hotel royal limited_annual report 2011

7/31/2019 Hotel Royal Limited_annual Report 2011

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BOARD OF DIRECTORS Dr Lee Keng Thon, Non-Executive Group ChairmanCol (Ret) Rodney How Seen Shing, Independent Non-Executive Director Mr Ng Kok Lip, Independent Non-Executive Director Prof. Pang Eng Fong, Independent Non-Executive Director Mr Lee Khin Tien, Non-Executive Director Mr Lee Kin Hong, Non-Executive Director

AUDIT COMMITTEE Col (Ret) Rodney How Seen Shing (Chairman)Mr Ng Kok Lip

Prof. Pang Eng FongMr Lee Khin Tien

REMUNERATION COMMITTEE Prof. Pang Eng Fong (Chairman)Col (Ret) Rodney How Seen ShingMr Ng Kok LipMr Lee Khin Tien

NOMINATING COMMITTEE Mr Ng Kok Lip (Chairman)Col (Ret) Rodney How Seen ShingProf. Pang Eng Fong

Mr Lee Khin Tien

COMPANY SECRETARY Sharon Yeoh (Ms)Wong Siew Choo (Mrs)

SHARE REGISTRAR B.A.C.S. Private Limited63 Cantonment RoadSingapore 089758Tel : (65) 6593 4848Fax : (65) 6593 4847Email : [email protected]

REGISTERED OFFICE 36 Newton RoadSingapore 307964Tel : (65) 6426 0168Fax : (65) 6256 2710Email : [email protected]

AUDITORS Deloitte & Touche LLPCerti ed Public Accountants Singapore6 Shenton Way #32-00DBS Building Tower TwoSingapore 068809Tel : (65) 6224 8288Fax : (65) 6538 6166

Audit Partner-in-ChargeKee Cheng Kong, Michael

Appointed on 11 August 2007

PRINCIPAL BANKERS Oversea-Chinese Banking Corporation LimitedUnited Overseas Bank LimitedDBS Bank LimitedBank of New Zealand LimitedCredit Suisse

Company Reg. No: 196800298G

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


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Chairmans Message 2

Board of Directors 4

Senior Management 6

Report on Corporate Governance 7

Risk Factors and Risk Management 18 Report of the Directors 20

Statement of Directors 23

Independent Auditors Report 24

Statements of Financial Position 25

Consolidated Pro t and Loss Statement 27

Consolidated Statement of Comprehensive Income 28

Statements of Changes in Equity 29

Consolidated Statement of Cash Flows 30

Notes to Financial Statements 32

Schedule of the Groups Major Properties 77

Statistics of Shareholdings 78

Five Year Group Financial Statistics 81

Notice of Annual General Meeting 82

Proxy Form

C o n t e n t s

Annual Report 2011


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Dear Shareholders,

On behal o your Board o Directors, I am pleased to present the Groupsannual report or the nancial year ended 31 December 2011.

Operations and Financial Review

2011 had been an event ul year, with natural disasters such as earthquake andtsunami in Japan and massive foods in Thailand in the third quarter. This hasresulted in disruption o supply chains across industries and led to a slow-downin the regional economy. Furthermore, the euro zone debt crisis in Europe andslow economic recovery in United States all added to the economic uncertainty,and had a dampening e ect on tourist arrivals to Singapore.

The Groups pro t be ore income tax or 2011 decreased by 17.4% or S$1.996 million rom S$11.467 million in 2010to S$9.471 million in 2011 mainly due to the expenses relating to the acquisition o White Orchid Hotel in Bangkok

o S$0.450 million and impairment loss on the investment property in New Zealand o S$2.460 million.

However, the Groups pro t a ter income tax increased in 2011 as compared with 2010 mainly due to additionalde erred tax liability o S$5.075 million being recognised by Grand Complex Properties Limited in New Zealand in2010, which was absent in 2011. The increase in de erred tax expense arose rom a change in the tax regulations inNew Zealand which disallowed the Groups New Zealand subsidiary rom claiming tax deduction or the remainingdepreciation or the estimated use ul li e o the building e ective rom year o assessment 2012.

O tlook or 2012

The Group expects a slower year in 2012 due to the economic uncertainties in Europe. We continue to closely

monitor our room occupancy and room rates or the Groups hotel segment, so that we are able to react swi tly toany changes in the operating environment.

The current uncertain economic outlook may have an adverse a ect on New Zealands commercial leasing marketand that o the Groups investment property, Grand Complex, in Wellington. Meanwhile, the subsidiary is activelymarketing its vacant premises so as to maximise rental income.

The current economic uncertainties in Europe will also have an impact on the Groups managed und port olio.

In addition to the above, the Groups pro tability will continue to be infuenced by the per ormance o the NZD, USDand RM against the SGD, the changes in the market value o our investment trading port olio and the investment

income rom our total investment port olio.

Other Developments

With the completion o the Royal Residences ( ormerly known as Star Mansions) at 1A Surrey Road, Singapore,which will be held as a long-term investment, the Group looks orward to marketing the units or recurring rentalincome.

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Chairmans Message


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The Group will embark on the renovations plans to increase room count and also to upgrade the existing roomsand ood and beverages acilities or Hotel Royal Kuala Lumpur (previously known as The Hotel Coronade KualaLumpur) during the second quarter o 2012. Planning approval rom the relevant authorities was received towardsthe end o 2011.

The Group is looking into the upgrading o the recently acquired White Orchid Hotel in Bangkok. Our architect ispresently studying the hotel layout and working on the design or the proposed upgrading works.

Net Tangible Asset Per Share

Based on directors estimate, the total market value o the Groups hotel and investment properties as at 31 December2011 was about S$566.7 million as compared to their total net book value o S$406.3 million. The unrecordedrevaluation surplus (net o tax e ect) amounted to S$133.6 million. Had this revaluation surplus (net o tax e ect)been included in the net asset value, the net asset (a ter revaluation) would have increased rom S$3.98 to S$5.57per share as at 31 December 2011.

Proposed Dividend

The Board o Directors recommends a one-tier tax exempt rst and nal dividend o ve cents per share amountingto S$4.2 million.

A Word o Appreciation

I wish to express my utmost appreciation to our valued shareholders or your continuous support. I also thank ourloyal customers and business partners or their staunch support and assistance. In addition, I wish to thank themanagement and sta or their dedicated services during the year and look orward to their consistent excellentservice to our guests. Last but not least, I would like to thank my ellow directors or their invaluable guidance and

contribution.

Dr Lee Keng ThonChairman

19 March 2012

Chairmans Message


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Dr Lee Keng Thon

Dr Lee Keng Thon, aged 68, was appointed to the Board o Directors on8 September 1971. He was last re-elected as a director on 24 April 2010 and wasappointed the Chairman o the Company on 29 April 2006.

Dr Lee is a director o Aik Siew Tong Limited, Melodies Limited and Singapore-Johore Express (Private) Limited with businesses in real estate, bus transportationand plantation. He is a medical graduate rom University o Sydney with a privatemedical practice.

Col (Ret) How Seen Shing

Col (Ret) Rodney How, aged 69, was appointed to the Board on 26 February1986 and is currently the Chairman o the Audit Committee and a member o the Nominating and the Remuneration Committees. He was last re-elected as adirector on 30 April 2011. He previously served in the Singapore Armed Forcesas Commander o Central Manpower Base (CMPB), Director o EmploymentDept, Commanding O cer o Fourth In antry Battalion, and Assistant Chie o the GENERAL STAFF (INTELLIGENCE).

Col (Ret) Rodney How was also previously a Board Member o the InternationalShip Suppliers Association and President o the Singapore Association o ShipSuppliers.

He graduated rom Sydney University with a Bachelor o Arts (Public Administration).

Ng Kok Lip

Ng Kok Lip, aged 70, was appointed to the Board o Directors on 1 January 2003and is the Chairman o the Nominating Committee and a member o the Auditand Remuneration Committees. He was last re-elected as a director on 25 April2009.

He is the Managing Director o Beng Kim Holdings Pte Ltd.

He graduated rom the University o Cali ornia, Berkeley with a M.A. and romthe University o Singapore with a Bachelor o Science (Hons). Be ore joiningthe Group, Mr. Ng was with the University o Singapore as a lecturer and was theManaging Director o National Kap Ltd rom 1970-1999.

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Board of Directors


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Pang Eng Fong

Pang Eng Fong, aged 68, was appointed to the board o directors on 5 December2011.

He is a pro essor (practice) in the Lee Kong Chian School o Business, SingaporeManagement University. He graduated in economics rom the University o Singapore and holds a Ph.D romthe University o Illinois. He has served as head o Singapores diplomatic missionsin Seoul, Brussels and London.

Lee Khin Tien

Lee Khin Tien, aged 60, was appointed to the Board o Directors on 31 December1996 as a non-executive director. He is a member o the Audit, Nominating andRemuneration Committees. He was last re-elected as a director on 24 April 2010.

Lee Khin Tien is a director o Aik Siew Tong Limited, Melodies Limited andSingapore-Johore Express (Private) Limited with businesses ranging rom realestate, bus transportation and plantation. He has more than 20 years o experiencein real estate and plantation business. He graduated rom Nanyang University witha Bachelor o Science (Biology).

Lee Kin Hong

Lee Kin Hong, aged 58, was appointed to the Board o Directors on 21 June 2002 asa non-executive director. He was last re-elected as a director on 30 April 2011.

He is currently the Managing Director o Singapore-Johore Express (Private) Limitedand has more than 20 years o experience in managing commercial, industrial andresidential projects.

He graduated rom the National University o Singapore with a Bachelor o Science(Building) and Master o Science (Project Management). He is also a member o the Singapore Institute o Building.

Board of Directors


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Preamble

The Board o Directors o Hotel Royal Limited (the Company) is pleased to con rm that it has adhered to theollowing corporate principles and guidelines tailored to the speci c needs o the Company set out in the Code

o Corporate Governance 2005 (the Code). These principles and guidelines refect the Boards commitment inhaving e ective sel -regulatory corporate practices to sa eguard the interests o its shareholders and maximisinglong-term shareholders value. The Board believes that these guidelines should be an evolving set o corporategovernance principles, subject to the speci c needs o the Company and subject to modi cation as circumstancesmay warrant.

1. BOARD MATTERS

1.1 The Boards Cond ct o its A airs

Principle 1: Every company should be headed by an e ective Board to lead and control the company. The Board is collectively responsible or the success o the company. The Board works with Management toachieve this and the Management remains accountable to the Board.

The primary responsibilities o the Board o Directors encompass the ollowing:

To provide strategic direction and decision-making pertaining to the Groups activities that are o signi cantnature and approve periodic plans as well as major investments and divestments;

To oversee the business and a airs o the Company, and working with management, establish strategicdirections and nancial goals to be implemented by management as well as monitoring the per ormance o management;

To oversee the evaluation o the adequacy o internal controls, risks management, nancial reporting andcompliance, and satis y itsel as to the su ciency o such processes; and

To be responsible or the overall corporate governance o the Group.

The Company requires the approval rom the Board or material new investments or increase in investments inbusinesses o subsidiaries, projects or xed assets and any divestments or sales by any company in the Group.

Other aspects which require the approval o the Board include all material commitments to term loans and lineso credit rom banks and nancial institutions by the Company.

Each Board member exercises equal responsibility in overseeing the business and a airs o the Company.

The Board meets quarterly and as and when deems necessary. To cater to urgent substantial matters, however,the Board may convene on an ad-hoc basis. The Board o Directors held our meetings in total or the nancial

year ended 31 December 2011.

Report on Corporate Governance


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The directors attendance at those meetings are as ollows:

During 2011, the Board held our meetings:

Director (a) (b) Percentage (%)

Dr Lee Keng Thon 4 4 100%

Col (Ret) Rodney How Seen Shing 4 4 100%

Ng Kok Lip 4 4 100%

Lee KhinTien 4 4 100%

Lee Kin Hong 4 4 100%

Goh Kok Yeow * 1 1 100%

During 2011, the Audit Committee held our meetings:

(a) (b) Percentage (%)


Ng Kok Lip 4 4 100%

Lee Khin Tien 4 4 100%


During 2011, the Nominating Committee held two meetings:



Ng Kok Lip 2 2 100%

Lee Khin Tien 2 2 100%


During 2011, the Remuneration Committee held one meeting:


Ng Kok Lip 1 1 100%

Col (Ret) Rodney How Seen Shing 1 1 100%Lee Khin Tien 1 1 100%

Goh Kok Yeow * 0 0 NA

* Resigned on 30 April 2011

Notes:

(a) Number o meetings held while a director

(b) Number o meetings attended



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Directors are in ormed o and encouraged to attend relevant courses conducted by the Singapore Institute o Directors, Singapore Exchange Limited and relevant business and nancial consultants. During the year, theCompany secretary conducted detailed brie ng on new disclosure listing requirement at Board meetings.

1.2 Board Composition and G idance

Principle 2: There should be a strong and independent element on the Board, which is able to exerciseobjective judgement on corporate a airs independently, in particular, rom Management. No individualor small group o individuals should be allowed to dominate the Boards decision making.

The Board believes that it should generally have at least 5 members and not more than 9 directors. This rangepermits a good mix o experiences without hindering e ective deliberation.

At present, the Board comprises 6 directors o whom 3 are considered independent by the Nominating Committeein accordance with the de nition o independence in the Code.

The Board collectively possesses the core competencies, appropriate mix o expertise and experience or e ectiveunctioning and decision.

The composition o the Board is as ollows:-

Dr Lee Keng Thon Non-Executive Group Chairman

Col (Ret) Rodney How Seen Shing Independent Non-Executive Director Chairman Member Member

Ng Kok Lip Independent Non-Executive Director Member Chairman Member

Professor Pang Eng Fong Independent Non-Executive Director Member Member Chairman

Lee Khin Tien Non-Executive Director Member Member Member

Lee Kin Hong Non-Executive Director

Goh KokYeow * Independent Non-Executive Director Member Chairman Member

* Resigned on 30 April 2011 Other than directorships in the Company, none o the directors hold directorships in other listed company or bothcurrent and preceding 3 years.

1.3 Chairman and Chie Exec tive O fcer

Principle 3: There should be a clear division o responsibilities at the top o the company the working o the Board and the executive responsibility o the companys business which will ensure a balance o power and authority, such that no one individual represents a considerable concentration o power.

The Non-Executive Chairman and the Chie Executive O cer (CEO) are separate appointments. The CEO, LeeChou Hock, is the nephew o the Non-Executive Chairman, Dr Lee Keng Thon.

Director Board MembershipCommittee Membership

A dit Nominating Rem neration



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The Non-Executive Chairmans roles in relation to Board matters are as ollows:

(a) To schedule meetings that enable the Board to per orm its duties responsibly while not inter ering with thefow o the Companys operations;

(b) To prepare meeting agenda in consultation with the CEO;

(c) To exercise control over quality, quantity and timeliness o the fow o in ormation between Managementand the Board; and

(d) To assist in ensuring compliance with Companys guidelines on corporate governance.

1.4 Board Membership

Principle 4: There should be a ormal and transparent process or the appointment o new directors to the Board.

The Nominating Committee

The Nominating Committee consists o our directors; namely, Ng Kok Lip (Chairman o the Nominating Committee),Col (Ret) Rodney How Seen Shing, Pro essor Pang Eng Fong and Lee Khin Tien. The terms o re erence o theNominating Committee include the ollowing:

(a) To recommend appointment and re-appointment o directors;

(b) To review the pro ciency or expertise required by the Board annually and the size o the Board;

(c) To review the independence o each director and ensure that the Board consists o at least one-third o independent directors;

(d) To assess the capabilities o the director in the execution o his work i he has multiple board

representation;(e) To establish measures or evaluating the per ormance o the Board;

( ) To conduct annual assessment on the e ectiveness o the Board; and

(g) To report to the Board.

Directors will submit themselves or re-election at regular intervals o at least once every three years. Pursuantto Article 117 o the Companys Articles o Association, one-third o the directors retires rom o ce at theCompanys Annual General Meeting. In addition, Article 102 o the Companys Articles o Association providesthat a newly appointed director must submit himsel or re-election at the Annual General Meeting ollowing theappointment.

In identi ying suitable candidates and in recommending new Board members to ensure continuity o Board talent,some o the criteria used or selection o Board member are diversity o competencies, track record o gooddecision-making, integrity, independent mindedness, ability to commit time and e ort to the Board, experiencein high-per orming companies and nancial literacy. The Nominating Committee may seek advice rom externalsearch consultants where necessary.

The Nominating Committee has reviewed the independence o Col (Ret) Rodney How Seen Shing, Ng Kok Lipand Pro essor Pang Eng Fong and is satis ed that there are no relationships which would deem any o them notto be independent. In reviewing their independence, the Nominating Committee has considered the relationshipsidenti ed by the Code and additionally the independent directors are also independent o substantial shareholderso the Company.


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Details o the year o initial appointment and last re-election o the directors are appended below:

Dr Lee Keng Thon 68 Non-Executive Chairman 08.09.1971 24.04.2010Col (Ret) Rodney How Seen Shing 69 Director 26.02.1986 30.04.2011

Ng Kok Lip 70 Director 01.01.2003 25.04.2009

Pro essor Pang Eng Fong 69 Director 05.12.2011

Lee KhinTien 60 Director 31.12.1996 24.04.2010

Lee Kin Hong 58 Director 21.06.2002 30.04.2011

The Nominating Committee held two meetings during the nancial year ended 31 December 2011.

1.5 Board Per ormance

Principle 5: There should be a ormal assessment o the e ectiveness o the Board as a whole and thecontribution by each director to the e ectiveness o the Board.

We believe that the Boards per ormance is ultimately refected in the per ormance o the Group. The Board ensurescompliance with applicable laws and Board members act in good aith, with due diligence and care in the bestinterests o the Company and its shareholders. In addition to these duciary duties, the Board is charged withtwo key responsibilities: setting strategic directions and ensuring that the Company is ably led. The measure o aBoards per ormance is also tested through its ability to lend support to management especially in times o crisisand to steer the Group in the right direction.

The nancial indicators set out in the Code as guides or the evaluation o directors are, in our opinion, more o a measure o managements per ormance and hence are less applicable to directors. In any case, such nancialindicators provide a snapshot o a companys per ormance, and do not ully measure the sustainable long-termwealth and value creation o the Company.

The Board through the delegation o its authority to the Nominating Committee, has used its best e orts toensure that directors appointed to our Board possess the background, experience and knowledge in technology,business, nance and management skills critical to the Companys business and that each director with his specialcontributions brings to the Board an independent and objective perspective to enable balanced and well-considereddecisions to be made.

The Board has implemented a process or assessing the e ectiveness o the Board as a whole and or assessing thecontribution by directors to the e ectiveness o the Board.

During the nancial year, all directors were requested to complete a questionnaire to assess the overall e ectivenesso the Board. The results o the questionnaire are rst reviewed by the Nominating Committee, tabled as an agenda

or Boards discussion to determining areas or improvement and enhancement. Renewal or replacement o Boardmembers when it occurs, do not necessarily refect their contributions to date, but may be driven by the need toposition and shape the Board in line with the medium term needs o the Company and its business.

1.6 Access to In ormation

Principle 6: In order to ulfl their responsibilities, board members should be provided with complete,adequate and timely in ormation prior to board meetings and on an on-going basis.


Date of Lastre-electionName Age Position

Date of InitialAppointment


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The Company recognises the importance o continual dissemination o relevant in ormation which are explicit,accurate, timely and vital to the Board in carrying its duties. As such, the Board expects management to reportthe Companys progress and drawbacks in meeting its strategic business objectives or nancial targets and otherin ormation relevant to the strategic issues encountered by the Company in a timely and accurate manner.

In exercising their duties, the directors have unrestricted access to the Companys management and independent

auditors.

Directors have separate and independent access to the Company Secretary. The Company Secretary is responsibleor ensuring that board procedures are ollowed and that applicable rules and regulations are complied with.

All new directors are oriented by senior management with the Companys operations, its signi cant nancial,accounting and risk management issues, its principal o cers and its independent auditors. All directors arealso encouraged to attend, at Companys expense, directors continuing education programs o ered by variousorganisations.

Pro essional advices are sought by the Board when necessary to enable the Board or its independent directors tocarry out their roles e ectively. Individual directors may obtain pro essional advice to assist them in the executiono their tasks subject to the approval rom the Chairman, at the Companys expense.

2. REMuNERATION MATTERS

2.1 Proced res or Developing Rem neration Policies

Principle 7: There should be a ormal and transparent procedure or developing policy on executiveremuneration and or fxing the remuneration packages o individual directors. No director should beinvolved in deciding his own remuneration.

The Remuneration Committee comprises our directors; namely Pro essor Pang Eng Fong, (Chairman o theRemuneration Committee), Col (Ret) Rodney How Seen Shing, Ng Kok Lip and Lee Khin Tien. Where necessary,the Committee can engage pro essional help rom external consultants in areas o executive compensation.

The Remuneration Committee held one meeting during the nancial year ended 31 December 2011 and executedthe ollowing in consultation with the Chairman:

(a) Made recommendations to the Board a ramework o remuneration or the Board members as well as keyexecutives;

(b) Determined speci c remuneration packages or each non-executive director and the Chie Executive O cer;and

(c) Reviewed the terms, conditions and remuneration o the senior executives o the Company.

The Remuneration Committees objective is to motivate and retain pro cient executives and ensure that the

Company is able to attract competent sta in the market to maximise shareholders value.

The review covers all areas o remuneration, including but not limited to directors salaries, ees, bonuses, allowancesand bene ts-in-kind. No director is involved in deciding his own remuneration.

2.2 Level and Mix o Rem neration

Principle 8: The level o remuneration should be appropriate to attract, retain and motivate the directors needed to run the company success ully but companies should avoid paying more than is necessary or this purpose. A signifcant proportion o executive directors remuneration should be structured so as to linkrewards to corporate and individual per ormance.

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The Remuneration Committee has recommended a ramework o remuneration or the Board members and keymanagement executives. The details are as ollows:

Board members

The directors ees paid to the directors are based on the number o meetings attended during the year, subject to aminimum sum. The Chairman o the Board and the sub-committees will receive an additional Chairmans allowanceo 100% o the directors ees o the main Board and 50% o the directors ees o the sub-committees respectively.The directors ees are recommended by the Board or approval at the Companys Annual General Meeting.

Senior Exec tives

Senior executive remuneration consists o three parts:

1. Base or xed remuneration

This element refects the scope o the job and the level o skill and experience o the individuals.

2. Variable or per ormance related income/bonuses

This is paid depending on the annual per ormance o the Company and its subsidiaries. It usually takes theorm o an end o the year ex-gratia payment.

3. Directors ees in subsidiaries

Some o the executives are directors o the subsidiaries and receive directors ees.

2.3 Disclos re on Rem neration

Principle 9: Each company should provide clear disclosure o its remuneration policy, level and mix o remuneration, and the procedure or setting remuneration, in the companys annual report. It should

provide disclosure in relation to its remuneration policies to enable investors to understand the link betweenremuneration paid to directors and key executives, and per ormance.

The breakdown o remuneration o the directors o the Company or the nancial year ended 31 December 2011is as ollows:

Annual Remuneration Report

Remuneration of directors for the year ended 31 December 2011

Variable for Directors Fees Remuneration Band & Base/Fixed performance related (including

Name of Director salary income/bonuses subsidiaries)

Below S$60,000

Dr Lee Keng Thon - - 100%Col (Ret) Rodney How Seen Shing - - 100%Ng Kok Lip - - 100%Lee Khin Tien - - 100%Lee Kin Hong - - 100%Goh Kok Yeow * - - 100%* resigned on 30 April 2011



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Details o remuneration paid to key executives o the Group (who are not directors o the Company) or the nancial year ended 31 December 2011 are set out below:

Variable for Directors Fees Remuneration Band & Base/Fixed performance related (including

Name of Executive salary income/bonuses subsidiaries)

S$300,000 to below S$350,000

Lee Chou Hock 80% 16% 4%George Lee Chou Hor 79% 17% 4%

Below S$200,000

Lee Chin Chuan 87% 13% -Tay Kok Liang 94% 6% -Wong Siew Choo 100% - -Lee Chu Bing 83% 17% -

Lee Chou Hock (Chie Executive O cer) and George Lee Chou Hor (General Manager, Subsidiaries) are thenephews o the Non-Executive Chairman, Dr Lee Keng Thon and Non-Executive Directors, Lee Khin Tien and LeeKin Hong. Their annual remuneration exceeded S$300,000 during the year.

Lee Chu Bing is the son o Dr Lee Keng Thon. Tay Kok Liang is the niece and Wong Siew Choo is the sister o DrLee Keng Thon respectively.

Lee Chin Chuan, Lee Khin Tien and Lee Kin Hong are brothers o the Non-Executive Chairman, Dr Lee KengThon.

3. ACCOuNTABILITY AND AuDIT

3.1 Acco ntability

Principle 10: The Board should present a balanced and understandable assessment o the companys per ormance, position and prospects.

The Board believes that it should conduct itsel in ways that deliver maximum sustainable value to its shareholders.Prompt ul llment o statutory requirements is one o the ways to maintain shareholders con dence and trust inthe Boards capability and integrity.

Management is responsible to the Board and the Board itsel is accountable to the shareholders.

The Management will provide the Board with detailed management accounts which present a balanced andunderstandable assessment o the Groups per ormance, position and prospects on a quarterly basis.

The Management also presents to the Board quarterly, and ull year nancial results o the Group and the AuditCommittee reports to the Board on the results or review and approval. The Board approved the results a terreview and authorised the release o the quarterly and ull year nancial results o the Group to the SGX-ST andthe public via SGXNET.

Annual general meetings are held every year to obtain shareholders approval to routine business, as well as theelection o directors.

In addition to its statutory responsibilities, the Board also ensures that the principal risks o the Companys businessare identi ed and appropriately managed.

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3.2 Audit Committee

Principle 11: The Board should establish an Audit Committee with written terms of reference which clearly set out its authority and duties.

Members o the Audit Committee comprise our directors; namely Col (Ret) Rodney How Seen Shing (Chairman

o the Audit Committee), Ng Kok Lip, Pro essor Pang Eng Fong and Lee Khin Tien.The Audit Committee held our meetings during the fnancial year ended 31 December 2011 and per ormed the

ollowing unctions:

(a) Reviewed with management and the external auditors on audit plans and the areas to be audited on pertainingto external audit, fnancial and operating results, internal controls, accounting policies as well as othersignifcant matters;

(b) Reviewed the assistance rendered to the external auditors by the Companys o fcers;

(c) Reviewed the annual fnancial statements, inclusive o quarterly announcements to shareholders andSGX- ST prior to submission to the Board o Directors or approval;

(d) Per ormed annual review o the independence and objectivity o the external auditors;(e) Recommended the appointment or re-appointment o external and internal auditors and remuneration o

the external and internal auditors;

( ) Reviewed the scope and extent o non-audit services per ormed by external auditors;

(g) Held meetings annually with both external and internal auditors without the presence o management;

(h) Reviewed the adequacy o the Companys internal controls;

(i) Reviewed the e fciency and e ectiveness o internal audit unction; and

(j) Reviewed interested person transactions, i any.

The Audit Committee has ull access to and co-operation o the management and has been given the resourcesrequired or it to discharge its unction properly. It also has ull discretion to invite any director and executiveo fcer to attend its meetings. The external auditors have unrestricted access to the Audit Committee.

The Companys internal audit unction has been outsourced to Philip Liew & Co. Both the external and internalauditors report directly to the Audit Committee their fndings and recommendations.

The Audit Committee, having reviewed the scope and value o non-audit services provided to the Company andGroup by the external auditors, are satisfed that the nature and extent o such services will not prejudice theindependence and objectivity o the external auditors.

The Audit Committee is satisfed that the appointment o external auditors is in compliance with therequirements o Rule 712 and 715 o the SGX-ST Listing Manual. Accordingly, the Audit Committee has

recommended to the directors the nomination o Deloitte & Touche LLP or re- appointment as externalauditors o the Company at the orthcoming annual general meeting. Rule 716 o the Listing Manual o the SGX-STis not applicable as the same auditing frm is appointed or Hotel Royal Limited and its subsidiaries.

The Audit Committee has established the whistle-blowing policy in which serious matters relating to fnancialreporting, illegal or unethical conduct can be reported directly to the Chairman o the Audit Committee orappropriate actions. A whistle-blowing policy which has been endorsed by the Audit committee has been put inplace. Under the policy, employees o the Group can in confdence, raise concerns about improper conduct orinvestigation.

For the year ended 31 December 2011, the Company paid S$38,000 or non-audit services provided by the externalauditors.



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3.3 Internal Control

Principle 12: The Board should ensure that the Management maintains a sound system o internal controlsto sa eguard the shareholders investments and the companys assets.

The Board is satis ed that the Group has in place internal controls and systems designed to provide reasonableassurance in sa eguarding assets and that proper accounting records are maintained, and in ensuring nancialin ormation used with the business and or publication is reliable.

The external and internal auditors conducted annual review to assess the risk pro le including the review on theadequacy o the internal controls, addressing nancial, operational and compliance risks. Such review also assesswhether there was reasonable assurance regarding the e ectiveness and e ciency o operations, reliability o management and nancial reporting, and compliance with internal policies. Any material non-compliance or lapsesin internal controls together with corrective measures are reported to Audit Committee. The timely and properimplementation o all required corrective, preventive or improvement measures are closely monitored.

In addition, the Audit Committee, together with the Board, reviewed the e ectiveness o the Groups system o internal control put in place to address key nancial, operational and compliance risks a ecting the operations.

Based on the reports submitted by the external and internal auditors and the various management controls put inplace, the Board with the concurrence o the Audit Committee is satis ed that the internal control systems providereasonable assurance that assets are sa eguarded and that proper accounting records are maintained and nancialstatements are reliable.

The Board acknowledges that it is responsible or the overall internal control ramework. It recognises that areliable internal control system is designed to provide reasonable assurance, but is not an absolute guarantee,against material misstatement or loss.

3.4 Internal A dit

Principle 13: The company should establish an internal audit unction that is independent o the activities

it audits.

The Company has engaged a public accounting company, Philip Liew & Co., to per orm the internal audit unction.The internal auditors adopt the Standards or the Pro essional Practice o Internal Auditing set by the Instituteo Internal Auditors. The internal auditors report directly to the Audit Committee, with ull and direct access tothe members o the Audit Committee at all times. Their duties encompass reviewing the Groups material internalcontrols consisting o nancial, operational and compliance controls as well as risk management. The internal auditcomprises all areas o operations.

4. COMMuNICATION WITH SHAREHOLDERS

4.1 Comm nication with shareholders

Principle 14: Companies should engage in regular, e ective and air communication with shareholders.

In line with the continuous disclosure obligations o the Company pursuant to the Singapore Exchange Listing Rulesand the Singapore Companies Act, it is the Boards policy to ensure that all shareholders are in ormed regularlyand on a timely basis o every signi cant development that impact on the Group.

Pertinent in ormation is communicated to shareholders on a regular and timely basis through the ollowingmeans:

The Companys annual reports;

16



19/90

Notices o and explanatory memoranda or annual general meetings and extraordinary general meetings;

Announcements o quarterly and ull-year nancial statements containing a summary o the nancialin ormation and a airs o the Group or the period. These are disclosed on SGXNET;

Other announcements, where appropriate;

Press releases regarding major developments o the Group; and

Disclosures to the Singapore Exchange Securities Trading Limited.

4.2 Greater Shareholder Participation

Principle 15: Companies should encourage greater shareholder participation at annual general meetings,and allow shareholders the opportunity to communicate their views on various matters a ecting thecompany.

Shareholders are encouraged to be present at annual general meeting in person so that ace-to- ace communicationcan best be achieved. The annual general meeting is the principal orum or dialogue with shareholders. Thus,with greater shareholders participation, it will ensure that they will be kept up to date as to the Groups long-termstrategies and goals.

In addition, the Chairmen o the Board Committees as well as the external auditors are also present in the meetingto assist in addressing any appropriate queries rom the shareholders.

The Board will ensure that there should be separate resolutions at general meetings on each substantially separateissue and adhere to the Codes principle with regards to the bundling o resolutions. In the event that bundledresolutions cannot be avoided whereby such resolutions are interdependent and linked so as to orm one signi cantproposal, the Board will provide reasons and material implications.

ADDITIONAL INFORMATION

5. DEALING IN SECuRITIES

The Group has adopted an internal code which prohibits the directors and key executives o the Group rom dealingin the Companys share during the period o two weeks and one month immediately preceding the announcement o the Companys quarterly and ull-year results respectively or i they are in possession o unpublished price-sentitivein ormation o the Group. In addition, directors and key executives are expected to observe insider trading lawsat all times even when dealing in securities within the permitted trading period. They are also discouraged romdealing in the Companys shares on short-term considerations.

6. MATERIAL CONTRACTS

There are no material contracts (including loans) o the Company or its subsidiaries involving the interests o the

Chie Executive O cer or any director or controlling shareholder subsisted at the end o the nancial year or havebeen entered into since the end o the previous nancial year.

7. INTERESTED PERSON TRANSACTIONS

The Company has established procedures to ensure that all transactions with interested persons are reported ina timely manner to the Audit Committee and that transactions are conducted on an arms length basis and are notprejudicial to the interests o the shareholders. The Companys disclosure in accordance with Rule 907 o the ListingManual o the SGX-ST in respect o the interested person transaction or the nancial year ended 31 December2011 is set out on page 53 o this Annual Report.



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Financial risks

The Groups activities expose it to a variety o nancial risks, including the e ects o changes in debt and equitymarket prices, oreign currency exchange rates and interest rates. The Group may use derivative nancialinstruments such as interest rate swap to hedge certain exposures. The Group does not hold or issue derivative

nancial instruments or speculative purposes.

1. Credit risk

The Groups credit risk is primarily attributable to its cash and bank balances, trade and other receivables andinvestments. Cash and xed deposits are placed with creditworthy nancial institutions. The trade and otherreceivables presented in the statement o nancial position are net o allowances or doubt ul receivables,estimated by management based on prior experience and the current economic condition. Investments arealso subject to credit risk, which have been actored in the determination o their air values.

The Group has no signi cant concentration o credit risk, with exposure spread over a large number o counterparties and customers.

The carrying amounts o nancial assets recorded in the nancial statements, grossed up or any allowancesor losses, represents the Groups maximum exposure to credit risk.

2. Interest rate risk

The Group is exposed to interest rate risk through the impact o rate changes on interest rate bearingliabilities and assets. Those exposures are managed as ar as possible by using natural hedges that arise

rom o setting interest rate sensitive assets and liabilities.

Further in ormation related to interest rate and maturities o bank loans is disclosed in Notes 16 and 20 tothe nancial statements.

3. Foreign currency risk

The Group has investments in unds under management o certain banks and cash deposits which areexposed to oreign exchange risk arising rom the exchange rate movements o the United States dollar,the Euro, the Australian dollar, the Great Britain pound, the Malaysian ringgit, the Hong Kong dollar andthe Thai baht vis-- vis the Singapore dollar. In addition, the Group is exposed to currency translation riskas it has signi cant subsidiaries operating in Malaysia, New Zealand and Thailand. For the year ended 31December 2011, approximately 12% (2010 : 13%) is denominated in Malaysian ringgit, approximately 11%(2010 : 12%) o the Groups net assets is denominated in New Zealand dollar and approximately 2% (2010: nil) o the Groups net assets is denominated in Thai baht.

4. Price risk

The Group is exposed to price risks arising rom its investments classifed as held- or-trading and

available- or-sale. These investments include equity shares, and instruments whose air values are subjectto volatility in equity prices, commodity prices or real estate prices.

Further details o these investments can be ound in Notes 7 and 8 to the nancial statements.

5. Liquidity risk

Liquidity risk refects the risk that the Group will have insu cient resources to meet its nancial liabilitiesas they all due.

18

Risk Factors and Risk Management


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Risk Factors and Risk Management

As at 31 December 2011, total current liabilities exceeded total current assets by $15.2 million (2010 : $5.3million) or the Company. This is mainly due to some o the Companys bank loans being arranged onshort- term revolving basis, as the interest rates are more avourable.

Management assesses the availability o credit acilities and compliance with loan covenants on an on-goingbasis and no matters have been drawn to its attention that the roll-over o the short-term nancing may

not be orthcoming or that covenants have been breached. The Group and the Company have unutilisedcredit acilities totalling $139.4 million (2010 : $138.9 million) and $102.4 million (2010 : $105.1 million)respectively.

6. Capital risk

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concernwhile maximising the return to stakeholders through the optimisation o the debt and equity balance.

The capital structure o the Group consists o debt, which includes the bank borrowings disclosed in Notes16, 18 and 20, and equity comprising share capital disclosed in Note 22, reserves and retained earnings.

The Group reviews the capital structure on an annual basis. As a part o this review, the Group considersthe cost o capital and the risks associated with each class o capital. The Group seeks to balance its overallcapital structure through the payment o dividends, new share issues and share buy-backs as well as theobtaining o new debts, re nancing or redemption o existing debts.

The Groups overall strategy remains unchanged rom 2010. The bank loans require the Group to complywith certain nancial covenants with respect o the market values o asset collaterals, and there has beenno non-compliance with these externally imposed capital requirements during the year.

General b siness risks

The Groups businesses are subject to general business risks. They are as ollows:

a. War and terrorism, and its adverse e ect on business;

b. The spread o contagious diseases and their adverse e ect on tourist arrivals;

c. Global recession and its e ect on the per ormance o the local economy; and

d. Changes in government regulations that burden the Groups operating costs or restrict business.

It is recognised that such risks can never be eliminated totally and that the cost controls in minimising these risksmay outweigh their potential bene ts. Accordingly the Group continues to ocus on risk management and incidentmanagement. Where appropriate, this is supported by risk trans er mechanism such as insurance.


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The directors present their report together with the audited consolidated nancial statements o the Group andstatement o fnancial position and statement o changes in equity o the Company or the fnancial year ended31 December 2011.

1 DIRECTORS

The directors o the Company in o ce at the date o this report are:

Dr Lee Keng ThonCol (Ret) Rodney How Seen ShingNg Kok LipPro essor Pang Eng Fong (Appointed on 5 December 2011)Lee Khin TienLee Kin Hong

2 ARRANGEMENTS TO ENABLE DIRECTORS TO ACQuIRE BENEFITS BY MEANS OF THE

ACQuISITION OF SHARES AND DEBENTuRES

Neither at the end o the nancial year nor at any time during the nancial year did there subsist anyarrangement whose object is to enable the directors o the Company to acquire bene ts by means o theacquisition o shares or debentures in the Company or any other body corporate.

3 DIRECTORS INTERESTS IN SHARES AND DEBENTuRES

The directors o the Company holding o ce at the end o the nancial year had no interests in the sharecapital and debentures o the Company and related corporations as recorded in the register o directorsshareholdings kept by the Company under Section 164 o the Singapore Companies Act except as ollows:

Shareholdings Name o directors and companies Shareholdings registered in which directors are

in which interests are held in name o directors deemed to have an interest

At beginning At end At beginning At endo year o year o year o year

The Company Ordinary shares Ordinary shares

Dr Lee Keng Thon 499,800 499,800 - -Lee Khin Tien 235,200 235,200 - -

Lee Kin Hong 77,280 77,280 336,000 336,000

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

Report of the Directors

20


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4 DIRECTORS RECEIPT AND ENTITLEMENT TO CONTRACTUAL BENEFITS

Since the beginning o the fnancial year, no director has received or become entitled to receive a beneftwhich is required to be disclosed under Section 201(8) o the Singapore Companies Act, by reason o acontract made by the Company or a related corporation with the director or with a frm o which he is a

member, or with a Company in which he has a substantial fnancial interest except or salaries, bonuses andother benefts as disclosed in the fnancial statements. Certain directors received remuneration rom relatedcorporations in their capacity as directors and/or executives o those related corporations and as disclosedin the fnancial statements. There were certain transactions (as shown in the fnancial statements) with acorporation in which certain directors have interest.

5 SHARE OPTIONS

(a) Options to take up unissued sharesDuring the fnancial year, no option to take up unissued shares o the Company or any corporation inthe Group was granted.

(b) Options exercisedDuring the fnancial year, there were no shares o the Company or any corporation in the Groupissued by virtue o the exercise o an option to take up unissued shares.

(c) Unissued shares under option At the end o the fnancial year, there were no unissued shares o the Company or any corporation inthe Group under option.

6 AUDIT COMMITTEE

Members o the Audit Committee comprise our directors, namely Col (Ret) Rodney How Seen Shing(Chairman o the Audit Committee), Ng Kok Lip, Pro essor Pang Eng Fong and Lee Khin Tien.

The Audit Committee held our meetings during the fnancial year ended 31 December 2011 and per ormedthe ollowing unctions:

(a) Reviewed with management and the external auditors on audit plans and the areas to be audited onpertaining to external audit, fnancial and operating results, internal controls, accounting policies aswell as other signifcant matters;

(b) Reviewed the assistance rendered to the external auditors by the Groups o fcers;

(c) Reviewed the annual fnancial statements, inclusive o quarterly announcements to shareholders andSGX-ST prior to submission to the Board o Directors or approval;

(d) Per ormed annual review o the independence and objectivity o the external auditors;

(e) Recommended the appointment or re-appointment o external and internal auditors and remunerationo the external and internal auditors;



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( ) Reviewed the scope and extent o non-audit services per ormed by external auditors;

(g) Held meetings annually with both external and internal auditors without the presence o management;

(h) Reviewed the adequacy o the Groups internal controls;

(i) Reviewed the e ciency and e ectiveness o internal audit unction; and

(j) Reviewed interested person transactions, i any.

The Audit Committee has ull access to and co-operation o management and has been given the resourcesrequired or it to discharge its unction properly. It also has ull discretion to invite any director andexecutive o cer to attend its meetings. The external and internal auditors have unrestricted access to the

Audit Committee.

The Companys internal audit unction has been outsourced to Philip Liew & Co. Both the external auditorsand the internal auditors report directly to the Audit Committee their ndings and recommendations.

The Audit Committee, having reviewed the scope and value o non-audit services provided to the Companyand Group by the external auditors, are satis ed that the nature and extent o such services will notprejudice the independence and objectivity o the external auditors.

The Audit Committee has recommended to the directors the nomination o Deloitte & Touche LLPor re-appointment as external auditors o the Group at the orthcoming annual general meeting o the

Company.

7 AuDITORS

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

ON BEHALF OF THE DIRECTORS

Dr Lee Keng Thon

Lee Khin Tien

19 March 2012


22


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In the opinion o the directors, the consolidated nancial statements o the Group and the statement o nancial

position and statement o changes in equity o the Company set out on pages 25 to 76 are drawn up so as to give

a true and air view o the state o a airs o the Group and o the Company as at 31 December 2011, and o the

results, changes in equity, and cash fows o the Group and changes in equity o the Company or the nancial year

then ended and at the date o this statement there are reasonable grounds to believe that the Company will be able

to pay its debts when they all due.

ON BEHALF OF THE DIRECTORS

Dr Lee Keng Thon

Lee Khin Tien

19 March 2012

STATEMENT OF DIRECTORS


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24

Report on the Financial Statements

We have audited the consolidated nancial statements o Hotel Royal Limited (the Company) and its subsidiaries(the Group) which comprise the statement o nancial position o the Group and o the Company as at 31 December2011, and the pro t and loss statement, statement o comprehensive income, statement o changes in equity andstatement o cash fows o the Group and the statement o changes in equity o the Company or the year then ended,

and a summary o signi cant accounting policies and other explanatory notes, as set out on pages 25 to 76.

Managements Responsibility or the Financial Statements

Management is responsible or the preparation o nancial statements that give a true and air view in accordancewith the provisions o the Singapore Companies Act (the Act) and Singapore Financial Reporting Standards and

or devising and maintaining a system o internal accounting controls su cient to provide reasonable assurance thatassets are sa eguarded against loss rom unauthorised use or disposition; and transactions are properly authorisedand that they are recorded as necessary to permit the preparation o true and air pro t and loss accounts andbalance sheets and to maintain accountability o assets.

A ditors Responsibility

Our responsibility is to express an opinion on these nancial statements based on our audit. We conducted ouraudit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethicalrequirements and plan and per orm the audit to obtain reasonable assurance about whether the nancial statementsare ree rom material misstatement.

An audit involves per orming procedures to obtain audit evidence about the amounts and disclosures in the nancialstatements. The procedures selected depend on the auditors judgment, including the assessment o the risks o material misstatement o the nancial statements, whether due to raud or error. In making those risk assessments,the auditor considers internal control relevant to the entitys preparation o nancial statements that give a trueand air view in order to design audit procedures that are appropriate in the circumstances, but not or the purposeo expressing an opinion on the e ectiveness o the entitys internal control. An audit also includes evaluating theappropriateness o accounting policies used and the reasonableness o accounting estimates made by management,as well as evaluating the overall presentation o the nancial statements. We believe that the audit evidence wehave obtained is su cient and appropriate to provide a basis or our audit opinion.

Opinion

In our opinion, the consolidated nancial statements o the Group and the statement o nancial position andstatement o changes in equity o the Company are properly drawn up in accordance with the provisions o the Actand Singapore Financial Reporting Standards so as to give a true and air view o the state o a airs o the Groupand o the Company as at 31 December 2011 and o the results, changes in equity and cash fows o the Group andthe changes in equity o the Company or the year ended on that date.

Report on Other Legal and Reg latory Req irements

In our opinion, the accounting and other records required by the Act to be kept by the Company and by thosesubsidiaries incorporated in Singapore o which we are the auditors have been properly kept in accordance with

the provisions o the Act.

Deloitte & Touche LLPPublic Accountants andCerti ed Public Accountants

Singapore

19 March 2012

To The Members of Hotel Royal LimitedINDEPENDENT AUDITORS REPORT


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STATEMENTS OF FINANCIAL POSITION 31 December 2011

The Group The CompanyNote 2011 2010 2011 2010

$000 $000 $000 $000

ASSETS

C rrent assets

Cash and cash equivalents 6 19,436 25,841 4,376 9,997

Held- or-trading investments 7 5,157 4,956 491 397

Available- or-sale investments 8 3,190 2,771 450 374

Trade receivables 9 4,624 4,307 1,424 1,444

Other receivables, deposits

and prepaid expenses 10 1,488 1,112 60 80

Inventories 351 272 61 72

Total current assets 34,246 39,259 6,862 12,364

Non-c rrent assets

Subsidiaries 11 - - 84,182 78,727

Available- or-sale investments 8 3,687 4,397 1,424 1,778

Other asset 12 1,328 - - -

Goodwill 13 123 - - -

Property, plant and equipment 14 325,987 279,144 143,050 121,901

Investment properties 15 90,436 84,377 23,291 17,522

Total non-current assets 421,561 367,918 251,947 219,928

Total assets 455,807 407,177 258,809 232,292

LIABILITIES AND EQuITY

C rrent liabilities

Bank loans 16 20,540 11,081 12,250 9,350

Trade payables 3,596 3,333 2,537 2,277

Other payables 17 4,139 2,208 5,865 5,069

Current portion o nance lease 18 8 7 - -

Income tax payable 2,120 1,716 1,386 1,000

Total current liabilities 30,403 18,345 22,038 17,696


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26

The Group The CompanyNote 2011 2010 2011 2010

$000 $000 $000 $000

Non-c rrent liabilities

Retirement bene t obligations 19 719 548 - -

Long-term bank loans 20 75,129 67,279 - -

Finance lease 18 24 32 - -

De erred income tax 21 15,114 13,595 442 442

Total non-current liabilities 90,986 81,454 442 442

Capital and reserves

Share capital 22 100,438 100,438 100,438 100,438

Asset revaluation reserve 158,977 132,077 115,908 96,008Fair value reserve 1,671 3,025 284 658

Translation reserve (1,406) (1,210) - -

Retained earnings 74,738 73,048 19,699 17,050

Total equity 334,418 307,378 236,329 214,154

Total liabilities and eq ity 455,807 407,177 258,809 232,292

See accompanying notes to nancial statements.

STATEMENTS OF FINANCIAL POSITION 31 December 2011


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The GroupNote 2011 2010

$000 $000

Reven e 23 48,807 39,951

Cost o sales (23,182) (18,847)

Gross proft 25,625 21,104

Distribution costs (529) (311)

Administrative expenses (9,729) (8,118)

Other income

- Bargain purchase gain arising rom acquisition o business 30 - 4,109

- Miscellaneous income 24 247 790

Other expenses

- Expenses relating to acquisition o business (450) (2,190)

- Miscellaneous expenses (3,164) (2,389)

Finance costs 25 (2,529) (1,528)

Proft be ore income tax 26 9,471 11,467

Income tax expense 27 (3,581) (6,419)

Proft or the year attrib table to

owners o the Company 5,890 5,048

Basic earnings per share (cents) 28 7.01 cents 6.72 cents

Diluted earnings per share (cents) 28 7.01 cents 6.72 cents

Year ended 31 December 2011 CONSOLIDATED PROFIT AND LOSS STATEMENT



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28

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Year ended 31 December 2011

The GroupNote 2011 2010

$000 $000

Proft or the year 5,890 5,048

Other comprehensive income:

Revaluation increase o reehold land - hotels 14 26,900 18,900

Available- or-sale investments:

Fair value (loss) gain recognised in air value reserve (1,278) 742

Trans er rom air value reserve to pro t or loss

arising rom impairment o investments 81 19

Trans er rom air value reserve to pro t or loss upon

disposal o available- or-sale investments (157) (322)

Exchange di erences on translation o oreign operations (196) (1,269)

Income tax relating to components o other comprehensive income - -

Other comprehensive income or the year, net o tax 25,350 18,070

Total comprehensive income or the year attrib table

to owners o the Company 31,240 23,118



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Year ended 31 December 2011 STATEMENTS OF CHANGES IN EQUITY


AssetShare revaluation Fair value Translation Retainedcapital reserve reserve reserve earnings Total$000 $000 $000 $000 $000 $000

The Group

Balance at 1 January 2010 64,569 113,177 2,586 59 71,000 251,391

Total comprehensive income or the year - 18,900 439 (1,269) 5,048 23,118

Rights issue (Note 22) 35,869 - - - - 35,869

Final dividends (Note 34) - - - - (3,000) (3,000)

Balance at 31 December 2010 100,438 132,077 3,025 (1,210) 73,048 307,378

Total comprehensive income or the year - 26,900 (1,354) (196) 5,890 31,240

Final dividends (Note 34) - - - - (4,200) (4,200)

Balance at 31 December 2011 100,438 158,977 1,671 (1,406) 74,738 334,418

AssetShare revaluation Fair value Retainedcapital reserve reserve earnings Total$000 $000 $000 $000 $000

The Company

Balance at 1 January 2010 64,569 88,108 483 13,207 166,367

Total comprehensive income or the year - 7,900 175 6,843 14,918

Rights issue (Note 22) 35,869 - - - 35,869

Final dividends (Note 34) - - - (3,000) (3,000)

Balance at 31 December 2010 100,438 96,008 658 17,050 214,154

Total comprehensive income or the year - 19,900 (374) 6,849 26,375

Final dividends (Note 34) - - - (4,200) (4,200)

Balance at 31 December 2011 100,438 115,908 284 19,699 236,329


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30

CONSOLIDATED STATEMENT OF CASH FLOWS Year ended 31 December 2011

The Group Note 2011 2010

$000 $000

Operating activities

Pro t be ore income tax 9,471 11,467

Adjustments or:

Depreciation expense 4,169 3,452

Impairment loss on available- or-sale investments 81 19

Dividend income (240) (180)

Interest income (132) (97)

Allowance or doubt ul debts 271 363

Write-back o allowance or doubt ul debts (56) (24)

Bad debts written o 33 -

Bargain purchase gain arising rom acquisition o business 30 - (4,109)Interest expense 2,529 1,528

Gain on disposal o available- or-sale investments (157) (322)

Gain on disposal o property, plant and equipment (12) (41)

Impairment loss on an investment property 2,460 1,116

Fair value loss (gain) on held- or-trading investments 241 (276)

Operating cash fows be ore movements in working capital 18,658 12,896

Available- or-sale investments (current assets) (1,280) 33

Held- or-trading investments (442) 434

Trade and other receivables (2,275) (935)

Inventories (79) (76)

Trade and other payables 2,190 721

Cash generated rom operations 16,772 13,073

Interest paid (2,529) (1,528)

Interest received 132 97

Dividend received 240 180Income tax paid - net o re und (1,705) (1,211)

Net cash rom operating activities 12,910 10,611


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CONSOLIDATED STATEMENT OF CASH FLOWSYear ended 31 December 2011


The Group Note 2011 2010

$000 $000

Investing activities

Purchase o available- or-sale investments (non-current assets) (83) (44)Proceeds rom disposal o property, plant and equipment 30 45Proceeds rom disposal o available- or-sale investments 376 907Additions to property, plant and equipment A (3,260) (1,112)Arising rom acquisition o business 30 (21,320) (39,395)Additions to investment properties (9,077) (11,469)

Net cash used in investing activities (33,334) (51,068)

Financing activitiesProceeds rom bank loans 77,630 46,738Net proceeds rom rights issue - 35,869Repayment o bank loans (59,637) (27,540)Repayment o nance lease (7) (1)Dividends paid (4,200) (3,000)

Net cash rom nancing activities 13,786 52,066

Net (decrease) increase in cash and cash equivalents (6,638) 11,609Cash and cash equivalents at beginning o year 25,841 13,241E ect o currency exchange adjustment 233 991Cash and cash eq ivalents at end o year 19,436 25,841

Note A

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


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32

NOTES TO FINANCIAL STATEMENTS 31 December 2011

1 GENERAL

The Company (Registration No. 196800298G) is incorporated in Singapore with its registered o ce and itsprincipal place o business at 36 Newton Road, Singapore 307964. The nancial statements are expressedin Singapore dollars, which is the unctional currency o the Company.

The principal activity o the Company is that o a hotelier and investment holding. The principal activitieso the subsidiaries are disclosed in Note 11.

On 2 December 1968, the Company was listed on the Main Board o Singapore Exchange Securities TradingLimited (SGX-ST).

The nancial statements o the Group and the statement o nancial position and statement o changesin equity o the Company or the year ended 31 December 2011 were authorised or issue by the board o directors on 19 March 2012

2 SuMMARY OF SIGNIFICANT ACCOuNTING POLICIES

BASIS OF ACCOUNTING - The nancial statements have been prepared in accordance with the historicalcost convention, except as disclosed in the accounting policies below and are drawn up in accordance withthe provisions o the Singapore Companies Act and Singapore Financial Reporting Standards (FRS).

ADOPTION OF NEW AND REVISED STANDARDS - In the current nancial year, the Group has adoptedall the new and revised FRSs and Interpretations o FRS (INT FRS) that are relevant to its operations ande ective or annual periods beginning on or a ter 1 January 2011. The adoption o these new/revised FRSsand INT FRSs does not result in changes to the Groups accounting policies and has no material e ect onthe amounts reported or the current or prior years.

At the date o authorisation o these nancial statements, the ollowing FRSs, INT FRSs and amendmentsto FRS that are relevant to the Group and the Company were issued but not e ective:

Amendments to FRS 1 - Presentation o Financial Statements - Amendments relating to Presentationo Items o Other Comprehensive Income

Amendments to FRS 12 - Income Taxes - De erred Taxes: Recovery o Underlying AssetsAmendments to FRS 19 - Employee Bene tsFRS 27 (Revised) - Separate Financial StatementsAmendments to FRS 107 - Financial Instruments: Disclosures - Trans ers o Financial AssetsFRS 110 - Consolidated Financial StatementsFRS 112 - Disclosure o Interests in Other EntitiesFRS 113 - Fair Value Measurement

Consequential amendments were also made to various standards as a result o these new/revisedstandards.

The management anticipates that the adoption o the above FRSs and amendments to FRS that were issuedbut only e ective in uture periods will not have no material impact on the nancial statements o the Groupand the Company in the period o their initial adoption, except or the ollowing:

FRS 110 Consolidated Financial Statements and FRS 27 Separate Financial Statements

FRS 110 replaces the control assessment criteria and consolidation requirements currently in FRS 27 andINT FRS 12 Consolidation - Special Purpose Entities .

FRS 110 de nes the principle o control and establishes control as the basis or determining which entities areconsolidated in the consolidated nancial statements. It also provides more extensive application guidance on


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assessing control based on voting rights or other contractual rights. Under FRS 110, control assessment willbe based on whether an investor has (i) power over the investee; (ii) exposure, or rights, to variable returns

rom its involvement with the investee; and (iii) the ability to use its power over the investee to a ect theamount o the returns. FRS 27 remains as a standard applicable only to separate nancial statements.

FRS 110 will take e ect rom nancial years beginning on or a ter 1 January 2013, with ull retrospective

application.

When the Group adopts FRS 110, entities it currently consolidates may not quali y or consolidation, andentities it currently does not consolidate may quali y or consolidation. The Group is currently evaluatingthe e ects o FRS 110 on its investments in the period o initial adoption.

FRS 112 Disclosure of Interests in Other Entities

FRS 112 requires an entity to provide more extensive disclosures regarding the nature o and risks associatedwith its interest in subsidiaries, associates, joint arrangements and unconsolidated structured entities.

FRS 112 will take e ect rom nancial years beginning on or a ter 1 January 2013, and the Group is currentlyevaluating the extent o additional disclosures needed.

FRS 113 Fair Value Measurement

FRS 113 is a single new Standard that applies to both nancial and non- nancial items. It replaces the guidanceon air value measurement and related disclosures in other Standards, with the exceptions o measurementdealt with under FRS 102 Share-based Payment , FRS 17 Leases , net realisable value in FRS 2 Inventories and value-in-use in FRS 36 Impairment o Assets .

FRS 113 provides a common air value de nition and hierarchy applicable to the air value measurement o assets, liabilities, and an entitys own equity instruments within its scope, but does not change the requirementsin other Standards regarding which items should be measured or disclosed at air value.

FRS 113 will be e ective prospectively rom annual periods beginning on or a ter 1 January 2013. Comparativein ormation is not required or periods be ore initial application.

The Group is currently evaluating the e ects o FRS 113 in the period o initial adoption.

BASIS OF CONSOLIDATION - The consolidated nancial statements incorporate the nancial statementso the Company and entities (including special purpose entities) controlled by the Company (its subsidiaries).Control is achieved where the Company has the power to govern the nancial and operating policies o anentity so as to obtain bene ts rom its activities.

The results o subsidiaries acquired or disposed o during the year are included in the consolidated statemento comprehensive income rom the e ective date o acquisition or up to the e ective date o disposal, asappropriate.

Where necessary, adjustments are made to the nancial statements o subsidiaries to bring their accountingpolicies into line with those used by other members o the Group.

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

Non-controlling interests in subsidiaries are identi ed separately rom the Groups equity therein. Theinterest o non-controlling shareholders that are present ownership interests and entitle their holders to aproportionate share o the entitys net assets in the event o liquidation may be initially measured (at dateo original business combination) either at air value or at the non-controlling interests proportionate shareo the air value o the acquirees identi able net assets. The choice o measurement basis is made on an


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acquisition-by-acquisition basis. Other types o non-controlling interests are measured at air value or, whenapplicable, on the basis speci ed in another FRS.

Subsequent to acquisition, the carrying amount o non-controlling interests is the amount o those interestsat initial recognition plus the non-controlling interests share o subsequent changes in equity. Totalcomprehensive income is attributed to non-controlling interests even i this results in the non-controlling

interests having a de cit balance.

Changes in the Groups interests in subsidiaries that do not result in a loss o control are accounted or asequity transactions. The carrying amounts o the Groups interests and the non-controlling interests areadjusted to refect the changes in their relative interests in the subsidiaries. Any di erence between theamount by which the non-controlling interests are adjusted and the air value o the consideration paid orreceived is recognised directly in equity and attributed to owners o the Company.

When the Group loses control o a subsidiary, the pro t or loss on disposal is calculated as the di erencebetween (i) the aggregate o the air value o the consideration received and the air value o any retainedinterest and (ii) the previous carrying amount o the assets (including goodwill), and liabilities o the subsidiaryand any non-controlling interests. Amounts previously recognised in other comprehensive income in relationto the subsidiary are accounted or (i.e. reclassi ed to pro t or loss or trans erred directly to retained earnings)in the same manner as would be required i the relevant assets or liabilities were disposed o . The air valueo any investment retained in the ormer subsidiary at the date when control is lost is regarded as the air

value on initial recognition or subsequent accounting under FRS 39 Financial Instruments: Recognitionand Measurement or, when applicable, the cost on initial recognition o an investment in an associate or

jointly controlled entity.

In the Companys nancial statements, investments in subsidiaries are carried at cost less any impairmentin net recoverable value that has been recognised in the pro t or loss.

BUSINESS COMBINATIONS - Acquisitions o subsidiaries and businesses are accounted or using theacquisition method. The consideration or each acquisition is measured at the aggregate o the acquisitiondate air values o assets given, liabilities incurred by the Group to the ormer owners o the acquiree, andequity instruments issued by the Group in exchange or control o the acquiree. Acquisition-related costsare recognised in pro t or loss as incurred.

Where applicable, the consideration or the acquisition includes any asset or liability resulting rom a contingentconsideration arrangement, measured at its acquisition-date air value. Subsequent changes in such air

values are adjusted against the cost o acquisition where they quali y as measurement period adjustments(see below). The subsequent accounting or changes in the air value o the contingent consideration that donot quali y as measurement period adjustments depends on how the contingent consideration is classi ed.Contingent consideration that is classi ed as equity is not remeasured at subsequent reporting dates and itssubsequent settlement is accounted or within equity. Contingent consideration that is classi ed as an assetor a liability is remeasured at subsequent reporting dates in accordance with FRS 39 Financial Instruments :

Recognition and Measurement , or FRS 37 P rovision, Contingent Liabilities and Contingent Asset , asappropriate, with the corresponding gain or loss recognised in pro t or loss.

Where a business combination is achieved in stages, the Groups previously held interests in the acquiredentity are remeasured to air value at the acquisition date (i.e. the date the Group attains control) and theresulting gain or loss, i any, is recognised in pro t or loss. Amounts arising rom interests in the acquiree priorto the acquisition date that have previously been recognised in other comprehensive income are reclassi edto pro t or loss, where such treatment would be appropriate i that interest were disposed o .

The acquirees identi able assets, liabilities and contingent liabilities that meet the conditions or recognitionunder FRS 103 Business Combinations are recognised at their air value at the acquisition date, exceptthat:


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deferred tax assets or liabilities and liabilities or assets related to employee bene t arrangements arerecognised and measured in accordance with FRS 12 Income Taxes and FRS 19 Employee Beneftsrespectively;

liabilities or equity instruments related to share-based payment transactions of the acquiree or thereplacement o an acquirees share-based payment awards transactions with share-based payment

awards transactions o the acquirer in accordance with the method in FRS 102 Share-based Paymentat the acquisition date; and

assets (or disposal groups) that are classi ed as held for sale in accordance with FRS 105 Non- current Assets Held or Sale and Discontinued Operations are measured in accordance withthat Standard.

I the initial accounting or a business combination is incomplete by the end o the reporting period in whichthe combination occurs, the Group reports provisional amounts or the items or which the accounting isincomplete. Those provisional amounts are adjusted during the measurement period (see below), or additionalassets or liabilities are recognised, to refect new in ormation obtained about acts and circumstances thatexisted as o the acquisition date that, i known, would have a ected the amounts recognised as o thatdate.

The measurement period is the period rom the date o acquisition to the date the Group obtains completein ormation about acts and circumstances that existed as o the acquisition date - and is subject to a maximumo one year rom acquisition date.

The accounting policy or initial measurement o non-controlling interests is described above.

The policy described above is applied to all business combinations that take place on or a ter 1 January2010.

FINANCIAL INSTRUMENTS - Financial assets and nancial liabilities are recognised on the Groupsstatement o nancial position when the Group becomes a party to the contractual provisions o theinstrument.

E ective interest method

The e ective interest method is a method o calculating the amortised cost o a nancial instrument and o allocating interest income or expense over the relevant period. The e ective interest rate is the rate thatexactly discounts estimated uture cash receipts or payments through the expected li e o the nancialinstrument, or where appropriate, a shorter period. Income and expense are recognised on an e ectiveinterest rate basis or debt instruments other than those nancial instruments at air value through pro tor loss.

Financial assets

Investments are recognised and de-recognised on a trade date where the purchase or sale o an investmentis under a contract whose terms require delivery o the investment within the time rame established by themarket concerned, and are initially measured at air value, net o transaction costs except or those nancialassets classi ed as at air value through pro t or loss which are initially measured at air value.

Financial assets are classi ed into the ollowing speci ed categories: nancial assets at air value throughpro t or loss, available- or-sale nancial assets and loans and receivables. The classi cation depends onthe nature and purpose o nancial assets and is determined at the time o initial recognition.

Financial assets at air value through pro t or loss (FVTPL)

Financial assets are classi ed as at FVTPL where the nancial asset is either held- or-trading or it is designatedas at FVTPL.


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A nancial asset is classi ed as held- or-trading i :

it has been acquired principally for the purpose of selling in the near future; or

it is a part of an identi ed portfolio of nancial instruments that the Company manages together andhas a recent actual pattern o short-term pro t-taking; or

it is a derivative that is not designated and effective as a hedging instrument.

A nancial asset other than a nancial asset held- or-trading may be designated as at FVTPL upon initialrecognition i :

such designation eliminates or signi cantly reduces a measurement or recognition inconsistency thatwould otherwise arise; or

the nancial asset forms part of a group of nancial assets or nancial liabilities or both, which ismanaged and its per ormance is evaluated on a air value basis, in accordance with the Companysdocumented risk management or investment strategy, and in ormation about the grouping is providedinternally on that basis; or

it forms part of a contract containing one or more embedded derivatives, and FRS 39 permits theentire combined contract (asset or liability) to be designated as at FVTPL.

Financial assets at air value through pro t or loss are stated at air value, with any resultant gain or lossrecognised in pro t or loss. The net gain or loss recognised in pro t or loss incorporates any dividend orinterest earned on the nancial asset. Fair value is determined in the manner described in Note 4.

Available- or-sale nancial assets

Certain shares and debt securities held by the Group are classi ed as being available- or-sale and are stated atair value. Fair value is determined in the manner described in Note 4. Gains and losses arising rom changes

in air value are recognised in other comprehensive income with the exception o impairment losses, interestcalculated using the e ective interest method and oreign exchange gains and losses on monetary assetswhich are recognised directly in pro t or loss. Where the investment is disposed o or is determined to beimpaired, the gain or loss previously recognised in other comprehensive income and accumulated in the air

value reserve is reclassi ed in pro t or loss or the period. Dividends on available- or-sale equity instrumentsare recognised in pro t or loss when the Groups right to receive payments is established. The air value o available- or-sale monetary assets denominated in a oreign currency is determined in that oreign currencyand translated at the spot rate at reporting date. The change in air value attributable to translation di erencesthat result rom a change in amortised cost o the asset is recognised in pro t or loss, and other changes arerecognised in other comprehensive income.

Loans and receivables

Trade receivables, loans and other receivables that have xed or determinable payments that are notquoted in an active market are classi ed as loans and receivables. Loans and receivables are measured atamortised cost using the e ective interest method less impairment. Interest is recognised by applying thee ective interest rate method, except or short-term receivables when the recognition o interest would beimmaterial.

Impairment o nancial assets

Financial assets, other than those at air value through pro t or loss, are assessed or indicators o impairmentat the end o each reporting period. Financial assets are impaired where there is objective evidence that, asa result o one or more events that occurred a ter the initial recognition o the nancial asset, the estimated


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uture cash fows o the investment have been impacted. For nancial assets carried at amortised cost, theamount o the impairment is the di erence between the assets carrying amount and the present value o estimated uture cash fows, discounted at the original e ective interest rate.

The carrying amount o the nancial asset is reduced by the impairment loss directly or all nancial assetswith the exception o trade receivables where the carrying amount is reduced through the use o an allowance

account. When a trade receivable is uncollectible, it is written o against the allowance account. Subsequentrecoveries o amounts previously written o are credited to the allowance account. Changes in the carryingamount o the allowance account are recognised in pro t or loss.

With the exception o available- or-sale equity instruments, i , in a subsequent period, the amount o theimpairment loss decreases and the decrease can be related objectively to an event occurring a ter theimpairment loss was recognised, the previously recognised impairment loss is reversed through pro t or lossto the extent the carrying amount o the investment at the date the impairment is reversed does not exceedwhat the amortised cost would have been had the impairment not been recognised.

In respect o available- or-sale equity instruments, any subsequent increase in air value a ter an impairmentloss, is recognised directly in other comprehensive income.

Derecognition o nancial assets

The Group derecognises a nancial asset only when the contractual rights to the cash fows rom the assetexpire, or it trans ers the nancial asset and substantially all the risks and rewards o owners

hotel royal limited_annual report 2011

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