the statement of financial position are determined as follows: The Group 2011 2010 $000 $000 Present value of unfunded defined benefit obligations Unrecognised net actuarial gain Net liability Analysed as due: Within 1 year Later than 1 year but not later than 2 years Later than 2 years but not later than 5 years Later than 5 years 580 139 719 42 42 156 479 719 397 151 548 19 16 62 451 548

The movement in the present value of the defined benefit obligations since the beginning of year is due to current service costs incurred, less benefits paid, which are of immaterial amounts and therefore not separately disclosed. (ii) Consolidated profit and loss statement The amount of expense recognised in profit or loss during the year is immaterial.

65

NOTES TO FINANCIAL STATEMENTS


(iii) Actuarial assumptions

31 December 2011

Principal actuarial assumptions used for the purpose of the actuarial valuations were as follows: The Group 2011 2010 % % Discount rate Expected rate of salary increases 20 LONG-TERM BANK LOANS The Group 2011 2010 $000 $000 Bank Loan A - NZ$6.08 million (2010: NZ$4.35 million) Bank Loan B RM32 million (2010: RM33 million) Bank Loan C $26 million (2010: $26 million) Bank Loan D RM58 million (2010: RM60 million) Bank Loan E THB364 million Less: Current portion of long-term bank loans (Note 16) 6,109 13,182 25,550 23,654 14,924 83,419 (8,290) 75,129 4,324 13,813 25,950 24,923 69,010 (1,731) 67,279 3.3 to 6.6 2.5 to 5.0 6.6 5.0

Bank Loan A is secured by a mortgage over a subsidiarys assets and its investment properties with a carrying amount of $51.3 million (NZ$51.1 million) [2010 : $51.7 million (NZ$52.1 million)] and corporate guarantees from both the Company and another subsidiary. The loan is repayable by 26 August 2012. Bank Loan A bears floating interest rate at 5.25% (2010 : 5.80%) per annum. Bank Loan B is secured by a mortgage over a subsidiarys freehold hotel property and investment property with a carrying amount of $28.9 million (RM70.6 million) [2010 : $31.5 million (RM75.5 million)], fixed and floating charge on all assets of the subsidiary, subordination of intercompany advances made to the subsidiary, and corporate guarantee from the Company. The bank loan bears interest at 4.75% (2010 : 3.55%) per annum which represents 1.25% plus the banks cost of funds. The repayment term will be based on 83 monthly installments of varying amounts commencing from January 2010 and a final repayment amount of S$8.1 million (RM19.8 million) in December 2016. Bank Loan C is secured by a mortgage over a subsidiarys freehold hotel land and building with a carrying amount of $92.7 million (2010 : $86.1 million), fixed and floating charge on all assets of subsidiary and all undertakings of the subsidiary and corporate guarantee from the Company. The loan is repayable in 39 quarterly installments of $0.1 million each from June 2008 and a final repayment amount of $25.1 million. The bank loan bears interest at 1.17% (2010 : 1.01%) per annum which represents 0.75% plus the banks swap offer rate. Bank Loan D is secured by a mortgage over a subsidiarys freehold hotel property with a carrying amount of $41.9 million (RM102.5 million) [2010: 43.4 million (RM104.1 million)], fixed and floating charge on all assets of the subsidiary, subordination of intercompany advances made to the subsidiary, and corporate guarantee from the Company. The bank loan bears interest at 4.80% per annum which represents 1.20% plus the banks cost of funds. The repayment term will be based on 83 monthly installments of varying amounts commencing from October 2010 and a final repayment amount of S$14.7 million (RM35.2 million) in September 2017. Bank Loan E is secured by a mortgage over a subsidiarys freehold hotel property with a carrying amount of $21.3 million (THB519.2 million), fixed and floating charge on all assets of the subsidiary, subordination of intercompany advances made to the subsidiary, and corporate guarantee from the Company. The bank loan
66

31 December 2011

NOTES TO FINANCIAL STATEMENTS

bears interest at 5.05% per annum which represents 1.25% plus the banks cost of funds. The repayment term will be based on 21 quarterly installments of varying amounts commencing from October 2013 and a final repayment amount of S$5.2 million (THB127.4 million) in October 2018. As the borrowing rates for the bank loans are variable, management expects those rates to be similar to the borrowing rates that would be available to the Group at the end of the reporting period. Accordingly, the carrying amounts of these bank loans approximate their fair values. The bank loans are denominated in the functional currencies of the respective entities of the Group. 21 DEFERRED INCOME TAX The Group 2011 2010 $000 $000 Balance at beginning of year Origination (Reversal) of temporary differences Effect of change in tax rates Effect of change in tax rules in New Zealand Under provision in prior year Arising from acquisition of business (Note 30) Exchange adjustment Balance at end of year 13,595 377 1,089 (52) 105 15,114 7,874 54 (344) 5,189 72 826 (76) 13,595 The Company 2011 2010 $000 $000 442 442 450 (8) 442

The deferred income tax balance is made up of the following: Accelerated tax depreciation $000 The Group At 1 January 2010 Arising from acquisition of business (Note 30) Debit (Credit) to profit or loss for the year Exchange adjustment At 31 December 2010 Arising from acquisition of business (Note 30) Debit (Credit) to profit or loss for the year Exchange adjustment At 31 December 2011 The Company At 1 January 2010 Credit to profit or loss for the year At 31 December 2010 and 31 December 2011 450 (8) 442 450 (8) 442 6,852 826 5,937 (76) 13,539 (630) 105 13,014 1,022 (966) 56 (52) 2,096 2,100 7,874 826 4,971 (76) 13,595 (52) 1,466 105 15,114 Others $000 Total $000

A subsidiary has unutilised tax losses and capital allowances carryforward of approximately $29.4 million (2010 : $30.2 million), which management has not recognised the related deferred tax benefits, as the expected amount and timing of recoverability are uncertain.

67

NOTES TO FINANCIAL STATEMENTS


22 SHARE CAPITAL The Group and the Company 2011 2010 2011 Number of ordinary shares $000 (000) Issued and fully paid: At beginning of year Issued during the year At end of year 84,000 84,000 60,000 24,000 84,000 100,438 100,438

31 December 2011

2010 $000 64,569 35,869 100,438

In 2010, the issued and paid up ordinary share capital of the Group and the Company was increased by way of rights issue of 24 million new ordinary shares of $1.50 each on the basis of two rights shares for every five ordinary shares. The rights issue was completed in July 2010 and a total of $35.869 million (net of rights issue expenses of $0.131 million) was raised. The Company has one class of ordinary shares with no par value, carry one vote per share and carry a right to dividends. 23 REVENuE The Group 2011 2010 $000 $000 Room revenue Food and beverage revenue Rental income from: Investment properties Other properties Car park revenue Interest income from outside parties Dividend income from: Quoted equity investments Unquoted equity investments Others 24 MISCELLANEOuS INCOME The Group 2011 2010 $000 $000 Gain on disposal of available-for-sale investments Fair value gain on held-for-trading investments Gain on disposal of property, plant and equipment Write-back of allowance for doubtful debts Other income 25 FINANCE COSTS The Group 2011 2010 $000 $000 Interest on bank loans
68

31,589 7,438 5,261 2,637 1,239 132 212 28 271 48,807

24,827 6,090 4,367 2,951 1,220 97 166 14 219 39,951

157 12 56 22 247

322 276 41 24 127 790

2,529

1,528

31 December 2011 26 PROFIT BEFORE INCOME TAX Profit before income tax includes:

NOTES TO FINANCIAL STATEMENTS

The Group 2011 2010 $000 $000 Staff costs (including directors remuneration) Cost of defined contribution plans included in staff costs Directors remuneration: Directors of the subsidiaries (key management personnel) Proposed directors fee: Directors of the Company Directors of the subsidiaries (key management personnel) Fees paid to a director in respect of professional services Audit fees paid to: Auditors of the Company Other auditors Non-audit fees paid to: Auditors of the Company Other auditors Depreciation of property, plant and equipment Depreciation of investment properties Allowance for doubtful debts * Bad debts written off Impairment loss on available-for-sale investments * Impairment loss on investment property * Fair value loss (gain) on held-for-trading investments * Net foreign exchange adjustment loss * * 27 9,158 601 619 147 81 52 190 65 38 9 3,254 915 271 33 81 2,460 241 76 7,679 492 567 141 61 41 168 55 26 5 2,741 711 363 19 1,116 (276) 883

Included in other (income) expenses in the consolidated profit and loss statement. The Group 2011 2010 $000 $000

INCOME TAX EXPENSE

Current tax Deferred tax Under (Over) provision in prior years - current tax - deferred tax Total income tax expense

1,944 377 2,321 171 1,089 3,581

1,739 4,899 6,638 (291) 72 6,419

69

NOTES TO FINANCIAL STATEMENTS

31 December 2011

The income tax expense varied from the amount of income tax expense determined by applying the Singapore income tax rate of 17% (2010 : 17%) to profit before income tax as a result of the following differences: The Group 2011 2010 $000 $000 Income tax expense at statutory rate Non-taxable items Effect of change in tax rates Effect of change in tax rules in New Zealand * Under (Over) provision in prior years Difference due to foreign tax rates Tax exemption and rebate Other items Total income tax expense * 1,610 834 1,260 (43) (80) 3,581 1,949 (84) (344) 5,189 (219) 14 (80) (6) 6,419

The New Zealand governments analysis suggests that on average long-lived buildings have been appreciating since 1993 and a 2% depreciation rate that is tax deductible is not appropriate. Hence, with effect from year of assessment 2012, depreciation expenses will no longer be tax deductible for buildings with an estimated useful life of fifty years or more. No further tax depreciation can be claimed from year of assessment 2012.

28

EARNINGS PER SHARE Basic earnings per share is calculated on the Group profit after tax of $5.89 million (2010 : $5.05 million) divided by weighted average number of ordinary shares of 84 million (2010 : 75,108,932), which has been adjusted to reflect the effects of rights issue in 2010. Diluted earnings per ordinary share is the same as basic earnings per share as there are no dilutive potential ordinary shares.

29

SEGMENT INFORMATION Products and services of the Group Products and services of the Group The Group is primarily engaged in the following operations: Owning and operating hotels and providing ancillary services (hotel operation) Owning and letting out investment properties (property investment) Holding financial investments which comprise financial assets such as shares, bonds, funds and other financial products, to generate a stable stream of income through interest and dividends, and also for potential capital appreciation (financial investment)

Definition of operating segments and reportable segments of the Group For the purpose of reporting to the Groups chief operating decision-maker for resource allocation and assessment of operational performance, the information is organised in the following manner: Hotel operation information is reported on individual hotel basis

70

31 December 2011

NOTES TO FINANCIAL STATEMENTS

Property investment information is reported on individual property basis Financial investment information is reported on overall performance of the investment portfolio

The above forms the basis of determining an operating segment of the Group. For the purpose of reporting segment information externally, the following reportable segments are identified: Hotel operation - Singapore - Malaysia - Thailand Property investment - Singapore - New Zealand - Malaysia Financial investment

The accounting policies of the reportable segments are the same as the Groups accounting policies described in Note 2. Segment profits represent profits earned by each segment without allocation of the finance costs and income tax expense. All assets are allocated to reportable segments except for certain financial assets. Segment liabilities represent operating liabilities attributable to each reportable segment. Bank borrowings and tax liabilities are not allocated. These are the measures reported to the chief operating decision-maker for the purposes of resource allocation and assessment of segment performance. Information regarding the Groups reportable segments is presented below: I Revenue External 2011 2010 $000 $000 Hotel operation Singapore Malaysia Thailand Property investment Singapore New Zealand Malaysia Financial investment Segments total 31,129 10,874 462 42,465 419 4,800 751 5,970 372 48,807 28,585 6,028 34,613 395 4,206 460 5,061 277 39,951 Inter-segment 2011 2010 $000 $000 121 121 1,265 1,386 107 107 1,960 2,067 Total 2011 $000 31,129 10,874 462 42,465 540 4,800 751 6,091 1,637 50,193 2010 $000 28,585 6,028 34,613 502 4,206 460 5,168 2,237 42,018

71

NOTES TO FINANCIAL STATEMENTS


II Net profit Net profit before one-off One-off income income and expenses and expenses (Note 1) 2011 2010 2011 2010 $000 $000 $000 $000 Hotel operation Singapore Malaysia Thailand Property investment Singapore New Zealand Malaysia Financial investment Segments total Finance costs Profit before income tax Income tax expense Profit after income tax 12,041 1,815 186 14,042 29 (1,613) 274 (1,310) (282) 12,450 11,004 726 10,644 (60) (610) (133) (803) 149 11,076 (450) (450) (450) 1,919 1,919 1,919

31 December 2011

Total 2011 $000 12,041 1,815 (264) 13,592 29 (1,613) 274 (1,310) (282) 12,000 (2,529) 9,471 (3,581) 5,890 2010 $000 11,004 2,645 13,649 (60) (610) (133) (803) 149 12,995 (1,528) 11,467 (6,419) 5,048

Note 1 This relates to the bargain purchase gain net of expenses relating to acquisition of Hotel Royal Kuala Lumpur and its business as completed on 1 October 2010 and expenses relating to acquisition of White Orchid Hotel and its business as completed on 6 October 2011. III Segment assets and liabilities Segment assets 2011 2010 $000 $000 Hotel operation Singapore Malaysia Thailand Property investment Singapore New Zealand Malaysia Financial investment Segments total Unallocated items Consolidated total 250,363 61,256 23,009 334,628 31,115 54,205 15,353 100,673 13,221 448,522 7,285 455,807 221,318 66,298 287,616 24,770 53,144 13,438 91,352 12,796 391,764 15,413 407,177 Segment liabilities 2011 2010 $000 $000 3,789 1,940 864 6,593 182 824 680 1,686 175 8,454 112,935 121,389 3,090 1,526 4,616 173 194 925 1,292 181 6,089 93,710 99,799

72

31 December 2011 IV Other segment information Depreciation 2011 2010 $000 $000 Hotel operation Singapore Malaysia Thailand Property investment Singapore New Zealand Malaysia Financial investment Segments total Reconciling items Consolidated total V Geographical information 2,138 1,040 33 3,211 166 633 159 958 4,169 4,169 2,085 615 2,700 97 555 100 752 3,452 3,452

NOTES TO FINANCIAL STATEMENTS

Impairment loss 2011 2010 $000 $000 2,460 2,460 81 2,541 2,541 1,116 1,116 19 1,135 1,135

Additions to non-current assets 2011 2010 $000 $000 2,386 710 21,484 24,580 5,837 2,069 1,171 9,077 33,657 33,657 881 44,483 45,364 2,561 6,182 2,844 11,587 56,951 56,951

Information about the Groups revenue and non-current assets by geographical location are described below: Revenue from Non-current external customers assets 2011 2010 2011 2010 $000 $000 $000 $000 Singapore Malaysia New Zealand Thailand 30 ACQuISITION OF A BuSINESS During the year, the Groups wholly-owned subsidiary, Hotel Royal Thailand Private Limited (formerly known as Hotel Royal Investments Pte Ltd), entered into a Sale and Purchase Agreement (Agreement) to acquire Ace Hotel Co., Ltd together with White Orchid Hotel in Bangkok and its business from a third party, for a cash consideration of approximately $21.3 million (THB 520 million). This acquisition has been completed on 6 October 2011. The acquisition is an opportunity for the Group to expand its hotel operations in the region. 31,884 11,651 4,808 464 48,807 29,225 6,496 4,230 39,951 273,351 74,160 52,633 21,417 421,561 241,260 74,921 51,737 367,918

73

NOTES TO FINANCIAL STATEMENTS


The net identifiable assets acquired in the transaction are as follows:

31 December 2011

Total $000 Land Building Retirement benefit obligations Deferred tax assets Total consideration Goodwill arising from acquisition of business Total consideration, satisfied by cash Net cash outflow arising on acquisitions: Cash consideration paid 15,170 6,150 (175) 52 21,197 123 21,320 21,320

The acquired business contributed $0.5 million and $0.3 million increase to the Groups revenue and loss before income tax respectively for the period between the date of acquisition and the end of the reporting period. If acquisition had been completed on 1 January 2011, total Groups revenue and loss before income tax would have increased by $2.0 million and $1.1 million respectively. In 2010, the Groups wholly-owned subsidiary, Premium Lodge Sdn. Bhd., entered into a Sale and Purchase Agreement (Agreement) to acquire the Coronade Hotel Kuala Lumpur and its business from a third party, for a cash consideration of approximately $39.4 million (RM93 million). The acquisition is an opportunity for the Group to expand its hotel operations in the region. In addition, the Coronade Hotel Kuala Lumpur located in one of the prime tourist and hotel belts of Kuala Lumpur city centre offers potential capital appreciation in the future. The net identifiable assets acquired in the transaction are as follows: Total $000 Land Building Other assets Deferred tax liabilities Total consideration Bargain purchase gain arising from acquisition of business Total consideration, satisfied by cash Net cash outflow arising on acquisitions: Cash consideration paid 9,172 34,914 244 (826) 43,504 (4,109) 39,395 39,395

Management was of the view, after re-assessment, that the gain represented a bargain purchase on acquisition, which was primarily due to the fact that the price was negotiated with the seller during the economic downturn and the market condition had improved subsequently at the completion date of the acquisition. The acquired business contributed $1.6 million and $0.1 million increase to the Groups revenue and profit before income tax respectively for the period between the date of acquisition and the end of the reporting period. If acquisition had been completed on 1 January 2010, total Groups revenue and profit before income tax would have increased by $6.5 million and $0.4 million respectively.

74

31 December 2011 31 OPERATING LEASE ARRANGEMENTS The Group and Company as lessor

NOTES TO FINANCIAL STATEMENTS

The Group and Company rents out its office premises and shop space under operating lease to outside parties. Most of the office premises and shop space held have committed tenancy ranging from 1 to 8 years. At the end of the reporting period, the Group and Company have contracted with tenants for the following future minimum lease receipts for the following periods: The Group 2011 2010 $000 $000 Within one year In the second to fifth years inclusive After fifth year 32 CONTINGENT LIABILITIES (a) Guarantees given The Company and a subsidiary provide guarantees amounting to $6.11 million (NZ$6.08 million) [2010 : $4.32 million (NZ$4.35 million)] to banks for banking facilities granted to another subsidiary which are secured as disclosed in Note 20. In addition, the Company agrees to stand as guarantor for banking facilities totaling $115.7 million (2010 : $96.3 million) obtained by subsidiaries. The fair values of the financial guarantee contract liabilities is about $5.5 million (2010: $5.0 million). The maximum amount that the Company could be forced to settle, in the event that the full guaranteed amount is claimed, is about $83.6 million (2010 : $69.2 million). (b) Legal claims - civil suit initiated by former hotel operator In January 2009, Faber Kompleks Sdn. Bhd., a wholly-owned subsidiary of the Company was served with a notice of civil suit by the former hotel operator of Hotel Royal Penang, for alleged wrongly termination of its services. The former hotel operator is seeking to claim injunctive relief, specific performance and general damages. Faber Kompleks Sdn. Bhd. had maintained that there was no valid claim on the grounds that the former hotel operator had previously operated solely on an interim arrangement which has ceased on 31 December 2008. No formal management contract had been entered between Faber Kompleks Sdn. Bhd. and the former hotel operator. In January 2010, the former hotel operator obtained an interlocutory order from the High Court of Malaya at Penang to restrain Faber Kompleks Sdn. Bhd. from interfering with his operation and management of the hotel. Faber Kompleks Sdn. Bhd. had filed an appeal to the Appeals Court of Malaysia against this order and the High Court of Malaya at Penang had granted Faber Kompleks Sdn. Bhd. a stay of execution in February 2010. On 12 October 2010, the Appeals Courts of Malaysia had allowed the appeal of Faber Kompleks Sdn. Bhd. against the decision of the High Court in granting the Injunction against Faber Kompleks Sdn. Bhd. On 15 November 2010, the former hotel operator filed an appeal to the Federal Court of Malaysia against the Appeals Court of Malaysias decision in not granting the injunction against Faber Kompleks Sdn. Bhd.
75

The Company 2011 2010 $000 $000 1,390 962 2,352 708 4 712

8,257 19,323 39 27,619

9,360 12,621 3,569 25,550

NOTES TO FINANCIAL STATEMENTS

31 December 2011

On 27 January 2011, the application by the former hotel operator was dismissed by the Federal Court of Malaysia in favour of Faber Kompleks Sdn. Bhd. As the claims for damages remained contested, the financial impact, should there be any, cannot be estimated or ascertained with reasonable certainty at this juncture. Based on consultation with legal adviser in Malaysia, management is of the view that the claims for damages by the former hotel operator are without merit, and management intends to and will defend vigorously the civil suit. As such, management has not made any provision for this legal claim as at 31 December 2011. 33 CAPITAL EXPENDITURE COMMITMENTS The Group 2011 2010 $000 $000 Estimated amounts committed for future capital expenditure but not provided for in the financial statements 34 DIVIDENDS During the financial year ended: (a) 31 December 2010, the Company declared and paid a first and final one-tier tax exempt dividend of $0.05 per share on the ordinary shares of the Company totaling $3.0 million in respect of the financial year ended 31 December 2009. 31 December 2011, the Company declared and paid a first and final one-tier tax exempt dividend of $0.05 per share on the ordinary shares of the Company totaling $4.2 million in respect of the financial year ended 31 December 2010. The Company 2011 2010 $000 $000

16,529

7,322

890

6,405

(b)

Subsequent to 31 December 2011, the directors of the Company recommended that a first and final one-tier tax exempt dividend be paid at $0.05 per ordinary share totaling $4.2 million for the financial year just ended on the ordinary shares of the Company. The dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as liability in these financial statements.

76

Schedule of the Groups Major Properties


The schedule below shows the Groups major properties as at 31 December 2011 with particulars of their tenure and usage. Held By
Hotel Royal Limited

Location
36 Newton Road Singapore 1A Surrey Road Singapore

Description and area


Land area of about 7,200 sq m Hotel building with built-up area of approximately 23,500 sq m Land area of about 718 sq m Residential building held for redevelopment with strata floor area of 1,232 sq m (The Company has a 87.5% share of the above property. The remaining 12.5% is owned by a related party) Land area of about 1,979 sq m Hotel building with built-up area of approximately14,605 sq m Land area of about 3,495 sq m Hotel building with build-up area of approximately 28,569 sq m Land area of about 5,498 sq m Shopping centre and offices with total lettable retail area of 5,786 sq m; total lettable office area of 2,714 sq m; and 88 carpark lots Land area of about 773 sq m Hotel building with built-up area of approximately 20,027 sq m Land area of about 1,480 sq m Hotel building with build-up area of approximately 19,802 sq m

Tenure
Freehold

Effective Stake
100%

Freehold

100%

Hotel Royal @ Queens (Singapore) Pte Ltd Presitge Properties Sdn. Bhd. and subsidiaries

12 Queen Street Singapore 3 Jalan Larut Georgetown Penang Malaysia 126 Jalan Burma Georgetown Penang Malaysia*

Freehold

100%

Freehold

100%

Freehold

97%

Jalan Walter Frenier 55100 Kuala Lumpur Malaysia Ace Hotel (Thailand) Co., Ltd. Yaowaraj Road Samphanthawong Sub-district Samphanthawong District Bangkok Metropolis 16 Willis Street 22-42 Willis Street 80 Boulcott Street & 84 Boulcott Street Wellington New Zealand* No. 20 Maxwell Road #12-02 Maxwell House Singapore* #05-14 Kapo Factory Building Singapore* #02-14, #06-02, #07-02 and #09-08 Tong Lee Building Singapore* * Investment properties

Freehold

100%

Freehold

100%

Grand Complex Properties Limited

Land area of about 6,898 sq m Shopping centre and offices with lettable retail area of 4,431 sq m; lettable office area of 20,028 sq m and 323 car park lots Office unit Strata floor area of about 551 sq m

Freehold

100%

Royal Properties Investment Pte Ltd

99 years (from 1969)

100%

Flatted factory unit Strata floor area of about 157 sq m Factory unit Strata floor area of about 277 sq m each

Freehold

100%

Freehold

100%

77

Statistics of Shareholdings
ANALYSIS OF SHAREHOLDINGS as at 23 March 2012 Issued and Fully Paid-Up Capital No of Shares Issued Class of Shares Voting Rights Treasury Shares S$100,729,496 ** 84,000,000 Ordinary Shares 1 Vote Per Share Nil

** This is based on records kept with the Accounting & Corporate Regulatory Authority (ACRA) and differs from the accounting records of the Company which is S$100,438,356 due to certain share issue expenses. Size of Shareholdings 1 999 1,000 10,000 10,001 - 1,000,000 1,000,001 & above Total No. of Shareholders 316 749 272 15 1,352 % of Shareholders 23.37 55.40 20.12 1.11 100.00

No. of Shares 65,373 3,016,209 15,066,216 65,852,202 84,000,000

% of Shares 0.07 3.59 17.94 78.40 100.00

Based on the information provided and to the best knowledge of the Directors, approximately 25.46% of the issued ordinary shares of the Company is held in the hands of the public as at 23 March 2012 and therefore Rule 723 of the Listing Manual of Singapore Exchange Securities Trading Limited is complied with. TOP TWENTY SHAREHOLDERS as at 23 March 2012 Name of Shareholders 1. Oversea Chinese Bank Nominees Pte Ltd 2. The Great Eastern Life Assurance Co Ltd - Participating Fund 3. Aik Siew Tong Ltd 4. Asia Building Bhd 5. Hock Tart Pte Ltd 6. Melodies Limited 7. United Overseas Bank Nominees Pte Ltd 8. Mayban Nominees (S) Pte Ltd 9. Singapore Island Bank Nominees Pte Ltd 10. The Singapore-Johore Express (Private) Limited 11. Mellford Pte Ltd 12. Lee Chin Chuan 13. Chan Tai Moy 14. Tan Chaw @ Tan Kow Tee 15. Chip Keng Holding Bhd 16. The Great Eastern Trust Private Limited 17. Season Holdings Pte Ltd 18. Bank of Singapore Nominees Pte Ltd 19. UOB Kay Hian Pte Ltd 20. Liu Ping-Nan Phyllis Total
78

No. of Shares 9,379,460 9,307,012 8,246,000 6,875,400 5,292,000 4,060,000 3,763,130 3,360,000 3,360,000 3,154,200 2,986,000 2,164,400 1,377,600 1,372,000 1,155,000 741,066 600,800 555,800 540,223 486,500 68,776,591

% of Shares 11.17 11.08 9.82 8.19 6.30 4.83 4.48 4.00 4.00 3.76 3.55 2.58 1.64 1.63 1.37 0.88 0.72 0.66 0.64 0.58 81.88

Statistics of Shareholdings
STATISTICS OF SHAREHOLDINGS as at 23 March 2012 SuBSTANTIAL SHAREHOLDERS as at 23 March 2012 as shown in the Register of Substantial Shareholders:Direct Interest No. of Shares % 42,000 20,286,000 8,652,000 9,310,372 6,875,400 7,560,000 0.05 24.15 10.30 11.08 8.19 9.00 Deemed Interest No. of Shares % 8,666,000 8,652,000 10,714,200 20,286,000 10,054,798 10,054,798 1,155,000 10.32 10.30 12.76 24.15 11.97 11.97 1.38 -

Substantial Shareholders Lee Chou Hor George (1) Lee Chou Tart (2) Aik Siew Tong Ltd (3) Hock Tart Pte Ltd (4) The Great Eastern Life Assurance Co Ltd (5) Great Eastern Holdings Limited (5) Oversea-Chinese Banking Corporation Limited (6) Asia Building Bhd (7) Melodies Limited (3)

Other Shareholders The Singapore-Johore Express (Private) Limited (3) Chip Keng Holding Bhd (7) 3,154,200 1,155,000 3.76 1.38 -

Note:
(1) (2) (3) Lee Chou Hor George owns 23.8% of the share capital of Hock Tart Pte Ltd (Hock Tart). He is deemed interested in the shares held by Hock Tart. Additionally, Lee Chou Hor George is deemed interested in the shares held by his spouse. Lee Chou Tart owns 23.8% of the share capital of Hock Tart. He is deemed interested in the shares held by Hock Tart. Aik Siew Tong Ltd (AST) holds 83.4% and 69.1% of the share capital of Melodies Limited (Melodies) and The Singapore-Johore Express (Private) Limited (S-J Express) respectively and is deemed to be interested in the 7,560,000 Shares and 3,154,200 Shares which are held by Melodies and S-J Express respectively. Hock Tart Pte Ltd holds 31.7% of the share capital of AST and is therefore deemed interested in the shares held by AST. The Great Eastern Life Assurance Co Ltd is the wholly-owned subsidiary of Great Eastern Holdings Limited. Great Eastern Holdings Limited is therefore deemed interested in the 9,310,372 Shares (of which 3,360 Shares are registered in the name of United Overseas Bank Nominees Pte Ltd). Great Eastern Holdings Limited is deemed interested in the 10,054,798 Shares which made up of 9,310,372 Shares as aforementioned; 741,066 Shares registered in the name of its subsidiary, The Great Eastern Trust Private Limited and 3,360 Shares registered in the name of United Overseas Bank Nominees Pte Ltd. (6) (7) Oversea-Chinese Banking Corporation Limited is deemed to be interested in the shares held by Great Eastern Life Assurance Company Ltd through Great Eastern Holdings Ltd. Chip Keng Holding Bhd is the wholly-owned subsidiary of Asia Building Bhd. Asia Building Bhd is deemed interested in the 1,155,000 Shares held by Chip Keng Holding Bhd.

(4) (5)

79

Artists Impression:

Proposed Rejuvenation of White Orchid Hotel, Bangkok

(in $000)

FIVE YEAR GROUP FINANCIAL STATISTICS


2011 2010 2009 2008 2007

PROFIT & LOSS Turnover Profit before income tax Profit after income tax Dividends 48,807 9,471 5,890 4,200 39,951 11,467 5,048 3,000 35,507 10,058 10,616 3,000 36,909 13,703 10,853 3,000 30,961 40,074 37,727 2,460

BALANCE SHEET Current assets Investments Property, plant & equipment Investment properties Lease incentives Goodwill Total 34,246 3,687 325,987 90,436 1,328 123 455,807 39,259 4,397 279,144 84,377 407,177 26,843 3,851 217,861 75,824 324,379 21,813 2,448 234,967 52,551 311,779 26,526 3,526 221,318 56,936 308,306

Current liabilities Finance lease Long-term bank loans Deferred income tax Other payables Total liabilities Shareholders equity Total Earnings per share before income tax (1) Earnings per share after income tax (1) Net tangible asset backing per ordinary share

30,403 24 75,129 15,114 719 121,389 334,418 455,807

18,345 32 67,279 13,595 548 99,799 307,378 407,177

25,066 39,525 7,874 523 72,988 251,391 324,379

43,310 26,433 7,689 521 77,953 233,826 311,779

51,124 8,903 60,027 248,279 308,306

11.28cts 7.01cts $3.98(2)

15.27cts 6.72cts $3.66

15.03cts 15.86cts $4.19

20.48cts 16.22cts $3.90

59.88cts 56.38cts $4.14

(1)

The weighted average number of ordinary shares of 84,000,000 for 2011,75,108,932 for 2010 and 66,919,791 for 2007 to 2009 have been adjusted to reflect the rights issue during 2010. Please refer to Chairmans Message on page 3.

(2)

81

NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the 43rd Annual General Meeting of Hotel Royal Limited will be held at the Hotel Royal @ Queens, Queens Room, Level 3, 12 Queen Street, Singapore 188553 on 28 April 2012 at 2.30 p.m. for the following purposes:Ordinary Business 1. 2. 3. 4. 5. To receive and adopt the Directors Report and Audited Financial Statements for the financial year ended 31 December 2011 together with the Auditors Report thereon. (Resolution 1) To declare a First and Final Dividend of 5 cents per ordinary share one-tier tax exempt for the financial year ended 31 December 2011. (Resolution 2) To approve the sum of S$147,000 as Directors Fees for the financial year ended 31 December 2011. (FY2010: S$141,488). (Resolution 3) To re-elect Dr Lee Keng Thon who is retiring in accordance with Article 117 of the Companys Articles of Association. (Resolution 4) To re-elect Professor Pang Eng Fong who is retiring in accordance with Article 102 of the Companys Articles of Association. (Resolution 5) (Note: Professor Pang Eng Fong will, upon re-election as director of the Company, remain as the Chairman of the Remuneration Committee and a member of the Audit Committee and Nominating Committee and will be considered independent). 6. To re-appoint Mr Ng Kok Lip as Director who will retire and seek re-appointment under Section 153(6) of the Companies Act, Cap 50, to hold office from the date of this Annual General Meeting until the next Annual General Meeting of the Company. (Resolution 6) (Note: Mr Ng Kok Lip will, upon re-election as director of the Company, remain as the Chairman of the Nominating Committee and a member of the Audit Committee and Remuneration Committee and will be considered independent). 7. To re-appoint Deloitte & Touche LLP as Auditors of the Company and to authorise the Directors to fix their remuneration. (Resolution 7)

Special Business To consider and, if thought fit, to pass the following resolutions, with or without amendments, as Ordinary Resolutions:8. Authority to issue shares That pursuant to Section 161 of the Companies Act, Chapter 50 (the Act), the Articles of Association and the listing rules of the Singapore Exchange Securities Trading Limited (SGX-ST), authority be and is hereby given to the directors of the Company to:(a) (i) (ii) allot and issue shares in the capital of the Company (the Shares) (whether by way of rights, bonus or otherwise); and/or make or grant offers, agreements, or options (collectively, Instruments) that might or would require Shares to be issued, including but not limited to the creation and issue of warrants, debentures or other instruments convertible into Shares,

at any time and upon such terms and conditions and for such purposes and to such persons as the directors may in their absolute discretion deem fit; and
82

NOTICE OF ANNUAL GENERAL MEETING (b) (notwithstanding the authority conferred by this Resolution may have ceased to be in force): (i) (ii) issue additional instruments as adjustments in accordance with the terms and conditions of the Instruments made or granted by the directors while this Resolution was in force; and issue Shares in pursuance of any Instruments made or granted by the directors while this Resolution was in force or such additional Instruments in (b)(i) above,

provided that: (1) the aggregate number of Shares to be issued pursuant to this Resolution (including Shares to be issued in pursuance of Instruments made or granted pursuant to this Resolution) does not exceed 50% of the total number of issued Shares (excluding treasury shares, if any) at the time of the passing of this Resolution (as calculated in accordance with sub-paragraph (2) below), of which the aggregate number of Shares issued other than on a pro rata basis to existing shareholders (including Shares to be issued in pursuance of Instruments made or granted pursuant to this Resolution) does not exceed 5% of the Companys total number of issued Shares (excluding treasury shares, if any) (as calculated in accordance with sub-paragraph (2) below); and (subject to such manner of calculation as may be prescribed by the SGX-ST) for the purpose of determining the aggregate number of Shares that may be issued under sub-paragraph (1) above, the total number of issued Shares (excluding treasury shares, if any) shall be calculated based on the total number of issued Shares (excluding treasury shares, if any) at the time of the passing of this Resolution, after adjusting for:(a) (b) new Shares arising from the conversion or exercise of convertible securities; new Shares arising from the exercise of share options or vesting of share awards outstanding or subsisting at the time this Resolution is passed, provided the options or awards were granted in compliance with Part VIII of Chapter 8 of the SGX-ST Listing Manual; and any subsequent bonus issue, consolidation or subdivision of Shares;

(2)

(c) (3)

in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of the listing rules of the SGX-ST for the time being in force (unless such compliance has been waived by the SGX-ST) and the Articles of Association for the time being of the Company; and (unless revoked or varied by the Company in general meeting) the authority conferred by this Resolution shall continue in force until the conclusion of the next annual general meeting of the Company or the date by which the next annual general meeting of the Company is required by law to be held, whichever is the earlier. [See Explanatory Note (a)] (Resolution 8)

(4)

9.

Renewal of Share Purchase Mandate

That for the purposes of Sections 76C and 76E of the Companies Act, Cap. 50, the Directors of the Company be and are hereby authorised to make purchases or otherwise acquire issued shares in the capital of the Company from time to time (whether by way of market purchases or off-market purchases on an equal access scheme) of up to ten per centum (10%) of the total number of issued shares (excluding treasury shares) in the capital of the Company (as ascertained as at the date of the Annual General Meeting of the Company) at the price of up to but not exceeding the Maximum Price as defined in the section entitled Definitions set out on Page 4 of the Circular dated 9 April 2009 to the Shareholders of the Company and in accordance with the Guidelines on Share Purchases set out in Appendix I of the said Circular and this mandate shall, unless revoked or varied by the Company in general meeting, continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier. [See Explanatory Note (b)] (Resolution 9)

83

NOTICE OF ANNUAL GENERAL MEETING Any Other Business 10. To transact any other business which may be properly transacted at an Annual General Meeting.

BY ORDER OF THE BOARD

Sharon Yeoh Company Secretary

Singapore, 13 April 2012


Explanatory Notes:(a) Resolution 8, if passed, will empower the Directors from the date of the Annual General Meeting until the date of the next Annual General Meeting, to issue shares and convertible securities in the Company. The number of shares and convertible securities that the Directors may allot and issue under this Resolution would not exceed 50% of the total number of issued shares (excluding treasury shares) of the Company at the time of the passing of this resolution. For issue of shares and convertible securities other than on a pro rata basis to all shareholders, the aggregate number of shares and convertible securities to be issued shall not exceed 5% of the total number of issued shares (excluding treasury shares) of the Company. Resolution 9, if passed, will renew the Share Purchase Mandate and will authorise the directors to purchase or otherwise acquire Shares on the terms and subject to the conditions of the resolution. The rationale for, the authority and limitation on, the sources of funds to be used for the purchase or acquisition including the amount of financing and the financial effects of the purchase or acquisition of Shares by the Company pursuant to the Share Purchase Mandate on the audited consolidated financial statements of the Group for the financial year ended 31 December 2011 are set out in greater detail in the Appendix enclosed together with the Annual Report. The authority will expire at the next Annual General Meeting of the Company, unless previously revoked or waived at a general meeting.

(b)

NOTES:1. 2. 3. A member entitled to attend and vote at the Annual General Meeting is entitled to appoint not more than two proxies to attend and vote in his/her stead. A proxy need not be a member of the Company. The instrument appointing a proxy shall, in the case of an individual, be signed by the appointor or his attorney, and in case of a corporation, shall be either under the Common Seal or signed by its attorney or an officer on behalf of the corporation. The instrument appointing a proxy must be deposited at the Registered Office of the Company at 36 Newton Road, Singapore 307964 not less than forty-eight (48) hours before the time for holding the Annual General Meeting.

84

HOTEL ROYAL LIMITED


(Co. Reg. No. 196800298G) (Incorporated in the Republic of Singapore)

IMPORTANT 1. For investors who have used their CPF monies to buy shares of Hotel Royal Limited, the Annual Report 2011 is forwarded to them at the request of their CPF Approved Nominees and is sent solely FOR INFORMATION ONLY. This Proxy Form is not valid for use by CPF Investors and shall be ineffective for all intents and purposes if used or purported to be used by them. CPF Investors who wish to vote should contact their CPF Approved Nominee.

ANNUAL GENERAL MEETING


PROXY FORM

2.

3.

I/We, _____________________________________________________(Name), NRIC/Passport No. ________________________ of ____________________________________________________________________________________________ (Address) being a member / members of HOTEL ROYAL LIMITED hereby appoint: Name Address NRIC/ Passport Number Proportion of Shareholdings (%)

and/or (delete as appropriate) Name Address NRIC/ Passport Number Proportion of Shareholdings (%)

or failing him/her, the Chairman of the Meeting, as my/our proxy/proxies to vote for me/us on my/our behalf, at the 43rd Annual General Meeting (AGM) of the Company, to be held at the Hotel Royal @ Queens, Queens Room, Level 3, 12 Queen Street, Singapore 188553 on 28 April 2012, at 2.30 p.m. and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the Resolutions to be proposed at the AGM as indicated hereunder. If no specific directions as to voting is given or in the event of any item arising not summarised below, the proxy/proxies will vote or abstain from voting at his/their discretion.

No. 1. 2. 3. 4. 5. 6. 8. 9.
*

Resolutions: Adoption of Directors Report, Audited Financial Statements and Auditors Report for the financial year ended 31 December 2011. Declaration of First and Final Dividend. Approval of Directors Fees. Re-election of Dr Lee Keng Thon. Re-election of Professor Pang Eng Fong. Re-appointment of Mr Ng Kok Lip. Authority to issue new shares. Re-appointment of Auditors and fixing their remuneration. Renewal of Share Purchase Mandate.

For*

Against*

7.

Please indicate your vote For or Against with a tick () within the box provided.

Dated this _______ day of ________________________ 2012. Shares in: ________________________________________ Signature(s) of Member(s)/Common Seal IMPORTANT: PLEASE READ NOTES OVERLEAF (a) Depository Register (b) Register of Members No. of Shares

NOTES 1. 2. A member of the Company entitled to attend and vote at the Meeting is entitled to appoint not more than two proxies to attend and vote in his stead. Such proxy need not be a member of the Company. Where a member appoints more than one proxy, he/she shall specify the proportion of his/her shareholdings (expressed as a percentage of the whole) to be represented by each proxy. If no such proportion or number is specified, the first named proxy may be treated as representing 100% of the shareholding and any second named proxy as an alternate to the first named. A member should insert the total number of shares held. If the member has shares entered against his/her name in the Depository Register (as defined in Section 130A of the Companies Act, Cap. 50 of Singapore), he/she should insert that number of shares. If the member has shares registered in his/her name in the Register of Members of the Company, he/she should insert that number of shares. If the member has shares entered against his/her name in the Depository Register and registered in his name in the Register of Members, he/she should insert the aggregate number of shares. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all shares held by the member. The instrument appointing a proxy or proxies must be deposited at the Companys Registered Office at 36 Newton Road, Singapore 307964 not less than forty-eight (48) hours before the time for holding the Meeting. The instrument appointing a proxy or proxies must be under the hand of the appointor or his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its Common Seal or under the hand of its attorney or a duly authorised officer. Where an instrument appointing a proxy is signed on behalf of the appointor by an attorney, the letter or power of attorney or a duly certified copy thereof shall (failing previous registration with the Company) be lodged with the instrument of proxy, failing which the instrument may be treated as invalid. A corporation which is a member may by resolution of its directors or other governing body authorise such person as it thinks fit to act as its representative at the Annual General Meeting. The Company shall be entitled to reject the instrument appointing a proxy or proxies which is incomplete, improperly completed, illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointer specified in the instrument appointing a proxy or proxies. In addition, in the case of shares entered in the Depository Register, the Company shall be entitled to reject any instrument appointing a proxy or proxies if the member, being the appointor, is not shown to have shares entered against his/her name in the Depository Register as at 48 hours before the time appointed for holding the Meeting, as certified by The Central Depository (Pte) Limited to the Company.

3.

4. 5.

6.

7. 8.