annual fragrance group limited report company …

A n n u A lR e p o R tF Y 2 0 0 7

Fragrance group Limited

FRAGRANCE GROUP LIMITED

company registration number : 200006656m(incorporated in the republic of Singapore)168 changi road #04-01 Fragrance Building Singapore 419730tel: 6346 6888

W e b s i t e : w w w . f r a g r a n c e g r o u p . c o m . s g

www.global-reports.com

Our Group is mainly involved in real estate development which encompasses primarily residential properties and the investment and management of hotel properties.

We specialize in boutique residential developments, developing low to medium rise private apartments. The strategy for our property development arm is to offer customers quality homes at affordable prices. Today’s busy urban lifestyle calls for simple design solutions that uncover precious space. Every square foot at our property units has been meticulously mapped out to our customer’s absolute satisfaction and their fittings have been carefully selected to offer comfort and durability with the perfect combination of essential living and convenience.

As the hotel arm of Fragrance Group and one of Singapore’s leading tourist class hotel chain, Fragrance Hotel Chain comprises 17 hotels that span across the island serving predominantly the economic leisure and business travelers. The hotels are strategically located near Central Business District, famous shopping belts, exhibition & convention centers and tourist attractions. There are many ways of saying ‘We Care’, but it is in a very professional and personal way we do that makes every moment of our hotel guests’ stay a memorable one. At Fragrance Hotel Chain, we epitomize the highest standards of hospitality and care, juxtaposing luxury and affordability. With our dedicated team of professionals we cater to every need of our valued guests with meticulous attention to details and we are ‘Always Accommodating’ as our tagline goes.


contentsChairman’s Statement 02Corporate Structure 04Corporate Information 05Board of Directors 06Financial Highlights 08

Operations and Financial Review 11Corporate Governance Report 18Financial Contents 25Shareholding Statistics 59Particulars of properties owned by the Group 60Notice of Annual General Meeting 63


CHAIRMAN’SSTATEMENT

Dear Shareholders,

On behalf of the Board of Directors, I take immense pleasure in presenting the annual report of Fragrance Group Limited for the financial year ended 31 December 2007.

The year 2007 has been an eventful one for the group as we continued our growth momentum to achieve a record turnover of S$136 million which was an increase of 39% as compared to the previous year. Net profit after tax of S$30.4 million has outpaced the revenue growth to show a 104% improvement over the previous year in view of the buoyant property market and boom in the tourism industry.

Review for the year 2007The demand and prices for the private residential properties increased splendidly in 2007 and the group has managed to capitalise on the boom to launch many of its projects and sold most of them in a relatively short period of time. The successful launches include Pristine Heights, Palm Grove Regency and Prestige Residence. The revenue from our property division was S$112.5 million, a 39% increase as compared to S$80.8 million over the previous year with pre-tax profit doubled to S$27.5 million as against S$13.7 million in FY 2006.

The upbeat sentiments in the tourism industry have provided many good opportunities for our hotel division which we have taken advantage of. We have embarked on an on-going expansion plan to increase our room capacity to cater to the increased demand and are pleased to report that our overall yields have improved in FY 2007. During the year, we have opened four new hotels with a total of 178 guest rooms. Turnover from hotel operations which recorded S$23.6 million was an improvement of 39% over S$16.9 million achieved in FY 2006 with pre-tax profit increased substantially by 94% to S$9.6 million from S$4.9 million in the previous year.

Perspective view of Fragrance Building

Perspective view of Pristine Heights

Fragrance Group Limited


02 • 0

The group has during the year made a significant strategic move through the bonus share exercise by issuing four new shares for every one existing share at nil consideration. The objective was to augment the issued share capital base to reflect the growth and expansion of the Group’s business as well as to increase the liquidity of the shares in the market and making it more affordable to the investing public. The bonus shares were allotted and issued on 28 January 2008 and we are hopeful that the exercise will attract greater investors’ interest in our Company.

An Interim tax exempt (one-tier) dividend of 1 cent per share for FY2007 was paid on 19 November 2007. Recognising the longstanding and stalwart support from shareholders, the Board is also recommending a final tax exempt (one-tier) dividend of 0.5 cent per share for FY2007 based on the enlarged share capital of 840,000,000 shares. The dividend will be paid on 19 May 2008 if approved by the shareholders at the forthcoming Annual General Meeting.

Going forwardThe momentum of growth in the property market in 2008 is expected to be slower as compared to 2007. However, we expect the demand and prices for the mid-end private residential properties to be fairly stable and we will continue

to strengthen our niche in developing mid-end small to medium sized residential projects. The development works are in progress for our projects which have been successfully sold earlier and we intend to launch at least another three residential projects comprising 68 apartment units and 17 landed houses in 2008. Harnessing our experience and expertise, we will keep a close watch for suitable and timely acquisition of new land sites for redevelopment.

On the hotel operations sector, we will continue with our expansion plans through acquistion of suitable new hotel sites. Two new hotels, both strategically located, with a total capacity of about 105 guest rooms are in the works for FY2008. This will increase our total room capacity by another 9%.

AcknowledgementI would wish to thank our Board members, management and staff as well as our shareholders and business partners for their support, confidence and contributions in helping the group to achieve the good results for FY2007.

Koh Wee MengExecutive Chairman and CEO

ANNuALREPORT FY 2007

3



CORPORATESTRUCTURE

100%100%

FRAGRANCE GROUP LIMITED

FragranceHomesPte Ltd

FragranceProject

ManagementPte Ltd

FragranceLand

Pte Ltd

100% 100%

FragranceProperties

Pte Ltd

Fragrance Investment

Pte Ltd

100% 100%

Fragrance CapitalPte Ltd

100%100%

Fragrance VenturesPte Ltd

Fragrance Hotel

ManagementPte Ltd



CORPORATEINfORMATION

Board of DirectorsKoh Wee Meng (Executive Chairman and CEO)Sim Mong Yeow (Executive Director)Lim Wan Looi (Executive Director)* Teo Cheng Kuang (Independent Director) Watt Kum Kuan (Independent Director)Tang Man (Independent Director)* Re-designated as Non-Executive Director wef 01.01.08

Audit CommitteeTang Man (Chairman)Teo Cheng KuangWatt Kum Kuan

Nominating CommitteeTeo Cheng Kuang (Chairman)Watt Kum KuanKoh Wee Meng

Remuneration CommitteeWatt Kum Kuan (Chairman)Teo Cheng KuangLim Wan Looi

Company SecretaryKeloth Raj Kumar

Registered OfficeFragrance Building168 Changi Road #04-01Singapore 419730Tel: 6346 6888Registration Number:200006656M

Share Registrar andShare Transfer OfficeTricor Barbinder Share Registration Services(A division of Tricor Singapore Pte Ltd)8 Cross Street #11-00PWC BuildingSingapore 048424

AuditorsDeloitte & ToucheCertified Public Accountants6 Shenton Way #32-00DBS Building Tower TwoSingapore 068809Partner-in-charge:Cheung Pui Yuen

Principal Financial InstitutionsHong Leong Finance Limited16 Raffles Quay #01-05Hong Leong BuildingSingapore 048581

united Overseas Bank Limited80 Raffles PlaceuOB PlazaSingapore 048624

Sing Investments & Finance Limited96 Robinson Road #01-00SIF BuildingSingapore 068899

RHB Bank Berhad90 Cecil Street Singapore 069531

04 • 0ANNuALREPORT FY 2007

5



BOARd OfdIRECTORS

Sim Mong Yeow was appointed as an Independent Director on 20 December 2004 and was redesignated as Executive Director on 25 October 2005. Mr Sim is an Associate of Chartered Institute of Bankers and The Institute of Chartered Secretaries and Administrators, uK. Mr Sim is assisting our CEO in the hotel division of the group overseeing business development, human resource development and training, hotel operations and public relations.

Koh Wee Meng is the Founder, Executive Chairman and CEO of our Group. He is the key decision maker who charts the strategic direction, vision and growth of the Group’s core businesses of property development and hotel operations. In addition, he is also responsible in overseeing the smooth and profitable operations of the group’s businesses and to provide guidance to the management staff. Mr Koh has extensive experience in both property development and hotel operations having been in the former for more than 20 years and the latter for more than 10 years. Mr Koh was awarded an Honorary Doctorate in Philosophy in Entrepreneurship from Wisconsin International university in 2004.

Lim Wan Looi was appointed as an Executive Director on 28 July 2000 and was redesignated as Non-Executive Director on 1 January 2008. Ms Lim assisted our CEO, Koh Wee Meng in the property development business in the early 1990s and subsequently played an active role in hotel operations when the group diversified into this business.



Tang Man was appointed as an Independent Director on 1 May 2007. Mr Tang graduated in Commerce from Melbourne, Australia and is also holding a Fellowship Certificate from the Institute of Taxation of Australia. He is a Fellow of the Institute of Certified Public Accountants of Singapore as well as a Fellow of the Australia Society of Certified Practising Accountants. Mr Tang worked for JC-MPH Ltd for more than 20 years as an Accountant.

Teo Cheng Kuang was appointed as our Independent Director on 20 December 2004. From 1967 to 1999, Mr Teo worked for the Ministry of Home Affairs, Immigration Department where he rose through the ranks from Deputy Assistant Controller of Immigration to Assistant Commander of the Woodlands Checkpoint before he retired in 1999. Through the years, Mr Teo has been the Head of the Work Permit unit and the Singapore Restricted Passport Centre, as well as the Assistant Officer-in-Charge of both the Woodlands Checkpoint and Singapore Changi Airport. He graduated from the Nanyang university with a Bachelor of Arts (Geography) Degree in 1964.

Watt Kum Kuan was appointed as our Independent Director on 23 January 2006. Mr Watt was previously from the Institute of Technical Education where he held various positions such as Project Manager, Administrative Manager and Training Manager for more than 10 years. Mr Watt was awarded with the Colombo Plan Fellowship during 1962 to 1964 in Sydney, Australia.

06 • 0ANNuALREPORT FY 2007

7



fINANCIAL HIGHLIGHTS

Profit and Loss Account

Group

FY2007 FY2006 Change in %

S$’000 S$’000 Increase/(Decrease)

Revenue 136,116 97,744 39.26

Cost of sales (80,103) (64,109) 24.95

Gross profit 56,013 33,635 66.53

Other operating income 480 230 108.70

Selling and distribution cost (4,023) (2,428) 65.69

Administrative expenses (11,640) (9,185) 26.73

Finance costs (3,778) (3,583) 5.44

Profit before income tax 37,052 18,669 98.47

Taxation (6,652) (3,828) 73.77

Net profit for the period 30,400 14,841 104.84

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Segmented Results

PROPERTY HOTEL

GROUP DEVELOPMENT OPERATION ELIMINATION TOTAL

S$’000 S$’000 S$’000 S$’000

FY2007

REVENuE 112,537 23,768 (189) 136,116

RESULT

Segment result 36,003 20,199 (189) 56,013

Other operating income, net 291 189 - 480

Other operating expenses (8,690) (7,162) 189 (15,663)

Profit from operations 27,604 13,226 - 40,830

Finance costs (131) (3,647) - (3,778)

Profit before income tax 27,473 9,579 - 37,052

Income tax (6,652)

Profit after income tax 30,400

FY 2006

REVENuE 80,805 17,078 (139) 97,744

RESULT

Segment result 19,673 14,101 (139) 33,635

Other operating income, net 65 165 - 230

Other operating expenses (5,512) (6,240) 139 (11,613)

Profit from operations 14,226 8,026 - 22,252

Finance costs (495) (3,088) - (3,583)

Profit before income tax 13,731 4,938 - 18,669

Income tax (3,828)

Profit after income tax 14,841

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9



Balance Sheet

Group Company

31-Dec-07 31-Dec-06 31-Dec-07 31-Dec-06

S$’000 S$’000 S$’000 S$’000

Non Current Assets

Property, plant and equipment (Note a) 139,664 117,337 2,061 2,132

Investment in Subsidiaries - - 41,432 32,686

Total non current assets 139,664 117,337 43,493 34,818

Current Assets

Development properties 90,026 75,049 - -

Trade debtors 73,102 34,488 - -

Other debtors, deposits and prepayments 4,007 3,398 7 15

Amount due from subsidiaries - - 10,088 14,365

Properties held for sale 1,548 1,550 - -

Cash and bank balances 21,761 6,626 1,968 917

Total current assets 190,444 121,111 12,063 15,297

Current Liabilities

Trade creditors 2,888 2,886 - -

Term loans, current portion 59,303 26,130 111 106

Amount due to subsidiaries - - 8,234 9,650

Other creditors, accruals and other payables 11,654 6,276 964 616

Provision for taxation 3,250 4,535 16 -

Total current liabilities 77,095 39,827 9,325 10,372

Net current assets 113,349 81,284 2,378 4,925

Non-current Liabilities

Term loans, non-current portion 167,856 141,832 1,433 1,544

Other payables, non-current portion - - 803 793

Deferred taxation 4,839 1,411 - -

Total non-current liabilities 172,695 143,243 2,236 2,337

Net assets 80,318 55,378 43,995 37,406

Shareholders’ Equity

Share capital 36,260 36,260 36,260 36,260

Retained earnings 44,058 19,118 7,735 1,146

80,318 55,378 43,995 37,406



OPERATIONSANd fINANCIAL

REVIEW

This year has been an exciting year for the Group as we continued to ride on the wings of growth for the third consecutive year since our Initial Public Offering in 2005. This year also marked the upturn in Singapore’s property market and a boom in the tourism industry. The group nimbly rode the boom and out-performed the results for the previous financial year. The consolidated revenue grew 39% while the net profit attributable to shareholders doubled. Beyond this glowing sales and profit figures, the key notes for this year have been the successful launch of many property projects and commencement for four new hotels.

PROPERTY DEVELOPMENT

Property development sector has been our predominant source of revenue with contribution of 82% to the consolidated turnover of the group. This sector has contributed S$112.49 million to the Group’s revenue this year as compared to S$80.81 million in the previous year, an increase of 39.2%. The terrace housing development at Highland road and the Strata-landed housing development at Palm Grove Avenue are the major sales contributors for this year. Progressive revenue is also recognised from our sold and ongoing projects such as Imperial Heights (100 units), Pristine Heights (60 units), The Merlot (42 units), City Regency (56 units), E-space (14 units) and Prestige Residence (16 units). In addition to these projects, completed projects such as, Sunshine Regency, East Elegance, Sunshine Grandeur, the terrace houses at Lorong Marzuki, a semi-detached unit at Toh Avenue and a commercial shop at Beach Road have also contributed to group’s revenue in FY2007.

10 •

Our current property portfolio:Launched Projects:

Pristine HeightsFreehold, 77 Mergui Road - 100% Sold

Pristine Heights is where impeccable taste meets sleek modernity. This 19-storey freehold development encapsulates what it means to live in today’s advanced world in 60 exclusive units. It is located in the heart of hustle and bustle of city living and is well connected with easy access to major road confluences and also to public transport lines.


11



Imperial HeightsFreehold, 16 Ipoh Lane – 100% Sold

A man’s home is his castle, so the saying goes. Imperial Heights, in all its splendour, allows one to experience all the luxuries. Standing 19 storey tall, this freehold development exudes a stately grandeur, subtle yet strong. 100 units of pure bliss, with a selection of 1,2,3 bedroom apartments and sprawling penthouse units, Imperial Heights is a well-coveted address.

The MerlotFreehold, 101 Keng Lee Road – 100% Sold

Characteristically like fine wine, The Merlot is a 15-storey freehold development that encapsulates the modern crispness of city living. With only 42 units, The Merlot’s exclusivity is for the privileged few. The Merlot brings the city closer to one, with famed shopping-belt Orchard Road close by, presenting a smorgasbord of shopping choices, hip entertainment and delectable cuisine.

City RegencyFreehold, 18 St Michaels’ Road – 93% Sold

The perfect combination of essential living and convenience. City Regency is ideally located in an exclusive and established neighbourhood that offers an endless myriad of amenities. It is distinguished by the intrinsic attributes of quality, comfort, security and convenience. Every one of the exclusive 56 units epitomize the ultimate in luxurious home living.

Palm Grove Regency999 Years Leasehold, 12/16 Palm Grove Avenue – 100% Sold

Fourteen beautifully designed strata terrace houses, together with six exclusive strata semi-detached houses provide the ideal canvas for one’s family to paint a life of happiness and fulfillment. Everyone in the family is free to explore and grow in a limitless sanctuary of lush greenery. Palm Grove Regency – is where convenience meets pleasure.



E-SpaceFreehold, 135 Lorong K Telok Kurau – 100% Sold

Bask is the feeling of complete serenity. It’s easy to find joy when the right amenities are in place and you are cocooned in a universe of supreme comfort. This is what E-space is all about. Tucked away in idyllic east and with 14 exclusive apartment units, E-Space presents the best of nature and cosmopolitanism.

Legend @ Jansen999 Years Leasehold, 43/45 Jansen Road – 58% Sold

Living is all about “Being close and accessible to place where you want to be”. Legend @ Jansen lets one experience the buzz of suburban living by living close to the heart of the community. This development comprises of 12 units of exclusive strata terrace houses.

Residence 66Freehold, 66 Telok Kurau Road – 94% Sold

Set amidst the lush greenery of Telok Kurau Road is the elegant façade of Residence 66. Stepping into any of its 18 freehold apartment units, you are immediately charmed by an aura of quiet luxury and peace. Residence 66 – a place where every moment is suffused with bliss and contentment.

Projects to be launched:

Name/Location Proposed Development No. of unitsSimon Place 5-storey residential apartments 54Sunflower Regency 8-storey residential apartments 14Wak Hassan Drive/Andrews Terrace 3-storey terrace houses 14Andrews Terrace 3-storey terrace houses 3

12 •

Prestige ResidenceFreehold, 52 Lorong G Telok Kurau – 100% Sold

Small is beautiful at Prestige Residence. Here is where life is grand without needless enhancements, where everything looks more beautiful under the unobstructed azure sky. With only 16 exclusive freehold apartment units, every square foot has been meticulously mapped out to one’s absolute satisfaction.


13



HOTEL OPERATIONS

In the year, the Group’s hotel sector continued to achieve outstanding revenue and profit figures. Hotel sector contributed S$23.63 million or 18% of the total consolidated turnover. This represents an increase of S$6.69 million or 39.5% from the S$16.94 million achieved in FY2006. This was made possible mainly due to the improved occupancy and room rates achieved in FY2007 at the existing 13 hotels under our Group. All the 13 hotel branches achieved higher room revenue compared to FY2006 in the light of the increased visitor’s arrival and the good market conditions. The increase in revenue was also attributed to the four new hotel branches that commenced operations during FY2007, namely Fragrance Hotel-Viva, Fragrance Hotel-Lavender, Fragrance Hotel-Imperial and Fragrance Hotel-Oasis.

Our current hotel portfolio:

Fragrance Hotel-Imperial situated at Penhas Road has 74 guest rooms, complete with WIFI facility, mini fridge and room service available from our in-house café located on the ground floor. The hotel also has a roof top swimming pool for guests to simply relax at the poolside or to enjoy a leisure swim.

Within few minutes walking distance from Lavender MRT station, our hotel guests are able to enjoy the serene surroundings of the hotel and at the same time have easy access to public transportation.

Fragrance Hotel-Selegie is a 120-room hotel that features the beauty of both the conservation colonial pre-war 2-storey shop houses on the front façade and an ultra modern 10-storey building at the back.

Modern amenities such as WIFI is available in every guest room for those who wish to surf the net in the comfort of their room and a roof top swimming pool is there for those who wish to have a leisure swim besides offering a good view of the beautiful city skyline especially at night.

Located just a stone’s throw away from “Little India”, guests will be fascinated by the colourful temples and shops lining the spice scented streets in this area.

The famous shopping belt of Orchard Road is also within walking distance and the hotel is conveniently located just 5 minutes from Little India MRT station.

Hotels in Balestier Area:

Hotel guests staying at any of the four hotels at Balestier Road will be able to enjoy a wide selection of local delights as well as entertainment and shopping experience conveniently located along this stretch of road. For those who are interested in Singapore history, the famous Sun Yat Sen Nanyang Memorial Hall is just nearby.

This area is well served by the public transport such as buses and the nearest Novena MRT station is just a short distance away by bus.

Fragrance Hotel - Oasis Fragrance Hotel - Classic Fragrance Hotel - Balestier Fragrance Hotel - Rose



Fragrance Hotel-Lavender is located within few minutes walk to Lavender MRT station and bus-stops. Travelers staying at the 35-room hotel will get a chance to experience the local lifestyle of Singaporeans while having easy access to the bustling shopping and entertainment districts such as Bugis Village and Orchard Road.

Fragrance Hotel-Viva is situated at the foot of Mount Faber. This 33-room hotel provides guests with peaceful greenery and easy access to places such as Mount Faber, Sentosa and the nearby Labrador Park to catch a picturesque sunset.

Famous shopping centres such as Vivo City and Harbourfront are within walking distance and for guests who wish to enjoy a drink or savour the nightlife, there is the St. James Powerstation.

Guests staying at The Fragrance Hotel, with 82 rooms and situated in the Peranakan heritage conservation area will be greeted with colourful pre-war shop houses with eateries, shops and entertainment places. Hotel guests may also take a leisure stroll to the nearby Malay Village which showcases the traditional lifestyle of the Malays during the early “kampong days”.

Hotels in Geylang Area:

All the 6 hotels are located in the Geylang area with each having a distinctive feature and characteristics that blend in nicely with the surroundings. The guests will be able to select from the biggest 168 rooms Fragrance Hotel-Ruby to the smallest 27 rooms Hotel Sunflower.

The area is very vibrant throughout the day and guests will be spoilt for choice as there are plenty of eating outlets offering a wide variety of Asian cuisine with many operating round the clock.

The hotels are located close to the upcoming Sports Hub at Kallang and guests will be able to have easy access to places of interest such as The Esplanade, Clifford Pier and Orchard Road as well as the financial district of Shenton Way.

The area is well served by public transport such as buses and the hotels are not too far away from Kallang and Aljunied MRT stations.

14 •

Fragrance Hotel - Crystal Fragrance Hotel - Emerald Fragrance Hotel - Pearl Fragrance Hotel - Ruby

Fragrance Hotel - Sapphire

Fragrance Hotel - Sunflower


15



Fragrance Hotel-Kovan, with 43 guest rooms is situated in the heartlands of Singapore. Our hotel guests are able to experience the lifestyle of the locals at the nearby shops and shopping malls.

Fragrance Hostel is a dormitory style hostel consisting of 17 dormitories with 6 beds each. An internet room is provided to allow guests consisting largely of backpackers and students easy access to the information they need.

Situated near Sim Lim Square and Mustafa Centre, hostel guests are able to source for merchandize that are economically priced.

FINANCIAL PERFORMANCE

Our overall gross profit increased by 66.5% to $56.01 million mainly due to the improved gross profit margin achieved in our property sector as a result of higher selling prices of property units. Hotel sector also experienced an increase in gross profit margin due to the improved room occupancy and room rates achieved in FY2007.

Other operating expenses increased from $11.61 million in FY2006 to $15.66 million in FY2007 mainly because of the following factors:

1. Increase in commission expenses incurred in relation to the sale of property development projects launched during this period partly offset by a decrease in advertising expenses.

2. Increase in staff costs mainly due to the additional staffs employed for the new hotels and the general increase in salaries.

3. Increase in performance related bonuses to executive directors in line with their service agreements.

Finance costs also increased by $0.20 million from $3.58 million in FY2006 to $3.78 million in FY2007, mainly because of the additional interest costs incurred on loans pertaining to the new hotels partly offset by decrease in interest costs relating to property development sector.

Overall profit before taxation increased by 98.5% from $18.67 million in FY2006 to $37.05 in FY2007 with property development and hotel sectors contributing 74.2% and 25.8% respectively to the total profit before taxation.

BALANCE SHEET

Current assets comprise mainly of development properties, trade debtors, other receivables and cash. As at 31 December 2007, the Group’s current assets totaled $190.44 million. Development properties include land costs, development costs, interest capitalised and other related costs and this accounted for $90.03 million or 47.3% of total current assets as at 31 December 2007. Trade debtors, mainly the unbilled revenue portion of the recognised sales of our property units stood at $73.10 million, while cash and bank balances were $21.76 million.

As at 31 December 2007, the Group’s total borrowings amounted to $227.16 million (31 Dec 2006 - $167.96 million) with $59.30 million repayable within one year and $167.86 million repayable beyond one year. The increase in borrowings was due to the acquisition of new land sites for the development of residential units and hotels.



Building Affordable Housing




ANNUAL REPORT - FY 200718

CORPORATE GOVERNANCE REPORT

The Board is committed to developing and maintaining a high standard of good corporate governance to enhance the interests of shareholders. This statement describes the Company corporate governance processes and activities with specifi c reference to the Code of Corporate Governance and the Listing Rules of the Singapore Exchange Securities Trading Limited.

1. THE BOARD’S CONDUCT OF ITS AFFAIRS – PRINCIPLE 1 Every Company should be headed by an effective Board to lead and control the Company.

The Board of Directors (“the Board”) originally comprised three executive directors, as well as three independent non-executive directors. Following the re-designation of Executive Director, Ms Lim Wan Looi as Non-Executive Director, the Board currently comprised two executive directors, one non-executive director and three independent non-executive directors. The six Board members comprise businessmen and professionals with strong fi nancial and business backgrounds, providing the necessary experience and expertise to direct and lead the Group. More details of the board members can be found under the section ‘Board of Directors’.

The Board reviews the corporate governance practices of the Group periodically. It also reviews the Group’s fi nancial performance, sets its corporate and strategic direction and approves major funding and internal guidelines for material transactions. To enable the Board to fulfi ll its responsibility, the Management provides the Board with management reports on a regular and timely basis, with relevant and adequate information prior to Board meetings. The Board also has separate and independent access to the Company Secretary and the Company’s senior management.

The Company Secretary attends all Board meetings and ensures that Board procedures are followed. The Company Secretary also

ensures that the Companies Act and all other regulations of the SGX-ST are complied with.

The Board of Directors has formed three committees: (i) the Audit Committee, (ii) the Remuneration Committee and (iii) the Nominating Committee. These committees function within clearly defi ned terms of references and operating procedures, which are reviewed on a regular basis.

The Board meets at least twice annually and as and when necessary to address any specifi c signifi cant matters that may arise. The attendances of the directors at meetings of the Board and Committees during the year are as follows:

Board Audit Committee Nominating Committee

Remuneration Committee

No. of Meetings

held

No. of Meetings Attended

No. of Meetings

held


No. of Meetings

held


No. of Meetings

held


Koh Wee Meng 1 3 3 2 2 1 1 NA NA

Lim Wan Looi 1, 2 3 3 2 2 NA NA 1 1

Sim Mong Yeow 1 3 3 2 2 NA NA NA NA

Chin Sek Peng 3 NA NA NA NA NA NA NA NA

Teo Cheng Kuang 3 3 2 2 1 1 1 1

Watt Kum Kuan 3 3 2 2 1 1 1 1

Tang Man 4,5 3 3 2 2 NA NA 1 1

(1) Mr Koh Wee Meng, Ms Lim Wan Looi and Mr Sim Mong Yeow are not members of the Audit Committee and were invited by the Committee to attend its meeting.

(2) Re-designated as Non-Executive Director with effect from 1 January 2008. (3) Retired as an independent non-executive Director as well as the Chairman of the Audit Committee on 19 April 2007.(4) Appointed as an independent non-executive Director as well as the Chairman of the Audit Committee on 1 May 2007.(5) Mr Tang Man is not a member of the Remuneration Committee and was invited by the Committee to attend its meeting.

Newly appointed directors are briefed by the Board to familiarize them with the Group’s business and its strategic directions. Directors are provided with regular updates on the latest governance and listing policies.



ANNUAL REPORT - FY 2007 19

Corporate Governance Report

2. BOARD COMPOSITION AND BALANCE – PRINCIPLE 2 There should be a strong and independent element on the Board, which is able to exercise objective judgement on

corporate affairs independently, in particular, from Management. No individual or small group of individuals should be allowed to dominate the Board’s decision making.

The Board now consists of six directors, of whom three are independent directors. The criteria for independence are determined based on the defi nition as provided in the Code. The Board considers an independent director as one who has no relationship with the Company, its related companies or its offi cers that could interfere, or be reasonably perceived to interfere, with the exercise of the directors’ independent judgement of the Group’s affairs.

The Board is of the view that the current Board members comprise persons whose diverse skills, experience and attributes provide for effective direction for the Group. The Board will constantly examine its size with a view to determining its impact upon its effectiveness.

Key information regarding the directors is given in the ‘Board of Directors’ section of the annual report

3. CHAIRMAN AND CHIEF EXECUTIVE OFFICER – PRINCIPLE 3 There should be a clear division of responsibilities at the top of the Company-the working of the Board and the executive

responsibility of the company’s business – which will ensure a balance of power and authority, such that no one individual represents a considerable concentration of power.

Koh Wee Meng is both the Executive Chairman and Chief Executive Offi cer of the Group. The Board is of the opinion that the present Group structure and business scope does not warrant a split of the role. The Board is of the view that the process of decision making by the Board is independent and based on collective decisions without any individual exercising any considerable concentration of power or infl uence and there is good balance of power and authority with all critical committees chaired by independent directors.

The CEO together with the Executive Director, Director of Finance and Executive Offi cers has full executive responsibilities over the business directions and operational decisions. The CEO is responsible to the Board for all corporate governance procedures to be implemented by the Group and to ensure conformance by the Management to such practices. Directors are given board papers in advance of meetings for them to be adequately prepared for the meeting and senior management staff (who are not executive directors) are in attendance at board and board committee meetings whenever necessary.

4. BOARD MEMBERSHIP – PRINCIPLE 4 There should be formal and transparent process for the appointment of new directors to the Board.

The Nominating Committee (NC) comprises the Group’s independent directors, Mr Teo Cheng Kuang and Mr Watt Kum Kuan, as well as the Group’s Executive Chairman and Chief Executive Offi cer, Mr Koh Wee Meng. Mr Teo Cheng Kuang is the chairman of the NC.

The NC main functions as defi ned in the written terms of reference are as follows:

(a) make recommendations to the Board on all board appointments;(b) assess the effectiveness of the Board as a whole and the effectiveness and contribution of each Director to the Board;(c) recommend re-nomination and re-election of directors

The NC is also charged with the responsibility of determining annually whether a director is independent. Each NC member will not take part in determining his own re-nomination or independence.

The Company’s Articles of Association require newly appointed director to hold offi ce until the next AGM and at least one-third of the directors to retire by rotation at every AGM. A retiring director is eligible for re-election by the shareholders of the Company at the AGM. The NC recommends that Mr Tang Man, Mr Teo Cheng Kuang and Mr Sim Mong Yeow be re-elected at the forthcoming AGM.




5. BOARD PERFORMANCE – PRINCIPLE 5 There should be a formal assessment of the effectiveness of the Board as a whole and the contribution by each director

to the effectiveness of the Board. The Nominating Committee examines its size to satisfy that it is appropriate for effective decision making, taking into account the

nature and scope of the Company’s operations. The Directors are also from diverse background and areas of expertise, such as property development, hospitality and hotel operations, banking, fi nance and accounting and manpower matters. The Directors bring to the Board their related experience and knowledge and also provide guidance in the various Board Committees as well as to the Management of the Group.

The Nominating Committee will review and evaluate the performance of the Board as a whole, taking into consideration the attendance record at the meetings of the Board and the Board Committees and also the contribution of each Director to the effectiveness of the Board.

6. ACCESS TO INFORMATION – PRINCIPLE 6 In order to fulfi ll their responsibilities, board members should be provided with complete, adequate and timely information

prior to board meetings and on an on-going basis.

The Management provides the Directors with a regular supply of information about the Group’s fi nancial and operational performance. Detailed Board papers are prepared for each meeting of the Board. The Board papers include suffi cient information on fi nancial, business and corporate issues to enable the Directors to be properly briefed on issues to be considered at Board meetings.

All Directors have unrestricted access to the Company’s records and information. Directors also liaise with Senior Management as and when required. In addition, Directors have separate and independent access to the Company Secretary, who is responsible to the Board for ensuring that relevant statutes and regulations are complied with. The Company Secretary will attend all Board and Board Committees’ meetings. Where the directors, either individually or as a group, in the furtherance of their duties, require professional advice, the Company Secretary can assist them in obtaining independent professional advice, at the Company’s expense.

7. REMUNERATION MATTERS

PROCEDURES FOR DEVELOPING REMUNERATION POLICIES – PRINCIPLE 7 There should be a formal and transparent procedure for developing policy on executive remuneration and for fi xing the

remuneration packages of individual directors. No director should be involved in deciding his own remuneration.

The Group’s Remuneration Committee (RC) comprises the independent directors, Mr Watt Kum Kuan and Mr Teo Cheng Kuang, as well as the Group’s Non-Executive Director, Ms Lim Wan Looi. Mr Watt Kum Kuan is the chairman of the RC.

The independent non-executive directors believe that the RC benefi ts from the experiences and expertise of the participation of Ms Lim Wan Looi as a non-executive director. As the RC is made up of a majority of independent directors, the Board believes that the independence of the RC will not be sacrifi ced.

The RC recommends to the Board a framework of remuneration for the directors and executive offi cers, and determines specifi c remuneration packages for each executive director. The RC’s recommendations will be submitted for endorsement by the Board. All aspects of remuneration, including but not limited to directors’ fees, salaries, allowances, bonuses and benefi ts in kind, will be covered by the RC. Each RC member will abstain from voting on any resolution in respect of his remuneration package.

8. LEVEL AND MIX OF REMUNERATION – PRINCIPLE 8 The level and mix of remuneration should be appropriate to attract, retain and motivate the directors needed to run the

company successfully but companies should avoid paying more for this purpose. A signifi cant proportion of executive directors’ remuneration should be structured so as to link rewards to corporate and individual performance.

In setting remuneration packages, the Remuneration Committee will take into consideration the pay and employment conditions within the industry and in comparable companies. The remuneration of non-executive directors will also be reviewed to ensure that the remuneration is commensurate with the contribution and responsibilities of the directors.

Executive directors do not receive directors’ fees. The executive directors are paid a basic salary and a performance-related profi t sharing bonus pursuant to their respective service agreements.





Non-executive directors are compensated based on a fi xed annual fee taking into considerations their respective contributions and attendance at meetings. Their fees are recommended to shareholders for approval at the Annual General Meeting.

9. DISCLOSURE ON REMUNERATION – PRINCIPLE 9 Each company should provide clear disclosure of its remuneration policy, level and mix of remuneration, and the procedure

for setting remuneration, in the company’s annual report.

The details of the remuneration of the directors during the year are as follows:

Directors Remuneration Directors’ Fee Base Salary Performance-based Bonus

Benefi ts in Kind

% % % %

Non-Executive Directors

Below $250,000

Teo Cheng Kuang 100 - - -

Chin Sek Peng 100 - - -

Watt Kum Kuan 100 - - -

Tang Man 100 - - -

Executive Directors

$2,000,000 to $2,500,000

Koh Wee Meng - 19 81 -

$1,250,000 to $1,500,000

Lim Wan Looi - 22 78 -

Below $250,000

Sim Mong Yeow - 58 42 -

The gross remuneration received by the top four executives of the Group is as follows:

Range Name of the Executive

Below $250,000 Periakaruppan Aravindan

Choy Cheong Sum

Lim Chee Chong (1)

Lim Wan Mee (2)

Lim Chee Kee (3)

(1) Mr Lim Chee Chong is the brother of Ms Lim Wan Looi, the Non-Executive Director and brother-in-law of Mr Koh Wee Meng, the Executive Chairman and Chief Executive Offi cer.

(2) Ms Lim Wan Mee is the sister of Ms Lim Wan Looi, the Non-Executive Director and sister-in-law of Mr Koh Wee Meng, the Executive Chairman and Chief Executive Offi cer.

(3) Mr Lim Chee Kee is the brother of Ms Lim Wan Looi, the Non-Executive Director and brother-in-law of Mr Koh Wee Meng, the Executive Chairman and Chief Executive Offi cer.





10. ACCOUNTABILITY – PRINCIPLE 10 The Board should present a balanced and understandable assessment of the company’s performance, position and

prospects.

The Board is accountable to the shareholders and is mindful of its obligations to furnish timely information and to ensure full disclosure of material information to shareholders in compliance with statutory requirements and the Listing Manual of SGX-ST.

Price sensitive information will be publicly released either before the Company meets with any group of investors or analysts or simultaneously with such meetings. Financial results and annual reports will be announced or issued within legally prescribed periods.

11. AUDIT COMMITTEE – PRINCIPLE 11 The Board should establish an Audit Committee with written terms of reference which clearly set out its authority and

duties.

The Audit Committee (AC) comprises three independent directors, namely Mr Tang Man, Mr Watt Kum Kuan and Mr Teo Cheng Kuang. Mr Tang Man is the chairman of the AC.

The independent directors do not have any existing business or professional relationship of a material nature with the Group, other directors or substantial shareholders. They are also not related to the other directors or the substantial shareholders.

The AC assists the Board in discharging its responsibility to safeguard the Group’s assets, maintain adequate accounting records and develop and maintain effective systems of internal control, with the overall objective of ensuring that the Management creates and maintains an effective control environment. The AC provides a channel of communication between the Board, the Management and external auditors on audit matters.

The duties and responsibilities of the AC are contained in a written terms of reference. The AC meets periodically to perform the following main functions:

• Review the audit plans of external auditors and, where applicable, the Group’s internal auditors, including the results of the auditors’ review and evaluation of the Group’s system of internal controls;

• Review the consolidated fi nancial statements and the external auditors’ report on those fi nancial statements, and discuss any signifi cant adjustments, major risk areas, changes in accounting policies, compliance with Singapore fi nancial reporting standards, concerns and issues arising from their audits including any matters that the auditors may wish to discuss in the absence of the Management, where necessary, before submission to the Board for approval;

• Review and discuss with auditors any suspected fraud, irregularity or infringement of any relevant laws, rules or regulations, which has or is likely to have a material impact on the Group’s operating results or fi nancial position and the Management’s response;

• Review the co-operation given by the Management to the auditors;• Consider the appointment and re-appointment of the auditors;• Review any interested person transactions as defi ned under the Singapore Exchange Listing Manual (“the Listing Manual”);• Review any potential confl icts of interest;• Undertake such other reviews and projects as may be requested by the Board, and report to the Board its fi ndings from time

to time on matters that require the attention of the AC; and• Undertake other functions and duties as may be required by law or the Listing Manual, and by such amendments made

thereto from time to time.

The AC also has express power to investigate any matter brought to its attention, within its terms of reference, with the power to retain professional advice at the Company’s expense.

The AC has been given full access to the Management and has reasonable resources to discharge its function properly. The AC has full discretion to invite any director or executive offi cer to attend its meetings. The AC meets with external auditors, without the presence of the Management, at least once a year. Minutes of the AC meetings are submitted to the Board for information and review with such recommendations as the AC considers appropriate.

The AC confi rms that it has undertaken a review of all non-audit services provided by external auditors and such services would not, in the AC’s opinion, affect the independence of the external auditors.





12. INTERNAL CONTROLS – PRINCIPLE 12 The Board should ensure that the Management maintains a sound system of internal controls to safeguard the shareholders’

investments and the company’s assets.

The Audit Committee will ensure that a review of the effectiveness of the Company’s material internal controls, including fi nancial, operational, compliance controls and risk management is conducted annually. In this respect, the Audit Committee will review the audit plans, and the fi ndings of the auditors and will ensure that the Company follows up on auditors’ recommendations raised, if any, during the audit process.

13. INTERNAL AUDIT – PRINCIPLE 13 The Company should establish an internal control function that is independent of the activities it audits.

Currently, the Internal Audit Function of the Company is outsourced to an accounting/audit fi rm. The audit committee considers the independence, skills and experience of the fi rm prior to the appointment.

The audit committee will review the audit plans of the internal auditors, ensures that adequate resources are directed to carry out those plans and will review the results of the results of the internal auditors’ examination of the Company’s system of internal controls.

14. COMMUNICATIONS WITH SHAREHOLDERS – PRINCIPLE 14 & 15 Companies should engage in regular effective and fair communication with shareholders. Companies should encourage greater shareholder participation at AGM’s and allow shareholders the opportunity to

communicate their views on various matters affecting the Company.

The Board is mindful of the obligation to provide timely and fair disclosure of material information. The Board is accountable to the shareholders while the Management is accountable to the Board.

Results and other material information are released through SGX-NET on a timely basis for disseminating to shareholders and the

public in accordance with the requirements of the SGX-ST.

All shareholders of the Company receive the notice of the AGM. The notice is also advertised in the newspapers. At the AGM, shareholders are given the opportunity to air their views and ask executive directors or the Management questions regarding the Company. The external auditors will also be present to assist the directors in addressing any relevant queries posed by shareholders.

15. DEALINGS IN SECURITIES

In line with the Best Practices Guide issued by the SGX-ST, the Company has in place a policy prohibiting share dealings by Directors and executive offi cers of the Company for the period of one month prior to the announcement of the Company’s half yearly and full yearly results or two weeks prior to the announcement of quarterly results as the case may be, and ending on the date of the announcement of the relevant results. Directors and executive offi cers are expected to observe the insider trading laws at all times even when dealing in securities within the permitted trading period.





16. INTERESTED PARTY TRANSACTIONS (IPT)

The Company has adopted an internal policy in respect of any transactions with interested persons and has set out the procedures for review and approval of the Company’s interested person transactions. All interested person transactions are subject to review by the Audit Committee.

Details of IPT for the year ended 31 December 2007 are as follows:

Name of interested person Aggregate value of all IPT during the fi nancial year under review (excluding transactions less than S$100,000 and transactions conducted under shareholders’ mandate pursuant to Rule 920 of the Listing Manual)

Aggregate value of all IPT conducted under a shareholders’ mandate pursuant to Rule 920 (excluding transactions less than S$100,000)

Koh Wee Meng - Sale of property units S$1,054,933/- -

Lim Wan Looi - Sale of property units S$ 576,489/- -

The Audit Committee and the Board of Directors have reviewed the transaction and were satisfi ed that the terms were fair and reasonable and were not prejudicial to the interests of the Company and its minority shareholders.

17. MATERIAL CONTRACTS

There were no material contracts entered into by the Company or any of its subsidiary companies involving the interests of the Group’s Chief Executive, any director and/or substantial shareholder.

18. RISK MANAGEMENT

(Listing Manual Rule 1207(4)(d))

The Group currently does not have a Risk Management Committee but the management regularly reviews the Group’s business and operational activities to identify areas of signifi cant business risks as well as appropriate measures to control and mitigate these risks. The Management reviews all signifi cant control policies and procedures and will highlight all signifi cant matters to the Directors and the AC.





The directors present their report together with the audited consolidated fi nancial statements of the group and balance sheet and statement of changes in equity of the company for the fi nancial year ended December 31, 2007.

1 DIRECTORS

The directors of the company in offi ce at the date of this report are:

Koh Wee Meng Sim Mong Yeow Lim Wan Looi Teo Cheng Kuang Watt Kum Kuan Tang Man (Appointed on May 1, 2007)

2 ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE BENEFITS BY MEANS OF THE ACQUISITION OF SHARES AND DEBENTURES

Neither at the end of the fi nancial year nor at any time during the fi nancial year did there subsist any arrangement whose object is to enable the directors of the company to acquire benefi ts by means of the acquisition of shares or debentures in the company or any other body corporate.

3 DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES

The directors of the company holding offi ce at the end of the fi nancial year had no interests in the share capital and debentures of the company and related corporations as recorded in the register of directors’ shareholdings kept by the company under Section 164 of the Singapore Companies Act except as follows:

Shareholdings in which directorsName of directors are deemed to have an interest

The company At beginning of year At end of year

(Ordinary shares)

Koh Wee Meng 121,722,000 122,080,000Lim Wan Looi 18,315,000 18,365,000

By virtue of Section 7 of the Singapore Companies Act, the above directors are deemed to have an interest in all the ordinary shares of the company’s wholly-owned subsidiaries.

The directors’ interests in the shares of the company as at January 21, 2008 were the same as those at the end of the year.

4 DIRECTORS’ RECEIPT AND ENTITLEMENT TO CONTRACTUAL BENEFITS

Since the beginning of the fi nancial year, no director has received or become entitled to receive a benefi t which is required to be disclosed under Section 201(8) of the Singapore Companies Act, by reason of a contract made by the company or a related corporation with the director or with a fi rm of which he is a member, or with a company in which he has a substantial fi nancial interest except for salaries, bonuses and other benefi ts as disclosed in the fi nancial statements. Certain directors received remuneration from related corporations in their capacity as directors and/or executives of those related corporations.

REPORT OF THE DIRECTORS




Report of the Directors

5 SHARE OPTIONS

a) Options to take up unissued shares

During the fi nancial year, no option to take up unissued shares of the company or any corporation in the group was granted.

b) Options exercised

During the fi nancial year, there were no shares of the company or any corporation in the group issued by virtue of the exercise of an option to take up unissued shares.

c) Unissued shares under option

At the end of the fi nancial year, there were no unissued shares of the company or any corporation in the group under option.

6 AUDIT COMMITTEE

The Audit Committee of the company, consisting of all non-executive directors is chaired by Tang Man and includes Teo Cheng Kuang and Watt Kum Kuan. The Audit Committee has met two times since the last Annual General Meeting (“AGM”) and has reviewed the following, where relevant, with the executive directors and external and internal auditors of the company:

a) the audit plans and results of the internal auditors’ examination and evaluation of the group’s systems of internal accounting controls;

b) the group’s fi nancial and operating results and accounting policies;

c) the balance sheet and statement of changes in equity of the company and the consolidated fi nancial statements of the group before their submission to the directors of the company and external auditors’ report on those fi nancial statements;

d) the half-yearly and annual announcements as well as the related press releases on the results of the group and fi nancial position of the company and the group;

e) the co-operation and assistance given by the management to the group’s external auditors; and

f) the re-appointment of the external auditors of the group.

The Audit Committee has full access to and has the co-operation of the management and has been given the resources required for it to discharge its functions properly. It also has full discretion to invite any director and executive offi cer to attend its meetings. The external auditors have unrestricted access to the Audit Committee.

The Audit Committee has recommended to the directors the nomination of Deloitte & Touche for re-appointment as external auditors of the group at the forthcoming AGM of the company.




7 AUDITORS

The auditors, Deloitte & Touche, have expressed their willingness to accept re-appointment.

ON BEHALF OF THE DIRECTORS

......................................……….Koh Wee Meng

......................................……….Lim Wan Looi

March 18, 2008

Report of the Directors




We have audited the accompanying fi nancial statements of Fragrance Group Ltd (the “company”) and its subsidiaries (the “group”) which comprise the balance sheets of the group and the company as at December 31, 2007, the profi t and loss statement, statement of changes in equity and cash fl ow statement of the group and the statement of changes in equity of the company for the year then ended, and a summary of signifi cant accounting policies and other explanatory notes, as set out on pages 29 to 57.

Directors’ Responsibility

The company’s directors are responsible for the preparation and fair presentation of these fi nancial statements in accordance with the provisions of the Singapore Companies Act, Cap. 50 (the “Act”) and the Singapore Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of fi nancial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility

Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the fi nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by directors, as well as evaluating the overall presentation of the fi nancial statements. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion,

(a) the consolidated fi nancial statements of the group and the balance sheet and statement of changes in equity of the company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the group and of the company as at December 31, 2007 and of the results, changes in equity and cash fl ows of the group and changes in equity of the company for the year ended on that date; and

(b) the accounting and other records required by the Act to be kept by the company and by those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.

Deloitte & ToucheCertifi ed Public Accountants

Cheung Pui YuenPartnerAppointed on May 18, 2004

SingaporeMarch 18, 2008

INDEPENDENT AUDITORS’ REPORTto the Members of Fragrance Group Limited




Group Company Note 2007 2006 2007 2006 $’000 $’000 $’000 $’000

ASSETS

Current assetsCash and bank balances 6 21,761 6,626 1,968 917Trade receivables 7 73,102 34,488 - - Other receivables 8 4,007 3,398 10,095 14,380Properties under development 9 90,026 75,049 - - Properties held for sale 10 1,548 1,550 - -

Total current assets 190,444 121,111 12,063 15,297

Non-current assetsInvestment in subsidiaries 11 - - 41,432 32,686Property, plant and equipment 12 139,664 117,337 2,061 2,132

Total non-current assets 139,664 117,337 43,493 34,818

Total assets 330,108 238,448 55,556 50,115

LIABILITIES AND EQUITY

Current liabilitiesTrade payables 13 2,888 2,886 - - Other payables 14 11,654 6,276 9,198 10,266Term loans 15 59,303 26,130 111 106Income tax payable 3,250 4,535 16 -

Total current liabilities 77,095 39,827 9,325 10,372

Non-current liabilitiesOther payables 14 - - 803 793Term loans 15 167,856 141,832 1,433 1,544Deferred tax liabilities 16 4,839 1,411 - -

Total non-current liabilities 172,695 143,243 2,236 2,337

Capital and reservesShare capital 17 36,260 36,260 36,260 36,260Accumulated profi ts 44,058 19,118 7,735 1,146

Total equity 80,318 55,378 43,995 37,406

Total liabilities and equity 330,108 238,448 55,556 50,115

BALANCE SHEETSDecember 31, 2007

See accompanying notes to fi nancial statements.




Group Note 2007 2006 $’000 $’000

Revenue 18 136,116 97,744

Cost of sales (80,103) (64,109)

Gross profi t 56,013 33,635

Other operating income 19 480 230

Selling and distribution costs (4,023) (2,428)

Administrative expenses (11,640) (9,185)

Finance costs 20 (3,778) (3,583)

Profi t before income tax 37,052 18,669

Income tax 21 (6,652) (3,828)

Profi t for the year 22 30,400 14,841

Earnings per share – Basic/Diluted (cents) 23 3.6 1.8

CONSOLIDATED PROFIT AND LOSS STATEMENTYear ended December 31, 2007





Share Share Accumulated Note capital premium profi ts Total $’000 $’000 $’000 $’000

Group

Balance at January 1, 2006 33,600 2,670 11,921 48,191

Share issue expenses paid # - (10) - (10)Adjustment arising from abolition of par value of shares 17 2,660 (2,660) - - Dividends paid 24 - - (7,644) (7,644)Profi t for the year - - 14,841 14,841

Balance at December 31, 2006 36,260 - 19,118 55,378

Dividends paid 24 - - (5,460) (5,460)

Profi t for the year - - 30,400 30,400


Company

Balance at January 1, 2006 33,600 2,670 728 36,998

Share issue expenses paid # - (10) - (10)Adjustment arising from abolition of par value of shares 17 2,660 (2,660) - - Dividends paid 24 - - (7,644) (7,644)Profi t for the year - - 8,062 8,062


Dividends paid 24 - - (5,460) (5,460)

Profi t for the year - - 12,049 12,049


# This amount relates to the Initial Public Offering registration expenses incurred.

STATEMENTS OF CHANGES IN EQUITYYear ended December 31, 2007





Group 2007 2006 $’000 $’000

Operating activities Profi t before income tax 37,052 18,669 Adjustments for: Depreciation of property, plant and equipment 970 878 Gain on disposal of property, plant and equipment (7) - Interest income (213) (53) Interest expense 3,778 3,583

Operating cash fl ows before movements in working capital 41,580 23,077

Trade receivables (38,614) 8,018 Other receivables (609) (2,457) Development properties (14,975) (12,704) Trade payables 2 1,620 Other payables 5,378 1,281

Cash (used in) generated from operations (7,238) 18,835

Interest paid (3,778) (3,583) Income tax paid (4,509) (1,957)

Net cash (used in) from operating activities (15,525) 13,295

Investing activities Interest received 213 53 Purchase of property, plant and equipment (23,300) (10,479) Proceeds from disposal of property, plant and equipment 10 -

Net cash used in investing activities (23,077) (10,426)

Financing activities Proceeds from borrowings 90,763 73,980 Repayment of borrowings (31,566) (65,761) Share issue expenses paid - (10) Dividends paid (5,460) (7,644)

Net cash from fi nancing activities 53,737 565

Net increase in cash and bank balances 15,135 3,434Cash and bank balances at beginning of year 6,626 3,192

Cash and bank balances at end of year 21,761 6,626

CONSOLIDATED CASH FLOW STATEMENTYear ended December 31, 2007





1 GENERAL

The company (Registration No. 200006656M) is incorporated in Singapore with its principal place of business and registered offi ce at 101 Joo Chiat Road, #01-01 Fragrance Centre, Singapore 427395. The company is listed on the Singapore Exchange Securities Trading Limited. The fi nancial statements are expressed in Singapore dollars, which is also the functional currency of the company and its subsidiaries.

On March 8, 2008, the company changed its principal place of business and registered offi ce to 168 Changi Road, #04-01 Fragrance Building, Singapore 419730.

The principal activity of the company is that of investment holding.

The principal activities of its subsidiaries are described in Note 11 to the fi nancial statements.

The consolidated fi nancial statements of the group and the balance sheet and statement of changes in equity of the company for the year ended December 31, 2007 were authorised for issue by the Board of Directors on March 18, 2008.

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF ACCOUNTING - The fi nancial statements are prepared in accordance with the historical cost basis, except as disclosed in the accounting policies below, and are drawn up in accordance with the provisions of the Singapore Companies Act and Singapore Financial Reporting Standards (“FRS”).

ADOPTION OF NEW AND REVISED STANDARDS - In the current fi nancial year, the group has adopted all the new and revised FRSs and Interpretations of FRS (“INT FRS”) that are relevant to its operations and effective for annual periods beginning on or after January 1, 2007. The adoption of these new/revised FRSs and INT FRSs does not result in changes to the group’s and company’s accounting policies and has no material effect on the amounts reported for the current or prior years except as disclosed below and in the notes to the fi nancial statements.

FRS 107 - Financial Instruments: Disclosures and amendments to FRS 1 Presentation of Financial Statements relating to capital disclosures

The group has adopted FRS 107 with effect from annual periods beginning on or after January 1, 2007. The new Standard has resulted in an expansion of the disclosures in these fi nancial statements regarding the group’s fi nancial instruments. The group has also presented information regarding its objectives, policies and processes for managing capital (see Note 4) as required by the amendments to FRS 1 which are effective from annual periods beginning on or after January 1, 2007.

At the date of authorisation of these fi nancial statements, the following FRS, INT FRS and amendments to FRS that are relevant to

the group and the company were issued but not effective:

FRS 23 - Borrowing Costs (Revised) FRS 108 - Operating Segments

Consequential amendments were also made to various standards as a result of these new/revised standards.

The directors anticipate that the adoption of the above FRS, INT FRS and amendments to FRS in future periods will not have a material impact on the fi nancial statements of the group and of the company in the period of their initial adoption.

BASIS OF CONSOLIDATION - The consolidated fi nancial statements incorporate the fi nancial statements of the company and entities controlled by the company. Control is achieved when the company has the power to govern the fi nancial and operating policies of an entity so as to obtain benefi ts from its activities.

The results of subsidiaries acquired or disposed off during the year are included in the consolidated profi t and loss statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the fi nancial statements of the subsidiaries to bring their accounting policies in line with those used by other members of the group.

NOTES TO FINANCIAL STATEMENTSDecember 31, 2007




2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

In the company’s fi nancial statements, investments in subsidiaries are carried at cost less any impairment in net recoverable value that has been recognised in the profi t and loss statement.

FINANCIAL INSTRUMENTS - Financial assets and fi nancial liabilities are recognised on the group’s balance sheet when the group becomes a party to the contractual provisions of the instrument.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a fi nancial asset or liability and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the fi nancial asset or liability, or where appropriate, a shorter period.

Financial assets

Cash and bank balances

Cash and bank balances are subject to an insignifi cant risk of changes in value.

Trade and other receivables

Trade and other receivables that have fi xed or determinable payments that are not quoted in an active market are classifi ed as “Receivables”. Receivables are measured at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest method, except for short-term receivables when the recognition of interest would be immaterial.

Impairment of fi nancial assets

Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the fi nancial asset, the estimated future cash fl ows of the investment have been impacted.

For fi nancial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash fl ows, discounted at the original effective interest rate.

The carrying amount of the fi nancial asset is reduced by the impairment loss directly for all fi nancial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in the profi t and loss statement.

Financial liabilities and equity instruments

Classifi cation as debt or equity

Financial liabilities and equity instruments issued by the group are classifi ed according to the substance of the contractual arrangements entered into and the defi nitions of a fi nancial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs.

Other fi nancial liabilities

Trade and other payables are initially measured at fair value, net of transaction costs, and are subsequently measured at amortised cost, using the effective interest rate method, with interest expense recognised on an effective yield basis.

Notes to Financial StatementsDecember 31, 2007





Interest-bearing bank loans and overdrafts are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the group’s accounting policy for borrowing costs (see below).

Financial guarantee contract liabilities of the company are measured initially at their fair values and subsequently at the higher of the

amount of obligation under the contract recognised as a provision in accordance with FRS 37 Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognised less cumulative amortisation in accordance with FRS 18 Revenue.

PROPERTIES UNDER DEVELOPMENT - Development properties are stated at the lower of cost (specifi c identifi cation) and net realisable value. Cost comprises the payment made for acquisition of land, development costs, fi nance costs and other related expenditure which are capitalised as and when activities that are necessary to get the asset ready for its intended use are in progress until such time as the properties are substantially ready for sale.

Foreseeable losses, if any, are provided as soon as they become known based on the directors’ estimates of net realisable value and estimates of cost to complete.

PROPERTIES HELD FOR SALE - Properties held for sale are stated at the lower of cost (specifi c identifi cation) and net realisable value. Net realisable value is determined by reference to estimated sale proceeds less selling expense.

Cost of property includes acquisition costs, development expenditure, interests and other direct costs attributable to such property up to completion.

PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are carried at cost, less accumulated depreciation and any impairment losses.

Construction-in-progress consists of land cost, related acquisition expenses, construction costs and fi nance costs incurred during the period of construction.

Depreciation is charged so as to write off the cost of assets, other than freehold land and construction-in-progress, over their estimated useful lives, using the straight-line method, on the following bases:

Hotel buildings - 2% Offi ce premises - 2% Motor vehicles - 20% Furniture, fi xtures and fi ttings - 20% Offi ce equipments - 20% Computer - 20% to 331/3% Electrical installation - 20% Renovation - 20%

Depreciation is not provided for freehold land and construction-in-progress.

The estimated useful lives, residual values and depreciation method are reviewed each year and, with the effect of any changes in estimate accounted for on a prospective basis.

Fully depreciated assets are retained in the fi nancial statements until they are no longer in use.

The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the profi t and loss statement.

IMPAIRMENT OF TANGIBLE ASSETS - At each balance sheet date, the group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs.






Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the profi t and loss statement, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, to the extent the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the profi t and loss statement, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

PROVISIONS - Provisions are recognised when the group has a present obligation (legal or constructive) as a result of a past event, and it is probable that the group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash fl ows estimated to settle the present obligation, its carrying amount is the present value of those cash fl ows.

When some or all of the economic benefi ts required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

REVENUE RECOGNITION – Revenue is measured at the fair value of the consideration received or receivable and represents

amounts receivable for goods and services provided in the normal course of business, net of discounts and sales related taxes.

The group recognises profi ts on property development projects using the percentage of completion method. The percentage of completion is measured by reference to the percentage of physical completion. Profi ts are recognised only in respect of fi nalised sales agreements and to the extent that such profi ts related to the progress of the construction work. When losses are expected, full provision is made in the fi nancial statements after adequate allowance has been made for estimated costs to completion. Developments are considered complete upon the issue of temporary occupation permits.

Hotel room revenue is recognised based on room occupancy. Revenue from vending machines and sale of phone cards is recognised when goods are delivered.

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established.

Income from providing fi nancial guarantee to certain wholly-owned subsidiaries is recognised in the profi t and loss statement of the company over the guarantee period on a straight-line basis.

BORROWING COSTS - Borrowing costs directly attributable to the acquisition and construction of properties, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised in the profi t and loss statement in the period in which they are incurred.

LEASES - Leases are classifi ed as fi nance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classifi ed as operating leases.






Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease unless another systematic basis is more representative of the time pattern in which use benefi t derived from the leased asset is diminished. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.

RETIREMENT BENEFIT COSTS - Payments to defi ned contribution retirement benefi t plans are charged as an expense as they fall due. Payments made to state-managed retirement benefi t schemes, such as the Singapore Central Provident Fund, are dealt with as payments to defi ned contribution plans where the group’s obligations under the plans are equivalent to those arising in a defi ned contribution retirement benefi t plan.

EMPLOYEE LEAVE ENTITLEMENT - Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the balance sheet date.

INCOME TAX - Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profi t for the year. Taxable profi t differs from profi t as reported in the profi t and loss statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are not taxable or tax deductible. The group’s liability for current tax is calculated using tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the fi nancial statements and the corresponding tax bases used in the computation of taxable profi t, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profi ts will be available against which deductible temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that suffi cient taxable profi ts will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised based on the tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited to profi t or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the group intends to settle its current tax assets and liabilities on a net basis.

Current and deferred tax are recognised as an expense or income in profi t and loss statement, except when they relate to items credited or debited directly to equity, in which case the tax is also recognised directly in equity, or where they arise from the initial accounting for a business combination.

3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the group’s accounting policies, which are described in Note 2, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.





3 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (cont’d)

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Critical judgements in applying the entity’s accounting policies

Management is of the opinion that there are no critical judgements involved that have a signifi cant effect on the amounts recognised in the fi nancial statements.

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next fi nancial year, are discussed below.

Revenue from properties under development

As described in Note 2 to the fi nancial statements, revenue and costs associated with a project are recognised as revenue and expenses respectively by reference to the stage of completion of a project activity at the balance sheet date, using architects’ estimates. When it is probable that the total project costs will exceed the total project revenue, the expected loss is recognised as an expense immediately. These computations are based on the presumption that the outcome of a project can be estimated reliably.

The carrying amounts of the properties under development are stated in Note 9 to the fi nancial statements.

Management has performed cost studies, taking into account the costs to date and costs to complete each project. Management has also reviewed the status of such projects and is satisfi ed that the estimates to complete are realistic, and the estimates of total project costs and sales proceeds indicate full project recovery.

4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT

(a) Categories of fi nancial instruments

The following table sets out the fi nancial instruments as at the balance sheet date:

Group Company 2007 2006 2007 2006 $’000 $’000 $’000 $’000

Financial Assets

Receivables (including cash and cash equivalents) 98,870 44,512 12,063 15,297

Financial Liabilities

Amortised cost 241,701 177,124 9,947 11,439Financial guarantee contracts - - 1,598 1,270





4 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (cont’d)

(b) Financial risk management policies and objectives

The group is exposed to various fi nancial risks arising in the normal course of business. It has adopted risk management policies and utilises a variety of techniques to manage its exposure to these risks.

There has been no change to the group’s exposure to these fi nancial risks or the manner in which it manages and measures

the risk. Market risk exposures are measured using sensitivity analysis indicated below.

(i) Foreign exchange risk management

The group is not exposed to any signifi cant foreign currency risk as the group’s transactions are mainly carried out in Singapore.

(ii) Interest rate risk management

The group is exposed to interest rate risk through the impact of rate changes on interest bearing liabilities and assets. The group manages its interest rate exposure by actively reviewing its debt portfolio and switching to cheaper sources of funding to achieve a certain level of protection against interest hikes. Summary quantitative data of the group’s interest-bearing fi nancial instruments can be found in section (iv) of this Note.

Interest rate sensitivity

The sensitivity analyses below have been determined based on the exposure to interest rates for the group’s term loans at the balance sheet date and the stipulated change taking place at the beginning of the fi nancial year and held constant throughout the reporting period in the case of instruments that have fl oating rates. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the possible change in interest rates.

If interest rates had been 50 basis points higher or lower and all other variables were held constant:

• the group’s profi t for the year ended December 31, 2007 would decrease/increase by approximately $634,000 (2006 : decrease/increase by $651,000). This is mainly attributable to the group’s exposure to interest rates on its variable rate borrowings; and

• the company’s profi t for the year ended December 31, 2007 would decrease/increase by approximately $8,000 (2006 : decrease/increase by $8,000). This is mainly attributable to the company’s exposure to interest rates on its variable rate borrowings.

(iii) Credit risk management

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in fi nancial loss to the group. The group has adopted a policy of only dealing with creditworthy counterparties.

The group’s fi nancial assets are cash and bank balances, and trade and other receivables. The group’s credit risk with respect to trade receivables is limited due to the fact that the group has a legal recourse to the properties sold in the event of default.

The group does not have any signifi cant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The group has no signifi cant concentration of credit risk.

Cash is held with creditworthy fi nancial institutions.

The carrying amounts of fi nancial assets recorded in the fi nancial statements, net of any allowances for losses, represent the group’s maximum exposure to credit risk.






(b) Financial risk management policies and objectives (cont’d)

(iv) Liquidity risk management

The group maintains suffi cient cash and cash equivalents, and internally generated cash fl ows to fi nance their activities. The group fi nances its liquidity needs through internally generated cash fl ows and external fi nancing, and minimises liquidity risk by keeping committed credit lines available.

Liquidity and interest risk analyses

Financial liabilities

The following tables detail the remaining contractual maturity for non-derivative fi nancial liabilities. The tables have been drawn up based on the undiscounted cash fl ows of fi nancial liabilities based on the earliest date on which the group and company can be required to pay. The table includes both interest and principal cash fl ows. The adjustment column represents the possible future cash fl ows attributable to the instrument included in the maturity analysis which is not included in the carrying amount of the fi nancial liability on the balance sheet.

Weighted On average demand Within effective or within 2 to After interest rate 1 year 5 years 5 years Adjustment Total % $’000 $’000 $’000 $’000 $’000

Group 2007

Non-interest bearing NA 14,542 - - - 14,542 Variable interest rate instruments 3.38 67,592 110,636 98,029 (49,098) 227,159

2006

Non-interest bearing NA 9,162 - - - 9,162 Variable interest rate instruments 3.70 33,434 107,320 61,222 (34,014) 167,962 Company 2007

Non-interest bearing NA 8,403 - - - 8,403 Variable interest rate instruments 2.62 185 741 1,050 (432) 1,544 Financial guarantee contracts NA 795 513 290 - 1,598

2006

Non-interest bearing NA 9,789 - - - 9,789 Variable interest rate instruments 2.65 185 741 1,235 (511) 1,650 Financial guarantee contracts NA 477 549 244 - 1,270

Financial assets

The following table details the expected maturity for non-derivative fi nancial assets. The tables below have been drawn up based on the undiscounted contractual maturities of the fi nancial assets including interest that will be earned on those assets except where the group and the company anticipates that the cash fl ow will occur in a different period. The adjustment column represents the possible future cash fl ows attributable to the instrument included in the maturity analysis which are not included in the carrying amount of the fi nancial asset on the balance sheet.






(b) Financial risk management policies and objectives (cont’d)

(iv) Liquidity risk management (cont’d)

Weighted On average demand Within effective or within 2 to After interest rate 1 year 5 years 5 years Adjustment Total % $’000 $’000 $’000 $’000 $’000

Group 2007

Non-interest bearing NA 82,635 - - - 82,635 Fixed interest rate instruments NA 16,235 - - - 16,235

2006

Non-interest bearing NA 44,512 - - - 44,512

Company 2007

Non-interest bearing NA 10,363 - - - 10,363 Fixed interest rate instruments NA 1,700 - - - 1,700

2006

Non-interest bearing NA 15,297 - - - 15,297

(v) Fair value of fi nancial assets and fi nancial liabilities

The carrying amounts of cash and bank balances, trade and other current receivables and payables and other liabilities and amounts payable approximate their respective fair values due to the relatively short-term maturity of these fi nancial instruments.

The fair values of other classes of fi nancial assets and liabilities are disclosed in the respective notes to the fi nancial statements.

(c) Capital risk management policies and objectives The group manages its capital to ensure that entities in the group will be able to continue as a going concern while maximising

the return to stakeholders through the optimisation of the debt and equity balance.

The capital structure of the group consists of debt, which includes the borrowings as disclosed in Notes 13 to 15 and equity attributable to equity holders of the company, comprising issued capital as disclosed in Note 17, reserves and retained earnings.

The directors review the capital structure on a semi-annual basis. As a part of the review, the directors consider the cost of capital and the risks associated with each class of capital. Based on the review, the group will balance its overall capital structure through the payment of dividends, new share issues as well as the issue of new debt or the redemption of existing debts.

The group’s overall strategy remains unchanged from 2006.





5 RELATED PARTY TRANSACTIONS

Related parties are entities with common direct or indirect shareholders and/or directors. Parties are considered to be related if one party has the ability to control the other party or exercise signifi cant infl uence over the other party in making fi nancial and operating decisions.

Certain of the company’s transactions and arrangements are with related parties and the effects of these on the basis determined between the parties are refl ected in these fi nancial statements. The balances with related parties are unsecured, interest-free and repayable on demand unless stated otherwise.

In accordance with Financial Reporting Standard 24 – Related Party Disclosures, the close members of the families of Koh Wee Meng, Lim Wan Looi, Sim Mong Yeow and key executive offi cers are also considered to be related parties.

By virtue of Section 7 of the Singapore Companies Act, Koh Wee Meng and Lim Wan Looi are deemed to have substantial interest in the company and in all the subsidiaries of the company.

In addition to the related party information disclosed elsewhere in the fi nancial statements, the signifi cant transactions with the related parties, on the terms agreed between the parties are as follows:

Group 2007 2006 $’000 $’000

Salaries and related costs paid to key management personnel and relatives of a director (Note 22) 603 596

Compensation of directors and key management personnel

The remuneration of directors and other members of key management during the year was as follows:

Group 2007 2006 $’000 $’000

Short-term benefi ts 4,467 2,816 Post-employment benefi ts 44 59

The remuneration of directors and key management is determined by the remuneration committee having regard to the performance of individuals and market trends.

6 CASH AND BANK BALANCES Group Company 2007 2006 2007 2006 $’000 $’000 $’000 $’000

Cash and bank balances 1,925 2,971 268 917 Fixed deposit 16,235 - 1,700 - Project accounts 3,601 3,655 - -

Total 21,761 6,626 1,968 917

Monies received from sale of units of the properties under development are deposited in the project accounts. Withdrawal of monies from the project account is governed by the Housing Developers (Control and Licensing) Act.

Fixed deposits bear average interest rate of 2.29% per annum for tenure ranging from 30 to 90 days.





7 TRADE RECEIVABLES Group 2007 2006 $’000 $’000

Outside parties 1,177 889 Unbilled revenue on properties under development 71,925 33,599

Total 73,102 34,488

At December 31, 2007, amounts of $12,184,000 (2006: $3,823,000) included in trade receivables and arising from sale of properties are due for settlement after more than 12 months, but have been classifi ed as current because they are expected to be realised in the normal operating cycle.

8 OTHER RECEIVABLES Group Company 2007 2006 2007 2006 $’000 $’000 $’000 $’000

Deposits 3,830 3,304 2 2 Prepayments 20 53 5 2 Subsidiaries - - 10,088 14,365 Others 157 41 - 11

Total 4,007 3,398 10,095 14,380

The amount due from subsidiaries is unsecured, interest-free and repayable on demand.

9 PROPERTIES UNDER DEVELOPMENT Group 2007 2006 $’000 $’000

Land and other related costs 98,658 70,984 Development costs 27,841 8,058 Interest, property tax and others 24,340 13,210

150,839 92,252 Less: Cost of properties sold (65,265) (21,653)

85,574 70,599 Add: Transfer from properties held for sale (Note 10) 6,000 6,000 Less: Transfer to properties held for sale (Note 10) (1,548) (1,550)

Net 90,026 75,049

Interest capitalised during the year was $3,815,000 (2006 : $2,373,000) at interest rates from 3.28% to 5.63% (2006 : 2.875% to 6.25%) per annum (Note 15).

These properties are mortgaged to the banks and fi nance companies to secure credit facilities of the subsidiaries (Note 15).





9 PROPERTIES UNDER DEVELOPMENT (cont’d)

The properties under development as at December 31, 2007 are as follows: Land area Property and address Description Tenure (sq m)

135 Lor K Telok Kurau Development of 5-storey residential apartments Freehold 903

Lot 8343V & 8344P MK 22 Development of 3-storey strata terrace and 999 years 2,696 Palm Grove Avenue strata semi-detached houses

Lot 1356T MK 22 43 Jansen Road Development of 3-storey strata terrace houses 999 years 1,505

52 Lor G Telok Kurau Development of 5-storey residential apartments Freehold 883

Lot 4288V MK 22 Simon Place Development of 5-storey residential apartments Freehold 3,117

77 Mergui Road Development of 19-storey residential apartments Freehold 1,962

16 Ipoh Lane Development of 19-storey residential apartments Freehold 2,220

101 Keng Lee Road Development of 15-storey residential apartments Freehold 1,152

37 Lor 20 Geylang Additions and alteration to the existing 8-storey Freehold 575 association building to convert into a 8-storey residential apartments

18 St Michael’s Road Development of 15-storey residential apartments Freehold 1,383

66 Telok Kurau Road Development of 5-storey residential apartments Freehold 1,131

Lot 98643T MK 22 Highland Road Development of 3-storey terrace houses Freehold 2,022

The properties under development as at December 31, 2006 are as follows: Land area Property and address Description Tenure (sq m)

77 Mergui Road Development of 19-storey residential apartments Freehold 1,962

37 Lor 20 Geylang Additions and alteration to the existing 8-storey Freehold 575 association building to convert into a 8-storey residential apartments

16 Ipoh Lane Development of 19-storey residential apartments Freehold 2,220

101 Keng Lee Road Development of 15-storey residential apartments Freehold 1,152

63 Lor K Telok Kurau Development of 5-storey residential apartments Freehold 1,115

Lot 98643T MK 22 Highland Road Development of 3-storey terrace houses Freehold 2,022

190 Joo Chiat Terrace Development of 5-storey residential apartments Freehold 979

9/11 Rambai Road Development of 5-storey residential apartments Freehold 1,835

18 St Michael’s Road Development of 15-storey residential apartments Freehold 1,383

The above properties are located in Singapore.





10 PROPERTIES HELD FOR SALE Group $’000

Land and other related costs 5,618 Development costs 613 Interest, property tax and others 1,972

8,203 Less: Impairment in value (2,203)

Net 6,000 Less: Transfer to properties under development (Note 9) (6,000) Add: Transfer from properties under development (Note 9) 1,550

Balance as at December 31, 2006 1,550

Less: Transfer to cost of sales (1,550) Add: Transfer from properties under development (Note 9) 1,548

Balance as at December 31, 2007 1,548

The property under held-for-sale as at December 31, 2007 is as follows: Land area Property and address Description Tenure (sq m)

76C Lorong Marzuki 3-storey terrace house Freehold 218

The property under held-for-sale as at December 31, 2006 is as follows: Land area Property and address Description Tenure (sq m)

25 Toh Avenue Semi-detached house Freehold 435

The properties are mortgaged to a bank to secure credit facilities of the subsidiaries (Note 15).

11 INVESTMENT IN SUBSIDIARIES Company 2007 2006 $’000 $’000

Unquoted equity shares, at cost 39,000 31,000 Deemed interest (1) 2,432 1,686

41,432 32,686





11 INVESTMENT IN SUBSIDIARIES (cont’d)

Country of Proportion Proportion incorporation of of and Cost of Deemed ownership voting power Name of subsidiaries operation investment interest (1) interest held Principal activities $ $ % % 2007 2006 2007 2006 2007 2006 2007 2006

Held by the company

Fragrance Land Singapore 6,101 6,101 670 154 100 100 100 100 Developing, dealing Pte Ltd (2) and trading in properties

Fragrance Singapore 6,679 6,679 688 682 100 100 100 100 Developing, dealing Properties Pte Ltd (2) and trading in properties

Fragrance Singapore 20,532 12,532 467 418 100 100 100 100 Investment holding Capital Pte Ltd (2) and investing in properties for long term holding purposes

Fragrance Singapore 994 994 132 51 100 100 100 100 Investment holding Ventures Pte Ltd (2) and investing in properties for long term holding purposes

Fragrance Singapore 3,429 3,429 76 60 100 100 100 100 Investment holding Investment Pte Ltd (2) and investing in properties for long term holding purposes

Fragrance Singapore 265 265 - 2 100 100 100 100 Hotels and restaurants Hotel Management operators Pte Ltd (2)

Fragrance Singapore * * - - 100 100 100 100 Project management Project Management and site supervision Pte Ltd (2) services

Fragrance Singapore 1,000 1,000 399 319 100 100 100 100 Development, dealing Homes Pte Ltd (2) and trading in properties

Total 39,000 31,000 2,432 1,686

(1) Deemed interest arose from fi nancial guarantees provided by the company to banks and fi nancial institutions in respect of loans borrowed by its wholly-owned subsidiaries. Management has assessed that the fair value of the fi nancial guarantees equivalent to 1% (2006 : 1%) of the loans guaranteed and of which the present value is discounted at 4.75% (2006 : 4.75%) per annum over the remaining terms of loans from the dates when the fi nancial guarantees were issued.

(2) Audited by Deloitte & Touche, Singapore.

* Representing $2.





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12 PROPERTY, PLANT AND EQUIPMENT (cont’d) Furniture, fi xtures Freehold Offi ce and Electrical land premises fi ttings installation Renovation Total $’000 $’000 $’000 $’000 $’000

Company

Cost: At January 1, 2006, December 31, 2006 and 2007 1,082 927 67 163 30 2,269

Accumulated depreciation: At January 1, 2006 - - 19 40 8 67 Depreciation - 19 13 32 6 70

At December 31, 2006 - 19 32 72 14 137 Depreciation - 18 14 32 7 71

At December 31, 2007 - 37 46 104 21 208

Carrying amount: At December 31, 2007 1,082 890 21 59 9 2,061

At December 31, 2006 1,082 908 35 91 16 2,132

Interest capitalised for hotel buildings under construction during the year was $564,000 (2006 : $255,000) at interest rates from 2.859% to 5.375% (2006 : 4.3938% to 5.375%) per annum (Note 15).

All freehold land, hotel buildings, offi ce premises and construction-in-progress are mortgaged to banks and fi nance companies to secure credit facilities of the company and subsidiaries (Note 15).

Property, plant and equipment includes a sum of $122.3 million (2006 : $102.3 million) being the carrying amount (depreciated cost) of the 17 (2006 : 13) operating hotels. In the opinion of the directors, the market value of these hotels based on the professional valuation carried out by independent valuers on the basis of desktop valuation for existing use is $258.4 million (2006 : $151.5 million).

Details of properties held by the Group as at December 31, 2007 are as follows:

Land area Number of Hotels and address Tenure (sq m) rooms

Fragrance Hotel - Balestier Freehold 313 48 255 Balestier Road Singapore 329710

Fragrance Hotel - Classic Freehold 282 48 418 Balestier Road Singapore 329808

Fragrance Hotel - Crystal Freehold 1,051 125 50 Lorong 18 Geylang Singapore 398824

Fragrance Hotel - Emerald Freehold 818 126 20 Lorong 6 Geylang Singapore 399174





12 PROPERTY, PLANT AND EQUIPMENT (cont’d)


Hotel Sunfl ower Freehold 323 27 10 Lorong 10 Geylang Singapore 399043

Fragrance Hotel - Imperial Freehold 571 74 28 Penhas Road Singapore 208187

Fragrance Hotel - Kovan Freehold 284 43 760 Upper Serangoon Road Singapore 534629

Fragrance Hotel - Lavender Freehold 220 35 51 Lavender Street Singapore 338710

Fragrance Hotel - Oasis Freehold 229 36 435 Balestier Road Singapore 329816

Fragrance Hotel - Pearl Freehold 843 129 21 Lorong 14 Geylang Singapore 398961

Fragrance Hotel - Rose Freehold 400 68 263 Balestier Road Singapore 329715

Fragrance Hotel - Ruby Freehold 902 168 10 Lorong 20 Geylang Singapore 398730

Fragrance Hotel - Sapphire Freehold 528 50 3 Lorong 10 Geylang Singapore 399037

Fragrance Hotel - Selegie Freehold 508 120 183 Selegie Road Singapore 188329

The Fragrance Hotel Freehold 672 82 219 Joo Chiat Road Singapore 427485

Fragrance Hotel - Viva Freehold 349 33 75 Wishart Road Singapore 098721

Fragrance Hotel - Waterfront Freehold 478 57 418 Pasir Panjang Road Singapore 118759





12 PROPERTY, PLANT AND EQUIPMENT (cont’d)


Fragrance Hostel Freehold 238 17 63 Dunlop Street Singapore 209391 #

Fragrance Building Freehold 790 - 168 Changi Road Singapore 419730

Fragrance Centre Freehold 149 - 101 Joo Chiat Road Singapore 427395

44 Foch Road Freehold 125 - Singapore 209270

# This property is being operated as a hostel with 102 dormitory beds.

13 TRADE PAYABLES Group 2007 2006 $’000 $’000

Progress billings 1,260 1,604 Retention sum 1,123 942 Others 505 340

2,888 2,886

14 OTHER PAYABLES Group Company 2007 2006 2007 2006 $’000 $’000 $’000 $’000

Subsidiaries - - 8,234 9,650 Financial guarantee contracts - - 1,598 1,270 Accruals 11,095 5,940 169 139 Others 559 336 - -

11,654 6,276 10,001 11,059 Less: Non-current portion of fi nancial guarantee contracts - - (803) (793)

11,654 6,276 9,198 10,266

The amount due to subsidiaries is unsecured, interest-free and repayable on demand.





15 TERM LOANS Group Company 2007 2006 2007 2006 $’000 $’000 $’000 $’000

Secured – At amortised cost

Term loans 227,159 167,962 1,544 1,650

The loans are repayable as follows:

On demand or within one year 59,303 26,130 111 106 In the second year 66,170 16,875 117 111 In the third year 5,462 49,962 123 117 In the fourth year 5,556 5,224 129 123 In the fi fth year 5,655 5,455 136 129 After fi ve years 85,013 64,316 928 1,064

227,159 167,962 1,544 1,650 Less: Amount due for settlement within 12 months (59,303) (26,130) (111) (106)

Amount due for settlement after 12 months 167,856 141,832 1,433 1,544

As the interest rates of the term loans are at fl oating rates, the management is of the opinion that the carrying value of the term loans

approximates the fair value.

The company’s term loan from a fi nance company of $1,544,000 (2006 : $1,650,000) is repayable in 180 months from the date of fi rst drawdown, August 23, 2003. It bears an average effective interest rate at 5% (2006 : 3.875%) per annum and is secured against the offi ce premises of the company, personal guarantee by a director and corporate guarantee by the company.

The group’s term loans from banks and fi nance companies range from $892,000 to $17,260,000 (2006 : $401,000 to $15,300,000) and bear effective interest rates from 2.75% to 5.625% (2006 : 2.5% to 6.25%) per annum. The term loans are secured against the properties of the group with a net book value of $230,585,000 (2006 : $193,343,000) (Notes 9, 10 and 12), personal guarantee by a director, corporate guarantee by the company, and assignment of developer’s rights and benefi ts in the sale and purchase agreements.

16 DEFERRED TAX LIABILITIES

Deferred tax assets and liabilities have been offset in accordance with the group’s accounting policy. The following is the analysis of the deferred tax balances (after offset) for balance sheet purpose:

Group 2007 2006 $’000 $’000

Deferred tax liabilities 5,360 1,411 Deferred tax assets (521) -

4,839 1,411





16 DEFERRED TAX LIABILITIES (cont’d)

The following are the major deferred tax liabilities recognised by the Group and the movement thereon, during the current and prior years:

Recognition of profi t from properties Accelerated Tax under development tax depreciation losses Total $’000 $’000 $’000 $’000

At January 1, 2006 1,776 41 - 1,817 Transfer to income tax payable (1,527) - - (1,527) Charge to profi t for the year 1,095 26 - 1,121

At December 31, 2006 1,344 67 - 1,411 Transfer to income tax payable (1,280) (12) - (1,292) Charge (Credit) to profi t for the year 5,382 - (521) 4,861 Effect due to change in tax rates (141) - - (141)

At December 31, 2007 5,305 55 (521) 4,839

17 SHARE CAPITAL Group and Company 2007 2006 2007 2006 Number of ordinary shares $’000 $’000

Issued and paid up: At beginning of year 168,000,000 168,000,000 36,260 33,600 Transfer from share premium account - - - 2,660

168,000,000 168,000,000 36,260 36,260

The company has one class of ordinary shares which carry no right to fi xed income. As a result of the Companies (Amendment) Act 2005, the concept of authorised share capital and par value has been abolished.

Any amount standing to the credit of share premium account has been transferred to the Company’s share capital account in the current year.

18 REVENUE Group 2007 2006 $’000 $’000

Property development 112,487 80,805 Hotel room revenue 23,339 16,726 Rental income 290 213

Total 136,116 97,744

The following are adjusted balances resulting from the fi nancial effect had the completed contract method been adopted by the property development division of the group:

Group 2007 2006 $’000 $’000

Opening balance of retained earnings 24,033 13,300 Revenue 47,379 80,875 Profi t for the year 3,209 10,733 Balance of properties under development as at beginning of year 95,797 77,615 Balance of properties under development as at end of year 152,066 95,797





19 OTHER OPERATING INCOME Group 2007 2006 $’000 $’000

Interest income 213 53 Income from vending machines 66 38 Others 201 139

Total 480 230

20 FINANCE COSTS Group 2007 2006 $’000 $’000

Interest expense on term loans 3,778 3,583

21 INCOME TAX Group 2007 2006 $’000 $’000

Current tax 3,250 4,477 Deferred tax 3,569 (406) Effect due to change in tax rates (141) - Overprovision in prior year (52) (231) Underprovision in prior year 26 - Tax refund - (12)

Net 6,652 3,828

The income tax varied from the amount of income tax expense determined by applying the Singapore income tax rate of 18% (2006 : 20%) to profi t before income tax as a result of the following differences:

Group 2007 2006 $’000 $’000

Profi t before income tax 37,052 18,669

Income tax expense at the statutory rate 6,669 3,734 Tax effect of expenses that are not deductible in determining taxable profi t 321 2,150 Effect of income exempted from taxation (168) (1,720) Overprovision in prior year (52) (231) Underprovision in prior year 26 - Effect due to change in tax rates (141) - Others (3) (105)

Net 6,652 3,828





22 PROFIT FOR THE YEAR Group 2007 2006 $’000 $’000

The company: Directors’ remuneration 4,004 2,324 Directors’ fee 98 90 Cost of development properties recognised as expenses 76,533 61,131 Depreciation of property, plant and equipment 970 878 Employee benefi ts expense (including directors’ remuneration) 5,263 4,894 Cost of defi ned contribution plans included in employee benefi ts expense 419 421 Salaries and related costs paid to related parties included in employee benefi ts expense (Note 5) 603 596

23 EARNINGS PER SHARE

On January 31, 2008, the shareholders of the company approved bonus issue of 672,000,000 new shares on the basis of 4 bonus shares for every existing share. Earnings per share have been calculated based on the group’s profi t attributable to the shareholders divided by the adjusted number of ordinary shares of the company of 840,000,000 (2006: 840,000,000). There is no dilution as there were no share options outstanding at the end of the year.

Earnings per share based on the number of ordinary shares of the company in issue at the end of the year of 168,000,000 (2006: 168,000,000) would have been 18.1 cents (2006: 8.8 cents).

24 DIVIDENDS Group 2007 2006 $’000 $’000

Paid fi nal tax exempt (one-tier) dividend of $0.0225 (2006 : $0.038) per ordinary share in respect of fi nancial year ended December 31, 2006 (2006 : December 31, 2005) 3,780 6,384

Paid interim tax exempt (one-tier) dividend of $0.01 (2006 : $0.0075) per ordinary share in respect of fi nancial year ended December 31, 2007 (2006 : December 31, 2006) 1,680 1,260

5,460 7,644

Subsequent to the fi nancial year, the company proposed a fi nal tax exempt (one-tier) dividend of $0.005 per ordinary share amounting to a total of $4,200,000 for year ended December 31, 2007. The proposed dividend is not accrued as a liability for the current fi nancial year in accordance with Financial Reporting Standard 10 - Events After The Balance Sheet Date.

25 SEGMENT INFORMATION

Segment information is presented in respect of the group’s business and geographical segments. For the primary format, business segments is based on the group’s management and internal reporting structure.

Segment revenue and expense are revenue and expense reported in the group’s profi t and loss statement that either are directly attributable to a segment or can be allocated on a reasonable basis to a segment.

Segment assets are all operating assets that are employed by a segment in its operating activities and that either are directly attributable to the segment or can be allocated to the segment on a reasonable basis.

Segment liabilities are all operating liabilities of a segment and that either are directly attributable to the segment or can be allocated to the segment on a reasonable basis. Segment liabilities exclude income tax liabilities.





25 SEGMENT INFORMATION a) Business segments

The group comprises the following main business segments:

Property development segment is involved in the development and sale of residential properties.

Hotel operation segment is involved in hotel operations.

Property Hotel Group development operation Elimination Total $’000 $’000 $’000 $’000

2007

REVENUE 112,537 23,768 (189) 136,116

RESULT Segment result 36,003 20,199 (189) 56,013 Other operating income 291 189 - 480 Other operating expenses (8,690) (7,162) 189 (15,663) Finance costs (131) (3,647) - (3,778)

Profi t before income tax 27,473 9,579 - 37,052

Income tax (6,652)

Profi t after income tax 30,400

OTHER INFORMATION Capital expenditure - 23,300 - 23,300 Depreciation expense 12 958 - 970

BALANCE SHEET

Assets: Segment assets 187,331 191,467 (48,690) 330,108

Liabilities: Segment liabilities 135,972 114,616 (8,887) 241,701 Unallocated liabilities 8,089

Total liabilities 249,790





25 SEGMENT INFORMATION (cont’d) a) Business segments (cont’d)

Property Hotel Group development operation Elimination Total $’000 $’000 $’000 $’000

2006

REVENUE 80,805 17,078 (139) 97,744

RESULT Segment result 19,673 14,101 (139) 33,635 Other operating income 65 165 - 230 Other operating expenses (5,512) (6,240) 139 (11,613) Finance costs (495) (3,088) - (3,583)

Profi t before income tax 13,731 4,938 - 18,669

Income tax (3,828)

Profi t after income tax 14,841

OTHER INFORMATION Capital expenditure 1 10,478 - 10,479 Depreciation expense 16 862 - 878

BALANCE SHEET

Assets: Segment assets 122,320 158,008 (41,880) 238,448

Liabilities: Segment liabilities 90,562 97,330 (10,768) 177,124 Unallocated liabilities 5,946

Total liabilities 183,070

b) Geographical segments

The group’s operations and its identifi able assets are solely located in Singapore and accordingly, no geographical segmental analysis is presented.

26 COMMITMENT Group 2007 2006 $’000 $’000

Commitment for acquisition of land and contracted construction costs of properties but not provided for in the fi nancial statements 54,203 37,457





27 CONTINGENT LIABILITIES Company 2007 2006 $’000 $’000

Banker guarantees given in respect of bank facilities utilised by subsidiaries - Secured 3,973 1,160 Insurance guarantees given in respect of guarantee facilities utilised by subsidiaries - Unsecured 4,846 5,363

8,819 6,523

The guarantees are secured against the properties of the group (Notes 9, 10 and 12) and assignment of developer’s rights and benefi ts in the sale and purchase agreements.





STATEMENT OF DIRECTORS

In the opinion of the directors, the accompanying consolidated fi nancial statements of the group and balance sheet and statement of changes in equity of the company set out on pages 29 to 57 are drawn up so as to give a true and fair view of the state of affairs of the group and of the company as at December 31, 2007 and of the results of the group, changes in equity of the group and the company and cash fl ows of the group for the year then ended and at the date of this statement there are reasonable grounds to believe that the company will be able to pay its debts as and when they fall due.

ON BEHALF OF THE DIRECTORS

..................................………..….Koh Wee Meng

......................................……….Lim Wan Looi

March 18, 2008




SHAREHOLDING STATISTICSas at 7 March 2008

No. of issued shares : 840,000,000Issued and fully paid-up : S$36.26 millionClass of Shares : Ordinary SharesVoting rights : On a show of hands: One vote for each member On a poll: One vote for each ordinary share

Based on the information available to the Company as at 7th March 2008, approximately 13.78% of the issued ordinary shares of the Company is held by the public and therefore Rule 723 of the Listing Manual issued by the Singapore Exchange Securities Trading Limited is complied with.

Size of Shareholdings No. of Shareholders % No. of Shares %

1 - 999 - - - -1,000 - 10,000 312 42.33 2,112,000 0.2510,001 - 1,000,000 409 55.50 40,449,000 4.821,000,001 and above 16 2.17 797,439,000 94.93

737 100.00 840,000,000 100.00

TWENTY LARGEST SHAREHOLDERS

No Shareholder’s Name No of Shares % of Holdings

1 KOH WEE MENG (2) 592,575,000 70.542 LIM WAN LOOI (3) 91,725,000 10.923 HONG LEONG FINANCE NOMINEES PTE LTD 39,104,000 4.664 TAN SU LAN @ TAN SOO LUNG 18,859,000 2.255 TAN SU KIOK OR SIA LI WEI 14,000,000 1.676 SBS NOMINEES PTE LTD 12,580,000 1.507 JIMMY LEE PENG SIEW 6,295,000 0.758 HUAY KWOK MENG 3,260,000 0.399 LEE AH POY 2,764,000 0.3310 KOH WEE SENG 2,734,000 0.3311 UNITED OVERSEAS BANK NOMINEES PTE LTD 2,693,000 0.3212 LAI CHOOI FOONG 2,610,000 0.3113 KOH SOR CHER 2,570,000 0.3114 LIM KIT HEE 2,530,000 0.3015 PHILLIP SECURITIES PTE LTD 1,716,000 0.2016 OCBC NOMINEES SINGAPORE PRIVATE LTD 1,424,000 0.1717 LIM CHIN TIONG 881,000 0.1018 TAN ENG YEOW 850,000 0.1019 SNG CHOON PIOW 805,000 0.1020 TAN LEE HUA 785,000 0.09

800,760,000 95.33

SUBSTANTIAL SHAREHOLDERS AS AT 7 MARCH 2008

Name of Substantial Shareholders Direct Interest % Deemed Interest %

Koh Wee Meng (1) (2) 610,815,000 72.72 91,825,000 10.93Lim Wan Looi (1) (3) 91,825,000 10.93 610,815,000 72.72

(1) Koh Wee Meng is the husband of Lim Wan Looi. Each of them deemed to be interested in the shares held by each other.(2) Of the 610,815,000 shares in which Koh Wee Meng has an interest, 18,000,000 shares are held through Hong Leong Finance

Nominees Pte Ltd and 240,000 shares are held through OCBC Nominees (Pte) Ltd.(3) Of the 91,825,000 shares in which Lim Wan Looi has an interest, 100,000 shares are held through OCBC Nominees (Pte) Ltd.




PARTICULARS OF PROPERTIES OWNED BY THE GROUPas at December 31, 2007

A Classifi ed as Properties under Development (Note 9 to the fi nancial statements)

Location Tenure Land Area(Sqm)

Approximate Gross Floor

Area(Sqm)

Stage of completion as at

18 March 2008

Expected date of

completion

Effective Stake(%)

Description and existing use

135 Lor K Telok Kurau

Freehold 903 1,361 Completed. Pending issuance of TOP.

NA 100% Development of 5-storey residential apartments

Lot 8343V &8344P MK 22 Palm Grove Avenue

999 years 2,696 3,971 Piling works completed. Structural & Architectural works in progress.

31 Dec 2008

100% Development of 3-storey strata terrace and strata semi-detached houses

Lot 1356T MK 22 43 Jansen Road

999 years 1,505 1,840 Completed. Pending issuance of TOP.

NA 100% Development of 3-storey strata terrace houses

52 Lor G Telok Kurau

Freehold 883 1,336 Completed. TOP issued.


Lot 4288V MK 22 Simon Place

Freehold 3,117 4,154 Demolition works in progress.

31 Dec 2009

100% Development of 5-storeyresidential apartments

77 Mergui Road Freehold 1,962 5,492 Piling works completed. Structural works in progress.

31 June 2010

100% Development of 19-storey residential apartments

16 Ipoh Lane Freehold 2,220 6,213 Piling and foundation works in progress.

31 Dec 2009


101 Keng Lee Road

Freehold 1,152 3,208 Piling and basement works completed. Structural works in progress.

31 June 2009


37 Lor 20 Geylang

Freehold 575 1,689 Additions and alterations works in progress.

30 June 2008

100% Additions and alteration to the existing 8-storey association building to convert into a 8-storey residential apartments

18 St Michael’s Road

Freehold 1,383 3,870 Piling and foundation works completed. Basement works in progress.

31 Dec2009


66 Telok Kurau Road

Freehold 1,131 1,582 Completed. Pending issuance of TOP.


Lot 98643T MK 22 Highland Road

Freehold 2,022 2,999 Completed. TOP issued.

NA 100% Development of 3-storey terrace houses

B Classifi ed as Properties held for Sale (Note 10 to the fi nancial statements)

Location Tenure Land Area(Sqm)

ApproximateGross Floor

Area(Sqm)

Stage of completion as at 18 March 2008

Expected date of completion

Effective Stake(%)

Description and existing use

76C Lorong Marzuki

Freehold 218 315 Completed. TOP issued

NA 100% 1 unit of completed 3-storey terrace house.




C Classifi ed as Property, Plant and Equipment (Note 12 to the fi nancial statements)

Name and Address Tenure Land Area(Sqm)

ApproximateGross Floor Area

(Sqm)

No of Rooms Effective Stake(%)

Fragrance Hotel - Balestier255 Balestier Road, Singapore 329710

Freehold 315 890 48 100%

Fragrance Hotel - Classic418 Balestier Road, Singapore 329808

Freehold 282 841 48 100%

Fragrance Hotel - Crystal50 Lorong 18 Geylang, Singapore 398824

Freehold 1,051 3,360 125 100%

Fragrance Hotel - Emerald20 Lorong 6 Geylang, Singapore 399174

Freehold 818 2,677 126 100%

Hotel Sunfl ower10 Lorong 10 Geylang, Singapore 209391

Freehold 323 732 27 100%

Fragrance Hotel - Imperial28 Penhas Road, Singapore 208187

Freehold 571 1,714 74 100%

Fragrance Hotel - Kovan760 Upper Serangoon Road,Singapore 534629

Freehold 284 850 43 100%

Fragrance Hotel - Lavender51 Lavender Street, Singapore 338710

Freehold 220 660 35 100%

Fragrance Hotel - Oasis435 Balestier Road, Singapore 329816

Freehold 229 687 36 100%

Fragrance Hotel - Pearl21 Lorong 14 Geylang, Singapore 398961

Freehold 843 2,582 129 100%

Fragrance Hotel - Rose263 Balestier Road, Singapore 329715

Freehold 400 1,179 68 100%

Fragrance Hotel - Ruby10 Lorong 20 Geylang, Singapore 398730

Freehold 902 2,919 168 100%

Fragrance Hotel - Sapphire3 Lorong 10 Geylang, Singapore 399037

Freehold 528 1,524 50 100%

Fragrance Hotel - Selegie 183 Selegie Road, Singapore 188329

Freehold 508 2,128 120 100%

The Fragrance Hotel219 Joo Chiat Road, Singapore 427485

Freehold 672 2,105 82 100%

Fragrance Hotel - Viva75 Wishart Road, Singapore 098721

Freehold 349 661 33 100%

Fragrance Hotel - Waterfront418 Pasir Panjang Road, Singapore 118759

Freehold 478 1024 57 100%

Particulars of Properties Owned by the Groupas at December 31, 2007




C Classifi ed as Property, Plant and Equipment (Note 12 to the fi nancial statements) (cont’d)

Name and Address Tenure Land Area(Sqm)

ApproximateGross Floor Area

(Sqm)

No of Rooms Effective Stake(%)

Fragrance Hostel63 Dunlop Street, Singapore 209391

Freehold 238 782 17# 100%

Fragrance Building168 Changi Road, Singapore 419730

Freehold 790 1,671 NA 100%

Fragrance Centre101 Joo Chiat Road, Singapore 427395 *

Freehold 149 551 NA 100%

44 Foch Road, Singapore 209270

Freehold 125 237 NA 100%

* - The property has been presented as investment property in the company’s balance sheet (Note 11 to the fi nancial statements) # - This property is being operated as a hostel with 102 dormitory beds.

The above additional information are provided in compliance with Rule 1207 (10) of the Listing Manual.

Particulars of Properties Owned by the Groupas at December 31, 2007




NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the Annual General Meeting of Fragrance Group Limited will be held on April 18, 2008 at 9.00 a.m. at 168 Changi Road #05-01 (Attic Level) Fragrance Building Singapore 419730 to transact the following business:-

ORDINARY BUSINESS

1. To receive and adopt the Report of the Directors and Auditors and the Audited Accounts for the fi nancial year ended December 31, 2007. [Resolution 1]

2. To declare a fi nal tax-exempt (one-tier) dividend of 0.5 cent per ordinary share for the fi nancial year ended December 31, 2007. [Resolution 2]

3. To approve the proposed Directors’ fees of S$97,500/- for the fi nancial year ended December 31, 2007. [2006: S$90,000/-] [Resolution 3]

4. To re-elect the following Directors who retire pursuant to the Company’s Articles of Association:-

(a) Mr Tang Man {retiring pursuant to Article 97} [Resolution 4]

(b) Mr Teo Cheng Kuang {retiring pursuant to Article 91} [Resolution 5]

(c) Mr Sim Mong Yeow {retiring pursuant to Article 91} [Resolution 6] 5. To re-appoint Messrs Deloitte & Touche as the Company’s Auditors and to authorise the Directors to fi x their remuneration. [Resolution 7]

6. To transact any other ordinary business that may be properly transacted at the Annual General Meeting.

SPECIAL BUSINESS

To consider and, if thought fi t, to pass the following Ordinary Resolution:-

7. Authority to allot and issue shares up to fi fty per cent (50%) of issued share capital.

“THAT pursuant to Section 161 of the Companies Act, Cap. 50 and Rule 806 of the Listing Manual of the Singapore Exchange Securities Trading Limited, the Directors of the Company be and are hereby authorised to issue and allot new shares in the Company (whether by way of rights, bonus or otherwise) at any time and upon such terms and conditions and for such purposes and to such persons as the Directors may, in their absolute discretion, deem fi t, PROVIDED ALWAYS that the aggregate number of shares to be issued pursuant to this Resolution shall not exceed 50% of the issued share capital of the Company, of which the aggregate number of shares to be issued other than on a pro-rata basis to shareholders of the Company shall not exceed 20% of the issued share capital of the Company, and, unless revoked or varied by the Company in general meeting, such authority shall continue in force until the conclusion of the Company’s next Annual General Meeting or the date by which the Company’s next Annual General Meeting is required by law or by the Articles of Association of the Company to be held, whichever is the earlier.”

[Resolution 8]

By Order of the Board

KELOTH RAJ KUMAR (MR)Company Secretary

Date: April 1, 2008




Note:-

A Member is entitled to appoint a proxy to attend and vote in his place. A proxy need not be a Member of the Company. Members wishing to vote by proxy at the Meeting may use the proxy form enclosed. The completed proxy form must be lodged at the Registered Offi ce of the Company at 168 Changi Road #04-01 Fragrance Building Singapore 419730 not less than 48 hours before the time appointed for the Meeting.

Note to item no. 4:-

(a) Mr Tang Man is an Independent Director, who is the Chairman of the Audit Committee and he will continue in the said capacity upon re-election as a Director of the Company.

(b) Mr Teo Cheng Kuang is an Independent Director, who is the Chairman of the Nominating Committee as well as a member of the Audit and Remuneration Committees and he will continue in the said capacities upon re-election as a Director of the Company.

(c) Mr Sim Mong Yeow is an Executive Director of the Company and he will continue in the said capacity upon re-election as a Director of the Company.

Explanatory Note on Special Business to be transacted:

In the proposed resolution 8 above, the percentage of issued share capital is calculated based on the issued share capital at the time of the passing of the resolution approving the mandate after adjusting for:- (a) new shares arising from the conversion or exercise of convertible securities; (b) new shares arising from the exercise of share options or vesting of share awards outstanding or subsisting at the time of the passing of the resolution approving the mandate; and (c) any subsequent consolidation or subdivision of shares. The proposed resolution 8, if passed, will empower the Directors of the Company from the date of the above Meeting until the date of the next Annual General Meeting, to allot and issue new shares in the Company (whether by way of rights, bonus or otherwise). The number of shares which the Directors may issue under this Resolution shall not exceed 50% of the issued share capital of the Company. For issue of shares other than on a pro-rata basis to all shareholders of the Company, the aggregate number of shares to be issued shall not exceed 20% of the issued share capital of the Company. This authority will, unless previously revoked or varied at a general meeting, expire at the next Annual General Meeting of the Company.

Notice of Annual General Meeting


PROXY FORM

FRAGRANCE GROUP LIMITED(Incorporated in the Republic of Singapore)Company Registration No. 200006656M

I/We _________________________________________________________________________________________________________

of ___________________________________________________________________________________________________________

being a *member/members of Fragrance Group Limited, hereby appoint

Name Address NRIC / Passport No.Proportion of

Shareholding (%)

and/or (delete as appropriate)

as my/our proxy/proxies to vote for me/us on my/our behalf at the Annual General Meeting of the Company to be held on April 18, 2008 at 9.00 a.m. at 168 Changi Road #05-01 (Attic Level) Fragrance Building Singapore 419730 and at any adjournment thereof.

The proxy is required to vote as indicated with an “X” on the resolutions set out in the Notice of Meeting and summarised below. If no specifi c direction as to voting is given, the proxy/proxies may vote or abstain at his/her/their discretion.

No. Resolution For Against

1. To receive and adopt the Report of the Directors and Auditors and the Audited Accounts for the fi nancial year ended December 31, 2007

2. To declare a fi nal tax-exempt (one-tier) dividend of 0.5 cent per ordinary share.

3. To approve the proposed Directors’ Fees of $97,500/- for the fi nancial year ended December 31, 2007.

4. To re-elect Mr Tang Man as a Director

5. To re-elect Mr Teo Cheng Kuang as a Director

6. To re-elect Mr Sim Mong Yeow as a Director

7. To re-appoint Messrs Deloitte & Touche as Auditors and to authorise the Directors to fi x their remuneration

8. Authority to allot and issue shares up to 50% of issued share capital

Signed this ______________ day of ____________________ 2008

Total Number of Shares

_______________________________________Signature(s)/Common Seal(s) of Member(s)


Notes:

a) Where a member appoints two proxies, the appointments shall be invalid unless the member specifi es the proportion (expressed as a percentage of the whole) of the member’s shareholding to be represented by each proxy.

b) The instrument appointing a proxy shall be in writing under the hand of the appointor or of the appointor’s attorney duly authorised in writing or if such appointor is a corporation under its common seal or under the hand of its attorney.

c) An instrument appointing a proxy must be deposited at the registered offi ce of the Company at 168 Changi Road #04-01 Fragrance Building Singapore 419730, not less than 48 hours before the time appointed for holding the Meeting.

d) The Company shall be entitled to reject a Proxy Form which is incomplete, improperly completed, illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specifi ed on the Proxy Form. In addition, in the case of shares entered in the Depository Register, the Company may reject a Proxy Form if the member, being the appointor, is not shown to have shares entered against the member’s name in the Depository Register as at 48 hours before the time appointed for holding the Meeting, as certifi ed by The Central Depository (Pte) Limited to the Company.


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