Hotel Royal Limited Annual Report 2009

Transcription

1 Hotel Royal Limited Annual Report 2009

2 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 Mr Goh Kok Yeow, 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 Mr Goh Kok Yeow Mr Lee Khin Tien REMUNERATION COMMITTEE Mr Ng Kok Lip (Chairman) Col (Ret) Rodney How Seen Shing Mr Goh Kok Yeow Mr Lee Khin Tien NOMINATING COMMITTEE Mr Goh Kok Yeow (Chairman) Col (Ret) Rodney How Seen Shing Mr Ng Kok Lip Mr Lee Khin Tien COMPANY SECRETARY Lynette Loo (Ms) Wong Siew Choo (Mrs) SHARE REGISTRAR B.A.C.S. Private Limited 63 Cantonment Road Singapore Tel : (65) Fax : (65) main@bacs.com.sg REGISTERED OFFICE 36 Newton Road Singapore Tel : (65) Fax : (65) royal@hotelroyal.com.sg AUDITORS Deloitte & Touche LLP Certified Public Accountants Singapore 6 Shenton Way #32-00 DBS Building Tower Two Singapore Tel : (65) Fax : (65) 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: G

3 Contents Chairman s Message 2 Board of Directors 4 Senior Management 6 Report on Corporate Governance 7 Risk Factors and Risk Management 18 Report of the Directors 20 Statement of Directors 23 Independent Auditors Report 24 Statements of Financial Position 25 Consolidated Profit and Loss Statement 27 Consolidated Statement of Comprehensive Income 28 Statements of Changes in Equity 29 Consolidated Statement of Cash Flows 30 Notes to Financial Statements 32 Schedule of the Group s Major Properties 71 Statistics of Shareholdings 74 Five Year Group Financial Statistics 77 Notice of Annual General Meeting 78 Proxy Form

4 Chairman s Message Dear Shareholders, 2009 has been a challenging year for Hotel Royal Limited Group of companies as the global financial crisis and the declining tourist arrivals affect the business of the Company and the Group. Performance in 2009 The Group s revenue for 2009 decreased by 3.8% or S$1.4 million from S$36.9 million in 2008 to S$35.5 million in 2009 mainly due to lower room rates given to capture a larger share of the tourist market. This decrease was smaller as it was partly offset by additional contribution from the Penang properties acquired in the fourth quarter of Despite the challenges, the Group made a profit after tax of S$10.6 million in 2009 which is slightly lower than the S$10.9 million in The Group had a relatively satisfactory year. Outlook for 2010 Tourist arrivals in Singapore are expected to grow strongly in 2010, especially with the phased opening of the two integrated resorts. This will hopefully benefit both hotels in Singapore. Hotel Royal Penang will still have a challenging year to build up its brand name and presence in Penang. Our investment property in Grand Complex, New Zealand, is actively marketing its vacant space and we will be doing some major renovation works on the property this year for a major long-term tenant. In addition to the above, the Group s profitability will continue to be influenced by the performance of the NZD, USD and MYR against the SGD, the changes in the market value and investment income of our financial investment portfolio. Expanding Our Horizon Penang Plaza will be undergoing a major upgrading in 2010 to unlock the value of this shopping mall. Star Mansions which the Company bought in 2007 will be redeveloped into an apartment block with eleven units, including a penthouse. The Company intends to hold this as a long term investment so as to broaden the Company s recurring revenue base. The redevelopment is expected to be completed by The Group has just announced that it has entered into a conditional sale and purchase agreement to purchase The Coronade Hotel Kuala Lumpur for RM93 million. Barring unforeseen circumstances, this purchase should be completed within 2010 and the Group intends to manage the hotel property itself. Awards In 2009, the Company was successfully recertified as a Singapore Service Class and Singapore Quality Class organization. Hotel Queens achieved ISO certification and will be embarking on Singapore Service Class certification. These form part of our journey towards Service Excellence. 2

5 Chairman s Message Hotel Club.com s (a major internet reservation portal) customers have voted Hotel Royal as one of the three outstanding performers in Asia. We are the only independent hotel in Singapore to achieve this award and it is a recognition of our effort to live up to our vision of Every Room A Home. Net Tangible Asset Per Share Based on directors estimate, the total market value of the Group s hotel and investment properties as at 31 December 2009 was about S$395 million as compared to their total net book value of S$284.1 million. The unrecorded revaluation surplus (net of tax effect) amounted to S$95.9 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$4.19 to S$5.79 per share as at 31 December Proposed Dividend The Board of Directors recommends a one-tier tax exempt first and final dividend of five cents per share amounting to S$3 million. A Word of Appreciation I wish to thank each and every shareholder for your unfailing support. Our customers have continued to support us strongly in a difficult A great thank you to all our staff for their excellent service to our customers and to my fellow directors for their continued support and wise counsel during the year. Dr Lee Keng Thon Chairman 11 March

6 Board of Directors Dr. Lee Keng Thon Dr. Lee Keng Thon, aged 66, was appointed to the Board of Directors on 8 September He was last re-elected as a director on 28 April 2007 and was appointed the Chairman of the Company on 29 April Dr. Lee is a director of Aik Siew Tong Limited, Melodies Limited and Singapore- Johore 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 67, 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 25 April 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 68, was appointed to the Board of Directors on 1 January 2003 and is the Chairman of the Remuneration Committee and a member of the Audit and Nominating Committees. He was last re-elected as a director on 25 April 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

7 Board of Directors Goh Kok Yeow Goh Kok Yeow, aged 48, was appointed to the Board of Directors on 21 June He is a practising lawyer and currently a partner in a local law firm, De Souza Lim & Goh LLP. He was last re-elected as a director on 26 April 2008 and is the Chairman of the Nominating Committee and a member of the Audit and Remuneration Committees. He graduated from University of Manchester, UK with a LLB (Hons) and is also a Barrister-at-law. Mr. Goh practices in the areas of commercial litigation, corporate law, banking and securities and intellectual property law. Mr. Goh is a member of the Law Society of Singapore, the Singapore Academy of Law and the Singapore Institute of Arbitrators. He is also a member of the Inquiry Panel appointed by the Honourable the Chief Justice under the Legal Profession Act. Lee Khin Tien Lee Khin Tien, aged 58, 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 28 April 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 56, 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 26 April 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. 5

8 Senior Management Lee Chin Chuan Adviser Lee Chin Chuan, aged 78, 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 He was appointed as the Group Adviser on 29 April 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 Group s Key Subsidiaries George Lee Chou Hor joined the Group in 1993 and is the General Manager/Director of the Group s 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 Group s accounting and taxation functions. She joined the Group in 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 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 Group s investment properties. He was appointed the General Manager of Hotel Queens (Singapore) Pte Ltd in April He holds a Bachelor of Arts from the National University of Singapore. 6

9 Report on Corporate Governance Preamble The Board of Directors of Hotel Royal Limited has adopted 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 Board s 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. BOARD MATTERS 1.1 The Board s 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 Group s 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 five meetings in total for the financial year ended 31 December

10 Report on Corporate Governance The directors attendance at those meetings are as follows: Director (a) (b) Percentage (%) Dr Lee Keng Thon % Col (Ret) Rodney How Seen Shing % Ng Kok Lip % Goh Kok Yeow % Lee Khin Tien % Lee Kin Hong % During 2009, the Audit Committee held five meetings: (a) (b) Percentage (%) Col (Ret) Rodney How Seen Shing % Ng Kok Lip % Goh Kok Yeow % Lee Khin Tien % During 2009, the Nominating Committee held two meetings: (a) (b) Percentage (%) Goh Kok Yeow % Col (Ret) Rodney How Seen Shing % Ng Kok Lip % Lee Khin Tien % During 2009, the Remuneration Committee held one meeting: (a) (b) Percentage (%) Ng Kok Lip % Col (Ret) Rodney How Seen Shing % Goh Kok Yeow % Lee Khin Tien % Notes: (a) Number of meetings held in 2009 (b) Number of meetings attended 8

11 Report on Corporate Governance 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 Board s 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. The composition of the Board and independence of each non-executive director will be reviewed annually by the Nominating Committee. At present, the Board comprises six directors of whom three are considered independent by the Nominating Committee in accordance with the definition of independence in the Code. The details are as follows: Director Dr Lee Keng Thon Board Membership Non-Executive Chairman Audit Committee Membership Nominating Remuneration Col (Ret) Rodney How Seen Shing Independent & Non-Executive Chairman Member Member Ng Kok Lip Independent & Non-Executive Member Member Chairman Goh Kok Yeow Independent & Non-Executive Member Chairman Member Lee Khin Tien Non-Executive Member Member Member Lee Kin Hong Non-Executive The Board collectively possess the core competencies, appropriate mix of expertise and experience for effective functioning and decision. 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 company s 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. The Non-Executive Chairman s roles in relation to Board matters are as follows: (a) (b) (c) (d) To schedule meetings that enable the Board to perform its duties responsibly while not interfering with the flow of the Company s 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 Company s guidelines on corporate governance. 9

12 Report on Corporate Governance 1.4 Board Membership Principle 4: There should be a formal and transparent process for the appointment of new directors to the Board. Directors will present themselves for re-nomination and re-election at regular intervals of at least once every three years. Pursuant to Article 117 of the Company s Articles of Association, one-third of the directors retires from office at the Company s Annual General Meeting. The year of initial appointment and last re-election of the directors are as appended below: Name Age Position Date of Initial Appointment Date of Last re-election Dr Lee Keng Thon 66 Non-Executive Chairman Col (Ret) Rodney How Seen Shing 67 Director Ng Kok Lip 68 Director Goh Kok Yeow 48 Director Lee Khin Tien 58 Director Lee Kin Hong 56 Director The Nominating Committee The Nominating Committee consists of four directors; namely, Goh Kok Yeow, (Chairman of the Nominating Committee), Col (Ret) Rodney How Seen Shing, Ng Kok Lip and Lee Khin Tien. The terms of reference of the Nominating Committee are as follows: (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. The Board will engage in annual self-evaluation as a collective body. The evaluation process will be administered by the Nominating Committee and the results of this evaluation will be deliberated with the full Board. The Nominating Committee held two meetings during the financial year ended 31 December

13 Report on Corporate Governance 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 Board s 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 Board s 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 management s performance and hence are less applicable to directors. In any case, such financial indicators provide a snapshot of a company s 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 Company s 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. Informal reviews of the Board s performance are undertaken on a continual basis by the Nominating Committee with inputs from the other Board members and CEO. Renewals or replacement of Board members 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. 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 Company s 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 Company s 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 Company s operations, its significant financial, accounting and risk management issues, its principal officers and its independent auditors. All directors are also encouraged to attend, at Company s 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 Company s expense. 11

14 Report on Corporate Governance 2. Remuneration Matters 2.1 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 Ng Kok Lip, (Chairman of the Remuneration Committee), Col (Ret) Rodney How Seen Shing, Goh Kok Yeow 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 2009 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 Committee s 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 director s 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. 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 Chairman s 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 Company s Annual General Meeting. 12

15 Report on Corporate Governance 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 company s 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 2009 is as follows: Annual Remuneration Report Remuneration of directors for the year ended 31 December 2009 Variable for Director s Fees Remuneration Band & Base/Fixed performance related (including Name of Director salary income/bonuses subsidiaries) Below S$250,000 Dr Lee Keng Thon % Col (Ret) Rodney How Seen Shing % Ng Kok Lip % Goh Kok Yeow % Lee Khin Tien 16%* - 84% Lee Kin Hong % * This was from Prestige Properties Sdn. Bhd., a wholly-owned subsidiary, amounting to RM13,

16 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 2009 are set out below: Variable for Director s Fees Remuneration Band & Base/Fixed performance related (including Name of Executive salary income/bonuses subsidiaries) S$250,000 to below S$500,000 Lee Chou Hock 91% 6% 3% George Lee Chou Hor 90% 6% 4% Below S$250,000 Lee Chin Chuan 95% 5% - Tay Kok Liang 100% - - Wong Siew Choo 100% - - Lee Chu Bing 94% 6% - 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$250,000 during the year. Mr 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. ACCOUNTABILITY AND AUDIT 3.1 Accountability Principle 10: The Board should present a balanced and understandable assessment of the company s 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 Board s 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 Group s 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 Company s business are identified and appropriately managed. 14

17 Report on Corporate Governance 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, Goh Kok Yeow and Lee Khin Tien. The Audit Committee held four meetings during the financial year ended 31 December 2009 and performed the following functions: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) 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 Company s officers; Reviewed the quarterly and annual financial statements, inclusive of 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 Company s internal controls; Reviewed the efficiency and effectiveness of internal audit function; and Reviewed interested person transactions, if any. 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 Company s 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 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. 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. 15

18 Report on Corporate Governance 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 company s 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. 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 Group s material internal controls consisting of financial, operational and compliance controls as well as risk management. The internal audit comprises all areas of operations. 4. COMMUNICATION WITH SHAREHOLDERS 4.1 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 Board s 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 Company s annual reports; 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. 4.2 Greater Shareholder Participation 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. 16

19 Report on Corporate Governance 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 Group s 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 Code s 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 Company s share during the period of two weeks and one month immediately preceding the announcement of the Company s quarterly and full-year reasults 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 Company s 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 arm s length basis and are not prejudicial to the interests of the shareholders. The Company s 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 2009 is set out on page 51 of this Annual Report. 17

20 Risk Factors and Risk Management Financial risks The Group s 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 Group s 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, net of any allowances for losses represents the Group s 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 14 and 17 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 and the Swiss franc vis-à-vis the Singapore dollar. In addition, the Group is exposed to currency translation risk as it has significant subsidiaries operating in New Zealand and Malaysia. For the year ended 31 December 2009, approximately 18% (2008 : 14%) of the Group s net assets is denominated in New Zealand dollar and approximately 6% (2008 : 13%) is denominated in Malaysian ringgit. 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. 18

21 Risk Factors and Risk Management 5. Liquidity risk 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 2009, total current liabilities exceeded total current assets by $16.2 million (2008 : $31.8 million) for the Company. This is mainly due to some of the Company s bank loans being arranged on short-term revolving basis, as the interest rates are more favourable. Management assesses the availability of credit facilities 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. The Group and the Company have unutilised credit facilities totalling $81.7 million (2008 : $67.6 million) and $66.7 million (2008 : $52.1 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 14 and 17, and equity comprising share capital disclosed in Note 19, 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 Group s overall strategy remains unchanged from 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 Group s businesses are subject to general business risks. They are as follows: a. War and terrorism, and its adverse effect on business; b. The spread of contagious diseases and their adverse effect on tourist arrivals; c. Global recession and its effect on the performance of the local economy; and d. Changes in government regulations that burden the Group s 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

22 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 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 Goh Kok Yeow 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 Name of directors and companies Shareholdings registered in which directors are in which interests are held in name of directors deemed to have an interest At beginning At end At beginning At end of year of year of year of year The Company Ordinary shares Ordinary shares Dr Lee Keng Thon 357, , Lee Khin Tien 168, , Lee Kin Hong 55,200 55, , ,000 The directors interests as disclosed above remained unchanged at 21 January

23 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. (b) 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. (c) 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. 6 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, Lee Khin Tien and Goh Kok Yeow. The Audit Committee held four meetings during the financial year ended 31 December 2009 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; (b) Reviewed the assistance rendered to the external auditors by the Company s officers; (c) Reviewed the quarterly and annual financial statements, inclusive of announcements to shareholders and SGX-ST prior to submission to the Board of Directors for approval; 21

24 Report of the Directors (d) Performed annual review of the independence and objectivity of the external auditors; (e) Recommended the appointment or re-appointment of external and internal auditors and remuneration of the external and internal auditors; (f) Reviewed the scope and extent of non-audit services performed by external auditors; (g) Held meetings annually with both external and internal auditors without the presence of management; (h) Reviewed the adequacy of the Company s internal controls; (i) Reviewed the efficiency and effectiveness of internal audit function; and (j) Reviewed interested person transactions, if any. 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 auditors have unrestricted access to the Audit Committee. The Company s 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 Company at the forthcoming annual general meeting. 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 11 March

25 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 70 are drawn up so as to give a true and fair view of the state of affairs of the Company and of the Group as at 31 December 2009, 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 as and when they fall due. ON BEHALF OF THE DIRECTORS. Dr Lee Keng Thon Lee Khin Tien 11 March

26 INDEPENDENT AUDITORS REPORT 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 2009, 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 70. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of the Singapore Companies Act, Cap. 50 (the Act ) and Singapore Financial Reporting Standards. This responsibility includes: devising and maintaining a system of internal accounting controls sufficient to provide a 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; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. 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 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 auditor s 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 entity s preparation and fair presentation of the financial statements 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 entity s 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, a) 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 2009 and 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; and b) 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 11 March

27 31 December 2009 STATEMENTS OF FINANCIAL POSITION The Group The Company Note $ 000 $ 000 $ 000 $ 000 ASSETS Current assets Cash and bank balances 6 13,241 9,183 2,244 2,250 Held-for-trading investments 7 5,114 5, Available-for-sale investments 8 3,471 2, Trade receivables 9 3,451 3,322 1,779 1,645 Other receivables, deposits and prepaid expenses 10 1,370 1, Inventories Total current assets 26,843 21,813 4,986 5,162 Non-current assets Subsidiaries ,592 64,213 Available-for-sale investments 8 3,851 2,048 1, Other receivable Property, plant and equipment , , , ,035 Investment properties 13 75,824 52,551 15,080 - Total non-current assets 297, , , ,064 Total assets 324, , , ,226 LIABILITIES AND EQUITY Current liabilities Bank loans 14 18,746 34,765 18,049 32,699 Trade payables 3,301 3,629 2,040 2,161 Other payables 15 1,544 2, Income tax payable 1,475 2,755 1,017 2,122 Total current liabilities 25,066 43,310 21,138 37,007 25

28 STATEMENTS OF FINANCIAL POSITION 31 December 2009 The Group The Company Note $ 000 $ 000 $ 000 $ 000 Non-current liabilities Retirement benefit obligations Long-term bank loans 17 39,525 26, Deferred income tax 18 7,874 7, Total non-current liabilities 47,922 34, Capital and reserves Share capital 19 64,569 64,569 64,569 64,569 Asset revaluation reserve 113, ,177 88,108 88,108 Fair value reserve 2, Translation reserve 59 (7,516) - - Retained earnings 71,000 63,384 13,207 9,981 Total equity 251, , , ,697 Total liabilities and equity 324, , , ,226 See accompanying notes to financial statements. 26

29 Year ended 31 December 2009 CONSOLIDATED PROFIT AND LOSS STATEMENT The Group Note $ 000 $ 000 Revenue 20 35,507 36,909 Cost of sales (16,983) (15,700) Gross profit 18,524 21,209 Other income 21 1,715 4,978 Distribution costs (323) (161) Administrative expenses (8,156) (5,902) Other expenses (450) (5,038) Finance cost 22 (1,252) (1,383) Profit before income tax 23 10,058 13,703 Income tax credit (expense) (2,850) Profit for the year attributable to owners of the Company 10,616 10,853 Basic earnings per share (cents) cents cents Diluted earnings per share (cents) cents cents See accompanying notes to financial statements. 27

30 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Year ended 31 December 2009 The Group $ 000 $ 000 Profit for the year 10,616 10,853 Other comprehensive income: Revaluation decrease of freehold land - hotels - (9,293) Available-for-sale investments: Fair value gain (loss) recognised in fair value reserve 2,294 (3,059) Transfer from fair value reserve to profit or loss arising from impairment of investments 91 1,503 Transfer from fair value reserve to profit or loss upon disposal of available-for-sale investments (11) 232 Exchange differences on translation of foreign operations 7,575 (11,689) Income tax relating to components of other comprehensive income - - Other comprehensive income for the year, net of tax 9,949 (22,306) Total comprehensive income for the year attributable to owners of the Company 20,565 (11,453) See accompanying notes to financial statements. 28

31 Year ended 31 December 2009 STATEMENTS OF CHANGES IN EQUITY Asset Share revaluation Fair value Translation Retained capital reserve reserve reserve earnings Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 The Group Balance at 1 January , ,470 1,536 4,173 55, ,279 Total comprehensive income for the year - (9,293) (1,324) (11,689) 10,853 (11,453) Final dividends (Note 31) (3,000) (3,000) Balance at 31 December , , (7,516) 63, ,826 Total comprehensive income for the year - - 2,374 7,575 10,616 20,565 Final dividends (Note 31) (3,000) (3,000) Balance at 31 December , ,177 2, , ,391 The Company Asset Share revaluation Fair value Retained capital reserve reserve earnings Total $ 000 $ 000 $ 000 $ 000 $ 000 Balance at 1 January ,569 93, , ,760 Total comprehensive income for the year - (5,500) (174) 6, Final dividends (Note 31) (3,000) (3,000) Balance at 31 December ,569 88, , ,697 Total comprehensive income for the year ,226 6,670 Final dividends (Note 31) (3,000) (3,000) Balance at 31 December ,569 88, , ,367 See accompanying notes to financial statements. 29

32 CONSOLIDATED STATEMENT OF CASH FLOWS Year ended 31 December 2009 The Group $ 000 $ 000 Operating activities Profit before income tax 10,058 13,703 Adjustments for: Depreciation expense 3,183 2,477 Impairment loss on available-for-sale investments 91 1,503 Dividend income (161) (177) Interest income (154) (335) Allowance for doubtful debts Write-back of allowance for doubtful debts (110) (24) Excess of fair values of net identifiable assets acquired over cost of combination - (4,826) Interest expense 1,252 1,383 (Gain) Loss on disposal of available-for-sale investments (13) 177 Loss on disposal of property, plant and equipment Fair value (gain) loss on held-for-trading investments (918) 2,895 Operating cash flows before movements in working capital 13,399 16,900 Available-for-sale investments (current assets) Held-for-trading investments 1, Trade and other receivables Inventories Trade and other payables (943) 723 Cash generated from operations 13,921 19,373 Interest paid (1,252) (1,383) Interest received Dividend received Income tax paid - net of refund (1,615) (1,049) Net cash from operating activities 11,369 17,453 30

33 Year ended 31 December 2009 CONSOLIDATED STATEMENT OF CASH FLOWS Investing activities The Group $ 000 $ 000 Purchase of available-for-sale investments (non-current assets) (530) (9) Proceeds from disposal of property, plant and equipment 35 - Additions to property, plant and equipment (1,085) (5,829) Acquisition of a subsidiary (Note 27) - (24,117) Additions to investment properties (19) (789) Net cash used in investing activities (1,599) (30,744) Financing activities Proceeds from bank loans 16,662 53,098 Repayment of bank loans (19,589) (37,953) Dividends paid (3,000) (3,000) Net cash (used in) from financing activities (5,927) 12,145 Net increase (decrease) in cash and cash equivalents 3,843 (1,146) Cash and cash equivalents at beginning of year 9,183 9,481 Effect of currency exchange adjustment Cash and cash equivalents at end of year 13,241 9,183 Cash and cash equivalents consist of: The Group $ 000 $ 000 Cash on hand Cash at bank 6,661 3,536 Fixed deposits 6,460 5,524 Total 13,241 9,183 See accompanying notes to financial statements. 31

34 NOTES TO FINANCIAL STATEMENTS 31 December GENERAL The Company (Registration No G) is incorporated in Singapore with its registered office and its principal place of business at 36 Newton Road, Singapore 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 2009 were authorised for issue by the board of directors on 11 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING - The financial statements have been prepared in accordance with the historical cost convention, modified to include the revaluation of certain property, plant and equipment and investments 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 The adoption of these new/revised FRSs and INT FRSs does not result in changes to the Group s accounting policies and has no material effect on the amounts reported for the current or prior years. FRS 1 Presentation of Financial Statements (Revised) FRS 1 (revised 2008) has introduced terminology changes (including revised titles for the financial statements) and changes in the format and presentation of the financial statements. In addition, the revised Standard requires the presentation of a third statement of financial position at the beginning of the earliest comparative period presented if an entity applies new accounting policies retrospectively or makes retrospective restatements or reclassifies items in its financial statements. Amendments to FRS 107 Financial Instruments: Disclosures Improving Disclosure about Financial Instruments The amendments to FRS 107 expand the disclosures required in respect of fair value measurements and liquidity risk of the Group s financial assets and liabilities. Financial assets and liabilities carried at fair values need to be categorised into a 3-level fair value hierarchy which reflects the significance of inputs used in making the fair value measurements: Level 1 - Quoted prices in active markets for identical instrument (i.e. without modification or repackaging); Level 2 - Inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly; and Level 3 - Inputs that are not based on observable market data. 32

35 31 December 2009 NOTES TO FINANCIAL STATEMENTS Additional disclosures are required on the basis and changes relating to the Level 3 category. There are also additional disclosures relating to maturity analyses to provide additional quantitative information for cash flows that could either occur significantly earlier, or be for significantly different amounts, from those indicated in the liquidity analysis presented by management. Where applicable, the Group has elected not to provide comparative information for these expanded disclosures in the current year in accordance with the transitional reliefs offered in these amendments. FRS 108 Operating Segments The Group adopted FRS 108 with effect from 1 January FRS 108 requires operating segments to be identified on the basis of internal reports about components of the group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to assess its performance. In contrast, the predecessor standard (FRS 14 Segment Reporting) required an entity to identify two sets of segments (Business and Geographical), using a risks and rewards approach, with the entity s system of internal financial reporting to key management personnel serving only as the starting point for the identification of such segments. The adoption of FRS 108 has resulted in more reportable segments due to the application of more stringent criteria for aggregating segments for reporting purposes. There are also additional disclosures required by FRS 108. The comparatives have been restated to conform to the requirements of FRS 108. At the date of authorisation of these financial statements, the following FRSs that are relevant to the Company and the Group were issued but not effective: FRS 27 - Consolidated and Separate Financial Statements (Revised); and FRS Business Combinations (Revised) FRS 27 (Revised) Consolidated and Separate Financial Statements; and FRS 103 (Revised) Business Combinations FRS 27 (Revised) is effective for annual periods beginning on or after 1 July FRS 103 (Revised) is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July Apart from matters of presentation, the principal amendments to FRS 27 that will impact the Company and the Group concern the accounting treatment for transactions that result in changes in a parent s interest in a subsidiary. It is likely that these amendments will significantly affect the accounting for such transactions in future accounting periods, but the extent of such impact will depend on the detail of the transactions, which cannot be anticipated. The changes will be adopted prospectively for transactions after the date of adoption of the revised Standard and, therefore, no restatements will be required in respect of transactions prior to the date of adoption. Similarly, FRS 103 is concerned with accounting for business combination transactions. The changes to the Standard are significant, but their impact can only be determined once the detail of future business combination transactions is known. The amendments to FRS 103 will be adopted prospectively for transactions after the date of adoption of the revised Standard and, therefore, no restatements will be required in respect of transactions prior to the date of adoption. Except for the above, management anticipates that the adoption of other FRSs, INT FRSs and amendments to FRSs issued at the date of authorisation of these financial statements but effective only in future periods will have no material impact on the financial statements of the Group and the Company in the period of the initial application. 33

36 NOTES TO FINANCIAL STATEMENTS 31 December 2009 BASIS OF CONSOLIDATION - The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee enterprise so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the year are included in the consolidated profit and loss statement and 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 the accounting policies used in line with those used by other members of the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation. In the Company s financial statements, investments in subsidiaries are carried at cost less any impairment in net recoverable value that has been recognised in profit or loss. BUSINESS COMBINATIONS - The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under FRS 103 Business Combinations are recognised at their fair values at the acquisition date. Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Company s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Company s interest in the net fair value of the acquiree s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in the consolidated profit or loss. FINANCIAL INSTRUMENTS - Financial assets and financial liabilities are recognised on the Group s 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 is 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. Other 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. 34

37 31 December 2009 NOTES TO FINANCIAL STATEMENTS 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. 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 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 Company s 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 Group s 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. 35

38 NOTES TO FINANCIAL STATEMENTS 31 December 2009 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 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 asset s 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 risk 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. 36

39 31 December 2009 NOTES TO FINANCIAL STATEMENTS 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 rate method, with interest expense recognised on an effective yield basis. Interest-bearing bank loans and overdrafts are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate 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 Group s 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 Group s 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 as an expense, 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. 37

40 NOTES TO FINANCIAL STATEMENTS 31 December 2009 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. The estimated useful lives are as follows: Number of years Freehold buildings - hotels 80 Building improvement - hotels 20 to 25 Plant and equipment 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 50 to 80 Leasehold buildings 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 Group s 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. IMPAIRMENT OF 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 38

41 31 December 2009 NOTES TO FINANCIAL STATEMENTS 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. 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. 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. 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 asset s net carrying amount. Dividend income from investments is recognised when the shareholders rights to receive payment have been established. 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. 39

42 NOTES TO FINANCIAL STATEMENTS 31 December 2009 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, are dealt with as payments to defined contribution plans where the Group s obligations under the plans are equivalent to those arising in a defined contribution retirement benefit plan. A subsidiary operates an unfunded, defined benefit Retirement Benefit Scheme ( the Scheme ) for its eligible employees. The subsidiary s obligation under the Scheme, calculated using the Projected Unit Credit Method, is determined based on actuarial computations by independent actuary, through which the amount of benefit that employees have earned in return for their service in the current and prior years is estimated. That benefit is discounted in order to determine its present value. 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 Scheme 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 plan. 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 Group s 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 40

43 31 December 2009 NOTES TO FINANCIAL STATEMENTS 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 acquirer s interest in the net fair value of the acquiree s 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. In preparing the financial statements of the individual entities, transactions in currencies other than the entity s 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 nonmonetary 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 Group s 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 the Group s translation reserve. Such translation differences accumulated in the translation reserve shall be reclassified to profit or loss (as a reclassification adjustment) in the period in which the foreign operation is disposed of. 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 Group s 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 41

44 NOTES TO FINANCIAL STATEMENTS 31 December 2009 period, or in the period of the revision and future periods if the revision affects both current and future periods. Critical judgements in applying accounting policies Impairment of investments in subsidiaries in the Company s 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 $6.5 million (2008 : $3.7 million) and $1.2 million (2008 : $0.3 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 $0.09 million (2008 : $1.5 million) for the Group and $0.03 million (2008 : $0.1 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 (2008 : $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 Group entities have entered into intercompany advances of $31 million (2008 : $36 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 gain of $3.2 million (2008 : $5.6 million loss) 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. Provision for legal claim (Note 29) 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 Unutilised tax losses and capital allowances carryforward (Notes 18 and 27) The subsidiary, Faber Kompleks Sdn. Bhd., has unutilised tax losses and capital allowances of approximately $29.9 million (2008 : $29.5 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

45 31 December 2009 NOTES TO FINANCIAL STATEMENTS Impairment indicators of investment properties (Note 13) and property, plant and equipment (Note 12) 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, has determined that there were no impairment indicators. 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 (Notes 9 and 10) Management considered the recoverability of the Group s trade and other receivables, and have made estimates for unrecoverable amounts based on objective evidence of debtors financial status. Allowances made are as disclosed in Notes 9 and 10. Fair values of net assets acquired in a business combination (Note 27) In 2008, the Group acquired the subsidiary, Faber Kompleks Sdn. Bhd., which was accounted for using the purchase method. As at 31 December 2008, the Group has applied the purchase method using the provisional fair values of the net assets of the acquiree as described in Note 27. In 2009, the fair values of the net identifiable assets of the acquiree were finalised, and no retrospective adjustment is required to the fair values as reported as at 31 December Retirement benefit obligations (Note 16) The subsidiary, Faber Kompleks Sdn. Bhd., operates an unfunded defined benefit Retirement Benefit Scheme that requires actuarial estimates to determine the present value of the benefit obligations. The basis of estimates is described in Note 16. 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 $5.1 million (2008 : $5.0 million) for the Group and $0.3 million (2008 : $0.3 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. 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 13) and property, plant and equipment (Note 12) over their estimated useful lives, using the straight-line method. Freehold land - hotels at revalued amounts (Note 12) 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 2009 were assessed by independent professional valuers, taking into account open market values of similar properties in Singapore 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. 43

46 NOTES TO FINANCIAL STATEMENTS 31 December 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: Financial assets The Group The Company $ 000 $ 000 $ 000 $ 000 Fair value through profit or loss (FVTPL): Held-for-trading investments 5,114 5, Loans and receivables (including cash and cash equivalents) 17,659 13,571 49,006 61,469 Available-for-sale investments 7,322 4,498 1,992 1,111 Financial liabilities Amortised cost 63,116 66,988 20,121 34,885 (b) Financial risk management policies and objectives The Group s overall financial risk management programme seeks to minimise potential adverse effects of financial performance of the Group. The Group s 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. 44

47 31 December 2009 NOTES TO FINANCIAL STATEMENTS There has been no change to the Group s 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 The Group s 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, net of any allowances for losses represents the Group s maximum exposure to credit risk. ii) Interest rate risk Summary quantitative data of the Group s 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 14 and 17. 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 Group s profit for the year ended 31 December 2009 would decrease/increase by approximately $0.3 million (2008 : decrease/increase by $0.3 million). This is mainly attributable to the Group s 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 Company s profit for the year ended 31 December 2009 would decrease/increase by approximately $0.1 million (2008 : decrease/increase by $0.2 million). This is mainly attributable to the Company s exposure to interest rate risk on its variable rate borrowings. The above analysis may not be fully reflective of the Group s exposure to interest rate risk as the extent of interest rate sensitivity of the Group s investments may vary given the dynamic management of the portfolio and the variety of the instruments involved. 45

48 NOTES TO FINANCIAL STATEMENTS 31 December 2009 iii) Foreign currency risk The Group s 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 and the Swiss franc 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 The Company Assets Liabilities Assets Liabilities $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 United States dollar 3,762 3, Euro Australian dollar Great Britain pound Malaysian ringgit Hong Kong dollar Swiss franc 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 The Company $ 000 $ 000 $ 000 $ 000 Impact arising from United States dollar Euro Australian dollar Great Britain pound Swiss franc

49 31 December 2009 NOTES TO FINANCIAL STATEMENTS Other comprehensive income will increase by approximately: The Group The Company $ 000 $ 000 $ 000 $ 000 Impact arising from United States dollar Hong Kong dollar Euro Malaysian ringgit 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 New Zealand and Malaysia. For the year ended 31 December 2009, approximately 18% (2008 : 14%) of the Group s net assets is denominated in New Zealand dollar and approximately 6% (2008 : 13%) is denominated in Malaysian ringgit. 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 Group s investments, if prices had been 10% higher/lower while all other variables were held constant: the Group s profit for the year ended 31 December 2009 would increase/decrease by approximately $0.4 million (2008 : $0.4 million); and the Group s other comprehensive income would increase/decrease by approximately $0.7 million (2008 : $0.4 million). In respect of the Company s investments, if prices had been 10% higher/lower while all other variables were held constant: the Company s profit for the year ended 31 December 2009 would increase/decrease by approximately $0.03 million (2008 : increase/decrease by $0.03 million). the Company s other comprehensive income for the year ended 31 December 2009 would increase/decrease by approximately $0.1 million (2008 : increase/decrease by $0.03 million). 47

50 NOTES TO FINANCIAL STATEMENTS 31 December 2009 v) Liquidity risk 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 2009, total current liabilities exceeded total current assets by $16.2 million (2008 : $31.8 million) for the Company. This is mainly due to some of the Company s bank loans being arranged on short-term revolving basis, as the interest rates are more favourable. Management assesses the availability of credit facilities 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. The Group and the Company have unutilised credit facilities totalling $81.7 million (2008 : $67.6 million) and $66.7 million (2008 : $52.1 million) respectively. Liquidity and interest risk analyses Financial liabilities The following tables detail the remaining contractual maturity for non-derivative financial liabilities. The tables have 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 statement of financial position. The Group Weighted average On demand effective or within Within interest rate 1 year 2 to 5 years After 5 years Adjustment Total % p.a. % p.a. $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Non-interest bearing NA NA 4,845 5, ,845 5,790 Variable interest rate instruments ,993 35,210 4,438 1,684 35,836 25,100 (996) (796) 58,271 61,198 The Company Non-interest bearing NA NA 2,072 2, ,072 2,186 Variable interest rate instruments ,462 33, (413) (621) 18,049 32,699 NA: not applicable. The company has given corporate guarantees to banks for credit facilities granted to certain subsidiaries of the Group, as disclosed in Note 29. The fair values of the financial guarantee contract liabilities are not recognised by the Company as the accounting effects are immaterial. The maximum amount that the company could be forced to settle in the event the full guaranteed amount is claimed is about $54 million (2008 : $67 million). The earliest period that the guarantee could be called is within 1 year (2008 : 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. 48

51 31 December 2009 NOTES TO FINANCIAL STATEMENTS Financial assets The following table details the expected maturity for non-derivative financial assets. The tables below have 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 statement of financial position. The Group Weighted average effective On demand interest rate or within 1 year Within 2 to 5 years Adjustment Total % p.a. % p.a. $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Non-interest bearing NA NA 19,071 14,613 3,851 2, ,922 16,662 Fixed interest rate instruments ,478 5, (18) (42) 6,460 5,524 Variable interest rate instruments (10) (18) 713 1,177 The Company Non-interest bearing NA NA 3,306 3,113 1, ,939 3,929 Fixed interest rate instruments ,563 1,539 45,584 58,570 (770) (1,138) 46,377 58,971 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. Held-for-trading and available-for-sale investments Held-for-trading and available-for-sale investments that are measured at fair values amounted to $5.1 million (2008 : $5.3 million) and $6.5 million (2008 : $3.7 million) respectively for the Group and $0.3 million (2008 : $0.3 million) and $1.2 million (2008 : $0.3 million) respectively for the Company. For 2009, the information on the basis of fair values are categorised into the following 3 categories: The Group The Company $ 000 $ 000 Level 1 6,503 1,211 Level 2 3, Level 3 2,

52 NOTES TO FINANCIAL STATEMENTS 31 December 2009 Level 1: Level 2: Level 3: 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. 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. 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 The Company $ 000 $ 000 Opening balance 2, Fair value gains 70 - Purchases Disposals (788) - Closing balance 2, 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. Bank loans The fair values of bank loans are disclosed in Notes 14 and 17. (d) 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 14 and 17, and equity comprising share capital disclosed in Note 19, 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. 50

53 31 December 2009 NOTES TO FINANCIAL STATEMENTS The Group s overall strategy remains unchanged from 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. 5 RELATED PARTY TRANSACTIONS Related parties are entities with common direct or indirect shareholders and/or directors. Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions. 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 $ 000 $ 000 Short-term benefits 1,061 1,115 Post-employment benefits ,114 1,183 The remuneration of directors and key management 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 $ 000 $ 000 Fees paid to a director in respect of professional services Rental paid to key management personnel for staffing housing Money-changing transactions CASH AND BANK BALANCES The Group The Company $ 000 $ 000 $ 000 $ 000 Cash on hand Cash at bank 6,661 3, Fixed deposits 6,460 5,524 1,537 1,510 Total 13,241 9,183 2,244 2,250 Fixed deposits bear interest ranging from 0.07% to 2.00% (2008 : 0.31% to 3.00%) per annum and for a tenure ranging from 13 to 91 days (2008 : 31 to 58 days) for the Group and 0.11% to 0.54% (2008 : 1.16%) per annum and for a tenure of 30 to 91 days (2008 : 58 days) for the Company. 51

54 NOTES TO FINANCIAL STATEMENTS 31 December 2009 The Group and Company s cash and bank balances that are not denominated in the functional currencies of the respective entities are as follows: The Group The Company $ 000 $ 000 $ 000 $ 000 United States dollar 1,657 1, Australian dollar Euro Great Britain pound Hong Kong dollar Swiss Franc HELD-FOR-TRADING INVESTMENTS The Group The Company $ 000 $ 000 $ 000 $ 000 Quoted bonds Quoted fixed income funds Structured notes with embedded derivatives 2,780 2, Managed funds and alternative investments 1,350 1, ,114 5, The Group s investments in quoted bonds have effective interest rates of 3.85% (2008 : 3.85% to 7.61%) per annum and have maturity dates in August 2010 (2008 : November 2009 to October 2017). 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 Company s held-for-trading investments that are not denominated in the functional currencies of the respective entities are as follows: The Group The Company $ 000 $ 000 $ 000 $ 000 United States dollar 1,010 1, Euro Great Britain pound Swiss franc AVAILABLE-FOR-SALE INVESTMENTS The Group The Company $ 000 $ 000 $ 000 $ 000 Current assets Equity-linked funds 1, Quoted equity shares 2,449 1, ,471 2,

55 31 December 2009 NOTES TO FINANCIAL STATEMENTS The Group The Company $ 000 $ 000 $ 000 $ 000 Non-current assets Quoted equity shares 3,070 1, Unquoted equity share - at cost ,851 2,048 1, Total 7,322 4,498 1,992 1,111 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. The availablefor-sale investments presented as non-current assets are those held and managed directly by the Group and the Company. 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 Company s available-for-sale investments that are not denominated in the functional currencies of the respective entities are as follows: The Group The Company $ 000 $ 000 $ 000 $ 000 United States dollar 1, Hong Kong dollar Euro Malaysian ringgit TRADE RECEIVABLES The Group The Company $ 000 $ 000 $ 000 $ 000 Trade receivables 3,632 3,597 1,801 1,667 Less: Allowance for doubtful debts (181) (275) (22) (22) 3,451 3,322 1,779 1,645 The average credit period granted to customers is 30 days (2008 : 30 days). No interest is charged on the trade receivables. Before accepting any new customer, the Group assesses the potential customer s 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 $0.7 million (2008 : $0.7 million) which made up 19% (2008 : 20%) of the Group s trade receivables, there is no other customer who represents more than 5% of the total balance of trade receivables of the Group. 53

56 NOTES TO FINANCIAL STATEMENTS 31 December 2009 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 $1.2 million (2008 : $0.6 million) ranges from 31 to 60 days (2008 : 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 The Company $ 000 $ 000 $ 000 $ 000 Balance at beginning of the year Amounts recovered - (24) - - (Decrease) Increase in allowance (94) Arising from acquisition of subsidiary Exchange adjustment - (67) - - Balance at end of the year OTHER RECEIVABLES, DEPOSITS AND PREPAID EXPENSES The Group The Company $ 000 $ 000 $ 000 $ 000 Outside parties Income tax recoverable Refundable deposits Structured deposit with a bank Prepaid expenses ,370 1, Less: Structured deposit with a bank classified as non-current - (400) - - 1,370 1, Structured deposit represents a capital-protected deposit placed with a bank, which earns interest that is linked to the performance of certain equities. The tenure of the deposit is 3 years, maturing in November 2010, but is subject to early redemption by the bank if certain trigger events occur, hence placing a cap on the variable interest at 5% per annum. The deposit is carried at amortised cost and fair value approximates its carrying amount. 11 SUBSIDIARIES The Company $ 000 $ 000 Unquoted equity shares - at cost 6,494 6,494 Advances to subsidiaries 44,840 57,461 Deemed investment in subsidiaries arising from fair value of corporate guarantee ,592 64,213 54

57 31 December 2009 NOTES TO FINANCIAL STATEMENTS The details of the Company s subsidiaries at 31 December 2009 are as follows: Country of incorporation Proportion of (or registration) ownership interest Name of subsidiary and operation and voting power held Principal activity % % Royal Properties Singapore Property investment Investment Pte Ltd Royal Capital Pte Ltd Singapore Investment holding and provision of management services Castle Mall Properties Singapore Investment holding Pte Ltd (wholly owned subsidiary of Royal Properties Investment Pte Ltd) Grand Complex New Zealand Property investment Properties Ltd (wholly owned subsidiary of Royal Properties Investment Pte Ltd) (1) Hotel Queens Singapore Hotelier (Singapore) Pte Ltd (wholly owned subsidiary of Royal Properties Investment Pte Ltd) Hotel Royal Investment Singapore Dormant Pte Ltd (2) Premium Lodge Sdn. Bhd. (1)(3) Malaysia Dormant Prestige Properties Malaysia Investment holding Sdn. Bhd. (1) Faber Kompleks Malaysia Hotelier and property Sdn. Bhd. (1) (wholly investment owned subsidiary of Prestige Properties Sdn. Bhd.) All the subsidiaries are audited by Deloitte & Touche LLP, Singapore except for the subsidiaries that are indicated as follows: (1) Audited by overseas practices of Deloitte Touche Tohmatsu. (2) Not audited as the subsidiary has remained dormant since incorporation. (3) Acquired in June 2009 as a dormant company with RM2 in share capital. 55

58 NOTES TO FINANCIAL STATEMENTS 31 December 2009 The amounts owing by subsidiaries are unsecured, not expected to be repaid within the next 12 months and bear interest at 1.6% (2008 : 2.5%) per annum which approximate market interest rate. Hence, the carrying amounts approximate their respective fair values. 12 PROPERTY, PLANT AND EQUIPMENT Linen, china, Freehold Freehold Building glassware, Freehold land building improvement Plant and silver and land for - hotels - hotels - hotels equipment uniform redevelopment Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 The Group Cost or valuation: As at 1 January ,500 44,677 3,344 11, , ,943 Additions , ,829 Additions arising from acquisition of a subsidiary 4,447 14, ,416 Disposal (2) - - (2) Revaluation decrease (9,293) (9,293) Exchange adjustment (89) (285) (17) (22) - - (413) As at 31 December ,565 58,579 4,186 16, , ,480 Additions ,085 Disposal - (200) - (144) - - (344) Transferred to investment property (Note 13) (15,080) (15,080) Exchange adjustment (54) (214) (10) (12) - - (290) As at 31 December ,511 58,165 4,176 17, ,851 Comprising: 31 December 2009 At valuation 159, ,511 At cost - 58,165 4,176 17, ,340 Total 159,511 58,165 4,176 17, , December 2008 At valuation 159, ,565 At cost - 58,579 4,186 16, ,762 94,915 Total 159,565 58,579 4,186 16, , ,480 Accumulated depreciation: As at 1 January ,523 3,136 5, ,625 Charge for the year , ,889 Disposal (1) - - (1) As at 31 December ,739 3,178 7, ,513 Charge for the year , ,631 Disposal - (13) - (141) - - (154) As at 31 December ,401 3,290 9, ,990 Carrying amount: As at 31 December ,511 48, , ,861 As at 31 December ,565 49,840 1,008 9, , ,967 The Company 56 Cost or valuation: As at 1 January ,500 7,985 3,344 9, , ,563 Additions Disposal (3) - - (3) Revaluation decrease (5,500) (5,500) As at 31 December ,000 7,985 3,344 9, , ,274 Additions Disposal (142) - - (142) Transferred to investment property (Note 13) (15,080) (15,080) As at 31 December ,000 7,985 3,344 9, ,611

59 31 December 2009 NOTES TO FINANCIAL STATEMENTS Comprising: Linen, china, Freehold Freehold Building glassware, Freehold land building improvement Plant and silver and land for - hotels - hotels - hotels equipment uniform redevelopment Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ December 2009 At valuation 110, ,000 At cost - 7,985 3,344 9, ,611 Total 110,000 7,985 3,344 9, , December 2008 At valuation 110, ,000 At cost - 7,985 3,344 9, ,762 36,274 Total 110,000 7,985 3,344 9, , ,274 Accumulated depreciation: As at 1 January ,819 3,136 5, ,362 Charge for the year Disposal (1) - - (1) As at 31 December ,847 3,164 6, ,239 Charge for the year Disposal (141) - - (141) As at 31 December ,875 3,192 6, ,947 Carrying amount: As at 31 December ,000 1, , ,664 As at 31 December ,000 1, , , ,035 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 Group s freehold land and buildings - hotels are as follows: $ 000 $ 000 The Company - Hotel Royal at Newton Road (1) : Freehold land 110, ,000 Freehold building 62,000 60,000 Subsidiary - Hotel Queens (2) : Freehold land 46,000 45,000 Freehold building 69,000 63,500 Subsidiary - Hotel Royal Penang (3) : Freehold land 5,330 4,565 Freehold building 14,350 14,110 (1) Full valuation performed by an independent professional valuer in Singapore. (2) Full valuation (2008 : Desktop valuation) performed by an independent professional valuer in Singapore. (3) Full valuation performed by an independent professional valuer in Malaysia. 57

60 NOTES TO FINANCIAL STATEMENTS 31 December 2009 Revaluation increase/decrease is recognised only for freehold land-hotels in accordance with the Group s accounting policies. Revaluation increase/decrease is not recognised for freehold building - hotels. As at 31 December 2009, had the freehold land - hotels been carried at historical cost less accumulated impairment losses, its carrying amount would have been approximately $25.4 million (2008 : $25.4 million) for the Group and $1 million (2008 : $1 million) for the Company. Property, plant and equipment of the Group and the Company are pledged as securities for the Group s and the Company s bank loans as disclosed in Notes 14 and INVESTMENT PROPERTIES The Group Freehold Freehold Leasehold Construction land buildings buildings in-progress Total $ 000 $ 000 $ 000 $ 000 $ 000 Cost: As at 1 January ,617 50,210 1,456-65,283 Additions arising from acquisition of subsidiary 6,352 2, ,316 Additions Exchange adjustment (3,608) (12,196) - - (15,804) As at 31 December ,361 41,767 1,456-59,584 Additions Transferred from property, plant and equipment ,080 15,080 Exchange adjustment 2,204 7, ,064 As at 31 December ,565 49,646 1,456 15,080 84,747 Accumulated depreciation: As at 1 January , ,063 Charge for the year Exchange adjustment - (1,902) - - (1,902) As at 31 December , ,749 Charge for the year Exchange adjustment - 1, ,338 As at 31 December , ,639 Impairment: As at 1 January 2008, 31 December 2008 and 31 December Carrying amount: As at 31 December ,565 41,146 1,033 15,080 75,824 As at 31 December ,361 35,139 1,051-52,551 58

61 31 December 2009 NOTES TO FINANCIAL STATEMENTS The Company Construction-in-progress: $ 000 Cost: As at 1 January 2008 and 1 January Transferred from property, plant and equipment 15,080 As at 31 December ,080 Accumulated depreciation: As at 1 January 2008, 31 December 2008 and 31 December Carrying amount: As at 31 December ,080 As at 31 December Fair values of investment properties (for information only): $ 000 $ 000 Freehold land and buildings in New Zealand (1) 50,898 55,561 Freehold land and buildings in Malaysia (2) 11,070 9,545 Freehold buildings in Singapore (3) 3,870 3,120 Leasehold buildings in Singapore (3) 4,500 5,250 Freehold land under redevelopment in Singapore (3) (4) 17,938-88,276 73,476 (1) Full valuation by an independent professional valuer in New Zealand. (2) Full valuation by an independent professional valuer in Malaysia. (3) Full valuation by an independent professional valuer in Singapore. (4) Included under construction-in-progress. 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 2009, the Company has committed to develop its freehold land for redevelopment into a residential investment property, and has transferred the related carrying amount from property, plant and equipment (Note 12) to investment property construction-in-progress. The carrying amount of the freehold land for redevelopment represents 87.5% interest in the titles to the property. The remaining 12.5% interest is held by a related party (a company with common directors and in which certain directors have interest). The Company s interest in the freehold land for redevelopment was valued by an independent professional valuer in Singapore at approximately $17.9 million (2008: $17.1 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 Group s bank loans as disclosed in Notes 14 and

62 NOTES TO FINANCIAL STATEMENTS 31 December 2009 The property rental income for the Group from the Group s investment properties which are leased out under operating leases, amounted to $6.8 million (2008 : $5.6 million). Direct operating expenses (including repairs and maintenance) of the Group arising from the rental-generating investment properties and nonrental generating investment properties amounted to $2.5 million (2008 : $2.3 million) and $1.1 million (2008 : $0.7 million) respectively. 14 BANK LOANS The Group The Company $ 000 $ 000 $ 000 $ 000 Short-term bank loans (secured) 18,049 32,699 18,049 32,699 Long-term bank loans (secured) - current portion (Note 17) 697 2, ,746 34,765 18,049 32,699 Short-term bank loan, drawn down under the Company s specific advance facility with a bank, with carrying amount of $9.8 million as at 31 December 2009 (2008 : $6.8 million), bears interest rate at 1.25% (2008 : 0.95%) per annum over the prevailing swap offer rate of the bank. The specific advance facility is secured by a mortgage on the Company s freehold land for redevelopment which has been reclassified as an investment property construction-in-progress (Note 13) with carrying amount of $15.1 million (2008 : $14.8 million). Another short-term bank loan, drawn down from the Company s 5-year revolving credit facility with a bank, with carrying amount of $8.2 million as at 31 December 2009 (2008 : $25.9 million), bears interest at 2.28% (2008 : 1.92%) per annum which represents 1.25% (2008 : 0.95%) plus Singapore Swap Offer Rate. This 5-year revolving credit facility is secured by a mortgage on the Company s freehold hotel land and building with a carrying amount of $111.1 million (2008 : $111.1 million). The carrying amounts of short-term bank loans approximate their fair values due to the relatively short-term maturity of these borrowings. 15 OTHER PAYABLES The Group The Company $ 000 $ 000 $ 000 $ 000 Outside parties 1,544 2, Director of a subsidiary ,544 2, The amount owing to a director is unsecured, interest-free and is repayable on demand. 16 RETIREMENT BENEFIT OBLIGATIONS A subsidiary operates an unfunded, defined benefit Retirement Benefit Scheme (the Scheme ) for its eligible employees in Malaysia. Under the Scheme, eligible employees are entitled to retirement benefits based on 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 2009 have been valued by projecting forward the most recent actuarial valuation in April 2008 which was performed by a qualified independent actuary using the projected unit credit method. 60

63 31 December 2009 NOTES TO FINANCIAL STATEMENTS (i) Statement of financial position The amounts recognised on the statement of financial position are determined as follows: The Group $ 000 $ 000 Present value of unfunded defined benefit obligations Unrecognised net actuarial gain Net liability Analysed as due: Within 1 year 15 8 Later than 1 year but not later than 2 years Later than 2 years but not later than 5 years Later than 5 years The defined benefit obligations arose from the acquisition of a subsidiary in 2008 (Note 27). The movement in the present value of the defined benefit obligations since the beginning of year (2008: acquisition date) is due to current service costs incurred, less benefits paid, which are of immaterial amounts. (ii) Consolidated profit and loss statement The amount of expense recognised in profit or loss during the year is immaterial. (iii) Actuarial assumptions Principal actuarial assumptions used for the purpose of the latest actuarial valuation in April 2008 were as follows: The Group % % Discount rate Expected rate of salary increases LONG-TERM BANK LOANS The Group $ 000 $ 000 Bank Loan A - NZ$50,000 (2008: NZ$2.1 million) 51 1,749 Bank Loan B - RM33 million 13,821 - Bank Loan C - S$ 26,350 26,750 40,222 28,499 Less: Current portion of long-term bank loans (Note 14) (697) (2,066) 39,525 26,433 Bank Loan A is secured by a mortgage over a subsidiary s assets and its investment properties with a carrying amount of $48 million (NZ$47 million) [2008 : $40.0 million (NZ$48.0 million)] and corporate 61

64 NOTES TO FINANCIAL STATEMENTS 31 December 2009 guarantees from both the Company and another subsidiary. The loan is repayable by 31 July Bank Loan A bears floating interest rate at 3.78% (2008 : 9.18%) per annum. In 2009, Bank Loan B is secured by a mortgage over a subsidiary s freehold hotel properties and investment property with a carrying amount of $28.6 million (RM69.8 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 3.55% per annum which represents 1.25% plus the bank s cost of funds. The repayment term will be based on 83 monthly instalments of varying amounts commencing from January 2010 and a final repayment amount of S$8.1 million (RM19.8 million) in December Bank Loan C is secured by a mortgage over a subsidiary s freehold hotel land and building with a carrying amount of $75.5 million (2008 : $76.2 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 instalments of $0.1 million each from June 2008 and a final repayment amount of $25.1 million. The bank loan bears interest at 1.34% (2008 : 1.96%) per annum which represents 0.75% plus the bank s swap offer rate. 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. 18 DEFERRED INCOME TAX The Group The Company $ 000 $ 000 $ 000 $ 000 Balance at beginning of year 7,689 8, Origination (reversal) of temporary differences (72) 199 Overprovision in prior year (1,005) Exchange adjustment 1,078 (1,778) - - Balance at end of year 7,874 7, The deferred income tax balance is made up of the following: The Group The Company $ 000 $ 000 $ 000 $ 000 Excess of net carrying amount over tax written down value of property, plant and equipment and investment properties 6,852 6, Other temporary differences 1,022 1, ,874 7, SHARE CAPITAL The Group and the Company Number of ordinary shares $ 000 $ 000 ( 000) Issued and fully paid: At beginning and end of year 60,000 60,000 64,569 64, The Company has one class of ordinary shares with no par value, carry one vote per share and carry a right to dividends.

65 31 December 2009 NOTES TO FINANCIAL STATEMENTS 20 REVENUE The Group $ 000 $ 000 Room revenue 19,645 22,824 Food and beverage revenue 4,470 4,128 Rental income from: Investment properties 6,753 5,575 Other properties 3,018 2,753 Car park revenue 1,169 1,062 Interest income from outside parties Dividend income from: Quoted equity investments Unquoted equity investments 12 8 Others ,507 36, OTHER INCOME The Group $ 000 $ 000 Excess of fair values of net identifiable assets acquired over the cost of combination (Note 27) - 4,826 Gain on disposal of available-for-sale investments 13 - Fair value gain on held-for-trading investments Write-back of allowance for doubtful debts Other income ,715 4, FINANCE COSTS The Group $ 000 $ 000 Interest on bank loans 1,252 1, PROFIT BEFORE INCOME TAX Profit before income tax includes: The Group $ 000 $ 000 Staff costs (including directors remuneration) 7,183 6,356 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

66 NOTES TO FINANCIAL STATEMENTS 31 December 2009 The Group $ 000 $ 000 Non-audit fees paid to: Auditors of the Company Depreciation of property, plant and equipment 2,631 1,889 Depreciation of investment properties Write-back of allowance for doubtful debts (110) (24) Allowance for doubtful debts Bad debts written off - 21 Impairment loss on available-for-sale investments * 91 1,503 (Gain) Loss on disposal of available-for-sale investments * (13) 177 Loss on disposal of property, plant and equipment Fair value (gain) loss on held-for-trading investments * (918) 2,895 Transfer from fair value reserve upon disposal of available-for-sale investments * (11) 232 Net foreign exchange adjustment loss * * Included in other (income) expenses in the consolidated profit and loss statement. 24 INCOME TAX CREDIT (EXPENSE) The Group $ 000 $ 000 Current tax (1,500) (2,500) Deferred tax (112) (564) (1,612) (3,064) Overprovision in prior years - current tax 1, deferred tax 1,005 - Total income tax credit (expense) 558 (2,850) The income tax expense varied from the amount of income tax expense determined by applying the Singapore income tax rate of 17% (2008 : 18%) to profit before income tax as a result of the following differences: The Group $ 000 $ 000 Income tax (expense) at statutory rate (1,710) (2,466) Non-taxable (deductible) items 89 (665) Overprovision in prior years 2, Difference due to foreign tax rates (84) - Tax exemption and rebate Other items 12 (22) Total income tax credit (expense) 558 (2,850) 25 EARNINGS PER SHARE Basic earnings per share is calculated on the Group profit after tax of $10.6 million (2008 : $10.9 million) divided by weighted average number of ordinary shares of 60 million (2008 : 60 million). Diluted earnings per ordinary share is the same as basic earnings per share as there are no dilutive potential ordinary shares. 64

67 31 December 2009 NOTES TO FINANCIAL STATEMENTS 26 SEGMENT INFORMATION 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 Group s 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 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 Property investment - Singapore - New Zealand - Malaysia Financial investment The accounting policies of the reportable segments are the same as the Group s accounting policies described in Note 2. Segment profits represent profits earned by each segment without allocation of the central administrative costs, 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 Group s reportable segments is presented below: I. Revenue External Inter-segment Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Hotel operation Singapore 24,223 29, ,223 29,107 Malaysia 3,563 1, ,563 1,018 27,786 30, ,786 30,125 Property investment Singapore New Zealand 6,398 5, ,398 5,737 Malaysia ,406 6, ,506 6,391 65

68 NOTES TO FINANCIAL STATEMENTS 31 December 2009 I. Revenue External Inter-segment Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Financial investment ,560 1,567 1,875 2,079 Segments total 35,507 36,909 1,660 1,686 37,167 38,595 II. Net profit (loss) Before exceptional item Exceptional item (Note 1) Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Hotel operation Singapore 7,977 11, ,977 11,964 Malaysia (1,119) (352) - 2,726 (1,119) 2,374 6,858 11,612-2,726 6,858 14,338 Property investment Singapore New Zealand 2,854 2, ,854 2,636 Malaysia (46) (158) - 2,100 (46) 1,942 3,000 2,588-2,100 3,000 4,688 Financial investment 1,452 (3,940) - - 1,452 (3,940) Segments total 11,310 10,260-4,826 11,310 15,086 Finance costs (1,252) (1,383) Profit before income tax 10,058 13,703 Income tax credit (expense) 558 (2,850) Profit after income tax 10,616 10,853 Note 1 This relates to the excess of fair values of net identifiable assets acquired over cost of acquisition of Faber Kompleks Sdn. Bhd. in October III. Segment assets and liabilities Segment assets Segment liabilities $ 000 $ 000 $ 000 $ 000 Hotel operation Singapore 203, ,478 2,880 2,925 Malaysia 19,084 21,498 1,204 1, , ,976 4,084 4,924 Property investment Singapore 19,248 4, New Zealand 50,685 40, Malaysia 11,311 9, ,244 54,676 1,116 1,205 Financial investment 14,523 10, Segments total 317, ,255 5,369 6,311 66

69 31 December 2009 NOTES TO FINANCIAL STATEMENTS III. Segment assets and liabilities Segment assets Segment liabilities $ 000 $ 000 $ 000 $ 000 Unallocated items 6,460 5,524 67,619 71,642 Consolidated total 324, ,779 72,988 77,953 IV. Other segment information Additions to Depreciation Impairment loss non-current assets $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 Hotel operation Singapore 2,120 1, ,009 5,687 Malaysia ,545 1, ,085 5,829 Property investment Singapore New Zealand Malaysia Financial investment , Segments total 3,183 2, ,503 1,104 6,618 Reconciling items - (97) Consolidated total 3,183 2, ,503 1,104 6,618 V. Geographical information Information about the Group s revenue and non-current assets by geographical location are described below: Revenue from Non-current external customers assets $ 000 $ 000 $ 000 $ 000 Singapore 24,922 29, , ,172 Malaysia 4,168 1,195 30,671 29,784 New Zealand 6,417 5,768 48,424 40,010 35,507 36, , , ACQUISITION OF A SUBSIDIARY On 9 October 2008, the Group acquired a wholly-owned subsidiary, Faber Kompleks Sdn. Bhd. ( FKSB ), incorporated in Malaysia, for a cash consideration of approximately $23.8 million (RM56 million), which included an amount of $0.1 million pertaining to fees paid to third parties that were directly attributable to the business combination. This transaction has been accounted for by the purchase method of accounting. 67

70 NOTES TO FINANCIAL STATEMENTS 31 December 2009 The net identifiable assets acquired in the transaction are as follows: 2008 Net identifiable assets acquired: Carrying Provisional amount before fair value Provisional acquisition adjustments fair value $ 000 $ 000 $ 000 Property, plant and equipment 17,293 2,123 19,416 Investment properties 7,681 1,635 9,316 Inventories Trade and other receivables 2,079-2,079 Overdraft, less cash and bank balances (270) - (270) Other payables and accruals (1,401) - (1,401) Retirement benefits obligations (545) - (545) Total consideration 24,915 3,758 28,673 Excess of fair value of acquiree s net identifiable assets over cost of combination (4,826) Total consideration, satisfied by cash 23,847 Net cash outflow arising on acquisitions: Cash consideration paid 23,847 Overdraft, less cash and bank balances acquired ,117 As at 31 December 2008, the initial accounting for the acquisition of FKSB (acquiree) was provisionally determined using the market values of property, plant and equipment and investment properties assessed by independent professional valuers, and the existing book values of other assets and liabilities as at acquisition date. In 2009, the fair values of the identifiable assets and liabilities (including contingent liabilities) were finalised within 12 months from the acquisition date. No adjustment is required to the fair values reported as at 31 December The acquiree has unutilised tax losses and capital allowances carryforward of approximately $29.5 million at the acquisition date, which management has not recognised the related deferred tax benefits, as the expected amount and timing of recoverability are uncertain. The Group has given an undertaking to the vendor not to resell its interest in the hotel properties and investment properties acquired within five years from the acquisition date. In 2008, FKSB contributed $0.2 million decrease to the Group s profit before income tax for the period between the date of acquisition and the end of the reporting period. If acquisition had been completed on 1 January 2008, total Group s profit before income tax for 2008 would have decreased by $1.4 million. 28 OPERATING LEASE ARRANGEMENTS The Group and Company as lessor 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 5 years. 68

71 31 December 2009 NOTES TO FINANCIAL STATEMENTS At the end of the reporting period, the Group and Company have contracted with tenants for the following future minimum lease payments for the following periods: The Group The Company $ 000 $ 000 $ 000 $ 000 Within one year 3,005 7,515 1,438 1,475 In the second to fifth years inclusive 13,238 5, After fifth year 2, ,813 13,763 1,799 1, CONTINGENT LIABILITIES (a) Guarantees given The Company and a subsidiary provide guarantees amounting to $0.05 million (NZ$0.05 million) [2008 : $1.7 million (NZ$2.1 million)] to banks for banking facilities granted to another subsidiary which are secured as disclosed in Note 17. In addition, the Company agrees to stand as guarantor for banking facilities totaling $54.0 million (2008 : $67.0 million) obtained by subsidiaries. (b) Legal claims (i) Civil suit initiated by former hotel operator of Faber Kompleks Sdn. Bhd. ( FKSB ) In January 2009, FKSB was served with a notice of civil suit by the former hotel operator of Hotel Royal Penang (the Hotel ) for alleged wrongful termination of its services. The former hotel operator is seeking to claim injunctive relief, specific performance and general damages. FKSB had disputed the claim on the grounds that the former hotel operator had previously operated solely on an interim arrangement which has ceased on 31 December No formal management contract had been entered between FKSB and the former hotel operator. In January 2010, the former hotel operator obtained an interlocutory order from the High Court of Malaya at Penang, inter alia, getting back possession of the Hotel and an injunction restraining FKSB from interfering with the former hotel operator s operation and management of the Hotel. FKSB has filed an appeal to the Court of Appeal of Malaysia against this order and the High Court of Malaya at Penang had granted FKSB a stay of execution in February As the claims by both sides are contested, the financial and operational impact, or expected losses, 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 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 (ii) Legal claim by owner of five shop units of the investment property owned by FKSB The owner of 5 shop units of Penang Plaza has initiated a claim against FKSB for specific performance, injunction and related damages and costs on the following grounds, that FKSB: has not applied for strata title for the property; has not formed a management council for the property; and is not entitled to mortgage the property for obtaining of bank loan. 69

72 NOTES TO FINANCIAL STATEMENTS 31 December 2009 FKSB has since taken action on the specific performance in relation to the strata title sub-division and management council. As the claims by both sides are contested, the financial and operational impact, or expected losses, should there be any, cannot be estimated or ascertained with reasonable certainty at this juncture. Based on the advice obtained from a legal adviser in Malaysia, management is of the view that FKSB has a fair chance of defending the claims. As such, management has not made any provision for this legal claim as at 31 December CAPITAL EXPENDITURE COMMITMENTS The Group The Company $ 000 $ 000 $ 000 $ 000 Estimated amounts committed for future capital expenditure but not provided for in the financial statements 9,038-8, DIVIDENDS During the financial year ended: (a) (b) 31 December 2008, 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 December 2009, 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 Subsequent to 31 December 2009, 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 $3.0 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. 32 SUBSEQUENT EVENTS Subsequent to the financial year ended 31 December 2009, the following events occurred: (a) (b) (c) The Company s 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. The Group s wholly-owned subsidiary, Premium Lodge Sdn. Bhd. ( Purchaser ), entered into a conditional Sale and Purchase Agreement ( Agreement ) to acquire the Coronade Hotel Kuala Lumpur and its business from the vendor, Achi Jaya Properties Sdn. Bhd., for a consideration of RM93 million. The acquisition is conditional upon the approvals by the relevant authorities in Malaysia to be received by the Purchaser within three months from the date of the Agreement, and subject to further extension as provided by the Agreement. The Company entered into an agreement with a related party (a company with common directors and in which certain directors have interest) 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 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. 70

73 Schedule of the Group s Major Properties The schedule below shows the Group s major properties as at 31 December 2009 with particulars of their tenure and usage. Held By Location Description and area Tenure Hotel Royal Limited 36 Newton Road Land area of about Freehold Singapore 7,200 sq m Hotel building with built-up area of approximately 23,500 sq m 1A Surrey Road Land area of about Freehold Singapore 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) Royal Properties No. 20 Office unit 99 years Investment Pte Ltd Maxwell Road Strata floor area of about (from 1969) # sq m Maxwell House Singapore* #05-14 Flatted factory unit Freehold Kapo Factory Building Strata floor area of about Singapore* 157 sq m #02-14, #06-02, #07-02 Factory unit Freehold and #09-08 Strata floor area of about Tong Lee Building 277 sq m each Singapore* Grand Complex 16 Willis Street Land area of about Freehold Properties Willis Street 6,898 sq m Limited 80 Boulcott Street & Shopping centre 84 Boulcott Street and offices with Wellington lettable retail area New Zealand* of 4,431 sq m; lettable office area of 20,028 sq m and 323 car park lots Hotel Queens 12 Queen Street Land area of about Freehold Pte Ltd Singapore 1,979 sq m Hotel building with built-up area of approximately 14,605 sq m Faber Kompleks 3 Jalan Larut Land area of about Freehold Sdn. Bhd. Georgetown 3,495 sq m Penang Hotel building Malaysia with built-up area of approximately 28,569 sq m * Investment properties 126 Jalan Burma Land area of about Freehold Georgetown 5,498 sq m Penang Shopping centre Malaysia* and offices with lettable retail area of 5,529 sq m; lettable office area of 1,699 sq m; and 88 carpark lots 71

74 Artist s Impression: Redevelopment of Star Mansions

75 Function Room Proposed Acquisition of The Coronade Hotel Kuala Lumpur Lobby Spacious Room Lobby Lounge Nearby Attractions... Shopping!

76 Statistics of Shareholdings ANALYSIS OF SHAREHOLDINGS as at 22 March 2010 Issued and Fully Paid-Up Capital - S$64,569,119 No of Shares Issued - 60,000,000 Class of Shares - Ordinary Shares Voting Rights - 1 Vote Per Share Treasury Shares - Nil Size of No. of % of Shareholdings Shareholders Shareholders No. of Shares % of Shares , ,000-10, ,571, ,001-1,000, ,066, ,000,001 & above ,314, Total 1, ,000, Based on the information provided and to the best knowledge of the Directors, approximately 25.24% of the issued ordinary shares of the Company is held in the hands of the public as at 22 March 2010 and therefore Rule 723 of the Listing Manual of Singapore Exchange Securities Trading Limited is complied with. TOP TWENTY SHAREHOLDERS as at 22 March 2010 Name of Shareholders No. of Shares % of Shares 1. Oversea Chinese Bank Nominees Pte Ltd 6,705, The Great Eastern Life Assurance Co Ltd - Participating Fund 6,647, Aik Siew Tong Ltd 5,890, Asia Building Bhd 4,911, Hock Tart Pte Ltd 3,780, Mellford Pte Ltd 2,980, Melodies Limited 2,900, United Overseas Bank Nominees Pte Ltd 2,756, Mayban Nominees (S) Pte Ltd 2,400, Singapore Island Bank Nominees Pte Ltd 2,400, The Singapore-Johore Express (Private) Limited 2,253, Lee Chin Chuan 1,546, Tan Tan Kow Tee 1,145, Chan Tai Moy 984, Chip Keng Holding Bhd 825, Season Holdings Pte Ltd 547, The Great Eastern Trust Private Limited 529, Liu Ping-Nan Phyllis 376, Lee Keng Thon 357, UOB Kay Hian Pte Ltd 308, Total 50,241,

77 Statistics of Shareholdings STATISTICS OF SHAREHOLDINGS as at 22 March 2010 SUBSTANTIAL SHAREHOLDERS as at 22 March 2010 as shown in the Register of Substantial Shareholders:- Direct Interest Deemed Interest Substantial Shareholders No. of Shares % No. of Shares % Lee Chou Hor George (1) 30, ,190, Lee Chou Tart (2) - - 6,180, Aik Siew Tong Ltd (3) 14,490, ,653, Hock Tart Pte Ltd (4) 6,180, ,490, The Great Eastern Life Assurance Co Ltd (5) 7,181, Great Eastern Holdings Limited (5) - - 7,181, Oversea-Chinese Banking Corporation Limited (6) - - 7,181, Asia Building Bhd (7) 4,911, , Melodies Limited (3) 5,400, Other Shareholders The Singapore-Johore Express (Private) Limited (3) 2,253, Chip Keng Building Bhd (7) 825, Note: (1) 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. (2) Lee Chou Tart owns 23.8% of the share capital of Hock Tart. He is deemed interested in the shares held by Hock Tart. (3) 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 5,400,000 shares and 2,253,000 shares which are held by Melodies and S-J Express respectively. (4) Hock Tart Pte Ltd holds 31.7% of the share capital of AST and is therefore deemed interested in the shares held by AST. (5) 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 shares which are held by The Great Eastern Life Assurance Co Ltd. (6) 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. (7) Chip Keng Building Bhd is the wholly-owned subsidiary of Asia Building Bhd. Asia Building Bhd is deemed interested in the 825,000 shares held by Chip Keng Building Bhd. 75

78 Hotel Queens Singapore Hotel Royal Singapore Hotel Royal Penang All the modern comforts and amenities for today s travellers. The traditional Royal service awaits you... - Every Room A Home - The Hotel Royal s three distinctive hotels, strategically located in the respective city s business, education, food and entertainment hubs, give you the convenience and warmth of a home away from home. Within the comfort of our fully airconditioned, spacious and cosy rooms are tea/coffee-making facilities, mini-bar, broadband internet access, satellite television channels, IDD phone and a personal room safe. Make your stay in Singapore and Penang with Hotel Royal and be pampered by the much talked about Traditional Royal Service. At Hotel Royal, we care. 833 fully air-conditioned suites, apartments and rooms * Chinese restaurants * Japanese restaurants * lobby lounges * coffee houses & brasserie * business centres * swimming pools * near to subway stations * ample car park * broadband internet access Hotel Royal 36 Newton Road Singapore Tel: (65) Fax: (65) royal@hotelroyal.com.sg Website: Hotel Queens 12 Queen Street Singapore Tel: (65) Fax: (65) info@royalqueens.com.sg Website: Hotel Royal Penang 3 Jalan Larut Penang Malaysia Tel: (604) Fax: (604) info@hotelroyalpenang.com Website:

79 (in $ 000) FIVE YEAR GROUP FINANCIAL STATISTICS PROFIT & LOSS Turnover 35,507 36,909 30,961 28,913 24,427 Profit before income tax 10,058 13,703 40,074 8,894 4,452 Profit after income tax 10,616 10,853 37,727 5,157 3,061 Dividends 3,000 3,000 2,460 12,400 2,400 BALANCE SHEET Current assets 26,843 21,813 26,526 42,801 16,770 Investments 3,851 2,448 3,526 2,866 2,424 Associated companies Property, plant & equipment 217, , , , ,952 Investment properties 75,824 52,551 56,936 53,306 81,374 Total 324, , , , ,685 Current liabilities 25,066 43,310 51,124 27,736 11,498 Finance lease Long-term bank loans 39,525 26,433-57,512 79,115 Deferred income tax 7,874 7,689 8,903 8,088 5,424 Other payables Total liabilities 72,988 77,953 60,027 93,336 96,201 Shareholder s equity 251, , , , ,484 Total 324, , , , ,685 Earnings per share before income tax (1) 16.76cts 22.84cts 66.79cts 15.55cts 8.17cts Earnings per share after income tax (1) 17.69cts 18.09cts 62.88cts 9.02cts 5.62cts Net tangible asset backing per ordinary share $4.19 (2) $3.90 $4.14 $2.47 $2.93 (1) The number of ordinary shares for 2007, 2008 and 2009 is 60,000,000. The weighted average number of ordinary shares of 57,192,719 for 2006 and 54,520,548 for 2005 have been adjusted to reflect the rights issue during (2) Please refer to Chairman s Message on page 3. 77

80 NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN that the 41st Annual General Meeting of Hotel Royal Limited will be held at Hotel Queens, Royal Ballroom (Level 3), 12 Queen Street, Singapore on 24 April 2010 at 2.30 p.m. for the following purposes:- Ordinary Business 1. To receive and adopt the Directors Report and Audited Financial Statements for the financial year ended 31 December 2009 together with the Auditors Report thereon. (Resolution 1) 2. To declare a tax exempt First and Final Dividend of 5 cents per ordinary share for the financial year ended 31 December (Resolution 2) 3. To approve the Directors Fees of S$128,625 for the financial year ended 31 December (FY2008: S$128,625) (Resolution 3) 4. To re-elect the following Directors who are retiring in accordance with Article 117 of the Company s Articles of Association:- (a) Dr Lee Keng Thon (Resolution 4) (b) Mr Lee Khin Tien (Resolution 5) (Note: Mr Lee Khin Tien will, upon re-election as director of the Company, remain as a member of the Audit Committee, Remuneration Committee and Nominating Committee). (c) Mr Goh Kok Yeow (Resolution 6) (Note: Mr Goh Kok Yeow 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. Mr Goh Kok Yeow is considered as an independent director for purposes of Rule 704(8) of the listing rules of the Singapore Exchange Securities Trading Limited). 5. To re-appoint Messrs 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:- 6. Authority to issue shares That pursuant to Section 161 of the Companies Act, Cap. 50 and Rule 806 of 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) issue shares in the capital of the Company ( Shares ), whether by way of rights, bonus or otherwise, and including any capitalisation pursuant to Article 172 of the Company s Articles of Association of any sum for the time being standing to the credit of any of the Company s reserve accounts or any sum standing to the credit of the profit and loss account or otherwise available for distribution; and/or (ii) make or grant offers, agreements or options (collectively, Instruments ) that might or would require Shares to be issued, including but not limited to: (aa) the creation and issue of (as well as adjustments to) warrants, debentures or other instruments convertible into Shares; and 78

81 NOTICE OF ANNUAL GENERAL MEETING (bb) adjustments to the Instruments and any Shares to be issued pursuant to such adjustments to the Instruments, 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 (b) (notwithstanding that the authority conferred by this resolution ( Resolution ) may have ceased to be in force) issue Shares in pursuance of any Instrument made or granted by the Directors while the authority was in force, provided that: (i) (ii) (iii) 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 but excluding shares which may be issued pursuant to any adjustments effected under any relevant instrument), does not exceed fifty per cent. (50%) of the total number of issued shares (excluding treasury shares) of the Company (calculated in accordance with (ii) below), of which the aggregate number of shares issued other than on a pro rata basis to existing shareholders must be not more than twenty per cent. (20%) of the total number of issued shares (excluding treasury shares) of the Company (calculated in accordance with (ii) below); (subject to such manner of calculation and adjustments as may be prescribed by the SGX-ST) for the purpose of determining the aggregate number of shares that may be issued pursuant to (i) above, the percentage of issued shares shall be based on the Company s potential maximum issued shares at the date of the passing of this Resolution after adjusting for new shares arising from the conversion of convertible securities or employee share options in issue at the time when this Resolution is passed, and any subsequent bonus issue or consolidation or subdivision of shares; and the 50% limit in sub-paragraph (i) may be increased to 100% for issue of Shares and/or Instruments by way of a renounceable rights issue where shareholders of the Company are given the opportunity to participate in the same on a pro rata basis. In exercising the authority conferred by this Resolution, the Company shall comply with the provisions of the Listing Manual 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 remain 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 (a)] (Resolution 8) 7. Authority to issue new shares (other than on a pro rata basis to shareholders) at a discount exceeding 10% but not more than 20% That, conditional upon the passing of Resolution 8 above, but without limiting the effect of the authority in Resolution 8, authority be and is hereby given to the Directors to issue new shares (other than on a pro rata basis to shareholders) in the capital of the Company (whether in pursuance of any offer, agreement or option made or granted by the Directors or otherwise) at an issue price per new share which shall be determined by the Directors in their absolute discretion provided that such price may represent a discount exceeding ten per cent. (10%) but not more than twenty per cent. (20%) discount (or such other discount as may be permitted by the SGX-ST from time to time) to the price per share determined in accordance with the requirements of the SGX-ST. [See Explanatory Note (b)] (Resolution 9) 8. 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 79

82 NOTICE OF ANNUAL GENERAL MEETING time to time (whether by way of market purchases or off-market purchases on an equal access scheme) of up to ten per cent. (10%) of the total number of issued shares (excluding treasury shares) in the capital of the Company (as ascertained as at the date of Annual General Meeting of the Company) at the price of up to but not exceeding the Maximum Price as defined in 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 (c)] (Resolution 10) Any Other Business 9. To transact any other business which may be properly transacted at an Annual General Meeting. BY ORDER OF THE BOARD Lynette Loo Company Secretary Singapore 8 April 2010 (a) (b) (c) Resolution 8, if passed, will empower the Directors from the date of the above 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 fifty per cent. (50%) (100% for renounceable rights issue) 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 twenty per cent. (20%) of the total number of issued shares (excluding treasury shares) of the Company. Resolution 9, if passed, will empower the Directors of the Company to issue shares in the capital of the Company (other than on a pro rata basis to shareholders of the Company) at a price which shall represent not more than a 20% discount (or such other discount as may be permitted by the SGX-ST from time to time) to the price per share determined in accordance with the requirements of the SGX-ST, without seeking any further approval from shareholders in general meeting but within the limitation imposed by the Resolution. Resolution 10, 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 2009 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 Explanatory Notes:- NOTES:- 1. A member entitled to attend and vote at the Annual General Meeting ( the 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. 2. 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. 3. The instrument appointing a proxy must be deposited at the Registered Office of the Company at 36 Newton Road, Singapore not less than forty-eight (48) hours before the time for holding the Meeting. 80

83 HOTEL ROYAL LIMITED (Co. Reg. No G) (Incorporated in the Republic of Singapore) ANNUAL GENERAL MEETING PROXY FORM IMPORTANT 1. For investors who have used their CPF monies to buy shares of Hotel Royal Limited, the Annual Report 2009 is forwarded to them at the request of their CPF Approved Nominees and is sent solely FOR INFORMATION ONLY. 2. 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. 3. CPF Investors who wish to vote should contact their CPF Approved Nominee. I/We, (Name), NRIC/Passport No. of (Address) being a member / members of HOTEL ROYAL LIMITED hereby appoint: NRIC/ Proportion of Name Address Passport Shareholdings Number (%) and/or (delete as appropriate) NRIC/ Proportion of Name Address Passport Shareholdings Number (%) 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 41st Annual General Meeting of the Company, to be held on 24 April 2010, 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 Meeting 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. To be used on a To be used in the show of hands event of a Poll No. Resolutions: Number For* Against* of Votes For** 1. Adoption of Directors Report, Audited Financial Statements and Auditors Report. 2. Declaration of First and Final Dividend. 3. Approval of Directors Fees. 4. Re-election of Dr Lee Keng Thon 5. Re-election of Mr Lee Khin Tien 6 Re-election of Mr Goh Kok Yeow 7. Re-appointment of Auditors and fixing their Remuneration. 8. Authority to allot and issue new shares 9. Authority to issue new shares (other than pro rata to shareholders) at a discount not exceeding 20% 10. Renewal of Share Purchase Mandate * Please indicate your vote For or Against with a tick ( ) within the box provided. ** If you wish to exercise all your votes For or Against, please tick ( ) within the box provided. Alternately, please indicate the number of votes as appropriate. Dated this day of Number of Votes Against** Shares in: No. of Shares Signature(s) of Member(s)/Common Seal (a) Depository Register (b) Register of Members IMPORTANT: PLEASE READ NOTES OVERLEAF

84 NOTES 1. 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. 2. 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. 3. 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. 4. The instrument appointing a proxy or proxies must be deposited at the Company s Registered Office at 36 Newton Road, Singapore not less than forty-eight (48) hours before the time for holding the Meeting. 5. 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. 6. 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 must (failing previous registration with the Company) be lodged with the instrument of proxy, failing which the instrument may be treated as invalid. 7. 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.

85 Hotel Royal Limited Group of Companies Hotel Queens (Singapore) Pte Ltd Royal Properties Investment Pte Ltd Hotel Royal Investment Pte Ltd Grand Complex Properties Ltd Castle Mall Properties Pte Ltd Prestige Properties Sdn Bhd Faber Kompleks Sdn Bhd Premium Lodge Sdn Bhd Royal Capital Pte Ltd 36 Newton Road Singapore Tel: Fax: royal@hotelroyal.com.sg website: