United Industrial Corporation Limited

Transcription

1 United Industrial Corporation Limited Annual REport 2011 United Industrial Corporation Limited i

2 Cover Picture: Artist s impression of the UIC Building Redevelopment Project

3 1,032 1,194 1, (113) (132) 7,287 7,242 7,106 3,728 3,309 7,016 3,159 6,429 3,011 3, ($ million) (restated) (restated) (restated) (restated) Revenue ,032 1, Net profit from operations Net fair value gain/(loss) on investment properties 1,051 (262) (384) Attributable profit/(loss) 1,156 (113) (132) Total assets 7,287 7,106 6,429 7,016 7,242 Shareholders' equity 3,309 3,159 3,011 3,728 3,940 Annual REport 2011 United Industrial Corporation Limited 1

4 2011 OVERVIEW Following an exceptional strong recovery the year before, the Singapore economy grew at a modest 4.9% in During the year, the global economy had been weakened by the euro zone debt crises and the soft US economy. 2 Annual REport 2011 United Industrial Corporation Limited

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7 Dr Wee Cho Yaw was appointed a Director and Chairman of United Industrial Corporation Limited ( UIC ) in He is also the Chairman of the United Overseas Bank Group comprising United Overseas Bank Limited, Far Eastern Bank Ltd and their subsidiaries. He has more than 50 years of experience in the banking industry. He is also the Chairman of UOL Group Limited, Haw Par Corporation Limited, Pan Pacific Hotels Group Limited, Singapore Land Limited and Marina Centre Holdings Private Limited. He is also the Chairman of the Wee Foundation. Dr Wee received Chinese high school education. He is the Honorary President of the Singapore Federation of Chinese Clan Associations, Singapore Chinese Chamber of Commerce and Industry and Singapore Hokkien Huay Kuan. He was appointed Pro-Chancellor of Nanyang Technological University in 2004 and was conferred Honorary Doctor of Letters by the National University of Singapore in Dr John Gokongwei, Jr. was appointed a Director and Deputy Chairman of UIC in As of January 2002, he is the Chairman Emeritus of JG Summit Holdings, Inc., a company incorporated in the Philippines and listed on the Philippines Stock Exchange Inc., since its formation in He is also a Director and Deputy Chairman of Singapore Land Limited, Director of Marina Centre Holdings Private Limited, Universal Robina Corporation, Robinsons Land Corporation, Digital Telecommunications Phils., Inc., Oriental Petroleum and Minerals Corporation and Anscor Phils. Dr Gokongwei received a Master in Business Administration from the De la Salle University in the Philippines, and attended the Advanced Management Program at Harvard University, Boston, Massachusetts, USA. Dr Wee was conferred the Businessman Of The Year award twice at the Singapore Business Awards in 2001 and In 2006, he received the inaugural Credit Suisse-Ernst & Young Lifetime Achievement Award for his outstanding achievements in the Singapore business community. In 2009, he was conferred the Lifetime Achievement Award by The Asian Banker. In 2011, Dr Wee was awarded the Distinguished Service Order by the Government for his contributions towards the community and education in Singapore. Annual REport 2011 United Industrial Corporation Limited 5

8 Mr James L. Go was appointed a Director of UIC in He is the Chairman and Chief Executive Officer of JG Summit Holdings, Inc., Universal Robina Corporation, Robinsons Land Corporation, JG Summit Petrochemical Corporation and Oriental Petroleum and Minerals Corporation. He also sits as a director of Singapore Land Limited, Marina Centre Holdings Private Limited and Hotel Marina City Private Limited. He was the Vice-Chairman of the Board of Directors of Digital Telecommunication Phils. Inc. and also held the positions of President and Chief Executive Officer until October 26, He was elected as a director of the Philippine Long Distance Telephone Company (PLDT) on November 3, 2011 and was also appointed a member of PLDT s Technology Strategy Committee. Mr Go graduated with a Bachelor of Science and Master of Science, Chemical Engineering from Massachusetts Institute of Technology, USA. Mr Lim Hock San, the President and Chief Executive Officer, was appointed a Director of UIC in Mr Lim is also the President and Chief Executive Officer of Singapore Land Limited and a Director of Keppel Corporation Limited and the Chairman of the National Council on Problem Gambling. Mr Lim graduated with a Bachelor of Accountancy from the University of Singapore. He obtained a Master of Science in Management from the Massachusetts Institute of Technology, and attended the Advanced Management Program at Harvard Business School. He is a Fellow of the Chartered Institute of Management Accountants (UK) and a Fellow and past President of the Institute of Certified Public Accountants of Singapore. Mr Gwee Lian Kheng was appointed a Director of UIC in He is the Group Chief Executive of UOL and its listed subsidiary Pan Pacific Hotels Group Limited. Mr Gwee has been with the UOL Group since He also sits on the board of Singapore Land Limited. Mr Gwee graduated with a Bachelor degree in Accountancy (Honours) from the University of Singapore. He is a Fellow Member of the Chartered Institute of Management Accountants, Association of Chartered Certified Accountants and the Institute of Certified Public Accountants of Singapore. 6 Annual REport 2011 United Industrial Corporation Limited

9 The late Mr Tan Boon Teik was appointed a Director of UIC in 1992 and was the Chairman of the Audit Committee. Mr Tan was a Director of Singapore Land Limited. He was on the Panel of International Commercial Arbitrators of CIETAC in Beijing, Shanghai and Shenzhen. He was the Attorney General of Singapore from 1969 to 1992, and was also the Chairman of Singapore Petroleum Co. Ltd. He was a Member of the panel of the Singapore International Arbitration Centre. Mr Tan was a Fellow of the Singapore Academy of Law and a Fellow of the Singapore Institute of Directors. He graduated with a LLM (London) and was a Barrister-at-Law (Middle Temple). Mr Tan passed away on 10 March Mr Hwang Soo Jin was appointed a Director of UIC in January 2003 and is currently the Chairman of the Nominating Committee. He is a Chartered Insurer qualified in the United Kingdom, and has more than 50 years business experience. Mr Hwang is currently the Chairman Emeritus and director of Singapore Reinsurance Corporation Ltd and also sits on the boards of directors of United Overseas Insurance Ltd, Haw Par Corporation Ltd and Singapore Land Limited, among others. He is a former director of Lee Kim Tah Holdings Limited and former Chairman of Singapore Reinsurance Corporation Ltd. Mr Hwang is an Associate of the Chartered Insurance Institute, United Kingdom. Mr Alvin Yeo Khirn Hai was appointed a Director of UIC in 2002 and is currently the Chairmen of the Remuneration Committee and Audit Committee. He is a lawyer in private practice and the Senior Partner of WongPartnership LLP. Mr Yeo was appointed Senior Counsel of the Supreme Court of Singapore in January He is the Chairman of the Audit Committee of the Law Society of Singapore, and a member of the Appeals Advisory Panel of the Monetary Authority of Singapore, the Singapore International Arbitration Centre s Council of Advisors, and a Fellow of the Singapore Institute of Arbitrators. He is also a Director of Singapore Land Limited and Keppel Corporation Limited. Mr Yeo is a Member of Parliament. Mr Yeo graduated with a Bachelor of Laws (Honours) from King s College, University of London, and is a Barristerat-Law (Gray s Inn). Annual REport 2011 United Industrial Corporation Limited 7

10 Mr Wee Ee Lim was appointed a Director of UIC in He is presently the President and Chief Executive Officer of Haw Par Corporation Limited. In addition, he sits on the board of directors of Singapore Land Limited as well as UOL Group Limited, Pan Pacific Hotels Group Limited, Hua Han Bio-Pharmaceutical Holdings Limited (a company listed on the Hong Kong Stock Exchange) and Wee Foundation. Mr Wee graduated with a Bachelor of Arts (Economics) from Clark University, USA. Mr Antonio L. Go was appointed a Director of UIC in April He is currently a Director and President of Equitable Computer Services, Inc. and Chairman of Equicom Savings Bank and Algo Leasing and Finance Inc. He is a Trustee of Go Kim Pah Foundation and Equitable Foundation Inc. He sits on the boards of Petz Ltd. HK, Cebu Air, Inc., Maxicare Healthcare Corporation, Oriental Petroleum and Minerals Corporation, Equicom Information Technology, Equicom Manila Holdings, Medilink Network, Inc. and Equitable Development Corporation. From year , he was an Independent Director of Digital Telecommunications Philippines, Inc. Mr Go graduated with a Bachelor of Business Administration from Youngstown University, USA. He also attended the International Advanced Management programme at the International Management Institute, Geneva, Switzerland, and the ABA National School of Bankcard Management, Northwestern University, USA. Mr Lance Y. Gokongwei was appointed a Director of UIC in He is the President and Chief Operating Officer and a Director of JG Summit Holdings, Inc., Universal Robina Corporation and JG Summit Petrochemical Corporation. He is also the Vice Chairman and Deputy Chief Executive Officer of Robinsons Land Corporation. He is the President and Chief Executive Officer of Cebu Air, Inc.. He is also the Chairman of Robinsons Bank, Vice Chairman of JG Summit Capital Markets Corporation and a Director of Oriental Petroleum and Minerals Corporation and Singapore Land Limited. He is also a trustee, secretary and treasurer of the Gokongwei Brothers Foundation, Inc.. He served as a Director of Digital Telecommunications Phils. Inc. from May 1994 up to October Mr Gokongwei graduated with a Bachelor of Science (Applied Science) from Pennsylvania Engineering School and a Bachelor of Science (Finance) from Wharton School, USA. He also attended the management and technology program at the University of Pennsylvania. 8 Annual REport 2011 United Industrial Corporation Limited

11 The Company is committed to maintaining high standards of corporate governance. This report outlines the Company s corporate governance practices with reference to the revised Code of Corporate Governance 2005 ( Revised Code ). Name Attendance at 4 Board Meetings Attendance at 4 Audit Committee Meetings Attendance at 1 Nominating Committee Meeting Attendance at 1 Remuneration Committee Meeting Wee Cho Yaw 4 n/a 1 1 John Gokongwei, Jr. 3 n/a n/a n/a Lim Hock San 4 n/a n/a n/a James L. Go Lance Y. Gokongwei 4 n/a n/a n/a Gwee Lian Kheng 4 n/a n/a n/a Hwang Soo Jin Antonio L. Go 4 n/a 1 1 Tan Boon Teik* n/a Wee Ee Lim 3 n/a n/a n/a Alvin Yeo Khirn Hai 3 2 n/a 1 *Mr Tan Boon Teck passed away on 10 March The Board has nominated Mr Yang Soo Suan as a Non-Executive Independent Director to be considered and approved by the shareholders at the forthcoming Annual General Meeting on 27 April Upon Mr Yang s election, it is intended that he will be appointed a Member of the Nominating Committee and Audit Committee. Annual REport 2011 United Industrial Corporation Limited 9

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16 Remuneration of Directors For The Year Ended 31 December 2011 Remuneration Band & Name of Director Base/Fixed Salary Variable or Performance- Related Income/Bonuses Directors Fees Share Options Granted, Allowances and Other Benefits $1,000,000 $1,250,000 Lim Hock San 51% 39% n/a 10% Below $250,000 Wee Cho Yaw n/a n/a 100% n/a John Gokongwei, Jr. n/a n/a 100% n/a Antonio L. Go n/a n/a 100% n/a James L. Go n/a n/a 100% n/a Lance Y. Gokongwei n/a n/a 100% n/a Gwee Lian Kheng n/a n/a 100% n/a Hwang Soo Jin n/a n/a 100% n/a Tan Boon Teik n/a n/a 100% n/a Wee Ee Lim n/a n/a 100% n/a Alvin Yeo Khirn Hai n/a n/a 100% n/a 14 Annual REport 2011 United Industrial Corporation Limited

17 Remuneration of Key Executives (Who Are Not Also Directors) For The Year Ended 31 December 2011 Remuneration Band & Name of Key Executive Base/Fixed Salary Variable or Performance- Related Income/Bonuses Share Options Granted, Allowances and Other Benefits $500,000 $750,000 Michael Ng Seng Tat 77% 13% 10% $250,000 $500,000 Loy Chee Chang 51% 17% 32% Goh Poh Leng 50% 21% 29% Lee Wah Poh 71% 20% 9% Below $250,000 Susie Koh 58% 17% 25% No employee of the Company and its subsidiaries was an immediate family member of a Director or the CEO and whose remuneration exceeded $150,000 during the financial year ended 31 December Michael Ng Seng Tat (Group General Manager) Mr Michael Ng Seng Tat was Managing Director of Savills Singapore for 6 years before joining the Group in October His other previous appointments were Managing Director of Hamptons International; General Manager of the real estate arm of COSCO Singapore where he handled investment and development projects in Singapore and China; and Associate Director of Investment sales at Richard Ellis. He holds a Bachelor of Science (Estate Management) Honours degree from National University of Singapore. Mr Michael Ng is in charge of property investments and development projects for the Group. Loy Chee Chang (Senior Financial Controller) Mr Loy Chee Chang graduated from the National University of Singapore in 1982 with a Bachelor of Accountancy degree and worked in Pricewaterhouse, Singapore as an auditor from 1982 to He joined UIC in 1991 as its Financial Controller. He is the Senior Financial Controller of both UIC and Singapore Land Limited. Goh Poh Leng (Senior General Manager, Marketing) Ms Goh Poh Leng graduated with a Bachelor of Science (Estate Management)(Honours) from the National University of Singapore in 1990 and subsequently obtained her Certified Diploma in Accounting and Finance conducted by The Association of Chartered Certified Accountants, UK. Prior to joining the Group, Ms Goh worked in an international property consultancy firm for two years. She joined in 1992 and held various positions until her appointment as Senior General Manager, Marketing in January Susie Koh (Company Secretary/Legal Manager) Mrs Susie Koh obtained her L.L.B. (Honours), University of London in 1976 and Barrister-at-Law (Gray s Inn) in Mrs Koh was in private legal practice in Singapore as an Annual REport 2011 United Industrial Corporation Limited 15

18 Advocate & Solicitor from She became an in-house corporate lawyer and held the position of Company Secretary/General Manager (Legal) in Scotts Holding Ltd in 1991 until 1995 when she joined Sembawang Corporation Ltd as Senior Vice President, Group Legal/Group Company Secretary. She was appointed Company Secretary and Legal Manager for both UIC and Singapore Land Limited in She is a member of the Singapore Academy of Law. Lee Wah Poh (Managing Director of UIC Technologies Pte Ltd) Ms Lee obtained her Bachelor of Technology with First Class Honours in Chemistry and Control Engineering and Master in Business Administration at the University of Bradford, U.K. She worked as a Programmer/ Analyst with Hewlett Packard, Singapore from February 1981 to October She joined UIC Computer Systems Pte Ltd in November 1982 as an Assistant to the Managing Director and was promoted to the post of Managing Director in July Ms Lee resigned in 1998 and re-joined the UIC Group to become the Managing Director of UIC Technologies Pte Ltd in March The Board provides shareholders with a balanced and understandable assessment of the Company s performance, position and prospects on a quarterly basis via quarterly announcements of results and other ad hoc announcements as required by SGX-ST; and Management provides Directors with the management accounts on a monthly basis. The AC comprises four non-executive Directors, namely, the late Tan Boon Teik (Chairman), James L. Go, Hwang Soo Jin and Alvin Yeo Khirn Hai, the majority of whom, including the Chairman, are independent. Mr Alvin Yeo Khirn Hai has been appointed Chairman of AC on 19 March 2012 and the Board has nominated Yang Soo Suan as a Non-Executive Independent Director to be considered and approved by the shareholders at the forthcoming Annual General Meeting on 27 April When appointed, Yang Soo Suan will also be a member of the AC. The members have many years of financial management experience in the finance and legal industry. The main functions and Terms of Reference of the AC are to: (a) review with the external auditor the scope and results of the audit report and its cost effectiveness; (b) review the significant financial reporting issues and judgements so as to ensure the integrity of the financial statements of the Company and any formal announcements relating to the Company s financial performance; (c) review the effectiveness of the Company s material internal controls and risk management and the adequacy of the internal audit function annually; (d) review the assistance given by the Company s officers to the external and internal auditors and determining that no Management restriction has been placed on the scope of the examination of the auditors; (e) commission and review the findings of internal investigations into matters where there is any suspected fraud or irregularity, or failure of internal controls or infringement of any Singapore law, rule and regulation, which has or is likely to have a material impact on the Group s operating results or financial position; (f ) review Interested Person Transactions ( IPT ); (g) meet with the external and internal auditors annually without the presence of Management; and (h) review the independence of external auditors annually; and (i) decide and award tender contracts exceeding $10 million. The AC has explicit authority to investigate any matter within its Terms of Reference, full access to and cooperation by Management and full discretion to invite any Director or executive Director to attend its meetings, and has reasonable resources to enable it to discharge its functions properly. Management has put in place, with the AC s endorsement, arrangements by which staff of the Group may, in confidence, raise concerns about 16 Annual REport 2011 United Industrial Corporation Limited

19 possible improprieties in matters of financial reporting or other matters. The objective for such arrangement is to ensure independent investigation of such matter and for appropriate follow-up action. During the year, the AC held four meetings. The announcements of the quarterly and full year results and the financial statements of the Group and the Auditors Report thereon for the full year were reviewed by the AC prior to consideration and approval of the Board. The AC has met with the external and internal auditors, without the presence of Management, at least once during the year. For the financial year 2011, the AC undertook a review of the fees and expenses of the audit and non-audit services provided by the external auditor, PricewaterhouseCoopers LLP. For details of fees payable in respect of audit and non-audit services, please refer to Note 7 to the Financial Statements. It assessed whether the nature and extent of the non-audit services might prejudice the independence and objectivity of the auditor before confirming its re-nomination. It was satisfied that such services did not affect the independence of external auditor. The AC also reviewed the Company s IPT and the costeffectiveness of the audit conducted by the external auditor. Minutes of the AC meetings are submitted to the Board for information and review. The Company confirms that Rules 712 and 715 of the SGX- ST Listing Manual have been complied with. of the assessment of the degree of risk, evaluation of effectiveness of controls in place and the requirements for further controls. The Company has implemented a whistleblowing policy, approved by the AC, in February The Board, with the concurrence of the AC, is satisfied with the adequacy of the Company s internal controls, addressing financial, operational and compliance risks. The Group maintains accountability through an internal audit function that is independent of the activities it audits. The internal audit team is guided by the Standards of Professional Practice of internal auditing set by the Institute of Internal Auditors, and it reports directly to the Chairman of the AC and, administratively, to the CEO. The Company s internal auditors review the effectiveness of the Company s material internal controls, including financial, operational and compliance controls, and risk management. Any material non-compliance or failures in internal controls and recommendations for improvements are reported to the AC. The internal audit team has unrestricted access to all records, properties, functions and co-operation from Management and staff necessary to effectively discharge its responsibilities. The AC has reviewed the Company s internal audit function and risk assessment based on reports from the internal audit team, and satisfied that there are adequate internal controls in the Company. The Group has in place a sound system of internal controls and risk management for ensuring proper accounting records and reliable financial information as well as management of business risks with a view to safeguarding shareholders investments and the Company s assets. The risk management framework implemented provides for systematic and structured review and reporting The Company engages in regular, effective and fair communication with its shareholders. The Board provides shareholders with a balanced and understandable assessment of the Company s performance, position and prospects on a quarterly basis via quarterly announcement of results and other ad hoc announcements as required by SGX-ST. Timely as well as detailed disclosure is made in compliance with the SGX-ST guidelines. When material Annual REport 2011 United Industrial Corporation Limited 17

20 information is disseminated to the SGX-ST, such information is posted as soon as practicable on the Company s website at Shareholders participation at AGMs are highly encouraged. Each item of special business included in the Notice of the meeting is accompanied by an explanation for the proposed resolution. Separate resolutions are proposed for substantially separate issues at the meeting. The Chairman of each Board Committee as well as external auditors are normally present at general meetings to address shareholders queries, if any. The Articles allow a member of the Company to appoint one or two proxies to attend and vote on behalf of the member. For fairness to all shareholders, the Company has not amended its Articles to lift the limit on the number of proxies for nominee shareholders. However, upon written request, the Company may allow additional proxies for nominee shareholders to attend the shareholders meetings as an observer on a case by case basis. The Company has not amended its Articles to provide for absentia voting as the Board feels that it is difficult to ensure a foolproof system. The Company has adopted Rule 1207(19) of the SGX-ST Listing Manual with respect to dealings in the Company s securities by its Directors and employees. Circulars are issued to all Directors and employees of the Company and within the Group to remind them of, inter alia, laws of insider trading and the importance of not dealing in the shares of the Company and its subsidiaries on short term consideration and during the prohibitive periods. The Company has adopted an internal policy in respect of any transaction with interested persons and has set out the procedures for review and approval of the Company s IPT. Except as disclosed under the section on Material Contracts, there were no IPT for the financial year ended 31 December There were no other material contracts of the Company or its subsidiaries involving the interests of the CEO, each Director or controlling shareholder, either still subsisting at the end of the financial year or if not then subsisting entered into since the end of the previous financial year, except for the following: (a) Singland China Holdings Pte. Ltd. (a wholly-owned subsidiary of Singapore Land Limited), UOL Capital Investments Pte. Ltd. (a subsidiary of UOL Group Limited) and Peak Star Pte. Ltd., (a subsidiary of Kheng Leong Co Pte Ltd), have established a joint venture company, Shanghai Jin Peng Realty Co Ltd on a 30:40:30 basis respectively to develop Parcel 11, Chang Feng District, Shanghai, PRC into a mixed-use development comprising residential units and retail component. The purchase price for the site was RMB2.06 billion. The aforesaid transaction was on normal commercial terms, the risks and rewards of the joint consortium are in proportion to the equity of each joint venture partner. 18 Annual REport 2011 United Industrial Corporation Limited

21 (b) S.L. Development Pte. Limited (a wholly-owned subsidiary of Singpore Land Limited) entered into a joint venture with UOL Venture Investments Pte. Ltd (a wholly owned subsidiary of UOL Group Limited) in United Venture Development (Bedok) Pte. Ltd for the acquisition and development of Archipelago, a residential development at Bedok Reservoir Road. The purchase price of the land was $320 million. The aforesaid transaction was on normal commercial terms, the risks and reward of the joint venture are in proportion to the equity of each joint venture partner (50:50). Annual REport 2011 United Industrial Corporation Limited 19

22 Date of Initial Date of Board of Directors Board Appointment Appointment Last Re-Election Wee Cho Yaw Non-Executive Chairman John Gokongwei, Jr. Non-Executive Deputy Chairman Lim Hock San President & Chief Executive Officer Antonio L. Go Non-Executive and Independent Director James L. Go Non-Executive Director Lance Y. Gokongwei Non-Executive Director Gwee Lian Kheng Non-Executive Director Hwang Soo Jin Non-Executive and Independent Director Tan Boon Teik* Non-Executive and Independent Director Wee Ee Lim Non-Executive Director Alvin Yeo Khirn Hai Non-Executive and Independent Director Frederick D. Go Alternate to John Gokongwei, Jr n/a Patrick O. Ng Alternate to Lance Y. Gokongwei n/a Audit Committee Alvin Yeo Khirn Hai Tan Boon Teik* James L. Go Hwang Soo Jin Chairman (appointed 19 March 2012) Chairman member member Auditors PricewaterhouseCoopers LLP 8 Cross Street #17-00 PWC Building Singapore Audit Partner: Sim Hwee Cher (appointed with effect from financial year 2008) Nominating Committee Hwang Soo Jin Wee Cho Yaw James L. Go Tan Boon Teik* Antonio L. Go Chairman member member member Member Remuneration Committee Alvin Yeo Khirn Hai Chairman Wee Cho Yaw member James L. Go member Hwang Soo Jin member Antonio L. Go member Company Secretary Susie Koh *Mr Tan Boon Teik passed away on 10 March Share Registrars KCK CorpServe Pte Ltd 333 North Bridge Road #08-00 KH KEA Building Singapore Telephone: Facsimile: Registered Office 24 Raffles Place #22-01/06 Clifford Centre Singapore Telephone: Facsimile: Website: Company Registration Number E 20 Annual REport 2011 United Industrial Corporation Limited

23 After fifteen months of growth, the office market started to weaken in the third quarter of 2011 following concerns on the US economy and Europe s sovereign debt crisis. Despite the growth achieved in the first nine months of the year, market rents were still about 40% lower than peak rents achieved three years ago. Local residential market remained active due to low interest rates and high liquidity. Prices and sales activities continued to be healthy supported by genuine home buyers and upgraders. However, optimism in the market is contained by global uncertainties and cooling measures implemented by the government. SGX Centre Pan Pacific Singapore The Trizon Annual REport 2011 United Industrial Corporation Limited 21

24 Singapore Land Tower The Gateway Abacus Plaza and Tampines Plaza 22 Annual REport 2011 United Industrial Corporation Limited

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26 Mandarin Oriental West Mall Marina Square Shopping Mall 24 Annual REport 2011 United Industrial Corporation Limited

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28 Park Natura Archipelago at Bedok Reservoir (artist s impression) 26 Annual REport 2011 United Industrial Corporation Limited

29 The Excellency, Chengdu Shanghai Chang Feng Poject (artist s impression) The Westin Tianjin Annual REport 2011 United Industrial Corporation Limited 27

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31 UIC Technologies Pte Ltd For the year ended 31 December 2011, UIC Technoogies Group s ( UICT Group ) revenue increased by 27% to $80.6 million due to improved hardware sales in corporate sector, notebook sales to Polytechnic students and Microsoft software sales to Education and Public Healthcare sectors. The UICT Group s pre-tax profit increased by 15% to $2.8 million with a 23% Return on Total Equity. Amidst the global economic uncertainty for 2012, UICT Group will strive to maintain its preferred IT Solutions and Service Provider position in Education, Financial Services, Healthcare, mid-size Enterprise and the Public sector. The Management Team of UIC Technologies Group Annual REport 2011 United Industrial Corporation Limited 29

32 SGX Bull Charge group picture of staff Staff volunteers at Community Outreach Programme Kickboxing class in action The HR function focus on the provision of effective services to support business units and deliver initiatives including compensation and benefits, talent management and retention, and performance management. The Group remains committed to the growth of its employees potential through continuous training and development. Regular in-house newsletters, as part of its employee communications programme, update employees on staff activities and movement in the company. During the year, employees are encouraged to pursue a balanced and healthy lifestyle through Workplace Health Promotion. These programmes, such as physical and mental health talks, weight management, Vertical Challenge, yoga, aerobics, healthy cooking classes and distribution of fruits were organised. These activities also provide opportunities for employees interaction and the enhancement of team spirit. The Group continues to support corporate and social responsibility programme. In addition to donations to social community organisations, staff volunteers brought a group of underprivileged children for a movie show and lunch. For the eighth consecutive year, staff participated in the annual Bull Run 2011, a 5 km charity fun run organised by the Stock Exchange of Singapore. 30 Annual REport 2011 United Industrial Corporation Limited

33 AS AT 31 December 2011 Site Area (sq metres) Approximate Gross Net Floor Floor Area Area (sq metres) (sq metres) Car Parking Lots Capital Value ($m) Subsidiary Companies Investment Properties Stamford Court A 4-storey commercial building of shops and offices 2,072 7,264 5, situated at the junction of Stamford Road and Hill Street West Mall A 5-storey retail and entertainment complex with three 9,890 26,300 17, basements of car parking space, located at Bukit Batok Town Centre Singapore Land Tower A 47-storey complex of banks and offices and three 5,064 74,215 57, ,400 basements of car parking space with frontages on Raffles Place/Battery Road SGX Centre 2 2,970 36,590 25, A 29-storey office building with two basements of car (inclusive of (UIC Group s parking space located at 4 Shenton Way 3,336 sqm in SGX interest in SGX CENTRE 1) Centre 1 & 2) Clifford Centre A 29-storey complex of shops and offices with frontages 3,343 37,267 25, on both Raffles Place and Collyer Quay The Gateway A pair of 37-storey towers with two basements of car 22,381 97,430 69, ,035 parking space located at Beach Road ABACUS Plaza 2,614 10,970 8, and Tampines Plaza 2,613 10,965 8, A pair of 8-storey office buildings with two basements of car parking space located at Tampines Central 1 in the Tampines Finance Park Marina Square 3 Hotels and two investment properties, a 4-storey Retail Mall (comprising fashion boutiques, department store, eating and entertainment outlets, food court, cinemas, bowling alley and car park) and a six-storey office building (Marina Bayfront) 5 Shenton Way Proposed commercial development (at former location of UIC Building) This is part of a 60:40 mixed development (residential/ commercial building) with the residential component classified under properties held for sale 92, , ,780 1, (In respect of retail mall and office building only) 6,778 30,933 25, Annual REport 2011 United Industrial Corporation Limited 31

34 AS AT 31 December 2011 Site Area (sq metres) Gross Floor Area (sq metres) Approximate Net Floor Area (sq metres) Car Parking Lots Capital Value ($m) Associated Company s Investment Property Novena Square 16,673 70,010 57, A commercial complex comprising two office towers of 25 and 18 storeys and a three-storey retail block located at the junction of Thomson Road and Moulmein Road Tenure Site Area (sq metres) Gross Floor Area (sq metres) Actual/ Expected Year of TOP Subsidiary Companies and Joint Venture s Properties Held For Sale Completed in 2011 Park Natura Freehold 19,823 27, A 192-unit condominium off Upper Bukit Timah Road Under Development The Excellency, Chengdu Leasehold 7,566 77, Two towers of 51 storeys each with 3 basement car parks at the junction of Dacisi Road and Tian Xian Qiao Road North The Trizon Freehold 18,153 38, A 289-unit condominium development at Ridgewood Close Archipelago A 577-unit condominium development at Bedok Reservoir Road Leasehold 45,623 71, Shenton Way Proposed residential development (at former location of UIC Building) This is part of a 60:40 mixed development (residential/commercial building) with the commercial component classified under investment properties Leasehold 6,778 55, Annual REport 2011 United Industrial Corporation Limited

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36 The directors present their report to the members together with the audited financial statements of the Group for the financial year ended 31 December 2011 and the statement of financial position of the Company as at 31 December The directors of the Company in office at the date of this report are: Wee Cho Yaw (Chairman) John Gokongwei, Jr. (Deputy Chairman) Lim Hock San (President and Chief Executive Officer) Antonio L. Go James L. Go Lance Y. Gokongwei Gwee Lian Kheng Hwang Soo Jin Tan Boon Teik Wee Ee Lim Alvin Yeo Khirn Hai Frederick D. Go (Alternate to John Gokongwei, Jr.) Patrick O. Ng (Alternate to Lance Y. Gokongwei) Arrangements to enable directors to acquire shares and debentures Neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose object was to enable the directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate, other than as disclosed under Share options of this report. 34 Annual REport 2011 United Industrial Corporation Limited

37 (a) According to the register of directors shareholdings, none of the directors holding office at the end of the financial year had any interest in the shares or debentures of the Company or related corporations, except as follows: Holdings registered in name of director or nominee Holdings in which a director is deemed to have an interest At At At At United Industrial Corporation Limited ( UIC ) (Ordinary shares) Wee Cho Yaw 1,857,000 1,857, ,112, ,427,565 John Gokongwei, Jr ,195, ,801,000 Lim Hock San 22,000 22, Hwang Soo Jin 300, , Tan Boon Teik ,000 Singapore Land Limited (Ordinary shares) John Gokongwei, Jr ,565, ,327,384 Lim Hock San 340, , (b) According to the register of directors shareholdings, the following director holding office at the end of the financial year had an interest in options to subscribe for ordinary shares of the Company granted pursuant to the UIC Share Option Scheme: No of unissued ordinary shares of the Company under option At At Lim Hock San Options to subscribe ordinary shares at $2.70 per share (Offer dated ) 300, ,000 Options to subscribe ordinary shares at $2.91 per share (Offer dated ) 150, ,000 Options to subscribe ordinary shares at $1.07 per share (Offer dated ) 100, ,000 Options to subscribe ordinary shares at $2.03 per share (Offer dated ) 100, ,000 Options to subscribe ordinary shares at $2.78 per share (Offer dated ) 120,000 - (c) There was no change in any of the above-mentioned directors interests between the end of the financial year and 21 January Annual REport 2011 United Industrial Corporation Limited 35

38 Since the end of the previous financial year, no director has received or become entitled to receive a benefit 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 as disclosed in the accompanying financial statements note 31. UIC Share Option Scheme (a) The UIC Share Option Scheme ( ESOS ) which was approved by the shareholders of the Company on 18 May 2001 had expired on 17 May 2011 and was continued with the shareholders approval at an annual general meeting held on 27 April 2011, for a further period of 10 years from 18 May 2011 to 17 May Other than the extension, there is no change in any other rules of the ESOS. The ESOS is administered by the Remuneration Committee ( RC ) comprising the following members: Alvin Yeo Khirn Hai Chairman (Independent) Wee Cho Yaw Member (Non-independent) James L. Go Member (Non-independent) Hwang Soo Jin Member (Independent) Antonio L. Go Member (Independent) Under the terms of the ESOS, the total number of shares granted shall not exceed 5% of the issued shares of the Company on the day immediately preceding the offer date of the ESOS. The exercise price is equal to the average of the last done price per share of the Company s ordinary shares on the Singapore Exchange Securities Trading Limited ( SGX-ST ) for five market days immediately preceding the date of the offer. (b) The ESOS became operative on 5 March 2007 upon the Company granting options to key executives to subscribe for 2,610,000 ordinary shares of the Company ( 2007 Options ). On 10 March 2008 ( 2008 Options ), 4 May 2009 ( 2009 Options ) and 26 February 2010 ( 2010 Options ), the Company granted options to subscribe for 1,068,000 shares, 760,000 shares and 656,000 shares of the Company respectively. Particulars of the 2007 Options, 2008 Options, 2009 Options and 2010 Options were set out in the Directors Reports for respective financial years. On 1 March 2011, the Company granted options to key executives to subscribe for 894,000 shares at an exercise price of $2.78 per ordinary share ( 2011 Options ). The 2011 Options were accepted by key executives, including an executive director of the Company, Lim Hock San. 36 Annual REport 2011 United Industrial Corporation Limited

39 The details of the 2011 Options accepted are as follows: Number of employees At exercise price of $2.78 per share Executive Director 1 120,000 Executives , ,000 (c) Principal terms of the ESOS are set out below: (i) only full time confirmed executives of the Company or any of its subsidiary companies (including executive directors) are eligible for the grant of options; (ii) the ESOS shall be in force at the discretion of the RC subject to a maximum period of 10 years and may be continued with the approval of the shareholders; (iii) all options granted shall be exercisable, in whole or in part (only in respect of 1,000 shares or any multiple thereof ), before the tenth anniversary of the Offer Date and in accordance with the following vesting schedule: Vesting schedule Percentage of shares over which options are exercisable On or after the second anniversary of the Offer Date 50% On or after the third anniversary of the Offer Date 25% On or after the fourth anniversary of the Offer Date 25% The vesting and exercising of vested or unexercised options are governed by conditions set out in the ESOS; and (iv) participants in the ESOS, shall not, except with the prior approval of the RC in its absolute discretion, be entitled to participate in any other share option schemes or share incentive schemes implemented by companies within or outside the Group. The settlement of options are subject to conditions as set out in the ESOS. (d) Other information required by SGX-ST: (i) The details of options granted to an executive director of the Company, Lim Hock San under the ESOS are as follows: Granted in the financial year ended Aggregate granted since commencement of ESOS to Aggregate exercised since commencement of ESOS to Aggregate outstanding as at , ,000 Nil 770,000 (ii) No options have been granted to controlling shareholders or their associates and no participant has received 5% or more of the total options available under the ESOS. No options were granted at a discount during the financial year. Annual REport 2011 United Industrial Corporation Limited 37

40 (e) During the financial year, 334,000 shares of the Company were issued upon the exercise of options by: Holders of Number of shares Exercise price per share 2007 Options 60,000 $ Options 274,000 $ ,000 (f ) As at the end of the financial year, the following options to acquire ordinary shares in the Company were outstanding: Date of grant of options Options outstanding at Options granted in 2011 Options exercised Options cancelled in 2011 Options outstanding at Exercise price per share Date of expiry ,046,000 - (60,000) (204,000) 1,782,000 $ , (96,000) 804,000 $ ,000 - (274,000) (36,000) 338,000 $ , (72,000) 584,000 $ ,000 - (70,000) 824,000 $ ,250, ,000 (334,000) (478,000) 4,332,000 The Audit Committee comprises four non-executive directors, namely, Tan Boon Teik (Chairman), James L. Go, Alvin Yeo Khirn Hai and Hwang Soo Jin, majority of whom including the Chairman, are independent directors. The Audit Committee carried out its functions in accordance with Section 201B(5) of the Companies Act. At a series of meetings convened during the twelve months up to the date of this report, the Audit Committee reviewed reports prepared respectively by the external and the internal auditors and approved proposals for improvements in internal controls. The announcement of quarterly and full year results, the financial statements of the Group and the Independent Auditor s Report thereon for the full year were also reviewed prior to consideration and approval of the Board. The independent auditor, PricewaterhouseCoopers LLP, has expressed its willingness to accept re-appointment. On behalf of the directors WEE CHO YAW Director 17 February 2012 LIM HOCK SAN Director 38 Annual REport 2011 United Industrial Corporation Limited

41 In the opinion of the directors, (a) the statement of financial position of the Company and the consolidated financial statements of the Group as set out on pages 42 to 99 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 2011 and of the results of the business, changes in equity and cash flows of the Group for the financial year then ended; and (b) 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 WEE CHO YAW Director LIM HOCK SAN Director 17 February 2012 Annual REport 2011 United Industrial Corporation Limited 39

42 TO THE MEMBERS OF UNITED INDUSTRIAL CORPORATION LIMITED Report on the Financial Statements We have audited the accompanying financial statements of United Industrial Corporation Limited (the Company ) and its subsidiaries (the Group ) set out on pages 42 to 99, which comprise the consolidated statement of financial position of the Group and statement of financial position of the Company as at 31 December 2011, the consolidated income statement, statement of comprehensive income, statement of changes in equity and statement of cash flows of the Group for the year then ended, and a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of the Singapore Companies Act (the Act ) and Singapore Financial Reporting Standards, and for devising and maintaining a system of internal accounting controls sufficient to provide 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 statements of financial position and to maintain accountability of assets. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgement, 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 of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the 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, the consolidated financial statements of the Group and statement of financial position of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2011, and the results, changes in equity and cash flows of the Group for the financial year ended on that date. 40 Annual REport 2011 United Industrial Corporation Limited

43 TO THE MEMBERS OF UNITED INDUSTRIAL CORPORATION LIMITED Report on Other Legal and Regulatory Requirements In our opinion, the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditors, have been properly kept in accordance with the provisions of the Act. PricewaterhouseCoopers LLP Public Accountants and Certified Public Accountants Singapore, 17 February 2012 Annual REport 2011 United Industrial Corporation Limited 41

44 Note $ 000 $ 000 (restated) Revenue 4 805,504 1,194,302 Cost of sales 5 (451,774) (724,109) Gross profit 353, ,193 Investment income 6 3,080 1,648 Other gains/(losses) - net 1, Selling and distribution costs (19,407) (20,580) Administrative expenses (19,214) (21,156) Finance expenses (5,566) (9,613) Share of results of associated companies 42,207 44,657 Share of results of a joint venture (500) - 355, ,412 Fair value gain on investment properties 16 21, ,022 Profit before income tax 7 377,286 1,156,434 Income tax expense 8 (37,214) (194,095) Net profit 340, ,339 Attributable to: Equity holders of the Company 9 214, ,765 Non-controlling interests 125, , , ,339 Basic/Diluted earnings per share attributable to equity holders of the Company (expressed in cents per share) cents 54.0 cents The accompanying notes form an integral part of these financial statements. 42 Annual REport 2011 United Industrial Corporation Limited

45 $ 000 $ 000 (restated) Net profit 340, ,339 Other comprehensive income/(expense) taken directly to equity: Net exchange differences on translation of financial statements of foreign entities 14,578 (6,835) Total comprehensive income 354, ,504 Total comprehensive income attributable to: Equity holders of the Company 224, ,710 Non-controlling interests 130, , , ,504 The accompanying notes form an integral part of these financial statements. Annual REport 2011 United Industrial Corporation Limited 43

46 As at 31 December Annual REport 2011 United Industrial Corporation Limited Note The Group The Company $ 000 $ 000 $ 000 $ 000 $ 000 Assets (restated) (restated) Non-current assets Other receivables 11 73,381 4,305 16,029 1,231,507 1,057,239 Available-for-sale financial assets 12 12,045 12,045 12, Investments in associated companies , , , Investment in a joint venture Investments in subsidiary companies ,227,519 1,227,519 Investment properties 16 5,219,900 5,458,000 4,597, Property, plant and equipment , , , ,164,070 6,199,193 5,326,029 2,459,763 2,284,901 Current assets Cash and cash equivalents , , , Properties held for sale , , , Trade and other receivables 20 96, ,468 45,712 1, Inventories 1,995 2,561 1, ,077, ,638 1,102,536 1, Total assets 7,241,528 7,015,831 6,428,565 2,461,733 2,285,669 Liabilities Current liabilities Trade and other payables , , ,626 3,252 2,294 Current income tax liabilities 8 85,513 83,729 49, Borrowings , , , , ,068 1,103, , , , ,035 Non-current liabilities Trade and other payables 21 54,412 50, , ,518 19,391 Borrowings 22 41, , , Deferred income tax liabilities , , , , , , ,518 19,391 Total liabilities 1,752,469 1,736,093 1,954, , ,426 NET ASSETS 5,489,059 5,279,738 4,473,885 1,797,842 1,795,243 EQUITY Capital and reserves attributable to equity holders of the Company Share capital 24 1,401,382 1,400,927 1,400,927 1,401,382 1,400,927 Reserves 2,538,503 2,326,955 1,610, , ,316 3,939,885 3,727,882 3,010,954 1,797,842 1,795,243 Non-controlling interests 1,549,174 1,551,856 1,462, TOTAL EQUITY 5,489,059 5,279,738 4,473,885 1,797,842 1,795,243 The accompanying notes form an integral part of these financial statements.

47 Attributable to equity holders of the Company Share capital Retained earnings Asset revaluation reserve Other reserve Total Noncontrolling interests Total equity $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ Balance at 1 January as previously reported 1,400,927 2,303,356 29,382 1,924 3,735,589 1,551,856 5,287,445 - effect of adopting INT FRS (7,707) - - (7,707) - (7,707) Balance at 1 January 2011, as restated 1,400,927 2,295,649 29,382 1,924 3,727,882 1,551,856 5,279,738 Total comprehensive income - 214,158-10, , , ,650 Employee share option scheme - value of employee services proceeds from shares issued Effect of purchase of shares from non-controlling shareholders - 28, ,051 (84,553) (56,502) Dividends paid - (41,334) - - (41,334) (48,517) (89,851) Balance at 31 December ,401,382 2,496,524 29,382 12,597 3,939,885 1,549,174 5,489, Balance at 1 January as previously reported 1,400,927 1,623,342 29,382 5,774 3,059,425 1,476,693 4,536,118 - effect of adopting INT FRS (48,471) - - (48,471) (13,762) (62,233) Balance at 1 January 2010, as restated 1,400,927 1,574,871 29,382 5,774 3,010,954 1,462,931 4,473,885 Total comprehensive income/ (expense) - 743,765 - (4,055) 739, , ,504 Employee share option scheme - value of employee services Effect of purchase of shares from non-controlling shareholders - 18, ,337 (81,971) (63,634) Dividends paid - (41,324) - - (41,324) (44,898) (86,222) Balance at 31 December ,400,927 2,295,649 29,382 1,924 3,727,882 1,551,856 5,279,738 The accompanying notes form an integral part of these financial statements. Annual REport 2011 United Industrial Corporation Limited 45

48 $ 000 $ 000 (restated) Cash flows from operating activities Profit before income tax 377,286 1,156,434 Adjustments for: Depreciation of property, plant and equipment 22,341 18,888 Employee share option expense Loss on disposal of property, plant and equipment Share of results of associated companies (42,207) (44,657) Share of results of a joint venture Fair value gain on investment properties (21,366) (691,022) Investment income (3,080) (1,648) Interest expense 5,566 9,613 Operating cash flow before working capital changes 339, ,538 Change in operating assets and liabilities: Properties held for sale 69, ,379 Inventories 566 (834) Trade and other receivables 69,978 (136,795) Trade and other payables 22,373 (53,300) Cash generated from operations 502, ,988 Interest paid (10,077) (18,903) Income tax paid (64,619) (43,735) Net cash provided by operating activities 427, ,350 The accompanying notes form an integral part of these financial statements. 46 Annual REport 2011 United Industrial Corporation Limited

49 Note $ 000 $ 000 (restated) Cash flows from investing activities Purchase of property, plant and equipment (4,630) (23,889) Proceeds from disposal of property, plant and equipment Upgrading of investment properties (10,663) (8,552) Redevelopment of an investment property (182,964) (160,556) Loan to a joint venture (71,243) - Repayment of loans by associated companies 3,072 10,939 Investments in associated companies (94,852) (25,425) Investment in a joint venture (500) - Dividends received from unquoted equity investments 1, Dividends received from associated companies 15,810 42,841 Interest received 1,308 2,124 Net cash used in investing activities (342,967) (161,641) Cash flows from financing activities Repayment of borrowings (239,780) (311,424) Proceeds from borrowings 261,009 - Proceeds from issue of shares Purchase of shares from non-controlling shareholders (56,502) (63,634) Dividends paid to shareholders (41,334) (41,324) Dividends paid to non-controlling shareholders (48,517) (44,898) Net cash used in financing activities (124,669) (461,280) Net decrease in cash and cash equivalents (39,976) (22,571) Cash and cash equivalents at beginning of financial year 140, ,599 Cash and cash equivalents at end of financial year , ,028 The accompanying notes form an integral part of these financial statements. Annual REport 2011 United Industrial Corporation Limited 47

50 These notes form an integral part of and should be read in conjunction with the accompanying financial statements. 1. General information United Industrial Corporation Limited (the Company ) is incorporated and domiciled in Singapore. The address of its registered office is 24 Raffles Place #22-01/06, Clifford Centre, Singapore The Company is listed on the Singapore Exchange. The principal activity of the Company is that of an investment holding company. The principal activities of the Group consist of development of properties for investment and trading, investment holding, property management, investment in hotels and retail centres, trading in computers and related products, and provision of information technology services. 2. Significant accounting policies 2.1 Basis of preparation The financial statements have been prepared in accordance with Singapore Financial Reporting Standards ( FRS ). The financial statements have been prepared under the historical cost convention, except as disclosed in the accounting policies below. The preparation of financial statements in conformity with FRS requires management to exercise its judgement in the process of applying the Group s accounting policies. It also requires the use of accounting estimates and assumptions. Areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 3. Amendments to published standards effective in 2011 On 1 January 2011, the Group adopted the new or amended FRS and Interpretations of FRS ( INT FRS ) that are mandatory for application from that date. Changes to the Group s accounting policies have been made as required, in accordance with the transitional provisions in the respective FRS and INT FRS. The adoption of these new or amended FRS and INT FRS did not result in substantial changes to the Group s and Company s accounting policies and had no effect on the amounts reported for the current or prior financial years, except as disclosed below. 48 Annual REport 2011 United Industrial Corporation Limited

51 2. Significant accounting policies (continued) 2.1 Basis of preparation (continued) Amendments to published standards effective in 2011 (continued) INT FRS Agreements for the Construction of Real Estate with an Accompanying Note was issued by the Accounting Standards Council ( ASC ) and applies for financial year beginning on or after 1 January The Group had early adopted this interpretation for the financial year beginning 1 January Upon the early adoption, revenue for the sale of The Excellency development property in China was recognised only upon completion of construction whereas the sale of residential properties in Singapore continued to be recognised on a percentage of completion basis. In June 2011, the ASC clarified that its earlier ruling on the recognition of revenue by stage of completion on sales of uncompleted residential properties in Singapore does not address the accounting treatment of sales made with a Deferred Payment Scheme ( DPS ) feature. Following this clarification note, the Group has retrospectively recognised such sales on the completion of construction method. In respect of sales of residential properties in Singapore with a DPS feature, the effects of adopting INT FRS 115 on the previously reported Group s results are as follows: Increase/(Decrease) Consolidated statement of financial position as at 31 December: $ 000 $ 000 $ 000 Investments in associated companies - - (12,754) Properties held for sale - (5,291) 312 Trade and other payables (current) - 3,995 59,926 Deferred income tax liabilities - (1,579) (10,135) Retained earnings - (7,707) (48,471) Non-controlling interests - - (13,762) Consolidated income statement for the financial year ended 31 December: Revenue 18, ,282 Cost of sales 9, ,954 Share of results of associated companies - 12,754 Income tax expense 1,579 8,556 Non-controlling interests - 13,762 Basic and diluted earnings per share for the financial year ended 31 December (cents per share) 0.6 cents 3.0 cents Annual REport 2011 United Industrial Corporation Limited 49

52 2. Significant accounting policies (continued) 2.2 Revenue recognition Revenue comprises the fair value of consideration received or receivable for the sale of goods and rendering of services, net of goods and services tax, rebates and discounts after eliminating revenue within the Group. The Group recognises revenue when the amount of revenue and related cost can be reliably measured, it is probable that the collectibility of the related receivables is reasonably assured and when the specific criteria for each of the Group s activities are met as follows: (a) Rental income Rental income from operating leases (net of any incentives given to the lessees) on investment properties is recognised on a straight-line basis over the lease term. (b) Revenue on sale of properties held for sale Revenue from sale of properties held for sale in respect of sale and purchase agreements entered into prior to completion of construction is recognised when the properties are delivered to the buyers, except for in cases where the control and risk and rewards of the property are transferred to the buyers as construction progresses. For sales of uncompleted residential properties made with a Normal Payment Scheme feature in Singapore, the transfer of significant risks and rewards of ownership occurs in the current state as construction progresses. Revenue is recognised by reference to the stage of completion using the percentage of completion method, determined by the level of construction costs incurred as a proportion of the estimated total construction costs to completion. For sales of overseas development properties and Singapore residential properties made with a Deferred Payment Scheme feature, such transfer generally occurs when the property units are completed and delivered to the purchasers. Revenue is recognised upon completion of construction. (c) Revenue from hotel operations Revenue from the rental of hotel rooms and other facilities is recognised when the services are rendered. Revenue from the sale of food and beverage is recognised when the goods are delivered to the customer. (d) Revenue from information technology operations Revenue from sale of computer hardware and software is recognised when the Group has transferred significant risks and rewards of ownership of the products to the customer on delivery and the customer has accepted the products. Revenue from the rendering of services is recognised when the service is rendered, by reference to completion of specific transaction assessed on the basis of the actual service provided as a proportion to the total services to be performed. (e) Property management fees Property management fees are recognised on a straight-line basis over the contract term. (f) Interest income Interest income is recognised on a time proportion basis using the effective interest method. 50 Annual REport 2011 United Industrial Corporation Limited

53 2. Significant accounting policies (continued) 2.2 Revenue recognition (continued) (g) Dividend income dividend income is recognised when the right to receive payment is established. (h) Car parking income Car parking income is recognised on a straight-line basis based on time proportion. 2.3 Group accounting (a) Subsidiary companies (i) Consolidation Subsidiary companies are entities over which the Group has power to govern the financial and operating policies so as to obtain benefits from its activities, generally accompanied by a shareholding giving rise to the majority of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiary companies are consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date on which control ceases. In preparing the consolidated financial statements, transactions, balances and unrealised gains on transactions between group entities are eliminated. Unrealised losses are also eliminated but are considered an impairment indicator of the asset transferred. Accounting policies of subsidiary companies have been changed where necessary to ensure consistency with the policies adopted by the Group. Non-controlling interests are that part of the net results of operations and of net assets of a subsidiary company attributable to the interests which are not owned directly or indirectly by the equity holders of the Company. They are shown separately in the consolidated statement of comprehensive income, statement of changes in equity and statement of financial position. Total comprehensive income is attributed to the non-controlling interests based on their respective interests in a subsidiary company, even if this results in the non-controlling interests having a deficit balance. (ii) Acquisitions The acquisition method of accounting is used to account for business combinations by the Group. The consideration transferred for the acquisition of a subsidiary company or business comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any contingent consideration arrangement and fair value of any pre-existing equity interest in the subsidiary company. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. Annual REport 2011 United Industrial Corporation Limited 51

54 2. Significant accounting policies (continued) 2.3 Group accounting (continued) (a) Subsidiary companies (continued) (ii) Acquisition (continued) on an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree at the date of acquisition either at fair value or at the non-controlling interest s proportionate share of the acquiree s net identifiable assets. The excess of (i) the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the (ii) fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary company acquired and the measurement of all amounts have been reviewed, the difference is recognised directly in the income statement as a bargain purchase. Please refer to the paragraph Goodwill on acquisitions for the subsequent accounting policy on goodwill. (iii) Disposals When a change in the Group ownership interest in a subsidiary company results in a loss of control over the subsidiary company, the assets and liabilities of the subsidiary company including any goodwill are derecognised. Amounts previously recognised in other comprehensive income in respect of that entity are also reclassified to the income statement or transferred directly to retained earnings if required by a specific Standard. Any retained interest in the entity is remeasured at fair value. The difference between the carrying amount of the retained investment at the date when control is lost and its fair value is recognised in the income statement. Please refer to the paragraph Investments in subsidiary and associated companies, and joint ventures for the accounting policy on investments in subsidiary companies in the separate financial statements of the Company. (b) Transactions with non-controlling interests Changes in the Group s ownership interest in a subsidiary company that do not result in a loss of control over the subsidiary company are accounted for as transactions with equity owners of the Company. Any difference between the change in the carrying amounts of the non-controlling interest and the fair value of the consideration paid or received is recognised in retained earnings within equity attributable to the equity holders of the Company. 52 Annual REport 2011 United Industrial Corporation Limited

55 2. Significant accounting policies (continued) 2.3 Group accounting (continued) (c) Associated companies and joint ventures Associated companies are entities over which the Group has significant influence, but not control, generally accompanied by a shareholding giving rise to voting rights of 20% and above but not exceeding 50%. Joint ventures are entities over which the Group has contractual arrangements to jointly share control over the economic activity of the entities with one or more parties. Investments in associated companies and joint ventures are accounted for in the consolidated financial statements using the equity method of accounting less impairment losses, if any. (i) Acquisitions Investments in associated companies and joint ventures are initially recognised at cost. The cost of an acquisition is measured at the fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Goodwill on associated companies and joint ventures represents the excess of the cost of acquisition of the associate/ joint venture over the Group s share of the fair value of the identifiable net assets of the associate/joint venture and is included in the carrying amount of the investments. (ii) Equity method of accounting In applying the equity method of accounting, the Group s share of its associated companies and joint ventures post-acquisition profits or losses are recognised in the income statement and its share of postacquisition other comprehensive income is recognised in other comprehensive income. These postacquisition movements and distributions received from the associated companies and joint ventures are adjusted against the carrying amount of the investment. When the Group s share of losses in an associated company or joint venture equals or exceeds its interest in the associated company or joint venture, including any other unsecured non-current receivables, the Group does not recognise further losses, unless it has obligations to make or has made payments on behalf of the associated company or joint venture. Unrealised gains on transactions between the Group and its associated companies and joint ventures are eliminated to the extent of the Group s interest in the associated companies and joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Where necessary, adjustments are made to the financial statements of associated companies and joint ventures to ensure consistency of accounting policies with those of the Group. Annual REport 2011 United Industrial Corporation Limited 53

56 2. Significant accounting policies (continued) 2.3 Group accounting (continued) (c) Associated companies and joint ventures (continued) (iii) Disposals Investments in associated companies and joint ventures are derecognised when the Group loses significant influence and joint control respectively. Any retained equity interest in the entity is remeasured at its fair value. The difference between the carrying amount of the retained interest at the date when significant influence or joint control is lost and its fair value is recognised in the income statement. Please refer to the paragraph Investments in subsidiary and associated companies, and joint ventures for the accounting policy on investments in associated companies and joint ventures in the separate financial statements of the Company. 2.4 Property, plant and equipment (a) Measurement Property, plant and equipment are initially recognised at cost and subsequently carried at cost less accumulated depreciation and accumulated impairment losses. The cost of an item of property, plant and equipment initially recognised includes its purchase price and any cost that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. (b) Depreciation Renovations in progress is not depreciated. Depreciation is calculated using the straight-line method to allocate the depreciable amounts of property, plant and equipment over their estimated useful lives as follows: leasehold land and building years Plant and machinery years Furniture, fittings and office equipment 5-13 years motor vehicles 5 years The residual values, estimated useful lives and depreciation method of property, plant and equipment are reviewed, and adjusted as appropriate, at each statement of financial position date. The effects of any revision are recognised in the income statement when the changes arise. 54 Annual REport 2011 United Industrial Corporation Limited

57 2. Significant accounting policies (continued) 2.4 Property, plant and equipment (continued) (c) Subsequent expenditure Subsequent expenditure relating to property, plant and equipment that has already been recognised is added to the carrying amount of the asset only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repair and maintenance expenses are recognised in the income statement when incurred. (d) Disposal On disposal of an item of property, plant and equipment, the difference between the disposal proceeds and its carrying amount is recognised in the income statement. 2.5 Goodwill on acquisitions Goodwill on acquisitions of subsidiary companies and businesses represents the excess of (i) the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over (ii) the fair value of the net identifiable assets acquired. Goodwill on subsidiary companies is recognised separately as intangible assets and carried at cost less accumulated impairment losses. Goodwill on associated companies and joint ventures is included in the carrying amount of the investments. Gains and losses on the disposal of subsidiary and associated companies, and joint ventures include the carrying amount of goodwill relating to the entity sold. 2.6 Borrowing costs Borrowing costs are recognised in the income statement using the effective interest method except for those costs that are directly attributable to the construction or development of properties. This includes those costs on borrowings acquired specifically for the construction or development of properties, as well as those in relation to general borrowings used to finance the construction or development of properties. The actual borrowing costs incurred during the period up to the issuance of the temporary occupation permit less any investment income on temporary investments of these borrowings, are capitalised in the cost of the properties held for sale and investment properties. Borrowing costs on general borrowings are capitalised by applying a capitalisation rate to construction or development expenditures that are financed by general borrowings. Annual REport 2011 United Industrial Corporation Limited 55

58 2. Significant accounting policies (continued) 2.7 Properties held for sale Properties held for sale are those which are intended for sale in the ordinary course of business. Properties held for sale which are unsold are carried at the lower of cost and estimated net realisable value. Cost of properties held for sale includes land, construction and related development costs and interest on borrowings obtained to finance the purchase and construction of the properties. Net realisable value represents the estimated selling price in the ordinary course of business less costs to complete the development and selling expenses. Singapore properties held for sale under the Normal Payment Scheme are stated at cost plus attributable profits/ losses less progress billings. Progress billings not yet paid by customers are included within trade and other receivables. Where progress billings exceed costs incurred plus recognised profits (less recognised losses), the balance is shown as due to customers on development projects, under trade and other payables. When it is probable that the total development costs will exceed the total revenue, the expected loss is recognised as an expense immediately. Singapore properties held for sale under the Deferred Payment Scheme and overseas properties held for sale are stated at cost and payments received from purchasers prior to completion are included in current liabilities as monies received in advance. 2.8 Investment properties Investment properties of the Group, principally comprising office buildings, are held for long-term rental yields and capital appreciation. Investment properties include properties that are being constructed or developed for future use as investment properties. Investment properties are initially recognised at cost and subsequently carried at fair value, representing the open market value determined by independent professional valuers. Changes in fair values are recognised in the income statement. Investment properties are subject to renovations or improvements at regular intervals. The cost of major renovations and improvements is capitalised. The cost of maintenance, repairs and minor improvement is recognised in the income statement when incurred. On disposal of an investment property, the difference between the disposal proceeds and its carrying amount is recognised in the income statement. 2.9 Investments in subsidiary and associated companies, and joint ventures Investments in subsidiary and associated companies, and joint ventures are carried at cost less accumulated impairment losses in the Company s statement of financial position. On disposal of investment in subsidiary and associated companies, and joint ventures, the difference between disposal proceeds and its carrying amount is recognised in the income statement. 56 Annual REport 2011 United Industrial Corporation Limited

59 2. Significant accounting policies (continued) 2.10 Impairment of non-financial assets (a) Goodwill Goodwill recognised separately as an intangible asset is tested for impairment annually and whenever there is indication that the goodwill may be impaired. For the purpose of impairment testing of goodwill, goodwill is allocated to each of the Group s cash-generatingunits ( CGU ) expected to benefit from synergies arising from the business combination. An impairment loss is recognised when the carrying amount of a CGU, including the goodwill, exceeds the recoverable amount of the CGU. The recoverable amount of a CGU is the higher of the CGU s fair value less cost to sell and value-in-use. The total impairment loss of a CGU is allocated first to reduce the carrying amount of goodwill allocated to the CGU and then to the other assets of the CGU pro-rata on the basis of the carrying amount of each asset in the CGU. An impairment loss on goodwill is recognised as an expense and is not reversed in a subsequent period. (b) Intangible assets Property, plant and equipment Investments in subsidiary and associated companies, and joint ventures Intangible assets, property, plant and equipment and investments in subsidiary and associated companies, and joint ventures are tested for impairment whenever there is any objective evidence or indication that these assets may be impaired. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash inflows that are largely independent of those from other assets. If this is the case, the recoverable amount is determined for the CGU to which the asset belongs. If the recoverable amount of the asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. The difference between the carrying amount and recoverable amount is recognised as an impairment loss in the income statement, unless the asset is carried at revalued amount, in which case, such impairment loss is treated as a revaluation decrease. An impairment loss for an asset other than goodwill is reversed if, and only if, there has been a change in the estimates used to determine the asset s recoverable amount since the last impairment loss was recognised. The carrying amount of this asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of accumulated amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss for an asset other than goodwill is recognised in the income statement, unless the asset is carried at revalued amount, in which case, such reversal is treated as a revaluation increase. However, to the extent that an impairment loss on the same revalued asset was previously recognised as an expense, a reversal of that impairment is also credited to the income statement. Annual REport 2011 United Industrial Corporation Limited 57

60 2. Significant accounting policies (continued) 2.11 Financial assets (a) Classification The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, held-to-maturity, and available-for-sale. The classification depends on the nature of the asset and the purpose for which the assets were acquired. Management determines the classification of its financial assets at initial recognition and in the case of assets classified as held-to-maturity, re-evaluates this designation at each statement of financial position date. (i) Financial assets at fair value through profit or loss This category has two sub-categories: financial assets held for trading, and those designated at fair value through profit or loss at inception. A financial asset is classified as held for trading if it is acquired principally for the purpose of selling in the short term. Financial assets designated as at fair value through profit or loss at inception are those that are managed and their performances are evaluated on a fair value basis, in accordance with a documented Group investment strategy. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are presented as current assets if they are either held for trading or are expected to be realised within 12 months after the statement of financial position date. (ii) Loans and receivables loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are presented as current assets, except for those expected to be realised later than 12 months after the statement of financial position date which are presented as noncurrent assets. Loans and receivables are presented as trade and other receivables and cash and cash equivalents on the statement of financial position. (iii) Held-to-maturity financial assets Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group s management has the positive intention and ability to hold to maturity. If the Group were to sell other than an insignificant amount of held-to-maturity financial assets, the whole category would be tainted and reclassified as available-for-sale. They are presented as noncurrent assets, except for those maturing within 12 months after the statement of financial position date which are presented as current assets. (iv) Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are presented as non-current assets unless the investment matures or management intends to dispose of the assets within 12 months after the statement of financial position date. 58 Annual REport 2011 United Industrial Corporation Limited

61 2. Significant accounting policies (continued) 2.11 Financial assets (continued) (b) Recognition and derecognition (c) Regular way purchases and sales of financial assets are recognised on trade-date the date on which the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. On disposal of a financial asset, the difference between the carrying amount and the sale proceeds is recognised in the income statement. Any amount in other comprehensive income relating to that asset is reclassified to the income statement. Initial measurement Financial assets are initially recognised at fair value plus transaction costs except for financial assets at fair value through profit or loss, which are recognised at fair value. Transaction costs for financial assets at fair value through profit and loss are recognised immediately as expenses. (d) Subsequent measurement Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables and held-to-maturity financial assets are subsequently carried at amortised cost using the effective interest method. Changes in the fair values of financial assets at fair value through profit or loss including the effects of currency translation, interest and dividends, are recognised in the income statement when the changes arise. Interest and dividend income on available-for-sale financial assets are recognised separately in income statement. Changes in the fair values of available-for-sale debt securities (i.e. monetary items) denominated in foreign currencies are analysed into currency translation differences on the amortised cost of the securities and other changes; the currency translation differences are recognised in the income statement and the other changes are recognised in other comprehensive income and accumulated in the fair value reserve. Changes in fair values of available-for-sale equity securities (i.e. non-monetary items) are recognised in other comprehensive income and accumulated in the fair value reserve, together with the related currency translation differences. (e) Impairment The Group assesses at each statement of financial position date whether there is objective evidence that a financial asset or a group of financial assets is impaired and recognises an allowance for impairment when such evidence exists. (i) Loans and receivables/ Held-to-maturity financial assets Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy, and default or significant delay in payments are objective evidence that these financial assets are impaired. The carrying amount of these assets is reduced through the use of an impairment allowance account which is calculated as the difference between the carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. When the asset becomes uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are recognised against the same line item in the income statement. Annual REport 2011 United Industrial Corporation Limited 59

62 2. Significant accounting policies (continued) 2.11 Financial assets (continued) (e) Impairment (continued) (f) (i) 2.12 Borrowings Loans and receivables/ Held-to-maturity financial assets (continued) The allowance for impairment loss account is reduced through the income statement in a subsequent period when the amount of impairment loss decreases and the related decrease can be objectively measured. The carrying amount of the asset previously impaired is increased to the extent that the new carrying amount does not exceed the amortised cost had no impairment been recognised in prior periods. (ii) Available-for-sale financial assets In addition to the objective evidence of impairment described in note 2.11(e)(i), a significant or prolonged decline in the fair value of an equity security below its cost is considered as an indicator that the availablefor-sale financial asset is impaired. If any evidence of impairment exists, the cumulative loss that was recognised in other comprehensive income is reclassified to the income statement. The cumulative loss is measured as the difference between the acquisition cost (net of any principal repayments and amortisation) and the current fair value, less any impairment loss previously recognised as an expense. The impairment losses recognised as an expense on equity securities are not reversed through the income statement. Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. Borrowings are presented as current liabilities unless the Group has an unconditional right to defer settlement for at least 12 months after the statement of financial position date, in which case they are presented as non-current liabilities. Borrowings are initially recognised at fair value (net of transaction costs) and subsequently carried at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method Trade and other payables Trade and other payable represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. They are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade and other payables are initially recognised at fair value, and subsequently carried at amortised cost using the effective interest method. 60 Annual REport 2011 United Industrial Corporation Limited

63 2. Significant accounting policies (continued) 2.14 Fair value estimation of financial assets and liabilities The fair values of financial instruments traded in active markets (such as exchange-traded and over-the-counter securities and derivatives) are based on quoted market prices at the statement of financial position date. The quoted market prices used for financial assets are the current bid prices; the appropriate quoted market prices for financial liabilities are the current asking prices. The fair values of financial instruments that are not traded in an active market are determined by using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each statement of financial position date. Where appropriate, quoted market prices or dealer quotes for similar instruments are used. Valuation techniques, such as discounted cash flows analyses, are also used to determine the fair values of the financial instruments. The fair values of current financial assets and liabilities carried at amortised cost approximate their carrying amounts Leases (a) Operating leases when the Group is the lessee Leases where substantially all risks and rewards incidental to ownership are retained by the lessors are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessors) are recognised in the income statement on a straight-line basis over the period of the lease. (b) Operating leases when the Group is the lessor 2.16 Inventories Leases of investment properties where the Group retains substantially all risks and rewards incidental to ownership are classified as operating leases. Rental income from operating leases (net of any incentives given to the lessees) is recognised in the income statement on a straight-line basis over the lease term. Contingent rents are recognised as income in the income statement when earned. Inventories are carried at the lower of cost and net realisable value. Cost is determined on a weighted average basis and includes all costs in bringing the inventories to their present location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less the costs of completion and selling expenses Income taxes Current income tax for current and prior periods is recognised at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the statement of financial position date. Deferred income tax is recognised for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements except when the deferred income tax arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction. Annual REport 2011 United Industrial Corporation Limited 61

64 2. Significant accounting policies (continued) 2.17 Income taxes (continued) A deferred income tax liability is recognised on temporary differences arising on investments in subsidiary and associated companies, and joint ventures, except where the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. A deferred income tax asset is recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilised. Under FRS 12 - Income Taxes, where the recovery of the carrying amount of leasehold properties is through receipt of rental income over the remaining useful lives of the properties ( recovery through use ), deferred income tax liability is to be provided on the fair value gains of these properties at the tax rates which the underlying rental income would be subject to. Deferred income tax liability is released to the income statement over the remaining useful lives of the properties as the underlying rental income is earned and fair value gains reversed. Under FRS 12, where the recovery of the carrying amount of leasehold properties is through disposal ( recovery through sale ), deferred income tax liability on the fair value gains is to be computed based on the tax rates that are applicable upon disposal of the properties. As there is currently no capital gains tax in Singapore, where the fair value gains of the Group s Singapore investment properties are considered capital gains by the Singapore tax authority, no deferred income tax liability would be provided on these fair value gains. Deferred income tax is measured: (i) at the tax rates that are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the statement of financial position date; and (ii) based on the tax consequence that will follow from the manner in which the Group expects, at the statement of financial position date, to recover or settle the carrying amounts of its assets and liabilities. Current and deferred income taxes are recognised as income or expense in the income statement, except to the extent that the tax arises from a business combination or a transaction which is recognised directly in equity. Deferred income tax arising from a business combination is adjusted against goodwill on acquisition. 62 Annual REport 2011 United Industrial Corporation Limited

65 2. Significant accounting policies (continued) 2.18 Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are measured at the present value of the expenditure expected to be required to settle the obligation using a pre-tax discount rate that reflects the current market assessment of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as finance expense. Changes in the estimated timing or amount of the expenditure or discount rate are recognised in the income statement when the changes arise Employee compensation The Group s contributions are recognised as employee compensation expense when they are due. (a) Defined contribution plans Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into separate entities such as the Central Provident Fund. The Group has no further payment obligations once the contributions have been paid. (b) Share-based compensation The Group operates an equity-settled, share-based compensation plan. The fair value of the employee services received in exchange for the grant of options is recognised as an expense with a corresponding increase in the share option reserve over the vesting period. The total amount to be recognised over the vesting period is determined by reference to the fair value of the options granted on the date of the grant. Non-market vesting conditions are included in the estimation of the number of shares under options that are expected to become exercisable on the vesting date. At each statement of financial position date, the Group revises its estimates of the number of shares under options that are expected to become exercisable on the vesting date and recognises the impact of the revision of the estimates in the income statement, with a corresponding adjustment to the share option reserve over the remaining vesting period. When the options are exercised, the proceeds received (net of transaction costs) and the related balance previously recognised in the share option reserve are credited to share capital account, when new ordinary shares are issued. Annual REport 2011 United Industrial Corporation Limited 63

66 2. Significant accounting policies (continued) 2.20 Currency translation (a) Functional and presentation currency Items included in the financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates ( functional currency ). The financial statements are presented in Singapore Dollars, which is the functional currency of the Company. (b) Transactions and balances Transactions in a currency other than the functional currency ( foreign currency ) are translated into the functional currency using the exchange rates at the dates of the transactions. Currency translation differences resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at the closing rates at the statement of financial position date are recognised in the income statement. However, in the consolidated financial statements, currency translation differences arising from borrowings in foreign currencies and other currency instruments designated and qualifying as net investment hedges and net investment in foreign operations, are recognised in other comprehensive income and accumulated in the currency translation reserve. When a foreign operation is disposed of or any borrowings forming part of the net investment of the foreign operation are repaid, a proportionate share of accumulated translation differences is reclassified to income statement, as part of the gain or loss on disposal. Non-monetary items measured at fair values in foreign currencies are translated using the exchange rates at the date when the fair values are determined. (c) Translation of Group entities financial statements The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: (i) assets and liabilities are translated at the closing exchange rates at the date of the statement of financial position; (ii) income and expenses are translated at average exchange rates (unless the average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated using the exchange rates at the dates of the transactions); and (iii) all resulting currency translation differences are recognised in other comprehensive income and accumulated in the currency translation reserve. Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and liabilities of the foreign operations and translated at the closing rates at the date of the statement of financial position. 64 Annual REport 2011 United Industrial Corporation Limited

67 2. Significant accounting policies (continued) 2.21 Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the management who are responsible for allocating resources and assessing performance of the operating segments Cash and cash equivalents For the purpose of presentation in the consolidated cash flow statement, cash and cash equivalents include cash on hand, deposits with financial institutions which are subject to an insignificant risk of change in value, and bank overdrafts. Bank overdrafts are presented as current borrowings on the statement of financial position Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares are deducted against the share capital account Dividends to Company s shareholders Dividends to Company s shareholders are recognised when the dividends are approved for payment. 3. Critical accounting estimates, assumptions and judgements Estimates and judgements are made in the preparation of the financial statements. They affect the application of the Group s accounting policies, reported amounts of assets, liabilities, income and expenses, and disclosures made. They are assessed on an on-going basis and are based on experience and relevant factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group on its own or in reliance on third party experts, applies estimates and judgements in the following key areas: (i) the determination of investment property values by independent professional valuers (note 2.8). The carrying amount of investment properties is disclosed in note 16; (ii) the assessment of the stage of completion, extent of the construction costs incurred and the estimated total construction costs of properties for sale under development (note 2.2(b)). The carrying amount of properties for sale under development is disclosed in note 19; and (iii) the assessment of adequacy of provision for income taxes (note 2.17). The carrying amounts of current income tax and deferred income tax are disclosed in note 8 and 23 respectively. Annual REport 2011 United Industrial Corporation Limited 65

68 4. Revenue The Group $ 000 $ 000 (restated) Gross rental income 287, ,360 Gross revenue from hotel operations 141, ,341 Sale of properties held for sale 287, ,466 Gross revenue from information technology operations 80,594 63,677 Car parking income and property management fees 8,858 8, ,504 1,194, COST OF SALEs The Group $ 000 $ 000 (restated) Property operating expenses 69,422 68,492 Cost of sales from hotel operations 99,406 89,708 Cost of properties held for sale sold 211, ,208 Cost of sales from information technology operations 71,756 55, , , Investment income The Group $ 000 $ 000 Interest income from: - Bank deposits Amounts due from associated companies Amount due from a joint venture Others , Dividend income from unquoted equity investments 1, ,080 1, Annual REport 2011 United Industrial Corporation Limited

69 7. Profit before income tax The following items have been included in arriving at profit before income tax: The Group Charging/(Crediting): Auditor s remuneration paid/payable to: - Auditors of the Company $ $ Other auditors * Other fees paid/payable to auditors of the Company Wages, salaries and other payroll-related costs 56,122 54,015 Employer s contribution to defined contribution plans 5,933 5,274 Share option expense Total employee compensation 62,624 59,494 Rental expense - operating leases 984 1,113 Loss on disposal of property, plant and equipment Depreciation of property, plant and equipment 22,341 18,888 Foreign exchange loss/(gain) - net 143 (255) Property tax 24,076 24,481 Utilities 20,466 19,000 Interest expense on loans 5,566 9,613 Cost of inventories recognised as an expense 82,905 65,323 * PricewaterhouseCoopers firms outside Singapore 8. Income taxes (a) Income tax expense The Group $ 000 $ 000 (restated) Tax expense/(credit) attributable to profit is made up of: 47,801 48,851 - Current income tax (note (b)) (6,267) 142,125 - Deferred income tax (note 23) 41, ,976 (Over)/Underprovision in preceding financial years - Current income tax (note (b)) (4,794) (1,557) - Deferred income tax (note 23) 474 4,676 (4,320) 3,119 37, ,095 Annual REport 2011 United Industrial Corporation Limited 67

70 8. Income taxes (continued) (a) Income tax expense (continued) The tax expense on profit differs from the amount that would arise using the Singapore standard rate of income tax as explained below: The Group $ 000 $ 000 (restated) Profit before income tax 377,286 1,156,434 Less: Share of results of associated companies (42,207) (44,657) Less: Share of results of a joint venture ,579 1,111,777 Tax calculated at a statutory tax rate of 17% 57, ,002 Effects of: - Different tax rates in other countries 9 (468) - Singapore statutory tax exemption (409) (445) - Change in tax base (17,400) - - Expenses not deductible for tax purposes 3,301 5,794 - Income not subject to tax (1,311) (749) - Utilisation of previously unrecognised deferred income tax assets - (2,825) - Deferred income tax assets not recognised Others - (95) Tax expense 41, ,976 (b) Movements in current income tax liabilities The Group The Company $ 000 $ 000 $ 000 $ 000 Beginning of financial year 83,729 49, Currency translation difference 603 (553) - - Income tax (paid)/refunded (64,619) (43,735) 23 (63) Tax expense on profit for the current financial year (note (a)) 47,801 48, Overprovision in preceding financial years (note (a)) (4,794) (1,557) - - Transfer from deferred income tax liabilities (note 23) 22,793 31, End of financial year 85,513 83, Annual REport 2011 United Industrial Corporation Limited

71 8. Income taxes (continued) (c) There is no tax charge relating to the components of other comprehensive income. 9. Net attributable profit The net profit attributable to equity holders of the Company can be analysed as follows: The Group $ 000 $ 000 (restated) Net profit before fair value gain on investment properties (note 10) 200, ,778 Fair value gain on investment properties held by subsidiary and associated companies net of deferred income tax and non-controlling interests included in: - Fair value gain on investment properties 21, ,022 - Share of results of associated companies 11,362 6,351 - Deferred income tax 13,768 (115,063) - Non-controlling interests (32,568) (116,323) 13, ,987 Net attributable profit 214, , Earnings per share Basic earnings per share is calculated by dividing the net profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the financial year. Diluted earnings per share amounts are calculated by dividing the net profit attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all dilutive potential shares into ordinary shares. The Company s dilutive potential ordinary shares are its share options. The weighted average number of shares in issue is adjusted as if all share options that are dilutive were exercised. The number of shares that could have been issued upon the exercise of all dilutive share options less the number of shares that could have been issued at fair value (determined as the Company s average share price for the financial year) for the same total proceeds is added to the denominator as the number of shares was issued for no consideration. No adjustment is made to the net profit. Annual REport 2011 United Industrial Corporation Limited 69

72 10. Earnings per share (continued) The Group (restated) Net profit attributable to equity holders of the Company ($ 000) 214, ,765 Weighted average number of ordinary shares in issue for basic earnings per share ( 000) 1,377,732 1,377,481 Adjustment for share options ( 000) Weighted average number of ordinary shares in issue for diluted earnings per share ( 000) 1,378,154 1,377,770 Basic and diluted earnings per share (cents per share) - excluding fair value gain on investment properties held by subsidiary and associated companies (note 9) 14.5 cents 20.2 cents - including fair value gain on investment properties held by subsidiary and associated companies 15.5 cents 54.0 cents 11. Other receivables The Group The Company Amounts due from: $ 000 $ 000 $ 000 $ associated companies (note (a)) 749 3,799-3,072 - a joint venture (note (b)) 72, subsidiary companies (note (c)) - - 1,246,931 1,069,565 Less: Allowance for impairment in value of receivables - - (15,559) (15,559) - - 1,231,372 1,054,006 Others ,381 4,305 1,231,507 1,057,239 (a) Amounts due from associated companies The amounts due from associated companies for the Group are unsecured, not repayable within the next 12 months and are interest-bearing at floating rate except for an amount of $3,072,000 in 2010 which was interest-free. In 2010, the amount due from an associated company for the Company was unsecured, not repayable within the next 12 months and was interest-free. At the statement of financial position date, the carrying amounts of amounts due from associated companies approximate their fair values. 70 Annual REport 2011 United Industrial Corporation Limited

73 11. Other receivables (continued) (b) Amount due from a joint venture (c) The amount due from a joint venture for the Group is subordinated to the borrowings of the joint venture, not repayable within the next 12 months and is interest-bearing at floating rate. At the statement of financial position date, the carrying amount of amount due from a joint venture approximates its fair value. Amounts due from subsidiary companies The amounts due from subsidiary companies are unsecured, not repayable within the next 12 months and are interest-bearing except for amounts totalling $265,513,000 (2010: $278,794,000) which are interest-free. At the statement of financial position date, the carrying amounts of amounts due from subsidiary companies approximate their fair values. Interest is charged on amounts due from certain subsidiary companies and is based on interest incurred by the Company in respect of bank loans obtained on behalf of these subsidiary companies. 12. Available-for-sale financial assets The Group $ 000 $ 000 Unquoted equity investments 12,045 12, Investments in associated companies The Group $ 000 $ 000 $ 000 (restated) Unquoted equity investments, at cost 293, , ,634 Share of post acquisition reserves 85,024 50,266 49, , , ,384 The restated summarised financial information of associated company, not adjusted for the proportionate ownership interest held by the Group, is as follows: - Assets 1,829,999 1,357,005 1,376,878 - Liabilities 521, , ,091 - Revenues 262, , ,223 - Net profit 136, ,186 63,790 Details of associated companies are included in note 35. Annual REport 2011 United Industrial Corporation Limited 71

74 14. Investment in a joint venture The Group $ 000 $ 000 Unquoted equity investments, at cost Share of post acquisition reserves (500) The summarised financial information of the joint venture, based on the proportionate ownership interest held by the Group, is as follows: - Assets 174, Liabilities 174, Revenues Net loss Details of the joint venture is included in note Investments in subsidiary companies The Company $ 000 $ 000 Unquoted equity investments, at cost 1,229,212 1,229,212 Less: Allowance for impairment in value of investments (1,693) (1,693) 1,227,519 1,227,519 Details of subsidiary companies are included in note Annual REport 2011 United Industrial Corporation Limited

75 16. Investment properties The Group Completed leasehold properties, at valuation: $ 000 $ 000 Beginning of financial year 5,458,000 4,597,500 Reclassify to development property (268,000) - Reclassify to properties held for sale (454,000) - Redevelopment of an investment property 183, ,926 Upgrading 10,663 8,552 Fair value gain 21, ,022 End of financial year 4,951,900 5,458,000 Development property, at valuation: Beginning of financial year - - Reclassify from completed leasehold properties 268,000 - End of financial year 268,000-5,219,900 5,458,000 (a) Borrowing costs of $907,000 (2010: $370,000) for the redevelopment of an investment property were capitalised during the financial year. A capitalisation rate of 0.9% to 1.1% (2010: 1.1% to 1.2%) per annum was used in 2011, representing the borrowing costs of the loans used to finance the project. The Group s completed investment properties consist of the following: Name of building/location Description Tenure of land Unexpired term of lease Stamford Court 61 Stamford Road Singapore storey office building with shops on a land area of 2,072 square metres. The net area in this building is 5,990 square metres. 99-year lease from years West Mall 1 Bukit Batok Central Link Singapore Retail and family entertainment complex on a land area of 9,890 square metres. The net area in this complex is 17,042 square metres. 99-year lease from years Singapore Land Tower 50 Raffles Place Singapore storey office building on a land area of 5,064 square metres. The net area in this building is 57,500 square metres. 999-year lease from years Clifford Centre 24 Raffles Place Singapore storey shopping cum office building on a land area of 3,343 square metres. The net area in this building is 25,470 square metres. 999-year lease from years The Gateway 150/152 Beach Road Singapore /1 Two 37-storey office buildings on a land area of 22,381 square metres. The net area in these buildings is 69,803 square metres. 99-year lease from years Annual REport 2011 United Industrial Corporation Limited 73

76 16. Investment properties (continued) (a) The Group s completed investment properties consist of the following (continued): Name of building/location Description Tenure of land Unexpired term of lease SGX CENTRE 2 4 Shenton Way Singapore storey office building on a land area of 2,970 square metres. The net area in this building (inclusive of 3,336 square metres in SGX CENTRE 1) is 25,800 square metres. 99-year lease from years ABACUS Plaza 3 Tampines Central 1 Singapore storey office building on a land area of 2,614 square metres. The net area in this building is 8,397 square metres. 99-year lease from years Tampines Plaza 5 Tampines Central 1 Singapore storey office building on a land area of 2,613 square metres. The net area in this building is 8,397 square metres. 99-year lease from years Marina Square Retail Mall 6 Raffles Boulevard Singapore storey retail mall with a retail underpass. The net area in this building is 61,886 square metres. 99-year lease from years Marina Bayfront 2 Raffles Link Singapore storey office building. The net area in this building is 7,214 square metres. 99-year lease from years (b) Marina Square Retail Mall and Marina Bayfront are components of an integrated commercial complex known as Marina Square. The Group s development property is as follows: Location of site Description Tenure of land Unexpired term of lease 5 Shenton Way Singapore A proposed development comprising commercial space with a gross floor area of 30,933 square metres. The development is expected to be completed in This is part of a mixed development with the residential component classified under properties held for sale. 99-year lease from years Investment properties are carried at fair values at the statement of financial position date as determined by independent professional valuers. Valuations are made based on the properties highest-and-best use using various valuation methods such as Direct Market Comparison Method, Income Method and Residual Method. Investment properties are leased to non-related parties under operating leases (note 28(c)). 74 Annual REport 2011 United Industrial Corporation Limited

77 17. Property, plant and equipment Leasehold land and building Plant and machinery Furniture, fittings and office equipment Motor Renovations vehicles in progress Constrution in progress Total The Group $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ Cost Beginning of financial year 393,563 41, ,826 1, ,504 Currency translation 2,082 1,794 2, ,886 difference Additions - - 1, ,647-4,630 Transfer in/(out) (341) - - Disposals - (1,621) (3,447) (429) - - (5,497) End of financial year 395,645 41, ,362 1,231 2, ,523 Accumulated depreciation Beginning of financial year 19,535 5,160 29, ,986 Currency translation difference Depreciation charge 6,102 2,242 13, ,341 Disposals - (1,621) (3,310) (420) - - (5,351) End of financial year 25,725 5,976 40, ,749 Net book value End of financial year 369,920 35,847 70, , , Cost Beginning of financial year 356,528 12,108 57,492 1, , ,932 Currency translation (5) (177) (284) (38) - (5,471) (5,975) difference Additions 4,892 6,386 10, ,066-23,889 Transfer in/(out) 32,312 23,820 42,725 - (2,076) (96,781) - Disposals (164) (552) (503) (123) - - (1,342) End of financial year 393,563 41, ,826 1, ,504 Accumulated depreciation Beginning of financial year 13,517 2,370 20, ,861 Currency translation difference (22) (47) (123) (9) - - (201) Depreciation charge 6,045 2,837 9, ,888 Disposals (5) - (454) (103) - - (562) End of financial year 19,535 5,160 29, ,986 Net book value End of financial year 374,028 36,425 80, ,518 Annual REport 2011 United Industrial Corporation Limited 75

78 17. Property, plant and equipment (continued) The Company Furniture, fittings and office equipment Motor vehicle Total $ 000 $ 000 $ Cost Beginning of financial year Additions Disposals (508) (208) (716) End of financial year Accumulated depreciation Beginning of financial year Depreciation charge Disposals (451) (208) (659) End of financial year Net book value End of financial year Cost Beginning of financial year Additions Disposals (7) - (7) End of financial year Accumulated depreciation Beginning of financial year Depreciation charge Disposals (7) - (7) End of financial year Net book value End of financial year Annual REport 2011 United Industrial Corporation Limited

79 18. Cash and cash equivalents The Group The Company $ 000 $ 000 $ 000 $ 000 Cash at bank and on hand 63,263 55, Short-term bank deposits 36,789 84, , , Included in cash and cash equivalents of the Group, are amounts of $11,188,000 (2010: $46,768,000) maintained in the Project Accounts. The funds in the Project Accounts can only be applied in accordance with Housing Developers (Project Account) Rules (1997 Ed.). 19. Properties held for sale The Group $ 000 $ 000 $ 000 (restated) (restated) Properties held for sale accounted for using the completion of construction method 139, , ,969 Properties held for sale accounted for using the percentage of completion method 739, , , , , ,498 Properties held for sale accounted for using percentage of completion method can be analysed as follows: The Group $ 000 $ 000 $ 000 (restated) (restated) Cost 974, ,836 1,025,033 Add: Development profits recognised on percentage of completion method 83, , ,430 Less: Progress billings (318,388) (400,998) (668,934) 739, , ,529 Progress billings relating to properties held for sale sold but accounted for using the completion of construction method has been classified as monies received in advance under current trade and other payables. Annual REport 2011 United Industrial Corporation Limited 77

80 19. Properties held for sale (continued) Borrowing costs of $2,236,000 (2010: $6,081,000) were capitalised during the financial year. A capitalisation rate of 0.8% to 7.2% (2010: 1.1% to 6.4%) per annum was used in 2011, representing the borrowing costs of the loans used to finance the projects. Title Percentage of completion at / Expected year of completion Site area/gross floor area (sqm) Group s effective interest % The Excellency Leasehold 88%/2012 7,566/77, (Chengdu) The Trizon Freehold 80%/ ,153/38, Development site at 5 Shenton Way Leasehold Nil/2017 */55, * The residential component under this site, together with the commercial component (classified under investment properties) are situated on a site area of 6,778 square metres. 20. Trade and other receivables The Group The Company $ 000 $ 000 $ 000 $ 000 Trade receivables 30,612 45, Less: Allowance for impairment of receivables (2,099) (1,733) ,513 43, Accrued receivables 24, , Deposits , Prepaid taxes 8,166 5, Prepayments 12, Other receivables 22,802 9, , ,468 1, Accrued receivables comprise of the balance of sales consideration to be billed upon receipt of Temporary Occupation Permit for properties held for sale. In 2010, included in deposits was an amount of $16,035,000 placed for a land tender. This amount was subsequently converted to investment in an associated company during the year. 78 Annual REport 2011 United Industrial Corporation Limited

81 21. Trade and other payables The Group The Company (a) (b) $ 000 $ 000 $ 000 $ 000 $ 000 Current (restated) (restated) Monies received in advance 106,367 73,377 59, Rental deposits 22,852 28,642 28, Trade payables 75,886 83, , Other payables 10,258 9,108 6, Accrued operating expenses 58,608 61,602 55,395 2,337 1, , , ,626 3,252 2,294 Non-current Rental deposits 52,788 48,621 50, Amounts due to an associated company 1,624 1,624 1,624 1,624 1,491 Amounts due to subsidiary companies ,894 17,900 Amounts due to a non-controlling shareholder of a subsidiary company , ,412 50, , ,518 19,391 The amounts due to associated and subsidiary companies are unsecured, not repayable within the next 12 months and are interest-free. At the statement of financial position date, the carrying amounts of non-current trade and other payables approximate their fair values. 22. Borrowings The Group The Company (a) (b) Note Current $ 000 $ 000 $ 000 $ 000 Short-term bank loans (unsecured) (i) 738, , , ,068 Term loan (secured) (ii) 2, , Revolving credit loans (unsecured) (iii) 4, , , , ,068 Non-current Term loans (secured) (ii) 41,440 17, Term loan (unsecured) (iv) - 40, Revolving credit loans (unsecured) (iii) - 57, , , Total borrowings 785, , , ,068 Annual REport 2011 United Industrial Corporation Limited 79

82 22. Borrowings (continued) (c) (i) The unsecured short-term loans are drawn under various uncommitted floating rate revolving credit facilities. (ii) In 2011, $30,000,000 of term loans is secured by way of an open debenture and legal mortgage over certain property, plant and equipment of a subsidiary company with carrying amounts of $368,369,000. The remaining $13,520,000 of term loans is secured by way of legal mortgage over certain property, plant and equipment of a subsidiary company with carrying amounts of $109,350,000. In 2010, the term loans were drawn under $285,000,000 land and construction loan facilities taken by subsidiary companies and were secured by way of legal mortgages over certain property development projects. (iii) The revolving credit loans taken by subsidiary companies are obtained by way of a negative pledge over all the assets of those subsidiary companies. In 2010, revolving credit loans were included as non-current liabilities as the Group has the discretion to rollover the loans for at least 12 months after the statement of financial position date. For the purposes of liquidity risk disclosure (note 30(c)), the revolving credit loans have been classified as current as the disclosure is based on actual contractual drawdowns to be repaid within a year. (iv) The unsecured term loan taken by a subsidiary company was obtained by way of a negative pledge over all the assets of that subsidiary company. Carrying amounts and fair values The carrying amounts of non-current borrowings approximate their fair values. The fair values are based on discounted cash flows using a discount rate of 1.0% to 7.2% (2010: 1.0% to 6.5%) based upon the prevailing market rates. The exposure of the borrowings of the Group and of the Company to interest rate changes and the contractual repricing dates at the statement of financial position dates are as follows: The Group The Company $ 000 $ 000 $ 000 $ months or less 755, , , , months 30,000 19, , , , , Annual REport 2011 United Industrial Corporation Limited

83 23. Deferred income taxes The Group $ 000 $ 000 $ 000 (restated) (restated) Deferred income tax liabilities: - to be settled within 1 year 11,504 22,793 31,205 - to be settled after 1 year 541, , , , , ,801 The movement in the deferred income tax account is as follows: The Group $ 000 $ 000 $ 000 (restated) (restated) Beginning of financial year - as previously reported 582, , ,222 - effect of adopting INT FRS 115 (1,579) (10,135) (11,278) Beginning of financial year, as restated 581, , ,944 Currency translation difference 123 (6) (250) Effect of change in Singapore tax rate - - (32,277) (Credited)/Charged to income statement (note 8(a)) (6,267) 142,125 (85,644) Under/(Over)provision in preceding financial years (note 8(a)) 474 4,676 (4,972) Transfer to current income tax liabilities (note 8(b)) (22,793) (31,205) - End of financial year 552, , ,801 Deferred income tax assets are recognised for tax losses carried forward to the extent that realisation of the related tax benefits through future taxable profits is probable. The Group has unrecognised tax losses in certain subsidiary companies of approximately $11,732,000 (2010: $11,732,000), which can be carried forward and used to offset against future taxable income subject to meeting certain statutory requirements by those companies with unrecognised tax losses in their respective countries of incorporation. These tax losses have no expiry dates. Annual REport 2011 United Industrial Corporation Limited 81

84 23. Deferred income taxes (continued) The movements in the deferred income tax assets and liabilities (prior to offsetting of balances within the same tax jurisdiction) during the financial year are as follows: Deferred development profits Fair value gain Accelerated tax depreciation Total The Group $ 000 $ 000 $ 000 $ 000 Deferred income tax liabilities 2011 Beginning of financial year - as previously reported 27, ,574 27, ,970 - effect of adopting INT FRS 115 (1,579) - - (1,579) Beginning of financial year, as restated 25, ,574 27, ,391 Currency translation difference Charged/(Credited) to income statement 8,454 (14,187) (534) (6,267) Underprovision in preceding financial years Transfer to current income tax liabilities (22,793) - - (22,793) End of financial year 11, ,387 28, , (restated) Beginning of financial year - as previously reported 42, ,086 19, ,936 - effect of adopting INT FRS 115 (10,135) - - (10,135) Beginning of financial year, as restated 31, ,086 19, ,801 Currency translation difference - - (6) (6) Charged to income statement 25, ,643 2, ,125 (Over)/Underprovision in preceding financial years - (1,155) 5,831 4,676 Transfer to current income tax liabilities (31,205) - - (31,205) End of financial year 25, ,574 27, , (restated) Beginning of financial year - as previously reported 20, ,724 25, ,222 - effect of adopting INT FRS 115 (11,278) - - (11,278) Beginning of financial year, as restated 9, ,724 25, ,944 Currency translation difference (250) - - (250) Effect of change in Singapore tax rate (731) (30,110) (1,436) (32,277) Charged to income statement 23,635 (109,528) 249 (85,644) Overprovision in preceding financial years - - (4,972) (4,972) End of financial year 31, ,086 19, , Annual REport 2011 United Industrial Corporation Limited

85 24. Share capital No. of ordinary shares The Group and the Company Amount No. of ordinary shares Amount 000 $ $ 000 Beginning of financial year 1,377,481 1,400,927 1,377,481 1,400,927 Shares issued End of financial year 1,377,815 1,401,382 1,377,481 1,400,927 All issued shares are fully paid. There is no par value for these ordinary shares. The UIC Share Option Scheme ( ESOS ) which was approved by the shareholders of the Company on 18 May 2001 had expired on 17 May 2011 and was continued with the shareholders approval at an annual general meeting held on 27 April 2011, for a further period of 10 years from 18 May 2011 to 17 May Other than the extension, there is no change in any other rules of the ESOS. Under the terms of the ESOS, the total number of shares granted shall not exceed 5% of the issued shares of the Company on the day immediately preceding the Offer Date of the Option. The exercise price is equal to the average of the last done prices per share of the Company s ordinary shares on the Singapore Exchange Securities Trading Limited ( SGX ST ) for five market days immediately preceding the date of the offer. On 1 March 2011 ( Offer Date ), options were granted pursuant to the ESOS to the executives of the Company and its subsidiary companies to subscribe for 894,000 ordinary shares in the Company at the exercise price of $2.78 per ordinary share. Principal terms of the ESOS are set out below: (i) only full time confirmed executives of the Company or any of its subsidiary companies (including executive directors) are eligible for the grant of options; (ii) the ESOS shall be in force at the discretion of the Remuneration Committee ( RC ) subject to a maximum period of 10 years and may be continued with the approval of the shareholders; Annual REport 2011 United Industrial Corporation Limited 83

86 24. Share capital (continued) Principal terms of the ESOS are set out below: (continued) (iii) all options granted shall be exercisable, in whole or in part (only in respect of 1,000 shares or any multiple thereof ), before the tenth anniversary of the Offer Date and in accordance with the following vesting schedule: Vesting Schedule Percentage of shares over which options are exercisable On or after the second anniversary of the Offer Date 50% On or after the third anniversary of the Offer Date 25% On or after the fourth anniversary of the Offer Date 25% The vesting and exercising of vested or unexercised options are governed by conditions set out in the ESOS; and (iv) participants in the ESOS, shall not, except with the prior approval of the RC in its absolute discretion, be entitled to participate in any other share option schemes or share incentive schemes implemented by companies within or outside the Group. The settlement of options are subject to conditions as set out in the ESOS. Movement in the number of unissued ordinary shares under option and their exercise price are as follows: Beginning of financial year Granted during financial year Cancelled during financial year Exercised during financial year End of financial year Exercise price per share Date of expiry The Group and the Company Options - 894,000 (70,000) - 824,000 $ Options 656,000 - (72,000) - 584,000 $ Options 648,000 - (36,000) (274,000) 338,000 $ Options 900,000 - (96,000) - 804,000 $ Options 2,046,000 - (204,000) (60,000) 1,782,000 $ ,250, ,000 (478,000) (334,000) 4,332, Options - 656, ,000 $ Options 760,000 - (112,000) - 648,000 $ Options 1,068,000 - (168,000) - 900,000 $ Options 2,382,000 - (336,000) - 2,046,000 $ ,210, ,000 (616,000) - 4,250,000 Out of the unexercised options for 4,332,000 (2010: 4,250,000) shares, options for 2,435,000 (2010: 1,984,500) shares are exercisable at the statement of financial position date. 84 Annual REport 2011 United Industrial Corporation Limited

87 24. Share capital (continued) The weighted average share price at the time of exercise was $2.83 (2010: Nil) per share. The fair value of options granted on 1 March 2011 (2010: 26 February 2010), determined using the Binomial Valuation Model, was $978,000 (2010: $489,000). The significant inputs into the model were share price of $2.80 (2010: $2.01) at the grant date, exercise price of $2.78 (2010: $2.03), expected dividend yield of 1.07% (2010: 1.49%), standard deviation of expected share price returns of 31% (2010: 32%), the option life shown above and annual risk-free interest rate of 2.6% (2010: 2.7%). The volatility measured as the standard deviation of expected share price returns was based on statistical analysis of share prices over the last five years. 25. Dividends The Group and the Company $ 000 $ 000 Final tax-exempt (one-tier) dividend paid in respect of the previous financial year of 3.0 cents per share (2010: 3.0 cents per share) 41,334 41,324 At the Annual General Meeting to be held on 27 April 2012, a final tax-exempt (one-tier) dividend of 3.0 cents per share will be recommended. Based on the number of issued shares as at 31 December 2011, this will amount to $41,334,000 which will be accounted for in shareholders equity as an appropriation of retained earnings in the financial year ending 31 December Retained earnings (a) Retained earnings of the Group included accumulated fair value gains from the Group s investment properties amounting to $679,036,000 (2010: $665,108,000). (b) Reserves of the Company comprise of retained earnings of $393,277,000 (2010: $391,702,000) and share option reserve of $3,183,000 (2010: $2,614,000), of which the movement in retained earnings for the Company is as follows: The Company $ 000 $ 000 Beginning of financial year 391, ,850 Total comprehensive income - net profit 42,909 43,176 Dividends paid (note 25) (41,334) (41,324) End of financial year 393, ,702 Annual REport 2011 United Industrial Corporation Limited 85

88 27. Other reserves The Group (a) Foreign currency reserve $ 000 $ 000 Beginning of financial year (690) 3,365 Net exchange differences on translation of financial statements of foreign entities 10,104 (4,055) End of financial year 9,414 (690) (b) Share option reserve Employee share option scheme Beginning of financial year 2,614 2,409 Value of employee services End of financial year 3,183 2,614 Total 12,597 1, Commitments (a) Capital commitments The Group $ 000 $ 000 Capital expenditure contracted for but not recognised in the financial statements in respect of: - investment in an associated company - 109,351 - upgrading of investment properties 1,838 1,842 - property, plant and equipment 1, , ,740 (b) Operating lease commitments - where the Group is a lessee The Group leases certain space under non-cancellable operating lease agreements. The leases have varying terms, escalation clauses and renewal rights. 86 Annual REport 2011 United Industrial Corporation Limited

89 28. Commitments (continued) (b) Operating lease commitments - where the Group is a lessee (continued) The future minimum lease payables under non-cancellable operating leases contracted for at the statement of financial position date but not recognised as liabilities, are as follows: The Group $ 000 $ 000 Not later than 1 year Between 1 and 5 years 1, ,386 1,499 (c) Operating lease commitments - where the Group is a lessor The Group has entered into commercial property leases on its investment property portfolio, consisting of the Group s office buildings and retail malls. The future minimum lease receivables under non-cancellable operating leases contracted for at the statement of financial position date but not recognised as receivables, are as follows: The Group $ 000 $ 000 Not later than 1 year 229, ,189 Between 1 and 5 years 254, ,944 Later than 5 years - 4, , , Contingent liabilities The Group $ 000 $ 000 Guarantees given to financial institutions in connection with borrowings given to a joint venture 96,988 - The directors are of the view that no material losses will arise from these contingent liabilities. Annual REport 2011 United Industrial Corporation Limited 87

90 30. Financial risk management Financial risk factors The Group s activities expose it to market risk (including currency risk and interest rate risk), credit risk and liquidity risk. The Group s overall risk management strategy seeks to minimise any adverse effects from the unpredictability of financial markets on the Group s financial performance. Risk management is carried out in accordance with established policies and guidelines approved by the Board of Directors. (a) Market risk (i) Currency risk The Group operates dominantly in Singapore, with some operations in the People s Republic of China. Entities in the Group transact in currencies other than their respective functional currencies ( foreign currencies ) such as United States Dollars. Currency risk arises when transactions are denominated in foreign currencies. As the entities in the Group transact substantially in their respective functional currencies, the currency exposure at the Group is minimal. In addition, the Group is exposed to currency risk on its monetary assets and liabilities denominated in foreign currencies when they are translated at the statement of financial position date. As these assets and liabilities are substantially denominated in their respective functional currencies, the currency exposure is minimal. The Company s exposure to currency risk is minimal as revenue and expenses and assets and liabilities are substantially denominated in Singapore Dollars. (ii) Cash flow and fair value interest rate risks Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the fair value of a financial instrument will fluctuate due to changes in market interest rates. As the Group has no significant interest-bearing assets, the Group s income and operating cash flows are substantially independent of changes in market interest rates. The Group s interest rate risks mainly arise from borrowings. Borrowings at variable rates expose the Group to cash flow interest rate risk. Borrowings obtained at fixed rates expose the Group to fair value interest rate risk. The Group monitors the interest rates on borrowings closely to ensure that the borrowings are maintained at favourable rates. If the interest rates increase/decrease by 25 basis points (2010: 25 basis points) with all other variables remaining constant, the profit after tax for the Group will be lower/higher by $773,000 (2010: $1,169,000) as a result of higher/lower interest expense on these borrowings. The Company does not have any exposure to the interest rates as all its finance expenses are recharged to the subsidiary companies. 88 Annual REport 2011 United Industrial Corporation Limited

91 30. Financial risk management (continued) (b) Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. For trade receivables, the Group adopts the policy of dealing only with customers of appropriate credit history, and obtaining sufficient security where appropriate to mitigate credit risk. For the property investment segment, generally advance deposits of at least 3 months rental (or equivalent amount in bankers guarantee) are obtained for all tenancies. For the property trading segment, progress billings from customers are followed up, and appropriate action taken promptly in instances of non-payment or delay in payment. For other financial assets, the Group adopts the policy of dealing only with high credit quality counterparties. Other than amounts due from subsidiary and associated companies, and joint venture, concentration of credit risk relating to trade receivables is limited due to the Group s many varied customers. As the Group and the Company does not hold any collateral, the maximum exposure to credit risk for each class of financial instruments is the carrying amount of that class of financial instruments presented on the statement of financial position. The Group s maximum exposure to credit risk in respect of guarantees given to financial institutions in connection with borrowings given to a joint venture is disclosed in note 29. The Group s and the Company s major classes of financial assets are bank deposits, trade receivables and other non-current receivables. The Group s and the Company s other non-current receivables comprise amounts due from associated companies and a joint venture and amounts due from subsidiary and associated companies respectively. These receivables are assessed for their recoverability and any recognition/writeback of allowance for impairment are made where necessary. Information regarding these receivables is disclosed in note 11. The credit risk profile of the Group s trade receivables at the statement of financial position date is as follows: The Group $ 000 $ 000 By segment of business Property investment 4,689 4,545 Property trading 29, ,406 Hotel operations 5,852 5,150 Technologies 12,199 10,116 52, ,217 (i) Financial assets that are neither past due nor impaired Bank deposits that are neither past due nor impaired are mainly deposits with banks with high creditratings assigned by international credit-rating agencies. Trade receivables that are neither past due nor impaired are substantially companies with a good collection track record with the Group. Annual REport 2011 United Industrial Corporation Limited 89

92 30. Financial risk management (continued) (b) Credit risk (continued) (ii) Financial assets that are past due and/or impaired There is no other significant class of financial assets that is past due and/or impaired except for trade receivables. The age analysis of trade receivables past due but not impaired is as follows: The Group $ 000 $ 000 Past due 0 to 1 month 5,404 4,593 Past due 1 to 2 months 2,511 1,925 Past due 2 to 3 months Past due over 3 months 1, ,793 7,943 The carrying amount of trade receivables individually determined to be impaired and the movement in the related allowance for impairment are as follows: The Group $ 000 $ 000 Beginning of financial year 1,733 1,730 Allowance made Allowance utilised (202) (213) Allowance written-back (219) (18) End of financial year 2,099 1,733 Trade receivables that are individually determined to be impaired at the statement of financial position date relate to debtors that are in significant financial difficulties and have defaulted on payments despite attempts to recover the debts owing through legal means where appropriate. These receivables are not secured by any collateral or credit enhancements. 90 Annual REport 2011 United Industrial Corporation Limited

93 30. Financial risk management (continued) (c) Liquidity risk The table below analyses the Group s and the Company s financial liabilities into relevant maturity groupings based on the remaining period from the statement of financial position date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying amounts as the impact of discounting is not significant. Less than 1 year Between 1 and 3 years Between 3 and 5 years Over 5 years The Group $ 000 $ 000 $ 000 $ 000 At 31 December 2011 Trade and other payables (167,604) (48,081) (4,707) (1,624) Borrowings (744,997) (12,370) (30,695) - Financial guarantees (96,988) (1,009,589) (60,451) (35,402) (1,624) At 31 December 2010 Trade and other payables (182,935) (48,368) (253) (1,624) Borrowings (719,763) (8,009) (10,360) (30,139) (902,698) (56,377) (10,613) (31,763) The Company At 31 December 2011 Trade and other payables (3,252) (152,894) - (1,624) Borrowings (505,659) (508,911) (152,894) - (1,624) At 31 December 2010 Trade and other payables (2,294) (17,900) - (1,491) Borrowings (468,331) (470,625) (17,900) - (1,491) The Group s and the Company s policy on liquidity risk management is to maintain sufficient cash to enable them to meet their normal operating commitments and the availability of funding through adequate amounts of credit facilities with various banks. At the statement of financial position date, assets held by the Group and the Company for managing liquidity risk included cash and short-term deposits as disclosed in note 18. Annual REport 2011 United Industrial Corporation Limited 91

94 30. Financial risk management (continued) (d) Capital risk The Group s main objective when managing capital is to safeguard the Group s ability to continue as a going concern. The Group manages capital using various common measures applied by real estate companies which may include adjusting the dividend payment, returning capital to shareholders or issuing new shares. Management monitors the Group s capital using a ratio calculated as debt divided by net assets. Debt comprises total borrowings and net assets are calculated as total assets less total liabilities. The Group $ 000 $ 000 $ 000 Debt 785, ,416 1,075,840 Net assets (restated) 5,489,059 5,279,738 4,473,885 Debt/Net assets ratio 14% 14% 24% (e) The Group and the Company are in compliance, where applicable, with all externally imposed capital requirements for the financial years ended 31 December 2010 and Financial instruments by category The aggregate carrying amounts of loans and receivables and financial liabilities at amortised cost are as follows: The Group The Company $ 000 $ 000 $ 000 $ 000 Loans and receivables 249, ,770 1,233,477 1,058,007 Financial liabilities at amortised cost 1,007, , , , Annual REport 2011 United Industrial Corporation Limited

95 31. Related party transactions (a) In addition to the related party information shown elsewhere in the financial statements, the following transactions took place between the Group and related parties during the financial year: The Group $ 000 $ 000 Transactions with a joint venture Project management fees income received Fees received for arrangement of bank loan 60 - Transactions with an associated company Project management fees income received Transactions with a non-controlling shareholder of a subsidiary company Project management fees paid Transactions with a firm in which a director has an interest Professional fees paid (b) Key management personnel compensation Key management s remuneration included fees, salary, bonus and other emoluments (including benefits-inkind) computed based on the cost incurred by the Group and the Company, and where the Group or the Company did not incur any costs, the value of the benefit is included. The total key management s remuneration is as follows: The Group $ 000 $ 000 Directors of the Company - Fees Salaries, bonus and other emoluments 1,158 1,094 - Employer s contribution to defined contribution plan Share option expense ,924 1,959 Annual REport 2011 United Industrial Corporation Limited 93

96 32. Segment information For management purposes, the Group is organised into business units based on their products and services, and has four reportable operating segments as follows: Property investment - leasing of commercial office property, property management, investment holding, and investment in retail centres. Property trading - development of properties for trading. Hotel operations - operation of hotels. Technologies - distribution of computers and related products; provision of systems integration and networking infrastructure services. Except as indicated above, no operating segments have been aggregated to form the above reportable operating segments. Property investment Property trading Hotel operations Technologies The Group $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 (restated) (restated) Revenue - external sales 296, , , , , ,341 80,594 63, ,504 1,194,302 Segment result 230, ,751 59, ,928 28,271 21,052 2,761 2, , ,119 Unallocated costs (4,901) (4,399) Interest income 1, Dividend income 1, Finance expenses (5,566) (9,613) Share of results of associated companies 17,559 11,894 1,374 15,484 23,274 17, ,207 44,657 Share of results of a joint venture - - (500) (500) - 355, ,412 Fair value gain on investment properties 21, , , ,022 Profit before income tax 377,286 1,156,434 Segment assets 5,727,210 5,524, , , , ,421 21,272 16,797 6,862,558 6,782,506 Investments in associated companies 119, , ,866 28, , , , ,325 Consolidated total assets 7,241,528 7,015,831 Other segment items Capital expenditure 194, , ,104 18, , ,997 Depreciation 306 1, ,882 16, ,341 18, Annual REport 2011 United Industrial Corporation Limited

97 32. Segment information (continued) Geographical information Singapore is the home country of the Company which is also an operating company. The areas of operation are holding of investment properties for leasing, property development and trading, investment holding, property management, and investment in hotels and retail centres. Revenue is based on the country in which the sale is originated. Non-current assets are shown by the geographical area in which the assets are located. Revenue Non-current assets $ 000 $ 000 $ 000 $ 000 (restated) Singapore 784,543 1,158,349 5,826,722 6,048,839 China 20,961 35, , , ,504 1,194,302 6,078,644 6,182, New or revised accounting standards and interpretations Certain new standards, amendments and interpretations to existing standards have been published and are mandatory for the Group s accounting periods beginning on or after 1 January 2012 or later periods which the Group has not early adopted. The Group does not expect that the adoption of these accounting standards or interpretations will have a material impact on the Group s financial statements for the financial year ending 31 December 2012, except for the amendments to FRS12 Deferred Tax: Recovery of Underlying Assets (effective for annual periods beginning 1 January 2012). FRS 12 currently requires an entity to measure the deferred income tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. The amendments to FRS 12 introduce an exception to the existing principle for the measurement of deferred income tax assets or liabilities on investment properties measured at fair value, where it is presumed that the carrying amount of an investment property is recovered entirely through sale unless this presumption is rebutted. The Group estimates that, due to this change, which will be applied on 1 January 2012, the deferred income tax liabilities would have been decreased by $487,700,000 in Consequently, the reserves attributable to the equity holders of the Company would increase by $368,300, Authorisation of financial statements These financial statements were authorised for issue in accordance with a resolution of the Board of Directors of United Industrial Corporation Limited on 17 February Annual REport 2011 United Industrial Corporation Limited 95

98 35. Listing of subsidiary and associated companies, and joint venture in the Group Principal activities Country of incorporation/ business The Group s equity holding Subsidiary companies % % UIC Development (Private) Limited Investment holding Singapore UIC Enterprise Pte Ltd Investment holding Singapore UIC Investment Pte Ltd Property trading Singapore UIC Investments (Properties) Pte Ltd Property investment Singapore UIC Supplies Pte Ltd Property trading Singapore UIC Land Pte Ltd Property investment Singapore UIC Management Services Pte. Ltd. Property management agents Singapore Active Building & Civil Construction (1985) Pte Ltd Investment holding Singapore Networld Realty Pte Ltd Investment holding Singapore UIC China Realty Pte. Ltd. Investment holding Singapore Alprop Pte Ltd Property investment Singapore Singapore Land Limited Investment holding Singapore Gateway Land Limited Property investment Singapore Ideal Homes Pte. Limited Property trading Singapore Realty Management Services (Pte) Ltd. Property management agents Singapore RMA-Land Development Private Ltd Property investment Singapore Shing Kwan Realty (Pte.) Limited Property investment Singapore and investment holding Singland (Chengdu) Development Co. Ltd. # Property trading People s Republic of China S.L. Development Pte. Limited Property investment Singapore and investment holding 96 Annual REport 2011 United Industrial Corporation Limited

99 35. Listing of subsidiary and associated companies, and joint venture in the Group (continued) Principal activities Country of incorporation/ business The Group s equity holding Subsidiary companies % % S L Prime Properties Pte Ltd Property investment Singapore S L Prime Realty Pte Ltd Property investment Singapore S.L. Properties Limited Property investment and investment holding Singapore Pothonier Singapore Pte Ltd Investment holding Singapore Shenton Holdings Private Limited Investment holding Singapore Singland China Holdings Pte. Ltd. Investment holding Singapore S.L. Home Loans Pte. Ltd. Investment holding Singapore S.L. Management Services Pte Limited Investment holding Singapore Brendale Pte. Ltd. Property trading Singapore UIC Asian Computer Services Pte Ltd Retailing of computer hardware and software Singapore UIC Investments (Equities) Pte Ltd Investment holding Singapore UIC Technologies Pte Ltd Investment holding Singapore UIC JinTravel (Tianjin) Co., Ltd # Property investment and trading People s Republic of China Marina Centre Holdings Private Limited + Property development and investment Singapore Marina Food Court Pte Ltd + Food court operator Singapore Marina Management Services Pte Ltd + Property management agents Singapore Hotel Marina City Private Limited+ Hotelier Singapore Annual REport 2011 United Industrial Corporation Limited 97

100 35. Listing of subsidiary and associated companies, and joint venture in the Group (continued) Associated companies Principal activities Country of incorporation/ business The Group s equity holding % % United Regency Pte Ltd Property trading Singapore Avenue Park Development Pte. Ltd. ## Property trading Singapore Tianjin Yan Yuan International Hotel * Hotel investment People s Republic of China Shanghai Jin Peng Realty Co Ltd * Property trading People s Republic of China Aquamarina Hotel Private Limited Hotelier Singapore Marina Bay Hotel Private Limited Hotelier Singapore Novena Square Development Ltd ++ Property investment Singapore Novena Square Investments Ltd ++ Property investment Singapore Joint venture United Venture Development (Bedok) Pte. Ltd. (formerly known as United Venture Development Pte. Ltd.) Property trading Singapore Inactive companies Subsidiary companies Netpearl Sdn Bhd # Malaysia Networld Pte Ltd Singapore UIC China Resources Pte. Ltd. Singapore UIC Commodities Pte Ltd Singapore UIC Printedcircuits Pte Ltd Singapore UIC Indochina Pte Ltd Singapore Annual REport 2011 United Industrial Corporation Limited

101 35. Listing of subsidiary and associated companies, and joint venture in the Group (continued) Inactive companies Subsidiary companies Country of incorporation/ business The Group s equity holding % % Union Commodities Pte Ltd Singapore Interpex Services Private Limited Singapore Asian Computer Services Pte Ltd Singapore Grocorp Assets Sdn Bhd # Malaysia S L Realty Management Service (HK) Limited ^^ Singapore - 76 Associated companies CITIC-UIC Investment Pte Ltd Singapore UVD Pte. Ltd. (formerly known as United Venture Investments Pte. Ltd.) Singapore Kogan Investments Limited ^ British Virgin Islands Marina Laundry Private Limited Singapore Notes + Effective interest is less than 50% as the subsidiary company is indirectly held by another subsidiary company. ++ Effective interest is less than 20% as the associated company is directly held by another subsidiary company. All the subsidiary and associated companies, and joint venture are audited by PricewaterhouseCoopers LLP, Singapore except for the following: # Audited by PricewaterhouseCoopers firms outside Singapore. ## Audited by Ernst & Young LLP, Singapore. * Audited by other auditors. This foreign incorporated company is not considered a significant associated company under the SGX-ST Listing Manual. ^ Not required to be audited by the law of the country of incorporation. ^^ Not applicable as company was deregistered during the year. Annual REport 2011 United Industrial Corporation Limited 99

102 GROUP PROFIT AND LOSS ACCOUNTS - Year ended 31 December ($ 000) (restated) (restated) (restated) (restated) Revenue 431, ,817 1,032,084 1,194, ,504 Profit/(Loss) before income tax 1,898,871 (97,374) (252,305) 1,156, ,286 Income tax (expense)/credit (301,460) 12,306 76,228 (194,095) (37,214) Net profit/(loss) 1,597,411 (85,068) (176,077) 962, ,072 Attributable to: Equity holders of the Company - Net profit from operations 104, , , , ,230 - Net fair value gain/(loss) on investment properties 1,051,243 (262,133) (383,594) 465,987 13,928 1,155,980 (112,885) (131,530) 743, ,158 Non-controlling interests 441,431 27,817 (44,547) 218, ,914 1,597,411 (85,068) (176,077) 962, ,072 Dividends proposed (net) 41,324 41,324 41,324 41,324 41,334 GROUP Statements of financial postion - As at 31 December ($ 000) (restated) (restated) (restated) (restated) Investment properties 5,476,361 5,248,437 4,597,500 5,458,000 5,219,900 Property, plant and equipment 401, , , , ,774 Other non-current assets 248, , , , ,396 Current assets 1,160,169 1,218,843 1,102, ,638 1,077,458 Total assets 7,287,334 7,106,064 6,428,565 7,015,831 7,241,528 Current liabilities (1,072,340) (1,192,189) (962,689) (989,716) (1,103,689) Non-current liabilities (1,302,358) (1,152,262) (991,991) (746,377) (648,780) Net assets employed 4,912,636 4,761,613 4,473,885 5,279,738 5,489,059 Share capital 1,400,927 1,400,927 1,400,927 1,400,927 1,401,382 Reserves 1,907,885 1,758,420 1,610,027 2,326,955 2,538,503 3,308,812 3,159,347 3,010,954 3,727,882 3,939,885 Non-controlling interests 1,603,824 1,602,266 1,462,931 1,551,856 1,549,174 Total equity 4,912,636 4,761,613 4,473,885 5,279,738 5,489, Annual REport 2011 United Industrial Corporation Limited

103 OTHER DATA - Year ended 31 December ($ 000) (restated) (restated) (restated) (restated) Profit/(Loss) before income tax - % of revenue 440 (13) (24) Profit/(Loss) attributable to equity holders of the Company - % of revenue 268 (15) (13) % of share capital and reserves 35 (4) (4) 20 5 Earnings/(Loss) per share (cents) - excluding fair value gain/loss on investment properties - including fair value gain/loss on investment properties (8.2) (9.5) Dividends proposed - per share (cents) cover (times) 28.0 n.a. n.a Net asset value per share ($) n.a. - Not applicable Certain prior years figures have been restated following the clarification note by the Accounting Standards Council on Interpretation of Singapore Financial Reporting Standard 115 Agreements for the Construction of Real Estate with an Accompanying Note. Annual REport 2011 United Industrial Corporation Limited 101

104 As at 1 March 2012 Number of Issued Shares Voting Rights : 1,377,987,220 ordinary shares : One vote per share Distribution of Shareholdings as at 1 March 2012 Size of Shareholdings No. of Shareholders % No. of Shares % , ,000-10,000 7, ,731, ,001-1,000,000 2, ,468, ,000,001 and above ,255,414, Total 11, ,377,987, List of 20 Largest Shareholders as at 1 March 2012 No. Name No. of Shares % 1 UOB KAY HIAN PTE LTD 591,232, OVERSEA CHINESE BANK NOMS PTE LTD 290,077, DBS VICKERS SECS (S) PTE LTD 150,653, UNITED OVERSEAS BANK NOMINEES 95,280, UOB NOMINEES (2006) PTE LTD 45,707, DBS NOMINEES PTE LTD 31,119, CITIBANK NOMS S'PORE PTE LTD 22,199, CIMB SEC (S'PORE) PTE LTD 5,241, OCBC NOMINEES SINGAPORE 3,601, HSBC (SINGAPORE) NOMS PTE LTD 3,206, DBSN SERVICES PTE LTD 3,093, SHANWOOD DEVELOPMENT PTE LTD 3,000, KWEE SIU SUDJASMIN KUSMIN OR DIANAWATI TJENDERA 2,790, MERRILL LYNCH (S'PORE) PTE LTD 2,514, CHING MUN FONG 1,954, KI INVESTMENTS (HK) LIMITED 1,446, PRIMA INVESTMENT HOLDINGS (SINGAPORE) PTE LTD 1,215, MAYBANK KIM ENG SECS PTE LTD 1,082, OCBC SECURITIES PRIVATE LTD 912, ESPOIR INVESTMENTS PTE LTD 899, TOTAL 1,257,225, Annual REport 2011 United Industrial Corporation Limited

105 As at 1 March 2012 Substantial Shareholders Shareholdings as at 1 March 2012 Shareholdings registered in the name of substantial shareholders or nominees Shareholdings in which the substantial shareholders are deemed to have an interest Name No. of Shares No. of Shares % 1) UOL Equity Investments Pte Ltd 558,499,565 (1) nil ) UOL Group Limited 32,318,000 (2) 558,499,565 (2) ) Dr Wee Cho Yaw 1,857, ,375,565 (3) ) Telegraph Developments Ltd 497,195,000 (4) nil Notes: (1) UOL Group Limited and Dr Wee Cho Yaw have deemed interests in the UIC shares of UOL Equity Investments Pte Ltd. (2) Dr Wee Cho Yaw is deemed to have an interest in the UIC shares held by UOL Group Limited. (3) Dr Wee Cho Yaw s deemed interest in the 658,375,565 UIC shares is derived as follows: United Overseas Bank Nominees (Pte) Ltd 61,343,000 - beneficiary: Straits Maritime Leasing Private Limited United Overseas Bank Nominees (Pte) Ltd 6,215,000 - beneficiary: Haw Par Capital Pte Ltd UOB Kay Hian Private Limited 32,318,000 - beneficiary: UOL Group Limited UOB Kay Hian Private Limited 558,499,565 - beneficiary: UOL Equity Investments Pte Ltd (4) By virtue of Section 7 of the Companies Act, Cap. 50, JG Summit Philippines Limited, JG Summit Holdings, Inc. and Dr John Gokongwei, Jr. are deemed to have an interest in the 497,195,000 UIC shares held by Telegraph Developments Ltd ( Telegraph ) as follows: i) JG Summit Philippines Limited is the holding company of Telegraph; ii) iii) JG Summit Holdings, Inc. is the holding company of JG Summit Philippines Limited; and Dr. John Gokongwei, Jr. has an interest of more than 20% of the voting shares in JG Summit Holdings, Inc. RULE 723 OF THE SGX-ST LISTING MANUAL Based on the information available to the Company as at 1 March 2012, approximately 15.98% of the issued ordinary shares of the Company is held by the public and therefore the Company has complied with the Exchange s requirement that at least 10% of equity securities (excluding preference shares and convertible equity securities) in a class that is listed is at all times held by the public. Annual REport 2011 United Industrial Corporation Limited 103

106 united industrial corporation limited (Company Registration No E) Incorporated in the Republic of Singapore Notice is hereby given that the 50th Annual General Meeting of United Industrial Corporation Limited will be held at 80 Raffles Place, 61st Storey, UOB Plaza 1, Singapore , on Friday, 27 April 2012 at 3.00 p.m. to transact the following business: 1. To receive and adopt the Directors Report and Audited Financial Statements for the financial year ended 31 December 2011 and the Auditors Report thereon. 2. To declare a first and final dividend of 3.0 cents per share tax-exempt (one-tier) for the financial year ended 31 December (2010: 3.0 cents) 3. To approve Directors fees of $328,750 for the financial year ended 31 December (2010: $391,750) 4. To re-elect the following Directors, who will retire by rotation pursuant to Article 104 of the Articles of Association of the Company and who, being eligible, offer themselves for re-election: (a) Mr Lim Hock San (b) Mr Lance Y. Gokongwei (c) Mr Alvin Yeo Khirn Hai (See Explanatory Note 1) 5. To re-appoint the following Directors, each of whom will retire and seek re-appointment under Section 153(6) of the Companies Act, Cap. 50, to hold office from the date of this Annual General Meeting until the next Annual General Meeting: (a) Dr Wee Cho Yaw (b) Dr John Gokongwei, Jr. (c) Mr Hwang Soo Jin (See Explanatory Note 2) (d) Mr Antonio L. Go (e) Mr James L. Go (See Explanatory Note 3) (f ) Mr Gwee Lian Kheng 6. To re-appoint Messrs PricewaterhouseCoopers LLP as Auditors of the Company to hold office until the next Annual General Meeting of the Company and to authorise the Directors to fix their remuneration. (See Explanatory Note 4) To consider and, if thought fit, to pass, with or without modifications, the following resolutions as Ordinary Resolutions: 7. That Mr Yang Soo Suan, who is over seventy years of age be and is hereby appointed as a Non-Executive Independent Director of the Company pursuant to Section 153(6) of the Companies Act, Cap. 50, to hold office from the date of this Annual General Meeting until the next Annual General Meeting. (See Explanatory Note 5) 104 Annual REport 2011 United Industrial Corporation Limited

107 united industrial corporation limited (Company Registration No E) Incorporated in the Republic of Singapore 8A. That pursuant to Section 161 of the Companies Act, Cap 50, and subject to the listing rules, guidelines and directions ( Listing Requirements ) of the Singapore Exchange Securities Trading Limited ( SGX-ST ), the Directors of the Company be and are hereby authorised to issue: (i) shares in the capital of the Company ( Shares ); (ii) convertible securities (iii) additional convertible securities issued pursuant to adjustments; or (iv) Shares arising from the conversion of the securities in (ii) and (iii) above, (whether by way of rights, bonus, or otherwise or pursuant to any offer, agreement or option made or granted by the Directors during the continuance of this authority which would or might require Shares or convertible securities to be issued during the continuance of this authority or thereafter) at any time, to such persons, upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fit (notwithstanding that the authority conferred by this Ordinary Resolution may have ceased to be in force), provided that: a. the aggregate number of Shares and convertible securities to be issued pursuant to this Ordinary Resolution (including Shares to be issued in pursuance of convertible securities made or granted pursuant to this Ordinary Resolution) does not exceed 50% of the total number of issued Shares (excluding treasury shares) provided that the aggregate number of Shares to be issued other than on a pro rata basis to Shareholders of the Company (including Shares to be issued in pursuance of instruments made or granted pursuant to this Ordinary Resolution) does not exceed 20% of the total number of issued Shares; b. (subject to such other manner of calculation as may be prescribed by the SGX-ST) for the purpose of determining the aggregate number of Shares that may be issued under (a) above, the percentage of issued Shares shall be based on the total number of issued Shares (excluding treasury shares) at the time of the passing of this Ordinary Resolution, after adjusting for: (1) any new Shares arising from the conversion or exercise of convertible securities; (2) (where applicable) any new Shares arising from exercising share options or vesting of share awards outstanding or subsisting at the time this Ordinary Resolution is passed, provided the options or awards were granted in compliance with the Listing Requirements; and (3) any subsequent bonus issue, consolidation or subdivision of Shares; c. in exercising the authority conferred by this Ordinary Resolution, the Company complies with the Listing Requirements (unless such compliance has been waived by the SGX-ST) and the existing Articles of Association of the Company; and Annual REport 2011 United Industrial Corporation Limited 105

108 united industrial corporation limited (Company Registration No E) Incorporated in the Republic of Singapore d. such authority shall, unless revoked or varied by the Company at a general meeting, continue to be in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier. (See Explanatory Note 6) 8B. That the Directors be and are hereby authorised to: a. offer and grant options to any full-time confirmed employee (including any Executive Director) of the Company and its subsidiaries who are eligible to participate in the United Industrial Corporation Limited Share Option Scheme (the Scheme ); and b. pursuant to Section 161 of the Companies Act, Cap. 50, to allot and issue from time to time such number of Shares in the Company as may be required to be issued pursuant to the exercise of options under the Scheme, provided that the aggregate number of Shares to be issued pursuant to this Ordinary Resolution shall not exceed 5% of the total issued Shares in the capital of the Company (excluding treasury shares) from time to time. (See Explanatory Note 7) 9. To transact any other ordinary business as may be transacted at an Annual General Meeting of the Company. By Order of the Board Susie Koh Company Secretary Singapore, 28 March 2012 NOTE: A member of the Company entitled to attend and vote at this meeting is entitled to appoint one or two proxies to attend and vote in his stead. A proxy need not be a member of the Company. The instrument appointing a proxy or proxies must be deposited at the Registered Office of the Company at 24 Raffles Place #22-01/06, Clifford Centre, Singapore not less than 48 hours before the time appointed for holding the annual general meeting. 106 Annual REport 2011 United Industrial Corporation Limited

109 united industrial corporation limited (Company Registration No E) Incorporated in the Republic of Singapore Explanatory Notes: 1. Mr Alvin Yeo Khirn Hai, if re-appointed, will remain as an Audit Committee Chairman and will be considered as an Independent Director pursuant to Rule 704(8) of the SGX-ST Listing Manual. 2. Mr Hwang Soo Jin, if re-appointed, will remain as an Audit Committee Member and will be considered as an Independent Director pursuant to Rule 704(8) of the SGX-ST Listing Manual. 3. Mr James L. Go, if re-appointed, will remain as an Audit Committee Member and will be considered as a non Independent Director pursuant to Rule 704(8) of the SGX-ST Listing Manual. 4. The Audit Committee undertook a review of the fees and expenses of the audit and non-audit services provided by the external auditor, Messrs PricewaterhouseCoopers LLP. It assessed whether the nature and extent of the non-audit services might prejudice the independence and objectivity of the auditor before confirming its re-nomination. It was satisfied that such services did not affect the independence of the external auditor. 5. Mr Yang Soo Suan is an Architect by training and has more than 48 years of professional practice experience. He is a Director of United Overseas Insurance Limited and United International Securities Limited. He is a Life Fellow of the Singapore Institute of Architects, a Fellow member of the Singapore Society of Project Managers, and a member of the Singapore Institute of Directors. He is the former Chairman of Architects 61 Pte Ltd and National Fire Prevention Council. He is also a former Board member of the Housing and Development Board and the Board of Architects, a former President of the Singapore Institute of Architects and currently a member of the Appeals Board (Land Acquisition). mr Yang Soo Suan holds a Bachelor of Architecture (Honours) in Design, Town Planning and Building (1961) from Melbourne University, Australia and was awarded the Bintang Bakti Masyarakat (Public Service Star, Singapore) in If Mr Yang Soo Suan is appointed, he would be a Non-Executive Independent Director, and would simultaneously be appointed by the Board to be a Member of its Nominating and Audit Committees. 6. The Ordinary Resolution 8A proposed above, if passed, will empower the Directors of the Company, from the date of the above Meeting until the next Annual General Meeting, to issue shares in the capital of the Company and to make or grant convertible securities, and to issue shares in pursuance of such convertible securities, without seeking any further approval from Shareholders in general meeting, up to a number not exceeding in total 50% of the total number of issued shares (excluding treasury shares) in the capital of the Company, provided that the total number of issued shares (excluding treasury shares) which may be issued other than on a pro rata basis to Shareholders does not exceed 20%. 7. The Ordinary Resolution 8B proposed above, if passed, will empower the Directors of the Company, from the date of the above Meeting until the next Annual General Meeting, to offer and grant options under the Scheme, and to allot and issue shares pursuant to the exercise of such options provided that the aggregate number of shares to be issued pursuant to this Ordinary Resolution 8B does not exceed 5% of the total number of issued shares in the capital of the Company on the date immediately preceding the relevant date(s) on which the offer(s) to grant such options is/are made. Annual REport 2011 United Industrial Corporation Limited 107

110 united industrial corporation limited (Company Registration No E) Incorporated in the Republic of Singapore Notice of Books Closure Date and Payment Date for First and Final Dividend NOTICE IS ALSO HEREBY GIVEN that subject to shareholders approval being obtained for the proposed first and final dividend (one-tier tax exempt) of 3.0 cents per share for the financial year ended 31 December 2011, the Share Transfer Books and the Register of Members of the Company will be closed from 15 May 2012 to 16 May 2012, both dates inclusive, for the preparation of dividend warrants. Duly completed transfers received by the Company s Share Registrar, Messrs KCK CorpServe Pte Ltd at 333 North Bridge Road #08-00 KH KEA Building, Singapore up to 5.00 p.m. on 14 May 2012 will be registered to determine shareholders entitlement to the proposed dividend. Shareholders whose securities accounts with The Central Depository (Pte) Limited are credited with ordinary shares in the capital of the Company as at 5.00 p.m. on 14 May 2012 will be entitled to the proposed dividends. The proposed dividends, if approved, will be paid on 25 May 2012.

111 UNITED INDUSTRIAL CORPORATION LIMITED Company Registration No E Incorporated in the Republic of Singapore PROXY FORM ANNUAL GENERAL MEETING IMPORTANT 1. For investors who have used their CPF monies to buy shares in United Industrial Corporation Limited, this Report 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 attend the Annual General Meeting as OBSERVERS must submit their requests through their CPF Approved Nominees within the time frame specified. (CPF Approved Nominee: Please see Note 8 on the reverse side). 4. CPF investors who wish to vote must submit their voting instructions to the CPF Approved Nominees within the time frame specified to enable them to vote on their behalf I/We (Name) of (Address) being a member/member (s) of United Industrial Corporation Limited (the Company ), hereby appoint:- Name Address NRIC/Passport No. Proportion ofshareholdings (%) and/or (delete as appropriate) Name Address NRIC/Passport No. Proportion ofshareholdings (%) or failing him/her/them, the Chairman of the Meeting, as my/our proxy/proxies to attend and to vote for me/us on our behalf and, if necessary, to demand a poll at the 50th Annual General Meeting of the Company to be held at 80 Raffles Place, 61st Storey, UOB Plaza 1, Singapore on 27 April 2012 at 3.00 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 below. If no specific direction as to voting is given, the proxy/proxies will vote or abstain from voting at his/her/their discretion. No. Resolutions For * Against* 1 Adoption of Directors Report and Audited Financial Statements 2 Declaration of a First and Final Dividend tax-exempt (one-tier) 3 Approval of Directors fees 4 Re-election of Directors retiring by rotation in accordance with Article 104 of the Company s Articles of Association (a) Mr Lim Hock San (b) Mr Lance Y. Gokongwei (c) Mr Alvin Yeo Khirn Hai 5 Re-appointment of Directors retiring pursuant to Section 153(6) of the Companies Act, Cap. 50 (a) Dr Wee Cho Yaw (b) Dr John Gokongwei, Jr. (c) Mr Hwang Soo Jin (d) Mr Antonio L. Go (e) Mr James L. Go (f ) Mr Gwee Lian Kheng 6 Re-appointment of Auditors 7 Appointment of Mr Yang Soo Suan as a Non-Executive Independent Director pursuant to Section 153(6) of the Companies Act, Cap. 50 8A Authority for Directors to issue shares (Section 161 of the Companies Act, Cap. 50 and SGX-ST Listing Manual) 8B Authority for Directors to issue shares pursuant to the United Industrial Corporation Limited Share Option Scheme. 9 Any Other Business * Please indicate your vote For or Against with an X within the box provided. Dated this day of 2012 Total Number of Shares held Signature (s) or Common Seal of Member(s) IMPORTANT: PLEASE READ NOTES OVERLEAF BEFORE COMPLETING THIS PROXY FORM

112 Notes: 1. Please insert the total number of shares held by you. If you have shares entered against your name in the Depository Register (as defined in Section 130A of the Companies Act, Cap. 50), you should insert that number of shares. If you have shares registered in your name in the Register of Members, you should insert that number of shares. If you have shares entered against your name in the Depository Register and shares registered in your name in the Register of Members, you should insert the aggregate number of shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, this instrument appointing a proxy or proxies shall be deemed to relate to all shares held by you. 2. A member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint one or two proxies to attend and vote in his stead. A proxy need not be a member of the Company. 3. Where a member appoints more than one proxy, he shall specify the proportion of his shareholding (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 shall be deemed to represent 100 per cent of the shareholding and the second named proxy shall be deemed to be an alternate to the first named proxy. 4. Completion and return of this instrument appointing a proxy shall not preclude a member from attending and voting at the meeting. Any appointment of a proxy or proxies shall be deemed to be revoked if a member attends the meeting in person, and in such event, the Company reserves the right to refuse to admit any person or persons appointed under this instrument of proxy, to the meeting. 5. The instrument appointing a proxy or proxies must be deposited at the Registered Office of the Company at 24 Raffles Place, #22-01/06 Clifford Centre, Singapore not less than 48 hours before the time appointed for the Annual General Meeting. 6. The instrument appointing a proxy or proxies must be under the hand of the appointor or his attorney duly authorised in writing. Where the appointor is a corporation, the instrument of proxy must be executed either under its common seal or under the hand of its duly authorized officer or attorney. Where an instrument appointing a proxy or proxies 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. A corporation which is a member may authorise, by resolution of its directors or other governing body, such person as it thinks fit to act as its representative at the Annual General Meeting, in accordance with its Articles of Association and Section 179 of the Companies Act, Cap Agent Banks acting on the request of CPF Investors who wish to attend the Annual General Meeting as Observers are required to submit in writing, a list with details of the investors name, NRIC/Passport numbers, addresses and numbers of shares held. The list, signed by an authorized signatory of the agent bank, should reach the Company Secretary at the registered office of the Company not later than 48 hours before the time appointed for holding the Annual General Meeting. General: The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies. In addition, in the case of members whose shares are entered against their names in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if such members are not shown to have shares entered against their names in the Depository Register 48 hours before the time appointed for holding the Annual General Meeting as certified by The Central Depository (Pte) Limited to the Company.

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114 UNITED INDUSTRIAL CORPORATION LIMITED United Industrial Corporation Limited Incorporated in the Republic of Singapore (Company Registration No E) Incorporated in the Republic of Singapore 24 Raffles Place #22-01/06 Clifford Centre Singapore (Company Registration No E) Tel: (65) Fax: (65) Shenton Way #02-16 Podium Block UIC Building Singapore Tel: Fax: Annual REport 2011 United Industrial Corporation Limited